Insurance Compilation of BarQs

COR JESU COLLEGE
Sacred Heart Heart Avenue, Digos City, 8002 Davao del Sur
College of Law
Bar Questions and Answers

for
INSURANCE LAWS
(1998-2018)
Compiled and Arranged by:
CJC LAW Insurance Special Class of 2020
Submitted to:
ATTY. MARULI ALI GARCIA SANCHEZ

Professor
1994
What is your understanding of a “no to the designated percentage of the full
fault indemnity” clause found in an value of the property insured while Re-
insurance policy? insurance is where the insurer procures a
third party called the reinsurer, to insure
SUGGESTED ANSWER: him against the liability by reason of such
Under the “ NO FAULT INDEMNITY” original insurance. Basically, a
clause, any claim for death or injury of any reinsurance is an insurance against
passenger or third party shall be paid liability which the original insurer may
without the necessity of proving fault or occur in favor of the original insured.
negligence of any kind. The indemnity in
respect of any one person shall not exceed In a civil suit, the Court ordered
P5,000.00, provided they are under oath, Benjie to pay Nat P500, 000. To
the following proofs shall be sufficient: execute the judgment, the sheriff
1. police report of the accident; and levied upon Benjie’s registered
2. death certificate and evidence property ( a parcel of land and the
sufficient to establish the propser payee; or building thereon), and sold the same
3. medical report and evidence of at public auction to Nat, the highest
medical or hospital disbursement in respect bidder. The latter, on March 18, 1992,
of which refund is claimed. registered with the register of deeds
4. Claim may be made against one the certificate of sale issued to him by
motor vehicle only. the sheriff. Meanwhile, on January
27, 1993, Benjie insured with Garapal
Distinguish co- insurance from re- Insurance for P1, 000, 000 the same
insurance. building that was sold at public
auction to Nat. Benjie failed to
SUGGESTED ANSWER: redeem the property by March 18,
Co- insurance is the percentage in the value 1993.
of the insured property which the insured
himself assumes or undertakes to act the On March 19, 1993, a fire razed the
insurer to the extent of the deficiency on the building to the ground. Garapal
insurance of the insured property. In case insurance refused to make good its
of loss or damage, the insurer will be liable obligation to Benjie under the
only for such proportion of the loss or insurance contract.
damage as the amount of insurance bears
Page 2 of 49 Compilation of Bar Questions and Suggested Answers in Insurance

1.) Is Garapal Insurance legally already paid Luz P4,500 for the damage to
justified in refusing the car as evidenced by a release of claim
payment to Benjie? executed by Luz discharging Raul.
So Cala demanded reimbursement

SUGGESTED ANSWER: from Luz, who refused to pay, saying
Yes. At the time of loss, Benjie was no that total damage to the car was P9,
longer the owner of the property insured as 500. Since Cala paid P5,000 only, Luz
he failed to redeem the property. The law contends that she was entitled to go
requires in property insurance that a after Raul to claim the additional P4,
person can recover the proceeds of the 500.
1policy and also in the time when the loss
occurs. At the time of fire, Benjie no longer 1.) Is Cala, as Subrogee of Luz,
had insurable interest in the property entitled to reimbursement from Raul?
insured.
SUGGESTED ANSWER:
2.) Is Nat entitled to collect on the No. Luz executed a release in favor of Raul.
insurance policy?
2.) May Cala recover what it has
SUGGESTED ANSWER: paid Luz?
No. While at the time of the loss he had
insurable interest in the building, as he was SUGGESTED ANSWER:
the owner thereof, Nat did not have the Yes, Cala lost its right against Raul because
interest in the policy. There was no of the release executed by Luz. Since the
automatic transfer clause in the policy that release was made without the consent of
would give him such interest of the policy. Cala, Cala may recover the amount of
4. Raul’s truck bumped the car owned by P5,000.00 from Luz.
Luz. The car was insured by Cala
Insurance. For the damage caused, Cala
paid Luz P5,000 in amicable settlement. On September 23, 1990, Tan took a
Luz executed a release of claim subrogating life insurance policy from Philam.
Cala to all her rights against Raul. When The policy was issued on November 6,
Cala demanded reimbursement from Raul, 1990. He died on April 26, 1992 of
the latter refused saying that he had hematoma. The insurance company

denied the beneficiaries claim and the insured person attempting to
rescinded the policy by reason of commit suicide or willfully exposing
alleged misrepresentation and himself to needless peril except in an
concealment of materials facts made attempt to save human life. “Six
by Tan in his application. It returned months later, Henry Dy died of a
the premiums paid. bullet wound in his head.
The beneficiaries contend that the Investigation showed that one
company had no right to rescind the evening Henry was in a happy mood
contract as rescission must be done although he was not drunk. He was
“during the lifetime” of the insured playing with handgun from which he
within two years and prior to the had previously removed its magazine.
commencement of the action. He pointed the gun at his sister who
got scared. He assured her it was not
Is the contention of the beneficiaries loaded. He then pointed the gun at his
tenable? temple and pulled the trigger. The gun
fired and Henry Dy slumped dead on
SUGGESTED ANSWER: the floor.
No. The incontestability clause does not
apply. The insured dies within less than Decide: Discuss fully.
two years formt he issuance of the policy
on September 23, 1990. The insured died on SUGGESTED ANSWER:
April 26, 1992, or less than 2 years from Beverly can recover the proceeds of the
September 23,1990. The tight of the insurer policy from the insurer. The death of the
to rescind is only lost if the beneficiary has insured was not due to suicide or willful
commenced an action on the policy. There exposure to needless peril which are
is no such action on this. excepted risks. The isnured’s act was purely
an act of negligence which is covered by the
policy and for which the insured got the
1995 insurance for his protection. In fact, he
Sun – Moon insurance issued a removed the magazine from the gun and
Personal Accident Policy to Henry Dy when he pointed the gun to his temple he
with a face value of P500, 000. A did so because he thought that it was safe
provision in the policy states that “the for him to do so. He did so to assure his
company shall not be liable in respect sister that the gun was harmless. There is
of” bodily injury” consequent upon

none in the policy that would relieve the a disclosure may have warranted a
insurer of liability for the death of the medical examination of Juan by Good Life
insured since the death was an accident. in order for it to reasonably assess the risk
involved in accepting the application. In
1996 any case, good faith is no defense in
Juan procured a “non-medical’ life concealment. The waiver of the medical
insurance from Good Life Insurance. examinationin the “non medical“life
He designated his wife, Petra, as the insurance from Good Life makes it even
beneficiary. Earlier, in his application more necessary that Juan supply complete
in response to the question as to information about his previous
whether or not he had ever been hospitalization for such information
hospitalized, he answered in the constitutes an important factor which
negative. He forgot to mention his Good Life into consideration in deciding
confinement at the Kidney Hospital. whether to issue the policy or not.
After Juan died in a plane crash, If the policy of the insurance has been in
Petra filed a claim with the Good force for a period of 2 years or more from
Insurance Life. Discovering Juan’s the date of its issue, then Good Life can no
previous hospitalization, Good Life longer prove that the policy is void ab initio
rejected Petra’s claim on the ground or is rescindable by reason of the
of concealment and fraudulent concealment or
misrepresentation. Petra sued Good misrepresentation of Juan.
Life, invoking good faith on the part
of Juan. RC Corporation purchased rice from
Will Petra’s suit prosper? Explain. Thailand, which it intended to sell
local. Due to stormy weather, the ship
SUGGESTED ANSWER: carrying the rice became submerged
Purita’s suit will not prosper . The matters in sea water and with it the rice cargo.
which Juan failed to disclose was the When the cargo arrived in Manila, RC
material and relevant the approval and filed a claim for total loss with the
issuance of the insurance policy. They insurer, because the rice was no
would have affected Good’s Life’s Action on longer fit for human consumption.
his application, either by approving it with Admittedly, the rice could still be used
the corresponding adjustment for a higher in animal feed.
premium or rejecting the same. Moreover,

Is RC’s claim for total loss justified? SUGGESTED ANSWER:
Explain. No, Robin’s action should not be given due
course. Is filing of the request for
reconsideration did not suspend the
SUGGESTED ANSWER: running of the prescriptive period of one
Yes, RC’s claim for total loss is justified. The year stipulated in the insurance policy.
rice, which was imported from Thailand Thus, when Robin commenced judicial
for sale locally, is obviously intended for action against EFG Assurance on March
consumption by the public. The complete 20, 1995, his ability to do so had already
physical destruction of the rice is not prescribed. The one- year is counted from
essential to constitute an actual total loss. February 28, 1994 when EFG denied
Such a loss exists in this case since the rice, Robin’s claim, not form the date when EFG
having been soaked in sea water and reiterated its position denying Robin’s
thereby rendered unfit for human claim. The reason for this rule is to insure
consumption, has become totally useless that claims against insurance companies
for the purpose for which it was imported. are promptly settled and that insurance
suits are brought by the insured while the
Robin insured his building against evidenc e as to origin and cause of the
fire with EFG Assurance. The destruction has not yet disappeared.
Insurance policy contained the usual
stipulation that any action or suit While driving his car along EDSA,
must be filed within one year after the Cesar sideswiped Roberto, causing
rejection of the claim. injuries to the latter. Roberto sued
After his building burned down, Cesar and the third party liability
Robin filed his claim for fire loss with insurer for damages and/ or
EFG. On February 28, 1994, EFG insurance proceeds. The insurance
denied Robin’s claim. On April 3, company moved to dismiss the
1994, Robin sought reconsideration of complaint contending that the
the denial, but EFG reiterated its liability of Cesar has not yet been
position. On March 30, 1995, Robin determined with finality.
commenced judicial action EFG.
Should Robin’s action be given due (1) Is the contention of the insurer
course? Explain. correct? Explain.

SUGGESTED ANSWER: 1997
No, the contention of the insurer is
not correct . There is no The assured answered “No” to the
need to wait for the decision of the question in the application for a life
court determining Cesar’s liability policy. “Are you suffering from any
with finality before the third party form of heart illness?” In fact, the
liability insurer could be sued. The assured has been a heart patient for
occurrence of the injury to Roberto many years. On September 7, 1991,
immediately gave rise to the liability the assured killed in a plane crash.
of the insurer under its policy. In The insurance company denies the
other words, where an insurance claim for insurance proceeds and
policy insures directly against returns the premium paid.
liability, the insurer’s liability accrues Is the decision of the insurance
immediately upon the occurrence of company justified?
the injury or event upon which the
liability depends. SUGGESTED ANSWER:
(2) May the insurer be held Assuming that the incontestability clause
solidarily liable with Cesar? does not apply because the policy has not
been in force for 2 years, form the date of
SUGGESTED ANSWER: issue, during the lifetime of the insured, the
The insurer cannot be held solidarily liable decision of the insurance company not to
with Cesar. The liability of the insurer is pay is justified. There was fraudulent
based on contract while that of Cesar is concealment. It is not material that the
based on tort. If the insurer were solidarily injured died of a different cause than the
liable with Cesar, it could be made to pay fact concealed, that is heart ailment, is
more than the amount stated in the policy. material to the determination by the
This would, however, be contrary to the insurance company whether or not to
principles underlying insurance contracts. accept the application for insurance and to
On the other hand, if the insurer were require the medical examination of the
solidarily liable with Cesar and it is made insured.
to pay only up to the amount stated in the However, if the contestability clause which
insurance policy, the principle underlying applies to the insurance policy covering the
solidary obligations would be violated. life of the insured had been in forced in 2
years from issuance thereof, the insurance

company would not be justified in denying proceeds of the policy as the
the claim for proceeds of the insurance and designated beneficiary therein. The
in returning the prmium paid. In that case, widow, Cynthia also filed a claim as
the insurer cannot prove the policy void ab the legal wife. To whom should the
initio or rescindible by reason of fraudulent proceeds of the insurance policy be
concealment of misrepresentation of the awarded?
insured.
SUGGESTED ANSWER:
A obtains a fire insurance on his The proceeds of the insurance policy shall
house and as a generous gesture be awarded to the estate of Juan Dela Cruz,
names is neighbors as the beneficiary. the common law wife, is disqualified as the
If A’s house is destroyed by fire, can B beneficiary of the deceased because of illicit
successfully claim against the policy? relation between the deceased and Purita,
the designated beneficiary. Due to the illicit
SUGGESTED ANSWER: relation, Purita cannot be a done of the
No. In Property Insurance, the beneficiary deceased. Hence, she cannot also be his
must have insurable interest in the beneficiary.
property insured. B does not have
insurable interest in the house insured. Renato was issued life insurance
policy on January 2, 1990. He
1998 concealed the fact that three prior to
Juan de la Cruz was issued a Policy the insurance of his life insurance
No. 8888 of the Midland Life policy, he had been seeing a doctor
Insurance Co., on a whole life plan for about his heart ailment.
P20, 000 on August 19, 1989. Juan de On March 1, 1992, Renato died of
la Cruz is married to Cynthia with heart failure. May the heirs file a
whom he has three legitimate claim on the proceeds of the life
children. He, however, designated insurance policy of Renato?
Purita, his common-law wife, as the
revocable beneficiary. Juan de la Cruz SUGGESTED ANSWER:
referred to Purita in his application Yes, the life insurance policy in question
and policy as the legal wife. was issued on January 9, 1990. More than
Three years later, Juan de la Cruz 2 years had elapsed when Renato, the
died. Purita filed claim for the insured, died on March 1, 1992. The

contestability clause applies. Insurable Interest: Separate
Insurable Interest (1999)
Incontestability clause, the insurer has two
years from the date of issuance of the A businessman in the grocery
insurance contract or of its last business obtained from First
reinstatement within which to contest the Insurance an insurance policy for
policy, whether or not, the insured still lives P5M to fully cover his stocks-in-trade
within such period. After two years, the from the risk of fire.
defenses of concealment or Three months thereafter, a fire of
misrepresentation, no matter how patent accidental origin broke out and
or well founded, no longer lie. completely destroyed the grocery
including his stocks-in-trade. This
A marine insurance on cargo states prompted the businessman to file
that “the insurer shall be liable for with First Insurance a claim for five
losses incident to “perils of the sea.” million pesos representing the full
During the voyage, sea water entered value of his goods.
the compartment where the cargo was First Insurance denied the claim
stored due to the defective drainpipe because it discovered that at the time
of the ship. The insured filed an of the loss, the stocks-in-trade were
action on the policy for recovery of mortgaged to a creditor who likewise
the damages caused to the cargo. May obtained from Second Insurance
the insured recover damages? Company fire insurance coverage for
the stocks at their full value of P5M.
SUGGESTED ANSWER:
No. The proximate cause of the damage to a) May the businessman and the
the cargo insured was the defective creditor obtain separate insurance
drainpipe of the ship. This is peril of the coverages over the same stocks-in-
ship, and not peril of the sea. The defect in trade? Explain (3%)
the drainpipe was the result of the ordinary b) First Insurance refused to pay
use of the ship. To recover under a marine claiming that double insurance is
insurance policy, the proximate cause of contrary to law. Is this contention
the loss or damage must be peril of the sea. tenable? (3%)
c) Suppose you are the Judge, how
much would you allow the
businessman and the creditor to

recover from their respective Insurable Interest: Bank Deposit
insurers. Explain (3%) (2000)
SUGGESTED ANSWER: BD has a bank deposit of half a

a) Yes. The businessman, as owner, million pesos. Since the limit of the
and the creditor, as mortgagee, have insurance coverage of the Philippine
separate insurable interests in the same Deposit Insurance Corp (PDIC) (RA
stocks-in-trade. Each may insure such 3591) is only one tenth of BD’s
interest to protect his own separate deposit, he would like some
interest. protection for the excess by taking out
an insurance against all risks or
b) The contention of First Insurance contingencies of loss arising from any
that double insurance is contrary to law is unsound or unsafe banking practices
untenable. There is no law providing that including unforeseen adverse effects
double insurance is illegal per se. of the continuing crisis involving the
banking and financial sector in the
Moreover, in the problem at hand, there is Asian region. Does BD have an
no double insurance because the insured insurable interest within the meaning
with the First Insurance is different from of the Insurance Code of the
the insured with the Second Insurance Philippines (PD1460)? (2%)
Company. The same is true with respect to
the interests insured in the two policies.
SUGGESTED ANSWER:
c) As Judge, I would allow the Yes. BD has insurable interest in his bank
businessman to recover his total loss of deposit. In case of loss of said deposit, more
P5M representing the full value of his particularly to the extent of the amount in
goods which were lost through fire. As to excess of the limit covered by the PDIC Act,
the creditor, I would allow him to recover PBD will be damnified. He will suffer
the amount to the extent of or equivalent to pecuniary loss of P300,000.00, that is, his
the value of the credit he extended to the bank deposit of half a million pesos minus
businessman for the stocks-in-trade which P200,000.00 which is the maximum
were mortgaged by the businessman. amount recoverable from the PDIC.

Insurable Interest: Public Enemy He immediately assigned all his rights
(2000) to the insurance proceeds to BX, a
friend-companion living with him.
May a member of the MILF or its Three years later, IS died in a fire that
breakaway group, the Abu Sayyaf, be gutted his insured house two days
insured with a company licensed to do after he had sold it. There is no
business under the Insurance Code of evidence of suicide or arson or
the Phils (PD 1460)? Explain. (3%) involvement of BX in these events. BX
demanded payment of the insurance
SUGGESTED ANSWER: proceeds from the two policies, the
A member of the MILF or the Abu Sayyaf premiums for which IS had been
may be insured with a company licensed to faithfully paying during all the time
do business under the Insurance Code of he was alive. Starbrite refused
the Phils. What is prohibited to be insured payment, contending that BX had no
is a public enemy. A public enemy is a insurable interest and therefore was
citizen or national of a country with which not entitled to receive the proceeds
the Philippines is at war. Such member of from IS’s insurance coverage on his
the MILF or the Abu Sayyaf is not a citizen life and also on his property. Is
or national of another country, but of the Starbrite’s contention valid? Explain?
Philippines. (5%)
Insurable Interest; Life vs. Property SUGGESTED ANSWER:

Insurance (2000)
Starbrite is correct with respect to the
IS, an elderly bachelor with no known insurance coverage on the property of IS.
relatives, obtained life insurance The beneficiary in the property insurance
coverage for P250,000.00 from policy or the assignee thereof must have
Starbrite Insurance Corporation, an insurable interest in the property insured.
entity licensed to engage in the BX, a mere friend-companion of IS, has no
insurable business under the insurable interest in the residential house
Insurance Code of the Philippines of IS. BX is not entitled to receive the
(PD1460). He also insured his proceeds from IS’s insurance on his
residential house for twice that property. As to the insurance coverage on
amount within the same corporation. the life of IS, BX is entitled to receive the

proceeds. There is no requirement that BX of facts the existence of which the insured
should have insurable interest in the life of was ignorant without his fault; or when,
IS. It was IS himself who took the by any default of the insured other than
insurance on his own life. actual fraud, the insurer never incurred
any liability under the policy.
Insurance; Return of Premiums
(2000) ALTERNATIVE INSTANCE:
In case of an over insurance by several
Name at least three instances when an insurers, the insured is entitled to a ratable
insured is entitled to a return of the return of the premium, proportioned to the
premium paid. amount by which the aggregate sum
insured in all the policies exceeds the
SUGGESTED ANSWER: insurable value of the thing at risk.
Three instances when an insured is
entitled to a return of premium paid are: Insurer; 3rd Party Liability (2000)
1. To the WHOLE PREMIUM, if no X was riding a suburban utility
part of his interest in the thing insured be vehicle (SUV) covered by a
exposed to any of the perils insured comprehensive motor vehicle liability
against. insurance (CMVLI) underwritten by
FastPay Insurance Company when it
2. Where the insurance is made for a collided with a speeding bus owned by
definite period of time and the insured RM Travel Inc. The collision resulted
surrenders his policy, to such portion of the in serious injuries to X; Y, a
premium as corresponds with the passenger of the bus; and Z, a
unexpired time at a pro rata rate, unless a pedestrian waiting for a ride at the
short period rate has been agreed upon scene of the collision. The police
and appears on the face of the policy, after report established that the bus was
deducting from the whole premium any the offending vehicle. The bus had
claim for loss or damage under the policy CMVLI policy issued by Dragon Ins
which has previously accrued. Co. X, Y, and Z jointly sued RM Travel
and Dragon Ins for indemnity under
3. When the contract is voidable on the Insurance Code of the Phils
account of the fraud or misrepresentation (PD1460). The lower court applied the
of the insurer or of his agent or on account “no fault” indemnity policy of the

statute, dismissed the suit against RM 1) That the ship is seaworthy to make
Travel, and ordered Dragon Ins to pay the voyage and/or to take in certain
indemnity to all three plaintiffs. Do cargoes
you agree with the court’s judgment? 2) That the ship shall not deviate from
Explain (2%) the voyage insured;
3) That the ship shall carry the
SUGGESTED ANSWER: necessary documents to show nationality
No. The cause of action of Y is based on the or neutrality and that it will not carry any
contract of carriage, while that of X and Z document which will cast reasonable
is based on torts. The court should not have suspicion thereon;
dismissed the suit against RM Travel. The 4) That the ship shall not carry
court should have ordered Dragon Ins to contraband, especially if it is making a
pay each of X, Y , and Z to the extent of the voyage through belligerent waters.
insurance coverage, but whatever amount
is agreed upon in the policy should be
answered first by RM Travel and the Insurable Interest; Property
succeeding amount should be paid by Insurance (2001)
Dragon Insurance up to the amount of the
insurance coverage. The excess of the JQ, owner of a condominium unit,
claims of X, Y, and Z, over and above such insured the same against fire with the
insurance coverage, if any, should be XYZ Insurance Co., and made the loss
answered or paid by RM Travel. payable to his brother, MLQ. In case
of loss by fire of the said
Marine Insurance; Implied condominium unit, who may recover
Warranties (2000) on the fire insurance policy? State the
reason(s) for your answer. (5%)
What warranties are implied in
marine insurance? SUGGESTED ANSWER:
JQ can recover on the fire insurance
SUGGESTED ANSWER: policy for the loss of said condominium
The following warranties are implied in unit. He has the insurable interest as
marine insurance: owner-insured. As beneficiary in the fire
insurance policy, MLQ cannot recover on
the fire insurance policy. For the

beneficiary to recover on the fire or Insurable Interest; Life vs. Property
property insurance policy, it is required Insurance (2002)
that he must have insurable interest in the
property insured. In this case, MLQ does Distinguish insurable interest in
not have insurable interest in the property insurance from insurable
condominium unit. interest in life insurance. (5%)
Concealment; Material Concealment SUGGESTED ANSWER:

(2001) a) In property insurance, the
A applied for a non-medical life expectation of benefit must have a legal
insurance. The insured did not basis. In life insurance, the expectation of
inform the insurer that one week benefit to be derived from the continued
prior to his application for insurance, existence of a life need not have any legal
he was examined and confined at St. basis.
Luke’s Hospital where he was
diagnosed for lung cancer. The b) In property insurance, the actual
insured soon thereafter died in a value of the interest therein is the limit of
plane crash. Is the insurer liable the insurance that can validly be placed
considering that the fact concealed thereon. In life insurance, there is no limit
had no bearing with the cause of to the amount of insurance that may be
death of the insured? Why? (5%) taken upon life.
c) In property insurance, an interest

SUGGESTED ANSWER: insured must exist when the insurance
No. The concealed fact is material to the takes effect and when the loss occurs but
approval and issuance of the insurance need not exist in the meantime. In life
policy. It is well settled that the insured insurance, it is enough that insurable
need not die of the disease he failed to interest exists at the time when the contract
disclose to the insurer. It is sufficient that is made but it need not exist at the time of
his nondisclosure misled the insurer in loss.
forming his estimate of the risks of the
proposed insurance policy or in making Insurer; Authorized Driver Clause
inquiries. (2003)

Rick de la Cruz insured his passenger
jeepney with Asiatic Insurers, Inc. Josie Gatbonton obtained from
The policy provided that the Warranty Insurance Corporation a
authorized driver of the vehicle comprehensive motor vehicle
should have a valid and existing insurance to cover her brand new
driver’s license. The passenger automobile. She paid, and the insurer
jeepney of Rick de la Cruz which was accepted payment in check. Before
at the time driven by Jay Cruz figured the check could be encashed, Josie
in an accident resulting in the death was involved in a motor vehicle
of a passenger. At the time of the accident where her car became a total
accident, Jay Cruz was licensed to wreck. She sought payment from the
drive but it was confiscated by an LTO insurer. Could the insurer be made
agent who issued him a Traffic liable under the insurance coverage?
Violation Report (TVR) just minutes (6%)
before the accident. Could Asiatic
Insurers, Inc., be made liable under SUGGESTED ANSWER:
its policy? Why? (6%) (per Dondee) Yes, because there was a
perfected contract of insurance the moment
SUGGESTED ANSWER: there is a meeting of the minds with respect
Asiatic Insurers, Inc., should be made to the object and the cause of payment. The
liable under the policy. The fact that the payment of check is a valid payment unless
driver was merely holding a TVR does not upon encashment the check bounced.
violate the condition that the driver should 2004
have a valid and existing driver’s license.
Besides, such a condition should be Insured; Accident Policy
disregarded because what is involved is a
passenger jeepney, and what is involved CNI insure SAM under a
here is not own damage insurance but homeowner’s policy against claims
third party liability where the injured for accidental injuries by neighbors.
party is a third party not privy to the SAM’s minorson, BOY, injured 3
contract of insurance. children of POS, a neighbor, who sued
SAM for damages. SAM’s lawyer was
Insurance; Perfection of Insurance ATT, who paid for his services by the
Contracts (2003) insurer for reporting periodically on

the case to CNI. In one report, ATT (1992), it was explained that there is no
disclosed to CNI that after his “accident” in the context of an accident
investigations, he found the injuries policy, if it is the natural result of the
to the 3 children not accidental but insured’s voluntary act, unaccompanied by
intentional. anything unforeseen except the injury.
There is no accident about the injury. This
SAM lost the case in court, and POS element of deliberateness is not clearly
was awarded one million pesos in shown from the facts of the case, especially
damages which he sought to collect considering the fact that BOY is a minor,
from the insurer. But CNI used ATT’s and the injured parties are also children.
report to deny the claim on the Accordingly, it is possible that CNI may not
ground that the injuries to POS’s 3 prosper. ATT’s report is not conclusive on
children were intentional, hence POS or the court.
excluded from the policy’s coverage.
POS countered that CNI was stopped 2005
against his client to the insurer, CNI. Beneficiary: Effects: Irrevocable
Who should prevail: the claimant, Beneficiary
POS; or the insurer, CNI? Decide with
reasons briefly. (5%) What are the effects of an irrevocable
designation of a beneficiary under the
SUGGESTED ANSWER: Insurance Code? Explain. (2%)
CNI is not stopped from using ATT’s report,
because CNI, in the first place, SUGGESTED ANSWER:
commissioned it and paid ATT for it. On the The irrevocable designation gives the
other hand, ATT has no conflict of interest beneficiary a vested right over Life
because SAM and CNI are on the same Insurance. The insured cannot act to divest
side--- their interests being congruent with the irrevocable beneficiary, in whole or in
each other, namely, to oppose POS’s claim. part, without the beneficiary’s consent. To
It cannot be said that ATT has used the be specific:
information to the disadvantage or
prejudice of SAM. (1) The beneficiary designated in a life
insurance contract cannot be changed
However, in Finman General Assurance without the consent of the beneficiary
Corp. v. Court of Appeals, 213 SCRA 493 because he has a vested interest in the

policy (Philamlife v. Pineda, G.R. No.
54216, July 19, 1989, citing Gcrcio v. Sun Jacob obtained a life insurance policy
Life, G.R. No. 23703, September 28, 1925; for P1 Million designating irrevocably
and Go v. Redfern, G.R. No. 47705, April Diwata, a friend, as his beneficiary.
25, 1841); Jacob, however, changed his mind
and wants Yob and Jojo, his other
(2) Neither can the Insured take the friends, to be included as
cash surrender value, assign or even beneficiaries considering that the
borrow on said policy without the proceeds of the policy are sufficient
beneficiary’s consent (Nario v. Philamlife, for the three friends. Can Jacob still
G.R. No. 22796, June 26, 1967); add Yob and Jojo as his beneficiaries?
Explain. (2%)
(3) The Insured cannot add another
beneficiary because that would reduce the SUGGESTED ANSWER:
amount which the first beneficiary may No, Jacob can no longer add Yob and Jojo
recover and therefore adversely affect his as his beneficiaries in addition to Diwata.
vested right (Go v. Redfern, G.R. No. As the irrevocable beneficiary, Diwata has
47705, April 25, 1941); acquired a-vested right over Jacob’s life
insurance policy. Any additional
(4) Unless the policy allows, the beneficiaries will reduce the amount which
Insured cannot even designate another Diwata, as the first beneficiary, may
beneficiary should the original beneficiary recover, which will adversely affect her
predecease him. His estate acquires the vested right. (Go v. Redfern, G.R. No.
beneficiary’s vested right upon his death; 47705, April 25, 1941)
and
(5) The Insured cannot allow his Insurance; Double Insurance

creditors to attach or execute on the policy.
(Philamlife v. Pineda, G.R. No. 54216, July When does double insurance exist?
19, 1989) (2%)
SUGGESTED ANSWER:
Beneficiary: Rights: Irrevocable Under Section 93 of the Insurance Code,
Beneficiary there is double insurance when there is

over-insurance with two or more which he is liable under his contract. (Sec.
companies, covering the same property, 94, Insurance Code)
the same insurable interest and the same
risk. Double insurance exists where the
same person is insured by several insurers Loss: Constructive Total Loss
separately in respect of the same subject
matter and interests. (Geagonia v. Court of M/V Pearly Shells, a passenger and
Appeals, G.R. No. 114427, February 6, cargo vessel, was insured for
1995) P40,000,000,00 against—
constructive total loss. Due to a
typhoon, it sank near Palawan.
Insurer: Effects: Several Insurers Luckily, there were no casualties, only
injured passengers. The ship owner
What is the nature of the liability of sent a notice of abandonment of his
the several insurers in double interest over the vessel to the
insurance? Explain. (2%) insurance company which then hired
professionals to afloat the vessel for
SUGGESTED ANSWER: P900,000.00. When refloated, the
The nature of the liability of the several vessel needed repairs estimated at
insurers in double insurance is that each P2,000,000.00. The insurance
insurer is bound to contribute ratably to company refused to pay the claim of
the loss in proportion to the amount for the ship owner, stating that there was
which he is liable under his contract as –no constructive total loss.
provided for by Sec 94 of ICP par. The a) Was there –constructive total
ratable contribution of each insurer will be loss to entitle the ship owner to
determined based on the following recover from the insurance company?
formula: AMOUNT OF POLICY divided by Explain.
TOTAL INSURANCE TAKEN multiplied by
LOSS = LIABILITY OF THE INSURER. b) Was it proper for the ship
owner to send a notice of
ALTERNATIVE ANSWER: abandonment to the insurance
Each insurer is bound, as between himself company? Explain. (5%)
and other insurers, to contribute ratably to
the loss in proportion to the amount for

