II.

The Contract of Insurance  Upon the termination of the agreement, the same was extended for another year from March 1,
1989 to March 1, 1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was
1. What may be insured (Sec. 3 - 5) increased to a maximum sum of P75,000.00 per disability.
1. Philamcare Health Systems Inc. v. Court of Appeals, G.R. No. 125678, March 18,  During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila
2002 Medical Center (MMC) for 1 month beginning March 9, 1990.
1.1 Insurance distinguished from gambling
 While her husband was in the hospital, Julina Trinos tried to claim the benefits under the health
care agreement.
2. Parties to the Contract (Sec. 6 – 9)
2.1. Sec. 54 – General Banking Law  Philamcare denied her claim saying that the Health Care Agreement was void
2.2. Control Test on Corporations for concealing Ernani’s medical history so she paid the hospitalization expenses of P76,000.00
2.3 Proper party to file action herself.
2.4 Types of Mortgage Clauses  Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the application form.
Cases:  After being discharged from the MMC, he was attended by a physical therapist at home.
2. Eternal Gardens Memorial Park Corp. v. The Philippine American Life Insurance  Later, he was admitted at the Chinese General Hospital.
Company, G.R. NO. 166245, April 9, 2008  Due to financial difficulties, however, he was brought home again.
3. Filipinas Compaña De Seguros vs. Christern, Huenefeld And Co.,
Inc., G.R.No. L-2294, May 25, 1951
 April 13, 1990 morning: Ernani had fever and was feeling very weak
4. Constantino v. Asia Life Insurance Company, G.R. No. 1669, August 31, 1950  He was brought to Chinese General Hospital where he died
5. Great Pacific Life Assurance v. Court of Appeals, G.R. No. 113899, October 13, 1999  July 24, 1990: She brought action for damages against Philamcare Health Systems Inc. and its
president, Dr. Benito Reverente
3. Insurable Interest (Sec. 10 - 25)  RTC: Philamcare and Dr. Benito Reverent to pay and reimburse P76k plus interest, moral
3.1 Types of beneficiaries damages, exemplary damages, attorney's fees and cost of suit
3.2 Rights of beneficiaries  CA: affirmed the decision of RTC but deleted all awards for damages and absolved Philamcare
3.3 Persons disqualified to be beneficiaries  Philamcare brought an instant petition for review arguing that:
 health care agreement is not an insurance contract; hence the "incontestability clause" under the
Cases: Insurance Code does not apply.
6. Heirs of Loreto C. Maramag represented by surviving spouse Vicente Pangilinan
Maramag v. Eva Verna De Guzman Maramag, et al, G.R. No. 181132, June 5, 2009  grants "living benefits," such as medical check-ups and hospitalization which a member may
7. Violeta Lalican v. The Insular Life Assurance Company, Limited, G.R. No. 183526, immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-
August 25, 2009 year thereafter
8. Gaisano Cagayan, Inc. v. Insurance Company of North America, G.R. No. 147839,  only medical and hospitalization benefits are given under the agreement without any
June 8, 2006 indemnification, unlike in an insurance contract where the insured is indemnified for his loss
9. The Insular Life Assurance Company, Ltd. vs. Ebrado, G.R. No. L-44059, October  since Health Care Agreements are only for a period of one year, as compared to insurance
28, 1977 contracts which last longer; incontestability clause does not apply, as the same requires an
10. Sing vs. Feb Leasing & Finance Corporation G.R. No. 168115, June 8, 2007 effectivity period of at least two years
____________________________  insurance company is governed by the Insurance Commission, but a Health Maintenance
Organization under the authority of the Department of Health
1. Philamcare Health Systems Inc. v. Court of Appeals, G.R. No. 125678, March 18, 2002 ISSUE:
1. W/N the health care agreement is a contract of insurance. - YES
Lessons Applicable: 2. W/N the spouse being "not" legal wife can claim - YES
 Elements (Insurance)
 Blood Relationship (Insurance) HELD: Petition is DENIED. CA AFFIRMED.

FACTS: 1. YES.
 Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with
Philamcare Health Systems, Inc.
