INSULAR LIFE ASSURANCE COMPANY v. PAZ Y. KHU, GR No.

195176, 2016-04-18

Facts:
On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular
Life under the latter's Diamond Jubilee Insurance Plan. Felipe accomplished the required
medical questionnaire wherein he did not declare any illness or adverse medical condition.
Insular Life thereafter issued him Policy Number A000015683 with a face value of PI million.
This took effect on June 22, 1997.
On June 23, 1999, Felipe's policy lapsed due to non-payment of the premium covering the
period from June 22, 1999 to June 23, 2000
On September 7, 1999, Felipe applied for the reinstatement of his policy and paid
P25,020.00 as premium
On October 12, 1999, Insular Life advised Felipe that his application for reinstatement may
only be considered if he agreed to certain conditions such as payment of additional
premium and the cancellation of the riders pertaining to premium waiver and accidental
death benefits. Felipe agreed to these conditions[8] and on December 27, 1999 paid the
agreed additional premium of P3,054.50
On September 22, 2001, Felipe died
On October 5, 2001, Paz Y. Khu, Felipe Y. Khu, Jr. .and Frederick Y. Khu (collectively, Felipe's
beneficiaries or respondents) filed with Insular Life a claim for benefit under the reinstated
policy. This claim was denied.

Issues:
Insular Life countered that Felipe did not disclose the ailments (viz., Type 2 Diabetes
Mellitus, Diabetes Nephropathy and Alcoholic Liver Cirrhosis with Ascites) that he already
had prior to his application for reinstatement of his insurance policy; and that it would not
have reinstated the insurance policy had Felipe disclosed the material information on his
adverse health condition. It contended that when Felipe died, the policy was still
contestable... whether Felipe's reinstated life insurance policy is already incontestable at
the time of his death.

Ruling:
this Court adopts the interpretation favorable to the insured in determining the date when
the reinstatement was approved.
We deny the Petition.
Based on the foregoing, we find that the CA did not commit any error in holding that the
subject insurance policy be considered as reinstated on June 22, 1999. This finding must be
upheld not only because it accords with the evidence, but also because this is favorable to
the insured who was not responsible for causing the ambiguity or obscurity in the
insurance contract.
WHEREFORE, the Petition is DENIED. The assailed June 24, 2010 Decision and December 13,
2010 Resolution of the Court of Appeals in CA-GR. CV No. 81730 are AFFIRMED.
Principles: That given the obscurity/ambiguity in the language of these two documents, the
construction/interpretation that favors the insured's right to recover should be adopted; a...
that the CA erred in declaring that resort to the principles of statutory construction is still
necessary to resolve that question given that the Application for Reinstatement,... The
court below is correct. Given the obscurity of the language, the construction favorable to
the insured will be adopted by the courts.
HH Hollero Construction Inc vs GSIS G.R. No. 152334 September 24, 2014
Facts: On April 26, 1988, the GSIS and petitioner entered into a Project Agreement
(Agreement) whereby the latter undertook the development of a GSIS housing project
known as Modesta Village Section B (Project). Petitioner obligated itself to insurethe
Project, including all the improvements, upon the execution of the Agreement under a
Contractors’ All Risks (CAR) Insurance with the GSIS General Insurance Department for an
amount equal to its cost or sound value, which shall not be subject to any automatic annual
reduction. Pursuant to its undertaking, petitioner secured CAR Policy No. 88/085 in the
amount of P development, which was later increased to P 1,000,000.00 for land
10,000,000.00, effective from May 2, 1988 to May 2, 1989. Petitioner likewise secured CAR
Policy No. 88/086 in the amount of P 1,000,000.00 for the construction of twenty (20)
housing units, which amount was later increased to P 17,750,000.00 from May 2, 1988 to
June 1, 1989. to cover the construction of another 355 new units, effective In turn, the GSIS
reinsured CAR Policy No. 88/085 with respondent Pool of Machinery Insurers (Pool). Under
both policies, it was provided that: (a) there must be prior notice of claim for loss, damage
or liability within fourteen (14) days from the occurrence of the loss or damage; (b) all
benefits thereunder shall be forfeited if no action is instituted within twelve(12) months
after the rejection of the claim for loss, damage or liability; and (c) if the sum insured is
found to be less than the amount required to be insured, the amount recoverable shall be
reduced tosuch proportion before taking into account the deductibles stated in the
schedule (average clause provision). During the construction, three (3) typhoons hit the
country, namely, Typhoon Biring from June 1 to June 4, 1988, Typhoon Huaning on July 29,
1988, and Typhoon Saling on October 11, 1989, which caused considerable damage to the
Project. Accordingly, petitioner filed several claims for indemnity with the GSIS on June 30,
1988, August 25, 1988, and October 18, 1989, respectively. In a letter dated April 26,
1990, the GSIS rejected petitioner’s indemnity claims for the damages wrought by
Typhoons Biring and Huaning, finding that no amount is recoverable pursuant to the
average clause provision under the policies. In a letter dated June 21, 1990, the GSIS
similarly rejected petitioner’s indemnity claim for damages wrought by Typhoon Saling on a
“no loss” basis, it appearing from its records that the policies were not renewed before the
onset of the said typhoon.

Issue: Whether or not the petitioner is barred from filing a complaint before the courts
based on the insurance claim.

Held: Yes. 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.
Section 10 of the General Conditions of the subject CAR Policies commonly read:
10. If a claim is in any respect fraudulent, or if any false declaration is made or used in
support thereof, or if any fraudulent means or devices are used by the Insured or anyone
acting on his behalf to obtain any benefit under this Policy, or if a claim is made and
rejected and no action or suit is commenced within twelve months after such rejectionor,
in case of arbitration taking place as provided herein, within twelve months after the
Arbitrator or Arbitrators or Umpire have made their award, all benefit under this Policy
shall be forfeited.
In this relation, case law illumines that the prescriptive period for the insured’s action for
indemnity should be reckoned from the “final rejection” of the claim.
As correctly observed by the CA, “final rejection” simply means denial by the insurer of the
claims of the insured and not the rejection or denial by the insurer of the insured’s motion
or request for reconsideration. The rejection referred to should be construed as the
rejection in the first instance, as in the two instances above-discussed.
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.
FORTUNE MEDICARE, INC. vs. DAVID ROBERT U. AMORIN 12 March 2014
FACTS:While Amorin was on vacation in Hawaii, he underwent an emergency surgery,
specifically appendectomy, causing him to incur professional and hospitalization expens
es of US$7,242.35 and US$1,777.79, respectively. Being a cardholder/member of Fortu
ne Medicare, Inc. (Fortune Care), a corporation engaged in providing health maintenan
ce services to its members, he attempted to recover the full amount upon his return t
o Manila. However, the company merely approved a reimbursement of P12,151.36, an
amount that was based on the average cost of appendectomy, net of medicare dedu
ction, if the procedure were performed in an accredited hospital in Metro Manila. Am
orin received under protest the approved amount, but asked for its adjustment to cov
er the total amount of professional fees which he had paid, and eighty percent (80%)
of the approved standard charges based on “American standard”, considering that the
emergency procedure occurred in the U.S.A., citing provisions of the contract.
He then filed a complaint for breach of contract with damages but this was dismissed
by the RTC. It said that the parties intended to use the Philippine standard as basis. H
owever, this was reversed by the CA. The appellate court pointed out that, first, healt
h care agreements such as the subject Health Care Contract, being like insurance contr
acts, must be liberally construed in favor of the subscriber. In case its provisions are d
oubtful or reasonably susceptible of two interpretations, the construction conferring co
verage is to be adopted and exclusionary clauses of doubtful import should be strictly
construed against the provider. Second, the CA explained that there was nothing unde
r the Health Care Contract which provided that the Philippine standard should be used
even in the event of an emergency confinement in a foreign territory.

ISSUE:
1) Whether or not a member of a health care provider can recover to the extent
agreed in the contract.

2) Whether or not ambiguities should be taken in favor of the member.

HELD:
1.)Yes. In the case at bar, the Supreme Court said that for purposes of determining th
e liability of a health care provider to its members, jurisprudence holds that a health
care agreement is in the nature of non-life insurance, which is primarily a contract of i
ndemnity. Once the member incurs hospital, medical or any other expense arising fro
m sickness, injury or other stipulated contingent, the health care provider must pay fo
r the same to the extent agreed upon under the contract.

2.) Yes. With regard the ambiguities in the contract, settled is the rule that they shoul
d be interpreted against the party that caused the ambiguity. “Any ambiguity in a con
tract whose terms are susceptible of different interpretations must be read against the
party who drafted it.” Furthermore, it affirmed the CA’s finding that Fortune Care’s li
ability to Amorin under the subject Health Care Contract should be based on the expe
nses for hospital and professional fees which he actually incurred, and should not be li
mited by the amount that he would have incurred had his emergency treatment been
performed in an accredited hospital in the Philippines.
EASTERN SHIPPING LINES vs. BPI/MS INSURANCE CORP. and MITSUI SUM TOMO
INSURANCE CO. LTD. January 15, 2014

FACTS: Sumitomo Corporation shipped through vessels of Eastern Shipping Lines various
steel sheets in coil in favor of the consignee Calamba Steel. In each of the three shipments,
several coils were observed to be in bad condition as evidenced by the Turn Over Survey of
Bad Order Cargo. The cargoes were then turned over to Asian Terminals, Inc. (ATI) for
stevedoring, storage and safekeeping pending Calamba Steel’s withdrawal of the goods.
When ATI delivered the cargo to Calamba Steel, the latter rejected its damaged portion for
being unfit for its intended purpose.
Calamba Steel filed an insurance claim with Mitsui through the latter’s settling
agent, respondent BPI/MS Insurance Corporation (BPI/MS), and the former was paid the
sums of US$7,677.12, US$14,782.05 and US$7,751.15 for the damage suffered by all three
shipments. Correlatively, on August 31, 2004, as insurer and subrogee of Calamba Steel,
Mitsui and BPI/MS filed a Complaint for Damages against petitioner and ATI.

ISSUE: Whether or not Eastern Shipping was solidarily liable with ATI on account of the
damage incurred by the goods.

HELD: YES. The Court held that both Eastern Shipping and ATI were negligent in handling
and transporting the goods.
Verily, it is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier. As hereinbefore found by the
RTC and affirmed by the CA based on the evidence presented, the goods were damaged
even before they were turned over to ATI. Such damage was even compounded by
the negligent acts of petitioner and ATI which both mishandled the goods during the
discharging operations. Thus, it bears stressing unto petitioner that common carriers, from
the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods transported by them.
Subject to certain exceptions enumerated under Article 1734 of the Civil Code,
common carriers are responsible for the loss, destruction, or deterioration of the goods.
The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or
to the person who has a right to receive them.
Owing to this high degree of diligence required of them, common carriers, as a
general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods. In order to avoid responsibility
for any loss or damage, therefore, they have the burden of proving that they observed
such high level of diligence. In this case, petitioner failed to hurdle such burden.
ALPHA INSURANCE AND SURETY CO. vs. ARSENIA SONIA CASTO September 2, 2013

FACTS: Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota Revo DLX
DSL with Alpha Insurance and Surety Co (Alpha). The contract of insurance obligates the
petitioner to pay the respondent the amount of P630,000 in case of loss or damage to said
vehicle during the period covered.
On April 16, 2007, respondent instructed her driver, Jose Joel Salazar Lanuza to bring the
vehicle to nearby auto-shop for a tune up. However, Lanuza no longer returned the motor
vehicle and despite diligent efforts to locate the same, said efforts proved futile.
Resultantly, respondent promptly reported the incident to the police and concomitantly
notified petitioner of the said loss and demanded payment of the insurance proceeds.
Alpha, however, denied the demand of Castor claiming that they are not liable since the
culprit who stole the vehicle is employed with Castor. Under the Exceptions to Section III of
the Policy, the Company shall not be liable for (4) any malicious damage caused by the
insured, any member of his family or by “A PERSON IN THE INSURED’S SERVICE”.
Castor filed a Complaint for Sum of Money with Damages against Alpha before the Regional
Trial Court of Quezon City. The trial court rendered its decision in favor of Castor which
decision is affirmed in toto by the Court of Appeals. Hence, this Petition for Review on
Certiorari.

ISSUE: Whether or not the loss of respondent’s vehicle is excluded under the insurance
policy

HELD: NO. The words “loss” and “damage” mean different things in common ordinary
usage. The word “loss” refers to the act or fact of losing, or failure to keep possession,
while the word “damage” means deterioration or injury to property. Therefore, petitioner
cannot exclude the loss of Castor’s vehicle under the insurance policy under paragraph 4 of
“Exceptions to Section III”, since the same refers only to “malicious damage”, or more
specifically, “injury” to the motor vehicle caused by a person under the insured’s service.
Paragraph 4 clearly does not contemplate “loss of property”.
A contract of insurance is a contract of adhesion. So, when the terms of the insurance
contract contain limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. Thus, in Eternal Gardens
Memorial Park Corporation vs. Philippine American Life Insurance Company, this Court
ruled that it must be remembered that an insurance contract is a contract of adhesion
which must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latter’s interest.
 Malayan Insurance Co., Inc. V. Arnaldo (1987) G.R. No. L-67835 October 12, 1987

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