COMMREV Insurance Digests

ETERNAL
GARDENS MEMORIAL PARK CORPORATION VS. PHIL. AMERICAN LIFE - Since the contract is a group life insurance, once proof of death is
INSURANCE CO. submitted, payment must follow.
GR No. 166245 | 09 April 2008 Philamlife appealed to the CA.
(burial lots) CA: Reversed RTC decision.
FACTS: - Based its Decision on the factual finding that Chuang’s application was not
enclosed in Eternals letter.
Respondent Philamlife entered into an agreement (Creditor Group Life Policy No. P-
- It further ruled that the non-accomplishment of the submitted application
1920) with petitioner Eternal. Under the policy, the clients of Eternal who purchased
form violated Section 26 of the Insurance Code.
burial lots from it on installment basis would be insured by Philamlife.
- Concluded that there being no application form, Chuang was not covered
Eternal was required under the policy to submit to Philamlife a list of all new lot by Philamlife’s insurance.
purchasers, together with a copy of the application of each purchaser, and the
amounts of the respective unpaid balances of all insured lot purchasers. Eternal ETERNAL claims that the evidence that it presented before the trial court supports
complied by submitting a letter, containing a list of insurable balances of its lot its contention that it submitted a copy of the insurance application of Chuang before
buyers for October 1982. One of those included in the list as new business was a his death. In Eternal’s letter, a list of insurable interests of buyers for October 1982
certain John Chuang. His balance of payments was Php 100,000. On August 2, 1984, was attached, including Chuang in the list of new businesses. Eternal added it was
Chuang died. noted at the bottom of said letter that the corresponding Phil-Am Life Insurance
Application Forms & Cert. were enclosed in the letter that was apparently received
Eternal sent a letter to Philamlife, which served as an insurance claim for Chuang’s by Philamlife. Finally, Eternal alleged that it provided a copy of the insurance
death. In reply, Philamlife wrote Eternal a letter, requiring Eternal to submit application which was signed by Chuang himself and executed before his death.
additional documents relative to its insurance claim for Chuang’s death. Eternal
transmitted the required documents through a letter dated November 14, 1984, PHILAMLIFE claims that the evidence presented by Eternal is insufficient, arguing
which was received by Philamlife the next day. that Eternal must present evidence showing that Philamlife received a copy of
Chuang’s insurance application.
After more than a year, Philamlife had not furnished Eternal with any reply to the
latter’s insurance claim. This prompted Eternal to demand from Philamlife the ISSUE: Whether or not Philamlife assumed the risk of loss without approving the
payment of the claim for PhP 100,000. application. - YES
In response to Eternals demand, Philamlife denied Eternals insurance claim in a RULING:

letter. The letter dated December 29, 1982, which Philamlife stamped as received, states
Eternal filed a case before Makati RTC for a sum of money against Philamlife. that the insurance forms for the attached list of burial lot buyers were attached to
the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter
RTC: Ruled in favor of Eternal. together with the attachments. Such receipt is an admission by Philamlife against its
own interest. The burden of evidence has shifted to Philamlife, which must prove
- Eternal submitted Chuang’s application for insurance which he
that the letter did not contain Chuang’s insurance application. However, Philamlife
accomplished before his death, as testified to by Eternals witness and
failed to do so; thus, Philamlife is deemed to have received Chuang’s insurance
evidenced by the letter dated December 29, 1982, stating, among others:
application.
Encl: Phil-Am Life Insurance Application Forms & Cert.
- Due to Philamlife’s inaction from the submission of the requirements of It was Philamlife’s bounden duty to make sure that before a transmittal letter is
the group insurance to Chuang’s death, as well as Philamlife’s acceptance stamped as received, the contents of the letter are correct and accounted for.
of the premiums during the same period, Philamlife was deemed to have
As earlier stated, Philamlife and Eternal entered into an agreement denominated as
approved Chuang’s application.
Creditor Group Life Policy No. P-1920. In the policy, it is provided that:
AIRIRI & DANA DIGESTS 1

TOPIC: INSURANCE
COMMERCIAL LAW REVIEW
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.
Clearly, the vague contractual provision, in Creditor Group Life Policy No. P-1920,
must be construed in favor of the insured and in favor of the effectivity of the
insurance contract.
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.
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.

TOPIC: INSURANCE
PHILAMCARE HEALTH SYSTEMS, INC. VS. COURT OF APPEALS and JULITA TRINOS - Only medical and hospitalization benefits are given under the agreement
without any indemnification, unlike in an insurance contract where the insured
379 SCRA 356 | G.R. No. 125678 | March 18, 2002
is indemnified for his loss.
FACTS:
- Since Health Care Agreements are only for a period of one year, as compared
Ernani Trinos, deceased husband of respondent, applied for a health care coverage to insurance contracts which last longer, petitioner argues that the
with petitioner Philamcare. In the standard application form, he answered no to the incontestability clause does not apply, as the same requires an effectivity period
following question: Have you or any of your family members ever consulted or been of at least two years.
treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma
- It is not an insurance company, which is governed by the Insurance Commission,
or peptic ulcer? (If Yes, give details).
but a Health Maintenance Organization under the authority of the Department
The application was approved for a period of one year. He was issued Health Care of Health.
Agreement No. P010194. Under the agreement, respondent’s husband was entitled
RTC: Ruled against petitioners.
to avail of hospitalization benefits, whether ordinary or emergency, listed therein.
He was also entitled to avail of “out-patient benefits.” CA: Affirmed the decision of the trial court but deleted all awards for damages
and absolved petitioner Reverente. Denied petitioner’s MR.
Upon its termination, the agreement was extended for another year from March 1,
1989 to March 1, 1990, then from March 1, 1990 to June 1, 1990. The amount of ISSUE: Whether or not a health care agreement is not an insurance contract;
coverage was increased to a maximum sum of P75,000.00 per disability. hence, the “incontestability clause” does not apply. – NO
Ernani suffered a heart attack and was confined at the MMC for one month RATIO:
beginning March 9, 1990. While her husband was in the hospital, respondent tried
to claim the benefits under the health care agreement. However, petitioner denied Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement
her claim saying that the Health Care Agreement was void. According to petitioner, whereby one undertakes for a consideration to indemnify another against loss,
there was a concealment regarding Ernani’s medical history. Doctors at the MMC damage or liability arising from an unknown or contingent event. An insurance
allegedly discovered at the time of Ernani’s confinement that he was hypertensive, contract exists where the following elements concur: (1) The insured has an
diabetic and asthmatic, contrary to his answer in the application form. Thus, insurable interest; (2) The insured is subject to a risk of loss by the happening of the
respondent paid the hospitalization expenses (about P76,000) herself. 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
After her husband was discharged from the MMC, he was attended by a physical bearing a similar risk; and (5) In consideration of the insurer’s promise, the insured
therapist at home. Later, he was admitted at the CGH. Due to financial difficulties, pays a premium.
however, respondent brought her husband home again. In the morning of April 13,
1990, Ernani had fever and was feeling very weak. Respondent was constrained to Section 3 of the Insurance Code states that any contingent or unknown event,
bring him back to the CGH where he died on the same day. 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
Respondent instituted with the Manila RTC, an action for damages against petitioner life and health of himself.
and its president, Dr. Reverente. She asked for reimbursement of her expenses plus
moral damages and attorney’s fees. The insurable interest of respondent’s husband in obtaining the health care
agreement was his own health. The health care agreement was in the nature of non-

Petitioner argues: 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
- The agreement grants “living benefits” which a member may immediately enjoy
stipulated contingent, the health care provider must pay for the same to the extent
so long as he is alive upon effectivity of the agreement until its expiration one-
agreed upon under the contract.
year thereafter.
As to the contention that respondent’s husband concealed material fact

TOPIC: INSURANCE
It appears that in the application for health coverage, petitioners required As to the incontestability of membership of respondent’s husband
respondent’s husband to sign an express authorization for any person, organization
(U)nder the title Claim procedures of expenses, the defendant Philamcare Health
or entity that has any record or knowledge of his health to furnish any and all
Systems Inc. had 12 months from the date of issuance of the Agreement within which
information relative to any hospitalization, consultation, treatment or any other
to contest the membership of the patient if he had previous ailment of asthma, and
medical advice or examination. In addition to the above condition, petitioner
6 months from the issuance of the agreement if the patient was sick of diabetes or
additionally required the applicant for authorization to inquire about the applicant’s
hypertension. The periods having expired, the defense of concealment or
medical history.
misrepresentation no longer lie.
Petitioner cannot rely on the stipulation regarding “Invalidation of agreement”
As to petitioner’s contention that respondent was not the legal wife
which states that failure to disclose or misrepresentation of any material information
shall automatically invalidate the Agreement. 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. It is not
The answer assailed by petitioner was in response to the question relating to the
controverted that respondent paid all the hospital and medical expenses. She is
medical history of the applicant. This largely depends on opinion rather than fact,
therefore entitled to reimbursement. The records adequately prove the expenses
especially coming from respondent’s husband who was not a medical doctor. Where
incurred by respondent for the deceased’s hospitalization, medication and the
matters of opinion or judgment are called for, answers made in good faith and
professional fees of the attending physicians.
without intent to deceive will not avoid a policy even though they are untrue.

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, none of the pre-conditions in cancellation of insurance policies were
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. This is equally applicable to Health Care Agreements. The
phraseology used in medical or hospital service contracts 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.

