EMILIO TAN vs.

COURT OF APPEALS
G.R. No. 48049, 29 June 1989

FACTS:

In September 1973, Tan Lee Siong applied for a life insurance under the Philippine American
Life Insurance Company (PHILAMLIFE). He stated in the application form that he has no
health issues whatsoever and so in November 1973 he was issued a life insurance policy in the
amount of P80,000.00. He listed his sons as beneficiaries (Emilio Tan et al). In April 1975, Tan
Lee Siong died due to hepatoma. His sons filed an insurance claim but PHILAMLIFE denied the
same as it alleged that Tan Lee Siong concealed the fact that he was hypertensive, diabetic, and
was suffering from hepatoma at the time of his application for the insurance.
The beneficiaries averred that PHILAMLIFE can no longer rescind the insurance contract
because the insured is already dead. They invoke Section 48 of the Insurance Code which they
interpreted to mean that an insurer can only rescind an insurance contract during the lifetime of
the insured; and that such rescission should be done within two years prior to the filing of a suit
involving the insurance.

ISSUE:

 Whether or not the insurance company has the right to rescind the contract of insurance
despite the presence of an incontestability clause.
 Whether or not the interpretation of the Tan brothers is correct.
 Whether or not the respondent company no longer had the right to rescind the contract
of insurance as rescission must allegedly be done during the lifetime of the insured
within two years and prior to the commencement of action.
 Whether or not there could have been no concealment or misrepresentation by their late
father because Tan Lee Siong did not have to buy insurance. He was only pressured by
insistent salesmen to do so.
 What is meant by the phrase "during the lifetime" found in Section 48?

HELD:

 YES. The so-called “incontestability clause” precludes the insurer from raising the
defenses of false representations or concealment of material facts insofar as health and
previous diseases are concerned if the insurance has been in force for at least two years
during the insured’s lifetime. The phrase “during the lifetime” found in Section 48 of the
Insurance Law simply means that the policy is no longer considered in force after the
insured has died. The key phrase in the second paragraph of Section 48 is “for a period of
two years”. The policy was issued on November 6, 1973 and the insured died on April 26,
1975. The policy was thus in force for a period of only one year and five months.
Considering that the insured died before the two-year period has lapsed, respondent
 company is not, therefore, barred from proving that the policy is void ab initio by reason
of the insured’s fraudulent concealment or misrepresentation. Moreover, respondent
company rescinded the contract of insurance and refunded the premiums paid on
November 11, 1975, previous to the commencement of this action on November 27, 1975.
WHEREFORE, the petition is hereby DENIED for lack of merit. The questioned decision
of the Court of Appeals is AFFIRMED.
 No. The pertinent section in the Insurance Code provides:
Section 48. Whenever a right to rescind a contract of insurance is given to the insurer
by any provision of this chapter, such right must be exercised previous to the
commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been
in force during the lifetime of the insured for a period of two years from the date of its
issue or of its last reinstatement, the insurer cannot prove that the policy is void ab
initio or is rescindable by reason of the fraudulent concealment or misrepresentation of
the insured or his agent.
The so-called “incontestability clause” precludes the insurer from raising the defenses of
false representations or concealment of material facts insofar as health and previous
diseases are concerned if the insurance has been in force for at least two years during the
insured’s lifetime. The phrase “during the lifetime” found in Section 48 simply means
that the policy is no longer considered in force after the insured has died. The key phrase
in the second paragraph of Section 48 is “for a period of two years.”
Note that the policy was in force for only one year and 5 months when Tan Lee Siong
died. This means that PHILAMLIFE can still contest and rescind the policy issued by
reason of the misrepresentation made by Tan Lee Siong.
Further, because of Tan Lee Siong’s statement that he does not have any health issues,
the insurance company was misled into believing that he was healthy and so it did not
deem a medical checkup to be necessary and that ultimately led to the issuance of the life
insurance policy.

