party to the original contract, and any act of his, prior to

Great Pacific Life Insurance Corp. v. Court of the loss, which would otherwise avoid the insurance, will
have the same effect, although the property is in the
Appeals hands of the mortgagee, but any act which, under the
contract of insurance, is to be performed by the
mortgagor, may be performed by the mortgagee therein
G.R.No. 113899, 13 October 1999, 316 SCRA 677 named, with the same effect as if it had been performed
by the mortgagor.”
FACTS:
The insured Dr. Wilfredo Leuterio did not cede to the
mortgagee all his rights or interests in the insurance.
There was an existing group life insurance executed
When Grepalife denied payment, DBP collected the debt
between Great Pacific Life Assurance (Grepalife) and the
from the mortgagor and took the necessary action of
Development Bank of the Philippines (DBP). Grepalife
foreclosure on the residential lot of Dr. Wilfredo Leuterio.
agreed to insure the lives of eligible housing loan
mortgagors of DBP. In November 1983, Wilfredo Leuterio,
mortgagor of DBP applied to be a member of the group Insured may be regarded as the real party in interest,
life insurance. He filled out a form where he indicated he although he has assigned the policy for the purpose of
never consulted any physician regarding any illness collection, or has assigned as collateral security any
(heart condition etc) and that he is in good health. He was judgment he may obtain.
eventually included in the group life insurance and he was
covered for the amount of his indebtedness (P86,200.00).
Sps. Nilo and Stella Cha v. Court of Appeals
In August 1984, Wilfredo died. DBP submitted a death
claim but it was denied by Grepalife as it insisted that
Wilfredo actually concealed that he was suffering from G.R. No. 124520, 18 August 1997, 277 SCRA 690
hypertension at the time of his insurance application.
Grepalife relied on the statement made by the doctor who FACTS:
issued Wilfredo’s death certificate wherein it was stated
that Wilfredo’s immediate cause of death was massive
Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered
cerebral hemorrhage secondary to hypertension or
into a lease contract with CKS Development Corporation,
hypertension as a “possible cause of death”.
as lessor, on 5 October 1988. One of the stipulations of
the 1 year lease contract states that “The LESSEE shall
Since Grepalife refused to pay the insurance claim filed not insure against fire the chattels, merchandise, textiles,
by DBP, Medarda Leuterio (widow) sued Grepalife. goods and effects placed at any stall
Grepalife assailed the suit and insisted that Medarda is or store or space in the leased premises without first
not a proper party in interest. The lower court ruled in obtaining the written consent and approval of the
favor of Medarda and the court ordered Grepalife to pay LESSOR. If the LESSEE obtain(s) the insurance thereof
the amount of the insurance to DBP. The Court of Appeals without the consent of the LESSOR then the policy is
affirmed this decision in 1993. Grepalife appealed to the deemed assigned and transferred to the LESSOR for its
Supreme Court. In 1995, pending resolution of the case own benefit” Notwithstanding the above stipulation in the
in the SC, DBP foreclosed the property of Medarda. lease contract, the Cha spouses insured against loss by
fire their merchandise inside the leased premises for
ISSUE: 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
Whether or not DBP has insurable interest as creditor.
premises. When CKS learned of the insurance earlier
procured by the Cha spouses (without its consent), it
HELD: wrote the insurer (United) a demand letter asking
that the proceeds of the insurance contract (between the
YES. In this type of policy insurance, the mortgagee is Cha spouses and United) be paid directly to CKS, based
simply an appointee of the insurance fund, such loss- on its lease contract with the Cha spouses. United refused
payable clause does not make the mortgagee a party to to pay CKS. Hence, the latter filed a complaint against the
the contract. Cha spouses and United. On 2 June 1992, the Regional
Trial Court, Branch 6, Manila, rendered a decision
Section 8 of the Insurance Code provides: “Unless the ordering United to pay CKS the amount of P335,063.11
policy provides, where a mortgagor of property effects and the Cha spouses to pay P50,000.00 as exemplary
insurance in his own name providing that the loss shall be damages, P20,000.00 as attorney’s fees and costs of suit.