TOPIC: INSURANCE
ASIAN TERMINALS, INC. V. FIRST LEPANTO-TAISHO INSURANCE CORP. Request for Bad Order Survey No. 40622 jointly executed by the respective
representatives of ATI and PROVEN. ATI also submitted various Cargo Gate
G.R. No. 185964 | June 16, 2014
Passes showing that PROVEN was able to completely withdraw all the shipment from
FACTS: ATI’s warehouse in good order condition except for that one damaged jumbo bag.
3,000 bags of sodium tripolyphosphate contained in 100 plain jumbo bags complete ATI asserted that even if it is found liable for the lost/damaged portion of the
and in good condition were loaded and received on board M/V "Da Feng" owned by shipment, its contract for cargo handling services limits its liability to not more than
COSCO in favor of consignee GASI. Based on a Certificate of Insurance dated August ₱5,000.00 per package. ATI interposed a counterclaim of ₱20,000.00 against FIRST
24, 1995, it appears that the shipment was insured against all risks by GASI with FIRST LEPANTO as and for attorney’s fees. It also filed a cross-claim against its co-
LEPANTO for ₱7,959,550.50 under Marine Open Policy No. 0123. defendants COSCO and SMITH BELL in the event that it is made liable to FIRST
LEPANTO.
The shipment arrived in Manila on July 18, 1996 and was discharged into the
possession and custody of ATI, a domestic corporation engaged in arrastre business. PROVEN denied any liability for the lost/damaged shipment and averred that the
The shipment remained for quite some time at ATI’s storage area until it was complaint alleged no specific acts or omissions that makes it liable for damages.
withdrawn by broker, PROVEN, on August 8 and 9, 1996 for delivery to the PROVEN claimed that the damages in the shipment were sustained before they were
consignee. Upon receipt of the shipment, GASI subjected the same to inspection and withdrawn from ATI’s custody under which the shipment was left in an open area
found that the delivered goods incurred shortages of 8,600 kilograms and spillage of exposed to the elements, thieves and vandals. PROVEN contended that it exercised
3,315 kg for a total of11,915 kg of loss/damage valued at ₱166,772.41. due diligence and prudence in handling the shipment. PROVEN also filed a
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counterclaim for attorney’s fees and damages.
GASI sought recompense from COSCO, thru its SMITH BELL, AT and PROVEN but was
denied. Hence, it pursued indemnification from the shipment’s insurer. Despite receipt of summons, COSCO and SMITH BELL failed to file an answer to the
complaint. FIRST LEPANTO thus moved that they be declared in default but the
FIRST LEPANTO paid GASI the amount of ₱165,772.40 as insurance indemnity. motion was denied by the MeTC.
GASI executed a Release of Claim discharging FIRST LEPANTO from any and all MeTC: Dismissed the instant case for failure of [FIRST LEPANTO] to sufficiently
liabilities pertaining to the lost/damaged shipment and subrogating it to all the rights establish its cause of action against [ATI, COSCO, SMITH BELL, and
of recovery and claims the former may have against any person or corporation in PROVEN].
relation to the lost/damaged shipment.
RTC: Reversed MeTC’s findings.
As such subrogee, FIRST LEPANTO demanded from COSCO, its shipping agency in the
Philippines, SMITH BELL, PROVEN and ATI, reimbursement of the amount it paid to CA: CA dismissed the appeal and held that the Release of Claim and the
GASI. When FIRST LEPANTO’s demands were not heeded, it filed a Complaint for sum Certificate of Insurance presented by FIRST LEPANTO sufficiently
of money before the MeTC of Manila. FIRST LEPANTO sought that it be reimbursed established its relationship with the consignee and that upon proof of
the amount of 166,772.41, twenty-five percent (25%) thereof as attorney’s fees, and payment of the latter’s claim for damages, FIRST LEPANTO was subrogated
costs of suit. to its rights against those liable for the lost/damaged shipment.
ATI denied liability for the lost/damaged shipment and claimed that it exercised due ISSUE: Whether or not the presentation of the insurance policy is indispensable
diligence and care in handling the same. ATI averred that upon arrival of the in proving the right of FIRST LEPANTO to be subrogated to the right of the
shipment, SMITH BELL requested for its inspection and it was discovered that one consignee. - NO
jumbo bag thereof sustained loss/damage while in the custody of COSCO as
RATIO:
evidenced by Turn Over Survey of Bad Order Cargo No. 47890 jointly executed by
the respective representatives of ATI and COSCO. During the withdrawal of the "Subrogation is the substitution of one person in the place of another with reference
shipment by PROVEN from ATI’s warehouse, the entire shipment was re-examined to a lawful claim or right, so that he who is substituted succeeds to the rights of the
and it was found to be exactly in the same condition as when it was turned over to other in relation to a debt or claim, including its remedies or securities." The right of
ATI such that one jumbo bag was damaged. To bolster this claim, ATI submitted subrogation springs from Article 2207 of the Civil Code.

TOPIC: INSURANCE
As a general rule, the marine insurance policy needs to be presented in evidence
before the insurer may recover the insured value of the lost/damaged cargo in the

exercise of its subrogatory right.

Nevertheless, the rule is not inflexible. In certain instances, the Court has admitted
exceptions by declaring that a marine insurance policy is dispensable evidence in
reimbursement claims instituted by the insurer.
In Delsan Transport Lines, Inc. v. CA, the Court ruled that the right of subrogation
accrues simply upon payment by the insurance company of the insurance claim.
Hence, presentation in evidence of the marine insurance policy is not indispensable
before the insurer may recover from the common carrier the insured value of the
lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself,
was held sufficient to establish not only the relationship between the insurer and
consignee, but also the amount paid to settle the insurance claim. The presentation
of the insurance contract was deemed not fatal to the insurer’s cause of action
because the loss of the cargo undoubtedly occurred while on board the petitioner’s
vessel.
The same rationale was the basis of the judgment in International Container
51
Terminal Services, Inc. v. FGU Insurance Corporation, wherein the arrastre operator
was found liable for the lost shipment despite the failure of the insurance company
to offer in evidence the insurance contract or policy. As in Delsan, it was certain that
the loss of the cargo occurred while in the petitioner’s custody.
Based on the attendant facts of the instant case, the application of the exception is
warranted. As discussed above, it is already settled that the loss/damage to the
GASI’s shipment occurred while they were in ATI’s custody, possession and control
as arrastre operator. Verily, the Certificate of Insurance and the Release of Claim
presented as evidence sufficiently established FIRST LEPANTO’s right to collect
reimbursement as the subrogee of the consignee, GASI.
With ATI’s liability having been positively established, to strictly require the
presentation of the insurance contract will run counter to the principle of equity
upon which the doctrine of subrogation is premised. 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 in justice, equity and good conscience
55
ought to pay.
The payment by the insurer to the insured operates as an equitable assignment to
the insurer of all the remedies which the insured may have against the third party
whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of contract or upon payment by
the insurance company of the insurance claim. It accrues simply upon payment by
56
the insurance company of the insurance claim.

TOPIC: INSURANCE
CHA VS. COURT OF APPEALS 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
277 SCRA 690 | G.R. No. 124520 | August 18, 1997
collecting the proceeds of said policy in case of loss of the property. In such a case,
(automatic transfer of insurance policy) the contract of insurance is a mere wager which is void under Section 25 of the
Insurance Code.
FACTS:
In the present case, it cannot be denied that CKS has no insurable interest in the
Petitioner-spouses Cha, as lessees, entered into a lease contract with private goods and merchandise inside the leased premises.
respondent CKS, as lessor. One of the stipulations of the one (1) year lease contract
states: Therefore, respondent CKS cannot, under the Insurance Code a special law be validly
a beneficiary of the fire insurance policy taken by the petitioner-spouses over their
x x x. The LESSEE shall not insure against fire the chattels, merchandise, merchandise. This insurable interest over said merchandise remains with the
textiles, goods and effects placed at any stall or store or space in the leased insured, the Cha spouses. The automatic assignment of the policy to CKS under the
premises without first obtaining the written consent and approval of the provision of the lease contract previously quoted is void for being contrary to law
LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent and/or public policy. The proceeds of the fire insurance policy thus rightfully belong
of the LESSOR then the policy is deemed assigned and transferred to the to the spouses Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer
[1]
LESSOR for its own benefit; x x x (United) cannot be compelled to pay the proceeds of the fire insurance policy to a
Notwithstanding the above stipulation in the lease contract, the Cha spouses insured person (CKS) who has no insurable interest in the property insured.
against loss by fire their merchandise inside the leased premises with the United The liability of the Cha spouses to CKS for violating their lease contract in that Cha
without the written consent of CKS. spouses obtained a fire insurance policy over their own merchandise, without the
On the day that the lease contract was to expire, fire broke out inside the leased consent of CKS, is a separate and distinct issue which we do not resolve in this case.
premises. When CKS learned of the insurance earlier procured by the Cha spouses
(without its consent), it wrote the insurer (United) a demand letter asking that the
proceeds of the insurance contract (between the Cha spouses and United) be paid
directly to CKS, based on its lease contract with Cha spouses.
United refused to pay CKS. CKS filed a complaint against the Cha spouses and United.
RTC: Ordered defendant United to pay to CKS and Cha.
CA: Affirmed the trial court decision, deleting however the awards for exemplary
damages and attorneys fees.
United’s MR was denied.
ISSUE: Whether or not paragraph 18 of the lease contract entered into between
CKS and the Cha spouses is valid. – NO
It is basic in the law on contracts that the stipulations contained in a contract cannot
be contrary to law, morals, good customs, public order or public policy.
A non-life insurance policy such as the fire insurance policy taken by petitioner-
spouses over their merchandise is primarily a contract of indemnity. Insurable
interest in the property insured must exist at the time the insurance takes effect and
at the time the loss occurs. The basis of such requirement of insurable interest in

TOPIC: INSURANCE
GAISANO CAGAYAN, INC. VS. INSURANCE COMPANY OF NORTH AMERICA IMC and LSPI retained ownership of the delivered goods and must bear the
loss.
490 SCRA 286 | G.R. No. 147839 | June 8, 2006
CA: Set aside the decision of the RTC. It ordered defendant-appellee Gaisano
FACTS:
Cagayan, Inc. to pay.the amount of P2,119,205.60 representing the
IMC is the maker of Wrangler Blue Jeans. LSPI is the local distributor of products amount paid by the plaintiff-appellant to the insured IMC and the amount
bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI separately obtained of P535,613.00 representing the amount paid by the plaintiff-appellant to
from respondent fire insurance policies with book debt endorsements. The the insured LSPI
insurance policies provide for coverage on "book debts in connection with ready-
- The CA held that the sales invoices are proofs of sale, being detailed
made clothing materials which have been sold or delivered to various customers and
statements of the nature, quantity and cost of the thing sold; that loss of
dealers of the Insured anywhere in the Philippines.” The policies defined book debts
the goods in the fire must be borne by petitioner since
as the "unpaid account still appearing in the Book of Account of the Insured 45 days
the proviso contained in the sales invoices is an exception under Article
after the time of the loss covered under this Policy."
1504 (1) of the Civil Code, to the general rule that if the thing is lost by a
Petitioner is a customer and dealer of the products of IMC and LSPI. The Gaisano fortuitous event, the risk is borne by the owner of the thing at the time the
Superstore Complex, owned by petitioner, was consumed by fire. Included in the loss under the principle of res perit domino; that petitioner's obligation to
items lost or destroyed in the fire were stocks of ready-made clothing materials sold IMC and LSPI is not the delivery of the lost goods but the payment of its
and delivered by IMC and LSPI. unpaid account and as such the obligation to pay is not extinguished, even
if the fire is considered a fortuitous event; that by subrogation, the insurer
Respondent filed a COMPLAINT for damages against petitioner. It alleges that IMC has the right to go against petitioner; that, being a fire insurance with book
and LSPI filed with respondent their claims under their respective fire insurance
debt endorsements, what was insured was the vendor's interest as a
policies with book debt endorsements; that as of February 25, 1991, the unpaid
creditor.
accounts of petitioner on the sale and delivery of ready-made clothing materials with
IMC was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the Petitioner’s MR was denied.
claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their
ISSUE:
rights against petitioner; that respondent made several demands for payment upon
petitioner but these went unheeded. 1. Whether or not the CA erred in construing a fire insurance policy on book
debts as one covering the unpaid accounts of IMC and LSPI since such
In its ANSWER WITH COUNTERCLAIM, petitioner contends that it could not be held
insurance applies to loss of the ready-made clothing materials sold and
liable because the property covered by the insurance policies were destroyed due to
delivered to petitioner. – NO
fortuities event or force majeure; that respondent's right of subrogation has no basis
inasmuch as there was no breach of contract committed by it since the loss was due 2. Whether or not petitioner is liable for the unpaid accounts. – YES
to fire which it could not prevent or foresee; that IMC and LSPI never communicated
3. Whether it has been established that petitioner has outstanding accounts
to it that they insured their properties; that it never consented to paying the claim
with IMC and LSPI.
of the insured.
RTC: Dismissed respondent's complaint. RATIO:
1. It is well-settled that when the words of a contract are plain and readily
- It held that the fire was purely accidental; that the cause of the fire was
understood, there is no room for construction. Nowhere is it provided in the
not attributable to the negligence of the petitioner; that it has not been
questioned insurance policies that the subject of the insurance is the goods sold
established that petitioner is the debtor of IMC and LSPI; that since the
and delivered to the customers and dealers of the insured. Thus, what were
sales invoices state that "it is further agreed that merely for purpose of
insured against were the accounts of IMC and LSPI with petitioner which
securing the payment of purchase price, the above-described merchandise
remained unpaid 45 days after the loss through fire, and not the loss or
remains the property of the vendor until the purchase price is fully paid",
destruction of the goods delivered.

TOPIC: INSURANCE
The Court is not persuaded with the petitioner’s argument that IMC bears the risk of shall not relieve him of his liability. The rationale for this is that the rule that an
loss because it expressly reserved ownership of the goods by stipulating in the sales obligor should be held exempt from liability when the loss occurs thru a
invoices that "[i]t is further agreed that merely for purpose of securing the payment fortuitous event only holds true when the obligation consists in the delivery of
of the purchase price the above described merchandise remains the property of the a determinate thing and there is no stipulation holding him liable even in case
vendor until the purchase price thereof is fully paid." The present case clearly falls of fortuitous event. It does not apply when the obligation is pecuniary in nature.
under paragraph (1), Article 1504 of the Civil Code.
3. With respect to IMC, the respondent has adequately established its claim. The
Thus, when the seller retains ownership only to insure that the buyer will pay its subrogation receipt, by itself, is sufficient to establish not only the relationship
debt, the risk of loss is borne by the buyer. Accordingly, petitioner bears the risk of of respondent as insurer and IMC as the insured, but also the amount paid to
loss of the goods delivered. settle the insurance claim. The right of subrogation accrues simply upon
payment by the insurance company of the insurance claim.
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 As to LSPI, respondent failed to present sufficient evidence to prove its cause of
42
concept of res perit domino, where ownership is the basis for consideration of who action. No evidentiary weight can be given to Exhibit "F Levi Strauss", a letter dated
bears the risk of loss, in property insurance, one's interest is not determined by April 23, 1991 from petitioner's General Manager, Stephen S. Gaisano, Jr., since it is
concept of title, but whether insured has substantial economic interest in the not an admission of petitioner's unpaid account with LSPI. It only confirms the loss
property. of Levi's products in the amount of P535,613.00 in the fire that razed petitioner's
building on February 25, 1991.
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 Moreover, there is no proof of full settlement of the insurance claim of LSPI; no
thereof, of such nature that a contemplated peril might directly damnify the subrogation receipt was offered in evidence. Thus, there is no evidence that
insured." Parenthetically, under Section 14 of the same Code, an insurable interest respondent has been subrogated to any right which LSPI may have against petitioner.
in property may consist in: (a) an existing interest; (b) an inchoate interest founded Failure to substantiate the claim of subrogation is fatal to petitioner's case for
on existing interest; or (c) an expectancy, coupled with an existing interest in that recovery of the amount of P535,613.00.
out of which the expectancy arises.

Therefore, 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, 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. Anyone has an insurable interest in property who derives a
benefit from its existence or would suffer loss from its destruction. Indeed, a vendor
or seller retains an insurable interest in the property sold so long as he has any
interest therein, in other words, so long as he would suffer by its destruction, as
where he has a vendor's lien. In this case, the insurable interest of IMC and LSPI
pertain to the unpaid accounts appearing in their Books of Account 45 days after the
time of the loss covered by the policies.
2. The 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.
Accordingly, petitioner's obligation is for the payment of money. As correctly
stated by the CA, where the obligation consists in the payment of money, the
failure of the debtor to make the payment even by reason of a fortuitous event

TOPIC: INSURANCE
-
SUN LIFE OF CANADA (PHILIPPINES), INC. v. MA. DAISY'S. SIBYA, JESUS MANUEL Sun Life violated Section 241 and 242 of the Insurance Code when it

S. SIBYA III, JAIME LUIS S. SIBYA, AND THE ESTATE OF THE DECEASED ATTY. JESUS refused to pay the rightful claim of the respondents.
-
SIBYA, JR. Held that Atty. Jesus Jr. did not commit material concealment and
misrepresentation when he applied for life insurance with Sun Life. It
793 SCRA 45 | G.R. No. 211212 | June 8, 2016
observed that given the disclosures and the waiver and authorization to
FACTS: investigate executed by Atty. Jesus Jr. to Sun Life, the latter had all the

means of ascertaining the facts allegedly concealed by the applicant.
Atty. Jesus Sibya, Jr. applied for life insurance with Sun Life. In his Application for
Insurance, he indicated that he had sought advice for kidney problems. Atty. Jesus CA: Affirmed RTC decision in ordering Sun Life to pay death benefits and damages

Jr. indicated the following in his application: "Last 1987, had undergone lithotripsy in favor of the respondents
due to kidney stone under Dr. Jesus Benjamin Mendoza at National Kidney Institute, -
Modified the RTC decision by absolving Sun Life from the charges of
discharged after 3 days, no recurrence as claimed."
violation of Sections 241 and 242 of the Insurance Code.
-
Sun Life approved Atty. Jesus Jr.'s application and issued an insurance policy. The Ruled that the evidence on records show that there was no fraudulent
policy indicated the respondents as beneficiaries and entitles them to a death intent on the part of Atty. Jesus Jr. in submitting his insurance application.
benefit of P1,000,000.00 should Atty. Jesus Jr. dies on or before February 5, 2021, or Instead, it found that Atty. Jesus Jr. admitted in his application that he had

a sum of money if Atty. Jesus Jr. is still living on the endowment date. sought medical treatment for kidney ailment.
On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound. Ma. Daisy filed Sun Life’s MR was denied.
a Claimant's Statement with Sun Life to seek the death benefits indicated in his
insurance policy.
ISSUE: Whether or not there was concealment or misrepresentation when Atty.
Jesus Jr. submitted his insurance application with Sun Life. - NO
Sun Life denied the claim on the ground that the details on Atty. Jesus Jr.'s medical
history were not disclosed in his application. Sun Life also tendered a check RATIO:

representing the refund of the premiums paid by Atty. Jesus Jr. In Manila Bankers Life Insurance Corporation v. Aban, the Court held that if the
The respondents reiterated their claim against Sun Life. Sun Life refused to heed the insured dies within the two-year contestability period, the insurer is bound to make
respondents' requests and instead filed a Complaint for Rescission before the RTC good its obligation under the policy, regardless of the presence or lack of
and prayed for judicial confirmation of Atty. Jesus Jr.'s rescission of insurance policy. concealment or misrepresentation. The Court held:
- Section 48 serves a noble purpose, as it regulates the actions of both the insurer and
Sun Life alleged that Atty. Jesus Jr. did not disclose in his insurance
the insured. Under the provision, an insurer is given two years - from the effectivity
application his previous medical treatment in May and August of 1994.
o of a life insurance contract and while the insured is alive - to discover or prove that
According to Sun Life, the undisclosed fact suggested that the
the policy is void ab initio or is rescindible by reason of the fraudulent concealment
insured was in "renal failure" and at a high risk medical
or misrepresentation of the insured or his agent. After the two-year period lapses,
condition.
o or when the insured dies within the period, the insurer must make good on the
Had it known such fact, it would not have issued the insurance
policy, even though the policy was obtained by fraud, concealment, or
policy in favor of Atty. Jesus Jr.
misrepresentation. This is not to say that insurance fraud must be rewarded, but
For their defense, the respondents claimed that Atty. Jesus Jr. did not commit that insurers who recklessly and indiscriminately solicit and obtain business must be
misrepresentation in his application for insurance. They averred that Atty. Jesus Jr. penalized, for such recklessness and lack of discrimination ultimately work to the
was in good faith when he signed the insurance application and even authorized Sun detriment of bona fide takers of insurance and the public in general.
Life to inquire further into his medical history for verification purposes. According to
In the present case, Sun Life issued Atty. Jesus Jr.'s policy on February 5, 2001. Thus,
them, the complaint is just a ploy to avoid the payment of insurance claims.
it has two years from its issuance, to investigate and verify whether the policy was

obtained by fraud, concealment, or misrepresentation. Upon the death of Atty. Jesus
RTC: Dismissed the complaint for lack of merit.
Jr., however, on May 11, 2001, or a mere three months from the issuance of the
TOPIC: INSURANCE
policy, Sun Life loses its right to rescind the policy. As discussed in Manila Bankers,
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.
Assuming, however, for the sake of argument, that the incontestability period has
not yet set in, the Court agrees, nonetheless, with the CA when it held that Sun Life
failed to show that Atty. Jesus Jr. committed concealment and misrepresentation.
Atty. Jesus Jr. 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.
- Records show that in the Application for Insurance, he admitted that he
had sought medical treatment for kidney ailment.
- It appears that he also signed the Authorization which gave Sun Life the
opportunity to obtain information on the facts disclosed by him in his
insurance application.
- Given the express language of the Authorization, it cannot be said that he
concealed his medical history since Sun Life had the means of ascertaining
his medical record.
- With regard to allegations of misrepresentation, we note that Atty. Jesus
Jr. was not a medical doctor, and his answer "no recurrence" may be
construed as an honest opinion. Where matters of opinion or judgment
are called for, answers made in good faith and without intent to deceive
will not avoid a policy even though they are untrue.
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.


TOPIC: INSURANCE
ARMANDO GEAGONIA vs. COURT OF APPEALS and COUNTRY BANKERS the PFIC were already in existence; however, he had no knowledge of the
INSURANCE CORPORATION provision in the private respondent's policy requiring him to inform it of
the prior policies; this requirement was not mentioned to him by the
241 SCRA 152 | G.R. No. 114427 | February 6, 1995
private respondent's agent; and had it been mentioned, he would not have
FACTS: withheld such information.
Petitioner is the owner of Norman's Mart located at the public market. He obtained In its ANSWER, the private respondent specifically denied the allegations in the
from the private respondent a fire insurance policy (F-14622) for P100,000. The complaint and set up as its principal defense the violation of Condition 3 of the
period of the policy was from December 22, 1989 to December 22, 1990 and covered policy.
the following: "Stock-in-trade consisting principally of dry goods such as RTW's for
IC: Petitioner did not violate Condition 3 as he had no knowledge of the
men and women wear and other usual to assured's business."
existence of the two fire insurance policies obtained from the PFIC; that it
The petitioner declared in the policy under that Mercantile Insurance Co., Inc. was was Cebu Tesing Textiles which procured the PFIC policies without
the co-insurer for P50,000.00. From 1989 to 1990, the petitioner had in his inventory informing him or securing his consent; and that Cebu Tesing Textile, as his
stocks amounting to P392,130.50 creditor, had insurable interest on the stocks.
The policy contained the following condition (Condition 3): The insured shall give - These findings were based on the petitioner's testimony that he came to
notice to the Company of any insurance or insurances already affected, or which may know of the PFIC policies only when he filed his claim with the private
subsequently be effected, covering any of the property or properties consisting of respondent and that Cebu Tesing Textile obtained them and paid for their
stocks in trade, goods in process and/or inventories only hereby insured, and unless premiums without informing him thereof.
such notice be given and the particulars of such insurance or insurances be stated
CA: Reversed the decision of the IC because it found that the petitioner knew
therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or
of the existence of the two other policies issued by the PFIC.
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 ISSUES: Whether the petitioner had prior knowledge of the two insurance
shall not apply when the total insurance or insurances in force at the time of the loss policies issued by the PFIC when he obtained the fire insurance policy
or damage is not more than P200,000.00. from the private respondent, thereby, for not disclosing such fact,
violating Condition 3 of the policy. - YES
On May 27, 1990, fire of accidental origin broke out at around 7:30 p.m. at the public
market. The petitioner's insured stock-in-trade were completely destroyed RATIO:
prompting him to file with the private respondent a claim under the policy.
His letter to the private respondent conclusively proves this knowledge. His
The private respondent denied the claim because it found that at the time of the loss testimony to the contrary before the IC and which the latter relied upon cannot
the petitioner's stocks-in-trade were likewise covered by other fire insurance policies prevail over a written admission made ante litem motam. It was, indeed, incredible
(GA-28146 and GA-28144) for P100,000.00 each, issued by the PFIC. These policies that he did not know about the prior policies since these policies were not new or
indicate that the insured was "Messrs. Discount Mart (Mr. Armando Geagonia, original.
Prop.)" with a mortgage clause.
Condition 3 is a condition which is not proscribed by law. Its incorporation in the
The basis of private respondent’s denial was petitioner’s alleged violation of policy is allowed by Section 75 of the Insurance Code. Such a condition is a provision
Condition 3 of the policy. which invariably appears in fire insurance policies and is intended to prevent an
increase in the moral hazard. It is commonly known as the additional or "other
Petitioner filed a COMPLAINT against the private respondent with the Insurance
insurance" clause and has been upheld as valid and as a warranty that no other
Commission for the recovery of P100,000 under the fire insurance policy (F-14622)
insurance exists. Its violation would thus avoid the policy. However, in order to
and for attorney’s fees and costs of litigation.
constitute a violation, the other insurance must be upon same subject matter, the
- He admitted in a letter that at the time he obtained the private same interest therein, and the same risk.
respondent's fire insurance policy he knew that the two policies issued by
TOPIC: INSURANCE
As to a mortgaged property, the mortgagor and the mortgagee have each an selection or arrangement of the words employed therein. On the other hand, the
independent insurable interest therein and both interests may be one policy, or each language of the contract was carefully chosen and deliberated upon by experts and
may take out a separate policy covering his interest, either at the same or at separate legal advisers who had acted exclusively in the interest of the insurers and the
times. The mortgagor's insurable interest covers the full value of the mortgaged technical language employed therein is rarely understood by ordinary laymen.
property, even though the mortgage debt is equivalent to the full value of the
With these principles in mind, we are of the opinion that Condition 3 of the subject
property. The mortgagee's insurable interest is to the extent of the debt, since the
policy is not totally free from ambiguity and must, perforce, be meticulously
property is relied upon as security thereof, and in insuring he is not insuring the
analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to
property but his interest or lien thereon. His insurable interest is prima facie the
double insurance, and (b) the nullity of the policy shall only be to the extent
value mortgaged and extends only to the amount of the debt, not exceeding the
exceeding P200,000.00 of the total policies obtained.
value of the mortgaged property. Thus, separate insurances covering different
insurable interests may be obtained by the mortgagor and the mortgagee. 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,
A mortgagor may take out insurance for the benefit of the mortgagee, which is the
goods in process and/or inventories only hereby insured," and the portion regarding
usual practice. The mortgagee may be made the beneficial payee in several ways.
the insured's declaration on the subheading CO-INSURANCE that the co-insurer is
In the policy obtained by the mortgagor with loss payable clause in favor of the Mercantile Insurance Co., Inc. in the sum of P50,000.00. A double insurance exists
mortgagee as his interest may appear, the mortgagee is only a beneficiary under the where the same person is insured by several insurers separately in respect of the
contract, and recognized as such by the insurer but not made a party to the contract same subject and interest. As earlier stated, the insurable interests of a mortgagor
himself. Hence, any act of the mortgagor which defeats his right will also defeat the and a mortgagee on the mortgaged property are distinct and separate. Since the two
right of the mortgagee. This kind of policy covers only such interest as the mortgagee policies of the PFIC do not cover the same interest as that covered by the policy of
has at the issuing of the policy. 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
On the other hand, a mortgagee may also procure a policy as a contracting party in
respondent's policy.
accordance with the terms of an agreement by which the mortgagor is to pay the
premiums upon such insurance. It has been noted, however, that although the Furthermore, by stating within Condition 3 itself that such condition shall not apply
mortgagee is himself the insured, as where he applies for a policy, fully informs the if the total insurance in force at the time of loss does not exceed P200,000.00, the
authorized agent of his interest, pays the premiums, and obtains on the assurance private respondent was amenable to assume a co-insurer's liability up to a loss not
that it insures him, the policy is in fact in the form used to insure a mortgagor with exceeding P200,000.00. What it had in mind was to discourage over-insurance.
loss payable clause. 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
The fire insurance policies issued by the PFIC name the petitioner as the assured and
a property owner obtains insurance policies from two or more insurers in a total
contain a mortgage clause which reads: Loss, if any, shall be payable to MESSRS.
amount that exceeds the property's value, the insured may have an inducement to
TESING TEXTILES, Cebu City as their interest may appear subject to the terms of this
destroy the property for the purpose of collecting the insurance. The public as well
policy. This is clearly a simple loss payable clause, not a standard mortgage clause.
as the insurer is interested in preventing a situation in which a fire would be
Condition 3 in the private respondent's policy No. F-14622 does not absolutely profitable to the insured.
declare void any violation thereof. It expressly provides that the 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."
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. The reason for this is that, except for riders which may later be inserted,
the insured sees the contract already in its final form and has had no voice in the

