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Case 17: White Gold Marine Service Inc. vs. Pioneer Case 18: Republic vs.

8: Republic vs. Sunlife Assurance Company of Canada

Insurance and Surety Co. 464 SCRA 448 GR No. 158085; October 14, 2005

Facts: Facts:

Petitioner White Gold bought a protection and indemnity On December 29, 1997, the [Court of Tax Appeals] (CTA)
coverage for its ships from Steamship Mutual through rendered its decision in Insular Life Assurance Co. Ltd. v. [CIR],
Respondent Pioneer. Certificates and receipts thus were which held that mutual life insurance companies are purely
given. However, Petitioner failed to fulfill its payments thus cooperative companies and are exempt from the payment of
Steamship refused to renew its coverage. Steamship then premium tax and DST. This pronouncement was later
filed for collection against Petitioner for recovery of unpaid affirmed by this court in [CIR] v. Insular Life Assurance
balance. Thereafter, Petitioner also filed a complaint against Company, Ltd. Sun Life surmised that[,] being a mutual life
Steamship and Respondent before the Insurance Commission insurance company, it was likewise exempt from the payment
for violations (186,187 for Steamship and 299,300,301 in of premium tax and DST. Hence, on August 20, 1999, Sun Life
relation to 302 and 303 for Respondent) of the Insurance filed with the CIR an administrative claim for tax credit of its
Code-license requirements as an Insurance company for the alleged erroneously paid premium tax and DST for the
former and as insurance agent for the latter. Said commission aforestated tax periods.
dismissed the complaint which decision was affirmed by the
CA. For failure of the CIR to act upon the administrative claim for
tax credit and with the 2-year period to file a claim for tax
Issue: credit or refund dwindling away and about to expire, Sun Life
filed with the CTA a petition for review. The CTA found in
Whether or not Steamship Mutual is a Protection and favor of Sun Life.
Indemnity Club engaged in the insurance business in the
Philippines Seeking reconsideration of the decision of the CTA, the CIR
argued that Sun Life ought to have registered, foremost, with
Held: the Cooperative Development Authority before it could enjoy
the exemptions from premium tax and DST extended to
Steamship Mutual as a P & I Club is a mutual insurance purely cooperative companies or associations under
company engaged in the marine insurance business. [S]ections 121 and 199 of the Tax Code. For its failure to
register, it could not avail of the exemptions prayed for. The
An insurance contract is a contract of indemnity. This means
CTA denied the CIR’s motion for reconsideration.
that one party undertakes for a consideration to indemnify
another party against loss, damage, or liability arising from an Issue:
unknown or contingent event. While to determine if a
contract is an insurance contract we can look at the nature of Whether or not respondent is exempted from payment of tax
the promise, the act to be performed, exact nature of the on life insurance premiums and documentary stamp tax
agreement in view of the entire occurrence, contingency or
circumstance where the performance is mandated. The label Held:
is not controlling. While under Section 2(2) of the Insurance
Code the phrase “doing an insurance business” constitutes YES. The Tax Code defines a cooperative as an association
the following: 1) making or proposing to make, as insurer, any “conducted by the members thereof with the money
insurance contract; 2) making or proposing to make, as collected from among themselves and solely for their own
surety, any contract of suretyship as a vocation and not as protection and not for profit.” Without a doubt, respondent
merely incidental to any other legitimate business or activity is a cooperative engaged in a mutual life insurance business.
of the surety; 3) doing any kind of business, including a
reinsurance business, specifically recognized as constituting First, it is managed by its members. Both the CA and the CTA
the doing of an insurance business within the meaning of this found that the management and affairs of respondent were
code; 4) doing or proposing to do any business in substance conducted by its member-policyholders. SUNLIFE has been
to any of the foregoing in a manner designed to evade the mutualized or converted from a stock life insurance company
provision of this code. to a nonstock mutual life insurance corporation pursuant to
Section 266 of the Insurance Code of 1978. On the basis of its
Taking all of these in to consideration, Steamship Mutual bylaws, its ownership has been vested in its member-
engaged in marine insurance business undertook to policyholders who are each entitled to one vote; and who, in
indemnify Petitioner White Gold against marine losses as turn, elect from among themselves the members of its board
enumerated under sec. 99 of the Insurance Code. It is of trustees.
immaterial whether profit is derived from making insurance
contract and that no separate or direct consideration is Second, it is operated with money collected from its
received since these does not preclude the existence of an members. Since respondent is composed entirely of members
insurance business. who are also its policyholders, all premiums collected
obviously come only from them. The member-policyholders Further, Philamcare, in believing there was concealment,
constitute “both insurer and insured” who “contribute, by a should have taken the necessary steps to void the health
system of premiums or assessments, to the creation of a fund coverage agreement prior to the filing of the suit by Julita.
from which all losses and liabilities are paid.” Philamcare never gave notice to Julita of the fact that they
are voiding the agreement. Therefore, Philamcare should pay
Third, it is licensed for the mutual protection of its members, the expenses paid by Julita.
not for the profit of anyone. A mutual life insurance company
is conducted for the benefit of its member-policyholders, Case 20: Commissioner Of Internal Revenue V. Lincoln
who pay into its capital by way of premiums. Philippine Life Insurance Co., Inc (2002)

Under the Tax Code although respondent is a cooperative, FACTS:

registration with the Cooperative Development Authority
(CDA) is not necessary in order for it to be exempt from the Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA
payment of both percentage taxes on insurance premiums, Life Insurance Company, Inc.) issued a special kind of life
under Section 121; and documentary stamp taxes on policies insurance policy known as the "Junior Estate Builder Policy"
of insurance or annuities it grants, under Section 199. with a distinguishing feature. It had a "automatic increase
clause" upon attainment of a certain age by the insured.
Case 19: Philamcare Health Systems Inc. vs Court of Appeals
379 SCRA 356 (2002) Commissioner of Internal Revenue issued deficiency
documentary stamps tax assessment for the year 1984
FACTS: pertaining to the amount in the automatic increase clause.

In 1988, Ernani Trinos applied for a health care insurance Lincoln questioned the deficiency assessments.
under the Philamcare Health Systems. He was asked if he was
ever treated for high blood, heart trouble, diabetes, cancer, Court of Tax Appeals: found no valid basis and cancelled it
liver disease, asthma, or peptic ulcer; he answered no. His
application was approved and it was effective for one year. CA: affirmed CTA.
His coverage was subsequently renewed twice for one year
CIR claims that "automatic increase clause" in the subject
each. While the coverage was still in force in 1990, Ernani
insurance policy is separate .
suffered a heart attack for which he was hospitalized. The
cost of the hospitalization amounted to P76,000.00. Julita ISSUE:
Trinos, wife of Ernani, filed a claim before Philamcare for
them to pay the hospitalization cost. Philamcare refused to W/N the "automatic increase clause" should not be taxed
pay as it alleged that Ernani failed to disclose the fact that he with the main policy.
was diabetic, hypertensive, and asthmatic. Julita ended up
paying the hospital expenses. Ernani eventually died. In July HELD:
1990, Julita sued Philamcare for damages. Philamcare alleged
that the health coverage is not an insurance contract; that NO. CA set aside
the concealment made by Ernani voided the agreement.
Section 49, Title VI of the Insurance Code defines an
ISSUE: insurance policy as the written instrument in which a contract
of insurance is set forth
Whether or not Philamcare can avoid the health coverage
agreement. Section 50 of the same Code provides that the policy, which is
required to be in printed form, may contain any word,
HELD: phrase, clause, mark, sign, symbol, signature, number, or
word necessary to complete the contract of insurance.
No. The health coverage agreement entered upon by Ernani
with Philamcare is a non-life insurance contract and is Any rider, clause, warranty or endorsement pasted or
covered by the Insurance Law. It is primarily a contract of attached to the policy is considered part of such policy or
indemnity. Once the member incurs hospital, medical or any contract of insurance.
other expense arising from sickness, injury or other stipulated
contingent, the health care provider must pay for the same to Section 173 that the payment of documentary stamp taxes is
the extent agreed upon under the contract. There is no done at the time the act is done or transaction had and the
concealment on the part of Ernani. He answered the question tax base for the computation of documentary stamp taxes on
with good faith. He was not a medical doctor hence his life insurance policies under Section 183 is the amount fixed
statement in answering the question asked of him when he in policy, unless the interest of a person insured is susceptible
was applying is an opinion rather than a fact. Answers made of exact pecuniary measurement.
in good faith will not void the policy.
The amount fixed in the policy is the figure written on its face
and whatever increases will take effect in the future by
reason of the "automatic increase clause" embodied in the admitted that its enforcement avoids uncertainty and tends
policy without the need of another contract. to security. Not only this, but in order that the principle may
not be taken too lightly, it is identical with the principles
The amount insured by the policy at the time of its issuance announced by a considerable number of respectable, courts
necessarily included the additional sum covered by the in the United States. The courts who take this view have
automatic increase clause because it was already expressly held that an acceptance of an offer of insurance not
determinable at the time the transaction was entered into actually or constructively communicated to the proposer
and formed part of the policy. does not make a contract. Only the mailing of acceptance, it
has been said, completes the contract of insurance, as the
To claim that the increase in the amount insured (by virtue of locus poienitentise is ended when the acceptance has passed
the automatic increase clause incorporated into the policy at beyond the control of the party. In resume, therefore, the law
the time of issuance) should not be included in the applicable to the case is found to be the second paragraph of
computation of the documentary stamp taxes due on the article 1262 of the Civil Code providing that an acceptance
policy would be a clear evasion of the law requiring that the made by letter shall not bind the person making the offer
tax be computed on the basis of the amount insured by the except from the time it came to his knowledge. The pertinent
policy. fact is, 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
21. ENRIQUEZ v. Sunlife Assurance Co. of Canada
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
On 24 September 1917, Joaquin Herrer made application to
company to the applicant. The further admitted facts are that
the Sun Life Assurance Company of Canada through its office
the head office in Montreal did accept the application, did
in Manila for a life annuity. Two days later he paid the sum of
cable the Manila office to that effect, did actually issue the
P6,000 to the manager of the company's Manila office and
policy and did, through its agent in Manila, actually write the
was given a receipt. The application was immediately
letter of notification and place it in the usual channels for
forwarded to the head office of the company at Montreal,
transmission to the addressee. The fact as to the letter of
notification thus fails to concur with the essential elements of
On 26 November 1917, the head office gave notice of
the general rule pertaining to the mailing and delivery of mail
acceptance by cable to Manila. (Whether on the same day
matter as announced by the American courts, namely, when
the cable was received notice was sent by the Manila office
a letter or other mail matter is addressed and mailed with
to Herrer that the application had been accepted, is a
postage prepaid there is a rebuttable presumption of fact
disputed point.)
that it was received by the addressee as soon as it could have
On 4 December 1917, the policy was issued at Montreal. On
been transmitted to him in the ordinary course of the mails.
18 December 1917, attorney Aurelio A. Torres wrote to the
But if any one of these elemental facts fails to appear, it is
Manila office of the company stating that Herrer desired to
fatal to the presumption. For instance, a letter will not be
withdraw his application. The following day the local office
presumed to have been received by the addressee unless it is
replied to Mr. Torres, stating that the policy had been issued,
shown that it was deposited in the post-office, properly
and called attention to the notification of 26 November 1917.
addressed and stamped. The contract for a life annuity in the
This letter was received by Mr. Torres on the morning of 21
case at bar was not perfected because it has not been proved
December 1917. Mr. Herrer died on 20 December 1917.
satisfactorily that the acceptance of the application ever
An action was brought by Rafaek Enriquez as administrator of
came to the knowledge of the applicant.
the estate of the late Joaquin Ma. Herrer to recover from Sun
Life Assurance Company of Canada the sum of P6,000 paid by
22. Great Pacific Life Insurance Co. v. CA
the deceased for a life annuity. The trial court gave judgment
for Sun Life. Enriquez appealed.
Issue: Whether Herrer received notice of acceptance of his
On 14 March 1957, Ngo Hing filed an application with the
application, to hold that the contract for a life annuity was
Great Pacific Life Assurance Company for a 20-year
endowment policy in the amount of P50,000.00 on the life of
his one-year old daughter Helen Go. Ngo Hing supplied the
NO. The letter of 26 November 1917, notifying Mr. Ferrer
essential data which Lapulapu D. Mondragon, Branch
that his application had been accepted, was prepared and
Manager of the Pacific Life in Cebu City wrote on the
signed in the local office of the insurance company, was
corresponding form in his own handwriting . Mondragon
placed in the ordinary channels for transmission, but was
finally type-wrote the data on the application form which was
never actually mailed and thus was never received by the
signed by Ngo Hing. The latter paid the annual premium, the
applicant. The Civil Code rule, that an acceptance made by
sum of P1,077.75 going over to the Company, but he retained
letter shall bind the person making the offer only from the
the amount of P1,317.00 as his commission for being a duly
date it came to his knowledge, may not be the best
authorized agent of Pacific Life. Upon the payment of the
expression of modern commercial usage. Still it must be
insurance premium, the binding deposit receipt was issued to not be in force at any time, and the premium paid shall be
Ngo Hing. Likewise, Mondragon handwrote at the bottom of returned to the applicant. Clearly implied from the aforesaid
the back page of the application form his strong conditions is that the binding deposit receipt in question is
recommendation for the approval of the insurance merely an acknowledgment, on behalf of the company, that
application. Then on 30 April1957, Mondragon received a the latter's branch office had received from the applicant the
letter from Pacific Life disapproving the insurance application. insurance premium and had accepted the application subject
The letter stated that the said life insurance application for for processing by the insurance company; and that the latter
20-year endowment plan is not available for minors below 7 will either approve or reject the same on the basis of whether
years old, but Pacific Life can consider the same under the or not the applicant is "insurable on standard rates." Since
Juvenile Triple Action Plan, and advised that if the offer Pacific Life disapproved the insurance application of Ngo
is acceptable, the Juvenile Non-Medical Declaration be sent Hing, the binding deposit receipt in question had never
to the Company. The non-acceptance of the insurance plan become in force at any time. Upon this premise, the binding
by Pacific Life was allegedly not communicated by deposit receipt is, manifestly, merely conditional and does
Mondragon to Ngo Hing. Instead, on 6 May 1957, Mondragon not insure outright. Where an agreement is made between
wrote back Pacific Life again strongly recommending the the applicant and the agent, no liability shall attach until the
approval of the 20-year endowment life insurance on the principal approves the risk and a receipt is given by the agent.
ground that Pacific Life is the only insurance company not The acceptance is merely conditional, and is subordinated to
selling the 20-year endowment insurance plan to children, the act of the company in approving or rejecting the
pointing out that since 1954 the customers, especially the application. Thus, in life insurance, a "binding slip" or "binding
Chinese, were asking for such coverage. It was when things receipt" does not insure by itself. It bears repeating that
were in such state that on 28 May 1957 Helen Godied of through the intra-company communication of 30 April 1957,
influenza with complication of broncho-pneumonia. Pacific Life disapproved the insurance application in question
Thereupon, Ngo Hing sought the payment of the proceeds of on the ground that it is not offering the 20-year endowment
the insurance, but having failed in his effort, he filed the insurance policy to children less than 7 years of age. What it
action for the recovery of the same before the Court of First offered instead is another plan known as the Juvenile Triple
Instance of Cebu, which rendered a decision against Pacific Action, which Ngo Hing failed to accept. In the absence of a
Life and Mondragon, orderig them to solidarily pay Ngo Hing meeting of the minds between Pacific Life and Ngo Hing over
the amount of P50,000.00 with interest at 6% from the date the 20-year endowment life insurance in the amount of
of the filing of the complaint, and the sum of P10,000.00 as P50,000.00 in favor of the latter's one-year old daughter, and
attorney's fees plus costs of suits. On appeal, the Court of with the non-compliance of the abovequoted conditions
Appeals set aside the appealed decision of the Court of First stated in the disputed binding deposit receipt, there could
Instance of Cebu, and absolved Pacific Life and Mondragon have been no insurance contract duly perfected between
from liability on the insurance policy, but ordered the them. Accordingly, the deposit paid by Ngo Hing shall have to
reimbursement to Ngo Hing the amount of P1,077.75, be refunded by Pacific Life.
without interest. On reconsideration, however, the appellate
court affirmed in toto the decision of the Court of First 23. DBP vs. CA
Instance of Cebu, ordering Pacific Life and Mondragon jointly
and severally to pay Ngo Hing. Two petitions for certiorari by Facts:
way of appeal were filed by Pacific Life and Mondragon. The In May 1987, Juan B. Dans, together with his wife Candida, his
petitons were consolidated by the Supreme Court in a son and daughter-in-law, applied for a loan of P500,000.00
resolution dated 29 April 1970. with the Development Bank of the Philippines (DBP), Basilan
Issue: Whether the binding deposit receipt constituted a Branch. As the principal mortgagor, Dans, then 76 years of
temporary contract of the life insurance in question, and thus age, was advised by DBP to obtain a mortgage redemption
negate the claim that the insurance contract was perfected. insurance (MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool). A loan, in the reduced
Held: amount of P300,000.00, was approved by DBP on 4 August
YES. The provisions printed on the binding deposit receipt 1987 and released on 11 August 1987. From the proceeds of
show that the binding deposit receipt is intended to be the loan, DBP deducted the amount of P1,476.00 as payment
merely a provisional or temporary insurance contract and for the MRI premium. On 15 August 1987, Dans accomplished
only upon compliance of the following conditions: (1) that the and submitted the "MRI Application for Insurance" and the
company shall be satisfied that the applicant was insurable on "Health Statement for DBP MRI Pool." On 20 August 1987,
standard rates; (2) that if the company does not accept the the MRI premium of Dans, less the DBP service fee of 10%,
application and offers to issue a policy for a different plan, was credited by DBP to the savings account of the DBP MRI
the insurance contract shall not be binding until the applicant Pool. Accordingly, the DBP MRI Pool was advised of the
accepts the policy offered; otherwise, the deposit shall be credit. On 3 September 1987, Dans died of cardiac arrest. The
refunded; and (3) that if the applicant is not insurable DBP, upon notice, relayed this information to the DBP MRI
according to the standard rates, and the company Pool. On 23 September 1987, the DBP MRI Pool notified DBP
disapproves the application, the insurance applied for shall that Dans was not eligible for MRI coverage, being over the
acceptance age limit of 60 years at the time of application. On insurance; hence, the DBP MRI Pool cannot be held liable on
21 October 1987, DBP apprised Candida Dans of the a contract that does not exist.
disapproval of her late husband's MRI application. The DBP
offered to refund the premium of P1,476.00 which the Issue [2]: Whether DBP is liable for the entire value of the
deceased had paid, but Candida Dans refused to accept the insurance policy, as it led Dans to believe that he has fulfilled
same, demanding payment of the face value of the MRI or an all the requirements for the MRI and that the issuance of his
amount equivalent to the loan. She, likewise, refused to policy was forthcoming.
accept an ex gratia settlement of P30,000.00, which the DBP
later offered. On 10 February 1989, the Estate of the Late Held [2]: It was DBP, as a matter of policy and practice, that
Juan B. Dans, through Candida Dans as administratrix, filed a required Dans, the borrower, to secure MRI coverage. Instead
complaint with the Regional Trial Court, Branch I, Basilan, of allowing Dans to look for his own insurance carrier or some
against DBP and the insurance pool for collection of Sum of other form of insurance policy, DBP compelled him to apply
Money with Damages. On 10 March 1990, the trial court with the DBP MRI Pool for MRI coverage. When Dan's loan
rendered a decision in favor of the Estate and against DBP. was released on 11 August 1987, DBP already deducted from
The DBP MRI Pool, however, was absolved from liability, after the proceeds thereof the MRI premium. Four days latter, DBP
the trial court found no privity of contract between it and made Dans fill up and sign his application for MRI, as well as
the] deceased. The trial court declared DBP in estoppel for his health statement. The DBP later submitted both the
having led Dans into applying for MRI and actually collecting application form and health statement to the DBP MRI Pool
the premium and the service fee, despite knowledge of his at the DBP Main Building, Makati Metro Manila. As service
age ineligibility. The court ordered DBP to return and fee, DBP deducted 10% of the premium collected by it from
reimburse the Estate the amount of P139,500.00 plus legal Dans. In dealing with Dans, DBP was wearing two legal hats:
rate of interest as amortization payment paid under protest; the first as a lender, and the second as an insurance agent. As
to consider the mortgage loan of P300,000.00 including all an insurance agent, DBP made Dans go through the motion of
interest accumulated or otherwise to have been settled, applying for said insurance, thereby leading him and his
satisfied or set-off by virtue of the insurance coverage of the family to believe that they had already fulfilled all the
late Juan B. Dans; to pay the Estate the amount of P10,000.00 requirements for the MRI and that the issuance of their policy
as attorney's fees; to pay the Estate the amount of was forthcoming. Apparently, DBP had full knowledge that
P10,000.00 as costs of litigation and other expenses, and Dan's application was never going to be approved. The
other relief just and equitable. The DBP appealed to the Court maximum age for MRI acceptance is 60 years as clearly and
of Appeals. In a decision dated 7 September 1992, the specifically provided in Article 1 of the Group Mortgage
appellate court affirmed in toto the decision of the trial court. Redemption Insurance Policy signed in 1984 by all the
The DBP's motion for reconsideration was denied in a insurance companies concerned. The DBP is not authorized to
resolution dated 20 April 1993. DBP filed the petition for accept applications for MRI when its clients are more than 60
review on certiorari. years of age. Knowing all the while that Dans was ineligible
for MRI coverage because of his advanced age, DBP exceeded
Issue [1]: Whether there was a perfected contract of the scope of its authority when it accepted Dan's application
insurance for DBP MRI Pool to be held liable. for MRI by collecting the insurance premium, and deducting
its agent's commission and service fee. The liability of an
Held [1]: NO. When Dans applied for MRI, he filled up and agent who exceeds the scope of his authority depends upon
personally signed a "Health Statement for DBP Pool" with the whether the third person is aware of the limits of the agent's
following declaration: "I hereby declare and agree that all the powers. There is no showing that Dans knew of the limitation
statements and answers contained herein are true, complete on DBP's authority to solicit applications for MRI. If the third
and correct to the best of my knowledge and belief and form person dealing with an agent is unaware of the limits of the
part of my application for insurance. It is understood and authority conferred by the principal on the agent and he
agreed that no insurance coverage shall be effected unless (third person) has been deceived by the non-disclosure
and until this application is approved and the full premium is thereof by the agent, then the latter is liable for damages to
paid during my continued good health." Under the him. The DBP's liability, however, cannot be for the entire
aforementioned provisions, the MRI coverage shall take value of the insurance policy. To assume that were it not for
effect: (1) when the application shall be approved by the DBP's concealment of the limits of its authority, Dans would
insurance pool; and (2) when the full premium is paid during have secured an MRI from another insurance company, and
the continued good health of the applicant. These two therefore would have been fully insured by the time he died,
conditions, being joined conjunctively, must concur. is highly speculative. Considering his advanced age, there is
Undisputably, the power to approve MRI applications is no absolute certainty that Dans could obtain an insurance
lodged with the DBP MRI Pool. The pool, however, did not coverage from another company. It must also be noted that
approve the application of Dans. There is also no showing Dans died almost immediately, i.e., on the nineteenth day
that it accepted the sum of P1,476.00, which DBP credited to after applying for the MRI, and on the twenty-third day from
its account with full knowledge that it was payment for Dan's the date of release of his loan.
premium. There was, as a result, no perfected contract of
24. Perez v. CA The contract was not perfected.
Insurance is a contract whereby, for a stipulated
Primitivo Perez had been insured with the BF Lifeman consideration, one party undertakes to compensate the other
Insurance Corporation since 1980 for P20,000.00. for loss on a specified subject by specified perils. A contract,
> In October 1987, an agent of Lifeman, Rodolfo Lalog, on the other hand, is a meeting of the minds between two
visited Perez in Quezon and convinced him to apply for persons whereby one binds himself, with respect to the other
additional insurance coverage of P50,000.00, to avail of the to give something or to render some service.
ongoing promotional discount of P400.00 if the premium
were paid annually. Consent must be manifested by the meeting of the offer and
> Primitivo B. Perez accomplished an application form for the the acceptance upon the thing and the cause which are to
additional insurance coverage. Virginia A. Perez, his wife, constitute the contract. The offer must be certain and the
paid P2,075.00 to Lalog. The receipt issued by Lalog indicated acceptance absolute. When Primitivo filed an application for
the amount received was a "deposit." insurance, paid P2,075.00 and submitted the results of his
> Unfortunately, Lalog lost the application form medical examination, his application was subject to the
accomplished by Perez and so on October 28, 1987, he asked acceptance of private respondent BF Lifeman Insurance
the latter to fill up another application form. On November 1, Corporation. The perfection of the contract of insurance
1987, Perez was made to undergo the required medical between the deceased and respondent corporation was
examination, which he passed. further conditioned upon compliance with the following
> Lalog forwarded the application for additional insurance of requisites stated in the application form:
Perez, together with all its supporting papers, to the office of "there shall be no contract of insurance unless and until a
BF Lifeman Insurance Corporationn in Quezon which office policy is issued on this application and that the said policy
was supposed to forward the papers to the Manila office. shall not take effect until the premium has been paid and the
> On November 25, 1987, Perez died while he was riding a policy delivered to and accepted by me/us in person while
banca which capsized during a storm. I/We, am/are in good health."
> At the time of his death, his application papers for the The assent of private respondent BF Lifeman Insurance
additional insurance were still with the Quezon office. Lalog Corporation therefore was not given when it merely received
testified that when he went to follow up the papers, he found the application form and all the requisite supporting papers
them still in the Quezon office and so he personally brought of the applicant. Its assent was given when it issues a
the papers to the Manila office of BF Lifeman Insurance corresponding policy to the applicant. Under the
Corporation. It was only on November 27, 1987 that said abovementioned provision, it is only when the applicant pays
papers were received in Manila. the premium and receives and accepts the policy while he is
> Without knowing that Perez died on November 25, 1987, in good health that the contract of insurance is deemed to
BF Lifeman Insurance Corporation approved the application have been perfected.
and issued the corresponding policy for the P50,000.00 on
December 2, 1987 It is not disputed, however, that when Primitivo died on
> Virginia went to Manila to claim the benefits under the November 25, 1987, his application papers for additional
insurance policies of the deceased. She was paid P40,000.00 insurance coverage were still with the branch office of
under the first insurance policy for P20,000.00 (double respondent corporation in Gumaca and it was only two days
indemnity in case of accident) but the insurance company later, or on November 27, 1987, when Lalog personally
refused to pay the claim under the additional policy coverage delivered the application papers to the head office in Manila.
of P50,000.00, the proceeds of which amount to P150,000.00 Consequently, there was absolutely no way the acceptance of
in view of a triple indemnity rider on the insurance policy. the application could have been communicated to the
> In its letter of January 29, 1988 to Virginia A. Perez, the applicant for the latter to accept inasmuch as the applicant at
insurance company maintained that the insurance for the time was already dead.
P50,000.00 had not been perfected at the time of the death
of Primitivo Perez. Consequently, the insurance company
refunded the amount of P2,075.00 which Virginia Perez had 25. Philamcare Health System vs. CA
> Lifeman filed for the rescission and the declaration of
nullity. Perez, on the other hand, averred that the deceased Facts:
had fulfilled all his prestations under the contract and all the Ernani Trinos, deceased husband of Julita Trinos, applied for a
elements of a valid contract are present. health care coverage with Philamcare Health Systems, Inc. In
> RTC ruled in favor of Perez. CA reversed. the standard application form, he answered no to the
following question: "Have you or any of your family members
Issue: ever consulted or been treated for high blood pressure, heart
Whether or not there was a perfected additional insurance trouble, diabetes, cancer, liver disease, asthma or peptic
contract. ulcer? (If Yes, give details). " The application was approved for
a period of one year from 1 March 1988 to 1 March 1989.
Held: Accordingly, he was issued Health Care Agreement P010194.
Under the agreement, Trinos' husband was entitled to avail of insured is subject to a risk of loss by the happening of the
hospitalization benefits, whether ordinary or emergency, designated peril; (3) The insurer assumes the risk; (4) Such
listed therein. He was also entitled to avail of "out-patient assumption of risk is part of a general scheme to distribute
benefits" such as annual physical examinations, preventive actual losses among a large group of persons bearing a similar
health care and other out-patient services. Upon the risk; and (5) In consideration of the insurer's promise, the
termination of the agreement, the same was extended for insured pays a premium. Section 3 of the Insurance Code
another year from 1 March 1989 to 1 March 1990, then from states that any contingent or unknown event, whether past
1 March 1990 to 1 June 1990. The amount of coverage was or future, which may damnify a person having an insurable
increased to a maximum sum of P75,000.00 per disability. interest against him, may be insured against. Every person
During the period of his coverage, Ernani suffered a heart has an insurable interest in the life and health of himself.
attack and was confined at the Manila Medical Center (MMC) Section 10 provides that "Every person has an insurable
for one month beginning 9 March 1990. While her husband interest in the life and health: (1) of himself, of his spouse and
was in the hospital, Trinos tried to claim the benefits under of his children; (2) of any person on whom he depends wholly
the health care agreement. However, Philamcare denied her or in part for education or support, or in whom he has
claim saying that the Health Care Agreement was void. a pecuniary interest; (3) of any person under a legal
According to Philamcare, there was a concealment regarding obligation to him for the payment of money, respecting
Ernani's medical history. Doctors at the MMC allegedly property or service, of which death or illness might delay or
discovered at the time of Ernani's confinement that he was prevent the performance; and (4) of any person upon whose
hypertensive, diabetic and asthmatic, contrary to his answer life any estate or interest vested in him depends." Herein, the
in the application form. Thus, Trinos paid the hospitalization insurable interest of Trinos' husband in obtaining the health
expenses herself, amounting to about P76,000.00. After her care agreement was his own health. The health care
husband was discharged from the MMC, he was attended by agreement was in the nature of non-life insurance, which is
a physical therapist at home. Later, he was admitted at the primarily a contract of indemnity. Once the member incurs
Chinese General Hospital. Due to financial difficulties, hospital, medical or any other expense arising from sickness,
however, Trinos brought her husband home again. In the injury or other stipulated contingent, the health care provider
morning of 13 April 1990, Ernani had fever and was feeling must pay for the same to the extent agreed upon under the
very weak. Trinos was constrained to bring him back to the contract.
Chinese General Hospital where he died on the same day. On
24 July 1990, Trinos instituted with the Regional Trial Court of Issue [2]: Whether answers made in good faith, where
Manila, Branch 44, an action for damages against Philamcare matters of opinion or judgment are called for, without intent
and its president, Dr. Benito Reverente (Civil Case 90 53795). to deceive will avoid a policy when they were untrue.
She asked for reimbursement of her expenses plus moral
damages and attorney's fees. After trial, the lower court ruled Held [2]: NO. Where matters of opinion or judgment are
against Philamcare and Reverente, ordering them to pay and called for, answers made in good faith and without intent to
reimburse the medical and hospital coverage of the late deceive will not avoid a policy even though they are untrue.
Ernani Trinos in the amount of P76,000.00 plus interest, until Thus, although false, a representation of the expectation,
the amount is fully paid to plaintiff who paid the same; the intention, belief, opinion, or judgment of the insured will not
reduced amount of moral damages of P10,000.00 to Trinos; avoid the policy if there is no actual fraud in inducing the
the reduced amount of P10,000.00 as exemplary damages to acceptance of the risk, or its acceptance at a lower rate of
Trinos; and the attorney's fees of P20,000.00, plus costs of premium, and this is likewise the rule although the statement
suit. On appeal, the Court of Appeals affirmed the decision of is material to the risk, if the statement is obviously of the
the trial court but deleted all awards for damages and foregoing character, since in such case the insurer is not
absolved Reverente. Philamcare's motion for reconsideration justified in relying upon such statement, but is obligated to
was denied. Hence, Philamcare brought the petition for make further inquiry. There is a clear distinction between
review, raising the primary argument that a health care such a case and one in which the insured is fraudulently and
agreement is not an insurance contract; hence the intentionally states to be true, as a matter of expectation or
"incontestability clause" under the Insurance Code does not belief, that which he then knows, to be actually untrue, or the
apply. impossibility of which is shown by the facts within his
knowledge, since in such case the intent to deceive the
Issue [1]: Whether a health care agreement between insurer is obvious and amounts to actual fraud. The
Philamcare and Ernani Trinos is an insurance contract. fraudulent intent on the part of the insured must be
Held [1]: established to warrant rescission of the insurance contract.
YES. Section 2 (1) of the Insurance Code defines a contract of Concealment as a defense for the health care provider or
insurance as an agreement whereby one undertakes for a insurer to avoid liability is an affirmative defense and the duty
consideration to indemnify another against loss, damage or to establish such defense by satisfactory and convincing
liability arising from an unknown or contingent event. An evidence rests upon the provider or insurer. In any case, with
insurance contract exists where the following elements or without the authority to investigate, Philamcare is liable
concur: (1) The insured has an insurable interest; (2) The for claims made under the contract. Having assumed a
responsibility under the agreement, Philamcare is bound to the policy to be issued by Phil Charter. Phil Charter issued
answer the same to the extent agreed upon. In the end, the Policy No. 31944 to Gulf Resorts covering the period of March
liability of the health care provider attaches once the 14, 1990 to March 14, 1991 for P10,700,600.00 for a total
member is hospitalized for the disease or injury covered by premium of P45,159.92. the break-down of premiums shows
the agreement or whenever he avails of the covered benefits that Gulf Resorts paid only P393.00 as premium against
which he has prepaid. earthquake shock (ES). In Policy No. 31944 issued by
defendant, the shock endorsement provided that “In
Issue [3]: Whether rescission must be exercised before consideration of the payment by the insured to the company
commencement of an action on the contract. of the sum included additional premium the Company agrees,
notwithstanding what is stated in the printed conditions of
Held [3]: YES. Under Section 27 of the Insurance Code, "a this policy due to the contrary, that this insurance covers loss
concealment entitles the injured party to rescind a contract or damage to shock to any of the property insured by this
of insurance." The right to rescind should be exercised Policy occasioned by or through or in consequence of
previous to the commencement of an action on the contract. earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and
Herein, no rescission was made. Besides, the cancellation of "7-C"). In Exhibit "7-C" the word "included" above the
health care agreements as in insurance policies require the underlined portion was deleted. On July 16, 1990 an
concurrence of the following conditions: (1) Prior notice of earthquake struck Central Luzon and Northern Luzon and
cancellation to insured; (2) Notice must be based on the plaintiff’s properties covered by Policy No. 31944 issued by
occurrence after effective date of the policy of one or more defendant, including the two swimming pools in its Agoo
of the grounds mentioned; (3) Must be in writing, mailed or Playa Resort were damaged.
delivered to the insured at the address shown in the policy;
(4) Must state the grounds relied upon provided in Section 64 Petitioner advised respondent that it would be making a
of the Insurance Code and upon request of insured, to furnish claim under its Insurance Policy 31944 for damages on its
facts on which cancellation is based. None of the above pre- properties. Respondent denied petitioner’s claim on the
conditions was fulfilled in this case. When the terms of ground that its insurance policy only afforded earthquake
insurance contract contain limitations on liability, courts shock coverage to the twoswimming pools of the resort. The
should construe them in such a way as to preclude the trial court ruled in favor of respondent. In its ruling,
insurer from non-compliance with his obligation. Being a the schedule clearly shows that petitioner paid only a
contract of adhesion, the terms of an insurance contract are premium of P393.00 against the peril of earthquake shock,
to be construed strictly against the party which prepared the the same premium it had paid against earthquake shock only
contract — the insurer. By reason of the exclusive control of on the two swimming pools in all the policies issued by
the insurance company over the terms and phraseology of AHAC.
the insurance contract, ambiguity must be strictly interpreted
against the insurer and liberally in favor of the insured, Issue: Whether or not the policy covers only the
especially to avoid forfeiture. This is equally applicable to two swimming pools owned by Gulf Resorts and does not
Health Care Agreements. extend to all properties damaged therein
Issue [4]: Whether the membership of the late Trinos is now
incontestable. Held: YES. All the provisions and riders taken and interpreted
together, indubitably show the intention of the parties to
Held [4]: YES. Under the title Claim procedures of expenses, extend earthquake shock coverage to the two swimming
Philamcare had twelve months from the date of issuance of pools only. Aninsurance premium is the consideration paid an
the Agreement within which to contest the membership of insurer for undertaking to indemnify the insured against a
the patient if he had previous ailment of asthma, and six specified peril. In fire, casualty and marine insurance, the
months from the issuance of the agreement if the patient premium becomes a debt as soon as the risk attaches. In the
was sick of diabetes or hypertension. subject policy, no premium payments were made with regard
The periods having expired, the defense of concealment or to earthquake shock coverage except on the two swimming
misrepresentation no longer lie. pools. There is no mention of any premium payable for the
other resort properties with regard to earthquake shock. This
26. Gulf Resorts, Inc v. Philippine Charter Insurance Corp. is consistent with the history of petitioner’sinsurance
policies with AHAC.
Facts: Gulf Resorts is the owner of the Plaza Resort situated
at Agoo, La Union and had its properties in said resort insured 27. Malayan Insurance Co v Court of Appeals
originally with the American Home Assurance Company
(AHAC). In the first 4 policies issued, the risks of loss from Facts: Malayan Insurance Co. Inc. (MALAYAN) issued a Private
earthquake shock was extended only to petitioner’s CarComprehensive Policy covering a Willys jeep. The
two swimming pools. Gulf Resorts agreed to insure with Phil insurance coverage was for "own damage" not to exceed
Charter the properties covered by the AHAC policy provided P600.00 and "third-party liability" in the amount of
that the policy wording and rates in said policy be copied in P20,000.00.
nor does it grow out of any privity of contract or upon written
During the effectivity of the insurance policy, , the insured assignment of claim, and payment to the insured makes the
jeep, while being driven by one Juan P. Campollo an insurer assignee in equity.
employee of the respondent San Leon Rice Mill, Inc., (SAN
LEON) collided with apassenger bus belonging to the
respondent Pangasinan Transportation Co., Inc.
(PANTRANCO) at the national highway in Barrio San Pedro, 28. Manila Mahogany v Court of Appeals
Rosales, Pangasinan, causing damage to the insured vehicle
and injuries to the driver, Juan P. Campollo, and the FACTS:
respondent Martin C. Vallejos, who was riding in the ill-fated Petitioner Manila Mahogany Manufacturing Corporation
jeep. insured its Mercedes Benz 4-door sedan with respondent
Zenith Insurance Corporation. The insured vehicle was
Martin C. Vallejos filed an action for damages against Sio bumped and damaged by a truck owned by San Miguel
Choy, Malayan Insurance Co., Inc. and the PANTRANCO Corporation. For the damage caused, respondent company
before the Court of First Instance of Pangasinan. The trial paid petitioner five thousand pesos (P5,000.00) in amicable
court rendered judgment holding Sio Choy, SAN LEON, and settlement. Petitioner's general manager executed a Release
MALAYAN jointly and severally liable. However, MALAYAN’s of Claim, subrogating respondent company to all its right to
liability will only be up to P20,000. action against San Miguel Corporation. Thereafter,
respondent company wrote Insurance Adjusters, Inc. to
On appeal, CA affirmed the decision of the trial court. demand reimbursement from San Miguel Corporation of the
However, it ruled that SAN LEON has no obligation to amount it had paid petitioner. Insurance Adjusters, Inc.
indemnify or reimburse the petitioner insurance company for refused reimbursement, alleging that San Miguel Corporation
whatever amount it has been ordered to pay on its policy, had already paid petitioner P4,500.00 for the damages to
since the San Leon Rice Mill, Inc. is not a privy to the contract petitioner's motor vehicle, as evidenced by a cash voucher
of insurance between Sio Choy and the insurance company. and a Release of Claim executed by the General Manager
of petitioner discharging San Miguel Corporation from "all
MALAYAN appealed to the SC by way of review on certiorari. actions, claims, demands the rights of action that now exist or
hereafter develop arising out of or as a consequence of the
Issues: accident."Respondent insurance company thus demanded fro
(1) Whether or not MALAYAN is solidarily liable to Vallejos, m petitioner reimbursement of the sum of P4,500.00 paid by
along with Sio Choy and SAN LEON San Miguel Corporation. Petitioner refused; hence, the
instant case.
(2) Whether or not MALAYAN is entitled to be reimbursed by
SAN LEON for whatever amount petitioner has been ISSUE:
adjudged to pay respondent Vallejos on its insurance policy. Whether or not the respondent insurance company is
subrogated to the rights of the petitioner against San
Held: Miguel Corporation.
(1) Only Sio Choy and SAN LEON are solidarily liable to
Vallejos for the award of damages. Sio Choy is liable as owner HELD:
of the jeeppursuant to Article 2184, while SAN LEON is liable YES. The Supreme Court held that if a property is insured and
as the employer of the driver of the jeep at the time of the the owner receives the indemnity from the insurer, it is
accident pursuant to Art 2180. provided in [Article 2207 of the New Civil Code] that the
insurer is deemed subrogated to the rights of the insured
MALAYAN’s liability, however, arose only out of the insurance against the wrongdoer and if the amount paid by the insurer
policywith Sio Choy. Petitioner as insurer of Sio Choy, is liable does not fully cover the loss, then the aggrieved party is the
to respondent Vallejos, but it cannot, as incorrectly held by one entitled to recover the deficiency. Under this legal
the trial court, be made "solidarily" liable with the two provision, the real party in interest with regard to the portion
principal tortfeasors namely respondents Sio Choy and SAN of the indemnity paid is the insurer and not the insured.
LEON. Hence, petitioner is entitled to keep the sum of P4,500.00
paid by San Miguel Corporation under its clear right to file a
(2) MALAYAN is entitled to be reimbursed. Upon payment of deficiency claim for damages incurred, against the
the loss, the insurer is entitled to be subrogated pro tanto to wrongdoer, should the insurance company not fully pay for
any right of action which the insured may have against the the injury caused (Article 2207, New Civil Code).
third person whose negligence or wrongful act caused the However, when petitioner released San Miguel Corporation
loss. When the insurance company pays for the loss, such from any liability, petitioner's right to retain the sum of
payment operates as an equitable assignment to the insurer P5,000.00 no longer existed, thereby entitling private
of the property and all remedies which the insured may have respondent to recover the same. The right of subrogation can
for the recovery thereof. That right is not dependent upon , only exist after the insurer has paid the insured otherwise the
insured will be deprived of his right to full indemnity. If the of, the insurance company shall be subrogated to the rights
insurance proceeds are not sufficient to cover the damages of the insured against the wrongdoer or the person who has
suffered by the insured, then he may sue the party violated the contract."
responsible for the damage for the remainder. To the extent
of the amount he has already received from, the insurer Article 2207 of the Civil Code is founded on the well-settled
enjoys the right of subrogation. Since the insurer can be principle of subrogation. If the insured property is destroyed
subrogated to only such rights as the insured may or damaged through the fault or negligence of a party other
have, should the insured, after receiving payment from the than the assured, then the insurer, upon payment to the
insurer, release the wrongdoer who caused the loss, the assured, will be subrogated to the rights of the assured to
insurer loses his rights against the latter. But in such a case, recover from the wrongdoer to the extent that the insurer
the insurer will be entitled to recover from the insured has been obligated to pay. Payment by the insurer to the
whatever it has paid to the latter, unless the release was assured operates as an equitable assignment to the former of
made with the consent of the insure all remedies which the latter may have against the third party
whose negligence or wrongful act caused the loss. The right
29. Pan Malayan Insurance Corp vs Court of Appeals of subrogation is not dependent upon, nor does it grow out
Facts: of, any privity of contract or upon written assignment of
In 1985, PANMALAY filed a complaint for damages with the claim. It accrues simply upon payment of the insurance
RTC of Makati against private respondents Erlinda Fabie and claim by the insurer.
her driver. PANMALAY averred that: it is an insurer of a
Mitsubishi Colt Lancer car registered in the name of PANMALAY contends that the coverage of insured risks under
Canlubang Automotive Resources Corporation; on May 26, the above section, specifically Section III-1(a), is
1985, due to the "carelessness, recklessness, and comprehensive enough to include damage to the insured
imprudence" of the unknown driver of a pick-up with plate vehicle arising from collision or overturning due to the fault
no. PCR-220, the insured car was hit and suffered damages in or negligence of a third party. CANLUBANG is apparently of
the amount of P42,052.00; PANMALAY defrayed the cost of the same understanding. Based on a police report wherein
repair of the insured car and, therefore, was subrogated to the driver of the insured car reported that after the vehicle
the rights of Canlubang against the driver of the pick-up and was sideswiped by a pick-up, the driver thereof fled the scene
his employer, Erlinda Fabie; and, despite repeated demands, [Record, p. 20], CANLUBANG filed its claim with PANMALAY
defendants, failed and refused to pay the claim of for indemnification of the damage caused to its car. It then
PANMALAY. accepted payment from PANMALAY, and executed a Release
of Claim and Subrogation Receipt in favor of latter.
Private respondents filed a Motion for Bill of Particulars. In
compliance therewith, PANMALAY clarified, among others, Considering that the very parties to the policy were not
that the damage caused to the insured car was settled under shown to be in disagreement regarding the meaning and
the "own damage", coverage of the insurance policy, and that coverage of Section III-1, specifically sub-paragraph (a)
the driver of the insured car was, at the time of the accident, thereof, it was improper for the appellate court to indulge in
an authorized driver duly licensed to drive the vehicle. contract construction, to apply the ejusdem generis rule, and
PANMALAY also submitted a copy of the insurance policy and to ascribe meaning contrary to the clear intention and
the Release of Claim and Subrogation Receipt executed by understanding of these parties.
For even if under the above circumstances PANMALAY could
Private respondents filed a Motion to Dismiss alleging that not be deemed subrogated to the rights of its assured under
PANMALAY had nocause of action against them. They argued Article 2207 of the Civil Code, PANMALAY would still have
that payment under the "own damage" clause of the a cause of action against private respondents. In the
insurance policy precluded subrogation under Article 2207 of pertinent case of Sveriges Angfartygs Assurans Forening
the Civil Code, since indemnification thereunder was made on v. Qua Chee Gan, the Court ruled that the insurer who may
the assumption that there was no wrongdoer or no third have no rights of subrogation due to "voluntary" payment
party at fault. may nevertheless recover from the third party responsible for
the damage to the insured property under Article 1236 of the
Issue: Civil Code.
Whether or not PANMALAY was legally subrogated to the
rights of Canlubang. 30. Cebu Shipyard and Engineering Works v William Lines
Held: Cebu Shipyard and Engineering Works, Inc. repaired marine
Yes. Article 2207 of the Civil Code provides: "If vessels while the Prudential is in the non-life insurance
the plaintiffs property has been insured, and he has received business. William Lines, Inc., the owner of M/V Manila City, a
indemnity from the insurance company for the injury or loss luxury passenger-cargo vessel, which caught fire and sank. At
arising out of the wrong or breach of contract complained the time of the incident, subject vessel was insured with
Prudential for P45M for hull and machinery. CSEW was rights of the insured against the wrongdoer or the
insured for only Php 10 million for the shiprepairer’s liability person who has violated the contract. If the amount
policy. They entered into a contract where negligence was paid by the insurance company does not fully cover
the only factor that could make CSEW liable for damages. the injury or loss, the aggrieved party shall be
Moreover, liability of CSEW was limited to only Php 1million entitled to recover the deficiency from the person
for damages. The Hull Policy included an “Additional Perils causing the loss or injury.
(INCHMAREE)” Clause covering loss of or damage to the
vessel through the negligence of, among others, ship When Prudential paid the latter the total amount covered by
repairmen. William brought Manila City to the dry dock of its insurance policy, it was subrogated to the right of the
CSEW for repairs. The officers and cabin crew stayed at the latter to recover the insured loss from the liable party, CSEW.
ship while it was being repaired. After the vessel was Petitioner theorizes further that there can be no right of
transferred to the docking quay, it caught fire and sank, subrogation as it is deemed a co-assured under the subject
resulting to its total loss. insurance policy with reliance on Clause 20 of the Work Order
which states:
William brought suit against CSEW alleging that it was
through the latter’s negligence that the ship caught fire and 20. The insurance on the vessel should be
sank. Prudential was impleaded as co-plaintiff after it had maintained by the customer and/or owner of the
paid the value of insured items. It was subrogated to 45 vessel during the period the contract is in effect.
million, or the value it claimed to indemnify. Clause 20 of the Work Order in question is clear in
The trial court brought judgment against CSEW 45 million for the sense that it requires William Lines to maintain
the ship indemnity, 65 million for loss of income, and more insurance on the vessel during the period of dry-
than 13 million in other damages. The CA affirmed the TC docking or repair.
However, the fact that CSEW benefits from the said
CSEW contended that the cause of the fire was due to stipulation does not automatically make it as a co-assured of
William’s hotworks on the said portion of the ship which they William Lines. The intention of the parties to make each other
didn’t ask CSEW permission for. a co-assured under an insurance policy is to be read from the
Prudential, on the other hand, blamed the negligence of the insurance contract or policy itself and not from any other
CSEW workers in the instance when they didn’t mind rubber contract or agreement because the insurance policy
insulation wire coming out of the air-conditioning unit that denominates the beneficiaries of the insurance. The hull and
was already burning. machinery insurance procured by William Lines, Inc. from
Prudential named only “William Lines, Inc.” as the
Issue: assured. There was no manifestation of any intention of
1. WON Prudential has the right of subrogation against its William Lines, Inc. to constitute CSEW as a co-assured under
own insured subject policy. The claim of CSEW that it is a co-assured is
2. WON the provisions limiting CSEW’s liability for negligence unfounded.
to a maximum of Php 1 million are valid
Then too, in the Additional Perils Clause of the same Marine
Held: Yes. Yes. Yes. No. Petition denied. Insurance Policy, it is provided that this insurance also covers
loss of or damage to vessel directly caused by the negligence
Ratio: of charterers and repairers who are not assured.
1. Petitioner contends that Prudential is not entitled to be
subrogated to the rights of William Lines, Inc., theorizing that As correctly pointed out by respondent Prudential, if CSEW
(1) the fire which gutted M/V Manila City was an excluded were deemed a co-assured under the policy, it would nullify
risk and (2) it is a co-assured under the Marine Hull Insurance any claim of William Lines, Inc. from Prudential for any loss or
Policy. This was wrong. The one who caused the fire has damage caused by the negligence of CSEW. Certainly, no
already been adjudicated by the courts as CSEW. shipowner would agree to make a shiprepairer a co-assured
under such insurance policy; otherwise, any claim for loss or
Upon proof of payment by Prudential to William Lines, Inc., damage under the policy would be invalidated.
the former was subrogated to the right of the latter to 4. Although in this jurisdiction, contracts of adhesion have
indemnification from CSEW. As aptly ruled by the Court of been consistently upheld as valid per se; as binding as an
Appeals, the law says: ordinary contract, the Court recognizes instances when
reliance on such contracts cannot be favored especially
Art. 2207. If the plaintiff’s property has been where the facts and circumstances warrant that subject
insured, and he has received indemnity from the stipulations be disregarded. Thus, in ruling on the validity and
insurance company for the injury or loss arising out applicability of the stipulation limiting the liability of CSEW
of the wrong or breach of contract complained of, for negligence to P1M only, the facts and circumstances vis-a-
the insurance company shall be subrogated to the vis the nature of the provision sought to be enforced should
be considered, bearing in mind the principles of equity and Whether or not the payment made by private respondent to
fair play. Caltex amounted to an automatic admission of the vessel’s
It is worthy to note that M/V Manila City was insured with seaworthiness.
Prudential for P45M. Upon thorough investigation by its hull
surveyor, M/V Manila City was found to be beyond RULING:
economical salvage and repair. The evaluation of the average No. The payment made by the private respondent for the
adjuster also reported a constructive total loss. The said claim insured value of the lost cargo operates as waiver of its
of William Lines, Inc., was then found to be valid and (private respondent) right to enforce the term of the implied
compensable such that Prudential paid the latter the total warranty against Caltex under the marine insurance policy.
value of its insurance claim. Furthermore, it was ascertained However, the same cannot be validly interpreted as an
that the replacement cost of the vessel, amounts to P55M. automatic admission of the vessel’s seaworthiness by the
private respondent as to foreclose recourse against the
31. Delsan Transport v Court of Appeals petitioner for any liability under its contractual obligation as a
FACTS: common carrier. The fact of payment grants the private
Caltex Philippines entered into a contract of affreightment respondent subrogatory right which enables it to exercise
with the petitioner, Delsan Transport Lines, Inc., for a period legal remedies that would otherwise be available to Caltex as
of one year whereby the said common carrier agreed to owner of the lost cargo against the petitioner common
transport Caltex’s industrial fuel oil from the Batangas-Bataan carrier.
Refinery to different parts of the country. Under the contract,
petitioner took on board its vessel, MT Maysun, 2,277.314 32. Federal Express v American Home
kiloliters of industrial fuel oil of Caltex to be delivered to the FACTS:
Caltex Oil Terminal in Zamboanga City. The shipment was On January 26, 1994, SMITHKLINE Beecham (SMITHKLINE for
insured with the private respondent, American Home brevity) of Nebraska, USA delivered to Burlington Air Express
Assurance Corporation. (BURLINGTON), an agent of [Petitioner] Federal Express
Corporation, a shipment of 109 cartons of veterinary
On August 14, 1986, MT Maysun set sail from Batangas for biologicals for delivery to consignee SMITHKLINE and French
Zamboanga City. Unfortunately, the vessel sank in the early Overseas Company in Makati City, Metro Manila. The
morning of August 16, 1986 near Panay Gulf in the Visayas shipment was covered by Burlington Airway Bill No.
taking with it the entire cargo of fuel oil. 11263825 with the words, 'REFRIGERATE WHEN NOT IN
TRANSIT' and 'PERISHABLE' stamp marked on its face. That
Subsequently, private respondent paid Caltex the sum of Five same day, Burlington insured the cargoes in the amount of
Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos $39,339.00 with American Home Assurance Company
and Fifty-Seven Centavos (P5,096,635.57) representing the (AHAC). The following day, Burlington turned over the
insured value of the lost cargo. Exercising its right of custody of said cargoes to Federal Express which transported
subrogation under Article 2207 of the New Civil Code, private the same to Manila. On February 10, 1994, DARIO C.
respondent demanded of the petitioner the same amount it DIONEDA ('DIONEDA'), twelve (12) days after the cargoes
paid to Caltex. Due to its failure to collect from the petitioner arrived in Manila, a non-licensed custom's broker who was
despite prior demand, private respondent filed a complaint assigned by GETC to facilitate the release of the subject
with the Regional Trial Court of Makati, Branch 137, for cargoes, found out, while he was about to cause the release
collection of a sum of money. After trial, the trial court of the said cargoes, that the same [were] stored only in a
rendered a decision on November 29, 1990 dismissing the room with two (2) air conditioners running, to cool the place
complaint. The trial court found that the vessel, MT Maysun, instead of a refrigerator. As a consequence of the foregoing
was seaworthy and that the incident was caused by result of the veterinary biologics test, SMITHKLINE
unexpected inclement weather condition or force majeure, abandoned the shipment and, declaring 'total loss' for the
thus, exempting the common carrier from liability for the loss unusable shipment, filed a claim with AHAC through its
of its cargo. representative in the Philippines, the Philam Insurance Co.,
Inc. ('PHILAM') which recompensed SMITHKLINE for the
The decision of the trial court, however, was reversed, on whole insured amount of THIRTY NINE THOUSAND THREE
appeal, by the Court of Appeals. The appellate court ruled HUNDRED THIRTY NINE DOLLARS ($39,339.00).
that petitioner is liable on its obligation as common carrier to
herein private respondent insurance company as subrogee of ISSUE:
Caltex. The subsequent motion for reconsideration was Is FEDEX liable for damage to or loss of the insured goods
denied by the appellate court. Hence, petitioner filed the
instant petition before the Supreme Court. HELD:
Petition granted. Assailed decision reversed insofar as it
ISSUE: pertains to FEDEX. 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. Insurance Code: “The measure of an insurable interest in
The shipper or consignee must allege and prove the property is the extent to which the insured might be
fulfillment of the condition. If it fails to do so, no right of damnified by loss or injury thereof.” Therefore, CKS cannot
action against the carrier can accrue in favor of the be validly a beneficiary of the fire insurance policy taken by
former. The aforementioned requirement is a reasonable petitioner-spouses. The insurable interest remains with the
condition precedent; it does not constitute a limitation of Cha spouses.
action. The requirement of giving notice of loss of or injury to
the goods is not an empty formalism. The fundamental The stipulation in the lease contract is void for being contrary
reasons for such a stipulation are (1) to inform the carrier to law and public policy. This is in keeping with the provision
that the cargo has been damaged, and that it is being charged under Sec. 25 of the Insurance Code that: Every stipulation in
with liability therefor; and (2) to give it an opportunity to a policy of Insurance for the payment of loss, whether the
examine the nature and extent of the injury. “This protects person insured has or has not any interest in the property
the carrier by affording it an opportunity to make an insured or that the policy shall be received as proof of such
investigation of a claim while the matter is fresh and easily interest and every policy executed by way of gaming
investigated so as to safeguard itself from false and or wagering is void.”
fraudulent claims. As to Subrogation, upon receipt of the
insurance proceeds, the consignee (Smithkline) executed a 34. Great Pacific Life Insurance Corp v Court of Appeals
subrogation Receipt in favor of respondents. The latter were FACTS:
thus authorized “to file claims and begin suit against any such Great Pacific Life Assurance Corporation (Grepalife) executed
carrier, vessel, person, corporation or government.” a contract of group life insurance with Development Bank of
Undeniably, the consignee had a legal right to receive the the Philippines (DBP) wherein Grepalife agreed to insure the
goods in the same condition it was delivered for transport to lives of eligible housing loan mortgagors of DBP. One such
petitioner. If that right was violated, the consignee would loan mortgagor is Dr. Wilfredo Leuterio. In an application
have a cause of action against the person responsible form, Dr. Leuterio answered questions concerning his test,
therefor. attesting among others that he does not have any heart
conditions and that he is in good health to the best of his
33. Sps. Cha v Court of Appeals knowledge.
Facts: Petitioner spouses Nilo Cha and Stella Uy-Cha, as
lessees entered into a lease contract with private respondent However, after about a year, Dr. Leuterio died due to
CKS Development Corporation as lessor. A stipulation of “massive cerebral hemorrhage.” When DBP submitted a
the lease contract provides that the Lessee is not allowed death claim to Grepalife, the latter denied the claim, alleging
to insure against fire the chattels, merchandise, textiles, that Dr. Leuterio did not disclose he had been suffering from
goods and effects placed at any stall or store or space in the hypertension, which caused his death. Allegedly, such non-
leased premises without first obtaining the written consent disclosure constituted concealment that justified the denial
and approval of the Lessor. If the Lessee violates this the of the claim.
policy is deemed assigned and transferred to the Lessor for
his own benefit. Hence, the widow of the late Dr. Leuterio filed a complaint
against Grepalife for “Specific Performance with Damages.”
Petitioner took out a policy of fire insurance over the Both the trial court and the Court of Appeals found in favor
merchandise inside the leased premises with United of the widow and ordered Grepalife to pay DBP.
Insurance without consent of CKS. On the day the lease
contract was to expire a fire broke out inside the leased
premises. CKS, wrote a letter to United asking that the ISSUE: Whether the CA erred in holding Grepalife liable to
proceeds of the fire insurance be paid directly to CKS. United DBP as beneficiary in a group life insurance contract from a
refused. Hence, the latter filed a complaint against the Cha complaint filed by the widow of the decedent/mortgagor
spouses and United.
Issue: Whether or not CKS can recover from the insurance The rationale of a group of insurance policy of mortgagors,
policy. otherwise known as the “mortgage redemption insurance,” is
a device for the protection of both the mortgagee and
Held: No. Section 18 of the Insurance Code provides that: “No the mortgagor. On the part of the mortgagee, it has to enter
contract or policy of insurance on property shall be into such form of contract so that in the event of the
enforceable except for the benefit of some person having an unexpected demise of the mortgagor during the subsistence
insurable interest in the property insured.” of the mortgage contract, the proceeds from such insurance
will be applied to the payment of the mortgage debt, thereby
In the present case, it cannot be denied that CKS has no relieving the heirs of the mortgagor from paying the
insurable interest in the goods and merchandise inside the obligation. In a similar vein, ample protection is given to
leased premises under the provisions of Section 17 of the themortgagor under such a concept so that in the event of
death, the mortgage obligation will be extinguished by the or damage from its destruction, termination or injury by the
application of the insurance proceeds to the mortgage happening of the event insured against.
indebtedness. In this type of policy insurance, the mortgagee
is simply an appointee of the insurance fund. Such loss- Here Harvardian was not only in possession of the building
payable clause does not make the mortgagee a party to the but was in fact using the same for several years with the
contract. knowledge and consent of Ildefonso Yap. It is reasonably fair
to assume that had the building not been burned, Harvardian
The insured, being the person with whom the contract was would have been allowed the continued use of the same as
made, is primarily the proper person to bring suit thereon. the site of its operation as an educational
Subject to some exceptions, insured may thus sue, although institution. Harvardian therefore would have been directly
the policy is taken wholly or in part for the benefit of another benefited by the preservation of the property, and certainly
person, such as a mortgagee. suffered a pecuniary loss by its being burned.

