CASE # 11

ENRIQUEZ VS. SUN LIFE INSURANCE OF CANADA

G.R. No. L-15895; November 29, 1920
FACTS:
Joaquin Herrer made an application with Sun Life for a life annuity. He paid the amount of
P6,000.00 to the Manila manager who gave him a “provisional” receipt “subject to medical
examination and approval of the Company’s Central Office.” The application was forwarded to
the head office in Canada and the policy was issued on December 4, 1917 in Canada.
Meanwhile, on December 18, 1917, Herrer’s attorney wrote to the Manila Office stating that
Herrer wanted to withdraw his application to which the office wrote a letter dated November 26,
1917 stating that the policy had already been issued. The letter was received by the attorney on
December 21, 1917. Herrer had died a day earlier on December 20, 1920.
The trial court ruled that the contract had been perfected, hence this appeal.
ISSUES:
Whether or not the contract of life annuity was perfected.
HELD:
NO.
The contract was not perfected. Art. 1262 provides that acceptance by letter does not bind the
person making the offer except from the time it came to his knowledge. The pertinent fact is that
according to the provisional receipt, the insurance company had to: 1) conduct a medical
examination; 2) had to obtain the head office’s approval; and 3) somehow communicate such
approval. It is true that the letter notifying acceptance was deposited in the post office, but the
fact of notification is a rebuttable presumption and the facts clearly show that Herrer never
received the notice of the acceptance before his death.
CASE # 12
GREAT PACIFIC VS. COURT OF APPEALS
G.R. No. L-31845 April 30, 1979
FACTS:
Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the essential
data which petitioner Mondragon, the Branch Manager, wrote on the form. The latter paid the
annual premium the sum of P1,077.75 going over to the Company, but he retained the amount of
P1,317.00 as his commission for being a duly authorized agent of Pacific Life.
Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing.
Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application
form his strong recommendation for the approval of the insurance application. Then Mondragon
received a letter from Pacific Life disapproving the insurance application. The letter stated that
the said life insurance application for 20-year endowment plan is not available for minors below
seven years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan,
and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the
company.
The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon
wrote back Pacific Life again strongly recommending the approval of the 20-year endowment
insurance plan to children, pointing out that since the customers were asking for such coverage.
Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery before the Court of First Instance
of Cebu, which ruled against him.
ISSUES:
1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question
2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which
rendered void the policy
HELD:.
1.NO
The receipt was intended to be merely a provisional insurance contract. Its perfection was subject
to compliance of the following conditions: (1) that the company shall be satisfied that the
applicant was insurable on standard rates; (2) that if the company does not accept the application
and offers to issue a policy for a different plan, the insurance contract shall not be binding until
the applicant accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if
the company disapproves the application, the insurance applied for shall not be in force at any
time, and the premium paid shall be returned to the applicant.
The receipt is merely an acknowledgment that the latter’s branch office had received from the
applicant the insurance premium and had accepted the application subject for processing by the
insurance company. There was still approval or rejection the same on the basis of whether or not
the applicant is “insurable on standard rates.” Since Pacific Life disapproved the insurance
application of respondent Ngo Hing, the binding deposit receipt in question had never become in
force at any time. The binding deposit receipt is conditional and does not insure outright. This
was held in Lim v Sun. The deposit paid by private respondent shall have to be refunded by
Pacific Life.
2.YES
Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he
supplied data, he was fully aware that his one-year old daughter is typically a mongoloid child.
He withheld the fact material to the risk insured. The concealment entitles the insurer to rescind
the contract of insurance.
CASE # 13
SPOUSES NILO AND STELLA CHA VS. COURT OF APPEALS
G.R. No. 124520, 18 August 1997, 277 SCRA 690
FACTS:
Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with CKS
Development Corporation, as lessor, on 5 October 1988. One of the stipulations of the 1 year
lease contract states that “The LESSEE shall not insure against fire the chattels, merchandise,
textiles, goods and effects placed at any stall
Or store or space in the leased premises without first obtaining the written consent and approval
of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the
LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit”
Notwithstanding the above stipulation in the lease contract, the Cha spouses insured against loss
by fire their merchandise inside the leased premises for P500,000.00 with the United Insurance
Co., Inc. without the written consent of CKS. On the day that the lease contract was to expire,
fire broke out inside the leased premises. When CKS learned of the insurance earlier procured by
the Cha spouses (without its consent), it wrote the insurer (United) a demand letter asking
That the proceeds of the insurance contract (between the Cha spouses and United) be paid
directly to CKS, based on its lease contract with the Cha spouses. United refused to pay CKS.
Hence, the latter filed a complaint against the Cha spouses and United. On 2 June 1992, the
Regional Trial Court, Branch 6, Manila, rendered a decision ordering United to pay CKS the
amount of P335,063.11 and the Cha spouses to pay P50,000.00 as exemplary damages,
P20,000.00 as attorney’s fees and costs of suit. On appeal, the Court of Appeals in CA GR CV
39328 rendered a decision dated 11 January 1996, affirming the trial court decision, deleting
however the awards for exemplary damages and attorney’s fees. A motion for reconsideration by
United was denied on 29 March 1996. The spouses Cha and United filed the petition for review
on certiorari.
ISSUE:
Whether or not the CKS has insurable interest because the spouses Cha violated the stipulation
on the lease contract.
HELD:
NO.
Under Sec. 18 of the Insurance Code of the Philippines which provides that “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 non-life insurance policy such as the fire
insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of
indemnity. Insurable interest in the property insured must exist a t the time the insurance takes
effect and at the time the loss occurs. The basis of such requirement of insurable interest in
property insured is based on sound public policy: to prevent a person from taking out an
insurance policy on property upon which he has no insurable interest and collecting the proceeds
of said policy in case of loss of the property. In such a case, the contract of insurance is a mere
wager which is void under Section 25 of the Insurance Code. In Sec. 25 of the same Code states,
“Every stipulation in a policy of Insurance for the payment of loss, whether the person insured
has or has not any interest in the property insured, or that the policy shall be received as proof of
such interest, and every policy executed by way of gaming or wagering, is void”. Also under
Sec. 17 of the same Code provides that the measure of an insurable interest in property is the
extent to which the insured might be damnified by loss of injury thereof. Hence, the automatic
assignment of the policy to CKS under the provision of the lease contract previously quoted is
void for being contrary to law and/or public policy. The proceeds of the fire insurance policy
thus rightfully belong to the spouses. The liability of the Cha spouses to CKS for violating their
lease contract in that Cha spouses obtained a fire insurance policy over their own merchandise,
without the consent of CKS, is a separate and distinct issue which we do not resolve in this case.
CASE # 14
GAISANO VS. INSURANCE
G.R. No. 147839 June 8, 2006
FACTS:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire insurance
policies with book debt endorsements. The insurance policies provide for coverage on “book
debts in connection with ready-made clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in the Philippines.”
The policies defined book debts as the “unpaid account still appearing in the Book of Account of
the Insured 45 days after the time of the loss covered under this Policy.” The policies also
provide for the following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in respect of the
merchandise sold and delivered by the Insured which are outstanding at the date of loss for a
period in excess of six (6) months from the date of the covering invoice or actual delivery of the
merchandise whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12) days after the
close of every calendar month all amount shown in their books of accounts as unpaid and thus
become receivable item from their customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the
Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by
fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing
materials sold and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC and
LSPI were paid for their claims and that the unpaid accounts of petitioner on the sale and
delivery of ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was
P535,613.00.
The RTC rendered its decision dismissing Insurance’s complaint. It held that the fire was purely
accidental; that the cause of the fire was not attributable to the negligence of the petitioner. Also,
it said that IMC and LSPI retained ownership of the delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano to pay
Insurance the P 2 million and the P 500,000 the latter paid to IMC and Levi Strauss.
ISSUES:
1. WON the CA erred in construing a fire insurance policy on book debts as one covering the
unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made
clothing materials sold and delivered to petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods by
stipulating in the sales invoices that “[i]t is further agreed that merely for purpose of securing the
payment of the purchase price the above described merchandise remains the property of the
vendor until the purchase price thereof is fully paid.”
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with IMC and LSPI.
HELD:
1.NO
Nowhere is it provided in the questioned insurance policies that the subject of the insurance is
the goods sold and delivered to the customers and dealers of the insured.Thus, what were insured
against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after
the loss through fire, and not the loss or destruction of the goods delivered. The present case
clearly falls under paragraph (1), Article 1504 of the Civil Code:
2. YES
ART. 1504. Unless otherwise agreed, the goods remain at the seller’s risk until the ownership
therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the
goods are at the buyer’s risk whether actual delivery has been made or not, except that:
Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance
of the contract and the ownership in the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract, the goods are at the buyer’s risk
from the time of such delivery. Thus, when the seller retains ownership only to insure that the
buyer will pay its debt, the risk of loss is borne by the buyer. Petitioner bears the risk of loss of
the goods delivered.
3. YES
IMC and LSPI had an insurable interest until full payment of the value of the delivered goods.
Unlike the civil law concept of res perit domino, where ownership is the basis for consideration
of who bears the risk of loss, in property insurance, one’s interest is not determined by concept
of title, but whether insured has substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as “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.” Parenthetically, under Section 14 of
the same Code, an insurable interest in property may consist in: (a) an existing interest; (b) an
inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing
interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or would
suffer loss from its destruction. Indeed, a vendor or seller retains an insurable interest in the
property sold so long as he has any interest therein, in other words, so long as he would suffer by
its destruction, as where he has a vendor’s lien. In this case, the insurable interest of IMC and
LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time
of the loss covered by the policies.
Petitioner’s argument that it is not liable because the fire is a fortuitous event under Article
117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article
1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but
for petitioner’s accounts with IMC and LSPI that remained unpaid 45 days after the fire.
Accordingly, petitioner’s obligation is for the payment of money. As correctly stated by the CA,
where the obligation consists in the payment of money, the failure of the debtor to make the
payment even by reason of a fortuitous event shall not relieve him of his liability. The rationale
for this is that the rule that an obligor should be held exempt from liability when the loss occurs
thru a fortuitous event only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case of fortuitous event.
It does not apply when the obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, “[i]n an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the obligation.” This rule is based
on the principle that the genus of a thing can never perish. An obligation to pay money is
generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.
4. YES
With respect to IMC, the respondent has adequately established its claim. The P 3 m claim has
been proven. The subrogation receipt, by itself, is sufficient to establish not only the relationship
of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance
claim. The right of subrogation accrues simply upon payment by the insurance company of the
insurance claim Respondent’s action against petitioner is squarely sanctioned by Article 2207 of
the Civil Code which provides:
Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. There
was no evidence that respondent has been subrogated to any right which LSPI may have against
petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner’s case for
recovery of P535,613.00.

CASE # 15
GEAGONIA VS. COURT OF APPEALS
G.R. No. 114427, 6 February 1995, 241 SCRA 152
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 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 petitioner’s 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 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 attorney’s 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.
ISSUE:
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:
1.YES
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.
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.
2.NO
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 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.
CASE # 16
SUNLIFE ASSURANCE COMPANY OF CANADA vs. COURT OF APPEALS
G.R. No. 105135, 22 June 1995
FACTS:
Robert John Bacani procured a life insurance contract for himself from petitioner-company,
designating his mother Bernarda Bacani, herein private respondent, as the beneficiary. He was
issued a policy valued at P100,000.00 with double indemnity in case of accidental death.
Sometime after, the insured died in a plane crash. Bernarda filed a claim with petitioner, seeking
the benefits of the insurance policy taken by her son. However, said insurance company rejected
the claim on the ground that the insured did not disclose material facts relevant to the issuance of
the policy, thus rendering the contract of insurance voidable. Petitioner discovered that two
weeks prior to his application for insurance, the insured was examined and confined at the Lung
Center of the Philippines, where he was diagnosed for renal failure. The RTC, as affirmed by the
CA, this fact was concealed, as alleged by the petitioner. But the fact that was concealed was not
the cause of death of the insured and that matters relating to the medical history of the insured is
deemed to be irrelevant since petitioner waived the medical examination prior to the approval
and issuance of the insurance policy.
ISSUE:
Whether or not the concealment of such material fact, despite it not being the cause of death of
the insured, is sufficient to render the insurance contract voidable
HELD:
YES
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. 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. The SC, therefore, ruled that
petitioner properly exercised its right to rescind the contract of insurance by reason of the
concealment employed by the insured. It must be emphasized that rescission was exercised
within the two-year contestability period as recognized in Section 48 of The Insurance Code.
WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is
REVERSED and SET ASIDE.

CASE # 17
THELMA VDA. DE CANILANG VS. COURT OF APPEALS
G.R. No. 92492, 17 June 1993, 223 SCRA 443
FACTS:
Canilang was found to have suffered from sinus tachycardia and bronchitis after a check-up from
his doctor. The next day, he applied for a “non-medical” insurance policy with respondent
Grepalife naming his wife, Thelma Canilang, as his beneficiary with the face value of
Php19,700.
He died of “congestive heart failure,” “anemia,” and “chronic anemia.” When Thelma filed a
claim with Great Pacific, it was denied on the ground that Jaime concealed material information.
Thelma filed a complaint against Great Pacific with the Insurance Commission for recovery of
the insurance proceeds. She testified that she was not aware of any serious illness suffered by
Jaime, and that what she knew was that he died because of a kidney disorder. Great Pacific
presented a physician who explained that Jaime’s application had been approved based on his
medical declaration, and that medical examinations are required only in cases where applicant
indicated that he has undergone medical consultation and hospitalization.
The Insurance Commissioner ordered Great Pacific to pay P19,700 plus legal interest and
P2,000.00 as attorney’s fees. On appeal by Great Pacific, the Court of Appeals reversed. It found
that the failure of Jaime Canilang to disclose previous medical consultation and treatment
constituted material information which should have been communicated to Great Pacific to
enable the latter to make proper inquiries.
ISSUE:
Whether or not Canilang was guilty of misrepresentation
HELD:
YES. .
There was a right of the insurance company to rescind the contract if it was proven that the
insured committed fraud in not affirming that he was treated for heart condition and other
ailments stipulated.
Apart from certifying that he didn’t suffer from such a condition, Canilang also failed to disclose
that he had twice consulted a doctor who had found him to be suffering from “sinus tachycardia”
and “acute bronchitis.”
Under the Insurance Code:
Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called
a concealment.
Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all
factors within his knowledge which are material to the contract and as to which he makes no
warranty, and which the other has not the means of ascertaining.
The information concealed must be information which the concealing party knew and should
have communicated. The test of materiality of such information is contained in Section 31 which
provides that “materiality is to be determined not by the event, but solely by the probable and
reasonable influence of the facts upon the party to whom the communication is due, in forming
his estimate of the disadvantages of the proposed contract, or in making his inquiries.”
The information which Jaime Canilang failed to disclose was material to the ability of Great
Pacific to estimate the probable risk he presented as a subject of life insurance. Had he 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 Great Pacific would have made further
inquiries and would have probably refused to issue a non-medical insurance policy.
Materiality relates rather to the “probable and reasonable influence of the facts” upon the party to
whom the communication should have been made, in assessing the risk involved in making or
omitting to make further inquiries and in accepting the application for insurance; that “probable
and reasonable influence of the facts” concealed must, of course, be determined objectively, by
the judge ultimately.
The Insurance Commissioner had also ruled that the failure of Great Pacific to convey certain
information to the insurer was not “intentional” in nature, for the reason that Canilang believed
that he was suffering from minor ailment like a common cold. Section 27 stated that
“concealment whether intentional or unintentional entitles the injured party to rescind a contract
of insurance.”
The failure to communicate must have been intentional rather than inadvertent. Canilang could
not have been unaware that his heart beat would at times rise to high and alarming levels and that
he had consulted a doctor twice in the two (2) months before applying for non-medical
insurance. Indeed, the last medical consultation took place just the day before the insurance
application was filed. In all probability, Jaime Canilang went to visit his doctor precisely because
of the ailment.
Canilang’s failure to set out answers to some of the questions in the insurance application
constituted concealment.

CASE # 18
MA. LOURDES S. FLORENDO VS. PHILAM PLANS, INC., PERLA ABCEDE MA.
CELESTE ABCEDE
G.R. No. 186983 February 22, 2012
FACTS:
Manuel Florendo filed an application for comprehensive pension plan with respondent Philam
Plans, Inc. (Philam Plans) Manuel signed the application and left to Perla the task of supplying
the information needed in the application. Respondent Ma. Celeste Abcede, Perla’s daughter,
signed the application as sales counselor. Philam Plans issued Pension Plan Agreement to
Manuel, with petitioner Ma. Lourdes S. Florendo, his wife, as beneficiary. In time, Manuel paid
his quarterly premiums. Eleven months later, Manuel died of blood poisoning. Subsequently,
Lourdes filed a claim with Philam Plans for the payment of the benefits under her husband’s plan
but Philam Plans declined her claim prompting her to file the present action against the pension
plan company before the Regional Trial Court (RTC) of Quezon City and ruled in favor of Ma.
Lourdes. However, the Court of Appeals then reversed the RTC decision. Hence this appeal.
ISSUE:
Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband under the
insurance plan despite consideration that her husband Manuel concealed the true condition of his
health.
HELD:
NO.
The comprehensive pension plan that Philam Plans issued contains a one-year incontestability
period. It states:
VIII. INCONTESTABILITY
After this Agreement has remained in force for one (1) year, we can no longer contest for health
reasons any claim for insurance under this Agreement, except for the reason that installment has
not been paid (lapsed), or that you are not insurable at the time you bought this pension program
by reason of age. If this Agreement lapses but is reinstated afterwards, the one (1) year
contestability period shall start again on the date of approval of your request for reinstatement.
The above incontestability clause precludes the insurer from disowning liability under the policy
it issued on the ground of concealment or misrepresentation regarding the health of the insured
after a year of its issuance.
