1. San Miguel Brewery v. La Union and Rock Insurance Co.

G.R. No. L-14300, January 19, 1920

FACTS: > On Jan. 12, 1918, Dunn mortgaged a parcel of land to SMB to secure a debt of
10T.
> Mortgage contract stated that Dunn was to have the property insured at his own expense,
authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so
much of the proceeds as would cover the mortgage debt.
> Dunn likewise authorized SMB to take out the insurance policy for him.
> Brias, SMBs general manager, approached Law Union for insurance to the extent of 15T
upon the property. In the application, Brias stated that SMBs interest in the property was
merely that of a mortgagee.
> Law Union, not wanting to issue a policy for the entire amount, issued one for P7,500 and
procured another policy of equal amount from Filipinas Cia de Seguros. Both policies were
issued in the name of SMB only and contained no reference to any other interests in the
propty. Both policies required assignments to be approved and noted on the policy.
> Premiums were paid by SMB and charged to Dunn. A year later, the policies were
renewed.
> In 1917, Dunn sold the property to Harding, but no assignment of the policies was made
to the latter.
> Property was destroyed by fire. SMB filed an action in court to recover on the policies.
Harding was made a defendant because by virtue of the sale, he became the owner of the
property, although the policies were issued in SMBs name.
> SMB sought to recover the proceeds to the extent of its mortgage credit with the balance
to go to Harding.
> Insurance Companies contended that they were not liable to Harding because their
liability under the policies was limited to the insurable interests of SMB only.
> SMB eventually reached a settlement with the insurance companies and was paid the
balance of its mortgage credit. Harding was left to fend for himself. Trial court ruled against
Harding. Hence the appeal.
Issue:

Whether or not the insurance companies are liable to Harding for the balance of the
proceeds of the 2 policies.

Held:
NOPE.
Under the Insurance Act, the measure of insurable interest in the property is the extent to
which the insured might be daminified by the loss or injury thereof. Also it is provided in the
IA that the insurance shall be applied exclusively to the proper interest of the person in
whose name it is made. Undoubtedly, SMB as the mortgagee of the property, had an
insurable interest therein; but it could NOT, in any event, recover upon the two policies an
amount in excess of its mortgage credit.

By virtue of the Insurance Act, neither Dunn nor Harding could have recovered from the two
policies. With respect to Harding, when he acquired the property, no change or assignment
of the policies had been undertaken. The policies might have been worded differently so as
to protect the owner, but this was not done.

If the wording had been: Payable to SMB, mortgagee, as its interests may appear,
remainder to whomsoever, during the continuance of the risk, may become owner of the
interest insured, it would have proved an intention to insure the entire interest in the
property, NOT merely SMBs and would have shown to whom the money, in case of loss,
should be paid. Unfortunately, this was not what was stated in the policies.
If during the negotiation for the policies, the parties had agreed that even the owners
interest would be covered by the policies, and the policies had inadvertently been written in
the form in which they were eventually issued, the lower court would have been able to
order that the contract be reformed to give effect to them in the sense that the parties
intended to be bound. However, there is no clear and satisfactory proof that the policies
failed to reflect the real agreement between the parties that would justify the reformation of
these two contracts.

2. Valenzuela v. CA
G.R. No. 83122, October 19, 1990

FACTS: Petitioner Valenzuela, a General Agent respondent Philamgen, was authorized

to solicit and sell all kinds of non-life insurance. He had a 32.5% commission rate.
From 1973 to 1975, Valenzuela solicited marine insurance from Delta Motors, Inc. in
the amount of P4.4 Million from which he was entitled to a commission of 32%.
However, Valenzuela did not receive his full commission which amounted to P1.6
Million from the P4.4 Million. Premium payments amounting to P1,946,886.00 were
paid directly to Philamgen. Valenzuelas commission amounted to P632,737.00.

Philamgen wanted to cut Valenzuelas commission to 50% of the amount. He declined.

When Philamgen offered again, Valenzuela firmly reiterated his objection.
Philamgen took drastic action against Valenzuela. They: reversed the commission due him,
threatened the cancellation of policies issued by his agency, and started to leak out news
that Valenzuela has a substantial debt with Philamgen. His agency contract was terminated.
The petitioners sought relief by filing the complaint against the private respondents. The
trial court found that the principal cause of the termination as agent was his refusal to share
his Delta commission.
The court considered these acts as harassment and ordered the company to pay for the
resulting damage in the value of the commission. They also ordered the company to pay
350,000 in moral damages.
The company appealed. The CA ordered Valenzuela to pay the entire amount of the
commission. Hence, this appeal by Valenzuela.
ssue:
1. WON the agency contract is coupled with interest on the part of agent Valenzuela.
2. Whether or not Philamgen can be held liable for damages due to the termination of the
General Agency Agreement it entered into with the petitioners.
3. WON Valenzuela should pay the premiums he collected.
Held: Yes. Yes. Petition granted
Ratio:
1. In any event the principal's power to revoke an agency at will is so pervasive, that the
Supreme Court has consistently held that termination may be effected even if the principal
acts in bad faith, subject only to the principal's liability for damages.
The Supreme Court accorded great weight on the trial courts factual findings and found the
cause of the conflict to be Valenzuelas refusal to share the commission. Philamgen told the
petitioners of its desire to share the Delta Commission with them. It stated that should Delta
back out from the agreement, the petitioners would be charged interests through a reduced
commission after full payment by Delta.
Philamgen proposed reducing the petitioners' commissions by 50% thus giving them an
agent's commission of 16.25%. The company insisted on the reduction scheme. The
company pressured the agents to share the income with the threat to terminate the agency.
The petitioners were also told that the Delta commissions would not be credited to their
account. This continued until the agency was terminated.
Records also show that the agency is one "coupled with an interest," and, therefore, should
not be freely revocable at the unilateral will of the company.
The records sustain the finding that the private respondent started to covet a share of the
insurance business that Valenzuela had built up, developed and nurtured. The company
appropriated the entire insurance business of Valenzuela. Worse, despite the termination of

the agency, Philamgen continued to hold Valenzuela jointly and severally liable with
theinsured for unpaid premiums.
Under these circumstances, it is clear that Valenzuela had an interest in the continuation of
the agency when it was unceremoniously terminated not only because of
the commissions he procured, but also Philamgens stipulation liability against him for
unpaid premiums. The respondents cannot state that the agency relationship between
Valenzuela and Philamgen is not coupled with interest.
There is an exception to the principle that an agency is revocable at will and that is when the
agency has been given not only for the interest of the principal but also for the mutual
interest of the principal and the agent. The principal may not defeat the agent's right to
indemnification by a termination of the contract of agency. Also, if a principal violates a
contractual or quasi-contractual duty which he owes his agent, the agent may as a rule bring
an appropriate action for the breach of that duty.
2. Hence, if a principal acts in bad faith and with abuse of right in terminating the agency,
then he is liable in damages. The Civil Code says that "every person must in the exercise of
his rights and in the performance of his duties act with justice, give every one his due, and
observe honesty and good faith: (Art. 19, Civil Code), and every person who, contrary to law,
wilfully or negligently causes damages to another, shall indemnify the latter for the same
(Art. 20, Civil Code).
3. As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and
uncollected premiums which the appellate court ordered Valenzuela to pay, the respondent
court erred in holding Valenzuela liable.
Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to
put an end to and render theinsurance policy not binding.
Philippine Phoenix- non-payment of premium does not merely suspend but puts an end to an
insurance contract since the time of the payment is peculiarly of the essence of the contract.
Section 776 of the insurance Code says that no contract of insurance by an insurance
company is valid and binding unless and until the premium has been paid, notwithstanding
any agreement to the contrary
Since the premiums have not been paid, the policies issued have lapsed. The insurance
coverage did not go into effect or did not continue and the obligation of Philamgen as
insurer ceased. Philam cant demand from or sue Valenzuela for the unpaid premiums.
The court held that the CAs giving credence to an audit that showed Valenzuela owing
Philamgen P1,528,698.40 was unwarranted. Valenzuela had no unpaid account with
Philamgen. But, facts show that the beginning balance of Valenzuela's account with
Philamgen amounted to P744,159.80. 4 statements of account were sent to the agent.
It was only after the filing of the complaint that a radically different statement of accounts
surfaced in court. Certainly, Philamgen's own statements made by its own accountants over
a long period of time and covering examinations made on four different occasions must
prevail over unconfirmed and unaudited statements made to support a position made in the
course of defending against a lawsuit.
The records of Philamgen itself are the best refutation against figures made as an
afterthought in the course of litigation. Moreover, Valenzuela asked for a meeting where the

figures would be reconciled. Philamgen refused to meet with him and, instead, terminated
the agency agreement.
After off-setting the amount, Valenzuela had overpaid Philamgen the amount of P530,040.37
as of November 30, 1978. Philamgen cannot later be heard to complain that it committed a
mistake in its computation. The alleged error may be given credence if committed only once.
But as earlier stated, the reconciliation of accounts was arrived at four (4) times on different
occasions where Philamgen was duly represented by its account executives. On the basis of
these admissionsand representations, Philamgen cannot later on assume a different posture
and claim that it was mistaken in its representation with respect to the correct
beginning balance as of July 1977 amounting to P744,159.80. The audit reportcommissioned
by Philamgen is unreliable since its results are admittedly based on an unconfirmed and
unaudited beginning balance of P1,758,185.43.
Philamgen has been appropriating for itself all these years the gross billings and income that
it took away from the petitioners. A principal can be held liable for damages in cases of
unjust termination of agency. This Court ruled that where no time for the continuance of the
contract is fixed by its terms, either party is at liberty to terminate it at will, subject only to
the ordinary requirements of good faith. The right of the principal to terminate his authority
is absolute and unrestricted, except only that he may not do so in bad faith.
The circumstances of the case, however, require that the contractual relationship between
the parties shall be terminated upon the satisfaction of the judgment. No more claims
arising from or as a result of the agency shall be entertained by the courts after that date.

3. Vda. De Canilang v. CA
G.R. No. 92492, June 17, 1993

FACTS: Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus
tachycardia." Mr. Canilang consulted the same doctor again on 3 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. Canilang was issued ordinary life
insurance with the face value of P19,700.
> On 5 August 1983, Canilang died of "congestive heart failure," "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.
> 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:
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 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.

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.

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.

4. Cathay Insurance Co. vs. CA

G.R. No. 76145, June 30, 1987

FACTS: A complaint was filed by private respondent corporation against petitioner (then
defendant) company seeking collection of the sum of P868,339.15 representing private
respondent's losses and damages incurred in a shipment of seamless steel pipes under an
insurance contract in favor of the said private respondent as the insured, consignee or
importer of aforesaid merchandise while in transit from Japan to the Philippines on board
vessel SS "Eastern Mariner." The total value of the shipment was P2,894,463.83 at the
prevailing rate of P7.95 to a dollar in June and July 1984, when the shipment was made. The
trial court decided in favor of private respondent corporation by ordering petitioner to pay it
the sum of P866,339.15 as its recoverable insured loss equivalent to 30% of the value of the
seamless steel pipes; ordering petitioner to pay private respondent interest on the
aforecited amount at the rate of 34% or double the ceiling prescribed by the Monetary Board
per annum from February 3, 1982 or 90 days from private respondent's submission of proof
of loss to petitioner until paid as provided in the settlement of claim provision of the policy;
and ordering petitioner to pay private respondent certain amounts for marine surveyor's fee,
attorney's fees and costs of the suit.

ISSUE: WON the rusting of steel pipes in the course of a voyage is a "peril of the sea" in
view of the toll on the cargo of wind, water, and salt conditions.
RULING:
There is no question that the rusting of steel pipes in the course of a voyage is a "peril of the
sea" in view of the toll on the cargo of wind, water, and salt conditions. At any rate if the
insurer cannot be held accountable therefor, We would fail to observe a cardinal rule in the
interpretation of contracts, namely, that any ambiguity therein should be construed against
the maker/issuer/drafter thereof, namely, the insurer. Besides the precise purpose of
insuring cargo during a voyage would be rendered fruitless. Be it noted that any attack of
the 15-day clause in the policy was foreclosed right in the pre-trial conference.

5. Palermo v. Pyramid Insurance Co.

G.R. No. L-36480, May 31, 1988

FACTS: On March 7, 1969, the insured, appellee Andrew Palermo, filed a complaint in the
Court of First Instance of Negros Occidental against Pyramid Insurance Co., Inc., for payment
of his claim under a Private Car Comprehensive Policy MV-1251 issued by the defendant
(Exh. A). In its answer, the appellant Pyramid Insurance Co., Inc., alleged that it disallowed

the claim because at the time of the accident, the insured was driving his car with an
expired driver's license. After the trial, the court a quo rendered judgment on October 29,
1969 ordering the defendant "to pay the plaintiff the sum of P20,000.00, value of the
insurance of the motor vehicle in question and to pay the costs." On November 26, 1969,
the plaintiff filed a "Motion for Immediate Execution Pending Appeal." It was opposed by the
defendant, but was granted by the trial court on December 15, 1969.

ISSUE: WON plaintiff was not authorized to drive the insured motor vehicle because his
driver's license had expired.
RULING:
There is no merit in the appellant's allegation that the plaintiff was not authorized to drive
the insured motor vehicle because his driver's license had expired. The driver of the insured
motor vehicle at the time of the accident was, the insured himself, hence an "authorized
driver" under the policy. While the Motor Vehicle Law prohibits a person from operating a
motor vehicle on the highway without a license or with an expired license, an infraction of
the Motor Vehicle Law on the part of the insured, is not a bar to recovery under the
insurance contract. It however renders him subject to the penal sanctions of the Motor
Vehicle Law. The requirement that the driver be "permitted in accordance with the licensing
or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving
such motor vehicle by order of a Court of Law or by reason of any enactment or regulation in
that behalf," applies only when the driver" is driving on the insured's order or with his
permission." It does not apply when the person driving is the insured himself.

6. Corpuz v. Lugue
G.R. No. 137772, July 29, 2005

Facts: On 14 September 1984, at around 7:15 in the morning, while an Isuzu KC-20
passenger jeep (KC-20), then being driven by Jimmy Basilio, was traversing the right side of
the Roman Highway in Barangay Pias, Orion, Bataan, it collided with a tanker truck driven by
Gerardo Lim, which was then moving from the right shoulder of the highway. As a
consequence of the accident, passengers of the KC-20, including respondent Lugue, suffered
physical injuries. Respondent Lugue then filed an action for damages arising from the
vehicular incident before the Balanga, Bataan RTC, Branch 2, against herein petitioners
Amador Corpuz and Romeo Gonzales, owner and driver of the minibus, respectively, and
Oscar Jaring and Gerardo Lim, owner and driver of the tanker truck, respectively. Therein
defendants filed a third-party complaint against Ricardo Santiago and Jimmy Basilio,
owner/operator and driver of the KC-20, respectively.

ISSUE: whether or not the appellate court erred in holding them liable for damages based
on the findings of facts adduced by the trial court.
RULING:
It is clear that the proximate cause of the injuries suffered by respondent Lugue was the
collision between the KC-20 and the tanker truck. As correctly pointed out by the lower
court, proximate legal cause is that acting first and producing the injury either immediately
or by setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate predecessor, the final
event in the chain immediately effecting the injury as a natural and probable result of the
cause which first acted, under such circumstances that the person responsible for the first
event should, as an ordinarily prudent and intelligent person, have reasonable ground to
expect at the moment of his act or default that an injury to some person might probably
result therefrom. This conclusion of the appellate court of recklessness on the part of
petitioner Gonzales is, however, unwarranted. Based on the unchallenged testimony of
petitioner Gonzales, he signaled to overtake the KC-20 because the way was clear. That
despite his best effort to do everything to avoid hitting the KC-20, petitioner failed to do so
because the KC-20 had moved to a position blocking the way of the minibus as a result of
the tanker bumping the KC-20. Furthermore, based on the unrebutted testimony of both
Remigio Gervacio and Patrocinio Carillo, at the time when the minibus hit the KC-20, the
former was already moving towards the middle portion of the highway, occupying the left
portion of the road, a little beyond the center line. Certainly, even assuming that petitioner
Gonzales had a few seconds before actual collision, he no longer had any opportunity to
avoid it. Petitioner Gonzales cannot be deemed negligent for failing to prevent the collision
even after applying all means available to him within the few instants when he had
discovered the impending peril.

7. Finman v. CA
213 SCRA 493, September 2, 1992

FACTS: On 14 September 1984, at around 7:15 in the morning, while an Isuzu KC-20
passenger jeep (KC-20), then being driven by Jimmy Basilio, was traversing the right side of
the Roman Highway in Barangay Pias, Orion, Bataan, it collided with a tanker truck driven by
Gerardo Lim, which was then moving from the right shoulder of the highway. As a
consequence of the accident, passengers of the KC-20, including respondent Lugue, suffered
physical injuries. Respondent Lugue then filed an action for damages arising from the
vehicular incident before the Balanga, Bataan RTC, Branch 2, against herein petitioners
Amador Corpuz and Romeo Gonzales, owner and driver of the minibus, respectively, and
Oscar Jaring and Gerardo Lim, owner and driver of the tanker truck, respectively. Therein

defendants filed a third-party complaint against Ricardo Santiago and Jimmy Basilio,
owner/operator and driver of the KC-20, respectively.

ISSUE: whether or not the appellate court erred in holding them liable for damages based
on the findings of facts adduced by the trial court.
RULING:
It is clear that the proximate cause of the injuries suffered by respondent Lugue was the
collision between the KC-20 and the tanker truck. As correctly pointed out by the lower
court, proximate legal cause is that acting first and producing the injury either immediately
or by setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate predecessor, the final
event in the chain immediately effecting the injury as a natural and probable result of the
cause which first acted, under such circumstances that the person responsible for the first
event should, as an ordinarily prudent and intelligent person, have reasonable ground to
expect at the moment of his act or default that an injury to some person might probably
result therefrom. This conclusion of the appellate court of recklessness on the part of
petitioner Gonzales is, however, unwarranted. Based on the unchallenged testimony of
petitioner Gonzales, he signaled to overtake the KC-20 because the way was clear. That
despite his best effort to do everything to avoid hitting the KC-20, petitioner failed to do so
because the KC-20 had moved to a position blocking the way of the minibus as a result of
the tanker bumping the KC-20. Furthermore, based on the unrebutted testimony of both
Remigio Gervacio and Patrocinio Carillo, at the time when the minibus hit the KC-20, the
former was already moving towards the middle portion of the highway, occupying the left
portion of the road, a little beyond the center line. Certainly, even assuming that petitioner
Gonzales had a few seconds before actual collision, he no longer had any opportunity to
avoid it. Petitioner Gonzales cannot be deemed negligent for failing to prevent the collision
even after applying all means available to him within the few instants when he had
discovered the impending peril.

8. Gibson v. Revilla
G.R. No. L-41432, July 30, 1979

FACTS: Lepanto Consolidated Mining Company filed a complaint against Malayan Insurance
Company, Inc. The civil suit thus instituted by Lepanto against Malayan was founded on the
fact that Malayan issued a Marine Open Policy covering all shipments of copper, gold, and
silver concentrates in bulk from Poro, San Fernando, La Union to Tacoma, Washington or to
other places in the United States. Thereafter, Malayan obtained reinsurance abroad through

Sedgwick, Collins & Co., Limited, a London insurance brokerage. The Memorandum of
Insurance issued by Sedgwick to Malayan listed three groups of underwriters or reinsurers
Lloyds 62.808%, Companies (I.L.U.) 34.705%, Other companies 2.487%. At the top of the list
of underwriting members of Lloyds is Syndicate No. 448, assuming 2.48% of the risk
assumed by the reinsurer, which syndicate number petitioner Ivor Robert Dayton Gibson
claims to be himself. Petitioner then filed a motion to intervene as defendant, which motion
was denied by the lower court.

ISSUE: WON THE LOWER COURT COMMITTED, REVERSIBLE ERROR IN REFUSING THE
INTERVENTION OF THE PETITIONER IN THE SUIT BETWEEN LEPANTO AND MALAYAN
COMPANIES.
HELD:
No. The respondent Judge committed no error of law in denying petitioners Motion to
Intervene and neither has he abused his discretion in his denial of petitioners Motion for
Intervention. We agree with the holding of the respondent court that since movant Ivor
Robert Dayton Gibson appears to be only one of several re-insurers of the risks and liabilities
assumed by Malayan Insurance Company, Inc., it is highly probable that other re-insurers
may likewise intervene. If petitioner is allowed to intervene, We hold that there is good and
sufficient basis for the Court a quo to declare that the trial between Lepanto and Malayan
would be definitely disrupted and would certainly unduly delay the proceedings between the
parties especially at the stage where Lepanto had already rested its case and that the issue
would also be compounded as more parties and more matters will have to be litigated. In
other words, the Courts discretion is justified and reasonable. We also hold that respondent
Judge committed no reversible error in further sustaining the fourth ground of Lepantos
Opposition to the Motion to Intervene that the rights, if any, of petitioner are not prejudiced
by the present suit and will be fully protected in a separate action against him and his coinsurers by Malayan. Petitioners contention that he has to pay once Malayan is finally
adjudged to pay Lepanto because of the very nature of a contract of reinsurance and
considering that the re-insurer is obliged to pay as may be paid thereon (referring to the
original policies), although this is subject to other stipulations and conditions of the
reinsurance contract, is without merit. The general rule in the law of reinsurance is that the
re-insurer is entitled to avail itself of every defense which the re-insured (which is Malayan)
might urge in an action by the person originally insured (which is Lepanto). As to the effect
of the clause to pay as may be paid thereon contained in petitioners re-insurance
contract, Arnould, on the Law of Marine Insurance and Average, 13th Ed., Vol. 1, Section 327,
p. 315, states the rule, this: It has been decided that this clause does not preclude the
reinsurer from insisting upon proper proof that a loss strictly within the terms of the original
policy has taken place. This clause does not enable the original underwriter to recover from
his reinsurer to an extent beyond the subscription of the latter. Wherefore, in view of the

foregoing, the petition is hereby dismissed. No costs. Pacific Timber Export Corporation vs
Court of Appeals In 1963, Pacific Timber Export Corporation (PTEC) applied for a temporary
marine insurance from Workmens Insurance Company (WIC) in order for the latter to insure
1,250,000 board feet of logs to be exported to Japan. In March 1963, WIC issued a cover
note to PTEC for the said logs. On April 2, 1963, WIC issued two policies for the logs.
However, the total board feet covered this time is only 1,195,498. On April 4, 1963, while the
logs were in transit to Japan, bad weather prevailed and this caused the loss of 32 pieces of
logs. WIC then asked an adjuster to investigate the loss. The adjuster submitted that the
logs lost were not covered by the two policies issued on April 2, 1963 but said logs were
included in the cover note earlier issued. WIC however denied the insurance claim of PTEC
as it averred that the cover note became null and void when the two policies were
subsequently issued. The Court of Appeals ruled that the cover note is void for lack of
valuable consideration as it appeared that no premium payment therefor was made by
PTEC. ISSUE: Whether or not a separate premium is needed for cover notes. HELD: No. The
Cover Note was not without consideration for which the Court of Appeals held the Cover
Note as null and void, and denied recovery therefrom. The fact that no separate premium
was paid on the Cover Note before the loss insured against occurred, does not militate
against the validity of PTECs contention, for no such premium could have been paid, since
by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain
particulars of the shipment that would serve as basis for the computation of the premiums.
As a logical consequence, no separate premiums are intended or required to be paid on a
Cover Note. At any rate, it is not disputed that PTEC paid in full all the premiums as called
for by the statement issued by WIC after the issuance of the two regular marine insurance
policies, thereby leaving no account unpaid by PTEC 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.

9. Geagonia v. CA
G.R. No. 114427, February 6, 1995

FACTS: Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for
P100,000.00. The 1 year policy and covered thestock trading of dry goods. The policy noted
the requirement that "3. The insured shall give notice to the Company of any insurance or
insurances already effected, or which may subsequently be effected, covering any of the
property or properties consisting of stocks in trade, goods in process and/or inventories only
hereby insured, and unless notice be given and the particulars of such insurance or
insurances be stated therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the occurrence of any loss or
damage, all benefits under this policy shall be deemed forfeited, provided however, that this

condition shall not apply when the total insurance or insurances in force at the time of the
loss or damage is not more than P200,000.00." The petitioners stocks were destroyed by
fire. He then filed a claim which was subsequently denied because the petitioners stocks
were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis
of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the
policy. Geagonia then filed a complaint against the private respondent in the Insurance
Commission for the recovery of P100,000.00 under fire insurance policy and damages. He
claimed that he knew the existence of the other two policies. But, he said that he had no
knowledge of the provision in the private respondent's policy requiring him to inform it of the
prior policies and this requirement was not mentioned to him by the private respondent's
agent. The Insurance Commission found that the petitioner did not violate Condition 3 as he
had no knowledge of the existence of the two fire insurance policies obtained from the PFIC;
that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing
his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the
stocks. The Insurance Commission then ordered the respondent company to pay
complainant the sum of P100,000.00 with interest and attorneys fees. CA reversed the
decision of the Insurance Commission because it found that the petitioner knew of the
existence of the two other policies issued by the PFIC.

Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire
insurance and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering
Held: Yes. No. Petition Granted
Ratio:
1. The court agreed with the CA that the petitioner knew of the prior policies issued by the
PFIC. His letter of 18 January 1991 to the private respondent conclusively proves this
knowledge. His testimony to the contrary before the Insurance Commissioner and which the
latter relied upon cannot prevail over a written admission made ante litem motam. It was,
indeed, incredible that he did not know about the prior policies since these policies were not
new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a
forfeiture of insurance policies should be construed most strictly against those for whose
benefits they are inserted, and most favorably toward those against whom they are intended
to operate. With these principles in mind, Condition 3 of the subject policy is not totally free
from ambiguity and must be meticulously analyzed. Such analysis leads us to conclude that
(a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall

only be to the extent exceeding P200,000.00 of the total policies obtained. Furthermore, by
stating within Condition 3 itself that such condition shall not apply if the total insurance in
force at the time of loss does not exceed P200,000.00, the private respondent was amenable
to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in
mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of
"other insurance" clause in fire policies is to prevent over-insurance and thus avert the
perpetration of fraud. When a property owner obtains insurance policies from two or more
insurers in a total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the insurance. The public
as well as the insurer is interested in preventing a situation in which a fire would be
profitable to the insured.

10. Stokes v. Malayan Insurance Co.

FACTS: Daniel Adolfson had a subsisting Malayan car insurance policy with coverage against
own damage as well as 3rd party liability when his car figured in a vehicular accident with
another car, resulting to damage to both vehicles. At the time of the accident, Adolfsons car
was being driven by James Stokes, who was authorized to do so by Adolfson. Stokes, an Irish
tourist who had been in the Philippines for only 90 days, had a valid and subsisting Irish
drivers license but without a Philippine drivers license. Adolfson filed a claim with Malayan
but the latter refused to pay contending that Stokes was not an authorized driver under the
Authorized Driver clause of the insurance policy in relation to Section 21 of the Land
Transportation Office.
ISSUE: Whether or not Malayan is liable to pay the insurance claim of Adolfson
HELD:
NO. A contract of insurance is a contract of indemnity upon the terms and conditions
specified therein. When the insurer is called upon to pay in case of loss or damage, he has
the right to insist upon compliance with the terms of the contract. If the insured cannot bring
himself within the terms and conditions of the contract, he is not entitled as a rule to recover
for the loss or damage suffered. For the terms of the contract constitute the measure of the
insurers liability, and compliance therewith is a condition precedent to the right of recovery.
At the time of the accident, Stokes had been in the Philippines for more than 90 days.
Hence, under the law, he could not drive a motor vehicle without a Philippine drivers
license. He was therefore not an authorized driver under the terms of the insurance policy
in question, and Malayan was right in denying the claim of the insured. Acceptance of
premium within the stipulated period for payment thereof, including the agreed period of
grace, merely assures continued effectivity of the insurance policy in accordance with its
terms. Such acceptance does not estop the insurer from interposing any valid defense under

the terms of the insurance policy. The principle of estoppel is an equitable principle rooted
upon natural justice which prevents a person from going back on his own acts and
representations to the prejudice of another whom he has led to rely upon them. The
principle does not apply to the instant case. In accepting the premium payment of the
insured, Malayan was not guilty of any inequitable act or representation. There is nothing
inconsistent between acceptance of premium due under an insurance policy and the
enforcement of its terms. WHEREFORE, the appealed judgment is reversed. The complaint is
dismissed. Costs against appellees.

11. Tan v. CA

FACTS: Tan Lee Siong was issued a policy by Philamlife on Nov. 6, 1973.
> On Aprl 26, 1975, Tan died of hepatoma. His beneficiaries then filed a claim with
Philamlife for the proceeds of the insurance.
> Philamlife wrote the beneficiaries in Sep. 1975 denying their claim and rescinding the
contract on the ground of misrepresentation. The beneficiaries contend that Philamlife can
no longer rescind the contract on the ground of misrepresentation as rescission must
allegedly be done during the lifetime of the insured within two years and prior to the
commencement of the action following the wording of Sec. 48, par. 2.
Issue:
Whether or not Philamlife can rescind the contract.

Held:
YES.
The phrase during the lifetime found in Sec. 48 simply means that the policy is no longer
in force after the insured has died. The key phrase in the second paragraph is for a period
of two years.

What is a simpler illustration of the ruling in Tan v. CA?

The period to consider in a life insurance poiicy is two years from the date of issue or of
the last reinstatement. So if for example the policy was issued/reinstated on Jan 1, 2000,
the insurer can still exercise his right to rescind up to Jan. 1, 2003 or two years from the date
of issue/reinstatement, REGARDLESS of whether the insured died before or after Jan. 1,
2003.

12. Sun life v. CA

Facts:
> On April 15, 1986, Bacani procured a life insurance contract for himself from Sun Life. He
was issued a life insurance policy with double indemnity in case of accidental death. The
designated beneficiary was his mother, Bernarda.
> On June 26, 1987, the insured died in a plane crash. Bernarda Bacani filed a claim with
Sun Life, seeking the benefits of the insurance. Sun Life conducted an investigation and its
findings prompted it to reject the claim.
> Sun Life discovered that 2 weeks prior to his application, Bacani was examined and
confined at the Lung Center of the Philippines, where he was diagnosed for renal failure.
During his confinement, the deceased was subjected to urinalysis, ultra-sonography and
hematology tests. He did not reveal such fact in his application.
> In its letter, Sun Life informed Berarda, that the insured did not disclosed material facts
relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A
check representing the total premiums paid in the amount of P10,172.00 was attached to
said letter.
> Bernarda and her husband, filed an action for specific performance against Sun Life. RTC
ruled for Bernarda holding that the facts concealed by the insured were made in good faith
and under the belief that they need not be disclosed. Moreover, it held that the health
history of the insured was immaterial since the insurance policy was "non-medical." CA
affirmed.
Issue:
Whether or not the beneficiary can claim despite the concealment.

Held:
NOPE.
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.

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 communication is due, in forming his estimate

of the disadvantages of the proposed contract or in making his inquiries (The Insurance
Code, Sec 31)

The terms of the contract are clear. 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 the 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. Moreover, a disclosure may have warranted a medical examination of the insured
by petitioner in order for it to reasonably assess the risk involved in accepting the
application.

Thus, "good 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. It appears that such concealment was deliberate on his
part.