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INSURANCE LAW

1. Note the definition under Section 2 of “doing an insurance business” and “transacting an insurance business” for purposes of determining the jurisdiction of the Insurance Commissioner. A contract of agency is not within its jurisdiction.

2. The Insurance Commissioner has adjudicatory functions to settle claims and complaints not exceeding 100T. Its jurisdiction is concurrent with the regular courts

3. Note the 5 cardinal principles in insurance: Insurable Interest Principle of Utmost Good Faith Contract of Indemnity Contract of Adhesion (Fine Print Rule) Principle of Subrogation

4. Test for existence of insurable interest: Whether in life or property: will he derive pecuniary advantage from its preservation or will he suffer prejudice by its loss or destruction?

5. Concubine of a married man cannot be a beneficiary of his life insurance, being disqualified under Art. 739 of the CC. The action to annul the donation may be brought by the spouse of the donor or donee and the guilt may be proved by preponderance of evidence. However, where the insured is single, he can validly designate his common-law wife, also unmarried, as beneficiary.

6. Insurable interest is a matter of public policy. The rule of estoppel does not apply.

7. Husband takes an insurance on the life of his Wife. The marriage was annulled. The wife died. Can the husband recover? Yes. Insurable interest needs to exist only at the time of the effectivity of the policy.

8. When a person takes an insurance policy on his own life, he may designate any person provided that such person is not disqualified. Such person need not have an insurable interest on the life of the insured. However, when a person insures the life of another person and designates himself as the beneficiary, he must have an insurable interest over the life of such person.

9. A creditor has insurable interest over the life of his debtor. However, such insurable interest is coterminous with the debt. In addition, the extent of the insurable interest is limited to the amount of the debt.

10. The insurable interest of the mortgagor is up to the full value of the mortgaged or pledged property. The insurable interest of the mortgagee is limited to the extent of the mortgage. Under the civil code, the mortgage is deemed to extend to the indemnity paid by the insurer upon the occurrence of the event insured against.

11. In contract of sale after perfection but before delivery, the seller(because he still the owner) and the buyer(equitable title) both has an insurable interest in the subject of the sale.

12. Principle of Subrogation: The payment made by the insurer to the assured operates as an equitable assignment to the former of all the remedies which the latter may have against the obligor.

13. Note the determination of materiality of concealment under Sec. 31. There need not be a causal connection between the cause of death of the insured and the fact concealed as long as it is material.

14. Breach of warranty need not be the cause of loss. The insurer may therefore deny the claim.

15. Double insurance is not prohibited by law. But if there is a requirement in the policy that existing insurances must be disclosed that stipulation is valid and non-disclosure may justify the insurer to deny the claim of the insured

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16. Distinguish concealment under Sec. 31 and 110 on marine insurance of the Insurance Code. In the latter, fact concealed must be the cause of the loss for the insurer to be held liable.

17. All Risks Policy – insurance against all causes of conceivable loss or damage, except: 1) as otherwise excluded in the policy; or 2) due to fraud or intentional misconduct on the part of the insured.

18. Implied warranty of seaworthiness applies to the owner of the cargo because he has complete control over the choice of common carrier that maintains its vessel in seaworthy condition

19. Co-insurance; rules Co-insurance applies only to marine insurance Logically, there cannot be co-insurance in life insurance. Co-insurance applies in fire insurance when expressly provided for by the parties.

20. ALTERATION AS A SPECIAL GROUND FOR RESCISSION BY INSURER Requisites:

The use or condition of the thing is specifically limited or stipulated in the policy; Such use or condition as limited by the policy is altered; The alteration is made without the consent of the insurer; The alteration is made by means within the control of the insured; The alteration increases the risk; (Sec. 168) and

21. Suicide Insurer is liable in the following cases:

1. If committed after two years from the date of the policy’s issue or its last reinstatement;

2. If committed in a state of insanity regardless of the date of the commission unless suicide is an excepted peril. (Sec. 180-A)3. If committed after a shorter period provided in the policy

22. Third Party – In a CTPL, any person other than the passenger, excluding a member of the household or a member of the family within the second degree of consanguinity or affinity, of a motor vehicle owner or land transportation operator, or his employee in respect of death or bodily injury arising out of and in the course of employment.

23. Where the vessel is hypothecated by loan on bottomry, the owner has an insurable interest only in the excess of its value over the amount of the bottomry loan.

24. “Authorized driver clause” means that the driver, other than the insured owner, must be duly licensed to drive the motor vehicle, otherwise the insurer is excused form liability (Villacorta vs. I.C.) Not applicable when the driver is the insured himself.

25. No-Fault Indemnity Insurance: Third party is given the option to file a claim without the necessity of proving fault negligence if claim does not exceed 5,000.

26. Third party liability insurance; rules The insurer assumes the obligation of paying the injured party to whom the insured is

liable. The insurer becomes liable as soon as the liability of the insured attaches Hence, the insured acquires interest in the insurance contract, which interest may be

garnished just like any other credit. (Perla Compania de Seguro, Inc. vs. Ramolete, 203 SCRA 487)

27. In Third Party Liability Insurance, the insurer is not solidarily liable with the insured. The liability of insurer is based on contract while the liability of the insured is based on tort

28. GENERAL RULE: No policy issued by an insurance company is valid and binding until actual payment of premium. Any agreement to the contrary is void. (Sec. 77)

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EXCEPTIONS:1. In case of life or industrial life insurance, when the grace periods applies; (Sec. 77)2. When the insurer makes a written acknowledgment of the receipt premium; (Sec. 78) 3. Section 77 may not apply if the parties have agreed to the payment of the premium in

installments and partial payment has been made at the time of the loss. (Makati Tuscany Condominium Corp. v. CA, 215 SCRA 462)

4. Where a credit term has been agreed upon. (UCPB vs. Masagana Telemart, 308 SCRA 259) 5. Where the parties are barred by estoppel. (UCPB vs. Maagana Telemart, 356 SCRA 307)

29. Section 77 merely precludes the parties from stipulating that the policy is valid even if the premiums are not paid.

INSURANCE LAW

Ric, a businessman, obtained from HHH Insurance Co. five (5) insurance policies for its properties to expire on May 22, 2005. On June 13, 2005, Ric’s properties were razed by fire so it made a formal demand for indemnification for the burned insured properties. The premiums were paid only on June 15, 2005. HHH Insurance Co. rejected such claim despite the claimant’s assertion that it had an implied credit arrangement under a 60 to 90 day credit term, which has been customarily granted by HHH Insurance Co. by virtue of which the policies were deemed renewed though payment is later to be made.

