ONLINE MATERIAL IN COMMERCIAL LAW REVIEW / 1.

INSTRUCTIONS
Please read the provisions and, if your reference books so provide, the annotations of the
INSURANCE CODE OF THE PHILIPPINES. It is suggested that, since you belong to a
review class, you spend only a maximum of four (4) days, or until April 22, 2020, to
completely read the material.

You are, thereafter, required to answer the following problems. Your answers shall be made
via a Word Document that you shall submit via email to cledera.h@yahoo.com. When you so
submit such answers, please make sure you send your email with a carbon copy or back
carbon copy addressed to you. This is to ensure that your mail. Your deadline for the
submission of answers is April 23, 2020.

QUESTIONS

1.) On June 21, 2008, Yate took out a life insurance policy on her life in the amount of PhP
10 million and named her husband Vandy and daughter as joint irrevocable beneficiaries.
Before the policy was issued and the premiums were paid, Yate underwent a medical
checkup with a physician accredited by the insurer, and the only result found was that she
was suffering from high blood pressure. Yate was previously diagnosed by a private
physician of having breast cancer which she did not disclose to the insurer in her application,
nor to the insurer's accredited physician because by then, she was told that she was already
cancer-free after undergoing surgery which removed both her breasts. She was later
diagnosed with psychotic tendency that graduated into extreme despondency. She was found
dead hanging in her closet 36 months after the issuance of the policy. The police authorities
declared it to be a case of suicide. The policy did not include suicide as an excepted risk.

(a) Can the insurer raise the issue of failure to disclose that she had cancer as a cause
for denying the claim of the beneficiaries?

(b) Are the beneficiaries entitled to receive the proceeds of the life insurance
notwithstanding the fact that the cause of death was suicide?

2.) In January 2016, Mr. H was issued a life insurance policy by XYZ Insurance Co., wherein
his wife, Mrs. W, was designated as the sole beneficiary. Unknown to XYZ Insurance Co.,
however, Mr. H had been previously diagnosed with colon cancer, the fact of which Mr. H had
concealed during the entire time his insurance policy was being processed.

In January 2019, Mr. H committed suicide. Due to her husband's death, Mrs. W, as
beneficiary, filed a claim with XYZ Insurance Co. to recover the proceeds of the late Mr. H's
life insurance policy. However, XYZ Insurance Co. resisted the claim, contending that: 1. the
policy is void ab initio because Mr. H fraudulently concealed or misrepresented his medical
condition, i.e., his colon cancer; and 2. as an insurer in a life insurance policy, it cannot be
held liable in case of suicide.

Rule on each of XYZ Insurance Co.'s contentions.

3.) Enrique obtained from Seguro Insurance Company a comprehensive motor vehicle
insurance to cover his top of the line Aston Martin. The policy was issued on March 31, 2010
and, on the same date, Enrique paid the premium with a personal check postdated April 6,
2010. On April 5, 2010, the car was involved in an accident that resulted in its total loss. On
April 10, 2010, the drawee bank returned Enrique’s check with the notation ―”Insufficient
funds.” Upon notification, Enrique immediately deposited additional funds with the bank and
asked the insurer to redeposit the check. Enrique thereupon claimed indemnity from the
insurer.

Is the insurer liable under the insurance coverage? Why or why not?

4.) Terrazas de Patio Verde, a condominium building, has a value of P50 Million. The owner
insured the building against fire with three (3) insurance companies for the following amounts:
Northern Insurance Corp. – P20 Million Southern Insurance Corp. – P30 Million Eastern
Insurance Corp. – P50 Million

(A) Is the owner’s taking of insurance for the building with three (3) insurers valid?
Discuss.

(B) The Building was totally razed by fire. If the owner decides to claim from Eastern
Insurance Corp. only P50 Million, will the claim prosper? Explain.
5.) X borrowed from CCC Bank. She mortgaged her house and lot in favor of the bank. X
insured her house. The bank also got the house insured.

(A) Is this double insurance? Explain your answer.

(B) Is this legally valid? Explain your answer.

(C) In case of damage, can X and CCC Bank separately claim for the insurance
proceeds? Explain.

