7.

Del Rosario v Equitable Insurance

FACTS:
April 13, 1957: Simeon del Rosario, father of the insured who died from drowning filed a
claim for payment with Equitable Ins. and Casualty Co., Inc. but it refused to pay more than
P1,000 php so a case was filed with the RTC for the P2,000 balance stating that under the
policy they are entitled to P1,000 to P3,000 as indemnity
RTC: entitled to recover P3,000 - policy does not positively state any definite amount, there
is an ambiguity in this respect in the policy, which ambiguity must be interpreted in favor of
the insured and strictly against the insurer so as to allow greater indemnity
ISSUE: W/N Simeon is entitled to recover P3,000
HELD: YES.
terms in an insurance policy, which are ambiguous, equivocal or uncertain are to be
construed strictly against, the insurer, and liberally in favor of the insured so as to effect the
dominant purpose of indemnity or payment to the insured, especially where a forfeiture is
involved
reason for this rule is that the "insured usually has no voice in the selection or arrangement
of the words employed and that the language of the contract is selected with great care and
deliberation by expert and legal advisers employed by, and acting exclusively in the interest
of, the insurance company
8. Landicho v GSIS
FACTS:
On June 1, 1964, the GSIS issued in favor of Flaviano Landicho, a civil engineer of the Bureau
of Public Works, stationed at Mamburao, Mindoro Occidental, optional additional life
insurance policy No. OG-136107in the sum of P7,900.
Before the issuance of said policy, Landicho had filed an application, by filing and signing a
printed form of the GSIS on the basis of which the policy was issued. Paragraph 7 of said
application States:7. xxx I hereby agree as follows: xxxc. That this application serves as a
letter of authority to the Collecting Officer of our Office thru the GSIS to deduct from my
salary the monthly premium in the amount of P33.36,beginning the month of May, 1964,and
every month thereafter until notice of its discontinuance shall have been received from the
System; .d. That the failure to deduct from my salary the month premiums shall not make
the policy lapse, however, the premium account shall be considered as indebtedness which,
I bind myself to pay the System; .e. That my policy shall be made effective on the first day of
the month next following the month the first premium is paid; provided, that it is not more
ninety (90) days before or after the date of the medical examination, was conducted if
required. "While still an employee of the Bureau of Public Works ,Mr. Landicho died in an
airplane crash on June 29,1966. Mrs. Landicho, in her own behalf and that of her co-plaintiffs
and minor children, Rafael J. and Maria Lourdes Eugenia, filed with the GSIS a claim
forP15,800, as the double indemnity due under policy No.OG-136107. GSIS denied the claim,
upon the ground that the policy had never been in force because, pursuant to subdivision (e)
of the above-quoted paragraph 7 of the application, the policy "shall be ...effective on the
first day of the month next following the month the first premium is paid," and no premium
had ever been paid on said policy. The Lower Court decided in favor of the petitioner. GSIS
appealed to the Supreme Court.
ISSUE:

