1. San Miguel Brewery, etc. v. Law Union and Rock Insurance Co., (Ltd.), et.al.
CA
G.R. No. L-14300 January 19, 1920
FACTS
(1916) A property originally owned by D.P. Dunn was mortgaged to plaintiff to secure a
debt of P10,000. Dunn agreed to keep the property insured at his expense to insurance companies to
be selected by plaintiff; to receive the proceeds of the insurance in case of loss and to retain such
part necessary to cover the mortgage debt. Brias, general manager of plaintiff made a verbal
application to Law Union for P15,000. In the application, Brias stated that the company is
interested only as a mortgagee. No information was asked as to who was the owner of the property,
and no information upon this point was given. Law Union assumes one-half of the risk only and the
other half was issued by co-defendant insurance company Filipinas Compania de Seguros.
(1917) the policies were renewed, renewal premiums being paid by plaintiff, supposedly
for the account of the owner. Thereafter, Dunn sold the mortgage property to co-defendant Henry
Harding, but not assignment of the insurance, or of the insurance policies, was at any time made to
him.
The property was destroyed by fire and plaintiff wanted to recover from the insurance the
proceeds to the extent of its mortgage credit with the balance to go to Harding.
Defendant insurance companies contended that they were not liable to Harding because
their liability under the policies was limited to the insurable interests of plaintiff only.
Plaintiff eventually reached a settlement with the insurance companies and was paid the
balance of its mortgage credit. Harding was left to fend for himself.
Ruling of the Lower Court
Concluded that Harding had no right of action whatever against the insurance companies.
ISSUE
Are the insurance companies liable to defendant Harding?
RULING
No. Under the Insurance Act, the measure of insurable interest in the property is the
extent to which the insured might be damnified by the loss or injury thereof. Also it is provided in
that the insurance shall be applied exclusively to the proper interest of the person in whose name it
is made. Undoubtedly, SMB as the mortgagee of the property, had an insurable interest therein;
but it could not, in any event, recover upon the two policies an amount in excess of its mortgage
credit.
An additional insuperable obstacle is that the ownership over the property had changed
prior to the loss, without corresponding change having been effected in the policy of insurance. In
section 19 of the Insurance Act we find it stated that "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." Again in section 55 it is declared that "the mere transfer of a thing
insured does not transfer the policy, but suspends it until the same person becomes the owner of
both the policy and the thing insured."
2. Valenzuela v.
G.R. No. 83122 October 19, 1990
FACTS
Petitioner Arturo Valenzuela, a General Agent of respondent Philippine American
General Insurance Co., Inc. (Philamgen) solicited a marine insurance from Delta Motors, Inc. in the
amount of P4.4M, and is entitled to a 32% commission. But petitioner was not able to receive said
commissions on premium payments from 1976 to 1978. In 1977, Philamgen had manifested its
interest to share, in a 50-50 basis, in the supposed commission of petitioner. Petitioner consistently
refused to heed Philamgens demand until it came to a point were respondent terminated the
General Agency Agreement of petitioner, and still, hold petitioner jointly and severally liable with
the insured for unpaid premiums. Thus, a complaint was filed against Philamgen.
Ruling of the Trial Court
Respondents are not justified in terminating petitioner by the mere refusal of the latterin
sharing his Delta Commission.
Ruling of the CA
Reverse the trial court ruling relying on the pervasiveness of the principal's power to
revoke an agency at will; that the Supreme Court has consistently held that termination
may be effected even if the principal acts in bad faith, subject only to the principal's
liability for damages.
ISSUE
Is an agent liable for unpaid or uncollected premiums?
RULING
No. Under Section 77 of the Insurance Code, the remedy for the non-payment of
premiums is to put an end to and render the insurance policy not binding
Sec. 77 ... [N]otwithstanding any agreement to the contrary, no policy or contract of
insurance is valid and binding unless and until the premiums thereof have been paid except in the
case of a life or industrial life policy whenever the grace period provision applies (P.D. 612, as
amended otherwise known as the Insurance Code of 1974)
In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. (92 SCRA 419
[1979]) we held that the non-payment of premium does not merely suspend but puts an end to an
insurance contract since the time of the payment is peculiarly of the essence of the contract.
3. Thelma Vda. De Canilang v. CA
G.R. No. 92492 June 17, 1993
FACTS
(1982) Petitioners late husband (Jaime Canilang) in two occasion, consulted Dr.
