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Henry Harding
Commercial Union Assurance Company

FACTS: In February 1916, Mrs. Harding applied for car insurance for a
Studebaker she received as a gift from her husband. She was assisted by
Smith, Bell, and Co. which was the duly authorized representative (insurance
agent) of Commercial Union Assurance Company in the Philippines. The
cars value was estimated with the help of an experienced mechanic (Mr.
Server) of the Luneta Garage. The car was bought by Mr. Harding for
P2,800.00. The mechanic, considering some repairs done, estimated the
value to be at P3,000.00. This estimated value was the value disclosed by
Mrs. Harding to Smith, Bell, and Co. She also disclosed that the value was
an estimate made by Luneta Garage (which also acts as an agent for Smith,
Bell, and Co).

Garage made some repairs and body paints which amounted to P900.00. Mr.
Server attested that the car is as good as new at the time the insurance was

Commercial Union, upon the information given by Mrs. Harding, and after an
inspection of the automobile by its examiner, having agreed that it was worth
P3,000, is bound by this valuation in the absence of fraud on the part of the
insured. All statements of value are, of necessity, to a large extent matters of
opinion, and it would be outrageous to hold that the validity of all valued
policies must depend upon the absolute correctness of such estimated value.

Estefania Saturnino
In March 1916, a fire destroyed the Studebaker. Mrs. Harding filed an
insurance claim but Commercial Union denied it as it insisted that the
representations and averments made as to the cost of the car were false;
and that said statement was a warranty. Commercial Union also stated that
the car does not belong to Mrs. Harding because such a gift [from her
husband] is void under the Civil Code.

ISSUE: Whether or not Mrs. Harding is entitled to the insurance claim.

HELD: Yes. Commercial Union is not the proper party to attack the validity of
the gift made by Mr. Harding to his wife.

The statement made by Mrs. Harding as to the cost of the car is not a
warranty. The evidence does not prove that the statement is false. In fact, the
evidence shows that the cost of the car is more than the price of the
insurance. The car was bought for P2,800.00 and then thereafter, Luneta

The Philippine American Life Insurance Company

FACTS: In September 1957, Estefania Saturnino was operated for cancer in

which her right breast was removed. She was advised by her surgeon that
shes not totally cured because her cancer was malignant. In November
1957, she applied for an insurance policy under Philamlife (Philippine
American Life Insurance Company). She did not disclose the fact that she
was operated nor did she disclose any medical histories. Philamlife, upon
seeing the clean bill of health from Estefania waived its right to have
Estefania undergo a medical checkup. In September 1958, Estefania died of
pneumonia secondary to influenza. Her heirs now seek to enforce the
insurance claim.

ISSUE: Whether or not Saturnino is entitled to the insurance claim.

HELD: No. The concealment of the fact of the operation is fraudulent. Even
if, as argued by the heirs, Estefania never knew she was operated for cancer,
there is still fraud in the concealment no matter what the ailment she was
operated for. Note also that in order to avoid a policy, it is not necessary that
actual fraud be established otherwise insurance companies will be at the
mercy of any one seeking insurance.
Segundina Musngi, et al.
In this jurisdiction a concealment, whether intentional or unintentional,
entitles the insurer to rescind the contract of insurance, concealment being
defined as negligence to communicate that which a party knows and ought
to communicate.

Also, the fact that Philamlife waived its right to have Estefania undergo a
medical examination is not negligence. Because of Estefanias concealment,
Philamlife considered medical checkup to be no longer necessary. Had
Philamlife been informed of her operation, she would have been made to
undergo medical checkup to determine her insurability.

West Coast Life Insurance Co.

FACTS: Arsenio Garcia was insured by the defendant company in the sum of
P5, 000 effective as of 25 July 1931. He was again insured by the same
company for P10, 000 effective as of 20 October 1931. The two policies were
valid and subsisting at the time of his death on 30 December 1932. However,
the claim of the beneficiaries Segundina Musngi and Buenaventura Garcia
were denied by the defendant company on the ground that the latter
discovered that the insureds answers in the policy regarding his state of
health were false and fraudulent, because the truth was that the insured,
before answering and signing that applications and before the issuance of
the policies, he had been treated in the General Hospital by Dr. Pilar Cruz for
different ailments. Defendant contended that at the outset that the two
policies did not create any valid obligation because they were fraudulently
obtained by the insured.

ISSUE: Whether the answers given by the insured in his applications are
false, and if they were the cause, or one of the causes, which induced the
defendant to issue the policies.

HELD: Yes. The insured knew that he had suffered from a number of
ailments, including incipient pulmonary tuberculosis, before subscribing the

applications, yet he concealed them and omitted the hospital where he was
confined as well as the name of the lady physician who treated him. That this
concealment and the false statements constituted fraud, is likewise clear,
because the defendant by reason thereof accepted the risk which it would
otherwise have flatly refused. When not otherwise specially provided for by
the Insurance Law, the contract of life insurance is governed by the general
rules of the civil law regarding contracts.

Article 1261 of the Civil Code provides that there is no contract unless there
should be, in addition to consent and a definite object, a consideration for the
obligation established. And article 1276 provides that the statement of a false
consideration shall render the contract void. The two answers being one of
the considerations of the policies, and it appearing that they are false and
fraudulent, it is evident that the insurance contracts were null and void and
did not give rise to any right to recover their value or amount. Moreover, one
ground for the rescission of a contract of insurance under the Insurance Act
is a "concealment", which in section 25 is defined as "A neglect to
communicate that which a party knows and ought to communicate".
Concealment exists where the assured has knowledge of a fact material to
the risk, and honesty, good faith and fair dealing requires that he should
communicate it to the assured, but he designedly and intentionally withholds
the same.
The Insular Life Assurance Co., Ltd.
Serafin Feliciano, et al.
FACTS: The present case is a motion to reconsider and set aside the
previous Supreme Court decision promulgated on 13 September 1941,
wherein the latter ruled in favor of the respondents and against the petitioner
for the sum of P25, 000, representing the value of two insurance policies
issued by the petitioner on the life of Evaristo Feliciano. Evaristo Feliciano,
who died on 29 September 1935, was suffering from advanced pulmonary
tuberculosis when he signed his applications for insurance on 12 October
On that same date Dr. Trepp, who took x-ray pictures of his lungs, informed
respondent Dr. Serafin Feliciano, brother of Evaristo, that the latter was in
very serious condition. Nevertheless the question contained in the application
Have you suffered from any ailment or disease of the lungs?appears
to have been answered, no. The false answer above referred to, as well as

the others, was written by the Company's soliciting agent Romulo M. David,
in collusion with the medical examiner Dr. Gregorio Valdez, for the purpose of
securing the Company's approval of the application so that the policy to be
issued thereon might be credited to said agent in connection with the interprovincial contest which the Company was then holding among its soliciting
agents to boost the sales of its policies.
The petitioner insists that upon the facts of the case the policies in question
are null and void ab initio and that all that the respondents are entitled to is
the refund of the premiums paid thereon.
HELD: Petitioners contention is correct. When Evaristo Feliciano, the
applicant for insurance, signed the application in blank and authorized the
soliciting agent and/or medical examiner of the Company to write the
answers for him, he made them his own agents for that purpose, and he was
responsible for their acts in that connection. Moreover, from the facts of the
case we cannot escape the conclusion that the insured acted in connivance
with the soliciting agent and the medical examiner of the Company in
accepting the policies in question. In conclusion, the insured was a coparticipant in the fraudulent procurement of the policies in question and that
by reason thereof said policies are void ab initio.

Manila Bankers Life

FACTS: In April 1969, Carmen Lapuz filled out an application form for
insurance under Manila Banker Life Assurance Corporation. She stated that
her date of birth was July 11, 1904. Upon payment of the Php 20.00
premium, she was issued the insurance policy in April 1969. In May 1969,
Carmen Lapuz died in a vehicular accident. Regina Edillon, who was named
a beneficiary in the insurance policy sought to collect the insurance
proceeds but Manila Banker denied the claim.

Apparently, it is a rule of the insurance company that they were not to issue
insurance policies to persons who are under the age of sixteen (16) years of
age or over the age of sixty (60) years Note, that Lapuz was already 65
years old when she was applying for the insurance policy.

ISSUE: Whether or not Edillon is entitled to the insurance claim as a


HELD: Yes. Carmen Lapuz did not conceal her true age. Despite this, the
insurance company still received premium from Lapuz and issued the
corresponding insurance policy to her. When the accident happened, the
insurance policy has been in force for 45 days already and such time was
already sufficient for Manila Banker to notice the fact that Lapuz is already
over 60 years old and thereby cancel the insurance policy. If Manila Banker
failed to act, it is either because it was willing to waive such disqualification;
or, through the negligence or incompetence of its employees for which it has
only itself to blame, it simply overlooked such fact. Under the circumstances,
Manila Banker is already deemed in estoppel.

