RAFAEL ENRIQUEZ vs.

SUN LIFE
ASSURANCE COMPANY OF CANADA
G.R. No. L-15895 November 29, 1920

RULING:

FACTS:

bar was not perfected because it has not been

On September 24, 1917, Joaquin Herrer made

proved satisfactorily that the acceptance of the

application to the Sun Life Assurance Company

application ever came to the knowledge of the

of Canada through its office in Manila for a life

applicant.

No, the contract for a life annuity in the case at

annuity. Two days later he paid the sum of

P6,000 to the manager of the company's Manila

An acceptance of an offer of insurance not

office and was given a provisional receipt.

actually or constructively communicated to the

proposer does not make a contract. Only the

The application was forwarded to the head office

mailing of acceptance, it has

been said,

of the company at Montreal, Canada and on

completes the contract of insurance, as the locus

November 26, 1917 a notice of acceptance was

poenitentiae is ended when the acceptance has

sent by cable to Manila. (There is no evidence

passed beyond the control of the party.

however, whether on the same day the cable

was received notice was sent by the Manila
office of Herrer that the application had been
accepted)

An acceptance made by letter shall not bind the

person making the offer except from the time it
came to his knowledge (Civil Code Art. 1262).
When a letter or other mail matter is addressed

On December 4, 1917, the policy was issued. On

December 18, 1917, Herrer communicated his
desire to withdraw his application through his
lawyer.

and mailed with postage prepaid there is

a rebuttable presumption of fact that it was
received by the addressee as soon as it could
have been transmitted to him in the ordinary
course of the mails. But if any one of these

The local office replied to Mr. Torres, stating

that the policy had been issued, and called
attention to the notification of November 26,
1917. The reply was received by Herrer's council
a day after the latter died.

Plaintiff ad administrator of the estate of the late

Joaquin Ma. Herrer to recover from the
defendant life insurance company the sum of
pesos 6,000 paid by the deceased for a life
annuity. The trial court gave judgment for the
defendant.

ISSUE:
Whether or not the insurance contract between
Sun Life and Herrer has been perfected

elemental facts fails to appear, it is fatal to the

presumption. A letter will not be presumed to
have been received by the addressee unless it is
shown that it was deposited in the post-office,
properly addressed and stamped.

Ratio:
Section 50 of the Insurance Act which provides

Insular v Ebrado G.R. No. L-44059

October 28, 1977

that "the insurance shall be applied exclusively

Facts:

to the proper interest of the person in whose

J. Martin:

name it is made"

Cristor Ebrado was issued by The Life Assurance

The word "interest" highly suggests that the

Co., Ltd., a policy for P5,882.00 with a rider

provision refers only to the "insured" and not to

for Accidental Death. He designated Carponia T.

the beneficiary, since acontract of insurance is

Ebrado as the revocable beneficiary in his policy.

personal in character. Otherwise, the prohibitory

He referred to her as his wife.

laws against illicit relationships especially on

Cristor was killed when he was hit by a

property and descent will be rendered nugatory,

failing branch of a tree. Insular Life was made

as the same could easily be circumvented by

liable to pay the coverage in the total amount of

modes of insurance.

P11,745.73, representing the face value of the

When not otherwise specifically provided for by

policy in the amount of P5,882.00 plus the

the Insurance Law, the contract of life insurance

additional benefits foraccidental death.

is governed by the general rules of the civil law

Carponia T. Ebrado filed with the insurer a claim

regulating contracts. And under Article 2012 of

for

the same Code, any person who is forbidden

the

proceeds

as

the

designated beneficiary therein, although she

from receiving any donation under Article 739

admited that she and the insured were merely

cannot be named beneficiary of a fife insurance

living as husband and wife without the benefit of

policy

marriage.

a donation to him. Common-law spouses are

Pascuala Vda. de Ebrado also filed her claim as

barred from receiving donations from each

the widow of the deceased insured. She asserts

other.

that she is the one entitled to the insurance

Article 739 provides that void donations are

proceeds.

those made between persons who were guilty of

Insular commenced an action for Interpleader

adultery or concubinage at the time of donation.

before the trial court as to who should be given

There is every reason to hold that the bar in

the proceeds. The court declared Carponia

donations between legitimate spouses and those

as disqualified.

between illegitimate ones should be enforced in

by

the

person

who

cannot

make

life insurance policies since the same are based

Issue:

WON

common-law

wife

named

on similar consideration. So long as marriage

as beneficiary in the life insurance policy of a

remains the threshold of family laws, reason and

legally married man can claim the proceeds in

morality dictate that the impediments imposed

case of death of the latter?

upon married couple should likewise be imposed

upon extra-marital relationship.

Held: No. Petition

A conviction for adultery or concubinage isnt

required

exacted

before

the

disabilities

mentioned in Article 739 may effectuate. The

article says that in the case referred to in No. 1,
the action for declaration of nullity may be
brought by the spouse of the donor or donee;
and the guilty of the donee may be proved by
preponderance of evidence in the same action.
The underscored clause neatly conveys that no
criminal conviction for the offense is a condition
precedent. The law plainly states that the guilt of
the party may be proved in the same acting for
declaration of nullity of donation. And, it would
be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado
with whom she has six legitimate children. He
was also living in with his common-law wife with
whom he has two children.

Filipinas Compania de Seguros, et al. v.

Mandanas, G.R. No. L19638, June 20,
1966
[T]he purpose of Article 22 is to maintain a high
degree or
standard of ethical practice, so that insurance
companies
may earn and maintain the respect of the public,
because
the intense competition between the great
number of non-life
insurance companies operating in the
Philippines is
conducive to unethical practices, oftentimes
taking the form
of underrating; that to achieve this purpose it is
highly
desirable to have cooperative action between
said
companies in the compilation of their total
experience in the
business, so that the Bureau could determine
more
accurately the proper rate of premium to be
charged from
the insured; that, several years ago, the very
Insurance
Commissioner had indicated to the Bureau the
necessity of
doing something to combat underrating, for,
otherwise, he
would urge the amendment of the law so that
appropriate
measures could be taken therefor by his office;
that much of
the work of the Bureau has to do with ratemaking and
policy-wording; that rate-making is actually
dependent very
much on statistics; that, unlike life insurance
companies,
which have tables of mortality to guide them in
the fixing of
rates, non-life insurance companies have, as yet,
no such
guides; that, accordingly, non-life insurance
companies need
an adequate record of losses and premium
collections that
will enable them to determine the amount of risk
involved in
each type of risk and, hence, to determine the
rates or
premiums that should be charged in insuring
every type of
risk; that this information cannot be compiled
without full
cooperation on the part of the companies
concerned, which
cannot be expected from non-members of the
Bureau, over

which the latter has no control; and that, in

addition to
submitting information about their respective
experience,
said Bureau members must, likewise, share in
the rather
appreciable expenses entailed in compiling the
aforementioned data and in analyzing

Hence this petition by White Gold.

Issues:
1. Is Steamship Mutual, a P & I Club, engaged in
the insurance business in the Philippines?

White Gold v Pioneer G.R. No. 154514.

July 28, 2005

2. Does Pioneer need a license as an insurance

agent/broker for Steamship Mutual?

