---CONCEALMENT
daughter Helen Go. When private respondent supplied the
*Waiver of Right to Information
89 SCRA 543 (1979)
No. L-31845
April 30, 1979
GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner,
vs. HONORABLE COURT OF APPEALS, respondents.
No. L-31878
April 30, 1979
LAPULAPU D. MONDRAGON, petitioner, vs. HON. COURT
OF APPEALS and NGO HING, respondents.
FACTS:
On March 14, 1957, private respondent Ngo Hing filed an
application with the Great Pacific Life Assurance Company
(hereinafter referred to as Pacific Life) for a twenty-year
endowment policy in the amount of P50,000.00 on the life of
his one-year old daughter Helen Go. Said respondent supplied
the essential data which petitioner Lapulapu D. Mondragon,
Branch Manager of the Pacific Life in Cebu City wrote on the
corresponding form in his own handwriting. Mondragon finally
type-wrote the data on the application form which was signed
by private respondent Ngo Hing. The latter paid the annual
premium, the sum of P1,077.75 going over to the Company,
but he retained the amount of P1,317.00 as his commission
for being a duly authorized agent of Pacific life. Upon the
payment of the insurance premium, the binding deposit
receipt was issued to private respondent Ngo Hing. Likewise,
petitioner Mondragon handwrote at the bottom of the back
page of the application form his strong recommendation for
the approval of the insurance application. Then on April 30,
1957, Mondragon received a letter from Pacific Life
disapproving the insurance application. The letter stated that
the said life insurance application for 20-year endowment
plan is not available for minors below seven years old, but
Pacific life can consider the same under the Juvenile Triple
Action Plan, and advised that if the offer is acceptable, the
Juvenile NonMedical Declaration be sent to the Company.
The non-acceptance of the insurance plan by Pacific Life was
allegedly not communicated by petitioner Mondragon to
private respondent Ngo Hing. Instead, on May 6, 1957,
Mondragon wrote back Pacific life again strongly
recommending the approval of the 20-year endowment life
insurance on the ground that Pacific Life is the only insurance
company not selling the 20-year endowment insurance plan
to children, pointing out that since 1954 the customers,
especially the Chinese, were asking for such coverage.
It was when things were in such state that as May 28, 1957
Helen Go died of influenza with complication of
bronchopneumonia. Thereupon, private respondent sought
the payment of the proceeds of the insurance, but having
failed in his effort, he filed the action for the recovery of the
same before the Court of First Instance of Cebu, which
rendered the adverse decision as earlier referred to against
both petitioners.
ISSUE:
Whether or not private respondent Ngo Hing concealed the
state of health and physical condition of Helen Go, which
rendered void the deposit receipt.
HELD:
Relative to the second issue of alleged concealment, this is of
the firm belief that private respondent had deliberately
concealed the state of health and physical condition of his
required essential data for the insurance application form, he
was fully aware that his one-year old daughter is typically a
mongoloid child. Such a congenital physical defect could
never be ensconced nor disguised. Nonetheless, private
respondent, in apparent bad faith, withheld the fact material
to the risk to be assumed by the insurance company. As an
insurance agent of Pacific life, he ought to know, as he surely
must have known, his duty and responsibility to supply such a
material fact. Had he divulged said significant fact in the
insurance application form, Pacific Life would have verified the
same and would have had no choice but to disapprove the
application outright.
The contract of insurance is one of perfect good faith
(uberrima fides meaning good faith; absolute and perfect
candor or openness and honesty; the absence of any
concealment or deception, however slight [Blacks Law
Dictionary, 2nd Edition], not for the insured alone but equally
so for the insurer (Field mans Insurance Co., Inc. vs. Vda de
Songco, 25 SCRA 70). Concealment is a neglect to
communicate that which a party knows and ought to
communicate (Section 25, Act No. 2427). Whether intentional
or unintentional, the concealment entitles the insurer to
rescind the contract of insurance (Section 26, id.: Yu Pang
Cheng vs. Court of Appeals, et al., 105 Phil. 930; Saturnino vs.
Philippine American Life Insurance Company, 7 SCRA 316).
Private respondent appears guilty thereof.
We are thus constrained to hold that no insurance contract
was perfected between the parties with the noncompliance of
the conditions provided in the binding receipt, and
concealment, as legally defined, having been committed by
herein private respondent.
WHEREFORE, the decision appealed from is hereby set aside,
and in lieu thereof, one is hereby entered absolving
petitioners Lapulapu D. Mondragon and Great Pacific Life
Assurance Company from their civil liabilities as found by
respondent Court and ordering the aforesaid insurance
company to reimburse the amount of P1,077.75, without
interest, to private respondent, Ngo Hing. Costs against
private respondent.
SUNLIFE ASSURANCE COMPANY OF CANADA vs. CA &
SPS. BACANI
G.R. No. 105135 June 22, 1995
Facts:
On April 15, 1986, Robert John B. Bacani procured a life
insurance contract for himself from petitioner. He was issued
a Policy valued at P100,000.00, with double indemnity in case
of accidental death. The designated beneficiary was his
mother, respondent Bernarda Bacani.
On June 26, 1987, the insured died in a plane crash.
Respondent Bernarda Bacani filed a claim with petitioner,
seeking the benefits of the insurance policy taken by her son.
Petitioner conducted an investigation and its findings
prompted it to reject the claim.
In its letter, petitioner informed respondent Bernarda, that the
insured did not disclose material facts relevant to the
issuance of the policy, thus rendering the contract of
insurance voidable. A check representing the total premiums
paid in the amount of P10,172.00 was attached to said letter.
Petitioner claimed that the insured gave false statements in
his application:

xxx 5. Within the past 5 years have you:
consulted any doctor or other health practitioner? xxx
xxx 6. Have you ever had or sought advice for:
b. urine, kidney or bladder disorder? xxx
The deceased answered question No. 5(a) in the affirmative
but limited his answer to a consultation with a certain Dr.
Reinaldo D. Raymundo of the Chinese General Hospital on
February 1986, for cough and flu complications. The other
questions were answered in the negative .