Gonzalez Lao
Yek Tong Lin Fire & Marine Insurance
FACTS: Gonzales was issued 2 fire insurance policies by Yek for 100T
covering his leaf tobacco prducts. They were stored in Gonzales building on
Soler St., which on Jan. 11, 1928, burned down. Art. 3 of the Insurance
policies provided that: Any insurance in force upon all or part of the things
unsured must be declared in writing by the insured and he (insured) should
cause the company to insert or mention it in the policy. Without such
requisite, such policy will be regarded as null and void and the insured will be
deprived of all rights of indemnity in case of loss.

Notwithstanding said provision, Gonzales entered into other insurance

contracts. When he sought to claim from Yek after the fire, the latter denied
any liability on the ground of violation of Art. 3 of the said policies. Gonzales
however proved that the insurer knew of the other insurance policies
obtained by him long efore the fire, and the insurer did NOT rescind the
insurance policies in question but demanded and collected from the insured
the premiums.

Whether or not Yek is still entitled to annul the contract.

The action by the insurance company of taking the premiums of the insured
notwithstanding knowledge of violations of the provisions of the policies
amounted to waiver of the right to annul the contract of insurance.

Tan Chay Heng

The West Coast Life Insurance Company
FACTS: In April 1925, the defendant company approved a life insurance
policy in favor of Tan Ceang for P10, 000, in which the plaintiff was sole
beneficiary. Tan Ceang died on 10 May 1925 and the following month,
plaintiff submitted proofs of the death of Tan Ceang with a claim for the
payment of the policy which the defendant refused to pay on the grounds of
fraud and misrepresentation.
The lower court ruled in favor of plaintiff which defendant appealed and held
that the lower court erred in holding that an insurer cannot avoid a policy
which had been procured by fraud unless he brings action to rescind it before
he is sued thereon (Section 47 of the Insurance Act).
ISSUE: Whether or not Section 47 of the Insurance Act applies in the case at
HELD: No. In the instant case, it will be noted that even in its prayer, the
defendant does not seek to have the alleged insurance contract rescinded. It
denies that it ever made any contract of insurance on the life of Tan Ceang or
that any such a contract ever existed, and that is the question which it seeks
to have litigated by its special defense. In the very nature of things, if the
defendant never made or entered into the contract in question, there is no
contract to rescind, and, hence, section 47 upon which the lower court based
its decision in sustaining the demurrer does not apply. Therefore, Section 47
does not apply.

void because Qua Chee Gan failed to install 11 hydrants; and that gasoline
was found in one of the warehouses.

ISSUE: Whether or not the insurance contract is void.

Qua Chee Gan


HELD: No. Law Union cannot exempt itself from paying Qua Chee Gan
because it is estopped from invoking the same. 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.

Law Union And Rock Insurance Co., Ltd. (1955)

FACTS: Qua Chee Gan owns four warehouses in Albay. He was using these
warehouses to house crops like copra and hemp. All warehouses were
insured by Law Union and Rock Insurance for the amount of P370,000.00.
The insurance states that Qua Chee Gan should install 11 hydrants in the
warehouses premises. Qua Chee Gan installed only two, but Law Union
nevertheless went on with the insurance policy and collected premiums from
Qua Chee Gan. The insurance contract also provides that oil should not be
stored within the premises of the warehouses.

In 1940, three of the warehouses were destroyed by fire. The damage

caused amounted to P398k. Qua Chee Gan demanded insurance pay from
Law Union but the latter refused as it alleged that after investigation from
their part, they found out that Qua Chee Gan caused the fire. Law Union in
fact sued Qua Chee Gan for Arson.

Qua Chee Gan was acquitted in the arson case. He then demanded that Law
Union pay up. This time, Law Union averred that the insurance contract is

Also, gasoline is not one of those items specifically prohibited from the
premises of the warehouses. What was mentioned was the word oil which
could mean anything (from palm oil to lubricant and not gasoline or
kerosene). This ambiguity is to be interpreted against Law Union because a
contract of insurance is a contract of adhesion. Further, oil is incidental to
Qua Chee Gans business, it being used for motor fuel.

US Life

FACTS: US Life issued a 20 yr endowment life policy on the joint lives of

Patricio Soliman and his wife Rosario, each of them being the beneficiary of
the other. In Mar. 1949, the spouses were informed that the premium for Jan
1949 was still unpaid notwithstanding that the 31-day grace period has
already expired, and they were furnished at the same time long-form health
certificates for the reinstatement of the policies. In Apr 1949, they submitted
the certificates and paid the premiums.

In Jan. 1950, Rosario died of acute dilation of the heart, and thereafter,
Patricio filed a claim for the proceeds of the insurance. US life denied the
claim and filed for the rescission of the contract on the ground that the
certificates failed to disclose that Rosario had been suffering from bronchial
asthma for 3 years prior to their submission.

ISSUE: Whether or not the contract can still be rescinded.

HELD: Yes. The insurer is once again given two years from the date of
reinstatement to investigate into the veracity of the facts represented by the
insured in the application for reinstatement. When US life sought to rescind
the contract on the ground of concealment/misrepresentation, two years had
not yet elapsed. Hence, the contract can still be rescinded.

Emilio Tan, et al.

Court of Appeals, et al.

FACTS: On 23 September 1973, Tan Lee Siong applied for life insurance in
the amount of P80, 000, effective 6 November 1973, with petitioners the
beneficiaries thereof. On 26 April 1975, Tan Lee Siong died of hepatoma. On
11 September 1975, respondent company denied petitioners claim and
rescinded the policy by reason of the alleged misrepresentation and
concealment of material facts made by the deceased. The premiums paid
were thereupon refunded. Petitioners filed a complaint with the Office of the
Insurance Commissioner, which was dismissed and affirmed by the Court of
ISSUE: Whether or not 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
the action.
HELD: 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." 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

Vda de Sindayen
Insular Life

FACTS: Sindayen, employed in the Bureau of Printing at Manila went to

Tarlac, to spend the Christmas vacation with his aunt. There he applied for
for life insurance in the sum of P1,000 and paid to the agent P15 cash as
part of the first premium. It was agreed with the agent that the policy, when
and if issued, should be delivered to his aunt with whom he left sum of
P26.06 to complete the payment of the first annual premium of P40.06.
Sindayen returned to Manila and resumed his work a linotype operator. The
company accepted the risk after examining Sindayen and issued a policy and
to the same agent for delivery to the insured. Sindayen abruptly passed
The policy which the company issued was received by its agent in Tarlac.
The agent delivered the policy to Felicidad Estrada upon her payment of the
balance of the first years annual premium. The agent asked Felicidad
Estrada if her nephew was in good health and she replied that she believed
so. He gave her the policy. The agent learned of the death of Arturo Sindayen
and the aunt to return the policy. He did not return or offer to return the
premium paid. The aunt gave him the policy.
The company obtained from the beneficiary, the widow of Arturo Sindayen,
her signature to a legal document entitled ACCORD, SATISFACTION AND
RELEASE In consideration of the sum of P40.06 paid to her by a check of
the company, she discharged the company for all claims . The said check for
P40.06 was never cashed but returned to the company. The widow brought
action to enforce payment of the policy. The first premium was already paid
by the insured covering the period from December 1, 1932. It is to December
1, 1933. Hence, this appeal.
ISSUE: WON the said policy never took effect because of paragraph 3 of the
application for at the time of its delivery by the agent the insured was not in
good health.
Held: No. Petition granted.
The application which the insured signed in Tarlac, contained among others
the following provisions:
3. That the said policy shall not take effect until the first premium has been
paid and the policy has been delivered to and accepted by me, while I am in
good health.
There is one line of cases which holds that the stipulation contained in
paragraph 3 is in the nature of a condition precedent, that is to say, that there
can be no valid delivery to the insured unless he is in good health at the time.
A number of these cases, on the other hand, go to the of holding that the
delivery of the policy by the agent to the insured consummates the contract

even though the agent knew that the insured was not in good health at the
time, the theory being that his knowledge is the companys knowledge and
his delivery of the policy is the companys delivery.
We are inclined to the view that it is more consonant with the well known
practice of life insurance companies and the evidence in the present case to
rest our decision on the proposition that Mendoza was authorized by the
company to make the delivery of the policy when he received the payment of
the first premium and he was satisfied that the insured was in good health.
In the case of MeLaurin vs. Mutual Life Insurance Co. -It is plain, therefore,
that upon the facts it is not necessarily a case of waiver or of estoppel, but a
case where the local agents, in the exercise of the powers lodged in them,
accepted the premium and delivered the policy. That act binds their principal,
the defendant.
The evidence in the record shows that Mendoza had the authority, given him
by the company, to withhold the delivery of the policy to the insured until the
first premium has been paid and the policy has been delivered to and
accepted by me (the insured) while I am in good health. Mendozas decision
that the condition had been met by the insured and that it was proper to
make a delivery of the policy to him is just as binding on the company as if
the decision had been made by its board of directors.
It is the interest not only the applicant but of all insurance companies as well
that there should be some act which gives the applicant the definite
assurance that the contract has been consummated. A cloud will be thrown
over the entire insurance business if the condition of health of the insured at
the time of delivery of the policy may be required into years afterwards with
the view to avoiding the policy on the ground that it never took effect because
of an alleged lack of good health, at the time of delivery.
When the policy is issued and delivered it is plainly not within the intention of
the parties that there should be any questions held in abeyance or reserved
for future determination. It would be a most serious handicap to business if
the very existence of the contract remains in doubt even though the policy
has been issued and delivered with all the formalities required by the law.
The delivery of the policy to the insured by an agent is the final act which
binds the company and insured in the absence of fraud or other legal ground
for rescission. The fact that the agent to whom it has entrusted this duty is
derelict or negligent or even dishonest in the performance of the duty which
has been entrusted to him would create a liability of the agent to the
company but does not resolve the companys obligation based upon the
authorized acts of the agent toward a third party who was not in collusion
with the agent.
4. That the agent taking this application has no authority to make, modify or
discharge contracts, or to waive any of the Companys right or requirements.