Were the insurance policies validly renewed so as to warrant Ric’s claims for indemnification?

Yes. Accordingly, HHH Insurance Co. should indemnify Ric for the value of his properties. Sec. 77 of the Insurance Code merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement that is not contrary to morals, good customs, public order or public policy.

The agreement binds the parties. In the instant case, it would be unjust & inequitable if recovery would not be permitted against HHH Insurance Co. which had constantly granted a 60 to 90 day credit term for the payment of premiums despite its full awareness of Sec. 77 of the Insurance code. (UCPB Gen. Insurance Inc. vs. Masagana Telemart, April 4, 2001)

Voltaire insured his vessel with ABC Insurance Corporation on January 2, 2005 and the insurance company issued the corresponding marine insurance policy to Voltaire on the same date. A week later, reliable information reached Voltaire and the insurance company that on December 29, 2004, the vessel in question had already sunk.

Can Voltaire recover the proceeds of the marine insurance policy? Explain.

Yes. Under a marine insurance, it is possible that at the time of the insuring, the vessel had already been already lost. For instance, this is true where the policy states that the vessel is insured “whether it is lost or not lost”. The insurance therefore covers a “past event unknown to the parties”.

It is for this reason that utmost good faith is required in marine insurance. The good faith on the part of the insured is premised on the fact that at the time of the insuring, the information concerning the loss of the vessel could not have possibly reached him in the usual mode of transmission and at the usual rate of communication.

Otherwise, if the insured have acted in bad faith, it will prevent his recovery of the proceeds under the marine insurance policy.

Rey Guerrero, a concerned citizen filed a letter-complaint with the Insurance Commissioner alleging certain problems encountered by agents, supervisors, managers and public consumers of the SBC Insurance Co. as a result of certain prejudicial practices of said company. The Commissioner in response to the letter-complaint conducted a hearing. Does the Commissioner have jurisdiction to hear and decide the cases which were the subject of the letter-complaint?

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NO. The contract between XYZ Co. and its agents are not included with in the meaning of an insurance business as defined in the Insurance Code. Therefore, the Commissioner has no jurisdiction to hear and decide the case. A reading of section 416 of the Insurance Code that the Commissioner can only hear and decide claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy. It does not contemplate those cases affecting the Insurance Company and its agents. (PHILIPPINE AMERICAN LIFE ASSURANCE CO. VS ANSALDO (234 SCRA 509))

On September 15, 2002, Lita insured her own life naming her boyfriend Adam as her irrevocable beneficiary. The insurance company’s physician conducted a physical examination but was not able to detect the fact that Lita was already in the advance stage of cancer. In good faith Lita did not disclose the fact that she previously consulted an oncologist because after the medical consultation, Madam Auring, a fortune-teller, predicted that she will not die of cancer. On September 13, 2004 while Lita was on her way to SM Manila to meet Adam for their movie date, she was ran over by a speeding Tamaraw FX. Lita died immediately. Adam now claims the life insurance proceeds. Decide.

Adam could not recover, there was concealment, which is a neglect to communicate that

which a party knows and ought to communicate. The matter concealed was material and relevant

to the approval and issuance of the policy, it having a probable and reasonable influence upon the

insurer’s forming an estimate of the disadvantages of the proposed contract.

Good faith is not a defense to concealment, as materiality of the information withheld does not depend on the state of mind of the insured nor on the actual or physical events which ensue.

It is settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that the non-disclosure misled the insurer in forming his estimates on the risks of the proposed insurance policy or in making inquiries.

In the above problem, the incontestability clause does not find application because the two-year period has not yet lapsed. (SUNLIFE ASSURANCE COMPANY OF CANADA V. COURT OF APPEALS, ET AL., 245 SCRA 268)

Star Insurance issued a Personal Accident Policy to Voltaire with a face value of P500,000.00. A provision in the policy states that “the company shall not be liable in respect of “bodily injury” consequent upon the insured person attempting to commit suicide willfully exposing himself to needless peril except in an attempt to save human life.” Six months later Voltaire died of a bullet wound in his head. Investigation showed that one evening Voltaire was in a happy mood although he was not drunk. He was playing with his handgun from which he has previously removed its magazine. He pointed the gun at sister who got scared. He assured her it was not loaded. He then pointed the gun at his temple and pulled the trigger. The gun fired and Voltaire slumped dead on the floor.

Voltaire’s wife Mae, as the designated beneficiary, sought to collect under the policy. Star Insurance rejected her claim on the ground that the death of Voltaire was not accidental. Mae sued the insurer.

Decide. Discuss fully.

Mae can recover the proceeds of the policy from the insurer. The death of the insured was not due to suicide or willful exposure to needless peril which are excepted risks. The insured’s act was purely an act of negligence which is covered by the policy and for which the insured got the insurance for protection. In fact, he removed the magazine from the gun and when he pointed the gun to his temple he did so because he thought that it was safe for him to do so. He did so to assure his sister that the gun was harmless. There is no stipulation in the policy that would relieve the insurer of liability for the death of the insured since the death was an accident. (SUN INSURANCE VS. CA, 211 SCRA 554)

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INSURANCE LAW

INSURABLE INTEREST [1980, 1982, 1987, 2001, 2002]Rule: A person who is interested in the safety and preservation of materials in his possession belonging to third parties because he stands either to benefit from their continued existence or to be prejudiced by their destruction, has an insurable interest thereon which is not necessarily limited to the extent of his liability to the owners thereof. A person having mere right of possession of property may insure it to its full value and in his own name, even when he is not responsible for its safekeeping. (ANG KA YU vs. PHOENIX ASSURANCE CO. LTD 1CAR 2)

1) Q: BD has a bank deposit of half a million pesos. Since the limit of the insurance coverage of the Philippine Deposit Insurance Corporation Act (R.A. 3591) is only one tenth of BD’s deposit, he would like some protection for the excess by taking out an insurance against all risks or contingencies of loss arising from any unsound or unsafe banking practices including unforeseen adverse effects of the continuing crisis involving the banking and financial sector in the Asian Region. Does BD have an insurable interest within the meaning of the Insurance Code of the Philippines (P.D. 1460)?

A: Yes. BD has insurable interest in his bank deposit. In case of loss of said deposit, more particularly to the extent of the amount in excess of the limit covered by the Philippine Deposit Insurance Corporation Act, BD will be damnified. He will suffer pecuniary loss of P 400,000.00, that is, his bank deposit of half a million pesos minus P100,000.00 which is the maximum amount recoverable from the PDIC.

(Note: R.A. No. 9302 is now in effect increasing the PDIC insurance coverage from P100,000.00 to P250,000.00.)

