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125678 MARCH 18, 2002 YNARES-SANTIAGO, J.:

Facts:ErnaniTrinos, deceased husband of JulitaTrinos, applied for a health care coverage withPhilamcare Health Systems, Inc. In the standard application form, he answered NO to the following question: Have you or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details). Coverage of the health care agreement (HCA): approved for a period of one year, Renewed 3 times yearly: March 1, 1988 - March 1, 1990; March 1, 1990 June 1, 1990. The amount of coverage was increased to a maximum sum of P75,000.00 per disability. Ernanis entitlement under HCA: hospitalization benefits, whether ordinary or emergency, listed therein out-patient benefits" such as annual physical examinations, preventive health care and other out-patient services. Ernaniwas subsequently confined. HISTORY (everything happened within the period of coverage): 1. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9, 1990. 2. Julita tried to claim the benefits under the health care agreement. 3. Philamdenied her claim saying that the Health Care Agreement was void. there was a concealment regarding Ernanis medical history. Doctors at the MMC allegedly discovered at the time of Ernanis confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in the application form. 4. Julita paid the hospitalization expenses herself, amounting to about P76,000.00 5. Ernani was discharged at MMC 6. He was attended by a physical therapist at home. 7. Again he was admitted at the Chinese General Hospital. 8. Julita brought her husband home again due to financial difficulties. 9. In the morning of April 13, 1990, Ernani had fever and was feeling very weak. 10. Julita was constrained to bring him back to the Chinese General Hospital where he died on the same day.

On July 24, 1990, respondent instituted with the Regional Trial Court of Manila, Branch 44, an action for damages against Philam and its president, Dr. Benito Reverente, She asked for reimbursement of her expenses plus moral damages and attorneys fees. After trial, the lower court ruled against Philam, ordered: 1. Defendants to pay and reimburse the medical and hospital coverage of the late ErnaniTrinos in the amount of P76,000.00 plus interest, until the amount is fully paid to plaintiff who paid the same; 2. Defendants to pay the reduced amount of moral damages of P10,000.00 to plaintiff; 3. Defendants to pay the reduced amount ofP10,000.00 as exemplary damages to plaintiff; 4. Defendants to pay attorneys fees of P20,000.00, plus costs of suit. CA: affirmed the decision of the trial court but deleted all awards for damages and absolved petitioner Reverente.Denied MR. Issues: 1. Whether health care agreements are considered insurance contracts. 2. Whether there was concealment of material facts on the part of Ernani that rendered the HCA void by virtue of the "Invalidation of agreement" contained in the contract. 3. Suppose there was concealment, what are the steps Philam should have done? Ruling: 1. YES, it is an insurance contract. 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. An insurance contract exists where the following elements concur: (1) The insured has an insurable interest; (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 insurers promise, the insured pays a premium. Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest against him, may be insured against. Every person has an insurable interest in the life and health of himself. Section 10 provides: Every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children; (2) of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; (3) of any person under a legal obligation to him for the payment of money, respecting property or service, of which death or illness might delay or prevent the performance; and (4) of any person upon whose life any estate or interest vested in him depends.

In the case at bar, the insurable interest of respondents husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract. 2. NONE, there was no concealment of material facts. Petitioner cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination, whether intentional or unintentional, shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. This largely depends on opinion rather than fact, especially coming from respondents husband who was not a medical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. Thus, (A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. (Underscoring ours) The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In any case, with or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. 3. Philamshloud have followed Section 27 of the Insurance Code: "a concealment entitles the injured party to rescind a contract of insurance." The right to rescind should be exercised previous to the commencement of an action on the contract.In this case, no

rescission was made. Besides, the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: a. Prior notice of cancellation to insured; b. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned; c. Must be in writing, mailed or delivered to the insured at the address shown in the policy; d. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based. None of the above pre-conditions was fulfilled in this case. Anent the incontestability of the membership of respondents husband, we quote with approval the following findings of the trial court: (U)nder the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.
Malayan Insurance Co., Inc. v. Arnaldo (1987) G.R. No. L-67835 October 12, 1987