J. Quisimbing
Held: Yes. Petition granted.
Facts:
White Gold procured a protection and indemnity
coverage for its vessels from The Steamship
Mutual through Pioneer Insurance and Surety
Corporation. White Gold was issued a
Certificate of Entry and Acceptance. Pioneer also
issued receipts. When White Gold failed to fully
pay its accounts, Steamship Mutual refused to
renew the coverage.
Steamship Mutual thereafter filed a case against
White Gold for collection of sum of money to
recover the unpaid balance. White Gold on the
other hand, filed a complaint before the
Insurance Commission claiming that Steamship
Mutual and Pioneer violated provisions of the
Insurance Code.
The Insurance Commission dismissed the
complaint. It said that there was no need for
Steamship Mutual to secure a license because it
was not engaged in the insurance business and
that it was a P & I club. Pioneer was not required
to obtain another license as insurance agent
because Steamship Mutual was not engaged in
the insurance business.
The Court of Appeals affirmed the decision of
the Insurance Commissioner. In its decision,
the appellate court distinguished between P & I
Clubs vis--vis conventional insurance. The
appellate court also held that Pioneer merely
acted as a collection agent of Steamship Mutual.

Ratio:
White Gold insists that Steamship Mutual as a P
& I Club is engaged in the insurance business.
To buttress its assertion, itcites the definition as
an association composed of shipowners in
general who band together for the specific
purpose of providing insurance cover on a
mutual basis against liabilities incidental to
shipowning that the members incur in favor of
third parties.
They argued that Steamship Mutuals primary
purpose is to solicit and provide protection and
indemnity coverage and for this purpose, it has
engaged the services of Pioneer to act as its
agent.
Respondents contended
that although Steamship Mutual is a P & I Club,
it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel
owners who have come together to provide
mutual protection against liabilities incidental to
shipowning.
Is Steamship Mutual engaged in the insurance
business?
A P & I Club is a form of insurance against third
party liability, where the third party is anyone
other than the P & I Club and the members. By
definition then, Steamship Mutual as a P & I

Club is a mutual insurance association engaged

insurance, any commission or other

in the marine insurance business.

compensation from any insurance

The records reveal Steamship Mutual is doing

company doing business in the Philippines or

business in the country albeit without the

any agent thereof, without first procuring a

requisite certificate of authority mandated by

license so to act from the Commissioner

Section 187 of the Insurance Code. It maintains

a resident agent in the Philippines to solicit
insurance and to collect payments in its behalf.
Steamship Mutual even renewed its P & I Club
cover until it was cancelled due to non-payment
of the calls. Thus, to continue doing
business here, Steamship Mutual or through its
agent Pioneer, must secure a license from the
Insurance Commission.
Since a contract of insurance involves public
interest, regulation by the State is necessary.
Thus, no insurer or insurance company is
allowed to engage in the insurance business
without a license or a certificate of authority
from the Insurance Commission.
2. Pioneer is the resident agent of Steamship
Mutual as evidenced by the certificate of
registration issued by the Insurance
Commission. It has been licensed to do or
transact insurance business by virtue of the
certificate of authority issued by the same
agency. However, a Certification from the
Commission states that Pioneer does not have a
separate license to be an agent/broker of
Steamship Mutual.
Although Pioneer is already licensed as an
insurance company, it needs a separate license
to act as insurance agent for Steamship Mutual.
Section 299 of the Insurance Code clearly states:
SEC. 299 No person shall act as an insurance
agent or as an insurance broker in the
solicitation or procurement ofapplications for
insurance, or receive for services in obtaining

damages. Philamcare alleged that the health

coverage is not an insurance contract; that the
G.R. No. 125678
PHILAMCARE

March 18, 2002

HEALTH

concealment

SYSTEMS,

INC., petitioner,

made

by

Ernani

voided

the

agreement.
ISSUE: Whether or not Philamcare can avoid
the health coverage agreement.

vs.
COURT

OF

APPEALS

and

JULITA

HELD: No. The health coverage agreement

(health care agreement) entered upon by Ernani

TRINOS, respondents.

with Philamcare is a non-life insurance contract

and is covered by the Insurance Law. It is
379 SCRA 356 Mercantile Law Insurance
Law Representation Concealment
Rescission of an Insurance Contract Health
Care Agreement is an Insurance Contract

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

In 1988, Ernani Trinos applied for a health care

must pay for the same to the extent agreed upon

insurance under the Philamcare Health Systems,

under the contract. There is no concealment on

Inc. He was asked if he was ever treated for high

the part of Ernani. He answered the question

blood, heart trouble, diabetes, cancer, liver

with good faith. He was not a medical doctor

disease, asthma, or peptic ulcer; he answered no.

hence his statement in answering the question

His application was approved and it was

asked of him when he was applying is an opinion

effective for one year. His coverage was

rather than a fact. Answers made in good faith

subsequently renewed twice for one year each.

will not void the policy.

While the coverage was still in force in 1990,

Ernani suffered a heart attack for which he was
hospitalized. The cost of the hospitalization
amounted to P76,000.00. Julita Trinos, wife of
Ernani, filed a claim before Philamcare for the
latter to pay the hospitalization cost. Philamcare
refused to pay as it alleged that Ernani failed to
disclose

the

fact

that

he

was

diabetic,

hypertensive, and asthmatic. Julita ended up

paying the hospital expenses. Ernani eventually
died. In July 1990, Julita sued Philamcare for

Further, Philamcare, in believing there was

concealment, should have taken the necessary
steps to void the health coverage agreement
prior to the filing of the suit by Julita.
Philamcare never gave notice to Julita of the fact
that they are voiding the agreement. Therefore,
Philamcare should pay the expenses paid by
Julita.

PHIL. HEALTH CARE PROVIDERS, INC

vs. COMMISSIONER OF INTERNAL
REVENUE

P22,054,831.75 inclusive of 25% surcharge plus

20% interest from January 20, 1997 until fully
paid for the 1996 VAT deficiency and

GR. NO. 1677330 September 18, 2009, SPECIAL

P31,094,163.87 inclusive of 25% surcharge plus

FIRST DIVISION (CORONA, J.)

20% interest from January 20, 1998 until fully

paid for the 1997 VAT deficiency. Accordingly,

FACTS:

VAT Ruling No. [231]-88 is declared void and

without force and effect. The 1996 and 1997

Petitioner is a domestic corporation whose

deficiency DST assessment against petitioner is

primary purpose is to establish, maintain,

hereby CANCELLED AND SET ASIDE.

conduct and operate a prepaid group practice

Respondent is ORDERED to DESIST from

health care delivery system or a health

collecting the said DST deficiency tax.

maintenance organization to take care of the sick

Respondent appealed the CTA decision to the

and disabled persons enrolled in the health care

(CA) insofar as it cancelled the DST assessment.

plan and to provide for the administrative, legal,

He claimed that petitioners health care

and financial responsibilities of the organization.

agreement was a contract of insurance subject to

On January 27, 2000, respondent CIR sent

DST under Section 185 of the 1997 Tax Code.

petitioner a formal deman letter and the

On August 16, 2004, the CA rendered its

corresponding assessment notices demanding

decision which held that petitioners health care

the payment of deficiency taxes, including

agreement was in the nature of a non-life

surcharges and interest, for the taxable years

insurance contract subject to DST. Respondent

1996 and 1997 in the total amount of

is ordered to pay the deficiency Documentary

P224,702,641.18. The deficiency assessment was

Stamp Tax. Petitioner moved for reconsideration

imposed on petitioners health care agreement

but the CA denied it.

with the members of its health care program

pursuant to Section 185 of the 1997 Tax Code.