2) Q: JQ, owner of a condominium unit, insured the same against fire with XYZ Insurance Co., and made the loss payable to his brother, MLQ. In case of loss by fire of the said condominium unit, who may recover on the fire insurance policy? State the reason(s) for your answer.

A: JQ can recover on the fire insurance policy for the loss of the said condominium unit. He has the insurable interest as owner-insured. As beneficiary in the fire insurance policy, MLQ cannot recover on the fire insurance policy. For the beneficiary to recover on the fire or property insurance policy, it is required that he must have insurable interest in the property insured. In this case, MLQ does not have insurable interest in the condominium unit.

3) Q: On February 3, 1987, while Jose Palacio was in the hospital preparatory to a heart surgery, he called his only son, Boy Palacio, and showed the latter a will naming the son as sole heir to all

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the father's estate including the family mansion in Forbes Park. The following day, Boy Palacio took out a fire insurance policy on the Forbes Park mansion. One week later, the father died. After his father's death, Boy Palacio moved his wife and children to the family mansion which he inherited. On March 30, 1987, a fire occurred razing the mansion to the ground. Boy Palacio then proceeded to collect on the fire insurance he took earlier on the house..

Should the insurance company pay? Reasons.

A: No. In property insurance, insurable interest must exist both at the time of the taking of the insurance and at the time the risk insured against occurs. The insurable interest must be an existing interest. The fact alone that Boy Palacio was the expected sole heir of his father's estate does not give the prospective heir any existing interest prior to the death of the decedent.

BENEFICIARY [1985, 1988, 2000]Rule: According to the Article 2012 of the New Civil Code that any person who is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation to him. Both are founded upon the same consideration which is liberality. (INSULAR LIFE vs. EBRADO 80 SCRA 181)

1) Q: Juan de la Cruz was issued Policy no. 8888 of the Midland Life Insurance Co. on a whole life plan for P 20,000.00 on August 19, 1989. Juan de la Cruz is married to Cynthia with whom he has three legitimate children. He, however, designated Purita, his common-law wife, as the revocable beneficiary. Juan de la Cruz referred to Purita in his application and policy as the legal wife.

Three years later, Juan de la Cruz died. Purita filed her claim for the proceeds of the policy as designated beneficiary therein. The widow, Cynthia also filed a claim as the legal wife. To whom should the proceeds of the insurance policy be awarded?

A: The proceeds of the insurance policy shall be awarded to the estate of Juan de la Cruz. Purita, the common law wife, is disqualified as the beneficiary of the deceased because of illicit relation between the deceased and Purita, the designated beneficiary. Due to such illicit relation, Purita cannot be a Donee of the deceased. Hence, she cannot also be his beneficiary.

2) Q: On October 18, 1980, P. took out a life insurance policy and named his only son Q as beneficiary. The policy was silent with regard to any change of beneficiary. P later learned that Q was hooked on drugs and immediately notified the insurance company in writing that he is substituting his sister, R, as his beneficiary in place of Q. P later died of advanced tuberculosis. In the application form filled up by the agent of the insurance company prior to the issuance of the life insurance policy by the insurance company, the agent, without the knowledge of P, filled in a false answer and made it appear that P was in good health. Upon P's death, Q claimed the proceeds of the insurance policy contending that as designated beneficiary, he cannot be changed without his consent, he having acquired a vested right to the proceeds of the policy.

(a) Is Q's contention correct? Reasons.(b) Can the insurance company refuse liability on the policy? Reasons.

A: (a) No, the designation of the beneficiary is revocable unless the right to revoke is waived (Sec. 11, Insurance Code).

(b) No, the insurer cannot escape liability. The insurance agent is an agent not of the insured but of the insurer (see Malayan Insurance Co. vs. Pinca, G.R. No. 67835, 12 October 1987) and the latter must thus suffer for the misconduct of the agent. The result would have been different had the false answer been made by the agent in connivance with the insured (Great Pacific Life vs. CA, 89 SCRA 543).

CONCEALMENT OR MISREPRESENTATION IN RELATION TO THE INCONSTESTABILITY CLAUSE [1983, 1984, 1988, 1989, 1994, 1998, 2002]Rule: Section 48 of the Insurance Code precludes the insurer from raising the defense 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 2 years during the insured’s lifetime. The phrase “during the lifetime” in section 48 means that the policy is no longer considered in force after the insured has died. The key phrase in section 48 is for a period of 2 years. The insurer has 2

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years from the date of the issuance of the contract or its last reinstatement within which to contest the policy whether or not the insured still lives within such period. (TAN vs. CA 174 SCRA 403)

1) Q: On September 23, 1990, Tan took a life insurance policy from Philam. The Policy was issued on November 6, 1990. He died on April 26, 1992 of hematoma. The insurance company denied the beneficiaries’ claim and rescinded the policy by reason of alleged misrepresentation and concealment of material facts made by Tan in his application. It returned the premiums paid.

The beneficiaries contend that the company had no right to rescind the contract as rescission must be done “during the lifetime” of the insured within two years and prior to the commencement of the action.

Is the contention of the beneficiaries tenable?

A: No. The incontestability clause does not apply. The insured died within less than two (2) years from the issuance of the policy on September 23, 1990. The insured died on April 26, 1992, or less than two (2) years from September 23, 1990.

The right of the insurer to rescind is only lost if the beneficiary has commenced an action on the policy. There is no such action in the case. (Tan v. Court of Appeals, 174 SCRA 143)

2) Q: Juan procured a “non-medical” life insurance from Good Life Insurance. He designated his wife Petra as the beneficiary. Earlier, in his application in response as to whether or not he had ever been hospitalized, he answered in the negative. He forgot to mention his confinement at the Kidney Hospital.

After Juan died in a plane crash, Petra filed a claim with Good Life. Discovering Juan’s previous hospitalization, Good Life rejected Petra’s claim on the ground of concealment and representation. Petra sued Good Life, invoking good faith on the part of Juan.

Will Petra’s suit prosper? Explain.