SUGGESTED ANSWER: of Appeals and Panama Saw Mill, G.R. No.
a) No, there was no “constructive total 940552, August 9, 1991).
loss” because the vessel was refloated and
the costs of refloating plus the needed 2006
Mutual insurance Company; Nature &
repairs (P2.9 Million) will not be more than
Definition
three-fourths of the value of the vessel. A
constructive total loss is one which gives to What is mutual insurance company or
a person insured a right to abandon. (Sec. association?
131, Insurance Code) There would have
been a constructive total loss had the vessel SUGGESTED ANSWER:
MN Pearly Shells suffer loss or needed A mutual life insurance corporation is a
refloating and repairs of more than the cooperative that promotes the welfare of its
required three-fourths of its value, i.e., own members, with the money collected
more than P30.0 Million (Sec. 139, from among themselves and solely for their
Insurance code, cited in Oriental Assurance own protection and not for profit. Members
v. Court of Appeals and Panama Saw Mill, are both insurer and insured. A mutual life
G.R. No. 94052, August 9, 1991) However, insurance company has no capital stock
the insurance company shall pay for the and relies solely upon its contributions or
total costs of refloating and needed repairs premiums to meet unexpected losses,
(P2.9 Million). contingencies and expenses (Republic v.
Sunlife, G.R. No. 158085, October 14,
b) No, it was not proper for the ship 2005).
owner to send a notice of abandonment to
the insurance company because
abandonment can only be availed of when, Insurance; Effects; Payments of
in a marine insurance contract, the amount Premiums by Installment
to be expended to recover the vessel would
have been more than three-fourths of its The Peninsula Insurance Company
value. Vessel MN Pearly Shells needed only offered to insure Francis’ brand new
P2.9 Million, which does not meet the car against all risks in the sum of P1
required three-fourths of its value to merit Million for 1 year. The policy was
abandonment. (Section 139, Insurance issued with the premium fixed at
Code, cited in Oriental assurance v. Court 160,000.00 payable in 6 months.
Francis only paid the first two months

installments. Despite demands, he pay the insurance premium. Upon
failed to pay the subsequent delivery of the policy on May 15, 2006,
installments. Five months after the Alfredo issued a postdated check
issuance of the policy, the vehicle was payable on May 30, 2006. On May 28,
car-napped. Francis filed with the 2006, a fire broke out and destroyed
insurance company a claim for its the building owned by Alfredo. (10%)
value. However, the company denied
his claim on the ground that he failed [A] May Alfredo recover on the
to pay the premium resulting in the insurance policy?
cancellation of the policy. Can Francis
recover from the Peninsula Insurance [B] Would your answer in [A] be the
Company? (5%) same if it was found that the
proximate cause of the fire was an
SUGGESTED ANSWER: explosion and that fire was but the
Yes, when the insured and insurer have immediate cause of loss and there is
agreed to the payment of premium by no excepted peril under the policy?
installments and partial payment has been
made at the time of loss, then the insurer [C] If the fire was found to have been
becomes liable. When the car loss happened caused by Alfredo’s own negligence,
on the 5th month, the six months agreed can he still recover on the policy?
period of payment had not yet elapsed
(UCPB General Insurance v. Masagana Reason briefly in [A], [B] and [C].
Telamart, G.R. No. 137172, April 4, 2001).
Francis can recover from Peninsula SUGGESTED ANSWER:
Insurance Company, but the latter has the [A] Yes Alfredo may recover on the policy.
right to deduct the amount of unpaid It is valid to stipulate that the insured will
premium from the insurance proceeds. be granted credit term for payment of
premium. Payment by means of a check
2007 which was accepted by the insurer, bearing
Insurance; Property Insurance; a date prior to the loss, would be sufficient.
Payment of Premiums by Check
The subsequent effects of encashment
Alfredo took out a policy to insure this retroact to the date of the check (UCPB
commercial building fire. The broker General Insurance Co., v. Masagana
for the insurance company agreed to Telamart, Inc., 356 SCRA 307, 2001).
give a 15-day credit within which to

[B] Yes, recovery under the insurance killing of Antonio Rivera? Discuss
contract is allowed if the cause of the loss with reasons. (4%)
was either the proximate or the immediate
cause as long as an excepted peril, if any SUGGESTED ANSWER:
was not the proximate cause of the loss Under Section 12 of the Insurance Code, the
(Section 86, Insurance Code of the interest of the beneficiary shall be forfeited
Philippines). when the beneficiary is the principal,
accomplice, or accessory in willfully
[C] Yes, mere negligence on the part of the bringing about the death of the insured. In
insured will not prevent recovery under the which event, the nearest relative of the
insurance policy. The law merely prevents insured shall receive the proceeds of said
recovery when the cause of loss is the insurance if not otherwise disqualified.
willful act of the insured, alone or in Thus, the insurance company must still pay
connivance with other ( Section 87, out the proceeds of the life insurance policy
Insurance Code of the Philippines). to the nearest qualified relative of the
insured.
2008
Beneficiary; Death of Insured Due to
Beneficiary Insurer; Effects; Several Insurers
On January 1, 2000, Antonio Rivera Terrazas de Patio Verde, a

secured a life insurance from SOS condominium building, has a value of
Insurance Corp. for P1 Million with P50 Million. The owner insured the
Gemma Rivera, his adopted daughter, building against fire with three (3)
as the beneficiary. Antonio Rivera insurance companies for the
died on March 4, 2005 and in the following amounts:
police investigation, it was
ascertained that Gemma Rivera Northern Insurance Corp. - P20
participated as an accessory in the Million
killing of Antonio Rivera. Can SOS
Insurance Corp. avoid liability by Southern Insurance Corp. - P 30
setting up as a defense the Million
participation of Gemma Rivera in the
Eastern Insurance Corp. - P50 Million

(A) Is the owner’s taking of contracts over the building are deemed
insurance for the building with three valid and enforceable.
(3) insurers valid? Discuss. (3%)
(B) The building was totally razed The law prohibits double or over-recovery,
by fire. If the owner decides to claim not double insurance. Since Eastern
from Eastern Insurance Corp. only insured the property up to 50% of the total
P50 Million, will the claim prosper? coverage, it is liable for only 50% of the
Explain. (2%) total actual loss. Eastern insurance Corp. is
liable to the extent of its coverage but may
SUGGESTED ANSWER: recover one-half of the total indemnity
(A) Taking out insurance covering the from the co-insurers in the proportion of
same property, same insurable interest 60% (Southern Insurance) – 40%
and same risk with three insurance (Northern Insurance).
companies is “double insurance”,
recognized under Sec. 93, of the Insurance Insurance; Perfection of Insurance
Code. However, in American Home Contracts (2009)
Assurance Co. v. Chua, G.R. No. 130421,
June 28, 1999, the court referred to the No.IV. Antarctica Life Assurance
common inclusion of the “other insurance Corporation (ALAC) publicly offered a
clause” in the fire insurance policies, specially designed insurance policy
requiring disclosure of co-insurance of the covering persons between the ages of
same property with other insurers. 50 to 75 who may be afflicted with
serious and debilitating illnesses.
(B) Insured can recover from Eastern Quirico applied for insurance
Insurance Corp. up to the extent of his loss. coverage, stating that he was already
However, Eastern may refuse to pay if the 80 years old. Nonetheless, ALAC
policy contains an “other insurance clause” approved his application.
stipulating that non-disclosure of double
insurance will avoid the policy (Geagonia Quirico then requested ALAC for the
v. County Bankers Insurance, G.R. No. issuance of a cover note while he was
114427, February 6, 1995). As there is no trying to raise funds to pay the
indication of a contractual prohibition on insurance premium. ALAC granted
double or other insurance, all insurance the request. Ten days after he
received the cover note, Quirico had a

heart seizure and had to be but is integrated in the regular policy to be
hospitalized. He then filed a claim on subsequently issued.
the policy.
Insurance; Property Insurance;
(A) Can ALAC validly deny the claim Assignments (2009)
on the ground that the insurance
coverage, as publicly offered, was No.XIII. Ciriaco leased a commercial
available only to persons 50 to 75 apartment from Supreme Building
years of age? Why or why not? (2%) Corporation (SBC). One of the
provisions of the one-year lease
SUGGESTED ANSWER: contract states:
No. By approving the application of
Quirino who disclosed that he was already ―18.xxx The LESSEE shall not insure
80 years old, ALAC waived the age against fire the chattels, merchandise,
requirement. ALAC is now estopped from textiles, goods and effects placed at
raising such defense of age of the insured. any stall or store or space in the
leased premises without first
(B) Did ALAC’s issuance of a cover obtaining the written consent of the
note result in the perfection of an LESSOR. If the LESSEE obtains fire
insurance contract between Quirico insurance coverage without the
and ALAC? Explain. (3%) consent of the LESSOR, the insurance
policy is deemed assigned and
SUGGESTED ANSWER: transferred to the LESSOR for the
The issuance of a cover note by ALAC latter’s benefit.‖
resulted in the perfection of the contract of
insurance. In that case, it is only because Notwithstanding the stipulation in the
there is delay in the issuance of the policy contract, without the consent of SBC,
that the cover notes was issued. Ciriaco insured the merchandise
inside the leased premises against
The cover note is a receipt whereby the loss by fire in the amount of P500,
company agrees to insure the insured for 000 with First United Insurance
60 days pending the issuance of a regular Corporation (FUIC).
policy. No separate premium is to be paid
on a cover note. It is not a separate policy

A day before the lease contract
expired, fire broke out inside the On April 5, 2010, the car was involved
leased premises, damaging Ciriaco’s in an accident that resulted in its total
merchandise. Having learned of the loss.
insurance earlier procured by Ciriaco,
SBC demanded from FUIC that the On April 10, 2010, the drawee bank
proceeds of the insurance policy be returned Enrique’s check with the
paid directly to it, as provided in the notation ―Insurance funds.‖ Upon
lease contract. notification, Enrique immediately
deposited additional funds with the
Who is legally entitled to receive the bank and asked the insurer to
insurance proceeds? Explain. (4%) redeposit the check.
SUGGESTED ANSWER: Enrique thereupon claimed

Ciriaco is entitled to receive the proceeds indemnity from the insurer. Is the
of the insurance policy. The stipulation that insurer liable under the insurance
the policy is deemed assigned and coverage? Why or why not? (3%)
transferred to SBC is void, because SBC has
no insurable interest in the merchandise of SUGGESTED ANSWER:
Ciriaco (Cha v. Court of Appeals, 277 SCRA The insurer is not liable under the
690 (1997)) insurance policy. Under Article 1249 of the
Civil Code, the delivery of a check produces
the effect of payment only when it is
Insurance; Property Insurance; Late encashed. The loss occurred on April 5,
Payment of Premiums (2010) 2010. When the check was deposited, it was
returned on April 10, 2010, for
No.XI. Enrique obtained from Seguro insufficiency of funds. The check was
Insurance Company a comprehensive honored only after Enrique deposited
motor vehicle insurance to cover his additional funds with the bank. Hence, it
top of the line Aston martin. The did not produce the effect of payment
policy was issued on March 31, 2010 (Vitug, Commercial Laws and
and, on even date, Enrique paid the Jurisprudence, Vol. I, p.250).
premium with a personal check
postdated April 6, 2010.

