Perez v CA G.R. No. 112329. January 28, 2000 the hemp and copra.
the hemp and copra. Fire broke out and destroyed bodegas 1, 3 ad 4. QCG informed LU
J. Ynares-Santiago
Facts: Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for
P20,000.00. Sometime in October 1987, an agent of the insurance corporation, visited
Perez in Quezon and convinced him to apply for additional insurance coverage of
P50,000.00. Virginia A. Perez, Primitivo’s wife, paid P2,075.00 to the agent. The receipt
issued indicated the amount received was a "deposit." Unfortunately, the agent lost the
application form accomplished by Perez and he asked the latter to fill up another
application form. The agent sent the application for additional insurance of Perez to the
Quezon office. Such was supposed to forwarded to the Manila office.
Perez drowned. His application papers for the additional insurance of P50,000.00 were
still with the Quezon. It was only after some time that the papers were brought to Manila.
Without knowing that Perez died, BF Lifeman Insurance Corporation approved the
application and issued the corresponding policy for the P50,000.00.
Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies
of the deceased. She was paid P40,000.00 under the first insurance policy for P20,000.00
but the insurance company refused to pay the claim under the additional policy coverage
of P50,000.00, the proceeds of which amount to P150,000.00.
The insurance company maintained that the insurance for P50,000.00 had not been
perfected at the time of the death of Primitivo Perez. Consequently, the insurance
company refunded the amount paid.
BF Lifeman Insurance Corporation filed a complaint against Virginia Perez seeking the
rescission and declaration of nullity of the insurance contract in question.
Petitioner Virginia A. Perez, on the other hand, averred that the deceased had fulfilled all
his prestations under the contract and all the elements of a valid contract are present.
On October 25, 1991, the trial court rendered a decision in favor of petitioner ordering
respondent to pay 150,000 pesos. The Court of Appeals, however, reversed the decision
of the trial court saying that the insurance contract for P50,000.00 could not have been
perfected since at the time that the policy was issued, Primitivo was already dead.
Petitioner’s motion for reconsideration having been denied by respondent court, the
instant petition for certiorari was filed on the ground that there was a consummated
contract of insurance between the deceased and BF Lifeman Insurance Corporation.
Issue: WON the widow can receive the proceeds of the 2nd insurance policy
Held: No. Petition dismissed.
Ratio:
Perez’s application was subject to the acceptance of private respondent BF Lifeman
Insurance Corporation. The perfection of the contract of insurance between the deceased
and respondent corporation was further conditioned with the following requisites stated
in the application form:
"there shall be no contract of insurance unless and until a policy is issued on this
application and that the said policy shall not take effect until the premium has been paid
and the policy delivered to and accepted by me/us in person while I/We, am/are in good
health." BF Lifeman didn’t give its assent when it merely received the application form
and all the requisite supporting papers of the applicant. This happens only when it gives
a policy. It is not disputed, however, that when Primitivo died on November 25, 1987, his
application papers for additional insurance coverage were still with the branch office of
respondent corporation in Quezon. Consequently, there was absolutely no way the
acceptance of the application could have been communicated to the applicant for the
latter to accept inasmuch as the applicant at the time was already dead. Petitioner insists
that the condition imposed by BF that a policy must have been delivered to and accepted
by the proposed insured in good health is potestative, being dependent upon the will of
the corporation and is therefore void. The court didn’t agree. A potestative condition
depends upon the exclusive will of one of the parties and is considered void. The Civil
Code states: When the fulfillment of the condition depends upon the sole will of the
debtor, the conditional obligation shall be void. The following conditions were imposed
by the respondent company for the perfection of the contract of insurance: a policy must
have been issued, the premiums paid, and the policy must have been delivered to and
accepted by the applicant while he is in good health. The third condition isn’t potestative,
because the health of the applicant at the time of the delivery of the policy is beyond the
control or will of the insurance company. Rather, the condition is a suspensive one
whereby the acquisition of rights depends upon the happening of an event which
constitutes the condition. In this case, the suspensive condition was the policy must have
been delivered and accepted by the applicant while he is in good health. There was non-
fulfillment of the condition, because the applicant was already dead at the time the policy
was issued. As stated above, a contract of insurance, like other contracts, must be
assented to by both parties either in person or by their agents. So long as an application
for insurance has not been either accepted or rejected, it is merely an offer or proposal
to make a contract. The contract, to be binding from the date of application, must have
been a completed contract. The insurance company wasn’t negligent because delay in
acting on the application does not constitute acceptance even after payment. The
corporation may not be penalized for the delay in the processing of the application papers
due to the fact that process in a week wasn’t the usual timeframe in fixing the application.
Delay could not be deemed unreasonable so as to constitute gross negligence.
QUA CHEE GAN v. LAW UNION AND ROCK INSURANCE
1955 / JBL Reyes / Appeal from CFI judgment
Qua Chee Gan owned 4 warehouses or bodegas used for the storage of copra and hemp,
which were insured with Law Union, and the lose made payable to PNB as mortgage of
by telegram, and the next day, fire adjusters arrived to conduct an investigation. LU
resisted payment, claiming violation of warranties and conditions, filing of fraudulent
claims, and that the fire had been deliberately caused by QCG or by other persons in
connivance with him.
QCG, his brother, and some employees were indicted and tried for arson, but they
were acquitted. Thereafter, the civil suit to collect the insurance money proceeded to its
trial. CFI rendered a decision in QCG’s favor.
CFI AFFIRMED; LAW UNION LIABLE
On false and fraudulent claims
CFI found that the discrepancies were a result of QCG’s erroneous interpretation of the
provisions of the insurance policies and claim forms, caused by his imperfect English, and
that the misstatements were innocently made and without intent to defraud. The rule is
that to avoid a policy, the false swearing must be willful and with intent to defraud which
was not the cause.
On the storage of gasoline
Ambiguities or obscurities must be strictly interpreted against the party that caused them.
This rigid application of the rule has become necessary in view of current business
practices. In contrast to contracts entered into by parties bargaining on an equal footing,
a contract of insurance calls for greater strictness and vigilance on the part of courts of
justice with a view to protect the weaker party from abuses and imposition, and prevent
their becoming traps for the unwary. The contract of insurance is one of perfect good
faith (uferrimal fidei) not for the insured alone, but equally so for the insurer; in fact, it is
more so for the latter, since its dominant bargaining position carries with it stricter
responsibility.
QCG admitted that there were 36 cans of gasoline in Bodega 2. Gasoline is not
specifically mentioned among the prohibited articles listed in the hemp warranty. The
cause relied upon LU speaks of oils. In ordinary parlance, “oils” means “lubricants” and
not gasoline or kerosene. The prohibition of keeping gasoline could have been expressed
clearly and unmistakably.
On fire hydrants warranty
LU is estopped from claiming that there was a violation of such warranty, since it knew
that from the start, the number of hydrants it demanded never existed, yet it issued
policies and received premiums.
Sweet Lines, Inc. v. Teves
G.R. No. L-37750, 19 May 1978, 83 SCRA 361
FACTS: Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Tagbiliran City via the
port of Cebu. Since many passengers were bound for Surigao, “M/S Sweet Hope” would
not be proceeding to Bohol. They went to the proper branch office and were relocated to
“M/S Sweet Town” where they were forced to agree “to hide at the cargo section to avoid
inspection of the officers of the Philippines Coastguard.” They were exposed to the
scorching heat of the sun and the dust coming from the ship’s cargo of corn grits and their
tickets were not honored so they had to purchase a new one. Because of the terrible
experience they had, they sued Sweet Lines for damages and for breach of contract of
carriage before the Court of First Instance of Misamis Oriental who dismissed the
complaint for improper venue. A motion was premised on the condition printed at the
back of the tickets and was later dismissed. Hence this instant petition for prohibition for
preliminary injunction.
ISSUE: Whether or not, a common carrier engaged in inter-island shipping stipulate thru
condition printed at the back of passage tickets to its vessels that any and all actions
arising out of the contract of carriage should be filed only in a particular province or city.
HELD: No. Actions arising out of the contract of carriage should be filed not only in a
particular province or city. Contract of adhesions are not the kind of contract where the
parties sit down to deliberate, discuss and agree specifically on all its terms, but rather,
one which respondents took no part at all in preparing. It is only imposed upon them
when they paid for the fare for the freight they wanted to ship.
We find and hold that Condition No. 14 printed at the back of the passage tickets should
be held as void and unenforceable for the following reasons:
1. Circumstances obligation in the inter-island ship will prejudice rights and interests of
innumerable passengers in different parts of the country who, under Condition No. 14,
will have to file suits against petitioner only in the City of Cebu;
2. Subversive of public policy on transfers of venue of actions; and
3. Philosophy underlying the provisions of transfers of venue of actions is the convenience
of the plaintiffs as well as his witnesses and to promote the ends of justice.
Hence, petition for prohibition is hereby dismissed. The restraining order is LIFTED and
SET ASIDE.
Sun Insurance Office, Ltd. v. CA and Emilio Tan
G.R. No. 89741 March 13, 1991 Paras, J.
FACTS: Emilio Tan took from Sun Insurance Office a P300,000.00 property insurance
policy to cover his interest in the electrical supply store of his brother. Four days after the
issuance of the policy, the building was burned including the insured store. On August 20,
1983, Tan filed his claim for fire loss with Sun Insurance Office, but on February 29, 1984,
Sun Insurance Office wrote Tan denying the latter’s claim. On April 3, 1984, Tan wrote
Sun Insurance Office, seeking reconsideration of the denial of his claim. Sun Insurance
Office answered the letter, advising Tan’s counsel that the Insurer’s denial of Tan’s claim
remained unchanged.
ISSUES:
(1) WON the filing of a motion for reconsideration interrupts the 12 months prescriptive
period to contest the denial of the insurance claim; and
(2) WON the rejection of the claim shall be deemed final only of it contains words to the
effect that the denial is final;
HELD: (1) No. In this case, Condition 27 of the Insurance Policy of the parties reads:
27. Action or suit clause - If a claim be made and rejected and an action or suit be not
commenced either in the Insurance Commission or in any court of competent jurisdiction
within twelve (12) months from receipt of notice of such rejection, or in case of arbitration
taking place as provided herein, within twelve (12) months after due notice of the award
made by the arbitrator or arbitrators or umpire, then the claim shall for all purposes be
deemed to have been abandoned and shall not thereafter be recoverable hereunder.
As the terms are very clear and free from any doubt or ambiguity whatsoever, it must be
taken and understood in its plain, ordinary and popular sense.
Tan, in his letter addressed to Sun Insurance Office dated April 3, 1984, admitted that he
received a copy of the letter of rejection on April 2, 1984. Thus, the 12-month prescriptive
period started to run from the said date of April 2, 1984, for such is the plain meaning and
intention of Section 27 of the insurance policy.
The condition contained in an insurance policy that claims must be presented within one
year after rejection is not merely a procedural requirement but an important matter
essential to a prompt settlement of claims against insurance companies as it demands
that insurance suits be brought by the insured while the evidence as to the origin and
cause of destruction have not yet disappeared.
It is apparent that Section 27 of the insurance policy was stipulated pursuant to Section
63 of the Insurance Code, which states that:
Sec. 63. A condition, stipulation or agreement in any policy of insurance, limiting the time
for commencing an action thereunder to a period of less than one year from the time
when the cause of action accrues, is void.
It also begs to ask, when does the cause of action accrue? The insured’s cause of action
or his right to file a claim either in the Insurance Commission or in a court of competent
jurisdiction commences from the time of the denial of his claim by the Insurer, either
expressly or impliedly. But the rejection referred to should be construed as the rejection
in the first instance (i.e. at the first occasion or for the first time), not rejection conveyed
in a resolution of a petition for reconsideration. Thus, to allow the filing of a motion for
reconsideration to suspend the running of the prescriptive period of twelve months, a
whole new body of rules on the matter should be promulgated so as to avoid any conflict
that may be brought by it, such as:
a. whether the mere filing of a plea for reconsideration of a denial is sufficient
or must it be supported by arguments/affidavits/material evidence;
b. how many petitions for reconsideration should be permitted?
(2) No. The Eagle Star case cited by Tan to defend his theory that the rejection of the claim
shall be deemed final only of it contains words to the effect that the denial is final is
inapplicable in the instant case. Final rejection or denial cannot be taken to mean the
rejection of a petition for reconsideration. The Insurance policy in the Eagle Star case
provides that the insured should file his claim, first, with the carrier and then with the
insurer. The final rejection being referred to in said case is the rejection by the insurance
company.
FORTUNE MEDICARE, INC. vs. AMORIN G.R. No. 195872, 12 March 2014
FACTS: While Amorin was on vacation in Hawaii, he underwent an emergency surgery,
specifically appendectomy, causing him to incur professional and hospitalization
expenses of US$7,242.35 and US$1,777.79, respectively. Being a cardholder/member of
Fortune Medicare, Inc. (Fortune Care), a corporation engaged in providing health
maintenance services to its members, he attempted to recover the full amount upon his
return to Manila. However, the company merely approved a reimbursement of
P12,151.36, an amount that was based on the average cost of appendectomy, net of
medicare deduction, if the procedure were performed in an accredited hospital in Metro
Manila. Amorin received under protest the approved amount, but asked for its
adjustment to cover the total amount of professional fees which he had paid, and eighty
percent (80%) of the approved standard charges based on “American standard”,
considering that the emergency procedure occurred in the U.S.A., citing provisions of the
contract. He then filed a complaint for breach of contract with damages but this was
dismissed by the RTC. It said that the parties intended to use the Philippine standard as
basis. However, this was reversed by the CA. The appellate court pointed out that, first,
health care agreements such as the subject Health Care Contract, being like insurance
contracts, must be liberally construed in favor of the subscriber. In case its provisions are
doubtful or reasonably susceptible of two interpretations, the construction conferring
coverage is to be adopted and exclusionary clauses of doubtful import should be strictly
construed against the provider. Second, the CA explained that there was nothing under
the Health Care Contract which provided that the Philippine standard should be used even
in the event of an emergency confinement in a foreign territory.
ISSUE: Whether or not a member of a health care provider can recover to the extent
agreed in the contract.
Whether or not ambiguities should be taken in favor of the member.
HELD:
1.)Yes. In the case at bar, the Supreme Court said that for purposes of determining the
liability of a health care provider to its members, jurisprudence holds that a health care
agreement is in the nature of non-life insurance, which is primarily a contract of
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.
2.) Yes. With regard the ambiguities in the contract, settled is the rule that they should be
interpreted against the party that caused the ambiguity. “Any ambiguity in a contract
whose terms are susceptible of different interpretations must be read against the party
who drafted it.” Furthermore, it affirmed the CA’s finding that Fortune Care’s liability to
Amorin under the subject Health Care Contract should be based on the expenses for
hospital and professional fees which he actually incurred, and should not be limited by
the amount that he would have incurred had his emergency treatment been performed
in an accredited hospital in the Philippines.
ALPHA INSURANCE AND SURETY CO. vs. ARSENIA SONIA CASTOR G.R. No. 198174,
September 2, 2013 (PERALTA, J.)
FACTS: Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota Revo DLX
DSL with Alpha Insurance and Surety Co (Alpha). The contract of insurance obligates the
petitioner to pay the respondent the amount of P630,000 in case of loss or damage to
said vehicle during the period covered. On April 16, 2007, respondent instructed her
driver, Jose Joel Salazar Lanuza to bring the vehicle to nearby auto-shop for a tune up.
However, Lanuza no longer returned the motor vehicle and despite diligent efforts to
locate the same, said efforts proved futile. Resultantly, respondent promptly reported the
incident to the police and concomitantly notified petitioner of the said loss and demanded
payment of the insurance proceeds. Alpha, however, denied the demand of Castor
claiming that they are not liable since the culprit who stole the vehicle is employed with
Castor. Under the Exceptions to Section III of the Policy, the Company shall not be liable
for (4) any malicious damage caused by the insured, any member of his family or by “A
PERSON IN THE INSURED’S SERVICE”. Castor filed a Complaint for Sum of Money with
Damages against Alpha before the Regional Trial Court of Quezon City. The trial court
rendered its decision in favor of Castor which decision is affirmed in toto by the Court of
Appeals. Hence, this Petition for Review on Certiorari.
ISSUE: Whether or not the loss of respondent’s vehicle is excluded under the insurance
policy
HELD: NO. The words “loss” and “damage” mean different things in common ordinary
usage. The word “loss” refers to the act or fact of losing, or failure to keep possession,
while the word “damage” means deterioration or injury to property. Therefore, petitioner
cannot exclude the loss of Castor’s vehicle under the insurance policy under paragraph 4
of “Exceptions to Section III”, since the same refers only to “malicious damage”, or more
specifically, “injury” to the motor vehicle caused by a person under the insured’s service.
Paragraph 4 clearly does not contemplate “loss of property”.
A contract of insurance is a contract of adhesion. So, when the terms of the insurance
contract contain limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. Thus, in Eternal Gardens
Memorial Park Corporation vs. Philippine American Life Insurance Company, this Court
ruled that it must be remembered that an insurance contract is a contract of adhesion
which must be construed liberally in favor of the insured and strictly against the insurer
in order to safeguard the latter’s interest.
Philippine Health Care v CIR G.R. No. 167330 September 18, 2009
J. Corona
Facts: Philippine Health Care’s objectives were:
"[t]o establish, maintain, conduct and operate a prepaid group practice health care
delivery system or a health maintenance organization to take care of the sick and disabled
persons enrolled in the health care plan and to provide for the administrative, legal, and
financial responsibilities of the organization.”
It lost the case in 2004 when it was made to pay over 100 million in VAT deficiencies. At
the time the MFR was filed, it was able to avail of tax amnesty under RA 9840 by paying
5 percent of the tax or 5 million pesos.
Petitioner passed an MFR but the CA denied. Hence, this case.
Issue: Was petitioner, as an HMO, engaged in the business of insurance during the
pertinent taxable years, and was thus liable for DST?
Held: No. Mfr granted. CIR must desist from collecting tax.
Ratio:
Section 185 of the NIRC . Stamp tax on fidelity bonds and other insurance policies. – On
all policies of insurance or bonds or obligations of the nature of indemnity for loss,
damage, or liability made or renewed by any person, association or company or
corporation transacting the business of accident, fidelity, employer’s liability, plate, glass,
steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except
life, marine, inland, and fire insurance).
Two requisites must concur before the DST can apply, namely: (1) the document must be
a policy of insurance or an obligation in the nature of indemnity and (2) the maker should
be transacting the business of accident, fidelity, employer’s liability, plate, glass, steam
boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life,
marine, inland, and fire insurance).
Under RA 7875, an HMO is "an entity that provides, offers or arranges for coverage of
designated health services needed by plan members for a fixed prepaid premium."
Various courts in the United States have determined that HMOs are not in the insurance
business. One test that they have applied is whether the assumption of risk and
indemnification of loss are the principal object and purpose of the organization or
whether they are merely incidental to its business. If these are the principal objectives,
the business is that of insurance. But if such is incidental and service is the principal
purpose, then the business is not insurance.
Applying the "principal object and purpose test," there is significant American case law
supporting the argument that a corporation, whose main object is to provide the
members of a group with health services, is not engaged in the insurance business.
For the purpose of determining what "doing an insurance business" means, we have to
scrutinize the operations of the business as a whole. This is of course only prudent and
appropriate, taking into account laws applicable to those in the insurance business.
Petitioner, as an HMO, is not part of the insurance industry. This is evident from the fact
that it is not supervised by the Insurance Commission but by the Department of Health.
In fact, in a letter dated September 3, 2000, the Insurance Commissioner confirmed that
petitioner is not engaged in the insurance business.
As to whether the business is covered by the DST, we can see that while the contract did
contains all the elements of an insurance contract, as stated in Sec 2., Par 1 of the
Insurance Code, the primary purpose of the company is to render service. The primary
purpose of the parties in making the contract may negate the existence of an insurance
contract.
Also, there is no loss, damage or liability on the part of the member that should be
indemnified by petitioner as an HMO. Under the agreement, the member pays petitioner
a predetermined consideration in exchange for the hospital, medical and professional
services rendered by the petitioner’s physician or affiliated physician to him.
In other words, there is nothing in petitioner's agreements that gives rise to a monetary
liability on the part of the member to any third party-provider of medical services which
might in turn necessitate indemnification from petitioner. The terms "indemnify" or
"indemnity" presume that a liability or claim has already been incurred. There is no
indemnity precisely because the member merely avails of medical services to be paid or
already paid in advance at a pre-agreed price under the agreements.
Also, a member can take advantage of the bulk of the benefits anytime, e.g. laboratory
services, x-ray, routine annual physical examination and consultations, vaccine
administration as well as family planning counseling, even in the absence of any peril, loss
or damage on his or her part.
Petitioner is obliged to reimburse the member who receives care from a non-participating
physician or hospital. However, this is only a very minor part of the list of services
available. The assumption of the expense by petitioner is not confined to the happening
of a contingency but includes incidents even in the absence of illness or injury.
Consequently, there is a need to distinguish prepaid service contracts (like those of
petitioner) from the usual insurance contracts.
However, assuming that petitioner’s commitment to provide medical services to its
members can be construed as an acceptance of the risk that it will shell out more than
the prepaid fees, it still will not qualify as an insurance contract because petitioner’s
objective is to provide medical services at reduced cost, not to distribute risk like an
insurer.
If it had been the intent of the legislature to impose DST on health care agreements, it
could have done so in clear and categorical terms. It had many opportunities to do so. But
it did not. The fact that the NIRC contained no specific provision on the DST liability of
health care agreements of HMOs at a time they were already known as such, belies any
legislative intent to impose it on them. As a matter of fact, petitioner was assessed its DST
liability only on January 27, 2000, after more than a decade in the business as an HMO.
In view of petitioner’s availment of the benefits of [RA 9840], and without conceding the
merits of this case as discussed above, respondent concedes that such tax amnesty
extinguishes the tax liabilities of petitioner.
21 Our Insurance Code was based on California and New York laws. When a statute has
been adopted from some other state or country and said statute has previously been
construed by the courts of such state or country, the statute is deemed to have been
adopted with the construction given.
FILIPINAS COMPANIA DE SEGUROS vs. CHRISTERN HUENEFELD and CO., INC. 89 Phil 54
FACTS: On October 1, 1941, the respondent corporation, Christern Huenefeld and Co.,
Inc., after payment of corresponding premium, obtained from the petitioner, Filipinas Cia
de Seguros fire policy covering merchandise contained in a building located at Binondo,
Manila. On February 27, 1942 or during the Japanese military occupation, the building
and insured merchandise were burned. In due time, the respondent submitted to the
petitioner its claim under the policy. The petitioner refused to pay the claim on the ground
that the policy in favor of the respondent that ceased to be a force on the date the United
States declared war against Germany, the respondent corporation (through organized
under and by virtue of the laws of Philippines) being controlled by German subjects and
the petitioner being a company under American jurisdiction when said policy was issued
on October 1, 1941. The theory of the petitioner is that the insured merchandise was
burned after the policy issued in 1941 had ceased to be effective because the outbreak
of the war between United States and Germany on December 10, 1941, and that the
payment made by the petitioner to the respondent corporation during the Japanese
military occupation was under pressure.
ISSUE: Whether or not the respondent corporation is a corporation of public enemy.
RULING: Since the majority of stockholders of the respondent corporation were German
subjects, the respondent became an enemy of the state upon the outbreak of the war
between US and Germany. The English and American cases relied upon by the Court of
Appeals lost in force upon the latest decision of the Supreme Court of US in which the
control test has adopted. Since World War I, the determination of enemy nationality of
corporations has been discussed in many countries, belligerent and neutral. A corporation
was subject to enemy legislation when it was controlled by enemies, namely managed
under the influence of individuals or corporations themselves considered as enemies…
The Philippine Insurance Law (Act No 2427, as amended), in Section 8, provides that
“anyone except a public enemy may be insured”. It stands to reason that an insurance
policy ceases to be allowable as soon as an insured becomes a public enemy.
The respondent having an enemy corporation on December 10, 1941, the insurance policy
issued in its favor on October 1, 1941, by the petitioner had ceased to be valid and
enforceable, and since the insured good were burned during the war, the respondent was
not entitled to any indemnity under said policy from the petitioner. However, elementary
rule of justice (in the absence of specific provisions in the Insurance Law) require that the
premium paid by the respondent for the period covered by its policy from December 11,
1941, should be returned by the petitioner.
United Merchants Corporation vs Country Bankers Insurance Corporation
G.R. No. 198588 July 11, 2012
Facts: Petitioner United Merchants Corporation (UMC) is engaged in the business of
buying, selling, and manufacturing Christmas lights. UMC leased a warehouse at 19-B
Dagot Street, San Jose Subdivision, Barrio Manresa, Quezon City, where UMC assembled
and stored its products. On 6 September 1995, UMCs General Manager Alfredo Tan
insured UMCs stocks in trade of Christmas lights against fire with defendant Country
Bankers Insurance Corporation (CBIC) for P 15,000,000.00. The Fire Insurance Policy No.
F-HO/95-576 (Insurance Policy) and Fire Invoice No. 12959A, valid until 6 September
1996. On 7 May 1996, UMC and CBIC executed Endorsement F/96-154 and Fire Invoice
No. 16583A to form part of the Insurance Policy. Endorsement F/96-154 provides that
UMCs stocks in trade were insured against additional perils, to wit: typhoon, flood, ext.
cover, and full earthquake. The sum insured was also increased to P50,000,000.00
effective 7 May 1996 to 10 January 1997. On 9 May 1996, CBIC issued Endorsement F/96-
157 where the name of the assured was changed from Alfredo Tan to UMC. On 3 July
1996, a fire gutted the warehouse rented by UMC. CBIC designated CRM Adjustment
Corporation (CRM) to investigate and evaluate UMCs loss by reason of the fire. CBICs
reinsurer, Central Surety, likewise requested the National Bureau of Investigation (NBI) to
conduct a parallel investigation. On 6 July 1996, UMC, through CRM, submitted to CBIC
its Sworn Statement of Formal Claim, with proofs of its loss.
Issue: Whether or not UMC is entitled to claim from CBIC the full coverage of its fire
insurance policy.
Held: No. Burden of proof is the duty of any party to present evidence to establish his
claim or defense by the amount of evidence required by law, which is preponderance of
evidence in civil cases. The party, whether plaintiff or defendant, who asserts the
affirmative of the issue has the burden of proof to obtain a favorable judgment.
Particularly, in insurance cases, once an insured makes out a prima facie case in its favor,
the burden of evidence shifts to the insurer to controvert the insureds prima facie case.
In the present case, UMC established a prima facie case against CBIC. CBIC does not
dispute that UMCs stocks in trade were insured against fire under the Insurance Policy
and that the warehouse, where UMCs stocks in trade were stored, was gutted by fire on
3 July 1996, within the duration of the fire insurance. However, since CBIC alleged an
excepted risk, then the burden of evidence shifted to CBIC to prove such exception.
An insurer who seeks to defeat a claim because of an exception or limitation in the policy
has the burden of establishing that the loss comes within the purview of the exception or
limitation. If loss is proved apparently within a contract of insurance, the burden is upon
the insurer to establish that the loss arose from a cause of loss which is excepted or for
which it is not liable, or from a cause which limits its liability.
In Uy Hu & Co. v. The Prudential Assurance Co., Ltd., the Court held that where a fire
insurance policy provides that if the claim be in any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any fraudulent means or devices are
used by the Insured or anyone acting on his behalf to obtain any benefit under this Policy,
and the evidence is conclusive that the proof of claim which the insured submitted was
false and fraudulent both as to the kind, quality and amount of the goods and their value
destroyed by the fire, such a proof of claim is a bar against the insured from recovering
on the policy even for the amount of his actual loss.
In the present case, as proof of its loss of stocks in trade amounting to P 50,000,000.00,
UMC submitted its Sworn Statement of Formal Claim together with the following
documents: (1) letters of credit and invoices for raw materials, Christmas lights and
cartons purchased; (2) charges for assembling the Christmas lights; and (3) delivery
receipts of the raw materials. However, the charges for assembling the Christmas lights
and delivery receipts could not support its insurance claim. The Insurance Policy provides
that CBIC agreed to insure UMCs stocks in trade. UMC defined stock in trade as tangible
personal property kept for sale or traffic. Applying UMCs definition, only the letters of
credit and invoices for raw materials, Christmas lights and cartons may be considered.
It has long been settled that a false and material statement made with an intent to
deceive or defraud voids an insurance policy.
The most liberal human judgment cannot attribute such difference to mere innocent
error in estimating or counting but to a deliberate intent to demand from insurance
companies payment for indemnity of goods not existing at the time of the fire. This
constitutes the so-called fraudulent claim which, by express agreement between the
insurers and the insured, is a ground for the exemption of insurers from civil liability.