MALAYAN INSURANCE CORPORATION, petitioner, vs.

THE
HON. COURT OF APPEALS and TKC MARKETING
CORPORATION, respondents.

• By way of a historical background, marine insurance developed

as an all­risk coverage, using the phrase “perils of the sea” to
encompass the wide and varied range of risks that were
covered. The subject policies contain the “Perils” clause which
is a standard form in any marine insurance policy.
• “Arrest” caused by ordinary judicial process is deemed included
among the covered risks.
• If a marine insurance company desires to limit or restrict the
operation of the general provisions of its contract by special
proviso, exception, or exemption, it should express such
limitation in clear and unmistakable language.
• Exceptions to the general coverage are construed most strongly
against the company. Even an express exception in a policy is
to be construed against the underwriters by whom the policy is
framed, and for whose benefit the exception is introduced.
• An insurance contract should be so interpreted as to carry out
the purpose for which the parties entered into the contract
which is, to insure against risks of loss or damage to the goods.
Such interpretation should result from the natural and
reasonable meaning of language in the policy.
• Where restrictive provisions are open to two interpretations that
which is most favorable to the insured is adopted.
• Indemnity and liability insurance policies are construed in
accordance with the general rule of resolving any ambiguity
therein in favor of the insured, where the contract or policy is
prepared by the insurer. A contract of insurance, being a
contract of adhesion, par excellence, any ambiguity therein
should be resolved against the insurer; in other words, it should
be construed liberally in favor of the insured and strictly against
the insurer.
SIMEON DEL ROSARIO, plaintiff­appellee, vs. THE EQUITABLE
INSURANCE AND CASUALTY Co., INC., defendant­appellant.

• Since the defendant has bound itself to pay P1,000.00 to

P3,000.00, as indemnity for the death of the insured but the
policy does not positively state any definite amount that may be
recovered in case of death by drowning, there is an ambiguity in
this respect in the policy, which ambiguity must be interpreted in
favor of the insured and strictly against the insurer so as to
allow a greater indemnity.
• Where there is an ambiguity with respect to the terms and
conditions of a policy, the same will be resolved against the one
responsible thereof. Generally, the insured, has little, if any,
participation in the preparation of the policy, together with the
drafting of its terms and conditions. The interpretation of
obscure stipulations in a contract should not favor the party who
caused the obscurity (Art. 1377, N.C.C.) which, in the case at
bar, is the insurance company.

FORTUNE INSURANCE AND SURETY CO., INC., petitioner, vs.

COURT OF APPEALS and PRODUCERS BANK OF THE
PHILIPPINES, respondents.

• Except with respect to compulsory motor vehicle liability

insurance, the Insurance Code contains no other provisions
applicable to casualty insurance or to robbery insurance in
particular. These contracts are, therefore, governed by the
general provisions applicable to all types of insurance. Outside
of these, the rights and obligations of the parties must be
determined by the terms of their contract, taking into
consideration its purpose and always in accordance with the
general principles of insurance law.
• It has been aptly observed that in burglary, robbery, and theft
insurance, “the opportunity to defraud the insurer—the moral
hazard—is so great that insurers have found it necessary to fill
up their policies with countless restrictions, many designed to
reduce this hazard. Seldom does the insurer assume the risk of
 all losses due to the hazards insured against.” Persons
frequently excluded under such provisions are those in the
insuredʼs service and employment. The purpose of the
exception is to guard against liability should the theft be
committed by one having unrestricted access to the property. In
such cases, the terms specifying the excluded classes are to be
given their meaning as understood in common speech. The
terms “service” and “employment” are generally associated with
the idea of selection, control, and compensation.
• Contract of insurance is a contract of adhesion, thus any
ambiguity therein should be resolved against the insurer, or it
should be construed liberally in favor of the insured and strictly
against the insurer. Limitations of liability should be regarded
with extreme jealousy and must be construed in such a way as
to preclude the insurer from non­compliance with its obligation.
It goes without saying then that if the terms of the contract are
clear and unambiguous, there is no room for construction and
such terms cannot be enlarged or diminished by judicial
construction.
• An insurance contract is a contract of indemnity upon the terms
and conditions specified therein. It is settled that the terms of
the policy constitute the measure of the insurerʼs liability. In the
absence of statutory prohibition to the contrary, insurance
companies have the same rights as individuals to limit their
liability and to impose whatever conditions they deem best upon
their obligations not inconsistent with public policy.

RAFAEL (REX) VERENDIA, petitioner, vs. COURT OF AP­PEALS

and FIDELITY & SURETY CO. OF THE PHILIP­PINES,
respondents.

• Basically a contract of indemnity, an insurance contract is the

law between the parties. Its terms and conditions constitute the
measure of the insurerʼs liability and compliance therewith is a
condition precedent to the insuredʼs right to recovery from the
insurer. As it is also a contract of adhesion, an insurance
contract should be liberally construed in favor of the insured
 and strictly against the insurer company which usually prepares
it.
• Considering, however, the foregoing discussion pointing to the
fact that Verendia used a false lease contract to support his
claim under Fire Insurance Policy No. F­18876, the terms of the
policy should be strictly construed against the insured. Verendia
failed to live by the terms of the policy, specifically Section 13
thereof which is expressed in terms that are clear and
unambiguous, that all benefits under the policy shall be forfeited
“If the claim be in any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any
fraudulent means or devises are used by the Insured or anyone
acting in his behalf to obtain any benefit under the policy”.
Verendia, having presented a false declaration to support his
claim for benefits in the form of a fraudulent lease contract, he
forfeited all benefits therein by virtue of Section 13 of the policy
in the absence of proof that Fidelity waived such provision.
Worse yet, by presenting a false lease contract, Verendia
reprehensibly disregarded the principle that insurance contracts
are uberrimae fidae and demand the most abundant good faith.
• There is also no reason to conclude that by submitting the
subrogation receipt as evidence in court, Fidelity bound itself to
a “mutual agreement” to settle Verendiaʼs claims in
consideration of the amount of P142,685.77. While the said
receipt appears to have been a filled­up form of Fidelity, no
representative of Fidelity had signed it. It is even incomplete as
the blank spaces for a witness and his address are not filled up.
More significantly, the same receipt states that Verendia had
received the aforesaid amount. However, that Verendia had not
received the amount stated therein, is proven by the fact that
Verendia himself filed the complaint for the full amount of
P385,000.00 stated in the policy. It might be that there had
been efforts to settle Verendiaʼs claims, but surely, the
subroga­tion receipt by itself does not prove that a settlement
had been arrived at and enforced. Thus, to interpret Fidelityʼs
presentation of the subrogation receipt in evidence as indicative
of its accession to its “terms” is not only wanting in rational
 basis but would be substituting the will of the Court for that of
the parties.

NEW LIFE ENTERPRISES and JULIAN SY, petitioners, vs. HON.

COURT OF APPEALS, EQUITABLE INSURANCE
CORPORATION, RELIANCE SURETY AND INSURANCE CO., INC.
and WESTERN GUARANTY CORPORATION, respondents.

• The terms of the contract are clear and unambiguous. The

insured is specifically required to disclose to the insurer any
other insurance and its particulars which he may have effected
on the same subject matter. The knowledge of such insurance
by the insurerʼs agents, even assuming the acquisition thereof
by the former, is not the “notice” that would estop the insurers
from denying the claim. Besides, the so­called theory of
imputed knowledge, that is, knowledge of the agent is
knowledge of the principal, aside from being of dubious
applicability here has likewise been roundly refuted by
respondent court whose factual findings we find acceptable.
• Furthermore, when the words and language of documents are
clear and plain or readily understandable by an ordinary reader
thereof, there is absolutely no room for interpretation or
construction anymore. Courts are not allowed to make contracts
for the parties; rather, they will intervene only when the terms of
the policy are ambiguous, equivocal, or uncertain. The parties
must abide by the terms of the contract because such terms
constitute the measure of the insurerʼs liability and compliance
therewith is a condition precedent to the insuredʼs right of
recovery from the insurer.
• While it is a cardinal principle of insurance law that a policy or
contract of insurance is to be construed liberally in favor of the
insured and strictly against the insurer company, yet contracts
of insurance, like other contracts, are to be construed according
to the sense and meaning of the terms which the parties
themselves have used. If such terms are clear and
unambiguous, they must be taken and understood in their plain,
ordinary and popular sense. Moreover, obligations arising from
 contracts have the force of law between the contracting parties
and should be complied with in good faith.
• Petitioners should be aware of the fact that a party is not
relieved of the duty to exercise the ordinary care and prudence
that would be exacted in relation to other contracts. The
conformity of the insured to the terms of the policy is implied
from his failure to express any disagreement with what is
provided for.

