Compiled Digest

August 28, 2017 | Author: Angela Aquino | Category: Insurance, Life Insurance, Misrepresentation, Rescission, Indemnity
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Argente v West Coast G.R. No. L-24899 March 19, 1928 Facts: Bernardo Argente signed an application for joint insurance with his wife in the sum of P2,000. The wife, Vicenta de Ocampo, signed for the same. All the information contained in the applications was furnished the agent by Bernardo Argente. Argente was examined by Dr. Sta. Ana, a medical examiner for the West Coast. The result was recorded in the Medical Examiner's Report, and with the exception of the signature of Bernardo Argente, was in the hand-writing of Doctor Sta. Ana. But the information or answers to the questions contained on the face of the Medical Examiner's Report were furnished the doctor by Argente. Vicenta de Ocampo, wife of the plaintiff, was examined at her residence by the same doctor. The spouses submitted to West Coast Life an amended application, increasing the amount to P15,000, and asked that the policy be dated May 15, 1925. The amended application was accompanied by the documents entitled "Short Form Medical Report." In both of these documents appear certain questions and answers. A temporary policy for P15,000 was issued to Bernardo Argente and his wife as of May 15, but it was not delivered until the first quarterly premium on the policy was paid. More than thirty days had elapsed since the applicants were examined. Each of them was required to file a certificate of health before the policy was delivered. Vicenta de Ocampo died of cerebral apoplexy. Argente presented a claim in due form to the West Coast Life Insurance Co. for the payment of the sum of P15,000. It was apparently disclosed that the answers given by the insured in their medical

examinations with regard to their health were untrue. West Coastrefused to pay the claim and wrote Argente to the effect that the claim was rejected due to fraud. The trial court held the policy null and void, hence this appeal. Issue: WON Argente and Ocampo were guilty of concealment and thereby misled the insurer into accepting the risk? Held: Yes. Petition dismissed. Vicenta de Ocampo, in response to the question asked by the medical examiner, answered no to "Have you ever consulted a physician for or have you ever suffered from any ailment or disease of the brain or nervous system?" She also answered “none” as to the question whether she consumed alcohol of not. To the question, "What physician or physicians, if any, not named above, have you consulted or been treated by, within the last five years and for what illness or ailment?" she answered "None." But the facts show that she was taken to San Lazaro Hospital, her case was diagnosed by the admitting physician as "alcoholism”, moreover, she was diagnosed with "phycho-neurosis." Section 25 of the Insurance Code defined concealment as "a neglect to communicate that which a party knows and ought to communicate." The court held that the alleged concealment was not immaterial and insufficient to avoid the policy. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue, the truth of falsity of the answers become the determining factor. If the true facts been disclosed by the assured, the insurance would never have been granted.

Concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld. If no inquiries are made and no fraud or design to conceal enters into the concealment the contract is not avoided. The assurer is entitled to know every material fact of which the assured has exclusive or peculiar knowledge, as well as all material facts which directly tend to increase the hazard or risk which are known by the assured, or which ought to be or are presumed to be known by him. And a concealment of such facts vitiates the policy. If the assured has exclusive knowledge of material facts, he should fully and fairly disclose the same, whether he believes them material or not. The determination of the point whether there has or has not been a material concealment must rest largely in all cases upon the exact terms of the contract.

Great Pacific v CA G.R. No. L-31845 April 30, 1979 Facts: Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the essential data which petitioner Mondragon, the Branch Manager, wrote on the form. The latter paid the annual premium the sum of P1,077.75 going over to the Company, but he retained the amount of P1,317.00 as his commission for being a duly authorized agent of Pacific Life. Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application form his

strong recommendation for the approval of the insurance application. Then Mondragon received a letter from 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 seven years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly recommending the approval of the 20-year endowment insurance plan to children, pointing out that since the customers were asking for such coverage. Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but having failed in his effort, he filed the action for the recovery before the Court of First Instance of Cebu, which ruled against him. Issues: 1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in question 2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered void the policy Held: (1) No. (2) Yes. Petition dismissed. (1) NO. The receipt was intended to be merely a provisional insurance contract. Its perfection was subject to compliance of the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and

offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant. The receipt is merely an acknowledgment 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. There was still approval or rejection the same on the basis of whether or not the applicant is "insurable on standard rates." Since Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. The binding deposit receipt is conditional and does not insure outright. This was held in Lim v Sun.

Estefania Saturnino vs The Philippine American Life G.R. NO. 16163, February 28, 1963 FACTS: In September 1957, Estefania Saturnino was operated for cancer in which her right breast was removed. She was advised by her surgeon that she’s 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.

2. YES. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he supplied data, he was fully aware that his one-year old daughter is typically a mongoloid child. He withheld the fact material to the risk insured.

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 anyone seeking insurance.

“The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and perfect candor or openness and honesty; the absence of any concealment or demotion, however slight.”

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.”

The concealment entitles the insurer to rescind the contract of insurance.

Also, the fact that Philamlife waived its right to have Estefania undergo a medical examination is not negligence. Because of Estefania’s concealment, Philamlife considered medical

The deposit paid by private respondent shall have to be refunded by Pacific Life.

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.

Vda Canilang v CA G.R. No. 92492 June 17, 1993 Facts: Canilang was found to have suffered from sinus tachycardia then bronchitis after a check-up from his doctor. The next day, he applied for a "non-medical" insurance policy with respondent Grepalife naming his wife, Thelma Canilang, as his beneficiary. This was to the value of P19,700. He died of "congestive heart failure," "anemia," and "chronic anemia." The widow filed a claim with Great Pacific which the insurer denied on the ground that the insured had concealed material information from it. Petitioner then filed a complaint against Great Pacific for recovery of the insurance proceeds. Petitioner testified that she was not aware of any serious illness suffered by her late husband and her husband had died because of a kidney disorder. The doctor who gave the check up stated that he treated the deceased for “sinus tachycardia” and "acute bronchitis." Great Pacific presented a physician who testified that the deceased's insurance application had been approved on the basis of his medical declaration. She explained that as a rule, medical examinations are required only in cases where the applicant has indicated in his application for insurance coverage that he has previously undergone medical consultation and hospitalization. The Insurance Commissioner ordered Great Pacific to pay P19,700 plus legal interest and P2,000.00 as attorney's fees. On appeal by Great Pacific, the

