[GRN 119599 20 March 1997] contained one of the exceptions in Part VI that it shall not

MALAYAN INSURANCE CORPORATION vs. CA and cover deaths “by drowning except as a consequence of
TKC MARKETING CORPORATION the wrecking or disablement in the Philippine waters of a
passenger steam or motor vessel in which the Insured is
Facts: Private respondent TKC was the
traveling as a fare-paying passenger”. On February 24,
owner/consignee of tons of soya bean meal which was
1957, the insured Francisco, while on board the motor
loaded on board a ship for carriage from Brazil to Manila.
launch "ISLAMA", and his beneficiary, Remedios Jayme,
Said cargo was insured against the risk of loss by
were forced to jump off said launch on account of fire
petitioner Malayan for which it issued 2 Marine Cargo
which broke out on said vessel, resulting to the death by
Policy. While the vessel was docked in South Africa, the
drowning, of the insured and beneficiary in the waters of
civil authorities arrested and detained it because of a
Jolo. Simeon, the sole heir, filed a claim from the
lawsuit filed on a question of ownership and possession.
defendant and the latter paid only P1,000 pursuant to Sec.
TKC advised Malayan that it might tranship the cargo and
1 Part 1 of the policy. After sometime, petitioner’s lawyer
requested an extension of the insurance coverage until
asked for more which led them to file an action in the
actual transhipment, which extension was approved upon
courts.
payment of additional premium under the same terms
and conditions in the original policy. However, due to its
Issue: How much should the indemnity be?
perishable nature, the cargo was sold in South Africa.
Malayan claimed that the arrest of the vessel by civil
authorities was an excepted risk under the marine Ruling: P3,000.00. It has been generally held that the
insurance policies. TKC filed a case with the RTC for its 'terms in an insurance policy, which are ambiguous,
equivocal or uncertain are to be construed strictly
claim under the insurance policy which ruled in its favor
against, the insurer, and liberally in favor of the insured
and later affirmed by the CA on appeal stating that the
so as to effect the dominant purpose of indemnity or
arrest of the vessel was a risk covered under the subject
insurance policies. payment to the insured, especially where a forfeiture is
involved, and the reason for this rule is that the 'insured
usually has no voice in the selection or arrangement of
Issue: Is petitioner liable for the claims of the
the words employed and that the language of the
respondent?
contract is selected with great care and deliberation by
expert and legal advisers employed by, and acting
Ruling: Yes. The exception to the “Perils” clause (Clause
exclusively in the interest of, the insurance company'
12 or the Free from Capture and Seizure Clause
(contract of adhesion).
[F.C.&S.]) was deleted from the policy when TKC
requested for an extension of insurance. Consequently,
Where two interpretations, equally fair, of languages used
the Institute War Clauses was incorporated (Sec. 1,
in an insurance policy may be made, that which allows the
subsection 1.1) which gave rise to the ambiguity in the
greater indemnity will prevail. The policy under
policy. This Court agrees with the CA when it held that
consideration, covers death or disability by accidental
although the F.C.& S. Clause may have originally been
means, and the appellant insurance company agreed to
inserted in marine policies to protect against risk of war,
pay P1,000 to P3,000, as indemnity for death of the
its interpretation in recent years to include seizure or
insured.
detention by civil authorities seems consistent with the
general purposes of the clause. Since what was also
FORTUNE INSURANCE AND SURETY CO., INC.,
excluded in the deleted F.C. & S. Clause was “arrest”
petitioner, vs. COURT OF APPEALS and
occasioned by ordinary judicial process, logically, such
PRODUCERS BANK OF THE PHILIPPINES,
“arrest” would now become a covered risk under Sec.1,
respondents.
subsection
Facts: Fortune issued a policy to Producers wherein it
1.1 of the IWC.
stipulated under the General Exceptions Clause that
Furthermore, an insurance contract should be so
“[t]he company shall not be liable under this policy in
interpreted as to carry out the purpose for which the
respect of x x x (b) any loss caused by any dishonest,
parties entered into the contract which is, to insure against
fraudulent or criminal act of the insured or any officer,
risks of loss or damage to the goods. Such interpretation
employee, partner, director, trustee or authorized
should result from the natural and reasonable meaning of
representative of the Insured whether acting alone or in
language in the policy. Where restrictive provisions are
conjunction with others. x x x" An armored car of the
open to 2 interpretations, that which is most favorable to
bank was robbed of P725,000 while transferring it to
the insured is adopted.
another branch. After an investigation conducted by the
Pasay police authorities, the driver Magalong and
SIMEON DEL ROSARIO, plaintiff and appellee vs. THE
guard Atiga (et. al.) were charged with violation of the
EQUITABLE INSURANCE AND CASUALTY CO., INC.,
Anti- Highway Robbery Law. Petitioner claims that it
defendant and appellant.
was not liable because the incident fell under the
Facts: Defendant issued Personal Accident Policy No.
General Exception Clause. Private respondent says
7136 on the life of Francisco del Rosario, son of Simeon,
otherwise.
binding itself to pay the sum of P1,000 to P3,000, as
indemnity for the death of the insured. The policy
Issue: Is the petitioner is liable under the Money,
Security, and Payroll Robbery policy it issued to the
private respondent?
Ruling: No. A contract of insurance is a contract of
adhesion, thus any ambiguity therein should be
resolved against the insurer, or it should be construed
liberally in favor of the insured and strictly against the
insurer. An insurance contract is a contract of indemnity
upon the terms and conditions specified therein. It is
settled that the terms of the policy constitute the
measure of the insurer's liability. In the absence of
statutory prohibition to the contrary, insurance
companies have the same rights as individuals to limit
their liability and to impose whatever conditions they
deem best upon their obligations not inconsistent with
public policy.
It has been aptly observed that in burglary, robbery,
and theft insurance, "the opportunity to defraud the
insurer - the moral hazard - is so great that insurers
have found it necessary to fill up their policies with
countless restrictions, many designed to reduce this
hazard. Seldom does the insurer assume the risk of all
losses due to the hazards insured against." Persons
frequently excluded under such provisions are those in
the insured's service and employment. The purpose of
the exception is to guard against liability should the
theft be committed by one having unrestricted access
to the property. In such cases, the terms specifying the
excluded classes are to be given their meaning as
understood in common speech. The terms "service"
and "employment" are generally associated with the
idea of selection, control, and compensation.
Magalong and Atiga were, in respect of the transfer of
Producer's money from its Pasay City branch to its
head office in Makati, its "authorized representatives"
who served as such with its teller Maribeth Alampay.
Howsoever viewed, Producers entrusted the three with
the specific duty to safely transfer the money to its head
office, with Alampay to be responsible for its custody in
transit; Magalong to drive the armored vehicle which
would carry the money; and Atiga to provide the
needed security for the money, the vehicle, and his two
other companions. In short, for these particular tasks,
the three acted as agents of Producers. A
"representative" is defined as one who represents or
stands in the place of another; one who represents
others or another in a special capacity, as an agent,
and is interchangeable with "agent."
RAFAEL (REX) VERENDIA, petitioner, vs. COURT OF
APPEALS and FIDELITY & SURETY CO. OF THE
PHILIPPINES, respondents FIDELITY & SURETY CO.
OF THE PHILIPPINES, INC., petitioner, vs. RAFAEL
VERENDIA and THE COURT OF APPEALS,
respondents.