A: No. Petra’s suit will not prosper (assuming that the policy of life insurance has been in force for a period of less than two years from the date of issue.) The matters which Juan failed to disclose was material and relevant to the approval and issuance of the insurance policy. They would have affected Good Life’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 Juan by Good Life in order for it to reasonably assess the risk involved in accepting the application. In any case, good faith is no defense in concealment. The waiver of a medical examination in the non-medical life insurance from Good Life makes it more necessary that Juan supply complete information constitutes an important factor which Good Life takes into consideration in deciding whether to issue the policy or not. (Sun Life Assurance vs. CA, 245 SCRA 268)

If the policy of life insurance has been in force for a period of two years or more from the date of its issue then Good Life can no longer prove that the policy is void ab initio or is rescindable by reason of fraudulent concealment or misrepresentation of Juan. (Sec.48, Insurance Code)

LOSS [1982, 1988]Rule: Suffice it to say that any attempt to draw a distinction between "loss" and "damage" is uncalled for, because the word "loss" in insurance law embraces injury or damage. (Bonifacio Bros. vs. Mora)

1) Q: RC Corporation purchased rice from Thailand, which it intended to sell locally. Due to stormy weather, the ship carrying the rice became submerged in sea water, and with it the rice cargo. When the cargo arrived in Manila, RC filed a claim for total loss with the insurer, because the rice was no longer fit for human consumption. Admittedly, the rice could still be used as animal feed.

Is RC’s claim for total loss justified? Explain.

A: Yes. RC’s claim for total loss is justified. The rice, which was imported from Thailand for sale locally, is obviously intended for consumption by the public. The complete physical destruction of the rice is not essential to constitute an actual total loss. Such a loss exists in this case since the rice having been soaked in sea water and thereby rendered unfit for human consumption, has

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become totally useless for the purpose for which it was imported. (Pan Malayan Insurance Corp vs. CA, 201 SCRA 382)

2) Q: An insurance company issued a marine insurance policy covering a shipment by sea from Mindoro to Batangas of 1,000 pieces of Mindoro harden stones against “total loss only”. The stones were loaded in two lighters, the firsy with 600 pieces and the second with 400 pieces. Because of rough sees, damage was caused the second lighter resulting in the loss of 325 out of 400 pieces. The owner of the shipment filed a claim against the insurance company on the ground of constructive total loss inasmuch as more than three-fourths (3/4) of the value of stones had been lost in one of the lighters.

Is the insurance company liable under its policy? Why?

A: The insurance company is not liable under its policy covering against “total loss only” the shipment of 1,000 pieces of Mindoro Garden Stones. There is no constructive total loss that can be claimed since the ¾ rule is to be computed on the total 1,000 pieces of Mindoro garden stones covered by the single policy coverage, see Oriental Assurance Corporation v. CA, 200 SCRA 459)

3) Q: A marine insurance policy on a cargo states that “the insurer shall be liable for losses incident to perils of the sea.” During the voyage, seawater entered the compartment where the cargo was stored due to the defective drainpipe of the ship. The insured filed an action on the policy for recovery of the damages caused to the cargo. May the insured recover damages?

A: No. The proximate cause of the damage to the cargo insured was the defective drainpipe of the ship. This is peril of the ship, and not peril of the sea. The defect in the drainpipe was the result of the ordinary use of the ship. To recover under a marine insurance policy, the proximate cause of the loss or damage must be peril of the sea.

THEFT CLAUSE [1985, 1988]Rule: Where a car is admittedly unlawfully and wrongfully taken without the owner’s consent, such taking constitutes or partakes the nature of theft for purposes of recovery under the insurance policy. (VILLACORTA vs. INSURANCE COMMISSION, 100 SCRA 467)

1) Q: HL insured his brand new car with P Insurance Company for comprehensive coverage wherein the insurance company undertook to indemnify him against loss or damage to the car (a) by accidental collision xxx, (b) by fire, external explosion, burglary, or theft, and (c) malicious act.

After a month, the car was carnapped while parked in the parking space in front of the Intercontinental Hotel in Makati. Hl’s wife who was driving said car before it was carnapped reported immediately the incident to various government agencies in compliance with the insurance requirements.

Because the car could not be recovered, HL filed a claim for the loss of the car with the insurance company but it was denied on the ground that his wife was driving the car when it was carnapped was in possession of an expired driver’s license, a violation of the “authorized driver” clause of the insurance company.

1) May the insurance company be held liable to indemnify HL for the loss of the insured vehicle? Explain.

2) Supposing that the car was brought by HL on installment basis and there were installments due and payable before the loss of the car was as installments not yet payable. Because of the loss of the car, the vendor demanded from HL the unpaid balance of the promissory note. HL resisted the demand and claimed that he was only liable for the installments due and payable before the loss of the car but no longer liable for the other installments not yet due at the time of the loss of the car.

Decide.

A: 1) Yes. The car was lost due to theft. What applies in this case is the “theft” clause, and not the “authorized driver” clause. It is immaterial that HL’s wife was driving the car with an expired driver’s license at the time it was carnapped. (Perla Compania de Seguros v. CA, 208 SCRA 487).

2) The promissory note is not affected by whatever befalls the subject matter of the accessory contract. The unpaid balance on the promissory note should be paid and not only the installments due and payable before the loss of the car.

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2) Q: Mr. Gonzales was the owner of a car insured with Masagana Insurance Company for “Own Damage", "Theft", and "Third Party Liability" effective May 14, 1986 to May 14,1987. On May 2,1987, the car was brought to a machine shop for repairs. On May 11, 1987, while in the custody of the machine shop, the car was taken by one of the employees (of the machine shop) to show off to his girlfriend. While on the way to his girlfriend’s house, the car smashed into a parked truck and was extensively damaged. Mr. Gonzales filed a claim for recovery under the policy but was refused payment. The insurance company averred that the ear was not stolen, and therefore was not covered by the "Theft Clause".

Decide the merits of the insurer’s contention, with reasons.

A: I would decide in favor of the insured. The coverage of the policy was rather comprehensive in scope. The Theft Clause particularly, at least by intendment, should cover situations of the loss of the property occasioned by the taking or use by another without the authority of the insured (see Association of Baptists vs. Fieldmen's Insurance, 124 SCRA 618). Furthermore, doubts on the insurance, being a “contract by adherence" must be construed against the insurer (Bayview Hotel vs. Ker & Co., 116 SCRA 327).

NO-FAULT INDEMNITY CLAUSE [1989, 1993, 1994]Rule: Section 378 of the Insurance Code has established the following rules under the “no fault indemnity provision” 1.) a claim maybe made against one motor vehicle only; 2) if the victim is an occupant of a vehicle, the claim shall lie against the insurer of the motor vehicle in which he is riding, mounting, dismounting from; 3) in any other case [i.e.] if the victim was not an occupant of the vehicle, the claim shall lie against the insurer of the directly offending vehicle; 4) in all cases, the right of the party paying the claim to recover the owner of the vehicle responsible for the accident shall be maintained. (PERLA COMPANIA DE SEGURO INC. vs. ANCHETA 164 SCRA 144)

1) Q: What is your understanding of a “no fault indemnity” clause in an insurance policy?