ISSUES:

Petitioner protested the assessment in a letter

dated February 23, 2000. As respondent did not

(1) Whether or not Philippine Health Care

act on the protest, petitioner filed a petition for

Providers, Inc. engaged in insurance business.

review in the Court of Tax Appeals (CTA)

seeking the cancellation of the deficiency VAT

(2) Whether or not the agreements between

and DST assessments. On April 5, 2002, the CTA

petitioner and its members possess all elements

rendered a decision, ordering the petitioner to

necessary in the insurance contract.

PAY the deficiency VAT amounting to

HELD:

this Code; doing or proposing to do any business

in substance equivalent to any of the foregoing

NO. Health Maintenance Organizations are not

in a manner designed to evade the provisions of

engaged in the insurance business. The SC said

this Code.

in June 12, 2008 decision that it is irrelevant

that petitioner is an HMO and not an insurer

Overall, petitioner appears to provide insurance-

because its agreements are treated as insurance

type benefits to its members (with respect to its

contracts and the DST is not a tax on the

curative medical services), but these are

business but an excise on the privilege,

incidental to the principal activity of providing

opportunity or facility used in the transaction of

them medical care. The insurance-like aspect

the business. Petitioner, however, submits that it

of petitioners business is miniscule compared to

is of critical importance to characterize the

its noninsurance activities. Therefore, since it

business it is engaged in, that is, to determine

substantially provides health care services rather

whether it is an HMO or an insurance company,

than insurance services, it cannot be considered

as this distinction is indispensable in turn to the

as being in the insurance business.

issue of whether or not it is liable for DST on its

health care agreements. Petitioner is admittedly
an HMO. Under RA 7878 an HMO is an entity
that provides, offers or arranges for coverage of
designated health services needed by plan
members for a fixed prepaid premium. The
payments do not vary with the extent, frequency
or type of services provided. Section 2 (2) of PD
1460 enumerates what constitutes doing an
insurance business or transacting an insurance
businesswhich are making or proposing to
make, as insurer, any insurance contract;
making or proposing to make, as surety, any
contract of suretyship as a vocation and not as
merely incidental to any other legitimate
business or activity of the surety; doing any kind
of business, including a reinsurance business,
specifically recognized as constituting the doing
of an insurance business within the meaning of

"contained and/or stored during the currency of

Rizal Surety v CA G.R. No. 112360. July
18, 2000
J. Purisima

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

Facts:

stored in the areas occupied by Transworld and

Rizal Surety issued a 1 million peso fire

second, said areas mustform part of the building

insurance policy with Transworld. This was

described in the policy xxx"

increased to 1.5 million. A four span building

This generally means that the policy didnt limit

was part of the policy. A fire broke out and

its coverage to what was stored in the four-span

gutted the building, together with a two storey

building.

building behind it weregaming machines were

As to questions of fact, both the trial court and

stored. The company filed its claims but to no

the Court of Appeals found that the so called

avail. Hence, it brought a suit in court. It aimed

"annex " was not an annex building but an

to make Rizal pay for almost 3 million including

integral part of the four-span building described

legal interest and damages. Rizal claimed that

in the policy and consequently, the machines

the policy only covered damage on the four span

and spare parts stored were covered by the fire

building and not the two storey building. The

insurance.

trial court ruled in Transworlds favor and

A report said: "Two-storey building constructed

ordered Rizal to pay actual damages only.

of partly timber and partly concrete hollow

The court of appeals increased the damages.

blocks under g.i. roof which isadjoining and

The insurance company filed a MFR. The CA

intercommunicating with the repair of the

answered by modifying the imposition of

first right span of the lofty storey building and

interest. Not satisfied, the insurance

thence by property fence wall."

company petitioned to the Supreme Court.

"Art.1377. The interpretation of obscure words

or stipulations in a contract shall not favor the

Issue:

party who caused the obscurity"

WON Rizal Surety is liable for loss of the two-

Landicho v GSIS- the 'terms in an insurance

storey building considering that the fire

policy, which are ambiguous, equivocal, or

insurance policy sued upon covered only the

uncertain are to be construed strictly and most

contents of the four-span building.

strongly against the insurer, and liberally in

favor of the insured so as to effect the dominant

Held: Yes. Petition dismissed.

purpose ofindemnity or payment to the insured

The issue of whether or not Transworld has an

Ratio:

insurable interest in the fun and amusement

The policy had clauses on the building coverage

machines and spare parts, which entitles it to be

that read:

indemnified for the loss thereof, had been

settled in another SC case.

Blue Cross v Olivares G.R. No. 169737,

February 12, 2008

Ratio:

J. Corona

1. Philamcare Health Systems, Inc. v. CAa health care agreement is in the nature of a

Facts:

non-life insurance. It is an established rule in

Neomi Olivares applied for a health

insurance contracts that when their terms

care program with Blue Cross for the amount of

contain limitations on liability, they should be

12,000 pesos. 38 days after she applied, she

construed strictly against the insurer. These are

suffered from a stroke. Ailments due to pre-

contracts of adhesion the terms of which must

existing conditions were excluded from the

be interpreted and enforced stringently against

coverage. She was confined in Medical City and

the insurer which prepared the contract. This

discharged with a bill of Php 34,000. Blue

doctrine is equally applicable to health

Cross refused to pay unless she had her

care agreements.

physicians certification that she was suffering

The agreement defined a pre-existing condition

from a pre-existing condition. When Blue

as:

Cross still refused to pay, she filed suit in the

a disability which existed before the

MTC. The health care company rebutted by

commencement date of membership whose

saying that the physician didnt disclose the

natural history can be clinicallydetermined,

condition due to the patients invocation of the

whether or not the Member was aware of such

doctor-client privilege. The MTC dismissed for a

illness or condition. Such conditions also include

lack of cause of action because the physician

disabilities existing prior to reinstatement date

didnt disclose the condition. In the RTC, the

in the case of lapse of an Agreement.

spouses were awarded the amount of the

Under this provision, disabilities which existed

hospital bills plus 60,000 in damages. This was

before the commencement of the agreement are

under the ratio that the burden to prove that

excluded from its coverage if they become

Neomi had a pre-existing condition was

manifest within one year from its effectivity.

under Blue Cross. The CA denied the motion for

Petitioners still averred that the non-disclosure

reconsideration of the health care company.

of the pre-existing condition made a

presumption in its favor. Respondents still

Issues:

maintained that the petitioner had the duty to

1. Whether petitioner was able to prove that

prove its accusation.

respondent Neomi's stroke was caused by a pre-

Petitioner never presented evidence to prove its

existing condition and therefore was excluded

presumption that the Doctors report would

from the coverage of the health care agreement.

work against Neomi. They only perceived that

2. Whether it was liable for moral and exemplary

the invocation of the privilege made the report

damages and attorney's fees.

adverse to Neomi and such was a disreputable

presumption. They should have made an

Held: No. Yes. Petition dismissed.

independent assessment of Neomis condition

when it failed to obtain the report. They

shouldnt have waited for the attending
physicians report to come out.

