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Insurance Cases
Insurance Cases
Before us are the consolidated petitions filed by the partiesPioneer Insurance and
Surety Corporation[1] (Pioneer) and Keppel Cebu Shipyard, Inc.[2] (KCSI)to review
on certiorari the Decision[3]dated December 17, 2004 and the Amended
Decision[4] dated December 20, 2007 of the Court of Appeals (CA) in CA-G.R. SP
Nos. 74018 and 73934.
On January 26, 2000, KCSI and WG&A Jebsens Shipmanagement, Inc. (WG&A)
executed a Shiprepair Agreement[5] wherein KCSI would renovate and reconstruct
WG&As M/V Superferry 3 using its dry docking facilities pursuant to its restrictive
safety and security rules and regulations. Prior to the execution of the Shiprepair
Agreement, Superferry 3 was already insured by WG&A with Pioneer for
US$8,472,581.78. The Shiprepair Agreement reads
SHIPREPAIR AGREEMENT[6]
(Signed)
BARRY CHIA SOO HOCK _________(Signed)__________
(Printed Name/Signature Above Name) (Printed Name/Signature Above Name)
On February 8, 2000, in the course of its repair, M/V Superferry 3 was gutted by
fire. Claiming that the extent of the damage was pervasive, WG&A declared the
vessels damage as a total constructive loss and, hence, filed an insurance claim with
Pioneer.
On June 16, 2000, Pioneer paid the insurance claim of WG&A in the amount of
US$8,472,581.78. WG&A, in turn, executed a Loss and Subrogation Receipt[9] in
favor of Pioneer, to wit:
16 June 2000
Our Claim Ref: MH-NIL-H0-99-00018
US$8,472,581.78
------------------------------------------------
Armed with the subrogation receipt, Pioneer tried to collect from KCSI, but
the latter denied any responsibility for the loss of the subject vessel. As KCSI
continuously refused to pay despite repeated demands, Pioneer, on August 7, 2000,
filed a Request for Arbitration before the Construction Industry Arbitration
Commission (CIAC) docketed as CIAC Case No. 21-2000, seeking the following
reliefs:
KCSI and WG&A reached an amicable settlement, leading the latter to file a
Notice of Withdrawal of Claim on April 17, 2001 with the CIAC. The CIAC granted
the withdrawal on October 22, 2001, thereby dismissing the claim of WG&A against
KCSI. Hence, the arbitration proceeded with Pioneer as the remaining claimant.
In the course of the proceedings, Pioneer and KCSI stipulated, among others,
that: (1) on January 26, 2000, M/V Superferry 3 arrived at KCSI in Lapu-Lapu City,
Cebu, for dry docking and repairs; (2) on the same date, WG&A signed a ship repair
agreement with KCSI; and (3) a fire broke out on board M/V Superferry 3 on
February 8, 2000, while still dry docked in KCSIs shipyard.[11]
As regards the disputed facts, below are the respective positions of the
parties, viz.:
Pioneers Theory of the Case:
First, Pioneer (as Claimant) is the real party in interest in this case and that
Pioneer has been subrogated to the claim of its assured. The Claimant
claims that it has the preponderance of evidence over that of the
Respondent. Claimant cited documentary references on the Statutory
Source of the Principle of Subrogation. Claimant then proceeded to
explain that the Right of Subrogation:
Is by Operation of Law
exists in Property Insurance
is not Dependent Upon Privity of Contract.
Second, Respondent Keppel had custody of and control over the M/V
Superferry 3 while said vessel was in Respondent Keppels premises. In its
Draft Decision, Claimant stated:
Third, the Vessels Safety Manual cannot be relied upon as proof of the
Masters continuing control over the vessel.
Fourth, the Respondent Yard is liable under the Doctrine of Res Ipsa
Loquitur. According to Claimant, the Yard is liable under the ruling laid
down by the Supreme Court in the Manila City case. Claimant asserts that
said ruling is applicable hereto as The Law of the Case.
Fifth, the liability of Respondent does not arise merely from the
application of the Doctrine of Res Ipsa Loquitur, but from
its negligence in this case.
Sixth, the Respondent Yard was the employer responsible for the
negligent acts of the welder. According to Claimant;
Claimant proffers that Dr. Joniga was not a Contractor of the Hot
Work Done on Deck A. Claimant argued that:
A. The yard, not Dr. Joniga, gave the welders their
marching orders, and
Seventh, the shipowner had no legal duty to apply for a hotworks permit
since it was not required by the yard, and the owners hotworks were
conducted by welders who remained employees of the yard. Claimant
contends that the need, if any, for an owners application for a hot work
permit was canceled out by the yards actual knowledge of Sevillejos
whereabouts and the fact that he was in deck A doing owners hotworks.
According to Claimant:
The Claimant called the attention of the Tribunal (CIAC) on the non-
appearance of the welder involved in the cause of the fire, Mr. Severino
Sevillejo. Claimant claims that this is suppression of evidence by
Respondent.
1. The Claimant has no standing to file the Request for Arbitration and
the Tribunal has no jurisdiction over the case:
(a) There is no valid arbitration agreement between the Yard
and the Vessel Owner. On January 26, 2000, when the ship
repair agreement (which includes the arbitration agreement)
was signed by WG&A Jebsens on behalf of the Vessel, the
same was still owned by Aboitiz Shipping. Consequently,
when another firm, WG&A, authorized WG&A Jebsens to
manage the MV Superferry 3, it had no authority to do
so. There is, as a result, no binding arbitration agreement
between the Vessel Owner and the Yard to which the
Claimant can claim to be subrogated and which can support
CIAC jurisdiction.
(b) The Claimant is not a real party in interest and has no
standing because it has not been subrogated to the Vessel
Owner. For the reason stated above, the insurance policies
on which the Claimant bases its right of subrogation were
not validly obtained. In any event, the Claimant has not been
subrogated to any rights which the Vessel may have against
the Yard because:
(a) The Claimants material witnesses lied on the record and the
Claimant presented no credible proof of any negligence by
Angelino Sevillejo.
(b) Uncontroverted evidence proved that Dr. Joniga neglected
or decided not to obtain a hot work permit for the bulkhead
cutting and also neglected or refused to have the ceiling and
the flammable lifejackets removed from underneath the area
where he instructed Angelino Sevillejo to cut the bulkhead
door. These decisions or oversights guaranteed that the
cutting would be done in extremely hazardous conditions
and were the proximate cause of the fire and the resulting
damage to the Vessel.
(c) The Yards expert witness, Dr. Eric Mullen gave the only
credible account of the cause and the mechanics of ignition
of the fire. He established that: i) the fire started when the
cutting of the bulkhead door resulted in sparks or hot molten
slag which fell through pre-existing holes on the deck floor
and came into contact with and ignited the flammable
lifejackets stored in the ceiling void directly below; and ii)
the bottom level of the bulkhead door was immaterial,
because the sparks and slag could have come from the
cutting of any of the sides of the door. Consequently, the
cutting itself of the bulkhead door under the hazardous
conditions created by Dr. Joniga, rather than the positioning
of the doors bottom edge, was the proximate cause of the
fire.
