INSURANCE LAW CASE DIGESTS Held: Yes.
The test to determine if a contract is an
I. INTRODUCTION
1. G.R. No. 154514. July 28, 2005
WHITE GOLD MARINE SERVICES, INC.,
Petitioners vs.
PIONEER INSURANCE AND SURETY
CORPORATION AND THE STEAMSHIP MUTUAL
UNDERWRITING ASSOCIATION (BERMUDA)
LTD., Respondents.
This petition for review assails the Decision1 dated
July 30, 2002 of the Court of Appeals in CA-G.R.
SP No. 60144, affirming the Decision2 dated May
3, 2000 of the Insurance Commission in I.C. Adm.
Case No. RD-277. Both decisions held that there
was no violation of the Insurance Code and the
respondents do not need license as insurer and
insurance agent/broker.
The facts are undisputed.
Facts: White Gold Marine Services, Inc. (White
Gold) procured a protection and indemnity
coverage for its vessels from The Steamship
Mutual Underwriting Association (Bermuda) Limited
(Steamship Mutual) through Pioneer Insurance and
Surety Corporation (Pioneer). Subsequently, White
Gold was issued a Certificate of Entry and
Acceptance. Pioneer also issued receipts
evidencing payments for the coverage. When
White Gold failed to fully pay its accounts,
Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against
White Gold for collection of sum of money to
recover the latter’s unpaid balance. White Gold on
the other hand, filed a complaint before the
Insurance Commission claiming that Steamship
Mutual violated Sections 186[4] and 187[5] of the
Insurance Code, while Pioneer violated Sections
299 300 and 301 in relation to Sections 302 and
303, thereof. The Insurance Commission dismissed
the complaint. It said that there was no need for
Steamship Mutual to secure a license because it
was not engaged in the insurance business. It
explained that Steamship Mutual was a Protection
and Indemnity Club (P & I Club). Likewise, Pioneer
need not obtain another license as insurance agent
and/or a broker for Steamship Mutual because
Steamship Mutual was not engaged in the
insurance business. Moreover, Pioneer was
already licensed, hence, a separate license solely
as agent/broker of Steamship Mutual was already
superfluous.
Issues: Whether or not the contract entered into by
the parties is an insurance contract.
Whether or not Pioneer is required to obtain
a separate license as an insurance agent.
insurance contract or not, depends on the nature of
the promise, the act required to be performed, and
the exact nature of the agreement in the light of the
occurrence, contingency, or circumstances under
which the performance becomes requisite. It is not
by what it is called.
Basically, an insurance contract is a contract of
indemnity. In it, one undertakes for a consideration
to indemnify another against loss, damage or
liability arising from an unknown or contingent
event.
In particular, a marine insurance undertakes to
indemnify the assured against marine losses, such
as the losses incident to a marine adventure.
Section 99 of the Insurance Code enumerates the
coverage of marine insurance.
Relatedly, a mutual insurance company is a
cooperative enterprise where the members are
both the insurer and insured. In it, the members all
contribute, by a system of premiums or
assessments, to the creation of a fund from which
all losses and liabilities are paid, and where the
profits are divided among themselves, in proportion
to their interest. Additionally, mutual insurance
associations, or clubs, provide three types of
coverage, namely, protection and indemnity, war
risks, and defense costs.
A P & I Club is a form of insurance against third
party liability, where the third party is anyone other
than the P & I Club and the members. By definition
then, Steamship Mutual as a P & I Club is a mutual
insurance association engaged in the marine
insurance business.
Since a contract of insurance involves public
interest, regulation by the State is necessary. Thus,
no insurer or insurance company is allowed to
engage in the insurance business without a license
or a certificate of authority from the Insurance
Commission.
Yes. Pioneer is the resident agent of Steamship
Mutual as evidenced by the certificate of
registration[22] issued by the Insurance
Commission. It has been licensed to do or transact
insurance business by virtue of the certificate of
authority issued by the same agency. However, a
Certification from the Commission states that
Pioneer does not have a separate license to be an
agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an
insurance company, it needs a separate license to
act as insurance agent for Steamship Mutual.
Section 299 of the Insurance Code clearly states:
1

No person shall act as an insurance agent or as an
insurance broker in the solicitation or procurement
of applications for insurance, or receive for services
in obtaining insurance, any commission or other
compensation from any insurance company doing
business in the Philippines or any agent thereof,
without first procuring a license so to act from the
Commissioner, which must be renewed annually
on the first day of January, or within six months
thereafter.
2. G.R. No. 75605 January 22, 1993
RAFAEL (REX) VERENDIA, petitioner,
vs. COURT OF APPEALS and FIDELITY &
SURETY CO. OF THE
PHILIPPINES, respondents.
G.R. No. 76399 January 22, 1993
FIDELITY & SURETY CO. OF THE PHILIPPINES,
INC., petitioner,
vs.
RAFAEL VERENDIA and THE COURT OF
APPEALS, respondents.
FACTS:
 Rafael (Rex) Verendia's residential building
was insured with Fidelity and Surety
Insurance Company, Country Bankers
Insurance and Development
Insurance with Monte de Piedad & Savings
Bank as beneficiary
 December 28, 1980 early morning: the
building was completely destroyed by fire
 Fidelity refused the claim stating that there
was a misrepresentation since the lessee
was not Roberto Garcia but Marcelo Garcia  complete forgery.
 trial court: favored Fidelity
 CA: reversed
On May 24, 1983, the trial court rendered a
decision, per Judge Rodolfo A. Ortiz, ruling in favor
of Fidelity. In sustaining the defenses set up by
Fidelity, the trial court ruled that Paragraph 3 of the
policy was also violated by Verendia in that the
insured failed to inform Fidelity of his other
insurance coverages with Country Bankers
Insurance and Development Insurance.
Verendia appealed to the then Intermediate
Appellate Court and in a decision promulgated on
March 31, 1986, (CA-G.R. No. CV No. 02895,
Coquia, Zosa, Bartolome, and Ejercito (P), the
appellate court reversed for the following reasons:
(a) there was no misrepresentation concerning the
lease for the contract was signed by Marcelo
Garcia in the name of Roberto Garcia; and (b)
Paragraph 3 of the policy contract requiring
Verendia to give notice to Fidelity of other contracts
of insurance was waived by Fidelity as shown by its
conduct in attempting to settle the claim of
Verendia.
the issues Fidelity raises therein are: (a) whether or
not the contract of lease submitted by Verendia to
support his claim on the fire insurance policy
constitutes a false declaration which would forfeit
his benefits under Section 13 of the policy and (b)
whether or not, in submitting the subrogation
receipt in evidence, Fidelity had in effect agreed to
settle Verendia's claim in the amount stated in said
receipt
ISSUE: W/N there was false declaration which
would forfeit his benefits under Section 13 of the
policy
HELD: YES.
 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"
 Robert Garcia then executed an affidavit
before the National Intelligence and Security
Authority (NISA) to the effect that he was not
the lessee of Verendia's house and that his
signature on the contract of lease was a
 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.
In view of the conflicting findings of the trial court
and the appellate court on important issues in
these consolidated cases and it appearing that the
appellate court judgment is based on a
misapprehension of facts, this Court shall review
the evidence on record.
The contract of lease upon which Verendia relies to
support his claim for insurance benefits, was
entered into between him and one Robert Garcia,
married to Helen Cawinian, on June 25, 1980 (Exh.
"1"), a couple of days after the effectivity of the
insurance policy. When the rented residential
building was razed to the ground on December 28,
2
1980, it appears that Robert Garcia (or Roberto
Garcia) was still within the premises. However,
according to the investigation report prepared by
Pat. Eleuterio M. Buenviaje of the Antipolo police,
the building appeared to have "no occupant" and
that Mr. Roberto Garcia was "renting on the
otherside (sic) portion of said compound"
Robert Garcia disappeared after the fire. It was
only on October 9, 1981 that an adjuster was able
to locate him. Robert Garcia then executed an
affidavit before the National Intelligence and
Security Authority (NISA) to the effect that he was
not the lessee of Verendia's house and that his
signature on the contract of lease was a complete
forgery. Thus, on the strength of these facts, the
adjuster submitted a report dated December 4,
1981 recommending the denial of Verendia's claim.
Ironically, during the trial, Verendia admitted that it
was not Robert Garcia who signed the lease
contract. According to Verendia, it was signed by
Marcelo Garcia, cousin of Robert, who had been
paying the rentals all the while. Verendia, however,
failed to explain why Marcelo had to sign his
cousin's name when he in fact was paying for the
rent and why he (Verendia) himself, the lessor,
allowed such a ruse. Fidelity's conclusions on
these proven facts appear, therefore, to have
sufficient bases; Verendia concocted the lease
contract to deflect responsibility for the fire towards
an alleged "lessee", inflated the value of the
property by the alleged monthly rental of P6,500
when in fact, the Provincial Assessor of Rizal had
assessed the property's fair market value to be only
P40,300.00, insured the same property with two
other insurance companies for a total coverage of
around P900,000, and created a dead-end for the
adjuster by the disappearance of Robert Garcia.
Basically a contract of indemnity, an insurance
contract is the law between the parties (Pacific
Banking Corporation vs. Court of Appeals 168
SCRA 1 [1988]). Its terms and conditions constitute
the measure of the insurer's liability and
compliance therewith is a condition precedent to
the insured's right to recovery from the insurer
(Oriental Assurance Corporation vs. Court of
Appeals, 200 SCRA 459 [1991], citing Perla
Compania de Seguros, Inc. vs. Court of Appeals,
185 SCRA 741 [1991]). As it is also a contract of
adhesion, an insurance contract should be liberally
construed in favor of the insured and strictly
against the insurer company which usually
prepares it (Western Guaranty Corporation vs.
Court of Appeals, 187 SCRA 652 [1980]).
Considering, however, the foregoing discussion
pointing to the fact that Verendia used a false lease
contract to support his claim under Fire Insurance
Policy No. F-18876, the terms of the policy should
be strictly construed against the insured. Verendia
failed to live by the terms of the policy, specifically
Section 13 thereof which is expressed in terms that
are clear and unambiguous, that all benefits under
the policy shall be forfeited
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 Verendia's claims in consideration of the
amount of P142,685.77. While the said receipt
appears to have been a filled-up 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.
WHEREFORE, the petition in G.R. No. 75605 is
DISMISSED. The petition in G.R. No. 76399 is
GRANTED and the decision of the then
Intermediate Appellate Court under review is
REVERSED and SET ASIDE and that of the trial
court is hereby REINSTATED and UPHELD.
3. G.R. No. 112360               July 18, 2000
RIZAL SURETY & INSURANCE
COMPANY, petitioner,
vs. COURT OF APPEALS and TRANSWORLD
KNITTING MILLS, INC., respondents
Facts:
Rizal Surety issued a 1 million peso
fire insurance policy with Transworld. This
was increased to 1.5 million. A four span building
was part of the policy. A fire broke out
and gutted the building, together with a two storey
building behind it were gaming machines were
stored. The company filed its claims but to no avail.
Hence, it brought a suit in court. It aimed to make
Rizal pay for almost 3 million including legal
interest and damages. Rizal claimed that the policy
only covered damage on the four span building and
not the two storey building. The trial court ruled in
Transworld’s favor and ordered Rizal to pay actual
damages only. The court of appeals increased the
damages. The insurance company filed a MFR.
The CA answered by modifying the imposition of
interest. Not satisfied, the insurance company
petitioned to the Supreme Court.
Issue:
WON Rizal Surety is liable for loss of the two-
storey building considering that the
3
fire insurance policy sued upon covered only the
contents of the four-span building.
petitioner Rizal Surety & Insurance Company found
its way to this Court via the present Petition,
contending that:
I.....SAID DECISION (ANNEX A) ERRED IN
ASSUMING THAT THE ANNEX BUILDING
WHERE THE BULK OF THE BURNED
PROPERTIES WERE STORED, WAS INCLUDED
IN THE COVERAGE OF THE INSURANCE
POLICY ISSUED BY RIZAL SURETY TO
TRANSWORLD.
II.....SAID DECISION AND RESOLUTION
(ANNEXES A AND B) ERRED IN NOT
CONSIDERING THE PICTURES (EXHS. 3 TO 7-
C-RIZAL SURETY), TAKEN IMMEDIATELY
AFTER THE FIRE, WHICH CLEARLY SHOW
THAT THE PREMISES OCCUPIED BY
TRANSWORLD, WHERE THE INSURED
PROPERTIES WERE LOCATED, SUSTAINED
PARTIAL DAMAGE ONLY.
III. SAID DECISION (ANNEX A) ERRED IN NOT
HOLDING THAT TRANSWORLD HAD ACTED IN
PALPABLE BAD FAITH AND WITH MALICE IN
FILING ITS CLEARLY UNFOUNDED CIVIL
ACTION, AND IN NOT ORDERING
TRANSWORLD TO PAY TO RIZAL SURETY
MORAL AND PUNITIVE DAMAGES (ART. 2205,
CIVIL CODE), PLUS ATTORNEY'S FEES AND
EXPENSES OF LITIGATION (ART. 2208 PARS. 4
and 11, CIVIL CODE).11
The Petition is not impressed with merit.
It is petitioner's submission that the fire insurance
policy litigated upon protected only the contents of
the main building (four-span),12 and did not include
those stored in the two-storey annex building. On
the other hand, the private respondent theorized
that the so called "annex" was not an annex but
was actually an integral part of the four-span
building13 and therefore, the goods and items stored
therein were covered by the same fire insurance
policy.
Held: Yes. Petition dismissed.
Ratio:
The policy had clauses on the building coverage
that read:
"contained and/or stored during the currency of this
Policy in the premises occupied by them forming
part of the buildings situated within own
Compound"
"First, said properties must be contained and/or
stored in the areas occupied by Transworld and
second, said areas must form part of the building
described in the policy xxx"
This generally means that the policy didn’t limit its
coverage to what was stored in the four-span
building.
As to questions of fact, both the trial court and the
Court of Appeals found that the so called "annex "
was not an annex building but an integral part of
the four-span building described in the policy
and consequently, the machines and spare parts
stored were covered by the fire insurance.
A report said: "Two-storey building constructed of
partly timber and partly concrete
hollow blocks under g.i. roof which is adjoining
and intercommunicating with the repair of the
first right span of the lofty storey building and
thence by property fence wall."
"Art.1377. The interpretation of obscure words or
stipulations in a contract shall not favor the party
who caused the obscurity"
Landicho v GSIS- the 'terms in an insurance policy,
which are ambiguous, equivocal, or uncertain are
to be construed strictly and most strongly against
the insurer, and liberally in favor of the insured so
as to effect the dominant purpose of indemnity or
payment to the insured’
The issue of whether or not Transworld has an
insurable interest in the fun and amusement
machines and spare parts, which entitles it to be
indemnified for the loss thereof, had been settled in
another SC case
The issue of whether or not Transworld has an
insurable interest in the fun and amusement
machines and spare parts, which entitles it to be
indemnified for the loss thereof, had been settled in
G.R. No. L-111118, entitled New India Assurance
Company, Ltd., vs. Court of Appeals, where the
appeal of New India from the decision of the Court
of Appeals under review, was denied with finality
by this Court on February 2, 1994.
So also, considering that the two-storey building
aforementioned was already existing when subject
fire insurance policy contract was entered into on
January 12, 1981, having been constructed
sometime in 1978,18 petitioner should have
specifically excluded the said two-storey building
from the coverage of the fire insurance if minded to
exclude the same but if did not, and instead, went
on to provide that such fire insurance policy covers
the products, raw materials and supplies stored
within the premises of respondent Transworld
which was an integral part of the four-span building
occupied by Transworld, knowing fully well the
existence of such building adjoining and
intercommunicating with the right section of the
four-span building.
The controversy at bar is on all fours with the
aforecited case. Considering that private
4
respondent's insurable interest in, and
compensability for the loss of subject fun and
amusement machines and spare parts, had been
adjudicated, settled and sustained by the Court of
Appeals in CA-G.R. CV NO. 28779, and by this
Court in G.R. No. L-111118, in a Resolution, dated
February 2, 1994, the same can no longer be
relitigated and passed upon in the present case.
Ineluctably, the petitioner, Rizal Surety Insurance
Company, is bound by the ruling of the Court of
Appeals and of this Court that the private
respondent has an insurable interest in the
aforesaid fun and amusement machines and spare
parts; and should be indemnified for the loss of the
same.
So also, the Court of Appeals correctly adjudged
petitioner liable for the amount of P470,328.67, it
being the total loss and damage suffered by
Transworld for which petitioner Rizal Insurance is
liable.26
All things studiedly considered and viewed in
proper perspective, the Court is of the irresistible
conclusion, and so finds, that the Court of Appeals
erred not in holding the petitioner, Rizal Surety
Insurance Company, liable for the destruction and
loss of the insured buildings and articles of the
private respondent.
WHEREFORE, the Decision, dated July 15, 1993,
and the Resolution, dated October 22, 1993, of the
Court of Appeals in CA-G.R. CV NO. 28779 are
AFFIRMED in toto
4. Philamcare Health Systems, Inc. vs. Court of
Appeals and Julita Trinos
G.R. No. 125678, March 18, 2002
FACTS:
Respondent Julita Trinos’ deceased husband,
Ernani Trinos applied for a health care coverage
with petitioner Philamcare Health Systems, Inc. In
the standard application form, he answered NO to
the following question: Have you or any of your
family members ever consulted or been treated for
high blood pressure, heart trouble, diabetes,
cancer, liver disease, asthma or peptic ulcer?
The application was approved and extended for 13
months, until June 1, 1990.
During the period of the coverage, Ernani suffered
a heart attack resulting in confinement for a month
at the Manila Medical Center (MMC). While her
husband was in the hospital, respondent tried to
claim the benefits under the health care
agreement. However, petitioner denied her claim
saying that the Health Care Agreement was void
on the ground that there was a concealment
regarding Ernani’s medical history.
After his discharge, Ernani was brought again at
the Chinese General Hospital where he died. Julita
then filed an action for damages against
Philamcare including its President Dr. Benito
Reverente. RTC ruled in favour of Julita, and this
was affirmed by the CA except that it deleted
awards for damages and absolved Dr. Reverente.
ISSUE:
Whether or not the agreement is a contract of
indemnity.
RULING:
Yes. The health care agreement was in the nature
of non-life insurance, which is primarily a contract
of indemnity. The insurable interest of respondent’s
husband in obtaining the health care agreement
was his own health. Once the member incurs
hospital, medical or any other expense arising from
sickness, injury or other stipulated contingent, the
health care provider must pay for the same to the
extent agreed upon under the contract.
Elements of an Insurance Contract
Section 2 (1) of the Insurance Code defines a
contract of insurance as an agreement whereby
one undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event. An
insurance contract exists where the following
elements concur:
(a) The insured has an insurable interest;
(b) The insured is subject to a risk of loss by the
happening of the designated peril;
(c) The insurer assumes the risk;
(d) Such assumption of risk is part of a general
scheme to distribute actual losses among a large
group of persons bearing a similar risk; and
(e) In consideration of the insurer’s promise, the
insured pays a premium.
WHEREFORE, in view of the foregoing, the petition
is DENIED. The assailed decision of the Court of
Appeals dated December 14, 1995 is AFFIRMED.
5. G.R. No. 115278 May 23, 1995
FORTUNE INSURANCE AND SURETY CO.,
INC., petitioner,
5
vs. COURT OF APPEALS and PRODUCERS
BANK OF THE PHILIPPINES, respondents.
DAVIDE, JR., J.:
The fundamental legal issue raised in this petition
for review on certiorari is whether the petitioner is
liable under the Money, Security, and Payroll
Robbery policy it issued to the private respondent
or whether recovery thereunder is precluded under
the general exceptions clause thereof. Both the trial
court and the Court of Appeals held that there
should be recovery. The petitioner contends
otherwise.
This case began with the filing with the Regional
Trial Court (RTC) of Makati, Metro Manila, by
private respondent Producers Bank of the
Philippines (hereinafter Producers) against
petitioner Fortune Insurance and Surety Co., Inc.
(hereinafter Fortune) of a complaint for recovery of
the sum of P725,000.00 under the policy issued by
Fortune. The sum was allegedly lost during a
robbery of Producer's armored vehicle while it was
in transit to transfer the money from its Pasay City
Branch to its head office in Makati. The case was
docketed as Civil Case No. 1817 and assigned to
Branch 146 thereof.
Rule Synopsis
Manpower supplied by agencies may be
considered employees or authorized
representatives of the employer for purposes of
construing exceptions to a robbery and theft policy
exempting the insurer from liability for any loss
caused by any dishonest, fraudulent or criminal act
of its employees or authorized representatives,
among others.
Case Summary
Producers Bank had a Money, Security, and
Payroll Robbery policy with Fortune Insurance and
Surety Co., Inc. The policy states that the insurer
shall not be liable for: “any loss caused by any
dishonest, fraudulent or criminal act of the insured
or any officer, employee, partner, director, trustee
or authorized representative of the Insured whether
acting alone or in conjunction with others.”
Producers then allegedly lost a sum of P725k
during a robbery of its armored vehicle while it was
in transit to transfer the money from Pasay to
Makati. The vehicle was driven by one Magalong
(assigned by PRC Management Systems). The
security guard, Atiga, was assigned by Unicorn
Security Services, Inc. The driver and the security
guard, along with others, were charged with
highway robbery. The criminal case was still
pending as of writing of this decision. Producers
filed a claim Fortune. Fortune denied on the ground
that the robbery was due to the acts of Producers’
own employees, thus an excluded loss under the
general exceptions in the policy.
Producers filed a case against Fortune for the
recovery of the insurance proceeds.
The trial court ruled in favor of Producers Bank.
The CA affirmed. The lower courts found that both
Magalong and Atiga were not employees of the
Bank. The SC reversed.
Issues resolved —
Was Fortune Insurance liable under the Money,
Security, and Payroll Robbery policy it issued to
Producers Bank or was the recovery thereunder is
precluded under the general exceptions clause
thereof?
HELD – RECOVERY PRECLUDED. FORTUNE
NOT LIABLE.
On the applicable law. The Court said that theft or
robbery insurance policy, as with the case at bar, is
a form of casualty insurance governed by Sec. 174
of the Insurance Code. The Court also noted that
the Code contains no provisions specifically
applicable to casualty insurance. Thus, this shall be
governed by the general provisions applicable to all
types of insurance.
On the usual exceptions in robbery and theft
policies. The numerous restrictions in the robbery
and theft policies were intended to reduce the
moral hazard. It was noted that in these types of
insurance, the opportunity to defraud the insurer is
so great (e.g. through conspiracy, etc.). Usually,
losses occasioned on the acts of the persons under
the insured’s service and employment, are
excepted risks. The purpose of the exception is to
guard against liability should the theft be committed
by one having unrestricted access to the property.
“Service” and “employment” in this case are to be
understood in their ordinary sense.
On whether Magalong and Atiga were Producers’
employees, given that they were merely supplied
by agencies. The Court held that Magalong and
Atiga may be considered employees of Producers.
This is under the assumption that the contract of
Producers with the providers of concerned
manpower were “labor-only.” And under the Labor
Code, employees under labor-only contract are
considered employees of the party employing them
and not of the party who supplied them to the
employer, the former merely acting as an agent for
the latter.
6
However, the Court noted that there was still lack
of evidence as to the real nature of the contract
between producers and its suppliers of manpower,
since the parties merely entered into stipulation
without submitting additional evidence other than
the insurance policy. Nevertheless, the Court held
that even if Magalong and Atiga were not to be
considered employees of Producers, then may still
be deemed its authorized representatives for
purposes of transferring the money in question. For
the said particular task, the subject employees
acted as agents of Producers.
Petition granted. Judgment on appeal reversed and
set aside.
…from fulltext
But even granting for the sake of argument that
these contracts were not "labor-only" contracts, and
PRC Management Systems and Unicorn Security
Services were truly independent contractors, we
are satisfied that Magalong and Atiga were, in
respect of the transfer of Producer's money from its
Pasay City branch to its head office in Makati, its
"authorized representatives" who served as such
with its teller Maribeth Alampay. Howsoever
viewed, Producers entrusted the three with the
specific duty to safely transfer the money to its
head office, with Alampay to be responsible for its
custody in transit; Magalong to drive the armored
vehicle which would carry the money; and Atiga to
provide the needed security for the money, the
vehicle, and his two other companions. In short, for
these particular tasks, the three acted as agents of
Producers. A "representative" is defined as one
who represents or stands in the place of another;
one who represents others or another in a special
capacity, as an agent, and is interchangeable with
"agent." 23
In view of the foregoing, Fortune is exempt from
liability under the general exceptions clause of the
insurance policy.
WHEREFORE , the instant petition is hereby
GRANTED. The decision of the Court of Appeals in
CA-G.R. CV No. 32946 dated 3 May 1994 as well
as that of Branch 146 of the Regional Trial Court of
Makati in Civil Case No. 1817 are REVERSED and
SET ASIDE. The complaint in Civil Case No. 1817
is DISMISSED.
6. G.R. NO. 156167 : May 16, 2005]
GULF RESORTS, INC., Petitioner, v. PHILIPPINE
CHARTER INSURANCE
CORPORATION, Respondent.
DECISION
PUNO, J.:
Before the Court is the Petition for Certiorariunder
Rule 45 of the Revised Rules of Court by petitioner
GULF RESORTS, INC., against respondent
PHILIPPINE CHARTER INSURANCE
CORPORATION. Petitioner assails the appellate
court decision1 which dismissed its two appeals
and affirmed the judgment of the trial court.
FACTS:
 Gulf Resorts, Inc at Agoo, La Union was
insured with American Home Assurance
Company which includes loss or damage to
shock to any of the property insured by this
Policy occasioned by or through or in
consequence of earthquake 
 July 16, 1990: an earthquake struck Central
Luzon and Northern Luzon so the properties
and 2 swimming pools in its Agoo Playa
Resort were damaged
 August 23, 1990: Gulf's claim was denied on
the ground that its insurance policy only
afforded earthquake shock coverage to the
two swimming pools of the resort
 Petitioner contends that pursuant to
this rider, no qualifications were
placed on the scope of the
earthquake shock coverage.  Thus,
the policy extended earthquake shock
coverage to all of the insured
properties.
 RTC: Favored American Home
- endorsement rider means that only the two
swimming pools were insured against
earthquake shock 
 CA: affirmed RTC
ISSUE: W/N Gulf can claim for its properties aside
from the 2 swimming pools
HELD: YES. Affirmed.