Fortune v CA G.R. No. 115278 May 23,

1995

Section 3 (e), Rule 131 of the Rules of Court

J. Davide Jr.

states:
Under the rules of court, Rule 131, Sec. 3.

Facts:

Disputable presumptions. The following

Producers Banks money was stolen while it was

presumptions are satisfactory if uncontradicted,

being transported from Pasay to Makati. The

but may be contradicted and overcome by other

people guarding the money were charged with

evidence:

the theft. The bank filed a claim for the amount

(e) That evidence willfully suppressed would be

of Php 725,000, and such was refused by the

adverse if produced.

insurance corporation due to the stipulation:

The exception on presenting evidence applies

GENERAL EXCEPTIONS

when the suppression is an exercise of a

The company shall not be liable under this policy

privilege.

in report of

Hence, Neomi had the privilege not to present

(b) any loss caused by any dishonest, fraudulent

the Doctors report under the doctor-client

or criminal act of the insured or any officer,

privilege.

employee, partner, director, trustee

2. The court quoted the CA and RTC decision

or authorized representative of the Insured

stating that the refusal of petitioner to pay

whether acting alone or in conjunction with

respondent Neomi's bills smacks of bad faith, as

others. . . .

its refusal [was] merely based on its own

In the trial court, the bank claimed that the

perception that a stroke is a pre-existing

suspects were not any of the above mentioned.

condition. Also, there was factual bases in the

They won the case. The appellate court affirmed

RTC and CA for the award of the damages.

on the basis that the bank had no power to hire

or dismiss the guard and could only ask for
replacements from the security agency.

Issue: Did the guards fall under the

general exceptions clause of the insurance policy
and thus absolved the insurance company from
liability?

Held: Yes to both. Petition granted.

Ratio:
The insurance agency contended that the guards
automatically became

the authorized representatives of the bank when

The term "employee," should be read as a

they cited International Timber Corp. vs. NLRC

person who qualifies as such as generally and

where a contractor is a "labor-only" contractor in

universally understood, or jurisprudentially

the sense that there is an employer-employee

established in the light of the four standards in

relationship between the owner of the project

the determination of the employer-employee

and the employees of the "labor-only"

relationship, or as statutorily declared even in a

contractor.

limited sense as in the case of Article 106 of the

They cited Art. 106. Of the Labor Code which

Labor Code which considers the employees

said:

under a "labor-only" contract as employees of

Contractor or subcontractor. There is "labor-

the party employing them and not of the party

only" contracting where the person supplying

who supplied them to the employer.

workers to an employer does not have

But even if the contracts were not labor-only, the

substantial capital or investment in the form of

bank entrusted the suspects with the duty to

tools, equipment, machineries, work premises,

safely transfer the money to its head office, thus,

among others, and the workers recruited and

they were representatives. According to the

placed by such persons are performing activities

court, a representative is defined as one who

which are directly related to the principal

represents or stands in the place of another; one

business of such employer. In such cases, the

who represents others or another in a special

person or intermediary shall be considered

capacity, as an agent, and is interchangeable

merely as an agent of the employer who shall be

with agent.

responsible to the workers in the same manner

and extent as if the latter were directly employed
by him.
The bank asserted that the guards were not its
employees since it had nothing to do with their
selection and engagement, the payment of their
wages, their dismissal, and the control of their
conduct.
They cited a case where an employee-employer
relationship was governed by (1) the selection
and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal;
and (4) the power to control
the employee's conduct.
The case was governed by Article 174 of the
Insurance Code where it stated
that casualty insurance awarded an amount to
loss cause by accident or mishap.


Gulf Resorts Inc. V. Philippine Charter

Insurance Corp. (2005)

CA: affirmed RTC

ISSUE: W/N Gulf can claim for its properties

aside from the 2 swimming pools

G.R. No. 156167 May 16, 2005

Lessons Applicable: Stipulations Cannot Be
Segregated (Insurance)

HELD: YES. Affirmed.

It is basic that all the provisions of the

insurance policy should be examined and
interpreted in consonance with each other.

FACTS:

Gulf Resorts, Inc at Agoo, La Union was

insured with American Home Assurance

An insurance premium is the

undertaking to indemnify the insured

this Policy occasioned by or through or in

against a specified peril.

In the subject policy, no premium

July 16, 1990: an earthquake struck

payments were made with regard to

Central Luzon and Northern Luzon so the

earthquake shock coverage, except on the

properties and 2 swimming pools in its

two swimming pools.

August 23, 1990: Gulf's claim was denied

only afforded earthquake shock coverage

to the two swimming pools of the resort
Petitioner contends that pursuant to this
rider, no qualifications were placed on the
scope of the earthquake shock coverage.
Thus, the policy extended earthquake
shock coverage to all of the insured
properties.

shock to any of the property insured by

on the ground that its insurance policy

of the parties.

consideration paid an insurer for

Agoo Playa Resort were damaged

All its parts are reflective of the true intent

Company which includes loss or damage to

consequence of earthquake

RTC: Favored American Home endorsement rider means that only the
two swimming pools were insured against
earthquake shock

contract of insurance as an agreement whereby

one undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event

ETERNAL VS. PHILAMLIFE

G.R. No. 166245

EFFECTIVE DATE OF BENEFIT.

April 09, 2008

The insurance of any eligible Lot

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

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.

from it on installment basis would be insured by

xx

Philamlife. The amount of insurance coverage

depended upon the existing balance of the
purchased burial lots.
The relevant provisions of the policy are:

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

ELIGIBILITY.

unpaid balances of all insured lot purchasers.

Eternal complied by submitting a letter dated

xx

December 29, 1982, containing a list of insurable

EVIDENCE OF INSURABILITY.

balances of its lot buyers for October 1982. One

xx

of those included in the list as new business

LIFE INSURANCE BENEFIT.

was a certain John Chuang. His balance of

xx

payments was 100K. on August 2, 1984, Chuang

died.

Gardens Memorial Park in October 1982 for the

total maximum insurable amount of
Eternal sent a letter dated to Philamlife, which

P100,000.00 each. No application for Group

served as an insurance claim for Chuangs death.

Insurance was submitted in our office prior

Attached to the claim were certain documents.

to his death on August 2, 1984

In reply, Philamlife wrote Eternal a letter

requiring Eternal to submit the additional
documents relative to its insurance claim for

Eternal filed a case with the RTC for a sum of

Chuangs death. Eternal transmitted the

money against Philamlife, which decided in

required documents through a letter which was

favor of Eternal, ordering Philamlife to pay the

received by Philamlife.

former 100K representing the proceeds of the

policy.

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

CA reversed. Hence this petition.

claim for PhP 100,000.

In response to Eternals demand, Philamlife
denied Eternals insurance claim in a letter a
portion of which reads:

ISSUE: WON Philamlife should pay the 100K

insurance proceeds

HELD: petition granted.

The deceased was 59 years old when he entered

into Contract #9558 and 9529 with Eternal

YES

An examination of the provision of the POLICY

the Creditor Group Life Policy on the Effective

under effective date of benefit, would show

Date of Benefit is in the nature of a resolutory

ambiguity between its two sentences. The first

condition which would lead to the cessation of

sentence appears to state that the insurance

the insurance contract. Moreover, the mere

coverage of the clients of Eternal already became

inaction of the insurer on the insurance

effective upon contracting a loan with Eternal

application must not work to prejudice the

while the second sentence appears to require

insured; it cannot be interpreted as a

Philamlife to approve the insurance contract

termination of the insurance contract. The

before the same can become effective.

termination of the insurance contract by the

It must be remembered that an insurance

insurer must be explicit and unambiguous.

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

G.R. No. 175666, July 29, 2013

MANILA BANKERS LIFE INSURANCE
CORPORATION, Petitioner, v. CRESENCIA
P. ABAN,Respondent.
Facts:
On July 3, 1993, Delia Sotero (Sotero) took out a
life insurance policy from Manila Bankers Life
Insurance Corporation (Bankers Life),
designating respondent Cresencia P. Aban
(Aban), her niece,5as her beneficiary.
Petitioner issued Insurance Policy No. 747411
(the policy), with a face value of P100,000.00, in
Sotero's favor on August 30, 1993, after the
requisite medical examination and payment of
the insurance premium.6cralaw virtualaw library
On April 10, 1996,7 when the insurance policy
had been in force for more than two years and
seven months, Sotero died. Respondent filed a
claim for the insurance proceeds on July 9, 1996.
Petitioner conducted an investigation into the
claim,8 and came out with the following
findings:
1. Sotero did not personally apply for
insurance coverage, as she was illiterate;
2. Sotero was sickly since 1990
3. Sotero did not have the financial
capability to pay the insurance
premiums on Insurance Policy No.
747411
4. Sotero did not sign the July 3, 1993
application for insurance;9 [and]
5.

Respondent was the one .who filed the

insurance application, and x x x
designated herself as the beneficiary.

For the above reasons, petitioner denied

respondent's claim on April 16, 1997 and
refunded the premiums paid on the policy.
On April 24, 1997, petitioner filed a civil case for
rescission and/or annulment of the policy, which
was docketed as Civil Case No. 97-867 and
assigned to Branch 134 of the Makati Regional
Trial Court. The main thesis of the Complaint
was that the policy was obtained by fraud,
concealment and/or misrepresentation under
the Insurance Code,12 which thus renders it
voidable under Article 139013 of the Civil Code.
Respondent filed a Motion to Dismiss14 claiming
that petitioner's cause of action was barred by
prescription pursuant to Section 48 of the
Insurance Code, which provides as follows:
Whenever a right to rescind a contract of
insurance is given to the insurer by any
provision of this chapter, such right must be
exercised previous to the commencement of an
action on the contract.
After a policy of life insurance made 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, the insurer cannot prove that the
policy is voidab initio or is rescindible by reason
of the fraudulent concealment or
misrepresentation of the insured or his agent.
During the proceedings on the Motion to
Dismiss, petitioner's investigator testified in
court, stating among others that the insurance
underwriter who solicited the insurance is a
cousin of respondent's husband, Dindo
Aban,15 and that it was the respondent who paid
the annual premiums on the policy.
Ruling of RTC:
The RTC granted respondent's Motion to
Dismiss:
In dismissing the case, the trial court found that
Sotero, and not respondent, was the one who
procured the insurance; thus, Sotero could
legally take out insurance on her own life and
validly designate - as she did respondent as
the beneficiary. It held further that under
Section 48, petitioner had only two years from
the effectivity of the policy to question the same;
since the policy had been in force for more than
two years, petitioner is now barred from
contesting the same or seeking a rescission or
annulment thereof.
Ruling of CA:
The CA sustained the trial court.
Applying Section 48 to petitioner's case, the CA
held that petitioner may no longer prove that the
subject policy was void ab initio or rescindible
by reason of fraudulent concealment or
misrepresentation after the lapse of more than
two years from its issuance. It ratiocinated that
petitioner was equipped with ample means to
determine, within the first two years of the
policy, whether fraud, concealment or
misrepresentation was present when the
insurance coverage was obtained. If it failed to
do so within the statutory two-year period, then
the insured must be protected and allowed to
claim upon the policy.

Issue:
WON THE COURT OF APPEALS ERRED IN
SUSTAINING THE APPLICATION OF THE
INCONTESTABILITY PROVISION IN THE
INSURANCE CODE BY THE TRIAL COURT.
Ruling:
The Court denied the Petition.
The Court will not depart from the trial and
appellate courts' finding that it was Sotero who
obtained the insurance for herself, designating
respondent as her beneficiary. Both courts are in
accord in this respect, and the Court is loath to
disturb this. While petitioner insists that its
independent investigation on the claim reveals

that it was respondent, posing as Sotero, who

obtained the insurance, this claim is no longer
feasible in the wake of the courts' finding that it
was Sotero who obtained the insurance for
herself. This finding of fact binds the Court.
The so-called "incontestability clause" precludes
the insurer from raising the defenses of false
representations or concealment of material facts
insofar as health and previous diseases are
concerned if the insurance has been in force for
at least two years during the insureds lifetime.
The phrase "during the lifetime" found in
Section 48 simply means that the policy is no
longer considered in force after the insured has
died. The key phrase in the second paragraph of
Section 48 is "for a period of two years."
As borne by the records, the policy was issued on
August 30. 1993, the insured died on April 10,
1996, and the claim was denied on April 16,
1997. The insurance policy was thus in force for
a period of 3 years, 7 months, and 24 days.
Considering that the insured died after the twoyear period, the plaintiff-appellant is, therefore,
barred from proving that the policy is void ab
initio by reason of the insured fraudulent
concealment or misrepresentation or want of
insurable interest on the part of the beneficiary,
herein defendant-appellee.
The "Incontestability Clause" under Section 48
of the Insurance Code provides that an insurer is
given two years from the effectivity of a life
insurance contract and while the insured is alive
to discover or prove that the policy is void ab
initio or is rescindible by reason of the
fraudulent concealment or misrepresentation of
the insured or his agent. After the two-year
period lapses, or when the insured dies within
the period, the insurer must make good on the
policy, even though the policy was obtained by
fraud, concealment, or misrepresentation.

Verendia V CA G.R. No. 75605 January

22, 1993

G.R. No. 75605 January 22, 1993

Lessons Applicable: Exception to Ambiguous
Provisions Interpreted Against Insurer
(Insurance)

FACTS:

Rafael (Rex) Verendia's residential

building was insured with Fidelity and
Surety Insurance Company, Country
Bankers Insurance and Development
Insurance with Monte de Piedad & Savings
Bank as beneficiary

December 28, 1980 early morning: the

building was completely destroyed by fire

Fidelity refused the claim stating that

there was a misrepresentation since the
lessee was not Roberto Garcia but Marcelo
Garcia

trial court: favored Fidelity

CA: reversed

ISSUE: W/N there was false declaration which

would forfeit his benefits under Section 13 of the
policy

HELD: YES.

Section 13 thereof which is expressed in

terms that are clear and unambiguous,
that all benefits under the policy shall be

forfeited "If the claim be in any respect

this Policy occasioned by or through or in

fraudulent, or if any false declaration be

consequence of earthquake

made or used in support thereof, or if any

July 16, 1990: an earthquake struck

fraudulent means or devises are used by

Central Luzon and Northern Luzon so the

the Insured or anyone acting in his behalf

properties and 2 swimming pools in its

to obtain any benefit under the policy"

Agoo Playa Resort were damaged

Robert Garcia then executed an affidavit

August 23, 1990: Gulf's claim was denied

before the National Intelligence and

on the ground that its insurance policy

Security Authority (NISA) to the effect that

only afforded earthquake shock coverage

he was not the lessee of Verendia's house

to the two swimming pools of the resort

and that his signature on the contract of

Petitioner contends that pursuant to this

lease was a complete forgery.

rider, no qualifications were placed on the

Worse yet, by presenting a false lease

scope of the earthquake shock coverage.

contract, Verendia, reprehensibly

Thus, the policy extended earthquake

disregarded the principle that insurance

shock coverage to all of the insured

contracts are uberrimae fidae and demand

properties.

the most abundant good faith

RTC: Favored American Home endorsement rider means that only the
two swimming pools were insured against
earthquake shock

Gulf Resorts Inc. V. Philippine Charter

CA: affirmed RTC

ISSUE: W/N Gulf can claim for its properties

Insurance Corp. (2005)

aside from the 2 swimming pools

G.R. No. 156167 May 16, 2005

Lessons Applicable: Stipulations Cannot Be
Segregated (Insurance)

HELD: YES. Affirmed.

It is basic that all the provisions of the

insurance policy should be examined and
interpreted in consonance with each other.

FACTS:

Gulf Resorts, Inc at Agoo, La Union was

of the parties.

insured with American Home Assurance

Company which includes loss or damage to
shock to any of the property insured by

All its parts are reflective of the true intent

An insurance premium is the

consideration paid an insurer for

undertaking to indemnify the insured

against a specified peril.

In the subject policy, no premium

payments were made with regard to
earthquake shock coverage, except on the
two swimming pools.

contract of insurance as an agreement whereby

one undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event

Thursday, July 12, 2012

Philamcare v CA G.R. No. 125678. March
18, 2002
J. Ynares-Santiago
Facts:
Ernani Trinos applied for a health care coverage
with Philam. He answered no to a question
asking if he or his family members were treated
to heart trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was
also given hospitalization benefits and outpatient benefits. After the period expired, he was
given an expanded coverage for Php 75,000.
During the period, he suffered from heart attack
and was confined at MMC. The wife tried to
claim the benefits but the petitioner denied it
saying that he concealed his medical history by
answering no to the aforementioned question.
She had to pay for the hospital bills amounting
to 76,000. Her husband subsequently passed
away. She filed a case in the trial court for the
collection of the amount plus damages. She was
awarded 76,000 for the bills and 40,000 for
damages. The CA affirmed but deleted awards
for damages. Hence, this appeal.
Issue: WON a health care agreement is not an
insurance contract; hence the incontestability
clause under the Insurance Code does not
apply.
Held: No. Petition dismissed.
Ratio:
Petitioner claimed that it granted benefits only
when the insured is alive during the one-year
duration. It contended that there was no
indemnification unlike in insurance contracts. It
supported this claim by saying that it is a health
maintenance organization covered by the DOH
and not the Insurance Commission. Lastly, it
claimed that the Incontestability clause didnt
apply because two-year and not one-year
effectivity periods were required.
Section 2 (1) of the Insurance Code defines a
contract of insurance as an agreement whereby
one undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event.
Section 3 states: every person has an insurable
interest in the life and health:
(1) of himself, of his spouse and of his
children.
In this case, the husbands health was the
insurable interest. The health care agreement
was in the nature of non-life insurance, which is
primarily a contract of indemnity. The provider
must pay for the medical expenses resulting
from sickness or injury.
While petitioner contended that the husband
concealed materialfact of his sickness, the
contract stated that:
that any physician is, by these presents,
expressly authorized to disclose or give
testimony at anytime relative to any information
acquired by him in his professional capacity

upon any question affecting the eligibility for

health care coverage of the Proposed Members.
This meant that the petitioners required him to
sign authorization to furnish reports about his
medical condition. The contract also authorized
Philam to inquire directly to his medical history.
Hence, the contention of concealment isnt valid.
They cant also invoke the Invalidation of
agreement clause where failure of the insured
to disclose information was a grounds for
revocation simply because the answer assailed
by the company was the heart condition
question based on the insureds opinion. He
wasnt a medical doctor, so he cant accurately
gauge his condition.
Henrick v Fire- in such case the insurer is not
justified in relying upon such statement, but is
obligated to make further inquiry.
Fraudulent intent must be proven to rescind the
contract. This was incumbent upon the provider.
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.
Section 27 of the Insurance Code- a
concealment entitles the injured party to rescind
a contract of insurance.
As to cancellation procedure- Cancellation
requires certain conditions:
1.
Prior notice of cancellation to insured;
2.
Notice must be based on the occurrence
after effective date of the policy of one or more of
the grounds mentioned;
3.
Must be in writing, mailed or delivered to
the insured at the address shown in the policy;
4.
Must state the grounds relied upon
provided in Section 64 of the Insurance Code
and upon request of insured, to furnish facts on
which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that
under the title Claim procedures of expenses,
the defendant Philamcare Health Systems Inc.
had twelve months from the date of issuance of
the Agreement within which to contest the
membership of the patient if he had previous
ailment of asthma, and six months from the
issuance of the agreement if the patient was sick
of diabetes or hypertension. The periods having
expired, the defense of concealment or
misrepresentation no longer lie.

MANILA MAHOGANY MFG CORP V CA &

ZENITH INSURANCE
OCT 12, 1997; PADILLA, J
FACTS:
From March 6, 1970 1971, petitioner
insured its Mercedes Benz 4-door sedan
w/ respondent insurance company. On
May 4, 1970, vehicle was bumped and
damaged by a truck owned by San
Miguel Corp (SMC).
Zenith paid P5K to petitioner in
amicable settlement. Petitioners general
manager executed a Release Claim,
subrogating respondent company to all
its right to action against SMC
Dec. 11, 1972 respondent co. wrote
Insurance Adjusters Inc. To demand
reimbursement from SMC. Insurance
Adjusters refused saying that SMC had
already paid petitioner P4,500 for the
damages to petitioners vehicle, as
evidenced by a cash voucher and
Release of Claim executed by the GM of
petitioner discharging SMC from all
actions, claims, demands the rights of
action that now exist or hereafter
develop arising out of or as a
consequence of the accident
Respondent demanded the P4.5K
amount from petitioner. Petitioner
refused. Suit filed for recovery.
City Court ordered petitioner to pay
respondent. CFI affirmed. CA affirmed
with modification that petitioner was to
pay respondent the total amount of 5K it
had received from respondent co.
Petitioners argument: Since the total damages
were valued at P9,486.43 and only 5K was
received by petitioner from respondent,
petitioner argues that it was entitled to go after
SMC to claim the additional which was
eventually paid to it
Respondents argument: No qualification to its
right of subrogation
ISUE: WON petitioner should pay respondent
despite the subrogation in the Release of Claim
was conditioned on recovery of the total amount
of damages petitioner has sustained?
HELD/RATIO: NO.
SC: no other evidence to support its
allegation that a gentlemans agreement
existed between the parties, not
embodied in the Release of Claim, such
Release of Claim must be taken as the

best evidence of the intent and purpose

of the parties
CA correct in holding petitioner should
reimburse respondent 5K
o When Manila Mahogany
executed another release claim
discharging SMC from all rights
of action after the insurer had
paid the proceeds of the policy
the compromise agreement of
5K- the insurer is entitled to
recover from the insured the
amount of insurance money
paid
o Petitioner by its own acts
released SMC, thereby defeating
respondents right of
subrogation, the right of action
against the insurer was also
nullified
Since the insurer can be subrogated to
only such rights as the insured may
have, should the insured, after receiving
payment from the insurer, release the
wrongdoer who caused the loss, the
insurer losses his rights against the
latter. But in such a case, the insurer will
be entitled to recover from the insured
whatever it has paid to the latter, unless
the release was made w/ the consent of
the insurer

FEDEX vs. AHAC and PHILAM

INSURANCE COMPANY, INC
G.R. No. 150094
August 18, 2004

FACTS: shipper SMITHKLINE

USA delivered to carrier Burlington Air
Express (BURLINGTON), an agent of
[Petitioner] Federal Express Corporation, a
shipment of 109 cartons of veterinary biologicals
for delivery to consignee SMITHKLINE and
French Overseas Company in Makati City. The
shipment was covered by Burlington Airway Bill

DISPOSITIVE: PETITION DENIED

No. 11263825 with the words, REFRIGERATE
WHEN NOT IN TRANSIT and PERISHABLE
stamp marked on its face. That same day,
Burlington insured the cargoes with American
Home Assurance Company (AHAC). The
following day, Burlington turned over the
custody of said cargoes to FEDEX which
transported the same to Manila.
The shipments arrived in Manila and was
immediately stored at [Cargohaus Inc.s]
warehouse. Prior to the arrival of the cargoes,

FEDEX informed GETC Cargo International

loss for the unusable shipment, filed a claim

Corporation, the customs broker hired by the

with AHAC through its representative in the

consignee to facilitate the release of its cargoes

Philippines, the Philam Insurance Co., Inc.

from the Bureau of Customs, of the impending

(PHILAM) which recompensed SMITHKLINE

arrival of its clients cargoes.

for the whole insured amount. Thereafter,

PHILAM filed an action for damages against the

12 days after the cargoes arrived in Manila,

FEDEX imputing negligence on either or both of

DIONEDA, a non-licensed customs broker who

them in the handling of the cargo.

was assigned by GETC, found out, while he was

about to cause the release of the said cargoes,

Trial ensued and ultimately concluded with the

that the same [were] stored only in a room with

FEDEX being held solidarily liable for the loss.

2 air conditioners running, to cool the place

Aggrieved, petitioner appealed to the CA. The

instead of a refrigerator. DIONEDA, upon

appellate court ruled in favor of PHILAM and

instructions from GETC, did not proceed with

held that the shipping Receipts were a prima

the withdrawal of the vaccines and instead,

facie proof that the goods had indeed been

samples of the same were taken and brought to

delivered to the carrier in good condition.

the Bureau of Animal Industry of the

Department of Agriculture in the Philippines by

ISSUE: Is FEDEX liable for damage to or loss of

SMITHKLINE for examination wherein it was

the insured goods

discovered that the ELISA reading of vaccinates

sera are below the positive reference serum.

HELD: petition granted. Assailed decision

reversed insofar as it pertains to FEDEX

As a consequence of the foregoing result of the

Prescription of Claim

veterinary biologics test, SMITHKLINE

From the initial proceedings in the trial court up

abandoned the shipment and, declaring total

to the present, petitioner has tirelessly pointed

out that respondents claim and right of action

12.1.1 of visible damage to the goods,

are already barred. Indeed, this fact has never

immediately after discovery of the damage and

been denied by respondents and is plainly

at the latest within fourteen (14) days from

evident from the records.

receipt of the goods; xxx

Airway Bill No. 11263825, issued by Burlington

Article 26 of the Warsaw Convention, on the

as agent of petitioner, states:

other hand, provides:

6.

Xxx (2)

No action shall be maintained in the case

In case of damage, the person entitled

of damage to or partial loss of the shipment

to delivery must complain to the carrier

unless a written notice, sufficiently describing

forthwith after the discovery of the damage, and,

the goods concerned, the approximate date of

at the latest, within 3 days from the date of

the damage or loss, and the details of the claim,

receipt in the case of baggage and 7 days from

is presented by shipper or consignee to an office

the date of receipt in the case of goods. xx

of Burlington within (14) days from the date the

goods are placed at the disposal of the person

(3)

Every complaint must be made in writing

entitled to delivery, or in the case of total loss

upon the document of transportation or by

(including non-delivery) unless presented within

separate notice in writing dispatched within the

(120) days from the date of issue of the [Airway

times aforesaid.

Bill]. xxx
Relevantly, petitioners airway bill states:

(4)

Failing complaint within the times

aforesaid, no action shall lie against the carrier,

12./12.1 The person entitled to delivery must

save in the case of fraud on his part. xxx

make a complaint to the carrier inwriting in the

case:

Condition Precedent

In this jurisdiction, the filing of a claim with the

NOTES: as to proper payee:

carrier within the time limitation therefor

The Certificate specifies that loss of or damage to

actually constitutes a condition precedent to the

the insured cargo is payable to order x x x upon

accrual of a right of action against a carrier for

surrender of this Certificate. Such wording

loss of or damage to the goods. The shipper or

conveys the right of collecting on any such

consignee must allege and prove the fulfillment

damage or loss, as fully as if the property were

of the condition. If it fails to do so, no right of

covered by a special policy in the name of the

action against the carrier can accrue in favor of

holder itself. At the back of the Certificate

the former. The aforementioned requirement is

appears the signature of the representative of

a reasonable condition precedent; it does not

Burlington. This document has thus been duly

constitute a limitation of action.

indorsed in blank and is deemed a bearer

instrument.

The requirement of giving notice of loss of or

injury to the goods is not an empty formalism.

Since the Certificate was in the possession of

The fundamental reasons for such a stipulation

Smithkline, the latter had the right of collecting

are (1) to inform the carrier that the cargo has

or of being indemnified for loss of or damage to

been damaged, and that it is being charged with

the insured shipment, as fully as if the property

liability therefor; and (2) to give it an

were covered by a special policy in the name of

opportunity to examine the nature and extent of

the holder. Hence, being the holder of the

the injury. This protects the carrier by affording

Certificate and having an insurable interest in

it an opportunity to make an investigation of a

the goods, Smithkline was the proper payee of

claim while the matter is fresh and easily

the insurance proceeds.

investigated so as to safeguard itself from false

and fraudulent claims.

Subrogation

Upon receipt of the insurance proceeds, the

consignee (Smithkline) executed a subrogation
Receipt in favor of respondents. The latter were
thus authorized to file claims and begin suit
against any such carrier, vessel, person,
corporation or government. Undeniably, the
consignee had a legal right to receive the goods
in the same condition it was delivered for
transport to petitioner. If that right was
violated, the consignee would have a cause of
action against the person responsible therefor.

Keppel Cebu Shipyard Inc. v. Pioneer

Insurance
and Surety Corp.
[G.R. No. 180880-81. September 25, 2009]
FACTS
KCSI and WG&A Jebsens Shipmanagement, Inc.
(WG&A)
executed a Shiprepair Agreement wherein KCSI
would
renovate and reconstruct WG&As M/V
Superferry 3 using
its dry docking facilities pursuant to its
restrictive safety and
security rules and regulations. Prior to the
execution of the
Shiprepair Agreement, Superferry 3 was
already insured by
WG&A with Pioneer. In the course of its repair,
M/V
Superferry 3 was gutted by fire. Claiming that
the extent of
the damage was pervasive, WG&A declared the
vessels
damage as a total constructive loss and, hence,
filed an
insurance claim with Pioneer. Armed with the
subrogation
receipt, Pioneer tried to collect from KCSI, but
the latter
denied any responsibility for the loss of the
subject vessel.
Arbitration ensued, the Construction Industry
Arbitration
Commission (CIAC) rendered its Decision
declaring both
WG&A and KCSI guilty of negligence. However,
the award
amount was limited to only PhP50 Million.
ISSUE
Whether or not the right of subrogation covers
total
constructive loss of Superferry 3.
RULING
YES. There existed a total constructive loss so
that it had to
pay WG&A the full amount of the insurance
coverage and,
by operation of law, it was entitled to be
subrogated to the
rights of WG&A to claim the amount of the loss.
The
Supreme Court held that payment by the insurer
to the
insured operates as an equitable assignment to
the insurer
of all the remedies that 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. It
accrues simply
upon payment by the insurance company of the
insurance
claim. The doctrine of subrogation has its roots
in equity. It

is designed to promote and to accomplish

justice; and is the
mode that equity adopts to compel the ultimate
payment of a
debt by one who, in justice, equity, and good
conscience,
ought to pay. KCSI is ordered to pay Pioneer the
net amount
of P329,747,351.91 plus legal interests.

Malayan Insurance v. Alberto and Reyes

[G.R. No. 194320. February 1, 2012]
FACTS
An accident occurred at the corner of EDSA and
Ayala
Avenue, Makati City, involving four (4) vehicles.
Having
insured the vehicle against such risks, Malayan
Insurance
claimed in its Complaint that it paid the
damages sustained
by the assured. Respondent questioned the
subrogation by
Malayan. Trial Court ruled in favor of Malayan.
Respondent
appealed contending that the evidence on record
has failed
to establish not only negligence on the part of
respondents,
but also compliance with the other requisites
and the
consequent right of Malayan Insurance to
subrogation.
These were raised for the first time in the
appellate court and
noted that the police report, which has been
made part of the
records of the trial court, was not properly
identified by the
police officer who conducted the on-the-spot
investigation of
the subject collision.
ISSUE
Whether or not the subrogation by Malayan
Insurance is
proper and valid.
RULING
YES. Malayan has been properly and validly
subrogated to
the rights and interests of the assured by
operation of law.
Respondents are now deemed to have waived
their right to
make an objection. It is worth mentioning that
just like any
other disputable presumptions or inferences, the
presumption of negligence may be rebutted or
overcome by
other evidence to the contrary. It is unfortunate,
however,
that respondents failed to present any evidence
before the
trial court. Bearing in mind that the claim check
voucher and
the Release of Claim and Subrogation Receipt
presented by
Malayan Insurance are already part of the
evidence on
record, and since it is not disputed that the
insurance
company, indeed, paid already to the assured,
then there is
a valid subrogation in the case at bar.

ASIAN TERMINALS, INC., vs.

FIRST LEPANTO-TAISHO
INSURANCE CORPORATION
G.R. No. 185964, 16 June 2014

FACTS: A shipment of 3,000 bags of sodium trip

olyphosphate arrived in Manila through COSCO
and was discharged into the possession and cust
ody of ATI, a domestic corporation engaged in ar
rastre business. The shipment remained for quit
e some time at ATIs storage area until it was wit
hdrawn by broker, PROVEN, on for delivery to t
he consignee. Upon receipt of the shipment, it w
as found out that the delivered goods incurred sh
ortages and spillage for a loss/damage valued at
P166,772.41. GASI sought recompense from CO
SCO, thru its Philippine agent SMITH BELL, AT
I and PROVEN but was denied. Hence, it pursue
d indemnification from the shipments insurer, F
IRST LEPANTO. As subrogee, FIRST LEPANTO
demanded from COSCO, its shipping agency in t
he Philippines, SMITH BELL, PROVEN and ATI
, reimbursement of the amount it paid to GASI.
ATI and PROVEN denied liability for the lost/da
maged shipment and claimed that it exercised d
ue diligence and care in handling the same.
MeTC dismissed the case. On appeal, the Region
al Trial Court (RTC) reversed the MeTCs finding
s. ATI sought recourse with the CA challenging t
he RTCs finding that FIRST LEPANTO was vali
dly subrogated to the rights of GASI with respect
to the lost/damaged shipment. ATI argued that
there was no valid subrogation because FIRSTL
EPANTO failed to present a valid, existing and e
nforceable Marine Open Policy or insurance cont
ract. ATI reasoned that the Certificate of Insuran
ce or Marine Cover Note submitted by FIRST LE
PANTO as evidence is not the same as an actual i
nsurance contract.

ISSUE:
Whether or not the nonpresentation of an insurance contract will bar a s
ubrogee from collecting reimbursement.

HELD:
No, Nonpresentation of the insurance contract is not fata
l to FIRST LEPANTOs cause of action for reimb
ursement as subrogee. Subrogation is the substit
ution of one person in the place of another with r

eference to a lawful claim or right, so that he wh

o is substituted succeeds to the rights of the othe
r in relation to a debt or claim, including its rem
edies or securities.
In the case at bar, the Supreme Court observed t
hat it is conspicuous from the records that ATI p
ut in issue the submission of the insurance contr
act for the first time before the CA. Despite oppo
rtunity to study FIRST LEPANTOs complaint be
fore the MeTC, ATI failed to allege in its answer t
he necessity of the insurance contract. Neither w
as the same considered during pretrial as one of the decisive matters in the case. Fu
rther, ATI never challenged the relevancy or mat
eriality of the Certificate of Insurance presented
by FIRST LEPANTO as evidence during trial as
proof of its right to be subrogated in the consign
ees stead. Since it was not agreed during the pre
trial proceedings that FIRST LEPANTO will hav
e to prove its subrogation rights by presenting a
copy of the insurance contract, ATI is barred fro
m pleading the absence of such contract in its ap
peal. It is imperative for the parties to disclose d
uring pretrial all issues they intend to raise during the tria
l because, they are bound by the delimitation of s
uch issues. The determination of issues during t
he pretrial conference bars the consideration of other q
uestions, whether during trial or on appeal.