WON the insurance policy in question has ever been in force, not a single premium having
been paid thereon.
RULING:
Lower Court decision is sustained.(T)he language, of subdivisions (c), (d) and (e) is such as
to create an ambiguity that should be resolved against the party responsible therefor
defendant GSIS, as the party who prepared and furnished the application form and in
favor of the party misled thereby, the insured employee. Indeed, our Civil Code provides:
The interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity.
This is particularly true as regards insurance policies, in respect of which it is settled that the
" "terms in an insurance policy, which are ambiguous, equivocal, or uncertain ...
are to be construed strictly and most strongly against the insurer, and liberally in favor of
the insured
so as to effect the dominant purpose of indemnity or payment to the insured, especially
where a forfeiture is involved" (29 Am. Jur., 181), and the reason for this rule is the "insured
usually has no voice in the selection or arrangement of the words employed and that the
language of the contract is selected with great care and deliberation by experts and legal
advisers employed by, and acting exclusively in the interest of, the insurance company." (44
C.J.S., p.1174.).The equitable and ethical considerations justifying the foregoing view are
bolstered up by two (2) factors, namely:(a) The aforementioned subdivision (c) states "that
this application serves as a letter of authority to the Collecting Officer of our Office" the
Bureau of Public Works "thru the GSIS to deduct from my salary the monthly premium in
the amount of P33.36." No such deduction was made and, consequently, not even the
first premium "paid" because the collecting officer of the Bureau of Public Works was not
advised by the GSIS to make it (the deduction) pursuant to said authority. Surely, this
omission of the GSIS should not inure to its benefit. .(b)The GSIS had impliedly induced the
insured to believe that Policy No. OG-136107 was in force, he having been paid by the GSIS
the dividends corresponding to said policy . Had the insured had the slightest inkling that
the latter was not, as yet, effective for non-payment of the first premium, he would have, in
all probability, caused the same to be forthwith satisfied. WHEREFORE, the decision
appealed from should be, it is hereby affirmed, with costs against the defendant-appellant,
Government Service Insurance System. It is so ordered. .
9. Eternal Gardens v Philamlife
FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group
Life Policy 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 relevant provisions of the policy are:
ELIGIBILITY, EVIDENCE OF INSURABILITY.,LIFE INSURANCE BENEFIT.,EFFECTIVE DATE OF
BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan
with the Assured. However, there shall be no insurance if the application of the Lot
Purchaser is not approved by the Company.
Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers,
together with a copy of the application of each purchaser, and the amounts of the respective

unpaid balances of all insured lot purchasers. Eternal complied by submitting a letter dated
December 29, 1982, containing a list of insurable balances of its lot buyers for October
1982. One of those included in the list as new business was a certain John Chuang. His
balance of payments was 100K. on August 2, 1984, Chuang died.
Eternal sent a letter dated to Philamlife, which served as an insurance claim for Chuangs
death. Attached to the claim were certain documents. In reply, Philamlife wrote Eternal a
letter requiring Eternal to submit the additional documents relative to its insurance claim for
Chuangs death. Eternal transmitted the required documents through a letter which was
received by Philamlife.
After more than a year, Philamlife had not furnished Eternal with any reply to the latters
insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim
for PhP 100,000.
In response to Eternals demand, Philamlife denied Eternals insurance claim in a letter a
portion of which reads:
The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal
Gardens Memorial Park in October 1982 for the total maximum insurable amount of
P100,000.00 each. No application for Group Insurance was submitted in our office prior to
his death on August 2, 1984
Eternal filed a case with the RTC for a sum of money against Philamlife, which decided in
favor of Eternal, ordering Philamlife to pay the former 100K representing the proceeds of the
policy.
CA reversed. Hence this petition.
ISSUE: WON Philamlife should pay the 100K insurance proceeds
HELD: petition granted. YES
An examination of the provision of the POLICY under effective date of benefit, 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 latters interest.
On the other hand, the seemingly conflicting provisions must be harmonized to mean that
upon a partys 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
the Creditor Group Life Policy 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.
10. Malayan Insurance v Ca