TOPIC: INSURANCE
THE INSULAR LIFE ASSURANCE COMPANY VS. PAZ Y. KHU ET. AL In its Answer, Insular Life countered that Felipe did not disclose the ailments (viz.,
Type 2 Diabetes Mellitus, Diabetes Nephropathy and Alcoholic Liver Cirrhosis with
GR No. 195176 | April 18, 2016
Ascites)
KEYWORD/S: Concealment, Diabetes, Liver Cirrhosis
RTC: Ruled in favor of Felipe’s beneficiaries. The RTC agreed with the latter’s
FACTS: claim that the insurance policy was reinstated on June 22, 1999 (when the
policy took effect). The RTC cited the ruling in Malayan Insurance
Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular Life under Corporation v. Court of Appeals that any ambiguity in a contract of
the latter’s Diamond Jubilee Insurance Plan. Felipe accomplished the required insurance should be resolved strictly against the insurer upon the principle
medical questionnaire wherein he did not declare any illness or adverse medical that an insurance contract is a contract of adhesion. The RTC also held that
condition. Insular Life thereafter issued him a Policy with a face value of P1 million. the reinstated insurance policy had already become incontestable by the
This took effect on June 22, 1997. time of Felipe’s death on September 22, 2001. <- 2 years after the policy
Felipe’s policy lapsed due to non-payment of the premium covering the period from took effect
June 22, 1999 to June 23, 2000. CA: Upheld RTC’s decision on non-contestability
September 7, 1999: Felipe applied for the reinstatement of his policy and paid ISSUE: Whether Felipe’s reinstated life insurance policy is already incontestable
P25,020.00 as premium. Except for the change in his occupation of being self- at the time of his death.
employed to being the Municipal Mayor of Binuangan, Misamis Oriental, all the
other information submitted by Felipe in his application for reinstatement was RATIO:
virtually identical to those mentioned in his original policy. Insular Life advised Felipe
Yes.
that his application for reinstatement may only be considered if he agreed to certain
conditions such as payment of additional premium and the cancellation of the riders Sec. 48. Whenever a right to rescind a contract of insurance is given to the insurer by
pertaining to premium waiver and accidental death benefits. Felipe agreed to these any provision of this chapter, such right must be exercised previous to the

conditions and on December 27, 1999 paid the agreed additional premium of commencement of an action on the contract. After a policy of life insurance made
P3,054.50 payable on the death of the insured shall have been in force during the lifetime of the
insured for a period of two years from the date of its issue or of its last reinstatement,
On January 7, 2000, Insular issued an endorsement in favor of Felipe stating that the
the insurer cannot prove that the policy is void ab initio or is rescindible by reason of
policy is already reinstated and the following changes in the policy are effective as
the fraudulent concealment or misrepresentation of the insured or his agent.
of June 22, 1999: extra premium and accidental death benefit and waiver of
premium disability riders are deleted. The rationale for this provision was discussed by the Court in Manila Bankers Life
Insurance Corporation v. Aban:
September 22, 2001, Felipe died. His Certificate of Death enumerated the following
as causes of death: Section 48 regulates both the actions of the insurers and prospective takers of life
insurance. It gives insurers enough time to inquire whether the policy was obtained
Immediate cause: a. End stage renal failure, Hepatic failure
by fraud, concealment, or misrepresentation; on the other hand, it forewarns
Antecedent cause: b. Congestive heart failure, Diffuse myocardial ischemia. scheming individuals that their attempts at insurance fraud would be timely
uncovered – thus deterring them from venturing into such nefarious enterprise. At
Underlying cause: c. Diabetes Neuropathy, Alcoholism, and Pneumonia. the same time, legitimate policy holders are absolutely protected from unwarranted
Felipe’s heirs filed a claim for death benefit under the insurance policy with Insular. denial of their claims or delay in the collection of insurance proceeds occasioned by
Insular denied the claim.Instead, insular stated that it decided to rescind the policy allegations of fraud, concealment, or misrepresentation by insurers, claims which
on the ground of concealment and misrepresentation. may no longer be set up after the two-year period expires as ordained under the law.
Heirs filed a complaint for SPECIFIC PERFORMANCE WITH DAMAGES with the RTC The insurer is deemed to have the necessary facilities to discover such fraudulent
concealment or misrepresentation within a period of two (2) years. It is not fair for

TOPIC: INSURANCE
the insurer to collect the premiums as long as the insured is still alive, only to raise
the issue of fraudulent concealment or misrepresentation when the insured dies in
order to defeat the right of the beneficiary to recover under the policy.
At least two (2) years from the issuance of the policy or its last reinstatement, the
beneficiary is given the stability to recover under the policy when the insured dies.
The provision also makes clear when the two-year period should commence in case
the policy should lapse and is reinstated, that is, from the date of the last
reinstatement’.
In the case at bar: The Court discerns a genuine ambiguity or obscurity in the
language of the two documents.
In the Letter of Acceptance, Khu declared that he was accepting "the imposition of
an extra/additional premium of P5.00 a year per thousand of insurance; effective
June 22, 1999". It is true that the phrase as used in this particular paragraph does
not refer explicitly to the effectivity of the reinstatement. But the Court notes that
the reinstatement was conditioned upon the payment of additional premium not
only prospectively, that is, to cover the remainder of the annual period of coverage,
but also retroactively, that is for the period starting June 22, 1999. Hence, by paying
the amount of P3,054.50 on December 27, 1999 in addition to the P25,020.00 he
had earlier paid on September 7, 1999, Khu had paid for the insurance coverage
starting June 22, 1999. In the Endorsement, the obscurity is patent. In the first
sentence of the Endorsement, it is not entirely clear whether the phrase "effective
June 22, 1999" refers to the subject of the sentence, namely "the reinstatement of
this policy," or to the subsequent phrase "changes are made on the policy." The court
below is correct. Given the obscurity of the language, the construction favorable to
the insured will be adopted by the courts. Accordingly, the subject policy is deemed
reinstated as of June 22, 1999. Thus, the period of contestability has lapsed.


TOPIC: INSURANCE
VDA. DE MAGLANA VS. HON. CONSOLACION ISSUE/S: Whether or not insurance company is directly and solidarily liable with the
negligent operator up to the extent of its insurance coverage.
GR No. 60506 | August 6, 1992
RATIO:
KEYWORD/S: Direct vs Solidary Liability; Car crash; Death; Compulsory motor
Vehicle liability The particular provision of the insurance policy on which petitioners base their claim
is as follows:
FACTS:
Sec. 1 — LIABILITY TO THE PUBLIC
Lope Maglana was an employee of the Bureau of Customs whose work station was
at Lasa, here in Davao City. Maglana was on his way to his work station, driving a 1. The Company will, subject to the Limits of Liability, pay all sums necessary to
motorcycle owned by the Bureau of Customs. At Km. 7, Lanang, he met an accident discharge liability of the insured in respect of
that resulted in his death. He died on the spot. The PUJ jeep that bumped the
(a) death of or bodily injury to any THIRD PARTY
deceased was driven by Pepito Into, operated and owned by defendant Destrajo.
From the investigation conducted by the traffic investigator, the PUJ jeep was (b) . . . .
overtaking another passenger jeep that was going towards the city poblacion. While
overtaking, the PUJ jeep of defendant Destrajo running abreast with the overtaken 2. . . . .
jeep, bumped the motorcycle driven by the deceased who was going towards the 3. In the event of the death of any person entitled to indemnity under this Policy, the
direction of Lasa, Davao City. The point of impact was on the lane of the motorcycle Company will, in respect of the liability incurred to such person indemnify his personal
and the deceased was thrown from the road and met his untimely death. representatives in terms of, and subject to the terms and conditions hereof.
Heirs Maglana, Sr., here petitioners, filed an action for damages and attorney's fees
against operator Patricio Destrajo and the Afisco Insurance Corporation (AFISCO for The above-quoted provision leads to no other conclusion but that AFISCO can be
brevity) before the then Court of First Instance of Davao, Branch II. An information held directly liable by petitioners. As this Court ruled in Shafer vs. Judge, RTC
for homicide thru reckless imprudence was also filed against Pepito Into. During the of Olongapo City: "where an insurance policy insures directly against liability, the
pendency of the civil case, Into was found guilty and was mandated to pay moral and insurer's liability accrues immediately upon the occurrence of the injury or even
exemplary damages. 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
RTC: the lower court rendered a decision finding that Destrajo had not exercised party liability (TPL) of the Compulsory Motor Vehicle Liability Insurance is "to protect
sufficient diligence as the operator of the jeepney injured persons against the insolvency of the insured who causes such injury, and to
MR: Destrajo contended that AFISCO should not merely be held secondarily give such injured person a certain beneficial interest in the proceeds of the policy . .
liable because the Insurance Code provides that the insurer's liability is ." Since petitioners had received from AFISCO the sum of P5,000.00 under the no-
"direct and primary and/or jointly and severally with the operator of the fault clause, AFISCO's liability is now limited to P15,000.00.
vehicle, although only up to the extent of the insurance coverage." Hence, However, we cannot agree that AFISCO is likewise solidarily liable with Destrajo.
they argued that the P20,000.00 coverage of the insurance policy issued In Malayan Insurance Co., Inc. v. Court of Appeals, this Court had the opportunity to
by AFISCO, should have been awarded in their favor. resolve the issue as to the nature of the liability of the insurer and the insured vis-a-
In its comment on the motion for reconsideration, AFISCO argued that since the vis the third party injured in an accident. While it is true that where the insurance
Insurance Code does not expressly provide for a solidary obligation, the presumption contract provides for indemnity against liability to third persons, such third persons
is that the obligation is joint. 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
RTC again: denied MR ruling that since the insurance contract "is in the be held solidarily liable with the insured and/or the other parties found at fault. The
nature of suretyship, then the liability of the insurer is secondary liability of the insurer is based on contract; that of the insured is based on tort.
only up to the extent of the insurance coverage.”
In the case at bar: Petitioners herein cannot validly claim that AFISCO, whose liability
No CA. Petition for CERTIORARI - SC under the insurance policy is also P20,000.00, can be held solidarily liable

TOPIC: INSURANCE
with Destrajo for the total amount of P53,901.70 in accordance with the decision of
the lower court. Since under both the law and the insurance policy, AFISCO's liability
is only up to P20,000.00, the second paragraph of the dispositive portion of the
decision in question may have unwittingly sown confusion among the petitioners
and their counsel. What should have been clearly stressed as to leave no room for
doubt was the liability of AFISCO under the explicit terms of the insurance contract.
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. As such, petitioners have the option either to claim the P15,000 from
AFISCO and the balance from Destrajo or enforce the entire judgment
from Destrajo subject to reimbursement from AFISCO to the extent of the insurance
coverage.


