Luzon Surety Co., Inc. vs.

City of Bacolod
34 SCRA 509, August 31, 1970

Facts:

The city council of the City of Bacolod approved Ordinance 158, series of 1962. Pursuant to the said
ordinance the plaintiff Luzon Surety Co., Inc. was required to pay a fixed annual license fee of P300 and
to apply for and obtain from the City Mayor a permit (upon payment, of the sum of P20 to the City
Treasurer). In 1963 the plaintiff started to pay the said fees, but under protest. On February 13, 1964 the
plaintiff filed a complaint with the Court of First Instance of Negros Occidental, assailing the ordinance as
"illegal, invalid and unconstitutional" and asking for the refund of the amount of F430 it had previously
paid under protest.

The plaintiff alleged, inter alia, that the Bacolod city council exceeded the power and authority granted
to it by law in approving the said ordinance, as the latter contravenes section 2, subsection (j) of
Republic Act 2264 3 which prohibits cities from taxing insurance companies. The defendants contended,
however, that Commonwealth Act 326, as amended, otherwise known as "The Charter of the City of
Bacolod," grants the city council the power to enact ordinances intended to regulate and fix the amounts
of permit and license fees, and that moreover the ordinance in question does not violate section 2, sub-
section (j) of the Local Autonomy Act because the plaintiff is a surety company and not an insurance
company. On July 25, 1964 the lower court adjudged the plaintiff as a surety company and not an
insurance company and, therefore, as not entitled to claim exemption from the effects of the
controverted ordinance, which it declared valid, legal and constitutional.

Issue:
Whether the plaintiff which is a surety company can be considered an insurance company within the
meaning and intendment of section 2, sub-section (j) of the Local Autonomy Act

Ruling:
The plaintiff, which is the holder of a “Certificate of Authority” (issued by the Insurance Commissioner)
as a "fire, marine, earthquake, typhoon, tidal wave, riot, flood, civil commotion, war, civil war,
revolutions, rebellions, military or usurped power, use & occupancy, storm, bombardment, invasion,
insurrection, motor car, burglary, accident, and fidelity insurance company," and is authorized "to
become a surety upon official recognizances, stipulations, bonds and undertakings," 11 (a) is engaged in
the insurance business, and (b) is an insurance company within the intendment of section 2(j) of the
Local Autonomy Act. We therefore hold that the plaintiff is not liable for the payment of the annual
license fee of P300 imposed by the ordinance in question.
Gulf Resorts, Inc. vs. Philippine Charter Insurance Corporation
458 SCRA 550, May 16, 2005

Facts:
Plaintiff is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort
insured originally with the American Home Assurance Company (AHAC-AIU). In the first four insurance
policies issued by AHAC-AIU, the risk of loss from earthquake shock was extended only to plaintiff’s two
swimming pools. petitioner filed its formal demand for settlement of the damage to all its properties in
the Agoo Playa Resort. On August 23, 1990, respondent denied petitioner’s claim on the ground that its
insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort.
Petitioner and respondent failed to arrive at a settlement. The lower court after trial ruled in favor of the
respondent.

Because it is the finding of the Court as stated in the immediately preceding paragraph that defendant is
liable only for the damage caused to the two (2) swimming pools and that defendant has made known to
plaintiff its willingness and readiness to settle said liability, there is no basis for the grant of the other
damages prayed for by plaintiff. Petitioner’s Motion for Reconsideration was denied. Thus, petitioner
filed an appeal with the Court of Appeals. After review, the appellate court affirmed the decision of the
trial court. Hence, this petition.

Issue:
Whether or not the scope of the earthquake shock coverage shall cover all the properties since there is
no qualification placed

Ruling:
No. The supreme court held that the petition is devoid of merit. It is basic that all the provisions of the
insurance policy should be examined and interpreted in consonance with each other. All its parts are
reflective of the true intent of the parties. The policy cannot be construed piecemeal. Certain
stipulations cannot be segregated and then made to control; neither do particular words or phrases
necessarily determine its character. Petitioner cannot focus on the earthquake shock endorsement to
the exclusion of the other provisions. All the provisions and riders, taken and interpreted together,
indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming
pools only.

