1. Vda de Sindayen v Insular September 4, 1935 G.R. No.
41702 of the powers lodged in them, accepted the premium and delivered the policy. That act binds their
Facts: Sindayen, employed in the Bureau of Printing at Manila went to Tarlac, to spend the
Christmas vacation with his aunt. There he applied for for life insurance in the sum of P1,000 and
paid to the agent P15 cash as part of the first premium. It was agreed with the agent that the
policy, when and if issued, should be delivered to his aunt with whom he left sum of P26.06
to complete the payment of the first annual premium of P40.06. Sindayen returned to Manila and
resumed his work a linotype operator. The company accepted the risk after examining Sindayen
and issued a policy and to the same agent for delivery to the insured. Sindayen abruptly passed
away.
The policy which the company issued was received by its agent in Tarlac. The agent delivered the
policy to Felicidad Estrada upon her payment of the balance of the first years annual premium.
The agent asked Felicidad Estrada if her nephew was in good health and she replied that she
believed so. He gave her the policy. The agent learned of the death of Arturo Sindayen and the
aunt to return the policy. He did not return or offer to return the premium paid. The aunt gave him
the policy.
The company obtained from the beneficiary, the widow of Arturo Sindayen, her signature to a legal
document entitled ACCORD, SATISFACTION AND RELEASE In consideration of the sum of P40.06
paid to her by a check of the company, she discharged the company for all claims . The
said check for P40.06 was never cashed but returned to the company. The widow brought action to
enforce payment of the policy. The first premium was already paid by the insured covering the
period from December 1, 1932. It is to December 1, 1933. Hence, this appeal.
Issue: WON the said policy never took effect because of paragraph 3 of the application for at the
time of its delivery by the agent the insured was not in good health.
Held: No. Petition granted.
Ratio: The application which the insured signed in Tarlac, contained among others the following
provisions:
3. That the said policy shall not take effect until the first premium has been paid and the policy has
been delivered to and accepted by me, while I am in good health.
There is one line of cases which holds that the stipulation contained in paragraph 3 is in the nature
of a condition precedent, that is to say, that there can be no valid delivery to the insured unless he
is in good health at the time. A number of these cases, on the other hand, go to the of holding that
the delivery of the policy by the agent to the insured consummates the contract even though the
agent knew that the insured was not in good health at the time, the theory being that his
knowledge is the companys knowledge and his delivery of the policy is the companys delivery.
We are inclined to the view that it is more consonant with the well known practice of life insurance
companies and the evidence in the present case to rest our decision on the proposition that
Mendoza was authorized by the company to make the delivery of the policy when he received the
payment of the first premium and he was satisfied that the insured was in good health.
In the case of MeLaurin vs. Mutual Life Insurance Co. -It is plain, therefore, that upon the facts it is
not necessarily a case of waiver or of estoppel, but a case where the local agents, in the exercise
principal, the defendant.
The evidence in the record shows that Mendoza had the authority, given him by the company, to
withhold the delivery of the policy to the insured until the first premium has been paid and the
policy has been delivered to and accepted by me (the insured) while I am in good health.
Mendozas decision that the condition had been met by the insured and that it was proper to make
a delivery of the policy to him is just as binding on the company as if the decision had been made
by its board of directors.
It is the interest not only the applicant but of all insurance companies as well that there should be
some act which gives the applicant the definite assurance that the contract has been
consummated. A cloud will be thrown over the entire insurance business if the condition of health
of the insured at the time of delivery of the policy may be required into years afterwards with the
view to avoiding the policy on the ground that it never took effect because of an alleged lack of
good health, at the time of delivery.
When the policy is issued and delivered it is plainly not within the intention of the parties that
there should be any questions held in abeyance or reserved for future determination. It would be a
most serious handicap to business if the very existence of the contract remains in doubt even
though the policy has been issued and delivered with all the formalities required by the law. The
delivery of the policy to the insured by an agent is the final act which binds the company and
insured in the absence of fraud or other legal ground for rescission. The fact that the agent to
whom it has entrusted this duty is derelict or negligent or even dishonest in the performance of the
duty which has been entrusted to him would create a liability of the agent to the company but
does not resolve the companys obligation based upon the authorized acts of the agent toward a
third party who was not in collusion with the agent.
4. That the agent taking this application has no authority to make, modify or discharge contracts,
or to waive any of the Companys right or requirements.
Paragraph 4 of the application to the effect is not in point. Mendoza neither waived nor pretended
to waive any right or requirement of the company. In fact, his inquiry as to the state of health of
the insured discloses that he was endeavoring to assure himself that this requirement of the
company had been satisfied. In doing so, he acted within the authority conferred on him by his
agency and his acts within that authority bind the company. The company therefore having
decided that all the conditions precedent to the taking effect of the policy had been complied with,
it is now estopped to assert that it never intended that the policy should take effect.
2. Tai Tong v Insurance G.R. No. L-55397 February 29, 1988
Facts: Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00.
To secure the payment of the loan, a mortgage was executed over the land and the building in
favor of Tai Tong Chuache & Co. Arsenio Chua, representative of Thai Tong Chuache & Co. insured
the latter's interest with Travellers Multi-Indemnity Corporation for P100,000.00 (P70,000.00 for the
building and P30,000.00 for the contents thereof)
Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000.00 with respondent
Zenith Insurance Corporation. On July 16, 1975, another Fire Insurance was procured from
respondent Philippine British Assurance Company, covering the same building for P50,000.00 and
the contents thereof for P70,000.00.
The building and the contents were totally razed by fire.
Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents,
Zenith Insurance, Phil. British Assurance and S.S.S. Accredited Group of Insurers, paid their
corresponding shares of the loss. Complainants were paid the following: P41,546.79 by Philippine
British Assurance Co., P11,877.14 by Zenith Insurance Corporation, and P5,936.57 by S.S.S. Group
of Accredited Insurers Demand was made from respondent Travellers Multi-Indemnity for its share
in the loss but the same was refused. Hence, complainants demanded from the other three (3)
respondents the balance of each share in the loss in the amount of P30,894.31 (P5,732.79-Zenith
Insurance: P22,294.62, Phil. British: and P2,866.90, SSS Accredited) but the same was refused,
hence, this action.
In their answers, Philippine British Assurance and Zenith Insurance Corporation denied liability on
the ground that the claim of the complainants had already been waived, extinguished or paid. Both
companies set up counterclaim in the total amount of P 91,546.79.
SSS Accredited Group of Insurers informed the Commission that the claim of complainants for the
balance had been paid in the amount in full.
Travellers Insurance, on its part, admitted the issuance of a Policy and alleged defenses that Fire
Policy, covering the furniture and building of complainants was secured by a certain Arsenio Chua
and that the premium due on the fire policy was paid by Arsenio Chua.
Tai Tong Chuache & Co. also filed a complaint in intervention claiming the proceeds of the fire
Insurance Policy issued by respondent Travellers Multi-Indemnity.
As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on
the ground that the insurance policy subject of the complaint was taken out by Tai Tong Chuache &
Company, for its own interest only as mortgagee of the insured property and thus complainant as
mortgagors of the insured property have no right of action against the respondent. It likewise
dismissed petitioner's complaint in intervention in the following words:
From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it
was likewise denied hence, the present petition.
Issue: WON Tai Tong had insurable interest
Held: Yes. Petition granted.
Ratio: Respondent advanced an affirmative defense of lack of insurable interest on the part of the
petitioner that before the occurrence of the peril insured against, the Palomos had already paid
their credit due the petitioner. However, they were never able to prove that Tai had a lack of
insurable interest. Hence, the decision must be adverse against them.
However respondent Insurance Commission absolved respondent insurance company from liability
on the basis of the certification issued by the then Court of First Instance of Davao, Branch II, that
in a certain civil action against the Palomos, Arsenio Lopez Chua stands as the complainant and
not Tai Tong Chuache.
From said evidence respondent commission inferred that the credit extended by petitioner to the
Palomos secured by the insured property must have been paid. These findings was based upon a
mere inference.
The record of the case shows that the petitioner to support its claim for the insurance proceeds
offered as evidence the contract of mortgage which has not been cancelled nor released. It has
been held in a long line of cases that when the creditor is in possession of the document of credit,
he need not prove non-payment for it is presumed. The validity of the insurance policy taken by
petitioner was not assailed by private respondent. Moreover, petitioner's claim that the loan
extended to the Palomos has not yet been paid was corroborated by Azucena Palomo who testified
that they are still indebted to herein petitioner.
Public respondent argues however, that if the civil case really stemmed from the loan granted
to Azucena Palomo by petitioner the same should have been brought by Tai Tong Chuache or by its
representative in its own behalf. From the above premise, respondent concluded that the obligation
secured by the insured property must have been paid. However, it should be borne in mind that
petitioner being a partnership may sue and be sued in its name or by its duly authorized
representative. Petitioner's declaration that Arsenio Lopez Chua acts as the managing partner of
the partnership was corroborated by respondent insurance company. Thus Chua as the managing
partner of the partnership may execute all acts of administration including the right to
sue debtors of the partnership in case of their failure to pay their obligations when it became due
and demandable. Public respondent's allegation that the civil case flied by Arsenio Chua was in his
capacity as personal creditor of spouses Palomo has no basis. The policy, then had legal force
and effect.
3. Insular Life Assurance Co., Ltd. vs Serafin Feliciano (1943)
74 Phil. 468 Mercantile Law Insurance Law Representation Insurance Agents Fraud
From the courts decision rendered in the case of Insular Life Assurance vs Feliciano (1941), Insular
Life filed a motion for reconsideration. Insular avers that Feliciano is not entitled to the claim
because the insurance policy is void ab initio; that he connived with the insurance agent and the
medical examiner; and that at best, Feliciano is only entitled to refund or the reimbursement of
what he has paid in premium.
ISSUE: Whether or not Insular Life is correct.
HELD: Yes. This time, the Supreme Court held that Insular Lifes contention is correct. When
Evaristo Feliciano, the applicant for insurance, signed the application in blank and authorized the
soliciting agent and/or medical examiner of Insular to write the answers for him, he made them his
own agents for that purpose, and he was responsible for their acts in that connection. If they
falsified the answers for him, he could not evade the responsibility for the falsification. He was not
supposed to sign the application in blank. He knew that the answers to the questions therein
contained would be the basis of the policy, and for that very reason he was required with his
signature to vouch for truth thereof.

4. Insurance Case Digest: Malayan Insurance Co., Inc. V. Arnaldo (1987)
G.R. No. L-67835 October 12, 1987
Lessons Applicable: Authority to Receive Payment/Effect of Payment (Insurance)
Laws Applicable: Article 64, Article 65, Section 77, Section 306 of the Insurance Code
FACTS:
June 7, 1981: Malayan insurance co., inc. (MICO) issued to Coronacion Pinca, Fire
Insurance Policy for her property effective July 22, 1981, until July 22, 1982
October 15,1981: MICO allegedly cancelled the policy for non-payment, of the premium
and sent the corresponding notice to Pinca
December 24, 1981: payment of the premium for Pinca was received by Domingo Adora,
agent of MICO
January 15, 1982: Adora remitted this payment to MICO,together with other payments
January 18, 1982: Pinca's property was completely burned
February 5, 1982: Pinca's payment was returned by MICO to Adora on the ground that her
policy had been cancelled earlier but Adora refused to accept it and instead demanded for
payment
Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of
the decision of the Insurance Commission. The petitioner filed its motion for reconsideration on
April 25, 1981, or fifteen days such notice, and the reglementary period began to run again
after June 13, 1981, date of its receipt of notice of the denial of the said motion for
reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days later, there is
no question that it is tardy by four days.
Insurance Commission: favored Pinca
MICO appealed
ISSUE: W/N MICO should be liable because its agent Adora was authorized to receive it
HELD: YES. petition is DENIED
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy
or contract of insurance issued by an insurance company is valid and binding unless and until
the premium thereof has been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies.
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance agant or insurance broker a policy or
contract of insurance shall be demmed to have authorized such agent or broker to receive on its
behalf payment of any premium which is due on such policy or contract of insurance at the time of
its issuance or delivery or which becomes due thereon.
Payment to an agent having authority to receive or collect payment is equivalent to
payment to the principal himself; such payment is complete when the money delivered is into
the agent's hands and is a discharge of the indebtedness owing to the principal.
SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except
upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless
it is based on the occurrence, after the effective date of the policy, of one or more of the
following:
(a) 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.
All MICO's offers to show that the cancellation was communicated to the insured is its
employee's testimony that the said cancellation was sent "by mail through our mailing
section." without more
It stands to reason that if Pinca had really received the said notice, she would not have
made payment on the original policy on December 24, 1981. Instead, she would have asked
for a new insurance, effective on that date and until one year later, and so taken advantage of
the extended period.
Incidentally, Adora had not been informed of the cancellation either and saw no reason not
to accept the said payment
Although Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO
sought to return it to Adora only on February 5, 1982, after it presumably had learned of the
occurrence of the loss insured against on January 18, 1982 make the motives of MICO highly
suspicious
5. Filipino Merchants Insurance v CA G.R. No. 85141 November 28, 1989
Facts: Choa insured 600 tons of fishmeal for the sum of P267,653.59 from Bangkok, Thailand to
Manila against all risks under warehouse to warehouse terms. What was imported in the SS
Bougainville was 59.940 metric tons at $395.42 a ton. The cargo was unloaded from the ship and
227 bags were found to be in bad condition by the arrastre.
Choa made a formal claim against the defendant Filipino Merchants Insurance Company for
P51,568.62 He also presented a claim against the ship, but the defendant Filipino Merchants
Insurance Company refused to pay the claim. The plaintiff brought an action against the company
and presented a third party complaint against the vessel and the arrastre contractor.
The court below, after trial on the merits, rendered judgment in favor of private respondent, for the
sum of P51,568.62 with interest at legal rate.
The common carrier, Compagnie, was ordered to pay as a joint debtor.
On appeal, the respondent court 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. The AC made
Filipino Merchants pay but absolved the common carrier, Compagnie. Hence this petition.
Issues:
1. WON the "all risks" clause of the marine insurance policy held the petitioner liable to the private
respondent for the partial loss of the cargo, notwithstanding the clear absence of proof of some
fortuitous event, casualty, or accidental cause to which the loss is attributable.
2. WON The Court of Appeals erred in not holding that the private respondent had no
insurable interest in the subject cargo, hence, the marine insurance policy taken out by private
respondent is null and void.
Held: No. No. Petition denied.
Ratio:
1. The "all risks clause" of the Institute Cargo Clauses read as follows:
5. This insurance is against all risks of loss 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. Accident is construed by the courts in their ordinary and
common acceptance.
The very nature of the term "all risks" must be given a broad and comprehensive meaning as
covering any loss other than a willful 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.
Institute Cargo Clauses 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.
Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril,
but under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or
damage for which it seeks compensation. The insured under an "all risks insurance policy" has the
initial burden of proving that the cargo was in good condition when the policy attached and that
the cargo was damaged when unloaded from the vessel. The burden then shifts to the insurer to
show the exception to the coverage. This creates a special type of insurance which extends
coverage to risks not usually contemplated and avoids putting upon the insured the burden of
establishing that the loss was due to the peril falling within the policy's coverage; the insurer can
avoid coverage upon demonstrating that a specific provision expressly excludes the loss from
coverage.
Under an 'all risks' policy, it was sufficient to show that there was damage occasioned by some
accidental cause of any kind, and there is no necessity to point to any particular cause.
2. Section 13 of the Insurance Code- anyone has an insurable interest in property who derives a
benefit from its existence or would suffer loss from its destruction
Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest
founded on an existing interest; or (c) an expectancy, coupled with an existing interest in that out
of which the expectancy arises.
Choa, as vendee/consignee of the goods in transit, has such existing interest as may be the
subject of a valid contract of insurance. His interest over the goods is based on the perfected
contract of sale. The perfected contract of sale between him and the shipper of the goods operates
to vest in him an equitable title even before delivery or before conditions have been performed.
Further, Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the
seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier,
for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer.
The Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake
of the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss
of the goods and paid the insurance premium covering them.
6. Saura Import & Export Co., Inc. V. Philippine International Surety Co., Inc. (1963)
G.R. No. L-15184 May 31, 1963
Lessons Applicable: Mortgagor (Insurance)
Laws Applicable:
FACTS:
Saura Import & Export Co Inc., mortgaged to the Phil. National Bank, a parcel of land.
The mortgage was amended to guarantee an increased amount, bringing the total
mortgaged debt to P37,000
On the land mortgage is a building owned by Saura Import & Export Co Inc. which was
insured with Philippine International Surety (Insurer) even before the mortgage contract so it
was required to endorse to mortgagee PNB
October 15, 1954: Barely 13 days after the issuance of the fire insurance policy, the insurer
cancelled it. Notice of the cancellation was given to PNB (mortgagee). But Saura (insured) was
not informed.
April 6, 1955: The building and all its contents worth P40,685.69 were burned so Saura
filed a claim with the Insurer and mortgagee Bank
RTC: dismissed
ISSUE: W/N Philippine International Surety should be held liable for the claim because notice to
only the mortgagee is not substantial

HELD: YES. Appealed from is hereby reversed. Philippine International Surety Co., Inc., to pay
Saura Import & Export Co., Inc., P29,000
It was the primary duty of Philippine International Surety to notify the insured, but it did
not
If a mortgage or lien exists against the property insured, and the policy contains a clause
stating that loss, if any, shall be payable to such mortgagee or the holder of such lien as
interest may appear, notice of cancellation to the mortgagee or lienholder alone is ineffective
as a cancellation of the policy to the owner of the property.
liability attached principally the insurance company, for its failure to give notice of the
cancellation of the policy to Saura
it is unnecessary to discuss the errors assigned against appellee bank
7. SHERMAN SHAFER vs. HON. JUDGE, REGIONAL TRIAL COURT OF OLONGAPO CITY,
BRANCH 75, and MAKATI INSURANCE COMPANY, INC. (SHORT Full Text)
G.R. No. 78848 November 14, 1988
This is a petition for review on certiorari of the Order * of the Regional Trial Court, Olongapo City,
Branch 75, dated 24 April 1986 dismissing petitioner's third party complaint filed in Criminal Case
No. 381-85, a prosecution for reckless imprudence resulting in damage to property and serious
physical injuries. 1
On 2 January 1985, petitioner Sherman Shafer obtained a private car policy, GA No. 0889, 2 over
his Ford Laser car with Plate No. CFN-361 from Makati Insurance Company, Inc., for third party
liability During the effectivity of the policy, an information 3 for reckless imprudence resulting in
damage to property and serious physical injuries was filed against petitioner. The information
reads as follows:
That on or about the seventeeth (17th) day of May 1985, in the City of Olongapo, Philippines, and
within the jurisdiction of this Honorable Court, the above-named accused, being then the driver
and in actual physical control of a Ford Laser car bearing Plate No. CFN-361, did then and there
wilfully, unlawfully and criminally drive, operate and manage the said Ford Laser car in a careless,
reckless and imprudent manner without exercising reasonable caution, diligence and due care to
avoid accident to persons and damage to property and in disregard of existing traffic rules and
regulations, causing by such carelessness, recklessness and imprudence the said Ford Laser car to
hit and bump a Volkswagen car bearing Plate No. NJE-338 owned and driven by Felino llano y
Legaspi, thereby causing damage in the total amount of P12,345.00 Pesos, Philippine Currency,
and as a result thereof one Jovencio Poblete, Sr. who was on board of the said Volkswagen car
sustained physical injuries, to wit:
1. 2 cm. laceration of left side of tongue.
2. 6 cm. laceration with partial transection of muscle (almost full thickness) left side of face.
3. Full thickness laceration of lower lip and adjacent skin.
which injuries causing [sic] deformity on the face. 4
The owner of the damaged Volkswagen car filed a separate civil action against petitioner for
damages, while Jovencio Poblete, Sr., who was a passenger in the Volkswagen car when allegedly
hit and bumped by the car driven by petitioner, did not reserve his right to file a separate civil
action for damages. Instead, in the course of the trial in the criminal case, Poblete, Sr. testified on
his claim for damages for the serious physical injuries which he claimed to have sustained as a
result of the accident.
Upon motion, petitioner was granted leave by the former presiding judge of the trail court to file a
third party complaint against the herein private respondent, Makati Insurance Company, Inc. Said
insurance company, however, moved to vacate the order granting leave to petitioner to file a third
party complaint against it and/or to dismiss the same. 5
On 24 April 1987, the court a quo issued an order dismissing the third party complaint on the
ground that it was premature, based on the premise that unless the accused (herein petitioner) is
found guilty and sentenced to pay the offended party (Poblete Sr.) indemnity or damages, the third
party complaint is without cause of action. The court further stated that the better procedure is for
the accused (petitioner) to wait for the outcome of the criminal aspect of the case to determine
whether or not 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.6 Petitioner moved for reconsideration of said order, but the motion was denied; 7 hence,
this petition.
It is the contention of herein petitioner that the dismissal of the third party complaint amounts to a
denial or curtailment of his right to defend himself in the civil aspect of the case. Petitioner further
raises the legal question of whether the accused in a criminal action for reckless imprudence,
where the civil action is jointly prosecuted, can legally implead the insurance company as third
party defendant under its private car insurance policy, as one of his modes of defense in the civil
aspect of said proceedings.
On the other hand, the insurance company submits that a third party complaint is, under the rules,
available only if the defendant has a right to demand contribution, indemnity, subrogation or any
other relief in respect of plaintiff's claim, to minimize the number of lawsuits and avoid the
necessity of bringing two (2) or more suits involving the same subject matter. The insurance
company further contends that the contract of motor vehicle insurance, the damages and
attorney's fees claimed by accused/third party plaintiff are matters entirely different from his
criminal liability in the reckless imprudence case, and that petitioner has no cause of action
against the insurer until petitioner's liability shall have been determined by final judgment, as
stipulated in the contract of insurance. 8
Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is 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. 9 The victims and/or
their dependents are assured of immediate financial assistance, regardless of the financial
capacity of motor vehicle owners.
The liability of the insurance company under the Compulsory Motor Vehicle Liability Insurance is
for loss or damage. Where an insurance policy insures directly against liability, the insurer's liability
accrues immediately upon the occurrence of the injury or event upon which the liability depends,
and does not depend on the recovery of judgment by the injured party against the insured. 10
The injured for whom the contract of insurance is intended can sue directly the insurer. The
general purpose of statutes enabling an injured person to proceed directly against the insurer is to
protect injured persons against the insolvency of the insured who causes such injury, and to give
such injured person a certain beneficial interest in the proceeds of the policy, and statutes are to
be liberally construed so that their intended purpose may be accomplished. It has even been held
that such a provision creates a contractual relation which inures to the benefit of any and every
person who may be negligently injured by the named insured as if such injured person were
specifically named in the policy. 11
In the event that the injured fails or refuses to include the insurer as party defendant in his claim
for indemnity against the insured, the latter is not prevented by law to avail of the procedural rules
intended to avoid multiplicity of suits. Not even a "no action" clause under the policy-which
requires that a final judgment be first obtained against the insured and that only thereafter can the
person insured recover on the policy can prevail over the Rules of Court provisions aimed at
avoiding multiplicity of suits. 12
In the instant case, the court a quo erred in dismissing petitioner's third party complaint on the
ground that petitioner had no cause of action yet against the insurance company (third party
defendant). There is no need on the part of the insured to wait for the decision of the trial court
finding him guilty of reckless imprudence. The occurrence of the injury to the third party
immediately gave rise to the liability of the insurer under its policy.
A third party complaint is a device allowed by the rules of procedure by which the defendant can
bring into the original suit a party against whom he will have a claim for indemnity or remuneration
as a result of a liability established against him in the original suit. 13 Third party complaints are
allowed to minimize the number of lawsuits and avoid the necessity of bringing two (2) or more
actions involving the same subject matter. They are predicated on the need for expediency and the
avoidance of unnecessary lawsuits. If it appears probable that a second action will result if the
plaintiff prevails, and that this result can be avoided by allowing the third party complaint to
remain, then the motion to dismiss the third party complaint should be denied. 14
Respondent insurance company's contention that the third party complaint involves extraneous
matter which will only clutter, complicate and delay the criminal case is without merit. An offense
causes two (2) classes of injuries the first is the social injury produced by the criminal act which is
sought to be repaired thru the imposition of the corresponding penalty, and the second is the
personal injury caused to the victim of the crime, which injury is sought to be compensated thru
indemnity, which is civil in nature. 15
In the instant case, the civil aspect of the offense charged, i.e., serious physical injuries allegedly
suffered by Jovencio Poblete, 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 (Jovencio Poblete, 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.
8. Insular v Ebrado G.R. No. L-44059 October 28, 1977
Facts: Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a
rider for Accidental Death. He designated Carponia T. Ebrado as the revocable beneficiary in his
policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay
the coverage in the total amount of P11,745.73, representing the face value of the policy in the
amount of P5,882.00 plus the additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the
designated beneficiary therein, although she admited that she and the insured were merely living
as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts
that she is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given the
proceeds. The court declared Carponia as disqualified.
Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally
married man can claim the proceeds in case of death of the latter?
Held: No. Petition
Ratio: Section 50 of the Insurance Act which provides that "the insurance shall
be applied exclusively to the proper interest of the person in whose name it is made"
The word "interest" highly suggests that the provision refers only to the "insured" and not to
the beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory
laws against illicit relationships especially on property and descent will be rendered nugatory, as
the same could easily be circumvented by modes of insurance.
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. And under Article 2012 of the
same Code, any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a fife insurance policy by the person who cannot make a donation to him.
Common-law spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were guilty of
adultery or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those
between illegitimate ones should be enforced in life insurance policies since the same are based on
similar consideration. So long as marriage remains the threshold of family laws, reason and
morality dictate that the impediments imposed upon married couple should likewise be imposed
upon extra-marital relationship.
A conviction for adultery or concubinage isnt required exacted before the disabilities mentioned in
Article 739 may effectuate. The article says that in the case referred to in No. 1, the action for
declaration of nullity may be brought by the spouse of the donor or donee; and the guilty of the
donee may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. The law plainly states that the guilt of the party may be proved in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was
also living in with his common-law wife with whom he has two children.
9. Capital Insurance & Surety Co. Inc. V. Plastic Era Co. Inc (1975)
G.R.No. L-22375 July 18, 1975
Lessons Applicable: Estoppel and credit extension (Insurance)
Laws Applicable: Article 1249 of the New Civil Code
FACTS:
December 17, 1960: Capital Insurance & Surety Co., Inc. delivered to the respondent
Plastic Era Manufacturing Co., Inc. its open Fire Policy insuring its building, equipments, raw
materials, products and accessories located at Sheridan Street, Mandaluyong, Rizal
between December 15, 1960 1 pm - December 15, 1961 1 pm up to P100,000 but Plastic Era
did not pay the premium
January 8, 1961: Plastic Era delivered to Capital Insurance its partial payment through
check P1,000 postdated January 16, 1961
February 20, 1961: Capital Insurance tried to deposit the check but it was dishonored due
to lack of funds. According to the records, on January 19, 1961 Plastic Era has had a bank
balance of P1,193.41
January 18, 1961: Plastic Era's properties were destroyed by fire amounting to a loss
of P283,875. The property was also insured to Philamgen Insurance Company for P200K.
Capital Insurance refused Plastic Era's claim for failing to pay the insurance premium
CFI: favored Capital Insurance
CA: affirmed
ISSUE: W/N there was a valid insurance contract because there was an extention of credit despite
failing to encash the check payment
HELD: YES. Affirmed
Article 1249 of the New Civil Code
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been cashed,
or when through the fault of the creditor they have been impaired
Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within
30 days from the effective date of policy. Considering that the insurance policy is silent as to
the mode of payment, Capital Insurance is deemed to have accepted the promissory note in
payment of the premium. This rendered the policy immediately operative on the date it was
delivered.
By accepting its promise to pay the insurance premium within thirty (30) days from the
effectivity date of the policy December 17, 1960 Capital Insurance had in effect extended
credit to Plastic Era.
Where credit is given by an insurance company for the payment of the premium it has no
right to cancel the policy for nonpayment except by putting the insured in default and giving
him personal notice
Having held the check for such an unreasonable period of time, Capital Insurance was
estopped from claiming a forfeiture of its policy for non-payment even if the check had been
dishonored later.
----- ----- ------ ------ ------ ------ ------
10. Enriquez v. SunLife- Insurance Policy 41 PHIL 269 (digest 1)
Facts:
> On Sept. 24 1917, Herrer made an application to SunLife through its office in Manila for life
annuity.
> 2 days later, he paid the sum of 6T to the companys anager in its Manila office and was given a
receipt.
> On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On the same
date, the Manila office prepared a letter notifying Herrer that his application has been accepted
and this was placed in the ordinary channels of transmission, but as far as known was never
actually mailed and never received by Herrer.
> Herrer died on Dec. 20, 1917. The plaintiff as administrator of Herrers estate brought this
action to recover the 6T paid by the deceased.
Issue: Whether or not the insurance contract was perfected.
Held: NO. The contract for life annuity was NOT perfected because it had 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 of insurane, as the locus poenitentiae is ended when an
acceptance has passed beyond the control of the party.
NOTE: Life annuity is the opposite of a life insurance. In life annuity, a big amount is given to the
insurance company, and if after a certain period of time the insured is still living, he is entitled to
regular smaller amounts for the rest of his life. Examples of Life annuity are pensions. Life
Insurance on the other hand, the insured during the period of the coverage makes small regular
payments and upon his death, the insurer pays a big amount to his beneficiaries.
Digest 2: Enriquez vs. Sun Life Assurance Co. [GR No. 15895; November 29, 1920]
Facts: Plaintiff is estate administrator for late Joaquin Herrer. Herrer has pending application with
defendant Sun Life Assurance Co (sun Life) evidenced by a provisional receipt. The provisional
receipt reads payment of Php6, 000 for life annuity received 26 September 1917.
The application was received by Sun Life head office a month after.
04 December 1917, the policy was issued in Montreal. A petition for withdrawal of application was
filed by Herrers lawyer 18 December 1917. Herrer died 20 December. A letter from Sun Life was
received 21 December stating policy was issued and reminds the party of a notification of
acceptance of the application dated 26 November.
Plaintiff testified that he had found no letter of notification from the Sun Life.
Lower Court decides in favor of respondent. Appeal was taken.
Issue: Whether or not the there has been a valid offer and acceptance??
Held: None. The Civil Code provides that the acceptance made by letter binds the person making
the offer only from the date it has came to its knowledge. The contract of life annuity was not
perfected. There was no satisfactory evidence that the application acceptance came to the
knowledge of Herrer.
Article 16 of the civil code provides that any deficiency in the special law shall be supplied by the
Code. The Insurance Code does not provide for law on the principle of acceptance, thus the Civil
Code shall govern.
Article 1262 provides that consent is shown by concurrence of offer and acceptance with the thing
and the consideration to the contract. The acceptance by letter shall not bind the person making
the offer except from the time It came to his knowledge.
American Courts held that acceptance of offer not actually communicated does not complete the
contract but the mailing of the acceptance. Locus Poenitrntiae is ended when acceptance has
passed beyond partys control.
Furthermore, the provisional receipt provides for conditions before a contract is deemed final.
1. Medical examination. 2. Approval by head office of the application. 3. the
company communicates approval to the applicant.
In the case, there was no letter of notification. No evidence of knowledge. Judgment reversed.
Php6000 with interest is to be returned.
11. Edillon vs. Manila Bankers Life Insurance Corporation [G.R. No. L-34200, 117 SCRA
187, September 30, 1982]
Facts: Sometime in April 1969, Carmen O, Lapuz applied Manila Bankers for insurance coverage
against accident and injuries. She filled up the blank application form given to her and filed the
same with the respondent insurance corporation. In the said application form she gave the date of
her birth as July 11, 1904. On the same date, she paid the sum of P20.00 representing the
premium for which she was issued the corresponding receipt signed by an authorized agent of
Manila Bankers. Upon the filing and the payment of the premium, the respondent insurance
corporation issued to Carmen O. Lapuz its Certificate of Insurance. The policy was to be effective
for a period of 90 days. During the effectivity of the certificate of insurance Carmen Lapuz died on
a vehicular accident in the North Diversion Road. On June 7, 1969, petitioner Regina L. Edillon, a
sister of the insured and who was the named beneficiary in the policy, filed her claim for the
proceeds of the insurance, submitting all the necessary papers and other requisites. However, her
claim was denied by the respondent corporation hence her filing of complaint in the Court of First
Instance of Rizal on August 27, 1969. The respondent insurance corporation asserts that since
Carmen Lapuz was over 60 years of age the policy in question was null and void because there is a
provision in the certificate of insurance excluding its liability to pay claims under the policy in
behalf of persons who are under the age of sixteen (16) years of age or over the age of sixty (60)
years. The trial court dismissed the complaint. Hence, this petition.
Issue: Whether or not the acceptance by the private respondent insurance corporation of the
premium and the issuance of the corresponding certificate of insurance should be deemed a
waiver of the exclusionary condition of overage stated in the said certificate of insurance
Held: Yes. The age of the insured Carmen 0. Lapuz was not concealed to the insurance company.
Her application for insurance coverage which was on a printed form furnished by private
respondent and which contained very few items of information clearly indicated her age of the
time of filing the same to be almost 65 years of age. Despite such information which could hardly
be overlooked in the application form, considering its prominence thereon and its materiality to the
coverage applied for, the respondent insurance corporation received her payment of premium and
issued the corresponding certificate of insurance without question. The accident which resulted in
the death of the insured, a risk covered by the policy, occurred on May 31, 1969 or FORTY-FIVE (45)
DAYS after the insurance coverage was applied for. There was sufficient time for the private
respondent to process the application and to notice that the applicant was over 60 years of age
and thereby cancel the policy on that ground if it was minded to do so. If the private respondent
failed to act, it is either because it was willing to waive such disqualification; or, through the
negligence or incompetence of its employees for which it has only itself to blame, it simply
overlooked such fact. Under the circumstances, the insurance corporation is already deemed in
estoppel. Its inaction to revoke the policy despite a departure from the exclusionary
condition contained in the said policy constituted a waiver of such condition.
12. Insurance Case Digest: De La Cruz V. Capital Ins. & Surety Co, Inc. (1966)
G.R. No. L-21574 June 30, 1966
Lessons Applicable: Liability of Insurer for Suicide and Accidental Death (Insurance)
Laws Applicable:
FACTS:
 Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines, Inc. in Baguio, was
the holder of an accident insurance policy "against death or disability caused by accidental
means"
January 1, 1957: For the celebration of the New Year, the Itogon-Suyoc Mines, Inc.
sponsored a boxing contest for general entertainment wherein Eduardo, a non-professional
boxer participated
In the course of his bout with another non-professional boxer of the same height, weight,
and size, Eduardo slipped and was hit by his opponent on the left part of the back of the head,
causing Eduardo to fall, with his head hitting the rope of the ring
He was brought to the Baguio General Hospital the following day. He died due
to hemorrhage, intracranial.
Simon de la Cruz, the father of the insured and who was named beneficiary under the
policy, thereupon filed a claim with the insurance company
The Capital Insurance and Surety co., inc denied stating that the death caused by his
participation in a boxing contest was not accidental
RTC: favored Simon
ISSUE: W/N the cause of death was accident
HELD: YES.
Eduardo slipped, which was unintentional
The terms "accident" and "accidental"
as used in insurance contracts, have not acquired any technical meaning and are
construed by the courts in their ordinary and common acceptation
happen by chance or fortuitously, without intention and design, and which is
unexpected, unusual, and unforeseen
event that takes place without one's foresight or expectation
event that proceeds from an unknown cause, or is an unusual effect of a known
cause and, therefore, not expected
where the death or injury is not the natural or probable result of the insured's voluntary
act, or if something unforeseen occurs in the doing of the act which produces the injury, the
resulting death is within the protection of policies insuring against death or injury from
accident
while the participation of the insured in the boxing contest is voluntary, the injury was
sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw
him to the ropes of the ring is not
The fact that boxing is attended with some risks of external injuries does not make any
injuries received in the course of the game not accidental
In boxing as in other equally physically rigorous sports, such as basketball or baseball,
death is not ordinarily anticipated to result. If, therefore, it ever does, the injury or death can
only be accidental or produced by some unforeseen happening or event as what occurred in
this case
Furthermore, the policy involved herein specifically excluded from its coverage
(e) Death or disablement consequent upon the Insured engaging in football, hunting,
pigsticking, steeplechasing, polo-playing, racing of any kind, mountaineering, or motorcycling.
Death or disablement resulting from engagement in boxing contests was not
declared outside of the protection of the insurance contract
13. PACIFICA EVANGELISTA vs. GOVERNMENT SERVICE INSURANCE SYSTEM.
G.R. No. L-21161 August 7, 1975 (Short Full text)
Appeal from a decision of the Court of First Instance of Manila, Branch V in its Civil Case No. 32508,
entitled "Pacifica Evangelista vs. Government Service Insurance System", which dismissed the
complaint of plaintiff Evangelista wherein she seeks to recover from the defendant, Government
Service Insurance System, the proceeds of the insurance policy of her deceased brother, Pablo A.
Evangelista, a former member of the Pasay City Police Department, together with damages and
costs. The Court of Appeals where the appeal was elevated as C.A.-G.R. No. 23151-R concluding
that "the plaintiff raises the question regarding the constitutionality of Republic Act No. 541, the
determination of which falls within the exclusive appellate jurisdiction of the Supreme Court",
certified and forwarded the case to Us per its Resolution of March 14, 1963.
The undisputed facts according to the findings of the Appellate Court are as follows:
The late Pablo Evangelista was appointed detective in the Police Department, Pasay City, effective
November 17, 1949. He discharged the duties of said office until June 4, 1951, when he was killed
in line of duty. Said Evangelista was considered 'automatically insured, effective May 31, 1950, in
accordance with Section 4, Commonwealth Act No. 186'. The premium paid by him for his
insurance amounted to P36.00, personal share, and P6.00, Government share.
On June 17, 1970, Republic Act No. 541 (An Act to provide life pensions for uniformed officers,
sergeants, corporals, patrolmen and detectives of the Police Department as well as uniformed
officers and firemen of Fire Department of the chartered cities), took effect, providing pertinently
as follows:
'Sec. 8. Upon approval of this Act, any person entitled to its benefits and who is already insured
with the Government Service Insurance System, is given the option to continue such insurance:
Provided, That he will assume full payment of the premium of the said insurance including the
contribution of the Government: Provided further, that his contribution to the Division fund under
this Act be made compulsory and any deduction made from his monthly pay or salary be noted in
the monthly or semi-monthly payrolls of the Police Department or Fire Department, as the case
may be; And, Provided, lastly, that no person entitled to the benefit of this Act shall be entitled to
any benefit provided for in other Acts.'
The Court a quo in dismissing plaintiff's complaint found as follows:
'The insurance policy issued to the deceased Pablo Evangelista as of May 31, 1950, was
compulsory by virtue of Section 4, of Commonwealth Act No. 186. However, it became optional by
operation of Republic Act No. 541, which took effect on June 17, 1950, as already above stated.
The policy of the deceased having become optional, the P3.00 which he caused to be remitted
each month to the defendant System represented only one-half of what was due from him because
an optional policy, as already seen, calls for the payment of premiums in full by the insured.
Hence, the total premium remittances of the deceased were only enough to make his policy in
force or active up to the end of March 1951. Said policy, not having been in force for one year, had
not earned any cash value which could be applied to his premiums in arrears, pursuant to the
automatic premium loan provision thereof.'
It is the principal and crucial contention of plaintiff-appellant that "the lower court erred in holding
that the insurance policy of the deceased Detective Pablo Evangelists with the defendant-appellee
was converted to an optional insurance by the passage of Republic Act No. 541" and "that the
legislature could not, by the passage of said law (R.A. No. 541) effectuate a unilateral change in
the deceased's automatic and compulsory contract of insurance under Commonwealth Act No.
186, without violating Article III, See. 1, Clause 10 of the 1935 Constitution which provides that "no
law impairing the obligation of contracts shall be passed".
We fully concur with the observations of the Appellate Court that:
If the insurance policy of the deceased (Pablo Evangelista) was not converted to optional by
Republic Act No. 541, but remained automatic or compulsory whereby, under Commonwealth Act
No. 186, Sections 5 and 6, the monthly premiums would consist of the 'membership contributions'
of the insured and the 'government contributions' in equal shares, the payments made by the
deceased as his 'personal share' of the premiums would have made the policy effective until May
30, 1951. With the 31 days grace period, it would have been in force until July 1, 1951, or for 27
days after the death of the insured. On this score, the proceeds of the policy would be payable to
the beneficiary or heirs, but if the conversion (from compulsory to optional insurance) was valid
and does no violence to the constitutional guaranty against impairment of the obligation of
contracts, such right would not be available.
I
Without passing upon the constitutional question raised by the plaintiff- appellant as it is not
absolutely necessary to the determination of this appeal, We believe that the primary question is
whether there was automatic conversion of the insurance policy of the deceased insured, Pablo
Evangelista, from compulsory under Sections 5 and 6 of Commonwealth Act No. 186 to optional
under Section 8 of Republic Act 541 upon the effectivity of the latter law on June 17, 1950, in the
light of the proven circumstances. Stated otherwise, was there an automatic novation of the
insurance contract from compulsory to optional by the mere passage of Sec. 8 of Republic Act 541,
without taking into consideration the acts of both the insured and insurer subsequent to the
approval of Republic Act 541?
It seems fairly clear that Pablo Evangelista was automatically insured (compulsory insurance)
under Secs. 5 and 6 of Commonwealth Act No. 186, on May 31, 1950 that the sum of P36.00
personal share and P6.00 government share was paid to insurer G.S.I.S. as premium for said
insurance policy; that said premiums were deducted from the monthly salary of the insured by the
City Treasurer of Pasay City as agent of the insurer G.S.I.S. that the insured was never informed of
the change of his insurance policy from compulsory to optional as brought about by the effectivity
of R.A. 541 on June 17, 1950, that the Treasurer of Pasay City as agent of insurer G.S.I.S. never
took the initiative of notifying the insured as to the change in the nature of his life insurance policy
from compulsory to optional, nor to the need for the insured to defray alone the full amount of the
premium including the government share; that said treasurer as agent of the insurer G.S.I.S. never
deducted the full amount of the premiums from the monthly salary of the insured notwithstanding
his knowledge of the effectivity of R.A. 541 and its possible adverse effects on the life insurance
policy of the insured; that the insurer G.S.I.S., itself, also never notified the insured of the
effectivity of R.A. 541 and of the increase of his premiums as he will have to bear the government
share, nor of the change in the status of the insurance policy from compulsory to optional.
In the light of the foregoing circumstances, We cannot but conclude that the insured Evangelista
was lulled into complacency by the acts of the Pasay City Treasurer as agent of the insurer
G.S.I.S. and by the Insurer, itself, into the firm belief that the deductions from his monthly salary
for payment of premiums on his life insurance policy were legal, proper, and adequate; that his
right under the policy was not prejudiced because during his lifetime he never knew that there was
a change in the status of his policy from compulsory to optional upon the effectivity of R.A. 541. In
short, the insured was never given a chance to exercise the option given him by Sec. 8 of R.A. 541
and the insurer G.S.I.S., acting by itself and through its agent, the Pasay City Treasurer, led the
insured Evangelista up to the time of his death to believe that he was protected by the mantle of
compulsory insurance, and that the premiums being deducted from his monthly salary by the
agent of the insurer were fully adequate to keep the insurance policy alive. It is but logical to rule
that if the insurance policy of the insured lapsed because of inadequate payment of premium, such
failure to pay the full premium because of the conversion of the insurance from compulsory to
optional under Sec. 8, of R.A. 541, on June 17, 1950, is attributable to insurer's fault as explained
above. We, therefore, come to the inevitable conclusion that due to insurer G.S.I.S.'s fault the
compulsory insurance of the insured was never converted to optional insurance because the
insured was not given the chance to exercise the option given him by Sec. 8 of R.A. 541. Therefore,
said insurance policy was effective until May 30, 1951, and with the 31 days grace period, it would
have been in force until July 1, 1951, or for 27 days after the death of the insured.
II
On the claim of plaintiff-appellant for double indemnity (accidental death benefit) because the
deceased insured Pablo Evangelista was shot to death while in the performance of his duties as
detective of the Pasay City Police Force, suffice it to say that at the time of the insured's death on
June 4, 1951, he did not pay additional premiums to entitle him to double indemnity, and that said
double indemnity (accidental death benefit) free of charge was only given on September 30, 1955,
long after the insured's accidental death (Exh. "22").
III
As a basis for plaintiff's claim of "moral, actual and consequential" damages in the amount of
P5,000.00, she alleges "the grave inconveniences and annoyances" caused to her "by reason of
the attitude and acts of the defendant-appellee in treating her claim"; the "defendant-appellee's
inclination to deny the plaintiff-appellant's claim with all inconveniences and annoyances imposed
on her" "expenses incurred in the preparation of all the papers necessary to her claim"; and she
had "to abandon her store just to attend to this claim".
An examination of the record of his case reveals the persistent tendency of the defendant G.S.I.S.
to resist the claim of the plaintiff, on the ground that insured Pablo Evangelista had a temporary
appointment pending receipt of medical certificate; that deceased Evangelista did not submit the
medical certificate; that he was not able to pass a medical and physical examination for purposes
of membership with the insurer G.S.I.S.; and that all premiums paid by said deceased Evangelista
were only refundable to his legal heirs with interest. When the plaintiff was able to hurdle
successfully the obstacles of "temporary appointment" and "lack of medical and physical
examination" by convincing the insurer G.S.I.S. that the insured Evangelista complied with those
requirements, the Insurer continued denying the claim, this time on the ground that the insurance
policy of the deceased Evangelista lapsed on April 1, 1951, after allowing a grace period of 31 days
or long before the insured's death on June 4, 1951, because of the inadequate premiums paid.
There is very little doubt in Our mind that the plaintiff must really have undergone an ordeal in G.R. No. 95546 November 6, 1992
effort, time and expenses to justify her claim for 1952 to 1957 when she finally had to resort to the Lessons Applicable:
courts of justice for redress because of the persistent denial of her claim interposed by the insurer Installments and partial payment (Insurance)
G.S.I.S. Plaintiff had to hurdle one legal obstacle after another to justify her claim, and she had to Grounds on Return of Premium: No exposed to peril insured against (Insurance)
follow up papers not only in the Pasay City Treasurer's and Insurer's office but also in the Civil FACTS:
Service Commission to establish the permanent status of her late brother's appointment. Early 1982: American Home Assurance Co. (AHAC), represented by American International
Considering that her claim then was only for P1,200 or P2,400 for double indemnity, if the latter is Underwriters (Phils.), Inc., issued in favor of Makati Tuscany Condominium Corporation
legally applicable, and her very apparent need for legal guidance from counsel, it is immediately (Tuscany) on the latter's building and premises, for a period beginning 1 March 1982 and
discernible that she must have spent more in following up what she believed to be a very ending 1 March 1983, with a total premium of P466,103.05.
legitimate claim than what she could ever expect to receive if she turned out successful in the Premium were paid on installments on:
pursuit of her claim. We can also surmise, if not presume, that to the mind of plaintiff who is not a March 12 1982
lawyer, she must really have suffered mental anguish and anxiety when her claim was persistently May 20 1982
turned down by the insurer G.S.I.S. because she could not comprehend why the insurance June 21 1982
proceeds of her late brother who gave his life unselfishly in upholding the cause of peace and order November 16 1982
was being denied to a lawful claimant, notwithstanding that the amount thereof is relatively February 10 1983: AHAC replaced and renewed the previous policy, for a term covering 1
insignificant compared to the enormity of the supreme sacrifice made by the deceased insured for March 1983 to 1 March 1984
premium of P466,103.05 was again paid on installments on:
a noble purpose.
April 13 1983
On the part of the defendant G.S.I.S., We understand the zeal of its officials and employees in July 13 1983
trying to protect its interest as Insurer, but those acts of persistent denial in the light of claimant's August 3 1983
successful hurdling of the legal obstacles placed on the path of her claim, may amount to September 9 1983
overzealousness, if overdone, and easily fall within the orbit of bad faith or malicious interference November 21 1983
in the rightful claim of another person. January 20 1984: policy was again renewed for the period March 1 1984 to March 1 1985
Tuscany only paid two installment payments
Taking into consideration the circumstances of this case, although We do not with exactitude February 6 1984 for P52k
declare the persistent denial of plaintiff's claim by the Insurer G.S.I.S. as acts done in bad faith, June 6 1984 for P100k
because the acts done by the Insurer's official and employees are presumed done in the ordinary AHAC filed an action to recover the unpaid balance of P314,103.05
course of business and in good faith, We, nevertheless recognize, based on the general principles RTC: dismissed the complaint
of equity, fairness, and justice that said persistent acts of denial amounting to unreasonable While it is true that the receipts issued to the defendant contained the
obstinacy caused damage to the plaintiff, for which defendant must be declared liable. Said claim aforementioned reservations, it is equally true that payment of the premiums of the three
for damages in the sum of P5,000.00 for moral, actual, and consequential damages is hereby aforementioned policies (being sought to be refunded) were made during the lifetime or term
declared proven and reasonable and the same is allowed. of said policies, hence, it could not be said, inspite of the reservations, that no risk attached
under the policies
WHEREFORE, the decision of the trial court dismissing the complaint is set aside, and a new counterclaim for refund is not justified
decision is rendered declaring the compulsory insurance policy issued by defendant G.S.I.S. in CA: ordered Tuscany to pay premiums when due is ordinarily as indivisible obligation to pay
favor of the deceased insured, Pablo Evangelista, in full force and effect at the time of the insured's the entire premium; insurance contract became valid and binding upon payment of the first
death on June 4, 1951; ordering the defendant G.S.I.S. to pay plaintiff the full amount of the premium
proceeds of the policy of the deceased, Pablo Evangelista, minus whatever sum that would have ISSUE:
been due from him as a result of the conversion of his policy from compulsory to optional so as to 1. W/N payment by installment of the premiums due on an insurance policy invalidates the
complete the 6% premium thereon, with legal interest at 6% per annum on the balance of the contract of insurance on the basis of:
proceeds of the policy from May 8, 1957, time of judicial demand, until the amount is fully paid; Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium
plus P5,000.00 as actual, moral, and consequential damages. thereof has been paid, notwithstanding any agreement to the contrary. As a consequence,
petitioner seeks a refund of all premium payments made on the alleged invalid insurance policies.
Costs against defendant-appellee. 2. W/N there is risk attached to the insurance so it cannot be refunded

SO ORDERED. HELD:
----- ----- ----- ---
1. NO
14. Insurance Case Digest: Makati Tuscany V. CA (1992)
 Section 77 merely precludes the parties from stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement granting credit
extension, and such an agreement is not contrary to morals, good customs, public order or
public policy
At the very least, both parties should be deemed in estoppel to question the
arrangement they have voluntarily accepted.
It paid the initial installment and thereafter made staggered payments resulting in full
payment of the 1982 and 1983 insurance policies. For the 1984 policy, petitioner paid 2
installments although it refused to pay the balance. - appearing that they actually intended to
make 3 insurance contracts valid
2. NO.
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
15. IVOR ROBERT DAYTON GIBSON, petitioner, vs. HON. PEDRO A. REVILLA
IVOR ROBERT DAYTON GIBSON, petitioner, vs. HON. PEDRO A. REVILLA, in his official capacity as
Presiding Judge of Branch XIII, Court of First Instance of Rizal, and LEPANTO CONSOLIDATED MINING
COMPANY, respondents. G.R. No. L-41432 July 30, 1979
FACTS: Lepanto Consolidated Mining Company filed a complaint against Malayan Insurance
Company, Inc. The civil suit thus instituted by Lepanto against Malayan was founded on the fact
that Malayan issued a Marine Open Policy covering all shipments of copper, gold, and silver
concentrates in bulk from Poro, San Fernando, La Union to Tacoma, Washington or to other places
in the United States. Thereafter, Malayan obtained reinsurance abroad through Sedgwick, Collins &
Co., Limited, a London insurance brokerage. The Memorandum of Insurance issued by Sedgwick to
Malayan listed three groups of underwriters or reinsurers Lloyds 62.808%, Companies (I.L.U.)
34.705%, Other companies 2.487%. At the top of the list of underwriting members of Lloyds is
Syndicate No. 448, assuming 2.48% of the risk assumed by the reinsurer, which syndicate number
petitioner Ivor Robert Dayton Gibson claims to be himself. Petitioner then filed a motion to
intervene as defendant, which motion was denied by the lower court.
ISSUE: WON THE LOWER COURT COMMITTED, REVERSIBLE ERROR IN REFUSING THE
INTERVENTION OF THE PETITIONER IN THE SUIT BETWEEN LEPANTO AND MALAYAN COMPANIES.
HELD: No. The respondent Judge committed no error of law in denying petitioners Motion to
Intervene and neither has he abused his discretion in his denial of petitioners Motion for
Intervention. We agree with the holding of the respondent court that since movant Ivor Robert
Dayton Gibson appears to be only one of several re-insurers of the risks and liabilities assumed by
Malayan Insurance Company, Inc., it is highly probable that other re-insurers may likewise
intervene. If petitioner is allowed to intervene, We hold that there is good and sufficient basis for
the Court a quo to declare that the trial between Lepanto and Malayan would be definitely
disrupted and would certainly unduly delay the proceedings between the parties especially at the
stage where Lepanto had already rested its case and that the issue would also be compounded as
more parties and more matters will have to be litigated. In other words, the Courts discretion is
justified and reasonable. We also hold that respondent Judge committed no reversible error in
further sustaining the fourth ground of Lepantos Opposition to the Motion to Intervene that the
rights, if any, of petitioner are not prejudiced by the present suit and will be fully protected in a
separate action against him and his co-insurers by Malayan. Petitioners contention that he has to
pay once Malayan is finally adjudged to pay Lepanto because of the very nature of a contract of
reinsurance and considering that the re-insurer is obliged to pay as may be paid thereon (referring
to the original policies), although this is subject to other stipulations and conditions of the
reinsurance contract, is without merit. The general rule in the law of reinsurance is that the re-
insurer is entitled to avail itself of every defense which the re-insured (which is Malayan) might
urge in an action by the person originally insured (which is Lepanto). As to the effect of the clause
to pay as may be paid thereon contained in petitioners re-insurance contract, Arnould, on the
Law of Marine Insurance and Average, 13th Ed., Vol. 1, Section 327, p. 315, states the rule, this: It
has been decided that this clause does not preclude the reinsurer from insisting upon proper proof
that a loss strictly within the terms of the original policy has taken place. This clause does not
enable the original underwriter to recover from his reinsurer to an extent beyond the subscription
of the latter. Wherefore, in view of the foregoing, the petition is hereby dismissed. No costs.
Pacific Timber Export Corporation vs Court of Appeals In 1963, Pacific Timber Export Corporation
(PTEC) applied for a temporary marine insurance from Workmens Insurance Company (WIC) in
order for the latter to insure 1,250,000 board feet of logs to be exported to Japan. In March 1963,
WIC issued a cover note to PTEC for the said logs. On April 2, 1963, WIC issued two policies for the
logs. However, the total board feet covered this time is only 1,195,498. On April 4, 1963, while the
logs were in transit to Japan, bad weather prevailed and this caused the loss of 32 pieces of logs.
WIC then asked an adjuster to investigate the loss. The adjuster submitted that the logs lost were
not covered by the two policies issued on April 2, 1963 but said logs were included in the cover
note earlier issued. WIC however denied the insurance claim of PTEC as it averred that the cover
note became null and void when the two policies were subsequently issued. The Court of Appeals
ruled that the cover note is void for lack of valuable consideration as it appeared that no premium
payment therefor was made by PTEC. ISSUE: Whether or not a separate premium is needed for
cover notes. HELD: No. The Cover Note was not without consideration for which the Court of
Appeals held the Cover Note as null and void, and denied recovery therefrom. The fact that no
separate premium was paid on the Cover Note before the loss insured against occurred, does not
militate against the validity of PTECs contention, for no such premium could have been paid, since
by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of
the shipment that would serve as basis for the computation of the premiums. As a logical
consequence, no separate premiums are intended or required to be paid on a Cover Note. At any
rate, it is not disputed that PTEC paid in full all the premiums as called for by the statement issued
by WIC after the issuance of the two regular marine insurance policies, thereby leaving no account
unpaid by PTEC due on the insurance coverage, which must be deemed to include the Cover Note.
If the Note is to be treated as a separate policy instead of integrating it to the regular policies
subsequently issued, the purpose and function of the Cover Note would be set at naught or
rendered meaningless, for it is in a real sense a contract, not a mere application for insurance
which is a mere offer.
16. The Phil. American Gen. Insurance Co., Inc.
vs Court of Appeals and Felman Shipping Lines
G.R. No. 116940 June 11, 1997
Facts: July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by Felman, 7,500
cases of 1-liter Coca-Cola soft drink bottles to be transported to Zamboanga City to Cebu. The
shipment was insured with Philamgen.
July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a claim with respondent the face of the policy. However, the implied warranty of seaworthiness can be excluded by terms in
Felman for recovery of damages. Felman denied thus prompted cocacola to file an insurance claim writing in the policy of the clearest language. The marine policy issued by Philamgen to cocacola
with Philamgen. Philamgen later on claimed its right of subrogation against Felman which has dispensed that the "seaworthiness of the vessel as between the assured and the underwriters
disclaimed any liability for the loss. in hereby admitted."

Philamgen alleged that the sinking and loss were due to the vessel's unseaworthiness, that the The result of the admission of seaworthiness by Philamgen may mean two things: (1) the warranty
vessel was improperly manned and its officers were grossly negligent. Felman filed a motion to of seaworthiness is fulfilled and (2) the risk of unseaworthiness is assumed by the insurance
dismiss saying that there is no right of subrogation in favor of Philamgen was transmitted by the company. This waiver clause would mean that Philamgen has accepted the risk of
shipper. unseaworthiness, therefore Philamgen is liable.

RTC dismissed the complaint of Philamgen. CA set aside the dismissal and remanded the case to On the matter of subrogation, it is provided that;
the lower court for trial on the merits. Felman filed a petition for certiorari but was denied.

RTC rendered judgment in favor of Felman. it ruled that the vessel was seaworthy when it left the
port of Zamboanga as evidenced by the certificate issued by the Phil. Coast Guard and the ship
owners surveyor. Thus, the loss is due to a fortuitous event, in which, no liability should attach
unless there is stipulation or negligence.
On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo for being top-
heavy and the cocacola bottles were also improperly stored on deck. Nonetheless, the CA denied
the claim of Philamgen, saying that Philamgen was not properly subrogated to the rights and
interests of the shipper plus the filing of notice of abandonment had absolved the ship owner from
liability under the limited liability rule.
Issues: (a) Whether the vessel was seaworthy, (b) whether limited liability rule should apply and (c)
whether Philamgen was properly subrogated to the rights against Felman.
Ruling:
(a) The vessel was unseaworthy. The proximate cause thru the findings of the Elite Adjusters, Inc.,
is the vessel's being top-heavy. Evidence shows that days after the sinking coca-cola bottles were
found near the vicinity of the sinking which would mean that the bottles were in fact stowed on
deck which the vessel was not designed to carry substantial amount of cargo on deck. The
inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric height thus
making it unstable.
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent upon, nor does it
grow out of any privity of contract or upon payment by the insurance company of the insurance
claim. It accrues simply upon payment by the insurance company of the insurance claim.
Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the
former the right to bring an action as subrogee against FELMAN. Having failed to rebut the
presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola soft
drink bottles is inevitable.
WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay
petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.

(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for the negligent acts of
the captain in the care of the goods. This liability however can be limited through abandonment of
the vessel, its equipment and freightage. Nonetheless, there are exceptions wherein the ship agent
could still be held answerable despite the abandonment, as where the loss or injury was due to the
fault of the ship owner and the captain. The international rule is that the right of abandonment of
vessels, as legal limitation of liability, does not apply to cases where the injury was occasioned by
the fault of the ship owner. Felman was negligent, it cannot therefore escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to the assurer that the
vessel is seaworthy and such warranty is as much a term of the contract as if expressly written on