Insurance Case Digests

Malayan Insurance vs. CA

FACTS: Private respondent TKC Marketing Corp. was the owner/consignee of some 3,189.171 metric tons of soya
bean meal which was loaded on board the ship MV Al Kaziemah on or about September 8, 1989 for carriage from the
port of Rio del Grande, Brazil, to the port of Manila. Said cargo was insured against the risk of loss by petitioner
Malayan Insurance Corporation for which it issued two (2) Marine Cargo Policy Nos. M/LP 97800305 amounting
to P18,986,902.45 and M/LP 97800306 amounting to P1,195,005.45, both dated September 1989.

While the vessel was docked in Durban, South Africa on September 11, 1989 enroute to Manila, the civil authorities
arrested and detained it because of a lawsuit on a question of ownership and possession. As a result, private respondent
notified petitioner on October 4, 1989 of the arrest of the vessel and made a formal claim for the amount of
US$916,886.66, representing the dollar equivalent on the policies, for non-delivery of the cargo. Private respondent
likewise sought the assistance of petitioner on what to do with the cargo.

Petitioner replied that the arrest of the vessel by civil authority was not a peril covered by the policies. Private
respondent, accordingly, advised petitioner that it might tranship the cargo and requested an extension of the insurance
coverage until actual transhipment, which extension was approved upon payment of additional premium. The insurance
coverage was extended under the same terms and conditions embodied in the original policies while in the process of
making arrangements for the transhipment of the cargo from Durban to Manila, covering the period October 4-
December 19, 1989.

However, on December 11, 1989, the cargo was sold in Durban, South Africa, for US$154.40 per metric ton or a total
of P10,304,231.75 due to its perishable nature which could no longer stand a voyage of twenty days to Manila and
another twenty days for the discharge thereof. On January 5, 1990, private respondent forthwith reduced its claim to
US$448,806.09 (or its peso equivalent of P9,879,928.89 at the exchange rate of P22.0138 per $1.00) representing private
respondent's loss after the proceeds of the sale were deducted from the original claim of $916,886.66 or P20,184,159.55.

Petitioner maintained its position that the arrest of the vessel by civil authorities on a question of ownership was an
excepted risk under the marine insurance policies. This prompted private respondent to file a complaint for damages
praying that aside from its claim

The lower court decided in favor of private respondent and required petitioner to pay, aside from the insurance claim,
consequential and liquidated damages

On appeal, the Court of Appeals affirmed the decision of the lower court stating that with the deletion of Clause 12 of
the policies issued to private respondent, the same became automatically covered under subsection 1.1 of Section 1 of
the Institute War Clauses. The arrests, restraints or detainments contemplated in the former clause were those effected
by political or executive acts. Losses occasioned by riot or ordinary judicial processes were not covered therein. In other
words, arrest, restraint or detainment within the meaning of Clause 12 (or F.C. & S. Clause) rules out detention by
ordinary legal processes. Hence, arrests by civil authorities, such as what happened in the instant case, is an excepted risk
under Clause 12 of the Institute Cargo Clause or the F.C. & S. Clause. However, with the deletion of Clause 12 of the
Institute Cargo Clause and the consequent adoption or institution of the Institute War Clauses (Cargo), the arrest and
seizure by judicial processes which were excluded under the former policy became one of the covered risks.

Respondent herein also argued that petitioner, being the sole author of the policies, "arrests" should be strictly
interpreted against it because the rule is that any ambiguity is to be taken contra proferentum. Risk policies should be
construed reasonably and in a manner as to make effective the intentions and expectations of the parties. It added that
the policies clearly stipulate that they cover the risks of non-delivery of an entire package and that it was petitioner itself
that invited and granted the extensions and collected premiums thereon.
ISSUE: Whether the interpretation of the word “peril” covers ordinary arrest hence the premium can be
received

RULING: YES, it covers ordinary arrest hence recovered

By way of a historical background, marine insurance developed as an all-risk coverage, using the phrase "perils of the
sea" to encompass the wide and varied range of risks that were covered.[3] The subject policies contain the "Perils"
clause which is a standard form in any marine insurance policy. Said clause reads:

"Touching the adventures which the said MALAYAN INSURANCE CO., are content to bear, and to take upon them
in this voyage; they are of the Seas; Men-of-War, Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Letters of Mart and
Counter Mart, Suprisals, Takings of the Sea, Arrests, Restraints and Detainments of all Kings, Princess and Peoples, of
what Nation, condition, or quality soever, Barratry of the Master and Mariners, and of all other Perils, Losses, and
Misfortunes, that have come to hurt, detriment, or damage of the said goods and merchandise or any part thereof

According to petitioner, the automatic incorporation of subsection 1.1 of section 1 of the Institute War Clauses (Cargo),
among others, means that any "capture, arrest, detention, etc." pertained exclusively to warlike operations if this Court
strictly construes the heading of the said Clauses. However, it also claims that the parties intended to include arrests, etc.
even if it were not the result of hostilities or warlike operations. It further claims that on the strength of jurisprudence on
the matter, the term "arrests" would only cover those arising from political or executive acts, concluding that whether
private respondent's claim is anchored on subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) or the F.C. &
S. Clause, the arrest of the vessel by judicial authorities is an excluded risk.

This Court cannot agree with petitioner's assertions, particularly when it alleges that in the "Perils" Clause, it assumed the
risk of arrest caused solely by executive or political acts of the government of the seizing state and thereby excludes
"arrests" caused by ordinary legal processes, such as in the instant case.

With the incorporation of subsection 1.1 of Section 1 of the Institute War Clauses, however, this Court agrees with the
Court of Appeals and the private respondent that "arrest" caused by ordinary judicial process is deemed included among
the covered risks. This interpretation becomes inevitable when subsection 1.1 of Section 1 of the Institute War Clauses
provided that "this insurance covers the risks excluded from the Standard Form of English Marine Policy by the clause
'Warranted free of capture, seizure, arrest, etc. x x x'" or the F.C. & S. Clause. Jurisprudentially, "arrests" caused by
ordinary judicial process is also a risk excluded from the Standard Form of English Marine Policy by the F.C. & S.
Clause.

Petitioner cannot adopt the argument that the "arrest" caused by ordinary judicial process is not included in the covered
risk simply because the F.C. & S. Clause under the Institute War Clauses can only be operative in case of hostilities or
warlike operations on account of its heading "Institute War Clauses." This Court agrees with the Court of Appeals when
it held that ". . . Although the F.C. & S. Clause may have originally been inserted in marine policies to protect against
risks of war, (see generally G. Gilmore & C. Black, The Law of Admiralty Section 2-9, at 71-73 [2d Ed. 1975]), its
interpretation in recent years to include seizure or detention by civil authorities seems consistent with the general
purposes of the clause

It has been held that a strained interpretation which is unnatural and forced, as to lead to an absurd conclusion or to
render the policy nonsensical, should, by all means, be avoided.[9] Likewise, it must be borne in mind that such contracts
are invariably prepared by the companies and must be accepted by the insured in the form in which they are written.[10]
Any construction of a marine policy rendering it void should be avoided.[11] Such policies will, therefore, be construed
strictly against the company in order to avoid a forfeiture, unless no other result is possible from the language used.[12]

If a marine insurance company desires to limit or restrict the operation of the general provisions of its contract by
special proviso, exception, or exemption, it should express such limitation in clear and unmistakable language.[13]
Obviously, the deletion of the F.C. & S. Clause and the consequent incorporation of subsection 1.1 of Section 1 of the
Institute War Clauses (Cargo) gave rise to ambiguity. If the risk of arrest occasioned by ordinary judicial process was
expressly indicated as an exception in the subject policies, there would have been no controversy with respect to the
interpretation of the subject clauses.

Be that as it may, exceptions to the general coverage are construed most strongly against the company.[14] Even an
express exception in a policy is to be construed against the underwriters by whom the policy is framed, and for whose
benefit the exception is introduced.[15]

An insurance contract should be so interpreted as to carry out the purpose for which the parties entered into the
contract which is, to insure against risks of loss or damage to the goods. Such interpretation should result from the
natural and reasonable meaning of language in the policy.[16] Where restrictive provisions are open to two
interpretations, that which is most favorable to the insured is adopted.

Del Rosario v. Equitable Insurance

FACTS: On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued Personal Accident
Policy No. 7136 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.

If the insured sustains any bodily injury which is effected solely through violent, external, visible and accidental means,
and which shall result, independently of all other causes and within sixty (60) days from the occurrence thereof, in the
Death of the Insured, the Company shall pay the amount set.

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:

(h) By drowning except as a consequence of the wrecking or disablement in the Philippine waters of a
passenger steam or motor vessel in which the Insured is travelling as a farepaying passenger

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, I believe 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.

Defendant refused to pay more than the amount of 1kphp, prompting herein petitioner to file a case against it for
recovery of sum of money.

RTC RULED and AFFIRMED by CA: 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, there is an ambiguity in this respect in the policy, which
ambiguity must be interpreted in favor of the insured and strictly against the insurer so as to allow greater indemnity.
Plaintiff is therefore entitled to recover P3,000.00. The defendant had already paid the amount of P1,000.00 to the
plaintiff so that there still remains a balance of P2,000.00 of the amount to which plaintiff is entitled to recover under
the policy

ISSUE: Whether the insurance premium covers 1k or more

RULING: NO, the insurance premium is more than 1kphp

All the parties agree that indemnity has to be paid. The conflict centers on how much should the indemnity be. We
believe that under the proven facts and circumstances, the findings and conclusions of the trial court, are well taken, for
they are supported by the generally accepted principles or rulings on insurance, which enunciate that where there is an
ambiguity with respect to the terms and conditions of the policy, the same will be resolved against the one responsible
thereof. It should be recalled in this connection, that generally, the insured, has little, if any, participation in the
preparation of the policy, together with the drafting of its terms and Conditions. The interpretation of obscure
stipulations in a contract should not favor the party who cause the obscurity (Art. 1377, N.C.C.), which, in the case at
bar, is the insurance company.

And so it has been generally held that the "terms in an insurance policy, which are ambiguous, equivocal or uncertain . . .
are to be construed strictly 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," (29 Am. Jur. 181) and the reason for
this rule 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 expert and legal advisers employed by, and acting
exclusively in the interest of, the insurance company"

At any event, the policy under consideration, covers death or disability by accidental means, and the appellant insurance
company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the insured.

Fortune Insurance v. CA

FACTS: This case began with the filing with the Regional Trial Court (RTC) of Makati, Metro Manila, by private
respondent Producers Bank of the Philippines (hereinafter Producers) against petitioner Fortune Insurance and Surety
Co., Inc. (hereinafter Fortune) of a complaint for recovery of the sum of P725,000.00 under the policy issued by
Fortune. The sum was allegedly lost during a robbery of Producer's armored vehicle while it was in transit to transfer the
money from its Pasay City Branch to its head office in Makati.

An armored car of the plaintiff, while in the process of transferring cash in the sum of P725,000.00 under the custody of
its teller, Maribeth Alampay, from its Pasay Branch to its Head Office at 8737 Paseo de Roxas, Makati, Metro Manila on
June 29, 1987, was robbed of the said cash. The robbery took place while the armored car was traveling along Taft
Avenue in Pasay City;

an investigation conducted by the Pasay police authorities, the driver Magalong and guard Atiga were charged, together
with Edelmer Bantigue Y Eulalio, Reynaldo Aquino and John Doe, with violation of P.D. 532 (Anti-Highway Robbery
Law) before the Fiscal of Pasay City.

Demands were made by the plaintiff upon the defendant to pay the amount of the loss of P725,000.00, but the latter
refused to pay as the loss is excluded from the coverage of the insurance policy;
 (b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee,
partner, director, trustee or authorized representative of the Insured whether acting alone or in conjunction
with others.

RTC ruled in favour of the bank, affirmed in toto by CA: The Court is satisfied that plaintiff may not be said to have
selected and engaged Magalong and Atiga, their services as armored car driver and as security guard having been merely
offered by PRC Management and by Unicorn Security and which latter firms assigned them to plaintiff. The wages and
salaries of both Magalong and Atiga are presumably paid by their respective firms, which alone wields the power to
dismiss them. Magalong and Atiga are assigned to plaintiff in fulfillment of agreements to provide driving services and
property protection as such — in a context which does not impress the Court as translating into plaintiff's power to
control the conduct of any assigned driver or security guard, beyond perhaps entitling plaintiff to request are
replacement for such driver guard. The finding is accordingly compelled that neither Magalong nor Atiga were plaintiff's
"employees" in avoidance of defendant's liability under the policy, particularly the general exceptions therein embodied.

It asserts that the power of control over Magalong and Atiga was vested in and exercised by Producers. Fortune further
insists that PRC Management System and Unicorn Security Services are but "labor-only" contractors under Article 106
of the Labor Code

On the other hand, Producers contends that Magalong and Atiga were not its employees since it had nothing to do with
their selection and engagement, the payment of their wages, their dismissal, and the control of their conduct. Producers
argued that the rule in International Timber Corp. is not applicable to all cases but only when it becomes necessary to
prevent any violation or circumvention of the Labor Code, a social legislation whose provisions may set aside contracts
entered into by parties in order to give protection to the working man.

ISSUE: Whether the accused to the case can be considered as an employee hence exempting the payment of
the insurance premium

RULING: YES, they are considered employees hence the bank cannot claim the insurance premiums

A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the insurer, 15
or it should be construed liberally in favor of the insured and strictly against the insurer. 16 Limitations of liability should
be regarded with extreme jealousy and must be construed

in such a way, as to preclude the insurer from non-compliance with its obligation. 17 It goes without saying then that if
the terms of the contract are clear and unambiguous, there is no room for construction and such terms cannot be
enlarged or diminished by judicial construction. 18

An insurance contract is a contract of indemnity upon the terms and conditions specified therein. 19 It is settled that the
terms of the policy constitute the measure of the insurer's liability. 20 In the absence of statutory prohibition to the
contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever
conditions they deem best upon their obligations not inconsistent with public policy.

It is clear to us that insofar as Fortune is concerned, it was its intention to exclude and exempt from protection and
coverage losses arising from dishonest, fraudulent, or criminal acts of persons granted or having unrestricted access to
Producers' money or payroll. When it used then the term "employee," it must have had in mind any person who qualifies
as such as generally and universally understood, or jurisprudentially established in the light of the four standards in the
determination of the employer-employee relationship, 21 or as statutorily declared even in a limited sense as in the case
of Article 106 of the Labor Code which considers the employees under a "labor-only" contract as employees of the party
employing them and not of the party who supplied them to the employer. 22

Fortune claims that Producers' contracts with PRC Management Systems and Unicorn Security Services are "labor-only"
contracts
 Producers, however, insists that by the express terms thereof, it is not the employer of Magalong.
Notwithstanding such express assumption of PRC Management Systems and Unicorn Security Services that the
drivers and the security guards each shall supply to Producers are not the latter's employees, it may, in fact, be
that it is because the contracts are, indeed, "labor-only" contracts. Whether they are is, in the light of the criteria
provided for in Article 106 of the Labor Code, a question of fact. Since the parties opted to submit the case for
judgment on the basis of their stipulation of facts which are strictly limited to the insurance policy, the
contracts with PRC Management Systems and Unicorn Security Services, the complaint for violation of P.D.
No. 532, and the information therefor filed by the City Fiscal of Pasay City, there is a paucity of evidence as to
whether the contracts between Producers and PRC Management Systems and Unicorn Security Services are
"labor-only" contracts.

But even granting for the sake of argument that these contracts were not "labor-only" contracts, and PRC Management
Systems and Unicorn Security Services were truly independent contractors, we are satisfied that Magalong and Atiga
were, in respect of the transfer of Producer's money from its Pasay City branch to its head office in Makati, its
"authorized representatives" who served as such with its teller Maribeth Alampay. Howsoever viewed, Producers
entrusted the three with the specific duty to safely transfer the money to its head office, with Alampay to be responsible
for its custody in transit; Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the
needed security for the money, the vehicle, and his two other companions. In short, for these particular tasks, the three
acted as agents of Producers. A "representative" is defined as one who represents or stands in the place of another; one
who represents others or another in a special capacity, as an agent, and is interchangeable with "agent."

Verendia v. CA

Facts: The two consolidated cases involved herein stemmed from the issuance by Fidelity and Surety Insurance
Company of the Philippines (Fidelity for short) of its Fire Insurance Policy No. F-18876 effective between June 23, 1980
and June 23, 1981 covering Rafael (Rex) Verendia's residential building located at Tulip Drive, Beverly Hills, Antipolo,
Rizal in the amount of P385,000.00. Designated as beneficiary was the Monte de Piedad & Savings Bank. Verendia also
insured the same building with two other companies, namely, The Country Bankers Insurance for P56,000.00 under
Policy No. PDB-80-1913 expiring on May 12, 1981, and The Development Insurance for P400,000.00 under Policy No.
F-48867 expiring on June 30, 198l.

While the three fire insurance policies were in force, the insured property was completely destroyed by fire on the early
morning of December 28, 1980. Fidelity was accordingly informed of the loss and despite demands, refused payment
under its policy, thus prompting Verendia to file a complaint with the then Court of First Instance of Quezon City.

Answering the complaint, Fidelity, among other things, averred that the policy was avoided by reason of over-insurance;
that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on
June 25, 1980 to a certain Roberto Garcia, when actually it was a Marcelo Garcia who was the lessee.

On May 24, 1983, the trial court rendered a decision, per Judge Rodolfo A. Ortiz, ruling in favor of Fidelity. In
sustaining the defenses set up by Fidelity, the trial court ruled that Paragraph 3 of the policy was also violated by
Verendia in that the insured failed to inform Fidelity of his other insurance coverages with Country Bankers Insurance
and Development Insurance.

CA Reversed the decision: (a) there was no misrepresentation concerning the lease for the contract was signed by
Marcelo Garcia in the name of Roberto Garcia; and (b) Paragraph 3 of the policy contract requiring Verendia to give
notice to Fidelity of other contracts of insurance was waived by Fidelity as shown by its conduct in attempting to settle
the claim of Verendia

ISSUE: Whether Verendia’s misrepresentations caused him his insurance premium

RULING: YES, it caused its insurance premium

Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed the lease contract. According to
Verendia, it was signed by Marcelo Garcia, cousin of Robert, who had been paying the rentals all the while. Verendia,
however, failed to explain why Marcelo had to sign his cousin's name when he in fact was paying for the rent and why he
(Verendia) himself, the lessor, allowed such a ruse. Fidelity's conclusions on these proven facts appear, therefore, to have
sufficient bases; Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee",
inflated the value of the property by the alleged monthly rental of P6,500 when in fact, the Provincial Assessor of Rizal
had assessed the property's fair market value to be only P40,300.00, insured the same property with two other insurance
companies for a total coverage of around P900,000, and created a dead-end for the adjuster by the disappearance of
Robert Garcia.

Basically a contract of indemnity, an insurance contract is the law between the parties (Pacific Banking Corporation vs.
Court of Appeals 168 SCRA 1 [1988]). Its terms and conditions constitute the measure of the insurer's liability and
compliance therewith is a condition precedent to the insured's right to recovery from the insurer (Oriental Assurance
Corporation vs. Court of Appeals, 200 SCRA 459 [1991], citing Perla Compania de Seguros, Inc. vs. Court of Appeals,
185 SCRA 741 [1991]). As it is also a contract of adhesion, an insurance contract should be liberally construed in favor
of the insured and strictly against the insurer company which usually prepares it (Western Guaranty Corporation vs.
Court of Appeals, 187 SCRA 652 [1980]).

Considering, however, the foregoing discussion pointing to the fact that Verendia used a false lease contract to support
his claim under Fire Insurance Policy No. F-18876, the terms of the policy should be strictly construed against the
insured. Verendia failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in terms that
are clear and unambiguous, that all benefits under the policy shall be forfeited "If the claim be in any respect fraudulent,
or if any false declaration be made or used in support thereof, or if any fraudulent means or devises are used by the
Insured or anyone acting in his behalf to obtain any benefit under the policy". Verendia, having presented a false
declaration to support his claim for benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by
virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision (Pacific Banking
Corporation vs. Court of Appeals, supra). Worse yet, by presenting a false lease contract, Verendia, reprehensibly
disregarded the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith

New Life Enterprises v. CA

FACTS: The antecedents of this case show that Julian Sy and Jose Sy Bang have formed a business partnership in the
City of Lucena. Under the business name of New Life Enterprises, the partnership engaged in the sale of construction
materials at its place of business, a two storey building situated at Iyam, Lucena City. The facts show that Julian Sy
insured the stocks in trade of New Life Enterprises with Western Guaranty Corporation, Reliance Surety and Insurance.
Co., Inc., and Equitable Insurance Corporation.

It secured three fire insurance from; Western Guaranty, Reliance Surety and Insurance co. and Equitable Insurance Co.

Thus when the building occupied by the New Life Enterprises was gutted by fire at about 2:00 o'clock in the morning of
October 19, 1982, the stocks in the trade inside said building were insured against fire in the total amount of
P1,550,000.00. According to the certification issued by the Headquarters, Philippine Constabulary /Integrated National
Police, Camp Crame, the cause of fire was electrical in nature. According to the plaintiffs, the building and the stocks
inside were burned. After the fire, Julian Sy went to the agent of Reliance Insurance whom he asked to accompany him
to the office of the company so that he can file his claim. He averred that in support of his claim, he submitted the fire
clearance, the insurance policies and inventory of stocks. He further testified that the three insurance companies are
sister companies, and as a matter of fact when he was following-up his claim with Equitable Insurance, the Claims
Manager told him to go first to Reliance Insurance and if said company agrees to pay, they would also pay. The same
treatment was given him by the other insurance companies. Ultimately, the three insurance companies denied plaintiffs'
claim for payment.
RTC ruled in favour of Julian Sy and ordering the three insurance company to pay the premium but was reversed by CA.

ISSUE: Whether the failure of Julian Sy to notify the insurance companies of other insurance over the same
property, denies him of receiving the premium

RULING: YES, it constitute as fraud hence denial of premium

Condition No. 3 of said insurance policies, otherwise known as the "Other Insurance Clause," is uniformly contained in
all the aforestated insurance contracts of herein petitioners, as follows:

The insured shall give notice to the Company of any insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in
process and/or inventories only hereby insured, and unless such notice be given and the particulars of such
insurance or insurances be stated therein or endorsed on this policy pursuant to Section 50 of the Insurance
Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this
policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance
or insurances in force at the time of loss or damage not more than P200,000.00.

Petitioners admit that the respective insurance policies issued by private respondents did not state or endorse thereon
the other insurance coverage obtained or subsequently effected on the same stocks in trade for the loss of which
compensation is claimed by petitioners. 6 The policy issued by respondent Western Guaranty Corporation (Western) did
not declare respondent Reliance Surety and Insurance Co., Inc. (Reliance) and respondent Equitable Insurance
Corporation (Equitable) as co-insurers on the same stocks, while Reliance's Policies covering the same stocks did not
likewise declare Western and Equitable as such co-insurers. It is further admitted by petitioners that Equitable's policy
stated "nil" in the space thereon requiring indication of any co-insurance although there were three (3) policies subsisting
on the same stocks in trade at the time of the loss, namely, that of Western in the amount of P350,000.00 and two (2)
policies of Reliance in the total amount of P1,000,000.00.

In other words, the coverage by other insurance or co-insurance effected or subsequently arranged by petitioners were
neither stated nor endorsed in the policies of the three (3) private respondents, warranting forfeiture of all benefits
thereunder if we are to follow the express stipulation in the aforequoted Policy Condition No. 3.

Petitioners contend that they are not to be blamed for the omissions, alleging that insurance agent Leon Alvarez (for
Western) and Yap Kam Chuan (for Reliance and Equitable) knew about the existence of the additional insurance
coverage and that they were not informed about the requirement that such other or additional insurance should be
stated in the policy, as they have not even read policies.8 These contentions cannot pass judicial muster.

The terms of the contract are clear and unambiguous. The insured is specifically required to disclose to the insurer any
other insurance and its particulars which he may have effected on the same subject matter. The knowledge of such
insurance by the insurer's agents, even assuming the acquisition thereof by the former, is not the "notice" that would
estop the insurers from denying the claim. Besides, the so-called theory of imputed knowledge, that is, knowledge of the
agent is knowledge of the principal, aside from being of dubious applicability here has likewise been roundly refuted by
respondent court whose factual findings we find acceptable.

Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent Alvarez regarding the co-
insurance on the property, he contradicted himself by inexplicably claiming that he had not read the terms of the
policies; that Yap Dam Chuan could not likewise have obtained such knowledge for the same reason, aside from the fact
that the insurance with Western was obtained before those of Reliance and Equitable; and that the conclusion of the trial
court that Reliance and Equitable are "sister companies" is an unfounded conjecture drawn from the mere fact that Yap
Kam Chuan was an agent for both companies which also had the same insurance claims adjuster. Availment of the
services of the same agents and adjusters by different companies is a common practice in the insurance business and
such facts do not warrant the speculative conclusion of the trial court.
Furthermore, when the words and language of documents are clear and plain or readily understandable by an ordinary
reader thereof, there is absolutely no room for interpretation or construction anymore.9 Courts are not allowed to make
contracts for the parties; rather, they will intervene only when the terms of the policy are ambiguous, equivocal, or
uncertain. 10 The parties must abide by the terms of the contract because such terms constitute the measure of the
insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from the insurer.
11

While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor
of the insured and strictly against the insurer company, yet contracts of insurance, like other contracts, are to be
construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are
clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. 12 Moreover,
obligations arising from contracts have the force of law between the contracting parties and should be complied with in
good faith.

Jurisprudence (Pioneer Insurance v. Yap) : The obvious purpose of the aforesaid requirement in the policy is to prevent
over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the
situation in which a fire would be profitable to the insured. According to Justice Story: "The insured has no right to
complain, for he assents to comply with all the stipulations on his side, in order to entitle himself to the benefit of the
contract, which, upon reason or principle, he has no right to ask the court to dispense with the performance of his own
part of the agreement, and yet to bind the other party to obligations, which, but for those stipulations, would not have
been entered into."

Pacific Banking Co. vs. CA: It is not disputed that the insured failed to reveal before the loss three other insurances. As
found by the Court of Appeals, by reason of said unrevealed insurances, the insured had been guilty of a false
declaration; a clear misrepresentation and a vital one because where the insured had been asked to reveal but did not,
that was deception. Otherwise stated, had the insurer known that there were many co-insurances, it could have hesitated
or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud

National Power Co. v CA

FACTS: The National Power Corporation (NPC) entered into a contract with the Far Eastern Electric, Inc. (FFEI) on
December 26, 1962 for the erection of the Angat Balintawak 115-KW-3-Phase transmission lines for the Angat
Hydroelectric Project. FEEI agreed to complete the work within 120 days from the signing of the contract, otherwise it
would pay NPC P200.00 per calendar day as liquidated damages, while NPC agreed to pay the sum of P97,829.00 as
consideration. On the other hand, Philippine American General Insurance Co., Inc. (Philamgen) issued a surety bond in
the amount of P30,672.00 for the faithful performance of the undertaking by FEEI, as required.

The liability of the PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC. under this bond will
expire One (1) year from final Completion and Acceptance and said bond will be cancelled 30 days after its expiration,
unless surety is notified of any existing obligation thereunder.

(a) Should the Contractor fail to complete the construction of the work as herein specified and agreed upon, or if
the work is abandoned, ... the Corporation shall have the power to take over the work by giving notice in
writing to that effect to the Contractor and his sureties of its intention to take over the construction work.

The work was abandoned on June 26, 1963, leaving the construction unfinished. On July 19, 1963, in a joint letter,
Philamgen and FEEI informed NPC that FEEI was giving up the construction due to financial difficulties. On the same
date, NPC wrote Philamgen informing it of the withdrawal of FEEI from the work and formally holding both FEEI and
Philamgen liable for the cost of the work to be completed as of July 20, 1962 plus damages.
The work was completed by NPC on September 30, 1963. On January 30, 1967 NPC notified Philamgen that FEEI had
an outstanding obligation in the amount of P75,019.85, exclusive of interest and damages, and demanded the remittance
of the amount of the surety bond the answer for the cost of completion of the work.

Philamgen did not pay as demanded but contended instead that its liability under the bond has expired on September 20,
1964 and claimed that no notice of any obligation of the surety was made within 30 days after its expiration.

RTC ruled in favour of NPC but was reversed by CA.

Petitioner argued that the notice required in the bond within 30 days after its expiration of any existing obligation, is
applicable only in case the contractor itself had completed the contract and not when the contractor failed to complete
the work, from which arises the continued liability of the surety under its bond as expressly provided for in the contract.
Petitioner's contention was sustained by the trial court.

On the other hand, private respondent insists that petitioner's notice dated July 19, 1983 is not sufficient despite
previous events that it had knowledge of FEEI's failure to comply with the contract and claims that it cannot be held
liable under the bond without notice within thirty days from the expiration of the bond, that there is a subsisting
obligation. Private respondent's contention is sustained by the Court of Appeals.

ISSUE: Whether NPC has complied with the notice requirement hence entitling it to the insurance premiums

RULING: YES, it complied with the contractual obligation

Philamgen was duly informed of the failure of its principal to comply with its undertaking. In fact, said notice of failure
was also signed by its Assistant Vice President. On July 19, 1963, when FEEI informed NPC that it was abandoning the
construction job, the latter forthwith informed Philamgen of the fact on the same date. Moreover, on August 1, 1963,
the fact that Philamgen was seasonably notified, was even bolstered by its request from NPC for information of the
percentage completed by the bond principal prior to the relinquishment of the job to the latter and the reason for said
relinquishment.

Furthermore, it is well settled that contracts of insurance are to be construed liberally in favor of the insured and strictly
against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its
beneficiary. (Serrano v. Court of Appeals, 130 SCRA 327, July 16, 1984).

In the case at bar, it cannot be denied that the breach of contract in this case, that is, the abandonment of the unfinished
work of the transmission line of the petitioner by the contractor Far Eastern Electric, Inc. was within the effective date
of the contract and the surety bond. Such abandonment gave rise to the continuing liability of the bond as provided for
in the contract which is deemed incorporated in the surety bond executed for its completion. To rule therefore that
private respondent was not properly notified would be gross error.

Great Pacific Life Assurance v. CA

FACTS: It appears that on March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific
Life Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year endownment policy in the amount of
P50,000.00 on the life of his one-year old daughter Helen Go.

Upon the payment of the insurance premuim, the binding deposit receipt (Exhibit E) was issued to private respondent
Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application form his strong
recommendation for the approval of the insurance application. Then on April 30, 1957, Mondragon received a letter
from Pacific Life disapproving the insurance application (Exhibit 3-M). The letter stated that the said life insurance
application for 20-year endowment plan is not available for minors below seven years old, but Pacific Life can consider
the same under the Juvenile Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical
Declaration be sent to the company.

The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to
private respondent Ngo Hing.

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

ISSUE: Whether the binding receipt constituted as the consent of Pacific Life hence insurance was created

RULING: NO, there exists no insurance contract based on the contractual stipulation

At the back of Exhibit E are condition precedents required before a deposit is considered a BINDING RECEIPT.
These conditions state that:

A. If the Company or its agent, shall have received the premium deposit ... and the insurance application,
ON or PRIOR to the date of medical examination ... said insurance shall be in force and in effect from the date
of such medical examination, for such period as is covered by the deposit ..., PROVIDED the company shall
be satisfied that on said date the applicant was insurable on standard rates under its rule for the amount of
insurance and the kind of policy requested in the application.

D. If the Company does not accept the application on standard rate for the amount of insurance and/or
the kind of policy requested in the application but issue, or offers to issue a policy for a different plan and/or
amount ..., the insurance shall not be in force and in effect until the applicant shall have accepted the policy as
issued or offered by the Company and shall have paid the full premium thereof. If the applicant does not
accept the policy, the deposit shall be refunded.

E. If the applicant shall not have been insurable under Condition A above, and the Company declines to
approve the application the insurance applied for shall not have been in force at any time and the sum paid be
returned to the applicant upon the surrender of this receipt.

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

Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an
acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the insurance
premium and had accepted the application subject for processing by the insurance company; and that the latter will
either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since
petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in
question had never become in force at any time.

In the absence of a meeting of the minds between petitioner Pacific Life and private respondent Ngo Hing over the 20-
year endowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the
non-compliance of the abovequoted conditions stated in the disputed binding deposit receipt, there could have been no
insurance contract duly perfected between then Accordingly, the deposit paid by private respondent shall have to be
refunded by Pacific Life.

a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents ...
The contract, to be binding from the date of the application, must have been a completed contract, one that leaves
nothing to be dione, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect.
There can be no contract of insurance unless the minds of the parties have met in agreement."

We are not impressed with private respondent's contention that failure of petitioner Mondragon to communicate to him
the rejection of the insurance application would not have any adverse effect on the allegedly perfected temporary
contract (Respondent's Brief, pp. 13-14). In this first place, there was no contract perfected between the parties who had
no meeting of their minds. Private respondet, being an authorized insurance agent of Pacific Life at Cebu branch office,
is indubitably aware that said company does not offer the life insurance applied for. When he filed the insurance
application in dispute, private respondent was, therefore, only taking the chance that Pacific Life will approve the
recommendation of Mondragon for the acceptance and approval of the application in question along with his proposal
that the insurance company starts to offer the 20-year endowment insurance plan for children less than seven years.
Nonetheless, the record discloses that Pacific Life had rejected the proposal and recommendation. Secondly, having an
insurable interest on the life of his one-year old daughter, aside from being an insurance agent and an offense associate
of petitioner Mondragon, private respondent Ngo Hing must have known and followed the progress on the processing
of such application and could not pretend ignorance of the Company's rejection of the 20-year endowment life insurance
application.

Relative to the second issue of alleged concealment. this Court is of the firm belief that private respondent had
deliberately concealed the state of health and piysical condition of his daughter Helen Go. Wher private regpondeit
supplied the required essential data for the insurance application form, he was fully aware that his one-year old daughter
is typically a mongoloid child. Such a congenital physical defect could never be ensconced nor disguished. Nonetheless,
private respondent, in apparent bad faith, withheld the fact materal to the risk to be assumed by the insurance compary.
As an insurance agent of Pacific Life, he ought to know, as he surely must have known. his duty and responsibility to
such a material fact. Had he diamond said significant fact in the insurance application fom Pacific Life would have
verified the same and would have had no choice but to disapprove the application outright.