WILLIAM TIU V. PEDRO ARRIESGADO et al.

, 437 SCRA 426 (2004)

FACTS: On March 15, 1987, a truck owned by Condor was travelling along Poblacion,
Compostela,Cebu blew one of its rear tires.

1. The truck driver parked the truck on the right side of the highway to get assistance

2. Thereafter, D’Rough Riders passenger bus was cruising along the highway in thesame direction.

3. Its driver saw the stalled truck 25 meters away but it was too late. The bus rammed onthe rear
part of the truck resulting in the injury of its passengers, including Arriesgadoand his wife (died
from her injuries)

4. Arriesgado filed a complaint for breach of contract of carriage against D’RoughRiders and its
driver.

5. For its part, Tiu (owner of D’Rough Riders) filed a third party complaint against its insurer,
PPSII, the owner of the truck and its driver. He claimed that PPSII, as insurer,should be held
solidarily liable with Tiu

6. The trial court held in favor of Arriesgado but it made no mention ofCA affirmed thetrial court’s
ruling and cited that as a common carrier, Tiu must exercise extraordinarydiligence in transporting
its passengers, which it failed to do

7. As to the liability of PPSII: CA held that no evidence was presented against PPSII soit cannot
be held liable for Arriesgado’s claim

8. PPSII’s argument: There is a contract of insurance (TPL) but it had already settled theclaims of
those injured in the incident

ISSUE: In third-party liability insurance, would it be possible for a third party to sue the
insurerdirectly?

HELD: Yes. This is an exception to the rule on mutuality of contract. Whenever a contract
containsstipulation for the benefit of a third person and the moment the third person communicates
his assentthereto, the contract becomes binding upon him. The fact that a third person demands
fulfillment ofthe insurance policy may be reasonably construed as an assent on his part to the
benefit provided inthe policy. This provision arms him with the requisite legal personality to bring
an action on theinsurance policy. (stipulation pour atrui).

ISSUE: In a TPL insurance, is the insurer solidarily liable with the insured?

HELD: No. Although the victim may proceed directly against the insurer for indemnity, the third
party liability is only up to the extent of the insurance policy and those required by law. While it is
true that where the insurance contract provides for indemnity against liability to third persons,
andsuch persons can directly sue the insurer, the direct liability of the insurer under indemnity
contracts against third party liability does not mean that the insurer can be held liable in solidum
with the insured and/or the other parties found at fault. For the liability of the insurer is based on
contract; that of the insured carrier or vehicle owner is based on tort.

The respondent PPSII could not then just deny petitioner Tiu's claim; it should have paid P12,000
for the death of Felisa Arriesgado, and respondent Arriesgado's hospitalization expenses of
P1,113.80,which the trial court found to have been duly supported by receipts. The total amount of
the claims,even when added to that of the other injured passengers which the respondent PPSII
claimed to havesettled, would not exceed the P50,000 limit under the insurance agreement.

INSULAR LIFE ASSURANCE COMPANY v. PAZ Y. KHU

The date of last reinstatement mentioned in Section 48 of the Insurance Code pertains to the date
that the insurer approved' the application for reinstatement. However, in light of the ambiguity in
the insurance documents to this case, this Court adopts the interpretation favorable to the insured
in determining the date when the reinstatement was approved.

On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular Life
under the latter's Diamond Jubilee Insurance Plan.

Felipe accomplished the required medical questionnaire wherein he did not declare any illness or
adverse medical condition. Insular Life thereafter issued him Policy with a face value of PI
million. This took effect on June 22, 1997

On June 23, 1999, Felipe's policy lapsed due to non-payment of the premium covering the period
from June 22, 1999 to June 23, 2000.

On September 7, 1999, Felipe applied for the reinstatement of his policy and paid P25,020.00 as
premium. Except for the change in his occupation of being self-employed to being the Municipal
Mayor of Binuangan, Misamis Oriental, all the other information submitted by Felipe in his
application for reinstatement was virtually identical to those mentioned in his original policy.[7]

On October 12, 1999, Insular Life advised Felipe that his application for reinstatement may only
be considered if he agreed to certain conditions such as payment of additional premium and the
cancellation of the riders pertaining to premium waiver and accidental death benefits. Felipe
agreed to these conditions[8] and on December 27, 1999 paid the agreed additional premium of
P3,054.50.[9]

On January 7, 2000, Insular Life issued Endorsement No. PN-A000015683, which reads:
This certifies that as agreed by the Insured, the reinstatement of this policy has been approved by
the Company on the understanding that the following changes are made on the policy effective
June 22, 1999:

1. The EXTRA PREMIUM is imposed; and

2. The ACCIDENTAL DEATH BENEFIT (ADB) and WAIVER OF PREMIUM DISABILITY

(WPD) rider originally attached to and forming parts of this policy [are] deleted.

In consequence thereof, the premium rates on this policy are adjusted to P28,000.00 annually,
P14,843.00 semi-annually and P7,557.00 quarterly, Philippine currency.[10]

On June 23, 2000, Felipe paid the annual premium in the amount of P28,000.00 covering the
period from June 22, 2000 to June 22, 2001. And on July 2, 2001, he also paid the same amount as
annual premium covering the period from June 22,2001 to June 21, 2002.[11]

On September 22, 2001, Felipe died. His Certificate of Death enumerated the following as causes
of death:
Immediate cause: a. End stage renal failure, Hepatic failure

Antecedent cause: b. Congestive heart failure, Diffuse myocardial ischemia.

Underlying cause: c. Diabetes Neuropathy, Alcoholism, and Pneumonia.[12]

Felipe's beneficiaries or respondents) filed with Insular Life a claim for benefit under the
reinstated policy. This claim was denied. Instead, Insular Life advised Felipe's beneficiaries that it
had decided to rescind the reinstated policy on the grounds of concealment and misrepresentation
by Felipe.

Hence, respondents instituted a complaint for specific performance with damages.

Insurance company contended that when Felipe died, the policy was still contestable

RTC - in favor of felipe's beneficiaries

The RTC agreed with the latter's claim that the insurance policy was reinstated on June 22, 1999
(so 2 years had already lapsed from the time of death).

The RTC cited the ruling that any ambiguity in a contract of insurance should be resolved strictly
against the insurer upon the principle that an insurance contract is a contract of adhesion.

CA - affirmed the RTCs ruling.

Hence, the present Petition.

Issue: whether Felipe's reinstated life insurance policy is already incontestable at the time of his
death.

Petitioner's Arguments

In praying for the reversal of the CA Decision, Insular Life basically argues that respondents
should not be allowed to recover on the reinstated insurance policy because the two-year
contestability period had not yet lapsed inasmuch as the insurance policy was reinstated only on
December 27, 1999, whereas Felipe died on September 22, 2001;[24] that the CA overlooked the
fact that Felipe paid the additional extra premium only on December 27, 1999, hence, it is only
upon this date that the reinstated policy had become effective; that the CA erred in declaring that
resort to the principles of statutory construction is still necessary to resolve that question given
that the Application for Reinstatement, the Letter of Acceptance and the Endorsement in and by
themselves already embodied unequivocal provisions stipulating that the two-year contestability
clause should be reckoned from the date of approval of the reinstatement;[25] and that Felipe's
misrepresentation and concealment of material facts in regard to his health or adverse medical
condition gave it (Insular Life) the right to rescind the contract of insurance and consequently, the
right to deny the claim of Felipe's beneficiaries for death benefits under the disputed policy.[26]

Respondents'Arguments

Respondents maintain that the phrase "effective June 22, 1999" found in both the Letter of
Acceptance and in the Endorsement is unclear whether it refers to the subject of the sentence, i.e.,
the "reinstatement of this policy" or to the subsequent phrase "changes are made on the policy;"
that granting that there was any obscurity or ambiguity in the insurance policy, the same, should
be laid at the door of Insular Life as it was this insurance company that prepared the necessary
documents that make up the same;[27] and that given the CA's .finding which effectively affirmed
the RTC's finding on this particular issue, it stands to reason that the insurance policy had indeed
become incontestable upon the date of Felipe's death.[28]

Our Ruling

We deny the Petition.

In Lalican v. The Insular Life Assurance Company, Limited,[30] which coincidentally also
involves the herein petitioner, it was there held that the reinstatement of the insured's policy is to
be reckoned from the date when the application was processed and approved by the insurer.

Thus, it is settled that the reinstatement of an insurance policy should be reckoned from the date
when the same was approved by the insurer.

In this case, the parties differ as to when the reinstatement was actually approved. Insular Life
claims that it approved the reinstatement only on December 27, 1999. On the other hand,
respondents contend that it was on June 22, 1999 that the reinstatement took effect.

Given the obscurity of the language, the construction favorable to the insured will be adopted by
the courts.

Accordingly, the subject policy is deemed reinstated as of June 22, 1999. Thus, the period of
contestability has lapsed

7. Geagonia v. CA

ARMANDO GEAGONIA, petitioner, v. COURT OF APPEALS and COUNTRY BANKERS

INSURANCE CORPORATION, respondents. G.R. No. 114427 February 6, 1995

FACTS: Petitioner Armando Geagonia obtained from the private respondent fire insurance for his
business Normanâs Mart which covered the following: "Stock-in-trade consisting principally of
dry goods such as RTW's for men and women wear and other usual to assured's business."

The policy contained the following 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.

A fire of accidental origin broke out at the public and the petitioner's insured stock-in-trade were
completely destroyed prompting him to file with the private respondent a claim under the policy.

The private respondent denied the claim because it found that at the time of the loss the
petitioner's stocks-in-trade were likewise covered by fire insurance policies issued by the Cebu
Branch of the Philippines First Insurance Co., Inc.

The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of
the policy. Petitioner then filed a complaint against the private respondent in the Insurance
Commission for the recovery of P100,000.00 under fire insurance policy and damages. He
claimed that he knew the existence of the other two policies. But, he said that he had no
knowledge of the provision in the private respondent's policy requiring him to inform it of the
prior policies and this requirement was not mentioned to him by the private respondent's agent.
The Insurance Commission found that the petitioner did not violate Condition 3 as he had no
knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was
Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent;
and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. The Insurance
Commission then ordered the respondent company to pay complainant the sum of P100,000.00
with interest and attorneyâs fees. CA reversed the decision of the Insurance Commission because
it found that the petitioner knew of the existence of the two other policies issued by the PFIC.
Hence, this petition.

ISSUES: 1. Whether the petitioner had prior knowledge of the two insurance policies issued by
the PFIC when he obtained the fire insurance policy from the private respondent, thereby, for not
disclosing such fact, violating Condition 3 of the policy. 2. Whether petitioner is precluded from
recovering insurance claim

HELD The Court agrees with the Court of Appeals that the petitioner knew of the prior policies
issued by the PFIC. His letter of 18 January 1991 to the private respondent conclusively proves
this knowledge. His testimony to the contrary before the Insurance Commissioner and which the
latter relied upon cannot prevail over a written admission made ante litem motam. It was,
indeed, incredible that he did not know about the prior policies since these policies were not new
or original. 2. Provisions, conditions or exceptions in policies which tend to work a forfeiture of
insurance policies should be construed most strictly against those for whose benefits they are
inserted, and most favorably toward those against whom they are intended to operate. The
reason for this is that, except for riders which may later be inserted, the insured sees the contract
already in its final form and has had no voice in the selection or arrangement of the words
employed therein. With these principles in mind, the Court is of the opinion that Condition 3 of
the subject policy is not totally free from ambiguity and must, perforce, be meticulously analyzed.
Such analysis leads us to conclude that (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. Furthermore, by stating within Condition 3 itself that such condition shall not apply if
the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent
was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it
had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of
"other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration
of fraud. 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.

WON double insurance exists

No. 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 non-disclosure then of the former policies was not fatal to the petitioner's right to recover on
the private respondent's policy.