1.

WHITE GOLD MARINE SERVICES INC vs PIONEER INSURANCE AND SURETY CORPORATION ; STEAMSHIP MUTUAL UNDERWRITING
ASSOCIATION (BERMUDA) LTD
> Insurance contract : PD612 S2(2) : whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown
or contingent event
> Nature of the promise, the act required to be performed and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances
under which the performance becomes requisite determines WON a contract is insurance, not by what it is called.

WGMSI : procured a protection and indemnity coverage for its vessels from SMUA(B) Ltd. through PISC
PISC issued a certificate of entry and acceptance in favor of WGMSI
PISC also issued receipts evidencing payment for the coverage
however failed to fully pay its accounts, causing SMUA to refuse renewal of the coverage
SMUA : filed a case against for collection of sum of money to recover s unpaid balance
WGMSI : filed an [administrative] complaint before the IC
SMUA violated PD612 S186 [capital and asset requirements + IC certification] and S187 [IC certification of authority]
PISC violated PD612 S299 [IC license for insurance brokers] S300 [Entity acting as a broker shall be liable as insurance agent] and
S301 [Entity acting as a broker shall be liable as insurance broker]
IC dismissed s complaint
No need for SMUA to obtain a license since it was not engaged in the insurance business
o
SMUA was a Protection and Indemnity Club
No need for PISC to obtain another license as insurance agent or broker since SMUA was not engaged in the insurance business
o
PISC was already licensed, a separate license solely as an agent/broker of SMUA would be superfluous
CA affirmed decision of the IC
Protection and Indemnity Club is different from conventional insurance ; PISC merely acted as a collection agent for SMUA
and admit that
SMUA is a protection and indemnity club and that it had no license to conduct business locally ; thus PISC is its resident agent
o
Relationship is reflected by ICs certification
I. WON SMUA [a P&I Club] is engaged in the insurance business? YES ; IT IS A MUTUAL INSURANCE COMPANY ENGAGED IN
MARINE INSURANCE BUSINESS
: SMUA is engaged in the insurance business
Hyposung Maritime Co. Ltd vs CA : P&I Club = an association composed of shipowners in general who band together for the specific
purpose of providing insurance cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of
third parties
SMUAs primary purpose is to solicit and provide protection and indemnity coverage ; engaging PISC as its agent
SMUA : it is not engaged in the insurance business
Merely an association of vessel owners who come together to provide mutual protection against liabilities incidental to shipowning
Hyposung Maritime Co. Ltd vs CA is not applicable because the issue in the case involves the jurisdiction of the court over
Hyposung
PD612 S2(2) (2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code, shall include
(a) Making or proposing to make, as insurer, any insurance contract;
(b) 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.
In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that
no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing or
transacting of an insurance business.

Nature of the promise, the act required to be performed and the exact nature of the agreement in the light of the occurrence, contingency,
or circumstances under which the performance becomes requisite determines WON a contract is insurance, not by what it is called.
Insurance contract = contract of indemnity
PD612 S2(1) x x x one undertakes for a consideration to indemnify another against loss, damage or liability arising from
an unknown or contingent event
Marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to marine adventure
-

PD612 S99 lists the coverage of marine insurance

o
SS(1) Insurance against loss or damage to:

Vessels, craft, aircraft, vehicles, goods, freights, cargos, merchandise, effects, disbursements, profits, moneys, securities x x x and
all other kinds of property x x x in respect to x x x any and all risks of navigation, transit or transportation, or while being assembled,
packed, x x xor similarly prepared for shipment x x x

Person or property in connection with x x x marine, inland marine, transit or transportation insurance, including x x x loss or damage
x x x [in] construction, repair, operation, maintenance, or use of the subject matter

Precious stones, jewels, jewelry, precious metals, whether in the course of transportation or otherwise

Bridges, tunnels and other instrumentalities of transportation and communication [excluding buildings, their furniture and fixings x x
x] piers, wharves, docks and slips, and other aids of navigation and transportation, including dry docks and marine railways, dams x
x x waterway controls

SS(2)Marine protection and indemnity insurance against or against legal liability of the insured for loss, damage, or expense incident to
ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft, or instrumentality in use of ocean or inland
waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person

Mutual insurance company = a cooperative enterprise where the members are both the insurer and the insured
Members all contribute, by a system of premiums or assessment
Aggregate fund used to pay for liabilities and losses
Profits are divided among themselves in proportion to their interest
Mutual insurance associations / Clubs provides three types of coverage
War risks = covers damage due to acts of war [invasion, insurrection, rebellion and hijacking ; weapons of mass destruction]
Defense costs = club provides [legal] defense [expense] to its insured-members
Protection and indemnity = insurance against third party liability ; 3 rd party is anyone other than the P&I Club and its members
o
Thus by definition, SMUA is a mutual insurance association engaged in the marine insurance business
: SMUA is doing business without the requisite certificate of authority mandated by PD612 S187
It maintains a resident agent [PISC] to solicit insurance and to collect payments in its behalf
SMUA even renewed its P&I Club cover until it was cancelled due to non-payment of the calls
Thus, SMUA or through its agent PISC must secure a license from the insurance commission
o
Contract of insurance involves public interest making State regulation a necessity ; PD612 S187 [IC Certificate of Authority]
II. WON PISC needs a license as an insurance agent/broker of SMUA? YES ; ALTHOUGH PISC HAS THE CERTIFICATE OF
AUTHORITY / LICENSE TO CONDUCT INSURANCE BUSINESS, PD612 S299 REQUIRES A SEPARATE LICENSE FROM THE IC TO ACT
AS AN AGENT
: PISC is the resident agent of SMUA as evidenced by the certificate of registration issued by the IC
Licensed to do or transact business by virtue of the certificate of authority issued by the same agency
However, PISC does not have a separate license to be an agent/broker of SMUA
: PISC is already licensed as an insurance company, but it still needs a separate license to act as insurance agent for SMUA
PD 612 S299 x x x No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing business
in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner, which must be renewed annually on
the first day of January, or within six months thereafter.

: The Court cannot grant WGMSIs request for the revocation of PISCs COA and removal of its directors and officers because it is not the
proper forum

2. VERENDIA, RAFAEL vs CA ; FIDELITY & SURETY CO. of the Philippines [Fire policy ; burned-down residential building; over-insurance ;
uberrimae fidei]
> Insurance Contracts require uberrimae fidei [utmost good faith]
> Terms and conditions of the insurance contract are the measure of the insurers liability
: Insured his residential building located in Tulip Drive, Beverly Hills, Antipolo, Rizal
With P FSCP Fire Insurance Policy for P385K ; effective between 1980/06/23 to 1981/06/23 with Monte de Piedad Savings Bank as
the beneficiary
With Country Bankers Insurance [CBI] for P56K ; expires on 1981/05/12
With Development Insurance [DI] for P400K ; expires on 1981/06/30
1980/12/28 : Insured property was completely destroyed by the fire
informed PFSCP but despite demands the latter refused payment under its policy
o
thus filed a complaint with COFI Quezon City praying for the payment of the P385K sum + legal interest
o
FSCP : policy was avoided by reason of over-insurance + maliciously represented that the building at the time of fire was
leased to a certain Garcia, Roberto on 1980/06/25 when it actually was leased to Garcia, Marcelo
1983/05/24 COFI : ruled in favor of PFSCP sustaining the defenses it set up
Insurance Policy P3 was violated by when it failed to inform P of his other insurance coverages with CBI and DI
1986/03/31 IAC reversed the COFI ruling
No misrepresentation concerning the lease contract [Marcelo signed in the name of Roberto Garcia]
Insurance Policy P3 was waived by P FSCP when it attempted to settle the claim of
o
1986/04/04 : P received a copy of the IAC decision which will reach finality by 1986/04/19
o
1986/04/21 : P Filed a motion to extend for 3 days within which to file its MFR [since 1986/04/19 fell on a Saturday and the
following day was a Sunday], which was later granted by the IAC on 1986/04/30
o
1986/04/24 : P filed its MFR but was denied on 1986/10/21
PROCEDURAL ISSUE
Garcia vs Buenaventura [1944] : Pendency of a motion for extension of time to perfect an appeal does not suspend the running of the period
sought to be extended
However ROC do not expressly prohibit the filing of a motion for extension of time to file a motion for reconsideration in regard a final
order or judgment ; thus resulting in conflicting opinions between magistrates
Habaluyas Enterprises, Inc vs Japson [1986] : Rule shall be strictly enforced that no motion for extension of time to file a motion for new trial
or reconsideration shall be filed
Instant case came before formal prescription of the new rule
I. WON the contract of lease submitted by constituted a false declaration which would forfeit his benefits under S13 of the
policy? YES ; TERMS AND CONDITIONS CONSTITUTE THE MEASURE OF INSURERS LIABILTY ; S13 THEREOF PROVIDES ALL
BENEFITS ARE FORFEITED WHEN ANY CLAIM IS MADE WITH FRAUD] + VIOLATION OF THE PRINCIPLE OF UBERRIMAE FIDAE
[Utmost good faith]
GENERAL RULE : In Review for Certiorari under ROC R45, Court is limited to the review of errors of law
EXCEPTION :
(1) When the conclusion is a finding grounded entirely on speculation, surmises, or conjectures
(2) When the inference made is manifestly absurd, mistaken, or impossible
(3) When there is grave abuse of discretion in the appreciation of facts
(4) When the judgment is premised on a misapprehension of facts
(5) When the findings of fact are conflicting [Findings of COFI and IAC are conflicting]
(6) When the Court of Appeals in making its findings went beyond the issues of the case and the same are contrary to the admissions of both
appellant and appellee
Contract of lease submitted by to support his claim was entered between and Garcia, Roberto on 1980/06/25, a few days after
effectivity of the insurance contract
However, on the day of the fire, an investigative report prepared by Patrolman Buenviaje stated that the building had no occupant
and that Garcia was renting another portion of the compound
Garcia disappeared after the fire, and only on 1981/10/09 was he located by an adjuster
Garcia executed an affidavit before the National Intelligence and Security Authority [NISA] : he was not the lessee of s house ;
signature was forged
: latter admitted that it was Roberts cousin Marcelo Garcia who was paying rent all the while [did not provide reason for the ruse]
PFSCO : shifted blame to lessee ; Inflated the value of the property by the alleged monthly rental of P6,500 per month
Provincial Assessor of Rizal : Fair Market Value of only P40,300
Insured the property for the total of P900K and created a dead-end for the adjuster by the disappearance of Robert Garcia

 Contract of insurance is a contract of indemnity

Contract is the law between the party
Terms and conditions constitute the measure of insurers liability and compliance therewith is a condition precedent to the insureds
right to recover
Also a contract of adhesion [terms and conditions are set by one party ; other party has little or no ability to negotiate
more favorable terms = take it or leave it]
o
Thus should be liberally construed in favor of the insured and strictly against the insurer which usually
prepares it
However, since used a false lease contract to support his claim, the terms of the policy should be strictly construed
against the insured .
failed to live by the terms of the policy, specifically S13 [All benefits shall be forfeited if the claim be in any respect fraudulent, or if
any false declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone
acting in his behalf to obtain any benefit under the policy]
by presenting a false lease contract, reprehensibly disregarded the principle that contracts are uberrimae fidae and demand the
most abundant good faith
II. WON in submitting the subrogation receipt in evidence, PFSCP had in effect agreed to settle s claim in the amount
stated in the receipt? NO ; P DID NOT SIGN IT ; RECEIPT FURTHER STATES THAT ALREADY RECEIVED THE AMOUNT WHICH IS
CONTRADICTORY TO HIS PRESENT CLAIM
Ps submission of the subrogation receipt does not bind P to a mutual agreement to settle s claim in consideration of the amount of
P142,685.77
Although receipt appears to have been a filled-up form of P, no representative of P had signed it
Receipt is incomplete
o
Blank spaces for witnesses + no address provided
o
Receipt states that already received the amount [which he had not because filed a claim]

3. RIZAL SURETY & INSURANCE COMPANY vs CA and TRANSWORLD KNITTING MILLS, INC [Fire insurance policy ; four-span lofty
storey building ; annex building ; Adhesion ]
> Terms of the policy constitute the measure of the insurer's liability
1980/03/13 : Rizal Insurance issued a Fire Insurance Policy in favor of P Transworld initially for P1M which was later increased to P1.5M
[1980/08/14 to 1981/03/13]
"On stocks of finished and/or unfinished products, raw materials and supplies of every kind and description, the properties of the Insureds and/or held by them in
trust, on commission or on joint account with others and/or for which they (sic) responsible in case of loss whilst contained and/or stored during the currency of this
Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound at MAGDALO STREET, BARRIO UGONG, PASIG, METRO
MANILA, PHILIPPINES, BLOCK NO. 601. x x x x x x x x x
Said building of four-span lofty one storey in height with mezzanine portions is constructed of reinforced concrete and hollow blocks and/or concrete under
galvanized iron roof and occupied as hosiery mills, garment and lingerie factory, transistor stereo assembly plant, offices, warehouse and caretaker's quarters. x x
x

P also insured the same property with New India Assurance Company Ltd [NIAC, Ltd]
1981/01/12 : A fire broke out in Ps compound
Middle portion of its four-span building was razed ; Left and right sections were partly gutted
A 2-storey building [behind the four-span building] with fun and amusement machines and spare parts are stored was also destroyed
by the fire
1982/05/26 P filed its claim against and NIAC, Ltd to no avail thus prompting it to file an action for collection with COFI, Rizal
RSIC and NIAC to pay P2,747,867.00 + legal interest ; P400K as AFs + ED + P50K Expenses of Litigation + Cost of suit
: Insurance policy only covered the contents of the four-span building which was partly burned and not the damage caused to the 2-storey
building
1990/01/04 COFI : Dismiss the case against NIAC, Ltd ; to pay P P826,500 [actual value of the losses] ; costs against
1993/07/15 CA : Modified COFI ruling
NIAC, Ltd to pay P1,818,604.19 [Out of its policy claim of P5.8M]
o
NIAC, Ltd appealed to the SC allegedly because P had no insurable interest in the razed 2-storey building

SC denied the appeal with finality

RSIC to pay P470,328.67 [Out of the its policy claim of P1.5M]
o
Both and P interposed a MFR before the CA

CA modified its earlier ruling by imposing legal interest

I. WON RSICs fire policy covered the two-storey building? YES ; 2-STOREY BUILDING IS COVERED BY THE TERMS AND
CONDITIONS OF THE POLICY
: policy protected only the contents of the main building [four-span] and did not include those stored in the 2-storey annex building
P : Annex building was not an annex but an integral part of the four-span building therefore covered by the same policy
Fire Insurance Policy : xxx contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the
buildings situate (sic) within own Compound xxx
Clearly, the policy is not limited to what were stored in the four-span building
COFI correctly provided the concurring requirements that would place the destroyed fun and amusement machines in the coverage of
the policy
o
That the property were contained or stored in the areas occupied by P
o
That said areas must form part of the building described in the policy
Factual findings of the CA are conclusive on the parties and not reviewable by the Court
Carries more weight when affirmed by the findings of fact by the lower court
o
Both COFI and CA found that the so-called annex were not annex buildings but integral and inseparable from the four-span
building
o
Thus the machines and spare parts stored within were covered by the policy
Letter-report of the Manila Adjusters and Surveyors Company [which cited and invoked] described the annex building as:

2-storey building x x x is constructed under a g.i. roof which is adjoining and intercommunicating with the repair of the first
right span of the lofty storey building and thence by the property fence wall

Thus it is a permanent structure within the purview of the coverage of the policy
Further the two-storey building was already existing when the insurance was perfected ; should have excluded it specifically
Doubt as to the coverage of the policy
CC A1377 The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity
Thus that doubt should be resolved against , whose lawyers / managers drafted the policy
II. WON P has an insurable interest in the fun and entertainment machines and spare parts? YES ; ALREADY RESOLVED IN
NIAC vs CA
: already resolved in New India Assurance Co vs CA : conclusiveness of previous judgment applies to the subsequent case on matters
directly controverted and determined
CA also held that was liable for P470,328.67 it being the total loss and damage suffered by P

4. PHILAMCARE HEALTH SYSTEMS, INC vs CA ; TRINOS, JULITA [HCA ; Heart Attack ; Question of Opinion ; Contract of Adhesion]
> HCA are in the nature of non-life insurance which is a contract of indemnity, thus payment should be made to the one who paid for the
expenses [P although she is not the legal wife paid for the expenses]
> Elements of an insurance contract [listed below]
> Requisites for the cancellation of an HCA
Ps deceased husband Trinos, Ernani applied for a health care coverage with PHSI ; answered no in 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).
: approved the application for 1 year ; 1988/03/01 1989/03/01
Hospitalization benefits [ordinary or emergency] + out-patient benefits [annual physical exams ; preventive health care ; other out-patient benefits]
Upon termination, the same was extended from 1989/03/01 1990/03/01 then from 1990/03/01 -1990/06/01
o
Amount of coverage was increased to the maximum of P75,000.00 per disability
Trinos, Ernani suffered a heart attack and was confined at the Manila Medical Center for 1 month [1990/03/09]
P tried to claim the benefits which denied because allegedly the agreement was void ; she paid the P76,000.00 hospitalization herself
: there was concealment regarding the medical history
o
Doctors discovered that Ernani was hypertensive, diabetic and asthmatic, contrary to his answer in the application form.
Ernani was discharged from the MMC and was attended by a PT at home
o
Latter admitted to the Chinese General Hospital but was brought home again because of financial difficulties
o
1990/04/13 : Ernani had a fever and was brought to the CGH again where he died
1990/07/24 P : filed an action for damages with the RTC against and its president Dr. Reverente ; damages + MD + AF
RTC : In favor of P ; to pay/reimburse medical and hospital coverage of P76K plus interest + P10K MD + P10 ED + P20K AF
CA : Affirmed decision of RTC but deleted all awards for damages and absolved Dr. Reverente
: petition for review ; Health Care Agreement is not an insurance contract thus incontestability clause under PD612/1460 S48does not apply
Agreement grants living benefits such as medical check-ups and hospitalizations which a member may enjoy so long as he is alive upon effectivity until
its expiration 1 year thereafter
HCAs also provide that benefits are given without any indemnification unlike in an insurance contract [where the insured is indemnified for loss]
HCAs are only for a period of one year, as compared to insurance contracts which last longer thus the incontestability clause does not apply [because
the latter requires an effectivity period of at least 2 years]
It is not an insurance company [thus not under the IC] but a Health Maintenance Organization [under the DOH]
I. WON the health care agreement is an insurance contract? YES ; THE AGREEMENT HAS ALL THE ELEMENTS OF AN INSURANCE CONTRACT ; HCAs
ARE IN THE NATURE OF NON-LIFE INSURANCE
PD612 S(2)(1) a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising
from an unknown or contingent event
INSURANCE CONTRACT ELEMENTS
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and
5. In consideration of the insurers promise, the insured pays a premium.
PD612 S3 : Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest against him, may be insured against
PD612 S10 : Every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children; x x x

: Ps husband had an insurable interest in his own health

HCA was in the nature of a non-life insurance = a contract of indemnity
If a member incurs hospital, medical or any other expense arising from sickness et al or other stipulated contingent, the health care
provider must pay for the same
II. WON Ps husband concealed a material fact in his application? NO ; IT IS A QUESTION OF OPINION AND WHEN ANSWERED
IN GOOD FAITH and WITHOUT INTENT TO DECEIVE, WILL NOT AVOID A POLICY EVEN IF UNTRUE ; FURTHER, CONCEALMENT IS
AN AFFIRMATIVE DEFENSE THUS REQUIRED TO BE ESTABLISHED BY THE INSURER
HCA Stipulations
x x x that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime relative to any information acquired by him in his
professional capacity upon any question affecting the eligibility for health care coverage of the Proposed Members
x x x any and all information relative to any hospitalization, consultation, treatment or any other medical advice or examination. This authorization is in connection
with the application for health care coverage only. x x x
x x x Failure to disclose or misrepresentation of any material information in the application/medical examination, whether intentional or unintentional, x x x
automatically invalidates the Agreement from the very beginning and the liability of Philamcare shall be the return of all membership fees paid. x x x Information is
material if it would result in declination of the applicant or the assessment of a higher membership fee x x x

: Answer assailed by are questions of opinion rather than fact especially coming from the deceased 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
Fraudulent intent of the insured must be established to warrant a rescission of the insurance contract
Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the
duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer
PD612 S27 Concealment entitles the injured party to rescind a contract of insurance
The right to rescind should be exercised previous to the commencement of an action on the contract
No rescission was made in this case
Further cancellation of HCAs in insurance policies require the concurrence of the following
Which none were fulfilled
CANCELLATION OF HCAs ; Requisites
1. Prior notice of cancellation to insured
2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which
cancellation is based
When the insurance contracts contain limitations on liability, they should be construed in such a way as to preclude the
insurer from non-compliance
Insurance contracts are contracts of adhesion, thus they are to be construed strictly against the party that prepared the contract and
liberally in favor of the insured
o
Principle is applicable in HCAs
Anent the incontestability, the RTC was correct in holding that : under the title Claims procedure of expenses, had 12 months from date of
issuance of the HCA within which to contest the membership of the patient if he had previous ailment of asthma, and 6 months from issuance
if the patient was sick of diabetes or hypertension.
The periods expired without contesting the membership, thus the defense of concealment or misrepresentation no
longer lie
Although P was not the legal wife [deceased was previously married to another woman who was still alive], HCA is in the nature of a
contract of indemnity
Thus payment should be made to the party who incurred the expense [which P paid for]
CONCLUSION : Affirm CA decision

5. FORTUNE INSURANCE AND SURETY CO, INC vs CA ; PRODUCERS BANK OF THE PHILIPPINES [ Casualty insurance ; robbery ;
armored vehicle ]
> Casualty insurance : insurance against loss/liability from accident or mishap [except fire / marine and motor vehicles]
P filed a case against to recover P725K under the policy issued by
Stipulation of facts by both parties
Sum was allegedly lost during a robbery of Ps armored vehicle while in transit in Taft Avenue, Pasay City [Pasay City Branch to
Makati Head Office]
Driver Magalong and Guard Atiga were charged together with Bantigue, Aquino and John Doe of violation of PD532 Anti Highway
Robbery Law
refused to pay the amount because the loss is excluded from the coverage of the insurance policy [exclusion for the criminal acts of
employees]
P argued that the driver and guard were not their officers, employees, or trustee or authorized representative at the time of robbery
1990/04/26 RTC, Makati : to pay P P540K as liability under the policy [mitigated by special clause deduction P40K + recovered sum of
P145K] with interest + 30K AF
Magalong and Atiga were not employees / representatives of P
o
They were offered by PRC Management and by Unicorn Security respectively [they paid the salaries and exercises control
over them]
CA agreed with the conclusion of the RTC that Magalong and Atiga were neither employees nor authorized representatives of P
Labor code definition of employee cannot be applied since the insurance policy did not provide for its application ; thus its ordinary
meaning controls
Magalong and Atiga cannot be considered as employees because P had no power to hire or dismiss them under the contracts
: Magalong and Atiga were either
Authorized representatives : in the care and custody of the money
Employees : existence of E-E relationship is determined by law [Labor Code] and not subject by agreement [thus stipulation that P is
not the employer would not obliterate relationship]
Standards for determining employment relationship (1) the manner of selection and engagement of the putative employee (2) the
mode of payment of wages (3) the presence or absence of a power to dismiss and (4) the presence and absence of a power to
control the putative employee's conduct [most decisive]
PRC Management System and Unicorn Security are but labor-only contractors under PD612 S106 [making them merely agents]
Timber Corp vs NLRC : if a contractor is a labor-only contractor = there is E-E relationship between the project owner and the
employees of said contractor
P : Magalong and Atiga were not their employee
Nothing to do with selection and engagement ; payment of wages ; dismissal ; nor control of their conduct
Timber Corp vs NLRC is not applicable to all cases ; only to prevent circumvention/violation of PD612
P paid PRC Management System for the services rendered by Magalong
P : Security Contract stipulation : Guards are in no sense employees of the Client.
Insurance policy entered into by the parties is a theft or robbery insurance = form of casualty insurance
PD612 S174 Casualty insurance is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of insurance such as fire or marine. It includes, but is not limited to, employer's liability insurance, public liability

insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal accident and health insurance as written by nonlife
insurance companies, and other substantially similar kinds of insurance

I. WON was liable for the casualty insurance? YES ; MAGALONG AND ATIGA ARE AUTHORIZED REPRESENTATIVES / AGENTS
FOR THE TRANSFER OF THE SUM
Except w/ respect to compulsory motor vehicle insurance, the IC contains no other provision applicable to casualty insurance or to robbery
insurance in particular
Therefore, contracts are governed by the general provisions applicable to all types of insurance
Outside of those, rights and obligations are governed by the terms of the contract along with its purpose and general principles of
insurance laws
In burglary, theft and robbery insurance, opportunity to defraud the insurer is so great that countless restrictions are put in place
Such as exceptions of the insureds own service and employment [have unrestricted access to the property]
Service and employment are generally associated with the idea of selection, control and compensation
Contract of adhesion discussion : Limitations of liability should be regarded with extreme jealousy and must be
construed in such a way, as to preclude the insurer from noncompliance with its obligation
Stipulation in the policy : GENERAL EXCEPTIONS : The company shall not be liable [for] x x x (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
Employee as intended by in the stipulation, is any person who qualifies as such generally and universally understood / as under the 4
standards / as statutorily declared under PD612 S106
: Issue of employment is a question of fact
However and P submitted the case for judgment on the basis of their stipulation of facts [limited to the insurance policy, contracts
of PRC Management Systems and Unicorn Security, the complaint for violation of PD532, and information filed with Pasay City Fiscal] ;
cannot determine if employees under PD612 S106
: Even if PRCMS and US were not labor-only contractors ; Magalong and Atiga were authorized representatives as much as its teller
Alampay, Maribeth [custodian]
The 3 were entrusted with the specific duty to safely transfer the armored vehicle, thus they were agents of P
Representative = 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."
6. GULF RESORTS , INC vs PHILIPPINE CHARTER INSURANCE CORPORATION
> Provisions of the insurance policy are to be read together to ascertain the true intent of the parties
owner of Plaza Resort [Agoo, La Union] and had its properties insured originally by American Home Assurance Company [AHAC-AIU]
1st 4 insurance policies [1984-1988] : risk of loss from earthquakes extended only to 2 swimming pools (item 5) [thus earthquake
shock endorsement]
5th insurance policy 1988/03/14 1989/03/14 : Earthquake endorsement clause deleted [thus it appears that all properties were
covered]
However, the entry under endorsements/warranties read that renewed its policy from 1989/03/14 1990/03/14
o
This included under endorsement/warranties at time of issue had earthquake shock coverage for P10,700 and paid the
premium of P42,658.14
had properties insured with under policy 31944 [1990/03/14 1991/03/14] for P10,700,600 for a total premium of P45,159.92 with the
following breakdown
One stipulation provided that : this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned
by or through or in consequence of earthquake
-