NATIONAL POWER CORPORATION, petitioner, vs. COURT OF

APPEALS and PHILIPPINE AMERICAN GENERAL INSURANCE
CO., INC., respondents.

• As correctly assessed by the trial court, the evidence on record

shows that as early as May 30,1963, Philamgen was duly
informed of the failure of its principal to comply with its
undertaking. In fact, said notice of failure was also signed by its
Assistant Vice President. On July 19, 1963, when FEEI
informed NPC that it was abandoning the construction job, the
latter forthwith informed Philamgen of the fact on the same
date. Moreover, on August 1, 1963, the fact that Philamgen was
seasonably notified, was even bolstered by its request from
NPC for information of the percentage completed by the bond
principal prior to the relinquishment of the job to the latter and
the reason for said relinquishment. (Record on Appeal, pp.
193–195). The 30­day notice adverted to in the surety bond
applies to the completion of the work by the contractor. This
completion by the contractor never materialized.
• The surety bond must be read in its entirety and together with
the contract between NPC and the contractors. The provisions
must be construed together to arrive at their true meaning.
Certain stipulations cannot be segregated and then made to
control.
• Furthermore, it is well settled that contracts of insurance are to
be construed liberally in favor of the insured and strictly against
the insurer. Thus ambiguity in the words of an insurance
contract should be interpreted in favor of its beneficiary.
• In the case at bar, it cannot be denied that the breach of
contract in this case, that is, the abandonment of the unfinished
work of the transmission line of the petitioner by the contractor
Far Eastern Electric, Inc. was within the effective date of the
contract and the surety bond. Such abandonment gave rise to
the continuing liability of the bond as provided for in the contract
which is deemed incorporated in the surety bond executed for
its completion. To rule therefore that private respondent was not
properly notified would be gross error.

GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner, vs.

HONORABLE COURT OF APPEALS, respondents.

• Clearly implied from the aforesaid conditions is that the binding

deposit receipt in question is merely an acknowledgment, on
behalf of the company, that the latterʼs branch office had
received from the applicant the insurance premium and had
accepted the application subject for processing by the
insurance company; and that the latter will either approve or
reject the same on the basis of whether or not the applicant is
“insurable on standard rates.” Since petitioner Pacific Life
disapproved the insurance application of respondent Ngo Hing,
the binding deposit receipt in question had never become in
force at any time. Upon this premise, the binding deposit receipt
is, manifestly, merely conditional and does not insure outright.
As held by this Court, where an agreement is made between
the applicant and the agent, no liability shall attach until the
principal approves the risk and a receipt is given by the agent.
The acceptance is merely conditional, and is subordinated to
the act of the company in approving or rejecting the application.
Thus, in life insurance, a “binding slip” or “binding receipt” does
not insure by itself.
• It bears repeating that through the intra­company
communication of April 30, 1957. Pacific Life disapproved the
insurance application in question on the ground that it is not
offering the twenty­year endowment insurance policy to children
less than seven years of age. What it offered instead is another
 plan known as the Juvenile Triple Action, which private
respondent failed to accept. In the absence of a meeting of the
minds between petitioner Pacific Life and private respondent
Ngo Hing over the 20­year endowment life insurance in the
amount of P50,000.00 in favor of the latterʼs one­year old
daughter, and with the non­ compliance of the abovequoted
conditions stated in the disputed binding deposit receipt, there
could have been no insurance contract duly perfected between
them. Accordingly, the deposit paid by private respondent shall
have to be refunded by Pacific Life.
• As held in De Lim vs. Sun Life Assurance Company of Canada,
supra, “a contract of insurance, like otter contracts, must be
asserted to by both parties either in parson or by their agents. x
x x. The contract, to be binding from the date of the application,
must have been a completed contract, one that leaves nothing
to be done, nothing to be completed, nothing to be passed
upon, or determined, before it shall take effect. There can be no
contract of insurance unless the minds of the parties have met
in agreement.”
• Relative to the second issue of alleged concealment, this Court
is of the firm belief that private respondent had deliberately
concealed the state of health and physical condition of his
daughter Helen Go. When private respondent supplied the
required essential data for the insurance application form, he
was fully aware that his one­year old daughter is typically a
mongoloid child. Such a congenital physical defect could never
be ensconced nor disguised. Nonetheless, private respondent,
in apparent bad faith, withheld the fact material to the risk to be
assumed by the insurance company. As an insurance agent of
Pacific Life, he ought to know, as he surely must have known,
his duty and responsibility to supply such a material fact. Had
he divulged said significant fact in the insurance application
form. Pacific Life would have verified the same and would have
had no choice but to disapprove the application outright.
• The contract of insurance is one of perfect good faith (uberrima
fides meaning good faith; absolute and perfect candor or
openness and honesty; the absence of any concealment or
deception, however slight [Blackʼs Law Dictionary, 2nd Edition],
 not for the insured alone but equally so for the insurer
Fieldmanʼs Insurance Co., Inc. vs. Vda. de Songco, 25 SCRA
70). Concealment is a neglect to communicate that which a
party known and ought to communicate (Section 25, Act No.
2427). Whether intentional or unintentional, the concealment
entitles the insurer to rescind the contract of insurance (Section
26, Id.; Yu Pang Cheng vs. Court of Appeals, et al., 105 Phil.
930; Saturnino vs. Philippine American Life Insurance
Company, 7 SCRA 316). Private respondent appears guilty
thereof.

MAYER STEEL PIPE CORPORATION and HONGKONG

GOVERNMENT SUPPLIES DEPARTMENT, petitioners, vs.
COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE
CO., INC. and the CHARTER INSURANCE CORPORATION,
respondents.

• Section 3(6) of the Carriage of Goods by Sea Act states that the
carrier and the ship shall be discharged from all liability for loss
or damage to the goods if no suit is filed within one year after
delivery of the goods or the date when they should have been
delivered. Under this provision, only the carrierʼs liability is
extinguished if no suit is brought within one year. But the liability
of the insurer is not extinguished because the insurerʼs liability
is based not on the contract of carriage but on the contract of
insurance. A close reading of the law reveals that the Carriage
of Goods by Sea Act governs the relationship between the
carrier on the one hand and the shipper, the consignee and/or
the insurer on the other hand. It defines the obligations of the
carrier under the contract of carriage. It does not, however,
affect the relationship between the shipper and the insurer. The
latter case is governed by the Insurance Code.
• The ruling in Filipino Merchants should apply only to suits
against the carrier filed either by the shipper, the consignee or
the insurer. When the court said in Filipino Merchants that
Section 3(6) of the Carriage of Goods by Sea Act applies to the
insurer, it meant that the insurer, like the shipper, may no longer
 file a claim against the carrier beyond the one­year period
provided in the law. But it does not mean that the shipper may
no longer file a claim against the insurer because the basis of
the insurerʼs liability is the insurance contract.
• An insurance contract is a contract whereby one party, for a
consideration known as the premium, agrees to indemnify
another for loss or damage which he may suffer from a
specified peril. An “all risks” insurance policy covers all kinds of
loss other than those due to willful and fraudulent act of the
insured. Thus, when private respondents issued the “all risks”
policies to petitioner Mayer, they bound themselves to
indemnify the latter in case of loss or damage to the goods
insured. Such obligation prescribes in ten years, in accordance
with Article 1144 of the New Civil Code.

PARAMOUNT INSURANCE CORPORATION, petitioner, vs. HON.

MAXIMO M. JAPZON, Presiding Judge, Br. 36, RTC, Manila; City
Sheriff and Deputy Sheriffs Nestor Macabilin & Teodoro
Episcope, public respondents, JOSE LARA and ARSENIO PAED,
private respondents.

• Jurisdiction over the person of the defendant in civil cases is

acquired either by his voluntary appearance in court and his
submission to its authority or by service of summons. The
service of summons is intended to give notice to the defendant
or respondent that an action has been commenced against it.
The defendant or respondent is thus put on guard as to the
demands of the plaintiff or the petitioner.
• It strains credulity that a counsel who has no personal interest
in the case would fight for and defend a case with persistence
and vigor if he has not been authorized or employed by the
party concerned.
• To the mind of the Court, the instant petition is filed merely to
derail its execution. It took Paramount almost six years to
question the jurisdiction of the lower court. Moreover, as earlier
adverted to, the controverted Decision of August 30, 1983,
 became final and executory on October 20, 1983. In any event,
it is axiomatic that there is no justification in law and in fact for
the reopening of a case which has long become final and which
in fact was already executed on July 18, 1984. Time and again,
this Court has said that the doctrine of finality of judgment is
grounded on fundamental considerations of public policy and
sound practice and at the risk of occasional error, the
judgments of courts must become final at some definite date
fixed by law.
• However, there is merit in petitionerʼs contention that its liability
is limited only to P50,000.00 as expressed in Insurance Policy
No. CV­3466 issued on February 23, 1978. The said insurance
policy clearly and categorically placed the petitionerʼs liability for
all damages arising out of death or bodily injury sustained by
one person as a result of any one accident at P50,000.00. Said
amount complied with the minimum fixed by law then prevailing,
Section 377 of Presidential Decree No. 6123 (which was
retained by P.D. No. 1460, the Insurance Code of 1978), which
provided that the liability of land transportation vehicle operators
for bodily injuries sustained by a passenger arising out of the
use of their vehicles shall not be less than P12,000.00. Since
the petitionerʼs liability under the insurance contract is neither
less than P12,000.00 nor contrary to law, morals, good
customs, public order or public policy, said stipulation must be
upheld as effective and binding between the parties. Therefore,
the terms of the contract constitute the measure of the insurerʼs
liability.

THE PHILIPPINE AMERICAN GENERAL INSURANCE

COMPANY, INC., petitioner, vs. COURT OF APPEALS and
FELMAN SHIPPING LINES, respondents.

• It is generally held that in every marine insurance policy the

assured impliedly warrants to the assurer that the vessel is
seaworthy and such warranty is as much a term of the
contract as if expressly written on the face of the policy. Thus
Sec. 113 of the Insurance Code provides that “(i)n every
 marine insurance upon a ship or freight, or freightage, or
upon anything which is the subject of marine insurance, a
warranty is implied that the ship is seaworthy.” Under Sec.
114, a ship is “seaworthy when reasonably fit to perform the
service, and to encounter the ordinary perils of the voyage,
contemplated by the parties to the policy.” Thus, it becomes
the obligation of the cargo owner to look for a reliable
common carrier which keeps its vessels in seaworthy
condition. He may have no control over the vessel but he
has full control in the selection of the common carrier that will
transport his goods. He also has full discretion in the choice
of assurer that will underwrite a particular venture.
• We need not belabor the alleged breach of warranty of
seaworthiness by the assured as painstakingly pointed out
by FELMAN to stress that subrogation will not work in this
case. In policies where the law will generally imply a
warranty of seaworthiness, it can only be excluded by terms
in writing in the policy in the clearest language. And where
the policy stipulates that the seaworthiness of the vessel as
between the assured and the assurer is admitted, the
question of seaworthiness cannot be raised by the assurer
without showing concealment or misrepresentation by the
assured.
• The result of the admission of seaworthiness by the assurer
PHILAMGEN may mean one or two things: (a) that the
warranty of the seaworthiness is to be taken as fulfilled; or,
(b) that the risk of unseaworthiness is assumed by the
insurance company. The insertion of such waiver clauses in
cargo policies is in recognition of the realistic fact that cargo
owners cannot control the state of the vessel. Thus it can be
said that with such categorical waiver, PHILAMGEN has
accepted the risk of unseaworthiness so that if the ship
should sink by unseaworthiness, as what occurred in this
case, PHILAMGEN is liable.
• In Pan Malayan Insurance Corporation v. Court of Appeals,
we said that payment by the assurer to the assured operates
as an equitable assignment to the assurer of all the remedies
which the assured may have against the third party whose
 negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of
any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon
payment by the insurance company of the insurance claim.
• The doctrine of subrogation has its roots in equity. It is
designed to promote and to accomplish justice and is the
mode which equity adopts to compel the ultimate payment of
a debt by one who in justice, equity and good conscience
ought to pay. Therefore, the payment made by PHILAMGEN
to Coca­Cola Bottlers Philippines, Inc., gave the former the
right to bring an action as subrogee against FELMAN.
Having failed to rebut the presumption of fault, the liability of
FELMAN for the loss of the 7,500 cases of 1­liter Coca­Cola
softdrink bottles is inevitable.

FIREMANʼS FUND INSURANCE COMPANY and FIRESTONE TIRE

AND RUBBER COMPANY OF THE PHILIPPINES, plaintiffs-
appellants, vs. JAMILA & COMPANY, INC. and FIRST
QUEZON CITY INSURANCE CO., INC., defendants-
appellees.

• Firemanʼs Fundʼs action against Jamila is squarely sanctioned

by article 2207. As the insurer, Firemanʼs Fund is entitled to go
after the person or entity that violated its contractual
commitment to answer for the loss insured against.
• Subrogation has been referred to as the doctrine of substitution.
It „is an arm of equity that may guide or even force one to pay a
debt for which an obligation was incurred but which was in
whole or in part paid by another.
• Subrogation is founded on principles of equity. It rests on the
principle that substantial justice should be attained regardless
of form, that is, its basis is the doing of complete, essential, and
perfect justice between all the parties without regard to form.
• Upon payment of the loss, the insurer is entitled to be
subrogated pro tanto to any right of action which the insured
may have against the third person whose negligence or
wrongful act caused the loss
• The right of subrogation is of the highest equity. The loss in the
first instance is that of the insured but after reimbursement or
compensation, it becomes the loss of the insurer. „Although
many policies, including policies in the standard form, now
provide for subrogation, and thus determine the rights of the
insurer in this respect, the equitable right of subrogation as the
legal effect of payment insures to the insurer without any formal
assignment or any express stipulation to that effect in the
policy. Stated otherwise, when the insurance company pays for
the loss, such payment operates as an equitable assignment to
the insurer of the property and all remedies which the insured
may have for the recovery thereof. That right is not dependent
upon, nor does it grow out of, any privity of contract, or upon
written assignment of claim, and payment to the insured makes
the insurer as assignee in equity.

FILIPINAS COMPAÑIA DE SEGUROS, petitioner, vs.

CHRISTERN, HUENEFELD & Co., INC., respondent.

• The nationality of a private corporation is determined by the

character or citizenship of its controlling stockholders.
• Where majority of the stockholders of a corporation were
German subjects, the corporation became an enemy
corporation upon the outbreak of the war between the United
States and Germany.
• As the Philippine Insurance Law (Act No. 2427, as amended),
in its section 8, provides that "anyone except a public enemy
may be insured," an insurance policy ceases to be allowable as
soon as an insured becomes a public enemy.
• This for the reason that the subjects of one country cannot be
permitted to lend their assistance to protect by insurance the
commerce or property of belligerent, alien subjects, or to do
anything detrimental to their country's interest. The purpose of
 war is to cripple the power and exhaust the resources of the
enemy, and it is inconsistent that one country should destroy its
enemy's property and repay in insurances the value of what has
been so destroyed, or that it should in such manner increase
the resources of the enemy, or render it aid, and the
commencement of war determines, for like reasons, all trading
intercourse with the enemy, which prior thereto may have been
lawful.
• when the parties become alien enemies, the contractual tie is
broken and the contractual rights of the parties, so far as not
vested, lost.
• The respondent having become an enemy corporation on
December 10, 1941, the insurance policy issued in its favor on
October 1, 1941, by the petitioner (a Philippine corporation) had
ceased to be valid and enforceable, and since the insured
goods were burned after December 10, 1941, and during the
war, the respondent was not entitled to any indemnity under
said policy from the petitioner. However, elementary rules of
justice (in the absence of specific provision in the Insurance
Law) require that the premium paid by the respondent for the
period covered by its policy from December 11, 1941, should be
returned by the petitioner.

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs.

YIP WAI MING, accused-appellant.

• It needs not much emphasis to say that an application form

does not prove that insurance was secured. Anybody can get
an application form for insurance, fill it up at home before filing it
with the insurance company. In fact, the very first sentence of
the form states that it merely
• forms the basis of a contract between you and NZI Life. There
was no contract yet.
• Lam Po Chun must have been unbelievably trusting or stupid to
follow the alleged advice of Andy Kwong. It is usually the man
who insures himself with the wife or future wife as beneficiary
instead of the other way around. Why should Lam Po Chun,
 with her relatively small salary which is not even enough to pay
for the monthly premiums, insure herself for such a big amount.
This is another reason why doubts arise as to the truth of the
insurance angle.

THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY,

petitioner, vs. HONORABLE GREGORIO G. PINEDA, in his
capacity as Judge of the Court of First Instance of Rizal, and
RODOLFO C. DIMAYUGA, respondents.

• Needless to say, the applicable law in the instant case is the

Insurance Act, otherwise known as Act No. 2427 as amended,
the policy having been procured in 1968. Under the said law,
the beneficiary designated in a life insurance contract cannot be
changed without the consent of the beneficiary because he has
a vested interest in the policy.
• In this regard, it is worth noting that the Beneficiary Designation
Indorsement in the policy which forms part of Policy Number
0794461 in the name of Rodolfo Cailles Dimayuga states that
the designation of the beneficiaries is irrevocable.
• Inevitably therefore, based on the aforequoted provision of the
contract, not to mention the law then applicable, it is only with
the consent of all the beneficiaries that any change or
amendment in the policy concerning the irrevocable
beneficiaries may be legally and validly effected. Both the law
and the policy do not provide for any other exception, thus,
abrogating the contention of the private respondent that said
designation can be amended if the Court finds a just,
reasonable ground to do so.
• Similarly, the alleged acquiescence of the six (6) children
beneficiaries of the policy (the beneficiary-wife predeceased the
insured) cannot be considered an effective ratification to the
change of the beneficiaries from irrevocable to revocable.
Indubitable is the fact that all the six (6) children named as
beneficiaries were minors at the time, for which reason, they
could not validly give their consent. Neither could they act
 through their father-insured since their interests are quite
divergent from one another.

THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-

appellee, vs. CARPONIA T. EBRADO and PASCUALA VDA. DE
EBRADO, defendants-appellants.

• Section 50 of the Insurance Act which provides that „(t)he

insurance shall be applied exclusively to the proper interest of
the person in whose name it is made cannot be validly seized
upon to hold that the same includes the beneficiary. The word
“interest” highly suggests that the provision refers only to the
“insured” and not the beneficiary, since a contract of insurance
is personal in character. Otherwise, the prohibitory laws against
illicit relationships especially on property and descent will be
rendered nugatory, as the same could easily be circumvented
by modes of insurance.
• Rather the general rules of civil law should be applied to resolve
this void in the Insurance Law. Article 2011 of the New Civil
Code states: “The contract of insurance is governed by special
laws. Matters not expressly provided for in such special laws
shall be regulated by this Code.” When not otherwise
specifically provided for by the Insurance Law, the contract of
life insurance is governed by the general rules of the civil law
regulating contracts. And under Article 2012 of the same Code,
“any person who is forbiden from receiving any donation under
Article 739 cannot be named beneficiary of a life insurance
policy by the person who cannot make a donation to him.
Common-law spouses are, definitely, barred from receiving
donations from each other”.
• In essence, a life insurance policy is no different from a civil
donation insofar as the beneficiary is concerned. Both are
founded upon the same consideration: liberality. A beneficiary is
like a donee, because from the premiums of the policy which
the insured pays out of liberality, the beneficiary will receive the
proceeds or profits of said insurance. As a consequence, the
proscription in Article 739 of the new Civil Code should equally
 operate in life insurance contracts. The mandate of Article 2012
cannot be laid aside: any person who cannot receive a donation
cannot be named as beneficiary in the life insurance policy of
the person who cannot make the donation. Under American
law, a policy of life insurance is considered as a testament and
in construing it, the courts will, so far as possible treat it as a
will and determine the effect of a clause designating the
beneficiary by rules under which wills are interpreted.
• We do not think that a conviction for adultery or concubinage is
exacted before the disabilities mentioned in Article 739 may
effectuate. More specifically, with regard to the disability on
“persons who were guilty of adultery or concubinage at the time
of the donation” x x x The underscored clause neatly conveys
that no criminal conviction for the disqualifying offense is a
condition precedent. In fact, it cannot even be gleaned from the
aforequoted provision that a criminal prosecution is needed. On
the contrary, the law plainly states that the guilt of the party may
be proved “in the same action” for declaration of nullity of
donation. And, it would be sufficient if evidence preponderates
upon the guilt of the consort for the offense indicated. The
quantum of proof in criminal cases is not demanded.

FILIPINO MERCHANTS INSURANCE CO., INC., petitioner, vs.

COURT OF APPEALS and CHOA TIEK SENG, respondents.

• The very nature of the term “all risks” must be given a broad
and comprehensive meaning as covering any loss other than a
wilful and fraudulent act of the insured. This is pursuant to the
very purpose of an “all risks” insurance to give protection to the
insured in those cases where difficulties of logical explanation
or some mystery surround the loss or damage to property. An
“all risks” policy has been evolved to grant greater protection
than that afforded by the “perils clause” in order to assure that
no loss can happen through the incidence of a cause neither
insured against nor creating liability in the ship; it is written
against all losses, that is, attributable to external causes.
• Generally, the burden of proof is upon the insured to show that
a loss arose from a covered peril, but under an “all risks”, policy
the burden is not on the insured to prove the precise cause of
loss or damage for which it seeks compensation. The insured
under an “all risks insurance policy” has the initial burden of
proving that the cargo was in good condition when the policy
attached and that the cargo was damaged when unloaded from
the vessel; thereafter, the burden then shifts to the insurer to
show the exception to the coverage. As we held in Paris-Manila
Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is
that the insurance company has the burden of proving that the
loss is caused by the risks excepted and for want of such proof,
the company is liable.
• Herein private respondent, as 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 delivery or
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.
• Further, Article 1523 of the Civil Code provides that where, in
pursuance of a contract of sale, the seller is authorized or
required to send the goods to the buyer, delivery of the goods to
a carrier, whether named by the buyer or not, for, the purpose
of transmission to the buyer is deemed to be a delivery of the
goods to the buyer, the exceptions to said rule not obtaining in
the present case. The Court has heretofore ruled that the
delivery of the goods on board the carrying vessels partake of
the nature of actual delivery since, from that time, the foreign
buyers assumed the risks of loss of the goods and paid the
insurance premium covering them.
 Spouses NILO CHA and STELLA UY CHA, and UNITED
INSURANCE CO., INC., petitioners, vs. COURT OF APPEALS and
CKS DEVELOPMENT CORPORATION, respondents.

• The core issue to be resolved in this case is whether or not the

aforequoted paragraph 18 of the lease contract entered into
between CKS and the Cha spouses is valid insofar as it
provides that any fire insurance policy obtained by the lessee
(Cha spouses) over their merchandise inside the leased
premises is deemed assigned or transferred to the lessor (CKS)
if said policy is obtained without the prior written consent of the
latter. It is, of course, basic in the law on contracts that the
stipulations contained in a contract cannot be contrary to law,
morals, good customs, public order or public policy.
• Sec. 18 of the Insurance Code provides: 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 petitionerspouses 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.
• Therefore, respondent CKS cannot, under the Insurance
Code·a special law·be validly a beneficiary of the fire insurance
policy taken by the petitioner-spouses over their merchandise.
This insurable 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.) The insurer (United) cannot be compelled to pay
the proceeds of the fire insurance policy to a person (CKS) who
has no insurable interest in the property insured.