Insurable Interest; Building from First Insurance Company. First
Destroyed by Fire (2010) Insurance Company is not liable for the
loss of the building. First, it was due to a
No.X. To secure a loan of P10 million, willful act of Mario, who committed arson
Mario mortgaged his building to (Section 87 of the Insurance Code; East
Armando. In accordance with the Furnitures, Inc. v.
loan arrangements, Mario had the Globe & Rutgers Fire Insurance Company,
building insured with First Insurance 57 Phil. 576 (1932)). Second, fire insurance
Company for P10 million, designating policies contain a warranty that the
Armando as the beneficiary. Armando insured will not store hazardous materials
also took an insurance of the building within the insured premises. Mario
upon his own interest with Second breached this warranty when he stored
Insurance Company for P5 million. inflammable materials in the building.
The building was totally destroyed by (Young v. Midland Textile Insurance
fire, a peril insured against under Company, 30 Phil. 617 (1915)).These two
both insurance policies. It was factors exonerate First Insurance Company
subsequent determined that the fire from liability to Armando as mortgagee
had been intentionally started by even though it was Mario who committed
Mario and that in violation of the loan them (Section 8 of the Insurance Code).
agreement, he had been storing
inflammable materials in the (B). What happens to the P10
building. million debt of Mario to Armando?
Explain. (3%)
(A)How much, if any, can
Armando recover from either SUGGESTED ANSWER:
or both insurance companies? Since Armando would have collected P5
(2%) million from Second Insurance Company,
this amount should be considered as partial
SUGGESTED ANSWER: payment of the loan. Armando can only
Armando can receive P5 million from collect the balance of P5 million (Panlileo v.
Second Insurance Company. As Cosio, supra). Second Insurance Company
mortgagee, he had an insurable interest in can recover from Mario the amount of P5
the building (Panlileo v. Cosio, 97 Phil. 919 million it paid, because it became
(1955)). Armando cannot collect anything

subrogated to the rights of Armando
(Panlileo v. Cosio, supra).
Paulo, the owner of an ocean-going SUGGESTED ANSWER:
vessel, offered to transport the logs of The insurance company is not liable,
Constantino from Manila to Nagoya. because there is an implied warranty in
Constantino accepted the offer, not every marine insurance that the ship is
knowing that the vessel was named by seaworthy whoever is insuring the cargo,
an irresponsible crew with deep- whether it be the ship-owner or not. There
seated resentments againsts Paolo, was a breach of warranty, because the logs
their employer. were improperly loaded and the crew was
irresponsible. It is the obligation of the
Constantino insured the Cargo of logs owner of the cargo to look for the reliable
against both perils of the sea and common carrier which keeps its vessel in
barratry. The logs were improperly seaworthy condition (Roque v.
loaded on one side, thereby causing Intermediate Appelate Court, 139 SCRA
the vessel to tilt on one side. On the 596 [1985]).
day to Nagoya, the crew unbolted the
sea valves of the vessel causing water Basic Concepts (2011)
to flood the ship hold. The vessel Shipowner X, in applying for a marine
sank. insurance policy from ABC, Co.,
stated that his vessel usually sails
Constantino tried to collect from the middle of August and with normally
insurance company which denied 100 tons of cargo. It turned out later
liability, given unworthiness of both that the vessel departed on the first
the vessel and its crew. week of September and with only 10
tons of cargo. Will this avoid the
Constantino countered thathe was not policy that was issued? (2011 Bar
the owner of the vessel and he could Question)
therefore not be responsible for the A) 10
conditions about which he was B) 6
innocent. (2010 Bar Question) C) 7
D) 5
Is the insurance company liable? Why
or why not? (3%) SUGGESTED ANSWER:

B.) 6 Insurance that X Shipping was
abandoning the ship. Later, ABC
Beneficiary insurance denied X Shipping;s claim
X has been a long-time household for loss on the ground that a notice of
helper of Z. X’s husband, Y, has also abandonment through its agent is
been Z’s long-time driver. May Z improper. Is ABC Insurance right?
insure the lives of both X and Y with Z (2011 Bar Question)
as beneficiary? (2011 Bar Question) A) Yes, since X Shipping should
A) Yes, since X and Y render have ratified its agent’s action.
services to Z. B) No, since T, as agent of X
B) No, since X and Y have no Shipping who procured the
pecuniary interest on the life of insurance, can also give notice
Z arising from their of abandonment for his
employment with him. principal is sufficient that he
C) No, since Z has no pecuniary was declared no longer a
interest in the lives of X and Y member of the board.
arising from their employment C) Yes, since only the agent X
with him. Shipping relayed the fact of
D) Yes, since X and Y are Z’s abandonment.
employee. D) No, since in the first place, the
damage was more than ¼ of the
SUGGESTED ANSWER: ship value.
B) No, since Z has no pecuniary
interest in the lives of X and Y SUGGESTED ANSWER:
arising from their employment with B) No, since T, as agent of X Shipping
him. who procured the insurance, can
also give notice of abandonment for
X Shipping, Co., insured its vessel MV his principal is sufficient that he was
Don Teodoro for PhP100 Million with declared no longer a member of the
ABC Insurance, Co., through T, an board.
agent of X Shipping. During a voyage,
the vessel accidentally caught fire and X, Co., a partnership, is composed of
suffered damages estimated at PhP80 A (capitalist partner) , B (capitalist
Million. T personally informed ABC partner) and C (industrial partner).

If you were partner A, who between B SUGGESTED ANSWER:
and C would have an insurable B.) Avoids the policy
interest on, such that you may then Basic Concepts (2012)
insure him? (2011 Bar Question)
For both the Life Insurance and
A) No one, as there is merely a Property Insurance, the insurable
partnership contract among A, interest is required to be- (2012 Bar
B and C. Question)
B) Both B and C, as they are your A) Existing at the time of
partner. perfection of the contract and
C) Only C, as he an industrial at the time of loss.
partner. B) Existing at the time of
D) Only B, as he is a capitalist perfection of the contract and
partner. at the time of loss for property
insurance but only at the time
SUGGESTED ANSWER: of perfection for life insurance.
B) Both B and C, as they are your C) Existing at the time of
partner. perfection for property
insurance but for life insurance
Insured both at the time of perfection
and at the time of loss
If an insurance policy prohibits D) Existing at the time of
additional insurance on the property perfection only.
insured without the insurer’s consent,
such provision being valid and SUGGESTED ANSWER:
reasonable, a violation by the insured B) Existing at the time of perfection of
(2011 Bar Question) the contract and at the time of loss for
A) Reduced the value of the policy. property insurance but only at the time of
B) Avoids the policy perfection for life insurance.
C) Offsets the value of the policy
with the additional insurance’s X, in January 30, 2009, or two (2)
value. years before reaching the age of 65,
D) Forfeits premiums already paid. insured his life for Php20 Million. For
reason unknown to his family, he took

his own life two (20 days after his 65 th C) The proceeds of the life
birthday. The policy contained no insurance will go to the
excepted risk. Which statement is compulsory heirs of Y.
most accurate? (2012 Bar Question) D) The proceeds of the life
A) The insurer will be liable. insurance will be divided
B) The insurer will not be liable. equally amongst X and the
C) The state of sanity of the compulsory heirs of Y.
insured is relevant in cases of
suicide in order to hold the SUGGESTED ANSWER:
insurer liable. A) X as the sole beneficiary
D) The state of sanity of the under the life insurance
insured is irrelevant in cases of policy on the life of Y will be
suicide in order to hold the entitled to the proceeds of
insurer liable. the life insurance.
SUGGESTED ANSWER: X, a minor, contracted an insurance

A) The insurer will be liable. on his own life. Which statement is
most accurate? - (2012 Bar Question)
X is the common law wife of Y. Y loves A) The life insurance is void ab
X so much that he took out a life initio.
insurance on his own life and made B) The life insurance is valid
her the sole beneficiary. Y did this to provided it is with the consent
ensure that X will be financially of the beneficiary.
comfortable when he is gone. Upon C) The life insurance policy is
the death of Y, - (2012 Bar Question) valid provided the beneficiary
A) X as the sole beneficiary under is his estate or his parents, or
the life insurance policy on the spouse or child.
life of Y will be entitled to the D) The life insurance is valid
proceeds of the life insurance. provided the disposition of the
B) Despite the designation of X as proceeds will be subject to the
the sole beneficiary, the approval of the legal guardian
proceeds of the life insurance of the minor.
will go to the estate of Y.
SUGGESTED ANSWER:

C) The life insurance policy is valid house be insured. The owner of the
provided the beneficiary is his policy failed to endorse nor assign the
estate or his parents, or spouse or
policy to the bank. However, the deed
child.
of Real Estate Mortgage has an
express provision which says that the
An insurance contract is a contract of
insurance policy is also endorsed with
adhesion, which means that in
the signing of the REM. Will this be
resolving ambiguities in the provision
sufficient? (2012 Bar Question)
of the insurance contract, (2012 Bar
A) No, insurance policy must be
Question)
expressly endorsed to the bank
A) The general rule is that, the
so that the bank will have a
insurance contract is to be
right in the proceeds of such
interpreted strictly in
insurance in the event of loss.
accordance with what is written
B) The express provision
in the contract.
contained in the Deed of Real
B) Are to be construed liberally in
Estate Mortgage to the effect
favour of the insured and
that the policy is also endorsed
strictly against the insurer who
is sufficient.
drafted the insurance policy.
C) Endorsement of Insurance
C) Are to be construed strictly
Policy in any form is not legally
against the insured and
allowed.
liberally in favour of the
D) Endorsement of the Insurance
insurer.
Policy must be in a formal
D) If there is an ambiguity in the
document to be valid.
insurance contract, this will
invalidate the contract.
SUGGESTED ANSWER:
A) No, insurance policy must be
SUGGESTED ANSWER:
expressly endorsed to the bank so that the
B.) Are to be construed liberally in favour
bank will have a right in the proceeds of
of the insured and strictly against the
such insurance in the event of loss.
insurer who drafted the insurance policy.
A house and lot is covered by a real

X insured the buildings he owns with
estate mortgage (REM) in favour of
two (2) insurance companies for the
ZZZ bank. The bank required that the

same amount. In case of damage, D) The insurance policy is fixed
(2012 Bar Question) regardless of the change in the
A) X cannot claim from any of the use.
two (2) insurers because with
the double insurance, the Recommendation in respect of MCQ:
insurance coverage becomes It is recommended that examinees be given
automatically void. full credit of whatever answer they gave as
B) The two (2) insurers will be the question is unclear. What is clear is
solidarily liable to the extent of there was a misrepresentation of the part
the loss. of X when he indicate in his application
C) The two (2) insurers will be that the building is residential when it was
proportionately liable. actually being used as a warehouse. The
D) X can choose who he wants to problem does not indicate that the change
claim against. in the use of the house was carried out by X
and that it was done without the
SUGGESTED ANSWER: permission of the insurer.
D) X can choose who he wants to claim
against.
A group of Malaysians wanted to
When X insured his building, X invest in the Philippines’ insurance
indicated in the application that it is a business. After negotiations, they
residential building, but actually the agreed to organize “FIMA Insurance
building was being used as a Corp.” with a group of Filipino
warehouse for some hazardous businessmen. FIMA would have a
materials. What is the effect on the PhP50 Million paid up capital, PhP40
insurance policy, if any? (2012 Bar Million of which would come from the
Question) Filipino group. All corporate officers
A) The insurance policy can be would be Filipinos and 8 out of 10-
cancelled because of the change member Board of Directors would be
in the use. Filipinos. Can FIMA operate an
B) The insurance policy will insurance business in the
automatically be charged. Philippines? (2012 Bar Question)
C) The insurance policy need not
be changed.