Breakdown of property valuation and rates for premium [AHACAIUs last policy]
P7,691,000 Clubhouse only @ .392%
P1,500,000 Furniture contained in building above @.490%
P393,000 on two swimming pools only [against peril of
earthquake shock only] @.100% [P393.00 premium]
P116,000 other buildings with their furniture fixtures

Premium P37,420.60 F/L [Under PCIC]

2,061.52 Typhoon
1,030.76 EC
393.00 ES
Doc. Stamps 3,068.10
F.S.T. 776.89
Prem. Tax 409.05

1990/07/16 : An earthquake struck Central and Northern Luzon damaging s property

advised that it would make its claim under policy 31944 for damages on its properties by the earthquake
instructed to make a formal claim then assigned the investigation to independent claims adjuster Bayne Adjusters and
Surveryors
BAS VP reported that there were extensive damages caused by the earthquake to the clubhouse and to the 2 swimming pools
1990/08/11 made formal demands for damages ; however denied the claim : insurance policy only afforded earthquake shock
coverage to the 2 pools
1991/01/24 filed a complaint with RTC Pasig [P5.4M for actual losses ; P428K / month as continuing losses ; P500K ED ; P500K AF
and expense of litigation
1994/02/21 RTC : In favor of
paid the premium of P393.00 against earthquake shock, the same premium it paid against shock only on the 2 swimming pools in
the policies issued by AHAC-AIU
Thus the endorsement rider (Exhibit 7-C]) means that only the two swimming pools were insured against earthquake shock
Contract is clear and unambiguous ; Only the 2 swimming pools had earthquake shock coverage
s adjuster valuated the damage to the pool at P386,000 ; thus is liable for that amount
No basis for ED since was willing to settle the amount [at least the lower and proper amount]
CA Affirmed RTC decision
Last two insurance contracts with AHAC-AIU upon which s policy 31944 was based/copied covered an extended earthquake shock
insurance on all properties
I. WON the PCIC policy accorded protection to all the properties or only to the 2 swimming pools? ONLY TO THE 2
SWIMMING POOLS
Item 3 - P393,000.00 On the two (2) swimming pools only (against the peril of earthquake shock only)
Premium payments section Amount : P393K ; Rate : .100% E/S ; Premium : P393.00
Policy condition 6 - This insurance does not cover x x x (a) Earthquake, volcanic eruption or other convulsion of nature
Rider attached : Extended Coverage Endorsement (To Include the Perils of Explosion, Aircraft, Vehicle and Smoke x x x Earthquake
endorsement : this insurance covers loss or damage (including loss or damage by fire) to any of the property insured by this Policy
occasioned by or through or in consequence of Earthquake.
: rider attached did not place any qualification on earthquake shock coverage ; thus coverage extends to all insured properties
Ruiz vs Sheriff of Manila : All provisions should be examined and interpreted in consonance with each other [similar
to Ut res magis valeat quam pereat]
: All parts of the contract is reflective of the true intent of the parties
Policy cannot be construed piecemeal ; stipulations cannot be segregated and then made to control
Thus cannot focus on the earthquake endorsement to the exclusion of other provisions
All provisions and riders indubitably show that the parties intended to extend earthquake shock coverage to the 2 pools only
INSURANCE CONTRACT REQUISITES
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar
risk; and
5. In consideration of the insurer's promise, the insured pays a premium
Premium : the consideration paid an insurer for undertaking to indemnify the insured against a specified peril
Premium payable becomes a debt as soon as the risk attaches
No premium payments were made except for the 2 pools
: s citation of the phrase : Subject to: Other Insurance Clause, Typhoon Endorsement, Earthquake Shock Endorsement, Extended
Coverage Endorsement, FEA Warranty & Annual Payment Agreement on Long Term Policies in the policy is misplaced ; it is merely an
enumeration of the descriptive titles of the riders and clauses
Interview of witnesses : deletion of original phrase in AHAC-AIU policy was merely inadvertent
7. MANILA MAHOGANY MANUFACTURING CORPORATION vs CA ; ZENITH INSURANCE CORPORATION [Mercedes Benz ; collision ;
deficiency ; release of claim ; subrogation]
> Insured may seek the deficiency from the wrongdoer but cannot release the latter from future actions
> Should the insured release the wrongdoer to the detriment of the insurer, the latter may seek reimbursement of its payments to
the former
> Payment of the proceeds of the policy subrogates the insurer to whatever rights the insured may have against the wrongdoer
insured its Mercedes Benz 4-door sedan with P for the period of 1970/03/06 1971/03/06
1970/05/04 the vehicle was bumped and damaged by a truck owned by San Miguel Corporation
P paid P5K in amicable settlement ; s GM executed a release of claim, subrogating P to all its right of action against SMC
P wrote to Insurance Adjusters, Inc to demand reimbursement from SMC of the amount it paid to
Insurance Adjusters, Inc refused to reimburse P since SMC already paid of P4,500 for the damages [evidenced by cash voucher
and a release of claim of ]

P demanded reimbursement of the sum of P4,500 paid by SMC which refused, prompting P to file a suit with City Court, Manila
CC, Manila : should pay P P4,500
COFI affirmed CC, Manila decision in toto
CA affirmed with modification of amount to P5,000.00
: not bound to pay P4,500 or P5000 to P since subrogation in the release of claim was conditioned on recovery of the total amount
of damages
Total damages was valued at P9,486.43 ; P only paid P5,000.00 so it sought P4,500 from SMC
P release of claim did not provide for s alleged qualification
cites
CC A2207 If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does
not fully cover the injury or loss the aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury.
CC A1304 A creditor, to whom partial payment has been made, may exercise his right for the remainder, and he shall be
preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit.
I. WON can still claim the alleged remainder of its claim from SMC and refuse to pay P?
No evidence to support gentlemans agreement [that may seek balance from SMC and that the release of claim was
conditioned on full claim of damages]
CA correct in holding that:
Even if had the right to file a deficiency claim against SMC on legal basis without prejudice to the insurers right to subrogation,
nevertheless executed a release of claim in favor of SMC discharging the latter from all actions, claims, demands and ROA after
insurer paid the proceeds of the policy
released SMC thereby defeating P of its right of subrogation ; thus P may recover the P5,000.00 sum it earlier paid
PAL vs Heald Lumber Co : If a property is insured and the owner receives the indemnity from the insurer, it is provided in [Article
2207 of the New Civil Code] that the insurer is deemed subrogated to the rights of the insured against the wrongdoer and if the
amount paid by the insurer does not fully cover the loss, then the aggrieved party is the one entitled to recover the deficiency. ...
Under this legal provision, the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured
CA also correct in holding that:
is entitled to keep P4,500 that was paid by SMC
However, when released SMC from any liability
If insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may sue the party responsible for
the remainder
The insurer can be subrogated to only as such rights as the insured may have [thus the insurer has the right of subrogation for that
amount it paid]
However, if the insured, after being indemnified, releases the wrongdoer who caused the loss, the insurer loses his rights against the
latter
o
In such 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

8. FEDERAL EXPRESS CORPORATION vs AMERICAN HOME ASSURANCE COMPANY ; PHILAM INSURANCE COMPANY
INC[Veterinary biological / vaccines ; refrigerated when not in transit / perishable ; subrogation of insurer in the place of consignee ;
airway bill stipulations ; Warsaw convention ; notice of claim ; prescription]
> For shipments, the shipper/consignee [or the insurer when subrogating the former] must give a notice of claim to the carrier within
the time limitations
1994/01/26 Smithkline Beecham of Nebraska, USA delivered to Burlington Air Express [Burlington ; agent of FEC] a shipment

109 cartons of veterinary biological : to be delivered to consignee Smithkline and French Overseas Company in Makati City
Shipment was covered by Burlington Airway Bill with the words refrigerate when not in transit and perishable stamp marked on
its face
Burlington insured the cargoes in the amount of $39,339.00 with AHAC and turned over the same to FEC
1994/01/29 : First shipment of 92 cartons arrived in Manila and stored in Cargohaus Incs warehouse
1994/01/31 : Second shipment of 17 cartons arrived in Manila ; likewise stored in the same warehouse
Prior to arrival of the cargoes, FEC informed GETC Cargo International Corporation [the customs broker hired by consignee] to
facilitate the release of its cargoes from BOC
1994/02/10 : Dioneda, Dario [non-licensed custom broker of GETCCIC] found out that only 2 air-conditioners, instead of refrigerators
were used to cool the goods
o
Cargohaus Inc employees stated that the vaccines specifically indicated that it should not be subjected to hot or cold
temperatures
o
Dioneda did not proceed with the withdrawal but took samples for testing with the Bureau of Animal Industry

ELISA reading of vaccinates sera are below the positive reference serum.
Smithkline thus abandoned the shipment declaring a total loss
Filed a claim against through its representative in the Philippines, P
P paid Smithkline for the whole insured amount of $39,339.00 ; latter filed an action for damages against imputing negligence
1997/03/18 RTC : solidarily liable ; Actual damages of $39,339.00 + interest ; AF P50K
CA Affirmed RTC decision
USDA Test Report was found inadmissible as evidence
Shipping receipts were prima facie proof that the goods had been delivered to the in good condition
o
Shipping receipts show that the goods were delivered to the carrier and good condition
o
Carrier then delivered the goods in a damaged condition
o
Thus there is a presumption that the damage occurred through the fault or negligence of the carrier
I. WON the SC may review the petition? YES ; QUESTION OF LAW [of the legal conclusions drawn from the undisputed
facts]
Correctness of legal conclusions drawn by the CA from undisputed facts is a question of law cognizable by the SC
Facts are undisputed and is only questioning the conclusions drawn from such facts
II. WON FEC is liable for damage or loss of the insured goods? NO ; THE CLAIM HAS ALREADY PRESCRIBED SINCE
FAILED TO FILE A CLAIM WITHIN THE LIMITATIONS SET FORTH IN THE AIRWAY BILL / WARSAW CONVENTION
: had no personality to sue [thus no COA] because the payment made to Smithkline was erroneous
Both parties cite the Certificate of Insurance, each having different interpretation of what their rights are under the terms
PROPER PAYEE
Certificate : that loss of or damage to the insured cargo is "payable to order x x x upon surrender of this Certificate.
Wording : right of collecting [proceeds of the insurance] on any such damage/loss is on the holder of the certificate
Burlington representative signed the back of the certificate : thus it was indorsed in blank = bearer instrument
Smithkline was in the possession of the certificate thus that latter had the right of collecting or being indemnified for
loss/damage as if the policy were covered by a special policy in the name of the holder + they had an insurable
interest in the goods
SUBROGATION
Upon receipt of the insurance proceeds, the consignee [Smithkline] executed a subrogation receipt in favor of
Thus was authorized to file claims and begin suit against any such carrier, vessel, person, corporation or government
Upon payment to the consignee of an indemnity, the insurers entitlement to subrogation pro tanto [to such extent]
equips it with a COA in case of contractual breach or negligence
Jurisprudence upholds the insurer's subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the
cargo
In the exercise of its subrogatory right, an insurer may proceed against an erring carrier
o
To all intents and purposes, it stands in the place and in substitution of the consignee

A fortiori, both the insurer and consignee are bound by the contractual stipulations under the bill of lading
PRESCRIPTION OF CLAIM
From initial proceedings up to the present, has tirelessly pointed out prescription
and the consignee never filed with any written notice or complaint regarding its claim for damages/loss to the
subject cargo w/in the period required by the Warsaw Convention and/or in the airway bill [never denied by and
evidenced by record]
s agent Burlington Air Express Airway Bill :
6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice, sufficiently
describing the goods concerned, the approximate date of the damage or loss, and the details of the claim, is presented by shipper or
consignee to an office of Burlington within (14) days from the date the goods are placed at the disposal of the person entitled to
delivery, or in the case of total loss (including nondelivery) unless presented within (120) days from the date of issue of the [Airway
Bill].
12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case:
12.1.1 Of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen (14) days from
receipt of the goods
12.1.2 Of other damage to the goods, within fourteen (14) days from the date of receipt of the goods
12.1.3 Delay, within twentyone (21) days of the date the goods are placed at his disposal and
12.1.4 Of nondelivery of the goods, within one hundred and twenty (120) days from the date of the issue of the air waybill.

12.2 For the purpose of 12.1 complaint in writing may be made to the carrier whose air waybill was used, or to the first carrier or to
the last carrier or to the carrier who performed the transportation during which the loss, damage or delay took place
Warsaw Convention ART. 26.
(1) Receipt by the person entitled to the delivery of baggage or goods without complaint shall be prima facie evidence that the same
have been delivered in good condition and in accordance with the document of transportation.
(2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and,
at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods.
In case of delay the complaint must be made at the latest within 14 days from the date on which the baggage or goods have been
placed at his disposal.
(3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within
the times aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part
Filing of claim with the carrier within the time limitation therefor is a condition precedent to the accrual to a right of action against a
carrier for loss/damage to goods
Shipper / consignee must allege and prove the fulfillment of the condition [of filing the claim]
o
Failing to do so results in no ROA accruing in their favor
Reason for the requirement
(1) To inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor and
(2) To give it an opportunity to examine the nature and extent of the injury [to investigate a claim while the matter is fresh and easily
investigated]
When an airway bill / or any contract for carriage has a stipulation that requires a notice of claim for loss/damage and the
stipulation is not complied with, enforcement can be prevented and the liability cannot be enforced against the carrier
Notice of claim is a condition precedent
There is neither an allegation nor a showing of s compliance with the requirement
: still has recourse against Cargohaus Inc : s codefendant which the RTC has held as liable for actual damages of $39,339 or its
peso equivalent which was affirmed by the CA and is final and executory

9. ETERNAL GARDENS MEMORIAL PARK CORPORATION vs PHILIPPINE AMERICAN LIFE INSURANCE COMPANY [ Group life
insurance ; Burial lots ; Construction of insurance]
> Insurance contract = contract of adhesion ; liberally construed in favor of insured ; strictly construed against insurer
1980/12/10 Philamlife entered an agreement denominated as Creditor Group Life Policy with
Clients of who purchased burial lots from it on installment basis would be insured by
Amount of insurance coverage depended upon the existing balance of the purchased burial lots
Effective for 1 year, renewable on a yearly basis
ELIGIBILITY.
Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age, is indebted to the Assured for the unpaid balance of his loan with
the Assured, and is accepted for Life Insurance coverage by the Company on its effective date is eligible for insurance under the Policy.
EVIDENCE OF INSURABILITY.
No medical examination shall be required for amounts of insurance up to P50,000.00. However, a declaration of good health shall be required for all Lot
Purchasers as part of the application. The Company reserves the right to require further evidence of insurability satisfactory to the Company in respect
of the following:
1. Any amount of insurance in excess of P50,000.00.
2. Any lot purchaser who is more than 55 years of age.
LIFE INSURANCE BENEFIT.
The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan (including arrears up to but not
exceeding 2 months) as reported by the Assured to the Company or the sum of P100,000.00, whichever is smaller. Such benefit shall be paid to the
Assured if the Lot Purchaser dies while insured under the Policy.
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if
the application of the Lot Purchaser is not approved by the Company

was required under the policy to submit to a list of all new lot purchasers + copy of all applications + amounts of the respective
unpaid balances of all insured lot owners
1982/12/29 submitted a letter with a list of insurable balances of its lot buyers for 1982 October which included a certain Chuang,
John who had a balance of 100K
1984/08/02 Chuang died
1984/08/20 sent a letter to which served as an insurance claim for Chuangs death
o
Letter contained certification of death ; Identification Certificate ; Certificate of Claimant ; Certificate of Attending Physician ;
Assureds Certificate
o
wrote requiring : (1) Certificate of Claimant (with form attached) (2) Assureds Certificate (with form attached) (3)
Application for Insurance accomplished and signed by the insured, Chuang, while still living and (4) Statement of Account
showing the unpaid balance of Chuang before his death
o
1984/11/14 Complied with the requirements which after a year, was not replied to by
1986/05/20 denied s claim
Chuang was 59 years old when he purchased 2 lots from for a total insurable of P100,000.00 each
No application for Group Insurance was submitted
Policy requires declaration of good health for all lot purchasers
Policy : no insurance if the application is not approved by the Company
Acceptance of premiums not connoted as approval per se but are held in trust for the payor until the prerequisites are complied
with
Engages to return the premiums
RTC in favor of
to pay the sum of P100K with legal interest + AF P10K
submitted Chuangs application as evidenced by a letter on 1982/12/29
s inaction from this submission to Chuangs death as well as their acceptance of the premiums is deemed as approval
Since the contract is a group life insurance : once proof of death is submitted, payment must follow
CA reversed and set aside RTC ruling
Factual finding that Chuangs application was not enclosed in s 1982/12/29 letter
Non-accomplishment of the submitted application form violated PD612 S26
o
Thus no application form = no insurance
I. WON Chuang is covered by the insurance policy? YES ; s INACTION, RECEIPT OF PREMIUMS AND STAMPING s 1982/12/29 LETTER
WITH APPLICATIONS DEEMED AS APPROVAL ; AMBIGUITY OF EFFECTIVE DATE CONSTRUED AGAINST INSURER
: In s 1982/12/29 letter [which stamped as received]
Insurance forms for the attached list of burial lot buyers were attached in the letter
s stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments
o
Burden of proof shifted to which must prove that the letter did not contain Chuangs insurance application

failed to discharge that burden

Testimonies of s witnesses : contain minor inconsistencies that are too trivial to affect credibility
: Philamlife assumed the risk of loss without approving the application
Policy stipulation EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the
Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.

Ambiguity between first and second sentence

Insurance contract = contract of adhesion
o
Liberally construed in favor of the insured ; strictly construed against the insurer
o
Philamcare Health Systems vs CA : When the terms of insurance contract contain limitations on liability, courts should
construe them in such a
o
way as to preclude the insurer from noncompliance with his obligation
Thus vague contractual provision must be construed in favor of the insured and the effectivity of the insurance contract
Harmonizing the stipulation :
Insurance contract is effective upon purchase/loan with
But rendered ineffective / terminated upon s disapproval
o
Second sentence interpreted as resolutory condition
o
Moreover, mere inaction of the insurer on the application must not work to prejudice the insured
Reverse CA ; RTC decision modified : to pay P100K + 6% interest from time of extrajudicial demand until receipt of 1996/05/29
RTC decision + 12% legal interest from 1996/06/17 until payment of this award + AF P10K

10. ENRIQUEZ, RAFAEL [Admin. of the estate of the late Herrer, Joaquin] vs SUN LIFE ASSURANCE COMPANY OF CANADA
> An acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge [Cognition
theory]
>
1917/09/24 Herrer applied for a life annuity [insurance : annuitant receives payments for lifetime after retirement] with
Paid P6,000.00 to s manager
Was given a provisional receipt ; receipt stated that application was subject to medical examination and approval of s Central Office
Application was immediately forwarded to the Head Office in Canada
1917/11/26 The head office gave its notice of acceptance by cable to Manila [ Herrer was allegedly received notice of
acceptance : subject issue of the case]
1917/12/04 The policy was issued at Montreal
1917/12/18 Atty Torres wrote to the Manila Office stating that Herrer desired to withdraw his application
1917/12/19 Manila Office : policy already issued + 11/26 notice ; Atty Torres received this letter on 12/21
1917/12/20 Herrer died
: sought to recover the P6,000 sum paid by Herrer for life annuity
: No liability since acceptance was not transmitted to applicant
TC : Not liable [not explained why]
I. WON the life annuity contract was already perfected by reason of Herrers disputed receipt of the notice of
acceptance? NO ; THE LETTER OF ACCEPTANCE WAS NOT SENT AND THUS COULD NOT HAVE BEEN RECEIVED BY THE
APPLICANT ; PROVISIONAL RECEIPT REQUIRED, INTER ALIA, THE COMMUNICATION OF ACCEPTANCE BY THE COMPANY
TO THE APPLICANT
s Manila Branchs Chief Clerk testified that he prepared the 1917/11/26 letter and handed it to the local manager Mr. White for
signing
During cross-examination, the witness admitted that he knew nothing of further development regarding the letter
Mr. White testified to having received the cablegram accepting the application from the home office
o
Further admitted that he signed a (different) letter to Herrer of said acceptance, sending the same to the chief clerk and
placed the same on the mailing desk for transmission but could not tell if the letter was actually been placed in the mails
Mr. Tuason [chief clerk on 1917/11/26] was not called as a wiotness
s Atty Torres, Manuel testified of having to prepare the will of the late Herrer, Joaquin
While drafting the will, Herrer mentioned his application of the life annuity and revealing the only document relating to such as the
provisional receipt
Rafael searched through Herrers possession but could not find any letter of notification

: Deduction of evidence : letter of notification was prepared and signed by the local office but was never sent
Until effectivity of the recent insurance laws, life insurance was governed by the Code of Commerce and the Civil Code
CoComm : BIII, TVIII and BIII TIII SIII ; CC : BIV TXII
1915/07/01 Act 2427 CIV governs life and health insurance, repealing the provisions of the Code of Commerce on life and
health insurance
The Insurance Act and the CC [old] superseded all this previous laws
Insurance Act dealt with life insurance but it is silent as to the methods followed for perfection of said contracts
[Old] CC, A1802 [now A2021] The aleatory contract of life annuity binds the debtor to pay an annual pension or income during the
life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is
transferred to him at once with the burden of the income.
[Old] CC A16 [now A18] In matters which are governed by the Code of Commerce and special laws, their deficiency shall be supplied
by the provisions of this Code
[Old] CC A1262 [reproduced in A1319] : Consent is shown by the concurrence of offer and acceptance with respect to the thing and
the consideration which are to constitute the contract. An acceptance made by letter shall not bind the person making the offer
except from the time it came to his knowledge. The contract, in such case, is presumed to have been entered into at the place where
the offer was made
Applying CC, acceptance made by letter shall bind the person making the offer only from the date it came to his knowledge
an acceptance of an offer of insurance not actually or constructively communicated to the proposer does not make a contract
US Jurisprudence : Mailing of acceptance, it has been said, completes the contract of insurance, as the locus poenitentiae is ended
when the acceptance has passed beyond the control of the party [Expedition theory]
However, the law applicable in this case is in [Old] CC A1262 2 nd paragraph : An acceptance made by letter shall not bind the
person making the offer except from the time it came to his knowledge
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 [not raised]
(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 company to the applicant [absent]
-

1.
2.
1.
2.
-

Admitted facts:
Montreal Office accepted the application and cabled its Manila Office [thus it issued the policy]
Letter of notification was not sent and thus not received by the applicant
No contract of life annuity because it is not proven that the acceptance of application ever came knowledge of the applicant ;
SIDE NOTE
1.
2.
3.
4.

Manifestation Theory - The contract is perfected from the moment the acceptance is declared or made
Expedition Theory - The contract is perfected from the moment the offeree transmits the notification of acceptance to the offeror
Reception Theory - The contract is perfected from the moment that the notification of acceptance is in the hands of the offeror
Cognition Theory - The contract is perfected from the moment the acceptance comes to the knowledge of the offeror. [used locally]

11. DEVELOPMENT BANK OF THE PHILIPPINES vs CA ; Estate of the Late Dans, Juan [Rep by Dans, Candida (wife)] ; DBP
MORTGAGE REDEMPTION INSURANCE POOL [ ]
> An insurer is not liable for an insurance contract which does not exist
> An [insurance] agent that exceeds its authority without giving the party sufficient notice of his powers is personally liable to the
party he contracts with
1987/05 : Dans, Juan along with Candida (wife), his son and daughter-in-law applied for a loan of P500,000.00 with DBP
Juan then 76 years of age, was advised by DBP to obtain a MORTGAGE REDEMPTION INSURANCE [MRI] with P DBP Mortgage
Redemption Insurance Pool
1987/08/04 A reduced loan of P300,000.00 was approved by and released on 1987/08/11 ; DBP deducted the amount of
P1,476.00 for the MRI premium
1987/08/15 Dans, Juan accomplished and submitted the MRI application for Insurance and the Health Statement for DBP MRI Pool
1987/08/20 DBP credited the savings account of P DBPMRIP of the MRI premium less the DBP service fee of 10% and informed the
latter of the same
1987/09/03 : Dans, Juan died of cardiac arrest
DBP informed DBPMRIP of the event ; PDBPMRIP notified DBP that Dans was not eligible for MRI Coverage being over the
acceptance age limit of 60 years old
1987/10/21 : DBP informed P Candida of the disapproval of the MRI application
offered to refund the premium but P Candida refused the same, demanding payment of the face value of the MRI
offered an ex gratia settlement of P30,000.00 but was again refused
1987/02/10 : P estate, filed a complaint with RTC against DBP and P DBPMRIP for Collection of Sum of Money with Damages.
Dans became insured by DBPMRIP when DBP, with full knowledge of Dans age at the time of application required him to apply for
MRI and collected the premium
Prayer to return P139,500 it paid under protest ; mortgage debt to be declared fully paid ; damages be awarded
DBP and P DBPMRIP admitted all documents submitted by P estate in pre-trial
RTC : Decision in favor of P Estate and against DBP
DBPMRIP however is absolved from liability, since there was no privity of contract between P estate and PDBPMRIP
DBP was in estoppel for leading Dans to apply for MRI and actually collecting the premium despite knowledge of age ineligibility
CA : Affirm in toto ; later, also denied s MFR
I. WON a contract of insurance exists upon which DBPMRIP may be held liable? NO ; THE MRI CONJUNCTIVELY
REQUIRED APPROVAL AND FULL PAYMENT OF THE PREMIUM IS MADE DURING THE APPLICANTS GOOD HEALTH, BOTH
OF WHICH WERE NOT MET
When Dans applied for MRI he personally filled up and signed a "Health Statement for DBP MRI Pool" which contained
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
Thus the MRI shall take effect when
The application shall be approved by the insurance pool ; and
When the full premium is paid during the continued good health of the applicant
o
These conditions are joined conjunctively and thus must concur
Thus the power to approve the MRI application is lodged with the DBPMRIP
P DBPMRIP did not approve the application
There was no showing of acceptance of the premium [aside from the crediting of DBP of its savings account]
Thus there is no perfected contract of insurance and DBPMRIP cannot be held liable on a contract which does not exist
II. WON DBP may be held liable for the MRI? YES, BUT NOT FOR THE FULL AMOUNT IN THE FORM OF MORAL DAMAGES
IN THE AMOUNT OF P50,000
: DBP required Dans to secure MRI coverage instead of allowing him to look for his own insurance carrier
When the loan was released, DBP already deducted from the proceeds thereof the MRI premium
Dans was made to fill up and sign his MRI application as well as his health statement
DBP itself submitted the forms to DBPMRIP Main Building in Makati and deducted from the premium given its service fee of 10%
: In dealing with Dans, DBP assumed two roles : as a lender and as an insurance agent
DBP, as an insurance agent, led the family to believe that they had already fulfilled the MRI requirements and the issuance thereof
forthcoming
DBP had full knowledge that the application was never going to be approved

o
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1.
2.
3.
-

Group Mortgage Redemption Insurance Policy, Article 1 clearly prescribed the age limitation of 60 years

CC A1897 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
DBP was not authorized to accept MRI applications when its clients are more than 60 years of age
Thus it exceed its authority when it accepted Dans application
The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the
agent's powers.
o
There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI.
: However, DBPs liability cannot be for the entire value of the insurance policy
Despite the concealment, Dans probability of securing an MRI with other providers is highly speculative
CC2199 Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.
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
While Dans is not entitled to actual/compensatory damages, he is entitled to moral damages
Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages, may be
adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the
circumstances of each case.
Considering that DBP offered an ex gratia settlement of P30,000.00, an award of MD of P50,000 is reasonable
12. GREAT PACIFIC LIFE ASSURANCE COMPANY vs CA/ MONDRAGON, LAPULAPU vs CA ; NGO HING [20-year endowment
policy on special daughter; Binding Deposit Receipt]
> 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 binding slip/receipt does not insure by itself
> Whether intentional or unintentional, the concealment entitles the insurer to rescind the contract of insurance
> Concealment is a neglect to communicate that which a party knows and ought to communicate
1957/03/14 PNgo Hing applied with GPAC a 20-year endowment policy for P50,000.00 on his daughters [Go, Helen] life
Endowment policy : life insurance contract to pay a lump sum after a specific term [on maturity] or on death ; typically
10/15/20 years up to a certain age limit
o
P Ngo Hing paid the annual premium of P1,077.75 going over to GPAC and was given the corresponding binding deposit
receipt
o
P Ngo Hing retained P1,317.00 as his commission [he was an agent of GPAC too]
1957/04/30 However, GPAC disapproved the insurance application because the 20-year endowment plan is not available for minors
below 7 years old
o
It however recommended the Juvenile Triple Action Plan and asked for the submission of the Juvenile Non-Medical
Declaration
1957/05/06 Mondragon did not communicate the disapproval to P Ngo Hing but again insisted on approval because applicants
have been requesting coverage since 1954
1957/05/28 : Go, Helen died of influenza with complication of bronchopneumonia
P Ngo Hing thus sought payment of the proceeds of the insurance but was denied thus constraining him to file the action for
recovery before COFI Cebu
COFI : GPAC and Mondragon are solidarily liable to pay P Ngo Hing the amount of P50,000.00 with 6% from date of filing of
complaint and P1,077.75 without interest
CA affirm in toto
I. WON the binding deposit receipt constituted a temporary contract of the life insurance in question? NO ; THE BDR
PROVIDED CONDITIONS PRECEDENTS THAT WERE NOT FULFILLED NEGATING THE CONCLUSION OF AGREEMENT OF
MINDS BETWEEN THE PARTIES THUS THERE IS NO INSURANCE CONTRACT
The binding deposit receipt had condition precedents written on its back that required the following before a deposit is considered
being a binding receipt
A. If the Company or its agent, shan have received the premium deposit ... and the insurance application, ON or PRIOR to the date of
medical examination ... said insurance shall be in force and in effect from the date of such medical examination, for such period as is
covered by the deposit ..., PROVIDED the company shall be satisfied that on said date the applicant was insurable on standard rates
under its rule for the amount of insurance and the kind of policy requested in the application.
D. If the Company does not accept the application on standard rate for the amount of insurance and/or the kind of policy requested in
the application but issue, or offers to issue a policy for a different plan and/or amount ..., the insurance shall not be in force and in
effect until the applicant shall have accepted the policy as issued or offered by the Company and shall have paid the full premium
thereof. If the applicant does not accept the policy, the deposit shall be refunded.
E. If the applicant shall not have been insurable under Condition A above, and the Company declines to approve the application the
insurance applied for shall not have been in force at any time and the sum paid be returned to the applicant upon the surrender of
this receipt.
: Provisions show that the binding deposit receipt is intended to be merely a provisional / temporary insurance contract and only
upon compliance of:
That the company shall be satisfied that the applicant was insurable on standard rates
That if the company does not accept the application and offers to issue a different plan, the insurance contract shall not be binding
unless the latter offer is accepted
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 applicant

Clearly, the BDR is merely an acknowledgement that the company branch received from the applicant the insurance premium and
accepted the application for processing
Since GPAC disapproved the application, the BDR never became in force
Thus the BDR, by its own provision, is 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
o
Acceptance is merely conditional and is subordinated to the act of the company in approving / rejecting the application
o
De Lim vs Sun Life Assurance Company of Canada : In life insurance, the binding slip/receipt does not insure by itself
: GPAC in its 1957/04/30 letter to Mondragon, disapproved the application since the plan was not offered to children less than
7years of age
It instead offered the Juvenile Triple Action, which P Ngo Hing failed to accept
In the absence of meeting of the minds and non-compliance of the mentioned condition precedents, there could have been no
insurance contract duly perfected
De Lim vs Sun Life Assurance Co. of Canada : a contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents ... The contract, to be binding from the date of the application, must have
been a completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon,
or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have
met in agreement
: Ps contention that failure of Mondragon to communicate the disapproval did not have any adverse effect on the contract is
not persuasive
There was no perfected contract between the parties
P, being an authorized agent of GPAC, knows that the company does not offer the life insurance applied for
o
He only took chance that the same will be approved based on s recommendation
P had an insurable interest on the life of his daughter thus he should have followed and known the progress of processing and
cannot pretend ignorance of events
II. WON P Ngo Hing concealed the state of health and physical condition of Go, Helen which rendered void the
binding deposit receipt? YES ; CONCEALED THE FACT OF HIS DAUGHTERS CONGENITAL PHYSICAL DEFECT
: When P Ngo Hing supplied the required essential data for the insurance application, he was fully aware that his daughter is
typically a mongoloid child [cases phrasing]
Congenital physical defect could never be ensconced nor disguised
o
P in bad faith, withheld the fact material to the risk to be assumed by GPAC
Contract of insurance is one of uberrimae fidae [good faith, absolute and perfect candor or openness and honesty]
o
Concealment is a neglect to communicate that which a party knows and ought to communicate
o
Whether intentional or unintentional, the concealment entitles the insurer to rescind the contract of insurance

13. SPOUSES CHA, NILO and STELLA ; UNITED INSURANCE CO, INC vs CA ; CKS DEVELOPMENT CORPORATION
1988/10/05 : entered a lease contract with P CKSDC
Paragraph 18 : The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or
store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s)
the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its
own benefit
Despite the restriction, procured a fire insurance policy for the merchandise inside the leased premises with P UICI for P500K
without the written consent of
On the day the lease contract was to expire, a fire broke out inside the leased premises
CKS, upon discovery of the insurance, wrote a demand letter to PUICI, asking that the proceeds be paid directly to it, based on the
lease contract stipulation 18
Co- UICI refused to pay PCKSDC
P CKSDC filed a complaint against and Co-
RTC : P UICI should pay P CKSDC P335,063.11 ; to pay P CKSDC P50,000 as ED ; P20,000 as AF and cost of suit
CA Affirm RTC decision with modification : delete awards of ED and AF ; deny subsequent MFR
I. WON the Stipulation 18 is valid? THE STIPULATION IS VOID FOR BEING AGAINST LAW [PD612 S18 : contract or policy
is unenforceable because the beneficiary does not have an insurable interest in the property] ; PROCEEDS RIGHTFULLY
BELONGS TO
Basic in law of contracts that stipulations contained in a contract cannot be contrary to law, morals, good customs, public order or
public policy CC1409(1)
PD612 S18 No contract or policy of insurance on property shall be enforceable except for the benefit of some person
having an insurable interest in the property insured.
Non-life insurance policy [like the policy taken by over their merchandise] is primarily a contract of indemnity
Thus insurable interest must exist at the time the insurance takes effect [is perfected] and at the time the loss occurs [PD612 S19]
Section 19. An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but
not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes
effect, but need not exist thereafter or when the loss occurs.

Reason for the rule : public policy : to prevent a person taking out an insurance policy on property upon which he has no insurable
interest and collecting the proceeds of said policy in case of loss of the property
When there is no insurable interest in the property, the contract becomes a mere wager is void
PD612 S25 Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has
not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy
executed by way of gaming or wagering, is void.
It cannot be denied that P CKS has no insurable interest in the goods and merchandise inside the leased premises under PD612
S17
PD612 S17. The measure of an insurable interest in property is the extent to which the insured might be damnified by
loss of injury thereof.
Therefore, P CKS [or any beneficiary/insured for that matter] cannot, under PD612, be validly a beneficiary of the fire insurance
policy taken by over their merchandise
[as owners] have insurable interest over the merchandise
Lease contract Paragraph 18 is void for being contrary to law and/or public policy
The proceeds of the fire insurance policy thus rightfully belongs to the insured [ ]
Insurer [Co-] cannot be compelled to pay the proceeds to a person [P CKS] who has no insurable interest in the property insured
The liability of for violating their lease contract is a separate and distinct issue which cannot be resolved in this case.
CONCLUSION : SET ASIDE CA DECISION ; PROCEEDS OF THE POLICY AWARDED TO

14. GEAGONIA, ARMANDO vs CA ; COUNTRY BANKERS INSURANCE CORPORATION

: owner of Normans Mart in San Francisco, Agusan Del Sur
1989/12/22 obtained a fire insurance policy [F-14622] for P100K from P CBIC
Policy period 1989/12/22 1990/12/22 and covered : Stockintrade consisting principally of dry goods such as RTW's for men and
women wear and other usual to assured's business
From 1989-1990 had stocks amounting to P392,130.50
Zenco Sales, Inc.
P55,698.00
F. Legaspi Gen. Merchandise
P86,432.50
Cebu Tesing Textiles
P250,000.00
declared in the policy under the subheading entitled CO-INSURANCE : Mercantile Insurance Co, Inc [MICI] for P50,000.00
Policy Condition 3 The insured shall give notice to the Company of any insurance or insurances already affected, or which may
subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories
only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or
endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any
loss or damage, all benefits under this policy shall be deemed forfeited, provided 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.
1990/05/27 07:30PM A fire of accidental origin broke out at the public market of San Francisco, Agusan Del Sur
insured stock-in-trade were completely destroyed ; filed a claim against P under the policy
P denied the claim : goods were covered by Philippines First Incurance Co, Cebu Branch [PFIC] 2 fire insurance policies [GA-28146
and GA-28144] P100K each
o
Policies indicated that the insured was Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)
o
Policies Mortgage Clause : Loss, if any shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may
appear subject to the terms of this policy. COINSURANCE DECLARED: P100,000. Phils. First CEB/F 24758
1991/01/18 : sent letter of reconsideration

filed a[n administrative] complaint against P with the Insurance Commission for recovery of the P100K under the fire insurance
policy + AF + cost of litigation
admitted that the PFIC fire insurance policy were already in existence, however he did not know of Ps condition 3 requiring him to
inform it of prior policies
o
P agent allegedly did not mention it to him ; and had it been mentioned, he would not have withheld such information
further asserted that the total amounts claimed under the 3 policies was below the actual value of his stocks at time of loss [ P1M ]
P : denied the allegations and set up as its principal defense the violation of condition 3
IC : did not violate condition 3 as he had no knowledge of the existence of the 2 PCIF policies ; P should pay P100K with legal
interest + P10K AF
Cebu Tesing Textiles procured the policies without informing or securing his consent
Cebu Tesing Textiles [as s creditor] had insurable interest on the stocks
Finding was based on s testimony that he came to know of the PCIF policies only when he filed his claim with P and that Cebu
Tesing obtained and paid premiums without s knowledge
Denied Ps MFR
CA reversed the IC decision
PCIF insurance 28144 was taken in the name of [Discount Mart (Geagonia, Armando)] was assured and Cebu Tesing Textiles was
only the mortgagee of the goods
Premiums were paid by , and not by Cebu Tesing [Premium Invoices] ; Cebu Tesing was evidenced by the invoices to be only
mortgagee of the goods
clearly took out the policies ; s letters clearly admitted that he knew that the policy existed
petition for review under ROC Rule 45
I. WON had prior knowledge of the 2 insurance policies issued by PFIC when he obtained the fire insurance policy
from P thereby not disclosing the fact, violating condition 3?
: s claim that the letter [of reconsideration] was not offered in evidence and thus should not be considered in deciding the case is
without merit
A copy of the letter was attached to s complaint in the IC case, thus making it an integral part of the complaint
It attained the status of judicial admission and since its due execution and authenticity was not denied by the other party, is bound
by it
o
ROC R129 S4 : Judicial admissions. An admission, verbal or written, made by the party in the course of the proceedings in
the same case, does not require proof. The admission may be contradicted only by showing that it was made through
palpable mistake or that no such admission was made
: IC found that had no knowledge of the previous 2 policies ; CA disagreed and found otherwise because of s explicit admission
on his letter [of reconsideration]
Divergent findings of fact = exception to the general rule in petitions for review under ROC R45
: Agree with CA that knew of the prior policies issued by PFIC
1991/01/18 letter conclusively proves his knowledge
Contrary testimony before the IC [which the latter relied upon] cannot prevail over a written admission made ante litem motam
Incredible that did not know about the prior policies since these policies were not new or original
o
GA-28144 renewed policy F-24758
o
GA-28146 renewed twice the prior policy F-24792
: Condition 3 in the policy is not proscribed by law
PD612 S75 : [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
Condition 3 is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral
hazard
Commonly known as the additional or other insurance clause and has been upheld as valid and as a warranty that
no other insurance exists
o
However, in order to constitute a violation, the other insurance must be

upon the same subject matter

upon the same interest therein

upon the same risk

In mortgages : mortgagor and mortgagee each have an independent insurable interest therein
both interests may be covered by one policy; or
each may take out a separable policy covering his interest either at the same time or at separate times
MORTGAGEE
Insurable interest is to the extent of the debt

He insures not the property, but his interest or lien thereon

Insurable interest is prima facie the value mortgaged and

extends only to that amount of indebtedness, not exceeding
the value of a mortgaged property
Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and the
mortgagee.

MORTGAGOR
Insurable interest is to the extent of the value of the
property
He insures the property, or specifically his interest in the
property

Mortgagor may, however take out insurance for the benefit of the mortgagee, which is the usual practice

Mortgagee may be made the beneficial payee in several ways

o
Mortgagee may be the assignee of the policy with the consent of the insurer
o
Mortgagee may be the mere pledgee if it was made without the consent of the insurer
o
The original policy may contain a mortgage clause
o
A rider making the policy payable to the mortgagee as his interest may appear may be attached
o
A standard mortgage clause containing a collateral independent contract between the mortgagee and the insurer may be
attached
o
The policy, although by its term is payable absolutely to the mortgagor, may have been procured by a mortgagor under a
contract duty to insure for the mortgagees benefit, thus the mortgagee acquires an equitable lien upon the proceeds
In policies obtained by the mortgagor with loss payable clause in favor of the mortgagee as his interest may appear, the mortgagee
is only a beneficiary under the contract
Mortgagee is recognized as such by the insurer but not made a party to the contract himself
Hence, any act of the mortgagor which defeats his right will also defeat the right of the mortgagee
Kind of policy covers only such interest as the mortgagee has at the issuing of the policy
A mortgagee may also procure a policy as a contracting party in accordance with the terms of an agreement by which the
mortgagor is to pay the premiums upon such insurance
Although the mortgagee himself is insured, as where he applies for a policy, then fully informs the authorized agent of his interest,
then pays the premiums, and thus obtains on the assurance that it insures him, the policy is in fact in the form used to insure a
mortgagor with loss payable clause
The PFIC Fire Insurance Policies name as the assured and contain a mortgage clause
Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their interest may appear subject to the terms of this policy.
clearly a simple loss payable clause, not a standard mortgage clause
: However, condition 3 also contains the proviso provided 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
CARDINAL RULE : a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the
company, the reason being, undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he
applied for insurance
CARDINAL PRINCIPLE OF LAW : forfeitures are not favored and that any construction which would result in the forfeiture of the
policy benefits for the person claiming thereunder, will be avoided, if it is possible to construe the policy in a manner which would
permit recovery, as, for example, by finding a waiver for such forfeiture
[Contract of Adhesion]
Interpreting condition 3 with the above-mentioned principles
(a) the prohibition applies only to double insurance, and
(b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained.
DOUBLE INSURANCE exists where the same person is insured by several insurers separately in respect of the same
subject and interest
Since the two policies of the PFIC do not cover the same interest as that covered by the policy of the private respondent, no double
insurance exists.
The nondisclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy.
The P200K limitation shows that P is amenable to assume a co-insurers liability up to a loss not exceeding P200K
It merely intended to discourage over-insurance
other insurance clauses is intended to prevent over-insurance and thus avert the perpetration of fraud [moral hazard]
When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value,
the insured may have an inducement to destroy the property for the purpose of collecting the insurance.
The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured
II. WON is precluded from recovering therefrom? NOPE ; THERE WAS NO DOUBLE INSURACE
CONCLUSION : SET ASIDE CA DECISION ; REINSTATE IC RULING

15. RIZAL COMMERCIAL BANKING CORPORATION ; UY CHUNG BING ; LAO, EDI vs CA ; GOYU&SONS, INC
P Goyu applied for credit facilities and accommodations with RCBC [Binondo Branch]
Uy and Lao [Key officers of RCBC] recommended Ps application for approval by s executive committee
A credit facility of P30M was initially granted and upons P Goyus application and Uy and Laos recommendation, RCBC EC
increased it to P50M, then P90M and finally P117M
As security, P executed 2 REM and 2 CM in favor of ; and registered the same with RD at Valenzuela, Metro Manila
o
Under each mortgage, P Goyu committed itself to insure the mortgaged properties with an insurance company approved
by and to subsequently endorse and delivery the policies to

o
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P Goyu obtained in its name 10 insurance policies from Malayan Insurance Company Inc [MICO]

Alchester Insurance Agency Inc [AIAI : insurance agent of MICO] issued 9 endorsement in favor of seemingly upon
instructions of P Goyu

1992/04/27 : One of Ps buildings in Valenzuela was gutted by fire

P submitted its claim for indemnity for the loss insured against
MICO denied the claim on the ground that
o
the policies were either attached pursuant to Writs of Attachments/Garnishments issued by various courts
o
The proceeds were also claimed by other creditors of P alleging better rights to the proceeds than the insured itself
P thus filed a complaint for specific performance and damages with RTC Manila
also filed a claim with MICO over the proceeds of the policies but was again denied by MICO for the same reasons
1993/10/13 RTC Manila interlocutory order confirming that Ps other creditors [Urban Bank ; Sebastian, Alfredo ; Philippine Trust
Company] obtained their respective writs of attachments from various courts for the aggregate amount of P14,938,080.23
Ordered the proceeds of the ten insurance policies be deposited with the court minus the aforementioned P14,938,080.23
1994/01/07 : MICO deposited the amount of P50,505,594.60 with the RTC Manila [Br. 3]
Meanwhile another notice of garnishment was handed down by another RTC Manila [Br. 28] for P8,696,838.75
RTC judgment in favor of P and against and MICO
MICO : pay P its fire loss claim of P74,040,518.58 less the amount of P50M [deposited in court]
MICO : pay P damages by way of interest for the duration of delay [1992/07/27 ninety days after insurers receipt of required proof
of loss and notice of loss] at twice the ceiling prescribed by the Monetary Board
o
1) P50,000,000.00 from July 27, 1992 up to the time said amount was deposited with this Court on January 7, 1994
o
2) P24,040,518.58 from July 27, 1992 up to the time when the writs of attachments were received by defendant Malayan
RCBC : pay P actual and compensatory damages P2M
MICO and RCBC : pay P P1M ED ; P1M AF ; Cost of suit
P : pay its loan obligations with in the amount of P68,785,069.04 as of 1992/04/27 with interest at the rate stipulated in the
respective promissory notes
Clerk of court to release the P50M deposited by MICO
All parties appealed [P was unstatisfied with award ; and MICO contested their liabilities]
CA modified RTC ruling
MICO : pay P its fire loss claim of P74,040,518.58 less the amount of P50,505,594.60 [amount deposited in court] and damages by
way of interest commencing July 27, 1992 until the time Goyu receives the said amount at the rate of thirty-seven (37%) percent per
annum
RCBC : pay P actual and compensatory damages of P5M
MICO and RCBC : pay P P1.5M ED ; P1.5M AF
P : pay its loan obligations P68,785,069.04 without any interest, surcharge, and penalties
Clerk of court to release P50,505,594.60 deposited by MICO
RCBC : GR 128833 : appeal CA decision + appeal separate case ruled on by CA [issue : RCBCs right to intervene in the action
between Sebastian, Alfredo against P where the subject insurance policies were attached in favor of Sebastian]
MICO : GR 128866 : appeal CA decision
I. WON [as mortgagee] has any right over the insurance policies taken by P [mortgagor], in case of the occurrence
of loss

RCBC has a right over the insurance proceeds.

It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such
that each one of them may insure the same property for his own sole benefit. There is no question that GOYU could insure the
mortgaged property for its own exclusive benefit. In the present case, although it appears that GOYU obtained the subject insurance
policies naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts, must be given due
consideration in order to better serve the interest of justice and equity.

It is to be noted that 9 endorsement documents were prepared by Alchester in favor of RCBC. The Court is in a quandary how
Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any particular beneficiary or payee other than
the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. It is also significant that GOYU
voluntarily and purposely took the insurance policies from MICO, a sister company of RCBC, and not just from any other insurance
company. Alchester would not have found out that the subject pieces of property were mortgaged to RCBC had not such information
been voluntarily disclosed by GOYU itself. Had it not been for GOYU, Alchester would not have known of GOYU's intention of obtaining
insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC, and verify, Alchester would not have
endorsed the policies to RCBC had it not been so directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in favor of mortgagor RCBC. RCBC, in
good faith, relied upon the endorsement documents sent to it as this was only pursuant to the stipulation in the mortgage contracts.
We find such reliance to be justified under the circumstances of the case. GOYU failed to seasonably repudiate the authority of the
person or persons who prepared such endorsements. Over and above this, GOYU continued, in the meantime, to enjoy the benefits of
the credit facilities extended to it by RCBC. After the occurrence of the loss insured against, it was too late for GOYU to disown the
endorsements for any imagined or contrived lack of authority of Alchester to prepare and issue said endorsements. If there had not
been actually an implied ratification of said endorsements by virtue of GOYU's inaction in this case, GOYU is at the very least
estopped from assailing their operative effects.

To permit GOYU to capitalize on its non-confirmation of these endorsements while it continued to enjoy the benefits of the credit
facilities of RCBC which believed in good faith that there was due endorsement pursuant to their mortgage contracts, is to
countenance grave contravention of public policy, fair dealing, good faith, and justice. Such an unjust situation, the Court cannot
sanction. Under the peculiar circumstances obtaining in this case, the Court is bound to recognize RCBC's right to the proceeds of the
insurance policies if not for the actual endorsement of the policies, at least on the basis of the equitable principle of estoppel.

GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of insurance shall exclusively apply
to the interest of the person in whose name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the
instant case presents a justification to take exception to the strict application of said provision, it having been sufficiently established
that it was the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were taken out.
Consider thus the following:

1.

It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and

GOYU in consideration of and for securing GOYU's credit facilities from RCBC. The mortgage contracts contained common provisions
whereby GOYU, as mortgagor, undertook to have the mortgaged property properly covered against any loss by an insurance
company acceptable to RCBC.
-

2.

GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO, no less than a sister company of

RCBC and definitely an acceptable insurance company to RCBC.

-

3.

Endorsement documents were prepared by MICO's underwriter, Alchester Insurance Agency, Inc., and copies thereof were sent

to GOYU, MICO and RCBC. GOYU did not assail, until of late, the validity of said endorsements.
-

4.

GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended by RCBC which was

conditioned upon the endorsement of the insurance policies to be taken by GOYU to cover the mortgaged properties.
-

This Court can not over stress the fact that upon receiving its copies of the endorsement documents prepared by Alchester, GOYU,
despite the absence written conformity thereto, obviously considered said endorsement to be sufficient compliance with its obligation
under the mortgage contracts since RCBC accordingly continued to extend the benefits of its credit facilities and GOYU continued to
benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various insurance
policies obtained by GOYU. The intention of the parties will have to be given full force and effect in this particular case. The insurance
proceeds may, therefore, be exclusively applied to RCBC, which under the factual circumstances of the case, is truly the person or
entity for whose benefit the policies were clearly intended.

16. CAISANO CAGAYAN, INC vs INSURANCE COMPANY OF NORTH AMERICA

Intercapitol Marketing Corporation [IMC] is the maker of Wrangler Blue Jeans ; Levi Strauss (Phils.) Inc [LSPI] is the local distributor of
products owned by Levi Strauss & Co.
IMC and LSPI separately obtained from fire insurance policies with book debt endorsements
Insurance policies provided for coverage on book debts in connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the Philippines
o
BOOK DEBT = unpaid account still appearing in the Book of Accounts of the insured 45 days after the time of loss covered
under this policy
1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and delivered by the
Insured which are outstanding at the date of loss for a period in excess of six (6) months from the date of the covering invoice or
actual delivery of the merchandise whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month all amount
shown in their books of accounts as unpaid and thus become receivable item from their customers and dealers
: customer and dealer of the products of IMC and LSPI
1991/02/25 : Gaisano Superstore Complex [Cagayan de Oro City] was consumed by fire
Included in the loss were stocks of ready-made clothing materials sold and delivered by IMC and LSPI
1992/02/25 : filed a complaint for damages against
IMC and LSPI filed with their claims under their respective fire insurance policies with book debt endorsements
1991/02/25 s unpaid accounts on the sale and delivery of ready-made clothing materials with IMC was P2,119,205.00 ; with LSPI
P535,613.00
paid the claims of IMC and LSPI, thus was subrogated to their rights against
made several demands upon but these went unheeded
1995/07/04 : Answer w/ counterclaim
Cannot be held liable because the property covered by the policies were destroyed due to fortuitous event / force majeure
s right of subrogation has no basis : no breach of contract committed by it since the loss was due to fire which cannot be prevented
nor foreseen
IMC and LSPI never communicated that they insured their properties and it never consented to paying the claim of the insured
RTC dismissed s complaint
Fire was purely accidental : cause of the fire was not attributable to the negligence of
It was not established that was the debtor of IMC and LSPI
Sales invoice state that "it is further agreed that merely for purpose of securing the payment of purchase price, the above-described
merchandise remains the property of the vendor until the purchase price is fully paid
o
Thus since ownership has not yet passed, IMC and LSPI must bear the loss
CA set aside RTC ruling
should pay
o
P2,119,205.60 [amount paid by to IMC] + legal interest from time of demand until fully paid
o
P535,613.00 [amount paid by LSPI] + legal interest from time of demand until fully paid
Sales invoices are proofs of sale, being detailed statements of the nature, quantity and cost of the thing sold
Loss of goods must be borne by since the proviso contained in the invoice is an exception under CC A1504 to the general rule that
the owner bears the risk of loss [res perit domino]

s obligation to IMC and LSPI is not the delivery of the lost goods but the payment of its unpaid account and as such obligation to
pay is not extinguished even in FE
By subrogation, the insurer has the right to go against
Being a fire insurance with book debt endorsements, what was insured was the vendors interest as a creditor
arguments
CA erred in ruling that the insurance in the case was over credit ; IMC and LSPI insured the goods against loss to fire and not because
of non-payment
o
Assuming that the insurance was over credit, there was no loss yet, since IMC and LSPI did not make prior demands
CA erred in ruling that the risk over the subject goods in the case had already transferred to upon delivery thereof
o
Despite delivery of goods, IMC and LSPI assumed the risk of loss when they secured the insurance policies over the goods
CA erred in holding that there was automatic subrogation under CCA2207 in favor of
o
There is no subrogation because there was no valid insurance because all the risk had transferred to upon delivery of the
goods
o
was not privy to the insurance contract or the payment between and IMC and LSPI nor was consent or approval secured

Lack of privity forecloses any real interest on the part of ; limiting its interest to keeping the insured goods safe
from fire
arguments
Although ownership has already transferred upon delivery, still had insurable interest as creditors who stand to suffer direct
pecuniary loss from its destruction
is liable since it failed to overcome the presumption of liaibility under CC A1265
o
Art. 1265. Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was due to his fault,
unless there is proof to the contrary, and without prejudice to the provisions of article 1165. This presumption does not apply
in case of earthquake, flood, storm, or other natural calamity.
Fire was caused by s negligence
is guilty of gross and evident bad faith in refusing to pay s valid claim [should be liable for legal expenses, litigation expenses
and cost of suit]
I. WON the CA erred in construing a fire insurance policy on book debts as one covering unpaid accounts of IMC and
LSPI since such insurance applies to the loss of the ready-made clothing materials sold and delivered to ? NO ; FIRE
INSURANCE POLICY EXPRESSLY PROVIDES THAT IT COVERS BOOK DEBTS ; PROPERTY INSURANCE : ONES INTEREST IS
NOT DETERMINED BY CONCEPT OF TITLE, BUT WON THE INSURED HAS SUBSTANTIAL ECONOMIC INTEREST IN THE
PROPERTY
GENERAL RULE when the words of a contract are plain and readily understood, there is no room for construction
COVERAGE : book debts in connection with readymade clothing materials which have been sold or delivered to various customers
and dealers of theInsured anywhere in the Philippines
BOOK DEBT : unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under
this Policy
Nowhere is it provided that the policy covers the goods sold and delivered to the customers and dealers of the insured
Literal reading of the agreement : the property insured were the accounts of IMC and LSPI which remained unpaid
45 days after loss through fire ; not the loss of the goods insured
: The retention of ownership by IMC and LSPI was merely in name ; it was stipulated to guarantee the s performance of his
obligation to wit, pay his accounts
CC A1504 but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that: x x x (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer
of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery;
Thus bears the risk of loss of the goods delivered
IMC and LSPI did not lose complete interest over the goods
They have an insurable interest until full payment of the value of the delivered goods
In the civil law concept of res perit domino [ownership is the basis for consideration of who bears the risk of loss]
In property insurance, ones interest is not determined by concept of title, but WON the insured has substantial
economic interest in the property
PD612 S13 Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature
that a contemplated peril might directly damnify the insured, is an insurable interest.
PD 612 S14 an insurable interest in property may consist in:
(a) an existing interest
(b) an inchoate interest founded on existing interest or
(c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.
Therefore, an insurable interest does not necessarily imply a property interest in, or a lien upon, or possession of, the subject
matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest.
It is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be
injured or destroyed by the peril against which it is insured
In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account
45 days after the time of the loss covered by the policies.
II. WON is liable for the unpaid accounts? YES ; BUT ONLY FOR THE PROCEEDS TOWARDS IMC ; FAILED TO PROVE
SUBROGATION IN LSPIs PLACE
: s argument for non-liability based on FE [CC A1174] is misplaced
bears the risk of loss under CC A1504(1)

Moreover, the insurance in this case is not for loss of goods by fire but for s account with IMC and LSPI that remained unpaid 45
days after a fire
o
Thus, s obligation is the payment of money
o
CA correctly held that where the obligation consists in the payment of money, the failure of the debtor to
make the payment even by reason of a fortuitous event shall not relieve him of his liability

Non-liability due to FE only applies to determinate things and there is no stipulation holding him liable even in case
of FE

Does not apply when the obligation is pecuniary in nature

CC A1263 : [i]n an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not
extinguish the obligation
This rule is based on the principle that the genus of a thing can never perish. Genus nunquan perit
: has adequately established its claims
IMC : Evidence shows s account with IMC is P2,119,205.00 + check voucher evidencing payment by to IMC + IMCs subrogation
receipt
o
Subrogation receipt by itself establishes

Relationship of to the insured

Amount paid to settle the claim

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract
LSPI : failed to present sufficient evidence to prove its cause of action
o
No evidentiary weight can be given to the letter [1991/04/31] from General Manager Gaisano, Stephen since it is not an
admission of s unpaid account

It merely confirmed the loss of the Levis products in the amount of P535,613.00
o
No proof of full settlement of the insurance claim of LSPI because there was no subrogation receipt offered in evidence

Thus no evidence that has been subrogated to any right LSPI may have against
CONCLUSION : Petition partly granted : AFFIRM AWARD WITH DELETION of P535,613.00

17. GREAT PACIFIC LIFE ASSURANCE CORP vs CA ; LEUTERIO, MEDARDA

entered into a group life insurance contract with Development Bank of the Philippines
Insured the lives of eligible housing loan mortgagors of DBP
1983/11/11 Dr. Wilfredo Leuterio, a physician and debtor of DBP applied for membership in the group life insurance plan
In the application form : He crossed yes in the question 8. Are you now, to the best of your knowledge, in good health?
1983/11/15 : issued certificate B-18558 as coverage of Dr. Leuterio to the extent of his DBP mortgage indebtedness of P86,200.00
1984/08/06 : Dr. Leuterio died due to massive cerebral hemorrhage
DBP thus submitted a death claim to , but the latter denied the claim alleging that Dr. Leuterio was not physically healthy when he
applied for insurance coverage
: Dr. Leuterio did not disclose that he was suffering from hypertension, which caused his death ; such concealment justifies denial
of claim
P [Widow of Dr. Leuterio] filed a complaint with RTC Misamis Oriental against for Specific Performance with Damages
During trial, Dr Mejia, Hernando [issued the death certificate] testified that Dr. Leuterio complained of headaches presumably due to
high blood pressure
o
Inference was not conclusive because Dr. Leuterio was not autopsied, hence the other causes were not ruled out
RTC ruled in favor of P
CA sustained RTC decision
I. WON the CA erred in holding liable to DBP as beneficiary in a group life insurance contract from a complaint filed
by the widow of the decedent/mortgagor? NO
: complaint was initiated by the widow of Dr. Leuterio, not the real party in interest, hence the RTC had no jurisdiction over the case
When the CA affirmed the judgment, was held liable to pay the proceeds of the insurance contract to DBP, the indispensable party
who was not joined in the suit
: Consider the insurable interest in mortgaged properties and the parties to this type of contract

Group insurance policy of mortgagors AKA mortgage redemption insurance = device for protection of both mortgagee and mortgagor
o
On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the
mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the
payment of the mortgaged debt, relieving the heirs of the mortgagor from paying
o
On the part of the mortgagor, even in death, the mortgage obligation will be extinguished by the application of the
insurance proceeds to the mortgage indebtedness
Consequently, where the mortgagor pays the insurance premium under the group insurance policy, making the loss payable to the
mortgagee, the insurance is on the mortgagors interest and the mortgagor continues to be a party to the contract
o
The mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the
mortgagee a party to the contract
PD612 S8 Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall
be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the
mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise
avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the
contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect
as if it had been performed by the mortgagor.
Insured P did not cede to the mortgagee all his rights or interests in the insurance
Since a policy of insurance upon life or health may pass by transfer, will or succession to any person, WON he has an insurable
interest or not and such person may recover whatever the insured might have recovered, the widow of the decedent Dr. Leuterio
may file the suit against the insurer
II. WON the CA erred in not finding that Dr. Leuterio concealed that he had hypertension, which would vitiate the
insurance contract? NO
Dr Leuterio failed to disclose that he had hypertension, which might have caused his death
Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing
requires that he should communicate it to the assured, but he designedly and intentionally withholds the same
: merely relied on the testimony of the attending physician, Dr. Meija, Hernando as supported by the information given by the
widow of the decedent
However, the medical findings were not conclusive because Dr. Meija did not conduct an autopsy on the body of the decedent
As attending physician, Dr. Meija stated that he had no knowledge of Dr. Leuterios previous hospital confinement
As the CA correctly held, there was no proof that Dr. Leuterio had hypertension, but it was merely surmised by the attending
physician that he died of cerebral hemorrhage secondary to hypertension
: fraudulent intent on the part of the insured must be established to entitle the insurer the right to rescind the
contract
III. WON the CA erred in holding liable in the amount of P86,200.00 without proof of actual outstanding mortgage
payable by the mortgagor to DBP? NO
no evidence as to the amount of Dr. Leuterio's outstanding indebtedness to DBP at the time of the mortgagor's death thus the case
should be dismissed
A life insurance policy is a valued policy
Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of
insurance upon life or health is the sum fixed in the policy
The policy states that upon receipt of due proof of the Debtor's death during the terms of this insurance, a death benefit in the amount of P86,200.00
shall be paid. In the event of the debtor's death before his indebtedness with the creditor shall have been fully paid, an amount to pay the outstanding
indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be paid to the beneficiary/ies designated by
the debtor."
However, since the DBP already foreclosed in 1995 their residential lot, the insurance proceeds should inure to the benefit of the heirs of the deceased
or his beneficiaries
18. SUN LIFE ASSURANCE COMPANY OF CANADA vs CA ; Spouses BACANI [Rolando and Bernarda]
1986/04/15 : Bacani, Robert John procured a life insurance [non-medical] for himself from
He was issued Policy 3-903-766-X valued at P100,000.00 with double indemnity in case of accidental death
The designated beneficiary was his mother, P Bernarda Bacani
1987/06/26 : the insured died in a plane crash
P thus filed a claim with seeking the benefits of the insurance policy taken by her son
However, conducted an investigation and its findings prompted it to reject the claim
The insured, Robert, allegedly failed to disclose facts relevant to the issuance of the policy thus rendering the same voidable ;
attached to the letter was a check of P10,172.00 representing the total premiums paid
Robert gave false statements when he answered the following questions in the application
5. Within the past 5 years, have you
a.
consulted to any doctor or other health practitioner
b.
submitted to ECG, X-rays, blood tests, other tests
c. attended or been admitted to any hospital or other medical facility
6. Have you ever had or sought advice for
Urine, kidney, or bladder disorder

Robert answered affirmative in question 5(a) but limited his answer to a consultation with a certain Dr. Reinaldo Raymundo of the
Chinese General Hospital
o
Allegedly for cough and flu complications
o
All other questions were answered negative
discovered that 2 weeks prior to his 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
1988/11/17 P Spouses filed an action for specific performance against with the RTC
Later 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
Thus moved for a summary judgment and the trial court decided in favor of P
RTC ruled in favor of P
Ordered to pay P P100,000.00 [face value of the policy] and P100,000.00 [accidental death benefit] + P5,000.00 as AF
Facts concealed were made in good faith and under a belief that they need not to be disclosed
Health history of the insured was immaterial since the policy was non-medical
CA affirmed the decision of the RTC
cannot avoid its obligation by claiming concealment because the cause of death was unrelated to the facts concealed
Health history were irrelevant since waived the medical examination prior to the approval and issuance of the policy
CA also agreed with the RTC that the policy was non-medical
CA denied s MFR
I. WON there was concealment that would avoid the policy?
PD612 S26 A neglect to communicate that which a party knows and ought to communicate, is called concealment.
PD612 S31 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
Terms of the contract are clear
The insured is specifically required to disclose to the insurer matters relating to his health
The information which the insured failed to disclose were material and relevant to the approval and issuance of the
insurance policy
o
The matters concealed would have definitely affected petitioner's action on his application, either by approving it with the
corresponding adjustment for a higher premium or rejecting the same.
o
Moreover, a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably
assess the risk involved in accepting the application.
Vda de Canilang vs CA : materiality of the information withheld does not depend on the state of mind of the insured. Neither does it
depend on the actual or physical events which ensue.
Good faith is no defense to 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

: argument that waived the medical examination is untenable

Saturnino vs Philippine American Life Insurance Company : the waiver of a medical examination [in a nonmedical
insurance contract] renders even more material the information required of the applicant concerning previous
condition of health and diseases suffered, for such information necessarily constitutes an important factor which the
insurer takes into consideration in deciding whether to issue the policy or not
Moreover, such argument would render PD612 S27 ineffective
Anent the finding that the fact concealed had no bearing to the cause of death of the insured
It is well settled that the insured need not die of the disease he had failed to disclose to the insurer
Henson vs Philippine American Life Insurance Co. : It is sufficient that his nondisclosure misled the insurer in
forming his estimates of the risks of the proposed insurance policy or in making inquiries
Thus properly exercised its right to rescind the contract of insurance by reason of the concealment employed by
the insured
The rescission was exercised within the 2-year contestability period recognized in S48
19. PHILAMCARE HEALTH SYSTEMS, INC vs CA ; TRINOS, JULITA [HCA ; Heart Attack ; Question of Opinion ; Contract of
Adhesion]
> HCA are in the nature of non-life insurance which is a contract of indemnity, thus payment should be made to the one who paid for
the expenses [P although she is not the legal wife paid for the expenses]
> Elements of an insurance contract [listed below]
> Requisites for the cancellation of an HCA
Ps deceased husband Trinos, Ernani applied for a health care coverage with PHSI ; answered no in 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).
: approved the application for 1 year ; 1988/03/01 1989/03/01
Hospitalization benefits [ordinary or emergency] + out-patient benefits [annual physical exams ; preventive health care ; other outpatient benefits]

Upon termination, the same was extended from 1989/03/01 1990/03/01 then from 1990/03/01 -1990/06/01
o
Amount of coverage was increased to the maximum of P75,000.00 per disability
Trinos, Ernani suffered a heart attack and was confined at the Manila Medical Center for 1 month [1990/03/09]
P tried to claim the benefits which denied because allegedly the agreement was void ; she paid the P76,000.00 hospitalization
herself
: there was concealment regarding the medical history
o
Doctors discovered that Ernani was hypertensive, diabetic and asthmatic, contrary to his answer in the application form.
Ernani was discharged from the MMC and was attended by a PT at home
Latter admitted to the Chinese General Hospital but was brought home again because of financial difficulties
o
1990/04/13 : Ernani had a fever and was brought to the CGH again where he died
1990/07/24 P : filed an action for damages with the RTC against and its president Dr. Reverente ; damages + MD + AF
RTC : In favor of P ; to pay/reimburse medical and hospital coverage of P76K plus interest + P10K MD + P10 ED + P20K AF
CA : Affirmed decision of RTC but deleted all awards for damages and absolved Dr. Reverente
: petition for review ; Health Care Agreement is not an insurance contract thus incontestability clause under PD612/1460 S48does
not apply
Agreement grants living benefits such as medical check-ups and hospitalizations which a member may enjoy so long as he is alive
upon effectivity until its expiration 1 year thereafter
HCAs also provide that benefits are given without any indemnification unlike in an insurance contract [where the insured is
indemnified for loss]
HCAs are only for a period of one year, as compared to insurance contracts which last longer thus the incontestability clause does not
apply [because the latter requires an effectivity period of at least 2 years]
It is not an insurance company [thus not under the IC] but a Health Maintenance Organization [under the DOH]
I. WON the health care agreement is an insurance contract? YES ; THE AGREEMENT HAS ALL THE ELEMENTS OF AN
INSURANCE CONTRACT ; HCAs ARE IN THE NATURE OF NON-LIFE INSURANCE
PD612 S(2)(1) a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event
INSURANCE CONTRACT ELEMENTS
1. The insured has an insurable interest
2. The insured is subject to a risk of loss by the happening of the designated peril
3. The insurer assumes the risk
4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar
risk and
5. In consideration of the insurers promise, the insured pays a premium.
PD612 S3 : Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest
against him, may be insured against
PD612 S10 : Every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children x x x
: Ps husband had an insurable interest in his own health
HCA was in the nature of a non-life insurance = a contract of indemnity
If a member incurs hospital, medical or any other expense arising from sickness et al or other stipulated contingent, the health care
provider must pay for the same
II. WON Ps husband concealed a material fact in his application? NO ; IT IS A QUESTION OF OPINION AND WHEN
ANSWERED IN GOOD FAITH and WITHOUT INTENT TO DECEIVE, WILL NOT AVOID A POLICY EVEN IF UNTRUE ; FURTHER,
CONCEALMENT IS AN AFFIRMATIVE DEFENSE THUS REQUIRED TO BE ESTABLISHED BY THE INSURER
HCA Stipulations
x x x that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime relative to any
information acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the
Proposed Members
x x x any and all information relative to any hospitalization, consultation, treatment or any other medical advice or examination. This
authorization is in connection with the application for health care coverage only. x x x
x x x Failure to disclose or misrepresentation of any material information in the application/medical examination, whether intentional
or unintentional, x x x automatically invalidates the Agreement from the very beginning and the liability of Philamcare shall be the
return of all membership fees paid. x x x Information is material if it would result in declination of the applicant or the assessment of a
higher membership fee x x x
: Answer assailed by are questions of opinion rather than fact especially coming from the deceased 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
Fraudulent intent of the insured must be established to warrant a rescission of the insurance contract
Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the
duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer
PD612 S27 Concealment entitles the injured party to rescind a contract of insurance
The right to rescind should be exercised previous to the commencement of an action on the contract
No rescission was made in this case
Further cancellation of HCAs in insurance policies require the concurrence of the following
Which none were fulfilled
CANCELLATION OF HCAs ; Requisites
1. Prior notice of cancellation to insured
2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on
which cancellation is based
When the insurance contracts contain limitations on liability, they should be construed in such a way as to preclude
the insurer from non-compliance
Insurance contracts are contracts of adhesion, thus they are to be construed strictly against the party that prepared the contract and
liberally in favor of the insured
o
Principle is applicable in HCAs
Anent the incontestability, the RTC was correct in holding that : under the title Claims procedure of expenses, had 12 months
from date of issuance of the HCA within which to contest the membership of the patient if he had previous ailment of asthma, and 6
months from issuance if the patient was sick of diabetes or hypertension.
The periods expired without contesting the membership, thus the defense of concealment or misrepresentation no
longer lie
Although P was not the legal wife [deceased was previously married to another woman who was still alive], HCA is in the nature of
a contract of indemnity
Thus payment should be made to the party who incurred the expense [which P paid for]
CONCLUSION : Affirm CA decision

20. Vda. De CANILANG, THELMA vs CA ; GREAT PACIFIC LIFE ASSURANCE CORPORATION

Canilang, Jaime consulted with Dr. Claudio, Wilfredo

1982/06/18 : diagnosed with sinus tachycardia ; prescribed with Trazepam [tranquilizer] and Aptin [beta-blocker drug]
1982/08/03 : diagnosed with acute bronchitis
1982/08/04 : Canilang, Jaime applied for a non-medical insurance policy with P Great Pacific Life Assurance Corporation naming his
wife Thelma Canilang as beneficiary
P issued ordinary life insurance with the face value of P19,700.00 effective on 1982/08/09
1982/08/05 : Canilang, Jaime died of congestive heart failure, anemia and chronic anemia
thus filed a claim with P which the insurer denied on 1983/12/05 upon the ground of concealment
: thus filed an administrative complaint with the Insurance Commission for the recovery of the insurance proceeds
testified that she was not aware of any serious illness suffered by her late husband and that as far as she knew, he died because of
a kidney disorder
Dr. Claudio provided a deposition as the family physician and that he had previously treated Canilang for sinus tachycardia and acute
bronchitis
P presented Dr. Quismorio, Esperanza, a physician and a medical underwriter working for P
Explained that as a rule, medical examinations are required only in cases where the applicant has indicated in his application for
insurance that he has previously undergone medical consultation or hospitalization
IC Ansaldo, Armando ordered P to pay P19,700.00 + P2000.00 as AF
Ailment of Jaime was not serious and even if disclosed would not have affected Ps decision to insure him
P waived its right to inquire into the health condition when it issued the policy despite the lack of answers to some of the pertinent
questions in the application
No intentional concealment because he only thought he was merely suffering from a minor ailment and simple cold
BP847 which voids an insurance contract, WON concealment was intentionally made, was not applicable because it became effective
only on 1985/06/01
CA reversed the IC decision
The use of the word intentionally by the IC in defining and resolving the issue was not supported by evidence
The issue agreed upon by the parties was WON Jaime made a material concealment
Jaimes failure to disclose the previous medical consultation and treatment constituted material information which should have been
communicated to P
I. WON Canilang, Jaime made a material concealment? YES
: Jaime made a medical declaration that reads as follows
He had not been confined in any hospital, sanitarium, or infirmary nor received any medical or surgical advice/attention within the
last 5 years
He had not been treated nor consulted any physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney,
stomach disorder or any other physical ailment
He was, to the best of his knowledge, of good health
o
In the exceptions, he left it blank
: He gave negative statements in paragraph 1 and 2 + he failed to disclose in the appropriate space under the caption exceptions,
that he had twice consulted Dr. Claudio
PD1460 [effective 1978/06/11]
Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment.
Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all factors within his knowledge which
are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining.
Information concealed must be information which the concealing party knew and ought to have communicated, that is to say
information material to the contract
Test of materiality is found in S31
Sec. 31. Materially is to be determined not by the event, but solely by the probable and reasonable influence of the
facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed
contract, or in making his inquiries.
"Sinus tachycardia" is considered present "when the heart rate exceeds 100 beats per minute
Symptoms : pounding in the chest and sometimes faintness and weakness of the person affected
P elaborated : [it is] a common reaction to heart disease, including myocardial infarction, and heart failure per se ;
Trazepam which is antianxiety, anticonvulsant, musclerelaxant and Aptin, (Idem, p. 36) a cardiac drug, for palpitations and nervous
heart. Such treatment could have been a very material information to the insurer in determining the action to be take on Canilang's
application for life insurance coverage
Thus agree with CA that the information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to
estimate the probable risk he presented as a subject of life insurance.
Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the
communication should have been made, in assessing the risk involved in making or omitting to make further inquiries
and in accepting the application for insurance that "probable and reasonable influence of the facts" concealed must,
of course, be determined objectively, by the judge ultimately.
- Materiality of the information withheld does not depend on the state of mind of the insured. Neither does it depend on the actual or
physical events which ensue.
BP874 which amended the Insurance Code of 1978 ; Sec. 27. A concealment whether intentional or unintentional entitles the
injured party to rescind a contract of insurance.

The prior elimination of the words intentional or unintentional left the word concealment unqualified
o
Thus the IC incorrectly held that the concealment required should only be intentional
, 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 his heart beat would at times rise to high and alarming levels and that he had
consulted a doctor twice in the two (2) months before applying for nonmedical 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."
21. TAN [EMILIO, JUANITO, ALBERTO, and ARTURO] vs CA ; PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
1973/09/23 Tan, Lee Siong [father of ] applied for life insurance for P80,000 with P
Application was approved and the policy was issued effective P1973/11/06 with as beneficiaries
1975/04/26 Tan, Lee Siong died of Hepatoma
filed claim for the proceeds of the life insurance
1975/09/11 P sent a letter denying the claim and rescinding the policy because of alleged misrepresentation and concealment of
material facts ; premiums were refunded
thus filed a complaint with the Office of the Insurance Commissioner
IC : dismissed s complaint
CA : dismissed s appeal
s arguments
CAs conclusion that the insurer has the right to rescind the policy contract when the insured is already dead is not in accordance with
law
CAs conclusion that the insurer may be allowed to avoid the policy on grounds of concealment by the deceased assured is contrary
to the provisions of the policy contract itself, as well as applicable legal provisions and established jurisprudence
The inference of CA that respondent insurer was misled in issuing the policy are manifestly mistaken and contrary to admitted
evidence
In sum, contend that the P no longer had the right to rescind the contract of insurance as rescission must allegedly be done
during the lifetime of the insured within 2 years and prior to the commencement of the action
I. WON P had the right/power to rescind the contract on the ground of concealment and WON the same can still be
validly exercised? YES ; THE 2 YEAR PERIOD REQUIRED IN THE INCONTESTABILITY CLAUSE HAS NOT YET LAPSED ; THE
INSURED CONCEALED HIS CONSULTATIONS AND TREATMENT FOR HYPERTENSION, DIABETES AND LIVER DISORDERS
PD612 S48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right
must be exercised previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the
insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the
policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent.
: Insurance law was amended and the second paragraph of S48 added to prevent the insurance company from exercising a right to
rescind after the death of the insured
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 2 years during the lifetime
of the insured
The phrase during the lifetime means the policy is no longer considered in force after the insured has died
Key phrase = for a period of two years
As noted by the CA
The policy was issued on 1973/11/06 and the insured died on 1975/04/26
Policy was in force for only 1 year and 5 months
Considering that the insured died before the lapse of the 2 year period, P is not barred from proving that the policy is void ab initio
by reason of concealment et al
: s contention that their father [insured] did not make any concealment because he did not have to buy insurance if not for the
insistence of the salesmen is not tenable
Insular Life vs Feliciano : common knowledge that selling of insurance is subjected to the whirlwind pressure of modern
salesmanship ; agents supply all information, prepare and answer the applications, submit the applications to their companies,
conclude transactions and otherwise smooth difficulties
o
Thus legislature answered with the incontestability clause added by the 2 nd paragraph of S48
: Insurer has 2 years from date of issuance or last reinstatement within which to contest the policy WON the insured still lives
within such period
After 2 years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer lie
Congress felt this period was sufficient to answer the various tactics employed by insurance companies to avoid liability
s argument would result to the incongruous situation where beneficiaries of the 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
Agreed with CA in finding that s contention that P did not present evidence to show that the questions in the insurance
application were asked / explained to the applicant to prove concealment on his part is not tenable
Evidence for P shows that
o
1972/09/19 The deceased was examined Dr. Lim, Victoriano and found to be diabetic and hypertensive
o
1973 he was complaining of progressive weight loss and abdominal pain and was diagnosed of hepatoma

o
1973/12/14 The deceased came to Dr. Vitug, Wenceslao and claimed to have been diabetic for 5 years
Because the insured concealed his consultations and treatments for hypertension, diabetes and liver disorders, P was thus misled

22. PRUDENTIAL GUARANTEE and ASSURANCE INC vs TRANS-ASIA SHIPPING LINES, INC
: owned the vessel M/V Asia Korea
Secured insurance from for loss/damage of the hull and machinery arising from perils, inter alia, of fire and explosion for P40M
[1993/07/01 1994/07/01]
1993/10/25 a fire broke out aboard MV Asia Korea while undergoing repairs at the port of Cebu
1993/10/26 filed its notice of claim for damages sustained by the vessel, with reservation to subsequent notification of the claim
upon final survey
o
Adjusters report on the fire was submitted by Richard Hogg International [hired by ] together with U-Marine Surveyor
Reports
1995/05/29 executed a document denominated as Loan and Trust Receipt
Received from a P3M loan without interest, repayable only in the event and to the extent that any net recovery is made by on
account of the loss
As security for such repayment, pledged to whatever recovery made
: denied s claim through a letter
allegedly breached policy conditions, among them : warranted vessel classed and class maintained
Requested the return of the P3M sum
thus filed a complaint for sum of money against ; claiming P8,395,072.26 [balance of the P11,395,072.26 insurance policy] +
42% interest PD612 S243
RTC Ruled in favor of ; to return the P3M
Liabilities of the parties hinged on WON violated / breached the policy conditions on warranted class and class maintained =
which meant that is required to maintain the vessel at a certain class at all times pertinent during the life of the policy, which
failed to do
committed concealment PD612 S107 ; failure to maintain/preserve its class was a material concealment sufficient to avoid the
policy and entitling the injured party to rescind
The Loan and Trust Receipt should be interpreted as a loan since the parties called it as such
CA Reverse RTC decision ; should keep the P3M and retains the claim for the balance
On the issue of WON breached the policy condition of warranted class and class maintained, it was [the party asserting noncompensability] who had the burden of proof to show that breached the warranty
Further, the warranty allegedly breached by was a rider which, while contained in the policy, was inserted by without s
intervention
o
Thus it partakes of the nature of a contract of adhesion which should be construed against
Further still, the 2 renewals by constitutes a waiver by of any breach of warranty
Lastly, the Loan and Trust Receipt is a contract of subrogation and not a receipt, with the P3M considered as partial payment of s
obligation towards
I. WON is liable towards for the subject insurance policy? YES ; FAILED TO PROVE THAT BREACHED THE
WARRANTY ; ARGUENDO, ALSO WAIVED ITS RIGHT TO RESCIND WHEN IT ACCEPTED RENEWAL FOR 2 CONSECUTIVE
YEARS
A. failed to establish that violated and breached the policy condition [warranted vessel classed and class maintained]
Marine Insurance Policy Warranty Clause 5 : the insured vessel, "M/V ASIA KOREA" is required to be CLASSED AND CLASS
MAINTAINED
According to , on 1993/10/25 [time of occurrence of fire], the vessel was in violation of its warranty as it was not classed and not
class maintained
Classed and class maintained as defined by s Senior Manager of the Marine and Aviation Division Fernandez, Lucio [in examination
interview] : entered into a classification society which set certain standards for a vessel to maintain for them to maintain membership
in the society. Such classification must be continuous throughout the effectivity of the policy, otherwise the warranty is breached
However, merely asserted that the warranty was breached without even attempting to discharge the burden of proof to establish
the same.
Further Senior Manager Fernandez admitted that at the time of procurement of the insurance contract, s vessel was properly
classed by Bureau Veritas
PD612 S74 The violation of a material warranty, or other material provision of a policy on the part of either party thereto, entitles the
other to rescind
o
[a] warranty is a statement or promise set forth in the policy, or by reference incorporated therein, the untruth or
nonfulfillment of which in any respect, and without reference to whether the insurer was in fact prejudiced by such untruth or
nonfulfillment, renders the policy voidable by the insurer.

o
-

However, it is indubitable that for the breach of warranty to avoid a policy, the same must be duly shown by the party
alleging the same

B. Assuming that violated the policy condition, made a valid waiver of the same
CA correctly held that the 2 consecutive renewals made by resulted in s waiver of the alleged breach
Breach of a warranty or of a condition renders the contract defeasible at the option of the insurer but if he so elects, he may waive
his privilege and power to rescind by the mere expression of an intention so to do
No clearer intention of the waiver of the alleged breach of warranty, than the renewal of the policy
Further bolstered by the fact that consistently requested for a certification that the vessel was classed and class maintained, which
WON was acceded to, did not affect s decision to renew
II. WON is liable towards for the Loan and Trust Receipt Agreement? NO ; THE P3M IS AN ADVANCE PAYMENT OF
THE INSURANCE PROCEED AND NOT A LOAN
: P3M given to is a loan and not as partial payment against s liabilities ; as a customary practice for insurance companies to
afford their assured to continue business without embarrassment while awaiting the outcome of their claim
The Loan and Trust Agreement did not subrogate to whatever rights and/or actions may have against 3 rd persons
Notwithstanding its designation, the tenor of the "Loan and Trust Receipt" evidences that the real nature of the transaction between
the parties was that the amount of P3,000,000.00 was not intended as a loan whereby TRANSASIA is obligated to pay PRUDENTIAL,
but rather, the same was a partial payment or an advance on the policy of the claims due to TRANSASIA.
The amount constitutes as an advanced payment subrogating the former to the extent of any net recovery made
even is obligated under the agreement to promptly prosecute suit against any third party responsible for the loss, at the expense
and under the exclusive direction and control of , making it the principal and the agent
The obligation of to repay is highly speculative and contingent i.e. only in the event and to the extent that any net recovery is
made by from persons liable
o
Transaction was made to benefit such that if no recovery from 3 rd parties is made, then cannot be repaid
III. What is the correct imposable interest on the liability, if any, of either or both parties?
: is directed to pay the balance of P8,395,072.26 + AF of 10% P839,507.226
: AF is granted [contrary to CAs ruling] because under PD612 S244 : AF is granted after the finding of an unreasonable denial /
withholding of the payment
Further the law imposes an interest of twice the ceiling prescribed by the Monetary Board on the amount of the claim due the insured
from the date following the time prescribed under S242 or in S243 until fully satisfied
o
S244 considers the failure to pay the claims within the periods specified under S242 and S243
o
S244 does not require a showing of bad faith ; a prima facie evidence of unreasonable delay in payment of the claim is
created by mere failure to pay
: There was unreasonable delay by to pay s claims
1993/10/26 [day after loss] filed its notice of claim
1996/08/13 Richard Hogg International completed its survey report recommending the amount of P11,395,072.26 as the total
indemnity
1997/04/21 sent a letter denying s claim
1997/07/21 sent another letter seeking the return of P3M
PD612 S244 : categorical in imposing an interest twice the ceiling prescribed by the Monetary Board due the insured, from the date
following the time prescribed in Section 242 or in Section 243, as the case may be, until the claim is fully satisfied
PD612 S243. 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.
Prevailing interest ceiling is 12% per annum, thus 24% per annum
Interest computed from 1996/08/13 [proof of loss : as done by the surveyors]
A further legal interest of 12% per annum for the total amount of liability computed from finality of judgment until full satisfaction
CONCLUSION
1. PRUDENTIAL is DIRECTED to PAY TRANSASIA the amount of P8,395,072.26, representing the balance of the loss suffered by
TRANSASIA and covered by Marine Policy No. MH93/1363
2. PRUDENTIAL is DIRECTED further to PAY TRANSASIA damages in the form of attorneys fees equivalent to 10% of the amount of
P8,395,072.26
3. The aggregate amount (P8,395,072.26 plus 10% thereof as attorneys fees) shall be imposed double interest at the rate of 24% per
annum to be computed from 13 September 1996 until fully paid and
4. An interest of 12% per annum is similarly imposed on the TOTAL amount of liability adjudged as abovestated in paragraphs (1), (2),
and (3) herein, computed from the time of finality of judgment until the full satisfaction thereof.

23. PACIFIC TIMBER CORPORATION vs CA ; WORKMENS INSURANCE COMPANY

1963/03/19 secured a temporary insurance from P for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs
to be shipped from Diapitan Bay, Quezon to Okinawa and Tokyo, Japan
P issued on the same date Cover Note 1010, insuring the said cargo Subject to the Terms and Conditions of the Workmens
Insurance Company, Inc. printed marine policy form as filed with and approved by the Office of the Insurance Commissioner
1963/04/02 P issued the regular marine cargo policies
o
Marine Policy 53 HO 1032 was for 542 pieces of logs equivalent to 499,950 board feet
o
Marine Policy 53 HO 1033 was for 853 pieces of logs equivalent to 695,548 board feet
o
Thus total cargo insured under the 2 policies consisted of 1,395 logs or 1,195,498 board feet
After the issuance of Cover Note 1010 but before the issuance of the two marine policies [53 HO 1032 & 53 HO 1033], some of the
logs were lost during loading in Dapitan Bay
The logs were to be loaded on SS Woodlock which docked about 500 meters from the shoreline
The logs were taken from the log pond of and from which they were towed in rafts to the vessel
1963/03/29 10AM : bad weather resulted in 75 pieces of logs which were rafted together to break loose from each other ; 45 were
salvaged but 30 pieces were verified to have been lost / washed away
: sent a letter dated 1963/04/04 informing P about the loss of approximately 32 pieces of logs during the loading of the SS
Woodlock [Sgd. by Asst. Gen. Manager Atilano, Emmanuel]
It was received in the office of P only on 1963/04/15 as shown by the stamp impression appearing on the left bottom corner of said
letter
subsequently submitted a Claim Statement demanding payment of the loss under Policies 53 HO 1032 and 53 HO 1033 for the
total of P19,286.79
1963/07/17 P requested First Philippine Adjustment Corporation to inspect the loss and assess the damage
The adjustment company submitted its Report on August 23, 1963
o
30 pieces of logs lost were not covered by the policies because the policies covered actual number of logs loaded on board
SS Woodlock
o
However, the 30 pieces of logs lost were within the 1,250,000 board feet covered by Cover Note 1010 insured for $70,000.00
1963/09/14 The adjustment company submitted a computation of Ps probable liability in the total amount of P11,042.04
1964/01/13 : P wrote to denying the latters claim
Entire shipment of logs were covered by the 2 marine policies were received in good condition at their point of destiatnion
Lost logs may be considered by the temporary insurance Cover Note 1010 but the same became null and void by virtue of the
issuance of the 2 marine policies
: wrote to the Insurance Commissioner informing the latter of the denial of its claim
Insurance Commissioner Mandanas, Francisco sent a letter dated 1964/03/24, and observed that it is only fair and equitable to
indemnify the insured under Cover Note 1010 and advised early settlement of the said marine loss and salvage claim
However, P still denied the claim ; prompting to file suit
RTC Ruled in favor of ; P should pay P11,042.04 with interest rate of 12% from receipt of notice of loss on 1963/04/15 +
P3000.00 AF
CA Reverse RTC ruling

Cover Note was null and void for lack of consideration

P was released from liability because of unreasonable delay on s part to give notice of loss
I. WON the CA erred in ruling that the Cover Note was null and void for lack of valuable consideration? YES ; COVER
NOTES, BY ITS NATURE, DO NOT PROVIDE / REQUIRE SEPARATE PREMIUMS
Cover Note 1010 was not without consideration
The fact that no separate premium was paid on the Cover Note before the loss does not militate against the validity of s contention
that there was consideration
No such premium could have been paid because the very nature of a Cover Note does not provide for particulars of the shipment that
would serve as a basis for the computation of the premiums
o
As a logical consequence, no separate premiums are intended or required to be paid on a Cover Note, as admitted by
Camacho, Juan [officer who issues cover notes of P]
Not disputed that paid in full all the premiums as called for by the statement issued by P after the issuance of the 2 marine
insurance policies
No account was unpaid, which must be deemed to have included the Cover Note
If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and
function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application
for insurance which is a mere offer.
True that the marine insurance policies were issued for logs no longer including those which had been lost during the loading
operations
The risk insured against is not for loss during loading operation but for loss during transit, the logs already been safely placed aboard
Fact would not make a difference insofar as the liability on the cover note is concerned because the number of logs lost can be
determined independently as in fact it had been ascertained at the instance of P when it sent its own adjuster
Cover Note operates as a binder : where it legally binds the parties during its temporary effectivity prior to the issuance of the actual
insurance policies
o
In this case, should premium payments be required, it would be more prudent to deduct the premium to the liability the
insurer has
II. WON the CA erred in holding that P was released from liability on account of unreasonable delay? YES
The law requires this ground of delay to be promptly and specifically asserted when a claim on the insurance agreement is made.
Instead of revoking on the ground of delay, P took steps clearly indicative that this particular ground for objection was never in its
mind
P made steps to determine the cause and extent of the loss, presumably with a view to the payment thereof on the insurance
agreement
o
It sent its adjusters to investigate and assess the loss
From 1963/04 to 1963/07, P had enough time to determine if was guilty of delay
In the proceeding before the Insurance Commissioner, P should have raised this ground of delay to avoid liability but it did not so
PD612 S84 Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to take
objection promptly and specifically upon that ground
24. GREAT PACIFIC LIFE ASSURANCE COMPANY vs CA/ MONDRAGON, LAPULAPU vs CA ; NGO HING [20-year endowment
policy on special daughter; Binding Deposit Receipt]
> 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 binding slip/receipt does not insure by itself
> Whether intentional or unintentional, the concealment entitles the insurer to rescind the contract of insurance
> Concealment is a neglect to communicate that which a party knows and ought to communicate
1957/03/14 PNgo Hing applied with GPAC a 20-year endowment policy for P50,000.00 on his daughters [Go, Helen] life
Endowment policy : life insurance contract to pay a lump sum after a specific term [on maturity] or on death ; typically
10/15/20 years up to a certain age limit
o
P Ngo Hing paid the annual premium of P1,077.75 going over to GPAC and was given the corresponding binding deposit
receipt
o
P Ngo Hing retained P1,317.00 as his commission [he was an agent of GPAC too]
1957/04/30 However, GPAC disapproved the insurance application because the 20-year endowment plan is not available for minors
below 7 years old
o
It however recommended the Juvenile Triple Action Plan and asked for the submission of the Juvenile Non-Medical
Declaration
1957/05/06 Mondragon did not communicate the disapproval to P Ngo Hing but again insisted on approval because applicants
have been requesting coverage since 1954
1957/05/28 : Go, Helen died of influenza with complication of bronchopneumonia
P Ngo Hing thus sought payment of the proceeds of the insurance but was denied thus constraining him to file the action for
recovery before COFI Cebu
COFI : GPAC and Mondragon are solidarily liable to pay P Ngo Hing the amount of P50,000.00 with 6% from date of filing of
complaint and P1,077.75 without interest
CA affirm in toto
I. WON the binding deposit receipt constituted a temporary contract of the life insurance in question? NO ; THE BDR
PROVIDED CONDITIONS PRECEDENTS THAT WERE NOT FULFILLED NEGATING THE CONCLUSION OF AGREEMENT OF
MINDS BETWEEN THE PARTIES THUS THERE IS NO INSURANCE CONTRACT

The binding deposit receipt had condition precedents written on its back that required the following before a deposit is considered
being a binding receipt
If the Company or its agent, shan have received the premium deposit ... and the insurance application, ON or PRIOR to the date of
medical examination ... said insurance shall be in force and in effect from the date of such medical examination, for such period as is
covered by the deposit ..., PROVIDED the company shall be satisfied that on said date the applicant was insurable on standard rates
under its rule for the amount of insurance and the kind of policy requested in the application.
D. If the Company does not accept the application on standard rate for the amount of insurance and/or the kind of policy requested in
the application but issue, or offers to issue a policy for a different plan and/or amount ..., the insurance shall not be in force and in
effect until the applicant shall have accepted the policy as issued or offered by the Company and shall have paid the full premium
thereof. If the applicant does not accept the policy, the deposit shall be refunded.
E. If the applicant shall not have been insurable under Condition A above, and the Company declines to approve the application the
insurance applied for shall not have been in force at any time and the sum paid be returned to the applicant upon the surrender of
this receipt.
: Provisions show that the binding deposit receipt is intended to be merely a provisional / temporary insurance contract and only
upon compliance of:
That the company shall be satisfied that the applicant was insurable on standard rates
That if the company does not accept the application and offers to issue a different plan, the insurance contract shall not be binding
unless the latter offer is accepted
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 applicant
Clearly, the BDR is merely an acknowledgement that the company branch received from the applicant the insurance premium and
accepted the application for processing
Since GPAC disapproved the application, the BDR never became in force
Thus the BDR, by its own provision, is 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
o
Acceptance is merely conditional and is subordinated to the act of the company in approving / rejecting the application
o
De Lim vs Sun Life Assurance Company of Canada : In life insurance, the binding slip/receipt does not insure by itself
: GPAC in its 1957/04/30 letter to Mondragon, disapproved the application since the plan was not offered to children less than
7years of age
It instead offered the Juvenile Triple Action, which P Ngo Hing failed to accept
In the absence of meeting of the minds and non-compliance of the mentioned condition precedents, there could have been no
insurance contract duly perfected
De Lim vs Sun Life Assurance Co. of Canada : a contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents ... The contract, to be binding from the date of the application, must have
been a completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon,
or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have
met in agreement
: Ps contention that failure of Mondragon to communicate the disapproval did not have any adverse effect on the contract is
not persuasive
There was no perfected contract between the parties
P, being an authorized agent of GPAC, knows that the company does not offer the life insurance applied for
o
He only took chance that the same will be approved based on s recommendation
P had an insurable interest on the life of his daughter thus he should have followed and known the progress of processing and
cannot pretend ignorance of events
II. WON P Ngo Hing concealed the state of health and physical condition of Go, Helen which rendered void the
binding deposit receipt? YES ; CONCEALED THE FACT OF HIS DAUGHTERS CONGENITAL PHYSICAL DEFECT
: When P Ngo Hing supplied the required essential data for the insurance application, he was fully aware that his daughter is
typically a mongoloid child [cases phrasing]
Congenital physical defect could never be ensconced nor disguised
o
P in bad faith, withheld the fact material to the risk to be assumed by GPAC
Contract of insurance is one of uberrimae fidae [good faith, absolute and perfect candor or openness and honesty]
o
Concealment is a neglect to communicate that which a party knows and ought to communicate
o
Whether intentional or unintentional, the concealment entitles the insurer to rescind the contract of insurance

25. PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY vs Judge VALENCIA-BAGALACSA, LORE [RTC] ;
LUMANIOG [Eduardo, Celso and Ruben]
1995/06/20 P : legitimate children and thus forced heirs of their father Lumaniog, Faustino, filed with RTC a complaint for recovery of
sum of money against
Their father was insured by under Life Insurance Policy with a face value of P50,000.00 and their father died on 1980/11/25 of
coronary thrombosis
1981/06/22 P continuously claimed for all the proceeds and interests under the policy in the amount of P641,000.00
Despite repeated demands, refused the claim
: filed an answer with counterclaim and motion to dismiss
Ps cause of action has prescribed and they are guilty of laches

Denied the claim in a letter signed by Assistant VP Dimalanta, Amado on 1982/03/12 the ground of concealment by the
deceased insured Lumaniog, Faustino
Insured asserted that he had not been treated for indication of chest pain, palpitation, high blood pressure, rheumatic fever, heart
murmur, heart attack, or other disorder of the heart or blood vessel when in fact he was a known hypertensive since 1974
Denied the requests for reconsideration sent by P on 1983/07/11 and even the one through provincial board member Claro,
Jose M. sent 1994/12/01
Denied the last request for reconsideration through a letter dated 1995/02/14
RTC Denied s motion to dismiss since the matter was evidentiary in nature and required a hearing
Subsequently denied s MFR
10-year period [of prescription] was stopped on 1983/05/25 when P requested for a reconsideration of s denial of claim
10-year period resumed only on 1995/02/14 when finally decided to deny their claim that the 10-year period began to run again
thus filed a petition for certiorari under ROC R65 with the CA
CA Denied due course for s petition for certiorari with prayer for issuance of TRO and/or preliminary injunction and is accordingly
dismissed for lack of merit
Prescriptive period commenced to run only on 1995/02/14, the date when finally rejected the claim of P and not in 1983
Summit Guaranty and Insurance Co vs De Guzman : an insured-plaintiffs cause of action does not accrue until his claim is finally
rejected by the insurance company. This is because, before such final rejection, there is no real necessity for bringing suit
Thus the RTC did not commit GAOD in ruling as such
I. WON the CA committed reversible error? YES, IT COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT THE RTC DID
NOT COMMIT GAOD SINCE THE LATTER ARBITRARILY RULED THAT THE PERIOD OF 10 YEARS HAD NOT YET LAPSED
BASED ON THE MERE EXPLANATION OF THE PS EXPLANATION AND NOT ON THE EVIDENCE PRESENTED
RTC was initially correct in issuing its 1996/06/07 order for hearing as there are matters in the respective pleadings that are
evidentiary in nature, in effect denying s MTD
ROC R16 S3 Hearing and order. After hearing the court may deny or grant the motion or allow amendment of pleading, or may defer
the hearing and determination of the motion until the trial if the ground alleged therein does not appear to be indubitable [then
effective before the 1997/07/01 amendment]
However, had specifically alleged that it denied Ps per its letter dated 1983/07/11
Due process demands that be given the opportunity to prove that P already received the said letter
RTC committed GAOD when in resolving s MFR, it arbitrarily ruled in its order that the period of 10 years had not yet lapsed
Such decision was based on the mere explanation of Ps counsel and not on the evidence
The ruling of the RTC that the cause of action of private respondents had not prescribed, is arbitrary and patently erroneous for not
being founded on evidence on record, and therefore, the same is void.
CONCLUSION : Reverse and set aside the CA Order insofar as it upheld the 1997/12/12 RTC order. New judgment
entered reversing and setting aside the RTC decision dated 1997/12/12 and affirming its order dated 1995/06/20

26. MAKATI TUSCANY CONDOMINIUM CORPORATION vs CA ; AMERICAN HOME ASSURANCE CO [Rep. by American Intl
Underwriters (Phils.) Inc]
P AHAC, in early 1982 issued in favor of an insurance policy on the latters building and properties
For 1 year 1982/03/01 to 1983/02/01 with a total premium of P466,103.05 which was paid in 4 installments all accepted by P

1.
2.
-

For another 1 year from 1983/03/01 to 1984/03/01 for a premium of P466,103.05 again paid in installments which were again
accepted
Another policy was issued for 1984/03/01 to 1985/03/01, paid 2 installments for P52,000 and P100K but refused to pay the balance
of the premium
P thus filed an action to recover the unpaid balance of P314,103.05
claimed that it discontinued payment of premiums because the policy did not contain a credit clause in its favor and receipts
covering all the policies had reservations
that acceptance of payments [of premium] shall not waive the P the rights to deny liability arising before such payments or after the
expiration of the credit clause in the policy ;
Subjected to no loss prior to premium payment, and if such loss occurs the same is not covered
Further claimed that the policy was never binding and valid since no risk attached to the policy ; filed counterclaim for premiums
already paid
TC dismissed complaint and counterclaim
Receipts issued to did contain the reservations but it is equally true that payment of the premiums were made during the lifetime /
term of said policies, thus it cannot be said, inspite of the reservations, that no risk attached
Lapse of the term of said policy on 1985/03/01 makes justified in refusing to pay the same
CA : modified the decision that should pay the balance of the premiums + legal interest ; affirm the denial of the counterclaim
Obligation to pay premium is ordinarily an indivisible obligation to pay the entire premium
Parties in this case agreed to make the premiums payable in installment
Insured never informed the insurer that it was terminating the policy because the terms were unacceptable
Although PD612 S77 provides that parties may not agree to make the insurance contract valid and binding without payment of
premiums, it does not prohibit payment in installments or to consider the contract as valid and binding upon payment of the first
premium
o
To otherwise let the contract be not binding upon full payment of installments would allow the insurer to renege on any
liability when any loss occurs before completion of payment of the entire premium
Thus the contract became valid and binding upon payment of the first premium and P cannot deny liability on the ground that
payment [in full] was not made
: Now asserts that its payment by installment of the premiums for the policies invalidated the same because of PD612 S77 and by
conditions stipulated by the insurer in its receipts, disclaiming liability for loss occurring before payment of premiums [ apparently
wants a refund]
Since premiums were not actually paid in full, the policy would only be effective if there is an acknowledgement in the policy of the
receipt of premium pursuant to PD612 S78
There was no perfected contract because S77 provides that no contract of insurance is valid and binding unless the premium thereof
has been paid, notwithstanding any agreement to the contrary
I. WON payment by installment of the premiums due invalidates the contract of insurance in view of PD612 S77
The subject policies are valid even if the premiums were paid on installments
Records clearly show that the and P intended the policies to be binding and effective notwithstanding the staggered payment of
premiums
o
The initial contract was entered into 1982 and renewed in 1983 and then in 1984
- In those 3 years, the insurer accepted all installment payments
- Such acceptance of payments speaks loudly of the insurers intention to honor the policies
- Basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums, although by
installments, and later deny liability on the lame excuse that the premiums were not prepared in full
Thus sustain the CA ruling that
While the import of S77 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 from
going into effect despite payment and acceptance of the initial premium or first installment
PD612 S78 in effect allows waiver by the insurer to the condition of prepayment by making an acknowledgement 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
PD612 S77 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 agreements as are not contrary to morals, good customs, public order or
public policy
An understanding to allow payment of premiums in installments is also not proscribed
At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted
Moreover, as correctly observed by the CA, where the risk is entire and the contract is indivisible, the insured is not entitled to a
refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary

27. UCPB General Insurance Co. Inc vs Masagana Telamart, Inc

1991/04/15 issued 5 insurance policies covering s various properties against fire
Initial contract was for the period from 1991/05/22 to 1992/05/22
In 1992/03 evaluated the policies and decided not to renew them upon expiry ; it gave notice to s broker Zuellig Insurance
Brokers, Inc of its intention
1992/04/06 gave written notice to of the non-renewal of the policies at the address stated in the policies
1992/06/13 : A fire razed s properties covered by 3 of the insurance policies issued
On the same day, presented to s cashier at its head office 5 managers checks in the total amount of P225,753.95 representing
the premium for the renewal of the policies from 1992/05/22 to 1993/05/22
No notice of loss was filed by under the policies prior to 1992/07/14
1992/07/14 filed with its formal claim for indemnification of the insured property razed by the fire
1992/07/14 returned the 5 managers checks that tendered and rejected s claim
Policies had expired and were not renewed
The fire occurred on 1992/06/13 before the respondents tender of premium payment
o
Thus filed with the RTC a complaint against for the recovery of P18,645,000.00 representing the face value of the
policies covering the insured properties razed by fire and AFs
RTC Ruled in favor of
Authorized and allowed to consign the premium payment of P225,753.95
fully complied with its obligation to pay the premium thereby rendering the replacement-renewal effective and binding, and
ordered to deliver said policies
must pay the sums of P18,645,000.00 for the insurance claim ; 25% as AFs ; P25K as necessary litigation expense and costs of suit
CA Affirmed RTC ruling with modification [effectivity of policies changed but were still in effect ; reduction of AFs to 10%]
Previous practice allows the insured a 60-90 day credit term for the renewal of its policies and that acceptance of the late premium
payment suggested an understanding that payment could be made later
: no timely notice of non-renewal was sent
- Notice of non-renewal sent to the broker Zuellig which claimed that it verbally notified the insurance agency but not itself does
not suffice
- CA did not err in finding that there existed a 60-90 days credit agreement between and
- SC cannot review factual findings of the lower court as affirmed by the CA
I. Whether the fire insurance policies issued by had expired on 1992/05/22 or had been extended/renewed by an
implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of
the risk insured against? WITHOUT GOING INTO THE FACT OF RENEWAL, THE SUBSEQUENT POLICY IS RULED TO BE
NOT BINDING SINCE PD612 S77 PROVIDES THAT A POLICY IS NOT VALID AND BINDING UNTIL ACTUAL PAYMENT OF THE
PREMIUM, AND THE PARTIES CANNOT AGREE OTHERWISE
PD612 S77An 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 by the creditor the time to pay the premium and consider the
policy binding before actual payment
Malayan Insurance Co vs Cruz-Arnaldo as cited by the CA is not applicable because the premium payment was in fact made before
the risk occurred
-

28. UCPB GENERAL INSURANCE vs MASAGANA TELAMART, INC

Resolution on the prior UCPB vs MASAGANA TELAMART, INC
SC : policies expired last 1992/05/22 on notice of non-renewal earlier, thus cannot be liable for the loss
filed MFR
o
Decision was based on a finding of fact by SC which are not in accord with the concurring RTC and CA findings
o
Parties may either agree expressly or impliedly on the extension of credit or time to pay the premium or consider a policy
binding before actual payment because extension of credit terms in premium payment has been the prevalent practice in
the industry
o
Estoppel applies on since
1. For years, Petitioner had been issuing fire policies to the Respondent, and these policies were annually renewed.
2. Petitioner had been granting Respondent a 60 to 90day credit term within which to pay the premiums on the renewed policies.
3. There was no valid notice of nonrenewal of the policies in question, as there is no proof at all that the notice sent by ordinary mail
was received by Respondent, and the copy thereof allegedly sent to Zuellig was ever transmitted to Respondent.
4. The premiums for the policies in question in the aggregate amount of P225,753.95 were paid by Respondent within the 60 to 90day
credit term and were duly accepted and received by Petitioner's cashier.
PD612 S77. 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.
It can be seen at once that Section 77 does not restate the portion of Section 72 of Act 2427 expressly permitting an agreement to
extend the period to pay the premium
I. WON the policy was renewed? YES ; S77 ADMITS OF SEVERAL EXCEPTIONS ; ESTOPPEL BARS FROM CLAIMING
REFUGE IN S77
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:
SECTION 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 binding, notwithstanding any stipulation therein that it shall not be binding until premium is
actually paid.
The third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals 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
The fourth exception is also in the Makati Tuscany case, as declared by the CA there : that the insurer may grant credit extension for
the payment of the premium.
This simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the
expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit
term
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.
ARTICLE 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.
it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner, which had consistently
granted a 60to 90day 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.

29. AMERICAN HOME INSURANCE COMPANY vs CHUA, ANTONIO

1990 : obtained a fire insurance from , covering its stock-in-trade of his business, Moonlight Enterprises [Valencia, Bukidnon]
1990/03/25 Insurance was due to expire
1990/04/05 issued a PCIB check of P2,983.50 to s agent as payment for the renewal of the policy, and the latter delivered the
Renewal Certificate to the former
The check was drawn against a Manila bank and deposited in s bank account in Cagayan De Oro City
The corresponding OR was issued on 04/10 [encashment of the check]
subsequently issued a new insurance policy for the amount of P200,000 against loss arising from fire from 1990/03/25 to
1991/03/25
1990/04/06 : Moonlight Enterprises was completely razed by fire
Total loss was estimated from P4,000,000.00 to P5,000,000.00
filed a claim with and 4 other co-insurers [Pioneer Insurance and Surety Corporation ; Prudential Guarantee and Assurance, Inc. ;
Filipino Merchants ; Insurance Co. and Domestic Insurance Company of the Philippines]
refused to honor the claim despite several demands ; thus filed an action before the RTC
: no existing insurance contract when the fire occurred since the premium was not yet paid
Assuming there was a contract, violated several conditions of the policy : fraudulent tax returns and financial statements ; failure
to establish actual loss [which assessed at only P70,000.00] ; failure to notify of the other insurances
RTC : Ruled in favor of
paid by check a day before the fire, the same being deposited in s account and acknowledged in the renewal certificate
Alleged fraudulent returns were limited to disparity between the ORs issued by the BIR and income tax returns for the years 19871989 ; all others genuine
failed to show that intentionally or fraudulently concealed the other insurances
Other insurance companies also conducted investigations and found no irregularity ; settled claims already
Pay P200K amount of the insurance ; P200K MD ; P200K loss of profit ; P100K ED ; P50K AF ; cost of suit
CA : affirmed in toto the RTC decision ; s claim was substantially proved ; Denied MFR
: Cannot be held liable cites PD612 S77 [Cash and carry rule]
Arce vs Capital Surety and Co : Unless and until the premium is paid there is no insurance
When the fire occurred on 1990/04/06 the insurance was not yet subsisting pursuant to CC A1249
Further, s non-disclosure of other insurance contracts rendered the policy void
Stipulations in the policy : [Subject to the payment by the assured of the amount due prior to renewal date, the policy shall be
renewed for the period stated ; Any payment tendered other than in cash is received subject to actual cash collection ; Subject to no
loss prior to premium and payment. If there be any loss, is not covered]
PD612 S77An 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.
CC A 1249. x x x The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce
the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. x x x
: non-payment of premium is a question of fact which can no longer be assailed
s adjuster admitted prior knowledge of other insurances
cites PD612 S66 [notice of non-renewal by the insurer within 45 days before the policy ends] ;
since there was no notice of non-renewal + renewal certificate was issued, at that precise moment, the insurance contract was
already executed and in effect
I. WON there was a valid payment of premium? YES ; THE ACKNOWLEDGEMENT OF PAYMENT OF PREMIUM IN THE
RENEWAL POLICY ESTBLISHES A LEGAL FICTION OF PAYMENT AND SHOULD BE INTERPRETED AS AN EXCEPTION TO S77
[CASH AND CARRY RULE]
GENERAL RULE : Unless the premium is paid, the policy is not valid and binding.
EXCEPTIONS : Life and industrial insurance
WON payment was made is a question of fact best determined by the trial court
Factual findings and conclusions of the trial court and the CA are entitled to great weight and respect
TC : Renewal certificate contained an acknowledgement that the premium was paid
PD612 S78 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.

S78 establishes a legal fiction of payment and should be interpreted as an exception to Section 77.
II. WON the policy was violated by s submission of fraudulent documents and non-disclosure of other existing
contracts? NO ; BIR CERTIFICATION SHOWS THAT PAID THE PROPER TAXES ; ALTHOUGH FAILED TO DISCLOSE THE
CO-INSURERS, IS ESTOPPED BECAUSE ITS LOSS ADJUSTER KNEW OF THE SAME
: failed to prove fraud
s BIR certification that he had paid the proper taxes for the said years the documents were allegedly falsified, with such given
credence by both the RTC and CA
It being a question of fact and concurred on by both the TC and CA is conclusive
: Ordinarily, policies specify as a condition the disclosure of existing co-insurers, non-disclosure thereof avoids the policy
Common condition in fire insurance policies also known as other insurance clause [to prevent the increase in the moral hazard]
To constitute a violation the other existing insurance contracts must be upon the same subject matter and with the same interest and
risk
Although indeed acquire several co-insurers and failed to disclose the same, is estopped because s loss adjuster knew of the
other insurers
III. WON is entitled to damages? NO BASIS FOR AWARD OF LOSS OF PROFITS ; NO BASIS FOR AWARD OF ED ; REDUCE
AF TO 10K
30. SPOUSES TIBAY [ANTONIO AND VIOLETA] ; RORALDO [OFELIA, VICTORINA, VIRGILIO, MYRNA, and ROSABELLA] vs
CA ; FORTUNE LIFE GENERAL INSURANCE CO
1987/01/22 : P issued a fire insurance policy in favor of Violeta Tibay and/or Nicolas Roraldo on their 2-storey residential building
[Zobel St., Makati City] together with personalty within
For the amount of P600K ; 1987/01/23 to 1988/01/23
1987/01/23 : of the total premium of P2,983.50, Violeta only paid P600.00, leaving a considerable balance unpaid
1987/03/08 : The insured building was completely destroyed by fire
03/10 : Tibay, Violeta paid the balance of the premium and filed a claim with P on the policy
P was referred to Ps adjuster [Goodwill Adjustment Services Inc (GASI)], with whom she signed a non-waiver agreement with to
the effect that any action taken by the companies in investigating the claim shall not waive nor invalidate any conditions of the
policies held by said claimant, nor the rights either of any of the parties to this agreement, and such action shall not be, or be claimed
to be, an admission of liability
P subsequently denied Violetas claim for violation of Policy Condition 2 and of PD612 S77
Violeta et al thus sued P for damages in the amount of P600K representing the total coverage of the policy ; P100K as MD, AF of
20%
TC ruled in favor of
Adjudged P liable for the value of the insured building and the personal properties therein in the amount of P600K +6% legal
interest + AF of 20%
CA reversed the TC ruling, but ordered P to return the premium P2,983.50 + 12% interest
I. WON P is liable for the loss? NO
THIS POLICY OF INSURANCE WITNISSETH THAT only after payment to the Company in accordance with Policy Condition No. 2 of the
total premiums by the insured as stipulated above for the period aforementioned for insuring against Loss or Damage by Fire or
Lightning as herein appears, the Property herein described . . .
2. This policy including any renewal thereof and/or any endorsement thereon is not in force until the premium has been fully paid to
and duly receipted by the Company in the manner provided herein.
Any supplementary agreement seeking to amend this condition prepared by agent, broker or Company official, shall be deemed
invalid and of no effect.
xxx xxx xxx
Except only in those specific cases where corresponding rules and regulations which are or may hereafter be in force provide for the
payment of the stipulated premiums in periodic installments at fixed percentage, it is hereby declared, agreed and warranted that
this policy shall be deemed effective, valid and binding upon the Company only when the premiums therefor have actually been paid
in full and duly acknowledged in a receipt signed by any authorized official or representative/agent of the Company in such manner
as provided herein.
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 PD612
PD612 S77 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
insists that P is liable on the policy despite partial payment of the premium due and the express stipulation thereof to the
contrary, petitioners rely heavily on the 1967 case of Philippine Phoenix and Insurance Co., Inc. v. Woodworks, Inc.
1967 Phoenix case is not persuasive, nor is it decisive
In Phoenix it was the insurance company that sued for the balance of the premium, i.e., it recognized and admitted the existence of
an insurance contract with the insured.
In the case before us, there is, quite unlike in Phoenix, a specific stipulation that (t)his policy . . . is not in force until the premium has
been fully paid and duly receipted by the Company . . . Resultantly, it is correct to say that in Phoenix a contract was perfected upon

1.
2.
3.
-

partial payment of the premium since the parties had not otherwise stipulated that prepayment of the premium in full was a condition
precedent to the existence of a contract
In Phoenix, by accepting the initial payment of P3,000.00 and then later demanding the remainder of the premium without any other
precondition to its enforceability as in the instant case, the insurer in effect had shown its intention to continue with the existing
contract of insurance, as in fact it was enforcing its right to collect premium, or exact specific performance from the insured. This is
not so here. By express agreement of the parties, no vinculum juris or bond of law was to be established until full payment was
effected prior to the occurrence of the risk insured against.
Makati Tuscany Condominium Corp vs CA : Parties mutually agreed that the premiums be paid in installments
Thus the Court did not invalidate the policy
2 cases adequately demonstrate that waiver, express or otherwise, of prepayment in full by the insurer
impliedly, by suing for the balance of the premium as in Phoenix,
expressly, by agreeing to make premiums payable in installments as in Tuscany
South Sea Surety and Insurance Company, Inc. v. Court Of Appeals : exceptions to the cash and carry rule
(a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period applies, and
(b) when the insurer makes a written acknowledgment of the receipt of premium, this acknowledgment being declared by law to be
then conclusive evidence of the premium payment
A maxim of recognized practicality is the rule that the expressed exception or exemption excludes others. Exceptio firmat
regulim in casibus non exceptis.

31. PHILIPPINE PHOENIX SURETY & INSURANCE COMPANY vs WOODWORKS, INC

1960/07/21 : Upon s application, issued in its favor a fire insurance policy for P500K for s building, machinery, and equipment
for 1 year [1960/07/21 to 1961/07/21]
Premium and other charges including the margin fee surcharge of P590.76 and documentary stamps of P156.60 amounted to
P10,593.36
Undisputed that did not pay the premium when the policy was issued nor at any time thereafter
1961/04/19 [before expiry] notified of the cancellation of the policy, allegedly upon request of
However, denied making such a request
Thus credited defendant with the amount of P3,110.25 for the unexpired period of 94 days, and claimed the balance of P7,483.11
representing ,earned premium from July 21, 1960 to 18th April 1961 or, say 271 days.
1961/07/06, plaintiff demanded in writing for the payment of said amount
disclaimed any liability - because the Insurer did not stand liable for any indemnity during the period the premiums were not paid,
thus filed suit
COFI, Manila rendered judgment in favor of ; must pay P7,483.11
CA Certified the case to the SC since it only involved questions of law
: assignment of errors
COFI erred in sustaining that the policy was a binding contract even if the premium was not paid
COFI erred in sustaining that the premium became an obligation which was demandable even after the period of the policy expired
COFI erred in not deciding that a premium not paid is not a debt enforceable by action of the insurer
I. WON the COFI erred?
Insurance is "a contract whereby one undertakes for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event."
Consideration is the premium
The premium must be paid at the time and in the way and manner specified in the policy and, if not so paid, the policy
will lapse and be forfeited by its own terms
Policy Provision
THIS POLICY OF INSURANCE WITNESSETH, THAT in consideration of MESSRS. WOODWORKS, INC. hereinafter called the Insured,
paying to the PHILIPPINE PHOENIX SURETY
AND INSURANCE, INC., hereinafter called the Company, the sum of PESOS NINE THOUSAND EIGHT HUNDRED FORTY SIX ONLY
the Premium for the first period hereinafter mentioned
THE COMPANY HEREBY AGREES with the Insured ... that if the Property above described, or any part thereof, shall be destroyed or
damaged by Fire or Lightning after payment of Premium, at any time between 4:00 o'clock in the afternoon of the TWENTY FIRST day
of JULY One Thousand Nine Hundred and SIXTY and 4:00 o'clock in the afternoon of the TWENTY FIRST day of JULY One Thousand Nine
Hundred and SIXTY ONE
P2 No payment in respect of any premium shall be deemed to be payment to the Company unless a printed form of receipt for the
same signed by an Official or dulyappointed
Agent of the Company shall have been given to the Insured.
P10 This insurance may be terminated at any time at the request of the Insured, in which case the Company will retain the customary
short period rate for the time the policy has been in force. This insurance may also at any time be terminated at the option of the

Company, on notice to that effect being given to the Insured, in which case the Company shall be liable to repay on demand a ratable
proportion of the premium for the unexpired term from the date of the cancellation
-

1.
2.

3.

Clearly, the Policy provides for pre-payment of premium

Accordingly when the policy is tendered the insured must pay the premium unless credit is given or there is a waiver,
or some agreement obviating the necessity for prepayment.
From the policy provisions, there is no clear agreement that a credit extension was accorded to
Even if it were to be presumed that had extended credit from the circumstance of unconditional delivery of the policy without
prepayment of the premium, it is obvious that had not accepted s offer to extend credit
An acceptance of an offer to allow credit, if one was made, is as essential to make a valid agreement for credit, to change a
conditional delivery of an insurance policy to an unconditional delivery, as it is to make any other contract. Such an acceptance could
not be merely a mental act or state of mind, but would require a promise to pay made known in some manner to defendant.
Since the premium had not been paid, the policy must be deemed to have lapsed.
The nonpayment of premiums does not merely suspend but put, an end to an insurance contract, since the time of the payment is
peculiarly of the essence of the contract.
the failure to make a payment of a premium or assessment at the time provided for, the policy shall become void or forfeited, or the
obligation of the insurer shall cease, or words to like effect, because the contract so prescribes and because such a stipulation is a
material and essential part of the contract. This is true, for instance, in the case of life, health and accident, fire and hail insurance
policies
In fact, if the peril insured against had occurred, plaintiff, as insurer, would have had a valid defense against recovery under the
Policy it had issued.
Explicit in the Policy itself is plaintiff's agreement to indemnify defendant for loss by fire only "after payment of premium,"
The continuance of the insurer's obligation is conditional upon the payment of premiums, so that no recovery can be had upon a
lapsed policy, the contractual relation between the parties having ceased
Moreover, "an insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the purpose of
indemnity."
PD612 S77 no contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has
been paid, notwithstanding any agreement to the contrary.

32. BONIFACIO BROS, INC et al vs MORA, ENRIQUE et al

Mora, Enrique : owned an Oldsmobile sedan model 1956
mortgaged the same to H.S. Reyes Inc with the condition that the mortgagor [] would insure the same and name HSR as the
beneficiary
The automobile was thus insured n 1959/06/23 with the State Bonding & Insurance Co
Pertinent provisions read:
The Company (referring to the State Bonding & Insurance Co., Inc.) will, subject to the Limits of Liability, indemnify the Insured
against loss of or damages to the Motor Vehicle and its accessories and spare parts whilst thereon (a) by accidental collision or
overturning or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear, x x x x x x x x x
At its own option the Company may pay in cash the amount of the loss or damage or may repair, reinstate, or replace the Motor
Vehicle or any part thereof or its accessories or spare parts. The liability of the Company shall not exceed the value of the parts
whichever is the less. The Insured's estimate of value stated in the schedule will be the maximum amount payable by the Company in
respect of any claim for loss or damage.x x x x x x x x x
The Insured may authorize the repair of the Motor Vehicle necessitated by damage for which the Company may be liable under this
Policy provided that: (a) The estimated cost of such repair does not exceed the Authorized Repair Limit, (b) A detailed estimate of
the cost is forwarded to the Company without delay, subject to the condition that "Loss, if any is payable to H.S. Reyes, Inc.," by
virtue of the fact that said Oldsmobile sedan was mortgaged in favor of the said H.S. Reyes, Inc. and that under a clause in said
insurance policy, any loss was made payable to the H.S. Reyes, Inc. as Mortgagee
During the effectivity of the insurance contract, the car met an accident
SBIC assigned the accident to Bayne Adjustment Cofor investigation and appraisal
, without the knowledge and consent of SBIC, authorized to furnish the labor and materials
was billed at P2,102.73 through the HH Bayne Adjustment Co.
SBIC, after claiming a franchise fee of P100.00, drew a check in the amount of P2,002.73 as proceeds of the policy payable to the
order of or HS Reyes Inc and entrusted the check to HH Bayne Adjustment for disposition and delivery to the proper party
In the meantime the car was delivered to without the consent of HS Reyes Inc and without payment to [and Ayala Auto Parts for
the parts]
Upon the theory that the insurance proceeds should be paid directly to them, and the Ayala Auto Parts Co filed a complaint with the
MC of Manila against and SBIC
Sought the sum of P2,002.73
MC : HS Reyes has a better right to the disputed amount
COFI affirmed MC decision
I. WON there is privity of contract between + Ayala Auto Parts Co. and the Insurer [SBIC]? NO, WERE NOT
MENTIONED AS BENEFICIARIES, NOR IS THERE ANY STIPULATION POUR AUTRI ;

: SBIC and are parties to the repair of the car as well as the towage performed [as found in the policy paragraph 4 (3 in this
digest)]
: assertion is irrelevant. Lack of cause of action rests exclusively upon the terms of the insurance contract
- were not mentioned in the policy as beneficiaries
- Nor is there any clause stating that payment of the proceeds shall be paid to them directly
It is fundamental that contracts take effect only between the parties thereto, except in some specific instances
provided by law where the contract contains some stipulation in favor of a third person.
Such stipulation is known as stipulation pour autrui or a provision in favor of a third person not a party to the contract [a third person
is allowed to avail himself of a benefit granted to him by the terms of the contract, provided that the contracting parties have clearly
and deliberately conferred a favor upon such person]
Consequently, a third person not a party to the contract has no action against the parties thereto, and
cannot generally demand the enforcement of the same
The rule, that the fairest test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely
an incidental interest, is to rely upon the intention of the parties as disclosed by their contract
In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any
repairmen or material-men in case of repair of the car in question.
The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion
On the other hand, the "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc."
indicating that it was only the H.S. Reyes, Inc. which they intended to benefit.
A policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have
no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust,
expressed or implied between the insured and third person
PD612 S50 The insurance shall be applied exclusively to the proper interests of the person in whose name it is made
unless otherwise specified in the policy.
"Loss, if any, is payable to H.S. Reyes, Inc.," which unmistakably shows the intention of the parties.
right of the H.S. Reyes, Inc. to the insurance proceeds arises only if there was loss and not where there is mere
damage as in the instant case
Nigga no. PD612 S120 a loss may be either total or partial.

