INSURANCE

LOYOLA LIFE PLANS v. ATR PROFESSIONAL LIFE INSURANCE

G.R. NO. 228402, August 26, 2020
Carandang, J:

DOCTRINE:

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 insurer's promise, the
insured pays a premium.

FACTS:

Loyola applied with ATR for a Group Creditors Life Insurance Plan. Dwight, husband of Angelita,
purchased a Timeplan from Loyola payable in 120 monthly installments. Dwight issued checks for
downpayment, and was issued with an Official Receipt stating that the receipt is valid for downpayment
only, and checks and other similar forms shall be valid only when cleared by the bank. Checks were
deposited on May 2, 2000; unfortunately, Dwight was stabbed to death on May 1, 2000. Angelita filed a
claim to recover the proceeds, but ATR denied it for the initial installment payment was not completed.
Loyola asked for reconsideration, insisting that the Timeplan was in full force and effect upon payment of
premium on April 28, 2000.

ISSUES:

1. Whether or Not an insurance contract was perfected between Dwight and ATR on April 28 when
Dwight paid Loyola an partial amount in cash and the full payment in check

2. Whether or Not Dwight’s death is a risk covered by the Timeplan contract

HELD:

1. Yes. It is only when the applicant pays the premium and receives and accepts the policy while he is in
good health that the contract of insurance is deemed to have been perfected. is only when the applicant
pays the premium and receives and accepts the policy while he is in good health that the contract of
insurance is deemed to have been perfected. Furthermore, ATR agreed to insure all present and future
planholders of Loyola.

2. Yes. Although it is indicated in the Master Policy that murder or provoked assault, or any attempt
thereat, is excluded, there are no records of any circumstances showing that the fatal stabbing of Dwight
is a product of the crime of murder. Nothing in the investigation report 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 insurer's promise, the insured pays a premium.
PHILIPPINE HEALTH CARE PROVIDERS v. CIR
G.R. NO. 167330, September 18, 2009
Corona, J:

DOCTRINE:

Section 2 (2) of PD 1460 (otherwise known as the Insurance Code) enumerates what constitutes "doing
an insurance business" or "transacting an insurance business:" a) making or proposing to make, as
insurer, any insurance contract; b) making or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate business or activity of the surety; c) doing
any kind of business, including a reinsurance business, specifically recognized as constituting the doing
of an insurance business within the meaning of this Code; d) doing or proposing to do any business in
substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

FACTS:

Petitioner’s health care agreement with its members was assessed with DST pursuant to Section 185 of
the 1997 Tax Code. CIR sent formal demand letter and tax assessment notices demanding payment of
deficiency taxes, including surcharges and interests. Petitioner protested the assessment, but CIR did not
act on it, hence, Petitioner filed a petition for review in the CTA seeking the cancellation of deficiency
VAT and DST assessments. CTA ordered the Petitioner to pay VAT, inclusive of surcharges and
interests, but cancelled the assessment for DST. CIR insists that the health care agreement was a contract
of insurance subject to DST.

ISSUE:

Whether or Not the health care agreements issued by the Petitioner are subject to DST

HELD:

Yes. From the language of Section 185, it is evident that two requisites must concur before the DST can
apply, namely: (1) the document must be a policy of insurance or an obligation in the nature of
indemnity and (2) the maker should be transacting the business of accident, fidelity, employer’s
liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch
of insurance (except life, marine, inland, and fire insurance). Petitioner is admittedly an HMO, and was
not engaged in the business of insurance during the pertinent taxable years. Section 2 (2) of PD 1460
(otherwise known as the Insurance Code) enumerates what constitutes "doing an insurance business" or
"transacting an insurance business:" a) making or proposing to make, as insurer, any insurance contract;
b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely
incidental to any other legitimate business or activity of the surety; c) doing any kind of business,
including a reinsurance business, specifically recognized as constituting the doing of an insurance
business within the meaning of this Code; d) doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. HMOs are
not in the insurance business. One test that they have applied is whether the assumption of risk and
indemnification of loss (which are elements of an insurance business) are the principal object and purpose
of the organization or whether they are merely incidental to its business. If these are the principal
objectives, the business is that of insurance. But if they are merely incidental and service is the principal
purpose, then the business is not insurance.
FORTUNE MEDICARE v. DAVID ROBERT U. AMORIN
G.R. NO. 195872, March 12, 2014
Reyes, J:

DOCTRINE:

A health-care agreement is in the nature of non-life insurance, which is primarily a contract of indemnity.

FACTS:

David was a cardholder /member of Fortune. he terms of David’s medical coverage were provided in a
Corporate Health Program Contract which was executed on January 6, 2000. While on vacation in
Hawaii, David underwent an emergency appendectomy, and attempted to recover the expenses from
Fortune, but the latter approved a certain amount only which was based on the average cost of the surgery
in Metro Manila.