Since Manuel died on the eleventh month following the issuance of his plan, the one year
incontestability period has not yet set in. Consequently, Philam Plans was not barred from
questioning Lourdes’ entitlement to the benefits of her husband’s pension plan.

CASE # 19
TAN VS. COURT OF APPEALS
G.R. No. 48049, 29 June 1989, 174 SCRA 403
FACTS:
In September 1973, Tan Lee Siong applied for a life insurance under the Philippine American
Life Insurance Company (PHILAMLIFE). He stated in the application form that he has no health
issues whatsoever and so in November 1973 he was issued a life insurance policy in the amount
of P80,000.00. He listed his sons as beneficiaries (Emilio Tan et al). In April 1975, Tan Lee
Siong died due to hepatoma. His sons filed an insurance claim but PHILAMLIFE denied the
same as it alleged that Tan Lee Siong concealed the fact that he was hypertensive, diabetic, and
was suffering from hepatoma at the time of his application for the insurance.
The beneficiaries averred that PHILAMLIFE can no longer rescind the insurance contract
because the insured is already dead. They invoke Section 48 of the Insurance Code which they
interpreted to mean that an insurer can only rescind an insurance contract during the lifetime of
the insured; and that such rescission should be done within two years prior to the filing of a suit
involving the insurance.
ISSUE:
WON the interpretation of the Tan brothers is correct.
HELD:
NO.
Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by any
provision of this chapter, such right must be exercised previous to the commencement of an
action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been in force
during the lifetime of the insured for a period of two years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason
of the fraudulent concealment or misrepresentation of the insured or his agent.
The so-called “incontestability clause” precludes the insurer from raising the defenses of false
representations or concealment of material facts insofar as health and previous diseases are
concerned if the insurance has been in force for at least two years during the insured’s lifetime.
The phrase “during the lifetime” found in Section 48 simply means that the policy is no longer
considered in force after the insured has died. The key phrase in the second paragraph of Section
48 is “for a period of two years.”
Note that the policy was in force for only one year and 5 months when Tan Lee Siong died. This
means that PHILAMLIFE can still contest and rescind the policy issued by reason of the
misrepresentation made by Tan Lee Siong.
Further, because of Tan Lee Siong’s statement that he does not have any health issues, the
insurance company was misled into believing that he was healthy and so it did not deem a
medical checkup to be necessary and that ultimately led to the issuance of the life insurance
policy.
CASE # 20.
MANILA BANKERS LIFE INSURANCE CORPORATION VS. CRESENCIA P. ABAN
FACTS :
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life
Insurance Corporation. Petitioner issued Insurance Policy No. 747411 (the policy), with a face
value of P100,000.00, in Sotero’s favor on August 30, 1993, after the requisite medical
examination and payment of the insurance premium. On April 10, 1996, when the insurance
policy had been in force for more than two years and seven months, Sotero died. Respondent
filed a claim for the insurance proceeds on July 9, 1996. Petitioner conducted an investigation
into the claim. Petitioner denied respondent’s claim on April 16, 1997 and refunded the
premiums paid on the policy. On April 24, 1997, petitioner filed a civil case for rescission and/or
annulment of the policy. The main thesis of the Complaint was that the policy was obtained by
fraud, concealment and/or misrepresentation under the Insurance Code. Respondent filed a
Motion to Dismiss claiming that petitioner’s cause of action was barred by prescription pursuant
to Section 48 of the Insurance Code.On December 9, 1997, the trial court issued an Order
granting respondent’s Motion to Dismiss. Petitioner interposed an appeal with the CA. The CA
sustained the trial court. Hence this petition.
ISSUE :
WON the CA erred in sustaining the application of the incontestability provision
HELD :
NO
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured.
Under the provision, an insurer is given two years – from the effectivity of a life insurance
contract and while the insured is alive – to discover or prove that the policy is void ab initio or is
rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his
agent. After the two-year period lapses, or when the insured dies within the period, the insurer
must make good on the policy, even though the policy was obtained by fraud, concealment, or
misrepresentation. Section 48 regulates both the actions of the insurers and prospective takers of
life insurance. It gives insurers enough time to inquire whether the policy was obtained by fraud,
concealment, or misrepresentation; on the other hand, it forewarns scheming individuals that
their attempts at insurance fraud would be timely uncovered – thus deterring them from
venturing into such nefarious enterprise. At the same time, legitimate policy holders are
absolutely protected from unwarranted denial of their claims or delay in the collection of
insurance proceeds occasioned by allegations of fraud, concealment, or misrepresentation by
insurers, claims which may no longer be set up after the two-year period expires as ordained
under the law.