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Insurance 1

Insurance 1

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Lezlee Amor R. Escalante Insurance A. Concepts Defined 1. Contract of Insurance Mayer Steel Pipe vs Court of Appeals GR No. 124050, 1997-06-19 Facts: In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and MSPC-1022 Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). The pipes and fittings were checked by a third party inspector which certified that all pipes and fittings were in good condition. However when it reached Hongkong, it was discovered that a large amount of the goods were damage resulting to petitioners filingg an insurance claim against herein respondent. Nonetheless only a portion of the claim was indemnified due to the insurance surveyor’s report that the damage was due to factory defect which respondent claimed to be not covered by the insurance policy. Petitioner sought the payment of the balance Issue: Whether or not respondent is liable of indemnifying petitioner of the complete amount Ruling: In the case at bar, it was the shipper which filed a claim against the insurer. The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner Mayer. The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril. An "all risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured.Thus, when private respondents issued the "all risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. 2. Doing or Transacting an Insurance Business Phil Health Care Providers vs Commissioner of Intenal Revenue GR No. 167330, 2009-09-18 Facts: Petitioner is a domestic corporation whose primary purpose is [t]o establish, maintain, conduct and operate a prepaid group practice health care delivery system or a health maintenance organization to take care of the sick and disabled persons enrolled in the health care plan and to provide for the administrative, legal, and financial responsibilities of the organization. Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by its duly licensed physicians, specialists and other professional technical staff participating in the group practice health delivery system at a hospital or clinic owned, operated or accredited by it. On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent petitioner a formal demand letter and the corresponding assessment notices demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of P224,702,641.18. The deficiency [documentary stamp tax (DST)] assessment was imposed on petitioners health care agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code. Issue: Whether or not Petitioner is an Insurance Business and thus liable to pay for Documentary Stamp Tax Ruling: Petitioner was formally registered and incorporated with the Securities and Exchange Commission and is engage in the dispensation of medical services to those that enter into the health care agreement. Individuals enrolled in its health care program pay an annual membership fee. Membership is on a year-to-year basis. To avail of petitioners health care programs, the individual members are required to sign and execute a standard health care agreement embodying the terms and conditions for the provision of the health care services. The same agreement contains the various health care services that can be engaged by the enrolled member, i.e., preventive, diagnostic and curative medical services. Except for the curative aspect of the medical service offered, the enrolled member may actually make use of the health care services being offered by petitioner at any time. Petitioner is admittedly a Health Maintenance Organization [HMO]. Under RA 7875 (or The National Health Insurance Act of 1995), an HMO is an entity that provides, offers or arranges for coverage of designated health services needed by plan members for a fixed prepaid premium. As an HMO, petitioner is not engaged in the insurance business. Section 2 (2) of PD 1460 (otherwise known as the Insurance Code) enumerates what constitutes doing an insurance business or transacting an insurance business: a) making or proposing to make, as insurer, any insurance contract; b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. An insurance company is concerned primarily, if not exclusively, with risk and the consequences of its descent, not with service, or its extension in kind, quantity or distribution; with the unusual occurrence, not the daily routine of living. Hazard is predominant. Another and more compelling reason for holding that the service is not engaged in the insurance business is that absence or presence of assumption of risk or peril is not the sole test to be applied in determining its status. The question, more broadly, is whether, looking at the plan of operation as a whole, service rather than indemnity is its principal object and purpose. American courts have pointed out that the main difference between an HMO and an insurance company is that HMOs undertake to provide or arrange for the provision of medical services through participating physicians while insurance companies simply undertake to indemnify the insured for medical expenses incurred up to a pre-agreed limit. Lastly, it is significant that petitioner, as an HMO, is not part of the insurance industry. This is evident from the fact that it is not supervised by the Insurance Commission but by the Department of Health. The Insurance Commissioner in its letter confirmed that petitioner is not engaged in the insurance business and thus this determination of the commissioner must be accorded great weight. It is well-settled that the interpretation of an administrative agency which is tasked to implement a statute is accorded great respect and ordinarily controls the interpretation of laws by the courts. 