(d) The Manila City case is irrelevant to this dispute and in any
case, does not establish governing precedent to the effect that
when a ship is damaged in dry dock, the shipyard is
presumed at fault.Apart from the differences in the factual
setting of the two cases, the Manila City pronouncements
regarding the res ipsa loquitur doctrine are obiter
dicta without value as binding precedent.Furthermore, even
if the principle were applied to create a presumption of
negligence by the Yard, however, that presumption is
conclusively rebutted by the evidence on record.
(e) The Vessels deliberate acts and its negligence created the
inherently hazardous conditions in which the cutting work
that could otherwise be done safely ended up causing a fire
and the damage to the Vessel. The fire was a direct and
logical consequence of the Vessels decisions to: (1) take
Angelino Sevillejo away from his welding work at the
Promenade Deck restaurant and instead to require him to do
unauthorized cutting work in Deck A; and (2) to have him
do that without satisfying the requirements for and obtaining
a hot work permit in violation of the Yards Safety Rules and
without removing the flammable ceiling and life jackets
below, contrary to the requirements not only of the Yards
Safety Rules but also of the demands of standard safe
practice and the Vessels own explicit safety and hot work
policies.
(f) The vessel has not presented any proof to show that the
Yard was remiss in its fire fighting preparations or in the
actual conduct of fighting the 8 February 2000 fire. The
Yard had the necessary equipment and trained personnel and
employed all those resources immediately and fully to
putting out the 8 February 2000 fire.
4. Even assuming that Angelino Sevillejo cut the bulkhead door close to
the deck floor, and that this circumstance rather than the extremely
hazardous conditions created by Dr. Joniga and the Vessel for that
activity caused the fire, the Yard may still not be held liable for the
resulting damage.
(a) Under the law, the Yard may not be held liable to the
Claimant, as subrogee, for an amount greater than that which
the Vessel could have recovered, even if the Claimant may
have paid a higher amount under its policies. In turn, the
right of the Vessel to recover is limited to actual damage to
the MV Superferry 3, at the time of the fire.
(b) Under the Ship [R]epair Agreement, the liability of the
Yard is limited to P50 million a stipulation which, under the
law and decisions of the Supreme Court, is valid, binding
and enforceable.
Respondent disputed the above by presenting its own argument in its Final
Memorandum.[12]
On October 28, 2002, the CIAC rendered its Decision[13] declaring both
WG&A and KCSI guilty of negligence, with the following findings and conclusions
Holding that the liability for damages was limited to P50,000,000.00, the CIAC
ordered KCSI to pay Pioneer the amount of P25,000,000.00, with interest at 6% per
annum from the time of the filing of the case up to the time the decision is
promulgated, and 12% interest per annum added to the award, or any balance
thereof, after it becomes final and executory. The CIAC further ordered that the
arbitration costs be imposed on both parties on a pro rata basis.[15]
Pioneer appealed to the CA and its petition was docketed as CA-G.R. SP No.
74018. KCSI likewise filed its own appeal and the same was docketed as CA-G.R.
SP No. 73934. The cases were consolidated.
On December 17, 2004, the Former Fifteenth Division of the CA rendered its
Decision, disposing as follows:
The Yard and The WG&A are hereby ordered to pay the arbitration costs
pro-rata.
SO ORDERED.[16]
SO ORDERED.[18]
Hence, these petitions. Pioneer bases its petition on the following grounds:
II
III
IV
VI
On the other hand, KCSI cites the following grounds for the allowance of its petition,
to wit:
To our minds, these errors assigned by both Pioneer and KCSI may be summed up
in the following core issues:
A. To whom may negligence over the fire that broke out on board M/V
Superferry 3 be imputed?
To resolve these issues, it is imperative that we digress from the general rule
that in petitions for review under Rule 45 of the Rules of Court, only questions of
law shall be entertained.Considering the disparate findings of fact of the CIAC and
the CA which led them to different conclusions, we are constrained to revisit the
factual circumstances surrounding this controversy.[21]
Undeniably, the immediate cause of the fire was the hot work done by Angelino
Sevillejo (Sevillejo) on the accommodation area of the vessel, specifically on Deck
A. As established before the CIAC
The fire broke out shortly after 10:25 and an alarm was raised (Exh. 1-Ms.
Aini Ling,[22] p. 20). Angelino Sevillejo tried to put out the fire by pouring
the contents of a five-liter drinking water container on it and as he did so,
smoke came up from under Deck A. He got another container of water
which he also poured whence the smoke was coming. In the meantime,
other workers in the immediate vicinity tried to fight the fire by using fire
extinguishers and buckets of water. But because the fire was inside the
ceiling void, it was extremely difficult to contain or extinguish; and it
spread rapidly because it was not possible to direct water jets or the fire
extinguishers into the space at the source. Fighting the fire was extremely
difficult because the life jackets and the construction materials of the Deck
B ceiling were combustible and permitted the fire to spread within the
ceiling void. From there, the fire dropped into the Deck B accommodation
areas at various locations, where there were combustible
materials. Respondent points to cans of paint and thinner, in addition to
the plywood partitions and foam mattresses on deck B (Exh. 1-
Mullen,[23] pp. 7-8, 18; Exh. 2-Mullen, pp. 11-12).[24]
Pioneer contends that KCSI should be held liable because Sevillejo was its employee
who, at the time the fire broke out, was doing his assigned task, and that KCSI was
solely responsible for all the hot works done on board the vessel. KCSI claims
otherwise, stating that the hot work done was beyond the scope of Sevillejos
assigned tasks, the same not having been authorized under the Work Order[25] dated
January 26, 2000 or under the Shiprepair Agreement. KCSI further posits that
WG&A was itself negligent, through its crew, particularly Dr. Raymundo Joniga
(Dr. Joniga), for failing to remove the life jackets from the ceiling void, causing the
immediate spread of the fire to the other areas of the ship.
First. The Shiprepair Agreement is clear that WG&A, as owner of M/V Superferry
3, entered into a contract for the dry docking and repair of the vessel under KCSIs
Standard Conditions of Contract for Shiprepair, and its guidelines and regulations
on safety and security. Thus, the CA erred when it said that WG&A would renovate
and reconstruct its own vessel merely using the dry docking facilities of KCSI.
Second. Pursuant to KCSIs rules and regulations on safety and security, only
employees of KCSI may undertake hot works on the vessel while it was in the
graving dock in Lapu-Lapu City, Cebu.This is supported by Clause 3 of the
Shiprepair Agreement requiring the prior written approval of KCSIs Vice President
for Operations before WG&A could effect any work performed by its own workers
or sub-contractors. In the exercise of this authority, KCSIs Vice-President for
Operations, in the letter dated January 2, 1997, banned any hot works from being
done except by KCSIs workers, viz.:
The Yard will restrict all hot works in the engine room, accommodation
cabin, and fuel oil tanks to be carried out only by shipyard workers x x
x.[26]
WG&A recognized and complied with this restrictive directive such that,
during the arrival conference on January 26, 2000, Dr. Joniga, the vessels passage
team leader in charge of its hotel department, specifically requested KCSI to finish
the hot works started by the vessels contractors on the passenger accommodation
decks.[27] This was corroborated by the statements of the vessels hotel manager
Marcelo Rabe[28] and the vessels quality control officer Joselito Esteban.[29] KCSI
knew of the unfinished hot works in the passenger accommodation areas. Its safety
supervisor Esteban Cabalhug confirmed that KCSI was aware that the owners of this
vessel (M/V Superferry 3) had undertaken their own (hot) works prior to arrival
alongside (sic) on 26th January, and that no hot work permits could thereafter be
issued to WG&As own workers because this was not allowed for the Superferry
3.[30] This shows that Dr. Joniga had authority only to request the performance of hot
works by KCSIs welders as needed in the repair of the vessel while on dry dock.
Third. KCSI welders covered by the Work Order performed hot works on various
areas of the M/V Superferry 3, aside from its promenade deck. This was a
recognition of Dr. Jonigas authority to request the conduct of hot works even on the
passenger accommodation decks, subject to the provision of the January 26, 2000
Work Order that KCSI would supply welders for the promenade deck of the ship.
It is evident, therefore, that although the January 26, 2000 Work Order was a
special order for the supply of KCSI welders to the promenade deck, it was not
restricted to the promenade deck only. The Work Order was only a special
arrangement between KCSI and WG&A that meant additional cost to the latter.
Fourth. At the time of the fire, Sevillejo was an employee of KCSI and was subject
to the latters direct control and supervision.
Indeed, KCSI was the employer of Sevillejopaying his salaries; retaining the
power and the right to discharge or substitute him with another welder; providing
him and the other welders with its equipment; giving him and the other welders
marching orders to work on the vessel; and monitoring and keeping track of his and
the other welders activities on board, in view of the delicate nature of their
work.[34] Thus, as such employee, aware of KCSIs Safety Regulations on Vessels
Afloat/Dry, which specifically provides that (n)o hotwork (welding/cutting works)
shall be done on board [the] vessel without [a] Safety Permit from KCSI Safety
Section,[35] it was incumbent upon Sevillejo to obtain the required hot work safety
permit before starting the work he did, including that done on Deck A where the fire
started.
Fifth. There was a lapse in KCSIs supervision of Sevillejos work at the time the fire
broke out.
It was established that no hot works could be hidden from or remain undetected by
KCSI because the welding cables and the gas hoses emanating from the dock would
give the hot works away.Moreover, KCSI had roving fire watchmen and safety
assistants who were moving around the vessel.[36] This was confirmed by Restituto
Rebaca (Rebaca), KCSIs Safety Supervisor, who actually spotted Sevillejo on Deck
A, two hours before the fire, doing his cutting work without a hot work permit, a fire
watchman, or a fire extinguisher. KCSI contends that it did its duty when it
prohibited Sevillejo from continuing the hot work. However, it is noteworthy that,
after purportedly scolding Sevillejo for working without a permit and telling him to
stop until the permit was acquired and the other safety measures were observed,
Rebaca left without pulling Sevillejo out of the work area or making sure that the
latter did as he was told. Unfortunately for KCSI, Sevillejo reluctantly proceeded
with his cutting of the bulkhead door at Deck A after Rebaca left, even disregarding
the 4-inch marking set, thus cutting the door level with the deck, until the fire broke
out.
In this light, therefore, Sevillejo, being one of the specially trained welders
specifically authorized by KCSI to do the hot works on M/V Superferry 3 to the
exclusion of other workers, failed to comply with the strict safety standards of KCSI,
not only because he worked without the required permit, fire watch, fire buckets,
and extinguishers, but also because he failed to undertake other precautionary
measures for preventing the fire. For instance, he could have, at the very least,
ensured that whatever combustible material may have been in the vicinity would be
protected from the sparks caused by the welding torch. He could have easily
removed the life jackets from the ceiling void, as well as the foam mattresses, and
covered any holes where the sparks may enter.
Conjunctively, since Rebaca was already aware of the hazard, he should have
taken all possible precautionary measures, including those above mentioned, before
allowing Sevillejo to continue with his hot work on Deck A. In addition to scolding
Sevillejo, Rebaca merely checked that no fire had started yet. Nothing more. Also,
inasmuch as KCSI had the power to substitute Sevillejo with another electric arc
welder, Rebaca should have replaced him.
KCSI failed to exercise the necessary degree of caution and foresight called for by
the circumstances.
We cannot subscribe to KCSIs position that WG&A, through Dr. Joniga, was
negligent.
On the one hand, as discussed above, Dr. Joniga had authority to request the
performance of hot works in the other areas of the vessel. These hot works were
deemed included in the January 26, 2000 Work Order and the Shiprepair
Agreement. In the exercise of this authority, Dr. Joniga asked Sevillejo to do the
cutting of the bulkhead door near the staircase of Deck A. KCSI was aware of what
Sevillejo was doing, but failed to supervise him with the degree of care warranted
by the attendant circumstances.
Neither can Dr. Joniga be faulted for not removing the life jackets from the
ceiling void for two reasons (1) the life jackets were not even contributory to the
occurrence of the fire; and (2) it was not incumbent upon him to remove the same. It
was shown during the hearings before the CIAC that the removal of the life jackets
would not have made much of a difference. The fire would still have occurred due
to the presence of other combustible materials in the area. This was the uniform
conclusion of both WG&As[40] and KCSIs[41] fire experts. It was also proven during
the CIAC proceedings that KCSI did not see the life jackets as being in the way of
the hot works, thus, making their removal from storage unnecessary.[42]
Art. 2180. The obligation imposed by article 2176 is demandable not only
for ones own act or omission, but also for those of persons for whom one
is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.
xxxx
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good
father of a family to prevent damage.
KCSI failed to prove that it exercised the necessary diligence incumbent upon
it to rebut the legal presumption of its negligence in supervising
Sevillejo.[44] Consequently, it is responsible for the damages caused by the negligent
act of its employee, and its liability is primary and solidary. All that is needed is
proof that the employee has, by his negligence, caused damage to another in order
to make the employer responsible for the tortuous act of the former. [45] From the
foregoing disquisition, there is ample proof of the employees negligence.
B. The right of subrogation
Pioneer asseverates that there existed a total constructive loss so that it had to pay
WG&A the full amount of the insurance coverage and, by operation of law, it was
entitled to be subrogated to the rights of WG&A to claim the amount of the loss. It
further argues that the limitation of liability clause found in the Shiprepair
Agreement is null and void for being iniquitous and against public policy.
KCSI counters that a total constructive loss was not adequately proven by Pioneer,
and that there is no proof of payment of the insurance proceeds. KCSI insists on the
validity of the limited-liability clause up to P50,000,000.00, because WG&A
acceded to the provision when it executed the Shiprepair Agreement. KCSI also
claims that the salvage value of the vessel should be deducted from whatever amount
it will be made to pay to Pioneer.
We find in favor of Pioneer, subject to the claim of KCSI as to the salvage value of
M/V Superferry 3.
In marine insurance, a constructive total loss occurs under any of the conditions set
forth in Section 139 of the Insurance Code, which provides
(b) If it is injured to such an extent as to reduce its value more than three-
fourths; x x x.
It appears, however, that in the execution of the insurance policies over M/V
Superferry 3, WG&A and Pioneer incorporated by reference the American Institute
Hull Clauses 2/6/77, the Total Loss Provision of which reads
Total Loss
KCSI denies the liability because, aside from its claim that it cannot be held
culpable for negligence resulting in the destructive fire, there was no constructive
total loss, as the amount of damage was only US$3,800,000.00 or P170,611,260.00,
the amount of repair expense quoted by Simpson, Spence & Young.
In the face of this apparent conflict, we hold that Section 139 of the Insurance
Code should govern, because (1) Philippine law is deemed incorporated in every
locally executed contract; and (2) the marine insurance policies in question expressly
provided the following:
IMPORTANT
The CA held that Section 139 of the Insurance Code is merely permissive on account
of the word may in the provision. This is incorrect. Properly considered, the word
may in the provision is intended to grant the insured (WG&A) the option or
discretion to choose the abandonment of the thing insured (M/V Superferry 3), or
any particular portion thereof separately valued by the policy, or otherwise
separately insured, and recover for a total loss when the cause of the loss is a peril
insured against. This option or discretion is expressed as a right in Section 131 of
the same Code, to wit:
Sec. 131. A constructive total loss is one which gives to a person insured
a right to abandon under Section one hundred thirty-nine.
It cannot be denied that M/V Superferry 3 suffered widespread damage from the fire
that occurred on February 8, 2000, a covered peril under the marine insurance
policies obtained by WG&A from Pioneer. The estimates given by the three
disinterested and qualified shipyards show that the damage to the ship would
exceed P270,000,000.00, or of the total value of the policiesP360,000,000.00. These
estimates constituted credible and acceptable proof of the extent of the damage
sustained by the vessel. It is significant that these estimates were confirmed by the
Adjustment Report dated June 5, 2000 submitted by Richards Hogg Lindley (Phils.),
Inc., the average adjuster that Pioneer had enlisted to verify and confirm the extent
of the damage. The Adjustment Report verified and confirmed that the damage to
the vessel amounted to a constructive total loss and that the claim
for P360,000,000.00 under the policies was compensable.[46] It is also noteworthy
that KCSI did not cross-examine Henson Lim, Director of Richards Hogg, whose
affidavit-direct testimony submitted to the CIAC confirmed that the vessel was a
constructive total loss.
Considering the extent of the damage, WG&A opted to abandon the ship and
claimed the value of its policies. Pioneer, finding the claim compensable, paid the
claim, with WG&A issuing a Loss and Subrogation Receipt evidencing receipt of
the payment of the insurance proceeds from Pioneer. On this note, we find as
unacceptable the claim of KCSI that there was no ample proof of payment simply
because the person who signed the Receipt appeared to be an employee of Aboitiz
Shipping Corporation.[47] The Loss and Subrogation Receipt issued by WG&A to
Pioneer is the best evidence of payment of the insurance proceeds to the former, and
no controverting evidence was presented by KCSI to rebut the presumed authority
of the signatory to receive such payment.
Art. 2207. If the plaintiffs property has been insured and he has
received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If the amount paid
by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury.
Clauses 20 and 22(a) of the Shiprepair Agreement are without factual and
legal foundation. They are unfair and inequitable under the premises. It was
established during arbitration that WG&A did not voluntarily and expressly agree to
these provisions. Engr. Elvin F. Bello, WG&As fleet manager, testified that he did
not sign the fine-print portion of the Shiprepair Agreement where Clauses 20 and
22(a) were found, because he did not want WG&A to be bound by them. However,
considering that it was only KCSI that had shipyard facilities large enough to
accommodate the dry docking and repair of big vessels owned by WG&A, such as
M/V Superferry 3, in Cebu, he had to sign the front portion of the Shiprepair
Agreement; otherwise, the vessel would not be accepted for dry docking.[50]
Along the same vein, Clause 22(a) cannot be upheld. The intention of the
parties to make each other a co-assured under an insurance policy is to be gleaned
principally from the insurance contract or policy itself and not from any other
contract or agreement, because the insurance policy denominates the assured and the
beneficiaries of the insurance contract. Undeniably, the hull and machinery
insurance procured by WG&A from Pioneer named only the former as the
assured. There was no manifest intention on the part of WG&A to constitute KCSI
as a co-assured under the policies. To have deemed KCSI as a co-assured under the
policies would have had the effect of nullifying any claim of WG&A from Pioneer
for any loss or damage caused by the negligence of KCSI. No ship owner would
agree to make a ship repairer a co-assured under such insurance policy. Otherwise,
any claim for loss or damage under the policy would be rendered nugatory. WG&A
could not have intended such a result.[54]
Nevertheless, we concur with the position of KCSI that the salvage value of
the damaged M/V Superferry 3 should be taken into account in the grant of any
award. It was proven before the CIAC that the machinery and the hull of the vessel
were separately sold for P25,290,000.00 (or US$468,333.33) and US$363,289.50,
respectively. WG&As claim for the upkeep of the wreck until the same were sold
amounts to P8,521,737.75 (or US$157,809.96), to be deducted from the proceeds of
the sale of the machinery and the hull, for a net recovery of US$673,812.87, or
equivalent to P30,252,648.09, at P44.8977/$1, the prevailing exchange rate when
the Request for Arbitration was filed. Not considering this salvage value in the award
would amount to unjust enrichment on the part of Pioneer.
Pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,[55] the
award in favor of Pioneer in the amount of P350,146,786.89 should earn interest at
6% per annum from the filing of the case until the award becomes final and
executory. Thereafter, the rate of interest shall be 12% per annum from the date the
award becomes final and executory until its full satisfaction.
D. On the payment for the cost of arbitration
It is only fitting that both parties should share in the burden of the cost of arbitration,
on a pro rata basis. We find that Pioneer had a valid reason to institute a suit against
KCSI, as it believed that it was entitled to claim reimbursement of the amount it paid
to WG&A. However, we disagree with Pioneer that only KCSI should shoulder the
arbitration costs. KCSI cannot be faulted for defending itself for perceived wrongful
acts and conditions. Otherwise, we would be putting a price on the right to litigate
on the part of Pioneer.
ELIGIBILITY.
xx
EVIDENCE OF INSURABILITY.
xx
LIFE INSURANCE BENEFIT.
xx
xx
Eternal was required under the policy to submit to Philamlife a list of all new
lot purchasers, together with a copy of the application of each purchaser, and
the amounts of the respective unpaid balances of all insured lot purchasers.
Eternal complied by submitting a letter dated December 29, 1982, containing
a list of insurable balances of its lot buyers for October 1982. One of those
included in the list as “new business” was a certain John Chuang. His balance
of payments was 100K. on August 2, 1984, Chuang died.
After more than a year, Philamlife had not furnished Eternal with any reply to
the latter’s insurance claim. This prompted Eternal to demand from Philamlife
the payment of the claim for PhP 100,000.
In response to Eternal’s demand, Philamlife denied Eternal’s insurance claim
in a letter a portion of which reads:
The deceased was 59 years old when he entered into Contract #9558 and 9529
with Eternal Gardens Memorial Park in October 1982 for the total maximum
insurable amount of P100,000.00 each. No application for Group Insurance
was submitted in our office prior to his death on August 2, 1984
Eternal filed a case with the RTC for a sum of money against Philamlife, which
decided in favor of Eternal, ordering Philamlife to pay the former 100K
representing the proceeds of the policy.
YES
GR. NO. 1677330 September 18, 2009, SPECIAL FIRST DIVISION (CORONA, J.)
FACTS:
Petitioner is a domestic corporation whose primary purpose is to establish, maintain, conduct and operate
a prepaid group practice health care delivery system or a health maintenance organization to take care of
the sick and disabled persons enrolled in the health care plan and to provide for the administrative, legal,
and financial responsibilities of the organization. On January 27, 2000, respondent CIR sent petitioner a
formal deman letter and the corresponding assessment notices demanding the payment of deficiency
taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of
P224,702,641.18. The deficiency assessment was imposed on petitioner’s health care agreement with the
members of its health care program pursuant to Section 185 of the 1997 Tax Code. Petitioner protested
the assessment in a letter dated February 23, 2000. As respondent did not act on the protest, petitioner
filed a petition for review in the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT
and DST assessments. On April 5, 2002, the CTA rendered a decision, ordering the petitioner to PAY the
deficiency VAT amounting to P22,054,831.75 inclusive of 25% surcharge plus 20% interest from January
20, 1997 until fully paid for the 1996 VAT deficiency and P31,094,163.87 inclusive of 25% surcharge plus
20% interest from January 20, 1998 until fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling
No. [231]-88 is declared void and without force and effect. The 1996 and 1997 deficiency DST assessment
against petitioner is hereby CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST from collecting
the said DST deficiency tax. Respondent appealed the CTA decision to the (CA) insofar as it cancelled the
DST assessment. He claimed that petitioner’s health care agreement was a contract of insurance subject to
DST under Section 185 of the 1997 Tax Code.
On August 16, 2004, the CA rendered its decision which held that petitioner’s health care agreement was
in the nature of a non-life insurance contract subject to DST. Respondent is ordered to pay the deficiency
Documentary Stamp Tax. Petitioner moved for reconsideration but the CA denied it.
ISSUES:
(1) Whether or not Philippine Health Care Providers, Inc. engaged in insurance business.
(2) Whether or not the agreements between petitioner and its members possess all elements necessary in
the insurance contract.
HELD:
NO. Health Maintenance Organizations are not engaged in the insurance business. The SC said in June 12,
2008 decision that it is irrelevant that petitioner is an HMO and not an insurer because its agreements are
treated as insurance contracts and the DST is not a tax on the business but an excise on the privilege,
opportunity or facility used in the transaction of the business. Petitioner, however, submits that it is of
critical importance to characterize the business it is engaged in, that is, to determine whether it is an HMO
or an insurance company, as this distinction is indispensable in turn to the issue of whether or not it is
liable for DST on its health care agreements. Petitioner is admittedly an HMO. Under RA 7878 an HMO is
“an entity that provides, offers or arranges for coverage of designated health services needed by plan
members for a fixed prepaid premium. The payments do not vary with the extent, frequency or type of
services provided. Section 2 (2) of PD 1460 enumerates what constitutes “doing an insurance business” or
“transacting an insurance business”which are making or proposing to make, as insurer, any insurance
contract; making or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety; doing any kind of business,
including a reinsurance business, specifically recognized as constituting the doing of an insurance
business within the meaning of this Code; doing or proposing to do any business in substance equivalent
to any of the foregoing in a manner designed to evade the provisions of this Code.
Overall, petitioner appears to provide insurance-type benefits to its members (with respect to its curative
medical services), but these are incidental to the principal activity of providing them medical care. The
“insurance-like” aspect of petitioner’s business is miniscule compared to its noninsurance activities.
Therefore, since it substantially provides health care services rather than insurance services, it cannot be
considered as being in the insurance business.
J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider
for Accidental Death. He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He
referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay the
coverage in the total amount of P11,745.73, representing the face value of the policy in the amount of
P5,882.00 plus the additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiary
therein, although she admited that she and the insured were merely living as husband and wife without
the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that
she is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given the
proceeds. The court declared Carponia as disqualified.
Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally married
man can claim the proceeds in case of death of the latter?
Ratio:
Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively to the
proper interest of the person in whose name it is made"
The word "interest" highly suggests that the provision refers only to the "insured" and not to the
beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory laws
against illicit relationships especially on property and descent will be rendered nugatory, as the same
could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is
governed by the general rules of the civil law regulating contracts. And under Article 2012 of the same
Code, any person who is forbidden from receiving any donation under Article 739 cannot be named
beneficiary of a fife insurance policy by the person who cannot make a donation to him. Common-law
spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were guilty of adultery
or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those between
illegitimate ones should be enforced in life insurance policies since the same are based on similar
consideration. So long as marriage remains the threshold of family laws, reason and morality dictate
that the impediments imposed upon married couple should likewise be imposed upon extra-marital
relationship.
A conviction for adultery or concubinage isn’t required exacted before the disabilities mentioned in
Article 739 may effectuate. The article says that in the case referred to in No. 1, the action for
declaration of nullity may be brought by the spouse of the donor or donee; and the guilty of the donee
may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. The law plainly states that the guilt of the party may be proved “in the same acting for
declaration of nullity of donation.” And, it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was also
living in with his common-law wife with whom he has two children.
5. heirs of loreto maramag vs maramag
FACTS:
Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag
Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto
Maramag) and his concubine Eva de Guzman Maramag, also suspected in the killing
of Loreto and his illegitimate children are claiming for his insurance.
Vicenta alleges that Eva is disqualified from claiming
RTC: Granted - civil code does NOT apply
CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period
ISSUE: W/N Eva can claim even though prohibited under the civil code against donation
Issue:
1. Whether the petitioner is liable for the unpaid accountsHeld:1. Yes. Petitioner
ordered to pay P2,119.205.60 for IMC's claims, but not P535,613 for LSPI's claims
forlack of factual basis.- The insurance in this case is not for loss of goods by fire but
for petitioner's accounts with IMC and LSPIthat remained unpaid 45 days after
the fire. Petitioner's obligation is for the payment of money. Wherethe obligation
consists in the payment of money, the failure of the debtor to make the payment
even byreason of a fortuitous event shall not relieve him of his liability. The rule that
the obligor should be heldexempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligationconsists in the delivery of a determinate
thing and there is no stipulation holding him liable even in caseof fortuitous event. It
does not apply when the obligation is pecuniary in nature.- Under Art 1263, if the
obligation is generic in the sense that the object thereof is designated merely byits
class or genus without any particular designation or physical segregation from all
others of the sameclass, the loss or destruction of anything of the same kind even
without the debtor's fault and before hehas incurred in delay will not have the
effect of extinguishing the obligation. An obligation to pay moneyis generic;
therefore, it is not excused by fortuitous loss of any specific property of the
debtor.***There are other issues but focused on that which involved Article 1263
(1998)
FACTS:
RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons,
Inc. GOYU’s applied again and through Binondo Branch key officer's Uy’s and Lao’s
recommendation, RCBC’s executive committee increased its credit facility to P50M
to P90M and finally to P117M.
As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in
favor of RCBC.
GOYU obtained in its name 10 insurance policy on the mortgaged properties
from Malayan Insurance Company, Inc. (MICO). In February 1992, he was issued 8
insurance policies in favor of RCBC.
April 27, 1992: One of GOYU’s factory buildings was burned so he claimed against
MICO for the loss who denied contending that the insurance policies were
either attached pursuant to writs of attachments/garnishments or that creditors are
claiming to have a better right
GOYU filed a complaint for specific performance and damages at the RTC
RCBC, one of GOYU’s creditors, also filed with MICO its formal claim over the
proceeds of the insurance policies, but said claims were also denied for the same
reasons that MICO denied GOYU’s claims
RTC: Confirmed GOYU’s other creditors (Urban Bank, Alfredo Sebastian, and
Philippine Trust Company) obtained their writs of attachment covering an aggregate
amount of P14,938,080.23 and ordered that 10 insurance policies be deposited with
the court minus the said amount so MICO deposited P50,505,594.60.
Another Garnishment of P8,696,838.75 was handed down
RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay RCBC
its loan
CA: Modified by increasing the damages in favor of GOYU
In G.R. No. 128834, RCBC seeks right to intervene in the action between Alfredo C.
Sebastian (the creditor) and GOYU (the debtor), where the subject insurance
policies were attached in favor of Sebastian
RTC and CA: endorsements do not bear the signature of any officer of GOYU concluded that the
endorsements favoring RCBC as defective.
ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by
GOYU, the mortgagor, in case of the occurrence of loss
HELD: YES.
mortgagor and a mortgagee have separate and distinct insurable interests in the
same mortgaged property, such that each one of them may insure the same
property for his own sole benefit
although it appears that GOYU obtained the subject insurance policies naming itself
as the sole payee, the intentions of the parties as shown by their contemporaneous
acts, must be given due consideration in order to better serve the interest of justice
and equity
8 endorsement documents were prepared by Alchester in favor of RCBC
MICO, a sister company of RCBC
GOYU continued to enjoy the benefits of the credit facilities extended to it by RCBC.
GOYU is at the very least estopped from assailing their operative effects.
The two courts below erred in failing to see that the promissory notes which they
ruled should be excluded for bearing dates which are after that of the fire, are mere
renewals of previous ones
RCBC has the right to claim the insurance proceeds, in substitution of the property lost in the
fire. Having assigned its rights, GOYU lost its standing as the beneficiary of
the said insurance policies
insurance company to be held liable for unreasonably delaying and withholding payment of
insurance proceeds, the delay must be wanton, oppressive, or malevolent - not shown
Sebastian’s right as attaching creditor must yield to the preferential rights of RCBC over the
Malayan insurance policies as first mortgagee.
Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire
insurance and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering
Issue:
WON Mr. Chua acted as an agent of the surety company or of the insured when he received
the check for insurance premiums.
Ratio:
To determine if there was a valid contract of insurance, it must be determine if the premium was validly
paid to the company or its agents at the time of the loss.
The appellate and trial courts have found that Chua acted as an agent.
South Sea insisted that Chua has been an agent for less than ten years of the Columbia Insurance
Brokers, a different company. Appellant argued that Mr.Chua, having received the premiums, acted
as an agent under Section 301 of the Insurance Code which provides:
Sec. 301. Any person who for any compensation, commission or other thing of value, acts, or aids in
soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out
insurance, on behalf of an insured other than himself, shall be an insurance broker within the intent of
this Code, and shall thereby become liable to all the duties requirements, liabilities and penalties to
which an insurance broker is subject.
Valenzuela claimed that the second paragraph of Section 306 of the Insurance Code provided:
Sec. 306 Any insurance company which delivers to an insurance agent or insurance broker a policy
or contract of insurance shall be deemed to haveauthorized such agent or broker to receive on its
behalf payment of any premium which is due on such policy of contract of insurance at the time of its
issuance or delivery or which becomes due thereon.
Mr. Chua testified that the marine cargo insurance policy logs was by South Sea to be given to the
wood company.
When South Sea delivered to Mr. Chua the marine cargo insurance policy for Valenzuela’s logs, he is
deemed to have been authorized by former to receive the premium which is due on its behalf.
When the logs were lost, the insured had already paid the premium to an agent of the South Sea
Surety and Insurance Co., Inc., which is consequently liable to pay the insurance proceeds under the
policy it issued to the insured.
The court followed the factual evidence of the lower courts and held that they didn’t try questions of
fact.
10. Makati Tuscany v CA G.R. No. 95546 November 6,
1992
Facts:
Issue: Whether payment by installment of the premiums due on an insurance policy invalidates the
contract of insurance, in view of Sec. 77 of P.D. 612
Ratio:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is exposed to the
peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid and binding unless and until the premium thereof
has been paid, except in the case of a life or an industrial life policy whenever the grace period
provision applies.
Petitioner concluded that there cannot be a perfected contract of insurance upon mere partial payment
of the premiums because under Sec. 77 of theInsurance Code, no contract of insurance is valid and
binding unless the premium thereof has been paid, notwithstanding any agreement to the contrary. As
a consequence, petitioner seeks a refund of all premium payments made on the alleged
invalid insurance policies.
We hold that the subject policies are valid even if the premiums were paid on installments. The records
clearly show that petitioner and private respondent intended subject insurance policies to be binding
and effective notwithstanding the staggered payment of the premiums. The initial insurance contract
entered into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted
all the installment payments. Such acceptance of payments speaks loudly of the insurer's intention to
honor the policies it issued to petitioner.
Quoting the CA decision:
“While the import of Section 77 is that prepayment of premiums is strictly required as a condition to
the validity of the contract, we are not prepared to rule that the request to make installment payments
duly approved by the insurer, would prevent the entire contract of insurance from going into effect
despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance
Code in effect allows waiver by the insurer of the condition of prepayment by making an
acknowledgment in the insurance policy of receipt of premium as conclusive evidence of
payment so far as to make the policy binding despite the fact that premium is actually
unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement granting credit extension. So is
an understanding to allow insured to pay premiums in installments not so proscribed.
The reliance by petitioner on Arce vs. Capital Surety and Insurance Co. is unavailing because the
facts therein are substantially different from those in the case at bar. In Arce, no payment was made
by the insured at all despite the grace period given. Here, petitioner paid the initial installment and
thereafter made staggered payments resulting in full payment of the 1982 and 1983 insurance policies.
For the 1984 policy, petitioner paid two (2) installments although it refused to pay the balance.
It appearing from the peculiar circumstances that the parties actually intended to make three (3)
insurance contracts valid, effective and binding, petitioner may not be allowed to renege on its
obligation to pay the balance of the premium after the expiration of the whole term. Moreover,
as correctly observed by the appellate court, where the risk is entire and the contract is indivisible,
the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the
risk insured for any period, however brief or momentary.
(1999)
FACTS:
April 5, 1990: Antonio Chua renewed the fire insurance for its stock-in-trade of his business,
Moonlight Enterprises with American Home Assurance Companyby issuing a check
of P2,983.50 to its agent James Uy who delivered the Renewal Certificate to
him.
April 6, 1990: Moonlight Enterprises was completely razed by fire with an est.
loss of P4,000,000 to P5,000,000
April 10, 1990: An official receipt was issued and subsequently, a policy was issued
covering March 25 1990 to March 25 1991
Antonio Chua filed an insurance claim with American Home and 4 other
co-insurers (Pioneer Insurance and Surety Corporation, Prudential
Guarantee and Assurance, Inc. and Filipino Merchants Insurance Co)
American Home refused alleging the no premium was paid
RTC: favored Antonio Chua for paying by way of check a day before the fire
occurred
CA: Affirmed
ISSUE:
1. W/N there was a valid payment of premium considering that the check was
cashed after the occurrence of the fire since the renewal certificate issued
containing the acknowledgement receipt
2. W/N Chua violated the policy by his submission of fraudulent documents
and non-disclosure of the other existing insurance contracts or “other
insurance clause"
1. YES.
12. Malayan Insurance Co., Inc vs Philippines First Insurance Co., Inc
G.R. No. 184300 July 11, 2012
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 Insurance
Co., Inc. (Philippines First) to secure its interest over its own products. Philippines First
thereby insured Wyeth’s nutritional, pharmaceutical and other products usual or
incidental to the insured’s business while the same were being transported or shipped
in the Philippines. The policy covers all risks of direct physical loss or damage from
any external cause, if by land, and provides a limit of P6,000,000.00 per any one land
vehicle. On December 1, 1993, Wyeth executed its annual contract of 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 thereof faithfully observed by the parties and, as previously stated, the same
contract of carriage had been annually executed by the parties every year since 1989.
Under the contract, Reputable undertook to answer for “all risks with respect to the
goods and shall be liable to the COMPANY (Wyeth), for the loss, destruction, or
damage of the goods/products due to any and all causes whatsoever, including 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, 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 Reputable is the recognized
insured of Malayan under the SR Policy. The fact that Reputable procured 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.
The interest of Wyeth over the property subject matter of both insurance contracts is
also different and distinct from that of Reputable’s. The policy issued by Philippines
First was in consideration of the legal and/or equitable interest of Wyeth over its own
goods. On the other hand, what was issued by Malayan to Reputable was over the
latter’s insurable interest over the safety of the goods, which may become the basis of
the latter’s liability in case of loss or damage to the property and falls within the
contemplation of Section 15 of the Insurance Code.
Therefore, even though the two concerned insurance policies were issued over the same
goods and cover the same risk, there arises no double insurance since they were issued
to two different persons/entities having distinct insurable interests. Necessarily, over
insurance by double insurance cannot likewise exist. Hence, as correctly ruled by the
RTC and CA, neither Section 5 nor Section 12 of the SR Policy can be applied.
FACTS:
March 19, l963: Pacific Timber secured temporary insurance from Workmen's
Insurance Company, Inc. for its exportation of 1,250,000 board feet of
Philippine Lauan and Apitong logs to be shipped from the Diapitan
Bay, Quezon Province to Tokyo, Japan.
Workmen's issued Cover Note insuring the cargo "Subject to the Terms and
Conditions of the Workmen's Insurance Company, Inc."
April 2, 1963: regular marine cargo policies were issued for a total
of 1,195.498 bd. ft. Due to the bad weather some of the logs were lost
during loading operations. 45 pieces of logs were salvaged, but 30 pieces
were lost. Pacific informed Workmen's who refused stating that the logs
covered in the 2 marine policies were received in good order at the point
of destination and that the cover note was null and void upon the
issuance of the Marine Policies
CFI: cover note is valid
CA: reversed
ISSUE: W/N the cover note is valid despite the absence of premium payment upon it
it was not necessary to ask for payment of the premium on the Cover Note , for the loss
insured against having already occurred, the more practical procedure is
simply to deduct the premium from the amount due on the Cover Note
Had all the logs been lost during the loading operations, but after the issuance of the Cover
Note, liability on the note would have already arisen even before payment of premium
cover note as a "binder"
supported by the doctrine that where a policy is delivered without requiring payment of the
premium, the presumption is that a credit was intended and policy is valid
it sent its adjuster to investigate and assess the loss to determine if petitioner was guilty of
delay in communicating the loss but there was none
Section 84
Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any
act of his or if he omits to take objection promptly and specifically upon that ground
14.
15. NgGan Zee vs Asian Crusader
Life Assurance Corporation
In May 1962, Kwong Nam applied for a 20-year endowment policy with Asian Crusader Life
Assurance Corporation. Asian Crusader asked the following question:
Has any life insurance company ever refused your application for insurance or for
reinstatement of a lapsed policy or offered you a policy different from that applied for? If, so,
name company and date.
Kwong Nam answered “No” to the above question.
Kwong Nam was also examined by Asian Crusader’s medical examiner to whom he disclosed
that he was once operated and a tumor was removed from his stomach and such was
“associated with ulcer of the stomach.”
Kwong Nam’s application was approved. In May 1963, he died. His widow, Ng Gan Zee, filed
an insurance claim but Asian Crusader refused her claim as it insisted that Kwong Nam
concealed material facts from them when he was applying for the insurance; that he
misrepresented the fact that he was actually denied application by Insular Life when he was
renewing his application with them; that Kwong Nam was actually operated for peptic ulcer.
ISSUE: Whether or not Ng Gan Zee can collect the insurance claim.
HELD: Yes. Asian Crusader was not able to prove that Kwong Nam’s statement that Insular
Life did not deny his insurance renewal with them is untrue. In fact, evidence showed that in
April 1962, Insular Life approved Kwong Nam’s request of reinstatement only with the
condition that Kwong Nam’s plan will be lowered from P50,000.00 to P20,000.00 considering
his medical history.
Kwong Nam did not conceal anything from Asian Crusader. His statement that his operation,
in which a tumor the size of a hen’s egg was removed from his stomach, was only “associated
with ulcer of the stomach” and not peptic ulcer can be considered as an expression made in
good faith of his belief as to the nature of his ailment and operation. Indeed, such statement
must be presumed to have been made by him without knowledge of its incorrectness and
without any deliberate intent on his part to mislead Asian Crusader.
While it may be conceded that, from the viewpoint of a medical expert, the information
communicated was imperfect, the same was nevertheless sufficient to have induced Asian
Crusader to make further inquiries about the ailment and operation of Kwong Nam. It has
been held that where, upon the face of the application, a question appears to be not answered
at all or to be imperfectly answered, and the insurers issue a policy without any further inquiry,
they waive the imperfection of the answer and render the omission to answer more fully
immaterial.
Vda. De Canilang v. CA -
16.
Concealment
223 SCRA 443 (1993)
Facts:
> Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus tachycardia." Mr.
Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute
bronchitis."
> On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance policy with
Grepalife naming his wife, as his beneficiary. Canilang was issued ordinary life insurance with the
face value of P19,700.
> On 5 August 1983, Canilang died of "congestive heart failure," "anemia," and "chronic
anemia." The wife as beneficiary, filed a claim with Grepalife which the insurer denied on the ground
that the insured had concealed material information from it.
> Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife contending
that as far as she knows her husband was not suffering from any disorder and that he died of kidney
disorder.
> Grepalife was ordered to pay the widow by the Insurance Commissioner holding that there was no
intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into
the health condition of the applicant by the issuance of the policy despite the lack of answers to
"some of the pertinent questions" in the insurance application. CA reversed.
Issue:
Whether or not Grepalife is liable.
Held:
SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Wilfredo
B. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. Under
the relevant provisions of the Insurance Code, the information concealed must be information which
the concealing party knew and "ought to [have] communicate[d]," that is to say, information which
was "material to the contract.
The information which Canilang failed to disclose was material to the ability of Grepalife to estimate
the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his
doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance
application, it may be reasonably assumed that Grepalife would have made further inquiries and
would have probably refused to issue a non-medical insurance policy or, at the very least, required a
higher premium for the same coverage.
The materiality of the information withheld by Canilang from Grepalife did not depend upon the state
of mind of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our
judicial process, except through proof of external acts or failure to act from which inferences as to his
subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or
physical events which ensue. Materiality relates rather to the "probable and reasonable influence of
the facts" upon the party to whom the communication should have been made, in assessing the risk
involved in making or omitting to make further inquiries and in accepting the application for
insurance; that "probable and reasonable influence of the facts" concealed must, of course, be
determined objectively, by the judge ultimately.
SC found it difficult to take seriously the argument that Grepalife had waived inquiry into the
concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to
some of the questions in the insurance application. Such failure precisely constituted concealment
on the part of Canilang. Petitioner's argument, if accepted, would obviously erase Section 27 from
the Insurance Code of 1978.
17. Tanv. CA - Rescission of the
contract of insurance
174 SCRA 403
Facts:
> Tan Lee Siong was issued a policy by Philamlife on Nov. 6, 1973.
> On Aprl 26, 1975, Tan died of hepatoma. His beneficiaries then filed a claim with Philamlife for
the proceeds of the insurance.
> Philamlife wrote the beneficiaries in Sep. 1975 denying their claim and rescinding the contract on
the ground of misrepresentation. The beneficiaries contend that Philamlife can no longer rescind the
contract on the ground of misrepresentation as rescission must allegedly be done “during the lifetime
of the insured” within two years and prior to the commencement of the action following the wording
of Sec. 48, par. 2.
Issue:
Whether or not Philamlife can rescind the contract.
Held:
YES.
The phrase “during the lifetime” found in Sec. 48 simply means that the policy is no longer in force
after the insured has died. The key phrase in the second paragraph is “for a period of two years”.
The period to consider in a life insurance poiicy is “two years” from the date of issue or of the last
reinstatement. So if for example the policy was issued/reinstated on Jan 1, 2000, the insurer can
still exercise his right to rescind up to Jan. 1, 2003 or two years from the date of issue/reinstatement,
REGARDLESS of whether the insured died before or after Jan. 1, 2003.
18.
19. LOADMASTERS CUSTOMS SERVICES, INC., vs. GLODEL BROKERAGE
CORPORATION and R&B INSURANCE CORPORATION, / G.R. No. 179446 / January 10,
2011
FACTS:
The case is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court assailing the August 24, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CV No.
82822.
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbiato insure the shipment of 132 bundles of electric copper cathodes against All Risks.
On August 28, 2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela,
Leyte, to Pier 10, North Harbor,Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes
from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the
services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia’s
warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by
its employed drivers and accompanied by its employed truck helpers. Of the six (6) trucks route
to Balagtas, Bulacan, only five (5) reached the destination. One (1) truck, loaded with 11
bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
Later on, the said truck, was recovered but without the copper cathodes. Because of this
incident,Columbia filed with R&B Insurance a claim for insurance indemnity in the amount
ofP1,903,335.39. After the investigation, R&B Insurance paid Columbia the amount
ofP1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and
Glodel before the Regional Trial Court, Branch 14, Manila (RTC), It sought reimbursement of
the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been
subrogated "to the right of the consignee to recover from the party/parties who may be held
legally liable for the loss."
On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages
for the loss of the subject cargo and dismissing Loadmasters’ counterclaim for damages and
attorney’s fees against R&B Insurance.
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered that the appellee is an agent of appellant Glodel,
whatever liability the latter owes to appellant R&B Insurance Corporation as insurance
indemnity must likewise be the amount it shall be paid by appellee Loadmasters. Hence,
Loadmasters filed the present petition for review on certiorari.
ISSUE:
Whether or not Loadmasters and Glodel are common carriers to determine their liability for the
loss of the subject cargo.
RULING: