INSURANCE LAW amount, which Diwata, as the first beneficiary, may recover, which will

adversely affect her vested right. (Go v. Redfern, G.R. No. 47705, April 25,
Beneficiary: Effects: Irrevocable Beneficiary (2005) 1941)

What are the effects of an irrevocable designation of a beneficiary under the Beneficiary; Life Insurance; Prohibited Beneficiaries (1998)
Insurance Code? Explain. (2%)
Juan de la Cruz was issued Policy No. 8888 of the Midland Life Insurance Co
SUGGESTED ANSWER: The irrevocable designation gives the beneficiary a on a whole life plan for P20,000 on August 19, 1989. Juan is married to
vested right over Life Insurance. The Insured cannot act to divest the Cynthia with whom he has three legitimate children. He, however, designated
irrevocable beneficiary, in whole or in part, without the beneficiary's consent. Purita, his common-law wife, as the revocable beneficiary. Juan referred to
Purita in his application and policy as the legal wife.
To be specific:
3 years later, Juan died. Purita filed her claim for the proceeds of the policy as
(1) The beneficiary designated in a life insurance contract cannot be changed the designated beneficiary therein. The widow, Cynthia, also filed a claim as
without the consent of the beneficiary because he has a vested interest in the the legal wife. To whom should the proceeds of the insurance policy be
policy (Philamlife v. Pineda, G.R. No. 54216, July 19, 1989, citing Gcrcio v. awarded? (5%)
Sun Life, G.R. No. 23703, September 28, 1925; and Go v. Redfern, G.R. No.
47705, April 25, 1841); SUGGESTED ANSWER:

(2) Neither can the Insured take the cash surrender value, assign or even The proceeds of the insurance policy shall be awarded to the ESTATE of Juan
borrow on said policy without the beneficiary's consent (Nario v. Philamlife, de la Cruz. Purita, the common- law-wife, is disqualified as the beneficiary of
G.R. No. 22796, June 26, 1967); the deceased because of illicit relation between the deceased and Purita, the
designated beneficiary. Due to such illicit relation, Purita cannot be a donee of
(3) The Insured cannot add another beneficiary because that would reduce the the deceased. Hence, she cannot also be his beneficiary.
amount which the first beneficiary may recover and therefore adversely affect
his vested right (Go v. Redfem, G.R. No. 47705, April 25, 1941); Concealment; Material Concealment (2001)

(4) Unless the policy allows, the Insured cannot even designate another A applied for a non-medical life insurance. The insured did not inform the
beneficiary should the original beneficiary predecease him. His estate acquires insurer that one week prior to his application for insurance, he was examined
the beneficiary's vested right upon his death; and and confined at St. Lukes Hospital where he was diagnosed for lung cancer.
The insured soon thereafter died in a plane crash. Is the insurer liable
(5) The Insured cannot allow his creditors to attach or execute on the policy. considering that the fact concealed had no bearing with the cause of death of
(Philamlife v. Pineda, G.R. No. 54216, July 19, 1989) the insured? Why? (5%)

Beneficiary: Rights; Irrevocable Beneficiary (2005) SUGGESTED ANSWER:

Jacob obtained a life insurance policy for P1 Million designating irrevocably No. The concealed fact is material to the approval and issuance of the
Diwata, a friend, as his beneficiary. Jacob, however, changed his mind and insurance policy. It is well settled that the insured need not die of the disease
wants Yob and Jojo, his other friends, to be included as beneficiaries he failed to disclose to the insurer. It is sufficient that his nondisclosure misled
considering that the proceeds of the policy are sufficient for the three friends. the insurer in forming his estimate of the risks of the proposed insurance policy
Can Jacob still add Yob and Jojo as his beneficiaries? Explain. (2%) or in making inquiries.

SUGGESTED ANSWER: Concealment; Material Concealment: Incontestability Clause (1994)

No, Jacob can no longer add Yob and Jojo as his beneficiaries in addition to On September 23, 1990, Tan took a life insurance policy from Philam. The
Diwata. As the irrevocable beneficiary, Diwata has acquired a-vested right over policy was issued on November 6, 1990. He died on April 26, 1992 of
Jacob's life insurance policy. Any additional beneficiaries will reduce the hepatoma. The insurance company denied the beneficiaries claim and
rescinded the policy by reason of alleged misrepresentation and concealment hospitalization for such information constitutes an important factor which Good
of material facts made by Tan in his application. It returned the premiums paid. Life takes into consideration in deciding whether to issue the policy or not.
(See Sunlife Assurance Co of Canada v CA GR 105135, June 22, 1995 245 s
The beneficiaries contend that the company had no right to rescind the 268)
contract as rescission must be done during the lifetime of the insured within
two years and prior to the commencement of the action. If the policy of life insurance has been in force for a period of 2 years or more
from the date of its issue (on which point the given facts are vague) then Good
Is the contention of the beneficiaries tenable? Life can no longer prove that the policy is void ab initio or is rescindible by
reason of the fraudulent concealment or misrepresentation of Juan (Sec 48 Ins
SUGGESTED ANSWER: Code)

No. The incontestability clause does not apply. The insured dies within less Concealment; Material Concealment: Incontestability Clause (1997)
than two years from the issuance of the policy on September 23, 1990. The
insured died on April 26, 1992, or less than 2 years from September 23, 1990. The assured answers No to the question in the application for a life policy:
Are you suffering from any form of heart illness? In fact, the assured has
The right of the insurer to rescind is only lost if the beneficiary has commenced been a heart patient for many years. On 7 Sep 1991, the assured is killed in a
an action on the policy. There is no such action in this case. (Tan v CA 174 s plane crash. The insurance company denies the claim for insurance proceeds
143) and returns the premiums paid.

Concealment; Material Concealment: Incontestability Clause (1996) Is the decision of the insurance company justified?

Juan procured a non-medical life insurance from Good Life Insurance. He SUGGESTED ANSWER:
designated his wife, Petra, as the beneficiary. Earlier, in his application in
response to the question as to whether or not he had ever been hospitalized, Assuming that the incontestability clause does not apply because the policy
he answered in the negative. He forgot to mention his confinement at the has not been in force for 2 years, from the date of issue, during the lifetime of
Kidney Hospital. the insured, the decision of the insurance company not to pay is justified.
There was fraudulent concealment. It is not material that the insured died of a
After Juan died in a plane crash, Petra filed a claim with Good Life. different cause than the fact concealed. The fact concealed, that is heart
Discovering Juans previous hospitalization, Good Life rejected Petras claim ailment, is material to the determination by the insurance company whether or
on the ground of concealment and misrepresentation. Petra sued Good Life, not to accept the application for insurance and to require the medical
invoking good faith on part of Juan. examination of the insured.

Will Petras suit prosper? Explain. However, if the incontestability clause which applies to the insurance policy
covering the life of the insured had been in force for 2 years from issuance
SUGGESTED ANSWER: thereof, the insurance company would not be justified in denying the claim for
proceeds of the insurance and in returning the premium paid. In that case, the
No, Petras suit will not prosper (assuming that the policy of life insurance has insurer cannot prove the policy void ab initio or rescindible by reason of
been in force for a period of less than 2 years from the date of its issue). The fraudulent concealment or misrepresentation of the insured.
matters which Juan failed to disclose was material and relevant to the approval
and issuance of the insurance policy. They would have affected Good Lifes Concealment; Material Concealment; Incontestability Clause (1991)
action on his application, either by approving it with the corresponding
adjustment for a higher premium or rejecting the same. Moreover, a disclosure Atty Roberto took out a life insurance policy from the Dana Ins Co (DIC) on 1
may have warranted a medical examination of Juan by Good Life in order for it Sep 1989. On 31 Aug 1990, Roberto died. DIC refused to pay his beneficiaries
to reasonably assess the risk involved in accepting the application. In any because it discovered that Robert had misrepresented certain material facts in
case, good faith is no defense in concealment. The waiver of a medical his application. The beneficiaries sued on the basis that DIC can contest the
examination in the non-medical life insurance from Good Life makes it even validity of the insurance policy only within 2 years from the date of issue and
more necessary that Juan supply complete information about his previous during the lifetime of the insured. Decide the case.
SUGGESTED ANSWER: Insurance Code of the Philippines (PD1460)? (2%)

I would rule in favor of the insurance company. The incontestability clause, SUGGESTED ANSWER:
applies only if the policy had been in effect for at least 2 years. The 2 year
period is counted from the time the insurance becomes effective until the death Yes. BD has insurable interest in his bank deposit. In case of loss of said
of the insured and not thereafter (Tan v CA GR 48044 29Jun1989) deposit, more particularly to the extent of the amount in excess of the limit
covered by the PDIC Act, PBD will be damnified. He will suffer pecuniary loss
ALTERNATIVE ANSWER: of P300,000.00, that is, his bank deposit of half a million pesos minus
P200,000.00 which is the maximum amount recoverable from the PDIC.
I would rule in favor of the insurance company. Although an insurer may not
rescind the contract on ground of misrepresentation after an action is Insurable Interest: Public Enemy (2000)
commenced for recovery under the policy, the insurer is not precluded from
invoking the ground of misrepresentation as a defense in the action for May a member of the MILF or its breakaway group, the Abu Sayyaf, be insured
recovery. This is alright since the bar problem is not covered yet by the with a company licensed to do business under the Insurance Code of the Phils
incontestability clause. (PD 1460)? Explain. (3%)

Concealment; Material Concealment; Incontestability Clause (1998) SUGGESTED ANSWER:

Renato was issued a life insurance policy on January 2, 1990. He concealed A member of the MILF or the Abu Sayyaf may be insured with a company
the fact that 3 years prior to the issuance of his life insurance policy, he had licensed to do business under the Insurance Code of the Phils. What is
been seeing a doctor about his heart ailment. On March 1, 1992, Renato died prohibited to be insured is a public enemy. A public enemy is a citizen or
of heart failure. May the heirs file a claim on the proceeds of the life insurance national of a country with which the Philippines is at war. Such member of the
policy of Renato? (5%) MILF or the Abu Sayyaf is not a citizen or national of another country, but of
the Philippines.
SUGGESTED ANSWER:
Insurable Interest: Separate Insurable Interest (1999)
Yes. The life insurance policy in question was issued on January 9, 1990.
More than 2 years had elapsed when Renato, the insured, died on March 1, A businessman in the grocery business obtained from First Insurance an
1992. The incontestability clause applies. insurance policy for P5M to fully cover his stocks-in-trade from the risk of fire.

INCONTESTABILITY CLAUSE Three months thereafter, a fire of accidental origin broke out and completely
destroyed the grocery including his stocks-in-trade. This prompted the
The insurer has two years from the date of issuance of the insurance contract businessman to file with First Insurance a claim for five million pesos
or of its last reinstatement within which to contest the policy, whether or not, representing the full value of his goods.
the insured still lives within such period. After two years, the defenses of
concealment or misrepresentation, no matter how patent or well founded, no First Insurance denied the claim because it discovered that at the time of the
longer lie. loss, the stocks-in-trade were mortgaged to a creditor who likewise obtained
from Second Insurance Company fire insurance coverage for the stocks at
Insurable Interest: Bank Deposit (2000) their full value of P5M.

BD has a bank deposit of half a million pesos. Since the limit of the insurance a) May the businessman and the creditor obtain separate insurance coverages
coverage of the Philippine Deposit Insurance Corp (PDIC) (RA 3591) is only over the same stocks- in-trade? Explain (3%)
one tenth of BDs deposit, he would like some protection for the excess by
taking out an insurance against all risks or contingencies of loss arising from b) First Insurance refused to pay claiming that double insurance is contrary to
any unsound or unsafe banking practices including unforeseen adverse effects law. Is this contention tenable? (3%)
of the continuing crisis involving the banking and financial sector in the Asian
region. Does BD have an insurable interest within the meaning of the c) Suppose you are the Judge, how much would you allow the businessman
and the creditor to recover from their respective insurers. Explain (3%) SUGGESTED ANSWER:

SUGGESTED ANSWER: a) No. In property insurance, the beneficiary must have insurable interest in the
property insured. (Sec 18 Ins Code). B does not have insurable interest in the
a) Yes. The businessman, as owner, and the creditor, as mortgagee, have house insured.
separate insurable interests in the same stocks-in-trade. Each may insure such
interest to protect his own separate interest. b) Yes. In life insurance, it is not required that the beneficiary must have
insurable interest in the life of the insured. It was the insured himself who took
b) The contention of First Insurance that double insurance is contrary to law is the policy on his own life.
untenable. There is no law providing that double insurance is illegal per se.
Insurable Interest; Life vs. Property Insurance (2000)
Moreover, in the problem at hand, there is no double insurance because the
insured with the First Insurance is different from the insured with the Second IS, an elderly bachelor with no known relatives, obtained life insurance
Insurance Company. The same is true with respect to the interests insured in coverage for P250,000.00 from Starbrite Insurance Corporation, an entity
the two policies. licensed to engage in the insurable business under the Insurance Code of the
Philippines (PD1460). He also insured his residential house for twice that
c) As Judge, I would allow the businessman to recover his total loss of P5M amount within the same corporation. He immediately assigned all his rights to
representing the full value of his goods which were lost through fire. As to the the insurance proceeds to BX, a friend-companion living with him. Three years
creditor, I would allow him to recover the amount to the extent of or equivalent later, IS died in a fire that gutted his insured house two days after he had sold
to the value of the credit he extended to the businessman for the stocks-in- it. There is no evidence of suicide or arson or involvement of BX in these
trade which were mortgaged by the businessman. events. BX demanded payment of the insurance proceeds from the two
policies, the premiums for which IS had been faithfully paying during all the
Insurable Interest; Equitable Interest (1991) time he was alive. Starbrite refused payment, contending that BX had no
insurable interest and therefore was not entitled to receive the proceeds from
A piece of machinery was shipped to Mr Pablo on the basis of C&F Manila. ISs insurance coverage on his life and also on his property. Is Starbrites
Pablo insured said machinery with the Talaga Merchants Ins Co (Tamic) for contention valid? Explain? (5%)
loss or damage during the voyage. The vessel sank en route to Manila. Pablo
then filed a claim with Tamic which was denied for the reason that prior to SUGGESTED ANSWER:
deliver, Pablo had no insurable interest. Decide the case.
Starbrite is correct with respect to the insurance coverage on the property of
SUGGESTED ANSWER: IS. The beneficiary in the property insurance policy or the assignee thereof
must have insurable interest in the property insured. BX, a mere friend-
Pablo had an existing insurable interest on the piece of machinery he bought. companion of IS, has no insurable interest in the residential house of IS. BX is
The purchase of goods under a perfected contract of sale already vests not entitled to receive the proceeds from ISs insurance on his property.
equitable interest on the property in favor of the buyer even while it is pending
delivery (Filipino Merchants Ins Co v CA GR 85144 28Nov1989) As to the insurance coverage on the life of IS, BX is entitled to receive the
proceeds. There is no requirement that BX should have insurable interest in
Insurable Interest; Life vs. Property Insurance (1997) the life of IS. It was IS himself who took the insurance on his own life.

a) A obtains a fire insurance on his house and as a generous gesture names Insurable Interest; Life vs. Property Insurance (2002)
his neighbor as the beneficiary. If As house is destroyed by fire, can B
successfully claim against the policy? Distinguish insurable interest in property insurance from insurable interest in
life insurance. (5%)
b) A obtains insurance over his life and names his neighbor B the beneficiary
because of As secret love for B. If A dies, can B successfully claim against the SUGGESTED ANSWER:
policy?
a) In property insurance, the expectation of benefit must have a legal basis. In
life insurance, the expectation of benefit to be derived from the continued policy? State the reason(s) for your answer. (5%)
existence of a life need not have any legal basis.
SUGGESTED ANSWER:
b) In property insurance, the actual value of the interest therein is the limit of
the insurance that can validly be placed thereon. In life insurance, there is no JQ can recover on the fire insurance policy for the loss of said condominium
limit to the amount of insurance that may be taken upon life. unit. He has the insurable interest as owner-insured. As beneficiary in the fire
insurance policy, MLQ cannot recover on the fire insurance policy. For the
c) In property insurance, an interest insured must exist when the insurance beneficiary to recover on the fire or property insurance policy, it is required that
takes effect and when the loss occurs but need not exist in the meantime. In he must have insurable interest in the property insured. In this case, MLQ does
life insurance, it is enough that insurable interest exists at the time when the not have insurable interest in the condominium unit.
contract is made but it need not exist at the time of loss.
Insurance; Cash & Carry Basis (2003)
Insurable Interest; Property Insurance (1994)
What is meant by cash and carry in the business of insurance?
In a civil suit, the Court ordered Benjie to pay Nat P500,000.00. To execute the
judgment, the sheriff levied upon Benjies registered property (a parcel of land SUGGESTED ANSWER:
and the building thereon),and sold the same at public auction to Nat, the
highest bidder. The latter, on March 18, 1992, registered with the Register of Insurance; Co-Insurance vs. Re-Insurance (1994)
Deeds the certificate of sale issued to him by the sheriff. Meanwhile, on
January 27, 1993, Benjie insured with Garapal Insurance for P1,000,000.00 Distinguish co-insurance from re-insurance.
the same building that was sold at public auction to Nat. Benjie failed to
redeem the property by March 18, 1993. SUGGESTED ANSWER:

On March 19, 1993, a fire razed the building to the ground. Garapal Insurance CO-INSURANCE is the percentage in the value of the insured property which
refused to make good its obligation to Benjie under the insurance contract. 1) the insured himself assumes or undertakes to act as insurer to the extent of
Is Garapal Insurance legally justified in refusing payment to Benjie? 2) Is Nat the deficiency in the insurance of the insured property. In case of loss or
entitled to collect on the insurance policy? damage, the insurer will be liable only for such proportion of the loss or
damage as the amount of insurance bears to the designated percentage of the
SUGGESTED ANSWER: full value of the property insured.

1) Yes. At the time of the loss, Benjie was no longer the owner of the property REINSURANCE is where the insurer procures a third party, called the
insured as he failed to redeem the property. The law requires in property reinsurer, to insure him against liability by reason of such original insurance.
insurance that a person can recover the proceeds of the policy if he has Basically, a reinsurance is an insurance against liability which the original
insurable interest at the time of the issuance of the policy and also at the time insurer may incur in favor of the original insured.
when the loss occurs. At the time of fire, Benjie no longer had insurable
interest in the property insured. Insurance; Double Insurance (2005)

2) No. While at the time of the loss he had insurable interest in the building, as When does double insurance exist? (2%)
he was the owner thereof, Nat did not have any interest in the policy. There
was no automatic transfer clause in the policy that would give him such interest SUGGESTED ANSWER:
in the policy.
Under Section 93 of the Insurance Code, there is double insurance when there
Insurable Interest; Property Insurance (2001) is over-insurance with two or more companies, covering the same property, the
same insurable interest and the same risk. Double insurance exists where the
JQ, owner of a condominium unit, insured the same against fire with the XYZ same person is insured by several insurers separately in respect of the same
Insurance Co., and made the loss payable to his brother, MLQ. In case of loss subject matter and interests. (Geagonia v. Court of Appeals, G.R. No. 114427,
by fire of the said condominium unit, who may recover on the fire insurance February 6, 1995)
Insurance; Double Insurance; effect (1993) recover from Peninsula Insurance Company, but the latter has the right to
deduct the amount of unpaid premium from the insurance proceeds.
Julie and Alma formed a business partnership. Under the business name Pino
Shop, the partnership engaged in a sale of construction materials. Julie Insurance; Life Insurance; Assignment of Policy (1991)
insured the stocks in trade of Pino Shop with WGC Insurance Co for P350th.
Subsequently, she again got an insurance contract with RSI for P1m and then The policy of insurance upon his life, with a face value of P100th was assigned
from EIC for P200th. A fire of unknown origin gutted the store of the by Jose, a married man with 2 legitimate children, to his nephew Y as security
partnership. Julie filed her claims with the three insurance companies. for a loan of P50th. He did not give the insurer any written notice of such
However, her claims were denied separately for breach of policy condition assignment despite the explicit provision to that effect in the policy. Jose died.
which required the insured to give notice of any insurance effected covering Upon the claim on the policy by the assignee, the insurer refused to pay on the
the stocks in trade. Julie went to court and contended that she should not be ground that it was not notified of the assignment. Upon the other hand, the
blamed for the omission, alleging that the insurance agents for WGC, RSI and heirs of Jose contended that Y is not entitled to any amount under the policy
EIC knew of the existence of the additional insurance coverages and that she because the assignment without due notice to the insurer was void. Resolve
was not informed about the requirement that such other or additional insurance the issues.
should be stated in the policy.
SUGGESTED ANSWER:
Is the contention of Julie tenable? Explain. May she recover on her fire
insurance policies? Explain. A life insurance is assignable. A provision, however, in the policy stating that
written notice of such an assignment should be given to the insurer is valid
SUGGESTED ANSWER: (Secs 181-182 Ins Code). The failure of the notice of assignment would thus
preclude the assignee from claiming rights under the policy. The failure of
1) No. An insured is required to disclose the other insurances covering the notice did not, however, avoid the policy; hence, upon the death of Jose, the
subject matter of the insurance being applied for. (New Life Ent v CA 207 s proceeds would, in the absence of a designated beneficiary, go to the estate of
669) the insured. The estate, in turn, would be liable for the loan of P50,000 owing
in favor of Y.
2) No, because she is guilty of violation of a warranty/ condition.
Insurance; Perfection of Insurance Contracts (2003)
Insurance; Effects; Payment of Premiums by Installment (2006)
Josie Gatbonton obtained from Warranty Insurance Corporation a
The Peninsula Insurance Company offered to insure Francis' brand new car comprehensive motor vehicle insurance to cover her brand new automobile.
against all risks in the sum of PI Million for 1 year. The policy was issued with She paid, and the insurer accepted payment in check. Before the check could
the premium fixed at 160,000.00 payable in 6 months. Francis only paid the be encashed, Josie was involved in a motor vehicle accident where her car
first two months installments. Despite demands, he failed to pay the became a total wreck. She sought payment from the insurer. Could the insurer
subsequent installments. Five months after the issuance of the policy, the be made liable under the insurance coverage? (6%)
vehicle was carnapped. Francis filed with the insurance company a claim for its
value. However, the company denied his claim on the ground that he failed to SUGGESTED ANSWER:
pay the premium resulting in the cancellation of the policy.
(per Dondee) Yes, because there was a perfected contract of insurance the
Can Francis recover from the Peninsula Insurance Company? (5%) moment there is a meeting of the minds with respect to the object and the
cause of payment. The payment of check is a valid payment unless upon
SUGGESTED ANSWER: encashment the check bounced.

Yes, when insured and insurer have agreed to the payment of premium by Insurance; Property Insurance; Prescription of Claims (1996)
installments and partial payment has been made at the time of loss, then the
insurer becomes liable. When the car loss happened on the 5th month, the six Robin insured his building against fire with EFG Assurance. The insurance
months agreed period of payment had not yet elapsed (UCPB General policy contained the usual stipulation that any action or suit must be filed within
Insurance v. Masagana Telamart, G.R. No. 137172, April 4, 2001). Francis can one year after the rejection of the claim.
After his building burned down, Robin filed his claim for fire loss with EFG. On aggregate sum insured in all the policies exceeds the insurable value of the
Feb 28, 1994, EFG denied Robins claim. On April 3, 1994, Robin sought thing at risk.
reconsideration of the denial, but EFG reiterated its position. On March 20,
1995, Robin commenced judicial action against EFG. Should Robins action be Insured; Accident Policy (2004)
given due course? Explain.
CNI insure SAM under a homeowner's policy against claims for accidental
SUGGESTED ANSWER: injuries by neighbors. SAM's minor son, BOY, injured 3 children of POS, a
neighbor, who sued SAM for damages. SAM's lawyer was ATT, who was paid
No, Robins action should not be given due course. Is filing of the request for for his services by the insurer for reporting periodically on the case to CNI. In
reconsideration did not suspend the running of the prescriptive period of one one report, ATT disclosed to CNI that after his investigations, he found the
year stipulated in the insurance policy. Thus, when robin commenced judicial injuries to the 3 children not accidental but intentional.
action against EFG Assurance on March 20, 1995, his ability to do so had
already prescribed. The one-year period is counted from Feb 28, 1994 when SAM lost the case in court, and POS was awarded one million pesos in
EFG denied Robins claim, not from the date (presumably after April 3, 1994) damages which he sought to collect from the insurer. But CNI used ATTs
when EFG reiterated its position denying Robins claim. The reason for this report to deny the claim on the ground that the injuries to POS's 3 children
rule is to insure that claims against insurance companies are promptly settled were intentional, hence excluded from the policy's coverage. POS countered
and that insurance suits are brought by the insured while the evidence as to that CNI was estopped from using ATTs report because it was unethical for
the origin and cause of the destruction has not yet disappeared. (See Sun Ins ATT to provide prejudicial information against his client to the insurer, CNI.
Office Ltd v CA gr 89741, Mar 13 91 195s193)
Who should prevail: the claimant, POS; or the insurer, CNI? Decide with
Insurance; Return of Premiums (2000) reasons briefly. (5%)

Name at least three instances when an insured is entitled to a return of the SUGGESTED ANSWER:
premium paid.
CNI is not estopped from using ATT's report, because CNI, in the first place,
SUGGESTED ANSWER: Three instances when an insured is entitled to a commissioned it and paid ATT for it. On the other hand, ATT has no conflict of
return of premium paid are: interest because SAM and CNI are on the same side their interests being
congruent with each other, namely, to oppose POS's claim. It cannot be said
1. To the WHOLE PREMIUM, if no part of his interest in the thing insured be that ATT has used the information to the disadvantage or prejudice of SAM.
exposed to any of the perils insured against.
However, in Finman General Assurance Corp. v. Court of Appeals, 213 SCRA
2. Where the insurance is made for a definite period of time and the insured 493 (1992), it was explained that there is no "accident" in the context of an
surrenders his policy, to such portion of the premium as corresponds with the accident policy, if it is the natural result of the insured's voluntary act,
unexpired time at a pro rata rate, unless a short period rate has been agreed unaccompanied by anything unforeseen except the injury. There is no accident
upon and appears on the face of the policy, after deducting from the whole when a deliberate act is performed, unless some additional and unforeseen
premium any claim for loss or damage under the policy which has previously happening occurs that brings about the injury. This element of deliberateness
accrued. is not clearly shown from the facts of the case, especially considering the fact
that BOY is a minor, and the injured parties are also children. Accordingly, it is
3. When the contract is voidable on account of the fraud or misrepresentation possible that CNI may not prosper. ATT's report is not conclusive on POS or
of the insurer or of his agent or on account of facts the existence of which the the court.
insured was ignorant without his fault; or when, by any default of the insured
other than actual fraud, the insurer never incurred any liability under the policy. Insured; Accident vs. Suicide (1990)

ALTERNATIVE INSTANCE: Luis was the holder of an accident insurance policy effective Nov 1, 1988 to
Oct 31, 1989. At a boxing contest held on Jan 1, 1989 and sponsored by his
In case of an over insurance by several insurers, the insured is entitled to a employer, he slipped and was hit on the fact by his opponent so he fell and his
ratable return of the premium, proportioned to the amount by which the head hit one of the posts of the boxing ring. He was rendered unconscious and
was dead on arrival at the hospital due to intra-cranial hemorrhage. except in an attempt to save human life. Six months later Henry Dy died of a
bullet wound in his head. Investigation showed that one evening Henry was in
Can his father who is a beneficiary under said insurance policy successfully a happy mood although he was not drunk. He was playing with his handgun
claim indemnity from the insurance company? Explain. from which he had previously removed its magazine. He pointed the gun at his
sister who got scared. He assured her it was not loaded. He then pointed the
SUGGESTED ANSWER: gun at his temple and pulled the trigger. The gun fired and Henry slumped on
the floor.
Yes, the father who is a beneficiary under the accidental insurance can
successfully claim indemnity for the death of the insured. Clearly, the Henrys wife Beverly, as the designated beneficiary, sought to collect under the
proximate cause of death was the boxing contest. Death sustained in a boxing policy. Sun-Moon Insurance rejected her claim on the ground that the death of
contest is an accident. (De la Cruz v Capital Ins & Surety Co 17s559 Henry was not accidental. Beverly sued the insurer.

Insured; Accident vs. Suicide (1993) Decide and Discuss fully.

S Insurance Co issued a personal accident policy to Bob Tan with a face value SUGGESTED ANSWER:
of P500th. In the evening of Sep 5, 1992, after his birthday party, Tan was in a
happy mood but not drunk. He was playing with his hand gun, from which he Beverly can recover the proceeds of the policy from the insurer. The death of
previously removed the magazine. As his secretary was watching television, the insured was not due to suicide or willful exposure to needless peril which
he stood in front of her and pointed the gun at her. She pushed it aside and are excepted risks. The insureds act was purely an act of negligence which is
said that it may be loaded. He assured her that it was not and then pointed it at covered by the policy and for which the insured got the insurance for his
his temple. The next moment, there was an explosion and Tan slumped to the protection. In fact, he removed the magazine from the gun and when he
floor lifeless. pointed the gun to his temple he did so because he thought that it was safe for
him to do so. He did so to assure his sister that the gun was harmless. There is
The wife of the deceased sought payment on the policy but her claim was none in the policy that would relieve the insurer of liability for the death of the
rejected. The insurance company agreed that there was no suicide. However, insured since the death was an accident.
it was the submission of the insurance company that there was no accident. In
support thereof, it contended a) that there was no accident when a deliberate Insurer: Effects: Several Insurers (2005)
act was performed unless some additional, unexpected, independent and
unforeseen happening occur which produces or brings about the injury or What is the nature of the liability of the several insurers in double insurance?
death; and b) that the insured willfully exposed himself to needless peril and Explain. (2%)
thus removed himself from the coverage of the insurance policy. Are the two
contentions of the insurance company tenable? Explain. SUGGESTED ANSWER: The nature of the liability of the several insurers in
double insurance is that each insurer is bound to the contribute ratably to the
SUGGESTED ANSWER: loss in proportion to the amount for which he is liable under his contract as
provided for by Sec 94 of ICP par. The ratable contribution of each of each
No. These two contentions are not tenable. The insurer is liable for injury or insurer will be determined based on the following formula: AMOUNT OF
death even due to the insureds gross negligence. The fact that the insured POLICY divided by TOTAL INSURANCE TAKEN multiplied by LOSS =
removed the magazine from the hand gun means that the insured did not LIABILITY OF THE INSURER.
willfully expose himself to needless peril. At most, the insured is only guilty of
negligence (Sun Ins v CA 211 s 554) ALTERNATIVE ANSWER:

Insured; Accident vs. Suicide (1995) Each insurer is bound, as between himself and other insurers, to contribute
ratably to the loss in proportion to the amount for which he is liable under his
Sun-Moon Insurance issued a Personal Accident Policy to Henry Dy with a contract. (Sec. 94, Insurance Code)
face value of P500th. A provision in the policy states that the company shall
not be liable in respect of bodily injury consequent upon the insured person Insurer; 3rd Party Liability (1996)
attempting to commit suicide or willfully exposing himself to needless peril
While driving his car along EDSA, Cesar sideswiped Roberto, causing injuries X and Z is based on torts. The court should not have dismissed the suit against
to the latter, Roberto sued Cesar and the third party liability insurer for RM Travel. The court should have ordered Dragon Ins to pay each of X, Y ,
damages and/or insurance proceeds. The insurance company moved to and Z to the extent of the insurance coverage, but whatever amount is agreed
dismiss the complaint, contending that the liability of Cesar has not yet been upon in the policy should be answered first by RM Travel and the succeeding
determined with finality. amount should be paid by Dragon Insurance up to the amount of the insurance
coverage. The excess of the claims of X, Y, and Z, over and above such
a) Is the contention of the insurer correct? Explain. b) May the insurer be held insurance coverage, if any, should be answered or paid by RM Travel.
liable with Cesar?
Insurer; 3rd Party Liability; No Fault Indemnity (1994)
SUGGESTED ANSWER:
What is your understanding of a no fault indemnity clause found in an
No, the contention of the insurer is not correct. There is no need to wait for the insurance policy?
decision of the court determining Cesars liability with finality before the third
party liability insurer could be sued. The occurrence of the injury to Roberto SUGGESTED ANSWER:
immediately gave rise to the liability of the insurer under its policy. In other
words, where an insurance policy insures directly against liability, the insurers Under the NO FAULT INDEMNITY clause, any claim for death or injury of
liability accrues immediately upon the occurrence of the injury or event upon any passenger or third party shall be paid without the necessity of proving fault
which the liability depends (Sherman Shafer v Judge RTC Olongapo City or negligence of any kind. The indemnity in respect of any one person shall not
Branch 75 GR l-78848, Nov 14 88 167s386) exceed P5,000.00, provided they are under oath, the following proofs shall be
sufficient:
The insurer cannot be held solidarily liable with Cesar. The liability of the
insurer is based on contract while that of Cesar is based on tort. If the insurer . police report of the accident; and
were solidarily liable with Cesar, it could be made to pay more than the amount
stated in the policy. This would, however, be contrary to the principles . death certificate and evidence sufficient to establish the proper payee; or
underlying insurance contracts. On the other hand, if the insurer were solidarily
liable with Cesar and it is made to pay only up to the amount stated in the
insurance policy, the principles underlying solidary obligations would be . medical report and evidence of medical or hospital disbursement in
violated. (Malayan Ins Co v CA GR L-36413 Sep 26, 88 165s536; Figuracion respect of which refund is claimed.
vda de Maglana v Consolacion GR 60506 Aug 6, 92 212s268)
. Claim may be made against one motor vehicle only.
Insurer; 3rd Party Liability (2000)

X was riding a suburban utility vehicle (SUV) covered by a comprehensive Insurer; 3rd Party Liability; Quitclaim (1994)
motor vehicle liability insurance (CMVLI) underwritten by FastPay Insurance
Company when it collided with a speeding bus owned by RM Travel Inc. The Rauls truck bumped the car owned by Luz. The car was insured by Cala
collision resulted in serious injuries to X; Y, a passenger of the bus; and Z, a Insurance. For the damage caused, Cala paid Luz P5,000.00 in amicable
pedestrian waiting for a ride at the scene of the collision. The police report settlement. Luz executed a release of claim, subrogating Cala to all her rights
established that the bus was the offending vehicle. The bus had CMVLI policy against Raul. When Cala demanded reimbursement from Raul, the latter
issued by Dragon Ins Co. X, Y, and Z jointly sued RM Travel and Dragon Ins refused saying that he had already paid Luz P4,500 for the damage to the car
for indemnity under the Insurance Code of the Phils (PD1460). The lower court as evidenced by a release of claim executed by Luz discharging Raul.
applied the no fault indemnity policy of the statute, dismissed the suit against
RM Travel, and ordered Dragon Ins to pay indemnity to all three plaintiffs. Do So Cala demanded reimbursement from Luz, who refused to pay, saying that
you agree with the courts judgment? Explain (2%) the total damage to the car was P9,500.00 Since Cala paid P5,000 only, Luz
contends that she was entitled to go after Raul to claim the additional
SUGGESTED ANSWER: P4,500.00

No. The cause of action of Y is based on the contract of carriage, while that of 1) Is Cala, as subrogee of Luz, entitled to reimbursement from Raul?
2) May Cala recover what it has paid Luz?
SUGGESTED ANSWER: figured in an accident resulting in the death of a passenger. At the time of the
accident, Jay Cruz was licensed to drive but it was confiscated by an LTO
1) No. Luz executed a release in favor of Raul (Manila Mahogany Mfg Corp v agent who issued him a Traffic Violation Report (TVR) just minutes before the
CA GR 52756, 12 Oct 1987) accident. Could Asiatic Insurers, Inc., be made liable under its policy? Why?
(6%)
2) Yes. Cala lost its right against Raul because of the release executed by Luz.
Since the release was made without the consent of Cala, Cala may recover the SUGGESTED ANSWER:
amount of P5,000 form Luz (Manila Mahogany Mfg Corp v CA GR 52756, 12
Oct 1987). Asiatic Insurers, Inc., should be made liable under the policy. The fact that the
driver was merely holding a TVR does not violate the condition that the driver
Insurer; Authorized Driver Clause (1991) should have a valid and existing drivers license.

Sheryl insured her newly acquired car, a Nissan Maxima against any loss or Besides, such a condition should be disregarded because what is involved is a
damage for P50th and against 3rd party liability for P20th with the XYZ Ins Co. passenger jeepney, and what is involved here is not own damage insurance
Under the policy, the car must be driven only by an authorized driver who is but third party liability where the injured party is a third party not privy to the
either: 1) the insured, or 2) any person driving on the insureds order or with his contract of insurance.
permission: provided that the person driving is permitted in accordance with
the licensing or other laws or regulations to drive the motor vehicle and is not Insurer; Authorized Driver Clause; vehicle is stolen (1993) HL insured his
disqualified from driving such motor vehicle by order of a court. brand new car with P Ins Co for comprehensive coverage wherein the
insurance company undertook to indemnify him against loss or damage to the
During the effectivity of the policy, the car, then driven by Sheryl herself, who car a) by accidental collision ... b) by fire, external explosion, burglary, or theft,
had no drivers license, met an accident and was extensively damaged. The and c) malicious act.
estimated cost of repair was P40th. Sheryl immediately notified XYZ, but the
latter refused to pay on the policy alleging that Sheryl violated the terms After a month, the car was carnapped while parked in the parking space in
thereof when she drove it without a drivers license. Is the insurer correct? front of the Intercontinental Hotel in Makati. HLs wife who was driving said car
before it was carnapped reported immediately the incident to various
SUGGESTED ANSWER: government agencies in compliance with the insurance requirements.

The insurer was not correct in denying the claim since the proviso that the Because the car could not be recovered, HL filed a claim for the loss of the car
person driving is permitted in accordance with the licensing, etc. qualified only with the insurance company but it was denied on the ground that his wife who
a person driving the vehicle other than the insured at the time of the accident was driving the car when it was carnapped was in the possession of an expired
(Palermo v Pyramid Ins Co GR 36480 31 May 88) drivers license, a violation of the authorized driver clause of the insurance
company.
ALTERNATIVE ANSWER:
1) May the insurance company be held liable to indemnify HL for the loss of
The insurer is correct. The clause authorized driver in the policy evidently the insured vehicle? Explain.
applies to both the insured and any other person driving the vehicle at the time
of the accident. The term authorized driver should be construed as a person 2) Supposing that the car was brought by HL on installment basis and there
who is authorized by law to driver the vehicle (Peza v Alikpala 160s31) were installments due and payable before the loss of the car as well as
installments not yet payable. Because of the loss of the car, the vendor
Insurer; Authorized Driver Clause (2003) demanded from HL the unpaid balance of the promissory note. HL resisted the
demand and claimed that he was only liable for the installments due and
Rick de la Cruz insured his passenger jeepney with Asiatic Insurers, Inc. The payable before the loss of the car but no longer liable for other installments not
policy provided that the authorized driver of the vehicle should have a valid and yet due at the time of the loss of the car. Decide.
existing drivers license. The passenger jeepney of Rick de la Cruz which was
at the time driven by Jay Cruz, SUGGESTED ANSWER:
1) Yes. The car was lost due to theft. What applies in this case is the theft Valued Policy
clause, and not the authorized driver clause. It is immaterial that HLs wife
was driving the car with an expired drivers license at the time it was b) If each of the fire insurance policies obtained by Fortune in the problem (a)
carnapped. (Perla Compania de Seguros v CA 208 s 487) is a valued policy and the value of his house was fixed in each of the policies
at P1m, how much would Fortune recover from X if he has already obtained
2) The promissory note is not affected by whatever befalls the subject matter of full payment on the insurance policies issued by Y and Z?
the accessory contract. The unpaid balance on the promissory note should be
paid and not only the installments due and payable before the loss of the car. SUGGESTED ANSWER:

Insurer; Group Insurance; Employer-Policy Holder (2000) Fortune may still recover only the balance of P200,000 from X insurance
company since the insured may only recover up to the extent of his loss.
X company procured a group accident insurance policy for its construction
employees variously assigned to its provincial infrastructure projects. Y ALTERNATIVE:
Insurance Company underwrote the coverage, the premiums of which were
paid for entirely by X Company without any employee contributions. While the Having already obtained full payment on the insurance policies issued by Y
policy was in effect, five of the covered employees perished at sea on their and Z, Fortune may no longer recover from X insurance policy.
way to their provincial assignments. Their wives sued Y Insurance Company
for payment of death benefits under the policy. While the suit was pending, the Open Policy
wives signed a power of attorney designating X Company executive, PJ, as
their authorized representative to enter into a settlement with the insurance c) If each of the policies obtained by Fortune in the problem (a) above is an
company. When a settlement was reached, PJ instructed the insurance open policy and it was immediately determined after the fire that the value of
company to issue the settlement check to the order of X Company, which will Fortunes house was P2.4m, how much may he collect from X, Y and Z?
undertake the payment to the individual claimants of their respective shares.
PJ misappropriated the settlement amount and the wives pursued their case SUGGESTED ANSWER:
against Y Insurance Co. Will the suit prosper? Explain (3%)
In an open policy, the insured may recover his total loss up to the amount of
SUGGESTED ANSWER: the insurance cover. Thus, the extent of recovery would be P400th from X,
P200th from Y, and P600th from Z.
Yes. The suit will prosper. Y Ins Co is liable. X Co, through its executive, PJ,
acted as agent of Y Ins Co. The latter is thus bound by the misconduct of its d) In problem (a), what is the extent of the liability of the insurance companies
agent. It is the usual practice in the group insurance business that the among themselves?
employer-policy holder is the agent of the insurer.
SUGGESTED ANSWER: In problem (a), the insurance companies among
Insurer; Liability of the Insurers (1990) themselves would be liable, viz:

a) Suppose that Fortune owns a house valued at P600th and insured the same X 4/12 of P600th = P200th Y 2/12 of P600th = P100th Z 6/12 of P600th =
against fire with 3 insurance companies as follows: X P400th Y P200th Z P300th
P600th
e) Supposing in problem (a) above, Fortune was able to collect from both Y
In the absence of any stipulation in the policies from which insurance company and Z, may he keep the entire amount he was able to collect from the said 2
or companies may Fortune recover in case fire should destroy his house insurance companies?
completely?
SUGGESTED ANSWER:
SUGGESTED ANSWER:
No, he can only be indemnified for his loss, not profit thereby; hence he must
Fortune may recover from the insurers in such order as he may select up to return P200th of the P800th he was able to collect.
their concurrent liability (Sec 94 Ins Code)
Loss: Actual Total Loss (1996) However, the insurance company shall pay for the total costs of refloating and
needed repairs (P2.9 Million).
RC Corporation purchased rice from Thailand, which it intended to sell locally.
Due to stormy weather, the ship carrying the rice became submerged in sea c) Was it proper for the ship owner to send a notice of abandonment to the
water, and with it the rice cargo. When the cargo arrived in Manila, RC filed a insurance company? Explain.
claim for total loss with the insurer, because the rice was no longer fit for
human consumption. Admittedly, the rice could still be used as animal feed. Is SUGGESTED ANSWER:
RCs claim for total loss justified? Explain.
No, it was not proper for the ship owner to send a notice of abandonment to
SUGGESTED ANSWER: the insurance company because abandonment can only be availed of when, in
a marine insurance contract, the amount to be expended to recover the vessel
Yes, RCs claim for total loss is justified. The rice, which was imported from would have been more than three- fourths of its value. Vessel MN Pearly
Thailand for sale locally, is obviously intended for consumption by the public. Shells needed only P2.9 Million, which does not meet the required three-
The complete physical destruction of the rice is not essential to constitute an fourths of its value to merit abandonment. (Section 139, Insurance Code, cited
actual total loss. Such a loss exists in this case since the rice, having been in Oriental Assurance v. Court of Appeals and Panama Saiv Mill, G.R. No.
soaked in sea water and thereby rendered unfit for human consumption, has 94052, August 9, 1991)
become totally useless for the purpose for which it was imported (Pan Malayan
Ins Co v CA gr 95070 Sep 5, 1991) Loss: Total Loss Only (1992)

Loss: Constructive Total Loss (2005) An insurance company issued a marine insurance policy covering a shipment
by sea from Mindoro to Batangas of 1,000 pieces of Mindoro garden stones
M/V Pearly Shells, a passenger and cargo vessel, was insured for against total loss only. The stones were loaded in two lighters, the first with
P40,000,000.00 against constructive total loss. Due to a typhoon, it sank near 600 pieces and the second with 400 pieces. Because of rough seas, damage
Palawan. Luckily, there were no casualties, only injured passengers. The ship was caused the second lighter resulting in the loss of 325 out of the 400
owner sent a notice of abandonment of his interest over the vessel to the pieces. The owner of the shipment filed claims against the insurance company
insurance company which then hired professionals to afloat the vessel for on the ground of constructive total loss inasmuch as more than 34 of the value
P900,000.00. When re-floated, the vessel needed repairs estimated at of the stones had been lost in one of the lighters.
P2,000,000.00. The insurance company refused to pay the claim of the ship
owner, stating that there was no constructive total loss. Is the insurance company liable under its policy? Why?

a) Was there constructive total loss to entitle the ship owner to recover from SUGGESTED ANSWER:
the insurance company? Explain.
The insurance company is not liable under its policy covering against total
b) Was it proper for the ship owner to send a notice of abandonment to the loss only the shipment of 1,000 pieces of Mindoro garden stones. There is no
insurance company? Explain. (5%) constructive total loss that can claimed since the 34 rule is to be computed on
the total 1,000 pieces of Mindoro garden stones covered by the single policy
SUGGESTED ANSWER: coverage (see Oriental Assurance Co v CA 200 s 459)

No, there was no "constructive total loss" because the vessel was refloated Marine Insurance; Implied Warranties (2000)
and the costs of refloating plus the needed repairs (P 2.9 Million) will not be
more than three-fourths of the value of the vessel. A constructive total loss is What warranties are implied in marine insurance?
one which gives to a person insured a right to abandon. (Sec, 131, Insurance
Code) There would have been a constructive total loss had the vessel MN SUGGESTED ANSWER:
Pearly Shells suffer loss or needed refloating and repairs of more than the
required three-fourths of its value, i.e., more than P30.0 Million (Sec. 139, The following warranties are implied in marine insurance:
Insurance Code, cited in Oriental Assurance v. Court of Appeals and Panama
Saw Mill, G.R. No. 94052, August 9, 1991) 1) That the ship is seaworthy to make the voyage and/or to take in certain
cargoes SUGGESTED ANSWER:
2) That the ship shall not deviate from the voyage insured;
3) That the ship shall carry the necessary documents to show nationality or Under Sec. 12 of the Insurance Code. The interest of a beneficiary shall be
neutrality and that it will not carry any document which will cast reasonable forfeited when the beneficiary is the principal, accomplice, or accessory in
suspicion thereon; willfully bringing about the death of the insured. In which event, the nearest
4) That the ship shall not carry contraband, especially if it is making a voyage relative of the insured shall receive the proceeds of said insurance, if not
through belligerent waters. otherwise disqualified. Thus, the insurance company must still pay out the
proceed of the life insurance policy to the nearest qualified relative of the
Marine Insurance; Peril of the Ship vs. Peril of the Sea (1998) insured.

A marine insurance policy on a cargo states that the insurer shall be liable for Concealment; Material Concealment (2013)
losses incident to perils of the sea. During the voyage, seawater entered the
compartment where the cargo was stored due to the defective drainpipe of the Benny applied for life insurance for Php 1.5 Million. The insurance company
ship. The insured filed an action on the policy for recovery of the damages approved his application and issued an insurance policy effective Nov, 6, 2008.
caused to the cargo. May the insured recover damages? (5%) Benny named his children as his beneficiaries. On April 6, 2010, Benny died of
hepatoma, a liver ailment.
SUGGESTED ANSWER:
The insurance company denied the childrens claim for the proceeds of the
No. The proximate cause of the damage to the cargo insured was the defective insurance policy on the ground that Benny failed to disclose in his application
drainpipe of the ship. This is peril of the ship, and not peril of the sea. The two previous consultations with his doctors for diabetes and hypertension, and
defect in the drainpipe was the result of the ordinary use of the ship. To that he had been diagnosed to be suffering from hepatoma. The insurance
recover under a marine insurance policy, the proximate cause of the loss or company also rescinded the policy and refunded the premiums paid.
damage must be peril of the sea.
Was the insurance company correct? (8%)
Mutual Insurance Company; Nature & Definition (2006)
SUGGESTED ANSWER:
What is a mutual insurance company or association?
The insurance company correctly rescinded the policy because of concealment
SUGGESTED ANSWER: (Section 27 of Insurance Code). Benny did not disclose that he was suffering
from diabetes, hypertension, and hepatoma. The concealment is material,
A mutual life insurance corporation is a cooperative that promotes the welfare because these are serious ailments (Florendo v. Philam Plans, Inc., 666 SCRA
of its own members, with the money collected from among themselves and 618, 2012). Benny died less than two years from the date of the issuance of
solely for their own protection and not for profit. Members are both the insurer the policy (Section 48 of Insurance Code).
and insured. A mutual life insurance company has no capital stock and relies
solely upon its contributions or premiums to meet unexpected losses, Insurable Interest; Building Destroyed by Fire (2010)
contingencies and expenses (Republic v. Sunlife, G.R. No 158085, October
14, 2005). To secure a loan of P10 million, Mario mortgaged his building to Armando. In
accordance with the loan arrangements, Mario had the building insured with
Beneficiary; Death of Insured Due to Beneficiary (2008) First Insurance Company for P10 million, designating Armando as the
beneficiary. Armando also took an insurance of the building upon his own
On January 1, 2000, Antonio Rivera secured a life insurance from SOS interest with Second Insurance Company for P5 million.
Insurance Corp. for P1 Million with Gemma Rivera, his adopted daughter, as
the beneficiary. Antonio Rivera died on March 4, 2005 and in the police The building was totally destroyed by fire, a peril insured against under both
investigation, it was ascertained that Gemma Rivera participated as an insurance policies. It was subsequent determined that the fire had been
accessory in the killing of Antonio Rivera. Can SOS Insurance Corp. avoid intentionally started by Mario and that in violation of the loan agreement, he
liability by setting up as a defense the participation of Gemma Rivera in the had been storing inflammable materials in the building.
killing of Antonio Rivera? Discuss with reasons. (4%)
(A) How much, if any, can Armando recover from either or both insurance
companies? (2%) insurable interest therein. X, the borrower mortgagor, has an insurable interest
in the house being the owner thereof while CCC Bank, the lender, also has an
SUGGESTED ANSWER: insurable interest in the house as mortgagee thereof.

Armando can receive P5 million from Second Insurance Company. As (C) In case of damage, can X and CCC Bank separately claim for the
mortgagee, he had an insurable interest in the building (Panlileo v. Cosio, 97 insurance proceeds? (4%)
Phil. 919 (1955)). Armando cannot collect anything from First Insurance
Company. First Insurance Company is not liable for the loss of the building. SUGGESTED ANSWER:
First, it was due to a willful act of Mario, who committed arson (Section 87 of
the Insurance Code; East Furnitures, Inc. v. Globe & Rutgers Fire Insurance Yes. If X obtained an open policy then she could claim an amount
Company, 57 Phil. 576 (1932)). Second, fire insurance policies contain a corresponding to the extent of the damage based on the value of the house
warranty that the insured will not store hazardous materials within the insured determined as of the date the damage occurred, but not to exceed the face
premises. Mario breached this warranty when he stored inflammable materials value of the insurance policy; however, if she obtained a valued policy then
in the building. (Young v. Midland Textile Insurance Company, 30 Phil. 617 she could claim an amount corresponding to the extent of the damage based
(1915).These two factors exonerate First Insurance Company from liability to on the agreed upon valuation of the house.
Armando as mortgagee even though it was Mario who committed them
(Section 8 of the Insurance Code). As for CCC Bank, it could claim an amount corresponding to the extent of the
damage but not to exceed the amount of the loan it extended to X or so much
(B) What happens to the P10 million debt of Mario to Armando? Explain. (3%) thereof as may remain unpaid.

SUGGESTED ANSWER: Insurance; Perfection of Insurance Contracts (2009)

Since Armando would have collected P5 million from Second Insurance Antarctica Life Assurance Corporation (ALAC) publicly offered a specially
Company, this amount should be considered as partial payment of the loan. designed insurance policy covering persons between the ages of 50 to 75 who
Armando can only collect the balance of P5 million (Panlileo v. Cosio, supra). may be afflicted with serious and debilitating illnesses. Quirico applied for
Second Insurance Company can recover from Mario the amount of P5 million it insurance coverage, stating that he was already 80 years old. Nonetheless,
paid, because it became subrogated to the rights of Armando (Panlileo v. ALAC approved his application.
Cosio, supra).
Quirico then requested ALAC for the issuance of a cover note while he was
Insurance; Double Insurance, Validity (2012) trying to raise funds to pay the insurance premium. ALAC granted the request.
Ten days after he received the cover note, Quirico had a heart seizure and had
X borrowed from CCC Bank. She mortgaged her house and lot in favor of the to be hospitalized. He then filed a claim on the policy.
bank. X insured her house. The bank also got the house insured.
(A) Can ALAC validly deny the claim on the ground that the insurance
(A) Is this double insurance? Explain your answer. (3%) coverage, as publicly offered, was available only to persons 50 to 75 years of
age? Why or why not? (2%)
SUGGESTED ANSWER:
SUGGESTED ANSWER:
No, there is no double insurance. Double insurance exists where the same
person is insured by several insurers separately with respect to the same No. By approving the application of Quirino who disclosed that he was already
subject and interest. (Sec. 93, Insurance Code) 80 years old, ALAC waived the age requirement. ALAC is now stopped from
raising such defense of age of the insured.
(B) Is this legally valid? Explain your answer. (3%)
(B) Did ALACs issuance of a cover note result in the perfection of an
SUGGESTED ANSWER: insurance contract between Quirico and ALAC? Explain. (3%)

Yes, X and CCC Bank can both insure the house as they have different SUGGESTED ANSWER:
The issuance of a cover note by ALAC resulted in the perfection of the contract loss.
of insurance. In that case, it is only because there is delay in the issuance of
the policy that the cover notes was issued. On April 10, 2010, the drawee bank returned Enriques check with the notation
Insurance funds. Upon notification, Enrique immediately deposited
The cover note is a receipt whereby the company agrees to insure the insured additional funds with the bank and asked the insurer to redeposit the check.
for 60 days pending the issuance of a regular policy. No separate premium is
to be paid on a covernote. It is not a separate policy but is integrated in the Enrique thereupon claimed indemnity from the insurer. Is the insurer liable
regular policy to be subsequently issued. under the insurance coverage? Why or why not? (3%)

Insurance; Property Insurance; Assignments (2009) SUGGESTED ANSWER:

Ciriaco leased a commercial apartment from Supreme Building Corporation The insurer is not liable under the insurance policy. Under Article 1249 of the
(SBC). One of the provisions of the one-year lease contract states: Civil Code, the delivery of a check produces the effect of payment only when it
is encashed. The loss occurred on April 5, 2010. When the check was
18.xxx The LESSEE shall not insure against fire the chattels, merchandise, deposited, it was returned on April 10, 2010, for insufficiency of funds. The
textiles, goods and effects placed at any stall or store or space in the leased check was honored only after Enrique deposited additional funds with the
premises without first obtaining the written consent of the LESSOR. If the bank. Hence, it did not produce the effect of payment (Vitug, Commercial Laws
LESSEE obtains fire insurance coverage without the consent of the LESSOR, and Jurisprudence, Vol. I, p.250).
the insurance policy is deemed assigned and transferred to the LESSOR for
the latters benefit. ALTERNATIVE ANSWER:

Notwithstanding the stipulation in the contract, without the consent of SBC, Yes. The insurer is liable. The insurance policy was issued. In effect, there was
Ciriaco insured the merchandise inside the leased premises against loss by a grant of credit for the payment of the premium. The insurer can deduct the
fire in the amount of P500, 000 with First United Insurance Corporation (FUIC). amount of the check from the proceeds of the insurance.