 NO. The pertinent section in the Insurance Code provides: Section 48. Whenever a right
to rescind a contract of insurance is given to the insurer by any provision of this chapter,
such right must be exercised previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been
in force during the lifetime of the insured for a period of two years from the date of its
issue or of its last reinstatement, the insurer cannot prove that the policy is void ab
initio or is rescindable by reason of the fraudulent concealment or misrepresentation of
the insured or his agent.
 NO. We call attention to what this Honorable Court said in Insular Life v. Feliciano, et al., 73
Phil. 201; at page 205:

It is of common knowledge that the selling of insurance today is subjected to the

whirlwind pressure of modern salesmanship.

Insurance companies send detailed instructions to their agents to solicit and procure
applications.
 These agents are to be found all over the length and breadth of the land. They are stimulated
to more active efforts by contests and by the keen competition offered by the other rival
insurance companies.

They supply all the information, prepare and answer the applications, submit the
applications to their companies, conclude the transactions, and otherwise smooth out all
difficulties.

The agents in short do what the company set them out to do.

The Insular Life case was decided some forty years ago when the pressure of insurance
salesmanship was not overwhelming as it is now; when the population of this country was
less than one-fourth of what it is now; when the insurance companies competing with one
another could be counted by the fingers. (pp. 140-142, Rollo)

xxx xxx xxx

In the face of all the above, it would be unjust if, having been subjected to the whirlwind
pressure of insurance salesmanship this Court itself has long denounced, the assured who
dies within the two-year period, should stand charged of fraudulent concealment and
misrepresentation." (p. 142, Rollo)

 The phrase "during the lifetime" found in Section 48 simply means that the policy is no
longer considered in force after the insured has died. The key phrase in the second
paragraph of Section 48 is "for a period of two years."
As noted by the Court of Appeals, to wit:
The policy was issued on November 6,1973 and the insured died on April 26,1975. The
policy was thus in force for a period of only one year and five months. Considering that
the insured died before the two-year period had lapsed, respondent company is not,
therefore, barred from proving that the policy is void ab initio by reason of the insured's
fraudulent concealment or misrepresentation. Moreover, respondent company rescinded
the contract of insurance and refunded the premiums paid on September 11, 1975,
previous to the commencement of this action on November 27,1975. (Rollo, pp. 99-100)

Manila Bankers Life Insurance Corporation vs Aban

G.R. No. 175666 July 29, 2013

Facts: On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila
Bankers Life Insurance Corporation (Bankers Life), designating respondent Cresencia P. Aban
(Aban), her niece, as her beneficiary. Petitioner issued Insurance Policy No. 747411 (the policy),
with a face value of P 100,000.00, in Sotero’s favor on August 30, 1993, after the requisite
medical examination and payment of the insurance premium. On April 10, 1996, when the
insurance policy had been in force for more than two years and seven months, Sotero died.
Respondent filed a claim for the insurance proceeds on July 9, 1996. Petitioner conducted an
investigation into the claim, and came out with the following findings: 1. Sotero did not
personally apply for insurance coverage, as she was illiterate; 2. Sotero was sickly since 1990; 3.
Sotero did not have the financial capability to pay the insurance premiums on Insurance Policy
No. 747411; 4. Sotero did not sign the July 3, 1993 application for insurance; and 5. Respondent
was the one who filed the insurance application, and x x x designated herself as the beneficiary.
For the above reasons, petitioner denied respondent’s claim on April 16, 1997 and refunded the
premiums paid on the policy.

Issue:

 Whether or not Manila Bankers is barred from denying the insurance claims based on
fraud or concealment.
 Whether or not the Court of Appeals erred in sustaining the application of the
incontestability provision in the insurance code.
 Whether or not insurable interest was present.
 What is the purpose of the incontestability clause?
 What does Section 48 of the Insurance Code regulate?

