INSURANCE LAW III – MANRESA 2020-2021 1
INSURANCE LAW
TY-SY Case Summaries
PART THREE: NON-LIFE INSURANCE
WHAT MAY BE INSURED AGAINST
HEIRS OF COSCOLLUELA v. RICO GENERAL
G.R. No. 84628 | November 16, 1989
Digest by: Ryan James Amistad
DOCTRINE OF THE CASE
The burden of proof to show that the insurer is not liable because
of an excepted risk is on the insurance company. Where the
insurer denies liability for a loss alleged to be due to a risk not
insured against, but fails to establish the truth of such fact by
concrete proofs, the Court rules that the insurer is liable under the
terms and conditions of the policy by which it has bound itself.
Facts of the case
Heirs of Ildefonso Coscoluella, Sr. Inc. (“The Heirs”, for brevity) is a
domestic corporation and the registered owner of an Isuzu Pickup
truck. The vehicle was insured with Rico General Insurance
Corporation (Rico General) for a consideration of P100,000.00.
On August 28, 1987 and within the period covered by the insurance,
the insured vehicle was severely damaged and rendered unserviceable
when fired upon by a group of unidentified armed persons at
Hacienda Puyas, Barangay Blumentritt, Murcia, Negros Occidental.
The Heirs filed its claim of P80,000.00 for the repair of the vehicle but
Rico General in a letter dated October 8, 1987, refused to grant it.
Rico General’s Defense:
Rico General alleged that the firing was "an indirect consequence
of rebellion, insurrection or civil commotion." That the firing by
armed men is a risk excepted under the provisions in their insurance
policy:
The Company shall not be liable under any Section of the Policy
in respect of:—
3. Except in respect of claims arising under Sections I and II of
the policy, any accident, loss, damage or liability directly
or indirectly, proximately or remotely occasioned by,
contributed to by or traceable to, or arising out of, or in
connection with flood, typhoon, hurricane, volcanic eruption,
earthquake or other convulsion of nature, invasion, the act of
foreign enemies, hostilities or warlike operations (whether
war be declared or not), civil commotion, mutiny, rebellion,
insurrection, military or usurped power, or by any direct or
indirect consequences of any of the said occurrences and in
the event of any claim hereunder, the insured shall prove
that the accident, loss or damage or liability arose
independently of, and was in no way connected with, or
occasioned by, or contributed to, any of the said
occurrences, or any consequence thereof, and in default of
such proof, the Company shall not be liable to make any
payment in respect of such claim."
The Heirs argued that the quoted provision does not apply in the
absence of an official governmental proclamation of any of the above
enumerated conditions.
Issue
WON Rico General is liable in the insurance policy. -YES
Ruling
The burden of proof to show that the insurer is not liable because
of an excepted risk is on Rico General.
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Where the insurer denies liability for a loss alleged to be due to a
risk not insured against, but fails to establish the truth of such
fact by concrete proofs, the Court rules that the insurer is liable
under the terms and conditions of the policy by which it has
bound itself. In this case, the dismissal order without hearing and
reception of evidence to prove that the firing incident was indeed a
result of a civil commotion, rebellion or insurrection constitutes
reversible error on the part of the trial court.
The Court stresses that it would be a grave and dangerous procedure
for the courts to permit insurance companies to escape liability through
a motion to dismiss without the benefit of hearing and evidence every
time someone is killed, or as in this case, property is damaged in an
ambush. The question on the nature of the firing incident for the
purpose of determining whether or not the insurer is liable must first be
threshed out and resolved in a full-blown trial.
The evidence to be received does not even have to relate to the
existence of an official government proclamation of the nature of the
incident because the latter is not an explicit requirement in the
exception clause resolved in a mere motion to dismiss and is, for
purposes of this petition for review on certiorari, immaterial. This
particular issue on when to take cognizance of a rebellion for purposes
of the law on contracts and obligations should have been developed
during the trial on the merits or may have to await remedial legislation
in Insurance Law or a decision in a more appropriate case.
Rico General's invocation of the exception clause in the insurance
policy as the basis for its non-liability and the consequent dismissal of
the complaint is without merit. It is an established rule that when the
terms of an insurance contract contain limitations on liability, the
court "should construe them in such a way as to preclude the
insurer from non-compliance with his obligations." A policy of
insurance with a narration of exceptions tending to work a forfeiture of
the policy shall be interpreted liberally in favor of the insured and
strictly against the insurance company or the party for whose benefit
they are inserted.
The facts alleged in the complaint do not give a complete
scenario of the real nature of the firing incident. Hence, it was
incumbent upon the trial judge to have made a deeper scrutiny
into the circumstances of the case by receiving evidence instead
of summarily disposing of the case. This case does not present a
pure question of law but demands a factual determination of whether
the incident was a result of events falling under the exceptions to the
liability of insurance company contained in the policy of insurance.
PRATS v. PHOENIX
G.R. No. L-28607 | February 21, 1929
Digest by: Carlo L. Bahalla
DOCTRINE OF THE CASE
Prats cannot recover under the insurance policy because under
Section 89 of the Insurance Code, the insurer is not liable when
the thing is lost due to the willful act or in connivance with the
insured. The Supreme Court concluded that not only the plaintiff
caused the fire to be set, or connived therein, but also that it
submitted fraudulent proof
Facts of the case
On July 10, 1923, Prats, Hanna and Bejar registered two mercantile
partnerships for the purpose of engaging in mercantile business. It was
apparently contemplated, in so far as any legitimate function may have
been intended, that Prats & Co. should be an importing firm, while
Hanna, Bejar & Co. should engage in retail business.
On May 27, 1924, Prats, acting for Hanna, Bejar & Co., purchased a
one-story building at 95 Plaza Gardenia , Manila and soon thereafter,
he begun to assemble in this place the stock of merchandise which
was the subject of insurance in this case.
Nine policies aggregating P160,000 were taken out by Prats in the
name of Hanna, Bejar & Co. on merchandise stored at 95 Plaza

Gardenia. At the time these policies were taken out, the valuation of
the goods then in said store could not have been more than P68,753.
Prats procured from the agent of Phoenix in this case policy of
insurance No. 600217 in the amount of P200,000 on merchandise
stored in the same place. The nine policies already procured had been
taken out in the name of Hanna, Bejar & Co. But when Prats applied to
the agent of Phoenix for the P200,000 policy last above mentioned, the
agent told him that if Hanna or Bejar had any interest in the stock to be
insured the policy could not be issued for the reason of the bad
reputation of Hanna and Bejar. Accordingly, at the request of Prats &
Co., it assured the agent that Hanna and Bejar were not partners in
Prats & Co. With the writing of this policy, the amount of insurance on
the merchandise at 95 Plaza Gardenia was increased to P360,000,
while the value of the stock at that time was not probably much in
excess of P158,000. On August 11, 1924, or just ten days before the
fire, Prats took out an additional policy for P50,000 in the name of
Prats & Co. on the same stock. This made a total insurance of
P410,000 on the contents of the store at 95 Plaza Gardenia. At the
time, according to Prats himself, the evaluation of the merchandise
then in the place was not in excess of P230,000. Furthermore, Prats,
about this time, caused the first nine policies, which had been taken
out in the name of Hanna, Bejar & Co., to be indorsed to Prats &Co.,
thereby making this firm the sole insured firm with respect to this stock
of merchandise.
On August 21, 1924, a fire broke out in the bodega.
After the fire, Prats & Co., instituted and action for the purpose of
recovering from Phoenix Insurance Co. the sum of P117,800.60, with
interest, by reason of a loss alleged to have been sustained from a fire.
Pheonix Insurance Co., admitted the insurance of the policy of
insurance but alleged that the fire in question had been set by the
plaintiff, or with its connivance, and that the plaintiff had submitted
under oath to Phoenix a fraudulent claim of loss, in contravention of the
express terms of the policy.
Issue
Whether or not Prats & Co., may recover the proceeds from the
insurance policy. –NO
Ruling
So far as liability under the policy of insurance which is the subject of
this action is concerned, the Supreme Court ruled that Phoenix has
sufficiently established that the fire was set by the procurance or
connivance of the plaintiff for the purpose of defrauding the insurer and
that the plaintiff, after the fire, submitted to Phoenix a fraudulent claim
supported by the false proof, in violation of the terms of the policy.
The proof submitted by Phoenix tends to show that obscure
manipulations were used by the plaintiff in the storing of merchandise
at 95 Plaza Gardenia and in the removal of part of the contents of the
bodega before the fire. It appears that 45 cases of old stock of Hanna,
Bejar & Co. were shipped to Manila before the fire but, instead of being
taken directly to 95 Plaza Gardenia, they were housed for a time in the
back part of the lower floor of the Bazar Filipino in which Prats & Co.
and Hanna, Bejar & Co. had their offices. Moreover, a quantity of
merchandise purchased from the place shortly before the fire, instead
of directly to 95 Plaza Gardenia. And that new merchandise purchased
from Talambiras Brothers was substituted for the old stock in boxes
from Hanna, Bejar & Co. leaving the old goods to be deposited in the
bodega to swell the debris of the fire.
There is also evidence that on various occasions before the fire, goods
were removed from the bodega to the store of B. Abolafia, at Manila,
where they were received without invoice. Some of these goods were
subsequently sent away by Abolafia for sale in the provinces.
The Supreme Court also noted that about the time the bodega at 95
Plaza Gardenia had been purchased, Domingo Romero assisted one
person, Mr. Osete, to rent a place close to the rear of the building at 95
Plaza Gardenia. Osete appears to have been the individual chosen for
the role of incendiary, and he slept at the place mentioned until the
night of the fire. A night or two before the fire, Osete, accompanied by
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one Antonio Prats, appears to have brought two cans of petroleum to
his lodging place. After the fire had been started in the plaintiff's
bodega, Osete planted his boy at the alarm box on Plaza Gardenia
with instructions to stop anyone who might attempt to turn in the alarm
by telling him that he (the boy) had already done so.
Domingo Romero, who had been living at 97 Plaza Gardenia, had,
before the fire, taken his family temporarily to the home of Prats in
Pasay. And after the fire was over, the family moved back to 97 Plaza
Gardenia, although that place had been considerably damaged by the
flames. Also, among those who suffered from the fire were the
members of the Artigas family and one Juan Atayde who were living on
the side of the subject bodega. Soon after the fire, Domingo Romero
quietly passed a 100-peso bill into the hand of Artigas family and to
Juan Atayde. It is self-evident that the gifts thus made by Romero had
other motives than pure charity and that the money probably came
from some other source than his own modest earnings.
As to Prats’ attempt to deceive Phoenix with respect to the extent of
the loss, the point relied upon by the Supreme Court to sustain such
conclusion was that after the fire, the plaintiff presented to the adjuster
certain cost sheets and copies of supposed invoices in which the
prices and expenses of importation of a quantity of goods were stated
at double the true amount. The adjuster soon discovered the artificial
nature of these documents, and, with his consent, they were withdrawn
by Prats and subsequently destroyed. At the hearing, Prats stated that
these documents had been fabricated in order that they might be
exhibited to intending purchasers of the goods, thereby making it
appear to them that the cost of the merchandise had been much
greater than it in fact was — a ruse which is supposed to have been
entirely innocent or at least not directed against the insurer. But a
question naturally arises as to the purpose which these documents
might have been made to serve if the fire, as doubtless intended by its
designers, had been so destructive as to remove all vestiges of the
stock actually involved.
Therefore, the Supreme Court concluded that not only the plaintiff
caused the fire to be set, or connived therein, but also that it submitted
fraudulent proof.
EAST v. GLOBE
G.R. No. L-35848 | November 22, 1932
Digest by: Pet
Facts of the case
Three actions were instituted by the East Furniture in the CFI of Manila
to recover the full amount of three fire insurance policies from three
different insurers (Globe and Rutgers, Commercial Union and
Continental Insurance). These complaints allege that the East
Furniture insured against fire the articles in its establishment. A fire
broke out in The East’s establishment, destroying the articles insured.
The East presented to the insurance companies an inventory of the
insured furniture which was destroyed by the fire, the value of which,
before or at the time of the fire, amounted to P52,061.99; and that of
the furniture destroyed by the fire some was saved, of the value of
P5,000, more or less.
The defendants (the insurance companies) contend that the fire was of
intentional original and that the claims of loss were false and
fraudulent.
1st Issue
WON the fire was of intentional origin – YES
Ruling
The evidence shows that the fire started in the second floor of the
building. That floor was constructed of wood. Immediately after the fire
was extinguished, the deputy chief of the fire department investigated
and found three cans containing gasoline and kapok (according to
google, it’s a fibrous cotton-like material) saturated with gasoline. 
Filoteo Miranda, the proprietor and manager of the East, made no
attempt to deny the presence of these materials while testifying as a

witness for the East. Eugenio Pineda testified that he had known
Filoteo for about 15 years and about six months before the fire, Filoteo
intimated to him that he intended to burn the East Furniture Store
because it was on the verge of bankruptcy.  pieces of furniture in the building at the time of the fire and
This information was communicated to Atty de Silva which
communicated it to the insurance agent which caused one of the
policies (the policy issued by Smith, Bell and Co.) to be cancelled. On
the night of the fire, Eugenio saw the cashier of the East enter the back
door of the building, and that ten minutes later, the building burned.  made or used in support thereof, or if any fraudulent means or devices
Atty de Silva corroborated the testimony of Eugenio and further
testified that sometime after the cancellation of the policy, he called
Filoteo to ask why the Smith, Bell and Co insurance was cancelled,
saying “Why should we not cancel the policy when we heard from
Eugenio that you were going to burn the establishment” to which
Miranda replied “That is confidential, please don’t repeat to anybody”.
It further appears that at the time of the fire, the East was heavily
indebted to the Manila Finance & Discount Corporatin, BPI and Atty
Mendoza.
The SC is thus led to conclude that the fire in question was of
intentional origin and was caused with the connivance of the East.  Loss, The immediate cause of which was the peril insured
nd
2 Issue
WON the claims were false and fraudulent – YES
Ruling
Overstated claims
The proofs of loss presented to the respective insurance companies
was attached an inventory of the furniture claimed to have been in the
building at the time of the fire. But a comparison between the prices
listed in the inventory listed by the plaintiff and the list of furniture sold
by the plaintiff tends to show that the value claimed against the
insurance companies is much higher than the selling price. 
The only book the plaintiff produced and offered in evidence to support
the validity of the inventories was a new book, only the first six pages
of which contain entries. The first page consisting of a testament of
assets and liabilities as of December 1928, and the second to the fifth
page consisting of a list of furniture and its price, from which list the
inventory in question appears to have been copied. This seems
significant in view of Filoteo’s testimony that at the end of the two
preceding years, he took a physical inventory and in view of his
inability to account for the whereabouts of those alleged previous
inventories. 
It appears that after the fire, at the request of the insurance companies,
a furniture manufacturer named Guevara, made an inventory of all the
damaged and undamaged furniture found in the building after the fire.
The inventory contains 202 pieces of furniture which to Guevara’s
appraisal totals P4,184.60. It is to be recalled that the plaintiff claimed
that there were 506 pieces of furniture with a total value of P52,061.99.
The plaintiff alleged that the inventory by Guevera was not reliable
since Guevera was not a competent appraiser. However, it was found
that Guevera had been engaged in the manufacture of furniture in
Manila for 18 years. His inventory seems to be reasonable as the same
furniture was subsequently sold by the sheriff at public auction and
brought only the sum of P2,650.
The plaintiff also alleged that Guevera’s inventory is not reliable since
some of the furniture found in the building at the time of the fire may
have been completely consumed by the fire. However, considering that
most of the insured furniture was located in the ground floor of the
building, which was not damaged by the fire, and that the fire lasted
only twelve minutes and damaged only the second floor where
comparatively few pieces of furniture found at the time of the fire; and
considering the testimony of the deputy chief and Geuvera that judging
from the condition of the remains of the fire, they believed not a single
piece of furniture was completely consumed, the SC cannot bring
themselves to believe that 304 pieces of wooden furniture to have
been entirely consumed without leaving any vestige. 
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Regardless of any difference of opinion as to the value of the insured
furniture and the extent of the damage caused thereto by the fire in
question, the fact that the insured only had approximately 202
sought to compel the insurance companies to pay for 506 pieces
conclusively shows that its claim was not honestly conceived.
Condition 12 of each of the insurance policies sued upon provides that
"if the claim be in any respect fraudulent, or if any false declaration be
are used by the Insured or anyone acting on his behalf to obtain any
benefit under this policy; or, if the loss or damage be occasioned by the
wilful act, or with the connivance of the Insured, — all benefit under this
policy shall be forfeited."
PARIS-MNL PERFUMERY CO. v. PHOENIX
G.R. No. L-25845 | December 17, 1926
Digest by: Maria Margarita Chua
DOCTRINE OF THE CASE
against, if the proximate cause thereof was NOT excepted in
the contract
"Section 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.
"Section 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
Facts of the case
Paris is a domestic corporation engaged in the manufacture of
perfumery and toilet articles while Phoenix is engaged in the fire
insurance business in the Philippine Islands. It issued to Paris its fire
insurance policy for P13,000, insuring plaintiff's property against
fire and by two other insurance company for P1,200 and P5,000
respectively,
On July 4, 1924, the property was completely destroyed by fire for the
total loss to the plaintiff of P38.025.56; Paris filed for a claim but
defendant wrongfully and unjustly refused to pay it;
Defendant denied any liability and refused arbitration, and as a special
defense alleges that:
1. the policy in question was issued "to one Peter Johnson,
as proprietor of Paris-Manila Perfumery Co.," and that the
company was not the insured named in the policy, that the
insurance was of no legal force and effect with the company.
2. As a second special defense, it is alleged that "the policy of
insurance did not cover any loss or damage occasioned
by explosion," and that the loss was occasioned by an
explosion, and was not covered by the policy.
3. As a third special defense, it is alleged that the policy
provides that, if the claim is fraudulent, and that any false
declaration was made or used to obtain it, all benefits are
thereby forfeited; that the claim of the plaintiff is fraudulent as
to the quantity and value of the insured property at the time
of the fire.
4. As a fourth special defense, it is alleged that the policy
becomes forfeited if a loss is occasioned by the willful
act or connivance of the insured, and that the loss in
question was caused by the willful act of Peter Johnson, and
it prays that plaintiff's complaint be dismissed, with costs.
Unless otherwise expressly stated in the policy the insurance does not
cover

(h) Loss or damage occasioned by the explosion; but loss or damage
by explosion of gas for illuminating or domestic purposes in a building
in which gas is not generated and which does not form a part of any
gas works, will be deemed to be loss by fire within the meaning of this
policy.
Issue
W/N Phoenix should be liable for the loss because there was no
explosion which is an exemption from the policy - YES
Ruling
If it be a fact that the fire resulted from an explosion that fact, if proven,
would be a complete defense, the burden of the proof of that fact is
upon the defendant, and upon that point, there is a failure of proof
lower court found as a fact that there was no fraud in the insurance,
and that the value of the property destroyed by the fire was more than
the amount of the insurance.
It will be noted that section 5 excludes not only the damages which
may immediately result from an earthquake, but also any damage
which may follow the earthquake, and that section 6 excludes only the
damages which are the direct result of the explosion itself, and that it
does not except damages which occurred from the fire occuring after
the explosion, even though the explosion may have been the primary
cause of the fire. But assuming, without deciding, that if it be a fact that
the fire resulted from an explosion that fact, if proven, would be a
complete defense, the burden of the proof of that fact is upon the
defendant, and upon that point, there is a failure of proof. There is no
competent evidence as to whether the explosion caused the fire or the
fire caused the explosion.
The defendant has assigned numerous and different errors, but
exclusive of the first and second, they are largely question of facts and
objections to the admissibility of the evidence, and upon all of the
material questions of fact, the lower court found for the plaintiff. That is
to say, the lower court found as a fact that there was no fraud in the
insurance, and that the value of the property destroyed by the fire was
more than the amount of the insurance. The defendant having issued
its policy which was in legal force and effect at the time of the fire, it is
bound by its terms and conditions, and the property having been
destroyed, the burden of proof was upon the defendant to show
that it was exempt from liability under the terms and conditions of
the policy, and upon that point, there is a failure of proof.
INSURABLE INTEREST
ANTONINA LAMPANO vs. PLACIDA A. JOSE ET AL.,
G.R. No. 9401 | 1915-03-30
Digest by: Kanal Clooney
DOCTRINE OF THE CASE
Where different persons have different interests in the same
property, the insurance taken by one in his own right and in his
own interest does not in any way inure to the benefit of another.
Facts of the case
 Barretto – constructed the house and took out an insurance
policy in his name.
 Placida – original owner and seller
 Lampano – buyer
Barretto constructed a house for Placida for the agreed price of P6K.
Placida sold the house to Lampano, for the sum of P6K. The house
was destroyed by fire. At the time of the fire Lampano still owed
Placida P2K, and Placida still owed Barretto on the cost of the
construction the sum of P2K.
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After the completion of the house and sometime before it was
destroyed, Barretto took out an insurance policy upon it in his own
name, with the consent of Placida for P4K. After its destruction, he
collected P3.6K from the insurance company, having paid in premiums
P301.50.
Lampano alleged that there was a verbal agreement between her and
Placida, at the time of the purchase and sale of the house, to the effect
that the latter agreed to deliver to her the insurance policy on the
building; that she did not learn that the policy was in the name of
Barretto until after the fire; and that neither Placida nor Barretto has
any right to the insurance or to the money received therefrom.
Placida denied that she agreed to transfer the policy of insurance to
the Lampano and alleging:
(a) that the insurance was taken out and paid for by Barretto
before the sale of the house to the Lampano;
(b) that Barretto did this because he had constructed the house
and she was owing him therefor; and
(c) that the insurance was entirely for the personal account and
in the exclusive interest of Barretto.
Issue
Does Lampano have any right to recover from Barretto any portion of
the insurance money? – NO, the insurance policy is a personal
contract between Barretto and the company.
Ruling
Insurance Policy Only Between Barretto and Company
The policy was in the name of Barretto alone. It was, therefore, a
personal contract between him and the company and not a contract
which ran with the property. According to this personal contract the
insurance policy was payable to the insured without regard to the
nature and extent of his interest in the property, provided that he
had, as we have said, an insurable interest at the time of the making of
the contract, and also at the time of the fire. Where different persons
have different interests in the same property, the insurance taken by
one in his own right and in his own interest does not in any way inure
to the benefit of another.
In the case at bar Barretto assumed the responsibility for the
insurance. The premiums were paid by him without any agreement or
right to recoup the amount paid therefor should no loss result to the
property. It would not, therefore, be in accordance with law and his
contractual obligations to compel him to account for the insurance
money, or any part thereof, to the Lampano, who assumed no risk
whatever.
Barretto had an insurable interest.
He constructed the building, furnishing all the materials and supplies,
and insured it after it had been completed.
TRADERS INSURANCE & SURETY CO vs. GOLANGCO
G.R. No. L-6442| Sep 21, 1954
Digest by: Jurilex Maglinte
DOCTRINE OF THE CASE
Both at the time of the issuance of the policy and at the time of the
fire, plaintiff Golangco was in legal possession of the premises,
collecting rentals from its occupant. It seems plain that if the
premises were destroyed - as they were - by fire, Golangco would
be, as he was, directly damnified thereby; and hence he had an
insurable interest therein (section 13, Insurance Law).
Facts of the case
Lianco and the Archbishop (name not indicated) entered into a contract
of lease on a parcel of land owned by church. As lessee, Lianco
erected a building on the leased portion of the church’s land. Lianco
later transferred ownership of this building to Kaw Eng Si, who later
transferred the same to Golangco. This transfers by Lianco of his right

to lease and the building’ownership were without consent of the
Archbishop. An ejectment case was filed (by Archbishop) and a
decision was rendered judicially recognizing the right of Golangco to
receive rent on the building.
Golangco applied for fire insurance with Trader’s Insurance and
Surety Co. of which Golangco was issued fire insurance policy
stating “that all insurance covered under said policy, includes the 'rent
or other subject matter of insurance in respect of or in connection with
any building or any property contained in any building'. Subsequently,
a fire ravaged the building premises pursuant of which Golangco
requested Trader’s Insurance to pay the insurance amount of 10,000
including the amount of rent P1,100 monthly.
Trader’s insurance refused to pay the insurance as pertaining to the
rent averring that Golangco has no insurable interest therein.
Issue
Whether Golangco has insurable interest (in the property) on the rent
of the building premises which may lawfully/validly be subject of
insurance? – YES.
Ruling
Sec. 13 of the Insurance Code provides that “Every interest in the
property, whether real or personal, or any relation thereto, or liability in
respect thereof of such nature that a contemplated peril might directly
damnify the insured, is an insurable interest.”
By virtue of the contract between Tomas B. Lianco and the Archbishop,
Lianco erected the building of which the premises in question form part
and became owner thereof . He transferred the ownership of the
premises in question to kaw Eng Si, who in turn transferred it to plaintiff
Juan Golangco .Lianco and the actual occupant of the premises
acknowledged plaintiff's right to collect rentals thereon in a
compromise agreement which was incorporated in a judicial judgment.
Both at the time of the issuance of the policy and at the time of
the fire, plaintiff Golangco was in legal possession of the
premises, collecting rentals from its occupant. It seems plain that
if the premises were destroyed - as they were - by fire, Golangco
would be, as he was, directly damnified thereby; and hence he
had an insurable interest therein (section 13, Insurance Law).
It is to be noted that the policy so worded indicates that the fire
insurance policy includes 'rent or other subject matter of insurance
in respect of or in connection with any building or any property
contained in any building'.
The argument of Trader’s Insurance that a policy of insurance must
specify the interest of the insured in the property insured, if he is not
the absolute owner thereof, is not meritorious because it was the
Trader’s, not Golangco, who prepared that policy, and it cannot take
advantage of its own acts to plaintiff's detriment; and, in any case, this
provision was substantially complied with by Golangco when he made
a full and clear statement of his interests to Trader's manager.
Side Issue
The contract between Lianco and the Archbishop only forbade Lianco
from transferring 'his rights as LESSEE but the contracts Lianco made
in favor of Kaw Eng Si and plaintiff Golangco did not transfer such
rights; and hence no written consent thereto was necessary. At worst,
the contract would be voidable, but not a void contract, at the option of
the Archbishop; but this would not deprive Golangco of his insurable
interest until such option were exercised; and it does not appear that it
was ever exercised.
The ejectment case filed by the Archbishop against Lianco did not
remove nor destroy plaintiff's insurable interest: first, because
plaintiff was not a party thereto and cannot be bound thereby; and
second, because the judgment of the Municipal Court, had not been
executed so far as possession of the premises were concerned; so
that, as far as plaintiff Golangco was concerned, his right to the
premises and to the rentals thereon continued to exist when the fire
took place."
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FILIPINO MERCHANTS v. CA
GR. No. 85141 | November 28, 1989
Digest by: Rica Andrea Ortizo
DOCTRINE OF THE CASE
In principle, anyone who has an insurable interest in property who
derives a benefit therefrom or would suffer loss from its destruction
whether he has or has not title in, or lien upon or possession of the
property.
The perfected contract of sale, even without delivery, vests in the
vendee an equitable title, an existing interest over the goods
sufficient to be the subject of insurance.
Facts of the case
In 1976, Choa Tiek Seng insured its shipment of fishmeal with Filipino
Merchants Insurance Company for the sum of P267,653.59 against all
risks. When the goods arrived, it showed that a substantial part
thereon, specifically 227 out of 666 bags, were in bad order condition.
Consequently, Choa Tiek Seng made a formal claim against Filipino
Merchants Insurance Company for P51,568.62. A formal claim of third-
party complaint was also presented by Choa Tiek Seng against the
vessel but Filipino Merchants Insurance refused to pay the claim.
Later, the trial court rendered judgment in favor of Choa Tiek Seng,
which was affirmed by the appellate court.
Filipino Merchants Insurance Company’s contention
Choa does not have insurable interest being only a consignee of the
goods.
Issues
Whether or not Choa Tiek Seng had no insurable interest in the subject
cargo – NO.
Ruling
Choa Tiek Seng, as consignee of the goods in transit, has
insurable interest over the goods.
In principle, anyone who has an insurable interest in property who
derives a benefit therefrom or would suffer loss from its destruction
whether he has or has not title in, or lien upon or possession of the
property.
Choa Tiek Seng, being a vendee/consignee of the goods in transit, has
such existing interest therein as may be the subject of a valid contract
of insurance. His interest over the goods is based on the perfected
contract of sale.
The perfected contract of sale between him and the shipper of the
goods operates to vest in him an equitable title even before he
performed the conditions of the sale. The contract of shipment,
whether under F.O.B., C.I.F., or C. & F., as in this case, is immaterial in
the determination of whether the vendee has an insurable interest or
not in the goods in transit. The perfected contract of sale, even without
delivery, vests in the vendee an equitable title, an existing interest over
the goods sufficient to be the subject of insurance.
The equitable title over the goods subject of the contract of sale is
sufficient enough to be considered as an insurable interest for the
consignee to insure the goods.

CHA v. CA
G.R. No. 124520 | August 18, 1997
Digest by: Ivan Jules Capin
DOCTRINE OF THE CASE
No contract or policy of insurance on property shall be enforceable
except for the benefit of some person having an insurable interest
in the property insured.” A non-life insurance policy such as the
fire insurance policy taken by petitioner spouses over their
merchandise is primarily a contract of indemnity. Insurable interest
in the property insured must exist at the time the insurance takes
effect and at the time the loss occurs. The basis of such
requirement of insurable interest in property insured is based on
sound public policy: to prevent a person from taking out an
insurance policy on property upon which he has no insurable
interest and collecting the proceeds of said policy in case of loss of
the property. In such a case, the contract of insurance is a mere
wager which is void under Section 25 of the Insurance Code.
Facts of the Case
Petitioner-spouses Nilo Cha and Stella Uy-Cha, as lessees, entered
into a lease contract with private respondent CKS Development
Corporation (hereinafter CKS), as lessor.
One of the stipulations of the one (1) year lease contract states:
The LESSEE shall not insure against fire the chattels,
merchandise, textiles, goods and effects placed at any stall
or store or space in the leased premises without first
obtaining the written consent and approval of the LESSOR.  by the petitioner-spouses over their merchandise. This insurable
If the LESSEE obtain(s) the insurance thereof without the
consent of the LESSOR then the policy is deemed
assigned and transferred to the LESSOR for its own
benefit;
The Cha spouses insured against loss by fire the merchandise inside
the leased premises for Five Hundred Thousand (P500,000.00) with
the United Insurance Co., Inc. without the written consent of private
respondent CKS.
A fire broke out inside the leased premises. When CKS learned of the
insurance earlier procured by the Cha spouses (without its consent), it
wrote the insurer (United) a demand letter asking that the proceeds of
the insurance contract (between the Cha spouses and United) be paid
directly to CKS, based on its lease contract with the Cha spouses.
United refused to pay CKS. Hence, the latter filed a complaint against
the Cha spouses and United.
Issue
W/N CKS, as lessor, had an insurable interest over the merchandise of
Sps. Cha when they acquired the fire insurance policy from United
Insurance - NO. CKS has no insurable interest over the
merchandise of Sps. Cha. They cannot claim the proceeds of the
fire insurance policy.
Ruling
Insurable Interest in Non-Life Insurance Defined
Sec. 18 of the Insurance Code provides:
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Sec. 18. No contract or policy of insurance on property
shall be enforceable except for the benefit of some person
having an insurable interest in the property insured.
A non-life insurance policy such as the fire insurance policy taken by
petitioner-spouses over their merchandise is primarily a contract of
indemnity. Insurable interest in the property insured must exist at the
time the insurance takes effect and at the time the loss occurs.
The basis of such requirement of insurable interest in property insured
is based on sound public policy: to prevent a person from taking out
an insurance policy on property upon which he has no insurable
interest and collecting the proceeds of said policy in case of loss of the
property.
A Non-Life Insurance Without Insurable Interest Becomes A
Wagering Contract and is Void
The contract of insurance is a mere wager which is void under Section
25 of the Insurance Code, which provides:
Sec. 25. Every stipulation in a policy of Insurance for the
payment of loss, whether the person insured has or has
not any interest in the property insured, or that the policy
shall be received as proof of such interest, and every
policy executed by way of gaming or wagering, is void.
CKS Has No Insurable Interest Over the Properties of the Sps.
Cha
In the present case, it cannot be denied that CKS has no insurable
interest in the goods and merchandise inside the leased premises
under the provisions of Section 17 of the Insurance Code which
provide:
Sec. 17. The measure of an insurable interest in property
is the extent to which the insured might be damnified by
loss of injury thereof.
Therefore, respondent CKS cannot, under the Insurance Code — a
special law — be validly a beneficiary of the fire insurance policy taken
interest over said merchandise remains with the insured, the Cha
spouses. 
The automatic assignment of the policy to CKS under the provision of
the lease contract previously quoted is void for being contrary to law
and/or public policy. The proceeds of the fire insurance policy thus
rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-
petitioners).
GARCIA v. HONGKONG
G.R. No. 20341 | September 1, 1923
Digest by: Julie Andrea Ceros
Facts of the Case
 On the 19th of March, 1918, Domingo Garcia, then a merchant and
owner of a bazaar known as "Las Novedades" in the district of Legaspi,
municipality and Province of Albay, entered into a contract with the
defendant whereby it insured his merchandise in the sum of P15,000 at
a premium of P300 per annum. In consideration of such premium, the
defendant issued its fire insurance policy No. 1951 in favor of the
plaintiff, not on the merchandise in the building, but on the building
which contained the merchandise. 
That for such reason the policy does not contain the true agreement
and intent of the parties; that the plaintiff was not the owner of, and did
not have any interest in, the building; and that the policy was so issued
through error, carelessness and negligence of the defendant.
On august 30, 1919, Garcia executed a mortgage to the plaintiff Bank
on the merchandise insured by the defendant, and that with the
consent of the defendant, the plaintiff endorsed the policy to the Bank.

Thereafter, on February 6, 1920, and while the policy was in force and
effect, a fire took place which destroyed the merchandise in the
building of the value of P20,000, together with the building itself
Demand was made upon the defendant for the payment of P15,000, as
provided for in the policy, and that payment was refused.  merchandise and the reason why he wanted it.
RTC ruled in favor of plaintiff. 
Defendant contended that the lower court
 in denying its motion to make the complaint more
definite and certain
 in permitting Garcia over its objection to testify to
the contents of certain documents
 in refusing to strike them from the record
  in finding that the defendant, through its agent,
knew that it was the merchandise which was
insured and not the building
 in failing to find the plaintiffs, and Garcia in
particular, guilty of negligence;
 in finding that the defendant committed error in
making out the policy to cover the building rather
than the merchandise; in rendering the judgment;
and in denying defendant's motion for a new trial.
Issue
Whether or not Hongkong Fire & Marine Insurance should be held
liable for the loss of the building. YES
Ruling
It appears that the policy was in the English language, of which the
plaintiff Garcia is ignorant. When he received it he noticed that the
amount P15,000 was correct, and never personally made a further
investigation. He was the exclusive owner of the merchandise in the
building which, at the time of the fire, was of the probable value of
P20,000. He did not own or claim any interest in the building. Desiring
to have his merchandise insured for P15,000, he wrote a letter to "El
Pilar," requesting that firm to have it insured, as a result of which, the
policy in questions was issued and delivered to him, and it was issued
on the building with Garcia did not own, and did not cover the
merchandise which he did own.
In the letters sent by the bank to the Hongkong Fire & Marine
Insurance, It clearly appears that where the word "merchandise" was
written in the letter of August 6th above quoted, some other word had
been previously written and erased, and the word "merchandise" was
the written.
It is possible that when the Bank wrote the letter, it knew of the error in
the issuance of the policy. But that is a matter of inference or
conjecture only. Outside of the appearance of the letter itself, there is
no evidence that the Bank had any acknowledge of the error.  of the fact that Lim Cuan Sy was only one of several partners
Garcia had his dealings with the officials of the branch Bank at Legaspi
where he was doing business as a merchant, of which the officials of
that Bank had knowledge. Under such facts, the presumption of
knowledge, if any, on the part of the Bank would be that the policy was
on the merchandise. Be that as it may, when the defendant received
the letter from the Bank, it knew from its own records that the policy
was issued on the building, and, as a matter of fair dealing, it should
have notified the Bank that the policy was on the building. It will be
noted that the letters in question were all written several months before
the fire.  Court ruled that there was no misrepresentation by Lim Cuan Sy.
In the final analysis, Garcia wanted insurance upon a stock of goods,
which he owned, and he received and paid for a policy on a building,
which he did not own, and while the policy was in force and effect, both
the building, which he did not own, and the stock of merchandise,
which he did own, were completely destroyed by fire. Garcia was a well
known merchant, and his merchandise was in the building described in
the policy.
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In a well-written opinion, the trial court analyzed the evidence and
made findings of fact upon which it rendered judgment for the plaintiff.
It is claimed that the letters and the copy of the telegram introduced in
evidence were hearsay and not competent. If for no other purpose,
they were competent to show that Garcia wanted insurance on his
 
The defense is purely technical, and is founded upon the contention
that plaintiff cannot recover, because the policy covers loss on a
erred 
building, and does not cover loss of merchandise.
It is very apparent that a mistake was made in the issuance of the
policy.
The opinion of the trial court further points out that, under the pleadings
and proof, there is ground for the contention that the plaintiff would be
entitled to recover on the policy for the loss of the building.
LIM CUAN SY v. NORTHERN
G.R. No. 31952 | November 13, 1930
Digest by: Imee Dalagdagan
DOCTRINE OF THE CASE
A policy insuring merchandise against fire is not invalidated by the
fact that the name of the insured in the policy is incorrectly written
"Lim Cuan Sy" instead of "Lim Cuan Sy & Co.," the latter being the
proper legal designation of the firm, where it appears that the
designation "Lim Cuan Sy" was commonly used as the name of
the firm in its business dealings and that the error in the
designation of the insured in the policy was not due to any
fraudulent intent on the part of the latter and did not mislead the
insurer as to the extent of the liability assumed.
Facts of the case
On May 5, 1927, Lim Cuan Sy filed a claim for the purpose of
recovering from Northern Assurance Company he sum of P10,000,
upon a policy of insurance issued through its Manila agency upon a
stock of textiles stored in a bodega which had been destroyed by
fire on December 28, 1926. The claim was in connection to the 155
boxes of textiles, with an alleged value of P91,425.46. The bodega
was located at No. 62, Calle Urbiztondo, San Nicolas, Manila.
Northern Assurance company denied the claim on the following
grounds:
⮚ First, that there was a misrepresentation by the insured as to
the nature and extent of his interest in the insured goods.
Northern calls attention to the fact that the true owner of the
insured goods was the mercantile entity Lim Cuan Sy & Co.,
whereas the policies were written in the name of Lim Cuan
Sy only, without any revelation having been made to the insurer
in the business and that he was not the sole owner.
⮚ Secondly, that immediately prior to the fire, the plaintiff
caused a large part of the goods to be removed
surreptitiously from the bodega and that the goods so
removed were included in the claim of loss, thereby rendering
the claim fraudulent.
Issue
WON Lim Cuan Sy committed misrepresentation - NO, the Supreme
Ruling
The proof, shows that the agent who wrote the policy made no
inquiry as to the interest of Lim Cuan Sy in the insured goods, and he
merely asked in what name the insurance should be written.
The proof further shows that, in accordance with the Chinese genius
for mixing names, the name Lim Cuan Sy was commonly used to

indicate the business pertaining to the mercantile entity Lim Cuan
Sy & Co.
Thus, the following are established:
⮚ The store at 174 Rosario Street was rented in the name of Lim
Cuan Sy;
⮚ The goods in the same store are insured in the name of Lim
Cuan Sy; and
⮚ The obligations contracted by the concern with the Philippine
National Bank for goods bought on credit were contracted in the
name of Lim Cuan Sy.
The agent knew of the identity of the insured
There is no question but what when this policy of insurance was
written, the agent of the company knew that he was insuring a
stock of goods the identity of which was not in doubt, and which
pertained to a business commonly known as the business of Lim
Cuan Sy. The Court is of the opinion that the misrepresentation
complained of was not fraudulently made, and it could only have
resulted from ignorance on the part of the insured.
Northern Assurance company cannot escape liability
Inasmuch as the defendant was content to take the premium
corresponding to the insurance on goods of the value of those then
contained in the bodega, the company should not now be permitted
to escape responsibility merely upon the lack of conformity
between the name used in the policy and the true name of the
legal entity existing under our law. If questions had been put to the
agent of the insured at the time the policies were written and
misrepresentation had been deliberately made with respect to the
ownership, a different problem would have been presented.
There is no proof that the entire 155 boxes were destroyed by the
fire. Thus, Lim cannot recover the whole value for the said boxes.
Of these bands enough pieces were found to have served, as is
supposed, for about 73 boxes; and as the plaintiff claims that 155
boxes were destroyed, it is therefore insisted by the appellant that
there were not in the place at the time of the fire as many boxes as the
plaintiff claims. With respect to the remnants of textiles found in the
debris, it appears that no vestige remained of 14 kinds of goods
comprising the 30 items included in the claim of loss, and it is therefore
insisted by the appellant that there could not reasonably have been in
the place anything like the quantity of goods claimed by the plaintiff.
Thus, it cannot be considered wholly incredible that half of the iron
bands might have been entirely destroyed.
CHUCUHE* v. INSURANCE COMMISSION
G.R. No. L- 55397 | February 29, 1988
*In the FT, Chuache.
Digest by: Pearl Leanne Eugenio
DOCTRINE OF THE CASE:
Party having admitted the material allegations in the complaint,
has the burden of proof to show that petitioner has no insurable
interest over the insured property at the time the contingency took
place. Upon that point, there is a failure of proof, the decision must
be adverse to it.
The respondent insurance company having issued a policy in
favor of herein petitioner which policy was of legal force and effect
at the time of the fire, it is bound by its terms and conditions. Upon
its failure to prove the allegation of lack of insurable interest on the
part of the petitioner, respondent insurance company is and must
be held liable.
Facts of the case
Azucena Palomo acquired from Gonzales a parcel of land and building
located in Davao City. Palomo assumed the mortgage of the building in
favor of S.S.S. Accredited Group of P50,000.
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Azucena Palomo obtained a loan from Tai Tong Chuache, Inc. in the
amount of P100,000 and a mortgage of land and building in favor of
the latter was executed as a security to the loan.
Arsenio Chua, representative of Tai Tong Chuache insurered the
latter’s interest with Travellers Multi-Indemnity Corporation for
P100,000 (P70,00 for the building and P30,00 fir the contents thereof).
Pedro Palomo secured a Fire insurance Policy covering the building for
P50,000 with Zenith Insurance Corporation and another was procured
from Philippine British Assurance Company for the same building for
P50,000 and P70,00 for its contents.
On July 1975, the building and the contents were totally razed by fire.
Based on the computation of the loss, including the Travellers Multi-
Indemnity, Zenith Insurance, Phil. British Assurance and S.S.S.
Accredited Group of Insurers, paid their corresponding shares of the
loss. Complainants were paid the following:
- Philippine British Assurance Co = P41,546.79
- Zenith Insurance Corporation = P11,877.14
- S.S.S. Group of Accredited Insurers = P5,936.57
Demand was made from respondent Travellers Multi-Indemnity for its
share in the loss but the same was refused. Hence, complainants
demanded from, the other three (3) respondents the balance of each
share in the loss based on the computation of the Adjustment
Standards Report excluding Travellers Multi-Indemnity in the amount of
P30,894.31.
Philippine British Assurance and Zenith Insurance admitted the
material allegations in the complaint denied liability on the ground that
the claim of the complaints had already been waived, extinguished or
paid. While SSS Accredited informed the commission the balance had
been paid.
Travellers Insurance, on its part, admitted the issuance of the policy
covering the furniture and building of complainants was secured by a
certain Arsenio Chua, mortgage creditor, for the purpose of protecting
his mortgage credit against the complainants; that the said policy was
issued in the name of Azucena Palomo, only to indicate that she owns
the insured premises; that the policy contains an endorsement in favor
of Arsenio Chua as his mortgage interest may appear to indicate that
insured was Arsenio Chua and the complainants; that the premiums
due on said fire policy was paid by Arsenio Chua; that respondent
Travellers is not liable to pay complainants.
Travellers Insurance alleged that the Intervenor is not entitled to
indemnity under its Fire Insurance Policy for lack of insurable interest
before the loss of the insured premises and that the complainants,
spouses Pedro and Azucena Palomo, had already paid in full their
mortgage indebtedness to the intervenor.
Insurance Commission: Absolved respondent insurance company
from liability on the basis of the commissioner's conclusion that at the
time of the occurrence of the peril insured against petitioner as
mortgagee had no more insurable interest over the insured property. It
was based on the inference that the credit secured by the mortgaged
property was already paid by the Palomos before the said property was
gutted down by fire.
Issue/s
WON Tai Tong Chuache has an insurable interest over the building
and it contents which served as a security mortgage to the money
loaned from it. - YES.
Ruling
INSURANCE COMPANY FAILED TO ASSAIL THE VALIDITY OF
THE INSURANCE POLICY.
It will be recalled that respondent insurance company did not assail the
validity of the insurance policy taken out by petitioner over the