A day before the lease contract expired, fire broke out inside the leased Insurance; Property Insurance; Payment of Premiums by Check (2007)
premises, damaging Ciriacos merchandise. Having learned of the insurance
earlier procured by Ciriaco, SBC demanded from FUIC that the proceeds of Alfredo took out a policy to insure this commercial building fire. The broker for
the insurance policy be paid directly to it, as provided in the lease contract. the insurance company agreed to give a 15-day credit within which pay the
insurance premium. Upon delivery of the policy on May 15, 2006, Alfredo
Who is legally entitled to receive the insurance proceeds? Explain. (4%) issued a postdated check payable on May 30, 2006. On May 28, 2006, a fire
broke out and destroyed the building owned by Alfredo. (10%)
SUGGESTED ANSWER:
(A) May Alfredo recover on the insurance policy?
Ciriaco is entitled to receive the proceeds of the insurance policy. The
stipulation that the policy is deemed assigned and transferred to SBC is void, SUGGESTED ANSWER:
because SBC has no insurable interest in the merchandise of Ciriaco (Cha v.
Court of Appeals, 277 SCRA 690 (1997)) Yes, Alfredo may recover on the policy. It is valid to stipulate that the insured
will be granted credit term for payment of premium. Payment by means of a
Insurance; Property Insurance; Late Payment of Premiums (2010) check which was accepted by the insurer, bearing a date prior to the loss,
would be sufficient. The subsequent effects of encashment retroact to the date
Enrique obtained from Seguro Insurance Company a comprehensive motor of the check (UCPB General Insurance Co., Inc. v. Masagana Telamart, Inc.,
vehicle insurance to cover his top of the line Aston martin. The policy was 356 SCRA 307 [2001]).
issued on March 31, 2010 and, on even date; Enrique paid the premium with a
personal check postdated April 6, 2010. (B) Would your answer in (a) be the same if it was found that the proximate
cause of the fire was an explosion and that fire was but the immediate cause of
On April 5, 2010, the car was involved in an accident that resulted in its total loss and there is no excepted peril under the policy?
SUGGESTED ANSWER: Company is in estoppels (UCPB General Insurance Company, Inc. v.
Masagana Telemart, Inc. 356 SCRA 307, 2001).
Yes, recovery under the insurance contract is allowed if the cause of the loss
was either the proximate or the immediate cause as long as an excepted peril, Insurer: Effects: Several Insurers (2008)
if any was not the proximate cause of the loss (Section 86, Insurance Code of
the Philippines). Terrazas de Patio Verde, a condominium building, has a value of P50 Million.
The owner insured the building against fire with three (3) insurance companies
(C) If the fire was found to have been caused by Alfredos own negligence, can for the following amounts:
he still recover on the policy?
Northern Insurance Corp. P20
Reason briefly in (a), (b) and (c). Million Southern Insurance Corp. P30 Million
Eastern Insurance Corp. P50 Million
SUGGESTED ANSWER:
(A) Is the owners taking of insurance for the building with three (3) insurers
Yes, mere negligence on the part of the insured will not prevent recovery under valid? Discuss. (3%)
the insurance policy. The law merely prevents recovery when the cause of loss
is the willful act of the insured, alone or in connivance with others (Section 87, SUGGESTED ANSWER:
Insurance Code of The Philippines).
Taking out insurance covering the same property, same insurable interest and
Insurance; Property Insurance; Payment of Premiums even after Loss same risk with three insurance companies is double insurance, recognized
(2013) under Sec. 93 of the Insurance Code. However, in American Home Assurance
Co. v, Chua, G.R. No. 130421, 28 June 1999, the court referred to the
Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have had common inclusion of the other insurance clause in fire insurance policies,
a long-standing insurance relationship with each other; SPMC secures the requiring disclosure of co-insurance of the same property with other insurers.
comprehensive fire insurance on its plant and facilities from SIC. The standing
business practice between them has been to allow SPMC a credit period of 90 (B) The Building was totally razed by fire. If the owner decides to claim from
days from the renewal of the policy with which to pay the premium. Eastern Insurance Corp. only P50 Million, will the claim prosper? Explain. (2%)

Soon after the new policy was issued and before premium payments could be SUGGESTED ANSWER:
made, a fire gutted the covered plant and facilities to the ground. The day after
the fire, SPMC issued a managers check to SIC for the fire insurance Insured can recover from Eastern Insurance Corp. up to the extent of his loss.
premium, for which it was issued a receipt; a week later SPMC issued its However, Eastern may refuse to pay if the policy contains an other insurance
notice of loss. clause stipulating that non- disclosure of double insurance will avoid the policy
(Geagonia v. Country Bankers Insurance, G.R. No. 114427, 06 February
SIC responded by managers check for the amount of the premiums SPMC 1995.) As there is no indication of a contractual prohibition on double or other
had paid, and denied SPMCs claim on the ground that under the cash and insurance, all insurance contracts over the building are deemed valid and
carry principle governing fire insurance, no coverage existed at the time the enforceable.
fire occurred because the insurance premium had not been paid. Is SPMC
entitled to recover for the loss form SIC? (8%) The law prohibits double or over- recovery, not double insurance. Since
Eastern insured the property up 50% of the total coverage, it is liable for only
SUGGESTED ANSWER: 50% of the total actual loss. Eastern insurance Corp. is liable to the extent of
its coverage but may recover one-half of the total indemnity from the co-
St. Peter Manufacturing Company is entitled to recover for the loss from stable insurers in the proportion of 60% (Southern Insurance) 40% (Northern
Insurance Company. Stable Insurance Company granted a credit term to pay Insurance).
the premiums. This is not against the law, because the standing business
practice of allowing St. Peter Manufacturing Company to pay the premiums
after 60 or 90 days, was relied upon in good faith by SPMC. Stable Insurance
Carlo and Bianca met in the La Boracay festivities. Immediately, they fell in Spouse Remondeulaz (2012)
love with each other and got married soon after. They have been cohabiting
blissfully as husband and wife, but they did not have any offspring. As the 2. As a rule, an insurance contract is consensual and voluntary. The exception
years passed by, Carlo decided to take out an insurance on Biancaslife for is in the case of: (1%)
P1,000,000.00 with him (Carlo) as sole beneficiary, given that he did not have
a steady source of income and he always depended on Bianca both (A) Inland Marine Insurance
emotionally and financially. During the term of the insurance, Bianca died of
what appeared to bea mysterious cause so that Carlo immediately requested (B) Industrial Life Insurance
for an autopsy tobe conducted. It was established that Bianca died of a natural
cause. More than that, it was also established that Bianca was a transgender (C) Motor Vehicle Liability Insurance
all along a fact unknown to
(D) Life Insurance
Carlo. Can Carlo claim the insurance benefit? (5%)
ANS: (C) Motor Vehicle Liability Insurance
SUGGESTED ANSWERS
3. On February 21, 2013, Barrack entered into a contract of insurance with
Yes, Carlo can claim the insurance benefit. He had insurable interest on Matino Insurance Company (Matino) involving a motor vehicle. The policy
Biancas life under Section 10 (b) of the Insurance Code as the problem states obligates Matino to pay Barrack the amount of Six Hundred Thousand Pesos
that Carlo always depended on Bianca both emotionally and financially. The (P600,000.00) in case of loss or damage to said vehicle during the period
insurable interest upon the life of another under the aforesaid provision need covered, which is from February 26, 2013 to February 26, 2014.
not be based on kinship or legal obligation to give support (see Alvendia, The
Law of Insurance in the Philippines, 1968 ed., p. 42; Martin, Commentaries On April 16, 2013, at about 9:00 a.m., Barrack instructed his driver, JJ, to bring
and Jurisprudence on the Philippine Commercial Laws, vol. 2, 1986 ed., p. 21). the motor vehicle to a near by auto shop for tune-up. However, JJno longer
The fact that their marriage may be void is irrelevant. returned and despite diligent efforts to locate the said vehicle, the efforts
proved futile. Resultantly, Barrack promptly notified Matino of the said loss and
2014 BAR Qs demanded payment of the insurance proceeds of P600,000.00.
1. On May 26, 2014, Jess insured with Jack Insurance (Jack) his 2014 Toyota In a letter dated July 5, 2013. Matino denied the claim, reasoning as stated in
Corolla sedan under a comprehensive motor vehicle insurance policy for one the contract that "the company shall not be liable for any malicious damage
year. On July 1, 2014, Jess car was unlawfully taken. Hence, he immediately caused by the insured, any member of his family or by a person in the
reported the theft to the Traffic Management Command (TMC) of the Philippine insureds service. Is Matino correct in denying the claim? (4%)
National Police (PNP), which made Jess accomplish a complaint sheet as part
of its procedure. In the complaint sheet, Jess alleged that a certain Ric SUGGESTED ANSWER
Silat(Silat) took possession of the subject vehicle to add accessories and
improvements thereon. However, Silat failed to return the subject vehicle within
Matino Insurance is not correct in denying the claim. The loss of the motor
the agreed 3-day period. As a result, Jess notified Jack of his claim for
vehicle is not excluded under the insurance policy as the loss was due to theft,
reimbursement of the value of the lost vehicle under the insurance policy. Jack
not malicious damage. The malicious damage clause under the policy is not
refused to pay claiming that there is no theft as Jess gave Silat lawful
applicable but rather the theft clause. Thus, the provision under the policy
possession of the car. Is Jack correct? (4%)
that the company shall not be liable for any malicious damage caused by the
insured, any member of his family or by a person in the insureds service is
SUGGESTED ANSWER
not applicable. (Alpha Insurance and Surety Co vs Castor (2003)
Jack Insurance is not correct. Ric Silat was merely given physical possession
4. A person is said to have an insurable interest in the subject matter insured
of the car. He did not have juridical possession over the same. It is also
where he has a relation or connection with, or concern in it that he will derive
apparent that the taking by Silat of the car of Jess is without the consent or
pecuniary benefit or advantage from its preservation. Which among the
authority of the latter. Thus, the act of Silat in depriving Jess of his car, soon following subject matters is not considered insurable? (1%)
after the transfer of physical possession of the same to him, constitutes theft
under the insurance policy that is compesable. (Paramount Insurance vs
(A) A partner in a firm on its future profits Tina. RN Insurance had the check as early as September 25, 2013 and could
have encashed the check before the death of Danny on October 5, 2013. The
(B) A general creditor on debtors property problem did not indicate that there was any problem with the check, e.g. that it
was not adequately funded. RN Insurance was at fault and Tina should not be
(C) A judgment creditor on debtors property denied the proceeds of the policy.

(D) A mortgage creditor on debtors mortgaged property (See the case of Malayan Insurance Co., Inc. vs Arnaldo (1987), where the
Court held that the insurer could no longer claim forfeiture of the insureds right
because it held the check used to pay the premium on a fire insurance policy
ANS: (B) A general creditor on debtors property for an unreasonable time; see also the comments of Justice Jose C. Vitug
(ret.) in his book, Commercial Laws and Jurisprudence, 2006 Vol 1., p. 250,
5. On September 25, 2013, Danny Marcial (Danny) procured an insurance on that payment x x x by means of a check or note, accepted by the insurer,
his life with a face value ofP5,000,000.00 from RN Insurance Company (RN), bearing a date prior to the loss, assuming an availability of funds thereof,
with his wife Tina Marcial(Tina) as sole beneficiary. On the same day, Danny would be sufficient even if it remains uncashed at the time of the loss. The
issued an undated check to RN for the full amount of the premium. On October subsequent effects of encashment (or impairment by the fault of the creditor)
1, 2013, RN issued the policy covering Dannys life insurance. On October 5, or of legal compensation under Articles 1278-1279, in relation to Article 1249
2013, Dannymet a tragic accident and died. Tina claimed the insurance of the Civil Code, would retroact to the date of the mercantile instrument and
benefit, but RN was quick to deny the claim because at the time of Dannys its acceptance by the creditor.
death, the check was not yet encashed and therefore the premium remained
unpaid. To the second question

Is RN correct? Will your answer be the same if the check is dated October 15, My answer would not be the same if the check were dated October 15, 2013.
2013? (4%) This answer assumes that Danny was the one who dated the check and,
therefore what he issued was a postdated check. The payment of a promissory
SUGGESTED ANSWERS note or a postdated check at a stated maturity subsequent to the loss,
assuming that there was no estoppel (e.g. written acknowledgment of the
To the first question receipt of premium), is insufficient to put the insurance into effect. (Vitug,
Commercial Laws and Jurisprudence, 2006, Vol 1 p 250)
RN Insurance is not correct. The facts of the case show that Danny procured
insurance on his life on September 25, 2013, with his wife Tina as beneficiary, If it were RN Insurance who dated the check October 15, 2013, then my
and that on the same day, i.e. September 25, 2013, he issued an undated answer would be the same as my answer to the first question.
check to RN for the full amount of the premium. Since the undated check was
issued to RN on September 25, 2013, it will be considered dated as of the 6. On December 1, 2010, Kore A Corporation shipped from South Korea to LT
same day, i.e. September 25, 2013 pursuant to Section 17(c) of the Negotiable Corporation in Manila some 300,000 sheets of high-grade special steel. The
Instruments Law. The facts also show that RN Insurance issued the policy on shipment was insured against all risks by NA Insurance (NA). The carrying
Dannys life on October 1, 2013 and that Danny died in an accident on October vessel arrived at the Port of Manila on January 10, 2011. When the shipment
5, 2013. was discharged, it was noted that 25,000 sheets were damaged and in bad
order. The entire shipment was turned over to the custody of ATI, the arrastre
RN Insurance denied that claim of Tina because at the time of Dannys death, operator, on January 21, 2011 for storage and safekeeping, pending its
the check was not yet encashed and, therefore, the premium remained unpaid. withdrawal by the consignees authorized customs broker, RVM.
Presumably, RN Insurance is relying on the second paragraph of Article 1249
of the Civil Code which states that the delivery of promissory notes payable to On January 26 and 29, 2011, the subject shipment was withdrawn by RVM
order, or bills of exchange or other mercantile documents shall produce the from the custody of ATI. On January 29, 2011, prior to the withdrawal of the
effect of payment only when they have been cashed, or when through the fault last batch of the shipment, a joint inspection of the cargo was conducted per
of the creditor they have been impaired. the Request for Bad Order Survey (RBO) dated January 28, 2011. The
examination report showed that 30,000 sheets of steel were damaged and in
Whose fault was it that the check was not encashed? Certainly not Danny or bad order.
NA Insurance paid LT Corporationthe amount of P30,000,000.00 for the PAM, Inc. without Ilocanos consent (as is the case here) would free the latter
30,000 sheets that were damaged, as shown in the Subrogation Receipt dated from any liability. (Malayan Insurance Company vs PAPCO (2013)
January 13, 2013. Thereafter, NA Insurance demanded reparation against ATI
for the goods damaged in its custody, in the amount of P5,000,00.00. ATI 8. On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from
refused to pay claiming that the claim was already barred by the statute of Ilocos Bankers Life Insurance Corporation (Ilocos Life) designating Creencia
limitations. ATI alleged that the Carriage of Goods by Sea Act (COGSA) Aban(Aban), her niece, as her beneficiary. Ilocos Life issued Policy No. 747,
applies in this case since the goods were shipped from a foreign port to the with a face value of P100,000.00, in Soteros favor on August 30, 1993, after
Philippines. NA Insurance claims that the COGSA does not apply, since ATIis the requisite medical examination and payment of the premium.
not a shipper or carrier. Who is correct? (5%)
On April 10, 1996, Sotero died. Aban filed a claim for the insurance proceeds
SUGGESTED ANSWER on July 9, 1996. Ilocos Life conducted an investigation into the claim and came
out withthe following findings: 1. Soterodid not personally apply for insurance
NA Insurance is correct. The COGSA applies only to carriers or ships. A coverage, as she was illiterate. 2. Soterowas sickly since 1990. 3. Soterodid
carrier, under Section 1(a) of the COGSA, includes the owner or the not have the financial capability to pay the premium on the policy. 4. Soterodid
charterer who enters into a contract of carriage with a shipper, while a ship is not sign the application for insurance. 5. Aban was the one who filed the
defined under Section 1(d) as any vessel used for the COGSA. The COGSA insurance application and designated herself as the beneficiary.
does not apply to ATI as it is neither a carrier nor a ship, much less a
shipper. It is simply an arrastre operator. Moreover, the COGSA does not For the above reasons and claiming fraud, Ilocos Life denied Abans claim on
mention that an arrastre operator may invoke the prescriptive period of one April 16, 1997, but refunded the premium paid on the policy. (6%)
year; hence, it does not cover the arrastre operator. (Insurance Co. of North
America vs Asian Terminals, Inc., (2012) (A) May Sotero validly designate her niece as beneficiary? (B) May the
incontestability period set in even in cases of fraud as alleged in this case? (C)
Is Aban entitled to claim the proceeds under the policy?
7. On May 13, 1996, PAM, Inc. obtained a P15,000,000.00 fire insurance
policy from Ilocano Insurance covering its machineries and equipment effective SUGGESTED ANSWERS
for one (1) yearor until May 14, 1997. The policy expressly stated that the
insured properties were located at "Sanyo Precision Phils. Building, Phase III, (A) Yes, Sotero may validly designate her niece as beneficiary. The same is
Lots 4 and 6, Block 15, PEZA, Rosario, Cavite." Before its expiration, the policy not prohibited under the Insurance Code or any other law pertinent to the
was renewed on "as is" basis for another year or until May 13, 1998. The problem.
subject properties were later transferred to Pace Factory also in PEZA. On
October 12, 1997, during the effectivity of the renewed policy, a fire broke out (B) Yes, the incontestability period applies even in cases of fraud as claimed in
at the Pace Factory which totally burned the insured properties. this problem. Note that the findings are those of the insurer and these were
made in an investigation conducted unilaterally by the insurer more than 3
The policy forbade the removal of the insured properties unless sanctioned by years after the policy was taken out by Sotero. These findings may very well
Ilocano. Condition 9(c) of the policy provides that "the insurance ceases to be dismissed as self-serving considering the incontestability clause set out in
attach as regards the property affected unless the insured, before the Sec. 48 of the Insurance Code.
occurrence of any loss or damage, obtains the sanction of the company
signified by endorsement upon the policy x x x (c) if the property insured is Sec. 48 regulates both the actions of the insurers and prospective takers of life
removed to any building or place other than in that which is herein stated to be insurance. It gives insurers enough time to inquire whether the policy was
insured." PAM claims that it has substantially complied with notifying Ilocano obtained by fraud, concealment, or misrepresentation; on the other hand, it
through its sister company, the RBC, which, in fact, referred PAM to Ilocano for forewarns scheming individuals that their attempts at insurance fraud would be
the insurance coverage. Is Ilocano liable under the policy? (4%) timely uncovered thus deterring them from venturing into such nefarious
enterprise. At the same time, legitimate policy holders are absolutely protected
SUGGESTED ANSWERS from unwarranted denial of their claims or delay in the collection of insurance
proceeds occasioned by allegations of fraud, concealment, or
Ilocano Insurance is not liable under the policy. By the clear and express misrepresentation by insurers, claims which may no longer be set up after the
condition in the renewal policy, the removal of the insured property to any two-year period expires as ordained under the law.
building or place required the consent of Ilocano. Any transfer effected by
Thus, the self-regulating feature of Sec. 48 lies in the fact that both the insurer cargo.
and the insured are given the assurance that any dishonest scheme to obtain
life insurance would be exposed, and attempts at unduly denying a claim Because of this incident, FCL Corp. filed with ELP Insurance, Inc. a claim for
would be struck down. Life insurance policies that pass the statutory two-year insurance indemnity in the amount of P1,500,000.00. After the requisite
period are essentially treated as legitimate and beyond question, and the investigation and adjustment, ELP Insurance, Inc. paid FCL Corp. the amount
individuals who wield them are made secure by the thought that they will be of P1,350,000.00 as insurance indemnity.
paid promptly upon claim. In this manner, Sec. 48 contributes to the stability of
the insurance industry. 10. ELP Insurance, Inc., thereafter, filed a complaint for damages against
CGM, Inc. before the Regional Trial Court (RTC), seeking reimbursement of
Sec. 48 prevents a situation where the insurer knowingly continues to accept the amount it had paid to FCL Corp. for the loss of the subject cargo. CGM,
annual premium payments on life insurance, only to later on deny a claim on Inc. denied the claim on the basis that it is not privy to the contract entered into
the policy on specious claims of fraudulent concealment and by and between FCL Corp. and ELP Insurance, Inc., and hence, it is not liable
misrepresentation, such as what obtains in the instant case. Thus, instead of therefor. If you are the judge, how will you decide the case? (4%)
conducting at the first instance an investigation into the circumstances
surrounding the issuance of the insurance policy which would have timely SUGGESTED ANSWER
exposed the supposed flaws and irregularities attending it as it now professes,
Ilocos Life appears to have turned a blind eye and opted instead to continue I will decide the case in favor of ELP Insurance. Even if CGM, Inc. is not privy
collecting collected the premiums and devoted the same to its own profit. It to the contract between FCL Corp. and ELP Insurance, it is still liable for the
cannot now deny the claim when it is called to account. Sec. 48 must be loss of the subject cargo. Art. 2207 of the Civil Code states if the plaintiffs
applied to it with full force and effect. property has been insured and he has received indemnity from the insurance
company for injury or loss arising out of the wrong or breach of contract
Insurers may not be allowed to delay the payment of claims by filing frivolous complained of, the insurance company shall be subrogated to the rights of the
cases in court, hoping that the inevitable may be put off for years or even insured against the wrong-doer or the person who has violated the contract,
decades by the pendency of these unnecessary court cases. In the which in this case is CGM. Since ELP Insurance is subrogated to the rights of
meantime, they benefit from collecting the interest and/or returns on both the FCL Corporation to the extent of the amount it paid to the latter under the
premiums previously paid by the insured and the insurance proceeds which marine insurance contract, it has the right to seek reimbursement from CGM,
should otherwise go to their beneficiaries. The business of insurance is a Inc, for breach of contract and/or tort (Loadmasters Customs Services, Inc. vs
highly regulated commercial activity in the country, and is imbued with public Glodel Brokerage Corporation and R & B Insurance Corp (2011)
interest. An insurance contract is a contract of adhesion that must be
construed liberally in favor of the insured and strictly against the insurer in 2015 BAR QS
order to safeguard the formers interest (Manila Bankers Life Insurance Corp
vs Aban (2013) Novette entered into a contract for the purchase of certain office supplies. The
goods were shipped. While in transit, the goods were insured by Novette. Does
(C) Yes, Aban is entitled to claim the proceeds under the policy as beneficiary she have an insurable interest over the goods even before delivery of the
for the same reasons adduced in (B) above. same to her? Explain. (2%)

9. ELP Insurance, Inc. issued Marine Policy No. 888 in favor of FCL Corp. to SUGGESTED ANSWER:
insure the shipment of 132 bundles of electric copper cathodes against all
risks. Subsequently, the cargoes were shipped on board the vessel "M/V Yes, Novette has an insurable interest in the goods. The contract of sale was
Menchu" from Leyte to Pier 10, North Harbor, Manila. already perfected and Novette acquired interest thereon although the goods
have yet to be delivered.
Upon arrival, FCL Corp. engaged the services of CGM, Inc. for the release and
withdrawal of the cargoes from the pier and the subsequent delivery to its B. Will an insurance policy be binding even if the premium is unpaid? What if it
warehouses/plants in Valenzuela City. The goods were loaded on board twelve were partially paid? (3%)
(12) trucks owned by CGM, Inc., driven by its employed drivers and
accompanied by its employed truck helpers. Of the twelve (12) trucks en SUGGESTED ANSWER:
routeto Valenzuela City, only eleven (11) reached the destination. One (1)
truck, loaded with eleven (11) bundles of copper cathodes, failed to deliver its
As a general rule, the insurance policy is not valid and binding unless the a) A member of the MILF or the Abu Sayyaf may be insured with a company
premium thereof has been paid. This is the cash and carry rule under the licensed to do business under the Insurance Code of the Philippines. What is
Insurance Code. Premium is the consideration for the undertaking of the prohibited to be insured is a public enemy. A public enemy is a citizen or
insurer to indemnify the insured against a specified peril. There are exceptions, national of a country with which the Philippines is at war. Such member of the
however, one of them is when there is an agreement allowing the insured to MILF or the Abu Sayyaf is not a citizen or national of another country, but of
pay the premium in installments and partial payment has been made at the the Philippines.
time of the loss. (Makati Tuscany Condominium Corporation vs Court of
Appeals, 215 SCRA 463) b) Yes. BD has insurable interest in his bank deposit. In case of loss of said
deposit, more particularly to the extent of the amount in excess of the limit
covered by the PDIC Act, BD will be damnified. He will suffer pecuniary loss of
UST COMPILATION OF INSURANCE BAR QS P400,000, that is, his bank deposit of half a million pesos minus P100,000
which is the maximum amount recoverable from the PDIC. (BAR 2000)
1. A group of Malaysians wanted to invest in the Philippines insurance
business. After negotiations, they agreed to FIMA Insurance Corp. with a 2. What is a mutual insurance company or association?
group of Filipino businessmen. FIMA would have a P50 M paid up capital. P40
M of which would come up from the Filipino group. All corporate officers would Answer: A mutual insurance company is a cooperative enterprise where the
be Filipinos and 8 out of 10-member Board of Directors would be Filipinos. Can members are both the insurer and the insured. In it, the members all
FIMA operate an insurance business in the Philippines? contribute, by a system of premiums or assessments, to the creation of a fund
from which all losses and liabilities are paid, and where the profits are divided
a) No, since an insurance company must have at least P74 M paid among themselves, in proportion of their interest. (BAR 2006)
up capital.
3. In return for the 20 years of faithful service of X as a house helper to Y, the
b) Yes, since there is substantial compliance with our nationalization laws latter promised to pay P100,000 to Xs heirs if he (X) dies in an accident by
respecting paid-up capital and Filipino dominated Board of Directors. fire. X agreed. Is this an insurance contract?

