Case 17: White Gold Marine Service Inc. vs. Pioneer Case 18: Republic vs.
8: Republic vs. Sunlife Assurance Company of Canada
Insurance and Surety Co. 464 SCRA 448
Facts:
Petitioner White Gold bought a protection and indemnity
coverage for its ships from Steamship Mutual through
Respondent Pioneer. Certificates and receipts thus were
given. However, Petitioner failed to fulfill its payments thus
Steamship refused to renew its coverage. Steamship then
filed for collection against Petitioner for recovery of unpaid
balance. Thereafter, Petitioner also filed a complaint against
Steamship and Respondent before the Insurance Commission
for violations (186,187 for Steamship and 299,300,301 in
relation to 302 and 303 for Respondent) of the Insurance
Code-license requirements as an Insurance company for the
former and as insurance agent for the latter. Said commission
dismissed the complaint which decision was affirmed by the
CA.
Issue:
Whether or not Steamship Mutual is a Protection and
Indemnity Club engaged in the insurance business in the
Philippines
Held:
Steamship Mutual as a P & I Club is a mutual insurance
company engaged in the marine insurance business.
An insurance contract is a contract of indemnity. This means
that one party undertakes for a consideration to indemnify
another party against loss, damage, or liability arising from an
unknown or contingent event. While to determine if a
contract is an insurance contract we can look at the nature of
the promise, the act to be performed, exact nature of the
agreement in view of the entire occurrence, contingency or
circumstance where the performance is mandated. The label
is not controlling. While under Section 2(2) of the Insurance
Code the phrase “doing an insurance business” constitutes
the following: 1) making or proposing to make, as insurer, any
insurance contract; 2) making or proposing to make, as
surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity
of the surety; 3) doing any kind of business, including a
reinsurance business, specifically recognized as constituting
the doing of an insurance business within the meaning of this
code; 4) doing or proposing to do any business in substance
to any of the foregoing in a manner designed to evade the
provision of this code.
Taking all of these in to consideration, Steamship Mutual
engaged in marine insurance business undertook to
indemnify Petitioner White Gold against marine losses as
enumerated under sec. 99 of the Insurance Code. It is
immaterial whether profit is derived from making insurance
contract and that no separate or direct consideration is
received since these does not preclude the existence of an
insurance business.
GR No. 158085; October 14, 2005
Facts:
On December 29, 1997, the [Court of Tax Appeals] (CTA)
rendered its decision in Insular Life Assurance Co. Ltd. v. [CIR],
which held that mutual life insurance companies are purely
cooperative companies and are exempt from the payment of
premium tax and DST. This pronouncement was later
affirmed by this court in [CIR] v. Insular Life Assurance
Company, Ltd. Sun Life surmised that[,] being a mutual life
insurance company, it was likewise exempt from the payment
of premium tax and DST. Hence, on August 20, 1999, Sun Life
filed with the CIR an administrative claim for tax credit of its
alleged erroneously paid premium tax and DST for the
aforestated tax periods.
For failure of the CIR to act upon the administrative claim for
tax credit and with the 2-year period to file a claim for tax
credit or refund dwindling away and about to expire, Sun Life
filed with the CTA a petition for review. The CTA found in
favor of Sun Life.
Seeking reconsideration of the decision of the CTA, the CIR
argued that Sun Life ought to have registered, foremost, with
the Cooperative Development Authority before it could enjoy
the exemptions from premium tax and DST extended to
purely cooperative companies or associations under
[S]ections 121 and 199 of the Tax Code. For its failure to
register, it could not avail of the exemptions prayed for. The
CTA denied the CIR’s motion for reconsideration.
Issue:
Whether or not respondent is exempted from payment of tax
on life insurance premiums and documentary stamp tax
Held:
YES. The Tax Code defines a cooperative as an association
“conducted by the members thereof with the money
collected from among themselves and solely for their own
protection and not for profit.” Without a doubt, respondent
is a cooperative engaged in a mutual life insurance business.
First, it is managed by its members. Both the CA and the CTA
found that the management and affairs of respondent were
conducted by its member-policyholders. SUNLIFE has been
mutualized or converted from a stock life insurance company
to a nonstock mutual life insurance corporation pursuant to
Section 266 of the Insurance Code of 1978. On the basis of its
bylaws, its ownership has been vested in its member-
policyholders who are each entitled to one vote; and who, in
turn, elect from among themselves the members of its board
of trustees.
Second, it is operated with money collected from its
members. Since respondent is composed entirely of members
who are also its policyholders, all premiums collected
obviously come only from them. The member-policyholders
constitute “both insurer and insured” who “contribute, by a
system of premiums or assessments, to the creation of a fund
from which all losses and liabilities are paid.”
Third, it is licensed for the mutual protection of its members,
not for the profit of anyone. A mutual life insurance company
is conducted for the benefit of its member-policyholders,
who pay into its capital by way of premiums.
Under the Tax Code although respondent is a cooperative,
registration with the Cooperative Development Authority
(CDA) is not necessary in order for it to be exempt from the
payment of both percentage taxes on insurance premiums,
under Section 121; and documentary stamp taxes on policies
of insurance or annuities it grants, under Section 199.
Case 19: Philamcare Health Systems Inc. vs Court of Appeals
379 SCRA 356 (2002)
FACTS:
In 1988, Ernani Trinos applied for a health care insurance
under the Philamcare Health Systems. He was asked if he was
ever treated for high blood, heart trouble, diabetes, cancer,
liver disease, asthma, or peptic ulcer; he answered no. His
application was approved and it was effective for one year.
His coverage was subsequently renewed twice for one year
each. While the coverage was still in force in 1990, Ernani
suffered a heart attack for which he was hospitalized. The
cost of the hospitalization amounted to P76,000.00. Julita
Trinos, wife of Ernani, filed a claim before Philamcare for
them to pay the hospitalization cost. Philamcare refused to
pay as it alleged that Ernani failed to disclose the fact that he
was diabetic, hypertensive, and asthmatic. Julita ended up
paying the hospital expenses. Ernani eventually died. In July
1990, Julita sued Philamcare for damages. Philamcare alleged
that the health coverage is not an insurance contract; that
the concealment made by Ernani voided the agreement.
ISSUE:
Whether or not Philamcare can avoid the health coverage
agreement.
HELD:
No. The health coverage agreement entered upon by Ernani
with Philamcare is a non-life insurance contract and is
covered by the Insurance Law. It is primarily a contract of
indemnity. Once the member incurs hospital, medical or any
other expense arising from sickness, injury or other stipulated
contingent, the health care provider must pay for the same to
the extent agreed upon under the contract. There is no
concealment on the part of Ernani. He answered the question
with good faith. He was not a medical doctor hence his
statement in answering the question asked of him when he
was applying is an opinion rather than a fact. Answers made
in good faith will not void the policy.
Further, Philamcare, in believing there was concealment,
should have taken the necessary steps to void the health
coverage agreement prior to the filing of the suit by Julita.
Philamcare never gave notice to Julita of the fact that they
are voiding the agreement. Therefore, Philamcare should pay
the expenses paid by Julita.
Case 20: Commissioner Of Internal Revenue V. Lincoln
Philippine Life Insurance Co., Inc (2002)
FACTS:
Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA
Life Insurance Company, Inc.) issued a special kind of life
insurance policy known as the "Junior Estate Builder Policy"
with a distinguishing feature. It had a "automatic increase
clause" upon attainment of a certain age by the insured.
Commissioner of Internal Revenue issued deficiency
documentary stamps tax assessment for the year 1984
pertaining to the amount in the automatic increase clause.
Lincoln questioned the deficiency assessments.
Court of Tax Appeals: found no valid basis and cancelled it
CA: affirmed CTA.
CIR claims that "automatic increase clause" in the subject
insurance policy is separate .
ISSUE:
W/N the "automatic increase clause" should not be taxed
with the main policy.
HELD:
NO. CA set aside
Section 49, Title VI of the Insurance Code defines an
insurance policy as the written instrument in which a contract
of insurance is set forth
Section 50 of the same Code provides that the policy, which is
required to be in printed form, may contain any word,
phrase, clause, mark, sign, symbol, signature, number, or
word necessary to complete the contract of insurance.
Any rider, clause, warranty or endorsement pasted or
attached to the policy is considered part of such policy or
contract of insurance.
Section 173 that the payment of documentary stamp taxes is
done at the time the act is done or transaction had and the
tax base for the computation of documentary stamp taxes on
life insurance policies under Section 183 is the amount fixed
in policy, unless the interest of a person insured is susceptible
of exact pecuniary measurement.
The amount fixed in the policy is the figure written on its face
and whatever increases will take effect in the future by
reason of the "automatic increase clause" embodied in the admitted that its enforcement avoids uncertainty and tends
policy without the need of another contract. to security. Not only this, but in order that the principle may
not be taken too lightly, it is identical with the principles
The amount insured by the policy at the time of its issuance announced by a considerable number of respectable, courts
necessarily included the additional sum covered by the in the United States. The courts who take this view have
automatic increase clause because it was already expressly held that an acceptance of an offer of insurance not
determinable at the time the transaction was entered into actually or constructively communicated to the proposer
and formed part of the policy. does not make a contract. Only the mailing of acceptance, it
has been said, completes the contract of insurance, as the
To claim that the increase in the amount insured (by virtue of locus poienitentise is ended when the acceptance has passed
the automatic increase clause incorporated into the policy at beyond the control of the party. In resume, therefore, the law
the time of issuance) should not be included in the applicable to the case is found to be the second paragraph of
computation of the documentary stamp taxes due on the article 1262 of the Civil Code providing that an acceptance
policy would be a clear evasion of the law requiring that the made by letter shall not bind the person making the offer
tax be computed on the basis of the amount insured by the except from the time it came to his knowledge. The pertinent
policy. fact is, that according to the provisional receipt, three things
had to be accomplished by the insurance company before
there was a contract: (1) There had to be a medical
21. ENRIQUEZ v. Sunlife Assurance Co. of Canada
examination of the applicant; (2) there had to be approval of
the application by the head office of the company; and (3)
Facts:
this approval had in some way to be communicated by the
On 24 September 1917, Joaquin Herrer made application to
company to the applicant. The further admitted facts are that
the Sun Life Assurance Company of Canada through its office
the head office in Montreal did accept the application, did
in Manila for a life annuity. Two days later he paid the sum of
cable the Manila office to that effect, did actually issue the
P6,000 to the manager of the company's Manila office and
policy and did, through its agent in Manila, actually write the
was given a receipt. The application was immediately
letter of notification and place it in the usual channels for
forwarded to the head office of the company at Montreal,
transmission to the addressee. The fact as to the letter of
Canada.
notification thus fails to concur with the essential elements of
On 26 November 1917, the head office gave notice of
the general rule pertaining to the mailing and delivery of mail
acceptance by cable to Manila. (Whether on the same day
matter as announced by the American courts, namely, when
the cable was received notice was sent by the Manila office
a letter or other mail matter is addressed and mailed with
to Herrer that the application had been accepted, is a
postage prepaid there is a rebuttable presumption of fact
disputed point.)
that it was received by the addressee as soon as it could have
On 4 December 1917, the policy was issued at Montreal. On
been transmitted to him in the ordinary course of the mails.
18 December 1917, attorney Aurelio A. Torres wrote to the
But if any one of these elemental facts fails to appear, it is
Manila office of the company stating that Herrer desired to
fatal to the presumption. For instance, a letter will not be
withdraw his application. The following day the local office
presumed to have been received by the addressee unless it is
replied to Mr. Torres, stating that the policy had been issued,
shown that it was deposited in the post-office, properly
and called attention to the notification of 26 November 1917.
addressed and stamped. The contract for a life annuity in the
This letter was received by Mr. Torres on the morning of 21
case at bar was not perfected because it has not been proved
December 1917. Mr. Herrer died on 20 December 1917.
satisfactorily that the acceptance of the application ever
An action was brought by Rafaek Enriquez as administrator of
came to the knowledge of the applicant.
the estate of the late Joaquin Ma. Herrer to recover from Sun
Life Assurance Company of Canada the sum of P6,000 paid by
22. Great Pacific Life Insurance Co. v. CA
the deceased for a life annuity. The trial court gave judgment
for Sun Life. Enriquez appealed.
Facts:
Issue: Whether Herrer received notice of acceptance of his
On 14 March 1957, Ngo Hing filed an application with the
application, to hold that the contract for a life annuity was
Great Pacific Life Assurance Company for a 20-year
perfected.
endowment policy in the amount of P50,000.00 on the life of
Held:
his one-year old daughter Helen Go. Ngo Hing supplied the
NO. The letter of 26 November 1917, notifying Mr. Ferrer
essential data which Lapulapu D. Mondragon, Branch
that his application had been accepted, was prepared and
Manager of the Pacific Life in Cebu City wrote on the
signed in the local office of the insurance company, was
corresponding form in his own handwriting . Mondragon
placed in the ordinary channels for transmission, but was
finally type-wrote the data on the application form which was
never actually mailed and thus was never received by the
signed by Ngo Hing. The latter paid the annual premium, the
applicant. The Civil Code rule, that an acceptance made by
sum of P1,077.75 going over to the Company, but he retained
letter shall bind the person making the offer only from the
the amount of P1,317.00 as his commission for being a duly
date it came to his knowledge, may not be the best
authorized agent of Pacific Life. Upon the payment of the
expression of modern commercial usage. Still it must be
insurance premium, the binding deposit receipt was issued to
Ngo Hing. Likewise, Mondragon handwrote at the bottom of
the back page of the application form his strong
recommendation for the approval of the insurance
application. Then on 30 April1957, Mondragon received a
letter from Pacific Life disapproving the insurance application.
The letter stated that the said life insurance application for
20-year endowment plan is not available for minors below 7
years old, but Pacific Life can consider the same under the
Juvenile Triple Action Plan, and advised that if the offer
is acceptable, the Juvenile Non-Medical Declaration be sent
to the Company. The non-acceptance of the insurance plan
by Pacific Life was allegedly not communicated by
Mondragon to Ngo Hing. Instead, on 6 May 1957, Mondragon
wrote back Pacific Life again strongly recommending the
approval of the 20-year endowment life insurance on the
ground that Pacific Life is the only insurance company not
selling the 20-year endowment insurance plan to children,
pointing out that since 1954 the customers, especially the
Chinese, were asking for such coverage. It was when things
were in such state that on 28 May 1957 Helen Godied of
influenza with complication of broncho-pneumonia.
Thereupon, Ngo Hing sought the payment of the proceeds of
the insurance, but having failed in his effort, he filed the
action for the recovery of the same before the Court of First
Instance of Cebu, which rendered a decision against Pacific
Life and Mondragon, orderig them to solidarily pay Ngo Hing
the amount of P50,000.00 with interest at 6% from the date
of the filing of the complaint, and the sum of P10,000.00 as
attorney's fees plus costs of suits. On appeal, the Court of
Appeals set aside the appealed decision of the Court of First
Instance of Cebu, and absolved Pacific Life and Mondragon
from liability on the insurance policy, but ordered the
reimbursement to Ngo Hing the amount of P1,077.75,
without interest. On reconsideration, however, the appellate
court affirmed in toto the decision of the Court of First
Instance of Cebu, ordering Pacific Life and Mondragon jointly
and severally to pay Ngo Hing. Two petitions for certiorari by
way of appeal were filed by Pacific Life and Mondragon. The
petitons were consolidated by the Supreme Court in a
resolution dated 29 April 1970.
Issue: Whether the binding deposit receipt constituted a
temporary contract of the life insurance in question, and thus
negate the claim that the insurance contract was perfected.
Held:
YES. The provisions printed on the binding deposit receipt
show that the binding deposit receipt is intended to be
merely a provisional or temporary insurance contract and
only upon compliance of the following conditions: (1) that the
company shall be satisfied that the applicant was insurable on
standard rates; (2) that if the company does not accept the
application and offers to issue a policy for a different plan,
the insurance contract shall not be binding until the applicant
accepts the policy offered; otherwise, the deposit shall be
refunded; and (3) that if the applicant is not insurable
according to the standard rates, and the company
disapproves the application, the insurance applied for shall
not be in force at any time, and the premium paid shall be
returned to the applicant. Clearly implied from the aforesaid
conditions is that the binding deposit receipt in question is
merely an acknowledgment, on behalf of the company, that
the latter's branch office had received from the applicant the
insurance premium and had accepted the application subject
for processing by the insurance company; and that the latter
will either approve or reject the same on the basis of whether
or not the applicant is "insurable on standard rates." Since
Pacific Life disapproved the insurance application of Ngo
Hing, the binding deposit receipt in question had never
become in force at any time. Upon this premise, the binding
deposit receipt is, manifestly, merely conditional and does
not insure outright. Where an agreement is made between
the applicant and the agent, no liability shall attach until the
principal approves the risk and a receipt is given by the agent.
The acceptance is merely conditional, and is subordinated to
the act of the company in approving or rejecting the
application. Thus, in life insurance, a "binding slip" or "binding
receipt" does not insure by itself. It bears repeating that
through the intra-company communication of 30 April 1957,
Pacific Life disapproved the insurance application in question
on the ground that it is not offering the 20-year endowment
insurance policy to children less than 7 years of age. What it
offered instead is another plan known as the Juvenile Triple
Action, which Ngo Hing failed to accept. In the absence of a
meeting of the minds between Pacific Life and Ngo Hing over
the 20-year endowment life insurance in the amount of
P50,000.00 in favor of the latter's one-year old daughter, and
with the non-compliance of the abovequoted conditions
stated in the disputed binding deposit receipt, there could
have been no insurance contract duly perfected between
them. Accordingly, the deposit paid by Ngo Hing shall have to
be refunded by Pacific Life.
23. DBP vs. CA
Facts:
In May 1987, Juan B. Dans, together with his wife Candida, his
son and daughter-in-law, applied for a loan of P500,000.00
with the Development Bank of the Philippines (DBP), Basilan
Branch. As the principal mortgagor, Dans, then 76 years of
age, was advised by DBP to obtain a mortgage redemption
insurance (MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool). A loan, in the reduced
amount of P300,000.00, was approved by DBP on 4 August
1987 and released on 11 August 1987. From the proceeds of
the loan, DBP deducted the amount of P1,476.00 as payment
for the MRI premium. On 15 August 1987, Dans accomplished
and submitted the "MRI Application for Insurance" and the
"Health Statement for DBP MRI Pool." On 20 August 1987,
the MRI premium of Dans, less the DBP service fee of 10%,
was credited by DBP to the savings account of the DBP MRI
Pool. Accordingly, the DBP MRI Pool was advised of the
credit. On 3 September 1987, Dans died of cardiac arrest. The
DBP, upon notice, relayed this information to the DBP MRI
Pool. On 23 September 1987, the DBP MRI Pool notified DBP
that Dans was not eligible for MRI coverage, being over the
acceptance age limit of 60 years at the time of application. On
21 October 1987, DBP apprised Candida Dans of the
disapproval of her late husband's MRI application. The DBP
offered to refund the premium of P1,476.00 which the
deceased had paid, but Candida Dans refused to accept the
same, demanding payment of the face value of the MRI or an
amount equivalent to the loan. She, likewise, refused to
accept an ex gratia settlement of P30,000.00, which the DBP
later offered. On 10 February 1989, the Estate of the Late
Juan B. Dans, through Candida Dans as administratrix, filed a
complaint with the Regional Trial Court, Branch I, Basilan,
against DBP and the insurance pool for collection of Sum of
Money with Damages. On 10 March 1990, the trial court
rendered a decision in favor of the Estate and against DBP.
The DBP MRI Pool, however, was absolved from liability, after
the trial court found no privity of contract between it and
the] deceased. The trial court declared DBP in estoppel for
having led Dans into applying for MRI and actually collecting
the premium and the service fee, despite knowledge of his
age ineligibility. The court ordered DBP to return and
reimburse the Estate the amount of P139,500.00 plus legal
rate of interest as amortization payment paid under protest;
to consider the mortgage loan of P300,000.00 including all
interest accumulated or otherwise to have been settled,
satisfied or set-off by virtue of the insurance coverage of the
late Juan B. Dans; to pay the Estate the amount of P10,000.00
as attorney's fees; to pay the Estate the amount of
P10,000.00 as costs of litigation and other expenses, and
other relief just and equitable. The DBP appealed to the Court
of Appeals. In a decision dated 7 September 1992, the
appellate court affirmed in toto the decision of the trial court.
The DBP's motion for reconsideration was denied in a
resolution dated 20 April 1993. DBP filed the petition for
review on certiorari.
Issue [1]: Whether there was a perfected contract of
insurance for DBP MRI Pool to be held liable.
Held [1]: NO. When Dans applied for MRI, he filled up and
personally signed a "Health Statement for DBP Pool" with the
following declaration: "I hereby declare and agree that all the
statements and answers contained herein are true, complete
and correct to the best of my knowledge and belief and form
part of my application for insurance. It is understood and
agreed that no insurance coverage shall be effected unless
and until this application is approved and the full premium is
paid during my continued good health." Under the
aforementioned provisions, the MRI coverage shall take
effect: (1) when the application shall be approved by the
insurance pool; and (2) when the full premium is paid during
the continued good health of the applicant. These two
conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is
lodged with the DBP MRI Pool. The pool, however, did not
approve the application of Dans. There is also no showing
that it accepted the sum of P1,476.00, which DBP credited to
its account with full knowledge that it was payment for Dan's
premium. There was, as a result, no perfected contract of
insurance; hence, the DBP MRI Pool cannot be held liable on
a contract that does not exist.
Issue [2]: Whether DBP is liable for the entire value of the
insurance policy, as it led Dans to believe that he has fulfilled
all the requirements for the MRI and that the issuance of his
policy was forthcoming.
Held [2]: It was DBP, as a matter of policy and practice, that
required Dans, the borrower, to secure MRI coverage. Instead
of allowing Dans to look for his own insurance carrier or some
other form of insurance policy, DBP compelled him to apply
with the DBP MRI Pool for MRI coverage. When Dan's loan
was released on 11 August 1987, DBP already deducted from
the proceeds thereof the MRI premium. Four days latter, DBP
made Dans fill up and sign his application for MRI, as well as
his health statement. The DBP later submitted both the
application form and health statement to the DBP MRI Pool
at the DBP Main Building, Makati Metro Manila. As service
fee, DBP deducted 10% of the premium collected by it from
Dans. In dealing with Dans, DBP was wearing two legal hats:
the first as a lender, and the second as an insurance agent. As
an insurance agent, DBP made Dans go through the motion of
applying for said insurance, thereby leading him and his
family to believe that they had already fulfilled all the
requirements for the MRI and that the issuance of their policy
was forthcoming. Apparently, DBP had full knowledge that
Dan's application was never going to be approved. The
maximum age for MRI acceptance is 60 years as clearly and
specifically provided in Article 1 of the Group Mortgage
Redemption Insurance Policy signed in 1984 by all the
insurance companies concerned. The DBP is not authorized to
accept applications for MRI when its clients are more than 60
years of age. Knowing all the while that Dans was ineligible
for MRI coverage because of his advanced age, DBP exceeded
the scope of its authority when it accepted Dan's application
for MRI by collecting the insurance premium, and deducting
its agent's commission and service fee. The liability of an
agent who exceeds the scope of his authority depends upon
whether the third person is aware of the limits of the agent's
powers. There is no showing that Dans knew of the limitation
on DBP's authority to solicit applications for MRI. If the third
person dealing with an agent is unaware of the limits of the
authority conferred by the principal on the agent and he
(third person) has been deceived by the non-disclosure
thereof by the agent, then the latter is liable for damages to
him. The DBP's liability, however, cannot be for the entire
value of the insurance policy. To assume that were it not for
DBP's concealment of the limits of its authority, Dans would
have secured an MRI from another insurance company, and
therefore would have been fully insured by the time he died,
is highly speculative. Considering his advanced age, there is
no absolute certainty that Dans could obtain an insurance
coverage from another company. It must also be noted that
Dans died almost immediately, i.e., on the nineteenth day
after applying for the MRI, and on the twenty-third day from
the date of release of his loan.
24. Perez v. CA
Primitivo Perez had been insured with the BF Lifeman
Insurance Corporation since 1980 for P20,000.00.
> In October 1987, an agent of Lifeman, Rodolfo Lalog,
visited Perez in Quezon and convinced him to apply for
additional insurance coverage of P50,000.00, to avail of the
ongoing promotional discount of P400.00 if the premium
were paid annually.
> Primitivo B. Perez accomplished an application form for the
additional insurance coverage. Virginia A. Perez, his wife,
paid P2,075.00 to Lalog. The receipt issued by Lalog indicated
the amount received was a "deposit."
> Unfortunately, Lalog lost the application form
accomplished by Perez and so on October 28, 1987, he asked
the latter to fill up another application form. On November 1,
1987, Perez was made to undergo the required medical
examination, which he passed.
> Lalog forwarded the application for additional insurance of
Perez, together with all its supporting papers, to the office of
BF Lifeman Insurance Corporationn in Quezon which office
was supposed to forward the papers to the Manila office.
> On November 25, 1987, Perez died while he was riding a
banca which capsized during a storm.
> At the time of his death, his application papers for the
additional insurance were still with the Quezon office. Lalog
testified that when he went to follow up the papers, he found
them still in the Quezon office and so he personally brought
the papers to the Manila office of BF Lifeman Insurance
Corporation. It was only on November 27, 1987 that said
papers were received in Manila.
> Without knowing that Perez died on November 25, 1987,
BF Lifeman Insurance Corporation approved the application
and issued the corresponding policy for the P50,000.00 on
December 2, 1987
> Virginia went to Manila to claim the benefits under the
insurance policies of the deceased. She was paid P40,000.00
under the first insurance policy for P20,000.00 (double
indemnity in case of accident) but the insurance company
refused to pay the claim under the additional policy coverage
of P50,000.00, the proceeds of which amount to P150,000.00
in view of a triple indemnity rider on the insurance policy.
> In its letter of January 29, 1988 to Virginia A. Perez, the
insurance company maintained that the insurance for
P50,000.00 had not been perfected at the time of the death
of Primitivo Perez. Consequently, the insurance company
refunded the amount of P2,075.00 which Virginia Perez had
paid
> Lifeman filed for the rescission and the declaration of
nullity. Perez, on the other hand, averred that the deceased
had fulfilled all his prestations under the contract and all the
elements of a valid contract are present.
> RTC ruled in favor of Perez. CA reversed.
Issue:
Whether or not there was a perfected additional insurance
contract.
Held:
The contract was not perfected.
Insurance is a contract whereby, for a stipulated
consideration, one party undertakes to compensate the other
for loss on a specified subject by specified perils. A contract,
on the other hand, is a meeting of the minds between two
persons whereby one binds himself, with respect to the other
to give something or to render some service.
Consent must be manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the
acceptance absolute. When Primitivo filed an application for
insurance, paid P2,075.00 and submitted the results of his
medical examination, his application was subject to the
acceptance of private respondent BF Lifeman Insurance
Corporation. The perfection of the contract of insurance
between the deceased and respondent corporation was
further conditioned upon compliance with the following
requisites stated in the application form:
"there shall be no contract of insurance unless and until a
policy is issued on this application and that the said policy
shall not take effect until the premium has been paid and the
policy delivered to and accepted by me/us in person while
I/We, am/are in good health."
The assent of private respondent BF Lifeman Insurance
Corporation therefore was not given when it merely received
the application form and all the requisite supporting papers
of the applicant. Its assent was given when it issues a
corresponding policy to the applicant. Under the
abovementioned provision, it is only when the applicant pays
the premium and receives and accepts the policy while he is
in good health that the contract of insurance is deemed to
have been perfected.
It is not disputed, however, that when Primitivo died on
November 25, 1987, his application papers for additional
insurance coverage were still with the branch office of
respondent corporation in Gumaca and it was only two days
later, or on November 27, 1987, when Lalog personally
delivered the application papers to the head office in Manila.
Consequently, there was absolutely no way the acceptance of
the application could have been communicated to the
applicant for the latter to accept inasmuch as the applicant at
the time was already dead.
25. Philamcare Health System vs. CA
Facts:
Ernani Trinos, deceased husband of Julita Trinos, applied for a
health care coverage with Philamcare Health Systems, Inc. In
the standard application form, he answered no to the
following question: "Have you or any of your family members
ever consulted or been treated for high blood pressure, heart
trouble, diabetes, cancer, liver disease, asthma or peptic
ulcer? (If Yes, give details). " The application was approved for
a period of one year from 1 March 1988 to 1 March 1989.
Accordingly, he was issued Health Care Agreement P010194.
Under the agreement, Trinos' husband was entitled to avail of
hospitalization benefits, whether ordinary or emergency,
listed therein. He was also entitled to avail of "out-patient
benefits" such as annual physical examinations, preventive
health care and other out-patient services. Upon the
termination of the agreement, the same was extended for
another year from 1 March 1989 to 1 March 1990, then from
1 March 1990 to 1 June 1990. The amount of coverage was
increased to a maximum sum of P75,000.00 per disability.
During the period of his coverage, Ernani suffered a heart
attack and was confined at the Manila Medical Center (MMC)
for one month beginning 9 March 1990. While her husband
was in the hospital, Trinos tried to claim the benefits under
the health care agreement. However, Philamcare denied her
claim saying that the Health Care Agreement was void.
According to Philamcare, there was a concealment regarding
Ernani's medical history. Doctors at the MMC allegedly
discovered at the time of Ernani's confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer
in the application form. Thus, Trinos paid the hospitalization
expenses herself, amounting to about P76,000.00. After her
husband was discharged from the MMC, he was attended by
a physical therapist at home. Later, he was admitted at the
Chinese General Hospital. Due to financial difficulties,
however, Trinos brought her husband home again. In the
morning of 13 April 1990, Ernani had fever and was feeling
very weak. Trinos was constrained to bring him back to the
Chinese General Hospital where he died on the same day. On
24 July 1990, Trinos instituted with the Regional Trial Court of
Manila, Branch 44, an action for damages against Philamcare
and its president, Dr. Benito Reverente (Civil Case 90 53795).
She asked for reimbursement of her expenses plus moral
damages and attorney's fees. After trial, the lower court ruled
against Philamcare and Reverente, ordering them to pay and
reimburse the medical and hospital coverage of the late
Ernani Trinos in the amount of P76,000.00 plus interest, until
the amount is fully paid to plaintiff who paid the same; the
reduced amount of moral damages of P10,000.00 to Trinos;
the reduced amount of P10,000.00 as exemplary damages to
Trinos; and the attorney's fees of P20,000.00, plus costs of
suit. On appeal, the Court of Appeals affirmed the decision of
the trial court but deleted all awards for damages and
absolved Reverente. Philamcare's motion for reconsideration
was denied. Hence, Philamcare brought the petition for
review, raising the primary argument that a health care
agreement is not an insurance contract; hence the
"incontestability clause" under the Insurance Code does not
apply.
Issue [1]: Whether a health care agreement between
Philamcare and Ernani Trinos is an insurance contract.
Held [1]:
YES. Section 2 (1) of the Insurance Code defines a contract of
insurance as an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event. An
insurance contract exists where the following elements
concur: (1) The insured has an insurable interest; (2) The
insured is subject to a risk of loss by the happening of the
designated peril; (3) The insurer assumes the risk; (4) Such
assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar
risk; and (5) In consideration of the insurer's promise, the
insured pays a premium. Section 3 of the Insurance Code
states that any contingent or unknown event, whether past
or future, which may damnify a person having an insurable
interest against him, may be insured against. Every person
has an insurable interest in the life and health of himself.
Section 10 provides that "Every person has an insurable
interest in the life and health: (1) of himself, of his spouse and
of his children; (2) of any person on whom he depends wholly
or in part for education or support, or in whom he has
a pecuniary interest; (3) of any person under a legal
obligation to him for the payment of money, respecting
property or service, of which death or illness might delay or
prevent the performance; and (4) of any person upon whose
life any estate or interest vested in him depends." Herein, the
insurable interest of Trinos' husband in obtaining the health
care agreement was his own health. The health care
agreement was in the nature of non-life insurance, which is
primarily a contract of indemnity. Once the member incurs
hospital, medical or any other expense arising from sickness,
injury or other stipulated contingent, the health care provider
must pay for the same to the extent agreed upon under the
contract.
Issue [2]: Whether answers made in good faith, where
matters of opinion or judgment are called for, without intent
to deceive will avoid a policy when they were untrue.
Held [2]: NO. Where matters of opinion or judgment are
called for, answers made in good faith and without intent to
deceive will not avoid a policy even though they are untrue.
Thus, although false, a representation of the expectation,
intention, belief, opinion, or judgment of the insured will not
avoid the policy if there is no actual fraud in inducing the
acceptance of the risk, or its acceptance at a lower rate of
premium, and this is likewise the rule although the statement
is material to the risk, if the statement is obviously of the
foregoing character, since in such case the insurer is not
justified in relying upon such statement, but is obligated to
make further inquiry. There is a clear distinction between
such a case and one in which the insured is fraudulently and
intentionally states to be true, as a matter of expectation or
belief, that which he then knows, to be actually untrue, or the
impossibility of which is shown by the facts within his
knowledge, since in such case the intent to deceive the
insurer is obvious and amounts to actual fraud. The
fraudulent intent on the part of the insured must be
established to warrant rescission of the insurance contract.
Concealment as a defense for the health care provider or
insurer to avoid liability is an affirmative defense and the duty
to establish such defense by satisfactory and convincing
evidence rests upon the provider or insurer. In any case, with
or without the authority to investigate, Philamcare is liable
for claims made under the contract. Having assumed a
responsibility under the agreement, Philamcare is bound to
answer the same to the extent agreed upon. In the end, the
liability of the health care provider attaches once the
member is hospitalized for the disease or injury covered by
the agreement or whenever he avails of the covered benefits
which he has prepaid.
Issue [3]: Whether rescission must be exercised before
commencement of an action on the contract.
Held [3]: YES. Under Section 27 of the Insurance Code, "a
concealment entitles the injured party to rescind a contract
of insurance." The right to rescind should be exercised
previous to the commencement of an action on the contract.
Herein, no rescission was made. Besides, the cancellation of
health care agreements as in insurance policies require the
concurrence of the following conditions: (1) Prior notice of
cancellation to insured; (2) Notice must be based on the
occurrence after effective date of the policy of one or more
of the grounds mentioned; (3) Must be in writing, mailed or
delivered to the insured at the address shown in the policy;
(4) Must state the grounds relied upon provided in Section 64
of the Insurance Code and upon request of insured, to furnish
facts on which cancellation is based. None of the above pre-
conditions was fulfilled in this case. When the terms of
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. Being a
contract of adhesion, the terms of an insurance contract are
to be construed strictly against the party which prepared the
contract — the insurer. By reason of the exclusive control of
the insurance company over the terms and phraseology of
the insurance contract, ambiguity must be strictly interpreted
against the insurer and liberally in favor of the insured,
especially to avoid forfeiture. This is equally applicable to
Health Care Agreements.
Issue [4]: Whether the membership of the late Trinos is now
incontestable.
Held [4]: YES. Under the title Claim procedures of expenses,
Philamcare had twelve months from the date of issuance of
the Agreement within which to contest the membership of
the patient if he had previous ailment of asthma, and six
months from the issuance of the agreement if the patient
was sick of diabetes or hypertension.
The periods having expired, the defense of concealment or
misrepresentation no longer lie.
26. Gulf Resorts, Inc v. Philippine Charter Insurance Corp.
Facts: Gulf Resorts is the owner of the Plaza Resort situated
at Agoo, La Union and had its properties in said resort insured
originally with the American Home Assurance Company
(AHAC). In the first 4 policies issued, the risks of loss from
earthquake shock was extended only to petitioner’s
two swimming pools. Gulf Resorts agreed to insure with Phil
Charter the properties covered by the AHAC policy provided
that the policy wording and rates in said policy be copied in
the policy to be issued by Phil Charter. Phil Charter issued
Policy No. 31944 to Gulf Resorts covering the period of March
14, 1990 to March 14, 1991 for P10,700,600.00 for a total
premium of P45,159.92. the break-down of premiums shows
that Gulf Resorts paid only P393.00 as premium against
earthquake shock (ES). In Policy No. 31944 issued by
defendant, the shock endorsement provided that “In
consideration of the payment by the insured to the company
of the sum included additional premium the Company agrees,
notwithstanding what is stated in the printed conditions of
this policy due to the contrary, that this insurance covers loss
or damage to shock to any of the property insured by this
Policy occasioned by or through or in consequence of
earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and
"7-C"). In Exhibit "7-C" the word "included" above the
underlined portion was deleted. On July 16, 1990 an
earthquake struck Central Luzon and Northern Luzon and
plaintiff’s properties covered by Policy No. 31944 issued by
defendant, including the two swimming pools in its Agoo
Playa Resort were damaged.
Petitioner advised respondent that it would be making a
claim under its Insurance Policy 31944 for damages on its
properties. Respondent denied petitioner’s claim on the
ground that its insurance policy only afforded earthquake
shock coverage to the twoswimming pools of the resort. The
trial court ruled in favor of respondent. In its ruling,
the schedule clearly shows that petitioner paid only a
premium of P393.00 against the peril of earthquake shock,
the same premium it had paid against earthquake shock only
on the two swimming pools in all the policies issued by
AHAC.
Issue: Whether or not the policy covers only the
two swimming pools owned by Gulf Resorts and does not
extend to all properties damaged therein
Held: YES. All the provisions and riders taken and interpreted
together, indubitably show the intention of the parties to
extend earthquake shock coverage to the two swimming
pools only. Aninsurance premium is the consideration paid an
insurer for undertaking to indemnify the insured against a
specified peril. In fire, casualty and marine insurance, the
premium becomes a debt as soon as the risk attaches. In the
subject policy, no premium payments were made with regard
to earthquake shock coverage except on the two swimming
pools. There is no mention of any premium payable for the
other resort properties with regard to earthquake shock. This
is consistent with the history of petitioner’sinsurance
policies with AHAC.
27. Malayan Insurance Co v Court of Appeals
Facts: Malayan Insurance Co. Inc. (MALAYAN) issued a Private
CarComprehensive Policy covering a Willys jeep. The
insurance coverage was for "own damage" not to exceed
P600.00 and "third-party liability" in the amount of
P20,000.00.

During the effectivity of the insurance policy, , the insured
jeep, while being driven by one Juan P. Campollo an
employee of the respondent San Leon Rice Mill, Inc., (SAN
LEON) collided with apassenger bus belonging to the
respondent Pangasinan Transportation Co., Inc.
(PANTRANCO) at the national highway in Barrio San Pedro,
Rosales, Pangasinan, causing damage to the insured vehicle
and injuries to the driver, Juan P. Campollo, and the
respondent Martin C. Vallejos, who was riding in the ill-fated
jeep.
Martin C. Vallejos filed an action for damages against Sio
Choy, Malayan Insurance Co., Inc. and the PANTRANCO
before the Court of First Instance of Pangasinan. The trial
court rendered judgment holding Sio Choy, SAN LEON, and
MALAYAN jointly and severally liable. However, MALAYAN’s
liability will only be up to P20,000.
On appeal, CA affirmed the decision of the trial court.
However, it ruled that SAN LEON has no obligation to
indemnify or reimburse the petitioner insurance company for
whatever amount it has been ordered to pay on its policy,
since the San Leon Rice Mill, Inc. is not a privy to the contract
of insurance between Sio Choy and the insurance company.
MALAYAN appealed to the SC by way of review on certiorari.
Issues:
(1) Whether or not MALAYAN is solidarily liable to Vallejos,
along with Sio Choy and SAN LEON
(2) Whether or not MALAYAN is entitled to be reimbursed by
SAN LEON for whatever amount petitioner has been
adjudged to pay respondent Vallejos on its insurance policy.
Held:
(1) Only Sio Choy and SAN LEON are solidarily liable to
Vallejos for the award of damages. Sio Choy is liable as owner
of the jeeppursuant to Article 2184, while SAN LEON is liable
as the employer of the driver of the jeep at the time of the
accident pursuant to Art 2180.
MALAYAN’s liability, however, arose only out of the insurance
policywith Sio Choy. Petitioner as insurer of Sio Choy, is liable
to respondent Vallejos, but it cannot, as incorrectly held by
the trial court, be made "solidarily" liable with the two
principal tortfeasors namely respondents Sio Choy and SAN
LEON.
(2) MALAYAN is entitled to be reimbursed. Upon payment of
the loss, the insurer is entitled to be subrogated pro tanto to
any right of action which the insured may have against the
third person whose negligence or wrongful act caused the
loss. When the insurance company pays for the loss, such
payment operates as an equitable assignment to the insurer
of the property and all remedies which the insured may have
for the recovery thereof. That right is not dependent upon ,
nor does it grow out of any privity of contract or upon written
assignment of claim, and payment to the insured makes the
insurer assignee in equity.
28. Manila Mahogany v Court of Appeals
FACTS:
Petitioner Manila Mahogany Manufacturing Corporation
insured its Mercedes Benz 4-door sedan with respondent
Zenith Insurance Corporation. The insured vehicle was
bumped and damaged by a truck owned by San Miguel
Corporation. For the damage caused, respondent company
paid petitioner five thousand pesos (P5,000.00) in amicable
settlement. Petitioner's general manager executed a Release
of Claim, subrogating respondent company to all its right to
action against San Miguel Corporation. Thereafter,
respondent company wrote Insurance Adjusters, Inc. to
demand reimbursement from San Miguel Corporation of the
amount it had paid petitioner. Insurance Adjusters, Inc.
refused reimbursement, alleging that San Miguel Corporation
had already paid petitioner P4,500.00 for the damages to
petitioner's motor vehicle, as evidenced by a cash voucher
and a Release of Claim executed by the General Manager
of petitioner discharging San Miguel Corporation from "all
actions, claims, demands the rights of action that now exist or
hereafter develop arising out of or as a consequence of the
accident."Respondent insurance company thus demanded fro
m petitioner reimbursement of the sum of P4,500.00 paid by
San Miguel Corporation. Petitioner refused; hence, the
instant case.
ISSUE:
Whether or not the respondent insurance company is
subrogated to the rights of the petitioner against San
Miguel Corporation.
HELD:
YES. The Supreme Court held that if a property is insured and
the owner receives the indemnity from the insurer, it is
provided in [Article 2207 of the New Civil Code] that the
insurer is deemed subrogated to the rights of the insured
against the wrongdoer and if the amount paid by the insurer
does not fully cover the loss, then the aggrieved party is the
one entitled to recover the deficiency. Under this legal
provision, the real party in interest with regard to the portion
of the indemnity paid is the insurer and not the insured.
Hence, petitioner is entitled to keep the sum of P4,500.00
paid by San Miguel Corporation under its clear right to file a
deficiency claim for damages incurred, against the
wrongdoer, should the insurance company not fully pay for
the injury caused (Article 2207, New Civil Code).
However, when petitioner released San Miguel Corporation
from any liability, petitioner's right to retain the sum of
P5,000.00 no longer existed, thereby entitling private
respondent to recover the same. The right of subrogation can
only exist after the insurer has paid the insured otherwise the
insured will be deprived of his right to full indemnity. If the
insurance proceeds are not sufficient to cover the damages
suffered by the insured, then he may sue the party
responsible for the damage for the remainder. To the extent
of the amount he has already received from, the insurer
enjoys the right of subrogation. Since the insurer can be
subrogated to only such rights as the insured may
have, should the insured, after receiving payment from the
insurer, release the wrongdoer who caused the loss, the
insurer loses his rights against the latter. But in such a case,
the insurer will be entitled to recover from the insured
whatever it has paid to the latter, unless the release was
made with the consent of the insure
29. Pan Malayan Insurance Corp vs Court of Appeals
Facts:
In 1985, PANMALAY filed a complaint for damages with the
RTC of Makati against private respondents Erlinda Fabie and
her driver. PANMALAY averred that: it is an insurer of a
Mitsubishi Colt Lancer car registered in the name of
Canlubang Automotive Resources Corporation; on May 26,
1985, due to the "carelessness, recklessness, and
imprudence" of the unknown driver of a pick-up with plate
no. PCR-220, the insured car was hit and suffered damages in
the amount of P42,052.00; PANMALAY defrayed the cost of
repair of the insured car and, therefore, was subrogated to
the rights of Canlubang against the driver of the pick-up and
his employer, Erlinda Fabie; and, despite repeated demands,
defendants, failed and refused to pay the claim of
PANMALAY.
Private respondents filed a Motion for Bill of Particulars. In
compliance therewith, PANMALAY clarified, among others,
that the damage caused to the insured car was settled under
the "own damage", coverage of the insurance policy, and that
the driver of the insured car was, at the time of the accident,
an authorized driver duly licensed to drive the vehicle.
PANMALAY also submitted a copy of the insurance policy and
the Release of Claim and Subrogation Receipt executed by
CANLUBANG in favor of PANMALAY.
Private respondents filed a Motion to Dismiss alleging that
PANMALAY had nocause of action against them. They argued
that payment under the "own damage" clause of the
insurance policy precluded subrogation under Article 2207 of
the Civil Code, since indemnification thereunder was made on
the assumption that there was no wrongdoer or no third
party at fault.
Issue:
Whether or not PANMALAY was legally subrogated to the
rights of Canlubang.
Held:
Yes. Article 2207 of the Civil Code provides: "If
the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained
of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has
violated the contract."
Article 2207 of the Civil Code is founded on the well-settled
principle of subrogation. If the insured property is destroyed
or damaged through the fault or negligence of a party other
than the assured, then the insurer, upon payment to the
assured, will be subrogated to the rights of the assured to
recover from the wrongdoer to the extent that the insurer
has been obligated to pay. Payment by the insurer to the
assured operates as an equitable assignment to the former of
all remedies which the latter may have against the third party
whose negligence or wrongful act caused the loss. The right
of subrogation is not dependent upon, nor does it grow out
of, any privity of contract or upon written assignment of
claim. It accrues simply upon payment of the insurance
claim by the insurer.
PANMALAY contends that the coverage of insured risks under
the above section, specifically Section III-1(a), is
comprehensive enough to include damage to the insured
vehicle arising from collision or overturning due to the fault
or negligence of a third party. CANLUBANG is apparently of
the same understanding. Based on a police report wherein
the driver of the insured car reported that after the vehicle
was sideswiped by a pick-up, the driver thereof fled the scene
[Record, p. 20], CANLUBANG filed its claim with PANMALAY
for indemnification of the damage caused to its car. It then
accepted payment from PANMALAY, and executed a Release
of Claim and Subrogation Receipt in favor of latter.
Considering that the very parties to the policy were not
shown to be in disagreement regarding the meaning and
coverage of Section III-1, specifically sub-paragraph (a)
thereof, it was improper for the appellate court to indulge in
contract construction, to apply the ejusdem generis rule, and
to ascribe meaning contrary to the clear intention and
understanding of these parties.
For even if under the above circumstances PANMALAY could
not be deemed subrogated to the rights of its assured under
Article 2207 of the Civil Code, PANMALAY would still have
a cause of action against private respondents. In the
pertinent case of Sveriges Angfartygs Assurans Forening
v. Qua Chee Gan, the Court ruled that the insurer who may
have no rights of subrogation due to "voluntary" payment
may nevertheless recover from the third party responsible for
the damage to the insured property under Article 1236 of the
Civil Code.
30. Cebu Shipyard and Engineering Works v William Lines
Facts:
Cebu Shipyard and Engineering Works, Inc. repaired marine
vessels while the Prudential is in the non-life insurance
business. William Lines, Inc., the owner of M/V Manila City, a
luxury passenger-cargo vessel, which caught fire and sank. At
the time of the incident, subject vessel was insured with
Prudential for P45M for hull and machinery. CSEW was
insured for only Php 10 million for the shiprepairer’s liability
policy. They entered into a contract where negligence was
the only factor that could make CSEW liable for damages.
Moreover, liability of CSEW was limited to only Php 1million
for damages. The Hull Policy included an “Additional Perils
(INCHMAREE)” Clause covering loss of or damage to the
vessel through the negligence of, among others, ship
repairmen. William brought Manila City to the dry dock of
CSEW for repairs. The officers and cabin crew stayed at the
ship while it was being repaired. After the vessel was
transferred to the docking quay, it caught fire and sank,
resulting to its total loss.
William brought suit against CSEW alleging that it was
through the latter’s negligence that the ship caught fire and
sank. Prudential was impleaded as co-plaintiff after it had
paid the value of insured items. It was subrogated to 45
million, or the value it claimed to indemnify.
The trial court brought judgment against CSEW 45 million for
the ship indemnity, 65 million for loss of income, and more
than 13 million in other damages. The CA affirmed the TC
decision.
CSEW contended that the cause of the fire was due to
William’s hotworks on the said portion of the ship which they
didn’t ask CSEW permission for.
Prudential, on the other hand, blamed the negligence of the
CSEW workers in the instance when they didn’t mind rubber
insulation wire coming out of the air-conditioning unit that
was already burning.
Issue:
1. WON Prudential has the right of subrogation against its
own insured
2. WON the provisions limiting CSEW’s liability for negligence
to a maximum of Php 1 million are valid
Held: Yes. Yes. Yes. No. Petition denied.
Ratio:
1. Petitioner contends that Prudential is not entitled to be
subrogated to the rights of William Lines, Inc., theorizing that
(1) the fire which gutted M/V Manila City was an excluded
risk and (2) it is a co-assured under the Marine Hull Insurance
Policy. This was wrong. The one who caused the fire has
already been adjudicated by the courts as CSEW.
Upon proof of payment by Prudential to William Lines, Inc.,
the former was subrogated to the right of the latter to
indemnification from CSEW. As aptly ruled by the Court of
Appeals, the law says:
Art. 2207. If the 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.
When Prudential paid the latter the total amount covered by
its insurance policy, it was subrogated to the right of the
latter to recover the insured loss from the liable party, CSEW.
Petitioner theorizes further that there can be no right of
subrogation as it is deemed a co-assured under the subject
insurance policy with reliance on Clause 20 of the Work Order
which states:
20. The insurance on the vessel should be
maintained by the customer and/or owner of the
vessel during the period the contract is in effect.
Clause 20 of the Work Order in question is clear in
the sense that it requires William Lines to maintain
insurance on the vessel during the period of dry-
docking or repair.
However, the fact that CSEW benefits from the said
stipulation does not automatically make it as a co-assured of
William Lines. The intention of the parties to make each other
a co-assured under an insurance policy is to be read from the
insurance contract or policy itself and not from any other
contract or agreement because the insurance policy
denominates the beneficiaries of the insurance. The hull and
machinery insurance procured by William Lines, Inc. from
Prudential named only “William Lines, Inc.” as the
assured. There was no manifestation of any intention of
William Lines, Inc. to constitute CSEW as a co-assured under
subject policy. The claim of CSEW that it is a co-assured is
unfounded.
Then too, in the Additional Perils Clause of the same Marine
Insurance Policy, it is provided that this insurance also covers
loss of or damage to vessel directly caused by the negligence
of charterers and repairers who are not assured.
As correctly pointed out by respondent Prudential, if CSEW
were deemed a co-assured under the policy, it would nullify
any claim of William Lines, Inc. from Prudential for any loss or
damage caused by the negligence of CSEW. Certainly, no
shipowner would agree to make a shiprepairer a co-assured
under such insurance policy; otherwise, any claim for loss or
damage under the policy would be invalidated.
4. Although in this jurisdiction, contracts of adhesion have
been consistently upheld as valid per se; as binding as an
ordinary contract, the Court recognizes instances when
reliance on such contracts cannot be favored especially
where the facts and circumstances warrant that subject
stipulations be disregarded. Thus, in ruling on the validity and
applicability of the stipulation limiting the liability of CSEW
for negligence to P1M only, the facts and circumstances vis-a-
vis the nature of the provision sought to be enforced should
be considered, bearing in mind the principles of equity and
fair play.
It is worthy to note that M/V Manila City was insured with
Prudential for P45M. Upon thorough investigation by its hull
surveyor, M/V Manila City was found to be beyond
economical salvage and repair. The evaluation of the average
adjuster also reported a constructive total loss. The said claim
of William Lines, Inc., was then found to be valid and
compensable such that Prudential paid the latter the total
value of its insurance claim. Furthermore, it was ascertained
that the replacement cost of the vessel, amounts to P55M.
31. Delsan Transport v Court of Appeals
FACTS:
Caltex Philippines entered into a contract of affreightment
with the petitioner, Delsan Transport Lines, Inc., for a period
of one year whereby the said common carrier agreed to
transport Caltex’s industrial fuel oil from the Batangas-Bataan
Refinery to different parts of the country. Under the contract,
petitioner took on board its vessel, MT Maysun, 2,277.314
kiloliters of industrial fuel oil of Caltex to be delivered to the
Caltex Oil Terminal in Zamboanga City. The shipment was
insured with the private respondent, American Home
Assurance Corporation.
On August 14, 1986, MT Maysun set sail from Batangas for
Zamboanga City. Unfortunately, the vessel sank in the early
morning of August 16, 1986 near Panay Gulf in the Visayas
taking with it the entire cargo of fuel oil.
Subsequently, private respondent paid Caltex the sum of Five
Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos
and Fifty-Seven Centavos (P5,096,635.57) representing the
insured value of the lost cargo. Exercising its right of
subrogation under Article 2207 of the New Civil Code, private
respondent demanded of the petitioner the same amount it
paid to Caltex. Due to its failure to collect from the petitioner
despite prior demand, private respondent filed a complaint
with the Regional Trial Court of Makati, Branch 137, for
collection of a sum of money. After trial, the trial court
rendered a decision on November 29, 1990 dismissing the
complaint. The trial court found that the vessel, MT Maysun,
was seaworthy and that the incident was caused by
unexpected inclement weather condition or force majeure,
thus, exempting the common carrier from liability for the loss
of its cargo.
The decision of the trial court, however, was reversed, on
appeal, by the Court of Appeals. The appellate court ruled
that petitioner is liable on its obligation as common carrier to
herein private respondent insurance company as subrogee of
Caltex. The subsequent motion for reconsideration was
denied by the appellate court. Hence, petitioner filed the
instant petition before the Supreme Court.
ISSUE:
Whether or not the payment made by private respondent to
Caltex amounted to an automatic admission of the vessel’s
seaworthiness.
RULING:
No. The payment made by the private respondent for the
insured value of the lost cargo operates as waiver of its
(private respondent) right to enforce the term of the implied
warranty against Caltex under the marine insurance policy.
However, the same cannot be validly interpreted as an
automatic admission of the vessel’s seaworthiness by the
private respondent as to foreclose recourse against the
petitioner for any liability under its contractual obligation as a
common carrier. The fact of payment grants the private
respondent subrogatory right which enables it to exercise
legal remedies that would otherwise be available to Caltex as
owner of the lost cargo against the petitioner common
carrier.
32. Federal Express v American Home
FACTS:
On January 26, 1994, SMITHKLINE Beecham (SMITHKLINE for
brevity) of Nebraska, USA delivered to Burlington Air Express
(BURLINGTON), an agent of [Petitioner] Federal Express
Corporation, a shipment of 109 cartons of veterinary
biologicals for delivery to consignee SMITHKLINE and French
Overseas Company in Makati City, Metro Manila. The
shipment was covered by Burlington Airway Bill No.
11263825 with the words, 'REFRIGERATE WHEN NOT IN
TRANSIT' and 'PERISHABLE' stamp marked on its face. That
same day, Burlington insured the cargoes in the amount of
$39,339.00 with American Home Assurance Company
(AHAC). The following day, Burlington turned over the
custody of said cargoes to Federal Express which transported
the same to Manila. On February 10, 1994, DARIO C.
DIONEDA ('DIONEDA'), twelve (12) days after the cargoes
arrived in Manila, a non-licensed custom's broker who was
assigned by GETC to facilitate the release of the subject
cargoes, found out, while he was about to cause the release
of the said cargoes, that the same [were] stored only in a
room with two (2) air conditioners running, to cool the place
instead of a refrigerator. As a consequence of the foregoing
result of the veterinary biologics test, SMITHKLINE
abandoned the shipment and, declaring 'total loss' for the
unusable shipment, filed a claim with AHAC through its
representative in the Philippines, the Philam Insurance Co.,
Inc. ('PHILAM') which recompensed SMITHKLINE for the
whole insured amount of THIRTY NINE THOUSAND THREE
HUNDRED THIRTY NINE DOLLARS ($39,339.00).
ISSUE:
Is FEDEX liable for damage to or loss of the insured goods
HELD:
Petition granted. Assailed decision reversed insofar as it
pertains to FEDEX. In this jurisdiction, the filing of a claim with
the carrier within the time limitation therefor actually
constitutes a condition precedent to the accrual of a right of
action against a carrier for loss of or damage to the goods.
The shipper or consignee must allege and prove the
fulfillment of the condition. If it fails to do so, no right of
action against the carrier can accrue in favor of the
former. The aforementioned requirement is a reasonable
condition precedent; it does not constitute a limitation of
action. The requirement of giving notice of loss of or injury to
the goods is not an empty formalism. The fundamental
reasons for such a stipulation are (1) to inform the carrier
that the cargo has been damaged, and that it is being charged
with liability therefor; and (2) to give it an opportunity to
examine the nature and extent of the injury. “This protects
the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily
investigated so as to safeguard itself from false and
fraudulent claims. As to Subrogation, upon receipt of the
insurance proceeds, the consignee (Smithkline) executed a
subrogation Receipt in favor of respondents. The latter were
thus authorized “to file claims and begin suit against any such
carrier, vessel, person, corporation or government.”
Undeniably, the consignee had a legal right to receive the
goods in the same condition it was delivered for transport to
petitioner. If that right was violated, the consignee would
have a cause of action against the person responsible
therefor.
33. Sps. Cha v Court of Appeals
Facts: Petitioner spouses Nilo Cha and Stella Uy-Cha, as
lessees entered into a lease contract with private respondent
CKS Development Corporation as lessor. A stipulation of
the lease contract provides that the Lessee is not allowed
to insure against fire the chattels, merchandise, textiles,
goods and effects placed at any stall or store or space in the
leased premises without first obtaining the written consent
and approval of the Lessor. If the Lessee violates this the
policy is deemed assigned and transferred to the Lessor for
his own benefit.
Petitioner took out a policy of fire insurance over the
merchandise inside the leased premises with United
Insurance without consent of CKS. On the day the lease
contract was to expire a fire broke out inside the leased
premises. CKS, wrote a letter to United asking that the
proceeds of the fire insurance be paid directly to CKS. United
refused. Hence, the latter filed a complaint against the Cha
spouses and United.
Issue: Whether or not CKS can recover from the insurance
policy.
Held: No. Section 18 of the Insurance Code provides that: “No
contract or policy of insurance on property shall be
enforceable except for the benefit of some person having an
insurable interest in the property insured.”
In the present case, it cannot be denied that CKS has no
insurable interest in the goods and merchandise inside the
leased premises under the provisions of Section 17 of the
Insurance Code: “The measure of an insurable interest in
property is the extent to which the insured might be
damnified by loss or injury thereof.” Therefore, CKS cannot
be validly a beneficiary of the fire insurance policy taken by
petitioner-spouses. The insurable interest remains with the
Cha spouses.
The stipulation in the lease contract is void for being contrary
to law and public policy. This is in keeping with the provision
under Sec. 25 of the Insurance Code that: Every stipulation in
a policy of Insurance for the payment of loss, whether the
person insured has or has not any interest in the property
insured or that the policy shall be received as proof of such
interest and every policy executed by way of gaming
or wagering is void.”
34. Great Pacific Life Insurance Corp v Court of Appeals
FACTS:
Great Pacific Life Assurance Corporation (Grepalife) executed
a contract of group life insurance with Development Bank of
the Philippines (DBP) wherein Grepalife agreed to insure the
lives of eligible housing loan mortgagors of DBP. One such
loan mortgagor is Dr. Wilfredo Leuterio. In an application
form, Dr. Leuterio answered questions concerning his test,
attesting among others that he does not have any heart
conditions and that he is in good health to the best of his
knowledge.
However, after about a year, Dr. Leuterio died due to
“massive cerebral hemorrhage.” When DBP submitted a
death claim to Grepalife, the latter denied the claim, alleging
that Dr. Leuterio did not disclose he had been suffering from
hypertension, which caused his death. Allegedly, such non-
disclosure constituted concealment that justified the denial
of the claim.
Hence, the widow of the late Dr. Leuterio filed a complaint
against Grepalife for “Specific Performance with Damages.”
Both the trial court and the Court of Appeals found in favor
of the widow and ordered Grepalife to pay DBP.
ISSUE: Whether the CA erred in holding Grepalife liable to
DBP as beneficiary in a group life insurance contract from a
complaint filed by the widow of the decedent/mortgagor
HELD:
The rationale of a group of insurance policy of mortgagors,
otherwise known as the “mortgage redemption insurance,” is
a device for the protection of both the mortgagee and
the mortgagor. On the part of the mortgagee, it has to enter
into such form of contract so that in the event of the
unexpected demise of the mortgagor during the subsistence
of the mortgage contract, the proceeds from such insurance
will be applied to the payment of the mortgage debt, thereby
relieving the heirs of the mortgagor from paying the
obligation. In a similar vein, ample protection is given to
themortgagor under such a concept so that in the event of
death, the mortgage obligation will be extinguished by the
application of the insurance proceeds to the mortgage
indebtedness. In this type of policy insurance, the mortgagee
is simply an appointee of the insurance fund. Such loss-
payable clause does not make the mortgagee a party to the
contract.
The insured, being the person with whom the contract was
made, is primarily the proper person to bring suit thereon.
Subject to some exceptions, insured may thus sue, although
the policy is taken wholly or in part for the benefit of another
person, such as a mortgagee.
And since a policy of insurance upon life or health may pass
by transfer, will or succession to any person, whether he has
an insurable interest or not, and such person may recover it
whatever the insured might have recovered, the widow of
the decedent Dr. Leuterio may file the suit against the
insurer, Grepalife.
35. HARVARDIAN COLLEGES V COUNTRY BANKERS
Facts:
> Harvardian is a family corporation, the stockholders of
which are Ildefonso Yap, Virginia King Yap and their children.
> Prior to Aug. 9, 1979, an agent of Country Bankers
proposed to Harvardian to insure its school
building. Although at first reluctant, Harvardian agreed.
> Country Banks sent an inspector to inspect the school
building and agreed to insure the same for P500,000 for
which Harvardian paid an annual premium of P2,500.
> On Aug. 9, 1979, Country Bankers issued to Harvardian a
fire insurance policy. On March 12, 1980, (39 days before I
was born… hehehehe )during the effectivity of said insurance
policy, the insured property was totally burned rendering it a
total loss.
> A claim was made by plaintiff upon defendant but
defendant denied it contending that plaintiff had no insurable
interest over the building constructed on the piece of land in
the name of the late Ildefonso Yap as owner.
> It was contended that both the lot and the building were
owned by Ildefonso Yap and NOT by the Harvardian Colleges.
Issue:
Whether or not Harvardian colleges has a right to the
proceeds.
Held:
Harvardian has a right to the proceeds. Regardless of the
nature of the title of the insured or even if he did not have
title to the property insured, the contract of fire insurance
should still be upheld if his interest in or his relation to the
property is such that he will be benefited in its continued
existence or suffer a direct pecuniary loss from its destruction
or injury. The test in determining insurable interest in
property is whether one will derive pecuniary benefit or
advantage from its preservation, or will suffer pecuniary loss
or damage from its destruction, termination or injury by the
happening of the event insured against.
Here Harvardian was not only in possession of the building
but was in fact using the same for several years with the
knowledge and consent of Ildefonso Yap. It is reasonably fair
to assume that had the building not been burned, Harvardian
would have been allowed the continued use of the same as
the site of its operation as an educational
institution. Harvardian therefore would have been directly
benefited by the preservation of the property, and certainly
suffered a pecuniary loss by its being burned.
36. Ang Ka Yu v Phoenix Assurance
Facts:
> Ang Ka Yu had a piece of property in his possession. He
insured it with Phoenix.
> The property was lost, so Ang Ka Yu sought to claim the
proceeds.
> Phoenix denied liability on the ground that Ang was not the
owner but a mere possessor and as such, had no insurable
interest over the property.
Issue:
Whether or not a mere possessor has insurable interest over
the property.
Held:
Yes. A person having a mere right or possession of property
may insure it to its full value and in his own name, even when
he is not responsible for its safekeeping. The reason is that
even if a person is NOT interested in the safety and
preservation of material in his possession because they
belong to 3rd parties, said person still has insurable interest,
because he stands either to benefit from their continued
existence or to be prejudiced by their destruction.
37. INSULAR LIFE V. FELICIANO - CONCEALMENT
Facts:
> Evaristo Feliciano filed an application with Insular Life upon
the solicitation of one of its agents.
> It appears that during that time, Evaristo was already
suffering from tuberculosis. Such fact appeared during the
medical exam, but the examiner and the company’s agent
ignored it.
> After that, Evaristo was made to sign an application form
and thereafter the blank spaces were filled by the medical
examiner and the agent making it appear that Evaristo was a
fit subject of insurance. (Evaristo could not read and
understand English)
> When Evaristo died, Insular life refused to pay the
proceeds because of concealment.
Issue:
Whether or not Insular Life was bound by their agent’s acts.

Held:
Yes.
The insurance business has grown so vast and lucrative within
the past century. Nowadays, even people of modest means
enter into insurance contracts. Agents who solicit contracts
are paid large commissions on the policies secured by
them. They act as general representatives of insurance
companies.
IN the case at bar, the true state of health of the insured was
concealed by the agents of the insurer. The insurer’s medical
examiner approved the application knowing fully well that
the applicant was sick. The situation is one in which of two
innocent parties must bear a loss for his reliance upon a third
person. In this case, it is the one who drafted and accepted
the policy and consummated the contract. It seems
reasonable that as between the two of them, the one who
employed and gave character to the third person as its agent
should be the one to bear the loss. Hence, Insular is liable to
the beneficiaries.
38. INSULAR LIFE V. FELICIANO
2nd FELICIANO CASE RULING:
Moreover, from the facts of the case we cannot escape the
conclusion that the insured acted in connivance with the
soliciting agent and the medical examiner of the Company in
accepting the policies in question. Above the signature of the
applicant is the printed statement or representation: " . . . I
am a proper subject for life insurance." In another sheet of
the same application and above another signature of the
applicant was also printed this statement: "That the said
policy shall not take effect until he first premium has been
paid and the policy as been delivered to and accepted by me,
while I am in good health." When the applicant signed the
application he was "having difficulty in breathing, . . . with a
very high fever." He had gone three times to the Santol
Sanatorium and had X-ray pictures taken of his lungs. He
therefore knew that he was not "a proper subject for life
insurance." When he accepted the policy, he knew that he
was not in good health. Nevertheless, he not only accepted
the first policy of P20,000 but then and there applied for and
later accepted another policy of P5,000.
We cannot bring ourselves to believe that the insured did not
take the trouble to read the answers contained in the
photostatic copy of the application attached to and made a
part of the policy before he accepted it and paid the premium
thereon. He must have notice that the answers to the
questions therein asked concerning his clinical history were
false, and yet he accepted the first policy and applied for
another. In any event, he obligated himself to read the policy
when he subscribed to this statement: "My acceptance of any
policy issued on this application will constitute a ratification
by me of any corrections in or additions to this application
made by the Company . . ." By accepting the policy he
became charged with knowledge of its contents, whether he
actually read it or not. He could not ostrich-like hide his head
from it in order to avoid his part of the bargain and at the
same time claim the benefit thereof. He knew, or was
chargeable with knowledge, from the very terms of the two
policies sued upon (one of which is printed in English and the
other in Spanish) that the soliciting agent and the medical
examiner had no power to bind the Company by any verbal
promise or oral representation. The insured, therefore, had
no right to rely — and we cannot believe he relied in good
faith — upon the oral representation. The insured, therefore,
had no right to rely — and we cannot believe he relied in
good faith — upon the oral representation of said agent and
medical examiner that he (the applicant) was a fit subject for
insurance notwithstanding that he had been and was still
suffering with advanced pulmonary tuberculosis.
From all the facts and circumstances of this case, we are
constrained to conclude that the insured was a coparticipant,
and coresponsible with Agent David and Medical Examiner
Valdez, in the fraudulent procurement of the policies in
question and that by reason thereof said policies are void ab
initio.
39. Sunlife v CA G.R. No. 105135 June 22, 1995
Facts:
Robert John B. Bacani procured a life insurance contract for
himself from Sunlife. He was issued a policy for P100,000.00,
with double indemnity in case of accidental death. The
designatedbeneficiary was his mother, Bernarda Bacani.
The insured died in a plane crash. Respondent Bernarda
Bacani filed a claim with petitioner, seeking the benefits
of the insurance policy taken by her son. Petitioner
conducted an investigation and its findings prompted it to
reject the claim.
Sunlife informed Bacani that the insured did not disclose
material facts relevant to the issuance of the policy, thus
rendering the contract of insurance voidable. A check
representing the total premiums paid in the amount of
P10,172.00 was attached to said letter.
Petitioner claimed that the insured gave false statements in
his application. The deceased answered claimed that he
consulted a Dr. Raymundo of the Chinese General Hospital
for cough and flu complications. The other questions were
answered in the negative.
Petitioner discovered that two weeks prior to his application
for insurance, the insured was examined and confined at the
Lung Center of the Philippines, where he was diagnosed for
renal failure. During his confinement, the deceased was
subjected to urinalysis tests.
Bernarda Bacani and her husband filed an action for specific
performance against petitioner with the RTC. The court ruled
in favor of the spouses and ordered Sunlife to pay
P100,000.00.
In ruling for private respondents, the trial court concluded
that the facts concealed by the insured were made in good
faith and under a belief that they need not be disclosed. The
court also held that the medial history was irrelevant because
it wasn’t medical insurance.
The Court of Appeals affirmed the decision of the trial court.
The appellate court ruled that petitioner cannot avoid its
obligation by claiming concealment because the cause of
death was unrelated to the facts concealed by the insured.
Petitioner's motion for reconsideration was denied. Hence,
this petition.
Issue: WON the insured was guilty
of misrepresentation which made the contract void.
Held: Yes. Petition dismissed.
Ratio:
Section 26 of The Insurance Code required a party to a
contract of insurance to communicate to the other, in good
faith, all facts within his knowledge which are material to the
contract and as to which he makes no warranty, and which
the other has no means of ascertaining.
“A neglect to communicate that which a party knows and
ought to communicate, is called concealment.”
“Materiality is to be determined not by the event, but solely
by the probable and reasonable influence of the facts upon
the party to whom communication is due, in forming his
estimate of the disadvantages of the proposed contract or in
making his inquiries.”
The terms of the contract are clear. The insured is specifically
required to disclose to the insurer matters relating to his
health.
The information which the insured failed to disclose were
material and relevant to the approval and issuance of the
insurance policy. The matters concealed would have
definitely affected petitioner's action on his application,
either by approving it with the corresponding adjustment for
a higher premium or rejecting the same. Moreover, a
disclosure may have warranted a medicalexamination of
the insured by petitioner in order for it to reasonably assess
the risk involved in accepting the application.
Vda. de Canilang v. Court of Appeals- materiality of the
information withheld does not depend on the state of mind
of the insured. Neither does it depend on the actual or
physical events which ensue.
“Good faith" is no defense in concealment. The insured's
failure to disclose the fact that he was hospitalized raises
grave doubts about his eligibility. Such concealment was
deliberate on his part.
The argument, that petitioner's waiver of the
medical examination of the insured debunks the materiality
of the facts concealed, is untenable.
Saturnino v. Philippine American Life Insurance " . . . the
waiver of a medical examination [in a non-medical insurance
contract] renders even more material the information
required of the applicant concerning previous condition of
health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into
consideration in deciding whether to issue the policy or not . .
."
Anent the finding that the facts concealed had no bearing to
the cause of death of the insured, it is well settled that the
insured need not die of the disease he had failed to disclose
to the insurer. It is sufficient that his non-disclosure misled
the insurer in forming his estimates of the risks of the
proposed insurance policy or in making inquiries as held in
Henson.
40. Vda Canilang v CA G.R. No. 92492 June 17, 1993
J. Feliciano
Facts:
Canilang was found to have suffered from
sinus tachycardia then bronchitis after a check-up from his
doctor. The next day, he applied for a "non-medical"
insurance policy with respondent Grepalife naming his wife,
Thelma Canilang, as his beneficiary. This was to the value of
P19,700.
He died of "congestive heart failure," "anemia," and "chronic
anemia." The widow filed a claim with Great Pacific which
the insurer denied on the ground that the insured had
concealed material information from it.
Petitioner then filed a complaint against Great Pacific for
recovery of the insurance proceeds. Petitioner testified that
she was not aware of any serious illness suffered by her late
husband and her husband had died because of a kidney
disorder. The doctor who gave the check up stated that he
treated the deceased for “sinus tachycardia” and
"acute bronchitis."
Great Pacific presented a physician who testified that the
deceased's insurance application had been approved on the
basis of his medical declaration. She explained that as a rule,
medical examinations are required only in cases where the
applicant has indicated in his application for insurance
coverage that he has previously undergone medical
consultation and hospitalization.
The Insurance Commissioner ordered Great Pacific to pay
P19,700 plus legal interest and P2,000.00 as attorney's fees.
On appeal by Great Pacific, the Court of Appeals reversed. It
found that the failure of Jaime Canilang to disclose previous
medical consultation and treatment constituted material
information which should have been communicated to Great
Pacific to enable the latter to make proper inquiries.
Hence this petition by the widow.
Issue: Won Canilang was guilty of misrepresentation
Held: Yes. Petition denied.
Ratio:
There was a right of the insurance company to rescind the
contract if it was proven that the insured committed fraud in
not affirming that he was treated for heart condition and
other ailmentsstipulated.
Apart from certifying that he didn’t suffer from such a
condition, Canilang also failed to disclose in the that he had
twice consulted a doctor who had found him to be suffering
from "sinustachycardia" and "acute bronchitis."
Under the Insurance Code:
Sec. 26. A neglect to communicate that which a party knows
and ought to communicate, is called a concealment.
Sec. 28. Each party to a contract of insurance must
communicate to the other, in good faith, all factors within his
knowledge which are material to the contract and as to which
he makes no warranty, and which the other has not the
means of ascertaining.
The information concealed must be information which the
concealing party knew and should have communicated. The
test of materiality of such information is contained in Section
31:
Sec. 31. Materiality is to be determined not by the event, but
solely by the probable and reasonable influence of the facts
upon the party to whom the communication is due, in
forming his estimate of the disadvantages of the proposed
contract, or in making his inquiries.
The information which Jaime Canilang failed to disclose was
material to the ability of Great Pacific to estimate the
probable risk he presented as a subject of life insurance. Had
he disclosed his visits to his doctor, the diagnosis made and
medicines prescribed by such doctor, in the insurance
application, it may be reasonably assumed that Great Pacific
would have made further inquiries and would have probably
refused to issue a non-medical insurance policy.
Materiality relates rather to the "probable and reasonable
influence of the facts" upon the party to whom the
communication should have been made, in assessing the risk
involved in making or omitting to make further inquiries and
in accepting the application for insurance; that "probable and
reasonable influence of the facts" concealed must, of course,
be determined objectively, by the judge ultimately.
The Insurance Commissioner had also ruled that the failure of
Great Pacific to convey certain information to the insurer was
not "intentional" in nature, for the reason that Canilang
believed that he was suffering from minor ailment like a
common cold. Section 27 stated that:
Sec. 27. A concealment whether intentional or unintentional
entitles the injured party to rescind a contract of insurance.
The failure to communicate must have been intentional
rather than inadvertent. Canilang could not have been
unaware that his heart beat would at times rise to high and
alarming levels and that he had consulted a doctor twice in
the two (2) months before applying for non-medical
insurance. Indeed, the last medical consultation took place
just the day before the insurance application was filed. In all
probability, Jaime Canilang went to visit his doctor precisely
because of the ailment.
Canilang's failure to set out answers to some of the questions
in the insurance application constituted concealment.
41. PHILAMCARE HEALTH SYSTEMS, INC., vs.COURT OF
APPEALS and JULITA TRINOS
Facts:
Ernani Trinos, deceased husband of JulitaTrinos, applied for a
health care coverage withPhilamcare Health Systems, Inc. In
thestandard application form, he answered “NO” to the
following question:
Have you or any of your family members ever consulted or
been treated for high blood pressure, heart trouble,
diabetes,cancer, liver disease, asthma or peptic ulcer? (If Yes,
give details).
Coverage of the health care agreement (HCA):
•approved for a period of one year, Renewed 3 times yearly:
March 1, 1988 - March 1, 1990; March 1, 1990 – June 1,
1990.The amount of coverage was increased to a maximum
sum of P75,000.00 per disability.
Ernani’s entitlement under HCA:
•hospitalization benefits, whether ordinary or emergency,
listed therein
•out-patient benefits" such as annual physical examinations,
preventive health care and other out-patient services
.Ernani was subsequently confined. HISTORY (everything
happened within the period of coverage):
1.Ernani suffered a heart attack and was confined at the
Manila Medical Center (MMC) for one month beginning
March 9, 1990.
2.Julita tried to claim the benefits under the health care
agreement.
3.Philamdenied her claim saying that the Health Care
Agreement was void. there was a concealment regarding
Ernani’s medicalhistory. Doctors at the MMC allegedly
discovered at the time of Ernani’s confinement that he was
hypertensive, diabetic andasthmatic, contrary to his answer
in the application form.
4.Julita paid the hospitalization expenses herself, amounting
to about P76,000.00
5.Ernani was discharged at MMC
6.He was attended by a physical therapist at home.
7.Again he was admitted at the Chinese General Hospital.
8.Julita brought her husband home again due to financial
difficulties.
9.In the morning of April 13, 1990, Ernani had fever and was
feeling very weak.
10.Julita was constrained to bring him back to the Chinese
General Hospital where he died on the same day.
On July 24, 1990, respondent instituted with the Regional
Trial Court of Manila, Branch 44, an action for damages
against Philam andits president, Dr. Benito Reverente, She
asked for reimbursement of her expenses plus moral
damages and attorney’s fees. After trial,the lower court ruled
against Philam, ordered:
1. Defendants to pay and reimburse the medical and hospital
coverage of the late ErnaniTrinos in the amount of
P76,000.00 plusinterest, until the amount is fully paid to
plaintiff who paid the same;
2. Defendants to pay the reduced amount of moral damages
of P10,000.00 to plaintiff;
3. Defendants to pay the reduced amount ofP10,000.00 as
exemplary damages to plaintiff;
4. Defendants to pay attorney’s fees of P20,000.00, plus costs
of suit.
CA: affirmed the decision of the trial court but deleted all
awards for damages and absolved petitioner
Reverente.Denied MR
HELD:
Petitioner cannot rely on the stipulation regarding
“Invalidation of agreement” which reads:
Failure to disclose or misrepresentation of any material
information by the member in the application or medical
examination, whether intentional or unintentional, shall
automatically invalidate the Agreement from the very
beginning and liability of Philamcare shall be limited to return
of all Membership Fees paid. An undisclosed or
misrepresented information is deemed material if its
revelation would have resulted in the declination of the
applicant by Philamcare or the assessment of a higher
Membership Fee for the benefit or benefits applied for.[13]
Where matters of opinion or judgment are called for, answers
made in good faith and without intent to deceive will not
avoid a policy even though they are untrue.[14] Thus,
although false, a representation of the expectation, intention,
belief, opinion, or judgment of the insured will not avoid the
policy if there is no actual fraud in inducing the acceptance of
the risk, or its acceptance at a lower rate of premium, and
this is likewise the rule although the statement is material to
the risk, if the statement is obviously of the foregoing
character, since in such case the insurer is not justified in
relying upon such statement, but is obligated to make further
inquiry.
The fraudulent intent on the part of the insured must be
established to warrant rescission of the insurance
contract.[16] Concealment as a defense for the health care
provider or insurer to avoid liability is an affirmative defense
and the duty to establish such defense by satisfactory and
convincing evidence rests upon the provider or insurer.
42. BONIFACIO BROS., INC. vs MORA
G.R. No. L-20853, May 29, 1967
FACTS:
 Enrique Mora is the owner of Oldsmobile sedan
model 1956 mortgaged to H.S. Reyes, Inc., with the
condition that the former would insure the
automobile with the latter as beneficiary. The car
was insured on June 23, 1959 with the State
Bonding & Insurance Co., Inc., and motor car
insurance policy A-0615 was issued to Enrique Mora,
the pertinent provisions of which read:
1. The Company (referring to the State Bonding &
Insurance Co., Inc.) will, subject to the Limits of
Liability, indemnify the Insured against loss of or
damages to the Motor Vehicle and its
accessories and spare parts whilst thereon; (a)
by accidental collision or overturning or collision
or overturning consequent upon mechanical
breakdown or consequent upon wear and tear,
2. At its own option the Company may pay in cash
the amount of the loss or damage or may repair,
reinstate, or replace the Motor Vehicle or any
part thereof or its accessories or spare parts.
The liability of the Company shall not exceed the
value of the parts whichever is the less. The
Insured's estimate of value stated in the
schedule will be the maximum amount payable
by the Company in respect of any claim for loss
or damage.
4. The Insured may authorize the repair of the
Motor Vehicle necessitated by damage for
which the Company may be liable under this
Policy provided that: — (a) The estimated cost
of such repair does not exceed the Authorized
Repair Limit, (b) A detailed estimate of the cost
is forwarded to the Company without delay,
subject to the condition that "Loss, if any is
payable to H.S. Reyes, Inc.," by virtue of the fact
that said Oldsmobile sedan was mortgaged in
favor of the said H.S. Reyes, Inc. and that under
a clause in said insurance policy, any loss was
made payable to the H.S. Reyes, Inc. as
Mortgagee;
 During the effectivity of the insurance contract, the
car met with an accident. The insurance company
then assigned the accident to the Bayne Adjustment
Co. for investigation and appraisal of the damage.
 Enrique Mora, without the knowledge and consent
of the H.S. Reyes, Inc., authorized the Bonifacio
Bros. Inc. to furnish the labor and materials, some of
which were supplied by the Ayala Auto Parts Co.
 For the cost of labor and materials, Enrique Mora
was billed at P2,102.73 through the H.H. Bayne
Adjustment Co.
 The insurance company after claiming a franchise in
the amount of P100, drew a check in the amount of
P2,002.73, as proceeds of the insurance policy,
payable to the order of Enrique Mora or H.S.
Reyes,. Inc., and entrusted the check to the H.H.
Bayne Adjustment Co. for disposition and delivery to
the proper party.
 In the meantime, the car was delivered to Enrique
Mora without the consent of the H.S. Reyes, Inc.,
and without payment to the Bonifacio Bros. Inc.
 and the Ayala Auto Parts Co. of the cost of repairs
and materials.
 Upon the theory that the insurance proceeds should
be paid directly to them, the Bonifacio Bros. Inc. and
the Ayala Auto Parts Co. filed on May 8, 1961 a
complaint with the Municipal Court of Manila
against Enrique Mora and the State Bonding &
Insurance Co., Inc. for the collection of the sum of
P2,002.73
 However, the counsel for the Bonifacio Bros. Inc.,
Ayala Auto Parts Co. and State Bonding & Insurance
Co. Inc. submitted a stipulation of facts, on the basis
of which are Municipal Court rendered a decision
declaring the H.S. Reyes, Inc. as having a better
right to the disputed amount and ordering State
Bonding & Insurance Co. Inc. to pay to the H. S.
Reyes, Inc. the said sum of P2,002.73.
ISSUES:
o Who had the better right to the insurance proceeds?
(Bonifacio Bros and Ayala Auto Parts or H.S. Reyes,
Inc. – the mortgagee?)
o Whether there is privity of contract between the
Bonifacio Bros. Inc. and the Ayala Auto Parts Co. on
the one hand and the insurance company on the
other.
RULING:
o The appellants seek to recover the insurance
proceeds, and for this purpose, they rely upon
paragraph 4 of the insurance contract document
executed by and between the State Bonding &
Insurance Company, Inc. and Enrique Mora. The
appellants are not mentioned in the contract as
parties thereto nor is there any clause or provision
thereof from which we can infer that there is an
obligation on the part of the insurance company to
pay the cost of repairs directly to them. It is
fundamental that contracts take effect only between
the parties thereto, except in some specific instances
provided by law where the contract contains some
stipulation in favor of a third person. Such
stipulation is known as stipulation pour autrui or a
provision in favor of a third person not a party to the
contract.
 Under this doctrine, a third person
is allowed to avail himself of a
benefit granted to him by the
terms of the contract, provided
that the contracting parties have
clearly and deliberately conferred
a favor upon such person
 stipulation pour autrui must be
clearly expressed by the parties
In this connection, this Court has laid down the rule that the
fairest test to determine whether the interest of a third
person in a contract is a stipulation pour autrui or merely an
incidental interest, is to rely upon the intention of the
parties as disclosed by their contract. In the instant case the
insurance contract does not contain any words or clauses to
disclose an intent to give any benefit to any repairmen or
materialmen in case of repair of the car in question.
o On the other hand, the "loss payable" clause of the
insurance policy stipulates that "Loss, if any, is
payable to H.S. Reyes, Inc." indicating that it was
only the H.S. Reyes, Inc. which they intended to
benefit.
 Section 50 of the Insurance Act:
The insurance shall be applied
exclusively to the proper interests
of the person in whose name it is
made unless otherwise specified in
the policy.
o As regards paragraph 4 of the insurance contract, a
perusal thereof would show that such stipulation
merely establishes the procedure that the insured
has to follow in order to be entitled to indemnity
for repair. This paragraph therefore should not be
construed as bringing into existence in favor of the
appellants a right of action
o "A policy of insurance is a distinct and independent
contract between the insured and insurer, and third
persons have no right either in a court of equity, or
in a court of law, to the proceeds of it, unless there
be some contract of trust, expressed or implied
between the insured and third person." The
appellants' claim, if at all, is merely equitable in
nature and must be made effective through Enrique
Mora who entered into a contract with the Bonifacio
Bros. Inc.
o Obiter: The final contention of the appellants is that
the right of the H.S. Reyes, Inc. to the insurance
proceeds arises only if there was loss and not where
there is mere damage as in the instant case. Suffice
it to say that any attempt to draw a distinction
between "loss" and "damage" is uncalled for,
because the word "loss" in insurance law embraces
injury or damage.
 Loss in insurance, defined. — The
injury or damage sustained by the
insured in consequence of the
happening of one or more of the
accidents or misfortune against
which the insurer, in consideration
of the premium, has undertaken to
indemnify the insured.
43. FIRST INTEGRATED BONDING & INSURANCE COMPANY,
INC., vs HERNANDO
G.R. No. L-51221 July 31, 1991
FACTS:
  Silverio Blanco was the owner of a passenger
jeepney which he insured against liabilities for
death and injuries to third persons with First
Integrated Bonding and Insurance Company, Inc.
(First Insurance) under Motor Vehicle Policy No. V-
0563751 with the face value of P30,000.00
 On November 25, 1976, the said jeepney driven by
Blanco himself bumped a five-year old child,
Deogracias Advincula, causing the latter's death.
 A complaint for damages was brought by the child's
parents, against Silverio Blanco. First Insurance was
also impleaded in the complaint as the insurer.
 RTC decision: for moral damages, this court
adjudicates to the plaintiffs P5,000.00; for the life of
Deogracias Advincula P12,000.00, for funeral
expenses, P3,663.50 and for attomey's fees,
P3,000.00 or in the total amount of P23,663.50 nd
the balance of P6,336.50 shall also be paid by said
defendant Insurance Company to the defendant
Silverio Blanco. The grand total under the insurance
policy, Exhibit H, is P30,000.00.
ISSUE:
o Whether the parents of the child (the Advincula
spouses) can claim from or proceed directly against
First Integrated even if they are not parties to the
insurance contract
RULING:
o It is settled that where the insurance contract
provides for indemnity against liability to a third
party, such third party can directly sue the insurer
(Caguia v. Fieldman's Insurance)
o The liability of the insurer to such third person is
based on contract while the liability of the insured to
the third party is based on tort
o The injured for whom the contract of insurance is
intended can sue directly the insurer, this so to
protect the 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. “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.”
o 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.
o 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. The victims and/or their
dependents are assured of immediate financial
assistance, 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. Its liability is primary and not
dependent on the recovery of judgment from the
insured.
o As to the negligence of Blanco, no objections were
raised by him; decision became final and may no
longer be attacked. As to First Integrated, it was
declared in default for its failure to file an Answer
and failure to raise triable issues.
o It appears that the award of damages in favor of
Blanco has no basis. The complaint in Civil case 1104
was for damages brought by the spouses against
Blanco and First Insurance. Blanco did not put up any
claim against the latter. However, since the said
decision had already become final and executory, it
can no longer be corrected or amended. In the
same vein, the claim of petitioner that its liability to
third parties under the insurance policy is limited to
P20,000.00 only can no longer be given
consideration at this late stage, when the decision of
the trial court awarding damages had already
become final and executory.
44. SHERMAN SHAFER vs. HON. JUDGE, RTC OF OLONGAPO
CITY
G.R. No. 78848, November 14, 1988
 Sherman Shafer obtained a private car policy, GA
No. 0889, over his Ford Laser car from Makati
Insurance Company, Inc., for third party liability
(TPL). During the effectivity of the policy, an
information for reckless imprudence resulting in
damage to property and serious physical injuries
was filed against petitioner.
 hit and bump a Volkswagen car
owned and driven by Felino llano y
Legaspi, thereby causing damage in
the total amount of P12,345.00
Pesos and as a result thereof one
Jovencio Poblete, Sr. who was on
board of the said Volkswagen car
sustained physical injuries
 The owner of the damaged Volkswagen car filed a
separate civil action against petitioner for damages,
while Jovencio Poblete, Sr. 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
 Petitioner was granted leave by the trail court to file
a third party complaint against the herein private
respondent, Makati Insurance Company
  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 (insured) is found guilty and sentenced to
pay the offended party (Poblete Sr.) indemnity or
damages, the third party complaint is without
cause of action; to wait for the outcome of the
criminal aspect of the case
ISSUE:
o Whether or not Sherman can file a 3rd party
complaint against the insurer and whether the
insurer is liable to pay the proceeds to the injured
third party
RULING:
o 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.
o 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.
o The injured for whom the contract of insurance is
intended can sue directly the insurer. In order 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. 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.
o 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.
G. INCONTESTABLE CLAUSE
45. TAN vs CA, 174 SCRA 403
G.R. No. 48049, June 29, 1989
The period to consider in a life insurance poiicy is “two years”
from the date of issue or of the last reinstatement. So if for
example the policy was issued/reinstated on Jan 1, 2000, the
insurer can still exercise his right to rescind up to Jan. 1, 2003
or two years from the date of issue/reinstatement,
REGARDLESS of whether the insured died before or after Jan.
1, 2003.
FACTS:
 In September 1973, Tan Lee Siong (Father of the
petitioners) applied for a life insurance under
Philippine American Life Insurance Company in the
amount of P80,000.00 with petitioners the
beneficiaries.
 He stated in the application form that he has no
health issues whatsoever. On April 26,1975, Tan Lee
Siong died of hepatoma.
 His sons filed an insurance claim but PHILAMLIFE
denied the same as it alleged that Tan Lee Siong
concealed the fact that he was hypertensive,
diabetic, and was suffering from hepatoma at the
time of his application for the insurance.
 PHILAMLIFE rescinded the policy by reason of the
alleged misrepresentation and concealment of
material facts made by the deceased Tan Lee Siong
in his application for insurance. The premiums paid
on the policy were thereupon refunded.
 The beneficiaries averred that PHILAMLIFE can no
longer rescind the insurance contract because the
insured is already dead. They invoke Section 48 of
the Insurance Code which they interpreted to mean
that an insurer can only rescind an insurance
contract during the lifetime of the insured; and that
such rescission should be done within two years
prior to the filing of a suit involving the insurance.
ISSUE:
o Whether or not the interpretation of the Tan
brothers is correct.
RULING:
o No. The pertinent section in the Insurance Code
provides:
 Section 48. Whenever a right to rescind
a contract of insurance is given to the
insurer by any provision of this chapter,
such right must be exercised previous to
the commencement of an action on the
contract.
After a policy of life insurance made payable on the death of
the insured shall have been in force during the lifetime of the
insured for a period of two years from the date of its issue or
of its last reinstatement, the insurer cannot prove that the
policy is void ab initio or is rescindable by reason of the
fraudulent concealment or misrepresentation of the insured
or his agent.
o The so-called “incontestability clause” precludes
the insurer from raising the defenses of false
representations or concealment of material facts
insofar as health and previous diseases are
concerned if the insurance has been in force for at
least two years during the insured’s lifetime.
According to petitioners, the phrase “during the
 lifetime” found in Section 48 simply means that the
policy is no longer considered in force after the
insured has died. The key phrase in the second
paragraph of Section 48 is “for a period of two
years.”
o The policy was thus in force for a period of only one
year and five months. Considering that the insured
died before the two-year period had lapsed,
respondent company is not, therefore, barred from
proving that the policy is void ab initio by reason of
the insured's fraudulent concealment or
misrepresentation.
o Moreover, respondent company rescinded the
contract of insurance and refunded the premiums
paid on September 11, 1975, previous to the
commencement of this action on November
27,1975.
o The insurer has two years from the date of issuance
of the insurance contract or of its last
reinstatement within which to contest the policy,
whether or not, the insured still lives within such
period. After two years, the defenses of
concealment or misrepresentation, no matter how
patent or well founded, no longer lie.
o Petitioners argue that no evidence was presented by
respondent company to show that the questions
appearing in Part II of the application for insurance
were asked, explained to and understood by the
deceased: SC - The deceased, by affixing his
signature on the application form, affirmed the
correctness of all the entries and answers appearing
therein. It is but to be expected that he, a
businessman, would not have affixed his signature
on the application form unless he clearly understood
its significance. For, the presumption is that a person
intends the ordinary consequence of his voluntary
act and takes ordinary care of his concerns.
o Concealment - September 19,1972, the deceased
was examined by Dr. Victoriano Lim and was found
to be diabetic and hypertensive; January, 1973, the
deceased was complaining of progressive weight loss
and abdominal pain and was diagnosed to be
suffering from hepatoma
o Because of the concealment made by the deceased
of his consultations and treatments for
hypertension, diabetes and liver disorders,
respondent company was thus misled into accepting
the risk and approving his application as medically
standard
o Obiter: There is no strong showing that we should
apply the "fine print" or "contract of adhesion" rule
in this case - no showing that the questions in the
application form for insurance regarding the
insured's medical history are in smaller print than
the rest of the printed form or that they are
designed in such a way as to conceal from the
applicant their importance.
46. Development Insurance Corp v IAC
Facts:
A fire occurred in the building of Philippine Union. It
sued for recovery of damages from the petitioner on
the basis of an insurance contract between them. The
petitioner failed to answer on time despite the
numerous extensions it asked for. It was declared in
default by the trial court. A judgment of default was
subsequently rendered on the strength of the evidence
given by the private respondent, which was allowed
damages. The petitioner moved to lift the order of
default. Its motion was denied. It went to the appellate
court, which affirmed the decision of the trial court.
Hence this appeal.
Issue: Was Philippine Union required to jointly
indemnify the building?
Held: No. Petition dismissed. The policy insured the
private respondent's building against fire for
P2,500,000.00. The petitioner argued that the
respondent must share the difference between that
amount and the face value of the policy and the loss
sustained for 5.8 million under Condition 17 of the
policy. The building was insured at P2,500,000.00 by
agreement of the insurer and the insured. The
agreement is known as an open policy and is subject to
the express condition that: “In the event of loss,
whether total or partial, it is understood that the
amount of the loss shall be subject to appraisal and the
liability of the company, if established, shall be limited
to the actual loss, subject to the applicable terms,
conditions, warranties and clauses of this Policy, and in
no case shall exceed the amount of the policy.” Section
60 of the Insurance Code defines an open policy is one
in which the value of the thing insured is not agreed
upon but is left to be ascertained in case of loss." This
means that the actual loss, as determined, will
represent the total indemnity due the insured from the
insurer except only that the total indemnity shall not
exceed the face value of the policy. The actual loss has
been ascertained in this case. Hence, applying the open
policy clause as expressly agreed upon, the private
respondent is entitled to indemnity in the total amount
of P508,867.00. The refusal of its vice-president to
receive the private respondent's complaint was the first
indication of the petitioner's intention to prolong this
case and postpone the discharge of its obligation to the
private respondent under this agreement. They still
evaded payment for 5 years.

47. Sun Insurance Office Ltd v CA
Facts:
Sun Insurance Office Ltd. issued Personal Accident
Policy 05687 to Felix Lim, Jr. with a face value
ofP200,000.00. Two months later, he was dead with a
bullet wound in his head. As beneficiary, his wife
Nerissa Lim sought payment on the policy but her claim
was rejected. Sun Insurance agreed that there was no
suicide. It argued, however, that there was no accident
either. Pilar Nalagon, Lim's secretary, was the only
eyewitness to his death. It happened on 6 October
1982, at about 10 p.m., after his mother's birthday
party. According to Nalagon, Lim was in a happy mood
(but not drunk) and was playing with his handgun, from
which he had previously removed the magazine. As she
watched the television, he stood in front of her and
pointed the gun at her. She pushed it aside and said it
might be loaded. He assured her it was not and then
pointed it to his temple. The next moment there was an
explosion and Lim slumped to the floor. He was dead
before he fell. The widow sued Sun Insurance in the
Regional Trial Court of Zamboanga City and was
sustained. Sun Insurance was sentenced to pay
her P200,000.00, representing the face value of
the policy, with interest at the legal rate; P10,000.00
as moral damages; P5,000.00 as exemplary damages;
P50,000.00 as actual and compensatory damages; and
P5,000.00 as attorney's fees, plus the cost of the suit.
This decision was affirmed on appeal, and the motion
for reconsideration was denied. Sun Insurance then
came to the Supreme Court.
Issue:
Whether the insured willfully exposed himself to
needless peril and thus removed himself from the
coverage of the insurance policy.
Held:
NO. An accident is an event which happens without any
human agency or, if happening through human agency,
an event which, under the circumstances, is unusual to
and not expected by the person to whom it happens. It
has also been defined as an injury which happens by
reason of some violence or casualty to the insured
without his design, consent, or voluntary co-operation.
Herein, the incident that resulted in Lim'sdeath was
indeed an accident. On the other hand, the parties
agree that Lim did not commit suicide. Nevertheless,
Sun Insurance contends that the insured willfully
exposed himself to needless peril and thus removed
himself from the coverage of the insurance policy. It
should be noted at the outset that suicide and willful
exposure to needless peril are in pari materia because
they both signify a disregard for one's life. The only
difference is in degree, as suicide imports a positive act
of ending such life whereas the second act indicates a
reckless risking of it that is almost suicidal in intent. The
posture -- that by the mere act of pointing the gun to
his temple, Lim had willfully exposed himself to
needless peril and so came under the exception -- is
arguable. But what is not is that Lim had removed the
magazine from the gun and believed it was no longer
dangerous. He expressed assured her that the gun was
not loaded. It is submitted that Lim did not willfully
expose himself to needless peril when he pointed the
gun to his temple because the fact is that he thought it
was not unsafe to do so. The act was precisely intended
to assure Nalagon that the gun was indeed harmless.
Lim was unquestionably negligent and that negligence
cost him his own life. But it should not prevent his
widow from recovering from the insurance policy he
obtained precisely against accident. There is nothing in
the policy that relieves the insurer of the responsibility
to pay the indemnity agreed upon if the insured is
shown to have contributed to his own accident. Indeed,
most accidents are caused by negligence. There are only
four exceptions expressly made in the contract to
relieve the insurer from liability, and none of these
exceptions is applicable in the present case. It bears
noting that insurance contracts are as a rule supposed
to be interpreted liberally in favor of the assured. There
is no reason to deviate from this rule, especially in view
of the circumstances of the case.
48. Vda. de Gabriel v CA
Facts:
Marcelino Gabriel, the insured, was employed by
Emerald Construction & Development
Corporation(ECDC) at its construction project in Iraq. He
was covered by a personal accident insurance in the
amount ofP100,000.00 under a group policy procured
from Fortune Insurance & Surety Company Inc. by ECDC
for itso verseas workers. The insured risk was for
"bodily injury caused by violent accidental external and
visible means which injury would solely and
independently of any other cause" result in death or
disability. On 22May 1982, within the life of the policy,
Gabriel died in Iraq. A year later, or on 12 July 1983,
ECDC reported Gabriel's death to Fortune by telephone.
Among the documents thereafter submitted to Fortune
were a copy of the death certificate 5 issued by
the Ministry of Health of the Republic of Iraq — which
stated "REASON OFDEATH: UNDER EXAMINATION NOW
— NOT YET KNOWN " and an autopsy report of the
National Bureau of Investigation (NBI) to the effect that
"due to advanced state of post mortem decomposition,
cause of death could not be determined." In addition,
Fortune raised the defense of "prescription," invoking
Section 384 10 of the Insurance Code.
Issue:
Whether prescription was properly invoked by
Fortune in this case.
Held:
YES. On the issue of "prescription," Fortune correctly
invoked Section 384 of the Insurance Code which
provides that "Any person having any claim upon the
policy issued pursuant to this chapter shall, without any
unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the
nature, extent and duration of the injuries sustained as
certified by a duly licensed physician. Notice of claim
must be filed within six months from date of the
accident, otherwise, the claim shall be deemed waived.
Action or suit for recovery of damage due to loss or
injury must be brought, in proper cases, with the
Commissioner or the Courts within one year from
denial of the claim, otherwise, the claimant's right of
action shall prescribe." The notice of death was given to
Fortune, concededly, more than a year after the death
of Vda. de Gabriel's husband. Fortune, in invoking
prescription, was not referring to the one-year period
from the denial of the claim within which to file an
action against an insurer but obviously to the written
notice of claim that had to be submitted within six
months from the time of the accident. On the other
hand, there is absolutely no basis in fact and in law to
hold that the insurance company was deemed to have
waived – by failing to have its answers (to the Request
for Admission) duly verified -- the defense, that the
death of Vda.de Gabriel's husband was not caused by
violent accidental external and visible means' as
contemplated in the insurance policy. The
Death Certificate and the Autopsy Report, more
than controverted the allegation of Vda.de Gabriel as to
the cause of death of her husband.
49. Malayan Insurance Co v Cruz Arnaldo
Facts:
On June 7, 1981, the petitioner (MICO) issued to the
private respondent, Coronacion Pinca, Fire Insurance
Policy No. F-001-17212 on her property for the amount
of P14,000.00. On October 15,1981, MICO allegedly
cancelled the policy for non-payment, of the premium
and sent the corresponding notice to Pinca. On
December 24, 1981, payment of the premium for Pinca
was received by Domingo Adora, agent of MICO. On
January 15, 1982, Adora remitted this payment to
MICO, together with other payments. On January 18,
1982, Pinca's property was completely burned. On
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. Pinca
made demands for payment but MICO rejected it in the
ground of non-payment of premium.
Issue:
WON the insurance policy is not valid due to non-
payment of premium
Held:
The Court held that the insurance policy is valid because
payment of the premium was in fact eventually made.
The premium invoice issued to Pinca at the time of the
delivery of the policy on June 7, 1981 was stamped
"Payment Received" of the amount of P930.60 on "12-
24-81" by Domingo Adora. This is important because it
suggests an understanding between MICO and the
insured that such payment could be made later, as
agent Adora had assured Pinca. In any event, it is not
denied that this payment was actually made by Pinca to
Adora, who remitted the same to MICO.
The payment was made on December 24, 1981, and the
fire occured on January 18, 1982. We do not share
MICO's view that there was no existing insurance at the
time of the loss sustained by Pinca because her policy
never became effective for non-payment of premium.
Payment was in fact made, rendering the policy
operative as of June 22, 1981, and removing it from the
provisions of Article 77. We see in this case an obvious
design to evade or at least delay the discharge of a just
obligation.
50. Makati Tuscany Condominium Corp v CA
Facts:
Private respondent American Home Assurance Co.
(AHAC), represented by American International
Underwriters (Phils.), Inc., issued in favor of petitioner
Makati Tuscany Condominium Corporation (TUSCANY)
three insurance policies covering the years 1982-1985
on the latter’s buildings and premises of which the
payment of the premium was made on an installment
basis all of which were accepted by the private
respondents. On the third policy covering for 1984-
1985, TUSCANY made two instalments however
thereafter refused to pay the balance of the premium.
Consequently, private respondent filed an action to
recover the unpaid balance of P314,103.05 for the third
policy. Petitioner refused to pay on the ground that
there cannot be a perfected contract of insurance upon
mere partial payment of the premiums because under
Sec. 77 of the Insurance Code, no contract of insurance
is valid and binding unless the premium thereof has
been paid.
Issue:
Whether or not payment by installment of the
premiums due on an insurance policy invalidates the
contract of insurance, in view of Sec. 77 of P.D. 612.
Held:
No. While the import of Section 77 is that prepayment
of premiums is strictly required as a condition to the
validity of the contract, We are not prepared to rule
that the request to make installment payments duly
approved by the insurer, would prevent the entire
contract of insurance from going into effect despite
payment and acceptance of the initial premium or first
installment. Section 78 of the Insurance Code in effect
allows waiver by the insurer of the condition of
prepayment by making an acknowledgment in the
insurance policy of receipt of premium as conclusive
evidence of payment so far as to make the policy
binding despite the fact that premium is actually
unpaid. 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. So is an understanding to
allow insured to pay premiums in installments not so
proscribed. At the very least, both parties should be
deemed in estoppel to question the arrangement they
have voluntarily accepted. Parties actually intended to
make three (3) insurance contracts valid, effective and
binding, petitioner may not be allowed to renege on its
obligation to pay the balance of the premium.
51. South Sea Surety and Insurance Co v CA
Facts:
On 16 January 1984, Valenzuela Hardwood and
Industrial Supply, Inc. entered into an agreement with
the defendant Seven Brothers whereby the latter
undertook to load on board its vessel M/V Seven
Ambassador the former's round logs. On 20 January
1984, Hardwood insured the logs, against loss and/or,
damage with defendant South Sea Surety and Insurance
Co., Inc. for P2,000,000.00 and the latter issued its
Marine Cargo Insurance Policy No. 84/24229 for
P2,000,000.00 on said date. On 24 January 1984, the
plaintiff gave the check in payment of the premium on
the insurance policy to Mr. Victorio Chua. The said
vessel M/V Seven Ambassador sank on 25 January 1984
resulting in the loss of the plaintiffs insured logs. South
Sea Surety and Insurance Co., Inc. cancelled the
insurance policy it issued as of the date of inception for
non-payment of the premium due in accordance with
Section 77 of the Insurance Code.
Issue:
Whether or not Victorio Chua, in receiving the check for
the insurance premium prior to the occurrence of the
risk insured against has so acted as an agent of
petitioner.
Held:
Yes. The Marine Cargo Insurance Policy No. 84/24229
was issued by defendant insurance company on 20
January 1984. At the time the vessel sank on 25 January
1984 resulting in the loss of the insured logs, the
insured had already delivered to Victorio Chua the
check in payment of premium. Mr. Chua is an
administrative assistant for the past ten years and an
agent for less than ten years. He is paid a salary as an
administrative assistant and a commission as agent
based on the premiums he turns over to the broker.
Under the second paragraph of Section 306 of the
Insurance Code provide as follows:
Sec. 306. . . . Any insurance company which
delivers to an insurance agent or insurance
broker a policy or contract of insurance shall be
deemed to have authorized such agent or
broker to receive on its behalf payment of any
premium which is due on such policy of
contract of insurance at the time of its issuance
or delivery or which becomes due thereon.
When the appellant South Sea Surety and Insurance
Co., Inc. delivered to Mr. Chua the marine cargo
insurance policy for the plaintiffs logs, he is deemed to
have been authorized by the South Sea Surety and
Insurance Co., Inc. to receive the premium which is due
on its behalf. Thus, South Sea which is liable to pay the
insurance proceeds.
52. Tibay v CA
Facts:
On 22 January 1987 private respondent Fortune Life
and General Insurance Co., Inc. (FORTUNE) issued Fire
Insurance Policy in favor of Violeta R. Tibay and/or
Nicolas Roraldo on their two-storey residential building
located at Makati City, together with all their personal
effects therein. The insurance was for P600,000.00
covering the period from 23 January 1987 to 23 January
1988. On 23 January 1987, of the total premium of
P2,983.50, petitioner Violeta Tibay only paid P600.00
thus leaving a considerable balance unpaid. On 8 March
1987 the insured building was completely destroyed by
fire. Two days later or on 10 March 1987 Violeta Tibay
paid the balance of the premium. On the same day, she
filed with FORTUNE a claim on the fire insurance policy.
FORTUNE denied the claim of Violeta for violation of
Policy Condition No. 2 and of Sec. 77 of the Insurance
Code.
Issue:
May a fire insurance policy be valid, binding and
enforceable upon mere partial payment of premium?
Held:
No. In the case at bar, the Policy clearly provides for
payment of premium in full. Accordingly, where the
premium has only been partially paid and the balance
paid only after the peril insured against has occurred,
the insurance contract did not take effect and the
insured cannot collect at all on the policy. This is fully
supported by Sec. 77 of the Insurance Code. The
insurance contract itself expressly provided that the
policy would be effective only when the premium was
paid in full. It would have been altogether different
were it not so stipulated. Ergo, petitioners had absolute
freedom of choice whether or not to be insured by
FORTUNE under the terms of its policy and they freely
opted to adhere thereto. For it cannot be disputed that
premium is the elixir vitae of the insurance business
because by law the insurer must maintain a legal
reserve fund to meet its contingent obligations to the
public, hence, the imperative need for its prompt
payment and full satisfaction.
53. Paulin v Insular
54. UCPB General Insurance Co. v Masagana Telemart
(1999) 308 SCRA 259
Facts:
In 1991, UCPB issued 5 fire insurance policies covering
Masagana Telamart’s various properties for the period
from 22 May 1991 to 22 May 1992. On March 1992 (2
months before policy expiration), UCPB evaluated the
policies and decided not to renew them upon
expiration of their terms on 22 May 1992. On April
1992 (1 month before policy expiration), UCPB gave
written notice to Masagana of the non-renewal of the
policies. On June 1992 (policy already
expired), Masagana’s property covered by 3 UCPB-
issued policies was razed by fire.
On 13 July 1992, Masagana presented to UCPB’s cashier
5 manager's checks, representing premium for the
renewal of the policies for another year. It was only on
the following day, 14 July 1992, when Masagana filed
with UCPB a formal claim for indemnification of the
insured property razed by fire. On the same day, UCPB
returned the 5 manager's checks, and rejected
Masagana’s claim since the policies had expired and
were not renewed, and the fire occurred on 13 June
1992, before tender of premium payment.
Issue:
WON the fire insurance policies had expired on 22 May
1992, or had been extended or renewed by an implied
credit arrangement though actual payment of premium
was tendered on a later date after the occurrence of
the risk.
Held:
The fire insurance policies had already expired. An
insurance policy, other than life is not valid and binding
until actual payment of the premium. Any agreement
to the contrary is void. The parties may not agree
expressly or impliedly on the extension of credit or time
to pay the premium and consider the policy binding
before actual payment. The case of Malayan Insurance
v. Cruz-Arnaldo cited by the CA is not applicable. In that
case, payment of the premium was made on before the
occurrence of the fire. In the present case, the payment
of the premium for renewal of the policies was
tendered a month after the fire occurred. Masagana
did not even give UCPB a notice of loss within a
reasonable time after occurrence of the fire.
55. UCPB General Insurance Co. v Masagana Telemart
(2001)
Facts:
The following facts have been established:
1. For years, UCPB had been issuing fire policies to the
Masagana, and these policies were annually renewed.
2. UCPB had been granting Masagana a 60-90-day
credit term within which to pay the premiums on the
renewed policies.
3. There was no valid notice of non-renewal of the
policies, as there is no proof that the notice sent by
ordinary mail was received by Masagana, and the copy
allegedly sent to Zuellig was ever transmitted to
Masagana.
4. The premiums for the policies were paid by
Masagana within the 60- 90-day credit term and were
duly accepted and received by UCPB’s cashier.
Issue:
Whether or not Sec.77 of the Insurance Code must be
strictly applied to UCPB’s advantage despite its practice
of granting a 60- to 90-day credit term for the payment
of premiums.
Held:
No. Masagana wins this time; the 1999 decision is set
aside; CA decision affirmed. Section 77 does not restate
the portion of Section 72 of the old Insurance Code
(formerly Act 2427) expressly permitting an agreement
to extend the period to pay the premium. However,
there are exceptions to Section 77:
1. In case of a life or industrial life policy whenever
the grace period provision applies [Sec. 77]
2. Any acknowledgment of the receipt of
premium is conclusive evidence of payment
[Sec. 78]
3. If the parties have agreed to the payment
in installments of the premium and partial
payment has been made at the time of
loss [Makati Tuscany Condominium v. CA]
4. The insurer may grant credit extension for the
payment of the premium [Makati Tuscany
Condominium]
5. Estoppel
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.
[Makati Tuscany Condominium v. CA]
ON EXCEPTION #4. If the insurer has granted the
insured a credit term for the payment of the premium
and loss occurs before the expiration of the term,
recovery on the policy should be allowed even though
the premium is paid after the loss but within the credit
term. It would be unjust and inequitable if recovery on
the policy would not be permitted against UCPB, which
had consistently granted a 60-90-day credit term for the
payment of premiums despite its full awareness of
Section 77. Estoppel bars it from taking refuge under
said section, since Masagana relied in good faith on
such practice.
56. American Home Assurance Co v Chua
Facts:
Chua obtained from American Home a fire insurance
covering the stock-in-trade of his business. The
insurance was due to expire on March 25, 1990. On
April 5, 1990, Chua issued a check for P2,983.50 to
American Home’s agent, James Uy, as payment for
the renewal of the policy. The official receipt was issued
on April 10. In turn, the latter a renewal certificate. A
new insurance policy was issued where petitioner
undertook to indemnify respondent for any damage or
loss arising from fire up to P200,000 March 20, 1990 to
March 25, 1991. On April 6, 1990, the business was
completely razed by fire. Total loss was estimated
between P4,000,000 and P5,000,000. Respondent filed
an insurance claim with petitioner and four other co-
insurers, namely, Pioneer Insurance, Prudential
Guarantee, Filipino Merchants and Domestic
Insurance. Petitioner refused to honor the claim hence,
the respondent filed an action in the trial court.
American Home claimed there was no existing contract
because respondent did not pay the premium. Even
with a contract, they contended that he was ineligible
because of his fraudulent tax returns, his failure to
establish the actual loss and his failure to notify to
petitioner of any insurance already effected.
Issues:
1. Whether there was a valid payment of premium,
considering that respondent’s check was cashed after
the occurrence of the fire
2. Whether respondent violated the policy by his
submission of fraudulent documents and non-disclosure
of the other existing insurance contracts
Held:
1. The trial court found, as affirmed by the Court of
Appeals, that there was a valid check payment by
respondent to petitioner. The court respected this.
The renewal certificate issued to respondent contained
the acknowledgment that premium had been paid.
In the instant case, the best evidence of such authority
is the fact that petitioner accepted the check and issued
the official receipt for the payment. It is, as well, bound
by its agent’s acknowledgment of receipt of payment.
Section 78 of the Insurance Code explicitly provides:
An acknowledgment in a policy or contract of insurance
of the receipt of premium is conclusive evidence of its
payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not
be binding until the premium is actually paid.
2. Submission of the alleged fraudulent documents
pertained to respondent’s income tax returnsfor 1987
to 1989. Respondent, however, presented a BIR
certification that he had paid the proper taxes for the
said years. Since this is a question of fact, the finding is
conclusive. Ordinarily, where the insurance policy
specifies as a condition the disclosure of existing co-
insurers, non-disclosure is a violation that entitles the
insurer to avoid the policy. The purpose for the
inclusion of this clause is to prevent an increase in the
moral hazard. The relevant provision is Section 75,
which provides that: A policy may declare that a
violation of specified provisions thereof shall avoid it,
otherwise the breach of an immaterial provision does
not avoid the policy. Respondent acquired several co-
insurers and he failed to disclose this information to
petitioner. Nonetheless, petitioner is estopped from
invoking this argument due to the loss adjuster’s
admission of previous knowledge of the co-insurers. It
cannot be said that petitioner was deceived by
respondent by the latter’s non-disclosure of the other
insurance contracts when petitioner actually had prior
knowledge thereof. The loss adjuster, being an
employee of petitioner, is deemed a representative of
the latter whose awareness of the other insurance
contracts binds petitioner.
57. Pioneer Insurance and Surety v Yap
Facts:
Respondent Oliva Yap was the owner of a store in a
two-storey building where she sold shopping bags and
footwear. Chua Soon Poon, her son-in-law, was in
charge of the store. Yap took out a Fire Insurance
Policy No. 4216 from Pioneer Insurance with a value of
P25,000.00 covering her stocks, office furniture, fixtures
and fittings. Among the conditions in the policy
executed by the parties are the following: unless such
notice be given and the particulars of such insurance
or insurances be stated in, or endorsed on this Policy by
or on behalf of the Company before the occurrence of
any loss or damage, all benefits under this Policy shall
be forfeited… Any false declaration or breach or this
condition will render this policy null and void. Another
insurance policy for P20,000.00 issued by Great
American covering the same properties. The
endorsement recognized co-insurance by Northwest for
the same value. Oliva Yap took out another fire
insurance policy for P20,000.00 covering the same
properties from the Federal Insurance Company, Inc.,
which was procured without notice to and the written
consent of Pioneer. A fire broke out in the building, and
the store was burned. Yap filed an insurance claim, but
the same was denied for a breach. Oliva Yap filed a case
for payment of the face value of her fire insurance
policy. The insurance company refused to pay because
she never informed Pioneer of another insurer.
Issue:
Whether or not petitioner should be absolved from
liability on the Pioneeer policy on account of any
violation of the co-insurance clause
Held:
No. Petition dismissed. There was a violation. The
insurance policy for P20,000.00 issued by the Great
American, ceased to be recognized by them as a co-
insurance policy. The endorsement shows the clear
intention of the parties to recognize on the date the
endorsement was made, the existence of only one co-
insurance, the Northwest one. The finding of the Court
of Appeals that the Great American Insurance policy
was substituted by the Federal Insurance policy is
indeed contrary to said stipulation. Other insurance
without the consent of Pioneer would avoid the
contract. It required no affirmative act of election on
the part of the company to make operative the
clause avoiding the contract, wherever the specified
conditions should occur. Its obligations ceased, unless,
being informed of the fact, it consented to the
additional insurance. The validity of a clause in a fire
insurance policy to the effect that the procurement of
additional insurance without the consent of the insurer
renders the policy void is in American jurisprudence.
Milwaukee Mechanids' Lumber Co., vs. Gibson- "The
rule in this state and practically all of the states is to the
effect that a clause in a policy to the effect that the
procurement of additional insurance without the
consent of the insurer renders the policy void is a valid
provision.” In this jurisdiction, General Insurance
& Surety Corporation vs. Ng Hua- “The annotation then,
must be deemed to be a warranty that the property was
not insured by any other policy. Violation thereof
entitled the insurer to rescind. Furthermore, even if the
annotations were overlooked the defendant insurer
would still be free from liability because there is no
question that the policy issued by General Indemnity
has not been stated in nor endorsed on Policy No. 471
of defendant. The obvious purpose of the aforesaid
requirement in the policy is to prevent over-insurance
and thus avert the perpetration of fraud where a fire
would be profitable to the insured.“
58. Republic Bank v Phil Guarantee
Facts:
(1)On January 12, 1962, the Union Manufacturing Co.,
Inc. obtained certain loans, overdrafts and other credit
accommodations from the Republic Bank in the total
sum of P415,000.00 with interest at 9% per annum from
said date and to secure the payment thereof, said Union
Manufacturing Co., Inc. executed a real and chattel
mortgages on certain properties, which are more
particularly described and listed at the back of the
mortgage contract ...;
(2) That as additional condition of the mortgage
contract, the Union Manufacturing Co., Inc. undertook
to secure insurance coverage over the mortgaged
properties for the same amount of P415,000.00
distributed as follows: (a) Buildings, P30,000.00; (b)
Machineries, P300,000.00; and (c) Merchandise
Inventory, P85,000.00, giving a total of P415,000.00;
(3) That as Union Manufacturing Co., Inc. failed to
secure insurance coverage on the mortgaged properties
since January 12, 1962, despite the fact that Cua Tok, its
general manager, was reminded of said requirement,
the Republic Bank procured from the defendant,
Philippine Guaranty Co., Inc. an insurance coverage on
loss against fire for P500,000.00 over the properties of
the Union Manufacturing Co., Inc., as described in
defendant's 'Cover Note' dated September 25, 1962,
with the annotation that loss or damage, if any, under
said Cover Note is payable to Republic Bank as its
interest may appear, subject however to the printed
conditions of said defendant's Fire Insurance Policy
Form;
(4) That on September 27, 1962, Fire Insurance Policy
No. 43170 ... was issued for the sum of P500,000.00 in
favor of the assured, Union Manufacturing Co., Inc., for
which the corresponding premium in the sum of
P8,328.12, which was reduced to P6,688.12, was paid
by the Republic Bank to the defendant, Philippine
Guaranty Co., Inc. ...;
(5) That upon the expiration of said fire policy on
September 25, 1963, the same was renewed by the
Republic Bank upon payment of the corresponding
premium in the same amount of P6,663.52 on
September 26, 1963;
(6) That in the corresponding voucher ..., it appears that
although said renewal premium was paid by the
Republic Bank, such payment was for the account of
Union Manufacturing Co., Inc. and that the cash
voucher for the payment of the first premium was paid
also by the Republic Bank but for the account Union
Manufacturing Co., Inc.;
(7) That sometime on September 6, 1964, a fire
occurred in the premises of the Union Manufacturing
Co., Inc.;
(8) That on October 6, 1964, the Union Manufacturing
Co., Inc. filed its fire claim with the defendant Philippine
Guaranty Co., Inc., thru its adjuster, H. H. Bayne
Adjustment Co., which was denied by said defendant in
its letter dated November 27, 1964 on the following
grounds: 'a. Policy Condition No. 3 and/or the 'Other
Insurance Clause' of the policy violated because you did
not give notice to us the other insurance which you had
taken from New India for P80,000.00, Sincere Insurance
for P25,000.00 and Manila Insurance for P200,000.00.
Issue:
WON the plaintiffs can recover the proceeds
Held:
No. As was made clear in the opinion of this Court,
penned by Justice Villa-Real: "Without deciding whether
notice of other insurance upon the same property must
be given in writing, or whether a verbal notice is
sufficient to render an insurance valid which requires
such notice, whether oral or written, we hold that in the
absolute absence of such notice when it is one of the
conditions specified in the fire insurance policy, the
policy is null and void." 7 The next year, in Ang Giok Chip
v. Springfield Fire & Marine Ins. Co., 8 the conformity of
the insured to the terms of the policy, implied from the
failure to express any disagreement with what is
provided for, was stressed in these words of
the ponente, Justice Malcolm: "It is admitted that the
policy before us was accepted by the plaintiff. The
receipt of this policy by the insured without objection
binds both the acceptor and the insured to the terms
thereof. The insured may not thereafter be heard to say
that he did not read the policy or know its terms, since
it is his duty to read his policy and it will be assumed
that he did so." More specifically, there was a
reiteration of this Santa Ana ruling in a decision by the
then Justice, later Chief Justice, Bengzon, in General
Insurance & Surety Corp. v. Ng Hua. 12 Thus: "The
annotation then, must be deemed to be a warranty that
the property was not insured by any other policy.
Violation thereof entitles the insurer to rescind.
59. Oriental Assurance Corp v CA
Facts: Panama bought, in Palawan, 1,208 pieces of
apitong logs, with a total volume of 2,000 cubic meters.
It hired Transpacific Towage, Inc., to transport said logs
by sea to Manila and insured it against loss for P1-M
with Oriental Assurance. The policy was issued. It is
stipulated there, among others, that the subject matter
insured is 2,000 cubic meters of apitong logs and that
the vessels to be utilized are the following: MT.
'Seminole', BargePCT-7000 for the 1,000 cubic meter of
apitong logs and BargeTranspac-1000 for the other
1,000 cubic meter of apitong logs. It is also stipulated in
the policy that the insurance is against TOTAL LOSS only,
and it is subject to the following clauses, to wit: Civil
Code Article 1250 Waiver clause, Typhoon warranty
clause, and Omnibus clause. On 28 January 1986, the
2 barges were towed by MT 'Seminole'(tugboat), during
the voyage, rough seas and strong winds caused
damage to Barge TPAC-1000 resulting in the loss of 497
pieces of logs out of the 598 pieces loaded thereon.
Panama demanded payment for the loss but Oriental
Assurance refused on the ground that its contracted
liability was for "TOTAL LOSS ONLY." Consequently,
Panama filed a Complaint for Damages against Ever
Insurance Agency (allegedly, also liable), Benito Sy Lee
Yong and Oriental Assurance, before the RTC-Kalookan.
Issue: Is Oriental Assurance liable?
Held: No. The SC held that the terms of the contract
constitute the measure of the insurer’s liability and
compliance therewith is a condition precedent to the
insured's right to recovery from the insurer. That
whether a contract is entire or severable is a question
of intention to be determined by the language
employed by the parties. The policy in question shows
that the subject matter insured was the entire shipment
of 2,000 cubic meters of apitong logs. The fact that the
logs were loaded on two different barges did not make
the contract several and divisible as to the items
insured. The logs on the two barges were not separately
valued or separately insured. Only one premium was
paid for the entire shipment, making for only one cause
or consideration. The insurance contract must,
therefore, be considered indivisible. The logs involved,
although placed in two barges, were not separately
valued by the policy, nor separately insured.
Resultantly, the logs lost in barge TPAC-1000 in relation
to the total number of logs loaded on the
same barge cannot be made the basis for determining
constructive total loss. The logs having been insured as
one inseparable unit, the correct basis for determining
the existence of constructive total loss is the totality of
the shipment of logs. Of the entirety of 1,208, pieces of
logs, only 497 pieces thereof were lost or 41.45% of the
entire shipment. Since the cost of those 497 pieces does
not exceed 75% of the value of all 1,208 pieces of logs,
the shipment cannot be said to have sustained a
constructive total loss. Hence, no recovery can be had
against Oriental Assurance. The latter has no liability
under the policy.
60. Roque v IAC
Facts:
On 19 February 1972, the Manila Bay Lighterage
Corporation (MBLC) a common carrier, entered into a
contract with Isabela Roque (doing business under
the name and style of Isabela Roque Timber
Enterprises)and Ong Chiong whereby the former would
load and carry on board its barge Mable 10 about
422.18 cubic meters of logs from Malampaya Sound,
Palawan to North Harbor, Manila. Roque and Ong
insured the logs against loss for P100,000.00 with the
Pioneer Insurance and Surety Corporation (Pioneer). On
29 February1972, Roque and Ong loaded on the barge,
811 pieces of logs at Malampaya Sound, Palawan for
carriage and delivery to North Harbor, Port of Manila,
but the shipment never reached its destination because
Mable 10sank with the 811 pieces of logs somewhere
off Cabuli Point in Palawan on its way to Manila. The
barge where the logs were loaded was apparently not
seaworthy such that it developed a leak. One of the
hatches was left open causing water to enter the barge
and because the barge was not provided with the
necessary cover or tarpaulin, the ordinary splash of sea
waves brought more water inside the barge. On 8
March 1972,Roque and Ong wrote a letter to MBLC
demanding payment of P150,000.00 for the loss of the
shipment plusP100,000.00 as unrealized profits but the
latter ignored the demand. Another letter was sent to
Pioneer claiming the full amount of P100,000.00 under
the insurance policy but Pioneer refused to pay on the
ground that its liability depended upon the "Total loss
by Total Loss of Vessel only".
Issue:
Whether there is a warranty of seaworthiness by the
cargo owner in cases of marine cargo insurance.
Held:
YES. There is no dispute over the liability of the
common carrier MBLC. In fact, it did not bother to
appeal the questioned decision. However, Roque and
Ong state that MBLC has ceased operating as a firm and
nothing may be recovered from it. They are, therefore,
trying to recover their losses from the insurer. The
liability of the insurance company is governed by law.
Section 113 of the Insurance Code provides that "In
every marine insurance upon a ship or freight, or
freightage, or upon anything which is the subject of
marine insurance, a warranty is implied that the ship
is seaworthy." Section 99 of the same Code also
provides in part that "Marine insurance includes: (1)
Insurance against loss of or damage to: (a) Vessels,
craft, aircraft, vehicles, goods, freights,
cargoes, merchandise..." From the above-
quoted provisions, there can be no mistaking the fact
that the term "cargo" can be the subject of marine
insurance and that once it is so made, the implied
warranty of seaworthiness immediately attaches to
whoever is insuring the cargo whether he be the
shipowner or not. As ruled in the case of Go Tiaoco y
Hermanos v. Union Insurance Society of Canton (40Phil.
40), "it is universally accepted that in every contract of
insurance upon anything which is the subject of marine
insurance, a warranty is implied that the ship shall
be seaworthy at the time of the inception of the
voyage. This rule is accepted in our own Insurance Law
(Act No. 2427, sec. 106)." Moreover, the fact that the
unseaworthiness of the ship was unknown to the
insured is immaterial in ordinary marine insurance and
may not be used by him as a defense in order to recover
on the marine insurance policy. As was held in Richelieu
and Ontario Nav. Co. v. Boston Marine, Inc., Co. (136
U.S. 406), "the exception of losses occasioned by
unseaworthiness was in effect a warranty that a loss
should not be so occasioned, and whether the fact of
unseaworthiness were known or unknown would
be immaterial." Since the law provides for an implied
warranty of seaworthiness in every contract of ordinary
marine insurance, it becomes the obligation of a cargo
owner to look for a reliable common carrier which
keeps its vessels in seaworthy condition. The shipper of
cargo may have no control over the vessel but he has
full control in the choice of the common carrier that will
transport his goods. Or the cargo owner may enter into
a contract of insurance which specifically provides that
the insurer answers not only for the perils of the sea but
also provides for coverage of perils of the ship. The
Court was constrained to apply Section 113 of the
Insurance Code to the facts of this case. "In marine
cases, the risks insured against are 'perils of the sea'
(Chute v. North River Ins. Co., Minn. 214 NW 472, 55ALR
933). The purpose of such insurance is protection
against contingencies and against possible damages and
such a policy does not cover a loss or injury which must
inevitably take place in the ordinary course of things.
There is no doubt that the term 'perils of the sea'
extends only to losses caused by sea damage, or by the
violence of the elements, and does not embrace all
losses happening at sea. They insure against losses from
extraordinary occurrences only, such as stress of
weather, winds and waves, lightning, tempests, rocks
and the like. These are understood to be the 'perils of
the sea' referred in the policy, and not those ordinary
perils which every vessel must encounter. 'Perils of the
sea' has been said to include only such losses as are of
extraordinary nature, or arise from some overwhelming
power, which cannot be guarded against by the
ordinary exertion of human skill and prudence. Damage
done to a vessel by perils of the sea includes every
species of damages done to a vessel at sea, as
distinguished from the ordinary wear and tear of the
voyage.
61. Filipino Merchants Insurance Co v CA
Facts:
 Choa Tiek Seng, consignee of the shipment of
fishmeal loaded, insured in "all risks policy" 600
metric tons of fishmeal in new gunny bags of 90
kilos each from Bangkok, Thailand to Manila
against all risks under warehouse to warehouse
terms but only 59.940 metric tons was
imported
 When it was unloaded unto the arrastre
contractor E. Razon, Inc. and Filipino
Merchants's surveyor ascertained and certified
that in such discharge 105 bags were in bad
order condition which was reflected in
the survey report of Bad Order cargoes
 Before delivery to Choa, E. Razon's Bad Order
Certificate showed that a total of 227 bags in
bad order condition
 Choa brought an action against Filipino
Merchants Insurance Co. who brought a third
party complaint against Compagnie Maritime
Des Chargeurs Reunis and/or E. Razon, Inc.
 RTC: Ordered Filipino Merchants to pay Choa
and reimbursefrom Compagnie Maritime Des
Chargeurs Reunis and third party defendant E.
Razon, Inc.
 CA: Affirmed but modified by adjudicating the
third party complaint
 Filipino Merchants contended that Chao
has no insurable interest and therefore
the policy should be void and that it
 was fraud that it did not disclose of
such fact
Issue:
W/N Choa Tiek Seng as consignee of the shipment has
insurable interest
Held:
YES. CA affirmed.
 GR: 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; thereafter, the burden then
shifts to the insurer to show the exception to
the coverage. - none was shown = liable
 Section 13 of the Insurance Code defines
insurable interest in property as every interest
in property, whether real or personal, or any
relation thereto, or liability in respect thereof,
of such nature that a contemplated peril might
directly damnify the insured.
 As vendee/consignee of the goods in transit has
such existing interest. 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 be performed the conditions
of the sale. The contract of shipment, whether
under F.O.B., C.I.F., or C. & F. as in this case, is
immaterial in the determination of whether the
vendee has an insurable interest or not in the
goods in transit.
 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, whether named by the buyer or not, for,
the purpose of transmission to the buyer is
deemed to be a delivery of the goods to the
buyer, the exceptions to said rule not obtaining
in the present case. 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 theinsurance premium covering them
 C & F contracts are shipment contracts. The
term means that the price fixed includes in a
lump sum the cost of the goods and freight to
the named destination. It simply means that the
seller must pay the costs and freight necessary
to bring the goods to the named destination but
the risk of loss or damage to the goods is
transferred from the seller to the buyer when
the goods pass the ship's rail in the port of
shipment.
62. Choa Tiek Seng v CA
Facts:
On November 4, 1976 petitioner imported some lactose
crystals from Holland. The importation involved fifteen
(15) metric tons packed in 600 6-ply paper bags with
polythelene inner bags, each bag at 25 kilos net. The
goods were loaded at the port at Rotterdam in sea vans
on board the vessel "MS Benalder' as the mother vessel,
and thereafter aboard the feeder vessel "Wesser Broker
V-25" of respondent Ben Lines Container, Ltd. (Ben
Lines for short). The goods were insured by the
respondent Filipino Merchants' Insurance Co., Inc.
(insurance company for short) for the sum of
P98,882.35, the equivalent of US$8,765.00 plus 50%
mark-up or US$13,147.50, against all risks under the
terms of the insurance cargo policy. Upon arrival at the
port of Manila, the cargo was discharged into the
custody of the arrastre operator respondent E. Razon,
Inc. (broker for short), prior to the delivery to petitioner
through his broker. Of the 600 bags delivered to
petitioner, 403 were in bad order. The surveys showed
that the bad order bags suffered spillage and loss later
valued at P33,117.63. Petitioner filed a claim for said
loss dated February 16, 1977 against respondent
insurance company in the amount of P33,117.63 as the
insured value of the loss. Respondent insurance
company rejected the claim alleging that assuming that
spillage took place while the goods were in transit.
Isssue:
WON the insured shipment suffered damage at the
time of the devanning thereof.
Held:
The Court disagrees. In Gloren Inc. vs. Filipinas Cia. de
Seguros, 12 it was held that an all risk insurance policy
insures against all causes of conceivable loss or damage,
except as otherwise excluded in the policy or due to
fraud or intentional misconduct on the part of the
insured. It covers all losses during the voyage whether
arising from a marine peril or not, including pilferage
losses during the war. In the present case, the "all risks"
clause of the policy sued upon reads as follows:
5. This insurance is against all risks of loss or damage to
the subject matter insured but shall 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. 13
The terms of the policy are so clear and require no
interpretation. The insurance policy covers all loss or
damage to the cargo except those caused by delay or
inherent vice or nature of the cargo insured. It is the
duty of the respondent insurance company to establish
that said loss or damage falls within the exceptions
provided for by law, otherwise it is liable therefor.
An "all risks" provision of a marine policy 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 peril falling within the policy's coverage. The
insurer can avoid coverage upon demonstrating that a
specific provision expressly excludes the loss from
coverage. 14 In this case, the damage caused to the
cargo has not been attributed to any of the exceptions
provided for nor is there any pretension to this effect.
Thus, the liability of respondent insurance company is
clear.
63. Delsan Transport Lines v CA
FACTS:
Caltex Philippines entered into a contract of
affreightment with the petitioner, Delsan Transport
Lines, Inc., for a period of one year whereby the said
common carrier agreed to transport Caltex’s industrial
fuel oil from the Batangas-Bataan Refinery to different
parts of the country. Under the contract, petitioner took
on board its vessel, MT Maysun, 2,277.314 kiloliters of
industrial fuel oil of Caltex to be delivered to the Caltex
Oil Terminal in Zamboanga City. The shipment was
insured with the private respondent, American Home
Assurance Corporation. On August 14, 1986, MT
Maysun set sail from Batangas for Zamboanga City.
Unfortunately, the vessel sank in the early morning of
August 16, 1986 near Panay Gulf in the Visayas taking
with it the entire cargo of fuel oil. Subsequently, private
respondent paid Caltex the sum of Five Million Ninety-
Six Thousand Six Hundred Thirty-Five Pesos and Fifty-
Seven Centavos (P5,096,635.57) representing the
insured value of the lost cargo. Exercising its right of
subrogation under Article 2207 of the New Civil Code,
private respondent demanded of the petitioner the
same amount it paid to Caltex. Due to its failure to
collect from the petitioner despite prior demand,
private respondent filed a complaint with the Regional
Trial Court of Makati, Branch 137, for collection of a
sum of money. After trial, the trial court rendered a
decision on November 29, 1990 dismissing the
complaint. The trial court found that the vessel, MT
Maysun, was seaworthy and that the incident was
caused by unexpected inclement weather condition or
force majeure, thus, exempting the common carrier
from liability for the loss of its cargo.
ISSUE:
Whether or not the payment made by private
respondent to Caltex amounted to an automatic
admission of the vessel’s seaworthiness.
RULING:
No. The payment made by the private respondent for
the insured value of the lost cargo operates as waiver of
its (private respondent) right to enforce the term of the
implied warranty against Caltex under the marine
insurance policy. However, the same cannot be validly
interpreted as an automatic admission of the vessel’s
seaworthiness by the private respondent as to foreclose
recourse against the petitioner for any liability under its
contractual obligation as a common carrier. The fact of
payment grants the private respondent subrogatory
right which enables it to exercise legal remedies that
would otherwise be available to Caltex as owner of the
lost cargo against the petitioner common carrier.
64. Del Val v Del Val
> Petitioners and private respondents are brothers and
Sisters and are the only heirs and next of kin of Gregorio
del Val who died intestate.
> It was found out that the deceased took out
insurance on his life for the sum of 40T and made it
payable to private respondents as sole beneficiary.
> After Gregorio’s death, Andres collected the proceeds
of the policy.
> Of the said policy, Andres paid 18T to redeem some
real property which Gregorio had sold to third persons
during his lifetime.
> Said redemption of the property was made by
Andres’ laywer in the name of Andres and the
petitioners. (Accdg to Andres, said redemption in the
name of Petitioners and himself was without his
knowledge and that since the redemption, petitioners
have been in possession of the property)
> Petitioners now contend that the amount of the
insurance policy belonged to the estate of the deceased
and not to Andres personally.
> Pet filed a complaint for partition of property
including the insurance proceeds
> Andress claims that he is the sole owner of the
proceeds and prayed that he be declared:
> Sole owner of the real property, redeemed with the
use of the insurance proceeds and its remainder;
> Petitioners to account for the use and occupation of
the premises.
Issue:
Whether or not the petitioners have a right to the
insurance proceeds?
Held:
NO. The contract of life insurance is a special contract
and the destination of the proceeds thereof is
determined by special laws which deal exclusively with
the subject. Our civil code has no provisions which
relate directly and specifically to life-insurance contracts
of to the destination of life-insurance proceeds that
subject is regulated exclusively by the Code of
Commerce. Thus, contention of petitioners that
proceeds should be considered as a dontation or gift
and should be included in the estate of the deceased is
UNTENABLE.
Since the repurchase has been made n the names of all
the heirs instead of the defendant alone, petitioners
claim that the property belongs to the heirs in common
and not to the defendant alone. The SC held that if it is
established by evidence that that was his intention and
that the real estate was delivered to the plaintiffs with
that understanding, then it is probable that their
contention is correct and that they are entitled to share
equally with the defendant. HOWEVER, it appears from
the evidence that the conveyances were taken in the
name of the plaintiffs without the knowledge and
consent of Andres, or that it was not his intention to
make a gift to them of real estate, when it belongs to
him.
65. BPI v Posadas
Facts: The estate of Adolphe Oscar Schuetze is the sole
beneficiary named in the life-insurance policy for
$10,000, issued by the Sun Life Assurance Company of
Canada. During the following five years the insured paid
the premiums at the Manila branch of the company.
The deceased Adolphe Oscar Schuetze married the
plaintiff-appellant Rosario Gelano.
The plaintiff-appellant, the Bank of the Philippine
Islands, was appointed administrator of the late
Adolphe Oscar Schuetze's testamentary estate by an
order, entered by the Court of First Instance of Manila.
The Sun Life Assurance Company of Canada, whose
main office is in Montreal, Canada, paid Rosario Gelano
Vda. de Schuetze upon her arrival at Manila, the sum of
P20,150, which was the amount of the insurance policy
on the life of said deceased, payable to the latter's
estate. On the same date Rosario Gelano Vda. de
Schuetze delivered the money to said Bank of the
Philippine Islands, as administrator of the deceased's
estate, which entered it in the inventory of the
testamentary estate, and then returned the money to
said widow. The appellee alleges that it is a
fundamental principle that a life-insurance policy
belongs exclusively to the beneficiary upon the death of
the person insured.
Issue: Whether or not the life insurance policy belongs
to the conjugal partnership.
Ruling: SC holds, (1) that the proceeds of a life-
insurance policy payable to the insured's estate, on
which the premiums were paid by the conjugal
partnership, constitute community property, and
belong one-half to the husband and the other half to
the wife, exclusively; and (2) that if the premiums were
paid partly with paraphernal and partly conjugal funds,
the proceeds are likewise in like proportion paraphernal
in part and conjugal in part.
That the proceeds of a life-insurance policy payable to
the insured's estate as the beneficiary, if delivered to
the testamentary administrator of the former as part of
the assets of said estate under probate administration,
are subject to the inheritance tax according to the law
on the matter, if they belong to the assured exclusively,
and it is immaterial that the insured was domiciled in
these Islands or outside.
66. Insular Life Assurance Co Ltd v Ebrado
Facts:
> Buenaventura Ebrado was issued al life plan by
Insular Company. He designated Capriona as his
beneficiary, referring to her as his wife.
> The insured then died and Carponia tried to claim the
proceeds of the said plan.
> She admitted to being only the common law wife of
the insured.
> Pascuala, the legal wife, also filed a claim asserting
her right as the legal wife. The company then filed an
action for interpleader.
Issue:
Whether or not the common law wife named as
beneficiary can collect the proceeds.
Held:
NO.
The civil code prohibitions on donations made between
persons guilty of adulterous concubinage applies to
insurance contracts. On matters not specifically
provided for by the Insurance Law, the general rules on
Civil law shall apply. A life insurance policy is no
different from a civil donation as far as the beneficiary is
concerned, since both are founded on liberality.
WHY WAS THE COMMON LAW WIFE NOT ED TO
COLLECT THE PROCEEDS DESPITE THE FACT THAT SHE
WAS THE BENEFICIARY? ISN’T THIS AGAINST SEC. 53?
It is true that SC went against Sec. 53. However, Sec. 53
is NOT the only provision that the SC had to
consider. Art. 739 and 2012 of CC prohibit persons who
are guilty of adultery or concubinage from being
beneficiaries of the life insurance policies of the persons
with whom they committed adultery or
concubinage. If the SC used only Sec. 53, it would have
gone against Art. 739 and 2012.
67. Manufacturers Life Insurance Co v Meer
Facts: The plaintiff, the Manufacturer Life Insurance
Company in a corporation duly organized in Canada
with head office at Toronto. It is duly registered and
licensed to engage in life insurance business in the
Philippines, and maintains a branch office in Manila. It
was engaged in such business in the Philippines for
more than five years before and including the year
1941. But due to the exigencies of the war it closed the
branch office at Manila during 1942 up to September
1945. In the course of its operations before the war,
plaintiff issued a number of life insurance policies in the
Philippines containing stipulations referred to as non-
forfeiture clauses, as follows:
8. Automatic Premium Loan. — This Policy shall not
lapse for non-payment of any premium after it has been
three full years in force, if, at the due date of such
premium, the Cash Value of this Policy and of any bonus
additions and dividends left on accumulation (after
deducting any indebtedness to the Company and the
interest accrued thereon) shall exceed the amount of
said premium. In which event the company will, without
further request, treat the premium then due as paid,
and the amount of such premium, with interest from its
actual due date at six per cent per annum, compounded
yearly, and one per cent, compounded yearly, for
expenses, shall be a first lien on this Policy in the
Company's favour in priority to the claim of any
assignee or any other person. The accumulated lien may
at any time, while the Policy is in force, be paid in whole
or in part.
From January 1, 1942 to December 31, 1946 for failure
of the insured under the above policies to pay the
corresponding premiums for one or more years, the
plaintiff's head office of Toronto, applied the provision
of the automatic premium loan clauses; and the net
amount of premiums so advanced or loaned totalled
P1,069,254.98. On this sum the defendant Collector of
Internal Revenue assessed P17,917.12 — which plaintiff
paid supra protest
It is the plaintiff's contention that when it made
premium loans or premium advances, as above stated,
by virtue of the non-forfeiture clauses, it did not collect
premiums within the meaning of the above sections of
the law, and therefore it is not amendable to the tax
therein provided.
Issue: Whether or not premium advances made by
plaintiff-appellant under the automatic premium loan
clause of its policies are "premium collected" by the
Company subject to tax
Held: The cash value or cash surrender value is
therefore an amount which the insurance company
holds in trust2 for the insured to be delivered to him
upon demand. It is therefore a liability of the company
to the insured. Now then, when the company's credit
for advances is paid out of the cash value or cash
surrender value, that value and the company's liability is
thereby dismissed pro tanto. Consequently, the net
assets of the insurance company increased
corresponding; for it is plain mathematics that the
decrease of a person's liabilities means a corresponding
increase in his net assets.
Nevertheless let us grant for the nonce that the
operation of the automatic loan provision contributed
no additional cash to the funds of the insurer. Yet it
must be admitted that the insurer agreed to consider
the premium paid on the strength of the
automatic loan. The premium was therefore paid by
means of a "note" or "credit" or "other substitute for
money" and the taxis due because section 255 above
quoted levies taxes according to the total premiums
collected by the insurer "whether such premiums are
paid in money, notes, credits or any substitutes for
money
68. DBP v CA
Facts:
Juan B. Dans, together with his family applied for a
loan of P500,000 with DBP. As principal mortgagor,
Dans, then 76 years of age was advised by DBP to
obtain a mortgage redemption insurance (MRI) with
DBP MRI pool. A loan in the reduced amount was
approved and released by DBP. From the proceeds of
the loan, DBP deducted the payment for the MRI
premium. The MRI premium of Dans, less the DBP
service fee of 10%, was credited by DBP to the savings
account of DBP MRI-Pool. Accordingly, the DBP MRI
Pool was advised of the credit. Dans died of cardiac
arrest. DBP MRI Pool notified DBP that Dans was not
eligible for MRI coverage, being over the acceptance
age limit of 60 years at the time of application. DBP
apprised Candida Dans of the disapproval of her late
husband’s MRI application. DBP offered to refund the
premium which the deceased had paid, but Candida
Dans refused to accept the same demanding payment
of the face value of the MRI or an amount equivalent of
the loan. She, likewise, refused to accept an ex gratia
settlement which DBP later offered. Hence the case
at bar.
Issue:
Whether or not the DBP MRI Pool should be held liable
on the ground that the contract was already perfected?
Held:
No, it is not liable. The power to approve MRI
application is lodged with the DBP MRI Pool. The pool,
however, did not approve the application. There is also
no showing that it accepted the sum which DBP
credited to its account with full knowledge that it was
payment for the premium. There was as a result
no perfected contract of insurance¶ hence the DBP MRI
Pool cannot beheld liable on a contract that does not
exist. In dealing with Dans, DBP was wearing 2 legal
hats: the first as a lender and the second as aninsurance
agent. As an insurance agent, DBP made Dans go
through the motion of applying for said insurance,
thereby leading him and his family to believe that they
had already fulfilled all the requirements for the MRI
and that the issuance of their policy was forthcoming.
DBP had fullk nowledge that the application was never
going to be approved. The DBP is not authorized to
accept applications for MRI when its clients are more
than 60 years of age.
69. Tio Khe Chio v CA
Facts: Petitioner shipped bags of imported fish meals
and insured the same with respondent insurance
company Eastern Assurance & Surety Corp (EASCO).
During transit, the bags were found out to be damaged
thus rendering the fish meals useless. Petitioner filed a
claim before the EASCO which denied the same,
prompting the former to sue the
latterat CFI Cebu who ordered EASCO to pay the petitio
ner's claim forinsurance with damages. Upon execution,
respondent filed a petition for certiorari with the
CA who set aside the lower court's decision arguing that
the latter has erred in fixing the legal interest on 12%
per annum rather than the mandated 6%.
Issue: What should the legal interest be for damages
arising from loss of property?
Held: The applicable law is Article 2209 of the Civil Code
which reads that if the obligation consists in the
payment of a sum of money and the debtor incurs in
delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of
interest agreed upon, and in the absence of stipulation,
the legal interest which is 6%per
annum. The adjusted rate mentioned in the Circular No.
416, from which theCFI based its decision, refers only
to loans or forbearances of
money,goods or credits and court judgments thereon b
ut not to court judgments for damages arising from inju
ry to persons and loss of property which does not
involve a loan. Tio Khe Chio vs. Court of Appeals(202
SCRA 119)Circular No. 416 of the Central Bank which
took effect on July 29, 1974 pursuant to Presidential
Decree No. 116 (Usury Law)raised the legal rate of
interest from six (6%) percent to twelve
(12%)percent. The adjusted rate mentioned in the circul
ar refers only toloans or forbearances of money, goods
or credits and court judgments thereon but not to court
judgments for damages arising from injury to persons
and loss of property which does not involve a loan. In
the case of Philippine Rabbit Bus Lines, Inc. vs. Cruz,
G.R. No. 71017, July 28, 1986, 143 SCRA 158,
the Court declared that the legal rate of interest is six
(6%) percent per annum and not twelve(12%) percent,
where a judgment award is based on an action for
damages for personal injury, not use or forbearance
of money, goods or credit.
70. Finman General Assurance Corp v CA 361 SCRA 214
Facts:
On 15 September 1981, Usiphil Incorporated obtained a
fire insurance policy from Finman General Assurance
Corporation (then doing business under the name
Summa Insurance Corporation) covering certain
properties, e.g., office, furniture, fixtures, shop
machinery and other trade equipment. Under Policy
F3100issued to Usiphil, Finman undertook to indemnify
Usiphil for any damage to or loss of said properties
arising from fire. Sometime in 1982, Usiphil filed with
Finman an insurance claim amounting to P987,126.11
for the loss of the insured properties due to fire. Acting
thereon, Finman appointed Adjuster H.H. Bayne
to undertake the valuation and adjustment of the loss.
H.H. Bayne then required Usiphil to file a formal claim
and submit proof of loss. In compliance therewith,
Usiphil submitted its Sworn Statement of Loss and
Formal Claim,dated 22 July 1982, signed by Reynaldo
Cayetano, Usiphil's Manager. Usiphil likewise submitted
Proof of Loss signed by its Accounting Manager Pedro
Palallos and countersigned by H.H. Bayne's Adjuster
F.C.Medina. Palallos personally followed-up Usiphil's
claim with Finman's President Joaquin Ortega.
During their meeting, Ortega instructed their Finance
Manager, Rosauro Maghirang, to reconcile the records.
Thereafter, Maghirang and Palallos signed a
Statement/Agreement, dated 28 February 1985, which
indicated that the amount due Usiphil was P842,683.40.
Despite repeated demands by Usiphil, Finman refused
to pay the insurance claim. Thus, Usiphil was
constrained to file a complaint against Finman for the
unpaid insurance claim. In its Answer, Finman
maintained that the claim of Usiphil could not be
allowed because it failed to comply with Policy
Condition 13 regarding the submission of certain
documents to prove the loss.
Issue:
Whether Usiphil has complied with Policy Condition 13
in notifying Finman of the loss.
Held:
YES. Usiphil had substantially complied with Policy
Condition 13 which reads "The insured shall give
immediate written notice to the Company of any loss,
protect the property from further damage, forthwith
separate the damaged and undamaged personal
property, put it in the best possible order, furnish a
complete inventory of the destroyed, damaged, and
undamaged property, showing in detail quantities,
costs, actual cash value and the amount of loss claimed;
AND WITHIN SIXTY DAYS AFTER THE LOSS,UNLESS SUCH
TIME IS EXTENDED IN WRITING BY THE COMPANY, THE
INSURED SHALLRENDER TO THE COMPANY A PROOF OF
LOSS, signed and sworn to by the insured, stating the
knowledge and belief of the insured as to the following:
the time and origin of the loss, the interest of the
insured and of all others in the property, the actual cash
value of each item thereof and the amount of loss
thereto, all encumbrances thereon, all other contracts
of insurance, whether valid or not, covering any of said
property, any changes in the title, use, occupation,
location, possession or exposures of said property since
the issuing of this policy by whom and for what purpose
any buildings herein described and the several parts
thereof were occupied at the time of loss and whether
or not it then stood on leased ground, and shall furnish
a copy of all the descriptions and schedules in all
policies, and if required verified plans and specifications
of any building, fixtures, or machinery destroyed or
damaged. The insured, as often as may be reasonably
required, shall exhibit to any person designated by the
company all that remains of any property herein
described, and submit to examination under oath by
any person named by the Company, and subscribe the
same; and, as often as may be reasonably required,
shall produce for examination all books of account, bills,
invoices, and other vouchers or certified copies thereof
if originals be lost, at such reasonable time and place as
may be designated by the Company or its
representative and shall permit extracts and copies
thereof to be made. No claim under this policy shall be
payable unless the terms of this condition have been
complied with." A perusal of the records shows
that Usiphil, after the occurrence of
the fire, immediately notified Finman thereof.
Thereafter, Usiphil submitted the following documents:
(1) Sworn Statement of Loss and Formal Claim and; (2)
Proof of Loss. The submission of these documents
constitutes substantial compliance with the above
provision.
Fuck you Insurance! 