In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot rely on the
general rule that insurance contracts are contracts of adhesion which should be liberally construed in
favor of the insured and strictly against the insurer company which usually prepares it. A contract of
adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while
the other party merely affixes his signature or his “adhesion” thereto. Through the years, the courts have
held that in these type of contracts, the parties do not bargain on equal footing, the weaker party’s
participation being reduced to the alternative to take it or leave it. Thus, these contracts are viewed as
traps for the weaker party whom the courts of justice must protect. Consequently, any ambiguity therein
is resolved against the insurer, or construed liberally in favor of the insured.
Heirs of Ildelfonso Coscolluela, Sr., Inc. vs. Rico General Insurance Corp.
179 SCRA 511, November 16, 1989

Facts:
Petitioner, Heirs of Ildefonso Coscoluella, Inc. is a domestic corporation and the registered owner of an
Isuzu KBD Pick-up truck. The vehicle was insured with the private respondent Rico General Insurance
Corporation for a consideration of P100,000.00 excluding third party liability under Commercial Vehicle
Policy No. CV-122415 per Renewal Certificate No. 02189. The premiums and other expenses for
insurance paid covered the period from October 1, 1986 to October 1, 1987. On August 28, 1987 and
within the period covered by the insurance, the insured vehicle was severely damaged and rendered
unserviceable when fired upon by a group of unidentified armed persons at Hacienda Puyas, Barangay
Blumentritt, Murcia, Negros Occidental. In the same incident, four persons died. Petitioner filed its claim
of P80,000.00 for the repair of the vehicle but private respondent, in a letter dated October 8, 1987,
refused to grant it. As a consequence, the petitioner was prompted to file a complaint with the Regional
Trial Court, to recover the claim of P80,000.00 plus interest and attorney’s fees.

The private respondent filed a motion to dismiss alleging that the complaint lacks a cause of action
because the firing by armed men is a risk excepted under the provisions stated in the insurance policy.
The trial court ordered the dismissal of the complaint for lack of cause of action stating that the damage
arose from a civil commotion or was a direct result thereof. Petitioner filed a notice of appeal which was
given due course. Thereafter, the petitioner filed a petition for certiorari with the Court of Appeals. The
appellate court denied the petition, affirmed the trial court’s dismissal order, and also ruled that an
appeal in the ordinary course of law, not a special civil action of certiorari, is the proper remedy for the
petitioner in assailing the dismissal order. Hence, this petition to review the respondent appellate court’s
decision.

Issue:
Whether the Court of Appeals erred in affirming the dismissal of the complaint for lack of cause of action
and in denying due course to a petition for certiorari.

Ruling:
The allegations in the complaint sufficiently establish a cause of action. The insurance contract manifests
a right to pursue a claim and a duty on the part of the insurer to compensate the insured in case of a risk
insured against. The burden of proof to show that the insured is not liable because of an excepted risk is
on the insurance company. It would be a grave and dangerous procedure for the courts to permit
insurance companies to escape liability through a motion to dismiss without the benefit of hearing and
evidence. The nature of the firing incident for the purpose of determining liability must be resolved in a
full-blown trial.

The private respondent’s invocation of the exceptions clause in the insurance policy as the basis for its
non-liability and the consequent dismissal of the complaint is without merit. We also reiterate the
established rule that when the terms of an insurance contract contain limitations on liability, the court
“should construe them in such a way as to preclude the insurer from non-compliance with his
obligations.” A policy of insurance with a narration of exceptions tending to work a forfeiture of the
policy shall be interpreted liberally in favor of the insured and strictly against the insurance company or
the party for whose benefit they are inserted.

