IV.

FIRE INSURANCE have received a premium, shall be paid, and in case of a

Section 169 of Insurance Code
As used in this Code, the term "fire insurance" shall
include insurance against loss by fire, lightning,
windstorm, tornado or earthquake and other allied risks,
when such risks are covered by extension to fire
insurance policies or under separate policies.
Note: It must specifically covered on the allied risks such
as lightning, windstorm, tornado, or earthquake must be
stipulated in the policy and additional premium may be
paid.
Note: It is continuous fire
Section 170 of Insurance Code
An alteration in the use or condition of a thing insured
from that to which it is limited by the policy made without
the consent of the insurer, by means within the control of
the insured, and increasing the risks, entitles an insurer
to rescind a contract of fire insurance.
Section 171 of Insurance Code
An alteration in the use or condition of a thing insured
from that to which it is limited by the policy, which does
not increase the risk, does not affect a contract of fire
insurance.
partial loss the full amount of the partial loss shall be so
paid, and in case there are two or more policies covering
the insured's interest therein, each policy shall contribute
pro rata to the payment of such whole or partial loss. But
in no case shall the insurer be required to pay more than
the amount thus stated in such policy. This section shall
not prevent the parties from stipulating in such policies
concerning the repairing, rebuilding or replacing of
buildings or structures wholly or partially damaged or
destroyed.
Section 175 of Insurance Code
No policy of fire insurance shall be pledged,
hypothecated, or transferred to any person, firm or
company who acts as agent for or otherwise represents
the issuing company, and any such pledge,
hypothecation, or transfer hereafter made shall be void
and of no effect insofar as it may affect other creditors of
the insured.
PHILIPPINE INSURANCE CASE – They hire tugboat to
tow away. The shipping company took another. The insurer
paid but also tries to recover the additional premium. Fire
can be acrt God if it is not attributable to human. Fire is not
natural disaster unless caused by lightning. There was sea
negligence. They put a cylinder near a power room that
caused the explosion and fire.

Note: Alteration can be rescinded by the insurer.

Alteration is to change the purpose of the building.
Example: House turned into a warehouse without
consent of the insurer. It increases the risk.

Section 172 of Insurance Code

A contract of fire insurance is not affected by any act of
the insured subsequent to the execution of the policy,
which does not violate its provisions, even though it
increases the risk and is the cause of the loss.

Section 173 of Insurance Code

If there is no valuation in the policy, the measure of
indemnity in an insurance against fire is the expense it
would be to the insured at the time of the commencement
of the fire to replace the thing lost or injured in the
condition in which at the time of the injury; but if there is
a valuation in a policy of fire insurance, the effect shall be
the same as in a policy of marine insurance. (Conclusive
between the parties based on the stipulation of the
contract)

Section 174 of Insurance Code

Whenever the insured desires to have a valuation named
in his policy, insuring any building or structure against
fire, he may require such building or structure to be
examined by an independent appraiser and the value of
the insured's interest therein may then be fixed as
between the insurer and the insured. The cost of such
examination shall be paid for by the insured. A clause
shall be inserted in such policy stating substantially that
the value of the insured's interest in such building or
structure has been thus fixed. In the absence of any
change increasing the risk without the consent of the
insurer or of fraud on the part of the insured, then in case
of a total loss under such policy, the whole amount so
insured upon the insured's interest in such building or
structure, as stated in the policy upon which the insurers
1 BACHRACH V BRITISH AMERICAN ASSURANCE
Doctrine:
When property is insured any condition upon
which the insurer wishes to rely, in order to avoid liability in
case of a loss, must be expressed in the policy.
Facts:
Plaintiff Bachrach commenced an action against
the defendant insuer to recover the sum of P9,841.50, the
amount due, deducting the salvage, upon the following fire
insurance policy issued by the defendant to the plaintiff:
E. M. Bachrach having paid to the undersigned,
as authorized agent of the British American Assurance
Company, the sum of two thousand pesos Philippine
currency, for insuring against loss or damage by fire its
properties The policy states:
xxx The company hereby agrees with the insured that
if the property above described, or any part thereof,
shall be destroyed or damaged by fire, at any time
between the 21st day of February, 1908, and 4 o'clock
in the afternoon of the 21st day of February, 1909, or
(in case of the renewal of this policy) at any time
afterwards, so long as, and during the period in respect
of which the insured shall have paid to the company,
and they shall have accepted, the sum required for the
renewal of this policy, the company will, out of their
capital stock, and funds, pay or make good to the
insured the value of the property so destroyed, or the
amount of such damage thereto, to any amount not
exceeding, in respect of each or any of the several
matters above specified, the sum set opposite thereto,
respectively, and not exceeding in the whole the sum
of ten thousand pesos, and also not exceeding, in any
case, the amount of the insurable interest therein of the
insured at the time of the happening of such fire.
The plaintiff maintained a paint and varnish shop
in the said building where the goods which were insured
were stored. That the plaintiff transferred his interest in
and to the property covered by the policy to H. W.
Peabody & Co. to secure certain indebtedness due and
owing to said company, and also that the plaintiff had
transferred his interest in certain of the goods covered by
the said policy to one Macke, to secure certain obligations
assumed by the said Macke for and on behalf of the
insured. That the sanction of the said defendant had not
been obtained by the plaintiff, as required by the said
policy. That the plaintiff, immediately preceding the
outbreak of the alleged fire, willfully placed a gasoline can
containing 10 gallons of gasoline in the upper story of said
building in close proximity to a portion of said goods,
wares, and merchandise, which can was so placed by the
plaintiff as to permit the gasoline to run on the floor of said
second story, and after so placing said gasoline, he, the
plaintiff, placed in close proximity to said escaping
gasoline a lighted lamp containing alcohol, thereby greatly
increasing the risk of fire.
That the plaintiff made no proof of the loss within
the time required by condition five of said policy, nor did the
insured file a statement with the municipal or any other
judge or court of the goods alleged to have been in said
building at the time of the alleged fire, nor of the goods
saved, nor the loss suffered.
On the other hand, the plaintiff denying nearly all
of the facts set out in the special answer of the defendant.
That he had been acquitted in a criminal action against him,
after a trial duly and regularly had, upon a charge of arson,
based upon the same alleged facts set out in the answer of
the defendant. That her had made no proof of the loss set
up in his complaint for the reason that immediately after he
had, given the defendant due notice in writing of said loss,
the defendant, had waived all right to require proof of said
loss by denying all liability under the policy and by declaring
said policy to be null and void.
Lower court ruled in favor of plaintiff.
Issue: Whether or not keeping gasoline or alcohol would
annul the policy?
Held: No, keeping gasoline or alcohol would not annul the
policy.
Ratio:
It is claimed that either gasoline or alcohol was
kept in violation of the policy in the bodega containing the
insured property. The testimony on this point is somewhat
conflicting, but conceding all of the defendant's claims, the
construction given to this claim by American courts would
not justify the forfeiture of the policy on that ground. The
property insured consisted mainly of household furniture
kept for the purpose of sale. The preservation of the
furniture in a salable condition by retouching or otherwise
was incidental to the business. The evidence offered by the
plaintiff is to the effect that alcohol was used in preparing
varnish for the purpose of retouching, though he also says
that the alcohol was kept in store and not in the bodega
where the furniture was. It is well settled that the keeping
of inflammable oils on the premises, though prohibited by
the policy, does not void it if such keeping is incidental to
the business. Thus, where a furniture factory keeps
benzine for the purposes of operation, or where it is used
for the cleaning machinery, the insurer cannot on that
ground avoid payment of loss, though the keeping of the
benzine on the premises is expressly prohibited. These
authorities also appear sufficient to answer the objection
that the insured automobile contained gasoline and that the
plaintiff on one occasion was seen in the bodega with a
lighted lamp. The first was incidental to the use of the
insured article and the second being a single instance falls
within the doctrine of the case last cited.
It may be added that there was no provision in the
policy prohibiting the keeping of paints and varnishes upon
the premises where the insured property was stored. If the
company intended to rely upon a condition of that
character, it ought to have been plainly expressed in the
policy.
Dispositive: For all the foregoing reasons, we are of the
opinion that the judgment of the lower court should be
affirmed, and it is hereby ordered that judgment be entered
against the defendant and in favor of the plaintiff for the
sum of P9,841.50, with interest at the rate of 6 per cent
from the 13th of July, 1908, with costs. So ordered.
2 ONG GUAN CAN v. CENTURY INSURANCE (1924)
Doctrine:
If a clause (which states that the insurer’s liability may
be fulfilled either by reconstruction of the house or payment of the
insurance value) of the policies is valid, its effect is to make the
obligation of the insurance company an alternative one, that is to
say, that it may either pay the insured value of house, or rebuild it.
It must be noted that in alternative obligations, the debtor, the
insurance company in this case, must notify the creditor of his
election, stating which of the two prestations he is disposed to
fulfill, in accordance with article 1133 of the Civil Code. The object
of this notice is to give the creditor, that is, the plaintiff in the instant
case, opportunity to express his consent, or to impugn the election
made by the debtor, and only after said notice shall the election
take legal effect when consented by the creditor, or if impugned by
the latter, when declared proper by a competent court.
Facts:
A building of the plaintiff was insured against fire
by the defendant in the sum of P30,000, as well as the
goods and merchandise therein contained in the sum of
P15,000. The house and merchandise insured were burnt
early in the morning of February 28, 1923, while the policies
issued by the defendant in favor of the plaintiff were in
force.
The appellant contends that under clause 14 of
the conditions of the policies, it may rebuild the house
burnt, and although the house may be smaller, yet it would
be sufficient indemnity to the insured for the actual loss
suffered by him.
The clause cites by the appellant is as follows:
The Company may at its option
reinstate or replace the property
damaged or destroyed, or any
part thereof, instead of paying the
amount of the loss of damages, or
may join with any other Company
or insurers in so doing, but the
Company shall not be bound to
reinstate exactly or completely,
but only as circumstances permit
and in reasonable sufficient
manner, and in no case shall the
Company be bound to expend
more in reinstatement that it
would have cost to reinstate such
property as it was at the time of
the occurrence of such loss or
damage, nor more than the sum
insured by the Company thereon.
Whether or not the clause above-quoted may be
enforced hence, the insurer may rebuild the house burnt
instead of paying in the amount of insurance in money?
Held:
No, the clause above-quoted should not be
enforced hence, the insurer may rebuild the house burnt
instead of paying in the amount of insurance in money
Ratio:
The clause connotes an alternative obligation on
the part of the insurer. Therefore, in fulfilling the obligation,
the insurer must inform or give notice to the insured (who
stands as creditor) on what mode of fulfilling the obligation
it seeks to pursue or it elects (payment of money or
rebuilding the house). This formal notice requirement is for
the benefit of the insured. It is in accordance with Art. 1133
of the Civil Code.
The record shows that the appellant company did
not give a formal notice of its election to rebuild, and while
the witnesses, Cedrun and Cacho, speak of the proposed
reconstruction of the house destroyed, yet the plaintiff did
not give his assent to the proposition, for the reason that
the new house would be smaller and of materials of lower
kind than those employed in the construction of the house
destroyed.
Upon this point the trial judge very aptly says in
his decision: "It would be an imposition unequitable, as well
as unjust, to compel the plaintiff to accept the rebuilding of
a smaller house than the one burnt, with a lower kind of
materials than those of said house, without offering him an
additional indemnity for the difference in size between the
two house, which circumstances were taken into account
when the insurance applied for by the plaintiff was
accepted by the defendant." The Court finds in the record
nothing to justify the reversal of the finding of the trial judge,
holding that the election alleged by the appellant to rebuild
the house burnt instead of paying the value of the
insurance is improper.
Dispositive:
Ong Guan Can won!

Eventually, the Court of First Instance of Iloilo rendered a

judgment in favor of the insured, sentencing the defendant
company to pay him the sum of P45,000, the value of
certain policies of fire insurance, with legal interest thereon.
The defendant company appealed from this judgment, and
now insists that the same must be modified and that it must
be permitted to rebuild the house burnt, subject to the
alignment of the street where the building was erected, and
that it be relieved from the payment of the sum in which
said building was insured.

Issue:
3 GALIAN V. STATE ASSURANCE
Doctrine:
Clause 17 of the conditions of the policy reads: "If
the property hereby insured shall, at the breaking out of any
fire, be collectively of greater value than the sum insured
thereon, then the insured shall be considered as being his
own insurer for the difference, and shall bear a ratable
proportion of the loss accordingly. Every item, if more than
one, of the policy shall be separately subject to this
condition.”
Facts:
This is an action upon an open policy of fire
insurance of household effects. The property was insured
on January 25, 1912, for P3,000. On March 25, 1912, the
day following the fire, the insured presented an itemized
statement of the goods contained in the house at the time
of the fire, the total value of which he claims to be P4,512.
The insured property was not a total loss, and some of it
was afterward sold by the insured at public auction for the
net amount of P120.40 The complaint prays for the
recovery of the total amount of the policy less two-thirds of
the P120.40, or P2,919.74.
The insurance company interposed a special
defense to the effect that the policy had been forfeited by
reason of the fact that the claim presented by the plaintiff
was fraudulently false in that (a) the insured had alleged a
total loss, (b) that not all the articles listed in the plaintiff's
claim of loss were in the house where and when the fire
occurred, and (c) that the plaintiff had attributed much
greater value to the articles included in the list than they
were worth.
Upon trial there was evidence for the plaintiff that
the statement presented to the insurance company after
the fire was substantially correct, both in quantities and
values. The plaintiff testified that the statement was
prepared from memory immediately after the fire by himself
with the assistance of his brother. The defendant
introduced three witnesses, who were sent to the scene of
the fire shortly after it occurred to estimate the value of the
property contained in the house. The fire did the most
damages in the bedroom, where the roof partly fell in.
Articles of clothing contained in the wardrobes in
this room are visible in the photograph, they having
evidently been taken out for inspection after the fire. Mr.
Young testified that upon request of the defendant
company he had examined the contents of the house and
estimated the loss at P1,000. He said, however, that this
was only a casual estimate. They pulled out a few drawers
of the wardrobes and examined some of the wearing
apparel contained in them. Mr. Dow testified that he made
a rough estimate of the damage done. He estimated the
value of the goods on the first floor at P500, and said that
from what he saw of the remains on the upper floor, P1,500
would be a liberal estimate of the damages done. He did
not believe that there was P4,000 worth of property on the
second floor. Mr. Laing, agent of the defendant company,
estimated the loss at P1,500. This, he thought, was a very
liberal estimate. He appears to have made a more careful
estimate of the value of the different articles than either of
the other witnesses called by the defendant. He testified
that nothing had been entirely consumed by the fire.
Issue:
The main issue on this appeal is as to the value of
the property?
Held:
Every item, if more than one, of the policy shall be
separately subject to this condition
Ratio:
After a careful examination of the evidence, we
are of the opinion that there is no satisfactory evidence that
the plaintiff included in his itemized list of property
contained in the house at the time of the fire, any property
which was not there. The plaintiff prepared the list from
memory, and absolute accuracy could hardly be expected.
Having reached this conclusion, we presume that
the defendant company will no longer insist upon the
remainder of its points, which would, if decided favorably to
its contention, tend to reduce the total value of the plaintiff's
household effects, but not to a figure which would make the
company's liability under the policy less than that which
they would be held liable under the coinsurance clause of
the policy.
We do not understand that the plaintiff at any time
alleged a total loss. The list presented by him the day after
the fire is designated as a "Statement of household
furniture and personal effects . . . on hand" at the time of
the fire. He latter offered to abandon the remains of the fire,
and still later caused these remains to be sold at public
auction. These facts clearly negative the assertion that he
alleged a total loss. Clause 17 of the conditions of the policy
reads:
If the property hereby insured shall,
at the breaking out of any fire, be
collectively of greater value than the
sum insured thereon, then the
insured shall be considered as
being his own insurer for the
difference, and shall bear a ratable
proportion of the loss accordingly.
Every item, if more than one, of the
policy shall be separately subject to
this condition.
The property was worth P4,512. The salvage
amounted to P120.40. This leaves a partial loss amounting
to P4,391.60. As the property was insured for only P3,000,
the insurer must bear a portion of the loss represented by
a fraction the numerator of which is the amount of the
insurance and the denominator of which is the value of the
property at the time of the fire. This entitles the insured to
a judgment against the insurrer for 2,919.92. Let judgment
be entered accordingly, without costs in this instance. So
ordered.
Dispositive:
This entitles the insured to a judgment against the
insurer for 2,919.92. Let judgment be entered accordingly,
without costs in this instance. So ordered.
 V. CASUALTY INSURANCE
Section 176 of Insurance Code
Casualty insurance is insurance covering loss or liability
arising from accident or mishap, excluding certain types of
loss which by law or custom are considered as falling
exclusively within the scope of other types of insurance
such as fire or marine. It includes, but is not limited to,
employer's liability insurance, motor vehicle liability
insurance, plate glass-insurance, burglary and theft
insurance, personal accident and health insurance as
written by non-life insurance companies, and other
substantially similar kinds of insurance.
DOL (Director Officer Liability) – casualty insurance for the
director’s liability of the board of corporation.
Comprehensive Motor Vehicle Liability Insurance –
insurance for third party liability
4 FIRST INTEGRATED BONDING V HERNANDO, GR
51221, JULY 31 1991
5 COQUIA V FIELDMEN’S INSURANCE GR L-23276, NO
29 1968
Facts:
> On Dec. 1, 1961, Fieldmenʼs Insurance co. Issued in
favor of the Manila Yellow Taxicab a common carrier
insurance policy with a stipulation that the company shall
indemnify the insured of the sums which the latter wmy be
held liable for with respect to “death or bodily injury to any
faire-paying passenger including the driver and conductor”.
> The policy also stated that in “the event of the death of
the driver, the Company shall indemnify his personal
representatives and at the Companyʼs option may make
indemnity payable directly to the claimants or heirs of the
claimants.”
> During the policyʼs lifetime, a taxicab of the insured driven
by Coquia met an accident and Coquia died.
> When the company refused to pay the only heirs of
Coquia, his parents, they institued this complaint. The
company contends that plaintiffs have no cause of action
since the Coquias have no contractual relationship with the
company.
Issue:
Whether or not plaintiffs have the right to collect on the
policy.
Held:
YES.
Athough, in general, only parties to a contract may bring an
action based thereon, this rule is subject to exceptions, one
of which is found in the second paragraph of Article 1311
of the Civil Code of the Philippines, reading: "If a contract
should contain some stipulation in favor of a third person,
he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient.
The contracting parties must have clearly and deliberately
conferred a favor upon a third person." This is but the
restatement of a well-known principle concerning contracts
pour autrui, the enforcement of which may be demanded
by a third party for whose benefit it was made, although not
a party to the contract, before the stipulation in his favor
has been revoked by the contracting parties
In the case at bar, the policy under consideration is typical
of contracts pour autrui this character being made more
manifest by the fact that the deceased driver paid fifty
percent (50%) of the corresponding premiums, which were
deducted from his weekly commissions. Under these
conditions, it is clear that the Coquias — who, admittedly,
are the sole heirs of the deceased — have a direct cause
of action against the Company, and, since they could have
maintained this action by themselves, without the
assistance of the insured it goes without saying that they
could and did properly join the latter in filing the complaint
herein.
6 PAN MALAYAN INSURANCE v CA assured and strictly against the insurer in cases of
disagreement between the parties.
Doctrine:
The so-called “own damage” coverage of policy is The meaning advanced by Panmalay regarding
different from the “3rd party liability” coverage and from the the coverage of Section III-I of the policy is undeniable
“property damage” coverage. more beneficial to Canlubang than that insisted upon by the
CA.
Facts:
In any case, the very parties to the policy,
Petitioner PanMalay was an insurer of the car of
Canlubang and Panmalay, were not shown to be in
Canlubang Automotive Resources Corp. While the policy
disagreement regarding the meaning and coverage of
was still in effect, the insured car was allegedly hit by a pick-
Section III-I. Hence, it was improper for CA to assert its own
up owned by Erlinda Fabie but driven by another person.
interpretation of the contract that is contrary to the clear
The car suffered damages in the amount of P42,052.00.
understanding and intention of the parties to it.
PanMalay defrayed the cost of repair of the insured car. It
then demanded reimbursement from Fabie and her driver Thus, SC held that Panmalay, as subrogee, has
of said amount, but to no avail. no legal obstacle from filing the complaint for damages
against the 3rd parties responsible for the damage to the
Petitioner filed a complaint against private
car.
respondent before the RTC. It averred that the damages
caused to the insured car were settled under the “own
damage” coverage of the insurance policy. Private Dispositive:
respondent filed a motion to dismiss arguing that under the WHEREFORE, in view of the foregoing, the
"own damage" clause of the insurance policy precluded present petition is GRANTED. Petitioner's complaint for
subrogation under Article 2207 of the Civil Code, since damages against private respondents is hereby
indemnification thereunder was made on the assumption REINSTATED. Let the case be remanded to the lower
that there was no wrongdoer or no third party at fault. court for trial on the merits.
RTC dismissed the 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 its representatives.

Court of Appeals affirmed the trial court’s ruling

but on different ground. Applying the ejusdem generis rule,
CA held that Section III-I of 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:
Whether or not petitioner did not have any cause
of action against private respondents?

Held:
Yes, the petitioner did have any cause of action
against private respondents.

Ratio:
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, 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 of policy
is different from the “3rd party liability” coverage and from
the “property damage” coverage.

As to the Court of Appeals’ ruling: CA’s ruling that

the coverage of the insured risks under Section III-I of the
policy does not include damage to the insured vehicle
arising from collision or overturning due to negligent acts of
a 3rd party, has no merit.

Not only is it an erroneous interpretation of the

provisions of the section, but it also violates a fundamental
rule on the interpretation of property insurance contracts
where interpretation should be liberally in favor of the
7 PERLA CIA DE SEGUROS v. COURT OF APPEALS
(1992) – Michelle Sy
Doctrine:
It is worthy to note that there is no causal
connection between the possession of a valid driver's
license and the loss of a vehicle. To rule otherwise would
render car insurance practically a sham since an insurance
company can easily escape liability by citing restrictions
which are not applicable or germane to the claim, thereby
reducing indemnity to a shadow.
Facts:
Private respondents spouses Herminio and
Evelyn Lim executed a promissory note in favor Supercars,
Inc. in the sum of P77,940.00, payable in monthly
installments according to the schedule of payment
indicated in said note, and secured by a chattel mortgage
over a brand new red Ford Laser 1300 5DR Hatchback
1981 model which is registered under the name of private
respondent Herminio Lim 4and insured with the petitioner
Perla Compania de Seguros, Inc. (Perla).
1. No, the private respondent is not in violation of the
authorized driver clause of the insurance policy.
2. No, the loss of the collateral does not exempt the
debtor from his admitted obligations under the
promissory note particularly the payment of
interest, litigation expenses and attorney's fees
Ratio:
1. The comprehensive motor car insurance policy issued
by petitioner Perla undertook to indemnify the private
respondents against loss or damage to the car (a) by
accidental collision or overturning, or collision or
overturning consequent upon mechanical breakdown
or consequent upon wear and tear; (b) by fire, external
explosion, self-ignition or lightning or burglary,
housebreaking or theft; and (c) by malicious act.
a. Where a car is admittedly, as in this case,
unlawfully and wrongfully taken without the
owner's consent or knowledge, such taking
constitutes theft, and, therefore, it is the
"THEFT"' clause, and not the "AUTHORIZED
DRIVER" clause that should apply.

Supercars, Inc., with notice to private respondents 2. This Court agrees with petitioner FCP that private
spouses, assigned to petitioner FCP Credit Corporation respondents are not relieved of their obligation to pay
(FCP) its rights, title and interest on said promissory note the former the installments due on the promissory note
and chattel mortgage as shown by the Deed of on account of the loss of the automobile. The chattel
Assignment. mortgage constituted over the automobile is merely an
accessory contract to the promissory note. Being the
Said vehicle was carnapped while parked at the
principal contract, the promissory note is unaffected by
back of Broadway Centrum along N. Domingo St. in
whatever befalls the subject matter of the accessory
Quezon City. The car was driven by private petitioner
contract. Therefore, the unpaid balance on the
Evelyn Lim before it was carnapped. Private respondent
promissory note should be paid, and not just the
filed a claim for loss with the petitioner Perla but said claim
installments due and payable before the automobile
was denied on the ground that Evelyn Lim, who was using
was carnapped, as erronously held by the Court of
the vehicle before it was carnapped, was in possession of
Appeals.
an expired driver's license at the time of the loss of said
vehicle which is in violation of the authorized driver clause
Dispositive:
of the insurance policy.
The Decision of the Court of Appeals is modified
Private respondents requests from petitioner FCP
for a suspension of payment on the monthly amortization
agreed upon due to the loss of the vehicle and, since the
carnapped vehicle insured with petitioner Perla, said
insurance company should be made to pay the remaining
balance of the promissory note and the chattel mortgage
contract.

Perla, however, denied private respondents'

claim. Consequently, petitioner FCP demanded that private
respondents pay the whole balance of the promissory note
or to return the vehicle but the latter refused. Petitioner FCP
filed a complaint against private respondents, who in turn
filed an amended third party complaint against petitioner
Perla.

Issue:
1. Whether or not the private respondent is in
violation of the authorized driver clause of the
insurance policy?
2. Whether or not the loss of the collateral exempted
the debtor from his admitted obligations under the
promissory note particularly the payment of
interest, litigation expenses and attorney's fees?

Held:
8 GUINGON V. DEL MONTE (1967)
Doctrine:
Where the contract provides for indemnity against
liability to third persons, then third persons to whom the insured is
liable, can sue the insurer. Where the contract is for indemnity
against actual loss or payment, then third persons cannot proceed
against the insurer, the contract being solely to reimburse the
insured for liability actually discharged by him thru payment to third
persons, said third persons' recourse being thus limited to the
insured alone.
Facts:
Julio Aguilar owned and operated several
jeepneys in the City of Manila. He entered into a contract
with the Capital Insurance & Surety Co., Inc. insuring the
operation of his jeepneys against accidents with third-party
liability. As a consequence thereof an insurance policy was
executed by the Capital Insurance & Surety Co., Inc., the
pertinent provisions of which in so far as this case is
concerned contains the following:
Section II —LIABILITY TO THE PUBLIC
1. The Company, will, subject to the limits of
liability, indemnify the Insured in the event of
accident caused by or arising out of the use of the
Motor Vehicle/s or in connection with the loading
or unloading of the Motor Vehicle/s, against all
sums including claimant's costs and expenses
which the Insured shall become legally liable to
pay in respect of:
a. death of or bodily injury to any person
b. damage to property
During the effectivity of such insurance policy,
Iluminado del Monte, one of the drivers of the jeepneys
operated by Aguilar, while driving along the intersection of
Juan Luna and Moro streets, City of Manila, bumped with
the jeepney of Gervacio Guingon who had just alighted
from another jeepney and as a consequence the latter died
some days thereafter.
A corresponding information for homicide thru
reckless imprudence was filed against Iluminado del
Monte, who pleaded guilty. A penalty of four months
imprisonment was imposed on him. As a corollary to such
action, the heirs of Gervacio Guingon filed an action for
damages praying that the sum of P82,771.80 be paid to
them jointly and severally by the defendants, driver
Iluminado del Monte, owner and operator Julio Aguilar, and
the Capital Insurance & Surety Co., Inc. For failure to
answer the complaint, Del Monte and Aguilar were
declared in default. Capital Insurance & Surety Co., Inc.
answered, alleging that the plaintiff has no cause of action
against it.
During trial, the following facts were stipulated:
COURT: The Court wants to find if there is a
stipulation in the policy whereby the insured is
insured against liability to third persons who
are not passengers of jeeps.
ALMARIO: As far as I know, in my honest
belief, there is no particularization as to the
passengers, whether the passengers of the
jeep insured or a passenger of another jeep or
whether it is a pedestrian. With those, we can
submit the stipulation.
SIMBULAN: I admit that
The CFI of Manila rendered its judgment
sentencing Iluminado del Monte and Julio Aguilar jointly
and severally to pay plaintiffs the sum of P8,572.95 as
damages for the death of their father, plus P1,000.00 for
attorney's fees plus costs. The defendant Capital Insurance
and Surety Co., Inc. is hereby sentenced to pay the
plaintiffs the sum of Five Thousand (P5,000.00) Pesos plus
Five Hundred (P500.00) Pesos as attorney's fees and
costs. These sums of P5,000.00 and P500.00 adjudged
against Capital Insurance and Surety Co., Inc. shall be
applied in partial satisfaction of the judgment rendered
against Iluminado del Monte and Julio Aguilar in this case.
Issue:
1. Can plaintiffs sue the insurer at all? YES
2. If so, can plaintiffs sue the insurer jointly with
the insured? NO
Ratio:
1. The policy in the present case, as aforequoted, is one
whereby the insurer agreed to indemnify the insured
"against all sums . . . which the Insured shall become
legally liable to pay in respect of: a. death of or bodily
injury to any person . . . ." Clearly, therefore, it is one
for indemnity against liability; from the fact then that
the insured is liable to the third person, such third
person is entitled to sue the insurer.
The right of the person injured to sue the insurer
of the party at fault (insured), depends on whether the
contract of insurance is intended to benefit third persons
also or only the insured. And the test applied has been this:
Where the contract provides for indemnity against liability
to third persons, then third persons to whom the insured is
liable, can sue the insurer. Where the contract is for
indemnity against actual loss or payment, then third
persons cannot proceed against the insurer, the contract
being solely to reimburse the insured for liability actually
discharged by him thru payment to third persons, said third
persons' recourse being thus limited to the insured alone.
2. The policy requires, as afore-stated, that suit and final
judgment be first obtained against the insured; that
only "thereafter" can the person injured recover on the
policy; it expressly disallows suing the insurer as a co-
defendant of the insured in a suit to determine the
latter's liability. As adverted to before, the query is
which procedure to follow — that of the insurance
policy or the Rules of Court.
The "no action" clause in the policy of insurance
cannot prevail over the Rules of Court provision aimed at
avoiding multiplicity of suits. In a case squarely on the
point, American Automobile Ins. Co. vs. Struwe, it was held
that a "no action" clause in a policy of insurance cannot
override procedural rules aimed at avoidance of multiplicity
of suits.
In the instant suit, Sec. 5 of Rule 2 on "Joinder of
causes of action" and Sec. 6 of Rule 3 on "Permissive
joinder of parties" cannot be superseded, at least with
respect to third persons not a party to the contract, as
herein, by a "no action" clause in the contract of insurance.
9 MALAYAN INSURANCE V. CA and VALLEJOS
Doctrine:
When the insurance company pays for the loss,
such payment operates as an equitable assignment to the
insurer of the property and all remedies which the insured
may have for the recovery thereof. That right is not
dependent upon, nor does it grow out of any privity of
contract or upon written assignment of claim, and payment
to the insured makes the insurer assignee in equity.
1. Sio Choy is liable as owner of the jeep pursuant to
Article 2184, while SAN LEON is liable as the
employer of the driver of the jeep at the time of the
accident pursuant to Art 2180.
MALAYAN’s liability, however, arose only out of the
insurance policy with Sio Choy. Petitioner as insurer of Sio
Choy, is liable to respondent Vallejos, but it cannot, as
incorrectly held by the trial court, be made "solidarily" liable
with the two principal tortfeasors namely respondents Sio
Choy and SAN LEON.

Facts: 2. MALAYAN is entitled to be reimbursed. Upon payment

Malayan Insurance Co. Inc. (MALAYAN) issued in
favor of private respondent Sio Choy Private Car
Comprehensive Policy covering a Willys jeep, private car.
The insurance coverage was for "own damage" not to
exceed P600.00 and "third-party liability" in the amount of
P20,000.00.
During the effectivity of the insurance policy, the
insured jeep, while being driven by one Juan P. Campollo
an employee of the respondent San Leon Rice Mill, Inc.,
(SAN LEON) collided with a passenger bus belonging to
the respondent Pangasinan Transportation Co., Inc.
(PANTRANCO) at the national highway in Barrio San
Pedro, Rosales, Pangasinan, causing damage to the
insured vehicle and injuries to the driver, Juan P. Campollo,
and the respondent.
Martin C. Vallejos, who was riding in the ill-fated
jeep. Martin C. Vallejos filed an action for damages against
Sio Choy, Malayan Insurance Co., Inc. and the
PANTRANCO before the Court of First Instance of
Pangasinan. The trial court rendered judgment holding Sio
Choy, SAN LEON, and MALAYAN jointly and severally
liable. However, MALAYAN’s liability will only be up to
P20,000.
of the loss, the insurer is entitled to be subrogated pro
tanto to any right of action which the insured may have
against the third person whose negligence or wrongful
act caused the loss. When the insurance company
pays for the loss, such payment operates as an
equitable assignment to the insurer of the property and
all remedies which the insured may have for the
recovery thereof. That right is not dependent upon ,
nor does it grow out of any privity of contract or upon
written assignment of claim, and payment to the
insured makes the insurer assignee in equity.
Dispositive:
WHEREFORE, the petition is GRANTED. The
decision of the trial court, as affirmed by the Court of
Appeals, is hereby AFFIRMED, with the modification
above-mentioned. Without pronouncement as to costs. SO
ORDERED.

On appeal, CA affirmed the decision of the trial

court. However, it ruled that SAN LEON has no obligation
to indemnify or reimburse the petitioner insurance company
for whatever amount it has been ordered to pay on its
policy, since the San Leon Rice Mill, Inc. is not a privy to
the contract of insurance between Sio Choy and the
insurance company.

MALAYAN appealed to the SC by way of review

on certiorari.

Issues:
1. Whether or not MALAYAN is solidarily liable to
Vallejos, along with Sio Choy and SAN LEON ?
2. Whether or not MALAYAN is entitled to be
reimbursed by SAN LEON for whatever amount
petitioner has been adjudged to pay respondent
Vallejos on its insurance policy?

Held:
1. Only Sio Choy and SAN LEON are solidarily liable
to Vallejos for the award of damages.
2. Yes, MALAYAN is entitled to be reimbursed by
SAN LEON for whatever amount petitioner has
been adjudged to pay respondent Vallejos on its
insurance policy

Ratio:
10 SHAFER V. RTC JUDGE
Doctrine:
Compulsory Motor Vehicle Liability Insurance
(third party liability, or TPL) is primarily intended to provide
compensation for the death or bodily injuries suffered by
innocent third parties or passengers as a result of a
negligent operation and use of motor vehicles. The victims
and/or their dependents are assured of immediate financial
assistance, regardless of the financial capacity of motor
vehicle owners.
The liability of the insurance company under the
Compulsory Motor Vehicle Liability Insurance is for loss or
damage. Where an insurance policy insures directly
against liability, the insurer's liability accrues immediately
upon the occurrence of the injury or event upon which the
liability depends, and does not depend on the recovery of
judgment by the injured party against the insured.
Facts:
On 2 January 1985, petitioner Sherman Shafer
obtained a private car policy, GA No. 0889, over his Ford
Laser car with Plate No. CFN-361 from Makati Insurance
Company, Inc., for third party liability
(TPL).<äre||anº•1àw> During the effectivity of the policy, an
information for reckless imprudence resulting in damage
to property and serious physical injuries was filed against
petitioner. The information reads as follows:
That on or about the seventeeth (17th) day of May
1985, in the City of Olongapo, Philippines, and within the
jurisdiction of this Honorable Court, the above-named
accused, being then the driver and in actual physical
control of a Ford Laser car bearing Plate No. CFN-361, did
then and there wilfully, unlawfully and criminally drive,
operate and manage the said Ford Laser car in a careless,
reckless and imprudent manner without exercising
reasonable caution, diligence and due care to avoid
accident to persons and damage to property and in
disregard of existing traffic rules and regulations, causing
by such carelessness, recklessness and imprudence the
said Ford Laser car to hit and bump a Volkswagen car
bearing Plate No. NJE-338 owned and driven by Felino
llano y Legaspi, thereby causing damage in the total
amount of P12,345.00 Pesos, Philippine Currency, and as
a result thereof one Jovencio Poblete, Sr. who was on
board of the said Volkswagen car sustained physical
injuries, to wit:
1. 2 cm. laceration of left side of tongue.
2. 6 cm. laceration with partial
transection of muscle (almost full
thickness) left side of face.
3. Full thickness laceration of lower lip
and adjacent skin, which injuries causing
[sic] deformity on the face.
Issue:
Whether or not the court erred in dismissing the
third party complaint?
Held:
Yes, the court erred in dismissing the third party
complaint
Ratio:
It is the contention of herein petitioner that the
dismissal of the third party complaint amounts to a denial
or curtailment of his right to defend himself in the civil
aspect of the case. Petitioner further raises the legal
question of whether the accused in a criminal action for
reckless imprudence, where the civil action is jointly
prosecuted, can legally implead the insurance company as
third party defendant under its private car insurance policy,
as one of his modes of defense in the civil aspect of said
proceedings.
On the other hand, the insurance company
submits that a third party complaint is, under the rules,
available only if the defendant has a right to demand
contribution, indemnity, subrogation or any other relief in
respect of plaintiff's claim, to minimize the number of
lawsuits and avoid the necessity of bringing two (2) or more
suits involving the same subject matter. The insurance
company further contends that the contract of motor vehicle
insurance, the damages and attorney's fees claimed by
accused/third party plaintiff are matters entirely different
from his criminal liability in the reckless imprudence case,
and that petitioner has no cause of action against the
insurer until petitioner's liability shall have been determined
by final judgment, as stipulated in the contract of insurance.
The injured for whom the contract of insurance is
intended can sue directly the insurer. The general purpose
of statutes enabling an injured person to proceed directly
against the insurer is to protect injured persons against the
insolvency of the insured who causes such injury, and to
give such injured person a certain beneficial interest in the
proceeds of the policy, and statutes are to be liberally
construed so that their intended purpose may be
accomplished. It has even been held that such a provision
creates a contractual relation which inures to the benefit of
any and every person who may be negligently injured by
the named insured as if such injured person were
specifically named in the policy.
In the event that the injured fails or refuses to
include the insurer as party defendant in his claim for
indemnity against the insured, the latter is not prevented by
law to avail of the procedural rules intended to avoid
multiplicity of suits. Not even a "no action" clause under the
policy-which requires that a final judgment be first obtained
against the insured and that only thereafter can the person
insured recover on the policy can prevail over the Rules of
Court provisions aimed at avoiding multiplicity of suits.
In the instant case, the court a quo erred in
dismissing petitioner's third party complaint on the ground
that petitioner had no cause of action yet against the
insurance company (third party defendant). There is no
need on the part of the insured to wait for the decision of
the trial court finding him guilty of reckless imprudence. The
occurrence of the injury to the third party immediately gave
rise to the liability of the insurer under its policy
Dispositive:
Yes, the court should have entertained the third
party complaint.
11 ASSOCIATION OF BAPTISTS V FIELDMEN (1983) accident stole it or not is to be determined by a fair
preponderance of evidence and not by the rule of criminal
Doctrine: law requiring proof of guilt beyond reasonable doubt.
There need be no prior conviction for the crime of Besides, there is no provision in the policy requiring prior
theft to make an insurer liable under the theft clause of the criminal conviction for theft.
policy. In a civil action for recovery on an automobile
insurance, the question whether a person using a certain The Comprehensive Policy issued by the
automobile at the time of the accident stole it or not is to be insurance company includes loss of or damage to the
determined by a fair preponderance of evidence and not by motor vehicle by "burglary…or theft." It is settled that the
the rule of criminal law requiring proof of guilt beyond act of Catiben in taking the vehicle for a joy ride, constitutes
reasonable doubt. theft within the meaning of the insurance policy and that
recovery for damage to the car is not barred by the illegal
Facts: use of the car by one of the station boys.
The plaintiff Association of Baptists for World "Where a car is admittedly
Evangelism, Inc. is a religious corporation duly organized as in this case unlawfully and
and registered under the laws of the Philippines, while wrongfully taken by some
defendant Fieldmen’s Insurance Co., Inc., is also a people, be they employees of
domestic corporation duly organized and existing under the the car shop or not to whom it
laws of the Philippines. had been entrusted, and taken
That plaintiff, having an insurable interest in a on a long trip to Montalban
Chevrolet Carry-all, 1955 Model, owned by Reverend without the owner’s consent or
Clinton Bonnel, insured said vehicle with the defendant knowledge, such taking
under Fieldmen’s Insurance Co., Inc. The Private Car constitutes or partakes of the
Comprehensive Policy it has against loss or damage was nature of theft as defined in Art.
up to the amount of P5,000.00. 308 RPC. Theft is committed by
any person who, with intent to
Through plaintiff’s representative, Dr. Antonio gain but without violence
Lim, the aforementioned Chevrolet Carry-all was placed at against or intimidation of
the Jones Monument Mobilgas Service Station at Davao persons nor force upon things,
City, under the care of said station’s operator, Rene Te so shall take personal property of
that said carry-all could be displayed as being for sale, with another without the latter’s
the understanding that the latter or any of his station boys consent,’ for purposes of
would receive a 2% commission should they sell said recovering the loss under the
vehicle. policy in question."
Romeo Catiben one of the boys at the Jones When a person, either with the object of going to
Monument Service Station and a nephew of the wife of a certain place, or learning how to drive, or enjoying a free
Rene Te who is residing with them, took the chevrolet ride, takes possession of a vehicle belonging to another,
carry-all for a joy ride to without the prior permission, without the consent of its owner, he is guilty of theft
authority or consent of either the plaintiff or its because by taking possession of the personal property
representative Dr. Antonio Lim, or of Rene Te, and on its belonging to another and using it, his intent to gain is
way back, said vehicle, due to some mechanical defect evident since he derives therefrom utility, satisfaction,
accidentally bumped an electric post causing actual enjoyment and pleasure.
damages valued at P5,518.61.
The TC ruled in favor of the plaintiff and ordered
the defendant insurance company to pay indemnity. The
CA reversed hence, the petition with the SC.

Issue:
Whether or not there must be prior criminal
conviction for the damage to the Chevrolet carry-all to be
compensable under the issued policy?

Held:
No, there is no need of prior criminal conviction for
the damage to the Chevrolet carry-all to be compensable
under the issued policy

Ratio:
Upon the facts stipulated by the parties it is
admitted that Catiben had taken the vehicle for a joy ride
and while the same was in his possession he bumped it
against an electric post resulting in damages. That act is
theft within a policy of insurance. In a civil action for
recovery on an automobile insurance, the question whether
a person using a certain automobile at the time of the
12 PERLA CIA V. ANCHETA, GR L-49699, AUGUST 8
1988

Facts: In a collision between the IH Scout in which private

respondents were riding and a Superlines bus along the
national highway in Sta. Elena, Camarines Norte, private
respondents sustained physical injuries. Thus, they filed
with the CFI of Camarines Norte a complaint for damages
against Superlines, the bus driver and Perla Compania de
Seguros, the insurer of the bus. The vehicle in which
private respondents were riding was insured with Malayan
Insurance Co.Respondent judge issued an order directing
Perla Compania de Seguros to pay the plaintiffs under the
"no fault clause" as provided for under Section 378 of the
Insurance Code. 1aw ryPetitioner posits that under Sec.
378 of the Insurance Code, the insurer liable to pay the
P5,000.00 is the insurer of the vehicle in which private
respondents were riding, not petitioner, as the provision
states that" [i]n the case of an occupant of a vehicle, claim
shall lie against the insurer of the vehicle in which the
occupant is riding, mounting or dismounting from."

Issue: whether or not petitioner is the insurer liable to

indemnify private respondents under Sec. 378 of the
Insurance Code.

Held: From a reading of Sec. 378 of the Insurance Code,

the following rules on claims under the "no fault indemnity"
provision, where proof of fault or negligence is not
necessary for payment of any claim for death or injury to a
passenger or a third party, are established: 1. A claim may
be made against one motor vehicle only. 2. If the victim is
an occupant of a vehicle, the claim shall lie against the
insurer of the vehicle in which he is riding, mounting or
dismounting from. 3. In any other case (i.e. if the victim is
not an occupant of a vehicle), the claim shall lie against the
insurer of the directly offending vehicle.
13 VDA DE MAGLANA VS. CONSOLACION
Doctrine:
While it is true that where the insurance contract
provides for indemnity against liability to third persons, such third
persons can directly sue the insurer, however, the direct liability of
the insurer under indemnity contracts against third party liability
does not mean that the insurer can be held solidarily liable with the
insured and/or the other parties found at fault. The liability of the
insurer is based on contract; that of the insured is based on tort.
Facts:
Lope Maglana was an employee of the Bureau of
Customs. Lope Maglana was on his way to his work station, driving
a motorcycle owned by the Bureau of Customs. He met an
accident that resulted in his death. He died on the spot. The PUJ
jeep that bumped the deceased was driven by Pepito Into,
operated and owned by defendant Destrajo. From the
investigation, the PUJ jeep was overtaking another passenger jeep
that was going towards the city. While overtaking, the PUJ jeep of
defendant Destrajo running abreast with the overtaken jeep,
bumped the motorcycle driven by the deceased. The point of
impact was on the lane of the motorcycle and the deceased was
thrown from the road and met his untimely death. Consequently,
the heirs of Lope Maglana, Sr., here petitioners, filed an action for
damages and attorney's fees against operator Patricio Destrajo
and the Afisco Insurance Corporation (AFISCO). An information
for homicide thru reckless imprudence was also filed against
Pepito Into.
During the pendency of the civil case, Into was found
guilty and was ordered to indemnify the heirs of Lope Maglana, Sr.
No appeal was interposed by accused who later applied for
probation.
RTC rendered a decision finding that Destrajo had not exercised
sufficient diligence as the operator of the jeepney. The defendant
insurance company is ordered to reimburse defendant Destrajo
whatever amounts the latter shall have paid only up to the extent
of its insurance coverage.
Petitioners filed a motion for the reconsideration
contending that AFISCO should not merely be held secondarily
liable because the Insurance Code provides that the insurer's
liability is "direct and primary and/or jointly and severally with the
operator of the vehicle, although only up to the extent of the
insurance coverage." Hence, they argued that the P20,000.00
coverage of the insurance policy issued by AFISCO, should have
been awarded in their favor.
AFISCO argued that since the Insurance Code does not expressly
provide for a solidary obligation, the presumption is that the
obligation is joint.
RTC denied the motion for reconsideration ruling that since the
insurance contract "is in the nature of suretyship, then the liability
of the insurer is secondary only up to the extent of the insurance
coverage."
Petitioners filed a second motion for reconsideration
reiterating that the liability of the insurer is direct, primary and
solidary with the jeepney operator because the petitioners became
direct beneficiaries under the provision of the policy which, in
effect, is a stipulation pour autrui. This motion was likewise denied
for lack of merit.
Issue:
Whether or not AFISCO is directly and solidarily liable
with the negligent operator up to the extent of its insurance
coverage?
Held:
Yes, AFISCO is directly and solidarily liable with the
negligent operator up to the extent of its insurance coverage
Ratio:
AFISCO is directly liable but not solidarily liable. The
particular provision of the insurance policy on which petitioners
base their claim is as follows:
Sec. 1 — LIABILITY TO THE PUBLIC
1. The Company will, subject to the Limits of
Liability, pay all sums necessary to discharge
liability of the insured in respect of:
(a) death of or bodily injury to any THIRD PARTY
3. In the event of the death of any person entitled
to indemnity under this Policy, the Company will, in
respect of the liability incurred to such person
indemnify his personal representatives in terms of,
and subject to the terms and conditions hereof.
The above-quoted provision leads to no other
conclusion but that AFISCO can be held directly liable by
petitioners. As this Court ruled in Shafer vs. Judge, RTC of
Olongapo City, Br. 75, "where an insurance policy insures directly
against liability, the insurer's liability accrues immediately upon the
occurrence of the injury or even upon which the liability depends,
and does not depend on the recovery of judgment by the injured
party against the insured." The underlying reason behind the third
party liability (TPL) of the Compulsory Motor Vehicle Liability
Insurance is "to protect injured persons against the insolvency of
the insured who causes such injury, and to give such injured
person a certain beneficial interest in the proceeds of the policy . .
." Since petitioners had received from AFISCO the sum of
P5,000.00 under the no-fault clause, AFISCO's liability is now
limited to P15,000.00.
However, we cannot agree that AFISCO is likewise
solidarily liable with Destrajo. While it is true that where the
insurance contract provides for indemnity against liability to third
persons, such third persons can directly sue the insurer, however,
the direct liability of the insurer under indemnity contracts against
third party liability does not mean that the insurer can be held
solidarily liable with the insured and/or the other parties found at
fault. The liability of the insurer is based on contract; that of the
insured is based on tort.
The Court then proceeded to distinguish the extent of
the liability and manner of enforcing the same in ordinary contracts
from that of insurance contracts. While in solidary obligations, the
creditor may enforce the entire obligation against one of the
solidary debtors, in an insurance contract, the insurer undertakes
for a consideration to indemnify the insured against loss, damage
or liability arising from an unknown or contingent event. Thus,
petitioner therein, which, under the insurance contract is liable only
up to P20,000.00, cannot be made solidarily liable with the insured
for the entire obligation of P29,013.00 otherwise there would result
"an evident breach of the concept of solidary obligation."
In fine, we conclude that the liability of AFISCO based
on the insurance contract is direct, but not solidary with that of
Destrajo which is based on Article 2180 of the Civil Code. As such,
petitioners have the option either to claim from AFISCO and the
balance from Destrajo or enforce the entire judgment from
Destrajo subject to reimbursement from AFISCO to the extent of
the insurance coverage.
Dispositive:
WHEREFORE, premises considered, the present
petition is hereby GRANTED. The award of P28,800.00
representing loss of income is INCREASED to P192,000.00 and
the death indemnity of P12,000.00 to P50,000.00. SO ORDERED.
14 GSIS V. CA, GR 101439, JUNE 21 1999
15 VILLACORTA V INSURANCE COMMISSION, 1980
Doctrine:
The Court sets aside respondent Insurance
Commission's dismissal of petitioner's complaint and holds that
where the insured's car is wrongfully taken without the insured's
consent from the car service and repair shop to whom it had been
entrusted for check-up and repairs (assuming that such taking was
for a joy ride, in the course of which it was totally smashed in an
accident), respondent insurer is liable and must pay insured for the
total loss of the insured vehicle under the theft clause of the policy.
Facts:
Petitioner Villacorta was the owner of a Colt Lancer,
insured with respondent Empire Insurance Company under a
Private Car Policy for P35,000.00 — Own Damage; P30,000.00 —
Theft; and P30,000.00 — Third Party Liability. The vehicle was
brought to the Sunday Machine Works, Inc., for general check-up
and repairs. While it was in the custody of the Sunday Machine
Works, the car was allegedly taken by 6 persons and driven out to
Montalban, Rizal. The car figured in an accident, hitting and
bumping a gravel and sand truck parked at the right side of the
road. As a consequence, the car suffered extensive damage.
Complainant 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, however,
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.
"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. Under the second
category, it is to be noted that the words "any
person' is qualified by the phrase. It is
therefore clear that if the person driving is
other than the insured, he must have been
duly authorized by the insured, to drive the
vehicle to make the insurance company liable
for the driver's negligence. Complainant
admitted that she did not know the person who
drove her vehicle at the time of the accident,
much less consented to the use of the same.
Her husband likewise admitted that he neither
knew this driver Benito Mabasa. With these
declarations of complainant and her husband,
we hold that the person who drove the vehicle,
in the person of Benito Mabasa, is not an
authorized driver of the complainant.
Apparently, this is a violation of the
'Authorized Driver' clause of the policy.
Respondent commission likewise upheld private
respondent's assertion that the car was not stolen and therefore
not covered by the Theft clause, ruling that "The element of 'taking'
in Article 308 of the RPC means that the act of depriving another
of the possession and dominion of a movable thing is coupled ...
with the intention, at the time of the 'taking,' of withholding it with
the character of permanency. In other words, there must have
been shown a felonious intent upon the part of the taker of the car,
and the intent must be an intent permanently to deprive the insured
of his car," and that "Such was not the case in this instance. 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
RPC. If at all there was a 'taking', the same was merely temporary
in nature. A temporary taking is held not a taking insured against."
Issue: Whether or not petitioner can recover the loss under the
policy?
Held: Yes, the petitioner can recover the loss under the policy.
Ratio:
The Court finds respondent commission's dismissal of
the complaint to be contrary to the evidence and the law.
The main purpose of the "authorized driver" clause, as may
be seen from its text, supra, is that a person other than the insured
owner, such as
a) his regular driver who drives the car on the
insured's order, or
b) a friend or member of the family or the
employees of a car service or repair shop, with
his permission
i) must be duly licensed drivers and
ii) 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 happen stance 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. The situation is no different from the regular or family
driver, who instead of carrying out the owner's order to fetch the
children from school takes out his girl friend instead for a joy ride
and instead wrecks the car. There is no question of his being an
"authorized driver" which allows recovery of the loss although his
trip was for a personal or illicit purpose without the owner's
authorization.
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 RPC for purposes
of recovering the loss under the policy in question.
The Court rejects respondent commission's premise
that there must be an intent on the part of the taker of the car
"permanently to deprive the insured of his car" and that since the
taking here was for a "joy ride" and "merely temporary in nature,"
a "temporary taking is held not a taking insured against." The
evidence does not warrant respondent commission's findings that
it was a mere "joy ride". From the very investigator's report cited in
its comment, 3 the police found from the waist of the car driver
Benito Mabasa Bartolome who smashed the car and was found
dead right after the incident "one cal. 45 Colt. and one apple type
grenade," hardly the materials one would bring along on a "joy
ride". Then, again, it is equally evident that the taking proved to be
quite permanent rather than temporary, for the car was totally
smashed in the fatal accident and was never returned in
serviceable and useful condition to petitioner-owner.
The insurer must therefore indemnify the petitioner-
owner for the total loss of the insured car in the sum of P35,000.00
under the theft clause of the policy, subject to the filing of such
claim for reimbursement or payment as it may have as subrogee
against the Sunday Machine Works, Inc.
Dispositive:
ACCORDINGLY, the appealed decision is set aside and
judgment is hereby rendered sentencing private respondent to pay
petitioner the sum of P35,000.00 with legal interest from the filing
of the complaint. SO ORDERED.
16 PALERMO V PROVINCIAL (pyramid) INSURANCE,
L-36480, MAY 31 1988
FACTS: On October 12,1968, after having purchased a
brand new Nissan Cedric de Luxe Sedan car bearing Motor
No. 087797 from the Ng Sam Bok Motors Co. in Bacolod
City, plaintiff 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.
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. On April 17, 1968, while driving the
automobile in question, the plaintiff met a violent accident.
The La Carlota City fire engine crashed head on, and as a
consequence, the plaintiff sustained physical injuries, his
father, Cesar Palermo, who was with am in the car at the
time was likewise seriously injured and died shortly
thereafter, and the car in question was totally wrecked.
Palermo, filed a complaint in the Court of First Instance of
Negros Occidental against Pyramid Insurance Co., Inc., for
payment of his claim. Pyramid Insurance Co., Inc.,
disallowed the claim because at the time of the accident,
the insured was driving his car with an expired driver's
license.
ISSUE:
 WON Palermo is entitled to the
HELD:
 YES. AUTHORIZED DRIVER:
 Any of
following:
 (a) The Insured.
(b) Any person driving on the Insured's order or with his
permission. Provided that the person driving is permitted in
accordance with 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. (Exh.
"A.")
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.
17 TANCO V. PHIL GUARANTY COMPAMY, GR L-
17312, NOV 29, 1965
FACTS:
 While Tanco's automobile was driven by his
brother Manuel Tanco, who at the time didn't have
a valid license since it was not renewed until the
next week, had a collision with a pick-up delivery
van at the southern approach of the Jones bridge
 The repairs cost P2,536.99 so he filed a claim
against the insurance company which was
rejected
 He filed a claim in the Municipal Court of Manila
and elevated to the Court of First Instance of
Manila on Appeal which favored Tanco
 exception clause "the company shall not be liable
in respect of any accident, loss, damage or liability
caused, sustained or incurred ... whilst (the
insured vehicle) is ... being driven by or is for the
purpose of being driven by him in the charge of
any person other than an Authorized Driver.
o Authorized Driver" to be the insured
himself and "(b) any person driving on
the Insured's order or with his
permission, provided that the person
claim driving is permitted in accordance with
the licensing or other laws or regulations
the to drive the Motor Vehicle or has been
permitted and is not disqualified by order
of a court of law or by reason of any
enactment or regulation in that behalf
from driving such Motor Vehicle.
ISSUE: W/N the Tanco can claim because it was not
covered by the exemption clause
HELD: NO. appealed from is reversed, with costs
 The exclusion clause in the contract invoked by
appellant is clear. It does not refer to violations of
law in general, which indeed would tend to render
automobile insurance practically a sham, but to a
specific situation where a person other than the
insured himself, even upon his order or with his
permission, drives the motor vehicle without a
license or with one that has already expired. No
principle of law or of public policy militates against
the validity of such a provision.
18 TRAVELLERS INSURACE V CA GR 82036, MAY 22
1997
Facts:
Vicente Mendoza, Jr. as heir of his mother (Feliza Vineza
de Mendoza) who was killed in a vehicular accident, filed
an action for damages against the erring taxicab driver
(Rodrigo Dumlao), the owner (Armando Abellon) of the
taxicab (Lady Love Taxi with Plate No. 438-HA Pilipinas
Taxi 1980) and the alleged insurer of the vehicle which
featured in the vehicular accident. The erring taxicab was
allegedly covered by a third-party liability insurance policy
issued by petitioner Travellers Insurance & Surety
Corporation. Petitioner was included in the complaint as the
compulsory insurer of the said taxicab under Certificate of
Cover No. 1447785-3.
The trial court rendered judgment in favor of private
respondent and ordered Rodrigo Dumlao, Armando
Abellon and petitioner to pay private respondent death
indemnity, moral damages, exemplary damages,
attorney’s fees and other litigation expenses, jointly and
severally.
The decision was affirmed by the CA and the subsequent
MR was denied.
Hence this petition.
ISSUE: Whether petitioner is liable to private respondent?
HELD: NO.
I. The right of the person injured to sue the insurer of the
party at fault (insured), depends on whether the contract of
insurance is intended to benefit third persons also or on the
insured. And the test applied has been this: Where the
contract provides for indemnity against liability to third
persons, then third persons to whom the insured is liable
can sue the insurer. Where the contract is for indemnity
against actual loss or payment, then third persons cannot
proceed against the insurer, the contract being solely to
reimburse the insured for liability actually discharged by
him thru payment to third persons, said third persons’
recourse being thus limited to the insured alone.”
The trial court did not distinguish between the private
respondent’s cause of action against the owner and the
driver of the Lady Love taxicab and his cause of action
against petitioner. The former is based on torts and quasi-
delicts while the latter is based on contract. Confusing
these two sources of obligations as they arise from the
same act of the taxicab fatally hitting private respondent’s
mother, and in the face of overwhelming evidence of the
reckless imprudence of the driver of the Lady Love taxicab,
the trial court brushed aside its ignorance of the terms and
conditions of the insurance contract and forthwith found all
three - the driver of the taxicab, the owner of the taxicab,
and the alleged insurer of the taxicab - jointly and severally
liable for actual, moral and exemplary damages as well as
attorney’s fees and litigation expenses. This is clearly a
misapplication of the law by the trial court, and respondent
appellate court grievously erred in not having reversed the
trial court on this ground.
“While it is true that where the insurance contract provides
for indemnity against liability to third persons, such third
persons can directly sue the insurer, however, the direct
liability of the insurer under indemnity contracts against
third-party liability does not mean that the insurer can be
held solidarily liable with the insured and/or the other
parties found at fault. The liability of the insurer is based
on contract; that of the insured is based on tort.”
II. At the time of the vehicular incident which resulted in the
death of private respondent’s mother, during which time the
Insurance Code had not yet been amended by Batas
Pambansa (B.P.) Blg. 874, Section 384 provided as
follows:
“Any person having any claim upon the policy issued
pursuant to this chapter shall, without any unnecessary
delay, present to the insurance company concerned a
written notice of claim setting forth the amount of his loss,
and/or the nature, extent and duration of the injuries
sustained as certified by a duly licensed physician. Notice
of claim must be filed within six months from date of the
accident, otherwise, the claim shall be deemed
waived. Action or suit for recovery of damage due to loss
or injury must be brought in proper cases, with the
Commission or the Courts within one year from date of
accident, otherwise the claimant’s right of action shall
prescribe” [emphasis and underscoring supplied].
It is significant to note that the aforecited Section 384 was
amended by B.P. Blg. 874 to categorically provide that
“action or suit for recovery of damage due to loss or injury
must be brought in proper cases, with the Commissioner or
the Courts within one year from denial of the claim,
otherwise the claimant’s right of action shall prescribe”
[emphasis ours].
We have certainly ruled with consistency that the
prescriptive period to bring suit in court under an insurance
policy, begins to run from the date of the insurer’s rejection
of the claim filed by the insured, the beneficiary or any
person claiming under an insurance contract. This ruling is
premised upon the compliance by the persons suing under
an insurance contract, with the indispensable requirement
of having filed the written claim mandated by Section 384
of the Insurance Code before and after its
amendment. Absent such written claim filed by the person
suing under an insurance contract, no cause of action
accrues under such insurance contract, considering that it
is the rejection of that claim that triggers the running of the
one-year prescriptive period to bring suit in court, and there
can be no opportunity for the insurer to even reject a claim
if none has been filed in the first place, as in the instant
case.
WHEREFORE, the instant petition is HEREBY
GRANTED.

19 CALANOC v. COURT OF APPEALS
Doctrine:
“And he cannot be considered as making an arrest as an
officer of the law, as contended, simply because he went
with the traffic policeman, for certainly he did not go there
for that purpose nor was he asked to do so by the
policeman. Much less can it be pretended that Basilio died
in the course of an assault or murder considering the very
nature of these crimes. In the first place, there is no proof
that the death of Basilio is the result of either crime for the
record is barren of any circumstance showing how the fatal
shot was fired.” [Sec.176 Casualty insurance is insurance
covering loss or liability arising from accident or mishap…]
Facts:
Basilio was a watchman of the Manila Auto Supply
in Avenida Rizal & Zurbaran Street. He was insured by the
Philam Life Insurance in the amount of P2, 000 to which
was a supplementary contract was covering death by
accident. He died of a gunshot wound on the occasion of a
robbery committed in the house of Atty. Ojeda. The widow,
Calanoc, was paid the sum of P2, 000, face value of the
policy, but when she demanded the payment of the
additional sum of P2, 000 representation the value of the
supplemental policy, the company refused because they
alleged that the deceased died by reason of murder during
the commission of the robbery. The company further
contends that Basilio was killed which making an arrest as
an officer of the law or as result of an assault or murder
committed in the place and therefore his death was caused
by one of the risks excluded by the supplementary contract
which exempts the company from liability. This argument
was upheld by the CA. Hence, this case.
In the first place, there is no proof that the death
of Basilio is the result of either crime for the record is barren
of any circumstance showing how the fatal shot was fired.
Perhaps this may be clarified in the criminal case now
pending in court as regards the incident but before that is
done anything that might be said on the point would be a
mere conjecture. Nor can it be said that the killing was
intentional for there is the possibility that the malefactor had
fired the shot merely to scare away the people around for
his own protection and not necessarily to kill or hit the
victim. In any event, while the act may not exempt the
triggerman from liability for the damage done, the fact
remains that the happening was a pure accident on the part
of the victim. The victim could have been either the
policeman or Atty. Ojeda for it cannot be pretended that the
malefactor aimed at the deceased precisely because he
wanted to take his life.
Disposition:
Wherefore, reversing the decision appealed from,
we hereby order the company to pay petitioner-appellant
the amount of P2,000, with legal interest from January 26,
1951 until fully paid, with costs.

Issue:
Whether or not the death of Basilio comes with the
purview of the exception clause of the supplementary
policy and hence, exempts Philam from liability?

Held:
No, the death of Basilio comes with the purview of
the exception clause of the supplementary policy and
hence, exempts Philam from liability

Ratio:
The circumstance that he was a mere watchman
and had no duty to heed the call of Atty. Ojeda should not
be taken as a capricious desire on his part to expose his
life to danger considering the fact that the place he was in
duty-bound to guard was only a block away. In volunteering
to extend help under the situation, he might have thought,
rightly or wrongly, that to know the truth was in the interest
of his employer it being a matter that affects the security of
the neighborhood. No doubt there was some risk coming to
him in pursuing that errand, but that risk always existed it
being inherent in the position he was holding. He cannot
therefore be blamed solely for doing what he believed was
in keeping with his duty as a watchman and as a citizen.
And he cannot be considered as making an arrest as an
officer of the law, as contended, simply because he went
with the traffic policeman, for certainly he did not go there
for that purpose nor was he asked to do so by the
policeman. Much less can it be pretended that Basilio died
in the course of an assault or murder considering the very
nature of these crimes.
20 BIAGTAN V INSULAR LIFE
Doctrine:
Court decisions in the American jurisdiction,
where similar provisions in accidental death benefit clauses
in insurance policies have been construed, may shed light
on the issue before Us. Thus, it has been held that
"intentional" as used in an accident policy excepting
intentional injuries inflicted by the insured or any other
person, etc., implies the exercise of the reasoning faculties,
consciousness and volition. Where a provision of the policy
excludes intentional injury, it is the intention of the person
inflicting the injury that is controlling. If the injuries suffered
by the insured clearly resulted from the intentional act of a
third person the insurer is relieved from liability as
stipulated.
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 another party."
Sometime in the night of May 1964 or the first
hours of May 21, 1964, while the said life policy and
supplementary contract were in full force and effect, the
house of insured Juan S. Biagtan was robbed by a band of
robbers who were charged in and convicted by the Court of
First Instance of Pangasinan for robbery with homicide; that
in committing the robbery, the robbers, on reaching the
staircase landing on the second floor, rushed towards the
door of the second floor room, where they suddenly met a
person near the door of oneof the rooms who turned out to
be the insured Juan S. Biagtan who received thrusts from
their sharp-pointed instruments, causing wounds on the
body of said Juan S. Biagtan resulting in his death at about
7 a.m. on the same day, May 21, 1964;
Plaintiffs, as beneficiaries of the insured, filed a
claim under the policy. The insurance company paid the
basic amount of P5,000.00 but refused to pay the additional
sum of P5,000.00 under the accidental death benefit
clause, on the ground that the insured's death resulted from
injuries intentionally inflicted by third parties and therefore
was not covered.
Plaintiffs filed suit to recover, and after due hearing the
court a quo rendered judgment in their favor. Hence, this
present appeal by the insurer.
Issue: Whether or not under the facts are stipulated and
found by the trial court the wounds received by the insured
at the hands of the robbers — nine in all, five of them mortal
and four non-mortal — were inflicted intentionally by third
person wherein excepted from payment in the said policy?
Held:
Yes, under the facts are stipulated and found by
the trial court the wounds received by the insured at the
hands of the robbers — nine in all, five of them mortal and
four non-mortal — were inflicted intentionally by third
person wherein excepted from payment in the said policy.
Ratio:
The trial court committed a plain error in drawing
the conclusion it did from the admitted facts. Nine wounds
were inflicted upon the deceased, all by means of thrusts
with sharp-pointed instruments wielded by the robbers.
This is a physical fact as to which there is no dispute. So is
the fact that five of those wounds caused the death of the
insured. Whether the robbers had the intent to kill or merely
to scare the victim or to ward off any defense he might offer,
it cannot be denied that the act itself of inflicting the injuries
was intentional.
It should be noted that the exception in the
accidental benefit clause invoked by the appellant does not
speak of the purpose — whether homicidal or not — of a
third party in causing the injuries, but only of the fact that
such injuries have been "intentionally" inflicted — this
obviously to distinguish them from injuries which, although
received at the hands of a third party, are purely accidental.
This construction is the basic idea expressed in the
coverage of the clause itself, namely, that "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." A
gun which discharges while being cleaned and kills a
bystander; a hunter who shoots at his prey and hits a
person instead; an athlete in a competitive game involving
physical effort who collides with an opponent and fatally
injures him as a result: these are instances where the
infliction of the injury is unintentional and therefore would
be within the coverage of an accidental death benefit
clause such as thatin question in this case. 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.
Unlike the ruling in the case of Calanoc vs. Court
of Appeals, where the killing of the victim was held as
accidental and thus covered by the insurance policy, the
Supreme Court held that in the instant case, the insured
was killed intentionally. The term “intentional” implies the
exercise of the reasoning faculties, consciousness and
volition. A similar possibility is clearly ruled out by the facts
in the case now before Us. For while a single shot fired from
a distance, and by a person who was not even seen aiming
at the victim, could indeed have been fired without intent to
kill or injure, nine wounds inflicted with bladed weapons at
close range cannot conceivably be considered as innocent
insofar as such intent is concerned. The manner of
execution of the crime permits no other conclusion.
Dispositive:
Decision appealed from is hereby reversed.
Appellant Insurance company won!
21 FINMAN GENERAL ASSURANCE v CA
Doctrine:
The generally accepted rule is that, death or injury does
not result from accident or accidental means within the terms of an
accident-policy if it is the natural result of the insured's voluntary
act, unaccompanied by anything unforeseen except the death or
injury. There is no accident when a deliberate act is performed
unless some additional, unexpected, independent, and
unforeseen happening occurs which produces or brings about the
result of injury or death. In other words, where the death or injury
is not the natural or probable result of the insured's voluntary act,
or if something unforeseen occurs in the doing of the act which
produces the injury, the resulting death is within the protection of
the policies insuring against death or injury from accident.
Facts:
It appears on record that on October 22, 1986,
deceased, Carlie Surposa was insured with petitioner
Finman General Assurance Corporation under Finman
General Teachers Protection Plan Master Policy No. 2005
and Individual Policy No. 08924 with his parents, spouses
Julia and Carlos Surposa, and brothers Christopher,
Charles, Chester and Clifton, all surnamed, Surposa, as
beneficiaries.
While said insurance policy was in full force and
effect, the insured, Carlie Surposa, died on October 18,
1988 as a result of a stab wound inflicted by one of the
three (3) unidentified men without provocation and warning
on the part of the former as he and his cousin, Winston
Surposa, were waiting for a ride on their way home along
Rizal-Locsin Streets, Bacolod City after attending the
celebration of the "Maskarra Annual Festival."
Thereafter, private respondent and the other
beneficiaries of said insurance policy filed a written notice
of claim with the petitioner insurance company which
denied said claim contending that murder and assault are
not within the scope of the coverage of the insurance
policy.
On February 24, 1989, private respondent filed a
complaint with the Insurance Commission which held the
insurance company liable to pay the beneficiaries, P15,000
as insurance proceeds. The CA affirmed said decision.
Hence, petitioner filed this petition alleging grave 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 the cause of death of the insured
was not accidental, thus, excluded in the insurance policy?
Held:
No, the cause of death of the insured was not
accidental, thus, excluded in the insurance policy
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.
. . . The generally accepted rule is that, death or
injury does not result from accident or accidental
means within the terms of an accident-policy if it is
the natural result of the insured's voluntary act,
unaccompanied by anything unforeseen except the
death or injury. There is no accident when a
deliberate act is performed unless some additional,
unexpected, independent, and unforeseen
happening occurs which produces or brings about
the result of injury or death. In other words, where
the death or injury is not the natural or probable
result of the insured's voluntary act, or if something
unforeseen occurs in the doing of the act which
produces the injury, the resulting death is within the
protection of the policies insuring against death or
injury from accident.
As correctly pointed out by the respondent appellate court
in its decision:
In the case at bar, it cannot be pretended that
Carlie Surposa died in the course of an assault or murder
as a result of his voluntary act considering the very nature
of these crimes. In the first place, the insured and his
companion were on their way home from attending a
festival. They were confronted by unidentified persons. The
record is barren of any circumstance showing how the stab
wound was inflicted. Nor can it be pretended that the
malefactor aimed at the insured precisely because the killer
wanted to take his life. In any event, while the act may not
exempt the unknown perpetrator from criminal liability, the
fact remains that the happening was a pure accident on the
part of the victim. The insured died from an event that took
place without his foresight or expectation, an event that
proceeded from an unusual effect of a known cause and,
therefore, not expected. Neither can it be said that where
was a capricious desire on the part of the accused to
expose his life to danger considering that he was just going
home after attending a festival.
Furthermore, the personal accident insurance
policy involved herein specifically enumerated only ten (10)
circumstances wherein no liability attaches to petitioner
insurance company for any injury, disability or loss suffered
by the insured as a result of any of the stimulated causes.
The principle of " expresso unius exclusio alterius" — the
mention of one thing implies the exclusion of another thing
— is therefore applicable in the instant case since murder
and assault, not having been expressly included in the
enumeration of the circumstances that would negate
liability in said insurance policy cannot be considered by
implication to discharge the petitioner insurance company
from liability for, any injury, disability or loss suffered by the
insured. Thus, the failure of the petitioner insurance
company to include death resulting from murder or assault
among the prohibited risks leads inevitably to the
conclusion that it did not intend to limit or exempt itself from
liability for such death.
Dispositive:
WHEREFORE, finding no irreversible error in the
decision of the respondent Court of Appeals, the petition
for certiorari with restraining order and preliminary
injunction is hereby DENIED for lack of merit. SO
ORDERED.
22 DE LA CRUZ v. CAPITAL INSURANCE
Facts:
Eduardo de la Cruz was the holder of an accident
insurance policy underwritten by the Capital Insurance &
Surety Co., Inc., for one year. In celebration of New year,
Itogon-Suyoc Mines, Inc. sponsored a boxing contest
where Eduardo, a non-professional boxer participated.
Eduardo slipped and was hit by his opponent on the left
part of the back of the head, causing Eduardo to fall, with
his head hitting the rope of the ring. The cause of death
was reported as hemorrhage, intracranial, left. Simon de la
Cruz, the father of the insured and beneficiary aunder the
policy, filed a claim with the insurance company. As the
claim was denied, Simon instituted the action in CFI
Pangasinan for specific performance. Defendant insurer
set up the defense that the death of the insured, caused by
his participation in a boxing contest, was not accidental
and, therefore, not covered by insurance. CFI rendered the
decision in favor of the plaintiff. Hence this appeal.
Issue:
Whether or not the death of Eduardo is covered
by the insurance policy?
baseball, death is not ordinarily anticipated to result.
Furthermore, the policy involved herein specifically
excluded from its coverage —
(e) Death or disablement
consequent upon the Insured
engaging in football, hunting,
pigsticking, steeplechasing,
polo-playing, racing of any kind,
mountaineering, or
motorcycling.
Death or disablement resulting from engagement
in boxing contests was not declared outside of the
protection of the insurance contract. Failure of the
defendant insurance company to include death resulting
from a boxing match or other sports among the prohibitive
risks leads inevitably to the conclusion that it did not intend
to limit or exempt itself from liability for such death.
Dispositive:
Decision appealed from is affirmed.

Held:
Yes, the death of Eduardo is covered by the
insurance policy

Ratio:
It is not disputed that during the ring fight with
another non-professional boxer, Eduardo slipped, which
was unintentional. At this opportunity, his opponent landed
on Eduardo's head a blow, which sent the latter to the
ropes. That must have caused the cranial injury that led to
his death. Eduardo was insured "against death or disability
caused by accidental means".
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. 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 argued that to be considered within the
protection of the policy, what is required to be accidental is
the means that caused or brought the death and not the
death itself. But, even if we take appellant's theory, the
death of the insured in the case at bar would still be entitled
to indemnification under the policy. Where the death or
injury is not the natural or probable result of the insured's
voluntary act, or if something unforeseen occurs in the
doing of the act which produces the injury, the resulting
death is within the protection of policies insuring against
death or injury from accident. In the present case, while the
participation of the insured in the boxing contest is
voluntary, the injury was sustained when he slid, giving
occasion to the infliction by his opponent of the blow that
threw him to the ropes of the ring. Without this unfortunate
incident, that is, the unintentional slipping of the deceased,
perhaps he could not have received that blow in the head
and would not have died.
The fact that boxing is attended with some risks of
external injuries does not make any injuries received in the
course of the game not accidental. In boxing as in other
equally physically rigorous sports, such as basketball or
23 SUN INSURANCE OFFICE, LTD. vs. CA (1992) considered as "willfully exposing himself to needless peril"
within the meaning of the exception in question.
Doctrine: The words "accident" and "accidental" have never
It should be noted at the outset that suicide and acquired any technical signification in law, and when used
willful exposure to needless peril are in pari materia in an insurance contract are to be construed and
because they both signify a disregard for one's life. The considered according to the ordinary understanding and
only difference is in degree, as suicide imports a positive common usage and speech of people generally. In-
act of ending such life whereas the second act indicates a substance, the courts are practically agreed that the words
reckless risking of it that is almost suicidal in intent. To "accident" and "accidental" mean that which happens by
illustrate, a person who walks a tightrope one thousand chance or fortuitously, without intention or design, and
meters above the ground and without any safety device which is unexpected, unusual, and unforeseen. The
may not actually be intending to commit definition that has usually been adopted by the courts is
that an accident is an event that takes place without one's
Facts: foresight or expectation — an event that proceeds from an
The petitioner issued Personal Accident Policy to unknown cause, or is an unusual effect of a known case,
Felix Lim, Jr. with a face value of P200,000.00. Two months and therefore not expected. In light of these definitions, the
later, he was dead with a bullet wound in his head. As Court is convinced that the incident that resulted in Lim's
beneficiary, his wife Nerissa Lim sought payment on the death was indeed an accident.
policy but her claim was rejected. The petitioner agreed
that there was no suicide. It argued, however that there was
no accident either. Pilar Nalagon, Lim's secretary, was the
only eyewitness to his death. It happened on October 6,
1982, at about 10 o'clock in the evening, after his mother's
birthday party. According to Nalagon, Lim was in a happy
mood (but not drunk) and was playing with his handgun,
from which he had previously removed the magazine. As
she watched television, he stood in front of her and pointed
the gun at her. She pushed it aside and said it might he
loaded. He assured her it was not and then pointed it to his
temple. The next moment there was an explosion and Lim
slumped to the floor. He was dead before he fell. The widow
sued the petitioner in the Regional Trial Court of
Zamboanga City and was sustained. The RTC found
petioner liable for the policy. CA Affirmed the RTC

Issue:
Whether or not respondent Nerissa, as
beneficiary of Felix,has the right to claim payment of the
policy from the insurance company?

Held:
Yes, respondent Nerissa, as beneficiary of Felix,
has the right to claim payment of the policy from the
insurance company.

Ratio:
Lim was unquestionably negligent and that
negligence cost him his own life. But it should not prevent
his widow from recovering from the insurance policy he
obtained precisely against accident. 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. Indeed, most accidents are
caused by negligence. There are only four exceptions
expressly made in the contract to relieve the insurer from
liability, and none of these exceptions is applicable in the
case at bar.
It should be noted at the outset that suicide and
willful exposure to needless peril are in pari
materia because they both signify a disregard for one's life.
The only difference is in degree, as suicide imports a
positive act of ending such life whereas the second act
indicates a reckless risking of it that is almost suicidal in
intent. To illustrate, a person who walks a tightrope one
thousand meters above the ground and without any safety
device may not actually be intending to commit suicide, but
his act is nonetheless suicidal. He would thus be
 VI. SURETYSHIP

Section 177 of Insurance Code

A contract of suretyship is an agreement whereby a party
called the surety guarantees the performance by another
party called the principal or obligor of an obligation or
undertaking in favor of a third party called the obligee. It
includes official recognizances, stipulations, bonds or
undertakings issued by any company by virtue of and
under the provisions of Act No. 536, as amended by Act
No. 2206.

Section 178 of Insurance Code

The liability of the surety or sureties shall be joint and
several with the obligor and shall be limited to the amount
of the bond. It is determined strictly by the terms of the
contract of suretyship in relation to the principal contract
between the obligor and the obligee. (As amended by
Presidential Decree No. 1455).

Section 179 of Insurance Code

The surety is entitled to payment of the premium
as soon as the contract of suretyship or bond is perfected
and delivered to the obligor. No contract of suretyship or
bonding shall be valid and binding unless and until the
premium therefor has been paid, except where
the obligee has accepted the bond, in which case the
bond becomes valid and enforceable irrespective of
whether or not the premium has been paid by the obligor
to the surety: Provided, That if the contract
of suretyship or bond is not accepted by, or filed with
the obligee, the surety shall collect only reasonable
amount, not exceeding fifty per centum of the premium
due thereon as service fee plus the cost of stamps or
other taxes imposed for the issuance of the contract or
bond: Provided, however, That if the non-acceptance of
the bond be due to the fault or negligence of the surety,
no such service fee, stamps or taxes shall be collected.
In the case of a continuing bond, the obligor
shall pay the subsequent annual premium as it falls due
until the contract of suretyship is cancelled by
the obligee or by the Commissioner or by a court of
competent jurisdiction, as the case may be.

Section 180 of Insurance Code

Pertinent provisions of the Civil Code of
the Philippines shall be applied in a suppletory character
whenever necessary in interpreting the provisions of a
contract of suretyship.
24 NAPOCOR v. CA (1986) Yes, Philamgen is liable to pay NPC

Doctrine: Ratio:
The surety bond must be read in its entirety and Philamgen was informed as early as July 19, 1963
together with the contract between NPC and the that its principal FFEI had abandoned its work and that
contractors. The provisions must be construed together to NPC was to continue said work. NPC also informed them
arrive at their true meaning. Certain stipulations cannot be of their continuing liability. The 30-day notice adverted to in
segregated and then made to control. the surety bond applies to the completion of the work by the
contractor. This completion by the contractor never
Facts: materialized. There was sufficient notice made by the NPC.
The National Power Corporation (NPC) entered The surety bond must be read in its entirety and
into a contract with the Far Eastern Electric, Inc. (FFEI) on together with the contract between NPC and the
December 26, 1962 for the erection of transmission lines contractors. The provisions must be construed together to
for the Angat Hydroelectric Project. FFEI agreed to arrive at their true meaning. Certain stipulations cannot be
complete the work within 120 days from the signing of the segregated and then made to control.
contract otherwise FFEI will pay NPC P200 per day as Furthermore, it is well settled that contracts of
damages. Philippine American General Insurance Co., Inc. insurance are to be construed liberally in favor of the
(Philamgen) issued a surety bond in the amount of insured and strictly against the insurer. Thus ambiguity in
P30,672.00 for the faithful performance of the undertaking the words of an insurance contract should be interpreted in
by FEEI, as required. favor of its beneficiary.
The condition of the bond reads: The liability of the In the case at bar, it cannot be denied that the
PHILIPPINE AMERICAN GENERAL INSURANCE breach of contract in this case, that is, the abandonment of
COMPANY, INC. under this bond will expire One (1) year the unfinished work of the transmission line of the petitioner
from final Completion and Acceptance and said bond will by the contractor Far Eastern Electric, Inc. was within the
be cancelled 30 days after its expiration, unless surety is effective date of the contract and the surety bond. Such
notified of any existing obligation thereunder. abandonment gave rise to the continuing liability of the
The following stipulations are also incorporated in bond as provided for in the contract which is deemed
the construction contract between NPC and FFEI: incorporated in the surety bond executed for its completion.
(a) Should the Contractor fail to To rule therefore that private respondent was not properly
complete the construction of the work notified would be gross error.
as herein specified and agreed upon,
or if the work is abandoned, the Dispositive:.
Corporation shall have the power to Petitioner won!
take over the work by giving notice in
writing to the Contractor and his
sureties of its intention to take over the
construction work.
(b) It 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.
The work was abandoned on June 26, 1963,
leaving the construction unfinished. On July 19, 1963, 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 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. 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.
NPC filed case against Philamgen. TC: ruled in
favor of NPC; held FFEI and Philamgen jointly and
severally liable to NPC. CA: Reversed and dismissed the
complaint.

Issue:
Whether or not Philamgen is liable to pay NPC?

Held:
25 LEYSON vs. RIZAL
Doctrine:
The law has authorized the formation of
corporations for the purpose of conducting surety business,
and the corporate surety differs significantly from the
individual private surety. First, unlike the private surety, the
corporate surety signs for cash and not for friendship.
The private surety is regarded as someone doing
a rather foolish act for praiseworthy motives; the corporate
surety, to the contrary, is in business to be a profit and
charges a premium depending upon the amount of
guaranty and the risk involved. Second, the corporate
surety, like an insurance company, prepares the
instrument, which is a type of contract of adhesion,
whereas the private surety usually does not prepare the
note or bond which he signs. Third, the obligation of the
private surety often is assumed simply on the basis of the
debtor's representations and without legal advice, while the
corporate surety does not bind itself until a full investigation
has been made.
Facts:
The Rizal Surety & Insurance Co. brings this
appeal from an order of the Court of First Instance of Manila
which declared it liable for P6,051.57 on its bond it had
given in behalf of Victorio L. Rodriguez. Rodriguez was the
administrator of the estate of Honofre Leyson. On
December 27, 1951, theCFI of Manila, in which the estate
was at the time pending settlement, ordered Rodriguez
relieved of his trust after finding him guilty of
misadministration. As Rodriguez appealed the order of
relief, the court, as a measure of "protection of this estate,"
required him to file an increased bond of P10,000 (which
then was P500 only) to answer for "the faithful execution of
his trust as of the date of his appointment."
Rodriguez filed a bond, given by the appellant, but
instead of a bond for the purpose specified by the court in
its order, he filed a bond which reads: THEREFORE, if the
said Victorio L. Rodriguez faithfully prepares and present
to the Court, within three months from the date of his
appointment, a correct inventory of all the property of the
deceased which may have come into his possession or into
the possession of any other person representing him
according to law,
RTC approved the bond of 10,000 pesos. Said
bond shall answer for the faithful execution of his trust as
of the date of his appointment. Let the Rizal Surety &
Insurance Company be notified of this order.
Required to account for the period June 27, 1951
to August 30, 1954, Rodriguez was found short of
P6,248.22. (The amount of shortage was later found by
final judgment of the Court of Appeals to be P6,051.57.)
Despite several deadlines given to him,
Rodriguez failed to pay the money in court, for which
reason he was ordered arrested and declared in contempt.
On November 8, 1962, the Court, acting on
motion of the new administratrix, ordered the confiscation
of Rodriguez' bond for the satisfaction of the amount of
P6,051.57. It is from this order that the surety company
appeals.
It is first of all contended that appellant cannot
beheld liable on its bond because the defalcations, for
which the bond was ordered forfeited, were committed by
the principal before the bond was filed. The rule is invoked
that a contract of suretyship must be strictly construed and
since the contract in this case contains no provision malting
it expressly retroactive, the point is made that the bond
cannot cover violations of trust by the administrator before
the filing of that bond.
Issue:
Whether or not Rizal Surety & insurance Co. is
liable to pay P.6,051.75?
Ratio:
Yes, Rizal Surety & insurance Co. is liable to pay.
Held:
While it is indeed true that the bond does not specify the
date when it took effect, the fact is that both in its order requiring
the administrator to file an increased bond and in its subsequent
order approving the bond, the court made plain that the bond would
answer "for the faithful execution of his (administrator's) trust as of
the date of his appointment." Rodriguez' appointment as
administrator was made on December 8, 1947 and it was on this
date that the bond must be understood to have taken effect.
That the court should require this condition is
understandable, considering that it had earlier found the former
administrator guilty of maladministration and, as a consequence,
ordered his removal. To repeat, the bond in question was required
by the court "for the protection of (the) estate" in view of the fact
that Rodriguez had appealed the order of removal and, therefore,
could not immediately be relieved of his position of trust.
The law has authorized the formation of corporations for
the purpose of conducting surety business, and the corporate
surety differs significantly from the individual private surety. First,
unlike the private surety, the corporate surety signs for cash and
not for friendship.
The private surety is regarded as someone doing a
rather foolish act for praiseworthy motives; the corporate surety, to
the contrary, is in business to be a profit and charges a premium
depending upon the amount of guaranty and the risk involved.
Second, the corporate surety, like an insurance company,
prepares the instrument, which is a type of contract of adhesion,
whereas the private surety usually does not prepare the note or
bond which he signs. Third, the obligation of the private surety
often is assumed simply on the basis of the debtor's
representations and without legal advice, while the corporate
surety does not bind itself until a full investigation has been made.
For these reasons, the courts distinguish between the individual
gratuitous surety and the vocational corporate surety. In the case
of the corporate surety, the rule of strictissimi juris is not applicable,
and courts apply the rules of interpretation ... appertaining to
contracts of insurance.
Nor is there any merit in the claim that the bond in this
case was confiscated without giving the appellant a chance to be
heard on "the reality and reasonableness of the damages." It has
already been held that the nature of a surety's obligation on an
administrator's bond, which makes him privy to the proceedings
against his principal, is such that he is bound and concluded, in the
absence of fraud or collusion, by a judgment against his principal,
even though the surety was not a party to the proceedings.
Furthermore, the record shows that the surety was given an
opportunity to be heard. This motion refers to the petition filed by
the heiress and the temporary administratrix to make the surety
liable to the extent of P6,051.57, which amount was found due
from the said former administrator.
Dispositive:
Wherefore, the order appealed from is affirmed, without
pronouncement as to costs.
26 PHILIPPINE PRYCE ASSURANCE V. CA

Doctrine:
No person can claim benefit from the wrong he
himself committed. A representation made is rendered
conclusive upon the person making it and cannot be denied
or disproved as against the person relying thereon.

Facts:
Gegroco, Inc filed for a collection of the issued
surety bond for P500K and P1M by Interworld Assurance
Corporation (now Philippine Pryce Assurance Corporation)
in behalf of its principal Sagum General Merchandise.
RTC favored Gegroco, Inc. CA affirmed RTC.
Interworld checks issued by its principal which were
supposed to pay for the premiums bounced and it was not
yet authorized by the Insurance Commission to issue
surety bonds.

Issue:
Whether or not Interworld Assurance Corp. should
be liable for the surety bond that it issued as payment for
the premium?

Held:
Yes, Interworld Assurance Corp. should be liable
for the surety bond that it issued as payment for the
premium.

Ratio:
Interworld did not and never attempted to pay the
requisite docket fee and was not present during the
scheduled pre-trial so it is as if third-party complaint was
never filed
Sec. 177. The surety is
entitled to payment of the
premium as soon as the
contract of suretyship or bond
is perfected and delivered to
the obligor. No contract of
suretyship or bonding shall be
valid and binding unless and
until the premium therefor has
been paid, except where the
obligee has accepted the bond,
in which case the bond
becomes valid and enforceable
irrespective of whether or not
the premium has been paid by
the obligor to the surety
Interworld's defense that it did not have authority
to issue a Surety Bond when it did is an admission of fraud
committed against Gegroco. No person can claim benefit
from the wrong he himself committed. A representation
made is rendered conclusive upon the person making it
and cannot be denied or disproved as against the person
relying thereon.

Dispositive:
WHEREFORE, in view of the foregoing, the
decision of the Court of Appeals dismissing the petition
before them and affirming the decision of the trial court and
its order denying petitioner's Motion for Reconsideration
are hereby AFFIRMED. The present petition is
DISMISSED for lack of merit.
27 AFP GENERAL INSURANCE v. MOLINA
Doctrine:
It provides that a surety bond, once accepted by
the obligee becomes valid and enforceable, irrespective of
whether or not the premium has been paid by the obligor.
Facts:
The private respondents are the complainants in
a case for illegal dismissal filed against Radon Security &
Allied Services Agency and/or Raquel Aquias and Ever
Emporium, Inc. LA ruled that the private respondents were
illegally dismissed and ordered Radon Security to pay them
separation pay, backwages, and other monetary claims.
Radon Security appealed to NLRC and posted
a supersedeas bond. NLRC affirmed with modification. It
found the private respondents were constructively
dismissed and ordered Radon Security to pay them their
separation pay, in lieu of reinstatement with backwages, as
well as their monetary benefits limited to 3 years, plus
attorneys fees equivalent to 10% of the entire amount, with
Radon Security and Ever Emporium, Inc. adjudged jointly
and severally liable.
Radon Security filed a Petition for Certiorari, but it
was dismissed. The decision of NLRC, being final,
submitted a Computation of the Monetary Awards. Radon
Security opposed said computation in its Motion for
Recomputation.
LA issued a Writ of Execution incorporating the
computation of the NLRC Research and Information
Unit. LA dismissed the Motion for Recomputation. By virtue
of the writ of execution, the NLRC Sheriff issued a Notice
of Garnishment against the supersedeas bond. Radon
Security appealed to the NLRC.
AFPGIC entered the fray by filing before the LA
an Omnibus Motion to Quash Notice/Writ of Garnishment
and to Discharge AFPGICs Appeal Bond on the ground
that said bond has been cancelled and thus non-existent in
view of the failure of Radon Security to pay the yearly
premiums. LA denied. It pointed out that the question of
non-payment of premiums is a dispute between the party
who posted the bond and the insurer; to allow the bond to
be cancelled because of the non-payment of premiums
would result in a factual and legal absurdity wherein a
surety will be rendered nugatory by the simple expedient of
non-payment of premiums.
The petitioner then appealed to NLRC. In
dismissing the appeal of AFPGIC, the NLRC pointed out
that AFPGICs theory that the bond cannot anymore be
proceeded against for failure of Radon Security to pay the
premium is untenable, considering that the bond is effective
until the finality of the decision. The NLRC stressed that a
contrary ruling would allow respondents to simply stop
paying the premium to frustrate satisfaction of the money
judgment.
AFPGIC then filed a special civil action for
certiorari on the ground that the NLRC committed a grave
abuse of discretion in affirming the Order of LA. CA
dismissed the petition. Hence, the instant case.
Issue:
Whether or not the subject appeal bond was
already cancelled for non-payment of premium and thus
could not be subject for garnishment.
Held:
Yes. the subject appeal bond was already
cancelled for non-payment of premium and thus could not
be subject for garnishment?
Ratio:
The perfection of an appeal by an employer only
upon the posting of a cash or surety bond clearly and
categorically shows the intent of the lawmakers to make the
posting of a cash or surety bond by the employer to be the
exclusive means by which an employer’s appeal may be
perfected. Additionally, the filing of a cash or surety bond is
a jurisdictional requirement in an appeal involving a money
judgment to the NLRC. Rule VI, Section 6 categorically
states that the cash or surety bond posted in appeals
involving monetary awards in labor disputes shall be in
effect until final disposition of the case.
The instant case pertains to a surety bond; thus,
the applicable provision of the Insurance Code is Section
177, which specifically governs suretyship. It provides that
a surety bond, once accepted by the obligee becomes valid
and enforceable, irrespective of whether or not the
premium has been paid by the obligor. The private
respondents, the obligees here, accepted the bond posted
by Radon Security and issued by the petitioner. Hence, the
bond is both valid and enforceable. A verbis legis non est
recedendum(from the language of the law there must be no
departure).
When petitioner surety company cancelled the
surety bond because Radon Security failed to pay the
premiums, it gave due notice to the latter but not to the
NLRC. By its failure to give notice to the NLRC, AFPGIC
failed to acknowledge that the NLRC had jurisdiction not
only over the appealed case, but also over the appeal
bond. This oversight amounts to disrespect and contempt
for a quasi-judicial agency tasked by law with resolving
labor disputes. Until the surety is formally discharged, it
remains subject to the jurisdiction of the NLRC.
Our ruling, anchored on concern for the
employee, however, does not in any way seek to derogate
the rights and interests of the petitioner as against Radon
Security. The former is not devoid of remedies against the
latter. Under Section 176 of the Insurance Code, the
liability of petitioner and Radon Security is solidary in
nature. There is solidary liability only when the obligation
expressly so states, or when the law so provides, or when
the nature of the obligation so requires. Since the law
provides that the liability of the surety company and the
obligor or principal is joint and several, then either or both
of them may be proceeded against for the money award.
The Labor Arbiter directed the NLRC Sheriff to
garnish the surety bond issued by the petitioner. The latter,
as surety, is mandated to comply with the writ of
garnishment, for as earlier pointed out, the bond remains
enforceable and under the jurisdiction of the NLRC until it
is discharged. In turn, the petitioner may proceed to collect
the amount it paid on the bond, plus the premiums due and
demandable, plus any interest owing from Radon
Security. This is pursuant to the principle of subrogation
enunciated in Article 2067 of the Civil Code which we apply
to the suretyship agreement between AFPGIC and Radon
Security, in accordance with Section 178 of the Insurance
Code.
Dispositive:
Petition denied.
28 CAPITAL INSURANCE vs. RONQUILLO TRADING
(1983)
Doctrine:
In the surety bond it is stipulated that the "liability
of surety on this bond will expire on May 5, 1963 and said
bond will be cancelled 15 days after its expiration, unless
surety is notified of any existing obligations thereunder."
Under this stipulation the bond expired on the stated date
and the phrase "unless surety is notified of any existing
obligations thereunder" refers to obligations incurred during
the term of the bond.
Facts:
Capital Surety and Insurance Co., Inc., through its
general agent, executed and issued a surety bond in the
amount of $14,800.00 in behalf of Ronquillo Trading and in
favor of S.S. Eurygenes (its master), and/or Delgado
Shipping Agencies. The bond was a guarantee for any
additional freight which may be determined to be due on a
cargo of 258 surplus army vehicles consigned from Pusan,
Korea to the Ronquillo Trading on board the S.S.
Eurygenes and booked on said vessel by the Philippine
Merchants Steamship Company, Inc.
In consideration for the issuance by the appellant
of the aforesaid surety bond, the appellees executed an
indemnity agreement whereby among other things, they
jointly and severally promised to pay the appellant the sum
of P1,827.00 in advance as premium and documentary
stamps for each period of twelve months while the surety
bond was in effect.
About 5 days before the expiration of the liability
on the bond, P.D. Marchessini and Co., Ltd. and Delgado
Shipping Agencies, Inc., filed a civil case in the CFI Manila
against the defendants and the herein appellant Capital
Insurance & Surety Co., Inc. for the sum of $14,800.00, the
loss they allegedly suffered as a direct consequence of the
failure of the defendants to load the stipulated quantity of
406 U.S. surplus army vehicles. The appellant was made
party defendant because of the bond it posted in behalf of
the appellees.
Upon the expiration of the 12 months life of the
bond, the appellant made a formal demand for the payment
of the renewal premiums and cost of documentary stamps
for another year (P1,827.00). The appellees refused to pay,
contending that the liability of the appellant under the surety
bond accrued during the period of twelve months the said
bond was originally in force and before its expiration and
that the defendants-appellees were under no obligation to
renew the surety bond.
The appellant filed a complaint to recover the sum
of P1,827.00 against the appellees in the City Court of
Manila. The city court rendered judgment absolving the
appellees from the complaint. The appellant appealed the
judgment to the CFI Manila. CFI Manila affirmed the
decision of the City Court and the complaint dismissed.
Appellant’s Motion for Reconsideration was denied. Hence,
the instant appeal.
Issue:
Whether or not the trial court was correct in
holding that once surety’s liability under the bond accrued,
appellees are under no obligation to pay the premiums and
costs of documentary stamps for the succeeding period?
Held:
Yes, the trial court was correct in holding that once
surety’s liability under the bond accrued, appellees are
under no obligation to pay the premiums and costs of
documentary stamps for the succeeding period.
Ratio:
The appellees countered that the only purpose of
the Civil Case was to enforce a liability which existed even
before the bond was executed. The bond was given to
secure payment by appellees of such additional freight as
would already be due on the cargo when it actually arrived
in Manila. The bond was not executed to secure obligation
or liability which was still to arise after its twelve month life.
While it is true that the lower court held that the bond was
still in effect after its expiry date, the effectivity was not due
to a renewal made by the appellees but because the surety
bond provided that "the liability of the surety will not expire
if, as in this case, it is notified of an existing obligation
thereunder". The meaning of the bond's still being in effect
is that, the suit on the bond instituted by the obligees prior
to the expiration of the "liability" thereunder was only for the
purpose of enforcing that liability and amounted to notice to
appellant of an already existing or accrued liability so as not
to let that liability lapse or expire and thereby bar
enforcement.
We agree with the contention of the appellees. It must be
noted that in the surety bond it is stipulated that the "liability
of surety on this bond will expire on May 5, 1963 and said
bond will be cancelled 15 days after its expiration, unless
surety is notified of any existing obligations thereunder."
Under this stipulation the bond expired on the stated date
and the phrase "unless surety is notified of any existing
obligations thereunder" refers to obligations incurred during
the term of the bond.
Furthermore, under the Indemnity Agreement, the
appellees "agree to pay the COMPANY the sum of P1,800
in advance as premium thereof for every twelve (12)
months or fraction thereof, while this bond or any renewal
or substitution thereof is in effect." Obviously, the duration
of the bond is for "every twelve (12) months or fraction
thereof, while this bond or any renewal or substitution is in
effect." Since the appellees opted not to renew the contract
they cannot be obliged to pay the premiums. More
specifically, where a contract of surety is terminated under
its terms, the liability of the principal for premiums after
such termination ceases notwithstanding the pendency of
a lawsuit to enforce a liability that accrued during its
stipulated lifetime.
Dispositive:
WHEREFORE, the appeal is dismissed for lack of
merit. The decision of the court a quo is affirmed. SO
ORDERED.
 VII. LIFE INSURANCE
Section 179 of Insurance Code
Life insurance is insurance on human lives and insurance
appertaining thereto or connected therewith.
Section 180 of Insurance Code
An insurance upon life may be made payable on the
death of the person, or on his surviving a specified period,
or otherwise contingently on the continuance or cessation
of life.
Every contract or pledge for the payment of endowments
or annuities shall be considered a life insurance contract
for purpose of this Code.
In the absence of a judicial guardian, the father, or in the
latter's absence or incapacity, the mother, or any minor,
who is an insured or a beneficiary under a contract of life,
health or accident insurance, may exercise, in behalf of
said minor, any right under the policy, without necessity
of court authority or the giving of a bond, where the
interest of the minor in the particular act involved does
not exceed twenty thousand pesos. Such right may
include, but shall not be limited to, obtaining a policy loan,
surrendering the policy, receiving the proceeds of the
policy, and giving the minor's consent to any transaction
on the policy.
The insurer in a life insurance contract shall be liable in
case of suicides only when it is committed after the policy
has been in force for a period of two years from the date
of its issue or of its last reinstatement, unless the policy
provides a shorter period: Provided, however, That
suicide committed in the state of insanity shall be
compensable regardless of the date of commission.
Section 181 of Insurance Code
A policy of insurance upon life or health may pass by
transfer, will or succession to any person, whether he has
an insurable interest or not, and such person may recover
upon it whatever the insured might have recovered.
Section 179 of Insurance Code
Notice to an insurer of a transfer or bequest thereof is not
necessary to preserve the validity of a policy of insurance
upon life or health, unless thereby expressly required.
Section 179 of Insurance Code
Unless the interest of a person insured is susceptible of
exact pecuniary measurement, the measure of indemnity
under a policy of insurance upon life or health is the sum
fixed in the policy.
VIII. OTHER PROVISIONS
Section 247 of Insurance Code
If the Commissioner is of the opinion upon examination of
other evidence that any domestic or foreign insurance
company is in an unsound condition, or that it has failed to
comply with the provisions of law or regulations obligatory
upon it, or that its condition or method of business is such
as to render its proceedings hazardous to the public or to
its policyholders, or that its paid-up capital stock, in the
case of a domestic stock company, or its available cash
assets, in the case of a domestic mutual company, or its
security deposits, in the case of a foreign company, is
impaired or deficient, or that the margin of solvency
required of such company is deficient, the Commissioner is
authorized to suspend or revoke all certificates of authority
granted to such insurance company, its officers and
agents, and no new business shall thereafter be done by
such company or for such company by its agent in the
Philippines while such suspension, revocation or disability
continues or until its authority to do business is restored by
the Commissioner. Before restoring such authority, the
Commissioner shall require the company concerned to
submit to him a business plan showing the company's
estimated receipts and disbursements, as well as the
basis therefor, for the next succeeding three years.
Section 248 of Insurance Code
If at any time before, or after, the suspension or
revocation of the certificate of authority of an insurance
company as provided in the preceding title, the
Commissioner finds that such company is in a state of
continuing inability or unwillingness to maintain a
condition of solvency or liquidity deemed adequate to
protect the interest of policy holders and creditors, he
may appoint a conservator to take charge the assets,
liabilities, and the management of such company, collect
all moneys and debts due said company and exercise all
powers necessary to preserve the assets of said
company, reorganize the management thereof, and
restore its viability. The said conservator shall have the
power to overrule or revoke the actions of the previous
management and board of directors of the said company,
any provision of law, or of the articles of incorporation or
by-laws of the company, to the contrary notwithstanding,
and such other powers as the Commissioner shall deem
necessary.
The conservator may be another insurance company
doing business in the Philippines, by officer or officers of
such company, or any other competent and qualified
person, firm or corporation. The remuneration of the
conservator and other expenses attendant to the
conservation shall be borne by the insurance company
concerned.
The conservator shall not be subject to any action, claim
or demand by, or liability to, any person in respect of
anything done or omitted to be done in good faith in the
exercise, or in connection with the exercise, of the
powers conferred on the conservator.
The conservator appointed shall report and be
responsible to the Commissioner until such time as the
Commissioner is satisfied that the insurance company
can continue to operate on its own and
the conservatorship shall likewise be terminated should
be Commissioner, on the basis of the report of the
conservator or of his own findings, determine that the
continuance in business of the insurance company would
be hazardous to policy holders and creditors, in which
case the provisions of Title 15 shall apply.
Section 249 of Insurance Code
Whenever, upon examination or other evidence, it shall
be disclosed that the condition of any insurance company
doing business in the Philippines is one of insolvency, or
that its continuance in business would be hazardous to
its policyholders and creditors, the Commissioner shall
forthwith order the company to cease and desist from
transacting business in the Philippines and shall
designate a receiver to immediately take charge of its
assets and liabilities, as expeditiously as possible collect
and gather all the assets and administer the same for the
benefit of its policyholders and creditors, and exercise all
the powers necessary for these purposes including, but
not limited to, bringing suits and foreclosing mortgages in
the name of the insurance company.
The Commissioner shall thereupon determine within
thirty days whether the insurance company may be
reorganized or otherwise placed in such condition so that
it may be permitted to resume business with safety to its
policyholders and creditors and shall prescribe the
conditions under which such resumption of business shall
take place as well as the time for fulfillment of such
conditions. In such case, the expenses and fees in the
collection and administration of the insurance company
shall be determined by the Commissioner and shall be
paid out of the assets of such company.
If the Commissioner shall determine and confirm within
the said period that the insurance company is solvent, as
defined hereunder, or cannot resume business with
safety to its policyholders and creditors, he shall, if the
public interest requires, order its liquidation, indicate the
manner of its liquidation and approve a liquidation plan
and implement it immediately. The Commissioner shall
designate a competent and qualified person as liquidator
who shall take over the functions of the receiver
previously designated and, with all convenient speed,
reinsure all its outstanding policies, convert the assets of
the insurance company to cash, or sell, assign or
otherwise dispose of the same to the policyholders,
creditors and other parties for the purpose of settling the
liabilities or paying the debts of such company and he
may, in the name of the company, institute such actions
as may be necessary in the appropriate Court to collect
and recover accounts and assets of the insurance
company, and to do such other acts as may be necessary
to complete the liquidation as ordered by the
Commissioner.
The provisions of any law to the contrary notwithstanding,
the actions of the Commissioner under this Section shall
be final and executory, and can be set aside by the Court
upon petition by the company and only if there is
convincing proof that the action is plainly arbitrary and
made in bad faith. The Commissioner, through the
Solicitor General, shall then file the corresponding
answer reciting the proceeding taken and praying the
assistance of the Court in the liquidation of the company.
No restraining order or injunction shall be issued by the
Court enjoining the Commissioner from implementing his
actions under this Section, unless there is convincing
proof that the action of the Commissioner is plainly
arbitrary and made in bad faith and the petitioner or
plaintiff files with the Clerk or Judge of the Court in which
the action is pending a bond executed in favor of the
Commissioner in an amount to be fixed by the Court. The
restraining order or injunction shall be refused or, if
granted, shall be dissolved upon filing by the
Commissioner, if he so desires, of a bond in an amount
twice the amount of the bond of the petitioner or plaintiff
conditioned that it will pay the damages which the petition
or plaintiff may suffer by the refusal or the dissolution of
the injunction. The provisions of Rule 58 of the New
Rules of Court insofar as they are applicable shall govern
the issuance and dissolution of the restraining order or
injunction contemplated in this Section.
All proceedings under this Title shall be given preference
in the Courts. The Commissioner shall not be required to
pay any fee to any public officer for filing, recording, or in
any manner authenticating any paper or instrument
relating to the proceedings.
As used in this Title, the term "Insolvency" shall mean the
inability of an insurance company to pay its lawful
obligations as they fall due in the usual and ordinary
course of business as may be shown by its failure to
maintain the margin of solvency required under Section
194 of this Code.
Section 250 of Insurance Code
In case of liquidation of an insurance company, after
payment of the cost of the proceedings, including
reasonable expenses and fees incurred in the liquidation to
be allowed by the Court, the Commissioner shall pay all
allowed claims against such company, under order of the
Court, in accordance with their legal priority.
Section 251 of Insurance Code
The receiver or the liquidator, as the case may be,
designated under the provisions of this title shall not be
subject to any action, claim or demand by, or liability to, any
person in respect of anything done or omitted to be done in
good faith in the exercise, or in connection with the
exercise, of the powers conferred on such receiver or
liquidator.
29 CATHAY INSURANCE vs. CA (1989)
Doctrine:
The amount of any loss or damage for which an
insurer may be liable, under any policy other than the
insurance policy, shall be paid within thirty days after proof
of loss is received by the insurer and ascertainment of the
loss or damage is made either by agreement between the
insured and the insurer or by arbitration; but if such
ascertainment is not had or made within sixty days after
such receipt by the insurer of the proof of loss, then the loss
or damage shall be paid within ninety days after such
receipt x x x (Section 243, Insurance Code)
Facts:
Eight years after Emilia Chan Lugay's Cebu
Filipina Press was destroyed by fire in broad daylight, she
is still waiting to collect the proceeds of 7 fire policies which
the petitioners sold to her. The petitioners are the 6
insurance companies that issued fire insurance policies for
the total sum of P4,000,000 to the Cebu Filipino Press of
Cebu City. The fire policies described the insured property
as "stocks of printing materials, papers and general
merchandise usual to the Assured's trade" stored in a one-
storey building of strong materials housing the Cebu
Filipina Press located in Cebu City. All, except one policy
(Paramount's), were renewals of earlier policies issued for
the same property.
On December 18, 1981, at around 10 o'clock in
the morning, the Cebu Filipina Press was razed by
electrical fire together with all the stocks and merchandise
stored in the premises. On January 15, 1982, Mrs. Lugay,
owner and operator of the printing press, submitted sworn
Statements of Loss Formal Claims to the insurers, through
their adjusters. She claimed a total loss of P4, 595. She
submitted proofs of loss required by the adjusters. After
nearly 10 months of waiting for the insurers to pay his claim,
she sued to collect on December 15, 1982. The insurance
companies denied liability, alleging violation of certain
conditions of the policy, misdeclaration, and even arson
which was not seriously pressed for, come the pre-trial, the
petitioners offered to pay 50% of her claim, but she insisted
in full recovery.
The court rendered judgment in favor of Mrs. Lugay
directing payments by the insurance companies to the
former. On appeal, Court of Appeals affirmed the decision
in toto. Hence, this petition for review
Issue:
Whether or not the private respondent's cause of
action had already accrued when the complaint was filed
on December 15, 1982?
Held:
Yes, the private respondent's cause of action had
already accrued when the complaint was filed on
December 15, 1982.
Ratio:
The finding of the trial court and the Court of Appeals
that the insured's cause of action had already accrued
before she filed her complaint is supported by Section 243
of the Insurance Code which fixes a maximum period of 90
days after receipt of the proofs of loss by the insurer for the
latter to pay the insured s claim.
Sec. 243. The amount of any loss or
damage for which an insurer may be liable,
under any policy other than the insurance
policy, shall be paid within thirty days after
proof of loss is received by the insurer and
ascertainment of the loss or damage is
made either by agreement between the
insured and the insurer or by arbitration;
but if such ascertainment is not had or
made within sixty days after such receipt
by the insurer of the proof of loss, then the
loss or damage shall be paid within ninety
days after such receipt x x x
As the fire which destroyed the Cebu Filipina Press
occurred on December 19, 1981 and the proofs of loss
were submitted from January 15, 1982 through June 21,
1982 in compliance with the adjusters' numerous requests
for various documents, payment should have been made
within 90 days thereafter, or on or before September 21,
1982. Hence, when the assured file her complaint on
December 15, 1982, her cause of action had a ready
accrued.
There is no merit in the petitioners' contention that
the proof of loss were insufficient because respondent
Emilia Chan Luga failed to comply with the adjuster's
request for the submission of her bank statements.
Condition No. 13, as the Court of Appeals observed, does
not require the insured to produce her bank statements.
Therefore, the insured was not obligated to produce them
and the insurers had no right to ask for them. Condition No.
13 was prepared by the insurers themselves, hence, it
"should be taken most strongly."
The Court of Appeals found that the insured "fully
complied with the requirements of Condition No. 13." The
adjuster's demand for the assured's bank statements
(which under the law on the secrecy of bank deposits, she
need not disclose) would add more requirements to
Condition No. 13 of the insurance contract, and, as pointed
out by the Appellate Court, "would amount to giving the
insurers limitless latitude in making unreasonable demands
if only to evade and avoid liability." Nor was the claim
inflated. Both the trial court and the Court of Appeals noted
that the proofs were ample and "more than enough for
defendants (insurers) to do a just assessment supporting
the 1981 fire claim for an amount exceeding four million
pesos."
Dispositive:
WHEREFORE, the decision of the Court of
Appeals in CA-G.R. No. CV-12100 is affirmed, except the
award of attorney's fees to the private respondents which
is hereby reduced to ten (10%) percent of the proceeds of
the insurance policies sued upon. Costs against the
petitioners. SO ORDERED
30 ZENITH INSURANCE v. COURT OF APPEALS
Doctrine:
Under the Insurance Code, in case of
unreasonable delay in the payment of the proceeds of an
insurance policy, the damages that may be awarded are:
a) attorney’s fees; b) other expenses incurred by the
insured person by reason of such unreasonable denial or
withholding of payment; c) interest at twice the ceiling
prescribed by the Monetary Board of the amount of the
claim due the injured; and d) the amount of the claim.
Facts:
Private respondent Lawrence Fernandez insured
his car for "own damage" under private car Policy No.
50459 with petitioner Zenith Insurance Corporation the car
figured in an accident and suffered actual damages in the
amount of P3,640.00. After allegedly being given a run
around by Zenith for two (2) months, Fernandez filed a
complaint with the Regional Trial Court of Cebu 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 more damages in the
amount of P10,000.00, exemplary damages of P5,000.00,
attorney's fees of P3,000.00 and litigation expenses
ofP3,000.00. A decision was rendered by the trial court in
favor of private respondent Fernandez. The trial court,
ordered the execution of the decision pending appeal. The
order was assailed by petitioner in a petition for certiorari
with the Court of Appeals but which petition was also
dismissed the Court of Appeals rendered its decision
affirming in toto the decision of the trial court. The Motion
for Reconsideration of the decision of the Court of Appeals
was denied. Hence, the instant petition was filed by Zenith
allegation that respondent Court of Appeals'
decision and resolution ran counter to applicable decisions
of this Court and that they were rendered without or in
excess of jurisdiction
Civil Code of the Philippines shall
govern.
"The purpose of moral damages is essentially
indemnity or reparation, not punishment or correction.
Moral damages are emphatically not intended to enrich a
complainant at the expense of a defendant, they are
awarded only to enable the injured party to obtain means,
diversions or amusements that will serve to alleviate the
moral suffering he has undergone by reason of the
defendant's culpable action." The amount of P5,000.00
awarded as attorney's fees is justified under the
circumstances of this case considering that there were
other petitions filed and defended by private respondent in
connection with this case. As regards the actual damages
incurred by private respondent, the amount of P3,640.00
had been established before the trial court and affirmed by
the appellate court. Respondent appellate court correctly
ruled that the deductions of P250.00 and P274.00 as
deductible franchise and 20% depreciation on parts,
respectively claimed by petitioners as agreed upon in the
contract, had no basis.
Disposition:
The award of moral damages is reduced to
P10,000.00 and the award of exemplary damages is
hereby deleted ACCORDINGLY, the appealed decision is
MODIFIED as above stated.
Section 268 of Insurance Code
Every payment for the acquisition of any shares of the
capital stock of such insurer, the purchase price of which is
not fixed by such plan, shall be subject to the prior approval
of the Commissioner. Neither such plan, nor any such
payment, may be approved by the Commissioner unless
he finds that the rights and interests of the insurer, its
policyholders, and shareholders are protected.

Issue:
Whether or not the prayer of the respondent of
P20,000 as damages to his case is without factual or legal
basis and W/N the trial court erred in ruling in favor of the
respondent?

Held:
Yes, prayer of the respondent of P20,000 as
damages to his case is with factual or legal basis and W/N
the trial court erred in ruling in favor of the respondent.

Ratio:
It is clear that under the Insurance Code, 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. As
regards the award of moral and
exemplary damages, the rules under the
31 REPUBLIC V SUN LIFE
Facts:
Sun Life is a mutual life insurance company
organized and existing under the laws of Canada. It is
registered and authorized by the Securities and Exchange
Commission and the Insurance Commission to engage in
business in the Philippines as a mutual life insurance
company with principal office at Paseo de Roxas, Legaspi
Village, Makati City.
On October 20, 1997, Sun Life filed with the
[Commissioner of Internal Revenue] (CIR) its insurance
premium tax return for the third quarter of 1997 and paid
the premium tax in the amount of P31,485,834.51. For the
period covering August 21 to December 18, 1997,
petitioner filed with the CIR its [documentary stamp tax
(DST)] declaration returns and paid the total amount
of P30,000,000.00
On December 29, 1997, the [Court of Tax Appeals]
(CTA) rendered its decision in Insular Life Assurance Co.
Ltd. v. [CIR], which held that mutual life insurance
companies are purely cooperative companies and are
exempt from the payment of premium tax and DST. This
pronouncement was later affirmed by this court in [CIR] v.
Insular Life Assurance Company, Ltd. Sun Life surmised
that[,] being a mutual life insurance company, it was
likewise exempt from the payment of premium tax and
DST. Hence, on August 20, 1999, Sun Life filed with the
CIR an administrative claim for tax credit of its alleged
erroneously paid premium tax and DST for the aforestated
tax periods.
For failure of the CIR to act upon the administrative
claim for tax credit and with the 2-year period to file a claim
for tax credit or refund dwindling away and about to expire,
Sun Life filed with the CTA a petition for review on August
23, 1999. In its petition, it prayed for the issuance of a tax
credit certificate in the amount of P61,485,834.51
representingP31,485,834.51 of erroneously paid premium
tax for the third quarter of 1997 and P30,000[,000].00 of
DST on policies of insurance from August 21 to December
18, 1997. Sun Life stood firm on its contention that it is a
mutual life insurance company vested with all the
characteristic features and elements of a cooperative
company or association as defined in [S]ection 121 of the
Tax Code. Primarily, the management and affairs of Sun
Life were conducted by its members; secondly, it is
operated with money collected from its members; and,
lastly, it has for its purpose the mutual protection of its
members and not for profit or gain.
Thereafter, CTA found in favor
of Sun Life. Quoting largely from its earlier
findings in Insular Life Assurance
Company, Ltd. v. [CIR], which it found to
be on all fours with the present action, the
CTA ruled:
The [CA] has
already spoken. It
ruled that a mutual life
insurance company is
a purely cooperative
company[;] thus,
exempted from the
payment of premium
and documentary
stamp taxes.
Petitioner Sun Life is
without doubt a themselves the members of its board of trustees. Being the
mutual life insurance
company. x x x
Seeking reconsideration of the decision of the CTA, the
CIR argued that Sun Life ought to have registered,
foremost, with the Cooperative Development Authority
before it could enjoy the exemptions from premium tax
and DST extended to purely cooperative companies or
associations under [S]ections 121 and 199 of the Tax
Code. For its failure to register, it could not avail of the
exemptions prayed for. Moreover, the CIR alleged that
Sun Life failed to prove that ownership of the company
was vested in its members who are entitled to vote and
elect the Board of Trustees among [them]. The CIR further
claimed that change in the 1997 Tax Code subjecting
mutual life insurance companies to the regular corporate
income tax rate reflected the legislatures recognition that
these companies must be earning profits.
Notwithstanding these arguments, the
CTA denied the CIRs motion for reconsideration.
CA uphold the CTA decision saying that
respondent was a purely cooperative corporation
duly licensed to engage in mutual life insurance
business in the Philippines. Thus, respondent
was deemed exempt from premium and
documentary stamp taxes, because its affairs are
managed and conducted by its members with
money collected from among themselves, solely
for their own protection, and not for profit. Its
members or policyholders constituted both
insurer and insured who contribute, by a system
of premiums or assessments, to the creation of a
fund from which all losses and liabilities were
paid. Hence, this Petition.
Issues:
1. Whether or not the respondent cooperative.
2. Whether or not respondent should register in
the CDA.
3. Whether or not exempted from DTS and
premium taxes.
Held:
1. Yes, the respondent is a cooperative.
2. No, respondent should not register in the CDA.
3. Yes, exempted from DTS and premium taxes.
Ratio:
1. Yes. The Tax Code defines a cooperative as an
association conducted by the members thereof with the
money collected from among themselves and solely for
their own protection and not for profit.[8] Without a doubt,
respondent is a cooperative engaged in a mutual life
insurance business.
First, it is managed by its members. Both the CA
and the CTA found that the management and affairs of
respondent were conducted by its member-policyholders.[9]
A stock insurance company doing business in the
Philippines may alter its organization and transform itself
into a mutual insurance company.[10] Respondent has been
mutualized or converted from a stock life insurance
company to a nonstock mutual life insurance
corporationpursuant to Section 266 of the Insurance Code
of 1978.[12] On the basis of its bylaws, its ownership has
been vested in its member-policyholders who are each
entitled to one vote and who, in turn, elect from among
governing body of a nonstock corporation, the board
exercises corporate powers, lays down all corporate
business policies, and assumes responsibility for the
efficiency of management.
Second, it is operated with money collected from
its members. Since respondent is composed entirely of
members who are also its policyholders, all premiums
collected obviously come only from them.[16]
The member-policyholders constitute both insurer
and insuredwho contribute, by a system of premiums or
assessments, to the creation of a fund from which all losses
and liabilities are paid. The premiums pooled into this fund
are earmarked for the payment of their indemnity and
benefit claims.
Third, it is licensed for the mutual protection of its
members, not for the profit of anyone.
As early as October 30, 1947, the director of
commerce had already issued a license to respondent -- a
corporation organized and existing under the laws of
Canada -- to engage in business in the
Philippines.[20] Pursuant to Section 225 of Canadas
Insurance Companies Act, the Canadian minister of state
(for finance and privatization) also declared in its Amending
Letters Patent that respondent would be a mutual company
effective June 1, 1992.[21] In the Philippines, the insurance
commissioner also granted it annual Certificates of
Authority to transact life insurance business, the most
relevant of which were dated July 1, 1997 and July 1,
1998.[22]
A mutual life insurance company is conducted for
the benefit of its member-policyholders,] who pay into its
capital by way of premiums. To that extent, they are
responsible for the payment of all its losses The cash paid
in for premiums and the premium notes constitute their
assets x x x. In the event that the company itself fails before
the terms of the policies expire, the member-policyholders
do not acquire the status of creditors.[26] Rather, they
simply become debtors for whatever premiums that they
have originally agreed to pay the company, if they have not
yet paid those amounts in full, for [m]utual companies x x x
depend solely upon x x x premiums. Only when the
premiums will have accumulated to a sum larger than that
required to pay for company losses will the member-
policyholders be entitled to apro rata division thereof as
profits. The so-called dividend that is received by member-
policyholders is not a portion of profits set aside for
distribution to the stockholders in proportion to their
subscription to the capital stock of a corporation. One, a
mutual company has no capital stock to which subscription
is necessary; there are no stockholders to speak of, but
only members. And, two, the amount they receive does not
partake of the nature of a profit or income. The quasi-
appearance of profit will not change its character. It
remains an overpayment, a benefit to which the member-
policyholder is equitably entitled.
Verily, a mutual life insurance corporation is a
cooperative that promotes the welfare of its own members.
It does not operate for profit, but for the mutual benefit of
its member-policyholders. They receive their insurance at
cost, while reasonably and properly guarding and
maintaining the stability and solvency of the company. The
economic benefits filter to the cooperative members. Either
equally or proportionally, they are distributed among
members in correlation with the resources of the
association utilized.
It does not follow that because respondent is
registered as a nonstock corporation and thus exists for a
purpose other than profit, the company can no longer make
any profits. Earning profits is merely its secondary, not
primary, purpose. In fact, it may not lawfully engage in any
business activity for profit, for to do so would change or
contradict its natureas a non-profit entity. It may, however,
invest its corporate funds in order to earn additional income
for paying its operating expenses and meeting benefit
claims. Any excess profit it obtains as an incident to its
operations can only be used, whenever necessary or
proper, for the furtherance of the purpose for which it was
organized.
2. No. Under the Tax Code although respondent is a
cooperative, registration with the Cooperative
Development Authority (CDA) is not necessary in order for
it to be exempt from the payment of both percentage taxes
on insurance premiums, under Section 121; and
documentary stamp taxes on policies of insurance or
annuities it grants, under Section 199. True, the provisions
of the Insurance Code relative to the organization and
operation of an insurance company also apply to
cooperative insurance entities organized under the
Cooperative Code. The latter law, however, does not apply
to respondent, which already existed as a cooperative
company engaged in mutual life insurance prior to the laws
passage of that law. The statutes prevailing at the time of
its organization and mutualization were the Insurance Code
and the Corporation Code, which imposed no registration
requirement with the CDA.
3. Yes. Having determined that respondent is a cooperative
that does not have to be registered with the CDA, we hold
that it is entitled to exemption from both premium taxes and
documentary stamp taxes (DST).
The Tax Code is clear. On the one hand, Section
121 of the Code exempts cooperative companies from the
5 percent percentage tax on insurance premiums. On the
other hand, Section 199 also exempts from the DST,
policies of insurance or annuities made or granted by
cooperative companies. Being a cooperative, respondent
is thus exempt from both types of taxes.
Dispositive:
Petition is Denied. Sun Life won!
Section 307 of Insurance Code
Any provision of existing laws to the contrary
notwithstanding, no person shall, within the Philippines, sell
or offer for sale a variable contract or do or perform any act
or thing in the sale, negotiation, making or consummating
of any variable contract other than for himself unless such
person shall have a valid and current license from the
Commissioner authorizing such person to act as a variable
contract agent. No such license shall be issued unless and
until the Commissioner is satisfied, after examination that
such person is by training, knowledge, ability and character
qualified to act as such agent. Any such license may be
withdrawn and cancelled by the Commissioner after notice
and hearing, if he shall find that the holder thereof does not
then have the qualifications required for the issuance of
such license.
Section 308 of Insurance Code
It shall be unlawful for any person, company or corporation
in the Philippines to act as general agent of any insurance
company unless he is empowered by a written power of
attorney duly executed by such insurance company, and
registered with the Commissioner to receive notices,
summons and legal processes for and in behalf of the
insurance company concerned in connection with actions
or other legal proceedings against said insurance
company. It shall be the duty of said general agent to notify
the Commissioner of his post office address in
the Philippines, or any change thereof. Notices, summons,
or processes of any kind sent by registered mail to the last
registered address of such general agent of the company
concerned or to the Commissioner shall be sufficient
service and deemed as if served on the insurance company
itself.
Section 309 of Insurance Code
Except as otherwise provided by law or treaty, it shall be
unlawful for any person, partnership, association or
corporation in the Philippines, for himself or itself, or for
some other person, partnership, association or corporation,
either to procure, receive or forward applications of
insurance in, or to issue or to deliver or accept policies or
contracts of insurance of or for, any insurance company or
companies not authorized to transact business in the
Philippines, covering risks, life or non-life, situated in the
Philippines; and any such person, partnership, association
or corporation violating the provisions of this section shall
be deemed guilty of a penal offense, and upon conviction
thereof, shall for each such offense be punished by a fine
of ten thousand pesos, or imprisonment of six months, or
both at the discretion of the court: Provided, That the
provisions of this section shall not apply to reinsurance.
Section 310 of Insurance Code
Except as provided in the next succeeding title, no person
shall act as reinsurance broker in the Philippines unless
he is authorized as such by the Commissioner.
A reinsurance broker is one who, for compensation, not
being a duly authorized agent, employee or officer of an
insurer in which any reinsurance is effected, act or aids
in any manner in negotiating contracts of reinsurance, or
placing risks of effecting reinsurance, for any insurance
company authorized to do business in the Philippines.
Section 311 of Insurance Code
Upon application and payment of the corresponding fee
hereinafter prescribed, and the filing of two errors and
omissions (professional liability or professional
indemnity) policies hereinafter described, a person may,
if found qualified, be issued a license to act as
reinsurance broker by the Commissioner. No such
license shall be valid after the thirtieth day of June of the
year following its issuance unless it is renewed.
The errors and omissions (professional liability or
professional indemnity) policies mentioned above shall
indemnify the applicant against any claim or claims for
breach of duty as reinsurance broker which may be made
against him by reason of any negligent act, error or
omission, whenever or wherever committed or alleged to
have been committed, on the part of the applicant or any
person who has been, is now, or may hereafter during the
subsistence of the policies be employed by the said
applicant in his capacity as reinsurance broker; Provided,
That the filing of any claim or claims under one of such
policies shall preclude the filing of the said claim or claims
under the other policy. The said policies shall be issued
separately by two insurance companies authorized to do
business in the Philippines and shall be in such amounts
as may be prescribed by the Insurance Commissioner,
depending upon the size or amount of the broking
business of the applicant, but in no case shall the amount
of each of such policies be less than five hundred
thousand pesos.
The Commissioner may recall, suspend or revoke the
license granted to a reinsurance broker for violation of any
existing law, rule and regulation, or any provision of this
Code after due notice and hearing.
Section 322 of Insurance Code
Every adjuster shall keep his or its books, records, reports,
accounts, and vouchers in such manner that the
Commissioner or his duly authorized representatives may
readily verify the quarterly reports of the said adjuster and
ascertain whether the said adjuster has complied with the
provisions of law or regulations obligatory upon him or
whether the method of doing business of the said adjuster
has been fair, just and honest.
Section 344 of Insurance Code
Rating organization shall be subject to examination by the
Commissioner, as often as he may deem such examination
expedient, pursuant to the provisions of this Code
applicable to the examination of insurance companies. He
shall cause such an examination of each rating
organization to be made at least once in every five years.
Section 375 of Insurance Code
The Commissioner shall furnish the Land Transportation
Commissioner with a list of insurance companies
authorized to issue the policy of insurance or surety bond
required by this chapter
Section 376 of Insurance Code
The Land Transportation Commission shall not allow the
registration or renewal of registration of any motor vehicle
without first requiring from the land transportation operator
or motor vehicle owner concerned the presentation and
filing of a substantiating documentation in a form approved
by the Commissioner evidencing that the policy of
insurance or guaranty in cash or surety bond required by between 2,601 kilos and 3,930 kilos :
this chapter is in effect. Thirty thousand pesos;
(d) Vehicles with an unladen weight
Section 377 of Insurance Code over 3,930 kilos : Fifty thousand pesos.
Every land transportation operator and every owner of a
motor vehicle shall, before applying for the registration or The Commissioner may, if warranted, set forth schedule
renewal of registration of any motor vehicle, at his option, of indemnities for the payment of claims for death or
either secure an insurance policy or surety bond issued bodily injuries with the coverages set forth herein.
by any insurance company authorized by the
Commissioner or make a cash deposit in such amount as
herein required as limit of liability for purposes specified
in section three hundred seventy-four.

(1) In the case of a land transportation operator, the

insurance guaranty in cash or surety bond shall cover
liability for death or bodily injuries of third-parties and/or
passengers arising out of the use of such vehicle in the
amount not less than twelve thousand pesos per
passenger or third party and an amount, for each of such
categories, in any one accident of not less than that set
forth in the following scale:
(a) Motor vehicles with an authorized capacity
of twenty-six or more passengers: Fifty
thousand pesos;
(b) Motor vehicles with an authorized capacity
of from twelve to twenty-five passengers: Forty
thousand pesos;
(c) Motor vehicles with an authorized capacity of
from six to eleven passengers: Thirty thousand
pesos;
(d) Motor vehicles with an authorized capacity
of five or less passengers: Five thousand pesos
multiplied by the authorized capacity.

Provided, however, That such cash deposit made to, or

surety bond posted with, the Commissioner shall be
resorted to by him in cases of accidents the indemnities
for which to third-parties and/or passengers are not
settled accordingly by the land transportation operator
and, in that event, the said cash deposit shall be
replenished or such surety bond shall be restored with
sixty days after impairment or expiry, as the case may be,
by such land transportation operator, otherwise, he shall
secure the insurance policy required by this chapter. The
aforesaid cash deposit may be invested by the
Commissioner in readily marketable government bonds
and/or securities.

(2) In the case of an owner of a motor vehicle, the

insurance or guaranty in cash or surety bond shall cover
liability for death or injury to third parties in an amount not
less than that set forth in the following scale in any one
accident:
I. Private Cars

(a) Bantam : Twenty thousand pesos;

(b) Light : Twenty thousand pesos;
(c) Heavy : Thirty thousand pesos;

II. Other Private Vehicles

(a) Tricycles, motorcycles, and

scooters : Twelve thousand pesos;
(b) Vehicles with an unladen weight of
2,600 kilos or less : Twenty thousand
pesos;
(c) Vehicles with an unladen weight of