COMMERCIAL LAW REVIEW

DIGESTED CASES IN INSURANCE

(Philippine Jurisprudence)

1.) CONSTRUCTION OF INSURANCE CASES

Calanoc vs. CA
98 Phil 79
Facts:
MelencioBasilio, a watchman of the Manila Auto Supply, secured a life insurance policy fromthe
Philippine American Insurance Company in the amount of P2,000 to which was
attached
asupplemental contract covering death by accident. He later died from a gunshot
wound on the occasionof a robbery committed; subsequently, hiswidow was paid
P2,000 representing the face value of thepolicy.
The widow demanded the
payment of the additional sum of P2,000 representing the value of
thesupplemental policy which the company refused because the deceased died by
murder during the robbery and while making an arrest as an officer of the law
which were expressly
excluded in thecontract. The companys contention which
was upheld by the Court of Appeals provides thatthecircumstances surrounding
Basilios death was caused by one of the risks excluded by thesupplementary contract
which exempts the company from liability.
Issue:
Is the Philippine American Life Insurance Co. liable to the petitioner for the amount
covered by thesupplemental contract?
Held:
Yes.The circumstances of Basilios death cannot be taken as purely intentional on
the part of Basilio to expose himself to the danger. There is no proof that his death was the result
of intentionalkilling because there is the possibility that the malefactor had fired the
shot merely to scare away thepeople around. In this case, the companys defense
points out that Basiliosis included among the risksexcludedin
the
supplementary
contract; however, the terms and phraseology of the exception clause should
be
clearly
expressed within the understanding of the insured. Art. 1377 of the New Civil Codeprovides that
in case ambiguity, uncertainty or obscurity in the interpretation of the terms of
thecontract, it shall be construed against the party who caused such obscurity.
Applying this to thesituation, the ambiguous or obscure terms in the insurance policy
are to be construed strictly against theinsurer and liberally in favor of the insured
party. The reason is to ensure the protection of the insuredsince these insurance
contracts are usually arranged and employed by experts and legal advisers
actingexclusively in the interest of the insurance company. As long as insurance
companies insist upon the useof ambiguous, intricate and technical provisions, which
conceal their own intentions, the courts must, infairness to those who purchase insurance,
construe every ambiguity in favor of the insured.

Biagtan vs.Insular Life Assurance Company, Ltd.

44 SCRA 58
Facts:
Juan S. Biagtan was insured with defendant Insular Life Assurance Company
underPolicy No. 398075 for the sum of P5,000.00 and, under a
supplementary
contract denominated"Accidental Death Benefit Clause, for an
additional sum of
P5,000.00 if "the death of the Insuredresulted directly from bodily injury
effected
solely through external and violent means sustainedin an accident .
.
.
and
independently of all other causes." The clause, however,
expressly provided that
it would not apply where death resulted from an injury "intentionally inflicted by athird
party."On the night of May 20, 1964 or during the
first hours of the following day
a band of robbersentered the house of the insured
Juan S. Biagtan.

Issue:
Whether the wounds received by the insured at the hands of the robbers were
inflictedintentionally.
Held:
Yes. But where a gang of robbers enter a house and coming face to face with the
owner,even if unexpectedly, stab him repeatedly, it is contrary to all reason and logic
to say that hisinjuries are not intentionally inflicted, regardless of
whether
they
prove fatal or not. As it was, inthe present case they did prove fatal,
and
the
robbers have been accused and convicted of thecrime of robbery with
homicide.
Under the circumstance, the insurance company was correct inrefusing
to pay the
additional sum of P2,000.00 under the accidental death benefit clause
whichexpressly provided that it would not apply where death resulted from an
injury "intentionally"inflicted by a third party.

Zenith Insurance Corp. vs. Court of Appeals

185 SCRA 398

Facts:
On January 25, 1983, private respondent Lawrence Fernandez insured his car for
"own damage" with petitioner Zenith Insurance Corporation. On July 6, 1983, the car
figured in an accident and suffered actual damages in the amount of P3,640.00. After
allegedly being given a run around by Zenith for two (2) months, Fernandez filed a
complaint with the Regional Trial Court of Cebu for sum of money
and damages resulting from the refusal of Zenith to pay the amount claimed. Aside
from actual damages and interests, Fernandez also prayed for moral damages in the
amount of P10,000.00, exemplary damages of P5,000.00, attorney's fees of
P3,000.00 and litigation expenses of P3,000.00.
On September 28, 1983, Zenith filed an answer alleging that it offered to pay the
claim of Fernandez pursuant to the terms and conditions of the contract which, the
private respondent rejected. On June 4, 1986, a decision was rendered by the trial
court in favor of private respondent Fernandez. On August 17, 1988, the Court of
Appeals rendered its decision affirming in toto the decision of the trial court.
Issue:
The propriety of the award of moral damages, exemplary damages and attorney's
fees is the main issue raised herein by petitioner.
Held:
The award of damages in case of unreasonable delay in the payment of insurance
claims is governed by the Philippine Insurance Code, which provides:
Sec.244. In case of any litigation for the enforcement of any policy or contract of
insurance, it shall be the duty of the Commissioner or the Court, as the case may be,
to make a finding as to whether the payment of the claim of the insured has been
unreasonably denied or withheld; and in the affirmative case, the insurance company
shall be adjudged to pay damages which shall consist of attorney's fees and
other expenses incurred by the insured person by reason of such
unreasonable denial or withholding of payment plus interest of twice the ceiling
prescribed by the Monetary Board of the amount of the claim due the insured, from
the date following the time prescribed in section two hundred forty-two or in section
two hundred forty-three, as the case may be, until the claim is fully satisfied;
Provided, That the failure to pay any such claim within the time prescribed in said
sections shall be considered prima facie evidence of unreasonable delay in
payment.
It is clear that under the Insurance Code, in case of unreasonable delay in the
payment of the proceeds of an insurance policy, the damages that may be awarded
are: 1) attorney's fees; 2) other expenses incurred by the insured person by reason
of such unreasonable denial or withholding of payment; 3) interest at twice the
ceiling prescribed by the Monetary Board of the amount of the claim due the injured;
and 4) the amount of the claim.
Villacorta vs. Insurance Commission

100 SCRA 467

Facts:
Complainant [petitioner] was the owner of a Colt Lancer, Model 1976, insured with
respondent company under Private Car Policy No. MBI/PC-0704 for P35,000.00
Own Damage; P30,000.00 Theft; and P30,000.00 Third Party Liability, effective
May 16, 1977 to May 16, 1978. On May 9, 1978, the vehicle was brought to the
Sunday Machine Works, Inc., for general check-up and repairs. On May 11, 1978,
while it was in the custody of the Sunday Machine Works, the car was allegedly
taken by six (6) persons and driven out to Montalban, Rizal. While travelling along
Mabini St., SitioPalyasan, Barrio Burgos, going North at Montalban, Rizal, the car
figured in an accident, hitting and bumping a gravel and sand truck parked at the
right side of the road going south. As a consequence, the gravel and sand truck
veered to the right side of the pavement going south and the car veered to the right
side of the pavement going north. The driver, Benito Mabasa, and one of the
passengers died and the other four sustained physical injuries. The car, as well,
suffered extensive damage. Complainant, thereafter, filed a claim for total loss with
the respondent company but claim was denied. Hence, complainant, was compelled
to institute the present action.
Issue:
WON the private respondents contention is right that thethe policy under the
Authorized Driver Clause limits the use of the insured vehicle to two (2) persons
only, namely: the insured himself or any person on his (insured's) permission.
Held:
The Court sets aside respondent Insurance Commission's dismissal of petitioner's
complaint and holds that where the insured's car is wrongfully taken without the
insured's consent from the car service and repair shop to whom it had been
entrusted for check-up and repairs (assuming that such taking was for a joy ride, in
the course of which it was totally smashed in an accident), respondent insurer is
liable and must pay insured for the total loss of the insured vehicle under the theft
clause of the policy.The Court finds respondent commission's dismissal of the
complaint to be contrary to the evidence and the law.First, respondent commission's
ruling that the person who drove the vehicle in the person of Benito Mabasa, who,
according to its finding, was one of the residents of the Sunday Machine Works, Inc.
to whom the car had been entrusted for general check-up and repairs was not an
"authorized driver" of petitioner-complainant is too restrictive and contrary to the
established principle that insurance contracts, being contracts of adhesion where the
only participation of the other party is the signing of his signature or his "adhesion"
thereto, "obviously call for greater strictness and vigilance on the part of courts of
justice with a view of protecting the weaker party from abuse and imposition, and
prevent their becoming traps for the unwary. The main purpose of the "authorized
driver" clause, as may be seen from its text, supra, is that a person other than the
insured owner, who drives the car on the insured's order, such as his regular driver,
or with his permission, such as a friend or member of the family or the employees of
a car service or repair shop must be duly licensed drivers and have no

disqualification to drive a motor vehicle.Secondly, and independently of the foregoing

(since when a car is unlawfully taken, it is the theft clause, not the "authorized driver"
clause, that applies), where a car is admittedly as in this case unlawfully and
wrongfully taken by some people, be they employees of the car shop or not to whom
it had been entrusted, and taken on a long trip to Montalban without the owner's
consent or knowledge, such taking constitutes or partakes of the nature of theft as
defined in Article 308 of the Revised Penal Code. The insurer must therefore
indemnify the petitioner-owner for the total loss of the insured car in the sum of
P35,000.00 under the theft clause of the policy, subject to the filing of such claim for
reimbursement or payment as it may have as subrogee against the Sunday Machine
Works, Inc.ACCORDINGLY, the appealed decision is set aside and judgment is
hereby rendered sentencing private respondent to pay petitioner the sum of
P35,000.00 with legal interest from the filing of the complaint until full payment is
made.

Palermo vs. Pyramid Insurance

161 SCRA 677

Facts:
On October 12,1968, after having purchased a brand new Nissan Cedric
de LuxeSedan car bearing Motor No. 087797 from the Ng Sam Bok Motors
Co. in BacolodCity, Andrew Palermo (Palermo) insured the same with the Pyramid
Insurance Co.,Inc. (Pyramid), herein defendant, against any loss or damage for P
20,000.00 andagainst third party liability for P 10,000.00. Palermo paid Pyramid P
361.34 premiumfor one year, March 12, 1968 to March 12, 1969, for which
defendant issued PrivateCar Comprehensive Policy No. MV-1251.O n Ap r i l 1 7 ,
1968, while driving the automobile in question, the Palermo met
violent accident. The La Carlota City fire engine crashed he
a d o n , a n d a s a consequence, the Palermo sustained physical injuries,
his father, Cesar Palermo,who was with him in the car at the time, was
likewise seriously injured and died shortly thereafter, and the car in question was
totally wrecked. After the accident,Palermo filed a claim against Pyramid under
a Private Car Comprehensive Policy.
Issue:
WON Palermo can claim from his Insurance Policy. Whether or
not he fallsunder
the designation AuthorizedDriver.Ruling: There is no merit in
the Pyramids
allegation that the Palermo was not authorized todrive the insured motor vehicle
because his driver's license had expired.
Held:
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. 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.

Figuracionvda. De Maglana vs. Hon. Francisco Consolacion

212 SCRA 268

Facts:
Lope Maglana was an employee of the Bureau of Customs whose work station was
at Lasa, here in Davao City. On December 20, 1978, early morning, Lope Maglana
was on his way to his work station, driving a motorcycle owned by the Bureau of
Customs. At Km. 7, Lanang, he met an accident that resulted in his death. He died
on the spot. The PUJ jeep that bumped the deceased was driven by Pepito Into,
operated and owned by defendant Destrajo. From the investigation conducted by the
traffic investigator, the PUJ jeep was overtaking another passenger jeep that was
going towards the city poblacion. While overtaking, the PUJ jeep of defendant
Destrajo running abreast with the overtaken jeep, bumped the motorcycle driven by
the deceased who was going towards the direction of Lasa, Davao City. The point of
impact was on the lane of the motorcycle and the deceased was thrown from the
road and met his untimely death. Consequently, the heirs of Lope Maglana, Sr.,
Aninformation for homicide thru reckless imprudence was also filed against Pepito
Into.During the pendency of the civil case, Into was sentenced to suffer an
indeterminate penalty of one (1) year, eight (8) months and one (1) day
of prisioncorreccional, as minimum, to four (4) years, nine (9) months and eleven
(11) days of prisioncorreccional, as maximum, with all the accessory penalties
provided by law, and to indemnify the heirs of Lope Maglana, Sr. with subsidiary
imprisonment in case of insolvency. No appeal was interposed by accused who later
applied for probation. On December 14, 1981, the lower court rendered a decision
finding that Destrajo had not exercised sufficient diligence as the operator of the
jeepney.
Issue:
WON the petitioners contention that the insurance company is directly and solidarily
liable with the negligent operator up to the extent of its insurance coverage.
Held:
The petitioners contention is correct. The particular provision of the insurance policy
on which petitioners base their claim is as follows:
Sec. 1 LIABILITY TO THE PUBLIC
1. The Company will, subject to the Limits of Liability, pay all sums necessary to
discharge liability of the insured in respect of
(a) death of or bodily injury to any THIRD PARTY3. In the event of the death of any
person entitled to indemnity under this Policy, the Company will, in respect of the
liability incurred to such person indemnify his personal representatives in terms of,
and subject to the terms and conditions hereof. The above-quoted provision leads to
no other conclusion but that AFISCO can be held directly liable by petitioners.
WHEREFORE, premises considered, the present petition is hereby GRANTED. The
award of P28,800.00 representing loss of income is INCREASED to P192,000.00
and the death indemnity of P12,000.00 to P50,000.00. SO ORDERED.
2.)PERFECTION OF INSURANCE CONTRACT

Enriquez vs. Sun Life Assurance Co. Of Canada

41 Phil 269
Facts:
On September 24, 1917, Joaquin Herrer made application to the Sun Life Assurance
Company of Canada through its office in Manila for a life annuity. Two
days later
he paid the sum of P6,000 to the manager of the company's Manila office and was
given a provisional receipt. The application was forwarded to the
head office of
the company at Montreal, Canada and on November 26, 1917 a
notice
of
acceptance was sent by cable to Manila. (There is no evidence however, whether
on the same day the cable was received notice was sent by the Manila
office of
Herrer that the application had been accepted).On December 4, 1917, the policy
was issued. On December 18, 1917, Herrer communicated his desire to withdraw
his application through his lawyer. The local office replied to Mr. Torres, stating
that the policy had been issued, and called attention to the notification of November
26, 1917. The reply was received by Herrer's council a day after the
latter
died. Plaintiff ad administrator of the estate of the late Joaquin Ma.Herrer to recover
from the defendant life insurance company the sum of pesos 6,000 paid by
the
deceased for a life annuity. The trial court gave judgment for the defendant.
Issue:
WON the insurance contract between Sun Life and Herrer has

been perfected

Held:
No, the contract for a life annuity in the case at bar was not perfected
because it
has not been proved satisfactorily that the acceptance of the application ever
came to the knowledge of the applicant. An acceptance of an offer of
insurance
not actually or constructively communicated to the proposer does not
make
a
contract. Only the mailing of acceptance, it has been said, completes the contract
of insurance, as the locus penitential is ended when the acceptance has passed
beyond the control of the party. An acceptance made by letter shall not
bind the
person making the offer except from the time it came to his knowledge
(Civil
Code Art. 1262). When a letter or other mail matter is addressed and mailed
with postage prepaid there is a rebuttable presumption of fact that it was
received
by the addressee as soon as it could have been transmitted to him in
the ordinary course of the mails. But if any one of these elemental facts fails to
appear, it is fatal
to the presumption. A letter will not be presumed to have been
received by the
addressee unless it is shown that it was deposited in the postoffice, properly
addressed and stamped.

Great Pacific Life Insurance Co. vs.Honorable Court Of Appeals

89 SCRA 543
Facts:
The two above-entitled cases were ordered consolidated by the
Resolution of SC, because the petitioners in both cases sought similar relief,
through these petitions for certiorari by way of appeal, from the amended
decision of the CA which affirmed in toto the decision of the CFI of Cebu,
ordering Great Pacific Life Assurance Company and Mondragon jointly and
severally to pay Ngo Hing the amount of P50,000.00 with interest at 6% from
the date of the filing of the complaint, and the sum of P1,077.75, without
interest.NgoHing filed an application with the Great Pacific Assurance
Company (Grepalife) for a twenty-year endowment policy in the amount of
P50,000.00 on the life of his one-year old daughter Helen Go. Said respondent
supplied the essential data which petitioner Lapulapu D. Mondragon, Branch
Manager of the Grepalife in Cebu City wrote on the corresponding form in his
own handwriting. Mondragon finally type-wrote the data on the application
form which was signed by private respondent Ngo Hing. The latter paid the
annual premuim to the Company, but he retained a certain amount as his
commission for being a duly authorized agent of Grepalife. Upon the payment of the
insurance premium, the binding deposit receipt was issued to private respondent
Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom of the back page
of the application form his strong recommendation for the approval of the insurance
application. Then Mondragon received a letter from Grepalife disapproving the
insurance application. The letter stated that the said life insurance application for 20year endowment plan is not available for minors below seven years old, but
Grepalife can consider the same under the Juvenile Triple Action Plan, and advised
that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the
company. The non-acceptance of the insurance plan by Grepalife was allegedly not
communicated by Mondragon to NgoHing. Instead, Mondragon wrote back Grepalife
again strongly recommending the approval of the 20-yearendowment insurance plan
to children, pointing out that since 1954 the customers, especially the Chinese, were
asking for such coverage. It was when things were in such state that on May 28,
1957 Helen Go died of influenza with complication of bronchopneumonia.
Thereupon, Ngo Hing sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery of the same before the
CFI
of
Cebu,
which
rendered
the
adverse
decision.
Issue:
(1) Whether the binding deposit receipt constituted a temporary contract of the life
insurance in question; and

Held:

The provisions printed on the deposit receipt provide that the binding
deposit receipt is intended to be merely a provisional or temporary insurance
contract
and
only
upon
compliance
of
the
following
conditions:
(1) that the company shall be satisfied that the applicant was insurable
on standard rates; (2) that if the company does not accept the application
and offers to issue a policy for a different plan, the insurance contract shall
not be binding until the applicant accepts the policy offered; otherwise, the
deposit shall be refunded; and (3) that if the applicant is not able according
to the standard rates, and the company disapproves the application, the
insurance applied for shall not be in force at any time, and the premium paid
shall
be
returned
to
the
applicant.
Clearly implied from the aforesaid conditions is that the binding deposit
receipt in question is merely an acknowledgment, on behalf of the company,
that the latter's branch office had received from the applicant the insurance
premium and had accepted the application subject for processing by the
insurance company; and that the latter will either approve or reject the same
on the basis of whether or not the applicant is "insurable on standard rates."
Since petitioner Grepalife disapproved the insurance application of
respondent Ngo Hing, the binding deposit receipt in question had never
become
in
force
at
any
time.
Upon this premise, the binding deposit receipt is, manifestly, merely
conditional and does not insure outright. As held by this Court, where an
agreement is made between the applicant and the agent, no liability shall
attach until the principal approves the risk and a receipt is given by the
agent. The acceptance is merely conditional and is subordinated to the act
of the company in approving or rejecting the application. Thus, in life
insurance, a "binding slip" or "binding receipt" does not insure by itself (De Lim
vs.
Sun
Life
Assurance
Company
of
Canada,
41
Phil.
264).
As held in De Lim vs. Sun Life Assurance Company of Canada, supra,
"a contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents ... The contract, to be binding from
the date of the application, must have been a completed contract, one that
leaves nothing to be done, nothing to be completed, nothing to be passed
upon, or determined, before it shall take effect. There can be no contract of
insurance unless the minds of the parties have met in agreement."

Development Bank of the Phils.vs. Court of Appeals

231 SCRA 370

Facts:
Juan B. Dans, together with his family applied for a loan of P500,000 with DBP. As
principalmortgagor, Dans, then 76 years of age was advised by DBP to obtain a
mortgage redemptioninsurance (MRI) with DBP MRI pool. A loan in the reduced
amount was approved and released by DBP. From the proceeds of the loan, DBP
deducted the payment for the MRI premium. TheMRI premium of Dans, less the DBP
service fee of 10%, was credited by DBP to the savingsaccount of DBP MRI-Pool.
Accordingly, the DBP MRI Pool was advised of the credit.Dans died of cardiac
arrest. DBP MRI Pool notified DBP that Dans was not eligible for MRIcoverage,
being over the acceptance age limit of 60 years at the time of application.
DBPapprised Candida Dans of the disapproval of her late husbands MRI
application. DBP offered torefund the premium which the deceased had paid, but
Candida Dans refused to accept the samedemanding payment of the face value of
the MRI or an amount equivalent of the loan. She,likewise, refused to accept an ex
gratia settlement which DBP later offered. Hence the case at bar.
Issue:
WON the DBP MRI Pool should be held liable on the ground that the contract
wasalready perfected.
Held:
No. it is not liable. The power to approve MRI application is lodged with the DBP MRI
Pool.The pool, however, did not approve the application. There is also
no
showing that it accepted thesum which DBP credited to its account with full
knowledge that it was payment for the premium.There was as a result no perfected
contract of insurance hence the DBP MRI Pool cannot beheld
liable
on
a
contract that does not existing dealing with Dans, DBP was wearing 2
legal hats:
the first as a lender and the second as aninsurance agent. As an
insurance agent,
DBP made Dans go through the motion of applying for said insurance,
thereby
leading him and his family to believe that they had
already fulfilled
allthe
requirements for the MRI and that the issuance of their
policy was forthcoming.
DBP had fullknowledge that the application was never
going to be approved.
The DBP is not authorized toaccept applications for MRI
when
its
clients
are more than 60 years of age. Knowing all the while that Dans
was ineligible for
MRI coverage because of his advanced age, DBP exceeded
the scope of its
authority when it accepted Dan's application for MRI by collecting the
insurance
premium, and deducting its agent's commission and service fee.
While Dans is
not entitled to compensatory damages, he is entitled to moral
damages.
No
proof of pecuniary loss is required in the assessment of said kind of
damages
(Civil Code of Philippines, Art. 2216). The same may be recovered in
acts
referred to in Article 2219 of the Civil Code. Petitioner DBP is ORDERED.
Virginia Perez vs. Court of Appeals
323 SCRA 613

Facts:
Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for
P20,000.00. Sometime in October 1987, an agent of the insurance corporation,
visited Perez in Quezon and convinced him to apply for additional insurance
coverage of P50,000.00. Virginia A. Perez, Primitivos wife, paid P2,075.00 to the
agent. The receipt issued indicated the amount received was a "deposit."
Unfortunately, the agent lost the application form accomplished by Perez and he
asked the latter to fill up another application form. The agent sent the application for
additional insurance of Perez to the Quezon office. Such was supposed to forwarded
to the Manila office.
Perez drowned. His application papers for the additional insurance of P50,000.00
were still with the Quezon. It was only after some time that the papers were brought
to Manila. Without knowing that Perez died, BF Lifeman Insurance Corporation
approved the application and issued the corresponding policy for the P50,000.00.
Petitioner Virginia Perez went to Manila to claim the benefits under the insurance
policies of the deceased. She was paid P40,000.00 under the first insurance policy
for P20,000.00 but the insurance company refused to pay the claim under the
additional policy coverage of P50,000.00, the proceeds of which amount to
P150,000.00.
The insurance company maintained that the insurance for P50,000.00 had not been
perfected at the time of the death of Primitivo Perez. Consequently, the insurance
company refunded the amount paid.BF Lifeman Insurance Corporation filed a
complaint against Virginia Perez seeking the rescission and declaration of nullity of
the insurance contract in question.
Petitioner Virginia A. Perez, on the other hand, averred that the deceased had
fulfilled all his prestations under the contract and all the elements of a valid contract
are present.
On October 25, 1991, the trial court rendered a decision in favor of petitioner
ordering respondent to pay 150,000 pesos. The Court of Appeals, however, reversed
the decision of the trial court saying that the insurance contract for P50,000.00 could
not have been perfected since at the time that the policy was issued, Primitivo was
already dead.
Petitioners motion for reconsideration having been denied by respondent court, the
instant petition for certiorari was filed on the ground that there was a consummated
contract of insurance between the deceased and BF Lifeman Insurance Corporation.

Issue:
WON the widow can receive the proceeds of the 2nd insurance policy.
Held:

No. Petition dismissed.Perezs application was subject to the acceptance of private

respondent BF Lifeman Insurance Corporation. The perfection of the contract of
insurance
between
the deceased and
respondent
corporation
was
further conditioned with the following requisites stated in the application form:
"there shall be no contract of insurance unless and until a policy is issued on
this application and that the said policy shall not take effect until the premium has
been paid and the policy delivered to and accepted by me/us in person while I/We,
am/are in good health."
BF Lifeman didnt give its assent when it merely received the application form and all
the requisite supporting papers of the applicant. This happens only when it gives a
policy.
It is not disputed, however, that when Primitivo died on November 25, 1987,
his application papers for additional insurance coverage were still with the branch
office of respondent corporation in Quezon. Consequently, there was absolutely no
way the acceptance of the application could have been communicated to
the applicant for the latter to accept inasmuch as theapplicant at the time was
already dead.
.The Civil Code states: When the fulfillment of the condition depends upon the sole
will of the debtor, the conditional obligation shall be void.
The following conditions were imposed by the respondent company for the perfection
of the contract of insurance: a policy must have been issued, the premiums paid, and
the policy must have been delivered to and accepted by the applicantwhile he is in
good health.
The third condition isnt potestative, because the health of the applicant at the time of
the delivery of the policy is beyond the control or will of the insurance company.
Rather, the condition is a suspensive one whereby the acquisition of rights depends
upon the happening of an event which constitutes the condition. In this case, the
suspensive condition was the policy must have been delivered and accepted by
the applicant while he is in good health. There was non-fulfillment of the condition,
because the applicant was already dead at the time the policy was issued.
As stated above, a contract of insurance, like other contracts, must be assented to
by both parties either in person or by their agents. So long as an application for
insurance has not been either accepted or rejected, it is merely an offer or proposal
to make a contract. The contract, to be binding from the date of application, must
have been a completed contract.
The insurance company wasnt negligent because delay in acting on
the application does not constitute acceptance even after payment. The corporation
may not be penalized for the delay in the processing of the application papers due to
the fact that process in a week wasnt the usual timeframe in fixing the application.
Delay could not be deemed unreasonable so as to constitute gross negligence.
3.)SUBROGATION (Article 2207, New Civil Code)

Malayan Insurance Corp. Inc. vs. Court of Appeals

165 SCRA 536
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.

Manila Mahogany Manufacturing Corporation vs. Court Of Appeals

154 SCRA 650

Facts:
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:
WON 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 xxunder 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 remainder, To the extent of the
amount he has already received from the insurer, the insurer enjoysthe 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.

Pan Malayan Insurance Corporation vs. Court Of Appeals

184 SCRA 54

Facts:
Petitioner Panmalay was an insurer of the car of CANLUBANG AUTOMOTIVE
RESOURCE CORP. which was bump and damaged by the private respondent
through its negligent driver. Petitioner panmalayan paid the amount of insurance to
the insured.Subrogated on the rights of the insured, petitioner demand payment from
the private respondent who refused to pay the claim of the petitioner.
4. Petitioner filed a complaint against private respondent before the RTC.
5. Private respondent filed a motion to dismiss arguing that payment under the "own
damage" clause of the insurance policy precluded subrogation under Article 2207 of
the Civil Code, since indemnification thereunder was made on the assumption that
there was no wrongdoer or no third party at fault.
6. The RTC dismissed the complaint aswell as the motion for reconsideration and
this was affirmed by the CA.
Issue:
WON the petitioner is allowed to recovered the amount of insurance it had paid to
the insured from private respondent.
Held:
According to the Supreme Court, Art. 2207 of the civil code states that If the plaintiffs
property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract. This was
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, 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. WHEREFORE, in view of
the foregoing, the present petition is GRANTED. Petitioner's complaint for damages
against private respondents is reinstated. So the case was remanded to the Trial
Court for the trial of the merit.

Cebu Shipyard and Engineering Works vs. William Lines

306 SCRA 762

Facts:
Cebu Shipyard and Engineering Works, Inc. repaired marine vessels while the
Prudential is in the non-life insurance business. William Lines, Inc., the owner of M/V
Manila City, a luxury passenger-cargo vessel, which caught fire and sank. At the time
of the incident, subject vessel was insured with Prudential for P45M for hull and
machinery. CSEW was insured for only Php 10 million for the shiprepairers liability
policy. They entered into a contract where negligence was the only factor that could
make CSEW liable for damages. Moreover, liability of CSEW was limited to only
Php 1million for damages. The Hull Policy included an Additional Perils
(INCHMAREE) Clause covering loss of or damage to the vessel through the
negligence of, among others, ship repairmen.
William brought Manila City to the dry dock of CSEW for repairs. The officers
and cabin crew stayed at the ship while it was being repaired. After the vessel was
transferred to the docking quay, it caught fire and sank, resulting to its total loss.
William brought suit against CSEW alleging that it was through the latters
negligence that the ship caught fire and sank. Prudential was impleaded as coplaintiff after it had paid the value of insured items. It was subrogated to 45 million, or
the value it claimed to indemnify.
The trial court brought judgment against CSEW 45 million for the ship indemnity, 65
million for loss of income, and more than 13 million in other damages. The CA
affirmed the TC decision.
CSEW contended that the cause of the fire was due to Williams hotworks on the
said portion of the ship which they didnt ask CSEW permission for.
Prudential, on the other hand, blamed the negligence of the CSEW workers in the
instance when they didnt mind rubber insulation wire coming out of the airconditioning unit that was already burning.
Hence this MFR.
Issue:
1. WON CSEW had management and supervisory control of the ship at the time
the fire broke out
2. WON the doctrine of res ipsa loquitur applies against the crew
3. WON Prudential has the right of subrogation against its own insured
4. WON the provisions limiting CSEWs liability for negligence to a maximum of Php
1 million are valid
Held:
Yes. Yes. Yes. No. Petition denied
1. The that factual findings by the CA are conclusive on the parties and are not
reviewable by this Court. They are entitled to great weight and respect when the CA
affirmed the factual findings arrived at by the trial court.
The CA and the Cebu RTC are agreed that the fire which caused the total loss of
subject M/V Manila City was due to the negligence of the employees and workers of
CSEW.
Furthermore, in petitions for review on certiorari, only questions of law may be put
into issue. Questions of fact cannot be entertained.

2. For the doctrine of res ipsa loquitur to apply to a given situation, the following
conditions must concur: (1) the accident was of a kind which does not ordinarily
occur unless someone is negligent; and (2) that the instrumentality or agency which
caused the injury was under the exclusive control of the person charged with
negligence.
The facts and evidence reveal the presence of these conditions. First, the fire would
not have happened in the ordinary course of things if reasonable care and diligence
had been exercised.
Second, the agency charged with negligence, as found by the trial court and the CA
and as shown by the records, is CSEW, which had control over subject vessel when
it was docked for annual repairs.
What is more, in the present case the trial court found direct evidence to prove that
the workers didnt exercise due diligence in the care of subject vessel. The direct
evidence substantiates the conclusion that CSEW was really negligent even without
applying such doctrine.
3. Petitioner contends that Prudential is not entitled to be subrogated to the rights of
William Lines, Inc., theorizing that (1) the fire which gutted M/V Manila City was an
excluded risk and (2) it is a co-assured under the Marine Hull Insurance Policy. This
was wrong. The one who caused the fire has already been adjudicated by the courts
as CSEW.
Upon proof of payment by Prudential to William Lines, Inc., the former was
subrogated to the right of the latter to indemnification from CSEW. As aptly ruled by
the Court of Appeals, the law says:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has violated the contract. 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.
When Prudential paid the latter the total amount covered by its insurance policy, it
was subrogated to the right of the latter to recover the insured loss from the liable
party, CSEW.
Petitioner theorizes further that there can be no right of subrogation as it is deemed a
co-assured under the subject insurance policy with reliance on Clause 20 of the
Work Order which states:
The insurance on the vessel should be maintained by the customer and/or owner of
the vessel during the period the contract is in effect.
Clause 20 of the Work Order in question is clear in the sense that it requires William
Lines to maintain insurance on thevessel during the period of dry-docking or repair.
However, the fact that CSEW benefits from the said stipulation does not
automatically make it as a co-assured of William Lines. The intention of the parties to
make each other a co-assured under an insurance policy is to be read from the
insurance contract or policy itself and not from any other contract or agreement
because the insurance policy denominates the beneficiaries of the insurance. The
hull and machinery insurance procured by William Lines, Inc. from Prudential named
only William Lines, Inc. as the assured. There was no manifestation of any

intention of William Lines, Inc. to constitute CSEW as a co-assured under subject

policy. The claim of CSEW that it is a co-assured is unfounded.
Then too, in the Additional Perils Clause of the same Marine Insurance Policy, it is
provided that this insurance also covers loss of or damage to vessel directly caused
by the negligence of charterers and repairers who are not assured.
As correctly pointed out by respondent Prudential, if CSEW were deemed a coassured under the policy, it would nullify any claim of William Lines, Inc. from
Prudential for any loss or damage caused by the negligence of CSEW. Certainly, no
shipowner would agree to make a shiprepairer a co-assured under such insurance
policy; otherwise, any claim for loss or damage under the policy would be
invalidated.
4. Although in this jurisdiction, contracts of adhesion have been consistently upheld
as valid per se; as binding as an ordinary contract, the Court recognizes instances
when reliance on such contracts cannot be favored especially where the facts and
circumstances warrant that subject stipulations be disregarded. Thus, in ruling on the
validity and applicability of the stipulation limiting the liability of CSEW for negligence
to P1M only, the facts and circumstances vis-a-vis the nature of the provision sought
to be enforced should be considered, bearing in mind the principles of equity and fair
play.
It is worthy to note that M/V Manila City was insured with Prudential for P45M. Upon
thorough investigation by its hull surveyor, M/V Manila City was found to be beyond
economical salvage and repair. The evaluation of the average adjuster also reported
a constructive total loss. The said claim of William Lines, Inc., was then found to be
valid and compensable such that Prudential paid the latter the total value of its
insurance claim. Furthermore, it was ascertained that the replacement cost of
the vessel, amounts to P55M.
Considering the circumstances, it would unfair to limit the liability of petitioner to One
Million Pesos only. To allow CSEW to limit its liability to P1M notwithstanding the fact
that the total loss suffered by the assured and paid for by Prudential amounted to
P45M would sanction the exercise of a degree of diligence short of what is ordinarily
required because, then, it would not be difficult for petitioner to escape liability by the
simple expedient of paying an amount very much lower than the actual damage
suffered by William.

4.)INSURABLE INTEREST

Spouses Cha vs. Court of Appeals

227 SCRA 690
Facts:
Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with
CKS Development Corporation, as lessor, on 5 October 1988. One of the stipulations
of the 1 year lease contract states that "The LESSEE shall not insure against fire the
chattels, merchandise, textiles, goods and effects placed at any stall or store or
space in the leased premises without first obtaining the written consent and approval
of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent
of the LESSOR then the policy is deemed assigned and transferred to the LESSOR
for its own benefit" Notwithstanding the above stipulation in the lease contract, the
Cha spouses insured against loss by fire their merchandise inside the leased
premises for P500,000.00 with the United Insurance Co., Inc. without the written
consent
of
CKS.
On
the
day
that
the
lease contract was to expire, fire broke out inside the leased premises. When CKS
learned of the insuranceearlier procured by the Cha spouses (without its consent), it
wrote
the
insurer
(United)
a
demand
letter
asking
that the proceeds of the insurance contract (between the Cha spouses and United)
be paid directly to CKS,based on its lease contract with the Cha spouses. United
refused to pay CKS. Hence, the latter filed acomplaint against the Cha spouses and
United. On 2 June 1992, the Regional Trial Court, Branch 6, Manila,
rendered a decision ordering United to pay CKS the amount of P335,063.11 and the
Cha
spouses
to
pay
P50,000.00 as exemplary damages, P20,000.00 as attorney's fees and costs of
suit.On
appeal,
the
Court
of
Appeals in CA GR CV 39328 rendered a decision dated 11 January 1996, affirming
the
trial
court
decision,
deleting however the awards for exemplary damages and attorney's fees. A motion
for
reconsideration
by
United was denied on 29 March 1996.
Issue:
Whether paragraph 18 of the lease contract entered into between CKS and the Cha
spousesisvalidinsofar as it provides that any fire insurance policy obtained by the
lessee (Cha spouses) over theirmerchandise inside the leased premises is deemed
assigned or transferred to the lessor (CKS) if said policy is
obtained without the prior written consent of the latter.
Held:
No. It is basic in the law on contracts that the stipulations contained in a contract
cannot
be
contrary
to
law, morals, good customs, public order or public policy. Section 18 of the Insurance
Code
provides
that
"No
contract or policy of insurance on property shall be enforceable except for the benefit

of
some
person
having
an insurable interest in the property insured." A non-life insurance policy such as the
fire
insurance
policy
taken by the spouses over their merchandise is primarily a contract of indemnity.
Insurable
interest
in
the
property insured must exist at the time the insurance takes effect and at the time the
loss
occurs.
The
basis
of
such requirement of insurable interest in property insured is based on sound public
policy:
to
prevent
a
person
from taking out an insurance policy on property upon which he has no insurable
interest
and
collecting
the
proceeds of said policy in case of loss of the property. In such a case, the contract of
insurance
is
a
mere
wager which is void under Section 25 of the Insurance Code, which provides that
"Every
stipulation
in
a
policy of Insurance for the payment of loss whether the person insured has or has
not
any
interest
in
the
property insured, or that the policy shall be received as proof of such interest, and
every
policy
executed
by
way of gaming or wagering, is void." Herein, it cannot be denied that CKS has no
insurable
interest
in
the
goods and merchandise inside the leased premises under the provisions of Section
17
of
the
Insurance
Code
which provides that "The measure of an insurable interest in property is the extent to
which
the
insured
might
be damnified by loss of injury thereof." Therefore, CKS cannot, under the Insurance
Code

a
special
law

be validly a beneficiary of the fire insurance policy taken by the spouses over their
merchandise.
This
insurable interest over said merchandise remains with the insured, the Cha spouses.
The
automatic
assignment
of the policy to CKS under the provision of the lease contract previously quoted is
void
for
being
contrary
to
law and/or public policy. The proceeds of the fire insurance policy thus rightfully
belong
to
the
spouses
Nilo
Cha and Stella Uy-Cha. The insurer (United) cannot be compelled to pay the
proceeds
of
the
fire
insurance
policy to a person (CKS) who has no insurable interest in the property insured.

Great Pacific Life Insurance Corp. vs. Court of Appeals

316 SCRA 677

Facts:
Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life
insurance with Development Bank of the Philippines (DBP) wherein Grepalife agreed
to insure the lives of eligible housing loan mortgagors of DBP.
One such loan mortgagor is Dr. WilfredoLeuterio. In an application form, Dr. Leuterio
answered questions concerning his test, attesting among others that he does not
have any heart conditions and that he is in good health to the best of his knowledge.
However, after about a year, Dr. Leuterio died due to massive cerebral
hemorrhage. When DBP submitted a death claim to Grepalife, the latter denied the
claim, alleging that Dr. Leuterio did not disclose he had been suffering from
hypertension, which caused his death. Allegedly, such non-disclosure constituted
concealment
that
justified
the
denial
of
the
claim.
Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for
Specific Performance with Damages. Both the trial court and the Court of Appeals
found in favor of the widow and ordered Grepalife to pay DBP.
Issue:
Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life
insurance contract from a complaint filed by the widow of the decedent/mortgagor.
Held:
The rationale of a group of insurance policy of mortgagors, otherwise known as the
mortgage redemption insurance, is a device for the protection of both the
mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such
form of contract so that in the event of the unexpected demise of the mortgagor
during the subsistence of the mortgage contract, the proceeds from such insurance
will be applied to the payment of the mortgage debt, thereby relieving the heirs of the
mortgagor from paying the obligation. In a similar vein, ample protection is given to
the mortgagor under such a concept so that in the event of death, the mortgage
obligation will be extinguished by the application of the insurance proceeds to the
mortgage indebtedness. In this type of policy insurance, the mortgagee is simply an
appointee of the insurance fund. Such loss-payable clause does not make the
mortgagee a party to the contract.The insured, being the person with whom the
contract was made, is primarily the proper person to bring suit thereon. Subject to
some exceptions, insured may thus sue, although the policy is taken wholly or in part
for the benefit of another person, such as a mortgagee.And since a policy of
insurance upon life or health may pass by transfer, will or succession to any person,
whether he has an insurable interest or not, and such person may recover it
whatever the insured might have recovered, the widow of the decedent Dr. Leuterio
may file the suit against the insurer, Grepalife.

Harvardian Colleges of San Fernando, Pampanga Inc. vs. Country Bankers

Insurance Corp. (CA CV No. 03771, Jan. 6, 1986, 1 CARA 1)
Facts:
Harvardian is a family corporation, the stockholders of which are Ildefonso Yap,
Virginia King Yap and their children. Prior to Aug. 9, 1979, an agent of Country
Bankers proposed to Harvardian to insure its school building. Although at first
reluctant, Harvardian agreed. Country Banks sent an inspector to inspect the school
building and agreed to insure the same for P500,000 for which Harvardian paid an
annual premium of P2,500. On Aug. 9, 1979, Country Bankers issued to Harvardian
a fire insurance policy. On March 12, 1980, (39 days before I was born)during the
effectively of said insurance policy, the insured property was totally burned rendering
it a total loss.
A claim was made by plaintiff upon defendant but defendant denied it contending
that plaintiff had no insurable interest over the building constructed on the piece of
land in the name of the late Ildefonso Yap as owner.
It was contended that both the lot and the building were owned by Ildefonso Yap and
NOT by the Harvardian Colleges.
Issue:
WON Harvardian colleges has a right to the proceeds.
Held:
Harvardian has a right to the proceeds.Regardless of the nature of the title of the
insured or even if he did not have title to the property insured, the contract of fire
insurance should still be upheld if his interest in or his relation to the property is such
that he will be benefited in its continued existence or suffer a direct pecuniary loss
from its destruction or injury. The test in determining insurable interest in property is
whether one will derive pecuniary benefit or advantage from its preservation, or will
suffer pecuniary loss or damage from its destruction, termination or injury by the
happening of the event insured against.

Here Harvardian was not only in possession of the building but was in fact using the
same for several years with the knowledge and consent of Ildefonso Yap. It is
reasonably fair to assume that had the building not been burned, Harvardian would
have been allowed the continued use of the same as the site of its operation as an
educational institution. Harvardian therefore would have been directly benefited by
the preservation of the property, and certainly suffered a pecuniary loss by its being
burned.

AngKa Yu vs. Phoenix Assurance Co. Ltd. (1 CAR2s, Sept. 28, 1961)
Facts:
AngKa Yu had a piece of property in his possession. He insured it with Phoenix.
The property was lost, so AngKa Yu sought to claim the proceeds. Phoenix denied
liability on the ground that Ang was not the owner but a mere possessor and as
such, had no insurable interest over the property.

Issue:

WON a mere possessor has insurable interest over the property.

Held:
Yes.A person having a mere right or possession of property may insure it to its full
value and in his own name, even when he is not responsible for its safekeeping.
The reason is that even if a person is NOT interested in the safety and preservation
of material in his possession because they belong to 3 rd parties, said person still has
insurable interest, because he stands either to benefit from their continued existence
or to be prejudiced by their destruction

5.)CONCEALMENT AND REPRESENTATION

Insular Life v. Feliciano Concealment
73 Phil 201
Facts:
Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of
its agents.
It appears that during that time, Evaristo was already suffering from tuberculosis.
Such fact appeared during the medical exam, but the examiner and the companys
agent ignored it.
After that, Evaristo was made to sign an application form and thereafter the blank
spaces were filled by the medical examiner and the agent making it appear that
Evaristo was a fit subject of insurance. (Evaristo could not read and understand
English)
When Evaristo died, Insular life refused to pay the proceeds because of
concealment.

Issue:
WON Insular Life was bound by their agents acts.

Held:
Yes.The insurance business has grown so vast and lucrative within the past century.
Nowadays, even people of modest means enter into insurance contracts. Agents

who solicit contracts are paid large commissions on the policies secured by them.
They act as general representatives of insurance companies.

IN the case at bar, the true state of health of the insured was concealed by the
agents of the insurer. The insurers medical examiner approved the application
knowing fully well that the applicant was sick. The situation is one in which of two
innocent parties must bear a loss for his reliance upon a third person. In this case, it
is the one who drafted and accepted the policy and consummated the contract. It
seems reasonable that as between the two of them, the one who employed and
gave character to the third person as its agent should be the one to bear the loss.
Hence, Insular is liable to the beneficiaries.

Sun Life Assurance Corp. of Canada vs. Court of Appeals

245 SCRA 268
Facts:
Robert John B. Bacani procured a life insurance contract for himself from Sunlife. He
was issued a policy for P100,000.00, with double indemnity in case of accidental
death. The designated beneficiary was his mother, BernardaBacani.
The insured died in a plane crash. Respondent BernardaBacani filed a claim with
petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner
conducted an investigation and its findings prompted it to reject the claim.
Sunlife informed Bacani that the insured did not disclose 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 P10,172.00wasattached to
said letter.
Petitioner claimed that the insured gave false statements in his application. The
deceased answered claimed that he consulted a Dr. Raymundo of the Chinese
General Hospital for cough and flu complications. The other questions were
answered in the negative.
Petitioner discovered 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. During his confinement, the deceased was subjected
to urinalysis tests.
BernardaBacani and her husband filed an action for specific performance against
petitioner with the RTC. The court ruled in favor of the spouses and ordered Sunlife
to pay P100,000.00.

In ruling for private respondents, the trial court concluded that the facts concealed by
the insured were made in good faith and under a belief that they need not be
disclosed. The court also held that the medial history was irrelevant because it
wasnt medical insurance.
The Court of Appeals affirmed the decision of the trial court. The appellate court
ruled that petitioner cannot avoid its obligation by claiming concealment because the
cause of death was unrelated to the facts concealed by the insured. Petitioner's
motion for reconsideration was denied. Hence, this petition.
Issue:
WON the insured was guilty of misrepresentation which made the contract void.
Held:
Yes. Petition dismissed.Section 26 of The Insurance Code required 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.
A neglect to communicate that which a party knows and ought to communicate, is
called concealment.
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 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 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.
Vda.deCanilang v. Court of Appeals- materiality of the information withheld does not
depend on the state of mind of the insured. Neither does it depend on the actual or
physical events which ensue.
Good faith" is no defense in concealment. The insured's failure to disclose the fact
that he was hospitalized raises grave doubts about his eligibility. Such concealment
was deliberate on his part.
The argument, that petitioner's waiver of the medical examination of the insured
debunks the materiality of the facts concealed, is untenable.
Saturnino v. Philippine American Life Insurance " . . . the waiver of a medical
examination [in a non-medical insurance contract] renders even more material the
information required of the applicant concerning previous condition of health
anddiseases suffered,
for
such
information
necessarily
constitutes
an important factor which the insurer takes into consideration in deciding whether to
issue the policy or not . . . "
Anent the finding that the facts concealed had no bearing to the cause of death of
the insured, it is well settled that the insured need not die of the disease he had
failed to disclose to the insurer. It is sufficient that his non-disclosure misled the

insurer in forming his estimates of the risks of the proposed insurance policy or in
making inquiries as held in Henson.

Thelma vda. de Camilingvs. Court of Appeals

223 SCRA 443
Facts:
Camiling was found to have suffered from sinus tachycardia then bronchitis after a
check-up from his doctor. The next day, he applied for a "non-medical" insurance
policy with respondent Grepalife naming his wife, Thelma Camiling, as his
beneficiary. This was to the value of P19,700.
He died of "congestive heart failure," "anemia," and "chronic anemia." The widow
filed a claim with Great Pacific which the insurer denied on the ground that the
insured had concealed material information from it.
Petitioner then filed a complaint against Great Pacific for recovery of the insurance
proceeds. Petitioner testified that she was not aware of any serious illness suffered
by her late husband and her husband had died because of a kidney disorder. The
doctor who gave the checkup stated that he treated the deceased for sinus
tachycardia and "acute bronchitis."
Great Pacific presented a physician who testified that the deceased's
insurance application had been approved on the basis of his medical declaration.
She explained that as a rule, medical examinations are required only in cases where
theapplicant has indicated in his application for insurance coverage that he has
previously undergone medical consultationand hospitalization.
The Insurance Commissioner ordered Great Pacific to pay P19,700 plus legal
interest and P2,000.00 as attorney's fees. On appeal by Great Pacific, the Court of
Appeals reversed. It found that the failure of Jaime Canilang to disclose previous

medical consultation and treatment constituted material information which should

have been communicated to Great Pacific to enable the latter to make proper
inquiries.Hence this petition by the widow.
Issue:
WON Camling was guilty of misrepresentation
Held:
Yes. Petition denied. There was a right of the insurance company to rescind the
contract if it was proven that the insured committed fraud in not affirming that he was
treated for heart condition and other ailments stipulated.
Apart from certifying that he didnt suffer from such a condition, Camiling also failed
to disclose in the that he had twice consulted a doctor who had found him to be
suffering from "sinus tachycardia" and "acute bronchitis."
Under the Insurance Code:Sec. 26. A neglect to communicate that which a party
knows and ought to communicate, is called a concealment.
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.The information concealed must be information which the concealing
party knew and should have communicated. The test of materiality of such
information is contained in Section 31:
Sec. 31. 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 disadvantages of the proposed contract, or in
making his inquiries.
The information which Jaime Camiling failed to disclose was material to the ability of
Great Pacific to estimate the probable risk he presented as a subject of life
insurance. Had he disclosed his visits to his doctor, the diagnosis made and
medicines prescribed by such doctor, in the insurance application, it may be
reasonably assumed that Great Pacific would have made further inquiries and would
have probably refused to issue a non-medical insurance policy.
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
theapplication for insurance; that "probable and reasonable influence of the facts"
concealed must, of course, be determined objectively, by the judge ultimately.
The Insurance Commissioner had also ruled that the failure of Great Pacific to
convey certain information to the insurer was not "intentional" in nature, for the
reason that Camiling believed that he was suffering from minor ailment like
a common cold. Section 27 stated that:
Sec. 27.A concealment whether intentional or unintentional entitles the injured party
to rescind a contract of insurance.
The failure to communicate must have been intentional rather than inadvertent.
Camiling could not have been unaware that his heart beat would at times rise to high
and alarming levels and that he had consulted a doctor twice in the two (2) months
before applying for non-medical insurance. Indeed, the last medical consultation took

place just the day before the insurance application was filed. In all probability, Jaime
Camiling went to visit his doctor precisely because of the ailment.
Camiling's failure to set out answers to some of the questions in the
insurance application constituted concealment.

Philamcare Health Systems, Inc. vs. Court of Appeals and JulitaTrinos

379 SCRA 796
Facts:
ErnaniTrinos applied for a health care coverage with Philam. He answered no to a
question asking if he or his family members were treated to heart trouble, asthma,
diabetes, etc.The application was approved for 1 year. He was also given
hospitalization benefits and out-patient benefits. After the period expired, he was
given an expanded coverage for Php 75,000. During the period, he suffered from
heart attack and was confined at MMC. The wife tried to claim the benefits but the
petitioner denied it saying that he concealed his medical history by answering no to
the aforementioned question. She had to pay for the hospital bills amounting to
76,000. Her husband subsequently passed away. She filed a case in the trial court
for the collection of the amount plus damages. She was awarded 76,000 for the bills
and 40,000 for damages. The CA affirmed but deleted awards for damages. Hence,
this appeal.
Issue:
WON a health care agreement is not an insurance contract; hence the
incontestability clause under the Insurance Code does not apply.
Held:

No. Petition dismissed. Petitioner claimed that it granted benefits only when the
insured is alive during the one-year duration. It contended that there was no
indemnification unlike in insurance contracts. It supported this claim by saying that it
is a health maintenance organization covered by the DOH and not the Insurance
Commission. Lastly, it claimed that the Incontestability clause didnt apply because
two-year and not one-year effectivity periods were required.
Section 2 (1) of the Insurance Code defines a contract of insurance as an
agreement whereby one undertakes for aconsideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event.
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husbands health was the insurable interest. The health care
agreement was in the nature of non-life insurance, which is primarily a contract of
indemnity. The provider must pay for the medical expenses resulting from sickness
or injury.While petitioner contended that the husband concealed materialfact of his
sickness, the contract stated that:
that any physician is, by these presents, expressly authorized to disclose or give
testimony at anytime relative to any information acquired by him in his professional
capacity upon any question affecting the eligibility for health care coverage of the
Proposed Members.
This meant that the petitioners required him to sign authorization to furnish reports
about his medical condition. The contract also authorized Philam to inquire directly to
his medical history.
Hence, the contention of concealment isnt valid.
6.) PERSONS ENTITLED TO RECOVER UNDER THE POLICY
Bonifacio Brothers vs. Mora
20 SCRA 261
Facts:
Enrique Mora, owner of Oldsmobile sedan model 1956, mortgaged it to H.S. Reyes,
Inc., with the condition that they would be the beneficiary of its insuranceJune 23,
1959: The sedan was insured with State Bonding & Insurance Co., IncDuring the
period of effectivity, the sedan met an accident and it was appraised by Bayne
Adjustment Co. and repaired it with Bonifacio Bros. and the parts were supplied by
Ayala Auto Parts Co. This was all done without the knowledge of H.S. Reyes.
Enrique was billed P2,102.73 through Bayne. The insurance company drew a
check deducting P100 for franchise and entrusted it to Bayne payable to Enrique or
H.S. Reyes. Still unpaid, the sedan was delivered to Enrique without the Knowledge
of H.S.ReyesBonifacio Bros and Ayala Auto filed in the MTC on the theory that the
insurance proceeds should be paid directly to themCFI affirmed MTC: H.S. Reyes,
Inc. as having a better right
Issue:
WON there is privity between Bonifacio Bro and Ayala Auto against the insurance
company

Held:
No. Judgment affirmedGeneral Rule: contracts take effect only between the parties
thereto Exception: some specific instances provided by law where the contract
contains some stipulation in favor of a third person - stipulation pour autruiprovision
in favor of a third person not a party to the contractthird person is allowed to avail
himself of a benefit granted to him by the terms of the contract, provided that the
contracting parties have clearly and deliberately conferred a favor upon such
personstipulation pour autrui must be clearly expressed - none here"loss payable"
clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes,
Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to
benefit.stipulation merely establishes the procedure that the insured has to follow in
order to be entitled to indemnity for repaira policy of insurance is a distinct and
independent contract between the insured and insurer, and third persons have no
right either in a court of equity, or in a court of law, to the proceeds of it, unless there
be some contract of trust, expressed or implied between the insured and third
person"loss" in insurance law embraces injury or damageThe injury or damage
sustained by the insured in consequence of the happening of one or more of the
accidents or misfortune against which the insurer, in consideration of the premium,
has undertaken to indemnify the insured

First I ntegrated Bonding & Insurance Corp. vs. Hernando

199 SCRA 796
Facts:
Silverio Blanco was the owner of a passenger jeepney which he insured against
liabilities for death andinjuries to third persons with First Integrated Bonding and
Insurance Company, Inc. for P30,000. The said jeepneydriven by Blanco himself
bumped a five-year old child, DeograciasAdvincula, causing the latter's death. The
boysparents filed a complaint for damages against Blanco and First Insurance,
which was granted by the lower court. FirstInsurance filed a petition for certiorari
contending that the victims parents have no cause of action against it becausethey
are not parties to the insurance contract and that they may only proceed against the
driver based on theprovisions of the New Civil Code.
Issue:
WON an injured party for whom the contract of insurance is intended can sue directly
the insurer.
Held:

Yes. Where the insurance contract provides for indemnity against liability to a third
party, such third party candirectly sue the insurer. The liability of the insurer to such
third person is based on contract while the liability of theinsured to the third party is
based on tort. It cannot evade its liability as insurer by hiding under the cloak
oftheinsured. Its liability is primary and not dependent on the recovery of judgment
from the insured.

Sherman Shaper vs. Hon. RTC Judge of Olongapo City

167 SCRA 386

Facts:

Shaper is the owner of a car involved in an accident. A case was filed vs. him for
reckless imprudence. Shafer filed a third party complaint impleading his insurer.
The TPC was dismissed upon motion by the ins. co. on the ground that Shafer has
to pay first & found liable before the insurer could be made to pay the claim.
Shafer alleges that the dismissal of the TPC amounts to a denial or curtailment of his
right to defend himself in the civil aspect of the case.
Issue:

WON the accused, also the third party plaintiff, has a cause of action against the
third party defendant for the enforcement of its third party liability (TPL) under the
insurance contract.
Held:

The lower court erred in dismissing the TPC on the ground that there is no COA vs.
the ins. co. There is no need on the part of the insured to wait for the decision of the
trial ct. finding him guilty of reckless imprudence. The occurrence of the injury to
third party immediately gave rise to the liability of the insurer. A third party complaint
is a device allowed by the ROC by w/c the defendant can bring into the original suit
a party vs. whom he will have a claim for indemnity or remuneration as a result of a
liability established vs. him in an original suit. TPCs are allowed to minimize the
number of lawsuits established vs. him to avoid the necessity. of two or more
lawsuits involving the same subject matter.
In the instant case, the civil aspect of the offense charged, i.e., serious physical
injuries allegedly suffered by JovencioPoblete, Sr., was impliedly instituted with the
criminal case. Petitioner may thus raise all defenses available to him insofar as the
criminal and civil aspects of the case are concerned. The claim of petitioner for
payment of indemnity to the injured third party, under the insurance policy, for the
alleged bodily injuries caused to said third party, arose from the offense charged in
the criminal case, from which the injured (JovencioPoblete, Sr.) has sought to
recover civil damages. Hence, such claim of petitioner against the insurance
company cannot be regarded as not related to the criminal action.
WHEREFORE, the instant petition is GRANTED. The questioned order dated 24
April 1987 is SET ASIDE and a new one entered admitting petitioner's third party
complaint against the private respondent Makati Insurance Company, Inc.SO
ORDERED.

7.) INCONTESTABILITY CLAUSE

Tan vs. Court of Appeals

174 SCRA 403
Facts:
Tan Lee Siong, father of the petitioners, applied for life insurance in the amount of P
80,000.00 with Philamlife. It was approved. Tan Lee Siong died of hepatoma.
Petitioners then filed a claim for the proceeds. The company denied petitioners' claim

and rescinded the policy by reason of the alleged misrepresentation and

concealment of material facts. The premiums paid on the policy were refunded. The
petitioners filed a complaint in the Insurance Commission. The latter dismissed the
complaint.
The Court of Appeals dismissed ' the petitioners' appeal from the Insurance
Commissioner's decision for lack of merit. Hence, this petition.
Issue:
WON Philam didnt have the right to rescind the contract of insurance as rescission
must allegedly be done during the lifetime of the insured within two years and prior to
the commencement of action.
Held:
No. Petition dismissed.The Insurance Code states in Section 48:
Whenever a right to rescind a contract of insurance is given to the insurer by any
provision of this chapter, such right must be exercised previous to
the commencement of an action on the contract.After a policy of life insurance made
payable on the death of the insured shall have been in force during the lifetime of the
insured for a period of two years from the date of its issue or of its last reinstatement,
the insurer cannot prove that the policy is void ab initio or is rescindable by reason of
the fraudulent concealment or misrepresentation of the insured or his agent.
The so-called "incontestability clause" in the second paragraph prevents the insurer
from raising the defenses of falserepresentations insofar as health and
previous diseases are concerned if the insurance has been in force for at least two
years during the insured's lifetime.The policy was in force for a period of only one
year and five months. Considering that the insured died before the two-year period
had lapsed, respondent company is not, therefore, barred from proving that the
policy is void ab initio by reason of the insured's fraudulent concealment or
misrepresentation.The "incontestability clause" added by the second paragraph of
Section 48 is in force for two years. After this, the defenses of concealment or
misrepresentation no longer lie.The petitioners argue that no evidence was
presented to show that the medical terms were explained in a layman's language to
the insured. They also argue that no evidence was presented by respondent
company to show that the questions appearing in Part II of the application for
insurance were asked, explained to and understood by the deceased so as to prove
concealment on his part. This couldnt be accepted because the insured signed the
form. He affirmed the correctness of all the entries.
8.) LIABILITY UNDER AN OPEN POLICY
Development Insurance Corp. vs. Intermediate Appellate Court
143 SCRA 62

Facts:

A fire occurred in the building of Philippine Union. It sued for recovery

of damages from the petitioner on the basis of an insurance contract between them.
The petitioner failed to answer on time despite the numerous extensions it asked for.
It was declared in default by the trial court. A judgment of default was subsequently
rendered on the strength of the evidencegiven by the private respondent, which was
allowed damages. The petitioner moved to lift the order of default. Its motion was
denied. It went to the appellate court, which affirmed the decision of the trial court.
Hence this appeal.
Issue:
Was Philippine Union required to jointly indemnify the building?
Held:
No. Petition dismissed.The policy insured the private respondent's building against
fire for P2,500,000.00.
The petitioner argued that the respondent must share the difference between that
amount and the face value of the policy and the loss sustained for 5.8 million under
Condition 17 of the policy.
The building was insured at P2,500,000.00 by agreement of the insurer and the
insured.
The agreement is known as an open policy and is subject to the express condition
that:
In the event of loss, whether total or partial, it is understood that the amount of the
loss shall be subject to appraisal and the liability of the company, if established, shall
be limited to the actual loss, subject to the applicable terms, conditions, warranties
and clauses of this Policy, and in no case shall exceed the amount of the policy.
Section 60 of the Insurance Code defines an open policy is one in which the value of
the thing insured is not agreed upon but is left to be ascertained in case of loss." This
means that the actual loss, as determined, will represent the totalindemnity due the
insured from the insurer except only that the total indemnity shall not exceed the face
value of the policy.
The actual loss has been ascertained in this case. Hence, applying the open policy
clause as expressly agreed upon, the private respondent is entitled to indemnity in
the total amount of P508,867.00.
The refusal of its vice-president to receive the private respondent's complaint was
the first indication of the petitioner's intention to prolong this case and postpone
the discharge of its obligation to the private respondent under this agreement. They
still evaded payment for 5 years.

9.) PRESCRIPTION OF ACTION

Sun Insurance Office, Ltd. vs. Court of Appeals
195 SCRA 193

Facts:
Tan took from Sun Insurance a Php 300,000 policy to cover his electrical store in
Iloilo city. Tans request for an indemnity in 1983 was repeatedly denied, firstly in
1984. He wrote for a reconsideration in the same year. This was rejected in 1985,
prompting him to file a civil case in the same year. The insurance company filed a
motion to dismiss due to prescription in 1987, but this was denied. The company
went to the court of appeals to petition the same thing, but this was denied.
Issue:
1. WON the filing of a motion for reconsideration interrupts the twelve months
prescriptive period to contest the denial of the insurance claim.
2. When does the cause of action accrue?
Held:
1. No.The policy states in section 27.
Action or suit clause If a claim be made and rejected and an action or suit be not
commenced either in the Insurance Commission or in any court of competent
jurisdiction within twelve (12) months from receipt of notice of such rejection, or in
case of arbitration taking place as provided herein, within twelve (12) months after
due notice of the award made by thearbitrator or arbitrators or umpire, then the claim
shall for all purposes be deemed to have been abandoned and shall not thereafter
be recoverable hereunder.
Respondent Tan admitted that he received a copy of the letter of rejection on April 2,
1984. Thus, the 12-month prescriptive period started to run from the said date of
April 2, 1984, under section 27.
2.At the time of the first rejection of the insurance company
Eagle star- The right of the insured to the payment of his loss accrues from the
happening of the loss. However, the cause of action in an insurance contract does
not accrue until the insured's claim is finally rejected by the insurer. This is because
before such final rejection there is no real necessity for bringing suit.
The cause of action, then, started when the insurer denied his claim in the first
instance (1984). This rejection of a petition for reconsideration as insisted by
respondents wasnt the beginning of the cause of action.

Jimenez vda. De Gabriel vs. Court of Appeals

264 SCRA 137

FACTS:
Marcelino Gabriel was employed by Emerald Construction &
D e v e l o p m e n t Corporation (Emerald Construction for brevity) at its
construction project in Iraq. He was covered by a personal accident
insurance in the amount of P100,000.00 under a group policy procured from
Fortune Insurance & Surety Company (Fortune Insurance for brevity)by Emerald
Construction for its overseas workers. The insured risk was for bodily
injury
caused by violent accidental external
and visible
means which injury would solely and independently of any other cause result
in death or disability. On 22 May 1982, within the life of the policy, Gabriel
died in Iraq. On 12 July 1983, Emerald Construction reported Gabriels death to
Fortune
Insurance
by
telephone.
Amongt h e d o c u m e n t s t h e r e a f t e r s u b m i t t e d t o F o r t u n e I n s u r a n c e w e r
e a c o p y o f t h e d e a t h certificate issued by the Ministry of Health of the
Republic of Iraq which stated that an autopsy report by the National Bureau of
Investigation was conducted to the effect that due to advanced state of postmortem
decomposition,the cause of death of Gabriel could not be determined
Because of this development Fortune Insurance ultimately denied t
h e c l a i m o f Emerald Construction on the ground of prescription. Gabriels
widow, Jacqueline Jimenez, went to the to the lower court. In her complaint
against Emerald Construction and Fortune Insurance, she averred that her husband
died of electrocution while in the performance of his work .Fortune Insurance
alleged that since both the death certificate issued by the Iraqi Ministry of
Health and the autopsy report of the NBI failed to disclose the cause of Gabriels
death, it denied liability under the policy. In addition, private respondent raised the
defense of prescription, invoking Section 384 of the Insurance Code.
Issue:
WON Jacqueline Jimenez vda.de Gabriels claim against Fortune Insurance should
be denied on the ground of prescription
Held:
Yes. Section 384 of the Insurance Code provides: Sec. 384. Any person having any
claim upon the policy issued pursuant to this chapter shall, without any
unnecessary delay, present to the insurance company concerned a written
notice of claim setting forth the nature, extent and duration of the injuries
sustained
as
certified
bya d u l y l i c e n s e d p h y s i c i a n . N o t i c e o f c l a i m m u s t b e f i l e d w i t h i n
sixm o n t h s f r o m d a t e o f t h e a c c i d e n t , o t h e r w i s e , t h e c l a i m s h
a l l b e deemed waived. Action or suit for recovery of damage due to loss
or injury must be brought, in proper cases, with the Commissioner or
theC o u r t s w i t h i n o n e y e a r f r o m d e n i a l o f t h e c l a i m , o t h e r w i s e
, t h e claimants right of action shall prescribe. The notice of death was given
to Fortune Insurance, concededly, more than a year after the death of vda.
de Gabriels husband. Fortune Insurance, in invoking prescription,
was not referring to the one-year period from the denial of the claim within which to
file
an
action against an insurer but
obviously to the
written

n o t i c e o f c l a i m t h a t h a d t o b e submitted within six months from the time

of the accident. Vda.de Gabriel argues that Fortune Insurance must be deemed to
have waived its right to show that the cause of death is an excepted peril, by failing
to have its answers duly verified. It is true that a matter of which a written
request for admission is made shall be deemed impliedly admitted unless,
within a period designated in the request, which shall not be less than 10 days after
service thereof, or within such further time as the court may allow on motion and
notice, the party to whom the request is directed serves upon the party requesting
the admission a sworn statement either denying specifically the matters of which an
admission is requested or setting forth in detail the reasons why he cannot
truthfully either admit or deny those matters; however, the verification, like in
most cases required by the rules of procedure, is a formal, not jurisdictional,
requirement, and mainly intended to secure an assurance that matters which are
alleged are done in good faith or are true and correct and not of mere
speculation. When circumstances warrant, the court may simply order the
correction of unverified pleadings or act on it and waive strict compliance with the
rules in order that the ends of justice may thereby be served. In the case
of
answers
tow r i t t e n r e q u e s t s f o r a d m i s s i o n p a r t i c u l a r l y, t h e c o u r t c a n a l l o w t h
e p a r t y m a k i n g t h e admission, whether made expressly or deemed to have
been made impliedly, to withdraw oramend it upon such terms as may be just. The
insurance policy expressly provided that to be compensable, the injury or death
should be caused by violent accidental external and visible means. In attempting to
prove the cause of her husbands death, all that vda. de Gabriel could submit were a
letter sent to her by her husbands co-worker, stating that Gabriel died when he tried
to haul water out of a tank while its submerged motor was still functioning, and vda.
de Gabriels sworn affidavit. The said affidavit, however, suffers from procedural
infirmity as it was not even testified to or identified by vda. de Gabriel herself. This
affidavit therefore is a mere hearsay under the law. In like manner, the letter allegedly
written by the deceaseds co-worker which was never identified to in court by
the supposed author, suffers from the same defect as the affidavit of vda.
de Gabriel. Not one of the other documents submitted, to wit, the POEA
decision, the death certificate issued by the Ministry of Health of Iraq and the NBI
autopsy report, could give any probative value to vda. de Gabriels claim. The POEA
decision did not make any categorical holding on the specific cause of Gabriels
death. In summary, evidence is utterly wanting to establish that the insured suffered
from an accidental death, the risk covered by the policy.

10.) PREMIUM PAYMENTS (Sections 75, 77 & 78, ICP)

Malayan Insurance Corp. Inc. vs. Arnaldo
154 SCRA 672
Facts:

June 7, 1981: Malayan insurance co., inc. (MICO) issued to CoronacionPinca, 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
MICOpaymentsJanuary 18, 1982: Pinca's property was completely burnedFebruary
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 PincaMICO appealed
Issue:
WON 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 deemed 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) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) 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
(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:
(1) 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.

Makati Tuscany Condominium Corporation vs. Court of Appeals

215 SCRA 462
Facts:
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC),
represented by American International Underwriters (Phils.), Inc., issued in favor of

petitioner Makati Tuscany Condominium Corporation (TUSCANY) Insurance Policy

No. AH-CPP-9210452 on the latter's building and premises, for a period beginning 1
March 1982 and ending 1 March 1983, with a total premium of P466,103.05. The
premium was paid on installments on 12 March 1982, 20 May 1982, 21 June 1982
and 16 November 1982, all of which were accepted by private
respondent. Successive renewals of the policies were made in the same manner. On
1984, the policy was again renewed and petitioner made two installment payments,
both accepted by private respondent, the first on 6 February 1984 for P52,000.00
and the second, on 6 June 1984 for P100,000.00.. Petitioner explained that it
discontinued the payment of premiums because the policy did not contain a credit
clause in its favor. Petitioner further claimed that the policy was never binding and
valid, and no risk attached to the policy. It then pleaded a counterclaim for
P152,000.00 for the premiums already paid for 1984-85, and in its answer with
amended counterclaim, sought the refund of P924,206.10 representing the premium
payments
for
1982-85.
DECISIONOFLOWER
COURTS:
(1)
Trial
Court:
dismissed
the
complaint
and
counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due
Issue:
Whether payment by installment of the premiums due on an insurance policy
invalidates the contract of insurance, in view of Sec. 77 of P.D. 612, otherwise known
as
the
Insurance
Code,
as
amended,
which
provides:
Sec.77.
Held:
No. the contract remains valid even if the premiums were paid on installments.
Certainly, basic principles of equity and fairness would not allow the insurer to
continue collecting and accepting the premiums, although paid on installments, and
later deny liability on the lame excuse that the premiums were not prepared in full.
At the very least, both parties should be deemed in estoppel to question the
arrangement
they
have
voluntarily
accepted.
Moreover, as correctly observed by the appellate court, where the risk is entire and
the contract is indivisible, the insured is not entitled to a refund of the premiums paid
if the insurer was exposed to the risk insured for any period, however brief or
momentary. The obligation to pay premiums when due is ordinarily as indivisible
obligation to pay the entire premium.
South Sea Surety & Insurance Corp., Inc. vs. Court of Appeals
244 SCRA 744
Facts:
Valenzuela Hardwood entered into an agreement with the defendant Seven Brothers
whereby the latter undertook to load the former's 940 lauan logs for shipment to
Manila.South Sea insured the logs for P2,000,000.00 in its marine policy. Valenzuela
then gave the check in payment of the premium on the insurance policy to Mr.
VictorioChua.Seven Brothers ship sank resulting in the loss of the logs.

A check for P5,625.00 to cover payment of the premium tendered to the insurer but
was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled
the insurance policy it issued as of the date of inception for non-payment of the
premium due in accordance with Section 77 of the Insurance Code.
Valenzuela demanded from South Sea the payment of the proceeds of the policy but
the latter denied liability under the policy. Plaintiff likewise filed a formal claim with
defendant Seven Brothers Shipping Corporation for the value of the lost logs but the
latter denied the claim.Valenzuela filed a complaint a complaint for the recovery of
the value of lost logs and freight charges from Seven Brothers Shipping Corporation
or from South Sea Surety and Insurance Company, the insurer.
Issue:
WON Mr. Chua acted as an agent of the surety company or of the insured when he
received the check for insurance premiums.
Held:
Agent of the surety. Petition denied.To determine if there was a valid contract of
insurance, it must be determine if the premium was validly paid to the company or its
agents at the time of the loss.
The appellate and trial courts have found that Chua acted as an agent.
South Sea insisted that Chua has been an agent for less than ten years of the
Columbia Insurance Brokers, a different company. Appellant argued that Mr. Chua,
having received the premiums, acted as an agent under Section 301 of the
Insurance Code which provides:
Sec. 301. Any person who for any compensation, commission or other thing of value,
acts, or aids in soliciting, negotiating or procuring the making of any insurance
contract or in placing risk or taking out insurance, on behalf of an insured other than
himself, shall be an insurance broker within the intent of this Code, and shall thereby
become liable to all the duties requirements, liabilities and penalties to which an
insurance broker is subject.
Valenzuela claimed that the second paragraph of Section 306 of the Insurance Code
provided:
Sec. 306 Any insurance company which delivers to an insurance agent or insurance
broker a policy or contract of insurance shall be deemed to have authorized such
agent or broker to receive on its behalf payment of any premium which is due on
such policy of contract of insurance at the time of its issuance or delivery or which
becomes due thereon.

Spouses Tibayet. al vs. Court of Appeals

257 SCRA 126
Facts:

Fortune Life issued a fire insurance Policy to Tibay on her two-storey residential
building at Zobel Street, Makati City. The insurance was for P600,000.00 covering
the period from January 23, 1987 to January 23, 1988. On January 23 1987, Tibay
only paid P600.00 of 3,000 peso premium and left a balance.
The insured building was completely destroyed by fire. Tibay then paid the balance.
On the same day, she filed a claim on the policy. Her claim was accordingly referred
to the adjuster, Goodwill, which immediately wrote Violeta requesting her to furnish it
with the necessary documents for the investigation and processing of her claim.
Petitioner complied, and she signed a non-waiver agreement.
Fortune denied the claim for violation of the Insurance Code. Tibay sued
for damages in the amount of P600,000.00 representing the total coverage of the
policy.
The trial court ruled for petitioners and made fortune liable for the total value of the
insured building and personal properties. The Court of Appeals reversed the court by
removing liability from Fortune after returning the premium.
Hence this petition for review.
The petitioner contended that Fortune remained liable under the subject fire
insurance policy in spite of the failure of petitioners to pay their premium in full.
Issue:
May a fire insurance policy be valid, binding and enforceable upon mere partial
payment of premium?
Held:
No. Petition dismissed.The pertinent provisions read: 2. This policy including
any renewal thereof and/or any endorsement thereon is not in force until the
premium has been fully paid to and duly receipted by the Company in the manner
provided herein.
This policy shall be deemed effective, valid and binding upon the Company only
when the premiums therefor have actually been paid in full and duly acknowledged
in a receipt signed by any authorized official of the company
Where the premium has only been partially paid and the balance paid only after the
peril insured against has occurred, the insurance contract did not take effect and the
insured cannot collect at all on the policy. The Insurance Code which says that no
policy or contract of insurance issued by an insurance company is valid and binding
unless and until the premium has been paid.
What does unless and until the premium thereof has been paid mean?
Escosura v. San Miguel- the legislative practice was to interpret with pay in
accordance to the intention of distinguish between full and partial payment, where
the modifying term is used.
Petitioners used Philippine Phoenix v. Woodworks, where partial payment of the
premium made the policy effective during the whole period of the policy.
The SC didnt consider the 1967 Phoenix case as persuasive due to the different
factual scenario.
In Makati Tuscany v CA, the parties mutually agreed that the premiums could be
paid in installments, hence, this Court refused to invalidate the insurance policy.

Nothing in Article 77 of the Code suggested that the parties may not agree to allow
payment of the premiums in installment, or to consider the contract as valid and
binding upon payment of the first premium.
Phoenix and Tuscany demonstrated the waiver of prepayment in full by the insurer.
In this case however, there was no waiver. There was a stipulation that the policy
wasnt in force until the premium has been fully paid and receipted.
There was no juridical tie of indemnification from the fractional payment of premium.
The insurance contract itself expressly provided that the policy would be effective
only when the premium was paid in full.
Verily, it is elemental law that the payment of premium is requisite to keep the policy
of insurance in force. If the premium is not paid in the manner prescribed in the
policy as intended by the parties the policy is ineffective. Partial payment even when
accepted as a partial payment will not keep the policy alive.
South Sea v CA stipulated 2 exceptions to the requirement of payment of the entire
premium as a prerequisite to the validity of the insurance contract. These are when
in case the insurance coverage relates to life or insurance when a grace period
applies, and when the insurer makes a written acknowledgment of the receipt of
premium to be conclusive evidence of payment.
Hence, in the absence of clear waiver of prepayment in full by the insurer, the
insured cannot collect on the proceeds of the policy.
The terms of the insurance policy constitute the measure of the insurers liability. In
the absence of statutory prohibition to the contrary, insurance companies have the
same rights as individuals to limit their liability and to impose whatever conditions
they deem best upon their obligations not inconsistent with public policy.
Instead, the parties should be able to demand from each other the performance of
whatever obligations they had assumed or, if desired, sue timely for the rescission of
the contract.
In the meanwhile, the contract endures, and an occurrence of the risk insured riggers
the insurer's liability. Also, legalcompensation arises where insurer's liability to the
insured would simply be reduced by the balance of the premium.
It must here be noted that the insured had made, and the insurer had accepted
partial premium payment on the policy weeks before the risk insured against took
place. An insurance is an aleatory contract effective upon its perfection although the
occurrence of a condition or event may later dictate the demandability of certain
obligations. Fortunes stipulation that insurance shall not "be . . . in force until the
premium has been fully paid," and that it "shall be deemed effective, valid and
binding upon the company only when the premiums therefor have actually been paid
in full and duly acknowledged," override the efficaciousness of the insurance contract
despite the payment and acceptance.
Article 78 of the Insurance Code An acknowledgment in a policy or contract of
insurance of the receipt of premium is conclusive evidence of its payment, so far as
to make the policy binding, notwithstanding any stipulation therein that it shall not be
binding until the premium is actually paid
Even if a portion was paid in the premium, the insurance coverage becomes
effective and binding, any stipulation in the policy to the contrary notwithstanding.
American Home Assurance Corp. vs. Antonio Chua
309 SCRA 250
Facts:

Chua obtained from American Home a fire insurance covering the stock-in-trade of
his business. The insurance was due toexpire on March 25, 1990.
On April 5, 1990, Chua issued a check for P2,983.50 to American Homes agent,
James Uy, as payment for the renewal of the policy. The official receipt was issued
on April 10. In turn, the latter a renewal certificate. A new insurance policy was
issued where petitioner undertook to indemnify respondent for any damage or loss
arising from fire up to P200,000 March 20, 1990 to March 25, 1991.
On April 6, 1990, the business was completely razed by fire. Total loss was
estimated between P4,000,000 and P5,000,000. Respondent filed an insurance
claim with petitioner and four other co-insurers, namely, Pioneer Insurance,
Prudential Guarantee, Filipino Merchants and Domestic Insurance. Petitioner
refused to honor the claim hence, the respondent filed an action in the trial court.
American Home claimed there was no existing contract because respondent did not
pay the premium. Even with a contract, they contended that he was ineligiblebacue
of his fraudulent tax returns, his failure to establish the actual loss and his failure to
notify to petitioner of any insurance already effected. The trial court ruled in favor of
respondent because the respondent paid by way of check a day before the fire
occurred and that the other insurance companies promptly paid the claims. American
homes was made to pay 750,000 in damages.
The Court of Appeals found that respondents claim was substantially proved and
petitioners unjustified refusal to pay the claim entitled respondent to the award
of damages.
American Home filed the petition reiterating its stand that there was no existing
insurance contract between the parties. It invoked Section 77 of the Insurance
Code, which provides that no policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium thereof has been paid
and the case of Arce v. Capital Insurance that until the premium is paid there is no
insurance.
Issues:
1. Whether there was a valid payment of premium, considering that respondents
check was cashed after the occurrence of the fire
2. Whether respondent violated the policy by his submission of fraudulent documents
and non-disclosure of the other existing insurance contracts
3. Whether respondent is entitled to the award of damages.
Held:
Yes. No. Yes, but not all damages valid. Petition granted. Damages modified.
1. The trial court found, as affirmed by the Court of Appeals, that there was a valid
check payment by respondent to petitioner. The court respected this.
The renewal certificate issued to respondent contained the acknowledgment that
premium had been paid.
In the instant case, the best evidence of such authority is the fact that petitioner
accepted the check and issued the officialreceipt for the payment. It is, as well,
bound by its agents acknowledgment of receipt of payment.
Section 78 of the Insurance Code explicitly provides:

An acknowledgment in a policy or contract of insurance of the receipt of premium is

conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the premium is
actually paid.
2. Submission of the alleged fraudulent documents pertained to respondents income
tax returns for 1987 to 1989. Respondent, however, presented a BIR certification
that he had paid the proper taxes for the said years. Since this is a question of fact,
the finding is conclusive.
Ordinarily, where the insurance policy specifies as a condition the disclosure of
existing co-insurers, non-disclosure is a violation that entitles the insurer to avoid the
policy. The purpose for the inclusion of this clause is to prevent an increase in the
moral hazard. The relevant provision is Section 75, which provides that:
A policy may declare that a violation of specified provisions thereof shall avoid it,
otherwise the breach of an immaterial provision does not avoid the policy.
Respondent acquired several co-insurers and he failed to disclose this information to
petitioner. Nonetheless, petitioner is estopped from invoking this argument due to
the loss adjusters admission of previous knowledge of the co-insurers.
It cannot be said that petitioner was deceived by respondent by the latters nondisclosure of the other insurance contracts when petitioner actually had prior
knowledge thereof. The loss adjuster, being an employee of petitioner, is deemed a
representative of the latter whose awareness of the other insurance contracts binds
petitioner.
3. Petitioner is liable to pay the loss. But there is merit in petitioners grievance
against the damages and attorneys fees awarded. There was no basis for an award
for loss of profit. This cannot be shouldered by petitioner whose obligation is limited
to the object of insurance.
There was no fraud to justify moral damages. Exemplary damages cant be awarded
because the defendant never acted in a reckless manner to claim insurance.
Attorneys fees cant be recovered as part of damages because no premium should
be placed on the right to litigate.

11.) DOUBLE INSURANCE

Pioneer Insurances and Surety Corp. vs. Olivia Yap

61 CSRA 426
Facts:
Respondent Oliva Yap was the owner of a store in a two-storey building where she
sold shopping bags and footwear. Chua Soon Poon, her son-in-law, was in charge of
the store.
Yap took out a Fire Insurance Policy No. 4216 from Pioneer Insurance with a value
of P25,000.00 covering her stocks, office furniture, fixtures and fittings.
Among the conditions in the policy executed by the parties are the following:
unless such notice be given and the particulars of such insurance or insurances be
stated in, or endorsed on this Policy by or on behalf of the Company before the
occurrence of any loss or damage, all benefits under this Policy shall be forfeited
Any false declaration or breach or this condition will render this policy null and void.
Another insurance policy for P20,000.00 issued by Great American covering the
same properties. The endorsementrecognized co-insurance by Northwest for the
same value.
Oliva Yap took out another fire insurance policy for P20,000.00 covering the same
properties from the Federal Insurance Company, Inc., which was procured without
notice to and the written consent of Pioneer.
A fire broke out in the building, and the store was burned. Yap filed an insurance
claim, but the same was denied for a breach.
Oliva Yap filed a case for payment of the face value of her fire insurance policy. The
insurance company refused to pay because she never informed Pioneer of another
insurer. The trial court decided in favor of Yap. The CA affirmed.
Issue:
WON petitioner should be absolved from liability on the Pioneeer policy on account
of any violation of the co-insurance clause
Held:
No. Petition dismissed. There was a violation. The insurance policy for P20,000.00
issued by the Great American, ceased to be recognized by them as a co-insurance
policy.The endorsement shows the clear intention of the parties to recognize on the
date the endorsement was made, theexistence of only one co-insurance, the
Northwest one. The finding of the Court of Appeals that the Great American
Insurance policy was substituted by the Federal Insurance policy is indeed contrary
to said stipulation.Other insurance without the consent of Pioneer would avoid the
contract. It required no affirmative act of election on the part of the company to make
operative the clause avoiding the contract, wherever the specified conditions should
occur. Its obligations ceased, unless, being informed of the fact, it consented to the
additional insurance.
The validity of a clause in a fire insurance policy to the effect that the procurement of
additional insurance without the consent of the insurer renders the policy void is in
American jurisprudence.
Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc.
47 SCRA 271

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

Oriental Assurance Corporation vs. Court of Appeals

200 SCRA 459
Facts:
Sometime in January 1986, Panama Sawmill Co., Inc. (Panama) bought, in
Palawan, 1,208 pieces of apitong logs, with a total volume of 2,000 cubic meters. It
hired Transpacific Towage, Inc., to transport the logs by sea to Manila and insured it
against loss for PIM with Oriental Assurance Corporation (Oriental Assurance).
There is a claim by Panama, however, that the insurance coverage should have
been for P3M were it not for the fraudulent act of one Benito Sy Yee Long to whom it
had entrusted the amount of P6,000.00 for the payment of the premium for a P3M
policy. Oriental Assurance issued Marine Insurance Policy OACM-86/002. The logs
were loaded on 2 barges: (1) on barge PCT7000,610 pieces of logs with a volume f
1,000 cubic meters; and (2) on Barge TPAC-1000, 598 pieces of logs, also with a
volume of 1,000 cubic meters. On 28 January 1986, the two barges were towed by
one tugboat, the MT "Seminole." But, as fate would have it, during the voyage, rough
seas and strong winds caused damage to Barge TPAC-1000 resulting in the loss of
497 pieces of logs out of the 598 pieces loaded thereon. Panama demanded
payment for the loss but Oriental Assurance refuse on the ground that its contracted
liability was for "TOTAL LOSS ONLY." The rejection was upon the recommendation
of the Tan Gatue Adjustment Company. Unable to convince Oriental Assurance to
pay its claim, Panama filed a Complaint for Damages against Ever Insurance Agency
(allegedly, also liable), Benito Sy Lee Yong and Oriental Assurance, before the
Regional Trial Court, Kalookan, Branch 123 (Civil Case C-12601). After trial on the
merit, the RTC rendered its Decision, ordering Oriental Assurance to pay Panama
the amount of P415,000.00 as insurance indemnity with interest at the rate
Commercial Law Insurance Law, 2006 ( 45 ) Narratives (Berne Guerrero) of 12%
per annum computed from the date of the filing of the complaint; ordering Panama to
pay Ever Insurance Agency or Antonio Sy Lee Yong, owner thereof (Ever being a
single proprietorship) for the amount of P20,000.00 as attorney's fee and another
amount of P20,000.00 as moral damages; and dismissing the complaint against
Benito Sy Lee Yong. On appeal by both parties, the Appellate Court affirmed the
lower Court judgment in all respects except for the rate of interest, which was
reduced from 12% to 6% per annum. Oriental Assurance filed the petition for review
on certiorari
Issue:
Whether Oriental Assurance can be held liable under its marine insurance policy
based on the theory of a divisible contract of insurance and, consequently, a
constructive total loss.
Held:
No. No liability attaches. The terms of the contract constitute the measure of the
insurer's liability and compliance therewith is a condition precedent to the insured's
right to recovery from the insurer (PerlaCompania de Seguros, Inc. v. Court of
Appeals, G.R. No. 78860, May 28, 1990, 185 SCRA 741). Whether a contract is

entire or severable is a question of intention to be determined by the language

employed by the parties. The policy in question shows that the subject matter
insured was the entire shipment of 2,000 cubic meters of apitong logs. The fact that
the logs were loaded on two different barges did not make the contract several and
divisible as to the items insured. The logs on the two barges were not separately
valued or separately insured. Only one premium was paid for the entire shipment,
making for only one cause or consideration. The insurance contract must, therefore,
be considered indivisible. More importantly, the insurer's liability was for "total loss
only." A total loss may be either actual or constructive (Sec. 129, Insurance Code).
An actual total loss is caused by: (a) A total destruction of the thing insured; (b) The
irretrievable loss of the thing by sinking, or by being broken up; (c) Any damage to
the thing which renders it valueless to the owner for the purpose for which he held it;
or (d) Any other event which effectively deprives the owner of the possession, at the
port of destination, of the thing insured." (Section 130, Insurance Code). A
constructive total loss is one which gives to a person insured a right to abandon,
under Section 139 of the Insurance Code, which reads "A person insured by a
contract of marine insurance may abandon the thing insured, or any particular
portion thereof separately valued by the policy, or otherwise separately insured, and
recover for a total loss thereof, when the cause of the loss is a peril insured against.
(a) If more than threefourths thereof in value is actually lost, or would have to be
expended to recover it from the peril; (b) If it is injured to such an extent as to reduce
its value more than three-fourths; xxx" The requirements for the application of
Section 139 of the Insurance Code, have not been met. The logs involved, although
placed in two barges, were not separately valued by the policy, nor separately
insured. Resultantly, the logs lost in barge TPAC-1000 in relation to the total number
of logs loaded on the same barge cannot be made the basis for determining
constructive total loss. The logs having been insured as one inseparable unit, the
correct basis for determining the existence of constructive total loss is the totality of
the shipment of logs. Of the entirety of 1,208, pieces of logs, only 497 pieces thereof
were lost or 41.45% of the entire shipment. Since the cost of those 497 pieces does
not exceed 75% of the value of all 1,208 pieces of logs, the shipment cannot be said
to have sustained a constructive total loss under Section 139(a) of the Insurance
Code. In the absence of either actual or constructive total loss, there can be no
recovery by the insured Panama against the insurer, Oriental Assurance.

Roque vs. Intermediate Appellate Court

139 SCRA 597

Facts:
On 19 February 1972, the Manila Bay Lighterage Corporation (MBLC) a common
carrier, entered into a contract with IsabelaRoque (doing business under the name
and style of IsabelaRoque Timber Enterprises) and OngChiong whereby the former
would load and carry on board its barge Mable 10 about 422.18 cubic meters of logs
from Malampaya Sound, Palawan to North Harbor, Manila. Roque and Ong insured
the logs against loss for P100,000.00 with the Pioneer Insurance and Surety
Corporation (Pioneer). On 29 February 1972, Roque and Ong loaded on the barge,
811 pieces of logs at Malampaya Sound, Palawan for carriage and delivery to North
Harbor, Port of Manila, but the shipment never reached its destination because
Mable 10 sank with the 811 pieces of logs somewhere off Cabuli Point in Palawan on
its way to Manila. The barge where the logs were loaded was apparently not
seaworthy such that it developed a leak. One of the hatches was left open causing
water to enter the barge and because the barge was not provided with the necessary
cover or tarpaulin, the ordinary splash of sea waves brought more water inside the
barge. On 8 March 1972, Roque and Ong wrote a letter to MBLC demanding
payment of P150,000.00 for the loss of the shipment plus P100,000.00 as unrealized
profits but the latter ignored the demand. Another letter was sent to Pioneer claiming
the full amount of P100,000.00 under the insurance policy but Pioneer refused to pay
on the ground that its liability depended upon the "Total loss by Total Loss of Vessel
only". Hence, Roque and Ong commenced Civil Case 86599 against MBLC and
Pioneer Pioneer. During the initial stages of the hearing, MBLC informed the trial
court that it had salvaged part of the logs. The court ordered them to be sold to the
highest bidder with the funds to be deposited in a bank in the name of Civil Case
86599. After hearing, the trial court found in favor of Roque and Ong, condemning
MBLC and Pioneer to pay Roque and Ong, jointly and severally, the sum of
P100,000.00; sentencing MBLC to pay Roque and Ong, in addition, the sum of
P50,000.00, plus P12,500.00, that the latter advanced to the former as down
payment for transporting the logs in question; ordering the counterclaim of Pioneer
against Roque and Ong, dismissed, for lack of merit, but as to its cross-claim against
its MBLC, the latter is ordered to reimburse the former for whatever amount it may
pay Roque and Ong as such surety; ordering the counterclaim of MBLC against
Roque and Ong, dismissed Commercial Law Insurance Law, 2006 ( 38 ) Narratives
(Berne Guerrero) for lack of merit; dismissing Roque's and Ong's claim of not less
than P100,000.00 and P75,000.00 as exemplary damages, for lack of merit; granting
Roque's and Ong's claim for attorney's fees in the sum of P10,000.00; ordering
MBLC and Pioneer to pay the costs; and holding that the sum of P150,000.00 award
to Roque and Ong, shall bear interest of 6% from 25 March 1975, until amount is
fully paid. Pioneer appealed to the Intermediate Appellate Court. MBLC did not
appeal, as allegedly, the transportation company is no longer doing business and is
without funds. On 30 January 1984, the appellate court modified the trial court's
decision and absolved Pioneer from liability after finding that there was a breach of
implied warranty of seaworthiness on the part of Roque and Ong and that the loss of
the insured cargo was caused by the "perils of the ship" and not by the "perils of the
sea". It ruled that the loss is not covered by the marine insurance policy. After the

appellate court denied their motion for reconsideration, Roque and Ong filed the
petition for certiorari.
Issue:
Whether there is a warranty of seaworthiness by the cargo owner in cases of marine
cargo insurance.
Held:
Yes. There is no dispute over the liability of the common carrier MBLC. In fact, it did
not bother to appeal the questioned decision. However, Roque and Ong state that
MBLC has ceased operating as a firm and nothing may be recovered from it. They
are, therefore, trying to recover their losses from the insurer. The liability of the
insurance company is governed by law. Section 113 of the Insurance Code provides
that "In every marine insurance upon a ship or freight, or freightage, or upon
anything which is the subject of marine insurance, a warranty is implied that the ship
is seaworthy." Section 99 of the same Code also provides in part that "Marine
insurance includes: (1) Insurance against loss of or damage to: (a) Vessels, craft,
aircraft, vehicles, goods, freights, cargoes, merchandise..." From the above-quoted
provisions, there can be no mistaking the fact that the term "cargo" can be the
subject of marine insurance and that once it is so made, the implied warranty of
seaworthiness immediately attaches to whoever is insuring the cargo whether he be
the shipowner or not. As ruled in the case of Go Tiaoco y Hermanos v. Union
Insurance Society of Canton (40 Phil. 40), "it is universally accepted that in every
contract of insurance upon anything which is the subject of marine insurance, a
warranty is implied that the ship shall be seaworthy at the time of the inception of the
voyage. This rule is accepted in our own Insurance Law (Act No. 2427, sec. 106)."

Filipino Merchants Insurance Co. Inc. vs. Court of Appeals

179 SCRA 638

Facts:
In December 1976, ChoaTiekSeng insured said shipment with Filipino Merchants
Insurance Company (FMICI) under cargo Policy M-2678 for the sum of P267,653.59
for the goods described as 600 metric tons of fishmeal in new gunny bags of 90 kilos
each from Bangkok, Thailand to Manila against all risks under warehouse to
warehouse terms. Actually, what was imported was 59.940 metric tons not 600 tons
at $395.42 a ton CNF Manila. The fishmeal in 666 new gunny bags were unloaded
from the ship on 11 December 1976 at Manila unto the arrastre contractor E. Razon,
Inc. and FMICI's surveyor ascertained and certified that in such discharge 105 bags
were in bad order condition as jointly surveyed by the ship's agent and the arrastre
contractor. The condition of the bad order was reflected in the turn over survey report
of Bad Order cargoes 120320 to 120322, consisting of 3 pages. The cargo was also
surveyed by the arrastre contractor before delivery of the cargo to the consignee and
the condition of the cargo on such delivery was reflected in E. Razon's Bad Order
Certificates 14859, 14863 and 14869 covering a total of 227 bags in bad order
condition. FMICI's surveyor has conducted a final and detailed survey of the cargo in
the warehouse for which he prepared a survey report with the findings on the extent
of shortage or loss on the bad order bags totalling 227 bags amounting to 12,148
kilos. Based on said computation, Choa made a formal claim against FMICI for
P51,568.62 the computation of which claim is contained therein. A formal claim
statement was also presented by the Choa against the vessel dated 21 December
1976, but FMICI refused to pay the claim. Consequently, an action was brought by
the consignee (ChoaTiekSeng) of the shipment of fishmeal loaded on board the
vessel SS Bougainville and unloaded at the Port of Manila on or about 11 December
1976 and seeks to recover from FMICI the amount of P51,568.62 representing
damages to said shipment which has been insured by FMICI under Policy M-2678.
FMICI brought a third party complaint against third party defendants Compagnie
Maritime Des ChargeursReunis and/or E. Razon, Inc. seeking judgment against the
third party defendants in case judgment is rendered against FMICI. The court below,
after trial on the merits, rendered judgment in favor of Choa, ordering FMICI to pay
Choa the sum of P51,568.62 with interest at legal rate from the date of the filing of
the complaint; and, on the third party complaint, the third party defendant Compagnie
Maritime Des ChargeursReunis and third party defendant E. Razon, Inc. are ordered
to pay FMICI jointly and severally reimbursement of the amounts paid by FMICI with
legal interest from the date of such payment until the date of such reimbursement;
without pronouncement as to costs. On appeal, and on 18 July 1988, the Court of
Appeals affirmed the decision of the lower court insofar as the award on the
complaint is concerned and modified the same with regard to the adjudication of the
third-party complaint. A motion for reconsideration of the aforesaid decision was
denied, hence FMICI filed the petition for review.

Issue:

Whether an "all risks" marine policy has a technical meaning in insurance in that
before a claim can be compensable it is essential that there must be "some fortuity,"
"casualty" or "accidental cause" to which the alleged loss is attributable.
Held:
No. The "all risks clause" of the Institute Cargo Clauses read as follows "5. This
insurance is against all risks of logs or damage to the subject-matter insured but
shall in no case be deemed to extend to cover loss, damage, or expense proximately
caused by delay or inherent vice or nature of the subject-matter insured. Claims
recoverable hereunder shall be payable irrespective of percentage." An "all risks
policy" should be read literally as meaning all risks whatsoever and covering all
losses by an accidental cause of any kind. The terms "accident" and "accidental", as
used in insurance contracts, have not acquired any technical meaning. They are
construed by the courts in their ordinary and common acceptance. Thus, the terms
have Commercial Law Insurance Law, 2006 ( 43 ) Narratives (Berne Guerrero)
been taken to mean that which happens by chance or fortuitously, without intention
and design, and which is unexpected, unusual and unforeseen. An accident is an
event that takes place without one's foresight or expectation; an event that proceeds
from an unknown cause, or is an unusual effect of a known cause and, therefore, not
expected. The very nature of the term "all risks" must be given a broad and
comprehensive meaning as covering any loss other than a wilful and fraudulent act
of the insured. This is pursuant to the very purpose of an "all risks" insurance to give
protection to the insured in those cases where difficulties of logical explanation or
some mystery surround the loss or damage to property. An "all risks" policy has been
evolved to grant greater protection than that afforded by the "perils clause," in order
to assure that no loss can happen through the incidence of a cause neither insured
against nor creating liability in the ship; it is written against all losses, that is,
attributable to external causes. The term "all risks" cannot be given a strained
technical meaning, the language of the clause under the Institute Cargo Clauses
being unequivocal and clear, to the effect that it extends to all damages/losses
suffered by the insured cargo except (a) loss or damage or expense proximately
caused by delay, and (b) loss or damage or expense proximately caused by the
inherent vice or nature of the subject matter insured.

ChoaTiekSeng vs. CA
183 SCRA 223

Facts:
In 1976 Petitioner imported some lactose crystals from Holland. The importation
involved fifteen (15) metric tons packed in 600 6-ply paper bags with polythelene
inner bags, each bag at 25 kilos net.
The good were loaded at the port at Rotterdam (Holland) in sea vans on board the
vessels MS Benolder as the mother vessel , and thereafter aboard the feeder
vessel Wesser Broker V-25 of respondent Ben Lines Container, Ltd. (Ben Lines for
short). The goods were insured by the respondent Filipino Merchants Insurance Co.,
Inc. (insurance company for short) for the sum of Php 98,882.35, the equivalent of
US $ 8,765.00 plus 50% mark-up or US $ 13,147.50, against all risk under the terms
of the insurance cargo policy. Upon arrival at the port of Manila, the cargo was
discharged into the custody of the arrarstre operator respondent E. Razon, Inc
(broker for short), prior to the delivery to petitioner through his broker. Of the 600
bags delivered to petitioner, 403 were in bad order. The surveys showed that the bad
order bags suffered spillage and loss later valued at Php 33,11.63. Petitioner filed
claim for said loss dated February 16, 1977 against respondents insurance company
in the amount of Php 33,117.63 as the insured value of the loss. Respondents
insurance company rejected the claim. Petitioner filed a complaint in the RTC
against the insurance company seeking payment of the sum of Php 33,117.63 as
damages plus attorneys fees and expenses of litigation. Insurance company denied
all the material allegations of the complaint and raised several special defenses as
well as a compulsory counterclaim. Insurance company filed a third-party complaint
against respondents Ben Lines and broker .
RTC dismissed the complaint, the counterclaim and the third-party complaint with
costs against the petitioner. CA Appealed in CA but denied. MFR was denied as well.
- The insured goods did not sustain damage and so it cannot be held covered
and even assuming that it did, still theres no liability, because the insurance is
against all risk.
- -An all risk marine policy purports to cover losses from casualties at sea, it
does not cover losses occasioned by the ordinary circumstances of a voyage ,
but only those resulting from extra and fortuitous events. So that Filipino
Merchants is absolved from liability.
Issues:
1.) WON the goods sustained damage.
2.) WON insurance company should be held liable even if the technical meaning
in marine insurance of an insurance against all risk is applied.
Held:
1.) Yes. In the first place it was respondent insurance company which undertook
the protective survey aforestated relating to the goods from the time of
discharge up to the time of delivery thereof to the consignees warehouse, so
that it is bound by the report of its survey which is the Adjustment Corporation
of the Philippines. Said report is binding upon the respondent insurance who
caused the same survey. Secondly, contrary to the findings of the appellate

court that petitioners witness Jose See was not present at the time of the
actual devanning of the cargo, what the record shows is that he was present
when the cargo was unloaded and received in the warehouse of the
consignee. He saw 403 bags to be in bad order. Present then was the survey,
Adjustment Corporation of the Philippines, who surveyed the cargo by
segregating the bad order cargo from the good order and determined the
amount of loss. Thus, said witness was indeed competent to identity the
survey report aforestated. Thirdly, in its letter dated May 26, 1977 to petitioner,
respondent insurance company admitted in no uncertain terms that there
were 403 bags in damaged conditions.
2.) In Gloren Inc. vs. Filipinas Cia de Seguros, it was held that an all risk
insurance policy insures against all causes of conceivable loss or damage,
except as otherwise excluded in the policy or due to fraud or intentional
misconduct on the part of the insured. It covers all losses during the voyage
whether arising from a marine peril or not, including pilferage losses during
the war.
In the present case, the all risk clause of the policy sued upon reads as
follows;
5. This insurance is against all risks of loss or damage to the subject matter
insured but shall no case be deemed to extend to cover loss, damage, or
expense proximately caused by delay or inherent vice or nature of the subject
matter insured. Claims recoverable hereunder shall be payable irrespective of
percentage.
The terms of the policy are so clear and require no interpretation. The
insurance policy covers all loss or damage to the cargo except those caused
by delay or inherent vice or nature of the cargo insured. It is the duty of the
respondent insurance company to establish that said loss or damage falls
within the exceptions provided for by law, otherwise it is liable thereof.

Delsan Transportation Lines , Inc. vs. CA and American Home Assurance Corp.

369 SCRA 24

Facts:
Caltex Phil. entered into a contract of affreightment with the petitioner, Delsan
Transport Lines, Inc. for a period of one year whereby the petitioner agreed to
transport Caltex industrial fuel oil from Batangas refinery to different parts of the
country. On August 14, 1986, MT Maysun set sail for Zamboanga City but
unfortunately the vessel in the early morning of August 16, 1986 near Panay Gulf.
The shipment was insured with the private respondent, American Home Assurance
Corporation. Subsequently, private respondent paid Caltex the sum of
Php.5,096,635.57. Exercising its right of subrogation under Art. 2207, NCC, the
private respondent demanded from the petitioner the same amount paid to Caltex.
Due to its failure to collect from the petitioner, private respondent filed a complaint
with the RTC of Makati City but the trial court dismissed the complaint, finding the
vessel to be seaworthy and that the incident was due to a force majeure, thus
exempting the petitioner from liability. However, the decision of the trial court was
reversed by the CA, giving credence to the report of PAGASA that the weather was
normal and that it was impossible for the vessel to sink.
Issue:
WON the payment made by private respondent for the insured value of the lost
cargo amounted to an admission that the vessel was seaworthy, thus precluding any
action for recovery against the petitioner.
Held:
The payment by the private respondent for the insured value of the lost cargo
operates as waiver of its right to enforce the term of the implied warranty against
Caltex under the marine insurance policy. However, the same cannot be validly
interpreted as an automatic admission of the vessels seaworthiness by the private
respondent as to foreclose recourse against the petitioner for any liability under its
contractual obligation as common carrier. Angelo Doctrine: In case of ambiguity in an
insurance contract covering accidental death, the Supreme Court held that such
terms shall be construed strictly against the insurer and liberally in favor of the
insured in order to affect the purpose of indemnity.
13.) LIFE INSURANCE

Del Val vs. Del Val

29 Phil 534
Facts:
Petitioners and private respondents are brothers and Sisters and are the only heirs
and next of kin of Gregorio del Val who died intestate. It was found out that the
deceased took out insurance on his life for the sum of 40T and made it payable to
private respondents as sole beneficiary. After Gregorios death, Andres collected the
proceeds of the policy. Of the said policy, Andres paid 18T to redeem some real
property which Gregorio had sold to third persons during his lifetime. Said
redemption of the property was made by Andres laywer in the name of Andres and
the petitioners. (According to Andres, said redemption in the name of Petitioners
and himself was without his knowledge and that since the redemption, petitioners
have been in possession of the property) Petitioners now contend that the amount of
the insurance policy belonged to the estate of the deceased and not to Andres
personally. Petitioner filed a complaint for partition of property including the
insurance proceeds Andress claims that he is the sole owner of the proceeds and
prayed that he be declared: Sole owner of the real property, redeemed with the use
of the insurance proceeds and its remainder; Petitioners to account for the use and
occupation of the premises.
Issue:
WON the petitioners have a right to the insurance proceeds.
Held:
No. The contract of life insurance is a special contract and the destination of the
proceeds thereof is determined by special laws which deal exclusively with the
subject. Our civil code has no provisions which relate directly and specifically to lifeinsurance contracts of to the destination of life-insurance proceeds that subject is
regulated exclusively by the Code of Commerce. Thus, contention of petitioners that
proceeds should be considered as a donation or gift and should be included in the
estate of the deceased is untenable. Since the repurchase has been made in the
names of all the heirs instead of the defendant alone,petitioners claim that the
property belongs to the heirs in common and not to the defendant alone. The SC
held that if it is established by evidence that that was his intention and that the real
estate was delivered to the plaintiffs with that understanding, then it is probable that
their contention is correct and that they are entitled to share equally with the
defendant. However, it appears from the evidence that the conveyances were taken
in the name of the plaintiffs without the knowledge and consent of Andres, or that it
was not his intention to make a gift to them of real estate, when it belongs to him.

Bank of the Philippine Islands vs. Posadas

56 Phil 215
Facts:
BPI, as administrator of the estate of deceased AdolpheSchuetze, appealed to CFI
Manila absolving defendant, Collector of Internal Revenue, from the complaint filed
against him in recovering the inheritance tax amounting to P1209 paid by the
plaintiff, Rosario GelanoVda de Schuetze, under protest, and sum of P20,150
representing the proceeds of the insurance policy of the deceased.Rosario and
Adolphe were married in January 1914. The wife was actually residing and living in
Germany when Adolphe died in December 1927. The latter while in Germany,
executed a will in March 1926, pursuant with its law wherein plaintiff was named his
universal heir. The deceased possessed not only real property situated in the
Philippines but also personal property consisting of shares of stocks in 19 domestic
corporations. Included in the personal property is a life insurance policy issued..
BPI, as administrator of the decedents estate and attorney in fact of the plaintiff,
having been demanded by Posadas to pay the inheritance tax, paid under protest.
Notwithstanding various demands made by plaintiff, Posadas refused to refund such
amount.
Issue:
WON the plaintiff is entitled to the proceeds of the insurance.
Held:
SC ruled that(1)the proceeds of a life-insurance policy payable to the insured's
estate, on which the premiums were paid by the conjugal partnership, constitute
community property, and belong one-half to the husband and the other half to the
wife, exclusively; (2)if the premiums were paid partly with paraphernal and partly
conjugal funds, the proceeds are likewise in like proportion paraphernal in part and
conjugal in part; and (3)the proceeds of a life-insurance policy payable to the
insured's estate as the beneficiary, if delivered to the testamentary administrator of
the former as part of the assets of said estate under probate administration, are
subject to the inheritance tax according to the law on the matter, if they belong to the
assured exclusively, and it is immaterial that the insured was domiciled in these
Islands or outside. Hence, the defendant was ordered to return to the plaintiff onehalf of the tax collected upon the amount of Php 20,150, being the proceeds of the

insurance policy on the life of the late Adolphe Oscar Schuetze, after deducting the
proportional part corresponding to the first premium.
Insular Life Assurance Company, Ltd. vs. Ebrado
80 SCRA 181
Facts:
On September 1, 1968, Buenaventura Ebrado issued by the Insular Life Assurance
Policy No 009929 a whole-life plan with a rider for Accidental Death. Buenaventura
designated CarponiaEbrado as the revocable beneficiary in his policy. He referred
her as his wife.
On October 21, 1969, Buenaventura Ebrad died as a result of an accident when he
was hit by a falling tree. Carponia filed with the insurer a claim for the proceeds of
the policy as the designated beneficiary therein. Although she admits that she and
the insured Buenaventura were merely living as husband and wife without the
benefits of marriage. Pascuala de Ebrado, valid wife, also filed her claim as the
widow of the deceased insured.
Issue:
Whether or not a common-law wife named as beneficiary in the life insurance policy
of a legally married man claim the proceeds thereof in case of death of the latter.
Held:
The appealed judgment of the lower court is hereby affirmed.Carponia T. Ebrado is
hereby declared disqualified to be the beneficiary of the late Buenaventura C.
Ebrado in his life insurance policy. As a consequence, the proceeds of the policy are
hereby held payable to the estate of the deceased insured. Costs against Carponia
T. Ebrado.A common-law wife named as a beneficiary in the life insurance policy of a
legally married man cannot claim the proceeds thereof in case the death of the latter.
The contract of insurance is govern by the provisions of the new civil code on
matters not specifically provided for in the insurance code. Rather, the general rules
of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of
the New Civil Code states: 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 life insurance is governed by the general rules of the civil law regulating
contracts.Common-law spouses are, definitely, barred from receiving donations from
each other. Also conviction for adultery or concubinage is not required as only
preponderance of evidence is necessary. 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 donee,

because the premiums of the policy which the insured pays out of liberality, the
beneficiary will receive the proceeds or profits of said insurance.
14.) CASH SURRENDER VALUE (Section 227, ICP)
Manufacturers Life Insurance Co. vs. Meer
89 Phil 351
Facts:
From January 1, 1942 to December 31, 1946, Plaintiff head office at Toronto applied
the provisions of the automatic premium loan clauses upon the nonpayment of the
corresponding premiums by the people who subscribed to the insurance. The net
amount of premiums advanced (by the company) or loaned (to the insured) as
payment for the premium due totaledP1,069,254.98.Meer,. Then they filed a
complaint to recover money paid under protest for taxes- CFI: Dismiss complaintPLAINTIFFs MAIN CONTENTION: when it made premium loans or premium
advances by virtue of the non-forfeiture clauses, it did not collect premiums within
the meaning of the above sections of the law, and therefore it is not amenable to the
tax therein provided. 8. Automatic Premium Loan.-This Policy shall not lapse for
non-payment of any premium after it has been three full years in force, it, at the due
date of such premium, the Cash Value of this Policy and of any bonus additions and
dividends left on accumulation(after deducting any indebtedness to the company and
the interest accrued thereon) shall exceed the amount of said premium. In which
event the company will, without further request, treat the premium then due as paid,
and the amount of such premium, with interest from its actual due date at six per
cent per annum.
Issue:
WON premium advances made by plaintiff-appellant under the automatic premium
loan clause of its policies are premiums collected' by the Company subject to tax
Held:
Yes. Based on the example given by the plaintiff, the insurer collected the amount
ofP250 as the annual premium for the eleventh year on the said policy when it
loaned
to A the sum of P250. The insurer became a creditor of theloan, but not of the
premium that had already been paid (advanced by the insurer). The insurer is
entitled to collect interest on the loan, not on the premium. "A" paid the premium for
the eleventh year; but in turn he became a debtor of the company for the sum

ofP250. This debt he could repay either by later remitting the money to the insurer or
by letting the cash value compensate for it. The debt may also be deducted from the
amount of the policy should "A" die thereafter during the continuance of the policy.
there was an increase in assets in the form of CREDIT for the advances made (in
the example, the P250 for the 11thyear).-Cash surrender value "as applied to a life
insurance policy, is the amount of money the company agrees to pay to the holder of
the policy if he surrenders it and releases his claims upon it. The more premiums the
insured has paid the greater will be the surrender value; but the surrender value is
always a lesser sum than the total amount of premiums paid."(Cyclopedia Law
Dictionary 3d. ed. 1077.) The cash value or cash surrender value Is therefore an
amount which the insurance company holds In trust for the insured to be delivered to
him upon demand. It is therefore a liability of the company to the insured. Now then,
when the company's credit for advances is paid out of the cash value or cash
surrender value, that value and the company's liability is there by diminished pro
tanto.

15.) SURETYSHIP
Development Bank of the Philippines vs. Court of Appeals
231 SCRA 370
Facts:
In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-inlaw, applied for a loan of P500,000.00 with the Development Bank of the Philippines
(DBP), Basilan Branch. As the principal mortgagor, Dans, then 76 years of age, was
advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP
Mortgage Redemption Insurance Pool (DBP MRI Pool). A loan, in the reduced
amount of P300,000.00, was approved by DBP on 4 August 1987 and released on
11 August 1987. From the proceeds of the loan, DBP deducted the amount of
P1,476.00 as payment for the MRI premium. On 15 August 1987, Dans
accomplished and submitted the "MRI Application for Insurance" and the "Health
Statement for DBP MRI Pool." On 20 August 1987, the MRI premium of Dans, less
the DBP service fee of 10%, was credited by DBP to the savings account of the DBP
MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit. On 3 September
1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to
the DBP MRI Pool. The DBP offered to refund the premium of P1,476.00 which the
deceased had paid, but Candida Dans refused to accept the same, demanding
payment of the face value of the MRI or an amount equivalent to the loan. She,
likewise, refused to accept an ex gratia settlement of P30,000.00, which the DBP
later offered.. In a decision dated 7 September 1992, the appellate court affirmed in
toto the decision of the trial court. The DBP's motion for reconsideration was denied
in a resolution dated 20 April 1993. DBP filed the petition for review on certiorari.
Issue:
Whether DBP is liable for the entire value of the insurance policy, as it led Dans to
believe that he has fulfilled all the requirements for the MRI and that the issuance of
his policy was forthcoming.
Held:
It was DBP, as a matter of policy and practice, that required Dans, the borrower, to
secure MRI coverage. Instead of allowing Dans to look for his own insurance carrier
or some other form of insurance policy, DBP compelled him to apply with the DBP
MRI Pool for MRI coverage. When Dan's loan was released on 11 August 1987, DBP
already deducted from the proceeds thereof the MRI premium. Four days latter, DBP
made Dans fill up and sign his application for MRI, as well as his health statement.
The DBP later submitted both the application form and health statement to the DBP
MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP
deducted 10% of the premium collected by it from Dans. In dealing with Dans, DBP
was wearing two legal hats: the first as a lender, and the second as an insurance
agent. As an insurance agent, DBP made Dans go through the motion of applying for
said insurance, thereby leading him and his family to believe that they had already

fulfilled all the requirements for the MRI and that the issuance of their policy was
forthcoming. The DBP is not authorized to accept applications for MRI when its
clients are more than 60 years of age. Knowing all the while that Dans was ineligible
for MRI coverage because of his advanced age, DBP exceeded the scope of its
authority when it accepted Dan's application for MRI by collecting the insurance
premium, and deducting its agent's commission and service fee. The liability of an
agent who exceeds the scope of his authority depends upon whether the third
person is aware of the limits of the agent's powers. There is no showing that Dans
knew of the limitation on DBP's authority to solicit applications for MRI. If the third
person dealing with an agent is unaware of the limits of the authority conferred by
the principal on the agent and he (third person) has been deceived by the nondisclosure thereof by the agent, then the latter is liable for damages to him. The
DBP's liability, however, cannot be for the entire value of the insurance policy. To
assume that were it not for DBP's concealment of the limits of its authority, Dans
would have secured an MRI from another insurance company, and therefore would
have been fully insured by the time he died, is highly speculative. Considering his
advanced age, there is no absolute certainty that Dans could obtain an insurance
coverage from another company. It must also be noted that Dans died almost
immediately, i.e., on the nineteenth day after applying for the MRI, and on the
twenty-third day from the date of release of his loan.

16.) CLAIMS SETTLEMENT (Sections 243 & 244, ICP)

TioKheChio vs. Court of Appeals

202 SCRA 119
Facts:
On 18 December 1978, TioKheChio imported 1,000 bags of fishmeal valued at
$36,000.30 from Agro Impex, S.A. Dallas, Texas, U.S.A. The goods were insured
with Eastern Assurance and Surety Corporation (EASCO) and shipped on board the
M/V Peskov, a vessel owned by Far Eastern Shipping Company. When the goods
reached Manila on 28 January 1979, they were found to have been damaged by sea
water which rendered the fishmeal useless. Tio filed a claim with EASCO and Far
Eastern Shipping. Both refused to pay. Whereupon, Tio sued them before the then
Court of First Instance of Cebu, Branch II for damages. EASCO, as the insurer, filed
a counterclaim against the Tio for the recovery of P18,387.86 representing the
unpaid insurance premiums. On 30 June 1982, the trial court rendered judgment
ordering EASCO and Far Eastern Shipping to pay Tiosolidarily the sum of
P105,986.68 less the amount of P18,387.86 for unpaid premiums with interest at the
legal rate from the filing of the complaint, the sum of P15,000.00 as attorney's fees
and the costs. The judgment became final as to EASCO but the shipping company
appealed to the Court of Appeals and was absolved from liability by the said court in
AC-GR 00161, entitled "TioKheChio vs. Eastern Assurance and Surety Corporation."
The trial court, upon motion by Tio, issued a writ of execution against EASCO.
Issue:
Whether Sections 243 and 244, as to interest, apply in the present case.
Held:
NO. Section 243 of the Insurance Code provides that "the amount of any loss or
damage for which an insurer may be liable, under any policy other than life insurance
policy, shall be paid within thirty days after proof of loss is received by the insurer
and ascertainment of the loss or damage is made either by agreement between the
insured and the insurer or by arbitration; but if such ascertainment is not had or
made within sixty days after such receipt by the insurer of the proof of loss, then the
loss or damage shell be paid within ninety days after such receipt. Refusal or failure
to pay the loss or damage within the time prescribed herein will entitle the assured to
collect interest on the proceeds of the policy for the duration of the delay at the rate
of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal
to pay is based on the ground that the claim is fraudulent." Section 244 of the
aforementioned Code also provides that "In case of any litigation for the enforcement
of any policy or contract of insurance, it shall be the duty of the Commissioner or the
Court, as the case may be, to make a finding as to whether the payment of the claim
of the insured has been unreasonably denied or withheld; and in the affirmative
case, the insurance company shall be adjudged to pay damages which shall consist

of attorney's fees and other expenses incurred by the insured person by reason of
such undeniable denial or withholding of payment plus interest of twice the ceiling
prescribed by the Monetary Board of the amount of the claim due the insured, from
the date following the time prescribed in section two hundred forty-two or in section
two hundred forty-three, as the case may be, until the claim is fully satisfied;
Provided, That the failure to pay any such claim within the time prescribed in said
sections shall be considered prima facie evidence of unreasonable delay in
payment." Herein, there was no unjustified refusal or withholding of payment on Tio's
claim. The aforecited sections of the Insurance Code are not pertinent to the case,
as they apply only when the court finds an unreasonable delay or refusal in the
payment of the claims.

FinmanAssurance Corporation vs. Court of Appeals and Usiphil Inc.

361 SCRA 214
Facts:
On 15 September 1981, Usiphil Incorporated obtained a fire insurance policy from
Finman General Assurance Corporation (then doing business under the name
Summa Insurance Corporation) covering certain properties, e.g., office, furniture,
fixtures, shop machinery and other trade equipment. Under Policy F3100 issued to
Usiphil, Finman undertook to indemnify Usiphil for any damage to or loss of said
properties arising from fire. Sometime in 1982, Usiphil filed with Finman an insurance
claim amounting to P987,126.11 for the loss of the insured properties due to fire.
Acting thereon, Finman appointed Adjuster H.H. Bayne to undertake the valuation
and adjustment of the loss. H.H. Bayne then required Usiphil to file a formal claim
and submit proof of loss. In compliance therewith, Usiphil submitted its Sworn
Statement of Loss and Formal Claim, dated 22 July 1982, signed by Reynaldo
Cayetano, Usiphil's Manager. Ortega instructed their Finance Manager,
RosauroMaghirang, to reconcile the records. Thereafter, Maghirang and Palallos
signed a Statement/Agreement, dated 28 February 1985, which indicated that the
amount due Usiphil was P842,683.40. Despite repeated demands by Usiphil,
Finman refused to pay the insurance claim.
Issue:
Whether the payment of 24% interest per annum is authorized by Sections 243 and
244 of the Insurance Code.
Held:
Yes. Anent the payment of 24% interest per annum computed from 3 May 1985 until
fully paid, the same is authorized by Sections 243 and 244 of the Insurance Code.
Notably, under Section 244, a prima facie evidence of unreasonable delay in
payment of the claim is created by the failure of the insurer to pay the claim within
the time fixed in both Sections 243 and 244. Further, Section 29 of the policy itself
provides for the payment of such interest: "Settlement of claim clause. The amount
of any .loss or damage for which the company may be liable, under this policy shall
be paid within thirty days after proof of loss is received by the company and
ascertainment of the loss or damage is made either in an agreement between the
insured and the company or by arbitration; but if such ascertainment is not had or
made within sixty days after such receipt by the company of the proof of loss, then
the loss or damage shall be paid within ninety days after such receipt. Refusal or
failure to pay the loss or damage within the time prescribed herein will entitle the
assured to collect interest on the proceeds of the policy for the duration of the delay
at the rate of twice the ceiling prescribed by the Monetary Board.

17.) COMPULSORY MOTOR VEHICLE LIABILITY

PerlaCompania de Seguros vs. Hon. ConstanateAncheta
164 SCRA 144
Facts:
There was a collision between the IH Scout (in which private respondents were
riding) and a Superlines bus. Private respondents sustained injuries. A complaint for
damages
was
filed
against
Superlines,
the
bus driver and petitioner insurance company, the insurer of the bus. The vehicle in
which the private respondents wereriding was insured with Malayan Insurance Co.
Even before summons could be served, the judge issued an order for the
Insurance Company to pay immediately within 5 days the P5,000 under the no-fault
clause as provided for in Section 378 of the Insurance Code. Petitioner moved for
the reconsideration of the order; it was denied. Petitioner contends that under Sec.
378 of the Insurance Code, the insurer liable to pay the P5,000 is the insurer of the
vehicle in which private respondents were riding, not petitioner.
Issue:
Whether or not petitioner is the insurer liable to indemnify the private respondents
under Sec. 378 of the Insurance Code.

Ruling:
Supreme Court says that the provision is clear and unambiguous. Under Sec. 378,
the claim shall lie against the insurer of the vehicle in which the occupant is riding
and no other. The claimant is not free to choose from which insurer he will claim the
no fault indemnity as the law uses the term shall. That said vehicle might not be
the one that caused the accident is of no moment since the law itself provides that
the party paying the claim may recover against the owner of the vehicle responsible
for the accident. Essence of no fault indemnity clause: to provide victims of
vehicular accidents or their heirs immediate compensation pending final
determination of who is responsible for the accident. The no fault indemnity
provision is part and parcel of the Insurance Code provisions on compulsory motor
vehicle liability insurance (Secs. 373-389) and should be read together with the
requirement for compulsory passenger and/or third party liability insurance (Sec.
377).

First Quezon City Insurance Corporation vs. CA

218 SCRA 525

Facts:
One Jose del Rosario was injured while boarding a bus owned by DMTC in the
Manila International Airport. He was hospitalized for forty days. He filed suit against
the bus company and the court granted him of over 100,000 pesos in damages.
The appellate court reduced damages to 55,090 pesos. The insurance
companys liability was limited to 12,000. The amount for insurance was made Php
50,000 in the appellate courts decision.
First Quezon City, the insurer of DTMC, filed a motion for reconsideration to limit the
damages back to 12,000 pesos, the amount stipulated in the contract. This was
denied hence this petition for review.
Issue:
Can the amount of the insurance companys liability be limited to Php 12,000?
Held:
Yes
Ratio: The contract stipulated liability at Php 12,000 per passenger and at Php
50,000 as the maximum liability per accident. This means that the
insurers liability for a single accident will not exceed 50,000 pesos. The court gave
the example of 10 persons injured leaving a total of Php 120,000 in
insurance liability payments. But with the Php 50,000 limit, only such value was to be
paid by the company to the insured.

PerlaCia. De Seguros, Inc. v. Ramolete

203 SCRA 487
Facts:
Spouses Lim purchased a brand new red Ford Laser car from Supercars, Inc. in a
sale by installment secured by a chattel mortgage. The same car is insured with
PerlaCompania de Seguros (Perla). On the same day, Supercars, Inc. assigned its
rights, title and interest to FCP Credit Corporation (FCP). On a later date, the vehicle
was carnapped. Spouses Lim filed a claim for loss with Perla but this was denied on
the ground that Evelyn Lim, who was using the vehicle before it was carnapped, was
in possession of an expired drivers license at the time of the loss, in violation of the
authorized driver clause of the insurance policy.
Issue:
WON Perla is liable despite the alleged violation of the authorized driver clause in
the insurance contract.
Held:
The Supreme Court held that Perla is liable to pay the insurance claim. The
comprehensive motor car insurance policy issued by Perla covered loss or damage
to the car: (a) xxx; (b) by fire, external explosion, self-ignition or lightning or burglary,
housebreaking or theft; (c) xxx. Where a car is admittedly unlawfully and wrongfully
taken without the owners consent or knowledge, such taking
constitutes theft, and therefore, it is the THEFT clause, and not the AUTHORIZED
DRIVER clause that should apply. The Court of Appeals was correct in holding that:
Theft is an entirely different legal concept from that of accident. Theft is committed
by a person with the intent to gain or, to put it in another way, with the concurrence of
the doers will. On the other hand, accident, although it may proceed or result from
negligence, is the happening of an event without the concurrence of the will of the
person by whose agency it was caused.

Government Service Insurance System vs. Court of Appeals

308 SCRA 559
Facts:
NFA National Food Authority was the owner of Chevrolet truck insured by GSISCMVLI. Victor Uy was the owner of Toyota Tamaraw used as PU insured by
Mabuhay Insurance and Guarantee-CMVLI. On May 9, 1979 at Tabon-Tabon,
Butuan City, the two vehicles collided resulting death and injuries to passengers of
the Tamaraw. Petitioner denies solidary liability with the NFA or the negligent
operator of the cargo truck because it claims that they are liable under different
obligations. It asserts that the NFAs liability is based on quasi- delict, while
petitioners liability is based on the contract of insurance. Citing articles 1207 and
1208of the Civil Code of the Philippines, petitioner asserts that the presumption is
that its obligation arising from a contract of insurance is joint.
Issue:
WON GSIS and NFA are jointly liable.
Held:
Petitioners position insofar as joint liability is concerned is not tenable. It is now
established that the injured or the heirs of a deceased victim of a vehicular accident
may sue directly the insurer of the vehicle. Note that common carriers are required to
secure Compulsory Motor Vehicle Liability Insurance [CMVLI] coverage as provided
under Sec. 374of the Insurance Code, precisely for the benefit of victims of vehicular
accidents and to extend them immediate relief. Compulsory Motor Vehicle Liability
Insuranceis primarily intended to provide compensation for the death or bodily
injuries suffered by innocent third parties or passengers as a result of a negligent
operation and use of motor vehicles. The victims and/or their defendants
[dependents] are assured of immediate financial assistance, regardless of the
financial capacity of motor vehicle owners. However, although the victim may
proceed directly against the insurer for indemnity, the third party liability is only up to
the
extent
of
the
insurance
policy
and those required by law.