Lessons Applicable: Authority to Receive Payment/Effect of Payment (Insurance) Laws Applicable: Article 64, Article 65, Section 77, Section 306 of the Insurance Code FACTS:

June 7, 1981: Malayan insurance co., inc. (MICO) issued to Coronacion Pinca, Fire Insurance Policy for her property effective July 22, 1981, until July 22, 1982 October 15,1981: MICO allegedly cancelled the policy for non-payment, of the premium and sent the corresponding notice to Pinca December 24, 1981: payment of the premium for Pinca was received by Domingo Adora, agent of MICO January 15, 1982: Adora remitted this payment to MICO,together with other payments January 18, 1982: Pinca's property was completely burned February 5, 1982: Pinca's payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier but Adora refused to accept it and instead demanded for payment Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of the decision of the Insurance Commission. The petitioner filed its motion for reconsideration on April 25, 1981, or fifteen days such notice, and the reglementary period began to run again after June 13, 1981, date of its receipt of notice of the denial of

the said motion for reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days later, there is no question that it is tardy by four days. Insurance Commission: favored Pinca MICO appealed

ISSUE: W/N MICO should be liable because its agent Adora was authorized to receive it HELD: YES. petition is DENIED

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. SEC. 306. xxx xxx xxx

Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insurance shall be demmed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.

Payment to an agent having 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 agent's hands and is a discharge of the indebtedness owing to the principal. SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:

(a) (b) (c) (d)

non-payment of premium; conviction of a crime arising out of acts increasing the hazard insured against; discovery of fraud or material misrepresentation; discovery of willful, or reckless acts or commissions increasing the hazard insured against;

(e) physical changes in the property insured which result in the property becoming uninsurable;or (f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. As for the method of cancellation, Section 65 provides as follows:

SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based. A valid cancellation must, therefore, require concurrence of the following conditions:


There must be prior notice of cancellation to the insured;

(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds mentioned; (3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in the policy; (4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the insurer will furnish the facts on which the cancellation is based.

All MICO's offers to show that the cancellation was communicated to the insured is its employee's testimony that the said cancellation was sent "by mail through our mailing section." without more It stands to reason that if Pinca had really received the said notice, she would not have made payment on the original policy on December 24, 1981. Instead, she would have asked for a new insurance, effective on that date and until one year later, and so taken advantage of the extended period. Incidentally, Adora had not been informed of the cancellation either and saw no reason not to accept the said payment Although Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO sought to return it to Adora only on February 5, 1982, after it presumably had learned of the occurrence of the loss insured against on January 18, 1982 make the motives of MICO highly suspicious
Ignacio Saturnino vs. Philippine American Life Insurance Company February 28, 1963

Facts: This case pertains to the an action filed by Ignacio Saturnino against Philippine American Life Insurance Company (PhilAm Life for brevity) for collection of sum of money on the amount of P5,000. It became apparent that the complaint as well as the counterclaims were dismissed by the court.

A certain Estafania Saturnino applied for a 20-year endowment non-medical insurance on her life from PhilAm Life, dated November 16, 1957. On the same date, the insurance policy were approved and issued to her. A year later, she died of pneumonia, secondary to influenza. The appellants Igancio Saturnino and the children of the deceased filed a claim before PhilAm Life. The claim was rejected by PhilAm Life with the argument that It appears that two months prior to the issuance of the policy, Saturnino was operated 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. Issues: The question at issue is whether or not the insured made such false representations of material facts as to avoid the policy? Are the facts falsely represented material? Ruling; first issue: YES. There can be no dispute that the information given by her in her application for insurance was false, namely, that she had never had cancer or tumors, or consulted any physician or undergone any operation within the preceding period of five years.