Wilfredo Claudio and was diagnosed for from "sinus tachycardia and acute bronchitis. A day
after the last consultation, Mr. Canilang applied for a non-medical insurance policy (P19,700 face
value) with respondent Great Pacific Life Assurance Corp. (Grepalife), naming his wife as
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beneficiary. In the medical declaration set out in the application by Mr. Canilang, he failed to
disclose his recent consultations with Dr. Claudio.
Only almost a year after, Mr. Canilang died. Petitioner then filed a claim against the Grepalife,
which the latter denied upon the ground that the insured had concealed material information from
it. Thus the complaint before the Insurance Commissioner
Decision of the Insurance Commissioner
Made Grepalife liable contending that there was no intentional concealment on the part of
Mr. Canilang and that Grepalife had waived its right to inquire into the health of the insured where
the insurance policy was issued despite the lack of answers on some pertinent questions in the
insurance application.
Decision of the CA
Reversed the above decision. It contends that Mr. Canilang failed to disclose material
information which should have been communicated to Grepalife for the latter to make further
inquiries.
ISSUE
Is Grepalife liable to beneficiary petitioner?
RULING
No. The Court agreed with the CA that the information which Mr. Canilang failed to
disclose was material to the ability of Grepalife to estimate the probable risk he presented as a
subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and
medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed
that Grepalife would have made further inquiries and would have probably refused to issue a non-
medical insurance policy or, at the very least, required a higher premium for the same coverage.
Under the relevant provisions (Sections 26 & 28) of IC of 1978, the information
concealed must be information which the concealing party knew and "ought to have
communicated," that is to say, information which was "material to the contract."
The Court found it difficult to take seriously the argument that Great Pacific had waived
inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to
set out answers to some of the questions in the insurance application. Such failure precisely
constituted concealment on the part of Canilang. Petitioner's argument, if accepted, would
obviously erase Section 27 from the Insurance Code of 1978.
Section 27 of the Insurance Code of 1978 as it existed from 1974 up to 1985, that is,
throughout the time range material for present purposes, provided that:
Sec. 27. A concealment entitles the injured party to rescind a contract of insurance.
4. Cathay Insurance Co. v. CA
G.R. No. 76145 June 30, 1987
FACTS
Private respondent Remington Industrial Sales Corp. import seamless steel pipes from
Japan to the Phils., on board vessel SS Eastern Mariner. This shipment was insured to petitioner.
Private respondent filed a complaint against petitioner for the losses and damages
incurred by the shipment. The former contends that rust is not an inherent vice of the seamless steel
pipes without interference of external factors and thus insists that rusting is a peril of the sea
covered by the insurance policy. Petitioner on the other hand argued that rusting is not a risk
insured against, since a risk to be insured against should be a casualty or some casualty, something
which could not be foreseen as one of the necessary incidents of adventure.
Decision of the trial court (affirmed by CA)
It ordered petitioner to pay private respondent.
ISSUE
Is rusting a risk insured against?
RULING
Yes. There is no question that the rusting of steel pipes in the course of a voyage is a
"peril of the sea" in view of the toll on the cargo of wind, water, and salt conditions. At any rate if
the insurer cannot be held accountable therefor. We would fail to observe a cardinal rule in the
interpretation of contracts, namely, that any ambiguity therein should be construed against the
maker/issuer/drafter thereof, namely, the insurer. Besides, the precise purpose of insuring cargo
during a voyage would be rendered fruitless.
5. Palermo v. Pyramid Insurance Co., Inc.
G.R. No. L-36480 May 31, 1988
FACTS
Plantiff (Andrew Palermo) insured his car (Nissan Cedric de Luxe Sedan) against any
loss or damage for P 20,000.00 and against third party liability for P 10,000.00 with defendant
(Private Car Comprehensive Policy). The policy grants an option on defendant to indemnify the
plaintiff for loss or damage to the car in cash or to replace the damaged car.
Plaintiff filed a claim from defendant but the latter disallowed it because at the time of
the accident, the insured was driving his car with an expired driver's license; that in that instance,
he is not an AUTHORIZED DRIVER under the policy.
Decision of the trial court
Ordered defendant to pay plaintiff.
ISSUE
Is plaintiff insured an authorized driver at the time of the accident?