 It is basic that all the provisions of the
insurance policy should be examined and
interpreted in consonance with each other.
 All its parts are reflective of the true
intent of the parties.
Insurance Code
Section 2(1)
contract of insurance as an agreement whereby
one undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event
7
  An insurance premium is the consideration
paid an insurer for undertaking to indemnify
the insured against a specified peril.
 In the subject policy, no premium
payments were made with regard to
earthquake shock coverage, except
on the two swimming pools.  fees in the sum of five hundred pesos (P500.00),
Respondent, in compliance with the condition set
by the petitioner, copied AIU Policy No. 206-
4568061-9 in drafting its Insurance Policy No.
31944. It is true that there was variance in some
terms, specifically in the replacement cost
endorsement, but the principal provisions of the
policy remained essentially similar to AHAC-AIU's
policy. Consequently, we cannot apply the "fine
print" or "contract of adhesion" rule in this case as
the parties' intent to limit the coverage of the policy
to the two swimming pools only is not ambiguous.
FROMFULLTEXT:
 there is no ambiguity in the terms of the contract
and its riders. Petitioner cannot rely on the general
rule that insurance contracts are contracts of
adhesion which should be liberally construed in
favor of the insured and strictly against the insurer
company which usually prepares it. A contract of
adhesion is one wherein a party, usually a
corporation, prepares the stipulations in the
contract, while the other party merely affixes his
signature or his "adhesion" thereto. Through the
years, the courts have held that in these type of
contracts, the parties do not bargain on equal
footing, the weaker party's participation being
reduced to the alternative to take it or leave it.
Thus, these contracts are viewed as traps for the
weaker party whom the courts of justice must
protect.32 Consequently, any ambiguity therein is
resolved against the insurer, or construed liberally
in favor of the insured.33
We cannot apply the general rule on contracts of
adhesion to the case at bar. Petitioner cannot claim
it did not know the provisions of the policy. From
the inception of the policy, petitioner had required
the respondent to copy verbatim the provisions and
terms of its latest insurance policy from AHAC-AIU.
The testimony of Mr. Leopoldo Mantohac, a direct
participant in securing the insurance policy of
petitioner, is reflective of petitioner's knowledge.
IN VIEW WHEREOF, the judgment of the Court of
Appeals is affirmed. The Petition for Certiorari is
dismissed.
7. Manila Mahogany Manufacturing
Corporation v. CA and Zenith
Insurance Corporation (1987)
Petition to review the decision * of the Court of
Appeals, in CA-G.R. No. SP-08642, dated 21
March 1979, ordering petitioner Manila Mahogany
Manufacturing Corporation to pay private
respondent Zenith Insurance Corporation the sum
of Five Thousand Pesos (P5,000.00) with 6%
annual interest from 18 January 1973, attorney's
and costs of suit, and the resolution of the same
Court, dated 8 February 1980, denying petitioner's
motion for reconsideration of it's decision.
Facts:
Manila Mahogany Manufacturing insured its
Mercedez Benz 4-door sedan with private
respondent, Zenith Insurance Corporation. In
between the period covered by the insurance, the
insured vehicle was bumped and damaged by a
truck owned by San Miguel Corporation. Zenith
then paid Manila Mahogany P5,000 for the
damaged caused. The general manager of Manila
Mahogany executed a Release of Claim,
subrogating Zenith all its right to action against San
Miguel. When Zenith demanded reimbursement
from San Miguel thru Insurance Adjusters, Inc., it
was refused to be reimbursed in the amount it paid
to Manila Mahogany. It now demanded
reimbursement from the assured for P4,500, the
amount paid San Miguel. However, the insured
refused to pay. Thus, Zenith filed a suit.
Issue: W/N the insurance company is entitled to
recover from the assured the amount of insurance
money paid on account of right of subrogation
Held/Ratio: Yes, the insurer Zenith Insurance may
recover the insurance money in the amount of
P5,000 paid to the assured, Manila Mahogany. As
held in Phil Air Lines v. Heald Lumber Co., if a
property is insured and the owner receives the
indemnity from the insurer, it is provided in Art.
2207 of the New Civil Code that the insurer is
deemed subrogated to the rights of the insured
against the wrongdoer, and if the amount paid by
the insurer does not fully cover the loss, then the
aggrieved party is the one entitled to recover the
deficiency. Although petitioner’s right to file
deficiency claim against San Miguel is with legal
basis, without prejudice to the insurer’s right of
subrogation, nevertheless when it (Manila
Mahogany) executed another release claim
discharging San Miguel from all actions arising out
of the consequence of the accident after the insurer
had paid the proceeds of the policy, the insurer is
entitled to recover from the insured the amount of
insurance money paid.
WHEREFORE, premises considered, the petition is
DENIED. The judgment appealed from is hereby
AFFIRMED with costs against petitioner.
8

8. G.R. No. 150094 August 18,
2004
FEDERAL EXPRESS CORPORATION,
petitioner, vs. AMERICAN HOME ASSURANCE
COMPANY and PHILAM INSURANCE
COMPANY, INC., respondents.
Basic is the requirement that before suing to
recover loss of or damage to transported goods,
the plaintiff must give the carrier notice of the loss
or damage, within the period prescribed by the
Warsaw Convention and/or the airway bill.
The Case
Before us is a Petition for Review1 under Rule 45
of the Rules of Court, challenging the June 4, 2001
Decision2 and the September 21, 2001
Resolution3 of the Court of Appeals (CA) in CA-GR
CV No. 58208. The assailed Decision disposed as
follows:
"WHEREFORE, premises considered, the present
appeal is hereby DISMISSED for lack of merit. The
appealed Decision of Branch 149 of the Regional
Trial Court of Makati City in Civil Case No. 95-
1219, entitled 'American Home Assurance Co. and
PHILAM Insurance Co., Inc. v. FEDERAL
EXPRESS CORPORATION and/or CARGOHAUS,
INC. (formerly U-WAREHOUSE, INC.),' is hereby
AFFIRMED and REITERATED.
"Costs against the [petitioner and Cargohaus,
Inc.]." The assailed Resolution denied petitioner's
Motion for Reconsideration.
Digest: Federal Express Corporation vs.
American Home Assurance Company [GR
150094, 18 August 2004] PARTIES INVOLVED:
Petitioner is Federal Express Corporation
Respondent is American Home Assurance
Company & Philam Insurance Company Inc.
HOW THE CASE STARTED:
On January 26, 1994, SMITHKLINE Beecham
(SMITHKLINE) of Nebraska, USA delivered to
Burlington Air Express, an agent of FEDEX, a
shipment of 109 cartons of veterinary biologicals
for delivery to consignee SMITHKLINE and French
Overseas Company in Makati City, Metro Manila.
The shipment was covered by Burlington Airway
Bill No. 11263825 with the words, “REFRIGERATE
WHEN NOT IN TRANSIT” and “PERISHABLE”
stamp marked on its face.
BURLINGTON insured the cargoes in the amount
of $39,339.00 with American Home Assurance
Company (AHAC). The following day,
BURLINGTON turned over the custody of said
cargoes to FEDEX which transported the same to
Manila.
The first shipment, consisting of 92 cartons arrived
in Manila on January 29, 1994, the second,
consisting of 17 cartons, came in two (2) days later,
or on January 31, 1994 which was immediately
stored at Cargohaus warehouse.
Prior to the arrival of the cargoes, Federal Express
informed GETC Cargo International Corporation,
the customs broker hired by the consignee to
facilitate the release of its cargoes from the Bureau
of Customs, of the impending arrival of its client’s
cargoes.
On February 10, 1994, DARIO C. DIONEDA
(DIONEDA), found out, while he was about to
cause the release of the said cargoes, that the
same were stored only in a room with two (2) air
conditioners running, to cool the place instead of a
refrigerator.
Thereafter, DIONEDA, upon instructions from
GETC, did not proceed with the withdrawal of the
vaccines and instead, samples of the same were
taken and brought to the Bureau of Animal Industry
of the Department of Agriculture in the Philippines
by SMITHKLINE for examination.
As a consequence of the foregoing result of the
veterinary biologics test, SMITHKLINE abandoned
the shipment and, declaring total loss for the
unusable shipment, filed a claim with AHAC
through its representative in the Philippines, the
Philam Insurance Co., Inc. (PHILAM) which
recompensed SMITHKLINE for the whole insured
amount
$39,339.00. Thereafter, respondents filed an action
for damages against the petitioner imputing
negligence on either or both of them in the handling
of the cargo.
ISSUE: W/N there is legal subrogation on the part
of AHAC/PHILAM (YES)
HELD: It should be noted that The Certificate
specifies that loss of or damage to the insured
cargo is “payable to order x x x upon surrender of
this Certificate.” Such wording conveys the right of
collecting on any such damage or loss, as fully as if
the property were covered by a special policy in the
name of the holder itself. At the back of the
Certificate appears the signature of the
representative of Burlington. This document has
thus been duly indorsed in blank and is deemed a
bearer instrument. Since the Certificate was in the
possession of SMITHKLINE, the latter had the right
of collecting or of being indemnified for loss of or
damage to the insured shipment, as fully as if the
property were covered by a special policy in the
9
name of the holder. Hence, being the holder of the
Certificate and having an insurable interest in the
goods, SMITHKLINE was the proper payee of the
insurance proceeds. Upon payment to the
consignee of an indemnity for the loss of or
damage to the insured goods, the insurer's
entitlement to subrogation pro tanto -- being of the
highest equity -- equips it with a cause of action in
case of a contractual breach or negligence.
"Further, the insurer's subrogatory right to sue for
recovery under the bill of lading in case of loss of or
damage to the cargo is jurisprudentially upheld." In
the exercise of its subrogatory right, an insurer may
proceed against an erring carrier. To all intents and
purposes, it stands in the place and in substitution
of the consignee. A fortiori, both the insurer and the
consignee are bound by the contractual
stipulations... under the bill of lading.
9. G.R. NO. 166245 : April 9, 2008]
ETERNAL GARDENS MEMORIAL PARK
CORPORATION, Petitioner, v. THE PHILIPPINE
AMERICAN LIFE INSURANCE
COMPANY, Respondent.
The Case
Central to this Petition for Review
on Certiorari under Rule 45 which seeks to reverse
and set aside the November 26, 2004 Decision 1 of
the Court of Appeals (CA) in CA-G.R. CV No.
57810 is the query: May the inaction of the insurer
on the insurance application be considered as
approval of the application?
On December 10, 1980, respondent Philippine
American Life Insurance Company (Philamlife)
entered into an agreement denominated as
Creditor Group Life Policy No. P-19202 with
petitioner Eternal Gardens Memorial Park
Corporation (Eternal). Under the policy, the clients
of Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife.
The amount of insurance coverage depended upon
the existing balance of the purchased burial lots.
The policy was to be effective for a period of one
year, renewable on a yearly basis.
The relevant provisions of the policy are:
ELIGIBILITY.
Any Lot Purchaser of the Assured who is at least
18 but not more than 65 years of age, is indebted
to the Assured for the unpaid balance of his loan
with the Assured, and is accepted for Life
Insurance coverage by the Company on its
effective date is eligible for insurance under the
Policy.
EVIDENCE OF INSURABILITY.
No medical examination shall be required for
amounts of insurance up to P50,000.00. However,
a declaration of good health shall be required for all
Lot Purchasers as part of the application. The
Company reserves the right to require further
evidence of insurability satisfactory to the Company
in respect of the following:
1. Any amount of insurance in excess of
P50,000.00.
2. Any lot purchaser who is more than 55 years of
age.
LIFE INSURANCE BENEFIT.
The Life Insurance coverage of any Lot Purchaser
at any time shall be the amount of the unpaid
balance of his loan (including arrears up to but not
exceeding 2 months) as reported by the Assured to
the Company or the sum of P100,000.00,
whichever is smaller. Such benefit shall be paid to
the Assured if the Lot Purchaser dies while insured
under the Policy.
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall
be effective on the date he contracts a loan with
the Assured. However, there shall be no insurance
if the application of the Lot Purchaser is not
approved by the Company.
Eternal was required under the policy to submit to
Philamlife a list of all new lot purchasers, together
with a copy of the application of each purchaser,
and the amounts of the respective unpaid balances
of all insured lot purchasers. In relation to the
instant petition, Eternal complied by submitting a
letter dated December 29, 1982, containing a list of
insurable balances of its lot buyers for October
1982. One of those included in the list as “new
business” was a certain John Chuang. His balance
of payments was PhP100,000. On August 2, 1984,
Chuang died. Eternal sent a letter dated August 20,
1984 to Philamlife, which served as an insurance
claim for Chuang’s death. Attached to the claim
were the following documents: (1) Chuang’s
Certificate of Death; (2) Identification Certificate
stating that Chuang is a naturalized Filipino Citizen;
(3) Certificate of Claimant; (4) Certificate of
Attending Physician; and (5) Assured’s Certificate.
In reply, Philamlife wrote Eternal a letter on
November 12, 1984, requiring Eternal to submit the
following documents relative to its insurance claim
for Chuang’s death: (1) Certificate of Claimant (with
form attached); (2) Assured’s Certificate (with form
attached); (3) Application for Insurance
accomplished and signed by the insured, Chuang,
while still living; and (4) Statement of Account
showing the unpaid balance of Chuang before his
death. Eternal transmitted the required documents
through a letter dated November 14, 1984, which
was received by Philamlife on November 15, 1984.
After more than a year, Philamlife had not
furnished Eternal with any reply to the latter’s
10
insurance claim. This prompted Eternal to demand
from Philamlife the payment of the claim for
PhP100,000 on April 25, 1986.
ISSUE: WON THE INSURER IS LIABLE.  and in favor of the effectivity of the insurance
HELD: YES. As earlier stated, Philamlife and
Eternal entered into an agreement denominated as
Creditor Group Life Policy No. P-1920 dated
December 10, 1980. In the policy, it is provided
that:
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall
be effective on the date he contracts a loan with
the Assured. However, there shall be no insurance
if the application of the Lot Purchaser is not
approved by the Company.
An examination of the above provision would show
ambiguity between its two sentences. The first
sentence appears to state that the insurance
coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while
the second sentence appears to require Philamlife
to approve the insurance contract before the same
can become effective.
It must be remembered that an insurance contract
is a contract of adhesion which must be construed
liberally in favor of the insured and strictly against
the insurer in order to safeguard the latter’s
interest. Thus, in Malayan Insurance Corporation
v. Court of Appeals, this Court held that:
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.
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 obligations. (Emphasis supplied.) TECcHA
In the more recent case of Philamcare Health
Systems, Inc. v. Court of Appeals, we reiterated the
above ruling, stating that:
When the terms of insurance contract contain
limitations on liability, courts should construe them
in such a way as to preclude the insurer from non-
compliance with his obligation. Being a contract of
adhesion, the terms of an insurance contract are to
be construed strictly against the party which
prepared the contract, the insurer. By reason of the
exclusive control of the insurance company over
the terms and phraseology of the insurance
contract, ambiguity must be strictly interpreted
against the insurer and liberally in favor of the
insured, especially to avoid forfeiture.
Clearly, the vague contractual provision, in Creditor
Group Life Policy No. P-1920 dated December 10,
1980, must be construed in favor of the insured
contract.
On the other hand, the seemingly conflicting
provisions must be harmonized to mean that upon
a party’s purchase of a memorial lot on installment
from Eternal, an insurance contract covering the lot
purchaser is created and the same is effective,
valid, and binding until terminated by Philamlife by
disapproving the insurance application. The second
sentence of Creditor Group Life Policy No. P-1920
on the Effective Date of Benefit is in the nature of a
resolutory condition which would lead to the
cessation of the insurance contract. Moreover, the
mere inaction of the insurer on the insurance
application must not work to prejudice the insured;
it cannot be interpreted as a termination of the
insurance contract. The termination of the
insurance contract by the insurer must be explicit
and unambiguous.
As a final note, to characterize the insurer and the
insured as contracting parties on equal footing is
inaccurate at best. Insurance contracts are wholly
prepared by the insurer with vast amounts of
experience in the industry purposefully used to its
advantage. More often than not, insurance
contracts are contracts of adhesion containing
technical terms and conditions of the industry,
confusing if at all understandable to laypersons,
that are imposed on those who wish to avail of
insurance. As such, insurance contracts are
imbued with public interest that must be considered
whenever the rights and obligations of the insurer
and the insured are to be delineated. Hence, in
order to protect the interest of insurance applicants,
insurance companies must be obligated to act with
haste upon insurance applications, to either deny
or approve the same, or otherwise be bound to
honor the application as a valid, binding, and
effective insurance contract.
II. CONTRACT OF INSURANCE
1. ENRIQUEZ VS. SUN LIFE INSURANCE
CANADA, 1920
G.R. No. L-15895 November 29, 1920
RAFAEL ENRIQUEZ, as administrator of the
estate of the late Joaquin Ma. Herrer, plaintiff-
appellant,
vs. SUN LIFE ASSURANCE COMPANY OF
CANADA, defendant-appellee.
11
This is an action brought by the plaintiff ad
administrator of the estate of the late Joaquin Ma.
Herrer to recover from the defendant life insurance
company the sum of pesos 6,000 paid by the
deceased for a life annuity. The trial court gave
judgment for the defendant. Plaintiff appeals.
The undisputed facts are these: On September 24,
1917, Joaquin Herrer made application to the Sun
Life Assurance Company of Canada through its
office in Manila for a life annuity. Two days later he
paid the sum of P6,000 to the manager of the
company's Manila office and was given a receipt
reading as follows:
PROVISIONAL RECEIPT Pesos 6,000 Lessons
Applicable: Perfection (Insurance)
FACTS:
 September 24, 1917: Joaquin Herrer made
application to the Sun Life Assurance
Company of Canada through its office in
Manila for a life annuity
 2 days later: he paid P6,000 to the manager
of the company's Manila office and was
given a receipt
 according to the provisional receipt, 3 things
had to be accomplished by the insurance
company before there was a contract:  the application ever came to the knowledge
 (1) There had to be a medical
examination of the applicant; -check
 (2) there had to be approval of the
application by the head office of the
company; and - check
 (3) this approval had in some way to
be communicated by the company to
the applicant - ?
 November 26, 1917: The head office at
Montreal, Canada gave notice of
acceptance by cable to Manila but this was
not mailed
 December 4, 1917: policy was issued at
Montreal
 December 18, 1917: attorney Aurelio A.
Torres wrote to the Manila office of the
company stating that Herrer desired to
withdraw his application
 December 19, 1917: local office replied to
Mr. Torres, stating that the policy had been
issued, and called attention to the
notification of November 26, 1917
 December 21, 1917 morning: received by
Mr. Torres
 December 20, 1917: Mr. Herrer died
 Rafael Enriquez, as administrator of the
estate of the late Joaquin Ma. Herrer filed to
recover from Sun Life Assurance Company
of Canada through its office in Manila for a
life annuity
 RTC: favored Sun Life Insurance
ISSUE: W/N Mr. Herrera received notice of
acceptance of his application thereby perfecting his
life annuity
HELD: NO. Judgment is reversed, and the
Enriquez shall have and recover from the Sun Life
the sum of P6,000 with legal interest from
November 20, 1918, until paid, without special
finding as to costs in either instance. So ordered.
Art. 1319. Consent is manifested by the meeting of
the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute.
A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not
bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is
presumed to have been entered into in the place
where the offer was made.
 not perfected because it has not been
proved satisfactorily that the acceptance of
of the applicant.
SC: We hold that the contract for a life annuity in
the case at bar was not perfected because it has
not been proved satisfactorily that the acceptance
of the application ever came to the knowledge of
the applicant.
Judgment is reversed, and the plaintiff shall have
and recover from the defendant the sum of P6,000
with legal interest from November 20, 1918, until
paid, without special finding as to costs in either
instance.
2. DEVELOPMENT BANK VS. CA, 1994
G.R. No. L-109937 March 21, 1994
DEVELOPMENT BANK OF THE
PHILIPPINES, petitioner,
vs. COURT OF APPEALS and the ESTATE OF
THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE
REDEMPTION INSURANCE POOL, respondents.
This is a petition for review on certiorari under Rule
45 of the Revised Rules of Court to reverse and set
aside the decision of the Court of Appeals in CA-
G.R CV No. 26434 and its resolution denying
reconsideration thereof.
12
We affirm the decision of the Court of Appeals with
modification.
FACTS:
In May 1987, Juan B. Dans, together with his wife
Candida, his son and daughter-in-law, applied for a
loan of P500,000.00 with the DBP. As the principal
mortgagor, Dans, then 76 years of age, was
advised by DBP to obtain a mortgage redemption
insurance (MRI) A loan, in the reduced amount of
P300,000, was approved by the DBP and Dans
accomplished and submitted the application for the
MRI. The MRI premium of Dans, less the DBP
service fee of 10 percent, was credited by DBP to
the savings account of the DBP MRI Pool. On
September 1987, Dans died. The DBP MRI pool
then informed DBP that Dans was not eligible for
the MRI coverage because the acceptance limit
was 60 years at the time of application. Candida
Dans filed a case against DBP and the DBP MRI
for the collection of sum of money with damages,
alleging that Dans became insured by the DBP
MRI Pool when DBP, with full knowledge of Dans'
age at the time of application, required him to apply
for MRI, and later collected the insurance premium
thereon. The DBP was found to be liable. The DBP
MRI, on the other hand, was found by the trial court
to have no privity of contract between the it and the
deceased.
ISSUE: Was DBP estopped for having led Dans
into applying for MRI and actually collecting the
premium and the service fee, despite knowledge of
his age ineligibility
HELD: In dealing with Dans, DBP was wearing two
legal hats: the first as a lender, and the second as
an insurance agent. As an insurance agent, DBP
made Dans go through the motion of applying for
said insurance, thereby leading him and his family
to believe that they had already fulfilled all the
requirements for the MRI and that the issuance of
their policy was forthcoming. Apparently, DBP had
full knowledge that Dan's application was never
going to be approved. The maximum age for MRI
acceptance is 60 years as clearly and specifically
provided in Article 1 of the Group Mortgage
Redemption Insurance Policy signed in 1984 by all
the insurance companies concerned (Exh. "1-
Pool"). Under Article 1987 of the Civil Code of the
Philippines, "the agent who acts as such is not
personally liable to the party with whom he
contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving
such party sufficient notice of his powers." The
DBP is not authorized to accept applications for
MRI when its clients are more than 60 years of age
(Exh. "1-Pool"). Knowing all the while that Dans
was ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its
authority when it accepted Dan's application for
MRI by collecting the insurance premium, and
deducting its agent's commission and service fee.
The liability of an agent who exceeds the scope of
his authority depends upon whether the third
person is aware of the limits of the agent's powers.
There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications
for MRI. If the third person dealing with an agent is
unaware of the limits of the authority conferred by
the principal on the agent and he (third person) has
been deceived by the non-disclosure thereof by the
agent, then the latter is liable for damages to him.
Last paragraph from fulltext:
WHEREFORE, the decision of the Court of
Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is
ORDERED: (1) to REIMBURSE respondent Estate
of Juan B. Dans the amount of P1,476.00 with legal
interest from the date of the filing of the complaint
until fully paid; and (2) to PAY said Estate the
amount of Fifty Thousand Pesos (P50,000.00) as
moral damages and the amount of Ten Thousand
Pesos (P10,000.00) as attorney's fees. With costs
against petitioner.
3. GREAT PACIFIC LIFE ASSURANCE
CO. VS. CA, 1979
G.R. No. L-31845 April 30, 1979
GREAT PACIFIC LIFE ASSURANCE
COMPANY, petitioner,
vs. HONORABLE COURT OF
APPEALS, respondents.
G.R. No. L-31878 April 30, 1979 LAPULAPU D.
MONDRAGON, petitioner,
vs. HON. COURT OF APPEALS and NGO
HING, respondents.
The two above-entitled cases were ordered
consolidated by the Resolution of this Court dated
April 29, 1970, (Rollo, No. L-31878, p. 58),
because the petitioners in both cases seek similar
relief, through these petitions for certiorari by way
of appeal, from the amended decision of
respondent Court of Appeals which affirmed in toto
the decision of the Court of First Instance of Cebu,
ordering "the defendants (herein petitioners Great
Pacific Life Assurance Company and Mondragon)
jointly and severally to pay plaintiff (herein private
respondent Ngo Hing) the amount of P50,000.00
with interest at 6% from the date of the filing of the
complaint, and the sum of P1,077.75, without
interest.
Facts: Ngo Hing filed an application with the Great
Pacific for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year
old daughter Helen. He supplied the essential data
which petitioner Mondragon, the Branch Manager,
wrote on the form. The latter paid the annual
premium the sum of P1,077.75 going over to the
13
Company, but he retained the amount of P1,317.00
as his commission for being a duly authorized
agent of Pacific Life.
Upon the payment of the insurance premium, the
binding deposit receipt was issued Ngo Hing.
Likewise, petitioner Mondragon handwrote at the
bottom of the back page of the application form his
strong recommendation for the approval of the
insurance application. Then Mondragon received a
letter from Pacific Life disapproving the insurance
application. The letter stated that the said life
insurance application for 20-year endowment plan
is not available for minors below seven years old,
but Pacific Life can consider the same under the
Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical
Declaration be sent to the company.
The non-acceptance of the insurance plan by
Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo
Hing. Instead, on May 6, 1957, Mondragon wrote
back Pacific Life again strongly recommending the
approval of the 20-year endowment insurance plan
to children, pointing out that since the customers
were asking for such coverage.
Helen Go died of influenza. Ngo Hing sought the
payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the
recovery before the Court of First Instance of Cebu,
which ruled against him.
Issues:
1. Whether the binding deposit receipt constituted a
temporary contract of the life insurance in question
2. Whether Ngo Hing concealed the state of health
and physical condition of Helen Go, which
rendered void the policy
Held:  No. Yes. Petition dismissed.
Ratio: The receipt was intended to be merely a
provisional insurance contract. Its perfection was
subject to compliance of the following conditions:
(1) that the company shall be satisfied that the
applicant was insurable on standard rates; (2) that
if the company does not accept the application and
offers to issue a policy for a different plan, the
insurance contract shall not be binding until the
applicant accepts the policy offered; otherwise, the
deposit shall be refunded; and (3) that if the
company disapproves the application, the
insurance applied for shall not be in force at any
time, and the premium paid shall be returned to the
applicant.