Paragraph 4 of the application to the effect is not in point. Mendoza neither

waived nor pretended to waive any right or requirement of the company. In
fact, his inquiry as to the state of health of the insured discloses that he was
endeavoring to assure himself that this requirement of the company had
been satisfied. In doing so, he acted within the authority conferred on him by
his agency and his acts within that authority bind the company. The company
therefore having decided that all the conditions precedent to the taking effect
of the policy had been complied with, it is now estopped to assert that it
never intended that the policy should take effect.


NOTE: Life annuity is the opposite of a life insurance. In life annuity, a big
amount is given to the insurance company, and if after a certain period of
time the insured is stil living, he is entitled to regular smaller amounts for the
rest of his life. Examples of Life annuity are pensions. Life Insurance on the
other hand, the insured during the period of the coverage makes small
regular payments and upon his death, the insurer pays a big amount to his

FACTS: On Sept. 24 1917, Joaquin Herrer made an application to SunLife

through its office in Manila for life annuity. Two days later, he paid the sum of
6T to the companys anager in its Manila office and was given a receipt. On
Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila.
On the same date, the Manila office prepared a letter notifying Herrer that his
application has been accepted and this was placed in the ordinary channels
of transmission, but as far as known was never actually mailed and never
received by Herrer. Herrer died on Dec. 20, 1917. The plaintiff as
administrator of Herrers estate brought this action to recover the 6T paid by
the deceased.


Whether or not the insurance contract was perfected.

The contract for life annuity was NOT perfected because it had NOT been
proved satisfactorily that the acceptance of the application ever came to the
knowledge of the applicant. An acceptance of an offer of insurance NOT
actually or constructively communicated to the proposer does NOT make a
contract of insurane, as the locus poenitentiae is ended when an acceptance
has passed beyond the control of the party.

Court of Appeals

FACTS: On Sept. 25, 2965, Lee Su Guat, widow, 61 years old and illiterate
who spoke only Chinese, applied for life insurance for 60T with Philamlife.
The application was in two parts, both in English. The second part dealt with
her state of health. Her answers having shown that she was health,
Philamlife issued her a policy effective Oct. 23, 1965 with her nephew
Vicente Tang as beneficiary.On Nov. 15, 1965, Lee again applied for
additional insurance of her life for 40T. Since it was only recent from the time
she first applied, no further medical exam was made but she accomplished
Part 1 (which certified the truthfulness of statements made in Part. 2)

terms of the insurance contract were fully explained to the other party. Even
if we were to say that the insurer is the one seeking the performance of the
cont contracts by avoiding paying the claim, it has to be noted as above
stated that there has been NO imputation of mistake of fraud by the illiterate
insured whose personality is represented by her beneficiary. In sum, Art.
1332 is inapplicable, and considering the findings of both the trial court and
the CA as to the Concealment of Lee, the SC affirms their decisions.

The policy was again approved. On Apri 20 1966, Lee Su Guat died of Lung
cancer. Tang claimed the amount o 100T but Philamlife refused to pay on the
ground that the insured was guilty of concealment and misrepresentation.
Both trial court and CA ruled that Lee was guilty of concealment.

Concurring: J., Antonio

Tangs position, however, is that because Lee was illiterate and spoke only
Chinese, she could not be held guilty of concealment of her health history
because the application for insurance was English, and the insurer has not
proven that the terms thereof had been fully explained to her as provided by
Art. 1332 of Civil Code.

In a contract of insurance, each party must communicate to the other, in

good faith, all facts within his knowledge which are material to the contract,
and which the other has no means of ascertaining. As a general rule, the
failure by the insured to disclose conditions affecting the risk of which he is
aware makes the contract voidable at the option of the insurer.

ISSUE: Whether or not Art. 1332 applies.

The reason for this rule is that insurance policies are traditionally contracts
uberrimae fidei, which means most abundant good faith, absolute and
perfect candor or openness and honesty, absence of any concealment or
deception however slight. Here the CA found that the insured deliberately
concealed material facts about her physical condition and history and/or
concealed with whoever assisted her in relaying false information to the
medical examiner. Certainly, the petitioner cannot assume inconsistent
positions by attempting to enforce the contract of insurance for the purpose
of collecting the proceeds of the policy and at the same time nullify the
contract by claiming that it was executed through fraud or mistake.

Held: NO. Art. 1332 is NOT applicable. Under said article, the obligation to
show that the terms of the contract had been fully explained to the party who
is unable to read or understand the language of the contract, when fraud or
mistake is alleged, devolves on the party seeking to enforce it. Here, the
insurance company is NOT seeking to enforce the contract; on the contrary, it
is seeking to avoid its performance.

It is petitioner who is seeking to enforce it, even as fraud or mistake is NOT

alleged. Accordingly, Philamlife was under no obligation to prove that the

NOTE: Art. 1332: When one of the parties is unable to read or if the contract
is in a language not understood by him, and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been
fully explained to him.

Court of Appeals
FACTS: Primitivo Perez had been insured with the BF Lifeman Insurance
Corporation since 1980 for P20,000.00. In October 1987, an agent of
Lifeman, Rodolfo Lalog, visited Perez in Quezon and convinced him to apply
for additional insurance coverage of P50,000.00, to avail of the ongoing
promotional discount of P400.00 if the premium were paid annually. Primitivo
B. Perez accomplished an application form for the additional insurance
coverage. Virginia A. Perez, his wife, paid P2,075.00 to Lalog. The receipt
issued by Lalog indicated the amount received was a "deposit."

Unfortunately, Lalog lost the application form accomplished by Perez and so

on October 28, 1987, he asked the latter to fill up another application form.
On November 1, 1987, Perez was made to undergo the required medical
examination, which he passed. Lalog forwarded the application for additional
insurance of Perez, together with all its supporting papers, to the office of BF
Lifeman Insurance Corporationn in Quezon which office was supposed to
forward the papers to the Manila office.

On November 25, 1987, Perez died while he was riding a banca which
capsized during a storm. At the time of his death, his application papers for
the additional insurance were still with the Quezon office. Lalog testified that
when he went to follow up the papers, he found them still in the Quezon
office and so he personally brought the papers to the Manila office of BF
Lifeman Insurance Corporation. It was only on November 27, 1987 that said

papers were received in Manila. Without knowing that Perez died on

November 25, 1987, BF Lifeman Insurance Corporation approved the
application and issued the corresponding policy for the P50,000.00 on
December 2, 1987.

Virginia went to Manila to claim the benefits under the insurance policies of
the deceased. She was paid P40,000.00 under the first insurance policy for
P20,000.00 (double indemnity in case of accident) but the insurance
company refused to pay the claim under the additional policy coverage of
P50,000.00, the proceeds of which amount to P150,000.00 in view of a triple
indemnity rider on the insurance policy.

In its letter of January 29, 1988 to Virginia A. Perez, the insurance company
maintained that the insurance for P50,000.00 had not been perfected at the
time of the death of Primitivo Perez. Consequently, the insurance company
refunded the amount of P2,075.00 which Virginia Perez had paid.

Lifeman filed for the rescission and the declaration of nullity. Perez, on the
other hand, averred that the deceased had fulfilled all his prestations under
the contract and all the elements of a valid contract are present. RTC ruled in
favor of Perez. CA reversed.

ISSUE: Whether or not there was a perfected additional insurance contract.

HELD: The contract was not perfected.

Insurance is a contract whereby, for a stipulated consideration, one party
undertakes to compensate the other for loss on a specified subject by
specified perils. A contract, on the other hand, is a meeting of the minds

between two persons whereby one binds himself, with respect to the other to
give something or to render some service.

