Part 2_Case Digests

MHH_3.1_Insurance Law

M. Cash Surrender Value

(GR No. L-2910, 1951)

67) THE MANUFACTURERS LIFE INSURANCE CO., plaintiff-appellant, vs.
BIBIANO L. MEER, in the capacity as Collector of Internal
Revenue, defendant-appellee
Facts: The Manufacturers Life Insurance Company is duly registered and licensed
to engage in life insurance business in the Philippines for more than five years
until 1941. But due to the exigencies of the war it closed the branch office at
Manila during 1942 up to September 1945. In the course of its operations before
the war, plaintiff issued a number of life insurance policies in the Philippines
containing nonforfeiture clauses, viz:
8. Automatic Premium Loan This Policy shall not lapse for nonpayment of any premium after it has been three full years in
force, if, at the due date of such premium, the Cash Value of this
Policy and of any bonus additions and dividends left on
accumulation (after deducting any indebtedness to the Company
and the interest accrued thereon) shall exceed the amount of said
premium. In which event the company will, without further
request, treat the premium then due as paid, and the amount of
such premium, with interest from its actual due date at six per
cent per annum, compounded yearly, and one per cent,
compounded yearly, for expenses, shall be a first lien on this
Policy in the Company's favour in priority to the claim of any
assignee or any other person. The accumulated lien may at any
time, while the Policy is in force, be paid in whole or in part xxx
From January 1, 1942 to December 31, 1946 for failure of the insured under the
above policies to pay the corresponding premiums for one or more years, the
plaintiff's head office at Toronto, applied the provisions 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 CIR assessed P17,917.12
which plaintiff paid supra protest. The assessment was made pursuant to section
255 of the National Internal Revenue Code as amended, which partly provides:
SEC. 255. Taxes on insurance premiums There shall be
collected from every person, company, or corporation (except
purely cooperative companies or associations) doing insurance
business of any sort in the Philippines a tax of one per centum of
the total premiums collected . . . whether such premiums are paid
in money, notes, credits, or any substitute for money but
premiums refunded within six months after payment on account
of rejection of risk or returned for other reason to person insured
shall not be included in the taxable receipts . . . .

1
Plantiff: When there are premium loans or premium advances, as above stated,
by virtue of the non-forfeiture clauses, it did not collect premiums within the
meaning of the above sections of the law, and therefore it is not amenable to the
tax therein provided.

Issues:
1. WON premium advances made by plaintiff-appellant under the automatic
premium loan clause of its policies are 'premiums collected' by the Company
subject to tax.
2. WON in the application of the automatic premium loan clause of plaintiffappellant's policies, there is payment in money, notes, credits, or any
substitutes for money.
3. WON the collection of the alleged deficiency premium taxes constitutes double
taxation.
4. Whether the making of premium advances, granting for the sake of argument
that it amounted to collection of premiums, were done in Toronto, Canada, or in
the Philippines.
5. WON the fact that plaintiff-appellant was not doing business in the Philippines
from January 1, 1942 to September 30, 1945 exempts it from payment of
premium taxes corresponding to said period.
Held:
Illustration: Suppose that 'A', 30 years of age, secures a 20-year endowment
policy for P5,000 from plaintiff-appellant Company and pays an annual premium
of P250. 'A' pays the first ten yearly premiums amounting to P2,500 and on this
amount plaintiff-appellant pays the corresponding taxes under section 255 of the
NIRC. Suppose also that the cash value of said policy after the payment of the
10th annual premium amounts to P1,000. When on the 11th year the annual
premium fell due and the insured remitted no money within the month's grace,
the insurer treated the premium then over due as paid from the cash value, the
amount being a loan to the policyholder who could discharge it at any time with
interest at 6 per cent. The insurance contract, therefore, continued in force for the
11th year.
1. Yes. "How could there be such a collection" plaintiff argues "when as a result
thereof, insurer becomes a creditor, acquires a lien on the policy and is entitled
to collect interest on the amount of the unpaid premiums?" Wittingly or
unwittingly, the "premium" and the "loan" have been interchanged in the
argument. The insurer "became a creditor" of the loan, but not of the premium

Part 2_Case Digests

MHH_3.1_Insurance Law

that had already been paid. And it is entitled to collect interest on the loan, not
on the premium. In other words, "A" paid the premium for the eleventh year;
but in turn he became a debtor of the company for the sum of P250. This debt
he could repay either by later remitting the money to the insurer or by letting
the cash value compensate for it. The debt may also be deducted from the
amount of the policy should "A" die thereafter during the continuance of the
policy. The debt may also be deducted from the amount of the policy should
the insured die thereafter during the continuance of the policy.
There was an increase in the assets of the insurer. There was the new credit for
the advances made. True, the plaintiff could not sue the insured to enforce that
credit. But it has means of satisfaction out of the cash surrender value. If the
credit is paid out of the cash surrender value, there were no new funds added
to the company's assets. Cash surrender value "as applied to a 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 company's credit for advances is paid out of the
cash value or cash surrender value, that value and the company's liability is
thereby diminished pro tanto. The decrease of a person's liabilities means a
corresponding increase in his net assets.
2. Yes. The insurer agreed to consider the premium paid on the strength of
the automatic loan. The premium was therefore paid by means of a "note"
or "credit" or "other substitute for money" and the tax is due because
section 255 above quoted levies taxes according to the total premiums
collected by the insurer "whether such premiums are paid in
money, notes, credits or any substitute for money.

3. No. Appellant goes back to the illustration, "A failed to pay the premium on
the 11th year and the insurer advanced P250 from the cash value. If the
amount of P250 is deducted from the cash value of P1,000 of the policy,
then taxing this P250 anew as premium collected, as was done in the
present case, will amount to double taxation since taxes had already been
collected on the cash value of P1,000 as part of the P2,500 collected as
premiums for the first ten years." The trouble with the argument is that it
assumes all advances are necessarily repaid from the cash value. That is

2
true in some cases. In others the insured subsequently remits the
money to repay the advance and to keep unimpaired the cash reserve of
his policy. Of the total amount advanced (P1,069,255) P158,667 had
actually been repaid at the time of assessment notice. Besides, the
premiums paid and on which taxes had already been collected, were those
for the 10 years. The tax demanded is on the premium for the 11th year.
Further, there is no constitutional prohibition against double taxation.

4. Philippines. Appellant: as the advances of premiums were made in Toronto,

such premiums are deemed to have been paid there not in the
Philippines and therefore those payments are not subject to local
taxation. The law does not contemplate premiums collected in the
Philippines. Subscribing to this would make foreign insurers evade the tax
by contriving to require that premium payments shall be made at their
head offices. It is enough that the insurer is doing insurance business in
the Philippines, irrespective of the place of its organization or
establishment. In any event there is no constitutional prohibition against
double taxation.

5. Untenable. Although during those years the appellant was not open for
new business because its branch office was closed, still it was practically
and legally, operating in this country by collecting premiums on its
outstanding policies, incurring the risks and/or enjoying the benefits
consequent thereto, without having previously taken any steps indicating
withdrawal in good faith from this field of economic activity. Further, in
objecting to the payment of the tax, plaintiff-appellant never insisted,
before the BIR that it was not engaged in business in this country during
those years.

N. Suretyship
GR No. 109937, 1994
68) DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF
APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE
POOL, respondents
Facts:
In May 1987, Juan B. Dans, together with his family, applied for a loan of
P500,000 with DBP Basilan Branch. As the principal mortgagor, Dans, then 76
years of age, was advised by DBP to obtain a mortgage redemption insurance

Part 2_Case Digests

MHH_3.1_Insurance Law

with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). A loan, in the
reduced amount of P300,000, was approved and released by DBP. From the
proceeds of the loan, DBP deducted the amount of P1,476 as payment for the MRI
premium. Dans accomplished and submitted the "MRI Application for Insurance"
and the "Health Statement for DBP MRI Pool." 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. DBP apprised Candida
Dans of the disapproval of her late husband's MRI application. The DBP offered to
refund the premium of P1,476, but Candida refused to accept it, demanding
payment of the face value of the MRI or an amount equivalent to the loan. She,
likewise, refused to accept anex gratia settlement of P30,000, which the DBP later
offered.
Respondent Estate, through Candida Dans as administratrix, filed a complaint
with RTC against DBP and the insurance pool for "Collection of Sum of Money with
Damages." RTC decided 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. The CA
affirmed in toto.
Issue: WON DBP and DBP MRI Pool are liable.
Held: Yes and No. As to DBP MRI Pool, it did not approve the application of Dans.
There is also no showing that it accepted the sum of P1,476, which DBP credited
to its account with full knowledge that it was payment for Dan's premium. Under
the provisions of the Health Statement for DBP Pool, 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. There was no
perfected contract of insurance; hence, the DBP MRI Pool cannot be held liable on
a contract that does not exist.
As to DBP, it was wearing two legal hats: the first as a lender, and the second as
an insurance agent.
In dealing with Dans, DBP 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

3
that Dan's application was never going to be approved. The maximum age for MRI
acceptance is 60 years as clearly and specifically provided in the Group Mortgage
Redemption Insurance Policy. 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 DBP is not
authorized to accept applications for MRI when its clients are more than 60 years
of age. Knowing all the while that Dans was ineligible for MRI coverage because of
his advanced age, DBP exceeded the scope of its authority when it accepted
Dan's application for MRI by collecting the insurance premium, and deducting its
agent's commission and service fee. There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications for MRI. If the third person
dealing with an agent is unaware of the limits of the authority conferred by the
principal on the agent and he (third person) has been deceived by the nondisclosure thereof by the agent, then the latter is liable for damages to him.
Inasmuch as the non-disclosure of the limits of the agency carries with it the
implication that a deception was perpetrated on the unsuspecting client, the
provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines come into
play.
Article 19 Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
Article 20 Every person who, contrary to law, willfully or negligently
causes damage to another, shall indemnify the latter for the same.
Article 21 Any person, who willfully causes loss or injury to another
in a manner that is contrary to morals, good customs or public policy
shall compensate the latter for the damage.
The DBP's liability, however, cannot be for the entire value of the insurance policy.
To assume that were it not for DBP's concealment of the limits of its authority,
Dans would have secured an MRI from another insurance company, and therefore
would have been fully insured by the time he died, is highly speculative.
Considering his advanced age, there is no absolute certainty that Dans could
obtain an insurance coverage from another company. It must also be noted that
Dans died almost immediately, i.e., on the nineteenth day after applying for the
MRI, and on the twenty-third day from the date of release of his loan. One is
entitled to an adequate compensation only for such pecuniary loss suffered by
him as he has duly proved. Damages, to be recoverable, must not only be
capable of proof, but must be actually proved with a reasonable degree of
certainty. Speculative damages are too remote to be included in an accurate
estimate of damages.

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MHH_3.1_Insurance Law

WHEREFORE, the decision of the Court of Appeals is MODIFIED and petitioner DBP
is ORDERED: (1) to REIMBURSE respondent Estate of Juan B. Dans the amount of
P1,476 with legal interest from the date of the filing of the complaint until fully
paid; and (2) to PAY said Estate P50,000 as moral damages and P10,000 as
attorney's fees. With costs against petitioner.
Note: Wa bitaw ko kasabot ngano ni-fall under Suretyship ni siya nga topic, kay
wa jud na namention maski kausa. Basin ang pgconstitute sa Mortgage
Redemption Insurance Contract? Which in this case was not perfected.

4
Held: 6%.
Section 243 of the Insurance Code provides:
xxx Refusal or failure to pay the loss or damage within the
time prescribed herein will entitle the assured to collect interest
on the proceeds of the policy for the duration of the delay at the
rate of twice the ceiling prescribed by the Monetary
Board, unless such failure or refusal to pay is based on the
ground that the claim is fraudulent.

