Digest Final

INSURANCE (2S 2ndsem 2011-2012) Case Digest
Aguilar/Machado/Martir/Tayo
CONSTRUCTION OF INSURANCE CASES

Calanoc v. Court of Appeals
No. L-8151. December 16, 1955
Facts:
Melencio Basilio was a watchman of the Manila Auto Supply located at the
corner of Avenida Rizal and Zurbaran. He secured a life insurance policy from the
Philippine American Life Insurance Company in the amount of P2,000 to which was
attached a supplementary contract covering death by accident. On January 25,
1951, he died of a gunshot wound on the occasion of a robbery committed in the
house of Atty. Ojeda at the corner of Oroquieta and Zurbaran streets. Calanoc, the
widow, was paid the sum of P2,000, face value of the policy, but when she
demanded the payment of the additional sum of P2,000 representing the value of
the supplemental policy, the company refused alleging, as main defense, that the
deceased died because he was murdered by a person who took part in the
commission of the robbery and while making an arrest as an officer of the law
which contingencies were expressly excluded in the contract and have the effect of
exempting the company from liability.
It is contended in behalf of the company that Basilio was killed while "making an
arrest as an officer of the law" or as a result of an "assault or murder" committed in
the place and therefore his death was caused by one of the risks excluded by
the supplementary contract which exempts the company from liability. This
contention was upheld by the Court of Appeals. Hence, this petition.
Issue:
Whether or not the death of the victim comes within the purview of the
exception clause of the supplementary policy and, hence, exempts the company
from liability
Held:
No. Basilio was a watchman of the Manila Auto Supply which was a block
away from the house of Atty. Ojeda where something suspicious was happening
which caused the latter to ask for help. While at first he declined the invitation of
Atty. Ojeda to go with him to his residence to inquire into what was going on
because he was not a regular policeman, he later agreed to come along when
prompted by the traffic policeman, and upon approaching the gate of the residence
he was shot and died. The circumstance that he was a mere watchman and had no
duty to heed the call of Atty. Ojeda should not be taken as a capricious desire on
his part to expose his life to danger considering the fact that the place he was in
duty-bound to guard was only a block away. In volunteering to extend help under
the situation, he might have thought, rightly or wrongly, that to know the truth was
in the interest of his employer it being a matter that affects the security of the
neighborhood. No doubt there was some risk coming to him in pursuing that
errand, but that risk always existed it being inherent in the position he was holding.
He cannot therefore be blamed solely for doing what he believed was in keeping
with his duty as a watchman and as a citizen. And he cannot be considered as
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making an arrest as an officer of the law, as contended, simply because he went

with the traffic policeman, for certainly he did not go there for that purpose nor was
he asked to do so by the policeman.
Much less can it be pretended that Basilio died in the course of an assault or
murder considering the very nature of these crimes. In the first place, there is no
proof that the death of Basilio is the result of either crime for the record is barren of
any circumstance showing how the fatal shot was fired. Perhaps this may be
clarified in the criminal case now pending in court as regards the incident but before
that is done anything that might be said on the point would be a mere conjecture.
Nor can it be said that the killing was intentional for there is the possibility that the
malefactor had fired the shot merely to scare away the people around for his
own protection and not necessarily to kill or hit the victim. In any event, while the
act may not exempt the triggerman from liability for the damage done, the fact
remains that the happening was a pure accident on the part of the victim. The
victim could have been either the policeman or Atty. Ojeda for it cannot be
pretended that the malefactor aimed at the deceased precisely because he wanted
to take his life.
Biagtan, Jr. vs. Insular Life Assurance Co.
G.R. No. L-25579. March 29, 1972
Facts:
Juan Biagtan was insured with defendant for the sum of P5000 and, under
a supplementary contract denominated Accidental Death Benefit Clause for an
additional P5000 if the death of the insured resulted directly from bodily injury
effected solely through external and violent means sustained in an accident and
independently of all other causes. The clause expressly provided that it would not
apply where death resulted from an injury intentionally inflicted by a third party.
Sometime in May 1964, a band of robbers entered the house of the insured.
The insured received thrusts from the robbers' sharp-pointed instruments, causing
wounds resulting in his death. Plaintiffs, as beneficiaries, filed a claim under the
policy. Defendant paid the basic amount of P5000 but refused to pay the additional
P5000 on the ground that the death of the insured resulted from injuries
intentionally inflicted by third persons. Plaintiffs filed suit to recover and the court
rendered judgment in their favor. Hence, present appeal by the insurer.
Issue:
Whether or not the wounds received were inflicted intentionally
Held:
Yes. Nine wounds were inflicted upon the deceased, all by means of thrusts
with sharp-pointed instruments wielded by the robbers. Whether the robbers had
the intent to kill or merely to scare the victim or to ward off any defense he might
offer, it cannot be denied that the act itself of inflicting injuries was intentional.
Where a gang of robbers enter a house and coming face to face with the owner,
even if unexpectedly, stab him repeatedly, it is contrary to all reason and logic to
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say that his injuries are not intentionally inflicted, regardless of whether they prove
fatal or not.
It has been held that intentional as used in an accident policy excepting
intentional injuries inflicted by the insured or any other person implies the exercise
of the reasoning faculties, consciousness, and volition. Where a provision of the
policy excludes intentional injury, it is the intention of the person inflicting the
injury that is controlling. If the injuries suffered by the insured clearly resulted from
the intentional act of a third person, the insurer is relieved from liability as
stipulated.
Finman General Assurance Corp. v Court of Appeals
G.R. No. 100970. September 2, 1992
Facts:
Carlie Surposa was insured with petitioner Finman General Assurance
Corporation under Finman General Teachers Protection Plan Master Policy No. 2005
and Individual Policy No. 08924 with his parents, spouses Julia and Carlos Surposa,
and Christopher, Charles, Chester and Clifton, as beneficiaries. On October 18,
1988, Carlie Surposa died as a result of a stab wound. Thereafter, private
respondent and the other beneficiaries of said insurance policy filed a claim with the
insurance company which denied said claim contending that murder and assault are
not within the coverage of the insurance policy. The Insurance Commission
rendered a decision in favor of complainant, ordering the respondent to pay the
proceeds of the insurance policy with legal interest and cost of suit.
Respondent petitioner filed a petition alleging grave abuse of discretion on the part
of the appellate court in applying the principle of expresso unius exclusio alterius
since death resulting from murder and/or assault are impliedly excluded in said
insurance.
Issue:
Whether or not murder is included impliedly among the prohibitions of the
insurance policy
Held:
The Supreme Court ruled that the terms "accident" means that which happen
by chance or fortuitously, without intention and design, and which is unexpected,
unusual, and unforeseen. In the case at bar, while the act may not exempt the
unknown perpetrator from criminal liability, the fact remains that the happening
was a pure accident on the part of the victim. The insured died from an event that
took place without his foresight or expectation, an event that proceeded from an
unusual effect of a known cause and, therefore, not expected. Moreover the
principle of " expresso unius exclusio alterius", the mention of one thing implies the
exclusion of another thing, is therefore applicable in the instant case since murder
and assault, not having been expressly included in the enumeration of the
circumstances that would negate liability in said insurance policy cannot be
considered by implication to discharge the petitioner insurance company from
Page 3
liability for, any injury, disability or loss suffered by the insured. Thus, the failure of
the petitioner insurance company to include death resulting from murder or assault
among the prohibited risks leads inevitably to the conclusion that it did not intend
to limit or exempt itself from liability for such death. Wherefore the Supreme Court
affirmed the decision of the Court of Appeals in favor of the complainant.
Zenith Insurance Corp. v Court of Appeals
G.R. No. 85296. May 14, 1990
Facts:
On January 25, 1983, private respondent Lawrence Fernandez insured his car
for "own damage" with petitioner Zenith Insurance Corporation. On July 6, 1983,
the car figured in an accident and suffered actual damages in the amount of
P3,640.00. After allegedly being given a run around by Zenith for two (2) months,
Fernandez filed a complaint with the Regional Trial Court of Cebu for sum of money
and damages resulting from the refusal of Zenith to pay the amount claimed. Aside
from actual damages and interests, Fernandez also prayed for moral damages in
the amount of P10,000.00, exemplary damages of P5,000.00, attorney's fees of
P3,000.00 and litigation expenses of P3,000.00.
On September 28, 1983, Zenith filed an answer alleging that it offered to pay the
claim of Fernandez pursuant to the terms and conditions of the contract which, the
private respondent rejected. On June 4, 1986, a decision was rendered by the trial
court in favor of private respondent Fernandez. On August 17, 1988, the Court of
Appeals rendered its decision affirming in toto the decision of the trial court.
Issue:
Whether or not the propriety of the award of moral damages, exemplary
damages and attorney's fees is the main issue raised herein by petitioner
Held:
The award of damages in case of unreasonable delay in the payment of

insurance claims is governed by the Philippine Insurance Code, which provides:
Section 244. In case of any litigation for the enforcement of any policy or contract
of insurance, it shall be the duty of the Commissioner or the Court, as the case may
be, to make a finding as to whether the payment of the claim of the insured has
been unreasonably denied or withheld; and in the affirmative case,
the insurance company shall be adjudged to pay damages which shall consist of
attorney's fees and other expenses incurred by the insured person by reason of
such unreasonable denial or withholding of payment plus interest of twice
the ceiling prescribed by the Monetary Board of the amount of the claim due
the insured, from the date following the time prescribed in section two hundred
forty-two or in section two hundred forty-three, as the case may be, until the claim
is fully satisfied; Provided, That the failure to pay any such claim within the time
prescribed in said sections shall be considered prima facie evidence of unreasonable
delay in payment.
Page 4
It is clear that under the Insurance Code, in case of unreasonable delay in

the payment of the proceeds of an insurance policy, the damages that may be
awarded are: 1) attorney's fees; 2) other expenses incurred by the insured person
by reason of such unreasonable denial or withholding of payment; 3) interest at
twice the ceiling prescribed by the Monetary Board of the amount of the claim due
the injured; and 4) the amount of the claim.
Sun Insurance Office, Ltd. v Court of Appeals
GR. No. 92383. July 17, 1992
Facts:
Sun Insurance Office Ltd. issued Personal Accident Policy 05687 to Felix Lim,
Jr. with a face value of P200,000.00. 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 October 6, 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 or not 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's death 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
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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.
Villacorta v Insurance Commission
G.R. No. 54171. October 28, 1980
Facts:
Complainant Jewel Villacorta was the owner of a Colt Lancer, Model 1976,
insured with respondent Empire Insurance Company under Private Car Policy No.
MBI/PC-0704 for P35,000.00Own Damage; P30,000.00Theft; and P30,000.00
Third Party Liability, effective May 16, 1977 to May 16, 1978. On May 9, 1978, the
vehicle was brought to the Sunday Machine Works, Inc., for general check-up and
repairs. On May 11, 1978, while it was in the custody of the Sunday Machine
Works, the car was allegedly taken by six (6) persons and driven out to Montalban,
Rizal. While travelling along Mabini St., Sitio Palyasan, Barrio Burgos, going North
at Montalban, Rizal, the car figured in an accident, hitting and bumping a gravel
and sand truck parked at the right side of the road going south. As a consequence,
the gravel and sand truck veered to the right side of the pavement going south and
the car veered to the right side of the pavement going north. The driver, Benito
Mabasa, and one of the passengers died and the other four sustained physical
injuries. The car, as well, suffered extensive damage. Villacorta, thereafter, filed a
claim for total loss with the insurance company but claim was denied. Hence,
Villacorta was compelled to institute the present action.
The comprehensive motor car insurance policy for P35,000.00 issued by respondent
Empire Insurance Company admittedly undertook to indemnify the petitionerinsured against loss or damage to the car (a) by accidental collision or overturning,
or collision or overturning consequent upon mechanical breakdown or consequent
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upon wear and tear; (b) by fire, external explosion, self-ignition or lightning or
burglary, housebreaking or theft; and (c) by malicious act.
Respondent insurance commission, however, dismissed Villacortas complaint for
recovery of the total loss of the vehicle against Empire Insurance Company,
sustaining respondent insurers contention that the accident did not fall within the
provisions of the policy either for the Own Damage or Theft coverage, invoking the
policy provision on Authorized Driver clause. It must be observed that under the
above-quoted provisions, the policy limits the use of the insured vehicle to two (2)
persons only, namely: the insured himself or any person on his (insureds)
permission. Under the second category, it is to be noted that the words any
person is qualified by the phrase on the insureds order or with his permission.
Villacorta admitted that she did not know the person who drove her vehicle at the
time of the accident, much less consented to the use of the same. Her husband
likewise admitted that he neither knew this driver Benito Mabasa. With these
declarations of complainant and her husband, we hold that the person who drove
the vehicle, in the person of Benito Mabasa, is not an authorized driver of the
complainant. Apparently, this is a violation of the Authorized Driver clause of the
policy.
Issue:
Whether or not there is a violation of the authorized driver clause
Held:
Respondent commission held that the person who drove the vehicle in the
person of Benito Mabasa, who, according to its own finding, was one of the
residents of the Sunday Machine Works, Inc. to whom the car had been entrusted
for general check-up and repairs was not an authorized driver of Villacorta is too
restrictive and contrary to the established principle that insurance contracts, being
contracts of adhesion, where the only participation of the other party is the signing
of his signature or his adhesion thereto, obviously call for greater strictness and
vigilance on the part of courts of justice with a view of protecting the weaker party
from abuse and imposition, and prevent their becoming traps for the unwary.
A car owner who entrusts his car to an established car service and repair shop
necessarily entrusts his car key to the shop owner and employees who are
presumed to have the insureds permission to drive the car for legitimate purposes
of checking or road-testing the car. The mere happenstance that the employee(s)
of the shop owner diverts the use of the car to his own illicit or unauthorized
purpose in violation of the trust reposed in the shop by the insured car owner does
not mean that the authorized driver clause has been violated such as to bar
recovery, provided that such employee is duly qualified to drive under a valid
drivers license.
Palermo vs. Pyramid Insurance Co., Inc.
G.R. No. L-36480. May 31, 1988
Page 7
Facts:
On October 12,1968, after having purchased a brand new Nissan Cedric de
Luxe Sedan car from the Ng Sam Bok Motors Co. in Bacolod City, plaintiff Andrew
Palermo insured the same with the defendant Pyramid Insurance Company against
any loss or damage for P20,000.00 and against third party liability for P10,000.00.
Plaintiff paid the defendant P361.34 premium for one year, March 12,1968 to March
12,1969, for which defendant issued Private Car Comprehensive Policy No. MV1251.
The automobile was, however, mortgaged by Palermo with the vendor, Ng Sam Bok
Motors Co., to secure the payment of the balance of the purchase price, which
explains why the registration certificate in the name of Palermo remains in the
hands of the mortgagee, Ng Sam Bok Motors Co.
On April 17, 1968, while driving the automobile in question, Palermo met a violent
accident. The La Carlota City fire engine crashed head on, and as a consequence,
Palermo sustained physical injuries, his father, Cesar Palermo, who was with him in
the car at the time was likewise seriously injured and died shortly thereafter, and
the car in question was totally wrecked.
Pyramid Insurance was immediately notified of the occurrence, and upon its orders,
the damaged car was towed from the scene of the accident to the compound of Ng
Sam Bok Motors in Bacolod City where it remains deposited up to the present time.
The insurance policy grants an option unto the Pyramid Insurance, in case of
accident either to indemnify Palermo for loss or damage to the car in cash or to
replace the damaged car. The insurance company, however, refused to take either
of the above-mentioned alternatives for the reason as alleged, that the insured
himself had violated the terms of the policy when he drove the car in question with
an expired drivers license.
On March 7, 1969, the insured, appellee Andrew Palermo, filed a complaint in the
Court of First Instance of Negros Occidental against Pyramid Insurance Co., Inc.,
for payment of his claim under a Private Car Comprehensive Policy MV-1251 issued
by the insurance company. In its answer, the appellant Pyramid Insurance Co., Inc.
alleged that it disallowed the claim because at the time of the accident, the insured
was driving his car with an expired drivers license. After the trial, the court a quo
rendered judgment in favor of Palermo. Hence, an appeal.
Issue:
Whether or not Palermo is not an authorized driver under the authorized
driver clause
Held:
There is no merit in the insurance companys allegation that Palermo was not
authorized to drive the insured motor vehicle because his drivers license had
expired. The driver of the insured motor vehicle at the time of the accident was the
insured himself, hence an authorized driver under the policy.
Page 8
The requirement that the driver be permitted in accordance with the licensing or
other laws or regulations to drive the Motor Vehicle and is not disqualified from
driving such motor vehicle by order of a Court of Law or by reason of any
enactment or regulation in that behalf, applies only when the driver is driving on
the insureds order or with his permission. It does not apply when the person
driving is the insured himself.
Figuracion vda. de Maglana v Hon. Francisco Consolacion
G.R. No. 60506. August 6, 1992
Facts:
Lope Maglana was an employee of the Bureau of Customs whose work
station was at Lasa in Davao City. On December 20, 1978, early morning, Lope
Maglana was on his way to his work station, driving a motorcycle owned by the
Bureau of Customs. At Km. 7, Lanang, he met an accident that resulted in his
death. He died on the spot. The PUJ jeep that bumped the deceased was driven by
Pepito Into, operated and owned by defendant Destrajo. From the investigation
conducted by the traffic investigator, the PUJ jeep was overtaking another
passenger jeep that was going towards the city poblacion. While overtaking, the
PUJ jeep of defendant Destrajo running abreast with the overtaken jeep, bumped
the motorcycle driven by the deceased who was going towards the direction of
Lasa, Davao City. The point of impact was on the lane of the motorcycle and the
deceased was thrown from the road and met his untimely death.
Consequently, the heirs of Lope Maglana, Sr., here petitioners, filed an action
for damages and attorneys fees against operator Patricio Destrajo and the Afisco
Insurance Corporation (AFISCO for brevity) before the then Court of First Instance
of Davao, Branch II. An information for homicide thru reckless imprudence was also
filed against Pepito Into. On December 14, 1981, the lower court rendered a
decision finding that Destrajo had not exercised sufficient diligence as the operator
of the jeepney. The defendant insurance company is ordered to reimburse
defendant Destrajo whatever amounts the latter shall have paid only up to the
extent of its insurance coverage.
The heirs of Maglana filed a motion for the reconsideration of the second paragraph
of the dispositive portion of the decision contending that AFISCO should not merely
be held secondarily liable because the Insurance Code provides that the insurers
liability is direct and primary and/or jointly and severally with the operator of the
vehicle, although only up to the extent of the insurance coverage. Hence, they
argued that the P20,000.00 coverage of the insurance policy issued by AFISCO,
should have been awarded in their favor. In its comment on the motion for
reconsideration, AFISCO argued that since the Insurance Code does not expressly
provide for a solidary obligation, the presumption is that the obligation is joint. In
its Order of February 9, 1982, the lower court denied the motion for
reconsideration, held that since the insurance contract is in the nature of
suretyship, then the liability of the insurer is secondary only up to the extent of the
insurance coverage.
Page 9
The heirs filed a second motion for reconsideration reiterating that the liability of
AFISCO is direct, primary and solidary with the jeepney operator because they
became direct beneficiaries under the provision of the policy which, in effect, is a
stipulation pour autrui. This motion was likewise denied for lack of merit. Hence,
this petition for certiorari.
Issue:
Whether or not AFISCO is solidarily liable with the jeepney operator
Held:
While it is true that where the insurance contract provides for indemnity
against liability to third persons, such third persons can directly sue the insurer,
however, the direct liability of the insurer under indemnity contracts against third
party liability does not mean that the insurer can be held solidarily liable with the
insured and/or the other parties found at fault. The liability of the insurer is based
on contract; that of the insured is based on tort.
Petitioners herein cannot validly claim that AFISCO, whose liability under the
insurance policy is also P20,000.00, can be held solidarily liable with Destrajo for
the total amount of P53,901.70 in accordance with the decision of the lower court.
Since under both the law and the insurance policy, AFISCOs liability is only up to
P20,000.00, the second paragraph of the dispositive portion of the decision in
question may have unwittingly sown confusion among the petitioners and their
counsel. What should have been clearly stressed as to leave no room for doubt was
the liability of AFISCO under the explicit terms of the insurance contract.
We conclude that the liability of AFISCO based on the insurance contract is direct,
but not solidary with that of Destrajo which is based on Article 2180 of the Civil
Code. As such, petitioners have the option either to claim the P15,000 from AFISCO
and the balance from Destrajo or enforce the entire judgment from Destrajo subject
to reimbursement from AFISCO to the extent of the insurance coverage.
Perla Compania de Seguros, Inc. v Court of Appeals
G.R. No. 96452. May 7, 1992
Facts:
Spouses Lim purchased a brand new red Ford Laser car from Supercars, Inc.
in a sale by installment secured by a chattel mortgage. The same car
is insured with Perla Compania de Seguros (Perla). On the same day, Supercars,
Inc. assigned its rights, title and interest to FCP Credit Corporation (FCP).
On a later date, the vehicle was carnapped. Spouses Lim filed a claim for loss with
Perla but this was denied on the ground that Evelyn Lim, who was using
the vehicle before it was carnapped, was in possession of an expired drivers license
at the time of the loss, in violation of the authorized driver clause of
the insurance policy.
Page 10
Issue:
Whether or not Perla Compania de Seguros is liable despite the alleged
violation of the authorized driver clause in the insurance contract
Held:
The Supreme Court held that Perla is liable to pay the insurance claim. The
comprehensive motor car insurance policy issued by Perla covered loss or damage
to the car: (a) xxx; (b) by fire, external explosion, self-ignition or lightning
or burglary, housebreaking or theft; (c) xxx.
Where a car is admittedly unlawfully and wrongfully taken without the owners
consent or knowledge, such taking constitutes theft, and therefore, it is the
THEFT clause, and not the AUTHORIZED DRIVER clause that should apply.
The Court of Appeals was correct in holding that:
Theft is an entirely different legal concept from that of accident. Theft is
committed by a person with the intent to gain or, to put it in another way, with the
concurrence of the doers will. On the other hand, accident, although it may
proceed or result from negligence, is the happening of an event without the
concurrence of the will of the person by whose agency it was caused.
(Bouviers Law Dictionary).
Clearly, the risk against accident is distinct from the risk against theft. The
authorized driver clause in a typicalinsurance policy is in contemplation or
anticipation of accident in the legal sense in which it should be understood, and not
in contemplation or anticipation of an event such as theft. The distinction often
seized upon by insurance companies in resisting claims from their assureds
between death occurring as a result of accident and death occurring as a result of
intent may, by analogy, apply to the case at bar. Thus, if the insured vehicle had
figured in an accident at the time she drove it with an expired license, then,
appellee Perla Compania could properly resist appellants claim for indemnification
for the loss or destruction of the vehicle resulting from the accident. But in the
present case, the loss of the insuredvehicle did not result from an accident where
intent was involved; the loss in the present case was caused by theft, the
commission of which was attended by intent.
There is no causal connection between the possession of a valid drivers license and
the loss of a vehicle. To rule otherwise would render car insurance practically a
sham since an insurance company can easily escape liability by citing restrictions
which are not applicable or germane to the claim, thereby reducing indemnity to a
shadow.
Geagonia v Court of Appeals
G.R. No. 114427. February 6, 1995
Facts:
Page 11
The petitioner is the owner of Norman's Mart located in the public market of
San Francisco, Agusan del Sur. On December 22, 1989, he obtained from the
private respondent fire insurance policy No. F-146222 for P100,000.00. The policy
contained the following condition:
"3. The insured shall give notice to the Company of any insurance or insurances
already effected, or which may subsequently be effected, XXXXXprovided however,
that this condition shall not apply when the total insurance or insurances in force at
the time of the loss or damage is not more than P200,000.00."
On May 27, 1990, fire of accidental origin broke out at around 7:30 p.m. at the
public market of San Francisco, Agusan del Sur. The petitioner's insured stocks-intrade were completely destroyed prompting him to file with the private respondent
a claim under the policy. The private respondent denied the claim because it found
that at the time of the loss the petitioner's stocks-in-trade were likewise covered by
other fire insurance policies. The basis of the private respondent's denial was the
petitioner's alleged violation of Condition 3 of the policy.The petitioner then filed a
complaint against the private respondent with the Insurance Commission (Case No.
3340) for the recovery of P100,000.00 under fire insurance policy No. F14622
requirement was not mentioned to him by the private respondent's agent; and had
it been so mentioned, he would not have withheld such information.
In its decision of June 21, 1993, the Insurance Commission found that the
petitioner did not violate Condition 3 as he had no knowledge of the existence of
the two fire insurance policies obtained from the PFIC.
In its decision of December 29, 1993, the Court of Appeals reversed the decision of
the Insurance Commission because it found that the petitioner knew of the
existence of the two other policies issued by the PFIC. Hence this petition
Issue:
Whether or not the petitioner had prior knowledge of the two insurance
policies issued by the PFIC when he obtained the fire insurance policy from the
private respondent, thereby, for not disclosing such fact, violating Condition 3 of
the policy
Held:
The court held that they agree with the Court of Appeals that the petitioner
knew of the prior policies issued by the PFIC. His letter of January 18, 1991 to the
Condition 3 of the private respondent's Policy No. F-14622 is a condition which is
not proscribed by law. In accordance to law, provisions, conditions or exceptions in
policies which tend to work a forfeiture of insurance policies should be construed
most strictly against those for whose benefits they are inserted, and most favorably
toward those against whom they are intended to operate. The reason for this is
that, except for riders which may later be inserted, the insured sees the contract
already in its final form and has had no voice in the selection or arrangement of the
words employed therein. We are of the opinion that Condition 3 of the subject
policy is not totally free from ambiguity and must, perforce, be meticulously
Page 12
analyzed. What is avoided is double insurance, there is no double insurance in the

case at bar and the condition will avoid the insurance because the insurance
company will still be liable up to extent of the loss covered by the policy. Hence the
petition is granted.
Fortune Insurance & Surety Co., Inc. v Court of Appeals
G.R No. 115278. May 23, 1995
Facts:
On June 29, 1987, Producers Bank of the Philippines armored vehicle was
robbed, in transit, of seven hundred twenty-five thousand pesos (Php 725,000.00)
that it was transferring from its branch in Pasay to its main branch in Makati. To
mitigate
their
loss,
they
claim
the
amount
from
their
insurer,
namely Fortune Insurance and Surety Co.
Fortune Insurance, however, assails that the general exemption clause in the
Casualty Insurance coverage had a general exemption clause, to wit:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or
any officer, employee, partner, director, trustee or authorized representative of the
Insured whether acting alone or in conjunction with others. . . .
And, since the driver (Magalong) and security guard (Atiga) of the armored
vehicle were charged with three others as liable for the robbery, Fortune denies
Producers Bank of its insurance claim.
The Trial Court and the Court of Appeals ruled in favor of recovery, hence, the case
at bar.
Issue:
Whether or not recovery is precluded under the general exemption clause
Held:
Yes, recovery is precluded under the general exemption clause. Howsoever

viewed, Producers entrusted the three with the specific duty to safely transfer the
money to its head office, with Alampay to be responsible for its custody in transit;
Magalong to drive the armored vehicle which would carry the money; and Atiga to
provide the needed security for the money, the vehicle, and his two other
companions. In short, for these particular tasks, the three acted as agents of
Producers. A "representative" is defined as one who represents or stands in the
place of another; one who represents others or another in a special capacity, as an
agent, and is interchangeable with "agent."
In view of the foregoing, Fortune is exempt from liability under the general
exceptions clause of the insurance policy.
Page 13
Edillon v Manila Bankers Life Insurance Co.

No. L-34200. September 30, 1982
Facts:
Sometime in April 1969, Carmen O. Lapuz applied with Manila Bankers for
insurance coverage against accident and injuries. She filled up the blank application
form given to her and filed the same with the respondent insurance corporation. In
the said application form she gave the date of her birth as July 11, 1904. On the
same date, she paid the sum of P20.00 representing the premium for which she
was issued the corresponding receipt signed by an authorized agent of Manila
Bankers. Upon the filing and the payment of the premium, the respondent
insurance corporation issued to Carmen O. Lapuz its Certificate of Insurance. The
policy was to be effective for a period of 90 days. During the effectivity of the
certificate of insurance, Carmen Lapuz died on a vehicular accident in the North
Diversion Road. On June 7, 1969, petitioner Regina L. Edillon, sister of the insured
and who was the named beneficiary in the policy, filed her claim for the proceeds of
the insurance, submitting all the necessary papers and other requisites. However,
her claim was denied by the respondent corporation hence her filing of complaint in
the Court of First Instance of Rizal on August 27, 1969. The respondent insurance
corporation asserts that since Carmen Lapuz was over 60 years of age the policy in
question was null and void because there is a provision in the certificate of
insurance excluding its liability to pay claims under the policy in behalf of persons
who are under the age of sixteen (16) years of age or over the age of sixty (60)
years. The trial court dismissed the complaint. Hence, this petition.
Issue:
Whether or not the acceptance by the private respondent insurance
corporation of the premium and the issuance of the corresponding certificate of
insurance should be deemed a waiver of the exclusionary condition of overage
stated in the said certificate of insurance?
Held:
Yes. The age of the insured, Carmen O. Lapuz, was not concealed to the
insurance company. Her application for insurance coverage which was on a printed
form furnished by private respondent and which contained very few items of
information clearly indicated her age of the time of filing the same to be almost 65
years of age. Despite such information which could hardly be overlooked in the
application form, considering its prominence thereon and its materiality to the
coverage applied for, the respondent insurance corporation received her payment of
premium and issued the corresponding certificate of insurance without question.
The accident which resulted in the death of the insured, a risk covered by the
policy, occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance
coverage was applied for. There was sufficient time for the private respondent to
process the application and to notice that the applicant was over 60 years of age
and thereby cancel the policy on that ground if it was minded to do so. If the
private respondent failed to act, it is either because it was willing to waive such
disqualification; or, through the negligence or incompetence of its employees for
Page 14
which it has only itself to blame, it simply overlooked such fact. Under the
circumstances, the insurance corporation is already deemed in estoppel. Its inaction
to revoke the policy despite a departure from the exclusionary condition contained
in the said policy constituted a waiver of such condition.
Perla Compania de Seguros, Inc. v Court of Appeals
G.R. No. 78860. May 28, 1990
Facts:
Private respondent Milagros Cayas was the registered owner of a Mazda bus.
Said passenger vehicle was insured with Perla Compania de Seguros, Inc. (PCSI)
under policy No. LTO/60CC04241 issued on February 3, 1978.
On December 17, 1978, the bus figured in an accident in Naic, Cavite injuring
several of its passengers. One of them, 19-year old Edgardo Perea, sued Milagros
Cayas for damages in the Court of First Instance of Cavite, docketed as Civil Case
No. NC-794; while three others, namely: Rosario del Carmen, Ricardo Magsarili and
Charlie Antolin, agreed to a settlement of P4,000.00 each with Milagros Cayas. At
the pre-trial of Civil Case, Milagros Cayas failed to appear and hence, she was
declared as in default. After trial, the court rendered a decision in favor of Perea.
Subsequently, on November 11, 1981, Milagros Cayas filed a complaint for a sum
of money and damages against PCSI in the Court of First Instance of Cavite. She
alleged therein that to satisfy the judgment in Civil Case No. NC-794, her house
and lot were levied upon and sold at public auction for P38,200; that to avoid
numerous suits and the "detention" of the insured vehicle, she paid P4,000 to each
of the following injured passengers: Rosario del Carmen, Ricardo Magsarili and
Charlie Antolin; that she could not have suffered said financial setback had the
counsel for PCSI, who also represented her, appeared at the trial of Civil Case No.
NC-794 and attended to the claims of the three other victims; that she sought
reimbursement of said amounts from the defendant, which notwithstanding the fact
that her claim was within its contractual liability under the insurance policy, refused
to make such re-imbursement; that she suffered moral damages as a consequence
of such refusal, and that she was constrained to secure the services of counsel to
protect her rights. She prayed that judgment be rendered directing PCSI to pay her
P50,000 for compensation of the injured victims, such sum as the court might
approximate as damages, and P6,000 as attorney's fees.
Issue:
Whether or not Cayas can reimburse the amount of P50,000 from PCSI
Held:
No. Private respondent precluded from seeking reimbursement of the
payments made to del Carmen, Magsarili and Antolin in view of the failure to
comply with the condition contained in the insurance policy. It being specifically
required that petitioners written consent be first secured before any payment in
settlement of any claim could be made, private respondent is precluded from
Page 15
seeking reimbursement of the payments made to del Carmen, Magsarili and Antolin
in view of her failure to comply with the condition contained in the insurance policy.
Moreover, we stated in Pacific Oxygen & Acetylene Co. vs. Central Bank, that the
first and fundamental duty of the courts is the application of the law according to its
express terms, interpretation being called for only when such literal application is
impossible.
We observe that although Milagros Cayas was able to prove a total loss of only
P44,000.00, petitioner was made liable for the amount of P50,000.00, the
maximum liability per accident stipulated in the policy. This is patent error. An
insurance indemnity, being merely an assistance or restitution insofar as can be
fairly ascertained, cannot be availed of by any accident victim or claimant as an
instrument of enrichment by reason of an accident.
Mapalad Aisporna v. Court of Appeals
No. L-39419. April 12, 1982
Facts:
Since March 7 and on June 21, 1969, a Personal Accident Policy was issued
by Perla Compania de Seguros, through its authorized agent Rodolfo Aisporna, for a
period of 12 months with the beneficiary designated as Ana M. Isidro. The insured
died by violence during lifetime of policy. Mapalad Aisporna participated actively
with the aforementioned policy.
For reason unexplained, an information was filed against Mapalad Aisporna,
Rodolfos wife, with the City Court of Cabanatuan for violation of Section 189 of
the Insurance Act on 21 November 1970, or acting as an agent in the
soliciting insurance without securing the certificate of authority from the office of
the Insurance Commissioner. Mapalad contends that being the wife of true agent,
Rodolfo, she naturally helped him in his work, as clerk, and that policy was merely
a renewal and was issued because Isidro had called by telephone to renew, and at
that time, her husband, Rodolfo, was absent and so she left a note on top of her
husbands desk to renew. On August 2, 1971, the trial court found Mapalad guilty
and sentenced her to pay a fine of P500.00 with subsidiary imprisonment in case of
insolvency and to pay the costs. On appeal and on August 14, 1974, the trial
courts decision was affirmed by the appellate court. Hence, the present recourse
was filed on October 22, 1974. On December 20, 1974, the Office of the Solicitor
General, representing the Court of Appeals, submitted that Aisporna may not be
considered as having violated Section 189 of the Insurance Act.
Issue:
Whether or not Mapalad Aisporna is an insurance agent within the scope or
intent of the Insurance Act
Held:
Legislative intent must be ascertained from a consideration of the statute as

