1

MALAYAN VS PHILIPPINES FIRST (G.R. NO. 184300 JULY 11, 2012) it is, however, beyond cavil that the said policies were issued to two different persons or entities. It is
undisputed that Wyeth is the recognized insured of Philippines First under its Marine Policy, while
Malayan Insurance Co., Inc vs Philippines First Insurance Co., Inc Reputable is the recognized insured of Malayan under the SR Policy. The fact that Reputable procured
G.R. No. 184300 July 11, 2012 Malayan’s SR Policy over the goods of Wyeth pursuant merely to the stipulated requirement under its
contract of carriage with the latter does not make Reputable a mere agent of Wyeth in obtaining the
said SR Policy.
Facts: Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder Services, Inc.
(Reputable) had been annually executing a contract of carriage, whereby the latter undertook to
transport and deliver the former’s products to its customers, dealers or salesmen. On November 18,
1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from respondent Philippines First The interest of Wyeth over the property subject matter of both insurance contracts is also different and
Insurance Co., Inc. (Philippines First) to secure its interest over its own products. Philippines First thereby distinct from that of Reputable’s. The policy issued by Philippines First was in consideration of the legal
insured Wyeth’s nutritional, pharmaceutical and other products usual or incidental to the insured’s and/or equitable interest of Wyeth over its own goods. On the other hand, what was issued by Malayan
business while the same were being transported or shipped in the Philippines. The policy covers all risks to Reputable was over the latter’s insurable interest over the safety of the goods, which may become
of direct physical loss or damage from any external cause, if by land, and provides a limit of the basis of the latter’s liability in case of loss or damage to the property and falls within the
P6,000,000.00 per any one land vehicle. On December 1, 1993, Wyeth executed its annual contract of contemplation of Section 15 of the Insurance Code.
carriage with Reputable. It turned out, however, that the contract was not signed by Wyeth’s
representative/s. Nevertheless, it was admittedly signed by Reputable’s representatives, the terms Therefore, even though the two concerned insurance policies were issued over the same goods and
thereof faithfully observed by the parties and, as previously stated, the same contract of carriage had cover the same risk, there arises no double insurance since they were issued to two different
been annually executed by the parties every year since 1989. Under the contract, Reputable undertook persons/entities having distinct insurable interests. Necessarily, over insurance by double insurance
to answer for “all risks with respect to the goods and shall be liable to the COMPANY (Wyeth), for the cannot likewise exist. Hence, as correctly ruled by the RTC and CA, neither Section 5 nor Section 12 of
loss, destruction, or damage of the goods/products due to any and all causes whatsoever, including the SR Policy can be applied.
theft, robbery, flood, storm, earthquakes, lightning, and other force majeure while the goods/products
are in transit and until actual delivery to the customers, salesmen, and dealers of the COMPANY”. The
contract also required Reputable to secure an insurance policy on Wyeth’s goods. Thus, on February
11, 1994, Reputable signed a Special Risk Insurance Policy (SR Policy) with petitioner Malayan for the
amount of P1,000,000.00. On October 6, 1994, during the effectivity of the Marine Policy and SR Policy,
Reputable received from Wyeth 1,000 boxes of Promil infant formula worth P2,357,582.70 to be
delivered by Reputable to Mercury Drug Corporation in Libis, Quezon City. Unfortunately, on the same
date, the truck carrying Wyeth’s products was hijacked by about 10 armed men. They threatened to kill
the truck driver and two of his helpers should they refuse to turn over the truck and its contents to the
said highway robbers. The hijacked truck was recovered two weeks later without its cargo. Malayan
questions its liability based on sections 5 and 12 of the SR Policy.

Issue: Whether or not there is double insurance in this case such that either Section 5 or Section 12 of
the SR Policy may be applied.

Held: No. By the express provision of Section 93 of the Insurance Code, double insurance exists where
the same person is insured by several insurers separately in respect to the same subject and interest.
The requisites in order for double insurance to arise are as follows:

1. The person insured is the same;

2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.

In the present case, while it is true that the Marine Policy and the SR Policy were both issued over the
same subject matter, i.e. goods belonging to Wyeth, and both covered the same peril insured against,

[G.R. No. 126223. November 15, 2000]
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS and ELIZA
PULIDO, respondents.
DECISION
GONZAGA-REYES, J.:
This petition for review on certiorari seeks to reverse the Decision of the Special Second Division
of the Court of Appeals dated August 27, 1996,[1] which affirmed in toto the Decision of the Regional
Trial Court of Baguio City,[2] allowing herein private respondent, the beneficiary under a life insurance
policy issued by petitioner, to recover the face amount of the said policy.
Briefly, the antecedent facts are:
On January 9, 1989, petitioner received from one Florence Pulido an application for life insurance,
dated December 16, 1988, in the amount of P100,000.00 which designated her sister, herein private
respondent, as its principal beneficiary. Because the insurance applied for was non-medical, petitioner
did not require a medical examination and issued a policy on the sole basis of the application on
February 11, 1989. On April 1992, petitioner received private respondents claim, which declared that
the insured, Florence Pulido, died of acute pneumonia on September 10, 1991.
Petitioner withheld payment on the ground that the policy claimed under was void from the start
for having been procured in fraud. It is petitioners contention that even before they received private
respondents claim for death benefits, their investigation concerning the subject policy yielded the
information that the insured, Florence Pulido, died in 1988, before the application for insurance on her
life was made.[3] While this was communicated to private respondent in a letter dated April 29,
1992,[4] private respondent had already filed her claim earlier that month.[5] In another letter dated July
27, 1992, however, petitioner confirmed to private respondent receipt of the claim papers and assured
her that her case was being given preferential attention and prompt action.[6]
Following the filing by private respondent of her claim, petitioner caused another investigation
respecting the subject policy. Pursuant to the findings of this second investigation, petitioner stood by
its initial decision to treat the policy as void and not to honor the claim. On November 9, 1992, private
respondent enlisted the services of counsel in reiterating her claim for death benefits. [7] Petitioner still
refused to make payment and thus, this action.
The complaint before the lower court sought payment of the face amount of the policy,
equivalent to P100,000.00, with interest at 24% per annum for undue delay in payment pursuant to
Section 244 of the Insurance Code, and for P5,000.00 as consequential damages.
For its part, petitioner interposed that it was legally justified in denying plaintiffs claim, the results
of its investigations having indicated that the insured was already dead at the time the policy was
applied for. It also counterclaimed for attorneys fees.
To substantiate its defense, petitioner submitted copies of the reports of its investigators. The
first report,[8] prepared by one Dr. Benedicto Briones, was dated April 1, 1992, and had attached to it a
questionnaire, responded to by one Ramon Piganto,[9] who represented to be the brother-in-law of the
2
insured and the barangay chairman of Cardiz, Bagulin, La Union. To the question Where does [Florence
Pulido] reside now?, Piganto had replied that Florence Pulido used to live in Cardiz, but was dead since
1988. Pigantos statement was signed by him, and witnessed by his wife, Nenita Piganto. This report was
petitioners basis for treating the disputed policy as void since April 1992, even before receipt of private
respondents claim. The next two reports pertained to the investigation petitioner commenced after
private respondent filed her claim. One report, dated October 2, 1992, was submitted by Ferdinand
Tanchoco, another of petitioners investigators, and dealt with Tanchocos interview with a certain
Remylyn Piganto, a 14-year old high school student who was the niece of the insured and daughter of
Ramon Piganto. Remylyn purportedly told Tanchoco that her auntie Florence Pulido died young a long
time ago, before Remylyn was even born.[10] Remylyn, however, did not execute any written
statement. The other report, dated December 28, 1992,[11] was prepared by Dr. Benedicto Briones, who
also prepared the first report dated April 1, 1992. This last report intimated the claim of some neighbors
of the Pulido family that Florence Pulido died in a car accident in 1985. These persons, however, refused
to give their names or execute statements on the matter, as they were reportedly afraid of Ramon
Piganto, the insureds brother-in-law.[12]
During the trial, plaintiff-private respondent testified that the insured died of acute pneumonia
on September 10, 1991 in Barangay Cardiz, Bagulin, La Union and was buried two days after within their
own yard. Plaintiff next presented as a witness Dr. Irineo Gutierrez, who testified that he attended to
the ailing Florence Pulido on September 8, and 9, 1991 at their house in Cardiz. Dr. Gutierrez then
authenticated a Certificate of Death,[13] issued on September 12, 1991 by the Local Civil Registrar of
Bagulin, La Union, which bore his signature in his capacity as then Municipal Health Officer of Bagulin,
La Union. The death certificate declared that Florence Pulido died on September 10, 1991 at around
4:00 in the afternoon.
A neighbor of the Pulidos, Francisco Villano, also testified in support of plaintiff that the insured
died of illness on September 1991. Villano claimed that he was at the Pulidos house when Dr. Gutierrez
attended to the insured. He also said that he went to the wake of Florence Pulido and was able to view
her remains.[14]
Meanwhile, defendant-petitioner presented Pablito Angalot, petitioners Life Claims Manager,
who said that even before the filing of private respondents claim, petitioners Claims Committee had
already declared the disputed policy null and void in light of the investigative report dated April 1,
1992. However, petitioner was unable to present Dr. Benedicto Briones, the investigator who prepared
the April 1, 1992 report. Also, when it presented Ramon Piganto, whose statement attached to Dr.
Brioness report dated April 1, 1992 was the basis for petitioners treating the subject policy as void,
Piganto denied giving the statement that Florence Pulido died in 1988, and said that he was made to
sign a blank coupon bond.[15]
Ferdinand Tanchoco, petitioners other investigator, identified his investigative report[16] and
recounted the results of his investigation focusing particularly on the interview with Remylyn
Piganto.Tanchoco also reported that private respondents information on the insureds death, as
declared in her claim certificate, tallied with the entries of the death certificate as found in the records
of the Local Civil Register of Bagulin, La Union.
The dispositive portion of the decision of the Regional Trial Court, which was affirmed in toto by
the Court of Appeals, states:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering
the latter to pay the former the amount of P100,000.00, representing the face value of the insurance
 3

policy sued upon, with interest thereon at the legal rate from January 8, 1993, the date of the filing of purposely lie. Mere allegations of fraud could not substitute for the full and convincing evidence that is
the complaint, until fully paid, plus P20,000.00 for and as attorneys fees and costs of suit. required to prove it.[21] A failure to do so would leave intact the presumption of good faith and regularity
in the performance of public duties, which was the basis of both respondent court and the trial court in
In ruling in favor of plaintiff-private respondent, the trial court found no reason to doubt the finding the date of Florence Pulidos death to be as plaintiff-private respondent maintained.
correctness of the entries in the Certificate of Death, which declared that Florence Pulido died on We cannot likewise give credence to petitioners submission that the inconsistencies in the
September 10, 1991. It is also found that defendant, petitioner herein, failed to discharge the burden of testimonies of the witnesses for plaintiff-private respondent are in themselves evidence of fraud. Such
proving its affirmative defense that fraud attended the issuance of the policy sued upon.Contrarily, as alleged inconsistencies are matters of credibility which had been ably passed upon by the lower court.
the lower court observed, the evidence defendant presented sustained the validity of the policy instead
of establishing its alleged fraud. The absence of fraud, as a factual finding of the lower court adopted by the Court of Appeals,
entirely consistent with the evidence on record, will not be reversed and, hence, is final and conclusive
The lower court also struck down as hearsay the two reports prepared by Dr. Benedicto Briones, upon this Court.
the said investigator not having been presented as a witness in court. It also held as hearsay the alleged
declaration of Remylyn Piganto, as recounted by Ferdinand Tanchoco in his report and on testimony, WHEREFORE, the instant petition is DENIED. Costs against petitioners.
since Remylyn herself did not take the witness stand.
SO ORDERED.
However, the lower court found plaintiff-private respondent entitled to legal interest only, and
not to 24% per annum as prayed for. Under Section 242 of the Insurance Code, the refusal of the insurer Melo, (Chairman), Vitug, and Panganiban, JJ., concur.
to pay a life insurance claim within the period prescribed will entitle the beneficiary to collect interest
on the proceeds at the rate of twice the ceiling prescribed by the Monetary Board for the duration of
the delay, unless the refusal to pay is based on the ground that the claim is fraudulent. Fraud being the
ground invoked by petitioner for refusing to honor the claim, the lower court found no unreasonable
delay in petitioners decision to withhold payment.

The petition is without merit.

As a rule, a petition for review on certiorari may raise only questions of law which must be
distinctly set forth.[17] This Court does not countenance the elevation of patently factual questions
disguised by a loose and general wording of the assignment of errors.

It is clear that the only issue the petition raises for review is respondent courts negative finding
of fraud in the obtainment of Florence Pulidos insurance policy. Fraud is a question of fact which must
be alleged and proved at the level of the lower court.[18] The records bear out that since the onset of
this case, the main issue has always been whether there was fraud in the obtainment of the disputed
policy, or put differently, whether the insured, Florence Pulido, was in fact dead before the application
for insurance on her life was made. This the lower courts had effected ruled on, upon a preponderance
of the evidence duly received from both parties. We see no reversible error in the finding of both
respondent court and the trial court in favor of the correctness of the entries in Certificate of Death,
duly registered with the Local Civil Registrar of Bagulin, La Union, which declared that Florence Pulido
died of acute pneumonia on September 10, 1991. Dr. Irineo Gutierrez, the Municipal Health Officer of
Bagulin, La Union whose signature appeared in the death certificate, testified in addition that he
ministered to the ailing Florence Pulido for two days immediately prior to her death. This fact is likewise
noted in the death certificate.

Death certificates, and notes by a municipal health officer prepared in the regular performance
of his duties, are prima facie evidence of facts therein stated.[19] A duly-registered death certificate is
considered a public document and the entries found therein are presumed correct, unless the party
who contests its accuracy can produce positive evidence establishing otherwise.[20] Petitioners
contention that the death certificate is suspect because Dr. Gutierrez was not present when Florence
Pulido died, and knew of Florences death only through Ramon Piganto, does not merit a conclusion of
fraud. No motive was imputed to Dr. Gutierrez for seeking to perpetuate a falsity in public
records. Petitioner was likewise unable to make out any clear motive as to why Ramon Piganto would

G.R. No. 175666 July 29, 2013
MANILA BANKERS LIFE INSURANCE CORPORATION, Petitioner.
vs.
CRESENCIA P. ABAN, Respondent.
DECISION
DEL CASTILLO, J.:
The ultimate aim of Section 48 of the Insurance Code is to compel insurers to solicit business from or
provide insurance coverage only to legitimate and bona fide clients, by requiring them to thoroughly
investigate those they insure within two years from effectivity of the policy and while the insured is still
alive. If they do not, they will be obligated to honor claims on the policies they issue, regardless of fraud,
concealment or misrepresentation. The law assumes that they will do just that and not sit on their
laurels, indiscriminately soliciting and accepting insurance business from any Tom, Dick and Harry.
Assailed in this Petition for Review on Certiorari1 are the September 28, 2005 Decision2 of the Court of
Appeals' (CA) in CA-G.R. CV No. 62286 and its November 9, 2006 Resolution3 denying the petitioner’s
Motion for Reconsideration.4
Factual Antecedents
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life Insurance
Corporation (Bankers Life), designating respondent Cresencia P. Aban (Aban), her niece,5 as her
beneficiary.
Petitioner issued Insurance Policy No. 747411 (the policy), with a face value of ₱100,000.00, in Sotero’s
favor on August 30, 1993, after the requisite medical examination and payment of the insurance
premium.6
On April 10, 1996,7 when the insurance policy had been in force for more than two years and seven
months, Sotero died. Respondent filed a claim for the insurance proceeds on July 9, 1996. Petitioner
conducted an investigation into the claim,8 and came out with the following findings:
1. Sotero did not personally apply for insurance coverage, as she was illiterate;
2. Sotero was sickly since 1990;
3. Sotero did not have the financial capability to pay the insurance premiums on Insurance
Policy No. 747411;
4. Sotero did not sign the July 3, 1993 application for insurance;9 and
4
5. Respondent was the one who filed the insurance application, and x x x designated herself
as the beneficiary.10
For the above reasons, petitioner denied respondent’s claim on April 16, 1997 and refunded the
premiums paid on the policy.11
On April 24, 1997, petitioner filed a civil case for rescission and/or annulment of the policy, which was
docketed as Civil Case No. 97-867 and assigned to Branch 134 of the Makati Regional Trial Court. The
main thesis of the Complaint was that the policy was obtained by fraud, concealment and/or
misrepresentation under the Insurance Code,12 which thus renders it voidable under Article 139013 of
the Civil Code.
Respondent filed a Motion to Dismiss14 claiming that petitioner’s cause of action was barred by
prescription pursuant to Section 48 of the Insurance Code, which provides as follows:
Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this
chapter, such right must be exercised previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been in force during
the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement,
the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent
concealment or misrepresentation of the insured or his agent.
During the proceedings on the Motion to Dismiss, petitioner’s investigator testified in court, stating
among others that the insurance underwriter who solicited the insurance is a cousin of respondent’s
husband, Dindo Aban,15 and that it was the respondent who paid the annual premiums on the policy.16
Ruling of the Regional Trial Court
On December 9, 1997, the trial court issued an Order17 granting respondent’s Motion to Dismiss, thus:
WHEREFORE, defendant CRESENCIA P. ABAN’s Motion to Dismiss is hereby granted. Civil Case No. 97-
867 is hereby dismissed.
SO ORDERED.18
In dismissing the case, the trial court found that Sotero, and not respondent, was the one who procured
the insurance; thus, Sotero could legally take out insurance on her own life and validly designate – as
she did – respondent as the beneficiary. It held further that under Section 48, petitioner had only two
years from the effectivity of the policy to question the same; since the policy had been in force for more
than two years, petitioner is now barred from contesting the same or seeking a rescission or annulment
thereof.
Petitioner moved for reconsideration, but in another Order19 dated October 20, 1998, the trial court
stood its ground.
 5

Petitioner interposed an appeal with the CA, docketed as CA-G.R. CV No. 62286. Petitioner questioned
the dismissal of Civil Case No. 97-867, arguing that the trial court erred in applying Section 48 and
declaring that prescription has set in. It contended that since it was respondent – and not Sotero – who
obtained the insurance, the policy issued was rendered void ab initio for want of insurable interest.
Ruling of the Court of Appeals
On September 28, 2005, the CA issued the assailed Decision, which contained the following decretal
portion:
WHEREFORE, in the light of all the foregoing, the instant appeal is DISMISSED for lack of merit.
SO ORDERED.20
Petitioner’s Arguments
In praying that the CA Decision be reversed and that the case be remanded to the trial court for the
conduct of further proceedings, petitioner argues in its Petition and Reply24 that Section 48 cannot
apply to a case where the beneficiary under the insurance contract posed as the insured and obtained
the policy under fraudulent circumstances. It adds that respondent, who was merely Sotero’s niece, had
no insurable interest in the life of her aunt.
Relying on the results of the investigation that it conducted after the claim for the insurance proceeds
was filed, petitioner insists that respondent’s claim was spurious, as it appeared that Sotero did not
actually apply for insurance coverage, was unlettered, sickly, and had no visible source of income to pay
for the insurance premiums; and that respondent was an impostor, posing as Sotero and fraudulently
obtaining insurance in the latter’s name without her knowledge and consent.

The CA thus sustained the trial court. Applying Section 48 to petitioner’s case, the CA held that
petitioner may no longer prove that the subject policy was void ab initio or rescindible by reason of
fraudulent concealment or misrepresentation after the lapse of more than two years from its issuance.
It ratiocinated that petitioner was equipped with ample means to determine, within the first two years
of the policy, whether fraud, concealment or misrepresentation was present when the insurance
coverage was obtained. If it failed to do so within the statutory two-year period, then the insured must
be protected and allowed to claim upon the policy.
Petitioner moved for reconsideration,21 but the CA denied the same in its November 9, 2006
Resolution.22 Hence, the present Petition.
Petitioner adds that Insurance Policy No. 747411 was void ab initio and could not have given rise to
rights and obligations; as such, the action for the declaration of its nullity or inexistence does not
prescribe.25
Respondent’s Arguments
Respondent, on the other hand, essentially argues in her Comment26 that the CA is correct in applying
Section 48. She adds that petitioner’s new allegation in its Petition that the policy is void ab initio merits
no attention, having failed to raise the same below, as it had claimed originally that the policy was
merely voidable.

Issues On the issue of insurable interest, respondent echoes the CA’s pronouncement that since it was Sotero
who obtained the insurance, insurable interest was present. Under Section 10 of the Insurance Code,
Sotero had insurable interest in her own life, and could validly designate anyone as her beneficiary.
Petitioner raises the following issues for resolution: Respondent submits that the CA’s findings of fact leading to such conclusion should be respected.

I Our Ruling

WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING THE ORDER OF THE TRIAL COURT
DISMISSING THE COMPLAINT ON THE GROUND OF PRESCRIPTION IN CONTRAVENTION (OF)
PERTINENT LAWS AND APPLICABLE JURISPRUDENCE.
II
WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING THE APPLICATION OF THE
INCONTESTABILITY PROVISION IN THE INSURANCE CODE BY THE TRIAL COURT.
The Court denies the Petition.
The Court will not depart from the trial and appellate courts’ finding that it was Sotero who obtained
the insurance for herself, designating respondent as her beneficiary. Both courts are in accord in this
respect, and the Court is loath to disturb this. While petitioner insists that its independent investigation
on the claim reveals that it was respondent, posing as Sotero, who obtained the insurance, this claim is
no longer feasible in the wake of the courts’ finding that it was Sotero who obtained the insurance for
herself. This finding of fact binds the Court.

III With the above crucial finding of fact – that it was Sotero who obtained the insurance for herself –
petitioner’s case is severely weakened, if not totally disproved. Allegations of fraud, which are predicated
WHETHER THE COURT OF APPEALS ERRED IN DENYING PETITIONER’S MOTION FOR on respondent’s alleged posing as Sotero and forgery of her signature in the insurance application, are
RECONSIDERATION.23 at once belied by the trial and appellate courts’ finding that Sotero herself took out the insurance for

herself. "Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind
the contract."27 In the absence of proof of such fraudulent intent, no right to rescind arises.
Moreover, the results and conclusions arrived at during the investigation conducted unilaterally by
petitioner after the claim was filed may simply be dismissed as self-serving and may not form the basis
of a cause of action given the existence and application of Section 48, as will be discussed at length
below.
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under
the provision, an insurer is given two years – from the effectivity of a life insurance contract and while
the insured is alive – to discover or prove that the policy is void ab initio or is rescindible by reason of
the fraudulent concealment or misrepresentation of the insured or his agent. After the two-year period
lapses, or when the insured dies within the period, the insurer must make good on the policy, even
though the policy was obtained by fraud, concealment, or misrepresentation. This is not to say that
insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit and
obtain business must be penalized, for such recklessness and lack of discrimination ultimately work to
the detriment of bona fide takers of insurance and the public in general.
Section 48 regulates both the actions of the insurers and prospective takers of life insurance. It gives
insurers enough time to inquire whether the policy was obtained by fraud, concealment, or
misrepresentation; on the other hand, it forewarns scheming individuals that their attempts at insurance
fraud would be timely uncovered – thus deterring them from venturing into such nefarious enterprise.
At the same time, legitimate policy holders are absolutely protected from unwarranted denial of their
claims or delay in the collection of insurance proceeds occasioned by allegations of fraud, concealment,
or misrepresentation by insurers, claims which may no longer be set up after the two-year period expires
as ordained under the law.
Thus, the self-regulating feature of Section 48 lies in the fact that both the insurer and the insured are
given the assurance that any dishonest scheme to obtain life insurance would be exposed, and attempts
at unduly denying a claim would be struck down. Life insurance policies that pass the statutory two-
year period are essentially treated as legitimate and beyond question, and the individuals who wield
them are made secure by the thought that they will be paid promptly upon claim. In this manner,
Section 48 contributes to the stability of the insurance industry.
Section 48 prevents a situation where the insurer knowingly continues to accept annual premium
payments on life insurance, only to later on deny a claim on the policy on specious claims of fraudulent
concealment and misrepresentation, such as what obtains in the instant case. Thus, instead of
conducting at the first instance an investigation into the circumstances surrounding the issuance of
Insurance Policy No. 747411 which would have timely exposed the supposed flaws and irregularities
attending it as it now professes, petitioner appears to have turned a blind eye and opted instead to
continue collecting the premiums on the policy. For nearly three years, petitioner collected the
premiums and devoted the same to its own profit. It cannot now deny the claim when it is called to
account. Section 48 must be applied to it with full force and effect.
The Court therefore agrees fully with the appellate court’s pronouncement that –
6
the "incontestability clause" is a provision in law that after a policy of life insurance made payable on
the death of the insured shall have been in force during the lifetime of the insured for a period of two
(2) years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy
is void ab initio or is rescindible by reason of fraudulent concealment or misrepresentation of the
insured or his agent.
The purpose of the law is to give protection to the insured or his beneficiary by limiting the rescinding
of the contract of insurance on the ground of fraudulent concealment or misrepresentation to a period
of only two (2) years from the issuance of the policy or its last reinstatement.
The insurer is deemed to have the necessary facilities to discover such fraudulent concealment or
misrepresentation within a period of two (2) years. It is not fair for the insurer to collect the premiums
as long as the insured is still alive, only to raise the issue of fraudulent concealment or misrepresentation
when the insured dies in order to defeat the right of the beneficiary to recover under the policy.
At least two (2) years from the issuance of the policy or its last reinstatement, the beneficiary is given
the stability to recover under the policy when the insured dies. The provision also makes clear when the
two-year period should commence in case the policy should lapse and is reinstated, that is, from the
date of the last reinstatement.
After two years, the defenses of concealment or misrepresentation, no matter how patent or well-
founded, will no longer lie.
Congress felt this was a sufficient answer to the various tactics employed by insurance companies to
avoid liability.
The so-called "incontestability clause" precludes the insurer from raising the defenses of false
representations or concealment of material facts insofar as health and previous diseases are concerned
if the insurance has been in force for at least two years during the insured’s lifetime. The phrase "during
the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the
insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years."
As borne by the records, the policy was issued on August 30, 1993, the insured died on April 10, 1996,
and the claim was denied on April 16, 1997. The insurance policy was thus in force for a period of 3
years, 7 months, and 24 days. Considering that the insured died after the two-year period, the plaintiff-
appellant is, therefore, barred from proving that the policy is void ab initio by reason of the insured’s
fraudulent concealment or misrepresentation or want of insurable interest on the part of the beneficiary,
herein defendant-appellee.
Well-settled is the rule that it is the plaintiff-appellant’s burden to show that the factual findings of the
trial court are not based on substantial evidence or that its conclusions are contrary to applicable law
and jurisprudence. The plaintiff-appellant failed to discharge that burden.28
Petitioner claims that its insurance agent, who solicited the Sotero account, happens to be the cousin
of respondent’s husband, and thus insinuates that both connived to commit insurance fraud. If this were
truly the case, then petitioner would have discovered the scheme earlier if it had in earnest conducted
an investigation into the circumstances surrounding the Sotero policy. But because it did not and it
 7

investigated the Sotero account only after a claim was filed thereon more than two years later, naturally
it was unable to detect the scheme. For its negligence and inaction, the Court cannot sympathize with
its plight. Instead, its case precisely provides the strong argument for requiring insurers to diligently
conduct investigations on each policy they issue within the two-year period mandated under Section
48, and not after claims for insurance proceeds are filed with them.

Besides, if insurers cannot vouch for the integrity and honesty of their insurance agents/salesmen and
the insurance policies they issue, then they should cease doing business. If they could not properly
screen their agents or salesmen before taking them in to market their products, or if they do not
thoroughly investigate the insurance contracts they enter into with their clients, then they have only
themselves to blame. Otherwise said, insurers cannot be allowed to collect premiums on insurance
policies, use these amounts collected and invest the same through the years, generating profits and
returns therefrom for their own benefit, and thereafter conveniently deny insurance claims by
questioning the authority or integrity of their own agents or the insurance policies they issued to their
premium-paying clients. This is exactly one of the schemes which Section 48 aims to prevent.

Insurers may not be allowed to delay the payment of claims by filing frivolous cases in court, hoping
that the inevitable may be put off for years – or even decades – by the pendency of these unnecessary
court cases. In the meantime, they benefit from collecting the interest and/or returns on both the
premiums previously paid by the insured and the insurance proceeds which should otherwise go to
their beneficiaries. The business of insurance is a highly regulated commercial activity in the
country,29 and is imbued with public interest.30 "An insurance contract is a contract of adhesion which
must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard
the former’s interest."31

WHEREFORE, the Petition is DENIED. The assailed September 28, 2005 Decision and the November 9,
2006 Resolution of the Court of Appeals in CA-G.R. CV No. 62286 are AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

G.R. No. 113899. October 13, 1999]
GREAT PACIFIC LIFE ASSURANCE CORP., petitioner vs. COURT OF APPEALS AND MEDARDA V.
LEUTERIO, respondents.
DECISION
QUISUMBING, J.:
This petition for review, under Rule 45 of the Rules of Court, assails the Decision[1] dated May 17,
1993, of the Court of Appeals and its Resolution[2] dated January 4, 1994 in CA-G.R. CV No. 18341. The
appellate court affirmed in toto the judgment of the Misamis Oriental Regional Trial Court, Branch 18,
in an insurance claim filed by private respondent against Great Pacific Life Assurance Co. The dispositive
portion of the trial courts decision reads:
WHEREFORE, judgment is rendered adjudging the defendant GREAT PACIFIC LIFE ASSURANCE
CORPORATION as insurer under its Group policy No. G-1907, in relation to Certification B-18558 liable
and ordered to pay to the DEVELOPMENT BANK OF THE PHILIPPINES as creditor of the insured Dr.
Wilfredo Leuterio, the amount of EIGHTY SIX THOUSAND TWO HUNDRED PESOS (P86,200.00);
dismissing the claims for damages, attorneys fees and litigation expenses in the complaint and
counterclaim, with costs against the defendant and dismissing the complaint in respect to the plaintiffs,
other than the widow-beneficiary, for lack of cause of action.[3]
The facts, as found by the Court of Appeals, are as follows:
A contract of group life insurance was executed between petitioner Great Pacific Life Assurance
Corporation (hereinafter Grepalife) and Development Bank of the Philippines (hereinafter
DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP.
On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied
for membership in the group life insurance plan. In an application form, Dr. Leuterio answered questions
concerning his health condition as follows:
7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer,
diabetes, lung, kidney or stomach disorder or any other physical impairment?
Answer: No. If so give details ___________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [ x ] Yes [ ] No.[4]
On November 15, 1983, Grepalife issued Certificate No. B-18558, as insurance coverage of Dr.
Leuterio, to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand, two
hundred (P86,200.00) pesos.
On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage. Consequently, DBP
submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not
physically healthy when he applied for an insurance coverage on November 15, 1983. Grepalife insisted
that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his
death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim.
8
On October 20, 1986, the widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, filed a
complaint with the Regional Trial Court of Misamis Oriental, Branch 18, against Grepalife for Specific
Performance with Damages.[5] During the trial, Dr. Hernando Mejia, who issued the death certificate,
was called to testify. Dr. Mejias findings, based partly from the information given by the respondent
widow, stated that Dr. Leuterio complained of headaches presumably due to high blood pressure. The
inference was not conclusive because Dr. Leuterio was not autopsied, hence, other causes were not
ruled out.
On February 22, 1988, the trial court rendered a decision in favor of respondent widow and
against Grepalife. On May 17, 1993, the Court of Appeals sustained the trial courts decision. Hence, the
present petition.Petitioners interposed the following assigned errors:
"1. THE LOWER COURT ERRED IN HOLDING DEFENDANT-APPELLANT LIABLE TO THE
DEVELOPMENT BANK OF THE PHILIPPINES (DBP) WHICH IS NOT A PARTY TO THE CASE
FOR PAYMENT OF THE PROCEEDS OF A MORTGAGE REDEMPTION INSURANCE ON
THE LIFE OF PLAINTIFFS HUSBAND WILFREDO LEUTERIO ONE OF ITS LOAN
BORROWERS, INSTEAD OF DISMISSING THE CASE AGAINST DEFENDANT-APPELLANT
[Petitioner Grepalife] FOR LACK OF CAUSE OF ACTION.
2. THE LOWER COURT ERRED IN NOT DISMISSING THE CASE FOR WANT OF JURISDICTION
OVER THE SUBJECT OR NATURE OF THE ACTION AND OVER THE PERSON OF THE
DEFENDANT.
3. THE LOWER COURT ERRED IN ORDERING DEFENDANT-APPELLANT TO PAY TO DBP THE
AMOUNT OF P86,200.00 IN THE ABSENCE OF ANY EVIDENCE TO SHOW HOW MUCH
WAS THE ACTUAL AMOUNT PAYABLE TO DBP IN ACCORDANCE WITH ITS GROUP
INSURANCE CONTRACT WITH DEFENDANT-APPELLANT.
4. THE LOWER COURT ERRED IN - HOLDING THAT THERE WAS NO CONCEALMENT OF
MATERIAL INFORMATION ON THE PART OF WILFREDO LEUTERIO IN HIS APPLICATION
FOR MEMBERSHIP IN THE GROUP LIFE INSURANCE PLAN BETWEEN DEFENDANT-
APPELLANT OF THE INSURANCE CLAIM ARISING FROM THE DEATH OF WILFREDO
LEUTERIO.[6]
Synthesized below are the assigned errors for our resolution:
1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in
a group life insurance contract from a complaint filed by the widow of the
decedent/mortgagor?
2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he
had hypertension, which would vitiate the insurance contract?
3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty
six thousand, two hundred (P86,200.00) pesos without proof of the actual outstanding
mortgage payable by the mortgagor to DBP.
Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real
party in interest, hence the trial court acquired no jurisdiction over the case. It argues that when the
Court of Appeals affirmed the trial courts judgment, Grepalife was held liable to pay the proceeds of
insurance contract in favor of DBP, the indispensable party who was not joined in the suit.

To resolve the issue, we must consider the insurable interest in mortgaged properties and the
parties to this type of contract. The rationale of a group insurance policy of mortgagors, otherwise
known as the mortgage redemption insurance, is a device for the protection of both the mortgagee
and the mortgagor. On the part of the mortgagee, 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.[7] In a similar vein, ample protection is
given to the mortgagor under such a concept so that in the event of death; the mortgage obligation
will be extinguished by the application of the insurance proceeds to the mortgage
indebtedness.[8] Consequently, where the mortgagor pays the insurance premium under the group
insurance policy, making the loss payable to the mortgagee, the insurance is on the mortgagors interest,
and the mortgagor continues to be a party to the contract. In this type of policy insurance, the
mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the
mortgagee a party to the contract.[9]
Section 8 of the Insurance Code provides:
Unless the policy provides, where a mortgagor of property effects insurance in his own name providing
that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the
insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the
original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will
have the same effect, although the property is in the hands of the mortgagee, but any act which, under
the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee
therein named, with the same effect as if it had been performed by the mortgagor.
The insured private respondent did not cede to the mortgagee all his rights or interests in the
insurance, the policy stating that: In the event of the debtors death before his indebtedness with the
Creditor [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness shall first be
paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the
beneficiary/ies designated by the debtor.[10]When DBP submitted the insurance claim against petitioner,
the latter denied payment thereof, interposing the defense of concealment committed by the
insured. Thereafter, DBP collected the debt from the mortgagor and took the necessary action of
foreclosure on the residential lot of private respondent.[11] In Gonzales La O vs. Yek Tong Lin Fire &
Marine Ins. Co.[12] we held:
Insured, being the person with whom the contract was made, is primarily the proper person to bring
suit thereon. * * * Subject to some exceptions, insured may thus sue, although the policy is taken wholly
or in part for the benefit of another person named or unnamed, and although it is expressly made
payable to another as his interest may appear or otherwise. * * * Although a policy issued to a
mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor
may sue thereon in his own name, especially where the mortgagees interest is less than the full amount
recoverable under the policy, * * *.
And in volume 33, page 82, of the same work, we read the following:
Insured may be regarded as the real party in interest, although he has assigned the policy for the
purpose of collection, or has assigned as collateral security any judgment he may obtain.[13]
9
And since 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 it whatever the
insured might have recovered,[14] the widow of the decedent Dr. Leuterio may file the suit against the
insurer, Grepalife.
The second assigned error refers to an alleged concealment that the petitioner interposed as its
defense to annul the insurance contract. Petitioner contends that Dr. Leuterio failed to disclose that he
had hypertension, which might have caused his death. Concealment exists where the assured had
knowledge of a fact material to the risk, and honesty, good faith, and fair dealing requires that he should
communicate it to the assured, but he designedly and intentionally withholds the same.[15]
Petitioner merely relied on the testimony of the attending physician, Dr. Hernando Mejia, as
supported by the information given by the widow of the decedent. Grepalife asserts that Dr. Mejias
technical diagnosis of the cause of death of Dr. Leuterio was a duly documented hospital record, and
that the widows declaration that her husband had possible hypertension several years ago should not
be considered as hearsay, but as part of res gestae.
On the contrary the medical findings were not conclusive because Dr. Mejia did not conduct an
autopsy on the body of the decedent. As the attending physician, Dr. Mejia stated that he had no
knowledge of Dr. Leuterios any previous hospital confinement.[16] Dr. Leuterios death certificate stated
that hypertension was only the possible cause of death. The private respondents statement, as to the
medical history of her husband, was due to her unreliable recollection of events. Hence, the statement
of the physician was properly considered by the trial court as hearsay.
The question of whether there was concealment was aptly answered by the appellate court, thus:
The insured, Dr. Leuterio, had answered in his insurance application that he was in good health and that
he had not consulted a doctor or any of the enumerated ailments, including hypertension; when he
died the attending physician had certified in the death certificate that the former died of cerebral
hemorrhage, probably secondary to hypertension. From this report, the appellant insurance company
refused to pay the insurance claim. Appellant alleged that the insured had concealed the fact that he
had hypertension.
Contrary to appellants allegations, there was no sufficient proof that the insured had suffered from
hypertension. Aside from the statement of the insureds widow who was not even sure if the medicines
taken by Dr. Leuterio were for hypertension, the appellant had not proven nor produced any witness
who could attest to Dr. Leuterios medical history...
xxx
Appellant insurance company had failed to establish that there was concealment made by the insured,
hence, it cannot refuse payment of the claim.[17]
The fraudulent intent on the part of the insured must be established to entitle the insurer to
rescind the contract.[18] Misrepresentation as a defense of the insurer to avoid liability is an affirmative
defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the
insurer.[19] In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense, and
is therefore liable to pay the proceeds of the insurance.
 10

And that brings us to the last point in the review of the case at bar. Petitioner claims that there
was no evidence as to the amount of Dr. Leuterios outstanding indebtedness to DBP at the time of the
mortgagors death.Hence, for private respondents failure to establish the same, the action for specific
performance should be dismissed. Petitioners claim is without merit. A life insurance policy is a valued
policy.[20] 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.[21] The
mortgagor paid the premium according to the coverage of his insurance, which states that:
The policy states that upon receipt of due proof of the Debtors death during the terms of this insurance,
a death benefit in the amount of P86,200.00 shall be paid.
In the event of the debtors death before his indebtedness with the creditor shall have been fully paid,
an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of
the Sum Assured, if there is any shall then be paid to the beneficiary/ies designated by the
debtor.[22] (Emphasis omitted)
However, we noted that the Court of Appeals decision was promulgated on May 17, 1993. In
private respondents memorandum, she states that DBP foreclosed in 1995 their residential lot, in
satisfaction of mortgagors outstanding loan. Considering this supervening event, the insurance
proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. Equity
dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius
detrimenio protest). Hence, it cannot collect the insurance proceeds, after it already foreclosed on the
mortgage. The proceeds now rightly belong to Dr. Leuterios heirs represented by his widow, herein
private respondent Medarda Leuterio.
WHEREFORE, the petition is hereby DENIED. The Decision and Resolution of the Court of Appeals
in CA-G.R. CV 18341 is AFFIRMED with MODIFICATION that the petitioner is ORDERED to pay the
insurance proceeds amounting to Eighty-six thousand, two hundred (P86,200.00) pesos to the heirs of
the insured, Dr. Wilfredo Leuterio (deceased), upon presentation of proof of prior settlement of
mortgagors indebtedness to Development Bank of the Philippines. Costs against petitioner.
SO ORDERED.
G.R. No. L-24377 October 26, 1968
The record discloses that on 3 September 1957 the two respondents, Socorro Dancel Vda. de Misa and
Araceli Pinto, hired a taxicab operated by respondent La Mallorca in Quezon City. While proceeding
south toward the Archbishop's Palace in Shaw Boulevard, the taxicab collided with a gravel and sand
truck, driven by one Faustino Nabor, that was proceeding in the opposite direction. As a result the two
passengers of the La Mallorca taxicab were injured, and filed suit for damages against the taxicab
company in the Court of First Instance. The operator denied liability, but instituted a third party
complaint against herein appellant, Far Eastern Surety and Insurance Company, to recoup from the
latter, based on its Common Carrier's Accident Insurance No. CCA 106, any damages that might be
recovered by the plaintiffs taxicab passengers. The insurer, likewise, denied responsibility.
After trial, the Court of First Instance of Quezon City awarded to plaintiffs Vda. de Misa and Pinto (now
respondents) actual, moral, and exemplary damages and attorney's fees, payable by the taxicab
operator, La Mallorca; and sentenced the insurance company to pay to La Mallorca P10,000.00 on its
third party liability insurance.
On appeal, the Court of Appeals, while holding that the collision was due to the fault of the driver of
the sand truck nevertheless held the taxicab operator liable in damages to the passengers of its motor
vehicle on the strength of its representation that the passengers were insured against accidents, as
shown by the sticker affixed to the taxicab; and, overruling the defense of the insurance company that
it was not answerable except for whatever amounts the insured might be legally liable for in the event
of accident caused by, or arising out of, the use of the motor vehicle, the appellate court adjudged the
said insurer answerable to La Mallorca in view of its third party liability insurance contract. As a result,
it rendered judgment on appeal in the following terms:
IN VIEW WHEREOF, judgment affirmed with modifications; so that; 1st, on the complaint,
appellant La Mallorca is sentenced to pay unto appellee, Socorro Dancel Vda. de Misa the
sum of P3,910.00 plus P1,000.00 attorney's fees; and unto appellee, Araceli Pinto, the sum of
P3,751.50 plus P1,000.00 attorney's fees; and pursuant to Art. 2210, of the New Civil Code,
this Court orders that the P3,910.00 awarded unto Socorro Dancel and the P3,751.50 awarded
unto Araceli Pinto shall earn interest from the date of the promulgation of this decision; and
2ndly, on the third party complaint, condemning Far Eastern Surety and Insurance Co. Inc., to
pay unto La Mallorca the sum of P4,910.00 corresponding to Socorro Dancel and P4,751.50
corresponding to Araceli Pinto; costs against appellants La Mallorca and Far Eastern Surety
and Insurance Company.

FAR EASTERN SURETY & INSURANCE COMPANY, INC., petitioner, SO ORDERED.

vs.
SOCORRO DANCEL VDA. DE MISA, ARACELI MARIA PINTO and LA MALLORCA, respondents.
Unable to secure reconsideration, the insurance company appealed to this Court, but La Mallorca did
not. The decision of the Court of Appeals not having been appealed by the taxicab company, the same
Tan Kiang, Dimaculangan & Gupit for petitioner. is now final as far as that entity is concerned, and may not be modified by this Court. The insurance
Yabut, Monterey & Lagman for respondent La Mallorca. company's first and second assignments of error, regarding the correctness of the appealed judgment
Sison & San Juan for other respondents. in holding La Mallorca responsible to the taxicab passengers, must be, therefore, overruled. The only
issue before this Court at this stage of the litigation is whether or not the appellant insurer is liable to
REYES, J.B.L., J.: the insured on its policy of insurance.

Appeal by petition for review from a judgment of the Court of Appeals, in its Case CA-G.R. No. 30846- In affirming the responsibility of the insurer, the Court of Appeals reasoned out in this wise:
R, sentencing the Far Eastern Surety & Insurance Company to indemnify La Mallorca on its insurance
contract for P9,661.50.

In the first place, as we have said earlier, the Far Eastern Surety is not liable under the
insurance contract because the assured La Mallorca is not "legally liable" to the plaintiffs-
appellees. But in the very remote event that the La Mallorca is held "legally liable" and for
which reason that the Far Eastern Surety may be called upon to answer under the insurance
contract, it is the stand of this representation that it cannot be answerable to the full extent
of its maximum liability of P5,000.00 per passenger."
For one thing, the Far Eastern Surety's liability under the insurance contract does not extend
to moral, compensatory and exemplary damages, and attorney's fees. Its insurance liability is
limited to actual physical injuries. This is so because under the Common Carrier's Accident
Insurance Contract and its Third Party Liability Insurance Rider (Annex "C" of the Third-Party
Complaint, please see page 59 of the Record on Appeal), the liability of the Far Eastern Surety
is defined as follows: —
"l. 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 or in
connection with the loading or unloading of the Motor Vehicle against all sums
including claimant's costs and expense 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
"The above-quoted stipulation exempts the Far Eastern Surety from paying
damages other than actual bodily injuries sustained by third parties." (Brief for the
Third Party Defendant-Appellant Far Eastern Surety & Insurance Company, Inc.,
pages 12-13)
but this is wrong, because since La Mallorca has been found to be "legally liable", it must
follow that Far Eastern Surety must now answer unto it as its insurer; only that the total liability
per passenger should not exceed P5,000.00; nor is it correct for Far Eastern to say that it
should answer only for "actual bodily injuries" and to no other; for what the stipulation above
copied says and what it therefore must mean is that said Company:
"will ... indemnify the Insured in the event of accident caused by or arising out of
the use of the Motor Vehicle ... against all sums ... which the Insured shall become
legally liable in respect of ... bodily injury;"
otherwise stated, the "bodily injury" is only required to be the cause of the liability of Far
Eastern, but its liability should extend to "all sums which the Insured shall become legally
liable only that this should not exceed P5,000.00; the result of all these will be to sustain the
decision appealed from, within the corresponding deductions outlined above.
We agree with the appellant that the decision of the Court of Appeals on this point is not legally tenable,
for the reason that the policy of insurance limited the recovery of the insured to "all sums including
claimant's" (passengers in this case) "cost and expenses which the Insured shall become legally liable"
11
in the "event of accident caused by or arising out of the use of the Motor Vehicle;" and the appealed
decision itself shows that the indemnity awarded to the passengers of the La Mallorca taxicab was not
because of the accident but was exclusively predicated on the representation made by the taxicab
company to its passengers that the latter were insured against accidents. This is plain from
the consideranda made in the appealed decision (pages 10-11):
... indeed, the notice in the sticker evidently being intended in order to court the riding public
into patronizing La Mallorca, and being placed there right in the taxi, the only meaning that
can be given to it — and certainly it must have a meaning for it could not have been there
placed if intended to be useless — was that La Mallorca bound itself, in its contract of carriage,
with that additional stipulation therein indicated, that the passengers were "Insured", and if
there be any ambiguity in its meaning, such ambiguity must be construed most strongly
against the party causing the ambiguity, 1377 New Civil Code; and having that as a basis, this
Court must find that La Mallorca had indeed, insured its pasengers and since such a
stipulation was not at all illegal, it must bind La Mallorca, and would be enough to render it
liable for injuries to the passengers thereof, even though it had not been at fault, i.e., that the
damage had come from & fortuitous event coming from the fault of a third party for which
it was not responsible, since the Law also dictates that:
"ART. 1174. Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events which could
not be foreseen, or which, though foreseen, are inevitable." (Art. 1174, New Civil
Code)
and the result must be that La Mallorca would have to answer just the same and the 3rd and
4th assignments of error must have to be overruled; and this will take the discussion to the
amount of damages awarded, subject of the 5th error.
While the decision correctly held that la Mallorca was in estoppel, and could not be heard to deny that
its passengers were insured, it does not necessarily follow that the estoppel, likewise, applied to the
appellant insurer. The Court of Appeals concurred in the finding of the trial court that only the
negligence of the driver of the sand and gravel truck was the causative factor of the mishap, and made
no pronouncement that the driver of the taxicab in any way contributed thereto; so that, had it not
been for its representation that its passengers were insured, the taxicab company would not have been
liable at all. As it does not appear that the insurance company authorized or consented to, or even knew
of, the representation made by the taxicab company to its passengers, it follows that the source of the
award of damages against the taxicab company was beyond, or outside of, the contemplation of the
parties to the contract of Accident Insurance No. CCA 106, and that the insurer may not be held liable
for such damages.
WHEREFORE, the decision of the Court of Appeals is modified, by eliminating therefrom the award
against the appellant, Far Eastern Insurance Co., Inc., in favor of the taxicab operator, La Mallorca,
including the sharing of the costs of litigation, which shall be exclusively borne by the latter entity.
Without costs in this instance.
Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ., concur.
Zaldivar, J., is on leave.