O. Claims Settlement
GR No. 76101-02, 1991
69) TIO KHE CHIO, petitioner, vs. THE HONORABLE COURT OF APPEALS and
EASTERN ASSURANCE AND SURETY CORPORATION, respondents
Facts: On December 18, 1978, Tio Khe Chio imported 1,000 bags of fishmeal
valued at $36,000.30 from Agro Impex, Texas, USA. The goods were insured with
respondent EASCO and shipped on board the M/V Peskov, a vessel owned by Far
Eastern Shipping Company. When the goods reached Manila, they were found to
have been damaged by sea water which rendered the fishmeal useless. Petitioner
filed a claim with EASCO and Far Eastern Shipping. Both refused to pay. Petitioner
sued them before the then CFI for damages. EASCO, as the insurer, filed a
counterclaim against the petitioner for the recovery of P18,387.86 representing
the unpaid insurance premiums.
CFI ordered EASCO and Far Eastern Shipping to pay petitioner solidarily the sum
of P105,986.68 less the amount of P18,387.86 for unpaid premiums with interest
at the legal rate from the filing of the complaint, the sum of P15,000.00 as
attorney's fees and the costs. The judgment became final as to EASCO but the
shipping company appealed to the CA and was absolved from liability by the said
court.
The trial court, upon motion by petitioner, issued a writ of execution against
EASCO. The sheriff enforcing the writ reportedly fixed the legal rate of interest at
12%. Respondent EASCO moved to quash the writ alleging that the legal interest
to be computed should be 6%. The trial court denied EASCO's motion. EASCO
then filed a petition for certiorari and prohibition before the Court of Appeals.
CA held that the interest that the private respondent is entitled to collect from the
petitioner is hereby reduced to 6% per annum.
Issue: What is the legal rate of interest to be imposed in actions for damages
arising from unpaid insurance claims? Petitioner Tio Khe Chio claims that it should
be 12% pursuant to Articles 243 and 244 of the Insurance Code while EASCO
claims that it should be 6% under Article 2209 of the Civil Code.

Section 244 of the aforementioned Code also provides:

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 undeniable 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 xxx
The CA made no finding that there was an unjustified refusal or withholding of
payment on petitioner's claim. In fact, the CA had this to say:
xxx EASCO's refusal to settle the claim to Tio Khe Chio was based
on some ground which, while not sufficient to free it from liability
under its policy, nevertheless is sufficient to negate any assertion
that in refusing to pay, it acted unjustifiably. xxx The case posed
some genuine issues of interpretation of the terms of the policy
as to which persons may honestly differ. This is the reason the
trial court did not say EASCO's refusal was unjustified.
So the aforecited sections of the Insurance Code are not pertinent to the instant
case. They apply only when the court finds an unreasonable delay or refusal in
the payment of the claims.
Neither does Circular No. 416 of the Central Bank which took effect on July 29,
1974 pursuant to PD 116 (Usury Law) which raised the legal rate of interest from
6% to 12% apply to the case at bar as contended by the petitioner. The adjusted
rate mentioned in the circular refers only to loans or forbearances of money,
goods or credits and court judgments thereon but not to court judgments for

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MHH_3.1_Insurance Law

damages arising from injury to persons and loss of property which does not
involve a loan.

documents to prove the loss. RTC ruled in favor of Usiphil. CA modified decision as
to #1 below, but affirmed in toto the others: Finman is

The legal rate of interest is 6% per annum, and not 12%, where a
judgment award is based on an action for damages for personal injury,
not use or forbearance of money, goods or credit. The interest by way of
damages is governed by Article 2209 of the Civil Code, which reads:

1. To pay the plaintiff the sum of P842,683.40 and to pay 24%

interest per annum from 03 May 1985 until fully paid;
2. To pay the plaintiff the sum equivalent to 10% of the principal
obligation as and for attorney's fees, plus P1,500.00 per court
appearance of counsel;

If the obligation consists in the payment of a sum of money and

the debtor incurs in delay, the indemnity for damages, there
being no stipulation to the contrary, shall be the payment of
interest agreed upon, and in the absence of stipulation, the legal
interest which is six per cent per annum.
Since the contending parties did not allege the rate of interest stipulated in the
insurance contract, the legal interest was properly pegged by the Appellate Court
at 6%.

3. To pay the plaintiff the amount of P30,000.00 as exemplary

damages in addition to the actual and compensatory damages
awarded xxx
Issues:
1. Was there compliance by Usiphil of Condition No. 13?
2. Was the 24% interest rate proper?
Held:

GR No. 138737, 2001

70) FINMAN GENERAL ASSURANCE CORPORATION, petitioner, vs. COURT
OF APPEALS and USIPHIL INCORPORATED, respondents
Facts: Usiphil Inc. insured certain properties (office, furniture, fixtures, shop
machinery and other trade equipment) from fire with Finman (then doing business
under the name Summa Insurance Corporation). Sometime in 1982, Usiphil filed
an insurance claim amounting to P987,126.11 for the loss of the insured
properties due to fire. Finman appointed Adjuster H.H. Bayne to undertake the
valuation and adjustment of the loss. Usiphil submitted its Sworn Statement of
Loss and Formal Claim, signed by Reynaldo Cayetano, Usiphils Manager, and a
Proof of Loss signed by its Accounting Manager Pedro Palallos and countersigned
by H.H. Bayne's Adjuster F.C. Medina.
Palallos personally followed-up private respondent's claim with Finmans President
Joaquin Ortega. During their meeting, Ortega instructed their Finance Manager,
Rosauro Maghirang, to reconcile the records. Thereafter, Maghirang and Palallos
signed a Statement/Agreement, dated February 28, 1985, which indicated that
the amount due respondent was P842,683.40.
Despite repeated demands, petitioner refused to pay the insurance claim. Thus,
private respondent was constrained to file a complaint against petitioner for the
unpaid insurance claim. Finman maintained that Usiphil cannot recover because it
failed to comply with Policy Condition No. 13 regarding the submission of certain

1. Yes. Both the trial court and the CA concur in holding that private respondent
had substantially complied with Policy Condition No. 13. Requirements under
which were allegedly communicated to private respondent in the two letters
of H.H. Bayne to private respondent. The letter stated, among others:
To be able to expedite adjustment of this case, please submit to
us without delay the following documents and/or particulars:
For FFF, Machineries/Equipment Claims and For Stock Claim
1. Your formal claim (which may be accomplished in the enclosed
form) accompanied by a detailed inventory of the documents
submitted.
2. Certification from the appropriate government office indicating
the date of the occurrence of the fire, the property involved, its
location and possible point of origin.
3. Proof of premium payment.
4. Three
color
photographs
of
the
debris
properly
captioned/identified/dated and initiated by the claimant at the
back.
Though our adjusters will also take photographs in the manner
prescribed above, please do not rely on his photographs in the
preservations of your evidence of loss thru pictures.

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MHH_3.1_Insurance Law

5. Copies of purchase invoices xxx

Factual findings and conclusions of the trial court and the CA are entitled to great
weight and respect, and will not be disturbed on appeal in the absence of any
clear showing that the trial court overlooked certain facts or circumstances which
would substantially affect the disposition of the case. There is no cogent reason to
deviate from this salutary rule in the present case.
Policy Condition No. 13 reads:
The insured shall give immediate written notice to the Company
of any loss, protect the property from further damage, forthwith
separate the damaged and undamaged personal property, put it
in the best possible order, furnish a complete inventory of the
destroyed, damaged, and undamaged property, showing in detail
quantities, costs, actual cash value and the amount of loss
claimed; AND WITHIN SIXTY DAYS AFTER THE LOSS, UNLESS SUCH
TIME IS EXTENDED IN WRITING BY THE COMPANY, THE INSURED
SHALL RENDER TO THE COMPANY A PROOF OF LOSS, signed
and sworn to by the insured, stating the knowledge and belief of
the insured as to the following: the time and origin of the loss, the
interest of the insured and of all others in the property, the actual
cash value of each item thereof and the amount of loss thereto,
all encumbrances thereon, all other contracts of insurance,
whether valid or not, covering any of said property, any changes
in the title, use, occupation, location, possession or exposures of
said property since the issuing of this policy by whom and for
what purpose any buildings herein described and the several
parts thereof were occupied at the time of loss and whether or
not it then stood on leased ground, and shall furnish a copy of all
the descriptions and schedules in all policies, and if required
verified plans and specifications of any building, fixtures, or
machinery destroyed or damaged. The insured, as often as may
be reasonably required, shall exhibit to any person designated by
the company all that remains of any property herein described,
and submit to examination under oath by any person named by
the Company, and subscribe the same; and, as often as may be
reasonably required, shall produce for examination all books of
account, bills, invoices, and other vouchers or certified copies
thereof if originals be lost, at such reasonable time and place as
may be designated by the Company or its representative and
shall permit extracts and copies thereof to be made.
No claim under this policy shall be payable unless the terms of
this condition have been complied with.

6
Usiphil, after the occurrence of the fire, immediately notified petitioner thereof.
Thereafter, private respondent submitted the following documents: (1) Sworn
Statement of Loss and Formal Claim and; (2) Proof of Loss. The submission of
these documents, to the Court's mind, constitutes substantial compliance with
the above provision. As regards the submission of documents to prove
loss, substantial, not strict, compliance with the requirements will
always be deemed sufficient.
In any case, Finman (formerly Summa Insurance) itself acknowledged its liability
when through its Finance Manager, Rosauro Maghirang, it signed the document
indicating that the amount due Usiphil is P842,683.40. Even assuming that
plaintiff-appellee indeed failed to submit certain required documents as proof of
loss per Section 13, such violation was waived by the insurer Summa when it
signed the document-breakdown of the amount due to plaintiff-appellee on the
insurance claim. By such act, defendant-appellant acknowledged its liability under
the insurance policy. Finman alleges that Maghirang was without authority to sign
and therefore without authority to bind Finman. Untenable. At a meeting between
Usiphil's corporate president Pedro Pallalos and Finmans Joaquin Ortega, the
latter summoned Rosauro Maghirang to reconcile the claims of plaintiff-appellee.
One who clothes another with apparent authority as his agent and holds him to
the public as such, cannot later be allowed to deny the authority of such person
to act as his agent when such third person entered into the contract in good faith
and in an honest belief that he is such agent.
2. Yes. It is authorized by Sections 243 and 244 of the Insurance Code.
SECTION 243. The amount of any loss or damage for which an
insurer may be liable, under any policy other than life insurance
policy, shall be paid within thirty days after proof of loss is
received by the insurer and ascertainment of the loss or damage
is made either by agreement between the insured and the insurer
or by arbitration; but if such ascertainment is not had or made
within sixty days after such receipt by the insurer of the proof of
loss, then the loss or damage shall be paid within ninety days
after such receipt. Refusal or failure to pay the loss or damage
within the time prescribed herein will entitle the assured to collect
interest on the proceeds of the policy for the duration of the delay
at the rate of twice the ceiling prescribed by the Monetary
Board, unless such failure or refusal to pay is based on the
ground that the claim is fraudulent.
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

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MHH_3.1_Insurance Law

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 fortythree, 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 reasonable delay in payment.
Notably, under Section 244, a prima facie evidence of unreasonable delay in
payment of the claim is created by the failure of the insurer to pay the claim
within the time fixed in both Sections 243 and 244. Further, Section 29 of the
policy itself provides for the payment of such interest:
Settlement of claim clause. The amount of any loss or damage for
which the company may be liable, under this policy shall be
paid within thirty days after proof of loss is received by
the company and ascertainment of the loss or damage is
made either in an agreement between the insured and the
company or by arbitration; but if such ascertainment is not had or
made within sixty days after such receipt by the company of the
proof of loss, then the loss or damage shall be paid within ninety
days after such receipt. Refusal or failure to pay the loss or
damage within the time prescribed herein will entitle the
assured to collect interest on the proceeds of the policy
for the duration of the delay at the rate of twice the
ceiling prescribed by the Monetary Board unless such failure
or refusal to pay is based on the grounds (sic) that the claim is
fraudulent.
The policy itself obliges petitioner to pay the insurance claim within 30 days after
proof of loss and ascertainment of the loss made in an agreement. The amount
due private respondent was P842,683.40 on April 2, 1985. Finman had until May
2, 1985 to pay Usiphils insurance. For its failure to do so, the CA and the trial
court rightfully directed petitioner to pay, inter alia, 24% interest per annum.