TOPIC: INSURANCE
TIU VS. ARRIESGADO almost in the middle of the highway, and that no early warning device was displayed.
Petitioner Laspias promptly applied the brakes and swerved to the left to avoid
GR No. 138060 | September 1, 2004
hitting the truck head-on, but despite his efforts to avoid damage to property and
KEYWORD/S: Bus hit truck; no EWD; CMVLI physical injuries on the passengers, the right side portion of the bus hit the cargo
trucks left rear. PPSII, for its part, admitted that it had an existing contract with
FACTS: petitioner Tiu, but averred that it had already attended to and settled the claims of
Cargo truck marked Condor Hollow Blocks and General Merchandise was loaded those who were injured during the incident. It could not accede to the claim of
with firewood in Bogo, Cebu and left for CebuCity. Upon respondent Arriesgado, as such claim was way beyond the scheduled indemnity as
reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a contained in the contract of insurance.
bridge, one of its rear tires exploded. The driver, Sergio Pedrano, then parked along RTC: ruled in favor of ARRIESGADO. RTC ruled that if petitioner Laspias had not
the right side of the national highway and removed the damaged tire to have it been driving at a fast pace, he could have easily swerved to the left to avoid
vulcanized at a nearby shop, about 700 meters away. Pedrano left his helper, hitting the truck, thus, averting the unfortunate incident. It then concluded
Jose Mitante, Jr. to keep watch over the stalled vehicle, and instructed the latter to that petitioner Laspias was negligent.
place a spare tire six fathoms away behind the stalled truck to serve as a warning for
oncoming vehicles. The trucks tail lights were also left on. D Rough Riders passenger The trial court also ruled that the absence of an early warning device near the place
bus driven by Virgilio Te Laspias was cruising along the national highway where the truck was parked was not sufficient to impute negligence on the part of
of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger bus was also bound respondent Pedrano, since the tail lights of the truck were fully on, and the vicinity
for Cebu City, and had come from Maya, Daanbantayan, Cebu. Among its passengers was well lighted by street lamps. It also found that the testimony of petitioner Tiu,
were the Spouses Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were that he based the selection of his driver Laspias on efficiency and in-service training,
seated at the right side of the bus, about three (3) or four (4) places from the front and that the latter had been so far an efficient and good driver for the past six years
seat. of his employment, was insufficient to prove that he observed the diligence of a good
father of a family in the selection and supervision of his employees.
As the bus was approaching the bridge, Laspias saw the stalled truck, which was then
.
about 25 meters away He applied the breaks and tried to swerve to the left to avoid CA: affirmed RTC
hitting the truck. But it was too late; the bus rammed into the trucks left rear. The
ISSUE/S: W/N CA ERRED IN NOT FINDING RESPONDENT
impact damaged the right side of the bus and left several passengers injured.
. PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. LIABLE TO
Pedro Arriesgado lost consciousness and suffered a fracture in his right colles His
RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONER WILLIAM TIU
wife, Felisa, was brought to the Danao City Hospital. She was later transferred to the
Southern Island Medical Center where she died shortly thereafter. Pedro RATIO:
A. Arriesgado then filed a complaint for breach of contract of carriage, damages
Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification
and attorneys fees before the Regional Trial Court of Cebu City against D Rough
and/or reimbursement. This has no basis under the contract. Under the contract,
Riders bus operator William Tiu and his driver, Virgilio Te Laspias. Pedrano alleged
PPSII will pay all sums necessary to discharge liability of the insured subject to the
that the passenger bus in question was cruising at a fast and high speed along the
limits of liability but not to exceed the limits of liability as so stated in the contract.
national road, and that petitioner Laspias did not take precautionary measures to
Also, it is stated in the contract that in the event of accident involving indemnity to
avoid the accident.
more than one person, the limits of liability shall not exceed the aggregate amount
William Tiu and D Rough riders bus, for their part, filed a Third-Party Complaint so specified by law to all persons to be indemnified.
against the following: respondent Philippine Phoenix Surety and Insurance, Inc.
As can be gleaned from the Certificate of Cover, such insurance contract was issued
(PPSII), petitioner Tiu’s insurer; respondent Benjamin Condor, the registered owner
pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was expressly
of the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They
provided therein that the limit of the insurers liability for each person was P12,000,
alleged that petitioner Laspias was negotiating the uphill climb along the national
while the limit per accident was pegged at P50,000. An insurer in an indemnity
highway of Sitio Aggies, Poblacion, Compostela, in a moderate and normal speed. It
contract for third party liability is directly liable to the injured party up to the extent
was further alleged that the truck was parked in a slanted manner, its rear portion

TOPIC: INSURANCE
specified in the agreement but it cannot be held solidarily liable beyond that a common carrier to prove that he observed extraordinary diligence in the care of
amount. The respondent PPSII could not then just deny petitioner Tiu’s claim; it his passengers. It must be stressed that in requiring the highest possible degree of
should have paid P12,000 for the death of Felisa Arriesgado, and diligence from common carriers and in creating a presumption of negligence against
respondent Arriesgados hospitalization expenses of P1,113.80, which the trial court them, the law compels them to curb the recklessness of their drivers. While evidence
found to have been duly supported by receipts. The total amount of the claims, even may be submitted to overcome such presumption of negligence, it must be shown
when added to that of the other injured passengers which the respondent PPSII that the carrier observed the required extraordinary diligence, which means that the
claimed to have settled, would not exceed the P50,000 limit under the insurance carrier must show the utmost diligence of very cautious persons as far as human care
agreement. and foresight can provide, or that the accident was caused by fortuitous event. As
correctly found by the trial court, petitioner Tiu failed to conclusively rebut such
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is
presumption. The negligence of petitioner Laspiñas as driver of the passenger bus is,
primarily intended to provide compensation for the death or bodily injuries suffered
thus, binding against petitioner Tiu, as the owner of the passenger bus engaged as a
by innocent third parties or passengers as a result of the negligent operation and use
common carrier.
of motor vehicles. The victims and/or their dependents are assured of immediate
financial assistance, regardless of the financial capacity of motor vehicle owners. As
the Court, speaking through Associate Justice Leonardo A. Quisumbing, explained

in Government Service Insurance System v. Court of Appeals:

However, 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 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.
Obviously, the insurer could be held liable only up to the extent of what was provided
for by the contract of insurance, in accordance with the CMVLI law. At the time of
the incident, the schedule of indemnities for death and bodily injuries, professional
fees and other charges payable under a CMVLI coverage was provided for under the
Insurance Memorandum Circular (IMC) No. 5-78 which was approved on November
10, 1978. As therein provided, the maximum indemnity for death was twelve
thousand (P12,000.00) pesos per victim.
TRANSPO ISSUE (JUST IN CASE SHE ASKS): respondent and his wife were not safely
transported to the destination agreed upon. In actions for breach of contract, only
the existence of such contract, and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his destination are the matters that
need to be proved. This is because under the said contract of carriage, the petitioners
assumed the express obligation to transport the respondent and his wife to their
destination safely and to observe extraordinary diligence with due regard for all
circumstances. Any injury suffered by the passengers in the course thereof is
immediately attributable to the negligence of the carrier. Upon the happening of the
accident, the presumption of negligence at once arises, and it becomes the duty of

TOPIC: INSURANCE
PRUDENTIAL GUARANTEE VS. TRANS-ASIA SHIPPING LINES, INC. ISSUE/S:
GR No. 151890 | June 20, 2006 1. What is the liability of PRUDENTIAL to TRANS-ASIA arising from the subject
insurance contract?
KEYWORD/S: M/V Asia korea; breach of warranty
2. What is the liability, of TRANS-ASIA to PRUDENTIAL arising from the transaction
FACTS: between the parties as evidenced by a document denominated as Loan and
Trust Receipt?
TRANS-ASIA is the owner of the vessel M/V Asia Korea. In consideration of payment 3. What is the amount of interest to be imposed on the liability of either or both
of premiums, PRUDENTIAL insured M/V Asia Korea for loss/damage of the hull and parties?
machinery arising from perils, of fire and explosion for the sum of P40 Million,
beginning from the period of July 1, 1993 up to July 1, 1994. While the policy was in RATIO:
force, a fire broke out while M/V Asia Korea was undergoing repairs at
1. For the breach of a warranty to avoid a policy, the same must be duly shown
the port of Cebu. TRANS-ASIA filed its notice of claim for damage sustained by
by the party alleging the same. We cannot sustain an allegation that is
the vessel. TRANS-ASIA reserved its right to subsequently notify PRUDENTIAL as to
unfounded. Consequently, PRUDENTIAL, not having shown that TRANS-ASIA
the full amount of the claim upon final survey and determination by average adjuster
breached the warranty condition, CLASSED AND CLASS MAINTAINED, it
Richard Hogg International (Phil.) of the damage sustained by reason of fire. TRANS-
remains that TRANS-ASIA must be allowed to recover its rightful claims on the
ASIA executed a document denominated Loan and Trust receipt which stated that it
policy. At the outset, it must be emphasized that the party which alleges a fact
received 3m worth of loan from prudential and that it is repayable only in the event
as a matter of defense has the burden of proving it. PRUDENTIAL, as the party
and to the extent that any net recovery is made by Trans-Asia Shipping Corporation,
which asserted the claim that TRANS-ASIA breached the warranty in the policy,
from any person or persons, corporation or corporations, or other parties, on
has the burden of evidence to establish the same. Hence, on the part of
account of loss by any casualty for which they may be liable occasioned by the 25
PRUDENTIAL lies the initiative to show proof in support of its defense;
October 1993: Fire on board. Prudential denied trans-asia’s claim stating that trans-
otherwise, failing to establish the same, it remains self-serving. Clearly, if no
asia is in breach of policy conditions, among them WARRANTED VESSEL CLASSED
evidence on the alleged breach of TRANS-ASIA of the subject warranty is
AND CLASS MAINTAINED. Trans-asia filed for a complaint for the recovery of sum of
shown, TRANS-ASIA would be successful in claiming on the policy. It follows that
money against prudential in the RTC.
PRUDENTIAL bears the burden of evidence to establish the fact of breach. In
RTC: Dismissed the complaint. Ruled in favor of prudential. It ruled that a our rule on evidence, TRANS-ASIA, as the plaintiff below, necessarily has the
determination of the parties liabilities hinged on whether TRANS-ASIA burden of proof to show proof of loss, and the coverage thereof, in the subject
violated and breached the policy conditions on WARRANTED VESSEL insurance policy.However, in the course of trial in a civil case, once plaintiff
CLASSED AND CLASS MAINTAINED. It interpreted the provision to mean makes out a prima facie case in his favor, the duty or the burden of evidence
that TRANS-ASIA is required to maintain the vessel at a certain class at all shifts to defendant to controvert plaintiffs prima facie case, otherwise, a verdict
times pertinent during the life of the policy. According to the court a quo, must be returned in favor of plaintiff. TRANS-ASIA was able to establish proof
TRANS-ASIA failed to prove compliance of the terms of the warranty, the of loss and the coverage of the loss, i.e., 25 October 1993: Fire on
violation thereof entitled PRUDENTIAL, the insured party, to rescind the Board. Thereafter, the burden of evidence shifted to PRUDENTIAL to counter
contract. TRANS-ASIAs case, and to prove its special and affirmative defense that TRANS-
ASIA was in violation of the particular condition on CLASSED AND CLASS
CA: Reversed RTC decision. PRUDENTIAL cannot rely on the lack of certification MAINTAINED. Foremost, PRUDENTIAL, through the Senior Manager of its
to the effect that TRANS-ASIA was CLASSED AND CLASS MAINTAINED as its Marine and Aviation Division, Lucio Fernandez, made a categorical admission
sole basis for reaching the conclusion that the warranty was breached. CA that at the time of the procurement of the insurance contract in July 1993,
opined that the lack of a certification does not necessarily mean that the TRANS-ASIAs vessel, M/V Asia Korea was properly classed by Bureau Veritas.
warranty was breached by TRANS-ASIA. Instead, the CA considered Bureau Veritas is a classification society recognized in the marine industry. As it
PRUDENTIALs admission that at the time the insurance contract was is undisputed that TRANS-ASIA was properly classed at the time the contract of
entered into between the parties, the vessel was properly classed by insurance was entered into, thus, it becomes incumbent upon PRUDENTIAL to
Bureau Veritas, a classification society recognized by the industry.