Consent must be 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. When Primitivo filed an
application for insurance, paid P2,075.00 and submitted the results of his
medical examination, his application was subject to the acceptance of private
respondent BF Lifeman Insurance Corporation. The perfection of the contract
of insurance between the deceased and respondent corporation was further
conditioned upon compliance with the following requisites stated in the
application form:

"there shall be no contract of insurance unless and until a policy is issued on

this application and that the said policy shall not take effect until the premium
has been paid and the policy delivered to and accepted by me/us in person
while I/We, am/are in good health."

The assent of private respondent BF Lifeman Insurance Corporation

therefore was not given when it merely received the application form and all
the requisite supporting papers of the applicant. Its assent was given when it
issues a corresponding policy to the applicant. Under the abovementioned
provision, it is only when the applicant pays the premium and receives and
accepts the policy while he is in good health that the contract of insurance is
deemed to have been perfected.

It is not disputed, however, that when Primitivo died on November 25, 1987,
his application papers for additional insurance coverage were still with the
branch office of respondent corporation in Gumaca and it was only two days
later, or on November 27, 1987, when Lalog personally delivered the
application papers to the head office in Manila. Consequently, there was
absolutely no way the acceptance of the application could have been

communicated to the applicant for the latter to accept inasmuch as the

applicant at the time was already dead.

Commissioner Of Internal Revenue

Lincoln Philippine Life Insurance Co., Inc (2002)

FACTS: Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life
Insurance Company, Inc.) issued a special kind of life insurance policy known
as the "Junior Estate Builder Policy" with a distinguishing feature. It had
a "automatic increase clause" upon attainment of a certain age by the
insured. Commissioner of Internal Revenue issued deficiency documentary
stamps tax assessment for the year 1984 pertaining to the amount in
the automatic increase clause. Lincoln questioned the deficiency
assessments. Court of Tax Appeals: found no valid basis and cancelled it. CA
affirmed CTA. CIR claims that "automatic increase clause" in the subject
insurance policy is separate.
ISSUE: W/N the "automatic increase clause" should not be taxed with the
main policy.
HELD: NO. CA set aside. 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.

any rider, clause, warranty or endorsement pasted or attached to the

policy is considered part of such policy or contract of insurance
Section 173 that the payment of documentary stamp taxes is done at
the time the act is done or transaction had and the tax base for the
computation of documentary stamp taxes on life insurance policies under
Section 183 is the amount fixed in policy, unless the interest of a person
insured is susceptible of exact pecuniary measurement

the amount fixed in the policy is the figure written on its face and
whatever increases will take effect in the future by reason of the "automatic
increase clause" embodied in the policy without the need of another
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
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.
FACTS: Luis Lim of Zamboanga applied for a Sun Life policy for Php 5,000.
He designated his wife, Pilar, as beneficiary. The first premium of P433 was
paid by Lim, then the company issued a "provisional policy." Lim died after
the issuance of the provisional policy but before approval of the application.
Pilar brought an action to recover from Sun Life the sum of P5,000, the
amount named in the provisional policy. She lost in the trial court hence this
The "provisional policy" reads as follows:
The above-mentioned life is to be assured in accordance with the terms and
conditions contained or inserted by the Company in the policy which may be
granted by it in this particular case for four months only from the date of the
application, provided that the Company shall confirm this agreement by
issuing a policy on said application when the same shall be submitted to the
Head Office in Montreal. Should the Company not issue such a policy, then
this agreement shallbe null and void ab initio, and the Company shall be held
not to have been on the risk at all, but in such case the amount herein
acknowledged shall be returned.
ISSUE: WON there was a perfected contract of insurance
HELD: No. Petition dismissed.
The policy for four months is expressly made subjected to
the affirmative condition that "the company shall confirm this agreement by
issuing a policy on said application when the same shall be submitted to the
head office in Montreal."

Should the company not issue such a policy, then this agreement shall be
null and void ab initio, and the company shall be held not to have been on
the risk." This means that the agreement should not go into effect until the
home office of the company should confirm it by issuing a policy. The
provisional policy amounts to nothing but an acknowledgment on behalf of
the company, that it has received from the person named therein the sum of
money agreed upon as the first year's premium upon a policy to be issued
upon the application, if the application is accepted by the company.

become effective only when the "application shall be approved and the policy
duly signed by the secretary at the head office of the company and issued."
The premium of 433 must be returned.

There can be no contract of insurance unless the minds of the parties have
met in agreement. In this case, the contract of insurance was not
consummated by the parties.
The general rule concerning the agent's receipt pending approval or issuance
of policy is in several points, according to Joyce:
2. Where an agreement is made between the applicant and the agent
whether by signing an application containing such condition, or otherwise,
that no liability shall attach until the principal approves the risk and a receipt
is given buy the agent, such acceptance is merely conditional, and it
subordinated to the act of the company in approving or rejecting; so in life
insurance a "binding slip" or "binding receipt" does not insure of itself.
The court held that this second point applied to the case.
American jurisprudence tells us of such examples.
Steinle vs. New York Life Insurance Co.- the amount of the first premium had
been paid to an insurance agent and a receipt was given. The paper
declared that if the application was accepted by the company, the insurance
shall take effect from the date of the application but that if the application was
not accepted, the money shall be returned. The court held that there was no
perfection of the contract.
Cooksey vs. Mutual Life Insurance Co.- the person applying for the life
insurance paid and amount equal to the first premium, but the
application and the receipt for the money paid, stipulated that the insurance
was to become effective only when the application was approved and the
policy issued. There was also no perfection.
A binding receipt is a custom where temporary insurance pending the
consideration of the application was given until the policy be issued or the
application rejected, and such contracts are upheld and enforced when
the applicant dies before the issuance of a policy or final rejection of the
However, there was no perfected contract because of the clause in the
application and the receipt stipulate expressly that the insurance shall

Court of Appeals

FACTS: On March 14, 1957, respondent Ngo Hing filed an application with
Grepalife for a 20-yr endowment policy for 50T on the life of his one year old
daughter Helen Go. All the essential data regarding Helen was supplied by
Ngo to Lapu-Lapu Mondragon, the branch manager of Grepalife-Cebu.
Mondragon then typed the data on the application form which was later
signed by Ngo. Ngo then paid the insurance premium and a binding deposit
receipt was issued to him.
The binding receipt contained the following provision: If the applicant shall
not have been insurable xxx and the Company declines to approve the
application, the insurance applied for shall not have been in force at any time
and the sum paid shall be returned to the applicant upon the surrender of
this receipt. Mondragon wrote on the bottom of the application form his
strong recommendation for the approval of the insurance application.

On Apr 30, 1957, Mondragon received a letter from Grepalife Main office
disapproving the insurance application of Ngo for the simple reason that the
20yr endowment plan is not available for minors below 7 yrs old. Mondragon
wrote back the main office again strongly recommending the approval of the
endowment plan on the life of Helen, adding that Grepalife was the only
insurance company NOT selling endowment plans to children.

In May 1957, Helen died of influenza with complication of broncho

pneumonia. Ngo filed a claim with Gepalife, but the latter denied liability on
the ground that there was no contract between the insurer and the insured
and a binding receipt is NOT evidence of such contract.

Pacific Timber
Court of Appeals

Whether or not the binding deposit receipt, constituted a temporary contract
of life insurance.

FACTS: On March 13, 1963, Pacific secured temporary insurance from the
Workemens 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.

NO. The binding receipt in question was merely an acknowledgement on
behalf of the company, that the latters 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 Grepalife disapproved the insurance application of Ngo, the binding

deposit receipt had never became on force at any time, pursuant to par. E of
the said receipt. A binding 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.

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

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 not was without consideration, thus null
and void.

HELD: It was with consideration.

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.

SC upheld Pacifics contention that said cover not 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

Pacifics 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.

In 1917, Dunn sold the property to Harding, but no assignment of the policies
was made to the latter. Property was destroyed by fire. SMB filed an action
in court to recover on the policies. Harding was made a defendant because
by virtue of the sale, he became the owner of the property, although the
policies were issued in SMBs name.

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.

SMB sought to recover the proceeds to the extent of its mortgage credit with
the balance to go to Harding. Insurance Companies contended that they
were not liable to Harding because their liability under the policies was
limited to the insurable interests of SMB only. SMB eventually reached a
settlement with the insurance companies and was paid the balance of its
mortgage credit. Harding was left to fend for himself. Trial court ruled
against Harding. Hence the appeal.

San Miguel Brewery


ISSUE: Whether or not the insurance companies are liable to Harding for the
balance of the proceeds of the 2 policies.

Law Union Rock Insurance Company

FACTS: On Jan. 12, 1918, Dunn mortgaged a parcel of land to SMB to

secure a debt of 10T. Mortgage contract stated that Dunn was to have the
property insured at his own expense, authorizing SMB to choose the insurers
and to receive the proceeds thereof and retain so much of the proceeds as
would cover the mortgage debt. Dunn likewise authorized SMB to take out
the insurance policy for him. Brias, SMBs general manager, approached Law
Union for insurance to the extent of 15T upon the property. In the
application, Brias stated that SMBs interest in the property was merely that
of a mortgagee.
Law Union, not wanting to issue a policy for the entire amount, issued one for
P7,500 and procured another policy of equal amount from Filipinas Cia de
Seguros. Both policies were issued in the name of SMB only and contained
no reference to any other interests in the property. Both policies required
assignments to be approved and noted on the policy. Premiums were paid by
SMB and charged to Dunn. A year later, the policies were renewed.

HELD: No. Under the Insurance Act, the measure of insurable interest in the
property is the extent to which the insured might be daminified by the loss or
injury thereof. Also it is provided in the IA that the insurance shall be applied
exclusively to the proper interest of the person in whose name it is made.
Undoubtedly, SMB as the mortgagee of the property, had an insurable
interest therein; but it could NOT, in any event, recover upon the two policies
an amount in excess of its mortgage credit.

By virtue of the Insurance Act, neither Dunn nor Harding could have
recovered from the two policies. With respect to Harding, when he acquired
the property, no change or assignment of the policies had been undertaken.
The policies might have been worded differently so as to protect the owner,
but this was not done.

If the wording had been: Payable to SMB, mortgagee, as its interests may
appear, remainder to whomsoever, during the continuance of the risk, may
become owner of the interest insured, it would have proved an intention to
insure the entire interest in the property, NOT merely SMBs and would have
shown to whom the money, in case of loss, should be paid. Unfortunately,
this was not what was stated in the policies.

If during the negotiation for the policies, the parties had agreed that even the
owners interest would be covered by the policies, and the policies had
inadvertently been written in the form in which they were eventually issued,
the lower court would have been able to order that the contract be reformed
to give effect to them in the sense that the parties intended to be bound.
However, there is no clear and satisfactory proof that the policies failed to
reflect the real agreement between the parties that would justify the
reformation of these two contracts.

without the knowledge of H.S. Reyes. Enrique was billed P2,102.73 through
Bayne. The insurance company drew a check deducting P100 for franchise
and entrusted it to Bayne payable to Enrique or H.S. Reyes.
Still unpaid, the sedan was delivered to Enrique without the Knowledge of
H.S. Reyes. Bonifacio Bros and Ayala Auto filed in the MTC on the theory
that the insurance proceeds should be paid directly to them. CFI affirmed
MTC: H.S. Reyes, Inc. as having a better right.
ISSUE: W/N there is privity between Bonifacio Bro and Ayala Auto against
the insurance company
HELD: NO. Judgment affirmed.

Bonifacio Bros., Inc.

Mora (1967)

FACTS: Enrique Mora, owner of Oldsmobile sedan model 1956, mortgaged it

to H.S. Reyes, Inc., with the condition that they would be the beneficiary of its
insurance. June 23, 1959: The sedan was insured with State Bonding &
Insurance Co., Inc. During the period of effectivity, the sedan met an accident
and it was appraised by Bayne Adjustment Co. and repaired it with Bonifacio
Bros. and the parts were supplied by Ayala Auto Parts Co. This was all done

GR: contracts take effect only between the parties thereto

EX: some specific instances provided by law where the contract
contains some stipulation in favor of a third person - stipulation pour
provision in favor of a third person not a party to the contract
third person is allowed to avail himself of a benefit granted to
him by the terms of the contract, provided that the contracting parties
have clearly and deliberately conferred a favor upon such person
stipulation pour autrui must be clearly expressed - none here
"loss payable" clause of the insurance policy stipulates that
"Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only
the H.S. Reyes, Inc. which they intended to benefit.
stipulation merely establishes the procedure that the insured
has to follow in order to be entitled to indemnity for repair
a policy of insurance is a distinct and independent contract
between the insured and insurer, and third persons have no right either
in a court of equity, or in a court of law, to the proceeds of it, unless there
be some contract of trust, expressed or implied between the insured and
third person
"loss" in insurance law embraces injury or damage
The injury or damage sustained by the insured in
consequence of the happening of one or more of the accidents or
misfortune against which the insurer, in consideration of the premium,
has undertaken to indemnify the insured

FACTS: On Dec. 1, 1961, Fieldmens Insurance co. issued in favor of the

Manila Yellow Taxicab a common carrier insurance policy with a stipulation
that the company shall indemnify the insured of the sums which the latter
wmy be held liable for with respect to death or bodily injury to any fairepaying passenger including the driver and conductor.

The policy also stated that in the event of the death of the driver, the
Company shall indemnify his personal representatives and at the Companys
option may make indemnity payable directly to the claimants or heirs of the

During the policys lifetime, a taxicab of the insured driven by Coquia met an
accident and Coquia died. When the company refused to pay the only heirs
of Coquia, his parents, they instituted this complaint. The company contends
that plaintiffs have no cause of action since the Coquias have no contractual
relationship with the company.

ISSUE: Whether or not plaintiffs have the right to collect on the policy.

Fieldmens Insurance

HELD: YES. Athough, in general, only parties to a contract may bring an

action based thereon, this rule is subject to exceptions, one of which is found
in the second paragraph of Article 1311 of the Civil Code of the Philippines,
reading: "If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated his
acceptance to the obligor before its revocation. A mere incidental benefit or
interest of a person is not sufficient. The contracting parties must have
clearly and deliberately conferred a favor upon a third person." This is but the
restatement of a well-known principle concerning contracts pour autrui, the
enforcement of which may be demanded by a third party for whose benefit it
was made, although not a party to the contract, before the stipulation in his
favor has been revoked by the contracting parties

In the case at bar, the policy under consideration is typical of contracts pour
autrui this character being made more manifest by the fact that the deceased
driver paid fifty percent (50%) of the corresponding premiums, which were
deducted from his weekly commissions. Under these conditions, it is clear
that the Coquias who, admittedly, are the sole heirs of the deceased
have a direct cause of action against the Company, and, since they could
have maintained this action by themselves, without the assistance of the
insured it goes without saying that they could and did properly join the latter
in filing the complaint herein.

Del Monte, 20 SCRA 1043 (1967)

FACTS: Julio Aguilar owner and operator of several jeepneys insured them
with Capital Insurance & Surety Co., Inc. On February 20, 1961, along the
intersection of Juan Luna and Moro streets, City of Manila, the jeepneys
operated by Aguilar driven by Iluminado del Monte and Gervacio Guingon
bumped and Guingon died some days after. Iluminado del Monte was
charged with homicide thru reckless imprudence and was penalized
4 months imprisonment. The heirs of Gervacio Guingon filed an action for
damages praying that P82,771.80 be paid to them jointly and severally by the
driver del Monte, owner and operator Aguilar, and the Capital Insurance &
Surety Co., Inc.
CFI: Iluminado del Monte and Julio Aguilar jointly and severally to pay
plaintiffs the sum of P8,572.95 as damages for the death of their father, plus
P1,000.00 for attorney's fees plus costs. Capital Insurance and Surety Co.,
Inc. is hereby sentenced to pay P5,000 plus P500 as attorney's fees and
costs to be applied in partial satisfaction of the judgment rendered against
Iluminado del Monte and Julio Aguilar in this case.
1. W/N there a stipulation pour autriu to enable that will enable the heirs to
sue against Capital Insurance and Surety Co., Inc.? - YES
2. W/N the heirs can sue the insurer and insured jointly? - YES
HELD: Affirmed in toto.

1. YES

policy: the insurer agreed to indemnify the insured "against all sums .
. . which the Insured shall become legally liable to pay in respect of: a.
death of or bodily injury to any person . . . ." - indemnity against liability.

TEST: Where the contract provides for indemnity against liability to

third persons, then third persons to whom the insured is liable, CAN sue
the insurer. Where the contract is for indemnity against actual loss or
payment, then third persons CANNOT proceed against the insurer, the
contract being solely to reimburse the insured for liability actually
discharged by him thru payment to third persons, said third persons'
recourse being thus limited to the insured alone.

2. YES

policy: expressly disallows suing the insurer as a co-defendant of the

insured in a suit to determine the latter's liability.

no action close: suit and final judgment be first obtained

against the insured; that only "thereafter" can the person injured recover
on the policy

Sec. 5 of Rule 2 on "Joinder of causes of action" and Sec. 6 of Rule

3 on "Permissive joinder of parties" cannot be superseded, at least with
respect to third persons not a party to the contract, as herein, by a "no
action" clause in the contract of insurance.

Del Val
Del Val

FACTS: Petitioners and private respondents are brothers and Sisters and
are the only heirs and next of kin of Gregorio del Val who died intestate. It
was found out that the deceased took out insurance on his life for the sum of
40T and made it payable to private respondents as sole beneficiary. After
Gregorios death, Andres collected the proceeds of the policy. Of the said
policy, Andres paid 18T to redeem some real property which Gregorio had
sold to third persons during his lifetime.