Philamcare Health Systems, Inc. vs. Court of Appeals

379 SCRA 356 March 18, 2002

Facts:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage with
petitioner Philamcare Health Systems, Inc. In the standard application form, he answered no to the
following question: Have you or any of your family members ever consulted or been treated for high
blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? Under the
agreement, respondent’s husband was entitled to avail of hospitalization benefits, whether ordinary or
emergency, listed therein. He was also entitled to avail of “out-patient benefits” such as annual physical
examinations, preventive health care and other out-patient services. During the period of his coverage,
Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month
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 her claim saying that the Health Care
Agreement was void. According to petitioner, there was a concealment regarding Ernani’s medical
history. Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the application form. Thus, respondent
paid the hospitalization expenses herself, amounting to about P76,000.00.

On July 24, 1990, respondent instituted with the Regional Trial Court an action for damages against
petitioner and its president, Dr. Benito Reverente. She asked for reimbursement of her expenses plus
moral damages and attorney’s fees. After trial, the lower court ruled against petitioners. On appeal, the
Court of Appeals affirmed the decision of the trial court but deleted all awards for damages and
absolved petitioner Reverente. Petitioner’s motion for reconsideration was denied. Hence, petitioner
brought the instant petition for review.

Issue:
Whether or not the health care agreement is an insurance contract

Ruling:
Yes. Section 3 of the Insurance Code states that any contingent or unknown event, whether past or
future, which may damnify a person having an insurable interest against him, may be insured against.
Every person has an insurable interest in the life and health of himself. Section 10 provides: Every person
has an insurable interest in the life and health: of himself, of his spouse and of his children; of any person
on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
of any person under a legal obligation to him for the payment of money, respecting property or service,
of which death or illness might delay or prevent the performance; and of any person upon whose life any
estate or interest vested in him depends. In the case at bar, 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-life insurance, which is primarily a contract of indemnity. Once the member incurs
hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the
health care provider must pay for the same to the extent agreed upon under the contract.

Alpha Insurance and Surety Co. vs. Castor

704 SCRA 550 September 2, 2013

Facts:
On February 21, 2007, respondent entered into a contract of insurance with petitioner, involving her
motor vehicle, a Toyota Revo DLX DSL. The contract of insurance obligates the petitioner to pay the
respondent the amount of Six Hundred Thirty Thousand Pesos (P630,000.00) in case of loss or damage
to said vehicle during the period covered. On April 16, 2007, at about 9:00 a.m., respondent instructed
her driver, Jose Joel Salazar Lanuza (Lanuza), to bring the above-described vehicle to a nearby auto-shop
for a tune-up. However, Lanuza no longer returned the motor vehicle to respondent and despite diligent
efforts to locate the same, said efforts proved futile. Resultantly, respondent promptly reported the
incident to the police and concomitantly notified petitioner of the said loss and demanded payment of
the insurance proceeds in the total sum of P630,000.00.

In letters dated July 12, 2007 and August 3, 2007, respondent reiterated her claim and argued that the
exception refers to damage of the motor vehicle and not to its loss. However, petitioner’s denial of
respondent’s insured claim remains firm. Accordingly, respondent filed a Complaint for Sum of Money
with Damages against petitioner before the Regional Trial Court (RTC) of Quezon City on September 10,
2007. In a Decision dated December 19, 2008, the RTC of Quezon City ruled in favor of respondent
Aggrieved, petitioner filed an appeal with the CA. On May 31, 2011, the CA rendered a Decision affirming
in toto the RTC of Quezon City’s decision. Hence, the present petition.

Issue:
Whether or not the loss of respondent’s vehicle is excluded under the insurance policy.

