LAWS THAT GOVERN INSURANCE

Under The Civil Code:

Art. 2011. The contract of insurance is governed by special laws. Matters not expressly provided for in
such special laws shall be regulated by this Code.
Art. 2012. Any person who is forbidden from receiving any donation under Art. 739 cannot be named
beneficiary of a life insurance policy by a person who cannot make any donation to him, according to
said article.
Art. 2021. The aleatory contract of life annuity binds the debtor to pay an annual pension or income
during the life of one or more determinate persons in consideration of a capital consisting of money or
other property, whose ownership is transferred to him at once with the burden of income.
Art. 2022. The annuity may be constituted upon the life of the person who gives the capital, upon that
of a third person, or upon the lives of various persons, all of whom must be living at the time the annuity
is established.
It may also be constituted in favor of the person or persons upon whose life or lives the contract is
entered into, or in favor of another or other persons.
Art. 2023. Life annuity shall be void if constituted upon the life of a person who was already dead at the
time the contract was entered into, or who was at the that time suffering from an illness which caused
his death within twenty days following said date.
Art. 2024. The lack of payment of the income due does not authorize the recipient of the life annuity to
demand the reimbursement of the capital or to retake possession of the property alienated, unless
there is a stipulation to the contrary; he shall have only a right judicially to claim the payment of the
income in arrears and to require a security for the future income, unless there is a stipulation to the
contrary.
Art. 2025. The income corresponding to the year in which the person enjoying it dies shall be pain in
proportion to the days during which he lived; if the income should be paid by installments in advance,
the whole amount of the installment which began to run during his life shall be paid.
Art. 2026. He who constitutes an annuity by gratuitous title upon his property, may provide at the time
the annuity is established that the same shall not be subject to execution or attachment on account of
the obligations of the recipient of the annuity. If the annuity was constituted in fraud of creditors, the
latter may ask for execution or attachment of the property.
Art. 2027. No annuity shall be claimed without first proving the existence of the person upon whose life
the annuity is constituted.
Art. 2186. Every owner of a motor vehicle shall file with the proper government office a bond executed
by a government-controlled corporation or office, to answer for damages to third persons. The amount
of the bond and other terms shall be fixed by the competent public official. (n)
Art. 43. The termination of the subsequent marriage referred to in the preceding Article shall produce
the following effects:
(1) The children of the subsequent marriage conceived prior to its termination shall be
considered legitimate;
(2) The absolute community of property or the conjugal partnership, as the case may be, shall
be dissolved and liquidated, but if either spouse contracted said marriage in bad faith, his or her share of
the net profits of the community property or conjugal partnership property shall be forfeited in favor of
the common children or, if there are none, the children of the guilty spouse by a previous marriage or in
default of children, the innocent spouse;
(3) Donations by reason of marriage shall remain valid, except that if the donee contracted the
marriage in bad faith, such donations made to said donee are revoked by operation of law;
(4) The innocent spouse may revoke the designation of the other spouse who acted in bad faith
as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable; and
(5) The spouse who contracted the subsequent marriage in bad faith shall be disqualified to
inherit from the innocent spouse by testate and intestate succession. (n)

Art. 50. The effects provided for by paragraphs (2), (3), (4) and (5) of Article 43 and by Article 44 shall
also apply in the proper cases to marriages which are declared ab initio or annulled by final judgment
under Articles 40 and 45.
The final judgment in such cases shall provide for the liquidation, partition and distribution of the
properties of the spouses, the custody and support of the common children, and the delivery of third
presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings.
All creditors of the spouses as well as of the absolute community or the conjugal partnership shall be
notified of the proceedings for liquidation.
In the partition, the conjugal dwelling and the lot on which it is situated, shall be adjudicated in
accordance with the provisions of Articles 102 and 129.
Art. 64. After the finality of the decree of legal separation, the innocent spouse may revoke the
donations made by him or by her in favor of the offending spouse, as well as the designation of the
latter as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable. The
revocation of the donations shall be recorded in the registries of property in the places where the
properties are located. Alienations, liens and encumbrances registered in good faith before the
recording of the complaint for revocation in the registries of property shall be respected. The revocation
of or change in the designation of the insurance beneficiary shall take effect upon written notification
thereof to the insured.
The action to revoke the donation under this Article must be brought within five years from the time the
decree of legal separation become final. (107a)
Special Laws That Govern Insurance
1. Revised GSIS Act of 1977 (PD 1146, as amended)
2. Social Security Act of 1954 ( RA 1161, (as amended)
3. The Property Insurance Law ( RA 656, as amended by PD 245)
4. Republic Act No. 4898
5. EO 250; and
6. RA 3591



