payable to the mortgagee, or assigns a policy of insurance On appeal, the Court of Appeals in CA GR CV 39328
to a mortgagee, the insurance is deemed to be upon the rendered a decision dated 11 January 1996, affirming the
interest of the mortgagor, who does not cease to be a trial court decision, deleting however the awards for
exemplary damages and attorney’s fees. A motion for
reconsideration by Manila Bankers Life Insurance Corporation vs Aban
United was denied on 29 March 1996. The spouses Cha G.R. No. 175666 July 29, 2013
and United filed the petition for review on certiorari.
Facts: On July 3, 1993, Delia Sotero (Sotero) took out a
ISSUE: life insurance policy from Manila Bankers Life Insurance
Corporation (Bankers Life), designating respondent
Whether or not the CKS has insurable interest because Cresencia P. Aban (Aban), her niece, as her beneficiary.
the spouses Cha violated the stipulation on the lease Petitioner issued Insurance Policy No. 747411 (the
contract. policy), with a face value of P 100,000.00, in Sotero’s
favor on August 30, 1993, after the requisite medical
examination and payment of the insurance premium. On
RULING: April 10, 1996, when the insurance policy had been in
force for more than two years and seven months, Sotero
NO. CA set aside. Awarding the proceeds to spouses died. Respondent filed a claim for the insurance proceeds
Cha. on July 9, 1996. Petitioner conducted an investigation into
Under Sec. 18 of the Insurance Code of the Philippines the claim, and came out with the following findings: 1.
which provides that “No contract or policy of insurance on Sotero did not personally apply for insurance coverage,
property shall be enforceable except for the benefit of as she was illiterate; 2. Sotero was sickly since 1990; 3.
some person having an insurable interest in the property Sotero did not have the financial capability to pay the
insured”. insurance premiums on Insurance Policy No. 747411; 4.
Sotero did not sign the July 3, 1993 application for
A non-life insurance policy such as the fire insurance insurance; and 5. Respondent was the one who filed the
policy taken by petitioner-spouses over their merchandise insurance application, and x x x designated herself as the
is primarily a contract of indemnity. Insurable interest in beneficiary. For the above reasons, petitioner denied
the property insured must exist a t the time the insurance respondent’s claim on April 16, 1997 and refunded the
takes effect and at the time the loss occurs. The basis of premiums paid on the policy.
such requirement of insurable interest in property insured
is based on sound public policy: to prevent a person from Issue: Whether or not Manila Bankers is barred from
taking out an insurance policy on property upon which he denying the insurance claims based on fraud or
has no insurable interest and collecting the proceeds of concealment.
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. Held: Yes. The “incontestability clause” is a provision in
law that after a policy of life insurance made payable on
In Sec. 25 of the same Code states, “Every stipulation in the death of the insured shall have been in force during
a policy of Insurance for the payment of loss, whether the the lifetime of the insured for a period of two (2) years from
person insured has or has not any interest in the property the date of its issue or of its last reinstatement, the insurer
insured, or that the policy shall be received as proof of cannot prove that the policy is void ab initio or is
such interest, and every policy executed by way of gaming rescindible by reason of fraudulent concealment or
or wagering, is void”. misrepresentation of the insured or his agent.

Also under Sec. 17 of the same Code provides that the

measure of an insurable interest in property is the extent The purpose of the law is to give protection to the insured
to which the insured might be damnified by loss of injury or his beneficiary by limiting the rescinding of the contract
thereof. of insurance on the ground of fraudulent concealment or
misrepresentation to a period of only two (2) years from
the issuance of the policy or its last reinstatement.