Petitioner discovered that two weeks prior to his application
for insurance, the insured was examined and confined at the
Lung Center of the Philippines, where he was diagnosed for
renal failure. During his confinement, the deceased was
subjected to urinalysis, ultra-sonography and hematology
tests.
On November 17, 1988, respondents filed an action for
specific performance against petitioner with the RTC-
Valenzuela, Metro Manila. RTC ruled in favor of respondents
stating that facts concealed by the insured were made in
good faith and under a belief that they need not be disclosed.
Moreover, it held that the health history of the insured was
immaterial since the insurance policy was "non-medical".
CA affirmed the decision of RTC and also held that petitioner
cannot avoid its obligation by claiming concealment because
the cause of death was unrelated to the facts concealed by
the insured.
Hence this petition.
Issue:
1. Whether or not good faith is a defense to concealment.
2. Whether or not the cause of death of the insured must be
related to the facts concealed by him in order for petitioner to
rescind the contract of insurance against repsondents.
Held:
1. NO. Section 26 of The Insurance Code is explicit in requiring
a party to a contract of insurance to communicate to the
other, in good faith, all facts within his knowledge which are
material to the contract and as to which he makes no
warranty, and which the other has no means of ascertaining.
Said Section provides:
A neglect to communicate that which a party knows and
ought to communicate, is called concealment.
Materiality is to be determined not by the event, but solely by
the probable and reasonable influence of the facts upon the
party to whom communication is due, in forming his estimate
of the disadvantages of the proposed contract or in making
his inquiries (The Insurance Code, Sec. 31).
The terms of the contract are clear. The insured is specifically
required to disclose to the insurer matters relating to his
health.
The information which the insured failed to disclose were
material and relevant to the approval and issuance of the
insurance policy. The matters concealed would have definitely
affected petitioner's action on his application, either by
approving it with the corresponding adjustment for a higher
premium or rejecting the same. Moreover, a disclosure may
have warranted a medical examination of the insured by
petitioner in order for it to reasonably assess the risk involved
in accepting the application.
Materiality of the information withheld does not depend on
the state of mind of the insured. Neither does it depend on
the actual or physical events which ensue.
Thus, "good faith" is no defense in concealment. The insured's
failure to disclose the fact that he was hospitalized for two
weeks prior to filing his application for insurance, raises grave
doubts about his bonafides. It appears that such concealment
was deliberate on his part.
2. NO. Anent the finding that the facts concealed had no
bearing to the cause of death of the insured, it is well settled
that the insured need not die of the disease he had failed to
disclose to the insurer. It is sufficient that his non-disclosure
misled the insurer in forming his estimates of the risks of the
proposed insurance policy or in making inquiries (Henson v.
The Philippine American Life Insurance Co., 56 O.G. No. 48
[1960])
EDILLON VS. MANILA BANKERS
FACTS:
In April 1969, Carmen Lapuz filled out an application form for
insurance under Manila Banker Life Assurance Corporation.
She stated that her date of birth was July 11, 1904. Upon
payment of the Php 20.00 premium, she was issued the
insurance policy in April 1969. In May 1969, Carmen Lapuz
died in a vehicular accident. Regina Edillon her sister, who
was named a beneficiary in the insurance policy sought to
collect the insurance proceeds but Manila Banker denied the
claim. Apparently, it is a rule of the insurance company that
they were not to issue insurance policies to persons who are
under the age of sixteen (16) years of age or over the age of
sixty (60) years Note, that Lapuz was already 65 years old
when she was applying for the insurance policy.
ISSUE:
Whether or not Edillon is entitled to the insurance claim as a
beneficiary.
HELD:
Yes. Carmen Lapuz did not conceal her true age. Despite this,
the insurance company still received premium from Lapuz and
issued the corresponding insurance policy to her. When the
accident happened, the insurance policy has been in force for
45 days already and such time was already sufficient for
Manila Banker to notice the fact that Lapuz is already over 60
years old and thereby cancel the insurance policy. If Manila
Banker failed to act, it is either because it was willing to waive
such disqualification; or, through the negligence or
incompetence of its employees for which it has only itself to
blame, it simply overlooked such fact.
The plain, human justice of this doctrine is perfectly apparent.
To allow a company to accept ones money for a policy of
insurance which it then knows to be void and of no effect,
though it knows as it must, that the assured believes it to be
valid and binding, is so contrary to the dictates of honesty
and fair dealing, and so closely related to positive fraud, as to
be abhorrent to fair-minded men. It would be to allow the
company to treat the policy as valid long enough to get the
premium on it, and leave it at liberty to repudiate it the next
moment. This cannot be deemed to be the real intention of
the parties. Under the circumstances, Manila Banker is
already deemed in estoppel.
---REPRESENTATION
TAN VS. CA
FACTS:
Businessman Tan Lee Siong applied for life insurance policy
with American Life Insurance Company in the amount of
P80,000.00 by virtue of which he was issued Policy No.
1082467 effective November 6,1973, with his sons as
designated beneficiaries thereof. On April 1975, Tan Lee Siong
died and the sons subsequently filed their claim for the
insurance proceeds. But in September of the same year, the
company sent a letter denying petitioners' claim and
rescinded the policy by reason of the alleged
misrepresentation and concealment of material facts made by
the deceased Tan Lee Siong in his application for insurance.
The premiums paid on the policy, however, were thereupon
refunded.
ISSUES:
Whether or not the insurance company no longer had the
right to rescind the contract of insurance as rescission must
allegedly be done during the lifetime of the insured within two
years and prior to the commencement of the action.
RULING:
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 insured's 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 noted by the Court of Appeals, to wit:
The policy was issued on November 6, 1973 and the insured
died on April 26,1975. The policy was thus in force for a
period of only one year and five months. Considering that the
insured died before the two-year period had lapsed,
respondent company is not, therefore, barred from proving
that the policy is void ab initio by reason of the insured's
fraudulent concealment or misrepresentation. Moreover,
respondent company rescinded the contract of insurance and
refunded the premiums paid on September 11, 1975, previous
to the commencement of this action on November 27,1975.
The deceased, by affixing his signature on the application
form, affirmed the correctness of all the entries and answers
appearing therein. It is but to be expected that he, a
businessman, would not have affixed his signature on the
application form unless he clearly understood its significance.
For, the presumption is that a person intends the ordinary
consequence of his voluntary act and takes ordinary care of
his concerns.
The evidence for respondent company shows that on
September 19,1972, the deceased was examined by Dr.
Victoriano Lim and was found to be diabetic and hypertensive;
that by January, 1973, the deceased was complaining of
progressive weight loss and abdominal pain and was
diagnosed to be suffering from hepatoma, Another physician,
Dr. Wenceslao Vitug, testified that the deceased came to see
him on December 14, 1973 for consolation and claimed to
have been diabetic for five years. Because of the concealment
made by the deceased of his consultations and treatments for
hypertension, diabetes and liver disorders, respondent
company was thus misled into accepting the risk and
approving his application as medically standard and
dispensing with further medical investigation and
examination. For as long as no adverse medical history is
revealed in the application form, an applicant for insurance is
presumed to be healthy and physically fit and no further
medical investigation or examination is conducted by
respondent company
---THE POLICY
*Persons entitled to recover on policy
G.R. No. 181132
June 5, 2009
HEIRS OF LORETO C. MARAMAG, represented by
surviving spouse VICENTA PANGILINAN MARAMAG,
petitioners, vs. EVA VERNA DE GUZMAN MARAMAG,
ODESSA DE GUZMAN MARAMAG, KARL BRIAN DE
GUZMAN MARAMAG, TRISHA ANGELIE MARAMAG, THE
INSULAR LIFE ASSURANCE COMPANY, LTD., and GREAT
PACIFIC LIFE ASSURANCE CORPORATION, respondents.
FACTS:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court, seeking to reverse and set aside the
Resolution2 dated January 8, 2008 of the Court of Appeals
(CA), in CA-G.R. CV No. 85948, dismissing petitioners appeal
for lack of jurisdiction.
The petitioners were the legitimate wife and children of Loreto
Maramag, while respondents were Loretos illegitimate family.
Eva de Guzman Maramag and her children were assigned as
the beneficiary of Loreto. Eva, however, was a concubine of
Loreto and a suspect in the killing of the latter, thus, she is
disqualified to receive any proceeds from his insurance
policies from Insular Life Assurance Company, Ltd. (Insular)
and Great Pacific Life Assurance Corporation.
The petitioners also contented that the illegitimate children of
LoretoOdessa, Karl Brian, and Trisha Angeliewere entitled
only to one-half of the legitime of the legitimate children,
thus, the proceeds released to Odessa and those to be
released to Karl Brian and Trisha Angelie were inofficious and
should be reduced; and further, they contented that they
could not be deprived of their legitimes, which should be
satisfied first.
Petitioner then filed for the revocation and/or reduction of
insurance proceeds for being void and/or inofficious, with
prayer for a temporary restraining order (TRO) and a writ of
preliminary injunction.
In support of the prayer for TRO and writ of preliminary
injunction, petitioners alleged, among others, that part of the
insurance proceeds had already been released in favor of
Odessa, while the rest of the proceeds are to be released in
favor of Karl Brian and Trisha Angelie, both minors, upon the
appointment of their legal guardian. Petitioners also prayed
for the total amount of P320,000.00 as actual litigation
expenses and attorneys fees.
Insular admitted that Loreto misrepresented Eva as his
legitimate wife and Odessa, Karl Brian, and Trisha Angelie as
his legitimate children, and that they filed their claims for the
insurance proceeds of the insurance policies; that when it
ascertained that Eva was not the legal wife of Loreto, it
disqualified her as a beneficiary and divided the proceeds
among Odessa, Karl Brian, and Trisha Angelie, as the
remaining designated beneficiaries; and that it released
Odessas share as she was of age, but withheld the release of
the shares of minors Karl Brian and Trisha Angelie pending
submission of letters of guardianship. Insular alleged that the
complaint or petition failed to state a cause of action insofar
as it sought to declare as void the designation of Eva as
beneficiary, because Loreto revoked her designation in a
Policy and was disqualified in another Policy; and insofar as it
sought to declare as inofficious the shares of Odessa, Karl
Brian, and Trisha Angelie, considering that no settlement of
Loretos estate had been filed nor had the respective shares
of the heirs been determined. Insular further claimed that it
was bound to honor the insurance policies designating the
children of Loreto with Eva as beneficiaries pursuant to
Section 53 of the Insurance Code.
On the other hand, Grepalife alleged that Eva was not
designated as an insurance policy beneficiary; that the claims
filed by Odessa, Karl Brian, and Trisha Angelie were denied
because Loreto was ineligible for insurance due to a
misrepresentation in his application form that he was born on
December 10, 1936 and, thus, not more than 65 years old
when he signed it in September 2001; that the case was
premature, there being no claim filed by the legitimate family
of Loreto; and that the law on succession does not apply
where the designation of insurance beneficiaries is clear.
As the whereabouts of Eva, Odessa, Karl Brian, and Trisha
Angelie were not known to petitioners, summons by
publication was resorted to. Still, the illegitimate family of
Loreto failed to file their answer. Hence, the trial court, upon
motion of petitioners, declared them in default in its Order
dated May 7, 2004.
During the pre-trial on July 28, 2004, both Insular and
Grepalife moved that the issues raised in their respective
answers be resolved first. The trial court ordered petitioners
to comment within 15 days.
In their comment, petitioners alleged that the issue raised by
Insular and Grepalife was purely legal and that the
designation of a beneficiary is an act of liberality or a
donation and, therefore, subject to the provisions of Articles
7528 and 7729 of the Civil Code.
In reply, both Insular and Grepalife countered that the
insurance proceeds belong exclusively to the designated
beneficiaries in the policies, not to the estate or to the heirs of
the insured. Grepalife also reiterated that it had disqualified
Eva as a beneficiary.
On September 21, 2004, the trial court issued a Resolution,
granted the defendants motion to dismiss with respect to
Odessa, Karl Brian and Trisha Maramag. The action shall
proceed with respect to the other defendants Eva Verna de
Guzman, Insular Life and Grepalife.
ISSUE:
Whether or not the petitioners are entitled as beneficiaries of
Loreto Maramag.
HELD:
No, the petitioners are not entitled as beneficiaries of Loreto
Maramag.