 He answered the standard application form: Have you or any of your family members ever
consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease,
asthma or peptic ulcer? (If Yes, give details). - NO
 the application was approved for a period of one year from March 1, 1988 to March 1, 1989.
Accordingly, he was issued Health Care Agreement No. P010194
 Under the agreement, respondent’s husband was entitled to avail of hospitalization benefits,
whether ordinary or emergency, listed therein. He was also entitled to avail of "out-patient benefits"
such as annual physical examinations, preventive health care and other out-patient services.
P.D. 612 Insurance Code
Sec. 2 (1)
(1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or contingent
event.
Sec. 3
Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person
having an insurable interest, or create a liability against him, may be insured against, subject
to the provisions of this chapter.
The consent of the husband is not necessary for the validity of an insurance policy taken out
by a married woman on her life or that of her children.

Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract
for life, health and accident insurance, with any insurance company duly authorized to do
business in the Philippines, provided the insurance is taken on his own life and the beneficiary
appointed is the minor's estate or the minor's father, mother, husband, wife, child, brother or
sister.
The married woman or the minor herein allowed to take out an insurance policy may exercise
all the rights and privileges of an owner under a policy.
All rights, title and interest in the policy of insurance taken out by an original owner on the life
or health of a minor shall automatically vest in the minor upon the death of the original owner,
unless otherwise provided for in the policy.
 In the case at bar, the insurable interest of respondent's husband in obtaining the health care
agreement was his own health.
 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.
 The answer in response to the question relating to the medical history of the applicant largely
depends on opinion rather than fact, especially coming from respondent's husband who was not
a medical doctor.
 Where matters of opinion or judgment are called for, answers made in good faith and without intent
to deceive will not avoid a policy even though they are untrue.
 The fraudulent intent on the part of the insured must be established to warrant rescission of the
insurance contract.
 Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative
defense and the duty to establish such defense by satisfactory and convincing evidence rests
upon the provider or insurer.
 Chuang's death.
P.D. 612 Insurance Code
Sec. 27
Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind
a contract of insurance.
 cancellation of health care agreements as in insurance policies require the concurrence of the
following conditions: - none of these was made
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one or more of the
grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon
request of insured, to furnish facts on which cancellation is based.
 When the terms of insurance contract contain limitations on liability, courts should construe them
in such a way as to preclude the insurer from non-compliance with his obligation.
 Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against
the party which prepared the contract - the insurer.
 (U)nder the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc.
had twelve months from the date of issuance of the Agreement within which to contest the
membership of the patient if he had previous ailment of asthma, and six months from the issuance
of the agreement if the patient was sick of diabetes or hypertension. The periods having expired,
the defense of concealment or misrepresentation no longer lie.
2. YES.
P.D. 612 Insurance Code
Sec. 10
Sec. 10. 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.
 not the legal wife (deceased was previously married to another woman who was still alive)
 health care agreement is in the nature of a contract of indemnity.
 payment should be made to the party who incurred the expenses
2. Eternal Gardens Memorial Park Corp. v. The Philippine American Life Insurance
Company, G.R. NO. 166245, April 9, 2008
FACTS: Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. P-
19202 with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the
clients of Eternal who purchased burial lots from it on installment basis would be insured by
Philamlife. The amount of insurance coverage depended upon the existing balance of the
purchased burial lots.
Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers,
together with a copy of the application of each purchaser, and the amounts of the respective
unpaid balances of all insured lot purchasers. In relation to the instant petition, Eternal complied
by submitting a letter dated December 29, 1982,4 containing a list of insurable balances of its lot
buyers for October 1982. One of those included in the list as "new business" was a certain John
Chuang. His balance of payments was PhP 100,000. On August 2, 1984, Chuang died.
Eternal sent a letter dated August 20, 19845 to Philamlife, which served as an insurance claim for
After more than a year, Philamlife had not furnished Eternal with any reply to the latter's insurance
claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000
on April 25, 1986.8
In response to Eternal's demand, Philamlife denied Eternal's insurance claim in a letter dated May
20, 1986. Consequently, Eternal filed a case before the Makati City Regional Trial Court (RTC).
DECISION OF LOWER COURTS:
(1) RTC : in favor of Eternal. due to Philamlife's inaction from the submission of the requirements
of the group insurance on December 29, 1982 to Chuang's death on August 2, 1984, as well as
Philamlife's acceptance of the premiums during the same period, Philamlife was deemed to have
approved Chuang's application. The RTC said that since the contract is a group life insurance,
once proof of death is submitted, payment must follow.
(2) CA : in favor of Philamlife. there being no application form, Chuang was not covered by
Philamlife's insurance.
ISSUE: May the inaction of the insurer on the insurance application be considered as approval of
the application?
RULING: YES
As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor
Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is provided that:
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with
the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not
approved by the Company.
An examination of the above provision would show ambiguity between its two sentences. The first
sentence appears to state that the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second sentence appears to require
Philamlife to approve the insurance contract before the same can become effective.
It must be remembered that an insurance contract is a contract of adhesion which must be
construed liberally in favor of the insured and strictly against the insurer in order to safeguard the
latter's interest.
The fact of the matter is, the letter dated December 29, 1982, which Philamlife stamped as
received, states that the insurance forms for the attached list of burial lot buyers were attached to
the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter together with
the attachments. Such receipt is an admission by Philamlife against its own interest.13 The burden
of evidence has shifted to Philamlife, which must prove that the letter did not contain Chuang's
insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed to have
received Chuang's insurance application.
the seemingly conflicting provisions must be harmonized to mean that upon a party's purchase of
a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is
created and the same is effective, valid, and binding until terminated by Philamlife by disapproving
the insurance application. The second sentence of Creditor Group Life Policy No. P-1920 on the
Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation
of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application
must not work to prejudice the insured; it cannot be interpreted as a termination of the insurance
contract. The termination of the insurance contract by the insurer must be explicit and
unambiguous.
3. Filipinas Compaña De Seguros vs. Christern, Huenefeld And Co.,
Inc., G.R.No. L-2294, May 25, 1951
A corporation borrows its citizenship from the citizenship of majority of its stockholders, regardless
of the country under whose laws it was organized and created.
FACTS:
Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania de
Seguros to cover merchandise contained in a building. During the Japanese military occupation,
this same merchandise and the building were burned, so Huenefeld filed a claim under the policy.
Filipinas Compania refused to pay, alleging that the policy had ceased to be in force when the US
declared war against Germany. Filipinas Compania contended that Huenefeld, although organized
and created under Philippine laws, is a German subject, and hence, a public enemy, since majority
of its stockholders are Germans. On the other hand, Filipinas Compania is under American
jurisdiction.
However, the Director of Bureau of Financing, Philippine Executive Commission ordered Filipinas
Compania to pay, so Filipinas Compania did pay. The case at bar is about the recovery of that
sum paid.
ISSUES:
1. W/N Christern Huenefeld is a German subject because majority of its stockholders are
under German jurisdiction, despite the fact that it was organized and created under
Philippine laws
2. If so, W/N the fire insurance policy is enforceable against an enemy state
HELD:
The Court of Appeals ruled that a private corporation is a citizen of the country or state by and
under the laws of which it was created or organized. It rejected the theory that nationality of a
private corporation is determined by the character or citizenship of its controlling stockholders.
But the Supreme Court held that Christern Huenefeld is an enemy corporation since majority of
its stockholders are German subjects. The two American cases relied up by the Court of Appeals
have lost their force in view of a newer case where the control test was adopted.
The Philippine Insurance Law provides that anyone, except a public enemy, may be insured. It
stands to reason that an insurance policy ceases to be allowable as soon as the insured becomes
a public enemy.
Since Christern Huenefeld became a public enemy on Dec. 10, 1941, then the policy has ceased
to be enforcible and therefore Huenefeld is not entitled to indemnity. However, elementary rules
of justice require that the premium paid from Dec. 11, 1941 should be returned.
Thus, Filipinas Compania is allowed to recover the sum paid but only its equivalent in actual
Philippine currency, minus the premium that Huenefeld paid after Dec. 11.
4. Constantino v. Asia Life Insurance Company, G.R. No. 1669, August 31, 1950
FACTS:
 Case 1:
 The life of Arcadio Constantino was insured with Asia Life Insurance Company (Asia) for a term
of 20 years with Paz Lopez de Constantino as beneficiary. The first premium covered the period
up to September 26, 1942.
 After the first premium, no further premiums were paid. The insured died on September 22, 1944.
 Asia Life Insurance Company, being an American Corp., had to close its branch office in Manila
by reason of the Japanese occupation, i.e. from January 2, 1942, until the year 1945.
 Case 2:
 Spouses Tomas Ruiz and Agustina Peralta. Their premium were initially annually but
subsequently changed to quarterly. The last quarterly premium was delivered on on November
18, 1941 and it covered the period until January 31, 1942.
 Upon the Japanese occupation, the insurer and insured were not able to deal with each other
 Because the insured had borrowed on the policy P234.00 in January, 1941, the cash surrender
value of the policy was sufficient to maintain the policy in force only up to September 7, 1942.
 Tomas Ruiz died on February 16, 1945 with Agustina Peralta as beneficiary. Her demand for
payment was refused on the ground of non-payment of the premiums.
 Plaintiffs: As beneficiaries, they are entitled to receive the proceeds of the policies minus all sums
due for premiums in arrears. The non-payment of the premiums was caused by the closing of
Asia's offices in Manila during the Japanese occupation and the impossible circumstances created
by war.
 lower court: absolved Asia
ISSUE: W/N the insurers still have a right to claim.
 HELD: YES. lower court affirmed.
 it would seem that pursuant to the express terms of the policy, non-payment of premium produces
its avoidance
 Forfeitures of insurance policies are not favored, but courts cannot for that reason alone refuse to
enforce an insurance contract according to its meaning.
 Nevertheless, inasmuch as the non-payment of premium was the consequence of war, it should
be excused and should not cause the forfeiture of the policy
 3 Rules in case of war:
 Connecticut Rule
 2 elements in the consideration for which the annual premium is paid:
 mere protection for the year
 privilege of renewing the contract for each succeeding year by paying the premium for that year
at the time agreed upon
 payment of premiums is a condition precedent, the non-performance would be illegal necessarily
defeats the right to renew the contract
 New York Rule - greatly followed by a number of cases
 war between states in which the parties reside merely suspends the contracts of the life insurance,
and that, upon tender of all premiums due by the insured or his representatives after the war has
terminated, the contract revives and becomes fully operative
 United States Rule
 contract is not merely suspended, but is abrogated by reason of non-payments is peculiarly of the
essence of the contract
 it would be unjust to allow the insurer to retain the reserve value of the policy, which is the excess
of the premiums paid over the actual risk carried during the years when the policy had been in
force
 The business of insurance is founded on the law of average; that of life insurance eminently so
 contract of insurance is sui generis
 Whether the insured will continue it or not is optional with him. There being no obligation to pay
for the premium, they did not constitute a debt.
 It should be noted that the parties contracted not only for peacetime conditions but also for times
of war, because the policies contained provisions applicable expressly to wartime days. The logical
inference, therefore, is that the parties contemplated uninterrupted operation of the contract even
if armed conflict should ensue.
 the fundamental character of the undertaking to pay premiums and the high importance of the
defense of non-payment thereof, was specifically recognized
 adopt the United States Rule: first policy had no reserve value, and that the equitable values of
the second had been practically returned to the insured in the form of loan and advance for
premium
5. Great Pacific Life Assurance v. Court of Appeals, G.R. No. 113899, October 13, 1999
Credit in Life and Health Insurance (Insurance)
Mortgagor (Insurance)
Laws Applicable: Sec. 8 of Insurance Code
FACTS:
 A contract of group life insurance was executed between Great Pacific Life Assurance Corporation
Grepalife) and Development Bank of the Philippines (DBP)
 Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP
 November 11, 1983: Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for
membership in the group life insurance plan
 Dr. Leuterio answered questions concerning his health condition as follows:
“7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure,
cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment?
Answer: No. If so give details ___________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [ x ] Yes [ ] No.”[4]
 November 15, 1983: Grepalife issued Certificate No. B-18558, as insurance coverage of Dr.
Leuterio, to the extent of his DBP mortgage indebtedness amounting to P86,200
 August 6, 1984: Dr. Leuterio died due to “massive cerebral hemorrhage.”
 DBP submitted a death claim to Grepalife
 Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied
 RTC: Favored Medarda V. Leuterio (widow) and held Grepalife (insurer) liable to pay DBP
(creditor of the insured Dr. Wilfredo Leuterio)
 CA sustained
ISSUE:
1. W/N DBP has insurable interest as creditor - YES
2. W/N Grepalife should be held liable - YES
HELD:
1. YES
 In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such
loss-payable clause does not make the mortgagee a party to the contract
 Section 8 of the Insurance Code provides:
“Unless the policy provides, where a mortgagor of property effects insurance in his own name
providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a
mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease
to be a party to the original contract, and any act of his, prior to the loss, which would otherwise
avoid the insurance, will have the same effect, although the property is in the hands of the
mortgagee, but any act which, under the contract of insurance, is to be performed by the
mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had
been performed by the mortgagor.”
 The insured Dr. Wilfredo Leuterio did not cede to the mortgagee all his rights or interests in the
insurance. When Grepalife denied payment, DBP collected the debt from the mortgagor and took
the necessary action of foreclosure on the residential lot of Dr. Wilfredo Leuterio
 Insured may be regarded as the real party in interest, although he has assigned the policy for the
purpose of collection, or has assigned as collateral security any judgment he may obtain
2. YES
 medical findings were not conclusive because Dr. Mejia did not conduct an autopsy
 widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension
 Grepalife failed to establish that there was concealment made by the insured, hence, it cannot
refuse payment of the claim
 fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the
contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense
and the duty to establish such defense by satisfactory and convincing evidence rests upon the
insurer
 The policy states that upon receipt of due proof of the Debtor’s death during the terms of this
insurance, a death benefit in the amount of P86,200.00 shall be paid. In the event of the debtor’s
death before his indebtedness with the creditor shall have been fully paid, an amount to pay the
outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured,
if there is any shall then be paid to the beneficiary/ies designated by the debtor.
 DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagor’s outstanding loan
 insurance proceeds shall inure to the benefit of the heirs of the deceased person or his
beneficiaries
 Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum
alterius detrimenio protest). Hence, it cannot collect the insurance proceeds, after it already
foreclosed on the mortgage
6. Heirs of Loreto C. Maramag represented by surviving spouse Vicente Pangilinan
Maramag v. Eva Verna De Guzman Maramag, et al, G.R. No. 181132, June 5, 2009
Lessons Applicable: To whom insurance proceeds payable (Insurance)
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 claiming
 RTC: Granted - civil code does NOT apply
 CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period
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 insurer
 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
7. Violeta Lalican v. The Insular Life Assurance Company, Limited, G.R. No. 183526, August
25, 2009
Facts:
Violeta is the widow of the Eulogio Lalican. During his lifetime, Eulogio applied for an insurance
policy with Insular Life on April 24, 1997 which contained a 20-year endowment variable income
package flexi plan worth P500k with two riders worth P500k each. Violeta was named the primary
beneficiary.
Under the terms, Eulogio was to pay premiums on a quarterly basin in the amount of P8,062 with
a grace period of 31 days for the payment of each premium subsequent to the first. If any premium
was not paid on or before the due date, the policy would be in default, and if the premium remained
unpaid until the end of the grace period, the policy would automatically lapse and become void.
Eulogio paid the premiums, however he failed to pay the premium due on January 24, 1998, even
after the lapse of the grace period of 31 days. Therefore, lapsed and become void. Eulogio
submitted to the Cabanatuan District Office of Insular Life an application for reinstatement together
with the payment of the premium due on January 24. Insular Life notified Eulogio that his
application for reinstatement could not be fully processed because of the unpaid interest thereon.
Eulogio was likewise advised by Malaluan (insurance agent) to pay the premiums that
subsequently became due April 1998 and July 1998, plus interest.
September 17, 1998. Eulogio went to Malaluan's house and paid for the interest which was
received by Malaluan's husband. Later that day, Eulogio died. Without the knowledge of Eulogio's
death, Malaluan forwarded to the Insular Life the application for reinstatement and the payment
made by Eulogio. However, Insular Life did not act upon such reinstatement for they knew already
of Eulogio's death.
September 28, 1998, Violeta filed for the insurance claim. Insular Life then informed Violeta in a
letter that her claim could not be processed because the insurance policy had lapsed already and
that Eulogio failed to reinstate the same and the payment made done thru Malaluan's husband
was, under the insurance policy, was considered a deposit only until approval of the said
application. Enclosed to this letter was a check representing the full refund of the past payments
made by Eulogio, amounting to P25,417.
Violeta requested for a reconsideration of her claim and returned the check to Insular Life. Insular
Life agreed to conduct a re-evaluation of Violeta's claim. Without waiting for the result of the re-
evaluation, Violeta filed with the RTC a complaint for death claim benefit alleging the Insular Life
was engaged in unfair claim settlement practice and deliberately failed to act with reasonable
promptness on her insurance claim. Violeta claims for the P1.5M insurance, plus interest,
attorney's fees and cost of suit.
Insular Life filed with the RTC an answer with counterclaim saying that the insurance claim was
rendered void due to non-payment of the premium and countered that Violeta should be ordered
to pay attorney's fees and expenses of litigation incurred by Insular Life.
RTC declared that Violeta failed to establish by preponderance of evidence her cause of action
against the defendant. Violeta failed to establish that the receipt of payment by Malaluan amounted
to the reinstatement of the insurance policy. Violeta filed for motion for reconsideration but was
denied as well; hence she elevated her case for review on Certiorari.
Issues: (a) Whether the decision of the court can still be reviewed despite having allegedly attained
finality and despite the mode of appeal of Violeta erroneous. (b) Whether the RTC has decided
the case on a question of law not in accord with law and applicable decisions of the Supreme
Court.
Ruling:
Petition lacks merit.
RTC's decision has long acquired finality for Violeta failed to file a notice of appeal more than five
months after the decision was rendered.
As to the substantial claim of whether there is insurable interest, the Court says that the matter of
insurable interest is entirely irrelevant and the real point of contention herein is whether Eulogio
was able to reinstate the lapsed insurance policy on his life before his death.
The Court rules in the negative, for the insurance policy is clear on the procedure of the
reinstatement of the insurance contract, of which Eulogio has failed to accomplish before his
death. As provided by the policy, insurance shall be deemed reinstated upon the approval of the
insurance policy of the application for reinstatement. The approval should be made during the
lifetime of the insured, in the case at bar, it wasn’t.
8. Gaisano Cagayan, Inc. v. Insurance Company of North America, G.R. No. 147839, June
8, 2006
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil Code, Section 13 of Insurance
Code
Facts:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire insurance
policies with book debt endorsements. The insurance policies provide for coverage on "book debts
in connection with ready-made clothing materials which have been sold or delivered to various
customers and dealers of the Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book of Account of
the Insured 45 days after the time of the loss covered under this Policy." The policies also provide
for the following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in respect of the
merchandise sold and delivered by the Insured which are outstanding at the date of loss for a
period in excess of six (6) months from the date of the covering invoice or actual delivery of the
merchandise whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close
of every calendar month all amount shown in their books of accounts as unpaid and thus become
receivable item from their customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the
Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by
fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing materials
sold and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC and LSPI
were paid for their claims and that the unpaid accounts of petitioner on the sale and delivery of
ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that the fire was purely
accidental; that the cause of the fire was not attributable to the negligence of the petitioner. Also,
it said that IMC and LSPI retained ownership of the delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano to pay
Insurance the P 2 million and the P 500,000 the latter paid to IMC and Levi Strauss.
Hence this petition.
Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as one covering the
unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made clothing
materials sold and delivered to petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods by
stipulating in the sales invoices that "[i]t is further agreed that merely for purpose of securing the
payment of the purchase price the above described merchandise remains the property of the
vendor until the purchase price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with IMC and LSPI.
Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly granted.
Ratio:
1. Nowhere is it provided in the questioned insurance policies that the subject of the insurance is
the goods sold and delivered to the customers and dealers of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with petitioner which
remained unpaid 45 days after the loss through fire, and not the loss or destruction of the goods
delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the
goods are at the buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller merely
to secure performance by the buyer of his obligations under the contract, the goods are at the
buyer's risk from the time of such delivery
Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of
loss is borne by the buyer. Petitioner bears the risk of loss of the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of the delivered goods.
Unlike the civil law concept of res perit domino, where ownership is the basis for consideration of
who bears the risk of loss, in property insurance, one's interest is not determined by concept of
title, but whether insured has substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether
real or personal, or any relation thereto, or liability in respect thereof, of such nature that a
contemplated peril might directly damnify the insured." Parenthetically, under Section 14 of the
same Code, an insurable interest in property may consist in: (a) an existing interest; (b) an
inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing
interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or would
suffer loss from its destruction. Indeed, a vendor or seller retains an insurable interest in the
property sold so long as he has any interest therein, in other words, so long as he would suffer by
its destruction, as where he has a vendor's lien. In this case, the insurable interest of IMC and
LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of
the loss covered by the policies.
3. Petitioner's argument that it is not liable because the fire is a fortuitous event under Article
117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article 1504
(1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for
petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire. Accordingly,
petitioner's obligation is for the payment of money. As correctly stated by the CA, where the
obligation consists in the payment of money, the failure of the debtor to make the payment even
by reason of a fortuitous event shall not relieve him of his liability. The rationale for this is that the
rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligation consists in the delivery of a determinate thing and there
is no stipulation holding him liable even in case of fortuitous event. It does not apply when the
obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the obligation." This rule is based on
the principle that the genus of a thing can never perish. An obligation to pay money is generic;
therefore, it is not excused by fortuitous loss of any specific property of the debtor.
4. With respect to IMC, the respondent has adequately established its claim. The P 3 m claim has
been proven. The subrogation receipt, by itself, is sufficient to establish not only the relationship
of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance
claim. The right of subrogation accrues simply upon payment by the insurance company of the
insurance claim Respondent's action against petitioner is squarely sanctioned by Article 2207 of
the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained
of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer
or the person who has violated the contract.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. There
was no evidence that respondent has been subrogated to any right which LSPI may have against
petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery
of P535,613.00.
9. The Insular Life Assurance Company, Ltd. vs. Ebrado, G.R. No. L-44059, October 28, 1977
Facts:
J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider for
Accidental Death. He designated 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 for accidental 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 marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts
that she is the one entitled to the insurance proceeds.
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 latter?
Held: No. Petition
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"
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.
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 isn’t 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.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was
also living in with his common-law wife with whom he has two children.
10. Sing vs. Feb Leasing & Finance Corporation G.R. No. 168115, June 8, 2007
FACTS:
On March 9, 1995, FEB Leasing and Finance Corporation entered into a lease of equipment and
motor vehicles with JVL Food Products. On the same date, Vicente Ong Lim Sing, Jr. executed
an Individual Guaranty Agreement with FEB to guarantee the prompt and faithful performance of
the terms and conditions of the aforesaid lease agreement. Corresponding Lease Schedules with
Delivery and Acceptance Certificates over the equipment and motor vehicles formed part of the
agreement. Under the contract, JVL was obliged to pay FEB an aggregate gross monthly rental
of One Hundred Seventy Thousand Four Hundred Ninety-Four Pesos (P170,494.00).
JVL defaulted in the payment of the monthly rentals. As of July 31, 2000, the amount in arrears,
including the penalty charges and insurance premiums, amounted to Three Million Four Hundred
Fourteen Thousand Four Hundred Sixty-Eight and 75/100 Pesos (P3,414,468.75). On August 23,
2000, FEB sent a letter to JVL demanding payment of the said amount. However, JVL failed to
pay.
On December 6, 2000, FEB filed a Complaint with the Regional Trial Court of Manila for sum of
money, damages, and replevin against JVL, Lim, and John Doe.
In an Amended Answer, JVL and Lim admitted the existence of the lease agreement but asserted
that it is in reality a sale of equipment on instalment basis, with FEB acting as the financier. On
November 22, 2002, the trial court ruled in favor of JVL and Lim and stressed the contradictory
terms found in the lease agreement. The trial court stated, among others, that if JVL and Lim (then
defendants) were to be regarded as only a lessee, logically the lessor who asserts ownership will
be the one directly benefited or injured and therefore the lessee is not supposed to be the assured
as he has no insurable interest.
On December 27, 2002, FEB filed its Notice of Appeal. Accordingly, on January 17, 2003, the
court issued an Order elevating the entire records of the case to the Court of Appeals. On March
15, 2005, the Court of Appeals issued its Decision declaring the transaction between the parties
as a financial lease agreement. The said decision reversed and set aside the trial court’s decision
dated November 22, 2002. Hence, Lim filed the present Petition for Review on Certiorari.
ISSUE:
Whether or not petitioner has an insurable interest in the equipment and motor vehicles leased.
RULING:
Yes.
 The stipulation in Section 14 of the leased contract, that the equipment shall be insured at the cost
and expense of the lessee against loss, damage, or destruction from fire, theft, accident, or other
insurable risk for the full term of the lease, is a binding and valid stipulation. Petitioner, as a lessee,
has an insurable interest in the equipment and motor vehicles leased. Section 17 of the Insurance
Code provides that the measure of an insurable interest in property is the extent to which the
insured might be damnified by loss or injury thereof. It cannot be denied that JVL will be directly
damnified in case of loss, damage, or destruction of any of the properties leased.

Lessons Applicable: Existing Interest (Insurance)

Laws Applicable:

FACTS:

 FEB Leasing and Finance Corporation (FEB) leased equipment and motor vehicles to JVL Food
Products with a monthly rental of P170,494
 At the same date, Vicente Ong Lim Sing, Jr. (Lim) an executed an Individual Guaranty
Agreement with FEB to guarantee the prompt and faithful performance of the terms and
conditions of the lease agreement
 JVL defaulted in the payment of the monthly rentals resulting to arrears of P3,414,468.75 and
refused to pay despite demands
 FEB filed a complaint for damages and replevin against JVL, Lim and John Doe
 JVL and Lim admitted the existence of the lease agreement but asserted that it is in reality a
sale of equipment on installment basis, with FEB acting as the financier
 RTC: Sale on installment and the FEB elected full payment of the obligation so for the
unreturned units and machineries the JVL and Lim are jointly and severally liable to pay
 CA: granted FEB appeal that it is a financial lease agreement under Republic Act (R.A.) No.
8556 and ordered JVL and Lim jointly and severally to pay P3,414,468.75
ISSUE: W/N JVL and Lim should jointly and severally be liable for the insured financial lease

HELD: YES. CA affirmed.

 contract of adhesion is as binding as any ordinary contract

 The Lease Contract with corresponding Lease Schedules with Delivery and Acceptance
Certificates is, in point of fact, a financial lease within the purview of R.A. No. 8556
 FEB leased the subject equipment and motor vehicles to JVL in consideration of a monthly
periodic payment of P170,494.00. The periodic payment by petitioner is sufficient to amortize at
least 70% of the purchase price or acquisition cost of the said movables in accordance with the
Lease Schedules with Delivery and Acceptance Certificates.
 JVL entered into the lease contract with full knowledge of its terms and conditions.
 Lim, as a lessee, has an insurable interest in the equipment and motor vehicles leased.
 In the financial lease agreement, FEB did not assume responsibility as to the quality,
merchantability, or capacity of the equipment. This stipulation provides that, in case of defect of
any kind that will be found by the lessee in any of the equipment, recourse should be made to
the manufacturer. “The financial lessor, being a financing company, i.e., an extender of credit
rather than an ordinary equipment rental company, does not extend a warranty of the fitness of
the equipment for any particular use. Thus, the financial lessee was precisely in a position to
enforce such warranty directly against the supplier of the equipment and not against the financial
lessor. We find nothing contra legem or contrary to public policy in such a contractual
arrangement