The Insurance Code of 2013

The Insurance code of 2013
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General Provisions
Section 1. Presidential Decree No. 612, as amended, is hereby further amended to read as follows:
"GENERAL PROVISIONS
"Section 1. This Decree shall be known as The Insurance Code.
"Section 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth
or indicated, unless the context otherwise requires:
"(a) A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event.
"A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if
made by a surety who or which, as such, is doing an insurance business as hereinafter provided.
"(b) The term doing an insurance business or transacting an insurance business, within the meaning of this
Code, shall include:
"(1) Making or proposing to make, as insurer, any insurance contract;
"(2) Making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely
incidental to any other legitimate business or activity of the surety;
"(3) Doing any kind of business, including a reinsurance business, specifically recognized as constituting
the doing of an insurance business within the meaning of this Code;
"(4) Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner
designed to evade the provisions of this Code.
"In the application of the provisions of this Code, the fact that no profit is derived from the making of
insurance contracts, agreements or transactions or that no separate or direct consideration is received
therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing
or transacting of an insurance business.
"(c) As used in this Code, the term Commissioner means the Insurance Commissioner.
a. INSURANCE
A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event (Sec. 2, par.1)
b. Elements of the Contract

(1) Payment of Premium
(2) Assumption of Risk: Designated Peril as Cause
(3) Risk of Loss or Damage
(4) Insurable Interest
(5) Risk-Distributing Scheme
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Notes:
(1) Payment of Premium

(a) The consideration of the insurance contract
(b) The premium is a ratable consideration
(c) Paid by the insured to a general insurance fund
(d) For the insurers assumption of risk
(2) Assumption of Risk: Designated Peril as Cause

(a) The insurer promises to pay or indemnify such loss
(b) In a fixed or ascertainable amount
(c) In order to recover from the insurance contract, the cause of the damage or loss must be caused by the perils
expressly indicated in the contract
(3) Risk of Loss or Damage

(a) The happening of designated events,
(b) Either unknown or contingent,
(c) Past or future,
(d) Will subject such interest to some kind of loss,
(e) Whether in the form of injury, damage, or liability
(4) Insurable Interest

(a) The interest of the insured in a thing or a life
(b) Such interest is susceptible of pecuniary estimation (for non-life insurance only, does not apply to life insurance
because life does not have monetary value)
(c) Thing insured in non-life insurance must be capable of pecuniary estimation because non-life insurance is
essentially for indemnification.
(d) Cannot be waived (Sec. 25)
(5) Risk-Distributing Scheme

(a) This assumption of risk is part of a general scheme to distribute the loss
(b) Among a large number of persons
(c) Exposed to similar risks.
(d) Losses are borne not by the insurer but proportionally by all those who paid premiums.
c. Characteristics/Nature
(1) Consensual
(a) It is perfected by the meeting of the minds of the parties.
(b) There must be concurrence of offer and acceptance.
(c) Unless otherwise stipulated, the policy is not essential to the existence of the contract. It merely evidences
the terms and conditions thereof. (Campos)
(2) Voluntary
(a) General rule: It is not compulsory. Also, the parties are free to stipulate terms provided they are not contrary
to law, morals, good customs, public order, or public policy.
(b) Exceptions:
(i) Motor vehicles (Sec. 373-389);
(ii) Employees (Art. 168-184, Labor Code); or
(iii) As a condition to granting a license (De Leon).
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(3) Contract of Adhesion (Fine Print Rule)
(a) The contract is presented to the insured already in its printed form by which he either takes it or leaves it.
(b) Contracts of adhesion are valid.
(c) Ambiguity in the insurance contract shall be interpreted liberally in favor of the insured and strictly against
the insurer.
(4) Executory
(a) Once the insured pays the premium, the contract already takes effect.
(b) Synallagmatic and reciprocal such that even if the contingent event does not occur, the insurer has still
provided protection against the risk.
(5) Aleatory
(a) The obligation of the insurer to pay depends on the happening of an event which is uncertain, or though
certain, is to occur at an indeterminate time (Art. 2010, Civil Code)
(b) However, it cannot be considered as gambling, wagering, or a contract of chance because the risk is created
by the contract itself.
(c) When the designated peril does not happen, the insured nevertheless gets the protection against such risk for
the period covered by the insurance contract.
(6) Contract of Indemnity (only for non-life insurance)

(a) The insured who has insurable interest over the property is only entitled to recover the amount of actual loss
sustained
(b) The burden is upon him to establish the amount of such loss.
(c) Insurance contracts are not wagering contracts (Sec. 4).
(d) General rule: Applies only to property insurance. An insurance contingent on the life of a person is not an
indemnity contract because the value of a life is immeasurable.
(e) Exception: However, where the basis of the insurable interest of the policy owner on the life of the insured is
a commercial relationship (e.g., creditor-debtor, mortgagor/guarantor-mortgagee, supporter and supportee),
then such contract is an indemnity contract.
(7) Risk Distributing Device

(a) By paying a pre-determined amount into a general fund out of which payment will be made for an economic
loss of a defined type,
(b) Each member contributes to a small degree toward compensation for losses suffered by any member of the
group.
(8) Uberrimae Fides Contract

(a) Each party is required to disclose conditions affecting the risk, of which he is aware, or any material fact
which the applicant knows and those which he ought to know.
(b) Violation of this duty gives the aggrieved party the right to rescind the contract. Where the aggrieved party
is the insured, the bad faith of the insurer will preclude it from denying liability on the policy based on breach
of warranty. (Campos)
(9) Personal Contract

(a) Each party takes into consideration the character, conduct and/or credit of the other and in making of the
contract, each is enjoined by law to deal with the other in utmost good faith. (Campos)
(b) So, the insured cannot assign, before the happening of the loss, his rights under a property policy to others
without the consent of the insurer (Sec. 20, 58, 83)
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d. Doctrine of estoppel
e. How ambiguities are construed
Ambiguity in the insurance contract shall be interpreted liberally in favor of the insured and strictly against
the insurer.
Illustrative cases:
Insurance Case Digest: Del Rosario V. Equitable Ins. And Casualty Co., Inc. (1963)
G.R. No. L-16215 June 29, 1963

Lessons Applicable: Ambiguous Provisions Interpreted Against Insurer (Insurance)
FACTS:
April 13, 1957: Simeon del Rosario, father of the insured who died from drowning filed a claim for payment with
Equitable Ins. and Casualty Co., Inc. but it refused to pay more than P1,000 php so a case was filed with the RTC for
the P2,000 balance stating that under the policy they are entitled to P1,000 to P3,000 as indemnity
RTC: entitled to recover P3,000 - policy does not positively state any definite amount, there is an ambiguity in this
respect in the policy, which ambiguity must be interpreted in favor of the insured and strictly against the insurer so
as to allow greater indemnity
ISSUE: W/N Simeon is entitled to recover P3,000
HELD: YES.
terms in an insurance policy, which are ambiguous, equivocal or uncertain are to be construed strictly against, the
insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the
insured, especially where a forfeiture is involved
reason for this rule is that the "insured usually has no voice in the selection or arrangement of the words employed
and that the language of the contract is selected with great care and deliberation by expert and legal advisers
employed by, and acting exclusively in the interest of, the insurance company
FIELDMENS INSURANCE v. MERCEDES VARGAS vda. DE SONGCO, et al. and CA
1968 / Fernando / Review of CA decision
Federico Songco, a man of scant education [first grader], owned a private jeepney. He was induced by Fieldmens
Insurance agent Benjamin Sambat to apply for a Common Carriers Liability Insurance Policy covering his motor vehicle.
[As testified by Songcos son Amor later,] Federico said that his vehicle is an owner private vehicle and not for passengers,
but agent Sambat said that they can insure whatever kind of vehicle because their company is not owned by the
government, so they could do what they please whenever they believe a vehicle is insurable. Songco paid an annual
premium and he was issued a Common Carriers Accident Insurance Policy. After the policy expired, he renewed the policy.
During the effectivity of the renewed policy, the insured vehicle while being driven by Rodolfo Songco [duly licensed driver
and Federicos son] collided with a car. As a result, Federico and Rodolfo died, while Carlos (another son) and his wife
Angelita, and a family friend sustained physical injuries. The lower court held that Fieldmens Insurance cannot escape
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liability under a common carrier insurance policy on the pretext that what was insured was a private vehicle and not a
common carrier, the policy being issued upon the agents insistence. CA affirmed the lower court.
CA DECISION AFFIRMED; FIELDMENS INSURANCE IS LIABLE
From Qua Chee Gan v. Law Union and Rock Insurance Where inequitable conduct is shown by an insurance firm, it is
estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on the insured. Estoppel is
primarily based on the doctrine of good faith and the avoidance of harm that will befall the innocent party due to its
injurious reliance.
Fieldmens Insurance incurred legal liability under the policy. Since some of the conditions in the policy were impossible
to comply with under the existing conditions at the time and inconsistent with the known facts, the insurer is estopped
from asserting breach of such conditions. Except for the fact that the passengers were not fare-paying, their status as
beneficiaries under the policy is recognized. Even if the be assumed that there was an ambiguity, such must bestrictly
interpreted against the party that caused them.
The contract of insurance is one of perfect good faith (uberrima fides) not for the insured alone, but equally so for the
insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility.
New Life v CA G.R. No. 94071 March 31, 1992