6.) To secure a loan of P10 million, Mario mortgaged his building to Armando. In accordance
with the loan arrangements, Mario had the building insured with First Insurance Company for
P10 million, designating Armando as the beneficiary. Armando also took an insurance of the
building upon his own interest with Second Insurance Company for P5 million. The building
was totally destroyed by fire, a peril insured against under both insurance policies. It was
subsequent determined that the fire had been intentionally started by Mario and that in
violation of the loan agreement, he had been storing inflammable materials in the building.

(A) How much, if any, can Armando recover from either or both insurance companies?
Discuss fully.

7.) On January 1, 2000, Antonio Rivera secured a life insurance from SOS Insurance Corp.
for P1 Million with Gemma Rivera, his adopted daughter, as the beneficiary. Antonio Rivera
died on March 4, 2005 and in the police investigation, it was ascertained that Gemma Rivera
participated as an accessory in the killing of Antonio Rivera.

Can SOS Insurance Corp. avoid liability by setting up as a defense the participation of
Gemma Rivera in the killing of Antonio Rivera? Discuss with reasons.

8.) ELP Insurance, Inc. issued Marine Policy No. 888 in favor of FCL Corp. to insure the
shipment of 132 bundles of electric copper cathodes against all risks. Subsequently, the
cargoes were shipped on board the vessel “M/V Menchu” from Leyte to Pier 10, North
Harbor, Manila.
Upon arrival, FCL Corp. engaged the services of CGM, Inc. for the release and withdrawal of
the cargoes from the pier and the subsequent delivery to its warehouses/plants in Valenzuela
City. The goods were loaded on board twelve (12) trucks owned by CGM, Inc., driven by its
employed drivers and accompanied by its employed truck helpers. Of the twelve (12) trucks
en route to Valenzuela City, only eleven (11) reached the destination. One (1) truck, loaded
with eleven (11) bundles of copper cathodes, failed to deliver its cargo.

Because of this incident, FCL Corp. filed with ELP Insurance, Inc. a claim for insurance
indemnity in the amount of P1,500,000.00. After the requisite investigation and adjustment,
ELP Insurance, Inc. paid FCL Corp. the amount of P1,350,000.00 as insurance indemnity.

ELP Insurance, Inc., thereafter, filed a complaint for damages against CGM, Inc. before the
Regional Trial Court (RTC), seeking reimbursement of the amount it had paid to FCL Corp.
for the loss of the subject cargo. CGM, Inc. denied the claim on the basis that it is not privy to
the contract entered into by and between FCL Corp. and ELP Insurance, Inc., and hence, it is
not liable therefor.

If you are the judge, how will you decide the case?

9.) On May 13, 1996, PAM, Inc. obtained a P15,000,000.00 fire insurance policy from
Ilocano Insurance covering its machineries and equipment effective for one (1) year or until
May 14, 1997. The policy expressly stated that the insured properties were located at “Sanyo
Precision Phils. Building, Phase III, Lots 4 and 6, Block 15, PEZA, Rosario, Cavite.” Before its
expiration, the policy was renewed on “as is” basis for another year or until May 13, 1998.
The subject properties were later transferred to Pace Factory also in PEZA. On October 12,
1997, during the effectivity of the renewed policy, a fire broke out at the Pace Factory which
totally burned the insured properties.

The policy forbade the removal of the insured properties unless sanctioned by Ilocano.
Condition 9(c) of the policy provides that “the insurance ceases to attach as regards the
property affected unless the insured, before the occurrence of any loss or damage, obtains
the sanction of the company signified by endorsement upon the policy x x x (c) if the property
insured is removed to any building or place other than in that which is herein stated to be
insured.” PAM claims that it has substantially complied with notifying Ilocano through its sister
company, the RBC, which, in fact, referred PAM to Ilocano for the insurance coverage.

Is Ilocano liable under the policy? Discuss.

10.) On September 25, 2013, Danny Marcial (Danny) procured an insurance on his life with a
face value of P5,000,000.00 from RN Insurance Company (RN), with his wife Tina
Marcial(Tina) as sole beneficiary. On the same day, Danny issued an undated check to RN
for the full amount of the premium. On October 1, 2013, RN issued the policy covering
Danny’s life insurance. On October 5, 2013, Danny met a tragic accident and died. Tina
claimed the insurance benefit, but RN was quick to deny the claim because at the time of
Danny’s death, the check was not yet encashed and therefore the premium remained unpaid.

a. Is RN correct? Explain.

b. Will your answer be the same if the check is dated October 15, 2013?

11.) Carlo and Bianca met in the La Boracay festivities. Immediately, they fell in love with
each other and got married soon after. They have been cohabiting blissfully as husband and
wife, but they did not have any offspring. As the years passed by, Carlo decided to take out
an insurance on Bianca’s life for P1,000,000.00 with him (Carlo) as sole beneficiary, given
that he did not have a steady source of income and he always depended on Bianca both
emotionally and financially. During the term of the insurance, Bianca died of what appeared
to be a mysterious cause so that Carlo immediately requested for an autopsy to be
conducted. It was established that Bianca died of a natural cause. More than that, it was also
established that Bianca was a transgender all along – a fact unknown to Carlo.

Can Carlo claim the insurance benefit? Explain

12.) On May 26, 2014, Jess insured with Jack Insurance (Jack) his 2014 Toyota Corolla
sedan under a comprehensive motor vehicle insurance policy for one year. On July 1, 2014,
Jess’ car was unlawfully taken. Hence, he immediately reported the theft to the Traffic
Management Command (TMC) of the Philippine National Police (PNP), which made Jess
accomplish a complaint sheet as part of its procedure. In the complaint sheet, Jess alleged
that a certain Ric Silat(Silat) took possession of the subject vehicle to add accessories and
improvements thereon. However, Silat failed to return the subject vehicle within the agreed 3-
day period. As a result, Jess notified Jack of his claim for reimbursement of the value of the
lost vehicle under the insurance policy. Jack refused to pay claiming that there is no theft as
Jess gave Silat lawful possession of the car.

Is Jack correct? Discuss.

13.) Absolute Timber Co. (ATC) has been engaged in the logging business in lsabela. To
secure one of its shipments of logs to be transported by Andok Shipping Co., ATC purchased
a marine policy with an “all risks” provision. Because of a strong typhoon then hitting Northern
Luzon, the vessel sank and the shipment of logs was totally lost. ATC filed its claim, but the
insurer denied the claim on several grounds, namely: (1) the vessel had not been seaworthy;
(2) the vessel’s crew had lacked sufficient training; (3) the improper loading of the logs on
only one side of the vessel had led to the tilting of the ship to that side during the stormy
voyage; and (4) the extremely bad weather had been a fortuitous event. ATC now seeks
your legal advice to know if its claim was sustainable.

What is your advice? Explain your answer.

14.) Jason is the proud owner of a newly-built house worth P10 million. As a protection
against any possible loss or damage to his house, Jason applied for a fire insurance policy
thereon with Shure Insurance Corporation (Shure) on October 11, 2016 and paid the
premium in cash. It took the company a week to approve Jason’s application. On October 18,
2016, Shure mailed the approved policy to Jason which the latter received five (5) days later.
However, Jason’s house had been razed by fire which transpired a day before his receipt of
the approved policy. Jason filed a written claim with Shure under the insurance policy. Shure
prays for the denial of the claim on the ground that the theory of cognition applies to contracts
of insurance.

Decide Jason’s claim with reasons.

15.) X insured his life for P20 million. X, plays golf and regularly exercises everyday, hence
is considered in good health. He did not know, however, that his frequent headache is really
caused by his being hypertensive. In his application form for a life insurance for himself, he
did not put a check to the question if he is suffering from hypertension, believing that because
of his active lifestyle, being hypertensive is a remote possibility. While playing golf one day, X
collapsed at the fairway and was declared dead on arrival at the hospital. His death certificate
stated that X suffered a massive heart attack.

[a] Will the beneficiary of X be entitled to the proceeds of the life insurance under the
circumstances, despite the non-disclosure that he is hypertensive at the time of application?
Explain.
 [b] If X died in an accident instead of a heart attack, would the fact of X’s failure to
disclose that he is hypertensive be considered as material information? Explain.

PLEASE DO NOT FAIL TO EMAIL YOUR ANSWERS ON OR BEFORE APRIL 23, 2020.