A) No, since an Insurance C) No, since Y actually made a
company must have at least conditional donation in X’s
PhP75 Million paid-up capital. favor.
B) Yes, since there is substantial D) No, since it is infact an
compliance without innominate contract between X
nationalization laws respecting and Y.
paid-up capital and Filipino
dominated Board of Directors.
C) Yes, since FIMA’s paid up SUGGESTED ANSWER:
capital more than meets the C) No, since Y actually made a
country’s nationalization laws. conditional donation in X’s favour.
D) No, since an insurance
company should be 100% Insurance; Double Insurance, Validity
owned by Filipinos. (2012)
SUGGESTED ANSWER: No.V X borrowed from CCC Bank. She

A) No, since an Insurance company mortgaged her house and lot in favor
must have at least PhP75 Million paid-up of the bank. X insured her house. The
capital. bank also got the house insured.
(A) Is this double insurance?
Explain your answer. (3%)
In return for the 20 years of faithful
service of X as a househelper to Y, the SUGGESTED ANSWER:
latter promised to pay No, there is no double insurance. Double
PhP100,000.00 to X’s heirs if he (X) insurance exists where the same person is
dies in an accident by fire. X agreed. insured by several insurers separately with
Is this an insurance contract? (2011 respect to the same subject and interest.
Bar Question) (Sec. 93, Insurance Code)
A) Yes, since all the elements of
insurance contract are present. (B) Is this legally valid? Explain your
B) Yes, since X services may be answer. (3%)
regarded as the consideration.
SUGGESTED ANSWER:

Yes, X and CCC Bank can both insure the the country that have resulted in the death
house as they have different insurable of thousands of Filipino. A ransom of P15
interest therein. X, the borrower Million was placed on Kaddafy Benjelani’s
mortgagor, has an insurable interest in the head.
house being the owner thereof while CCC
Bank, the lender, also has an insurable Worried about the future of their family,
interest in the house as mortgagee thereof. Kaddafy Benjelani’s estranged wife, Aurelia,
secured in December 2010 a life insurance
(B) In case of damage, can X and policy on his life and designated
CCC Bank separately claim for herself as the beneficiary.
the insurance proceeds? (4%)
Is the policy valid and binding? (1%)
SUGGESTED ANSWER: (2013 Bar Question)
Yes. If X obtained an open policy then she A) Yes, the policy is valid and
could claim an amount corresponding to binding because Aurelia has an
the extent of the damage based on the value insurable interest on the life of
of the house determined as of the date the Kaddafy Benjelani.
damage occurred, but not to exceed the B) No, the policy is not valid and
face value of the insurance policy; binding because Kaddafy
however, if she obtained a valued policy Benjelani has been officially
then she could claim an amount declared a public enemy.
corresponding to the extent of the damage C) Yes, the policy is valid and
based on the agreed upon valuation of the binding because it has been
house. enforced for more than two
years .
As for CCC Bank, it could claim an amount D) No, the policy is not valid and
corresponding to the extent of the damage binding since the espouse’s
but not to exceed the amount of the loan it estrangement removed
extended to X or so much thereof as may Aurelia’s insurable interest in
remain unpaid. Benjelani’s life.
E) None of the above.
In 2010, the Philippine National Police
declared Kaddafy Benjelani – Public Enemy SUGGESTED ANSWER:
No. 11 because of his terrorist activities in

A) Yes, the policy is valid and C) That the insured can still claim
binding because Aurelia has an from the insurance policy after
insurable interest on the life of two (2) years even though
Kaddafy Benjelani. premium is not paid.
D) That the insured can only claim
The policy is valid. Aurelia had proceeds in life insurance’
insurable interest in the life of policy two (2) years after death.
Kaddafy Benjelani because he is
her husband even if they are
estranged (Section 10 (a) of the SUGGESTED ANSWER:
Insurance Code). Kaddfy B) That two (2) years after date of
Benjelani is not a public enemy insurance or reinstatement of
the life insurance policy, the
because he is not a national of
insurer cannot anymore prove
an enemy country (Flipinas that the policy is void ab initio
Compania de Sejunos v. or rescindable by reason of
fraudulent concealment of
Christen, Huefeld & Company,
misrepresentation of the
Inc., 89 Phil. 54, 1951). insured.
The “incontestability clause” in a Life

Concealment; Material Concealment
Insurance Policy means -- (2012 Bar
(2013)
Question)
A) That life insurance proceeds
No.II. Benny applied for life
cannot be claimed two (2) years
insurance for Php 1.5 Million. The
after the death of the insured.
insurance company approved his
B) That two (2) years after date of
application and issued an insurance
insurance or reinstatement of
policy effective Nov, 6, 2008. Benny
the life insurance policy, the
named his children as his
insurer cannot anymore prove
beneficiaries. On April 6, 2010, Benny
that the policy is void ab initio
died of hepatoma, a liver ailment.
or rescindable by reason of
fraudulent concealment of
The insurance company denied the
misrepresentation of the
children’s claim for the proceeds of
insured.
the insurance policy on the ground

that Benny failed to disclose in his
application two previous SUGGESTED ANSWER:
consultations with his doctors for No, there is no double insurance. Double
diabetes and hypertension, and that insurance exit where the same person is
he had been diagnosed to be suffering insured by several insurers separately with
from hepatoma. The insurance respect to the same subject and interest.
company also rescinded the policy (Sec. 93 of the Insurance Code)
and refunded the premiums paid.
Was the insurance company correct? B). Is this legally valid? Explain
(8%) your answer. (3%)
SUGGESTED ANSWER SUGGESTED ANSWER:

The insurance company correctly Yes, X and CCC Bank can both insure the
rescinded the policy because of house as they have different insurable
concealment (Section 27 of Insurance interest therein. X, the borrower
Code). Benny did not disclose that he was mortgagor, has an insurable interest in the
suffering from diabetes, hypertension, and house being the owner thereof what CCC.
hepatoma. The concealment is material, Bank, the lender, also has an insurable
because these are serious ailments interest in the house as mortgagee thereof.
(Florendo v. Philam Plans, Inc., 666 SCRA
618, 2012). Benny died less than two years C). In case of damage, can X and
from the date of the issuance of the policy CCC Bank separately claim for the
(Section 48 of Insurance Code). insurance proceeds. (4%)
Double insurance and overinsurance SUGGESTED ANSWER:

Yes. If X obtained an open policy then she
X borrowed from CCC bank. She could claim an amount corresponding to
mortgaged her house and lot in the extent of the damage based on the value
favour of the bank. X insured her of the house determined as of the date the
house. The bank also get the house damage occurred, but not to exceed the
insured. (2013) face value of the insurance policy;
however, if she obtained a valued policy
A) Is this double insurance? then she could claim an amount
Explain your answer. (3%) corresponding to the extent of the damage

based on the agreed upon valuation of the issued a receipt; a week later SPMC
house. issued its notice of loss.
As for CCC Bank it could claim an amount SIC responded by issuing its own
corresponding to the extent of the damage manager’s check for the amount of
but not to exceed the amount of the loan it the premiums SPMC had paid, and
extended to X or so much thereof as reamin denied SPMC’s claim on the ground
unpaid. that under the ―cash and carry‖
principle governing fire insurance, no
Insurance; Property Insurance; coverage existed at the time the fire
Payment of Premiums even after Loss occurred because the insurance
(2013) premium had not been paid. Is SPMC
entitled to recover for the loss form
No.VII. Stable Insurance Co. (SIC) SIC? (8%)
and St. Peter Manufacturing Co.
(SPMC) have had a long-standing SUGGESTED ANSWER:
insurance relationship with each
other; SPMC secures the St. Peter Manufacturing Company is
comprehensive fire insurance on its entitled to recover for the loss from stable
plant and facilities from SIC. The Insurance Company. Stable Insurance
standing business practice between Company granted a credit term to pay the
them has been to allow SPMC a credit premiums. This is not against the law,
period of 90 days from the renewal of because the standing business practice of
the policy with which to pay the allowing St. Peter Manufacturing
premium. Company to pay the premiums after 60 or
90 days, was relied upon in good faith by
Soon after the new policy was issued SPMC. Stable Insurance Company is in
and before premium payments could estoppels (UCPB General Insurance
be made, a fire gutted the covered Company, Inc. v. Masagana Telemart, Inc.
plant and facilities to the ground. The 356 SCRA 307, 2001).
day after the fire, SPMC issued a
manager’s check to SIC for the fire 2014 Bar Examinations
insurance premium, for which it was

Carlo and Bianca met in the La of the latter. Also, every person has an
Boracay festivities. Immediately, they insurable interest in the life and health of
fell in love with each other and got any person on whom he depends wholly or
married soon after. They have been in part for support. The insurable interest
cohabiting blissfully as husband and in the life of the person insured must exist
wife, but they did not have any when the insurance takes effect but need
offspring. As the years passed by, not exist when the loss occurs. Thus, the
Carlo decided to take out an subsequent knowledge of Carlo, upon the
insurance on Bianca’slife for death of Bianca, that the latter is a
P1,000,000.00 with him (Carlo) as transgender does not destroy his insurable
sole beneficiary, given that he did not interest on the life of the insured
have a steady source of income and he
always depended on Bianca both On May 26, 2014, Jess insured with
emotionally and financially. During Jack Insurance (Jack) his 2014 Toyota
the term of the insurance, Bianca died Corolla sedan under a comprehensive
of what appeared to bea mysterious motor vehicle insurance policy for
cause so that Carlo immediately one year. On July 1, 2014, Jess’ car
requested for an autopsy tobe was unlawfully taken. Hence, he
conducted. It was established that immediately reported the theft to the
Bianca died of a natural cause. More Traffic Management Command (TMC)
than that, it was also established that of the Philippine National Police
Bianca was a transgender all along – a (PNP), which made Jess accomplish a
fact unknown to Carlo. complaint sheet as part of its
Can Carlo claim the insurance procedure. In the complaint sheet,
benefit? (5%) Jess alleged that a certain Ric
Silat(Silat) took possession of the
SUGGESTED ANSWER subject vehicle to add accessories and
Yes. Carlo can claim the insurance benefit. improvements thereon. However,
If a person insures the life or health of Silat failed to return the subject
another person with himself as beneficiary, vehicle within the agreed 3-day
all his rights, title and interests in the period. As a result, Jess notified Jack
policy shall automatically vest in the of his claim for reimbursement of the
person insured. Carlo, as the husband of value of the lost vehicle under the
Bianca, has an insurable interest in the life insurance policy. Jack refused to pay

claiming that there is no theft as Jess The policy obligates Matino to pay
gave Silat lawful possession of the car. Barrack the amount of Six Hundred
Is Jack correct? Thousand Pesos (P600,000.00) in
case of loss or damage to said vehicle
SUGGESTED ANSWER during the period covered, which is
No. Jack is not correct. The “theft clause” of from February 26, 2013 to February
a comprehensive motor vehicle insurance 26, 2014.
policy has been interpreted by the Court in On April 16, 2013, at about 9:00 a.m.,
several cases to cover situations like (1) Barrack instructed his driver, JJ, to
when one takes the motor vehicle of bring the motor vehicle to a near by
another without the latter’s consent even if auto shop for tune-up. However, JJno
the motor vehicle is later returned, there is longer returned and despite diligent
theft—there being intent to gain as the use efforts to locate the said vehicle, the
of the thing unlawfully taken constitutes efforts proved futile. Resultantly,
gain, or (2) when there is taking of a Barrack promptly notified Matino of
vehicle by another person without the the said loss and demanded payment
permission or authority from the owner of the insurance proceeds of
thereof. P600,000.00.
In a letter dated July 5, 2013. Matino
As a rule, an insurance contract is denied the claim, reasoning as stated
consensual and voluntary. The in the contract that "the company
exception is in the case of: (1%) shall not be liable for any malicious
(A) Inland Marine Insurance damage caused by the insured, any
(B) Industrial Life Insurance member of his family or by a person
(C) Motor Vehicle Liability Insurance in the insured’s service.
(D) Life Insurance Is Matino correct in denying the
claim? (4%)
SUGGESTED ANSWER
C. Motor Vehicle Liability Life Insurance SUGGESTED ANSWER
No. Matino is not correct in denying the
On February 21, 2013, Barrack claim. An insurance company cannot deny
entered into a contract of insurance a claim by the owner of a motor vehicle
with Matino Insurance Company who insured it against loss or damage
(Matino) involving a motor vehicle. because the driver he employed stole it.

Matino cannot invoke the provision (D) A mortgage creditor on debtor’s
excluding malicious damages caused by a mortgaged property
person in the service of the insured. In
common ordinary usage, loss means
failure to keep possession, while malicious SUGGESTED ANSWER
damage is damage resulting from the A. A partner in a firm on its future profits
willful act of the driver. Words which have
different meanings shall be understood in On September 25, 2013, Danny
the sense which is most in keeping with the Marcial (Danny) procured an
nature and object of the insurance insurance on his life with a face value
contract. If a stipulation admits several of P5,000,000.00 from RN Insurance
meanings, is should be understood as Company (RN), with his wife Tina
bearing the meaning which is most Marcial(Tina) as sole beneficiary. On
adequate to render it effectual. It may be the same day, Danny issued an
shown that the words have a local, undated check to RN for the full
technical or peculiar meaning and were so amount of the premium. On October
used and understood by the parties. 1, 2013, RN issued the policy covering
Danny’s life insurance. On October 5,
2013, Dannymet a tragic accident and
A person is said to have an insurable died. Tina claimed the insurance
interest in the subject matter insured benefit, but RN was quick to deny the
where he has a relation or connection claim because at the time of Danny’s
with, or concern in it that he will death, the check was not yet encashed
derive pecuniary benefit or advantage and therefore the premium remained
from its preservation. Which among unpaid.
the following subject matters is not Is RN correct? Will your answer be
considered insurable? (1%) the same if the check is dated October
(A) A partner in a firm on its future 15, 2013? (4%)
profits
(B) A general creditor on debtor’s SUGGESTED ANSWER
property No. RN is not correct. After the issuance of
(C) A judgment creditor on debtor’s the check by Danny for the full amount of
property the premium, the unconditional delivery of
an insurance policy of RN to Danny

corresponding to the terms of the consignee’s authorized customs
application ordinarily consummates the broker, RVM.
contract, and the policy as delivered On January 26 and 29, 2011, the
becomes the final contract between the subject shipment was withdrawn by
parties. Where the parties, so intend, the RVM from the custody of ATI. On
insurance becomes effective at the time of January 29, 2011, prior to the
the delivery of the policy notwithstanding withdrawal of the last batch of the
the fact that the check was not yet shipment, a joint inspection of the
encashed. cargo was conducted per the Request
My answer will still be the same even if the for Bad Order Survey (RBO) dated
check is dated October 15, 2013 since an January 28, 2011. The examination
acknowledgment in a policy of the receipt report showed that 30,000 sheets of
of premium is conclusive evidence of its steel were damaged and in bad order.
payment for the purpose of making the NA Insurance paid LT Corporationthe
policy binding. amount of P30,000,000.00 for the
30,000 sheets that were damaged, as
shown in the Subrogation Receipt
On December 1, 2010, Kore A dated January 13, 2013. Thereafter,
Corporation shipped from South NA Insurance demanded reparation
Korea to LT Corporation in Manila against ATI for the goods damaged in
some 300,000 sheets of high-grade its custody, in the amount of
special steel. The shipment was P5,000,00.00. ATI refused to pay
insured against all risks by NA claiming that the claim was already
Insurance (NA). The carrying vessel barred by the statute of limitations.
arrived at the Port of Manila on ATI alleged that the Carriage of Goods
January 10, 2011. When the shipment by Sea Act (COGSA) applies in this
was discharged, it was noted that case since the goods were shipped
25,000 sheets were damaged and in from a foreign port to the Philippines.
bad order. The entire shipment was NA Insurance claims that the COGSA
turned over to the custody of ATI, the does not apply, since ATIis not a
arrastre operator, on January 21, shipper or carrier.
2011 for storage and safekeeping, Who is correct? (5%)
pending its withdrawal by the
SUGGESTED ANSWER

NA Insurance is correct. ATI should be during the effectivity of the renewed
ordered to pay NA Insurance policy, a fire broke out at the Pace
notwithstanding the lapse of the one year Factory which totally burned the
prescriptive period for filing a suit under insured properties.
the COGSA. The term “carriage of goods” The policy forbade the removal of the
under Section 1 in COGSA, covers the insured properties unless sanctioned
period from the time when the goods are by Ilocano. Condition 9(c) of the
loaded to the time when they are policy provides that "the insurance
discharged from the ship infer that the ceases to attach as regards the
period of time when the goods have been property affected unless the insured,
discharged from the ship and given to the before the occurrence of any loss or
custody of the arrastre operator is not damage, obtains the sanction of the
covered by the COGSA. The COGSA does company signified by endorsement
not mention that an arrastre operator may upon the policy x x x (c) if the
invoke the prescriptive period of one year; property insured is removed to any
hence, it does not cover the arrastre building or place other than in that
operator. which is herein stated to be insured."
PAM claims that it has substantially
complied with notifying Ilocano
On May 13, 1996, PAM, Inc. obtained a through its sister company, the RBC,
P15,000,000.00 fire insurance policy which, in fact, referred PAM to
from Ilocano Insurance covering its Ilocano for the insurance coverage. Is
machineries and equipment effective Ilocano liable under the policy?
for one (1) yearor until May 14, 1997. On July 3, 1993, Delia Sotero (Sotero)
The policy expressly stated that the took out a life insurance policy from
insured properties were located at Ilocos Bankers Life Insurance
"Sanyo Precision Phils. Building, Corporation (Ilocos Life) designating
Phase III, Lots 4 and 6, Block 15, Creencia Aban(Aban), her niece, as
PEZA, Rosario, Cavite." Before its her beneficiary. Ilocos Life issued
expiration, the policy was renewed on Policy No. 747, with a face value of
"as is" basis for another year or until P100,000.00, in Sotero’s favor on
May 13, 1998. The subject properties August 30, 1993, after the requisite
were later transferred to Pace Factory medical examination and payment of
also in PEZA. On October 12, 1997, the premium.

On April 10, 1996, Sotero died. Aban (B) May the incontestability
filed a claim for the insurance period set in even in cases of
proceeds on July 9, 1996. Ilocos Life fraud as alleged in this case?
conducted an investigation into the
claim and came out withthe following SUGGESTED ANSWER
findings: Yes. The “incontestability clause” is a
1. Soterodid not personally apply for provision in law that after a policy of life
insurance coverage, as she was insurance made payable on the death of the
illiterate. insured shall have been in force during the
2. Soterowas sickly since 1990. lifetime of the insured for a period of 2
3. Soterodid not have the financial years from the date of its issue or of its last
capability to pay the premium on the reinstatement, the insurer cannot prove
policy. that the policy is void ab initio or is
4. Soterodid not sign the application rescindable by reason of fraudulent
for insurance. concealment or misrepresentation of the
5. Aban was the one who filed the insured or his agent.
insurance application and designated In this case, the policy was issued on
herself as the beneficiary. August 30, 1993, and the insured died on
For the above reasons and claiming April 10, 1996. The insurance policy was
fraud, Ilocos Life denied Aban’s claim thus in force for a period of 3 years, 7
on April 16, 1997, but refunded the months and 24 days. Considering that the
premium paid on the policy. (6%) insured died after the 2-year period, Ilocos
(A) May Sotero validly designate is, therefore, barred from proving that the
her niece as beneficiary? policy is void ab initio by reason of the
insured’s fraudulent concealment or
misrepresentation or want of insurable
SUGGESTED ANSWER interest on the part of the beneficiary.
Yes. Sotero may validly designate her
niece, Aban, as beneficiary. Sotero had (C) Is Aban entitled to claim the
insurable interest in her own life, and could proceeds under the policy?
validly designate anyone as her
beneficiary. SUGGESTED ANSWER
Yes, Aban is entitled to claim the proceeds.
After the 2-year period lapse, or when the

insured dies within the period, the insurer (B) As a general rule, the insurance policy
must make good on the policy, even though is not valid and binding, unless the
the policy was obtained by fraud, premium thereof has been paid. This is the
concealment, or misrepresentation, as in cash-and-carry rule under the Insurance
this case, when the insured did not Code. Premium is the consideration for the
personally apply for the policy as she was undertaking of the insurer to indemnify the
illiterate and that it was the beneficiary insured against a specified peril. There are
who filled up the insurance application exceptions, however, one of them is, when
designating herself as beneficiary. there is an agreement allowing the insured
to pay the premium in – installments and
2015 Bar Examination partial payment has been made at the time
of the loss (Makati Tuscany Condominium
Novette entered into a contract for the Corporation v. Court of Appeals, G.R. No.
purchase of certain office supplies. 95546, November 6, 1992, 215 SCRA 463).
The goods were shipped. While in 2016 Bar Examination
transit, the goods were insured by
Novette. Jason is the proud owner of a newly-
A. Does she have an insurable interest built house worth PS million. As a
over the goods even before delivery of protection against any possible loss or
the same to her? Explain. (2%) damage to his house, Jason applied
for a fire insurance policy thereon
SUGGESTED ANSWER with Shure Insurance Corporation
(A) Yes, Novette has an insurable (Shure) on October 11, 2016 and paid
interest in the goods. The contract the premium in cash. It took the
of sale was already perfected and company a week to approve Jason's
Novette acquired interest thereon, application. On October 18, 2016,
although the goods have yet to be Shure mailed the approved policy to
delivered. Jason which the latter received five
(5) days later. However, Jason's
B. Will an insurance policy be binding house had been razed by fire which
even if the premium is unpaid? What transpired a day before his receipt of
if it were partially paid? (3%) the approved policy. Jason filed a
written claim with Shure under the
SUGGESTED ANSWER insurance policy. Shure prays for the

denial of the claim on the ground that because of his active lifestyle, being
the theory of cognition applies to hypertensive is a remote possibility.
contracts of insurance. While playing golf one day, X
Decide Jason's claim with reasons. collapsed at the fairway and was
(5%) declared dead on arrival at the
hospital. His death certificate stated
SUGGESTED ANSWER that X suffered a massive heart
No. What governs insurance contract is the attack.
cognition theory whereby the insurance [a] Will the beneficiary of X be
contract is perfected only from the time the entitled to the proceeds of the life
applicant came to know of the acceptance insurance under the circumstances,
of the offer by the insurer. In this case, the despite the non-disclosure that he is
loss occurred a day prior to Jason’s hypertensive at the time of
knowledge of the acceptance by Shure of application? (2.5%)
Jason’s application. There being no SUGGESTED ANSWER
perfected insurance contract, Jason is not (A) No, the beneficiary of X is not entitled
entitled to recover from Shure. to the proceeds of the life insurance. The
hypertension of X is a material fact that
ALTERNATIVE ANSWER should have been disclosed to the insurer.
The insurance contract may be deemed The concealment of such material fact
perfected allowing Jason to recover from entitles the insurer to rescind the insurance
Shure if there is a binding note or cover policy.
receipt duly issued by Shure to Jason.
ALTERNATIVE ANSWER
X insured his life for P20 million. X, (A) X’s beneficiary should be entitled to the
plays golf and regularly exercises proceeds of the life insurance as there was
everyday, hence is considered in good good faith on the part of the insured for the
health. He did not know, however, non disclosure since the insured was not
that his frequent headache is really aware of his hypertension.
caused by his being hypertensive. In
his application form for a life [b] IfX died in an accident instead of a
insurance for himself, he did not put a heart attack, would the fact of X's
check to the question if he is suffering failure to disclose that he is
from hypertension, believing that

hypertensive be considered as
material information? (2.5%) SUGGESTED ANSWER
ATC’s claim is sustainable. The all risk
SUGGESTED ANSWER policy that ATC procured from the insurer
(B) It is still a material information. It is insures against all causes of conceivable
settled that the insured cannot recover even loss or damage except when the loss or
though the material fact not disclosed is not damage was due to fraud or intentional
the cause of the loss. misconduct committed by ATC (I New
World International Development v. NYK
2017 Bar Examination FilJapan Shipping Corporation, G.R. No.
Absolute Timber Co. (ATC) has been 171468, August 24, 2011). The grounds of
engaged in the logging business in denial that the insurer invoked are not due
lsabela. To secure one of its to the fraud or • intentional misconduct of
shipments of logs to be transported by the insurer.
Andok Shipping Co., ATC purchased a
marine policy with an "all risks" ALTERNATIVE ANSWER
provision. Because of a strong The claim of Absolute Timber Company
typhoon then hitting Northern Luzon, that the extreme bad weather is a
the vessel sank and the shipment of fortuitous event is not valid. The ship was
logs was totally lost. ATC filed its not seaworthy. Its loss was not due to the
claim, but the insurer denied the perils of the sea, but perils of the ship
claim on several grounds, namely: (1) (Manila Steamship Company v.
the vessel had not been seaworthy; (2) Abdulhaman, G.R. No. L-9534, September
the vessel's crew had lacked sufficient 29, 1956, 100 Phil 32). ATC’s negligence
training; (3) the improper loading of also bars it from invoking the defense of
the logs on only one side of the vessel force majeure.
had led to the tilting of the ship to that
side during the stormy voyage; and
(4) the extremely bad weather had The newly restored Ford Mustang
been a fortuitous event. muscle car was just released from the
ATC now seeks your legal advice to car restoration shop to its owner,
know if its claim was sustainable. Seth, an avid sportsman. Given his
What is your advice? Explain your passion for sailing, he needed to go to
answer. (3%) a round-the-world voyage with his

crew on his brand-new 180-meter by the happening of the event insured
yacht. Hearing about his coming against it (44 CJS 870).
voyage, Sean, his bosom friend, asked
Seth if he could borrow the car for his (b) Do Seth and Sean have separate
next roadshow. Sean, who had been insurable interests? Explain Briefly
in the business of holding motor your answer (3%)
shows and promotions, proposed to
display the restored car of Seth in (b) Seth and Sean have separate insurable
major cities of the country. Seth interests. Seth’s neurable interest is his
agreed and lent the Ford Mustang to legal and/or equitable interest over the
Sean. Seth further expressly allowed vehicle as an owner while Sean’s insurable
Sean to use the car even for his own interest is the safety of the vehicle which
purposes on special occasions during may become the basis of liábility in case of
his absence from the country. Seth loss or damage to the vehicle (Malayan
and Sean then went together to Bayad Insurance Co., Inc. v. Philippine First
Agad Insurance Co. (BAIC) to get Insurance Co., G.R. No. 184300, July 11,
separate policies for the car in their 2012, 676 SCRA 268).
respective names.
SAIC consults you as its lawyer on
whether separate policies could be TRUE or FALSE - Explain briefly your
issued to Seth and Sean in respect of answer.
the same car.
(a) What is insurable interest? (e) The law on life insurance prohibits
(2%) double insurance.
SUGGESTED ANSWER SUGGESTED ANSWER

(a) Insurable interest is that interest which False. Double insurance only applies to
a person is deemed to have in the subject property insurance.
matter of the insured where he has a rela
tion or connection to it such that the person 2018 Bar Examination
will derive pecuniary benefit or advantage
from the preservation of the subject matter Shortly after Yin and Yang were wed,
or will suffer pecuniary loss or damage they each took out separate life
from its destruction, termination or injury insurance policies on their lives, and

mutually designated one another as the nature of one "coupled with
sole beneficiary. Both life insurance interest," since it was made in
policies provided for a double accordance with their mutual
indemnity clause, the cost for which agreement to designate one another
was added to the premium rate. as sole beneficiary in their respective
During the last 10 years of their life policies. She also claimed that the
marriage, the spouses had faithfully beneficiary designation of Vessel and
paid for the annual premiums over the illegitimate minor child Vinsel
the life policies from both their was void being the product of an illicit
salaries. Unfortunately, Yin fell in relationship, and therefore without
love with his officemate, Vessel, and "insurable interest."
they carried on an affair. After two (a) Is Yang correct in saying that her
years, their relationship bore them a designation as beneficiary was
daughter named Vinsel. Without the irrevocable? (2.5%)
knowledge of Yang, Yin changed the
designation of the beneficiary to an SUGGESTED ANSWER
"irrevocable designation" of Vinsel A. Yang is not correct. The insured
and Vessel jointly. When Yang shall have the right to change the
learned of the affair, she was so beneficiary he designated in the
despondent that, having chanced policy unless he has expressly
upon Yin and Vessel on a date, she waived this right in the policy.
rammed them down with the car she There is nothing in the life
was driving, resulting in Vin's death insurance policy taken by Yang
and Vessel's complete loss of which indicated that the
mobilization. Yang was sued for designation of Ying is irrevocable.
parricide, and while the case was As such, it is deemed to be
pending, she filed a claim on the revocable.
proceeds of the life insurance of Yin
as irrevocable beneficiary, or at least (b) Do Vessel and Vinsel have
his legal heir, and opposed the claims "insurable interest" on the life of Yin?
on behalf of Vessel and her daughter (2.5%)
Vinsel. Yang claimed that her
designation as beneficiary in Vin's life SUGGESTED ANSWER
insurance policy was irrevocable, in

B. Vessel has no insurable interest on the diagnosed with psychotic tendency
life of Yin because she cannot be lawfully that graduated into extreme
designated as beneficiary. Persons who are despondency. She was found dead
proscribed to become donees under the hanging in her closet 36 months after
rules on donation cannot be designated as the issuance of the policy. The police
beneficiary in life insurance. These include authorities declared it to be a case of
persons in illicit relations as in the case of suicide. The policy did not include
Yin and Veseel. Vinsel, however, has suicide as an excepted risk.
insurable interest on the life of Yin. There is (a) Can the insurer raise the issue
no proscription in naming an illegitimate of failure to disclose that she had
child as a beneficiary. (Heirs of Loreta cancer as a cause for denying the
Maramag vs Maramag, GR No. 181132, claim of the beneficiaries? (2.5%)
June 5, 2009)
SUGGESTED ANSWER
On June 21, 2008, Yate took out a life A. The insurer cannot raise the issue of
insurance policy on her life in the concealment because only material
amount of PhP 10 million and named facts known to the insured at the
her husband Vandy and daughter as time of the issuance of the policy
joint irrevocable beneficiaries. Before should be disclosed to the insurer.
the policy was issued and the ( Section 28 of the IC ) Yate’s
premiums were paid, Yate underwent previous cancer diagnosis is no
a medical checkup with a physician longer a material fact at the time
accredited by the insurer, and the she procured the policy.
only result found was that she was
suffering from high blood pressure. (b) Are the beneficiaries entitled to
Yate was previously diagnosed by a receive the proceeds of the life
private physician of having breast insurance notwithstanding the fact
cancer which she did not disclose to that the cause of death was suicide?
the insurer in her application, nor to (2.5%)
the insurer's accredited physician
because by then, she was told that she SUGGESTED ANSWER
was already cancer-free after B. Yes, the insurer is liable. The rule is that
undergoing surgery which removed the insurer in life insurance is liable in case
both her breasts. She was later of suicide only when it is committed after

the policy has been in force for a period of
two years from the date of issue or last
reinstatement. The rule, however, admits
of an exception so that when suicide is
committed in the state of insanity, it shall
be compensable regardless of the date of
commission (Section 183 of the Insurance
Code). In the given facts, Yate was
diagnosed with psychotic tendency that
graduated into extreme despondency.
Thus, even though Yate committed 36
months from issuance of the policy, the
insurer is liable.

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COR JESU COLLEGE

Bar Questions and Answers

Compiled and Arranged by:

CJC LAW Insurance Special Class of 2020

ATTY. MARULI ALI GARCIA SANCHEZ

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So Cala demanded reimbursement

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SUGGESTED ANSWER: BD has a bank deposit of half a

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Insurable Interest; Life vs. Property SUGGESTED ANSWER:

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Concealment; Material Concealment SUGGESTED ANSWER:

c) In property insurance, an interest

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(5) The Insured cannot allow his Insurance; Double Insurance

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On January 1, 2000, Antonio Rivera Terrazas de Patio Verde, a

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SUGGESTED ANSWER: Enrique thereupon claimed

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SUGGESTED ANSWER: X, a minor, contracted an insurance

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A house and lot is covered by a real

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SUGGESTED ANSWER: No.V X borrowed from CCC Bank. She

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The “incontestability clause” in a Life

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SUGGESTED ANSWER SUGGESTED ANSWER:

Double insurance and overinsurance SUGGESTED ANSWER:

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