A: Under the “no fault indemnity” clause, any claim for death or injury of any passenger or third party shall be paid without the necessity of proving fault or negligence of any kind. The indemnity in respect of any person shall not exceed P5,000.00, provided they are under oath, the following proofs shall be sufficient:

a) Police report of the accident; andb) Death certificate and evidence sufficient to establish the proper payee; orc) Medical report and evidence of medical or hospital disbursement in respect of

refund is claimed.Claim may be made against one vehicle only.

2) Q: X was riding a suburban utility vehicle (SUV) covered by a comprehensive motor vehicle liability insurance (CMVLI) underwritten by Fast Pay Insurance Company when it collided with a speeding bus owned by RM Travel, Inc. The collision resulted in serious injuries to X; Y, a passenger of the bus; and Z, a pedestrian waiting for a ride at the scene of the collision. The police report established that the bus was the offending vehicle. The bus had a CMVLI policy issued by Dragon Insurance Corporation. X, Y, and Z jointly sued RM Travel and Dragon Insurance for indemnity under the Insurance Code of the Philippines (P.D. 1460). The lower court applied the “no-fault” indemnity policy of the statute, dismissed the suit against RM travel, and ordered Dragon Insurance to pay indemnity to all three plaintiffs. Do you agree with the court’s judgment? Explain.

A: No. The cause of action of Y is based on the contract of carriage, while that of X and Z is based on torts. The court should not have dismissed the suit against RM Travel .The court should have ordered Dragon Insurance to pay each of X, Y, and Z to the extent of the Insurance coverage, but whatever amount is agreed upon in the policy should be answered first by RM Travel and the succeeding amount should be paid by Dragon Insurance up to the amount of the Insurance coverage. The excess of the claims of X, Y, and Z, over and above such insurance coverage, if any, should be answered or paid by RM Travel.

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AUTHORIZED DRIVER CLAUSE [1986, 1993, 1994]Rule: The requirement in an “authorized driver clause” that the driver be permitted in accordance with the licensing or other law or regulations to drive the motor vehicle and is not disqualified from driving such motor vehicle by order of a court of law or by reason of an enactment or regulation in that behalf applies only when the driver is driving under the insured’s order or with his permission. It does not apply when the person driving is the insured himself. (PALERMO vs. PYRAMID INSURANCE CO. INC., 161 SCRA 677)

1) Q: Sherly insured her newly acquired car, a Nissan Maxima against any loss or damage for P50,000.00 and against third party liability for P20,000.00 with the XYZ Insurance Corp. (XYZ). Under the policy, the car must be driven only by an authorized driver who is either: 1) the insured, or 2) any person driving on the insurer’s order or with his permission: provided that the person driving is permitted in accordance with the licensing or other laws or regulations to drive the motor vehicle and is not disqualified from driving such motor vehicle by order of a court.

During the effectively of the policy, the car, then driven by Sherly herself, who had no driver’s license, met an accident and was extensively damaged. The estimated cost of repairs was P40,000.00. Sheryl immediately notified XYZ but the latter refused to pay on the policy alleging that Sherly violated the terms thereof when she drove it without a driver’s license.

Is the insurer correct?

A: The insurer was not correct in denying the claim since the proviso “that the person driving is permitted in accordance with the licensing, etc.” qualifies only a person driving the vehicle other than the insured at the time of the accident (Palermo v. Pyramid Insurance Co. G.R. 36480, 31 May 1988)

INSURANCE LAW

1) Q: Raul’s truck bumped the car owned by Luz. The car was insured by Cala Insurance. For the damage caused, Cala paid Luz P5,000.00 in amicable settlement. Luz executed a release of claim, subrogating Cala to all her rights against Raul. When Cala demanded reimbursement from Raul, the latter refused saying that he had already paid Luz P4,500.00 for the damage to the car as evidenced by a release claim executed by Luz discharging Raul.

So Cala demanded reimbursement from Luz, who refused to pay, saying that the total damage to the car was P9,500.00. Since Cala paid P5,000.00 only, Luz contends that she was entitled to go after Raul to claim the additional P4,500.00.

1) Is Cala, as subrogee of Luz, entitled to reimbursement from Raul?2) May Cala recover what it has paid Luz?

A: 1) No. Luz executed a release in favor of Raul. The insurer can only be subrogated to only such rights as the insured may have. If the insured, after receiving payment from the insurer, releases the wrongdoer who caused the loss, the insurer loses his rights against the latter. (MANILA MAHOGANY MFG. CORP. V. CA, G.R. NO. 52756, OCTOBER 12, 1987)

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2) Cala can recover the amount of P5,000 which it paid to Luz. The insurer can only be subrogated to all the rights which the insured may have against the wrongdoer. By executing the release of claim it defeated the rights of the insurer to recover from the wrongdoer.

2) Q: Sun-Moon Insurance issued a Personal Accident Policy to Henry Dy with a face value of P500,000.00. A provision in the policy states that “the company shall not be liable in respect of “bodily injury” consequent upon the insured person attempting to commit suicide willfully exposing himself to needless peril except in an attempt to save human life.” Six months later Henry Dy died of a bullet wound in his head. Investigation showed that one evening Henry was in a happy mood although he was not drunk. He was playing with his handgun from which he has previously removed its magazine. He pointed the gun at sister who got scared. He assured her it was not loaded. He then pointed the gun at his temple and pulled the trigger. The gun fired and Henry slumped dead on the floor.

Henry’s wife Beverly, as the designated beneficiary, sought to collect under the policy. Sun-Moon Insurance rejected her claim on the ground that the death of Henry was not accidental. Beverly sued the insurer.

Decide. Discuss fully.

A: Beverly can recover the proceeds of the policy from the insurer. The death of the insured was not due to suicide or willful exposure to needless peril which are excepted risks. The insured’s act was purely an act of negligence which is covered by the policy and for which the insured got the insurance for protection. In fact, he removed the magazine from the gun and when he pointed the gun to his temple he did so because he thought that it was safe for him to do so. He did so to assure his sister that the gun was harmless. There is none in the policy that would relieve the insurer of liability for the death of the insured since the death was an accident. (SUN INSURANCE VS. CA, 211 SCRA 554)

3) Q: Robin insured his building against fire with EFG Assurance. The insurance policy contained the usual stipulation that any action or suit must be filed within one year after the rejection of the claim.

After his building burned, Robin filed his claim on January 20, 1994 for fire loss with EFG. On February 28, 1994, EFG denied Robin’s claim. On April 3, 1994, Robin sought reconsideration of the denial, but EFG reiterated its position. On March 20, 1995, Robin commenced judicial action against EFG.

Should Robin’s action be given due course? Explain.

A: No. Robin’s action should not be given de course. His filing of the request for reconsideration did not suspend the running of the prescriptive period of one year stipulated in the insurance policy. Thus, when Robin commenced judicial action against EFG Assurance on March 20, 1995, his ability to do so had already prescribed. The one-year period is counted from February 28, 1994 when EFG denied Robin’s claim, not from the date (presumably April 3, 1994) when EFG reiterated its position denying Robin’s claim. The reason for this rule is to insure that claims against insurance companies are promptly settled and that insurance suits are brought by the insured while the evidence and the cause of the destruction has not yet disappeared (SUN INSURANCE OFFICE VS. CA, 195 SCRA 193)

4) Q: What are the effects of insurance procured by the mortgagee without reference to the right of the mortgagor?

A: a. The mortgagee may collect from the insurer upon the occurrence of the loss to the extent of his credit.

b. Unless otherwise stated in the policy, the mortgagor has no right to collect the balance of the proceeds of the policy after payment of the interest of the mortgagee

c. The insurer, upon payment to the mortgagee-insured, becomes subrogated to the rights of the mortgagee against the mortgagor and may collect the debt of the mortgagor to the extent of the amount paid to the mortgagee

d. The mortgagee-insured can no longer collect the mortgagor’s indebtedness after receiving full payment of his credit from the insurer since the latter thereby acquires the right to collect from the mortgagor by virtue of the subrogation

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5) Q: While driving his car along EDSA, Cesar sideswiped Roberto causing injuries to the latter. Roberto sued Cesar and the third party liability insurer for damages and/or insurance proceeds. The insurance company moved to dismiss the complaint, contending that the liability of Cesar has not yet been determined with finality.

a) Is the contention of the insurer correct? Explain.b) May the insurer be held solidarily liable with Cesar? Explain.

A: a) No. The contention of the insurer is not correct. There is no need to wait for the decision of the court determining Cesar’s liability with finality before the third party liability insurer could be sued. The occurrence of the injury to Roberto immediately gave rise to the liability of the insurer under its policy. In other words, where an insurance policy insures directly against liability, the insurer’s liability accrues immediately upon the occurrence of the injury or event upon which the liability depends. (SHAFER VS. RTC JUDGE OF OLONGAPO CITY, 167 SCRA 386)

b) The insurer cannot be held solidarily liable with Cesar. The liability of the insurer is based on contract while that of Cesar is based on tort. If the insurer were solidarily liable with Cesar, it could be made to pay more than the amount stated in the policy. This would, however, be contrary to the principles underlying insurance contracts. On the other hand, if the insurer were solidarily liable with Cesar and it is made to pay only up to the amount stated in the insurance policy, the principles underlying solidary obligations would be violated. (VDA. DE MAGLANA VS. HON. CONSOLACION, 212 SCRA 268)

6) Q: Can third party liability insurance be subject to garnishment?

A: Yes. Every interest which the judgment debtor may have in property may be subjected to execution. A judgment debtor clearly has an interest in the proceeds of the third-party liability insurance contract. In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party to whom the insured is liable. The insurer becomes liable as soon as the liability of the insured to the injured third person attaches. Prior payment by the insured to the injured third person is not necessary in order that the obligation of the insurer may arise. From the moment that the insured became liable to the third person, the insured acquired an interest in the insurance contract, which interest may be garnished like any other credit. (PERLA COMPANIA DE SEGURO VS. RAMOLETE)

7) Q: Manpower Company obtained a group life insurance policy for its employees from Phoenix Insurance Company. The master policy issued by Phoenix on June 1, 1986 contained a provision that eligible employees for insurance coverage were all full time employees of Manpower regularly working at least 30 hours per week. The policy had also an incontestable clause. Beforehand, Phoenix sent enrollment cards to Manpower for distribution to its eligible employees. X filled out the card which contained a printed clause: "I request the insurance for which I may become eligible under said Group Policy." The cards were then sent to Phoenix and X was among the employees of Manpower who was issued a certificate of coverage by Phoenix.

On July 3, 1988, X was killed on the occasion of a robbery in their house. While processing the claim of X's beneficiary, Phoenix found out that X was not an eligible employee as defined in the group policy since he has not been employed 30 hours a week by Manpower. Phoenix refused to pay. May X's beneficiary invoke the incontestability clause against Phoenix? Reasons.

A: The beneficiary of X may validly invoke the incontestability clause. If the incontestability clause can apply even to cases of intentional concealment and misrepresentation, there would be no cogent reason for denying such application where the insured had not been guilty thereof. When X filled out the card containing the printed clause "I request the insurance for which I may become eligible under said Group Policy", it behooved the insurer to look into the qualifications of X whether he can thus be covered or not by the group life insurance policy. In issuing the certificate of coverage to X, Phoenix may, in fact, be said to have waived the 30-hour per week requirement (EDILLON VS. BANKERS LIFE, 117 SCRA 187).

8) Q: Lee Su Guat, an illiterate who spoke only Chinese applied for life insurance. The application was in English. Lee Su Guat declared that she was of good health. The application was approved. A second application was filed and in November 1965 and subsequently accepted. Lee Su Guat died in April 1966 of lung cancer. The insurer denied liability. The beneficiary claims that since the

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insured was illiterate and the policy was in English, the insurer must show that it has fully explained the terms of the policy to the insured, otherwise, the insured will not be guilty of misrepresentation. Is the insurer liable?

A: The insurer is not liable. The SC in TANG VS. CA ruled that the obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract, when fraud or mistake is alleged, devolves on the party seeking to enforce it. Here the insurance company is not seeking to enforce the contracts; on the contrary, it is seeking to avoid their performance. It is petitioner who is seeking to enforce them even as fraud or mistake is not alleged, Accordingly, the insurance company was under no obligation to prove that the terms of the insurance contracts were fully explained to the other party.

9) Q: The policy of insurance upon his life, with a face value of P100,000.00 was assigned by Jose, a married man with two (2) legitimate children, to his nephew, as security for a loan of P50,000. He did not give the insurer any written notice of such assignment despite the explicit provision to that effect in the policy. Jose died. Upon the claim on the policy by the assignee, the insurer refused to pay on the ground that it was not notified of the assignment. On the other hand, the heirs of Jose contend that Y is not entitled to any amount under the policy because the assignment without due notice to the insurer was void. Resolve the issues.