And since a policy of insurance upon life or health may pass

by transfer, will or succession to any person, whether he has 36. Ang Ka Yu v Phoenix Assurance
an insurable interest or not, and such person may recover it
whatever the insured might have recovered, the widow of Facts:
the decedent Dr. Leuterio may file the suit against the > Ang Ka Yu had a piece of property in his possession. He
insurer, Grepalife. insured it with Phoenix.
> The property was lost, so Ang Ka Yu sought to claim the
35. HARVARDIAN COLLEGES V COUNTRY BANKERS > Phoenix denied liability on the ground that Ang was not the
owner but a mere possessor and as such, had no insurable
Facts: interest over the property.
> Harvardian is a family corporation, the stockholders of
which are Ildefonso Yap, Virginia King Yap and their children. Issue:
> Prior to Aug. 9, 1979, an agent of Country Bankers Whether or not a mere possessor has insurable interest over
proposed to Harvardian to insure its school the property.
building. Although at first reluctant, Harvardian agreed.
> Country Banks sent an inspector to inspect the school
building and agreed to insure the same for P500,000 for
Yes. A person having a mere right or possession of property
which Harvardian paid an annual premium of P2,500.
may insure it to its full value and in his own name, even when
> On Aug. 9, 1979, Country Bankers issued to Harvardian a
he is not responsible for its safekeeping. The reason is that
fire insurance policy. On March 12, 1980, (39 days before I
even if a person is NOT interested in the safety and
was born… hehehehe )during the effectivity of said insurance
preservation of material in his possession because they
policy, the insured property was totally burned rendering it a
belong to 3rd parties, said person still has insurable interest,
total loss.
because he stands either to benefit from their continued
> A claim was made by plaintiff upon defendant but
existence or to be prejudiced by their destruction.
defendant denied it contending that plaintiff had no insurable
interest over the building constructed on the piece of land in
the name of the late Ildefonso Yap as owner. 37. INSULAR LIFE V. FELICIANO - CONCEALMENT
> It was contended that both the lot and the building were Facts:
owned by Ildefonso Yap and NOT by the Harvardian Colleges. > Evaristo Feliciano filed an application with Insular Life upon
the solicitation of one of its agents.
Issue: > It appears that during that time, Evaristo was already
Whether or not Harvardian colleges has a right to the suffering from tuberculosis. Such fact appeared during the
proceeds. medical exam, but the examiner and the company’s agent
ignored it.
Held: > After that, Evaristo was made to sign an application form
Harvardian has a right to the proceeds. Regardless of the and thereafter the blank spaces were filled by the medical
nature of the title of the insured or even if he did not have examiner and the agent making it appear that Evaristo was a
title to the property insured, the contract of fire insurance fit subject of insurance. (Evaristo could not read and
should still be upheld if his interest in or his relation to the understand English)
property is such that he will be benefited in its continued > When Evaristo died, Insular life refused to pay the
existence or suffer a direct pecuniary loss from its destruction proceeds because of concealment.
or injury. The test in determining insurable interest in
property is whether one will derive pecuniary benefit or Issue:
advantage from its preservation, or will suffer pecuniary loss Whether or not Insular Life was bound by their agent’s acts.
actually read it or not. He could not ostrich-like hide his head
Held: from it in order to avoid his part of the bargain and at the
Yes. same time claim the benefit thereof. He knew, or was
The insurance business has grown so vast and lucrative within chargeable with knowledge, from the very terms of the two
the past century. Nowadays, even people of modest means policies sued upon (one of which is printed in English and the
enter into insurance contracts. Agents who solicit contracts other in Spanish) that the soliciting agent and the medical
are paid large commissions on the policies secured by examiner had no power to bind the Company by any verbal
them. They act as general representatives of insurance promise or oral representation. The insured, therefore, had
companies. no right to rely — and we cannot believe he relied in good
faith — upon the oral representation. The insured, therefore,
IN the case at bar, the true state of health of the insured was had no right to rely — and we cannot believe he relied in
concealed by the agents of the insurer. The insurer’s medical good faith — upon the oral representation of said agent and
examiner approved the application knowing fully well that medical examiner that he (the applicant) was a fit subject for
the applicant was sick. The situation is one in which of two insurance notwithstanding that he had been and was still
innocent parties must bear a loss for his reliance upon a third suffering with advanced pulmonary tuberculosis.
person. In this case, it is the one who drafted and accepted
the policy and consummated the contract. It seems From all the facts and circumstances of this case, we are
reasonable that as between the two of them, the one who constrained to conclude that the insured was a coparticipant,
employed and gave character to the third person as its agent and coresponsible with Agent David and Medical Examiner
should be the one to bear the loss. Hence, Insular is liable to Valdez, in the fraudulent procurement of the policies in
the beneficiaries. question and that by reason thereof said policies are void ab

Moreover, from the facts of the case we cannot escape the 39. Sunlife v CA G.R. No. 105135 June 22, 1995
conclusion that the insured acted in connivance with the
soliciting agent and the medical examiner of the Company in Facts:
accepting the policies in question. Above the signature of the Robert John B. Bacani procured a life insurance contract for
applicant is the printed statement or representation: " . . . I himself from Sunlife. He was issued a policy for P100,000.00,
am a proper subject for life insurance." In another sheet of with double indemnity in case of accidental death. The
the same application and above another signature of the designatedbeneficiary was his mother, Bernarda Bacani.
applicant was also printed this statement: "That the said The insured died in a plane crash. Respondent Bernarda
policy shall not take effect until he first premium has been Bacani filed a claim with petitioner, seeking the benefits
paid and the policy as been delivered to and accepted by me, of the insurance policy taken by her son. Petitioner
while I am in good health." When the applicant signed the conducted an investigation and its findings prompted it to
application he was "having difficulty in breathing, . . . with a reject the claim.
very high fever." He had gone three times to the Santol Sunlife informed Bacani that the insured did not disclose
Sanatorium and had X-ray pictures taken of his lungs. He material facts relevant to the issuance of the policy, thus
therefore knew that he was not "a proper subject for life rendering the contract of insurance voidable. A check
insurance." When he accepted the policy, he knew that he representing the total premiums paid in the amount of
was not in good health. Nevertheless, he not only accepted P10,172.00 was attached to said letter.
the first policy of P20,000 but then and there applied for and Petitioner claimed that the insured gave false statements in
later accepted another policy of P5,000. his application. The deceased answered claimed that he
consulted a Dr. Raymundo of the Chinese General Hospital
We cannot bring ourselves to believe that the insured did not for cough and flu complications. The other questions were
take the trouble to read the answers contained in the answered in the negative.
photostatic copy of the application attached to and made a Petitioner discovered that two weeks prior to his application
part of the policy before he accepted it and paid the premium for insurance, the insured was examined and confined at the
thereon. He must have notice that the answers to the Lung Center of the Philippines, where he was diagnosed for
questions therein asked concerning his clinical history were renal failure. During his confinement, the deceased was
false, and yet he accepted the first policy and applied for subjected to urinalysis tests.
another. In any event, he obligated himself to read the policy Bernarda Bacani and her husband filed an action for specific
when he subscribed to this statement: "My acceptance of any performance against petitioner with the RTC. The court ruled
policy issued on this application will constitute a ratification in favor of the spouses and ordered Sunlife to pay
by me of any corrections in or additions to this application P100,000.00.
made by the Company . . ." By accepting the policy he In ruling for private respondents, the trial court concluded
became charged with knowledge of its contents, whether he that the facts concealed by the insured were made in good
faith and under a belief that they need not be disclosed. The consideration in deciding whether to issue the policy or not . .
court also held that the medial history was irrelevant because ."
it wasn’t medical insurance. Anent the finding that the facts concealed had no bearing to
The Court of Appeals affirmed the decision of the trial court. the cause of death of the insured, it is well settled that the
The appellate court ruled that petitioner cannot avoid its insured need not die of the disease he had failed to disclose
obligation by claiming concealment because the cause of to the insurer. It is sufficient that his non-disclosure misled
death was unrelated to the facts concealed by the insured. the insurer in forming his estimates of the risks of the
Petitioner's motion for reconsideration was denied. Hence, proposed insurance policy or in making inquiries as held in
this petition. Henson.

Issue: WON the insured was guilty

of misrepresentation which made the contract void. 40. Vda Canilang v CA G.R. No. 92492 June 17, 1993
J. Feliciano
Held: Yes. Petition dismissed.
Ratio: Canilang was found to have suffered from
Section 26 of The Insurance Code required a party to a sinus tachycardia then bronchitis after a check-up from his
contract of insurance to communicate to the other, in good doctor. The next day, he applied for a "non-medical"
faith, all facts within his knowledge which are material to the insurance policy with respondent Grepalife naming his wife,
contract and as to which he makes no warranty, and which Thelma Canilang, as his beneficiary. This was to the value of
the other has no means of ascertaining. P19,700.
“A neglect to communicate that which a party knows and He died of "congestive heart failure," "anemia," and "chronic
ought to communicate, is called concealment.” anemia." The widow filed a claim with Great Pacific which
“Materiality is to be determined not by the event, but solely the insurer denied on the ground that the insured had
by the probable and reasonable influence of the facts upon concealed material information from it.
the party to whom communication is due, in forming his Petitioner then filed a complaint against Great Pacific for
estimate of the disadvantages of the proposed contract or in recovery of the insurance proceeds. Petitioner testified that
making his inquiries.” she was not aware of any serious illness suffered by her late
The terms of the contract are clear. The insured is specifically husband and her husband had died because of a kidney
required to disclose to the insurer matters relating to his disorder. The doctor who gave the check up stated that he
health. treated the deceased for “sinus tachycardia” and
The information which the insured failed to disclose were "acute bronchitis."
material and relevant to the approval and issuance of the Great Pacific presented a physician who testified that the
insurance policy. The matters concealed would have deceased's insurance application had been approved on the
definitely affected petitioner's action on his application, basis of his medical declaration. She explained that as a rule,
either by approving it with the corresponding adjustment for medical examinations are required only in cases where the
a higher premium or rejecting the same. Moreover, a applicant has indicated in his application for insurance
disclosure may have warranted a medicalexamination of coverage that he has previously undergone medical
the insured by petitioner in order for it to reasonably assess consultation and hospitalization.
the risk involved in accepting the application. The Insurance Commissioner ordered Great Pacific to pay
Vda. de Canilang v. Court of Appeals- materiality of the P19,700 plus legal interest and P2,000.00 as attorney's fees.
information withheld does not depend on the state of mind On appeal by Great Pacific, the Court of Appeals reversed. It
of the insured. Neither does it depend on the actual or found that the failure of Jaime Canilang to disclose previous
physical events which ensue. medical consultation and treatment constituted material
“Good faith" is no defense in concealment. The insured's information which should have been communicated to Great
failure to disclose the fact that he was hospitalized raises Pacific to enable the latter to make proper inquiries.
grave doubts about his eligibility. Such concealment was Hence this petition by the widow.
deliberate on his part.
The argument, that petitioner's waiver of the Issue: Won Canilang was guilty of misrepresentation
medical examination of the insured debunks the materiality
of the facts concealed, is untenable. Held: Yes. Petition denied.
Saturnino v. Philippine American Life Insurance " . . . the
waiver of a medical examination [in a non-medical insurance Ratio:
contract] renders even more material the information There was a right of the insurance company to rescind the
required of the applicant concerning previous condition of contract if it was proven that the insured committed fraud in
health and diseases suffered, for such information necessarily not affirming that he was treated for heart condition and
constitutes an important factor which the insurer takes into other ailmentsstipulated.
Apart from certifying that he didn’t suffer from such a 41. PHILAMCARE HEALTH SYSTEMS, INC., vs.COURT OF
condition, Canilang also failed to disclose in the that he had APPEALS and JULITA TRINOS
twice consulted a doctor who had found him to be suffering
from "sinustachycardia" and "acute bronchitis." Facts:
Under the Insurance Code: Ernani Trinos, deceased husband of JulitaTrinos, applied for a
Sec. 26. A neglect to communicate that which a party knows health care coverage withPhilamcare Health Systems, Inc. In
and ought to communicate, is called a concealment. thestandard application form, he answered “NO” to the
Sec. 28. Each party to a contract of insurance must following question:
communicate to the other, in good faith, all factors within his Have you or any of your family members ever consulted or
knowledge which are material to the contract and as to which been treated for high blood pressure, heart trouble,
he makes no warranty, and which the other has not the diabetes,cancer, liver disease, asthma or peptic ulcer? (If Yes,
means of ascertaining. give details).
The information concealed must be information which the
concealing party knew and should have communicated. The Coverage of the health care agreement (HCA):
test of materiality of such information is contained in Section •approved for a period of one year, Renewed 3 times yearly:
31: March 1, 1988 - March 1, 1990; March 1, 1990 – June 1,
Sec. 31. Materiality is to be determined not by the event, but 1990.The amount of coverage was increased to a maximum
solely by the probable and reasonable influence of the facts sum of P75,000.00 per disability.
upon the party to whom the communication is due, in
forming his estimate of the disadvantages of the proposed Ernani’s entitlement under HCA:
contract, or in making his inquiries. •hospitalization benefits, whether ordinary or emergency,
The information which Jaime Canilang failed to disclose was listed therein
material to the ability of Great Pacific to estimate the •out-patient benefits" such as annual physical examinations,
probable risk he presented as a subject of life insurance. Had preventive health care and other out-patient services
he disclosed his visits to his doctor, the diagnosis made and
medicines prescribed by such doctor, in the insurance .Ernani was subsequently confined. HISTORY (everything
application, it may be reasonably assumed that Great Pacific happened within the period of coverage):
would have made further inquiries and would have probably 1.Ernani suffered a heart attack and was confined at the
refused to issue a non-medical insurance policy. Manila Medical Center (MMC) for one month beginning
Materiality relates rather to the "probable and reasonable March 9, 1990.
influence of the facts" upon the party to whom the 2.Julita tried to claim the benefits under the health care
communication should have been made, in assessing the risk agreement.
involved in making or omitting to make further inquiries and 3.Philamdenied her claim saying that the Health Care
in accepting the application for insurance; that "probable and Agreement was void. there was a concealment regarding
reasonable influence of the facts" concealed must, of course, Ernani’s medicalhistory. Doctors at the MMC allegedly
be determined objectively, by the judge ultimately. discovered at the time of Ernani’s confinement that he was
The Insurance Commissioner had also ruled that the failure of hypertensive, diabetic andasthmatic, contrary to his answer
Great Pacific to convey certain information to the insurer was in the application form.
not "intentional" in nature, for the reason that Canilang 4.Julita paid the hospitalization expenses herself, amounting
believed that he was suffering from minor ailment like a to about P76,000.00
common cold. Section 27 stated that: 5.Ernani was discharged at MMC
Sec. 27. A concealment whether intentional or unintentional 6.He was attended by a physical therapist at home.
entitles the injured party to rescind a contract of insurance. 7.Again he was admitted at the Chinese General Hospital.
The failure to communicate must have been intentional 8.Julita brought her husband home again due to financial
rather than inadvertent. Canilang could not have been difficulties.
unaware that his heart beat would at times rise to high and 9.In the morning of April 13, 1990, Ernani had fever and was
alarming levels and that he had consulted a doctor twice in feeling very weak.
the two (2) months before applying for non-medical 10.Julita was constrained to bring him back to the Chinese
insurance. Indeed, the last medical consultation took place General Hospital where he died on the same day.
just the day before the insurance application was filed. In all
probability, Jaime Canilang went to visit his doctor precisely On July 24, 1990, respondent instituted with the Regional
because of the ailment. Trial Court of Manila, Branch 44, an action for damages
Canilang's failure to set out answers to some of the questions against Philam andits president, Dr. Benito Reverente, She
in the insurance application constituted concealment. asked for reimbursement of her expenses plus moral
damages and attorney’s fees. After trial,the lower court ruled
against Philam, ordered:
1. Defendants to pay and reimburse the medical and hospital
coverage of the late ErnaniTrinos in the amount of
P76,000.00 plusinterest, until the amount is fully paid to insurance policy A-0615 was issued to Enrique Mora,
plaintiff who paid the same; the pertinent provisions of which read:
2. Defendants to pay the reduced amount of moral damages
of P10,000.00 to plaintiff; 1. The Company (referring to the State Bonding &
3. Defendants to pay the reduced amount ofP10,000.00 as Insurance Co., Inc.) will, subject to the Limits of
exemplary damages to plaintiff; Liability, indemnify the Insured against loss of or
4. Defendants to pay attorney’s fees of P20,000.00, plus costs damages to the Motor Vehicle and its
of suit. accessories and spare parts whilst thereon; (a)
by accidental collision or overturning or collision
CA: affirmed the decision of the trial court but deleted all or overturning consequent upon mechanical
awards for damages and absolved petitioner breakdown or consequent upon wear and tear,
Reverente.Denied MR 2. At its own option the Company may pay in cash
the amount of the loss or damage or may repair,
HELD: reinstate, or replace the Motor Vehicle or any
part thereof or its accessories or spare parts.
Petitioner cannot rely on the stipulation regarding The liability of the Company shall not exceed the
“Invalidation of agreement” which reads: value of the parts whichever is the less. The
Failure to disclose or misrepresentation of any material Insured's estimate of value stated in the
information by the member in the application or medical schedule will be the maximum amount payable
examination, whether intentional or unintentional, shall by the Company in respect of any claim for loss
automatically invalidate the Agreement from the very or damage.
beginning and liability of Philamcare shall be limited to return 4. The Insured may authorize the repair of the
of all Membership Fees paid. An undisclosed or Motor Vehicle necessitated by damage for
misrepresented information is deemed material if its which the Company may be liable under this
revelation would have resulted in the declination of the Policy provided that: — (a) The estimated cost
applicant by Philamcare or the assessment of a higher of such repair does not exceed the Authorized
Membership Fee for the benefit or benefits applied for.[13] Repair Limit, (b) A detailed estimate of the cost
is forwarded to the Company without delay,
Where matters of opinion or judgment are called for, answers subject to the condition that "Loss, if any is
made in good faith and without intent to deceive will not payable to H.S. Reyes, Inc.," by virtue of the fact
avoid a policy even though they are untrue.[14] Thus, that said Oldsmobile sedan was mortgaged in
although false, a representation of the expectation, intention, favor of the said H.S. Reyes, Inc. and that under
belief, opinion, or judgment of the insured will not avoid the a clause in said insurance policy, any loss was
policy if there is no actual fraud in inducing the acceptance of made payable to the H.S. Reyes, Inc. as
the risk, or its acceptance at a lower rate of premium, and Mortgagee;
this is likewise the rule although the statement is material to
the risk, if the statement is obviously of the foregoing  During the effectivity of the insurance contract, the
character, since in such case the insurer is not justified in car met with an accident. The insurance company
relying upon such statement, but is obligated to make further then assigned the accident to the Bayne Adjustment
inquiry. Co. for investigation and appraisal of the damage.
 Enrique Mora, without the knowledge and consent
The fraudulent intent on the part of the insured must be of the H.S. Reyes, Inc., authorized the Bonifacio
established to warrant rescission of the insurance Bros. Inc. to furnish the labor and materials, some of
contract.[16] Concealment as a defense for the health care which were supplied by the Ayala Auto Parts Co.
provider or insurer to avoid liability is an affirmative defense  For the cost of labor and materials, Enrique Mora
and the duty to establish such defense by satisfactory and was billed at P2,102.73 through the H.H. Bayne
convincing evidence rests upon the provider or insurer. Adjustment Co.
 The insurance company after claiming a franchise in
42. BONIFACIO BROS., INC. vs MORA the amount of P100, drew a check in the amount of
G.R. No. L-20853, May 29, 1967 P2,002.73, as proceeds of the insurance policy,
payable to the order of Enrique Mora or H.S.
FACTS: Reyes,. Inc., and entrusted the check to the H.H.
 Enrique Mora is the owner of Oldsmobile sedan Bayne Adjustment Co. for disposition and delivery to
model 1956 mortgaged to H.S. Reyes, Inc., with the the proper party.
condition that the former would insure the  In the meantime, the car was delivered to Enrique
automobile with the latter as beneficiary. The car Mora without the consent of the H.S. Reyes, Inc.,
was insured on June 23, 1959 with the State and without payment to the Bonifacio Bros. Inc.
Bonding & Insurance Co., Inc., and motor car
and the Ayala Auto Parts Co. of the cost of repairs insurance contract does not contain any words or clauses to
and materials. disclose an intent to give any benefit to any repairmen or
 Upon the theory that the insurance proceeds should materialmen in case of repair of the car in question.
be paid directly to them, the Bonifacio Bros. Inc. and o On the other hand, the "loss payable" clause of the
the Ayala Auto Parts Co. filed on May 8, 1961 a insurance policy stipulates that "Loss, if any, is
complaint with the Municipal Court of Manila payable to H.S. Reyes, Inc." indicating that it was
against Enrique Mora and the State Bonding & only the H.S. Reyes, Inc. which they intended to
Insurance Co., Inc. for the collection of the sum of benefit.
P2,002.73  Section 50 of the Insurance Act:
 However, the counsel for the Bonifacio Bros. Inc., The insurance shall be applied
Ayala Auto Parts Co. and State Bonding & Insurance exclusively to the proper interests
Co. Inc. submitted a stipulation of facts, on the basis of the person in whose name it is
of which are Municipal Court rendered a decision made unless otherwise specified in
declaring the H.S. Reyes, Inc. as having a better the policy.
right to the disputed amount and ordering State
Bonding & Insurance Co. Inc. to pay to the H. S. o As regards paragraph 4 of the insurance contract, a
Reyes, Inc. the said sum of P2,002.73. perusal thereof would show that such stipulation
ISSUES: merely establishes the procedure that the insured
o Who had the better right to the insurance proceeds? has to follow in order to be entitled to indemnity
(Bonifacio Bros and Ayala Auto Parts or H.S. Reyes, for repair. This paragraph therefore should not be
Inc. – the mortgagee?) construed as bringing into existence in favor of the
o Whether there is privity of contract between the appellants a right of action
Bonifacio Bros. Inc. and the Ayala Auto Parts Co. on
the one hand and the insurance company on the o "A policy of insurance is a distinct and independent
other. contract between the insured and insurer, and third
persons have no right either in a court of equity, or
RULING: in a court of law, to the proceeds of it, unless there
o The appellants seek to recover the insurance be some contract of trust, expressed or implied
proceeds, and for this purpose, they rely upon between the insured and third person." The
paragraph 4 of the insurance contract document appellants' claim, if at all, is merely equitable in
executed by and between the State Bonding & nature and must be made effective through Enrique
Insurance Company, Inc. and Enrique Mora. The Mora who entered into a contract with the Bonifacio
appellants are not mentioned in the contract as Bros. Inc.
parties thereto nor is there any clause or provision
thereof from which we can infer that there is an o Obiter: The final contention of the appellants is that
obligation on the part of the insurance company to the right of the H.S. Reyes, Inc. to the insurance
pay the cost of repairs directly to them. It is proceeds arises only if there was loss and not where
fundamental that contracts take effect only between there is mere damage as in the instant case. Suffice
the parties thereto, except in some specific instances it to say that any attempt to draw a distinction
provided by law where the contract contains some between "loss" and "damage" is uncalled for,
stipulation in favor of a third person. Such because the word "loss" in insurance law embraces
stipulation is known as stipulation pour autrui or a injury or damage.
provision in favor of a third person not a party to the
contract.  Loss in insurance, defined. — The
 Under this doctrine, a third person injury or damage sustained by the
is allowed to avail himself of a insured in consequence of the
benefit granted to him by the happening of one or more of the
terms of the contract, provided accidents or misfortune against
that the contracting parties have which the insurer, in consideration
clearly and deliberately conferred of the premium, has undertaken to
a favor upon such person indemnify the insured.
 stipulation pour autrui must be
clearly expressed by the parties
In this connection, this Court has laid down the rule that the 43. FIRST INTEGRATED BONDING & INSURANCE COMPANY,
fairest test to determine whether the interest of a third INC., vs HERNANDO
person in a contract is a stipulation pour autrui or merely an G.R. No. L-51221 July 31, 1991
incidental interest, is to rely upon the intention of the
parties as disclosed by their contract. In the instant case the FACTS:
 Silverio Blanco was the owner of a passenger dependents are assured of immediate financial
jeepney which he insured against liabilities for assistance, the insurer's liability accrues immediately
death and injuries to third persons with First upon the occurrence of the injury or event upon
Integrated Bonding and Insurance Company, Inc. which the liability depends, and does not depend on
(First Insurance) under Motor Vehicle Policy No. V- the recovery of judgment by the injured party
0563751 with the face value of P30,000.00 against the insured. Its liability is primary and not
 On November 25, 1976, the said jeepney driven by dependent on the recovery of judgment from the
Blanco himself bumped a five-year old child, insured.
Deogracias Advincula, causing the latter's death. o As to the negligence of Blanco, no objections were
 A complaint for damages was brought by the child's raised by him; decision became final and may no
parents, against Silverio Blanco. First Insurance was longer be attacked. As to First Integrated, it was
also impleaded in the complaint as the insurer. declared in default for its failure to file an Answer
 RTC decision: for moral damages, this court and failure to raise triable issues.
adjudicates to the plaintiffs P5,000.00; for the life of o It appears that the award of damages in favor of
Deogracias Advincula P12,000.00, for funeral Blanco has no basis. The complaint in Civil case 1104
expenses, P3,663.50 and for attomey's fees, was for damages brought by the spouses against
P3,000.00 or in the total amount of P23,663.50 nd Blanco and First Insurance. Blanco did not put up any
the balance of P6,336.50 shall also be paid by said claim against the latter. However, since the said
defendant Insurance Company to the defendant decision had already become final and executory, it
Silverio Blanco. The grand total under the insurance can no longer be corrected or amended. In the
policy, Exhibit H, is P30,000.00. same vein, the claim of petitioner that its liability to
third parties under the insurance policy is limited to
ISSUE: P20,000.00 only can no longer be given
o Whether the parents of the child (the Advincula consideration at this late stage, when the decision of
spouses) can claim from or proceed directly against the trial court awarding damages had already
First Integrated even if they are not parties to the become final and executory.
insurance contract

o It is settled that where the insurance contract 44. SHERMAN SHAFER vs. HON. JUDGE, RTC OF OLONGAPO
provides for indemnity against liability to a third CITY
party, such third party can directly sue the insurer G.R. No. 78848, November 14, 1988
(Caguia v. Fieldman's Insurance)
o The liability of the insurer to such third person is  Sherman Shafer obtained a private car policy, GA
based on contract while the liability of the insured to No. 0889, over his Ford Laser car from Makati
the third party is based on tort Insurance Company, Inc., for third party liability
o The injured for whom the contract of insurance is (TPL). During the effectivity of the policy, an
intended can sue directly the insurer, this so to information for reckless imprudence resulting in
protect the injured persons against the insolvency damage to property and serious physical injuries
of the insured who causes such injury, and to give was filed against petitioner.
such injured person a certain beneficial interest in  hit and bump a Volkswagen car
the proceeds of the policy. “Such a provision creates owned and driven by Felino llano y
a contractual relation which inures to the benefit of Legaspi, thereby causing damage in
any and every person who may be negligently injured the total amount of P12,345.00
by the named insured as if such injured person were Pesos and as a result thereof one
specifically named in the policy.” Jovencio Poblete, Sr. who was on
o Not even a "no action" clause under the policy which board of the said Volkswagen car
requires that a final judgment be first obtained sustained physical injuries
against the insured and that only thereafter can the  The owner of the damaged Volkswagen car filed a
person insured recover on the policy can prevail over separate civil action against petitioner for damages,
the Rules of Court provisions aimed at avoiding while Jovencio Poblete, Sr. did not reserve his right
multiplicity of suits. to file a separate civil action for damages. Instead, in
o Compulsory Motor Vehicle Liability Insurance (third the course of the trial in the criminal case, Poblete,
party liability, or TPL) is primarily intended to Sr. testified on his claim for damages for the serious
provide compensation for the death or bodily physical injuries
injuries suffered by innocent third parties or  Petitioner was granted leave by the trail court to file
passengers as a result of a negligent operation and a third party complaint against the herein private
use of motor vehicles. The victims and/or their respondent, Makati Insurance Company
 The court a quo issued an order dismissing the third REGARDLESS of whether the insured died before or after Jan.
party complaint on the ground that it was 1, 2003.
premature, based on the premise that unless the
accused (insured) is found guilty and sentenced to FACTS:
pay the offended party (Poblete Sr.) indemnity or  In September 1973, Tan Lee Siong (Father of the
damages, the third party complaint is without petitioners) applied for a life insurance under
cause of action; to wait for the outcome of the Philippine American Life Insurance Company in the
criminal aspect of the case amount of P80,000.00 with petitioners the
ISSUE:  He stated in the application form that he has no
o Whether or not Sherman can file a 3rd party health issues whatsoever. On April 26,1975, Tan Lee
complaint against the insurer and whether the Siong died of hepatoma.
insurer is liable to pay the proceeds to the injured  His sons filed an insurance claim but PHILAMLIFE
third party denied the same as it alleged that Tan Lee Siong
concealed the fact that he was hypertensive,
RULING: diabetic, and was suffering from hepatoma at the
o Compulsory Motor Vehicle Liability Insurance (third time of his application for the insurance.
party liability, or TPL) is primarily intended to  PHILAMLIFE rescinded the policy by reason of the
provide compensation for the death or bodily alleged misrepresentation and concealment of
injuries suffered by innocent third parties or material facts made by the deceased Tan Lee Siong
passengers as a result of a negligent operation and in his application for insurance. The premiums paid
use of motor vehicles. on the policy were thereupon refunded.
o The liability of the insurance company under the  The beneficiaries averred that PHILAMLIFE can no
Compulsory Motor Vehicle Liability Insurance is for longer rescind the insurance contract because the
loss or damage. Where an insurance policy insures insured is already dead. They invoke Section 48 of
directly against liability, the insurer's liability the Insurance Code which they interpreted to mean
accrues immediately upon the occurrence of the that an insurer can only rescind an insurance
injury or event upon which the liability depends, and contract during the lifetime of the insured; and that
does not depend on the recovery of judgment by the such rescission should be done within two years
injured party against the insured. prior to the filing of a suit involving the insurance.
o The injured for whom the contract of insurance is ISSUE:
intended can sue directly the insurer. In order to o Whether or not the interpretation of the Tan
protect injured persons against the insolvency of the brothers is correct.
insured who causes such injury, and to give such
injured person a certain beneficial interest in the RULING:
proceeds of the policy. It has even been held that o No. The pertinent section in the Insurance Code
such a provision creates a contractual relation provides:
which inures to the benefit of any and every person  Section 48. Whenever a right to rescind
who may be negligently injured by the named a contract of insurance is given to the
insured as if such injured person were specifically insurer by any provision of this chapter,
named in the policy. such right must be exercised previous to
o There is no need on the part of the insured to wait the commencement of an action on the
for the decision of the trial court finding him guilty contract.
of reckless imprudence. The occurrence of the
injury to the third party immediately gave rise to After a policy of life insurance made payable on the death of
the liability of the insurer under its policy. the insured shall have been in force during the lifetime of the
insured for a period of two years from the date of its issue or
of its last reinstatement, the insurer cannot prove that the
G. INCONTESTABLE CLAUSE policy is void ab initio or is rescindable by reason of the
fraudulent concealment or misrepresentation of the insured
45. TAN vs CA, 174 SCRA 403 or his agent.
G.R. No. 48049, June 29, 1989 o The so-called “incontestability clause” precludes
the insurer from raising the defenses of false
The period to consider in a life insurance poiicy is “two years” representations or concealment of material facts
from the date of issue or of the last reinstatement. So if for insofar as health and previous diseases are
example the policy was issued/reinstated on Jan 1, 2000, the concerned if the insurance has been in force for at
insurer can still exercise his right to rescind up to Jan. 1, 2003 least two years during the insured’s lifetime.
or two years from the date of issue/reinstatement, According to petitioners, the phrase “during the
lifetime” found in Section 48 simply means that the
policy is no longer considered in force after the 46. Development Insurance Corp v IAC
insured has died. The key phrase in the second
paragraph of Section 48 is “for a period of two Facts:
years.” A fire occurred in the building of Philippine Union. It
o The policy was thus in force for a period of only one
sued for recovery of damages from the petitioner on
year and five months. Considering that the insured
died before the two-year period had lapsed,
the basis of an insurance contract between them. The
respondent company is not, therefore, barred from petitioner failed to answer on time despite the
proving that the policy is void ab initio by reason of numerous extensions it asked for. It was declared in
the insured's fraudulent concealment or default by the trial court. A judgment of default was
misrepresentation. subsequently rendered on the strength of the evidence
o Moreover, respondent company rescinded the given by the private respondent, which was allowed
contract of insurance and refunded the premiums damages. The petitioner moved to lift the order of
paid on September 11, 1975, previous to the default. Its motion was denied. It went to the appellate
commencement of this action on November court, which affirmed the decision of the trial court.
Hence this appeal.
o The insurer has two years from the date of issuance
of the insurance contract or of its last
reinstatement within which to contest the policy, Issue: Was Philippine Union required to jointly
whether or not, the insured still lives within such indemnify the building?
period. After two years, the defenses of
concealment or misrepresentation, no matter how Held: No. Petition dismissed. The policy insured the
patent or well founded, no longer lie. private respondent's building against fire for
o Petitioners argue that no evidence was presented by P2,500,000.00. The petitioner argued that the
respondent company to show that the questions respondent must share the difference between that
appearing in Part II of the application for insurance amount and the face value of the policy and the loss
were asked, explained to and understood by the
sustained for 5.8 million under Condition 17 of the
deceased: SC - The deceased, by affixing his
signature on the application form, affirmed the
policy. The building was insured at P2,500,000.00 by
correctness of all the entries and answers appearing agreement of the insurer and the insured. The
therein. It is but to be expected that he, a agreement is known as an open policy and is subject to
businessman, would not have affixed his signature the express condition that: “In the event of loss,
on the application form unless he clearly understood whether total or partial, it is understood that the
its significance. For, the presumption is that a person amount of the loss shall be subject to appraisal and the
intends the ordinary consequence of his voluntary liability of the company, if established, shall be limited
act and takes ordinary care of his concerns. to the actual loss, subject to the applicable terms,
o Concealment - September 19,1972, the deceased conditions, warranties and clauses of this Policy, and in
was examined by Dr. Victoriano Lim and was found
no case shall exceed the amount of the policy.” Section
to be diabetic and hypertensive; January, 1973, the
deceased was complaining of progressive weight loss
60 of the Insurance Code defines an open policy is one
and abdominal pain and was diagnosed to be in which the value of the thing insured is not agreed
suffering from hepatoma upon but is left to be ascertained in case of loss." This
o Because of the concealment made by the deceased means that the actual loss, as determined, will
of his consultations and treatments for represent the total indemnity due the insured from the
hypertension, diabetes and liver disorders, insurer except only that the total indemnity shall not
respondent company was thus misled into accepting exceed the face value of the policy. The actual loss has
the risk and approving his application as medically been ascertained in this case. Hence, applying the open
standard policy clause as expressly agreed upon, the private
o Obiter: There is no strong showing that we should
respondent is entitled to indemnity in the total amount
apply the "fine print" or "contract of adhesion" rule
in this case - no showing that the questions in the
of P508,867.00. The refusal of its vice-president to
application form for insurance regarding the receive the private respondent's complaint was the first
insured's medical history are in smaller print than indication of the petitioner's intention to prolong this
the rest of the printed form or that they are case and postpone the discharge of its obligation to the
designed in such a way as to conceal from the private respondent under this agreement. They still
applicant their importance. evaded payment for 5 years.
should be noted at the outset that suicide and willful
47. Sun Insurance Office Ltd v CA exposure to needless peril are in pari materia because
they both signify a disregard for one's life. The only
Facts: difference is in degree, as suicide imports a positive act
Sun Insurance Office Ltd. issued Personal Accident of ending such life whereas the second act indicates a
Policy 05687 to Felix Lim, Jr. with a face value reckless risking of it that is almost suicidal in intent. The
ofP200,000.00. Two months later, he was dead with a posture -- that by the mere act of pointing the gun to
bullet wound in his head. As beneficiary, his wife his temple, Lim had willfully exposed himself to
Nerissa Lim sought payment on the policy but her claim needless peril and so came under the exception -- is
was rejected. Sun Insurance agreed that there was no arguable. But what is not is that Lim had removed the
suicide. It argued, however, that there was no accident magazine from the gun and believed it was no longer
either. Pilar Nalagon, Lim's secretary, was the only dangerous. He expressed assured her that the gun was
eyewitness to his death. It happened on 6 October not loaded. It is submitted that Lim did not willfully
1982, at about 10 p.m., after his mother's birthday expose himself to needless peril when he pointed the
party. According to Nalagon, Lim was in a happy mood gun to his temple because the fact is that he thought it
(but not drunk) and was playing with his handgun, from was not unsafe to do so. The act was precisely intended
which he had previously removed the magazine. As she to assure Nalagon that the gun was indeed harmless.
watched the television, he stood in front of her and Lim was unquestionably negligent and that negligence
pointed the gun at her. She pushed it aside and said it cost him his own life. But it should not prevent his
might be loaded. He assured her it was not and then widow from recovering from the insurance policy he
pointed it to his temple. The next moment there was an obtained precisely against accident. There is nothing in
explosion and Lim slumped to the floor. He was dead the policy that relieves the insurer of the responsibility
before he fell. The widow sued Sun Insurance in the to pay the indemnity agreed upon if the insured is
Regional Trial Court of Zamboanga City and was shown to have contributed to his own accident. Indeed,
sustained. Sun Insurance was sentenced to pay most accidents are caused by negligence. There are only
her P200,000.00, representing the face value of four exceptions expressly made in the contract to
the policy, with interest at the legal rate; P10,000.00 relieve the insurer from liability, and none of these
as moral damages; P5,000.00 as exemplary damages; exceptions is applicable in the present case. It bears
P50,000.00 as actual and compensatory damages; and noting that insurance contracts are as a rule supposed
P5,000.00 as attorney's fees, plus the cost of the suit. to be interpreted liberally in favor of the assured. There
This decision was affirmed on appeal, and the motion is no reason to deviate from this rule, especially in view
for reconsideration was denied. Sun Insurance then of the circumstances of the case.
came to the Supreme Court.

Issue: 48. Vda. de Gabriel v CA

Whether the insured willfully exposed himself to
needless peril and thus removed himself from the Facts:
coverage of the insurance policy. Marcelino Gabriel, the insured, was employed by
Emerald Construction & Development
Held: Corporation(ECDC) at its construction project in Iraq. He
NO. An accident is an event which happens without any was covered by a personal accident insurance in the
human agency or, if happening through human agency, amount ofP100,000.00 under a group policy procured
an event which, under the circumstances, is unusual to from Fortune Insurance & Surety Company Inc. by ECDC
and not expected by the person to whom it happens. It for itso verseas workers. The insured risk was for
has also been defined as an injury which happens by "bodily injury caused by violent accidental external and
reason of some violence or casualty to the insured visible means which injury would solely and
without his design, consent, or voluntary co-operation. independently of any other cause" result in death or
Herein, the incident that resulted in Lim'sdeath was disability. On 22May 1982, within the life of the policy,
indeed an accident. On the other hand, the parties Gabriel died in Iraq. A year later, or on 12 July 1983,
agree that Lim did not commit suicide. Nevertheless, ECDC reported Gabriel's death to Fortune by telephone.
Sun Insurance contends that the insured willfully Among the documents thereafter submitted to Fortune
exposed himself to needless peril and thus removed were a copy of the death certificate 5 issued by
himself from the coverage of the insurance policy. It the Ministry of Health of the Republic of Iraq — which
stated "REASON OFDEATH: UNDER EXAMINATION NOW cancelled the policy for non-payment, of the premium
— NOT YET KNOWN " and an autopsy report of the and sent the corresponding notice to Pinca. On
National Bureau of Investigation (NBI) to the effect that December 24, 1981, payment of the premium for Pinca
"due to advanced state of post mortem decomposition, was received by Domingo Adora, agent of MICO. On
cause of death could not be determined." In addition, January 15, 1982, Adora remitted this payment to
Fortune raised the defense of "prescription," invoking MICO, together with other payments. On January 18,
Section 384 10 of the Insurance Code. 1982, Pinca's property was completely burned. On
February 5, 1982, Pinca's payment was returned by
Issue: MICO to Adora on the ground that her policy had been
Whether prescription was properly invoked by cancelled earlier. But Adora refused to accept it. Pinca
Fortune in this case. made demands for payment but MICO rejected it in the
ground of non-payment of premium.
YES. On the issue of "prescription," Fortune correctly Issue:
invoked Section 384 of the Insurance Code which WON the insurance policy is not valid due to non-
provides that "Any person having any claim upon the payment of premium
policy issued pursuant to this chapter shall, without any
unnecessary delay, present to the insurance company Held:
concerned a written notice of claim setting forth the The Court held that the insurance policy is valid because
nature, extent and duration of the injuries sustained as payment of the premium was in fact eventually made.
certified by a duly licensed physician. Notice of claim The premium invoice issued to Pinca at the time of the
must be filed within six months from date of the delivery of the policy on June 7, 1981 was stamped
accident, otherwise, the claim shall be deemed waived. "Payment Received" of the amount of P930.60 on "12-
Action or suit for recovery of damage due to loss or 24-81" by Domingo Adora. This is important because it
injury must be brought, in proper cases, with the suggests an understanding between MICO and the
Commissioner or the Courts within one year from insured that such payment could be made later, as
denial of the claim, otherwise, the claimant's right of agent Adora had assured Pinca. In any event, it is not
action shall prescribe." The notice of death was given to denied that this payment was actually made by Pinca to
Fortune, concededly, more than a year after the death Adora, who remitted the same to MICO.
of Vda. de Gabriel's husband. Fortune, in invoking The payment was made on December 24, 1981, and the
prescription, was not referring to the one-year period fire occured on January 18, 1982. We do not share
from the denial of the claim within which to file an MICO's view that there was no existing insurance at the
action against an insurer but obviously to the written time of the loss sustained by Pinca because her policy
notice of claim that had to be submitted within six never became effective for non-payment of premium.
months from the time of the accident. On the other Payment was in fact made, rendering the policy
hand, there is absolutely no basis in fact and in law to operative as of June 22, 1981, and removing it from the
hold that the insurance company was deemed to have provisions of Article 77. We see in this case an obvious
waived – by failing to have its answers (to the Request design to evade or at least delay the discharge of a just
for Admission) duly verified -- the defense, that the obligation.
death of Gabriel's husband was not caused by
violent accidental external and visible means' as 50. Makati Tuscany Condominium Corp v CA
contemplated in the insurance policy. The
Death Certificate and the Autopsy Report, more Facts:
than controverted the allegation of Gabriel as to Private respondent American Home Assurance Co.
the cause of death of her husband. (AHAC), represented by American International
Underwriters (Phils.), Inc., issued in favor of petitioner
49. Malayan Insurance Co v Cruz Arnaldo Makati Tuscany Condominium Corporation (TUSCANY)
three insurance policies covering the years 1982-1985
Facts: on the latter’s buildings and premises of which the
On June 7, 1981, the petitioner (MICO) issued to the payment of the premium was made on an installment
private respondent, Coronacion Pinca, Fire Insurance basis all of which were accepted by the private
Policy No. F-001-17212 on her property for the amount respondents. On the third policy covering for 1984-
of P14,000.00. On October 15,1981, MICO allegedly 1985, TUSCANY made two instalments however
thereafter refused to pay the balance of the premium. Marine Cargo Insurance Policy No. 84/24229 for
Consequently, private respondent filed an action to P2,000,000.00 on said date. On 24 January 1984, the
recover the unpaid balance of P314,103.05 for the third plaintiff gave the check in payment of the premium on
policy. Petitioner refused to pay on the ground that the insurance policy to Mr. Victorio Chua. The said
there cannot be a perfected contract of insurance upon vessel M/V Seven Ambassador sank on 25 January 1984
mere partial payment of the premiums because under resulting in the loss of the plaintiffs insured logs. South
Sec. 77 of the Insurance Code, no contract of insurance Sea Surety and Insurance Co., Inc. cancelled the
is valid and binding unless the premium thereof has insurance policy it issued as of the date of inception for
been paid. non-payment of the premium due in accordance with
Section 77 of the Insurance Code.
Whether or not payment by installment of the Issue:
premiums due on an insurance policy invalidates the Whether or not Victorio Chua, in receiving the check for
contract of insurance, in view of Sec. 77 of P.D. 612. the insurance premium prior to the occurrence of the
risk insured against has so acted as an agent of
Held: petitioner.
No. While the import of Section 77 is that prepayment
of premiums is strictly required as a condition to the Held:
validity of the contract, We are not prepared to rule Yes. The Marine Cargo Insurance Policy No. 84/24229
that the request to make installment payments duly was issued by defendant insurance company on 20
approved by the insurer, would prevent the entire January 1984. At the time the vessel sank on 25 January
contract of insurance from going into effect despite 1984 resulting in the loss of the insured logs, the
payment and acceptance of the initial premium or first insured had already delivered to Victorio Chua the
installment. Section 78 of the Insurance Code in effect check in payment of premium. Mr. Chua is an
allows waiver by the insurer of the condition of administrative assistant for the past ten years and an
prepayment by making an acknowledgment in the agent for less than ten years. He is paid a salary as an
insurance policy of receipt of premium as conclusive administrative assistant and a commission as agent
evidence of payment so far as to make the policy based on the premiums he turns over to the broker.
binding despite the fact that premium is actually Under the second paragraph of Section 306 of the
unpaid. Section 77 merely precludes the parties from Insurance Code provide as follows:
stipulating that the policy is valid even if premiums are Sec. 306. . . . Any insurance company which
not paid, but does not expressly prohibit an agreement delivers to an insurance agent or insurance
granting credit extension. So is an understanding to broker a policy or contract of insurance shall be
allow insured to pay premiums in installments not so deemed to have authorized such agent or
proscribed. At the very least, both parties should be broker to receive on its behalf payment of any
deemed in estoppel to question the arrangement they premium which is due on such policy of
have voluntarily accepted. Parties actually intended to contract of insurance at the time of its issuance
make three (3) insurance contracts valid, effective and or delivery or which becomes due thereon.
binding, petitioner may not be allowed to renege on its
obligation to pay the balance of the premium. When the appellant South Sea Surety and Insurance
Co., Inc. delivered to Mr. Chua the marine cargo
insurance policy for the plaintiffs logs, he is deemed to
51. South Sea Surety and Insurance Co v CA have been authorized by the South Sea Surety and
Insurance Co., Inc. to receive the premium which is due
Facts: on its behalf. Thus, South Sea which is liable to pay the
On 16 January 1984, Valenzuela Hardwood and insurance proceeds.
Industrial Supply, Inc. entered into an agreement with
the defendant Seven Brothers whereby the latter 52. Tibay v CA
undertook to load on board its vessel M/V Seven
Ambassador the former's round logs. On 20 January Facts:
1984, Hardwood insured the logs, against loss and/or, On 22 January 1987 private respondent Fortune Life
damage with defendant South Sea Surety and Insurance and General Insurance Co., Inc. (FORTUNE) issued Fire
Co., Inc. for P2,000,000.00 and the latter issued its Insurance Policy in favor of Violeta R. Tibay and/or
Nicolas Roraldo on their two-storey residential building written notice to Masagana of the non-renewal of the
located at Makati City, together with all their personal policies. On June 1992 (policy already
effects therein. The insurance was for P600,000.00 expired), Masagana’s property covered by 3 UCPB-
covering the period from 23 January 1987 to 23 January issued policies was razed by fire.
1988. On 23 January 1987, of the total premium of On 13 July 1992, Masagana presented to UCPB’s cashier
P2,983.50, petitioner Violeta Tibay only paid P600.00 5 manager's checks, representing premium for the
thus leaving a considerable balance unpaid. On 8 March renewal of the policies for another year. It was only on
1987 the insured building was completely destroyed by the following day, 14 July 1992, when Masagana filed
fire. Two days later or on 10 March 1987 Violeta Tibay with UCPB a formal claim for indemnification of the
paid the balance of the premium. On the same day, she insured property razed by fire. On the same day, UCPB
filed with FORTUNE a claim on the fire insurance policy. returned the 5 manager's checks, and rejected
FORTUNE denied the claim of Violeta for violation of Masagana’s claim since the policies had expired and
Policy Condition No. 2 and of Sec. 77 of the Insurance were not renewed, and the fire occurred on 13 June
Code. 1992, before tender of premium payment.

Issue: Issue:
May a fire insurance policy be valid, binding and WON the fire insurance policies had expired on 22 May
enforceable upon mere partial payment of premium? 1992, or had been extended or renewed by an implied
credit arrangement though actual payment of premium
Held: was tendered on a later date after the occurrence of
No. In the case at bar, the Policy clearly provides for the risk.
payment of premium in full. Accordingly, where the
premium has only been partially paid and the balance Held:
paid only after the peril insured against has occurred, The fire insurance policies had already expired. An
the insurance contract did not take effect and the insurance policy, other than life is not valid and binding
insured cannot collect at all on the policy. This is fully until actual payment of the premium. Any agreement
supported by Sec. 77 of the Insurance Code. The to the contrary is void. The parties may not agree
insurance contract itself expressly provided that the expressly or impliedly on the extension of credit or time
policy would be effective only when the premium was to pay the premium and consider the policy binding
paid in full. It would have been altogether different before actual payment. The case of Malayan Insurance
were it not so stipulated. Ergo, petitioners had absolute v. Cruz-Arnaldo cited by the CA is not applicable. In that
freedom of choice whether or not to be insured by case, payment of the premium was made on before the
FORTUNE under the terms of its policy and they freely occurrence of the fire. In the present case, the payment
opted to adhere thereto. For it cannot be disputed that of the premium for renewal of the policies was
premium is the elixir vitae of the insurance business tendered a month after the fire occurred. Masagana
because by law the insurer must maintain a legal did not even give UCPB a notice of loss within a
reserve fund to meet its contingent obligations to the reasonable time after occurrence of the fire.
public, hence, the imperative need for its prompt
payment and full satisfaction.
55. UCPB General Insurance Co. v Masagana Telemart
53. Paulin v Insular (2001)

54. UCPB General Insurance Co. v Masagana Telemart Facts:

(1999) 308 SCRA 259 The following facts have been established:
1. For years, UCPB had been issuing fire policies to the
Facts: Masagana, and these policies were annually renewed.
In 1991, UCPB issued 5 fire insurance policies covering 2. UCPB had been granting Masagana a 60-90-day
Masagana Telamart’s various properties for the period credit term within which to pay the premiums on the
from 22 May 1991 to 22 May 1992. On March 1992 (2 renewed policies.
months before policy expiration), UCPB evaluated the 3. There was no valid notice of non-renewal of the
policies and decided not to renew them upon policies, as there is no proof that the notice sent by
expiration of their terms on 22 May 1992. On April ordinary mail was received by Masagana, and the copy
1992 (1 month before policy expiration), UCPB gave
allegedly sent to Zuellig was ever transmitted to 56. American Home Assurance Co v Chua
4. The premiums for the policies were paid by Facts:
Masagana within the 60- 90-day credit term and were Chua obtained from American Home a fire insurance
duly accepted and received by UCPB’s cashier. covering the stock-in-trade of his business. The
insurance was due to expire on March 25, 1990. On
Issue: April 5, 1990, Chua issued a check for P2,983.50 to
Whether or not Sec.77 of the Insurance Code must be American Home’s agent, James Uy, as payment for
strictly applied to UCPB’s advantage despite its practice the renewal of the policy. The official receipt was issued
of granting a 60- to 90-day credit term for the payment on April 10. In turn, the latter a renewal certificate. A
of premiums. new insurance policy was issued where petitioner
undertook to indemnify respondent for any damage or
Held: loss arising from fire up to P200,000 March 20, 1990 to
No. Masagana wins this time; the 1999 decision is set March 25, 1991. On April 6, 1990, the business was
aside; CA decision affirmed. Section 77 does not restate completely razed by fire. Total loss was estimated
the portion of Section 72 of the old Insurance Code between P4,000,000 and P5,000,000. Respondent filed
(formerly Act 2427) expressly permitting an agreement an insurance claim with petitioner and four other co-
to extend the period to pay the premium. However, insurers, namely, Pioneer Insurance, Prudential
there are exceptions to Section 77: Guarantee, Filipino Merchants and Domestic
1. In case of a life or industrial life policy whenever Insurance. Petitioner refused to honor the claim hence,
the grace period provision applies [Sec. 77] the respondent filed an action in the trial court.
2. Any acknowledgment of the receipt of American Home claimed there was no existing contract
premium is conclusive evidence of payment because respondent did not pay the premium. Even
[Sec. 78] with a contract, they contended that he was ineligible
3. If the parties have agreed to the payment because of his fraudulent tax returns, his failure to
in installments of the premium and partial establish the actual loss and his failure to notify to
payment has been made at the time of petitioner of any insurance already effected.
loss [Makati Tuscany Condominium v. CA]
4. The insurer may grant credit extension for the Issues:
payment of the premium [Makati Tuscany 1. Whether there was a valid payment of premium,
Condominium] considering that respondent’s check was cashed after
5. Estoppel the occurrence of the fire
Section 77 merely precludes the parties from stipulating 2. Whether respondent violated the policy by his
that the policy is valid even if premiums are not paid, submission of fraudulent documents and non-disclosure
but does not expressly prohibit an agreement granting of the other existing insurance contracts
credit extension, and such an agreement is not contrary
to morals, good customs, public order or public policy. Held:
[Makati Tuscany Condominium v. CA] 1. The trial court found, as affirmed by the Court of
ON EXCEPTION #4. If the insurer has granted the Appeals, that there was a valid check payment by
insured a credit term for the payment of the premium respondent to petitioner. The court respected this.
and loss occurs before the expiration of the term, The renewal certificate issued to respondent contained
recovery on the policy should be allowed even though the acknowledgment that premium had been paid.
the premium is paid after the loss but within the credit In the instant case, the best evidence of such authority
term. It would be unjust and inequitable if recovery on is the fact that petitioner accepted the check and issued
the policy would not be permitted against UCPB, which the official receipt for the payment. It is, as well, bound
had consistently granted a 60-90-day credit term for the by its agent’s acknowledgment of receipt of payment.
payment of premiums despite its full awareness of Section 78 of the Insurance Code explicitly provides:
Section 77. Estoppel bars it from taking refuge under An acknowledgment in a policy or contract of insurance
said section, since Masagana relied in good faith on of the receipt of premium is conclusive evidence of its
such practice. payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not
be binding until the premium is actually paid.
2. Submission of the alleged fraudulent documents the store was burned. Yap filed an insurance claim, but
pertained to respondent’s income tax returnsfor 1987 the same was denied for a breach. Oliva Yap filed a case
to 1989. Respondent, however, presented a BIR for payment of the face value of her fire insurance
certification that he had paid the proper taxes for the policy. The insurance company refused to pay because
said years. Since this is a question of fact, the finding is she never informed Pioneer of another insurer.
conclusive. Ordinarily, where the insurance policy
specifies as a condition the disclosure of existing co- Issue:
insurers, non-disclosure is a violation that entitles the Whether or not petitioner should be absolved from
insurer to avoid the policy. The purpose for the liability on the Pioneeer policy on account of any
inclusion of this clause is to prevent an increase in the violation of the co-insurance clause
moral hazard. The relevant provision is Section 75,
which provides that: A policy may declare that a Held:
violation of specified provisions thereof shall avoid it, No. Petition dismissed. There was a violation. The
otherwise the breach of an immaterial provision does insurance policy for P20,000.00 issued by the Great
not avoid the policy. Respondent acquired several co- American, ceased to be recognized by them as a co-
insurers and he failed to disclose this information to insurance policy. The endorsement shows the clear
petitioner. Nonetheless, petitioner is estopped from intention of the parties to recognize on the date the
invoking this argument due to the loss adjuster’s endorsement was made, the existence of only one co-
admission of previous knowledge of the co-insurers. It insurance, the Northwest one. The finding of the Court
cannot be said that petitioner was deceived by of Appeals that the Great American Insurance policy
respondent by the latter’s non-disclosure of the other was substituted by the Federal Insurance policy is
insurance contracts when petitioner actually had prior indeed contrary to said stipulation. Other insurance
knowledge thereof. The loss adjuster, being an without the consent of Pioneer would avoid the
employee of petitioner, is deemed a representative of contract. It required no affirmative act of election on
the latter whose awareness of the other insurance the part of the company to make operative the
contracts binds petitioner. clause avoiding the contract, wherever the specified
conditions should occur. Its obligations ceased, unless,
being informed of the fact, it consented to the
57. Pioneer Insurance and Surety v Yap additional insurance. The validity of a clause in a fire
insurance policy to the effect that the procurement of
Facts: additional insurance without the consent of the insurer
Respondent Oliva Yap was the owner of a store in a renders the policy void is in American jurisprudence.
two-storey building where she sold shopping bags and Milwaukee Mechanids' Lumber Co., vs. Gibson- "The
footwear. Chua Soon Poon, her son-in-law, was in rule in this state and practically all of the states is to the
charge of the store. Yap took out a Fire Insurance effect that a clause in a policy to the effect that the
Policy No. 4216 from Pioneer Insurance with a value of procurement of additional insurance without the
P25,000.00 covering her stocks, office furniture, fixtures consent of the insurer renders the policy void is a valid
and fittings. Among the conditions in the policy provision.” In this jurisdiction, General Insurance
executed by the parties are the following: unless such & Surety Corporation vs. Ng Hua- “The annotation then,
notice be given and the particulars of such insurance must be deemed to be a warranty that the property was
or insurances be stated in, or endorsed on this Policy by not insured by any other policy. Violation thereof
or on behalf of the Company before the occurrence of entitled the insurer to rescind. Furthermore, even if the
any loss or damage, all benefits under this Policy shall annotations were overlooked the defendant insurer
be forfeited… Any false declaration or breach or this would still be free from liability because there is no
condition will render this policy null and void. Another question that the policy issued by General Indemnity
insurance policy for P20,000.00 issued by Great has not been stated in nor endorsed on Policy No. 471
American covering the same properties. The of defendant. The obvious purpose of the aforesaid
endorsement recognized co-insurance by Northwest for requirement in the policy is to prevent over-insurance
the same value. Oliva Yap took out another fire and thus avert the perpetration of fraud where a fire
insurance policy for P20,000.00 covering the same would be profitable to the insured.“
properties from the Federal Insurance Company, Inc.,
which was procured without notice to and the written
consent of Pioneer. A fire broke out in the building, and
58. Republic Bank v Phil Guarantee Union Manufacturing Co., Inc. and that the cash
voucher for the payment of the first premium was paid
Facts: also by the Republic Bank but for the account Union
(1)On January 12, 1962, the Union Manufacturing Co., Manufacturing Co., Inc.;
Inc. obtained certain loans, overdrafts and other credit
accommodations from the Republic Bank in the total (7) That sometime on September 6, 1964, a fire
sum of P415,000.00 with interest at 9% per annum from occurred in the premises of the Union Manufacturing
said date and to secure the payment thereof, said Union Co., Inc.;
Manufacturing Co., Inc. executed a real and chattel
mortgages on certain properties, which are more (8) That on October 6, 1964, the Union Manufacturing
particularly described and listed at the back of the Co., Inc. filed its fire claim with the defendant Philippine
mortgage contract ...; Guaranty Co., Inc., thru its adjuster, H. H. Bayne
Adjustment Co., which was denied by said defendant in
(2) That as additional condition of the mortgage its letter dated November 27, 1964 on the following
contract, the Union Manufacturing Co., Inc. undertook grounds: 'a. Policy Condition No. 3 and/or the 'Other
to secure insurance coverage over the mortgaged Insurance Clause' of the policy violated because you did
properties for the same amount of P415,000.00 not give notice to us the other insurance which you had
distributed as follows: (a) Buildings, P30,000.00; (b) taken from New India for P80,000.00, Sincere Insurance
Machineries, P300,000.00; and (c) Merchandise for P25,000.00 and Manila Insurance for P200,000.00.
Inventory, P85,000.00, giving a total of P415,000.00;
(3) That as Union Manufacturing Co., Inc. failed to WON the plaintiffs can recover the proceeds
secure insurance coverage on the mortgaged properties
since January 12, 1962, despite the fact that Cua Tok, its
general manager, was reminded of said requirement, Held:
the Republic Bank procured from the defendant, No. As was made clear in the opinion of this Court,
Philippine Guaranty Co., Inc. an insurance coverage on penned by Justice Villa-Real: "Without deciding whether
loss against fire for P500,000.00 over the properties of notice of other insurance upon the same property must
the Union Manufacturing Co., Inc., as described in be given in writing, or whether a verbal notice is
defendant's 'Cover Note' dated September 25, 1962, sufficient to render an insurance valid which requires
with the annotation that loss or damage, if any, under such notice, whether oral or written, we hold that in the
said Cover Note is payable to Republic Bank as its absolute absence of such notice when it is one of the
interest may appear, subject however to the printed conditions specified in the fire insurance policy, the
conditions of said defendant's Fire Insurance Policy policy is null and void." 7 The next year, in Ang Giok Chip
Form; v. Springfield Fire & Marine Ins. Co., 8 the conformity of
the insured to the terms of the policy, implied from the
(4) That on September 27, 1962, Fire Insurance Policy failure to express any disagreement with what is
No. 43170 ... was issued for the sum of P500,000.00 in provided for, was stressed in these words of
favor of the assured, Union Manufacturing Co., Inc., for the ponente, Justice Malcolm: "It is admitted that the
which the corresponding premium in the sum of policy before us was accepted by the plaintiff. The
P8,328.12, which was reduced to P6,688.12, was paid receipt of this policy by the insured without objection
by the Republic Bank to the defendant, Philippine binds both the acceptor and the insured to the terms
Guaranty Co., Inc. ...; thereof. The insured may not thereafter be heard to say
that he did not read the policy or know its terms, since
(5) That upon the expiration of said fire policy on it is his duty to read his policy and it will be assumed
September 25, 1963, the same was renewed by the that he did so." More specifically, there was a
Republic Bank upon payment of the corresponding reiteration of this Santa Ana ruling in a decision by the
premium in the same amount of P6,663.52 on then Justice, later Chief Justice, Bengzon, in General
September 26, 1963; Insurance & Surety Corp. v. Ng Hua. 12 Thus: "The
annotation then, must be deemed to be a warranty that
(6) That in the corresponding voucher ..., it appears that the property was not insured by any other policy.
although said renewal premium was paid by the Violation thereof entitles the insurer to rescind.
Republic Bank, such payment was for the account of
59. Oriental Assurance Corp v CA one inseparable unit, the correct basis for determining
the existence of constructive total loss is the totality of
Facts: Panama bought, in Palawan, 1,208 pieces of the shipment of logs. Of the entirety of 1,208, pieces of
apitong logs, with a total volume of 2,000 cubic meters. logs, only 497 pieces thereof were lost or 41.45% of the
It hired Transpacific Towage, Inc., to transport said logs entire shipment. Since the cost of those 497 pieces does
by sea to Manila and insured it against loss for P1-M not exceed 75% of the value of all 1,208 pieces of logs,
with Oriental Assurance. The policy was issued. It is the shipment cannot be said to have sustained a
stipulated there, among others, that the subject matter constructive total loss. Hence, no recovery can be had
insured is 2,000 cubic meters of apitong logs and that against Oriental Assurance. The latter has no liability
the vessels to be utilized are the following: MT. under the policy.
'Seminole', BargePCT-7000 for the 1,000 cubic meter of
apitong logs and BargeTranspac-1000 for the other
1,000 cubic meter of apitong logs. It is also stipulated in 60. Roque v IAC
the policy that the insurance is against TOTAL LOSS only,
and it is subject to the following clauses, to wit: Civil Facts:
Code Article 1250 Waiver clause, Typhoon warranty On 19 February 1972, the Manila Bay Lighterage
clause, and Omnibus clause. On 28 January 1986, the Corporation (MBLC) a common carrier, entered into a
2 barges were towed by MT 'Seminole'(tugboat), during contract with Isabela Roque (doing business under
the voyage, rough seas and strong winds caused the name and style of Isabela Roque Timber
damage to Barge TPAC-1000 resulting in the loss of 497 Enterprises)and Ong Chiong whereby the former would
pieces of logs out of the 598 pieces loaded thereon. load and carry on board its barge Mable 10 about
422.18 cubic meters of logs from Malampaya Sound,
Panama demanded payment for the loss but Oriental Palawan to North Harbor, Manila. Roque and Ong
Assurance refused on the ground that its contracted insured the logs against loss for P100,000.00 with the
liability was for "TOTAL LOSS ONLY." Consequently, Pioneer Insurance and Surety Corporation (Pioneer). On
Panama filed a Complaint for Damages against Ever 29 February1972, Roque and Ong loaded on the barge,
Insurance Agency (allegedly, also liable), Benito Sy Lee 811 pieces of logs at Malampaya Sound, Palawan for
Yong and Oriental Assurance, before the RTC-Kalookan. carriage and delivery to North Harbor, Port of Manila,
but the shipment never reached its destination because
Issue: Is Oriental Assurance liable? Mable 10sank with the 811 pieces of logs somewhere
off Cabuli Point in Palawan on its way to Manila. The
Held: No. The SC held that the terms of the contract barge where the logs were loaded was apparently not
constitute the measure of the insurer’s liability and seaworthy such that it developed a leak. One of the
compliance therewith is a condition precedent to the hatches was left open causing water to enter the barge
insured's right to recovery from the insurer. That and because the barge was not provided with the
whether a contract is entire or severable is a question necessary cover or tarpaulin, the ordinary splash of sea
of intention to be determined by the language waves brought more water inside the barge. On 8
employed by the parties. The policy in question shows March 1972,Roque and Ong wrote a letter to MBLC
that the subject matter insured was the entire shipment demanding payment of P150,000.00 for the loss of the
of 2,000 cubic meters of apitong logs. The fact that the shipment plusP100,000.00 as unrealized profits but the
logs were loaded on two different barges did not make latter ignored the demand. Another letter was sent to
the contract several and divisible as to the items Pioneer claiming the full amount of P100,000.00 under
insured. The logs on the two barges were not separately the insurance policy but Pioneer refused to pay on the
valued or separately insured. Only one premium was ground that its liability depended upon the "Total loss
paid for the entire shipment, making for only one cause by Total Loss of Vessel only".
or consideration. The insurance contract must,
therefore, be considered indivisible. The logs involved, Issue:
although placed in two barges, were not separately Whether there is a warranty of seaworthiness by the
valued by the policy, nor separately insured. cargo owner in cases of marine cargo insurance.
Resultantly, the logs lost in barge TPAC-1000 in relation
to the total number of logs loaded on the Held:
same barge cannot be made the basis for determining YES. There is no dispute over the liability of the
constructive total loss. The logs having been insured as common carrier MBLC. In fact, it did not bother to
appeal the questioned decision. However, Roque and such a policy does not cover a loss or injury which must
Ong state that MBLC has ceased operating as a firm and inevitably take place in the ordinary course of things.
nothing may be recovered from it. They are, therefore, There is no doubt that the term 'perils of the sea'
trying to recover their losses from the insurer. The extends only to losses caused by sea damage, or by the
liability of the insurance company is governed by law. violence of the elements, and does not embrace all
Section 113 of the Insurance Code provides that "In losses happening at sea. They insure against losses from
every marine insurance upon a ship or freight, or extraordinary occurrences only, such as stress of
freightage, or upon anything which is the subject of weather, winds and waves, lightning, tempests, rocks
marine insurance, a warranty is implied that the ship and the like. These are understood to be the 'perils of
is seaworthy." Section 99 of the same Code also the sea' referred in the policy, and not those ordinary
provides in part that "Marine insurance includes: (1) perils which every vessel must encounter. 'Perils of the
Insurance against loss of or damage to: (a) Vessels, sea' has been said to include only such losses as are of
craft, aircraft, vehicles, goods, freights, extraordinary nature, or arise from some overwhelming
cargoes, merchandise..." From the above- power, which cannot be guarded against by the
quoted provisions, there can be no mistaking the fact ordinary exertion of human skill and prudence. Damage
that the term "cargo" can be the subject of marine done to a vessel by perils of the sea includes every
insurance and that once it is so made, the implied species of damages done to a vessel at sea, as
warranty of seaworthiness immediately attaches to distinguished from the ordinary wear and tear of the
whoever is insuring the cargo whether he be the voyage.
shipowner or not. As ruled in the case of Go Tiaoco y
Hermanos v. Union Insurance Society of Canton (40Phil.
40), "it is universally accepted that in every contract of 61. Filipino Merchants Insurance Co v CA
insurance upon anything which is the subject of marine
insurance, a warranty is implied that the ship shall Facts:
be seaworthy at the time of the inception of the  Choa Tiek Seng, consignee of the shipment of
voyage. This rule is accepted in our own Insurance Law fishmeal loaded, insured in "all risks policy" 600
(Act No. 2427, sec. 106)." Moreover, the fact that the metric tons of fishmeal in new gunny bags of 90
unseaworthiness of the ship was unknown to the kilos each from Bangkok, Thailand to Manila
insured is immaterial in ordinary marine insurance and against all risks under warehouse to warehouse
may not be used by him as a defense in order to recover terms but only 59.940 metric tons was
on the marine insurance policy. As was held in Richelieu imported
and Ontario Nav. Co. v. Boston Marine, Inc., Co. (136  When it was unloaded unto the arrastre
U.S. 406), "the exception of losses occasioned by contractor E. Razon, Inc. and Filipino
unseaworthiness was in effect a warranty that a loss Merchants's surveyor ascertained and certified
should not be so occasioned, and whether the fact of that in such discharge 105 bags were in bad
unseaworthiness were known or unknown would order condition which was reflected in
be immaterial." Since the law provides for an implied the survey report of Bad Order cargoes
warranty of seaworthiness in every contract of ordinary  Before delivery to Choa, E. Razon's Bad Order
marine insurance, it becomes the obligation of a cargo Certificate showed that a total of 227 bags in
owner to look for a reliable common carrier which bad order condition
keeps its vessels in seaworthy condition. The shipper of  Choa brought an action against Filipino
cargo may have no control over the vessel but he has Merchants Insurance Co. who brought a third
full control in the choice of the common carrier that will party complaint against Compagnie Maritime
transport his goods. Or the cargo owner may enter into Des Chargeurs Reunis and/or E. Razon, Inc.
a contract of insurance which specifically provides that  RTC: Ordered Filipino Merchants to pay Choa
the insurer answers not only for the perils of the sea but and reimbursefrom Compagnie Maritime Des
also provides for coverage of perils of the ship. The Chargeurs Reunis and third party defendant E.
Court was constrained to apply Section 113 of the Razon, Inc.
Insurance Code to the facts of this case. "In marine  CA: Affirmed but modified by adjudicating the
cases, the risks insured against are 'perils of the sea' third party complaint
(Chute v. North River Ins. Co., Minn. 214 NW 472, 55ALR  Filipino Merchants contended that Chao
933). The purpose of such insurance is protection has no insurable interest and therefore
against contingencies and against possible damages and the policy should be void and that it
was fraud that it did not disclose of  C & F contracts are shipment contracts. The
such fact term means that the price fixed includes in a
Issue: lump sum the cost of the goods and freight to
W/N Choa Tiek Seng as consignee of the shipment has the named destination. It simply means that the
insurable interest seller must pay the costs and freight necessary
to bring the goods to the named destination but
Held: the risk of loss or damage to the goods is
YES. CA affirmed. transferred from the seller to the buyer when
 GR: the burden of proof is upon the insured to the goods pass the ship's rail in the port of
show that a loss arose from a covered peril, but shipment.
under an "all risks" policy the burden is not on
the insured to prove the precise cause of loss or
damage for which it seeks compensation. The 62. Choa Tiek Seng v CA
insured under an "all risks insurance policy" has
the initial burden of proving that the cargo was Facts:
in good condition when the policy attached and On November 4, 1976 petitioner imported some lactose
that the cargo was damaged when unloaded crystals from Holland. The importation involved fifteen
from the vessel; thereafter, the burden then (15) metric tons packed in 600 6-ply paper bags with
shifts to the insurer to show the exception to polythelene inner bags, each bag at 25 kilos net. The
the coverage. - none was shown = liable goods were loaded at the port at Rotterdam in sea vans
 Section 13 of the Insurance Code defines on board the vessel "MS Benalder' as the mother vessel,
insurable interest in property as every interest and thereafter aboard the feeder vessel "Wesser Broker
in property, whether real or personal, or any V-25" of respondent Ben Lines Container, Ltd. (Ben
relation thereto, or liability in respect thereof, Lines for short). The goods were insured by the
of such nature that a contemplated peril might respondent Filipino Merchants' Insurance Co., Inc.
directly damnify the insured. (insurance company for short) for the sum of
 As vendee/consignee of the goods in transit has P98,882.35, the equivalent of US$8,765.00 plus 50%
such existing interest. His interest over the mark-up or US$13,147.50, against all risks under the
goods is based on the perfected contract of terms of the insurance cargo policy. Upon arrival at the
sale. The perfected contract of sale between port of Manila, the cargo was discharged into the
him and the shipper of the goods operates to custody of the arrastre operator respondent E. Razon,
vest in him an equitable title even before Inc. (broker for short), prior to the delivery to petitioner
delivery or before be performed the conditions through his broker. Of the 600 bags delivered to
of the sale. The contract of shipment, whether petitioner, 403 were in bad order. The surveys showed
under F.O.B., C.I.F., or C. & F. as in this case, is that the bad order bags suffered spillage and loss later
immaterial in the determination of whether the valued at P33,117.63. Petitioner filed a claim for said
vendee has an insurable interest or not in the loss dated February 16, 1977 against respondent
goods in transit. insurance company in the amount of P33,117.63 as the
 Article 1523 of the Civil Code provides that insured value of the loss. Respondent insurance
where, in pursuance of a contract of sale, the company rejected the claim alleging that assuming that
seller is authorized or required to send the spillage took place while the goods were in transit.
goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for, Isssue:
the purpose of transmission to the buyer is WON the insured shipment suffered damage at the
deemed to be a delivery of the goods to the time of the devanning thereof.
buyer, the exceptions to said rule not obtaining
in the present case. The Court has heretofore Held:
ruled that the delivery of the goods on board The Court disagrees. In Gloren Inc. vs. Filipinas Cia. de
the carrying vessels partake of the nature of Seguros, 12 it was held that an all risk insurance policy
actual delivery since, from that time, the foreign insures against all causes of conceivable loss or damage,
buyers assumed the risks of loss of the goods except as otherwise excluded in the policy or due to
and paid theinsurance premium covering them fraud or intentional misconduct on the part of the
insured. It covers all losses during the voyage whether
arising from a marine peril or not, including pilferage subrogation under Article 2207 of the New Civil Code,
losses during the war. In the present case, the "all risks" private respondent demanded of the petitioner the
clause of the policy sued upon reads as follows: same amount it paid to Caltex. Due to its failure to
5. This insurance is against all risks of loss or damage to collect from the petitioner despite prior demand,
the subject matter insured but shall in no case be private respondent filed a complaint with the Regional
deemed to extend to cover loss, damage, or expense Trial Court of Makati, Branch 137, for collection of a
proximately caused by delay or inherent vice or nature sum of money. After trial, the trial court rendered a
of the subject matter insured. Claims recoverable decision on November 29, 1990 dismissing the
hereunder shall be payable irrespective of complaint. The trial court found that the vessel, MT
percentage. 13 Maysun, was seaworthy and that the incident was
The terms of the policy are so clear and require no caused by unexpected inclement weather condition or
interpretation. The insurance policy covers all loss or force majeure, thus, exempting the common carrier
damage to the cargo except those caused by delay or from liability for the loss of its cargo.
inherent vice or nature of the cargo insured. It is the
duty of the respondent insurance company to establish ISSUE:
that said loss or damage falls within the exceptions Whether or not the payment made by private
provided for by law, otherwise it is liable therefor. respondent to Caltex amounted to an automatic
admission of the vessel’s seaworthiness.
An "all risks" provision of a marine policy creates a
special type of insurance which extends coverage to RULING:
risks not usually contemplated and avoids putting upon No. The payment made by the private respondent for
the insured the burden of establishing that the loss was the insured value of the lost cargo operates as waiver of
due to peril falling within the policy's coverage. The its (private respondent) right to enforce the term of the
insurer can avoid coverage upon demonstrating that a implied warranty against Caltex under the marine
specific provision expressly excludes the loss from insurance policy. However, the same cannot be validly
coverage. 14 In this case, the damage caused to the interpreted as an automatic admission of the vessel’s
cargo has not been attributed to any of the exceptions seaworthiness by the private respondent as to foreclose
provided for nor is there any pretension to this effect. recourse against the petitioner for any liability under its
Thus, the liability of respondent insurance company is contractual obligation as a common carrier. The fact of
clear. payment grants the private respondent subrogatory
right which enables it to exercise legal remedies that
63. Delsan Transport Lines v CA would otherwise be available to Caltex as owner of the
lost cargo against the petitioner common carrier.
Caltex Philippines entered into a contract of
affreightment with the petitioner, Delsan Transport 64. Del Val v Del Val
Lines, Inc., for a period of one year whereby the said
common carrier agreed to transport Caltex’s industrial > Petitioners and private respondents are brothers and
fuel oil from the Batangas-Bataan Refinery to different Sisters and are the only heirs and next of kin of Gregorio
parts of the country. Under the contract, petitioner took del Val who died intestate.
on board its vessel, MT Maysun, 2,277.314 kiloliters of > It was found out that the deceased took out
industrial fuel oil of Caltex to be delivered to the Caltex insurance on his life for the sum of 40T and made it
Oil Terminal in Zamboanga City. The shipment was payable to private respondents as sole beneficiary.
insured with the private respondent, American Home > After Gregorio’s death, Andres collected the proceeds
Assurance Corporation. On August 14, 1986, MT of the policy.
Maysun set sail from Batangas for Zamboanga City. > Of the said policy, Andres paid 18T to redeem some
Unfortunately, the vessel sank in the early morning of real property which Gregorio had sold to third persons
August 16, 1986 near Panay Gulf in the Visayas taking during his lifetime.
with it the entire cargo of fuel oil. Subsequently, private > Said redemption of the property was made by
respondent paid Caltex the sum of Five Million Ninety- Andres’ laywer in the name of Andres and the
Six Thousand Six Hundred Thirty-Five Pesos and Fifty- petitioners. (Accdg to Andres, said redemption in the
Seven Centavos (P5,096,635.57) representing the name of Petitioners and himself was without his
insured value of the lost cargo. Exercising its right of
knowledge and that since the redemption, petitioners the premiums at the Manila branch of the company.
have been in possession of the property) The deceased Adolphe Oscar Schuetze married the
> Petitioners now contend that the amount of the plaintiff-appellant Rosario Gelano.
insurance policy belonged to the estate of the deceased
and not to Andres personally. The plaintiff-appellant, the Bank of the Philippine
> Pet filed a complaint for partition of property Islands, was appointed administrator of the late
including the insurance proceeds Adolphe Oscar Schuetze's testamentary estate by an
> Andress claims that he is the sole owner of the order, entered by the Court of First Instance of Manila.
proceeds and prayed that he be declared: The Sun Life Assurance Company of Canada, whose
> Sole owner of the real property, redeemed with the main office is in Montreal, Canada, paid Rosario Gelano
use of the insurance proceeds and its remainder; Vda. de Schuetze upon her arrival at Manila, the sum of
> Petitioners to account for the use and occupation of P20,150, which was the amount of the insurance policy
the premises. on the life of said deceased, payable to the latter's
estate. On the same date Rosario Gelano Vda. de
Issue: Schuetze delivered the money to said Bank of the
Whether or not the petitioners have a right to the Philippine Islands, as administrator of the deceased's
insurance proceeds? estate, which entered it in the inventory of the
testamentary estate, and then returned the money to
Held: said widow. The appellee alleges that it is a
NO. The contract of life insurance is a special contract fundamental principle that a life-insurance policy
and the destination of the proceeds thereof is belongs exclusively to the beneficiary upon the death of
determined by special laws which deal exclusively with the person insured.
the subject. Our civil code has no provisions which
relate directly and specifically to life-insurance contracts Issue: Whether or not the life insurance policy belongs
of to the destination of life-insurance proceeds that to the conjugal partnership.
subject is regulated exclusively by the Code of
Commerce. Thus, contention of petitioners that Ruling: SC holds, (1) that the proceeds of a life-
proceeds should be considered as a dontation or gift insurance policy payable to the insured's estate, on
and should be included in the estate of the deceased is which the premiums were paid by the conjugal
UNTENABLE. partnership, constitute community property, and
belong one-half to the husband and the other half to
Since the repurchase has been made n the names of all the wife, exclusively; and (2) that if the premiums were
the heirs instead of the defendant alone, petitioners paid partly with paraphernal and partly conjugal funds,
claim that the property belongs to the heirs in common the proceeds are likewise in like proportion paraphernal
and not to the defendant alone. The SC held that if it is in part and conjugal in part.
established by evidence that that was his intention and
that the real estate was delivered to the plaintiffs with That the proceeds of a life-insurance policy payable to
that understanding, then it is probable that their the insured's estate as the beneficiary, if delivered to
contention is correct and that they are entitled to share the testamentary administrator of the former as part of
equally with the defendant. HOWEVER, it appears from the assets of said estate under probate administration,
the evidence that the conveyances were taken in the are subject to the inheritance tax according to the law
name of the plaintiffs without the knowledge and on the matter, if they belong to the assured exclusively,
consent of Andres, or that it was not his intention to and it is immaterial that the insured was domiciled in
make a gift to them of real estate, when it belongs to these Islands or outside.

66. Insular Life Assurance Co Ltd v Ebrado

65. BPI v Posadas
Facts: The estate of Adolphe Oscar Schuetze is the sole > Buenaventura Ebrado was issued al life plan by
beneficiary named in the life-insurance policy for Insular Company. He designated Capriona as his
$10,000, issued by the Sun Life Assurance Company of beneficiary, referring to her as his wife.
Canada. During the following five years the insured paid
> The insured then died and Carponia tried to claim the 8. Automatic Premium Loan. — This Policy shall not
proceeds of the said plan. lapse for non-payment of any premium after it has been
> She admitted to being only the common law wife of three full years in force, if, at the due date of such
the insured. premium, the Cash Value of this Policy and of any bonus
> Pascuala, the legal wife, also filed a claim asserting additions and dividends left on accumulation (after
her right as the legal wife. The company then filed an deducting any indebtedness to the Company and the
action for interpleader. interest accrued thereon) shall exceed the amount of
said premium. In which event the company will, without
Issue: further request, treat the premium then due as paid,
and the amount of such premium, with interest from its
Whether or not the common law wife named as actual due date at six per cent per annum, compounded
beneficiary can collect the proceeds. yearly, and one per cent, compounded yearly, for
expenses, shall be a first lien on this Policy in the
Held: Company's favour in priority to the claim of any
NO. assignee or any other person. The accumulated lien may
The civil code prohibitions on donations made between at any time, while the Policy is in force, be paid in whole
persons guilty of adulterous concubinage applies to or in part.
insurance contracts. On matters not specifically
provided for by the Insurance Law, the general rules on From January 1, 1942 to December 31, 1946 for failure
Civil law shall apply. A life insurance policy is no of the insured under the above policies to pay the
different from a civil donation as far as the beneficiary is corresponding premiums for one or more years, the
concerned, since both are founded on liberality. plaintiff's head office of Toronto, applied the provision
of the automatic premium loan clauses; and the net
WHY WAS THE COMMON LAW WIFE NOT ED TO amount of premiums so advanced or loaned totalled
COLLECT THE PROCEEDS DESPITE THE FACT THAT SHE P1,069,254.98. On this sum the defendant Collector of
WAS THE BENEFICIARY? ISN’T THIS AGAINST SEC. 53? Internal Revenue assessed P17,917.12 — which plaintiff
It is true that SC went against Sec. 53. However, Sec. 53 paid supra protest
is NOT the only provision that the SC had to
consider. Art. 739 and 2012 of CC prohibit persons who It is the plaintiff's contention that when it made
are guilty of adultery or concubinage from being premium loans or premium advances, as above stated,
beneficiaries of the life insurance policies of the persons by virtue of the non-forfeiture clauses, it did not collect
with whom they committed adultery or premiums within the meaning of the above sections of
concubinage. If the SC used only Sec. 53, it would have the law, and therefore it is not amendable to the tax
gone against Art. 739 and 2012. therein provided.

Issue: Whether or not premium advances made by

67. Manufacturers Life Insurance Co v Meer plaintiff-appellant under the automatic premium loan
clause of its policies are "premium collected" by the
Facts: The plaintiff, the Manufacturer Life Insurance Company subject to tax
Company in a corporation duly organized in Canada
with head office at Toronto. It is duly registered and Held: The cash value or cash surrender value is
licensed to engage in life insurance business in the therefore an amount which the insurance company
Philippines, and maintains a branch office in Manila. It holds in trust2 for the insured to be delivered to him
was engaged in such business in the Philippines for upon demand. It is therefore a liability of the company
more than five years before and including the year to the insured. Now then, when the company's credit
1941. But due to the exigencies of the war it closed the for advances is paid out of the cash value or cash
branch office at Manila during 1942 up to September surrender value, that value and the company's liability is
1945. In the course of its operations before the war, thereby dismissed pro tanto. Consequently, the net
plaintiff issued a number of life insurance policies in the assets of the insurance company increased
Philippines containing stipulations referred to as non- corresponding; for it is plain mathematics that the
forfeiture clauses, as follows: decrease of a person's liabilities means a corresponding
increase in his net assets.
Nevertheless let us grant for the nonce that the exist. In dealing with Dans, DBP was wearing 2 legal
operation of the automatic loan provision contributed hats: the first as a lender and the second as aninsurance
no additional cash to the funds of the insurer. Yet it agent. As an insurance agent, DBP made Dans go
must be admitted that the insurer agreed to consider through the motion of applying for said insurance,
the premium paid on the strength of the thereby leading him and his family to believe that they
automatic loan. The premium was therefore paid by had already fulfilled all the requirements for the MRI
means of a "note" or "credit" or "other substitute for and that the issuance of their policy was forthcoming.
money" and the taxis due because section 255 above DBP had fullk nowledge that the application was never
quoted levies taxes according to the total premiums going to be approved. The DBP is not authorized to
collected by the insurer "whether such premiums are accept applications for MRI when its clients are more
paid in money, notes, credits or any substitutes for than 60 years of age.

69. Tio Khe Chio v CA

68. DBP v CA
Facts: Petitioner shipped bags of imported fish meals
Facts: and insured the same with respondent insurance
Juan B. Dans, together with his family applied for a company Eastern Assurance & Surety Corp (EASCO).
loan of P500,000 with DBP. As principal mortgagor, During transit, the bags were found out to be damaged
Dans, then 76 years of age was advised by DBP to thus rendering the fish meals useless. Petitioner filed a
obtain a mortgage redemption insurance (MRI) with claim before the EASCO which denied the same,
DBP MRI pool. A loan in the reduced amount was prompting the former to sue the
approved and released by DBP. From the proceeds of latterat CFI Cebu who ordered EASCO to pay the petitio
the loan, DBP deducted the payment for the MRI ner's claim forinsurance with damages. Upon execution,
premium. The MRI premium of Dans, less the DBP respondent filed a petition for certiorari with the
service fee of 10%, was credited by DBP to the savings CA who set aside the lower court's decision arguing that
account of DBP MRI-Pool. Accordingly, the DBP MRI the latter has erred in fixing the legal interest on 12%
Pool was advised of the credit. Dans died of cardiac per annum rather than the mandated 6%.
arrest. DBP MRI Pool notified DBP that Dans was not
eligible for MRI coverage, being over the acceptance Issue: What should the legal interest be for damages
age limit of 60 years at the time of application. DBP arising from loss of property?
apprised Candida Dans of the disapproval of her late Held: The applicable law is Article 2209 of the Civil Code
husband’s MRI application. DBP offered to refund the which reads that if the obligation consists in the
premium which the deceased had paid, but Candida payment of a sum of money and the debtor incurs in
Dans refused to accept the same demanding payment delay, the indemnity for damages, there being no
of the face value of the MRI or an amount equivalent of stipulation to the contrary, shall be the payment of
the loan. She, likewise, refused to accept an ex gratia interest agreed upon, and in the absence of stipulation,
settlement which DBP later offered. Hence the case the legal interest which is 6%per
at bar. annum. The adjusted rate mentioned in the Circular No.
416, from which theCFI based its decision, refers only
Issue: to loans or forbearances of
Whether or not the DBP MRI Pool should be held liable money,goods or credits and court judgments thereon b
on the ground that the contract was already perfected? ut not to court judgments for damages arising from inju
ry to persons and loss of property which does not
Held: involve a loan. Tio Khe Chio vs. Court of Appeals(202
No, it is not liable. The power to approve MRI SCRA 119)Circular No. 416 of the Central Bank which
application is lodged with the DBP MRI Pool. The pool, took effect on July 29, 1974 pursuant to Presidential
however, did not approve the application. There is also Decree No. 116 (Usury Law)raised the legal rate of
no showing that it accepted the sum which DBP interest from six (6%) percent to twelve
credited to its account with full knowledge that it was (12%)percent. The adjusted rate mentioned in the circul
payment for the premium. There was as a result ar refers only toloans or forbearances of money, goods
no perfected contract of insurance¶ hence the DBP MRI or credits and court judgments thereon but not to court
Pool cannot beheld liable on a contract that does not judgments for damages arising from injury to persons
and loss of property which does not involve a loan. In Held:
the case of Philippine Rabbit Bus Lines, Inc. vs. Cruz, YES. Usiphil had substantially complied with Policy
G.R. No. 71017, July 28, 1986, 143 SCRA 158, Condition 13 which reads "The insured shall give
the Court declared that the legal rate of interest is six immediate written notice to the Company of any loss,
(6%) percent per annum and not twelve(12%) percent, protect the property from further damage, forthwith
where a judgment award is based on an action for separate the damaged and undamaged personal
damages for personal injury, not use or forbearance property, put it in the best possible order, furnish a
of money, goods or credit. complete inventory of the destroyed, damaged, and
undamaged property, showing in detail quantities,
70. Finman General Assurance Corp v CA 361 SCRA 214 costs, actual cash value and the amount of loss claimed;
On 15 September 1981, Usiphil Incorporated obtained a INSURED SHALLRENDER TO THE COMPANY A PROOF OF
fire insurance policy from Finman General Assurance LOSS, signed and sworn to by the insured, stating the
Corporation (then doing business under the name knowledge and belief of the insured as to the following:
Summa Insurance Corporation) covering certain the time and origin of the loss, the interest of the
properties, e.g., office, furniture, fixtures, shop insured and of all others in the property, the actual cash
machinery and other trade equipment. Under Policy value of each item thereof and the amount of loss
F3100issued to Usiphil, Finman undertook to indemnify thereto, all encumbrances thereon, all other contracts
Usiphil for any damage to or loss of said properties of insurance, whether valid or not, covering any of said
arising from fire. Sometime in 1982, Usiphil filed with property, any changes in the title, use, occupation,
Finman an insurance claim amounting to P987,126.11 location, possession or exposures of said property since
for the loss of the insured properties due to fire. Acting the issuing of this policy by whom and for what purpose
thereon, Finman appointed Adjuster H.H. Bayne any buildings herein described and the several parts
to undertake the valuation and adjustment of the loss. thereof were occupied at the time of loss and whether
H.H. Bayne then required Usiphil to file a formal claim or not it then stood on leased ground, and shall furnish
and submit proof of loss. In compliance therewith, a copy of all the descriptions and schedules in all
Usiphil submitted its Sworn Statement of Loss and policies, and if required verified plans and specifications
Formal Claim,dated 22 July 1982, signed by Reynaldo of any building, fixtures, or machinery destroyed or
Cayetano, Usiphil's Manager. Usiphil likewise submitted damaged. The insured, as often as may be reasonably
Proof of Loss signed by its Accounting Manager Pedro required, shall exhibit to any person designated by the
Palallos and countersigned by H.H. Bayne's Adjuster company all that remains of any property herein
F.C.Medina. Palallos personally followed-up Usiphil's described, and submit to examination under oath by
claim with Finman's President Joaquin Ortega. any person named by the Company, and subscribe the
During their meeting, Ortega instructed their Finance same; and, as often as may be reasonably required,
Manager, Rosauro Maghirang, to reconcile the records. shall produce for examination all books of account, bills,
Thereafter, Maghirang and Palallos signed a invoices, and other vouchers or certified copies thereof
Statement/Agreement, dated 28 February 1985, which if originals be lost, at such reasonable time and place as
indicated that the amount due Usiphil was P842,683.40. may be designated by the Company or its
Despite repeated demands by Usiphil, Finman refused representative and shall permit extracts and copies
to pay the insurance claim. Thus, Usiphil was thereof to be made. No claim under this policy shall be
constrained to file a complaint against Finman for the payable unless the terms of this condition have been
unpaid insurance claim. In its Answer, Finman complied with." A perusal of the records shows
maintained that the claim of Usiphil could not be that Usiphil, after the occurrence of
allowed because it failed to comply with Policy the fire, immediately notified Finman thereof.
Condition 13 regarding the submission of certain Thereafter, Usiphil submitted the following documents:
documents to prove the loss. (1) Sworn Statement of Loss and Formal Claim and; (2)
Proof of Loss. The submission of these documents
Issue: constitutes substantial compliance with the above
Whether Usiphil has complied with Policy Condition 13 provision.
in notifying Finman of the loss.

Fuck you Insurance! 