Held:

 YES. The “incontestability clause” is a provision in law that after a policy of life
insurance made payable on the death of the insured shall have been in force during the
lifetime of the insured for a period of two (2) years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible
by reason of fraudulent concealment or misrepresentation of the insured or his agent.
The purpose of the law is to give protection to the insured or his beneficiary by limiting
the rescinding of the contract of insurance on the ground of fraudulent concealment or
misrepresentation to a period of only two (2) years from the issuance of the policy or its
last reinstatement.
The insurer is deemed to have the necessary facilities to discover such fraudulent
concealment or misrepresentation within a period of two (2) years. It is not fair for the
insurer to collect the premiums as long as the insured is still alive, only to raise the issue
of fraudulent concealment or misrepresentation when the insured dies in order to defeat
the right of the beneficiary to recover under the policy.
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the
insured. Under the provision, an insurer is given two years – from the effectivity of a life
insurance contract and while the insured is alive – to discover or prove that the policy
is void ab initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period lapses, or when
the insured dies within the period, the insurer must make good on the policy, even
though the policy was obtained by fraud, concealment, or misrepresentation. This is not
to say that insurance fraud must be rewarded, but that insurers who recklessly and
indiscriminately solicit and obtain business must be penalized, for such recklessness and
lack of discrimination ultimately work to the detriment of bona fide takers of insurance
and the public in general.
 NO. The Court therefore agrees fully with the appellate court's pronouncement that -
The "incontestability clause" is a provision in law that after a policy of life insurance
made payable on the death of the insured shall have been in force during the lifetime of
the insured for a period of two (2) years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible
by reason of fraudulent concealment or misrepresentation of the insured or his agent.
The purpose of the law is to give protection to the insured or his beneficiary by limiting
the rescinding of the contract of insurance on the ground of fraudulent concealment or
 misrepresentation to a period of only two (2) years from the issuance of the policy or its
last reinstatement.
The so-called "incontestability clause" precludes the insurer from raising the defenses of
false representations or concealment of material facts insofar as health and previous
diseases are concerned if the insurance has been in force for at least two years during the
insured's lifetime. The phrase "during the lifetime" found in Section 48 simply means
that the policy is no longer considered in force after the insured has died. The key phrase
in the second paragraph of Section 48 is "for a period of two years."
As borne by the records, the policy was issued on August 30. 1993, the insured died on
April 10, 1996, and the claim was denied on April 16, 1997. The insurance policy was thus
in force for a period of 3 years, 7 months, and 24 days. Considering that the insured died
after the two-year period, the plaintiff-appellant is, therefore, barred from proving that
the policy is void ab initio by reason of the insured fraudulent concealment or
misrepresentation or want of insurable interest on the part of the beneficiary, herein
defendant-appellee.
 YES. On the issue of insurable interest, respondent echoes the CA's pronouncement that
since it was Sotero who obtained the insurance, insurable interest was present. Under
Section 10 of the Insurance Code, Sotero had insurable interest in her own life, and could
validly designate anyone as her beneficiary. Respondent submits that the CA's findings of
fact leading to such conclusion should be respected.
 The purpose of the law is to give protection to the insured or his beneficiary by limiting
the rescinding of the contract of insurance on the ground of fraudulent concealment or
misrepresentation to a period of only two (2) years from the issuance of the policy or its
last reinstatement.
 Section 48 regulates both the actions of the insurers and prospective takers of life
insurance. It gives insurers enough time to inquire whether the policy was obtained by
fraud, concealment, or misrepresentation; on the other hand, it forewarns scheming
individuals that their attempts at insurance fraud would be timely uncovered - thus
deterring them from venturing into such nefarious enterprise. At the same time,
legitimate policy holders are absolutely protected from unwarranted denial of their
claims or delay in the collection of insurance proceeds occasioned by allegations of fraud,
concealment, or misrepresentation by insurers, claims which may no longer be set up
after the two-year period expires as ordained under the law.

