CONSTANTINO V.

ASIA LIFE INSURANCE, 87 PHIL 248

(1950)
FACTS: There are two cases consolidated here. In the first
case, Arcadio Constantino obtained a life insurance policy
from Asia Life Insurance Company, a foreign company, in
Sept 1941. He appointed Paz Lopez de Constantino was
beneficiary. The insured paid the only the first premium
(period covering up to Sept 1942).
1. Subsequently, war broke out and the insured was
unable to pay the subsequent premiums. The insured
died in 1944
2. In the second case, spouses Tomas Ruiz and Agustina
Peralta obtained a life insurance from Asia Life in Aug
1938. He was paying his premiums until the war
broke out in 1942. He died in 1945. His beneficiary
was Agustina Peralta
3. After the war, the beneficiaries of both insurance
policies filed their claims but Asia Life (insurer)
denied their claims. The beneficiaries argued that the
obligation of the insured to pay the premiums was
suspended due to the impossibility of performance
(war), and as such, no unfavorable consequence
should follow from such failure (New York Rule). They
point out that the nonpayment was caused by the
closing of the insurers offices in Manila during the
Japanese
occupation
and
the
impossible
circumstances created by war
4. On the other hand, the insurer averred that the
nonpayment of the premiums cancelled the
insurance policy, following the United States Rule.
The policies had lapsed for nonpayment of premiums
in accordance with the contract of the parties and
the law applicable to the situation
ISSUE: WON the beneficiaries are entitled to recover the
amount insured despite the nonpayment of premiums
caused by the war
HELD: No. Contracts of insurance are contracts of indemnity
within the terms and condition found therein.

An insurance company for certain considerations guarantee

the insured against loss or damage as may be stipulated,
and when called to pay, the insurer may insist on the
fulfillment of said stipulations. Failure of the insured to do so
disqualifies recovery for the loss. Thus the terms of the
policy determines the insurers liability. Compliance to the
terms of the policy is a must as it is a condition precedent to
the right of recovery. Therefore, from the terms of the policy
it is clear that non-payment of premium produces avoidance
(forfeiture of the policy).
It would be unjust to permit the insurer to retain the reserve
value of the policy or the excess of premiums paid over the
actual risk when the policy was still effective as held in the
Statham Case. The SC held that promptness of payment is
essential in the business of life insurance since all
calculations of the company is based on the hypothesis of
prompt payments. Forfeiture for non-payment is necessary
to protect said business from embarrassment otherwise
confusion would abound. And that delinquency cannot be
tolerated nor redeemed except at the option of the
company. Moreover, the parties contracted both for peace
and war times since the policies contained also wartime
days. It follows that the parties contemplated uninterrupted
operation of the contract even if armed conflict ensues.
ISSUE: What is the nature of the payment of premiums?
HELD: The annual premium is not a debt, nor is it an
obligation which the insurer can maintain an action against
the insured; nor its settlement governed by the rules
on payment of debts.
A contract of insurance is sui generis. This means though
the insured may hold the insurer to the contract by the
fulfillment of the condition, the latter has no power or right
to compel the insured to maintain the contract relation
longer than the insured may desire. It is optional upon the
insured.

INSULAR LIFE V. EBRADO, 80 SCRA 181 (1977)

FACTS:
Buenaventura Ebrado (insured) obtained a
life insurance policy from Insular Life (insurer) with a rider
for accidental death. He designated Carponia Ebrado as the
revocable beneficiary, whom he referred to as his wife
1. Buenaventura died in Oct 1969 as a result of an
accident when he was hit by a falling tree branch
2. Insular Life was made liable for the amount of the
policy plus the additional benefits for accidental
death
3. Carponia, then, filed with the insurer a claim for the
proceeds of the policy as the designated beneficiary,
although she admitted to be the common-law spouse
of the insured
4. Pascuala Vda de Ebrado also filed her claim as the
widow of the insured decedent. She asserts that she,
as the widow of the decedent, is entitled to the
insurance proceeds
5. As such, the insurer filed an interpleader to
determine as to whom the insurance proceeds shall
be paid
6. The trial court held in favor of Pascuala and
disqualified Carponia from becoming the beneficiary
of the insured

barred from receiving donations from each other under Art

739.
In essence, a life insurance policy is no different from a civil
donation insofar as the beneficiary is concerned. Both are
founded upon the same consideration: liberality. A
beneficiary is like a done, because from the premiums of the
policy which the insured pays out of liberality, the
beneficiary will receive the proceeds or profits of said
insurance. As a consequence, the proscription in Art 739
NCC should equally operate in life insurance contracts.