Facts: Petitioner insured his residential building (Fire
Insurance) to Fidelity and to two other companies
(Country Bankers Insurance and Development
Insurance). While the three fire insurance policies were
in force, the insured property was completely destroyed
by fire. Fidelity refused payment under its Policy and
claimed among other things that the policy was avoided
by reason of over-insurance and that Verendia
maliciously represented that the building at the time of the
fire was leased under a contract executed on June 25,
1980 to a certain Roberto Garcia, when actually it was a
Marcelo Garcia who was the lessee. IAC ruled in favor
of Verendia.
Issues: (a) WON the contract of lease submitted by
Verendia to support his claim in the fire insurance policy
constitutes a false declaration which would forfeit his
benefits under Section 13 of the policy; and (b) WON, in
submitting the subrogation receipt in evidence, Fidelity
had in effect agreed to settle Verendia's claim in the
amount stated in said receipt.
Ruling: (a) Considering the foregoing discussion
pointing to the fact that Verendia used a false lease
contract to support his claim under Fire Insurance Policy,
the terms of the policy should be strictly construed
against the insured. Verendia failed to live by the terms
of the policy, specifically Section 13 thereof which is
expressed in terms that are clear and unambiguous, that
all benefits under the policy shall be forfeited "If the claim
be in any respect fraudulent, or if any false declaration be
made or used in support thereof, or if any fraudulent
means or devises are used by the Insured or anyone
acting in his behalf to obtain any benefit under the policy".
Verendia, having presented a false declaration to support
his claim for benefits in the form of a fraudulent lease
contract, he forfeited all benefits therein by virtue of
Section 13 of the policy in the absence of proof that
Fidelity waived such provision. Worse yet, by presenting
a false lease contract, Verendia reprehensibly
disregarded the principle that insurance contracts are
uberrimae fidae and demand the most abundant good
faith.
(b) There is also no reason to conclude that by
submitting the subrogation receipt as evidence in court,
Fidelity bound itself to a "mutual agreement" to settle
Verendia's claim, in consideration of the amount of
P142,685.77. While the said receipt appears to have
been a filled-up form of Fidelity, no representative of
Fidelity had signed it. It is even incomplete as the blank
spaces for a witness and his address are not filled up.
More significantly, the same receipt states that
Verendia had received the aforesaid amount. However,
that Verendia had not received the amount stated
therein, is proven by the fact that Verendia himself filed
the complaint for the full amount of P385,000 cited in
the policy. It might be that there had been efforts to
settle Verendia’s claims, but surely, the subrogation
receipt by itself does not prove that a settlement had
been arrived at and enforced. Thus, to interpret
Fidelity's presentation of the subrogation receipt in
evidence as indicative of its accession to its "terms" is
not only wanting in rational basis but would be
substituting the will of the Court for that of the parties.

NEW LIFE ENTERPRISES and JULIAN SY,
petitioners, vs. HON, COURT OF APPEALS,
EQUITABLE INSURANCE CORPORATION,
RELIANCE SURETY AND INSURANCE CO., INC,
and WESTERN GUARANTY CORPORATION,
respondents.
Facts: Julian Sy insured the stocks in trade (Fire
Insurance Policy) of New Life Enterprises with Western
Guaranty Corporation, Reliance Surety and Insurance
Co, Inc., and Equitable Insurance Corporation. Fire broke
out and Julian Sy went to the agent of Reliance Insurance
whom he asked to accompany him to the office of the
company so that he can file his claim. He averred that in
support of his claim, he submitted the fire clearance, the
insurance policies and inventory of stocks. He further
testified that the three insurance companies are sister
companies, and as a matter of fact when he was
following-up his claim with Equitable Insurance, the
Claims Manager told him to go first to Reliance Insurance
and if said company agrees to pay, they would also pay.
The same treatment was given him by the other
insurance companies. Ultimately, the three insurance
companies denied plaintiffs' claim for payment. RTC
ruled in favor of the plaintiffs. CA reversed.
Issue: May petitioners recover from the insurance
companies?
Ruling: NO. Condition No. 3 of said insurance policies
("Other Insurance Clause") is uniformly contained in all
the aforestated insurance contracts of herein petitioners,
as follows:
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 such notice be given
and the particulars of such insurance or
insurances be stated therein or endorsed on 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 loss or damage is not more than
P200,000.00.
The coverage by other insurance or co- insurance
effected or subsequently arranged by petitioners were
neither stated nor endorsed in the policies of the three
(3) private respondents, warranting forfeiture of all
benefits thereunder if we are to follow the express
stipulation in Policy Condition No. 3.
While it is a cardinal principle of insurance law that a
policy or contract of insurance is to be construed liberally
in favor of the insured and strictly against the insurer
company, yet contracts of insurance, like other contracts,
are to be construed according to the sense and meaning
of the terms which the parties themselves have used. If
such terms are clear and unambiguous, they must be
taken and understood in their plain, ordinary and popular
sense. Moreover, obligations arising from contracts have
the force of law between the contracting parties and
should be complied with in good faith.
Petitioners should be aware of the fact that a party is not
relieved of the duty to exercise the ordinary care and
prudence that would be exacted in relation to other
contracts. The conformity of the insured to the terms of
the policy is implied from his failure to express any
disagreement with what is provided for. It may be true
that the majority rule, as cited by petitioners, is that
insured persons may accept policies without reading
them, and that this is not negligence per se. But, this is
not without any exception. It is and was incumbent upon
petitioner Sy to read the insurance contracts, and this
can be reasonably expected of him considering that he
has been a businessman since 1965 and the contract
concerns indemnity in case of loss in his money-making
trade of which important consideration he could not have
been unaware as it was pre in case of loss in his money-
making trade of which important consideration he could
not have been unaware as it was precisely the reason for
his procuring the same.
NATIONAL POWER CORPORATION,
petitioner, vs. COURT OF APPEALS and
PHILIPPINE AMERICAN GENERAL
INSURANCE CO., INC., respondents.
Facts: NPC entered into a contract with the Far
Eastern Electric, Inc. (FFEI) on December 26, 1962 for
the erection of the transmission lines for the Angat
Hydroelectric Project. FEEI agreed to complete the
work within 120 days from the signing of the contract,
otherwise it would pay NPC P200.00 per calendar day
as liquidated damages, while NPC agreed to pay the
sum of P97,829.00 as consideration. On the other
hand, Philippine American General Insurance Co., Inc.
(Philamgen) issued a surety bond in the amount of
P30,672 for the faithful performance of the undertaking
by FEEI, as required.
The condition of the bond reads:
"The liability of the PHILIPPINE AMERICAN
GENERAL INSURANCE COMPANY, INC.
under this bond will expire One (l) year from final
Completion and Acceptance and said bond will be
cancelled 30 days after its expiration unless surety is
notified of any existing obligation thereunder."
The Specifications of the contract between petitioner and
FEEI states that “[s]hould the Contractor fail to complete
the construction of the work as herein specified and
agreed upon, or if the work is abandoned, . . . the
Corporation shall have the power to take over the work
by giving notice in writing to that effect to the Contractor
and his sureties of its intention to take over the
construction work,” and that “[i]t is expressly agreed that
in the event the Corporation takes over the work from the
Contractor, the latter and his bondsmen shall continue to
be liable under this contract for any expense in the
completion of the work in excess of the contract price and
the bond filed by the Contractor shall be answerable for
the same and for any and all damages that the
Corporation may suffer as a result thereof."
The work was abandoned on June 26, 1963, leaving the
construction unfinished. On July 19, 1963, in a joint letter,
Philamgen and FEEI informed NPC that FEEI was giving
up the construction due to financial difficulties. On the
same date, NPC wrote Philamgen informing it of the
withdrawal of FEEI from the work and formally holding
both FEEI and Philamgen liable for the cost of the work
to be completed as of July 20, 1962 plus damages.
The work was completed by NPC on September 30,
1963. On January 30, 1967 NPC notified Philamgen that
FEEI had an outstanding obligation in the amount of
P75,019.85, exclusive of interest and damages, and
demanded the remittance of the amount of the surety
bond the answer for the cost of completion of the work. In
reply, Philamgen requested for a detailed statement of
account, but after receipt of the same, Philamgen did not
pay as demanded but contended instead that its liability
under the bond has expired on September 20, 1964 and
claimed that no notice of any obligation of the surety was
made within 30 days after its expiration. RTC ruled in
favor of NPC, which was later reversed by the CA.
Issue: How should the condition of the bond relative to
its expiration be interpreted in correlation with the
provisions of the construction contract? Is the compliance
with the notice requirement a condition in order to hold
the surety liable under the bond?
Ruling: As correctly assessed by the trial court, the
evidence shows that as early as May 30, 1963,
Philamgen was duly informed of the failure of its principal
to comply with its undertaking. In fact, said notice of
failure was also signed by its Assistant Vice President.
On July 19, 1963, when FEEI informed NPC that it was
abandoning the construction job, the latter forthwith
informed Philamgen of the fact on the same date.
Moreover, on August 1, 1963, the fact that Philamgen
was seasonably notified, was even bolstered by its
request from NPC for information of the percentage
completed by the bond principal prior to the
relinquishment of the job to the latter and the reason for
said relinquishment. The 30-day notice adverted to in the
surety bond applies to the completion of the work by the
contractor. This completion by the contractor never
materialized.
The surety bond must be read in its entirety and together
with the contract between NPC and the contractors. The
provisions must be construed together to arrive at their
true meaning. Certain stipulations cannot be
segregated and then made to control.
Furthermore, 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.
In the case at bar, it cannot be denied that the breach of
contract in this case, that is, the abandonment of the
unfinished work of the transmission line of the petitioner
by the contractor Far Eastern Electric, Inc. was within the
effective date of the contract and the surety bond. Such
abandonment gave rise to the continuing liability of the
bond as provided for in the contract which is deemed
incorporated in the surety bond executed for its
completion. To rule therefore that private respondent was
not properly notified would be gross error.
ALPHA INSURANCE AND SURETY CO., V. ARSENIA
SONIA CASTOR
G.R. NO. 198174, September 2, 2013 (J. Peralta)
FACTS: Respondent Arsenia Castor entered into a
contract of insurance (Motor Car Policy No. MAND/CV-
00186) with petitioner Alpha Insurance, involving her
motor vehicle, a Toyota Revo DLX DSL. The contract of
insurance obligates the petitioner to pay the respondent
₱630,000.00 in case of loss or damage to said vehicle
during the period covered (Feb. 26, 2007 - Feb. 26, 2008).
On April 16, 2007, at about 9:00 a.m., Castor instructed
her driver, Jose Joel Salazar Lanuza (Lanuza), to bring
the above-described vehicle to a nearby auto-shop for a
tune-up. However, Lanuza no longer returned the motor
vehicle to respondent and despite diligent efforts to locate
the same, said efforts proved futile. Resultantly, Castor
promptly reported the incident to the police and
concomitantly notified petitioner of the said loss and
demanded payment of the insurance proceeds in the total
sum of ₱630,000.00.
Alpha, however, denied the demand of Castor claiming
that they are not liable since the culprit who stole the
vehicle is employed with Castor. Under the Exceptions to
Section III of the Policy, the Company shall not be liable
for (4) any malicious damage caused by the insured, any
member of his family or by “A PERSON IN THE
INSURED’S SERVICE”.
Castor reiterated her claim and argued that the exception
refers to damage of the motor vehicle and not to its loss.
However, Alpha’s denial of Castor’s insured claim
remains firm.
Castor filed a Complaint for Sum of Money with
Damages against petitioner before the RTC of Quezon
City. RTC ruled in favor of respondent.
Aggrieved, petitioner filed an appeal with the CA. CA
rendered a Decision affirming in toto the RTC’s decision.
Petitioner filed a Motion for Reconsideration against said
decision, but the same was denied.
Hence, the present petition.
ISSUE: Whether or not the loss of respondent’s vehicle is
excluded under the insurance policy.
RULING: No. Theft perpetrated by the driver of the
insured is not an exception to the coverage from the
insurance policy, since Section III thereof did not qualify
as to who would commit the theft. Thus, even if the same
is committed by the driver of the insured, there being no
categorical declaration of exception, the same must be
covered.
Contracts of insurance, like other contracts, are to be
construed according to the sense and meaning of the
terms which the parties themselves have used. If such
terms are clear and unambiguous, they must be taken and
understood in their plain, ordinary and popular sense.
Accordingly, in interpreting the exclusions in an
insurance contract, the terms used specifying the
excluded classes therein are to be given their
meaning as understood in common speech.
Adverse to Alpha’s claim, the words “loss” and “damage”
mean different things in common ordinary usage. The
word “loss” refers to the act or fact of losing, or failure to
keep possession, while the word “damage” means
deterioration or injury to property. Therefore, petitioner
cannot exclude the loss of Castor’s vehicle under the
insurance policy under paragraph 4 of “Exceptions to
Section III”, since the same refers only to “malicious
damage”, or more specifically, “injury” to the motor vehicle
caused by a person under the insured’s service.
Paragraph 4 clearly does not contemplate “loss of
property”, as what happened in the instant case.
It is a basic rule in the interpretation of contracts that the
terms of a contract are to be construed according to the
sense and meaning of the terms which the parties thereto
have used. In the case of property insurance policies, the
evident intention of the contracting parties, i.e., the insurer
and the assured, determine the import of the various
terms and provisions embodied in the policy. However,
when the terms of the insurance policy are ambiguous,
equivocal or uncertain, such that the parties themselves
disagree about the meaning of particular provisions, the
policy will be construed by the courts liberally in favor of
the assured and strictly against the insurer.
It must be remembered that an insurance contract is a
contract of adhesion which must be construed liberally in
favor of the insured and strictly against the insurer in
order to safeguard the latter’s interest.
GREAT PACIFIC LIFE ASSURANCE
COMPANY, petitioner, vs. HONORABLE COURT
OF APPEALS, respondents.
Facts: Ngo Hing applied for a twenty-year endowment
policy on the life of his one-year old daughter, Helen Go,
with Great Pacific Life Assurance Company. It was
alleged that Ngo Hing provided the essential data with
Lapulapu Mondragon, a Branch Manager of Pacific Life.
Ngo Hing paid the annual premium but he retained some
amount since he was a duly authorized agent of Pacific
Life. Upon payment of the insurance premium, a binding
deposit receipt was issued to Ngo Hing. At the back of the
receipt, it was noted that the insurance was still for
approval.
Subsequently, Great Pacific disapproved the application
and notified Mondragon about it through a letter. In the
letter, Great Pacific explained that the 20-year
endowment plan did not cover minor below seven years
old and offered the application be considered under
Juvenile Triple Action plan. It was alleged that Mondragon
did not notify Ngo Hing of the disapproval and the
additional offer. Instead, Mondragon sent again a
recommendation letter for the 20-year endowment
insurance plan.
Two months after the application, Helen Go died because
of influenza with bronchopneumonia. As a result, Ngo
Hing sought to recover from Great Pacific the proceeds of
the insurance. Since his efforts failed, he filed an action to
recover the same. CFI Cebu ruled in favor of Ngo Hing.
The CA affirmed this decision.
Issues:
1. WON the binding deposit receipt constituted a
temporary contract of the life insurance in
question
2. WON Ngo Hing concealed the state of health of
Helen Go which rendered the deposit receipt void
Ruling:
1. NO. The receipt issued to Ngo Hing is not binding.
For the receipt to be binding, the following
conditions must be present pursuant to the terms
and conditions of the receipt itself:
a. The company shall be satisfied that the
applicant was insurable on standard
rates
b. If the company does not accept the
application and offers to issue a different
plan, the insurance contract shall not be
binding until the applicant accepts the
policy offered; and
c. That if the applicant is not amenable
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
Given these conditions, the deposit receipt in question is
merely an acknowledgement and that the application will
either be approved or rejected first based on the
standards of Great Pacific. Since Great Pacific
disapproved the insurance application, the deposit receipt
never became in force. Hence, there was no meeting of
the minds between the parties and there could be no
insurance contract duly perfected. The deposit made by
Ngo Hing shall be reimbursed as well.
Furthermore, the failure of Mondragon to communicate to
Ngo Hing the disapproval does not affect the fact that no
contract of insurance was perfected since there was no
meeting of the minds of the parties in the first place. Ngo
Hing, as a duly authorized agent of Great Pacific, should
have known that the 20-year endowment policy does not
cover minors below 7 years old and that the application is
still subject to approval. He should have followed up the
processing of the application as well.
2. YES. Ngo Hing was fully aware that his daughter
is typically a mongoloid child. He should have
provided such data when applying for the
insurance. Hence, he violated the good faith
necessary in a contract of insurance (uberrima
fides). Whether intentional or unintentional,
concealment entitles the insured to rescind
the contract of insurance.
MAYER STEEL PIPE CORPORATION and
HONGKONG GOVERNMENT SUPPLIES
DEPARTMENT, petitioners, vs. COURT OF
APPEALS, SOUTH SEA SURETY AND
INSURANCE CO., INC. and the CHARTER
INSURANCE CORPORATION, respondents.
Defendant contracted with petitioner to manufacture
and supply various steel pipes and fittings. Mayer
shipped the pipes and fittings to Hongkong. Prior to the
shipping, Mayer insured the pipes and fittings against
all risks with private respondents. It was certified that
the pipes and fittings were in good order condition
before they were loaded in the vessel. Nonetheless,
when the goods reached Hongkong, it was discovered
that a substantial portion thereof was damaged. Mayer
filed a claim for indemnity under the insurance contract.
Private respondents refused to pay because the
insurance surveyor's report allegedly showed that the
damage is a factory defect. The trial court ruled in
favor of Mayer. It found that the damage to the
goods is not due to manufacturing defects. It also
noted that the insurance contracts executed by
Mayer and private respondents are "all risks"
policies which insure against all causes of
conceivable loss or damage. The only exceptions are
those excluded in the policy, or those sustained due to
fraud or intentional misconduct on the part of the
insured. CA affirmed the ruling of the RTC (on factory
defect) but set aside the complaint on the ground of
prescription. It held that the action is barred under
Section 3(6) of the Carriage of Goods by Sea Act since
it was filed more than two years from the time the goods
were unloaded from the vessel. Respondent court ruled
that this provision applies not only to the carrier but also
to the insurer, citing Filipino Merchants Insurance Co.,
Inc. v. Alejandro.
Issue: Was CA correct in applying the case of Filipino
Merchants Insurance Co., Inc. and in dismissing the
complaint?
Ruling: No. Section 3(6) of the Carriage of Goods by Sea
Act states that the carrier and the ship shall be
discharged from all liability for loss or damage to the
goods if no suit is filed within one year after delivery of
the goods or the date when they should have been
delivered. Under this provision, only the carrier's liability
is extinguished if no suit is brought within one year. But
the liability of the insurer is not extinguished because
the insurer's liability is based not on the contract of
carriage but on the contract of insurance. A close
reading of the law reveals that the Carriage of Goods by
Sea Act governs the relationship between the carrier on
the one hand and the shipper, the consignee and/or the
insurer on the other hand. It defines the obligations of the
carrier under the contract of carriage. It does not,
however, affect the relationship between the shipper and
the insurer. The latter case is governed by the Insurance
Code.
The Filipino Merchants case is different from the case at
bar. In Filipino Merchants, it was the insurer which filed a
claim against the carrier for reimbursement of the amount
it paid to the shipper. In the case at bar, it was the shipper
which filed a claim against the insurer. The basis of the
shipper's claim is the "all risks" insurance policies
issued by private respondents to petitioner Mayer.
PARAMOUNT INSURANCE CORPORATION,
petitioner, vs. HON. MAXIMO M. JAPZON, Presiding
Judge, Br. 36, RTC, Manila; City Sheriff and Deputy
Sheriffs Nestor Macabilin & Teodoro Episcope,
public respondents, JOSE LARA and ARSENIO
PAED, private respondents.
Lara contracted the services of a passenger jeepney to
transport his family, relatives and friends from Manila to
Pangasinan. The said jeepney was then driven by
Macasieb. In Tarlac, a Ford truck, driven by Willy
Manuel, side-swept the jeepney. Lara and Paed suffered
serious physical injuries. Both vehicles suffered minor
damages at their respective points of impact. The insurer
of said truck is Paramount Surety and Insurance Co. Inc.
Natividad (owner of the jeepney) filed a notice of claim
with Paramount. Thereafter, the adjustment of
Natividad's claims were transferred to Speedway
Adjustment and Appraisal Corporation which investigated
the facts surrounding the incident and recommended
petitioner to pay Natividad under its policy, using the "no
fault" clause under the Insurance Code as its basis of
liability. A check in the amount of P800 was paid to
Paed's wife. In addition to said amount, another check in
the amount of P5,000 was paid by Paramount to Central
Luzon Doctor's Hospital covering the expense for medical
treatment and hospitalization of the victims, Lara and
Paed. RTC ruled in favor of the victims rewarding them of
moral, exemplary, and actual damages plus attorney’s
fees.
Issue: How much should petitioner pay the private
respondents in accordance with the insurance policy?
Ruling: Its liability is limited only to P50,000 as
expressed in Insurance Policy. The said insurance policy
clearly and categorically placed the petitioner's liability for
all damages arising out of death or bodily injury sustained
by one person as a result of any one accident at
P50,000.00. Said amount complied with the minimum
fixed by law then prevailing, Section 377 of Presidential
Decree No.6123 (which was retained by P.D. No. 1460,
the Insurance Code of 1978), which provided that the
liability of land transportation vehicle operators for bodily
injuries sustained by a passenger arising out of the use
of their vehicles shall not be less than P12,000. Since the
petitioner's liability under the insurance contract is
neither less than P12,000 nor contrary to law, morals,
good customs, public order or public policy, said
stipulation must be upheld as effective and binding
between the parties. Therefore, the terms of the contract
constitute the measure of the insurer's liability. Thus,
petitioner should be held liable to pay respondents Lara
and Paed the amount of P50,000 each which is the limit
of its liability under the insurance policy minus the
amounts of P5,000 and P800 which it paid for the
hospitalization and medical expenses, respectively, of
respondents. An insurance contract is a contract whereby
one party, for a consideration known as the premium,
agrees to indemnify another for loss or damage which he
may suffer from a specified peril. An "all risks"
insurance policy covers all kinds of loss other than
those due to willful and fraudulent act of the insured.
Thus, when private respondents issued the "all
risks" policies to petitioner Mayer, they bound
themselves to indemnify the latter in case of loss or
damage to the goods insured. Such obligation
prescribes in ten years, in accordance with Article 1144
of the New Civil Code.
THE PHILIPPINE AMERICAN GENERAL
INSURANCE COMPANY, INC., petitioner, vs.
COURT OF APPEALS and FELMAN
SHIPPING LINES, respondents.
Coca-Cola Bottlers Philippines, Inc., loaded on board
"MV Asilda," a vessel owned and operated by
respondent Felman Shipping Lines, 7,500 cases Coca-
Cola softdrink bottles to be transported from
Zamboanga City to Cebu City for consignee Coca-Cola
Bottlers Philippines, Inc., Cebu. The shipment was
insured with petitioner Philippine American General
Insurance Co., Inc. The vessel sank in the waters of
Zamboanga bringing down her entire cargo with her
including the subject 7,500 cases of 1-liter Coca-Cola
softdrink bottles. Consignee Coca-Cola Bottlers
Philippines, Inc., Cebu plant, filed a claim with
FELMAN for recovery of damages it sustained as a
result of the loss of its softdrink bottles that sank.
Respondent denied the claim thus prompting the
consignee to file an insurance claim with PHILAMGEN
which paid its claim of P755,250.00. Claiming its right
of subrogation PHILAMGEN sought recourse
against respondent FELMAN which disclaimed any
liability for the loss. Consequently, on 29 November
1983 PHILAMGEN sued the shipowner for sum of
money and damages.
FELMAN filed a motion to dismiss based on the
affirmative defense that no right of subrogation in favor
of PHILAMGEN was transmitted by the shipper, and
that, in any event, FELMAN had abandoned all its rights,
interests and ownership over “MV Asilda.”
RTC: dismissed the complaint of PHILAMGEN
CA: remanded the case to the lower courts for trial on
the merits
The lower court ruled that the vessel was seaworthy
when in left the port of Zamboanga. Thus the loss of the
vessel and it entire shipment could only be attributed to
either a fortuitous event, in which case, no liability should
attach unless there was a stipulation to the contrary, or
to the negligence of the captain and his crew. It further
ruled that assuming it is unseaworthy, PHILAMGEN
could not recover from FELMAN since the assured
(coke) had breach its implied warranty of seaworthiness.
Since it was not legally owning, it did not give
PHILAMGEN the right of subrogation so as to permit it to
bring an action in court as subrogee.
CA: unseaworthy
Issue: Was PHILAMGEN subrogated to the rights of
FELMAN?
Ruling:
Sabi ng court unseaworthy daw
In policies where the law will generally imply a warranty
of seaworthiness, it can only be excluded by its terms in
writing in the policy in the clearest language. And where
the policy stipulates the seaworthiness of the vessel as
bet. the assured and assurer is admitted, the question of
seaworthiness cannot be raised by the assurer without
showing concealment or misrepresentation by the
assured.
PHILAMGEN admitted seaworthiness of the vessel in its
marine policy. Hence, if the ship should sink by
unseaworthiness, as what occurred in this case,
PHILAMGEN is liable.
Yes. Art. 2207 of the NCC states: If the plaintiff's property
has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of
the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of
the insured against the wrongdoer or the person who has
violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency
from the person causing the loss or injury.
In Pan Malayan Insurance Corporation v. Court of
Appeals, we said that payment by the assurer to the
assured operates as an equitable assignment to the
assurer of all the remedies which the assured may have
against the third party whose negligence or wrongful act
caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of
contract or upon payment by the insurance company of
the insurance claim. It accrues simply upon payment by
the insurance company of the insurance claim.
The doctrine of subrogation has its roots in equity. It is
designed to promote and to accomplish justice and is the
mode which equity adopts to compel the ultimate
payment of a debt by one who in justice, equity and good
conscience ought to pay. Therefore, the payment made
by PHILAMGEN to Coca-Cola Bottlers Philippines,
Inc., gave the former the right to bring an action as
subrogee against FELMAN. Having failed to rebut the
presumption of fault, the liability of FELMAN for the loss
of the 7,500 cases of 1-liter CocaCola softdrink bottles is
inevitable.
FIREMAN'S FUND INSURANCE COMPANY and FIRE
STONE TIRE and RUBBER COMPANY OF THE
PHILIPPINES, plaintiff-appellants, vs. JAMILA &
COMPANY, INC. and FIRST QUEZON CITY
INSURANCE CO., INC, defendants-appellees.
PETITION FOR REVIEW of an order of the Court of
First Instance of Manila, Br. 1.
Firestone suffered losses of Properties due to the acts of
its employees and its security guards provided under
contract by Jamila & Co., Inc. An amount was recovered
from its insurer, the Fireman's Fund Insurance Co. who,
together with the insured, sued Jamila and its surety, the
First Quezon City Insurance Co., Inc. to recover the
amount of loss on the basis of legal subrogation. The trial
court dismissed the complaint as to Jamila on the ground
that the plaintiff had no cause of action against it for lack
of the debtor's consent to the subrogation and as to First
Quezon City insurance Co., Inc., on the ground of res
judicata on a motion for reconsideration, plaintiffs
contention that there was no res judicdta was sustained.
Firestone and Fireman’s fund filed a motion for the
reconsideration of the lower court’s order on the ground
that Fireman’s Fund Insurance Company was suing on
the basis of legal subrogation – DENIED.
In this appeal Firestone and Fireman’s fund contend that
the trial court’s dismissal of their complaint is contrary to
Art. 2207 which provided for legal subrogation.
Issue: WON the trial court's order of dismissal, of the
complaint was contrary to Article 2207 of the Civil Code
which provides for legal subrogation.
Ruling: Article 2207 is a restatement of a settled
principle of American jurisprudence. Subrogation has
been referred to as the doctrine of substitution. It "is an
arm of equity that may guide or even force one to pay
a debt for which an obligation was incurred but which
was in whole or in part paid by another".
"Subrogation is founded on principles of justice and
equity, and its operation is governed by principles of
equity. It rests on the principle that substantial justice
should be attained regardless of form, that is, its basis
is the doing of complete, essential, and perfect justice
between all the parties without regard to form".
Subrogation is a normal incident of indemnity
insurance. Upon payment of the loss, the insurer is
entitled to be subrogated pro tanto to any right of action
which the insured may have against the third person
whose negligence or wrongful act caused the loss.
The right of subrogation is of the highest equity. The
ton in the first instance is that of the insured but after
reimbursement or compensation, it becomes the loss
of the insurer.
"Although many policies including policies in the standard
form, now provide for subrogation, and thus determine
the rights of the insurer in this respect, the equitable right
of subrogation as the legal effect of payment inures to the
insurer without any formal assignment or any express
stipulation to that effect in the policy"'. Stated otherwise,
when the insurance company pays for the loss, such
payment operates as an equitable assignment to the
insurer of the property and all remedies which the insured
may have for the recovery thereof. That right is not
dependent upon, nor does it grow out of, any privity of
contract, or upon written assignment of claim, and
payment to the insured makes the insurer an assignee in
equity.
Pan Malayan v. CA and Erlinda Fabie, et al
FACTS: PANMALAY insured a Mitsubishi Colt Lancer car
registered in the name of Canlubang Automotive
Resources Corporation (CANLUBANG). On May 26,
1985, the insured car was hit and suffered damages in the
amount of P42,052.00. PANMALAY paid for the cost of
repair of the insured car and contends that it was
subrogated to the rights of CANLUBANG against the
driver of the pick-up and his employer, Erlinda Fabie.
Despite repeated demands, defendants, failed and
refused to pay the claim of PANMALAY. PANMALAY
alleged in its complaint that, pursuant to a motor vehicle
insurance policy, it had indemnified CANLUBANG for the
damage to the insured car resulting from a traffic accident
allegedly caused by the negligence of the driver of private
respondent, Erlinda Fabie. PANMALAY contended,
therefore, that its cause of action against private
respondents was anchored upon Article 2207 of the Civil
Code, which reads:
If the plaintiffs property has been insured, and he
has received indemnity from the insurance
company for the injury or loss arising out of the
wrong or breach of contract complained of, the
insurance company shall be subrogated to the
rights of the insured against the wrongdoer or the
person who has violated the contract
Private respondents filed a Motion to Dismiss
alleging that PANMALAY had no cause of action
against them. They argued that payment under the "own
damage" clause of the insurance policy precluded
subrogation under Article 2207 of the Civil Code, since
indemnification thereunder was made on the assumption
that there was no wrongdoer or no third party at fault.
RTC dismissed PANMALAY's complaint for no cause of
action. It denied PANMALAY's motion for reconsideration.
The trial court held that payment by PANMALAY of
CANLUBANG's claim under the "own damage" clause of
the insurance policy was an admission by the insurer
that the damage was caused by the assured and/or its
representatives.
Court of Appeals upheld these orders. In applying
the ejusdem generis rule, it held that Section III-1 of the
policy, which was the basis for settlement of
CANLUBANG's claim, did not cover damage arising from
collision or overturning due to the negligence of third
parties as one of the insurable risks.
Both tribunals concluded that PANMALAY could not now
invoke Article 2207 and claim reimbursement from private
respondents as alleged wrongdoers or parties
responsible for the damage.
ISSUE: Whether or not Pan Malayan is subrogated to all
the rights of the insured.
HELD: YES. 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 contract or upon written assignment of
claim. It accrues simply upon payment of the insurance
claim by the insurer.
When PANMALAY utilized the phrase "own damage" —
a phrase which, incidentally, is not found in the insurance
policy — to define the basis for its settlement of
CANLUBANG's claim under the policy, it simply meant
that it had assumed to reimburse the costs for
repairing the damage to the insured vehicle. It is in this
sense that the so-called "own damage" coverage under
Section III of the insurance policy is differentiated from
Sections I and IV-1 which refer to "Third Party Liability"
coverage and from Section IV-2 which refer to "Property
Damage" coverage.
Neither is there merit in the Court of Appeals' ruling that
the coverage of insured risks under Section III-1 of the
policy does not include to the insured vehicle arising from
collision or overturning due to the negligent acts of the
third party. It is a basic rule in the interpretation of
contracts that the terms of a contract are to be construed
according to the sense and meaning of the terms which
the parties thereto have used. It is only when the terms of
the policy are ambiguous, equivocal or uncertain, such
that the parties themselves disagree about the meaning
of particular provisions, that the courts will intervene. In
such an event, the policy will be construed by the courts
liberally in favor of the assured and strictly against the
insurer
PANMALAY contends that the coverage of insured risks
under Section III-1(a), is comprehensive enough to
include damage to the insured vehicle arising from
collision or overturning due to the fault or negligence of a
third party. CANLUBANG is apparently of the same
understanding. Considering that the very parties to the
policy were not shown to be in disagreement regarding
the meaning and coverage of Section III-1, it was
improper for the appellate court to indulge in contract
construction, to apply the ejusdem generis rule, and to
ascribe meaning contrary to the clear intention and
understanding of these parties.
The meaning advanced by PANMALAY regarding the
coverage of Section III-1(a) of the policy is undeniably
more beneficial to CANLUBANG. By arguing that this
section covers losses or damages due not only to
malicious, but also to negligent acts of third parties,
PANMALAY in effect advocates for a more
comprehensive coverage of insured risks. And this, in
the final analysis, is more in keeping with the rationale
behind the various rules on the interpretation of
insurance contracts favoring the assured or
beneficiary so as to effect the dominant purpose of
indemnity or payment.
Moreover, even if under the above circumstances
PANMALAY could not be deemed subrogated to the
rights of its assured, PANMALAY would still have a cause
of action against private respondents. The Court ruled
that the insurer who may have no rights of subrogation
due to "voluntary" payment may nevertheless recover
from the third party responsible for the damage to the
insured property under Article 1236 of the Civil Code.
The Court holds that there is no legal obstacle to the filing
by PANMALAY of a complaint for damages against
private respondents as the third parties allegedly
responsible for the damage.
MALAYAN INSURANCE CO., INC vs .RODELIO
ALBERTO and ENRICO ALBERTO REYES
G.R. No. 194320 February 1, 2012
FACTS:
At around 5 o’clock in the morning of December 17, 1995,
an accident occurred at the corner of EDSA and Ayala
Avenue, Makati City, involving four vehicles -- a Nissan
Bus operated by Aladdin Transit, an Isuzu Tanker, a Fuzo
Cargo Truck and a Mitsubishi Galant. Based on the Police
Report issued by the on-the-spot investigator, SPO1
Dungga, the Isuzu Tanker was in front of the Mitsubishi
Galant with the Nissan Bus on their right side shortly
before the vehicular incident. All three vehicles were at a
halt along EDSA facing the south direction when the Fuzo
Cargo Truck simultaneously bumped the rear portion of
the Mitsubishi Galant and the rear left portion of the
Nissan Bus. Due to the strong impact, these two vehicles
were shoved forward and the front left portion of the
Mitsubishi Galant rammed into the rear right portion of the
Isuzu Tanker.
The Mitsubishi Galant was insured by Malayan Insurance
(Car insurance) against third party liability, own damage
and theft. Acting upon their claim of subrogation, Malayan
Insurance sent several demand letters to respondents
Rodelio Alberto (Alberto) and Enrico Reyes (Reyes), the
registered owner and the driver, respectively, of the Fuzo
Cargo Truck, requiring them to pay the amount it had paid
to the assured. Respondents, however, refused to settle
their liability. Hence, Malayan Insurance was constrained
to file a complaint for damages for gross negligence
against respondents claiming that it has paid the
damages sustained by the assured amounting to PhP
700,000 and that it has been subrogated to the rights
and interests of the assured by operation of law upon
its payment to the insured.
The trial court ruled in favor of Malayan Insurance and
declared respondents liable for damages. The CA,
reversed trial court’s ruling stating the evidence on record
has failed to establish not only negligence on the part of
respondents, but also compliance with the other
requisites and the consequent right of Malayan Insurance
to subrogation. Malayan Insurance, upon motion for
reconsideration which was subsequently denied, argued
that a police report is a prima facie evidence of the facts
stated in it. And inasmuch as they never questioned the
presentation of the report in evidence, respondents are
deemed to have waived their right to question its
authenticity and due execution.
ISSUES:
1. WON police report was admissible
2. WON there was sufficiency of the evidence to
support a claim for gross negligence
3. WON there was valid subrogation (main issue)
HELD:
1. Yes. Entries in official records made in the
performance of his duty by a public officer of the
Philippines, or by a person in the performance of a duty
specially enjoined by law are prima facie evidence of the
facts therein stated. There is no dispute that SPO1
Dungga, the on-the-spot investigator, prepared the report,
and he did so in the performance of his duty. What is not
clear is whether SPO1 Dungga had sufficient personal
knowledge of the facts contained in his report. However,
respondents failed to make a timely objection to the police
report’s presentation in evidence; thus, they are deemed
to have waived their right to do so. As a result, the police
report is still admissible in evidence.
2. Yes. The Court held that even if it consider the
inadmissibility of the police report in evidence, still,
respondents cannot evade liability by virtue of the res
ipsa loquitur doctrine. The presumption of negligence
may be rebutted or overcome by other evidence to the
contrary. However, the respondents failed to present any
evidence before the trial court for its rebuttal. Thus, the
presumption of negligence remains.
3. Yes. Subrogation is the substitution of one person by
another with reference to a lawful claim or right, so that he
who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or
securities. It contemplates full substitution such that it
places the party subrogated in the shoes of the creditor,
and he may use all means that the creditor could employ
to enforce payment.
The payment by the insurer to the insured operates
as an equitable assignment to the insurer of all the
remedies that the insured may have against the third
party whose negligence or wrongful act caused the
loss. The right of subrogation is not dependent upon, nor
does it grow out of, any privity of contract. It accrues
simply upon payment by the insurance company of the
insurance claim. The doctrine of subrogation has its roots
in equity. It is designed to promote and to accomplish
justice; and is the mode that equity adopts to compel the
ultimate payment of a debt by one who, in justice, equity,
and good conscience, ought to pay. Hence, bearing in
mind that the claim check voucher and the Release of
Claim and Subrogation Receipt presented by Malayan
Insurance are already part of the evidence on record, and
since it is not disputed that the insurance company,
indeed, paid PhP 700,000 to the assured, then there is a
valid subrogation in this case.
ABOITIZ SHIPPING CORPORATION VS INSURANCE
COMPANY OF NORTH AMERICA
THE RIGHT of subrogation attaches upon payment by
the insurer of the insurance claims by the assured. As
subrogee, the insurer steps into the shoes of the
assured and may exercise only those rights that the
assured may have against the wrongdoer who caused
the damage.
FACTS OF THE CASE:
ICNA UK Limited of London, insured the transshipment of
certain wooden work tools and workbenches purchased
for the consignee Science Teaching Improvement Project
(STIP), a school in Cebu City. The insurance policy was
procured by MSAS Cargo.
ICNA issued an "all-risk" open marine policy, stating
that loss shall be payable to the ASSURED or ORDER
and may be brought against ICNA UK or any of its listed
agents worldwide. The cargo then traveled from
Hamburg, Germany on board M/S Katsuragi to
Singapore, and upon arrival in Singapore a clean bill of
lading was issued by Hapag-Lloyd and was then boarded
on M/S Vigour Singapore en route to Manila. The ship
arrived and docked at the Manila International Container
Port where the container van was again off-loaded.
The cargo was received by petitioner Aboitiz Shipping
Corporation (Aboitiz) through its duly authorized
booking representative, Aboitiz Transport System. The bill
of lading issued by Aboitiz contained the notation
"grounded outside warehouse. The container van was
stripped and transferred to another crate/container van
without any notation on the condition of the cargo on the
Stuffing/Stripping Report. Subsequently, the container
van was loaded on board ABOITIZ vessel, MV Super
Concarrier I. The vessel left Manila en route to Cebu City.
Upon arrival in cebu, there was a stripping report made by
the petitioner’s checker that the crates were slightly
broken and cracked at the bottom.
The cargo was withdrawn by the representative of the
consignee, Science Teaching Improvement Project
(STIP) and delivered to Don Bosco Technical High
School. It was received by Mr. Bernhard Willig.
Mayo B. Perez, then Claims Head of petitioner (Aboitiz),
received a telephone call from Willig informing him that
the cargo sustained water damage. Perez, upon receiving
the call, immediately went to the bonded warehouse and
checked the condition of the container and other cargoes
stuffed in the same container. He found that the container
van and other cargoes stuffed there were completely dry
and showed no sign of wetness. Perez found that except
for the bottom of the crate which was slightly broken, the
crate itself appeared to be completely dry and had no
water marks. But he confirmed that the tools which were
stored inside the crate were already corroded. He further
explained that the "grounded outside warehouse" notation
in the bill of lading referred only to the container van
bearing the cargo.
Willig informed Aboitiz of the damage through a letter. The
letter duly described the damaged sustained and it
concluded that the damage was caused by water entering
through the broken parts of the crate. The consignee
contacted the Philippine office of ICNA for insurance
claims. An ocular inspection was conducted by the
Claimsmen Adjustment Corporation (CAC). The CAC
reported to ICNA that the goods sustained water,
damage, molds and corrosion which were discovered
upon delivery to the consignee.
The consignee then filed a formal claim with Aboitiz in the
amount of 276, 540.00 for the damaged condition of the
goods (workbenches, carbide-tipped saw blades, set of
ball bearing guides, set of overarm router bits, two rolls of
sandpaper for stroke sander). CAC then submitted a
supplemental report from PAGASA which stated that
heavy rains caused water damage to the shipment and
that the shipment was placed outside the warehouse as
can be gleaned from the bill of lading issued by Aboitiz
which contained the notation "grounded outside
warehouse.".
Aboitiz refused to settle the claim. On October 4, 1993,
ICNA paid the amount of P280,176.92 to consignee. A
subrogation receipt was duly signed by Willig. ICNA
formally advised Aboitiz of the claim and subrogation
receipt executed in its favor. Despite follow-ups, however,
no reply was received from Aboitiz.
ICNA filed a civil complaint against Aboitiz for collection of
actual damages in the sum of P280,176.92, plus interest
and attorney's fees. ICNA alleged that the damage
sustained by the shipment was exclusively and solely
brought about by the fault and negligence of Aboitiz when
the shipment was left grounded outside its warehouse
prior to delivery.
Aboitiz disavowed any liability and asserted that the claim
had no factual and legal bases. It countered that the
complaint stated no cause of action, plaintiff ICNA
had no personality to institute the suit, the cause of
action was barred, and the suit was premature there
being no claim made upon Aboitiz.
THE RTC RENDERED JUDGMENT AGAINST ICNA.
ICNA then appealed to the CA and argued that its cause
of action is anchored on the right of subrogation under
ART 2207 of the CC.
The CA REVERSED the decision of the RTC and
concluded that ABOITIZ is liable for the damage
ISSUES:
1. Whether or not ICNA is the real-party-in-interest and is
capacitated to file the case?
2. Whether or not ICNA is entitled to the right of
subrogation?
3. Whether or not there was a timely filing of the notice of
claim as required under ART 366 of the code of
commerce?
4. Whether or not the petitioner is held liable for
damages?
Held:
1. Yes. ICNA, the respondent, as subrogee of the
consignee, is the real party in interest to institute the claim
for damages against petitioner; ICNA may have been a
foreign corporation but a foreign corporation not licensed
to do business in the Philippines is NOT absolutely
prohibited from filing a suit, it is only when such
corporation is “transacting” or “doing business” in the
country will a license be necessary before it can institute
suits and it may bring suits on isolated business
transactions. Thus, this Court has held that a foreign
insurance company may sue in Philippine courts upon the
marine insurance policies issued by it abroad to cover
international-bound cargoes shipped by a Philippine
carrier, even if it has no license to do business in this
country. It is the act of engaging in business without the
prescribed license, and not the lack of license per se,
which bars a foreign corporation from access to our
courts.
To further support such, ICNA which issued the marine
policy was represented by its authorized agent in
MANILA, it was a DOMESTIC corporation not the foreign
company. Moreover, there was a proper indorsement of
the insurance policy by MSAS the shipper in favor of STIP
of Don Bosco technical HS, The consignee. It was very
clear from the Open policy that it benefits any subsequent
assignee, or holder, including the consignee, who may file
claims on behalf of the assured. Such is also in
consonance with Section 57 of the Insurance code which
states: A policy may be so framed that it will inure to
the benefit of whosoever, during the continuance of
the risk, may become the owner of the interest
insured.
2. Yes. ICNA is entitled to the right of subrogation.
The right of subrogation springs from Article 2207 of the
Civil Code, which states:
Article 2207. If the plaintiff's property has been insured,
and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or
breach of contract complained of, the insurance company
shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully
cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing
the loss or injury.
The payment by the insurer to the assured operates as an
equitable assignment of all remedies the assured may
have against the third party who caused the damage.
Subrogation is not dependent upon, nor does it grow out
of, any privity of contract or upon written assignment of
claim. It accrues simply upon payment of the insurance
claim by the insurer.
After the consignee was paid indemnity for the damage of
the insured goods, ICNA’s entitlement to subrogation was
equipped with a cause of action under a case of
contractual breach or negligence. The right of subrogation
also has its limitations to wit: (1) both the insurer and the
consignee are bound by the contractual stipulations under
the bill of lading and (2) the insurer can be subrogated
only to the rights as the insured may have against the
wrongdoer. If by its own acts after receiving payment from
the insurer, the insured releases the wrongdoer who
caused the loss from liability, the insurer loses its claim
against the latter.
3. Yes. However, this timely filing of notice claim was only
a pro hac vice decision by the court. There was a timely
filing of the notice of the claim. Under the Code of
Commerce, the notice of claim must be made within 24
hours from receipt of the cargo if the damages are NOT
apparent, and if they are VISIBLE, such notice of claim
must be made IMMEDIATELY. The giving of such notice
o loss or injury is a condition precedent to the action for
loss or injury or right to exercise carrier’s liability.
The law provides:
Article 366. Within twenty four hours following the receipt
of the merchandise, the claim against the carrier for
damages or average which may be found therein upon
opening the packages, may be made, provided that the
indications of the damage or average which give rise to
the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted
only at the time of receipt.
After the periods mentioned have elapsed, or the
transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in
which the goods transported were delivered.
In the given case however, it themtook almost 4 days after
the damage was discovered and it was a little over than a
month that the letter regarding the damages were
received by petitioner. However, Mr Perez, the head of
the company was informed by telephone regarding the
damage sustained and immediately inspected such
damage. Hence, there was SUBSTANTIAL
COMPLIANCE IN THIS CASE.
Stipulations requiring notice of loss or claim for damage
as a condition precedent to the right of recovery from a
carrier must be given a reasonable and practical
construction, adapted to the circumstances of the case
under adjudication, and their application is limited to
cases falling fairly within their object and purpose.
Provisions specifying a time to give notice of damage to
common carriers are ordinarily to be given a reasonable
and practical, rather than a strict construction.
4.Yes. The petitioner in this case is a COMMON
CARRIER and should exercise extraordinary diligence.
The presumption of negligence was never overturned by
the pieces of evidence submitted. Hence, damages
should thus be awarded.
FILIPINAS COMPAÑIA DE SEGUROS,
petitioner, vs. CHRISTERN, HUENEFELD & CO.,
INC., respondent.
Christern, Huenefeld & Co, Inc., after payment of
corresponding premium, obtained from the petitioner a
fire policy covering merchandise contained in a building
located at Binondo, Manila. On February 27, 1942, or
during the Japanese military occupation, the building and
insured merchandise were burned. In due time the
respondent submitted to the petitioner its claim under the
policy. The salvaged goods were sold at public auction
and, after deducting their value, the total loss suffered by
the respondent was fixed at P92,650. The petitioner be acquitted of the crime. The Prosecution presented the
refused, to pay the claim on the ground that the policy in “Proposal for Life Insurance” as proof, but the same was
favor of the respondent had ceased to be in force on the a mere Xerox copy and not the original first identified.
date the United States declared war against Germany, There was no signature indicating that the victim herself
the respondent corporation (though organized under and applied for the insurance. Although there appears a
by virtue of the laws of the Philippines) being controlled signature of “Apple Lam”, the same is not the name of the
by German subjects and the petitioner being a company victim and nobody insures himself under a nickname. The
under American jurisdiction when said policy was issued proof presented does not prove that the insurance was
on October 1, 1941. The petitioner, however, in secured, not was there a contract since there was no
pursuance of the order of the Director of the Bureau of proof that the company (NZI Life) approved the proposal,
Financing, Philippine Executive Commission, dated April no proof that any premiums were paid, and no proof when
9, 1943, paid to the respondent the sum of P92,050 on such was accomplished.
April 19, 1943.
Furthermore, the victim was working for National
Issue: Is respondent considered as insured even though Insurance Company. Why then should she insure her life
it was considered as a “public enemy”? with the NZI Life? The alleged premiums were also much
higher than the victim’s monthly salary. Why should any
Ruling: NO. The Philippine Insurance Law (Act No. 2427, insurance company approve insurance, the premiums of
as amended), in section 8, provides that "anyone except which the supposed insured obviously cannot afford to
a public enemy may be insured." It stands to reason that pay? It is usually the man who insures himself with the
an insurance policy ceases to be allowable as soon as an wife as the beneficiary instead of the other way around.
insured becomes a public enemy. The respondent having
become an enemy corporation on December 10, 1941,
the insurance policy issued in its favor on October 1,
1941, by the petitioner (a Philippine corporation) had
ceased to be valid and enforceable, and since the insured
goods were burned after December 10, 1941, and during
the war, the respondent was not entitled to any indemnity
under said policy from the petitioner. However,
elementary rules of justice (in the absence of specific
provision in the Insurance Law) require that the Premium
paid by the respondent for the period covered by its policy
from December 11, 1941, should be returned by the
petitioner.
It results that the petitioner is entitled to recover what was
paid to the respondent under the circumstances of this
case. However, the petitioner will be entitled to recover
only the equivalent, in actual Philippine currency, of
P92,650 paid on April 19, 1943, in accordance with the
rate fixed in the Ballantyne scale.

PEOPLE vs. YIP WAI MING

Ming and Lam Po Chun came to Manila on vacation on

10 July 1993. The two were engaged to be married.
Hardly a day passed when Chun was brutally beaten
up and strangled to death in their hotel room. On the
day of the killing (July 11), Ming was touring Manila with
Filipino welcomers while Chun was left in the hotel
room allegedly because she had a headache and was
not feeling well enough to do the sights. A witness and
evidence were presented which pointed out to Ming as
the guilty party, sentencing him to imprisonment by the
RTC. Prosecution also alleged that the victim insured
herself and the accused was the beneficiary, thus,
giving motive to the latter to kill the victim.

Issue: Was the “insurance angle” sufficient to convict

the accused of murder?
Ruling: NO. The evidences presented by the
Prosecution were not enough such that the accused must