Thus, the self-regulating feature of Section 48 lies in the fact that both the insurer and
the insured are given the assurance that any dishonest scheme to obtain life insurance
would be exposed, and attempts at unduly denying a claim would be struck down. Life
insurance policies that pass the statutory two-year period are essentially treated as
legitimate and beyond question, and the individuals who wield them are made secure by
the thought that they will be paid promptly upon claim. In this manner, Section 48
contributes to the stability of the insurance industry.

Section 48 prevents a situation where the insurer knowingly continues to accept annual
premium payments on life insurance, only to later on deny a claim on the policy on
specious claims of fraudulent concealment and misrepresentation, such as what obtains
in the instant case. Thus, instead of conducting at the first instance an investigation into
 the circumstances surrounding the issuance of insurance Policy No. 747411 which would
have timely exposed the supposed flaws and irregularities attending it as it now
professes, petitioner appears to have turned a blind eye and opted instead to continue
collecting the premiums on the policy. For nearly three years, petitioner collected the
premiums and devoted the same to its own profit. It cannot now deny the claim when it
is called to account. Section 48 must be applied to it with full force and effect.

MA. LOURDES S. FLORENDO, Petitioner,

vs.
PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE,
G.R. No. 186983 February 22, 2012

Facts:
On October 23, 1997 Manuel Florendo filed an application for comprehensive pension plan with
respondent Philam Plans, Inc. (Philam Plans) after some convincing by respondent Perla
Abcede. The plan had a pre-need price of ₱997,050.00, payable in 10 years, and had a maturity
value of ₱2,890,000.00 after 20 years. Manuel signed the application and left to Perla the task
of supplying the information needed in the application. Respondent Ma. Celeste Abcede, Perla’s
daughter, signed the application as sales counselor.

Aside from pension benefits, the comprehensive pension plan also provided life insurance
coverage to Florendo. This was covered by a Group Master Policy that Philippine American Life
Insurance Company (Philam Life) issued to Philam Plans. Under the master policy, Philam Life
was to automatically provide life insurance coverage, including accidental death, to all who
signed up for Philam Plans’ comprehensive pension plan. If the plan holder died before the
maturity of the plan, his beneficiary was to instead receive the proceeds of the life insurance,
equivalent to the pre-need price. Further, the life insurance was to take care of any unpaid
premium until the pension plan matured, entitling the beneficiary to the maturity value of the
pension plan.

On October 30, 1997 Philam Plans issued Pension Plan Agreement PP43005584 to Manuel, with
petitioner Ma. Lourdes S. Florendo, his wife, as beneficiary. In time, Manuel paid his quarterly
premiums.

Eleven months later or on September 15, 1998, Manuel died of blood poisoning. Subsequently,
Lourdes filed a claim with Philam Plans for the payment of the benefits under her husband’s
plan. Because Manuel died before his pension plan matured and his wife was to get only the
benefits of his life insurance, Philam Plans forwarded her claim to Philam Life.

On May 3, 1999 Philam Plans wrote Lourdes a letter, declining her claim. Philam Life found that
Manuel was on maintenance medicine for his heart and had an implanted pacemaker. Further,
he suffered from diabetes mellitus and was taking insulin. Lourdes renewed her demand for
payment under the plan but Philam Plans rejected it, prompting her to file the present action
against the pension plan company before the Regional Trial Court (RTC) of Quezon City. On
March 30, 2006 the RTC rendered judgment, ordering Philam Plans, Perla and Ma. Celeste,
solidarily, to pay Lourdes all the benefits from her husband’s pension plan, namely:
₱997,050.00, the proceeds of his term insurance, and ₱2,890,000.00 lump sum pension benefit
upon maturity of his plan; ₱100,000.00 as moral damages; and to pay the costs of the suit. The
RTC ruled that Manuel was not guilty of concealing the state of his health from his pension plan
application.