ISSUE: WON a common-law spouse named as a beneficiary

in the life insurance policy of a legally married man claim
the proceeds thereof
HELD: No. Art 2011 NCC provides that the contract of
insurance is governed by special laws. Matters not expressly
provided for in such special laws shall be regulated by this
Code. When not otherwise specifically provided for by the
Insurance Law, the contract of insurance is governed by the
general rules of the civil law regulating contracts. And under
Art 2012 NCC: any person who is forbidden from receiving
donation under Art 739 cannot be named beneficiary of a
life insurance policy by the person who cannot make a
donation to him. Common-law spouses are, definitely,

QUA CHEE GAN V. LAW UNION ROCK INSURANCE, 98

PHIL 86 (1955)
Plaintiff Qua Chee Gan owned 4 warehouses used for the
storage of stocks of copra and of hemp. Plaintiff obtained a
fire insurance policy over the 4 warehouses and its contents
with Law Union & Rock Insurance for the total amount of
P370, 000.
1 Of the 4 warehouses, 3 were totally destroyed by a
fire in July 1940. As such, plaintiff filed a claim based
on the insurance policy.
2 The insurance company denied payment on the
claim and alleged, among others, that plaintiff had
violated the warranties and conditions provided in
the policy.
3 The insurance policy provides that there shall be fire
hydrants installed for every 150 feet of external wall
measurement of the buildings. Since, the bodegas
insured had an external wall perimeter of 500 meters
(1,640 feet), then there should be 11 fire hydrants in
the compound when in fact, he had only 2 with
another pair nearby belonging to the municipality.
ISSUE: WON the insurance contract is void
HELD: No. Law Union cannot exempt itself from paying Qua
Chee Gan because it is estopped from invoking the same. It
is a well settled rule of law that an insurer which with
knowledge of facts entitling it to treat a policy as no longer
in force, receives and accepts a premium on the policy,
estopped to take advantage of the forfeiture.
An insurer should not be allowed, by the use of obscure
phrases and exceptions, to defeat the very purpose for
which the policy was procured.
The contract of insurance is one of perfect good faith
(uferrimal fidei) not for the insured alone, but equally so for
the insurer; in fact, it is mere so for the latter, since its

dominant bargaining
responsibility.

position

carries

with

it

stricter

TY V. FILIPINAS CIA DE SEGUROS, 17 SCRA 364 (1966)

FACTS: Diosdado Ty, a mechanic operator, took personal
accident policies from several insurance companies, on
different dates, effective for 12 months
1. During the effectivity of these policies, a fire broke
out in the factory where Ty was working. As he was
trying to put out the fire, a heavy object fell upon his
left hand and sustained injuries
2. Ty then filed a claim before the insurance companies.
The respondent insurer refused to pay his claim
3. Ty contends that to be entitled to indemnification
under the insurance policy, it is enough that the
insured is disabled to such an extent that he cannot
perform all acts or duties necessary in the ordinary
course of his business. It is argued that what is
compensable is the disability, not the amputation of
the hand.
ISSUE: WON Tys claim is valid
HELD: No. The agreement contained in the insurance
policies is the law between the parties. As the terms of the
policies are clear, express and specific that only amputation
of the left hand should be considered as a loss thereof, an
interpretation that would include the mere fracture or other
temporary disability not covered by the policies would
certainly be unwarranted.

CAB: The policy covers death or disability by accidental

means, and the insurer agreed to pay P1,000 to P3,000 as
indemnity for the death of the insured.
DEL ROSARIO V. EQUITABLE INSURANCE & CASUALTY
CO, 8 SCRA 343 (1963)
FACTS: Equitable Insurance issued a life insurance policy on
the life of Francisco del Rosario (aka Paquito Bolero), son of
plaintiff
1. While on board the motor launch Islama, the
insured jumped out of the launch after a fire broke
out on said vessel, and as a result, the insured and
the beneficiary (Remedios Jayme) died of drowning
2. Simeon del Rosario, the father of the insured and
sole heir, filed a claim for payment of the proceeds
on the insurance policy for P1,000. Plaintiff received
said amount but later demanded additional P3,000
3. The insurer refused to pay the additional amount,
claiming that it had been released of its obligation
having paid the full amount of P1,000 and as per the
opinion of the Insurance Commissioner
ISSUE: WON Del Rosario is entitled to recover P3,000
HELD: Yes. Terms in an insurance policy, which are
ambiguous, equivocal, or uncertain are to be constructed
strictly against the insurer and liberally in favor of the
insured so as to effect the dominant purpose of indemnity or
payment to the insured, especially where a forfeiture is
involved. The reason for this rule is that the insured usually
has no voice in the selection or arrangement of the words
employed and that the language of the contract is selected
with great care and deliberation by expert and legal
advisers employed by, and acting exclusively in the interest
of, the insurance company.
It is well-settled that where two interpretations, equally fair,
of languages used in an insurance policy may be made, that
which allows the greater indemnity will prevail.

INSURANCE; INDEMNITY; AMBIGUITY IN TERMS AND

CONDITIONS OF A LIFE ACCIDENT POLICY RESOLVED
AGAINST INSURER. Where there is an ambiguity with
respect to the terms and conditions of a policy, the same
will be resolved against the one responsible thereof.
Generally, the insured, has little, if any, participation in the
preparation of the policy, together with the drafting of its
terms and conditions. The interpretation of obscure
stipulations in a contract should not favor the party who
caused the obscurity (Art. 1377, N.C.C.) which, in the case
at bar, is the insurance company.

MISAMIS LUMBER V. CAPITAL INSURANCE & SURETY

CO, 17 SCRA 228 (1966)
FACTS: Misamis Lumber (insured) insured its vehicle for
P14,000 with Capital Insurance (insurer) against loss or
damage.
1. The policy stipulated that the insured may authorize
the repair of the vehicle necessitated by damage and
the liability of the insured is limited to P150
2. On Nov 25, 1961 and while the insurance policy was
in effect, the crankcase and flywheel housing of the
car broke when it hit a hollow block lying alongside a
water hole in Quezon City. As a result, the car was
towed and repaired amounting to P302.27
3. Misamis Lumber, then, file a claim for the repairs on
the vehicle which Capital Insurance
4. During the trial, the insurer admitted its liability in
the amount of P150, but not for any excess thereof
5. The lower court held in favor of the insured citing
that the insurers absolution would render the
insurance contract one-sided and the insurer had not
shown that the cost of repairs is unreasonable,
excessive or padded
ISSUE: WON the insurer may be held liable for more than
the repair limit stipulated in the insurance contract
HELD: No. The insurance contract may be onerous or onesided 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.
The policy is clear and specific, and leaves no room for
interpretation. The interpretation given is even unjustified
because it opposes what was specifically stipulated.
CAB: The policy drew out the not only the limits of the
insurers liability but also the mechanics that the insured

had to follow to be entitled to full indemnity of repairs. The

option to undertake the repairs is accorded to the insurer
per par. 2 of the policy. However, the insurer was deprived of
the option because the insured took it upon itself to have
the repairs made, and only notified the insurer after the
repair. As consequence, par. 4 which limits the insurers
liability to P150 applies.

VERENDIA V. COURT OF APPEALS AND FIDELITY &

SURETY INSURANCE CO, 217 SCRA 417 (1993)
FACTS: Fidelity & Surety Insurance issued a fire insurance
policy effective for one year over Rafael Verendias
residential building in Antipolo for P385,000. Monte de
Piedad & Savings Bank was designated as beneficiary
1. It appears that Verendia also insured the building
with two other insurance companies: Country
Bankers Insurance for P56,000, and Development
Insurance for P400,000
2. While the 3 fire insurance policies were in force, the
insured property was completely destroyed by fire.
Verendia filed a claim with Fidelity however, the
latter refused to pay
3. Fidelity averred that the policy was voided by reason
of over-insurance and that Verendia maliciously
misrepresented that the building was leased to
Roberto Garcia when in fact it was Marcelo Garcia
who was the lessee
4. The trial court held in favor of Fidelity citing that
Verendia violated the insurance policy when it failed
to inform Fidelity of his other insurance coverages.
On appeal, CA reversed the trial court decision
ISSUE: WON Verendia can claim on the insurance despite
the misrepresentation as to the lessee and the overinsurance
HELD: No. An insurance contract, being a contract of
indemnity, is the law between the parties. Its terms and
conditions constitute the measure of the insurers liability
and compliance therewith is a condition precedent to the
insureds right to recovery from the insurer. Since it is a
contract of adhesion, an insurance contract should be
liberally construed in favor of the insured and strictly
against the insurer company which usually prepares it.

Considering, however, the fact Verendia used a false lease

contract to support his claim, the terms of the policy should
be strictly construed against the insured. Verendia failed to
live by the terms of the policy, particularly if there was fraud
in the claim or in the means used by the insured to obtain
any benefit under the policy. Having presented a false
declaration in the lease contract, he forfeited all the benefits
therein.
CIVIL LAW; INSURANCE CONTRACT; LAW BETWEEN THE
PARTIES; GENERALLY, SHOULD BE CONSTRUED IN FAVOR OF
THE INSURED. Basically a contract of indemnity, an
insurance contract is the law between the parties (Pacific
Banking Corporation v. Court of Appeals 168 SCRA 1 [1988]).
Its terms and conditions constitute the measure of the
insurers liability and compliance therewith is a condition
precedent to the insureds right to recovery from the insurer
(Oriental Assurance Corporation v. Court of Appeals, 200
SCRA 459 [1991], citing Perla Compania de Sequros, Inc. v.
Court of Appeals, 185 SCRA 741 [1991]). As it is also a
contract of adhesion, an insurance contract should be
liberally construed in favor of the insured and strictly
against the insurer company which usually prepares itg b
(Western Guaranty Corporation v. Court of Appeals, 187
SCRA
652
[1980]).
ID.; ID.; BENEFITS THEREUNDER SHALL BE FORFEITED IF
ANY FALSE DECLARATIONS BE MADE IN SUPPORT OF THE
CLAIM; CASE AT BAR. Considering that Verendia used a
false lease contract to support his claim under Fire
Insurance Policy No. F-18876, the terms of the policy should
be strictly construed against the insured. Verendia failed to
live by the terms of the policy, specifically Section 13
thereof which is expressed in terms that are clear and
unambiguous, that all benefits under the policy shall be
forfeited "if the claim be in any respect fraudulent, or if any
false declaration be made or used in support thereof, or if
any fraudulent means or devises are used by the Insured or
anyone acting in his behalf to obtain any benefit under the
policy." Verendia, having presented a false declaration to

support his claim for benefits in the form of a fraudulent

lease contract, he forfeited all benefits therein by virtue of
Section 13 of the policy in the absence of proof that Fidelity
waived such provision (Pacific Banking Corporation v. Court
of Appeals, supra). Worse yet, by presenting a false lease
contract, Verendia reprehensibly disregarded the principle
that insurance contracts are uberrimae fidae and demand
the most abundant good faith (Velasco v. Apostol, 173 SCRA
228
[1989]).
ID.; ID.; SUBROGATION RECEIPTS, NOT AN INDICATION OF
PRESENCE OF MUTUAL AGREEMENT TO SETTLE CLAIM OF
INSURED. There is no reason to conclude that by
submitting the subrogation receipt as evidence in court,
Fidelity bound itself to a "mutual agreement" to settle
Verendias claims in consideration of the amount of
P142,685.77. While the said receipt appears to have been a
filled-up form of Fidelity, no representative of Fidelity had
signed it. It might be that there had been efforts to settle
Verendias claims, but surely, the subrogation receipt by
itself does not prove that a settlement had been arrived at
and enforced. Thus, to interpret Fidelitys presentation of the
subrogation receipt in evidence as indicative of its accession
to its "terms" is not only wanting in rational basis but would
be substituting the will of the Court for that of the parties.

GULF RESORTS V. PHILIPPINE CHARTER INSURANCE

CORP, 458 SCRA 550 (2005)
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
Co (AHAC).
1. In the first 4 policies issued, the risks of loss from
earthquake shock was extended to only petitioners
two swimming pools.
2. Gulf Resorts agreed to insure with Phil Charter the
properties covered by the AHAC policy provided that
the wordings and rate in the AHAC policy be copied
in the policy to be issued by Phil Charter
3. On Jul 16, 1991 and while the policy was in effect, an
earthquake struck Central and North Luzon and Gulf
Resorts properties, including the two swimming
pools in Agoo, were damaged
4. As such, Gulf Resorts filed a claim for damage on its
properties with Phil Charter. Phil Charter denied the
claim on the ground that its insurance policy only
covered the two swimming pools in its Agoo resort
5. The trial court ruled in favor of Phil Charter. It found
that the insured only paid a premium of P393 against
the perils of earthquake shock, the same premium it
paid AHAC on the two swimming pools
ISSUE: WON the Phil Charter policy covers only the two
swimming pools owned by Gulf Resorts and does not extend
to other properties damaged by the earthquake
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.
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 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. In fire, casualty, and marine insurance, the premium
payable 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
petitioner's previous insurance policies from AHAC-AIU.
There is no ambiguity in the terms of the contract and its
riders. Petitioner cannot rely on the general rule that
insurance contracts are contracts of adhesion which should
be liberally construed in favor of the insured and strictly
against the insurer company which usually prepares it. A
contract of adhesion is one wherein a party, usually a
corporation, prepares the stipulations in the contract, while
the other party merely affixes his signature or his
"adhesion" thereto. Through the years, the courts have held
that in these type of contracts, the parties do not bargain on
equal footing, the weaker party's participation being
reduced to the alternative to take it or leave it. Thus, these
contracts are viewed as traps for the weaker party whom
the courts of justice must protect. Consequently, any
ambiguity therein is resolved against the insurer, or
construed liberally in favor of the insured.

PAN MALAYAN INSURANCE CORP V. COURT OF

APPEALS AND ERLINDA FABIE, 184 SCRA 54 (1990)
FACTS: Pan Malayan insured a vehicle registered to
Canlubang Automotive Resources Corp. On May 26, 1985,
the car figured in an accident caused by the carelessness
and reckless of an unknown driver of a pick-up truck owned
by Erlinda Fabie. As a result, the car sustained damages
amounting to P42,052.
1. Pan Malayan defrayed the cost of repairs and as
such, was subrogated to the rights of Canlubang.
Despite repeated demands, Fabie failed and refused
to pay the claim of Pan Malayan
2. Pan Malayan then filed an action against Fabie. Fabie
filed a motion to dismiss alleging that Pan Malayan
has no cause of action against them. They argued
that the payment under the own damage of the
insurance policy precluded subrogation under Art
2207, since indemnification thereunder was made on
the assumption that there was no wrongdoer or no
third party at fault
3. Pan Malayan contended 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 Fabies driver. As such, it has a
cause of action against Fabie under Art 2207 NCC
ISSUE: WON Pan Malayan was subrogated to the rights of
Canlubang against the driver and his employer
HELD: Yes. It 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
claim. It accrues simply upon payment of the insurance
claim by the insurer
There are exceptions to this rule:
1. If the assured by his own act releases the wrongdoer
or third party liable for the loss or damage, from
liability
2. Where the insurer pays the assured the value of the
lost goods without notifying the carrier who has in
good faith settled the assureds claim for loss
3. Where the insurer pays the assured for a loss which
is not a risk covered by the policy (voluntary
payment)
None of the exceptions are availing in the present case.
It is a basic rule in the interpretation of contracts that the
terms of a contract are to be construed according to the
sense and meaning of the terms which the parties
thereto have used. In the case of property insurance
policies, the evident intention of the contracting parties, i.e.,
the insurer and the assured, determine the import of the
various terms and provisions embodied in the policy. It is
only when the terms of the policy are ambiguous, equivocal
or uncertain, such that the parties themselves disagree
about the meaning of particular provisions that the courts
will intervene. In such an event, the policy will be construed
by the courts liberally in favor of the assured and strictly
against the insurer

FEDERAL EXPRESS CORP V. AMERICAN HOME

ASSURANCE CORP, 437 SCRA 50 (2004)
FACTS: Smithklein caused the transportation of 109 cartons
of veterinary biologicals.
1. The shipment was initially loaded to Burlington Air
Express and then forwarded to petitioner Federal
Express for delivery to the consignee.
2. When the consignee received the same, it was found
out that the goods was damaged and decided to
abandon the shipment and declared a total loss and
then claimed against the insurance company.
3. The insurance company paid the loss.
ISSUE: WON there is a legal subrogation on the part of the
insurance company
HELD: Yes. Upon payment, the insurers entitlement to
subrogation pro tanto equips the insurance company with a
cause of action in case of a contractual breach or
negligence. The insurance company stands in the same
footing or in substitution of the insured party.
In the exercise of its subrogatory right, an insurer may
proeed against an erring carrier. For all intents and
purposes, it stands in the place and in substitution of the
consignee. A fortiori, both the insurer and the consignee are
bound by the contractual stipulations under the bill of
lading.

FIREMANS FUND INSURANCE CO AND FIRESTONE

TIRE & RUBBER CO V. JAMILA INC, 70 SCRA 23 (1976)
FACTS:
ISSUE:
HELD: