PART B, MARCH 25, 2020

II. In non-life insurance – 249-250, 88-91

A. In general

1. Loss – 86-89

2. Notice and proof of loss – 90-94

Finman v. CA, July 12, 2001

Cathay v CA, June 5, 1989
BPI v Laingo, March 16, 2016

3. Payment of proceeds

Mla. Mahogany v. CA, 154 SCRA 650

Yu v. Fieldmens, 14 SCRA 491
Le Bog v. Hanover, 1 SCRA 599
Chuy v. Philam, 95 Phil 282
RCBC v. CA, 289 SCRA 292
Zenith v. CA, 185 SCRA 398

4. Right of subrogation

American Federal v. American, August 18, 2004

Aboitiz v. Insurance Company, August 6, 2008
Henson v. UCPB, August 14, 2019
Gaisano Cagayan v. Insurance Company of North
America, supra June 8, 2006
Equitable v. Transmodal, August 7, 2017
 PART B, MARCH 25, 2020

II. In Non-Life Insurance

SEC. 249 – The amount of any loss or damage for which an insurer maybe liable, under any policy other
than life insurance policy, shall be paid within thirty (30) days after proof of loss is received by the
insurer and ascertainment is not had or made within sixty (60) days after such receipt by the insurer of
the proof of loss, then the loss or damage shall be paid within (90) days after such receipt. Refusal or
failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect
interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling
prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the
claim is fraudulent.

SEC. 250 – In case of any litigation for the enforcement of any policy or contract of insurance, it shall be
the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the
payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative
case, the insurance company shall be adjudged to pay damages which shall consist of attorney’s fees
and other expenses incurred by the insured person by reason of such unreasonable denial or
withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the
amount of the claim due the insured, from the date following the time prescribed in Section 248 or in
249, as the case may be, until the claim is fully satisfied: Provided, That failure to pay any such claim
within the time prescribed in said section shall be considered prima facie evidence of unreasonable
delay in payment.

SEC. 88 – Where a peril is especially excepted in a contract of insurance, a loss, which would not have
occurred but for such peril, is thereby excepted although the immediate cause of the loss was a peril
which was not excepted.

SEC. 89 – An insurer is not liable for a loss caused by the willful act or through the connivance of the
insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others.

SEC. 90 – In case of loss upon an insurance against fire, an insurer is exonerated, if written notice
thereof be not given to him by an insured or some person entitled to the benefit of the insurance,
without unnecessary delay. For other non-life insurance, the Commissioner may specify the period for
the submission of the notice of loss.

SEC. 91 – When a preliminary proof of loss is required by a policy, the insured is not bound to give such
proof as would be necessary in a court of justice; but is sufficient for him to give the best evidence which
he has in his power at the time.

A. In General
1. Loss
SEC. 86 – Unless otherwise provided by the policy, an insurer is liable for a loss of
which a peril insured against was the proximate cause, although a peril not
contemplated by the contract may have been a remote cause of the loss; but he is
not liable for a loss of which the peril insured against was only a remote cause.

SEC. 87 – An insurer is liable where the thing insured is rescued from a peril insured
against that would otherwise have caused a loss, if, in the course of suhc rescue, the
 thing is exposed to a peril not insured against, which permanently deprives the
insured of its possession, in whole or in part; or where a loss is caused by effort to
rescue the thing insured from a peril insured against.

SEC. 88 – Where a peril is especially excepted in a contract of insurance, a loss,

which would not have occurred but for such peril, is thereby excepted altough the
immediate cause of the loss was a peril which was not excepted.

SEC. 89 – An insurer is not liable for a loss caused by the willful act or through the
connivance of the insured; but he is not exonerated by the negligence of the
insured, or of the insurance agents or others.

2. Notice and Proof of Loss

SEC. 90 – In case of loss upon an insurance against fire, an insurer is exonerated, if
written notice thereof be not given to him by an insured, or some person entitled to
the benefit of the insuance, without unnecessary delay. For other non-life
insurance, the Commissioner may specify the period for the submission of the
notice of loss.

SEC. 91 – When a preliminary proof of loss is required by a policy, the insured is not
bound to give such proof as would be necessary in a court of justice; but it is
sufficient for him to give the best evidence which he has in his power at the time.

SEC. 92 – All defects in a notice of loss, or in preliminary prrof thereof, which the
insured might remedy, and which the insurer omits to specify to him, without
unnecessary delay, as grounds of objection, are waived.

SEC. 93 – Delay in the presentation to an insurer of notice or proof of loss is waived

if caused by any act of him, or if he omits to take objection promptly and specifically
upon that ground.

SEC. 94 – If the policy requires, by way of preliminary proof of loss, the certificate or
testimony of a person other than the insured, it is sufficient for the insured to use
reasonable diligence to procure it, and in case of the refusal of such person to give
it, then to furnish reasonable evidence to the insurer that such refusal was not
induced by any just grounds of disblief in the facts necessary to be certified or
testified.

Finman General Assurance Corporation vs CA and Usiphil Incorporated

G.R. No. 138737, July 12, 2001

FACTS: Usiphil Incorporated obtained a fire insurance policy from Finman General Assurance
Corporation (then doing business under the name Summa Insurance Corporation) covering certain
properties, e.g., office, furniture, fixtures, shop machinery, and other trade equipment. Finman General
undertook to indemnify Usiphil for any damage to or loss of said properties arising from fire.

Usiphil filed with Finman an insurance claim amounting to P987,126.11 for the loss of the insured
properties due to fire. Acting thereon, Finman appointed Adjuster H.H. Bayne to undertake to valuation
and adjustment of the loss. H.H. Bayne then required Usiphil to file a formal claima nd submit proof of
loss. Subsequently, despite repeated demands by Usiphil, Finman refused to pay the insurance claim.
Thus, Usiphil was constrained to file a complaint against Finman for the unpaid insurance claim.

In its Answer, Finman maintained that the claim of Usiphil could not be allowed because it failed to
comply with the submission of certain documents to prove the loss.

ISSUE: Whether or not the disallowance of Usiphil’s claim is justified by its failure to submit the required
documents

RULING: No. Both the trail court and the appellate court concur in holding that Usiphil had substantially
complied with Policy Condition No. 13. A perusal of the records show that Usiphil, after the occurance of
the fire, immediately notified Finman thereof. Thereafter, Usiphil submitted the following documents:
(1) Sworn Statement of Loss and Formal Claim and; (2) Proof of Loss. The submission of these
documents, to the Court’s mind, consitutes substantial complaince with the above provision. Indeed, as
regards the submission of documents to prove loss, substantial, not strict as urged by Finman,
complaince with the requirements will always be deemed sufficient.

In any case, Finman itself acknowledged its liability when through its Finance Manager it signed the
document indicating that the amount due Usiphil is P842, 683. 40.

Cathay Insurance Co., Inc. vs Court of Appeals and Emilia Chan Lugay
G.R. No. 85624, June 5, 1989

FACTS: Petitioners are the six (6) insurance companies that issued fire insurance policies for the total
sum of P4,000,000 to the Cebu Filipino Press of Cebu City. The fire policies described the insured
property as “stocks of printing materials, papers and general merchandise usual to the Assured’s trade”
stored in a one-storey building of strong materials housing the Cebu Filipina Press located at UNNO Pres.
Quirino co. Don V. Sotto Sts., Mabolo, Cebu City. The co-insurers were indicated in each of the policies.
All, except one policy (Paramount’s), were renewals of earlier policies issued for the same property.

Subsequently, the Cebu Filipina Press was razed by electrical fire together with all the stocks and
merchandise stored in the premises. Mrs. Lugay, owner and operator of the printing press, submitted
sworn Statements of Loss Formal Claims to the inusurers, through their adjusters. She claim a total loss
of P4,595,00. She submitted proofs of loss required by the adjusters. After nearly ten (10) months of
waiting for the insurers to pay his claim, she sued to collect. The insurance companies denied liability,
alleging violation of certain conditions of the policy, misdeclaration, and even arson which was not
seriously pressed for, come the pre-trial, the petitioners offered to pay 50% of her claim, but she insisted
in full recovery.

ISSUE: Whether or not sufficient proof of loss had been presented by Mrs. Lugay

RULING: Yes. There is no merit in the petitioner’s contention that the proof of loss were insufficient
because Emilia Chan Luga failed to comply with the adjuster’s request for the submission of her bank
statements. Condition No. 13, as the Court of Appeals observed, does not require the insured to
produce her bank statements. Therefore, the insured was not obligated to produce them and the
insurers had no right to ask for them. Condition No. 13 was prepared by the insurers themselves, hence,
it “should be strongly taken most strongly” against them.
The Court of Appeals found that the insured “fully complaid with the requirements of Condition No. 13”.
The adjuster’s demand for the assured’s bank statements (which under the law on the secrecy of bank
deposits, she need not disclose) would add more requirements to Condition No. 13 of the insurance
contract, and, as pointed out by the Appellate Court, “would amount to giving the insurers limitless
latitude in making unreaonable demands if only to evade and aviod libility”.

BPI and FGU Insurance Corporation vs Yolanda Laingo

G.R. 205206, March 16, 2016

FACTS: Rheozel Laingo, the son of Yolanda Laingo, opened a “Platinum 2-in-1 Savings and Insurance”
account with Bank of the Philippine Islands (BPI) in its Claveria, Davao City Branch. The Platinum 2-in-1
Savings and Insurance Account is a savings account where depositors are automatically covered by an
insurance policy against disability or death issued by FGU Insurance Corporation. A Personal Accident
Insurance Coverage was also issued by FGU Insurance in the name of Rheozel with Laingo as his named
beneficiary.

On 25 September 2000, Rheozel died due to a vehicular accident as evidenced by a Certificate of Death
issued by the Office of the Civil Registrar General of Tagum City, Davao del Norte. More then two year
later or on 21 January 2003, Rheozel’s sister found the Personal Accident Insurance Coverage issued by
FGU Insurance. Rhealyn immediately conveyed the information to Laingo.

Laingo sent two (2) letters to BPI and FGU Insurance requesting them to process her claim as beneficiary
of Rheozel’s insurance policy. FGU Insurance then sent a reply-letter to Laingo denying her claim. FGU
Insurance stated that Laingo should have filed the claim within three calendar months from the death of
Rheozel as required under Paragraph 15 of the Personal Accident Certificate of Insurance. Laingo filed a
Complaint for Specific Performance with Damages and Attorney’s Fees with the Regional Trial Court of
Davao City against BPI and FGU Insurance.

ISSUE: Whether or not Laingo, as named beneficiary who had no knowledge of the existence of the
insurance contract, bound by the three calendar month deadline for filing a written notice of claim upon
the death of the insured

RULING: No. Upon Rheozel’s death, which was properly communicated to BPI by his mother Laingo, BPI,
in turn, should have fulfilled its duty, as agent of FGU Insurance, of advising Laingo that there was an
added benefit of insurance coverage in Rheozel’s savings account. An insurance company has the duty
to communicate with the beneficiary upon receipt of notice of the death of the insured. This notification
is how a good father of a family should have acted within the scope of its business dealings with its
clients. BPI is expected not only to provide utmost customer satisfaction in terms of its own products
and services but also to give assurance that its business concerns with its partner entitieas are implented
accordingly.

FGU Insurance cannot now justify the denial of a beneficiary’s insurance claim for being filed out of time
when notice of death has been communicated to its agent within a few days after the death of the
depositor-insured. In short, there was timely notice of Rheozel’s death given to FGU Insurance within
three months from Rheozel’s death as required by the insurance company.
Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of the insurance
policy, Laingo had no means to ascertain that she was entitled to the insurance claim. It would be unfair
for Laingo to shoulder the burden of loss when BPI was remiss in its duty to properly notify her that she
was a beneficiary.

3. Payment of Proceeds
Manila Mahogany Manufacturing Corporation vs CA and Zenith Insurance Corporation
G.R. No. L-52756, October 12, 1987

FACTS: Manila Mahogany Manufacturing Corporation insured its Mercedez Benz 4-door sedan with
Zenith Insurance Corporation. On 4 May 1970, the insured vehicle was bumped and damaged by a truck
owned by San Miguel Corporation. For the damage caused, Zenith paid Manila Mahogany five thousand
pesos (P5000) in amicable settlement. Manila Mahogany’s general manager executed a Release of
Claim, subrogating Zenith to all its right to action against San Miguel Corporation.

Zenith wrote Insurance Adjusters, Inc. to demand reimbursement from San Miguel Corporation of the
amount it had paid to Manila Mahogany. However, reimnursement was refused by reason that San
Migueal Corporation had allegedly already paid Manila Mahogany P4,500.00 for the damages to the
motor vehicle, as evidenced by a cash voucher and a Release of Claim executed by the General Manager
of Manila Mahogany discharging San Miguel Corporation from “all actions, claims, demands the rights of
action now exist or hereafter develop arising out of or as a consequence of the accident.”

Zenith thus demanded from Manila Mahogany reimbursement of the sum paid by San Miguel
Corporation. Manila Mahogany refused; hence, Zenith filed suit in the City Court of Manila for the
recovery of P4,500.00.

ISSUE: Whether or not Manila Mahogany is bound to pay Zenith as the subrogation in the Release of
Claim it executed in favor of Zenith was conditioned on recovery of the total amount of damages Manila
Mahogany had sustained

RULING: Yes. In the absence of any other evidence to support its allegation that a gentlemen’s
agreement existed between it and Zenith, not embodied in the Release of Claim, such ease of Claim
must be taken as the best evidence of the intent and purpose of the parties. Thus, the Court of Appeals
rightly stated:

Petitioner argues that the release claim it executed subrogating Private respondent to any right
of action it had against San Miguel Corporation did not preclude Manila Mahogany from filing a
deficiency claim against the wrongdoer. Citing Article 2207, New Civil Code, to the effect that if
the amount paid by an insurance company does not fully cover the loss, the aggrieved party
shall be entitled to recover the deficiency from the person causing the loss, petitioner claims a
preferred right to retain the amount coming from San Miguel Corporation, despite the
subrogation in favor of Private respondent.

Although petitioners right to file a deficiency claim against San Miguel Corporation is with legal
basis, without prejudice to the insurer’s right of subrigation, nevertheless when Manila
Mahogany executed another release claim discharging San Miguel Corporation from “all actions,
claim, demands and rights of action that now exist or hereafter arising out of or as a
consequence of the accident” after the insurer had paid the proceeds of the policy – the insurer
 is entitled to recover from the insured the amount of insurance money paid. Since petitioner by
its own acts released San Miguel Corporation, thereby defeating private respondents, the right
of subrogation, the right of action of petitioner against the insurer was also nullified.

Yu Ban Chuan vs Fieldmen’s Insurance Co., Inc.

G.R. No. L-19851, June 29, 1965

FACTS: Yu Ban Chuan began his business enterprise under the name of “CMC Trading”, which was
engaged in the wholesale dealing in general merchandise and school supplies. Plaintiff insured against
fire the stock of merchandise contained therein with Fieldmen’s Insurance Co., for which the latter
issued an “open” policy limiting the insurer’s liability to the amount of P200,000 for a period of one (1)
year; that plaintiff again insured against fire the same stock of merchandise covered by Fieldmen’s policy
with defendant Paramount Surety & Insurance Co., being also issued an “open” policy limiting liability
thereunder to P140,000 for a one-year period. Subsequently, both insurers agrred to have the coverage
of the insurance policies transferred to the new premises. While both insurance policies were in full
force and effect, plaintiff’s business establishment was totally destroyed by fire.

The next day after the occurrence of the fire, plaintiff verbally notified the respective agents of the
defendants-insurers of such incident. On the same day, the adjusters of defendants Fieldmen’s and
Paramount executed “nonwaiver” agreements for the purpose of determining the circumstances of the
fire and the value or amount of loss and damage to the merchandise insured under said policies.
Because of plaintiff’s non-compliance or failure to submit the required documents and the adjusters’
demand in subsequent letters that the insured submit additional papers, the defendant rejected
plaintiff’s claims and denied liability under their respective policie.

Plaintiff commenced suit in the Court of First Instance of Manila and the defendants answered the
complaint with identical special defenses, to wit: (1) insured’s failure to prove the loss claimed; (2) false
and fraudulent claim; (3) arson or causes not independent of the will fo the insured; and counterclaims
for the annulment of the policies.

ISSUE: Whether or not Yu Ban Chuan is bound to provide the insurance company a proof of loss

RULING: No. Shielding himself under Section 82 of the Insurance Act, the plaintiff asserts that in
submitting his proof of loss he was “not bound ot give such proof as would be necessary in a court of
justice”. The assertion is correct, but does not give him any justification for submitting false proofs. Their
falsity is the best evidence of the fraudulent character and the unmeritoriousness of plaintiff’s claim.

The filing of collection suits for unpaid purchases against Yu Ban Chuan, however, valid these claims may
be, do not legitimize his fraudulent claim against the inssurers in the present case, nor show that the
goods allegedly delivered were at the store when the fire occurred. It is markworthy that in some
instances the debts are only attested by certifications from the creditors.

The plaintiff, Yu Ban Chuan, is a Chinese who came to this country in 1948. His combined income from
1956 through 1958 amounted to only P10,000. Yet in 1959 he appeared as running a business of his own
worht almost half a million peso. The source of the investment, according to him, were unsecured loans
in the fantastic sum of P224,000.00. From these circumstances, and the facts hereinbefore stated, it is
plain that no credence can be given to plaintiff’s claims.
Lee Bog & Company vs The Hanover Fire Insurance Company
G.R. No. L10305, February 28, 1961

FACTS: The assured in these policies is plaintiff-appellee Lee Bog & Company. The insurance covered
“stock of rice and palay (loose and/or in sacks), the property of the assured or held by him in trust, on
commission or on joint account with others and/or for which he is responsible in case of loss”, while
contained during the currency of the policies in the building of the assured in Pangasinan, otherwise
known as the Binalonan, Pangasinan Rice Mill. There was a common “simple loss payable clause” in
favor of the Bureau of Commerce in all policies isseued by defendant-appellants, except in one policy
which also contained a “simple loss payable clause” but in favor of the People’s Surety & Insurance Co.,
Inc.

The Republic of the Philippines intervened in behalf of the Bureau of Commerce as trustee to receive
payment in case of loss under the first ten policies. Crispin A. Fernandez and Quirino C. Martinez also
intervened as alleged depositors of the appellee for the puporse of recovering from the latter and the
appellants, jointly and severally, the value of their alleged deposits in the aggregate sum of P8,390.00.

ISSUE: Whether or not Lee Bog has failed to establish its loss

RULING: No. Lee Bog’s evidence of loss has satisfactorily established the amounts claimed. The quantity
of bonded palay lost and destroyed has been proved by the corresponding quedans (negotiable
warehouse receipts). As shown by these receipts, the outstanding deposits as of May 3, 1953, after
deducting the withdrawals, amounted to 659,513.5 kilos, which at 44 kilos a cavan, would be equivalent
to 14,989 cavanes of palay. These fihures tally with the quantity of palay stated in the proof of loss
covering the bonded palay.

As regards the unbonded palay or that belonging to the appellee, the amount of loss may verily be
determined from the purchase of palay and sales of milled rice that had been regularly recorded in the
columnar cash book at the place of transaction by a certified public accountant. After simple
arithmetical processes, the remaining palay at the time of the fire would be 14,514.7 canvanes
Appellant’s argument that fraud is manifested by the fact that the quantity of palay is still short by 68.3
cavanes on the basis of 14,583 cavanes stated in the proof of loss involves an insignificant error if due
consideration is taken of the cirumstance that it does not exactly and necessarily take two cavanes of
palay to mill a cavan of rice. The type of palay and the dryness of husks affect the process.

Ben L. Chuy vs The Philippine American Life Insurance Company

G.R. No. L-6672, June 29, 1954

FACTS: Eutiquiano P. Nava, an insurance agent for the Lincoln National Life Insurance Company,
managed to convince Dee Se to insure himself at P25,000. Dee Se’s application was approved and was
issued on May 8, 1950; Another policy for the same amount was issued to Dee Se on June 10, 1950 after
all the necessary formalities had been completed.

Paula Dolores Sendaydiego, an agent of Philamlife, also managed to convince Dee Se to obtain insurance
from the company for P25,000. On May 2, 1950, a policy was issued to Dee Se for the sum of P25,000.
Dee Se requested another policy for the amount of P25,000. The application was approved and Dee Se
was issued another policy for the sum of P25,000. The premiums of the four policies were duly paid.
On June 22, 1951, Dee Se died of cancer at the Pangasinan Provincial Hospital. His beneficiary, who is
the plaintiff in this case, claimed payment of the amount of the two policies. After seven months of
processing, the defendant sent him a letter stating that he had terminated the two insurance contracts
and refused to pay the amount of the two policies and instead sent two checks in the amounts that
constituted the restitution of the premiums paid, with his interest.

ISSUE: Whether or not the court erred by granting the plaintiff attorney’s fees

RULING: Yes. the New Civil Code Provides that, “In the absence of stipulation, attorney’s fees and
expenses of litigation, other than judicial costs, cannot be recovered, except: . . . (5) Where the
defendant acted in gross and evident bad fatih in refusing to satisfy the plaintiff’s plainly valid, just and
demandable claim;” (Article 2208, Civil Code of the Philippines).

In the present case, we believe that the defendant did not act with manifest and evident bad faith in not
paying the amount of the two policies. The seven-month process demonstrates the caution he has taken
in making sure that Dee Se was the same Jose Dy who had been treated by Dr. Chikiamco for nearly
three years. With Dr. Chikiamco’s information in sight, whoever was in place of Philamlife would have
done the same. If, after a long hearing in which several doctors testified, the Corut has concluded that
Dee Se was not the same Jose Dy, a three-year patient of Dr. Chikiamco, it should not necessarily be
inferred that the defendant has acted with open and evident bad faith. We believe that the lower
court’s decision, ordering the defendant to pay P10,000 for attorney’s fees, is unwarranted. The plaintiff
is the one who must pay them to their lawyer.

RCBC, Uy Chun Bing and Eli D. Lao vs CA and Goyu & Sons, Inc.,
G.R. No. 128833, April 20, 1998

FACTS: Goyu applied for credit facilities and accommodations with RCBC at its Binondo Branch. After
due evaluation, RCBC Binondo Branch, through its key officers, recommended Goyu’s application for
approval by RCBC’s executive committee. A credit facility in the amount of P30 million was initially
granted. Upon Goyu;s application and RCBC ofificers’ recommendation, RCBC executive committee
increased Goyu’s credit facility to P50 million, then to P90 million, and finally to P117 million.

As security, Goyu executed two real estate mortages and two chattel mortgages in favor of RCBC, which
were registered with the Registry of Deeds of Valenzuela, Metro Manila. Goyu committed itself to insure
the mortgaged property with an insurance company approved by RCBC, and subsequently, to endorse
and deliver the insurance policied to RCBC.

Goyu obtained in its name a total of ten insurance policies from Mico. Alchester Insurance Agency, Inc.,
the insurance agent where Goyu obtained the Malayan insurance policies, issued nine endorsements in
favor of RCBC seemingly upon instructions of Goyu. On April 27, 1992, one of Goyu’s facotry building in
Valenzuela was gutted by fire. Consequently, Goyu submitted its claim for indemnity on account of the
loss insured against. Mico denied the claim on the ground that the insurance policies were either
attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance
proceeds were also claimed by other creditors of Goyu alleging better rights to the proceeds than the
insured.

Goyu filed a complaint for specific performance and damages.

ISSUE: Whether or not RCBC as mortgagee, has any right over the insurance policies taken by Goyu, the
mortgagor, in case of the occurrence of loss

RULING: Yes. It is to be noted that nine endorsement documents were prepared by Alchester in favor of
RCBC. The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific
insurance policy in favor of any particular beneficiary or payee other than the insured had not such
named payee or beneficiary been specifically disclosed by the insured itself. It is also significant that
GOYU voluntarily and purposely took the insurance policies from MICO, a sister company of RCBC, and
not just from any other insurance company. Alchester would not have found out that the subject pieces
of property were mortgaged to RCBC had not such information been voluntarily disclosed by GOYU
itself. Had it not been for GOYU, Alchester would not have known of GOYUs intention of obtaining
insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC, and verily,
Alchester would not have endorsed the policies to RCBC had it not been so directed by GOYU.

RCBC, in good faith, relied upon the endorsement documents sent to it as this was only pursuant to the
stipulation in the mortgage contracts. We find such reliance to be justified under the circumstances of
the case. GOYU failed to seasonably repudiate the authority of the person or persons who prepared
such endorsements. Over and above this, GOYU continued, in the meantime, to enjoy the benefits of the
credit facilities extended to it by RCBC. After the occurrence of the loss insured against, it was too late
for GOYU to disown the endorsements for any imagined or contrived lack of authority of Alchester to
prepare and issue said endorsements. If there had not been actually an implied ratification of said
endorsements by virtue of GOYUs inaction in this case, GOYU is at the very least estopped from assailing
their operative effects. To permit GOYU to capitalize on its non-confirmation of these endorsements
while it continued to enjoy the benefits of the credit facilities of RCBC which believed in good faith that
there was due endorsement pursuant to their mortgage contracts, is to countenance grave
contravention of public policy, fair dealing, good faith, and justice. Such an unjust situation, the Court
cannot sanction. Under the peculiar circumstances obtaining in this case, the Court is bound to
recognize RCBCs right to the proceeds of the insurance policies if not for the actual endorsement of the
policies, at least on the basis of the equitable principle of estoppel.

GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of
insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is
made. The peculiarity of the circumstances obtaining in the instant case presents a justification to take
exception to the strict application of said provision, it having been sufficiently established that it was the
intention of the parties to designate RCBC as the party for whose benefit the insurance policies were
taken out. Consider thus the following:

1. It is undisputed that the insured pieces of property were the subject of mortgage contracts entered
into between RCBC and GOYU in consideration of and for securing GOYUs credit facilities from RCBC.
The mortgage contracts contained common provisions whereby GOYU, as mortgagor, undertook to have
the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC.

2. GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO, no less
than a sister company of RCBC and definitely an acceptable insurance company to RCBC.

3. Endorsement documents were prepared by MICOs underwriter, Alchester Insurance Agency, Inc., and
copies thereof were sent to GOYU, MICO, and RCBC. GOYU did not assail, until of late, the validity of said
endorsements.
4. GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended
by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by GOYU to
cover the mortgaged properties.

Zenith Insurance Corporation vs Court of Appeals and Lawrence Fernandez

G.R. No. 85296, May 14, 1990

FACTS: Lawrence Fernandez insured his car for “own damage” under a private car policy with Zenith
Insurance Corporation. On July 6, 1983, the car figured into an accident and suffered actual damages in
the amount of P3,640.00. After allegedly being given a run around by Zenith for two (2) months,
Fernandez filed a complaint with the Regional Trial Court of Cebu for sum of money and damages
resulting from the refusal of Zenith to pay the amount claimed.

Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the terms and
conditions of the contract which Fernandez rejected.

ISSUE: Whether or not the award of moral damages, exemplary damages and attorney’s fees is proper

RULING: Yes. The award of damages in case of unreasonable delay in the payment of insurance claims is
governed by the Philippine Insurance Code. It is clear under the Insurance Code, in case of unreasonable
delay in the payment of the proceeds of an insurance policy, the damages that may be awarded are: 1)
attorney’s fees; 2) other expenses incurred by the insured person by reason of such unreasonable denial
or withholding of payment; 3) interest at twice the ceiling prescribed by the Monetary Board of the
amount of the claim due the injured; and 4) the amount of the claim. As regards the award of moreal
and exemplary damages, the rules under the Civil Code of the Philippines shall govern.

On the other hand, exemplary or corrective damages are imposed by way of example or correction for
the public good. In the case of Noda v. Cruz-Arnaldo, exemplary damages were not awarded as the
insurance company had not acted in wanton, oppressive or malevolent manner. The same is tru in the
case at bar.

The amount of P5,000.oo awarded as attorney’s fees is justified under the circumstances of this case
considering that there were other petition’s filed and defended by private respondent in connection
with this case. As regards the actual damages incurred by Fernandez, the amount of P3,640.00 had been
established before the trial court and affirmed by the appellate court. The appellate court correctly
ruled that the deductions of P250.00 and P274.00 as deductible franchise and 205 depreciation on parts,
respectively claimed by Zenith as agreed upon the contract, had no basis.

4. Right of Subrogation

Federal Express Corporation vs American Home Assurance Company and Philam Insurance Company
G.R. No. 150094, August 18, 2004

FACTS: Smithkline Beecham of Nebraaska, USA delivered to Burlington Air Express, an agent of Federal
Express Corporation, a shipment of 109 cartons of veterinary biologicals for delivery to consignee
Smithkline and French Ovreseas Company in Makati City, Metro Manila. That same day, Burlington
insured the cargoes in the amount of $39,339.00 with American Home Assurance Company. The
following day, Burlington turned over the custody of said cargoes to Federal Express which transported
the same to Manila.

On February 10, 1994, Darion Dioneda, upon discovering that the cargoes were stored only in a room
with two (2) air conditioners running to cool the place instead of a refrigerator, asked an employee of
Cargohaus why the cargoes were stored in the “cool room” only, the latter told him that the cartons
where the vaccines were contained specifically indicated therein that it should not be subjected to hot
or cold temperature. Samples of the same were taken and brought to the Bureau of Animal Industry of
the Department of Agriculture in the Philippines by Smithkline for examination wherein it was
discovered that the “Elisa reading of the vaccinates sera are below the positive reference serum.”

As a consequence of the foregoing result of the veterinary biologics test, Smithkline abandoned the
shipment and, declaring “total loss” for the unusable shipment, filed a claim with AHAC through its
representative in the Philippines, the Philam Insurance Co., Inc. which recompensed Smithkline for the
whole amount of $39,339.00. Thereafter, respondents filed an action for damages against petitioner
imputing negligence on either or both of them in the handling of the cargo.

ISSUE: Whether or not petitioner’s claim that respondents have no personality to sue because the
payment was made by the respondents to Smithkline when the insured under the policy is Burlington
Air Express is devoid of merit

RULING: Yes. Upon the receipt of the insurance proceeds, the consignee (Smithkline) executed a
subrigation Receipt in favor of respondents. The latter were thus authorized “to file claims and begin
suit against any such carrier, vessel, person, corporation or governemt.” Undeniably, the consignee had
a legal right to receive the goods in the same condition it was delivered for transport to petitioner. If
that right was violated, the consignee would have a cause of action against the person responsible
therefor.

Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the
insurer’s entitlement to the subrogaiton pro tanto – being of the highest equity – equips it with a cause
of action in case of a contractual breach of negligence. Furhter, the insurer’s subrogatory right to sure
for recovery under the bill of lading in case of loss of or damages to the cargo is jurisprudentially upheld.

In the exercise of its subrigatory right, an insurer may procees against an erring carrier. To all intents and
purposes, it stands in the place and in substitution of the consignee. A fortiori, both the insurer and the
consignee are bound by the contractual stipulations under the bill of lading.

Aboitiz Shipping Corporation vs Insurance Company of North America

G.R. No. August 6, 2008

FACTS: MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies procured a
marine insurance policy from ICNA UK Limited of London. The insurance was for a transshipment of
certain wooden work tools and workbenches purchased dor the consignee Science Teaching
Improvement Project, Ecotech Center, Sudlon Lahug, Cebu City, Philippines. ICNA issued and “all-risk”
open marine policy.
The cargo, packed inside one container can, was shipped “freight prepaid” from Hamburg, Germany. A
clean bill of lading was issued by Hapag-Lloyd which stated the consignee to be STIP, Ecotech Center,
Sudlon Lahug, Cebu City. On July 26, 1993, the cargo was received by Aboitiz Shipping Corporation
through its duly authorized booking representative, Aboitiz Transport System. The bill of lading issued by
Aboitiz contained the notation “grounded outside warehouse” On, August 2, 1993, the vessel containing
the container van left Manila en route to Cebu City.

When the shipment arrived in Cebu City, Mayo B. Perez, the Claims Headof petitioner, received a
telephone call informing him that the cargo sustained water damage. Perez found that except for the
bottom of the crate which was slightly broken, the crate itself appeared to be completely dry and had no
water marks. But he confirmed that the tools which were stored inside the crate were already corroded.
He further explained that the “grounded outside warehouse” notation in the bill of lading referrefd only
to the container can bearing the cargo.

On September 21, 1993, the consignee filed a formal claim with Aboitiz in the amount of P276,540.00
for the damaged conditionof the goods. Aboitiz refused to settle the claim. On October 4, 1993, ICNA
paid the amount of P280,176.92 to consignee. A subrogation receipt was duly signed by Willig. ICNA
formally advised Aboitiz of the claim and subrogation receipt executed in its favor. Despite follow-ups,
however, no reply was received from Aboitiz.

ISSUE: Whether or not ICNA is the real party-in-interest that possess the right of subrogation to claim
reimbursement from Aboitiz

RULING: Yes. MSAM accepted the term of the Open Policy when it signed and accepted the policy. The
acceptance operated as an acceptance of authority of the agents. Hence, a formal indorsement of the
policy to the agent in the Philippines was unnecessary for the latter to exercise the rights of the insurer.
The policy benefits any subsequent assignee, or holder, including the consigneem who may file claims
on behalf of the assured. This is in keeping with Section 57 of the Insurance Code.

Respondent’s cause of action is founded on it being subrogated to the rights of the consignee of the
damaged shipment. The right of subrogation springs from Article 2207 of the Civil Code. Upon payment
of the consignee of indemnity for damage to the insured goods, ICNA’s entitlement to subgrocation
equipped it with a cause of action against petitioner in case of a contractual breach or negligence. This
right of subrogation, however, has its limitations. First, both the insurer and the consignee are bound by
the contractual stipulations under the bill of lading. Second, the insurer can be subrogated only to the
rights as the insured may have against the wrongdoer. If by its own ats after receiving the payment from
the insurer, the insured releases the wrongdoer who caused the loss from liability, the insurer loses its
claim against the latter.

Vicente G. Henson, Jr, vs UCPB General Insurance Co., Inc.

G.R. No. 223134, August 14, 2019

FACTS: National Arts Studio and Color Lab leased the front portion of the ground floor of a two (2)-
storey building then owned by petitioner. In 1999, NASCL gave up its initial lease and instead, leased the
right front portion of the ground floor and the entire second floor of the said building, and made
renovations with the building’s piping assembly. Meanwhile, Copylandia Office Systems Corp. moved in
to the ground floor.
On May 9, 2006, a water leak occurred in the building and damaged Copylandia’s various equipment,
causing injury to it in the amount of P2,062,640.00. As the said equipment was insured with respondent,
Copylandia filed a claim with the former. Eventuallym, the two parties settled for the amount of
P1,326,342.76. This resulted in respondent’s subrogation to the rights of Copylandia over all claims and
demands arising from the said incident. Respondent, then, as subrogee to Copylandia’s rights demanded
from, inter alia, NASCL for the payment of the aforesaid claim, but to no avail. Thus, it filed a complaint
for damages against NASCL before the Regional Trial Court.

ISSUE: Whether or not respondent’s claim has yet to prescribe

RULING: No. Following the principles of subrogation, the insurer only step into the shoes of the insured
and therefore, for purposes of prescription, inherits only the remaining period within which the insured
may file an action against the wrongdoer. To be sure, the prescriptive period of the action that the
insured may file against the wrongdoer begins at the time that the tort was committed and the
loss/injury occurred against the insured. The indemnification of the insured by the insurer only allows it
to be subrogated to the former’s rights, and does not create a new reckoning point for the cause of
action that the insured originally has against the wrongdoer.

In this case, it is undisputed that the water leak damage incident, which gave rise to Copylandia’s cause
of action against any possible defendants, including NASCL and petitioner, happened on May 9, 2006. As
this incident gave rise to an obligation classified as a quasi-delict, Copylandia would have only had four
(4) years, or until May 9, 2010, within which to file a suit to recover damages. When Copylandia’s rights
were transferred to respondent by virute of the latter’s payment of the former’s insurance claim on
November 2, 2006, as evidenced by the Loss and Subrogation Receipt, respondent was likewise bound
by the same prescriptive period. Since it was only on: (a) May 20, 2010 when respondent made an
extrajudicial demand to NASCL, and thereafter, filed its complaint; (b) October 6, 2011 when respondent
amended its complaint to implead CHI as party-defendant; and (c) April 21, 2014 when respondent
moved to further amend the complain in order to implead petitioner as party-defendant in lieu of CHI,
prescription – if adjudged under the present parameters of legal subrogation under this Decision –
should have already set in.

Gaisano Cagayan, Inc. vs Insurance Company of North America

G.R. No. 147839, June 8, 2006

FACTS: Intercapitol Marketing Corporation and Levi Strauss Phils. Inc. separately obtained from
respondent fire insurance policied with book debt endorsements. The insurance policied provide for
coverage on “book debts in connection with ready-made clothing materials which have been sold or
delivered to various customers and delalers of the Insured anywhere in the Philippines”. The policies
defined book debts as the “unpaid account still appearing in the Book of Account of the Insured 45 days
after the time of the loss covered under this Policy”.

Petitioner is a customer and deal of the products of IMC and LSPI. The Gaisano Superstore Complex in
Cagayan de Oro City, owned by petitioner, was consumed by fire. Inlcuded in the items lost or destroyed
in the fire were stocks of ready-made clothing material sold and delivered by IMC and LSPI. Respondent
then paid the claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their rights
against petitioner. Several demands were made upon the petitioner but these went unheeded. This
prompted respondent to file a complaint for damages against petitioner.
ISSUE: Whether or not there was automatic subrogation under Article 2207 of the Civil Code in favor of
respondent

RULING: Yes. With respect to IMC, the respondent has adequately established its claim. The
subrogation, receipt, by itself, is suffiicient to establish not only the relationship of respondent as insurer
and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subroation
accrues simply upon payment by the insurance company of the insurance claim. Respondent’s action
against petitioner is squarely sanctioned by Article 2207 of the Civil Code.

As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. There is no proof
of full settlement of the insurance claim of LSPI; no subrogation receipt was offered in evidence. Thus,
there is no evidence that respondent has been subrogated to any right which LSPI may have against
petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner’s case for recovery of the
amount of P535,613.00.

Equitable Insurance Corporation vs Transmodal International, Inc.,

G.R. No. 223592, August 07, 2017

FACTS: Sytengco Enterprises Corporation hired Transmodal International, Inc. to clear from the customs
authorities and withdraw, transport, and deliver to its warehouse, cargoes consisting of 200 cartons of
gum Arabic. The said cargoes arrived in Manila on August 14, 2014. In the preliminary survey, it was
found that 187 cartons had water marks and the contents of the 13 wet cartons were partly hardened.
On Ocotber 13, 2004, a re-inspection was conducted and it was found that the contents of the randomly
opened 20 cartons were about 40% to 60% hardened, while 8 cartons had marks of previous wetting.
The computed loss payable was at P728,712.00 after adjustment of 50% loss allowance.

Sytengco demanded from respondent Transmodal the payment of P1,457,424.00 as compensation for
total loss of shipment. On that same date, Equitable Insurance, as insurer of the cargoes per Marine
Open Policy paid Sytengco’s claim. Sytengco then signed a subrogation receipt and loss receipt in favor
of Equitable Insurance. As such, Equitable Insurance demanded from Transmodal reimbursement of the
payment given to Sytengco. Thereafter, Equitable Insurance filed a complaint for damages invoking its
right as subrogee after paying Sytengco’s insurance claim and averred that respondent Transmodal’s
fault and gross negligence were the causes of the damages sustained by Sytengco’s shipment.

ISSUE: Whether or not petitioner’s subrogation right is improper

RULING: No. A perusal of the records would show that petitioner is correct in its claim that the marine
insurance policy was offered as evidence. In fact, in the questioned decision of the CA, the latter,
mentioned such policy. As such, respondent had the opportunity to examine the said documents or to
object to its presentation as pieces of evidence. The records also show that respondent was able to
cross-examine petitioner’s witness regarding the said documents. Thus, it was well established that
petitioner has the right to step into the shoes of the insured who has a direct cause of action against
herein respondent on account of the damages sustained by the cargoes. “Subrogationis the substitution
of one person in the place of another with reference to a lawful claim or right, so that he who is
substituted succeeds tot eh rights of the other in relation to a debt or claim, including its remedies or
securities. The right of subrogation springs from Article 2207 of the Civil Code.
The records further shoe that petitioner was able to accomplish its obligation under the insurance policy
as it has paid the assured of its insurance claim as evidenced by, among others, the Subrogation Receipt,
Loss Receipt, Check Voucher, and Equitable PCI Bank Check. The payment by the insurer to the insured
operates as an equitable assignement to the insurer of all the remedies which the insured may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon payment by the insurance company of the
insurance claim.