Ruling; second issue: YES. 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." 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. Dispositive: Complaint dismissed and further ordered the appellee the return to appellants of the premiums already paid.
Sun Life Assurance Co. of Canada vs. CA and Sps. Bacani 7

June 22, 1995

Facts: On April 15, 1986, a certain Robert Bacani procured a life insurance contract for himself from Sun Life (petitioner) valued at P100,000.00 with a condition of double indemnity in case of accidental death of the insured. Robert designated his mother Bernarda Bacani (respondent) as beneficiary of the insurance policy. Later, Robert died in a plane crash. Respondent filed a claim with the petitioner. However, after conducting an investigation, the petitioner refused to pay the amount of the condition of the double indemnity on the ground that the insured allegedly failed to disclose material facts relevant to the insurance policy. Also, it was discovered by the petitioner that two weeks prior to his application for insurance, the insured was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. The same was not disclosed by the insurance in its application for insurance. Thereafter, the respondents filed an action for specific performance before RTC Valenzuela against petitioner. The RTC however ruled in favor of the respondents on the basis that the concealment made by the insured was in good faith. Petitioner interposed an appeal but the appellate court affirmed the decision of the RTC. Hence, an instant petition before the SC. Issue: Whether or not the respondents are entitled with claim of insurance policy of the deceased? Ruling: NO. Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. Said Section provides: A neglect to communicate that which a party knows and ought to communicate, is called concealment. In the case at bench, it was clear in the terms of the contract that the insured is specifically required to disclose to the insurer matters relating to his health. The information which the insured failed to disclose were material and relevant to the approval and issuance of the insurance policy. The matters concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. (See also ruling in Vda. De Canilang case re: good faith is not a defense in concealment) Thus, "goad faith" is no defense in concealment. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about his bonafides. Dispositive: Petition granted.
Thelma Vda. De Canilang vs. CA and

Great Pacific Life Insurance June 17, 1993

Facts: In August 1982, Jaime Canilang applied for a "non-medical" insurance policy with respondent Great Pacific Life Assurance Company (Grepalife) naming his wife, Thelma Canilang (petitioner), as his beneficiary. Jaime Canilang was issued ordinary life insurance Policy with the face value of P19,700, effective as of August 9, 1982. Later, Jaime died of congestive heart failure, anemia and chronic anemia. Petitioner filed a claim beforethe Grepalife but it was denied on the ground that the insured had concealed material information on it. Consequently, petitioner filed a complaint before the Insurance Commission. During the hearing, petitioner testified that she had no idea or not aware about the serious illness of her husband. The Insurance Commission rendered decision in favor of the petitioner. Grepalife interposed an appeal and the CA reversed and set aside the decision of the Insurance Commissioner. Hence, an instant petition for review before the SC. Issue: Whether or not good faith can be a defense in the concealment of information material to the insurance policy? Ruling: No. Section 26 provides a consequence if a party knows and ought to communicate matters or information material to the insurance. A neglect to this rule is considered a concealment. Further Sections 28 and 31 of Insurance Code of 1978 mandates a duty of a party, to wit: Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all factors within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. Further, Sec. 27 provides that a concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. Thus, good faith cannot be a defense. Dispositive: Petition for Review denied, affirming the decision of the CA. Malayan Insurance Co., Inc. vs. CA [G.R. No. L-36413, 26 September 1988] Facts: Malayan Insurance Co. Inc. (MALAYAN) issued a Private Car Comprehensive Policy covering a Willys jeep. The insurance coverage was for "own damage" not to exceed P600.00 and "third-party liability" in the amount of P20,000.00.