TOPIC: INSURANCE
show evidence that the status of TRANS-ASIA as being properly CLASSED by
Bureau Veritas had shifted in violation of the warranty. Unfortunately,

PRUDENTIAL failed to support the allegation. Lack of a certification in
PRUDENTIALs records to the effect that TRANS-ASIAs M/V Asia Korea was
CLASSED AND CLASS MAINTAINED at the time of the occurrence of the fire
cannot be tantamount to the conclusion that TRANS-ASIA in fact breached the
warranty contained in the policy. With more reason must we sustain the
findings of the Court of Appeals on the ground that as admitted by PRUDENTIAL,
it was likewise the responsibility of the average adjuster, Richards Hogg
International (Phils.), Inc., to secure a copy of such certification.
2. The amount of P3,000,000.00 granted by PRUDENTIAL to TRANS- ASIA via a
transaction between the parties evidenced by a document denominated as
Loan and Trust Receipt constituted partial payment on the policy. What is
clear from the wordings of the so-called Loan and Trust Receipt Agreement is
that appellant is obligated to hand over to appellee whatever recovery (Trans
Asia) may make and deliver to (Prudential) all documents necessary to prove its
interest in the said property.For all intents and purposes therefore, the money
receipted is payment under the policy, with Prudential having the right of
subrogation to whatever net recovery Trans-Asia may obtain from third parties
resulting from the fire. In the law on insurance, subrogation is an equitable
assignment to the insurer of all remedies which the insured may have against
third person whose negligence or wrongful act caused the loss covered by the
insurance policy, which is created as the legal effect of payment by the insurer
as an assignee in equity. The loss in the first instance is that of the insured but
after reimbursement or compensation, it becomes the loss of the insurer. It has
been referred to as the doctrine of substitution and rests on the principle that
substantial justice should be attained regardless of form, that is, its basis is the
doing of complete, essential, and perfect justice between all the parties without
regard to form.
3. An award of double interest is lawful and justified under Sections 243 and 244
of the Insurance Code. survey report on the ascertainment of the loss was
completed by the adjuster, Richard Hoggs International (Phils.), Inc. on 13
August 1996. PRUDENTIAL had thirty days from 13 August 1996 within which to
pay its liability to TRANS-ASIA under the insurance policy, or until 13 September
1996. Therefore, the double interest can begin to run from 13 September
1996 only.
Decision: PRUDENTIAL is directed to pay TRANS-ASIA the amount of P8,395,072.26,
representing the balance of the loss suffered by TRANS-ASIA + interests etc


TOPIC: INSURANCE
ROQUE VS. INTERMEDIATE APPELLATE COURT
GR No. L-66935 RATIO:
KEYWORD/S: Perils of the ship vs perils of the sea; logs damaged 1. The liability of the insurance company is governed by law. Section 113 of the
Insurance Code provides: In every marine insurance upon a ship or freight, or
FACTS:
freightage, or upon any thing which is the subject of marine insurance, a
Manila Bay Lighterage Corporation (Manila Bay), a common carrier, entered into a warranty is implied that the ship is seaworthy. Section 99 of the same Code also
contract with the petitioners whereby the former would load and carry on board its provides in part: Marine insurance includes: (1) Insurance against loss of or
barge Mable 10 about 422.18 cubic meters of logs from Malampaya Sound, Palawan damage to: (a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes,
to North Harbor, Manila. The petitioners insured the logs against loss for merchandise, ..From the quoted provisions, there can be no mistaking the fact
P100,000.00 with respondent Pioneer Insurance and Surety Corporation (Pioneer). 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
the petitioners loaded on the barge, 811 pieces of logs at Malampaya Sound, whoever is insuring the cargo whether he be the shipowner or not. Since the
Palawan for carriage and delivery to North Harbor, Port of Manila, but the shipment law provides for an implied warranty of seaworthiness in every contract of
never reached its destination because Mable 10 sank with the 811 pieces of logs ordinary marine insurance, it becomes the obligation of a cargo owner to look
somewhere off Cabuli Point in Palawan on its way to Manila. The barge where the for a reliable common carrier which keeps its vessels in seaworthy condition.
logs were loaded was not seaworthy such that it developed a leak. The appellate The shipper of cargo may have no control over the vessel but he has full control
court further found that one of the hatches was left open causing water to enter the in the choice of the common carrier that will transport his goods. Or the cargo
barge and because the barge was not provided with the necessary cover or tarpaulin, owner may enter into a contract of insurance which specifically provides that
the ordinary splash of sea waves brought more water inside the barge. Petitioners the insurer answers not only for the perils of the sea but also provides for
wrote a letter to Manila Bay demanding payment of P150,000.00 for the loss of the coverage of perils of the ship. We are constrained to apply Section 113 of the
shipment plus P100,000.00 as unrealized profits but the latter ignored the demand. Insurance Code to the facts of this case. As stated by the private respondents: In
Another letter was sent to respondent Pioneer claiming the full amount of marine cases, the risks insured against are "perils of the sea" (Chute v. North
P100,000.00 under the insurance policy but respondent refused to pay on the River Ins. Co). The purpose of such insurance is protection against contingencies
ground that its liability depended upon the "Total loss by Total Loss of Vessel only". and against possible damages and such a policy does not cover a loss or injury
Hence, petitioners commenced Civil Case against Manila Bay and respondent which must inevitably take place in the ordinary course of things. There is no
Pioneer. doubt that the term 'perils of the sea' extends only to losses caused by sea
RTC: Ruled in favor of petitioners. Only Pioneer appealed. damage, or by the violence of the elements, and does not embrace all losses
happening at sea. They insure against losses from extraordinary
CA: Absolved Pioneer from liability after finding that there was a breach of occurrences only, such as stress of weather, winds and waves, lightning,
implied warranty of seaworthiness on the part of the petitioners and that tempests, rocks and the like. These are understood to be the "perils of the sea"
the loss of the insured cargo was caused by the "perils of the ship" and not referred in the policy, and not those ordinary perils which every vessel must
by the "perils of the sea". It ruled that the loss is not covered by the marine encounter. "Perils of the sea" has been said to include only such losses as are
insurance policy. of extraordinary nature, or arise from some overwhelming power, which cannot
ISSUE/S: 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
1. w/n implied warranty of seaworthiness provided for in the Insurance Code done to a vessel at sea, as distinguished from the ordinary wear and tear of the
refers only to the responsibility of the shipowner who must see to it that his voyage, and distinct from injuries suffered by the vessel in consequence of her
ship is reasonably fit to make in safety the contemplated voyage. not being seaworthy at the outset of her voyage (as in this case). It is also the
2. W/n loss of the cargo was caused by the perils of the sea, not by the perils of general rule that everything which happens thru the inherent vice of the thing,
the ship because as found by the trial court, the barge was turned loose from or by the act of the owners, master or shipper, shall not be reputed a peril, if
the tugboat east of Cabuli Point "where it was buffeted by storm and waves." not otherwise borne in the policy.

TOPIC: INSURANCE

2. On the contention of the petitioners that the trial court found that the loss was
occasioned by the perils of the sea characterized by the "storm and waves"
which buffeted the vessel, the records show that the court ruled otherwise. It
stated: The other affirmative defense of defendant Lighterage, 'That the
supposed loss of the logs was occasioned by force majeure... "was not
supported by the evidence. 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 the petitioners' complaint, it is alleged that "the barge Mable 10 of
defendant carrier 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 "the loss of said
plaintiffs' cargo was due to the fault, negligence, and/or lack of skill of
defendant carrier and/or defendant carrier'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.


TOPIC: INSURANCE
AMERICAN HOME ASSURANCE COMPANY VS. CHUA ISSUE/S:
GR No. 130421 | June 28, 1999 1. whether there was a valid payment of premium, considering that respondents
check was cashed after the occurrence of the fire;
KEYWORD/S: cash and carry rule; check paid day before fire
2. whether respondent violated the policy by his submission of fraudulent
FACTS: documents and non-disclosure of the other existing insurance contracts; and
finally, whether respondent is entitled to the award of damages.
Antonio Chua obtained from American Home Assurance Co., a fire insurance
covering the stock-in-trade of his business, Moonlight Enterprises, located at RATIO:
Valencia, Bukidnon. The insurance was due to expire on 25 March 1990. Chua
1. general rule in insurance laws is that unless the premium is paid the insurance
issued a PCIBank check in the amount of P2,983.50 to petitioners agent, James Uy,
policy is not valid and binding. The only exceptions are life and industrial life
as payment for the renewal of the policy. In turn, the latter delivered a Renewal
insurance. Whether payment was indeed made is a question of fact which is
Certificate. The check was drawn against a Manila bank and deposited in petitioners
best determined by the trial court. The trial court found, as affirmed by the
bank account in Cagayan de Oro City. The corresponding official receipt was
Court of Appeals, that there was a valid check payment by respondent to
issued. Subsequently, a new insurance policy, was issued, whereby petitioner
petitioner. Well-settled is the rule that the factual findings and conclusions of
undertook to indemnify respondent for any damage or loss arising from fire up
the trial court and the Court of Appeals are entitled to great weight and respect,
to P200,000 for the period 25 March 1990 to 25 March 1991. On 6 April 1990
and will not be disturbed on appeal in the absence of any clear showing that
Moonlight Enterprises was completely razed by fire. Total loss was estimated
the trial court overlooked certain facts or circumstances which would
between P4,000,000 and P5,000,000. Respondent filed an insurance claim with
substantially affect the disposition of the case. We see no reason to depart from
petitioner and four other co-insurers, namely, Pioneer Insurance and Surety
this ruling.According to the trial court the renewal certificate issued to
Corporation, Prudential Guarantee and Assurance, Inc., Filipino Merchants Insurance
respondent contained the acknowledgment that premium had been paid. It is
Co. and Domestic Insurance Company of the Philippines. Petitioner refused to honor
not disputed that the check drawn by respondent in favor of petitioner and
the claim notwithstanding several demands by respondent, thus, the latter filed an
delivered to its agent was honored when presented and petitioner forthwith
action against petitioner before the trial court.
issued its official receipt to respondent on 10 April 1990. Section 306 of the
AHA’s contention: In its defense, petitioner claimed there was no existing insurance Insurance Code provides that any insurance company which delivers a policy or
contract when the fire occurred since respondent did not pay the premium. It also contract of insurance to an insurance agent or insurance broker shall be
alleged that even assuming there was a contract, respondent violated several deemed to have authorized such agent or broker to receive on its behalf
conditions of the policy, particularly: (1) his submission of fraudulent income tax payment of any premium which is due on such policy or contract of insurance
return and financial statements; (2) his failure to establish the actual loss, which at the time of its issuance or delivery or which becomes due thereon. In the
petitioner assessed at P70,000; and (3) his failure to notify to petitioner of any instant case, the best evidence of such authority is the fact that petitioner
insurance already effected to cover the insured goods. These violations, petitioner accepted the check and issued the official receipt for the payment. It is, as well,
insisted, justified the denial of the claim. bound by its agents acknowledgment of receipt of payment.
2. Is respondent guilty of the policy violations imputed against him? We are not
RTC: trial court ruled in favor of respondent. It found that respondent paid by convinced by petitioners arguments. The submission of the alleged fraudulent
way of check a day before the fire occurred. The check, which was documents pertained to respondents income tax returns for 1987 to
deposited in petitioners bank account, was even acknowledged in the 1989. Respondent, however, presented a BIR certification that he had paid the
renewal certificate issued by petitioners agent. It declared that the alleged proper taxes for the said years. The trial court and the Court of Appeals gave
fraudulent documents were limited to the disparity between the official credence to the certification and it being a question of fact, we hold that said
receipts issued by the Bureau of Internal Revenue (BIR) and the income tax finding is conclusive.
returns for the years 1987 to 1989. All the other documents were found to 3. Ordinarily, where the insurance policy specifies as a condition the disclosure of
be genuine. existing co-insurers, non-disclosure thereof is a violation that entitles the
CA: affirmed in toto rtc decision insurer to avoid the policy. This condition is common in fire insurance policies

TOPIC: INSURANCE
and is known as the other insurance clause. The purpose for the inclusion of this
clause is to prevent an increase in the moral hazard. However, we see an
exception in the instant case. Citing Section 29 of the Insurance Code, the trial
court reasoned that respondents failure to disclose was not intentional and
fraudulent. The application of Section 29 is misplaced. Section 29 concerns
concealment which is intentional. To constitute a violation the other existing
insurance contracts must be upon the same subject matter and with the same
interest and risk. Indeed, respondent acquired several co-insurers and he failed
to disclose this information to petitioner. Nonetheless, petitioner is estopped
from invoking this argument. The trial court cited the testimony of petitioners
loss adjuster who admitted previous knowledge of the co-insurers. , it cannot
be said that petitioner was deceived by respondent by the latters non-
disclosure of the other insurance contracts when petitioner actually had prior
knowledge thereof. Petitioners loss adjuster had known all along of the other
existing insurance contracts, yet, he did not use that as basis for his
recommendation of denial. The loss adjuster, being an employee of petitioner,
is deemed a representative of the latter whose awareness of the other
insurance contracts binds petitioner. We, therefore, hold that there was no
violation of the other insurance clause by respondent.


TOPIC: INSURANCE
LOURDES VS. PHILAM PLANS 1. Whether or not the CA erred in finding Manuel guilty of concealing his illness
when he kept blank and did not answer questions in his pension plan
GR No. 186983 | February 22, 2012
application regarding the ailments he suffered from;
KEYWORD/S: concealment; blood poisoning 2. Whether or not the CA erred in holding that Manuel was bound by the failure
of respondents Perla and Ma. Celeste to declare the condition
FACTS: of Manuels health in the pension plan application; and
Manuel Florendo filed an application for comprehensive pension plan with 3. Whether or not the CA erred in finding that Philam Plans approval
respondent Philam Plans, Inc. (Philam Plans) after some convincing by respondent of Manuels pension plan application and acceptance of his premium payments
Perla Abcede. Manuel signed the application and left to Perla the task of supplying precluded it from denying Lourdes claim.
the information needed in the application. Respondent Ma. RATIO:
Celeste Abcede, Perlas daughter, signed the application as sales counselor. Aside
from pension benefits, the comprehensive pension plan also provided life insurance 1. Since Manuel signed the application without filling in the details regarding his
coverage to Florendo. This was covered by a Group Master Policy that Philippine continuing treatments for heart condition and diabetes, the assumption is that
American Life Insurance Company (Philam Life) issued to Philam Plans. Under the he has never been treated for the said illnesses in the last five years preceding
master policy, Philam Life was to automatically provide life insurance coverage, his application. This is implicit from the phrase If your answer to any of the
including accidental death, to all who signed up for Philam Plans comprehensive statements above (specifically, the statement: I have never been treated for
pension plan. If the plan holder died before the maturity of the plan, his beneficiary heart condition or diabetes) reveal otherwise, please give details in the space
was to instead receive the proceeds of the life insurance, equivalent to the pre-need provided for. But this is untrue since he had been on Coumadin, a treatment for
price. Further, the life insurance was to take care of any unpaid premium until the venous thrombosis, and insulin, a drug used in the treatment of diabetes
pension plan matured, entitling the beneficiary to the maturity value of the pension mellitus, at that time. Manuel had been taking medicine for his heart condition
plan. Philam Plans issued Pension Plan Agreement PP43005584. to Manuel, with and diabetes when he submitted his pension plan application. These clearly fell
petitioner Ma. Lourdes S. Florendo, his wife, as beneficiary. In time, Manuel paid his within the five-year period. More, even if Perlas knowledge
quarterly premiums. Eleven months later Manuel died of. of Manuels pacemaker may be applied to Philam Plans under the theory of
blood poisoning.Subsequently, Lourdes filed a claim with Philam Plans for the imputed knowledge, it is not claimed that Perla was aware of his two other
payment of the benefits under her husbands plan. Because Manuel died before his afflictions that needed medical treatments. Pursuant to Section 27 of the
pension plan matured and his wife was to get only the benefits of his life Insurance Code, Manuels concealment entitles Philam Plans to rescind its
insurance, Philam Plans forwarded her claim to Philam Life. Philam life denied her contract of insurance with him.
claim. Philam Life found that Manuel was on maintenance medicine for his heart 2. Manuel forgot that in signing the pension plan application, he certified that he
and had an implanted pacemaker. Further, he suffered from diabetes mellitus and wrote all the information stated in it or had someone do it under his
was taking insulin. Lourdes renewed her demand for payment under the direction. Assuming that it was Perla who filled up the application form, Manuel
plan but Philam Plans rejected it, prompting her to file the present action against the is still bound by what it contains since he certified that he authorized her
pension plan company before the Regional Trial Court (RTC) of Quezon City action. Philam Plans had every right to act on the faith of that certification.
Lourdes could not seek comfort from her claim that Perla had assured Manuel
RTC: ruled in favor of lourdes that the state of his health would not hinder the approval of his application and
CA: reversed the RTC decision, holding that insurance policies are traditionally that what is written on his application made no difference to the insurance
contracts uberrimae fidae or contracts of utmost good faith. As such, it company. But, indubitably, Manuel was made aware when he signed the
required Manuel to disclose to Philam Plans conditions affecting the risk pension plan application that, in granting the same, Philam Plans
of which he was aware or material facts that he knew or ought to know and Philam Life were acting on the truth of the representations contained in
that application. The same may be said of Manuel, a civil engineer and manager
ISSUE/S: of a construction company. He could be expected to know that one must read
every document, especially if it creates rights and obligations affecting him,
before signing the same. Manuel is not unschooled that the Court must come

TOPIC: INSURANCE
to his succor. It could reasonably be expected that he would not trifle with
something that would provide additional financial security to him and to his
wife in his twilight years.
3. INCONTESTABILITY: The incontestability clause precludes the insurer from
disowning liability under the policy it issued on the ground of concealment or
misrepresentation regarding the health of the insured after a year of its
issuance. (As stated in the policy). Since Manuel died on the eleventh month
following the issuance of his plan, the one year incontestability period has not
yet set in. Consequently, Philam Plans was not barred from
questioning Lourdes entitlement to the benefits of her husband’s pension plan.


TOPIC: INSURANCE

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ETERNAL

In response to Eternals demand, Philamlife denied Eternals insurance claim in a RULING:

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