ISSUE:

Whether or Not the liability of Fortune shall be based in the Philippine Standard

HELD:

No. For purposes of determining the liability of a health care provider to its members, jurisprudence holds
that a health care agreement is 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. The limitation on payment based on "Philippine standard" for services of accredited
physicians was expressly made applicable only in the case of an emergency care in an accredited hospital.
For treatments in foreign territories, the only qualification was only as to the percentage, or 80% of that
payable for treatments performed in non-accredited hospital. All told, in the absence of any qualifying
word that clearly limited Fortune’s liability to costs that are applicable in the Philippines, the amount
payable by Fortune should not be limited to the cost of treatment in the Philippines, as to do so would
result in the clear disadvantage of its member. Settled is the rule that ambiguities in a contract are
interpreted against the party that caused the ambiguity. "Any ambiguity in a contract whose terms are
susceptible of different interpretations must be read against the party who drafted it."
VIOLETA LALICAN v. THE INSULAR LIFE INSURANCE
G.R. NO. 183526, August 25, 2009
Chici-Nazario, J:

DOCTRINE:

An insurable interest is one of the most basic and essential requirements in an insurance contract. In
general, an insurable interest is that interest which a person is deemed to have in the subject matter
insured, where he has a relation or connection with or concern in it, such that the person will derive
pecuniary benefit or advantage from the preservation of the subject matter insured and will suffer
pecuniary loss or damage from its destruction, termination, or injury by the happening of the event
insured against.

FACTS:

Violeta is the widow of Eulogio, the latter applied for an insurance policy with Insular which contained a
20-year endownment variable income package flexi plan worth P500,000 with 2 riders valued at
P500,000 each. Under the terms, Eulogio was to pay the premiums on a quarterly basis payable every 24
April, 24 July, 24 October and 24 January of each year. There was a grace period of 31 days for the
payment of each premium subsequent to the first. If any premium was not paid on or before the due date,
the policy would be in default, and if the premium remained unpaid until the end of the grace period, the
policy would automatically lapse and become void. Eulogio paid the premiums due on 24 July 1997 and
24 October 1997. However, he failed to pay the premium due on 24 January 1998, even after the lapse of
the grace period of 31 days. The policy lapsed and became void. He applied for reinstatement but was
initially denied; however, his second application was received by the agent’s husband and issued a receipt
for the amount deposited. Later on, Eulogio died of cardio-respiratory arrest secondary to electrocution.
Without knowledge of Eulogio’s death, the application was forwarded but Insular did not act upon it for it
was informed of the said death. Violeta filed a claim for payment of the full proceeds but was denied due
to the lapsed policy.

ISSUE:

Whether or Not Eulogio was able to reinstate the lapsed insurance policy before his death

HELD:

No. To reinstate a policy means to restore the same to premium-paying status after it has been permitted
to lapse. Both the Policy Contract and the Application for Reinstatement provide for specific conditions
for the reinstatement of a lapsed policy. Eulogio’s death rendered impossible full compliance with the
conditions for reinstatement. True, Eulogio, before his death, managed to file his Application for
Reinstatement and deposit the amount for payment of his overdue premiums and interests thereon with
Malaluan; but it could only be considered reinstated after the Application for Reinstatement had been
processed and approved by Insular during Eulogio’s lifetime and good health. The conditions for
reinstatement under the Policy Contract and Application for Reinstatement were written in clear and
simple language, which could not admit of any meaning or interpretation other than those that they so
obviously embody. A construction in favor of the insured is not called for, as there is no ambiguity in the
said provisions in the first place. The words thereof are clear, unequivocal, and simple enough so as to
preclude any mistake in the appreciation of the same.
PARAMOUNT LIFE v. CHERRY CASTRO
G.R. NO. 195728, April 19, 2016
Sereno, C.J:

DOCTRINE:

MRI is a device for the protection of both the mortgagee and the mortgagor On the part of the mortgagee,
it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor
during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the
payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In
a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of
death, the mortgage obligation will be extinguished by the application of the insurance proceeds to the
mortgage indebtedness.

FACTS:

PPSBI applied for and obtained insurance from Paramount, which accordingly issued Group Master
Policy containing an article that "all death benefits shall be payable to the creditor, PPSBI, as its interest
may appeal." Virgilio, Cherry’s husband, obtained a housing loan from PPSBI requiring a mortgage
redemption insurance (MRI) from Paramount to cover the loan. Cherry and Glenn were named as
beneficiaries. Virgilio died of septic shock and a claim for death benefits was filed under the individual
insurance coverage issued under the group policy. Paramount however denied the claim, on the ground of
the failure of Virgilio to disclose material information, or material concealment or misrepresentation by
answering "no" to questions on whether he had any adverse health history and whether he had sought
medical advice or consultation concerning it. Paramount filed a complaint before the RTC to declare the
insurance of Virgilio as null and void due to material concealment and misrepresentation.

ISSUE:

Whether or Not PPSBI shall be included as a third-party defendant

HELD:

Yes. The Court recognizes the inseparable interest of the bank (as policyholder of the group policy) in the
validity of the individual insurance certificates issued by Paramount. The PPSBI need not institute a
separate case, considering that its cause of action is intimately related to that of Paramount as against the
Castro’s. The soundness of admitting a third-party complaint hinges on causal connection between the
claim of the plaintiff in his complaint and a claim for contribution, indemnity or other relief of the
defendant against the third-party defendant. In this case, the Castro’s stand to incur a bad debt to the
PPSBI - the exact event that is insured against by Group Master Policy No. G-086 - in the event that
Paramount succeeds in nullifying Virgilio's Individual Insurance Certificate.
PHIL-NIPPON v. ROSALIA GUDELOSAO ET AL
G.R. NO. 181375, July 13, 2016
Jardeleza, J:

DOCTRINE:

Adjudicatory power to do so is not vested with the Insurance Commission exclusively. The POEA (now
the NLRC) is vested with quasi-judicial powers over all cases, including money claims, involving
employer-employee relations arising out of or by virtue of any law or contract involving Filipino workers
for overseas employment.

FACTS:

Petitioner purchased MV Mahlia in Japan and hired Gudelosao, Tancotian, and 6 other crewmembers to
conduct a one-month voyage. They were hired through the local mannging agency (TMCL). Petitioner
secured a Marine Insurance Policy from SSSICI over the vessel against loss, damage, and third party
liability arising from the perils of the sea. Said policy included Personal Accident Policies for the 8
crewmembers, While on Japanese waters, the vessel sank due to extreme bad weather condition, and only
1 survived. The heirs filed separate complaints for death benefits and other damages. The Labor Arbiter
found that SSSICI is liable to the heirs for the proceeds of the Personal Accident Policies and attorney’s
fees, and that said liability shall be extinguished only upon payment of the insurance proceeds. Petitioner
was absolved from liability based on limited-liability rule. Upon appeal, the CA held that Petitioner’s
liability is extinguished only upon SSSICI’s payment of the insurance proceeds.

ISSUE:

1. Whether or Not the doctrine of real and hypothecary nature of maritime law (limited liability rule)
applies in favor of Petitioner

2. Whether the CA erred in ruling that the liability of Petitioner is extinguished only upon SSSICI’s
payment of insurance proceeds

HELD:

1. No. The limited liability rule embodies the universal principle of limited liability in all cases wherein
the shipowner or agent may be properly held liable for the negligent or illicit acts of the captain. This is
not applicable in workmen’s compensation claims.

2. Yes. Personal Accident Policies are casualty insurance, they do not answer for petitioner's liabilities
arising from the sinking of the vessel. It is an indemnity insurance procured by petitioner for the benefit
of the seafarers. As a result, petitioner is not directly liable to pay under the policies because it is merely
the policyholder of the Personal Accident Policies. The insurer in this case admits that what is being
insured against is not the liability of the shipowner for death or injuries to passengers but the death of the
seafarers arising from accident; hence, its liability is direct to the beneficiaries under the insurance
contract. There is no obligation on the part of petitioner to pay the insurance proceeds because petitioner
is, in fact, the obligee or policyholder in the Personal Accident Policies. Since petitioner is not the party
liable for the value of the insurance proceeds, it follows that the limited liability rule does not apply as
well.
MANILA BANKERS LIFE INSURANCE CORP v. CRESENCIA ABAN
G.R. NO. 175666, July 29, 2013
Del Castillo, J:

DOCTRINE:

The ultimate aim of Section 48 of the Insurance Code is to compel insurers to solicit business from or
provide insurance coverage only to legitimate and bona fide clients, by requiring them to thoroughly
investigate those they insure within two years from effectivity of the policy and while the insured is still
alive. If they do not, they will be obligated to honor claims on the policies they issue, regardless of fraud,
concealment or misrepresentation.

FACTS:

Delia took out a life insurance policy designating Cresencia (niece) as beneficiary. When the insurance
policy has been in force for more than 2 years and 7 months, Delia died. When Cresencia filed her claim,
Petitioner came up with the findings that Delia did not personally apply for the insurance coverage since
she was illiterate; that she was sick since 1990; and that she did not have financial capacity to pay the
premiums among others. The claim was denied and Petitioner filed a case for rescission and/or annulment
of policy.

ISSUE:

Whether or Not the incontestability clause is applicable herein

HELD:

Yes. Allegations of fraud, which are predicated on respondent’s alleged posing as Sotero and forgery of
her signature in the insurance application, are at once belied by the trial and appellate courts’ finding that
Sotero herself took out the insurance for herself. "Fraudulent intent on the part of the insured must be
established to entitle the insurer to rescind the contract." In the absence of proof of such fraudulent intent,
no right to rescind arises. Section 48 serves a noble purpose, as it regulates the actions of both the insurer
and the insured. Under the provision, an insurer is given two years – from the effectivity of a life
insurance contract and while the insured is alive – to discover or prove that the policy is void ab initio or
is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent.
After the two-year period lapses, or when the insured dies within the period, the insurer must make good
on the policy, even though the policy was obtained by fraud, concealment, or misrepresentation. This is
not to say that insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately
solicit and obtain business must be penalized, for such recklessness and lack of discrimination ultimately
work to the detriment of bona fide takers of insurance and the public in general.
SUN LIFE OF CANADA (PHIL) v. MA. DAISY S. SIBYA, ET AL
G.R. NO. 211212, June 8, 2016
Reyes, J:

DOCTRINE:

The intent to defraud on the part of the insured must be ascertained to merit rescission of the insurance
contract. Concealment as a defense for the 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.

FACTS:

Jesus applied for life insurance with Sun Life and indicated that he sought advice for kidney problems.
The application was approved and the respondents were named as beneficiaries who can claim death
benefits should Jesus die on or before February 5, 2021, or a certain sum if Jesus is still living on the
endowment date. Jesus died on May 11, 2001 due to a gunshot wound. Daisy filed a claim for death
benefits but was denied due to Jesus’s undisclosed medical history of previous treatment at the National
Kidney Transplant Institute and that said fact is suggestive of Jesus having renal failure on the time of
application. Respondents argue that there is no misrepresentation for Jesus was in good faith when he
signed the application and authorized Sun Life to inquire further into his medical history for verification
purposes.

ISSUE:

Whether or Not there is concealment of misrepresentation made by Jesus

HELD:

No. Jesus admitted in his application his medical treatment for kidney ailment. Moreover, he executed an
authorization in favor of Sun Life to conduct investigation in reference with his medical history. Indeed,
the intent to defraud on the part of the insured must be ascertained to merit rescission of the insurance
contract. Concealment as a defense for the 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
the present case, Sun Life failed to clearly and satisfactorily establish its allegations, and is therefore
liable to pay the proceeds of the insurance. Also, the Court held in the case of Manila Bankers v. Aban
that if the insured dies within the two-year contestability period, the insurer is bound to make good its
obligation under the policy, regardless of the presence or lack of concealment or misrepresentation. The
death of the insured within the two-year period will render the right of the insurer to rescind the policy
nugatory. As such, the incontestability period will now set in.
MALAYAN INSURANCE v. PHILIPPINES FIRST INSURANCE
G.R. NO. 184300, July 11, 2012
Reyes, J:

DOCTRINE:

The requisite for double insurance are as follows: 1) the person insured is the same; 2) two or more
insurers insuring separately; 3) there is identity of subject matter; 4) there is identity of interest insured;
and 5) there is identity of the risk or peril insured against.

FACTS:

Wyeth and Reputable had been annually executing a contract of carriage. Wyeth procured a Marine
Policy from Respondent to secure its interest over its own products. The policy covers all risks of direct
physical loss or damage from external cause, if by land, and provides a certain limit per any one land
vehicle. Under the contract of carriage, Reputable undertook to answer for “all risks with respect to the
goods and shall be liable to Wyeth for the loss, destruction, or damage”. The contract also required
Reputable to secure an insurance policy on Wyeth’s goods; hence, Reputable signed a Special Risk
Insurance Policy (SR Policy) with Malayan. The truck carrying the Promil infant formula was hijacked,
and was recovered 2 weeks later but without the cargo. Respondent paid Wyeth a certain amount for
indemnity and demanded reimbursement from Reputable, having been subrogated to the rights of Wyeth.
An action for sum of money was instituted by the Respondent against Reputable, which impleaded
Malayan as a third-party defendant. Malayan argued, among others, that under Section 5 of the SR Policy,
the insurance does not cover any loss or damage to property which at the time of the happening of such
loss or damage is insured by any marine policy and that the SR Policy expressly excluded third-party
liability.

ISSUE:

Whether or Not there is double insurance

HELD:

No. The requisite for double insurance are as follows: 1) the person insured is the same; 2) two or more
insurers insuring separately; 3) there is identity of subject matter; 4) there is identity of interest insured;
and 5) there is identity of the risk or peril insured against. In the present case, while it is true that the
Marine Policy and the SR Policy were both issued over the same subject matter, i.e. goods belonging to
Wyeth, and both covered the same peril insured against, it is, however, beyond cavil that the said policies
were issued to two different persons or entities. The interest of Wyeth over the property subject matter of
both insurance contracts is also different and distinct from that of Reputable’s. Therefore, even though the
two concerned insurance policies were issued over the same goods and cover the same risk, there arises
no double insurance since they were issued to two different persons/entities having distinct insurable
interests. Necessarily, over insurance by double insurance cannot likewise exist.
JAIME T. GAISANO v. DEVELOPMENT INSURANCE
G.R. NO. 190702, February 27, 2017
Jardeleza, J:

DOCTRINE:

The general rule in insurance laws is that unless the premium is paid, the insurance policy is not valid and
binding.

FACTS:

Jaime was the registered owner of a Montero which was insured by Respondent with a comprehensive
commercial vehicle policy. Trans-Pacific, the agent of Respondent in collecting premiums and other
charges on the policies, issued a statement of account to Jaime’s company, Noah’s Ark, which
immediately processed the payments and issued a check dated September 27, but nobody from Trans-
Pacific picked up the check. In the evening of September 27, while under official custody of Noah’s Ark,
the vehicle was stolen in the vicinity of SM Megamall at Ortigas, Mandaluyong City. This was reported
to the PNP. Trans-Pacific picked up the check on September 28 and issued an official receipt, without
knowing the stealing incident. On October 1, Jaime was informed of his lost vehicle, who in turn reported
this to the Respondent and filed a claim for insurance proceeds, which was denied on the ground that
there was no insurance contract.

ISSUE:

Whether or Not there is a binding insurance contract between Jaime and the Respondent

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. Just like any other contract, it requires a
cause or consideration. The consideration is the premium, which must be paid at the time and in the way
and manner specified in the policy. If not so paid, the policy will lapse and be forfeited by its own terms.
The general rule in insurance laws is that unless the premium is paid, the insurance policy is not valid and
binding. Here, there is no dispute that the check was delivered to and was accepted by respondent's agent,
Trans-Pacific, only on September 28, 1996. No payment of premium had thus been made at the time of
the loss of the vehicle on September 27, 1996. While petitioner claims that Trans-Pacific was informed
that the check was ready for pick-up on September 27, 1996, the notice of the availability of the check, by
itself, does not produce the effect of payment of the premium. Trans-Pacific could not be considered in
delay in accepting the check because when it informed petitioner that it will only be able to pick-up the
check the next day, petitioner did not protest to this, but instead allowed Trans-Pacific to do so. Thus, at
the time of loss, there was no payment of premium yet to make the insurance policy effective.
PHILAM INSURANCE v. PARC CHATEAU CONDOMINIUM UNIT OWNERS ASSOC.
G.R. NO. 201116, March 4, 2019
Reyes, J. Jr., J:

DOCTRINE:

Without payment of any premium, there was no insurance contract to speak of.

FACTS:

Philam submitted a proposal to Parc to cover fire and comprehensive general liability insurance of its
condominium building. Colet (Parc Assoc.’s President, informed Philam that the latter was selected to
provide the insurance requirements. A fire and lightning insurance policy and a comprehensive general
liability policy were issued and the parties negotiated for a 90-day payment term of the premium
embodied in a jumbo risk provision which provided further for premium installment payments and
stipulated that if any of the scheduled payments are not received in full on or before the designated dates,
the insurance shall be deemed to ceased at 4pm of such date and the policy shall automatically become
void and ineffective. Parc found the terms unacceptable and did not pursue the transaction. Since no
premiums were paid, Philam made oral and written demands upon Parc, who refused to do so alleging
that the insurance agent had been informed of its decision not to take up the insurance coverage. 

ISSUE:

Whether or Not there is a perfected insurance

HELD:

No. Since Parc did not pay any premium, then there was no insurance contract to speak of. The Jumbo
Risk Provision clearly stated that failure to pay in full any of the scheduled installments on or before the
due date, shall render the insurance policy void and ineffective as of 4 p.m. of such date. Parc’s failure to
pay on the first due date, November 30, 2003, resulted in a void and ineffective policy as of 4 p.m. of
November 30, 2003. As a consequence, Philam cannot collect P3 63,215.21 unpaid premiums of void
insurance policies. The Court also upheld the CA’s discussion of the exceptions to this general rule, to
wit: 1) The first exception is in Section 77 of the Insurance Code, that is, "in the case of a life or an
industrial life policy whenever the grace period provision applies."; 2) The second exception is in Section
78 of the Insurance Code, which states that "an acknowledgment in a policy or contract of insurance or
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 paid."; 3)
The third exception is taken from the case of Makati Tuscany Condominium Corporation v. Court of
Appeals, Section 77 may not apply if the parties agreed to the payment of premium in installment and
partial payment has been made at the time of loss; 4) if the insurer has granted the insured a credit term
for the payment of the premium; and 5)  taken from the UCPB case, is estoppel in instances when the
insurer had consistently granted a credit term for the payment of premium despite full awareness of
Section 77. The insurer cannot deny recovery by the insured by citing the general rule in Section 77,
because the insured had relied in good faith on the credit term granted. None of the exceptions is
applicable in this case.
VICENTE HENSON v. UCPB GENERAL INSURANCE CO., INC.
G.R. NO. 223134, August 14, 2019
Perlas-Bernabe, J:

DOCTRINE:

The rights of a subrogee cannot be superior to the rights possessed by a subrogor.  "Subrogation is the
substitution of one person in the place of another with reference to a lawful claim or right, so that he who
is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or
securities.

FACTS:

National Arts Studio (NASCL) leased the front portion of the ground floor of a two (2)-storey building
located in Sto. Rosario Street, Angeles City, Pampanga, then owned by petitioner. Later on, NASCL gave
up its initial lease and instead, leased the right front portion of the ground floor and the entire second floor
of the said building, and made renovations with the building's piping assembly. Copyland moved to the
ground floor, but a water leak occurred in the building and damaged its various equipment insured with
UCPB. This was settled and UCPB was subrogated over all claims and demands arising from the said
incident, and demanded NASCL for the payment of the claim, but to no avail. Petitioner later on
transferred ownership of the building to CHI, where he is a stockholder and president. CHI was included
as a party-defendant to the case.

ISSUE:

Whether or Not the claim has prescribed

HELD:

No. The leak incident happened on May 9, 2006. As this incident gave rise to an obligation classified as
a quasi-delict, Copylandia would have only had four (4) years, or until May 9, 2010, within which to file
a suit to recover damages. When Copylandia's rights were transferred to respondent by virtue of the
latter's payment of the former's insurance claim on November 2, 2006, as evidenced by the Loss and
Subrogation Receipt, respondent was likewise bound by the same prescriptive period. Since it was only
on: (a) May 20, 2010 when respondent made an extrajudicial demand to NASCL, and thereafter, filed its
complaint; (b) October 6, 2011 when respondent amended its complaint to implead CHI as party-
defendant; and (c) April 21, 2014 when respondent moved to further amend the complaint in order to
implead petitioner as party-defendant in lieu of CHI, prescription - if adjudged under the present
parameters of legal subrogation under this Decision - should have already set in. However, it must be
recognized that the prevailing rule applicable to the pertinent events in this case is Vector -- For cases that
were filed by the subrogee-insurer during the applicability of the Vector ruling (i.e., from Vector's finality
on August 15, 201360 up until the finality of this Decision), the prescriptive period is ten (10) years from
the time of payment by the insurer to the insured, which gave rise to an obligation created by law.
INDUSTRIAL PERSONNEL AND MANAGEMENT SERVICES v. COUNTRY BANKERS
G.R. NO. 194126, October 17, 2018
Caguioa, J:

DOCTRINE:

Under the Insurance Code, all defects in the proof of loss, which the insured might remedy, are waived as
grounds for objection when the insurer omits to specify to him without unnecessary delay.

FACTS:

IPMS recruited registered nurses for work deployment in the US. Huge amounts of money were advanced
to the applicants and they were required to post surety bond. The purpose of the bond is to guarantee the
following during its validity period: (a) that they will comply with the entire immigration process, (b) that
they will complete the documents required, and (c) that they will pass all the qualifying examinations for
the issuance of immigration visa. The parties in this case agreed to provide bonds, Country will provide
surety bonds and IPMS will pay the premiums. The liability of Country "shall be limited only to actual
damages arising from Breach of Contract by the applicant." The parties entered as well a MOA which laid
down requirements for claim. Country was not able to pay 6 claims of IPMS for the former was cash
strapped at that time, but the number of unpaid claims increased later on. Later on, Country contested and
refused payment to the claims for non-presentation of official receipt of expenses incurred by the
applicants.

ISSUE:

Whether or Not Country has a ground to refuse payment

HELD:

No. Article 2199 of the Civil Code explicitly provides that the prerequisite of proof for the recovery of
actual damages is not absolute; the exceptions are when the law provides otherwise, or by stipulation of
the parties. The MOA entered by the parties excused the submission of official receipts and other pieces
of evidence as prerequisite for payment of claims. Furthermore, Country had previously admitted liability
and promised to make payment on similar claims under the surety agreement even without the submission
of official receipts. Country was not justified in denying the payment of claims presented by petitioner
IPAMS based on the lack of official receipts. Under the Insurance Code, all defects in the proof of loss,
which the insured might remedy, are waived as grounds for objection when the insurer omits to specify to
him without unnecessary delay. Being an entity doing an insurance business, the Insurance Code governs
as well as to the applicable provisions on suretyship, stating that pertinent provisions of the Civil Code
shall only apply suppletorily whenever necessary in interpreting the provisions of a contract of suretyship.
MALAYAN INSURANCE v. PAP CO
G.R. NO. 200784, August 7, 2013
Mendoza, J:

DOCTRINE:

Section 26 of the Insurance Code provides that a neglect to communicate that which a party knows and
ought to communicate, is called a concealment, and Section 27 provides that such concealment entitles
the injured party to rescind a contract of insurance. Accordingly, an insurer can exercise its right to
rescind an insurance contract when the following conditions are present, to wit: 1) the policy limits the
use or condition of the thing insured; 2) there is an alteration in said use or condition; 3) the alteration is
without the consent of the insurer; 4) the alteration is made by means within the insured’s control; and 5)
the alteration increases the risk of loss.

FACTS:

Malayan issued a Fire Insurance Policy for Pap Co’s machineries and equipment located at Sanyo
Building, and this was procured for RCBC (mortgagee of the insured machineries and equipment). Prior
to expiration, the policy was renewed on an “as is” basis. During the subsistence of the renewal policy,
the insured machineries and equipment were totally lost by fire. Hence, PAP Co. filed a fire insurance
claim with Malayan in the amount insured. Malayan denied the claim upon the ground that, at the time of
the loss, the insured machineries and equipment were transferred by PAP Co. to a location different from
that indicated in the policy.

ISSUE:

Whether or Not Malayan is liable to pay the loss of the insured properties

HELD:

No. The policy forbade the removal of the insured properties unless sanctioned by Malayan. Evidently, by
the clear and express condition in the renewal policy, the removal of the insured property to any building
or place required the consent of Malayan. Any transfer effected by the insured, without the insurer’s
consent, would free the latter from any liability. Pap Co failed to notify, and to obtain the consent of,
Malayan regarding the removal. What PAP did to prove that Malayan was notified was to show that it
relayed the fact of transfer to RCBC, the entity which made the referral and the named beneficiary in the
policy. Malayan and RCBC might have been sister companies, but such fact did not make one an agent of
the other. The fact that RCBC referred PAP to Malayan did not clothe it with authority to represent and
bind the said insurance company. After the referral, PAP dealt directly with Malayan. The transfer from
the Sanyo Factory to the PACE Factory increased the risk. Furthermore, Malayan is entitled to rescind the
insurance contract. It can also be said that with the transfer of the location of the subject properties,
without notice and without Malayan’s consent, after the renewal of the policy, PAP clearly committed
concealment, misrepresentation and a breach of a material warranty. Moreover, under Section 168 of the
Insurance Code, the insurer is entitled to rescind the insurance contract in case of an alteration in the use
or condition of the thing insured. It was clearly established that the renewal policy stipulated that the
insured properties were located at the Sanyo factory; that PAP removed the properties without the consent
of Malayan; and that the alteration of the location increased the risk of loss.

ALPHA INSURANCE AND SURETY v. ARSENIA SONIA CASTOR

G.R. NO. 198174, September 2, 2013
Peralta, J:

DOCTRINE:

A contract of insurance is a contract of adhesion. So, when the terms of the 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.

FACTS:

Arsenia entered into a contract of insurance with Alpha, insuring her Toyota Revo. The contract of
insurance obligates Alpha to pay Arsenia a certain amount in case of loss or damage to the vehicle from
February 26, 2007 to February 26, 2008. On April 16, 2007, Arsenia instructed her driver (Jose)  to bring
the above-described vehicle to a nearby auto-shop for a tune-up; however, Jose never returned the
vehicle. Arsenia notified Alpha of the said loss and demanded payment of the insurance proceeds. Alpha
denied the claim and reiterated the provision that it is not liable for Any malicious damage caused by the
Insured, any member of his family or by "A PERSON IN THE INSURED’S SERVICE." Alpha, in
denying Arsenia’s claim, takes exception by arguing that the word "damage," under paragraph 4 of
"Exceptions to Section III," means loss due to injury or harm to person, property or reputation, and should
be construed to cover malicious "loss" as in "theft." Thus, it asserts that the loss of respondent’s vehicle as
a result of it being stolen by the latter’s driver is excluded from the policy.

ISSUE:

Whether or Not Arsenia is entitled to the insurance proceeds

HELD:

Yes. The Supreme Court upheld the decision of the RTC that theft perpetrated by the driver of the insured
is not an exception to the coverage from the insurance policy, since Section III thereof did not qualify as
to who would commit the theft. Theft perpetrated by a driver of the insured is not an exception to the
coverage from the insurance policy subject of this case. This is evident from the very provision of Section
III – "Loss or Damage." The insurance company, subject to the limits of liability, is obligated to
indemnify the insured against theft. Said provision does not qualify as to who would commit the theft.
Thus, even if the same is committed by the driver of the insured, there being no categorical declaration of
exception, the same must be covered. A contract of insurance is a contract of adhesion. So, when the
terms of the 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. It must be construed liberally in favor
of the insured and strictly against the insurer in order to safeguard the latter’s interest.
EQUITABLE INSURANCE CORPORATION v. TRANSMODAL INTERNATIONAL
G.R. NO. 223592, August 7, 2017
Peralta, J:

DOCTRINE:

A marine’s risk note is insufficient to prove the insurer’s claim for it is not an insurance policy.

FACTS:

Sytengco hired Transmodal to clear from customs and withdraw, transport, and deliver to its warehouse
some cargoes. It was noted in the delivery receipt that the containers were wet. Elite Surveyors found that
some cartons had water marks and the contents were partly hardened. A reinspection was conducted and
the loss payable was computed. Sytengco demanded from Transmodal the payment amounting to the total
loss of shipment. Equitable, as insurer of the cargoes per a marine open policy, paid the claim. Sytengco
then signed a subrogation receipt and loss receipt in favor of Equitable, the latter then demanded payment
from Transmodal. Equitable filed a complaint for damages invoking its right as subrogee after paying
Sytengco's insurance claim and averred that Transmodal's fault and gross negligence were the causes of
the damages sustained by Sytengco's shipment. Transmodal denied knowledge of an insurance policy and
claimed that Equitable Insurance has no cause of action against it because the damages to the cargoes
were not due to its fault or gross negligence. Furthermore, Transmodal alleged that the policy was not
presented.

ISSUE:

Whether or Not Equitable has the right of subrogation

HELD:

Yes. The marine policy, aside from the marine risk note, was offered as evidence. Thus, it was well
established that petitioner has the right to step into the shoes of the insured who has a direct cause of
action against herein respondent on account of the damages sustained by the cargoes. "Subrogation is the
substitution of one person in the place of another with reference to a lawful claim or right, so that he who
is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or
securities." To reiterate, in this case, petitioner was able to present as evidence the marine open policy
that vested upon it, its rights as a subrogee. Subrogation is designed to promote and to accomplish justice
and is the mode which equity adopts to compel the ultimate payment of a debt by one who injustice,
equity and good conscience ought to pay.
H.H. HOLLERO CONSTRUCTION v. GSIS AND POOL OF MACHINERY INSURERS
G.R. NO. 152334, September 24, 2014
Perlas-Bernabe, J:

DOCTRINE:

The prescriptive period for the insured’s action for indemnity should be reckoned from the "final
rejection" of the claim.

FACTS:

GSIS and Hollero entered into an agreement whereby the latter undertook the development of a GSIS
housing project. Hollero obliged itself to insure the project, including all the improvements, upon the
execution of the Agreement under a Contractors’ All Risks (CAR) Insurance with the GSIS. Hollero
secured CAR Policy for land development, and CAR Policy for construction. GSIS reinsured the first
CAR Policy with Pool. Under both policies, it was provided that: (a) there must be prior notice of claim
for loss, damage or liability within fourteen (14) days from the occurrence of the loss or damage; (b) all
benefits thereunder shall be forfeited if no action is instituted within twelve(12) months after the rejection
of the claim for loss, damage or liability; and (c) if the sum insured is found to be less than the amount
required to be insured, the amount recoverable shall be reduced to such proportion before taking into
account the deductibles stated in the schedule (average clause provision). During construction, 3 typhoons
hit the country which caused considerable damage to the Project. Hollero filed several claims for
indemnity with GSIS, but was rejected finding that no amount is recoverable pursuant to the average
clause provision under the policies. The CAP Policies provide that  if a claim is made and rejected and no
action or suit is commenced within twelve months after such rejectionor, in case of arbitration taking
place as provided herein, within twelve months after the Arbitrator or Arbitrators or Umpire have made
their award, all benefit under this Policy shall be forfeited.

ISSUE:

Whether or Not Hollero can claim indemnities from GSIS

HELD:

No. Contracts of insurance, like other contracts, are to be construed according to the sense and meaning
of the terms which the parties themselves have used. In this relation, case law illumines that the
prescriptive period for the insured’s action for indemnity should be reckoned from the "final rejection" of
the claim. A  "final rejection" simply means denial by the insurer of the claims of the insured and not the
rejection or denial by the insurer of the insured’s motion or request for reconsideration. The rejection
referred to should be construed as the rejection in the first instance. In light of the foregoing, it is thus
clear that petitioner's causes of action for indemnity respectively accrued from its receipt of the letters
dated April 26, 1990 and June 21, 1990, or the date the GSIS rejected its claims in the first instance.
Consequently, given that it allowed more than twelve (12) months to lapse before filing the necessary
complaint before the RTC on September 27, 1991, its causes of action had already prescribed.

III. PRE-NEED
SECURITIES AND EXCHANGE COMMISSION v. HON. REYNALDO LAIGO, ET AL
G.R. NO. 188639, September 2, 2015
Mendoza, J:

DOCTRINE:

The trust fund is for the sole benefit of the planholders and cannot be used to satisfy the claims of other
creditors.

FACTS:

Legacy was the subject of a petition for involuntary insolvency and was later on declared insolvent. RTC
ordered SEC, being the pre-need industry’s regulator, to submit documents pertaining to Legacy’s assets
and liabilities. SEC opposed the inclusion of the trust fund in the inventory of corporate assets on the
ground that to do so would contravene the New Rules which treated trust funds as principally established
for the exclusive purpose of guaranteeing the delivery of benefits due to the planholders. It was of the
position that the inclusion of the trust fund in the insolvent's estate and its being opened to claims by non-
planholders would contravene the purpose for its establishment. Despite opposition, Hon. Laigo ordered
to take possession of the trust fund for being a corporate asset and included in the insolvent’s estate.

ISSUES:

1. Whether or Not the trust funds form part of the corporate assets
2. Whether or Not the provision of the Pre-need Code regarding liquidation is in the nature of a
procedural law that can be retroactively applied

HELD:

1. No. The trust fund is for the sole benefit of the planholders and cannot be used to satisfy the claims of
other creditors of Legacy (Section 30 of the Pre-need Code). It is clear that because the beneficial
ownership is vested in the planholders and the legal ownership in the trustee, LBP, Legacy, as trustor, is
left without any iota of interest in the trust fund. This is consistent with the nature of a trust arrangement,
whereby there is a separation of interests in the subject matter of the trust, the beneficiary having an
equitable interest, and the trustee having an interest which is normally legal interest. Claims before the
trust fund are within the jurisdiction of the SEC.

2. Yes. The primary protection accorded by the Pre-Need Code to the planholders is curative and
remedial and, therefore, can be applied retroactively. The rule is that where the provisions of a statute
clarify an existing law and do not contemplate a change in that law, the statute may be given curative,
remedial and retroactive effect. A reading of the Pre-Need Code immediately shows that its provisions
operate merely in furtherance of the remedy or confirmation of the right of the planholders to exclusively
claim against the trust funds as intended by the legislature. No new substantive right was created or
bestowed upon the planholders. Section 52 of the Pre-Need Code only echoes and clarifies the SRC's
intent to exclude from the insolvency proceeding trust fund assets that have been established "exclusively
for the benefit of planholders." Section 57 thereof provides that "[a]ny pre-need company who, at the time
of the effectivitv of this Code has been registered and licensed to sell pre-need plans and similar
contracts, shall be considered registered and licensed under the provision of this Code and its
implementing rules and regulations and shall be subject to and governed by the provisions hereof.”

SEC AND INSURANCE COMMISSION v. COLLEGE ASSURANCE PLAN PHIL

G.R. NO. 202052, March 7, 2018
Bersamin, J:

DOCTRINE:

The trust fund is to be treated as separate and distinct from the paid-up capital of the company, and is
established with a trustee under a trust agreement approved by the Securities and Exchange Commission
to pay the benefits as provided in the pre-need plans.

FACTS:

CAP sells pre-need educational plans. CAP set up a Trust Fund contributing therein a certain percentage
of the amount actually collected from each planholder. The Trust Fund, with the aid of trustee banks, is
invested in assets and securities with yields higher than the projected increase in tuition fees. With the
passage of SRC and the new rules on registration and sale of pre-need plans, CAP incurred a trust fund
deficiency. To correct the deficiency, CAP, among others, proposed to purchase MRT III Bonds and
assign the same to the Trust Fund. CAP was ordered by the SEC Oversight Board to stop paying
SMART/FEMI due to its perceived inadequacy of CAP's funds. Later on, CAP filed a petition for
rehabilitation. The receiver moved for the payment of the respondent's obligations to Smart and FEMI.

ISSUE:

Whether or Not the payment of outstanding obligation to SMART and FEMI can be validly withdrawn
from the trust fund

HELD:

No. The obligation to pay Smart and FEMI did not constitute the "benefits" or "cost of services rendered"
or "property delivered" under Section 16.4, Rule 16 of the New Rules and Section 30 of R.A. No. 9829.
The trust fund should be treated separately and distinctly from the corporate assets and obligations of the
respondent. The term "benefits" used in Section 16.4 is defined as "the money or services which the Pre-
Need Company undertakes to deliver in the future to the planholder or his beneficiary." Section 30 of
R.A. No. 9829 expressly stipulates that the trust fund is to be used at all times for the sole benefit of the
planholders, and cannot ever be applied to satisfy the claims of the creditors of the company. The allowed
withdrawals (specifically, the cost of benefits or services, the termination values payable to the
planholders, the insurance premium payments for insurance-funded benefits of memorial life plans and
other costs) refer to payments that the pre-need company had undertaken to be made based on the
contracts. Furthermore, payment to SMART and FEMI was not an administrative expense that can be
withdrawn from the trust fund. Section 16.4, Rule 6 of the New Rules made an exclusive enumeration of
the administrative expenses that may be withdrawn from the trust fund, as follows: trust fees, bank
charges and investment expenses in the operation of the trust fund, taxes on trust funds, as well as
reasonable withdrawals for minor repairs and costs of ordinary maintenance of trust fund assets.
Evidently, the purchase price of the bonds for the capital infusion to the trust fund was not included as an
administrative expense that could be validly taken from the trust fund.