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Philippine Home Assurance Corp (PHAC) vs.

Eeastern Shipping Lines Inc. (ESLI) loaded on board a
vessel (SS Easter Explorer) several shipment of 2 boxes
of internal combustion engine parts, 334 bags of
ammonium chloride, 200 bags of glue and garments for
carriage to several consignees. While the vessel was off
Okinawa, Japan, a small fire was detected on the
acetylene cylinder located in the accommodation area
near the engine room. This resulted in a flash of flame
throughout the accommodation area. The vessel was
abandoned. All the cargoes of ESLI were delivered to
their respective consignees but with corresponding
additional freight and salvage charges. All the charges
were paid by PHAC. Thus, PHAC, as subrogee of the
consignees now seeks recovery from ESLI alleging that
they were negligent. ESLI argues, among others, that the
fire was a fortuitous event. The trial court and the CA
ruled in favour o ESLI. Hence this petition for review with
the Supreme Court.
WON the fire was a fortuitous event.
WON ESLI should be held liable for the additional
Held: No, the fire cannot be considered as a fortuitous
event. Thus, it is presumed that ESLI was negligent and
should be held liable to PHAC.
In our jurisprudence, fire may not be considered a natural
disaster or calamity since it almost always arises from
some act of man or by human means.
It cannot be an act of God unless caused by lightning or a
natural disaster or casualty not attributable to human
There is strong evidence indicating that the acetylene
cylinder caught fire because of the fault and negligence of
respondent ESLI, its captain and its crew:
(1) The acetylene cylinder which was fully loaded should
not have been stored in the accommodation area near
the engine room where the heat generated therefrom
could cause the acetylene cylinder to explode by reason
of spontaneous combustion;
(2) Respondent ESLI should have known that by storing
the acetylene cylinder in the accommodation area
supposed to be reserved for passengers, it unnecessarily
exposed its passengers to grave danger and injury.
(3) The fact that the acetylene cylinder was checked,
tested and examined and subsequently certified as
having complied with the safety measures and standards
by qualified experts before it was loaded in the vessel
only shows to a great extent that negligence was present
in the handling of the acetylene cylinder after it was
loaded and while it was on board the ship.
Bachrach v. British American Insurance Co. Insurance Proceeds
17 PHIL 555

> Bachrach insured properties of its general furniture

shop with British. The properties were subsequently
destroyed by fire.
> Bachrach claims from the insurance company. The
claim was denied on the ff grounds:
The policy was allegedly forfeited because the
insured stored varnishes and paints within the premises;
o Insured stored gasoline in the building; and
Bachrach executed a chattel mortgage on the
properties insured without the consent of the insured.
Whether or not Bachrach can claim the proceeds of the
The policy was NOT forfeited due to the strong paints and
varnishes. There was no express provision pertaining to
it and these paints and varnishes are incidental to the
business of the insured to keep the furniture in a saleable
condition. The gasoline stored within the premises was in
the reservoir of the car and thus does not violate any
provision in the policy. There is no express prohibition
against the execution of a chattel mortgage on the
property insured.
Tan Chuco vs Yorkshire Fire and Life Insurance
Tan Chuco files a claim under an open fire
insurance policy for the alleged loss by fire of
certain stock of goods insured by Yorkshire.
CFI: Evidence did not sustain Yorkshires
allegation that Tan Chuco or his agents had
intentionally and fraudulently set the building on
o But was of the opinion that the Tan
Chuco failed to establish the value of
the goods he alleges were destroyed
by the fire.
o He submitted fabricated written evidence
and false testimony in support of his
claim that the insured goods actually
destroyed were worth more than the total
amount of the insurance thereon.
o CFI was of the opinion that the submitted
inventory was not genuine and was
fraudulently prepared.
o Tan
employees who were in the building
when the fire took place, not only made
no effort to extinguish the fire, or to save
the goods from destruction, but also
failed to save any of the books or papers
connected with the business of which he
was in charge ofthose could have
corroborated with the data in the alleged
o The inventory submitted was dated
January 1, not of custom to Tan Chuco
who were of Chinese decent.

No explanation was offered which would

account for the remarkable conduct of
Tan Chucos manager in preparing an
inventory two months after his employer
had left for China and then instead of
forwarding such inventory to his principal
by mail, entrusted it for transmission to a
friend who had not even left for China
when the fire took place.
Indication that Tan Chuco had been
conditions before the fire

Issue: Whether or not Tan Chuco may claim under


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

Held: NO.
We think that the action of the trial court in rejecting the
proof offered by Tan Chuco as to the amount of the loss
must be sustained.
The contract of fire insurance being a contract of
indemnity, Tan Chuco is only entitled to recover the
amount of actual loss sustained by him. There being no
express valuation in the policy, the judgment was properly
entered against him for lack of satisfactory proof of the
amount of loss.
Rule: In the absence of express valuation in a fire
insurance policy, the insured is only entitled to recover
the amount of actual loss sustained and the burden is
upon him to establish such amount.
MICO vs Arnaldo

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
of insurance issuedby 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
SEC. 306. xxx xxx xxx

1981: Malayan insurance
(MICO) issued to Coronacion
Fire Insurance Policy for her property effective July

Any insurance company

an insurance agant or insurance broker a policy or
contract ofinsurance 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:


G.R. No. L-67835 October 12, 1987

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

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
January 15, 1982: Adora remitted this payment to
MICO,together with other payments
January 18, 1982: Pinca's property was completely
February 5, 1982: Pinca's payment was returned by
MICO to Adora on the ground that her policy had

non-payment of premium;

(b) conviction of a crime arising out of acts increasing

the hazard insured against;

discovery of fraud or material misrepresentation;

(d) 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

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

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:

(1) There must be prior notice of cancellation to the

(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
Harding vs Commercial Union
In February 1916, Mrs. Harding applied for
car insurance for a Studebaker she received as a gift
from her husband. She was assisted by Smith, Bell, and
Co. which was the duly authorized representative
(insuranceagent) of Commercial Union Assurance
Company in the Philippines. The cars value was
estimated with the help of an experienced mechanic (Mr.
Server) of the Luneta Garage. The car was bought by Mr.

Harding for P2,800.00. The mechanic, considering some

repairs done, estimated the value to be at P3,000.00.
This estimated value was the value disclosed by Mrs.
Harding to Smith, Bell, and Co. She also disclosed that
the value was an estimate made by Luneta Garage
(which also acts as an agent for Smith, Bell, and Co).
In March 1916, a fire destroyed the Studebaker. Mrs.
Harding filed an insurance claim but Commercial Union
denied it as it insisted that the representations and
averments made as to the cost of the car were false; and
that said statement was a warranty. Commercial Union
also stated that the car does not belong to Mrs. Harding
because such a gift [from her husband] is void under the
Civil Code.
ISSUE: Whether or not Mrs. Harding is entitled to
the insurance claim.
HELD: Yes. Commercial Union is not the proper party to
attack the validity of the gift made by Mr. Harding to his
The statement made by Mrs. Harding as to the cost of the
car is not a warranty. The evidence does not prove that
the statement is false. In fact, the evidence shows that
the cost of the car is more than the price of theinsurance.
The car was bought for P2,800.00 and then thereafter,
Luneta Garage made some repairs and body paints
which amounted to P900.00. Mr. Server attested that the
car is as good as new at the time the insurancewas
Commercial Union, upon the information given by Mrs.
Harding, and after an inspection of the automobile by its
examiner, having agreed that it was worth P3,000, is
bound by this valuation in the absence of fraud on the
part of the insured. All statements of value are, of
necessity, to a large extent matters of opinion, and it
would be outrageous to hold that the validity of all valued
policies must depend upon the absolute correctness of
such estimated value.