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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

LuminaTech, Inc. (Lumina) borrowed PHP 250,000,000 from Citybank Financial to fund a major expansion. Lumina is the policy owner and sole beneficiary of a PHP 420,000,000 life insurance policy on the life of its founder and chief executive officer, Dr. Adrian Reyes. Citybank is named collateral assignee of the policy proceeds to secure the loan; Reyes consents to the policy. After Reyes dies, Citybank demands payment of the policy proceeds from the insurer; the insurer refuses, citing lack of insurable interest at policy issuance. (a) Identify the controlling doctrine governing the validity of this life-insurance contract and the effect of the collateral assignment on the insured's insurable interest. (b) Explain whether insurable interest must exist at the time of policy issuance, at the time of loss, or both, and distinguish the rule for life vs. property insurance. (c) Apply to the facts: Is the policy contract valid? Is Citybank entitled to the proceeds, to what extent, and what defenses may the insurer raise?

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Policy is valid; LuminaTech had insurable interest in Dr. Reyes's life at policy issuance due to its pecuniary stake in the firm's continued operation; The collateral assignment transfers rights to the bank to secure the loan but does not create a new insurable interest; The bank is entitled to proceeds only to the extent of the outstanding loan balance (plus accrued interest) at the time of Reyes's death; Any excess goes to LuminaTech as policy owner/beneficiary; The insurer may raise defenses such as misrepresentation or concealment but not lack of insurable interest. Insurable interest must exist at both the inception and at the time of loss for life insurance; The collateral assignment cannot retroactively create an insurable interest; Since Citybank's loan existed at issuance, the bank's claim is valid only up to the loan amount; If the face value exceeds the loan, the excess belongs to LuminaTech. For life insurance, insurable interest must be based on a family relationship; A corporation's ownership of the insured's life is insufficient; The bank's claim fails. There is no insurable interest since LuminaTech's future profits depend on Reyes's life but are not certain; The collateral assignment cannot create insurable interest; The policy is void; Proceeds go to Reyes's estate.

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