RULING
Yes. The driver of the insured motor vehicle at the time of the accident was, the insured
himself, hence an "authorized driver" under the policy.
While the Motor Vehicle Law prohibits a person from operating a motor vehicle on the
highway without a license or with an expired license, an infraction of the Motor Vehicle Law on
the part of the insured, is not a bar to recovery under the insurance contract. It however renders him
subject to the penal sanctions of the Motor Vehicle Law.
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 10. James Stokes v. Malayan Insurance Co., Inc.
G.R. No. L-34768. February 24, 1984
FACTS
Plaintff Daniel Stephen Adolfson had a subsisting car insurance policy against own
damage and as well as 3rd party liability with defendant. When the subject car collided with another
car, it was driven by co-plainitff James Stokes, who is an Irish citizen and had been in the
Philippines as a tourist for more than ninety days, had a valid and subsisting Irish drivers license
but without a Philippine drivers license.
Malayan refused to pay contending that Stokes is not an AUTHORIZED DRIVER of the
insurance policy in relation to Section 21 of the Land Transportation and Traffic Code.
Decision of CFI
In favor of plaintiffs; it held that Stokes lack of a Philippine drivers license was not fatal
to the enforcement of the insurance policy; and the MALAYAN was estopped from denying
liability under the insurance policy because it accepted premium payment made by the insured one
day after the accident.
ISSUE
Is defendant liable?
RULING
No. Stokes wass not an authorized driver under the terms of the insurance policy in
question, and MALAYAN was right in denying the claim of the insured.
A contract of insurance is a contract of indemnity upon the terms and conditions specified
therein. When the insurer is called upon to pay in case of loss or damage, he has the right to insist
upon compliance with the terms of the contract. If the insured cannot bring himself within the terms
and conditions of the contract, he is not entitled as a rule to recover for the loss or damage suffered.
For the terms of the contract constitute the measure of the insurers liability, and compliance
therewith is a condition precedent to the right of recovery.
Acceptance of premium within the stipulated period for payment thereof, including the
agreed period of grace, merely assures continued effectivity of the insurance policy in accordance
with its terms. Such acceptance does not estop the insurer from interposing any valid defense under
the terms of the insurance policy.
12. Sun Life Assurance Co. of Canada v. CA
G.R. No. 105135 June 22, 1995
FACTS
Robert John D. Bacani procured a non-medical insurance policy, with P100,000 face
value, with double indemnity in case of accidental death, designating his mother, respondent
Bernarda Bacani as beneficiary.
The insured died in a plane crash, thus respondent Bacani filed a claim against the
insurance company which the latter rejected upon the finding that the insured gave false statements
in question 5 and 6 on his insurance application, that the insured was examined and confined at the
Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement,
the deceased was subjected to urinalysis, ultra-sonography and hematology tests.
The spouses Bacani filed an action for specific performance. Petitioner filed its answer
with a counterclaim and a list of exhibits consisting of medical records furnished by the Lung
Center of the Philippines. From said exhibits, respondents Bacani manifested that they "have no
evidence to refute the documentary evidence of concealment/misrepresentation by the decedent of
his health condition.
Decision of the trial court
Condemning petitioner to pay respondents Bacani. It concluded that the facts concealed
by the insured were made in good faith and under a belief that they need not be disclosed.
Moreover, it held that the health history of the insured was immaterial since the insurance policy
was "non-medical".
Decision of the CA
Affirms that of the trial court. It ruled that petitioner cannot avoid its obligation by
claiming concealment because the cause of death was unrelated to the facts concealed by the
insured.
ISSUE
Is petitioner liable to the beneficiary?
RULING
No. Section 26 of The Insurance Code is explicit in requiring a party to a contract of
insurance to communicate to the other, in good faith, all facts within his knowledge which are
material to the contract and as to which he makes no warranty, and which the other has no means of
ascertaining.
The information which the insured failed to disclose was material and relevant to the
approval and issuance of the insurance policy. The matters concealed would have definitely
affected petitioner's action on his application, either by approving it with the corresponding
adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted
a medical examination of the insured by petitioner in order for it to reasonably assess the risk
involved in accepting the application.
Anent the finding that the facts concealed had no bearing to the cause of death of the
insured, it is well settled that the insured need not die of the disease he had failed to disclose to the
insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the
risks of the proposed insurance policy or in making inquiries.
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