Ang Ka Yu v.

Phoenix Assurance - Insurable Interest

1 CARA 704
Facts:
> Ang Ka Yu had a piece of property in his possession. He insured it with Phoenix.
> The property was lost, so Ang Ka Yu sought to claim the proceeds.
> Phoenix denied liability on the ground that Ang was not the owner but a mere
possessor and as such, had no insurable interest over the property.
Issue:Whether or not a mere possessor has insurable interest over the property.

Held: Yes. A person having a mere right or possession of property may insure it to its
full value and in his own name, even when he is not responsible for its safekeeping.
The reason is that even if a person is NOT interested in the safety and preservation of
material in his possession because they belong to 3
rd
parties, said person still has
insurable interest, because he stands either to benefit from their continued existence
or to be prejudiced by their destruction.

Great pacific life insurance corp. vs. ca
There was an existing group life insurance executed between Great Pacific Life
Assurance (Grepalife) and the Development Bank of the Philippines (DBP). Grepalife
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
life insurance. He filled out a form where he indicated he never consulted any
physician regarding any illness (heart condition etc) and that he is in good health. He
was eventually included in the group life insurance and he was covered for the amount
of his indebtedness (P86,200.00).
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
hypertension at the time of his insurance application. Grepalife relied on the statement
made by the doctor who issued Wilfredos death certificate wherein it was stated that
Wilfredos immediate cause of death was massive cerebral hemorrhage secondary to
hypertension or hypertension as a possible cause of death.
Since Grepalife refused to pay the insurance claim filed by DBP, Medarda Leuterio
(widow) sued Grepalife. Grepalife assailed the suit and insisted that Medarda is not a
proper party in interest. The lower court ruled in favor of Medarda and the court
ordered Grepalife to pay the amount of the insurance to DBP. The Court of
Appeals affirmed this decisionin 1993. Grepalife appealed to the Supreme Court. In
1995, pending resolution of the case in the SC, DBP foreclosed the property of
Medarda.
ISSUE: Whether or not Grepalife is liable to pay the insurance claim.
HELD: Yes. Grepalife is liable to pay the insurance claim. Medarda is a proper party in
interest (note that it was Wilfredo who has been paying the premium, as the insured,
he is the real party in interest and this status was transferred to his widow). The group
life insurance or mortgage redemption insurance provides that DBP as the
mortgagee is merely an assignee of Wilfredo; and that in the event of Wilfredos death
before his indebtedness to DBP is paid, proceeds from the insurance shall first be
applied to the sum of the balance insured. But this does not cease Wilfredo to be a
party to theinsurance contract.
Grepalife failed to prove that Wilfredo concealed that he was suffering from
hypertension at the time of his application. The doctors finding as to the cause of
death is not conclusive because no autopsy was conducted. The doctor who issued
the death certificate has no knowledge of Wilfredos hospital confinement [if there are
any]. The fraudulent intent on the part of the insured must be established to entitle
the insurer to rescind the contract. Misrepresentation as a defense of the insurer to
avoid liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the insurer.
Grepalife must however pay the claim to Medarda considering that DBP already
foreclosed the property.
8 Spouses Cha vs. Court of Appeals [GR 124520, 18 August 1997]
First Division, Padilla (J): 4 concur

Facts: Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract
ith CKS Development Corporation, as lessor, on 5 October 1988. One of the
stipulations of the 1 year lease contract states that "The LESSEE shall not insure
against fire the chattels, merchandise, textiles, goods and effects placed at any stall
or store or space in the leased premises without first obtaining the written consent and
approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the
consent of the LESSOR then the policy is deemed assigned and transferred to the
LESSOR for its own benefit" Notwithstanding the above stipulation in the lease
contract, the Cha spouses insured against loss by fire their merchandise inside the
leased premises for P500,000.00 with the United Insurance Co., Inc. without the
written consent of CKS. On the day that the lease contract was to expire, fire broke
out inside the leased premises. When CKS learned of the insurance earlier procured
by the Cha spouses (without its consent), it wrote the insurer (United) a demand letter
asking that the proceeds of the insurance contract (between the Cha spouses and
United) be paid directly to CKS, based on its lease contract with the Cha spouses.
United refused to pay CKS. Hence, the latter filed a complaint against the Cha
spouses and United. On 2 June 1992, the Regional Trial Court, Branch 6, Manila,
rendered a decision ordering United to pay CKS the amount of P335,063.11 and the
Cha spouses to pay P50,000.00 as exemplary damages, P20,000.00 as attorney's
fees and costs of suit. On appeal, the Court of Appeals in CA GR CV 39328 rendered
a decision dated 11 January 1996, affirming the trial court decision, deleting however
the awards for exemplary damages and attorney's fees. A motion for reconsideration
by United was denied on 29 March 1996. The spouses Cha and United filed the
petition for review on certiorari. Commercial Law Insurance Law, 2006 ( 11
)Narratives (Berne Guerrero)
Issue: Whether paragraph 18 of the lease contract entered into between CKS and the
Cha spouses is valid insofar as it provides that any fire insurance policy obtained
by the lessee (Cha spouses) over their merchandise inside the leased premises is
deemed assigned or transferred to the lessor (CKS) if said policy is
obtained without the prior written consent of the latter.

Held: NO. It is basic in the law on contracts that the stipulations contained in a
contract cannot be contrary to law, morals, good customs, public order or public
policy. Section 18 of the Insurance Code provides that "No contract or policy of
insurance on property shall be enforceable except for the benefit of some person
having an insurable interest in the property insured." A non-life insurance policy such
as the fire insurance policy taken by the spouses over their merchandise is primarily a
contract of indemnity. Insurable interest in the property insured must exist at the time
the insurance takes effect and at the time the loss occurs. The basis of such
requirement of insurable interest in property insured is based on sound public policy:
to prevent a person from taking out an insurance policy on property upon which he
has no insurable interest and collecting the proceeds of said policy in case of loss of
the property. In such a case, the contract of insurance is a mere
wager which is void under Section 25 of the Insurance Code, which provides that
"Every stipulation in a policy of Insurance for the payment of loss whether the person
insured has or has not any interest in the property insured, or that the policy shall be
received as proof of such interest, and every policy executed by way of gaming or
wagering, is void." Herein, it cannot be denied that CKS has no insurable interest in
the goods and merchandise inside the leased premises under the provisions of
Section 17 of the Insurance Code which provides that "The measure of an insurable
interest in property is the extent to which the insured might be damnified by loss of
injury thereof." Therefore, CKS cannot, under the Insurance Code a special law
be validly a beneficiary of the fire insurance policy taken by the spouses over their
merchandise. This insurable interest over said merchandise remains with the insured,
the Cha spouses. 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. 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.

Bonifacio vs. Mora (contracts; stipulation pour autrui)

Held: The appellants seek to recover the insurance proceeds, and for this purpose,
they rely upon paragraph 4 of the insurance contract document executed by and
between the State Bonding & Insurance Company, Inc. and Enrique Mora. The
appellants are not mentioned in the contract as parties thereto nor is there any clause
or provision thereof from which we can infer that there is an obligation on the part of
the insurance company to pay the cost of repairs directly to them. It is fundamental
that contracts take effect only between the parties thereto, except in some specific
instances provided by law where the contract contains some stipulation in favor of a
third person. Such stipulation is known as stipulation pour autrui or a provision in favor
of a third person not a pay to the contract. Under this doctrine, a third person is
allowed to avail himself of a benefit granted to him by the terms of the contract,
provided that the contracting parties have clearly and deliberately conferred a favor
upon such person. Consequently, a third person not a party to the contract has no
action against the parties thereto, and cannot generally demand the enforcement of
the same. The question of whether a third person has an enforcible interest in a
contract, must be settled by determining whether the contracting parties intended to
tender him such an interest by deliberately inserting terms in their agreement with the
avowed purpose of conferring a favor upon such third person. In this connection, this
Court has laid down the rule that the fairest test to determine whether the interest of a
third person in a contract is a stipulation pour autrui or merely an incidental interest, is
to rely upon the intention of the parties as disclosed by their contract. In the instant
case the insurance contract does not contain any words or clauses to disclose an
intent to give any benefit to any repairmen or materialmen in case of repair of the car
in question. The parties to the insurance contract omitted such stipulation, which is a
circumstance that supports the said conclusion. On the other hand, the "loss payable"
clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes,
Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to benefit.

Another cogent reason for not recognizing a right of action by the appellants against
the insurance company is that "a policy of insurance is a distinct and independent
contract between the insured and insurer, and third persons have no right either in a
court of equity, or in a court of law, to the proceeds of it, unless there be some
contract of trust, expressed or implied between the insured and third person." In this
case, no contract of trust, expressed or implied exists. We, therefore, agree with the
trial court that no cause of action exists in favor of the appellants in so far as the
proceeds of insurance are concerned. The appellants' claim, if at all, is merely
equitable in nature and must be made effective through Enrique Mora who entered
into a contract with the Bonifacio Bros. Inc.

Facts: Mora mortgaged his car to H.S Reyes with a condition that Mora would insure
the car with H.S. Reyes Inc. as the beneficiary. State Bonding & Company insured the
car and a motor car insurance policy was issued to Mora. Right after, the car met an
accident. The insurance company then assigned the accident to the Bayne
Adjustment Co. for investigation and appraisal of the damage. Mora, without the
consent and knowledge of H.S. Reyes Inc., authorized Bonifacio Brothers Inc. to fix
the car. For the cost of labor and materials, Enrique Mora was billed at P2,102.73
through the H.H. Bayne Adjustment Co. The insurance company after claiming a
franchise in the amount of P100, drew a check in the amount of P2,002.73, as
proceeds of the insurance policy, payable to the order of Enrique Mora or H.S. Reyes,.
Inc., and entrusted the check to the H.H. Bayne Adjustment Co. for disposition and
delivery to the proper party. In the meantime, the car was delivered to Enrique Mora
without the consent of the H.S. Reyes, Inc., and without payment to the Bonifacio
Bros. Inc. of the cost of repairs and materials. Upon the theory that the insurance
proceeds should be paid directly to them, the Bonifacio Bros. Inc filed a complaint
against Mora and the State Bonding & Insurance Co., Inc. for the collection of the sum
of P2,002.73