a whole. The particular words, clauses and phrases should not be studied as
Page 16
detached and isolated expressions, but the whole and every part of the statute
must be considered in fixing the meaning of any of its parts and in order to produce
harmonious whole. In the present case, the first paragraph of Section 189 prohibits
a person from acting as agent, subagent or broker in the solicitation
or procurement of applications for insurance without first procuring a certificate of
authority so to act from the Insurance Commissioner; while the second paragraph
defines who is an insurance agent within the intent of the section; while the third
paragraph prescribes the penalty to be imposed for its violation. The appellate
courts ruling that the petitioner is prosecuted not under the second paragraph of
Section 189 but under its first paragraph is a reversible error, as
the definition of insurance agent in paragraph 2 applies to the paragraph 1 and 2 of
Section 189, which is any person who for compensation shall be
an insurance agent within the intent of this section. Without proof of
compensation, directly or indirectly, received from the insurance policy or contract,
Mapalad Aisporna may not be held to have violated Section 189 of the
Insurance Act. Under the Texas Penal Code 1911, Article 689, making it a
misdemeanour for any person for direct or indirect compensation to
solicit insurance without a certificate of authority to act as an insurance agent, an
information, failing to allege that the solicitor was to receive compensation either
directly or indirectly, charges no offense. In the case of Bolen vs. Stake, the
provision of Section 3750, Snyder's Compiled Laws of Oklahoma 1909 is intended
to penalize persons only who acted as insurance solicitors without license, and while
acting in such capacity negotiated and concluded insurance contracts for
compensation. It must be noted that the information, in the case at bar, does not
allege that the negotiation of an insurance contracts by the accused with Eugenio
Isidro was one for compensation. This allegation is essential, and having been
omitted, a conviction of the accused could not be sustained. It is well-settled in our
jurisprudence that to warrant conviction, every element of the crime must be
alleged and proved. After going over the records of this case, we are fully
convinced, as the Solicitor General maintains, that accused did not violate Section
189 of the Insurance Act.
Country Bankers Insurance Corp. v Liangga Bay & Community MultiPurpose Cooperative Inc.
G.R No. 136914. January 25, 2002
Facts:
Country Bankers Insurance Corporation (CBIC) is a domestic corporation
principally engaged in the insurance business wherein it undertakes, for a
consideration, to indemnify another against loss, damage or liability from an
unknown or contingent event including fire while Lianga Baya and Community
Multi-purpose Cooperative Inc. (LBCMCI)
is a duly
registered
cooperative
judicially declared insolvent and represented by the elected assignee, Cornelio
Jamero. It appears that sometime in 1989, the CBIC and LBCMCI entered into a
contract of fire insurance. Under Fire Insurance Policy F-1397, CBIC insured
LBCMCI's stocks-in-trade against fire loss, damage or liability during the period
starting from June 20, 1989 at 4:00 p.m. to June 20, 1990 at 4:00 p.m., for the
sum of P200,000.00. On 1 July 1989, at or about 12:40 a.m., LBCMCI's building
Page 17
located at Barangay Diatagon, Lianga, Surigao del Sur was gutted by fire and
reduced to ashes, resulting in the total loss of LBCMCI's stocks-in-trade, pieces of
furniture and fixtures, equipments andrecords. Due to the loss, LBCMCI filed an
insurance claim with CBIC under its Fire Insurance Policy F-1397, submitting: (a)
the Spot Report of Pfc. Arturo V. Juarbal, INP Investigator, dated July 1, 1989; (b)
the Sworn Statement of Jose Lomocso; and (c) the Sworn Statement of Ernesto
Urbiztondo. CBIC, however, denied the insurance claim on the ground that, based
on the submitted documents, the building was set on fire by 2 NPA rebels who
wanted to obtain canned goods, rice and medicines as provisions for their comrades
in the forest, and that such loss was an excepted risk under paragraph 6 of
the policy conditions of Fire Insurance Policy F-1397, which provides that "This
insurance does not cover any loss or damage occasioned by or through or
inconsequence, directly or indirectly, of any of the following occurrences, namely:
xxx (d) Mutiny, riot, military or popular uprising, insurrection, rebellion,
revolution, military or usurped power. Any loss or damage happening during the
existence of abnormal conditions (whether physical or otherwise) which
are occasioned by or through or in consequence, directly or indirectly, of any of said
occurrences shall be deemed to be loss or damage which is not covered by this
insurance, except to the extent that the Insured shall prove that such loss or
damage happened independently of the existence of such abnormal conditions.
Finding the denial of its claim unacceptable, LBCMCI then instituted in the trial
court the complaint for recovery of "loss, damage or liability" against CBIC. In due
time, the trial court rendered its Decision dated December 26, 1991 in favor of
LBCMCI, ordering CBIC to pay LBCMCI to fully pay the insurance claim for the loss
LBCMCI sustained as a result of the fire under its Fire Insurance Policy F-1397 in its
full face value of P200,000.00 with interest of 12% per annum from date of filing of
the complaint until the same is fully paid; to pay as and in the concept of actual or
compensatory damages in the total sum of P50,000.00; to pay as and in the
concept of exemplary damages in the total sum of P50,000.00; to pay in the
concept of litigation expenses the sum of P5,000.00; to pay by way of
reimbursement the attorney's fees in the sum of P10,000.00; and to pay the costs
of the suit. CBIC interposed an appeal to the Court of Appeals. On December 29,
1998, the appellate court affirmed the challenged decision of the trial court in its
entirety. CBIC filed the petition for review on certiorari.
Issue:
Whether or not the burden of proof of loss in this case is upon the insurer,
and not the insured
Held:
Yes. CBIC does not dispute that LBCMCI's stocks-in-trade were insured
against fire loss, damage or liability under Fire Insurance Policy F-1397 and that
LBCMCI lost its stocks-in-trade in a fire that occurred on July 1, 1989, within the
duration of said fire insurance. CBIC, however, posits the view that the cause of the
loss was an excepted risk under the terms of the fire insurance policy. Where a risk
is excepted by the terms of a policy which insures against other perils or hazards,
loss from such a risk constitutes a defense which the insurer may urge, since it
has not assumed that risk, and from this it follows that an insurer seeking to defeat
Page 18
a claim because of an exception or limitation in the policy has the burden of proving
that the loss comes within the purview of the exception or limitation set up. If a
proof is made of a loss apparently within a contract of insurance, the burden is
upon the insurer to prove 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. Stated elsewise,
since CBIC in this case is defending on the ground of non-coverage and
relying upon an exemption or exception clause in the fire i n s u r a n c e
policy, it has the burden of proving the facts upon which such
e x c e p t e d r i s k i s b a s e d , b y a preponderance of evidence. But CBIC failed to
do so. CBIC relies on the Sworn Statements of Jose Lomocso and Ernesto
Urbiztondo as well as on the Spot Report of Pfc. Arturo V. Juarbal dated July 1,
1989. The Sworn Statements of Jose Lomocso and Ernesto Urbiztondo are
inadmissible in evidence, for being hearsay, inasmuch as they did not take
the witness stand and could not therefore be cross-examined. CBIC's evidence to
prove its defense is sadly wanting and thus, gives rise to its liability to
LBCMCI under Fire Insurance Policy F-1397.
American Home Assurance Co. v Tantuco Enterprises
G.R No. 138941. October 8, 2001
Facts:
Tantuco Enterprises, Inc. is a coconut oil milling and refining company. It
owned two mills (the first oil mill and a new one), both located at its
factory compound at Iyam, Lucena City. The two oil mills are separately covered by
fire insurance policies issued by American Home Assurance Co.
On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil
mill. American Home rejected the claim for the insurance proceeds on the ground
that no policy was issued by it covering the burned oil mill. It stated that the new
oil mill was under Building No. 15 while the insurance coverage extended only to
the oil mill under Building No. 5.
Issue:
Whether or not the new oil mill is covered by the fire insurance policy
Held:
In construing the words used descriptive of a building insured, the greatest

liberality is shown by the courts in giving effect to the insurance. In view of the
custom of insurance agents to examine buildings before writing policies upon them,
and since a mistake as to the identity and character of the building is extremely
unlikely, the courts are inclined to consider the policy of insurance covers any
building which the parties manifestly intended to insure, however inaccurate the
description may be.
Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to
our mind, that what the parties manifestly intended to insure was the new oil mill.
If the parties really intended to protect the first oil mill, then there is no need to
Page 19
specify it as new. Indeed, it would be absurd to assume that the respondent would
protect its first oil mill for different amounts and leave uncovered its second one.
PERFECTION OF INSURANCE CONTRACT
Enriquez v Sun Life Assurance Co. of Canada
G.R. No. L-15895. November 29, 1920
Facts:
On September 24, 1917, Joaquin Herrer made an application to the Sun Life
Assurance Company of Canada through its office in Manila for a life annuity. 2 days
later, he paid P6,000 to the manager of the company's Manila office and was given
a receipt. According to the provisional receipt, 3 things had to be accomplished by
the insurance company before there was a contract: (1) There had to be a
medical examination of the applicant -check; (2) there had to be approval of
the application by the head office of the company check; and (3) this approval had
in some way to be communicated by the company to the applicant. On November
26, 1917, the head office at Montreal, Canada gave notice of acceptance by cable
to Manila and on December 4, 1917, the policy was issued at Montreal. December
18, 1917, Attorney Aurelio A. Torres wrote to the Manila office of the company
stating that Herrer desired to withdraw his application. On December 19, 1917, the
local office replied to Mr. Torres, stating that the policy had been issued, and called
attention to the notification of November 26, 1917. Such reply was received by Mr.
Torres in the morning of December 21, 1917. However, Mr. Herrer died on
December 20, 1917. Rafael Enriquez, as administrator of the estate of the late
Joaquin Ma. Herrer, filed to recover from Sun Life Assurance Company of
Canada through its office in Manila for a life annuity. It was deduced that the letter
of November 26, 1917, notifying Mr. Herrer that his application had been accepted,
was prepared and signed in the local office of the insurance company, was placed in
the ordinary channels for transmission, but was never actually mailed and thus was
never received by the applicant. Hence, the RTC ruled in favor of Sun Life
Assurance Co.
Issue:
Whether or not Herrer received notice of acceptance of his application, thus
perfecting the contract for a life annuity
Held:
No. The contract for a life annuity in the case at bar was not perfected
because it has not been proved satisfactorily that the acceptance of the application
ever came to the knowledge of the applicant. The law applicable to the case is
found to be the second paragraph of article 1262 of the Civil Code providing that an
acceptance made by letter shall not bind the person making the offer except from
the time it came to his knowledge. The pertinent 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 examination of the
applicant; (2) there had to be approval of the application by the head office of the
company; and (3) this approval had in some way to be communicated by the
Page 20
company to the applicant. The further admitted facts are that the head office in
Montreal did accept the application, did cable the Manila office to that effect, did
actually issue the policy and did, through its agent in Manila, actually write the
letter of notification and place it in the usual channels for transmission to the
addressee. The fact as to the letter of notification thus fails to concur with the
essential elements of the general rule pertaining to the mailing and delivery of mail
matter as announced by the American courts, namely, when a letter or other mail
matter is addressed and mailed with postage prepaid there is a rebuttable
presumption of fact that it was received by the addressee as soon as it could have
been transmitted to him in the ordinary course of the mails. But if any one of these
elemental facts fails to appear, it is fatal to the presumption. For instance, a letter
will not be presumed to have been received by the addressee unless it is shown
that it was deposited in the post-office, properly addressed and stamped. An
acceptance of an offer of insurance not actually or constructively communicated to
the proposer does not make a contract. Only the mailing of acceptance completes
the contract of insurance, as the locus pnitenti is ended when the acceptance
has passed beyond the control of the party.
Great Pacific Life Insurance Co. v Court of Appeals
G.R. No. L-31845. April 30, 1979
Facts:
It appears that on March 14, 1957, private respondent Ngo Hing filed an
application with petitioner Great Pacific Life Assurance Company (Pacific Life) for a
twenty-year endowment policy in the life of Helen Go, his one year old daughter.
Petitioner Lapulapu D. Mondragon, the branch manager, prepared application form
using the essential data supplied by respondent. The latter paid the annual
premium and Mondragon retained a portion of it as his commission. The binding
deposit receipt was issued to respondent. Mondragon wrote his strong
recommendation for the approval of the insurance application. However, Pacific Life
disapproved the application since the plan was not available for minors below 7
years old but it can consider the same under another plan. The non-acceptance of
the insurance plan was allegedly not communicated by Mondragon to respondent.
Mondragon again asserted his strong recommendation. Helen Go died of influenza.
Thereupon, respondent sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed an action for the recovery of the same. Hence the
case at bar.
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;
Page 21
(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.
Development Bank of the Philippines v. Court of Appeals
G.R. No. L-109937. March 21, 1994
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 August 4,
1987 and released on August 11, 1987. From the proceeds of the loan, DBP
deducted the amount of P1,476.00 as payment for the MRI premium. On August
15, 1987, Dans accomplished and submitted the MRI Application for Insurance
Page 22
and the Health Statement for DBP MRI Pool. On August 20, 1987, the MRI
premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to
the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was
advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed
this information to the DBP MRI Pool. On September 23, 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 October 21, 1987, DBP apprised
Candida Dans of the disapproval of her late husbands 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 February 10, 1989, respondent Estate, 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. Respondent
Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full
knowledge of Dans age at the time of application, required him to apply for MRI,
and later collected the insurance premium thereon. Respondent Estate therefore
prayed: (1) that the sum of P139,500.00, which it paid under protest for the loan,
be reimbursed; (2) that the mortgage debt of the deceased be declared fully paid;
and (3) that damages be awarded.
On March 10, 1990, the trial court rendered a decision in favor of respondent 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.
Issue:
1. Whether or not there is a contract made between DBP MRI Pool and the
late Juan Dans
2. Whether or not DBP should be held liable
Held:
1) No. When Dans applied for MRI, he filled up and personally signed a
Health Statement for DBP MRI 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.
Page 23
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 Dans 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.
2) Yes. 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 Dans 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.
Under Article 1987 of the Civil Code of the Philippines, the agent who acts as such
is not personally liable to the party with whom he contracts, unless he expressly
binds himself or exceeds the limits of his authority without giving such party
sufficient notice of his powers.
The DBPs liability, however, cannot be for the entire value of the insurance policy.
To assume that were it not for DBPs 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.
One is entitled to an adequate compensation only for such pecuniary loss suffered
by him as he has duly proved.
Virginia Perez v Court of Appeals
G.R. No. 112329. January 28, 2000
Facts:
Primitivo Perez had been insured with the BF Lifeman Insurance Corporation
since 1980 for P20,000. 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
to Lalog. The receipt issued by Lalog indicated the amount received was a
Page 24
"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 on December 2, 1987. Virginia went to Manila to claim the benefits
under the insurance policies of the deceased. She was paid P40,000 under the first
insurance policy for P20,000 (double indemnity in case of accident) but the
insurance company refused to pay the claim under the additional policy coverage of
P50,000, the proceeds of which amount to P150,000 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 had not been
perfected at the time of the death of Primitivo Perez. Consequently, the insurance
company refunded the amount of P2,075 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. The RTC ruled in favor of Perez,
which the CA reversed. Hence, this appeal.
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 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
Page 25
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.
SUBROGATION
Malayan Insurance Co., Inc. v Court of Appeals
G.R. No. L-52756. October 12, 1987
Facts:
Private respondent Sio Choy insured his Willys jeep to petitioner, Malayan
Insurance Co., Inc., covering for own damage not to exceed P600.00 and thirdparty liability in the amount of P20,000.00. During the effectivity of the insurance
policy, the insured jeep driven by Juan Campollo collided with a passenger bus
belongin to PANTRANCO which caused damage to the insured jeep and injuries to
the driver and to respondent Martin Vallejos.
Martin C. Vallejos filed an action for damages against Sio Choy, Malayan
Insurance Co., Inc. and PANTRANCO before the Court of First Instance of
Pangasinan. PATRANCO answered that it had observed the diligence of a good
father of a family to prevent damage and on the other hand defendant Sio Choy
and the petitioner insurance company claimed that the accident was solely
imputable to PATRANCO. Sio Choy later filed a separate answer with a cross-claim
wherein he alleged that he actually paid the plaintiff the amount of P5,000.00 for
hospitalization and prayed to be reimbursed by the insurance company. Also later,
petitioner filed a third party complaint against the employer of the deceased driver,
San Leon Rice Mill Inc., wherein the petitioner prayed that judgment be rendered
against San Leon Rice Mill Inc., making it liable to reimburse and indemnify the
petitioner.
Issue:
Page 26
1. Whether or not the Trial Court, as upheld by the Court of Appeals, was
correct in holding petitioner and respondents Sio Choy and San Leon Rice Mill, Inc.
solidarily liable to respondent Vallejos
2. Whether or not petitioner is entitled to be reimbursed by respondent San
Leon Rice Mill, Inc.
Held:
1) It is only respondents Sio Choy and San Leon Rice Mill, Inc. that are
solidary liable to respondent Vallejos for damages. The basis of liablity of Sio Choy
is pursuant to rticle 2184 of the Civil Code which provides:
Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if
the former, who was in the vehicle, could have, by the use of due diligence,
prevented the misfortune. it is disputably presumed that a driver was negligent, if
he had been found guilty of reckless driving or violating traffic regulations at least
twice within the next preceding two months.
If the owner was not in the motor vehicle, the provisions of article 2180 are
applicable.
On the other hand, the basis of liability of San Leon Rice Mill, Inc. is Article 2180 of
the Civil Code which provides:
Art. 2180. The obligation imposed by article 2176 is demandable not only for ones
own acts or omissions, but also for those of persons for whom one is responsible.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
The responsibility treated in this article shall cease when the persons herein
mentioned proved that they observed all the diligence of a good father of a family
to prevent damage.
Respondents Sio Choy and San Leon Rice Mill, Inc are primarily liable to respondent
Vallejos. The law states that the responsibility of two or more persons who are
liable for a quasi-delict is solidary.
While it is true that where the insurance contract provides for indemnity against
liability to third persons, such third persons can directly sue the insurer however,
the direct liability of the insurer under indemnity contracts against third party
liability does not mean that the insurer can be held solidarily liable with the insured
and/or the other parties found at fault. The liability of the insurer is based on
contract; that of the insured is based on tort.
2) The principle of subrogation in insurance contracts must apply. 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
Page 27
act caused the loss. Therefore, petitioner, upon paying respondent Vallejos the
amount of not exceeding P20,000.00, shall become the subrogee of the insured, Sio
Choy; and subrogated to whatever rights the latter has against respondent San
Leon Rice Mill, Inc.
Manila Mahogany v Court of Appeals
G.R. No. L-52756. October 12, 1987
Facts:
Petitioner Manila Mahogany Manufacturing Corporation, insured its Mercedes
Benz with private respondent Zenith Insurance Corporation. On 1970, the insured
vehicle was bumped and damaged by a truck owned by San Miguel Corporation.
Respondent company paid petitioner 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. On 1972 respondent company
wrote Insurance Adjusters, Inc. to demand reimbursement from San Miguel
Corporation, however, the latter refused alleging that it had already paid petitioner
P4,500.00 for the damages caused, evidenced by a release of claim. Respondent
thereafter demanded from petitioner reimbursement of the sum of P4,500.00.
Petitioner then refused. Respondent company filed a suit in the City Court of Manila
and was affirmed by the Court of Appeals.
Petitioner now contends that it is not bound to pay P4,500.00, and much more,
P5,000.00 to respondent company as the subrogation in the Release of Claim it
executed in favor of respondent was conditioned on recovery of the total amount of
damages petitioner had sustained. Since total damages were valued by petitioner at
P9,486.43 and only P5,000.00 was received by petitioner from respondent,
petitioner argues that it was entitled to go after San Miguel Corporation to claim the
additional P4,500.00.
Issue:
1. Whether or not the right of subrogation of the insurer is prejudiced
2. Whether or not the Court of Appeals erred in ordering the petitioner to pay
respondent company not P4,500.00 but P5,000.00
Held:
1) Although petitioners right to file a deficiency claim against San Miguel

Corporation is with legal basis, nevertheless when Manila Mahogany executed
another release claim discharging San Miguel Corporation from "all actions, claims,
demands and rights of action that now exist or hereafter arising out of or as a
consequence of the accident". The compromise agreement of P5,000.00 being
based on the insurance policy, the insurer is entitled to recover from the insured
the amount of insurance money paid, Since petitioner by its own acts released San
Miguel Corporation, thereby defeating private respondent's right of subrogation, the
right of action of petitioner against the insurer was also nullified.
2) 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
Page 28
wrongdoer who caused the loss, the insurer loses his rights against the latter. But
in such a case, the insurer will be entitled to recover from the insured whatever it
has paid to the latter, unless the release was made with the consent of the insurer;
and even if the specific amount asked for in the complaint is P4,500.00 only and
not P5.000.00, still, the respondent Court acted well within its discretion in
awarding P5,000.00, the total amount paid by the insurer.
Although private respondent prays for the reimbursement of P4,500.00 paid by San
Miguel Corporation, instead of P5.000.00 paid under the insurance policy, the trial
court should have awarded the latter, although not prayed for, under the general
prayer in the complaint "for such further or other relief as may be deemed just or
equitable".
Pan Malayan Insurance Corp. v Court of Appeals
GR. No. 81026. April 30, 1990
Facts:
Pan Malayan filed a complaint for damages with the RTC against private
respondent Erlinda Fabie and her driver. Pan Malayan insured a vehicle registered
in the name of Canlubang. Due to recklessness of the unknown driver of a pick-up
owned by Fabie, the insured vehicle was damaged in the amount of Php 42,052.00.
Pan Malayan defrayed the cost of the repair of the insured car and was subrogated
to the rights of Canlubang against the driver and his employer Fabie. Defendants
refused to pay the claim of Pan Malayan. Pan Malayan clarified that the damage
caused to the insured car was settled under the own damage coverage of the
policy and the release of claim and subrogation receipt executed by Canlubang in
favor of Pan Malayan. RTC dismissed Pan Malayans complaint. CA upheld RTCs
decision.
Issue:
Whether or not the insurer, Pan Malayan, may institute an action to recover
the amount it had paid its assured in settlement of an insurance claim against
private respondents?
Held:
Yes. Article 2207 of the New Civil Code provides for the principle of
subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, the insurer, upon payment to the
assured will be subrogated to the rights of the assured to recover from the
wrongdoer. Subrogation accrues upon payment of the insurance claim by the
insurer. The own damage coverage implies damage to the insured vehicle being
repaired, the costs of which are assumed by the insurer.
Cebu Shipyard and Engineering Works, Inc. v William Lines
GR. NO.132607. May 5, 1999
Facts:
Page 29
Petitioner Cebu Shipyard and Engineering Works (CSEW) is engaged in the

business of dry-docking and repairing of marine vessels. William Lines insured its
vessel to respondent Prudential for Php 45 million for hull and machinery. The hull
policy included an Addition Perils clause containing loss or damage to the vessel
through the negligence of, among others, ship repairman. William Lines brought its
vessel to CSEW for repair but it caught fire and sank, resulting to its total loss.
William Lines sued CSEW alleging that the fire that broke out was caused by
CSEWs negligence and lack of care. Prudential was impleaded as co-plaintiff, after
it paid William Lines, Prudential was subrograted to the claim of Php 45 million.
Issue:
Whether or not Prudential is entitled to be subrogated to the rights of William
Lines.
Held:
Yes. Pursuant to Article 2207 of the New Civil Code, when Prudential, after
due verification of the merit of the insurance claim of William Lines, paid the latter
the amount covered by its policy, it was subrogated to the rights of the latter to
recover the insured loss from the liable party, CSEW.
INSURABLE INTEREST
Spouses Cha vs Court of Appeals
G.R. No. 124520. August 18, 1997
Facts:
Petitioner-spouses, Nilo Cha and Stella Uy-Cha, as lessees, entered into a
lease contract with private respondent CKS Development Corporation. A stipulation
of the contract of lease provides that the lessees shall not enter into an insurance
against fire for the chattels, merchandise, textiles, goods and affects placed in the
leased premises without first obtaining the consent of the lessor (CKS). If the
lessee does so, the insurance shall be forfeited in favor of the lessor.
However, spouses Cha entered into an insurance contract for the insurance against
fire of their merchandise with United Insurance Co., Inc. On the day of the
expiration of the lease contract, a fire broke out in the leased building. The lessor,
learned of the insurance policy and demanded from United that the proceeds be
given to him by virtue of the lease contract. United however refused such demand
and was then impleaded by CKS with the spouses Cha in a complaint filed to the
RTC. The RTC and the Court of Appeals ruled in favor of CKS hence this appeal.
Issue:
Whether or not the stipulation of the lease contract which gives to the lessor
the proceeds of the insurance in case an insurance contract was entered into by the
lessee without his consent is valid
Held:
Page 30
No. Section 18 of the insurance code provides that only parties who have
insurable interest may validly enter into an insurance contract. In the case at bar, it
is clear that CKS has no insurable interest over the merchandise of spouses Cha
since he is merely a lessor. As such, he cannot be made to claim the proceeds of
the policy. Also, it is ruled that the stipulation in the lease contract which prohibits
the lessee from entering an insurance contract without the consent of the lessor is
void for being against public policy.
Great Pacific Life Insurance Corp. v Court of Appeals
G.R. No. 113899. October 13, 1999
Facts:
A contract of group life insurance was executed between petitioner Great
Pacific Life Assurance Corporation (hereinafter Grepalife) and Development Bank of
the Philippines (hereinafter DBP). Grepalife agreed to insure the lives of eligible
housing loan mortgagors of DBP. Dr. Wilfredo Leuterio, a physician and a housing
debtor of DBP applied for membership in the group life insurance plan. In an
application form, Dr. Leuterio answered questions concerning his health condition
as follows:
7. Have you ever had, or consulted, a physician for a heart condition, high blood
pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical
impairment?
Answer: No. If so give details ___________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [ x ] Yes [ ] No.
Grepalife issued an insurance coverage for Dr. Leuterio amounting to eighty-six
thousand, two hundred (P86,200.00) pesos. In 1984, Dr. Leuterio died due to
massive cerebral hemorrhage. Consequently, DBP submitted a death claim to
Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not physically
healthy when he applied for an insurance coverage. Grepalife insisted that Dr.
Leuterio did not disclose he had been suffering from hypertension, which caused his
death. Such non-disclosure constituted concealment that justified the denial of the
claim. The widow of Dr. Leuterio, Medarda Leuterio, filed a complaint with the
Regional Trial Court against Grepalife for Specific Performance with Damages.
During the trial, Dr. Hernando Mejia, who issued the death certificate, was called to
testify. He stated that Dr. Leuterio complained of headaches presumably due to
high blood pressure. The inference was not conclusive because Dr. Leuterio was not
autopsied, hence, other causes were not ruled out. The trial court rendered a
decision in favor of respondent widow and against Grepalife. Such decision was
sustained by the Court of Appeals. Hence this petition.
Issue:
Whether or not there was concealment on the part of Dr. Leuterio
Held:
Page 31
No. The petitioner was not able to prove that Dr. Leuterio died of
hypertension. The testimony of Dr. Mejia who conducted the examination of the
body did not establish the cause of death was hypertension since the body was not
autopsied. The death certificate of Dr. Leuterio merely showed that he died of
cerebral haemorrhage. Aside from the statement of the widow that Dr. Leuterio was
taking medicines, there was no other proof or evidence that was shown by the
petitioner that Dr. Leuterio was not of good health, as answered in the
questionnaire, to show his medical history. Hence, the allegation of concealment
cannot be established.
Harvardian Colleges of San Fernando, Pampanga, Inc. v Country Bankers
Insurance Corp.
CA CV No. 03771. Jan. 6, 1986 1 CARA 1
Facts:
Harvardian is a family corporation, the stockholders of which are Ildefonso
Yap, Virginia King Yap and their children. Prior to August 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 August 9, 1979, Country Bankers issued to
Harvardian a fire insurance policy. On March 12, 1980, 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 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.
Page 32
Ang Ka Yu v Phoenix Assurance Co. Ltd.

1 CAR2s. Sept. 28, 1961
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.
CONCEALMENT AND REPRESENTATION
The Insular Life Assurance Co., Ltd. v Serafin D. Feliciano et al.
73 PHIL 201. September 13, 1941
Facts:
Evaristo Feliciano was issued an insurance policy by Insular Life. In
September 1935, he died. His heirs filed an insurance claim but Insular Life denied
the application as it averred that Felicianos application was attended by fraud. It
was later found in court that the insurance agent and the medical examiner of
Insular Life who assisted Feliciano in signing the application knew that Feliciano was
already suffering from tuberculosis; that they were aware of the true medical
condition of Feliciano yet they still made it appear that he was healthy in the
insurance application form; that Feliciano signed the application in blank and the
agent filled the information for him.
Issue:
Whether or not Insular Life can avoid the insurance policy by reason of the
fact that its agent knowingly and intentionally wrote down the answers in the
application differing from those made by Feliciano hence instead of serving the
interests of his principal, acts in his own or anothers interest and adversely to that
of his principal, the said principal is not bound by said acts of the agent?
Held:
No. Insular Life must pay the insurance policy. The weight of authority is that
if an agent of the insurer, after obtaining from an applicant for insurance a correct
and truthful answer to interrogatories contained in the application for insurance,
Page 33
without knowledge of the applicant fills in false answers, either fraudulently or

otherwise, the insurer cannot assert the falsity of such answers as a defense to
liability on the policy, and this is true generally without regard to the subject matter
of the answers or the nature of the agents duties or limitations on his authority, at
least if not brought to the attention of the applicant.
The fact that the insured did not read the application which he signed, is not
indicative of bad faith. It has been held that it is not negligence for the insured to
sign an application without first reading it if the insurer by its conduct in appointing
the agent influenced the insured to place trust and confidence in the agent.
The Insular Life Assurance Co., Ltd. v Serafin D. Feliciano et al.
74 PHIL 469. December 29, 1943
Facts:
From the courts decision rendered in the case of Insular Life Assurance v
Feliciano (1941), Insular Life filed a motion for reconsideration. It avers that
Feliciano is not entitled to the claim because the insurance policy is void ab initio;
that he connived with the insurance agent and the medical examiner; and that at
best, Feliciano is only entitled to refund or the reimbursement of what he has paid
in premium.
Issue:
Whether or not Insular Life is correct
Held:
Yes. This time, the Supreme Court held that Insular Lifes contention is
correct. When Evaristo Feliciano, the applicant for insurance, signed the application
in blank and authorized the soliciting agent and/or medical examiner of Insular to
write the answers for him, he made them his own agents for that purpose, and he
was responsible for their acts in that connection. If they falsified the answers for
him, he could not evade the responsibility for the falsification. He was not supposed
to sign the application in blank. He knew that the answers to the questions therein
contained would be the basis of the policy and for that very reason he was
required with his signature to vouch for truth thereof.
Sun Life Assurance Corp. of Canada v Court of Appeals
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 valued at P100,000.00, with double indemnity in
case of accidental death. The designated beneficiary was his mother, Bernarda
Bacani. In
his application
for insurance Robert
was asked if
within
5 years he (a) consulted any doctor or other health practitioner (b)
subjected to different test i.e. blood, x-rays etc. (c) attended or been admitted to
any hospital or other medical facility. Robert answered yes in letter a. but limited
his answer to a consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese
Page 34
General Hospital on February 1986, for cough and flu complications. Sunlife discovered that
two weeks prior to Roberts application for insurance, Robert 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, ultra
sonography and hematology tests. Robert died in a plane crash. Bernarda filed a claim
with sunlife, seeking the benefits of the insurance policy taken by her son. Sunlife
conducted an investigation and its findings prompted it to reject the claim. Sunlife informed
Bernarda that Robert 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. Bernarda subsequently filed an action for
specific performance against Sunlife. Sunlife filed a counter claim and a list of
exhibits consisting of medical records furnished by the Lung Center of the
Philippines. Bernarda filed a "Proposed Stipulation with Prayer for Summary
Judgment" where they manifested that they "have no evidence to refute
the documentary evidence of concealment/misrepresentation by the decedent of
his health condition. Sunlife also filed a motion for summary judgement.
Trial court ruled in favor of Bernarda and concluded that although there was
concealment and misrepresentation, the facts concealed by the insured were made
in good faith and under a belief that they need not be disclosed. Moreover, it held
that the health history of the insured was immaterial since the insurance policy was
"non-medical". Court of Appeals affirmed the decision and stated that the cause
of death was unrelated to the facts concealed by the insured.
Issue:
Whether or not there was concealment and can good faith be used as a defense
Held:
Yes, there was concealment and No, the defense of good faith is not applicable. Section
26 of The Insurance Code requires 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 and thus it provides that:
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 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 Sunlife's action on Roberts
application, either by approving it with the corresponding adjustment for a higher
premium or rejecting the same.
Page 35
Moreover, a disclosure may have warranted a medical examination of the insured

by Sunlife in order for it to reasonably assess the risk involved in accepting the application. 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.
Thus, "good faith" is no defense in concealment. The insured's failure to disclose
the fact that he was hospitalized for two weeks prior to filing his application for
insurance, raises grave doubts about his bona fides. It appears that such concealment
was deliberate on his part.
Thelma Vda. De Canilang, vs. Hon. Court of Appeals and Great Pacific Life
Insurance Corp.
G.R. No. 92492. June 17, 1993
Facts:
On 18 June 1982, Jaime Canilang consulted Dr. Wilfredo B. Claudio and was
diagnosed as suffering from "sinus tachycardia." The doctor prescribed the following
for him: Trazepam, a tranquilizer; and Aptin, a beta-blocker drug. Mr. Canilang
consulted the same doctor again on 3 August 1982 and this time was found to have
"acute bronchitis."
On the next day, 4 August 1982, Jaime Canilang applied for a "non-medical"
insurance policy with respondent Great Pacific Life Assurance Company ("Great
Pacific") naming his wife, petitioner Thelma Canilang, as his beneficiary. 1 Jaime
Canilang was issued ordinary life insurance Policy No. 345163, with the face value
of P19,700, effective as of 9 August 1982.
On 5 August 1983, Jaime Canilang died of "congestive heart failure," "anemia," and
"chronic anemia." 2 Petitioner, widow and beneficiary of the insured, filed a claim
with Great Pacific which the insurer denied on 5 December 1983 upon the ground
that the insured had concealed material information from it.
Petitioner then filed a complaint against Great Pacific with the Insurance
Commission for recovery of the insurance proceeds. During the hearing called by
the Insurance Commissioner, petitioner testified that she was not aware of any
serious illness suffered by her late husband 3 and that, as far as she knew, her
husband had died because of a kidney disorder. 4 A deposition given by Dr.
Wilfredo Claudio was presented by petitioner. There Dr. Claudio stated that he was
the family physician of the deceased Jaime Canilang 5 and that he had previously
treated him for "sinus tachycardia" and "acute bronchitis." 6 Great Pacific for its
part presented Dr. Esperanza Quismorio, a physician and a medical underwriter
working for Great Pacific 7 She testified that the deceased's insurance application
had been approved on the basis of his medical declaration. 8 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.
Page 36
Issue:
Whether or not the deceased made a material concealment at the time of the
filing of his application for an insurance policy.
Held:
Yes, there was concealment on the part of the deceased. The nature of the
facts not conveyed to the insurer was such that the failure to communicate must
have been intentional rather than merely inadvertent. For Jaime Canilang could not
have been unaware that this 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 discomfort and
concern brought about by his experiencing "sinus tachycardia." The court find it
difficult to take seriously the argument that Great Pacific had waived inquiry into
the concealment by issuing the insurance policy notwithstanding Canilang's failure
to set out answers to some of the questions in the insurance application. Such
failure precisely constituted concealment on the part of Canilang.
It remains only to note that the Court of Appeals finding that the parties had not
agreed in the pretrial before the Insurance Commission that the relevant issue was
whether or not Jaime Canilang had intentionally concealed material information
from the insurer, was supported by the evidence of record, i.e., the Pre-trial Order
itself dated 17 October 1984 and the Minutes of the Pre-trial Conference dated 15
October 1984, which "readily shows that the word `intentional' does not appear in
the statement or definition of the issue in the said Order and Minutes."
WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of
the Court of Appeals dated 16 October 1989 in C.A-G.R. SP No. 08696 is hereby
AFFIRMED. No pronouncement as to costs.
Philamcare Health Systems, vs. Court of Appeals and Julita
Trinos, respondents.
G.R. No. 125678. March 18, 2002
Facts:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a
health care coverage with petitioner 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 March 1, 1988 to March
1, 1989. Accordingly, he was issued Health Care Agreement No. P010194. Under
the agreement, respondents husband was entitled to avail of hospitalization
benefits, whether ordinary or emergency, listed therein. He was also entitled to
Page 37
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 March 1, 1989 to March 1, 1990, then from March 1, 1990 to June 1,
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 March 9, 1990. While
her husband was in the hospital, respondent tried to claim the benefits under the
health care agreement. However, petitioner denied her claim saying that the
Health Care Agreement was void. According to petitioner, there was a concealment
regarding Ernanis medical history. Doctors at the MMC allegedly discovered at the
time of Ernanis confinement that he was hypertensive, diabetic and asthmatic,
contrary to his answer in the application form. Thus, respondent 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, respondent brought her husband home again. In the
morning of April 13, 1990, Ernani had fever and was feeling very
weak. Respondent was constrained to bring him back to the Chinese General
Hospital where he died on the same day.
Issues:
1. Whether or not a health care agreement is not an insurance contract.
2. Whether or not the agreement was void due to concealment of a material
fact in the application.
Held:
1. No. The health care agreement is in the nature of non-life insurance,

which is primarily a contract of indemnity. Once a member incurs hospital expense
arising from any sickness, injury or other stipulated contingent, the health care
provider, which in this case is Philamcare, must pay for the same to the extent
embodied in the agreement.
2. No. The answer assailed by petitioner was in response to the question
relating to the medical history of the applicant. This largely depends on opinion
rather than fact, especially coming from respondents husband who was not a
medical doctor. 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
Page 38
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.
Finally, petitioner alleges that respondent was not the legal wife of the deceased
member considering that at the time of their marriage, the deceased was
previously married to another woman who was still alive. The health care
agreement is in the nature of a contract of indemnity. Hence, payment should be
made to the party who incurred the expenses. It is not controverted that
respondent paid all the hospital and medical expenses. She is therefore entitled to
reimbursement. The records adequately prove the expenses incurred by
respondent for the deceaseds hospitalization, medication and the professional fees
of the attending physicians.
WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed
decision of the Court of Appeals dated December 14, 1995 is AFFIRMED.
SO ORDERED.
INCONTESTABILITY CLAUSE
Tan, petitioner vs. Court of Appeals
174 SCRA 403
Facts:
Tan Lee Siong, father of herein petitioners, applied for life insurance in the
amount of P80,000.00 with Philippine American Life Insurance Company. He later
on died of hepatoma. Petitioners then filed with respondent company their claim for
the proceeds of the life insurance policy. However, the insurance company denied
petitioners claim and rescinded the policy by reason of the alleged
misrepresentation and concealment of material facts made by the deceased. The
premiums paid on the policy were thereupon refunded. Alleging that respondent
companys refusal to pay them the proceeds of the policy was unjustified and
unreasonable, petitioners filed a complaint with the Office of the Insurance
Commissioner but was later on dismissed. The Court of Appeals affirmed the
decision and dismissed the complaint for lack of merit. Hence, this petition.
Petitioners contend that the insurance company no longer had the right to rescind
the contract of insurance as rescission must allegedly be done during the lifetime of
the insured within two years and prior to the commencement of action. According
to the petitioners, the Insurance Law was amended and the second paragraph of
Section 48 added to prevent the insurance company from exercising a right to
rescind after the death of the insured.
Issue:
Whether or not Philamlife can rescind the contract even if he is already dead
Page 39
Held:
Yes. The phrase during the lifetime found in Sec. 48 simply means that the
policy is no longer in force after the insured has died. The key phrase in the second
paragraph is for a period of two years.
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 insureds lifetime. 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. 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 insureds fraudulent concealment or
misrepresentation. 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. Congress felt this was a sufficient answer to the various
tactics employed by insurance companies to avoid liability. Congress felt this was a
sufficient answer to the various tactics employed by insurance companies to avoid
liability. The petitioners interpretation would give rise to the incongruous situation
where the beneficiaries of an insured who dies right after taking out and paying for
a life insurance policy, would be allowed to collect on the policy even if the insured
fraudulently concealed material facts.
LIABILITY UNDER AN OPEN POLICY
Development Insurance Corp. vs. Intermediate Appellate Court
G.R. No. 71360. July 16, 1986
Facts:
A fire occurred in the building of the private respondent and it sued for
recovery of damages from the petitioner on the basis of an insurance contract
between them. The petitioner allegedly failed to answer on time and was declared
in default by the trial court. A judgment of default was subsequently rendered on
the strength of the evidence submitted ex parte by the private respondent, which
was allowed full recovery of its claimed damages. On learning of this decision, the
petitioner moved to lift the order of default, invoking excusable neglect, and to
vacate the judgment by default. Its motion was denied. It then went to the
respondent court, which affirmed the decision of the trial court in toto. The
petitioner is now before us, hoping presumably that it will fare better here than
before the trial court and the Intermediate Appellate Court. We shall see.
Issue:
Whether or not the insured should account for the difference between the
value of the thing insured and the face value of the policy
Held:
Page 40
Yes. As defined in the aforestated provision, which is now Section 60 of the

Insurance Code, "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 and, to repeat, this Court will
respect such factual determination in the absence of proof that it was arrived at
arbitrarily. There is no such showing. Hence, applying the open policy clause as
expressly agreed upon by the parties in their contract, we hold that the private
respondent is entitled to the payment of indemnity under the said contract in the
total amount of P508,867.00.
The refusal of its vice-president to receive the private respondent's, complaint, as
reported in the sheriff's return, 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 their agreement. That intention was revealed further in its
subsequent acts - or inaction - which indeed enabled it to avoid payment for more
than five years from the filing of the claim against it in 1980. The petitioner has
temporized long enough to avoid its legitimate responsibility; the delay must and
does end now.
WHEREFORE, the appealed decision is affirmed in full, with costs against the
petitioner. SO ORDERED.
PRESCRIPTION OF ACTION
Sun Insurance Office Ltd. vs. Court of Appeals and Emilio Tan
G.R. No. 89741. March 13, 1991
Facts:
This is a petition for review on certiorari of the June 20, 1989 decision 1 of
the Court of Appeals in CA-G.R. SP. Case No. 13848 affirming the November 3,
1987 and January 14, 1988 orders of the Regional Trial Court 2 of Iloilo, Branch 27,
in Civil Case No. 16817, denying the motion to dismiss and the subsequent motion
for reconsideration; and the August 22, 1989 resolution of the same court denying
the motion for reconsideration.
On August 15, 1983, herein private respondent Emilio Tan took from herein
petitioner a P300,000.00 property insurance policy to cover his interest in the
electrical supply store of his brother housed in a building in Iloilo City. Four (4) 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 petitioner, but on February
29, 1984, petitioner wrote Tan denying the latter's claim. On April 3, 1984, Tan
wrote petitioner, seeking reconsideration of the denial of his claim. On September
3, 1985, Tan's counsel wrote the Insurer inquiring about the status of his April 3,
1984 request for reconsideration. Petitioner answered the letter on October 11,
Page 41
1985, advising Tan's counsel that the Insurer's denial of Tan's claim remained
unchanged, enclosing copies of petitioners' letters of February 29, 1984 and May
17, 1985 (response to petition for reconsideration). On November 20, 1985, Tan
filed Civil Case No. 16817 with the Regional Trial Court of Iloilo, Branch 27 but
petitioner filed a motion to dismiss on the alleged ground that the action had
already prescribed. Said motion was denied in an order dated November 3, 1987;
and petitioner's motion for reconsideration was also denied in an order dated
January 14, 1988.
Issue:
Whether or not the right of action has prescribed
Held:
Yes. In support of private respondent's view, two rulings of this Court have
been cited, namely, the case of Eagle Star Insurance Co. vs. Chia Yu (96 Phil. 696
(1955]), where the Court held:
The right of the insured to the payment of his loss accrues from the happening of
the loss. However, the cause of action in an insurance contract does not accrue
until the insured's claim is finally rejected by the insurer. This is because before
such final rejection there is no real necessity for bringing suit.
In the case of ACCFA vs. Alpha Insurance & Surety Co., Inc. (24 SCRA 151 [1968],
holding that: Since "cause of action" requires as essential elements not only a legal
right of the plaintiff and a correlated obligation of the defendant in violation of the
said legal right, the cause of action does not accrue until the party obligated
(surety) refuses, expressly or impliedly, to comply with its duty (in this case to pay
the amount of the bond).
Indisputably, the above-cited pronouncements of this Court may be taken to mean
that 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 as pointed out by the petitioner insurance company, the rejection referred to
should be construed as the rejection, in the first instance, for if what is being
referred to is a reiterated rejection conveyed in a resolution of a petition for
reconsideration, such should have been expressly stipulated.
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?
While in the Eagle Star case (96 Phil. 701), this Court uses the phrase "final
rejection", the same cannot be taken to mean the rejection of a petition for
Page 42
reconsideration as insisted by respondents. Such was clearly not the meaning

contemplated by this Court. The Insurance policy in said 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.
PREMISES CONSIDERED, the questioned decision of the Court of Appeals is
REVERSED and SET ASIDE, and Civil Case No. 16817 filed with the Regional Trial
Court is hereby DISMISSED. SO ORDERED.
Jacqueline Jimenez Vda. De Gabriel vs. Court of Appeals
G.R. No. 103883. November 14, 1996
Facts:
The petition for review on certiorari in this case seeks the reversal of the
decision of the Court of Appeals setting aside the judgment of the Regional Trial
Court of Manila, Branch 55, which has ordered private respondent Fortune
Insurance & Surety Company, Inc., to pay petitioner Jacqueline Jimenez vda. de
Gabriel, the surviving spouse and beneficiary in an accident (group) insurance of
her deceased husband, the amount of P100,000.00, plus legal interest.
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 of P100,000.00 under a
group policy procured from private respondent by ECDC for its overseas workers.
The insured risk was for "(b)odily injury caused by violent accidental external and
visible means which injury (would) solely and independently of any other
cause" result in death or disability.
On 22 May 1982, within the life of the policy, Gabriel died in Iraq. A year later, or
on 12 July 1983, ECDC reported Gabriel's death to private respondent by
telephone. Among the documents thereafter submitted to private respondent were
a copy of the death certificate issued by the Ministry of Health of the Republic of
Iraq which stated
REASON OF DEATH: UNDER EXAMINATION NOW NOT YET KNOWN and an
autopsy report of the National Bureau of Investigation ("NBI") to the effect that
"(d)ue to advanced state of postmortem decomposition, cause of death (could) not
be determined." Private respondent referred the insurance claim to Mission
Adjustment Service, Inc.
Issue:
Whether or not the right of action has prescribed
Held:
Yes. Private respondent, 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
Page 43
insurer but to the written notice of claim that had to be submitted within six month
from the time of the accident pursuant to Section 384 of the Insurance Code.
While petitioner did fail in substantiating her allegation that the death of her
husband was due to an accident, considering, however, the uncertainty on the real
cause of death, private respondent might find its way clear into still taking a second
look on the matter and perhaps help ease the load of petitioner's loss.
WHEREFORE, the decision appealed from is AFFIRMED. No costs. SO ORDERED.
PREMIUM PAYMENTS
Malayan Insurance Co., Inc. v. Gregorio Cruz Arnaldo
G.R. No. L-67835. October 12, 1987
Facts:
When a person's house is razed, the fire usually burns down the efforts of a
lifetime and forecloses hope for the suddenly somber future. The vanished abode
becomes a charred and painful memory. Where once stood a home, there is now, in
the sighing wisps of smoke, only a gray desolation. The dying embers leave ashes
in the heart.
For peace of mind and as a hedge against possible loss, many people now secure
fire insurance. This is an aleatory contract. By such insurance, the insured in effect
wagers that his house will be burned, with the insurer assuring him against the
loss, for a fee. If the house does burn, the insured, while losing his house, wins the
wagers. The prize is the recompense to be given by the insurer to make good the
loss the insured has sustained.
It would be a pity then if, having lost his house, the insured were also to lose the
payment he expects to recover for such loss. Sometimes it is his fault that he
cannot collect, as where there is a defect imputable to him in the insurance
contract. Conversely, the reason may be an unjust refusal of the insurer to
acknowledge a just obligation, as has happened many times.
In the instant case the private respondent has been sustained by the Insurance
Commission in her claim for compensation for her burned property. The petitioner
is now before us to dispute the decision, on the ground that there was no valid
insurance contract at the time of the loss.
The chronology of the relevant antecedent facts is as follows:
On June 7, 1981, the petitioner (hereinafter called (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 effective July 22, 1981, until July 22, 1982.
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the
premium and sent the corresponding notice to Pinca.
Page 44
On December 24, 1981, payment of the premium for Pinca was received by
DomingoAdora, 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.
Issue:
Whether or not there was an existing insurance at the time of the loss
sustained by Pinca
Held:
Yes. In 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. Malayan Insurance claims that the policy was not
valid and binding as no payment of the premium was made, based on Sec 77 of the
Insurance Code. However, said invoice suggests an understanding between MICO
and the insured that such payment could be made later, as agent Adora had
assured Pinca.
It was not disputed that the premium was actually paid by Pinca to Adora on
December 24, 1981, who received it on behalf of MICO, to which it was remitted on
January 15, 1982. What was questioned was the validity of Pinca's payment and of
Adora's
authority
to receive
it.
However, the
insurance companys
acknowledgement that Adora as its agent defeats this contention.
Payment was in fact made and was operative as of July 22, 1981. Indeed the policy
could have been cancelled under any of the ground enumerated under Sec 64 in
compliance with the method provided in Sec 65.
According to Sec 65, a valid cancellation must, therefore, require concurrence of
the following conditions: (1) There must be prior notice of cancellation to the
insured; (2) The notice must be based on the occurrence, after the effective date of
the policy, of one or more of the grounds mentioned; (3) The notice must be (a) in
writing, (b) mailed, or delivered to the named insured, (c) at the address shown in
the policy; (4) It must state (a) which of the grounds mentioned in Section 64 is
relied upon and (b) that upon written request of the insured, the insurer will furnish
the facts on which the cancellation is based.
The insurance company claims that such notification was made, however, it is but
logical that had Pinca been aware of such cancellation she would not have made
payment on the original policy.
WHEREFORE, the petition is DENIED. The decision of the Insurance Commission
dated April 10, 1981, and its Order of June 4, 1981, are AFFIRMED in full, with
costs against the petitioner. This decision is immediately executory. SO ORDERED.
Page 45
Makati Tuscany Condominium Corp. v. Court of Appeals

G.R. No. 95546. November 6, 1992
Facts:
This case involves a purely legal question: whether payment by installment
of the premiums due on an insurance policy invalidates the contract of insurance, in
view of Sec. 77 of P.D. 612, otherwise known as the Insurance Code, as amended,
which provides:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing
is exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid, except in the case
of a life or an industrial life policy whenever the grace period provision applies.
Sometime in early 1982, private respondent American Home Assurance Co.
(AHAC), represented by American International Underwriters (Phils.), Inc., issued in
favor of petitioner Makati Tuscany Condominium Corporation (TUSCANY) Insurance
Policy No. AH-CPP-9210452 on the latter's building and premises, for a period
beginning 1 March 1982 and ending 1 March 1983, with a total premium of
P466,103.05. The premium was paid on installments on 12 March 1982, 20 May
1982, 21 June 1982 and 16 November 1982, all of which were accepted by private
respondent.
On 10 February 1983, private respondent issued to petitioner Insurance Policy No.
AH-CPP-9210596, which replaced and renewed the previous policy, for a term
covering 1 March 1983 to 1 March 1984. The premium in the amount of
P466,103.05 was again paid on installments on 13 April 1983, 13 July 1983, 3
August 1983, 9 September 1983, and 21 November 1983. All payments were
likewise accepted by private respondent.
On 20 January 1984, the policy was again renewed and private respondent issued
to petitioner Insurance Policy No. AH-CPP-9210651 for the period 1 March 1984 to
1 March 1985. On this renewed policy, petitioner made two installment payments,
both accepted by private respondent, the first on 6 February 1984 for P52,000.00
and the second, on 6 June 1984 for P100,000.00. Thereafter, petitioner refused to
pay the balance of the premium.
Consequently, private respondent filed an action to recover the unpaid balance of
P314,103.05 for Insurance Policy No. AH-CPP-9210651.
Issue:
Whether or not payment by installment of the premiums due on an insurance
policy invalidates the contract of insurance on the basis of Sec. 77 of the Insurance
Code which states that no contract of insurance is valid and binding unless the
premium thereof has been paid, notwithstanding any agreement to the contrary.
Held:
Page 46
No. We hold that the subject policies are valid even if the premiums were
paid on installments. The records clearly show that petitioner and private
respondent intended subject insurance policies to be binding and effective
notwithstanding the staggered payment of the premiums. The initial insurance
contract entered into in 1982 was renewed in 1983, then in 1984. In those three
(3) years, the insurer accepted all the installment payments. Such acceptance of
payments speaks loudly of the insurer's intention to honor the policies it issued to
petitioner. Certainly, basic principles of equity and fairness would not allow the
insurer to continue collecting and accepting the premiums, although paid on
installments, and later deny liability on the lame excuse that the premiums were
not prepared in full.
We therefore sustain the Court of Appeals. We quote with approval the wellreasoned findings and conclusion of the appellate court contained in its Resolution
denying the motion to reconsider its Decision
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, and such an agreement
is not contrary to morals, good customs, public order or public policy (De Leon, the
Insurance Code, at p. 175). 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.
The reliance by petitioner on Arce vs. Capital Surety and Insurance
Co. is unavailing because the facts therein are substantially different from those in
the case at bar. In Arce, no payment was made by the insured at all despite the
grace period given. In the case before Us, petitioner paid the initial installment and
thereafter made staggered payments resulting in full payment of the 1982 and
1983 insurance policies. For the 1984 policy, petitioner paid two (2) installments
although it refused to pay the balance.
It appearing from the peculiar circumstances that the 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 after the
expiration of the whole term of the third policy (No. AH-CPP-9210651) in March
1985. Moreover, as correctly observed by the appellate court, where the risk is
entire and the contract is indivisible, the insured is not entitled to a refund of the
Page 47
premiums paid if the insurer was exposed to the risk insured for any period,
however brief or momentary.
WHEREFORE, finding no reversible error in the judgment appealed from, the same
is AFFIRMED. Costs against petitioner. SO ORDERED.
South Sea Surety & Insurance Co. Inc. v. Court of Appeals
G.R. No. 102253. June 2, 1995
Facts:
Two issues on the subject of insurance are raised in this petition, that assails
the decision, that assails the decision of the Court of Appeals. (in CA-G.R. NO. CV20156), the first dealing on the requirement of premium payment and
the second relating to the agency relationship of parties under that contract.
The court litigation started when Valenzuela Hardwood and Industrial Supply, Inc.
("Hardwood"), filed with the Regional, Trial Court of the National Capital Judicial
Region, Branch l71 in Valenzuela, Metro Manila, a complaint for the recovery of the
value of lost logs and freight charges from Seven Brothers Shipping Corporation or,
to the extent of its alleged insurance cover, from South Sea Surety and insurance
Company.
The factual backdrop is described briefly by the appellate court thusly:
It appears that on 16 January 1984, plaintiff [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 lauan round logs numbering 940 at the port of Maconacon, Isabela for
shipment to Manila.
On 20 January 1984, plaintiff insured the logs, against loss and/or, damage with
defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 end 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.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984
resulting in the loss of the plaintiffs insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the
premium and documentary stamps due on the policy was tendered to the insurer
but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc.
cancelled the insurance policy it issued as of the date of inception for non-payment
of the premium due in accordance with Section 77 of the Insurance Code.
Issue:
Page 48
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 appellees, upon the other hand, claim that 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.
On cross-examination in behalf of South Sea Surety and Insurance Co., Inc. Mr.
Chua testified that the marine cargo insurance policy for the plaintiff's logs was
delivered to him on 21 January 1984 at his office to be delivered to the plaintiff.
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.
When therefore the insured logs were lost, the insured had already paid the
premium to an agent of the South Sea Surety and Insurance Co., Inc., which is
consequently liable to pay the insurance proceeds under the policy it issued to the
insured.
We see no valid reason to discard the factual conclusions of the appellate court.
Just as so correctly pointed out by private respondent, it is not the function of this
Court to assess and evaluate all over again the evidence, testimonial and
documentary, adduced by the parties particularly where, such as here, the findings
of both the trial court and the appellate court on the matter coincide.
WHEREFORE, the resolution, dated 01 February 1993, granting due course to the
petition is RECALLED, and the petition is DENIED. Costs against petitioner.
SO ORDERED.
Sps. Antonio Tibay and Violeta Tibay et al. v. Court of Appeals
G.R. No. 119655. May 24, 1996
Facts:
May a fire insurance policy be valid, binding and enforceable upon mere
partial payment of premium?
On 22 January 1987 private respondent Fortune Life and General Insurance Co.,
Inc. (FORTUNE) issued Fire Insurance Policy No. 136171 in favor of Violeta R. Tibay
and/or Nicolas Roraldo on their two-storey residential building located at 5855
Zobel Street, 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
Page 49
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. Her claim
was accordingly referred to its adjuster, Goodwill Adjustment Services, Inc. (GASI),
which immediately wrote Violeta requesting her to furnish it with the necessary
documents for the investigation and processing of her claim. Petitioner forthwith
complied. On 28 March 1987 she signed a non-waiver agreement with GASI to the
effect that any action taken by the companies or their representatives in
investigating the claim made by the claimant for his loss which occurred at 5855
Zobel Roxas, Makati on March 8, 1987, or in the investigating or ascertainment of
the amount of actual cash value and loss, shall not waive or invalidate any
condition of the policies of such companies held by said claimant, nor the rights of
either or any of the parties to this agreement, and such action shall not be, or be
claimed to be, an admission of liability on the part of said companies or any of
them.
Issue:
Whether a fire insurance policy be valid, binding and enforceable upon mere
partial payment of premium.
Held:
No. Clearly the Policy 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 which provides
Sec. 77. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement to
the contrary, no policy or contract of insurance issued by an insurance company is
valid and binding unless and until the premium thereof has been paid, except in the
case of a life or an industrial life policy whenever the grace period provision applies
(emphasis supplied).
In Makati Tuscany Condominium Corp. v. Court of Appeals the parties mutually
agreed that the premiums could be paid in installments, which in fact they did for
three (3) years, hence, this Court refused to invalidate the insurance policy. In
giving effect to the policy, the Court quoted with approval the Court of Appeals
The obligation to pay premiums when due is ordinarily an indivisible obligation to
pay the entire premium. Here, the parties . . . agreed to make the premiums
payable in installments, and there is no pretense that the parties never envisioned
to make the insurance contract binding between them. It was renewed for two
succeeding years, the second and third policies being a renewal/replacement for the
previous one. And the insured never informed the insurer that it was terminating
the policy because the terms were unacceptable.
Page 50
While it may be true that under Section 77 of the Insurance Code, the parties may
not agree to make the insurance contract valid and binding without payment of
premiums, there is nothing in said section which suggests that the parties may not
agree to allow payment of the premiums in installment, or to consider the contract
as valid and binding upon payment of the first premium. Otherwise we would allow
the insurer to renege on its liability under the contract, had a loss incurred (sic)
before completion of payment of the entire premium, despite its voluntary
acceptance of partial payments, a result eschewed by basic considerations of
fairness and equity . . .
The principle that where the law does not distinguish the court should neither
distinguish assumes that the legislature made no qualification on the use of a
general word or expression. 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. It must be emphasized here that all
actuarial calculations and various tabulations of probabilities of losses under the
risks insured against are based on the sound hypothesis of prompt payment of
premiums. Upon this bedrock insurance firms are enabled to offer the assurance of
security to the public at favorable rates. But once payment of premium is left to the
whim and caprice of the insured, as when the courts tolerate the payment of a
mere P600.00 as partial undertaking out of the stipulated total premium of
P2,983.50 and the balance to be paid even after the risk insured against has
occurred, as Tibay et al. have done in this case, on the principle that the strength of
the vinculum juris is not measured by any specific amount of premium payment, we
will surely wreak havoc on the business and set to naught what has taken
actuarians centuries to devise to arrive at a fair and equitable distribution of risks
and benefits between the insurer and the insured.
UCPB General Insurance Co., Inc. v. Masagana Telemart, Inc.
G.R. No. 137172. June 15, 1999
Facts:
On April 15, 1991, petitioner issued five (5) insurance policies covering
respondent's various property described therein against fire, for the period from
May 22, 1991 to May 22, 1992.
In March 1992, petitioner evaluated the policies and decided not to renew them
upon expiration of their terms on May 22, 1992. Petitioner advised respondent's
broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies.
On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of
the policies at the address stated in the policies.
On June 13, 1992, fire razed respondent's property covered by three of the
insurance policies petitioner issued.
Page 51
On July 13, 1992, respondent presented to petitioner's cashier at its head office five
(5) manager's checks in the total amount of P225,753.95, representing premium
for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of
loss was filed by respondent under the policies prior to July 14, 1992.
On July 14, 1992, respondent filed with petitioner
indemnification of the insured property razed by fire.
its
formal
claim
for
On the same day, July 14, 1992, petitioner returned to respondent the five (5)
manager's checks that it tendered, and at the same time rejected respondent's
claim for the reasons (a) that the policies had expired and were not renewed, and
(b) that the fire occurred on June 13, 1992, before respondent's tender of premium
payment.
Issue:
Whether the fire insurance policies issued by Insurer to Insured had expired
on May 1992 or had been extended or renewed by an implied credit arrangement
(even though actual tender of payment was made after the occurrence of the fire).
Held:
No, the insurance policies had not been renewed.
An insurance policy, other than life, issued originally or on renewal, 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 creditor time
to pay the premium and consider the policy binding before actual payment.
Here, the payment of the premium for renewal of the policies was tendered on July
13, 1992, a month after the fire occurred on June 13, 1992. The assured did not
even give the insurer a notice of loss within a reasonable time after occurrence of
the fire.
UCPB General Insurance Co., Inc. v. Masagana Telemart, Inc.
G.R. No. 137172. April 4, 2001
Facts:
In our decision of 15 June 1999 in this case, we reversed and set aside the
assailed decision of the Court of Appeals, which affirmed with modification the
judgment of the trial court (a) allowing Respondent to consign the sum
of P225,753.95 as full payment of the premiums for the renewal of the five
insurance policies on Respondents properties; (b) declaring the replacementrenewal policies effective and binding from 22 May 1992 until 22 May 1993; and (c)
ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for the burned
properties covered by the renewal-replacement policies. The modification consisted
in the (1) deletion of the trial courts declaration that three of the policies were in
Page 52
force from August 1991 to August 1992; and (2) reduction of the award of the
attorneys fees from 25% to 10% of the total amount due the Respondent.
The material operative facts upon which the appealed judgment was based are
summarized by the Court of Appeals in its assailed decision as follows:
Plaintiff [herein Respondent] obtained from defendant [herein Petitioner] five (5)
insurance policies (Exhibits "A" to "E", Record, pp. 158-175) on its properties [in
Pasay City and Manila].
All five (5) policies reflect on their face the effectivity term: "from 4:00 P.M. of 22
May 1991 to 4:00 P.M. of 22 May 1992." On June 13, 1992, plaintiff's properties
located at 2410-2432 and 2442-2450 Taft Avenue, Pasay City were razed by
fire. On July 13, 1992, plaintiff tendered, and defendant accepted, five (5)
Equitable Bank Manager's Checks in the total amount of P225,753.45 as renewal
premium payments for which Official Receipt Direct Premium No. 62926 (Exhibit
"Q", Record, p. 191) was issued by defendant. On July 14, 1992, Masagana made
its formal demand for indemnification for the burned insured properties. On the
same day, defendant returned the five (5) manager's checks stating in its letter
(Exhibit "R"/"8", Record, p. 192) that it was rejecting Masagana's claim on the
following grounds:
"a) Said policies expired last May 22, 1992 and were not renewed for
another term;
b) Defendant had put plaintiff and its alleged broker on notice of nonrenewal earlier; and
c) The properties covered by the said policies were burned in a fire that
took place last June 13, 1992, or before tender of premium payment."
Issue:
Whether Section 77 of the Insurance Code of 1978 (P.D. No. 1460) must be
strictly applied to Petitioners advantage despite its practice of granting a 60- to 90day credit term for the payment of premiums.
Held:
No. Section 77 of the Insurance Code of 1978 provides:
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement to
the contrary, no policy or contract of insurance issued by an insurance company is
valid and binding unless and until the premium thereof has been paid, except in the
case of a life or an industrial life policy whenever the grace period provision applies.
The first exception is provided by Section 77 itself, and that is, in case of a life or
industrial life policy whenever the grace period provision applies.
The second is that covered by Section 78 of the Insurance Code, which provides:
SEC. 78. Any 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
Page 53
binding, notwithstanding any stipulation therein that it shall not be binding until
premium is actually paid.
A third exception was laid down in Makati Tuscany Condominium Corporation vs.
Court of Appeals, wherein we ruled that Section 77 may not apply if the parties
have agreed to the payment in installments of the premium and partial payment
has been made at the time of loss. We said therein, thus:
We hold that the subject policies are valid even if the premiums were paid on
installments. The records clearly show that the petitioners and private respondent
intended subject insurance policies to be binding and effective notwithstanding the
staggered payment of the premiums. The initial insurance contract entered into in
1982 was renewed in 1983, then in 1984. In those three years, the insurer
accepted all the installment payments. Such acceptance of payments speaks loudly
of the insurers intention to honor the policies it issued to petitioner. Certainly,
basic principles of equity and fairness would not allow the insurer to continue
collecting and accepting the premiums, although paid on installments, and later
deny liability on the lame excuse that the premiums were not prepaid in full.
Moreover, there is nothing in Section 77 which prohibits the parties in an insurance
contract to provide a credit term within which to pay the premiums.
That agreement is not against the law, morals, good customs, public order or public
policy. The agreement binds the parties. Article 1306 of the Civil Code provides:
ART. 1306. The contracting parties may establish such stipulations clauses, terms
and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy.
Finally in the instant case, it would be unjust and inequitable if recovery on the
policy would not be permitted against Petitioner, which had consistently granted a
60- to 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
Respondent relied in good faith on such practice. Estoppel then is the fifth
exception to Section 77.
WHEREFORE, the Decision in this case of 15 June 1999 is RECONSIDERED and SET
ASIDE, and a new one is hereby entered DENYING the instant petition for failure of
Petitioner to sufficiently show that a reversible error was committed by the Court of
Appeals in its challenged decision, which is hereby AFFIRMED in toto.
No pronouncement as to cost. SO ORDERED.
American Home Assurance Co. v. Antonio Chua
G.R. No. 130421. June 28, 1999
Facts:
On April 5, 1990, Antonio Chua renewed the fire insurance for its stock-intrade of his business, Moonlight Enterprises with American Home Assurance
Page 54
Companyby issuing a check of P2,983.50 to its agent James Uy who delivered

the Renewal Certificate to him. Came April 6, 1990, the Moonlight Enterprises was
completely razed by fire with an estimated loss of P4,000,000 to P5,000,000.
Then on April 10, 1990, an official receipt was issued and subsequently, a policy
was issued covering March 25 1990 to March 25 1991. Antonio Chua filed an
insurance claim with American Home and 4 other co-insurers (Pioneer Insurance
and Surety Corporation, Prudential Guarantee and Assurance, Inc. and Filipino
Merchants Insurance Co). American Home refused alleging the no premium was
paid.
Issues:
1. Whether or not there was a valid payment of premium considering that
the check was cashed after the occurrence of the fire since
the renewal certificate issued containing the acknowledgement receipt.
2. Whether or not Chua violated the policy by his submission of
fraudulent documents and non-disclosure of the other existing insurance
contracts or other insurance clause".
Held:
1. Yes. Section 77 of the Insurance Code:
An insurer is entitled to payment of the premium as soon as the thing insured is

exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid, except in the case
of life or an industrial life policy whenever the grace period provision applies.
Section 66 of the Insurance Code is not applicable since it is not termination
but renewal. Renewal certificate issued contained the acknowledgment that
premium had been paid.
Section 306 of the Insurance Code provides that any insurance company which
delivers a policy or contract of insurance to an insurance agent or insurance
broker shall be deemed to have authorized such agent or broker to receive on its
behalf payment of any premium which is due on such policy or contract of
insurance at the time of its issuance or delivery or which becomes due thereon. 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 agents
acknowledgment of receipt of payment.
Section 78 of the Insurance Code:
An acknowledgment in a policy or contract of insurance of the receipt of premium is
conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the
premium is actually paid. This Section establishes a legal fiction of payment and
should be interpreted as an exception to Section 77.
Page 55
2. No. The purpose for the other insurance clause is to prevent an increase
in the moral hazard. Failure to disclose was not intentional and fraudulent.
Section 75 states 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.
American Home is estopped because its loss adjusters had previous knowledge of
the co-insurers. The loss adjuster, being an employee of petitioner, is deemed a
representative of the latter whose awareness of the other insurance contracts binds
petitioner. No legal and factual basis for the award of P200,000 for loss of profit. No
such fraud or bad faith, it is equivalent to no moral damages. Grant of attorneys
fees as part of damages is the exception rather than the rule.
Pioneer Insurance & Surety Corp. v. Oliva Yap
G.R. No. L-36232. December 19, 1974
Facts:
This is an appeal by certiorari from the decision of the Court of Appeals dated
December 16, 1972, in CA-G.R. No. 36669-R, affirming the judgment of the Court
of First Instance of Manila (Branch VI) in Civil Case No. 54508, which latter court
declared plaintiff Oliva Yap, herein respondent, entitled to recover from defendant
Pioneer Insurance & Surety Corporation, herein petitioner, the full amount of the
damage inquired in Policy No. 4219, which is P25,000.00, plus 12% of said sum
from the date of filing of the complaint until full payment, in addition to the sum of
P6,000.00 for attorney's fees, and costs.
Respondent Oliva Yap was the owner of a store in a two-storey building located at
No. 856 Juan Luna Street, Manila, where in 1962 she sold shopping bags and
footwear, such as shoes, sandals and step-ins. Chua Soon Poon Oliva Yap's son-inlaw, was in charge of the store.
On April 19, 1962, respondent Yap took out Fire Insurance Policy No. 4216 from
petitioner Pioneer Insurance & Surety Corporation with a face value of P25,000.00
covering her stocks, office furniture, fixtures and fittings of every kind and
description. Among the conditions in the policy executed by the parties are the
following:
The Insured shall give notice to the Company of any insurance or insurances
already effected, or which may subsequently be effected, covering any of the
property hereby insured, and 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. (emphasis supplied)
It is understood that, except as may be stated on the face of this policy there is no
other insurance on the property hereby covered and no other insurance is allowed
Page 56
except by the consent of the Company endorsed hereon. Any false declaration or
breach or this condition will render this policy null and void.
At the time of the insurance on April 19, 1962 of Policy No. 4219 in favor of
respondent Yap, an insurance policy for P20,000.00 issued by the Great American
Insurance Company covering the same properties was noted on said policy as coinsurance (Annex "1-E"). Later, on August 29, 1962, the parties executed Exhibit
"1-K", as an endorsement on Policy No. 4219, stating:
It is hereby declared and agreed that the co-insurance existing at present under
this policy is as follows: P20,000.00 Northwest Ins., and not as originally stated.
(emphasis supplied)
Except as varied by this endorsement, all other terms and conditions remain
unchanged.
Still later, or on September 26, 1962, respondent Oliva Yap took out another fire
insurance policy for P20,000.00 covering the same properties, this time from the
Federal Insurance Company, Inc., which new policy was, however, procured
without notice to and the written consent of petitioner Pioneer Insurance & Surety
Corporation and, therefore, was not noted as a co-insurance in Policy No. 4219.
At dawn on December 19, 1962, a fire broke out in the building housing respondent
Yap's above-mentioned store, and the said store was burned. Respondent Yap filed
an insurance claim, but the same was denied in petitioner's letter of May 17, 1963
(Exhibit "G"), on the ground of "breach and/or violation of any and/or all terms and
conditions" of Policy No. 4219.
Issue:
Whether or not petitioner should be absolved from liability on Fire Insurance
Policy No. 4219 on account of any violation by respondent Yap of the co-insurance
clause therein
Held:
No, There was a violation by respondent Oliva Yap of the co-insurance clause
contained in Policy No. 4219 that resulted in the avoidance of petitioner's liability.
The insurance policy for P20,000.00 issued by the Great American Insurance
Company covering the same properties of respondent Yap and duly noted on Policy
No. 4219 as c-insurance, ceased, by agreement of the parties (Exhibit "1-L"), to be
recognized by them as a co-insurance policy. The Court of Appeals says that the
Great American Insurance policy was substituted by the Federal Insurance policy
for the same amount, and because it was a mere case of substitution, there was no
necessity for its endorsement on Policy No. 4219. This finding, as well as reasoning,
suffers from several flaws. There is no evidence to establish and prove such a
substitution. If anything was substituted for the Great American Insurance policy, it
could only be the Northwest Insurance policy for the same amount of P20,000.00.
The endorsement (Exhibit "1-K") quoted above shows the clear intention of the
parties to recognize on the date the endorsement was made (August 29, 1962), the
existence of only one co-insurance, and that is the Northwest Insurance policy,
Page 57
which according to the stipulation of the parties during the hearing, was issued on
August 20, 1962 (t.s.n., January 12, 1965, pp. 3-4) and endorsed only on August
20, 1962. The finding of the Court of Appeals that the Great American Insurance
policy was substituted by the Federal Insurance policy is unsubstantiated by the
evidence of record and indeed contrary to said stipulation and admission of
respondent, and is grounded entirely on speculation, surmises or conjectures,
hence, not binding on the Supreme Court.
The Court of Appeals would consider petitioner to have waived the formal
requirement of endorsing the policy of co-insurance "since there was absolutely no
showing that it was not aware of said substitution and preferred to continue the
policy." The fallacy of this argument is that, contrary to Section 1, Rule 131 of the
Revised Rules of Court, which requires each party to prove his own allegations, it
would shift to petitioner, respondent's burden of proving her proposition that
petitioner was aware of the alleged substitution, and with such knowledge preferred
to continue the policy.
The obvious purpose of the aforesaid requirement in the policy is to prevent overinsurance and thus avert the perpetration of fraud. The public, as well as the
insurer, is interested in preventing the situation in which a fire would be profitable
to the insured. According to Justice Story: "The insured has no right to complain,
for he assents to comply with all the stipulation on his side, in order to entitle
himself to the benefit of the contract, which, upon reason or principle, he has no
right to ask the court to dispense with the performance of his own part of the
agreement, and yet to bind the other party to obligations, which, but for those
stipulation would not have been entered into."
In view of the above conclusion, We deem it unnecessary to consider the other
defenses interposed by petitioner.
WHEREFORE, the appealed judgment of the Court of Appeals is reversed and set
aside, and the petitioner absolved from all liability under the policy. Costs against
private respondent. SO ORDERED.
Republic Bank v. Phil. Guaranty Co., Inc.
G.R. No. L-27932. October 30, 1972
Facts:
On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain
loans, overdrafts and other credit accommodations from the Republic Bank and to
secure the payment thereof, said Union Manufacturing Co., Inc. executed a real and
chattel mortgages on certain properties, which. As additional condition of the
mortgage contract, the Union Manufacturing Co., Inc. undertook to secure
insurance coverage over the mortgaged properties. 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
Page 58
properties of the Union Manufacturing Co., Inc. On September 27, 1962, Fire
Insurance Policy No. 43170 was issued in favor of the assured, Union Manufacturing
Co., Inc., for which the corresponding premium was paid by the Republic Bank to
the defendant, Philippine Guaranty Co., Inc. Upon the expiration of said fire policy
on September 25, 1963, the same was renewed by the Republic Bank. 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. On
September 6, 1964, a fire occurred in the premises of the Union Manufacturing Co.,
Inc. 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 with the result that
these insurances, of which we became aware of only after the fire, were not
endorsed on our policy; and (b) Policy Condition No. 11 was not complied with
because you have failed to give to our representatives the required documents and
other proofs with respect to your claim and matters touching on our liability, if any,
and the amount of such liability'. As of September, 1962, when the defendant
Philippine Guaranty Co., issued Fire Insurance Policy No. 43170, the same
properties were already covered by Fire Policy No. 1533 of the Sincere Insurance
Company and by insurance policies Nos. F-2314 and F-2590 of the Oceanic
Insurance Agency. Also, when said defendant's Fire Insurance Policy No. 43170 was
already in full force and effect, the Union Manufacturing Co., Inc. without the
consent of the defendant, Philippine Guaranty Co., Inc., obtained other insurance
policies over the same properties prior to the fire, to wit: (1) Fire Policy No. 250 of
New India Assurance Co., Ltd.,; (2) Fire Policy No. 3702 of the Sincere Insurance
Company; and (3) Fire Policy No. 6161 of Manila Insurance Co.
Issue:
Whether or not the insurer can avoid the liability upon proof that there was a
violation of warranty.
Held:
Yes. It is to Santa Ana v. Commercial Union Assurance Co., a 1930 decision,
that one turns to for the first explicit formulation as to the controlling principle. 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." The next year, in Ang Giok Chip v. Springfield Fire &
Marine Ins. Co., 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
Page 59
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." 9 As far back as 1915, in Young v. Midland Textile Insurance
Company, it was categorically set forth that as a condition precedent to the right of
recovery, there must be compliance on the part of the insured with the terms of the
policy. As stated in the opinion of the Court through Justice Johnson: "If the insured
has violated or failed to perform the conditions of the contract, and such a violation
or want of performance has not been waived by the insurer, then the insured
cannot recover. Courts are not permitted to make contracts for the parties. The
function and duty of the courts consist simply in enforcing and carrying out the
contracts actually made. While it is true, as a general rule, that contracts of
insurance are construed most favorably to the insured, yet contracts of insurance,
like other contracts, are to be construed according to the sense and meaning of the
terms which the parties themselves have used. If such terms are clear and
unambiguous they must be taken and understood in their plain, ordinary and
popular sense." 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. 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. (Sec. 69, Insurance Act) Such misrepresentation is
fatal in the light of our views in Santa Ana v. Commercial Union Assurance
Company, Ltd. ... . The materiality of non-disclosure of other insurance policies is
not open to doubt." As a matter of fact, in a 1966 decision, Misamis Lumber Corp.
v. Capital Ins. & Surety Co., Inc., Justice J.B.L. Reyes, for this Court, made
manifest anew its adherence to such a principle in the face of an assertion that
thereby a highly unfavorable provision for the insured would be accorded
recognition. This is the language used: "The insurance contract may be rather
onerous ('one sided', as the lower court put it), but that in itself does not justify the
abrogation of its express terms, terms which the insured accepted or adhered to
and which is the law between the contracting parties."
There is no escaping the conclusion then that the lower court could not have
disposed of this case in a way other than it did. Had it acted otherwise, it clearly
would have disregarded pronouncements of this Court, the compelling force of
which cannot be denied. There is, to repeat, no justification for a reversal.
WHEREFORE, the decision of the lower court of March 31, 1967 is affirmed. No
costs.
MARINE INSURANCE
Oriental Assurance Corp. v Court of Appeals
G.R. No. 94052. August 9, 1991
Facts:
On January 28, 1986, the two barges were towed by one tug-boat, the MT
Seminole But, as fate would have it, during the voyage, rough seas and strong
winds caused damage to Barge TPAC-1000 resulting in the loss of 497 pieces of
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logs out of the 598 pieces loaded thereon. Panama Sawmill Co., Inc bought, in
Palawan, 1,208 pieces of apitong logs, with a total volume of 2,000 cubic meters. It
hired Transpacific Towage, Inc., to transport the logs by sea to Manila and insured
it against loss for P1-M with petitioner Oriental Assurance Corporation. There is a
claim by Panama, however, that the insurance coverage should have been for P3-M
were it not for the fraudulent act of one Benito Sy Yee Long to whom it had
entrusted the amount of P6,000.00 for the payment of the premium for a P3-M
policy. The logs were loaded on two 2 barges: (1) on barge PCT-7000,610 pieces of
logs with a volume of 1,000 cubic meters; and (2) on Barge TPAC-1000, 598 pieces
of logs, also with a volume of 1,000 cubic meters. Panama demanded payment for
the loss but Oriental Assurance refuse on the ground that its contracted liability was
for TOTAL LOSS ONLY. The rejection was upon the recommendation of the Tan
Gatue Adjustment Company.
Issue:
Whether or not Oriental is liable for the total loss of the cargo
Held:
The requirements for the application of Section 139 of the insurance Code,
quoted above, have not been met. The logs involved, although placed in two
barges, were not separately valued by the policy, nor separately insured.
Resultantly, the logs lost in barge TPAC-1000 in relation to the total number of logs
loaded on the same barge cannot be made the basis for determining constructive
total loss. The logs having been insured as one inseparable unit, the correct basis
for determining the existence of constructive total loss is the totality of the
shipment of logs. Of the entirety of 1,208, pieces of logs, only 497 pieces thereof
were lost or 41.45% of the shipment. Since the cost of those 497 pieces does not
exceed 75% of the value of all 1,208 pieces of logs, the shipment cannot be said to
have sustained a constructive total loss under Section 139 (a) of the Insurance
Code.
SECTION 139. A person insured by a contract of marine insurance may abandon the
thing insured, or any particular portion thereof separately valued by the policy, or
otherwise separately insured, and recover for a total loss thereof, when the cause
of the loss is a peril injured against,
If more than three-fourths thereof in value is actually lost, or would have to be
expended to recover it from the peril;
If it is injured to such an extent as to reduce its value more than three-fourths.
Roque v Intermediate Appellate Court
G. R. No. L-66935. November 11, 1985
Facts:
On February 29, 1972, the petitioners loaded on the barge, 811 pieces of
logs at Malampaya Sound, Palawan for carriage and delivery to North Harbor, Port
of Manila, but the shipment never reached its destination because Mable 10 sank
with the 811 pieces of logs somewhere off Cabuli Point in Palawan on its way to
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Manila. The Manila Bay Lighterage Corporation, a common carrier, entered into a
contract with the petitioners 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 NorthHarbor, Manila. The petitioners insured the logs against loss for
P100,000.00 with respondent Pioneer Insurance and Surety Corporation. As alleged
by the petitioners in their complaint and as found by both the trial and appellate
courts, the barge where the logs were loaded was not seaworthy such that it
developed a leak. The appellate court further found that the 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 March 8, 1972, the petitioners wrote a letter to
Manila Bay demanding payment of P150, 000.00 for the loss of the shipment plus
P100,000.00 under the insurance policy but respondent refused to pay on the
ground that its ability depended upon the Total loss by Total Loss of Vessel only.
Hence, petitioners commenced Civil Case No. 86599 against Manila Bay and
respondent Pioneer.
Issue:
Whether or not there was a breach of implied warranty
Whether or not there was barratry
Held:
There is no dispute over the liability of the common carrier Manila Bay. In
fact, it did not bother to appeal the questioned decision. However, the petitioners
state that Manila Bay 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:
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.
Marine Insurance includes:
Insurance against loss of or damage to:
Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise
Moreover, the fact that the unseaworthy of the ship was unknown to the insured is
immaterial in ordinary marine insurance and may not be used by him as a defence
in order to recover on the marine insurance policy.
Since the law provides for an implied warranty of seaworthiness in every contract
of ordinary marine insurance, it becomes the obligation of a cargo may have no
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control over the vessel but he had 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.
Barratry necessarily requires a wilful and intentional act in its commission. No
honest error of judgment or mere negligence, unless criminally gross, can be
barratry. In the case at bar, there is no finding that the loss was occasioned by the
wilful or fraudulent act of the vessels crew. There was only simple negligence or
lack of skill. Hence, the second assignment of error must likewise be dismissed.
Filipinas Merchants Insurance v Court of Appeals
G.R. No. 84507. March 15, 1990
Facts:
On December 11, 1976, the fishmeal in 666 gunny bags were unloaded from
the ship at Manila unto the arrester contractor E. Razon, Inc. and Filipinos surveyor
ascertained and certified that in such discharge 105 bags were in bad order
condition as jointly surveyed by the ships agent and the arrester contractor. Based
on said computation the Chao made a formal claim against the Filipino for P51,
568.62. The Chao Tiek Seng a consignee of the shipment of fishmeal loaded on
board the vessel SS Bougainville and unloaded at the Port of Manila on or about
December 11, 1976 and seeks to recover from the amount of P51, 568.62
representing damages to said shipment which had been insured by Filipino. Filipino
brought a third party complaint against Company Maritime Des Charguers Reunis
and/or E. Razon, Inc. seeking judgment against the third party defendants in case
judgment is rendered against it. It appears from the evidence presented that Chao
insured said shipment with Filipino for the sum of P267,653.59 for the goods
described as 600 metric tons of fishmeal in gunny bags of 90 kilos each from
Bangkok, Thailand to Manila against all risks under warehouse terms. Actually,
what was imported was 59.940 metric tons not 600 tons at $395.42 a ton.
Issue:
Whether or not insurance company should be held liable even if the technical
meaning in marine insurance of an insurance against all risk is applied
Held:
Supreme Court not upholds this contention. An all risks policy should be
read literally as meaning all risks whatsoever and covering all losses by an
accidental cause of any kind. The terms accident and accidental, as used in
insurance contracts, have not acquired any technical meaning. They are construed
by the courts in their ordinary and common acceptance. Thus, the terms have been
taken to mean that which happens by chance or fortuitously, without intention and
design, and which is unexpected, unusual and unforeseen. An accident is an event
that takes place without ones foresight or expectations; an event that proceeds
from an unknown cause, or is an unusual effect of a known cause and, therefore,
not expected.
Page 63
Coverage under an all risks provision of a marine insurance 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 the peril falling within the policys coverage; the insurer can avoid coverage
upon demonstrating that a specific provision expressly excludes the loss from
coverage. A marine insurance policy providing that the insurance was to be against
all risks must be construed as creating a special insurance and extending to other
risks than are usually contemplated, and covers all losses except such as arise from
the fraud of the insured. The burden of the insured, therefore, is to prove merely
that th goods he transported have been lost, destroyed or deteriorated. Thereafter,
the burden is shifted to the insurer to prove that the loss was due to expected
perils. To impose on the insured the burden of proving the precise cause of the loss
or damage would be inconsistent with the broad protective purpose of all risks
insurance.
In the present case, there being no showing that the loss was caused by any
of the expected perils, the insurer is liable under the policy.
Choo Tek Seng v Court of Appeals
G.R. No. 154618. April 14, 2004
Facts:
Petitioner imported some lactose crystals from Holland. The importation
involved fifteen (15) metric tons packed in 600 6-ply paper bags with polyethylene
inner bags, each bag at 25 kilos net. The goods were loaded at the port at
Rotterdam (Holland) in sea vans on board the vessel MS Benalder as the mother
vessel, and thereafter aboard the feeder vessel Wesse 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 risk under the terms of the insurance cargo policy. Upon
arrival at the port of Manila, the cargo was discharged into the custody of the
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
because assuming that spillage took place while the goods were in transit,
petitioner and his agent failed to avert or minimize the loss by failing to recover
spillage from the sea van, thus violating the terms of the insurance policy sued
upon and that assuming that the spillage did not occur while the cargo was in
transit, the said 400 bags were loaded in bad order, and that in any case, the van
did not carry any evidence of spillage. Petitioner filed a complaint in the RTC
against the insurance company seeking payment of the sum of P33, 117.63 as
damages plus attorneys fees and expenses of litigation. Insurance company denied
all the material allegations of the complaint and raised several special defenses as
well as a compulsory counterclaim. Insurance company filed a third-party complaint
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against respondents Ben Lines and broker. The RTC then dismissed the complaint,
the counterclaim and third-party complaint with costs against the petitioner. They
appealed in Court of Appeals but denied. MFR was denied as well.
Issue:
Whether or not insurance company should be held liable even if the technical
meaning in marine insurance of an insurance against all risk is applied
Held:
In the present case, the all risks clause of the policy sued upon reads as
follows:
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.
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 therefore. 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 policys coverage. the
insurer can avoid coverage upon demonstrating that a specific provision expressly
excludes the loss from coverage. 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.
LIFE INSURANCE
Del Val v Del Val
G. R. No. L-9374. February 16, 1915
Facts:
Plaintiffs and defendant, Andres, are brothers and sisters. They are the only
heirs at law and next of kin of Gregorio Nancianceno del Val, who died in Manila on
August 4, 1910, intestate. An administrator was appointed for the estate of the
deceased, and, after a partial administration, it was closed and the administrator
discharged by order of the Court of First Instance dated December 9, 1911. During
the lifetime of the deceased he took out insurance on his life for the sum of P40,000
and made it payable to the defendant as sole beneficiary. After the death, the
defendant collected the face of the policy. Out of said policy he paid the sum of
P18, 365.20 to redeem certain real estate which the decedent had sold to third
persons with a right to repurchase. The redemption of said premises was made by
the attorney of the defendant in the name of the plaintiffs and the defendant as
heirs of the deceased vendor. The redemption in the name of the plaintiffs was, so
Page 65
defendant declares, without his knowledge or consent. Since the redemption of said
premises they have been in the possession of the plaintiffs, who have had the use
and benefit thereof; and during that time the plaintiffs paid no taxes and made no
repairs. Further the defendant, on the death of the deceased, took possession of
most of his personal property, which he still has in his possession, and that he has
also the balance on said insurance policy amounting to P21, 634.80. Plaintiffs
contend that the amount of the insurance policy belonged to the estate of the
deceased and not to the defendant personally. Therefore, they are entitled to a
portion not only of the real and personal property, but also of the P40,00 life
insurance.
Issue:
Whether or not the plaintiffs are entitled to a portion
Held:
Where a life-insurance policy is made payable to one of the heirs of the
person whose life is insured, the proceeds of the policy on the death of the insured
belong exclusively to the beneficiary and not to the estate of the person whose life
was insured; and such proceeds are his individual property and not the property of
the heirs of the person whose life was insured. Further, Article 10035 of the Civil
Code, providing that an heir by force of law surviving with others of the same
character to a succession must bring into the hereditary estate the property or
securities he may have received from the deceased during the life of the same, by
way of dowry, gift, or for any good consideration, in order to compute it in fixing
the legal portions and in the account of the division, is not applicable to the
proceeds of an insurance policy made payable to one of the heirs of the insured by
name, nor can the proceeds of such policy be considered a gift under article 819 of
the Civil Code. However, in the case at bar the Supreme Court decided to return
the case to the trial court.
Bank of the Philippine Islands v Posadas
G. R. No. L-34583. October 22, 1931
Facts:
The present complaint seeks to recover from the defendant Juan Posadas,
Jr., Collector of Internal Revenue, the amount of P1, 209 paid by the plaintiff under
protest, in its capacity of administrator of the estate of the late Adolphe Oscar
Schuetze, as inheritance tax upon the sum of P20, 150, which is the amount of an
insurance policy on the deceaseds life, wherein his own estate was named the
beneficiary. On or about august 23, 1928, the herein plaintiff before notary public
Salvador Zaragoza, drew a general power appointing the above-mentioned Bank of
the Philippine Islands as her attorney-in-fact, among the powers conferred to said
attorney-in-fact was the power to represent her in all legal actions instituted by or
against her. The deceased Adolphe Oscar Schuetze came to the Philippine Islands
for the first time of March 31, 1890, and worked in the several German firms
employee. He was habitually making trips to Europe. While in the Philippines, he
died in 1928. The deceased at the time of his death was possessed of not only real
property situated in the Philippine Islands, but also personal property, among which
Page 66
was life-insurance policy No. 194538 issued at Manila Philippine Islands, on January
14, 1913, for the sum of $10,000 by the Sun Life Assurance Company of Canada,
Manila branch. Deceased was able to pay the premiums until the time of his death
and the only heir is his widow. At the time of the death of the deceased and at all
times thereafter including the date when the said insurance policy was paid, the
insurance policy was not in the hands or possession of the Manila office of the Sun
Life Assurance Company of Canada, nor in the possession of the herein plaintiff, nor
in the possession of her attorney-in-fact the Bank of Philippine Islands, but the
same was in the hands of the Head Office of the Sun Life Assurance Company of
Canada, at Montreal, Canada. Bank of the Philippine Islands as administrator of the
decedents estate received from the Sun Life Assurance Company of Canada, Manila
Branch, the sum of P20,150 representing of the policy in question in the sum of
P20,150 from the estate of the late Adolphe Oscar Schuetze to the sole heir of the
deceased, or plaintiff herein, which inheritance tax amounted to the sum of P1,209.
Issue:
Whether or not the life insurance policy, by reason of its ownership, is
subject to an inheritance tax
Held:
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,
and that in the present case, as the late Adolphe Oscar Schuetze named his own
estate as the sole beneficiary of the insurance on his life, upon his death the latter
became the sole owner of the proceeds, which therefore became subject to the
inheritance tax, citing Del Val vs. Del Val (29 Phil.,534), where the doctrine owner
of the proceeds of such policy upon the death of the insured.
Just as an individual beneficiary of a life-insurance policy taken out by a
married person becomes the exclusive owner of the proceeds upon the death of the
insured even if the premiums were paid by the conjugal partnership, so, it is
argued, where the beneficiary named is the estate of the deceased whose life is
insured, the proceeds of the polivy become a part of said estate the death of the
insured even f the premiums have been paid with conjugal funds.
Insular Life v Ebrado
G. R. No. L-44059. October 28, 1977
Facts:
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life
Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider
for Accidental Death for the same amount Buenaventura C. Ebrado designated
Carponia T. Ebrado as the revocable beneficiary in his policy his wife. Buenaventura
died when he was hit by a falling branch of a tree. As the policy was in force, the
Insular Life Assurance Co., Ltd., liable to pay the coverage. Carponia T. Ebrado filed
with the insurer a claim for the proceeds of the Policy as the designated beneficiary
therin, although she admits that she and the insured Buenaventura C. Ebrado were
merely living as husband and wife without the benefit of marriage. Pascuala Vda.
De Ebrado also filed her claim as the widow of the deceased insured. She asserts
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that she is the one entitled to the insurance proceeds, not the common-law wife,
carponia T. Ebrado. On September 25, 1972, the trial court rendered judgment
declaring among others, Carponia T. Embrado disqualified from becoming
beneficiary of the insured Buenaventura Cristor Ebrado and directing the payment
of the insurance proceeds to the estate of the deceased insured.
Issue:
Can a common-law wife named as beneficiary in the life insurance policy of a
legally married man claim the proceeds thereof in case of death of the latter
Held:
Article 2011 of the New Civil Code states: The contract of insurance is
governed by special laws. Matters not expressly provided for in such special laws
shall be regulated by this Code. And under Article 2012 of the same Code, any
person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a life insurance policy by the person who cannot make a
donation to him. In essence, a life insurance policy is no different from a civil
donation insofar as the beneficiary is concerned. Both are founded upon the same
consideration: liberality. A beneficiary is like a donee, because from the premiums
of the policy which the insured pays out of liberality, the beneficiary will receive the
proceeds or profits of said insurance.
The following donations shall be void:
Those made between persons who were guilty of adultery or concubinage at the
time of donation;
Those made between persons found guilty of the same criminal offense, in
consideration thereof;
Those made to a public officer or his wife, descendants or ascendants by reason of
his office.
In the case referred to in No. 1, the action for declaration of nullity may be
brought by the spouse of the donor or donee; and the guilt of the donee may be
proved by preponderance of evidence in the same action.
CASH SURRENDER VALUE (Section 227)
Manufacturing Life Insurance Corporation v Meer
G. R. No. L-61523. July 31, 1986
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
Page 68
closed the branch office at Manila during 1942 up to September 1945. In the course
of its operations before war, plaintiff issued a number of life insurance policies in
the Philippines containing stipulations referred to as non-forfeiture clauses. 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 plaintiffs
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 protest. It is the plaintiffs contention that when it made
premium loans or premium advances, as above stated, by virtue of the nonforfeiture 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, in the application of the automatic premium loan clause of
plaintiff-appellants policies, there is payment in money, notes, credit, or any
substitute for money
Held:
It may be urged that if the credit is paid out of the cash surrender value,
there were no new funds added to the companys assets. Cash surrender value as
applied to life insurance policy, is the amount of money the company agrees to pay
to the holder of the policy if he surrenders it and releases his claims upon it. The
more premiums the insured has paid the greater will be the surrender value; but
the surrender value is always a lesser sum than the total amount of premiums
paid.
The cash value or cash surrender value is therefore an amount which the insurance
company holds in trust for the insured to be delivered to him upon demand. It is
therefore a liability of the company to the insured. Now then, when the companys
credit for advances is paid out of the cash value or cash surrender value, that the
value and the companys liability is thereby dismissed pro tanto. Consequently, the
net assets of the insurance company increased corresponding; for it is plain
mathematics that the decease of a persons liabilities means a corresponding
increase in his net assets.
SURETYSHIP
Development Bank of the Philippines v Court of Appeals
G.R. No. 110053. March 21, 1994
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). The loan was
approved and released. From the proceeds of the loan, DBP deducted the amount
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of P1, 476.00 as payment for the MRI premium. The MRI premium of Dans, less the
DBP service fee was credited by DBP to the savings account of the DBP MRI Pool.
Accordingly, the DBP MRI Pool was advised of the credit. In 1987, Dans died of
cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI Pool.
On September 23, 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. DBP apprised Candida Dans of the disapproval of her late husbands
MRI application. DBP offered to refund the equivalent to the loan. The trial court
rendered a decision in favour of respondent 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.
Issue:
Whether or not DBP is liable
Held:
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 insurance of their
policy was forthcoming. Apparently, DBP had full knowledge that Danss 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.
Under Article 1897 of the Civil Code of the Philippines, the agent who acts
as such is not personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such
party sufficient notice of his powers.
CLAIMS SETTLEMENT (Section 243 and 244)
Tio Khe Chio v Court of Appeals
G.R. No. 76101-02. September 30, 1991
Facts:
On December 18, 1978, petitioner Tio Khe Chio imported one thousand
(1,000) bags of fishmeal valued at $36,000.30 from Agro Impex, avessel owned by
Far Eastern Shipping Company. Upon arrival in Manila, the goods were found to
have been damaged which rendered them useless. Petitioner filed a claim with
EASCO and Far Eastern Shipping. Both refused to pay. The trial court rendered
judgment ordering EASCO and Far Eastern Shipping to pay petitioner solidarity. The
judgment became final as to EASCO but the shipping company appealed to the
Court of Appeals and was absolved from liability.
Issue:
What interest rate should apply
Held:
Page 70
The interest rate that should apply is 6% and not 12%. In disputing the
aforesaid decision of the Court of Appeals, petitioner maintains that not only is it
unjust and unfair but it is also contrary to the correct interpretation of the fixing of
interest rates under Section 243 and 244 of the Insurance Code. And since
petitioners claims are based on an insurance contract, then it is the Insurance
Code which must govern and not the Civil Code.
CMLVI
Perla Compania De Seguro, Inc. v Hon. Constante Ancheta
G.R. No. L-49699. August 8, 1988
Facts:
A collision took place between the IH Scout in which private respondents
were riding and a Superlines bus along the national highway in Sta. Elena,
Camarines Norte, private respondents sustained physical injuries in varying degrees
of gravity. The bus was insured with petitioner for the amount of P50,000.00 as and
for passenger liability and P50, 000.00 as and for third party liability. The vehicle in
which private respondents were riding was insured with Malayan Insurance Co.
Respondent judge issued an order dated March 1, 1978 [Rollo, pp.40-41], the
pertinent portion of which stated:
The second incident is the prayer for an order of this court for the Insurance
Company, Perla Compania de Seguros, Inc., to pay immediately the P5, 000.00
under the no fault clause as provided for under Section 378 of the Insurance
Code, and finding that the requisite documents to be attached in the record, the
said Insurance Company is therefore directed to pay the plaintiffs (private
respondents herein) within five (5) days from receipt of this order.
Petitioner denied in its Answers its alleged liability no fault indemnity
provision [Rollo, pp.44] and likewise moved for the reconsideration of the order.
Petitioner held the position that under Sec. 378 of the Insurance Code, the insurer
liable to pay the P5,000.00 is the insurer of the vehicle in which private
respondents were riding, not petitioner, as the provision states that in the case of
an occupant of the vehicle, claim shall lie against the insurer of the vehicle in which
the occupant is riding, mounting or dismounting from.
Issue:
Whether or not petitioner is the insurer liable to indemnity private
respondents under Sec. 378 of the Insurance Code.
Held:
A reading of the provision, which is couched in straight-forward and
unambiguous language, the following rules on claims under the no fault indemnity
provision, where proof of fault or negligence is not necessary for payment of any
claim for death or injury to a passenger or a third party, are established:
A claim may be made against one motor vehicle only.
Page 71
If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the
vehicle. In which he is riding, mounting or dismounting from.
In any other case (i.e. if the victim is not an occupant of a vehicle), the claim lie
against the insurer of the directly offending vehicle.
In all cases, the right of the party paying the claim to recover against the owner of
the vehicle responsible for the accident shall be maintained.
The law is very clear the claim shall lie against the insurer of the vehicle in which
the occupant ** is riding, and no other. The claimant is not free to choose from
which insurer he will claim the no fault indemnity, as the law, by using the word
shall, makes mandatory that the claim be made against the insurer of the vehicle
in which the occupant is riding, mounting or dismounting from.
First Quezon City Insurance Corp. v Court of Appeals
G.R. No. 98414. February 28, 1993
Facts:
One of the buses of De Dios Marikina Transportation Company (DMTC) taking
the Pasay to Quezon City route was loading passengers moving in a crawling place.
When Jose Del Rosario boarded the bus it suddenly speed off as a consequence of
which Del Rosario lost his balance and fell on the bus suffering injuries. Jose Del
Rosario filed a complaint in the RTC of Manila against DMTC and its driver, the
latter being dropped because he could not be served with summons. DMTC filed a
third party complaint against First Quezon City Insurance Corporation. The RTC
ruled that first Quezon City Insurance is liable of P12, 000. DMT appealed and the
CA ruled that First Quezon City Insurance must indemnity DMTC the amount of P50,
090. Petition for review was filed by First Quezon City Insurance after its motion for
reconsideration was denied by the Court of Appeals.
Issue:
Whether or not the Insurance Company is liable for P50,000 and not P12,000
which is its liability for damages arising from death or bodily injury
Held:
The insurance company is liable for only P12,000. What does the P50,000
maximum liability per accident mean as against the P12,000 liability for death
injury? It means that the insurers liability for any single accident will not exceed
P50,000.00 regardless of the number of passengers killed or injured therein. For
example, if ten (10) passengers had been injured by the operation of the insured
bus, the insurers liability for the accident would not be P120,000.00 (at the rate of
P12,000.00 per passenfer) but would be limited to only P50,000.00 for the entire
accident, as provided in the insurance contract.
Perla Compania De Seguro v Ramolete
G. R. No. L-60887. November 13, 1991
Page 72
Facts:
A PUJ owned by Nelia Enriquez collided with a private jeep owned by Calixto
Palmes who died in the mishap. Primativa Palmes widow of Calixto filed a complaint
against Nelia Enriquez and the driver. CFI of Cebu ruled in favor of Primativa
ordering Nelia Enriquez to pay damages and attorneys fees. The judgment became
final and executor and a writ of execution was issued. The writ was unsatisfied.
Nelia enriquez was summoned and she declares that the PUJ is covered by third
party liability insurance by Perla Compania. Palmes filed a motion for garnishment
which was granted. On Certiorari, Perla contended that the insurance contract
cannot be subjected to garnishment or execution to satisfy the judgment because
Perla contended was not a party to the case and jurisdiction over the person was
not acquired by the CFI of Cebu.
Issue:
Whether or not the insurance contract cannot be subjected to garnishment
because the CFI did not acquire jurisdiction over the person of Petitioner
Held:
The SC held that in order that the trial court may validly acquire jurisdiction
to bind the person of the garnishee, it is not necessary that summons be served
upon him. The garnishee need not be impleaded as a party to the case. All that is
necessary for the trial court lawfully to bind the person of the garnishee or any
person who has in his possession credits belonging to the judgment debtor is
service upon him of the writ of garnishment. Through service of the wirt of
garnishment, the garnishee becomes a virtual party to, or a forced intervenor
in, the case and the trial court thereby acquires jurisdiction to bind him to
compliance with all orders and processes of the trial court with a view to the
complete satisfaction of the judgment of the court. Petition for Certiorari was
dismissed.
Government Service Insurance System v Court of Appeals
G.R. No. 162372. June 21, 1999
Facts:
A Chevrolet truck owned by the National Food Authority (NFA) and insured by
the Government Service Insurance System (GSIS) figured in an accident with
Toyota Tamaraw owned by Victor Uy. Ten passengers of the Tamaraw were injured
and another five died. Several complaints were filed which was consolidated and
tried by the CFI of Agusan. It ruled that GSIS is solidarily liable with the NFA. The
NFA appealed but the Court of Appeals affirmed the ruling of the trial court in toto.
GSIS filed for review on Certiorari in the Supreme Court after its Motion for
Reconsideration was denied by the CA.
Issue:
1. Whether or not GSIS is solidarily liable with NFA
2. Whether or not there was no cause of action against the GSIS for failure of
the victims to file aninsurance claim within 6 months from the accident
Page 73
Held:
1. On the first issue the SC held that GSIS cannot be solidarily liable with
NFA. The insurance contract provides for liability against third persons may sue
directly the insurer. But the liability of the insurer is to the extent of the insurance
policy. Hence, the insurer is directly liable o third person up to the extent of the
policy. The insurer cannot be solidarily liable with the tortfeasor because the
insurers liability is based on contract while that of the insured is based on tort.
2. On the second issue, the insurance company cannot raise laches or
prescription. The victims sent an notice of loss to the insurer which receipt was not
denied after it was presented in evidence in the trial court. Since it the proper
objection was not made, the defense of lashes and prescription has been deemed
waived.
JURISDICTION OF THE INSURANCE COMMISSION
Philippine American Life Insurance Co. v Ansaldo
G.R. No. 76452. July 26, 1994
Facts:
Ramon Paterno filed a letter of complaint against Philippine American Life
Insurance Company (PHILAMLIFE), alleging certain problems encountered by
agents, supervisors, managers and public consumers of the Philippine American Life
Insurance Company (Philamlife) as a result of certain practices by said company.
After some exchange letters, the Insurance Commissioner (Ansaldo) notified the
parties of a hearing on the validity of the Contract of agency base on the letter
complaint. Motion to Quash was filed by PHILAMLIFE one of the grounds of which is
jurisdiction over the subject matter.
Issue:
Whether or not the Insurance Commissioner has jurisdiction to hear the

validity of the contract of agency
Held:
The petition for Certiorari is granted by the Supreme Court. The Insurance
Commissioner has no jurisdiction on the subject matter of the contract of Agency.
The jurisdiction of the Insurance Commissioner as provided for in the insurance
code is limited to the authority to regulate the business as stated in Section 414 to
415 in relation to Section 2 of the Insurance code which defines the term doing an
insurance business writ:
The term doing an insurance business or transacting an insurance business,
which the meaning of this Code, shall include:
Making or proposing to make, as insurer, any insurance contract;
Page 74
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; (c) 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; (d) doing or proposing to do any business in substance equivalent to any
of the foregoing in a manner designed to evade the provisions of this Code.
Page 75

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INSURANCE (2S 2ndsem 2011-2012) Case Digest

CONSTRUCTION OF INSURANCE CASES

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making an arrest as an officer of the law, as contended, simply because he went

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The award of damages in case of unreasonable delay in the payment of

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It is clear that under the Insurance Code, in case of unreasonable delay in

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analyzed. What is avoided is double insurance, there is no double insurance in the

Yes, recovery is precluded under the general exemption clause. Howsoever

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Edillon v Manila Bankers Life Insurance Co.

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Legislative intent must be ascertained from a consideration of the statute as

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In construing the words used descriptive of a building insured, the greatest

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1) Although petitioners right to file a deficiency claim against San Miguel

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Petitioner Cebu Shipyard and Engineering Works (CSEW) is engaged in the

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Ang Ka Yu v Phoenix Assurance Co. Ltd.

Yes. A person having a mere right or possession of property may insure it to

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without knowledge of the applicant fills in false answers, either fraudulently or

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Moreover, a disclosure may have warranted a medical examination of the insured

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avail of out-patient benefits such as annual physical examinations, preventive

1. No. The health care agreement is in the nature of non-life insurance,

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Yes. As defined in the aforestated provision, which is now Section 60 of the

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reconsideration as insisted by respondents. Such was clearly not the meaning

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