Yes, since all the elements of an insurance contract are present.
c) Yes, since FIMAs paid up capital more than meets the countrys Yes, since Xs services may be regarded as the consideration.
nationalization laws. No, since Y actually made a conditional donation in Xs favor.
No, since it is in fact an innominate contract between X and Y.
d) No, since an insurance company should be 100% owned by Filipinos.
(BAR 2011)
1. The Civil Code adopts the theory of cognition, while the Code of Commerce
1. May a member of the MILF or its breakaway group, the Abu Sayyaf, be generally recognizes the theory of manifestation, in the perfection of contracts.
insured with a company licensed to do business under the Insurance Code of How do these two theories differ?
the Philippines? Explain.
Answer: Under the theory of cognition, the acceptance is considered to
b) BD has a bank deposit of half a million pesos. Since the limit of the effectively bind the offeror only from the time it came to his knowledge. Under
insurance coverage of the PDIC is only 1/10 of BDs deposit, he would like the theory of manifestation, the contract is perfected at the moment when the
some protection for the excess by taking out an insurance against all risk or acceptance is declared or made by the offeree. (BAR 1997)
contingencies of loss arising from any unsound or unsafe banking practices
including unforeseen adverse effects of the continuing crisis involving the 2. An Insurance Contract is a contract of adhesion, which means that in
banking and financial sector in the Asian region. Does BD have an insurable resolving ambiguities in the provision of the insurance contract
interest within the meaning the Insurance Code of the Philippines?
a) The general rule is that, the insurance contract is to be interpreted strictly in
Answer: accordance with what is written in the contract;

b) Are to be construed liberally in favor of the insured and strictly against

the insurer who drafted the insurance policy; recoverable beneficiary. He referred to her, in his application and policy, as his
wife.
c) Are to be construed strictly against the insured and liberally in favor of the
insurer; Two years later, Crispulo died. Angie filed her claim for the proceeds of the
policy as the designated beneficiary therein. The widow, Laura, also filed her
d) If there is an ambiguity in the insurance contract, this will invalidate the claim as legal wife.
contract.
If you were the Legal Counsel for the Insurance Company, to whom would you
3. An insurance contract is an aleatory contract, which means that adjudicate the proceeds of the insurance policy? Reason out your answer
briefly.
a) An insurer will pay the insured equivalent to the amount of the premium;
Answer: I would adjudicate the proceeds of the insurance policy to Laura, the
b) The obligation of the insurer is to pay depending upon the happening legal wife. In the appointment of beneficiary, the New Civil Code imposed
of an uncertain event; certain limitations; one of them being that the insured may not appoint, as his
beneficiary, one with whom he is guilty of concubinage, at the time of
c) The insured pays a fixed premium for the duration of the policy period and designation. Since Crispulo was married to Laura at the time when he
the amount of the premiums paid to the insurer is not necessarily the same designate as his beneficiary his concubine Angie, with whom he was guilty of
amount as what the insured will get upon the happening of an uncertain concubinage at the time of designation, Laura may have said designation of
future event; Angie nullified, by mere preponderance of evidence in the same action for
nullification. There is even no need of the criminal conviction for concubinage.
d) The obligation of the insurer is to pay depending upon the happening of an (Arts. 739 and 2012, N.C.C.; Insular Life assn. Co., Ltd. v. Ebrado, Oct. 28,
event that is certain to happen. 1977; 80 SCRA 181) (BAR 1981)

X Company procured a group accident insurance policy for its construction On December 20, 1974, A took out a life insurance policy and named his wife
employees variously assigned to its provincial infrastructure projects. Y B, as beneficiary. The policy was silent with regard to any change of
Insurance Company underwrote the coverage, the premiums of which were beneficiary. Suspecting that B was committing adultery, A immediately notified
paid for entirely by X Company without any employee contributions. While the the insurance company in writing that he is substituting his brother C as
policy was in effect, five of the covered employees perished at sea on their beneficiary in place of B. A died later on June 30, 1975. B claims the proceeds
way to their provincial assignments. Their wives sued Y Insurance Company of the insurance policy, contending that as designated beneficiary, she cannot
for payment of death benefits under the policy. While the suit was pending, the be changed without her consent, she having acquired a vested right to the
wives signed a power of attorney designating an X Company executive. PJ as proceeds of the policy. Decide. Give reasons for your answer.
their authorized representative to enter into a settlement with the insurance
company. When a settlement was reached, PJ instructed the insurance Answer: B cannot claim the proceeds of As life insurance policy. As action in
company to issue a settlement check to the order of the X Company, which will substituting his brother C as his beneficiary in place of B, his wife, in his
undertake the payment to the individual claimants of their respective shares. insurance policy, is valid. The insured, A, can change the beneficiary in a
PJ misappropriated the settlement amount and the wives pursued their case policy of life insurance, without the consent of the beneficiary. (BAR 1978)
against Y Insurance Company. Will the suit prosper? Explain.
Eduardo Fernandez applied for and was issued Policy No. 0777 by Atlas Life
Answer: Yes. The suit will prosper. Y insurance Company is liable. X Insurance Corporation on a whole-life plan for P200,000. Although he was
Company, through its executive, PJ, acted as agent of Y Insurance Company. married to Clara, with whom he had 5 legitimate children, he designated his
The latter is thus bound by the misconduct of its agent. It is the usual practice common-law wife, Diana Cruz, as his revocable beneficiary in the policy, and
in the group insurance business that the employer-policy holder is the agent of referred to Diana in his application and policy, as his wife. 5 years thereafter,
the issuer. (BAR 2000) he died. Diana immediately filed her claim for the proceeds of the policy as the
designated beneficiary. Clara also filed her claim as legal wife. The insurance
On July 1, 1979, Crispulo, married to Laura with whom he has two legitimate company filed a petition for Interpleader before the RTC of Rizal to determine
children, was issued Policy No. 8008 of the Midland Life Insurance Co. on a who should be entitled to the proceeds of the policy. If you were the judge,
whole-life plan for P10,000. He designated Angie, his common-law wife as the how would you decide the said interpleader action? Explain.
Answer: If I were the judge, I would decide that the legal wife, Clara, be Yob and Jojo as his beneficiaries? Explain.
entitled to the proceeds of insurance taken by Eduardo Fernandez who named
his common-law wife, Diana, as his revocable beneficiary, at the time they Answer: The insured cannot add other beneficiaries as this would diminish the
were guilty of concubinage. In that case, the designation of Diana is void, interest of Diwata who is the irrevocably designated beneficiary. The insured
being prohibited by the New Civil Code (Art. 739 and 2012). The guilt of can only do so with the consent of Diwata. (BAR 2005)
Eduardo and Diana for concubinage may be proved by mere preponderance of
evidence in the same action and there is no need for a criminal conviction for
What are the effects of an irrevocable designation of a beneficiary under the
concubinage. (BAR 1985)
Insurance Code? Explain.
On October 18, 1980, P, took out a life insurance policy and named his only
Answer: The irrevocable beneficiary has a vested interest in the policy,
son Q as beneficiary. The policy was silent with regard to any change of
including its incident such as the policy loan and cash surrender value. (BAR
beneficiary. P later learned that Q was hooked on drugs and immediately
2005)
notified the insurance company in writing that he is substituting his sister, R, as
his beneficiary in place of Q. P later died of advanced tuberculosis. In the
application form filled up by the agent of the insurance company prior to the On January 1, 2000, Antonio Rivera secured a life insurance from SOS
issuance of the life insurance policy by the insurance company, the agent, Insurance Corp. for P1 M with Gemma Rivera, his adopted daughter, as the
without the knowledge of P, filled in a false answer and made it appear that P beneficiary. Antonio Rivera died on March 4, 2005 and in the police
was in good health. Upon Ps death, Q claimed the proceeds of the insurance investigation, it was ascertained that Gemma Rivera participated as an
policy contending that as designated beneficiary, he cannot be changed accessory in the killing of Antonio Rivera. Can SOS Insurance Corp. avoid
without his consent, he having acquired a vested right to the proceeds of the liability by setting up as a defense the participation of Gemma Rivera in the
policy. killing of Antonio Rivera? Discuss with reasons.

a) Is Qs contention correct? Reasons. Answer: Answer: SOS cannot avoid liability under the policy. While Gemmas interest
as beneficiary in the policy is considered forfeited since she is an accessory to
a) No, the designation of the beneficiary is revocable unless the right to revoke the killing of Antonio, the proceeds of the policy should be paid to the nearest
is waived. (BAR 1988) relative of Antonio (if not otherwise disqualified). The Insurance Code provides
that the interest of a beneficiary in a life insurance policy shall be forfeited
Juan de la Cruz was issued Policy No. 8888 of the midland Life Insurance Co. when the beneficiary is the principal, accomplice, or accessory in willfully
On a whole life plan for P20,000 on August 19, 1989. Juan de la Cruz is bringing about the death of the insured; in which event, the nearest relative of
married to Cynthia with whom he has three legitimate children. He, however, the insured shall receive the proceeds of said insurance if not otherwise
designated Purita, his common-law-wife, as the revocable beneficiary. Juan de disqualified. (BAR 2008)
la Cruz referred to Purita in his application and policy as the legal wife. 3
years later, Juan de la Cruz died. Purita filed her claim for the proceeds of the X is the common law wife of Y. Y loves X so much that he took out a life
policy as the designated beneficiary therein. The widow, Cynthia, also filed a insurance on his own life and made her the sole beneficiary. Y did this to
claim as the legal wife. To whom should the proceeds of the insurance policy ensure that X will be financially comfortable when he is gone. Upon the death
be awarded? of Y

Answer: The proceeds of the insurance policy shall be awarded to the estate a) X as sole beneficiary under the life insurance policy on the life of Y will be
of Juan. Purita, the common-law wife, is disqualified as the beneficiary of the entitled to the proceeds of the life insurance;
deceased because of illicit relation between the deceased and Purita, the
designated beneficiary. Due to such illicit relation, Purita cannot be a donee of b) Despite the designation of X as the sole beneficiary, the proceeds of
the deceased. Hence, she cannot also be his beneficiary. (BAR 1998) the life insurance will go to the estate of Y;

Jacob obtained a life insurance policy for P1 M designating irrevocably Diwata, c) The proceeds of the life insurance will go to the compulsory heirs of Y;
a friend, as his beneficiary, Jacob, however, changed his mind and wants Yob
and Jojo, his other friends, to be included as beneficiaries considering that the d) The proceeds of the life insurance will be divided equally amongst X and the
proceeds of the policy are sufficient for the three friends. Can Jacob still add compulsory heirs of Y.
What warranties are implied in marine insurance? Answer:

Answer: The following warranties are implied in marine insurance: a) No, my answer will be different. Allowing the vessel to depart on a voyage
when it is not seaworthy is a violation of the implied warranty of seaworthiness,
and thus constitutes negligence on the part of owner of the ship and the ship
1. That the ship is seaworthy to make the voyage and/or to take in certain
captain. The hypothecary principle in maritime commercelimiting the ship
cargoes;
owners liability to the amount of insurance proceedsis not applicable when
2. That the ship shall not deviate from the voyage insured;
the unseaworthiness of the vessel is due to the owners fault or negligence.
3. That the ship shall carry the necessary documents to show nationality
or neutrality and that it will not carry document which will cast
b) Yes, the heirs of the 3 crew members perished can recover from CSC for
reasonable suspicion thereon;
negligence which constitutes a quasi-delict in this case. (BAR 2008)
4. That the ship shall not carry contraband, especially if it is making
voyage through belligerent waters. (BAR 2000)
A marine insurance policy on a cargo states that the insurer shall be liable for
losses incident to perils of the sea. During the voyage, seawater entered the
Paolo, the owner of an ocean-going vessel, offered to transport the logs of compartment where the cargo was stored due to the defective drainpipe of the
Constantino from Manila to Nagoya. Constantino accepted the offer, not ship. The insured filed an action on the policy for recovery of the damages
knowing that the vessel was manned by an irresponsible crew with deep- caused to the cargo. May the insured recover damages?
seated resentments against Paolo, their employer. Constantino insured the
cargo of logs against both perils of the sea and barratry. The logs were
improperly loaded on one side, thereby causing the vessel to tilt on one side. Answer: No. the proximate cause of the damage to the cargo insured was the
On the way to Nagoya, the crew unbolted the sea valve of the vessel causing defective drainpipe of the ship. This is peril of the ship, and not peril of the sea.
water to flood the ship hold. The vessel sank. Constantino tried to collect The defect in the drainpipe was the result of the ordinary use of the ship. To
from the insurance company which denied liability, given the unworthiness of recover under a marine insurance policy, the proximate cause of the loss or
both the vessel and its crew. Constantino countered that he was not the damage must be peril of the sea. (BAR 1998)
owner of the vessel and he could therefore not be responsible for conditions
about which he was innocent. Is the insurance company liable? Perils of the ship, under marine insurance law, refer to loss which in the
ordinary course of events results from
Answer: No. the insurance company is not liable because there is an implied
warranty in every marine insurance that the ship is seaworthy whoever is a. Natural and inevitable actions of the sea.
insuring the cargo, whether it be the shipowner or not. There was a breach of b. Natural and ordinary actions of the sea.
warranty, because the logs were improperly loaded and the crew was c. Unnatural and inevitable actions of the sea.
irresponsible. It is the obligation of the owner of the cargo to look for a reliable d. Unnatural and ordinary actions of the sea.
common carrier which keeps its vessel in seaworthy condition. (BAR 2010)
T Shipping, Co. insured all of its vessels with R insurance, Co. The insurance
On October 30, 2007, M/V Pacific, a Philippine registered vessel owned by policies stated that the insurer shall answer for all damages due to perils of the
Cebu Shipping Company (CSC), sank on her voyage from Hong Kong to sea. One of the insureds ship, the MV Don Priscilla, ran aground in the
Manila. Empire Assurance Company (Empire) is the insurer of the lost cargoes Panama Canal when its engine pipes leaked and the oil seeped into the cargo
loaded on board the vessel which were consigned to Debenhams Company. compartment. The leakage was caused by the extensive mileage that the ship
After it indemnified Denbenhams, Empire as subrogee filed an action for had accumulated. May the insurer be made to answer for the damage to the
damages against CSC. cargo and the ship?

a) Assume the vessel was not seaworthy as in fact its hull had leaked, causing a. Yes, because the insurance policy covered any or all damage arising
flooding in the vessel. Will your answer be the same? Explain. from perils of the sea.
b. Yes, since there appears to have been no fault on the part of the
b) Assume the facts in question b). Can the heirs of the 3 crew members who shipowner and ship captain.
perished recover from CSC? Explain fully. c. No, since the proximate cause of the damage was the breach of
warranty of seaworthiness of the ship.
 d. No, since the proximate cause of the damage was due to ordinary sea, it is the responsibility of the insured rather than the insurer to see to it that
usage of the ship, and thus not due to perils of the sea. the vessel is seaworthy. That responsibility, however, shifts to the insurer
where the covered risks include perils of the ship. Accordingly, the insurance
A shipped 100 pieces of plywood from Davao City to Manila. He took a marine company in the problem can be held liable. (BAR 1986)
insurance policy to insure the shipment against loss or damage due to perils
of the sea, barratry, fire, jettison, pirates and other such perils. When the On a clear weather, MV Sundo, carrying insured cargo, left the port of Manila
ship left the port of Davao, the shipman in charge forgot to secure one of the bound for Cebu. While at sea, the vessel encountered a strong typhoon forcing
portholes, thru which sea water seeped during the voyage, damaging the the captain to steer the vessel to the nearest island where it stayed for 7 days.
plywood. A filed a claim against the insurance company which refused to pay The vessel ran out of provisions for its passengers. Consequently, the vessel
on the ground that the loss or damage was not due to a peril of the sea or any proceeded to Leyte to replenish its supplies.
of the risks covered by the policy. It was admitted that the sea was reasonably
calm during the voyage and that no strong winds or waves were encountered a) Assuming that the cargo was damaged because of such deviation, who
by the vessel. How would you decide the case? Explain. between the insurance company and the owner of the cargo bears the loss?
Explain.
Answer: I would decide in favor of the insured A because the insurer was
guilty of breach of the implied warranty of seaworthiness. The Insurance Code b) Under what circumstances can a vessel properly proceed to a port other
provides that in every contract of marine insurance, there is a warranty that the than its port of destination? Explain.
ship is seaworthy at the commencement of the risk. Seaworthiness refers not
only to the structure of the ship but also as to its being properly laden. In other Answer:
words, a ship which is seaworthy for the insurance on the ship, may, by reason
of being unfit to receive the cargo, be unseaworthy for the purpose of
insurance upon the cargo. In this case, the fact that the porthole was not a) The insurance company should bear the loss. Since the deviation was
secured at the port of departure made the ship unseaworthy as far as the caused by a strong typhoon, it was caused by circumstances beyond the
cargo of plywood was concerned. Thus, the insurer should be liable for the control of the captain, and also to avoid a peril whether or not insured against.
damage thereto although the loss was not one due to perils insured against. Deviation is therefore proper.
(BAR 1983)
b) A vessel can properly proceed to a port other than its port of destination in
Jacob, the owner of a barge, offered to transport the logs of Esau from the following cases: 1. When caused by circumstances over which neither
Palawan to Manila. Esau accepted the offer not knowing that the barge was the master or the owner of the ship has any control; 2. When necessary to
manned by an irresponsible crew with deep-seated resentments against comply with a warranty, or to avoid a peril, whether or not the peril is insured
Jacob, their employer. Esau insured his cargo of logs against both perils of against; 3. When made in good faith, and upon reasonable grounds of belief
the sea and barratry. The logs were improperly loaded on one side, thereby in the necessity to avoid peril; 4. When made in good faith for the purpose of
causing the barge to tilt and to navigate on an uneven keel. When the strong saving human life or relieving another vessel in distress. (BAR 2005)
winds and high waves, normal for that season, started to pound the barge, the
crew took advantage of the situation and unbolted the sea valves of the barge, On October 30, 2007, M/V Pacific, a Philippine registered vessel owned by
causing sea water to come in. the barge sank. When Esau tried to collect Cebu Shipping Company (CSC), sank on her voyage from Hong Kong to
from the insurance firm, the latter stated that it could not be held responsible Manila. Empire Assurance Company (Empire) is the insurer of the lost cargoes
considering the unworthiness of both the barge and its crew. Esau countered loaded on board the vessel which were consigned to Debenhams Company.
that he was not the owner of the barge and he could not be held responsible After it indemnified Denbenhams, Empire as subrogee filed an action for
for conditions about which he was innocent. damages against CSC. Assume that the vessel was seaworthy. Before
departing, the vesse was advised by the Japanese Meteorological Center that
Is the insurance company liable? Decide with reasons. it was safe to travel to its destination. But while at sea, the vessel received a
report of a typhoon moving within its general path. To avoid the typhoon, the
vessel changed its course. However, it was still at the fringe of the typhoon
Answer:
when it was repeated hit by huge waves, foundered and eventually sank. The
captain and the crew were saved except 3 who perished. Is CSC liable to
In marine insurance, the implied warranty of seaworthiness of the vessel
Empire? Explain.
applies also to the insurance of the cargo. In an insurance against perils of the
Answer: No, CSC is not liable to Empire. The doctrine of proper deviation is Second Suggested Answer: The notice of abandonment made in writing was
applicable in this case. The change of course made by the vessel is proper as not proper, since the existence of the constructive total loss of the vessel had
it was to avoid the typhoon and the huge waves which are considered perils of not yet been determined. (Sec. 141, Insurance Code)
the sea. (BAR 2008)
b) Yes, the position of the insurance company as to the absence of
T, the captain of MV Don Alan, while asleep in his cabin, dreamt of an Intensity constructive total loss is well taken. The sum total of the damage to the vessel
8 earthquake along the path of his ship. On waking up, he immediately ordered was only P1,340,000.00 (P40,000 for the salvors, and P1,300 for the
the ship to return to port. True enough, the earthquake and tsunami struck 3 restoration of the vessel to its original condition) which amount is not more
days later and the ship was saved. Was the deviation proper? than 34 of the value of the vessel (P2 M). (Sec. 139, Corporation Code)

a. Yes, because the deviation was made in good faith and on reasonable c) Yes, the shipowner may still recover from the insurer, his actual loss, the
ground for believing that it was necessary to avoid a peril. amount of P1,340,000.00 which is now only partial loss, being not total loss.
b. No, because no reasonable ground for avoiding a peril existed at But since the said amount was already spent by the insurer on the vessel, the
the time of the deviation. insurer is no longer liable to the shipowner, except to deliver the vessel. (BAR
c. No, because T relied merely on his supposed gift of prophecy. 1982)
d. Yes, because the deviation took place based on a reasonable belief of
the captain.
An insurance company issued a marine insurance policy covering a shipment
by sea from Mindoro to Batangas of 1,000 pieces of Mindoro garden stones
An inter-island vessel, insured for P2 M against total and constructive total against total loss only. The stones were loaded in two lighters, the first with
loss, sank in 150 ft of water one mile off Paranaque during a typhoon. After 600 pieces and the second with 400 pieces. Because of rough seas, damage
the typhoon, the ship owner gave written notice of abandonment of his interest was caused the second lighter resulting in the loss of 325 out of the 400
in the entire sunken ship to the insurance company. Refusing to accept the pieces. The owner of the shipment filed claims against the insurance
offer of abandonment, the insurer hired salvors to refloat the vessel at a total company on the ground of constructive total loss inasmuch as more than 34 of
cost of P40,000. Because the refloated vessel needed repairs, the insurer the value of the stones had been lost in one of the lighter.
issued invitations to bid for repairs. Several firms submitted separate sealed
bids ranging from P1.2 M to P1.3 M for the complete refurbishing and/or
Is the insurance company liable under its policy? Why?
restoration of the vessel to its original condition. On the basis of the following
facts, the insurance company rejected the claim of the ship owner for payment
Answer: The insurance company is not liable under its policy covering against
of total loss on the ground that the ground that there was no constructive total
total loss only the shipment of 1,000 pieces of Mindoro garden stones. There
loss.
is no constructive total loss that can be claimed since the 34 rule is to be
computed on the total 1,000 pieces of Mindoro garden stones covered by the
a) Was the notice of abandonment given by the owner properly made? single policy coverage. (BAR 1992)
Reason.
RC Corporation purchased from Thailand, which it intended to sell locally. Due
b) Is the position of the insurance company as to the absence of constructive to stormy weather, the ship carrying the rice became submerged in sea water
total loss well taken? Reason. and with it the rice cargo. When the cargo arrived in Manila, RC filed a claim
for total loss with the insurer, because the rice was no longer fit for human
c) Assuming that the ship owner failed to give the proper notice of consumption. Admittedly, the rice could still be used as animal feed. Is RCs
abandonment, may he still recover from the insurer? Why? claim for total loss justified? Explain.

Answer: Answer: Yes, RCs claim for total loss is justified. The rice, which was
imported from Thailand for sale locally, is obviously intended for consumption
by the public. The complete physical destruction of the rice is not essential to
a) First Suggested Answer: The notice of abandonment made in writing by the
constitute an actual loss. Such a loss exists in this case since the rice, having
insured to the insurer was sufficient, had the loss been a constructive total
been soaked in sea water and thereby rendered unfit for human consumption,
loss of the vessel, meaning more than 34 of the value of the vessel. (Sec. 139,
has become totally useless for the purpose for which it was imported. (BAR
Corporation Code)
1996) A. Yes, since under the doctrine, the value of the lost cargo and the
damage to the ship can be set-off.
MV Pearly Shells, a passenger and cargo vessel, was insured for P40 M B. No, since each cargo owner has a separate and individual claim for
against constructive total loss. Due to typhoon, it sank near Palawan. Luckily, damages.
there were no casualties, only injured passengers. The shipowner sent a C. Yes, since the extent of the ships damage was greater than that of the
notice of abandonment of his interest over the vessel to the insurance value of the lost cargo.
company which then hired professionals to afloat the vessel for P900,000. D. No, since X Shipping neither incurred a total loss nor abandoned
When re-floated, the vessel needed repairs estimated at P2 M. the insurance its ship.
company refused to pay the claim of the shipowner, stating that there was no
constructive total loss. For a constructive total loss to exist in marine insurance, it is required that the
person insured relinquish his interest in the thing insured. This relinquishment
a) Was there constructive total loss to entitle the shipowner to recover from must be
the insurance company? Explain.
A. Actual.
b) Was it proper for the shippowner to send a notice of abandonment to the B. Constructive first and if it fails, then actual.
insurance company? Explain. C. Either actual or constructive.
D. Constructive.
Answer:
1. What is barratry in marine insurance?
a) There was constructive total loss. When the vessel sank, it was likely that it
would be totally lost because of the improbability of recovery. Answer:

b) It was proper for the shipowner to send a notice of abandonment to the Barratry is any willful misconduct on the part of the master or the crew in
insurance company, because there was reliable information of the loss of the pursuance of some unlawful or fraudulent purpose without the consent of the
vessel. (BAR 2005) owner and to the prejudice of the interest of the owner. (BAR 2010)

X Shipping Co., insured its vessel MV Don Teodoro for P100 M with ABC Suppose that Fortune owns a house valued at P600,000 and insured the same
Insurance Co. through T, an agent of X Shipping. During a voyage, the vessel against fire with 3 insurance companies as follows:
accidentally caught fire and suffered damages estimated at P80 M. T
personally informed ABC Insurance that X Shipping was abandoning the ship. X ------------------- P400,000.00
Later, ABC Insurance denied X Shippings claim for loss on the ground that a
notice of abandonment through its agent was improper. Is ABC Insurance Y ------------------- P200,000.00
right?
Z ------------------- P600,000.00
A. Yes, since X Shipping should have ratified its agents action.
B. No, since T, as agent of X Shipping who procured the insurance, A. In the absence of any stipulation in the policies from which insurance
can also give notice of abandonment for his principal. company or companies may Fortune recover in case of fire should destroy
C. Yes, since only the agent of X Shipping relayed the fact of his house completely?
abandonment. B. If each of the fire insurance policies obtained by Fortune in problem (a) is
D. No, since in the first place, the damage was more than 34 of the ships a valued policy and the value of his house was fixed in each of the policies
value. at P1 M, how much would Fortune recover from X if he has already
obtained full payment on the insurance policies issued by Y and Z?
A cargo ship of X Shipping Co. ran aground off the coast of Cebu during a C. If each of the policies obtained by Fortune in problem (a) above is an open
storm and lost all its cargo amounting to P50 M. the ship itself suffered policy and it was immediately determined after the fire that the value of
damages estimated at P80 M. the cargo owners filed a suit against X Shipping Fortunes house was P2.4 M, how much may he collect from X, Y and Z?
but it invoked the doctrine of limited liability since it vessel suffered an P80 M
damage, more than the collective value of all lost cargo. Is X Shipping correct? D. In problem (a), what is the extent of the liability of the insurance companies
 among themselves? Answer: Ilocano is not liable under the policy. With the transfer of the location
E. Supposing in problem (a) above, Fortune was able to collect from both Y of the subject properties, without notice and without insurers consent, after the
and Z, may he keep the entire amount he was able to collect from the said renewal of the policy, the insured clearly committed concealment,
2 insurance companies? Explain your answer. misrepresentation and a breach of material warranty. The Insurance Code
provides that a neglect to communicate that which a party knows and ought to
Answer: communicate, is called concealment. A concealment entitles the injured party
to rescind a contract of insurance in case of an alteration in the use or
a) Fortune may recover from the insurers in such order as he may select up to condition of the thing insured. An alteration in the use or condition of a thing
their concurrent liability. insured from that to which it is limited by the policy made without the consent
of the insurer, by means within the control of the insured, and increasing the
b) One Answer (assuming that the real value is P1 M): Fortune may still risks, entitles the insurer to rescind the contract of fire insurance. (BAR 2014)
recover only the balance of P200,000 from X Insurance Company since the
insured may only recover up to the extent of his loss. Another Answer 1Queens Insurance Company insured X, a resident of Baguio City, against all
(assuming that the real value is P600,000): Having obtained full payment on direct loss and damage by fire. X lived in a house heated by a furnace. His
the insurance policies issued by Y and Z, Fortune may no longer recover servant built a fire in the furnace using material that was highly flammable. The
from X Insurance Company. furnace fire caused intense heat and great volumes of smoke and soot that
damaged the furnishings in the rooms of X. when X tried to collect on the
c) In an open policy, the insured may recover his total loss up to the amount of policy, Queens Insurance refused to pay contending that the damage is not
the insurance coverage. Thus, the extent of recovery would be P400,000 from covered by the policy, where the fire is confined within the furnace. Decide.
X; P200,000 from Y; and P600,000 from Z.
Answer: The refusal of Queens to pay is justified. The damage is not covered
d) In the problem (a), the insurance companies among themselves would be by the policy which only insures against all direct loss and damage by fire.
liable, viz: X 4/12 of P600,000 = P200,000 Y 2/12 of P600,000 = The damage being claimed by X was caused by intense heat and great
P100,000 Z 6/12 of P600,000 = P300,000 volumes of smoke and soot and not directly by fire. The stipulation in the policy
is paramount, not being contrary to law. (BAR 1989)
e) No, he can only be indemnified for his loss, not profit thereby; hence, he
must return P200,000 of the P800,000 he was able to collect. (BAR 1990) In a course of a voluntary boxing content, B who had an accident insurance
policy, slid and slipped, enabling his opponent boxer to hit him with a blow that
On May 13, 1996, PAM, Inc. obtained a P15 M fire insurance policy from threw him to the ropes, hitting his head against the canvass, causing Bs
Ilocano Insurance covering its machineries and equipment effective for 1 year eventual death. There is nothing in the insurance contract appertaining to
or until May 14, 1997. The policy expressly stated that the insured properties boxing. Is the Insurance Company liable? Reasons.
were located at Sanyo Precision Phils. Building, Phase III, Lots 4 and 6, Block
15, PEZA, Rosario Cavite. Before its expiration, the policy was renewed on Answer: The insurer is liable because the death in this case was an accident
as is basis for another year until May, 13, 1998. The subject properties were within the meaning of the policy. It was an accident because the insured did
later transferred to Pace Factory also in PEZA. On October 12, 1997, during not expect to die by entering such contest. His slipping was accidental and this
the effectivity of the renewed policy, a fire broke out at the Pace Factory which caused him to hit his head against the canvass, leading to his death. (BAR
totally burned the insured properties. 1975)

The policy forbade the removal of the insured properties unless sanctioned by Luis was the holder of an accident insurance policy effective November 1,
Ilocano. Condition 9(c) of the policy provides that the insurance ceases to 1988 to October 31, 1989. At a boxing contest held on January 1, 1989 and
attach as regards the property affected unless the insured, before the sponsored by his employer, he slipped and was hit on the face by his opponent
occurrence of any loss or damage, obtains the sanction of the company so he fell and his head hit one of the posts of the boxing ring. He was rendered
signified by endorsement upon the policy x x x (c) if the property insured is unconscious and was dead on arrival at the hospital due to intracranial
removed to any building or place other than in that which is herein stated to be hemorrhage.
insured. PAM claims that it has substantially complied with notifying Ilocano
for the insurance coverage. Is Ilocano liable under the policy?
Can his father who is a beneficiary under said insurance policy successfully
claim indemnity from the insurance company? Explain your answer.
 Answer: Beverly can recover the proceeds of the policy from the insurer.
The death of the insured was not due to suicide or willful exposure to needless
Answer: peril which are the excepted risks. The insureds act was purely on act of
negligence which is covered by the policy and for which the insured got the
Yes, the father who is a beneficiary under the accident insurance can insurance for his protection. In fact, he removed the magazine from the gun
successfully claim indemnity for the death of the insured. Clearly, the and when he pointed the gun to his temple he did so because he thought that it
proximate cause of the death was the boxing contest. Death is sustained in a was safe for him to do so. He did so to assure his sister that the gun was
boxing contest is an accident. (BAR 1990) harmless. There is none in the policy that would relieve the insurer of liability
for the death of the insured since the death was an accident. (BAR 1995)
S Insurance Company issued a Personal Accident Policy to Bob Tan with a
face value of P500,000. In the evening of September 5, 1992, after his CNI insured SAM under a homeowners policy against claims for accidental
birthday party, Tan was in a happy mood but not drunk. He was playing with injuries by neighbors. SAMs minor son, BOY, injured 3 children of POS, a
his handgun, from which he previously removed the magazine. As his neighbor, who sued SAM for damages.
secretary was watching television, he stood in front of her and pointed the gun
at her. She pushed it aside and said that it may be loaded. He assured her that SAMs lawyer was at ATT, who was paid for his services by the insurer for
it was not and then pointed it at his temple. The next moment, there was an reporting periodically on the case to CNI. In one report, ATT disclosed to CNI
explosion and Tan slumped to the floor lifeless. The wife of the deceased that after his investigations, he found the injuries to the 3 children not
sought payment on the policy but her claim was rejected. The insurance accidental but intentional.
company agreed that there was no suicide. However, it was the submission of
the insurance company that there was no accident. In support thereof, it SAM lost the case in court, and POS was awarded P1 M in damages which he
contended (a) that there was no accident when a deliberated act was sought to collect from the insurer. But CNI used ATTs report to deny the claim
performed unless some additional, unexpected, independent and unforeseen on the ground that the injuries to POS 3 children were intentional, hence
happening occur which produces or brings about the injury or death; and (b) excluded from the policys coverage. POS countered that CNI was stopped
that the insured willfully exposed himself to needless peril and thus removed from using ATTs report because it was unethical for ATT to provide prejudicial
himself from the coverage of the insurance policy. Are the two contentions of information against his client to the insurer, CNI.
the insurance company tenable? Explain.
Who should prevail: the claimant, POS; or the insurer, CNI? Decide with
Answer: No. these 2 contentions of the insurance company are not tenable. reasons briefly.
The insurer is liable for injury or death even due to the insureds gross
negligence. The fact that the insured removed the magazine from the handgun Answer:
means that the insured did not willfully expose himself to needless peril. At
most, the insured is only guilty of negligence. (BAR 1993) CNI is not stopped from using ATTs report because CNI, in the first place,
commissioned it and paid ATT for it. On the other hand, ATT has no conflict of
Sun-Moon Insurance issued a Personal Accident Policy to Henry Dy with a interest because SAM and CNI are on the same sidetheir interests being
face value of P500,000. A provision in the policy states that the company shall congruent with each other, namely, to oppose POS claim. It cannot be said
not be liable in respect of bodily injury consequent upon the insured person that ATT has used the information to the disadvantage or prejudice of SAM.
attempting to commit suicide or willfully exposing himself to needless peril
except in an attempt to save human life. 6 months later, Henry died of a bullet However, in Finman General Assurance Corp. v. Court of Appeals, 213 SCRA
wound in his head. Investigation showed that one evening Henry was in a 493 (1992), it was explained that there is no accident in the context of an
happy mood although he was not drunk. He was playing with his handgun from accident policy, if it is the natural result of the insureds voluntary act,
which he had previously removed its magazine. He pointed the gun at his unaccompanied by anything unforeseen except the injury. There is no accident
sister who got scared. He assured her it was not loaded. He then pointed the when a deliberate act is performed, unless some additional and unforeseen
gun at his temple and pulled the trigger. The gun fires and Henry slumped happening occurs that brings about the injury. This element of deliberateness
dead on the floor. Henrys wife, Beverly, as the designated beneficiary, is not clearly shown from the facts of the case, especially considering the fact
sought to collect under the policy. Sun-Moon rejected her claim on the ground that BOY is a minor, and the injured parties are also children. Accordingly, it is
that the death of Henry was not accidental. Beverly sued the insurer. Decide. possible that CNI may not prosper. ATTs report is not conclusive on POS or
Discuss fully. the court. (BAR 2004)
On May 5, 1982, Juan applied for a life insurance policy with Acme Life Atty. Roberto took out a life insurance policy from Dana Insurance Corp. (DIC)
Insurance Co. The policy was issued to Juan on June 30, 1982 but the date of on September 1, 1989. On August 31, 1990, Roberto died. DIC refused to pay
issue, as appearing on the policy was May 15, 1982, the date of his his beneficiaries because it discovered that Roberto had misrepresented
application. Juan subsequently realized that some of his answers in the certain material facts in his application. The beneficiaries sued on the basis
insurance application were erroneous. Accordingly, he supplied the insurance that DIC can contest the validity of the insurance policy only within 2 years
company with the correct replies. However, his letter to the insurance company from the date of issue and during the lifetime of the insured. Decide the case.
was lost in the mails. Juan died June 1, 1984. The insurance company now
refuses to pay Juans beneficiary contending that Juan misrepresented the
state of his health at the time of his application. Is the insurance company Answer: I would rule in favor of the insurance company. The incontestability
liable? State your reason. clause, applies only if the policy had been in effect for at least 2 years. The 2-
year period is counted from the time the insurance becomes effective until the
Answer: Yes. The incontestability clause that must be contained in every death of the insured and not thereafter. (BAR 1991)
individual life insurance policy refers to the date of its issue as shown in the
policy. Since the policy of life insurance had been in force during the lifetime of On September 23, 1990, Tan took a life insurance policy from Philam. The
the insured, Juan, for a period of 2 years from May 15, 1982, the date of issue policy was issued on November 6, 1990. He died on April 26, 1992 of
as shown in the policy, the policy has become incontestable. The insurance hepatoma. The insurance company denied the beneficiaries claim and
company can no longer prove that the policy is void ab initio or rescindable by rescinded the policy by reason of alleged misrepresentation and concealment
reason fraudulent concealment or misrepresentation of the insured. (BAR of material facts made by Tan in his application. It returned the premiums paid.
1984) The beneficiaries contend that the company had no right to rescind the
contract as rescission must be done during the lifetime of the insured within 2
Manpower Company obtained a group life insurance policy for its employees years and prior to the commencement of the action. Is the contention of the
from Phoenix Insurance Company. The master policy issued by Phoenix on beneficiaries tenable?
June 1, 1986 contained a provision that eligible employees for insurance
coverage were all full time employees of Manpower regularly working at least Answer: No. The incontestability clause does not apply. The insured died
30 hours per week. The policy had also an incontestable clause. Beforehand, within less than 2 years from the issuance of the policy on September 23,
Phoenix sent enrollment cards to Manpower for distribution to its eligible 1990. The insured died on April 26, 1992, or less than 2 years from September
employees. X filled out the card which contained a printed clause: I request 23, 1990. The right of the insurer to rescind is only lost if the beneficiary has
the insurance for which I may become eligible under said Group Policy. The commenced an action on the policy. There is no such action in this case. (BAR
cards were then sent to Phoenix and X was among the employees of 1994)
Manpower who was issued a certificate of coverage by Phoenix
Renato was issued a life insurance policy on January 2, 1990. He concealed
On July 3, 1988, X was killed on the occasion of a robbery in their house. the fact that 3 years prior to the issuance of his life insurance policy, he had
While processing the claim of Xs beneficiary, Phoenix found out that X was been seeing a doctor about his heart ailment. On March 1, 1992, Renato died
not an eligible employee as defined in the group policy since he has not been of heart failure. May the heirs file a claim on the proceeds of the life insurance
employed 30 hours a week by Manpower. Phoenix refused to pay. May Xs policy of Renato?
beneficiary invoke the incontestability clause against Phoenix? Reasons.
Answer: Yes. The life insurance policy in question was issued on January 2,
Answer: The beneficiary of X may validly invoke the incontestability clause. If
1990. More than 2 years had elapsed when Renato, the insured, died on
the incontestability clause can apply even to cases of intentional concealment
March 1, 1992. The incontestability clause applies. (BAR 1998)
and misrepresentation, there would be no cogent reason for denying such
application where the insured had not been guilty thereof. When X filled out the
The incontestability clause in a Life Insurance Policy means
card containing the printed clause I request the insurance for which I may
become eligible under said Group Policy, it behooved the insurer to look into
the qualifications of X whether he can thus be covered or not by the group life a) That life insurance proceeds cannot be claimed 2 years after the death of
insurance policy. In issuing the certificate of coverage to X, Phoenix may, in the insured;
fact, be said to have waived the 30-hour per week requirement. (BAR 1989)
b) That 2 years after date of issuance or reinstatement of the life
insurance policy, the insurer cannot anymore prove that the policy is herself as the beneficiary.
void ab initio or rescindable by reason of fraudulent concealment or
misrepresentation of the insured; For the above reasons and claiming fraud, Ilocos Life denied Abans claim on
April 16, 1997, but refunded the premium paid on the policy.
c) That the insured can still claim from the insurance policy after 2 years even
though premium is not paid; a. May the incontestability period set in even in cases of fraud as alleged in
this case?
d) That the insured can only claim proceeds in a life insurance policy 2 years
after death.
b. Is Aban entitled to claim the proceeds under the policy?
X, in January 30, 2009, or 2 years before reaching the age of 65, insured his
life for P20 M. for reason unknown to his family, he took his own life 2 days Answer:
after his 65th birthday. The policy contains no excepted risk. Which statement A. Yes. The incontestability clause is a provision in law that after a policy of
is most accurate? 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 2 years from the date of
a) The insurer will be liable; its issue or of its last reinstatement, the insurer cannot prove that the policy is
void ab initio or is rescindable by reason of fraudulent concealment or
b) The insurer will not be liable; misrepresentation of the insured or his agent. In this case, the policy was
issued on August 30, 1993, and the insured died on April 10, 1996. The
c) The state of sanity of the insured is relevant in cases of suicide in order to insurance policy was thus in force for a period of 3 years, 7 months and 24
hold the insurer liable; days. Considering that the insured died after the 2-year period, Ilocos is,
therefore, barred from proving that the policy is void ab initio by reason of the
d) The state of sanity of the insured is irrelevant in cases of suicide in order to insureds fraudulent concealment or misrepresentation or want of insurable
hold the insurer liable. interest on the part of the beneficiary.

Answer: The insurer will be liable. (BAR 2012)

B. Yes, Aban is entitled to claim the proceeds. After the 2-year period lapse, or
when the insured dies within the period, the insurer must make good on the
On July 3, 1993, Delia Sotero (Delia) took out a life insurance policy from
policy, even though the policy was obtained by fraud, concealment, or
Ilocos Bankers Life Insurance Corporation (Ilocos Life) designating Creencia
misrepresentation, as in this case, when the insured did not personally apply
Aban (Aban), her niece, as her beneficiary. Ilocos Life issued Policy No. 747,
for the policy as she was illiterate and that it was the beneficiary who filled up
with a face value of P100,000, in Soteros favor on August 30, 1993, after the
the insurance application designating herself as beneficiary. (BAR 2014)
requisite medical examination and payment of the premium.

On April 10, 1996, Sotero died. Aban filed a claim for the insurance proceeds X was riding a suburban utility vehicle (SUV) covered by a comprehensive
on July 9, 1996. Ilocos Life conducted an investigation into the claim and came motor vehicle liability insurance (CMVLI) underwritten by FastPay Insurance
out with the following findings: Company when it collided with a speeding bus owned by RM Travel, Inc. the
collision resulted in serious injuries to X; Y, a passenger of the bus; and Z, a
1. Sotero did not personally apply for insurance coverage, as she was illiterate. pedestrian waiting for a ride at the scene of the collision. The police report
established that the bus was the offending vehicle. The bus had a CMVLI
policy issued by Dragon Insurance Corporation, X, Y and Z jointly sued RM
2. Sotero was sickly since 1990. Travel and Dragon Insurance for indemnity under the Insurance Code of the
Philippines. The lower court applied the no-fault indemnity policy of the
3. Sotero did not have the financial capability to pay the premium on the policy. statute, dismissed the suit against RM Travel, and ordered Dragon insurance
to pay indemnity to all three plaintiffs. Do you agree with the courts judgment?
4. Sotero did not sign the application for insurance. Explain.

5. Aban was the one who filed the insurance application and designated Answer: No. The cause of action of Y is based on the contract of carriage,
while that of X and Z is based on torts. The court should not have dismissed X owns and operates several passenger jeepneys in Metro Manila. He
the suit against RM Travel. The court should have ordered Dragon Insurance entered into a contract with Gold Mine Insurance & Surety Co., insuring the
to pay each of X, Y, and Z to the extent of the insurance coverage, but operation of his jeepneys against accidents with third- party-liability. During
whatever amount is agreed upon in the policy should be answered first by RM the effectivity of the insurance, one of his jeepneys bumped B, who had just
Travel and the succeeding amount should be paid by Dragon Insurance up to alighted from another passenger jeepney whose driver unloaded passengers
the amount of the insurance coverage. The excess of the claims of X, Y and Z, in the middle of the street. B suffered bodily injury as a consequence and
over and above such insurance coverage, if any, should be answered or paid filed a claim against the insurance company. The latter refused to pay on the
by RM Travel. (BAR 2000) ground that the driver of the jeepney from which passenger B alighted was
guilty of negligence in unloading in the middle of the street, and that the driver
1. As a rule, an insurance contract is consensual and voluntary. The exception of the insured operator was not at fault. Can passenger B recover from the
in the case of: insurance company? Explain.

A. Inland Marine Insurance Answer: Yes, passenger B may recover from the insurance company. The
B. Industrial Life Insurance insurance covers the operation of Xs jeepneys against accidents with third
C. Motor Vehicle Liability Life Insurance parties; therefore, the insurance covers the liability for death or body injuries of
D. Life Insurance third persons, like what happened to B, and the claim shall be against the
insurer of the directly offending vehicle (Xs vehicle). Furthermore, any claim of
this nature shall be paid without necessity of proving fault or negligence of any
Jose, driving his own car together with his wife Maria, were on their way home
kind, provided that the total indemnity in respect of any person shall be in
from their respective offices when a car driven by Pedro hit them from behind
accordance as provided under the law. (BAR 1981)
which was in turn hit by a gasoline tanker driven by Mario, causing the car of
Jose to turn-turtle, thus, resulting in the death of Maria. All motor vehicles
being insured, Jose filed his claim for the death of Maria against the NO Driving his car one night, A crossed an intersection as the signal light turned
FAULT Insurance, Section 378 of the Insurance Code. Will Joses claim for green. Suddenly he saw an old woman crossing the street just a few feet from
the death of Maria against insurers of said three motor vehicles prosper and up his car. He applied his brakes immediately, but just the same, he hit the
to what amount? Reasons. Answer: Joses claim for the death of Maria woman who turned out to be senile already. He brought her to the nearest
against the insurer of said three motor vehicles will not prosper. According to hospital where she was confined for 3 days due to her injuries. Upon her
Section 378 of the Insurance Code, Any claim for death or injury to any discharge, A had to pay the hospital bill which amounted to P2,000 including
passenger or third-party pursuant to the provisions of this chapter shall be paid X-rays, doctors fees and medicines. Being covered by the compulsory
without necessity of proving fault or negligence of any kind; Provided, that for liability policy required of all vehicle owners under the Insurance Code, A
purposes of this section. xxxx (iii) Claim may be made against one motor preferred the matter to his insurance company, which refused to reimburse
vehicle only. In the case of an occupant of a vehicle, claim shall lie against him, claiming that since A was not at fault (it was admitted that he was not
the insurer of the vehicle in which the occupant is riding, mounting or speeding or in any way negligent), there was no third party liability for which
dismounting from. Clearly, in the instant case, the NO-FAULT claim against the the insurance company could be liable under As policy. Is the insurance
vehicle in which the deceased was riding is the one authorized, but the claim company liable to reimburse A for the hospital expenses? Explain.
against the other vehicle will not prosper. Jose may claim only up to an
amount not exceeding P5,000.00 pursuant to par. (i), Section 378 of the Answer: Yes, the insurance company is liable provided A can present the
Insurance Code which provides that the total indemnity in respect to any one police report of the accident and the medical report as well as the hospital
person shall not exceed P5,000.00. (NOTE: amount has been adjusted to receipts. The Insurance Code has the no-fault provision imposing liability for
P15,000) If Jose includes in the claim damage for his car, will the claim any claim for death or injury to any third party under the compulsory motor
prosper? Why? vehicle liability insurance. Under the provision, the insurance company may be
held liable for the maximum amount of P5,000 without necessity of proving
Answer: Joses claim for damages for his car will not prosper. As may be fault or negligence of any kind, provided the aforementioned proofs are
clearly gleaned from Section 378 of the Insurance Code on NO-FAULT submitted under oath. Note: Sec. 391 of RA No. 10607 now provides that the
Insurance applies only to any claim for death or injury to any passenger or total indemnity in respect of any person shall not be less than P15,000.00.
third party. (BAR 1977) (BAR 1983)

(1) What do you understand by the no fault indemnity provision in the

Insurance Code? What are the rules on claims under said provision? 1. Is the contention of the insurer correct? Explain.

Answer: The no fault indemnity in the Insurance Code provides that any 2. May the insurer be held liable with Cesar?
claim for death or injury to a passenger or to a third party should be paid
without the necessity of proving fault or negligence of any kind, subject to the Answer:
following rule:
1. No, the contention of the insurer is not correct. There is no need to
The total indemnity in respect of any person shall not be less than wait for the decision of the court determining Cesars liability with
P15,000; finality before the third party liability insurer could be sued. The
The following proofs of loss, when submitted under oath, shall be occurrence of the injury to Roberto immediately gave rise to the liability
sufficient evidence to substantiate the claim: b.1. Police report of of the insurer under its policy. In other words, where an insurance
accident; and b.2.Death certificate and evidence sufficient to establish policy insures directly against liability, the insurers liability accrues
the proper payee; or b.3. Medical report and evidence of medical or immediately upon the occurrence of the injury or event upon which the
hospital disbursement in respect of which refund is claimed. liability depends.
Claim may be made against one motor vehicle only. In the case of an 2. The insurer cannot be held solidarily liable with Cesar. The liability of
occupant of a vehicle, claim, shall lie against the insurer of the vehicle the insurer is based on contract while that of Cesar is based on tort. If
in which the occupant is riding, mounting or dismounting from. In any the insurer were solidarily liable with Cesar, it could be made to pay
other case, claim shall lie against the insurer of the directly offending more than the amount stated in the policy. This would, however, be
vehicle. In all cases, the right of the party paying the claim to recover contrary to the principles underlying insurance contracts. On the other
against the owner of the vehicle responsible for the accident shall be hand, if the insurer were solidarily liable with Cesar and it is made to
maintained. (BAR 1989) pay only up to the amount stated in the insurance policy, the principles
underlying solidary obligations would be violated. (BAR 1996)
What is your understanding of a no fault indemnity clause found in an
insurance policy? X is a passenger of a jeepney for hire being driven by Y. the jeepney collided
with another passenger jeepney being driven by Z who was driving recklessly.
Answer: Under the no fault indemnity clause any claim for the death or As a result of the collision, X suffered injuries. Both passenger jeepneys are
injury of any passenger or third party shall be paid without the necessity of covered by Comprehensive Motor Vehicular Insurance Coverage. If X wants to
proving fault or negligence of any kind. The indemnity in respect of any one claim under the no fault indemnity clause, his claim will lie
person shall not exceed P15,000, provided they are under oath, the following
proofs shall be sufficient: a) Against the insurer of the jeepney being driven by Z who was the one
at fault;
a) Police report of the accident; and
b) The claim shall lie against the insurer of the passenger jeepeney driven by
b) Death certificate and evidence sufficient to establish the proper payee; or Y because X was his passenger;

c) Medical report and evidence of medical or hospital disbursement in respect c) X has a choice against whom he wants to make his claim;
of which refund is claimed.
d) None of the above.
Claim may be made against one motor vehicle only. (BAR 1994)
Mayari obtained a comprehensive insurance policy on his car. The policy
While driving his car along EDSA, Cesar sideswiped Roberto, causing injuries carried the standard authorized driver clause which states that the insurance
to the latter. Roberto sued Cesar and the third party liability insurer for company is not liable for any loss, accident or damage sustained while the car
damages and/or insurance proceeds. The insurance company moved to is being driven by someone other than a duly authorized driver. One day,
dismiss the complaint, contending that the liability of Cesar has not yet been Mayari allowed his friend, Kainigan, to drive the car. Kaibigan figured in a
determined with finality. mishap and the car was a total loss.
Kaibigan had been driving for the past 5 years but it appears that his drivers therefore, was not covered by the Theft Clause. Decide the merits of the
license was irregularly issued because he cannot read or write; neither did he insurers contention, with reasons.
take any of the prescribed drivers tests. After the initial case was issued, he
merely asked his wife to go to the LTC office to get a renewal of his license. Answer: The insurer is liable to A under the Theft Clause. The taking of a
Mayari did not know about the irregularity in the drivers license of Kaibigan. car even though temporary and only for a joy ride, without the car owners
consent is theft; and, therefore, insurer is liable for total loss due to car
Can Mayari recover on the insurance policy? Explain. accident of insureds car wrongfully taken, without the insureds consent, from
the repair shop entrusted for repairs. (Villacorta v. Insurance Commissioner,
Answer: Oct. 28, 1980, 100 SCRA 467) (BAR 1981)

Mayari cannot recover under the policy. The standard authorized driver Rey Bautista insured his 1984 Galant with Alpha Insurance Co., Inc. for own
clause requires that the driver at the time of the accident must be duly damage, theft and third- party liability effective August 21, 1984 to August 20,
authorized and licensed to drive. An irregular license is not a license at all. 1985. On August 3, 1985 the car was brought to Car Specialist, a well-known
(BAR 1986) auto repair shop for general check-up. On August 11, 1985, while in the
custody of the said shop, the car was taken by one of the employees of the
2. Sheryl insured her newly acquired car, a NISSAN Maxima against any loss shop and driven to a hide-out in Montalban, Rizal. While travelling along a
or damage for P50,000 and against third party liability for P20,000 with the narrow street, the car smashed into a parked gravel and sand truck and it
XYZ Insurance Corp. (XYZ). Under the policy, the car must be driven only by suffered an extensive damage. Rey filed a claim for total loss with Alpha, but
an authorized driver who is either: (1) the insured, or (2) any person driving on the claim was denied. Rey then sued Alpha to collect on the policy. Rule on the
the insureds order or with his permission: provided that the person driving is said case stating the legal basis in support of your decision.
permitted in accordance with the licensing or other laws or regulations to drive
the motor vehicle and is not disqualified from driving such motor vehicle by
order of a court. Answer: The insurer is liable. The contract of insurance shall be interpreted, in
case of doubt, in favor of the insured Rey Bautista, who is entrusting his car
During the effectivity of the policy, the car, then driven by Sheryl herself, who and key to the shop owner; its employees are presumed to have insureds
had no drivers license, met an accident and was extensively damaged. The (Bautista) permission. The theft clause applies, since the aforesaid act of the
estimated cost of the repair was P40,000. Sheryl immediately notified XYZ, but employees of the shop owner is within the article on theft of the Revised Penal
the latter refused to pay on the policy alleging that Sheryl violated the terms Code. (BAR 1985)
thereof when she drove it without a drivers license.
Mr. Gonzales was the owner of a car insured with Masagana Insurance
Is the insurer correct? Company for Own Damage, Theft, and Third Party Liability effective May
14, 1986 to May 14, 1987. On May 2, 1987, the car was brought to a machine
ship for repairs. On May 11, 1987, while in the custody of the machine shop,
Answer:
the car was taken by one of the employees (of the machine shop) to show off
to his girlfriend. While on the way to his girlfriends house, the car smashed
No. the insurer is not correct in denying the claim since the proviso that the
into a parked truck and was extensively damaged. Mr. Gonzales filed a claim
person driving is permitted in accordance with the licensing, etc. qualifies only
for recovery under the policy but was refused payment. The insurance
a person driving the vehicle, other than the insured, at the time of the accident.
company averred that the car was not stolen, and therefore was not covered
(BAR 1991)
by the Theft Clause.
A was the owner of a car insured with Fortune Insurance Company for Own
Decide the merits of the insurers contention, with reasons.
Damage, Theft, and Third-Party-Liability effective May 16, 1977 to May 16,
1978. On May 9, 1978, the car was brought to a machine shop for repairs. On
Answer: I would decide in favor of the insured. The coverage of the policy was
May 11, 1978, while in the custody of the machine shop, the car was taken by
rather comprehensive in scope. The Theft Clause particularly, at least by
one of the employees to be driven out to a certain place. While travelling along
intendment, should cover situations of the loss of the property occasioned by
the highway, the car smashed into parked truck and suffered extensive
the taking or use by another without the authority of the insured. Furthermore,
damage. A filed a claim for recovery under the policy but was refused
doubts on the insurance, being a contract by adherence must be construed
payment. The insurance company averred that the car was not stolen and,
against the insurer. (BAR 1988)
HL insured his brand new car with P Insurance Company for comprehensive the latters consent even if the motor vehicle is later returned, there is theft
coverage wherein the insurance company undertook to indemnify him against there being intent to gain as the use of the thing unlawfully taken constitutes
loss or damage to the car (a) by accidental collision xxx (b) by fire, external gain, or (2) when there is taking of a vehicle by another person without the
explosion, burglary, or theft, and (c) malicious act. permission or authority from the owner thereof. (BAR 2014)

After a month, the car was carnapped while parked in the parking space in On February 21, 2013, Barrack entered into a contract of insurance with
front of the Intercontinental Hotel in Makati. HLs wife who was driving the said Matino Insurance Company (Matino) involving a motor vehicle. The policy
car when it was carnapped was in possession of an expired drivers license, a obligates Matino to pay Barrack the amount of P600,000 in case of loss or
violation of the authorized driver clause of the insurance company. damage to said vehicle during the period covered, which is from February 26,
2013 to February 26, 2014. On April 16, 2013, at about 9:00am, Barrack
1. May the insurance company be held liable to indemnify HL for the loss of the instructed his driver, JJ, to bring the motor vehicle to a nearby auto shop for
insured vehicle? Explain. tune-up. However, JJ no longer returned and despite diligent efforts to locate
the said vehicle, the efforts proved futile. Resultantly, Barrack promptly notified
2. Supposing that the car was brought by HL on installment basis and there Matino of the said loss and demanded payment of the insurance proceeds of
were installments due and payable before the loss of the car, the vendor P600,000. In a letter dated July 5, 2013. Matino denied the claim, reasoning
demanded from HL the unpaid balance of the promissory note. HL resisted the as stated in the contract that the company shall not be liable for any malicious
demand and claimed that he was only liable for the installments due and damage caused by the insured, any member of his family or by a person in the
payable before the loss of the car but no longer liable for the other installments insureds service. Is Matino correct in denying the claim?
not yet due at the time of the loss of the car. Decide.
Answer: No. Matino is not correct in denying the claim. An insurance
Answer: company cannot deny a claim by the owner of a motor vehicle who insured it
against loss or damage because the driver he employed stole it. Matino cannot
1. Yes. The car was lost due to theft. What applies in this case is the invoke the provision excluding malicious damages caused by a person in the
theft clause, and not the authorized driver clause. It is immaterial service of the insured. In common ordinary usage, loss means failure to keep
that HLs wife was driving the car with an expired drivers license at the possession, while malicious damage is damage resulting from the willful act of
time it was carnapped. the driver. Words which have different meanings shall be understood in the
2. The promissory note is not affected by whatever befalls the subject sense which is most in keeping with the nature and object of the insurance
matter of the accessory contract. The unpaid balance on the contract. If a stipulation admits several meanings, is should be understood as
promissory note should be paid and not only the installments due and bearing the meaning which is most adequate to render it effectual. It may be
payable before the loss of the car. (BAR 1993) shown that the words have a local, technical or peculiar meaning and were so
used and understood by the parties. (BAR 2014)
On May 26, 201, Jess insured with Jack Insurance (Jack) his 2014 Toyota
Corolla sedan under a comprehensive motor vehicle insurance policy for one 1. A owns a house valued at P50,000 which he had insured against fire for
year. On July 1, 2014, Jess car was unlawfully taken. Hence, he immediately P100,000. He obtained a loan from B in the amount of P100,000, and to
reported the theft to the Traffic management Command (TMC) of the Philippine secure payment thereof, he executed a deed of mortgage on the house, but
National Police (PNP), which made Jess accomplish a complaint sheet as part without assigning the insurance policy to the latter. For As failure to pay the
of its procedure. In the complaint sheet, Jess alleged that a certain Ric Silat loan upon maturity, B initiated foreclosure proceedings and in the ensuing
(Silat) took possession of the subject vehicle to add accessories and public sale, the house was sold by the sheriff to B as highest bidder.
improvements thereon. However, Silat failed to return the subject vehicle within Immediately upon issuance of the sheriffs certificate of sale in his favor, B
the agreed 3-day period. As a result, Jess notified Jack of his claim for insured the house against fire for P120,000 with another insurance company.
reimbursement of the value of the vehicle under the insurance policy. Jack In order to redeem the house, A borrowed P100,000 from C and, as
refused to pay claiming that there is no theft as Jess gave Silat lawful security device, he assigned the insurance policy of P100,000 to C. However,
possession of the car. Is Jack correct? before A could pay B his obligation of P100,000, the house was accidentally
and totally burned.
Answer: No. Jack is not correct. The theft clause of a comprehensive motor
vehicle insurance policy has been interpreted by the Court in several cases to Does A, B or C have any insurance interest in the house? May A, B
cover situations like (1) when one takes the motor vehicle of another without and C recover under the policies? If so, how much? (BAR 1982)
Answer: As to A: He has insurable interest in his house, an existing interest, Blanco, as a debtor. In that case, Montenegros insurable interest in the life of
but only for P50,000, the value of the said house. But, when he assigned it to Blanco would be only to the extent of P50,000, which is the amount of his
C, said A had no more interest in his insurance policy, and A cannot anymore credit. (BA 1987)
recover on said insurance policy.
On July 14, 1985, X, a homosexual, took an insurance policy on the life of his
As to B: He has insurable interest on As house, having an interest founded boyfriend, Y. In the insurance application, X misrepresented that Y was in
upon an existing interest, but only for P50,000, the value of As house, and perfect health although he knew all the time that Y was afflicted with AIDS. On
therefore, he can recover only the amount of P50,000. October 18, 1987, Y died in a motor accident. Shortly thereafter, X filed his
insurance claim. Should the insurer pay? Reasons.
As to C: He has no insurable interest on As house, being mere contingent or
expectant interest not founded on an actual right or valid contract to As house; Answer: The insurer is not obliged to pay. Friendship alone is not the
besides, the assignment to him of As insurance policy was not approved by insurable interest contemplated in life insurance. Insurable interest in the life of
the insurer; hence, C cannot recover. others (other than ones own life, spouses or children) is merely to the extent of
the pecuniary interest in that life. Assuming that such pecuniary interest
1. On January 4, 1983, Mr. P joined Alpha Corporation (ALPHA) as President exists, an insurer would be liable despite concealment or misrepresentation if
of the company. ALPHA took out a life insurance policy on the life of Mr. P with the insurance had been in effect for more than 2 years (incontestability clause).
Mutual Insurance Company, designating ALPHA as the beneficiary. ALPHA (BAR 1987)
also carried fire insurance with Beta Insurance Co. on a house owned by it, but
temporarily occupied by Mr. P again with ALPHA as beneficiary.
A obtains insurance over his life and names his neighbor B the beneficiary
because of As secret love for B. if A dies, can B successfully claim against the
On September 1, 1983, Mr. P resigned from ALPHA and purchased the policy?
company house he had been occupying. A few days later, a fire occurred
resulting in the death of Mr. P and the destruction of the house.
Answer: Yes. In life insurance, it is required that the beneficiary must have
What are the rights of ALPHA (a) against Mutual Life Insurance Company on insurable interest in the life of the insured. It was the insured himself who took
the life insurance policy? the policy on his own life. (BAR 1997)

Answer: a) ALPHA can recover against Mutual Life Insurance Co. in the life IS, is an elderly bachelor with no known relatives, obtained life insurance
insurance policy as its insurable interest in the life of the person insured, Mr. P, coverage for P250,000 from Starbrite Insurance Corporation, an entity licensed
existed when the insurance took effect. In life insurance, insurable interest to engage in the insurable business under the Insurance Code of the
need not exist thereafter or when the loss occurred. (BAR 1984) Philippines. He also insured his residential house for twice that amount with
the same corporation. He immediately assigned all his rights to the insurance
2. Blanco took out a P1 M life insurance policy naming his friend and creditor, proceeds to BX, a friend- companion living with him. 3 years later, IS died in a
Montenegro, as his beneficiary. When Blanco died, his outstanding loan fire that gutted his insured house 2 days after he had sold it. There is no
obligation to Montenegro was only P50,000. Blancos executor contended that evidence of suicide or arson or involvement of BX in these events. BX
only P50,000 out of the insurance proceeds should be paid to Montenegro and demanded payment of the insurance proceeds from the 2 policies, the
the balance of P950,000 should be paid to Blancos estate. premiums for which IS had been faithfully paying during all the time he was
alive. Starbrite, refused payment, contending that BX had no insurable interest
Is the executors contention correct? Reason out your answer. and therefore was not entitled to receive the proceeds from IS insurance
coverage on his life and also on his property. Is Starbrites contention valid?
Answer: The contention of the executor is incorrect. The beneficiary of a life Explain.
insurance need not have any insurable interest in the life of the insured.
Answer: Starbrite is correct with respect to the insurance coverage on the
Altenative Answer: The contention of the executor is incorrect because it was property of IS. The beneficiary in the property insurance policy or the assignee
Blanco himself who took out the life insurance policy on his own life, naming thereof must have insurable interest in the property insured. BX, a mere friend-
only Montenegro as the beneficiary. It would have been different if it was companion of IS, has no insurable interest in the residential house of IS. BX is
Montenegro, as creditor, who took out a life insurance policy on the life of not entitled to receive the proceeds from IS insurance on his property. As to
the insurance coverage on the life of IS, BX is entitled to receive the proceeds. D. Yes, since X and Y are Zs employees.
There is no requirement that BX should have insurable interest in the life of IS.
It was IS himself who took the insurance on his own life. (BAR 2000) 8. For both the Life Insurance and Property Insurance, the insurable interest is
required to be
Distinguish insurable interest in property insurance from insurable interest in
life insurance. a) Existing at the time of perfection of the contract and at the time of loss;

Answer: b) Existing at the time of perfection and at the time of loss for property;

1) In property insurance, the expectation of benefit must have a legal basis. In
life insurance, the expectation of benefit to be derived from the continued c) Existing at the time of perfection for property insurance but for life insurance
existence of a life need not have any legal basis. both at the time of perfection and at the time of loss;

2) In property insurance, the actual value of the interest therein is the limit of
d) Existing at the time of perfection only.
the insurance that can validly be placed thereon. In life insurance, there is no
limit to the amount of insurance that may be taken upon life.
9. X, a minor, contracted an insurance on his own life. Which statement is most
3) In property insurance, an interest insured must exist when the insurance accurate?
takes effect and when the loss occurs but need not exist in the meantime. In
life insurance, it is enough that insurable interest exists at the time when the a) The life insurance policy is void ab initio;
contract is made but it need not exist at the time of loss. (BAR 2002)
b) The life insurance is valid provided it is with the consent of the beneficiary;
7. X, Co. a partnership, is composed of A (capitalist partner), B (capitalist
partner) and C (industrial partner). If you were partner A, who between B and
C would you have an insurable interest on, such that you may then insure him?
c) The life insurance policy is valid provided the beneficiary is his estate
or his parents, or spouse or child;
a. No one, as there is merely a partnership contract among A, B and C.

d) The life insurance is valid provided the disposition of the proceeds will be
b. Both B and C, as they are your partners.
subject to the approval of the legal guardian of the minor.

c. Only C, as he is an industrial partner.

Answer: c) The life insurance policy is valid provided the beneficiary is his
estate or his parents, or spouse or child. (BAR 2012)
d. Only B, as he is a capitalist partner.
11. In 2010, the PNP declared Kaddafy Benjelani Public Enemy No. 1
Answer: b. Both B and C, as they are your partners. (BAR 2011) because of his terrorist activities in the country that have resulted in the death
of thousands of Filipinos. A ransom of P15 M was placed on Kaddafy
X has been a long-time household helper of Z. Xs husband, Y, has also been Benjelanis head.
Zs long-time driver. May Z insure the lives of both X and Y with Z as
beneficiary? Worried about the future of their family, Kaddafy Benjelanis estranged wife,
Aurelia, secured in December 2010 a life insurance policy on his life and
A. Yes, since X and Y render services to Z. designated herself as beneficiary.
B. No, since X and Y have no pecuniary interest on the life of Z arising
from their employment with him. Is the policy valid and binding?
C. No, since Z has no pecuniary interest in the lives of X and Y
arising from their employment with him. a) Yes, the policy is valid and binding because Aurelia has an insurable
interest on the life of Kaddafy b. A general creditor on the debtors property

b) No, the policy is not valid and binding because Kaddafy Benjelani has been c. A judgment creditor on debtors property
officially declared a public enemy;
d. A mortgage creditor on debtors mortgaged property.
c) Yes, the policy is valid and binding because it has been in force for more
than 2 years;
Answer: a. A partner in a firm on its future profits. (BAR 2014)
d) No,thepolicyisnotvalidandbindingsincethespousesestrangementremovedAu
reliasinsurable interest in Benjalanis life; A owns a house worth P500, 000.00. He insured It against fire for P250,
000.00 for the period from January 1, 1977 to January 1, 1978. At the instance
e) None of the above. of B, who is a judgment creditor of A, the said house was levied upon by the
Sheriff and sold at public auction on March 15, 1977. It was adjudicated to B
Answer: a) Yes, the policy is valid and binding because Aurelia has an for P150, 000.00 at the auction sale. B insured the house against fire for P150,
insurable interest on the life of Kaddafy Benjelani. (BAR 2013) 000.00 for the period from March 16, 1977 to March 16, 1978. The house was
accidentally burned on April 1, 1977. May A recover under his policy? Give
Carlo and Bianca met in the La Boracay festivities. Immediately, they fell in reasons.
love with each other and got married soon after. They have been cohabiting
blissfully as husband and wife, but they did not have any offspring. As the Answer: A can recover under his policy. A judgment debtor whose property
years passed by, Carlo decided to take out an insurance on Biancas life for P1 has been seized on execution has an insurable interest therein until the right to
M with him (Carlo) as sole beneficiary, given that he did not have a steady redeem or have the same set aside has been lost. Inasmuch as the right of A
source of income and he always depended on Bianca both emotionally and to redeem has not expired, the 12 months time after the sale having not
financially. During the term of the insurance, Bianca died of what appeared to elapsed before the loss occurred; A has an insurable interest in the house at
be a mysterious cause so that Carlo immediately requested for an autopsy to the time of loss. May B recover under his policy? Give reasons. Answer:
be conducted. It was established that Bianca died of a natural cause. More B can recover upon his policy because as purchaser at a judicial sale he has
than that, it was also established that Bianca was a transgender all alonga an insurable interest in the property to the extent of the amount for which he
fact unknown to Carlo. Can Carlo claim the insurance benefit? insured it not exceeding his interest in the property. (BAR 1977)

Answer: Yes. Carlo can claim the insurance benefit. If a person insures the N owns a condominium unit presently insured with Holy Insurance Co. for P1
life or health of another person with himself as beneficiary, all his rights, title Million. N later sells the condominium unit to O. Somehow O fails to obtain
and interests in the policy shall automatically vest in the person insured. Carlo, the transfer of the insurance policy to his name from N. Subsequently, fire of
as the husband of Bianca, has an insurable interest in the life of the latter. unknown origin destroys completely the condominium unit.
Also, every person has an insurable interest in the life and health of any
person on whom he depends wholly or in part for support. The insurable Who may collect the insurance proceeds?
interest in the life of the person insured must exist when the insurance takes
effect but need not exist when the loss occurs. Thus, the subsequent Answer: Neither N nor O may collect. As to N; First Alternative ReasonAn
knowledge of Carlo, upon the death of Bianca, that the latter is a transgender interest in property insured must exist when the insurance takes effect and
does not destroy his insurable interest on the life of the insured. (BAR 2014) when the loss occurs. Although N had insurable interest when the insurance
takes effect, yet he had no more interest when the loss happened. Second
A person is said to have an insurable interest in the subject matter insured Alternative ReasonA change of interest in any part of a thing insured
where he has a relation or connection with, or concern in it that he will derive unaccompanied by a corresponding change of interest in the insurance,
pecuniary benefit or advantage from its preservation. Which among the suspends the insurance to an equivalent extent, until the interest in the thing
following subject matters is not considered insurable? insured and the interest in the insurance are vested in the same person.

a. A partner in a firm on its future profits. As to O: He cannot recover, because he had no insurance contract on the said
condominium unit which he bought from N. (BAR 1980)
The agent in Davao of the insured A was employed to ship As copra to 1987)
Manila and to communicate the shipment to the buyer A in Manila. The said
agent wrote the owner of the copra announcing the sailing of the ship, but A piece of machinery was shipped to Mr. Pablo on the basis of C&F, Manila.
failed to state that the ship had run a ground, which fact he already knew Mr. Pablo insured said machinery with the Talaga Merchants Insurance Corp.
before announcing the sailing. A, the buyer of the copra, in all good faith, took (TAMIC) for loss or damage during the voyage. The vessel sank en route to
out a marine insurance on the copra. The copra was badly damaged and was Manila. Mr. Pablo then filed a claim with TAMIC which was denied for the
a total loss. Can the insured recover on the policy? Reason. reason that prior to delivery, Mr. Pablo had no insurable interest. Decide the
case.
Answer: The insured may not recover on the policy, since the subject matter
of the marine insurance at the time of contracting the insurance was already Answer: Mr. Pablo had an existing insurable interest on the piece of
lost. An interest in property insured must exist when the insurance takes effect machinery he bought. The purchase of goods under a perfected contract of
and when the loss occurs. (BAR 1979) sale already vested equitable interest on the property in favor of the buyer
even while it is pending delivery. (BAR 1991)
On January 4, 1983, Mr. P joined Alpha Corporation (ALPHA) as President of
the company. ALPHA took out a life insurance policy on the life of Mr. P with In a civil suit, the Court ordered Benjie to pay Nat P500,000. To execute the
Mutual Insurance Company, designating ALPHA as the beneficiary. ALPHA judgment, the sheriff levied upon Benjies registered property (a parcel of land
also carried fire insurance with Beta Insurance Co. on a house owned by it, but and the building thereon), and sold the same at public auction to Nat, the
temporarily occupied by Mr. P again with ALPHA as beneficiary. On highest bidder. The latter, on March 18, 1992, registered with the Register of
September 1, 1983, Mr. P resigned from ALPHA and purchased the company Deeds the certificate of sale issued to him by the sheriff. Meanwhile, on
house he had been occupying. A few days later, a fire occurred resulting in the January 27, 1993, Benjie insured with Garapal Insurance for P1 M the same
death of Mr. P and the destruction of the house. What are the rights of building that was sold at public auction to Nat. Benjie failed to redeem the
ALPHA against Beta Insurance Company on the fire insurance? property by March 18, 1993. On March 19, 1993, a fire razed the building to
the ground. Garapal Insurance refused to make good its obligation to Benjie
Answer: ALPHA cannot recover from Beta Insurance Co. since an interest under the insurance contract.
in the property insured must exist not only when the insurance took effect but
also when the loss occurs. Since the fire that destroyed the insureds house 1. Is Garapal Insurance legally justified in refusing payment to Benjie?
took effect after ALPHA had sold the house to Mr. P, the insurable interest of
ALPHA in the property insured no longer exists when the loss occurred. (BAR
2. Is Nat entitled to collect on the insurance policy?
1984)

Answer:
On February 3, 1987, while Jose Palacio was in the hospital preparatory to a
heart surgery, he called his only son, Boy Palacio, and showed the latter a will
naming the son as sole heir to all the fathers estate including the family Yes. At the time of the loss, Benjie was no longer the owner of the property
mansion in Forbes Park. The following day, Boy Palacio took out a fire insured as he failed to redeem the property. The law requires in property
insurance policy on the Forbes Park mansion. One week later, the father died. insurance that a person can recover the proceeds of the policy if he has
After his fathers death, Boy Palacio moved his wife and children to the family insurable interest at the time of the issuance of the policy and also at the time
mansion which he inherited. On March 30, 1987, a fire occurred razing the when the loss occurs. At the time of fire, Benjie no longer had insurable
mansion to the ground. Boy Palacio then proceeded to collect on the fire interest in the property insured.
insurance he took earlier on the house. Should the insurance company pay?
Reasons. No. While at the time of the loss he has insurable interest in the building, as he
was the owner thereof, Nat did not have any interest in the policy. There was
Answer: In property insurance, insurable interest must exist both at the time no automatic transfer clause in the policy that would give him such interest in
of the taking of the insurance and at the time the risk insured against occurs. the policy. (BAR 1994)
The insurable interest must be an existing interest. The fact alone that Boy
Palacio was the expected sole heir of his fathers estate does not give the A obtains a fire insurance on his house and as a generous gesture names his
prospective heir any existing interest prior to the death of the decedent. (BAR neighbor as the beneficiary. If As house is destroyed by fire, can B
successfully claim against the policy? and therefore was not entitled to receive the proceeds from IS insurance
coverage on his life and also on his property. Is Starbrites contention valid?
Answer: No. in property insurance, the beneficiary must have insurable Explain.
interest in the property insured. B does not have insurable interest in the house
insured. (BAR 1997) Answer: Starbrite is correct with respect to the insurance coverage on the
property of IS. The beneficiary in the property insurance policy or the assignee
A businessman in the grocery business obtained from First Insurance an thereof must have insurable interest in the property insured. BX, a mere friend-
insurance policy for P5 M to fully cover his stocks-in-trade from the risk of fire. companion of IS, has no insurable interest in the residential house of IS. BX is
3 months later, a fire of accidental origin broke out and completely destroyed not entitled to receive the proceeds from IS insurance on his property. As to
the grocery including his stocks-in-trade. This prompted the businessman to the insurance coverage on the life of IS, BX is entitled to receive the proceeds.
file with First Insurance a claim for P5 M representing the full value of his There is no requirement that BX should have insurable interest in the life of IS.
goods. It was IS himself who took the insurance on his own life. (BAR 2000)

First Insurance denied the claim because it discovered that at the time of the JQ, owner of a condominium unit, insured the same against fire with XYZ
loss, the stock-in-trade were mortgaged to a creditor who likewise obtained Insurance Co., and made the loss payable to his brother, MLQ. In case of loss
from Second Insurance Company fore insurance coverage for the stocks at by fire of the said condominium unit, who may recover on the fire insurance
their full value of P5 M. policy? State the reason/s for your answer.

a) May the businessman and the creditor obtain separate insurance coverage Answer: JQ can recover on the fire insurance policy for the loss of the said
over the same stocks-in-trade? Explain. condominium unit. He has the insurable interest as owner-insured. As
beneficiary in the fire insurance policy, MLQ cannot recover on the fire
b) Suppose you are the Judge, how much would you allow the businessman insurance policy. For the beneficiary to recover on the fire or property
and the creditor to recover from their respective insurers. Explain. insurance policy, it is required that he must have insurable interest in the
property insured. In this case, MLQ does not have insurable interest in the
Answer: condominium unit. (BAR 2001)

a) Yes. The businessman, as owner, and the creditor, as mortgagee, have Distinguish insurable interest in property insurance from insurable interest in
separate insurable interests in the same stocks-in-trade. Each may insure life insurance.
such interest to protect his own separate interest.
Answer:
b) As judge, I would allow the businessman to recover his total loss of P5 M
pesos representing the full value of his goods which were lost through fire. As
to the creditor, I would allow him to recover the amount to the extent of or 1) In property insurance, the expectation of benefit must have a legal basis. In
equivalent to the value of the credit he extended to the businessman for the life insurance, the expectation of benefit to be derived from the continued
stocks-in-trade which were mortgaged by the businessman. (BAR 1999) existence of a life need not have any legal basis.

IS, is an elderly bachelor with no known relatives, obtained life insurance 2) In property insurance, the actual value of the interest therein is the limit of
coverage for P250,000 from Starbrite Insurance Corporation, an entity licensed the insurance that can validly be placed thereon. In life insurance, there is no
to engage in the insurable business under the Insurance Code of the limit to the amount of insurance that may be taken upon life.
Philippines. He also insured his residential house for twice that amount with
the same corporation. He immediately assigned all his rights to the insurance 3) In property insurance, an interest insured must exist when the insurance
proceeds to BX, a friend- companion living with him. 3 years later, IS died in a takes effect and when the loss occurs but need not exist in the meantime. In
fire that gutted his insured house 2 days after he had sold it. There is no life insurance, it is enough that insurable interest exists at the time when the
evidence of suicide or arson or involvement of BX in these events. BX contract is made but it need not exist at the time of loss. (BAR 2002)
demanded payment of the insurance proceeds from the 2 policies, the
premiums for which IS had been faithfully paying during all the time he was Ciriaco leased a commercial apartment from Supreme Building Corporation
alive. Starbrite, refused payment, contending that BX had no insurable interest (SBC). One of the provisions of the 1-year lease contract states:
18. x x x The LESSEE shall not insure against fire the chattels, merchandise, 15. For both the Life Insurance and Property Insurance, the insurable interest
textiles, goods and effects placed at any stall or store or space in the leased is required to be
premises without first obtaining the written consent of the LESSOR. If the
LESSEE obtains five insurance coverage without the consent of the LESSOR, . a) Existing at the time of perfection of the contract and at the time of loss;
the insurance policy is deemed assigned and transferred to the LESSRO for
the latters benefit. . b) Existing at the time of perfection and at the time of loss for property;

Notwithstanding the stipulation in the contract, without the consent of SBC, c) Existing at the time of perfection for property insurance but for life insurance
Ciriaco insured the merchandise inside the premises against loss by fire in the both at the time of perfection and at the time of loss;
amount of P500,000 with First United Insurance Corporation (FUIC).
d) Existing at the time of perfection only.
A day before the lease contract expired, fire broke out inside the leased
premises, damaging Ciriacos merchandise. Having learned of the insurance Answer:
earlier procured by Ciriaco, SBC demanded from FUIC that the proceeds of
the insurance policy be paid directly to it, as provided in the lease contract. b) Existing at the time of perfection and at the time of loss for property. (BAR
2012)
Who is legally entitled to receive the insurance proceeds? Explain.
Julie and Alma formed a business partnership. Under the business name Pino
Answer: Shop, the partnership engaged in a sale of construction materials. Julie
insured the stocks in trade of Pino Shop with WGC Insurance Company for
Ciriaco is entitled to receive the proceeds of the insurance policy. The P350,000. Subsequently, she again got an insurance contract with RSI for P1
stipulation that the policy is deemed assigned and transferred to SBC is void, M and then from EIC for P200,000. A fire of unknown origin gutted the store of
because SBC has no insurable interest in the merchandise of Ciriaco. (BAR the partnership. Julie filed her claims with the 3 insurance companies.
2009) However, her claims were denied separately for breach of policy condition
which required the insured to give notice of any insurance effected covering
14. X owned a house and lot. X insured the house. The house got burned. the stocks in trade. Julie went to court and contended that she should not be
Then he sold the partially burnt house and the lot to Y. Which statement is blamed for the omission, alleging that the insurance agents for WGC, RSI and
most accurate? EIC knew of the existence of the additional insurance coverage and that she
was not informed about the requirement that such other or additional insurance
a) X is not anymore entitled to the proceeds of the insurance policy because should be stated in the policy. Is the contention of Julie tenable? Explain.
he already sold the partially burnt house and lot;
Answer: No. An insured is required to disclose the other insurances covering
b) X is still entitled to the proceeds of the insurance policy because what the subject matter of the insurance being applied for. (BAR 1993)
is material is that at the time of the loss, X is the owner of the house and
lot;
Distinguish co-insurance from re-insurance.
c) No one is entitled to the proceeds because ownership over the house and
lot was already transferred; Answer: Co-insurance is the percentage in the value of the insured property
which the insured himself assumes or undertakes to act as insurer to the
d) Y will be the one entitled to the proceeds because he now owns the extent of the deficiency in the insurance of the insured property. In case of loss
partially burnt house and lot. or damage, the insurer will be liable only for such proportion of the loss or
damage as the amount of insurance bears to the designated percentage of the
Answer: full value of the property insured. Reinsurance is where the insurer procures
a third party, called the reinsurer, to insure him against liability by reason of
b) X is still entitled to the proceeds of the insurance policy because what is such original insurance. Basically, reinsurance is an insurance against liability
material is that at the time of the loss, X is the owner of the house and lot. which the original insurer may incur in favor of the original insured. (BAR 1994)
(BAR 2012)
A businessman in the grocery business obtained from First Insurance an a) The taking of insurance from the 3 insurers is valid. It is a case of double
insurance policy for P5 M to fully cover his stocks-in-trade from the risk of fire. insurance. The Insurance Code provides that a double insurance exist
3 months later, a fire of accidental origin broke out and completely destroyed where the same person is insured by several insurers separately in respect to
the grocery including his stocks-in-trade. This prompted the businessman to the same subject and interest. Double insurance is valid. What is prohibited
file with First Insurance a claim for P5 M representing the full value of his is for the insured to recover more than his interest or value of the property
goods. First Insurance denied the claim because it discovered that at the pursuant to the principle of indemnity.
time of the loss, the stock-in-trade were mortgaged to a creditor who likewise
obtained from Second Insurance Company for insurance coverage for the b) Yes, the owner may legally claim the entire P50 M from Eastern Insurance,
stocks at their full value of P5 M. First Insurance refused to pay claiming that Corp. The Insurance Code provides that where the insured is overinsured by
double insurance is contrary to law. Is this contention tenable? double insurance, the insured, unless the policy otherwise provides, may claim
payment from the insurers in such order as he may select, up to the amount for
Answer: which the insurers are severally liable under their respective contracts. Each
insurer is bound, as between himself and the other insurers, to contribute
The contention of First Insurance that double insurance is contrary to law is ratably to the loss in proportion to the amount for which he is liable under his
untenable. There is no law providing that double insurance is illegal per se. contract. (BAR 2008)
moreover, in the problem at hand, there is no double insurance because the
insured with the First Insurance is different from the insured with the Second 6. If an insurance policy prohibits additional insurance on the property insured
Insurance Company. The same is true with respect to the interests insured in without the insurers consent, such provision being valid and reasonable, a
the two policies. (BAR 1999) violation by the insured

a) When does double insurance exist? a. Reduces the value of the policy.

b) What is the nature of the liability of the several insurers in double insurance? b. Avoids the policy.
Explain.
c. Offsets the value of the policy with the additional insurances value.
Answer:
d. Forfeits premiums already paid.
a) Double insurance exists where the same person is insured by two or more
insurers separately with respect to the same subject matter and interest. Answer: a. Avoids the policy. (BAR 2011)

b) In double insurance, the insurers are considered as co-insurers. Each one X borrowed from CCC Bank. She mortgaged her house and lot in favor of the
is bound to contribute ratably to the loss in proportion to the amount for which bank. X insured her house. The bank also got the house insured.
he is liable under his contract. (BAR 2005)
a) Is this double insurance? Explain your answer.
Terrazas de Pation Verde, a condominium building, has a value of P50 M. The
owner insured the building against fire with 3 insurance companies for the b) Is this legally valid? Explain your answer.
following amounts: Northern Insurance Corp.P20 M Southern Insurance
Corp.P30 M Eastern Insurance Corp.P50 M c) In case of damage, can X and CCC bank separately claim for the insurance
proceeds?
a) Is the owners taking of insurance for the building with 3 insurers valid?
Discuss. b) The building was totally razed by fire. If the owner decides to Answer:
claim from Eastern Insurance

Corp. only P50 M, will the claim prosper? Explain. a) No, there is no double insurance. Double insurance exists where the same
person is insured by several insurers separately with respect to the same
subject and interest.
Answer:
b) Yes, X and CCC Bank can both insure the house as they have different provides, where a mortgagor of property effects insurance in his own name
insurable interests therein. X, the borrower-mortgagor, has an insurable providing that the loss shall be payable to the mortgagee, the insurance is
interest in the house being the owner thereof while CCC Bank, the lender, also deemed to be upon the interest of the mortgagor. Any act of the mortgagor
has an insurable interest in the house as mortgagee thereof. prior to the loss which would otherwise avoid the insurance will have the same
effect. Apart from the storing of the inflammable materials, the act of the
c) Yes. If X obtained an open policy then she could claim an amount owner-mortgagor, O, caused the peril insured against.
corresponding to the extent of the damage based on the value of the house
determined as of the date the damaged occurred, but not to exceed the face With respect to the Beta Insurance Co., C can recover the full amount of P5 M
value of the insurance policy; however, if she obtained a valued policy then since the act of O in intentionally starting the fire that caused the loss cannot
she could claim an amount corresponding to the extent of the damage based be attributable to the mortgagee, C. The act of O in storing inflammable in the
on the agreed upon valuation of the house. As for CCC Bank, it could claim building contrary to the loan agreement does not affect the insurance policy,
an amount corresponding to the extent of the damage but not to exceed the unless the insurance policy itself prohibited any storing of inflammable
amount of the loan it extended to X or so much thereof as may remain unpaid. materials.
(BAR 2012)
b) The P10 M debt of O to C will be affected by the amount which C is able to
collect from the insurance companies. If C is unable to recover any amount,
X insured the building she owns with 2 insurance companies for the same
the full amount of the debt remains. If C is able to recover P5 M from Beta
amount. In case of damage
insurance Co., the great weight of authority is that the mortgagee is not
allowed to retain his claim against O, the mortgagor, but it passes by
a) X cannot claim from any of the 2 insurers because with the double subrogation to the insurer to the extent of the money paid. (Palilieo v. Cosio,
insurance, the insurance coverage becomes automatically void; 97 Phil. 919). In this case, Beta Ins. Co. will become entitled to collect P5 M
from O, and O will continue to remain liable to C for the balance of P5 M. (BAR
b) The 2 insurers will be solidarily liable to the extent of the loss; 1984)

c) The 2 insurers will be proportionately liable; 2. A businessman in the grocery business obtained from First Insurance an
insurance policy for P5 M to fully cover his stocks-in-trade from the risk of fire.
d) X can choose who he wants to claim against.
3 months later, a fire of accidental origin broke out and completely destroyed
the grocery including his stocks-in-trade. This prompted the businessman to
7. Answer: d) X can choose who he wants to claim against. (BAR 2012) file with First Insurance a claim for P5 M representing the full value of his
goods.
1. To secure a loan of P10 M, O mortgaged his building to C. in accordance
with the loan arrangements, O had the property insured with Acme Insurance First Insurance denied the claim because it discovered that at the time of the
Company for P10 M with C as the beneficiary. C also took an insurance on the loss, the stock-in-trade were mortgaged to a creditor who likewise obtained
building upon his own interest with Beta Insurance Co. for P5 M. from Second Insurance Company fore insurance coverage for the stocks at
their full value of P5 M.
The building was totally destroyed by fire, a peril insured against in both
insurance policies. It was subsequently determined that the fire had been c) May the businessman and the creditor obtain separate insurance coverage
intentionally started by O and that, in violation of the loan agreement, O had over the same stocks-in- trade? Explain.
been storing inflammable materials in the building.
d)SupposeyouaretheJudge,howmuchwouldyouallowthebusinessmanandthecre
How much can C recover from either or both insurance companies? What ditortorecover from their respective insurers. Explain.
happens to the P10 M debt of O to C?
Answer:
Answer:
c) Yes. The businessman, as owner, and the creditor, as mortgagee, have
a) C cannot recover from Acme Insurance Co. unless the policy otherwise separate insurable interests in the same stocks-in-trade. Each may insure such
interest to protect his own separate interest. f) In case of damage, can X and CCC bank separately claim for the insurance
proceeds?
d) As judge, I would allow the businessman to recover his total loss of P5 M
pesos representing the full value of his goods which were lost through fire. As Answer:
to the creditor, I would allow him to recover the amount to the extent of or
equivalent to the value of the credit he extended to the businessman for the
d) No, there is no double insurance. Double insurance exists where the same
stocks-in-trade which were mortgaged by the businessman. (BAR 1999)
person is insured by several insurers separately with respect to the same
subject and interest.
3. To secure a loan of P10 M, Mario mortgaged his building to Armando. In
accordance with the loan arrangements, Mario had the building insured with
First Insurance Company for P10 M, designating Armando as the beneficiary. e) Yes, X and CCC Bank can both insure the house as they have different
insurable interests therein. X, the borrower-mortgagor, has an insurable
Armando also took an insurance on the building upon his own interest with interest in the house being the owner thereof while CCC Bank, the lender, also
Second Insurance Company for P5 M. has an insurable interest in the house as mortgagee thereof.

The building was totally destroyed by fire, a peril insured against under both f) Yes. If X obtained an open policy then she could claim an amount
insurance policies. It was subsequently determined that the fire had been corresponding to the extent of the damage based on the value of the house
intentionally started by Mario and that in violation of the loan agreement, he determined as of the date the damaged occurred, but not to exceed the face
had been storing inflammable materials in the building. value of the insurance policy; however, if she obtained a valued policy then
she could claim an amount corresponding to the extent of the damage based
1. How much, if any, can Armando recover from either or both insurance on the agreed upon valuation of the house. As for CCC Bank, it could claim
companies? an amount corresponding to the extent of the damage but not to exceed the
amount of the loan it extended to X or so much thereof as may remain unpaid.
Answer: Armando can receive P5 M from Second Insurance Company. As (BAR 2012)
mortgagee, he had an insurable interest in the building. Armando cannot
collect anything from First Insurance Company. First Insurance Company is A house and lot is covered by a real estate mortgage (REM) in favor of ZZZ
not liable for the loss of the building. First, it was due to a willful act of Mario, Bank. The Bank required that the house be insured. The owner of the policy
who committed arson. Second, fire insurance policies contain a warranty that failed to endorse nor assign the policy to the bank. However, the Deed of REM
the insured will not store hazardous materials within the insureds premises. has an express provision which says that the insurance policy is also endorsed
Mario breached this warranty when he stored inflammable materials in the with the signing of the REM. Will this be sufficient?
building. These two factors exonerate First Insurance Company from liability to
Armando as mortgagee even though it was Mario who committed them. a) No, insurance policy must be expressly endorsed to the bank so that the
bank will have a right in the proceeds of such insurance in the event of loss;
2. What happens to the P10 M debt of Mario to Armando? Explain.
b) TheexpressprovisioncontainedintheDeedofREMtotheeffectthatthepolicyisals
Answer: Since Armando would have collected P5 M from Second Insurance
Company, this amount should be considered as partial payment of the loan. oendorsedis sufficient;
Armando can only collect the balance of P5 M. Second Insurance Company
can recover from Mario the amount of P5 M it paid, because it became c) Endorsement of the Insurance Policy in any form is not legally allowed;
subrogated to the rights of Armando. (BAR 2010)
d) Endorsement of the Insurance Policy must be in a formal document to be
X borrowed from CCC Bank. She mortgaged her house and lot in favor of the valid.
bank. X insured her house. The bank also got the house insured.
Answer: b) No, insurance policy must be expressly endorsed to the bank so
d) Is this double insurance? Explain your answer. that the bank will have a right in the proceeds of such insurance in the event of
loss (BAR 2012)
e) Is this legally valid? Explain your answer.
1. Antarctica Life Assurance Corporation (ALAC) publicly offered a specially The execution of only one Affidavit of Good Faith for both mortgages is not a
designed insurance policy covering persons between the ages of 50 to 75 who ground to nullify the said mortgages and the foreclosure thereof. Said
may be afflicted with serious and debilitating illnesses. Quirco applied for mortgages are valid as between immediate parties, although they cannot bind
insurance coverage, stating that he was already 80 years old. Nonetheless, third parties.
ALAC approved his application.
b) The mortgage on the shares of stocks should have been registered in the
Quirco then requested ALAC for the issuance of a cover note while he was Office of the Register Deeds of Manila where he resides, as well as in the
trying to raise funds to pay the insurance premium. ALAC granted the request. stock and transfer book of Xerxes Corporation.
10 days after he received the cover note, Quirco had a heart seizure and had
to be hospitalized. He then filed a claim on the policy. Rule on the foregoing issues with reasons.

a) Answer: The mortgage on the shares of stock should be registered in the

CanALACvalidlydenytheclaimonthegroundthattheinsurancecoverage,aspublicly chattel mortgage registry in the register of Deeds of Makati City where the
offeredwas available only to persons 50 to 75 years of age? Why or why not? corporation has its principal office and also in the Register of Deeds of Manila
where the mortgagor resides. Registration of chattel mortgage in the stock and
Answer: No. by approving the application of Quirino who disclosed that he transfer book is not required to make the chattel mortgage valid. Registration
was already 80 years old, ALAC waived the age requirement. ALAC is now of dealings in the stock and transfer book under Section 63 of the Corporation
stopped from raising such defense of age of the insured. Code applies only to sale or disposition of shares, and has no application to
mortgages and other forms of encumbrances.
b)
DidALACsissuanceofacovernoteresultintheperfectionofaninsurancecontractbet c) Assume that Bernardo extrajudicially foreclosed on the mortgages, and both
weenQuirco and ALAC? Explain. the car and the shared of stock were sold at public auction. If the proceeds
from such public sale should be 1-million short of Armandos total obligation,
Answer: Yes. The issuance of a cover note resulted in the perfection of the can Bernardo recover the deficiency? Why or why not?
contract of insurance. In that case, it is only because there is delay in the
issuance of the policy that the cover note was issued. Answer: Yes. Bernardo can recover the deficiency. Chattels are given as
mere security, and not as payment or pledge.
The cover note is a receipt whereby the company agrees to insure the insured
for 60 days pending the issuance of a regular policy. No separate premium is P filed an application with an insurance company for a 20-year endowment
to be paid on a cover note. It is not a separate policy but is integrated in the policy in the amount of P50,000.00 on the life of his one-year-old daughter,
regular policy to be subsequently issued. (BAR 2009) Armando, a resident of supplying all the essential data in the application form, but without disclosing
Manila, borrowed P3 M from Bernardo, offering as security his 500 shares of that his daughter was a mongoloid child. Upon Ps payment of the annual
stock worth P1.5 M in Xerxes Corporation, and his 2007 BMW sedan, valued premium, a binding deposit receipt was issued to P by the insurance agent,
at P2 M. the mortgage on the shares of stock was registered in the Office of subject to processing by the company. The insurance company disapproved
the Register of Deeds of Makati City where Xerxes Corporation has its the insurance application stating that the plan applied for was not available for
principal office. The mortgage on the car was registered in the Office of the minors below seven years old, and offered another plan. The insurance agent
Register of Deeds of Manila. Armando executed a single Affidavit of Good did not inform P of the disapproval nor of the alternative plan offered, and
Faith, covering both mortgages. instead, strongly recommended that the company reconsider and approve the
insurance application. As fate would have it, Ps daughter died. P sought
Armando defaulted on the payment of his obligation; thus, Bernardo foreclosed payment of the proceeds of the insurance but the company refused on the
on the two chattel mortgages. Armando filed suit to nullify the foreclosure and grounds that there was concealment of a material fact in the insurance
the mortgages, raising the following issues: application form and that it had rejected the application. P contended, on the
other hand, that the binding deposit receipt constituted a temporary contract of
a) The execution of only one Affidavit of Good Faith for both mortgages life insurance. How would you resolve the issue?
invalidated the two mortgages; and
Answer: The insurance company is not liable. The binding deposit receipt is
Answer: merely conditional and does not insure outright. Where an agreement is made
between the applicant and the agent, no liability shall attach until the principal the full amount of the premium, the unconditional delivery of an insurance
(insurance company) approves the risk. The binding deposit receipt is policy of RN to Danny corresponding to the terms of the application ordinarily
subordinated to the act of the insurance company in approving or rejecting the consummates the contract, and the policy as delivered becomes the final
application; thus, in life insurance, a binding slip or binding receipt does not contract between the parties. Where the parties, so intend, the insurance
insure by itself; and, when as in this case the application was disapproved, becomes effective at the time of the delivery of the policy notwithstanding the
before the death of the insured, there was no perfected contract of insurance in fact that the check was not yet encashed. My answer will still be the same
order to make the company liable. (Great Pacific Life Ass. Co. v. C.A., April 30, even if the check is dated October 15, 2013 since an acknowledgment in a
1979; 89 SCRA 549.) (BAR 1980) policy of the receipt of premium is conclusive evidence of its payment for the
purpose of making the policy binding. (BAR 2014)
On June 1, 2011, X mailed to Y Insurance, Co. his application for life
insurance, with payment for 5 years of premium enclosed in it. On July 21, 1. The policy of insurance upon his life, with a face value of P100,000, was
2011, the insurance company accepted the application and mailed, on the assigned by Jose, a married man with 2 legitimate children, to his nephew, Y
same day, its acceptance plus the cover note. It reached Xs residence on as security for a loan of P50,000. He did not give the insurer any written notice
August 11, 2011. But, as it happened, on August 4, 2011, X figured in a car of such assignment despite the explicit provision to that effect in the policy.
accident. He died a day later. May Xs heir recover on the insurance policy? Jose died. Upon the claim on the policy by the assignee, the insurer refused to
pay on the ground that it was not notified of the assignment. Upon the other
hand, the heirs of Jose contended that Y is not entitled to any amount under
a. Yes, since under the Cognition Theory, the insurance contract was
the policy because the assignment without due notice to the insurer was void.
perfected upon acceptance by the insurer of Xs application.
Resolve the issues.

b. No, since there is no privity of contract between the insurer and Xs heirs. Answer: A life insurance is assignable. A provision, however, in the policy
stating that written notice of such an assignment should be given to the insurer
c. No, since X had no knowledge of the insurers acceptance of his application is valid. The failure of the notice of assignment would thus preclude the
before he died. assignee from claiming rights under the policy. The failure of notice did not,
however, avoid the policy; hence, upon the death of Jose, the proceeds would,
d. Yes, since under the Manifestation Theory, the insurance contract was in the absence of a designated beneficiary, go to the estate of the insured. The
perfected upon acceptance of the insurer of Xs application. estate, in turn, would be liable for the loan of P50,000 owing in favor of Y.
(BAR 1991)
Answer:
1. In 1964, Jose constructed a house worth P50,000.00, which he insured
against fire for the same amount. The insurance for the same amount was
c. No, since X had no knowledge of the insurers acceptance of his application
renewed every year. In 1974, when the house was already worth P100,00.00
before he died. (BAR 2011)
on account of inflationary prices (in case of a rebuilding), one-fifth (1/5) of the
house was destroyed by fire. As nothing illegal about the contract, how much,
1. On September 25, 2013, Danny Marcial (Danny) procured an insurance on if any, can Jose successfully recover from the Insurance Company? Reason.
his life with a face value of P5 M from RN Insurance Company (RN), with his
wife Tina Marcial (Tina) as sole beneficiary. On the same day, Danny issued
Answer:
an undated check to RN for the full amount of the premium. On October 1,
2013, RN issued the policy covering Dannys life insurance. On October 5,
If the fire policy is a valued one, then Jose can recover 1/5 of P50,000.00. i.e.,
2013, Danny met a tragic accident and died. Tina claimed the insurance
P10,000.00. Under the Insurance Code, the valuation in a valued policy is
benefit, but RN was quick to deny the claim because at the time of Dannys
conclusive between the parties in the absence of fraud. So Jose cannot claim
death, the check was not yet encashed and therefore the premium remained
that since his house was worth P100,00.00 at the time of the loss, he should
unpaid.
be able to recover P20,000.00 (actual value of loss1/5 of P100,00.00)
Is RN correct? Will your answer be the same if the check is dated October 15,
If the policy is an open policy then under the Iaw, appraisal of loss is made
2013?
after the fire. Since the house was worth P100,00.00 at such time, then the
loss of Jose is P20,000.00 and he can recover this amount under such an
Answer: No. RN is not correct. After the issuance of the check by Danny for
open policy. (BAR 1975)
A insured his house against loss by fire for P100,000.00. The policy provides The Peninsula Insurance Company offered to insure Francis brand new car
that the insurer shall be liable if the property insured shall be damaged or against all risks in the sum of P1 M per year. The policy was issued with the
destroyed by fire after payment of premium, at anytime from, from June 15, premium fixed at P60,000 payable in 6 months. Francis only paid the first two
1976 to June 15, 1977. The policy was delivered to A on June 14, 1976. months installments. Despite demands, he failed to pay the subsequent
Instead of paying the premium in cash, A issued a promissory note dated June installments. 5 months after the issuance of the policy, the vehicle was
15, 1976, for the amount of premium, payable within 30 days. The note was carnapped. Francis filed with the insurance company a claim for its value.
accepted. On June 29, 1976, the property insured was burned. The insurer However, the company denied his claim on the ground that he failed to pay the
refused to pay on the ground that the premium had not been paid, and the note premium resulting in the cancellation of the policy. Can Francis recover from
did not have the effect of payment as its value had not been realized at the the Peninsula Insurance Company?
time the house was burned. Decide with reasons.
Answer: Yes, Francis can recover from Peninsula considering that his car
Answer: Since the case given took place after the effectivity of the Insurance was carnapped before the 6 month period to pay the premium installments
Code, it must be governed by its provisions. Section 77 thereof provides: expired. An insurance premium can be paid in installments, and the insurance
Notwithstanding any agreement to the contrary, no policy or contract of contract became valid and binding upon payment of the first premium. When
insurance issued by an insurance company is valid and binding unless and the insurer granted a credit term for the payment of the premium, it is liable
until the premium thereof has been paid... Considering that this cited provision when the loss occurred before the expiration of such term. It could not deny
replaces Section 72 of old Insurance Act expressly permitting the granting of liability on the ground that payment was not made in full, for the reason that it
credit extension, the only conclusion is that the law-making power intended by agreed to accept installment payments. For the same reason, it could not
the amendment to disallow any agreement postponing payment of premium, validly cancel the policy, more so, without giving notice to the insured of its
including a grant of credit extension. The issuance of a promissory note cancellation. (BAR 2006)
postpones payment by granting credit extension. Therefore, the insurer is not
liable under this express provision of the new Insurance Code. The case of Alfredo took out a policy to insure his commercial building against fire. The
Capital Insurance & Surety Co. v. Plastic Era Co which held that acceptance of broker for the insurance company agreed to give a 15-day credit within which
a promissory note constitutes waiver of the stipulation that the insurer will be to pay the insurance premium. Upon delivery of the policy on May 15, 2006,
liable only after the payment of premium and that in the absence of stipulation Alfredo issued a postdated check payable on May 30, 2006. On May 28, 2006,
as to mode of payment, a promissory note constitutes payment, took place a fire broke out and destroyed the building owned by Alfredo.
before the Insurance Code came into effect and was based on Section 72 of
the old Insurance Act. It can therefore not be made applicable to the given
a) May Alfredo recover on the insurance policy?
case. (BAR 1976)

b) Would your answer in a) be the same if it as found that the proximate cause
On December 17, 1975, a fire policy, insuring a building and its contents, was
of the fire was an explosion and that fire was but the immediate cause of the
delivered to the insured company. By agreement, it was allowed to pay the
loss and there is no excepted peril under the policy?
premium within 30 days. On January 8, 1976, it paid the premium by means of
a check postdated January 16, 1976. The check was deposited by the
insurance company only on February 20, but the check bounced, although c) If the fire was found to have been caused by Alfredos own negligence, can
January 19, the insured has a sufficient bank balance. On January 18, two he still recover on the policy?
days after the premium became due, the insured property was burned and
became a total loss. Can the insurance company cancel the policy for non- 3. Reason briefly in a, b and c. Answer:
payment of premium? Give reasons for your answers.
a) Yes, Alfredo may recover on the policy. It is valid to stipulate that the
Answer: insured will be granted credit term for the payment of premium. Payment by
means of a check which was accepted by the insurer, bearing a date prior to
Yes, the insurance company can cancel the policy for nonpayment of the the loss, would be sufficient. The subsequent effects of encashment retroact to
premium. The new Insurance Code provides that notwithstanding any the date of the check.
agreement to contrary, no policy or contract of insurance is valid and binding
unless and until the premium thereof has been paid. (BAR 1978) b) Yes, recovery under the insurance contract is allowed if the cause of the
loss was either the proximate or the immediate cause as long as an excepted
peril, if any, was not the proximate cause of the loss. 1. Name at least 3 instances when an insured is entitled to a return of the
premium paid. Answer:
c) Yes, mere negligence on the part of the insured will not prevent recovery
under the insurance policy. The law merely prevents recovery when the cause Three instances when an insured is entitled to a return of premium paid are:
of loss is the willful act of the insured, alone or in connivance with others. (BAR
2007) 1. To the whole premium, if no part of his interest in the thing insured be
exposed to any of the perils insured against.
Enrique obtained from Seguro Insurance Company a comprehensive motor
vehicle insurance to cover his top of the line Aston Martin. The policy was 2. Where the insurance is made for a definite period of time and the insured
issued on March 31, 2010 and, on even date, Enrique paid the premium with a surrenders his policy, to such portion of the premium as corresponds
personal check postdated April 6, 2010. On April 5, 2010, the car was with the unexpired time at a pro rata rate, unless a short period rate
involved in an accident that resulted in its total loss. On April 10, 2010, the has been agreed upon and appears on the face of the policy, after
drawee bank returned Enriques check with the notation Insufficient Funds. deducting from the whole premium any claim for loss or damage under
Upon notification, Enrique immediately deposited additional funds with the the policy which has previously accrued.
bank and asked the insurer to redeposit the check. Enrique thereupon
claimed indemnity from the insurer. Is the insurer liable under the insurance 3. When the contract is voidable on account of the fraud or misrepresentation
coverage? Why or why not? of the insurer or of his agent or on account of facts the existence of
which the insured was ignorant without his fault; or when, by any
Answer: The insurer is not liable under the insurance policy. Under Art 1249 default of the insured other than actual fraud, the insurer never
of the Civil Code, the delivery of a check produces the effect of payment only incurred any liability under the policy. (BAR 2000)
when it is encashed. The loss occurred on April 5, 2010. When the check was
deposited, it was returned on April 10, 2010, for insufficiency of funds. The 1. Shipowner X, in applying for a marine insurance policy from ABC, Co.,
check was honored only after Enrique deposited additional funds with the stated that his vessel usually sails middle of August and with normally
bank. Hence, it did not produce the effect of payment. (BAR 2010) 100 tons of cargo. It turned out later that the vessel departed on the
first week of September and with only 10 tons of cargo. Will this avoid
Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have had the policy that was issued?
a long-standing insurance relationship with each other; SPMC secured the
comprehensive fire insurance on its plant and facilities from SIC. The standing a. Yes, because there was breach of implied warranty.
business practice between them has been to allow SPMC a credit period of 90
days from the renewal of the policy within which to pay the premium. Soon b. No, because there was no intent to breach an implied warranty.
after the new policy was issued and before premium payments could be made,
a fire gutted the covered plant and facilities to the ground. The day after the c. Yes, because it relates to a material representation.
fire, SPMC issued a managers check to SIC for the fire insurance premium,
for which it was issued a receipt; a week later SPMC issued its notice of loss.
SIC responded by issuing its own managers check for the amount of the d. No, because there was only representation of intention.
premiums SPMC had paid, and denied SPMCs claim on the ground that under
the cash and carry principle governing fire insurance, no coverage existed at Answer: d. No, because there was only representation of intention. (BAR
the time the fire occurred because the insurance premium had not been paid. 2011)
Is SPMC entitled to recover for the loss from SIC?
When X insured his building, X indicated in the application that it is a
Answer: SPMC is entitled to recover for the loss from SIC. SIC granted a residential building, but actually the building was being used as a warehouse
credit term to pay the premiums. This is not against the law, because the for some hazardous materials. What is the effect on the insurance policy, if
standing business practice of allowing SPMC to pay the premiums after 60 or any?
90 days, was relied upon in good faith by SPMC. SIC is in estoppel. (BAR
2013) a) The insurance policy can be cancelled because of the change in the use;
b) The insurance policy will automatically be changed; which may subsequently be effected, covering the property insured and that
unless such notice be given before the occurrence of any loss, all benefits
c) The insurance policy need not be changed; shall be forfeited. The face of the policy bore the annotation Co-insurance
declared. The things insured were burned. It turned out that several
insurances were obtained on the same goods for the same term. The insurer
d) The insurance policy is fixed regardless of the changes in the use.
refused to pay on the ground of concealment. May the insured recover?
Reason.
2. Answer: Any of the above should be given full credit. (BAR 2012)
Answer: Yes, the insured may recover since there is no concealment. The
1. In a non-medical insurance contract (one where the company waives face of the policy bore already the annotation, Co-insurance declared which
medical examination) the insured failed to disclose that she had once been is a notice to the insurer as to the existence of other insurance contracts on the
operated on, although the information on this matter was supposed to have property insured. (Gen. Insurance & Surety Corporation v. Ng Hua, L-14373,
been supplied the company. Within the proper period, may the Insurance Jan. 30, 1960) (BAR 1979)
Company have the contract rescinded? Reasons.
Marine insurance was secured upon goods on board a ship which departed
Answer: from Madagascar to Manila, without any disclosure to the insurer of the fact
that the ship had been reported at Lloyd of London as seen at sea, deep in
Yes, the Insurance Company can rescind the contract on the ground of water and leaky. This report turned out later to be wrong because the ship was
misrepresentation or concealment of material fact. The fact of the insureds at no time during the voyage leaky or in trouble, but was lost through another
operation is material to the insurer, who may have refused to issue the life insured risk. The insurer refuses to pay the insured, claiming concealment. The
policy had it known of such fact. This is even more true in a non-medical insured counters that the fact not disclosed was erroneous and did not
insurance where no medical exam is made and the information given by the increase the risk and therefore immaterial. Decide the dispute with reasons.
insured concerning his past health and diseases is a very important factor
which the insurer takes into consideration in deciding to issue the policy. (BAR
1975) Answer: The insured may not recover from the insurer. The information that
the ship in question was seen at sea, deep in water and leaky, although
Pedro Reyes applied for fire insurance on his house. In his application, it was erroneous, was material, and its concealment entitled the insurer to rescind the
asked the following question: Is the house insured with another Insurance contract of insurance. (BAR 1979)
Company? If so, for how much? His answer was No. The fact, however, is
that the house had been insured with the FGU for P100,000.00. the application In June 1981, Juan applied for a life insurance policy with a double indemnity
was approved and made a part of the policy. Subsequently, a fire occurred in a provision in case of death by accident. Despite an express inquiry in the
neighboring house, and spread to the house of Pedro Reyes which was application form for insurance, he did not mention the fact that he had suffered
completely burned. Demand for payment having been refused by the insurer, from viral hepatitis the previous year. As Juan had fully recovered from the
Pedro Reyes filed a complaint. May he recover? Reason. disease, the medical examination performed by the insurance companys
physician did not reveal such previous illness, and showed that Juan was
Answer: No, Pedro Reyes may not recover. He was guilty of concealment or healthy and was an insurable risk. The policy was issued forthwith. In March
misrepresentation of a material fact. The fact of the existence of the other 1983, Juan died in an automobile accident. Subsequent investigation revealed
insurance is material because had he answered truthfully, the insurer would that Juan was negligent in not having his brakes checked. The insurance
probably have charged him higher premium, or would have made further company refused to pay Juans wife, the designated beneficiary, on two
inquiries, or would have imposed some other conditions in the policy to protect grounds: that Juan was guilty of fraudulent concealment of his liver ailment,
its interest. The existence of a large amount of insurance increases the moral and that Juans death was caused by his own negligence.
hazard or the temptation to commit arson. Concealment of a material fact is a
ground for rescission and is a valid defense of an insurer in an action based on The policy is silent as to the effect of the insureds negligence on the right to
the policy. (BAR 1976) recover thereunder. Juans wife insists that she has a right to recover because
Juans death was caused by an accident which had nothing to do whatsoever
A fire insurance policy in favor of the insured contained a stipulation that the with his liver ailment. She therefore insists on double indemnity.
insured shall give notice to the company of any insurances already effected or
. a) Is she entitled to any indemnity? Explain. designed his wife, Petra, as the beneficiary. Earlier, in his application in
response to the question as to whether or not he had ever been hospitalized,
. b) If Juans accident occurred in July 1983, would your answer be the he answered in the negative. He forgot to mention his confinement at the
same? Kidney Hospital. After Juan died in a plane crash, Petra filed a claim with
Good Life. Discovering Juans previous hospitalization, Good Life rejected
Answer: Petras claim on the ground of concealment and misrepresentation. Petra sued
Good Life, invoking good faith on the part of Juan. Will Petras suit prosper?
a) No, she is not entitled to any indemnity. Although Juan did not die of a liver Explain.
ailment, the fact of his concealment vitiated the insurers consent to the
contract of insurance. Under the Insurance Code, concealment of a material Answer: No. Petras suit will not prosper (assuming that the policy of life
fact is a ground for rescission. And materiality is determined not by the event insurance has been in force for a period of less than 2 years from the date of
which caused the death but by the probable and reasonable influence of the its issue). The matters which Juan failed to disclose was material and relevant
fact concealed upon the other party in forming his estimate of the to the approval and issuance of the insurance policy. They would have affected
disadvantages of the proposed contract, or in making inquiries. If the insurer Good Lifes action on his application, either by approving it with the
had known of Juans previous liver ailment, it would in all probabilities have at corresponding adjustment for a higher premium or rejecting the same.
least made more detailed inquiries about it or make a special examination of Moreover, a disclosure may have warranted a medical examination of Juan by
his liver function, or perhaps even charge a higher premium because of the Good Life in order for it to reasonably assess the risk involved in accepting the
greater risk involved. The concealment was therefore of a material fact, application. In any case, good faith is no defense in concealment. The waiver
relieving the insurer from any liability on the policy, regardless of the cause of of a medical examination in the non-medical life insurance from Good Life
death. Since the insurer is relieved from liability, the question as to whether the makes it even more necessary that Juan supply complete information about
event was an accident or not becomes moot. In any case, under the Insurance his previous hospitalization for such information constitutes an important factor
Code, negligence of the insured or of others does not exonerate the insurer. which Good Life takes into consideration in deciding whether to issue the
policy or not.
My conclusion would be different. The insurer would be liable despite the
fraudulent concealment because the policy has become uncontestable since If the policy of life insurance has been in force for a period of 2 years or more
more than 2 years had elapsed from the date thereof. (BAR 1983) from the date of its issue (on which point the given facts are vague) then Good
Life can no longer prove that the policy is void ab initio or is rescindable by
b) reason of the fraudulent concealment or misrepresentation of Juan. (BAR
1996)
X applied for life insurance with Metropolitan Life Insurance Company. The
application contained this question: Have you ever had any ailment or disease The assured answers No to the question in the application for a life policy.
of x x x (b) the stomach or intestines, liver, kidney, or genitourinary organ? X, Are you suffering from any form of heart illness? In fact, the assured has
a laundrywoman who has no medical knowledge answered No. the been a heart patient for many years. On September 7, 1991, the assured is
application was approved, premium was paid and 6 months later, X died from killed in a plane crash. The insurance company denies the claim for insurance
cancer of the stomach. The post medical examination of X shows that she had proceeds and returns the premium paid. Is the decision of the insurance
the cancer at the time she applied for a policy. Can the beneficiary of X collect company justified?
on the policy? Reasons.
Answer: Assuming that the incontestability clause does not apply because
Answer: The beneficiary of X cannot collect on the policy. Concealment, as a the policy has not been in force for 2 years from date of issue, during the
defense against liability by the insurer, may either be intentional or lifetime of the insured, the decision of the insurance company not to pay is
unintentional. Lack of knowledge on the part of the insured about her ailment justified. There was fraudulent concealment. It is not material that the insured
will not preclude the insurer from raising the defense. The insurer may be held died of a different cause than the fact concealed. The fact concealed, that is
in estoppel only if, having known of the concealed or misrepresented fact, still the heart ailment, is material to the determination by the insurance company
accepts the payment of premium which is not the situation in this case. (BAR whether or not to accept the application for insurance and to require the
1989) medical examination of the insured. However, of the incontestability clause
applies t the insurance policy covering the life of the insured had been in force
Juan procured a non-medical life insurance from Good Life Insurance. He for 2 years from the issuance thereof, the insurance company would not be
justified in denying the claim for the proceeds of the insurance and in returning coverage.
the premium paid. In that case, the insurer cannot prove the policy void ab
initio or rescindable by reason of fraudulent concealment or misrepresentation Answer: a. Yes, since the previous hospitalization would influence the insurer
of the insured. (BAR 1997) in deciding whether to grant Xs application. (BAR 2011)

Renato was issued a life insurance policy on January 2, 1990. He concealed An insured, who gains knowledge of a material fact already after the effectivity
the fact that 3 years prior to the issuance of his life insurance policy, he had of the insurance policy, is not obliged to divulge it. The reason for this is that
been seeing a doctor about his heart ailment. On March 1, 1992, Renato died the test of concealment of material fact is determined.
of heart failure. May the heirs file a claim on the proceeds of the life insurance
policy of Renato?
e. At the time of the issuance of the policy.

Answer: Yes. The life insurance policy in question was issued on January 2,
f. At any time before the payment of premium.
1990. More than 2 years had elapsed when Renato, the insured, died on
March 1, 1992. The incontestability clause applies. (BAR 1998)
g. At the time of the payment of the premium.
A applied for a non-medical life insurance. The insured did not inform the
insurer that one week prior to his application for insurance, he was examined h. At any time before the policy becomes effective.
and confined at St. Lukes Hospital where he was diagnosed for lung cancer.
The insured soon thereafter died in a plane crash. Is the insurer liable Answer: d. any time before the policy becomes effective. (BAR 2011)
considering that the fact concealed had no bearing with the cause of death of
the insured? Why? Benny applied for life insurance for P1.5 M. the insurance company approved
his application and issued an insurance policy effective Nov. 6, 2008. Benny
Answer: No. The concealed fact is material to the approval and issuance of named his children as his beneficiaries. On April 6, 2010, Benny died of
the insurance policy. It is well settled that the insured need not die of the hapatoma, a liver ailment. The insurance company denied the childrens
disease he failed to disclose to the insurer. It is sufficient that his non- claim for the proceeds of the insurance policy on the ground that Benny failed
disclosure misled the insurer in forming his estimate of the risks of the to disclose in his application 2 previous consultations with his doctors for
proposed insurance policy or in making inquiries. (BAR 2001) diabetes and hypertension, and that he had been diagnosed to be suffering
from hepatoma. The insurance company also rescinded the policy and
X, in the hospital for kidney dysfunction, was about to be discharged when he refunded the premiums paid. Was the insurance company correct?
met his friend Y. X told Y the reason for his hospitalization. A month later, X
applied for an insurance covering serious illness from ABC Insurance, Co., Answer: The insurance company correctly rescinded the policy because of
where Y was working as Corporate Secretary. Since X had already told Y concealment. Benny did not disclose that he was suffering from diabetes,
about his hospitalization, he no longer answered a question regarding it in the hypertension, and hepatoma. The concealment is material because these are
application form. Would this constitute concealment? serious ailments. Benny died less than 2 years from the date of the issuance of
the policy. (BAR 2013)
a. Yes, since the previous hospitalization would influence the insurer in
deciding whether to grant Xs application. On May 13, 1996, PAM, Inc. obtained a P15 M fire insurance policy from
Ilocano Insurance covering its machineries and equipment effective for 1 year
b. No, since Y may be regarded as ABCs agent and he already knew or until May 14, 1997. The policy expressly stated that the insured properties
of Xs previous hospitalization. were located at Sanyo Precision Phils. Building, Phase III, Lots 4 and 6, Block
15, PEZA, Rosario Cavite. Before its expiration, the policy was renewed on
as is basis for another year until May, 13, 1998. The subject properties were
c. Yes, it would constitute concealment that amounts to
later transferred to Pace Factory also in PEZA. On October 12, 1997, during
misrepresentation on Xs part.
the effectivity of the renewed policy, a fire broke out at the Pace Factory which
totally burned the insured properties.
d. No, since the previous illness is not a material fact to the insurance
The policy forbade the removal of the insured properties unless sanctioned by without the knowledge of P, filled in a false answer and made it appear that P
Ilocano. Condition 9(c) of the policy provides that the insurance ceases to was in good health. Upon Ps death, Q claimed the proceeds of the insurance
attach as regards the property affected unless the insured, before the policy contending that as designated beneficiary, he cannot be changed
occurrence of any loss or damage, obtains the sanction of the company without his consent, he having acquired a vested right to the proceeds of the
signified by endorsement upon the policy x x x (c) if the property insured is policy. Can the insurance company refuse liability on the policy? Reasons.
removed to any building or place other than in that which is herein stated to be Answer: No, the insurer cannot escape liability. The insurance agent is an
insured. PAM claims that it has substantially complied with notifying Ilocano agent not of the insured but of the insurer and the latter must thus suffer for the
for the insurance coverage. Is Ilocano liable under the policy? misconduct of the agent. The result would have been different had the false
answer been made by the agent in connivance with the insured. (BAR 1988)
Answer:
Pabaya paid for a fire insurance policy on his multi storey building. At the time
Ilocano is not liable under the policy. With the transfer of the location of the he applied for the insurance, he told the representative of the insurance
subject properties, without notice and without insurers consent, after the company that he planned to assign a security guard on every floor of the
renewal of the policy, the insured clearly committed concealment, building right away. Except for the ground floor, no security guards were
misrepresentation and a breach of material warranty. The Insurance Code assigned. 11 months after the policy was issued, the building was gutted by
provides that a neglect to communicate that which a party knows and ought to fire which started on the third floor. Unknown to Pabaya, the insurance
communicate, is called concealment. A concealment entitles the injured party company had incorporated his planned undertaking in the policy. Can
to rescind a contract of insurance in case of an alteration in the use or Pabaya recover on the fire insurance policy?
condition of the thing insured. An alteration in the use or condition of a thing
insured from that to which it is limited by the policy made without the consent
Answer: Pabaya can recover under the insurance policy. The statement of
of the insurer, by means within the control of the insured, and increasing the
Pabaya that he planned to assign a security guard on every floor of the insured
risks, entitles the insurer to rescind the contract of fire insurance. (BAR 2014)
building, whether incorporated in the policy or not, did not amount to firm
commitment so as to constitute an express warranty or representation. The
A, an agent of life insurance company X, induced B who has been suffering facts indicate that it was simply planned, not obligatory or promissory,
from advance tuberculosis to apply for P10,000.00 life insurance which B did undertaking. (BAR 1986)
and he (B) requested A to fill the application form. Thru the connivance of the
physician, it was made to appear in the application that B is in good health and
the P10,000.00 life insurance policy was issued by X to B. If B dies of Julie and Alma formed a business partnership. Under the business name Pino
tuberculosis, may his beneficiaries recover? Shop, the partnership engaged in a sale of construction materials. Julie
insured the stocks in trade of Pino Shop with WGC Insurance Company for
P350,000. Subsequently, she again got an insurance contract with RSI for P1
Answer: It depends. The insurer is bound when its agent writes a false M and then from EIC for P200,000. A fire of unknown origin gutted the store of
answer into the application without the knowledge of the insured, in which case the partnership. Julie filed her claims with the 3 insurance companies.
his (insured) beneficiaries may recover, but a collusion between the agent and However, her claims were denied separately for breach of policy condition
the insured in misrepresenting the facts will vitiate the policy; thus, in the which required the insured to give notice of any insurance effected covering
instant case, if A obtained from B a correct and truthful answer to the stocks in trade. Julie went to court and contended that she should not be
interrogatories contained in the application but without the knowledge of B filed blamed for the omission, alleging that the insurance agents for WGC, RSI and
in false answer and thru the connivance with the company physician, it was EIC knew of the existence of the additional insurance coverage and that she
made to appear that B is in good health, the insurer cannot assert the falsity of was not informed about the requirement that such other or additional insurance
such answers as a defense to liability on the policy. (BAR 1976) should be stated in the policy. May she recover on her fire insurance
policies? Explain.
On October 18, 1980, P, took out a life insurance policy and named his only
son Q as beneficiary. The policy was silent with regard to any change of Answer: No, because she is guilty of violation of a warranty/ condition. (BAR
beneficiary. P later learned that Q was hooked on drugs and immediately 1992)
notified the insurance company in writing that he is substituting his sister, R, as
his beneficiary in place of Q. P later died of advanced tuberculosis. In the
application form filled up by the agent of the insurance company prior to the To secure a loan of P10 M, Mario mortgaged his building to Armando. In
issuance of the life insurance policy by the insurance company, the agent, accordance with the loan arrangements, Mario had the building insured with
First Insurance Company for P10 M, designating Armando as the beneficiary. two pilots (life insurance) for P50,000.00 each, and as a result of the crash, the
Armando also took an insurance on the building upon his own interest with insurer paid ABC Co. a total indemnity of P180,000.00. Nevertheless, ABC Co
Second Insurance Company for P5 M. The building was totally destroyed by sustained additional damages of about P100,000.00 which were not covered
fire, a peril insured against under both insurance policies. It was subsequently by insurance.
determined that the fire had been intentionally started by Mario and that in
violation of the loan agreement, he had been storing inflammable materials in 1)
the building. How much, if any, can Armando recover from either or both ABCCo.suedXYZtorecovernotonlytheadditionaldamages,butalsotheP180,000w
insurance companies? hichwas already compensated by the insurer. Decide. Give reasons.

Answer: Armando can receive P5 M from Second Insurance Company. As 2)

mortgagee, he had an insurable interest in the building. Armando cannot Whatright/recourse,ifany,hastheinsurerinordertobereimbursedfortheamountitpai
collect anything from First Insurance Company. First Insurance Company is dto ABC Co? Give reasons.
not liable for the loss of the building. First, it was due to a willful act of Mario,
who committed arson. Second, fire insurance policies contain a warranty that Answer:
the insured will not store hazardous materials within the insureds premises.
Mario breached this warranty when he stored inflammable materials in the . 1) ABC Co may bring the action against XYZ for its claim for the additional
building. These two factors exonerate First Insurance Company from liability damages not covered by insurance, but not for the P180,000 covered
to Armando as mortgagee even though it was Mario who committed them. by the insurance. If a property is insured and the owner received
(BAR 2010) indemnity from the insurer, the latter is deemed subrogated to the
rights of the insured against the wrongdoer, and if the amount paid by
1. Robin insured his building against fire with EFG Assurance. The insurance the insurer does not fully cover the loss, then the aggrieved party is the
policy contained the usual stipulation that any action or suit must be filed within one entitled to recover the deficiency.
1 year after the rejection of the claim.
. 2) The insurer is deemed subrogated to the rights of ABC Co against XYZ
After his building burned down, Robin filed his claim for fire loss with EFG. On to the extent of P80,000 insurance paid for the helicopter only, but not
February 28, 1994, EFG denied Robins claim. On April 3, 1994, Robin sought for the life insurance of the two dead pilots, since subrogation in the
reconsideration of the denial, but EFG reiterated its position. On March New Civil Code refers only to property, and not to the life insurance.
20,1995, Robin commenced judicial action against EFG. (Philippine Air Lines, Inc. v. Herald

Should Robins action be given due course? Explain. Lumber Co., G.R. L-11497, August 16, 1957; for both 1 and 2 answers.) (BAR
1978)
Answer: No, Robins action should not be given due course. His filing of the
request for reconsideration did not suspend the running of the prescriptive L borrows P50,000 from M payable 360 days after date, at 12% interest per
period of 1 year stipulated in the insurance policy. Thus, when Robin annum. To secure the loan, L mortgages his house and lot in favor of M. To
commenced judicial action against EFG on March 20, 1995, his ability to do so protect himself from certain contingencies, M insures the house for the full
had already prescribed. The 1 year period is counted from February 28, 1994 amount of the loan with Rock Insurance Company. A fire breaks out and
when EFG denied Robins claim, not from the date (presumably after April 3, burns the house and M collects from the insurance company the full value
1994) when EFG reiterated its position denying Robins claim. The reason for of the insurance. Upon maturity of the loan, the insurance company demands
this rule is to insure that claims against insurance companies are promptly payment from L. The latter refuses to pay on the ground that the loan had
settled and that insurance suits are brought by the insured while the evidence been extinguished by the insurance payment which M received from the
as to the origin and cause of the destruction has not yet disappeared. (BAR insurance company. He argues that he has not entered into any loan or
1996) contract of whatever nature with the insurance company. He further contends
that it is bad enough to lose a house but it is worse if one has to pay off a paid
1. A helicopter of ABC Co. collided with XYZs tramway steel cables in its obligation to somebody who has not extended any loan to him. Besides, he
logging area in Surigao resulting in the destruction of the helicopter and death states, that the insurance payment should inure to his benefit because he
of two pilots. ABC Co. insured at its expense the helicopter and death of two owns the house. Pass upon the merits of Ls contentions.
pilots. ABC Co. insured at its expense the helicopter for P80,000.00 and the
Answer: Neither the loan of L was extinguished by the insurance payment c. The insureds formal assignment of his right to indemnification to the insurer.
which M received from the insurance company; nor the insurance payment
inures to Ls benefit; what was then insured was the interest of M, the secured
creditor, and not the interest of L, so the proceeds shall be applied exclusively d. The insureds endorsement of its claim to the insurer.
to the proper interest of M. Ls argument that he has not entered into any
loan or contract of whatever nature with the insurance company is also
Answer: b. The equitable assignment that results from the insurers payment
untenable. When the secured creditors interest in the mortgaged property of
of the insured. (BAR 2011)
the mortgagor, L, was insured and said property would be burned, the
insurance company had to pay the insured, M, and payment by the insurer to
the insured creates legal subrogation and makes the insurer an assignee on 5. ELP Insurance, Inc. issued a Marine Policy No. 888 in favor of FCL Corp. to
equity to run after the mortgagor, L. Said right of the insurer is not dependent insure the shipment of 132 bundles of electric copper cathodes against all
upon nor does it grow out of, any privity of contract, or upon written assignment risks. Subsequently, the cargoes were shipped on board the vessel M/V
of claim, and payment to insured makes the insurer an assignee in equity; Menchu from Leyte to Pier 10, North Harbor, Manila.
thus, Ls consent to said subrogation is not necessary. (Art. 2207, N.C.C.;
Firemans Fund Insurance Co. v. Jamila & Co., April 7, 1976; 70 SCRA 323) Upon arrival, FCL Corp. engaged the services of CGM, Inc. for the release and
(BAR 1980) withdrawal of the cargoes from the pier and the subsequent delivery to its
warehouses/plants in Valenzuela City. The goods were loaded on board 12
trucks owned by CGM, Inc., driven by its employed drivers and accompanied
Rauls truck bumped the car owned by Luz. The car was insured by Cala by its employed truck helpers. Of the 12 trucks en route to Valenzuela City,
Insurance. For the damage caused, Cala paid Luz P5,000 in amicable only 11 reached the destination. One truck, loaded with 11 bundles of copper
settlement. Luz executed a release claim, subrogating Cala to all her rights cathodes, failed to deliver its cargo.
against Raul. When Cala demanded reimbursement from Raul, the latter
refused saying that he had already paid Luz P4,500 for the damage to the car Because of this incident, FCL Corp. filed with ELP Insurance, Inc. a claim for
as evidenced by a release of claim executed by Luz discharging Raul. So insurance indemnity in the amount of P1.5 M. After the requisite investigation
Cala demanded reimbursement from Luz, who refused to pay, saying that the and adjustment, ELP Insurance, Inc. paid FCL Corp. the amount of
total damage to the car was P9,500. Since Cala paid P5,000 only, Luz P1,350,000.00 as insurance indemnity.
contends that she was entitled to go after Raul to claim the additional P4,500.
ELP Insurance, Inc., thereafter, filed a complaint for damages against CGM,
Is Cala, as subrogee of Luz, entitled to reimbursement from Raul? Inc. before the RTC, seeking reimbursement of the amount it had paid to FCL
Corp. for the loss of the subject cargo. CGM, Inc. denied the claim on the basis
May Cala recover what it has paid Luz? that it is not privy to the contract entered into by and between FCL Corp. and
ELP Insurance, Inc., and hence, it is not liable therefor. If you are the judge,
Answer: 1. No. Luz executed a release in favor of Raul. 2. Yes. Cala lost its how will you decide the case?
right against Raul because of the release executed by Luz. Since the release
was made without the consent of Cala, Cala may recover the amount of Answer:
P5,000. (BAR 1994)
CGM, Inc. should be held liable for damages against ELP Insurance, Inc. The
insurer, upon happening of the risk insured against and after payment to the
4. Where the insurer was made to pay the insured for a loss covered by the
insured is subrogated to the rights and cause of action of the latter. As such,
insurance contract, such insurer can run after the third person who caused the
the insurer has the right to seek reimbursement for all the expenses paid.
loss through subrogation. What is the basis for conferring the right of
(BAR 2014)
subrogation to the insurer?

a. Their express stipulation in the contract of insurance.

b. The equitable assignment that results from the insurers payment of the
insured.