Insurance/ First Batch Cases/ Digests 2017
1.
Danzas Corporation vs. Abrogar and Seaboard Eastern Insurance
Co. and Phil. Skylander
GR 141462
December 15, 2005
Facts:
Danzas took a shipment for ICS watches , the consignee
International Freeport Traders Inc. (IFTI) secured Marine Risk Note
from Seaboard. The Korean Airlines (KAL) plane carrying the goods
arrived in Manila and discharged the goods to the custody of Phil.
Skylander for safekeeping.
On withdrawal of the shipment from Skylander, IFTI noted that the
watches sustained tears on sides and retape of flaps, the other
watches were also missing.
Seaboard as insurer paid the losses to IFTI. Seaboard invoking its
right of subrogation filed a complaint against Skylander for the
amount of damages. While the case was still pending, IFTI’s
treasurer accepted the proposal of KAL to settle consignees claim by
paying the amount of damage. IFTI correspondingly signed a release
form.
Danzas filed a motion to dismiss the case on the ground that
Seaboards demand had been extinguished by KAL.
The trial court denied the motion to dismiss. CA also denied the
motion for reconsideration by KAL and Skylander.
Danzas contended that Seaboards right of subrogation was
extinguished when IFTI received payment from KAL in settlement of
its obligation.
Issue:
WON KAL (wrongdoer), by settling with IFTI (insured), defeats the
right to subrogation of Seaboard (insurer).
Held:
No.
Manila Mahogany case:
“Since the insurer can be subrogated to only such rights as the
insured may have, should the insured, after receiving payment from
the insurer, release the wrongdoer who caused the loss, the insurer
loses his right against the latter. But in such a case, the insurer will
be entitled to recover from the insured whatever it has paid to the
latter, unless the release was made with the consent of the insurer.”
One of the exceptions to the rule laid down in Article 2207 CC, “if
the insured by his own act release the wrongdoer or 3 rd party liable
for the loss or damage from liability, the insurer’s right of
subrogation is defeated.”
However, in this case, the doctrine above mentioned is not
applicable, since KAL was not similarly situated with the case above.
KAL was fully aware of the prior payment made by the insurer to the
consignee.
While Manila Mahogany is silent on whether the existence of good
faith or bad faith on the wrongdoer affects the insurer’s right to
subrogation, there exists a wealth in US jurisprudence:
“Whenever the wrongdoer settles with the insured without the
consent of the insurer and with knowledge of the insurer’s payment
and right of subrogation, such right is not defeated by the
settlement.”
2
F.F CRUZ AND CO. , INC.VS. CA
G.R. NO. L-52732
AUGUST 29, 1988
FACTS:
The furniture manufacturing shop of petitioner in Caloocan City was
situated adjacent to the residence of private respondents. Sometime
in August 1971, private respondent Gregorio Mable first approached
Eric Cruz, petitioner's plant manager, to request that a firewall be
constructed between the shop and private respondents' residence.
The request was repeated several times but they fell on deaf ears. In
the early morning of September 6, 1974, fire broke out in
petitioner's shop.
The fire spread to private respondents' house. Both the shop and
the house were razed to the ground. Subsequently, private
respondents collected P35,000.00 on the insurance on their house.
On January 23, 1975, private respondents filed an action for
damages against petitioner.
WHEREFORE, the Court hereby renders judgment, in favor of
plaintiffs, and against the defendant:
On appeal, the Court of Appeals, affirmed the decision of the trial
court but reduced the award of damages:
Petitioner contends that the Court of Appeals erred:
In not deducting the sum of P35,000.00, which private respondents
recovered on the insurance on their house, from the award of
damages.
Issue:
Whether or not petitioner is liable for damages to private
respondents as found by the Court of Appeals.
HELD:
The fact that private respondents have been indemnified by their
insurer in the amount of P35,000.00 for the damage caused to their
house and its contents has not escaped the attention of the Court.
Hence, the Court holds that in accordance with Article 2207 of the
Civil Code the amount of P35,000.00 should be deducted from the
amount awarded as damages.
Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of,
the insurance company is subrogated to the rights of the insured
against the wrongdoer or the person who violated the contract. If
the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
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The law is clear and needs no interpretation. Having been
indemnified by their insurer, private respondents are only entitled to
recover the deficiency from petitioner. On the other hand, the
insurer, if it is so minded, may seek reimbursement of the amount it
indemnified private respondents from petitioner.
This is the essence of its right to be subrogated to the rights of the
insured, as expressly provided in Article 2207. Upon payment of the
loss incurred by the insured, 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
Under Article 2207, the real party in interest with regard to the
indemnity received by the insured is the insurer.
The damages awarded for the loss of the house is reduced to
P35,000.00; and (2) the right of the insurer to subrogation and thus
seek reimbursement from petitioner for the P35,000.00 it had paid
private respondents is recognized.
3.
Manila Mahogany Manufacturing Corp. vs. CA and Zenith
Insurance Corporation
GR No. L-53756
October 12, 1987
Facts:
Manila Mahogany insured its Mercedes Benz 4-door sedan with
Zenith Insurance Corp. The vehicle was bumped and damaged by a
truck owned by San Miguel Corporation (SMC).
For the damaged caused, Zenith Insurance paid Manila Mahogany
5,000 pesos. Petitioner then executed a Release of Claim,
subrogating Zenith Insurance to all of Manila Mahogany’s right to
action against SMC.
Zenith Insurance wrote Insurance Adjusters to demand
reimbursement from SMC, however the latter refused, alleging that
SMC had already paid Manila Mahogay 4,500 pesos for the damages
of the vehicle as evidenced by cash voucher and Release of Claim
executed by General Manager of petitioner.
Zenith Insurance thus demanded from petitioner reimbursement of
the sum of 4,500 paid by SMC. The trial court ordered petitioner to
pay 4,500 to Zenith insurance however on appeal, the CA modified
and ordered petitioner to pay Zenith Insurance the total of 5,000
that it had earlier received from the said Insurance Company.
Petitioner contended that, as the subrogation in the Release Claim it
executed in favor of Zenith was conditioned on recovery of the total
amount of damages which is 9,486.43 pesos and only 5k was
received by petitioner from Zenith, petitioner argues that it was
entitled to go after SMC to claim the addition 4,500 eventually paid
by the latter.
Petitioner cites Article 2207 that if the amount paid by the insurance
company does not fully cover the injury or loss the aggrieved party
shall be entitled to recover the deficiency from the person causing
the loss or injury.
Insurance/ First Batch Cases/ Digests 2017
Issue:
WON Zenith insurance is entitled to recover from Manila Mahogany
(insured) the amount of insurance paid.
Held:
Yes.
Since Manila Mahogany by its own acts released SMC, thereby
defeating the insurer’s right of subrogation, the right of action of
Manila Mahogany against the insurer was also nullified. Otherwise
stated, Zenith Insurance may recover the sum of 5,000 pesos it had
earlier paid to petitioner.
Manila Mahogany is entitled to keep the sum of 4,500 paid by SMC
under its clear right to file a deficiency claim for damages incurred,
against SMC should the insurance company not fully pay for the
injury caused (Article 2207 CC). However, when Manila Mahogany
released SMC from any liability, petitioner’s right to retain the 5,000
no longer existed, thereby entitling the insurer to recover the same.
The right of subrogation can only exist after the insurer has paid
the insured, otherwise the latter will be deprived of his right to full
indemnity. If the insurance proceeds are not sufficient to cover the
damages suffered by the insured, then he may sue the party
responsible for the damage for the remainder. To the extent of the
amount he has already received from the insurer, insurer enjoys
the right to subrogation.
Since the insurer can be subrogated to only such rights as the
insured may have, should the insured after receiving payment from
the insurer, release the wrongdoer who caused the loss, the insurer
loses his rights against the latter. But in such a case, the insurer
will be entitled to recover from the insured whatever it has paid to
the latter, unless the release was made with the consent of the
insurer.
4
RAFAEL ENRIQUEZ VS. SUN LIFE ASSURANCE COMPANY OF
CANADA
G.R. NO. L-15895,
NOVEMBER 29, 1920
FACTS:
This is an action brought by the plaintiff ad administrator of the
estate of the late Joaquin Ma. Herrer to recover from the defendant
life insurance company the sum of pesos 6,000 paid by the deceased
for a life annuity.
The application was immediately forwarded to the head office of the
company at Montreal, Canada. On November 26, 1917, the head
office
gave notice of acceptance by cable to Manila.
On December 4, 1917, the policy was issued at Montreal. On
December 18, 1917, attorney Aurelio A. Torres wrote to the Manila
office of the company stating that Herrer desired to withdraw his
application.
The following day the local office replied to Mr. Torres, stating that
the policy had been issued, and called attention to the notification of
2

November 26, 1917. This letter was received by Mr. Torres on the
morning of December 21, 1917.
Mr. Herrer died on December 20, 1917.
Our deduction from the evidence on this issue must be that the
letter of November 26, 1917, notifying Mr. Herrer that his
application had been accepted, was prepared and signed in the local
office of the insurance company, was placed in the ordinary
channels for transmission, but as far as we know, was never actually
mailed and thus was never received by the applicant.
ISSUE:
Whether or not Herrer receive notice of acceptance of his
application.
HELD:
NO
In resume, therefore, the law applicable to the case is found to be
the second paragraph of article 1262 of the Civil Code providing that
an acceptance made by letter shall not bind the person making the
offer except from the time it came to his knowledge.
The pertinent fact is, that according to the provisional receipt, three
things had to be accomplished by the insurance company before
there was a contract:
(1) There had to be a medical examination of the applicant;
(2) There had to be approval of the application by the head office of
the company; and
(3) This approval had in some way to be communicated by the
company to the applicant.
The further admitted facts are that the head office in Montreal did
accept the application, did cable the Manila office to that effect, did
actually issue the policy and did, through its agent in Manila, actually
write the letter of notification and place it in the usual channels for
transmission to the addressee.
We hold that the contract for a life annuity in the case at bar was
not perfected because it has not been proved satisfactorily that the
acceptance of the application ever came to the knowledge of the
applicant.
5.
The Insular Life Assurance Com. Ltd. vs. Caponia T. Ebrado and
Pascuala Vda De. Ebrado
GR. No L- 44059
October 28, 1977
Facts:
Buenaventura Ebrado was issued by Insular Life Assurance an
insurance policy on a whole-life with a rider for Accidental Death for
the same amount. Buenaventura designated Caponia as the
revocable beneficiary in his policy.
Insurance/ First Batch Cases/ Digests 2017
Buenaventura died as a result of an accident when he was hit by a
falling branch of a tree. Carponia filed with the insurer a claim for
the proceeds of the Policy as the designated beneficiary though she
admits that she and Buenaventura were merely living as husband
and wife without the benefit of marriage.
Pascuala also filed as the widow of the deceased insurer.
Issue:
Can a common-law wife named as beneficiary in the life insurance
policy of a legally married man claim the proceeds thereof in case of
death of the latter?
Held:
No.
It is quite unfortunate that the Insurance Code does not contain any
specific provisions grossly resolutory of the issue at hand.
Section 50 of the Insurance Act provides that, “the insurance shall be
applied exclusively to the proper interest of the persons in whose
name it is made” cannot be validly seized upon to hold that the
same includes the beneficiary. The word “interest” highly suggests
that the provision refers only to the “insured” and not to the
beneficiary, since a contract of insurance is personal in character.
Otherwise, the prohibitory laws against illicit relationships especially
on property and descent will be rendered nugatory as the same
could be easily circumvented by modes of insurance.
The general rules of civil law should be applied to resolve the void in
the Insurance Law.
Article 2011 NCC states: “The contract of insurance is governed by
special laws. Matters not expressly provided for in such special laws
shall be regulated by this Code.”
Under Article 2012 of NCC: “Any person who is forbidden from
receiving any donation under Article 739 cannot be named
beneficiary of a life insurance policy by the person who cannot make
a donation to him.”
Article 739 NCC:
1. Those made between person who were guilty of adultery
or concubinage at the time of donation.
In the case referred to No. 1, the action for declaration of nullity
may be brought by the spouse of the donor or done; and the guilt of
the done may be proved by preponderance of evidence in the same
action.
In essence, a life insurance policy is no different from a civil donation
insofar as the beneficiary is concerned. Both are founded upon the
same consideration: liberality. A beneficiary is like a done, because
from the premiums of the policy which the insured pays out of
liberality, the beneficiary will receive the proceeds or profits of said
insurance.
Supreme Court Hugot:
Policy considerations and dictates of morality rightly justify the
institution of a barrier between common law spouses in record to
Property relations since such hip ultimately encroaches upon the
nuptial and filial rights of the legitimate family. There is every reason
to hold that the bar in donations between legitimate spouses and
those between illegitimate ones should be enforced in life insurance
policies since the same are based on similar consideration As above
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pointed out, a beneficiary in a life insurance policy is no different
from a donee. Both are recipients of pure beneficence. So long as
manage remains the threshold of family laws, reason and morality
dictate that the impediments imposed upon married couple should
likewise be imposed upon extra-marital relationship. If legitimate
relationship is circumscribed by these legal disabilities, with more
reason should an illicit relationship be restricted by these disabilities.
Carponia is hereby declared disqualified to be the beneficiary of the
late Buenaventura, the proceeds of the life insurance policy are held
payable to the estate of the deceased insured.
6 particular accidents and risks or causes of loss, and may expressly
VIRGINIA CALANOC VS.CA
G.R. NO. L-8151
DECEMBER 16, 1955
FACTS:
This suit involves the collection of P2,000 representing the value of a
supplemental policy covering accidental death which was secured by
one Melencio Basilio from the Philippine American Life IMelencio
Basilio was a watchman of the Manila Auto Supply lnsurance
Company.
He secured a life insurance policy from the Philippine American Life
Insurance Company in the amount of P2,000 to which was attached
a supplementary contract covering death by accident. On January
25, 1951, he died of a gunshot.
Virginia Calanoc, the widow, 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 representing the value of the supplemental policy,
the company refused alleging, as main defense, that the deceased
died because he was murdered by a person who took part in the
commission of the robbery and while making an arrest as an officer
of the law which contingencies were expressly excluded in the
contract and have the effect of exempting the company from
liability.
It is contended in behalf of the company that Basilio was killed
which "making an arrest as an officer of the law" or as a 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.
ISSUE:
Whether or not the cause of death of the deceased is one of the
risks excluded by the supplementary contract which exempts the
company from liability.
HELD:
NO
We dissent from the above findings of the Court of Appeals. For one
thing, Basilio was a watchman of the Manila Auto Supply which was
a block away from the house of Atty. Ojeda where something
suspicious was happening which caused the latter to ask for help.
Insurance/ First Batch Cases/ Digests 2017
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.
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.
We take note that these defenses are included among the risks
exluded in the supplementary contract which enumerates the cases
which may exempt the company from liability. While as a general
rule "the parties may limit the coverage of the policy to certain
except other risks or causes of loss there from however, it is to be
desired that the terms and phraseology of the exception clause be
clearly expressed so as to be within the easy grasp and
understanding of the insured, for if the terms are doubtful or
obscure the same must of necessity be interpreted or resolved
against the one who has caused the obscurity.
(Article 1377, new Civil Code) And so it has bene generally held that
the "terms in an insurance policy, which are ambiguous, equivacal,
or uncertain . . . are to be construed strictly and most strongly
against the insurer, and liberally in favor of the insured so as to
effect the dominant purpose of indemnity or payment to the
insured, especially where a forfeiture is involved".
We are therefore persuaded to conclude that the circumstances
unfolded in the present case do not warrant the finding that the
death of the unfortunate victim comes within the purview of the
exception clause of the supplementary policy and, hence, do not
exempt the company from liability.
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.
7. Rizal Surety and Insurance Co. vs. CA and Transworld Knitting
Mills Inc.
GR No. 112360
July 18, 2000
Facts:
Rizal Insurance issued Fire Insurance Policy in favor of Transworld for
1.5M. The policy covered the “building of four-span lofty storey in
height with mezzanine portions is constructed of reinforced
concrete and hollow block and/or concrete under galvanized iron
roof and occupied as hosiery mills, garment and lingerie factory,
transistor-stereo assembly plant, offices, warehouse and caretaker’s
quarter.
The same property insured with Rizal Insurance were also insured
with New India Assurance Company.
A fire broke out in the compound of Transworld, razing the middle
portion of its 4-span building. A 2-storey building behind the 4-span
4

building where fun and amusement machines and spare parts were
stored was also destroyed by fire.
Transworld filed its insurance claim with Rizan and New India
Insurance but to no avail. Thus, it filed an action for collection of
money from the two insurance companies.
Rizal Insurance countered that its fire insurance policy covered only
the contents of the 4-span building which was partly burned, and
not the damage caused by the fire on the 2-story annex building.
Both insurances contended that Transworld has no insurable
interest on the 2-story annex building.
Issue:
WON the annex building where the bulk of the burned properties
were stored was included in the coverage of the insurance policy.
Held:
Yes.
The resolution of the issue posited, hinges on the proper
interpretation of the stipulation in subject fire insurance policy
regarding the coverage which reads:
“xxx contained and/or stored during the currency of this
Policy in the premises occupied by them forming part of the building
situate within own compound.”
It can be gleaned that the fire insurance policy did not limit its
coverage to what were stored in the 4-span building.
There are 2 requirements that must concur in order that the said fun
and amusement machines and spare parts would be deemed
protected by the fire insurance policy:
1. Said properties must be contained and/or in the areas
occupied by Transworld; and
2. Said areas must form part of the building described.
As found by the lower courts, the so called “annex” was not an
annex building but an integral and inseparable part of the 4-span
building described, consequently, the machines and spare parts
stored therein were covered by the fire insurance in dispute.
Moreover, the 2-storey building already existed when subject fire
insurance policy contract was entered into. The insurance company
should have specifically excluded the said 2-storey from the
coverage if minded to exclude the same but it did not.
Article 1377 NCC provides that, “ the interpretation of obscure
words or stipulations in a contract shall not favor the party who
caused the obscurity.”
Contract of Adhesion (Landicho vs. GSIS):
“xxx terms in an insurance policy, which are ambiguous, equivocal or
uncertain are to be construed strictly and most strongly against the
insurer and liberally in favor of the insured. xxxx the reason for this
is that the insured usually has no voice in the selection or
arrangement of the words employed and that the language of the
contract is selected with great care and deliberation by experts and
legal advisers employed by, and acting exclusively in the interest of
the insurance company.”
Insurance/ First Batch Cases/ Digests 2017
8
DEL ROSARIO VS. THE EQUITABLE INSURANCE AND CASUALTY CO.,
INC
G.R. NO. L-16215
JUNE 29, 1963
FACTS:
The defendant Equitable Insurance and Casualty Co., Inc., issued
Personal Accident Policy on the life of Francisco del Rosario, alias
Paquito Bolero, son of herein plaintiff-appellee, binding itself to pay
the sum of P1,000.00 to P3,000.00, as indemnity for the death of the
insured.
This policy shall not cover disappearance of the Insured nor shall it
cover Death, Disability, Hospital fees, or Loss of Time, caused to the
insured:.On February 24, 1957, the insured Francisco del Rosario,
alias Paquito Bolero, while on board the motor launch "ISLAMA"
together with 33 others, including his beneficiary in the Policy,
Remedios Jayme, were forced to jump off said launch on account of
fire which broke out on said vessel, resulting in the death of
drowning, of the insured and beneficiary in the waters of Jolo.
On April 13, 1957, Simeon del Rosario, father of the insured, and as
the sole heir, filed a claim for payment with defendant company,
and on September 13, 1957, defendant company paid to him
(plaintiff) the sum of P1,000.00, pursuant to Section 1 of Part I of the
policy..
On the same date (September 13, 1957), Atty. Vicente J. Francisco,
wrote defendant company acknowledging receipt by his client
(plaintiff herein), of the P1,000.00, but informing said company that
said amount was not the correct one. Atty. Francisco claimed —The
amount payable under the policy, should be P1,500.00 under the
provision of Section 2, part 1 of the policy, based on the rule of pari
materia as the death of the insured occurred under the
circumstances similar to that provided under the aforecited section.
ISSUE:
Whether or not the counsel of the deceased is correct
HELD
under the terms of this policy, defendant company agreed to pay
P1,000.00 to P3,000.00 as indemnity for the death of the insured.
The insured died of drowning. Death by drowning is covered by the
policy.
Besides, on the face of the policy Exhibit "A" itself, death by
drowning is a ground for recovery apart from the bodily injury
because death by bodily injury is covered by Part I of the policy while
death by drowning is covered by Part VI thereof. But while the policy
mentions specific amounts that may be recovered for death for
bodily injury, yet, there is not specific amount mentioned in the
policy for death thru drowning although the latter is, under Part VI
of the policy, a ground for recovery thereunder.
Since the defendant has bound itself to pay P1000.00 to P3,000.00
as indemnity for the death of the insured but the policy does not
positively state any definite amount that may be recovered in case
of death by drowning,
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IN VIEW OF THE FOREGOING, the Court hereby reconsiders and sets
aside its decision dated July 21, 1958 and hereby renders judgment,
ordering the defendant to
pay plaintiff the sum of Two Thousand (P2,000.00) Pesos and to pay
the costs.
The conflict centers on how much should the indemnity be where
two interpretations, equally fair, of languages used in an insurance
policy may be made, that which allows the greater indemnity will
prevail the judgment appealed from is hereby affirmed.
9.
Taurus Taxi Co. vs. The Capital Insurance & Surety Co. Inc.
GR No. L-23491
July 31, 1968
Facts:
Alfredo Monje was employed as taxi driver by Taurus Taxi Co., the
taxi he was driving collided with a Transport Taxicab resulting to his
death. At the time of his death, there was a subsisting Commercial
Vehicle Comprehensive Policy issued by Capital Insurance to Taurus
Taxi, the amount of which each passenger including the driver is
insured to 5,000 persos.
In the policy, reference was then made to Felicitas Monje being the
widow of the taxi driver and others as the children of the couple.
A claim was made by Taurus Taxi representing heirs Monje.
However, Capital Insurance refused to pay them.
Capital Insurance contended that, in view of the fact that the
deceased was entitled to indemnity under another insurance policy
issued by Ed. A. Keller Co., the heirs of the said deceased are not
entitled to indemnity under the insurance policy issued by Capital
for the reason that the latter policy contains a stipulation that “the
company will indemnify any authorized driver provided that such
authorized driver is not entitled to indemnity under any other
policy.” This defense was rejected by the lower court.
From its own version, Capital seek to escape liability on the plea that
the workman’s compensation to which the deceased driver was
rightfully entitled was settled by the employer through a policy
issued by another insurance firm.
Issue:
WON a provision in the insurance contract that the insurer will
indemnify any authorized driver provided he is not entitled to any
indemnity under any other policy, it being shown that the deceased
was paid his workman’s compensation from another insurance
policy, should defeat such a right to recover under the insurance
contract.
Held:
No.
The Workmen’s Compensation Act explicitly requires that an
employee suffering any injury or death arising out of or in the course
of employment be compensation. The fulfilment of such statutory
obligation cannot be the basis for evading the clear, explicit and
mandatory terms of a policy.
Insurance/ First Batch Cases/ Digests 2017
Assuming however that there is a doubt concerning the liability of
the insurance firm, nonetheless, it should be resolved against its
pretense and in favor of the insured.
“A contract of insurance couched in language chosen by the insurer
is, if open to the construction contended for by the insured, to be
construed most strongly or strictly against the insurer and liberally in
favor of the contention of the insured, which means in accordance
with the rule contra proferentem.”
10.
VILLACORTA VS. THE INSURANCE COMMISSION
G.R. NO. L-54171
OCTOBER 28, 1980
FACTS:
Complainant [petitioner] was the owner of a Colt Lancer, Model
1976, insured with respondent company under Private Car for
P35,000.00 — Own Damage; P30,000.00 — Theft; and P30,000.00 —
Third Party Liability.
On May 11, 1978, while it was in the custody of the Sunday Machine
Works, the car was allegedly taken by six (6) persons and driven out
to Montalban, Rizal. While travelling, the car figured in an
accident,the driver, Benito Mabasa, and one of the passengers died
and the other four sustained physical injuries.
The car, as well, suffered extensive damage. Complainant,
thereafter, filed a claim for total loss with the respondent company
but claim was denied. Hence, complainant was compelled to
institute the present action.
Respondent insurance commission, 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.
Respondent commission upheld private respondent's contention on
the:
(1) "Authorized Driver" clause in this wise: "It must be
observed that under the above-quoted provisions, the policy limits
the use of the insured vehicle to two
(2) Persons only, namely: the insured himself or any person
on his (insured's) permission.
Respondent commission likewise upheld private respondent's
assertion that the car was not stolen and therefore not covered by
the Theft clause.
ISSUE:
Whether or not respondent's assertion is correct that the car was
not stolen and therefore not covered by the Theft clause.
6

HELD:
NO.
The mere happenstance that the employee of the shop owner
diverts the use of the car to his own illicit or unauthorized purpose
in violation of the trust reposed in the shop by the insured car owner
does not mean that the "authorized driver" clause has been violated
such as to bar recovery, provided that such employee is duly
qualified to drive under a valid driver's license.
Secondly, and independently of the foregoing (since when a car is
unlawfully taken, it is the theft clause, not the "authorized driver"
clause, that applies) Theft is committed by any person who, with
intent to gain but without violence against or intimidation of
persons nor force upon things, shall take personal property of
another without the latter's consent," for
purposes of recovering the loss under the policy in question.
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.
11.
Norra Cansing Serrano vs. CA and SSC
GR No. L-35529
July 16, 1984
Facts:
Upon the application of the Social Security System (SYSTEM), a
Group Mortgage Redemption Policy No. GMR-1 was issued by
Private Life Insurance Companies operating in the Philippines for a
group life insurance policy on the lives of housing loan mortgagors
of the SYSTEM. Under this Group Mortgage Redemption scheme, a
grantee of a housing loan of the SYSTEM is required to mortgage the
house constructed out of the loan and the lot on which it stands.
The SYSTEM takes a life insurance on the eligible mortgagor to the
extent of the mortgage indebtedness such that if the mortgagor
dies, the proceeds of his life insurance under the Group Redemption
Policy will be used to pay his indebtedness to the SYSTEM and the
deceased's heirs will thereby be relieved of the burden of paying for
the amortization of the deceased's still unpaid loan to the SYSTEM.
The SYSTEM approved the real estate mortgage loan of Bernardo
Serrrano for the construction of his house. After a year, Captain
Serrano died in a plane crush and because of his death, the SYSTEM
closed his housing loan account to the released amount of 35,400
pesos.
The widow of late Serrano requested that the benefits of the Group
Mortgage Redemption Insurance (GMRI) be extended to her.
However, her letter was disapproved by the SYSTEM on the ground
that Captain Serrano was not yet covered by the GMRI Policy at the
time of his death.
Issue:
WON the deceased is covered by the GMRI Policy.
Held:
Insurance/ First Batch Cases/ Digests 2017
Yes.
There can be no doubt as to the eligibility of the late Captain
Serrano for coverage under Section 1 of Article II of the Group
Mortgage Redemption Insurance Policy as he was a mortgagor of
the Social Security System not over the age of 65 nearest his
birthday at the time when the mortgage loan was granted to him.
The problem manifests itself in Sections 2 and 3 of the same article
of the Group Mortgage Redemption Insurance Policy. Section 2
provides that "any mortgagor who is eligible for coverage on or after
the Date of Issue shall be automatically insured, ..."; while Section 3
provides that the insurance "shall take effect from the beginning of
the amortization period of such Mortgage loan or partial release of
Mortgage Loan.
What is controlling is the meaning of the provision itself. The said
section can only convey the idea that the mortgagor who is eligible
for coverage on or after the date of issue shall be automatically
insured. The only condition is that the age requirement should be
satisfied, which had been complied with by the deceased mortgagor
in the instant case.
Under Section 2, mortgage redemption insurance is not just
automatic, it is compulsory for all qualified borrowers.
However, Section 3 of Article II presents an ambiguity. The effective
date of coverage can be interpreted to mean that the insurance
contract takes effect "from the beginning of the amortization period
of such Mortgage Loan" or "partial release of Mortgage Loan."
Applying Article 1374 of the new Civil Code, the mortgagor in the
instant case was already covered by the insurance upon the partial
release of the loan.
”The various stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense which
may result from all of them taken jointly.”
The ambiguity in Section 3 of Article II should be resolved in favor of
the petitioner. "The interpretation of obscure words or stipulations
in a contract shall not favor the party who caused the obscurity"
(Article 1377, Civil Code).
We also take note that the insured indebtedness on the mortgage as
provided in the policy shall be deemed paid upon the death of a
mortgagor covered under the MRI.
It is imperative to dissect the rationale of the insurance scheme
envisioned by the Social Security System. The Mortgage Redemption
Insurance device is not only for the protection of the SYSTEM but
also for the benefit of the mortgagor. On the part of the SYSTEM, it
has to enter into such form of contract so that in the event of the
unexpected demise of the mortgagor during the subsistence of the
mortgage contract, the proceeds from such insurance will be applied
to the payment of the mortgage debt, thereby relieving the heirs of
the mortgagor from paying the obligation. The SYSTEM insures the
payment to itself of the loan with the insurance proceeds. It also
negates any future problem that can crop up should the heirs be not
in a position to pay the mortgage loan. In short, the process of
amortization is hastened and possible litigation in the future is
avoided. In a similar vein, ample protection is given to the
mortgagor under such a concept so that in the event of his death;
7
 Insurance/ First Batch Cases/ Digests 2017

the mortgage obligation will be extinguished by the application of
the insurance proceeds to the mortgage indebtedness.
The SYSTEM cannot be allowed to have the advantage of collecting
the insurance benefits from the private life insurance companies and
at the same time avoid its responsibility of giving the benefits of the
Mortgage Redemption Insurance plan to the mortgagor. The very
reason for the existence of the Social Security System is to extend
social benefits.
subrogated to whatever rights the latter has against respondent San
Leon Rice Mill, Inc. Article 1217 of the Civil Code gives to a solidary
debtor who has paid the entire obligation the right to be reimbursed
by his co-debtors for the share which corresponds to each insured,
the respondent Sio Choy; as such, it is subrogated to whatever rights
the latter has against respondent San Leon Rice Mill, Inc. Article
1217 of the Civil Code gives to a solidary debtor who has paid the
entire obligation the right to be reimbursed by his co-debtors for the
share which corresponds to each.

Art. 1217. Payment made by one of the solidary debtors

12.
MALAYAN INSURANCE CO., INC., petitioner,
vs.
THE HON. COURT OF APPEALS MARTIN C. VALLEJOS, SIO CHOY,
SAN LEON RICE MILL, INC. and PANGASINAN TRANSPORTATION
CO., INC., respondents.
G.R. No. L-36413
September 26, 1988
FACTS:
Malayan Insurance Co., Inc., issued in favor of private respondent
Sio Choy Private Car Comprehensive Policy covering a Willys jeep.
The insurance coverage was for "own damage" not to exceed
P600.00 and "third-party liability" in the amount of P20,000.00. The
insured jeep, while being driven by one Juan P. Campollo an
employee of the respondent San Leon Rice Mill, Inc., collided with a
passenger bus belonging to the respondent Pangasinan
Transportation Co., Inc. Martin C. Vallejos the respondent filed an
action for damages against Sio Choy, Malayan Insurance Co., Inc.
and the PANTRANCO.
He prayed therein that the defendants be ordered to pay him, jointly
and severally, the amount of P15,000.00, as reimbursement for
medical and hospital expenses; P6,000.00, for lost income;
P51,000.00 as actual, moral and compensatory damages; and
P5,000.00, for attorney's fees.
extinguishes the obligation. If two or more solidary debtors offer to
pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the
share which corresponds to each, with the interest for the payment
already made. If the payment is made before the debt is due, no
interest for the intervening period may be demanded.
In accordance with Article 1217, petitioner, upon payment to
respondent Vallejos and thereby becoming the subrogee of solidary
debtor Sio Choy, is entitled to reimbursement from respondent San
Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio Choy and
San Leon Rice Mill, Inc. are solidarily liable to the respondent Martin
C. Vallejos for the amount of P29,103.00. Vallejos may enforce the
entire obligation on only one of said solidary debtors. If Sio Choy as
solidary debtor is made to pay for the entire obligation (P29,103.00)
and petitioner, as insurer of Sio Choy, is compelled to pay
P20,000.00 of said entire obligation, petitioner would be entitled, as
subrogee of Sio Choy as against San Leon Rice Mills, Inc., to be
reimbursed by the latter in the amount of P14,551.50 (which is 1/2
of P29,103.00 )

Sio Choy, however, later filed a separate answer with a cross-claim

against the herein petitioner wherein he alleged that he had actually
paid the plaintiff, Martin C. Vallejos, the amount of P5,000.00 for
hospitalization and other expenses, and, in his cross-claim against
the herein petitioner, he alleged that the petitioner had issued in his
favor a private car comprehensive policy wherein the insurance
company obligated itself to indemnify Sio Choy, as insured, for the
damage to his motor vehicle, as well as for any liability to third
persons arising out of any accident during the effectivity of such
insurance contract, which policy was in full force and effect when
the vehicular accident complained of occurred. He prayed that he be
reimbursed by the insurance company for the amount that he may
be ordered to pay.

ISSUE:
Whether petitioner is entitled to be reimbursed by respondent San
Leon Rice Mill, Inc. for whatever amount petitioner has been
adjudged to pay respondent Vallejos on its insurance policy.

RULING:
It follows, therefore, that petitioner, upon paying respondent
Vallejos the amount of riot exceeding P20,000.00, shall become the
subrogee of the insured, the respondent Sio Choy; as such, it is