Calanoc v. CAG.R. No. L-8151 December 16, 1955J.

Bautista Angelo

Doctrine: In case of ambiguity in an insurance contract covering accidental death, the Supreme Court
held that such terms shall be construed strictly against the insurer and liberally in favor of the insured in
order to effect the purpose of indemnity.

Facts: Melencio Basilio, a watchman of the Manila Auto Supply, secured a life insurance policy from the
Philippine American Insurance Company in the amount of P2,000 to which was attached a supplemental
contract covering death by accident. He later died from a gunshot wound on the occasion of a robbery
committed; subsequently, his widow was paid P2,000 representing the face value of the policy. The
widow demanded the payment of the additional sum of P2,000 representing the value of the
supplemental policy which the company refused because the deceased died by murder during the
robbery and while making an arrest as an officer of the law which were expressly excluded in the
contract. The company’s contention which was upheld by the Court of Appeals provides that the
circumstances surrounding Basilio’s death was caused by one of the risks excluded by the
supplementary contract which exempts the company from liability.

Issue: Is the Philippine American Life Insurance Co. liable to the petitioner for the amount covered by
the supplemental contract?

Held: Yes.

The circumstances of Basilio’s death cannot be taken as purely intentional on the part of Basilio to
expose himself to the danger. There is no proof that his death was the result of intentional killing
because there is the possibility that the malefactor had fired the shot merely to scare away the people
around. In this case, the company’s defense points out that Basilio’s is included among the risks
excluded in the supplementary contract; however, the terms and phraseology of the exception clause
should be clearly expressed within the understanding of the insured. Art. 1377 of the New Civil Code
provides that in case ambiguity, uncertainty or obscurity in the interpretation of the terms of the
contract, it shall be construed against the party who caused such obscurity. Applying this to the
situation, the ambiguous or obscure terms in the insurance policy are to be construed strictly against the
insurer and liberally in favor of the insured party. The reason is to ensure the protection of the insured
since these insurance contracts are usually arranged and employed by experts and legal advisers acting
exclusively in the interest of the insurance company. As long as insurance companies insist upon the use
of ambiguous, intricate and technical provisions, which conceal their own intentions, the courts must, in
fairness to those who purchase insurance, construe every ambiguity in favor of the insured.
Biagtan vs. The Insular Life Assurance Company, Ltd. (winner) 44 SCRA 58 Facts:

Facts: Juan S. Biagtan was insured with defendant Insular Life Assurance Company under Policy No.
398075 for the sum of P5,000.00 and, under a supplementary contract denominated "Accidental Death
Benefit Clause, for an additional sum of P5,000.00 if "the death of the Insured resulted directly from
bodily injury effected solely through external and violent means sustained in an accident . . . and
independently of all other causes." The clause, however, expressly provided that it would not apply
where death resulted from an injury "intentionally inflicted by a third party."

On the night of May 20, 1964 or during the first hours of the following day a band of robbers entered
the house of the insured Juan S. Biagtan.

Issue:

Whether the wounds received by the insured at the hands of the robbers were inflicted intentionally.

Held:

Yes. But where a gang of robbers enter a house and coming face to face with the owner, even if
unexpectedly, stab him repeatedly, it is contrary to all reason and logic to say that his injuries are not
intentionally inflicted, regardless of whether they prove fatal or not. As it was, in the present case they
did prove fatal, and the robbers have been accused and convicted of the crime of robbery with
homicide. Under the circumstance, the insurance company was correct in refusing to pay the additional
sum of P2,000.00 under the accidental death benefit clause which expressly provided that it would not
apply where death resulted from an injury "intentionally" inflicted by a third party.
FINMAN GENERAL ASSURANCE CORPORATION, petitioner,

vs. THE HONORABLE COURT OF APPEALS and JULIA SURPOSA, respondents.

Aquino and Associates for petitioner.

FACTS:

Petitioner filed this petition alleging grove abuse of discretion on the part of the appellate court in
applying the principle of “expresso unius exclusio alterius” in a personal accident insurance policy since
death resulting from murder and/or assault are impliedly excluded in said insurance policy considering
that the cause of death of the insured was not accidental but rather a deliberate and intentional act of
the assailant in killing the former as indicated by the location of the lone stab wound on the insured.
Therefore, said death was committed with deliberate intent which, by the very nature of a personal
accident insurance policy, cannot be indemnified.

ISSUE:

Whether or not death petitioner is correct that results from assault or murder deemed are not included
in the terms “accident” and “accidental”.

HELD:

NO. Petition for certiorari with restraining order and preliminary injunction was denied for lack of merit.

RATIO:

The terms “accident” and “accidental” as used in insurance contracts have not acquired any technical
meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the terms
have been taken to mean that which happen by chance or fortuitously, without intention and design,
and which is unexpected, unusual, and unforeseen. An accident is an event that takes place without
one’s foresight or expectation — an event that proceeds from an unknown cause, or is an unusual effect
of a known cause and, therefore, not expected.

It is well settled that contracts of insurance are to be construed liberally in favor of the insured and
strictly against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted
in favor of its beneficiary.
ZENITH INSURANCE CORPORATION vs.CA and FERNANDEZ G.R. No. 85296 May 14, 1990

FACTS:

On January 25, 1983, private respondent Lawrence Fernandez insured with the insurer his car for "own
damage". The car figured in an accident and suffered actual damages in the amount of P3,640.00. The
insurer offered to pay the claim of Fernandez pursuant to the terms and conditions of the contract
which, the private respondent rejected. After allegedly being given a run around by Zenith for two (2)
months, Fernandez filed a complaint with the Regional Trial Court for sum of money and damages
resulting from the refusal of Zenith to pay the amount claimed. Aside from actual damages and
interests, Fernandez also prayed for moral damages in the amount of P10,000.00, exemplary damages
of P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00.

On June 4, 1986, a decision was rendered by the trial court ordered the insurance company to pay the
insured the damage incurred plus interest at the rate of twice the prevailing interest rates, moral
damages (20,000, that is twice the amount the insured prayed for), exemplary damages, attorney's
fees, litigation expenses and costs. The CA affiremed the decision of the trial court.

ISSUE:

Whether the insurer is liable to the insured for moral and exemplary damages as ordered by the trial
court

HELD:

The decision of the lower court is modified to which, the moral damages is reduced to 10,000 and the
award of exemplary damages is deleted

In case of unreasonable delay in the payment of the proceeds of an insurance policy, the damages that
may be awarded are: 1) attorney's fees; 2) other expenses incurred by the insured person by reason of
such unreasonable denial or withholding of payment; 3) interest at twice the ceiling prescribed by the
Monetary Board of the amount of the claim due the injured; and 4) the amount of the claim. (Insurance
Code Sec. 244)

In awarding moral damages in case of breach of contract, there must be a showing that the breach was
wanton and deliberately injurious or the one responsible acted fraudently or in bad faith.The act of
petitioner of delaying payment for two months cannot be considered as so wanton or malevolent to
justify an award of P20,000.00 as moral damages, taking into consideration the actual damage. The
reason for petitioner's failure to indemnify private respondent within the two-month period was that
the parties could not come to an agreement as regards the amount of the actual damage on the car.

On the other hand, exemplary or corrective damages are imposed by way of example or correction for
the public good (Art. 2229, NCC). In the case of Noda v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987; 151
SCRA 227, exemplary damages were not awarded as the insurance company had not acted in wanton,
oppressive or malevolent manner. The same is true in the case at bar.
Sun v CA G.R. No. 92383 July 17, 1992
J. Cruz

Facts:
Lim accidentally killed himself with his gun after removing the magazine, showing off, pointing the
gun at his secretary, and pointing the gun at his temple. The widow, the beneficiary, sued the
petitioner and won 200,000 as indemnity with additional amounts for other damages and attorney’s
fees. This was sustained in the Court of Appeals then sent to the Supreme court by the insurance
company.

Issue:
1. Was Lim’s widow eligible to receive the benefits?
2. Were the other damages valid?

Held:
1. Yes
2. No

Ratio:

1. There was an accident.

De la Cruz v. Capital Insurance says that "there is no accident when a deliberate act is performed
unless some additional, unexpected, independent and unforeseen happening occurs which
produces or brings about their injury or death." This was true when he fired the gun.
Under the insurance contract, the company wasn’t liable for bodily injury caused by attempted
suicide or by one needlessly exposing himself to danger except to save another’s life.
Lim wasn’t thought to needlessly expose himself to danger due to the witness testimony that he took
steps to ensure that the gun wasn’t loaded. He even assured his secretary that the gun was loaded.
There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity
agreed upon if the insured is shown to have contributed to his own accident.

2. “In order that a person may be made liable to the payment of moral damages, the law requires
that his act be wrongful. The adverse result of an action does not per se make the act wrongful and
subject the act or to the payment of moral damages. The law could not have meant to impose a
penalty on the right to litigate; such right is so precious that moral damages may not be charged on
those who may exercise it erroneously. For these the law taxes costs.”
If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses, since it is not
the fact of winning alone that entitles him to recover such damages of the exceptional circumstances
enumerated in Art. 2208. Otherwise, every time a defendant wins, automatically the plaintiff must
pay attorney's fees thereby putting a premium on the right to litigate which should not be so. For
those expenses, the law deems the award of costs as sufficient.”
JEWEL VILLACORTA, assisted by her husband, GUERRERO VILLACORTA,

petitioner, vs.

THE INSURANCE COMMISSION and EMPIRE INSURANCE COMPANY,

respondents.

FACTS:

Complainant [petitioner] was the owner of a Colt Lancer car insured with respondent company for
P35,000.00— Own Damage; P30,000.00— Theft; and P30,000.00— Third Party Liability. While the
vehicle was in the custody of the Sunday Machine Works, for general check-up and repairs, the car was
allegedly taken by 6 persons and driven out to Montalban, Rizal. While travelling, the car figured in an
accident, hitting and bumping a gravel and sand truck parked at the right side of the road. Complainant,
thereafter, filed a claim for total loss with the respondent company but claim was denied. Hence,
complainant was compelled to institute the present action.

Respondent insurance commission dismissed petitioner's complaint for recovery of the total loss of the
vehicle against private respondent, sustaining respondent insurer's contention that the accident did not
fall within the provisions of the policy either for the Own Damage or Theft coverage, invoking the policy
provision on

"Authorized Driver" clause.

Respondent commission upheld private respondent's contention on the "Authorized Driver" clause in
this wise: "It must be observed that under the above-quoted provisions, the policy limits the use of the
insured vehicle to two (2) persons only, namely: The insured himself or any person on his (insured's)
permission. Respondent commission likewise upheld private respondent's assertion that the car was not
stolen and therefore not covered by the Theft clause.

According to respondent commission, the fact that the car was taken by one of the residents of the
Sunday Machine Works, and the withholding of the same, for a joy ride should not be construed to
mean 'taking' under Art. 308 of the Revised Penal Code.

ISSUE: Whether the “authorized driver” clause bars petitioner from claiming against private respondent

HELD: NO. The main purpose of the "authorized driver" clause, is that a person other than the insured
owner, who drives the car on the insured's order, such as his regular driver, or with his permission, such
as a friend or member of the family or the employees of a car service or repair shop must be duly
licensed drivers and have no disqualification to drive a motor vehicle.
A car owner who entrusts his car to an established car service and repair shop necessarily entrusts his
car key to the shop owner and employees who are presumed to have the insured's permission to drive
the car for legitimate purposes of checking or road-testing the car.

The mere happenstance that the employee(s) of the shop owner diverts the use of the car to his own
illicit or unauthorized purpose in violation of the trust reposed in the shop by the insured car owner
does not mean that the "authorized driver" clause has been violated such as to bar recovery, provided
that such employee is duly qualified to drive under a valid driver's license. Secondly, and independently
of the foregoing (since when a car is unlawfully taken, it is the theft clause, not the "authorized driver"
clause, that applies), where a car is admittedly as in this case unlawfully and wrongfully taken by some
people, be they employees of the car shop or not to whom it had been entrusted, and taken on a long
trip to Montalban without the owner's consent or knowledge, such taking constitutes or partakes of the
nature of theft as defined in Article 308 of the Revised Penal Code.
ANDREW PALERMO vs. PYRAMID INSURANCE CO., INC. [G.R. No. L-36480 May 31, 1988]

Facts:

Petitioner, having purchased a brand new Nissan Cedric de Luxe Sedan, insured the same with the
defendant insurance company against any loss or damage for P 20,000.00 and against third party
liability for P 10,000.00. Plaintiff paid the defendant P 361.34 premium for one year The automobile
was, however, mortgaged by the plaintiff with the vendor, Ng Sam Bok Motors Co., to secure the
payment of the balance of the purchase price, which explains why the registration certificate in the
name of the plaintiff remains in the hands of the mortgagee, Ng Sam Bok Motors Co. while driving the
automobile in question, the plaintiff met a violent accident. The insured, Andrew Palermo, filed a
complaint in the Court of First Instance against Pyramid Insurance Co., Inc., for payment of his claim
under a Private Car Comprehensive Policy issued by the defendant. In its answer, Pyramid Insurance Co.,
Inc., alleged that it disallowed the claim because at the time of the accident, the insured was driving his
car with an expired driver's license. the court a quo rendered judgment ordering the defendant to pay
the plaintiff value of the insurance of the motor vehicle in question and to pay the costs."

Issue: Whether the insured is considered an unauthorized driver if he has an expired driver’s license,
thus the insurer is not liable under the policy.

Ruling: There is no merit in the appellant's allegation that the plaintiff was not authorized to drive the
insured motor vehicle because his driver's license had expired. The driver of the insured motor vehicle at
the time of the accident was, the insured himself, hence an "authorized driver" under the policy. While
the Motor Vehicle Law prohibits a person from operating a motor vehicle on the highway without a
license or with an expired license, an infraction of the Motor Vehicle Law on the part of the insured, is
not a bar to recovery under the insurance contract. It however renders him subject to the penal
sanctions of the Motor Vehicle Law. The requirement that the driver be "permitted in accordance with
the licensing or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving
such motor vehicle by order of a Court of Law or by reason of any enactment or regulation in that
behalf," applies only when the driver" is driving on the insured's order or with his permission." It does
not apply when the person driving is the insured himself. The main purpose of the "authorized driver"
clause, as may be seen from its text, is that a person other than the insured owner, who drives the car
on the insured's order, such as his regular driver, or with his permission, such as a friend or member of
the family or the employees of a car service or repair shop, must be duly licensed drivers and have no
disqualification to drive a motor vehicle.
Geagonia v CA G.R. No. 114427 February 6, 1995
Facts: Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for
P100,000.00. The 1 year policy and covered thestock trading of dry goods.
The policy noted the requirement that "3. The insured shall give notice to the Company of any
insurance or insurances already effected, or which may subsequently be effected, covering any of
the property or properties consisting of stocks in trade, goods in process and/or inventories only
hereby insured, and unless notice be given and the particulars of such insurance or insurances be
stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on
behalf of the Company before the occurrence of any loss or damage, all benefits under this policy
shall be deemed forfeited, provided however, that this condition shall not apply when the total
insurance or insurances in force at the time of the loss or damage is not more than P200,000.00."
The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied
because the petitioner’s stocks were covered by two other fire insurance policies for Php 200,000
issued by PFIC. The basis of the private respondent's denial was the petitioner's alleged violation of
Condition 3 of the policy.

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

Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire
insurance and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Ratio:
1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His
letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His
testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot
prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not
know about the prior policies since these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of
insurance policies should be construed most strictly against those for whose benefits they are
inserted, and most favorably toward those against whom they are intended to operate.
With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and
must be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies
only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding
P200,000.00 of the total policies obtained.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total
insurance in force at the time of loss does not exceed P200,000.00, the private respondent was
amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in
mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other
insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of
fraud. When a property owner obtains insurance policies from two or more insurers in a total amount
that exceeds the property's value, the insured may have an inducement to destroy the property for
the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a
situation in which a fire would be profitable to the insured.
 G.R. No. 138941, 8 Oct. 2001

o INSURANCE LAW: Liberality is the rule of construction in insurance contracts.

FACTS:

Tantuco Enterprises, Inc. is a coconut oil milling and refining company. It owned two
mills (the first oil mill and a new one), both located at its factory compound at Iyam,
Lucena City. The two oil mills are separately covered by fire insurance policies issued
by American Home Assurance Co.

On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil mill. American
Home rejected the claim for the insurance proceeds on the ground that no policy was
issued by it covering the burned oil mill. It stated that the new oil mill was under Building
No. 15 while the insurance coverage extended only to the oil mill under Building No. 5.

ISSUE:

o Whether or not the new oil mill is covered by the fire insurance policy

HELD:

In construing the words used descriptive of a building insured, the greatest liberality is
shown by the courts in giving effect to the insurance. In view of the custom of insurance
agents to examine buildings before writing policies upon them, and since a mistake as
to the identity and character of the building is extremely unlikely, the courts are inclined
to consider the policy of insurance covers any building which the parties manifestly
intended to insure, however inaccurate the description may be.

Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our

mind, that what the parties manifestly intended to insure was the new oil mill.

If the parties really intended to protect the first oil mill, then there is no need to specify it
as new. Indeed, it would be absurd to assume that the respondent would protect its first
oil mill for different amounts and leave uncovered its second one.
Enriquez v. SunLife- Insurance
Policy
41 PHIL 269
Facts:
> On Sept. 24 1917, Herrer made an application to SunLife through its office in Manila for life
annuity.
> 2 days later, he paid the sum of 6T to the company’s anager in its Manila office and was given a
receipt.
> On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On the same
date, the Manila office prepared a letter notifying Herrer that his application has been accepted and
this was placed in the ordinary channels of transmission, but as far as known was never
actually mailed and never received by Herrer.
> Herrer died on Dec. 20, 1917. The plaintiff as administrator of Herrer’s estate brought this action
to recover the 6T paid by the deceased.

Issue:

Whether or not the insurance contract was perfected.

Held:
NO.
The contract for life annuity was NOT perfected because it had NOT been proved satisfactorily that
the acceptance of the application ever came to the knowledge of the applicant. An acceptance of an
offer of insurance NOT actually or constructively communicated to the proposer does NOT make a
contract of insurane, as the locus poenitentiae is ended when an acceptance has passed beyond the
control of the party.

NOTE: Life annuity is the opposite of a life insurance. In life annuity, a big amount is given to the
insurance company, and if after a certain period of time the insured is stil living, he is entitled to
regular smaller amounts for the rest of his life. Examples of Life annuity are pensions. Life
Insurance on the other hand, the insured during the period of the coverage makes small regular
payments and upon his death, the insurer pays a big amount to his beneficiaries.
GREAT PACIFIC LIFE ASSURANCE COMPANY vs. CA G.R. No. L-
31845 April 30, 1979
FACTS:

Ngo Hing filed an application with the Great Pacific Life Assurance Company for a twenty-year
endownment on the life of his one-year old daughter Helen Go. Respondent supplied the essential
data and paid the premium retaining the agent commission. Binding deposit receipt was issued to
private respondent. He supplied the necessary information to the branch Manager Mondragon.

On April 30 1957, Mondragon received a letter from Pacific life disapproving the insurance for the
reason that the plan applied for is not available for minors below seven years old and offered
Juvenile Triple Action Plan which allegedly was not communicated to Ngo Hing.

On May 28, 1957 Helen Go died of influenza with complication of bronchopneumonia. Thereupon,
private respondent sought the payment of the proceeds of the insurance, but having failed in his
effort, he filed the action for the recovery of the same before the Court of First Instance of Cebu,
which rendered the adverse decision as earlier referred to against both petitioners.

ISSUES

(1) Whether the insurance contract was perfected

(2) Whether private respondent Ngo Hing concealed the state of health and physical condition of
Helen Go, which rendered void the aforesaid receipt

RULING:

(1)

No, the contract of insurance was not perfected.

Based on the conditions printed at the back of the receipt, the binding deposit receipt is intended to
be merely a provisional or temporary insurance contract and only upon compliance of the following
conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates;
(2) that if the company does not accept the application and offers to issue a policy for a different
plan, the insurance contract shall not be binding until the applicant accepts the policy offered;
otherwise, the deposit shall be refunded; and (3) that if the applicant is not insurable according to the
standard rates, and the company disapproves the application, the insurance applied for shall not be
in force at any time, and the premium paid shall be returned to the applicant.

The binding deposit receipt is merely conditional and is subordinated to the act of the company in
approving or rejecting the application. (Since Ngo Hing failed to fulfill the condition, for the
application to be accepted by the insurer, the contract was not perfected)

Failure of petitioner Mondragon to communicate to respondent, as the respondent alleged, the

rejection of the insurance application would not have any adverse effect on the allegedly perfected
temporary contract. First, there is no perfected contract. In applying for the pla, he is aware, being
agent of the petitioner that the plan being applied for is not available for minors below 7 years old.
Second, being the underwriter and having insurable interest over this daughter’s life, must have
known and followed the progress on the processing of such application and could not pretend
ignorance.

(2)

Private respondent had deliberately concealed the state of health and physical condition of his
daughter Helen Go. He was fully aware that his one-year old daughter is typically a mongoloid child.
Had he communicated said significant fact in the insurance application fom Pacific Life would have
verified the same and would have had no choice but to disapprove the application outright.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute
and perfect candor or openness and honesty; the absence of any concealment or demotion,
however slight, not for the alone but equally so for the insurer. Whether intentional or unintentional
the concealment entitles the insurer to rescind the contract of insurance.
VIRGINIA A. PEREZ,

petitioner,vs.

COURT OF APPEALS and BF LIFEMAN INSURANCE CORPORATION,

respondents.G.R. No. 112329 January 28, 2000

Facts:

Primitivo Perez has been insured with the BF Lifeman Insurance Corporation since 1980 for P20,000.
Sometime in 1987, Rodolfo Lalog, an agent of BF, convinced him to apply for additionalinsurance
coverage of P50, 000. Perez accomplished the application form and passed the requiredmedical exam.
He also paid P2,075 to Lalog for premium. On Nov. 25, 1987, perez died while riding a banca which
capsized during a storm. During this time his application papers for the additional insurance coverage
was still in the office of BF. Without knowing that Perez died, BF approved Perez’s application and issued
the corresponding policy for P50,000.Virginia Perez, his wife, claimed the benefits of the insurance
policy for her deceased husband but she was only able to obtain P40,000 under the first insurance
policy. BF refused to pay the proceeds amounting to P150,000 under the additional policy coverage of
P50,000 because they maintain that such policy had not been perfected. On Sept. 21, 1990, BF filed a
complaint against Mrs. Perez seeking recission and declaration of nullity of the insurance contract in
question. Mrs. Perez file a counterclaim for the collection of P150,000 plus damages.

Issue:

Whether or not there was a consummated contract of insurance between Perez and BF.

Held:

No. An essential requisite of a valid contract is consent. Consent must be manifested by the meeting of
the offer and acceptance upon the thing and the cause which are to constitute the contract. The offer
must be certain and the acceptance absolute. When Perez filed the application , it was subject to the
acceptance of BF. The perfection was also further conditioned upon 1) issuance of the policy; 2)payment
of the premium and; 3) the delivery to and acceptance by the applicant in good health. The delivery and
acceptance by the applicant was a suspensive condition which was not fulfilled in as much as the
applicant was already dead at the time the policy was issued. The non-fulfillment of the condition
resulted in the non-perfection of the contract. An application for insurance is merely an offer which
requires the overt act of the insurer for it to ripen to a contract. Delay in acting on the application does
not constitute acceptance even though the insured has forwarded his first premium with his application.
Delay, in this case, does not constitute gross negligence because the application was granted within the
normal processing time. WHEREFORE, the decision rendered by the Court of Appeals in CA-G.R. CV No.
35529 is AFFIRMED insofar as it declared Insurance Policy No. 056300 for P50,000.00 issued by BF
Lifeman Insurance Corporation of no force and effect and hence null and void. No costs.
Malayan Insurance Corp vs CA G.R. 119599 March
20, 1997
J. Romero

Facts:

TKC Marketing imported 3,000 metric tons of soya from Brazil to Manila. It was insured by Malayan
at the value of almost 20 million pesos. The vessel, however, was stranded on South Africa because
of a lawsuit regarding the possession of the soya. TKC consulted Malayan on recovery of the
amount, but the latter claimed that it wasn’t covered by the policy. The soya was sold in Africa for
Php 10 million, but TKC wanted Malayan to shoulder the remaining value of 10 million as well.

Petitioner filed suit due to Malayan’s reticence to pay. Malayan claimed that arrest by civil authorities
wasn’t covered by the policy. The trial court ruled in TKC’s favor with damages to boot. The
appellate court affirmed the decision under the reason that clause 12 of the policy regarding an
excepted risk due to arrest by civil authorities was deleted by Section 1.1 of the Institute War
Clauses which covered ordinary arrests by civil authorities. Failure of the cargo to arrive was also
covered by the Theft, Pilferage, and Non-delivery Clause of the contract. Hence this petition.

Issues:

1. WON the arrest of the vessel was a risk covered under the subject insurance policies.

2. WON the insurance policies must strictly construed against the insurer.

Held: Yes. Yes. Petition dismissed.

Ratio:

1. Section 12 or the "Free from Capture & Seizure Clause" states: "Warranted free of capture,
seizure, arrest, restraint or detainment, and the consequences thereof or of any attempt thereat…
Should Clause 12 be deleted, the relevant current institute war clauses shall be deemed to form part
of this insurance.”

This was really replaced by the subsection 1.1 of section 1 of Institute War Clauses (Cargo) which
included “the risks excluded from the standard form of English Marine Policy by the clause
warranted free of capture, seizure, arrest, restraint or detainment, and the consequences thereof of
hostilities or warlike operations, whether there be a declaration of war or not.”

The petitioner’s claim that the Institute War Clauses can be operative in case of hostilities or warlike
operations on account of its heading "Institute War Clauses" is not tenable. It reiterated the CA’s
stand that “its interpretation in recent years to include seizure or detention by civil authorities seems
consistent with the general purposes of the clause.” This interpretation was regardless of the fact
whether the arrest was in war or by civil authorities.

The petitioner was said to have confused the Institute War clauses and the F.C.S. in English law.

“It stated that "the F.C. & S. Clause was "originally incorporated in insurance policies to eliminate the
risks of warlike operations". It also averred that the F.C. & S. Clause applies even if there be no war
or warlike operations. In the same vein, it contended that subsection 1.1 of Section 1 of the Institute
War Clauses (Cargo) "pertained exclusively to warlike operations" and yet it also stated that "the
deletion of the F.C. & S. Clause and the consequent incorporation of subsection 1.1 of Section 1 of
the Institute War Clauses (Cargo) was to include "arrest, etc. even if it were not a result of hostilities
or warlike operations."

The court found that the insurance agency tried to interpret executive and political acts as those not
including ordinary arrests in the exceptions of the FCS clause , and claims that the War Clauses now
included executive and political acts without including ordinary arrests in the new stipulation.

“A strained interpretation which is unnatural and forced, as to lead to an absurd conclusion or to

render the policy nonsensical, should, by all means, be avoided.”

2. Indemnity and liability insurance policies are construed in accordance with the general rule of
resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by
the insurer. A contract of insurance, being a contract of adhesion, means that any ambiguity should
be resolved against the insurer.
MANILA MAHOGANY MANUFACTURING CORPORATION vs. COURT OF APPEALS ANDZENITH INSURANCE
CORPORATION (G.R. No. L-52756 (October 12, 1987)FACTS:

Petitioner Manila Mahogany Manufacturing Corporation insured its Mercedes Benz 4-door sedan with
respondent Zenith Insurance Corporation. The insured vehicle was bumped and damaged by a truck
owned by San Miguel Corporation. For the damage caused, respondent company paid petitioner five
thousand pesos(P5,000.00) in amicable settlement. Petitioner's general manager executed a Release of
Claim, subrogating respondent company to all its right to action against San Miguel Corporation.
Thereafter, respondent company wrote Insurance Adjusters, Inc. to demand reimbursement from San
Miguel Corporation of the amount it had paid petitioner. Insurance Adjusters, Inc. refused
reimbursement, alleging that San Miguel Corporation had already paid petitioner P4,500.00 for the
damages to petitioner's motor vehicle, as evidenced by a cash voucher and a Release of Claim executed
by the General Manager of petitioner discharging San Miguel Corporation from "all actions, claims,
demands the rights of action that now exist or hereafter develop arising out of or as a consequence of
the accident." Respondent insurance company thus demanded from petitioner reimbursement of the
sum of P4,500.00 paid by San Miguel Corporation. Petitioner refused; hence, the instant case.

ISSUE:

Whether or not the respondent insurance company is subrogated to the rights of the petitioner against
San Miguel Corporation.

HELD: YES

RULING:

The Supreme Court held that if a property is insured and the owner receives the indemnity from the
insurer, it is provided in [Article 2207 of the New Civil Code] that the insurer is deemed subrogated

to the rights of the insured against the wrongdoer and if the amount paid by the insurer does not fully
cover the loss, then the aggrieved party is the one entitled to recover the deficiency. Under this legal
provision, the real party in interest with regard to the portion of the indemnity paid is the insurer and
not the insured.

Hence, petitioner is entitled to keep the sum of P4,500.00 paid by San Miguel Corporation under itsclear
right to file a deficiency claim for damages incurred, against the wrongdoer, should the insurance
company not fully pay for the injury caused (Article 2207, New Civil Code).

However, when petitioner released San Miguel Corporation from any liability, petitioner's right to retain
the sum of P5,000.00 no longer existed, thereby entitling private respondent to recover the same

.The right of subrogation can only exist after the insurer has paid the insured otherwise the insured will
be deprived of his right to full indemnity. If the insurance proceeds are not sufficient to cover the
damages suffered by the insured, then he may sue the party responsible for the damage for the
remainder. To the extent of the amount he has already received from, the insurer enjoys the right of
subrogation. Since the insurer can be subrogated to only such rights as the insured may have,

should the insured, after receiving payment from the insurer, release the wrongdoer who caused the
loss, the insurer loses his rights against the latter. But in such a case, the insurer will be entitled to
recover from the insured whatever it has paid to the latter, unless the release was made with the
consent of the insurer.
Pan Malayan Insurance Corporation

v. Court of Appeals (Ana

)G.R. No. 81026 | April 3, 1990 | J. Cortes

Facts:

Canlubang Automotive Resources Corp. obtained from PanMalay a motor vehicle insurancepolicy for
its Mitsubishi Colt Lancer.

While the policy was still in effect, the insured car was allegedly hit by a pick-up owned byErlinda
Fabie but driven by another person. The car suffered damages in the amount of P42K.

PanMalay defrayed the cost of repair of the insured car. It then demanded reimbursement fromFabie
and her driver of said amount, but to no avail.

PanMalay filed a complaint for damages with the RTC of Makati against Fabie and the driver.
Itaverred that the damages caused to the insured car was settled under the “own damage ” coverage
of the insurance policy.

Private respondents filed a motion to dismiss alleging that PanMalay had no cause of action since the

“won damage” clause of the policy precluded subrogation under Art. 2207 of the Civil Code. They
contended that indemnification under said article is on the assumption that there was no wrongdoer
or no 3rd party at fault.

The RTC dismissed PanMalay’s complaint and ruled that payment under the “own damage” clause
was an admission by the insurer that the damage was caused by the assured and/or
itsrepresentatives.

CA affirmed but on different ground. Applying the ejusdem generis rule, CA held that Section III-Iof
the policy, which was the basis for the settlement of the claim against insurance, did not cover
damage arising from collision or overturning due to the negligence of 3rd parties as one of the
insurable risks.

Issue:

Was Pan Malay subrogated to the rights of Canlubang against the driver and his employer?

Held: Yes.

Decision: The Supreme Court remanded the case back to the trial court.
Ruling:

Right of Subrogation of the Insurer

Article 2207 of the Civil Code is founded on the well-settled principle of subrogation.

If the insured property is destroyed or damaged through the fault or negligence of a party other than
the assured, then the insurer, upon payment to the assured, will be subrogated to the rights of the
assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay.

Payment by the insurer to the assured operates as an equitable assignment to the former of all
remedies which the latter may have against the third party whose negligence or wrongful act caused
the loss.

The right of subrogation is not dependent upon, nor does it grow out of, any privity of contractor
upon written assignment of claim. It accrues simply upon payment of the insurance claim by the
insurer.
Insurance Case Digest: Cha V. CA (1997)

FACTS:

Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation entered a 1 year lease contract
with a stipulation not to insure against fire the chattels, merchandise, textiles, goods and effects placed
at any stall or store or space in the leased premises without first obtaining the written consent and
approval of the lessor. But it insured against loss by fire their merchandise inside the leased premises
for P500,000 with the United Insurance Co., Inc. without the written consent of CKS

On the day the lease contract was to expire, fire broke out inside the leased premises and CKS learning
that the spouses procured an insurance wrote to United to have the proceeds be paid directly to them.
But United refused so CKS filed against Spouses Cha and United.

RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to pay P50,000 as exemplary
damages, P20,000 as attorney’s fees and costs of suit.

CA: deleted exemplary damages and attorney’s fees

ISSUE: W/N the CKS has insurable interest because the spouses Cha violated the stipulation

HELD: NO. CA set aside. Awarding the proceeds to spouses Cha.

Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of
some person having an insurable interest in the property insured

A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their
merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist a
t the time the insurance takes effect and at the time the loss occurs. The basis of such requirement of
insurable interest in property insured is based on sound public policy: to prevent a person from taking
out an insurance policy on property upon which he has no insurable interest and collecting the proceeds
of said policy in case of loss of the property. In such a case, the contract of insurance is a mere wager
which is void under Section 25 of the Insurance Code.

SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person
insured has or has not any interest in the property insured, or that the policy shall be received as proof
of such interest, and every policy executed by way of gaming or wagering, is void

Section 17. The measure of an insurable interest in property is the extent to which the insured might be
damnified by loss of injury thereof. The automatic assignment of the policy to CKS under the provision of
the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds
of the fire insurance policy thus rightfully belong to the spouses. The liability of the Cha spouses to CKS
for violating their lease contract in that Cha spouses obtained a fire insurance policy over their own
merchandise, without the consent of CKS, is a separate and distinct issue which we do not resolve in this
case.
ANG KA YU vs. PHOENIX ASSURANCE CO. LTD. ANG KA YU vs. PHOENIX ASSURANCE CO. LTD.

1 CAR 704 28 September 1961

FACTS: Ang Ka Yu, herein petitioner, was engaged in the business of dyeing and washing clothes. This
would require his clients to deliver and deposit to the petitioner such clothes that would require his
service. He acquired from Phoenix Assurance Co. Ltd., herein respondent, a policy insuring the effects of
his business. When the clothes he had in his possession were lost, Ang Ka Yu sought to recover from
Phoenix Assurance. However, the latter refused the claim and denied liability on the ground that the
petitioner was a mere possessor of said items, and therefore did not have any insurable interest to the
same.

ISSUE: Whether or not the petitioner, allegedly being a mere possessor, has an insurable interest in the
property of concern.

HELD: Yes. A person to whom clothes are delivered for dyeing or washing has insurable interest on such
clothes, because destruction of the textiles will mean pecuniary loss to him as he will be deprived of the
compensation he would be entitled to for dyeing the same, not to mention his pecuniary liability for
labour and expenses. A person who is interested in the safety and preservation of materials in his
possession belonging to third parties because he stands either to benefit from their continued existence
or to be prejudiced by their destruction, has an insurable interest thereon which is not necessarily
limited to the extent of his liability to the owners thereof. A person having mere right of possession of
property may insure it to its full value and in his own name, even when he is not responsible for its
safekeeping.
Insular Life Assurance Co., Ltd. vs Serafin Feliciano (1941)

Evaristo Feliciano was issued an insurance policy by Insular Life. In September 1935, he died. His heirs
(Serafin Feliciano et al) filed an insurance claim but Insular Life denied the application as it averred that
Feliciano’s application was attended by fraud. It was later found in court that the insurance agent and
the medical examiner of Insular Life who assisted Feliciano in signing the application knew that Feliciano
was already suffering from tuberculosis; that they were aware of the true medical condition of Feliciano
yet they still made it appear that he was healthy in the insurance application form; that Feliciano signed
the application in blank and the agent filled the information for him.

ISSUE: Whether or not Insular Life can avoid the insurance policy by reason of the fact that its agent
knowingly and intentionally wrote down the answers in the application differing from those made by
Feliciano hence instead of serving the interests of his principal, acts in his own or another’s interest and
adversely to that of his principal.

HELD: No. Insular Life must pay the insurance policy. The weight of authority is that if an agent of the
insurer, after obtaining from an applicant for insurance a correct and truthful answer to interrogatories
contained in the application for insurance, without knowledge of the applicant fills in false answers,
either fraudulently or otherwise, the insurer cannot assert the falsity of such answers as a defense to
liability on the policy, and this is true generally without regard to the subject matter of the answers or
the nature of the agent’s duties or limitations on his authority, at least if not brought to the attention of
the applicant.

The fact that the insured did not read the application which he signed, is not indicative of bad faith. It
has been held that it is not negligence for the insured to sign an application without first reading it if the
insurer by its conduct in appointing the agent influenced the insured to place trust and confidence in the
agent.
Sun Life v. CA - Concealment in Insurance

Facts:
> On April 15, 1986, Bacani procured a life insurance contract for himself from Sun Life. He was issued a life
insurance policy with double indemnity in case of accidental death. The designated beneficiary was his
mother, Bernarda.
> On June 26, 1987, the insured died in a plane crash. Bernarda Bacani filed a claim with Sun Life, seeking the
benefits of the insurance. Sun Life conducted an investigation and its findings prompted it to reject the claim.
> Sun Life discovered that 2 weeks prior to his application, Bacani was examined and confined at the Lung
Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased
was subjected to urinalysis, ultra-sonography and hematology tests. He did not reveal such fact in his
application.
> In its letter, Sun Life informed Berarda, that the insured did not disclosed material facts relevant to the
issuance of the policy, thus rendering the contract of insurance voidable. A check representing the total
premiums paid in the amount of P10,172.00 was attached to said letter.
> Bernarda and her husband, filed an action for specific performance against Sun Life. RTC ruled for
Bernarda holding that the facts concealed by the insured were made in good faith and under the belief that
they need not be disclosed. Moreover, it held that the health history of the insured was immaterial since the
insurance policy was "non-medical." CA affirmed.

Issue:
Whether or not the beneficiary can claim despite the concealment.

Held:
NOPE.
Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to
the other, in good faith, all facts within his knowledge which are material to the contract and as to which he
makes no warranty, and which the other has no means of ascertaining.

Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the
facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the
proposed contract or in making his inquiries (The Insurance Code, Sec 31)

The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters
relating to his health. The information which the insured failed to disclose were material and relevant to the
approval and the issuance of the insurance policy. The matters concealed would have definitely affected
petitioner's action on his application, either by approving it with the corresponding adjustment for a higher
premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the
insured by petitioner in order for it to reasonably assess the risk involved in accepting the application.

Thus, "good faith" is no defense in concealment. The insured's failure to disclose the fact that he was
hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about his
bonafides. It appears that such concealment was deliberate on his part.
Case Digest: Philamcare vs. Court of Appeals and Trinos

PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS and JULITA TRINOS

G.R. No. 125678; 18 March 2002

Facts:

Ernani Trinos, deceased husband of private respondent Julita Trinos, was approved for a health care
coverage with petitioner from March 1988 to March1989. The same was extended twice until June
1990. During the period of his coverage, Ernani was hospitalized several times, however, petitioner
denied the claim of private respondent because the Health Care Agreement was allegedly void due to
the alleged concealment of Ernani that he was not hypertensive, diabetic, and asthmatic, contrary to his
answer in the application form.

Petitioner argues that the agreement merely granted living benefits, such as check-ups and
hospitalisation, hence it is not an insurance contract. Petitioner further argues that it is not an insurance
company, which is governed by the Insurance Commission, but a Health Maintenance Organization
under the authority of the Department of Health.

Issues:

Whether or not the Health Care Agreement between the deceased and the petitioner falls under the
ambit of an insurance contract.

Whether the alleged concealment of the deceased will invalidate the Agreement.

Ruling:

Yes. In the case at bar, the insurable interest of respondents husband in obtaining the health care
agreement was his own health. Section 10 of the Insurance Code is clear that every person has an
insurable interest in the life and health of himself. The health care agreement was in the nature of non-
life insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical or
any other expense arising from sickness, injury or other stipulated contingent, the health care provider
must pay for the same to the extent agreed upon under the contract

No. The answer assailed by petitioner was in response to the question relating to the medical history of
the applicant. This largely depends on opinion rather than fact, especially coming from respondents
husband who was not a medical doctor. Where matters of opinion or judgment are called for, answers
made in good faith and without intent to deceive will not avoid a policy even though they are untrue.
(A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment of the
insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its
acceptance at a lower rate of premium, and this is likewise the rule although the statement is material
to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not
justified in relying upon such statement, but is obligated to make further inquiry. There is a clear
distinction between such a case and one in which the insured is fraudulently and intentionally states to
be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the
impossibility of which is shown by the facts within his knowledge, since in such case the intent to
deceive the insurer is obvious and amounts to actual fraud. Under Section 27 of the Insurance Code, a
concealment entitles the injured party to rescind a contract of insurance. The right to rescind should be
exercised previous to the commencement of an action on the contract.
Bonifacio Brothers VS Mora

FACTS:
 Enrique Mora, owner of Oldsmobile sedan model 1956, mortgaged it to H.S.
Reyes, Inc., with the condition that they would be the beneficiary of its
insurance
 June 23, 1959: The sedan was insured with State Bonding & Insurance Co., Inc
 During the period of effectivity, the sedan met an accident and it was appraised
by Bayne Adjustment Co. and repaired it with Bonifacio Bros. and the parts were
supplied by Ayala Auto Parts Co. This was all done without the knowledge of
H.S. Reyes. Enrique was billed P2,102.73 through Bayne. The insurance
company drew a check deducting P100 for franchise and entrusted it to Bayne
payable to Enrique or H.S. Reyes.
 Still unpaid, the sedan was delivered to Enrique without the Knowledge of H.S.
Reyes
 Bonifacio Bros and Ayala Auto filed in the MTC on the theory that the insurance
proceeds should be paid directly to them
 CFI affirmed MTC: H.S. Reyes, Inc. as having a better right

ISSUE: W/N there is privity between Bonifacio Bro and Ayala Auto against the insurance
company

HELD: NO. Judgment affirmed

 GR: contracts take effect only between the parties thereto
 EX: some specific instances provided by law where the contract contains some
stipulation in favor of a third person - stipulation pour autrui
 provision in favor of a third person not a party to the contract
 third person is allowed to avail himself of a benefit granted to him by the terms of the contract,
provided that the contracting parties have clearly and deliberately conferred a favor upon such person
 stipulation pour autrui must be clearly expressed - none here
 "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating
that it was only the H.S. Reyes, Inc. which they intended to benefit.
 stipulation merely establishes the procedure that the insured has to follow in order to be entitled to
indemnity for repair
 a policy of insurance is a distinct and independent contract between the insured and insurer, and third
persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there
be some contract of trust, expressed or implied between the insured and third person
 "loss" in insurance law embraces injury or damage
 The injury or damage sustained by the insured in consequence of the happening of one or more of the
accidents or misfortune against which the insurer, in consideration of the premium, has undertaken to
indemnify the insured
First Integrated Bonding vs. Hernando

Facts

: Silverio Blanco was the owner of a passenger jeepney which he insured against liabilities for death and injuries to
third persons with First Integrated Bonding and Insurance Company, Inc. for P30,000. The said jeepney driven by
Blanco himself bumped a five-year old child, Deogracias Advincula, causing the latter's death. The boy’s parents
filed a complaint for damages against Blanco and First Insurance, which was granted by the lower court. First
Insurance filed a petition for certiorari contending that the victim’s parents have no cause of action against it
because they are not parties to the insurance contract and that they may only proceed against the driver based on
the provisions of the New Civil Code.

Issue

: W/N an injured party for whom the contract of insurance is intended can sue directly the insurer

Held

: YES

Doctrine

: Where the insurance contract provides for indemnity against liability to a third party, such third party can directly
sue the insurer. The liability of the insurer to such third person is based on contract while the liability of the
insured to the third party is based on tort. It cannot evade its liability as insurer by hiding under the cloak of the
insured. Its liability is primary and not dependent on the recovery of judgment from the insured.
Facts:
> Tan Lee Siong was issued a policy by Philamlife on Nov. 6, 1973.
> On Aprl 26, 1975, Tan died of hepatoma. His beneficiaries then filed a claim with Philamlife for
the proceeds of the insurance.
> Philamlife wrote the beneficiaries in Sep. 1975 denying their claim and rescinding the contract on
the ground of misrepresentation. The beneficiaries contend that Philamlife can no longer rescind the
contract on the ground of misrepresentation as rescission must allegedly be done “during the lifetime
of the insured” within two years and prior to the commencement of the action following the wording
of Sec. 48, par. 2.

Issue:
Whether or not Philamlife can rescind the contract.

Held:
YES.
The phrase “during the lifetime” found in Sec. 48 simply means that the policy is no longer in force
after the insured has died. The key phrase in the second paragraph is “for a period of two years”.

What is a simpler illustration of the ruling in Tan v. CA?

The period to consider in a life insurance poiicy is “two years” from the date of issue or of the last
reinstatement. So if for example the policy was issued/reinstated on Jan 1, 2000, the insurer can
still exercise his right to rescind up to Jan. 1, 2003 or two years from the date of issue/reinstatement,
REGARDLESS of whether the insured died before or after Jan. 1, 2003.
Development Insurance v IAC G.R. No. 71360 July
16, 1986
J. Cruz

Facts:

A fire occurred in the building of Philippine Union. It sued for recovery of damages from the petitioner
on the basis of an insurance contract between them. The petitioner failed to answer on time despite
the numerous extensions it asked for. It was declared in default by the trial court. A judgment of
default was subsequently rendered on the strength of the evidence given by the private respondent,
which was allowed damages. The petitioner moved to lift the order of default. Its motion was denied.
It went to the appellate court, which affirmed the decision of the trial court. Hence this appeal.

Issue: Was Philippine Union required to jointly indemnify the building?

Held: No. Petition dismissed.

Ratio:

The policy insured the private respondent's building against fire for P2,500,000.00.

The petitioner argued that the respondent must share the difference between that amount and the
face value of the policy and the loss sustained for 5.8 million under Condition 17 of the policy.

The building was insured at P2,500,000.00 by agreement of the insurer and the insured.

The agreement is known as an open policy and is subject to the express condition that:

“In the event of loss, whether total or partial, it is understood that the amount of the loss shall be
subject to appraisal and the liability of the company, if established, shall be limited to the actual loss,
subject to the applicable terms, conditions, warranties and clauses of this Policy, and in no case
shall exceed the amount of the policy.”

Section 60 of the Insurance Code defines an open policy is one in which the value of the thing
insured is not agreed upon but is left to be ascertained in case of loss." This means that the actual
loss, as determined, will represent the total indemnity due the insured from the insurer except only
that the total indemnity shall not exceed the face value of the policy.

The actual loss has been ascertained in this case. Hence, applying the open policy clause as
expressly agreed upon, the private respondent is entitled to indemnity in the total amount of
P508,867.00.

The refusal of its vice-president to receive the private respondent's complaint was the first indication
of the petitioner's intention to prolong this case and postpone the discharge of its obligation to the
private respondent under this agreement. They still evaded payment for 5 years.
Makati Tuscany Condominium v. CA

Facts: American Home Assurance Co., issued in favor of Makati Tuscany Condominium Corporation insurance
policies for 2 years. The premiums were paid by Tuscany on installments. The policy was again renewed however
Tuscany thereafter refused to pay the balance of the premium. AHAC filed an action to recover the unpaid balance.
Tuscany claimed that the policy was never binding and valid, and no risk attached to the policy.

Issue:

WON payment by installment of the premiums due on an insurance policy invalidates the contract of insurance.

Held: NO. Doctrine: Waiver of the condition of prepayment of the premium: While the import of Section 77 is that
prepayment of premiums is strictly required as a condition to the validity of the contract, Section 78 of the
Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an
acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to
make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties
from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an
agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order
or public policy.
South Sea Surety And Insurance Co., Inc. V. CA

FACTS:

 Valenzuela Hardwood and Industrial Supply, Inc. shipped with Seven Brothers'
vessel M/V Seven Ambassador lauan round logs numbering 940 at the port of
Maconacon, Isabela for shipment to Manila
 Valenzuela insured the logs against loss and/or, damage with South Sea Surety and
Insurance Co., Inc. for P2,000,000 issuing a Marine Cargo Insurance Policy
 January 24 1984: Valenzuela gave the check in payment of the premium on the
insurance policy to Mr. Victorio Chua
 January 25 1984: M/V Seven Ambassador sank
 January 30 1984: The check was tendered to South Sea but it refused. Instead it
cancelled the insurance policy for non-payment of the premium
 RTC: favored Valenzuela against South Sea and Seven Brothers
 CA: Absolved Seven Brothers
 stipulation in the charter party that the ship owner would be exempted from liability
in case of loss
 South Sea contends that it is cancelled and that Mr. Chua is not authorized
ISSUE: W/N Mr. Chua is an authorized representative to receive the payment

HELD: YES. petition is DENIED

 payment of the premium is a condition precedent to, and essential for, the efficaciousness of the contract.
 The only two statutorily provided exceptions are
 (a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period
applies and
 (b) when the insurer makes a written acknowledgment of the receipt of premium, this acknowledgment
being declared by law to be then conclusive evidence of the premium payment
 South Sea Surety and Insurance Co., Inc. delivered to him the policy on 21 January
1984 at his office to be delivered to the Valenzuela - deemed to have been
authorized by the South Sea Surety and Insurance Co., Inc. to receive the premium.
UCPB General Insurance Co. Inc. vs. Masagana Telemart Inc.

Facts: Plaintiff obtained from defendant fire insurance policies on its property effective from May
1991 - 1992. On June 1992, plaintiff's properties were raged by fire. On the same date plaintiff
tendered, and defendant accepted five checks as renewal premium payments for which a receipt
was issued. Masagana made a claim which was denied. the checks were then returned to plaintiff.
According to defendant, the claim cannot be entertained for properties were burned before the
tender of premium.

Issue: Whether or not section 77 of the insurance code must be strictly applied to petitioner’s
advantage despite its practice of granting 60 to 70 day credit term for the payment of its premium

Held: The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life
policy whenever the grace period provision applies.

The second is that covered by Section 78 of the Insurance Code, which provides:

SECTION 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is
conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any
stipulation therein that it shall not be binding until premium is actually paid.

A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals,
wherein we ruled that Section 77 may not apply if the parties have agreed to the payment in
installments of the premium and partial payment has been made at the time of loss.

Tuscany case has provided a fourth exception to Section 77, namely, that the insurer may grant
credit extension for the payment of the premium. This simply means that if the insurer has granted
the insured a credit term for the payment of the premium and loss occurs before the expiration of the
term, recovery on the policy should be allowed even though the premium is paid after the loss but
within the credit term.

Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to
provide a credit term within which to pay the premiums. That agreement is not against the law,
morals, good customs, public order or public policy. The agreement binds the parties. Article 1306 of
the Civil Code provides:

ARTICLE 1306. The contracting parties may establish such stipulations clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.

Finally in the instant case, it would be unjust and inequitable if recovery on the policy would not be
permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for the
payment of premiums despite its full awareness of Section 77. Estoppel bars it from taking refuge
under said Section, since Respondent relied in good faith on such practice. Estoppel then is the fifth
exception to Section 77.
American Home Assurance Co. V. Chua
FACTS:

 April 5, 1990: Antonio Chua renewed the fire insurance for its stock-in-trade of his business, Moonlight
Enterprises with American Home Assurance Companyby issuing a check of P2,983.50 to its agent James
Uy who delivered the Renewal Certificate to him.
 April 6, 1990: Moonlight Enterprises was completely razed by fire with an est. loss
of P4,000,000 to P5,000,000
 April 10, 1990: An official receipt was issued and subsequently, a policy was issued
covering March 25 1990 to March 25 1991
 Antonio Chua filed an insurance claim with American Home and 4 other co-insurers
(Pioneer Insurance and Surety Corporation, Prudential Guarantee and Assurance, Inc.
and Filipino Merchants Insurance Co)
 American Home refused alleging the no premium was paid
 RTC: favored Antonio Chua for paying by way of check a day before the fire occurred
 CA: Affirmed

ISSUE:
1. W/N there was a valid payment of premium considering that the check was cashed after the
occurrence of the fire since the renewal certificate issued containing the acknowledgement
receipt

HELD: petition is partly GRANTED modified by deleting the awards of P200,000 for loss of profit,
P200,000 as moral damages and P100,000 as exemplary damages, and reducing the award of
attorney’s fees from P50,000 to P10,000

1. YES.

Section 77 of the Insurance Code

 An insurer is entitled to payment of the premium as soon as the thing insured is exposed to
the peril insured against. Notwithstanding any agreement to the contrary, no policy or
contract of insurance issued by an insurance company is valid and binding unless and until
the premium thereof has been paid, except in the case of life or an industrial life policy
whenever the grace period provision applies
 Section 66 of the Insurance Code - not applicable since not termination but renewal
 renewal certificate issued contained the acknowledgment that premium had been paid
 Section 306 of the Insurance Code provides that any insurance company which delivers a
policy or contract of insurance to an insurance agent or insurance broker shall be deemed to
have authorized such agent or broker to receive on its behalf payment of any premium which
is due on such policy or contract of insurance at the time of its issuance or delivery or which
becomes due thereon
 best evidence of such authority is the fact that petitioner accepted the check and issued the
official receipt for the payment. It is, as well, bound by its agent’s acknowledgment of
receipt of payment
 Section 78 of the Insurance Code
 An acknowledgment in a policy or contract of insurance of the receipt of premium is
conclusive evidence of its 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.
 This Section establishes a legal fiction of payment and should be interpreted as an exception
to Section 77
INSURANCE CASE #49 PIONEER INSURANCE AND SURETY CORPORATION v. OLIVA YAP
G.R. No. L-36232; December 19, 1974

FACTS:

On April 19, 1962, respondent Yap took out Fire Insurance Policy No. 4216 from petitioner
Pioneer Insurance & Surety Corporation with a face value of P25,000.00 covering her
stocks, office furniture, fixtures and fittings of every kind and description. Among the
conditions in the policy executed by the parties are the following: The Insured shall give
notice to the Company of any insurance or insurances already effected, or which may
subsequently be effected, covering any of the property hereby insured, and unless such
notice be given and the particulars of such insurance or insurances be stated in, or endorsed
on this Policy by or on behalf of the Company before the occurrence of any loss or damage,
all benefits under this Policy shall be forfeited. (emphasis supplied) Still later, or on
September 26, 1962, respondent Oliva Yap took out another fire insurance policy for
P20,000.00 covering the same properties from the Federal Insurance Company, Inc. without
notice to and the written consent of petitioner. At dawn on December 19, 1962, a fire broke
out in the building housing respondent Yap's above-mentioned store, and the said store was
burned. Respondent Yap filed an insurance claim, but the same was denied in petitioner's
letter of May 17, 1963, on the ground of "breach and/or violation of any and/or all terms
and conditions" of Policy No. 4219.

ISSUE:

Whether or not petitioner should be absolved from liability on Fire Insurance Policy No. 4219
on account of any violation by respondent Yap of the co-insurance clause therein.

HELD:

YES. There was a violation by respondent Oliva Yap of the co-insurance clause contained in
Policy No. 4219 that resulted in the avoidance of petitioner's liability. By the plain terms of
the policy, other insurance without the consent of petitioner would ipso facto avoid the
contract. It required no affirmative act of election on the part of the company to make
operative the clause avoiding the contract, wherever the specified conditions should occur.
Its obligations ceased, unless, being informed of the fact, it consented to the additional
insurance. The obvious purpose of the aforesaid requirement in the policy is to prevent
over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer,
is interested in preventing the situation in which a fire would be profitable to the insured.
Roque v. Intermediate Appellate Court

Facts:

Isabela Roque (Roque of Isabela Roque Timber Enterprises) hired the Manila Bay Lighterage
Corp. (Manila Bay) to load and carry its logs from Palawan to North Harbor, Manila. The logs
were insured with Pioneer Insurance and Surety Corp. (Pioneer). The logs never reached
Manila due to certain circumstances (as alleged by Roque and found by the appellate court),
such as the fact that the barge was not seaworthy that it developed a leak, that one of the
hatches were left open causing water to enter, and the absence of the necessary cover of
tarpaulin causing more water to enter the barge. When Roque demanded payment from
Pioneer, but the latter refused on the ground that its liability depended upon the “Total Loss
by Total Loss of Vessel Only.” The trial court ruled in favor

of Roque in the civil complaint filed by the latter against Pioneer, but the decision was
reversed by the appellate court.

Issue:

WON in cases of marine insurance, there is a warranty of seaworthiness by the cargo

owner; WON the loss of the cargo was due to perils of the sea, not perils of the ship.

Held:

Yes, there is. The liability of the insurance company is governed by law. Section 113 of the
Insurance Code provides that “In every marine insurance upon a ship or freight, or
freightage, or upon anything which is the subject of marine insurance, a warranty is implied
that the ship is seaworthy.

” Hence, there can be no mistaking the fact that the term "cargo" can be the subject of
marine insurance and that once it is so made, the implied warranty of seaworthiness
immediately attaches to whoever is insuring the cargo whether he be the ship owner or not.
Moreover, the fact that the unseaworthiness of the ship was unknown to the insured is
immaterial in ordinary marine insurance and may not be used by him as a defense in order
to recover on the marine insurance policy. As to the second issue, by applying Sec. 113 of
the Insurance Code, there is no doubt that the term 'perils of the sea' extends only to losses
caused by sea damage, or by the violence of the elements, and does not embrace all losses
happening at sea; it is said to include only such losses as are of extraordinary nature, or
arise from some overwhelming power, which cannot be guarded against by the ordinary
exertion of human skill and prudence. t is also the general rule that everything which
happens thru the inherent vice of the thing, or by the act of the owners, master or shipper,
shall not be reputed a peril, if not otherwise borne in the policy. It must be considered to be
settled, furthermore, that a loss which, in the ordinary course of events, results from the
natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or
from the negligent failure of the ship's owner to provide the vessel with proper equipment to
convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is rather
due to what has been aptly called the "peril of the ship." The insurer undertakes to insure
against perils of the sea and similar perils, not against perils of the ship. Neither barratry
can be used as a ground by Roque. Barratry as defined in American Insurance Law is "any
willful misconduct on the part of master or crew in pursuance of some unlawful or
fraudulent purpose without the consent of the owners, and to the prejudice of the owner's
interest." Barratry necessarily requires a willful and intentional act in its commission. No
honest error of judgment or mere negligence, unless criminally gross, can be barratry. In
the case at bar, there is no finding that the loss was occasioned by the willful or fraudulent
acts of the vessel's crew. There was only simple negligence or lack of skill.
Filipino Merchants Insurance Co. V. CA

FACTS:

 Choa Tiek Seng, consignee of the shipment of fishmeal loaded, insured in "all risks policy" 600 metric tons of
fishmeal in new gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks under
warehouse to warehouse terms but only 59.940 metric tons was imported
 When it was unloaded unto the arrastre contractor E. Razon, Inc. and Filipino Merchants's
surveyor ascertained and certified that in such discharge 105 bags were in bad order
condition which was reflected in the survey report of Bad Order cargoes
 Before delivery to Choa, E. Razon's Bad Order Certificate showed that a total of 227 bags in
bad order condition
 Choa brought an action against Filipino Merchants Insurance Co. who brought a third party complaint
against Compagnie Maritime Des Chargeurs Reunis and/or E. Razon, Inc.
 RTC: Ordered Filipino Merchants to pay Choa and reimbursefrom Compagnie Maritime
Des Chargeurs Reunis and third party defendant E. Razon, Inc.
 CA: Affirmed but modified by adjudicating the third party complaint
 Filipino Merchants contended that Chao has no insurable interest and therefore the
policy should be void and that it was fraud that it did not disclose of such fact

ISSUE: W/N Choa Tiek Seng as consignee of the shipment has insurable interest

HELD: YES. CA affirmed.

 GR: the burden of proof is upon the insured to show that a loss arose from a covered peril, but 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 insured under an "all risks insurance policy" has the initial burden of proving that the cargo
was in good condition when the policy attached and that the cargo was damaged when unloaded from the
vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage. - none was shown
= liable
 Section 13 of the Insurance Code defines insurable interest in property as every interest in property, whether
real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril
might directly damnify the insured.
 As vendee/consignee of the goods in transit has such existing interest. His interest over the goods is based on
the perfected contract of sale. The perfected contract of sale between him and the shipper of
the goods operates to vest in him an equitable title even before delivery or before be
performed the conditions of the sale. The contract of shipment, whether under F.O.B.,
C.I.F., or C. & F. as in this case, is immaterial in the determination of whether the
vendee has an insurable interest or not in the goods in transit.
 Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the seller is authorized or
required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not,
for, the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions
to said rule not obtaining in the present case. The Court has heretofore ruled that the delivery of the goods on
board the carrying vessels partake of the nature of actual delivery since, from that time, the foreign buyers
assumed the risks of loss of the goods and paid the insurance premium covering them
Del Val v. Del Val
Facts:
> Petitioners and private respondents are brothers and Sisters and are the only heirs and next of kin
of Gregorio del Val who died intestate.
> It was found out that the deceased took out insurance on his life for the sum of 40T and made it
payable to private respondents as sole beneficiary.
> After Gregorio’s death, Andres collected the proceeds of the policy.
> Of the said policy, Andres paid 18T to redeem some real property which Gregorio had sold to third
persons during his lifetime.
> Said redemption of the property was made by Andres’ laywer in the name of Andres and the
petitioners. (Accdg to Andres, said redemption in the name of Petitioners and himself was without
his knowledge and that since the redemption, petitioners have been in possession of the property)
> Petitioners now contend that the amount of the insurance policy belonged to the estate of the
deceased and not to Andres personally.
> Pet filed a complaint for partition of property including the insurance proceeds
> Andress claims that he is the sole owner of the proceeds and prayed that he be declared:
> Sole owner of the real property, redeemed with the use of the insurance proceeds and its
remainder;
> Petitioners to account for the use and occupation of the premises.

Issue:
Whether or not the petitioners have a right to the insurance proceeds?

Held:
NOPE.
The contract of life insurance is a special contract and the destination of the proceeds thereof is
determined by special laws which deal exclusively with the subject. Our civil code has no provisions
which relate directly and specifically to life-insurance contracts of to the destination of life-insurance
proceeds that subject is regulated exclusively by the Code of Commerce. Thus, contention of
petitioners that proceeds should be considered as a dontation or gift and should be included in the
estate of the deceased is UNTENABLE
Insular Life v Ebrado

FACTS:
Buenaventura Cristor Ebrado was married to Pascuala Ebrado. During his lifetime, he was living with
his common-law wife, Carponia Ebrado, although he was not legally separated from his legal wife.
Buenaventura was issued by The Insular Life Assurance Co., Ltd., Policy No. 009929 on a whole-life
plan for PhP 5,8882.00 with a rider for Accidental Death Benefits for the same amount.
Buenaventura designated Carponia Ebrado as the revocable beneficiary in his policy. Buenaventura
died as a result of an accident when he was hit by a falling branch of a tree. As the insurance policy
was still in force, The Insular Life Assurance Co., Ltd stands liable to pay the coverage.Carponia
Ebrado, his common-law wife, filed with the insurer a claim for the proceeds of the policy as the
designated beneficiary therein. Pascuala Vda. de Ebrado also filed her claim as the widow of the
deceased insured. She asserts that she is the one entitled to the insurance proceeds, not the
common-law wife.In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular
Life Assurance Co., Ltd, commenced an action for Interpleader before the CFI of Rizal.

