1.

Part I E. Beneficiary
Loreto Maramag vs Maramag
G.R. No. 181132
Facts:
Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag
Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag) and his concubine Eva de
Guzman Maramag, also suspected in the killing of Loreto and his illegitimate children are
claiming for his insurance. Vicenta alleges that Eva is disqualified from claiming
' RTC: Granted - civil code does NOT apply
' CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period
'
Issue:
Whether or not Eva can claim even though prohibited under the civil code against donation
Ruling:
YES. Petition is DENIED.
' Any person who is forbidden from receiving any donation under Article 739 cannot be
named
beneficiary of a life insurance policy of the person who cannot make any donation to him If a
concubine is made the beneficiary, it is believed that the insurance contract will still remain
valid, but the indemnity must go to the legal heirs and not to the concubine, for evidently, what
is prohibited under Art. 2012 is the naming of the improper beneficiary.
SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of
the person in whose name or for whose benefit it is made unless otherwise specified in the
policy.
General Rule: only persons entitled to claim the insurance proceeds are either the insured, if
still alive; or the beneficiary, if the insured is already deceased, upon the maturation of the
policy.
Exemption: situation where the insurance contract was intended to benefit third persons who
are not parties to the same in the form of favorable stipulations or indemnity. In such a case,
third parties may directly sue and claim from the insurer
It is only in cases where the insured has not designated any beneficiary, or when the
designated beneficiary is disqualified by law to receive the proceeds, that the insurance policy
proceeds shall redound to the benefit of the estate of the insured
2.
G. Perfection of the contract
VIRGINIA A. PEREZ vs. COURT OF APPEALS and BF LIFEMAN INSURANCE
CORPORATION
G.R. No. 112329. January 28, 2000
Facts:
Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation since 1980
for P20,000.00. Sometime in October 1987, an agent of the insurance corporation, Rodolfo
Lalog, visited Perez in Guinayangan, Quezon and convinced him to apply for additional

insurance coverage of P50,000.00, to avail of the ongoing promotional discount of P400.00 if

the premium were paid annually.
On October 20, 1987, Primitivo B. Perez accomplished an application form for the additional
insurance coverage of P50,000.00. On the same day, petitioner Virginia A. Perez, Primitivos
wife, paid P2,075.00 to Lalog. The receipt issued by Lalog indicated the amount received was
a "deposit." Unfortunately, Lalog lost the application form accomplished by Perez and so he
asked the latter to fill up another application form. On November 1, 1987, Perez was made to
undergo the required medical examination, which he passed.
Pursuant to the established procedure of the company, Lalog forwarded the application for
additional insurance of Perez, together with all its supporting papers, to the office of BF
Lifeman Insurance Corporation at Gumaca, Quezon which office was supposed to forward the
papers to the Manila office.
On November 25, 1987, Perez died in an accident. He was riding in a banca which capsized
during a storm. At the time of his death, his application papers for the additional insurance of
P50,000.00 were still with the Gumaca office. Lalog testified that when he went to follow up
the papers, he found them still in the Gumaca office and so he personally brought the papers
to the Manila office of BF Lifeman Insurance Corporation. It was only on November 27, 1987
that said papers were received in Manila. Without knowing that Perez died on November 25,
1987, BF Lifeman Insurance Corporation approved the application and issued the
corresponding policy for the P50,000.00 on December 2, 1987.
At the time of his death, his application papers for the additional insurance of P50,000.00
were still with the Gumaca office. Lalog testified that when he went to follow up the papers, he
found them still in the Gumaca office and so he personally brought the papers to the Manila
office of BF Lifeman Insurance Corporation. It was only on November 27, 1987 that said
papers were received in Manila.
Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance Corporation
approved the application and issued the corresponding policy for the P50,000.00 on
December 2, 1987. Petitioner Virginia Perez went to Manila to claim the benefits under the
insurance policies of the deceased. She was paid P40,000.00 under the first insurance policy
for P20,000.00 (double indemnity in case of accident) but the insurance company refused to
pay the claim under the additional policy coverage of P50,000.00, the proceeds of which
amount to P150,000.00 in view of a triple indemnity rider on the insurance policy.
Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies of
the deceased. She was paid P40,000.00 under the first insurance policy for P20,000.00
(double indemnity in case of accident) but the insurance company refused to pay the claim
under the additional policy coverage of P50,000.00, the proceeds of which amount to
P150,000.00 in view of a triple indemnity rider on the insurance policy. In its letter of January
29, 1988 to Virginia A. Perez, the insurance company maintained that the insurance for
P50,000.00 had not been perfected at the time of the death of Primitivo Perez. Consequently,
the insurance company refunded the amount of P2,075.00 which Virginia Perez had paid.
On September 21, 1990, private respondent BF Lifeman Insurance Corporation filed a
complaint against Virginia A. Perez seeking the rescission and declaration of nullity of the
insurance contract in question.
Petitioner Virginia A. Perez, on the other hand, averred that the deceased had fulfilled all his
prestations under the contract and all the elements of a valid contract are present. She then
filed a counterclaim against private respondent for the collection of P150,000.00 as actual
damages, P100,000.00 as exemplary damages, P30,000.00 as attorneys fees and
P10,000.00 as expenses for litigation.
RTC: ruled in favor of defendant Virginia Perez ordering Lifeman Insurance to pay her the
face value of the policy plus double indemnity under the SARDI of the total amount of