J. Regalado
Facts:
Julian Sy, owner of New Life, insured his building in 3 different insurance agencies for 350,000, 1,000,000, and 200,000.
When his building and the goods inside burned down, he claimed for insurance indemnities, but these were rejected by
the three companies for violation of policy conditions.
Sy filed for 3 different suits in the trial court, where he won all suits against the insurance companies. The court of appeals
reversed the decision of the trial court.
Issue: Did the petitioner violate conditions 3 and 27 of the three insurance policies, thereby foreiting collection of
indemnities?
Held: Yes.
Ratio:
Condition 3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be
stated therein or endorsed on this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company
before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however,
that this condition shall not apply when the total insurance or insurances in force at the time of loss or damage not more
than P200,000.00.
Sy never disclosed co-insurance in the contracts he entered into with the three corporations. The insured is specifically
required to disclose the insurance that he had contracted with other companies. Sy also contended that the insurance
agents knew of the co-insurance. However, the theory of imputed knowledge, that the knowledge of the agent is
presumed to be known by the principal, is not enough.
When the words of the document are readily understandable by an ordinary reader, there is no need for construction
anymore.
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The conformity of the insured to the terms of the policy is implied with his failure to disagree with the terms of the
contract.
Since Sy, was a businessman, it was incumbent upon him to read the contracts.
Pioneer Insurance and Surety Corporation vs. Yap- The obvious purpose of the aforesaid requirement in the policy is to
prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in
preventing the situation in which a fire would be profitable to the insured.
Also, policy condition 15 was used. It stated: 15.. . . if any false declaration be made or used in support thereof, . . . all
benefits under this Policy shall be forfeited . . .
As for condition number 27, the stipulation read:
27. Action or suit clause. If a claim be made and rejected and an action or suit be not commenced either in the Insurance
Commission or any court of competent jurisdiction of notice of such rejection, or in case of arbitration taking place as
provided herein, within twelve (12) months after due notice of the award made by the arbitrator or arbitrators or umpire,
then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable
hereunder.
This is regarding Sys claim for one of the companies. Recovery was filed in court by petitioners only on January 31, 1984,
or after more than one (1) year had elapsed from petitioners' receipt of the insurers' letter of denial on November 29,
1982. This made it void.
Verendia V CA G.R. No. 75605 January 22, 1993
G.R. No. 75605 January 22, 1993
Lessons Applicable: Exception to Ambiguous Provisions Interpreted Against Insurer (Insurance)
FACTS:
Rafael (Rex) Verendia's residential building was insured with Fidelity and Surety Insurance Company, 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"
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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
[ GR No. 98414, Feb 08, 1993 ]
FIRST QUEZON CITY INSURANCE COMPANY v. CA +
DECISION
G.R. No. 98414
GRIO-AQUINO, J.:
Before the Court is a petition filed by the First Quezon City Insurance Company, Inc., seeking to limit to P12,000.00, the
amount specified in the insurance contract, its liability to indemnify the respondent, De Dios Marikina Transportation
Company (DMTC, for short), for the damages suffered by a passenger, Jose V. del Rosario, who accidentally fell off the
bus.
The undisputed facts are:
"On June 10, 1984, at about 3:00 p.m., after sending off certain seamen at the departure area of then known as Manila
International Airport (MIA), Plaintiff Jose V. del Rosario proceeded to the loading and unloading zone for public utility bus
stop, which was located in front of the MIA, to wait for a passenger bus bound for Quezon City. While at the bus stop, the
plaintiff saw a DMTC bus bearing body No. 236 and plate No. NVU-798 and which, per its signboard, was plying the Pasay
to Quezon City (passing Espaa) route. As it approach the bus stop, the bus slowed down with all its doors wide open:
while moving at a crawling pace, i.e., as slow as an 'ordinary walk,' it was taking several passengers, about five or seven of
them including the plaintiff, all of whom managed to board the bus while it was already at the bus stop; plaintiff was the
last one to board the bus.
"While the plaintiff was still on the bus' running board with his hand on the bus door's handle bar, the slowly moving bus
sped forward at a high speed, as a result of which, the plaintiff lost his balance and fell from the bus. As plaintiff clung
instinctively to the handle bar, he was dragged by the bus along the asphalted road for about two (2) seconds. Plaintiff
screamed of pain and anguished even as the other passengers shouted and the bus' driver, Gil Agpalo, an employee of
defendant and third-party plaintiff DMTC, abruptly stopped the bus. Then, Gil forth-with fled from the scene, leaving the
bus and the injured plaintiff behind.
"Thereafter, the plaintiff was brought to the Manila Sanitarium and Hospital where he was given immediate medical
treatment at the emergency ward. The doctors performed a major surgical operation on plaintiff's right leg. This leg was
extensively lacerated: its skin and tissues were exposed and detached from the muscles. Treatment was done under
special anesthesia and consisted of debridement or cleaning repair and suturing of the injured tissue. While at the hospital,
plaintiff was febrile or feverish for about forty (40) days. On July 12, 1984, a second major surgical operation, i.e., a skin
grafting operation, was performed on plaintiff's right leg.
"Plaintiff was confined at the hospital for a total period of forty (40) days, from June 10, 1984 to August 26, 1984. During
his stay at the hospital, plaintiff incurred medical expenses in the total amount of P69,444.41. Plaintiff's medical expenses
were advanced by his employer Maglines but he was required to reimbursed Maglines on a staggered basis by way of
salary deductions. Plaintiff was released from the hospital on August 29, 1984. After his release, he returned to the hospital
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from time to time for further treatment and checkup. The injuries had left plaintiff with a huge, ugly scar running almost
the entire length of his right leg. Also, the plaintiff incurred lost earning by way of unearned salaries amounting to
P7,500.00 due to said physical injuries and the consequent hospital confinement.
"Plaintiff filed on June 26, 1985 the aforesaid complaint against DMTC and its driver, Gil Agpalo. Agpalo was later dropped
as a party defendant because he could not be served with summons. Upon filing its answer on August 20, 1985, defendant
DMTC filed a third-party complaint against First Quezon City Insurance Co. Inc. Sometime on September 17, 1985 this
third-party defendant filed its answer to the third-party complaint.
"After the trial, the court a quo rendered the appealed decision, the decretal portion of which ordains:
"'WHEREFORE, the judgment is hereby rendered dismissing defendant De Dios Marikina Transportation Co. Inc.'s
counterclaim for lack of merit and ordering said defendant to pay plaintiff Jose V. del Rosario: (a) the sum of P76,944.91,
as the actual and compensatory damages; (b) the sum of P15,000.00, as moral and exemplenary damages; and (c) the sum
of P33,641.50 as attorney's fees, as well as to pay the cost of suit; and as regards the third?party complaint herein ordering
third-party defendant First Quezon City Insurance Co., Inc. to indemnify third-party plaintiff De Dios Marikina
Transportation Co., Inc. in the sum of P12,000.00 with interest thereon at the legal rate from date of filing of the third-
party complaint on August 20, 1985, until full payment thereof. Further, there being no satisfactory warrant therefor, the
court hereby dismisses the rest of the claims in the complaint and third-party complaint herein." (pp. 11-13, Rollo.)
The bus company appealed to the Court of Appeals on February 11, 1991. The Court of Appeals modified the dispositive
part of the decision of the trial court as follows:
"WHEREFORE, with the following modifications, first in appellee's complaint: that the award of attorney's fees be reduced
to P5,000.00 and that the cost of suit be deleted; and second, as regards the third-party complaint, that the third-
party defendant FirstQuezon City Insurance Co. Inc., be ordered to indemnify third-
party plaintiff DMTC, herein appellant, the sum of P50,000.00 withlegal interest thereon from date of filing of the third-
party complaint on August 20, 1985 until its full payment, the decision appealed from is AFFIRMED in all other respects.
No costs." (p. 19, Rollo.)
The insurance company (now the petitioner) filed a motion for reconsideration which was denied in a resolution dated
April 22, 1991.
Hence, this petition for review, assailing the appellate courts' interpretation of the provision of the insurance contract on
the limit of the insurer's liability.
We find merit in the petition.
The insurance policy clearly placed the maximum limit of the petitioner's liability for damages arising from death or bodily
injury at P12,000.00 per passenger and its maximum liability per accident at P50,000.00. Since only one passenger was
injured in the accident, the insurer's liability for the damages suffered by said passenger is pegged to the amount of
P12,000.00 only. What does the limit of P50,000.00 per accident mean? It means that the insurer's maximum liability for
any single accident will not exceed P50,000.00 regardless of the number of passengers killed or injured therein. For
example, if ten (10) passengers had been injured by the operation of the insured bus, the insurer's liability for the accident
would not be P120,000.00 (at the rate of P12,000.00 per passenger) but would be limited to only P50,000.00 for the entire
accident, as provided in the insurance contract.
The bus company may not recover from the insurance company (herein petitioner) more than P12,000.00 per passenger
killed or injured, or fifty thousand (P50,000.00) pesos per accident even if under the judgment of the court, the erring bus
operator will have to pay more than P12,000.00 to each injured passenger. The trial court's interpretation of the insurance
contract was the correct interpretation.
WHEREFORE, the petition for review is GRANTED. The decision promulgated on February 11, 1991 by the Court of Appeals
in CA-G.R. No. 24938, ordering the third-party defendant, First Quezon City Insurance Co., Inc., to indemnify the private
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respondent, De Dios Marikina Transportation Co. Inc. (DMTC), the sum of P50,000.00 for the damages of the passenger,
Jose V. Del Rosario, is hereby modified by reducing the award to P12,000.00 only. Costs against the private respondent,
De Dios Marikina Transportation Co., Inc.
SO ORDERED.
Development Bank of the Philippines v CA
231 SCRA 370
March 21, 1994
Facts:
Juan B. Dans, together with his family applied for a loan of P500,000 with DBP. As principal mortgagor, Dans, then 76 years
of age was advised by DBP to obtain a mortgage redemption insurance (MRI) with DBP MRI pool. A loan in the reduced
amount was approved and released by DBP. From the proceeds of the loan, DBP deducted the payment for the MRI
premium. The MRI premium of Dans, less the DBP service fee of 10%, was credited by DBP to the savings account of DBP
MRI-Pool. Accordingly, the DBP MRI Pool was advised of the credit.
Dans died of cardiac arrest. DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the
acceptance age limit of 60 years at the time of application. DBP apprised Candida Dans of the disapproval of her late
husbands MRI application. DBP offered to refund the premium which the deceased had paid, but Candida Dans refused
to accept the same demanding payment of the face value of the MRI or an amount equivalent of the loan. She, likewise,
refused to accept an ex gratia settlement which DBP later offered. Hence the case at bar.
Issue:
Whether or not the DBP MRI Pool should be held liable on the ground that the contract was already perfected?
Held:
No, it is not liable. The power to approve MRI application is lodged with the DBP MRI Pool. The pool, however, did not
approve the application. There is also no showing that it accepted the sum which DBP credited to its account with full
knowledge that it was payment for the premium. There was as a result no perfected contract of insurance hence the DBP
MRI Pool cannot be held liable on a contract that does not exist
In dealing with Dans, DBP was wearing 2 legal hats: the first as a lender and the second as an insurance agent. As an
insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading him and his family
to believe that they had already fulfilled all the requirements for the MRI and that the issuance of their policy was
forthcoming. DBP had full knowledge that the application was never going to be approved. The DBP is not authorized to
accept applications for MRI when its clients are more than 60 years of age. Knowing all the while that Dans was ineligible,
DBP exceeded the scope of its authority when it accepted the application for MRI by collecting the insurance premium
and deducting its agents commission and service fee. Since the third person dealing with an agent is unaware of the limits
of the authority conferred by the principal on the agent and he has been deceived by the non-disclosure thereof by the
agent, then the latter is liable for damages to him.
Filipinas Compaia de Seguros vs Christern, Huenefeld and Co., Inc
FACTS:
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In October 1941, Christern, Huenefeld and Company, a German company, obtained an insurance policy from Filipinas
Compaia for the formers merchandise contained in a building located in Binondo, Manila. Filipinas Compaia is an
American controlled company. During the Japanese occupation, the building housing the insured merchandise was
burned. Christern filed its claim amounting to P92,650.00 but Filipinas Compaia refused to pay alleging that Christern is
a corporation whose majority stockholders are Germans; that during the Japanese occupation, America declared war
against Germany hence the insurance policy ceased to be effective because the insured has become an enemy. Filipinas
Compaia was eventually ordered to pay Christern as ordered by the Japanese government.
ISSUE: Whether or not Christern, Huenefeld and Co is entitled to receive the proceeds from the insurance claim.
HELD: No. There is no question that majority of the stockholders of Christern were German subjects. This being so,
Christern became an enemy corporation upon the outbreak of the war between the United States and Germany. The
Philippine Insurance Law (Act No. 2427, as amended,) in Section 8, provides that anyone except a public enemy may be
insured. It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy.
Christern should return the amount it was earlier paid.
f. When Suretyship is deemed an insurance contract
It shall be deemed as insurance if the suretys main business is that of suretyship, and not where the contract
is merely incidental to any other legitimate business or activity of the surety. (Secs. 175 par. 2 and 3)
g. What term doing an insurance business includes
General rule: An insurance business consists in undertaking, for a consideration, to indemnify another against loss,
damage or liability arising from an unknown or contingent event.
Exception: Although the business is not formally designated as one of insurance and no profit is derived or no
separate or direct consideration is received, it is deemed to be doing an insurance business if it undertakes any of
the following circumstances:
(1) Making or proposing to make, as insurer, any insurance contract

(2) Making or proposing to make, as surety, any contract of suretyship as a vocation not as a mere incident
to any other legitimate business of a surety
(3) Doing any insurance business, including a reinsurance business
(4) Doing or proposing to do any business in substance equivalent to any of the above (Sec. 2, par. 2).
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Contract of Insurance
What may be Insured
"Section 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable
interest, or create a liability against him, may be insured against, subject to the provisions of this chapter.
"The consent of the spouse is not necessary for the validity of an insurance policy taken out by a married person on his
or her life or that of his or her children.
"All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of the person
insured shall automatically vest in the latter upon the death of the original owner, unless otherwise provided for in the
policy.
a. What perils or risks may be insured
(1) Marine
(2) Fire
(3) Suretyship
(4) Life
(5) Compulsory Motor Vehicle Liability Insurance
(6) Casualty
b. Insurance against damage

c. Insurance against liability
(1) Insurer assumes the obligation to pay the third party in whose favor the liability of the insured
arises.
(2) Liability of the insurer attaches as soon as the liability of the insured to the third party is
established.
(3) Insurer is liable regardless of whether or not the insured has paid the third party (Campos
d. Unknown past event;
e. Future contingent event
A contingent event is one that is not certain to take place. An unknown event is one which is certain
to happen, but the time of its happening is not known. A past event may be a designated event only
in cases where it has happened already but the parties do not know about it, e.g., prior loss of a ship
at sea.
"Section 4. The preceding section does not authorize an insurance for or against the drawing of any lottery, or for or
against any chance or ticket in a lottery drawing a prize.
a. Insurance for or against any lottery is void.
"Section 5. All kinds of insurance are subject to the provisions of this chapter so far as the provisions can apply.
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Parties to the Contract
"Section 6. Every corporation, partnership, or association, duly authorized to transact insurance business as elsewhere
provided in this Code, may be an insurer.
a. Parties to an insurance contract
1. Insurer - Person who undertakes to indemnify another.

For a person to be called an insurance agent, it is necessary that he should perform the function for
compensation. (Aisporna vs. CA, 113 SCRA 459)
2. Insured - The party to be indemnified upon the occurrence of the loss. He must have capacity to
contract, must possess an insurable interest in the subject of the insurance and must not be a public
enemy.
A public enemy- a nation with whom the Philippines is at war and it includes every citizen or subject
of such nation.
3. Beneficiary - A person designated to receive proceeds of policy when risk attaches.
Rules in the designation of the beneficiary:
a. LIFE
i. A person who insures his own life can designate any person as his beneficiary, whether or
not the beneficiary has an insurable interest in the life of the insured subject to the
limitations under Art. 739 and Art. 2012 of the NCC.
Reason: in essence, a life insurance policy is no different form a civil donation insofar as the
beneficiary is concerned. Both are founded on the same consideration of liberality. (Insular Life vs.
Ebrado, 80 SCRA 181)
ii. A person who insures the life of another person and name himself as the beneficiary must
have an insurable interest in such life. (Sec. 10)
iii. As a general rule, the designation of a beneficiary is revocable unless the insured expressly
waived the right to revoke in the policy. (Sec. 11)
iv. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary
is the principal accomplice or accessory in willfully bringing about the death of the insured in
which event, the nearest relative of the insured shall receive the proceeds of said insurance if
not otherwise disqualified. (Sec. 12)
b. PROPERTY
The beneficiary of property insurance must have an insurable interest in such property,
which must exist not only at the time the policy takes effect but also when the loss occurs.
(Sec. 13 and 18).
Effects of Irrevocable Designation Of Beneficiary
Insured cannot:
1. Assign the policy
2. Take the cash surrender value of the policy
3. Allow his creditors to attach or execute on the policy;
4. Add new beneficiary; or
5. Change the irrevocable designation to revocable, even though the change is just and
reasonable.
The insured does not even retain the power to destroy the contract by refusing to pay the premiums
for the beneficiary can protect his interest by paying such premiums for he has an interest in the
fulfillment of the obligation. (Vance, p. 665, cited in de Leon, p. 101, 2002 ed.)
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b. Who may be insurer?
A foreign or domestic insurance company may transact business in the Philippines but must first obtain a
certificate of authority for that purpose from the Insurance Commissioner who has the discretion to refuse
to issue such certificate if it will best promote the interests of the people of this country. (Sec. 187)
An individual may also be an insurer, provided he holds a certificate of authority from the Insurance
Commissioner, and provided further that he is possessed of the capital assets required of an insurance
corporation doing the same kind of business in the Philippines and invested in the same manner. (Secs.
184-186)
"Section 7. Anyone except a public enemy may be insured.
a. Who may be insured?
An insurance may be taken by a person, personally or through his agent or trustee.
b. A public enemy may not be insured;
Filipinas Compaia de Seguros vs Christern, Huenefeld and Co., Inc
In October 1941, Christern, Huenefeld and Company, a German company, obtained an insurance policy from Filipinas
Compaia for the formers merchandise contained in a building located in Binondo, Manila. Filipinas Compaia is an
American controlled company. During the Japanese occupation, the building housing the insured merchandise was
burned. Christern filed its claim amounting to P92,650.00 but Filipinas Compaia refused to pay alleging that Christern is
a corporation whose majority stockholders are Germans; that during the Japanese occupation, America declared war
against Germany hence the insurance policy ceased to be effective because the insured has become an enemy. Filipinas
Compaia was eventually ordered to pay Christern as ordered by the Japanese government.
ISSUE: Whether or not Christern, Huenefeld and Co is entitled to receive the proceeds from the insurance claim.
HELD: No. There is no question that majority of the stockholders of Christern were German subjects. This being so,
Christern became an enemy corporation upon the outbreak of the war between the United States and Germany. The
Philippine Insurance Law (Act No. 2427, as amended,) in Section 8, provides that anyone except a public enemy may be
insured. It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy.
Christern should return the amount it was earlier paid.
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"Section 8. Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name
providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the
insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original
contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect,
although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be
performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had
been performed by the mortgagor.
a. Who may insure mortgaged property