P. Compulsory Motor Vehicle Liability Insurance

GR No. L-49699, 1988
71) PERLA COMPANIA de SEGUROS, INC., petitioner, vs. HON. CONSTANTE
A. ANCHETA, Presiding Judge of the Court of First Instance of Camarines
Norte, Branch III, ERNESTO A. RAMOS and GOYENA ZENAROSA-RAMOS,
for themselves and as Guardian Ad Litem for Minors JOBET, BANJO,
DAVID and GRACE all surnamed RAMOS, FERNANDO M. ABCEDE, SR., for
himself and Guardian Ad Litem for minor FERNANDO G. ABCEDE, JR.,
MIGUEL JEREZ MAGO as Guardian Ad Litem for minors ARLEEN R. MAGO,
and ANACLETA J. ZENAROSA, respondents
Facts: On December 27, 1977, the IH Scout (in which private respondents were
riding) collided with a Superlines bus along the national highway in Sta. Elena,
Camarines Norte. Private respondents sustained physical injuries in varying
degrees of gravity. Thus, they filed with the CFI a complaint for damages against
Superlines, the bus driver and petitioner, the insurer of the bus. The bus was
insured with Perla Compania for P50,000 as and for passenger liability and
P50,000.00 as and for third party liability. The IH Scout was insured with Malayan
Insurance Co.
Even before summons could be served, respondent judge issued an order:
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 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 5 days from receipt of this
order.
Perla denied in its Answer its alleged liability under the "no fault indemnity"
provision. It held that under Sec. 378 of the Insurance Code, the insurer liable to
pay the P5,000 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 a
vehicle, claim shall lie against the insurer of the vehicle in which the occupant is
riding, mounting or dismounting from." Respondent judge, however, denied
reconsideration. The judge ordered the issuance of a writ of execution. Hence, the
instant petition praying principally for the annulment and setting aside of
respondent judge's orders. SC issued TRO.
Issue: WON Perla is the insurer liable to indemnify private respondents under
Sec. 378 of the Insurance Code.

Part 2_Case Digests

MHH_3.1_Insurance Law

Held: No. Irrespective of whether or not fault or negligence has with the driver of
the Superlines bus, as private respondents were not occupants of the bus, they
cannot claim the "no fault indemnity" provided in Sec. 378 from Perla. The claim
should be made against the insurer of the vehicle they were riding (i.e., Malayan).
This is very clear from the law. In ordering Perla to pay private respondents the
"no fault indemnity," respondent judge gravely abused his discretion in a manner
that amounts to lack of jurisdiction. The issuance of the corrective writ of
certiorari is therefore warranted.
The key to the resolution of the issue is Sec. 378, which provides:
Any claim for death or injury to any passenger or third party
pursuant to the provisions of this chapter shall be paid without
the necessity of proving fault or negligence of any kind. Provided,
that for purposes of this section
(i) The indemnity in respect of any one person shall not exceed
five thousand pesos;
(ii) The following proofs of loss, when submitted under oath, shall
be sufficient evidence to substantiate the claim:
(a)Police report of accident, and
(b)Death certificate and evidence sufficient to establish the
proper payee, or
(c)Medical report and evidence of medical or hospital
disbursement in respect of which refund is claimed;
(iii) Claim may be made against one motor vehicle only. In the
case of an occupant of a vehicle, claim shall lie against
the insurer of the vehicle in which the occupant is riding,
mounting or dismounting from. In any other case, claim
shall 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.

8
From a reading of the provision, 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:
1. A claim may be made against one motor vehicle only.
2. 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.
3. In any other case (i.e. if the victim is not an occupant of a vehicle), the
claim shall lie against the insurer of the directly offending vehicle.
4. 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 it mandatory that the claim be made
against the insurer of the vehicle in which the occupant is riding, mounting or
dismounting from.
That said vehicle might not be the one that caused the accident is of no moment
since the law itself provides that the party paying the claim under Sec. 378 may
recover against the owner of the vehicle responsible for the accident. This is
precisely the essence of "no fault indemnity" insurance which was introduced
to and made part of our laws in order to provide victims of vehicular
accidents or their heirs immediate compensation, although in a limited
amount, pending final determination of who is responsible for the
accident and liable for the victims' injuries or death. In turn, the "no
fault indemnity" provision is part and parcel of the Insurance
Code provisions on compulsory motor vehicle liability insurance [Sec.
373-389] and should be read together with the requirement for compulsory
passenger and/or third party liability insurance [Sec. 377] which was mandated in
order to ensure ready compensation for victims of vehicular accidents.