The receipt is merely an acknowledgment that the
latter's branch office had received from the
applicant the insurance premium and had accepted
the application subject for processing by the
insurance company. There was still approval or
rejection the same on the basis of whether or not
the applicant is "insurable on standard rates." Since
Pacific Life disapproved the insurance application
of respondent Ngo Hing, the binding deposit receipt
in question had never become in force at any time.
The binding deposit receipt is conditional and does
not insure outright. This was held in Lim v Sun.
The deposit paid by private respondent shall have
to be refunded by Pacific Life.
2.  Ngo Hing had deliberately concealed the state
of health of his daughter Helen Go. When he
supplied data, he was fully aware that his one-year
old daughter is typically a mongoloid child. He
withheld the fact material to the risk insured.
“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 demotion, however
slight.”
The concealment entitles the insurer to rescind the
contract of insurance.
III. INSURABLE INTEREST
1. Spouses Cha vs CA (August 18, 1997) G.R.
No. 124520  August 18, 1997
FACTS:
 Spouses Nilo Cha and Stella Uy-Cha
and CKS Development Corporation entered
a 1 year lease contract with a stipulation not
to 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.
But it insured against loss by fire their
merchandise inside the leased premises for
P500,000 with the United Insurance Co.,
Inc. without the written consent of CKS
 On the day the lease contract was to expire,
fire broke out inside the leased premises
and CKS learning that the spouses procured
an insurance wrote to United to have the
proceeds be paid directly to them. But
United refused so CKS filed against
Spouses Cha and United.
 RTC: United to pay CKS the amount of
P335,063.11 and Spouses Cha to pay
P50,000 as exemplary damages, P20,000
as attorney’s fees and costs of suit
 CA: deleted exemplary damages and
attorney’s fees
ISSUE: W/N the CKS has insurable interest
because the spouses Cha violated the stipulation
14
HELD: NO. CA set aside. Awarding the proceeds
to spouses Cha.
 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 a t 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.
 SECTION 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
 Section 17.  The measure of an insurable
interest in property is the extent to which the
insured might be damnified by loss of injury
thereof
 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.  The liability
of the Cha spouses to CKS for violating their
lease contract in that Cha spouses obtained
a fire insurance policy over their own
merchandise, without the consent of CKS, is
a separate and distinct issue which we do
not resolve in this case.
2. Geagonia vs CA February 6, 1995
Facts:
Geagonia, owner of a store, obtained from Country
Bankers fire insurance policy for P100,000.00. The
1 year policy and covered thestock trading of dry
goods.
The policy noted the requirement that
"3. The insured shall give notice to the Company
of any insurance or insurances already effected, or
which may subsequently be effected, covering any
of the property or properties consisting of stocks in
trade, goods in process and/or inventories only
hereby insured, and unless notice be given and the
particulars of such insurance or insurances be
stated therein or endorsed in this policy pursuant to
Section 50 of the Insurance Code, by or on behalf
of the Company before the occurrence of any loss
or damage, all benefits under this policy shall be
deemed forfeited, provided however, that this
condition shall not apply when the total insurance
or insurances in force at the time of the loss or
damage is not more than P200,000.00."
The petitioners’ stocks were destroyed by fire. He
then filed a claim which was subsequently denied
because the petitioner’s stocks were covered by
two other fire insurance policies for Php 200,000
issued by PFIC. The basis of the private
respondent's denial was the petitioner's alleged
violation of Condition 3 of the policy.
Geagonia then filed a complaint against the private
respondent in the Insurance Commission for the
recovery of P100,000.00 under fire insurance
policy and damages. He claimed that he knew the
existence of the other two policies. But, he said that
he had no knowledge of the provision in the private
respondent's policy requiring him to inform it of the
prior policies and this requirement was not
mentioned to him by the private respondent's
agent.
The Insurance Commission found that the
petitioner did not violate Condition 3 as he had no
knowledge of the existence of the two fire
insurance policies obtained from the PFIC; that it
was Cebu Tesing Textiles w/c procured the PFIC
policies w/o informing him or securing his consent;
and that Cebu Tesing Textile, as his creditor, had
insurable interest on the stocks.
The Insurance Commission then ordered the
respondent company to pay complainant the sum
of P100,000.00 with interest and attorney’s fees.
CA reversed the decision of the Insurance
Commission because it found that the petitioner
knew of the existence of the two other policies
issued by the PFIC.
The chief issues that crop up from the first and third
grounds are (a) whether the petitioner had prior
knowledge of the two insurance policies issued by
the PFIC when he obtained the fire insurance
policy from the private respondent, thereby, for not
disclosing such fact, violating Condition 3 of the
policy, and (b) if he had, whether he is precluded
from recovering therefrom.
Issues:
1. WON the petitioner had not disclosed the two
insurance policies when he obtained the fire
insurance and thereby violated Condition 3 of the
policy.
2. WON he is prohibited from recovering
15
Held: Yes. No. Petition Granted
Ratio:
1. The court agreed with the CA that the petitioner
knew of the prior policies issued by the PFIC. His
letter of 18 January 1991 to the private respondent
conclusively proves this knowledge. His testimony
to the contrary before the Insurance Commissioner
and which the latter relied upon cannot prevail over
a written admission made ante litem motam. It was,
indeed, incredible that he did not know about the
prior policies since these policies were not new or
original.
2. Stated differently, provisions, conditions or
exceptions in policies which tend to work a
forfeiture of insurance policies should be construed
most strictly against those for whose benefits they
are inserted, and most favorably toward those
against whom they are intended to operate.
With these principles in mind, Condition 3 of the
subject policy is not totally free from ambiguity and
must be meticulously analyzed. Such analysis
leads us to conclude that (a) the prohibition applies
only to double insurance, and (b) the nullity of the
policy shall only be to the extent exceeding
P200,000.00 of the total policies obtained.
Furthermore, by stating within Condition 3 itself that
such condition shall not apply if the total insurance
in force at the time of loss does not exceed
P200,000.00, the private respondent was
amenable to assume a co-insurer's liability up to a
loss not exceeding P200,000.00. What it had in
mind was to discourage over-insurance. Indeed,
the rationale behind the incorporation of "other
insurance" clause in fire policies is to prevent over-
insurance and thus avert the perpetration of fraud.
When a property owner obtains insurance policies
from two or more insurers in a total amount that
exceeds the property's value, the insured may have
an inducement to destroy the property for the
purpose of collecting the insurance. The public as
well as the insurer is interested in preventing a
situation in which a fire would be profitable to the
insured.
The first conclusion is supported by the portion of
the condition referring to other insurance "covering
any of the property or properties consisting of
stocks in trade, goods in process and/or inventories
only hereby insured," and the portion regarding the
insured's declaration on the subheading CO-
INSURANCE that the co-insurer is Mercantile
Insurance Co., Inc. in the sum of P50,000.00. A
double insurance exists where the same person is
insured by several insurers separately in respect of
the same subject and interest. As earlier stated, the
insurable interests of a mortgagor and a mortgagee
on the mortgaged property are distinct and
separate. Since the two policies of the PFIC do not
cover the same interest as that covered by the
policy of the private respondent, no double
insurance exists. The non-disclosure then of the
former policies was not fatal to the petitioner's right
to recover on the private respondent's policy.
Furthermore, by stating within Condition 3 itself that
such condition shall not apply if the total insurance
in force at the time of loss does not exceed
P200,000.00, the private respondent was
amenable to assume a co-insurer's liability up to a
loss not exceeding P200,000.00. What it had in
mind was to discourage over-insurance. Indeed,
the rationale behind the incorporation of "other
insurance" clause in fire policies is to prevent over-
insurance and thus avert the perpetration of fraud.
When a property owner obtains insurance policies
from two or more insurers in a total amount that
exceeds the property's value, the insured may have
an inducement to destroy the property for the
purpose of collecting the insurance. The public as
well as the insurer is interested in preventing a
situation in which a fire would be profitable to the
insured.32
WHEREFORE, the instant petition is hereby
GRANTED. The decision of the Court of Appeals in
CA-G.R. SP No. 31916 is SET ASIDE and the
decision of the Insurance Commission in Case No.
3340 is REINSTATED.
3. RCBC vs CA 289 SCRA 292
FACTS:
 RCBC Binondo Branch initially granted a
credit facility of P30M to Goyu & Sons, Inc.
GOYU’s applied again and through Binondo
Branch key officer's Uy’s and Lao’s
recommendation, RCBC’s executive
committee increased its credit facility to
P50M to P90M and finally to P117M.
 As security, GOYU executed 2 real
estate mortgages and 2 chattel
mortgages in favor of RCBC.  
 GOYU obtained in its name 10
insurance policy on the mortgaged
properties from Malayan Insurance
Company, Inc. (MICO). In February
1992, he was issued 8 insurance
policies in favor of RCBC.
 April 27, 1992: One of GOYU’s factory
buildings was burned so he claimed against
MICO for the loss who denied contending
that the insurance policies were
either attached pursuant to writs of
attachments/garnishments or that creditors
are claiming to have a better right
 GOYU filed a complaint for specific
performance and damages at the RTC
 RCBC, one of GOYU’s creditors, also filed
with MICO its formal claim over the
proceeds of the insurance policies, but said
16
 claims were also denied for the same
reasons that MICO denied GOYU’s claims
 RTC: Confirmed GOYU’s other creditors
(Urban Bank, Alfredo Sebastian, and
Philippine Trust Company) obtained their
writs of attachment covering an aggregate
amount of P14,938,080.23 and ordered that
10 insurance policies be deposited with the
court minus the said amount so MICO
deposited P50,505,594.60.   said insurance policies
 Another Garnishment of P8,696,838.75 was
handed down
 RTC: favored GOYU against MICO for the
claim, RCBC for damages and to pay RCBC
its loan
 CA: Modified by increasing the damages in
favor of GOYU
 In G.R. No. 128834, RCBC seeks right to
intervene in the action between Alfredo C.
Sebastian (the creditor) and GOYU (the
debtor), where the subject insurance policies
were attached in favor of Sebastian
 RTC and CA: endorsements do not bear the
signature of any officer of GOYU concluded
that the endorsements favoring RCBC as
defective.
ISSUE: W/N RCBC as mortgagee, has any right
over the insurance policies taken by GOYU, the
mortgagor, in case of the occurrence of loss
HELD: YES.
 mortgagor and a mortgagee have separate
and distinct insurable interests in the same
mortgaged property, such that each one of
them may insure the same property for his
own sole benefit
 although it appears that GOYU obtained the
subject insurance policies naming itself as
the sole payee, the intentions of the parties
as shown by their contemporaneous acts,
must be given due consideration in order to
better serve the interest of justice and equity
 8 endorsement documents were
prepared by Alchester in favor of
RCBC
 MICO, a sister company of RCBC
 GOYU continued to enjoy the benefits
of the credit facilities extended to it by
RCBC.  
 GOYU is at the very least
estopped from assailing their
operative effects. 
 The two courts below erred in failing to see
that the promissory notes which they ruled
should be excluded for bearing dates which
are after that of  the fire, are mere renewals
of previous ones
 RCBC has the right to claim the insurance
proceeds, in substitution of the property lost
in the fire. Having assigned its rights, GOYU
lost its standing as the beneficiary of the
 insurance company to be held liable for
unreasonably delaying and withholding
payment of insurance proceeds, the delay
must be wanton, oppressive, or malevolent -
not shown
 Sebastian’s right as attaching creditor must
yield to the preferential rights of RCBC over
the Malayan insurance policies as first
mortgagee.
4. Gaisano Cagayan, Inc vs Insurance
Company of North America GR No.
147839 June 8, 2006
FACTS:
 Intercapitol Marketing Corporation (IMC) is
the maker of Wrangler Blue Jeans.
while Levi Strauss (Phils.) Inc. (LSPI) is the
local distributor of products bearing
trademarks owned by Levi Strauss & Co
 IMC and LSPI separately obtained from
Insurance Company of North America fire
insurance policies for their book debt
endorsements related to their ready-made
clothing materials which have been sold or
delivered to various customers and dealers
of the Insured anywhere in the Philippines
which are unpaid 45 days after the time of
the loss
 February 25, 1991: Gaisano Superstore
Complex in Cagayan de Oro City, owned by
Gaisano Cagayan, Inc., containing the
ready-made clothing materials sold and
delivered by IMC and LSPI was consumed
by fire. 
 February 4, 1992: Insurance Company of
North America filed a complaint for damages
against Gaisano Cagayan, Inc. alleges that
IMC and LSPI filed their claims under their
respective fire insurance policies which it
paid thus it was subrogated to their rights
Gaisano Cagayan, Inc: not be held
liable because it was destroyed due
to fortuities event or force majeure
17
  RTC: IMC and LSPI retained ownership of
the delivered goods until fully paid, it must
bear the loss (res perit domino)
 CA: Reversed - sales invoices is an
exception under Article 1504 (1) of the Civil
Code to res perit domino
ISSUE: W/N Insurance Company of North America
can claim against Gaisano Cagayan for the debt
that was isnured
HELD: YES. petition is partly GRANTED. order to
pay P535,613 is DELETED
 insurance policy is clear that the subject of
the insurance is the book debts and
NOT goods sold and delivered to the
customers and dealers of the insured
 ART. 1504. Unless otherwise agreed, the
goods remain at the seller's risk until the
ownership therein is transferred to the
buyer, but when the ownership therein is
transferred to the buyer the goods are at the
buyer's risk whether actual delivery has
been made or not, except that:
(1) 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;
 IMC and LSPI did not lose complete interest
over the goods. They have an insurable
interest until full payment of the value of the
delivered goods. Unlike the civil law concept
of res perit domino, where ownership is the
basis for consideration of who bears the risk
of loss, in property insurance, one's interest
is not determined by concept of title, but
whether insured has substantial economic
interest in the property
 Section 13 of our Insurance Code defines
insurable interest as "every interest in
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."
Parenthetically, under Section 14 of the
same Code, an insurable interest in property
may consist in: (a) an existing interest; (b)
an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with
an existing interest in that out of which the
expectancy arises.  CONTROLLING RISK AND LOSS
 Anyone has an insurable interest in property
who derives a benefit from its existence or
would suffer loss from its destruction.
 it is sufficient that the insured is so
situated with reference to the property
that he would be liable to loss should
it be injured or destroyed by the peril
against which it is insured
 an insurable interest in property does
not necessarily imply a property
interest in, or a lien upon, or
possession of, the subject 
 matter of the insurance, and neither
the title nor a beneficial interest is
requisite to the existence of such an
interest
 insurance in this case is not for loss of
goods by fire but for petitioner's accounts
with IMC and LSPI that remained unpaid 45
days after the fire - obligation is pecuniary in
nature
 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
 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 (Genus
nunquan perit)
 The subrogation receipt, by itself, is
sufficient to establish not only the
relationship of respondent as insurer and
IMC as the insured, but also the amount
paid to settle the insurance claim
 Art. 2207. If the plaintiff's property has been
insured, and he has received indemnity from
the insurance company for the injury or loss
arising out of the wrong or breach of
contract complained of, the insurance
company shall be subrogated to the rights of
the insured against the wrongdoer or the
person who has violated the contract. 
 As to LSPI, no subrogation receipt was
offered in evidence. 
 Failure to substantiate the claim of
subrogation is fatal to petitioner's
case for recovery of the amount of
P535,613
IV. DEVICES FOR ASCERTAINING AND
1. GREAT PACIFIC LIFE ASSURANCE
COMPANY, petitioner, vs. HONORABLE
18
 COURT OF APPEALS, respondents.
G.R. No. L-31845 April 30, 1979
LAPULAPU D. MONDRAGON, petitioner, vs.
HON. COURT OF APPEALS and NGO HING,
respondents. G.R. No. L-31878 April 30, 1979
J. DE CASTRO
The Case:
The two above-entitled cases were ordered
consolidated by the Resolution of SC, because
the petitioners in both cases sought similar
relief, through these petitions for certiorari by
way of appeal, from the amended decision of
the CA which affirmed in toto the decision of the
CFI of Cebu, ordering Great Pacific Life
Assurance Company and Mondragon jointly and
severally to pay Ngo Hing the amount of
P50,000.00 with interest at 6% from the date of
the filing of the complaint, and the sum of
P1,077.75, without interest.
Facts:
Ngo Hing filed an application with the Great
Pacific Assurance Company (Grepalife) for a
twenty-year endowment policy in the amount of
P50,000.00 on the life of his one-year old
daughter Helen Go. Said respondent supplied
the essential data which petitioner Lapulapu D.
Mondragon, Branch Manager of the Grepalife in
Cebu City wrote on the corresponding form in
his own handwriting. Mondragon finally type-
wrote the data on the application form which
was signed by private respondent Ngo Hing.
The latter paid the annual premuim to the
Company, but he retained a certain amount as
his commission for being a duly authorized
agent of Grepalife. Upon the payment of the
insurance premium, the binding deposit receipt
was issued to private respondent Ngo Hing.
Likewise, petitioner Mondragon handwrote at
the bottom of the back page of the application
form his strong recommendation for the
approval of the insurance application.
Then Mondragon received a letter from
Grepalife disapproving the insurance
application. The letter stated that the said life
insurance application for 20-year endowment
plan is not available for minors below seven
years old, but Grepalife can consider the same
under the Juvenile Triple Action Plan, and
advised that if the offer is acceptable, the
Juvenile Non-Medical Declaration be sent to the
company.
The non-acceptance of the insurance plan by
Grepalife was allegedly not communicated by
Mondragon to Ngo Hing. Instead, Mondragon
wrote back Grepalife again strongly
recommending the approval of the 20-year
endowment insurance plan to children, pointing
out that since 1954 the customers, especially
the Chinese, were asking for such coverage. It
was when things were in such state that on May
28, 1957 Helen Go died of influenza with
complication of bronchopneumonia. Thereupon,
Ngo Hing sought the payment of the proceeds of
the insurance, but having failed in his effort, he
filed the action for the recovery of the same
before the CFI of Cebu, which rendered the
adverse decision.
Issues:
(1) whether the binding deposit receipt
constituted a temporary contract of the life
insurance in question; and
(2) whether private respondent Ngo Hing
concealed the state of health and physical
condition of Helen Go, which rendered void the
aforesaid deposit receipt.
Held:
The provisions printed on the deposit receipt
provide that the binding deposit receipt is
intended to be merely a provisional or temporary
insurance contract and only upon compliance of
the following conditions:
(1) that the company shall be satisfied that the
applicant was insurable on standard rates; (2)
that if the company does not accept the
application and offers to issue a policy for a
different plan, the insurance contract shall be
binding until the applicant accepts the policy
offered; otherwise, the deposit shall be
refunded; and (3) that if the applicant is not able
according to the standard rates, and the
company disapproves the application, the
insurance applied for shall not be in force at any
time, and the premium paid shall be returned to
the applicant. Clearly implied from the aforesaid
conditions is that the binding deposit receipt in
question is merely an acknowledgment, on
behalf of the company, that the latter's branch
office had received from the applicant the
insurance premium and had accepted the
application subject for processing by the
insurance company; and that the latter will either
approve or reject the same on the basis of
whether or not the applicant is "insurable on
standard rates." Since petitioner Grepalife
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
19
slip" or "binding receipt" does not insure by itself
(De Lim vs. Sun Life Assurance Company of
Canada, 41 Phil. 264).
As held in De Lim vs. Sun Life Assurance
Company of Canada, supra, "a contract of
insurance, like other contracts, must be
assented to by both parties either in person or
by their agents ... The contract, to be binding
from the date of the application, must have been
a completed contract, one that leaves nothing to
be 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."
2. Relative to the second issue of alleged
concealment, the Court is of the firm belief that
private respondent had deliberately concealed
the state of health and physical condition of his
daughter Helen Go. Where private respondent
supplied the required essential data for the
insurance application form, he was fully aware
that his one-year old daughter is typically a
mongoloid child. Such a congenital physical
defect could never be ensconced nor 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 Grepalife, he ought to know,
as he surely must have known. his duty and
responsibility to such a material fact. Had he
diamond said significant fact in the insurance
application form Grepalife 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
demotion, however slight [Black's Law
Dictionary, 2nd Edition], not for the alone but
equally so for the insurer (Field man's Insurance
Co., Inc. vs. Vda de Songco, 25 SCRA 70).
Concealment is a neglect to communicate that
which a party knows 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; Satumino vs.
Philippine American Life Insurance Company, 7
SCRA 316). Private respondent appears guilty
thereof.
The SC held that no insurance contract was
perfected between the parties with the
noncompliance of the conditions provided in the
binding receipt, and concealment, as legally
defined, having been committed by herein
private respondent.
Disposition:
The decision appealed from was SET ASIDE,
and in lieu thereof, one was entered which
absolved petitioners Lapulapu D. Mondragon
and Great Pacific Life Assurance Company from
their civil liabilities as found by respondent Court
and ordered the aforesaid insurance company to
reimburse the amount of P1,077.75, without
interest, to private respondent, Ngo Hing. Costs
against private respondent.
2. SUNLIFE ASSURANCE COMPANY OF
CANADA vs. COURT OF APPEALS
G.R. No. 105135, 22 June 1995
FACTS:
Robert John Bacani procured a life insurance
contract for himself from petitioner-company,
designating his mother Bernarda Bacani, herein
private respondent, as the beneficiary. He was
issued a policy valued at P100,000.00 with
double indemnity in case of accidental death.
Sometime after, the insured died in a plane
crash. Bernarda filed a claim with petitioner,
seeking the benefits of the insurance policy
taken by her son. However, said insurance
company rejected the claim on the ground that
the insured did not disclose material facts
relevant to the issuance of the policy, thus
rendering the contract of insurance voidable.
Petitioner discovered that two weeks prior to his
application for insurance, the insured was
examined and confined at the Lung Center of
the Philippines, where he was diagnosed for
renal failure. The RTC, as affirmed by the CA,
this fact was concealed, as alleged by the
petitioner. But the fact that was concealed was
not the cause of death of the insured and that
matters relating to the medical history of the
insured is deemed to be irrelevant since
petitioner waived the medical examination prior
to the approval and issuance of the insurance
policy.
 
ISSUE: Whether or not the concealment of such
material fact, despite it not being the cause of
death of the insured, is sufficient to render the
insurance contract voidable
HELD:
 
YES. Section 26 of the Insurance Code is
explicit in requiring a party to a contract of
insurance to communicate to the other, in good
faith, all facts within his knowledge which are
material to the contract and as to which he
makes no warranty, and which the other has no
20
means of ascertaining. Anent the finding that the
facts concealed had no bearing to the cause of
death of the insured, it is well settled that the
insured need not die of the disease he had
failed to disclose to the insurer. It is sufficient
that his non-disclosure misled the insurer in
forming his estimates of the risks of the
proposed insurance policy or in making
inquiries. The SC, therefore, ruled that petitioner
properly exercised its right to rescind the
contract of insurance by reason of the
concealment employed by the insured. It must
be emphasized that rescission was exercised
within the two-year contestability period as
recognized in Section 48 of The Insurance
Code. WHEREFORE, the petition is GRANTED
and the Decision of the Court of Appeals is
REVERSED and SET ASIDE.
3. PHILAMCARE HEALTH SYSTEMS,
INC., petitioner,
vs. COURT OF APPEALS and JULITA
TRINOS, respondents. G.R. No. 125678
March 18, 2002
Ernani Trinos, deceased, husband of
respondent Julita Trinos applied for a health
care coverage with petitioner Philamcare Health
Systems Inc. In the application form, he
answered “NO” to the question – “Have you or
any family member ever consulted or been
treated for high blood pressure, heart trouble,
diabetes, cancer, liver disease, asthma or peptic
ulcer?”
The application for was approved for a period of
one year, from March 1, 1988 to March 1, 1989,
and he was issued Health Care Agreement,
wherein the husband Ernani was entitled to avail
of hospitalization benefits; out patient benefits
such as annual physical examinations and
preventive health cared.
The agreement was extended with the coverage
amount increasing to P75,000 per disability.
During the period, Ernani suffered a heart attack
and was confined in Manila Medical Center
(MMC) for one month. While he was at the
hospital, Julita tried to claim the benefits under
the health care agreement, but Philamcare
denied liability saying that such was void.
Apparently, Ernani concealed his medical
history since the Manila Medical doctors
discovered that he was hypertensive, diabetic
and asthmatic, which was contrary to his answer
in the application form. Julita paid the expenses
amounting to P76,000.
RTC: ruled in favor of Julita; ordered Philamcare
to pay and reimburse the medical expenses +
Moral Damages + exemplary damages.
CA: affirmed RTC decision in favor of Julita but
removed the damages.
ISSUES:
(1) Whether or not a health care agreement is
an insurance contract.
(2) Whether or not the alleged concealment
avoided the agreement.
HELD:
(1) YES.
Section 2 (1) of the Insurance Code defines a
contract of insurance as an agreement whereby
one undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event. An
insurance contract exists where the following
elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by
the happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a
general scheme to distribute actual
losses among a large group of persons
bearing a similar risk; and
5. In consideration of the insurers promise,
the insured pays a premium
Section 3 of the Insurance Code states that any
contingent or unknown event, whether past or
future, which may damnify a person having an
insurable interest against him, may be insured
against. Every person has an insurable interest
in the life and health of himself. Section 10
provides:
Every person has an insurable interest in the life
and health:
1. of himself, of his spouse and of his
children;
2. of any person on whom he depends
wholly or in part for education or support,
or in whom he has a pecuniary interest;
3. of any person under a legal obligation to
him for the payment of money, respecting
property or service, of which death or
illness might delay or prevent the
performance; and
21
 4. of any person upon whose life any estate
or interest vested in him depends.
In the case at bar, the insurable interest of
respondents husband in obtaining the health
care agreement was his own health. The health
care agreement was in the nature of non-life
insurance, which is primarily a contract of
indemnity. Once the member incurs hospital,
medical or any other expense arising from
sickness, injury or other stipulated contingent,
the health care provider must pay for the same
to the extent agreed upon under the contract.
(2) NO.
The question relating to an applicant’s medical
history largely depends on opinion, rather than
fact, especially coming from Ernani, who was
not a medical doctor. Where matters of opinion
are called for, answers made in good faith and
without intent to deceive will not avoid a policy
even though they are untrue.
