Verendia vs.

Court of Appeals [GR 76399, 22 January 1993];

Facts: Fidelity and Surety Insurance Company of the Philippines issued its Fire Insurance Policy
covering Rafael (Rex) Verendia's residential building located in Antipolo, Rizal in the amount of
P385,000.00. Designated as beneficiary was the Monte de Piedad & Savings Bank. Verendia also
insured the same building with two other companies, The Country Bankers Insurance and The
Development Insurance for. While the three fire insurance policies were in force, the insured property
was completely destroyed by fire. Fidelity was accordingly informed of the loss and despite demands,
refused payment under its policy, thus prompting Verendia to file a complaint with the then Court of
First Instance of Quezon City, praying for payment of P385,000.00. The complaint was later amended
to include Monte de Piedad as an "unwilling defendant." Answering the complaint, Fidelity, among
other things, averred that the policy was avoided by reason of over-insurance. The trial court
rendered a decision in favor of Fidelity. In sustaining the defenses set up by Fidelity, the trial court
ruled that Paragraph 3 of the policy was also violated by Verendia in that the insured failed to inform
Fidelity of his other insurance coverages with Country Bankers Insurance and Development Insurance.
Verendia appealed to IAC which reversed the CFI QC decision. Hence the petitions.
Issue: Whether Verandia entitled to claims despite presentation of a false declarations?
Held: Basically a contract of indemnity, an insurance contract is the law between the parties. Its
terms and conditions constitute the measure of the insurer's liability and compliance therewith is a
condition precedent to the insured's right to recovery from the insurer. As it is also a contract of
adhesion, an insurance contract should be liberally construed in favor of the insured and strictly
against the insurer company which usually prepares it. Considering, however, the foregoing
discussion pointing to the fact that Verendia used a false lease contract to support his claim under
Fire Insurance Policy F-18876, the terms of the policy should be strictly construed against the insured.
Verendia failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in
terms that are clear and unambiguous, that all benefits under the policy shall be forfeited "if the
claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if
any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any
benefit under the policy". Verendia, having presented a false declaration to support his claim for
benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by virtue of Section
13 of the policy in the absence of proof that Fidelity waived such provision.

Vda. de Maglana vs. Consolacion [GR 60506, 6 August 1992]

Facts: Lope Maglana was an employee of the Bureau of Customs whose in Davao City. While on his
way to work, he met an accident that resulted in his death. The PUJ jeep that bumped the deceased
was driven by Pepito Into, operated and owned by Destrajo.. Consequently, the heirs of Lope
Maglana, Sr., filed an action for damages and attorney's fees against operator Patricio Destrajo and
the Afisco Insurance Corporation (AFISCO) before the CFI Davao. During the pendency of the civil
case, Into was sentenced to imprisonment and to indemnify the heirs of Lope Maglana, Sr. No appeal
was interposed by the accused who later applied for probation. The lower court rendered a decision
ordering Destrajo to pay the heirs of Maglana. The court ordered the insurance company to reimburse
Destrajo whatever amounts the latter shall have paid only up to the extent of its insurance coverage.
The heirs of Maglana filed a motion for the reconsideration of the second paragraph of the dispositive
portion of the decision contending that AFISCO should not merely be held secondarily liable because
the Insurance Code provides that the insurer's liability is "direct and primary and/or jointly and
severally with the operator of the vehicle, although only up to the extent of the insurance coverage."
But the lower court denied the motion for reconsideration ruling that since the insurance contract "is
in the nature of suretyship, then the liability of the insurer is secondary only up to the extent of the
insurance coverage." The heirs filed a second motion for reconsideration reiterating that the liability
of the insurer is direct, primary and solidary with the jeepney operator because the petitioners
became direct beneficiaries under the provision of the policy which, in effect, is a stipulation pour
autrui. This motion was likewise denied for lack of merit. The heirs filed the petition for certiorari.
Issue: Whether AFISCO is primarily liable on the insurance policy.
Held: AFISCO can be held directly liable by the heirs. "[w]here an insurance policy insures directly
against liability, the insurer's liability accrues immediately upon the occurrence of the injury or event
upon which the liability depends, and does not depend on the recovery of judgment by the injured

party against the insured." The underlying reason behind the third party liability (TPL) of the
Compulsory Motor Vehicle Liability Insurance is "to protect injured persons against the insolvency of
the insured who causes such injury, and to give such injured person a certain beneficial interest in the
proceeds of the policy." Since the heirs had received from AFISCO the sum of P5,000.00 under the nofault clause, AFISCO's liability is now limited to P15,000.00.