P150,000.00 It held that the premium for the insurance had been fully paid even the sum of
P2,075.00 were to be considered as partial payment the same doesnt affect the validity.
The deceased had fully complied with the requirements of the insurance company.
CA: reversed the decision of the RTC saying that the contract for P50,000.00 could not have
been perfected since at the time of issuance, Primitivo was dead.
"x x x there shall be no contract of insurance unless and until a policy is issued on this
application and that the policy shall not take effect until the first premium has been paid and
the policy has been delivered to and accepted by me/us in person while I/we, am/are in good
health"
Petitioners motion for reconsideration having been denied by respondent court, the instant
petition for certiorari was filed
Issue:
Whether or not there was a perfected insurance contract for the additional coverage worth
P50,000.00
Ruling:
Insurance is a contract whereby, for a stipulated consideration, one party undertakes to
compensate the other for loss on a specified subject by specified perils.[7] A contract, on the
other hand, is a meeting of the minds between two persons whereby one binds himself, with
respect to the other to give something or to render some service.[8] Under Article 1318 of the
Civil Code, there is no contract unless the following requisites concur:
(1).......Consent of the contracting parties;
(2).......Object certain which is the subject matter of the contract;
(3).......Cause of the obligation which is established.
Consent must be manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute.
When Primitivo filed an application for insurance, paid P2,075.00 and submitted the results of
his medical examination, his application was subject to the acceptance of private respondent
BF Lifeman Insurance Corporation. The perfection of the contract of insurance between the
deceased and respondent corporation was further conditioned upon compliance with the
following requisites stated in the application form:
"there shall be no contract of insurance unless and until a policy is issued on this application
and that the said policy shall not take effect until the premium has been paid and the policy
delivered to and accepted by me/us in person while I/We, am/are in good health."[9] Scnc m
The assent of private respondent BF Lifeman Insurance Corporation therefore was not given
when it merely received the application form and all the requisite supporting papers of the
applicant. Its assent was given when it issues a corresponding policy to the applicant. Under
the abovementioned provision, it is only when the applicant pays the premium and receives
and accepts the policy while he is in good health that the contract of insurance is deemed to
have been perfected.
It is not disputed, however, that when Primitivo died on November 25, 1987, his application
papers for additional insurance coverage were still with the branch office of respondent
corporation in Gumaca and it was only two days later, or on November 27, 1987, when Lalog
personally delivered the application papers to the head office in Manila. Consequently, there
was absolutely no way the acceptance of the application could have been communicated to
the applicant for the latter to accept inasmuch as the applicant at the time was already dead.
A potestative condition depends upon the exclusive will of one of the parties. For this reason,
it is considered void. Article 1182 of the New Civil Code states: When the fulfillment of the
condition depends upon the sole will of the debtor, the conditional obligation shall be void.
In the case at bar, the following conditions were imposed by the respondent company for the
perfection of the contract of insurance:
(a).......a policy must have been issued;

(b).......the premiums paid; and

(c).......the policy must have been delivered to and accepted by the applicant while he is in
good health.
The condition imposed by the corporation that the policy must have been delivered to and
accepted by the applicant while he is in good health can hardly be considered as a
potestative or facultative condition. On the contrary, the health of the applicant at the time of
the delivery of the policy is beyond the control or will of the insurance company. Rather, the
condition is a suspensive one whereby the acquisition of rights depends upon the happening
of an event which constitutes the condition. In this case, the suspensive condition was the
policy must have been delivered and accepted by the applicant while he is in good health.
There was non-fulfillment of the condition, however, inasmuch as the applicant was already
dead at the time the policy was issued. Hence, the non-fulfillment of the condition resulted in
the non-perfection of the contract.
WHEREFORE, the decision rendered by the Court of Appeals is AFFIRMED insofar as it
declared Insurance Policy No. 056300 for P50,000.00 issued by BF Lifeman Insurance
Corporation of no force and effect and hence null and void.
3.
RUFINO D. ANDRES vs.THE CROWN LIFE INSURANCE COMPANY
G.R. No. L-l0874
Facts:
Rufino D. Andres filed a complaint in the Court of First Instance of Ilocos Norte against the
Crown Life Insurance Company for the recovery of the amount of P5,000, as the face value of
a joint 20-year endowment insurance policy issued in favor of the plaintiff Rufino D. Andres
and his wife Severa G. Andres on the 13th of February, 1950, by said insurance company. On
Jun 7, 1951, Rufino Andres presented his death claim as survivor-beneficiary of the deceased
Severa G. Andres, who died May 3, 1951. Payment having been denied by the insurance
company on April 20, 1952, this case was instituted.
Defendant Company filed its answer in due time disclaiming liability and setting forth the
special defense that the aforementioned policy had already lapsed.
That the premiums are to be paid as called for in the policy, semi-annually, and the amount of
P165.15 for the first semester beginning November 25, 1949 to May 25, 1950 was paid on
November 25, 1949, and the premium likewise in the sum of P165.15 for the second
semester beginning May 25, 1950 to November 25, 1950, was paid on June 24, 1950 and the
premium for the third semester beginning November 25, 1950 to May 25, 1951 was NOT
paid.
That on January 6, 1951,the defendant, thru Mr. I.B. Melendres, wrote to Mr. and Mrs. Rufino
D. Andres advising them that the said Policy lapsed on December 25, 1950 and the amount
overdue was P165.15, giving them a period of sixty (60) days from the date of lapse to file an
application for reinstatement.
Plaitiff executed a Statement of Health which is at the same time an Application for
Reinstatement of the aforesaid policy. Severa G. Andres also executed in the month of
February, 1951, an Application for Reinstatement. On February 20, 1951, plaintiff wrote a
letter to the defendant and enclosed a money order for P100, which letter was received by the
defendant on February 26, 1951, wherein it is stated that the balance unpaid is the sum of
P65.15.
On April 14, 1951, the said Mr. I.B. Melendres, as branch secretary for the defendant; wrote
plaintiff advising him that the Home Office has approved the reinstatement of the lapsed
policy, subject to the payment of P65.15 due on November, 1950.

Mr. I.B. Melendres, branch secretary, again wrote the plaintiff requesting the remittance of the
balance of P65.15 due on the semi-annual premium for November, 1950, and upon receipt of
the said amount, there will be sent to him the Certificate of Reinstatement of the policy.
On May 5, 1951, plaintiff sent a letter to the defendant and enclosed therewith a Money Order
in the amount of P65.00 for the balance due which letter has been received in the office of the
defendant on May 11, 1951. That on May 15, 1951, said Mr. I.B. Melendres wrote a letter to
Mr. and Mrs. Rufino D. Andres, enclosing an Official Receipt for the receipt of P165.15 and
also enclosed therewith a Certificate of Reinstatement dated April 2, 1951.
On June 7, 1951, plaintiff presented his Death Claim as survivor-beneficiary of the deceased
Severa G. Andres which has been received in the office of the defendant on June 11, 1951.
Certificate of Death dated May 29, 1951, issued by the Local Civil Registrar of the
municipality of Sarrat, wherein it is shown that Mrs. Severa G. Andres died on May 3, 1951 of
dystocia, second degree, contracted pelvis.
Mr. I.B. Melendres wrote to plaintiff stating defendant's reasons for its refusal to pay the death
claim of the plaintiff in which there was therein enclosed a Death Claim Discharge to be
signed by the plaintiff but the plaintiff refused to sign, which Death Claim Discharge. The
plaintiff wrote defendant company and enclosed the National City Bank of New York Check
No. D-115356 dated June 21, 1951.
The stipulation of facts and accompanying exhibits render it undisputable that the original
policy No. 536423 lapsed for non-payment of premiums on December 26, 1950, upon
expiration of the customary 31-day period of grace. The subsequent reinstatement of the
policy was provided for in the contract itself in the following terms:
If this policy lapses, it may be reinstated upon
1. application made within three years from the date of lapse, and
2. upon production of evidence of the good health of the injured (and also of the
Beneficiary,
3. if the rate of premium depends upon the age of the Beneficiary), and
4. such other evidence of insurability at the date of application for reinstatement as
would then satisfy the Company to issue a new Policy on the same terms as this
Policy, and provided also that
5. no change has taken place in such good health and insurability subsequent to the
date of such application and before this Policy is reinstated.
6. upon payment of all overdue premiums and other indebtedness in respect of this
Policy, together with interest at six per cent, compounded annually.
The plaintiff-appellant did not comply with the last condition; for he only paid P100 (on
account of the over due semi-annual premium of P165.15) on February 20, 1951, before his
wife's death .
Appellant, however, contends that the condition regarding payment of the premium was
waived by the insurance Company by its letters.
Wherein the Company manifested to appellant:
If you can not pay the full amount immediately, send as large an amount as possible and
advise us how soon you expect to be able to pay the balance. Every consideration will be
given to your request consistent with the company's regulations.
If you are unable to cover this amount in full, send us as big an amount as you are able and
we will work out an adjustment most beneficial to you.
Issue:
Whether or not the policy was reinstated and the condition for payment was waived by the
insurance company
Ruling:

Nothing in these expressions that would indicate an intention on the insurer's part to waive the
full payment of the overdue premium as prerequisite to the reinstatement of the lapsed policy,
considering the well settled rule that a waiver must be clear and positive, and intent to waive
shown clearly and convincingly (Fernandez vs. Sebido, 70 Phil. 151, 159; Lang vs. Sheriff * 49
Off. Gaz. 3323, 3329; Jocson vs. Capitol Subdivision, Inc. G.R. L-6573, February 28, 1955).
The promise to give plaintiff's case every consideration does not import any decision to
renounce the insurer's rights; and as to the "working out of an adjustment most beneficial" to
the insured, the proposal is obviously so vague and indefinite as to require further
negotiations between the parties, for their criteria might differ as to what would be the most
beneficial arrangement.
Upon the other hand, the subsequent letters of the insurance Company patently indicated that
the Company insisted on the full payment of the premium before the policy was reinstated.
We take this opportunity of advising you that our Home Office has approved the
reinstatement of your lapsel policy subject to the payment of the balance of P65.15 due on
your November 1950 premium. Kindly remit this amount in order that you may once more
enjoy the benefits of insurance protection".
We may now reinstate your policy if you will kindly remit to us the balance of P65.15 due on
your semi-annual premium for November 1950. Please send us this amount by return mail
and upon its receipt we will in turn send the Certificate of Reinstatement of your policy, thus
rendering it once again in full force and effect,
Clearly the Company did not consider the partial payment as sufficient consideration for the
reinstatement. Appellant's failure to remit the balance before the death of his wife operated to
deprive him of any right to waive the policy and recover the face value thereof.
Wherefore, finding no error in the judgment appealed from, we hereby affirm the same, with
costs against appellant.
4.
Part II
a. Concealment
SUNLIFE ASSURANCE COMPANY OF CANADAvs.The Hon. COURT OF APPEALS
G.R. No. 105135
Facts:
Robert John B. Bacani procured a life insurance contract for himself from petitioner. He was
issued Policy valued at P100,000.00, with double indemnity in case of accidental death. The
designated beneficiary was his mother, respondent Bernarda Bacani. On June 26, 1987, the
insured died in a plane crash. Respondent Bernarda Bacani filed a claim with petitioner,
seeking the benefits of the insurance policy taken by her son. Petitioner conducted an
investigation and its findings prompted it to reject the claim.
In its letter, petitioner informed respondent Bernarda Bacani, that the insured did not disclose
material facts relevant to the issuance of the policy, thus rendering the contract of insurance
voidable. A check representing the total premiums paid in the amount of P10,172.00 was
attached to said letter.
Petitioner claimed that the insured gave false statements in his application.
Petitioner discovered that two weeks prior to his application for insurance, the insured was
examined and confined at the Lung Center of the Philippines, where he was diagnosed for
renal failure. During his confinement, the deceased was subjected to urinalysis, ultrasonography and hematology tests.

On November 17, 1988, respondent Bernarda Bacani and her husband, respondent Rolando
Bacani, filed an action for specific performance against petitioner with the Regional Trial
Court. Petitioner filed its answer with counterclaim and a list of exhibits consisting of medical
records furnished by the Lung Center of the Philippines.
RTC: decided in favor of private respondents, in ruling for private respondents, the trial court
concluded that the facts concealed by the insured were made in good faith and under a belief
that they need not be disclosed. Moreover, it held that the health history of the insured was
immaterial since the insurance policy was "non-medical".
CA: affirmed the decision of the trial court. The appellate court ruled that petitioner cannot
avoid its obligation by claiming concealment because the cause of death was unrelated to the
facts concealed by the insured. It also sustained the finding of the trial court that matters
relating to the health history of the insured were irrelevant since petitioner waived the medical
examination prior to the approval and issuance of the insurance policy. Moreover, the
appellate court agreed with the trial court that the policy was "non-medical"
Petitioner's motion for reconsideration was denied; hence, this petition.
Issue:
Whether or not there was concealment and the beneficiary is entitled to the proceeds of the
insurance policy.
Ruling:
We reverse the decision of the Court of Appeals.
The rule that factual findings of the lower court and the appellate court are binding on this
Court is not absolute and admits of exceptions, such as when the judgment is based on a
misappreciation of the facts.
Misrepresentation, however, the same was made in "good faith" and the facts concealed or
misrepresented were irrelevant since the policy was "non-medical". We disagree.
Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to
communicate to the other, in good faith, all facts within his knowledge which are material to
the contract and as to which he makes no warranty, and which the other has no means of
ascertaining. Said Section provides:
A neglect to communicate that which a party knows and ought to communicate, is called
concealment.
Materiality is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom communication is due, in forming his estimate of
the disadvantages of the proposed contract or in making his inquiries
The terms of the contract are clear. The insured is specifically required to disclose to the
insurer matters relating to his health.
The information which the insured failed to disclose were material and relevant to the
approval and issuance of the insurance policy. The matters concealed would have definitely
affected petitioner's action on his application, either by approving it with the corresponding
adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have
warranted a medical examination of the insured by petitioner in order for it to reasonably
assess the risk involved in accepting the application.
Thus, "goad faith" is no defense in concealment. The insured's failure to disclose the fact that
he was hospitalized for two weeks prior to filing his application for insurance, raises grave
doubts about his bonafides. It appears that such concealment was deliberate on his part.
5.

PHILAMCARE HEALTH SYSTEMS, INC.vs. COURT OF APPEALS and JULITA TRINOS

G.R. No. 125678
Facts:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care
coverage with petitioner Philamcare Health Systems, Inc. In the standard application form, he
answered no to the questions;
Have you or any of your family members ever consulted or been treated for high blood
pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer.
The application was approved for a period of one year from March 1, 1988 to March 1, 1989.
Accordingly, he was issued Health Care Agreement, under the agreement, respondents
husband was entitled to avail of hospitalization benefits, whether ordinary or emergency,
listed therein. He was also entitled to avail of out-patient benefits such as annual physical
examinations, preventive health care and other out-patient services.
Upon the termination of the agreement, the same was extended for another year, the amount
of coverage was increased to maximum P75,000.00 per disability.
During the period of his coverage, Ernani suffered a heart attack and was confined at the
Manila Medical Center (MMC) for one month beginning March 9, 1990. While her husband
was in the hospital, respondent tried to claim the benefits under the health care agreement.
However, petitioner denied her claim saying that the Health Care Agreement was void.
According to petitioner, there was a concealment regarding Ernanis medical history. Doctors
at the MMC allegedly discovered at the time of Ernanis confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the application form. Thus,
respondent paid the hospitalization expenses herself, amounting to about P76,000.00.
After her husband was discharged from the MMC, he was attended by a physical therapist at
home. Later, he was admitted at the Chinese General Hospital. Due to financial difficulties,
however, respondent brought her husband home again. In the morning of April 13, 1990,
Ernani had fever and was feeling very weak. Respondent was constrained to bring him back
to the Chinese General Hospital where he died on the same day.
Respondent instituted with the Regional Trial Court an action for damages against petitioner
and its president, Dr. Benito Reverente. She asked for reimbursement of her expenses plus
moral damages and attorneys fees. The lower court ruled against petitioners, ordered
defendants to pay and reimburse the medical and hospital coverage of the late Ernani Trinos
in the amount of P76,000.00 plus interest, until the amount is fully paid to plaintiff who paid
the same, plus damages.
The Court of Appeals affirmed the decision of the trial court but deleted all awards for
damages and absolved petitioner Reverente.
Petitioners motion for reconsideration was denied. Hence, petitioner brought the instant
petition for review, raising the primary argument that a health care agreement is not an
insurance contract; hence the incontestability clause under the Insurance Code does not
apply.
Issue:
Whether or not the assailed concealment will disqualify the insured from receiving the claim
from the health care agreement
Ruling:
Section 10 provides:
Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or support, or in
whom he has a pecuniary interest;

(3) of any person under a legal obligation to him for the payment of money, respecting
property or service, of which death or illness might delay or prevent the performance; and
(4) of any person upon whose life any estate or interest vested in him depends.
In the case at bar, the insurable interest of respondents 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.
Petitioner argues that respondents husband concealed a material fact in his application but
petitioner additionally required the applicant for authorization to inquire about the applicants
medical history.
Petitioner cannot rely on the stipulation regarding Invalidation of agreement, failure to
disclose or misrepresentation of any material information by the member in the application or
medical examination, whether intentional or unintentional, shall automatically invalidate the
Agreement from the very beginning and liability of Philamcare shall be limited to return of all
Membership Fees paid.
Although false, a representation of the expectation, intention, belief, opinion, or judgment of
the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of
the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the
statement is material to the risk, if the statement is obviously of the foregoing character, since
in such case the insurer is not justified in relying upon such statement, but is obligated to
make further inquiry. There is a clear distinction between such a case and one in which the
insured is fraudulently and intentionally states to be true, as a matter of expectation or belief,
that which he then knows, to be actually untrue, or the impossibility of which is shown by the
facts within his knowledge, since in such case the intent to deceive the insurer is obvious and
amounts to actual fraud
The fraudulent intent on the part of the insured must be established to warrant rescission of
the insurance contract. Concealment as a defense for the health care provider or insurer to
avoid liability is an affirmative defense and the duty to establish such defense by satisfactory
and convincing evidence rests upon the provider or insurer. In any case, with or without the
authority to investigate, petitioner is liable for claims made under the contract. Having
assumed a responsibility under the agreement, petitioner is bound to answer the same to the
extent agreed upon. In the end, the liability of the health care provider attaches once the
member is hospitalized for the disease or injury covered by the agreement or whenever he
avails of the covered benefits which he has prepaid.
Under Section 27 of the Insurance Code, a concealment entitles the injured party to rescind
a contract of insurance. The right to rescind should be exercised previous to the
commencement of an action on the contract. In this case, no rescission was made. Besides,
the cancellation of health care agreements as in insurance policies require the concurrence of
the following conditions:
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.
None of the above pre-conditions was fulfilled in this case.
Being a contract of adhesion, the terms of an insurance contract are to be construed strictly
against the party which prepared the contract the insurer. By reason of the exclusive control
of the insurance company over the terms and phraseology of the insurance contract,
ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured,

especially to avoid forfeiture. This is equally applicable to Health Care Agreements. The
phraseology used in medical or hospital service contracts, such as the one at bar, must be
liberally construed in favor of the subscriber, and if doubtful or reasonably susceptible of two
interpretations the construction conferring coverage is to be adopted, and exclusionary
clauses of doubtful import should be strictly construed against the provider.
Under the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc.
had twelve months from the date of issuance of the Agreement within which to contest the
membership of the patient if he had previous ailment of asthma, and six months from the
issuance of the agreement if the patient was sick of diabetes or hypertension. The periods
having expired, the defense of concealment or misrepresentation no longer lie.
The assailed decision of the Court of Appeals dated December 14, 1995 is AFFIRMED.
6.
EDILLONvs.MANILA BANKERS LIFE INSURANCE CORPORATION
G.R. No. L-34200
Facts:
Carmen O, Lapuz applied with respondent insurance corporation for insurance coverage
against accident and injuries. She filled up the blank application form given to her and filed
the same with the respondent insurance corporation. In the said application form which was
dated April 15, 1969, she gave the date of her birth as July 11, 1904. On the same date, she
paid the sum of P20.00 representing the premium for which she was issued the
corresponding receipt signed by an authorized agent of the respondent insurance corporation.
Upon the filing of said application and the payment of the premium on the policy applied for,
the respondent insurance corporation issued to Carmen O. Lapuz its Certificate of Insurance
No. 128866. The policy was to be effective for a period of 90 days.
On May 31, 1969 or during the effectivity of Certificate of Insurance, Carmen O. Lapuz died in
a vehicular accident in the North Diversion Road. Petitioner Regina L. Edillon, a sister of the
insured and who was the named beneficiary in the policy, filed her claim for the proceeds of
the insurance, submitting all the necessary papers and other requisites with the private
respondent. Her claim having been denied, Regina L. Edillon instituted this action in the Court
of First Instance of Rizal on August 27, 1969.
The respondent insurance corporation relies on a provision contained in the Certificate of
Insurance, excluding its liability to pay claims under the policy in behalf of "persons who are
under the age of sixteen (16) years of age or over the age of sixty (60) years ..." It is pointed
out that the insured being over sixty (60) years of age when she applied for the insurance
coverage, the policy was null and void, and no risk on the part of the respondent insurance
corporation had arisen therefrom.
RTC: sustained the contention of the private respondent and dismissed the complaint;
ordered the petitioner to pay attorney's fees in the sum of 1,000.00 PESOS in favor of the
private respondent; and ordered the private respondent to return the sum of 20.00 PESOS
received by way of premium on the insurancy policy. It was reasoned out that a policy of
insurance being a contract of adhesion, it was the duty of the insured to know the terms of the
contract he or she is entering into; the insured in this case, upon learning from its terms that
she could not have been qualified under the conditions stated in said contract, what she
should have done is simply to ask for a refund of the premium that she paid. It was further
argued by the trial court that the ruling calling for a liberal interpretation of an insurance
contract in favor of the insured and strictly against the insurer may not be applied in the
present case in view of the peculiar facts and circumstances obtaining therein.
CA: reverse the judgment of the trial court. The age of the insured Carmen O. Lapuz was not
concealed to the insurance company. Her application for insurance coverage which was on a
printed form furnished by private respondent and which contained very few items of

information clearly indicated her age of the time of filing the same to be almost 65 years of
age. Despite such information which could hardly be overlooked in the application form,
considering its prominence thereon and its materiality to the coverage applied for, the
respondent insurance corporation received her payment of premium and issued the
corresponding certificate of insurance without question.
Issue:
Whether or not CA erred in reversing the decision of the trial court that there was no
deliberate concealment on the part of the insurer
Ruling:
The accident which resulted in the death of the insured, a risk covered by the policy, occurred
on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance coverage was applied for.
There was sufficient time for the private respondent to process the application and to notice
that the applicant was over 60 years of age and thereby cancel the policy on that ground if it
was minded to do so. If the private respondent failed to act, it is either because it was willing
to waive such disqualification; or, through the negligence or incompetence of its employees
for which it has only itself to blame, it simply overlooked such fact. Under the circumstances,
the insurance corporation is already deemed in estoppel. Its inaction to revoke the policy
despite a departure from the exclusionary condition contained in the said policy constituted a
waiver of such condition.
The law, supported by a long line of cases, is expressed by American Jurisprudence. It is
usually held that where the insurer, at the time of the issuance of a policy of insurance, has
knowledge of existing facts which, if insisted on, would invalidate the contract from its very
inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with
the known facts, and the insurer is stopped thereafter from asserting the breach of such
conditions.
The law is charitable enough to assume, in the absence of any showing to the contrary, that
an insurance company intends to execute a valid contract in return for the premium received;
and when the policy contains a condition which renders it voidable at its inception, and this
result is known to the insurer, it will be presumed to have intended to waive the conditions and
to execute a binding contract, rather than to have deceived the insured into thinking he is
insured when in fact he is not, and to have taken is money without consideration.'
The reason for the rule is not difficult to find.
The plain, human justice of this doctrine is perfectly apparent. To allow a company to accept
one's money for a policy of insurance which it then knows to be void and of no effect, though
it knows as it must, that the assured believes it to be valid and binding, is so contrary to the
dictates of honesty and fair dealing, and so closely related to positive fraud, as to be abhorent
to fairminded men. It would be to allow the company to treat the policy as valid long enough to
get the premium on it, and leave it at liberty to repudiate it the next moment. This cannot be
deemed to be the real intention of the parties. To hold that a literal construction of the policy
expressed the true intention of the company would be to indict it, for fraudulent purposes and
designs which we cannot believe it to be guilty of.
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE. In lieu
thereof, the private respondent insurance corporation is hereby ordered to pay to the
petitioner the sum of 10,000.00 PESOS as proceeds of Insurance with interest at the legal
rate from May 31, 1969 until fully paid, the further sum of 2,000.00 PESOS as and for
attorney's fees, and the costs of suit.
7.
PERLA COMPANIA DE SEGUROS, INC.vs.THE COURT OF APPEALS
G.R. No. 96452
Facts:

Private respondents spouses Herminio and Evelyn Lim executed a promissory note in favor
Supercars, Inc. in the sum of P77,940.00, payable in monthly installments according to the
schedule of payment indicated in said note, and secured by a chattel mortgage over a brand
new red Ford Laser which is registered under the name of private respondent Herminio Lim
and insured with the petitioner Perla Compania de Seguros, Inc. (Perla for brevity) for
comprehensive coverage under Policy.
On the same date, Supercars, Inc., with notice to private respondents spouses, assigned to
petitioner FCP Credit Corporation (FCP for brevity) its rights, title and interest on said
promissory note and chattel mortgage as shown by the Deed of Assignment.
November 9, 1982, said vehicle was carnapped while parked at the back of Broadway
Centrum along N. Domingo Street, Quezon City. Private respondent Evelyn Lim, who was
driving said car before it was carnapped, immediately called up the Anti-Carnapping Unit of
the Philippine Constabulary to report said incident and thereafter, went to the nearest police
substation at Araneta, Cubao to make a police report regarding said incident, as shown by the
certification issued by the Quezon City police.
On November 10, 1982, private respondent Evelyn Lim reported said incident to the Land
Transportation Commission in Quezon City, as shown by the letter of her counsel to said
office, in compliance with the insurance requirement. She also filed a complaint with the
Headquarters, Constabulary Highway Patrol Group.
On November 11, 1982, private respondent filed a claim for loss with the petitioner Perla but
said claim was denied on the ground that Evelyn Lim, who was using the vehicle before it was
carnapped, was in possession of an expired driver's license at the time of the loss of said
vehicle which is in violation of the authorized driver clause of the insurance policy.
Private respondents requests from petitioner FCP for a suspension of payment on the
monthly amortization agreed upon due to the loss of the vehicle and, since the carnapped
vehicle insured with petitioner Perla, said insurance company should be made to pay the
remaining balance of the promissory note and the chattel mortgage contract.
Perla, however, denied private respondents' claim. Consequently, petitioner FCP demanded
that private respondents pay the whole balance of the promissory note or to return the vehicle
but the latter refused. On July 25, 1983, petitioner FCP filed a complaint against private
respondents, who in turn filed an amended third party complaint against petitioner Perla.
RTC: ruled in favor of FCP ordering defendants Herminio Lim and Evelyn Lim to pay, jointly
and severally, plaintiff the sum of P55,055.93 plus interest thereon at the rate of 24% per
annum from July 2, 1983 until fully paid; ordering defendants to pay plaintiff P50,000.00 as
and for attorney's fees; and the costs of suit.
Upon the other hand, likewise, ordering the DISMISSAL of the Third-Party Complaint filed
against Third-Party Defendant.
CA: reversed said decision on appeal.
Petitioners separate motions for reconsideration were denied by the Court of Appeals,
petitioners filed these separate petitions for review on certiorari.
Issue
1. Whether or not there was grave abuse of discretion on the part of the appellate court in
holding that the private respondent (Perla) is liable in the insurance contract under theft
clause
2. Whether or not the loss of the collateral exempted the debtor (Sps Lim) from their
obligations under the promissory note to FCP.
Ruling:

1. No merit in Perla's petition.

The comprehensive motor car insurance policy issued by petitioner Perla undertook to
indemnify the private respondents against loss or damage to the car (a) by accidental collision
or overturning, or collision or overturning consequent upon mechanical breakdown or
consequent upon wear and tear; (b) by fire, external explosion, self-ignition or lightning or
burglary, housebreaking or theft; and (c) by malicious act.
Where a car is admittedly, as in this case, unlawfully and wrongfully taken without the owner's
consent or knowledge, such taking constitutes theft, and, therefore, it is the "THEFT"' clause,
and not the "AUTHORIZED DRIVER" clause that should apply. As correctly stated by the
respondent court in its decision:
Theft is an entirely different legal concept from that of accident. Theft is committed by a
person with the intent to gain or, to put it in another way, with the concurrence of the doer's
will. On the other hand, accident, although it may proceed or result from negligence, is the
happening of an event without the concurrence of the will of the person by whose agency it
was caused.
Clearly, the risk against accident is distinct from the risk against theft. The "authorized driver
clause" in a typical insurance policy is in contemplation or anticipation of accident in the legal
sense in which it should be understood, and not in contemplation or anticipation of an event
such as theft. The distinction often seized upon by insurance companies in resisting claims
from their assureds between death occurring as a result of accident and death occurring as
a result of intent may, by analogy, apply to the case at bar. Thus, if the insured vehicle had
figured in an accident at the time she drove it with an expired license, then, appellee Perla
Compania could properly resist appellants' claim for indemnification for the loss or destruction
of the vehicle resulting from the accident. But in the present case, the loss of the insured
vehicle did not result from an accident where intent was involved; the loss in the present case
was caused by theft, the commission of which was attended by intent.
It is worthy to note that there is no causal connection between the possession of a valid
driver's license and the loss of a vehicle. To rule otherwise would render car insurance
practically a sham since an insurance company can easily escape liability by citing restrictions
which are not applicable or germane to the claim, thereby reducing indemnity to a shadow.
2. This Court agrees with petitioner FCP that private respondents are not relieved of their
obligation to pay the former the installments due on the promissory note on account of the
loss of the automobile. The chattel mortgage constituted over the automobile is merely an
accessory contract to the promissory note. Being the principal contract, the promissory note is
unaffected by whatever befalls the subject matter of the accessory contract. Therefore, the
unpaid balance on the promissory note should be paid, and not just the installments due and
payable before the automobile was carnapped, as erronously held by the Court of Appeals.
However, this does not mean that private respondents are bound to pay the interest, litigation
expenses and attorney's fees stipulated in the promissory note. Because of the peculiar
relationship between the three contracts in this case, i.e., the promissory note, the chattel
mortgage contract and the insurance policy, this Court is compelled to construe all three
contracts as intimately interrelated to each other, despite the fact that at first glance there is
no relationship whatsoever between the parties thereto.
Under the promissory note, private respondents are obliged to pay Supercars, Inc. the
amount stated therein in accordance with the schedule provided for. To secure said
promissory note, private respondents constituted a chattel mortgage in favor of Supercars,
Inc. over the automobile the former purchased from the latter. The chattel mortgage, in turn,
required private respondents to insure the automobile and to make the proceeds thereof
payable to Supercars, Inc. The promissory note and chattel mortgage were assigned by
Supercars, Inc. to petitioner FCP, with the knowledge of private respondents. Private
respondents were able to secure an insurance policy from petitioner Perla, and the same was
made specifically payable to petitioner FCP.

The insurance policy was therefore meant to be an additional security to the principal
contract, that is, to insure that the promissory note will still be paid in case the automobile is
lost through accident or theft. The Chattel Mortgage Contract provided that:
THE SAID MORTGAGOR COVENANTS AND AGREES THAT HE/IT WILL CAUSE THE
PROPERTY/IES HEREIN-ABOVE MORTGAGED TO BE INSURED AGAINST LOSS OR
DAMAGE BY ACCIDENT, THEFT AND FIRE FOR A PERIOD OF ONE YEAR FROM DATE
HEREOF AND EVERY YEAR THEREAFTER UNTIL THE MORTGAGE OBLIGATION IS
FULLY PAID WITH AN INSURANCE COMPANY OR COMPANIES ACCEPTABLE TO THE
MORTGAGEE IN AN AMOUNT NOT LESS THAN THE OUTSTANDING BALANCE OF THE
MORTGAGE OBLIGATION; THAT HE/IT WILL MAKE ALL LOSS, IF ANY, UNDER SUCH
POLICY OR POLICIES, PAYABLE TO THE MORTGAGE OR ITS ASSIGNS AS ITS
INTERESTS MAY APPEAR AND FORTHWITH DELIVER SUCH POLICY OR POLICIES TO
THE MORTGAGEE, . . . .
It is clear from the abovementioned provision that upon the loss of the insured vehicle, the
insurance company Perla undertakes to pay directly to the mortgagor or to their assignee,
FCP, the outstanding balance of the mortgage at the time of said loss under the mortgage
contract. If the claim on the insurance policy had been approved by petitioner Perla, it would
have paid the proceeds thereof directly to petitioner FCP, and this would have had the effect
of extinguishing private respondents' obligation to petitioner FCP. Therefore, private
respondents were justified in asking petitioner FCP to demand the unpaid installments from
petitioner Perla.
The assailed decision of the Court of Appeals is hereby MODIFIED to require private
respondents to pay petitioner FCP the amount of P55,055.93, with legal interest from July 2,
1983 until fully paid.
8.
COUNTRY BANKERS INSURANCE CORPORATION vs. LIANGA BAY AND COMMUNITY
MULTI-PURPOSE COOPERATIVE, INC.
G.R. No. 136914
Facts:
The petitioner is a domestic corporation principally engaged in the insurance business
wherein it undertakes, for a consideration, to indemnify another against loss, damage or
liability from an unknown or contingent event including fire while the respondent is a duly
registered cooperative judicially declared insolvent and represented by the elected assignee,
Cornelio Jamero.
Sometime in 1989, the petitioner and the respondent entered into a contract of fire insurance.
Under Fire Insurance Policy, the petitioner insured the respondents stocks-in-trade against
fire loss, damage or liability during the period starting from June 20, 1989 to June 20, 1990 at
for the sum of 200,000.00 PESOS.
On July 1, 1989, the respondents building located at Barangay Diatagon, Lianga, Surigao del
Sur was gutted by fire and reduced to ashes, resulting in the total loss of the respondents
stocks-in-trade, pieces of furniture and fixtures, equipments and records.
Due to the loss, the respondent filed an insurance claim with the petitioner under its Fire
Insurance Policy , submitting: (a) the Spot Report of Pfc. Arturo V. Juarbal, INP Investigator.
The petitioner, however, denied the insurance claim on the ground that, based on the
submitted documents, the building was set on fire by 2 NPA rebels who wanted to obtain
canned goods, rice and medicines as provisions for their comrades in the forest, and that
such loss was an excepted risk under paragraph No. 6 of the policy conditions of Fire
Insurance Policy which provides:
This insurance does not cover any loss or damage occasioned by or through or in
consequence, directly or indirectly, of any of the following occurrences, namely:

