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UNION MANUFACTURING CO., INC. VS. PHILIPPINE GUARANTY CO., INC. 47 SCRA 271 (G.R. NO.

L-27932) OCTOBER 30, 1972 Petitioner: Respondent: FACTS: On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans from the Republic Bank in the total sum of 415,000.00. To secure the payment thereof, UMC executed real and chattel mortgage on certain properties. The Republic Bank procured from the defendant Philippine Guaranty Co., Inc. an insurance coverage on loss against fire for 500,000.00 over the properties of the UMC, as described in defendants cover note dated September 25, 1962, with the annotation that loss or damage, if any, under said cover note is payable to Republic Bank as its interest may appear, subject however to the printed conditions of said defendants Fire Insurance Policy Form. On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964, UMC filed its fire claim with the PGC Inc., thru its adjuster, H.H. Bayne Adjustment Co., which was denied by said defendant in its letter dated November 26, 1964 on the following ground: Policy Condition No. 3 and/or the Other Insurance Clause of the policy was violated because you did not give notice to us of the other insurance which you had taken from New India for 80,000.00. Sincere Insurance for 25,000.00 and Manila Insurance for 200,000.00 with the result that these insurances of which we became aware of only after the fire, were not endorsed on our policy. ISSUE: Whether Republic Bank can recover. HELD: Without deciding- whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and void. (Santa Ana vs. Commercial Union Ass. Co., 55 Phil. 128). If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts for the parties. The functions and duty of the courts consist simply in enforcing and carrying out the contracts actually made. While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous they must be taken and understood in their plain, ordinary and popular sense. The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. The materiality of non-disclosure of other insurance policies is not open to doubt. The insurance contract may be rather onerous, but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the contracting parties. Republic Bank Philippine Guaranty Co.. Inc.

vs. THE CENTURY INSURANCE CO., LTD., defendant-appellant. G.R. No. L-22738 Facts: A building of the plaintiff was insured against fire by the defendant in the sum of P30,000, as well as the goods and merchandise therein contained in the sum of P15,000. The house and merchandise insured were burnt early in the morning of February 28, 1923, while the policies issued by the defendant in favor of the plaintiff were in force. The appellant contends that under clause 14 of the conditions of the policies, it may rebuild the house burnt, and although the house may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by him. The clause states that: The Company may at its option reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss of damages, or may join with any other Company or insurers in so doing, but the Company shall not be bound to reinstate exactly or completely, but only as circumstances permit and in reasonable sufficient manner, and in no case shall the Company be bound to expend more in reinstatement that it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage, nor more than the sum insured by the Company thereon. If the clause is valid it may either rebuild it or pay it. It must be taken in consideration that the insurance company must notify the insured which between the 2: either rebuild it or pay it, will be fulfilled. In which case, the final notice was not given and the rebuilding of the property would be the better option. Issue: Whether or not the Insurance Company should rebuild the house or not? Ruling of the Court: It was held that the trial judge very aptly says in his decision: "It would be an imposition unequitable, as well as unjust, to compel the plaintiff to accept the rebuilding of a smaller house than the one burnt, with a lower kind of materials than those of said house, without offering him an additional indemnity for the difference in size between the two house, which circumstances were taken into account when the insurance applied for by the plaintiff was accepted by the defendant." And we may add: Without tendering either the insured value of the merchandise contained in the house destroyed, which amounts to the sum of P15,000." The election alleged by the appellant to rebuild the house burnt instead of paying the value of the insurance is improper. G.R. No. L-26827 June 29, 1984 December 2, 1924

AGAPITO GUTIERREZ, plaintiff-appellee, vs. CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant. Facts: Capital Insurance & Surety Co., Inc. insured on December 7, 1961 for one year the jeepney of Agapito Gutierrez against passenger and thirdparty liability. The passenger liability would not exceed P5,000 for any one person.The policy provides in item 13 that the authorized driver must be the holder of a valid and subsisting professional driver's license. "A driver with an expired Traffic Violation Receipt or expired Temporary Operator's Permit is not considered an authorized driver." On May 29, 1962, the insured jeepney had an accident at Buendia Avenue, Makati, Rizal. As a result of said accident, a passenger named Agatonico Ballega fell off the vehicle and died. Teofilo Ventura, the jeepney driver, was duly licensed for the years 1962 and 1963. However, at the time of the accident he did not have the license. Instead, he had a carbon copy of a traffic violation report (summons) issued by a policeman on February 22, 1962, with the notation that he had committed the violation: "Inattentive to driving (Inv. in accident) at 9:30 a.m., 2-22-62". The same traffic violation report, which served as a receipt for his license, required him to report to Branch 8 of the traffic court at the corner of Arroceros and Concepcion Streets, Manila at nine o'clock in the morning of March 2, 1962. The TVR would "serve as a temporary operator's permit for 15 days from receipt hereof". It is indisputable that at the time of the accident (May 29, 1962), Ventura was holding an "expired Temporary Operator's Permit." Capital Insurance refused to make any reimbursement with regard to Guttierez's payment to the widow, hence he filed on October 14, 1963 in the city court of Manila an action for specific performance and damages. Insurance Company contended that paragraph 13 of the policy, already cited, is decisive and controlling in this case. It plainly provides, and we repeat, that "a driver with an expired

ONG GUAN CAN and THE BANK OF THE PHILIPPINE ISLANDS, plaintiffs-appellees,

Traffic Violation Receipt or expired Temporary Operator's permit is not considered an authorized driver within the meaning" of the policy. Obviously, Ventura was not an authorized driver. His temporary operator's permit had expired. The expiration bars recovery under the policy. In liability insurance, "the parties are bound by the terms of the policy and the right of insured to recover is governed thereby" (44 C.J.S. 934) Issue: Whether an insurance covers a jeepney whose driver's traffic violation report or temporary operator's permit had already expired? Rulling of the Court: It was held that the following ruling has persuasive authority with regards to Insurance: Insurance; Automobile; When insurer exempt from liability; Case at bar. The automobile insurance policy sued upon in the instant case exempts the insurer company from liability for any accident loss, damage or liability caused, sustained or incurred while the vehicle is being driven by any person other than an authorized driver. The policy defines the term 'authorized driver' to be the insured himself or any person driving on the insured's order or with his permission provided he is permitted to drive under the licensing laws. In the given case, plaintiff's brother, who was at the wheel at the time of the collision, did not have a valid license because the one he had obtained had already expired and had not been renewed as required by Section 31 of the Motor Vehicle Law. That since he had renewed his license one week after the accident, it did not cure the delinquency or revalidate the license which had already expired (Syllabus, Tanco, Jr. vs. Phil. Guaranty Co., 122 Phil. 709). Wherefore the case is against Gutierrez. REGINA L. EDILLON, as assisted by her husband, MARCIAL EDILLON, petitioners-appellants, vs. MANILA BANKERS LIFE INSURANCE CORPORATION and the COURT OF FIRST INSTANCE OF RIZAL, BRANCH V, QUEZON CITY, respondents-appellees.

Insurance, excluding its liability to pay claims under the policy in behalf of "persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years ..." It is pointed out that the insured being over sixty (60) years of age when she applied for the insurance coverage, the policy was null and void, and no risk on the part of the respondent insurance corporation had arisen therefrom.

The trial court sustained the contention of the private respondent and dismissed the complaint. It was reasoned out that a policy of insurance being a contract of adhesion, it was the duty of the insured to know the terms of the contract he or she is entering into; the insured in this case, upon learning from its terms that she could not have been qualified under the conditions stated in said contract, what she should have done is simply to ask for a refund of the premium that she paid. It was further argued by the trial court that the ruling calling for a liberal interpretation of an insurance contract in favor of the insured and strictly against the insurer may not be applied in the present case in view of the peculiar facts and circumstances obtaining therein.

Issue: Whether or not the acceptance by the private respondent insurance corporation of the premium and the issuance of the corresponding certificate of insurance should be deemed a waiver of the exclusionary condition of overage stated in the said certificate of insurance.

Ruling:

G.R. No. L-34200 September 30, 1982 Facts:

Sometime in April 1969, Carmen Lapuz applied with respondent insurance corporation for insurance coverage against accident and injuries. She filled up the blank application form given to her and filed the same with the respondent insurance corporation. In the said application form which was dated April 15, 1969, she gave the date of her birth as July 11, 1904. On the same date, she paid the sum of P20.00 representing the premium for which she was issued the corresponding receipt signed by an authorized agent of the respondent insurance corporation.Upon the filing of said application and the payment of the premium on the policy applied for, the respondent insurance corporation issued its Certificate. The policy was to be effective for a period of 90 days. On May 31, 1969 or during the effectivity of Certificate of Insurance, Carmen O. Lapuz died in a vehicular accident. Petitioner Regina L. Edillon, a sister of the insured and who was the named beneficiary in the policy, filed her claim for the proceeds of the insurance, submitting all the necessary papers and other requisites with the private respondent. Her claim having been denied, Regina L. Edillon instituted this action in the Court of First Instance.

The Supreme Court reversed trial court's decision. The Court ruled that the age of the insured Carmen Lapuz was not concealed to the insurance company. Her application for insurance coverage which was on a printed form furnished by private respondent and which contained very few items of information clearly indicated her age of the time of filing the same to be almost 65 years of age. Despite of, it could hardly be overlooked in the application form, considering its prominence thereon and its materiality to the coverage applied for, the respondent insurance corporation received her payment of premium and issued the corresponding certificate of insurance without question. The accident which resulted in the death of the insured, a risk covered by the policy, occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance coverage was applied for. There was sufficient time for the private respondent to process the application and to notice that the applicant was over 60 years of age and thereby cancel the policy on that ground if it was minded to do so. If the private respondent failed to act, it is either because it was willing to waive such disqualification; or, through the negligence or incompetence of its employees for which it has only itself to blame, it simply overlooked such fact. Under the circumstances, the insurance corporation is already deemed in estoppel. It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has knowledge of existing facts which, if insisted on, would invalidate the contract from its very inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with the known facts, and the insurer is stopped thereafter from asserting the breach of such conditions. The law is charitable enough to assume, in the absence of any showing to the contrary, that an insurance company intends to execute a valid contract in return for the premium received; and when the policy contains a condition which renders it voidable at its inception, and this result is known to the insurer, it will be presumed to have intended to waive the conditions and to execute a binding contract, rather than to have deceived the insured into thinking he is insured when in fact he is not, and to have taken is money without consideration. THE CAPITAL INSURANCE & SURETY CO., INC., petitioner,

In resisting the claim of the petitioner, the respondent insurance corporation relies on a provision contained in the Certificate of

vs. PLASTIC ERA CO., INC., AND COURT OF APPEALS, respondents. G.R. No. L-22375 July 18, 1975

Facts:

The mere delivery of a bill of exchange in payment of a debt does not immediately effect payment. It simply suspends the action arising from the original obligation in satisfaction of which it was delivered, until payment is accomplished either actually or presumptively. Tender of draft or check in order to effect payment that would extinguish the debtor's liability should be actually cashed. If the delivery of the check of Plastic Era to Capital Insurance were to be viewed in the light of the foregoing, no payment of the premium had been effected, for it is only when the check is cashed that it is said to effect payment. Significantly, in the case at bar, the Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within thirty (30) days from the effective date of policy. By so doing, it has implicitly agreed to modify the tenor of the insurance policy and in effect, waived the provision therein that it would only pay for the loss or damage in case the same occurs after the payment of the premium. Considering that the insurance policy is silent as to the mode of payment, Capital Insurance is deemed to have accepted the promissory note in payment of the premium. This rendered the policy immediately operative on the date it was delivered. The view taken in most cases in the United States: ... is that although one of conditions of an insurance policy is that "it shall not be valid or binding until the first premium is paid", if it is silent as to the mode of payment, promissory notes received by the company must be deemed to have been accepted in payment of the premium. In other words, a requirement for the payment of the first or initial premium in advance or actual cash may be waived by acceptance of a promissory note ... Precisely, this was what actually happened when the Capital Insurance accepted the acknowledgment receipt of the Plastic Era promising to pay the insurance premium within thirty (30) days from December 17, 1960. Hence, when the damage or loss of the insured property occurred, the insurance policy was in full force and effect. The fact that the check issued by Plastic Era in partial payment of the promissory note was later on dishonored did not in any way operate as a forfeiture of its rights under the policy, there being no express stipulation therein to that effect. In the absence of express agreement or stipulation to that effect in the policy, the non-payment at maturity of a note given for and accepted as premium on a policy does not operate to forfeit the rights of the insured even though the note is given for an initial premium, nor does the fact that the collection of the note had been enjoined by the insured in any way affect the policy.

On December 17, 1960, petitioner Capital Insurance & Surety Co., Inc.delivered to the respondent Plastic Era Manufacturing Co., Inc., its open Fire Policy wherein the former undertook to insure the latter's building, equipments, raw materials, products and accessories. The policy expressly provides that if the property insured would be destroyed or damaged by fire after the payment of the premiums, at anytime between the 15th day of December 1960 and one o'clock in the afternoon of the 15th day of December 1961, the insurance company shall make good all such loss or damage in an amount not exceeding P100,000.00. When the policy was delivered, Plastic Era failed to pay the corresponding insurance premium. However, through its duly authorized representative, it executed promisory note payable within 30 days which was accepted by the respondent. On January 8, 1961, in partial payment of the insurance premium, Plastic Era delivered to Capital Insurance, a check for the amount of P1,000.00 postdated January 16, 1961 payable to the order of the latter and drawn against the Bank of America. However, the same was dishonored by the bank for lack of funds. The records show that as of January 19, 1961 Plastic Era had a balance of P1,193.41 with the Bank of America. Two days after the insurance premium became due, at about 4:00 to 5:00 o'clock in the morning, the property insured by Plastic Era was destroyed by fire. In due time, the latter notified Capital Insurance of the loss of the insured property by fire and accordingly filed its claim for indemnity. The loss and/or damage suffered by Plastic Era was estimated to be P283,875. However, according to the records the same property has been insured by Plastic Era with the Philamgen Insurance Company for P200,000.00. In less than a month Plastic Era demanded from Capital Insurance the payment of the sum of P100,000.00 as indemnity for the loss of the insured property under Policy but the latter refused for the reason that, among others, Plastic Era failed to pay the insurance premium.

On August 25, 1961, Plastic Era filed its complaint against Capital Insurance for the recovery of the sum of P100,000.00 plus P25,000.00 for attorney's fees and P20,000.00 for additional expenses. Capital Insurance filed a counterclaim of P25,000.00 as and for attorney's fees. The trial court rendered judgment in favor of the plaintiff and against the defendant for the sum of P88,325.63 with interest at the legal rate from the filing of the complaint and to pay the costs. Court of appeals affirmes lower court's decision. Thus, Capital Insurance elevated the case in the Supreme Court. Issue: Whether or not a contract of insurance has been duly perfected between the petitioner, Capital Insurance, and respondent Plastic Era. Ruling: Yes

... If the check is accepted as payment of the premium even though it turns out to be worthless, there is payment which will prevent forfeiture.

By accepting its promise to pay the insurance premium within thirty (30) days from the effectivity date of the policy December 17, 1960 Capital Insurance had in effect extended credit to Plastic Era. The payment of the premium on the insurance policy therefore became an independent obligation the non-fulfillment of which would entitle Capital Insurance to recover. It could just deduct the premium due and unpaid upon the satisfaction of the loss under the policy. It did not have the right to cancel the policy for nonpayment of the premium except by putting Plastic Era in default and giving it personal notice to that effect. This Capital Insurance failed to do.

In clear and unequivocal terms the insurance policy provides that it is only upon payment of the premiums by Plastic Era that Capital Insurance agrees to insure the properties of the former against loss or damage in an amount not exceeding P100,000.00.

... Where credit is given by an insurance company for the payment of the premium it has no right to cancel the policy for nonpayment except by putting the insured in default and giving him personal notice....

On the contrary Capital Insurance had accepted a check for P1,000.00 from Plastic Era in partial payment of the premium on the insurance policy. Although the check was due for payment on January 16, 1961 and Plastic Era had sufficient funds to cover it as of January 19, 1961, Capital Insurance decided to hold the same for thirty-five (35) days before presenting it for payment. Having held the check for such an unreasonable period of time, Capital Insurance was estopped from claiming a forfeiture of its policy for non-payment even if the check had been dishonored late.

ISSUE: Whether or not the insured made such false representations of material facts as to avoid the policy.

RULING:

IGNACIO SATURNINO, in his own behalf and as the JUDICIAL GUARDIAN OF CARLOS SATURNINO vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY

G.R. No. L-16163 Facts:

February 28, 1963

The policy sued upon is one for 20-year endowment non-medical insurance. This kind of policy dispenses with the medical examination of the applicant usually required in ordinary life policies. However, detailed information is called for in the application concerning the applicant's health and medical history. The written application in this case was submitted by Saturnino to appellee on November 16, 1957, witnessed by appellee's agent Edward A. Santos. The policy was issued on the same day, upon payment of the first year's premium of P339.25. On September 19, 1958 Saturnino died of pneumonia, secondary to influenza. Appellants here, who are her surviving husband and minor child, respectively, demanded payment of the face value of the policy. The claim was rejected and this suit was subsequently instituted. Two months prior to the issuance of the policy or on September 9, 1957, Saturnino was operated on for cancer, involving complete removal of the right breast, including the pectoral muscles and the glands found in the right armpit. She stayed in the hospital for a period of eight days, after which she was discharged, although according to the surgeon who operated on her she could not be considered definitely cured, her ailment being of the malignant type. Notwithstanding the fact of her operation Estefania A. Saturnino did not make a disclosure thereof in her application for insurance. On the contrary, she stated therein that she did not have, nor had she ever had, among other ailments listed in the application, cancer or other tumors; that she had not consulted any physician, undergone any operation or suffered any injury within the preceding five years; and that she had never been treated for nor did she ever have any illness or disease peculiar to her sex, particularly of the breast, ovaries, uterus, and menstrual disorders. The application also recites that the foregoing declarations constituted "a further basis for the issuance of the policy."

The Insurance Law (Section 30) provides that "materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the proposed contract, or in making his inquiries." It seems to be the contention of appellants that the facts subject of the representation were not material in view of the "nonmedical" nature of the insurance applied for, which does away with the usual requirement of medical examination before the policy is issued. The contention is without merit. If anything, the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. It is logical to assume that if appellee had been properly apprised of the insured's medical history she would at least have been made to undergo medical examination in order to determine her insurability.

In the case of Kasprzyk v. Metropolitan Insurance Co., 140 N.Y.S. 211, 214, it was held: Moreover, if it were the law that an insurance company could not depend a policy on the ground of misrepresentation, unless it could show actual knowledge on the part of the applicant that the statements were false, then it is plain that it would be impossible for it to protect itself and its honest policyholders against fraudulent and improper claims. It would be wholly at the mercy of any one who wished to apply for insurance, as it would be impossible to show actual fraud except in the extremest cases. It could not rely on an application as containing information on which it could act. There would be no incentive to an applicant to tell the truth. In this jurisdiction a concealment, whether intentional or unintentional, entitles the insurer to rescind the contract of insurance, concealment being defined as "negligence to communicate that which a party knows and ought to communicate" (Sections 24 & 26, Act No. 2427). In the case of Argente v. West Coast Life Insurance Co., 51 Phil. 725, 732, this Court said, quoting from Joyce, The Law of Insurance, 2nd ed., Vol. 3:

"The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed upon. The insurer, relying upon the belief that the assured will disclose every material fact within his actual or presumed knowledge, is misled into a belief that the circumstance withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist."

Plaintiffs, now appellants, filed this action in the Court of to recover the sum of P5,000.00, corresponding to the face value of an insurance policy issued by defendant on the life of Estefania A. Saturnino, and the sum of P1,500.00 as attorney's fees. Both the complaint and the counterclaim were dismissed by the trial court; but appellants were declared entitled to the return of the premium already paid; plus interest at 6% up to January 8, 1959, when a check for the corresponding amount - P359.65 - was sent to them by appellee.

Supreme Court affirmed the decision of the lower court.

SUN INSURANCE OFFICE, LTD vs. COURT OF APPEALS and EMILIO TAN G.R. No. 89741 March 13, 1991 Facts:

On August 15, 1983, herein private respondent Emilio Tan took from herein petitioner a P300,000.00 property insurance policy to cover his interest in the electrical supply store of his brother housed in a building in Iloilo City. Four (4) days after the issuance of the policy, the building was burned including the insured store. On August 20, 1983, Tan filed his claim for fire loss with petitioner, but on February 29, 1984, petitioner wrote Tan denying the latter's claim. On April 3, 1984, Tan wrote petitioner, seeking reconsideration of the denial of his claim. On September 3, 1985, Tan's counsel wrote the Insurer inquiring about the status of his April 3, 1984 request for reconsideration. Petitioner answered the letter on October 11, 1985, advising Tan's counsel that the Insurer's denial of Tan's claim remained unchanged, enclosing copies of petitioners' letters of February 29, 1984 and May 17, 1985 (response to petition for reconsideration). On November 20, 1985, Tan filed Civil Case with the Regional Trial Court but petitioner filed a motion to dismiss on the alleged ground that the action had already prescribed. Said motion was denied in an order dated November 3, 1987; and petitioner's motion for reconsideration was also denied in an order dated January 14, 1988. Petitioner went to the Court of Appeals and sought the nullification of the said Nov. 3, 1987 and January 14, 1988 orders, but the Court of Appeals, in its June 20, 1989 decision denied the petition and held that the court a quomay continue until its final termination. A motion for reconsideration was filed, but the same was denied by the Court of Appeals in its resolution of August 22, 1989. Hence, petitioners elevated the case to the Supreme Court. ISSUE: Whether or not the filing of a motion for reconsideration interrupts the 12 months prescriptive period to contest the denial of the insurance claim. RULING: NO While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer company, yet, contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. Condition 27 of the Insurance Policy, which is the subject of the conflicting contentions of the parties, reads: 27. Action or suit clause If a claim be made and rejected and an action or suit be not commenced either in the Insurance Commission or in any court of competent jurisdiction within twelve (12) months from receipt of notice of such rejection, or in case of arbitration taking place as provided herein, within twelve (12) months after due notice of the award made by the arbitrator or arbitrators or umpire, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder. As the terms are very clear and free from any doubt or ambiguity whatsoever, it must be taken and understood in its plain, ordinary and popular sense pursuant to the above-cited principle laid down by this Court. Respondent Tan, in his letter addressed to the petitioner insurance company dated April 3, 1984, admitted that he received a copy of the letter of rejection on April 2, 1984. Thus, the 12-month prescriptive period started to run from the said date of April 2, 1984, for such is the plain meaning and intention of Section 27 of the insurance policy. It is also important to note the principle laid down by this Court in the case of Ang v. Fulton Fire Insurance Co., (2 SCRA 945 [1961]), to wit: The condition contained in an insurance policy that claims must be presented within one year after rejection is not merely a procedural requirement but an important matter essential to a prompt settlement of claims against insurance companies as it demands that insurance suits

be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared. In enunciating the above-cited principle, this Court had definitely settled the rationale for the necessity of bringing suits against the Insurer within one year from the rejection of the claim. The contention of the respondents that the one-year prescriptive period does not start to run until the petition for reconsideration had been resolved by the insurer, runs counter to the declared purpose for requiting that an action or suit be filed in the Insurance Commission or in a court of competent jurisdiction from the denial of the claim. To uphold respondents' contention would contradict and defeat the very principle which this Court had laid down. Moreover, it can easily be used by insured persons as a scheme or device to waste time until any evidence which may be considered against them is destroyed. It is apparent that Section 27 of the insurance policy was stipulated pursuant to Section 63 of the Insurance Code, which states that: Sec. 63. A condition, stipulation or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues, is void.

DIONISIA, EULOGIO, MARINA, GUILLERMO and NORBERTO all surnamed GUINGON, plaintiffs-appellees, vs. ILUMINADO DEL MONTE, JULIO AGUILAR and CAPITAL INSURANCE and SURETY CO., INC., defendants. CAPITAL INSURANCE and SURETY CO., INC., defendant-appellant. G.R. No. L-22042 August 17, 1967

FACTS: Julio Aguilar owned and operated several jeepneys in the City of Manila. . He entered into a contract with the Capital Insurance & Surety Co., Inc. insuring the operation of his jeepneys against accidents with third-party liability. Insurance policy was executed by the Capital Insurance & Surety Co., Inc., it contains the following provision: Section II LIABILITY TO THE PUBLIC 1. The Company, will, subject to the limits of liability, indemnify the Insured in the event of accident caused by or arising out of the use of the Motor Vehicle/s or in connection with the loading or unloading of the Motor Vehicle/s, against all sums including claimant's costs and expenses which the Insured shall become legally liable to pay in respect of: a. death of or bodily injury to any person b. damage to property During the effectivity of such insurance policy, Iluminado del Monte, one of the drivers of the jeepneys operated by Aguilar, bumped with the jeepney abovementioned one Gervacio Guingon who had just alighted from another jeepney and as a consequence the latter died some days thereafter. An information for homicide thru reckless imprudence was filed against Iluminado del Monte, who pleaded guilty. A penalty of four months imprisonment was imposed on him. The heirs of Gervacio Guingon filed an action for damages to be paid to them jointly and severally by the defendants, driver Iluminado del Monte,

owner and operator Julio Aguilar, and the Capital Insurance & Surety Co., Inc. The Court of First Instance of Manila rendered its judgment in favor of the heirs of the deceased holding the defendants jointly liable for damages. ARGUMENT: The case was appealed to the Court of Appeals contending that "no action" clause in the policy closes the avenue to any third party which may be injured in an accident wherein the jeepney of the insured might have been the cause of the injury of third persons, alleging the freedom of contracts. Will the mere fact that such clause was agreed upon by the parties in an insurance policy prevail over the Rules of Court which authorizes the joining of parties plaintiffs or defendants. ISSUE: Whether or not the plaintiffs being a third party can jointly sue the insurer and the insured. RULING: Yes. The policy in the present case is one for indemnity against liability; from the fact then that the insured is liable to the third person, such third person is entitled to sue the insurer. And the "no action" clause in the policy of insurance cannot prevail over the Rules of Court provision aimed at avoiding multiplicity of suits. The Rules of Court provides that; two causes of action are connected with each other, or grow out of the same transaction, they may be properly joined, and in such suit all parties against whom the plaintiff asserts a common or an alternative liability may be joined as defendants. . . . Even if appellants had presented any plea in abatement as to joinder of damages arising from a tort with those arising from a contract, it could not, under the facts of this case, be sustained, for the rule is that a suit may include an action for breach of contract and one for tort, provided they are connected with each other or grew out of the same transaction. In the case at bar, Sec. 5 of Rule 2 on "Joinder of causes of action" and Sec. 6 of Rule 3 on "Permissive joinder of parties" cannot be superseded, at least with respect to third persons not a party to the contract, as herein, by a "no action" clause in the contract of insurance. Wherefore, the judgment appealed from is affirmed.

On the basis of the evidence presented by the Advincula spouses, judgment was rendered by the trial court. First Insurance received a copy of the decision and upon motion of the Advincula spouses, the decision was amended, which, in addition to the damages granted in the original decision, awarded damages to Silverio Blanco. First Insurance filed a petition for relief from judgment in the same case. But the Court denied the said petition for relief from judgment. The Advincula spouses moved for the execution of judgment but the First Insurance filed a petition for relief from the order of execution and judgment with preliminary injunction but was denied by the court. The motion for reconsideration was likewise denied. ARGUMENT: It is the contention of the petitioner that the Advincula spouses have no cause of action against it. As parents of the victim, they may proceed against the driver, Silverio Blanco on the basis of the provisions of the New Civil Code. However, they have no cause of action against First Insurance, because they are not parties to the insurance contract. It is settled that where the insurance contract provides for indemnity against liability to a third party, such third party can directly sue the insurer. The liability of the insurer to such third person is based on contract while the liability of the insured to the third party is based on tort. ISSUE: Whether or not Advincula spouses can directly sue the insurer (First Insurance). RULING: Yes. The injured for whom the contract of insurance is intended can sue directly the insurer. The general purpose of statutes enabling an injured person to proceed directly against the insurer is to protect injured persons against the insolvency of the insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy, and statutes are to be liberally construed so that their intended purpose may be accomplished. It has even been held that such a provision creates a contractual relation which inures to the benefit of any and every person who may be negligently injured by the named insured as if such injured person were specifically named in the policy. First Insurance cannot evade its liability as insurer by hiding under the cloak of the insured. Its liability is primary and not dependent on the recovery of judgment from the insured. Compulsory Motor Vehicle Liability Insurance (third party liability or TPL) is primarily intended to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of a negligent operation and use of motor vehicles. The victims and/or their dependents are assured of immediate financial assistance, regardless of the financial capacity of the motor vehicle owners. The insurer's liability accrues immediately upon the occurrence of the injury or event upon which the liability depends, and does not depend on the recovery of judgment by the injured party against the insured. Wherefore, the petition is dismissed.

FIRST INTEGRATED BONDING & INSURANCE COMPANY, INC., petitioner, vs. HON. HAROLD M. HERNANDO, VICTORINO ADVINCULA, ROMANA ADVINCULA, SILVERIO BLANCO & THE SHERIFF OF MANILA and his DEPUTY SHERIFFS, respondents. G.R. No. L-51221 July 31, 1991

FACTS: Silverio Blanco was the owner of a passenger jeepney which he insured against liabilities for death and injuries to third persons with First Integrated Bonding and Insurance Company, Inc. (First Insurance). The said jeepney driven by Blanco himself bumped a five-year old child, Deogracias Advincula, causing the latter's death.Thereafter, a complaint for damages was brought by the child's parents, the Advincula spouses, against Silverio Blanco. First Insurance was also impleaded in the complaint as the insurer.

VIRGINIA A. PEREZ, petitioner, vs. COURT OF APPEALS and BF LIFEMAN INSURANCE CORPORATION, respondents. G.R. No. 112329. January 28, 2000

FACTS: Primitivo Perez had been insured with BF Lifeman Insurance Corporation since 1980 for P20,000. In October 1987 , an agent of Lifeman Insurance, Rodolfo Lalog, visited Perez in Quezon and

convinced him to apply for additional insurance coverage of P50,000, to avail of the ongoing promotional discount of P400 if the premium were paid annually. Primitivo accomplished an application form for the additional insurance coverage. Virginia Perez, his wife, paid P2,075 to Lalog. The receipt issued by Lalog indicated the amount receives as deposit. Unfortunately, Lalog lost the application form accomplished by Perez and so on, he asked the latter to fill up another application form. Sometime in 1987, Perez was made to undergo the required medical examination, which he passed. Lalog forwarded the application for additional insurance of Perez, together with all its supporting papers, to the office of BF Lifeman Insurance in Quezon which was supposed to forward the papers to the Manila Office. On November 25, 1987, Perez died while he was riding a banca which capsized during a storm. At the time of his death, his application papers for the additional insurance were still in the Quezon Office. Lalog testified that when he went to follow up the papers, he found them still in the Quezon office and so he personally brought the papers to the Manila office. It was only on November 27, 1987 that the said papers were received in Manila. Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for P50,000 on December 2, 1987. Virginia went to Manila to claim the benefits under the insurance policies of the deceased. She was paid P40,000 under the first insurance policy for P20,000 (double indemnity in case of accident) but the insurance company refused to pay the claim under the additional policy coverage of P50,000, the proceeds of which amount to P150,000 in view of a triple indemnity rider on the insurance policy. In its letter to Virginia , the insurance company maintained that the insurance for P50,000 had not been perfected at the time of the death of Primitivo Perez. Consequently, the insurance company refunded the amount of P2,075 which Virginia had paid. ARGUMENT: Lifeman Insurance filed for the rescission and declaration of nullity contending that the insurance policy in question was not yet perfected, hence, the wife cannot claim under said unperfected contract of insurance. Perez, on the other hand, averred that the deceased had fulfilled all his prestations under the Contract and all the elements of a valid contract are present. Trial Court ruled in favor of Virginia Perez, but on appeal the decision was reversed by the Court of Appeals, hence this petition.

Insurance is a contract whereby, for a stipulated consideration, one party undertakes to compensate the other for loss on specific subject by specific perils. A contract, on the other hand, is a meeting of the minds between two persons whereby one binds himself, with respect to the other to give something or to render some service. Consent must be manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. When Primitivo filed an application for insurance, paid the P2,075 and submitted the results of his medical examination, his application was subject to the acceptance of the insurance company. The perfection of the contract of insurance between the deceased and the respondent insurance company was further conditioned upon compliance with the following requisites stated in the application form: there shall be no contract of insurance unless and until a policy issued on this application and that the said policy shall not take effect until the premium has been paid and the policy delivered to and accepted by me/us in person while I/we,am/are in good health. The assent of respondent insurance company therefore was not given when it merely received the application form and all the requisite supporting papers of the applicant. Its assent was given when it issues a corresponding policy to the applicant. Under the abovementioned provision, it is only when the applicant pays the premium and receives and accepts the policy while he is in good health that the contract of insurance is deemed to have been perfected. It is not disputed, however, that Primitivo died on November 25, 1987, his application papers for additional insurance coverage were still with the branch office in Quezon and it was only two days later, when Lalog personally delivered the application papers to the head office in Manila. Consequently, there was absolutely no way the acceptance of the application could have been communicated to the applicant for the latter to accept inasmuch as the applicant at the time was already dead. Wherefore, the decision of the Court of Appeals is hereby affirmed.

LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON, DINA LORENA AYO, CELIA CALUMBAG and LUCIA LONTOK, petitioners, vs. HON. COURT OF APPEALS and THE INSULAR LIFE ASSURANCE COMPANY, LIMITED, respondents. G.R. No. 105562 September 27, 1993

FACTS: The petitioners were the complainants in an administrative complaint against private respondent Insular Life Assurance Company, Ltd. (Insular Life), which was filed with the Insurance Commission. They prayed that Insular Life "be ordered to pay the claimants their insurance claims" and that "proper sanctions/penalties be imposed on" it "for its deliberate, feckless violation of its contractual obligations to the complainants, and of the Insurance Code. Insular Life's motion to dismiss the complaint on the ground that "the claims of complainants are all respectively beyond the jurisdiction of the Insurance Commission as provided in Section 416 of the Insurance Code." Having been denied it filed its answer, thereafter, hearings were conducted.The Commission rendered its decision in favor of the complainants. Insular Life appealed the decision seeking that the appellate court to reverse the decision because the Insurance Commission:

ISSUE: Whether or not there was a perfected additional insurance contract.

RULING: No. the contract was not perfected. A contract of insurance, like all other contracts, must be assented to by both parties, either in person or through their agents and so long as an application for insurance has not been either accepted or rejected, it is merely a proposal or an offer to make a contract.

(a) had no jurisdiction over the case considering that the claims exceeded P100,000.00, (b) erred in holding that the powers of attorney relied upon by Insular Life were insufficient to convey absolute authority to Capt. Nuval to demand, receive and take delivery of the insurance proceeds pertaining to the petitioners, (c) erred in not giving credit to the version of Insular Life that the power of attorney supposed to have been executed in favor of the Alarcons was missing, and (d) erred in holding that Insular Life was liable for violating Section 180 of the Insurance Code for having released to the surviving mothers the insurance proceeds pertaining to the beneficiaries who were still minors despite the failure of the former to obtain a court authorization or to post a bond. The Court of Appeals rendered its decision with modification. Hence this petition. ARGUMENT: The Insurance Commission had jurisdiction over the case on the ground that although some of the claims exceed P100,000.00, the petitioners had asked for administrative sanctions against Insular Life which are within the Commission's jurisdiction to grant; hence, "there was merely a misjoinder of causes of action . . . and, like misjoinder of parties, it is not a ground for the dismissal of the action as it does not affect the other reliefs prayed for." When the officers of respondent-appellant read these written powers, they must have assumed Capt. Nuval indeed had authority to collect the insurance proceeds in behalf of the beneficiaries who duly affixed their signatures therein. The written power is specific enough to define the authority of the agent to collect any sum of money pertaining to the sinking of the fatal vessel. Respondent-appellant interpreted this power to include the collection of insurance proceeds in behalf of the beneficiaries concerned. We believe this is a reasonable interpretation even by an officer of respondent-appellant unschooled in the law. Had respondent appellant, consulted its legal department it would not have received a contrary view. There is nothing in the law which mandates a specific or special power of attorney to be executed to collect insurance proceeds. ISSUE: Whether or not the parents of the minors have a right in the policy in behalf of their minor children.

DEVELOPMENT INSURANCE CORPORATION vs IAC G.R. No. 71360 July 16, 1986 (case # 37) FACTS

a fire occurered in the building of the private respondent Philippine Union Realty Development Corporation and it sued for recovery of damages from petitioner on the basis of an insurance contract between them. Initially, petitioner failed to answer on the said claims and was declared in default prompting the court to decide in favor of private respondents

ARGUMENTS FOR THE PETITIONER

Petitioner refuses to pay the whole claim of the insured becuase at the time the fire occured the building was worth Php 5,800,000 the private respondent should be considered its own insurer for the difference between that amount and the face value of the policy and should share pro rata the loss sustained. accordingly, the private respondent is entitled to an indemnity of only Php 67,629, the rest of the loss to be shouldered by it alone. In support of this contention, petitioner cites condition 17 of the policy which provides

"If the property hereby insured shall, at the breaking out of any fire, be collectively of greater value than the sum insured thereon then the insured shall be considered as being his own insurer for the difference, and shall bear a ratable proportion of the loss accordingly. Every item, if more than one, of the policy shall be separately subject to this condition"

ARGUMENTS FOR THE RESPONDENT RULING: Yes. The Insurance Code expressly provides that; In the absence of a judicial guardian, the father, or in the latter's absence or incapacity, the mother, of any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such a right, may include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, and giving the minor's consent to any transaction on the policy. As amended by the Family Code which grants the father and mother joint legal guardianship over the property of their unemancipated common child without the necessity of a court appointment; however, when the market value of the property or the annual income of the child exceeds P50,000.00, the parent concerned shall be required to put up a bond in such amount as the court may determine. It is clear from the said Article that regardless of the value of the unemancipated common child's property, the father and mother ipso jure become the legal guardian of the child's property. However, if the market value of the property or the annual income of the child exceeds P50,000.00, a bond has to be posted by the parents concerned to guarantee the performance of the obligations of a general guardian. Wherefore, the instant petition is GRANTED. The Decision of the Insurance Commission is reinstated.

Philippine Union Realty Development contends that it should be paid for the value of the building at the time when the fire occured and should not be limited from the value of the policy because the insurance contract entered is an open policy.

ISSUE

Whether the amount of indemnity due to private respondent is based on the value of the property at the time of loss.

RULING OF THE COURT

Yes. As defined in the aforestated provision, which is now Section 60 of the Insurance Code, "an open policy is one in which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss. " This means that the actual loss, as determined, will

represent the total indemnity due the insured from the insurer except only that the total indemnity shall not exceed the face value of the policy.

ISSUE DISCUSSION

The court in ruling that private respondent is entitled to an indemnity if Php 508,867 instead of Php 67,629 as assessed by petitioner noted that the building at the time of loss is still under construction and not completed, furthermore it observed that the insurance contract (policy RY/F-082) entered was an open policy based from the contract itself

Whether the commisioner has jurisdiction over the subject matter of the complaint filed by the private respondent RULING OF THE COURT

"This is an open policy as defined in Section 57 of the Insurance Act. In the event of loss, whether total or partial, it is understood that the amount of the loss shall be subject to appraisal and the liability of the company, if established, shall be limited to the actual loss, subject to the applicable terms, conditions, warranties and clauses of this Policy, and in no case shall exceed the amount of the policy" PHILIPPINE ANSALDO AMERICAN LIFE INSURANCE COMPANY VS.

G.R. NO. 76452 JULY 26, 1994 (Case # 38)

FACTS

No. the quasi-judicial power of the insurance commissioner under section 416 of the insurance code which states that "The Commissioner shall have the power to adjudicate claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance, or for which such insurer may be liable under a contract of suretyship, or for which a reinsurer may be used under any contract or reinsurance it may have entered into, or for which a mutual benefit association may be held liable under the membership certificates it has issued to its members, where the amount of any such loss, damage or liability, excluding interest, costs and attorney's fees, being claimed or sued upon any kind of insurance, bond, reinsurance contract, or membership certificate does not exceed in any single claim one hundred thousand pesos" is limited by law "to claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance, . . ." Hence, this power does not cover the relationship affecting the insurance company and its agents but is limited to adjudicating claims and complaints filed by the insured against the insurance company.

Private respondent Ramon Paterno filed a letter of complaint before the respondent commissioner alleging certain problems encountered by agents, supervisors, managers and public consumers of the Philippine American Life Insurance Company (Philamlife) as a result of certain practices by said company. Petitioner asked for clarifications on what specific acts are complained (Bill of Particulars) of by Paterno. the commissioner took cognizance of the case and set the hearing.

DISCUSSION

the court explained in arriving at this ruling that The Insurance Code does not have provisions governing the relations between insurance companies and their agents. It follows that the Insurance Commissioner cannot, in the exercise of its quasi-judicial powers, assume jurisdiction over controversies between the insurance companies and their agents. in the cases of Great Pacific Life Assurance Corporation v. Judico, 180 SCRA 445 (1989), and Investment Planning Corporation of the Philippines v. Social Security Commission , 21 SCRA 904 (1962), an insurance company may have two classes of agents who sell its insurance policies: (1) salaried employees who keep definite hours and work under the control and supervision of the company; and (2) registered representatives, who work on commission basis. Under the first category, the relationship between the insurance company and its agents is governed by the Contract of Employment and the provisions of the Labor Code, while under the second category, the same is governed by the Contract of Agency and the provisions of the Civil Code on the Agency. Disputes involving the latter are cognizable by the regular courts.

ARGUMENTS FOR THE PETITIONER

Petitioner contends that the commissioner has no jurisdiction to entertain such complaint filed by paterno alleging anomalies in the agency contract between PHILAM and its agents, being cognizable by the regular courts

ARGUMENTS FOR THE RESPONDENT PAN MALAYAN APPEALS INSURANCE CORPORATION VS COUR OF

Private respondent contends that the Insurance Commissioner has jurisdiction to take cognizance of the complaint in the exercise of its quasi-judicial powers. The Solicitor General, upholding the jurisdiction of the Insurance Commissioner, claims that under Sections 414 and 415 of the Insurance Code, the Commissioner has authority to nullify the alleged illegal provisions of the Contract of Agency.

G.R. NO. 81026 APRIL 03, 1990 (CASE # 39)

FACTS

On December 10, 1985, PANMALAY filed a complaint for damages with the RTC of Makati against private respondents Erlinda Fabie and her driver. PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car with plate No. DDZ-431 and registered in the name of Canlubang Automotive Resources Corporation [CANLUBANG]; that on May 26, 1985, due to the "carelessness, recklessness, and imprudence" of the unknown driver of a pick-up with plate no. PCR-220, the insured car was hit and suffered damages in the amount of P42,052.00; that PANMALAY defrayed the cost of repair of the insured car and, therefore, was subrogated to the rights of CANLUBANG against the driver of the pick-up and his employer, Erlinda Fabie; and that, despite repeated demands, defendants, failed and refused to pay the claim of PANMALAY.

claim. It accrues simply upon payment of the insurance claim by the insurer [Compania Maritima v. Insurance Company of North America, G.R. No. L-18965, October 30, 1964, 12 SCRA 213; Fireman's Fund Insurance Company v. Jamilla & Company, Inc., G.R. No. L-27427, April 7, 1976, 70 SCRA 323].

DISCUSSION The court explained that although there are a few recognized exceptions to this rule. For instance, if the assured by his own act releases the wrongdoer or third party liable for the loss or damage, from liability, the insurer's right of subrogation is defeated [Phoenix Ins. Co. of Brooklyn v. Erie & Western Transport, Co., 117 US 312, 29 L. Ed. 873 (1886); Insurance Company of North America v. Elgin, Joliet & Eastern Railway Co., 229 F 2d 705 (1956)]. Similarly, where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's claim for loss, the settlement is binding on both the assured and the insurer, and the latter cannot bring an action against the carrier on his right of subrogation [McCarthy v. Barber Steamship Lines, Inc., 45 Phil. 488 (1923)]. And where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary payment", the former has no right of subrogation against the third party liable for the loss [Sveriges Angfartygs Assurans Forening v. Qua Chee Gan, G. R. No. L-22146, September 5, 1967, 21 SCRA 12].None of the exceptions are availing in the present case.

ARGUMENTS FOR THE PETITIONER

Petitioner contends that pursuant to a motor vehicle insurance policy, it had indemnified CANLUBANG for the damage to the insured car resulting from a traffic accident allegedly caused by the negligence of the driver of private respondent, Erlinda Fabie. PANMALAY contended, therefore, that its cause of action against private respondents was anchored upon Article 2207 of the Civil Code, which reads: 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. . . .

ANDRES VS. THE CROWN LIFE INSURANCE COMPANY G.R. NO. L 10874 JANUARY 28 1958 (CASE # 40)

FACTS On April 20, 1952, Rufino D. Andres filed a complaint in the Court of First Instance of Ilocos Norte against the Crown Life Insurance Company for the recovery of the amount of P5,000, as the face value of a joint 20-year endowment insurance policy issued in favor of the plaintiff Rufino D. Andres and his wife Severa G. Andres on the 13th of February, 1950, by said insurance company. On Jun 7, 1951, Rufino Andres presented his death claim as survivor-beneficiary of the deceased Severa G. Andres, who died May 3, 1951. Payment having been denied by the insurance company on April 20, 1952, this case was instituted.

ARGUMENTS FOR THE RESPONDENT

private respondents contends that PANMALAY had no cause of action against them. They argued 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.

ARGUMENTS FOR THE PETITIONER ISSUE: Whether petitioner insurance company has a cause of action against private respondent RULING OF THE COURT If you cannot pay the full amount immediately, send as large an amount as possible and advise us how soon you expect to be able to pay the balance. Every consideration will be given to your request consistent with the company's regulations (Exhibit 4). If you are unable to cover this amount in full, send us as big an amount as you are able and we will work out an adjustment most beneficial to you Furthermore petitioner paid a partial amount of the balance due Petitioner contends that although the policy has lapsed, the company waived its right to collect the payment of the premiums as communicated by the latter in a letter;

Yes. Article 2207 of the Civil Code is 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, then 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. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of

ARGUMENTS FOR THE RESPONDENTS Respondent contends that since the policy has lapsed, the insured is no longer protected by the policy the Company did not consider the partial payment as sufficient consideration for the reinstatement. Petitioners failure to remit the balance before the death of his wife operated to deprive him of any right to waive the policy and recover the face value thereof. ISSUE Whether there is a perfected contract of reinstatement after the policy lapsed due to non-payment of premiums? RULING OF THE COURT No. in the case of James McGuire vs. The Manufacturer's Life Insurance Co. (87 Phil,. 370, 48 Off. Gaz. [1], 114), it was held that The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon written application does not give the insured absolute right to such reinstatement by the mere filing of an application. The Company has the right to deny the reinstatement if it is not satisfied as to the insurability of the insured and if the latter does no pay all overdue premium and all other indebtedness to the Company. After the death of the insured the insurance Company cannot be compelled to entertain an application for reinstatement of the policy because the conditions precedent to reinstatement can no longer be determined and satisfied Respondent contends that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business in the Philippines. It is merely as association of vessel owners who have come together to provide mutual protection against liabilities incidental to ship owning. ARGUMENTS: Petitioner insists that Steamship Mutual is a P & I Club is engaged in the insurance business. To buttress its assertion, it sites the definition of a P & I club in Hyopsung Maritime Co.,Ltd. vs CA as an association composed of ship owners in generalwho band together for the specific purposes of providing insurance cover on a mutual basis against liabilities incidental to ship owning that the members incur in favor of third parties. It stresses that as a P & I Club, Steamship Mutuals primary purpose is to solicit and provide protection and indemnity coverage and for this purpose, it has engaged the services pioneer to act as its agent.

ISSUE: Whether or not Steamship Mutual, a Protection and Insurance Club, engaged in the business in the Philippines.

DISCUSSION The supreme court explained that the conditions set forth in the policy for reinstatement are the following: (a) application shall be made within three years from the date of lapse; (b) there should be a production of evidence of the good health of the insured: (c) if the rate of premium depends upon the age of the Beneficiary, there should likewise be a production of evidence of his or her good health; (d) there should be presented such other evidence of insurability at the date of application for reinstatement; (e) there should be no change which has taken place in such good health and insurability subsequent to the date of such application and before the policy is reinstated; and (f) all overdue premiums and other indebtedness in respect of the policy, together with interest at six per cent, compounded annually, should first be paid. The plaintiff-appellant did not comply with the last condition; for he only paid P100 (on account of the overdue semi-annual premium of P165.15) on February 20, 1951, before his wife's death (Stipulation, par. 7) ; and, despite the Company's reminders on April 14 and 27, he remitted the balance of P65 on May 5, 1951 (received by the Company's agency on May 11), two days after his wife died. On the face of such facts, the Company had the right to treat the contract as lapsed and refuse payment of the policy. WHITE GOLD MARINE SERVICES ,INC. VS. PIONEER INSURANCEAND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION G.R. No. L-44059, 28 October 1977

HELD: The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is not by what it is called. 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 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. By definition then, Steamship Mutual as a P and I Club is a mutual insurance association engaged in the marine insurance business.

DISCUSSION ON HOW THE SC RULED THE CASE A mutual insurance company is a cooperative enterprise where the members are both the insurer nd insured. the members all contribute, by a system of premiums or assessments, to the creation of fund from which all losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their interest. Additionally, mutual insurance associations, or clubs, provides three types of coverage, namely, protection and indemnity, war risk, and defense costs. GULF RESORT,INC CORPORATION VS PHILIPPINE CHARTER INSURANCE

G.R. No. 156167 May 16, 2005 FACTS: White Gold Marine Services, Inc. procured a protection and indemnity coverage for its vessels from the Steamship Mutual Underwriting Association Limited through Pioneer Insurance and Surety Corporation. 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 case against White Gold for collection of sum of money to recover the latters unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual Violated Sections 186 and 187, while Pioneer violated Sections 299 to 301 of the Insurance Code.

FACTS :

Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured originally with the American Home Assurance Company (AHAC). In the first 4 policies issued, the risks of loss from earthquake shock was extended only to petitioners

two swimming pools. Gulf Resorts agreed to insure with Phil Charter the properties covered by the AHAC policy provided that the policy wording and rates in said policy be copied in the policy to be issued by Phil Charter. Phil Charter issued Policy No. 31944 to Gulf Resorts covering the period of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of P45,159.92. the break-down of premiums shows that Gulf Resorts paid only P393.00 as premium against earthquake shock (ES). In Policy No. 31944 issued by defendant, the shock endorsement provided that In consideration of the payment by the insured to the company of the sum included additional premium the Company agrees, notwithstanding what is stated in the printed conditions of this policy due to the contrary, that this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake. In Exhibit "7-C" the word "included" above the underlined portion was deleted. On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiffs properties covered by Policy No. 31944 issued by defendant, including the two swimming pools in its Agoo Playa Resort were damaged.

in its policy were practically identical to its earlier policies, and there was no increase in the premium paid. AHAC-AIU, in a letter 19 by its representative Manuel C. Quijano, categorically stated that its previous policy, from which respondents policy was copied, covered only earthquake shock for the two swimming pools.

ISSUE: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and does not extend to all properties damaged therein

HELD: Yes, All the provisions and riders taken and interpreted together, indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only. Aninsurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk attaches. In the subject policy, no premium payments were made with regard to earthquake shock coverage except on the two swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. This is consistent with the history of

petitionersinsurance policies with AHAC.

Petitioner advised respondent that it would be making a claim under its Insurance Policy 31944 for damages on its properties. Respondent denied petitioners claim on the ground that its insurance policy only afforded earthquake shock coverage to the twoswimming pools of the resort. The trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that petitioner paid only a premium of P393.00 against the peril of earthquake shock, the same premium it had paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC. 2. The insured is subject to a risk of loss by the happening of the designated peril; 3. The insurer assumes the risk; 4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and 5. In consideration of the insurer's promise, the insured pays a premium. An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril.27 In fire, casualty, and marine insurance, the premium payable becomes a debt as soon as the risk attaches.28 In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on the two swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. DISCUSSION ON HOW THE SC RULED THE CASE A careful examination of the premium recapitulation will show that it is the clear intent of the parties to extend earthquake shock coverage only to the two swimming pools. Section 2(1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. Thus, an insurance contract exists where the following elements concur: 1. The insured has an insurable interest;

ARGUMENTS: Petitioner contends: First, that the policys earthquake shock endorsement clearly covers all of the properties insured and not only the swimming pools. It used the words "any property insured by this policy," and it should be interpreted as all inclusive. Respondent Arguments: None of the previous policies issued by AHAC-AIU from 1983 to 1990 explicitly extended coverage against earthquake shock to petitioners insured properties other than on the two swimming pools. Petitioner admitted that from 1984 to 1988, only the two swimming pools were insured against earthquake shock. From 1988 until 1990, the provisions

This is consistent with the history of petitioners previous insurance policies from AHAC-AIU. As borne out by petitioners witnesses. SUMMIT GUARANTY & INSURANCE COMPANY, INC ., vs.THE HONORABLE GREGORIA C. ARNALDO, in her capacity as Insurance Commissioner, and FGU INSURANCE CORPORATION G.R. No. L-48546 February 29, 1988

DELSAN TRANSPORT LINES, vs. THE HON. COURT OF APPEALS and ASSURANCE CORPORATION, respondents. G.R. No. 127897 FACTS: November 15, 2001

INC., petitioner, AMERICAN HOME

FACTS: As a result of a vehicular accident that happened on November 26,1976 whereby a Ford Pick-up with Plate No. UC-5925 Phil. '76 owned by Marcos Olaso was bumped by a cargo truck with Plate No. OY-783 then owned by Alberto Floralde, FGU insurance poration FGU by reason of Motor Vehicle Insurance Policy No. IC-VF-07185 paid Olaso the sum of P 2,817.50 as its share in the repair cost of the said Ford Pick-up. Having thus been subrogated to the rights and causes of action of said Olaso in the said amount FGU formally demanded payment of said amount from Floralde and attempted to verify Floralde's insurance carrier. Floralde failed to reveal his insurance carrier. In the early part of 1978 FGU was able to ascertain the Identity of Floralde's insurance carrier to be the Summit Guaranty and Insurance Company, Inc. (Summit). On February 22,1978 FGU wrote to the insurance commissioner requesting for a conference with Summit and demanded from Summit through counsel on February 28,1978 the payment of the damages sustained by the car of Olaso but to no avail. Hence on May 22,1978 FGU filed IC Case No. 825 in the Insurance Commissioner's Office against Summit for recovery of said amount. ARGUMENTS: Petitioner squarely brings into focus the provisions of Section 384 of PD 612, the Insurance Code, Petitioner company contends that the two periods prescribed in the aforementioned law that is, the six-month period for filing the notice of claim and the one-year period for bringing an action or suit are mandatory and must always concur. Respondent FGU, however, contends that the said one-year prescriptive period can not apply to it because it was merely subrogated to the rights of Olaso. Respondent Commissioner invites attention to the phrase "in proper cases" in Section 384 of PD 612 and argues that the prescriptive period was interrupted upon the extrajudicial demand for payment made by FGU on petitioner ISSUE: Whether the claim of Insurance Corporation is barred by prescription under section 384 of PD No. 612. HELD: In the present case, it is not denied that an extrajudicial demand for payment was made by respondent FGU on petitioner but petitioner failed to respond to the same. Nevertheless the complaint was filed even before a denial of the claim was made by petitioner. For all legal purposes, the one-year prescriptive period provided for in Section 384 of the Insurance Code has not begun to run. The cause of action arises only and starts to run upon the denial of the claim by the insurance company. DISCUSSION ON HOW THE SC RULED THE CASE

The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private respondent, American Home Assurance Corporation. On August 14, 1986, MT Maysum set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.67) representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, the private respondent demanded of the petitioner the same amount it paid to Caltex.1wphi1.nt Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the Regional Trial Court of Makati City, Branch 137, for collection of a sum of money. ARGUMENTS: Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the Insurance Code of the Philippines, which states that in every marine insurance upon a ship or freight, or freightage, or upon any thin which is the subject of marine insurance there is an implied warranty by the shipper that the ship is seaworthy. Private respondent argues that the vessel was not seaworthy ISSUE: Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. HELD: The payment made by the private respondent for the insured value of the lost cargo operates as waiver of its (private respondent) right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessels seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier. DISCUSSION ON HOW THE SC RULED THE CASE

We find no merit in the contention of petitioner company. There is absolutely nothing in the law which mandates that the two periods must always concur. On the contrary, it is very clear that the one-year period is only required 'in proper cases.' It appears that petitioner company disregarded this very significant phrase when it made its own interpretation of the law. Had the lawmakers intended it to be the way petitioner company assumes it to be, then the phrase in proper cases' would not have been inserted.

The right of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice and good conscience ought to pay.9 It is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance company of the insurance claim.10 Consequently, the payment made by the private respondent (insurer) to Caltex (assured) operates as an equitable assignment to the

former of all the remedies which the latter may have against the petitioner. PERLA COMPANIA DE SEGUROS, INC., PETITIONER, V. HON. CONSTANTE A. ANCHETA., RESPONDENTS. GR L-49699. AUGUST 8, 1988 Case no. 43 Facts: IH Scout in which private respondents were riding collided with Superlines bus, private respondent sustained physical injuries in varying degrees of gravity. Thus, they filed a complaint for damages against Superlines, the bus driver and petitioner, the insurer of the bus. The judge ordered petitioner to pay private respondents the 'no fault indemnity in the amount of P5,000. Petitioner contended that under Sec. 378 of the Insurance Code, the insurer liable to pay the P5,000.00 is the insurer of the vehicle in which private respondents were riding, not petitioner. Motions for Reconsiderations were denied. Issue: whether or not petitioner is the insurer liable to indemnify private respondents under Sec. 378 of the Insurance Code. Ruling: under the "no fault indemnity" provision, where proof of fault or negligence is not necessary for payment of any claim for death Or injury to a passenger or a third party, are established: 1. A claim may be made against one motor vehicle only. 2. If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the vehicle. in which he is riding, mounting or dismounting from. 3. In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall lie against the insurer of the directly offending vehicle. 4. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained. The claimant is not free to choose from which insurer he will claim the "no fault indemnity," as the law, by using the word "shall, makes it mandatory that the claim be made against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. That said vehicle might not be the one that caused the accident is of no moment since the law itself provides that the party paying the claim under Sec. 378 may recover against the owner of the vehicle responsible for the accident. This is precisely the essence of "no fault indemnity" insurance which was introduced to and made part of our laws in order to provide victims of vehicular accidents or their heirs immediate compensation, although in a limited amount, pending final determination of who is responsible for the accident and liable for the victims'injuries or death. Irrespective of whether or not fault or negligence lies with the driver of the Superlines bus, as private respondents were not occupants of the bus, they cannot claim the "no fault indemnity" provided in Sec. 378 from petitioner. The claim should be made against the insurer of the vehicle they were riding.

THE THEFT CLAUSE BECAUSE IT IS NOT EVIDENT THAT THE PERSON WHO TOOK THE CAR FOR A JOYRIDE INTENDS TO PERMANENTLY DEPRIVE THE INSURED OF HIS/ HER CAR.

ISSUE: WHETHER OR NOT THE INSURER COMPANY SHOULD PAY THE SAID CLAIM. RULING: YES. WHERE THE INSUREDS CAR IS WRONGFULLY TAKEN WITHOUT THE INSUREDS CONSENT FROM THE CAR SERVICE AND REPAIR SHOP TO WHOM IT HAD BEEN ENTRUSTED FOR CHECK-UP AND REPAIRS (ASSUMING THAT SUCH TAKING WAS FOR A JOY RIDE, IN THE COURSE OF WHICH IT WAS TOTALLY SMASHED IN AN ACCIDENT), RESPONDENT INSURER IS LIABLE AND
MUST PAY INSURED FOR THE TOTAL LOSS OF THE INSURED VEHICLE UNDER THE THEFT CLAUSE OF THE POLICY. ASSUMING, DESPITE THE TOTALLY INADEQUATE EVIDENCE, THAT THE TAKING WAS TEMPORARY AND FOR A JOY RIDE, THE COURT SUSTAINS AS THE BETTER VIEW THAT WHICH HOLDS THAT WHEN A PERSON, EITHER WITH THE OBJECT OF GOING TO A CERTAIN PLACE, OR LEARNING HOW TO DRIVE, OR ENJOYING A FREE RIDE, TAKES POSSESSION OF A VEHICLE BELONGING TO ANOTHER, WITHOUT THE CONSENT OF ITS OWNER, HE IS GUILTY OF THEFT BECAUSE BY TAKING POSSESSION OF THE PERSONAL PROPERTY BELONGING TO ANOTHER AND USING IT, HIS INTENT TO GAIN IS EVIDENT SINCE HE DERIVES THERE FROM UTILITY, SATISFACTION, ENJOYMENT AND PLEASURE. ACCORDINGLY, THE APPEALED DECISION IS SET ASIDE AND JUDGMENT IS HEREBY RENDERED SENTENCING PRIVATE RESPONDENT TO PAY PETITIONER THE SUM OF P35,000.00 WITH LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULL PAYMENT IS MADE AND TO PAY THE COSTS OF SUIT.

HEIRS OF LORETO C. MARAMAG, PETITIONERS V. EVA VERNA DE GUZMAN ET AL., RESPONDENTS G R 181132. JULY 5, 2009 Case no. 45 Facts: Petitioners filed a writ of preliminary injunction alleging that they were the legitimate wife and children of Loreto Maramag (Loreto), while respondents were Loretos illegitimate family; Eva de Guzman Maramag (Eva) was a concubine of Loreto and a suspect in the killing of the latter, thus she is disqualified to receive any proceeds from his insurance policies and the illegitimate children of Loreto Odessa, Karl, Brian and Trisha Angelie were entitled only to one-half of the legitime children, thus petitioners could not be deprived of their legitime. The insurance company claimed that it was bound to honor the insurance policies designating the children of Loreto with Eva as beneficiaries pursuant to Section 53 of the Insurance and not to the estate or to the heirs of the insured. The RTC granted the petition which states that civil code does not apply. It is very clear under Sec. 53 thereof that the insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made, unless otherwise specified in the policy. The CA dismissed the case for lack of jurisdiction for filing beyond reglementary period. Issue: W/N Eva can claim even though prohibited under the civil code against donation.

VILLACORTA V. INSURANCE COMMISSION, PETITIONER AND EMPIRE INSURANCE COMPANY, RESPONDENTS G.R. NO. L-54171 OCTOBER 28, 1980 Case no. 44 FACTS: PETITIONER VILLACORTA HAD HER COLT LANCER CAR INSURED WITH EMPIRE INSURANCE COMPANY AGAINST OWN DAMAGE, THEFT AND 3RD PARTY LIABILITY. WHILE THE CAR WAS IN THE REPAIR SHOP, ONE OF THE
EMPLOYEES OF THE SAID REPAIR SHOP TOOK IT OUT FOR A JOYRIDE AFTER WHICH IT FIGURED IN A VEHICULAR ACCIDENT. THIS RESULTED TO THE DEATH OF THE DRIVER AND SOME OF THE PASSENGERS AS WELL AS TO EXTENSIVE DAMAGE TO THE CAR. VILLACORTA FILED A CLAIM FOR TOTAL LOSS WITH THE SAID INSURANCE COMPANY. HOWEVER, IT DENIED THE CLAIM ON THE GROUND THAT THE ACCIDENT DID NOT FALL WITHIN THE PROVISIONS OF THE POLICY EITHER FOR THE OWN DAMAGE OR THEFT COVERAGE, INVOKING THE POLICY PROVISION ON AUTHORIZED DRIVER CLAUSE WHICH STATES THAT THE POLICY LIMITS THE USE OF THE INSURED VEHICLE TO TWO (2) PERSONS ONLY, NAMELY: THE INSURED HIMSELF OR ANY PERSON ON HIS (INSURED'S) PERMISSION. THIS WAS UPHELD BY THE INSURANCE COMMISSION FURTHER STATING THAT THE CAR WAS NOT STOLEN AND THEREFORE NOT COVERED BY

Ruling: YES. Petition is DENIED. Any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy of the person who cannot make any donation to him. If a concubine is made the beneficiary, it is believed that the insurance contract will still remain valid, but the indemnity must go to the legal heirs and not to the concubine, for evidently, what is prohibited under Art. 2012 is the naming of the improper beneficiary. SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy.Only persons entitled to claim the insurance proceeds are either the insured, if still alive; or the beneficiary, if the insured is already deceased, upon the maturation of the policy. The revocation of Eva as a beneficiary in one policy and her disqualification as such in another are of no moment considering that the designation of the illegitimate children as beneficiaries in Loretos insurance policies remains valid. Because no legal proscription exists in

naming as beneficiaries the children of illicit relationships by the insured, the shares of Eva in the insurance proceeds, whether forfeited by the court in view of the prohibition on donations under Article 739 of the Civil Code or by the insurers themselves for reasons based on the insurance contracts, must be awarded to the said illegitimate children, the designated beneficiaries, to the exclusion of petitioners. It is only in cases where the insured has not designated any beneficiary, or when the designated beneficiary is disqualified by law to receive the proceeds, that the insurance policy proceeds shall redound to the benefit of the estate of the insured. ETERNAL GARDENS VS PHILIPPINE AMERICAN LIFE INSURANCE G.R. NO. 166245 APRIL 9, 2008 FACTS: RESPONDENT PHILIPPINE AMERICAN LIFE INSURANCE COMPANY (PHILAMLIFE) ENTERED INTO A CREDITOR GROUP LIFE POLICY WITH PETITIONER ETERNAL GARDENS MEMORIAL PARK CORPORATION (ETERNAL). UNDER THE POLICY, THE CLIENTS OF ETERNAL WHO PURCHASED
BURIAL LOTS FROM IT ON INSTALLMENT BASIS WOULD BE INSURED BY PHILAMLIFE. ETERNAL WAS REQUIRED UNDER THE POLICY TO SUBMIT TO PHILAMLIFE A LIST OF ALL NEW LOT PURCHASERS, TOGETHER WITH A COPY OF THE APPLICATION OF EACH PURCHASER, AND THE AMOUNTS OF THE RESPECTIVE UNPAID BALANCES OF ALL INSURED LOT PURCHASERS. ETERNAL COMPLIED BY SUBMITTING A LETTER CONTAINING A LIST OF INSURABLE BALANCES OF ITS LOT BUYERS, ONE OF THOSE INCLUDED A CERTAIN JOHN CHUANG WHO SUBSEQUENTLY DIED.

ARGUMENTS: THE AGENT OF FIELDMENS CONTENDS THAT SINCE THEY ARE NOT GOVERNMENT-OWNED, THEY COULD DO WHAT THEY PLEASE WHENEVER THEY BELIEVE A VEHICLE IS INSURABLE. SONGCO, ON THE OTHER HAND, ASSERTS THAT THEY SHOULD BE ENTITLED FOR THE PAYMENT. ISSUE: WHETHER OR NOT FIELDMENS SHOULD BE HELD LIABLE. RULING OF THE COURT: YES. IT IS A WELL-SETTLED JURISPRUDENCE THAT WHERE INEQUITABLE CONDUCT IS SHOWN BY AN INSURANCE FIRM, IT IS "ESTOPPED FROM ENFORCING FORFEITURES IN ITS FAVOR, IN ORDER TO FORESTALL FRAUD OR IMPOSITION ON 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.

AS STATED IN QUA CHEE GAN CASE, 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.

ETERNAL GARDENS COMPLIED WITH THE REQUIREMENTS SET FORTH BY PHILAMLIFE. HOWEVER, ONE YEAR HAD ALREADY ELAPSED YET PHILAMLIFE STILL HAS NO REPLY. THIS PROMPTED ETERNAL TO DEMAND FROM PHILAMLIFE THE BALANCE DUE TO CHUANG. ARGUMENTS: PHILAMLIFE DENIES THE CLAIM OF ETERNAL CONTENDING THAT NO
APPLICATION WAS FILED IN THEIR OFFICE PRIOR TO THE DEATH AS THE POLICY STATES THAT "THERE SHALL BE NO INSURANCE IF THE APPLICATION IS NOT APPROVED BY THE COMPANY." THUS, THEY ARE NOT LIABLE.

SERVICEWIDE SPECIALIST VS COURT OF APPEALS G.R. NO. 110597 MAY 8, 1996 FACTS: PRIVATE RESPONDENT SPOUSES TRINIDAD PURCHASED AN ISUZU GEMINI CAR ON INSTALLMENTS FROM AUTOWORLD SALES CORPORATION. TO SECURE PAYMENT, TRINIDADS EXECUTED A PROMISSORY NOTE AND A DEED OF CHATTEL MORTGAGE IN FAVOUR OF AUTOWORLD. THE LATTER ASSIGNED ITS INTEREST TO FILINVEST, A FACT KNOWN TO TRINIDADS. THUS, TRINIDADS ISSUED POSTDATED CHECKS TO FULLY PAY THE CAR IN FAVOUR OF FILINVEST. FILINVEST ASSIGNED ALL ITS RIGHTS IN FAVOUR OF SERVICEWIDE WHO DEMANDED PAYMENT FROM TRINIDADS. WHEN THE LATTER REFUSED TO PAY, SERVICEWIDE FILED WITH THE MUNICIPAL TRIAL COURT AN ACTION FOR REPLEVIN AND DAMAGES. MTC RULED IN FAVOR OF SERVICEWIDE. RTC REVERSED THE DECISION. CA AFFIRMED THE DECISION OF THE RTC. HENCE, THIS PETITION. ARGUMENTS: PETITIONER CONTENDS THAT THE MATTER ABOUT THE NOTICE IS DEEMED
WAIVED BY PRIVATE RESPONDENTS BECAUSE THE CAR SHOULD BE FULLY COVERED AT ALL TIMES. PETITIONER CLAIMS THAT IF, AS STATED IN THE CHATTEL MORTGAGE, PRIVATE RESPONDENTS FAILED TO RENEW THE INSURANCE, PETITIONER IS ENTITLED TO RENEW THE SAME FOR THE ACCOUNT OF PRIVATE RESPONDENTS WITHOUT ANY NOTICE TO THEM.

ETERNAL CLAIMS THAT THE EVIDENCE THAT IT PRESENTED BEFORE THE


TRIAL COURT SUPPORTS ITS CONTENTION THAT IT SUBMITTED A COPY OF THE INSURANCE APPLICATION OF CHUANG BEFORE HIS DEATH.

ISSUE: WHETHER OR NOT PHILAMLIFE RECEIVED THE APPLICATION PRIOR TO THE DEATH OF CHUANG AND THEREBY BE HELD LIABLE. RULING OF THE COURT: YES. INSURANCE CONTRACTS ARE WHOLLY PREPARED BY THE INSURER WITH
VAST AMOUNTS OF EXPERIENCE IN THE INDUSTRY PURPOSEFULLY USED TO ITS ADVANTAGE. MORE OFTEN THAN NOT, INSURANCE CONTRACTS ARE CONTRACTS OF ADHESION CONTAINING TECHNICAL TERMS AND CONDITIONS OF THE INDUSTRY, CONFUSING IF AT ALL UNDERSTANDABLE TO LAYPERSONS, THAT ARE IMPOSED ON THOSE WHO WISH TO AVAIL OF INSURANCE. AS SUCH, INSURANCE CONTRACTS ARE IMBUED WITH PUBLIC INTEREST THAT MUST BE CONSIDERED WHENEVER THE RIGHTS AND OBLIGATIONS OF THE INSURER AND THE INSURED ARE TO BE DELINEATED. HENCE, IN ORDER TO PROTECT THE INTEREST OF INSURANCE APPLICANTS, INSURANCE COMPANIES MUST BE OBLIGATED TO ACT WITH HASTE UPON INSURANCE APPLICATIONS, TO EITHER DENY OR APPROVE THE SAME, OR OTHERWISE BE BOUND TO HONOR THE APPLICATION AS A VALID, BINDING, AND EFFECTIVE INSURANCE CONTRACT.

ISSUE: WHETHER OR NOT PETITIONER SHOULD HAVE APPLIED THE INSTALLMENT


PAYMENTS MADE BY PRIVATE RESPONDENTS FOR THE PAYMENT OF THE CAR TO THE PAYMENT OF THE INSURANCE PREMIUMS WITHOUT PRIOR NOTICE TO PRIVATE RESPONDENTS.

THUS, THE MERE INACTION OF THE INSURER DOES NOT TERMINATE THE CONTRACT. HAVING PROVED THAT PHILAMLIFE RECEIVED THE LETTER PRIOR
TO THE DEATH AND FAILURE ON THE PART OF THE LATTER TO PRODUCE EVIDENCE AGAINST IT, PHILAMLIFE IS DEEMED TO HAVE RECEIVED THE APPLICATION. FIELDMENS INSURANCE CO. VS. VDA DE SONGCO G.R. NO. 24833 SEPTEMBER 23, 1986

RULING OF THE COURT: NO. WHILE IT IS TRUE THAT THE CHATTEL MORTGAGE DOES NOT SAY THAT
NOTICE TO THE MORTGAGOR OF THE RENEWAL OF THE INSURANCE PREMIUM BY THE MORTGAGEE IS NECESSARY, AT THE SAME TIME, THERE IS NO PROVISION THAT AUTHORIZES PETITIONER TO APPLY THE PAYMENTS MADE TO IT FOR THE PAYMENT OF THE CHATTEL TO THE PAYMENT OF THE SAID PREMIUMS. FROM THE RECORDS OF THE CASE, IT IS CLEAR THAT PRIVATE RESPONDENTS HAD FULLY PAID FOR THE CAR. THIS FACT WAS NEVER REBUTTED BY PETITIONER. PETITIONER AS MORTGAGEE WAS NOT DUTYBOUND TO RENEW THE INSURANCE IN THE EVENT THAT PRIVATE RESPONDENTS FAILED TO DO SO; IT WAS MERELY OPTIONAL ON ITS PART.

FACTS: FEDERICO SONGCO, OWNER OF A PRIVATE JEEPNEY, WAS INDUCED BY THE AGENT OF FIELDMENS INSURANCE CO. TO APPLY FOR A COMMON CARRIERS INSURANCE POLICY WHICH WAS LATER RENEWED. DURING THE EFFECTIVITY OF THE RENEWED POLICY, THE JEEPNEY COLLIDED WITH A CAR RESULTING DEATH TO FEDERICO AND HIS SON. NOW, THE SURVIVING SPOUSE OF FEDERICO SEEKS RELIEF TO FIELDMENS. THE COMPANY REFUSED TO PAY.

AS TO THE ATTORNEYS FEES, ARTICLE 2208 OF THE CIVIL CODE ALLOWS ATTORNEY'S FEES TO BE AWARDED BY A COURT WHEN ITS CLAIMANT IS
COMPELLED TO LITIGATE WITH THIRD PERSONS OR TO INCUR EXPENSES TO

PROTECT HIS INTEREST BY REASON OF AN UNJUSTIFIED ACT OR OMISSION ON THE PART OF THE PARTY FROM WHOM IT IS SOUGHT. TO BE SURE, PRIVATE RESPONDENTS WERE FORCED TO LITIGATE TO PROTECT THEIR RIGHTS BUT AS WE HAVE PREVIOUSLY HELD: "WHERE NO SUFFICIENT SHOWING OF BAD FAITH WOULD BE REFLECTED IN A PARTY'S PERSISTENCE IN A CASE OTHER THAN AN ERRONEOUS CONVICTION OF THE RIGHTEOUSNESS OF HIS CAUSE, ATTORNEY'S FEE SHALL NOT BE RECOVERED AS COST."

255 of the NIRC which put taxes on insurance premiums paid by money, notes, credits or any substitutes for money.

Manufacturer contended that when it made premium loans or premium advances by virtue of the non-forfeiture clauses, it did not collect premiums within the meaning of the above sections of the law, and therefore it is not amendable to the tax provided.

ASIAN TERMINALS, INC., VS. MALAYAN INSURANCE CO. G.R. NO. 171406 APRIL 4, 2011 FACTS: THE SHIPMENT OF SHANDONG WEIFANG SODA ASH PLANT WAS INSURED WITH RESPONDENT MALAYAN INSURANCE COMPANY (MALAYAN). DUE TO THE UNLOADING DONE BY THE STEVEDORES OF PETITIONER ASIAN TERMINALS, INC., (ATI), A TOTAL OF 2,881 BAGS WERE IN BAD ORDER CONDITION DUE TO SPILLAGE, CAKING, AND HARDENING OF THE CONTENTS. MALAYAN, AS INSURER, PAID THE VALUE OF THE LOST/ DAMAGED CARGOES TO THE CONSIGNEE HOWEVER ASKS FOR REIMBURSEMENT TO ATI. ARGUMENTS: ATI CONTENDS THAT RESPONDENT HAS NO CAUSE OF ACTION BECAUSE IT
FAILED TO PRESENT THE INSURANCE CONTRACT OR POLICY COVERING THE SUBJECT SHIPMENT. THUS, PETITIONER SUBMITS THAT WITHOUT PROOF OF A VALID SUBROGATION, RESPONDENT IS NOT ENTITLED TO ANY REIMBURSEMENT.

ISSUE/S: (a) Whether or not premium advances made by plaintiffappellant under the automatic premium loan clause of its policies are "premium collected" by the Company subject to tax (b) Whether or not, in the application of the automatic premium loan clause of plaintiff-appellant's policies, there is "payment in money, notes, credit, or any substitutes for money

MALAYAN, ON THE OTHER HAND, ARGUES THAT UNDER PREVAILING JURISPRUDENCE, PRESENTATION OF THE INSURANCE POLICY IS NOT INDISPENSABLE. RESPONDENT FURTHER AVERS THAT "THE RIGHT OF SUBROGATION HAS ITS ROOTS IN EQUITY - IT IS DESIGNED TO PROMOTE AND
TO ACCOMPLISH JUSTICE AND IS THE MODE WHICH EQUITY ADOPTS TO COMPEL THE ULTIMATE PAYMENT OF A DEBT BY ONE WHO IN JUSTICE, EQUITY AND GOOD CONSCIENCE OUGHT TO PAY."

RULING OF THE COURT: BOTH IN AFFIRMATIVE. RATIONALE OF THE COURT BY CITING AN INSTANCE: 1. A person secures a 20-years endowment policy for P5,000 from Manufacturers and pays an annual premium of P250. He pays the first ten yearly premiums amounting to P2,500 and on this amount plaintiffappellant pays the taxes. Also, the cash value of said policy after the payment of the 10th annual premium amounts to P1,000." When on the eleventh year the annual premium fell due and the insured remitted no money within the grace period, the insurer treated the premium then overdue as paid from the cash value, the amount being loan to the policyholder who could discharge it at anytime with interest at 6 per cent. The insurance contract, therefore, continued in force for the eleventh year. Under the circumstances described, did the insurer collect the amount of P250 as the annual premium for the eleventh year on the said policy? In effect the Manufacturers Life Insurance Co. loaned to the person P250

ISSUE: WHETHER OR NOT MALAYAN HAS A RIGHT OF RELIEF AGAINST ATI. RULING: YES. Non-presentation of the insurance contract or policy is not necessarily fatal. The subrogation receipt, by itself, is sufficient to establish not only the relationship of insurer and the assured shipper of the lost cargo, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. Since there was no issue regarding the validity of the insurance contract or policy, or any provision thereof, respondent had no reason to present the insurance contract or policy as evidence during the trial. THE MANUFACTURERS LIFE INSURANCE CO vs. BIBIANO L. MEER, in the capacity as Collector of Internal Revenue FACTS: Manufacturer Life Insurance Company is a corporation duly organized in Canada with head office at Toronto. It is duly registered and licensed to engage in life insurance business in the Philippines, and maintains a branch office in Manila. It was engaged in such business in the Philippines for more than five years before and including the year 1941. But due to the exigencies of the war it closed the branch office at Manila during 1942 up to September 1945. In the course of its operations before the war, plaintiff issued a number of life insurance policies in the Philippines containing stipulations referred to as non-forfeiture clauses. Since the insured failed to pay from 1942 to 1946, the company applied the provision of the automatic premium loan clauses; and the net amount of premiums so advanced or loaned totaled P1,069,254.98. On this sum the defendant Collector of Internal Revenue assessed P17,917.12. The assessment was made pursuant to section

and the latter in turn paid with that sum the annual premium on his policy. The Company therefore collected the premium for the eleventh year. "How could there be such a collection when insurer becomes a creditor, acquires a lien on the policy and is entitled to collect interest on the amount of the unpaid premiums?". Wittingly, the "premium" and the "loan" have been interchanged in the argument. The insurer "became a creditor" of the loan, but not of the premium that had already been paid. And it is entitled to collect interest on the loan, not on the premium. The insured paid the premium for the eleventh; but in turn he became a debtor of the company for the sum of P250. This debt he could repay either by later remitting the money to the insurer or by letting the cash

value compensate for it. The debt may also be deducted from the amount of the policy should he die thereafter during the continuance of the policy. There was new credit for the advances made. True, the company could not sue the insured to enforce that credit. But it has means of satisfaction out of the cash surrender value. Here again it may be urged that if the credit is paid out of the cash surrender value, there were no new funds added to the company's assets. Cash surrender value "as applied to life insurance policy, is the amount of money the company agrees to pay to the holder of the policy if he surrenders it and releases his claims upon it. The more premiums the insured has paid the greater will be the surrender value; but the surrender value is always a lesser sum than the total amount of premiums paid." The cash value or cash surrender value is therefore an amount which the insurance company holds in trust for the insured to be delivered to him upon demand. It is therefore a liability of the company to the insured. Now then, when the company's credit for advances is paid out of the cash value or cash surrender value, that value and the company's liability is thereby dismissed. Consequently, the net assets of the insurance company increase.

claimed that Ang violated the 3 percent limit by placing hazardous goods to as high as 39 percent of all the goods stored in the building. His suit to recover was granted by the trial court. ISSUE: Whether a warranty referred to in the policy as forming part of the contract of insurance and in the form of a rider to the insurance policy, is null and void because not complying with the Philippine Insurance Act RULING OF THE COURT The Insurance Act, Section 65, taken from California law, states: "Every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making a part of it." Warranty F, indemnifying for a value of Php 20,000 and pasted on the left margin of the policy stated: It is hereby declared and agreed that during the currency of this policy no hazardous goods be stored in the Building to which this insurance applies or in any building communicating therewith, provided, always, however, that the Insured be permitted to stored a small quantity of the hazardous goods specified below, but not exceeding in all 3 per cent of the total value of the whole of the goods or merchandise contained in said warehouse, viz; . . . . Also, the court stated a book that said, "any express warranty or

2.

The insurer agreed to consider the premium paid on the strength of the automatic loan. The premium was paid by means of a "note" or "credit" or "other substitute for money" and the taxes due because section 255 above quoted levies taxes according to the total premiums collected by the insurer "whether such premiums are paid in money, notes, credits or any substitutes for money.

condition is always a part of the policy, but, like any other part of an express contract, may be written in the margin, or contained in proposals or documents expressly referred to in the policy, and so made a part of it." It is well settled that a rider attached to a policy is a part of the contract, to the same extent and with like effect as it actually embodied therein. In the second place, it is equally well settled that an express

ANG GIOK CHIP, vs. SPRINGFIELD FIRE & MARINE INSURANCE COMPANY

warranty must appear upon the face of the policy, or be clearly incorporated therein and made a part thereof by explicit reference, or by words clearly evidencing such intention. The court concluded that Warranty F is contained in the policy itself, because by the contract of insurance agreed to by the parties it was made to be a part. It wasnt a separate instrument agreed to by the parties. The receipt of the policy by the insured without objection binds him. It was his duty to read the policy and know its terms. He also never chose to accept a different policy by considering the earlier one as a mistake.

FACTS: Ang Giok Chip doing business under the name and style of Hua Bee Kong Si was formerly the owner of a warehouse situated at No. 643 Calle Reina Regente, City of Manila. The contents of the warehouse were insured with the three insurance companies for the total sum of P60,000. One insurance policy, in the amount of P10,000, was taken out with the Springfield Fire & Marine Insurance Company. The warehouse was destroyed by fire on January 11, 1928, while the policy issued by the latter company was in force. The insurance company interposed its defense on a rider in the policy in the form of Warranty F, fixing the amount of hazardous good that can be stored in a building to be covered by the insurance. They

PIONEER INSURANCE AND SURETY CORPORATION vs. OLIVA YAP

The endorsement shows the clear intention of the parties to recognize on the date the endorsement was made, the existence of only one co-insurance, the Northwest one. The finding of the Court of Appeals that the Great American Insurance policy was substituted by the

FACTS: Respondent Oliva Yap was the owner of a store in a two-storey building located at No. 856 Juan Luna Street, Manila, where in 1962 she sold shopping bags and footwear, such as shoes, sandals and step-ins. Chua Soon Poon Oliva Yap's son-in-law, was in charge of the store. Yap took out a Fire Insurance Policy No. 4216 from Pioneer Insurance with a value of P25,000.00 covering her stocks, office furniture, fixtures and fittings. Among the conditions in the policy executed by the parties are the following: unless such notice be given and the particulars of such insurance or insurances be stated in, or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this Policy shall be forfeited Any false declaration or breach or this condition will render this policy null and void.

Federal Insurance policy is indeed contrary to said stipulation. Other insurance without the consent of Pioneer would avoid the contract. It required no affirmative act of election on the part of the company to make operative the clause avoiding the contract, wherever the specified conditions should occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance. PIONEER vs. THE HON. COURT OF APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC., (BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM FACTS: In 1965, Jacob S. Lim was engaged in the airline business as INSURANCE & SURETY CORPORATION

Another insurance policy for P20,000.00 issued by Great American covering the same properties. The endorsement recognized co-insurance by Northwest for the same value. Oliva Yap took out another fire insurance policy for P20,000.00 covering the same properties from the Federal Insurance Company, Inc., which was procured without notice to and the written consent of Pioneer. A fire broke out in the building, and the store was burned. Yap filed an insurance claim, but the same was denied for a breach. Oliva Yap filed a case for payment of the face value of her fire insurance policy. The insurance company refused to pay because she never informed Pioneer of another insurer. The trial court decided in favor of Yap. The CA affirmed.

owner-operator of Southern Air Lines (SAL) a single proprietorship. On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract (Exhibit A) for the sale and purchase of two (2) DC-3A Type aircrafts and one (1) set of necessary spare parts for the total agreed price of US $109,000.00 to be paid in installments. One DC-3 Aircraft with Registry No. PIC-718, arrived in Manila on June 7,1965 while the other aircraft, arrived in Manila on July 18,1965. On May 22, 1965, Pioneer Insurance and Surety Corporation (Pioneer, petitioner in G.R. No. 84197) as surety executed and issued its Surety Bond No. 6639 (Exhibit C) in favor of JDA, in behalf of its principal, Lim, for the balance price of the aircrafts and spare parts. On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts. The deed (Exhibit D) was duly registered with the Office of the Register of Deeds of the City of Manila and with the Civil Aeronautics Administration pursuant to the Chattel Mortgage Law and the Civil Aeronautics Law

ISSUE: Whether or not petitioner should be absolved from liability on Fire Insurance Policy No. 4219 on account of any violation by respondent Yap of the co-insurance clause therein. RULING OF THE COURT: There was a violation by respondent Oliva Yap of the coinsurance clause contained in Policy No. 4219 that resulted in the avoidance of petitioner's liability. The insurance policy for P20,000.00 issued by the Great American, ceased to be recognized by them as a co-insurance policy.

(Republic Act No. 776), respectively. Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety. Pioneer paid a total sum of P298,626.12.

Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage before the Sheriff of Davao City. The Cervanteses and Maglana, however, filed a third party claim alleging that they are co-owners of the aircrafts, On July 19, 1966, Pioneer filed an action for judicial foreclosure with an application for a writ of preliminary attachment against Lim and respondents, the Cervanteses, Bormaheco and Maglana. In their Answers, Maglana, Bormaheco and the Cervanteses filed cross-claims against Lim alleging that they were not privies to the

contracts signed by Lim and, by way of counterclaim, sought for damages for being exposed to litigation and for recovery of the sums of money they advanced to Lim for the purchase of the aircrafts in question. After trial on the merits, a decision was rendered holding Lim liable to pay Pioneer but dismissed Pioneer's complaint against all other defendants. The appellate court modified the trial court's decision in that the plaintiffs complaint against all the defendants was dismissed

In its complaint PHILAMGEN alleged that the sinking and total loss of "MV Asilda" and its cargo were due to the vessel's unseaworthiness as she was put to sea in an unstable condition. It further alleged that the vessel was improperly manned and that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list.FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and ownership over "MV Asilda" together with her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of Commerce. 2 Issue: WONPHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against FELMAN, the ship-owner.

ISSUE: Whether or not Pioneer is the real party in interest with regard to the portion of the indemnity paid.

Ruling of the Court: The court ruled in favor of PHILAMGEN. RULING OF THE COURT:

The real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured. Petitioner was not the real party in interest in the complaint therefore has no cause of action against the respondents.

Discussion on how the SC ruled the case:

Interpreting the aforesaid provision, we ruled in the case of Phil. Air Lines, Inc. v. Heald Lumber Co . (101 Phil. 1031 [1957]) which we subsequently applied in Manila Mahogany Manufacturing Corporation v. Court of Appeals(154 SCRA 650 [1987]):

Note that if a property is insured and the owner receives the indemnity from the insurer, it is provided in said article that the insurer is deemed subrogated to the rights of the insured against the wrongdoer and if the amount paid by the insurer does not fully cover the loss, then the aggrieved party is the one entitled to recover the deficiency. Evidently, under this legal provision, the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured.

It is generally held that in every marine insurance policy the assured impliedly warrants to the assurer that the vessel is seaworthy and such warranty is as much a term of the contract as if expressly written on the face of the policy. 12 Thus Sec. 113 of the Insurance Code provides that "(i)n every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of marine insurance, a warranty is implied that the ship is seaworthy." Under Sec. 114, a ship is "seaworthy when reasonably fit to perform the service, and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy." Thus it becomes the obligation of the cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy condition. He may have no control over the vessel but he has full control in the selection of the common carrier that will transport his goods. He also has full discretion in the choice of assurer that will underwrite a particular venture. The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances has dispensed with the usual warranty of worthiness. Paragraph 15 of the Marine Open Policy No. 100367-PAG reads "(t)he liberties as per Contract of Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter Party and/or Contract of Affreightment as between the Assured and the Company shall not prejudice the insurance. The seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted." 15 Having disposed of this matter, we move on to the legal basis for subrogation. PHILAMGEN's action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code which provides: Art. 2207. If the plaintiff's 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. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. The doctrine of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay. 19 Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring an action as subrogee against FELMAN. Having failed to

It is clear from the records that Pioneer sued in its own name and not as an attorney-in-fact of the reinsurer.

Case title: Philippine American General Insurance vs. Felman Shipping Lines Case number: GR 116940. June 11, 1997 Facts: Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola soft drink bottles to be transported from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu. 1 The shipment was insured with petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open Policy No. 100367-PAG. "MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening of the same day. At around eight forty-five the following morning, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1liter Coca-Cola soft drink bottles. The consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN. Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN.Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss. Consequently, PHILAMGEN sued the ship owner. Arguments:

rebut the presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola soft drink bottles is inevitable. Case Title: Commissioner vs. Lincoln Case Number: G.R. No. 119176 March 19, 2002

The "automatic increase clause" in the policy is in the nature of a conditional obligation under Article 1181, 8 by which the increase of the insurance coverage shall depend upon the happening of the event which constitutes the obligation. In the instant case, the additional insurance that took effect in 1984 was an obligation subject to a suspensive obligation,9 but still a part of the insurance sold to which private respondent was liable for the payment of the documentary stamp tax. The deficiency of documentary stamp tax imposed on private respondent is definitely not on the amount of the original insurance coverage, but on the increase of the amount insured upon the effectivity of the "Junior Estate Builder Policy." Case Title: Tibay vs. Co urt of Ap peals

Facts: Private respondent Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.) is a domestic corporation registered with the Securities and Exchange Commission and engaged in life insurance business. In the years prior to 1984, private respondent issued a special kind of life insurance policy known as the "Junior Estate Builder Policy," the distinguishing feature of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by petitioner only on the initial sum assured. Documentary stamp taxes were paid based only on the par value of P5,000,000.00 and not on the book value. Subsequently, petitioner issued deficiency documentary stamps tax assessment for the year 1984 corresponding to the amount of automatic increase of the sum assured on the policy issued by respondent, and (corresponding to the book value in excess of the par value of the stock dividends. Private respondent questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of Tax Argument: Petitioner claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction; and that, while no new policy was issued, the original policy was essentially re-issued when the additional obligation was assumed upon the effectivity of this "automatic increase clause" in 1984; hence, a deficiency assessment based on the additional insurance not covered in the main policy is in order.

Case Number: [GR 119655, 24 May 1996]

Facts: On 22 Januar y 1987, For tune Li fe and Genera l In surance Co., In c. (For tune) issued Fire Insuran ce Policy 136171 in favor of Violeta R. Tibay and/or Nicolas Roraldo on their twostorey residential building located at 5855 Zobel Street, Makati City, together with all their personal effects therein. The insurance was for P600, 000.00 covering the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the total premium of P2,983.50, petitioner Violeta Tibay only paid P600.00 thus leaving a considerable balance unpaid. On 8 March 1987 the insured build ing was comple tel y destroyed by fi re. Two days later Violeta Tibay paid the balance of the premium. On the same day, she filed with Fortune a claim on the fire insurance policy. Her claim was accordingly referred to its adjuster, Goodwill Adjustment Services,Inc. (GASI), which immediately wrote Violeta requesting her to furnish it with the necessary documents for the investigation and processing of her claim. Petitioner forthwith complied. On 28 March 1987 she signed a non-waiver agreement with GASI to the effect that any action taken by the companies or their representatives in investigating the claim made by the claimant for his loss which occurred at 5855 Zobel Roxas, Makati on 8March 1987, or in the investigating or ascertainment of the amount of actual cash value and loss, shall not waive or invalidate any condition of the policies of such companies held by said claimant, nor the rights of either or any of the parties to this agreement, and such action shall not be, or be claimed to be, an admission of liability on the part of said companies or any of them. In a letter Fortune denied the claim of Violeta for violation of Policy Condition 2 and of Section 77 of the Insurance Code. Efforts to settle the case before the Insurance Commission proved futile. Violeta and the other petitioners( Antonio Tiba y, Ofelia M . Roraldo, Victor ina M . Roraldo, Virgi lio M. Roraldo, M yrna M . Roraldo, and Rosabella M . Rora ldo) sued For tune for damages in the amoun t of the tota l coverage of the fire insurance policy plus 12% inter est per annum, P100,000.00 moral damages, and attorney's fees equivalent to 20% of the total claim

Issue: THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE IS A SINGLE AGREEMENT EMBODIED IN THE POLICY AND THAT THE AUTOMATIC INCREASE CLAUSE IS NOT A SEPARATE AGREEMENT, CONTRARY TO SECTION 49 OF THE INSURANCE CODE AND SECTION 183 OF THE REVENUE CODE THAT A RIDER, A CLAUSE IS PART OF THE POLICY. Ruling: The petition is impressed with merit. Discussion on how the SC ruled the case: The subject insurance policy at the time it was issued contained an "automatic increase clause." Although the clause was to take effect only in 1984, it was written into the policy at the time of its issuance. The distinctive feature of the "junior estate builder policy" called the "automatic increase clause" already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age. Here, although the automatic increase in the amount of life insurance coverage was to take effect later on, the date of its effectivity, as well as the amount of the increase, was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy.

Argument: Petitioners maintain otherwise. Insisting that FORTUNE is liable on the policy despite partial payment of the premium due and the express stipulation thereof to the contrary, petitioners rely heavily on the 1967 case of Philippine Phoenix and Insurance Co., Inc. v. Woodworks, Inc. 8 where the Court through Mr. Justice Arsenio P. Dizon sustained the ruling of the trial court that partial payment of the premium made the policy effective during the whole period of the policy. In that case, the insurance company commenced action against the

insured for the unpaid balance on a fire insurance policy. In its defense the insured claimed that nonpayment of premium produced the cancellation of the insurance contract.

Facts: Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus tachycardia." Mr. Canilang consulted the same doctor again on 3

Issue: Whether a fire insuran ce poli cy be va lid, binding and en forceable upon mere partial payment of premium..

August 1982 and this time was found to have "acute bronchitis." On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance policy with Grepalife naming his wife, as his beneficiary.

Held:

The SC answered in the negative

Canilang was issued ordinary life insurance with the face value of P19,700. On 5 August 1983, Canilang died of "congestive heart failure,"

Discussion on how the SC ruled the case:

Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss, damage or liab ili ty ari sing from an unknown or con tingen t even t. The con sidera tion i s the prem ium, which mu st be paid a t the time and in the wa y and manner spe ci fied in the poli cy, and i f not so paid , the policy wi ll lapse and be forfeited by its own term s. The Pol icy pro vides fo r paymen t of premium in full . Accordingly, where the premium has only been partially paid and the balance paid only after the peril insured again st has occur red, the insuran ce contract did no t ta ke effect and the insured canno t co llect a t all on the policy. This is fully supported by Section 77 of the Insurance Code which provides that "An insurer is entitled to payment of the premium as soon as the thi ng insured is exposed to the peril insured ag a i n s t . Notw ith standing any agreemen t to the con trar y, no poli cy or con tra ct o f in surance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace perio d provision applies." Apparently the crux of the con tro versy lie s in the phra se "unle ss and un til the premium thereof has been paid ." Thi s leads us to the manner of payment envisioned by the law to make the insurance policy operative and binding. For whatever judicial construction may be accorded the disputed phrase must ultimately yield to the clear mandate of the law. The principle that where the law does not distinguish the court should neither distinguish assumes that the legislature made no qualification on the use of a general word or expression and it cannot be disputed that premium is the elixir vitae of the insurance business because by law the insurer must maintain a legal reserve fund to meet its contingent obligations to the public, hence, the imperative need for its prompt payment and full satisfaction. It must be emphasized here that al l actuarial calculations and various tabulations of probabilities of losses under the risks insured against are based on the sound hypothesis of prompt payment of premiums. Upon this bedrock insurance firms are enabled to offer the assurance of security to the public at favorable ra tes. But once paymen t of premium is le ft to the whim and cap rice of the insu red, as when the courts tolerate the payment of a mere P600.00 as partial undertaking out of the stipulated total premium ofP2,983.50 and the balance to be paid even after the risk insured against has occurred, as Tibay et al. have done in this case, on the principle that the strength of the vinculum juris is not measured by any specific amount of premium payment, we will surely wreak havoc on the business and set to naught what has taken actuarians centuries to devise to arrive at a fair and equitable distribution of risks and benefits between the insurer and the insured.

"anemia," and "chronic anemia." The wife as beneficiary, filed a claim with Grepalife which the insurer denied on the ground that the insured had concealed material information from it. Argument: Vda Canilang filed a complaint with the Insurance

Commissioner against Grepalife contending that as far as she knows her husband was not suffering from any disorder and that he died of kidney disorder. Grepalife was ordered to pay the widow by the Insurance Commissioner holding that there was no intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into the health condition of the applicant by the issuance of the policy despite the lack of answers to "some of the pertinent questions" in the insurance application. CA reversed.

Issue: Whether or not Grepalife is liable. Held: Petition lack of merit

Discussion on how the SC ruled the case:

SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. Under the relevant provisions of the Insurance Code, the information concealed must be information which the concealing party knew and "ought to [have] communicate[d]," that is to say, information which was "material to the contract.

The information which Canilang failed to disclose was material to the Case Title: Canilang vs. Great Pacific Case Number: GR No. 92492 ability of Grepalife to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor,

the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Grepalife would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage.

RESPONDENT: The defendant denied the claim, on the ground they defendant's investigation revealed that the entire shipment of logs covered by the two marines policies No. 53 110 1032 and 713 HO 1033 were received in good order at their point of destination. It was further stated that the said loss may be considered as covered under Cover Note No. 1010 because the said Note had become 'null and void by virtue of the issuance of Marine Policy Nos. 53 HO 1032 and 1033. PETITIONER: Petitioner contendd that the Cover Note was issued with a consideration when, by express stipulation, the cover note is made subject to the terms and conditions of the marine policies, and the payment of premiums is one of the terms of the policies.

The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of mind of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that "probable and reasonable influence of the facts" concealed must, of course, be determined objectively, by the judge ultimately.

ISSUE:

Whether the Note is to be treated as a separate policy?

RULING: It is not disputed that petitioner paid in full all the premiums as called for by the statement issued by private respondent after the issuance of the two regular marine insurance policies, thereby leaving no account unpaid by petitioner due on the insurance coverage, which must be deemed to include the Cover Note. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer.

SC found it difficult to take seriously the argument that Grepalife had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in the insurance application. Such failure precisely constituted concealment on the part of Canilang. Petitioner's argument, if accepted, would obviously erase Section 27 from the Insurance Code of 1978.

DISCUSSION: It may be true that the marine insurance policies issued were for logs no longer including those which had been lost during loading operations. This had to be so because the risk insured against is not for loss during operations anymore, but for loss during transit, the logs having already been safely placed aboard. This would make no difference, however, insofar as the liability on the cover note is concerned, for the number or volume of logs lost can be determined independently as in fact it had been so ascertained at the instance of private respondent itself when it sent its own adjuster to investigate and assess the loss, after the issuance of the marine insurance policies.

PACIFIC BANKING CORPORATION vs. COURT OF APPEALS and ORIENTAL ASSURANCE CORPORATION PACIFIC TIMBER EXPORT CORPORATION vs. CA and WORKMEN'S INSURANCE COMPANY, INC. G.R. No. L-38613 Case # 57 FACTS: The plaintiff secured temporary insurance from the defendant for its exportation of 1,250,000 board feet logs.The defendant issued Cover Note No. 1010, insuring the said cargo of the plaintiff. The regular marine cargo policies were issued by the defendant in favor of the plaintiff. The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033. After the issuance of Cover Note No. 1010, but before the issuance of the two marine policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be exported were lost during loading operations. The plaintiff subsequently submitted a 'Claim Statement demanding payment of the loss under Policies Nos. 53 HO 1032 and 53 HO 1033. February 25, 1982 DE CASTRO, J.: G.R. No. L-41014 Case # 58 FACTS: Fire Policy, an open policy, was issued to the Paramount Shirt Manufacturing Co. by which private respondent Oriental Assurance Corporation bound itself to indemnify the insured for any loss or damage caused by fire to its property. Said policy was duly endorsed to petitioner as mortgagee/ trustor of the properties insured, with the knowledge and consent of private respondent to the effect that "loss if any under the policy is payable to the Pacific Banking Corporation". While the aforesaid policy was in full force and effect, a fire broke out on the subject premises destroying the goods . Petitioner sent a letter of demand to private respondent for indemnity . At the trial, petitioner presented evidence, a communication of the insurance adjuster to Asian Surety Insurance Co., Inc., revealing undeclared co-insurances with the following: with Wellington Insurance; with Empire Surety and with Asian Surety; undertaken by insured Paramount on the same property covered by its policy with private November 28, 1988 PARAS, J.:

ARGUMENTS:

respondent whereas the only co-insurances declared in the subject policy are those of with Malayan, with South Sea and with Victory. ARGUMENTS: RESPONDENT: Private respondent raised the defense of fraud and/or violation of Condition No. 3 in the Policy, in the form of nondeclaration of co-insurances. PETITIONER: suspicion. ISSUE: The allegation of fraud is but a mere inference or

The so-called "incontestability clause" precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured's lifetime. The phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years." DISCUSSION: The insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The petitioners' interpretation would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if the insured fraudulently concealed material facts. QUA CHEE GAN vs. LAW UNION AND ROCK INSURANCE CO., LTD., represented by its agent, WARNER, BARNES AND CO., LTD., G.R. No. L-4611 Case no. 60 FACTS: Qua Chee Gan owned four warehouses or bodegas used for the storage of stocks of copra and of hemp, baled and loose, in which the appellee dealth extensively. They had been, with their contents, insured with the defendant Company. Fire of undetermined origin that broke out and lasted almost one week, gutted and completely destroyed Bodegas Nos. 1, 2 and 4, with the merchandise stored theren. Plaintiff-appellee informed the insurer by telegram, the fire adjusters engaged by appellant insurance company arrived and proceeded to examine and photograph the premises, pored over the books of the insured and conducted an extensive investigation. The plaintiff having submitted the corresponding fire claims, the Insurance Company resisted payment. December 17, 1955 REYES, J. B. L., J.:

Whether the plaintiff if guilty of fraud?

RULING: It is not disputed that the insured failed to reveal before the loss three other insurances. By reason of said unrevealed insurances, the insured had been guilty of a false declaration; a clear misrepresentation and a vital one because where the insured had been asked to reveal but did not, that was deception. Otherwise stated, had the insurer known that there were many co-insurances, it could have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud DISCUSSION: Concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of coinsurances taken over the subject property. Consequently, "the whole foundation of the contract fails, the risk does not attach and the policy never becomes a contract between the parties. Representations of facts are the foundation of the contract and if the foundation does not exist, the superstructure does not arise. Falsehood in such representations is not shown to vary or add to the contract, or to terminate a contract which has once been made, but to show that no contract has ever existed. TAN vs. CA and THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY G.R. No. 48049 Case # 59 FACTS: Tan Lee Siong, applied for life insurance with respondent company, with petitioners the beneficiaries thereof. Tan Lee Siong died of hepatoma. Petitioners then filed with respondent company their claim for the proceeds of the life insurance policy. However, respondent company denied petitioners' claim and rescinded the policy . ARGUMENTS: RESPONDENT: Alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Siong in his application for insurance. PETITIONERS: Contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action. June 29, 1989 GUTIERREZ, JR., J.:

ARGUMENTS: RESPONDENT: warranty. Claims violation of the so-called fire hydrants

PETITIONER: Claims that the respondent is estopped for failure to reject the application due to defect of warranty which was existing at the inception of the insurance contract. ISSUE: Whether the insurer is liable?

ISSUE:

Whether the contention of the petitioners is tenable?

RULIING: The appellant is barred by waiver (or rather estoppel) to claim violation of the so-called fire hydrants warranty, for the reason that knowing fully all that the number of hydrants demanded therein never existed from the very beginning, the appellant neverthless issued the policies in question subject to such warranty, and received the corresponding premiums. It would be perilously close to conniving at fraud upon the insured to allow appellant to claims now as void ab initio the policies that it had issued to the plaintiff without warning of their fatal defect, of which it was informed, and after it had misled the defendant into believing that the policies were effective.

RULING: Sec. 48. xxx After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent.

DISCUSSION: It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has knowledge of existing facts which, if insisted on, would invalidate the contract from its very inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with the facts, and the insurer is estopped thereafter from asserting the breach of such conditions. The law is charitable enough to assume, in the absence of any showing to the contrary, that an

insurance company intends to executed a valid contract in return for the premium received; and when the policy contains a condition which renders it voidable at its inception, and this result is known to the insurer, it will be presumed to have intended to waive the conditions and to execute a binding contract, rather than to have deceived the insured into thinking he is insured when in fact he is not, and to have taken his money without consideration Case no. 64 G.R. No. L-50997 June 30, 1987 SUMMIT GUARANTY AND INSURANCE COMPANY, INC., petitioner, vs. HON. JOSE C. DE GUZMAN, in his capacity as Presiding Judge of Branch III, CFI of Tarlac, GERONIMA PULMANO and ARIEL PULMANO, respondents. No. L-48679 June 30, 1987 SUMMIT GUARANTY AND INSURANCE COMPANY, INC., petitioner, vs. THE HONORABLE GREGORIA C. ARNALDO, in her capacity as Insurance Commissioner, and JOSE G. LEDESMA, JR., respondents. No. L-48758 June 30, 1987 SUMMIT GUARANTY AND INSURANCE COMPANY, INC., petitioner, vs. HONORABLE RAMON V. JABSON, in his capacity as Presiding Judge of Branch XXVI, Court of First Instance of Rizal, Pasig, Metro Manila and AMELIA GENERAO, respondents. Facts: Jose Ledesma was the owner of a tractor which was bumped by a minibus insured with petitioner for Third Party Liability. Ledesma immediately made a notice of claim. Petitioner company advised private respondent to have car repaired by G.A. Machineries, which was later estimated at an amount of Php21,000 and made assurance of payment. Upon repair, respondent made several demands on insurance company because of repair shops warning that failure to pay would result in the auctioning of the tractor to pay expenses. Petitioner Company continued giving assurance and promises to pay. Eventually, private respondent filed a formal complaint with the Insurance Commission, which petitioner company moved to dismiss on ground of prescription. Geronima Pulmano was the owner of a jeep insured with petitioner company in the amount of Php20,000. The jeep got into a vehicular accident which resulted in the death of one of the victims and private respondent immediately filed a notice of accident and claim. Petitioner company took no steps to process the claim so private respondents brought their claim to the Insurance Commission, but petitioner company still failed to settle. A complaint was eventually filed with the Court of First Instance of Tarlac which petitioner company moved to dismiss on the ground of prescription. Amelia Generao owned a passenger jeepney insured with petitioner under a Vehicle Comprehensive Policy. The jeepney struck the van of a certain Mr. Hahn and two days later Generao notified insurance company and demanded payment on both vehicles. Generao and petitioner insurance company even had a dialogue at the office of insurance company to settle the claim. Nonetheless, time passed without petitioner insurance company taking any final action. Mr. Hahn filed a complaint for damages against Generao who, in response, filed a third party complaint against petitioner insurance company which in turn filed a motion to dismiss on the ground of prescription. Petitioner insurance Company argues that under Section 384 of the Insurance Code, even if the notice of claim was timely filed with the insurance company within the six month period, if the action or suit that follows is filed beyond the one year period it should necessarily be dismissed on the ground of prescription. Issue: Whether or not the causes of action of private respondents have already prescribed. Ruling: NO. The Supreme Court finds absolutely nothing in the law which mandates that the two periods must always concur. On the contrary, it is very clear that the one year period is only required in proper cases. It is very obvious that petitioner Company is trying to use Section 384 of as a cloak to hide itself from its liabilities. In violation of its duties to adopt and implement reasonable standards for the prompt investigation of claims and to effectuate prompt, fair and equitable

settlement of claims, and with manifest bad faith, petitioner Company devised means and ways of stalling the settlement proceedings. The one year period should be counted from the date of rejection by the insurer as this is the time the cause of action accrues. Since in these cases there has yet been no accrual of cause of action, prescription has not yet set in. Section 384 has been amended as follows, Action or suit for recovery of damage due to loss or injury must be brought in proper cases, with the Commissioner or the Courts within one year from denial of the claim, otherwise the claimant right of action shall prescribe.

Bonifacio Bros., Inc., et al. vs Enrique Mora, et al. GR No. L-20853, May 29, 1967

Facts: Enrique Mora, owner of an Oldsman sedan mortgaged the same to the HS Reyes Inc. Thereafter, the automobile was insured with the State Bonding & Insurance Co., Inc with the provision that Loss, if any, is payable to HS Reyes Inc. by virtue of the fact that said Oldsman sedan was mortgaged in favor of the latter.

During the effectivity of the insurance contract, the car met with an accident. Enrique Mora, without the knowledge and consent of HS Reyes Inc. authorized Bonifacio Bros. Inc. to furnish the labor and materials and some of which were supplied by the Ayala Auto Parts Co. Proceeds of the insurance policy was not given to Bonifacio Bros. Inc. and Ayala Auto Parts Co., hence, complaint was filed before Municipal Court of Manila against Enrique Mora and the insurance company for the labor and materials supplied.

The appellants argued that they are privy to the contract. On the other hand, the insurance company maintains that appellants are not mentioned in the contract as parties thereto nor is there any clause or provision from which it can be inferred that there is an obligation on the part of the insurance company to pay the cost of repairs directly to them. Issue: Whether there is privity of contract between the Bonifacio Bos. Inc and the Ayala Auto Parts Co. on the one hand and the insurance company on the other. Ruling: The appellants are not privy to the contract, hence, they have no right of action against the insurance company.

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, by the insured and the third person.

It is fundamental that contracts take effect only between the parties thereto, except on some specific cases provided by law where the contract contains some stipulation in favor of a third person (Art. 1311, Civil Code) Such stipulation is known as stipulation pour autrui or a provision in favor of a third person not party to the 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 material men in

case of repair of the car in question. The loss payable clause of the insurance policy stipulates that Loss, if any, is payable to HS Reyes, Inc indicating that it was only the HS Reyes Inc. which they intended to benefit. Malayan Insurance Co., Inc (MICO) vs Gregoria Cruz Arnaldo and Coronacion Pinca G.R. No. 67835. October 12, 1987 Facts:

that the cancellation was actually sent to and received by the insured. Adora, incidentally, had not been informed of the cancellation either and saw no reason not to accept the said payment. As to the authority of Adora to receive payment, Payment to an agent having the authority to receive or collect payment is equivalent to payment to the principal himself; such payment is complete when the money delivered is into the agents hand and is a discharge of the indebtedness owing to the principal

Petition denied. The decision of the Insurance Commission affirmed. On June 7, 1981, petitioner MICO issued to the private respondent, Coronacion Pinca, Fire Insurance Policy on her property effective July 22, 1981 until July 22, 1982. Ng Gan Zee vs Asian Crusader Life Insurance On October 15, 1981, MICO allegedly cancelled the policy for nonpayment of the premium and sent the corresponding notice to Pinca. On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of MICO. Facts: On January 15, 1982, Adora remitted this payment to MICO, together with other payments. On January 18, 1982, Pincas property was completely burned. On February 5, 1982, Pincas payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier but Adora refused to accept. GR No. L-30685, may 30, 1983

On May 12, 1962, Kwong Nam applied for a 20-year endowment insurance on his life for the sum of P20,000.00, with his wife, appellee Ng Gan Zee, as beneficiary. On the same date, appellant, upon receipt of the required premium from the insured, approved the application and issued the corresponding policy.

Pinca made demands for payment but MICO rejected. Such demand was sustained by the respondent Insurance Commission, hence this petition. The petitioner argues that there was no payment of premium and that the policy had been cancelled before the occurrence of the loss. Also, Adora was not authorized to accept the premium payment because six months had elapsed since the issuance of the insurance policy and such acceptance was prohibited by the policy itself. It is also argued that this prohibition was binding upon Pinca, who made the payment to Adora at her own risk as she was bound to first check his authority to receive it.

Upon Kwong Nams death due to cancer of the liver with metastasis, appellant denied the claim on the ground that the answers given by the insured to the questions appearing in his application for life insurance were untrue. Appellant further maintains that when the insured was examined in connection with his application for life insurance he gave the appellants medical examiner false and misleading information as to his aliment and previous operation. Appellant argues that the insureds statement in hi application that a tumor hard and of a hens egg size was removed during said operation, constituted material concealment.

Issue: Issue: Whether there exists an insurance contract at the time of the loss sustained by Pinca.

Whether the insurance company, because of the insureds representation, was mislead or deceived into entering the contract. Ruling: Yes. There exists a valid contract of insurance. Payment of premium was in fact made, rendering the policy effective as of June 22, 1981, and removing it from the provisions of Sec 77.- An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. Ruling:

No. It bears emphasis that Kwong Nam had informed the appellants medical examine that the tumor for which he was operated on was associated with ulcer of the stomach and in the absence of evidence that the insured had sufficient medical knowledge as to enable him to distinguish between peptic ulcer and a tumor, his statement should be construed as an expression made in good faith of his belief as to the nature of hi ailment and operation. Thus, concealment exists where the assured had knowledge o a fact material to the risk, and honesty, good faith and fair dealing requires that he should communicate it to the assurer, but he designedly and intentionally withholds the same. Indeed kwong Nams statement must be presumed to have been made by him without knowledge of its incorrectness and without any deliberate intent on his part to mislead the appellant.

As to the claim of MICO that it cancelled the policy in question on October 15, 1981, for non-payment of premium, there is a flat denial of Pinca that she never received the claimed cancellation and who, of course, did not have to prove such denial considering the strict language of Section 64 of the Insurance Law that no insurance policy shall be cancelled except upon prior notice. MICO has the burden in making sure

Also, it has been held that where, upon the face of the application, a question appear to be not answered at all or to be imperfectly answered, and the insurer issued a polic

without any further inquiry, they waive the imperfection of the answer and render the omission to answer more fully immaterial. Ruling: The Philippine American Life Insurance Co. vs Hon. Gregorio Pineda and Dimayuga G.R. No. 54216. July 19, 1989 No. The applicable law in the instant case is the Insurance Act, otherwise known as Act No. 2427 as amended, the policy having been procured in 1968. Under the said law, the beneficiary designated in a life insurance contract cannot be changed without the consent of the beneficiary because he has a vested interest in the policy (Gercio v. Sun Life Ins. Co. of Canada, 48 Phil. 53; Go v. Redfern and the International Assurance Co., Ltd., 72 Phil. 71).

Facts:

In 1968, private respondent procured an ordinary life insurance policy from the petitioner company and designated his wife and children as irrevocable beneficiaries of said policy. In 1980, the petitioner subsequently filed a petition before the CFI of Rizal to amend the designation of the beneficiaries in his life policy from irrevocable to revocable. Respondent Judge Pineda allowed the private respondent to adduce evidence. The argument of the petitioner is the designation of the beneficiaries in the policy has been made without reserving the right to change said beneficiary/beneficiaries, such designation may not be surrendered to the Company, released or assigned; and no right or privilege under the Policy may be exercised, or agreement made with the Company to any change in or amendment to the Policy, without the consent of the said beneficiary/beneficiaries. On the other hand, the private respondent contends that said designation can be amended if the Court finds a just, reasonable ground to do so.

The Beneficiary Designation Indorsement in the policy of the respondent states that the designation of the beneficiaries is irrevocable, hence,both the law and the policy do not provide for any other exception. Such fact was not disproved by the respondent.

Issue: Whether the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the irrevocable beneficiaries.

The contract between the parties is the law binding on both of them and for so many times, this court has consistently issued pronouncements upholding the validity and effectivity of contracts. Where there is nothing in the contract which is contrary to law, good morals, good customs, public policy or public order the validity of the contract must be sustained. Likewise, contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are obligatory, no matter in what form they may be, whenever the essential requisites for their validity are present (Phoenix Assurance Co., Ltd. vs. United States Lines, 22 SCRA 675, Phil. American General Insurance Co., Inc. vs. Mutuc, 61 SCRA 22.)