Ruling:
No. Ruling in favor of respondent, the RTC of Quezon City scrupulously elaborated that theft perpetrated
by the driver of the insured is not an exception to the coverage from the insurance policy, since Section
III thereof did not qualify as to who would commit the theft. Moreover, contracts of insurance, like other
contracts, are to be construed according to the sense and meaning of the terms which the parties
themselves have used. If such terms are clear and unambiguous, they must be taken and understood in
their plain, ordinary and popular sense.

Therefore, petitioner cannot exclude the loss of respondent’s vehicle under the insurance policy under
paragraph 4 of “Exceptions to Section III,” since the same refers only to “malicious damage,” or more
specifically, “injury” to the motor vehicle caused by a person under the insured’s service. Paragraph 4
clearly does not contemplate “loss of property,” as what happened in the instant case.
Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company
551 SCRA 1, April 9, 2008

Facts:
On December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife) entered
into an agreement denominated as Creditor Group Life Policy No. P-19202 with petitioner Eternal
Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased
burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage
depended upon the existing balance of the purchased burial lots. The policy was to be effective for a
period of one year, renewable on a yearly basis. Eternal was required under the policy to submit to
Philamlife a list of all new lot purchasers, together with a copy of the application of each purchaser, and
the amounts of the respective unpaid balances of all insured lot purchasers. One of those included in the
list as “new business” was a certain John Chuang. His balance of payments was PhP 100,000. On August
2, 1984, Chuang died. Eternal sent a letter dated August 20, 19845 to Philamlife, which served as an
insurance claim for Chuang’s death.

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 payment of the claim for PhP 100,000. In
response to Eternal’s demand, Philamlife denied Eternal’s insurance claim. Consequently, Eternal filed a
case before the Makati City Regional Trial Court (RTC) for a sum of money against Philamlife. The trial
court decided in favor of Eternal. Philamlife appealed to the CA which it reversed the decision of the RTC.
Hence, we have this petition.

Issue:
May the inaction of the insurer on the insurance application be considered as approval of the
application?

Ruling:
Yes. 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.
Commissioner of Internal Revenue vs. Asturias Sugar Central, Inc.
2 SCRA 1140 August 31, 1961

Facts:
Asturias Sugar Central, Inc., a corporation in the Philippines, operated a sugar mill in Dumalag, Capiz.
During World War II, the mill was destroyed by the retreating USAFFE forces in 1942 but was rebuilt by
1947. The company filed a war damage claim with the Philippine War Damage Commission amounting to
P2,135,685.51, of which P1,064,812.92 was approved for payment. The first payment of P426,525.16
was made in 1950, followed by a second payment of P319,413.90 later that year. However, further
payments were halted due to insufficient funds.

Asturias Sugar Central claimed a deduction of P354,606.30 for war losses in its 1950 income tax return,
but this deduction was disallowed by the tax authorities. Consequently, deficiency income tax
assessments were issued for the years 1950 and 1951, totaling P25,402.00, which the company paid.
Despite requesting a refund of this amount, it was denied by the respondent in 1956.

Issue:
Whether the war losses were properly deductible in 1942 when the losses were actually sustained or in
1950 and 1951 when the claim for indemnity was finally determined.

Ruling:
The court held that the losses of the Asturias Sugar Central were compensable under the War Damage
Corporation Act. The Act authorized the War Damage Corporation to provide compensation for loss or
damage to property resulting from enemy attack. The losses sustained by the corporation on April 18,
1942, were within the period covered by the Act. The court distinguished this case from a previous case
involving Cu Unjieng & Sons, Inc., where the losses were not compensable under the Act because they
occurred after July 1, 1942. The court also rejected the argument that the compensation under the Act
was purely moral and not legal, stating that the Act established a relation between the War Damage
Corporation and the property owner identical to that of an insurer and insured under a contract of
insurance.

Cerezo vs. Atlantic, Gulf & Pacific Co.

33 PHIL 425, February 4, 1916

Facts:
On July 8, 1913, a day laborer working for the defendant was assisting in laying gas pipes on Calle Herran
in Manila. The trench had been dug and pipes laid up to a certain point, with work ongoing to fill the
trench at the west end. However, there was no work being done at the east end of the trench. The
deceased entered the trench at the east end to attend to a personal need, at which point the trench
collapsed, burying him up to his neck and resulting in his death.
There is no evidence to suggest that the deceased had been instructed by the defendant to enter the
trench at that specific location or that he was performing any duty for the defendant at the time.
Additionally, there was no indication that the defendant had designated the trench as a place to be used
for personal needs or that they had allowed such usage. The trench was between 3 and 4 feet deep, and
there was no danger associated with refilling it. The deceased's duty was to refill the trench at the west
end, where work was ongoing.

The plaintiff insists that the defendant was negligent in failing to shore or brace the trench at the place
where the accident occurred. While, on the other hand, the defendant urges (1) that it was under no
obligation, in so far as the deceased was concerned, to brace the trench, in the absence of a showing
that the soil was of a loose character or the place itself was dangerous, and (2) that although the relation
of master and servant may not have ceased, for the time being, to exist, the defendant was under no
duty to the deceased except to do him no intentional injury, and to furnish him with a reasonably safe
place to work.

Issue:
Whether or not the plaintiff has a right to recover for damages under the Employer’s Liability Act (Act
No. 1874) or the Civil Code

Ruling:
The Plaintiff cannot recover from neither laws, an overwhelming jurisprudence holds master was bound
to exercise that measure of care which reasonably prudent men take under similar circumstances. But
the master was not an insurer and was not required to provide the safest possible plant or to adopt the
latest improvements or to warrant against latent defects which a reasonable inspection did not disclose.
It was only necessary that the danger in the work be not enhanced through his fault.

Upon a full consideration of the evidence, we are clearly of the opinion that ordinary care did not
require the shoring of the trench walls at the place where the deceased met his death. The event
properly comes within the class of those which could not be foreseen; and, therefore, the defendant is
not liable under the Civil Code.

Constantino vs. Asia Life Insurance Co.

87 PHIL 248, August 31, 1950

Facts:
In the first case, Asia Life Insurance Company issued Policy No. 93912 to insure the life of Arcadio
Constantino for P3,000 for a term of twenty years, with Paz Lopez de Constantino as the beneficiary. The
initial premium was paid on September 27, 1941, but no further premiums were paid due to the closure
of the insurer's Manila branch during the Japanese occupation. Arcadio Constantino died on September
22, 1944.
In the second case, Asia Life Insurance Company issued Policy No. 78145 to cover the lives of spouses
Tomas Ruiz and Agustina Peralta for P3,000. Premiums were regularly paid until September 30, 1941,
and thereafter changed to quarterly payments until November 18, 1941. No further payments were
made due to the war, and Tomas Ruiz died on February 16, 1945.

Both plaintiffs argue that they are entitled to the policy proceeds minus any outstanding premiums,
attributing the nonpayment of premiums to the closure of the insurer's offices during the Japanese
occupation and the extraordinary circumstances of war. Defendant on the other hand asserts that the
policies had lapsed for non-payment of premiums, in accordance with the contract of the parties and the
law applicable to the situation.

Issue:
Whether the beneficiaries can still recover the amount of the policies despite the insured's failure to pay
the premiums

Ruling:
No. After perusing the Insurance Act, we are firmly persuaded that the non-payment of premiums is
such a vital defense of insurance companies that since the very beginning, said Act No. 2427 expressly
preserved it, by providing that after the policy shall have been in force for two years, it shall become
incontestable except for fraud, non-payment of premiums, and military or naval service in time of war
(sec. 184 [b], Insurance Act). And when Congress recently amended this section (Rep. Act No. 171), the
defense of fraud was eliminated, while the defense of nonpayment of premiums was preserved. Thus,
the fundamental character of the undertaking to pay premiums and the high importance of the defense
of non-payment thereof, was specifically recognized.