RIZAL SURETY & INSURANCE COMPANY, petitioner, vs.

COURT OF APPEALS and TRANSWORLD KNITTING MILLS,

INC., respondents
FACTS:

On March 13, 1980, Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy in favor of Transworld
Knitting Mills, Inc. (Transworld), initially for One Million Pesos and eventually increased to One Million Five Hundred
ThousandPesos, covering the period from August 14, 1980 to March 13, 1981.

The same pieces of property insured with the petitioner were also insured with New India Assurance Company, Ltd., (New
India).

On January 12, 1981, fire broke out in the compound of Transworld, razing the middle portion of its four-span building and
partly gutting the left and right sections thereof. A two-storey building (behind said four-span building) where fun and
amusement machines and spare parts were stored, was also destroyed by the fire.

Transworld filed its insurance claims with Rizal Surety & Insurance Company and New India Assurance Company but to no
avail.

Thereafter, it filed a civil case against the said insurance companies action for collection of sum of money and damages before
the then Court of First Instance of Rizal; praying for judgment ordering Rizal Insurance and New India. Petitioner Rizal
Insurance countered that its fire insurance policy sued upon covered only the contents of the four-span building, which was
partly burned, and not the damage caused by the fire on the two-storey annex building.

The trial court rendered its decision dismissing the case as against The New India Assurance Co., Ltd., but ordering defendant
Rizal Surety And Insurance Company to pay Transwrold (sic) Knitting Mills, Inc.

Both the petitioner, Rizal Insurance Company, and private respondent, Transworld Knitting Mills, Inc., went to the Court of
Appeal which the decision of the court below is modified and adding New India Assurance Company liable also.

It is petitioner's submission that the fire insurance policy litigated upon protected only the contents of the main building (four-
span), and did not include those stored in the two-storey annex building. On the other hand, the private respondent theorized
that the so called "annex" was not an annex but was actually an integral part of the four-span building and therefore, the goods
and items stored therein were covered by the same fire insurance policy.
In the case under consideration, both the trial court and the Court of Appeals found that the so called "annex " was not an annex
building but an integral and inseparable part of the four-span building described in the policy and consequently, the machines and spare
parts stored therein were covered by the fire insurance in dispute.
Issue: Whether or not “annex” is an integral and inseparable part of the four-span building, thus were covered by the fire insurance
policy?
Held:

Yes. Verily, the two-storey building involved, a permanent structure which adjoins and intercommunicates with the "first right span of the
lofty storey building" formed part thereof, and meets the requisites for compensability under the fire insurance policy sued upon.

So also, considering that the two-storey building aforementioned was already existing when subject fire insurance policy contract was
entered into on January 12, 1981, having been constructed sometime in 1978, petitioner should have specifically excluded the said two-
storey building from the coverage of the fire insurance if minded to exclude the same but if did not, and instead, went on to provide that
such fire insurance policy covers the products, raw materials and supplies stored within the premises of respondent Transworld which
was an integral part of the four-span building occupied by Transworld, knowing fully well the existence of such building adjoining and
intercommunicating with the right section of the four-span building.

After a careful study, the Court does not find any basis for disturbing what the lower courts found and arrived at.

Indeed, the stipulation as to the coverage of the fire insurance policy under controversy has created a doubt regarding the portions of
the building insured thereby. Article 1377 of the New Civil Code provides:

"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity"

Conformably, it stands to reason that the doubt should be resolved against the petitioner, Rizal Surety Insurance Company, whose
lawyer or managers drafted the fire insurance policy contract under scrutiny. Citing the aforecited provision of law in point, the Court
in Landicho vs. Government Service Insurance System, ruled:
"This is particularly true as regards insurance policies, in respect of which it is settled that the 'terms in an insurance policy, which are
ambiguous, equivocal, or uncertain x x x are to be construed strictly and most strongly against the insurer, and liberally in favor of the
insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where forfeiture is involved' (29 Am.
Jur., 181), and the reason for this is that the 'insured usually has no voice in the selection or arrangement of the words employed and
that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting
exclusively in the interest of, the insurance company.’’

Blue Cross Health Care Inc. v. Olivarez, G.R.

No. G.R. No. 169737, February 12, 2008
FACTS:
Respondent Neomi T. Olivares applied for a health care program with petitioner Blue Cross Health Care, Inc., a health maintenance firm. For the
period October 16, 2002 to October 15, 2003, she paid the amount of P11,117. For the same period, she also availed of the additional service of
limitless consultations for an additional amount of P1,000. She paid these amounts in full on October 17, 2002. The application was approved on
October 22, 2002. In the health care agreement, ailments due to pre-existing conditions were excluded from the coverage.
On November 30, 2002, or barely 38 days from the effectivity of her health insurance, respondent Neomi suffered a stroke and was admitted at the
Medical City which was one of the hospitals accredited by petitioner. She incurred hospital expenses amounting to P34,217.20. Consequently, she
requested from the representative of petitioner at Medical City a letter of authorization in order to settle her medical bills. But petitioner refused to
issue the letter and suspended payment pending the submission of a certification from her attending physician that the stroke she suffered was not
caused by a pre-existing condition.

She was discharged from the hospital on December 3, 2002. On December 5, 2002, she demanded that petitioner pay her medical bill.
When petitioner still refused, she and her husband, respondent Danilo Olivares, were constrained to settle the bill. They thereafter filed a complaint
for collection of sum of money against petitioner in the MeTC, petitioner maintained that it had not yet denied respondents' claim as it was still
awaiting Dr. Saniel's report. , the MeTC dismissed the complaint for lack of cause of action

On appeal, the RTC, in a decision it reversed the ruling of the MeTC and ordered petitioner to pay respondents. The RTC held that it was
the burden of petitioner to prove that the stroke of respondent Neomi was excluded from the coverage of the health care program for being caused by
a pre-existing condition. It was not able to discharge that burden. On appeal, the CA affirmed the decision of the RTC.
ISSUE:
Whether or not petitioner was able to prove that respondent Neomi's stroke was caused by a pre-existing condition and therefore was
excluded from the coverage of the health care agreement?
HELD:
 NO. The court favored the Respondents counter that the burden was on petitioner to prove that Neomi's stroke was excluded from the
coverage of their agreement because it was due to a pre-existing condition. It failed to prove this.

In Philamcare Health Systems, Inc. v. CA, we ruled that a health care agreement is in the nature of a non-life insurance. It is an established
rule in insurance contracts that when their terms contain limitations on liability, they should be construed strictly against the insurer. These are
contracts of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract. This doctrine is
equally applicable to health care agreements.

Petitioner never presented any evidence to prove that respondent Neomi's stroke was due to a pre-existing condition. It merely speculated that Dr.
Saniel's report would be adverse to Neomi, based on her invocation of the doctor-patient privilege. This was a disputable presumption at best.

Fortune Insurance and Surety Co. v. Court of Appeals, G.R. No. 115278, May 23, 1995

FACTS:
Poducers Bank of the Philippines insured with Fortune Insurance and Surety Co. P725,000 which was lost during a
robbery of Producer's armored vehicle while it was in transit from Pasay City City to its Makati head office.

The armored car was driven by Benjamin Magalong Y de Vera, escorted by Security Guard Saturnino Atiga Y
Rosete.
Upon claiming, Fortune refused stating that it is not liable since under the general exceptions of the policy:
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. . . .
Producers Bank opposes contends that Atiga and Magalong are not its "officer, employee, . . . trustee or authorized
representative . . . at the time of the robbery.
The RTC favored Producers Bank since Driver and Security Guard were merely assigned by the by PRC Management
and by Unicorn Security. On Appeal, the CA affirmed the decision.

ISSUE:

Whether or not the petitioner Fortune Insurance and Surety Co. is liable under the Money, Security, and Payroll Robbery policy it
issued to the private respondent

HELD:

NO. It has been aptly observed that in burglary, robbery, and theft insurance, "the opportunity to defraud the insurer — the moral
hazard — is so great that insurers have found it necessary to fill up their policies with countless restrictions, many designed to reduce
this hazard. Seldom does the insurer assume the risk of all losses due to the hazards insured against." Persons frequently excluded
under such provisions are those in the insured's service and employment. The purpose of the exception is to guard against liability
should the theft be committed by one having unrestricted access to the property. In such cases, the terms specifying the excluded
classes are to be given their meaning as understood in common speech. The terms "service" and "employment" are generally
associated with the idea of selection, control, and compensation.
A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the insurer, or it should be
construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme
jealousy and must be construed
in such a way, as to preclude the insurer from non-compliance with its obligation. It goes without saying then that if the terms of the
contract are clear and unambiguous, there is no room for construction and such terms cannot be enlarged or diminished by judicial
construction.
An insurance contract is a contract of indemnity upon the terms and conditions specified therein. It is settled that the terms of the policy
constitute the measure of the insurer's liability. In the absence of statutory prohibition to the contrary, insurance companies have the
same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent
with public policy.

It is clear that insofar as Fortune is concerned, it was its intention to exclude and exempt from protection and coverage losses arising
from dishonest, fraudulent, or criminal acts of persons granted or having unrestricted access to Producers' money or payroll. When it
used then the term "employee," it must have had in mind any person who qualifies as such as generally and universally understood, or
jurisprudentially established in the light of the four standards in the determination of the employer-employee relationship. The SC is
satisfied that Magalong and Atiga were, in respect of the transfer of Producer's money from its Pasay City branch to its head office in
Makati, its "authorized representatives" who served as such with its teller Maribeth Alampay. Hence, Fortune is exempt from liability
under the general exceptions clause of the insurance policy.

Gulf Resorts, Inc. v. Philippine Charter

Insurance Corp., G.R. No.156167, May 16, 2005
FACTS:

Petitioner Gulf Resorts, Inc. is the owner of the Playa Resort located at Agoo, La Union
and had its properties insured with American Home Assurance Company which
includes loss or damage to shock to any of the property insured by this Policy
occasioned by or through or in consequence of earthquake.

On July 16, 1990, an earthquake struck Central Luzon and Northern Luzon so the
properties in Playa Resort were damaged including its 2 swimming pools. On August 11,
1990, Gulf Resort filed its formal demand for settlement of damage to all of its
properties in the Agoo Playa Resort but Gulf's claim was denied on the ground that its
insurance policy only afforded earthquake shock coverage to the two swimming pools of
the resort.

Petitioner Gulf Resorts, Inc contends that the the policy’s earthquake shock endorsement
clearly covers all of the properties insured and not only the swimming pools. It used the
words any property insured by this policy, and it should be interpreted as all inclusive.

Eventually, Gulf Result filed a complaint and collection for sum of money with damages
against American Home Insurance.

In the decision by the RTC it favored American Home that it ruled that the insurance
coverage against the earthquake is limited only to the 2 swimming pools in the Agoo
Playa resort and does not extend against to other properties damaged by the
earthquake and the endorsement rider means that only the two swimming pools were
insured against earthquake shocks. On appeal, the CA affirmed the ruling of RTC.
ISSUE: Whether or not the insurance policy issued by the American Home Assurance Company to Gulf Resort’s Coverage is limited
only to the 2 swimming pools of Gulf’s Playa Resort?

HELD:

Petitioner Gulf Resorts, Inc contention that pursuant to this rider, no

YES. The SC denied the
qualifications were placed on the scope of the earthquake shock coverage. Thus, the
policy extended earthquake shock coverage to all of the insured properties.

It is basic that all the provisions of the insurance policy should be examined and
interpreted in consonance with each other. All its parts are reflective of the true intent of
the parties. The policy cannot be construed piecemeal. Certain stipulations cannot be
segregated and then made to control; neither do particular words nor phrases necessarily
determine its character. Petitioner cannot focus on the earthquake shock endorsement to
the exclusion of the other provisions. All the provisions and riders, taken and interpreted
together, indubitably show the intention of the parties to extend earthquake shock
coverage to the two swimming pools only.
A careful examination of the premium recapitulation will show that it is the clear intent
of the parties to extend earthquake shock coverage only to the two swimming pools.
Section 2(1) of the Insurance Code defines a contract of insurance as an agreement
whereby one undertakes for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event. Thus, an insurance contract exists
where the following elements concur:

1. The insured has an insurable interest;

2. The insured is subject to a risk of loss by the happening of the designated peril;

3. The insurer assumes the risk;

4. Such assumption of risk is part of a general scheme to distribute actual losses among a
large group of persons bearing a similar risk; and

5. In consideration of the insurer's promise, the insured pays a premium.

An insurance premium is the consideration paid an insurer for undertaking to indemnify

the insured against a specified peril. In fire, casualty, and marine insurance, the premium
payable becomes a debt as soon as the risk attaches. In the subject policy, no premium
payments were made with regard to earthquake shock coverage, except on the two
swimming pools. There is no mention of any premium payable for the other resort
properties with regard to earthquake shock.
In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner
cannot rely on the general rule that insurance contracts are contracts of adhesion which
should be liberally construed in favor of the insured and strictly against the insurer
company which usually prepares it. A contract of adhesion is one wherein a party, usually
a corporation, prepares the stipulations in the contract, while the other party merely affixes
his signature or his "adhesion" thereto. Through the years, the courts have held that in
these types of contracts, the parties do not bargain on equal footing, the weaker party's
participation being reduced to the alternative to take it or leave it. Thus, these contracts
are viewed as traps for the weaker party whom the courts of justice must protect.
Consequently, any ambiguity therein is resolved against the insurer, or construed liberally
in favor of the insured.
Respondent, in compliance with the condition set by the petitioner, copied AIU Policy
No. 206-4568061-9 in drafting its Insurance Policy No. 31944. It is true that there was
variance in some terms, specifically in the replacement cost endorsement, but the
principal provisions of the policy remained essentially similar to AHAC-AIUs policy.
Consequently, we cannot apply the "fine print" or "contract of adhesion" rule in this case
as the parties’ intent to limit the coverage of the policy to the two swimming pools only is
not ambiguous

FACTS:
ISSUE:
HELD:
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