Court of Appeals reversed. It found that the failure of Jaime Canilang to disclose previous medical consultation and treatment constituted material information which should have been communicated to Great Pacific to enable the latter to make proper inquiries. Hence this petition by the widow. Issue: Won Canilang misrepresentation




Held: Yes. Petition denied. There was a right of the insurance company to rescind the contract if it was proven that the insured committed fraud in not affirming that he was treated for heart condition and other ailments stipulated. Apart from certifying that he didn’t suffer from such a condition, Canilang also failed to disclose in the that he had twice consulted a doctor who had found him to be suffering from "sinus tachycardia" and "acute bronchitis." Under the Insurance Code: Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment. Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all factors within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. The information concealed must be information which the concealing party knew and should have communicated. The test of materiality of such information is contained in Section 31: Sec. 31. Materiality is to be determined not by the event, but solely by the probable and reasonable

influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries.

Indeed, the last medical consultation took place just the day before the insurance application was filed. In all probability, Jaime Canilang went to visit his doctor precisely because of the ailment.

The information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had he disclosed his visits to his doctor, the diagnosis made and medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refused to issue a nonmedical insurance policy.

Canilang's failure to set out answers to some of the questions in the insurance application constituted concealment.

Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that "probable and reasonable influence of the facts" concealed must, of course, be determined objectively, by the judge ultimately. The Insurance Commissioner had also ruled that the failure of Great Pacific to convey certain information to the insurer was not "intentional" in nature, for the reason that Canilang believed that he was suffering from minor ailment like a common cold. Section 27 stated that: Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. The failure to communicate must have been intentional rather than inadvertent. Canilang could not have been unaware that his heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice in the two (2) months before applying for non-medical insurance.

Sunlife v CA G.R. No. 105135 June 22, 1995 Facts: Robert John B. Bacani procured a life insurance contract for himself from Sunlife. He was issued a policy for P100,000.00, with double indemnity in case of accidental death. The designated beneficiary was his mother, Bernarda Bacani. The insured died in a plane crash. Respondent Bernarda Bacani filed a claim with petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner conducted an investigation and its findings prompted it to reject the claim. Sunlife informed Bacani that the insured did not disclose material facts relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to said letter. Petitioner claimed that the insured gave false statements in his application. The deceased answered claimed that he consulted a Dr. Raymundo of the Chinese General Hospital for cough and flu complications. The other questions were answered in the negative. Petitioner discovered that two weeks prior to his application for insurance, the insured was

examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased was subjected to urinalysis tests. Bernarda Bacani and her husband filed an action for specific performance against petitioner with the RTC. The court ruled in favor of the spouses and ordered Sunlife to pay P100,000.00. In ruling for private respondents, the trial court concluded that the facts concealed by the insured were made in good faith and under a belief that they need not be disclosed. The court also held that the medial history was irrelevant because it wasn’t medical insurance. The Court of Appeals affirmed the decision of the trial court. The appellate court ruled that petitioner cannot avoid its obligation by claiming concealment because the cause of death was unrelated to the facts concealed by the insured. Petitioner's motion for reconsideration was denied. Hence, this petition. Issue: WON the insured was guilty of misrepresentation which made the contract void. Held: Yes. Petition dismissed. Section 26 of The Insurance Code required a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. “A neglect to communicate that which a party knows and ought to communicate, is called concealment.”

“Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries.” The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. The information which the insured failed to disclose were material and relevant to the approval and issuance of the insurance policy. The matters concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application. Vda. de Canilang v. Court of Appeals- materiality of the information withheld does not depend on the state of mind of the insured. Neither does it depend on the actual or physical events which ensue. “Good faith" is no defense in concealment. The insured's failure to disclose the fact that he was hospitalized raises grave doubts about his eligibility. Such concealment was deliberate on his part. The argument, that petitioner's waiver of the medical examination of the insured debunks the materiality of the facts concealed, is untenable. Saturnino v. Philippine American Life Insurance " . . . the waiver of a medical examination [in a nonmedical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily

constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not . . . "

contrary to his answer in the application form. Thus, Julita paid for all the hospitalization expenses.

Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries as held in Henson.

After Ernani was discharged from the MMC, he was attended by a physical therapist at home. Later, he was admitted at the Chinese General Hospital. Due to financial difficulties, however, respondent brought her husband home again. In the morning of April 13, 1990, Ernani had fever and was feeling very weak. Respondent was constrained to bring him back to the Chinese General Hospital where he died on the same day.

Philamcare v CA G.R. No. 125678, March 18

Julita filed an action for damages and reimbursement of her expenses plus moral damages attorney’s fees against Philamcare and its president, Dr. Benito Reverente. The Regional Trial court or Manila rendered judgment in favor of Julita. On appeal, the decision of the trial court was affirmed but deleted all awards for damages and absolved petitioner Reverente. Hence, this 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.

FACTS: Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc. To the question ‘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?’, Ernani answered ‘No’. Under the agreement, Ernani is entitled to avail of hospitalization benefits and outpatient benefits. The coverage was approved for a period of one year from March 1, 1988 to March 1, 1989. The agreement was however extended yearly until June 1, 1990 which increased the amount of coverage to a maximum sum of P75,000 per disability. During the period of said coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month. While in the hospital, his wife Julita tried to claim the benefits under the health care agreement. However, the Philamcare denied her claim alleging that the agreement was void because Ernani concealed his medical history. Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive, diabetic and asthmatic,

ISSUES: (1) Whether or not the health care agreement is not an insurance contract; (2) Whether or not there is concealment of material fact made by Ernani HELD: (1)YES. Section2 (1)of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event. Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which my damnify a person having an insurable 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. The insurable interest of respondent’s 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. (2) NO. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. This 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 I 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. In any case, with or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a responsibility under the agreement, petitioner is bound to answer to the extent agreed upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or wherever he avails of the covered benefits which he has prepaid.

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. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured, especially to avoid forfeiture. This is equally applicable to Health Care Agreements.

Yu Pang Cheng v. CA G.R. NO. 12465, MAY 29 1959 FACTS: On September 1950, Yu Pang Eng submitted his application for insurance to an insurance company [defendant]. He answered “no” to questions on his medical history (stomach diseases, dizziness, ulcers, vertigo, cancer, tumors, etc.) as well as to the question of WON he consulted any physician regarding said diseases. Upon payment of the first premium, the company issued to him an insurance policy. On December 1950, he went to St. Luke’s for medical treatment but he died two months later. According to the death certificate, he died of infiltrating medullary carcinoma, Grade 4, advanced cardiac and of lesser curvature, stomach metastases spleen. His brother and beneficiary, Yu Pang Cheng [petitioner], demanded from the insurance company the payment of the policy proceeds [10k], but his demand was refused so he brought the present action. The insurance company’s defense was that the insured was guilty of misrepresentation and concealment of material facts in that he gave false and untruthful answers to questions asked him in his application; hence, the effect is the avoiding of the policy.

It appears that the insured entered the Chinese General Hospital for medical treatment on January 1950 [before application for insurance policy], complaining of dizziness, anemia, abdominal pains and tarry stools. His illness history shows that this started a year ago as frequent dizziness. An x-ray picture of his stomach and the diagnosis was that he suffered from peptic ulcer, bleeding. ISSUE: WON INSURED IS GUILTY OF CONCEALMENT OF MATERIAL FACTS HELD: YES. Concealment is a neglect to communicate that which a party knows and ought to communicate. Whether intentional or not, concealment entitles the insurer to rescind the contract. The law requires the insured to communicate to the insurer all facts within his knowledge which are material to the contract and which the other party has not the means of ascertaining. The materiality is determined not by the event but by the probable and reasonable influence of the facts upon the party to whom the communication is due. The insured’s negative answers to the questions on his previous ailments, or his concealment of his hospitalization deprived the insurance company of the opportunity to make the necessary inquiry as to the nature of his past illness so that it may form its estimate relative to the approval of his application. Had the insurance company been given such opportunity, it would not probably consent to the policy issuance.

Colado v. Insular Life 51 OG (No 12) 6269 Facts: Vivencio Collado applied for an insurance contract with Insular life in 1948. His application was approved and he began started making

premium payments. However, he defaulted and the insurance was cancelled. He then applied for the reinstatement of his insurance policy in Nov. of 1951 and tendered the amount of premium for the years 1950-1951. He stated that he was as of Nov. 1951 of good health, and that he had no injuries, ailments or illnesses and had not been sick for any case since 1948 (his medical check up when he applied for insurance) and that he had not consulted any physician or practitioner for any case since the date of such latest medical exam. However, when Vivencio applied for the reinstatement, he was already sick of a fatal disease known as carcinoma of the liver and that 4 days prior to his application for insurance, he consulted a doctor regarding his condition. The reinstatement was approved. Vivencio again failed to pay the premiums for the last quarter of Nov. 1951 and as such, Insular life sent him a notice canceling the policy. Vivencio then died. The beneificiaries instituted the present action to recover from Insular life the death benefits of a life insurance policy valued at 2T. Insular refused to pay claiming concealment on the part of Vivencio. Collado contends that Insular life had waived the right to rescine the policy in view of its repeated acceptance of the overdue premiums for the second and third years. Municipal court of Manila found for Collado and Insular filed an appeal with CFI of Manila. CFI rendered judgment in favor of Insular and dismissed Collado’s complaint.

Issue: Whether or not Insular life was estopped and could no longer cancel the contract due to the fact that it accepted the tender of overdue payments from Vivencio. Held: NO. It is enormously clear that when the deceased applied for a reinstatement of his policy in Nov. 1951, he had already been afflicted with the fatal ailment for a period of about four months. Furthermore, in submitting together with his application for reinstatement, a health statement to the effect that he was in good health, Vivencio concealed the material fact that he had consulted a doctor and was then found to be afflicted with the malady. The acceptance of Insular life of the overdue premiums did not necessarily deprive it of the right to cancel the policy in case of default incurred by the Insured in the payment of future premiums. The case would be different had the insured died at any time after the payment of overdue premiums but previous to the reinstatement of the policy, for the, Insular, by its acceptance of its overdue premiums is deemed to have waived its right to rescind the policy. The evidence at hand shows that insofar as the payment of the last quarterly premium for 1951 was concerned, Insular had availed of the right to rescind the policy by notifying the Insured that the policy had lapsed.

Edillon vs. Manila Bankers Life Insurance Corporation G.R. No. L-34200September 30, 1982 Facts: Sometime in April 1969, Carmen O, Lapuz applied Manila Bankers for insurance coverage

against accident and injuries. She filled up the blank application form given to her and filed the same with the respondent insurance corporation. In the said application form she gave the date of her birth as July 11, 1904. On the same date, she paid the sum of P20.00 representing the premium for which she was issued the corresponding receipt signed by an authorized agent of Manila Bankers. Upon the filing and the payment of the premium, the respondent insurance corporation issued to Carmen O. Lapuz its Certificate of Insurance. The policy was to be effective for a period of 90 days. During the effectivity of the certificate of insurance Carmen Lapuz died on a vehicular accident in the North Diversion Road. On June 7, 1969, petitioner Regina L. Edillon, a sister of the insured and who was the named beneficiary in the policy, filed her claim for the proceeds of the insurance, submitting all the necessary papers and other requisites. However, her claim was denied by the respondent corporation hence her filing of complaint in the Court of First Instance of Rizal on August 27, 1969. The respondent insurance corporation asserts that since Carmen Lapuz was over 60 years of age the policy in question was null and void because there is a provision in the certificate of insurance excluding its liability to pay claims under the policy in behalf of persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years. The trial court dismissed the complaint. Hence, this petition. Issue: Whether or not the acceptance by the private respondent insurance corporation of the premium and the issuance of the corresponding certificate of insurance should be deemed a waiver of the exclusionary condition of overage stated in the said certificate of insurance

Held: Yes. The age of the insured Carmen 0. Lapuz was not concealed to the insurance company. Her application for insurance coverage which was on a printed form furnished by private respondent and which contained very few items of information clearly indicated her age of the time of filing the same to be almost 65 years of age. Despite such information which could hardly be overlooked in the application form, considering its prominence thereon and its materiality to the coverage applied for, the respondent insurance corporation received her payment of premium and issued the corresponding certificate of insurance without question. The accident which resulted in the death of the insured, a risk covered by the policy, occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance coverage was applied for. There was sufficient time for the private respondent to process the application and to notice that the applicant was over 60 years of age and thereby cancel the policy on that ground if it was minded to do so. If the private respondent 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, the insurance corporation is already deemed in estoppel. Its inaction to revoke the policy despite a departure from the exclusionary condition contained in the said policy constituted a waiver of such condition.

Insular Life Assurance Co., Ltd. vs Serafin Feliciano G.R. No. 47596 (1941) FACTS: Evaristo Feliciano was issued an insurance policy by Insular Life. In September 1935, he died. His heirs (Serafin Feliciano et al) filed an insurance

claim but Insular Life denied the application as it averred that Feliciano’s application was attended by fraud. It was later found in court that the insurance agent and the medical examiner of Insular Life who assisted Feliciano in signing the application knew that Feliciano was already suffering from tuberculosis; that they were aware of the true medical condition of Feliciano yet they still made it appear that he was healthy in the insurance application form; that Feliciano signed the application in blank and the agent filled the information for him. ISSUE: Whether or not Insular Life can avoid the insurance policy by reason of the fact that its agent knowingly and intentionally wrote down the answers in the application differing from those made by Feliciano hence instead of serving the interests of his principal, acts in his own or another’s interest and adversely to that of his principal. HELD: No. Insular Life must pay the insurance policy. The weight of authority is that if an agent of the insurer, after obtaining from an applicant for insurance a correct and truthful answer to interrogatories contained in the application for insurance, without knowledge of the applicant fills in false answers, either fraudulently or otherwise, the insurer cannot assert the falsity of such answers as a defense to liability on the policy, and this is true generally without regard to the subject matter of the answers or the nature of the agent’s duties or limitations on his authority, at least if not brought to the attention of the applicant. The fact that the insured did not read the application which he signed, is not indicative of bad faith. It has been held that it is not negligence for the insured to sign an application without first reading it if the insurer by its conduct in appointing

the agent influenced the insured to place trust and confidence in the agent.

Assurance Corporation. Asian Crusader asked the following question:

Insular Life Assurance Co., Ltd. vs Serafin Feliciano G.R. No. 47593 (1943)

Has any life insurance company ever refused your application for insurance or for reinstatement of a lapsed policy or offered you a policy different from that applied for? If, so, name company and date.

FACTS: From the court’s decision rendered in the case of Insular Life Assurance vs Feliciano (1941), Insular Life filed a motion for reconsideration. Insular avers that Feliciano is not entitled to the claim because the insurance policy is void ab initio; that he connived with the insurance agent and the medical examiner; and that at best, Feliciano is only entitled to refund or the reimbursement of what he has paid in premium.

Kwong Nam answered “No” to the above question. Kwong Nam was also examined by Asian Crusader’s medical examiner to whom he disclosed that he was once operated and a tumor was removed from his stomach and such was “associated with ulcer of the stomach.”

ISSUE: Whether or not Insular Life is correct. HELD: Yes. This time, the Supreme Court held that Insular Life’s 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 Insular 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. If they falsified the answers for him, he could not evade the responsibility for the falsification. He was not supposed to sign the application in blank. He knew that the answers to the questions therein contained would be “the basis of the policy,” and for that very reason he was required with his signature to vouch for truth thereof.

Ng Gan Zee vs Asian Crusader Life Assurance Corporation G.R. No. 30685, May 20 1983 FACTS: In May 1962, Kwong Nam applied for a 20year endowment policy with Asian Crusader Life

Kwong Nam’s application was approved. In May 1963, he died. His widow, Ng Gan Zee, filed an insurance claim but Asian Crusader refused her claim as it insisted that Kwong Nam concealed material facts from them when he was applying for the insurance; that he misrepresented the fact that he was actually denied application by Insular Life when he was renewing his application with them; that Kwong Nam was actually operated for peptic ulcer. ISSUE: (1) Whether or not Ng Gan Zee can collect the insurance claim; (2) Whether or not Asian Crusader was deceived into entering the contract or in accepting the risk at the rate of premium agreed upon because of insured's representation? HELD: (1) Yes. Asian Crusader was not able to prove that Kwong Nam’s statement that Insular Life did not deny his insurance renewal with them is untrue. In fact, evidence showed that in April 1962, Insular Life approved Kwong Nam’s request of reinstatement only with the condition that Kwong Nam’s plan will be lowered from P50,000.00 to P20,000.00 considering his medical history.

Kwong Nam did not conceal anything from Asian Crusader. His statement that his operation, in which a tumor the size of a hen’s egg was removed from his stomach, was only “associated with ulcer of the stomach” and not peptic ulcer can be considered as an expression made in good faith of his belief as to the nature of his ailment and operation. Indeed, such statement must be presumed to have been made by him without knowledge of its incorrectness and without any deliberate intent on his part to mislead Asian Crusader. While it may be conceded that, from the viewpoint of a medical expert, the information communicated was imperfect, the same was nevertheless sufficient to have induced Asian Crusader to make further inquiries about the ailment and operation of Kwong Nam. It has been held that where, upon the face of the application, a question appears to be not answered at all or to be imperfectly answered, and the insurers issue a policy without any further inquiry, they waive the imperfection of the answer and render the omission to answer more fully immaterial. (2) No. Petition dismissed. Section 27 of the Insurance Law: Sec. 27. Such party a contract of insurance must communicate to the other, in good faith, all facts within his knowledge which are material to the contract, and which the other has not the means of ascertaining, and as to which he makes no warranty. "Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing requires that he should communicate it to the assurer, but he designedly and intentionally withholds the same."

It has also been held "that the concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld." Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. And as correctly observed by the lower court, "misrepresentation as a defense of the insurer to avoid liability is an 'affirmative' defense. The duty to establish such a defense by satisfactory and convincing evidence rests upon the defendant. The evidence before the Court does not clearly and satisfactorily establish that defense." It bears emphasis that Kwong Nam had informed the appellant's medical examiner of the tumor. His statement that said tumor was "associated with ulcer of the stomach" should be construed as an expression made in good faith of his belief as to the nature of his ailment and operation. While the information communicated was imperfect, the same was sufficient to have induced appellant to make further inquiries about the ailment and operation of the insured. Section 32 of Insurance Law: Section 32. The right to information of material facts maybe waived either by the terms of insurance or by neglect to make inquiries as to such facts where they are distinctly implied in other facts of which information is communicated. Where a question appears to be not answered at all or to be imperfectly answered, and the insurers issue a policy without any further inquiry, they waive the imperfection of the answer and render the omission to answer more fully immaterial. The company or its medical examiner did not make any further inquiries on such matters from the

hospital before acting on the application for insurance. The fact of the matter is that the defendant was too eager to accept the application and receive the insured's premium. It would be inequitable now to allow the defendant to avoid liability under the circumstances."

The widow, respondent Medarda V. Leuterio, filed against Grepalife.

Great Pacific v CA G.R. No. 113899. October 13, 1999

Issues: 1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor? 2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had hypertension, which would vitiate the insurance contract? 3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six thousand, two hundred (P86,200.00) pesos without proof of the actual outstanding mortgage payable by the mortgagor to DBP.

Facts: A contract of group life insurance was executed between petitioner Great Pacific and Development Bank Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. Wilfredo Leuterio, a physician and a housing debtor of DBP, applied for membership in the group life insurance plan. In an application form, 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? 8. Are you now, to the best of your knowledge, in good health?” Grepalife issued a coverage to the value of P86,200.00 pesos. 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 for an insurance coverage. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim.

The trial court rendered a decision in favor of respondent widow and against Grepalife. The Court of Appeals sustained the trial court’s decision.

Held: 1. NO. Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real party in interest, hence the trial court acquired no jurisdiction over the case. It argues that when the Court of Appeals affirmed the trial court’s judgment, Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP, the indispensable party who was not joined in the suit. The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: “In the event of the debtor’s death before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor.” When DBP’s claim was denied, it collected the debt from

the mortgagor and took the necessary action of foreclosure on the residential lot of private respondent. Gonzales vs. Yek Tong Lin- Insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Insured may thus sue, although the policy is taken wholly or in part for the benefit of another person named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor may sue thereon in his own name, especially where the mortgagee’s interest is less than the full amount recoverable under the policy. 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. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered,[14] the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife. 2. NO. The medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on the body of the decedent. The medical certificate stated that hypertension was “the possible cause of death.” Hence, the statement of the physician was properly considered by the trial court as hearsay. Contrary to appellant’s allegations, there was no sufficient proof that the insured had suffered from hypertension. Aside from the statement of the insured’s widow who was not even sure if the

medicines taken by Dr. Leuterio were for hypertension, the appellant had not proven nor produced any witness who could attest to Dr. Leuterio’s medical history. Appellant insurance company had failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim.” The 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. 3. NO. A life insurance policy is a valued policy. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy. The mortgagor paid the premium according to the coverage of his insurance. 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. DBP foreclosed one of the deceased person’s lots to satisfy the mortgage. Hence, the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries.

Tan Chay v West Coast G.R. No. L-27541 November 21, 1927 Facts: Tan Chay applied for a life insurance policy of for the sum of P10,000 where he was the sole beneficiary. The company approved this. The

policy was issued upon the payment by Tan Ceang of the first year's premium worth P936. The company agreed to pay the beneficiay the amount of the policy upon the receipt of the proofs of the death of the insured while the policy was in force. Without any premium due or unpaid, Ceang died. Tan Chay plaintiff submitted the proofs of the death of Tan Ceang with a claim for the payment. The company refused to pay. The company alleged that Tan Ceang obtained the policy by means of deceit to the effect that the medical certificate had false statements about his health. They also claimed that he didn’t pay the premium. The court ruled for Tan Chay and commanded the company to pay 10,000 pesos. Issue: WON Section 47 of the Insurance Code applies to this case.

The word "rescind" has a well defined legal meaning, and as applied to contracts, it presupposes the existence of a contract to rescind. The rescission relates only to the unfulfilled part, and not to the entire agreement, making the party rescinding liable on notes executed pursuant to the contract which matured before the rescission. The rescission is the unmaking of a contract, requiring the same concurrence of wills as that which made it, and nothing short of this will suffice. After a contract has been broken, whether by an inability to perform it, or by rescinding against right or otherwise, the party not in fault may sue the other for the damages suffered, or, if the parties can be placed in status quo, he may, should he prefer, return what he has received and recover in a suit value of what he has paid or done. The latter remedy is termed "rescission."

Held: No. Petition dismissed. The plaintiff contends that section 47 of the Insurance Act should be applied, and that when so applied, the company is barred and estopped to plead the matters alleged in its special defense. That section states: 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. The defendant contends that section 47 does not apply to this special defense. If in legal effect defendant's special defense is in the nature of an act to rescind "a contract of insurance," then such right must be exercised prior to an action enforce the contract. Defendant denied that if ever issued the policy in question.

In the instant case, the defendant does not seek to have the alleged insurance contract rescinded. It only denies that it ever made any contract of insurance on the life of Tan Ceang or that any such a contract ever existed. If the defendant never made or entered into the contract in question, there is no contract to rescind, and, hence, section 47 doesn’t apply. As stated, an action to rescind a contract is founded upon and presupposes the existence of the contract which is sought to be rescinded. If all of the material matters set forth and alleged in the defendant's special plea are true, there was no valid contract of insurance, for the simple reason that the minds of the parties never met and never agreed upon the terms and conditions of the contract. If such matters are known to exist by a preponderance of the evidence, they would constitute a valid defense to plaintiff's cause of action. Upon the question as to whether or not

they or are not true, the court couldn’t say, but they were sure that section 47 does not apply to the allegations made in the answer.

EMILIO TAN vs. COURT OF APPEALS G.R. No. 48049, 29 June 1989 FACTS: Tan Lee Siong, father of herein petitioners, applied for life insurance in the amount of P80,000.00 with respondent company Philippine American Life Insurance Company. Said application was approved and a corresponding policy was issued effective November 5, 1973, with petitioners as the beneficiaries. On April 26, 1975, Tan Lee Siong died of hepatoma. Hence, petitioners filed with respondent company their claim for the proceeds of the life insurance policy. However, the insurance company denied the said claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Siong in his application for insurance. The premiums paid on the policy were thereupon refunded. The petitioners contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action. ISSUE: Whether or not the insurance company has the right to rescind the contract of insurance despite the presence of an incontestability clause HELD: YES. The so-called “incontestability clause” precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured’s lifetime. The phrase “during the lifetime” found in Section 48 of the Insurance Law simply means that the policy is

no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is “for a period of two years”. The policy was issued on November 6, 1973 and the insured died on April 26, 1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the twoyear period has lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured’s fraudulent concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance and refunded the premiums paid on November 11, 1975, previous to the commencement of this action on November 27, 1975. WHEREFORE, the petition is hereby DENIED for lack of merit. The questioned decision of the Court of Appeals is AFFIRMED.

Manila Bankers vs Aban G.R. No. 175666 July 29, 2013 Facts: On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life Insurance Corporation (Bankers Life), designating respondent Cresencia P. Aban (Aban), her niece, as her beneficiary. Petitioner issued Insurance Policy No. 747411 (the policy), with a face value of P 100,000.00, in Sotero’s favor on August 30, 1993, after the requisite medical examination and payment of the insurance premium. On April 10, 1996, when the insurance policy had been in force for more than two years and seven months, Sotero died. Respondent filed a claim for the insurance proceeds on July 9, 1996. Petitioner conducted an investigation into the claim, and came out with the following findings: 1. Sotero did not personally apply for insurance coverage, as she was illiterate; 2. Sotero was sickly since 1990; 3. Sotero did not have the financial capability to pay the insurance premiums on Insurance Policy No. 747411; 4.

Sotero did not sign the July 3, 1993 application for insurance; and 5. Respondent was the one who filed the insurance application, and x x x designated herself as the beneficiary. For the above reasons, petitioner denied respondent’s claim on April 16, 1997 and refunded the premiums paid on the policy. Issue: Whether or not Manila Bankers is barred from denying the insurance claims based on fraud or concealment. Held: YES. The “incontestability clause” is a provision in law that after a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two (2) years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of fraudulent concealment or misrepresentation of the insured or his agent. The purpose of the law is to give protection to the insured or his beneficiary by limiting the rescinding of the contract of insurance on the ground of fraudulent concealment or misrepresentation to a period of only two (2) years from the issuance of the policy or its last reinstatement. The insurer is deemed to have the necessary facilities to discover such fraudulent concealment or misrepresentation within a period of two (2) years. It is not fair for the insurer to collect the premiums as long as the insured is still alive, only to raise the issue of fraudulent concealment or misrepresentation when the insured dies in order to defeat the right of the beneficiary to recover under the policy. Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under the provision, an insurer is given two years –

from the effectivity of a life insurance contract and while the insured is alive – to discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured dies within the period, the insurer must make good on the policy, even though the policy was obtained by fraud, concealment, or misrepresentation. This is not to say that insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business must be penalized, for such recklessness and lack of discrimination ultimately work to the detriment of bona fide takers of insurance and the public in general.

RCBC v. CA G.R. No. 128833 (1998) 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 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: YES, 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 equity. 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 effects. To permit GOYU to capitalize on its nonconfirmation 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: 1. 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. 2. 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. 3. 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 endorsements. 4. 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.

Tang v. CA G.R. No. 48563, MAY 25, 1979

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.

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.

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.

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 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.

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) 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. Tang’s 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 CC. Issue: Whether or not Art. 1332 applies. 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,

Concurring: J., Antonio 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. 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. 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.

Lim v Sunlife G.R. No. L-15774 November 29, 1920 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 appeal. 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 shall be 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. 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: 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 application. However, there was no perfected contract because of the clause in the application and the receipt stipulate expressly that the insurance shall 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.

JAMES STOKES vs. MALAYAN G.R. No. L-34768, 24 February 1984 FACTS: Daniel Adolfson had a subsisting Malayan car insurance policy with coverage against own damage as well as 3rd party liability when his car figured in a vehicular accident with another car, resulting to damage to both vehicles. At the time of the accident, Adolfson’s car was being driven by James Stokes, who was authorized to do so by Adolfson. Stokes, an Irish tourist who had been in the Philippines for only 90 days, had a valid and subsisting Irish driver’s license but without a Philippine driver’s license. Adolfson filed a claim with Malayan but the latter refused to pay contending that Stokes was not an authorized driver under the “Authorized Driver” clause of the insurance policy in relation to Section 21 of the Land Transportation Office. ISSUE: Whether or not Malayan is liable to pay the insurance claim of Adolfson HELD: NO. A contract of insurance is a contract of indemnity upon the terms and conditions specified therein. When the insurer is called upon to pay in case of loss or damage, he has the right to insist upon compliance with the terms of the contract. If the insured cannot bring himself within the terms and conditions of the contract, he is not entitled as a rule to recover for the loss or damage suffered. For the terms of the contract constitute the measure of the insurer’s liability, and compliance therewith is a condition precedent to the right of recovery. At the time of the accident, Stokes had been in the Philippines for more than 90 days. Hence, under the law, he could not drive a motor vehicle without a Philippine driver’s license. He was

therefore not an “authorized driver” under the terms of the insurance policy in question, and Malayan was right in denying the claim of the insured. Acceptance of premium within the stipulated period for payment thereof, including the agreed period of grace, merely assures continued effectivity of the insurance policy in accordance with its terms. Such acceptance does not estop the insurer from interposing any valid defense under the terms of the insurance policy. The principle of estoppel is an equitable principle rooted upon natural justice which prevents a person from going back on his own acts and representations to the prejudice of another whom he has led to rely upon them. The principle does not apply to the instant case. In accepting the premium payment of the insured, Malayan was not guilty of any inequitable act or representation. There is nothing inconsistent between acceptance of premium due under an insurance policy and the enforcement of its terms. WHEREFORE, the appealed judgment is reversed. The complaint is dismissed. Costs against appellees.

PERLA COMPANIA DE SEGUROS, INC vs. CA and CAYAS G.R. No. 78860, May 28, 1990 FACTS: Cayas was the registered owner of a Mazda bus which was insured with petitioner PERLA COMPANIA DE SEGUROS, INC (PCSI). The bus figured in an accident in Cavite, injuring several of its passengers. One of them, Perea, sued Cayas for damages in the CFI, while three others agreed to a settlement of P4,000.00 each with Cayas. After trial, the court rendered a decision in favor of Perea, Cayas ordered to compensate the latter with damages. Cayas filed a complaint with the CFI, seeking reimbursement from PCSI for the amounts she paid to ALL victims, alleging that the latter

refused to make such reimbursement notwithstanding the fact that her claim was within its contractual liability under the insurance policy. The decision of the CA affirmed in toto the decision of the RTC of Cavite, the dispositive portion of which states: IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant PCSI to pay plaintiff Cayas the sum of P50,000.00 under its maximum liability as provided for in the insurance policy; … In this petition for review on certiorari, petitioner seeks to limit its liability only to the payment made by private respondent to Perea and only up to the amount of P12,000.00. It altogether denies liability for the payments made by private respondents to the other 3 injured passengers totaling P12,000.00. ISSUE: How much should PCSI pay? HELD: The decision of the CA is modified, petitioner only to pay Cayas P12,000,000.00

The insurance policy provides: 5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the Company … It being specifically required that petitioner’s written consent be first secured before any payment in settlement of any claim could be made, private respondent is precluded from seeking reimbursement of the payments made to the other 3 victims in view of her failure to comply with the condition contained in the insurance policy.

Also, the insurance policy involved explicitly limits petitioner’s liability to P12,000.00 per person and to P50,000.00 per accident Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case. Thus, it was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance policy. We observe that although Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable for the amount of P50,000.00, the maximum liability per accident stipulated in the policy. This is patent error. An insurance indemnity, being merely an assistance or restitution insofar as can be fairly ascertained, cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason of an accident.

Pacific v CA G.R. No. L-41014 November 28, 1988 Facts: An open fire insurance policy, was issued to Paramount Shirt Manufacturing by Oriental Assurance Corporation to indemnify P61,000.00, caused by fire to the factory’s stocks, materials and supplies. The insured was a debtor of Pacific Banking in the amount of (P800,000.00) and the goods described in the policy were held in trust by the insured for Pacific Banking under trust receipts. The policy was endorsed to Pacific Banking as mortgagee/ trustor of the properties insured, with the knowledge and consent of private respondent to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation".

A fire broke out on the premises destroying the goods contained in the building. The bank sent a letter of demand to Oriental for indemnity. The company wasn’t ready to give since it was awaiting the adjuster’s report. The company then made an excuse that the insured had not filed any claim with it, nor submitted proof of loss which is a clear violation of Policy Condition No.11, as a result, determination of the liability of private respondent could not be made. Pacific Banking filed in the trial court an action for a sum of money for P61,000.00 against Oriental Assurance. At the trial, petitioner presented communications of the insurance adjuster to Asian Surety revealing undeclared co-insurances with the following: P30,000 with Wellington Insurance; P25,000 with Empire Surety and P250,000 with Asian Surety undertaken by insured Paramount on the same property covered by its policy with Oriental whereas the only co-insurances declared in the subject policy are those of P30,000.00 with Malayan P50,000.00 with South Sea and P25.000.00 with Victory. The defense of fraud, in the form of nondeclaration of co-insurances which was not pleaded in the answer, was also not pleaded in the Motion to Dismiss. The trial court denied the respondent’s motion. Oriental filed another motion to include additional evidence of the co-insurance which could amount to fraud. The trial court still made Oriental liable for P 61,000. The CA reversed the trial court decision. Pacific Banking filed a motion for reconsideration

of the said decision of the respondent Court of Appeals, but this was denied for lack of merit. Issues: 1. WON unrevealed co-insurances Violated policy conditions No. 3 2. WON the insured failed to file the required proof of loss prior to court action. Held: Yes. Petition dismissed. 1. YES. Policy Condition No. 3 explicitly provides: 3. The Insured shall give notice to the Company of any insurance already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this policy shall be forfeited. The insured failed to reveal before the loss three other insurances. Had the insurer known that there were many co-insurances, it could have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud.

Petitioner points out that Condition No. 3 in the policy in relation to the "other insurance clause" supposedly to have been violated, cannot certainly defeat the right of the petitioner to recover the insurance as mortgagee/assignee. Hence, they claimed that the purpose for which the endorsement or assignment was made was to protect the mortgagee/assignee against any untoward act or omission of the insured. It would be absurd to hold that petitioner is barred from recovering the insurance on account of the alleged violation committed by the insured. It is obvious that petitioner has missed all together the import of subject mortgage clause which specifically provides: “Loss, if any, under this policy, shall be payable to the PACIFIC BANKING CORPORATION Manila mortgagee/trustor as its interest may appear, it being hereby understood and agreed that this insurance as to the interest of the mortgagee/trustor only herein, shall not be invalidated by any act or neglect—except fraud or misrepresentation, or arson—of the mortgagor or owner/trustee of the property insured; provided, that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium, the mortgagee/ trustor shall, on demand pay the same.”

Concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of co-insurances taken over the subject property.

The paragraph clearly states the exceptions to the general rule that insurance as to the interest of the mortgagee, cannot be invalidated; namely: fraud, or misrepresentation or arson. Concealment of the aforecited co-insurances can easily be fraud, or in the very least, misrepresentation.

As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property, the total absence of such notice nullifies the policy.

Undoubtedly, it is but fair and just that where the insured who is primarily entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right.

Petitioner further stressed that fraud which was not pleaded as a defense in private respondent's answer or motion to dismiss, should be deemed to have been waived. It will be noted that the fact of fraud was tried by express or at least implied consent of the parties. Petitioner did not only object to the introduction of evidence but on the contrary, presented the very evidence that proved its existence. 2. YES. Generally, the cause of action on the policy accrues when the loss occurs, But when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment In the case at bar, policy condition No. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances, if any. Twenty-four days after the fire did petitioner merely wrote letters to private respondent to serve as a notice of loss. It didn’t even furnish other documents. Instead, petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. Since the required claim by insured, together with the preliminary submittal of relevant documents had not been complied with, it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore there was no cause of action.

It appearing that insured has violated or failed to perform the conditions under No. 3 and 11 of the contract, and such violation or want of performance has not been waived by the insurer, the insured cannot recover, much less the herein petitioner.

Perez v CA G.R. No. 112329. January 28, 2000 Facts: Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for P20,000.00. Sometime in October 1987, an agent of the insurance corporation, visited Perez in Quezon and convinced him to apply for additional insurance coverage of P50,000.00. Virginia A. Perez, Primitivo’s wife, paid P2,075.00 to the agent. The receipt issued indicated the amount received was a "deposit." Unfortunately, the agent lost the application form accomplished by Perez and he asked the latter to fill up another application form. The agent sent the application for additional insurance of Perez to the Quezon office. Such was supposed to forwarded to the Manila office. Perez drowned. His application papers for the additional insurance of P50,000.00 were still with the Quezon. It was only after some time that the papers were brought to Manila. Without knowing that Perez died, BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for the P50,000.00. Petitioner Virginia Perez 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 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.

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 paid. BF Lifeman Insurance Corporation filed a complaint against Virginia Perez seeking the rescission and declaration of nullity of the insurance contract in question. Petitioner Virginia A. 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. On October 25, 1991, the trial court rendered a decision in favor of petitioner ordering respondent to pay 150,000 pesos. The Court of Appeals, however, reversed the decision of the trial court saying that the insurance contract for P50,000.00 could not have been perfected since at the time that the policy was issued, Primitivo was already dead. Petitioner’s motion for reconsideration having been denied by respondent court, the instant petition for certiorari was filed on the ground that there was a consummated contract of insurance between the deceased and BF Lifeman Insurance Corporation. Issue: WON the widow can receive the proceeds of the 2nd insurance policy

corporation was further conditioned 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." BF Lifeman didn’t give its assent when it merely received the application form and all the requisite supporting papers of the applicant. This happens only when it gives a policy. 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 Quezon. 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. Petitioner insists that the condition imposed by BF that a policy must have been delivered to and accepted by the proposed insured in good health is potestative, being dependent upon the will of the corporation and is therefore void. The court didn’t agree. A potestative condition depends upon the exclusive will of one of the parties and is considered void. The Civil Code states: When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void.

Held: No. Petition dismissed. Perez’s 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

The following conditions were imposed by the respondent company for the perfection of the contract of insurance: a policy must have been issued, the premiums paid, and the policy must have been delivered to and accepted by the applicant while he is in good health.

The third condition isn’t potestative, because the health of the applicant at the time of the delivery of the policy is beyond the control or will of the insurance company. Rather, the condition is a suspensive one whereby the acquisition of rights depends upon the happening of an event which constitutes the condition. In this case, the suspensive condition was the policy must have been delivered and accepted by the applicant while he is in good health. There was non-fulfillment of the condition, because the applicant was already dead at the time the policy was issued. As stated above, a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. So long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date of application, must have been a completed contract. The insurance company wasn’t negligent because delay in acting on the application does not constitute acceptance even after payment. The corporation may not be penalized for the delay in the processing of the application papers due to the fact that process in a week wasn’t the usual timeframe in fixing the application. Delay could not be deemed unreasonable so as to constitute gross negligence.

Bonifacio Bros. v. Mora G.R. NO. L-20853, May 29, 1967 Facts: Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. with the condition that Mora would insure the car with HS Reyes as beneficiary.

The car was then insured with State Insurance Company and the policy delivered to Mora. During the effectivity of the insurance contract, the car figured in an accident. The company then assigned the accident to an insurance appraiser for investigation and appraisal of the damage. Mora without the knowledge and consent of HS Reyes, authorized Bonifacio Bros to fix the car, using materials supplied by the Ayala Auto Parts Company. For the cost of Labor and materials, Mora was billed P2,102.73. The bill was sent to the insurer’s appraiser. The insurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser for delivery to the proper party. The car was delivered to Mora without the consent of HS Reyes, and without payment to Bonifacio Bros and Ayala. Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio and Ayala filed a complaint against Mora and the insurer with the municipal court for the collection of P2,102.73. The insurance company filed its answer with a counterclaim for interpleader, requiring Bonifacio and HS Reyes to interplead in order to determine who has a better right to the proceeds. Issue: Whether or not there is privity of contract between Bonficacio and Ayala on one hand and State Insurance on the other. Held: NO. It is fundamental that contracts take effect only between the parties thereto, except in some specific instance provided by law where the

contract contains some stipulation in favor of a third person. Such stipulation is known as a stipulation pour autrui; or a provision in favor of a third person not a party to the contract. Under this doctrine, a third person is ed 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. Consequently, a third person NOT a party to the contract has NO action against the aprties thereto, and cannot generally demand the enforcement of the same. The question of whether a third person has an enforceable interest in a contract must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring favor upon such third person. IN this connection, this court has laid down the rule that the fairest test to determine whether the interest of a 3rd person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract.

In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or material men in case of repair of the car in question. The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "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. 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, by the insured and third person. In this case, no contract of trust, express or implied. In this case, no contract of trust, expressed or implied exists. We, therefore, agree with the trial court that no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned. The appellant's claim, if at all, is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros Inc. This conclusion is deducible not only from the principle governing the operation and effect of insurance contracts in general, but is clearly covered by the express provisions of section 50 of the Insurance Act (now Sec. 53). The policy in question has been so framed that "Loss, if any, is payable to H. S. Reyes, Inc." which unmistakably shows the intention of the parties.

Coquia v. Fieldmen’s Insurance G.R. NO. L-23276, November 29, 1968 Facts: On Dec. 1, 1961, Fieldmen’s 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 Company’s option may make indemnity payable directly to the claimants or heirs of the claimants.”

During the policy’s 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 institued 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. 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.

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