3. Contract of Adhesion or Fine Print Rule Eternal Garden Memorial vs Phil American Life Insurance GR No. 166245, 2008 – 04 - 09 Facts: Respondent insurance company entered into a Creditor Group Life Policy agreement with Eternal Gardens Memorial. Under said policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis. As required under the said policy, Eternal submitted a list of all new lot purchasers, including the application of each purchaser and their corresponding unpaid balances. Included in this list is a certain John Chuang. When Chuang died, Eternal sent a letter, together with the pertinent papers, to Philamlife which served as an insurance claim for Chuang’s death. Philamlife required that Eternal submit certain documents relative to its insurance claim for Chuang’s death. Eternal transmitted said documents which Philamlife was able to received. However, after more than one year, Philamlife did not anymore reply to Eternal’s insurance claim. This prompted Eternal to demand the insurance claims. However, Philamlife denied the said claim, prompting Eternal to file a case before the RTC of Makati. Issue: Whether or not Philamlife assumed the risk of loss without approving the application. Ruling: YES. An insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application. The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous. Western Guaranty Corporation Vs. Court of Appeals 187 SCRA 677 Facts: Prescilla E. Rodriguez was struck by a De Dios passenger bus owned by respondent De Dios Transportation Co., Inc. driven by Walter Saga y Aspero The bus driver disregarded the stop signal given by the traffic police causing Priscilla thrown to the ground, hitting her forehead. She was hospitalized and her face was permanently disfigured causing her serious anxiety and moral distress. The bus was insured with Western Guaranty Corp. which provides in the policy a protection against third party liability. Prescilla Rodriguez filed a complaint for damages before the Regional Trial Court against De Dios and Walter Saga, De Dios transportation in turn filed a case against insurance carrier- Western Guaranty Corp. The trial court rendered decision in favor of Prescilla Rodriguez. On appeal, the Court of Appeals affirmed in toto the decision of the trial court. Petitioner Western Guaranty Petition for Review alleging that the Court of Appeals erred in holding petitioner liable to pay beyond the limit set forth in the Schedule of Indemnities. Issue: Whether or not Western Guaranty Corp. be held liable for loss of earnings, moral damages and attorney’s fees because these items are not included in the Schedule of Indemnities. Ruling: Yes, Western Guaranty Corp., is liable . Insurance Contract is a Contract of Adhesion, the terms of such contract are to be construed strictly against the party which prepared the contract. The Schedule of Indemnities does not purport to limit or to enumerate exhaustively, the species of bodily injury occurrence of which generate liability for petitioner Western. An examination of Section 1 entitled “Liability to the Public” quoted above, of the Master Policy issued by the petitioner Western shows that Section Defines the Scope of Liability of Insurer Western as well as the events which generates such liability. The Court resolve to deny the Petition for Review for lack of merit. 4. Parties in Insurance Contract Insurer and Insured (Sec 6), Beneficiary (Art 739 and 2012 of the NCC) Great Pacific Life Assurance Corp vs Court of Appeals 316 SCRA 677, 1999- 10- 13 Facts: Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning his test, attesting among others that he does not have any heart conditions and that he is in good health to the best of his knowledge. However, after about a year, Dr. Leuterio died due to “massive cerebral hemorrhage.” When DBP submitted a death claim to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim. Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for “Specific Performance with Damages.” Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP. Issue: Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor Ruling: Yes, Grepalife is liable. The rationale of a group of 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. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund. Such loss-payable clause does not make the mortgagee a party to the contract. The insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person, such as a mortgagee. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife. 5. Interpretation of Insurance Contracts Rizal Surety and Insurance Company vs Court of Appeals 336 SCRA 12, 2000-07-18 Facts: Rizal Surety & Insurance Company issued a fire insurance policy in favor of Transworld Knitting Mills, Inc. The subject policy stated that Rizal Surety is “responsible in case of loss whilst contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situated within own Compound xxx.” The policy also described therein the four-span building covered by the same. On Jan. 12, 1981, fire broke out in the compound, razing the middle portion of its four-span building and partly gutting the left and right sections thereof. A two-storey building (behind said four-span building) was also destroyed by the fire. Issue: Whether or not Rizal Surety is liable for loss of the two-storey building considering that the fire insurance policy sued upon covered only the contents of the four-span building Ruling: Both the trial court and the CA found that the so-called “annex” as not an annex building but an integral and inseparable part of the four-span building described in the policy and consequently, the machines and spare parts stored therein were covered by the fire insurance in dispute. So also, considering that the two-storey building aforementioned was already existing when subject fire insurance policy contract was entered into on Jan. 12, 1981, having been constructed some time in 1978, petitioner should have specifically excluded the said two-storey building from the coverage of the fire insurance if minded to exclude the same but if did not, and instead, went on to provide that such fire insurance policy covers the products, raw materials and supplies stored within the premises of Transworld which was an integral part of the four-span building occupied by Transworld, knowing fully well the existence of such building adjoining and intercommunicating with the right section of the four-span building. Also, in case of doubt in the stipulation as to the coverage of the fire insurance policy, under Art. 1377 of the New Civil Code, the doubt should be resolved against the Rizal Surety, whose layer or managers drafted the fire insurance policy contract under scrutiny. In Landicho vs. Government Service Insurance System, the Court ruled that “the terms in an insurance policy, which are ambiguous, equivocal or uncertain x x x are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where forfeiture is involved, and the reason for this is that the insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company.” American Home Assurance Company vs. Tantuco Enterprises G.R. No. 138941, 2001-10-08 Facts: Tantuco Enterprises, Inc. is a coconut oil milling and refining company. It owned two mills (the first oil mill and a new one), both located at its factory compound at Iyam, Lucena City . The two oil mills are separately covered by fire insurance policies issued by American Home Assurance Co. On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil mill. American Home rejected the claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the new oil mill was under Building No. 15 while the insurance coverage extended only to the oil mill under Building No. 5. Issue: Whether or not the new oil mill is covered by the fire insurance policy Ruling: In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to the insurance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider the policy of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be. Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. If the parties really intended to protect the first oil mill, then there is no need to specify it as new. Indeed, it would be absurd to assume that the respondent would protect its first oil mill for different amounts and leave uncovered its second one. B. Characteristics of Insurance Contract 1. Aleatory Insurance Pan Malayan Insurance Corporation vs Court of Appeals GR No. 81026, 1990-04-03 Facts: Petitioner Panmalay was an insurer of the car of CANLUBANG AUTOMOTIVE RESOURCE CORP. which was bumpt and damaged by the private respondent through its negligent driver. Petitioner PANMALAy paid the amount of insurance to the insured. Subrogated on the rights of the insured, petitioner demand payment from the private respondent who refused to pay the claim of the petitioner. Petitioner filed a complaint against private respondent before the RTC. Private respondent filed a motion to dismiss arguing that payment under the "own damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code, since indemnification thereunder was made on the assumption that there was no wrongdoer or no third party at fault. The RTC dismissed the complaint aswell as the motion for reconsideration and this was affirmed by the CA. Issue: Whether or not, the petitioner is allowed to recover the amount of insurance it had paid to the insured . Ruling: Yes, according to the Supreme Court, Art. 2207 of the civil code states that If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. This was founded on the well-settled principle of subrogation. If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured, the insurer, upon payment to the assured, will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. 2. Contracts is considered a risk – distributing Sps. Antonio A. Tibay and Violeta R. Tibay et al. vs. Court of Appeals and Fortune Life and General Insurance Co., Inc., G.R. No. 119655, 1996-05-24 Facts: Violeta R. Tibay and/or Nicolas Roraldo insured their 2-story residential building with Fortune Life and General Insurance Co., Inc. (FORTUNE) for the amount Php 600,000.00 with total premium of P2,983.50. Tibay only paid P600.00 for the period January 23, 1987 to January 23, 1988. On March 8, 1987, the insured building was completely burned. Two days after, Tibay paid the balance premium and on the same day, demanded payment she filed with FORTUNE a claim on the fire insurance policy. FORTUNE denied the claim of Violeta for violation of Policy Condition No. 2 and of Sec. 77 of the Insurance Code. Violeta and other petitioners filed a case for damages. The trial court adjudged FORTUNE liable for the insured value of the building and the personal properties. On appeal, the CA reversed the decision. Hence, a petition was raised to the SC. Issue: Whether or not a fire insurance policy is valid, binding and enforceable upon mere partial payment of premium. Ruling: Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. The consideration is the premium, which must be paid at the time and in the way and manner specified in the policy, and if not so paid, the policy will lapse and be forfeited by its own terms. In the desire to safeguard the interest of the assured, it must not be ignored that the contract of insurance is primarily a risk distributing device, a mechanism by which all members of a group exposed to a particular risk contribute premiums to an insurer. From these contributory funds are paid whatever losses occur due to exposure to the peril insured against. Each party therefore takes a risk: the insurer, that of being compelled upon the happening of the contingency to pay the entire sum agreed upon, and the insured, that of parting with the amount required as premium, without receiving anything therefor in case the contingency does not happen. To ensure payment for these losses, the law mandates all insurance companies to maintain a legal reserve fund in favor of those claiming under their policies. It should be understood that the integrity of this fund cannot be secured and maintained if by judicial fiat partial offerings of premiums were to be construed as a legal nexus between the applicant and the insurer despite an express agreement to the contrary. The SC denied the petition and assailed the decision of the CA. 3. Uberrima Fides Fieldmen's Insurance Co., Inc., vs. Mercedes Vargas Vda. De Songco, Et Al. and Court Of Appeals G.R. No. L-24833, 1968 – 09- 23 Facts: Federico Songco, a man of scant education being only a first grader, applied for a Common Carrier's Liability Insurance Policy for his private jeepney after being induced by agent Benjamin Sambat. After paying the annual premium, Fieldmen's Insurance issued the policy with effectivity on September 15, 1960 to September 15, 1961. On September 22, 1961, Songco renewed the policy coverage from October 15, 1961 to October 15, 1962. On October 29, 1961, the insured vehicle collided with a car leaving Songco and companions dead while Jose Manuel was injured. Fieldmen's Insurance declined to pay the insurance proceeds on the grounds of breach of warranty and condition in the policy. They alleged that the insured jeepney is not a common carrier. The surviving widow and children, as well as Jose Manuel prevailed in the lower court as well as in the CA. Thus a petition was filed in the SC. Issue: Whether or not the respondents are estopped from claiming the insurance proceeds on the grounds of breach of warranty and condition in the policy. Ruling: As much, if not much more so than the Qua Chee Gan decision, this is a case where the doctrine of estoppel undeniably calls for application. After petitioner Fieldmen's Insurance Co., Inc. had led the insured Federico Songco to believe that he could qualify under the common carrier liability insurance policy, and to enter into contract of insurance paying the premiums due, it could not, thereafter, in any litigation arising out of such representation, be permitted to change its stand to the detriment of the heirs of the insured. As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall the innocent party due to its injurious reliance, the failure to apply it in this case would result in a gross travesty of justice. The conclusion that inescapably emerges from the above is the correctness of the decision of respondent Court of Appeals sought to be reviewed. For, to borrow once again from the language of the Qua Chee Gan opinion: "The contract of insurance is one of perfect good faith (uberima fides) not for the insured alone,but equally so for the insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility." This is merely to stress that while the morality of the business world is not the morality of institutions of rectitude like the pulpit and the academe, it cannot descend so low as to be another name for guile or deception. Moreover, should it happen thus, no court of justice should allow itself to lend its approval and support. 4. Contract of Indemnity White Gold Marine Services, Inc., vs. Pioneer Insurance And Surety Corporation G.R. No. 154514, 2005-07-28 Facts: White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and Acceptance.Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage. Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter’s unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186 and 187 of the Insurance Code, while Pioneer violated Sections 299, 300 and 301 in relation to Sections 302 and 303, thereof. The Insurance Commission dismissed the complaint. The Court of Appeals affirmed the decision of the Insurance Commissioner. White Gold filed a petition in the SC. Issue: Whether or not Steamship Mutual is engaged in the insurance business in the Philippines. Ruling: Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure. Section 99 of the Insurance Code enumerates the coverage of marine insurance. Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured. In it, the members all contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their interest.17 Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense costs. A P & I Club is "a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members." By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business. The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission. 5. Personal Contract The Insular Life Assurance Company, Ltd., vs. Carponia T. Ebrado and Pascuala Vda. De Ebrado, G.R. No. L-44059, 1977-10-28 Facts: Buenaventura C. Ebrado, married to Pascuala Ebrado and with six legitimate children was living with his common-law wife Carponia T. Ebrado. They have two children. On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the same amount Buenaventura C. Ebrado designated CarponiaT. Ebrado as the revocable beneficiary in his policy. On October 21, 1969, Buenaventura died. Carponia T. Ebrado filed a claim. Pascuala also filed a claimed asserting that she is the legal wife. In doubt as to whom the insurance proceeds shall be paid, the Insular Life filed an action for Interpleader before the CFI Rizal. The trial court disqualified Carponia T. Elardo. On appeal, the CA held that it is a question of law and forwarded the matter before the SC. Issue: Whether or not a common-law wife named as beneficiary in the life insurance policy of a legally married man can claim the proceeds thereof in case of death of the latter? Ruling: It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD No. 612, as amended) does not contain any specific provision grossly resolutory of the prime question at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shall be applied exclusively to the proper interest of the person in whose name it is made" cannot be validly seized upon to hold that the mm includes the beneficiary. The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance. Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. And under Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to him. 4 Common-law spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides: The following donations shall be void: 1. Those made between persons who were guilty of adultery or concubinage at the time of donation; 2. Those made between persons found guilty of the same criminal offense, in consideration thereof; 3. hose made to a public officer or his wife, descendants or ascendants by reason of his office. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation. Under American law, a policy of life insurance is considered as a testament and in construing it, the courts will, so far as possible treat it as a will and determine the effect of a clause designating the beneficiary by rules under which wins are interpreted E. Parties to an Insurance Contract 3. The Beneficiary a. Beneficiary of one who insures his own life – insured may designate any person as his beneficiary. Exception: Persons specified in Article 739 NCC The Insular Life Assurance Company, Ltd., vs. Carponia T. Ebrado and Pascuala Vda. De Ebrado, G.R. No. L-44059, 1977-10-28 Facts: Buenaventura C. Ebrado, married to Pascuala Ebrado and with six legitimate children was living with his common-law wife Carponia T. Ebrado. They have two children. On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the same amount Buenaventura C. Ebrado designated CarponiaT. Ebrado as the revocable beneficiary in his policy. On October 21, 1969, Buenaventura died. Carponia T. Ebrado filed a claim. Pascuala also filed a claimed asserting that she is the legal wife. In doubt as to whom the insurance proceeds shall be paid, the Insular Life filed an action for Interpleader before the CFI Rizal. The trial court disqualified Carponia T. Elardo. On appeal, the CA held that it is a question of law and forwarded the matter before the SC. Issue: Whether or not a common-law wife named as beneficiary in the life insurance policy of a legally married man can claim the proceeds thereof in case of death of the latter? Ruling: It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD No. 612, as amended) does not contain any specific provision grossly resolutory of the prime question at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shall be applied exclusively to the proper interest of the person in whose name it is made" cannot be validly seized upon to hold that the mm includes the beneficiary. The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance. Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. And under Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to him. 4 Common-law spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides: The following donations shall be void: 1. Those made between persons who were guilty of adultery or concubinage at the time of donation; 2. Those made between persons found guilty of the same criminal offense, in consideration thereof;