Said redemption of the property was made by Andres laywer in the name of
Andres and the petitioners. (Accdg to Andres, said redemption in the name
of Petitioners and himself was without his knowledge and that since the
redemption, petitioners have been in possession of the property).

Petitioners now contend that the amount of the insurance policy belonged to
the estate of the deceased and not to Andres personally. Petitioners filed a
complaint for partition of property including the insurance proceeds

ISSUE: Whether or not the petitioners have a right to the insurance

HELD: No. The contract of life insurance is a special contract and the
destination of the proceeds thereof is determined by special laws which deal
exclusively with the subject. Our civil code has no provisions which relate
directly and specifically to life-insurance contracts of to the destination of lifeinsurance proceeds that subject is regulated exclusively by the Code of
Commerce. Thus, contention of petitioners that proceeds should be
considered as a donation or gift and should be included in the estate of the
deceased is UNTENABLE.

Since the repurchase has been made n the names of all the heirs, instead of
the defendant alone, petitioners claim that the property belongs to the heirs
in common and not to the defendant alone. The SC held that if it is
established by evidence that that was his intention and that the real estate
was delivered to the plaintiffs with that understanding, then it is probable that
their contention is correct and that they are entitled to share equally with the
defendant. HOWEVER, it appears from the evidence that the conveyances
were taken in the name of the plaintiffs without the knowledge and consent of
Andres, or that it was not his intention to make a gift to them of real estate,
when it belongs to him.

Andres claims that he is the sole owner of the proceeds and prayed that he
be declared:

Sole owner of the real property, redeemed with the use of the insurance
proceeds and its remainder; Petitioners to account for the use and
occupation of the premises.

FACTS: Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy
for P5,882.00 with a rider for Accidental Death. Hedesignated Carponia T.
Ebrado as the revocable beneficiary in his policy. He referred to her as his
wife. Cristor was killed when he was hit by a failing branch of a tree. Insular
Life was made 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 foraccidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as
the designated beneficiary therein, although she admited that she and the
insured were merely living as husband and wife without the benefit of

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.
Insular commenced an action for Interpleader before the trial court as to who
should be given the proceeds. The court declared Carponia as disqualified.
ISSUE: WON a common-law wife named as beneficiary in the life insurance
policy of a legally married man can claim the proceeds in case of death of the
Held: No.

The insured was married to Pascuala Ebrado with whom she has six
legitimate children. He was also living in with hiscommon-law wife with whom
he has two children.


RATIO: Section 50 of the Insurance Act which provides that "the insurance
shall be applied exclusively to the proper interest of the person in whose
name it is made"

Court of Appeals (1998)

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.

FACTS: GOYU applied for credit facilities and accommodations with RCBC.
After due evaluation, a credit facility in the amount of P30 million was initially
granted. Upon GOYU's application increased GOYU's credit facility to P50
million, then to P90 million, and finally to P117 million. As security for its
credit facilities with RCBC, GOYU executed two REM and two CM in favor of
RCBC, which were registered with the Registry of Deeds at. Under each of
these four mortgage contracts, GOYU committed itself to insure the
mortgaged property with an insurance company approved by RCBC, and
subsequently, to endorse and deliver the insurance policies to RCBC. GOYU
obtained in its name a total of 10 insurance policies from MICO. In February
1992, Alchester Insurance Agency, Inc., the insurance agent where GOYU
obtained the Malayan insurance policies, issued nine endorsements in favor
of RCBC seemingly upon instructions of GOYU.

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 barred from
receiving donations from each other.
Article 739 provides that void donations are those made between persons
who were guilty of adultery or concubinage at the time of donation.
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. 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.
A conviction for adultery or concubinage isnt required exacted before the
disabilities mentioned in Article 739 may effectuate. The article says 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 guilty 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
offense is a condition precedent. The law plainly states that the guilt of the
party may be proved in the same acting for declaration of nullity of
donation. And, it would be sufficient if evidence preponderates.

On April 27, 1992, one of GOYU's factory buildings in Valenzuela was gutted
by fire. Consequently, GOYU submitted its claim for indemnity. MICO denied
the claim on the ground that the insurance policies were either attached
pursuant to writs of attachments/garnishments issued by various courts or
that the insurance proceeds were also claimed by other creditors of GOYU
alleging better rights to the proceeds than the insured.

GOYU filed a complaint for specific performance and damages. 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 AGCO denied GOYU's claims. However, because the

endorsements do not bear the signature of any officer of GOYU, the trial
court, as well as the Court of Appeals, concluded that the endorsements are
defective and held that RCBC has no right over the insurance proceeds.

ISSUE: Whether or not RCBC has a right over the insurance proceeds.
HELD: RCBC has a right over the insurance proceeds.

It is settled that a 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. There is no
question that GOYU could insure the mortgaged property for its own
exclusive benefit. In the present case, 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

It is to be noted that 9 endorsement documents were prepared by Alchester

in favor of RCBC. The Court is in a quandary how Alchester could arrive at
the idea of endorsing any specific insurance policy in favor of any particular
beneficiary or payee other than the insured had not such named payee or
beneficiary been specifically disclosed by the insured itself. It is also
significant that GOYU voluntarily and purposely took the insurance policies
from MICO, a sister company of RCBC, and not just from any other
insurance company. Alchester would not have found out that the subject
pieces of property were mortgaged to RCBC had not such information been
voluntarily disclosed by GOYU itself. Had it not been for GOYU, Alchester
would not have known of GOYU's intention of obtaining insurance coverage
in compliance with its undertaking in the mortgage contracts with RCBC, and
verify, Alchester would not have endorsed the policies to RCBC had it not
been so directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the Court is

constrained to rule in favor of mortgagor RCBC. RCBC, in good faith, relied
upon the endorsement documents sent to it as this was only pursuant to the
stipulation in the mortgage contracts. We find such reliance to be justified
under the circumstances of the case. GOYU failed to seasonably repudiate
the authority of the person or persons who prepared such endorsements.
Over and above this, GOYU continued, in the meantime, to enjoy the
benefits of the credit facilities extended to it by RCBC. After the occurrence of
the loss insured against, it was too late for GOYU to disown the
endorsements for any imagined or contrived lack of authority of Alchester to
prepare and issue said endorsements. If there had not been actually an
implied ratification of said endorsements by virtue of GOYU's inaction in this
case, GOYU is at the very least estopped from assailing their operative

To permit GOYU to capitalize on its non-confirmation of these endorsements

while it continued to enjoy the benefits of the credit facilities of RCBC which
believed in good faith that there was due endorsement pursuant to their
mortgage contracts, is to countenance grave contravention of public policy,
fair dealing, good faith, and justice. Such an unjust situation, the Court
cannot sanction. Under the peculiar circumstances obtaining in this case, the
Court is bound to recognize RCBC's right to the proceeds of the insurance
policies if not for the actual endorsement of the policies, at least on the basis
of the equitable principle of estoppel.

GOYU cannot seek relief under Section 53 of the Insurance Code which
provides that the proceeds of insurance shall exclusively apply to the interest
of the person in whose name or for whose benefit it is made. The peculiarity
of the circumstances obtaining in the instant case presents a justification to
take exception to the strict application of said provision, it having been
sufficiently established that it was the intention of the parties to designate
RCBC as the party for whose benefit the insurance policies were taken out.
Consider thus the following:
It is undisputed that the insured pieces of property were the subject of
mortgage contracts entered into between RCBC and GOYU in consideration

of and for securing GOYU's credit facilities from RCBC. The mortgage
contracts contained common provisions whereby GOYU, as mortgagor,
undertook to have the mortgaged property properly covered against any loss
by an insurance company acceptable to RCBC.
GOYU voluntarily procured insurance policies to cover the mortgaged
property from MICO, no less than a sister company of RCBC and definitely
an acceptable insurance company to RCBC.
Endorsement documents were prepared by MICO's underwriter,
Alchester Insurance Agency, Inc., and copies thereof were sent to GOYU,
MICO and RCBC. GOYU did not assail, until of late, the validity of said
GOYU continued until the occurrence of the fire, to enjoy the benefits
of the credit facilities extended by RCBC which was conditioned upon the
endorsement of the insurance policies to be taken by GOYU to cover the
mortgaged properties.

This Court cannot over stress the fact that upon receiving its copies of the
endorsement documents prepared by Alchester, GOYU, despite the absence
written conformity thereto, obviously considered said endorsement to be
sufficient compliance with its obligation under the mortgage contracts since
RCBC accordingly continued to extend the benefits of its credit facilities and
GOYU continued to benefit therefrom. Just as plain too is the intention of the
parties to constitute RCBC as the beneficiary of the various insurance
policies obtained by GOYU. The intention of the parties will have to be given
full force and effect in this particular case. The insurance proceeds may,
therefore, be exclusively applied to RCBC, which under the factual
circumstances of the case, is truly the person or entity for whose benefit the
policies were clearly intended.

Heirs of Loreto C. Maramag

Maramag (2009)

FACTS: Loreto Maramag designated as beneficiary his concubine Eva de

Guzman Maramag. Vicenta Maramag and Odessa, Karl Brian, and Trisha
Angelie (heirs of Loreto Maramag) and his concubine Eva de Guzman
Maramag, also suspected in the killing of Loreto and his illegitimate children
are claiming for his insurance. Vicenta alleges that Eva is disqualified from
RTC: Granted - civil code does NOT apply
CA: dismissed the case for lack of jurisdiction for filing beyond reglementary
ISSUE: W/N Eva can claim even though prohibited under the civil code
against donation.
HELD: YES. Petition is DENIED.

Any person who is forbidden from receiving any donation under Article 739
cannot be named beneficiary of a life insurance policy of the person who
cannot make any donation to him.
If a concubine is made the beneficiary, it is believed that the insurance
contract will still remain valid, but the indemnity must go to the legal heirs and
not to the concubine, for evidently, what is prohibited under Art. 2012 is the
naming of the improper beneficiary.
SECTION 53. The insurance proceeds shall be applied exclusively to the
proper interest of the person in whose name or for whose benefit it is made
unless otherwise specified in the policy.
GR: 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.
EX: 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
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.
Development Insurance Corporation
IAC (G.R. No. 71360 July 16, 1986)
FACTS: A fire occurred in the building of Philippine Union. It sued for
recovery of damages from the petitioner on the basis of an insurance
contract between them. The petitioner failed to answer on time despite the
numerous extensions it asked for. It was declared in default by the trial court.
A judgment of default was subsequently rendered on the strength of the
evidence given by the private respondent, which was allowed damages. The
petitioner moved to lift the order of default. Its motion was denied. It went to
the appellate court, which affirmed the decision of the trial court. Hence this

RATIO: The policy insured the private respondent's building against fire for
P2,500,000.00. The petitioner argued that the respondent must share the
difference between that amount and the face value of the policy and the loss
sustained for 5.8 million under Condition 17 of the policy. The building was
insured at P2,500,000.00 by agreement of the insurer and the insured.
The agreement is known as an open policy and is subject to the express
condition that:
In the event of loss, whether total or partial, it is understood that the amount
of the loss shall be subject to appraisal and the liability of the company, if
established, shall be limited to the actual loss, subject to the applicable
terms, conditions, warranties and clauses of this Policy, and in no case shall
exceed the amount of the policy.
Section 60 of the Insurance Code defines an open policy is one in which the
value of the thing insured is not agreed upon but is left to be ascertained in
case of loss." This means that the actual loss, as determined, will represent
the totalindemnity due the insured from the insurer except only that the
total indemnity shall not exceed the face value of the policy.
The actual loss has been ascertained in this case. Hence, applying the open
policy clause as expressly agreed upon, the private respondent is entitled
to indemnity in the total amount of P508,867.00.
The refusal of its vice-president to receive the private respondent's complaint
was the first indication of the petitioner's intention to prolong this case and
postpone the discharge of its obligation to the private respondent under this
agreement. They still evaded payment for 5 years.
Alpha Insurance & Surety Co Inc (1968)
Assoc Inc.
wanted to have a guarantee against loss on account of personal dishonesty,
amounting to larceny or estafa of its Secretary-Treasurer, Ricardo Ladines.
Alpha Insurance & Surety then issued a fidelity bond for P5k with Ladines as
principal and Alpha as solidary surety. FACOMA then assigned its rights to
ACCFA (Agricultural Credit Cooperative and Financing Admin). Ladines
misappropriated P11,513 of FACOMA funds to his personal benefit. On
October 1958, ACCFA notified in writing the survey company and presented
proof of loss. Surety Alpha refused to pay. ACCFA filed suit on 30 May1960.

ISSUE: Was Philippine Union required to jointly indemnify the building?

HELD: No. Petition dismissed.

Alpha seeks to dismiss due to a provision in the fidelity bond saying that no
action shall be had unless commenced within one year from the making of
the claim for loss. Another is that the complaint failed to show a civil or

criminal action filed against Ladines as required by the conditions of the

bond. Last, Ladines is an indispensable party but was not joined.
CFI denied dismissal but, upon reconsideration, reversed and dismissed the
complaint because the action was filed beyond the contractual limitation
ISSUE: Was contractual limitation void due to Sec. 61-A of Insurance Act?
HELD: Yes. Fidelity bond is in the nature of a contract of insurance against
loss from misconduct. Subject to Insurance Act.
Sec 61-A: A condition, stipulation or agreement in any policy of insurance,
limiting the time for commencing an action thereunder to a period of less than
1 year from the time when the cause of action accrues is VOID.
Cause of action (1) legal right (2) obligation (3) act or omission in violation of
legal right
Cause of action ACCRUED when insurance company REFUSED to comply
with the bond NOT from the time offiling claim of loss
Stipulation in contract is VOID because of Sec 61-A
Condition of previous conviction was deleted by express agreement
Surety assumed solidary liability so creditor may go against any one of the
solidary debtors. Case remanded to CFI with instructions to require
defendant to answer.
SPS. ANG (Paulo & Sally)
Fulton Fire Insurance Co.
FACTS: On September 9, 1953, Fulton Fire Insurance Company issued a
Fire policy in favor of P. & S Department Store (Sally C. Ang) over stocks of
general merchandise, consisting principally of dry goods, which were
contained in a building occupied by the Sps. at Laoag, Ilocos Norte. The
premium is P500.00 annually. The insurance was issued for one year, but the
same was renewed for another year on September 31, 1954.
3 months after, the store containing the goods insured was destroyed by fire.
The Sps. then first claim form together with all the necessary paper s
relating, which was denied on April 6, 1956. It should also be noted that on
January 13, 1955, Paulo Ang and 10 others were charged for arson but was
acquitted. Spouses Ang instituted this action against the Fulton Fire
Insurance Company and the Paramount Surety and Insurance Company, Inc.

to recover from them the face value of a fire insurance policy issued in
plaintiffs' favor covering a store owned and operated by them in Laoag,
Ilocos Norte.
Fulton Fire Insurance Company alleged that the loss by the fire was not
accidental and was occasioned by the wilful act of the plaintiff Paulo Ang
himself. It claims that under paragraph 13 of the policy, if the loss or damage
is occasioned by the wilful act of the insured, or if the claim is made and
rejected but no action is commenced within 12 months after such rejection,
all benefits under the policy would be forfeited, and that since the claim of the
plaintiffs was denied and plaintiffs received no tice of denial on April 18,
1956, and they brought the action only on May 5, 195 8, all the benefits
under the policy have been forfeited. The Sps. alleged that they instituted a
civil case (Paramount Surety & Insurance Co. - dropped as a defendant) to
assert the claim on May 11, 1956, but was dismissed without prejudice on
September 3, 1957. If such period is to be deducted, the present action was
still within the 12 month period. CFI: decision in favor of the plaintiffs.
ISSUE: WON the filing of the previous suit tolled or suspended the running of
the prescriptive period.
HELD: The condition contained in the insurance policy that claims must be
presented within one year after rejection is not merely a procedural
requirement. The condition is an important matter, essential to a prompt
settlement of claims against insurance companies, as it demands that
insurance suits be brought by the insured while the evidence as to the origin
and cause of destruction have not yet disappeared. It is in the nature of a
condition precedent to the liability of the insurer, or in other terms, a
resolutory cause, the purpose of which is to terminate all liabilities in case the
action is not filed by the insured within the period stipulated. The bringing of
the action against the Paramount Surety & Insurance Company, the agent of
the defendant Company cannot have any legal effect except that of notifying
the agent of the claim. Beyond such notification, the filing of the action can
serve no other purpose. There is no law giving any effect to such action up
on the principal. Besides, there is no condition in the policy that the action
must be filed against the agent, and this Court cannot by interpretation,
extend the clear scope of the agreement beyond what is agreed upon by the
parties. The rights of the parties flow from the contract of insurance; hence
they are not bound by the statute of limitations or by exemptions thereto. In
the words of our own law, their contract is the law between the parties, and
their agreement that an action on a claim denied by the insurer must be
brought within one year from the denial, governs, not the rules on the
prescription of actions.

New Life Enterprises

V. Court Of Appeals (1992)

FACTS: On May 15, 1981, Western Guaranty Corporation issued

Fire Insurance Policy to New Life Enterprises for P350,000, and was
renewed on May, 13, 1982.
On July 30,198, Reliance Surety and Insurance Co., Inc. issued Fire
Insurance Policy to New Life Enterprises for P300,000.
On November 12, 1981, Additional P700,000.
On February 8, 1982, Equitable Insurance Corporation issued Fire Insurance
Policy to New Life Enterprises for P200,000. On October 19, 1982, 2 am, fire
electrical in nature destroyed the stock in trade worth P1,550,000.
Julian Sy went to Reliance to claim but he was refused. Same thing
happened with the others who were sister companies. Sy
violated the "Other Insurance Clause". RTC: favored New Life and against
the three insurance companies. CA: reversed -failure to state or endorse the
other insurance coverage.

common practice in the insurance

business and
do not warrant the speculative conclusion of the trial court.