Thus, although false, a representation of the
expectation, intention, belief, opinion, or
judgment of the insured will not avoid the policy
if there is no actual fraud in inducing the
acceptance of the risk, or its acceptance at a
lower rate of premium, and this is likewise the
rule although the statement is material to the
risk, if the statement is obviously of the
foregoing character, since in such case the
insurer is not justified in relying upon such
statement, but is obligated to make further
inquiry. There is a clear distinction between
such a case and one in which the insured is
fraudulently and intentionally states to be true,
as a matter of expectation or belief, that which
he then knows, to be actually untrue, or the
impossibility of which is shown by the facts
within his knowledge, since in such case the
intent to deceive the insurer is obvious and
amounts to actual fraud.
The fraudulent intent on the part of the insured
must be established to warrant rescission of the
insurance contract. Concealment as a defense
for the health care provider or insurer to avoid
liability is an affirmative defense and the duty to
establish such defense by satisfactory and
convincing evidence rests upon the provider or
insurer. In any case, with or without the authority
to investigate, petitioner is liable for claims made
under the contract. Having assumed a
responsibility under the agreement, petitioner is
bound to answer the same to the extent agreed
upon. In the end, the liability of the health care
provider attaches once the member is
hospitalized for the disease or injury covered by
the agreement or whenever he avails of the
covered benefits which he has prepaid.
Under Section 27 of the Insurance Code, a
concealment entitles the injured party to rescind
a contract of insurance. The right to rescind
should be exercised previous to the
commencement of an action on the contract. In
this case, no rescission was made. Besides,
the cancellation of health care agreements as in
insurance policies require the concurrence of
the following conditions:
 Prior notice of cancellation to insured;
 Notice must be based on the occurrence
after effective date of the policy of one or
more of the grounds mentioned;
 Must be in writing, mailed or delivered to
the insured at the address shown in the
policy;
 Must state the grounds relied upon
provided in Section 64 of the Insurance
Code and upon request of insured, to
furnish facts on which cancellation is
based
None of the above pre-conditions was fulfilled in
this case. When the terms of insurance contract
contain limitations on liability, courts should
construe them in such a way as to preclude the
insurer from non-compliance with his obligation.
Being a contract of adhesion, the terms of an
insurance contract are to be construed strictly
against the party which prepared the contract
the insurer. By reason of the exclusive control of
the insurance company over the terms and
phraseology of the insurance contract, ambiguity
must be strictly interpreted against the insurer
and liberally in favor of the insured, especially to
avoid forfeiture. This is equally applicable to
Health Care Agreements. The phraseology used
in medical or hospital service contracts, such as
the one at bar, must be liberally construed in
favor of the subscriber, and if doubtful or
reasonably susceptible of two interpretations the
construction conferring coverage is to be
adopted, and exclusionary clauses of doubtful
import should be strictly construed against the
provider
As to incontestability:
Under the title Claim procedures of expenses,
the Philamcare Health Systems Inc. had twelve
months from the date of issuance of the
Agreement within which to contest the
membership of the patient if he had previous
ailment of asthma, and six months from the
issuance of the agreement if the patient was
22
sick of diabetes or hypertension. The periods
having expired, the defense of concealment or
misrepresentation no longer lie.
As to Julita being the proper claimant:
Finally, petitioner alleges that respondent was
not the legal wife of the deceased member
considering that at the time of their marriage, the
deceased was previously married to another
woman who was still alive. The health care
agreement is in the nature of a contract of
indemnity. Hence, payment should be made to
the party who incurred the expenses. She paid
all the hospital and medical expenses. She is
therefore entitled to reimbursement.
4. THELMA VDA. DE CANILANG vs.
COURT OF APPEALS G.R. No. 92492,
17 June 1993
FACTS:
Jaime Canilang applied for a “non-medical”
insurance policy with respondent Great Pacific
Life Assurance Company naming his wife,
Thelma Canilang as his beneficiary. But he did
not disclose the fact that he was diagnosed as
suffering from sinus tachycardia and that he has
consulted a doctor twice. Jaime was issued an
ordinary life insurance policy with the face value
of P19,700.00. Jaime died of “congestive heart
failure”, “anemia”, and “chronic anemia”.
Petitioner widow and beneficiary of the insured,
filed a claim with Great Pacific which the insurer
denied upon the ground that the insured had
concealed material information from it. Hence,
Thelma filed a complaint against Great Pacific
with the Insurance Commission for recovery of
the insurance proceeds.
ISSUE: Whether or not the non-disclosure of
certain facts about the insured’s previous health
conditions is material to warrant the denial of the
claims of Thelma Canilang.
HELD: YES. The SC agreed with the Court of
Appeals that the information which Jaime
Canilang failed to disclose was material to the
ability of Great Pacific to estimate the probable
risk he presented as a subject of life insurance.
Had Canilang disclosed his visits to his doctor,
the diagnosis made and medicines prescribed
by such doctor, in the insurance application, it
may be reasonably assumed that Great Pacific
would have made further inquiries and would
have probably refused to issue a non-medical
insurance policy or, at the very least, required a
higher premium for the same coverage. The
materiality of the information withheld by Great
Pacific did not depend upon the state of mind of
Jaime Canilang. A man’s state of mind or
subjective belief is not capable of proof in our
judicial process, except through proof of external
acts or failure to act from which inferences as to
his subjective belief may be reasonably drawn.
Neither does materiality depend upon the actual
or physical events which ensure. Materiality
relates rather to the “probable and reasonable
influence of the facts” upon the party to whom
the communication should have been made, in
assessing the risk involved in making or omitting
to make further inquiries and in accepting the
application for insurance; that “probable and
reasonable influence of the facts” concealed
must, of course, be determined objectively, by
the judge ultimately. WHEREFORE, the Petition
for Review is DENIED for lack of merit and the
Decision of the Court of Appeals dated 16
October 1989 in C.A.-G.R. SP No. 08696 is
hereby AFFIRMED. No pronouncement as to
the costs.
5. TAN V. COURT OF APPEALS, G.R. NO.
L-48049, [JUNE 29, 1989], 256 PHIL
158-166)
FACTS: Petitioners appeal from the Decision of
the Insurance Commissioner dismissing herein
petitioners’ complaint against respondent
Philippine American Life Insurance Company for
the recovery of the proceeds of Policy No.
1082467 in the amount of P80,000.00.
“On September 23, 1973, Tan Lee Siong, father
of herein petitioners, applied for life insurance in
the amount of P80,000.00 with respondent
company. Said application was approved and
Policy No. 1082467 was issued effective
November 6, 1973, with petitioners the
beneficiaries thereof (Exhibit A).
“On April 26, 1975, Tan Lee Siong died of
hepatoma (Exhibit B). Petitioners then filed with
respondent company their claim for the
proceeds of the life insurance policy. However,
in a letter dated September 11, 1975,
respondent company denied petitioners’ claim
and rescinded the policy by reason of the
alleged misrepresentation and concealment of
material facts made by the deceased Tan Lee
Siong in his application for insurance (Exhibit 3).
The premiums paid on the policy were
thereupon refunded.
“Alleging that respondent company’s refusal to
pay them the proceeds of the policy was
unjustified and unreasonable, petitioners filed on
November 27, 1975, a complaint against the
23
former with the Office of the Insurance
Commissioner, docketed as I.C. Case No. 218.
“After hearing the evidence of both parties, the
Insurance Commissioner rendered judgment on
August 3, 1977, dismissing petitioners’
complaint.”
The petitioners contend that the respondent
company no longer had the right to rescind the
contract of insurance as rescission must
allegedly be done during the lifetime of the
insured within two years and prior to the
commencement of action.
ISSUE: WON THE INSURER IS LIABLE.  law and jurisprudence. They have failed to
HELD: NO. The so-called “incontestability
clause” precludes the insurer from raising the
defenses of false representations or
concealment of material facts insofar as health
and previous diseases are concerned if the
insurance has been in force for at least two
years during the insured’s lifetime. The phrase
“during the lifetime” found in Section 48 simply
means that the policy is no longer considered in
force after the insured has died. The key phrase
in the second paragraph of Section 48 is “for a
period of two years.”
The insurer has two years from the date of
issuance of the insurance contract or of its last
reinstatement within which to contest the policy,
whether or not, the insured still lives within such
period. After two years, the defenses of
concealment or misrepresentation, no matter
how patent or well founded, no longer lie.
Congress felt this was a sufficient answer to the
various tactics employed by insurance
companies to avoid liability. The petitioners’
interpretation would give rise to the incongruous
situation where the beneficiaries of an insured
who dies right after taking out and paying for a
life insurance policy, would be allowed to collect
on the policy even if the insured fraudulently
concealed material facts.b
The petitioners argue that no evidence was
presented to show that the medical terms were
explained in a layman’s language to the insured.
They state that the insurer should have
presented its two medical field examiners as
witnesses. Moreover, the petitioners allege that
the policy intends that the medical examination
must be conducted before its issuance
otherwise the insurer “waives whatever
imperfection by ratification.”
There is no showing that the questions in the
application form for insurance regarding the
insured’s medical history are in smaller print
than the rest of the printed form or that they are
designed in such a way as to conceal from the
applicant their importance. If a warning in bold
red letters or a boxed warning similar to that
required for cigarette advertisements by the
Surgeon General of the United States is
necessary, that is for Congress or the Insurance
Commission to provide as protection against
high pressure insurance salesmanship. We are
limited in this petition to ascertaining whether or
not the respondent Court of Appeals committed
reversible error. It is the petitioners’ burden to
show that the factual findings of the respondent
court are not based on substantial evidence or
that its conclusions are contrary to applicable
discharge that burden.
6. PRUDENTIAL GUARANTEE AND
ASSURANCE INC. v. TRANS-ASIA SHIPPING
LINES, INC.
G.R. NO. 151890; June 20, 2006
FACTS:
TRANS-ASIA is the owner of the vessel M/V
Asia Korea. In consideration of payment of
premiums, PRUDENTIAL insured M/V Asia
Korea for loss/damage of the hull and machinery
arising from perils, inter alia, of fire and
explosion for the sum of P40 Million, beginning
on July 1, 1993 up to July 1, 1994. On October
25, 1993, while the policy was in force, a fire
broke out while M/V Asia Korea was undergoing
repairs at the port of Cebu. On October 26, 1993
plaintiff TRANS-ASIA filed its notice of claim for
damage sustained by the vessel. On August 13,
1996, the adjuster, Richards Hogg International,
Inc. completed is survey report determining the
amount of loss sustained by TRANS-ASIA.
PRUDENTIAL denied the claim of TRANS-ASIA
for alleged breach of insurance policy
conditions, that TRANS-ASIA violated an
express and material warranty in the insurance
contract – that M/V ASIA KOREA is required to
be CLASSED AND CLASS MAINTAINED.
ISSUE:
Whether or not TRANS-ASIA violated a material
warranty in the insurance contract that the
vessel should be classed and class maintained.
HELD:
NO. PRUDENTIAL failed to establish that
TRANS-ASIA violated and breached the policy
condition on WARRANTED VESSEL CLASSED
24
AND CLASS MAINTAINED, as contained in the
subject insurance contract.
We are not unmindful of the clear language of
Sec. 74 of the Insurance Code which provides
that, "the violation of a material warranty, or
other material provision of a policy on the part of
either party thereto, entitles the other to
rescind." It is generally accepted that "[a]
warranty is a statement or promise set forth in
the policy, or by reference incorporated therein,
the untruth or non-fulfillment of which in any
respect, and without reference to whether the
insurer was in fact prejudiced by such untruth or
non-fulfillment, renders the policy voidable by
the insurer." However, it is similarly indubitable
that for the breach of a warranty to avoid a
policy, the same must be duly shown by the
party alleging the same. We cannot sustain an
allegation that is unfounded. Consequently,
PRUDENTIAL, not having shown that TRANS-
ASIA breached the warranty condition,
CLASSED AND CLASS MAINTAINED, it
remains that TRANS-ASIA must be allowed to
recover its rightful claims on the policy.
V. POLICY
1. Pacific Timber Export Corporation vs
CA (112 SCRA 199)
This petition seeks the review of the decision of
the Court of Appeals reversing the decision of
the Court of First Instance of Manila in favor of
petitioner and against private respondent which
ordered the latter to pay the sum of Pll,042.04
with interest at the rate of 12% interest from
receipt of notice of loss on April 15, 1963 up to
the complete payment, the sum of P3,000.00 as
attorney's fees and the costs 1 thereby
dismissing petitioner s complaint with costs.
Facts:
The plaintiff secured temporary insurance from
the defendant for its exportation of
1,250,000 board feet of Philippine Lauan and
Apitong logs to be shipped from Quezon
Province to Okinawa and Tokyo, Japan.
Workmen’s Insurance issued a cover note
insuring the cargo of the plaintiff subject to its
terms and conditions.
The two marine policies bore the numbers 53
HO 1032 and 53 HO 1033. Policy No. 53 H0
1033 was for 542 pieces of logs equivalent to
499,950 board feet. Policy No. 53 H0 1033 was
for 853 pieces of logs equivalent to
695,548 board feet. The total cargo insured
under the two marine policies consisted of 1,395
logs, or the equivalent of 1,195.498 bd. ft.
After the issuance of the cover note, but before
the issuance of the two marine policies Nos. 53
HO 1032 and 53 HO 1033, some of the logs
intended to be exported were lost during loading
operations in the Diapitan Bay.
While the logs were alongside the vessel, bad
weather developed resulting in 75 pieces of logs
which were rafted together co break loose from
each other. 45 pieces of logs were salvaged, but
30 pieces were verified to have been lost or
washed away as a result of the accident.
Pacific Timber informed Workmen’s about the
loss of 32 pieces of logs during loading of SS
woodlock.
Although dated April 4, 1963, the letter was
received in the office of the defendant only on
April 15, 1963. The plaintiff claimed for
insurance to the value of P19,286.79.
Woodmen’s requested an adjustment company
to assess the damage. It submitted its report,
where it found that the loss of 30 pieces of logs
is not covered by Policies Nos. 53 HO 1032 and
1033 but within the 1,250,000 bd. ft. covered by
Cover Note 1010 insured for $70,000.00.
The adjustment
company submitted a computation of the
defendant's probable liability on the loss
sustained by the shipment, in the total amount of
P11,042.04.
Woodmen’s wrote the plaintiff denying the
latter's claim on the ground they defendant's
investigation revealed that the entire shipment of
logs covered by the two marine policies were
received in good order at their point
of destination. It was further stated that the said
loss may be considered as covered under Cover
Note No. 1010 because the said Note had
become null and void by virtue of the issuance
of Marine Policy Nos. 53 HO 1032 and 1033.
The denial of the claim by the defendant was
brought by the plaintiff to the attention of the
Insurance Commissioner. The Insurance
Commissioner ruled in favor of indemnifying
Pacific Timber. The company added that the
cover note is null and void for lack of valuable
consideration. The trial court ruled in petitioner’s
favor while the CA dismissed the case. Hence
this appeal.
25
Issues:
WON the cover note was null and void for lack
of valuable consideration
WON the Insurance company was absolved
from responsibility due to unreasonable delay in
giving notice of loss.
Held: No. No. Judgment reversed.
Ratio:
1. The fact that no separate premium was paid
on the Cover Note before the loss occurred
does not militate against the validity of the
contention even if no such premium was paid.
All Cover Notes do not contain particulars of the
shipment that would serve as basis for
the computation of the premiums. Also, no
separate premiums are required to be paid on a
Cover Note.
The petitioner paid in full all the premiums,
hence there was no account unpaid on the
insurance coverage and the cover note. If the
note is to be treated as a separate policy instead
of integrating it to the regular policies, the
purpose of the note would be meaningless. It is
a contract, not a mere application for insurance.
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 for loss during transit, because the
logs were safely placed aboard.
The non-payment of premium on the Cover Note
is, therefore, no cause for the petitioner 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. 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 policy is valid.
2. The defense of delay can’t be sustained. The
facts show that instead of invoking the ground of
delay in objecting to petitioner's claim of
recovery on the cover note, the insurer never
had this in its mind. It has a duty to inquire when
the loss took place, so that it could determine
whether delay would be a valid ground of
objection.
There was enough time for insurer to determine
if petitioner was guilty of delay in communicating
the loss to respondent company. It never did in
the Insurance Commission. Waiver can be
raised against it under Section 84 of the
Insurance Act.
Section 84.—Delay in the presentation to an
insurer of notice or proof of loss is waived if
caused by any act of his or if he omits to take
objection promptly and specifically upon that
ground.
From what has been said, We find duly
substantiated petitioner's assignments of error.
ACCORDINGLY, the appealed decision is set
aside and the decision of the Court of First
Instance is reinstated in toto with the affirmance
of this Court.
2. Great Pacific Life Assurance Cor. vs
CA (89 SCRA 543)
Facts:
Private respondent Ngo Hing filed an application
with the Great Pacific Life Assurance Company
for a twenty-year endowment policy on the life of
his one-year old daughter Helen Go. Petitioner
Mondragon, branch manager of Pacific Life
handwrote at the bottom of the back page of the
application form his strong recommendation for
the approval of the insurance application.
Mondragon received a letter from Pacific Life
disapproving the insurance application. The
letter stated that the said life insurance
application for 20-year endowment plan is not
available for minors below seven years old, but
Pacific Life can consider the same under the
Juvenile Triple Action Plan, and advised that if
the offer is acceptable, the Juvenile Non-
Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by
Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo
Hing. Mondragon wrote back Pacific Life again
strongly recommending the approval of the 20-
year endowment insurance plan.
On May 28, 1957 Helen Go died of influenza
with complication of bronchopneumonia.
Thereupon, private respondent sought the
26
payment of the proceeds of the insurance, but
having failed in his effort.
Issues: Whether or not there is a perfected
insurance contract between the parties.
Ruling:
Pacific Life disapproved the insurance
application in question on the ground that it is
not offering the twenty-year 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 20-year endowment life
insurance in the amount of P50,000.00 in favor
of the latter's one-year old daughter, and with
the non-compliance of the conditions stated in
the disputed binding deposit receipt, there could
have been no insurance contract duly perfected
between then Accordingly, the deposit paid by
private respondent shall have to be refunded by
Pacific Life.
A contract of insurance, like other contracts,
must be assented to by both parties either in
person or by their agents. The contract, to be
binding from the date of the application, must
have been a completed contract, one that
leaves nothing to be 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.
We are thus constrained to hold that no
insurance contract was perfected between the
parties with the noncompliance of the conditions
provided in the binding receipt, and
concealment, as legally defined, having been
comraitted by herein private respondent.
WHEREFORE, the decision appealed from is
hereby set aside, and in lieu thereof, one is
hereby entered absolving petitioners Lapulapu
D. Mondragon and Great Pacific Life Assurance
Company from their civil liabilities as found by
respondent Court and ordering the aforesaid
insurance company to reimburse the amount of
P1,077.75, without interest, to private
respondent, Ngo Hing
3. Philam Life and General Insurance Co. vs
Judge Valencia-Bagalacsa Regional
Trial Court of Libmanan, Camarines
Sur, Branch 56, and EDUARDO Z.
LUMANIOG, CELSO Z. LUMANIOG and
RUBEN Z. LUMANIOG, respondents
(GR No 139776; August 1, 2002
Before us is a petition for review on certiorari
under Rule 45 of the Rules of Court. Petitioner
Philippine American Life and General Insurance
Company prays that the decision of the Court of
Appeals promulgated on April 30, 1999 be
reversed and set aside and that the Complaint
filed against it by private respondents Eduardo
Z. Lumaniog, Celso Z. Lumaniog and Ruben Z.
Lumaniog before the Regional Trial Court of
Libmanan, Camarines Sur, docketed as Civil
Case No. L-787 be ordered dismissed on
ground of prescription of action.
Facts:
On June 20, 1995, private respondents, as
legitimate children and forced heirs of their late
father, Faustino Lumaniog, filed with the
aforesaid RTC, a complaint for recovery of sum
of money against petitioner alleging that: their
father was insured by petitioner under Life
Insurance Policy No. 1305486 with a face value
of P50,000.00; their father died of "coronary
thrombosis" on November 25, 1980; on June 22,
1981, they claimed and continuously claimed for
all the proceeds and interests under the life
insurance policy in the amount of P641,000.00,
despite repeated demands for payment and/or
settlement of the claim due from petitioner, the
last of which is on December 1, 1994, petitioner
finally refused or disallowed said claim on
February 14, 1995; and so, they filed their
complaint on June 20, 1995.
Petitioner filed an Answer with Counterclaim
and Motion to Dismiss, contending that: the
cause of action of private respondents had
prescribed and they are guilty of laches; it had
denied private respondents’ claim in a letter
dated March 12, 1982, signed by its then
Assistant Vice President, Amado Dimalanta, on
ground of concealment on the part of the
deceased insured Faustino when he asserted in
his application for insurance coverage that he
had not been treated for indication of "chest
pain, palpitation, high blood pressure, rheumatic
fever, heart murmur, heart attack or other
disorder of the heart or blood vessel" when in
27
fact he was a known hypertensive since 1974;
private respondents sent a letter dated May
25,1983 requesting for reconsideration of the
denial; in a letter dated July 11, 1983, it
reiterated its decision to deny the claim for
payment of the proceeds; more than ten (10)
years later, or on December 1, 1994, it received
a letter from Jose C. Claro, a provincial board
member of the province of Camarines Sur,
reiterating the early request for reconsideration
which it denied in a letter dated February 14,
1995.
RTC ruled that the 10 year period has not
prescribed.
Issue:
WON the 10 year prescriptive period had
elapsed and no cause of action can further be
asserted.
Held:
Yes. The ruling of the RTC that the cause of
action of private respondents had not
prescribed, is arbitrary and patently erroneous
for not being founded on evidence on record,
and therefore, the same is void.
It based its finding on a mere explanation of the
private respondents’ counsel and not on
evidence presented by the parties as to the date
when to reckon the prescriptive period.
Ruling:
It must be emphasized that petitioner had
specifically alleged in the Answer that it had
denied private respondents’ claim per its letter
dated July 11, 1983. Hence, due process
demands that it be given the opportunity to
prove that private respondents had received
said letter, dated July 11, 1983. Said letter is
crucial to petitioner’s defense that the filing of
the complaint for recovery of sum of money in
June, 1995 is beyond the 10-year prescriptive
period.
The appellate court should have granted the
petition for certiorari assailing said Order of
December 12, 1997. Certiorari is an appropriate
remedy to assail an interlocutory order (1) when
the tribunal issued such order without or in
excess of jurisdiction or with grave abuse of
discretion and (2) when the assailed
interlocutory order is patently erroneous and the
remedy of appeal would not afford adequate and
expeditious relief.16 Said Order was issued with
grave abuse of discretion for being patently
erroneous and arbitrary, thus, depriving
petitioner of due process, as discussed earlier.
WHEREFORE, the petition is partly GRANTED.
The assailed decision of the Court of Appeals
dated April 30, 1999 insofar only as it upheld the
Order dated December 12, 1997 is REVERSED
and SET ASIDE. A new judgment is entered
reversing and setting aside the Order dated
December 12, 1997 of the Regional Trial Court
of Libmanan, Camarines Sur (Branch 56) and
affirming its Order dated June 20, 1995. Said
RTC is directed to proceed with dispatch with
Civil Case No. L-787.
Makati Tuscany Condominium Corporation vs.
Court of Appeals
[GR 95546, 6 November 1992] First Division,
Bellosillo (J): 3 concur, 1 on leave
Facts:
Sometime in early 1982, American Home
Assurance Co. (AHAC), represented by
American International Underwriters (Phils.),
Inc., (AIUI) issued in favor of Makati Tuscany
Condominium Corporation (Tuscany) Insurance
Policy AH-CPP-9210452 on the latter's building
and premises, for a period beginning 1 March
1982 and ending 1 March 1983, with a total
premium of P466,103.05. The premium was
paid on installments on 12 March 1982, 20 May
1982, 21 June 1982 and 16 November 1982, all
of which were accepted by AHAC. On 10
February 1983, AHAC issued to Tuscany
Insurance Policy No. AH-CPP-9210596, which
replaced and renewed the previous policy, for a
term covering 1 March 1903 to 1 March 1984.
The premium in the amount of P466,103.05 was
again paid on installments on 13 April 1983, 13
July 1983, 3 August 1983, 9 September 1983,
and 21 November 1983. All payments were
likewise accepted by AHAC. On 20 January
1984, the policy was again renewed and AHAC
issued to Tuscany Insurance Policy AH-
CPP9210651 for the period 1 March 1984 to 1
March 1985. On this renewed policy, Tuscany
made two installment payments, both accepted
by AHAC, the first on 6 February 1984 for
P52,000.00 and the second, on 6 June 1984 for
P100,000.00. Thereafter, Tuscany refused to
pay the balance of the premium. Consequently,
AHAC filed an action to recover the unpaid
balance of P314,103.05 for Insurance Policy
AHCPP-9210651. In its answer with
counterclaim, Tuscany admitted the issuance of
Insurance Policy AH-CPP9210651. It explained
28
that it discontinued the payment of premiums
because the policy did not contain a credit
clause in its favor and the receipts for the
installment payments covering the policy for
1984-85, as well as the two (2) previous
policies, stated the following reservations: (2)
Acceptance of this payment shall not waive any
of the company rights to deny liability on any
claim under the policy arising before such
payments or after the expiration of the credit
clause of the policy; and (3) Subject to no loss
prior to premium payment. If there be any loss
such is not covered. Tuscany further claimed
that the policy was never binding and valid, and
no risk attached to the policy. It then pleaded a
counterclaim for P152,000.00 for the premiums
already paid for 1984-85, and in its answer with
amended counterclaim, sought the refund of
P924,206.10 representing the premium
payments for 1982-85. After some incidents,
Tuscany and AHAC moved for summary
judgment. On 8 October 1987, the trial court
dismissed the complaint and the counterclaim.
Both parties appealed from the judgment of the
trial court. Thereafter, the Court of Appeals
rendered a decision modifying that of the trial
court by ordering Tuscany to pay the balance of
the premiums due on Policy AHCPP-921-651, or
P314,103.05 plus legal interest until fully paid,
and affirming the denial of the counterclaim.
Tuscany filed the petition. Issue: Whether
payment by installment of the premiums due on
an insurance policy invalidates the contract of
insurance. Held: NO. The subject policies are
valid even if the premiums were paid on
installments. The records clearly show that
Tuscany and AHAC intended subject insurance
policies to be binding and effective
notwithstanding the staggered payment of the
premiums. The initial insurance contract entered
into in 1982 was renewed in 1983, then in 1984.
In those 3 years, the insurer accepted all the
installment payments. Such acceptance of
payments speaks loudly of the insurer's intention
to honor the policies it issued to Tuscany.
Certainly, basic principles of equity and fairness
would not allow the insurer to continue collecting
and accepting the premiums, although paid on
installments, and later deny liability on the lame
excuse that the premiums were not prepaid in
full. Thus, while the import of Section 77 is that
prepayment of premiums is strictly required as a
condition to the validity of the contract, the Court
was not prepared to rule that the request to
make installment payments duly approved by
the insurer, would prevent the entire contract of
insurance from going into effect despite
payment and acceptance of the initial premium
or first installment. Section 78 of the Insurance
Code in effect allows waiver by the insurer of the
condition of prepayment by making an
acknowledgment in the insurance policy of
receipt of premium as conclusive evidence of
payment so far as to make the policy binding
despite the fact that premium is actually unpaid.
Section 77 merely precludes the parties from
stipulating that the policy is valid even if
premiums are not paid, but does not expressly
prohibit an agreement granting credit extension,
and such an agreement is not contrary to
morals, good customs, public order or public
policy. So is an understanding to allow insured
to pay premiums in installments not so
proscribed. At the very least, both parties should
be deemed in estoppel to question the
arrangement they have voluntarily accepted. It
appearing from the peculiar circumstances that
the parties actually intended to make the three
(3) insurance contracts valid, effective and
binding, Tuscany may not be allowed to renege
on its obligation to pay the balance of the
premium after the expiration of the whole term of
the third policy (AHCPP-9210651) in March
1985. Moreover, where the risk is entire and the
contract is indivisible, the insured is not entitled
to a refund of the premiums paid if the insurer
was exposed to the risk insured for any period,
however brief or momentary.
UCPB General Insurance vs. Masagana
Telamart Inc. [GR 137172, 15 June 1999] First
Division, Pardo (J): 4 concur
Facts: On 15 April 1991, UCPB General
Insurance Co. Inc. (UCPBGen) issued 5
insurance policies covering Masagana Telamart,
Inc.'s various property described therein against
fire, for the period from 22 May 1991 to 22 May
1992. In March 1992, UCPBGen evaluated the
policies and decided not to renew them upon
expiration of their terms on 22 May 1992.
UCPBGen advised Masagana's broker, Zuellig
Insurance Brokers, Inc. of its intention not to
renew the policies. On 6 April 1992, UCPBGen
gave written notice to Masagana of the non-
renewal of the policies at the address stated in
the policies. On 13 June 1992, fire razed
Masagana's property covered by three of the
insurance policies UCPBGen issued. On 13 July
1992, Masagana presented to UCPBGen's
cashier at its head office 5 manager's checks in
the total amount of P225,753.95, representing
premium for the renewal of the policies from 22
May 1992 to 22 May 1993. No notice of loss
was filed by Masagana under the policies prior
to 14 July 1992. On 14 July 1992, Masagana
29
filed with UCPBGen its formal claim for
indemnification of the insured property razed by
fire. On the same day, 14 July 1992, UCPBGen
returned to Masagana the 5 manager's checks
that it tendered, and at the same time rejected
Masagana's claim for the reasons (a) that the
policies had expired and were not renewed, and
(b) that the fire occurred on 13 June 1992,
before Masagana's tender of premium payment.
On 21 July 1992, Masagana filed with the
Regional Trial Court, Branch 58, Makati City, a
civil complaint against UCPBGen for recovery of
P18,645,000.00, representing the face value of
the policies covering Masagana's insured
property razed by fire, and for attorney's fees.
On 23 October 1992, after its motion to dismiss
had been denied, UCPBGen filed an answer to
the complaint. It alleged that the complaint "fails
to state a cause of action"; that UCPBGen was
not liable to Masagana for insurance proceeds
under the policies because at the time of the
loss of Masagana's property due to fire, the
policies had long expired and were not renewed.
After due trial, on 10 March 1993, the Regional
Trial Court, Branch 58, Makati, rendered
decision, (1) authorizing and allowing Masagana
to consign/deposit with this Court the sum of
P225,753.95 (refused by UCPBGen) as full
payment of the corresponding premiums for the
replacement-renewal policies; (2) declaring
Masagana to have fully complied with its
obligation to pay the premium thereby rendering
the replacement-renewal policy effective and
binding for the duration 22 May 1992 until 22
May 1993; and, ordering UCPBGen to deliver
forthwith to Masagana the said replacement-
renewal policies; (3) declaring two of the policies
in force from 22 August 1991 up to 23 August
1992 and 9 August 1991 to 9 August 1992,
respectively; and (4) ordering UCPBGen to pay
Masagana the sums of: (a) P18,645,000.00
representing the latter's claim for indemnity
under three policies and/or its replacement-
renewal policies; (b) 25% of the total amount
due as and for attorney's fees; (c) P25,000.00
as necessary litigation expenses; and, (d) the
costs of suit. In due time, UCPBGen appealed to
the Court of Appeals. On 7 September 1998, the
Court of Appeals promulgated its decision
affirming that of the Regional Trial Court with the
modification that item 3 of the dispositive portion
was deleted, and the award of attorney's fees
was reduced to 10% of the total amount due.
The Court of Appeals held that following
previous practise, Masagana was allowed a 60
to 90 day credit term for the renewal of its
policies, and that the acceptance of the late
premium payment suggested an understanding
that payment could be made later. UCPBGen
appealed.
Issue: Whether the fire insurance policies issued
by UCPBGen to the Masagana covering the
period 22 May 1991 to 22 May 1992, had
expired on the latter date or had been extended
or renewed by an implied credit arrangement
though actual payment of premium was
tendered on a latter date after the occurrence of
the risk (fire) insured against.
Held: The answer is easily found in the
Insurance Code. No, an insurance policy, other
than life, issued originally or on renewal, is not
valid and binding until actual payment of the
premium. Any agreement to the contrary is void.
The parties may not agree expressly or impliedly
on the extension of credit or time to pay the
premium and consider the policy binding before
actual payment. The case of Malayan Insurance
Co., Inc. vs. Cruz-Arnaldo is not applicable. In
that case, payment of the premium was in fact
actually made on 24 December 1981, and the
fire occurred on 18 January 1982. Here, the
payment of the premium for renewal of the
policies was tendered on 13 July 1992, a month
after the fire occurred on 13 June 1992. The
assured did not even give the insurer a notice of
loss within a reasonable time after occurrence of
the fire. Hence, the Supreme Court reversed
and set aside the decision of the Court of
Appeals in CA-GR CV 42321. In lieu thereof, the
Court rendered judgment dismissing
Masagana's complaint and UCPBGen's
counterclaims thereto filed with the Regional
Trial Court, Branch 58, Makati City, in Civil Case
92-2023, without costs.
American Home Assurance Company vs. Chua
[GR 130421, 28 June 1999] First Division,
Davide Jr. (CJ): 4 concur
Facts: American Home Assurance Company
(AHAC) is a domestic corporation engaged in
the insurance business. Sometime in 1990,
Antonio Chua obtained from AHAC a fire
insurance covering the stock-in-trade of his
business, Moonlight Enterprises, located at
Valencia, Bukidnon. The insurance was due to
expire on 25 March 1990. On 5 April 1990 Chua
issued PCIBank Check 352123 in the amount of
P2,983.50 to AHAC’s agent, James Uy, as
payment for the renewal of the policy. In turn,
the latter delivered Renewal Certificate
00099047 to Chua. The check was drawn
against a Manila bank and deposited in AHAC’s
bank account in Cagayan de Oro City. The
corresponding official receipt was issued on 10
30
April. Subsequently, a new insurance policy,
Policy 206-4234498-7, was issued, whereby
AHAC undertook to indemnify Chua for any
damage or loss arising from fire up to P200,000
for the period 25 March 1990 to 25 March 1991.
On 6 April 1990 Moonlight Enterprises was
completely razed by fire. Total loss was
estimated between P4,000,000 and P5,000,000.
Chua filed an insurance claim with AHAC and
four other co-insurers, namely, Pioneer
Insurance and Surety Corporation, Prudential
Guarantee and Assurance, Inc., Filipino
Merchants Insurance Co. and Domestic
Insurance Company of the Philippines. AHAC
refused to honor the claim notwithstanding
several demands by Chua, thus, the latter filed
an action against AHAC before the trial court. In
its defense, AHAC claimed there was no
existing insurance contract when the fire
occurred since Chua did not pay the premium. It
also alleged that even assuming there was a
contract, Chua violated several conditions of the
policy, particularly: (1) his submission of
fraudulent income tax return and financial
statements; (2) his failure to establish the actual
loss, which AHAC assessed at P70,000; and (3)
his failure to notify to AHAC of any insurance
already effected to cover the insured goods.
These violations, AHAC insisted, justified the
denial of the claim. The trial court ruled in favor
of Chua. It found that Chua paid by way of
check a day before the fire occurred. The check,
which was deposited in AHAC’s bank account,
was even acknowledged in the renewal
certificate issued by AHAC’s agent. It declared
that the alleged fraudulent documents were
limited to the disparity between the official
receipts issued by the Bureau of Internal
Revenue (BIR) and the income tax returns for
the years 1987 to 1989. All the other documents
were found to be genuine. Nonetheless, it gave
credence to the BIR certification that Chua paid
the corresponding taxes due for the questioned
years. As to Chua’s failure to notify AHAC of the
other insurance contracts covering the same
goods, the trial court held that AHAC failed to
show that such omission was intentional and
fraudulent. Finally, it noted that AHAC’s
investigation of Chua's claim was done in
collaboration with the representatives of other
insurance companies who found no irregularity
therein. In fact, Pioneer Insurance and Surety
Corporation and Prudential Guarantee and
Assurance, Inc. promptly paid the claims filed by
Chua. The trial court ordered AHAC to pay Chua
P200,000.00, representing the amount of the
insurance, plus legal interest from the date of
filing of the case; P200,000.00 as moral
damages; P200,000.00 as loss of profit;
P100,000.00 as exemplary damages;
P50,000.00 as attorney’s fees; and Cost of suit.
On appeal, the assailed decision was affirmed in
toto by the Court of Appeals. The Court of
Appeals found that Chua’s claim was
substantially proved and AHAC’s unjustified
refusal to pay the claim entitled Chua to the
award of damages. Its motion for
reconsideration of the judgment having been
denied, AHAC filed the petition for review on
certiorari.
Issue: Whether there was a valid payment of
premium, considering that Chua’s check was
cashed after the occurrence of the fire.
Held: YES. The general rule in insurance laws is
that unless the premium is paid the insurance
policy is not valid and binding. The only
exceptions are life and industrial life insurance.
Whether payment was indeed made is a
question of fact which is best determined by the
trial court. The trial court found, as affirmed by
the Court of Appeals, that there was a valid
check payment by Chua to AHAC. Well-settled
is the rule that the factual findings and
conclusions of the trial court and the Court of
Appeals are entitled to great weight and respect,
and will not be disturbed on appeal in the
absence of any clear showing that the trial court
overlooked certain facts or circumstances which
would substantially affect the disposition of the
case. The Supreme Cpurt sees no reason to
depart from this ruling. According to the trial
court the renewal certificate issued to Chua
contained the acknowledgment that premium
had been paid. It is not disputed that the check
drawn by Chua in favor of AHAC and delivered
to its agent was honored when presented and
AHAC forthwith issued its official receipt to Chua
on 10 April 1990. Section 306 of the Insurance
Code provides that any insurance company
which delivers a policy or contract of insurance
to an insurance agent or insurance broker shall
be deemed to have authorized such agent or
broker to receive on its behalf payment of any
premium which is due on such policy or contract
of insurance at the time of its issuance or
delivery or which becomes due thereon. Herein,
the best evidence of such authority is the fact
that AHAC accepted the check and issued the
official receipt for the payment. It is, as well,
bound by its agent’s acknowledgment of receipt
of payment. Section 78 of the Insurance Code
explicitly provides that "An acknowledgment in a
policy or contract of insurance of the receipt of
premium is conclusive evidence of its payment,
so far as to make the policy binding,
notwithstanding any stipulation therein that it
shall not be binding until the premium is actually
31
paid." This Section establishes a legal fiction of
payment and should be interpreted as an
exception to Section 77.
Tibay vs. Court of Appeals [GR 119655, 24 May
1996] First Division, Bellosillo (J): 2 concur, 1
filed a separate opinion to which 1 joined
Facts: On 22 January 1987, Fortune Life and
General Insurance Co., Inc. (Fortune) issued
Fire Insurance Policy 136171 in favor of Violeta
R. Tibay and/or Nicolas Roraldo on their two-
storey residential building located at 5855 Zobel
Street, Makati City, together with all their
personal effects therein. The insurance was for
P600,000.00 covering the period from 23
January 1987 to 23 January 1988. On 23
January 1987, of the total premium of
P2,983.50, petitioner Violeta Tibay only paid
P600.00 thus leaving a considerable balance
unpaid. On 8 March 1987 the insured building
was completely destroyed by fire. Two days
later or on 10 March 1987 Violeta Tibay paid the
balance of the premium. On the same day, she
filed with Fortune a claim on the fire insurance
policy. Her claim was accordingly referred to its
adjuster, Goodwill Adjustment Services, Inc.
(GASI), which immediately wrote Violeta
requesting her to furnish it with the necessary
documents for the investigation and processing
of her claim. Petitioner forthwith complied. On
28 March 1987 she signed a non-waiver
agreement with GASI to the effect that any
action taken by the companies or their
representatives in investigating the claim made
by the claimant for his loss which occurred at
5855 Zobel Roxas, Makati on 8 March 1987, or
in the investigating or ascertainment of the
amount of actual cash value and loss, shall not
waive or invalidate any condition of the policies
of such companies held by said claimant, nor
the rights of either or any of the parties to this
agreement, and such action shall not be, or be
claimed to be, an admission of liability on the
part of said companies or any of them. In a letter
dated 11 June 1987 Fortune denied the claim of
Violeta for violation of Policy Condition 2 and of
Section 77 of the Insurance Code. Efforts to
settle the case before the Insurance
Commission proved futile. On 3 March 1988
Violeta and the other petitioners (Antonio Tibay,
Ofelia M. Roraldo, Victorina M. Roraldo, Virgilio
M. Roraldo, Myrna M. Roraldo, and Rosabella
M. Roraldo) sued Fortune for damages in the
amount of P600,000.00 representing the total
coverage of the fire insurance policy plus 12%
interest per annum, P100,000.00 moral
damages, and attorney's fees equivalent to 20%
of the total claim. On 19 July 1990 the trial court
ruled for Tibay, et al. and adjudged Fortune
liable for the total value of the insured building
and personal properties in the amount of
P600,000.00 plus interest at the legal rate of 6%
per annum from the filing of the complaint until
full payment, and attorney's fees equivalent to
20% of the total amount claimed plus costs of
suit. On 24 March 1995 the Court of Appeals
reversed the court a quo by declaring Fortune
not to be liable to Tibay et al. but ordering
Fortune to return to the former the premium of
P2,983.50 plus 12% interest from 10 March
1987 until full payment. Tibay, et al. filed the
petition for review.
Issue: Whether a fire insurance policy be valid,
binding and enforceable upon mere partial
payment of premium.
Held: NO. Insurance is a contract whereby one
undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event. The
consideration is the premium, which must be
paid at the time and in the way and manner
specified in the policy, and if not so paid, the
policy will lapse and be forfeited by its own
terms. The Policy provides for payment of
premium in full. Accordingly, where the premium
has only been partially paid and the balance
paid only after the peril insured against has
occurred, the insurance contract did not take
effect and the insured cannot collect at all on the
policy. This is fully supported by Section 77 of
the Insurance Code which provides that "An
insurer is entitled to payment of the premium as
soon as the thing insured is exposed to the peril
insured against. Notwithstanding any agreement
to the contrary, no policy or contract of
insurance issued by an insurance company is
valid and binding unless and until the premium
thereof has been paid, except in the case of a
life or an industrial life policy whenever the
grace period provision applies." Apparently the
crux of the controversy lies in the phrase "unless
and until the premium thereof has been paid."
This leads us to the manner of payment
envisioned by the law to make the insurance
policy operative and binding. For whatever
judicial construction may be accorded the
disputed phrase must ultimately yield to the
clear mandate of the law. The principle that
where the law does not distinguish the court
should neither distinguish assumes that the
legislature made no qualification on the use of a
32
general word or expression. It cannot be
disputed that premium is the elixir vitae of the
insurance business because by law the insurer
must maintain a legal reserve fund to meet its
contingent obligations to the public, hence, the
imperative need for its prompt payment and full
satisfaction. It must be emphasized here that all
actuarial calculations and various tabulations of
probabilities of losses under the risks insured
against are based on the sound hypothesis of
prompt payment of premiums. Upon this
bedrock insurance firms are enabled to offer the
assurance of security to the public at favorable
rates. But once payment of premium is left to the
whim and caprice of the insured, as when the
courts tolerate the payment of a mere P600.00
as partial undertaking out of the stipulated total
premium of P2,983.50 and the balance to be
paid even after the risk insured against has
occurred, as Tibay et al. have done in this case,
on the principle that the strength of the vinculum
juris is not measured by any specific amount of
premium payment, we will surely wreak havoc
on the business and set to naught what has
taken actuarians centuries to devise to arrive at
a fair and equitable distribution of risks and
benefits between the insurer and the insured.
Philippine Phoenix Surety & Insurance
Company vs. Woodworks Inc. [GR L-25317, 6
August 1979] First Division, Melencio-Herrera
(J): 4 concur, 1 abroad.
Facts: On 21 July 1960, upon Woodworks Inc.'s
application, Philippine Phoenix Surety &
Insurance Company (Phoenix) issued in its favor
Fire Insurance Policy 9749 for P500,000.00
whereby Phoenix insured Woodworks Inc.'s
building, machinery and equipment for a term of
one year from 21 July 1960 to 21 July 1961
against loss by fire. The premium and other
charges including the margin fee surcharge of
P590.76 and the documentary stamps in the
amount of P156.60 affixed on the Policy,
amounted to P10,593.36. Woodworks Inc. did
not pay the premium stipulated in the Policy
when it was issued nor at any time thereafter.
On 19 April 1961, or before the expiration of the
one-year term, Phoenix notified Woodworks
Inc., through its Indorsement F-6963/61, of the
cancellation of the Policy allegedly upon request
of Woodworks Inc. The latter has denied having
made such a request. In said Indorsement,
Phoenix credited Woodworks Inc. 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 21 July
1960 to 18 April 1961 or, say 271 days. On 6
July 1961, Phoenix demanded in writing for the
payment of said amount. Woodworks Inc.,
through counsel, disclaimed any liability in its
reply-letter of 15 August 1961, contending, in
essence, that it need not pay premium "because
the Insurer did not stand liable for any indemnity
during the period the premiums were not paid."
On 30 January 1962, Phoenix commenced
action in the Court of First Instance of Manila,
Branch IV (Civil Case 49468), to recover the
amount of P7,483.11 as "earned premium."
Woodworks Inc. 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." On 13 September 1962,
judgment was rendered in Phoenix's favor
"ordering Woodworks Inc. to pay Phoenix the
sum of P7,483.11, with interest thereon at the
rate of 6% per annum from 30 January 1962,
until the principal shall have been fully paid, plus
the sum of P700.00 as attorney's fees of the
Phoenix, and the costs of the suit." From this
adverse Decision, Woodworks Inc. appealed to
the Court of Appeals which certified the case to
the Supreme Court on a question of law.
Issue: Whether the Fire Insurance Policy was a
binding contract even if the premium stated in
the policy has not been paid.
Held: Insurance is "a contract whereby one
undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event." The
consideration is the "premium". "The premium
must be paid at the time and in the way and
manner specified in the policy and, if not so
paid, the policy will lapse and be forfeited by its
own terms." The Policy provides for pre-
payment of premium. Accordingly, "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. From the Policy
provisions, there was no clear agreement that a
credit extension was accorded Woodworks Inc.
And even if it were to be presumed that Phoenix
had extended credit from the circumstances of
the unconditional delivery of the Policy without
prepayment of the premium, yet it is obvious
that Woodworks Inc. 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, if one was
made, is as essential to make a valid agreement
for credit, to change a conditional delivery of an
33
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
Woodworks Inc. In this respect, the present
case differs from that involving the same parties
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. Since the premium had
not been paid, the policy must be deemed to
have lapsed. The nonpayment of premiums
does not merely suspend but puts 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 fact, if the
peril insured against had occurred, Phoenix, as
insurer, would have had a valid defense against
recovery under the Policy it had issued. Explicit
in the Policy itself is Phoenix's agreement to
indemnify Woodworks Inc. for loss by fire only
"after payment of premium. Compliance by the
insured with the terms of the contract is a
condition precedent to the right of recovery. 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. Moreover, an insurer
cannot treat a contract as valid for the purpose
of collecting premiums and invalid for the
purpose of indemnity. The foregoing findings are
buttressed by section 77 of the Insurance Code
(Presidential Decree No. 612, promulgated on
December 18, 1974), which now provides that
no contract of insurance issued by an insurance
company is valid and binding unless and until
the premium thereof has been paid,
notwithstanding any agreement to the contrary.
Bonifacio Brothers Inc. vs. Mora [GR L-20853,
29 May 1967] En Banc, Castro (J): 9 concur
Facts: Enrique Mora is the owner of an
Oldsmobile sedan model 1956, bearing plate
QC - 8088. He mortgaged the same to the H.S.
Reyes, Inc., with the condition that the former
would insure the automobile, with the latter as
beneficiary. The automobile was thereafter
insured on 23 June 1959 with the State Bonding
& Insurance Co. Inc., and motor car insurance
policy A-0615 was issued to Mora. During the
effectivity of an insurance contract, the car met
with an accident. The insurance company then
assigned the accident to the H.H. Bayne
Adjustment Co. for investigation and appraisal of
the damage. Mora, without the knowledge and
consent of the H.S. Reyes, Inc., authorized the
Bonifacio Bros. Inc. to furnish the labor and
materials, some of which were supplied by the
Ayala Auto Parts Co. For the cost of labor and
materials, Mora was billed at P2,102.73 through
the H. H. Bayne Adjustment Co. The insurance
company, after claiming a franchise in the
amount of P100, drew a check in the amount of
P2,002.73, as proceeds of the insurance policy,
payable to the order of Mora or H.S. Reyes, Inc.,
and entrusted the check to the H.H. Bayne
Adjustment Co. for disposition and delivery to
the proper party. In the meantime, the car was
delivered to Mora without the consent of the
H.S. Reyes, Inc., and without payment to the
Bonifacio Bros. Inc. and Ayala Auto Parts Co. of
the cost of repairs and materials. Upon the
theory that the insurance proceeds should be
paid directly to them, the Bonifacio Bros. Inc.
and the Ayala Auto Parts Co. filed on 8 May
1961 a complaint with the Municipal Court of
Manila against Mora and the State Bonding &
Insurance Co. Inc. for the collection of the sum
of P2,002.73. The insurance company filed its
answer with a counterclaim for interpleader,
requiring the Bonifacio Bros. Inc. and the H.S.
Reyes, Inc. to interplead in order to determine
who has a better right to the insurance proceeds
in question. Mora was declared in default for
failure to appear at the hearing, and evidence
against him was received ex parte. However,
the counsel for the Bonifacio Bros. Inc., Ayala
Auto Parts Co. and State Bonding & Insurance
Co. Inc. submitted a stipulation of facts, on the
basis of which the Municipal Court rendered a
decision declaring the H.S. Reyes, Inc. as
having a better right to the disputed amount, and
ordering the State Bonding & Insurance Co. Inc.
to pay to the H.S Reyes, Inc. the said sum of
34
P2,002.73. From this decision, Bonifacio Bros. person." Herein, no contract of trust, expressed
Inc. et al. elevated the case to the Court of First or implied exists. Thus, no cause of action exists
Instance of Manila before which the stipulation in favor of Bonifacio Bros. in so far as the
of facts was reproduced. On 19 October 1962 proceeds of insurance are concerned. Bonifacio
the latter court rendered a decision, affirming the Bros.' claim, if at all, is merely equitable in
decision of the Municipal Court. The Bonifacio nature and must be made effective through
Bros. Inc. and the Ayala Auto Parts Co. moved Enrique Mora who entered into a contract with
for reconsideration of the decision, but the trial the Bonifacio Bros Inc. This conclusion is
court denied the motion. Bonifacio Bros. Inc. et deducible not only from the principle governing
al. appealed. the operation and effect of insurance contracts
in general, but is clearly covered by the express
Issue: Whether Bonifacio Bros. has any cause
provisions of section 50 of the Insurance Act
of action to claim indemnity from the insurance
which read that "the insurance shall be applied
contract entered by State Bonding & Insurance
exclusively to the proper interest of the person in
Co. and Mora.
whose name it is made unless otherwise
Held: The insurance contract does not contain specified in the policy."
any words or clauses to disclose an intent to
The Insular Life Assurance Company Ltd. vs.
give any benefit to any repairmen or material
Ebrado [GR L-44059, 28 October 1977] First
men in case of repair of the car in question. The
Division, Martin (J): 5 concur
parties to the insurance contract omitted such
stipulation, which is a circumstance that
supports the said conclusion. On the other hand,
Facts: On 1 September 1968, Buenaventura
the "loss payable" clause of the insurance policy
Cristor Ebrado was issued by the Insular Life
stipulates that "Loss, if any, is payable to H.S.
Assurance Co., Ltd., Policy 009929 on a whole-
Reyes, Inc." indicating that it was only the H.S.
life plan for P5,882.00 with a rider for Accidental
Reyes, Inc. which they intended to benefit. It is
Death Benefits for the same amount.
likewise observed from the brief of the State
Buenaventura C. Ebrado designated Carponia
Bonding & Insurance Company that it has
T. Ebrado as the revocable beneficiary in his
vehemently opposed the assertion or pretension
policy. He referred to her as his wife. On 21
of Bonifacio Bros. that they are privy to the
October 1969, Buenventura C. Ebrado died as a
contract. If it were the intention of the Insurance
result of an accident when he was hit by a falling
Company to make itself liable to the repair shop
branch of a tree. As the insurance policy was in
or material men, it could have easily inserted in
force, Insular Life stands liable to pay the
the contract a stipulation to that effect. To hold
coverage of the policy in an amount of
now that the original parties to the insurance
P11,745.73, representing the face value of the
contract intended to confer upon Bonifacio Bros.
policy in the amount of P5,882.00 plus the
the benefit claimed by them would require as to
additional benefits for accidental death also in
ignore the indispensable requisite that a
the amount of P5,882.00 and the refund of
stipulation pour autrui must be clearly expressed
P18.00 paid for the premium due November,
by the parties, which the Court cannot do. As
1969, minus the unpaid premiums and interest
regards paragraph 4 of the insurance contract, a
thereon due for January and February, 1969, in
perusal thereof would show that instead of
the sum of P36.27. Carponia T. Ebrado filed
establishing privity between Bonifacio Bros. and
with the insurer a claim for the proceeds of the
the insurance company, such stipulation merely
policy as the designated beneficiary therein,
establishes the procedure that the insured has
although she admits that she and the insured
to follow in order to be entitled to indemnity for
Buenaventura C. Ebrado were merely living as
repair. This paragraph therefore should not be
husband and wife without the benefit of
construed as bringing into existence in favor of
marriage. Pascuala Vda. de Ebrado also filed
Bonifacio Bros. a right of action against the
her claim as the widow of the deceased insured.
insurance company as such intention can never
She asserts that she is the one entitled to the
be inferred therefrom. Another cogent reason for
insurance proceeds, not the common-law wife,
not recognizing a right of action by Bonifacio
Carponia T. Ebrado. In doubt as to whom the
Bros. against the insurance company is that "a
insurance proceeds shall be paid, the insurer
policy of insurance is a distinct and independent
commenced an action for Interpleader before
contract between the insured and insurer, and
the Court of First Instance of Rizal on 29 April
third persons have no right either in a court of
1970. On 25 September 1972, the trial court
equity, or in a court of law, to the proceeds of it,
rendered judgment declaring, among others,
unless there be some contract of trust,
Carponia T. Ebrado disqualified from becoming
expressed or implied, by the insured and third
35
beneficiary of the insured Buenaventura Cristor
Ebrado and directing the payment of the
insurance proceeds to the estate of the
deceased insured. From this judgment,
Carponia T. Ebrado appealed to the Court of
Appeals, but on 11 July 1976, the Appellate
Court certified the case to the Supreme Court as
involving only questions of law.
Issue [1]: Whether a common-law wife named
as beneficiary in the life insurance policy of a
legally married man can claim the proceeds
thereof in case of death of the latter.
Held[1]: NO. It is quite unfortunate that the
Insurance Act (RA 2327, as amended) or even
the new Insurance Code (PD 612, as amended)
does not contain any specific provision grossly
resolutory of the prime question at hand. 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 to the
beneficiary, since a contract of insurance is
personal in character. Otherwise, the prohibitory
laws against illicit relationships especially on
property and descent will be rendered nugatory,
as the same could easily be circumvented by
modes of insurance. 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 forbidden 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. Article 739 of the new Civil Code provides
that "the following donations shall be void: (1)
Those made between persons who were guilty
of adultery or concubinage at the time of
donation; (2) Those made between persons
found guilty of the same criminal offense, in
consideration thereof; (3) Those made to a
public officer or his wife, descendants or
ascendants by reason of his office. In the case
referred to in No. 1, the action for declaration of
nullity may be brought by the spouse of the
donor or donee; and the guilt of the donee may
be proved by preponderance of evidence in the
same action." 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. Policy considerations and dictates of
morality rightly justify the institution of a barrier
between common-law spouses in regard to
property relations since such relationship
ultimately encroaches upon the nuptial and filial
rights of the legitimate family. There is every
reason to hold that the bar in donations between
legitimate spouses and those between
illegitimate ones should be enforced in life
insurance policies since the same are based on
similar consideration. As pointed out, a
beneficiary in a life insurance policy is no
different from a donee. Both the recipients of
pure beneficence. So long as marriage remains
the threshold of family laws, reason and morality
dictate that the impediments imposed upon
married couple should likewise be imposed
upon extra-marital relationship. If legitimate
relationship is circumscribed by these legal
disabilities, with more reason should an illicit
relationship be restricted by these disabilities.
Issue [2]: Whether a conviction for adultery or
concubinage is exacted before the disabilities
mentioned in Article 739 may effectuate.
Held [2]: NO. A conviction for adultery or
concubinage is not 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,"
Article 739 itself provides that "In the case
referred to in No. 1, the action for declaration of
nullity may be brought by the spouse of the
donor or donee; and the guilt of the donee may
be proved by preponderance of evidence in the
same action." The underscored clause neatly
conveys that no criminal conviction for the
36
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.
Herein, the requisite proof of commonlaw
relationship between the insured and the
beneficiary has been conveniently supplied by
the stipulations between the parties in the pre-
trial conference of the case. It was agreed upon
and stipulated therein that the deceased insured
Buenaventura C. Ebrado was married to
Pascuala Ebrado with whom she has six
legitimate children; that during his lifetime, the
deceased insured was living with his common-
law wife, Carponia Ebrado, with whom he has
two children. These stipulations are nothing less
than judicial admissions which, as a
consequence, no longer require proof and
cannot be contradicted. A fortiori, on the basis of
these admissions, a judgment may be validly
rendered without going through the rigors of a
trial for the sole purpose of proving the illicit
liaison between the insured and the beneficiary
Vda de Consuegra vs. Government Service
Insurance System [GR L-28093, 30 January
1971] En Banc, Zaldivar (J): 10 concur
Facts: The late Jose Consuegra, at the time of
his death, was employed as a shop foreman of
the office of the District Engineer in the province
of Surigao-del Norte. In his lifetime, Consuegra
contracted two marriages, the first with Rosario
Diaz, solemnized in the parish church of San
Nicolas de Tolentino, Surigao, Surigao, on 15
July 1937, out of which marriage were born two
children, namely, Jose Consuegra, Jr. and
Pedro Consuegra, but both predeceased their
father; and the second, which was contracted in
good faith while the first marriage was
subsisting, with Basilia Berdin, on 1 May 1957 in
the same parish and municipality, out of which
marriage were born seven children, namely,
Juliana, Pacita, Maria Lourdes, Jose, Rodrigo,
Lenida and Luz, * all surnamed Consuegra.
Being a member of the Government Service
Insurance System (GSIS) when Consuegra died
on 26 September 1965, the proceeds of his life
insurance under policy 601801 were paid by the
GSIS to Basilia Berdin and her children who
were the beneficiaries named in the policy.
Having been in the service of the government
for 22.5028 years, Consuegra was entitled to
retirement insurance benefits in the sum of
P6,304.47 pursuant to Section 12(c) of
Commonwealth Act 186 as amended by
Republic Acts 1616 and 3836. Consuegra did
not designate any beneficiary who would receive
the retirement insurance benefits due to him.
Rosario Diaz, the widow by the first marriage,
filed a claim with the GSIS asking that the
retirement insurance benefits be paid to her as
the only legal heir of Consuegra, considering
that the deceased did not designate any
beneficiary with respect to his retirement
insurance benefits. Basilia Berdin and her
children, likewise, filed a similar claim with the
GSIS, asserting that being the beneficiaries
named in the life insurance policy of Consuegra,
they are the only ones entitled to receive the
retirement insurance benefits due the deceased
Consuegra. Resolving the conflicting claims, the
GSIS ruled that the legal heirs of the late Jose
Consuegra were Rosario Diaz, his widow by his
first marriage who is entitled to one-half, or 8/16,
of the retirement insurance benefits, on the one
hand; and Basilia Berdin, his widow by the
second marriage and their seven children, on
the other hand, who are entitled to the remaining
one-half, or 8/16, each of them to receive an
equal share of 1/16. Dissatisfied with the
foregoing ruling and apportionment made by the
GSIS, Basilia Berdin and her children filed on 10
October 1966 a petition for mandamus with
preliminary injunction in the Court of First
Instance of Surigao del Norte (Special
Proceeding 1720) naming as respondents the
GSIS, the Commissioner of Public Highways,
the Highway District Engineer of Surigao del
Norte, the Commissioner of Civil Service, and
Rosario Diaz, praying that they (Basilia Berdin,
et al.) be declared the legal heirs and exclusive
beneficiaries of the retirement insurance of the
late Jose Consuegra, and that writ of preliminary
injunction be issued restraining implementation
of the adjudication made by the GSIS. On 7
March 1967, the court of First Instance of
Surigao rendered judgment, holding that when
two women innocently and in good faith are
legally united in holy matrimony to the same
man, they and their children, born of said
wedlock, will be regarded as legitimate children
and each family be entitled to one half of the
estate. The court thus declared that Basilia
Berdin Vda. de Consuegra and Juliana, Pacita,
Maria Lourdes, Jose Jr., Rodrigo, Lenida and
Luis, all surnamed Consuegra, beneficiary and
entitled to 1/2 of the retirement benefit in the
amount of P6,304.47) due to the deceased Jose
Consuegra from the GSIS or the amount of
P3,152.235 to be divided equally among them in
the proportional amount of 1/16 each. Likewise,
Rosario Diaz Vda. de Consuegra is hereby
37
declared beneficiary and entitled to the other
half of the retirement benefit of the late Jose
Consuegra or the amount of P3,152.235. Basilia
Berdin and her children appealed (on purely
questions of law).
Issue [1]: Whether Basilia Berdin Vda. de
Consuegra. who were the beneficiaries named
in the life insurance should automatically be
considered the beneficiaries to receive the
retirement insurance benefits, to the exclusion of
Rosario Diaz, when the deceased Jose
Consuegra failed to designate the beneficiaries
in his retirement insurance.
Held [1]: NO. If Consuegra had 22.5028 years of
service in the government when he died on 26
September 1965, it follows that he started in the
government service sometime during the early
part of 1943, or before 1943. In 1943,
Commonwealth Act 186 was not yet amended,
and the only benefits then provided for in said
Act were those that proceed from a life
insurance. Upon entering the government
service Consuegra became a compulsory
member of the GSIS, being automatically
insured on his life, pursuant to the provisions of
CA 186 which was in force at the time. During
1943 the operation of the GSIS was suspended
because of the war, and the operation was
resumed sometime in 1946. When Consuegra
designated his beneficiaries in his life insurance
he could not have intended those beneficiaries
of his life insurance s also the beneficiaries of
his retirement insurance because the provisions
on retirement insurance under the GSIS came
about only when CA 186 was amended by RA
660 on 16 June 1951. Hence, it cannot be said
that cause Basilia Berdin et al. were designated
beneficiaries Consuegra's life insurance they
automatically became beneficiaries also of his
retirement insurance.
Issue [2]: Whether the GSIS and the trial court
are correct in ruling that each of the wives who
contracted marriage to the same man in good
faith are each entitled to half of the retirement
insurance benefits.
Held [2]: YES. In the case of the proceeds of a
life insurance, the same are paid to whoever is
named the beneficiary in the life insurance
policy. As in the case of a life insurance
provided for in the Insurance Act (Act 2427, as
amended), the beneficiary in a life insurance
under the GSIS may not necessarily be an heir
of the insured. The insured in a life insurance
may designate any person as beneficiary unless
disqualified to be so under the provisions of the
Civil Code. And in the absence of any
beneficiary named in the life insurance policy,
the proceeds of the insurance will go to the
estate of the insured. Retirement insurance is
primarily intended for the benefit of the
employee — to provide for his old age, or
incapacity, after rendering service in the
government for a required number of years. If
the employee reaches the age of retirement, he
gets the retirement benefits even to the
exclusion of the beneficiary or beneficiaries
named in his application for retirement
insurance. The beneficiary of the retirement
insurance can only claim the proceeds of the
retirement insurance if the employee dies before
retirement. If the employee failed or overlooked
to state the beneficiary of his retirement
insurance, the retirement benefits will accrue his
estate and will be given to his legal heirs in
accordance with law, as in the case of a life
insurance if no beneficiary is named in the
insurance policy. The GSIS, therefore, had
correctly acted when it ruled that the proceeds
of the retirement insurance of the late Jose
Consuegra should divided equally between his
first living wife Rosario on the one hand, and his
second wife Basilia Berdin his children by her,
on the other; and the lower court did not commit
error when it confirmed the action of the GSIS, it
being accepted as a fact that the second
marriage of Jose Consuegra to Basilia Berdin
was contracted in good faith. The lower court
has correctly applied the ruling of this Court in
the case of Lao, et al. vs. Dee Tim, et al., 45
Phil. 739. In the recent case of Gomez vs.
Lipana, L-23214, June 30, 1970, the Court, in
construing the rights of two women who were
married to the same man — a situation more or
less similar to the case of Basilia Berdin and
Rosario Diaz — held "that since the defendant's
first marriage has not been dissolved or
declared void the conjugal partnership
established by that marriage has not ceased.
Nor has the first wife lost or relinquished her
status as putative heir of her husband under the
new Civil Code, entitled to share in his estate
upon his death should she survive him.
Consequently, whether as conjugal partner in a
still subsisting marriage or as such putative heir
she has an interest in the husband's share in the
property here in dispute. " And with respect to
the right of the second wife, this Court observed
that although the second marriage can be
presumed to be void ab initio as it was
celebrated while the first marriage was still
subsisting, still there is need for judicial
declaration of such nullity. And inasmuch as the
conjugal partnership formed by the second
marriage was dissolved before judicial
declaration of its nullity, "[t]he only just and
equitable solution in this case would be to
38
recognize the right of the second wife to her
share of one-half in the property acquired by her
and her husband, and consider the other half as
pertaining to the conjugal partnership of the first
marriage."
Go vs. Redfern [GR 47705, 25 April 1941]
Second Division, Horrilleno (J): 4 concur
Decision in Spanish [Rough translation,
accuracy unverified]
Facts: In October 1937, Edward K. Redfern
obtained an insurance policy against accidents
from the International Assurance Co, Ltd. On 31
August 1938, Redfern died from an accident.
The mother of the deceased, presenting the
necessary evidence of the death of Redfern,
sought to claim the proceeds of the insurance
policy from the assurance company. The
company, however, denied such claim, on the
ground that the insurance policy was amended
on 22 November 1937 to include another
beneficiary, Concordia Go. Hence, an action
was filed to determine who has the right to
collect the insurance proceeds of the deceased
Redfern. The mother claimed that the addition of
the co-beneficiary is illegal. Go, on her part,
alleged the contrary. The trial court ruled in favor
of Angela Redfern, the mother. Go appealed.
Issue: Whether the addition of Go’s name as co-
beneficiary can be allowed for her share in the
insurance proceeds.
Held: When designated in a policy, the
beneficiary acquires a right of which he cannot
be deprived of without his consent, unless the
right has been reserved specifically to the
insured to modify the policy. The same doctrine
was enunciated by the Court in the cases of
Gercio vs. Sun Life Assurance Co. of Canada
(48 Phil. 55) and Insular Life vs. Suva (34 Off.
Gaz. 861). Thus, unless the insured has
reserved specifically the right to change or to
modify the policy, with respect to the beneficiary,
said policy constitutes an acquired right of the
beneficiary, which cannot be modified except
with the consent of the latter. Herein, it is
admitted that Redfern did not reserve expressly
his right to change or modify the policy. Change
implies the idea of an alteration. The addition of
Go's name as one of the beneficiaries of the
policy constitutes change as all addition is an
alteration. The addition of Go's name changed
the policy inasmuch as there are two
beneficiaries instead of one, and thus in effect
the original beneficiary cannot recieve the full
amount of the policy. The Supreme Court
affirmed the appealed judgment in all of its
parts, with costs against Go.
Country Bankers Insurance Corporation vs.
Lianga Bay and Community Multi-Purpose
Cooperative Inc. [GR 136914, 25 January 2002]
Second Division, De Leon Jr. (J): 4 concur
Facts: Country Bankers Insurance Corporation
(CBIC) is a domestic corporation principally
engaged in the insurance business wherein it
undertakes, for a consideration, to indemnify
another against loss, damage or liability from an
unknown or contingent event including fire while
Lianga Baya and Community Multipurpose
Cooperative Inc. (LBCMCI) is a duly registered
cooperative judicially declared insolvent and
represented by the elected assignee, Cornelio
Jamero. It appears that sometime in 1989, the
CBIC and LBCMCI entered into a contract of fire
insurance. Under Fire Insurance Policy F-1397,
CBIC insured LBCMCI's stocks-in-trade against
fire loss, damage or liability during the period
starting from 20 June 1989 at 4:00 p.m. to 20
June 1990 at 4:00 p.m., for the sum of
P200,000.00. On 1 July 1989, at or about 12:40
a.m., LBCMCI's building located at Barangay
Diatagon, Lianga, Surigao del Sur was gutted by
fire and reduced to ashes, resulting in the total
loss of LBCMCI's stocks-in-trade, pieces of
furniture and fixtures, equipments and records.
Due to the loss, LBCMCI filed an insurance
claim with CBIC under its Fire Insurance Policy
F-1397, submitting: (a) the Spot Report of Pfc.
Arturo V. Juarbal, INP Investigator, dated 1 July
1989; (b) the Sworn Statement of Jose
Lomocso; and (c) the Sworn Statement of
Ernesto Urbiztondo. CBIC, however, denied the
insurance claim on the ground that, based on
the submitted documents, the building was set
on fire by 2 NPA rebels who wanted to obtain
canned goods, rice and medicines as provisions
for their comrades in the forest, and that such
loss was an excepted risk under paragraph 6 of
the policy conditions of Fire Insurance Policy
F1397, which provides that "This insurance does
not cover any loss or damage occasioned by or
through or in consequence, directly or indirectly,
of any of the following occurrences, namely: xxx
(d) Mutiny, riot, military or popular uprising,
insurrection, rebellion, revolution, military or
usurped power. Any loss or damage happening
during the existence of abnormal conditions
(whether physical or otherwise) which are
occasioned by or through or in consequence,
directly or indirectly, of any of said occurrences
shall be deemed to be loss or damage which is
not covered by this insurance, except to the
39
extent that the Insured shall prove that such loss
or damage happened independently of the
existence of such abnormal conditions." Finding
the denial of its claim unacceptable, LBCMCI
then instituted in the trial court the complaint for
recovery of "loss, damage or liability" against
CBIC. In due time, the trial court rendered its
Decision dated 26 December 1991 in favor of
LBCMCI, ordering CBIC to pay LBCMCI to fully
pay the insurance claim for the loss LBCMCI
sustained as a result of the fire under its Fire
Insurance Policy F-1397 in its full face value of
P200,000.00 with interest of 12% per annum
from date of filing of the complaint until the same
is fully paid; to pay as and in the concept of
actual or compensatory damages in the total
sum of P50,000.00; to pay as and in the concept
of exemplary damages in the total sum of
P50,000.00; to pay in the concept of litigation
expenses the sum of P5,000.00; to pay by way
of reimbursement the attorney's fees in the sum
of P10,000.00; and to pay the costs of the suit.
CBIC interposed an appeal to the Court of
Appeals. On 29 December 1998, the appellate
court affirmed the challenged decision of the trial
court in its entirety. CBIC filed the petition for
review on certiorari.
Issue: Whether the burden of proof of loss in this
case is upon the insurer, and not the insured.
Held: YES. CBIC does not dispute that
LBCMCI's stocks-in-trade were insured against
fire loss, damage or liability under Fire
Insurance Policy F-1397 and that LBCMCI lost
its stocks-in-trade in a fire that occurred on 1
July 1989, within the duration of said fire
insurance. CBIC, however, posits the view that
the cause of the loss was an excepted risk
under the terms of the fire insurance policy.
Where a risk is excepted by the terms of a policy
which insures against other perils or hazards,
loss from such a risk constitutes a defense
which the insurer may urge, since it has not
assumed that risk, and from this it follows that
an insurer seeking to defeat a claim because of
an exception or limitation in the policy has the
burden of proving that the loss comes within the
purview of the exception or limitation set up. If a
proof is made of a loss apparently within a
contract of insurance, the burden is upon the
insurer to prove that the loss arose from a cause
of loss which is excepted or for which it is not
liable, or from a cause which limits its liability.
Stated elsewise, since CBIC in this case is
defending on the ground of non-coverage and
relying upon an exemption or exception clause
in the fire insurance policy, it has the burden of
proving the facts upon which such excepted risk
is based, by a preponderance of evidence. But
CBIC failed to do so. CBIC relies on the Sworn
Statements of Jose Lomocso and Ernesto
Urbiztondo as well as on the Spot Report of Pfc.
Arturo V. Juarbal dated 1 July 1989. The Sworn
Statements of Jose Lomocso and Ernesto
Urbiztondo are inadmissible in evidence, for
being hearsay, inasmuch as they did not take
the witness stand and could not therefore be
cross-examined. CBIC's evidence to prove its
defense is sadly wanting and thus, gives rise to
its liability to LBCMCI under Fire Insurance
Policy F-1397.
Roque vs. Intermediate Appellate Court [GR L-
66935, 11 November 1985] First Division,
Gutierrez (J): 5 concur, 1 on leave
Facts: On 19 February 1972, the Manila Bay
Lighterage Corporation (MBLC) a common
carrier, entered into a contract with Isabela
Roque (doing business under the name and
style of Isabela Roque Timber Enterprises) and
Ong Chiong whereby the former would load and
carry on board its barge Mable 10 about 422.18
cubic meters of logs from Malampaya Sound,
Palawan to North Harbor, Manila. Roque and
Ong insured the logs against loss for
P100,000.00 with the Pioneer Insurance and
Surety Corporation (Pioneer). On 29 February
1972, Roque and Ong loaded on the barge, 811
pieces of logs at Malampaya Sound, Palawan
for carriage and delivery to North Harbor, Port of
Manila, but the shipment never reached its
destination because Mable 10 sank with the 811
pieces of logs somewhere off Cabuli Point in
Palawan on its way to Manila. The barge where
the logs were loaded was apparently not
seaworthy such that it developed a leak. One of
the hatches was left open causing water to enter
the barge and because the barge was not
provided with the necessary cover or tarpaulin,
the ordinary splash of sea waves brought more
water inside the barge. On 8 March 1972,
Roque and Ong wrote a letter to MBLC
demanding payment of P150,000.00 for the loss
of the shipment plus P100,000.00 as unrealized
profits but the latter ignored the demand.
Another letter was sent to Pioneer claiming the
full amount of P100,000.00 under the insurance
policy but Pioneer refused to pay on the ground
that its liability depended upon the "Total loss by
Total Loss of Vessel only". Hence, Roque and
Ong commenced Civil Case 86599 against
MBLC and Pioneer Pioneer. During the initial
stages of the hearing, MBLC informed the trial
court that it had salvaged part of the logs. The
court ordered them to be sold to the highest
bidder with the funds to be deposited in a bank
40
in the name of Civil Case 86599. After hearing,
the trial court found in favor of Roque and Ong,
condemning MBLC and Pioneer to pay Roque
and Ong, jointly and severally, the sum of
P100,000.00; sentencing MBLC to pay Roque
and Ong, in addition, the sum of P50,000.00,
plus P12,500.00, that the latter advanced to the
former as down payment for transporting the
logs in question; ordering the counterclaim of
Pioneer against Roque and Ong, dismissed, for
lack of merit, but as to its cross-claim against its
MBLC, the latter is ordered to reimburse the
former for whatever amount it may pay Roque
and Ong as such surety; ordering the
counterclaim of MBLC against Roque and Ong,
dismissed for lack of merit; dismissing Roque's
and Ong's claim of not less than P100,000.00
and P75,000.00 as exemplary damages, for lack
of merit; granting Roque's and Ong's claim for
attorney's fees in the sum of P10,000.00;
ordering MBLC and Pioneer to pay the costs;
and holding that the sum of P150,000.00 award
to Roque and Ong, shall bear interest of 6%
from 25 March 1975, until amount is fully paid.
Pioneer appealed to the Intermediate Appellate
Court. MBLC did not appeal, as allegedly, the
transportation company is no longer doing
business and is without funds. On 30 January
1984, the appellate court modified the trial
court's decision and absolved Pioneer from
liability after finding that there was a breach of
implied warranty of seaworthiness on the part of
Roque and Ong and that the loss of the insured
cargo was caused by the "perils of the ship" and
not by the "perils of the sea". It ruled that the
loss is not covered by the marine insurance
policy. After the appellate court denied their
motion for reconsideration, Roque and Ong filed
the petition for certiorari.
Issue [1]: Whether there is a warranty of
seaworthiness by the cargo owner in cases of
marine cargo insurance.
Held [1]: YES. There is no dispute over the
liability of the common carrier MBLC. In fact, it
did not bother to appeal the questioned
decision. However, Roque and Ong state that
MBLC has ceased operating as a firm and
nothing may be recovered from it. They are,
therefore, trying to recover their losses from the
insurer. The liability of the insurance company is
governed by law. Section 113 of the Insurance
Code provides that "In every marine insurance
upon a ship or freight, or freightage, or upon any
thing which is the subject of marine insurance, a
warranty is implied that the ship is seaworthy."
Section 99 of the same Code also provides in
part that "Marine insurance includes: (1)
Insurance against loss of or damage to: (a)
Vessels, craft, aircraft, vehicles, goods, freights,
cargoes, merchandise..." From the above-
quoted provisions, there can be no mistaking the
fact that the term "cargo" can be the subject of
marine insurance and that once it is so made,
the implied warranty of seaworthiness
immediately attaches to whoever is insuring the
cargo whether he be the shipowner or not. As
ruled in the case of Go Tiaoco y Hermanos v.
Union Insurance Society of Canton (40 Phil. 40),
"it is universally accepted that in every contract
of insurance upon anything which is the subject
of marine insurance, a warranty is implied that
the ship shall be seaworthy at the time of the
inception of the voyage. This rule is accepted in
our own Insurance Law (Act No. 2427, sec.
106)." Moreover, the fact that the
unseaworthiness of the ship was unknown to the
insured is immaterial in ordinary marine
insurance and may not be used by him as a
defense in order to recover on the marine
insurance policy. As was held in Richelieu and
Ontario Nav. Co. v. Boston Marine, Inc., Co.
(136 U.S. 406), "the exception of losses
occasioned by unseaworthiness was in effect a
warranty that a loss should not be so
occasioned, and whether the fact of
unseaworthiness were known or unknown would
be immaterial." Since the law provides for an
implied warranty of seaworthiness in every
contract of ordinary marine insurance, it
becomes the obligation of a cargo owner to look
for a reliable common carrier which keeps its
vessels in seaworthy condition. The shipper of
cargo may have no control over the vessel but
he has full control in the choice of the common
carrier that will transport his goods. Or the cargo
owner may enter into a contract of insurance
which specifically provides that the insurer
answers not only for the perils of the sea but
also provides for coverage of perils of the ship.
The Court was constrained to apply Section 113
of the Insurance Code to the facts of this case.
"In marine cases, the risks insured against are
'perils of the sea' (Chute v. North River Ins. Co.,
Minn. 214 NW 472, 55 ALR 933). The purpose
of such insurance is protection against
contingencies and against possible damages
and such a policy does not cover a loss or injury
which must inevitably take place in the ordinary
course of things. There is no doubt that the term
'perils of the sea' extends only to losses caused
by sea damage, or by the violence of the
elements, and does not embrace all losses
happening at sea. They insure against losses
from extraordinary occurrences only, such as
stress of weather, winds and waves, lightning,
tempests, rocks and the like. These are
understood to be the 'perils of the sea' referred
41
in the policy, and not those ordinary perils which
every vessel must encounter. 'Perils of the sea'
has been said to include only such losses as are
of extraordinary nature, or arise from some
overwhelming power, which cannot be guarded
against by the ordinary exertion of human skill
and prudence. Damage done to a vessel by
perils of the sea includes every species of
damages done to a vessel at sea, as
distinguished from the ordinary wear and tear of
the voyage and distinct from injuries suffered by
the vessel in consequence of her not being
seaworthy at the outset of her voyage (as in this
case). It is also the general rule that everything
which happens thru the inherent vice of the
thing, or by the act of the owners, master or
shipper, shall not be reputed a peril, if not
otherwise borne in the policy. (14 RCL on
'Insurance', Sec. 384, pp. 1203-1204; Cia. de
Navegacion v. Firemen's Fund Ins. Co., 277 US
66, 72 L. ed. 787, 48 S. Ct. 459)."
Issue [2]: Whether the loss of the cargo was due
to the perils of the ship rather than the perils of
the sea.
Held [2]: PERILS OF THE SHIP. At the time
Mable 10 sank, there was no typhoon but
ordinary strong wind and waves, a condition
which is natural and normal in the open sea.
The evidence shows that the sinking of Mable
10 was due to improper loading of the logs on
one side so that the barge was tilting on one
side and for that it did not navigate on even keel;
that it was no longer seaworthy that was why it
developed leak; that the personnel of the
tugboat and the barge committed a mistake
when it turned loose the barge from the tugboat
east of Cabuli point where it was buffeted by
storm and waves, while the tugboat proceeded
to west of Cabuli point where it was protected by
the mountain side from the storm and waves
coming from the east direction. In fact, in
Roque's and Ong's complaint, it is alleged that
the barge Mable 10 of MBLC developed a leak
which allowed water to come in and that one of
the hatches of said barge was negligently left
open by the person in charge thereof causing
more water to come in", and that "he loss of
their cargo was due to the fault, negligence,
and/or lack of skill of MBLC and/or MBLC's
representatives on barge Mable 10. It is quite
unmistakable that the loss of the cargo was due
to the perils of the ship rather than the perils of
the sea. The facts clearly negate Roque's and
Ong's claim under the insurance policy. In the
case of Go Tiaoco y Hermanos v. Union Ins.
Society of Canton, the Court had occasion to
elaborate on the term "perils of the ship" when it
ruled that "It must be considered to be settled,
furthermore, that a loss which, in the ordinary
course of events, results from the natural and
inevitable action of the sea, from the ordinary
wear and tear of the ship, or from the negligent
failure of the ship's owner to provide the vessel
with proper equipment to convey the cargo
under ordinary conditions, is not a peril of the
sea. Such a loss is rather due to what has been
aptly called the 'peril of the ship.' The insurer
undertakes to insure against perils of the sea
and similar perils, not against perils of the ship.
As was well said by Lord Herschell in Wilson,
Sons & Co. v. Owners of Cargo per the Xantho
([1887], 12 A. C., 503, 509), there must, in order
to make the insurer liable, be 'some casualty,
something which could not be foreseen as one
of the necessary incidents of the adventure. The
purpose of the policy is to secure an indemnity
against accidents which may happen, not
against events which must happen.”
La Razon Social "Go Tiaoco y Hermanos" vs.
Union Insurance Society of Canton Ltd. [GR
13983, 1 September 1919] First Division, Street
Facts:
A cargo of rice belonging to the Go Tiaoco
Brothers, was transported in the early days of
May, 1915, on the steamship Hondagua from
the port of Saigon to Cebu. On discharging the
rice from one of the compartments in the after
hold, upon arrival at Cebu, it was discovered
that 1,473 sacks had been damaged by sea
water. The loss so resulting to the owners of
rice, after proper deduction had been made for
the portion saved, was P3,875. The policy of
insurance, covering the shipment, was signed
upon a form long in use among companies
engaged in maritime insurance. It purports to
insure the cargo from the following among other
risks: "Perils . . . of the seas, men, of war, fire,
enemies, pirates, rovers, thieves, .jettisons, . . .
barratry of the master and mariners, and of all
other perils, losses, and misfortunes that have
or shall come to the hurt, detriment, or damage
of the said goods and merchandise or any part
thereof." It was found out that the drain pipe
which served as a discharge from the water
closet passed down through the compartment
where the rice in question was stowed and
thence out to sea through the wall of the
compartment, which was a part of the wall of the
ship. The joint or elbow where the pipe changed
its direction was of cast iron; and in course of
time it had become corroded and abraded until a
longitudinal opening had appeared in the pipe
about one inch in length. This hole had been in
42
existence before the voyage was begun, and an
attempt had been made to repair it by filling with
cement and bolting over it a strip of iron. The
effect of loading the boat was to submerge the
vent, or orifice, of the pipe until it was about 18
inches or 2 feet below the level of the sea. As a
consequence the sea water rose in the pipe.
Navigation under these conditions resulted in
the washing out of the cement-filling from the
action of the sea water, thus permitting the
continued flow of the salt water into the
compartment of rice. An action on a policy of
marine insurance issued by the Union Insurance
Society of Canton, Ltd., upon the cargo of rice
belonging to the Go Tiaoco Brothers was filed.
The trial court found that the inflow of the sea
water during the voyage was due to a defect in
one of the drain pipes of the ship and concluded
that the loss was not covered by the policy of
insurance. Judgment was accordingly entered in
favor of Union Insurance and Go Tiaoco
Brothers appealed.
Issue [1]: Whether perils of the sea includes
“entrance of water into the ship’s hold through a
defective pipe.”
Held [1]: NO. It is determined that the words "all
other perils, losses, and misfortunes" are to be
interpreted as covering risks which are of like
kind (ejusdem generis) with the particular risks
which are enumerated in the preceding part of
the same clause of the contract. According to
the ordinary rules of construction these words
must be interpreted with reference to the words
which immediately precede them. They were no
doubt inserted in order to prevent disputes
founded on nice distinctions. Their office is to
cover in terms whatever may be within the spirit
of the cases previously enumerated, and so they
have a greater or less effect as a narrower or
broader view is taken of those cases. For
example, if the expression "perils of the seas" is
given its widest sense the general words have
little or no effect as applied to that case. If on the
other hand that expression is to receive a limited
construction and loss by perils of the seas is to
be confined to loss ex marine tempestatis
discrimine, the general words become most
important. But still, when they first became the
subject of judicial construction, they have always
been held or assumed to be restricted to cases
"akin to" or "resembling" or "of the same kind as"
those specially mentioned. I see no reason for
departing from this settled rule. In marine
insurance it is above all things necessary to
abide by settled rules and to avoid anything like
novel refinements or a new departure. It must be
considered to be settled, furthermore, that a loss
which, in the ordinary course of events, results
from the natural and inevitable action of the sea,
from the ordinary wear and tear of the ship, or
from the negligent failure of the ship's owner to
provide the vessel with proper equipment to
convey the cargo under ordinary conditions, is
not a peril of the sea. Such a loss is rather due
to what has been aptly called the "peril of the
ship." The insurer undertakes to insure against
perils of the sea and similar perils, not against
perils of the ship. There must, in order to make
the insurer liable, be "some casualty, something
which could not be foreseen as one of the
necessary incidents of the adventure. The
purpose of the policy is to secure an indemnity
against accidents which may happen, not
against events which must happen." Herein, the
entrance of the sea water into the ship's hold
through the defective pipe already described
was not due to any accident which happened
during the voyage, but to the failure of the ship's
owner properly to repair a defect of the
existence of which he was apprised. The loss
was therefore more analogous to that which
directly results from simple unseaworthiness
than to that which results from perils of the sea.
Issue [2]: Whether there is an implied warranty
on the seaworthy of the vessel in every marine
insurance contract.
Held [2]: YES. It is universally accepted that in
every contract of insurance upon anything which
is the subject of marine insurance, a warranty is
implied that the ship shall be seaworthy at the
time of the inception of the voyage. This rule is
accepted in our own Insurance Law (Act No.
2427, sec. 106). It is also well settled that a ship
which is seaworthy for the purpose of insurance
upon the ship may yet be unseaworthy for the
purpose of insurance upon the cargo (Act No.
2427, sec. 106).
Cathay Insurance Co. vs. Court of Appeals [GR
76145, 30 June 1987] Second Division, Paras
(J): 3 concur, 2 took no part
Facts: A complaint was filed by Remington
Industrial Sales Corporation against Cathay
Insurance Co. seeking collection of the sum of
P868,339.15 representing Remington's losses
and damages incurred in a shipment of
seamless steel pipes under an insurance
contract in favor of Remington as the insured,
consignee or importer of aforesaid merchandise
while in transit from Japan to the Philippines on
board vessel SS "Eastern Mariner." The total
value of the shipment was P2,894,463.83 at the
prevailing rate of P7.95 to a dollar in June and
July 1984, when the shipment was made. The
43
trial court decided in favor of Remington by
ordering Cathay Insurance to pay it the sum of
P866,339.15 as its recoverable insured loss
equivalent to 30% of the value of the seamless
steel pipes; ordering Cathay Insurance to pay
Remington interest on the aforecited amount at
the rate of 34% or double the ceiling prescribed
by the Monetary Board per annum from 3
February 1982 or 90 days from Remington's
submission of proof of loss to Cathay Insurance
until paid as provided in the settlement of claim
provision of the policy; and ordering Cathay
Insurance to pay Remington certain amounts for
marine surveyor's fee, attorney's fees and costs
of the suit. On appeal, the Court of Appeals
affirmed the decision of the Regional Trial Court
National Capital Region (NCR) Manila, Branch
38. Cathay Insurance moved for
reconsideration, but was denied. It thus filed the
petition for review. Remington, in its comment
on the petition, contends that (1) Coverage of
Remington's loss under the insurance policy
issued by Cathay Insurance is unmistakable; (2)
Alleged contractual limitations contained in
insurance policies are regarded with extreme
caution by courts and are to be strictly construed
against the insurer; obscure phrases and
exceptions should not be allowed to defeat the
very purpose for which the policy was procured;
(3) Rust is not an inherent vice of the seamless
steel pipes without interference of external
factors; (4) No matter how Cathay Insurance
might want it otherwise, the 15-day clause of the
policy had been foreclosed in the pre-trial order
and it was not even raised in Cathay Insurance's
answer to Remington's complaint; (5) The
decision was correct in not holding that the
heavy rusting of the seamless steel pipes did
not occur during the voyage of 7 days from July
1 to July 7, 1981; (6) The alleged lack of
supposed bad order survey from the arrastre
capitalized on by Cathay Insurance was more
than clarified by no less than 2 witnesses; (7)
The placing of notation "rusty" in the way bills is
not only Remington's right but a natural and
spontaneous reaction of whoever received the
seamless steel pipes in a rusty condition at
Remington's bodega; (8) The Court of Appeals
did not engage in any guesswork or speculation
in concluding a loss allowance of 30% in the
amount of P868,339.15; and (9) The rate of 34%
per annum double the ceiling prescribed by the
Monetary Board is the rate of interest fixed by
the Insurance Policy itself and the Insurance
Code. Cathay Insurance however maintains that
(1) Remington does not dispute the fact that,
contrary to the finding of the respondent Court
(that Cathay Insurance has failed "to present
any evidence of any viable exception to the
application of the policy") there is in fact an
express exception to the application of the
policy; (2) As adverted to in the Petition for
Review, Remington has admitted that the
questioned shipment is not covered by a
"square provision of the contract," but
Remington claims implied coverage from the
phrase "perils of the sea" mentioned in the
opening sentence of the policy; (3) The
insistence of Remington that rusting is a peril of
the sea is erroneous; (4) Remington
inaccurately invokes the rule of strict
construction against insurer under the guise of
construction in order to impart a non-existing
ambiguity or doubt into the policy so as to
resolve it against the insurer; (5) Remington
while impliedly admitting that a loss occasioned
by an inherent defect or vice in the insured
article is not within the terms of the policy,
erroneously insists that rusting is not an inherent
vice or in the nature of steel pipes; (6) Rusting is
not a risk insured against, since a risk to be
insured against should be a casualty or some
casualty, something which could not be
foreseen as one of the necessary incidents of
adventure; (7) A fact capable of unquestionable
demonstration or of public knowledge needs no
evidence. This fact of unquestionable
demonstration or of public knowledge is that
heavy rusting of steel or iron pipes cannot occur
within a period of a 7 day voyage. Besides,
Cathay Insurance had introduced the clear
cargo receipts or tally sheets indicating that
there was no damage on the steel pipes during
the voyage; and (8) The evidence of Remington
betrays the fact that the account of P868,339.15
awarded by the respondent Court is founded on
speculation, surmises or conjectures and the
amount of less has not been proven by
competent, satisfactory and clear evidence.
Issue: Whether the rusting of steel pipes in the
course of a voyage is a "peril of the sea," and
whether rusting is a risk insured against.
Held: YES. There is no question that the rusting
of steel pipes in the course of a voyage is a
"peril of the sea" in view of the toll on the cargo
of wind, water, and salt conditions. At any rate if
the insurer cannot be held accountable therefor,
the Court would fail to observe a cardinal rule in
the interpretation of contracts, namely, that any
ambiguity therein should be construed against
the maker/issuer/drafter thereof, namely, the
insurer. Besides the precise purpose of insuring
cargo during a voyage would be rendered
fruitless.
44
Filipino Merchants Insurance Co. Inc. vs. Court date of the filing of the complaint; and, on the
of Appeals [GR 85141, 28 November 1989] third party complaint, the third party defendant
Second Division, Regalado (J): 3 concur, 1 on Compagnie Maritime Des Chargeurs Reunis
leave and third party defendant E. Razon, Inc. are
ordered to pay FMICI jointly and severally
Facts: In December 1976, Choa Tiek Seng
reimbursement of the amounts paid by FMICI
insured said shipment with Filipino Merchants
with legal interest from the date of such payment
Insurance Company (FMICI) under cargo Policy
until the date of such reimbursement; without
M-2678 for the sum of P267,653.59 for the
pronouncement as to costs. On appeal, and on
goods described as 600 metric tons of fishmeal
18 July 1988, the Court of Appeals affirmed the
in new gunny bags of 90 kilos each from
decision of the lower court insofar as the award
Bangkok, Thailand to Manila against all risks
on the complaint is concerned and modified the
under warehouse to warehouse terms. Actually,
same with regard to the adjudication of the third-
what was imported was 59.940 metric tons not
party complaint. A motion for reconsideration of
600 tons at $395.42 a ton CNF Manila. The
the aforesaid decision was denied, hence FMICI
fishmeal in 666 new gunny bags were unloaded
filed the petition for review.
from the ship on 11 December 1976 at Manila
unto the arrastre contractor E. Razon, Inc. and Issue [1]: Whether an "all risks" marine policy
FMICI's surveyor ascertained and certified that has a technical meaning in insurance in that
in such discharge 105 bags were in bad order before a claim can be compensable it is
condition as jointly surveyed by the ship's agent essential that there must be "some fortuity,"
and the arrastre contractor. The condition of the "casualty" or "accidental cause" to which the
bad order was reflected in the turn over survey alleged loss is attributable.
report of Bad Order cargoes 120320 to 120322,
Held [1]: NO. The "all risks clause" of the
consisting of 3 pages. The cargo was also
Institute Cargo Clauses read as follows "5. This
surveyed by the arrastre contractor before
insurance is against all risks of logs or damage
delivery of the cargo to the consignee and the
to the subject-matter insured but shall in no case
condition of the cargo on such delivery was
be deemed to extend to cover loss, damage, or
reflected in E. Razon's Bad Order Certificates
expense proximately caused by delay or
14859, 14863 and 14869 covering a total of 227
inherent vice or nature of the subject-matter
bags in bad order condition. FMICI's surveyor
insured. Claims recoverable hereunder shall be
has conducted a final and detailed survey of the
payable irrespective of percentage." An "all risks
cargo in the warehouse for which he prepared a
policy" should be read literally as meaning all
survey report with the findings on the extent of
risks whatsoever and covering all losses by an
shortage or loss on the bad order bags totalling
accidental cause of any kind. The terms
227 bags amounting to 12,148 kilos. Based on
"accident" and "accidental", as used in
said computation, Choa made a formal claim
insurance contracts, have not acquired any
against FMICI for P51,568.62 the computation
technical meaning. They are construed by the
of which claim is contained therein. A formal
courts in their ordinary and common
claim statement was also presented by the
acceptance. Thus, the terms have been taken to
Choa against the vessel dated 21 December
mean that which happens by chance or
1976, but FMICI refused to pay the claim.
fortuitously, without intention and design, and
Consequently, an action was brought by the
which is unexpected, unusual and unforeseen.
consignee (Choa Tiek Seng) of the shipment of
An accident is an event that takes place without
fishmeal loaded on board the vessel SS
one's foresight or expectation; an event that
Bougainville and unloaded at the Port of Manila
proceeds from an unknown cause, or is an
on or about 11 December 1976 and seeks to
unusual effect of a known cause and, therefore,
recover from FMICI the amount of P51,568.62
not expected. The very nature of the term "all
representing damages to said shipment which
risks" must be given a broad and
has been insured by FMICI under Policy M-
comprehensive meaning as covering any loss
2678. FMICI brought a third party complaint
other than a wilful and fraudulent act of the
against third party defendants Compagnie
insured. This is pursuant to the very purpose of
Maritime Des Chargeurs Reunis and/or E.
an "all risks" insurance to give protection to the
Razon, Inc. seeking judgment against the third
insured in those cases where difficulties of
party defendants in case judgment is rendered
logical explanation or some mystery surround
against FMICI. The court below, after trial on the
the loss or damage to property. An "all risks"
merits, rendered judgment in favor of Choa,
policy has been evolved to grant greater
ordering FMICI to pay Choa the sum of
protection than that afforded by the "perils
P51,568.62 with interest at legal rate from the
clause," in order to assure that no loss can
45
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. The term "all risks" cannot
be given a strained technical meaning, the
language of the clause under the Institute Cargo
Clauses being unequivocal and clear, to the
effect that it extends to all damages/losses
suffered by the insured cargo except (a) loss or
damage or expense proximately caused by
delay, and (b) loss or damage or expense
proximately caused by the inherent vice or
nature of the subject matter insured.
Issue [2]: Whether the failure of Choa to adduce
evidence, showing that the alleged loss to the
cargo in question was due to a fortuitous event,
precludes his right to recover from the insurance
policy.
Held [2]: NO. Although generally, the burden of
proof is upon the insured to show that a loss
arose from a covered peril, 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 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.
Coverage under an "all risks" provision of a
marine insurance policy creates a special type
of insurance which extends coverage to risks
not usually contemplated and avoids putting
upon the insured the burden of establishing that
the loss was due to the peril falling within the
policy's coverage; the insurer can avoid
coverage upon demonstrating that a specific
provision expressly excludes the loss from
coverage. A marine insurance policy providing
that the insurance was to be "against all risks"
must be construed as creating a special
insurance and extending to other risks than are
usually contemplated, and covers all losses
except such as arise from the fraud of the
insured. The burden of the insured, therefore, is
to prove merely that the goods he transported
have been lost, destroyed or deteriorated.
Thereafter, the burden is shifted to the insurer to
prove that the loss was due to excepted perils.
To impose on the insured the burden of proving
the precise cause of the loss or damage would
be inconsistent with the broad protective
purpose of "all risks" insurance.
Issue [3]: Whether the insurer is liable
Issue [4]: There being no showing that the loss
was caused by any of the excepted perils, the
insurer is liable under the policy. It is believed
that in the absence of any showing that the
losses/damages were caused by an excepted
peril, i.e. delay or the inherent vice or nature of
the subject matter insured, and there is no such
showing, the loss was covered by the policy.
Herein, there is no evidence presented to show
that the condition of the gunny bags in which the
fishmeal was packed was such that they could
not hold their contents in the course of the
necessary transit, much less any evidence that
the bags of cargo had burst as the result of the
weakness of the bags themselves. Had there
been such a showing that spillage would have
been a certainty, there may have been good
reason to plead that there was no risk covered
by the policy (See Berk vs. Style [1956] cited in
Marine Insurance Claims, p. 125). Under an “all
risks” policy, it was sufficient to show that there
was damage occasioned by some accidental
cause of any kind, and there is no necessity to
point to any particular cause. Contracts of
insurance are contracts of indemnity upon the
terms and conditions specified in the policy. The
agreement has the force of law between the
parties. The terms of the policy constitute the
measure of the insurer's liability. If such terms
are clear and unambiguous, they must be taken
and understood in their plain, ordinary and
popular sense.
Issue [4]: Whether the consignee (Choa) has an
insurable interest in said goods.
Held [4]: Choa, as consignee of the goods in
transit under an invoice containing the terms
under "C & F Manila," has insurable interest in
said goods. Section 13 of the Insurance Code
defines insurable interest in property as every
interest in 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. In principle,
anyone has an insurable interest in property
who derives a benefit from its existence or
would suffer loss from its destruction whether he
has or has not any title in, or lien upon or
possession of the property. Insurable interest in
property may consist in (a) an existing interest;
(b) an inchoate interest founded on an existing
interest; or (c) an expectancy, coupled with an
existing interest in that out of which the
expectancy arises. As vendee/consignee of the
goods in transit has such existing interest
46
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 the present 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. C & F
contracts are shipment contracts. The term
means that the price fixed includes in a lump
sum the cost of the goods and freight to the
named destination. It simply means that the
seller must pay the costs and freight necessary
to bring the goods to the named destination but
the risk of loss or damage to the goods is
transferred from the seller to the buyer when the
goods pass the ship's rail in the port of
shipment.
Oriental Assurance Corporation vs. Court of
Appeals [GR 94052, 9 August 1991] Second
Division, Melencio-Herrera (J): 4 concur
Facts: Sometime in January 1986, Panama
Sawmill Co., Inc. (Panama) bought, in Palawan,
1,208 pieces of apitong logs, with a total volume
of 2,000 cubic meters. It hired Transpacific
Towage, Inc., to transport the logs by sea to
Manila and insured it against loss for PIM with
Oriental Assurance Corporation (Oriental
Assurance). There is a claim by Panama,
however, that the insurance coverage should
have been for P3M were it not for the fraudulent
act of one Benito Sy Yee Long to whom it had
entrusted the amount of P6,000.00 for the
payment of the premium for a P3M policy.
Oriental Assurance issued Marine Insurance
Policy OACM-86/002. The logs were loaded on
2 barges: (1) on barge PCT7000,610 pieces of
logs with a volume f 1,000 cubic meters; and (2)
on Barge TPAC-1000, 598 pieces of logs, also
with a volume of 1,000 cubic meters. On 28
January 1986, the two barges were towed by
one tugboat, the MT "Seminole." But, as fate
would have it, during the voyage, rough seas
and strong winds caused damage to Barge
TPAC-1000 resulting in the loss of 497 pieces of
logs out of the 598 pieces loaded thereon.
Panama demanded payment for the loss but
Oriental Assurance refuse on the ground that its
contracted liability was for "TOTAL LOSS
ONLY." The rejection was upon the
recommendation of the Tan Gatue Adjustment
Company. Unable to convince Oriental
Assurance to pay its claim, Panama filed a
Complaint for Damages against Ever Insurance
Agency (allegedly, also liable), Benito Sy Lee
Yong and Oriental Assurance, before the
Regional Trial Court, Kalookan, Branch 123
(Civil Case C-12601). After trial on the merit, the
RTC rendered its Decision, ordering Oriental
Assurance to pay Panama the amount of
P415,000.00 as insurance indemnity with
interest at the rate of 12% per annum computed
from the date of the filing of the complaint;
ordering Panama to pay Ever Insurance Agency
or Antonio Sy Lee Yong, owner thereof (Ever
being a single proprietorship) for the amount of
P20,000.00 as attorney's fee and another
amount of P20,000.00 as moral damages; and
dismissing the complaint against Benito Sy Lee
Yong. On appeal by both parties, the Appellate
Court affirmed the lower Court judgment in all
respects except for the rate of interest, which
was reduced from 12% to 6% per annum.
Oriental Assurance filed the petition for review
on certiorari.
Issue: Whether Oriental Assurance can be held
liable under its marine insurance policy based
on the theory of a divisible contract of insurance
and, consequently, a constructive total loss.
Held: NO. No liability attaches. The terms of the
contract constitute the measure of the insurer's
liability and compliance therewith is a condition
precedent to the insured's right to recovery from
the insurer (Perla Compania de Seguros, Inc. v.
Court of Appeals, G.R. No. 78860, May 28,
1990, 185 SCRA 741). Whether a contract is
entire or severable is a question of intention to
be determined by the language employed by the
parties. The policy in question shows that the
subject matter insured was the entire shipment
of 2,000 cubic meters of apitong logs. The fact
that the logs were loaded on two different
barges did not make the contract several and
47
divisible as to the items insured. The logs on the
two barges were not separately valued or
separately insured. Only one premium was paid
for the entire shipment, making for only one
cause or consideration. The insurance contract
must, therefore, be considered indivisible. More
importantly, the insurer's liability was for "total
loss only." A total loss may be either actual or
constructive (Sec. 129, Insurance Code). An
actual total loss is caused by: (a) A total
destruction of the thing insured; (b) The
irretrievable loss of the thing by sinking, or by
being broken up; (c) Any damage to the thing
which renders it valueless to the owner for the
purpose for which he held it; or (d) Any other
event which effectively deprives the owner of the
possession, at the port of destination, of the
thing insured." (Section 130, Insurance Code). A
constructive total loss is one which gives to a
person insured a right to abandon, under
Section 139 of the Insurance Code, which reads
"A person insured by a contract of marine
insurance may abandon the thing insured, or
any particular portion thereof separately valued
by the policy, or otherwise separately insured,
and recover for a total loss thereof, when the
cause of the loss is a peril insured against. (a) If
more than threefourths thereof in value is
actually lost, or would have to be expended to
recover it from the peril; (b) If it is injured to such
an extent as to reduce its value more than three-
fourths; xxx" The requirements for the
application of Section 139 of the Insurance
Code, have not been met. The logs involved,
although placed in two barges, were not
separately valued by the policy, nor separately
insured. Resultantly, the logs lost in barge
TPAC-1000 in relation to the total number of
logs loaded on the same barge can not be made
the basis for determining constructive total loss.
The logs having been insured as one
inseparable unit, the correct basis for
determining the existence of constructive total
loss is the totality of the shipment of logs. Of the
entirety of 1,208, pieces of logs, only 497 pieces
thereof were lost or 41.45% of the entire
shipment. Since the cost of those 497 pieces
does not exceed 75% of the value of all 1,208
pieces of logs, the shipment can not be said to
have sustained a constructive total loss under
Section 139(a) of the Insurance Code. In the
absence of either actual or constructive total
loss, there can be no recovery by the insured
Panama against the insurer, Oriental
Assurance.
Finman General Assurance Corporation vs.
Court of Appeals [GR 100970, 2 September
1992] Second Division, Nocon (J): 4 concur
Facts: On 22 October 1986, deceased Carlie
Surposa was insured with Finman General
Assurance Corporation under Finman General
Teachers Protection Plan Master Policy 2005
and Individual Policy 08924 with his parents,
spouses Julia and Carlos Surposa, and brothers
Christopher, Charles, Chester and Clifton, all
surnamed Surposa, as beneficiaries. While said
insurance policy was in full force and effect, the
insured, Carlie Surposa, died on 18 October
1988 as a result of a stab wound inflicted by one
of 3 unidentified men without provocation and
warning on the part of the former as he and his
cousin, Winston Surposa, were waiting for a ride
on their way home along Rizal-Locsin Streets,
Bacolod City after attending the celebration of
the "Maskarra Annual Festival." Thereafter, Julia
Surposa and the other beneficiaries of said
insurance policy filed a written notice of claim
with Finman which denied said claim contending
that murder and assault are not within the scope
of the coverage of the insurance policy. On 24
February 1989, Surposa filed a complaint with
the Insurance Commission which subsequently
rendered a decision, ordering Finman liable to
pay Surposa the sum of P15,000.00
representing the proceeds of the policy with
interest from the date of the filing of the
complaint until fully satisfied. As no evidence
was submitted to prove the claim for mortuary
aid in the sum of P1,000.00, the same was not
entertained. On 11 July 1991, the appellate
court affirmed said decision. Finman filed the
petition for certiorari.
Issue: Whether the death was committed with
deliberate intent which, by the very nature of a
personal accident insurance policy, cannot be
indemnified.
Held: NO. The terms "accident" and
"accidental," as used in insurance contracts
have not acquired any technical meaning, and
are construed by the courts in their ordinary and
common acceptation. Thus, the terms have
been taken to mean that which happen by
chance or fortuitously, without intention and
design, and which is unexpected, unusual, and
unforeseen. An accident is an event that takes
place without one's foresight or expectation —
an event that proceeds from an unknown cause,
or is an unusual effect of a known cause and,
therefore, not expected. The generally accepted
rule is that, death or injury does not result from
accident or accidental means within the terms of
an accident-policy if it is, the natural result of the
48
insured's voluntary act, unaccompanied by
anything unforeseen except the death or injury.
There is no accident when a deliberate act is
performed unless some additional, unexpected,
independent, and unforeseen happening occurs
which produces or brings about the result of
injury or death. In other words, where the death
or injury is not the natural or probable result of
the insured's voluntary act, or if something
unforeseen occurs in the doing of the act which
produces the injury, the resulting death is within
the protection of the policies insuring against
death or injury from accident. Herein, it cannot
be pretended that Carlie Surposa died in the
course of an assault or murder as a result of his
voluntary act considering the very nature of
these crimes. In the first place, the insured and
his companion were on their way home from
attending a festival. They were confronted by
unidentified persons. The record is barren of any
circumstance showing how the stab wound was
inflicted. Nor can it be pretended that the
malefactor aimed at the insured precisely
because the killer wanted to take his life. In any
event, while the act may not exempt the
unknown perpetrator from criminal liability, the
fact remains that the happening was a pure
accident on the part of the victim. The insured
died from an event that took place without his
foresight or expectation, an event that
proceeded from an unusual effect of a known
cause and, therefore, not expected. Neither can
it be said that there was a capricious desire on
the part of the accused to expose his life to
danger considering that he was just going home
after attending a festival. Furthermore, the
personal accident insurance policy involved
specifically enumerated only 10 circumstances
wherein no liability attaches to Finamn for any
injury, disability or loss suffered by the insured
as a result of any of the stipulated causes. The
principle of "expresso unius exclusio alterius" —
the mention of one thing implies the exclusion of
another thing — is therefore applicable in the
present case since murder and assault, not
having been expressly included in the
enumeration of the circumstances that would
negate liability in said insurance policy cannot
be considered by implication to discharge
Finman from liability for any injury, disability or
loss suffered by the insured. Thus, the failure of
Finman to include death resulting from murder
or assault among the prohibited risks leads
inevitably to the conclusion that it did not intend
to limit or exempt itself from liability for such
death.
Sun Insurance Office Ltd. vs. Court of Appeals
[GR 92383, 17 July 1992] First Division, Cruz
(J): 3 concur
Facts: Sun Insurance Office Ltd. issued
Personal Accident Policy 05687 to Felix Lim, Jr.
with a face value of P200,000.00. Two months
later, he was dead with a bullet wound in his
head. As beneficiary, his wife Nerissa Lim
sought payment on the policy but her claim was
rejected. Sun Insurance agreed that there was
no suicide. It argued, however, that there was
no accident either. Pilar Nalagon, Lim's
secretary, was the only eyewitness to his death.
It happened on 6 October 1982, at about 10
p.m., after his mother's birthday party. According
to Nalagon, Lim was in a happy mood (but not
drunk) and was playing with his handgun, from
which he had previously removed the magazine.
As she watched the television, he stood in front
of her and pointed the gun at her. She pushed it
aside and said it might be loaded. He assured
her it was not and then pointed it to his temple.
The next moment there was an explosion and
Lim slumped to the floor. He was dead before
he fell. The widow sued Sun Insurance in the
Regional Trial Court of Zamboanga City and
was sustained. Sun Insurance was sentenced to
pay her P200,000.00, representing the face
value of the policy, with interest at the legal rate;
P10,000.00 as moral damages; P5,000.00 as
exemplary damages; P50,000.00 as actual and
compensatory damages; and P5,000.00 as
attorney's fees, plus the cost of the suit. This
decision was affirmed on appeal, and the motion
for reconsideration was denied. Sun Insurance
then came to the Supreme Court.
Issue: Whether the insured willfully exposed
himself to needless peril and thus removed
himself from the coverage of the insurance
policy.
Held: NO. An accident is an event which
happens without any human agency or, if
happening through human agency, an event
which, under the circumstances, is unusual to
and not expected by the person to whom it
happens. It has also been defined as an injury
which happens by reason of some violence or
casualty to the insured without his design,
consent, or voluntary co-operation. Herein, the
incident that resulted in Lim's death was indeed
an accident. On the other hand, the parties
agree that Lim did not commit suicide.
Nevertheless, Sun Insurance contends that the
insured willfully exposed himself to needless
peril and thus removed himself from the
coverage of the insurance policy. It should be
noted at the outset that suicide and willful
49
exposure to needless peril are in pari materia
because they both signify a disregard for one's
life. The only difference is in degree, as suicide
imports a positive act of ending such life
whereas the second act indicates a reckless
risking of it that is almost suicidal in intent. The
posture -- that by the mere act of pointing the
gun to his temple, Lim had willfully exposed
himself to needless peril and so came under the
exception -- is arguable. But what is not is that
Lim had removed the magazine from the gun
and believed it was no longer dangerous. He
expressed assured her that the gun was not
loaded. It is submitted that Lim did not willfully
expose himself to needless peril when he
pointed the gun to his temple because the fact is
that he thought it was not unsafe to do so. The
act was precisely intended to assure Nalagon
that the gun was indeed harmless. Lim was
unquestionably negligent and that negligence
cost him his own life. But it should not prevent
his widow from recovering from the insurance
policy he obtained precisely against accident.
There is nothing in the policy that relieves the
insurer of the responsibility to pay the indemnity
agreed upon if the insured is shown to have
contributed to his own accident. Indeed, most
accidents are caused by negligence. There are
only four exceptions expressly made in the
contract to relieve the insurer from liability, and
none of these exceptions is applicable in the
present case. It bears noting that insurance
contracts are as a rule supposed to be
interpreted liberally in favor of the assured.
There is no reason to deviate from this rule,
especially in view of the circumstances of the
case.
Biagtan vs Insular Life Assurance Co., Ltd., 44
SCRA 58
Facts:
Juan S. Biagtan was insured with defendant
Insular Life Assurance Company under Policy
No. 398075 for the sum of P5,000.00 and, under
a supplementary contract denominated
"Accidental Death Benefit Clause, for an
additional sum of P5,000.00 if "the death of the
Insured resulted directly from bodily injury
effected solely through external and violent
means sustained in an accident and
independently of all other causes." The clause,
however, expressly provided that it would not
apply where death resulted from an injury
"intentionally inflicted by another party."
On the night of May 20, 1964, or during the first
hours of the following day a band of robbers
entered the house of the insured Juan S.
Biagtan.
Biagtan was killed as his house was being
robbed. The insurance company paid the basic
amount of P5,000 but refused to pay the
additional P5,000 under the accidental death
benefit clause, on the ground that his death was
the result of injuries intentionally inflicted by third
parties and was not covered. The trial court
ruled that there was no proof that the robbers
intended to kill Biagtan, or just to scare him
away by thrusting at him with their knives.
Issue: Whether or not, the wounds received by
the insured at the hands of the robbers were
inflicted intentionally?
Ruling: YES.
Unlike the ruling in the case of Calanoc vs.
Court of Appeals, where the killing of the victim
was held as accidental and thus covered by the
insurance policy, the Supreme Court held that in
the instant case, the insured was killed
intentionally. The term “intentional” implies the
exercise of the reasoning faculties,
consciousness and volition.
The Supreme Court held pointing out that there
were nine wounds in all. The exception in the
accidental benefit clause does not speak of the
purpose – whether homicidal or not – of a third
party in causing the injuries, but only of the fact
that such injuries have been intentionally
inflicted. Nine wounds inflicted with bladed
weapons at close range cannot be considered
innocent insofar as intent is concerned. The
manner of execution of the crime permits no
other conclusion.
Where a provision of the policy excludes
intentional injury, it is the intention of the person
inflicting the injury that is controlling. If the
injuries suffered by the insured clearly resulted
from the intentional act of a third party the
insurer is relieved from liability.
Under the circumstance, the insurance company
was correct in refusing to pay the additional sum
of P2,000.00 under the accidental death benefit
clause which expressly provided that it would
not apply where death resulted from an injury
"intentionally" inflicted by a third party.
XV. COMPULSORY MOTOR VEHICLE
LIABILITY INSURANCE (INSURANCE)
1. Vda. de Gabriel vs. Court of Appeals
50
264 SCRA 137 (G.R. No. 103883)
November 14, 1996
Facts:
The petitioner for review on certiorari seeks the
reversal of the decision of the Court of Appeals
setting aside the judgment of the Regional Trial
Court which ordered private respondent Fortune
Insurance and Surety Company, Inc., to pay
petitioner Jacqueline Jimenez Vda. de Gabriel,
the surviving spouse and beneficiary in an
accident (group) insurance of her dead
husband, the amount of ₱100,000.00, plus legal
interest.
Marcelino Gabriel, the insured, was employed
by Emerald Construction & Development
Corporation (“ECDC”) at its construction project
in Iraq. He was covered by a personal accident
insurance in the amount of ₱100,000.00 under a
group policy procured from private respondent
by ECDC for its overseas workers.
On May 22, 1982, within the life of the policy,
Gabriel died in Iraq. A year later, or on July 12,
1983, ECDC reported Gabriel’s death to private
respondent by telephone. Ultimately private
respondent denied the claim of ECDC on the
ground of prescription. Petitioner went to court
alleging that her husband died of electrocution
while working.
Issue:
Whether or not the cause of action had
prescribed.
Held:
Yes. On the issue of “prescription”, private
respondent correctly invoked Section 384 of the
Insurance Code; viz: “Sec. 384. Any person
having any claim upon the policy issued
pursuant to this chapter shall without any
unnecessary delay, present to the insurance
company concerned a written notice of claim
setting forth the nature, extent and duration of
the injuries sustained as certified by a duly
licensed physician. Notice of claim must be filed
within six months from date of the accident,
otherwise, the claim shall be deemed waived.
Action or suit for recovery of damage due to loss
or injury must be brought, in proper cases, with
the Commissioner on the Courts within one year
from the denial of the claim, otherwise, the
claimant’s right of action shall prescribe.” The
notice of death was given to private respondent,
concededly, more than a year after the death of
petitioner’s husband. Private respondent in
invoking prescription, was not referring to the
one-year period from the denial of the claim
within which to file an action against an insurer
but obviously to the written notice of claim that
had to be submitted within six months from the
time of the accident.
2. VDA. De Maglana v. Hon. Francisco
Consolacion G.R. No. 60506 August 6, 1992
Facts:
Lope Maglana was killed in a collision with a
jeepney owned by Destrajo and insured with
AFISCO. The heirs filed a civil case against the
owner and the insurer, and a criminal case
against the driver. In the civil case, the lower
court held the owner Destrajo primarily liable for
damages, while AFISCO was held liable only
secondarily (to reimburse Destrajo). Maglana’s
heirs now argue that AFISCO’s liability must be
direct and solidary.
Issues:
1. W/N the insurer, AFISCO, can be held directly
liable by a third party.
2. W/N the insurer should be held solidarily
liable with Destrajo.
1. YES. Where an insurance policy insures
directly against liability, the insurer's liability
accrues immediately upon the occurrence of the
injury or even upon which the liability depends,
and does not depend on the recovery of
judgment by the injured party against the
insured. The underlying reason behind the third
party liability (TPL) of the Compulsory Motor
Vehicle Liability Insurance is "to protect injured
persons against the insolvency of the insured
who causes such injury, and to give such injured
person a certain beneficial interest in the
proceeds of the policy.
2. NO. While it is true that where the insurance
contract provides for indemnity against liability to
third persons, such third persons can directly
sue the insurer, however, the direct liability of
the insurer under indemnity contracts against
third party liability does not mean that the
insurer can be held solidarily liable with the
insured and/or the other parties found at fault.
The liability of the insurer is based on contract;
that of the insured is based on tort. • AFISCO,
51
which, under the insurance contract is liable only
up to P20,000.00, can not be made solidarily
liable with the insured for the entire obligation of
P29,013.00 otherwise there would result "an
evident breach of the concept of solidary
obligation." • In fine, we conclude that the
liability of AFISCO based on the insurance
contract is direct, but not solidary with that of
Destrajo which is based on Article 2180 of the
Civil Code.
3. Tiu vs. Arriesgado Case Digest Tiu vs.
Arriesgado G.R. No. 138060, September 1,
2004
Facts:
A cargo truck marked "Condor Hollow Blocks
and General Merchandise" bearing plate
number GBP-675 was loaded with firewood in
Bogo, Cebu and left for Cebu City. Just as the
truck passed over a bridge, one of its rear tires
exploded. The driver, Sergio Pedrano, then
parked along the right side of the national
highway and removed the damaged tire to have
it vulcanized at a nearby shop. Pedrano left his
helper, Jose Mitante, Jr. to keep watch over the
stalled vehicle.
D Rough Riders passenger bus with plate
number PBP-724 driven by Virgilio Te Laspiñas
was cruising along the national highway of Sitio
Aggies, Poblacion, Compostela, Cebu. Among
its passengers were the Spouses Pedro A.
Arriesgado and Felisa Pepito Arriesgado, who
were seated at the right side of the bus, about
three (3) or four (4) places from the front seat.
As the bus was approaching the bridge,
Laspiñas saw the stalled truck, which was then
about 25 meters away. He applied the breaks
and tried to swerve to the left to avoid hitting the
truck. Too late; the bus rammed into the trucks
left rear. Felisa Arriesgado, was brought to the
Danao City Hospital but she died shortly
thereafter.
Respondent Pedro A. Arriesgado then filed a
complaint for breach of contract of carriage,
damages and attorneys fees against the
petitioners, D Rough Riders bus operator
William Tiu and his driver, Virgilio Te Laspiñas.
Petitioner filed a Third-Party Complaint against
Phoenix Surety and Insurance, Inc (PPSII) as
their insurer, the registered owner of the cargo
truck and the driver of the truck. Petitioner
alleged that they were driving at a normal
speed; that the truck was parked in a slanted
manner as its rear was almost in the middle of
the highway; and that no early warning device
was displayed.
PPSII, for its part, admitted that it had an
existing contract with petitioner Tiu, but averred
that it had already attended to and settled the
claims of those who were injured during the
incident. It could not accede to the claim of
respondent Arriesgado, as such claim was way
beyond the scheduled indemnity as contained in
the contract of insurance.
Issue:
What is the liability of PPSII as Insurer?
Ruling:
As can be gleaned from the Certificate of Cover,
such insurance contract was issued pursuant to
the Compulsory Motor Vehicle Liability
Insurance Law. It was expressly provided
therein that the limit of the insurer’s liability for
each person was P12,000, while the limit per
accident was pegged at P50,000. An insurer in
an indemnity contract for third party liability is
directly liable to the injured party up to the extent
specified in the agreement but it cannot be held
solidarily liable beyond that amount. PPSII could
not then just deny petitioner Tiu’s claim; it
should have paid P12,000 for the death of
Felisa, and respondent Arriesgado’s
hospitalization expenses of P1,113.80, which
the trial court found to have been duly supported
by receipts. The total amount of the claims, even
when added to that of the other injured
passengers which the respondent PPSII claimed
to have settled, would not exceed the P50,000
limit under the insurance agreement.
The nature of Compulsory Motor Vehicle
Liability Insurance is such that it is primarily
intended to provide compensation for the death
or bodily injuries suffered by innocent third
parties or passengers as a result of the
negligent operation and use of motor vehicles.
The victims and/or their dependents are assured
of immediate financial assistance, regardless of
the financial capacity of motor vehicle owners.
Although the victim may proceed directly
against the insurer for indemnity, the third party
liability is only up to the extent of the insurance
policy and those required by law. While it is true
that where the insurance contract provides for
indemnity against liability to third persons, and
such persons can directly sue the insurer, the
direct liability of the insurer under indemnity
contracts against third party liability does not
mean that the insurer can be held liable in
52
solidum with the insured and/or the other parties
found at fault. For the liability of the insurer is
based on contract; that of the insured carrier or
vehicle owner is based on tort.
XVI. CLAIMS SETTLEMENT (INSURANCE)
1. Tio Khe Chio vs CA, G.R. No. 76101-02
September 30, 1991
Facts:
On 18 December 1978, Tio Khe Chio imported
1,000 bags of fishmeal valued at $36,000.30
from Agro Impex, S.A. Dallas, Texas, U.S.A.
The goods were insured with Eastern Assurance
and Surety Corporation (EASCO) and shipped
on board the M/V Peskov, a vessel owned by
Far Eastern Shipping Company. When the
goods reached Manila on 28 January 1979, they
were found to have been damaged by sea water
which rendered the fishmeal useless. Tio filed a
claim with EASCO and Far Eastern Shipping.
Both refused to pay. Whereupon, Tio sued them
before the then Court of First Instance of Cebu,
Branch II for damages. EASCO, as the insurer,
filed a counterclaim against the Tio for the
recovery of P18,387.86 representing the unpaid
insurance premiums. On 30 June 1982, the trial
court rendered judgment ordering EASCO and
Far Eastern Shipping to pay Tio solidarily the
sum of P105,986.68 less the amount of
P18,387.86 for unpaid premiums with interest at
the legal rate from the filing of the complaint, the
sum of P15,000.00 as attorney's fees and the
costs. The judgment became final as to EASCO
but the shipping company appealed to the Court
of Appeals and was absolved from liability by
the said court. The trial court, issued a writ of
execution against EASCO. The sheriff enforcing
the writ reportedly fixed the legal rate of interest
at 12%. EASCO moved to quash the writ
alleging that the legal interest to be computed
should be 6% per annum in accordance with
Article 2209 of the Civil Code and not 12% as
insisted upon by Tio's counsel.
Issue:
Whether the interest to be imposed on claims
based on an insurance contract is 6% or 12%.
Held:
6%. The legal rate of interest is 6% per annum.
Circular 416 of the Central Bank which took
effect on 29 July 1974 pursuant to Presidential
Decree 116 (Usury Law) which raised the legal
rate of interest from 6% to 12% cannot apply as
the adjusted rate mentioned in the circular refers
only to loans or forbearances of money, goods
or credits and court judgments thereon but not
to court judgments for damages arising from
injury to persons and loss of property which
does not involve a loan. On the other hand, in
the case of Philippine Rabbit Bus Lines, Inc. vs.
Cruz, G.R. No. 71017, July 28, 1986, 143 SCRA
158, the Court declared that the legal rate of
interest is 6% per annum, and not 12%, where a
judgment award is based on an action for
damages for personal injury, not use or
forbearance of money, goods or credit. Clearly,
the applicable law is Article 2209 of the Civil
Code which reads "If the obligation consists in
the payment of a sum of money and the debtor
incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall
be the payment of interest agreed upon, and in
the absence of stipulation, the legal interest
which is six per cent per annum." And in the light
of the fact that the contending parties did not
allege the rate of interest stipulated in the
insurance contract, the legal interest was
properly pegged at 6%.
2. Finman General Assurance Corp. v. Court of
Appeals G.R. No. 138737 July 12, 2001
Facts:
Usiphil, Inc. obtained a fire insurance policy from
Finman General Assurance Corp. then doing
business in the name of Summa Insurance
Corp.). Sometime in 1982, Usiphil filed with
Finman an insurance claim for the loss of the
insured properties due to fire. Despite several
demands by Usiphil, Finman refused to pay the
insurance claim on the grund that the same
could not be allowed because Usiphil failed to
comply with a condition in the policy regarding
the submission of certain documents to prove
the loss. Thus, Usiphil was constraint to file a
complaint against Finman for the unpaid
insurance claim. After trial, the trial court
rendered a decision in favor of Usiphil, and
ordered Finman to pay Usiphil the amount of the
insurance proceeds plus a 24% interest rate per
annum until the judgment proceeds is fully paid.
Finman appealed the decision, arguing, among
others, that since there was no express finding
that it unreasonably withheld or denied the
payment of the subject insurance claim, then the
award of 24% per annum is not proper. The
Court of Appeals affirmed the decision of the
trial court.
53
Issue: Insurance Code. The RTC dismissed the
complaint for failure to state a cause of action. It
WON the 24% interest rate per annum awarded
interpreted the provision to mean that Trans-
by the lower courts is legal.
Asia is required to maintain the vessel at a
Held: certain class at all times pertinent during the life
of the policy. According to the court a quo,
Yes, it is, for the same is authorized by Secs. Trans-Asia failed to prove compliance of the
243 and 244 of the Insurance Code. Notably, terms of the warranty, the violation thereof
under Sec. 244, aprima facie evidence of entitled Prudential, the insured party, to rescind
unreasonable delay in payment of the claim is the contract. On appeal, said decision was
created by the failure of the insurer to pay the reversed by the CA.
claim within the time fixed in both Secs. 243 and
244. Further, Sec. 29 of the policy itself provides Issues:
that the claim shall be paid within 30 days after
Whether or not Trans-Asia breached a material
proof of loss is received by the company.
warranty that the vessel is classed and class
maintained.
3. Prudential Guarantee VS. Trans-Asia
Shipping Lines, Inc. G.R. NO. 151890 20 June
Ruling:
2006
In ruling in the negative, the Supreme Court held
Facts:
that Trans-Asia did not breach a material
Trans-Asia is the owner of the vessel M/V Asia warranty that the vessel is classed and class
Korea. In consideration of payment of maintained. Prudential Guaranty was not
premiums, defendant Prudential insured M/V successful in discharging the burden of
Asia Korea for loss/damage of the hull and evidence that Trans-Asia breached the subject
machinery arising from perils, inter alia, of fire policy condition on CLASSED AND CLASS
and explosion for the sum of P40 Million. While MAINTAINED. Foremost, Prudential, through
the policy was in force, a fire broke out while the Senior Manager of its Marine and Aviation
M/V Asia Korea was undergoing repairs at the Division, Lucio Fernandez, made a categorical
port of Cebu. Trans-Asia then filed its notice of admission that at the time of the procurement of
claim for damage sustained by the vessel. the insurance, Trans-Asia’s vessel, “M/V Asia
Trans-Asia reserved its right to subsequently Korea” was properly classed by Bureau Veritas,
notify Prudential as to the full amount of the a classification society recognized in the marine
claim upon final survey and determination by industry. As it is undisputed that Trans-Asia was
average adjuster Richard Hogg International properly classed at the time the contract of
(Phil.) of the damage sustained by reason of insurance was entered into, thus, it becomes
fire. Trans-Asia executed a Loan and Trust incumbent upon Prudential to show evidence
Receipt a portion of which states that it received that the status of Trans-Asia being properly
from Prudential P3 Million as a loan and without CLASSED by Bureau Veritas had shifted in
interest, repayable only in the event and to the violation of the warranty. Unfortunately,
extent that it recovers from any person or Prudential failed to support the allegation.
persons, corporation or corporations, or other
parties, on account of loss by any casualty for
which they may be liable occasioned by the fire
on board. Prudential, in a letter, denied Trans-
Asia’s claim from the fire incident due to the
latter’s breach of policy conditions one of which
is “WARRANTED VESSEL CLASSED AND
CLASS MAINTAINED”. This was followed by
another letter, requesting the return or payment
of the P3 Million within a period of ten 10 days
from receipt of said letter. Trans-Asia filed a
complaint for sum of money against Prudential
which sought the amount of P8,395,072.26 from
the latter, alleging that the same represents the
balance of the indemnity due upon the
insurance policy in the total amount of
P11,395,072.26. It similarly sought interest at
42% per annum citing Section 243 of the
54