33. THE INSULAR LIFE ASSURANCE COMPANY, LTD vs EBRADO, CARPONIA and VDA DE EBRADO, PASCUALA
1968/09/01 : Ebrado, Buenaventura Cristor was issued by a life insurance [whole life] for P5,882.00 with a rider for accidental death
for the same amount
Designated Carponia Ebrado as the revocable beneficiary, referring to her as his wife
1969/10/21 : Buenaventura died as a result of a falling branch from a tree
was liable to pay the coverage total amount of P11,745.73 representing the face value of the policy [P5,882.00] plus additional
benefits for accidental death [P5,882.00] and the refund of P18.00 paid for the premium due 1969/11 minus the unpaid premiums
and interest thereon due for 1969/01 and 02 [P36.27]
Carponia filed with a claim for the proceeds as the designated beneficiary although she admits that she was only a common-law
wife
Pascuala filed her claim as the widow of the deceased, asserting that she is the one entitled to the proceeds
commenced an action for interpleader before COFI Rizal
COFI Carponia is disqualified from becoming the beneficiary of the insured Buenaventura ; payment should be made to the estate
of the deceased
It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal conviction for adultery or concubinage is not essential
in order to establish the disqualification mentioned therein
Neither is it also necessary that a finding of such guilt or commission of those acts be made in a separate independent action brought
for the purpose
The guilt of the donee (beneficiary) may be proved by preponderance of evidence in the same proceeding (the action brought to
declare the nullity of the donation).
CA certified the case to the SC [only questions of law]
I. WON a common-law wife can be named as beneficiary in the life insurance policy of a legally married man claim the
proceeds thereof in case of death of the latter? NO, ANY PERSON WHO IS FORBIDDEN FROM RECEIVING ANY DONATION
UNDER ARTICLE 739 CANNOT BE NAMED BENEFICIARY OF A FIFE INSURANCE POLICY BY THE PERSON WHO CANNOT
MAKE A DONATION TO HIM
PD612 S50 the insurance shag be applied exclusively to the proper interest of the person in whose name it is made ; cannot be
validly seized

The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a contract of
insurance is personal in character
Otherwise, the prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory, as the same
could easily be circumvented by modes of insurance.
CC A2011 The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be
regulated by this Code.
CC A2012 Any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance
policy by the person who cannot make a donation to him
CC A739 The following donations shall be void:
1. Those made between persons who were guilty of adultery or concubinage at the time of donation;
2. Those made between persons found guilty of the same criminal offense, in consideration thereof;
3. 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
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.
As a consequence, the proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts.
: Conviction need not be had before the disqualification applies, the last paragraph of CC A739 merely requires preponderance of
evidence in the same action
The stipulation of facts [judicial admissions] show that Carponia were having an illicit affair

34. VDA. DE CONSUEGRA, BASILIA BERDIN ; CONSUEGRA [JULIANA, PACITA, MARIA LOURDES, JOSE JR, RODRIGO,
LINEDA and LUIS] vs GSIS ; COMMISSIONER OF PUBLIC HIGHWAYS ; HIGHWAY DISTRICT ENGINEER OF SURIGAO DEL
NORTE ; COMMISSIONER OF CIVIL SERVICE ; DIAZ, ROSARIO
The late Consuegra, Jose at the time of his death, was employed as a shop foreman of the District Engineer
He married twice in his lifetime
o
1937 With P Diaz, Rosario [2 children Jose Consuegra Jr and Pedro Consuegra ; but both predeceased their father]
o
1957 [In good faith while the 1st marriage was subsisting] with Basilia Berdin [7 children ; co-petitioners]
Member of the GSIS
When Jose Sr died on 1965/09/26 , the proceeds of the life insurance were paid by the GSIS to and her children
Jose was in service for 22.5028 years, thus was entitled to retirement insurance benefits in the sum of P6,304.47 [RA1616 and
RA3836]
o
However, Jose did not designate any beneficiary who would receive the retirement insurance benefits due to him
P Diaz : filed a claim with the GSIS asking that the retirement insurance benefit be paid to her as the only legal heir of Consuegra
considering that the deceased did not designate any beneficiary with respect to the retirement benefits
likewise filed a claim with the GSIS ; since they were named as beneficiaries in the life insurance policy, they should also have the
retirement benefits
GSIS legal heirs of the late Jose Consuegra were Rosario Diaz, thus shes entitled to one-half [8/16] of the retirement benefits and
and their 7 children who are entitled to the remaining half [8/16 ; 1/16 each]
filed a mandamus with preliminary injunction in COFI Surigao Del Norte [against GSIS, CPH, HDE, CSC and P]
COFI Affirmed GSIS ruling
When two women innocently and in good faith are legally united in holy matrimony to the same man, they and their children, born of
said wedlock, will be regarded as legitimate children and each family be entitled to one half of the estate.

P3,152.235 to be divided equally among them in the proportional amount of 1/16 each
COFI erred in not holding that the designated beneficiaries in the life insurance policy are also the exclusive beneficiaries of the
retirement insurance
I. WON , as designated beneficiaries in the life insurance policy of the late Jose Consuegra, are also the exclusive
beneficiaries of the retirement insurance benefits? NO ; RETIREMENT BENEFITS ARE GIVEN TO THOSE DESIGNATED AS
BENEFICIARIES, WHEN THE INSURED NEGLECTS TO NAME THE BENEFICIARY, SUCH BENEFIT ACCRUES TO HIS LEGAL
ESTATE WHEN HE DIES ; BY THE PREVAILING PROVISIONS ON MARRIAGE, WOMEN WHO ARE MARRIED IN GOOD FAITH
TO THE SAME MAN ARE EQUALLY ENTITLED TO HIS ESTATE
CA 186 S12(c) Retirement is likewise allowed to a member, regardless of age, who has rendered at least twenty years of service. The
benefit shall, in addition to the return of his personal contributions plus interest and the payment of the corresponding employer's
premiums described in subsection (a) of Section 5 hereof, without interest, be only a gratuity equivalent to one month's salary for
every year of service, based on the highest rate received, but not to exceed twentyfour months Provided, That the retiring
officer or employee has been in the service of the said employer or office for at least four years, immediately preceding his
retirement.
xxx xxx xxx
The gratuity is payable by the employer or office concerned which is hereby authorized to provide the necessary appropriation to pay
the same from any unexpended items of appropriations.
Elective or appointive officials and employees paid gratuity under this subsection shall be entitled to the commutation of the unused
vacation and sick leave, based on the highest rate received, which they may have to their credit at the time of retirement.
If Consuegra had 22.058 years of service when he died on 1965/09/26, it follows that he started serving during the early part of
1943 or earlier
In 1943 CA186 was not yet amended, and the only benefits provided in said CA 186 was life insurance
Upon entering service, he became a compulsory member
During 1943, the operation of GSIS was suspended because of the war and operation resumed some time in 1946
Thus, when Consuegra designated his beneficiaries in his life insurance as also the beneficiaries of his retirement insurance
because the provisions of retirement under the GSIS came about only when CA 186 was amended by RA660 [1951/06/16]
In effect, it cannot be said that because were the beneficiaries in the life insurance that they automatically became the
beneficiaries of his retirement insurance
CA186 [as amended by RA660] S11 (b) Survivors benefit. Upon death before he becomes eligible for retirement, his beneficiaries
as recorded in the application for retirement annuity filed with the System shall be paid his own premiums with interest of three per
centum per annum, compounded monthly. If on his death he is eligible for retirement, then the automatic retirement annuity or the
annuity chosen by him previously shall be paid accordingly.
Provision clearly indicate that there is need for the employee to file an application for retirement insurance benefits when he
becomes a member of the GSIS and should state in his application the beneficiary of his retirement insurance
Thus the beneficiary in the life insurance does not automatically become the beneficiary in the retirement insurance unless the same
beneficiary in the life insurance is so designated in the application for retirement insurance
Further, life insurance and retirement insurance offered by the GSIS are paid out of 2 separate funds maintained by the GSIS
- In the case of the proceeds of a life insurance, the same are paid to whoever is named the beneficiary in the life insurance policy
Retirement insurance is primarily intended for the benefit of the employee to provide for his old age, or incapacity, after
rendering service in the government for a required number of years.
If the employee reaches the age of retirement, he gets the retirement benefits even to the exclusion of the beneficiary or
beneficiaries named in his application for retirement insurance.
The beneficiary of the retirement insurance can only claim the proceeds of the retirement insurance if the employee dies before
retirement.
If the employee failed or overlooked to state the beneficiary of his retirement insurance, the retirement benefits will accrue to his
estate and will be given to his legal heirs in accordance with law, as in the case of a life insurance if no beneficiary is named in the
insurance policy.
Thus the GSIS correctly acted when it ruled that the proceeds of the retirement insurance should be divided equally between the
first living wife and the second wife and her children
35. GO, CONCORDIA vs REDFERN, ANGELA ; INTERNATIONAL ASSURANCE CO, LTD
1937/10 : Edward Redfern obtained an insurance policy against accidents from P
On 1938/08/31 : Edward died as a result of an accident
[Edwards mother] filed a claim along with the evidence of Edwards death with P but the latter rejected the claim because it was
amended to include, as a co-beneficiary, Go
: the addition of such co-beneficiary is illegal ; while argues otherwise
I. WON the addition of a co-beneficiary was valid? NO ; UNLESS THE INSURED EXPRESSLY RESERVES THE RIGHT TO
CHANGE THE POLICY IN RESPECT TO THE BENEFICIARY, THE NAMED BENEFICIARY HAS AN ACQUIRED RIGHT TO THE
POLICY AND THE SAME CANNOT BE CHANGED EXCEPT WITH THE BENEFICIARYS CONSENT
Wallace vs Mutual Benefit Life Insurance Co : The beneficiary acquires a right which cannot be deprived without their consent,
unless the insured has reserved specifically the right to change the policy.
: Therefore, unless the insured has expressly reserved the right to change or modify the policy in respect to its beneficiary, the
named beneficiary has an acquired right to it, which cannot be changed except with his or her consent

: Edward did not expressly reserve the right to change or modify the policy
maintains that the addition is not change
Change involves the idea of alteration, and every addition is alteration
thus the argument lacks merit

36. COUNTRY BANKERS INSURANCE CORPORATION vs LIANGA BAY AND COMMUNITY MULTI-PURPOSE COOPERATIVE INC
1989 : and entered into a contract of fire insurance
insured s stock-in-trade against fire loss, damage, or liability during the period starting from 1989/06/20 4:00PM to 1990/06/20
4:00PM for P200,000.00
1989/07/01 12:40am : s building in Barangay Diatagon, Lianga Surigao del Sur, was gutted by fire and reduced to ashes resulting in
total loss
filed an insurance claim with , submitting Spot Report by PFC Juarbal, Arturo[INP Investigator] dated 1989/07/01 ; Sworn
Statement of Lomosco, Jose ; Sworn Statement of Urbiztondo, Ernesto
, however, denied the 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 such loss was an excepted risk
under Paragraph 6 of the policy conditions
o
Policy Condition 6 : This insurance does not cover any loss or damage occasioned by or through or in consequence, directly
or indirectly, of any of the following occurrences, namely: xxx xxx xxx (d) Mutiny, riot, military or popular uprising,
insurrection, rebellion, revolution, military or usurped power
thus filed suit before the RTC
RTC Ruled in favor of
- to fully pay the insurance claim in its face value of P200K with 12% interest

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3.
I.
II.

- to pay AD of P50K
- to pay litigation expense of P5K
- to pay AF of P10K + cost of suit
CA Affirmed the RTC decision
I. WON is liable for the loss? YES ; FAILED TO DISCHARGE BURDEN OF PROOF TO SHOW THAT THE LOSS WAS
CAUSED BY AN EXCEPTED RISK
A party is bound by his own affirmative allegations.
Where a risk is excepted by the terms of the policy, loss from such a risk constitutes a defense which the insurer may urge.
The insurer seeking to defeat a claim because of an exception/limitation has the burden of proving that the loss comes within the
purview of the exception / limitation
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
: failed to discharge its burden of proof
: relies on the Sworn Statements of Lomocso and Urbiztondo as well as the Spot Report of PFC Juarbal [investigation revealed by
Jose Lomocso that those armed men wanted to get can goods and rice for their consumption in the forest PD investigation further
disclosed that the perpetrator are member (sic) of the NPA PD end]
A witness can testify only to those facts which he knows of his personal knowledge, which means those facts which are derived from
his perception
Consequently, a witness may not testify as to what he merely learned from others either because he was told or read or heard the
same [hearsay]
Thus, 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 crossexamined.
Exceptions to hearsay rule
that the entry was made by a public officer, or by another person specially enjoined by law to do so
that it was made by the public officer in the performance of his duties, or by such other person in the performance of a duty specially
enjoined by law and
that the public officer or other person had sufficient knowledge of the facts by him stated, which must have been acquired by him
personally or through official information.
Third requisite was not met in this case since no investigation, independent of the statements gathered from Lomocso, was
conducted by PFC Juarbal
Eastern Shipping Lines vs CA ; Mercantile Insurance Co [GUIDELINE FOR INTERESTS]
When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasidelicts, is breached, the
contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages.
With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to
be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged
on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established
at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
Forbearance : contractual obligation of lender or creditor to refrain, during a given period of time, from requiring the borrower or
debtor to repay a loan or debt then due and payable
Insurance claim is obviously not a forbearance of money, goods, or credit and thus the interest rate should be as it is hereby fixed
at 6% computed from the date of filing of the claim
No basis for the award of actual and exemplary damages + AF
Actual, compensatory and consequential damages must be proved, and cannot be presumed
NCC A2229 Exemplary damages may be imposed by way of example or correction for the public good
37. ROQUE, ISABELA [Isabela Roque Timber Enterprises] and CHIONG, ONG vs IAC ; PIONEER INSURANCE AND SURETY
CORPORATION
1972/02/19 : Manila Bay Lighterage Corporation [common carrier], entered into a contract with
Carry aboard on its barge Marble 10 about 422.18 cubic meters of logs from Malamapaya Sound, Palawan to North Harbor Manila
Insured the logs for P100,000.00 with P
1972/02/29 : loaded on the barge 811 pieces of logs at Malampaya Sound, Palawan for carriage and delivery
The shipment never arrived at its destination because Marble 10 sank with the 811 pieces of logs somewhere off Cabuli Point in
Palawan on its way to Manila

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As alleged and as found by both TC and IAC, the barge was not seaworthy such that it developed a leak
IAC further found that one of the hatches were left open causing water to enter the barge
The barge was also not provided with the necessary cover / tarpaulin, thus the ordinary splash of sea waves brought more water
inside
1972/03/08 : wrote a letter to Manila Bay Lighterage Corporation demanding payment of P150K for the loss of the shipment +
P100K as unrealized profits
MBLC ignored the demand
then wrote to P claiming the full P100K under the policy, but the same refused to pay on the ground that its ability to pay
depends upon the Total loss by the total loss of the vessel only ; thus filed a civil case against MBLC and P
TC found in favor of
MBLC and P must pay solidarily P100K ; MBLC to pay P, in addition, the sum of P50K and P12.5K [downpayment for transporting
the logs]
Dismiss MBLCs counterclaim ; P to be reimbursed by MBLC
P appealed ; MBLC did not
IAC modified TC decision ; absolve P from liability, breach of implied warranty of seaworthiness on the part of MBLC
Loss of the insured cargo was caused by perils of the ship and not by perils of the sea, thus it is not covered by the marine
insurance policy
: assignment of errors
IAC erred in holding that in marine cargo insurance, there is a warranty of seaworthiness by the cargo owner
IAC erred in holding that the loss of the cargo was caused by perils of the ship and not by perils of the sea
IAC erred in not ordering the return to the amount of P8,000 which was deposited in the TC as salvage value of the logs that were
recovered
I. WON the IAC erred? NO ; LOSS WAS CAUSED BY PERILS OF THE SHIP, THUS IS NOT COVERED BY THE POLICY
WARRANTY OF SEAWORTHINESS
: contends that the implied warranty of seaworthiness refers to the responsibility of the shipowner who must see to it that his ship
is reasonably fit to make in safety the contemplated voyage
As mere shipper of cargo, has no control over the ship and has nothing to do with its seaworthiness
: No merit
There is no dispute over the liability of the common carrier MBLC, in fact it did not appeal
However, MBLC has ceased operating as a firm and nothing may be recovered from it
The liability of the insurer is governed by law
PD612 S113 In every marine insurance upon a ship or freight, or freightage, or upon any thing which is the subject of marine
insurance, a warranty is implied that the ship is seaworthy.
PD612 S99 Marine insurance includes:
(1) Insurance against loss of or damage to: (a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise . . .
From the above-quoted provisions, cargo can be the subject of marine insurance and that once made the implied warranty
immediately attaches to whoever is insuring the cargo whether he be the shipowner or not
Moreover, the fact that the unseaworthiness of the ship was unknown to the insured is immaterial in ordinary marine insurance and
may not be used by him as a defense in order to recover on the marine insurance policy.
Since the law provides for an implied warranty of seaworthiness in every contract of ordinary marine insurance, it becomes the
obligation of a cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy condition
The shipper may have no control over the vessel but he has full control in the choice of the common carrier that will transport his
goods
Or the cargo owner may enter into a contract of insurance which specifically provides that the insurer answers not only for the perils
of the sea but also provides for coverage of perils of the ship.
PERILS OF THE SHIP
: loss was caused by perils of the sea, not by perils of the ship
Barge was turned loose from the tugboat east from Cabuli point, where it was buffeted by storm and waves
Insurance covered barratry, and such occurred when the personnel of the tugboat and the barge committed a mistake by turning
loose from the barge the tugboat
TC also found that the stranding and foundering of Marble 10 was due to improper loading as well as the leak in the barge which
constituted negligence
Unmistakable that the loss was caused by perils of the ship, and not by perils of the sea
Go Tiaoco vs Union Insurance Society of Canton : a loss which, in the ordinary course of events, results from the natural and
inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide
the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is rather due to
what has been aptly called the "peril of the ship." The insurer undertakes to insure against perils of the sea and similar perils, not
against perils of the ship
Neither was it barratry [any willful misconduct on the part of master or crew in pursuance of some unlawful or fraudulent purpose
without the consent of the owners, and to the prejudice of the owner's interest.]
o
No willful or fraudulent acts on the vessels crew ; only simple negligence or lack of skill
o
P8000 SALVAGE : : entitled to the P8,000.00 representing the amount of the salvaged logs, but must be deducted from the
amount paid by MBLC
38. LA RAZON SOCIAL GO TIAOCO Y HERMANOS vs UNION INSURANCE SOCIETY OF CANTON, LTD

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: had a cargo of rice transported in 1915/05 on the steamship Hondagua from the port of Saigon to Cebu
On discharging the rice from one of the compartments in the after hold upon arrival in Cebu, it was discovered that 1,473 had been
damaged by sea water.
The loss resulting, after proper deduction from the saved portion, was P3,875.25
thus claimed with upon the marine insurance policy it issued in favor of
TC inflow of sea water during the voyage was due to a defect in one of the drain pipes of the ship and concluded that the loss was
not covered by the policy
The drain pipe which served as a discharge from the water closet passed down through the compartment where the rice in question
was stowed
Thence goes out to the sea through the wall of the compartment, which was part of the hull of the ship
The joint or elbow where the pipe changed its direction was made of cast iron, and in the course of time became corroded and
abraded until a longitudinal opening had appeared on the pipe, about 1 inch in length
The hole existed prior to the voyage ; attempt to repair it was made by filling it with cement and bolting a strip of iron over it
The loading of the boat caused the vent to submerge, thus causing it to be 18 inches below the sea level
As a consequence, the sea water rose in the pipe, washing out the cement-filling from the action of the sea water, causing the
spillage into the compartment
Thus the ship was unseaworthy [not properly equipped to receive the goods]
I. WON is liable for the loss/damage to the shipment? NO, MUST LOOK TO THE SHIP-OWNER FOR REDRESS AND
NOT TO THE INSURER SINCE THE LOSS WAS BY REASON OF A PERIL OF THE SHIP AND NOT A PERIL OF THE SEA
The policy purports to protect the cargo from the following, among other risks : Perils . . . of the seas, men of war, fire, enemies,
pirates, rovers, thieves, jettisons, . . . barratry of the master and mariners, and of all other perils, losses, and misfortunes that have or
shall come to the hurt, detriment, or damage of the said goods and merchandise or any part thereof
The question of WON is liable for the loss presents two causes
Perils of the seas and all other perils, losses, and misfortunes [as used in the policy]
Implied warranty, as to the seaworthiness of the ship
Perils of the seas and all other perils, losses, and misfortunes = interpreted as covering risks which are of like kind [ejusdem
generis] with the particular risks which are enumerated in the preceding part of the same clause of the contract
A loss which, in the ordinary course of events, results from the natural and inevitable action of the sea, from the ordinary wear and
tear of the ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo
under ordinary conditions, is not a peril of the sea.
Such a loss is rather due to what has been aptly called the "peril of the ship.
The insurer undertakes to insure against perils of the sea and similar perils, not against perils of the ship
The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen
In this case, entrance of sea water into the ships hold through the defective pipe was not due to any accident which happened
during the voyage, but because of the failure of the ships owner to properly repair a defect, which he knew exists
Thus the loss is more analogous to that which directly results from simple unseaworthiness rather than that which
results from the perils of the sea
As applied to the present case it results that the owners of the damages rice must look to the ship-owner for
redress and not to the insurer.
Marine insurance : a warranty is implied that the ship shall be seaworthy at the time of the inception of the voyage
well settled that a ship which is seaworthy for the purpose of insurance upon the ship may yet be unseaworthy for the purpose of
insurance upon the cargo

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39. CATHAY INSURANCE CO vs CA ; REMINGTON INDUSTRIAL SALESA CORPORATION

P : originally filed a complaint against , seeking the collection of the sum of P869,339.15 representing the loss and damages
[heavy rusting] incurred in a shipment of seamless steel pipes under an insurance issued by in favor of P as the insured,
consignee/importer
The goods were in transit from Japan to the Philippines on board the vessel SS Eastern Mariner
Total value of the shipment was P2,894,463.83 at the prevailing rate of P7.95 to a dollar in 1984/06 and 07 when the shipment was
made
RTC ruled in favor of P
must pay the sum of P866,339.15 as its recoverable insured loss equivalent to the 30% of the value of the seamless steel pipes
must further pay the amount on an interest rate of 34% or double the ceiling prescribed by the Monetary Board per annum from
1982/02/03 [90 days from Ps submission of proof of loss to ] until paid
must pay P for marine surveryors fee, AFs and costs of the suit
CA affirmed the RTC decision
: comment to the petition
Coverage of P is unmistakable.
Alleged contractual limitations are strictly construed against the insurer
Rust is not an inherent vice of seamless steel pipes without interference of external factors
15-day clause of the policy had been foreclosed in the pre-trial order and was not even raised by
Decision was correct in not holding that the heavy rusting of the pipes did not occur during the voyage of 7 days
Alleged lack of supposed bad order survey from the arrastre capitalized by was more than clarified by no less than 2 witnesses
The placing of the notation rusty in the way bills is not only P right but a natural and spontaneous reaction of whoever received
the pipes in its condition
CA did not engage in guesswork or speculation in concluding a loss allowance of 30% in the amount of P869,339.15
The rate of 34% per annum is the rate fixed by the policy itself and the Insurance Code
maintains that:
P does not dispute, contrary to the finding of the CA] that there is an express exception to the application of the policy
P admitted that the shipment is not covered by a square provision of the contract but P claims implied coverage from the phrase
perils of the sea mentioned in the opening sentence of the policy
P insistence that rusting is a peril of the sea is erroneous
P inaccurately invokes the rule of strict construction
P impliedly admitted that a loss occasioned by an inherent defect/vice in the insured article is not within the terms of the policy ;
erroneously insists that rusting is not an inherent vice or in the nature of steel pipes
Rusting is not a risk insured against
A fact capable of unquestionable demonstration or of public knowledge needs no evidence ; thus heavy rusting of steel or iron pipes
cannot occur within a period of 7 days voyage ; further introduced clear cargo receipts or tally sheets indicating that there was no
damage during voyage
Ps evidence betrays the fact that the amount of P869.339.15 is found on speculation, surmises or conjectures and the amount of
less has not been proven by competent, satisfactory and clear evidence
I. WON the CA erred? NO ; RUSTING = PERIL OF THE SEA ; CONSTRUCTION OF INSURANCE CONTRACTS : STRICTLY
AGAINST THE INSURER
There is no question that the rusting of steel pipes = perils of the sea in view of the toll on the cargo by wind, water and salt
conditions
At any rate if the insurer cannot be held accountable therefor, it would fail to observe the cardinal rule in the interpretation of
contracts, namely that ambiguity therein should be construed against the maker/issuer/drafter thereof [insurer]
Be it noted that any attack of the 15-day clause in the policy was foreclosed right in the pre-trial conference

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40. FILIPINO MERCHANTS INSURANCE CO, INC vs CA ; CHOA TIEK SENG

P : was a consignee for the shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the Port of Manila on
1976/12/11
1976/12 P insured said shipment with for the sum of P267,653.59 for the goods described as 600 metric tons of fishmeal in new
gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks under warehouse to warehouse terms
Actually, what was imported was 599.40 metric tons [not 600] at $395.42 a ton CNF Manila
The fishmeal in 666 new gunny bags were unloaded from the ship on 1976/12/11 unto the arrastre contractor E. Razon Inc
s surveryor ascertained and certified in such discharge 105 bags were in bad condition [reflected in survey report of Bad Order
Cargoes]
E. Razon Inc also surveyed the same before delivery of the cargo to the consignee P ; 227 bags were found in bad order
A final survey was conducted by s surveyor and affirmed that 227 bags [12,148 kilos] were in bad order
P : made a formal claim based on these computations against [and subsequently against the vessel] for 51,568.52
refused the claim, this P sought to recover damages from in the amount of P51,568.62 representing damages to said shipment
brought a 3rd party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. Razon in case of adverse judgment
TC ruled in favor of P
must pay the claim for P51,568.52
3rd party defendant Compagnie Maritime Des Chargeurs Reunis and E. Razon Inc are ordered to pay jointly and severally
reimbursement of the amounts paid by
CA Affirmed TC ruling with modification
Affirmed Ps award
modified the 3rd party adjudication
: arguments [that the CA erred]
CA erred in interpreting the all risks clause of the marine insurance policy, notwithstanding the clear absence of proof of some
fortuitous event, casualty, or accidental cause to which the loss is attributable, contradicting the very precedents cited by it as well as
prior decisions of the same Division
CA erred in not holding that P had no insurable interest in the subject cargo [which would make it null and void]
CA erred in not holding that P was guilty of fraud in not disclosing the fact that it had no insurable interest in the subject cargo,
which bars recovery
I. WON is liable for the loss?
ALL RISK CLAUSE ARGUMENT
Policy Clause 5. This insurance is against all risks of loss or damage to the subject matter insured but shall in no case be deemed to
extend to cover loss, damage, or expense proximately caused by delay or inherent vice or nature of the subject matter insured.
Claims recoverable hereunder shall be payable irrespective of percentage
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 in insurance contracts, have not, contrary to s assertion, acquired any technical meaning
They are construed in their ordinary and common acceptance
Thus they 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 one's foresight or expectation an event that proceeds from an unknown cause, or is
an unusual effect of a known cause and, therefore, not expected
The very nature of the term all risks must be given a broad and comprehensive meaning as covering any loss other than a willful
and fraudulent act of the insured
An "all asks" policy has been evolved to grant greater protection than that afforded by the "perils clause in order to assure that no
loss can happen through the incidence of a cause neither insured against nor creating liability in the ship
it is written against all losses, that is, attributable to external causes
Institute Cargo Clauses [policy] being unequivocal and clear, to the effect that it extends to all damages/losses suffered by the
insured cargo except
loss or damage or expense proximately caused by delay, and
loss or damage or expense proximately caused by the inherent vice or nature of the subject matter insured
GENERALLY : Burden of proof is upon the insured to show that a loss arose from a covered peril
EXCEPTION : Under an all risk policy, burden of proof to prove the precise cause of loss/damage is not on the insured
The insured only has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo
was damaged when unloaded from the vessel, thereafter the burden shifts to the insurer to show the exception to the coverage
Paris-Manila Perfumery Co vs Phoenix Assurance Co : the insurance company has the burden of proving that the loss is caused by
the risk excepted and for want of such proof, the company is liable
In the present case, there is no showing that the loss was caused by any of the expected perils. Thus being an all risk policy, is
liable
INSURABLE INTEREST

TC and CA correctly held that P as a consignee of the shipment, has insurable interest in the goods
PD612 S13insurable interest in property as every interest in property, whether real or personal, or any relation thereto, or liability in
respect thereof, of such nature that a contemplated peril might directly damnify the insured.
Thus anyone who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in,
or lien upon or possession of the property, has insurable interest.
P as vendee/consignee of the goods in transit, such existing interest may validly be the subject of an insurance contract
o
His interest is based on the perfected contract of sale, and such operates to vest P an equitable title even before delivery
or before he performs the conditions of the sale
o
The contract of shipment WON FOB, CIF, CNF is immaterial in the determination of WON the vendee has insurable interest
o
CNF contracts are shipment contracts : price fixed is a lump sum of the cost of the goods and the freight but the risk of loss /
damage is transferred from the seller to the buyer when the goods pass the ships rail in the port of shipment

41. ORIENTAL ASSURANCE CORPORATION vs CA ; PANAMA SAW MILL CO. INC

1986/01 P bought in Palawan 1,208 Apitong logs, with total volume of 2000 cubic meters.
Hired Transpacific Towage, Inc to transport the logs by sea to Manila
Insured it against loss for P1M with
However, P claims that the coverage should be for P3M instead, if not for the fraudulent act of one Benito Sy Yee Long, to whom P
entrusted the P6K premium for the P3M policy
: issued the Marine Insurance Policy which stipulated
Warranted that this Insurance is against TOTAL LOSS ONLY
The premium was at P2,500 at the rate of .250%
Civil Code A1250 Waiver Clause [Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene,
the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an
agreement to the contrary ]
Typhoon Warranty Clause
Omnibus Clause
The logs were loaded on 2 barges
Barge PCT-7000 : 610 pieces of logs [1000 cubic meters]
Barge TPAC-1000 : 598 pieces of logs [1000 cubic meters]
Both barges were towed by one tug-boat MT Seminole
Strong winds and rough seas damaged barge TPAC-1000 resulting in the loss of 497 logs out of the 598 loaded thereon.
P demanded payment for the loss
refused because contracted liability was for TOTAL LOSS ONLY ; such rejection being recommended by the Tan Gatue Adjustment
Company
P thus filed a complaint for damages against Ever Insurance Agency [allegedly also liable], Benito Sy Yee Long and before the
RTC, Caloocan
RTC ruled in favor of P
must pay P the amount of P415,000.00 as insurance indemnity with the interest rate of 12% per annum from the date of filing of
complaint
P must pay Ever Insurance Agency / Antonio Sy Lee Long [owner] for the amount of P20K as AFs and another P20K for MD
Dismissed the complaint against Benito Sy Lee Long
CA : affirmed the RTC ruling with the modification of reducing the 12% interest to 6% instead
: challenges the decision of the RTC and CA in holding that logs should be treated separately such that the loss sustained by the
shipment in one of them may be considered as constructive total loss and thus correspondingly compensable
P : constructive total loss should be based on the policy value of P3M and not P1M and asks awards to Ever Insurance be set aside
I. WON can be held liable under its marine insurance policy based on the theory of a divisible contract of insurance,
and consequently, a constructive total loss? NO ; THE POLICY IS INDIVISIBLE AND STIPULATED FOR TOTAL LOSS ONLY ;
THERE IS NO TOTAL LOSS, WHETHER ACTUAL OR CONSTRUCTIVE
Perla Compania de Seguros vs CA : The terms of the contract constitute the measure of the insurer liability and compliance
therewith is a condition precedent to the insured's right to recovery from the insurer
Thus whether a contract is entire or severable is a question of intention to be determined by the language employed by the parties
Policy in question shows that the subject matter insured was the entire shipment of 2K cubic meters of Agapitong logs
The fact that the logs were loaded on two different barges did not make the contract several and divisible as to the
items insured.
The logs on the two barges were not separately valued or separately insured.
Only one premium was paid for the entire shipment, making for only one cause or consideration.
The insurance contract must, therefore, be considered indivisible.
More importantly the insurers liability was for total loss only
PD612 S129 A total loss may be either actual or constructive.
PD612 S130 An actual loss is caused by:
(a) A total destruction of the thing insured
(b) The irretrievable loss of the thing by sinking, or by being broken up
(c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it or

(d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured
A constructive total loss is one which gives to a person insured a right to abandon
PD612 S139 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,
(a) If more than threefourths thereof in value is actually lost, or would have to be expended to recover it from the peril
(b) If it is injured to such an extent as to reduce its value more than three-fourths
: CA treated the loss as constructive total loss and for the purpose of computing more than three-fourths value of the log lost,
considered the cargo in one barge as separate from the logs in the other [497 out of 598 logs]
Reversible error, since the requirements of S139 have not been met ; 497 out of 1208 logs is only 41.45% and thus does not exceed
the three-fourth req.
In the absence of either actual or constructive total loss, there can be no recovery by the insured from
ABSOLVE FROM LIABILITY
42. FINMAN GENERAL ASSURANCE CORPORATION vs CA ; SURPOSA, JULIA
1986/10/22 Carlie Surposa was insured with under Finman General Teachers Protection Plan Master Policy No. 2005 and individual
policy No. 08924 with his parents, spouses Julia and Carlos Surposa and brothers Christopher, Charlie, Chester and Clifton.
Carlie died on 1988/10/18 as a result of a stab wound inflicted by one of the three unidentified men without provocation and warning
while waiting for a ride home after attending the Maskara Annual Festival
P filed a written notice of claim with which denied the claim contending that murder and assault are not within the scope of
coverage of the insurance policy
1989/02/24 P filed a complaint with the IC
IC : is liable for the claim in the sum of P15,000.00
CA : affirmed the IC ruling
: expressio unius exclusion alterius : death resulting from murder and/or result are impliedly excused in its personal accident
insurance policy
the cause of death of the insured was not accidental but rather a deliberate and intentional act of the assailant in killing the insured
as indicated by the location of the lone stab wound
I. WON murder and assault is excluded from the coverage of accidental insurances? NO
The terms "accident" and "accidental" as used in insurance contracts have not acquired any technical meaning, and are construed
by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen by chance or
fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen
An accident is an event that takes place without one's foresight or expectation an event that proceeds from an unknown cause, or
is an unusual effect of a known cause and, therefore, not expected.
Where the death or injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in the
doing of the act which produces the injury, the resulting death is within the protection of the policies insuring against death or injury
from accident.
Carlie Surposa died in the course of an assault/murder which cannot be considered as a result of his voluntary act of Carlie
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
Neither can it be said that where was a capricious desire on the part of the accused to expose his life to danger considering that he
was just going home after attending a festival
Furthermore, the personal accident insurance policy specifically provided only 10 circumstances wherein no liability attaches to
for any injury, disability or loss suffered by the insured as a result of any of the stipulated causes
Expressio unius, exclusio alterius applies, but towards the inclusion of murder and/or assault because the same were not enumerated
in the exception

43. SUN INSURANCE OFFICE, LTD vs CA ; LIM, NERISSA

Felix Lim, Jr [husband of P] was insured for P200K with
Died because of a bullet wound in his head
His secretary Pilar Nalagon was the only eyewitness to his death
1982/10/06 10PM : playing with his handgun, from which he previously removed the magazine ; pointed the gun at the secretary as a
joke even assuring her that it was not loaded ; then subsequently pointed it at his temple ; suddenly exploded killing him even before
he hit the floor
P sought payment on the policy but rejected her claim ; agreed that it was not suicide but argued that it was not an accident
either
Thus P filed suit in RTC Zamboanga City
RTC : liable for the claim
must pay P200K for the face value of the policy with interest at the legal rate ; P10K as MD ; P5K as ED ; P5K as AD ; P5K as AF +
cost of the suit
CA : affirmed the RTC decision
I. WON the death of Felix Lim is within the coverage of the policy? YES ; THE ACCIDENTAL DISCHARGE OF THE GUN
WAS NEITHER A SUICIDE NOR A WILLFUL EXPOSURE TO NEEDLESS RISK ; AFFIRM THE CA DECISION WITH
MODIFICATION OF REMOVING THE AWARD OF DAMAGES EXCEPT COST OF SUIT
The terms "accident" and "accidental" as used in insurance contracts have not acquired any technical meaning, and are construed
by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen by chance or
fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen
An accident is an event that takes place without one's foresight or expectation an event that proceeds from an unknown cause, or
is an unusual effect of a known cause and, therefore, not expected.
Where the death or injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in the
doing of the act which produces the injury, the resulting death is within the protection of the policies insuring against death or injury
from accident.
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 injured without his design, consent,
or voluntary cooperation.
: Lims death was indeed an accident
the firing of the gun, which was the additional unexpected and independent and unforeseen occurrence that led to the insured
person's death
The exception of suicide cannot absolve because the parties already agreed that it was not suicide
: s argument that the insured willfully exposed himself to needless peril thus removing him from coverage does not hold
Suicide and willful exposure to needless peril are in pari materia, both signifying disregard for ones life
Suicide merely imports a positive act of ending such life while the second indicates a reckless risking of it that is almost suicidal in
intent
There was neither suicide [as agreed upon] nor willfully exposing oneself to needless peril
o
The act of Lim of pointing the gun at his temple was to assure Nalagon that the gun was not loaded

44. BIAGTAN [Emilia, Juan Jr, Miguel, Gil, Gracia] vs THE INSULAR LIFE ASSURANCE COMPANY LTD.
Juan S. Biagtan Sr. was insured with for the sum of P5,000.00
Under a supplementary contract Accidental Death Benefit Clause, for an additional sum of P5,000.00 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 cause
The clause expressly provided that it would not apply where the death resulted from an injury intentionally inflicted by another party
1964/05/20 : Robbers entered the house of Juan Sr. ; killed him during the course of the robbery with thrusts from sharp-pointed
instruments [9 wounds ; 5 mortal ; 4 non-mortal]
, as beneficiaries, file a claim under the policy
paid the basic amount of P5,000.00 but refused to pay the additional sum of P5,000.00 under the accidental death benefit clause
because the injuries were intentionally inflicted by third parties and therefore not covered
thus filed suit with COFI, Pangasinan
COFI : ruled in favor of
I. WON the wounds received by the insured were inflicted intentionally thus excluded from the coverage? YES
COFI committed plain error in drawing the conclusion from the admitted facts
9 wounds were inflicted, all by means of thrusts with sharp-pointed instruments wielded by the robbers
Whether the robbers had intent to kill or merely scare the victim or ward off any defense, it cannot be denied that the act itself of
inflicting the injuries were intentional
The exception in the accidental benefit clause does not speak of the purpose [of the injury causing the death ; whether homicidal or
not] but only of the fact that such injuries have been intentionally inflicted
it has been held that "intentional" as used in an accident policy excepting intentional injuries inflicted by the insured or any other
person, etc., 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

45. VDA. DE GABRIEL, JACQUELINE VS CA ; FORTUNE INSURANCE AND SURETY COMPANY

Marcelino Gabriel [Insured] was employed by Emerald Construction and Development Corporation in Iraq
Covered by personal accidental insurance for P100,000.00 under a group policy procured from P
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
On 1982/05/22 within the term of the policy, Marcelino died
A year later, ECDC reported the death to P by telephone, submitting death certificate [Ministry of Health, Iraq] and an autopsy
report [NBI]
o
Due to the advanced state of postmortem decomposition, cause of death cannot be determined
P : denied the claim of ECDC on the ground of prescription
thus filed a complaint with the RTC

47. Tiu, William [Doing business under the name of DRough Riders] ; Las Pias, Virgilio vs Arriesgado, Pedro ; Condor,
Benjamin ; Pedriano, Sergio ; Philippine Phoenix Surety and Insurance, Inc
1987/03/15 : The cargo truck marked Condor Hollow Blocks and General Merchandise, fully loaded with firewood, had one of its tires
explode while in transit
The driver parked along the rights side of the national highway and removed the damaged tire to vulcanize it in a nearby shop, some
700 meters away
The driver left his helper, Jose Mitante Jr. to keep watch and instructed the latter to place a spare tire six fathoms away behind the
truck to serve as a warning for incoming vehicles.
The trucks tail lights were also left on
A passenger bus owned by DRough Riders, driven by Las Pias, with the passengers [Arriesgado, Pedro and Felisa (spouses)],
rammed into the stalled truck
o
Pedro Arriesgado lost consciousness and suffered a fracture in his right colles
o
Felisa Arriesgado died while undergoing medical treatment
Arriesgado filed suit against owner and driver
filed a third-party complaint against P PPII ; Condor [owner of the truck] and Pedriano [driver of the truck]
TC : ruled in favor of Arriesgado
- Las Pinas was overspeeding, thus making him negligent
- Absence of EWD was not sufficient to impute negligence on Pedriano
CA : affirmed TC ruling, but reduced MD and ED awards from P50K to P25K
I. WON the CA committed error?
: Las Pias was negligent in driving the ill-fated bus
Even in the absence of expert evidence, the damage sustained by the truck supports the findings of the TC and CA that the bus was
travelling at a very fast speed
The collision took place at 4:45am, thus the other lane was empty. The bus couldve easily swerved to the left lane with proper
clearance
Las Pias further claimed that he was travelling at a speed of 40-50 KPH when he cleared the bridge, but the max speed allowed by
law is only 30KPH
CC A2185 a person driving a vehicle is presumed negligent if at the time of the mishap, he was violating any traffic regulation.
: failed to overcome the presumption of negligence against him as one engaged in the business of common carriage
While evidence may be submitted to overcome such presumption of negligence, it must be shown that the carrier observed the
required extraordinary diligence, which means that the carrier must show the utmost diligence of very cautious persons as far as
human care and foresight can provide, or that the accident was caused by fortuitous event
failed to conclusively rebut such presumption. The negligence of petitioner Laspias as driver of the passenger bus is, thus, binding
against petitioner Tiu, as the owner of the passenger bus engaged as a common carrier
: Doctrine of Last Clear Chance is inapplicable
It only applies in a suit between the owners and drivers of two colliding vehicles.
It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations, for it would be
inequitable to exempt the negligent driver and its owner on the ground that the other driver was likewise guilty of negligence
: However, Pedriano and Condor were likewise negligent
Pedriano parked the vehicle askew without any warning lights or reflector devices
violated RA4136 S34(g) Lights when parked or disabled. Appropriate parking lights or flares visible one hundred meters away
shall be displayed at a corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or is
placed in such manner as to endanger passing traffic

48. TIO KHE CHIO vs CA ; EASTERN ASSURANCE AND SURETY CORPORATION

1978/12/18 : imported 1000 bags of fishmeal valued at $36,000.30 from Agro Impex, Dallas, USA
Goods were insured with P and shipped on board M/V Peskov, a vessel owned by Far Eastern Shipping Company
Upon arrival, the goods were found to have been damaged by sea water which rendered it useless
Both P and FESC refused s claim, prompting the latter to sue the former before the CFI for damages
CFI ordered P and FESC to pay solidarily the sum of P105,986.86 less the amount of P18,387.86 for unpaid premiums, with legal
interest from the filing of complaint + P15,000 as AFs and the costs
Judgment became final as to P but FESC appealed and was absolved from liability
TC issued a writ of execution against P
The sheriff reportedly fixed the legal rate at 12%, which P moved to quash, insisting 6% interest only in accordance with CCA2209
CFI denied Ps motion
CA set aside order of CFI in so far as it fixes the interest at 12% ; imposed 6% interest
I. WON the CA erred when it fixed the interest at 6% only? NO
PD612 S243 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.
PD612 S244 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, from the
date following the time prescribed in section 242 or in section 243, 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
-

CA made no finding that there was unjustified refusal or withholding of payment of the insureds claim
S243 and S244 only applies when the court finds an unreasonable delay or refusal in the payment of the claims
Neither is CB Circular 416 [effective 1974/07/29 ; fixes legal interest from 6% to 12%]
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 damages arising from injury to persons and loss of property which does not involve a loan.
In the light of the fact that 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 six (6%) per cent.

49. FINMAN GENERAL ASSURANCE CORPORATION vs CA ; USIPHILINCORPORATED

P : obtained a fire insurance policy from [formerly under the name of Summa Insurance Corporation] covering certain properties
e.g. office, furniture, fixtures, shop machinery and other trade equipment
undertook to indemnify P for any damage or loss arising from fire
Sometime in 1982, P filed a claim for loss arising from fire amounting to P987,126.11
appointed Adjuster H.H. Bayne to undertake the valuation and adjustment of the loss
s Finance Officer Rosauro Maghirang and s Accounting Manager Pedro Palallos signed a Statement/Agreement fixing the loss at
P842,683.40
However, despite repeated demands by P, refused to pay the insurance claim
TC : is liable for P842,683.40 and to pay 24% interest per annum from 1985/02/28 + 10% as AFs plus P1,500.00 per counsel
appearance + P30K ED
CA : Affirm with modification of setting the 24% interest pegged from 1985/05/03
: argues disallowance because of P failure to submit the required documents in accordance with Policy Condition 13, which were
communicated to P by H.H. Bayne
Policy required, among other things:
o
Color photographs [close-up, not more than 2 meters away] of the most severely damaged
o
Color photographs [close-up, not more than 2 meters away] of the least damaged
o
Statement of salvage on burned items
I. WON Policy Condition 13 was not complied with thus justifying disallowance?
Factual findings and conclusions of the TC and CA are entitled to great weight and respect, and will not be disturbed
on appeal in the absence of any clear showing that either overlooked certain facts or circumstances which would
substantially affect the disposition of the case
TC and CA both found that P substantially complied with condition 13
The pertinent portion of condition 13 provides that : 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

Records show that P, after the occurrence of the fire immediately notified and submitted the following
o
Sworn Statement of Loss and Formal Claim (Exhibit C) and
o
Proof of Loss (Exhibit D)
In any case, through its Finance Manager Rosauro Mahirang, acknowledged its liability upon signing of the document indicating
that the amount due of P842,683.40
Anent the payment of the 24% interest per annum computed from 1985/05/03
Sec. 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.
Sec. 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
attorneys 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 242 or in section 243 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.
Under PD612 S243, there is prima facie evidence of unreasonable delay in payment of the claim by the failure of the insurer to pay
the whole claim within the time fixed by S243 and S244
Further Policy Condition 29 itself provides for the payment of interest : x x x 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.
In this case, as found by the CA, petitioner and private respondent signed the agreement (Exhibit E) indicating that the amount due
private respondent was P842,683.40 on April 2, 1985. Petitioner thus had until May 2, 1985 to pay private respondents insurance
For its failure to do so, the CA and the trial court rightfully directed petitioner to pay, inter alia, 24% interest per annum in accordance
with the above quoted provisions

50. PRUDENTIAL GUARANTEE and ASSURANCE INC vs TRANS-ASIA SHIPPING LINES, INC
: owned the vessel M/V Asia Korea
Secured insurance from for loss/damage of the hull and machinery arising from perils, inter alia, of fire and explosion for P40M
[1993/07/01 1994/07/01]
1993/10/25 a fire broke out aboard MV Asia Korea while undergoing repairs at the port of Cebu
1993/10/26 filed its notice of claim for damages sustained by the vessel, with reservation to subsequent notification of the claim
upon final survey
o
Adjusters report on the fire was submitted by Richard Hogg International [hired by ] together with U-Marine Surveyor
Reports
1995/05/29 executed a document denominated as Loan and Trust Receipt
Received from a P3M loan without interest, repayable only in the event and to the extent that any net recovery is made by on
account of the loss
As security for such repayment, pledged to whatever recovery made
: denied s claim through a letter
allegedly breached policy conditions, among them : warranted vessel classed and class maintained
Requested the return of the P3M sum
thus filed a complaint for sum of money against ; claiming P8,395,072.26 [balance of the P11,395,072.26 insurance policy] +
42% interest PD612 S243
RTC Ruled in favor of ; to return the P3M

Liabilities of the parties hinged on WON violated / breached the policy conditions on warranted class and class maintained =
which meant that is required to maintain the vessel at a certain class at all times pertinent during the life of the policy, which
failed to do
committed concealment PD612 S107 ; failure to maintain/preserve its class was a material concealment sufficient to avoid the
policy and entitling the injured party to rescind
The Loan and Trust Receipt should be interpreted as a loan since the parties called it as such
CA Reverse RTC decision ; should keep the P3M and retains the claim for the balance
On the issue of WON breached the policy condition of warranted class and class maintained, it was [the party asserting noncompensability] who had the burden of proof to show that breached the warranty
Further, the warranty allegedly breached by was a rider which, while contained in the policy, was inserted by without s
intervention
o
Thus it partakes of the nature of a contract of adhesion which should be construed against
Further still, the 2 renewals by constitutes a waiver by of any breach of warranty
Lastly, the Loan and Trust Receipt is a contract of subrogation and not a receipt, with the P3M considered as partial payment of s
obligation towards
I. WON is liable towards for the subject insurance policy? YES ; FAILED TO PROVE THAT BREACHED THE
WARRANTY ; ARGUENDO, ALSO WAIVED ITS RIGHT TO RESCIND WHEN IT ACCEPTED RENEWAL FOR 2 CONSECUTIVE
YEARS
A. failed to establish that violated and breached the policy condition [warranted vessel classed and class maintained]
Marine Insurance Policy Warranty Clause 5 : the insured vessel, "M/V ASIA KOREA" is required to be CLASSED AND CLASS
MAINTAINED
According to , on 1993/10/25 [time of occurrence of fire], the vessel was in violation of its warranty as it was not classed and not
class maintained
Classed and class maintained as defined by s Senior Manager of the Marine and Aviation Division Fernandez, Lucio [in examination
interview] : entered into a classification society which set certain standards for a vessel to maintain for them to maintain membership
in the society. Such classification must be continuous throughout the effectivity of the policy, otherwise the warranty is breached
However, merely asserted that the warranty was breached without even attempting to discharge the burden of proof to establish
the same.
Further Senior Manager Fernandez admitted that at the time of procurement of the insurance contract, s vessel was properly
classed by Bureau Veritas
PD612 S74 The violation of a material warranty, or other material provision of a policy on the part of either party thereto, entitles the
other to rescind
o
[a] warranty is a statement or promise set forth in the policy, or by reference incorporated therein, the untruth or
nonfulfillment of which in any respect, and without reference to whether the insurer was in fact prejudiced by such untruth or
nonfulfillment, renders the policy voidable by the insurer.
o
However, it is indubitable that for the breach of warranty to avoid a policy, the same must be duly shown by the party
alleging the same
B. Assuming that violated the policy condition, made a valid waiver of the same
CA correctly held that the 2 consecutive renewals made by resulted in s waiver of the alleged breach
Breach of a warranty or of a condition renders the contract defeasible at the option of the insurer but if he so elects, he may waive
his privilege and power to rescind by the mere expression of an intention so to do
No clearer intention of the waiver of the alleged breach of warranty, than the renewal of the policy
Further bolstered by the fact that consistently requested for a certification that the vessel was classed and class maintained, which
WON was acceded to, did not affect s decision to renew
II. WON is liable towards for the Loan and Trust Receipt Agreement? NO ; THE P3M IS AN ADVANCE PAYMENT OF
THE INSURANCE PROCEED AND NOT A LOAN
: P3M given to is a loan and not as partial payment against s liabilities ; as a customary practice for insurance companies to
afford their assured to continue business without embarrassment while awaiting the outcome of their claim
The Loan and Trust Agreement did not subrogate to whatever rights and/or actions may have against 3 rd persons
Notwithstanding its designation, the tenor of the "Loan and Trust Receipt" evidences that the real nature of the transaction between
the parties was that the amount of P3,000,000.00 was not intended as a loan whereby TRANSASIA is obligated to pay PRUDENTIAL,
but rather, the same was a partial payment or an advance on the policy of the claims due to TRANSASIA.
The amount constitutes as an advanced payment subrogating the former to the extent of any net recovery made
even is obligated under the agreement to promptly prosecute suit against any third party responsible for the loss, at the expense
and under the exclusive direction and control of , making it the principal and the agent
The obligation of to repay is highly speculative and contingent i.e. only in the event and to the extent that any net recovery is
made by from persons liable
o
Transaction was made to benefit such that if no recovery from 3 rd parties is made, then cannot be repaid
III. What is the correct imposable interest on the liability, if any, of either or both parties?
: is directed to pay the balance of P8,395,072.26 + AF of 10% P839,507.226
: AF is granted [contrary to CAs ruling] because under PD612 S244 : AF is granted after the finding of an unreasonable denial /
withholding of the payment
Further the law imposes an interest of twice the ceiling prescribed by the Monetary Board on the amount of the claim due the insured
from the date following the time prescribed under S242 or in S243 until fully satisfied
o
S244 considers the failure to pay the claims within the periods specified under S242 and S243

o
-

S244 does not require a showing of bad faith ; a prima facie evidence of unreasonable delay in payment of the claim is
created by mere failure to pay

: There was unreasonable delay by to pay s claims

1993/10/26 [day after loss] filed its notice of claim
1996/08/13 Richard Hogg International completed its survey report recommending the amount of P11,395,072.26 as the total
indemnity
1997/04/21 sent a letter denying s claim
1997/07/21 sent another letter seeking the return of P3M
PD612 S244 : categorical in imposing an interest twice the ceiling prescribed by the Monetary Board due the insured, from the date
following the time prescribed in Section 242 or in Section 243, as the case may be, until the claim is fully satisfied
PD612 S243. 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.
Prevailing interest ceiling is 12% per annum, thus 24% per annum
Interest computed from 1996/08/13 [proof of loss : as done by the surveyors]
A further legal interest of 12% per annum for the total amount of liability computed from finality of judgment until full satisfaction
CONCLUSION
1. PRUDENTIAL is DIRECTED to PAY TRANSASIA the amount of P8,395,072.26, representing the balance of the loss suffered by
TRANSASIA and covered by Marine Policy No. MH93/1363
2. PRUDENTIAL is DIRECTED further to PAY TRANSASIA damages in the form of attorneys fees equivalent to 10% of the amount of
P8,395,072.26
3. The aggregate amount (P8,395,072.26 plus 10% thereof as attorneys fees) shall be imposed double interest at the rate of 24% per
annum to be computed from 13 September 1996 until fully paid and
4. An interest of 12% per annum is similarly imposed on the TOTAL amount of liability adjudged as abovestated in paragraphs (1), (2),
and (3) herein, computed from the time of finality of judgment until the full satisfaction thereof.