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 The insurer is deemed to have the necessary facilities to
rightfully belong to the spouses. The liability of the Cha discover such fraudulent concealment or
spouses to CKS for violating their lease contract in that misrepresentation within a period of two (2) years. It is not
Cha spouses obtained a fire insurance policy over their fair for the insurer to collect the premiums as long as the
own merchandise, without the consent of CKS, is a insured is still alive, only to raise the issue of fraudulent
separate and distinct issue which we do not resolve in this concealment or misrepresentation when the insured dies
case. in order to defeat the right of the beneficiary to recover
under the policy.
MANILA BANKERS VS ABAN (G.R. NO. 175666 JULY
29, 2013)
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 To reinstate a policy means to restore the same
effectivity of a life insurance contract and while the insured to preium-paying status after it has been permitted to
is alive – to discover or prove that the policy is void ab lapse. Both the policy contract and application for
initio or is rescindible by reason of the fraudulent reinstatement provide for specific conditions for the
concealment or misrepresentation of the insured or his reinstatement of a lapsed policy.
agent. After the two-year period lapses, or when the According to the Application for Reinstatement,
insured dies within the period, the insurer must make the policy would only be considered reinstated upon the
good on the policy, even though the policy was obtained approval of the application by Insular Life during the
by fraud, concealment, or misrepresentation. This is not applicant’s “lifetime and good health” and whatever
to say that insurance fraud must be rewarded, but that amount the application paid in connection was considered
insurers who recklessly and indiscriminately solicit and to be a deposit only until approval of said application.
obtain business must be penalized, for such recklessness Eulogio’s death rendered impossible full
and lack of discrimination ultimately work to the detriment compliance with the conditions for reinstatement of policy
of bona fide takers of insurance and the public in general. even though, before his death, he managed to file his
application for reinstatement and deposit the amount for
Violeta R. Lalican v. Insular Life Assurance Co. Ltd. payment of his overdue premiums and interest thereon
Facts: with Malaluan. As expressly provided on the policy
Eulogio Lalican applied for an insurance policy contract, agents of Insular Life have no authority to
with the Insular Life amounting to Php 1,500,000. Under approve any application for reinstatement. They still had
the terms of the policy, Eulogio was to pay the premiums to turn over to Insular Life the application for reinstatement
on a quarterly basis, having a grace period of 31 days, for and accompanying deposit, for processing and approval
the payment of each premium subsequent to the first. If of the latter.
any premium was not paid on or before the due date, the
policy would be in default and if the premium remained
unpaid until the end of the grace period, the policy would
automatically lapse and become void.
Eulogio paid the premiums due on the first two
succeeding payment dates but failed to pay subsequent
premiums even after the lapse of the grace period thereby
rendering the policy void. He submitted an application for
reinstatement of policy through Josephine Malaluan, an
agent of Insular Life, together with the payment of the
unpaid premiums. However, the Insular Life notified him
that his application could not be processed because he
failed to pay the overdue interest of the unpaid premiums.
On Sept. 17, 1998, Eulogio submitted to
Malaluan’s house a second application for reinstatement
including the payment for the overdue interest as well as
for the premiums due for April and July of that year, which
was received by Malaluan’s husband on her behalf and
was thereby issued a receipt for the amount Eulogio
deposited. However, on that same day, Eulogio died of
cardio-respiratory arrest secondary to electrocution.
Violeta, Eulogio’s widow filed with the Insular Life
a claim for payment of the full proceeds of the policy but
the latter informed her that the claim could not be granted
since at the time of Eulogio’s death, his policy has already
lapsed and he failed to reinstate the same. Violeta
requested a reconsideration of her claim but the same
was also rejected. Therefore, she filed a complaint for
death claim benefits with the RTC alleging the unfair claim
settlement practice of Insular Life and its deliberate failure
to act with reasonable promptness on her insurance
claim. The trial court rendered a decision in favour of
Insular Life and after the former denied her motion for
reconsideration, she directly elevated her case to the
Supreme Court via the petition for review on Certiorari.
Issue:
Whether or not the policy of Eulogio was reinstated before
his death.
Ruling: