CHAPTER 1 of the damage.

To limit its liability to the amount of the

insurance proceeds, petitioner has the burden of proving
ORIGIN AND GROWTH OF INSURANCE
that the unseaworthiness of its vessel was not due to its
fault or negligence. In the case at bar, the petitioner failed
A. EARLY MARITIME INSURANCE
to do so. It argued that the sinking due to the typhoon.
• Law of insurance was derived from the maritime law. Evidence would show however that weather was moderate
- Mutual agreements among merchants engaged in
when it sank.
common shipping ventures, for distributing among the
mutual contractors the loss falling upon any one by
B. DEVELOPMENT OF INSURANCE
reason of the perils of navigation.
• Earliest traces of insurance:
- Lombard merchants who came to London brought with
- Modern mutual benefit societies were formed wherein
them the custom of insuring against hazards of trade,
dues are contributed primarily for funeral rites, and aid
- It was not until the middle of the 18th century that the
for the sick and aged members.
common law courts began to take cognizance of
- General average contributions: When the goods of one or
insurance causes.
more of several joint adventures were sacrificed by
- Italian merchants engaged in international commerce,
jettison to save the property of others, the loss was pro
being more enlightened than most of their countrymen
tanto made up by proportionate or general average
were unwilling to leave their commerce-related disputes
contributions from the owners of the other interests
to their countrymen and own rules. They then established
benefited by the sacrifice.
their own conventional courts.
- Bottomry bond: Loan was repayable only if vessel
completed voyage. The lender receives high interest and
ABOITIZ SHIPPING CORPORATION v. NEW INDIA
the vessel’s owner receives no indemnity in case of loss,
ASSURANCE COMPANY
but was immune from payment of loan.
Facts: A cargo of textiles and auxiliary chemicals was
• In England, the common law and admiralty courts were
loaded from France on board a vessel owned by Franco-
inadequate and the conventional merchant courts could
Belgian Services, Inc. The cargo was consigned to General
not enforce their judgments. Consequently, the first
Textile, Inc., in Manila and insured by respondent New India
English Insurance Act established a special court for the
Assurance Company, Ltd. While in Hong Kong, the cargo
trial of marine insurance causes.
was transferred to M/V P. Aboitiz for transshipment to
- It became a custom among seafarers engaged in
Manila. Before departing, the vessel was advised that it was
international trade to assemble at Lloyd’s Coffee House
safe to travel to its destination. But while at sea, the vessel
and arrange for mutual contracts of insurance. The
received a report of a typhoon moving within its general
person desiring the insurance would pass around a slip
path. To avoid the typhoon, the vessel changed its course.
describing the vessel and cargo and the people wishing to
However, the hull leaked resulting to the sinking of the ship.
be the insurers would put their names and amount which
Respondent then paid the consignee. Thereafter, an
each was willing to be liable for.
investigation was made and the report shows that the cause
- Lloyd’s policy was then adopted by the society as
of the sinking is the vessel’s sea unworthiness. Respondent
standard form of marine insurance.
filed an action for damages but the petitioner argued that
- Fire insurance was then introduced but it was greatly
its liability is extinguished in accordance with the real and
disfavored due the rapidly increasing cases of arson,
hypothecary nature of maritime law.
hence the heavy taxes imposed on companies insuring
fire risks.
HELD: An exception to the limited liability doctrine is when
- While it was not prohibited, life insurance was frowned
the damage is due to the fault of the shipowner or to the
upon as it was condemned as immoral agers on human
concurrent negligence of the shipowner and the captain. In
life.
which case, the shipowner shall be liable to the full-extent
Africa | 1
- In 1706, the Amicable Society for a Perpetual Assurance
Office was founded where each member, irrespective of
their age and condition, paid a fixed amount of premium
and the guaranty should not be less than 100 pounds.
- It was when the Equitable Assurance Society in London
when it was recognized that the amounts of premiums
paid should be in accordance with the age and condition
of the insured.
C. THE INSURANCE BUSINESS IN THE PHILIPPINES
• The need for economic security, growing need for social
stability, and clamor for protection against hazards of
calamities and sudden economic shocks.
• Yek Tong Lin Fire and Marine Insurance - first domestic
non life
• Sun Life - first life insurance
• Insular Life - first domestic non life insurance
• Under RA 9829, all pre-need companies are under the
primary and exclusive supervision and regulation by the
Office of the Insurance Commission.
• Insurance Commissioner exercises exclusive
administrative supervision over insurance companies,
mutual benefit associations, and trust for charitable uses.
- Also adjudicates claims involving loss, damages, liability
for which an insurer may be liable, under contract of
suretyship, or a contract of reinsurance where the amount
being claim doe snot exceed in any single claim Php5M.
• Basic Methods of insurance regulation:
- Legislation
- Administrative action: Licensing, to ensure insurer’s
financial condition; Examination, to check existing assets
and liabilities; Investigation, to determine compliance with
the requirements
- Court action
PHILAM v. ARNALDO
Facts: Case arose from letter complaint of private
respondent Paterno, Jr. to respondent Commissioner,
alleging certain problems encountered by agents,
supervisors, managers, and public consumers of the
Philippine American Life Insurance Company, as a result of
certain practices by said company. Upon multiple requests,
Paterno, Jr. submitted letter of speicfication, praying that
the provisions on charges and fees stated in the Contract of
Agency executed between Philam Life and tis agents, as well
as the implementing provisions in the handbook, bulletins,
and circulars be null and void. Pet. then questions the
jurisdiction of the Commission to decide on the case.
HELD: Plain reading of Sec 414 of the Insurance Codes
shows that the Commissioner has the authority to regulate
the “business of insurance”, defined as:
(a) making or proposing to make, as insurer, any
insurance contract;
(b) making, or proposing to make, as surety, any
contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or
activity of the surety;
(c) doing any kind of business, including a
reinsurance business, specifically recognized as
constituting the doing of an insurance business
within the meaning of this Code;
(d) doing or proposing to do any business in
substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this
Code.
Since the contract of agency is not included within the
meaning of the insurance business, Sec 2 of the insurance
code cannot be invoked to give jurisdiction over the same to
the Insurance Commissioner.
Furthermore, reading sec. 416 shows that the quasi-judicial
power of the Insurance Commissioner is limited by law "to
claims and complaints involving any loss, damage or liability
for which an insurer may be answerable under any kind of
policy or contract of insurance, . . ." Hence, this power does
not cover the relationship affecting the insurance company
and its agents but is limited to adjudicating claims and
complaints filed by the insured against the insurance
company.
COMMISSIONER v. DEL MONTE MOTORS INC
FACTS: Vilfran Liner lost in a case against Del Monte Motors
and was made to pay 11 million pesos. Such was sourced
from the counterbond posted by Vilfran, which was issued
by CISCO. The RTC released a motion for execution
commanding the sheriff to levy the amount on the property
of CISCO. To completely satisfy the amount, the Insurance
Africa | 2
Commissioner was also commanded to withdraw the
security deposit filed by CISCO with the Commission
according to Sec 203 of the Insurance Code. However,
Malinis refused to execute the order, prompting the
respondent to move to cite him in contempt of Court.
HELD: Insurance Code has vested the Office of the Insurance
Commission with both regulatory and adjudicatory authority
over insurance matters. Included in the regulatory
responsibilities is the duty to hold the security deposits
under Sec 191 and 203 of the Code, for the benefit and
security of all policy holders. He is therefore in the best
position to determine if the security deposit should be
released without prejudicingg the rights of the policy
holders. In this case, Comm. Malinis refused to release it
pursuant to Art. 203, which clearly states that the security
deposit shall: (1) be answerable for all the obligations of the
depositing insurer under its insurance contracts, (2) at all
times be free from liens or encumbrances; and (3) exempt
from levy by any claimant.
D. SPECIAL LAWS
• 11 December 1914, Insurance Act was enacted and took
effect on 1 July 1915.
- Superseded by PD 612 (Insurance Code) which was later
codified and consolidated by PD 1460.
- Then amended by BP 874 in 1985.
- RA 10607, which was approved on 15 August 2013, is the
governing law on insurance. This took effect on 20
September 2013.
GERDA v. SUNLIFE INSURANCE
FACTS: Gercio had his life insured, naming then-wife
Zialcita as a beneficiary. Zialcita was then convicted of
adultery in 1919, which led to their divorce. Now, Gercio
wants to change the beneficiary from Zialcita to his present
wife, Adela Garcia. However, the insurance company refused
to, hence the petition for a mandamus order.
HELD: There is no specific law on insurance under CC, and
no specific provisions on changing of beneficiary under the
Insurance Act. The deficiencies of the law therefore shall be
supplemented by the general principles prevailing on the
subject. In the interpretation of insurance laws, the Court
looked at jurisprudence from the SC of California, since our
Insurance Act was taken from the Insurance Code of
California. Citing the case of Yore v. Booth, SC of California
ruled that the insured may not change the beneficiary of the
insurance policy unless the policy itself provides.
ANG GIOK CHIP v. SPRINGFIELD
Facts: AGC was an owner of a warehouse engulfed in flames
whose contents were insured. One of the insuring
companies is Springfield Fire & Marine Insurance Company.
Action to recover part of the loss was then instituted.
Springfield argued that AGC violated a warranty fixing the
amount of hazardous goods which might be stored in the,
which was 3% of the total value of the whole of the goods
stored in warehouse. Springfield further averred that AGC
placed hazardous goods to as high as 39 percent of all the
goods stored in the building. However, this warranty was
reflected only in a rider, which AGK claims is not part of the
policy.
HELD: Sec. 65 of Insurance Law provides that warranty must
be in the policy itself or in another instrument signed by the
insured. As Philippine law was taken verbatim from the law
of California, the latter shall be used to fill in the gaps of
our insurance laws. “Contained” was interpreted in
California to include riders and warranties.
PHILIPPINE HEALTH CARE PRODUCTS v. CIR
FACTS: PHCP is engaged in the dispensation of preventive,
diagnostic and curative medical services to individuals who
enter into health care agreements with it and who pay
annual membership fee. CIR sent PHCP a formal demand
letter and assessment notices demanding the payment of
deficiency taxes (VAT and DST) imposed on its health care
agreements with its members pursuant to Sec. 185 of the
1997 Tax Code but PHCP protested the assessment.
HELD: Our Insurance Code was based on California and New
York laws. When a statute has been adopted from some
other state or country and said statute has previously been
construed by the courts of such state or country, the statute
is deemed to have been adopted with the construction
given. Various courts in the United States have determined
that HMOs are not in the insurance business. One test that
Africa | 3
they have applied is whether the assumption of risk and
indemnification of loss are the principal object and purpose
of the organization or whether they are merely incidental to
its business. If these are the principal objectives, the
business is that of insurance. But if such is incidental and
service is the principal purpose, then the business is not
insurance. For the purpose of determining whether the
company is doing insurance business, the business
operations shall be scrutinized. Its undertaking under its
agreements is not to indemnify its members against any
loss or damage arising from a medical condition but, on the
contrary, to provide the health and medical services needed
to prevent such loss or damage. Furthermore, PHCP is not
part of the insurance industry. This is evident from the fact
that it is not supervised by the Insurance Commission but
by the Department of Health. In fact, in a letter dated
September 3, 2000, the Insurance Commissioner confirmed
that petitioner is not engaged in the insurance business.
CHAPTER 2
DEFINITIONS
• A contract of insurance is an agreement whereby one
undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown
or contingent event.
• A contract of suretyship shall be deemed to be an
insurance contract, within the meaning of this Code, only
if made by a surety who or which, as such, is doing an
insurance business as hereinafter provided.
• The term doing an insurance business or transacting an
insurance business, within the meaning of this Code, shall
include:
(1) Making or proposing to make, as insurer, any
insurance contract;
(2) Making or proposing to make, as surety, any
contract of suretyship as a vocation and not as merely
incidental to any other legitimate business or activity of
the surety;
(3) Doing any kind of business, including a reinsurance
business, specifically recognized as constituting the
doing of an insurance business within the meaning of
this Code;
(4) Doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed
to evade the provisions of this Code.
In the application of the provisions of this Code, the fact
that no profit is derived from the making of insurance
contracts, agreements or transactions or that no separate or
direct consideration is received therefor, shall not be
deemed conclusive to show that the making thereof does
not constitute the doing or transacting of an insurance
business.
ELEMENTS
1. Insurable interest - the insured possesses an interest of
some king which the event insured against may cause
loss or damage; interest in life or thing capable of
pecuniary measure
2. Risk of loss or damage - insured is subjected to risk
through the destruction or impairment of that interest by
the happening of a designated peril.
3. Designated Peril as Cause – cause of damage or loss
which must be stated in the contract.
4. Consideration: Premium - ratable contribution to a
general insurance fund
CHARACTERISTICS
1. Aleatory - Liability of the insurer is dependent on the
happening of a contingent event which is uncertain, or
which though certain, is to occur at some future
undetermined time
2. Executory and conditional - once the contract is
perfected, the contract is executed. As to the insurer, it
is executory and conditional such that it is only when the
event insured against happens that the insurer becomes
liable to pay.
3. Synallagmatic - A highly reciprocal contract where the
rights and obligations of the parties correlate and
mutually correspond. The insurer assumes the risk of
loss which an insured might suffer in consideration of
premium payments under a risk-distributing device.
Such assumption of risk is a component of general
scheme to distribute actual losses among a group of
persons, bearing similar risks, who make ratable
contributions to a fund from which the losses incurred
due t exposures to the peril insured against are assured
Africa | 4
 and compensated. (UCPB General Insurance v. Masagana
Telemart, 2001)
4. Consensual and voluntary - may incorporate provisions
and conditions as they choose provided not contrary to
law, morals, public policy, or public order; perfected
upon the meeting of the minds and binding on both
parties
5. Contract of adhesion - policy is in printed forms
prepared by the insurer and there is hardly any
negotiation.
- Ambiguity is resolved in favor of the insured and against
the insurer.
6. Personal and of highest degree of good faith - not the
property that is insured but the rights of the insured, the
intention being to avert any loss or damage that the
insured might sustain because of the covered risk to the
property
7. Indemnity
- Non-Life Insurance – contract of indemnity.
- insured cannot seek to make a profit by demanding
from the insurer more than what he has actually lost or
suffered
- liability of the insurer is measured by the extent of the
loss suffered, regardless of the fact that the face value
of the policy may be much more.
- Life Insurance – investment
- life policy constitutes, through the insured’s savings
thus invested and the earnings thereon, a measure of
economic security for the insured during his lifetime,
or for his beneficiary after his death
CONTRACTS FOR CONTINGENT SERVICES
A. Warranty for goods sold or services rendered
• warranty that covers extended services within the scope of
goods sold for defects that likely existed in the goods at
the time of sale is not insurance, while warranty that goes
materially beyond the goods to compensate for losses
due to causes unrelated tot he general merchantability is
an insurance.
B. Pre-Need Plans
• Pre-need plan: contracts, agreements, deeds or plans for
the benefit of the planholders which provide for the
performance of future service/s, payment of monetary
considerations or delivery of other benefits at the time of
actual need or agreed maturity date, as specified therein,
in exchange for cash or installment amounts with or
without interest or insurance coverage.
PHILAMCARE HEALTH SYSTEMS v. CA
FACTS: Ernani Trinos applied for a health care coverage
from Philamcare, saying he or his family members have
never been consulted or been treated for certain diseases,
including heart trouble. In, 1990, Trinos suffered a heart
attack. When his wife tried to claim, she was denied the
benefits for concealing Ernani’s medical history.
BLUE CROSS HEALTH CARE v. OLIVARES
FACTS: Olivares applied for a health care program with
petitioner, a health maintenance firm. According to the
policy, ailments due to “pre-existing conditions” were
excluded from the coverage. Later on, Olivares suffered a
stroke, and was admitted into the hospital, thus incurring
expenses amounting to 32k. Blue Cross refused to pay
unless she had her physician’s certification that she was
suffering from a pre-existing condition, prompting Olivares
to file suit. Blue Cross argued that Olivares refused to allow
his doctor to divulge information citing patient-physician
confidentiality.
HELD: Health coverage contract is a non-life insurance
contract and a contract of adhesion, therefore, the limits on
their liability should be construed strictly against the
insurer. Petitioner never presented any evidence to prove
that respondent Neomi's stroke was due to a pre-existing
condition. It merely speculated that Dr. Saniel's report would
be adverse to Neomi, based on her invocation of the doctor-
patient privilege. This was a disputable presumption at best
The physician’s report is privileged communication, and the
patient was justified in refusing to divulge it.
• RA 9829 or Pre-Need Code, the main thrust of which is to
place the pre-need companies under the supervision and
control of Insurance Commission rather than the Security
and Exchange Commission.
- license effective for one year although renewable yearly
Africa | 5
- a pre-need company may be licensed and authorized to insurance benefits from Insular Life. However, the latter
issue any of the following plans: educational, pension, life denied liability since it already gave checks to the
or memorial plan (Sec. 10, IRR) beneficiaries.

GENERAL CLASSIFICATION OF INSURANCE HELD: SPAs do not contain in unequivocal and clear terms
to obtain, receive, receipt from respondent company.
UNDER THE CODE
Furthermore, Insular Life knew that a power of attorney in
• Generally, insurance may be classified as life or non life. It
favor of Capt. Nuval for the collection and receipt of such
may also be classified as voluntary or compulsory.
proceeds was a deviation from its practice with respect to
group policies. The group policy contract is between the
A. Life
policyholder and the insurance company. Even without the
• LIFE INSURANCE: insurance on human lives and insurance
SPA, policyholders are the ones who file the claim and not
appertaining thereto
the designated beneficiaries of the employees because
- a retirement program where a life insurance company
group insurance is normally taken by the employer as an
manages or acts as a trustee for such retirement program
employee-benefit program and as such, the benefit should
• Payable on the death of a person or on his surviving a
be awarded by the policyholder to make it appear that the
specified period, or otherwise contingently on the
benefit really is given by the employer.
continuance or cessation of life
• Sec. 181 and 182 deal with individual life insurance
• Sec. 234 for group insurance, which usually consists of the
B. Non-life
group policy or master contract, the policyholder’s • MARINE INSURANCE: loss or damage to vessels, goods,

application and the individual applications. cargoes, and other properties exposed tot he perils of
- noncontributory plan: premium paid by the policyholder navigation (sec. 101)
- contributory plan: example, contributions deduced from - Also covers marine protection and indemnity insurance,

wage which is an insurance against or against legal liability of the

• Sec. 235 for industrial insurance insured for the loss, damage, or expense incident to
- INDUSTRIAL INSURANCE: premiums are payable either ownership, operation, chartering, maintenance, use or

monthly to oftener if the face amount of insurance in the repair of any vessel, craft, or instrumentality in use of ocean

policy is not more than 500x that of the current statutory or inland waterways. This includes liability oft reinsured for

minimum daily wage, and if the words “industrial policy” personal injury, illness, death, or for loss of or damage to

are printed upon the policy as part of the descriptive the property of another person

matter
• FIRE INSURANCE: insurance against loss by fire, lightning,

PINEDA v. CA & INSULAR LIFE windstorm, tornado or earthquake and other allied risks,

FACTS: Prime Marine Services (PMSI) procured Group Policy when such risks are covered by extension to fire insurance

from Insular Life to provide life insurance to sea-based policies or under separate policies (sec. 169)

employees. MV Nemos sank, with six employees covered by • SURETYSHIP: a party called the surety guarantees the

the policy drowning. When the complainants sought to claim performance by another party called the principal or

death benefits, Capt. Nuval, asked them to execute SPA obligor of an obligation or undertaking in favor of a third

authorising the former to “follow up, ask, demain, collect, or party called the obligee. (sec. 177)

receive.” for their benefits indemnities. Nuval filed formal - only becomes an insurance contract if made by a surety

claims on behalf of the beneficiaries before Insular, and doing an insurance business

checks payable to the beneficiaries were then released. • CASUALTY or LIABILITY INSURANCE: insurance covering

However, Nuval pocketed the amounts in his bank account. loss or liability arising from accident or mishap, excluding

Later, the beneficiaries learned they were entitled to life certain types of loss which by law or custom are

Africa | 6
 considered as falling exclusively within the scope of other
types of insurance such as fire or marine.
C. Other modes of classification of insurance
contracts
• On the basis of the nature of the interest being protected,
it may be first-party insurance (the contract being for the
loss which the insured suffers directly) or third-party
insurance (interest being protected is that of a third party
and whose interest suffers damage or loss caused by the
insured)
• Private and public:
- GSIS – public; compulsory
- SSS – private; voluntary
D. Some life insurance plans in the market
• WHOLE LIFE PLAN: pays premium in a specified regular
intervals for as long as he lives
- LIMITED PAYMENT PLAN: obligation to pay premium is
limited to a specified period. This is considered fully paid
when the specified number of premium payments have
been made.
• TERM PLAN: insured is only covered for a specific period
of time and when that time lapses, the police expires
• MODIFIED LIFE: not pure life and may include accident
insurance.
• PURE ENDOWMENT PLAN: if the insured survives the
period, the insurer pays the insured face value of the
policy. If the insured dies before the period expires,
insurer is released from liability.
• ENDOWMENT PLAN: insurer pays value of the policy in the
event he outlives the policy period, but should the insured
die during the endowment period, his beneficiaries get
the proceeds of the policy
• TONTINE INSURANCE: based on survivorship among a
number of individuals. It is an agreement to hold all the
premiums collected for the duration of the tontine period
CONSTRUCTION AND INTERPRETATION OF
CONTRACTS
CEBU SHIPYARD v. WILLIAMS
FACTS: Cebu Shipyard did dry docking and repairs on MV
Manila City, which was owned by William Lines. The said
vessel was insured by Prudential for 45M. After it was
transferred to the docking quay, it caught fire and sank.
William Lines filed complaint vs. Cebu Shipyard. Prudential
paid William Lines, and joined the latter in the case vs. Cebu
Shipyard. CSEW argued that William Lines, Inc., agreed to
assume the risk of loss of the vessel while under drydock or
repair and to such extent, it is benefited and effectively
constituted as a co-assured under the policy.
HELD: 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.
NEW LIFE ENTERPRISES v. CA
FACTS: The stocks of the New Life Enterprises were insured
by three companies (Western Guaranty Corp, Reliance Surety
and Insurance Co. Inc, and Equitable Insurance Corp.). When
the building was set on fire due to electrical
misconnections, the insurance companies refused to pay on
the ground of violation of “Other Insurance Clause”
contained in all insurance policies.
HELD: If the terms are clear and unambiguous, they must be
taken and understood in their plain, ordinary and popular
sense. In the case at bar, the policy is clear when it provided
that the insured is specifically required to disclose to the
insurer any other insurance and its particulars which he may
have effected on the same subject matter. Unless such
notice be give, benefits under policy shall be forfeited.
FIRST QUEZON CITY INSURANCE v. CA
FACTS: When Del Rosario was about to board the bus, the
bus accelerated, causing petitioner to fall. He was then
confined at a hospital for 40 days, and was forced to receive
deducted salaries in order to pay hospital bills. He then filed
case against the bus company, which also filed a third-party
Africa | 7
complaint against the insurance company. Del Rosario was
then awarded damages amounting to 55k, but the insurance
company argued that its liability is limited to 12k as
stipulated in the policy.
Held: Insurance policy clearly placed the maximum limit for
petitioner’s liability for damages arising from death or injury
at 12,000 per passenger and its maximum liability for the
damages suffered per accidence at 50,000. Since only one
passenger injured the insurer’s liability for damages is
pegged to the amount of 12,000 only. The 50k limit only
means that the insurer’s maximum liability for any single
accident will not exceed 50K regardless of number of
passengers killed or injured. 
 an action or suit be not commenced either in the Insurance
TY v. FIRST NATIONAL
FACTS: 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. When a fire broke out, Ty fought his way out of
the factory and his left hand was broken by a heavy object
in the process. He then filed notice of accident and claim
with defendants to recover indemnity under Part II of policy,
which was the indemnity for total or partial disability.
However, the insurance company refused to on the ground
that there was no severance or amputation of his hand.
HELD: The insurance policies clearly define loss of hand as
amputation of the bones on the wrist. In the case at bar, Ty
only suffers from temporary hand disability, having been
caused by fracture of the index, the middle and the fourth
fingers of the left hand. Therefore, he cannot recover claims
from the insurance company.
MISAMIS LUMBER v, CAPITAL INC
FACTS: Misamis insured its Ford Falcon car. Due to an
accident, car broke down after passing a water hole, which
driver did not see because the oncoming car did not dim his
headlights. The car was needed to be towed and to be
repaired amounting to P307.27. Misamis lumber submitted
the accident report to the insurance company, but the latter
refused to pay.
HELD: The policy of the insurance explicitly states that
should insured have the repair done, the authorized repair
cost is limited to Php150. Literal meaning must control, it
being an actual contract, expressly and plainly provided for
in the policy.
SUN INSURANCE v. CA (1991)
FACTS: Tan took from Sun Insurance a Php 300,000 policy
to cover his electrical store. Building was burned 4 days
after issuance of the policy. Tan filed claim, but Sun refused
with a letter dated Feb. 29, 1984 (which Tan received on
April 2). On April 3, Tan sent a request for reconsideration,
but was ultimately denied with a letter date Oct. 11, 1985.
On Nov. 20, 1985, Tan filed a civil case.
HELD: Insurance company argued that the benefits are
deemed forfeited pursuant to Sec. 27 of the policy. Said
policy stipulates that, if a claim be made and rejected and
Commission or in any court of competent jurisdiction within
12 months from receipt of notice of such rejection, then the
claim shall for all purposes be deemed to have been
abandoned and shall not be recoverable. Tan admitted that
he received a copy of the letter of rejection on April 2, 1984.
Thus, the 12-month prescriptive period started to run from
the said date. Since the case was filed 7 months after the
claim has prescribed, Tan cannot recover damages from
insurance company.
FORTUNE INSURANCE v. CA
FACTS: Producers Bank was insured by Fortune Insurance.
While the former’s armored vehicle was en route to the
office, it was robbed and 725k was lost. After an
investigation, charges of violation of Anti-Highway Robbery
Law were filed against the driver and the guard of the
vehicle. The bank demanded payment from the insurance
company, but the latter refused as the loss was allegedly
excluded from coverage under General Exceptions provision
of the policy.
HELD: Under the said provision, “any loss caused by
dishonest, fraudulent, or criminal act of the insured, or any
officer, employee, partner, director, trustee, or authorized
representative, alone or in conjunction with others” is
excluded from the coverage. When it used then the term
"employee," it must have had in mind any person who
qualifies as established in the light of the four standards in
the determination of the employer-employee relationship,
or as statutorily declared even in a limited sense as in the
case of Article 106 of the Labor Code which considers the
employees under a "labor-only" contract as employees of
the party employing them and not of the party who supplied
Africa | 8
them to the employer. 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 the armored vehicle which would
carry the money; and Atiga to provide the needed security
for the money, the vehicle, and his two other companions.
Therefore, they fall under the definition of employees.
 insured as one inseparable unit, the correct basis for
PERLA v. CA
FACTS: The Lim spouses opened a chattel mortgage and
bought a Ford Laser for Php 77,000 and insured it with Perla
Compania de Seguros for a comprehensive coverage. The
vehicle was stolen while Evelyn Lim was driving it with an
expired license. The spouses filed a claim for loss but this
was denied by the company due to the spouses’ violation of
the Authorized Driver clause
HELD: The comprehensive motor car insurance policy issued
by Perla undertook to indemnify the respondents against
loss or damage to the car by theft. Where a car is admittedly
and unlawfully taken without the owner’s consent or
knowledge, such taking constitutes theft, and therefore, it is
the Theft Clause that applies. Furthermore, the AD clause in
a typical insurance policy is in contemplation of accident
and therefore should not apply.
ORIENTAL INSURANCE v. CA
FACTS: Panama Sawmill bought 1,208 pieces of apitong
logs. It hired Transpacific Towage to transport the logs by
sea to Manila and insured it against loss with Oriental
Assurance Corp. Logs were loaded on two barges but due to
rough seas, one broke and lost 497 of the 598 pieces of
logs. The other 610 arrived in good condition. Panama
demanded payment for loss, but petitioner refused because
its contracted liability was for “TOTAL LOSS ONLY,”
HELD: The terms of the contract constitute the measure of
the insurer liability and compliance therewith is a condition
precedent to the insured's right to recovery from the
insurer. Insurer’s liability is for total loss only. Total loss can
either be actual or constructive. Under the actual total loss,
it is caused by: (1) total destruction of the thing insured, (2)
The irretrievable loss of the thing by sinking, or by being
broken up, (3) Any damage to the thing which renders it
valueless to the owner for the purpose for which he held it,
or (4) Any other event which effectively deprives the owner
of the possession, at the port of destination, of the thing
insured. A constructive total loss is one which gives to a
person insured a right to abandon if more than three-
fourths thereof in value is actually lost. The logs, even
though placed in two barges, were not separately valued by
the policy nor separately insured. The logs having been
determining the existence of constructive total loss is the
totality of the shipment of logs. Of the entirety of 1,208
pieces of logs, only 497 pieces thereof were lost or 41.45%
of the entire shipment.
MALAYAN INS v. CA
FACTS: TKC Marketing imported 3,000 metric tons of soya
from Brazil to Manila. It was insured by Malayan at the value
of almost 20 million pesos. The vessel, however, was
stranded on South Africa because of a lawsuit regarding the
possession of the soya. TKC consulted Malayan on recovery
of the amount, but the latter claimed that it wasn’t covered
by the policy. The soya was sold in Africa for Php 10 million,
but TKC wanted Malayan to shoulder the remaining value of
10 million as well. Petitioner filed suit due to Malayan’s
reticence to pay. Malayan claimed that arrest by civil
authorities wasn’t covered by the policy.
WESTERN GUARANTY v. CA
FACTS: Rodriguez was struck by a De Dios Bus when driver
disregarded stop signal to allow pedestrians to cross road
(Rodriguez being one of them). Rodriguez had to be
hospitalized because her face was permanently disfigured.
The bus company was insured by petitioner Western
Guaranty Corporation under it Master Policy. When
Rodriguez filed a complaint for damages against the bus
company and driver, the company in turn filed a complaint
against petitioner. TC awarded actual damages, loss of
earnings, moral damages, and atty’s fees. Petitioner argued
that they cannot be liable for loss of earnings, moral
damages, and attorney’s fees because these items are not
among this included in the schedule of indemnities in the
insurance policy.
HELD: The sec.1 of the policy provides that the scope of
liability of the company is “all sums necessary to discharge
liability of the insured in respect of the precipitating
Africa | 9
events.” The Schedule of Indemnities is an exclusive
enumeration of the nature of the damages for which it
would be liable under its policy but rather meant to set
limits to the amounts the movant would be liable for in
cases of claims for death, bodily injuries of, professional
services and hospital charges, for services rendered to
traffic accident victims. Construing this with section 1, all
kinds of damages allowable by law were also to be covered
by the policy once it was shown that liability has arisen, but
the liability is limited to 50k per accident.
 drowning, there is an ambiguity in this respect in the policy,
QUA CHEE GAN v. LAW UNION
FACTS: Qua Chee Gan owns four warehouses in Albay which
were used to house crops like copra and hemp. All
warehouses were insured by Law Union. In 1940, three of
the warehouses were destroyed by fire. Qua Chee Gan
demanded insurance pay from Law Union but the latter
refused to pay on the ground that the insured violated the
"Hemp Warranty" against the storage of gasoline, since
appellee admitted that there were 36 cans of gasoline in the
building.
HELD: The ambiguity must be held strictly against the
insurer and liberally in favor of the insured, specially to
avoid a forfeiture. So long as insurance companies insist
upon the use of ambiguous, intricate and technical
provisions, which conceal rather than frankly disclose, their
own intentions, the courts must, in fairness to those who
purchase insurance, construe every ambiguity in favor of the
insured. Appellee admitted that there were 36 cans of
gasoline in the building designed. It However, gasoline is
not specifically mentioned among the prohibited articles
listed in the so-called "hemp warranty." The cause relied
upon by the insurer speaks of "oils", and is uncertain
because, "Oils" usually mean "lubricants" and not gasoline or
kerosene. If the company intended to rely upon a condition
of that character, it ought to have been plainly expressed in
the policy.
DEL ROSARIO v. EQUITABLE INS
FACTS: Equitable Insurance issued Personal Accident Policy
on the life of Francisco Del Rosario, son of herein plaintiff-
appellee, binding itself to pay the sum of 1K-3K as
indemnity for death of the insured. Later on, Del Rosario
was forced to jump because of fire that broke out on the
vessel, resulting to his death. When del Rosario’s father
claimed for payment, the insurance company only paid 1k
HELD: Ambiguous terms in a policy are to be construed
strictly against, the insurer, and liberally in favor of the
insured for the payment of indemnity where forfeiture is
involved. Since the defendant has bound itself to pay
P1000.00 to P3,000.00 as indemnity for the death of the
insured but the policy does not positively state any definite
amount that may be recovered in case of death by
which ambiguity must be interpreted in favor of the insured
and strictly against the insurer so as to allow greater
indemnity.
GEAGONIA v. CA
FACTS: Geagonia (owner) insured Norman’s Mart under fire
policy of Country Bankers covering stock-in-trade
consisting principally of dry goods. Mercantile Insurance Co.
was the co-insurer for P50K. When the petitioner’s stocks
were burnt, Geagonia then filed a complaint against the
private respondent in the Insurance Commission for the
recovery of P100,000.00 under fire insurance policy and
damages but Country Bakers refused to pay due to alleged
violation of Condition 3 of the policy.
HELD: Forfeitures are not favored and that any construction
which would result in the forfeiture of the policy benefits for
the person claiming thereunder, will be avoided, if it is
possible to construe the policy in a manner which would
permit recovery. Perusal of Condition 3 shows that (a) the
prohibition applies only to double insurance, and (b) the
nullity of the policy shall only be to the extent exceeding
P200,000.00 of the total policies obtained. By stating within
Condition 3 itself that such condition shall not apply if the
total insurance in force at the time of loss does not exceed
P200,000.00, the private respondent was amenable to
assume a co-insurer's liability up to a loss not exceeding
P200,000.00.
SUN INSURANCE v. CA (1992)
FACTS: Sun insured Lim with a personal accident policy. 2
months later, he died with a bullet wound, when he shot
himself just trying to prove that the gun was not loaded
when he was playing with it. Wife filed a claim for payment,
but Sun refused, since it was allegedly not an accident.
Africa | 10
 the lofty storey building and thence by property fence wall.”
HELD: The words "accident" and "accidental" have never the 'terms in an insurance policy, which are ambiguous,
acquired any technical signification in law, and when used in equivocal, or uncertain are to be construed strictly and most
an insurance contract are to be construed and considered strongly against the insurer, and liberally in favor of the
according to the ordinary understanding and common usage insured so as to effect the dominant purpose of indemnity
and speech of people generally. An accident is an event or payment to the insured’
which happens without any human agency or, if happening
through human agency, an event which, under the 

circumstances, is unusual to and not expected by the
person to whom it happens. In the case at bar, Lim had 

removed the magazine from the gun and believed it was no
longer dangerous. That the gun would fire was an
additional, unexpected, independent, and unforeseen
occurrence that led to Lim’s death. While he was
unquestionably negligent, nothing in the policy relieves
insurer of the responsibility to pay the indemnity agreed
upon if the insured is shown to have contributed to his own
accident. 


RIZAL SURETY v. CA
FACTS: Rizal Surety & Insurance Company issued a fire
insurance policy in favor of Transworld Knitting Mills, Inc.
The subject policy stated that Rizal Surety is “responsible in
case of loss whilst contained and/or stored during the
currency of this Policy in the premises occupied by them
forming part of the buildings situated within own
Compound xxx.” The policy also described therein the four-
span building covered by the same. On Jan. 12, 1981, fire
broke out in the compound, razing the middle portion of its
four-span building and partly gutting the left and right
sections thereof. A two-storey building (behind said four-
span building) where gaming machines were stored was also
destroyed by the fire.
HELD: According to the policy, said properties must be
contained and/or stored in the areas occupied by
Transworld and second, said areas must form part of the
building described in the policy. This generally means that
the policy didn’t limit its coverage to what was stored in the
four-span building. The 2-storey building was not an annex
building but an integral part of the four-span building
described in the policy and consequently, the machines and
spare parts stored were covered by the fire insurance. In
fact, a report said: "Two-storey building is adjoining and
intercommunicating with the repair of the first right span of

Africa | 11