A: A life insurance is assignable. A provision, however in the policy stating that written notice of such an assignment should be given to the insurer is valid (Secs. 181-182, Insurance Code). The failure of the notice of assignment would thus preclude the assignee from claiming rights under the policy. The failure of notice did not, however, avoid the policy; hence upon the death of Jose, the proceeds would in the absence of a designated beneficiary, go to the estate of the insured. The estate in turn, would be liable for the loan of P50,000.00 owing in favor of Y.

10) Q:X applied for insurance. He informed Y, the insurance agent, that he had tuberculosis. Y filled the application for life insurance but did not state X’s illness. X died, is the insurer liable?

A: Yes. The insurer is liable as any information material to the risk, either possessed by the agent at the time of the transaction or acquired by him before its completion. The knowledge of the agent is deemed to be the knowledge of the principal insofar as the transaction is concerned even though the information is not communicated to the principal at all.

11) Q:During the occasion of a robbery, Juan suffered nine stab wounds which eventually caused his death. He was insured under a Life Insurance procured from ABC Insurance Corporation. A stipulation in the policy provides that the insured shall be entitled to P5000 “if the death of the insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident and independently of all other causes” The clause, however, expressly provided that it would not apply “where the death resulted from an injury inflicted intentionally by a third party” His widow, the beneficiary, sought to recover from ABC Insurance Corporation. The latter however, rejected the claim of said beneficiary. Was the insurer correct in rejecting such claim?

A: Yes. Where the provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is controlling. If the injuries suffered by the insured clearly resulted from the intentional act of a third person, the insurer is relieved from liability as stipulated.

Whether the robbers had the intent to kill or merely scare the victim or to wound off any defense he might offer, it cannot be denied that the act itself of inflicting the injuries was intentional. (BIAGTAN VS. INSULAR LIFE ASSURANCE)

12) Q:A was a watchman at the premises of ABC Co. He was insured with XYZ Insurance Corp with a supplementary Accidental Benefit Clause. A robbery was going on in a house nearby and the policeman ho responded to the call asked A to accompany him to the house where said robbery was going on. While A and the policeman were standing at the gate of the house, a shot was fired by one of the robbers. The bullet ricocheted and hit A. As a result of which A died. Can his heirs as beneficiaries recover on the policy?

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A: Yes. The killing of the insured was not intentional for there is a possibility that the malefactor had fired the shot merely to scare way people around for his on protection and not necessarily to kill or hit the victim. The happening was a pure accident on the part of the victim-insured. In fact, the could either have been the policeman or A. (CALANOC VS. CA)

13) Q:ABC Motor Supply sent its armored car to withdraw money from X Bank. A, the treasurer of the company was accompanied by Boy and George, the security guards assigned to it by Y Security Agency. When the car reached Quirino Avenue, Boy and George announced a holdup. Because they were armed, A, helplessly gave the P1 Million to Boy and George. ABC Motor Supply was insured with DEF Insurance Corporation. However, the policy provides that the insurer shall not be liable if caused by the criminal acts of the employees of the insured.

Because of their confession to the commission of the crime, the RTC convicted Boy and George for violation of P.D. No. 552. ABC Motor Supply now wants to collect on the policy. Can it do so?

A: No. The stipulation in the policy expressly excludes from the protection and coverage losses arising from the criminal acts of persons granted or having unrestricted access to ABC’s money. Boy and George together with the treasurer A, were the authorized representatives of ABC in respect to the transfer of money from the bank to its office. (FORTUNE INSURANCE VS. CA)

14) Q:The lease contract provides that the “ lessee shall not insure against fire the chattels, goods, merchandise or any other fixture in the leased premises without first obtaining the consent and written approval of the lessor and if such insurance is procured without obtaining the consent of the lessor then the policy is deemed assigned and transferred to the lessor for its own benefit.” In case a fire breaks out, may the lessor recover on the policy assuming that the fire insurance was procured without its approval?

A: No. The lessor does not have any insurable interest in the goods and merchandise inside the leased premises. The insurable interest over said goods remained with the lessee. The automatic assignment of the policy to the lessor is void for being contrary to law and or public policy. The proceeds of the fire insurance rightfully belong to the lessee. (CHA VS. CA)

15) Q:XYZ Petroleum Corp entered into a contract of affreightment with ABC Transportation Lines for a period of one year whereby the said common carrier agreed to transport XYZ’s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, ABC Transport Lines took on board its vessel, MT MaySun, the industrial fuel oil of XYZ Corp to be delivered to its Oil Terminal in Zamboanga. The shipper was insured with Mabuhay Insurance Corp.

Unfortunately, the vessel sank one early morning near Panay Gulf. Mabuhay Insurance then paid XYZ the amount of P1 Million, the value of the lost cargo. When Mabuhay sought to recover from ABC Transport Lines, the latter contended that the payment by Mabuhay to XYZ the value of the lost cargo operates as a tacit recognition that its vessel was seaworthy. Was ABC Transport Lines correct?

A: No. The payment made by Mabuhay for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against XYZ under the marine insurance policy.  However, the same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by Mabuhay as to foreclose recourse against ABC Transport Lines for any liability under its contractual obligation as a common carrier.  The fact of payment grants the Mabuhay subrogatory right which enables it to exercise legal remedies that would otherwise be available to XYZ as owner of the lost cargo against ABC, the common carrier. (DELSAN TRANSPORT LINES VS.CA)

INSURANCE LAW INSURABLE INTEREST  A person who is interested in the safety and preservation of materials in his possession belonging to third parties because he stands either to benefit from their continued existence or to be prejudiced by their destruction, has an insurable interest thereon which is not necessarily limited to

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the extent of his liability to the owners thereof. A person having mere right of possession of property may insure it to its full value and in his own name, even when he is not responsible for its safekeeping. (ANG KA YU vs. PHOENIX ASSURANCE CO. LTD 1CAR 2)  

 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 Nilo Cha and Stella Uy-Cha (herein copetitioners), The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured. (SPOUSES CHA vs. CA, 277 SCRA 690) 

 The rationale of a group insurance policy of mortgagors, otherwise known as the "mortgage redemption insurance," is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. (GREPALIFE VS. CA & LEUTERIO) SUBROGATION  The insurer can only be subrogated to only such rights as the insured may have. However if the insured, after receiving payment from the insurer, releases the wrongdoer who caused the loss, the insurer loses his rights against the latter. In such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the release was made with the consent of the insurer. (MANILA MAHOGANY MANUFACTURING CORP. vs. CA, 154 SCRA 650) 

 Subrogation is a normal incident of indemnity insurance Upon payment of the loss, the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the third person whose negligence or wrongful act caused the loss.The right of subrogation is of the highest equity. The loss in the first instance is that of the insured but after reimbursement or compensation, it becomes the loss of the insurer.When the insurance company pays for the loss, such payment operates as an equitable assignment to the insurer of the property and all remedies which the insured may have for the recovery thereof. That right is not dependent upon, nor does it grow out of, any privity of contract, or upon written assignment of claim, and payment to the insured makes the insurer an assignee in equity. (MALAYAN INSURANCE VS. CA) 

 There are a few recognized exceptions to this rule on subrogation. For instance, if the assured by his own act releases the wrongdoer or third party liable for the loss or damage, from liability, the insurer's right of subrogation is defeated. Similarly, where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's claim for loss, the settlement is binding on both the assured and the insurer, and the latter cannot bring an action against the carrier on his right of subrogation. And where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary payment", the former has no right of subrogation against the third party liable for the loss. (PAN MALAYAN INSURANCE CORP. VS. CA) INCONTESTABILITY CLAUSE  Section 48 of the Insurance Code precludes the insurer from raising the defense 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 2 years during the insured’s lifetime. The phrase “during the lifetime” in section 48 means that the policy is no longer considered in force after the insured has died. The key phrase in section 48 is for a period of 2 years. The insurer has 2 years from the date of the issuance of the contract or its last reinstatement within which to contest the policy whether or not the insured still lives within such period. (TAN vs. CA 174 SCRA 403) MISCONDUCT OF INSURANCE AGENT  Where the applicant signs the application in blank and authorizes the agent of the insurance company to fill up the blank spaces for him, he made them his own agent for that purpose and he is responsible for their acts in that connection. If they falsified the answers for him, he could not

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evade the responsibility for the application being falsified. (INSURANCE LIFE ASSURANCE CORP. vs. FELICIANO, 74PHIL 468) MARINE INSURANCE  The fact that the subject matter insured was loaded on two different barges did not make the contract several and divisible as to the items insured, where it was shown that the items insured were not separately valued or separately insured and only one premium was paid for the entire shipment. (ORIENTAL ASSURANCE CORP. vs. CA 200 SCRA459) 

 The fact that the unseaworthiness of the ship was unknown to the insured is immaterial in ordinary marine insurance and may not be used as a defense to recover on the policy. The cargo owner is required to look for a common carrier that keeps its vessels seaworthy. In the absence of stipulation that the insurer answers for perils of the ship, insurance cannot be recovered on losses from perils of the ship. (ROQUE vs. IAC, 139SCRA 597) 

 Under an all-risks policy, it is 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. An all-risks coverage extends all damages/ losses suffered by the insured cargo except a.) loss or damage or expense proximately caused by delay; b) loss or damage or expense proximately caused by the inherent vice or nature of the subject matter insured. Also it covers all losses except such as arising from the fraud of the insured. (FILIPINO MERCHANTS INSURANCE CO. vs. CA, 179 SCRA 638) DOUBLE INSURANCE 

 The insurer may not recover under an insurance policy if he has violated the conditions of the policy to the effect that he did not reveal the existence of other insurance policies over the same properties as required by the warranty appearing on the face of the policy. (UNION MANUFACTURING CO. INC. vs. PHILIPPINE GURANTY CO. INC., 47 SCRA 271) REINSURANCE  In an action on a contract of reinsurance, as a general rule, the reinsurer is entitled to avail itself of every defense which the reinsured might urge in an action by the person originally insured. (GIBSON vs. REVILLA, 92 SCRA 219) IMPLIED WARRANTY OF SEAWORTHINESS   In every voyage policy of marine insurance, there is an implied warranty that the vessel is in all respect seaworthy, and such warranty can be excluded only by clear provisions of the policy. (PHILIPPINE AMERICAN GENERAL INSURANCE CO. vs. CA 273 SCRA 262) 

AUTHORIZED DRIVER CLAUSE   The main purpose of the authorized driver clause is that a person other than the insured owner who drives the car with his person must be duly licensed and not disqualified to drive a car.Where a car is admittedly unlawfully and wrongfully taken without the owner’s consent, such taking constitutes or partakes the nature of theft for purposes of recovery under the insurance policy. (VILLACORTA vs. INSURANCE COMMISSION, 100 SCRA 467)  The requirement in an “authorized driver clause” that the driver be permitted in accordance with the licensing or other law or regulations to drive the motor vehicle and is not disqualified from driving such motor vehicle by order of a court of law or by reason of an enactment or regulation in that behalf applies only when the driver is driving under the insured’s order or with his permission. It does not apply when the person driving is the insured himself. (PALERMO vs. PYRAMID INSURANCE CO. INC., 161 SCRA 677) LIFE INSURANCE  Where a life insurance policy is made payable to one of the heirs of the person whose life is insured, the proceeds of the policy on the death of the insured belong exclusively to the beneficiary and not to the estate of the person whose life was insured and such proceeds are his individual property and not the property of the heirs of the person whose life was insured. (DEL VAL vs. DEL VAL, 29 PHIL 534) 

 The proceeds of a life insurance policy payable to the insured person’s estate, on which the premiums were paid by the conjugal partnership, constitute community property and belong one-half to the husband exclusively, and the other half to the wife. If the premiums were paid partly with paraphernal and partly conjugal funds, the proceeds are in like proportion, paraphernal in part and conjugal in part. (BPI vs. POSADAS, 56 PHIL 215) 

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 According to the Article 2012 of the New Civil Code that any person who is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation to him. Both are founded upon the same consideration which is liberality. (INSULAR LIFE vs. EBRADO 80 SCRA 181) CASUALTY INSURANCE  

 Where the contract provides for indemnity against liability to third persons, then third persons to whom the insured is liable, can sue directly the insurer upon the occurrence of the injury or event upon which the liability depends. The purpose is to protect the injured person against the insolvency of the insured who causes such injury and to give him a certain beneficial interest in the proceeds of the policy. It is as if such injured person were especially named in person. (SHAFER vs. JUDGE, RTC, 167 SCRA 386) COMPULSORY MOTOR VEHICLE LAW INSURANCE  Section 378 of the Insurance Code has established the following rules under the “no fault indemnity provision” 1.) a claim maybe made against one motor vehicle only; 2) if the victim is an occupant of a vehicle, the claim shall lie against the insurer of the motor vehicle in which he is riding, mounting, dismounting from; 3) in any other case [i.e.] if the victim was not an occupant of the vehicle, the claim shall lie against the insurer of the directly offending vehicle; 4) in all cases, the right of the party paying the claim to recover the owner of the vehicle responsible for the accident shall be maintained. (PERLA COMPANIA DE SEGURO INC. vs. ANCHETA 164 SCRA 144)