The conformity of the insured to the terms of the policy is

implied from his failure to
express any
what is provided for.

a clear misrepresentation and a vital one

the insured had been asked
but did not, that was deception - guilty of clear fraud.



total absence of such notice nullifies the policy.

Assuming arguendo that petitioners felt the legitimate need to be
clarified as to the policy condition violated, there was a considerable
lapse of time from their receipt of the insurer's clarificatory letter dated
March 30, 1983, up to the time the complaint was filed in court on
January 31, 1984.The one-year prescriptive period was yet to expire on
November 29, 1983, or about eight (8) months from the receipt of
the clarificatory letter, but petitioners let the period lapse without bringing
their action in court.

ISSUE: W/N Sy can claim against the three insurance companies for
violating the "Other Insurance Clause"

The terms of the contract are clear and unambiguous.

The insured is specifically required to disclose to the insurer

any other insurance and its particulars which he may have effected on
the same subject matter.

The knowledge of such insurance by the insurer's agents,

assuming the
is not the "notice" that would estop the insurers from denying the claim.
conclusion of
the trial court that Reliance and Equitable are "sister
companies" is an unfounded conjecture drawn from the mere fact that
Yap Kam Chuan was an agent for both companies which also had the
same insurance claims adjuster.
services of the same agents and adjusters by different companies is a

Capital Ins. & Surety Co.
FACTS: Plaintiff Paulino secured a fire insurance policy issued by defendant
Capital Insurance on Feb. 8, 1952. On April 30, 1952 the Plaintiff wrote the
defendant requesting cancellation of the policy, which the latter received on
May 10, 1952.
Pursuant to the requirement, Saura insured the building together with its
contents with the Philippine International Surety, an insurance firm
acceptable to PNB for P29,000.00, against fire for the period of 1 year from
October 2, 1954 and as further required the insurance policy was endorsed
to PNB. 13 days after the issuance of the fire insurance policy, insurer

cancelled it, effective as of the date of issue. Notice of cancellation was given
to PNB in writing, sent via Registered Mail, personally addressed to
Fortunato Domingo, PNB Branch Manager. The latter received it on Nov. 8,

with which it (insurance company) had direct dealing. It was the primary duty
of the insurance company to notify the insured, but it did not. Thus, liability
attached principally to the insurance company, for its failure to give notice of
the cancellation of the policy to Saura.

On April 6, 1955, the building and its contents worth P40,685.69 were
burned. Saura filed a claim and upon presentation of notice of loss with PNB,
Saura learned for the 1st time that the policy had previously been cancelled.
Insurer refused to pay Saura.
ISSUE: Whether or not the notice of cancellation of the policy to the
mortgagee (PNB) was already a substantial compliance of the insurers duty
to notify the insured of the policy cancellation.
HELD: Fire insurance policies and other contracts of insurance upon
property, in addition to the common provision for cancellation of the policy
upon request of the insured, generally provide for cancellation by the insurer
by notice to the insured for a prescribed period, which is usually 5 days, and
the return of the unearned portion of the premium paid by the insured, such
provision for cancellation upon notice being authorized by statutes in some
jurisdiction, either specifically or as a provision of an adopted standard form
of policy.
The purpose of provisions or stipulations for notice to the insured is to
prevent the cancellation of the policy, without allowing the insured ample
opportunity to negotiate for other insurance in its stead. The form and
sufficiency of a notice of cancellation is determined by policy provisions. In
order to form the basis for the cancellation of a policy, notice to the insured
need not be in any particular form, in the absence of a statute or policy
provision prescribing such form, and it is sufficient, so long as it positively
and unequivocally indicates to the insured, that it is the intention of the
company that the policy shall cease to be binding. Where the policy contains
no provisions that a certain number of days notice shall be given, a
reasonable notice and opportunity to obtain other insurance must be given.
Actual personal notice to the insured is essential to a cancellation under a
provision for cancellation by notice.
The actual receipt by the insured of a notice of cancellation is universally
recognized as a condition precedent to a cancellation of the policy by the
insurer, and consequently a letter containing notice of cancellation which is
mailed by the insurer but not received by the insured, is ineffective as
cancellation. The notice should be personal to the insured and not to and/or
through any unauthorized person by the policy. In the case at bar, the
defendant insurance company, must have realized the paramount
importance of sending a notice of cancellation, when it sent the notice of
cancellation of the policy to the bank (as mortgagee), but not to the insured

Saura Import Export Co.

Philippine International

FACTS: On Dec. 26, 1952, Saura mortgaged to PNB its registered parcel of
land in Davao to secure the payment of a promissory note of P27T. A building
of strong materials which was also owned by Saura, was erected on the
parcel of land and the building had always been covered by insurance even
before the execution of the mortgage contract.

Pursuant to the mortgage agreement which required Saura to insure the

building and its contents, it obtained a fire insurance for P29T from PISC for
a period of 1 year starting Oct. 2, 1954.

The mortgage also required Saura to endorse the insurance policy to PNB.
The memo stated: Loss if any, payable to PNG as their interest may appear,
subject to the terms, conditions and warranties of this policy.

Actual notice of cancellation in a clear and unequivocal manner, preferably in

writing should be given by the insurer to the insured so that the latter might
be given an opportunity to obtain other insurance for his own protection. The
notice should be personal to the insurer and not to and/or through any
unauthorized person by the policy. Both the PSIC and the PNB failed,
wittingly or unwittingly to notify Saura of the cancellation made.

The policy was delivered to PNB by Saura.

On Oct. 15, 1954, barely 13 days after the issuance of the fire insurance,
PISC canceled the same, effective as of the date of issue. Notice of the
cancellation was sent to PNB in writing and was received by the bank on
Nov. 8, 1954.

The insurer contends that it gave notice to PNB as mortgagee of the property
and that was already substantial compliance with its duty to notify the insured
of the cancellation of the policy. But notice to the bank, as far as Saura
herein is concerned, is not effective notice. PISC is then ordered to pay
Saura P29T, the amount involved in the policy subject matter of this case.

On Apr. 6, 1955, the building and its contents worth P4,685 were burned. On
April 11, 1985, Saura filed a claim with PISC and mortgagee bank.

Upon presentation of notice of loss with PNB, Saura learned for the first time
that the policy had been previously canceled by PISC, when Sauras folder in
the banks file was opened and the notice of the cancellation by PISC was

Malayan Insurance Co. Inc.


ISSUE: Whether or not there was proper cancellation of the policy?

The policy in question does NOT provide for the notice of cancellation, its
form or period. The Insurance Law does not likewise provide for such
notice. This being the case, it devolves upon the Court to apply the generally
accepted principles of insurance, regarding cancellation of the insurance
policy by the insurer.

FACTS: On June 7, 1981, the petitioner (hereinafter called (MICO) issued to

the private respondent, Coronacion Pinca, Fire Insurance Policy No. F-00117212 on her property for the amount of P14,000.00 effective July 22, 1981,
until July 22, 1982.

On October 15,1981, MICO allegedly cancelled the policy for non-payment,

of the premium and sent the corresponding notice to Pinca. On December
24, 1981, payment of the premium for Pinca was received by Domingo
Adora, agent of MICO. On January 15, 1982, Adora remitted this payment to
MICO, together with other payments. On January 18, 1982, Pinca's property
was completely burned.
(1) Insurance Commission: granted claim for compensation for burned
Whether there was a valid insurance contract at the time of the loss.
HELD: Yes.
A valid cancellation must, therefore, require concurrence of the following
(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of
the policy, of one or more of the grounds mentioned;
(3) The notice must be
(a) in writing,

(b) mailed, or delivered to the named insured,

(c) at the address shown in the policy;
(4) It must state
(a) which of the grounds mentioned in Section 64 is relied upon and
(b) that upon written request of the insured, the insurer will furnish the facts
on which the cancellation is based.
MICO's claims it cancelled the policy in question on October 15, 1981, for
non-payment of premium. To support this assertion, it presented one of its
employees, who testified that "the original of the endorsement and credit
memo" presumably meaning the alleged cancellation "were sent the
assured by mail through our mailing section" However, there is no proof that
the notice, assuming it complied with the other requisites mentioned above,
was actually mailed to and received by Pinca.
We also look askance at the alleged cancellation, of which the insured and
MICO's agent himself had no knowledge, and the curious fact that although
Pinca's payment was remitted to MICO's by its agent on January 15, 1982,
MICO sought to return it to Adora only on February 5, 1982, after it
presumably had learned of the occurrence of the loss insured against on
January 18, 1982. These circumstances make the motives of the petitioner
highly suspect, to say the least, and cast serious doubts upon its candor and
bona fides.