Fortune Insurance and Surety Co. Inc. vs. Court of Appeals [GR 115278, 23 May 1995]
Facts: Producers Bank of the Philippines was insured by the Fortune Insurance and Surety Co. Inc. and
an insurance policy was issued. Maribeth Alampay, its teller, while in the process of transferring cash
was robbed. The robbery took place while the armored car was traveling along Taft Avenue in Pasay
City. The said armored car was driven by Benjamin Magalong y de Vera, escorted by Security Guard
Saturnino Atiga y Rosete. After an investigation conducted by the Pasay police authorities, the driver
Magalong and guard Atiga were charged, together with Edelmer Bantigue Y Eulalio, Reynaldo Aquino
and John Doe, with violation of PD 532 (Anti-Highway Robbery Law) before the Fiscal of Pasay City.
Demands were made by Producers upon Fortune to pay the amount of the loss of P725,000.00, but
the latter refused to pay as the loss is excluded from the coverage of the insurance policy, specifically
under page 1 thereof, "General Exceptions" Producers opposed the contention of Fortune and
contended that Atiga and Magalong are not its "officer, employee, trustee or authorized
representative at the time of the robbery. Ttrial court rendered its decision in favor of Producers.
Fortune appealed this decision to the Court of Appeals which affirmed in toto the appealed decision.
On Hence, Fortune filed the petition for review on certiorari.
Issue: whether Fortune is liable under the general exceptions clause of the insurance policy?
Held: An insurance contract is a contract of indemnity upon the terms and conditions specified
therein. It is settled that the terms of the policy constitute the measure of the insurer's liability. In the
absence of statutory prohibition to the contrary, insurance companies have the same rights as
individuals to limit their liability and to impose whatever conditions they deem best upon their
obligations not inconsistent with public policy. Insofar as Fortune is concerned, it was its intention to
exclude and exempt from protection and coverage losses arising from dishonest, fraudulent, or
criminal acts of persons granted or having unrestricted access to Producers' money or payroll. When
it used then the term "employee," it must have had in mind any person who qualifies as such as
generally and universally understood, or jurisprudentially established in the light of the four standards
in the determination of the employer-employee relationship, or as statutorily declared even in a
limited sense as in the case of Article 106 of the Labor Code which considers the employees under a
"laboronly" contract as employees of the party employing them and not of the party who supplied
them to the employer. Still, howsoever viewed, Producers entrusted the three with the specific duty to
safely transfer the money to its head office, with Alampay to be responsible for its custody in transit;
Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the needed
security for the money, the vehicle, and his two other companions. In short, for these particular tasks,
the three acted as agents of Producers. A "representative" is defined as one who represents or stands
in the place of another; one who represents others or another in a special capacity, as an agent, and
is interchangeable with "agent." In view of the foregoing, Fortune is exempt from liability under the
general exceptions clause of the insurance policy.

Philamcare Health Systems Inc. vs. Court of Appeals [GR 125678, 18 March 2002]
Facts: Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with
Philamcare Health Systems, Inc. answering NO to several medical history of the standard
application form. The application was approved was issued Health Care Agreement entitling Trinos'
husband to avail of hospitalization benefits, whether ordinary or emergency. He was also entitled to
avail of "out-patient benefits". Upon the termination of the agreement, the same was extended for
another year and the amount of coverage was increased to a maximum sum per disability. During
the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical
Center (MMC) for one month. While her husband was in the hospital, Trinos tried to claim the benefits
under the health care agreement. However, Philamcare denied her claim saying that the Health Care
Agreement was void. According to Philamcare, there was a concealment regarding Ernani's medical
history. Thus, Trinos paid the hospitalization expenses herself, Later, he was admitted at the Chinese

General Hospital but due to financial difficulties, Trinos brought her husband home and died
sometime later. Trinos instituted with the RTC Manila, an action for damages against Philamcare. After
trial, the lower court ruled against Philamcare and Reverente, ordering them to pay and reimburse the
medical and hospital coverage of the late Ernani Trinos. On appeal, the Court of Appeals affirmed the
decision of the trial court. Philamcare's motion for reconsideration was denied. Hence, Philamcare
brought the petition for review, raising the primary argument that a health care agreement is not an
insurance contract; hence the "incontestability clause" under the Insurance Code does not apply.
Issue: Whether a health care agreement between Philamcare and Trinos is an insurance contract.
Held: YES. An insurance contract exists where the following elements concur: (1) The insured has an
insurable interest; (2) The insured is subject to a risk of loss by the happening of the designated peril;
(3) The insurer assumes the risk; (4) Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk; and (5) In consideration of the
insurer's promise, the insured pays a premium. Section 3 of the Insurance Code states that any
contingent or unknown event, whether past or future, which may damnify a person having an
insurable interest against him, may be insured against. Every person has an insurable interest in the
life and health of himself. Section 10 provides that "Every person has an insurable interest in the life
and health: (1) of himself, of his spouse and of his children; (2) of any person on whom he depends
wholly or in part for education or support, or in whom he has a pecuniary interest; (3) of any person
under a legal obligation to him for the payment of money, respecting property or service, of which
death or illness might delay or prevent the performance; and (4) of any person upon whose life any
estate or interest vested in him depends." Herein, the insurable interest of Trinos' husband in
obtaining the health care agreement was his own health. The health care agreement was in the
nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs
hospital, medical or any other expense arising from sickness, injury or other stipulated contingent,
the health care provider must pay for the same to the extent agreed upon under the contract.

Great Pacific Life Assurance Company vs. Court of Appeals [GR L-31845, 30 April 1979];
Facts: Ngo Hing filed an application with the Great Pacific Life Assurance Company for a 20-year
endowment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go.
Upon the payment of the insurance premium, the binding deposit receipt was issued to Ngo Hing.
Mondragon received a letter from Pacific Life disapproving the insurance application. The letter stated
that the said life insurance application for 20-year endowment plan is not available for minors below 7
years old. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated
by Mondragon to Ngo Hing. Instead,he wrote back Pacific Life again strongly recommending the
approval of the 20-year endowment life insurance on the ground that Pacific Life is the only insurance
company not selling the 20- year endowment insurance plan to children. Helen Go died of influenza
with complication of broncho-pneumonia. Thereupon, Ngo Hing sought the payment of the proceeds
of the insurance, but having failed in his effort, he filed the action for the recovery of the same before
the CFI Cebu, which rendered a decision against Pacific Life and Mondragon, ordering them to
solidarily pay Ngo Hing. On appeal, the Court of Appeals set aside and absolved Pacific Life and
Mondragon from liability on the insurance policy. Two petitions for certiorari by way of appeal were
filed by Pacific Life and Mondragon.
Issue: Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question, and thus negate the claim that the insurance contract was perfected.
Held: YES. Implied from the aforesaid conditions is that the binding deposit receipt in question is
merely an acknowledgment, on behalf of the company, that the latter's branch office had received
from the applicant the insurance premium and had accepted the application subject for processing by
the insurance company; and that the latter will either approve or reject the same on the basis of
whether or not the applicant is "insurable on standard rates." Since Pacific Life disapproved the
insurance application of Ngo Hing, the binding deposit receipt in question had never become in force
at any time. Upon this premise, the binding deposit receipt is, manifestly, merely conditional and
does not insure outright. Where an agreement is made between the applicant and the agent, no
liability shall attach until the principal approves the risk and a receipt is given by the agent. The
acceptance is merely conditional, and is subordinated to the act of the company in approving or
rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt" does not insure
by itself. In the absence of a meeting of the minds between Pacific Life and Ngo Hing over the 20-year

endowment life insurance in, and with the non-compliance of the conditions stated in the disputed
binding deposit receipt, there could have been no insurance contract duly perfected between them.
Accordingly, the deposit paid by Ngo Hing shall have to be refunded by Pacific Life.

Enriquez vs. Sun Life Assurance Company of Canada [GR 15895, 29 November 1920]
Facts: Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its
office in Manila for a life annuity. He paid the sum of P6,000 to the manager of the company's Manila
office and was given a receipt. The application was immediately forwarded to the head office of the
company at Montreal, Canada. The head office gave notice of acceptance by cable to Manila and
later, the policy was issued at Montreal. Attorney Aurelio A. Torres wrote to the Manila office of the
company stating that Herrer desired to withdraw his application. The following day the local office
replied to Mr. Torres, stating that the policy had been issued of which they were notified, a letter was
received by Mr. Torres. Mr. Herrer died. An action was brought by Rafaek Enriquez as administrator of
the estate of the late Joaquin Ma. Herrer to recover from Sun Life Assurance Company of Canada the
sum of P6,000 paid by the deceased for a life annuity. The trial court gave judgment for Sun Life.
Enriquez appealed.
Issue: Whether the contract for a life annuity was perfected?
Held: NO. Article 1262 of the Civil Code provides that an acceptance made by letter shall not bind the
person making the offer except from the time it came to his knowledge. The pertinent fact is, that
according to the provisional receipt, three things had to be accomplished by the insurance company
before there was a contract: (1) There had to be a medical examination of the applicant; (2) there had
to be approval of the application by the head office of the company; and (3) this approval had in
some way to be communicated by the company to the applicant. The further admitted facts are that
the head office in Montreal did accept the application, did cable the Manila office to that effect, did
actually issue the policy and did, through its agent in Manila, actually write the letter of notification
and place it in the usual channels for transmission to the addressee. The fact as to the letter of
notification thus fails to concur with the essential elements of the general rule pertaining to the
mailing and delivery of mail matter as announced by the American courts, namely, when a letter or
other maimatter is addressed and mailed with postage prepaid there is a rebuttable presumption of
fact that it was received by the addressee as soon as it could have been transmitted to him in the
ordinary course of the mails. But if any one of these elemental facts fails to appear, it is fatal to the
presumption. For instance, a letter will not be presumed to have been received by the addressee
unless it is shown that it was deposited in the post-office, properly addressed and stamped. The
contract for a life annuity in the case at bar was not perfected because it has not been proved
satisfactorily that the acceptance of the application ever came to the knowledge of the applicant.

Spouses Cha vs. Court of Appeals [GR 124520, 18 August 1997]

Facts: Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with CKS
Development Corporation, as lessor. One of the stipulations of the 1 year lease contract states that
"The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed
at any stall or store or space in the leased premises without first obtaining the written consent and
approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the
LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit"
Notwithstanding the above stipulation, the Cha spouses insured against loss by fire their merchandise
inside the leased premises with the United Insurance Co., Inc. without the written consent of CKS. On
the day that the lease contract was to expire, fire broke out inside the leased premises. When CKS
learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the
insurer (United) a demand letter asking that the proceeds of the insurance contract (between the Cha
spouses and United) be paid directly to CKS, based on its lease contract with the Cha spouses. United
refused to pay CKS. Hence, the latter filed a complaint against the Cha spouses and United. RTC
Manila, rendered a decision ordering United to pay CKS. On appeal, the Court of Appeals affirmed the
trial court decision, thus, spouses Cha and United filed the petition for review on certiorari.
Issue: Whether CKS has insurable interest over the property insured?

Held: NO. It is basic in the law on contracts that the stipulations contained in a contract cannot be
contrary to law, morals, good customs, public order or public policy. Section 18 of the Insurance Code
provides that "No contract or policy of insurance on property shall be enforceable except for the
benefit of some person having an insurable interest in the property insured." A non-life insurance
policy such as the fire insurance policy taken by the spouses over their merchandise is primarily a
contract of indemnity. Insurable interest in the property insured must exist at the time the insurance
takes effect and at the time the loss occurs. The basis of such requirement of insurable interest in
property insured is based on sound public policy: to prevent a person from taking out an insurance
policy on property upon which he has no insurable interest and collecting the proceeds of said policy
in case of loss of the property. In such a case, the contract of insurance is a mere wager which is void
under Section 25 of the Insurance Code. It cannot be denied that CKS has no insurable interest in the
goods and merchandise inside the leased premises under the provisions of Section 17 of the
Insurance Code which provides that "The measure of an insurable interest in property is the extent to
which the insured might be damnified by loss of injury thereof." Therefore, CKS cannot be validly a
beneficiary of the fire insurance policy taken by the spouses over their merchandise. This insurable
interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment
of the policy to CKS under the provision of the lease contract previously quoted is void for being
contrary to law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to
the spouses Nilo Cha and Stella Uy-Cha. The insurer (United) cannot be compelled to pay the
proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property
insured.