#1. G.R. No. L-1669 August 31, 1950
PAZ LOPEZ DE CONSTANTINO, plaintiff-appellant, vs. ASIA LIFE INSURANCE COMPANY, defendant.

Facts: The Asia Life Insurance Company (a foreign corporation incorporated under the laws of Delaware,
U.S.A.), issued on September 27, 1941, its Policy No. 93912 for P3,000, whereby it insured the life of
Arcadio Constantino for a term of twenty years In consideration of the sum of P176.04 as annual
premium duly paid to it.
After the first payment, no further premiums were paid. The insured died on September 22, 1944.
Plaintiffs maintain that, as beneficiaries, they are entitled to receive the proceeds of the policies minus
all sums due for premiums in arrears. They allege that non-payment of the premiums was caused by the
closing of defendant's offices in Manila during the Japanese occupation and the impossible
circumstances created by war.
Defendant on the other hand asserts that the policies had lapsed for non-payment of premiums, in
accordance with the contract of the parties and the law applicable to the situation.
The lower court absolved the defendant. Hence this appeal.
Issue: w the lower court is correct in alsolving the defendant?
Held: Professor Vance of Yale, says that in determining the effect of non-payment of premiums
occasioned by war, the American cases may be divided into three groups, according as they support the
so-called Connecticut Rule, the New York Rule, or the United States Rule.
The first rule holds the view that "there are two elements in the consideration for which the annual
premium is paid.
First, the mere protection for the year, and
second, the privilege of renewing the contract for each succeeding year by paying the premium
for that year at the time agreed upon.
According to this view of the contract, the payment of premiums is a condition
precedent, the non-performance would be illegal necessarily defeats the right to renew the
contract."
The second rule, apparently followed by the greater number of decisions, hold that "war between states
in which the parties reside merely suspends the contracts of the life insurance, and that, upon tender of
all premiums due by the insured or his representatives after the war has terminated, the contract revives
and becomes fully operative."
The United States rule declares that the contract is not merely suspended, but is abrogated by reason of
non-payments is peculiarly of the essence of the contract. It additionally holds that it would be unjust to
allow the insurer to retain the reserve value of the policy, which is the excess of the premiums paid over
the actual risk carried during the years when the policy had been in force. This rule was announced in
the well-known Statham case which, in the opinion of Professor Vance, is the correct rule.
In the case of statham, the court held that this is a matter of stipulation, or of discretion, on the part of
the particular company. When no stipulation exists, it is the general understanding that time is material,
and that the forfeiture is absolute if the premium be not paid.
The case, therefore, is one in which time is material and of the essence and of the essence of the
contract. Non-payment at the day involves absolute forfeiture if such be the terms of the contract, as is
the case here. Courts cannot with safety vary the stipulation of the parties by introducing equities for
the relief of the insured against their own negligence.
The lower court's decision absolving the defendant from all liability on the policies in question, is hereby
affirmed, without costs.

#1. INSULAR LIFE V. EBRADO - INSURANCE PROCEEDS
80 SCRA 181
Facts: Buenaventura Ebrado was issued by Insular Life Assurance Co. a whole life plan for P5,882.00 with
a rider for Accidental Death Benefits for the same amount.
Ebrado designated Carponia Ebrado as the revocable beneficiary in his policy, referring to her as his
wife.
Ebrado died when he was accidentally hit by a falling branch of tree.
Insurer by virtue of the contract was liable for 11,745.73, and Carponia filed her claim, although she
admitted that she and the insured were merely living as husband and wife without the benefit of
marriage.
Pascuala Ebrado also filed her claim as the widow of the deceased insured.
Insular life filed an interpleader case and the lower court found in favor of Pascuala.
Issue: Between Carponia and Pascuala, who is entitled to the proceeds?
Held: Pascuala.
It is quite unfortunate that the Insurance Act or our own Insurance Code does not contain a specific
provision grossly resolutory of the prime question at hand. Rather, the general rules of civil law should
be applied to resolve this void in the insurance law. Art. 2011 of the NCC states: The contract of
insurance is governed by special laws. Matters not expressly provided for in such special laws shall be
regulated by this Code. When not otherwise specifically provided for in the insurance law, the contract
of life insurance is governed by the general rules of civil law regulating contracts.
Under Art. 2012, NCC: Any person who is forbidden from receiving any donation under Art. 739 cannot
be named beneficiary of a life insurance policy by a person who cannot make any donation to him,
according to said article. Under Art. 739, donations between persons who were guilty of adultery or
concubinage at the time of the donation shall be void.
In essence, a life insurance policy is no different from civil donations insofar as the beneficiary is
concerned. Both are founded on the same consideration of liberality. A beneficiary is like a donee
because from the premiums of the policy which the insured pays, the beneficiary will receive the
proceeds or profits of said insurance. As a consequence, the proscription in Art. 739 should equally
operate in life insurance contracts.
Therefore, since common-law spouses are barred from receiving donations, they are likewise barred
from receiving proceeds of a life insurance contract.
Issue: May a beneficiary in a life insurance policy recover the amount thereof although the insured died
after repeatedly failing to pay the stipulated premiums, such failure being caused by war?
Held: NO. Due to the express terms of the policy, non-payment of the premium produces its
avoidance. In Glaraga v. Sun Life, it was held that a life policy was avoided because the premium had
not been paid within the time fixed; since by its express terms, non-payment of any premium when due
or within the 31

day grace period ipso fact caused the policy to lapse.
When the life insurance policy provides that non-payment of premiums will cause its forfeiture, war
does NOT excuse non-payment and does not avoid forfeiture. Essentially, the reason why punctual
payments are important is that the insurer calculates on the basis of the prompt payments. Otherwise,
malulugi sila.
It should be noted that the parties contracted not only as to peace time conditions but also as to war-
time conditions since the policies contained provisions applicable expressly to wartime days. The logical
inference therefore is that the parties contemplated the uninterrupted operation of the contract even if
armed conflict should ensue.













#2. insular v Ebrado G.R. No. L-44059 October 28, 1977
Facts: Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider
forAccidental Death. He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He
referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay the
coverage in the total amount of P11,745.73, representing the face value of the policy in the amount of
P5,882.00 plus the additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiarytherein,
although she admited that she and the insured were merely living as husband and wife without the
benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she
is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given the
proceeds. The court declared Carponia as disqualified.

Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally married
man can claim the proceeds in case of death of the latter?
Held: No. Petition
Ratio:
Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively to the
proper interest of the person in whose name it is made"
The word "interest" highly suggests that the provision refers only to the "insured" and not to
thebeneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory laws
against illicit relationships especially on property and descent will be rendered nugatory, as the same
could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is
governed by the general rules of the civil law regulating contracts. And under Article 2012 of the same
Code, any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a fife insurance policy by the person who cannot make a donation to him.
Common-law spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were guilty of adultery
or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those between
illegitimate ones should be enforced in life insurance policies since the same are based
on similar consideration. So long as marriage remains the threshold of family laws, reason and morality
dictate that the impediments imposed upon married couple should likewise be imposed upon extra-
marital relationship.
A conviction for adultery or concubinage isnt required exacted before the disabilities mentioned in
Article 739 may effectuate. The article says that in the case referred to in No. 1, the action for
declaration of nullity may be brought by the spouse of the donor or donee; and the guilty of the donee
may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. The law plainly states that the guilt of the party may be proved in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was also
living in with his common-law wife with whom he has two children.






















#3. Qua chee gan vs law union

FACTS: Qua Chee Gan, a merchant of Albay, owned four bodegas which he insured with Law Union &
Rock Insurance Co., Ltd (Law Union) since 1937 and the lose made payable to the Philippine National
Bank (PNB) as mortgage of the hemp and crops, to the extent of its interest
July 21, 1940 morning: fire broke out in bodegas 1,2 and 4 which lasted for almost a week.
Upon Qua Chee Gan informed Law Union by telegram, Law Union rejected alleging that it was a
fraudulent claim that the fire had been deliberately caused by the insured or by other persons in
connivance with him
Que Chee Gan, with his brother, Qua Chee Pao, and some employees of his, were indicted and tried in
1940 for the crime of arson but was subsequently acquitted
During the pendency of the suit, Que Chee Gan paid PNB
Law Union states that ff. assignment of errors:
1. memo of warranty requires 11 hydrants instead of 2
2. violation of hemp warranty against storage of gasoline since it prohibits oils
3. fire was due to fraud
4. burned bodegas could not possibly have contained the quantities of copra and hemp
stated in the fire claims
ISSUE: W/N Qua Chee Gan should be allowed to claim.
HELD: YES. Affirmed.
1. It is a well settled rule of law that an insurer which with knowledge of facts entitling it to treat
a policy as no longer in force, receives and accepts a premium on the policy, estopped to take
advantage of the forfeiture
2. oils (animal and/or vegetable and/or mineral and/or their liquid products having a flash point
below 300o Fahrenheit", and is decidedly ambiguous and uncertain; for in ordinary parlance,
"Oils" mean "lubricants" and not gasoline or kerosene
by reason of the exclusive control of the insurance company over the terms and phraseology of the
contract, the ambiguity must be held strictly against the insurer and liberally in favor of the insured,
specially to avoid a forfeiture
3. trial Court found that the discrepancies were a result of the insured's erroneous
interpretation of the provisions of the insurance policies and claim forms, caused by his
imperfect knowledge of English, and that the misstatements were innocently made and without
intent to defraud.
4. Similarly, the 20 per cent over claim on 70 per cent of the hemo stock, was explained by the
insured as caused by his belief that he was entitled to include in the claim his expected profit on
the 70 per cent of the hemp, because the same was already contracted for and sold to other
parties before the fire occurred


























#4. TY V. FILIPINAS COMPAIA DE SEGUROS - INSURANCE POLICY
17 SCRA 364
Facts: Ty was employed as a mechanic operator by Broadway Cotton Factory at Grace Park, Caloocan.
In 1953, he took personal accident policies from 7 insurance companies (6 defendants), on different
dates, effective for 12 mos.
On Dec. 24. 1953, a fire broke out in the factory were Ty was working. A heavy object fell on his hand
when he was trying to put out the fire.
From Dec. 1953 to Feb. 6, 1954 Ty received treatment at the Natl Orthopedic Hospital for six listed
injuries. The attending surgeon certified that these injuries would cause the temporary total disability of
Tys left hand.
Insurance companies refused to pay Tys claim for compensation under the policies by reason of said
disability of his left hand. Ty filed a complaint in the municipal court who decided in his favor.
CFI reversed on the ground that under the uniform terms of the policies, partial disability due to loss of
either hand of the insured, to be compensable must be the result of amputation.
Issue: Whether or not Ty should be indemnified under his accident policies.
Held. NO.
SC already ruled in the case of Ty v. FNSI that were the insurance policies define partial disability as loss
of either hand by amputation through the bones of the wrist, the insured cannot recover under said
policies for temporary disability of his left hand caused by the fractures of some fingers. The provision is
clear enough to inform the party entering into that contract that the loss to be considered a disability
entitled to indemnity, must be severance or amputation of the affected member of the body of the
insured.


#7. Verendia vs ca
FACTS:
Rafael (Rex) Verendia's residential building was insured with Fidelity and
Surety InsuranceCompany, Country Bankers Insurance and Development Insurance with Monte
de Piedad & Savings Bank as beneficiary
December 28, 1980 early morning: the building was completely destroyed by fire
Fidelity refused the claim stating that there was a misrepresentation since the lessee was
not Roberto Garcia but Marcelo Garcia
trial court: favored Fidelity
CA: reversed
ISSUE: W/N there was false declaration which would forfeit his benefits under Section 13 of the policy
HELD: YES.
Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits
under the policy shall be forfeited "If the claim be in any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any fraudulent means or devises are used
by the Insured or anyone acting in his behalf to obtain any benefit under the policy"
Robert Garcia then executed an affidavit before the National Intelligence and Security Authority
(NISA) to the effect that he was not the lessee of Verendia's house and that his signature on the
contract of lease was a complete forgery.
Worse yet, by presenting a false lease contract, Verendia, reprehensibly disregarded the
principle that insurance contracts are uberrimae fidae and demand the most abundant good
faith

#8. Gulf resorts vs phil charter insurance corp.
Facts: Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in
said resort insured originally with the American Home Assurance Company (AHAC). In the first 4 policies
issued, the risks of loss from earthquake shock was extended only to petitioners two swimming pools.
Gulf Resorts agreed to insure with Phil Charter the properties covered by the AHAC policy provided that
the policy wording and rates in said policy be copied in the policy to be issued by Phil Charter.
Phil Charter issued Policy No. 31944 to Gulf Resorts covering the period of March 14, 1990 to March 14,
1991 for P10,700,600.00 for a total premium of P45,159.92. The break-down of premiums shows that
Gulf Resorts paid only P393.00 as premium against earthquake shock (ES). In Policy No. 31944 issued by
defendant, the shock endorsement provided that In consideration of the payment by the insured to the
company of the sum included additional premium the Company agrees, notwithstanding what is stated
in the printed conditions of this policy due to the contrary, that this insurance covers loss or damage to
shock to any of the property insured by this Policy occasioned by or through or in consequence of
earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit "7-C" the word
"included" above the underlined portion was deleted. On July 16, 1990 an earthquake struck Central
Luzon and Northern Luzon and plaintiffs properties covered by Policy No. 31944 issued by defendant,
including the two swimming pools in its Agoo Playa Resort were damaged.
Petitioner advised respondent that it would be making a claim under its Insurance Policy 31944 for
damages on its properties. Respondent denied petitioners claim on the ground that its insurance policy
only afforded earthquake shock coverage to the two swimming pools of the resort.
The trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that petitioner paid
only a premium of P393.00 against the peril of earthquake shock, the same premium it had paid against
earthquake shock only on the two swimming pools in all the policies issued by AHAC.
Issue: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and does
not extend to all properties damaged therein
Held: YES. All the provisions and riders taken and interpreted together, indubitably show the intention
of the parties to extend earthquake shock coverage to the two swimming pools only.
An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured
against a specified peril.
In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk attaches. In the
subject policy, no premium payments were made with regard to earthquake shock coverage except on
the two swimming pools. There is no mention of any premium payable for the other resort properties
with regard to earthquake shock. This is consistent with the history of petitioners insurance policies
with AHAC.

# 10. Philam care vs ca
Held: In the case at bar, the insurable interest of respondent's husband in obtaining the health
care agreement was his own health.
The health care agreement was In the nature of non-life insurance, which is primarily a contract of
indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury
or other stipulated contingent, the health care provider must pay for the same to the extent agreed
upon under the contract.
The answer in response to the question relating to the medical history of the applicant largely depends
on opinion rather than fact, especially coming from respondent's husband who was not a medical
doctor.
Where matters of opinion or judgment are called for, answers made in good faith and without intent to
deceive will not avoid a policy even though they are untrue.
The fraudulent intent on the part of the insured must be established to warrant rescission of the
insurance contract.
Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative
defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the
provider or insurer.
Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a
contract of insurance.
cancellation of health care agreements as in insurance policies require the concurrence of the
following conditions: - none of these was made
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one or more of the
grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of
insured, to furnish facts on which cancellation is based.
When the terms of insurance contract contain limitations on liability, courts should construe
them in such a way as to preclude the insurer from non-compliance with his obligation.
Being a contract of adhesion, the terms of an insurance contract are to be construed strictly
against the party which prepared the contract - the insurer.
(U)nder the title Claim procedures of expenses, the defendant Philamcare Health SystemsInc.
had twelve months from the date of issuance of the Agreement within which to contest the
membership of the patient if he had previous ailment of asthma, and six months from the
issuance of the agreement if the patient was sick of diabetes or hypertension. The periods
having expired, the defense of concealment or misrepresentation no longer lie.