ISSUE: Can a common-law wife of a man who was not legally separated from his legal wife be a
beneficiary of his life insurance plan?

HELD/RULING:
No.The Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD No. 612, as
amended) does not contain any specific provision grossly resolutory to the question at hand. Section
50 of the Insurance Act, which provides that “(t)he insurance shall be applied exclusively to the
proper interest of the person in whose name it is made,” cannot be interpreted that it includes the
beneficiary because a contract of insurance is personal in character. The general rules of civil law
should be applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code
states: “The contract of insurance is governed by special laws. Matters not expressly provided for in
such special laws shall be regulated by this Code.”Article 2012 of the same Code states that, “any
person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary
of a life insurance policy by the person who cannot make a donation to him.” Therefore, common-law
spouses are barred from receiving donations from each other. Article 739 provides:“The following
donations shall be void:Those made between persons who were guilty of adultery or concubinage at
the time of the donation;Those made between persons found guilty of the same criminal offense, in
consideration thereof;Those made to a public officer or his wife, descendants or ascendants by
reason of his office.
DBP vs Court of Appeals [March 21, 1994]

FACTS:

In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, appliedfor a loan of P500,000.00 with the DBP. As the
principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) A loan, in the reduced
amount of P300,000, was approved by the DBP and Dans accomplished and submitted the application for the MRI. The MRI premium of Dans,
less the DBP service fee of 10 percent, was credited by DBP to the savings account of the DBP MRI Pool.On September 1987, Dans died. The
DBP MRI pool then informed DBP that Dans was not eligible for the MRI coverage because the acceptance limit was 60 years at the time of
application. Candida Dans filed a case against DBP and the DBP MRI for the collection of sum of money with damages, alleging that Dans
became insured by the DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of application, required him to apply for MRI, and
later collected the insurance premium thereon. The DBP was found to be liable. The DBP MRI, on the other hand, was found by the trial court
to have no privity of contract between the it and the deceased.

ISSUE:

Was DBP estopped for having led Dans into applying for MRI and actually collecting the premium and the service fee, despite knowledge of his
age ineligibility

HELD:

In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an insurance agent. As an insurance agent, DBP
made Dans go through the motion of applying for said insurance, thereby leading him and his family to believe that they had already fulfilled all
the requirements for the MRI and that the issuance of their policy was forthcoming. Apparently, DBP had full knowledge that Dan's application
was never going to be approved. The maximum age for MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the Group
Mortgage Redemption Insurance Policy signed in 1984 by all the insurance companies concerned (Exh. "1-Pool").Under Article 1987 of the Civil
Code of the Philippines, "the agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. "The DBP is not authorized to accept
applications for MRI when its clients are more than 60 years of age (Exh. "1-Pool"). Knowing all the while that Dans was ineligible for MRI
coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the
insurance premium, and deducting its agent's commission and service fee. The liability of an agent who exceeds the scope of his authority
depends upon whether the third person is aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation on
DBP's authority to solicit applications for MRI. If the third person dealing with an agent is unaware of the limits of the authority conferred by
the principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is liable for
damages to him.
Perla Compania vs CA

FACTS: Cayas was the registered owner of a Mazda bus which was insured with petitioner PERLA COMPANIA DE SEGUROS, INC (PCSI). The bus
figured in an accident in Cavite, injuring several of its passengers. One of them, Perea, sued Cayas for damages in the CFI, while three others
agreed to a settlement of P4,000.00 each with Cayas.

After trial, the court rendered a decision in favor of Perea, Cayas ordered to compensate the latter with damages. Cayas filed a complaint with
the CFI, seeking reimbursement from PCSI for the amounts she paid to ALL victims, alleging that the latter refused to make such reimbursement
notwithstanding the fact that her claim was within its contractual liability under the insurance policy.

The decision of the CA affirmed in toto the decision of the RTC of Cavite, the dispositive portion of which states:

IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant PCSI to pay plaintiff Cayas the sum of P50,000.00 under its
maximum liability as provided for in the insurance policy; …

In this petition for review on certiorari, petitioner seeks to limit its liability only to the payment made by private respondent to Perea and only
up to the amount of P12,000.00. It altogether denies liability for the payments made by private respondents to the other 3 injured passengers
totaling P12,000.00.

ISSUE: how much should PCSI pay?

HELD: The decision of the CA is modified, petitioner only to pay Cayas P12,000,000.00

The insurance policy provides:

5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the Company …

It being specifically required that petitioner’s written consent be first secured before any payment in settlement of any claim could be made,
private respondent is precluded from seeking reimbursement of the payments made to the other 3 victims in view of her failure to comply with
the condition contained in the insurance policy.

Also, the insurance policy involved explicitly limits petitioner’s liability to P12,000.00 per person and to P50,000.00 per accident

Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case.
Thus, it was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their
own interpretation of the insurance policy.

We observe that although Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable for the amount of P50,000.00, the
maximum liability per accident stipulated in the policy. This is patent error. An insurance indemnity, being merely an assistance or restitution
insofar as can be fairly ascertained, cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason of an
accident.
GOVERNMENT SERVICE INSURANCE SYSTEM
vs. COURT OF APPEALS
FACTS: Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the Lagasca spouses, executed a deed of
mortgage in favor of petitioner GSIS. Subsequently, another deed of mortgage in connection with the two loans were
granted by the latter. A parcel of land, co-owned by said mortgagor spouses, was given as security under the
aforesaid two deeds. They also executed a “promissory note”. The Lagasca spouses executed an instrument
denominated “Assumption of Mortgage” under which they obligated themselves to assume obligation to the GSIS.
This undertaking was not fulfilled. Upon failure of the mortgagors to comply with the conditions of the mortgage,
particularly the payment of the amortizations due, GSIS extrajudicially foreclosed the mortgage and caused the
mortgaged property to be sold at public auction. Private respondents filed a complaint against the petitioner and the
Lagasca spouses praying that the extrajudicial foreclosure be declared null and void. In their aforesaid complaint,
they alleged that they signed the mortgage contracts not as sureties or guarantors for the Lagasca spouses but they
merely gave their common property to the said co-owners who were solely benefited by the loans from the GSIS.
Trial court dismissed the case. COA reversed decision stating that the respondents are that only of an
accommodation party.

ISSUE: Whether or not the NIL is applicable to the promissory note and mortgage deed.

HELD: NO. Both parties relied on the provisions of Section 29 of Act No. 2031, otherwise known as the Negotiable
Instruments Law, which provide that an accommodation party is one who has signed an instrument as maker, drawer,
acceptor of indorser without receiving value therefor, but is held liable on the instrument to a holder for value although
the latter knew him to be only an accommodation party.
This approach of both parties appears to be misdirected and their reliance misplaced. The promissory note
hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable instruments.
These documents do not comply with the fourth requisite to be considered as such under Section 1 of Act No. 2031
because they are neither payable to order nor to bearer. The note is payable to a specified party, the GSIS. Absent
the aforesaid requisite, the provisions of Act No. 2031 would not apply, governance shall be afforded, instead, by the
provisions of the Civil Code and special laws on mortgages.
Phil. American Life Insurance Company V. Ansaldo

FACTS:

Ramon M. Paterno, Jr. sent a letter dated April 17, 1986 to Insurance Commissioner alleging certain problems encountered by agents,
supervisors, managers and public consumers of the Philippine American Life Insurance Company (Philamlife)

During the hearing Ramon stated that the contract of agency is illegal Philamlife through its president De los Reyes contended that the
Insurance Commissioner as a quasi-judicial body cannot rule on the matter

ISSUE:

1. W/N the Insurance Commissioner has the authority to regulate the business of insurance - YES

2. W/N the business of insurance covers the contract of agency - NO

HELD: petition is GRANTED

1. YES.

Insurance Commissioner has the authority to regulate the business of insurance.

2. NO.
 power does not cover the relationship affecting the insurance company and its agents but is limited to adjudicating claims and
complaints filed by the insured against the insurance company
 While the subject of Insurance Agents and Brokers is discussed under Chapter IV, Title I of the Insurance Code, the provisions
of said Chapter speak only of the licensing requirements and limitations imposed on insurance agents and brokers.
 Great Pacific Life Assurance Corporation v. Judico, 180 SCRA 445 (1989):
 insurance company may have two classes of agents who sell its insurance policies:
 (1) salaried employees who keep definite hours and work under the control and supervision of the company - governed by the
Contract of Employment and the provisions of the Labor Code
 (2) registered representatives, who work on commission basis. - governed by the Contract of Agency and the provisions of the
Civil Code on the Agency