mortgaged property. Neither did it deny that the said property was
totally razed by fire within the period covered by the insurance.
Respondent, as mentioned earlier advanced an affirmative defense of
lack of insurable interest on the part of the petitioner alleging that
before the occurrence of the peril insured against the Palomos had
already paid their credit due the petitioner. Respondent having
admitted the material allegations in the complaint, has the burden of
proof to show that petitioner has no insurable interest over the
insured property at the time the contingency took place.
Upon that point, there is a failure of proof. Respondent, it will be noted,
exerted no effort to present any evidence to substantiate its claim,
while petitioner did. For said respondent's failure, the decision must be
adverse to it.
PALOMOS STILL INDEBTED TO TAI TONG CHUACHE.
The record of the case shows that the petitioner to support its claim for
the insurance proceeds offered as evidence the contract of mortgage
which has not been cancelled nor released. It has been held in a long
line of cases that when the creditor is in possession of the document of
credit, he need not prove nonpayment for it is presumed.8 The validity
of the insurance policy taken by petitioner was not assailed by private
respondent. Moreover, petitioner's claim that the loan extended to the
Palomos has not yet been paid was corroborated by Azucena
Palomo who testified that they are still indebted to herein
petitioner.
The respondent insurance company having issued a policy in favor of
herein petitioner which policy was of legal force and effect at the
time of the fire is bound by its terms and conditions. Upon its
failure to prove the allegation of lack of insurable interest on the part of
the petitioner, respondent insurance company is and must be held
liable.
SAN MIGUEL v. LAW UNION
G.R. No. 14300 | January 19, 1920
Digest by: Edjan Sumugat Parreño
DOCTRINE OF THE CASE:
A mortgagee of an insured property has undoubtedly an insurable
interest in the insured property, but could only recover on the
policy to the extent of the credit secured by the mortgage.
Facts of the case
On January 12, 1916, D. P. Dunn, then the owner of the property to
which the insurance relates, mortgaged the same to the San Miguel
Brewery to secure a debt of P10,000. In the contract of mortgage
Dunn agreed to keep the property insured at his expense to the full
amount of its value in companies to be selected by the Brewery
Company and authorized the latter in case of loss to receive the
proceeds of the insurance and to retain such part as might be
necessary to cover the mortgage debt. Antiono Brias, general
manager of SMB made verbal application to Law Union and Rock
Insurance company for insurance to the extent of P15,000.00 upon
said property. The 15,000 insurance was shared by Law Union and
Compania de Seguros for 7,500 each.
On March 1917, Dunn sold the insured property to defendant Harding
BUT NO ASSIGNMENT OF INSURANCE of the insurance policies
(property ra ang nabaligya, wala nalabot ang insurance sa property).
The property insured has been destroyed by fire causing SMB to file a
complaint for the recovery of the sum amounting to P15,000 as
insurance proceeds from Law Union and Compania de Seguros.
Harding also sought the recovery of insurance proceeds.
Issues
1. Whether or not Harding can recover the insurance proceeds? NO.
He is not party to the contract of insurance. His claim is merely of
an equitable and subsidiary in nature and must be made effective
through SMB in whose name the contract is written.
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2. Whether or not SMB is entitled to the full insurance proceeds
amounting to P15,000.00?– NO, SMB, as mortgagee of the insured
property, undoubtedly has an insurable interest therein; but it
could not in any event, recover upon these policies an amount in
excess of its mortgage credit.
Ruling
First Issue
Section 50 of the Insurance Act provides that:
"the insurance shall be applied exclusively to the proper interest of the
person in whose name it is made unless otherwise specified in the
policy"
Section 19 provides:
"a change of interest in any part of a thing insured unaccompanied by
a corresponding change of interest in the insurance, suspends the
insurance to an equivalent extent, until the interest in the thing and the
interest in the insurance are vested in the same person”
Section 55 provides:
"the mere transfer of a thing insured does not transfer the policy, but
suspends it until the same person becomes the owner of both the
policy and the thing insured."
Section 16 of the Insurance Act provides that:
“the measure of an insurable interest in property is the extent to which
the insured might be damnified by loss or injury thereof”
The court held that Harding cannot recover from the insurance
proceeds because had it been that the intent of the SMB and the
insurance companies to protect not only the interest of the mortagee
but also the residuary interest of the owner, they could have written it
as such, and if ever there was a mistake in the written form issued, the
court can reform the contract to conform with the parties’ agreement.
However, it is clear in this case that there is no proof sufficient to prove
that the parties’ SMB and the insurance companies intended to cover
the risk of the owner in addition to that of the mortgagee.
The facts of the case suggest that from the testimony of Antonio Brias,
it was SMB who was paying for the insurance premiums, instead of
Dunn (as stipulated in the Mortgage Contract) and it is very clear in the
record that there is no indication that SMB requested the insurance
companies to write insurance upon the insurable interest of the owner
or intended to make themselves liable to that extent.
Second Issue
Section 16 provides:
"the measure of an insurable interest in property is the extent to which
the insured might be damnified by loss or injury thereof" 
From the facts of the case, the court observed that upon the verbal
application Antonio Brias, it informed the insurance company that the
brewery was interested only as mortgagee. It would, therefore, be
impossible for the Brewery to recover anything beyond the amount
secured by its mortgage on the insured property.
RCBC v. CA
G.R. No. 128833 | April 20, 1998
Digest by: Gladys Hazel Perocho
DOCTRINE OF THE CASE:
A mortgagor and a mortgagee have separated 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.
Facts of the case

GOYU applied for credit facilities and accommodations with RCBC. A
credit facility in the amount of P30 million was initially granted. The
credit facility was alter increased to P50 million, then to P90 million,
and finally to P117 million.
As security for its credit facilities with RCBC, GOYU executed two real
estate mortgages and two chattel mortgages in favor of RCBC. GOYU
obtained in its name a total of ten insurance policies from MICO. In
February 1992, 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 factory buildings 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 proceeds were also claimed by other
creditors of GOYU alleging better rights to the proceeds than the
insured.
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. Based
on their stipulations in the mortgage contracts, GOYU was supposed to
endorse these insurance policies in favor of, and deliver them, to
RCBC. However, because these endorsements do not bear the
signature of any officer of GOYU, the trial court, as well as the Court of
Appeals, concluded that the endorsements are defective.
Issue
WON RCBC, as mortgagee, has any right over the insurance policies
taken by GOYU, the mortgagor, in case of the occurrence of loss. –
YES
Ruling
A mortgagor and a mortgagee have separated 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.
There is no question that GOYU could insure the mortgaged property
for its own exclusive benefit. In the present case, 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.
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.
On equitable principles, particularly on the ground of estoppel, the
Court is constrained to rule in favor of mortgagor RCBC.
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
insure 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
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
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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.
PARAMOUNT v. CASTRO
GR No. 195728 and GR No. 211329 | April 19, 2016
Digest by: Rikka Cassandra Reyes
DOCTRINE OF THE CASE:
A mortgage redemption insurance is a , a device for the protection
of both the mortgagee and the mortgagor: On the part of the
mortgagee, it has to enter into such form of contract so that in the
event of the unexpected demise of the mortgagor during the
subsistence of the mortgage contract, the proceeds from such
insurance will be applied to the payment of the mortgage debt,
thereby relieving the heirs of the mortgagor from paying the
obligation. In a similar vein, ample protection is given to the
mortgagor under such a concept so that in the event of death, the
mortgage obligation will be extinguished by the application of the
insurance proceeds to the mortgage indebtedness.
Facts of the case
In 2004, the PPSBI applied for and obtained insurance from
Paramount, which issued Group Master Policy No. G-086. Under
Section 20, Article IV of the said policy, "all death benefits shall be
payable to the creditor, PPSBI, as its interest may appeal."
Virgilio J. Castro - Cherry's husband and Glenn's father - obtained a
housing loan from the PPSBI in the amount of Pl .5 million.  PPSBI
required Virgilio to apply for a mortgage redemption insurance (MRI)
from Paramount to cover the loan.
In his application for the said insurance policy, Virgilio named Cherry
and Glenn as beneficiaries. 16 Paramount issued Certificate No.
041913 subject to the terms and conditions of Group Master Policy No.
G-086
Virgilio died on Februar7 26, 2009 of septic shock. Consequently, a
claim was filed for death benefits under the individual insurance
coverage issued under the group policy.
Paramount however denied the claim, on the ground of the failure of
Virgilio to disclose material information, or material concealment or
misrepresentation by answering "no" to questions on whether he had
any adverse health history and whether he had sought medical advice
or consultation concerning it. Paramount learned that in 2005, Virgilio
had sought consultation in a private hospital after complaining of a dull
pain in his lumbosacral area. 
Because of the alleged material concealment or misrepresentation, it
declared Virgilio's individual insurance certificate (No. 041913)
rescinded, null, and absolutely void from the very beginning.
TIMELINE OF CASES FILED:
July 2,2009 - Paramount filed a Complaint with the RTC and prayed
that Application and Insurance Certificate No. 041913 covering the
individual insurance of Virgilio be declared null and void by reason of
material concealment and misrepresentation. 
October 29, 2009 - The Castros filed a motion to include the PPSBI as
an indispensable party-defendant but was denied. 
They argued that due to the death of Virgilio, and by virtue of Group
Policy No. G-086 PPSBI stepped into the shoes of Cherry and Glen
under the principle of "indemnity, subrogation, or any other reliefs"
found in Section 22, Rule 6 of the Rules of Court.

This motion was likewise denied, on the ground that "what the
defendants herein want is the introduction of a controversy that is
entirely foreign and distinct from the main cause." The Castro’s Motion
for Reconsideration was again denied in a Resolution dated 19 April
2010.
October 4, 2010- the CA partially granted the Petition by allowing a
third-party complaint to be filed against the PPSBI. It ruled that the
Castro’s were freed from the obligation to pay the bank by virtue of
subrogation, as the latter would collect the loan amount pursuant to the
MRI issued by Paramount in Virgilio's favor.
April 11, 2011- Paramount filed a Petition for Review under Rule 45,
arguing that the case could be fully appreciated and resolved
without involving the PPSBI as a third-party defendant in Civil
Case No. 09-599.
Issue
W/N Paramount was correct in opposing PPSBI's inclusion as a third-
party defendant, because it is only seeking the nullification of Virgilio's
individual insurance certificate, and not the group insurance policy
forged between it and the PPSBI – NO
Ruling
If Paramount succeed in having the individual insurance certificate
nullified, the PPSBI shall then proceed against the Castro’s.  specific property of the debtor.
This would then contradict the provisions of the group insurance policy
that ensure the direct payment by the insurer to the bank which states
that:  Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue
“Notwithstanding the provision on Section 22 "No Assignment" of
Article IV Benefit Provisions, and in accordance with provisions of
Section 6 "Amendment of this Policy" under Article II General
Provisions of the Group Policy, it is hereby agreed that all death
benefits shall be payable to the Creditor, Philippine Postal
Savings Bank as its interest may appeal”
In allowing the inclusion of the PPSBI as a third-party defendant,
the Court recognizes the inseparable interest of the bank (as
policyholder of the group policy) in the validity of the individual
insurance certificates issued by Paramount. The PPSBI need not
institute a separate case, considering that its cause of action is
intimately related to that of Paramount as against the Castro’s.
The soundness of admitting a third-party complaint hinges on causal
connection between the claim of the plaintiff in his complaint and a
claim for contribution, indemnity or other relief of the defendant against
the third-party defendant. 48 In this case, the Castro’s stand to incur a
bad debt to the PPSBI - the exact event that is insured against by
Group Master Policy No. G-086 - in the event that Paramount
succeeds in nullifying Virgilio's Individual Insurance Certificate.
Moreover, the same defenses the third-party plaintiff has against the
original plaintiff are just some of the allegations a third-party defendant
may raise in its answer. Section 13 even gives the third-party
defendant the prerogative to raise a counterclaim against the
original plaintiff in respect of the latter's original claim against the
defendant/third-party plaintiff.
The CA correctly ruled that to admit the Castro’s Third-Party
Complaint, in which they can assert against the PPSBI an
independent claim they would otherwise assert in another action,
would prevent multiplicity of suits. 
Considering also that the original case from which these Present
Petitions arose has not yet been resolved, the Court deems it proper to
have all the parties air all their possible grievances in the original case
still pending with the RTC.
What is a mortgage redemption insurance?  Insurance Company’s Contention:
In Great Pacific Life Assurance Corp. v. Court of Appeals, a device for
the protection of both the mortgagee and the mortgagor:
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On the part of the mortgagee, it has to enter into such form of contract
so that in the event of the unexpected demise of the mortgagor during
the subsistence of the mortgage contract, the proceeds from such
insurance will be applied to the payment of the mortgage debt, thereby
relieving the heirs of the mortgagor from paying the obligation. In a
similar vein, ample protection is given to the mortgagor under such a
concept so that in the event of death, the mortgage obligation will be
extinguished by the application of the insurance proceeds to the
mortgage indebtedness.
GAISANO CAGAYAN v.
INSURANCE COMPANY OF NORTH AMERICA
G.R. No. 147839 | June 8, 2006
Digest by: Ryan James Amistad
DOCTRINE OF THE CASE
In an obligation to deliver a generic thing, the loss or destruction of
anything of the same kind does not extinguish the obligation. This
rule is based on the principle that the genus of a thing can never
perish (Genus nunquam perit). An obligation to pay money is
generic; therefore, it is not excused by fortuitous loss of any
Facts of the case
Jeans.
Levi Strauss Phils. Inc. (LSPI) is the local distributor of products
bearing trademarks owned by Levi Strauss & Co..
IMC and LSPI separately obtained a fire insurance policies with
book debt endorsements from the Insurance Company of North
America (Insurance Company, for brevity). The insurance policies
provide for coverage on "book debts in connection with ready-made
clothing materials which have been sold or delivered to various
customers and dealers 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."
Gaisano Cagayan Inc. (Gaisano) is a customer and dealer of the
products of IMC and LSPI. On February 25, 1991, the Gaisano
Superstore Complex in Cagayan de Oro City, owned by Gaisano, was
consumed by fire. Included in the items lost or destroyed in the fire
were stocks of readymade clothing materials sold and delivered by
IMC and LSPI.
On February 4, 1992, the Insurance Company filed a complaint for
damages against Gaisano. It alleges that IMC and LSPI filed with the
Insurance Company their claims under their respective fire insurance
policies with book debt endorsements; that as of February 25, 1991,
the unpaid accounts of Gaisano on the sale and delivery of ready-
made clothing materials with IMC was P2,119,205.00 while with LSPI it
was P535,613.00; that the Insurance Company paid the claims of IMC
and LSPI and, by virtue thereof, the Insurance Company was
subrogated to their rights against Gaisano; that the Insurance
Company made several demands for payment upon Gaisano but these
went unheeded.
Gaisano’s Defense:
It could not be held liable because the property covered by the
insurance policies were destroyed due to fortuities event or force
majeure.
1. While ownership over the ready-made clothing materials was
transferred upon delivery to Gaisano, IMC and LSPI have

insurable interest over said goods as creditors who stand to
suffer direct pecuniary loss from its destruction by fire;
2. That Gaisano is liable for loss of the ready-made clothing
materials since it failed to overcome the presumption of
liability under Article 1265 of the Civil Code; and
3. That the fire was caused through Gaisano’s negligence in
failing to provide stringent measures of caution, care and
maintenance on its property because electric wires do not
usually short circuit unless there are defects in their
installation or when there is lack of proper maintenance and
supervision of the property.
Issue
WON Gaisano is liable for the unpaid accounts. -YES
Ruling
The questioned insurance policies provide coverage for "book debts in
connection with ready-made clothing materials which have been sold
or delivered to various customers and dealers of the Insured anywhere
in the Philippines."; and 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." Nowhere is it provided in the
questioned insurance policies that the subject of the insurance is the
goods sold and delivered to the customers and dealers of the insured.
What were insured against were the accounts of IMC and LSPI
with petitioner which remained unpaid 45 days after the loss
through fire, and not the loss or destruction of the goods
delivered.
Under Art. 1504 (1) of the Civil Code, where delivery of the goods
has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has
been retained by the seller merely to secure performance by the
buyer of his obligations under the contract, the goods are at the
buyer's risk from the time of such delivery. Thus, when the seller
retains ownership only to insure that the buyer will pay its debt, the risk
of loss is borne by the buyer. Accordingly, Gaisano bears the risk of
loss of the goods delivered.
Gaisano's argument that it is not liable because the fire is a fortuitous
event under Article 1174 of the Civil Code is misplaced. It must be
stressed that the insurance in this case is not for loss of goods by
fire but for Gaisano's accounts with IMC and LSPI that remained
unpaid 45 days after the fire. Accordingly, Gaisano’s obligation is
for the payment of money. Where the obligation consists in the
payment of money, the failure of the debtor to make the payment even
by reason of a fortuitous event shall not relieve him of his liability. The
rationale for this is that the rule that an obligor should be held exempt
from liability when the loss occurs thru a fortuitous event only holds
true when the obligation consists in the delivery of a determinate thing
and there is no stipulation holding him liable even in case of fortuitous
event. It does not apply when the obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "in an obligation to deliver a
generic thing, the loss or destruction of anything of the same kind does
not extinguish the obligation." If the obligation is generic in the sense
that the object thereof is designated merely by its class or genus
without any particular designation or physical segregation from all
others of the same class, the loss or destruction of anything of the
same kind even without the debtor's fault and before he has incurred in
delay will not have the effect of extinguishing the obligation. This rule is
based on the principle that the genus of a thing can never perish
(Genus nunquam perit). An obligation to pay money is generic;
therefore, it is not excused by fortuitous loss of any specific property of
the debtor.
Thus, whether fire is a fortuitous event or Gaisano was negligent are
matters immaterial to this case. What is relevant here is whether it
has been established that Gaisano has outstanding accounts with
IMC and LSPI.
THE INSURANCE POLICY
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ANG GIOK v. SPRINGFIELD
56 Phil 375 | December 31, 1931
Digest by: Maria Margarita Chua
DOCTRINE OF THE CASE
In the first place, it is well settled that a rider attached to a policy is
a part of the contract, to the same extent and with like effect as it
actually embodied therein.
In the second place, it is equally well settled that an express
warranty must appear upon the face of the policy, or be clearly
incorporated therein and made a part thereof by explicit reference,
or by words clearly evidencing such intention. 
Also refer to Section Sec. 50 of the Insurance Code
Facts of the case
Ang Giok Chip doing business under the name and style of Hua Bee
Kong Si was formerly the owner of a warehouse situated at No. 643
Calle Reina Regente, City of Manila. The contents of the warehouse
were insured with the three insurance companies for the total sum of
P60,000. One insurance policy, in the amount of P10,000, was taken
out with the Springfield Fire & Marine Insurance Company. The
warehouse was destroyed by fire on January 11, 1928, while the policy
issued by the latter company was in force.
Predicated on this policy the plaintiff instituted action in the Court of
First Instance of Manila against the defendant to recover a proportional
part of the loss coming to P8,170.59. Four special defenses were
interposed on behalf of the insurance company, one being planted on a
violation of warranty F fixing the amount of hazardous goods which
might be stored in the insured building. The trial judge in his decision
found against the insurance company on all points, and gave judgment
in favor of the plaintiff for the sum of P8,188.74.
WARRANTY F
It is hereby declared and agreed that during the currency of this policy
no hazardous goods be stored in the Building to which this insurance
applies or in any building communicating therewith, provided, always,
however, that the Insured be permitted to stored a small quantity of the
hazardous goods specified below, but not exceeding in all 3 per cent of
the total value of the whole of the goods or merchandise contained in
said warehouse, viz; . . . .
Issue
W/N warranty F was null and void – NO
Ruling
The applicable law is found in the Instance Act, Act No. 2427, as
amended, section 65 reading:
"Every express warranty, made at or before the execution of a policy,
must be contained in the policy itself, or in another instrument signed
by the insured and referred to in the policy, as making a part of it." As
the Philippine law was taken verbatim from the law of California, in
accordance with well settled canons of statutory construction, the court
should follow in fundamental points, at least, the construction placed by
California courts on a California law. Unfortunately the researches of
counsel reveal no authority coming from the courts of California which
is exactly on all fours with the case before us. However, there are
certain consideration lying at the basis of California law and certain
indications in the California decisions which point the way for the
decision in this case.
We, therefore, think it wrong to hold that the California law represents a
radical departure from the basic principles governing the law of
insurance. We are more inclined to believe that the codification of the

law of California had exactly the opposite purpose, and that in the
language of the Federal court it was but an affirmance of the generally
accepted doctrine applicable to such contracts. This being true, we turn
to two of such well recognized doctrines.
In the first place, it is well settled that a rider attached to a policy is a
part of the contract, to the same extent and with like effect as it actually
embodied therein.
In the second place, it is equally well settled that an express warranty
must appear upon the face of the policy, or be clearly incorporated
therein and made a part thereof by explicit reference, or by words
clearly evidencing such intention.  Hence, Philippine Phoenix commenced action to recover the amount of
Section 65 of the Insurance Act and its counterpart, section 265 of the
Civil Code of California, will bear analysis as tested by reason and
authority. The law says that every express warranty must be
"contained in the policy itself." The word "contained," according to the
dictionaries, means "included," inclosed," "embraced,"
"comprehended," etc. When, therefore, the courts speak of a rider
attached to the policy, and thus "embodied" therein, or of a warranty
"incorporated" in the policy, it is believed that the phrase "contained in
the policy itself" must necessarily include such rider and warranty. As
to the alternative relating to "another instrument," "instrument" as here
used could not mean a mere slip of paper like a rider, but something
akin to the policy itself, which in section 48 of the Insurance Act is
defined as "The written instrument, in which a contract of insurance is
set forth." In California, every paper writing is not necessarily an
"instrument" within the statutory meaning of the term. The word
"instrument has a well defined definition in California, and as used in
the Codes invariably means some written paper or instrument signed
and delivered by one person to another, transferring the title to, or
giving a lien, on property, or giving a right to debt or duty. (Hoag vs.
Howard [1880], 55 Cal., 564; People vs. Fraser[1913], 137 Pac., 276.)
In other words, the rider, warranty F, is contained in the policy itself,
because by the contract of insurance agreed to by the parties it is
made to form a part of the same, but is not another instrument signed
by the insured and referred to in the policy as forming a part of it.
 We cannot believe that it was ever the legislative intention to insert in
the Philippine Law on Insurance an oddity, an incongruity, entirely out
of harmony with the law as found in other jurisdiction, and destructive
of good business practice.
We have studied this case carefully and having done so have reached
the definite conclusion that warranty F, a rider attached to the face of
the insurance policy, and referred to in contract of insurance, is valid
and sufficient under section 65 of the Insurance Act.
PHILIPPINE PHOENIX v. WOODWORKS
92 SCRA 419 | August 06, 1979
Digest by: Hazel Diane B. Estrosas
DOCTRINE OF THE CASE
Insurance contract lapses upon failure to pay the premium. There
is no valid and binding insurance contract where no premium is
paid unless credit is given or there is a waiver or some agreement
obviating the necessity for the prepayment of premiums.
Facts of the case
Upon Woodworks’ application, Philippine Phoenix issued a Fire
Insurance Policy for P500,000.00 whereby Philippine Phoenix insured
the building, machinery and equipment of Woodworks for a term of one
year from July 21, 1960 to July 21, 1961 against loss by fire. The
premium (P9,846.00) and other charges including the margin fee
surcharge (P590.76) and the documentary stamps (P156.80) affixed
on the Policy, amounted to P10,593.36. But here, Woodworks did not
pay the premium stipulated in the Policy when it was issued nor at any
time thereafter.
On April 19, 1961, or before the expiration of the one-year term,
Philippine Phoenix notified Woodworks, through its Indorsement, of the
cancellation of the Policy allegedly upon the latter’s request.
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Woodworks denied making such request. In said Indorsement,
Philippine Phoenix credited Woodworks with the amount of P3,110.25
for the unexpired period of 94 days, and claimed the balance of
P7,483.11 representing “earned premium from July 21,1960 to 18th
April 1961 or, say 271 days.”
On July 6, 1961, Philippine Phoenix demanded in writing for the
payment of the earned premium. Woodworks disclaimed any liability
contending that it need not pay premium "because the Insurer did not
stand liable for any indemnity during the period the premiums were not
paid."
"earned premium."
Woodworks controverted basically on the theory that its failure to pay
the premium after the issuance of the policy put an end to the
insurance contract and rendered the policy unenforceable.
Issue
Whether a property (fire) insurance policy is considered to have lapsed
upon non-payment of the premium – YES
Ruling
THE POLICY PROVIDES PRE-PAYMENT OF PREMIUM.
When the policy is tendered, the insured must pay the premium
unless credit is given or there is a waiver, or some agreement
obviating the necessity for prepayment. To constitute an
extension of credit, there must be a clear and express agreement
therefor.
In this case:
No clear agreement that a credit extension was accorded to
Woodworks. And even if it were to be presumed that the company had
extended credit from the circumstances of the unconditional delivery of
the Policy without prepayment of the premium, yet it is obvious that
Woodworks had not accepted the insurer's offer to extend credit, which
is essential for the validity of such agreement.
An acceptance of an offer to allow credit is as essential to make a valid
agreement for credit, to change a conditional delivery of an insurance
policy to an unconditional delivery, as it is to make any other contract.
Such an acceptance could not be merely a mental act or state of mind,
but would require a promise to pay made known in some manner to
defendant.
WOODWORKS DID NOT PAY THE PREMIUM
Since the premium had not been paid, the policy must be deemed
to have lapsed. The non-payment of premiums does not merely
suspend but put, an end to an insurance contract, since the time
of the payment is peculiarly of the essence of the contract.
The rule is that under policy provisions that upon the failure to make
a payment of a premium or assessment at the time provided for,
the policy shall become void or forfeited, or the obligation of the
insurer shall cease, or words to like effect, because the contract so
prescribes and because such a stipulation is a material and essential
part of the contract. This is true, for instance, in the case of life, health
and accident, fire and hail insurance policies.
In this case:
If the peril insured against had occurred, Philippine Phoenix, as
insurer, would have had a valid defense against recovery under the
Policy it had issued. It is explicitly stated in the Policy the
company’s agreement to indemnify Woodworks for loss by fire
only “after payment of premium,” supra. Compliance by the insured
with the terms of the contract is a condition precedent to the right of
recovery.

Moreover, “an insurer cannot treat a contract as valid for the
purpose of collecting premiums and invalid for the purpose of
indemnity.
Additional Discussions:
BURDEN TO KEEP A POLICY IN FORCE
The burden is on an insured to keep a policy in force by the
payment of premiums, rather than on the insurer to exert every
effort to prevent the insured from allowing a policy to elapse
through a failure to make premium payments. The continuance of
the insurer's obligation is conditional upon the payment of premiums,
so that no recovery can be had upon a lapsed policy, the contractual
relation between the parties having ceased.
Different from 20 SCRA 1270 (1967). The instant case differs from
that involving the same parties entitled Philippine Phoenix Surety
&Insurance Inc., vs. Woodworks, Inc., where recovery of the balance of
the unpaid premium was allowed inasmuch as in that case “there was
not only a perfected, contract of insurance but a partially performed
one as far as the payment of the agreed, premium was concerned.”
This is not the situation obtaining here where no partial payment of
premiums has been made whatsoever.
GONZALES vs YEH TING
G.R. No. L-11776 | August 30, 1958
Digest by: Pet  contemplated by the Warehouse Receipts Act, which failure, according
DOCTRINE OF THE CASE
Where the warehouseman receives grain for storage and refuses
to return or pay it, the fact that he failed to issue the receipt, when
the statute required him to issue on receiving it, is not available to
the surety as a defense against an action on the bond. The
obligation of the surety covers the duty of the warehouseman to
issue the prescribed receipt, as well as the other duties imposed
upon him by the statute.
Facts of the case
Go Tiong obtained a license to engage in the business of a bonded
warehouseman. To secure the performance of his obligations as such
bonded warehouseman, the Luzon Surety Co. executed Guaranty
Bond No. 294 in the sum of P18,334, conditioned on the fulfillment by
Go Tiong of his duty to deliver to the depositors in his storage
warehouse, the palay received by him for storage, at any time demand
is made, or to pay the market value thereof, in case he was unable to
return the same.  Go Tiong insured the warehouse and the palay
deposited therein with the Alliance Surety and Insurance Company.  duty to the loss or detriment of those who delivered grain for storage,
Ramon demanded from Go Tiong the value of his deposits in the
amount of P8,600, but he was told to return after two days, which he
did, but Go Tiong again told him to come back. A few days later, the
warehouse burned to the ground.  action on the bond. The obligation of the surety covers the duty of the
The receipts issued by Go Tiong to the Ramon were ordinary receipts,
not the "warehouse receipts" defined by the Warehouse Receipts Act
(Act No. 2137).
After the burning of the warehouse, the depositors of palay filed their
claims with the Bureau of Commerce, and it would appear that with the
proceeds of the insurance policy, the Bureau of Commerce paid off
some of the claims. Ramon’s counsel later withdrew his claim with the
Bureau of Commerce because nothing came from Ramon’s efforts to
have his claim paid. Thereafter, Ramon filed the present action against
Go Tiong and the Luzon Surety for the sum of P8,600, the value of his
palay.  integrating it to the regular policies subsequently issued, its
While the case was pending in court, Ramon Gonzales and Go Tiong
entered into a contract of amicable settlement to the effect that upon
the settlement of all accounts due to him by Go Tiong, he would have
all actions pending against Go Tiong dismissed. Inasmuch as Go Tiong
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failed to settle the accounts, Ramon Gonzales prosecuted his court
action.
1st Issue
WON the amicable settlement constituted a material alteration of the
surety bond of Luzon Surety which extinguished and discharged its
liability. – NO.
Ruling
The Luzon Surety claims that the amicable settlement by and between
Gonzales and Go Tiong constituted a material alteration of its bond,
thereby extinguishing and discharging its liability. It is evident,
however, that while there was an attempt to settle the case amicably,
the settlement was never consummated because Go Tiong failed to
settle the accounts of Gonzales to the latter’s satisfaction.
Consequently, said nonconsummated compromise settlement does not
discharge the surety. 
A compromise or settlement between the creditor or obligee and the
principal, by which the latter is discharged from liability, discharges the
surety. But an unconsummated  agreement to compromise, falling
short of an effective settlement, will not discharge the surety."
2nd Issue:
WON the insurer is liable. – YES.
Ruling
In relation to the failure of Go Tiong to issue the warehouse receipts
to appellants, precluded plaintiff from suing on the bond, reference may
be made to Section 2 of Act No. 3893, defining receipt as any receipt
issued by a warehouseman for commodity delivered to him, showing
that the law does not require as indispensable that a warehouse
receipt be issued. 
Furthermore, Section 7 of said law provides that as long as the
depositor is injured by a breach of any obligation of the
warehouseman, which obligation is secured by a bond, said depositor
may sue on said bond. In other words, the surety cannot avoid liability
from the mere failure of the warehouseman to issue the prescribed
receipt. 
The surety company concedes that the bond which it gave contains the
statutory conditions. The statute requires that the bond — ‘shall be
conditioned upon the faithful performance of the public local grain
warehouseman of all the provisions of law relating to the storage of
grain by such warehouseman.
The surety company thereby made itself responsible for the
performance by the warehouseman of all the duties and obligations
imposed upon him by the statute; and, if he failed to perform any such
the surety company became liable therefor. Where the warehouseman
receives grain for storage and refuses to return or pay it, the fact that
he failed to issue the receipt, when the statute required him to issue on
receiving it, is not available to the surety as a defense against an
warehouseman to issue the prescribed receipt, as well as the other
duties imposed upon him by the statute.
PACIFIC TIMBER v. CA
G.R. No. L-38613 | February 25, 1982
Digest by: Rica Andrea Ortizo
DOCTRINE OF THE CASE
If the Cover Note is to be treated as a separate policy, instead of
purpose and function would be set at naught or rendered
meaningless, for it is in a real sense a contract, not a mere
application for insurance which is a mere offer.
The non-payment of premium on the Cover Note is, therefore, no
cause for Pacific Timber to lose what is due it as if there had been

payment of premium, for non-payment by it was not chargeable
against its fault. 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.
This is how the cover note as a "binder" should legally operate;
otherwise, it would serve no practical purpose in the realm of
commerce, and is 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.
Facts of the case
In 1963, Pacific Timber secured temporary insurance from Workmen’s
Insurance Company for its exportation of logs to Japan. Workmen’s
Insurance subsequently issued Cover Note 1010, insuring said cargo.
The regular marine policies were issued by Workmen’s Insurance in
favor of Pacific Timber, bearing the numbers 53 HO 1032 and 53 HO
1033. The total cargo insured under the two marine policies
accordingly consisted of 1,395 logs.
After the issuance of the cover note but before the issuance of the two
policies, some of the logs intended to be exported were lost during
loading operations in the Dapitan Bay due to a typhoon.
Pacific Timber submitted its claim statement, demanding payment of
the loss under Policies 53 HO 1032 and 53 HO 1033, in the total
amount of P19.286.79, from Workmen’s Insurance but the latter
refused.
Workmen’s contention
Its investigation revealed that the entire shipment of logs covered by
the two marine policies were received in good order at their point of
destination. Moreover, it stated that the said loss may not be
considered as covered under Cover Note 1010 because said note
already became null and void by virtue of the issuance of the marine
policies.
Issue
WON the cover note is without valuable consideration, thereby
considered null and void – NO, the cover note was not without
consideration.
Ruling
No separate premium before the loss occurred does not militate
the validity of the contention.
The fact that no separate premium was paid on the Cover Note before
the loss insured against occurred does not militate against the validity
of Pacific Timber’s contention. No such premium could have been paid
since by nature of the Cover Note, it did not contain, as all cover notes,
particulars of the shipment that would serve as basis for the
computation of the premiums. As a logical consequence thereof, no
separate premiums are intended or required to be paid on a cover
note. This is a fact admitted by an official of Workmen’s Insurance.
At any rate, it is not disputed that Pacific Timber paid in full all
premiums as called for by the statement issued by Workmen’s
Insurance after the issuance of the two marine insurance policies,
thereby leaving no account unpaid due on the insurance coverage,
which must be deemed to include Cover Note 1010.
If the Cover Note is to be treated as a separate policy, instead of
integrating it to the regular policies subsequently issued, its purpose
and function would be set at naught or rendered meaningless, for it is
in a real sense a contract, not a mere application for insurance which is
a mere offer.
It may be true that the marine insurance policies issued were for logs
no longer including those which had been lost during loading
operations. This had to be so because the risk insured against is not
for loss during loading operations anymore, but for loss during transit,
the logs having already been safely placed aboard.
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For obvious reasons, it was not necessary to ask Pacific Timber to pay
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 Pacific Timber on the Cover Note.
The non-payment of premium on the Cover Note is, therefore, no
cause for Pacific Timber to lose what is due it as if there had been
payment of premium for its non-payment was not chargeable against
its fault. Had all the logs been lost during the loading operations, but
after the issuance of the Cover Note, liability on the said note would
have already arisen even before payment of premium. Otherwise, the
note would serve no practical purpose in the realm of commerce and is
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 the policy is valid.
MRS. HENRY E. HARDING v.
COMMERCIAL UNION ASSURANCE COMPANY
G.R. No. 12707 | 1918-08-10
Digest by: Kanal Clooney
DOCTRINE OF THE CASE
The valuation in a policy of insurance is conclusive if the insured
had an insurable interest and was not guilty of fraud.
Facts of the case
Mrs. Harding was the owner of a Stude-baker automobile. She applied
for a policy of insurance in writing upon said automobile in the sum of
P3K and that the value of said automobile was set forth in said policy
to be P3K.
The automobile was totally destroyed by fire. Mrs. Harding, furnished
the defendant the proofs of her loss and interest, and otherwise
performed all the conditions of said policy on her part, and that the
defendant has not paid said loss nor any part thereof, although due
demand was made.
Defendant contends that the value of said automobile at the time of the
execution and delivery of the said proposal were false and known to be
false by the said plaintiff at the time of signing and delivering the said
proposal and were made for the purpose of misleading and deceiving
the defendant, and inducing the defendant to issue the said policy of
insurance.
Issue
Whether the insurance company is bound by the valuation made in the
policy application. YES.
Ruling
There was no proof of fraud on the part of plaintiff in her statement of
the value of the automobile and that defendant, having agreed to the
estimated value, P3K and having insured the automobile for that
amount, upon the basis of which the premium was paid, is bound by it
and must pay the loss in accordance with the stipulated insured
value.
It has not been shown by the evidence that the statement was
false - on the contrary it shows that the automobile had in fact cost
more than the amount mentioned. In fact, the automobile was bought
 INSURANCE LAW III – MANRESA 2020-2021 16
by plaintiff's husband a few weeks before the issuance of the policy in Whether DIC is liable of the appraised value of the actual loss of
question for the sum of P2,800, and that between that time and the PURDC. – YES.
issuance of the policy some P900 was spent upon it in repairs and
repainting.
Ruling
Mrs. Harding, in fixing the value of the automobile at P3K acted upon
information given her by her husband and by the manager of the The Court notes that Policy RY/F-082 is an open policy and is subject
Luneta Garage. to the express condition that:

The defendant, upon the information given by plaintiff, and after an

inspection of the automobile by its examiner, having agreed that it was
worth P3,000, is bound by this valuation in the absence of fraud on
the part of the insured. All statements of value are, of necessity, to a
large extent matters of opinion, and it would be outrageous to hold that
the validity of all valued policies must depend upon the absolute
correctness of such estimated value. The valuation in a policy of
insurance is conclusive if the insured had an insurable interest and was
not guilty of fraud.
Open Policy
This is an open policy as defined in Section 57 of the Insurance Act. In
the event of loss, whether total or partial, it is understood that the
amount of the loss shall be subject to appraisal and the liability of the
company, if established, shall be limited to the actual loss, subject to
the applicable terms, conditions, warranties and clauses of this Policy,
and in no case shall exceed the amount of the policy.

As defined in the aforestated provision, which is now Section 60 of the

Plaintiff was the owner of the automobile in question and had an
insurable interest therein; that there was no fraud on her part in
procuring the insurance; that the valuation of the automobile, for the
purposes of the insurance, is binding upon the defendant
corporation.
Insurance Code, "an open policy is one in which the value of the
thing insured is not agreed upon but is left to be ascertained in
case of loss."
This means that the actual loss, as determined, will represent the
total indemnity due the insured from the insurer except only that
the total indemnity shall not exceed the face value of the policy.

In the case:

Contrary to petitioner’s argument, there is no evidence on record that

DEVELOPMENT INSURANCE CORPORATION v. IAC
G.R. No. L-71360 | July 16, 1986
Digest by: Jurilex Maglinte
DOCTRINE OF THE CASE
An open policy is one in which the value of the thing insured is not
agreed upon but is left to be ascertained in case of loss.
This means that the actual loss, as determined, will represent the
total indemnity due the insured from the insurer except only that
the total indemnity shall not exceed the face value of the policy.
Facts of the case
A fire occurred in the building of Private Respondent PURDC
(Philippine Union Realty Development Corp.), and it sued for recovery
of damages from the Petitioner DIC (Development Insurance Corp.) on
the basis of an insurance contract between them. Respondent was
allowed full recovery of its claimed damages.
the building was worth 5.88M at the time of the loss. Only the petitioner
says so and it does not back up its self-serving estimate with any
independent corroboration.
On the contrary, the building was insured at P2,500,000.00, and this
must be considered, by agreement of the insurer and the insured, the
actual value of the property insured on the day the fire occurred. This
valuation becomes even more believable if it is remembered that at the
time the building was burned it was still under construction and not yet
completed.
The actual loss has been ascertained in this case and, to repeat, this
Court will respect such factual determination in the absence of proof
that it was arrived at arbitrarily. There is no such showing.
Hence, applying the open policy clause as expressly agreed upon by
the parties in their contract, we hold that the private respondent is
entitled to the payment of indemnity under the said contract in the total
amount of P508,867.00.

On appeal, petitioner insurance company argues that since at the time

of the fire the building insured was worth more than the sum insured xxx Nothing Follows xxx
(5.8M) PURDC should be considered its own insurer for the difference
between that amount and the face value of the policy and should share
pro rata in the loss sustained.

Accordingly, the private respondent is entitled to an indemnity of only

P67,629.31, the rest of the loss to be shouldered by it alone. In support
of this contention, the petitioner cites Condition 17 of the policy, which
provides:

If the property hereby insured shall, at the breaking out of any fire, be
collectively of greater value than the sum insured thereon then the
insured shall be considered as being his own insurer for the difference,
and shall bear a ratable proportion of the loss accordingly. Every item,
if more than one, of the policy shall be separately subject to this
condition.

Issue

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