BAUTISTA, Coleen Joyce Q.
INSURANCE: Sat 3-6; Sun 9-12
Lim v Sunlife G.R. No. L-15774 November 29, 1920
J. Malcolm
Facts:
Luis Lim of Zamboanga applied for a Sun Life policy for Php 5,000. He
designated his wife, Pilar, as beneficiary. The first premium of P433 was paid by
Lim, then the company issued a "provisional policy." Lim died after the issuance
of the provisional policy but before approval of the application.
Pilar brought an action to recover from Sun Life the sum of P5,000, the amount
named in the provisional policy. She lost in the trial court hence this appeal.
The "provisional policy" reads as follows:
The above-mentioned life is to be assured in accordance with the terms and
conditions contained or inserted by the Company in the policy which may be
granted by it in this particular case for four months only from the date of
the application, provided that the Company shall confirm this agreement by
issuing a policy on said application when the same shall be submitted to
the Head Office in Montreal. Should the Company not issue such a policy, then
this agreement shall be null and void ab initio, and the Company shall be held
not to have been on the risk at all, but in such case the amount herein
acknowledged shall be returned.
Issue: WON there was a perfected contract of insurance
Held: No. Petition dismissed.
Ratio:
The policy for four months is expressly made subjected to the affirmative
condition that "the company shall confirm this agreement by issuing a policy on
said application when the same shall be submitted to the head office in
Montreal."
Should the company not issue such a policy, then this agreement shall be null
and void ab initio, and the company shall be held not to have been on the risk."
This means that the agreement should not go into effect until the home office of
the company should confirm it by issuing a policy. The provisional policy
amounts to nothing but an acknowledgment on behalf of the company, that it has
received from the person named therein the sum of money agreed upon as the
first year's premium upon a policy to be issued upon the application, if
the application is accepted by the company.
There can be no contract of insurance unless the minds of the parties have met in
agreement. In this case, the contract of insurance was not consummated by the
parties.
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The general rule concerning the agent's receipt pending approval or issuance of
policy is in several points, according to Joyce:
2. Where an agreement is made between the applicant and the agent whether by
signing an application containing such condition, or otherwise, that no liability
shall attach until the principal approves the risk and a receipt is given buy the
agent, such acceptance is merely conditional, and it subordinated to the act of
the company in approving or rejecting; so in life insurance a "binding slip" or
"binding receipt" does not insure of itself.
The court held that this second point applied to the case.
American jurisprudence tells us of such examples.
Steinle vs. New York Life Insurance Co.- the amount of the first premium had
been paid to an insurance agent and a receipt was given. The paper declared that
if the application was accepted by the company, the insurance shall take effect
from the date of the application but that if the application was not accepted, the
money shall be returned. The court held that there was no perfection of the
contract.
Cooksey vs. Mutual Life Insurance Co.- the person applying for the life
insurance paid and amount equal to the first premium, but the application and
the receipt for the money paid, stipulated that the insurance was to become
effective only when the application was approved and the policy issued. There
was also no perfection.
A binding receipt is a custom where temporary insurance pending the
consideration of the application was given until the policy be issued or
the application rejected, and such contracts are upheld and enforced when the
applicant dies before the issuance of a policy or final rejection of the application.
However, there was no perfected contract because of the clause in
the application and the receipt stipulate expressly that the insurance shall
become effective only when the "application shall be approved and the policy
duly signed by the secretary at the head office of the company and issued." The
premium of 433 must be returned.
Enriquez v Sunlife November 29, 1920 G.R. No. L-15895
Malcolm, J.:
Facts:
This is an action brought by the plaintiff ad administrator of the estate of the late
Joaquin Ma. Herrer to recover from the defendant life insurance company the
sum of pesos 6,000 paid by the deceased for a life annuity. The trial court gave
judgment for the defendant. Plaintiff appeals.
Joaquin Herrer made application to the Sun Life Assurance Company of Canada
through its office in Manila for a life annuity. Two days later he paid the sum of
P6,000 to the manager of the company’s Manila office and was given a receipt.
BAUTISTA, Coleen Joyce Q.
The application was given to the head office in Canada. The oofice gave
acceptance by cable on November 26, 1917. The policy was issued on December
4.
The attorney, Mr. Torres then wrote to the Manila office of the company stating
that Herrer desired to withdraw his application. The following day the local
office replied to Mr. Torres, stating that the policy had been issued, and called
attention to the notification. This letter was received by Mr. Torres on the
morning of December 21, 1917 and Mr. Herrer died on December 20, 1917.
(Whether on the same day the cable was received notice was sent by the Manila
office of Herrer that the application had been accepted, is a disputed point,
which will be discussed later.)
Issue: WON Herrer received notice of acceptance of his application.
Held: No. Judgment reversed.
Ratio:
Sunlife averred that that they prepared the letter on November 26, 1917, and
handed it to the local manager for signature. The manager said that he received
the application November 26, 1917. He said that on the same day he signed a
letter notifying Mr. Herrer of this acceptance. They said that these letters, after
being signed, were sent to the chief clerk and placed on the mailing desk for
transmission. The witness could not tell if the letter had every actually been
placed in the mails.
The plaintiff’s attorney testified to having prepared Herrer’s will, and his client
mentioned his application for a life annuity. He said that the only document
relating to the transaction in his possession was the provisional receipt. Rafael
Enriquez, the administrator of the estate, testified that he had gone through the
effects of the deceased and had found no letter of notification from the
insurance company to Mr. Herrer.
Our deduction from the evidence on this issue must be that the letter of
November 26, 1917, notifying Mr. Herrer that his application had been accepted,
prepared, and signed in the local office of the insurance company and was placed
in the ordinary channels for transmission. But this was never actually mailed and
thus was never received by the applicant.
The law that applies here is the Civil Code Art 1802, because the Insurance Act
is silent as to the methods followed to createa contract of insurance. Article
1802, not only describes a contact of life annuity, but but in two other articles,
also gives strong clues as to the proper disposition of the case.
For instance, article 16 of the Civil Code provides that “In matters which are
governed by special laws, any deficiency of the latter shall be supplied by the
provisions of this Code.” The special law on the subject of insurance is deficient
in enunciating the principles governing acceptance, the subject-matter of the
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Civil code, if there be any, would be controlling. In the Civil Code is found
article 1262 providing that “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.”
The Civil Code rule, that an acceptance made by letter shall bind the person
making the offer only from the date it came to his knowledge avoids uncertainty
and tends to security.
Also, U.S. jurisprudence states that the courts who take this view have expressly
held that an acceptance of an offer of insurance not actually or constructively
communicated to the proposer does not make a contract. Only the mailing of
acceptance, it has been said, completes the contract of insurance.
The law applicable to the case is found to be the second paragraph of article
1262 of the Civil Code providing that an acceptance made by letter shall not
bind the person making the offer except from the time it came to his knowledge.
Also, that according to the provisional receipt, three things had to be
accomplished by the insurance company before there was a contract: (1) There
had to be a medical examination of the applicant; (2) there had to be approval of
the application by the head office of the company; and (3) this approval had in
some way to be communicated by the company to the applicant. The further
admitted facts are that the head office in Montreal did accept the application, did
cable the Manila office to that effect, did actually issue the policy and did
actually write the letter of notification and place it in the usual channels for
transmission to the addressee.
The fact as to the letter of notification thus fails to concur with the essential
elements of the general rule pertaining to the mailing and delivery of mail matter
as announced by the American courts, namely, when a letter or other mail matter
is addressed and mailed with postage prepaid there is a rebuttable presumption
of fact that it was received by the addressee as soon as it could have been
transmitted to him in the ordinary course of the mails. But if any one of these
elemental facts fails to appear, it is fatal to the presumption. For instance, a letter
will not be presumed to have been received by the addressee unless it is shown
that it was deposited in the post-office, properly addressed and stamped.
The contract for a life annuity was not perfected because it has not been proved
satisfactorily that the acceptance of the application ever came to the knowledge
of the applicant.
Perez v CA G.R. No. 112329. January 28, 2000
J. Ynares-Santiago
Facts:
BAUTISTA, Coleen Joyce Q.
Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation
for P20,000.00. Sometime in October 1987, an agent of the insurance
corporation, visited Perez in Quezon and convinced him to apply for additional
insurance coverage of P50,000.00. Virginia A. Perez, Primitivo’s wife, paid
P2,075.00 to the agent. The receipt issued indicated the amount received was a
"deposit." Unfortunately, the agent lost the application form accomplished by
Perez and he asked the latter to fill up another application form. The agent sent
the application for additional insurance of Perez to the Quezon office. Such was
supposed to forwarded to the Manila office.
Perez drowned. His application papers for the additional insurance of
P50,000.00 were still with the Quezon. It was only after some time that
the papers were brought to Manila. Without knowing that Perez died, BF
Lifeman Insurance Corporation approved the application and issued the
corresponding policy for the P50,000.00.
Petitioner Virginia Perez went to Manila to claim the benefits under the
insurance policies of the deceased. She was paid P40,000.00 under the first
insurance policy for P20,000.00 but the insurance company refused to pay the
claim under the additional policy coverage of P50,000.00, the proceeds of which
amount to P150,000.00.
The insurance company maintained that the insurance for P50,000.00 had not
been perfected at the time of the death of Primitivo Perez. Consequently, the
insurance company refunded the amount paid.
BF Lifeman Insurance Corporation filed a complaint against Virginia Perez
seeking the rescission and declaration of nullity of the insurance contract in
question.
Petitioner Virginia A. Perez, on the other hand, averred that the deceased had
fulfilled all his prestations under the contract and all the elements of a valid
contract are present.
On October 25, 1991, the trial court rendered a decision in favor of petitioner
ordering respondent to pay 150,000 pesos. The Court of Appeals, however,
reversed the decision of the trial court saying that the insurance contract for
P50,000.00 could not have been perfected since at the time that the policy was
issued, Primitivo was already dead.
Petitioner’s motion for reconsideration having been denied by respondent court,
the instant petition for certiorari was filed on the ground that there was a
consummated contract of insurance between the deceased and BF Lifeman
Insurance Corporation.
Issue: WON the widow can receive the proceeds of the 2nd insurance policy
Held: No. Petition dismissed.
Ratio:
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Perez’s application was subject to the acceptance of private respondent BF
Lifeman Insurance Corporation. The perfection of the contract of insurance
between the deceased and respondent corporation was further conditioned with
the following requisites stated in the application form:
"there shall be no contract of insurance unless and until a policy is issued on
this application and that the said policy shall not take effect until the premium
has been paid and the policy delivered to and accepted by me/us in person while
I/We, am/are in good health."
BF Lifeman didn’t give its assent when it merely received the application
form and all the requisite supporting papers of the applicant. This happens only
when it gives a policy.
It is not disputed, however, that when Primitivo died on November 25, 1987,
his application papers for additional insurance coverage were still with
the branch office of respondent corporation in Quezon. Consequently, there was
absolutely no way the acceptance of the application could have been
communicated to the applicant for the latter to accept inasmuch as the applicant
at the time was already dead.
Petitioner insists that the condition imposed by BF that a policy must have been
delivered to and accepted by the proposed insured in good health is potestative,
being dependent upon the will of the corporation and is therefore void. The court
didn’t agree. A potestative condition depends upon the exclusive will of one of
the parties and is considered void. The Civil Code states: When the fulfillment
of the condition depends upon the sole will of the debtor,
the conditional obligation shall be void.
The following conditions were imposed by the respondent company for the
perfection of the contract of insurance: a policy must have been issued, the
premiums paid, and the policy must have been delivered to and accepted by the
applicant while he is in good health.
The third condition isn’t potestative, because the health of the applicant at the
time of the delivery of the policy is beyond the control or will of the
insurance company. Rather, the condition is a suspensive one whereby the
acquisition of rights depends upon the happening of an event which constitutes
the condition. In this case, the suspensive condition was the policy must have
been delivered and accepted by the applicant while he is in good health. There
was non-fulfillment of the condition, because the applicant was already dead at
the time the policy was issued.
As stated above, a contract of insurance, like other contracts, must be assented to
by both parties either in person or by their agents. So long as an application for
insurance has not been either accepted or rejected, it is merely an offer or
proposal to make a contract. The contract, to be binding from the date
of application, must have been a completed contract.
The insurance company wasn’t negligent because delay in acting on
the application does not constitute acceptance even after payment. The
BAUTISTA, Coleen Joyce Q.
corporation may not be penalized for the delay in the processing of
the application papers due to the fact that process in a week wasn’t the usual
timeframe in fixing the application. Delay could not be deemed unreasonable so
as to constitute gross negligence.
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS,
represented by CANDIDA G. DANS, and the DBP MORTGAGE
REDEMPTION INSURANCE POOL, respondents.
G.R. No. L-109937 March 21, 1994
QUIASON, J.
Facts: In May 1987, Juan B. Dans, together with his wife Candida, his son
and daughter-in-law, applied for a loan of P500,000.00 with the
Development Bank of the Philippines (DBP), Basilan Branch. As the
principal mortgagor, Dans, then 76 years of age, was advised by DBP to
obtain a mortgage redemption insurance (MRI) with the DBP Mortgage
Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on
August 4, 1987 and released on August 11, 1987. From the proceeds of the
loan, DBP deducted the amount of P1,476.00 as payment for the MRI
premium. On August 15, 1987, Dans accomplished and submitted the “MRI
Application for Insurance” and the “Health Statement for DBP MRI Pool.”
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10
percent, was credited by DBP to the savings account of the DBP MRI Pool.
Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice,
relayed this information to the DBP MRI Pool. On September 23, 1987, the
DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage,
being over the acceptance age limit of 60 years at the time of application.
On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late
husband’s MRI application. The DBP offered to refund the premium of
P1,476.00 which the deceased had paid, but Candida Dans refused to accept the
same, demanding payment of the face value of the MRI or an amount equivalent
to the loan. She, likewise, refused to accept an ex gratia settlement of
P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as
administratrix, filed a complaint with the Regional Trial Court, Branch I,
Basilan, against DBP and the insurance pool for “Collection of Sum of
Money with Damages.” Respondent Estate alleged that Dans became
insured by the DBP MRI Pool when DBP, with full knowledge of Dans’ age
at the time of application, required him to apply for MRI, and later
collected the insurance premium thereon. Respondent Estate therefore prayed:
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(1) that the sum of P139,500.00, which it paid under protest for the loan, be
reimbursed; (2) that the mortgage debt of the deceased be declared fully paid;
and (3) that damages be awarded.
On March 10, 1990, the trial court rendered a decision in favor of
respondent Estate and against DBP. The DBP MRI Pool, however, was
absolved from liability, after the trial court found no privity of contract
between it and the deceased. The trial court declared DBP in estoppel for
having led Dans into applying for MRI and actually collecting the premium and
the service fee, despite knowledge of his age ineligibility.
Issue: 1) Whether or not there is a contract made between DBP MRI Pool and
the late Juan Dans;
2) Whether or not DBP should be held liable.
Held: 1) No. When Dans applied for MRI, he filled up and personally signed a
“Health Statement for DBP MRI Pool” (Exh. “5-Bank”) with the following
declaration:
I hereby declare and agree that all the statements and answers contained herein
are true, complete and correct to the best of my knowledge and belief and form
part of my application for insurance. It is understood and agreed that no
insurance coverage shall be effected unless and until this application is approved
and the full premium is paid during my continued good health (Records, p. 40).
Under the aforementioned provisions, the MRI coverage shall take effect: (1)
when the application shall be approved by the insurance pool; and (2) when
the full premium is paid during the continued good health of the applicant.
These two conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the
DBP MRI Pool. The pool, however, did not approve the application of Dans.
There is also no showing that it accepted the sum of P1,476.00, which DBP
credited to its account with full knowledge that it was payment for Dan’s
premium. There was, as a result, no perfected contract of insurance; hence, the
DBP MRI Pool cannot be held liable on a contract that does not exist.
2) Yes. As an insurance agent, DBP made Dans go through the motion of
applying for said insurance, thereby leading him and his family to believe
that they had already fulfilled all the requirements for the MRI and that the
issuance of their policy was forthcoming. Apparently, DBP had full
knowledge that Dan’s application was never going to be approved. The
maximum age for MRI acceptance is 60 years as clearly and specifically
provided in Article 1 of the Group Mortgage Redemption Insurance Policy
signed in 1984 by all the insurance companies concerned (Exh. “1-Pool”).
Under Article 1987 of the Civil Code of the Philippines, “the agent who acts as
such is not personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving
such party sufficient notice of his powers.”
BAUTISTA, Coleen Joyce Q.
The DBP’s liability, however, cannot be for the entire value of the insurance
policy. To assume that were it not for DBP’s concealment of the limits of its
authority, Dans would have secured an MRI from another insurance company,
and therefore would have been fully insured by the time he died, is highly
speculative. Considering his advanced age, there is no absolute certainty
that Dans could obtain an insurance coverage from another company. It
must also be noted that Dans died almost immediately, i.e., on the nineteenth
day after applying for the MRI, and on the twenty-third day from the date of
release of his loan.
One is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved (Civil Code of the Philippines, Art.
2199).
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to
REIMBURSE respondent Estate of Juan B. Dans the amount of P1,476.00 with
legal interest from the date of the filing of the complaint until fully paid; and (2)
to PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as moral
damages and the amount of Ten Thousand Pesos (P10,000.00) as attorney’s fees.
With costs against petitioner.
ZENITH INSURANCE CORPORATION vs.CA and FERNANDEZ G.R. No.
85296 May 14, 1990
FACTS:
On January 25, 1983, private respondent Lawrence Fernandez insured with the
insurer his car for "own damage". The car figured in an accident and suffered
actual damages in the amount of P3,640.00. The insurer offered to pay the claim
of Fernandez pursuant to the terms and conditions of the contract which, the
private respondent rejected. After allegedly being given a run around by Zenith
for two (2) months, Fernandez filed a complaint with the Regional Trial Court
for sum of money and damages resulting from the refusal of Zenith to pay the
amount claimed. Aside from actual damages and interests, Fernandez also
prayed for moral damages in the amount of P10,000.00, exemplary damages of
P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00.
On June 4, 1986, a decision was rendered by the trial court ordered the insurance
company to pay the insured the damage incurred plus interest at the rate of twice
the prevailing interest rates, moral damages (20,000, that is twice the amount
the insured prayed for), exemplary damages, attorney's fees, litigation expenses
and costs. The CA affiremed the decision of the trial court.
ISSUE:
Whether the insurer is liable to the insured for moral and exemplary damages as
ordered by the trial court
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HELD:
The decision of the lower court is modified to which, the moral damages is
reduced to 10,000 and the award of exemplary damages is deleted
In case of unreasonable delay in the payment of the proceeds of an insurance
policy, the damages that may be awarded are: 1) attorney's fees; 2) other
expenses incurred by the insured person by reason of such unreasonable denial
or withholding of payment; 3) interest at twice the ceiling prescribed by the
Monetary Board of the amount of the claim due the injured; and 4) the amount
of the claim. (Insurance Code Sec. 244)
In awarding moral damages in case of breach of contract, there must be a
showing that the breach was wanton and deliberately injurious or the one
responsible acted fraudently or in bad faith.The act of petitioner of delaying
payment for two months cannot be considered as so wanton or malevolent to
justify an award of P20,000.00 as moral damages, taking into consideration the
actual damage. The reason for petitioner's failure to indemnify private
respondent within the two-month period was that the parties could not come to
an agreement as regards the amount of the actual damage on the car.
On the other hand, exemplary or corrective damages are imposed by way of
example or correction for the public good (Art. 2229, NCC). In the case of Noda
v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987; 151 SCRA 227, exemplary
damages were not awarded as the insurance company had not acted in wanton,
oppressive or malevolent manner. The same is true in the case at bar.
Insular v Ebrado G.R. No. L-44059 October 28, 1977
Facts:
J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for
P5,882.00 with a rider for Accidental Death. He designated Carponia T. Ebrado
as the revocable beneficiary in his policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was
made liable to pay the coverage in the total amount of P11,745.73, representing
the face value of the policy in the amount of P5,882.00 plus the additional
benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the
designated beneficiary therein, although she admited that she and the insured
were merely living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased
insured. She asserts that she is the one entitled to the insurance proceeds.
BAUTISTA, Coleen Joyce Q.
Insular commenced an action for Interpleader before the trial court as to who
should be given the proceeds. The court declared Carponia as disqualified.
Issue: WON a common-law wife named as beneficiary in the life insurance
policy of a legally married man can claim the proceeds in case of death of the
latter?
Held: No. Petition
Ratio:
Section 50 of the Insurance Act which provides that "the insurance shall be
applied exclusively to the proper interest of the person in whose name it is
made"
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.
When not otherwise specifically provided for by the Insurance Law, the contract
of life insurance is governed by the general rules of the civil law regulating
contracts. And under Article 2012 of the same Code, any person who is
forbidden from receiving any donation under Article 739 cannot be named
beneficiary of a fife insurance policy by the person who cannot make a donation
to him. Common-law spouses are barred from receiving donations from each
other.
Article 739 provides that void donations are those made between persons who
were guilty of adultery or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate
spouses and those between illegitimate ones should be enforced in life insurance
policies since the same are based on similar consideration. So long as marriage
remains the threshold of family laws, reason and morality dictate that the
impediments imposed upon married couple should likewise be imposed upon
extra-marital relationship.
A conviction for adultery or concubinage isn’t required exacted before the
disabilities mentioned in Article 739 may effectuate. The article says that 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 guilty of the donee may be proved by
preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the
offense is a condition precedent. The law plainly states that the guilt of the party
may be proved “in the same acting for declaration of nullity of donation.” And,
it would be sufficient if evidence preponderates.
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The insured was married to Pascuala Ebrado with whom she has six legitimate
children. He was also living in with his common-law wife with whom he has
two children.
5. GULF RESORTS INC vs PHILIPPINE CHARTER INSURANCE
CORPORATION (2005)
FACTS: Gulf Resorts, Inc at Agoo, La Union was 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
July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the
properties and 2 swimming pools in its Agoo Playa Resort were damaged
August 23, 1990: 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 insists that the parties have intended to extend the coverage
through the attachment 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" to the insurance policy.
ISSUE: Whether or not the insurance policy earthquake shock coverage extends
to other property aside from the two swimming pools.
HELD: NO. 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.
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. This is consistent with the history of petitioner’s previous
insurance policies from AHAC-AIU.
BAUTISTA, Coleen Joyce Q.
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
xxx
We cannot apply the general rule on contracts of adhesion to the case at
bar. Petitioner cannot claim it did not know the provisions of the policy. From
the inception of the policy, petitioner had required the respondent to copy
verbatim the provisions and terms of its latest insurance policy from AHAC-
AIU.
DOCTRINE:
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 or phrases necessarily determine its character.
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.
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. Consequently, any ambiguity therein is resolved against
the insurer, or construed liberally in favor of the insured.
Pan Malayan Insurance Corporation v CA (Insurance)
G.R. No. 81026 April 3, 1990
Page 7 of 21
INSURANCE: Sat 3-6; Sun 9-12
PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF
APPEALS, ERLINDA FABIE AND
HER UNKNOWN DRIVER, respondents.
FACTS:
On December 10, 1985, PANMALAY filed a complaint for damages with the
RTC of Makati against private respondents Erlinda Fabie and her driver.
PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car
with plate No. DDZ-431 and registered in the name of Canlubang Automotive
Resources Corporation [CANLUBANG]; that on May 26, 1985, due to the
"carelessness, recklessness, and imprudence" of the unknown driver of a pick-up
with plate no. PCR-220, the insured car was hit and suffered damages in the
amount of P42,052.00; that PANMALAY defrayed the cost of repair of the
insured car and, therefore, was subrogated to the rights of CANLUBANG
against the driver of the pick-up and his employer, Erlinda Fabie; and that,
despite repeated demands, defendants, failed and refused to pay the claim of
PANMALAY. private respondents filed a Motion to Dismiss alleging that
PANMALAY had no cause of action against them. They argued that payment
under the "own damage" clause of the insurance policy precluded subrogation
under Article 2207 of the Civil Code, since indemnification thereunder was
made on the assumption that there was no wrongdoer or no third party at fault.
DECISION OF LOWER COURTS:
(1) Trial Court: dismissed for no cause of action PANMALAY's complaint for
damages against private respondents Erlinda Fabie and her driver
(2) CA: affirmed trial court.
ISSUE:
Whether or not the insurer PANMALAY may institute an action to recover the
amount it had paid its assured in settlement of an insurance claim against private
respondents as the parties allegedly responsible for the damage caused to the
insured vehicle.
RULING:
PANMALAY is correct.
Article 2207 of the Civil Code is founded on the well-settled principle of
subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon payment to
the assured, will be subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay. Payment by
the insurer to the assured operates as an equitable that the insurer has been
obligated to pay. Payment by the insurer to the assured operates as an equitable
BAUTISTA, Coleen Joyce Q.
or negligence of a third party. CANLUBANG is apparently of the same
understanding. Based on a police report assignment to the former of all remedies
that the latter may have against the third party whose negligence or wrongful act
caused the loss. The right of subrogation is not dependent upon, nor does it grow
out of, any privity of contract or upon written assignment of claim. It accrues
simply upon payment of the insurance claim by the insurer.
The exceptions are:
(1) if the assured by his own act releases the wrongdoer or third party liable for
the loss or damage, from liability, the insurer's right of subrogation is defeated
(2) where the insurer pays the assured the value of the lost goods without
notifying the carrier who has in good faith settled the assured's claim for loss, the
settlement is binding on both the assured and the insurer, and the latter cannot
bring an action against the carrier on his right of subrogation
(3) where the insurer pays the assured for a loss which is not a risk covered by
the policy, thereby effecting "voluntary payment", the former has no right of
subrogation against the third party liable for the loss
None of the exceptions are availing in the present case.
Also, even if under the above circumstances PANMALAY could not be deemed
subrogated to the rights of its assured under Article 2207 of the Civil Code,
PANMALAY would still have a cause of action against private respondents. In
the pertinent case of Sveriges Angfartygs Assurans Forening v. Qua Chee Gan,
supra., the Court ruled that the insurer who may have no rights of subrogation
due to "voluntary" payment may nevertheless recover from the third party
responsible for the damage to the insured property under Article 1236 of the
Civil Code.
WHEREFORE, in view of the foregoing, the present petition is GRANTED.
Petitioner's complaint for damages against private respondents is hereby
REINSTATED. Let the case be remanded to the lower court for trial on the
merits.
MANILA MAHOGANY MANUFACTURING CORPORATION vs. COURT
OF APPEALS AND
ZENITH INSURANCE CORPORATION (G.R. No. L-52756 (October 12,
1987)
FACTS:
Petitioner Manila Mahogany Manufacturing Corporation insured its Mercedes
Benz 4-door sedan with respondent Zenith Insurance Corporation. The insured
vehicle was bumped and damaged by a truck owned by San Miguel Corporation.
For the damage caused, respondent company paid petitioner five thousand pesos
(P5,000.00) in amicable settlement. Petitioner's general manager executed a
Release of Claim, subrogating respondent company to all its right to action
against San Miguel Corporation.
Page 8 of 21
INSURANCE: Sat 3-6; Sun 9-12
Thereafter, respondent company wrote Insurance Adjusters, Inc. to demand
reimbursement from San Miguel Corporation of the amount it had paid
petitioner. Insurance Adjusters, Inc. refused reimbursement, alleging that San
Miguel Corporation had already paid petitioner P4,500.00 for the damages to
petitioner’s motor vehicle, as evidenced by a cash voucher and a Release of
Claim executed by the General Manager of petitioner discharging San Miguel
Corporation from "all actions, claims, demands the rights of action that now
exist or hereafter develop arising out of or as a consequence of the accident."
Respondent insurance company thus demanded from petitioner reimbursement
of the sum of P4,500.00 paid by San Miguel Corporation. Petitioner refused;
hence, the instant case.
ISSUE:
Whether or not the respondent insurance company is subrogated to the rights of
the petitioner against San Miguel Corporation.
HELD:
YES
RULING:
The Supreme Court held that 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.
Hence, petitioner is entitled to keep the sum of P4,500.00 paid by San Miguel
Corporation under its clear right to file a deficiency claim for damages incurred,
against the wrongdoer, should the insurance company not fully pay for the injury
caused (Article 2207, New Civil Code).
However, when petitioner released San Miguel Corporation from any liability,
petitioner's right to retain the sum of P5,000.00 no longer existed, thereby
entitling private respondent to recover the same.
The right of subrogation can only exist after the insurer has paid the insured
otherwise the insured will be deprived of his right to full indemnity. If the
insurance proceeds are not sufficient to cover the damages suffered by the
insured, then he may sue the party responsible for the damage for the remainder.
To the extent of the amount he has already received from, the insurer enjoys the
right of subrogation.
Since the insurer can be subrogated to only such rights as the insured may have,
should the insured, after receiving payment from the insurer, release the
wrongdoer who caused the loss, the insurer loses his rights against the latter. But
in such a case, the insurer will be entitled to recover from the insured whatever
it has paid to the latter, unless the release was made with the consent of the
insurer.
BAUTISTA, Coleen Joyce Q.
FEDEX vs. AHAC and PHILAM INSURANCE COMPANY, INC
G.R. No. 150094 August 18, 2004
FACTS: Shipper SMITHKLINE USA delivered to carrier Burlington Air
Express (BURLINGTON), an agent of [Petitioner] Federal Express Corporation,
a shipment of 109 cartons of veterinary biologicals for delivery to consignee
SMITHKLINE and French Overseas Company in Makati City. The shipment
was covered by Burlington Airway Bill No. 11263825 with the words,
‘REFRIGERATE WHEN NOT IN TRANSIT’ and ‘PERISHABLE’ stamp
marked on its face. That same day, Burlington insured the cargoes with
American Home Assurance Company (AHAC). The following day, Burlington
turned over the custody of said cargoes to FEDEX which transported the same to
Manila.
The shipments arrived in Manila and was immediately stored at [Cargohaus
Inc.’s] warehouse. Prior to the arrival of the cargoes, FEDEX informed GETC
Cargo International Corporation, the customs broker hired by the consignee to
facilitate the release of its cargoes from the Bureau of Customs, of the
impending arrival of its client’s cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed
custom’s broker who was assigned by GETC, found out, while he was about to
cause the release of the said cargoes, that the same [were] stored only in a room
with 2 air conditioners running, to cool the place instead of a
refrigerator. DIONEDA, upon instructions from GETC, did not proceed with
the withdrawal of the vaccines and instead, samples of the same were taken and
brought to the Bureau of Animal Industry of the Department of Agriculture in
the Philippines by SMITHKLINE for examination wherein it was discovered
that the ‘ELISA reading of vaccinates sera are below the positive reference
serum.’
As a consequence of the foregoing result of the veterinary biologics test,
SMITHKLINE abandoned the shipment and, declaring ‘total loss’ for the
unusable shipment, filed a claim with AHAC through its representative in the
Philippines, the Philam Insurance Co., Inc. (PHILAM) which recompensed
SMITHKLINE for the whole insured amount. Thereafter, PHILAM filed an
action for damages against the FEDEX imputing negligence on either or both of
them in the handling of the cargo.
Trial ensued and ultimately concluded with the FEDEX being held solidarily
liable for the loss. Aggrieved, petitioner appealed to the CA. The appellate court
ruled in favor of PHILAM and held that the shipping Receipts were a prima
facie proof that the goods had indeed been delivered to the carrier in good
condition.
ISSUE: Is FEDEX liable for damage to or loss of the insured goods
Page 9 of 21
INSURANCE: Sat 3-6; Sun 9-12
HELD: petition granted. Assailed decision reversed insofar as it pertains to
FEDEX
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has
tirelessly pointed out that respondents’ claim and right of action are already
barred. Indeed, this fact has never been denied by respondents and is plainly
evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
“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 non-delivery) unless presented
within (120) days from the date of issue of the [Airway Bill]. xxx
Relevantly, petitioner’s airway bill states:
“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; xxx
Article 26 of the Warsaw Convention, on the other hand, provides:
Xxx (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. xx
(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.” xxx
Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time
limitation therefor actually constitutes a condition precedent to the accrual of a
right of action against a carrier for loss of or damage to the goods. The shipper
or consignee must allege and prove the fulfillment of the condition. If it fails to
do so, no right of action against the carrier can accrue in favor of the
former. The aforementioned requirement is a reasonable condition precedent; it
does not constitute a limitation of action.
The requirement of giving notice of loss of or injury to the goods is not an empty
formalism. The fundamental reasons for such a stipulation are (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
BAUTISTA, Coleen Joyce Q.
extent of the injury. “This protects the carrier by affording it an opportunity to
make an investigation of a claim while the matter is fresh and easily investigated
so as to safeguard itself from false and fraudulent claims.
NOTES: as to proper payee:
The Certificate specifies that loss of or damage to the insured cargo is “payable
to order x x x upon surrender of this Certificate.” Such wording conveys the
right of collecting on any such damage or loss, as fully as if the property were
covered by a special policy in the name of the holder itself. At the back of the
Certificate appears the signature of the representative of Burlington. This
document has thus been duly indorsed in blank and is deemed a bearer
instrument.
Since the Certificate was in the possession of Smithkline, the latter had the right
of collecting or of being indemnified for loss of or damage to the insured
shipment, as fully as if the property were covered by a special policy in the name
of the holder. Hence, being the holder of the Certificate and having an insurable
interest in the goods, Smithkline was the proper payee of the insurance proceeds.
Subrogation
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a
subrogation Receipt in favor of respondents. The latter were thus authorized “to
file claims and begin suit against any such carrier, vessel, person, corporation or
government.” Undeniably, the consignee had a legal right to receive the goods in
the same condition it was delivered for transport to petitioner. If that right was
violated, the consignee would have a cause of action against the person
responsible therefor.
SVERIGES ANGFARTYGS ASSURANS FORENIN vs. GAN (1967). –Olive
Cachapero
Topic: Subrogation Article 2027, Civil Code
DOCTRINE: [A]n insurer who pays the insured for loss or liability not covered
by the policy is not subrogated to the latter. However, even assuming that there
was unwarranted — or "volunteer" — payment, plaintiff could still recover what
it paid — in effect — to the carrier from defendant shipper under Art. 1236 of
the Civil Code which allows a third person who pays on behalf of another to
recover from the latter, although there is no subrogation.
FACTS: Defendant Qua Chee Gan shipped on board the S.S. NAGARA, as per
bills of lading Exhs. A and B, 2,032,000 kilos of bulk copra at Siain, Quezon,
consigned to DAL International Trading Co., in Gdynia, Poland. The vessel first
called at the port of Karlshamn, Sweden, where it unloaded 969,419 kilos of
bulk copra. Then, it proceeded to Gdynia where it unloaded the remaining copra
shipment. The actual outturn weights in the latter port showed that only
Page 10 of 21
INSURANCE: Sat 3-6; Sun 9-12
1,569,429 kilos were discharged. Because of the alleged confirmed cargo
shortage, the Polish cargo insurers had to indemnify the consignee for the value
thereof. Thereafter, the former sued the shipowner, the Swedish East Asia
Company, in Gothenburg, Sweden. The latter, in turn sued, defendant and had it
summoned to Gothenburg. A settlement was effected between the Polish cargo
insurers and the shipowner. Plaintiff, as the indemnity insurer for the latter, paid
approximately $60,733.53 to the Polish insurers. Claiming to have been
subrogated to the rights of the carrier, plaintiff sued defendant before the CFI of
Manila to recover U.S. $60,733.53 plus 17% exchange tax, with legal interest, as
the value of the alleged cargo short shipment. Defendant filed a motion to
dismiss on the ground of prescription under the Carriage of Goods by Sea Act.
The lower court ruled that plaintiff's insurance policy did not cover the short
shipment, reasoning that unless the same — as the best evidence — were
presented, it could not be conclusively determined if "liability for short
shipment" was a covered risk.
ISSUE: WON plaintiff is subrogated to the rights of the carrier.
RULING: NO. [T]he rule is that an insurer who pays the insured for loss or
liability not covered by the policy is not subrogated to the latter. However, even
assuming that there was unwarranted — or "volunteer" — payment, plaintiff
could still recover what it paid — in effect — to the carrier from defendant
shipper under Art. 1236 of the Civil Code which allows a third person who pays
on behalf of another to recover from the latter, although there is no subrogation.
But since the payment here was without the knowledge and consent of
defendant, plaintiff's right of recovery is defeasible by the former's defenses
since the Code is clear that the recovery is only up to the amount by which the
defendant was benefited.
RIZAL SURETY v. MANILA RAILROAD COMPANY (1968) – Michelle Sy
Topic: Subrogation (Art. 2027 NCC)
DOCTRINE: Insurer after paying the claim of the insured for damages under the
insurance is subrogated merely to the rights of the insured and therefore can
necessarily recover only that to what was recoverable by the insured.
FACTS: On or about November 29, 1960, the vessel, SS Flying trader, loaded
on board at Genoa, Italy for shipment to Manila, among other cargoes, 6 cases
OMH Special Single Colour Offset Press machine, for which Bill of Lading No.
1 was issued, consigned to Suter, Inc. On or about January 16, 1961, the vessel
arrived in Manila and subsequently discharged complete and in good order the
aforementioned shipment into the custody of defendant Manila Port Service as
arrastre operator. While one of the six cases was being lifted and loaded by the
BAUTISTA, Coleen Joyce Q.
crane of Manila Port Service into the consignee’s truck, it was dropped by the
crane and as a consequence the machine was heavily damaged. The plaintiff, as
the insurer, paid the consignee the amount of P16,500 representing damages by
way of costs of replacement parts and repairs to put the machine on a working
condition. The plaintiff also paid P16,680.70 to the International Adjustment
Bureau as adjuster’s fee.
The paragraph 15 of the management contract between the Bureau of Customs
and Manila Port Service states that the Company’s liability is limited to P500.00
per package unless the value of the goods is otherwise, specified, declared or
manifested and the corresponding arrastre has been paid. The lower court
ordered the defendants, jointly and severally to pay the plaintiff the amount of
P500.00. on appeal, it was stated that the plaintiff could recover in full based on
Article 2207 of the Civil Code.
ISSUE: Whether or not the insurance company can collect more than what was
stipulated in the Management Contract?
RULING: No. The literal language of Article 2207, however, does not warrant
such an interpretation. It is there made clear that in the event that the property
has been insured and the Insurance Company has paid the indemnity for the
injury or loss sustained, it "shall be subrogated to the rights of the insured
against the wrong-doer or the person who has violated the contract." Plaintiff-
appellant Insurance Company, therefore, cannot recover from defendants an
amount greater than that to which the consignee could lawfully lay claim. The
management contract is clear. The amount is limited to Five Hundred Pesos
(P500.00). Plaintiff-appellant Rizal Surety and Insurance Company, having been
subrogated merely to the rights of the consignee, its recovery necessarily should
be limited to what was recoverable by the insured. The lower court therefore did
not err when in the decision appealed from, it limited the amount which
defendants were jointly and severally to pay plaintiff-appellants to "Five
Hundred Pesos (P500.00) with legal interest thereon from January 31, 1962, the
date of the filing of the complaint, . . . ."
DISPOSITIVE: The Decision appealed from is affirmed
CASE 14: NATIONAL UNION FIRE LNSURANCE V. STOLT NIELSEN –
Patrick Mendoza Topic: Subrogation
DOCTRINE:: By subrogation, it became privy to the Charter Party as fully as
the SHIPPER before the latter was indemnified, because as subrogee it stepped
into the shoes of the SHIPPER-ASSURED and is subrogated merely to the
latter's rights. It can recover only the amount that is recoverable by the assured.
Page 11 of 21
INSURANCE: Sat 3-6; Sun 9-12
FACTS: United Coconut Chemicals, Inc. shipped 404.774 metric tons of
distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by
Stolt-Nielsen Philippines Inc. , from Bauan, Batangas, Philippines, consigned to
"Nieuwe Matex" at Rotterdam, Netherlands, covered by Tanker Bill of Lading
BL No. BAT-1. The shipment was insured under a marine cargo policy with
Petitioner National Union Fire Insurance Company of Pittsburg, a non-life
American insurance corporation, through its settling agent in the Philippines, the
American International Underwriters (Philippines), Inc. A Bill of Lading was
present , containing a general statement of incorporation of the terms of a
Charter Party between the Shipper, namely, United Coconut Chemicals Inc., and
Parcel Tankers, Inc., entered into in Greenwich, Connecticut, U.S.A. Upon
receipt of the goods in Netherlands, they were found to be discolored. The
insurer indemnified the shipper because of this. As a subrogee of the shipper, the
insurer filed suit against the carrier, Stolt-Nielsen. The latter moved to dismiss
the case, as they claim it is an arbitrable one, the Bill of Lading being its basis
which contained provisions relating to a Charter Party. The RTC deferred the
motion, and the appellate court reversed the RTC, and ordered the case for
arbitration.
ISSUE: WON the claim of the insurer against the carrier is an arbitrable one.
RULING: We hold, therefore, that the INSURER cannot avoid the binding
effect of the arbitration clause. By subrogation, it became privy to the Charter
Party as fully as the SHIPPER before the latter was indemnified, because as
subrogee it stepped into the shoes of the SHIPPER-ASSURED and is subrogated
merely to the latter's rights. It can recover only the amount that is recoverable by
the assured. And since the right of action of the SHIPPER-ASSURED is
governed by the provisions of the Bill of Lading, which includes by reference
the terms of the Charter Party, necessarily, a suit by the INSURER is subject to
the same agreements
DISPOSITIVE: Yes, the case is an arbitrable one, Stolt-Nielsen wins the case, as
it cannot escape liability arising from the Charter Party Provisions included in
the Bill of Lading as it is a subrogee of the rights of the shipper.
ST. PAUL FIRE & MARINE INSURANCE CO. VS. MACONDRAY & CO.,
INC. (1976) Author: Carlo Guevara Topic: Subrogation, Article 2027 Civil
Code.
DOCTRINE: Insurance carrier is subrogated merely to rights of the assured and
can recover from common carrier only the amount recoverable by the latter.
BAUTISTA, Coleen Joyce Q.
FACTS: Winthrop Products, Inc., of U.S.A., shipped aboard the SS "Tai Ping",
owned and operated by Wilhelm Wilhelmsen, 218 cartons and drums of drugs
and medicine, with the freight prepaid, which were consigned to Winthrop-
Stearns Inc., Manila, Philippines. The shipment was insured by the shipper
against loss and/or damage with the St. Paul Fire & Marine Insurance Company.
The SS "Tai Ping" arrived at the Port of Manila and discharged its shipment into
the custody of Manila Port Service, the arrastre contractor for the Port of Manila.
The said shipment was discharged complete and in good order with the
exception of one (1) drum and several cartons which were in bad order
condition. Hence, the consignee filed a claim in the amount of P1,109.67
representing the C.I.F. value of the damaged drum and cartons of medicine with
the carrier, herein defendants-appellees and the Manila Port Service. Both
refused to pay the claim. Consequently, the consignee filed its claim with the
insurer, St. Paul Fire & Marine Insurance Co., and the insurance company, on
the basis of such claim, paid to the consignee the insured value of the lost and
damaged goods, including other expenses in connection therewith, in the total
amount of $1,134.46 As subrogee of the rights of the shipper and/or consignee,
the insurer, St. Paul Fire & Marine Insurance Co., instituted with the CFI the
present action against the defendants for the recovery of said amount plus costs.
Defendants resisted the action, contending that the whole cargo was delivered to
the consignee in the same condition in which it was received from the carrying
vessel; that their rights, duties and obligations as arrastre contractor at the Port of
Manila are governed by and subject to the terms, conditions and limitations
contained in the Management Contract between the Bureau of Customs and
Manila Port Service, and their liability is limited to the invoice value of the
goods, but in no case more than P500.00 per package, pursuant to the said
Management Contract; and that they are not the agents of the carrying vessel in
the receipt and delivery of cargoes in the Port of Manila. The defendants
Macondray & Co., Inc., Barber Steamship Lines, Inc. and Wilhelm Wilhelmsen
also contested the claim alleging that if any damage was sustained by the
shipment while it was under the control of the vessel, such damage was caused
by insufficiency of packing, force majeure and/or perils of the sea, and that they,
in good faith and for the purpose only of avoiding litigation without admitting
liability to the consignee, offered to settle the latter's claim in full by paying the
corresponding C.I.F. value, but their offer was declined by the consignee and/or
the plaintiff. The lower court rendered judgment ordering the defendants to pay
to the plaintiff, jointly and severally. Plaintiff-appellant argues that, as subrogee
of the consignee, it should be entitled to recover from the defendants appellees
the amount of $1,134.46 which it actually paid to the consignee and which
represents the value of the lost and damaged shipment as well as other legitimate
expenses. Defendants appellees are not insurers of the goods, and as such they
should not be made to pay the insured value.
Page 12 of 21
INSURANCE: Sat 3-6; Sun 9-12
ISSUE: WON the insurance carrier can recover the said amount claimed.
RULING: YES, the plaintiff-appellant, as insurer, after paying the claim of the
insured for damages under the insurance, is subrogated merely to the rights of
the assured. As subrogee, it can recover only the amount that is recoverable by
the latter. Since the right of the assured, in case of loss or damage to the goods,
is limited or restricted by the provisions in the bill of lading, a suit by the insurer
as subrogee necessarily is subject to like limitations and restrictions.
DISPOSITIVE: Respondent Won. Decision is affirmed.
CEBU SHIPYARD V. WILLIAM LINES, INC. Author: Geloace Topic:
Subrogation
DOCTRINE: When the insurer, after due verification of the merit and validity of
the insurance claim of the assured, pays the latter the total amount covered by its
insurance policy, it becomes subrogated to the right of the latter to recover the
insured loss from the liable party.
FACTS:
1. Cebu Shipyard is a domestic corporation engaged in the business of dry-
docking and repairing of marine vessels while the private respondent
Prudential, a domestic corporation, is in the business of non-life insurance.
2. William Lines, Inc. is in the shipping business. It was the owner of M/V
Manila City, a luxury passenger-cargo vessel, which caught fire and sank.
At the time of the accident, the vessel as insured with Prudential for P45M.
3. Petitioner was also insured by Prudential for 3rd party liability under a Ship
repairer’s Legal Liability for Insurance Policy, such was for P10M.
William Lines, Inc. brought its vessel to the Cebu Shipyard for annual dry-
docking and repair. After the subject vessel was transferred to the docking
quay, it caught fire and sank resulting to its loss.
4. William Lines, Inc. filed a complaint for damages against petitioner
alleging that the fire which broke out was the result of CSEW’s negligence
and lack of care. An amended complaint was filed impleading Prudential as
co-plaintiff after the latter had paid William Lines, Inc. the value of the hull
and machinery insurance on the M/V Manila City. As a result of the
payment, Prudential was subrogated to the claim of P45 million,
representing the value of the insurance it paid.
5. The trial court issued a decision against petitioner Cebu Shipyards. The
Court of Appeals affirmed the said decision.
6. Petitioner claims that Prudential is not entitled to be subrogated to the
rights of William Lines, Inc. theorizing that (1) the fire which gutted M/V
BAUTISTA, Coleen Joyce Q.
Manila City was an excluded risk (2) it is a co-assured under the Marine
Hull Insurance Policy.
ISSUE: WON Prudential was subrogated to the rights of William Lines, Inc.
upon its payment of the total amount covered in the insurance policy.
RULING: YES. Clause 20 of the Work Order in question is clear in the sense
that it requires William Lines to maintain insurance on the vessel during the
period of dry-docking or repair. Concededly, such a stipulation works to the
benefit of CSEW as the ship repairer. However, the fact that CSEW benefits
from the said stipulation does not automatically make it as a co-assured of
William Lines. The intention of the parties to make each other a co-assured
under an insurance policy is to be gleaned principally from the insurance
contract or policy itself and not from any other contract or agreement because
the insurance policy denominates the assured and the beneficiaries of the
insurance. The hull and machinery insurance procured by William Lines, Inc.
from Prudential named only "William Lines, Inc." as the assured. There was no
manifestation of any intention of William Lines, Inc. to constitute CSEW as a
co-assured under subject policy. It is axiomatic that when the terms of a contract
are clear its stipulations control. Thus, when the insurance policy involved
named only William Lines, Inc. as the assured thereunder, the claim of CSEW
that it is a co-assured is unfounded.
DISPOSITIVE: Petition was denied and petitioner was not allowed to limit its
liability based on the contract.
FIREMAN’S FUND INSURANCE COMPANY AND THE FIRESTONE TIRE
AND RUBBER COMPANY OF THE PHILIPPINES v JAMILA & COMPANY
- Rebecca Flores Topic: Subrogation
DOCTRINE: When the insurance company pays for the loss, such payment
operates as an equitable assignment to the insurer of the property and all
remedies which the insured may have for the recovery thereof. That right is not
dependent upon, nor does it grow out of, any privity of contract, or upon written
assignment of claim, and payment to the insured makes the insurer an assignee
in equity.
FACTS
1. Jamila/Veterans PH Scouts Security Agency contracted to supply security
guards to Firestone. Jamila assumed responsibility for the acts of its security
guards.
2. First Quezon City Insurance executed a bond for P20K to guarantee
Jamila’s obligation under that contract.
Page 13 of 21
INSURANCE: Sat 3-6; Sun 9-12
3. Later on Firestone’s properties valued at P11,925 were allegedly lost due to
the acts of its employees who connived with Jamila’s security guard
4. Fireman’s Fund, as insurer paid to Firestone the amount of the loss and
Fireman’s Fund was subrogated to Firestone’s right to get reimbursement
from Jamila. Jamila and its surety (First Quezon Insurance) failed to pay the
amount of the loss.
5. Fireman invoked Article 2207, as the insurer Fireman’s Fund is entitled to
go after the person or entity that violated its contractual commitment to
answer for the loss insured against.
6. Jamila contends that it did not consent to the subrogation of Fireman’s Fund
to Firestone’s right to get reimbursement from Jamila and its surety. Further
arguing that legal subrogation under Art 2207 of the Civil Code requires the
debtor’s consent and that according to Art 1302, the instant case is not
among the cases mentioned when legal subrogation can take place.
ISSUE: WON Fireman’s Fund can subrogate to the rights of Jamilia?
RULING: YES! Article 2207 is a restatement of a settled principle of American
jurisprudence. Subrogation has been referred to as the doctrine of substitution. It
„is an arm of equity that may guide or even force one to pay a debt for which an
obligation was incurred but which was in whole or in part paid by another.
Subrogation is founded on principles of justice and equity, and its operation is
governed by principles of equity. It rests on the principle that substantial justice
should be attained regardless of form, that is, its basis is the doing of complete,
essential, and perfect justice between all the parties without regard to form.
Subrogation is a normal incident of indemnity insurance. Upon payment of the
loss, the insurer is entitled to be subrogated pro tanto to any right of action
which the insured may have against the third person whose negligence or
wrongful act caused the loss When the insurance company pays for the loss,
such payment operates as an equitable assignment to the insurer of the property
and all remedies which the insured may have for the recovery thereof. That right
is not dependent upon, nor does it grow out of, any privity of contract, or upon
written assignment of claim, and payment to the insured makes the insurer an
assignee in equity
DIPOSITIVE: Costs against Jamila. Fireman Fund won!
F.F. Cruz v CA – Dennis Reyes Topic: Subrogation
DOCTRINE: in Article 2207. Upon payment of the loss incurred by the insured,
the insurer is entitled to be subrogated pro tanto to any right of action which the
insured may have against the third person whose negligence or wrongful act
caused the loss.
BAUTISTA, Coleen Joyce Q.
FACTS: The furniture manufacturing shop of petitioner was situated adjacent to
the residence of private respondents. Private respondent, Gregorio Mable, first
approached the petitioner's plant manager to request that a firewall be
constructed between the shop and private respondents' residence. The request
was repeated several times but they fell on deaf ears. A fire broke out in
petitioner's shop. Petitioner's employees tried to put out the fire, but their efforts
proved futile. The fire spread to private respondents' house. Both the shop and
the house were razed to the ground. The cause of the conflagration was never
discovered. Private respondents collected P35,000.00 on the insurance on their
house and the contents thereof. Private respondents filed an action for damages
against petitioner. Trial Court awarded damages in favor of the private
respondent; Court of Appeals: affirmed the decision of the trial court
ISSUE: Even though the Respondent received a sum of money (P35,000) from
the insurer, can the latter collect from the petitioner
RULING: The Court finds that petitioner is liable for damages to private
respondents, the fact that private respondents have been indemnified by their
insurer in the amount of P35,000.00 for the damage caused to their house and its
contents has not escaped the attention of the Court. Hence, the Court holds that
in accordance with Article 2207 of the Civil Code the amount of P35,000.00
should be deducted from the amount awarded as damages. Said article provides:
Art. 2207. Xxx 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.
DISPOSITIVE: WHEREFORE, the decision of the Court of Appeals is affirmed
and modified and deducted the award since the insurer had already paid the a
portion of the amount claimed
COMPAÑIA MARITIMA vs. INSURANCE COMPANY OF NORTH
AMERICA G.R. No. L-18965 October 30, 1964. AN INSURANCE LAW
CASE. BY C Y.
FACTS.
1. Macleod and Company of the Philippines contracted by telephone the services
of the Compañia Maritima, a shipping corporation,
for the shipment of 2,645 bales of hemp from the former's Sasa private pier at
Davao City to Manila and for their subsequent transhipment to Boston,
Massachusetts, U.S.A. on board the S.S. Steel Navigator.
Page 14 of 21
INSURANCE: Sat 3-6; Sun 9-12
2. Petitioner sent to Macleod's private wharf LCT Nos. 1023 and 1025 which
was manned by a patron to Get the cargo.
3. They issued a receipt which show that they have transported the cargo from
Davao to Manila for further transshipment to U,S,A.
4. One of the barge was sank resulting in the loss and damages of its cargo.
5. Macloud filed its claim of insurance which was paid by the insurance
company.
6. Subrogated in the right of Macloud, the insurance company demand from the
petitioner its liability but the latter refused to comply.
7. The insurance company filed a complaint against the petitioner before the trial
court who order the petitioner to pay the plaintiff insurance company and this
was affirmed by the CA.
ISSUE.
Can the insurance company maintain this suit without proof of its personality to
do so?
According to the Supreme Court, since the contract between the shipper and the
carrier in this case was valid and properly established, when macloud suffered
damages because of the doing of petitioner, the insurer who pay the insurance
claim was subrogated on behalf of Macloud giving the insurance company a
personality to institute this case.
WHEREFORE, the decision appealed from is affirmed, with costs against
petitioner.
CALANOC vs CA and THE PHILIPPINE AMERICAN LIFE INSURANCE
CO. G.R. No. L-8151 December 16, 1955
FACTS
Basilio was a watchman of the Manila Auto Supply, secured a life insurance
policy from the Philippine American Life Insurance Company in the amount of
P2,000 to which was attached a supplementary contract covering death by
accident. On January 25, 1951, he died of a gunshot wound on the occasion of a
robbery committed in the house of Atty. Ojeda (he was on the site, few blocks
away from the premises of the Manila Auto Supply because of the policeman’s
invitation to accompany them in checking the lawyers house which the lawyer
suspected of being robbed). Virginia, the widow, was paid the sum of P2,000,
BAUTISTA, Coleen Joyce Q.
face value of the policy, but when she demanded the payment of the additional
sum of P2,000 representing the value of the supplemental policy, the company
refused alleging that the deceased died because he was murdered by a person
who took part in the commission of the robbery and while making an arrest as an
officer of the law which contingencies were expressly excluded in the contract
and have the effect of exempting the company from liability.
ISSUE:
Whether the insurer is liable to the insured under the supplementary contract
HELD:
Yes the insurer is liable under the supplementary contract .The circumstance that
he was a mere watchman and had no duty to heed the call of Atty. Ojeda should
not be taken as a capricious desire on his part to expose his life to danger
considering the fact that the place he was in duty-bound to guard was only a
block away. In volunteering to extend help under the situation, he might have
thought, rightly or wrongly, that to know the truth was in the interest of his
employer it being a matter that affects the security of the neighborhood. He
cannot therefore be blamed solely for doing what he believed was in keeping
with his duty as a watchman and as a citizen. And he cannot be considered as
making an arrest as an officer of the law for certainly he did not go there for that
purpose nor was he asked to do so by the policeman. Much less can it be
pretended that Basilio died in the course of an assault or murder considering the
very nature of these crimes. It cannot be said be said that the killing was
intentional for there is the possibility that the malefactor had fired the shot
merely to scare away the people around for his own protection and not
necessarily to kill or hit the victim. In any event, the fact remains that the
happening was a pure accident on the part of the victim.
The terms and phraseology of the exception clause be clearly expressed so as to
be within the easy grasp and understanding of the insured, for if the terms are
doubtful or obscure the same must of necessity be interpreted or resolved against
the one who has caused the obscurity.
Biagtan vs Insular Life Assurance Co., Ltd., 44 SCRA 58
Facts:
Juan S. Biagtan was insured with defendant Insular Life Assurance Company
under Policy No. 398075 for the sum of P5,000.00 and, under a supplementary
contract denominated "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 causes." The clause, however, expressly provided that
Page 15 of 21
INSURANCE: Sat 3-6; Sun 9-12
it would not apply where death resulted from an injury "intentionally inflicted by
another party."
On the night of May 20, 1964, or during the first hours of the following day a
band of robbers entered the house of the insured Juan S. Biagtan.
Biagtan was killed as his house was being robbed. The insurance company paid
the basic amount of P5,000 but refused to pay the additional P5,000 under the
accidental death benefit clause, on the ground that his death was the result of
injuries intentionally inflicted by third parties and was not covered. The trial
court ruled that there was no proof that the robbers intended to kill Biagtan, or
just to scare him away by thrusting at him with their knives.
Issue: Whether or not, the wounds received by the insured at the hands of the
robbers were inflicted intentionally?
Ruling: YES.
Unlike the ruling in the case of Calanoc vs. Court of Appeals, where the killing
of the victim was held as accidental and thus covered by the insurance policy,
the Supreme Court held that in the instant case, the insured was killed
intentionally. The term “intentional” implies the exercise of the reasoning
faculties, consciousness and volition.
The Supreme Court held pointing out that there were nine wounds in all. The
exception in the accidental benefit clause does not speak of the purpose –
whether homicidal or not – of a third party in causing the injuries, but only of the
fact that such injuries have been intentionally inflicted. Nine wounds inflicted
with bladed weapons at close range cannot be considered innocent insofar as
intent is concerned. The manner of execution of the crime permits no other
conclusion.
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 party the insurer is
relieved from liability.
Under the circumstance, the insurance company was correct in refusing to pay
the additional sum of P2,000.00 under the accidental death benefit clause which
expressly provided that it would not apply where death resulted from an injury
"intentionally" inflicted by a third party.
QUA CHEE GAN vs. LAW UNION AND ROCK INSURANCE CO., LTD.
FACTS:
Qua Chee Gan owns four warehouses in Albay. He was using these warehouses
to house crops like copra and hemp. All warehouses were insured by Law Union
and Rock Insurance for the amount of P370,000.00. The insurance states that
Qua Chee Gan should install 11 hydrants in the warehouses’ premises. Qua Chee
Gan installed only two, but Law Union nevertheless went on with the insurance
BAUTISTA, Coleen Joyce Q.
policy and collected premiums from Qua Chee Gan. The insurance contract also
provides that “oil” should not be stored within the premises of the warehouses.
In 1940, three of the warehouses were destroyed by fire. The damage caused
amounted to P398k. Qua Chee Gan demanded insurance pay from Law Union
but the latter refused as it alleged that after investigation from their part, they
found out that Qua Chee Gan caused the fire. Law Union in fact sued Qua Chee
Gan for Arson.
Qua Chee Gan was acquitted in the arson case. He then demanded that Law
Union pay up. This time, Law Union averred that the insurance contract is void
because Qua Chee Gan failed to install 11 hydrants; and that gasoline was found
in one of the warehouses.
ISSUE:
Whether or not the insurance contract is void.
HELD:
No. Law Union cannot exempt itself from paying Qua Chee Gan because it is
estopped from invoking the same. It is a well settled rule of law that an insurer
which with knowledge of facts entitling it to treat a policy as no longer in force,
receives and accepts a premium on the policy, estopped to take advantage of the
forfeiture.
Also, gasoline is not one of those items specifically prohibited from the premises
of the warehouses. What was mentioned was the word “oil” which could mean
anything (from palm oil to lubricant and not gasoline or kerosene). This
ambiguity is to be interpreted against Law Union because a contract of insurance
is a contract of adhesion. Further, oil is incidental to Qua Chee Gan’s business, it
being used for motor fuel.
Ty V. First National Surety And Assurance Co., Inc. (1961)
G.R. No. L-16138 April 29, 1961
Lessons Applicable: Clear Provision Given Ordinary Meaning (Insurance)
FACTS:
• 2 months prior to December 24, 1953: Diosdado C. Ty,
employed as operator mechanic foreman in the Broadway Cotton
Factory insured himself in 18 local insurance companies
with Broadway Cotton Factory as his beneficiary
• December 24, 1953: fire broke out at the Broadway Cotton
Factory where Ty, fighting his way out, injured his left hand by a
heavy object.
• He was brought to the Manila Central University hospital, and
after receiving first aid there, he went to the National Orthopedic
Hospital for treatment of his injuries.
Page 16 of 21
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• His injuries caused temporary total disability on his left hand
so he filed a claim against all defendants who rejected the claim
reasoning that there it was not covered in his policy because there
was no severance of amputation of the left hand
• Trial Court: absolved the defendants
ISSUE: W/N Ty can claim
HELD: NO. Affirmed.
• can not go beyond the clear and express conditions of the insurance
policies, all of which define partial disability as loss of either hand
by amputation through the bones of the wrist
• Note that the disability of plaintiff's hand was merely temporary, having
been caused by fracture of the index, the middle and the fourth fingers of
the left hand
• agreement contained in the insurance policies is the law between the
parties
De La Cruz V. Capital Ins. & Surety Co, Inc. (1966)
G.R. No. L-21574 June 30, 1966
Lessons Applicable: Liability of Insurer for Suicide and Accidental Death
(Insurance)
Laws Applicable:
FACTS:
• Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines,
Inc. in Baguio, was the holder of an accident insurance policy "against
death or disability caused by accidental means"
• January 1, 1957: For the celebration of the New Year, the Itogon-Suyoc
Mines, Inc. sponsored a boxing contest for general entertainment wherein
Eduardo, a non-professional boxer participated
• In the course of his bout with another non-professional boxer of the
same height, weight, and size, Eduardo slipped and was hit by his opponent
on the left part of the back of the head, causing Eduardo to fall, with his
head hitting the rope of the ring
• He was brought to the Baguio General Hospital the following day. He
died due to hemorrhage, intracranial.
• Simon de la Cruz, the father of the insured and who was named
beneficiary under the policy, thereupon filed a claim with the insurance
company
BAUTISTA, Coleen Joyce Q.
• The Capital Insurance and Surety co., inc denied stating that the death
caused by his participation in a boxing contest was not accidental
• RTC: favored Simon
ISSUE: W/N the cause of death was accident
HELD:YES.
• Eduardo slipped, which was unintentional
• 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
• happen by chance or fortuitously, without intention and
design, and which is unexpected, unusual, and unforeseen
• event that takes place without one's foresight or expectation
• 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 policies insuring against death or injury from accident
• while the participation of the insured in the boxing contest is voluntary,
the injury was sustained when he slid, giving occasion to the infliction by
his opponent of the blow that threw him to the ropes of the ring is not
• The fact that boxing is attended with some risks of external injuries
does not make any injuries received in the course of the game not
accidental
• In boxing as in other equally physically rigorous sports, such as
basketball or baseball, death is not ordinarily anticipated to result. If,
therefore, it ever does, the injury or death can only be accidental or
produced by some unforeseen happening or event as what occurred in this
case
• Furthermore, the policy involved herein specifically excluded from its
coverage —
(e) Death or disablement consequent upon the Insured engaging in football,
hunting, pigsticking, steeplechasing, polo-playing, racing of any kind,
mountaineering, or motorcycling.
• Death or disablement resulting from engagement in boxing
contests was not declared outside of the protection of the
insurance contract
Capital Insurance & Surety Co. Inc. V. Plastic Era Co. Inc (1975)
Page 17 of 21
INSURANCE: Sat 3-6; Sun 9-12
G.R.No. L-22375 July 18, 1975
Lessons Applicable: Estoppel and credit extension (Insurance)
Laws Applicable: Article 1249 of the New Civil Code
FACTS:
• December 17, 1960: Capital Insurance & Surety Co., Inc. delivered to
the respondent Plastic Era Manufacturing Co., Inc. its open Fire
Policy insuring its building, equipments, raw materials, products and
accessories located at Sheridan Street, Mandaluyong, Rizal
between December 15, 1960 1 pm - December 15, 1961 1 pm up
to P100,000 but Plastic Era did not pay the premium
• January 8, 1961: Plastic Era delivered to Capital Insurance its partial
payment through check P1,000 postdated January 16, 1961
• February 20, 1961: Capital Insurance tried to deposit the check but it
was dishonored due to lack of funds. According to the records,
on January 19, 1961 Plastic Era has had a bank balance of P1,193.41
• January 18, 1961: Plastic Era's properties were destroyed by
fire amounting to a loss of P283,875. The property was also insured
to Philamgen Insurance Company for P200K.
• Capital Insurance refused Plastic Era's claim for failing to pay the
insurance premium
• CFI: favored Capital Insurance
• CA: affirmed
ISSUE: W/N there was a valid insurance contract because there was an extention
of credit despite failing to encash the check payment
HELD: YES. Affirmed
• Article 1249 of the New Civil Code
• 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
• Capital Insurance accepted the promise of Plastic Era to pay the
insurance premium within 30 days from the effective date of
policy. Considering that the insurance policy is silent as to the mode of
payment, Capital Insurance is deemed to have accepted the promissory
note in payment of the premium. This rendered the policy immediately
operative on the date it was delivered.
BAUTISTA, Coleen Joyce Q.
• By accepting its promise to pay the insurance premium within thirty
(30) days from the effectivity date of the policy — December 17, 1960
Capital Insurance had in effect extended credit to Plastic Era.
• Where credit is given by an insurance company for the payment of the
premium it has no right to cancel the policy for nonpayment except by
putting the insured in default and giving him personal notice
• Having held the check for such an unreasonable period of time, Capital
Insurance was estopped from claiming a forfeiture of its policy for non-
payment even if the check had been dishonored later.
Ccc Insurance Corp. V. Ca (1970)
G.R. No. L-25920 January 30, 1970
Lessons Applicable: Motor vehicle liability insurance - "Authoried Driver
Clause" (Insurance)
Laws Applicable:
FACTS:
• Carlos F. Robes insured with the CCC Insurance Corporation his
Dodge Kingsway car against loss or damage through accident for an
amount not exceeding P8,000
• June 25 1961: Carlos' driver Domingo Reyes met a vehicular collision
along Rizal Avenue Extension, Potrero, Malabon, Rizal
• Ccc Insurance Corporation denied his claim reasoning that the driver
was not an "authorized driver"
• Reyes, who cannot read and write, who has never passed any
examination for drivers, and has not applied for a license from
the duly constituted government agency entrusted with the duty
of licensing drivers, cannot be considered an authorized driver
• AUTHORIZED DRIVER:
• PERLA COMPANIA DE SEGUROS, INC vs. CA and CAYAS
Any of the following:
(a) The insured;
(b) Any person driving on the Insured's order or with his
permission, provided that the person driving is permitted in
accordance with licensing laws or regulations to drive the motor
vehicle covered by this Policy, or has been so permitted and is
not disqualified by order of a court of law or by reason of any
enactment or regulation from driving such Motor Vehicle.
• RTC: favored Robes and CCC was order to pay
ISSUE: W/N Domingo Reyes was an authorized driver
HELD: YES. CA affirmed
Page 18 of 21
INSURANCE: Sat 3-6; Sun 9-12
• Court of Appeals found that the driver's license No. 271703 DP was
genuine
• Domingo Reyes is in possession of a driver's license issued by
the Motor Vehicles Office which on its face appears to have
been regularly issued
• Neither Gloria Presa nor the officer-in-charge Marciano A.
Monzon was placed on the witness stand to be examined in
order to determine whether said license is indeed void
• Section 24 of the Revised Motor Vehicles Law, Act 3992 of the
Philippine Legislature, as amended by Republic Acts Nos. 587, 1204 and
2863,1
•
An examination or demonstration to show any applicant's ability to
operate motor vehicles may also be required in the discretion of the
Chief, Motor Vehicles Office or his deputies.
• Section 26 of the Act prescribes further:
• SEC. 26. Issuance of chauffeur's license; professional badge: If, after
examination, or without the same, the Chief, Motor Vehicles Office or his
deputies, believe the applicant to possess the necessary qualifications and
knowledge, they shall issue to such applicant a license to operate as
chauffeur ...
• There is no proof that the owner of the automobile knew that the
circumstance surrounding such issuance showed that it was irregular
• the weight of authority is in favor of a liberal interpretation of the
insurance policy for the benefit of the party insured, and strictly against
the insurer
FACTS:
Cayas was the registered owner of a Mazda bus which was insured with
petitioner PERLA COMPANIA DE SEGUROS, INC (PCSI). The bus figured
in an accident in Cavite, injuring several of its passengers. One of them,
Perea, sued Cayas for damages in the CFI, while three others agreed to a
settlement of P4,000.00 each with Cayas.
After trial, the court rendered a decision in favor of Perea, Cayas ordered to
compensate the latter with damages. Cayas filed a complaint with the CFI,
seeking reimbursement from PCSI for the amounts she paid to ALL victims,
alleging that the latter refused to make such reimbursement
notwithstanding the fact that her claim was within its contractual liability
BAUTISTA, Coleen Joyce Q.
under the insurance policy.
The decision of the CA affirmed in toto the decision of the RTC of Cavite,
the dispositive portion of which states:
IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering
defendant PCSI to pay plaintiff Cayas the sum of P50,000.00 under its
maximum liability as provided for in the insurance policy; …
In this petition for review on certiorari, petitioner seeks to limit its liability
only to the payment made by private respondent to Perea and only up to the
amount of P12,000.00. It altogether denies liability for the payments made
by private respondents to the other 3 injured passengers totaling P12,000.00.
ISSUE:
How much should PCSI pay?
HELD:
The decision of the CA is modified, petitioner only to pay Cayas
P12,000,000.00
The insurance policy provides:
5. No admission, offer, promise or payment shall be made by or on behalf of
the insured without the written consent of the Company …
It being specifically required that petitioner’s written consent be first
secured before any payment in settlement of any claim could be made,
private respondent is precluded from seeking reimbursement of the
payments made to the other 3 victims in view of her failure to comply with
the condition contained in the insurance policy.
Also, the insurance policy involved explicitly limits petitioner’s liability to
P12,000.00 per person and to P50,000.00 per accident
Clearly, the fundamental principle that contracts are respected as the law
between the contracting parties finds application in the present case. Thus,
it was error on the part of the trial and appellate courts to have disregarded
the stipulations of the parties and to have substituted their own
interpretation of the insurance policy.
We observe that although Cayas was able to prove a total loss of only
P44,000.00, petitioner was made liable for the amount of P50,000.00, the
maximum liability per accident stipulated in the policy. This is patent error.
An insurance indemnity, being merely an assistance or restitution insofar as
can be fairly ascertained, cannot be availed of by any accident victim or
claimant as an instrument of enrichment by reason of an accident.
Fortune Insurance and Surety Co., Inc. v. Court of Appeals
Page 19 of 21
INSURANCE: Sat 3-6; Sun 9-12
Facts:
On June 29, 1987, Producer’s Bank of the Philippines’ armored vehicle was
robbed, in transit, of seven hundred twenty-five thousand pesos (Php
725,000.00) that it was transferring from its branch in Pasay to its main
branch in Makati. To mitigate their loss, they claim the amount from their
insurer, namely Fortune Insurance and Surety Co.
Fortune Insurance, however, assails that the general exemption clause in the
Casualty Insurance coverage had a general exemption clause, to wit:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or criminal act of the
insured or any officer, employee, partner, director, trustee or authorized
representative of the Insured whether acting alone or in conjunction with
others. . . .
And, since the driver (Magalong) and security guard (Atiga) of the armored
vehicle were charged with three others as liable for the robbery, Fortune
denies Producer’s Bank of its insurance claim.
The trial court and the court appeals ruled in favor of recovery, hence, the
case at bar.
Issue:
Whether recovery is precluded under the general exemption clause.
Ruling:
Yes, recovery is precluded under the general exemption clause.
Howsoever viewed, Producers entrusted the three with the specific duty to
safely transfer the money to its head office, with Alampay to be responsible
for its custody in transit; Magalong to drive thearmored vehicle which would
carry the money; and Atiga to provide the needed security for the money, the
vehicle, and his two other companions. In short, for these particular tasks,
the three acted as agents of Producers. A "representative" is defined as one
who represents or stands in the place of another; one who represents others
or another in a special capacity, as an agent, and is interchangeable with
"agent."
In view of the foregoing, Fortune is exempt from liability under the general
exceptions clause of the insurance policy.
White Gold Marine vs Pioneer Insurance
BAUTISTA, Coleen Joyce Q.
Facts
Petitioner procured a protection and indemnity coverage for its vessels from
The Steamship Mutual Underwriting Association Ltd. through Pioneer
Insurance and Surety Corp. by virtue of a Certificate of Entry and
Acceptance. When White Gold failed topay its account, Steamship Mutual
refused to renew its coverage so it filed a collection case against the latter.
Petitioner contends in defense that it didn’t have the requisite certificate of
authority from the Insurance Commissioner under Sec. 187 of the Insurance
Code.
Issue
WON Pioneer still needs a license as an insurance agent/broker for
Steamship Mutual;
WON Steamship Mutual’s Protection and Indemnity club is engaged in
insurance business in the Philippines.
Ruling
YES on both issues.
1) A Protection and Indemnity Club is a form of insurance against third party
liability where the third party is anyone other than the P & I Club and the
members. Steamship Mutual, as P&I club, is a mutual insurance association
engaged in marine insurance business.
2) Although Pioneer is already a licensed insurance company, it still needs a
separate license to act as an insurance agent for Steamship Mutual as
provided by Section 299 of the Insurance Code
PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS and
JULITA TRINOS
G.R. No. 125678 | March 18, 2002
Facts:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a
health care coverage with petitioner Philamcare Health Systems, Inc.
The application was approved for a period of one year from March 1, 1988 to
March 1, 1989 and extended until June 1, 1990. The amount of coverage was
increased to a maximum sum of P75,000.00 per disability.
During the period of his coverage, Ernani suffered a heart attack and was
confined for one month. While her husband was in the hospital, respondent
tried to claim the benefits under the health care agreement. However,
petitioner denied her claim saying that the Health Care Agreement was void.
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INSURANCE: Sat 3-6; Sun 9-12
Thus, respondent paid the hospitalization expenses herself, amounting to
about P76,000.00.
After her husband was discharged from the MMC, he was later admitted at
the Chinese General Hospital. In the morning of April 13, 1990, Ernani had
fever and was feeling very weak; he died on the same day.
Respondent instituted with the Regional Trial Court (RTC) an action for
damages against petitioner. The RTC ruled against petitioner, which was
affirmed by the Court of Appeals.
Petitioner filed a petition for review arguing that the agreement grants
"living benefits," such as medical check-ups and hospitalization which a
member may immediately enjoy so long as he is alive upon effectivity of the
agreement until its expiration one-year thereafter. Petitioner also points out
that only medical and hospitalization benefits are given under the
agreement without any indemnification, unlike in an insurance contract
where the insured is indemnified for his loss. Moreover, since Health Care
Agreements are only for a period of one year, as compared to insurance
contracts which last longer,7 petitioner argues that the incontestability
clause does not apply, as the same requires an effectivity period of at least
two years. Petitioner further argues that it is not an insurance company,
which is governed by the Insurance Commission, but a Health Maintenance
Organization under the authority of the Department of Health.
Issue:
Whether or not a health care agreement is not an insurance contract.
Ruling:
A health care agreement is an insurance contract.
Under Section 2 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. 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.
Further, Section 10 of the Insurance Code provides that every person has an
insurable interest in the life and health of himself.
In the case at bar, the insurable interest of respondent’s husband in
obtaining the health care agreement was his own health. The health care
agreement was in the nature of non-life insurance, which is primarily a
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
contract of indemnity.9 Once the member incurs hospital, medical or any
other expense arising from sickness, injury or other stipulated contingent,
the health care provider must pay for the same to the extent agreed upon
under the contract.

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