During the effectivity of the insurance policy, , the insured jeep, while being driven by one Juan P. Campollo an employee of the respondent San Leon Rice Mill, Inc., (SAN LEON) collided with a passenger bus belonging to the respondent Pangasinan Transportation Co., Inc. (PANTRANCO) at the national highway in Barrio San Pedro, Rosales, Pangasinan, causing damage to the insured vehicle and injuries to the driver, Juan P. Campollo, and the respondent Martin C. Vallejos, who was riding in the ill-fated jeep. Martin C. Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc. and the PANTRANCO before the Court of First Instance of Pangasinan. The trial court rendered judgment holding Sio Choy, SAN LEON, and MALAYAN jointly and severally liable. However, MALAYANs liability will only be up to P20,000. On appeal, CA affirmed the decision of the trial court. However, it ruled that SAN LEON has no obligation to indemnify or reimburse the petitioner insurance company for whatever amount it has been ordered to pay on its policy, since the San Leon Rice Mill, Inc. is not a privy to the contract of insurance between Sio Choy and the insurance company. MALAYAN appealed to the SC by way of review on certiorari. Issues: (1) Whether or not MALAYAN is solidarily liable to Vallejos, along with Sio Choy and SAN LEON (2) Whether or not MALAYAN is entitled to be reimbursed by SAN LEON for whatever amount petitioner has been adjudged to pay respondent Vallejos on its insurance policy. Held: (1) Only Sio Choy and SAN LEON are solidarily liable to Vallejos for the award of damages. Sio Choy is liable as owner of the jeep pursuant to Article 2184, while SAN LEON is liable as the employer of the driver of the jeep at the time of the accident pursuant to Art 2180. MALAYANs liability, however, arose only out of the insurance policy with Sio Choy. Petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, as incorrectly held by the trial court, be made "solidarily" liable with the two principal tortfeasors namely respondents Sio Choy and SAN LEON. (2) MALAYAN is entitled to be reimbursed. Upon payment of the loss, the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the third person whose negligence or wrongful act caused the loss. When the insurance company pays for the loss, such payment operates as an equitable assignment to the insurer of the property and all remedies which the insured may have for the recovery thereof. That right is not dependent upon , nor does it grow out of any privity of contract or upon written assignment of claim, and payment to the insured makes the insurer assignee in equity.


VS. COURT OF APPEALS 154 SCRA 650 (G.R. NO. 52756) OCTOBER 12 1987

Petitioner: Respondent: J. Padilla: FACTS:

Manila Mahogany Manufacturing Corporation Court of Appeals and Zenith Insurance Corporation

Petitioner insured its Mercedes Benz 4-door sedan with respondent insurance company . The insured vehicle was bumped and damaged by a truck owned by San Miguel Corporation. For the damage caused, respondent company paid petitioner 5,000.00 in amicable settlement. Petitioners general manager executed a Release of Claim, subrogating respondent company to all its right to action against San Miguel Corp.. Respondent company wrote the Insurer Adjusters, Inc. to demand reimbursements from San Miguel Corporation of the amount it had paid petitioner. Insurer Adjusters, Inc. refuse reimbursement alleging that San Miguel Corporation had already paid petitioner 4,500.00 for the damages to petitioners motor vehicle, as evidenced by a cash voucher and Release of Claim executed by the General Manager of petitioner discharging San Miguel Corporation from all actions, claims, demands the right of action that now exist or hereafter develop arising out of or as a consequence of the accident. Respondent insurance company thus demanded from petitioner reimbursement of the sum of 4,500.00 paid by San Miguel Corporation. Petitioner refused. ISSUE: Whether or not the insurer is entitled to recover from the insured the amount of insurance money paid. HELD: Although petitioner s right to file a deficiency claim against San Miguel Corporation is with legal basis, without prejudice to the insurers right of subrogation, nevertheless when Manila Mahogany executed another release claim (Exhibit K) discharging San Miguel Corporation from all actions, claims, demands and rights of action that now exist or hereafter arising out of or as a consequence of the accident after the insurer bad paid the proceeds of the policythe compromise agreement of P5,000.00 being based on the insurance policythe insurer is entitled

to recover from the insured the amount of insurance money paid, Since petitioner by its own acts released San Miguel Corporation, thereby defeating private respondents right of subrogation, the right of action of petitioner against the insurer was also nullified. Otherwise stated: private respondent may recover the sum of P5,000.00 it had earlier paid to petitioner. As held in Phil Air Lines v. Heald Lumber Co,; If a property is insured and the owner receives the indemnity from the insurer, it is provided in [Article 2207 of the New Civil Code] 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. x x x 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. The right of subrogation can only exist after the insurer has paid the insured, otherwise the insured will be deprived of his right to full indemnity. If the insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may sue the party responsible for the damage for the the [sic] remainder, To the extent of the amount he has already received from the insurer, the insurer enjoys [sic] the right of subrogation. Since the insurer can be subrogated to only such rights as the insured may have, should the insured, after receiving payment from the insurer. release the wrongdoer who caused the loss, the insurer loses his rights against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the release was made with the consent of the insurer.
Aboitiz Shipping Corp. v. Insurance Co. of North America (2008) G.R. No. 168402 August 6, 2008

Lessons Applicable: Insurer's right of subrogration (Insurance) FACTS:

June 20, 1993: MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS) procured an "all-risk" marine insurance policy from ICNA UK Limited of London for wooden work tools and workbenches purchased by consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City. July 26, 1993: the cargo was received by Aboitiz Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz Transport System August 1, 1993: container van was loaded on board MV Super Concarrier I o The vessel left Manila en route to Cebu City August 3, 1993: shipment arrived in Cebu City August 5, 1993: Stripping Report, checker noted that the crates were slightly broken or cracked at the bottom August 11, 1993: cargo was withdrawn by the representative of the consignee, Science Teaching Improvement Project (STIP) and delivered to Don Bosco Technical High School, Punta Princesa, Cebu City

August 13, 1993: Mayo B. Perez, Head of Aboiti received a call from the receiver Mr. Bernhard Willig that the cargo sustained water damage so he checked the other cargo but they were dry In a letter dated August 15, 1993, Willig informed Aboitiz that the damage was caused by water entering through the broken bottom parts of the crate Consignee filed a claim against ICNA CAC reported to ICNA that the shipment was placed outside the warehouse when it was delivered on July 26, 1993 and it was only on July 31, 1993 when the shipment was stuffed inside another container van for shipment to Cebu. Weather report shows that the heavy rains on July 28 and 29, 1993 caused the damages. Aboitiz refused to settle the claim ICNA paid the amount of P280,176.92 to consignee and a subrogation receipt was duly signed by Willig. ICNA then advised Aboitiz of the receipt signed in its favor but received no reply so it filed for collection at the RTC. RTC: against ICNA - subrogation Form is self-serving and has no probative value since Wellig was not presented to the witness stand CA: reversed RTC ruling - right of subrogation accrues simply upon payment by the insurance company of the insurance claim even assuming that it is an unlicensed foreign corporation

ISSUE: W/N ICNA can claim under the right of subrogation HELD: YES. CA affirmed.

Only when that foreign corporation is "transacting" or "doing business" in the country will a license be necessary before it can institute suits. It may, however, bring suits on isolated business transactions, which is not prohibited under Philippine law The policy benefits any subsequent assignee, or holder, including the consignee, who may file claims on behalf of the assured.

Insurance Code Sec. 57 Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured. Civil Code Art. 2207 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.

This right of subrogation, however, has its limitations.


First, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading o Second, the insurer can be subrogated only to the rights as the insured may have against the wrongdoer. If by its own acts after receiving payment from the insurer, the insured releases the wrongdoer who caused the loss from liability, the insurer loses its claim against the latter. Civil Code Art. 366 Article 366. Within twenty four hours following the receipt of the merchandise, the claim against the carrier for damages or average which may be found therein upon opening the packages, may be made, provided that the indications of the damage or average which give rise to the claim cannot be ascertained from the outside part of such packages, in which case the claim shall be admitted only at the time of receipt. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.

The call was made 2 from delivery, a reasonable period considering that the goods could not have corroded instantly overnight such that it could only have sustained the damage during transit.

Civil Code Art. 1735 Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.

the shipment delivered to the consignee sustained water damage. We agree with the findings of the CA that petitioner failed to overturn this presumption
Pacific Timber v CA G.R. No. L-38613 February 25, 1982

J. De Castro

Facts: The plaintiff secured temporary insurance from the defendant for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from Quezon Province to Okinawa and Tokyo, Japan. Workmens Insurance issued a cover note insuring the cargo of the plaintiff subject to its terms and conditions. The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033. Policy No. 53 H0 1033 was for 542 pieces of logs equivalent to 499,950 board feet. Policy No. 53 H0

1033 was for 853 pieces of logs equivalent to 695,548 board feet. The total cargo insured under the two marine policies consisted of 1,395 logs, or the equivalent of 1,195.498 bd. ft. After the issuance of the cover note, 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 in the Diapitan Bay. While the logs were alongside the vessel, bad weather developed resulting in 75 pieces of logs which were rafted together co break loose from each other. 45 pieces of logs were salvaged, but 30 pieces were verified to have been lost or washed away as a result of the accident. Pacific Timber informed Workmens about the loss of 32 pieces of logs during loading of SS woodlock. Although dated April 4, 1963, the letter was received in the office of the defendant only on April 15, 1963. The plaintiff claimed for insurance to the value of P19,286.79. Woodmens requested an adjustment company to assess the damage. It submitted its report, where it found that the loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032 and 1033 but within the 1,250,000 bd. ft. covered by Cover Note 1010 insured for $70,000.00. The adjustment company submitted a computation of the defendant's probable liability on the loss sustained by the shipment, in the total amount of P11,042.04. Woodmens wrote the plaintiff denying the latter's claim on the ground they defendant's investigation revealed that the entire shipment of logs covered by the two marine policies 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. The denial of the claim by the defendant was brought by the plaintiff to the attention of the Insurance Commissioner. The Insurance Commissioner ruled in favor of indemnifying Pacific Timber. The company added that the cover note is null and void for lack of valuable consideration. The trial court ruled in petitioners favor while the CA dismissed the case. Hence this appeal. Issues: WON the cover note was null and void for lack of valuable consideration WON the Insurance company was absolved from responsibility due to unreasonable delay in giving notice of loss. Held: No. No. Judgment reversed. Ratio: 1. The fact that no separate premium was paid on the Cover Note before the loss occurred does not militate against the validity of the contention even if no such premium was paid. All Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. Also, no separate premiums are required to be paid on a Cover Note.


The petitioner paid in full all the premiums, hence there was no account unpaid on the insurance coverage and the cover note. If the note is to be treated as a separate policy instead of integrating it to the regular policies, the purpose of the note would be meaningless. It is a contract, not a mere application for insurance. 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 for loss during transit, because the logs were safely placed aboard. The non-payment of premium on the Cover Note is, therefore, no cause for the petitioner to lose what is due it as if there had been payment of premium, for non-payment by it was not chargeable against its fault. Had all the logs been lost during the loading operations, but after the issuance of the Cover Note, liability on the note would have already arisen even before payment of premium. Otherwise, the note would serve no practical purpose in the realm of commerce, and is supported by the doctrine that where a policy is delivered without requiring payment of the premium, the presumption is that a credit was intended and policy is valid. 2. The defense of delay cant be sustained. The facts show that instead of invoking the ground of delay in objecting to petitioner's claim of recovery on the cover note, the insurer never had this in its mind. It has a duty to inquire when the loss took place, so that it could determine whether delay would be a valid ground of objection. There was enough time for insurer to determine if petitioner was guilty of delay in communicating the loss to respondent company. It never did in the Insurance Commission. Waiver can be raised against it under Section 84 of the Insurance Act.