Facts: Malayan Insurance Co. Inc. (MALAYAN) issued a Private Car Comprehensive Policy
covering a Willys jeep. The insurance coverage was for "own damage" not to exceed
P600.00 and "third-party liability" in the amount of P20,000.00.
During the effectivity of the insurance policy, , the insured jeep, while being driven by one
Juan P. Campollo an employee of the respondent San Leon Rice Mill, Inc., (SAN LEON)
collided with a passenger bus belonging to the respondent Pangasinan Transportation Co.,
Inc. (PANTRANCO) at the national highway in Barrio San Pedro, Rosales, Pangasinan, causing
damage to the insured vehicle and injuries to the driver, Juan P. Campollo, and the
respondent Martin C. Vallejos, who was riding in the ill-fated jeep.
Martin C. Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc.
and the PANTRANCO before the Court of First Instance of Pangasinan. The trial court
rendered judgment holding Sio Choy, SAN LEON, and MALAYAN jointly and severally liable.
However, MALAYANs liability will only be up to P20,000.
On appeal, CA affirmed the decision of the trial court. However, it ruled that SAN LEON has
no obligation to indemnify or reimburse the petitioner insurance company for whatever
amount it has been ordered to pay on its policy, since the San Leon Rice Mill, Inc. is not a
privy to the contract of insurance between Sio Choy and the insurance company.
MALAYAN appealed to the SC by way of review on certiorari.
Issues:
(1) Whether or not MALAYAN is solidarily liable to Vallejos, along with Sio Choy and SAN
LEON
(2) Whether or not MALAYAN is entitled to be reimbursed by SAN LEON for whatever amount
petitioner has been adjudged to pay respondent Vallejos on its insurance policy.
Held:
(1) Only Sio Choy and SAN LEON are solidarily liable to Vallejos for the award of damages.
Sio Choy is liable as owner of the jeep pursuant to Article 2184, while SAN LEON is liable as
the employer of the driver of the jeep at the time of the accident pursuant to Art 2180.
MALAYANs liability, however, arose only out of the insurance policy with Sio Choy. Petitioner
as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, as incorrectly held by
the trial court, be made "solidarily" liable with the two principal tortfeasors namely
respondents Sio Choy and SAN LEON.
(2) MALAYAN is entitled to be reimbursed. Upon payment of the loss, the insurer is entitled to
be subrogated pro tanto to any right of action which the insured may have against the third
person whose negligence or wrongful act caused the loss. When the insurance company
pays for the loss, such payment operates as an equitable assignment to the insurer of the
property and all remedies which the insured may have for the recovery thereof. That right is
not dependent upon , nor does it grow out of any privity of contract or upon written
assignment of claim, and payment to the insured makes the insurer assignee in equity.
11. Alpha Insurance v Castor
FACTS:
Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota Revo DLX DSL with
Alpha Insurance and Surety Co (Alpha). The contract of insurance obligates the petitioner to

pay the respondent the amount of P630,000 in case of loss or damage to said vehicle during
the period covered.
On April 16, 2007, respondent instructed her driver, Jose Joel Salazar Lanuza to bring the
vehicle to nearby auto-shop for a tune up. However, Lanuza no longer returned the motor
vehicle 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.
Alpha, however, denied the demand of Castor claiming that they are not liable since the
culprit who stole the vehicle is employed with Castor. Under the Exceptions to Section III of
the Policy, the Company shall not be liable for (4) any malicious damage caused by the
insured, any member of his family or by A PERSON IN THE INSUREDS SERVICE.
Castor filed a Complaint for Sum of Money with Damages against Alpha before the Regional
Trial Court of Quezon City. The trial court rendered its decision in favor of Castor which
decision is affirmed in toto by the Court of Appeals. Hence, this Petition for Review on
Certiorari.
ISSUE:
Whether or not the loss of respondents vehicle is excluded under the insurance policy
HELD:
NO. The words loss and damage mean different things in common ordinary usage. The
word loss refers to the act or fact of losing, or failure to keep possession, while the word
damage means deterioration or injury to property. Therefore, petitioner cannot exclude the
loss of Castors 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 insureds service. Paragraph 4 clearly
does not contemplate loss of property.
A contract of insurance is a contract of adhesion. So, when the terms of the insurance
contract contain limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. Thus, in Eternal Gardens
Memorial Park Corporation vs. Philippine American Life Insurance Company, this Court ruled
that 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 latters interest.
12. Rizal Surety v Ca
J. Purisima
Facts:
Rizal Surety issued a 1 million peso fire insurance policy with Transworld. This was increased
to 1.5 million. A four span building was part of the policy. A fire broke out and gutted the
building, together with a two storey building behind it were gaming machines were stored.
The company filed its claims but to no avail. Hence, it brought a suit in court. It aimed to
make Rizal pay for almost 3 million including legal interest and damages. Rizal claimed that
the policy only covered damage on the four span building and not the two storey building.
The trial court ruled in Transworlds favor and ordered Rizal to pay actual damages only. The
court of appeals increased the damages. The insurance company filed a MFR. The CA
answered by modifying the imposition of interest. Not satisfied, the insurance company
petitioned to the Supreme Court.

Issue:
WON Rizal Surety is liable for loss of the two-storey building considering that the fire
insurance policy sued upon covered only the contents of the four-span building.
Held: Yes. Petition dismissed.
Ratio:
The policy had clauses on the building coverage that read:
"contained and/or stored during the currency of this Policy in the premises occupied by them
forming part of the buildings situated within own Compound"
"First, said properties must be contained and/or stored in the areas occupied by Transworld
and second, said areas must form part of the building described in the policy xxx"
This generally means that the policy didnt limit its coverage to what was stored in the fourspan building.
As to questions of fact, both the trial court and the Court of Appeals found that the so called
"annex " was not an annex building but an integral part of the four-span building described
in the policy and consequently, the machines and spare parts stored were covered by the
fire insurance.
A report said: "Two-storey building constructed of partly timber and partly concrete hollow
blocks under g.i. roof which is adjoining and intercommunicating with the repair of the first
right span of the lofty storey building and thence by property fence wall."
"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor
the party who caused the obscurity"
Landicho v GSIS- the 'terms in an insurance policy, which are ambiguous, equivocal, or
uncertain are to be construed strictly and most strongly against the insurer, and liberally in
favor of the insured so as to effect the dominant purpose of indemnity or payment to the
insured
The issue of whether or not Transworld has an insurable interest in the fun and amusement
machines and spare parts, which entitles it to be indemnified for the loss thereof, had been
settled in another SC case.
13. Gulf Resorts v Phil Charter Insurance
Facts: Gulf Resorts 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). In the first 4 policies issued, the risks of loss from earthquake shock was extended
only to petitioners two swimming pools. Gulf Resorts agreed to insure with Phil Charter the
properties covered by the AHAC policy provided that the policy wording and rates in said
policy be copied in the policy to be issued by Phil Charter. Phil Charter issued Policy No.
31944 to Gulf Resorts covering the period of March 14, 1990 to March 14, 1991 for
P10,700,600.00 for a total premium of P45,159.92. the break-down of premiums shows that
Gulf Resorts paid only P393.00 as premium against earthquake shock (ES). In Policy No.
31944 issued by defendant, the shock endorsement provided that In consideration of the
payment by the insured to the company of the sum included additional premium the
Company agrees, notwithstanding what is stated in the printed conditions of this policy due
to the contrary, that this insurance covers loss or damage to shock to any of the property
insured by this Policy occasioned by or through or in consequence of earthquake (Exhs. "1-

D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit "7-C" the word "included" above
the underlined portion was deleted. On July 16, 1990 an earthquake struck Central Luzon
and Northern Luzon and plaintiffs properties covered by Policy No. 31944 issued by
defendant, including the two swimming pools in its Agoo Playa Resort were damaged.
Petitioner advised respondent that it would be making a claim under its Insurance Policy
31944 for damages on its properties. Respondent denied petitioners claim on the ground
that its insurance policy only afforded earthquake shock coverage to the two swimming
pools of the resort. The trial court ruled in favor of respondent. In its ruling, the schedule
clearly shows that petitioner paid only a premium of P393.00 against the peril of earthquake
shock, the same premium it had paid against earthquake shock only on the two swimming
pools in all the policies issued by AHAC.
Issue: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts
and does not extend to all properties damaged therein
Held: YES. 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. An insurance premium is the consideration paid an insurer for undertaking to indemnify
the insured against a specified peril. In fire, casualty and marine insurance, the premium
becomes a debt as soon as the risk attaches. In the subject policy, no premium payments
were made with regard to earthquake shock coverage except on the two swimming pools.
There is no mention of any premium payable for the other resort properties with regard to
earthquake shock. This is consistent with the history of petitioners insurance policies with
AHAC.