On December 18, 2007 the Court of Appeals (CA) reversed the RTC decision, holding that
insurance policies are traditionally contracts uberrimae fidae or contracts of utmost good faith.
As such, it required Manuel to disclose to Philam Plans conditions affecting the risk of which he
was aware or material facts that he knew or ought to know.

Issues:
 Whether or not Manuel’s non filling in the details regarding his continuing treatments
for heart condition and diabetes constitutes an assumption that he has never been
treated for the same illnesses.
 Whether or not Manuel is still bound by the content of the policy since he was not the
one who filled in the necessary details.
 Whether or not any defect or insufficiency in the information provided by his pension
plan application should be deemed waived after the same has been approved, the policy
has been issued, and the premiums have been collected.
 Whether or not Manuel’s concealment entitles Philam Plans to rescind its contract of
insurance with him.
Ruling:
 YES. Since Manuel signed the application without filling in the details regarding his
continuing treatments for heart condition and diabetes, the assumption is that he has
never been treated for the said illnesses in the last five years preceding his application.
This is implicit from the phrase "If your answer to any of the statements above
(specifically, the statement: I have never been treated for heart condition or diabetes)
reveal otherwise, please give details in the space provided for." But this is untrue since he
had been on "Coumadin," a treatment for venous thrombosis, and insulin, a drug used in
the treatment of diabetes mellitus, at that time.

 YES. Assuming that it was Perla who filled up the application form, Manuel is still bound
by what it contains since he certified that he authorized her action. Philam Plans had
every right to act on the faith of that certification.

Lourdes could not seek comfort from her claim that Perla had assured Manuel that the
state of his health would not hinder the approval of his application and that what is
written on his application made no difference to the insurance company. But,
indubitably, Manuel was made aware when he signed the pension plan application that,
in granting the same, Philam Plans and Philam Life were acting on the truth of the
representations contained in that application.

 No. The comprehensive pension plan that Philam Plans issued contains a one-year
incontestability period. It states: VIII. INCONTESTABILITY After this Agreement has
remained in force for one (1) year, we can no longer contest for health reasons any claim
for insurance under this Agreement, except for the reason that installment has not been
 paid (lapsed), or that you are not insurable at the time you bought this pension program
by reason of age. If this Agreement lapses but is reinstated afterwards, the one (1) year
contestability period shall start again on the date of approval of your request for
reinstatement. The above incontestability clause precludes the insurer from disowning
liability under the policy it issued on the ground of concealment or misrepresentation
regarding the health of the insured after a year of its issuance. Since Manuel died on the
eleventh month following the issuance of his plan, the one year incontestability period
has not yet set in. Consequently, Philam Plans was not barred from questioning Lourdes’
entitlement to the benefits of her husband’s pension plan.
 Yes. Pursuant to Section 27 of the Insurance Code, Manuel’s concealment entitles Philam
Plans to rescind its contract of insurance with him. Manuel had been taking medicine for
his heart condition and diabetes when he submitted his pension plan application. These
clearly fell within the five-year period. More, even if Perla’s knowledge of Manuel’s
pacemaker may be applied to Philam Plans under the theory of imputed knowledge, it is
not claimed that Perla was aware of his two other afflictions that needed medical
treatments.



QUA CHEE GAN, plaintiff-appellee,

vs.
LAW UNION AND ROCK INSURANCE CO., LTD., represented by its agent,
WARNER, BARNES AND CO., LTD., defendant-appellant.
G.R. No. L-4611 December 17, 1955

Issue:

 Whether or not the policies should be avoided for the reason that there was a breach of
warranty.
 Whether or not the insured violated the hemp warranty provision against the storage of
gasoline since insured admitted there were 36 cans of gasoline in Bodega 2 which was a
separate structure and not affected by the fire.
 Whether or not the appellant is barred by waiver (or rather estoppel) to claim violation
of the so-called fire hydrants warranty
 Whether or not the insurance company can void the policies it had issued
 Whether or not the insured violated the "Hemp Warranty" provisions of the policy
against the storage of gasoline
 Whether or not the insured planned the destruction of the bodega

Ruling:

 Under the Memorandum of Warranty, there should be no less than 1 hydrant for each
150 feet of external wall measurements of the compound, and since bodegas insured had
an external wall per meter of 1640 feet, the insured should have 11 hydrants in the
compound. But he only had 2. Even so, the insurer is barred by estoppel to claim
violation of the fire hydrants warranty, because knowing that the number of hydrants it
demanded never existed from the very beginning, appellant nevertheless issued the
 policies subject to such warranty and received the corresponding premiums. The
insurance company was aware, even before the policies were issued, that in the premises
there were only 2 hydrants and 2 others were owned by the Municipality, contrary to the
requirements of the warranties in question. It should be close to conniving at fraud upon
the insured to allow the insurer to claim now as void the policies it issued to the insured,
without warning him of the fatal defect, of which the insurer was informed, and after it
had misled the insured into believing that the policies were effective. According to
American Jurisprudence: It is a well-settled rule that the insurer at the time of the
issuance of a policy has the knowledge of existing facts, which if insisted on, would
invalidate the contract from its very inception, such knowledge constitutes a waiver of
conditions in the contract inconsistent with known facts, and the insurer is stopped
thereafter from asserting the breach of such conditions. The reason for the rule is: To
allow a company to accept one’s money for a policy of insurance which it knows to be
void and of no effect, though it knows as it must that the insured believes it to be valid
and binding is so contrary to the dictates of honesty and fair dealing, as so closely related
to positive fraud, as to be abhorrent to fair-minded men. It would be to allow the
company to treat the policy as valid long enough to get the premium on it, and leave it at
liberty to repudiate it the next moment. Moreover, taking into account the well-known
rule that ambiguities or obscurities must strictly be interpreted against the party that
cause them, the memorandum of warranty invoked by the insurer bars the latter from
questioning the existence of the appliances called for, since its initial expression “the
undernoted appliances for the extinction of fire being kept on the premises insured
hereby..” admits of the interpretation as an admission of the existence of such appliances
which insurer cannot now contradict, should the parole evidence apply.
 It is well to note that gasoline is not specifically mentioned among the prohibited articles
listed in the so-called hemp warranty. The clause relied upon by the insurer speaks of
“oils”. Ordinarily, oils mean lubricants and not gasoline or kerosene. Here again, by
reason of the exclusive control of the insurance company over the terms of the contract,
the ambiguity must be held strictly against the insurer and liberally in favor of the
insured, specially to avoid a forfeiture. Furthermore, the gasoline kept was only
incidental to the insured’s business. It is a well settled rule that keeping of inflammable
oils in the premises though prohibited by the policy does NOT void it if such keeping is
incidental to the business. Also, the hemp warranty forbade the storage only in the
building to which the insurance applies, and/or in any building communicating
therewith; and it is undisputed that no gasoline was stored in the burnt bodegas and that
Bodega No. 2 which was where the gasoline was found stood isolated from the other
bodegas.
 Yes. the appellant is barred by waiver (or rather estoppel) to claim violation of the so-
called fire hydrants warranty, for the reason that knowing fully all that the number of
hydrants demanded therein never existed from the very beginning, the appellant
neverthless issued the policies in question subject to such warranty, and received the
corresponding premiums. It would be perilously close to conniving at fraud upon the
insured to allow appellant to claims now as void ab initio the policies that it had issued to
the plaintiff without warning of their fatal defect, of which it was informed, and after it
had misled the defendant into believing that the policies were effective.
 NO. The insurer, who at the time of issuance, has knowledge of existing facts which
would invalidate the contract from the beginning, such constitutes a waiver of conditions
in the contract inconsistent with the facts, and the insurer is stopped thereafter from
asserting the breach of such conditions. Also, an insurance company intends to executed
a valid contract in return for the premium received; and when the policy contains a
condition which renders it voidable at its inception, and this result is known to the
insurer, it will be presumed to have intended to waive the conditions and to execute a
binding contract, rather than to have deceived the insured into thinking he is insured
when in fact he is not. The appellant is barred estoppel to claim violation of the so-called
fire hydrants warranty, because it knew the number of hydrants demanded therein
never existed from the very beginning and issued the policies. To allow a company to
accept one's money for a policy of insurance which it then knows to be void and of no
effect, though it knows as it must, that the assured believes it to be valid and binding, is
so contrary to the dictates of honesty and fair dealing, and so closely related to positive
fraud, as to the abhorrent to fair-minded men. The appellant company so worded the
policies that while exacting the greater number of fire hydrants and appliances, it kept
the premium discount at the minimum of 2 1/2%, thereby giving the insurance company
a double benefit. Such abnormal treatment of the insured strongly points at an abuse of
the insurance company's selection of the words and terms of the contract, over which it
had absolute control. Receipt of Premiums or Assessments after Cause for Forfeiture
Other than Nonpayment. — It is a well settled rule of law that an insurer which with
knowledge of facts entitling it to treat a policy as no longer in force, receives
and accepts a premium on the policy, estopped to take advantage of the forfeiture. It
cannot treat the policy as void for the purpose of defense to an action to recover for a loss
thereafter occurring and at the same time treat it as valid for the purpose of earning and
collecting further premiums. Moreover, taking into account the well-known rule that
ambiguities or obscurities must be strictly interpreted against the party that caused
them, the "memo of warranty" invoked by appellant bars the latter from questioning the
existence of the appliances called for in the insured premises
 NO. The ambiguity must be held strictly against the insurer and liberally in favor of the
insured, specially to avoid a forfeiture. So long as insurance companies insist upon the
use of ambiguous, intricate and technical provisions, which conceal rather than frankly
disclose, their own intentions, the courts must, in fairness to those who purchase
insurance, construe every ambiguity in favor of the insured. Appellee admitted that there
were 36 cans of gasoline in the building designed. It However, gasoline is not specifically
mentioned among the prohibited articles listed in the so-called "hemp warranty." The
cause relied upon by the insurer speaks of "oils", and is uncertain because, "Oils" usually
mean "lubricants" and not gasoline or kerosene. If the company intended to rely upon a
condition of that character, it ought to have been plainly expressed in the policy. The
contract of insurance is one of perfect good faith not for the insured alone, but equally so
for the insurer; in fact, it is mere so for the latter, since its dominant bargaining position
carries with it stricter responsibility. Also, the gasoline kept in Bodega No. 2 was only
incidental to his business, being no more than a customary 2 day's supply for the five or
six motor vehicles used for transporting of the stored merchandise. "It is well settled that
 the keeping of inflammable oils on the premises though prohibited by the policy does not
void it if such keeping is incidental to the business."
 NO. It was unlikely that Qua burned the warehouse to defraud the company because he
had the resources to pay off the National Bank in a short time. Also, no motive appears
for attempt to defraud the insurer. While the acquittal of the insured in the arson case is
not res judicata on the present civil action, the insurer's evidence, to judge from the
decision in the criminal case, is practically identical in both cases and must lead to the
same result, since the proof to establish the defense of connivance at the fire in order to
defraud the insurer "cannot be materially less convincing than that required in order to
convict the insured of the crime of arson." As to the defense that the burned bodegas
could not possibly have contained the quantities of copra and hemp stated in the fire
claims, the insurer relied on its adjuster investigator who examined the premises during
and after the fire. His testimony, however, was based on inferences from the
photographs and traces found after the fire, and must yield to the contradictory
testimony of those who actually saw the contents of the bodegas shortly before the fire,
while inspecting them for the mortgagee Bank.