The mortgagor and the mortgagee have each an insurable interest in the property mortgaged, and this
interest is separate and distinct from the other. Consequently, insurance taken by one in his own name
only and in his favor alone does not inure to the benefit of the other. And in case both of them take out
separate insurance policies on the same property, or one policy covering their respective interests, the
same is not open to the objection that there is double insurance.
b. Extent of mortgagors and mortgagees insurable interest
The mortgagor of the property, as owner has an insurable interest to the extent of the value of the
property, even if the mortgage debt is equal to such value. The reason is that the loss or destruction of
the property insured will NOT extinguish the mortgage debt.
The mortgagee or his assignee has an insurable interest in the mortgaged property to the extent of the
debt secured, such interest continues until the mortgage debt is extinguished.
Geagonia v CA G.R. No. 114427 February 6, 1995
Facts:
Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1-
year policy and covered thestock trading of dry goods.
The policy noted the requirement that
"3. The insured shall give notice to the Company of any insurance or insurances already effected, or which
may subsequently be effected, covering any of the property or properties consisting of stocks in trade,
goods in process and/or inventories only hereby insured, and unless notice be given and the particulars
of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits
under this policy shall be deemed forfeited, provided however, that this condition shall not apply when
the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00."
The petitioners stocks were destroyed by fire. He then filed a claim which was subsequently denied
because the petitioners stocks were covered by two other fire insurance policies for Php 200,000 issued
by PFIC. The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3
of the policy.
Geagonia then filed a complaint against the private respondent in the Insurance Commission for the
recovery of P100,000.00 under fire insurance policy and damages. He claimed that he knew the existence
of the other two policies. But, he said that he had no knowledge of the provision in the private
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respondent's policy requiring him to inform it of the prior policies and this requirement was not
mentioned to him by the private respondent's agent.
The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge
of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles
w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile,
as his creditor, had insurable interest on the stocks.
The Insurance Commission then ordered the respondent company to pay complainant the sum of
P100,000.00 with interest and attorneys fees.
CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the
existence of the two other policies issued by the PFIC.
Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance
and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering
Held: Yes. No. Petition Granted
Ratio:
1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter
of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the
contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a
written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior
policies since these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of
insurance policies should be construed most strictly against those for whose benefits they are inserted,
and most favorably toward those against whom they are intended to operate.
With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and must
be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double
insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total
policies obtained.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance
in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume
a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-
insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to
prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains
insurance policies from two or more insurers in a total amount that exceeds the property's value, the
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insured may have an inducement to destroy the property for the purpose of collecting the insurance. The
public as well as the insurer is interested in preventing a situation in which a fire would be profitable to
the insured.
c. Insurance taken by mortgagor
Rizal Commercial Banking Corporation V. CA (1998)
FACTS:
RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons, Inc. GOYUs applied again and
through Binondo Branch key officer's Uys and Laos recommendation, RCBCs executive committee increased its
credit facility to P50M to P90M and finally to P117M.
As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in favor of RCBC.
GOYU obtained in its name 10 insurance policy on the mortgaged properties from Malayan Insurance
Company, Inc. (MICO). In February 1992, he was issued 8 insurance policies in favor of RCBC.
April 27, 1992: One of GOYUs factory buildings was burned so he claimed against MICO for the loss who denied
contending that the insurance policies were either attached pursuant to writs of attachments/garnishments or
that creditors are claiming to have a better right
GOYU filed a complaint for specific performance and damages at the RTC
RCBC, one of GOYUs creditors, also filed with MICO its formal claim over the proceeds of the insurance policies,
but said claims were also denied for the same reasons that MICO denied GOYUs claims
RTC: Confirmed GOYUs other creditors (Urban Bank, Alfredo Sebastian, and Philippine Trust Company) obtained
their writs of attachment covering an aggregate amount of P14,938,080.23 and ordered that 10 insurance policies
be deposited with the court minus the said amount so MICO deposited P50,505,594.60.
Another Garnishment of P8,696,838.75 was handed down
RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay RCBC its loan
CA: Modified by increasing the damages in favor of GOYU
In G.R. No. 128834, RCBC seeks right to intervene in the action between Alfredo C. Sebastian (the creditor) and
GOYU (the debtor), where the subject insurance policies were attached in favor of Sebastian
RTC and CA: endorsements do not bear the signature of any officer of GOYU concluded that the endorsements
favoring RCBC as defective.
ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the mortgagor,
in case of the occurrence of loss
HELD: YES.
mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such
that each one of them may insure the same property for his own sole benefit
although it appears that GOYU obtained the subject insurance policies naming itself as the sole payee, the
intentions of the parties as shown by their contemporaneous acts, must be given due consideration in order to
better serve the interest of justice and equity
8 endorsement documents were prepared by Alchester in favor of RCBC
MICO, a sister company of RCBC
GOYU continued to enjoy the benefits of the credit facilities extended to it by RCBC.
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GOYU is at the very least estopped from assailing their operative effects.
The two courts below erred in failing to see that the promissory notes which they ruled should be excluded for
bearing dates which are after that of the fire, are mere renewals of previous ones
RCBC has the right to claim the insurance proceeds, in substitution of the property lost in the fire. Having assigned
its rights, GOYU lost its standing as the beneficiary of the said insurance policies
insurance company to be held liable for unreasonably delaying and withholding payment of insurance proceeds,
the delay must be wanton, oppressive, or malevolent - not shown
Sebastians right as attaching creditor must yield to the preferential rights of RCBC over the Malayan insurance
policies as first mortgagee.
d. Insurance taken by mortgagee
Palileo V. Cosio (1955)
Lessons Applicable: Mortgagor (Insurance)

Laws Applicable:
FACTS:
Cherie Palileo (debtor-mortgagor) filed a complaint against Beatriz Cosio (creditor-mortgagee) praying that their
transaction be one of a loan with an equitable mortgage to secure the payment of the loan. The original counsel of
Cosio Atty. Guerrero being appointed Undersecretary of Foreign Affairs so she forgot the date of the trial and she
was substituted.
it is a loan of P12,000 secured by a "Conditional Sale of Residential Building" with right to repurchase. After the
execution of the contract, Cosio insured in her name the building with Associated Insurance & Surety Co. against
fire.
The building was partly destroyed by fire so she claimed an indemnity of P13,107
Palileo demanded that the amount of insurance proceeds be credited to her loan
RTC: it is a loan with equitable mortgage so the insurance proceeds should be credited to the loan and refund the
overpayment.
ISSUE: W/N Cosio as mortgagee is entitled to the insurance proceeds for her own benefit
HELD: YES. Modify. collection of insurance proceeds shall not be deemed to have compensated the obligation of the
Palileo to Cosio, but bars the Cosio from claiming its payment from the Palileo; and Cosio shall pay to Palileo P810
representing the overpayment made by Palileo by way of interest on the loan.
When the the mortgagee may insure his interest in the property independently of the mortgagor , upon the
destruction of the property the insurance money paid to the mortgagee will not inure to the benefit of the
mortgagor, and the amount due under the mortgage debt remains unchanged. The mortgagee, however, is not
allowed to retain his claim against the mortgagor, but it passes by subrogation to the insurer, to the extent of the
insurance money paid
It is true that there are authorities which hold that "If a mortgagee procures insurance on his separate interest
at his own expense and for his own benefit, without any agreement with the mortgagor with respect thereto,
the mortgagor has no interest in the policy, and is not entitled to have the insurance proceeds applied in
reduction of the mortgage debt" But these authorities merely represent the minority view
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"Section 9. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and, at the time of
his assent, imposes further obligations on the assignee, making a new contract with him, the acts of the mortgagor
cannot affect the rights of said assignee.
a. Transfer of insurance with approval of insurer
Interest can be transferred even without the notice to the insurer of such transfer or bequest, unless there
is a stipulation to the contrary (Sec. 182).
Note: There is no right of subrogation in life insurance, because it is not a contract of indemnity.
Insurable Interest
"Section 10. Every person has an insurable interest in the life and health:
"(a) Of himself, of his spouse and of his children;
"(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a
pecuniary interest;
"(c) Of any person under a legal obligation to him for the payment of money, or respecting property or
services, of which death or illness might delay or prevent the performance; and
"(d) Of any person upon whose life any estate or interest vested in him depends.
a. Insurable interest, defined;
An insurable interest is that interest which the law requires the owner of an insurance policy to have in
the person or thing insured, the absence of which renders the contract void.
b. Necessary to validity of insurance contract;
An insurable interest is one of the most basic and essential requirements in an insurance contract. As such,
it may not be waived by stipulation.
The insurable interest need not always be pecuniary in nature.
RATIONALE
(1) As a deterrence to the insured A policy issued to a person without interest is a mere wager policy or
contract and is void for illegality. A wager policy is obviously contrary to public interest. There is a
moral hazard in removing insurable interest as a requirement for the validity of an insurance policy in
that:
(a) It allows the insured to have an interest in the destruction of the subject matter rather than in
its preservation. (Myer vs. Grand Lodge)
(b) It affords a temptation or an inducement to the insured, having nothing to lose and everything
to gain, to bring to pass the event upon happening of which the insurance becomes payable.
(White vs. Equitable Nuptial Benefit Union)
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(2) As a measure of limit of recovery The insurable interest is the measure of the upper limit of his
provable loss under the contract. Sound public policy requires that insurance should not provide the
insured means of making a net profit from the happening of the event insured against.
c. In life insurance;
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, or respecting property or
services, 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 (Sec. 10).
d. In ones own life;
(1) Cestui que vie (He whose life is the measure of the duration of an estate) is the insured himself
(2) Insured can designate anyone to be the beneficiary of the policy.
(3) Each has unlimited interest in his own life, whether the insurance is for the benefit of himself or
another.
(4) The beneficiary designated need NOT have any interest in the life of the insured (when person takes
out policy on his own life)
(5) But if a person obtains a policy on the life of another and names himself as the beneficiary, he must
have insurable interest therein (when a person takes out policy on the life of another)
e. In ones spouse and children;
f. Education or support;
g. Pecuniary interest;
Insurance Case Digest: El Oriente, Fabrica De Tabacos, Inc., V. Posadas (1931)
FACTS:
March 18, 1925: El Oriente, Fabrica de Tabacos, Inc. in order to protect itself against the loss that it might suffer
by reason of the death of its manager, A. Velhagen, who had more than 35 years of experience in the manufacture
of cigars in the Philippine Islands, and whose death would be a serious loss procured from the Manufacturers Life
Insurance Co., of Toronto, Canada, thru its local agent E.E. Elser, an insurance policy on the life of A. Velhagen for
$50,000
designated itself as the sole beneficiary
Upon the death of A. Velhagen in the year 1929, El Oriente received all the proceeds of the life insurance policy,
together with the interests and the dividends accruing thereon, aggregating P104,957.88
Collector of Internal Revenue assessed and levied the sum of P3,148.74 as income tax on the proceeds of the
insurance policy which tax El Oriente paid
ISSUE: W/N proceeds of life insurance policies paid to corporate beneficiaries upon the death of the insured are also
exempted
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HELD: YES. reversed and favoring El Oriente
In reality, what the plaintiff received was in the nature of an indemnity for the loss which it actually suffered
because of the death of its manager and not taxable income
h. Some legal obligation
(1) Insurable interest MUST be based on moral and legal grounds

(2) Such interest exists whenever the insured has a responsible expectation of deriving benefit from the
continuation of the life of the other person or of suffering detriment through its termination.
(3) No insurable interest in the life of an illegitimate spouse
(4) CREDITOR may take out insurance on the life of his debtor. BUT his insurable interest is only up to the
amount of the debt.
(5) ASSIGNEE is not required to have insurable interest in the life of the insured, for to require such
interest in him is to diminish the investment value of the contract to the owner. Note, however, that
assignment is different from a change in the designated beneficiary.
(6) When the beneficiary is the PRINCIPAL, ACCOMPLICE, or ACCESSORY in willfully bringing about the
death of the insured = Interest of beneficiary in life insurance policy is FORFEITED (Sec. 12).
i. Where estate is dependent on the life insurance of the insured;

j. When it must exist;
k. Consent of person whose life is insured;
"Section 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has
expressly waived this right in said policy. Notwithstanding the foregoing, in the event the insured does not change the
beneficiary during his lifetime, the designation shall be deemed irrevocable.
a. Beneficiary, defined;
The person who is named or designated in a contract of life, health, or accident insurance as the one who
is to receive the benefits which become payable, according to the terms of the contract, intended to be
the recipient of the proceeds or benefits of insurance if the insured risk occurs.
b. Limitations and Disqualifications
General rule: A person may designate a beneficiary, irrespective of the beneficiarys lack of insurable
interest, provided he acts in good faith and without intent to make the transaction merely a cover for a
forbidden wagering contract (De Leon).
Exceptions: Any person who is forbidden from receiving any donation under Article 739 cannot be named
beneficiary of a life insurance policy by the person who cannot make any donation to him, according to
said article (Art. 2012, Civil Code).
(1) Those made between persons who were guilty of adultery or concubinage at the time of the
donation;
(2) Those made between persons found guilty of the same criminal offense, in consideration thereof;
(3) Those made to a public officer or his wife, descendants and ascendants, by reason of his office.
Insular Life vs. Ebrado
80 SCRA 181
Facts:
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Buenaventura Ebrado was issued al life plan by Insular Company. He designated Capriona as his beneficiary,
referring to her as his wife.
The insured then died and Carponia tried to claim the proceeds of the said plan.
She admitted to being only the common law wife of the insured.
Pascuala, the legal wife, also filed a claim asserting her right as the legal wife. The company then filed an action
for interpleader.
Issue:
Whether or not the common law wife named as beneficiary can collect the proceeds.
Held:
NO. The civil code prohibitions on donations made between persons guilty of adulterous concubinage applies to insurance
contracts. On matters not specifically provided for by the Insurance Law, the general rules on Civil law shall apply. A life
insurance policy is no different from a civil donation as far as the beneficiary is concerned, since both are founded on
liberality.
Why was the common law wife not ed to collect the proceeds despite the fact that she was the beneficiary? Isnt this
against Sec. 53?
It is true that SC went against Sec. 53. However, Sec. 53 is NOT the only provision that the SC had to consider. Art. 739
and 2012 of CC prohibit persons who are guilty of adultery or concubinage from being beneficiaries of the life insurance
policies of the persons with whom they committed adultery or concubinage. If the SC used only Sec. 53, it would have
gone against Art. 739 and 2012.
Southern Luzon Employees' Ass. v. Golpeo, et al. (1954)
FACTS:
Roman A. Concepcion listed as his beneficiaries Aquilina Maloles, Roman M. Concepcion, Jr., Estela M.
Concepcion, Rolando M. Concepcion and Robin M. Concepcion for the death benefit of an association amounting
to P2,505
Two sets of claimants presented themselves:
o Juanita Golpeo, legal wife and her children, named beneficiaries by the deceased
Marcelino and Josefina Concepcion intervened in their own right aligning themselves Juanita
Golpeo and her minor children
o Elsie Hicban, another common law wife and her child
RTC:Aquilina Maloles and her children the sole beneficiaries
Only the Juanita Golpeo and her minor children and the intervenors Marcelino and Josefina Concepcion have
appealed to this court
ISSUE: W/N Aquilina Molales common-law wife and her illegitimate children can claim the benefits
HELD: YES.
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Juanita Golpeo, by her silence and actions, had acquiesced in the illicit relations between her husband and
appellee Aquilina Maloles
new Civil Code recognized certain successional rights of illegitimate children
Separate Opinions:
REYES, J.B.L., J., concurring
o I concur in the result for the reason that the contract here involved was perfected before the new Civil
Code took effect, and hence its provisions cannot be made to apply retroactively
SSS v. Davac - SSS Benefits

17 SCRA 863
Facts:
Davac was an SSS member, and designated Candelaria Davac, his alleged wife, as his beneficiary.
When he died, both his first wife, Lourdes and his second wife, Candelaria filed claims for the death benefits.
Due to the conflicting claims, the SSS filed a petition praying that both of them be required to interplead and
litigate the conflicting claims.
The death benefits were awarded to Candelaria Davac.
Issue:
Who is entitled to the SSS benefits?
Held:
Candelaria.
Under the SSS Act, the beneficiary as recorded by the employees employer is the one entitled to the death benefits,
hence they should go to Candelaria. Lourdes contends that the designation made in the person of Candelaria who is
party in a bigamous marriage is null and void for being against Art. 739 of the CC. SC held that the disqualification
mentioned in Art. 739 is NOT applicable to Candelaria, because she was not guilty of concubinage , there bieing NO
proof that she had actual knowledge of the previous marriage of her husband.
c. When not designated
Insurance Case Digest: In Re: Mario V. Chanliongco (1977)
FACTS:
Atty. Chanliongco died leaving his heirs: (Distribution)

widow, Dra. Fidel B. Chanliongco (4/16)
Mario II Legitimate 17 years old (8/16)
Ma. Angelina C. Illegitimate (2/16)
Mario Jr., Illegitimate (2/16)
Benefits
(1) retirement benefits - to be settled
(2) money value of terminal leave - to be settled
(3) life insurance - released by GSIS to claimants
(4) refund of retirement premium - released by GSIS to claimants
The retirement benefits shall accrue to his estate and will be distributed among his Legal heirs in with the benefits
on intestate s , as in the caw of a fife if no benefit is named in the policy (Vda. de vs. GSIS, L-28093, Jan. 30, 1971,
37 SCRA 315, 325).
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"Vacation with pay is not a gratuity but is compensation for services rendered." - conjugal property thus 1/2 to his
widow and the remaining to the heirs
Separate Opinions:
AQUINO, J., concurring:
I concur. The provisions on legitime are found under the rubric of testamentary succession. That
does not mean that the legitime is taken into account only in testamentary succession. The
legitime must also be taken into consideration in legal succession.
There may be instances, like the instant case, where in legal succession the estate is distributed according
to the rules on legitime without applying the rules on intestate succession. The reason is that sometimes
the estate is not even sufficient to satisfy the legitimes. The legitimes of the primary compulsory heirs,
like a child or descendant, should first be satisfied.
In this case the decedent's legal heirs are his legitimate child, his widow and two intimate children. His
estate is partitioned among those heirs by giving them their respective time.
The legitimate child gets one-half of the estate as his legitime which is regarded as his share as a legal heir
Art 888, Civil Code).
The widow's legitime is one-fourth of the estate. That represents also her share as a legal heir (Art. 892,
1st sentence, Civil Code).
The remaining one-fourth of the estate, which is the free portion, goes to the illegitimate children in equal
shares, as their legitime, Pursuant to the provision that 'the legitimate of the illegitimate children shall be
taken from the portion of the estate at the free disposal of the testator, provoked that in no case shall the
total legitime of such illegitimate children exceed that free portion, and that the legitime of the surviving
spouse must first be fully satisfied par., art. 895, Civil Code).
The rule in Santillon vs. Miranda, L-19281, June 30, 1965, 14 SCRA 563, that when the surviving spouse
concurs with only one legitimate child, the spouse is entitled to one-half of the estate and the gets the
other half, t to article 996 of the Civil Code, does not apply to the case because here intimate children
concur with the surviving spouse and the intimate child.
In this case, to divide the estate between the surviving spouse and the illegitimate child that deprive the
illegitimate children of their legitime.
So, the decendent's estate is distributed in the proportion of 1/2 for the legitimate child, 1/4 for the widow
and 1/8 each for the two illegitimate children.
Also not of possible application to this case is the rule that the legal of an acknowledge natural child is 1/2
of the legitime of the legitimate child of that the of the spurious child is 2/5 of that of the of the intimate
child or 4/5 of that of that of the acknowledged natural child.
The rule be applied because the estate is not sufficient to cover legitimes of all compulsory heirs. That is
one of the flaws of the law of succession.
A situation as in the instant case may arise where the illegitimate children get less than their legitime.
With respect to the descendants unpaid salary and the money value of his leave, the same are conjugal
properties because of the rule that property "obtained by the or work, or as salary of the spouses, or
either of them", is conjugal in character (Art. 153[2], Civil Code).
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Consuegra v GSIS G.R. No. L-28093 January 30, 1971
J. Zaldivar
Facts:
Appeal on purely questions of law from the decision of the Court of First Instance of Surigao del Norte, dated March 7,
1967, in its Special Proceeding No. 1720.
The late Jose Consuegra was employed as a shop foreman in the province of Surigao del Norte. He contracted two
marriages, the first with Rosario Diaz and the second, which was contracted in good faith while the first marriage was
subsisting, with Basilia Berdin.
Consuegra died, while the proceeds of his GSIS life insurance were paid to petitioner Basilia Berdin and her children who
were the beneficiaries named in the policy. They received Php 6,000.
Consuegra did not designate any beneficiary who would receive the retirement insurance benefits due to him. Respondent
Rosario Diaz, the widow by the first marriage, filed a claim with the GSIS asking that the retirement insurance benefits be
paid to her as the only legal heir of Consuegra, considering that the deceased did not designate any beneficiary with
respect to his retirement insurance benefits.
Petitioner Berdin and her children, likewise, filed a similar claim with the GSIS, asserting that being the beneficiaries named
in the life insurance policy of Consuegra, they are the only ones entitled to receive the retirement insurance benefits due
the deceased Consuegra.
The GSIS ruled that the legal heirs of the late Jose Consuegra were Rosario Diaz, his widow by his first marriage who is
entitled to one-half, or 8/16, of the retirement insurance benefits, on the one hand; and Basilia Berdin, his widow by the
second marriage and their seven children, on the other hand, who are entitled to the remaining one-half, or 8/16.
Basilia Berdin didnt agree. She filed a petition declaring her and her children to be the legal heirs and exclusive
beneficiaries of the retirement insurance.
The trial court affirmed stating that: "when two women innocently and in good faith are legally united in holy matrimony
to the same man, they and their children, born of said wedlock, will be regarded as legitimate children and each family be
entitled to one half of the estate.
Hence the present appeal by Basilia Berdin and her children.
Issue: To whom should this retirement insurance benefits of Jose Consuegra be paid, because he did not designate the
beneficiary of his retirement insurance?
Held: No. Petition denied.
Ratio:
Berdin averred that because the deceased Jose Consuegra failed to designate the beneficiaries in his retirement insurance,
the appellants who were the beneficiaries named in the life insurance should automatically be considered the
beneficiaries to receive the retirement insurance benefits.
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The GSIS offers two separate and distinct systems of benefits to its members one is the life insurance and the other is
the retirement insurance. These two distinct systems of benefits are paid out from two distinct and separate funds that
are maintained by the GSIS.
In the case of the proceeds of a life insurance, the same are paid to whoever is named the beneficiary in the life insurance
policy. As in the case of a life insurance provided for in the Insurance Act, the beneficiary in a life insurance under the GSIS
may not necessarily be a heir of the insured. The insured in a life insurance may designate any person as beneficiary unless
disqualified to be so under the provisions of the Civil Code. And in the absence of any beneficiary named in the life
insurance policy, the proceeds of the insurance will go to the estate of the insured.
Retirement insurance is primarily intended for the benefit of the employee, to provide for his old age, or incapacity, after
rendering service in the government for a required number of years. If the employee reaches the age of retirement, he
gets the retirement benefits even to the exclusion of the beneficiary or beneficiaries named in his application for
retirement insurance. The beneficiary of the retirement insurance can only claim the proceeds of the retirement insurance
if the employee dies before retirement. If the employee failed or overlooked to state the beneficiary of his retirement
insurance, the retirement benefits will accrue to his estate and will be given to his legal heirs in accordance with law, as
in the case of a life insurance if no beneficiary is named in the insurance policy.
GSIS had correctly acted when it ruled that the proceeds should be divided equally between his first living wife and his
second. The lower court has correctly applied the ruling of this Court in the case of Lao v Dee.
Gomez vs. Lipana- in construing the rights of two women who were married to the same man, held "that since the
defendant's first marriage has not been dissolved or declared void the conjugal partnership established by that marriage
has not ceased. Nor has the first wife lost or relinquished her status as putative heir of her husband under the new Civil
Code, entitled to share in his estate upon his death should she survive him. Consequently, whether as conjugal partner in
a still subsisting marriage or as such putative heir she has an interest in the husband's share in the property here in
dispute....
With respect to the right of the second wife, although the second marriage can be presumed to be void ab initio as it was
celebrated while the first marriage was still subsisting, still there is need for judicial declaration of such nullity. And
inasmuch as the conjugal partnership formed by the second marriage was dissolved before judicial declaration of its
nullity, "the only lust and equitable solution in this case would be to recognize the right of the second wife to her share of
one-half in the property acquired by her and her husband and consider the other half as pertaining to the conjugal
partnership of the first marriage."
d. Exclusive recipient; exception;
LUZ PICAR v. GOVERNMENT SERVICE INSURANCE SYSTEM +

DECISION
144 Phil. 379
BARREDO, J.:
Appeal on pure questions of law from the decision of the Court of First Instance of Camarines Sur in its
Civil Case No. 5673, dismissing the action instituted by the petitioners as designated beneficiaries in the
life insurance policy of one Napoleon F. Picar, a de-ceased government employee, against the
Government Ser-vice Insurance System, on the ground that due to the failure of the said petitioners to
submit a certificate of clearance from the money and property accountabili-ties of the deceased, they
have no cause of action against the defendant GSIS.
The case was submitted by all the parties for de-cision in the court below upon the following Stipulation
of Facts:
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"1. That Policy No. 170329 issued in favor of the late Napoleon F. Picar, was, on September 13, 1961, in
force;
"2. That Napoleon F. Picar died on September 13, 1961;
"3. That Consolacion J. Picar is the guardian of all the minors who are the plaintiffs herein;
"4. That the beneficiaries in the insurance policy issued in favor of Napoleon F. Picar are the following:
Nancy Picar, Jesse Picar, Sylvia Picar, Luz Picar and Consolacion Picar;
"5. That the administrator of the estate of the late Napoleon F. Picar is the Provincial Treasurer of
Cama-rines Sur;
"6. That on September 30, 1961 a claim was presented to the G.S.I.S. for the proceeds of the life
insur-ance policy for relief or payment to the beneficiaries named therein;
"7. That the G.S.I.S. is withhold-ing payment of the proceeds of the life insurance policy only on the
ground that no clearance was issued to the deceased by the employer of the deceased, the Provincial
Trea-surer of Camarines Sur;
"8. That the Provincial Trea-surer filed a claim for P9,746.07 to the intestate estate of the late Napoleon
Picar;
"9. That the basis of the go-vernment represented by the Pro-vincial Treasurer of Camrines Sur in
intervening in this case (Civil Case No. 5673) is Section 26 of Commonwealth Act 186, as a-mended;
"10. That the plaintiffs are also withdrawing their claim for moral damages as well as attor-ney's fees, but
insist on the in-terest due from September 30, 1961 when the claim was made, up to the time the
insurance policy is fully paid;
"11. That the plaintiffs secured the services of counsel to claim this insurance policy in the amount of
P500.00."
On the basis of these stipulated facts, the court a quo on August 30, 1965, dismissed the aforesaid act-ion
of the beneficiaries. It ruled thus:
"The only issues to be decided in this case are: (1) whether it is legally necessary for the plaintiffs to
present a clearance from money and property accountabilities of the deceased to be issued by the
authorities concerned, and required by the defendant, GSIS, before the proceeds of the Policy No. 170329
is paid to the beneficiaries desig-nated therein; and (2) whether the Republic of the Philippines, as
re-presented by the Provincial Treasurer of Camarines Sur, can legally lay claim to the proceeds of the
policy in question.
"The contract of insurance enter-ed into by the insured, Napoleon F. Picar and the Government Service
Insurance System is governed by Com-monwealth Act No. 186, the law creat-ing the said insurance system
and not by Act 2427 as contended by the plaintiffs. While Act 2427 governs the contract of insurance
between Private Insurance Companies and pri-vate persons Commonwealth Act No. 186 on the other
hand, governs the contract of insurance between the Government Service Insurance System and
employees of the Philippine Go-vernment. The Government Service Insurance System was created by
Com-monwealth Act 186 for the sole pur-pose and benefit of government em-ployees, so much so, that
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nobody can be insured with the Government Service Insurance System except when he is a government
employee. Hence, General Circular No. 52 of the General Auditing Office dated December 23, 1957 is
applicable to the insurance contract between the deceased Napoleon F. Picar and the defendant,
Government Service In-surance System. And due to the failure of the plaintiffs to submit a certificate of
clearance from the money and property accountabilities of the deceased, Napoleon F. Picar, they have no
cause of action against the defendant, Government Service Insurance System.
"As to the claim of the intervenor, Republic of the Philippines represent-ed by the Provincial Treasurer of
Camarines Sur, the court is of the opi-nion and so holds, that it being the employer of the deceased,
Napoleon F. Picar, it has the right to the proceeds of said insurance to satisfy the indebtedness of said
deceased to the government, pursuant to the provision of Section 26 of Commonwealth Act 186.
"In view of all the foregoing considerations, judgment is hereby rendered; (a) dismissing the plaintiffs'
complaint with costs against them; and (b) declaring that the intervenor is legally entitled to the proceeds
of the life insurance policy of the defendant, Napoleon F. Picar."
It is from this holding of the court below that, as earlier stated in the opening paragraph of this decision,
the present appeal has been taken to this Court by the designated beneficiaries in the life insurance policy
here involved, the widow and the minor children of the late Napoleon F. Picar. Said appellants here allege
that the lower court erred: (a) in holding that the plain-tiffs-appellants have no cause of action against
the de-fendant-appellee due to the failure of the plaintiffs-appellants to submit a certificate of clearance
of the deceased Napoleon F. Picar; and (b) in holding that the Republic of the Philippines is the entity
legally enti-tled to the proceeds of the policy of the life of Napoleon F. Picar.
Appellants vigorously contend that the proceeds of the life insurance policy here involved - upon the death
of the insured employee during the endowment period - belonged exclusively to the beneficiaries
designated in the policy and not to the estate of the insured; that, therefore, the said deceased's employer
- the Provincial Treasurer of Camarines Sur or the Republic of the Philip-pines - cannot legally lay claim to
the proceeds of such life insurance, since it is not part of the estate of said deceased employee; and,
consequently, the appellee Government Service Insurance System acted without legal authority when it
made the presentation of a certificate of clearance from money and property accountabilities of the
deceased to be secured from his employer as a condi-tion precedent to the payment of the proceeds of
the life insurance in question to the appellants who are the designated beneficiaries in the policy. This
contention is untenable.
It is true that under general principles in the law of insurance, if a policy provides that the proceeds shall
be payable to the assured, if he lives to a cer-tain date, and, in case of his death before that date, then
they shall be payable to the beneficiary designated, the benefit of the policy will inure to such beneficiary
in case the assured dies before the end of the period de-signated in the policy,[1] and, generally, that the
proceeds of a life insurance in which a third person is named beneficiary belong exclusively to such
beneficiary as an individual, they are not the property of the heirs of the insured, are not subject to
administration, and cannot properly be claimed or received by the administrator or other legal
representative of the insured as assets of his estate[2] As correctly ruled by the lower court, however,
such general principles are not applicable to the life insurance herein involved which is governed by
specific law.
The law in point is Section 26 of Commonwealth Act 186 (the law creating the (Government Service
insurance System), as amended, which provides:
"Sec. 26.- Exemption from legal process and liens. - No policy of life insurance issued under this Act, or
the proceeds thereof, when paid to any member thereunder, nor any other benefit granted under this
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Act, shall be liable to attach-ment, garnishment, or other process, or to be seized, taken, appropriated, or
applied by any legal or equitable process or operation of law to pay any debt or liability of such member,
or his beneficiary, or any other person who may have a right thereunder, either before or after payment
nor shall the proceeds thereof, when not made payable to a named beneficiary, constitute a part of the
estate of the member for pay-ment of his debt: Provided, however, That this section shall not apply when
obligations or indebtedness to the System and the employer ate con-cerned; nor when the retirement
an-nuity is assigned to any person, corporation, association or bank or other financial institution, which is
hereby authorized."
The above-quoted provision is too clear to require the application of any rule of statutory construction
for purposes of showing the weakness of the position ta-ken by herein appellants. As may be seen, it
recognizes the principles relied upon by them, but at the same time, it expressly provides that "this section
shall not apply when obligations or indebtedness to the System and the employer are concerned". In
other words, in life insur-ance policies issued by the GSIS in favor of government employees, the proceeds
- even if not made payable to named beneficiaries and may, therefore, be payable to the estate of the
insured - shall not constitute part of the estate of the member (insured) for payment of his debt; but such
proceeds - whether or not made payable to named beneficiaries - shall so constitute part of the estate of
the insured for payment of his debt and shall thereby be liable to attachment, garnishment and other
legal processes, when obligations or indebtedness to the GSIS and the employer, that is, the government
are con-cerned. There can be no doubt then that the appellee Government Service Insurance System was
right in re-quiring herein appellants to submit the necessary clearance from money and property
accountabilities of the de-ceased government employee whose insurance policy is here involved, before
paying them the proceeds of the policy concerned; and the lower court did not err in holding that the
appellants, for their failure to submit the certificate of clearance required of them, have no cause of action
against the GSIS. Similarly, since it is not disputed by appellants that the Republic of the Philippines,
employer of the deceased employee in this cases is claiming the proceeds of his insurance on the basis of
the provisions of the law above-quoted, We agree with the appellee GSIS that the court a quo was right
in declaring that the intervenor Republic of the Philippines is legally entitled to the proceeds of the life
insurance here put to question.
WHEREFORE, the decision appealed from is affirmed. On equitable considerations, no pronouncement as

to costs.
Concepcion, C.J., Reyes, Fernando, Teehankee, and Villamor, JJ., concur.
Dizon, Makalintal, and Zaldivar, JJ., no part.
Castro, J., on official leave of absence.
e. Right of insured to change beneficiary;
The insured shall have the right to change the beneficiary he designated in the policy, unless he has
expressly waived this right in said policy (Sec. 11).
f. Where beneficiary dies ahead of the insured.
As a general rule the proceeds of insurance goes to the estate of the beneficiary.
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"Section 12. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the
principal, accomplice, or accessory in willfully bringing about the death of the insured. In such a case, the share
forfeited shall pass on to the other beneficiaries, unless otherwise disqualified. In the absence of other beneficiaries,
the proceeds shall be paid in accordance with the policy contract. If the policy contract is silent, the proceeds shall be
paid to the estate of the insured.
a. When beneficiary forfeits insurance proceeds;
The nearest relative of the insured shall receive the proceeds of said insurance if not otherwise
disqualified.
b. Who shall receive in case the beneficiary is disqualified?
The share forfeited shall pass on to the other beneficiaries, unless otherwise disqualified
"Section 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest.
a. Insurable interest in property;
NATURE OF INTEREST
An insurable interest in property may consist in:
(1) An existing interest;
(2) An inchoate interest founded on an existing interest; or
(3) An expectancy, coupled with an existing interest in that out of which the expectancy arises (Sec. 14).
The insurable interest may be in the property itself (e.g., ownership), or any relation thereto (e.g.,
interest of a trustee or a commission agent), or liability in respect thereof (e.g., interest of a carrier or
depository of goods). The relation of the insured to the property is such that he will be benefited
by its continued existence or will suffer a direct pecuniary loss by its destruction.
An existing interest may be a legal title or equitable title. Examples of those having existing interest are
owners as regards their properties, trustees in the case of the seller of property not yet delivered,
mortgagors over the property mortgaged, and lessor, lessee and sublessee over the property leased. An
inchoate interest MUST be founded on existing interests. It exists but is incomplete or unripe until the
happening of an event. Examples of inchoate interests are the interest of stockholders with respect to
dividends in case of profits and shares in the assets, and the interest of a partner in the properties
belonging to the partnership.
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Harvardian Colleges v. Country Bankers Insurance Corp.
1 CARA 2
Facts:
Harvardian is a family corporation, the stockholders of which are Ildefonso Yap, Virginia King Yap
and their children.
Prior to Aug. 9, 1979, an agent of Country Bankers proposed to Harvardian to insure its school
building. Although at first reluctant, Harvardian agreed.
Country Banks sent an inspector to inspect the school building and agreed to insure the same for
P500,000 for which Harvardian paid an annual premium of P2,500.
On Aug. 9, 1979, Country Bankers issued to Harvardian a fire insurance policy. On March 12, 1980,
(39 days before I was born hehehehe )during the effectivity of said insurance policy, the insured
property was totally burned rendering it a total loss.
A claim was made by plaintiff upon defendant but defendant denied it contending that plaintiff
had no insurable interest over the building constructed on the piece of land in the name of the
late Ildefonso Yap as owner.
It was contended that both the lot and the building were owned by Ildefonso Yap and NOT by the
Harvardian Colleges.
Issue:
Whether or not Harvardian colleges has a right to the proceeds.
Held:
Harvardian has a right to the proceeds.
Regardless of the nature of the title of the insured or even if he did not have title to the property
insured, the contract of fire insurance should still be upheld if his interest in or his relation to the
property is such that he will be benefited in its continued existence or suffer a direct pecuniary loss
from its destruction or injury. The test in determining insurable interest in property is whether one
will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or
damage from its destruction, termination or injury by the happening of the event insured against.
Here Harvardian was not only in possession of the building but was in fact using the same for several
years with the knowledge and consent of Ildefonso Yap. It is reasonably fair to assume that had the
building not been burned, Harvardian would have been allowed the continued use of the same as the
site of its operation as an educational institution. Harvardian therefore would have been directly
benefited by the preservation of the property, and certainly suffered a pecuniary loss by its being
burned.
Section 14. An insurable interest in property may consist in:
"(a) An existing interest;
"(b) An inchoate interest founded on an existing interest; or

