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2013 Insurance Law Bar Questions

Benny applied for life insurance but failed to disclose previous medical issues including diabetes, hypertension, and hepatoma. When Benny died of hepatoma less than two years after the policy was issued, the insurance company denied the claim and rescinded the policy, citing concealment. The insurance company was correct to do this under Section 27 and 48 of the Insurance Code, as Benny's concealment of serious medical ailments was material. SPMC had a policy with SIC that allowed 90 days of credit to pay premiums. After a fire destroyed SPMC's facilities but before premiums were paid, SPMC paid the premiums as usual. SIC denied the claim citing the "cash and carry" principle,

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113 views5 pages

2013 Insurance Law Bar Questions

Benny applied for life insurance but failed to disclose previous medical issues including diabetes, hypertension, and hepatoma. When Benny died of hepatoma less than two years after the policy was issued, the insurance company denied the claim and rescinded the policy, citing concealment. The insurance company was correct to do this under Section 27 and 48 of the Insurance Code, as Benny's concealment of serious medical ailments was material. SPMC had a policy with SIC that allowed 90 days of credit to pay premiums. After a fire destroyed SPMC's facilities but before premiums were paid, SPMC paid the premiums as usual. SIC denied the claim citing the "cash and carry" principle,

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marvin
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2013 Insurance Law Bar questions

Concealment; Material Concealment (2013)

No.II
Benny applied for life insurance for Php 1.5 Million. The insurance company
approved his application and issued an insurance policy effective Nov, 6, 2008.
Benny named his children as his beneficiaries. On April 6, 2010, Benny died of
hepatoma, a liver ailment. The insurance company denied the childrens claim for
the proceeds of the insurance policy on the ground that Benny failed to disclose in
his application two previous consultations with his doctors for diabetes and
hypertension, and that he had been diagnosed to be suffering from hepatoma. The
insurance company also rescinded the policy and refunded the premiums paid.
Was the insurance company correct? (8%)

SUGGESTED ANSWER

The insurance company correctly rescinded the policy because of concealment


(Section 27 of Insurance Code). Benny did not disclose that he was suffering
from diabetes, hypertension, and hepatoma. The concealment is material, because
these are serious ailments (Florendo v. Philam Plans, Inc., 666 SCRA 618, 2012).
Benny died less than two years from the date of the issuance of the policy (Section
48 of Insurance Code).

Insurance; Property Insurance; Payment of Premiums even after Loss


(2013)
No.VII.
Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have
had a long-standing insurance relationship with each other; SPMC secures the
comprehensive fire insurance on its plant and facilities from SIC. The standing
business practice between them has been to allow SPMC a credit period of 90 days
from the renewal of the policy with which to pay the premium. Soon after the new
policy was issued and before premium payments could be made, a fire gutted the
covered plant and facilities to the ground. The day after the fire, SPMC issued a
managers check to SIC for the fire insurance premium, for which it was issued a
receipt; a week later SPMC issued its notice of loss. SIC responded by issuing its
own managers check for the amount of the premiums SPMC had paid, and denied
SPMCs claim on the ground that under the cash and carry principle governing
fire insurance, no coverage existed at the time the fire occurred because the
insurance premium had not been paid. Is SPMC entitled to recover for the loss
form SIC? (8%)
SUGGESTED ANSWER:
St. Peter Manufacturing Company is entitled to recover for the loss from stable
Insurance Company. Stable Insurance Company granted a credit term to pay the
premiums. This is not against the law, because the standing business practice of
allowing St. Peter Manufacturing Company to pay the premiums after 60 or 90
days, was relied upon in good faith by SPMC. Stable Insurance Company is in
estoppels (UCPB General Insurance Company, Inc. v. Masagana Telemart, Inc.
356 SCRA 307, 2001).
Carriage; Breach of Contract; Presumption of Negligence (2013)

No.IX.
Fil-Asia Flight 916 was on a scheduled passenger flight from Manila when
it crashed as it landed at the Cagayan de Oro airport; the pilot miscalculated
the planes approach and undershot the runway. Of the 150 people on board,
ten (10) passengers died at the crash scene. Of the ten who died, one was a
passenger who managed to leave the plane but was run over by an ambulance
coming to the rescue. Another was an airline employee who hitched a free ride
to Cagayan de Oro and who was not in the passenger manifest. It appears
from the Civil Aeronautics Authority investigation that the co-pilot who had
control of the planes landing had less than the required flying and landing
time experience, and should not have been in control of the plane at the time.
He was allowed to fly as a co-pilot because of the scarcity of pilots Philippine
pilots have been recruited by foreign airlines under vastly improved flying
terms and wages so that newer and less trained pilots are being locally
deployed. The main pilot, on the other hand, had a very high level of blood
alcohol at the time of the crash. You are part of the team that the victims
hired to handle the case for them as a group. In your case conference, the
following questions came up:

(A) Explain the causes of action legally possible under the given facts against
the airline and the Pilots; whom will you specifically implead in these causes
of action? (5%)
SUGGESTED ANSWER:
A complaint for breach of contract of carriage can be filed against Fil-Asia for
failure to exercise extraordinary diligence in transporting the passengers
safety from their point of embarkation to their destination (Article 1755, Civil
Code). A complaint based on a quasi-delict can be filed against the pilots
because of their fault and negligence (Article 2176, Civil Code). Fil-Asia Air
can be included for negligence in the selection and supervision of the pilots
(Article 2180, Civil Code). A third cause of action may be a criminal
prosecution for reckless imprudence resulting in homicide against two pilots.
The airline will be subsidiarily liable for the civil liability only after the pilots
are convicted and found to be insolvent.
(B) How will you handle the cases of the passenger run over the ambulance
and the airline employee allowed to hitch a free ride to Cagayan de Oro? (3%)
SUGGESTED ANSWER:

It is the driver of the ambulance and his employer who should be held liable
for damages, because a passenger was run over. This is in accordance with
Articles 2176 and 2180 of the Civil Code. There could also be a criminal
prosecution for reckless imprudence resulting in homicide against the
ambulance driver and the consequent civil liability. Since the airline employee
was being transported gratuitously, Fil-Asia Air was not required to exercise
extraordinary diligence for his safety and only ordinary care. (Lara v. Valencia,
104 Phil. 65, 1958).

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