(d) Mutiny, riot, military or popular uprising, insurrection, rebellion, revolution, military or
usurped power.
Any loss or damage happening during the existence of abnormal conditions (whether physical
or otherwise) which are occasioned by or through or in consequence, directly or indirectly, of
any of said occurrences shall be deemed to be loss or damage which is not covered by this
insurance, except to the extent that the Insured shall prove that such loss or damage
happened independently of the existence of such abnormal conditions.
Finding the denial of its claim unacceptable, the respondent then instituted in the trial court
the complaint for recovery of loss, damage or liability against petitioner. The petitioner
answered the complaint and reiterated the ground it earlier cited to deny the insurance claim,
that is, that the loss was due to NPA rebels, an excepted risk under the fire insurance policy
RTC: rendered its decision favor of the respondent, holding to fully pay the insurance claim
for the loss the insured-plaintiff sustained as a result of the fire under its Fire Insurance Policy
in its full face value of P200,000.00 with interest of 12% per annum from date of filing of the
complaint until the same is fully paid.
Based on its findings, it is therefore the considered opinion of this Court, as it so holds, that
the defenses raised by defendant-Country Bankers has utterly crumbled on account of its
inherent weakness, incredibility and unreliability, and after applying those helpful tools like
common sense, logic and the Courts honest appraisal of the real and actual situation
obtaining in this area, such defenses remains unimpressive and unconvincing, and therefore,
the defendant-Country Bankers has to be irreversibly adjudged liable, as it should be, to
plaintiff-Insolvent Cooperative, represented in this action by its Assignee, Cornelio Jamero,
and thus, ordering said defendant-Country Bankers to pay the plaintiff-Insolvent Cooperative.
For being unsubstantiated with credible and positive evidence, the counterclaim is
dismissed.
CA: affirmed the challenged decision of the trial court in its entirety
Issue:
Whether or not Court of Appeals erred in holding that the petitioner is liable to pay the claim
considering that the stocks was burned by the NPA rebels, hence an excepted risk under the
fire insurance policy.
Ruling:
The petitioner does not dispute that the respondents stocks-in-trade were insured against fire
loss, damage or liability under Fire Insurance Policy and that the respondent lost its stocks-intrade in a fire that occurred on July 1, 1989, within the duration of said fire insurance. The
petitioner, however, posits the view that the cause of the loss was an excepted risk under the
terms of the fire insurance policy.
Where a risk is excepted by the terms of a policy which insures against other perils or
hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has
not assumed that risk, and from this it follows that an insurer seeking to defeat a claim
because of an exception or limitation in the policy has the burden of proving that the loss
comes within the purview of the exception or limitation set up.
If a proof is made of a loss apparently within a contract of insurance, the burden is upon the
insurer to prove that the loss arose from a cause of loss which is excepted or for which it is
not liable, or from a cause which limits its liability. Stated else wise, since the petitioner in this
case is defending on the ground of non-coverage and relying upon an exemption or exception
clause in the fire insurance policy, it has the burden of proving the facts upon which such
excepted risk is based, by a preponderance of evidence.But petitioner failed to do so.

The petitioner relies on the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo as
well as on the Spot Report of Pfc. Arturo V. Juarbal A witness can testify only to those facts
which he knows of his personal knowledge, which means those facts which are derived from
his perception. Consequently, a witness may not testify as to what he merely learned from
others either because he was told or read or heard the same. Such testimony is considered
hearsay and may not be received as proof of the truth of what he has learned. Such is the
hearsay rule which applies not only to oral testimony or statements but also to written
evidence as well.
The hearsay rule is based upon serious concerns about the trustworthiness and reliability of
hearsay evidence inasmuch as such evidence are not given under oath or solemn affirmation
and, more importantly, have not been subjected to cross-examination by opposing counsel to
test the perception, memory, veracity and articulateness of the out-of-court declarant or actor
upon whose reliability on which the worth of the out-of-court statement depends.
Thus, the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo are inadmissible in
evidence, for being hearsay, inasmuch as they did not take the witness stand and could not
therefore be cross-examined.
There are exceptions to the hearsay rule, among which are entries in official records.To be
admissible in evidence, however, three (3) requisites must concur, to wit:
(a) that the entry was made by a public officer, or by another person specially enjoined by law
to do so;
(b) that it was made by the public officer in the performance of his duties, or by such other
person in the performance of a duty specially enjoined by law; and
(c) that the public officer or other person had sufficient knowledge of the facts by him stated,
which must have been acquired by him personally or through official information.
The third requisite was not met in this case since no investigation, independent of the
statements gathered from Jose Lomocso, was conducted by Pfc. Arturo V. Juarbal.
The said Spot Report is admissible only insofar as it constitutes part of the testimony of Pfc.
Arturo V. Juarbal since he himself took the witness stand and was available for crossexamination. The portions of his Spot Report which were of his personal knowledge or which
consisted of his perceptions and conclusions are not hearsay. The rest of the said report
relative to the statement of Jose Lomocso may be considered as independently relevant
statements gathered in the course of Juarbals investigation and may be admitted as such but
not necessarily to prove the truth thereof.
WHEREFORE, the appealed Decision is MODIFIED. The rate of interest on the adjudged
principal amount of P200,000.00 shall be six percent (6%) per annum computed from the date
of filing of the Complaint in the trial court. The awards in the amounts of P50,000.00 as actual
damages, P50,000.00 as exemplary damages, P5,000.00 as litigation expenses, and
P10,000.00 as attorneys fees are hereby DELETED.