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"(c) An expectancy, coupled with an existing interest in that out of which the expectancy arises.
a. What insurable interest in property consist in:
The insurable interest may be in the property itself (e.g., ownership), or any relation thereto (e.g., interest
of a trustee or a commission agent), or liability in respect thereof (e.g., interest of a carrier or depository
of goods). The relation of the insured to the property is such that he will be benefited by its continued
existence or will suffer a direct pecuniary loss by its destruction. An existing interest may be a legal title
or equitable title. Examples of those having existing interest are owners as regards their properties,
trustees in the case of the seller of property not yet delivered, mortgagors over the property mortgaged,
and lessor, lessee and sublessee over the property leased.
An inchoate interest MUST be founded on existing interests. It exists but is incomplete or unripe until the
happening of an event. Examples of inchoate interests are the interest of stockholders with respect to
dividends in case of profits and shares in the assets, and the interest of a partner in the properties
belonging to the partnership.
An expectancy must be coupled with an existing interest in that out of which the expectancy arises. For
example, a farmer who planted crops has insurable interest over his harvest which can be expected.
A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon
any valid contract for it, is not insurable (Sec. 16).
A mere hope or expectation of benefit which may be frustrated by the happening of some event
uncoupled with any present legal right will not support a contract of insurance.
Traders Insurance and Surety Co. v. Golangco- Insurance Proceeds
95 PHIL 826
Facts:
A decision was rendred in Civil Case No. 6306 granting Golangco the right to collect rentals from a building
in Sta. Cruz, Manila.
Golangco then sought fire insurance from Traders. Before the policy was issued, Golangco made a full
and clear exposal of his interests in the premises, i.e. that he was not the owner.
The fire policy that defendant issued covered only all of Golangcos interest in the premises and his right
to collect the rentals.
The building burned down in a fire and Golangco sought to collect from Traders. Traders denied any
liability on the ground that since Golangco was not the owner of the premises then he had no insurable
interest in the same and consequently, he could not collect the insurance proceeds.
Issue:
Whether or not plaintiff can claim the insurance proceeds.
Held:
YES.
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Both at the time of the issuance of the policy and at the time of the fire, plaintiff Golangco was in legal
possession of the premises, collecting rentals from its occupant. It seems plain that if the premises were
destroyed as they were, by fire, Golangco would be, as he was, directly damnified thereby; and hence he
had an insurable interest therein.
Filipino Merchants Insurance v CA G.R. No. 85141 November 28, 1989
J. Regalado
Facts:
Choa insured 600 tons of fishmeal for the sum of P267,653.59 from Bangkok, Thailand to Manila against
all risks under warehouse to warehouse terms. What was imported in the SS Bougainville was 59.940
metric tons at $395.42 a ton. The cargo was unloaded from the ship and 227 bags were found to be in bad
condition by the arrastre.
Choa made a formal claim against the defendant Filipino Merchants Insurance Company for P51,568.62
He also presented a claim against the ship, but the defendant Filipino Merchants Insurance Company
refused to pay the claim. The plaintiff brought an action against the company and presented a third party
complaint against the vessel and the arrastre contractor.
The court below, after trial on the merits, rendered judgment in favor of private respondent, for the sum
of P51,568.62 with interest at legal rate.
The common carrier, Compagnie, was ordered to pay as a joint debtor.
On appeal, the respondent court affirmed the decision of the lower court insofar as the award on the
complaint is concerned and modified the same with regard to the adjudication of the third-party
complaint. A motion for reconsideration of the aforesaid decision was denied. The AC
made Filipino Merchants pay but absolved the common carrier, Compagnie. Hence this petition.
Issues:
1. WON the "all risks" clause of the marine insurance policy held the petitioner liable to the private
respondent for the partial loss of the cargo, notwithstanding the clear absence of proof of some fortuitous
event, casualty, or accidental cause to which the loss is attributable.
2. WON The Court of Appeals erred in not holding that the private respondent had no insurable interest
in the subject cargo, hence, the marine insurance policy taken out by private respondent is null and void.
Held: No. No. Petition denied.
Ratio:
1. The "all risks clause" of the Institute Cargo Clauses read as follows:
5. This insurance is against all risks of loss or damage to the subject-matter insured but shall in no case
be deemed to extend to cover loss, damage, or expense proximately caused by delay or inherent vice or
nature of the subject-matter insured. Claims recoverable hereunder shall be payable irrespective of
percentage.
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An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an
accidental cause of any kind. Accident is construed by the courts in their ordinary
and common acceptance.
The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any
loss other than a willful and fraudulent act of the insured. This is pursuant to the very purpose of an "all
risks" insurance to give protection to the insured in those cases where difficulties of logical explanation
or some mystery surround the loss or damage to property.
Institute Cargo Clauses extends to all damages/losses suffered by the insured cargo except (a) loss or
damage or expense proximately caused by delay, and (b) loss or damage or expense proximately caused
by the inherent vice or nature of the subject matter insured.
Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but
under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage
for which it seeks compensation. The insured under an "all risks insurance policy" has the initial burden
of proving that the cargo was in good condition when the policy attached and that the cargo was damaged
when unloaded from the vessel. The burden then shifts to the insurer to show the exception to the
coverage. This creates a special type of insurance which extends coverage to risks not usually
contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the
peril falling within the policy's coverage; the insurer can avoid coverage upon demonstrating that a
specific provision expressly excludes the loss from coverage.
Under an 'all-risks policy, it was sufficient to show that there was damage occasioned by some accidental
cause of any kind, and there is no necessity to point to any particular cause.
2. Section 13 of the Insurance Code- anyone has an insurable interest in property who derives a benefit
from its existence or would suffer loss from its destruction
Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on
an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which
the expectancy arises.
Choa, as vendee/consignee of the goods in transit, has such existing interest as may be the subject of a
valid contract of insurance. His interest over the goods is based on the perfected contract of sale. The
perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable
title even before delivery or before conditions have been performed.
Further, Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer, delivery of the goods to a carrier, for the purpose
of transmission to the buyer is deemed to be a delivery of the goods to the buyer. The Court has
heretofore ruled that the delivery of the goods on board the carrying vessels partake of the nature of
actual delivery since, from that time, the foreign buyers assumed the risks of loss of the goods and paid
the insurance premium covering them.
Section 15. A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of
his liability but not to exceed the value thereof.
a. Insurable Interest of carrier or depositary
A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent
of his liability but not to exceed the value thereof
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Section 16. A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon
any valid contract for it, is not insurable.
a. Mere contingent or expectant interest not insurable
An expectancy must be coupled with an existing interest in that out of which the expectancy arises. For
example, a farmer who planted crops has insurable interest over his harvest which can be expected.
A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon
any valid contract for it, is not insurable (Sec. 16).
A mere hope or expectation of benefit which may be frustrated by the happening of some event
uncoupled with any present legal right will not support a contract of insurance.
Notes:
(1) A son has no insurable interest over the property of his father because such is just a mere expectancy
and has no legal basis before he inherits such property.
(2) Insurable interest in property may be based on a perfected contract of sale, vesting an equitable title
even before delivery of the goods. (Filipino Merchants Ins. Co. v. CA, 1989)
(3) When the seller retains ownership only to ensure that the buyer will pay its debt, the risk of loss is
borne by the buyer. Insurable interest in property does not imply a property interest in, or a lien upon,
or possession of the subject matter of the insurance, and neither ownership nor a beneficial interest
is requisite to the existence of such an interest. Anyone has an insurable interest in property who
derives a benefit from its existence or would suffer loss from its destruction. (Gaisano Cagayan Ins. v.
Insurance Co. of North America, 2006)
Section 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by
loss or injury thereof.
a. Measure of indemnity in property insurance
Being a contract of indemnity, the measure of insurable interest in property is the extent to which the
insured might be damnified by the loss of injury thereof (Sec. 17). The insured cannot recover a greater
value than that of his actual loss because it would be a wagering policy contrary to public policy and void.
Thus, a mortgagor has an insurable interest equal to the value of the mortgaged property and a
mortgagee, only to the extent of the credit secured by the mortgage.
(see harvardian case)
Section 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person
having an insurable interest in the property insured.
a. Insurance is unenforceable if taken for the benefit of some person without insurable interest
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Section 19. An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but
need not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance
takes effect, but need not exist thereafter or when the loss occurs.
a. When insurable interest in property must exist
General rule: Interest in property insured must exist BOTH at inception and at time of loss, but not in the
meantime (Sec. 19).
Exceptions (i.e., automatic transfer of interest):
(1) A change in interest over the thing insured AFTER the loss contemplated. The insured may sell the
remains without prejudice to his right to recover (Sec. 21).
(2) A change of interest in one or more several distinct things, separately insured by one policy. This
does not avoid the insurance as to the others (Sec. 22).
(3) A change in interest by will or succession upon the death of the insured (Sec. 23).
(4) A transfer of interest by one of several partners, joint owners, or owners in common who are jointly
insured.
b. When insurable interest in life or health must exist
General rule: Interest in the life or health of a person must exist when the insurance takes effect (at
inception), but need not exist thereafter or when the loss occurs. (Sec. 19)
Exceptions:
(1) Creditors insurance taken on the life of the debtor - Insurable interest disappears once the debt has
been paid. At this point, the creditor/insured can no longer recover on the policy.
(2) Companys insurance taken on the life of an employee - insurable interest disappears once the
employee leaves the company, in which case, the company can no longer recover on the policy.
RGP-MLC2017
c. Distinctions between insurable interest in life and in property
Section 20. Except in the cases specified in the next four sections, and in the cases of life, accident, and health insurance,
a change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the
insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the
insurance are vested in the same person.
a. Change of interest, general rule
General rule: A change of interest in the thing insured does not transfer the policy, but suspends the
insurance to an equivalent extent until the interest in the thing and the interest in the insurance policy
are vested in the same person. (The contract is not rendered void but is merely suspended) (Sec. 58)
b. Exceptions to the general rule
Exceptions:
(1) In life, health, and accident insurance (Sec. 20).
(2) A change of interest in the thing insured after the occurrence of an injury which results in a loss
(Sec. 21) does not affect the policy
(3) A change in the interest in one or more of several things, separately insured by one policy (Sec.
22.) A conveyance of one or more things does not affect the policy with respect to the others not
so conveyed.
(4) A change of interest by will or succession on the death of the insured (Sec. 23)
(a) The death of the insured does not avoid insurance policy.
(b) It does not affect the policy except his interest passes to his heir or legal representative who
may continue the insurance policy on the property by continuing paying premiums.
(5) A transfer of interest by one of several partners, joint owners, or owners in common, who are
jointly insured, to the others (Sec. 24).
(a) It does not avoid the insurance.
RGP-MLC2017

The Insurance Code of 2013 - REVIEWER

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The Insurance Code of 2013 - REVIEWER

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"Section 1. This Decree shall be known as The Insurance Code.

"(1) Making or proposing to make, as insurer, any insurance contract;

b. Elements of the Contract

(1) Payment of Premium

(2) Assumption of Risk: Designated Peril as Cause

(3) Risk of Loss or Damage

(4) Insurable Interest

(5) Risk-Distributing Scheme

(6) Contract of Indemnity (only for non-life insurance)

(7) Risk Distributing Device

(8) Uberrimae Fides Contract

(9) Personal Contract

e. How ambiguities are construed

G.R. No. L-16215 June 29, 1963

FIELDMENS INSURANCE v. MERCEDES VARGAS vda. DE SONGCO, et al. and CA

1968 / Fernando / Review of CA decision

CA DECISION AFFIRMED; FIELDMENS INSURANCE IS LIABLE

New Life v CA G.R. No. 94071 March 31, 1992

As for condition number 27, the stipulation read:

Verendia V CA G.R. No. 75605 January 22, 1993

G.R. No. 75605 January 22, 1993

Lessons Applicable: Exception to Ambiguous Provisions Interpreted Against Insurer (Insurance)

trial court: favored Fidelity

[ GR No. 98414, Feb 08, 1993 ]

FIRST QUEZON CITY INSURANCE COMPANY v. CA +

G.R. No. 98414

The undisputed facts are:

We find merit in the petition.

Development Bank of the Philippines v CA

231 SCRA 370

March 21, 1994

Filipinas Compaia de Seguros vs Christern, Huenefeld and Co., Inc

f. When Suretyship is deemed an insurance contract

g. What term doing an insurance business includes

(1) Making or proposing to make, as insurer, any insurance contract

a. What perils or risks may be insured

b. Insurance against damage

d. Unknown past event;

e. Future contingent event

a. Insurance for or against any lottery is void.

a. Parties to an insurance contract

1. Insurer - Person who undertakes to indemnify another.

b. Who may be insurer?

"Section 7. Anyone except a public enemy may be insured.

a. Who may be insured?

An insurance may be taken by a person, personally or through his agent or trustee.

b. A public enemy may not be insured;

Filipinas Compaia de Seguros vs Christern, Huenefeld and Co., Inc

a. Who may insure mortgaged property

Geagonia v CA G.R. No. 114427 February 6, 1995

The policy noted the requirement that

2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Rizal Commercial Banking Corporation V. CA (1998)

d. Insurance taken by mortgagee

Palileo V. Cosio (1955)

Lessons Applicable: Mortgagor (Insurance)

a. Transfer of insurance with approval of insurer

"(a) Of himself, of his spouse and of his children;

a. Insurable interest, defined;

b. Necessary to validity of insurance contract;

The insurable interest need not always be pecuniary in nature.