It is clear from the petition filed before the trial court that,
although petitioners are the legitimate heirs of Loreto, they
were not named as beneficiaries in the insurance policies
issued by Insular and Grepalife.
It is evident from the face of the complaint that petitioners are
not entitled to a favorable judgment in light of Article 2011 of
the Civil Code which expressly provides that insurance
contracts shall be governed by special laws, i.e., the
Insurance Code. Section 53 of the Insurance Code states
SECTION53.The insurance proceeds shall be applied
exclusively to the proper interest of the person in whose
name or for whose benefit it is made unless otherwise
specified in the policy.
Pursuant thereto, it is obvious that the only persons entitled
to claim the insurance proceeds are either the insured, if still
alive; or the beneficiary, if the insured is already deceased,
upon the maturation of the policy. The exception to this rule is
a situation where the insurance contract was intended to
benefit third persons who are not parties to the same in the
form of favorable stipulations or indemnity. In such a case,
third parties may directly sue and claim from the insurer.
Petitioners are third parties to the insurance contracts with
Insular and Grepalife and, thus, are not entitled to the
proceeds thereof. Accordingly, respondents Insular and
Grepalife have no legal obligation to turn over the insurance
proceeds to petitioners. The revocation of Eva as a beneficiary
in one policy and her disqualification as such in another are of
no moment considering that the designation of the
illegitimate children as beneficiaries in Loretos insurance
policies remains valid. Because no legal proscription exists in
naming as beneficiaries the children of illicit relationships by
the insured, the shares of Eva in the insurance proceeds,
whether forfeited by the court in view of the prohibition on
donations under Article 739 of the Civil Code or by the
insurers themselves for reasons based on the insurance
contracts, must be awarded to the said illegitimate children,
the designated beneficiaries, to the exclusion of petitioners. It
is only in cases where the insured has not designated any
beneficiary, or when the designated beneficiary is disqualified
by law to receive the proceeds, that the insurance policy
proceeds shall redound to the benefit of the estate of the
insured.
In this regard, the assailed June 16, 2005 Resolution of the
trial court should be upheld. In the same light, the Decision of
the CA dated January 8, 2008 should be sustained. Indeed,
the appellate court had no jurisdiction to take cognizance of
the appeal; the issue of failure to state a cause of action is a
question of law and not of fact, there being no findings of fact
in the first place.
WHEREFORE, the petition is DENIED for lack of merit. Costs
against petitioners.
*Commencement of Action
TEAL MOTOR COMPANY, INC v. Orient Insurance
Company, et.al
G.R. No. L-36701 March 28, 1934
Facts:
These seven cases related to insurance policies covering the
goods, wares, and merchandise contained in the building in
the Port Area in the City of Manila which was damaged by a
fire of unknown origin the afternoon of Sunday, January 6,
1929. At the request of the insured, the companies gave
additional time for the filing of the claims of loss. These claims
were definitely rejected in writing by the insurance companies
through their agents on April 15, 1929.
Among the special defenses of the insurance companies is
one based upon a clause in the policies which, with the
exception of those of the Atlas Assurance Company, Ltd.,
among other things provides:
. . . if the claim be made and rejected, and action or suit be
not commenced within three months after such rejection, ...
all benefit under this Policy shall be forfeited.
The seven suits were filed between the 3rd and the 15th day
of August, 1929, or more than three months after the
rejection by the defendant companies of plaintiff's claim. Suits
were brought on the policies covering the building, the first
week in June.
Issue:
Whether or not the forfeiture clause of respondents are valid.
Held:
Yes. Plaintiff was given such time as it deemed necessary to
formulate and present its claim of loss. That claim was
investigated by the adjusters for several months, and under
the contract of insurance, the insured had three months after
rejection in which to bring suit. The issues were virtually
joined on the presentation of the claims and their rejection by
the companies in writing, and three months thereafter is not
an unreasonably short time to draft and file in court an
appropriate complaint on a contract of fire insurance.
Sun Insurance Office, Ltd. v. CA and Emilio Tan
G.R. No. 89741 March 13, 1991
FACTS:
August 15, 1983, Emilio Tan took from Sun Insurance Office a
P300,000.00 property insurance policy to cover his interest in
the electrical supply store of his brother. Four days after the
issuance of the policy, the building was burned including the
insured store.
On August 20, 1983, Tan filed his claim for fire loss with Sun
Insurance Office, but on February 29, 1984, Sun Insurance
Office wrote Tan denying the latters claim.
On April 3, 1984, Tan wrote Sun Insurance Office, seeking
reconsideration of the denial of his claim. Sun Insurance Office
answered the letter, advising Tans counsel that the Insurers
denial of Tans claim remained unchanged. Respondent filed a
complaint to RTC. Petitioner filed a motion to dismiss on the
alleged ground that the action had already prescribed but this
was denied by the trial court. RTC ruled in favor of respondent
. CA affirmed. Hence this petition.
ISSUES:
(1)WON the filing of a motion for reconsideration interrupts th
e 12 monthsprescriptive period to contest the denial of the
insurance claim; and
(2)WON the rejection of the claim shall be deemed final only
of it contains words to the effect that the denial is final.
HELD:
(1) No. In this case, Condition 27 of the Insurance Policy of the
parties reads:
27.Action or suit clause - If a claim be made and rejected and
an action or suit be not commenced either in the Insurance
Commission or in any court of competent jurisdiction within
twelve (12) months from receipt of notice of such rejection, or
in case of arbitration taking place as provided herein, within
twelve (12) months after due notice of the award made by the
arbitrator or arbitrators or umpire, then the claim shall for all
purposes be deemed to have been abandoned and shall not
thereafter be recoverable here under. As the terms are very
clear and free from any doubt or ambiguity whatsoever, it
must be taken and understood in its plain, ordinary and
popular sense. Tan, in his letter addressed to Sun Insurance
Office dated April 3, 1984, admitted that
the received a copy of the letter of rejection on April 2, 1984.
Thus, the 12-monthprescriptive period started to run from the
said date of April 2, 1984, for such is the plain meaning and
intention of Section 27 of the insurance policy. The condition
contained in an insurance policy that claims must be
presented within one year after rejection is not merely a
procedural requirement but an important matter essential to a
prompt settlement of claims against insurance companies as
it demands that insurance suits be brought by the insured
while the evidence as to the origin and cause of destruction
have not yet disappeared.
It is apparent that Section 27 of the insurance policy was
stipulated pursuant to Section 63 of the Insurance Code,
which states that:
Sec. 63. A condition, stipulation or agreement in any policy of
insurance, limiting the time for commencing an action
thereunder to a period of less than one year from the time
when the cause of action accrues, is void.
It also begs to ask, when does the cause of action accrue? The
insureds cause of action or his right to file a claim either
in the Insurance Commission or in a court of competent
jurisdiction commences from the time of the denial of his
claim by the Insurer, either expressly or impliedly. But
the rejection referred to should be construed as the rejection
in the first instance (i.e. at the first occasion or for the first
time), not rejection conveyed in a resolution of a petition for
reconsideration.
(2) No. The Eagle Star case cited by Tan to defend his theory
that the rejection of the claim shall be deemed final only of it
contains words to the effect that the denial is final is
inapplicable in the
instant case. Final rejection or denial cannot be taken to mean
therejection of a petition for reconsideration. The Insurance
policy in the Eagle Star case provides that the insured should
file his claim, first, with the carrier and then with the insurer.
The final rejection being referred to in said case is the
rejection by the insurance company.
PACIFIC BANKING CORPORATION vs. CA & ORIENTAL
ASSURANCE COMPANY
G.R. No. L-41014 November 28, 1988
Facts:
On October 21,1963, a Fire Policy an open policy, was issued
to the Paramount Shirt Manufacturing Co. (the insured, for
brevity), by which private respondent Oriental Assurance
Corporation bound itself to indemnify the insured for any loss
or damage, not exceeding P61,000.00, caused by fire to its
property consisting of stocks, materials and supplies usual to
a shirt factory, including furniture, fixtures, machinery and
equipment while contained in the ground, second and third
floors of the building situated at number 256 Jaboneros St.,
San Nicolas, Manila, for a period of one year commencing
from that date to October 21, 1964.
The insured was at the time of the issuance of the policy and
is up to this time, a debtor of petitioner in the amount of not
less than P800,000.00 and the goods described in the policy
were held in trust by the insured for the petitioner under
thrust receipts.
Said policy was duly endorsed to petitioner as mortgagee/
trustor of the properties insured, with the knowledge and
consent of private respondent to the effect that "loss if any
under this policy is payable to the Pacific Banking
Corporation".
On January 4, 1964, while the aforesaid policy was in full force
and effect, a fire broke out on the subject premises destroying
the goods contained in its ground and second floors.
On January 24, 1964, counsel for the petitioner sent a letter of
demand to private respondent for indemnity due to the loss of
property by fire under the endorsement of said policy.
On January 28, 1964, private respondent informed counsel for
the petitioner that it was not yet ready to accede to the
latter's demand as the former is awaiting the final report of
the insurance adjuster.
On March 25, 1964, the said insurance adjuster notified
counsel for the petitioner that the insured under the policy
had not filed any claim with it, nor submitted proof of loss
which is a clear violation of Policy Condition No.11, and for
which reason, determination of the liability of private
respondent could not be had.
For failure of the insurance company to pay the loss as
demanded, petitioner on April 28, 1964, filed in the court a
quo an action for a sum of money against the private
respondent, Oriental Assurance Corporation, in the principal
sum of P61,000.00 issued in favor of Paramount Shirt
Manufacturing Co.
At the trial, petitioner presented in evidence which is a
communication of the insurance adjuster revealing
undeclared co-insurances undertaken by insured Paramount
on the same property covered by its policy with private
respondent.
RTC ruled in favor of petitioner. CA reversed RTC, hence this
petition.
Issues:
1. WON unrevealed co-insurances Violated policy conditions
No. 3 leading to forfeiture of the contract of insurance.
2. WON the insured failed to file the required proof of loss
prior to court action.
Held:
1. YES. The insured failed to reveal before the loss three other
insurances. Had the insurer known that there were many co-
insurances, it could have hesitated or plainly desisted from
entering into such contract. Hence, the insured was guilty of
clear fraud.
Petitioner points out that Condition No. 3 in the policy in
relation to the "other insurance clause" supposedly to have
been violated, cannot certainly defeat the right of the
petitioner to recover the insurance as mortgagee/assignee.
It is obvious that petitioner has missed all together the import
of subject mortgage clause which specifically provides:
Mortgage Clause
Loss, if any, under this policy, shall be payable to the PACIFIC
BANKING CORPORATION Manila mortgagee/trustor as its
interest may appear, it being hereby understood and agreed
that this insurance as to the interest of the mortgagee/trustor
only herein, shall not be invalidated by any act or neglect
except fraud or misrepresentation, or arsonof the
mortgagor or owner/trustee of the property insured; provided,
that in case the mortgagor or owner/ trustee neglects or
refuses to pay any premium, the mortgagee/ trustor shall, on
demand pay the same.
The paragraph clearly states the exceptions to the general
rule that insurance as to the interest of the mortgagee,
cannot be invalidated; namely: fraud, or misrepresentation or
arson. As correctly found by the Court of Appeals,
concealment of the aforecited co-insurances can easily be
fraud, or in the very least, misrepresentation.
Undoubtedly, it is but fair and just that where the insured who
is primarily entitled to receive the proceeds of the policy has
by its fraud and/or misrepresentation, forfeited said right, with
more reason petitioner which is merely claiming as indorsee
of said insured, cannot be entitled to such proceeds.
2. Yes. Generally, the cause of action on the
policy accrues when the loss occurs. But when the policy
provides that no action shall be brought unless the claim is
first presented extrajudicially in the manner provided in the
policy, the cause of action will accrue from the time the
insurer finally rejects the claim for payment.
In the case at bar, policy condition No. 11 specifically provides
that the insured shall on the happening of any loss or damage
give notice to the company and shall within 15 days after
such loss or damage deliver to the private respondent:
(a) a claim in writing giving particular account as to the
articles or goods destroyed and the amount of the loss or
damage and
(b) particulars of all other insurances, if any.
24 days after the fire did petitioner merely wrote letters to
private respondent to serve as a notice of loss. It didnt even
furnish other documents. Instead, petitioner shifted upon
private respondent the burden of fishing out the necessary
information to ascertain the particular account of the articles
destroyed by fire as well as the amount of loss. Since the
required claim by insured, together with the preliminary
submittal of relevant documents had not been complied with,
it follows that private respondent could not be deemed to
have finally rejected petitioner's claim and therefore there
was no cause of action.
It appearing that insured has violated or failed to perform the
conditions under No. 3 and 11 of the contract, and such
violation or want of performance has not been waived by the
insurer, the insured cannot recover, much less the herein
petitioner.
[G.R. No. 82036. May 22, 1997]
TRAVELLERS INSURANCE & SURETY
CORPORATION, petitioner, vs. HON. COURT OF APPEALS
and VICENTE MENDOZA, respondents.
Facts:
At about 5:30 in the morning of July 20, 1980, a 78-year old
woman, Feliza Vineza de Mendoza was on her way to hear
mass at the Tayuman Cathedral. While walking along Tayuman
corner Gregorio Perfecto Streets, she was bumped by a taxi
that was running fast. Several persons witnessed the accident,
among whom were Rolando Marvilla, Ernesto Lopez and
Eulogio Tabalno. After the bumping, the old woman was seen
sprawled on the pavement. The woman was then brought to
Mary Johnston Hospital in Tondo. Upon knowing, Mendoza
brothers were then able to trace their mother at the Mary
Johnston Hospital where they were advised by the attending
physician that they should bring the patient to the National
Orthopedic Hospital because of her fractured bones. Instead,
the victim was brought to the U.S.T. Hospital where she expired
at 9:00 oclock that same morning. Death was caused by
traumatic shock as a result of the severe injuries she
sustained.
The evidence shows that at the moment the victim was
bumped by the vehicle, the latter was running fast, so much so
that because of the strong impact the old woman was thrown
away and she fell on the pavement. During the investigation,
defendant Armando Abellon, the registered owner of Lady Love
Taxi bearing No. 438-HA Pilipinas Taxi 1980, certified to the fact
that the vehicle was driven last July 20, 1980 by one Rodrigo
Dumlao. It was on the basis of this affidavit of the registered
owner that caused the police to apprehend Rodrigo Dumlao,
and consequently to have him prosecuted and eventually
convicted of the offense. Said Dumlao absconded in that
criminal case, especially at the time of the promulgation of the
judgment therein so much so that he is now a fugitive from
justice.
Private respondent filed a complaint for damages against
Armando Abellon as the owner of the Lady Love Taxi and
Rodrigo Dumlao as the driver of the Lady Love taxicab that
bumped private respondents mother. Subsequently, private
respondent amended his complaint to include petitioner,
Travellers Insurance, as the compulsory insurer of the said
taxicab.
The trial court rendered judgment in favor of private
respondent. Then the petitioner appealed to the Court of
Appeals. CA affirmed RTCs decision.
Issue:
WON Travellers Insurance & Surety Company is liable for
damages to private respondents.
Held: No.
The right of the person injured to sue the insurer of the party
at fault (insured), depends on whether the contract of
insurance is intended to benefit third persons also or on the
insured. And the test applied has been this: Where the
contract provides for indemnity against liability to third
persons, then third persons to whom the insured is liable can
sue the insurer. Where the contract is for indemnity against
actual loss or payment, then third persons cannot proceed
against the insurer, the contract being solely to reimburse the
insured for liability actually discharged by him thru payment
to third persons, said third persons recourse being thus
limited to the insured alone.
The RTC did not distinguish between the private respondents
cause of action against the owner and the driver of the Lady
Love taxicab and his cause of action against the petitioner.
Confusing this two sources of obligations as they arise from
the same act of the taxicab fatally hitting private
respondents mother, and in the face of the evidence of the
reckless imprudence of the driver, the trial court brushed
aside its ignorance of the terms and conditions of the
insurance contract found all three- the driver, owner of the
taxicab and the alleged insurer jointly and severally liable
for actual, moral and exemplary damages as well as
attorneys fees and litigation expenses. This is clearly a
misapplication of the law by the trial court on this ground.
While it is true that where the insurance contract
provides for indemnity against liability to third
persons, such third persons can directly sue the
insurer, however, the direct liability of the insurer
under indemnity contracts against third-party liability
does not mean that the insurer can be held solidarily
liable with the insured and/or the other parties found
at fault. The liability of the insurer is based on
contract; that of the insured is based on tort.
In solidary obligation, the creditor may enforce the entire
obligation against one of the solidary debtors. On the other
hand, insurance is defined as a contract whereby one
undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or
contingent event.
At the time of the vehicular incident which resulted in the
death of private respondents mother, during which time the
Insurance Code had not yet been amended by Batas
Pambansa (B.P.) Blg. 874, Section 384 provided as follows:
Any person having any claim upon the policy issued pursuant
to this chapter shall, without any unnecessary delay, present
to the insurance company concerned a written notice of claim
setting forth the amount of his loss, and/or the nature, extent
and duration of the injuries sustained as certified by a duly
licensed physician. Notice of claim must be filed within six
months from date of the accident, otherwise, the claim shall
be deemed waived. Action or suit for recovery of damage due
to loss or injury must be brought in proper cases, with the
Commission or the Courts within one year from date of
accident, otherwise the claimants right of action shall
prescribe.
It is significant to note that the aforecited Section 384 was
amended by B.P. Blg. 874 to categorically provide that action
or suit for recovery of damage due to loss or injury must be
brought in proper cases, with the Commissioner or the Courts
within one year from denial of the claim, otherwise the
claimants right of action shall prescribe
We have certainly ruled with consistency that the prescriptive
period to bring suit in court under an insurance policy, begins
to run from the date of the insurers rejection of the claim
filed by the insured, the beneficiary or any person claiming
under an insurance contract.
WHEREFORE, the instant petition is HEREBY GRANTED. The
decision of the CA and RTC is REVERSED and SET ASIDE. The
complaint against Travellers Insurance & Surety Corporation in
said case is hereby ordered dismissed.
*Cancellation of Non-life Policy
MALAYAN INSURANCE vs. GREGORIA CRUZ
ARNALDOG.R.
No. L-67835 October 12, 1987
FACTS:
On June 7, 1981, the petitioner (hereinafter called (MICO)
issued to the private respondent, P14,000.00 effective July 22,
1981, until July 22, 1982. On October 15,1981, MICO allegedly
cancelled the policy for non-payment, of the premium and
sent the corresponding notice to Pinca. On December 24,
1981, payment of the premium for Pinca was received by
Domingo Adora, agent of MICO. On January 15, 1982, Adora
remitted this payment to MICO,together with other payments.
On January 18, 1982, Pinca's property was completely burned.
On February 5, 1982, Pinca's payment was returned by MICO
to Adora on the ground that her policy had been cancelled
earlier. But Adora refused to accept it.
In due time, Pinca made the requisite demands for payment,
which MICO rejected. She then went to the Insurance
Commission. It is because she was ultimately sustained by the
public respondent that the petitioner has come to us for relief.
ISSUE:
Whether or not petitioner liable, for it alleged that the
insurance policy was already cancelled due to non-payment of
premium.
RULING:
On the merits, it must also fail. MICO's arguments that there
was no payment of premium and that the policy had been
cancelled before the occurence of the loss are not acceptable.
Its contention that the claim was allowed without proof of loss
is also untenable.
The petitioner relies heavily on Section 77 of the Insurance
Code providing that:
SEC. 77. An insurer is entitled to payment of the premium as
soon as the thing is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no policy or
contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies.
The above provision is not applicable because payment of the
premium was in fact eventually made in this case. Notably,
the premium invoice issued to Pinca at the time of the
delivery of the policy on June 7, 1981 was stamped "Payment
Received" of the amoung of P930.60 on "12-24-81" by
Domingo Adora. This is important because it suggests an
understanding between MICO and the insured that such
payment could be made later, as agent Adora had assured
Pinca. In any event, it is not denied that this payment was
actually made by Pinca to Adora, who remitted the same to
MICO.
It is not disputed that the premium was actually paid by Pinca
to Adora on December 24, 1981, who received it on behalf of
MICO, to which it was remitted on January 15, 1982. What is
questioned is the validity of Pinca's payment and of Adora's
authority to receive it.
MICO's acknowledgment of Adora as its agent defeats its
contention that he was not authorized to receive the premium
payment on its behalf. It is clearly provided in Section 306 of
the Insurance Code that:
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance agant
or insurance broker a policy or contract of insurance shall be
demmed to have authorized such agent or broker to receive
on its behalf payment of any premium which is due on such
policy or contract of insurance at the time of its issuance or
delivery or which becomes due thereon.
On the other hand Article 64 (except "nonpayment of
premium") provided the cancellation was made in accordance
therewith and with Article 65.
Section 64 reads as follows:
SEC. 64. No policy of insurance other than life shall be
cancelled by the insurer except upon prior notice thereof to
the insured, and no notice of cancellation shall be effective
unless it is based on the occurrence, after the effective date
of the policy, of one or more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the
hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions
increasing the hazard insured against;
(e) physical changes in the property insured which result in
the property becoming uninsurable;or
(f) a determination by the Commissioner that the continuation
of the policy would violate or would place the insurer in
violation of this Code.
As for the method of cancellation, Section 65 provides as
follows:
SEC. 65. All notices of cancellation mentioned in the
preceding section shall be in writing, mailed or delivered to
the named insured at the address shown in the policy, and
shall state (a) which of the grounds set forth in section sixty-
four is relied upon and (b) that, upon written request of the
named insured, the insurer will furnish the facts on which the
cancellation is based.
A valid cancellation must, therefore, require concurrence of
the following conditions:
(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the
effective date of the policy, of one or more of the grounds
mentioned;
(3) The notice must be (a) in writing, (b) mailed, or delivered
to the named insured, (c) at the address shown in the policy;
(4) It must state (a) which of the grounds mentioned in
Section 64 is relied upon and (b) that upon written request of
the insured, the insurer will furnish the facts on which the
cancellation is based.
There is no proof that the notice, assuming it complied with
the other requisites mentioned above, was actually mailed to
and received by Pinca. All MICO's offers to show that the
cancellation was communicated to the insured is its
employee's testimony that the said cancellation was sent "by
mail through our mailing section." without more. The
petitioner then says that its "stand is enervated (sic) by the
legal presumption of regularity and due performance of duty."
(not realizing perhaps that "enervated" means "debilitated"
not "strengthened").
On the other hand, there is the flat denial of Pinca, who says
she never received the claimed cancellation and who, of
course, did not have to prove such denial Considering the
strict language of Section 64 that no insurance policy shall be
cancelled except upon prior notice, it behooved MICO's to
make sure that the cancellation was actually sent to and
received by the insured. Adora incidentally, had not been
informed of the cancellation either and saw no reason not to
accept the said payment. Petition denied. Malayan Insurance
Co., Inc. is liable.
---WARRANTIES
*Effect of warranties, conditions and exceptions
American home assurance v. Tantuco Enterprises
Facts:
Respondent Tantuco Enterprises, Inc. is engaged in the
coconut oil milling and refining industry. It owns two
oil mills. Both are located at its factory compound at
Iyam, Lucena City. It appears that respondent
commenced its business operations with only one oil
mill. The two oil mills were separately covered by fire
insurance policies issued by petitioner American
Home Assurance Co., Philippine Branch. [1] The first oil
mill was insured for three million pesos
(P3,000,000.00) for the period March 1, 1991 to 1992.
[2]
The new oil mill was insured for six million pesos
(P6,000,000.00) for the same term.
A fire that broke out in the early morning of September
30,1991 gutted and consumed the new oil
mill. Respondent immediately notified the petitioner
of the incident. petitioner rejected respondents claim
for the insurance proceeds on the ground that no
policy was issued by it covering the burned oil mill. It
stated that the description of the insured
establishment referred to the old oil mill.
The RTC rendered judgment in favor of the plaintiff. The same
was affirmed by the CA. Hence, the present course of action,
where petitioner argues that this specific boundary
description clearly pertains, not to the burned oil mill, but to
the other mill. In other words, the oil mill gutted by fire was
not the one described by the specific boundaries in the
contested policy.
Issue:
Whether or not the new oil mill is covered by the fire
insurance policy
Held:
Yes. In construing the words used descriptive of a building
insured, the greatest liberality is shown by the courts in giving
effect to the insurance.[11] In view of the custom of insurance
agents to examine buildings before writing policies upon
them, and since a mistake as to the identity and character of
the building is extremely unlikely, the courts are inclined to
consider that the policy of insurance covers any building
which the parties manifestly intended to insure, however
inaccurate the description may be. Notwithstanding,
therefore, the misdescription in the policy, it is beyond
dispute, to our mind, that what the parties manifestly
intended to insure was the new oil mill.
If the parties really intended to protect the first oil mill, then
there is no need to specify it as new. Indeed, it would be
absurd to assume that the respondent would protect its first
oil mill for different amounts and leave uncovered its second
one.
Pioneer v. Yap
Facts:
Respondent Oliva Yap was the owner of a store in a two-storey
building located at No. 856 Juan Luna Street, Manila, where in
1962 she sold shopping bags and footwear, such as shoes,
sandals and step-ins. Chua Soon Poon Oliva Yap's son-in-law,
was in charge of the store.
On April 19, 1962, respondent Yap took out Fire Insurance
Policy No. 4216 from petitioner Pioneer Insurance & Surety
Corporation with a face value of P25,000.00 covering her
stocks, office furniture, fixtures and fittings of every kind and
description. Among the conditions in the policy executed by
the parties are the following:
the Insured shall give notice to the Company of any insurance
or insurances already effected, or which may subsequently be
effected, covering any of the property hereby insured,
and unless such notice be given and the particulars of such
insurance or insurances be stated in, or endorsed on this
Policy by or on behalf of the Company before the occurrence
of any loss or damage, all benefits under this Policy shall be
forfeited. (emphasis supplied)
It is understood that, except as may be stated on the face of
this policy there is no other insurance on the property hereby
covered and no other insurance is allowed except by the
consent of the Company endorsed hereon. Any false
declaration or breach or this condition will render this policy
null and void.
on April 19, 1962 an insurance policy for P20,000.00 issued by
the Great American Insurance Company covering the same
properties was noted on said policy as co-insurance.
on September 26, 1962, respondent Oliva Yap took out
another fire insurance policy for P20,000.00 covering the
same properties, this time from the Federal Insurance
Company, Inc., which new policy was, however, procured
without notice to and the written consent of petitioner Pioneer
Insurance & Surety Corporation and, therefore, was not noted
as a co-insurance.
At dawn on December 19, 1962, a fire broke out in the
building housing respondent Yap's store and burned
everything down. Respondent Yap filed an insurance claim,
but the same was denied on the ground of "breach and/or
violation of any and/or all terms and conditions".
On July 17, 1963, Oliva Yap filed with the Court of First
Instance of Manila the present complaint asking for payment
of the face value of her fire insurance policy. In its answer,
petitioner alleged that no property belonging to plaintiff Yap
and covered by the insurance policy was destroyed by the
fire; that Yap's claim was filed out of time; and that Yap took
out an insurance policy from another insurance company
without petitioner's knowledge and/or endorsement, in
violation of the express stipulations hence, all benefits
accruing from the policy were deemed forfeited.
the trial court decided for plaintiff Oliva Yap; and its judgment
was affirmed in full by the Court of Appeals.
Issue:
whether or not petitioner should be absolved from liability on
Fire Insurance Policy on account of any violation by
respondent Yap of the co-insurance clause.
Held:
There was a violation by respondent Oliva Yap of the co-
insurance clause contained in Policy No. 4219 that resulted in
the avoidance of petitioner's liability. The insurance policy for
P20,000.00 issued by the Great American Insurance Company
covering the same properties of respondent Yap and duly
noted on Policy as c-insurance, ceased, by agreement of the
parties, to be recognized by them as a co-insurance policy.
The endorsement shows the clear intention of the parties to
recognize on the date the endorsement was made, the
existence of only one co-insurance, the Northwest one. The
finding of the Court of Appeals that the
Great American Insurance policy was substituted by the
Federal Insurance policy is indeed contrary to said stipulation.
Other insurance without the consent of Pioneer would avoid
the contract. It required no affirmative act of election on the
part of the company to make operative the clause avoiding
the contract, wherever the specified conditions should occur.
Its obligations ceased, unless, being informed of the fact, it
consented to the additional insurance.
The validity of a clause in a fire insurance policy to the effect
that the procurement of additional insurance without the
consent of the insurer renders the policy void is
in American jurisprudence.
Milwaukee Mechanids' Lumber Co., vs. Gibson- "The rule in
this state and practically all of the states is to the effect that a
clause in a policy to the effect that the procurement of
additional insurance without the consent of the insurer
renders the policy void is a valid provision.
In this jurisdiction, General Insurance & Surety Corporation vs.
Ng Hua- The annotation then, must be deemed to be a
warranty that the property was not insured by any other
policy. Violation thereof entitled the insurer to rescind.
Furthermore, even if the annotations were overlooked the
defendant insurer would still be free from liability because
there is no question that the policy issued by
General Indemnity has not been stated in nor endorsed on
Policy No. 471 of defendant. The obvious purpose of the
aforesaid requirement in the policy is to prevent over-
insurance and thus avert the perpetration of fraud where a
fire would be profitable to the insured.
G.R. No. 151991 June 20, 2006
TRANS-ASIA SHIPPING LINES, INC., petitioner, vs.
PRUDENTIAL GUARANTEE and ASSURANCE
INC., Respondent.
Facts
Plaintiff [TRANS-ASIA] is the owner of the vessel M/V Asia
Korea. In consideration of payment of premiums, defendant
[PRUDENTIAL] insured M/V Asia Korea for loss/damage of the
hull and machinery arising from perils, inter alia, of fire and
explosion for the sum of P40 Million, beginning from the
period of July 1, 1993 up to July 1, 1994. This is evidenced by
Marine Policy No. MH93/1363.
On October 25, 1993, while the policy was in force, a fire
broke out while M/V Asia Korea was undergoing repairs at the
port of Cebu. On October 26, 1993, TRANS-ASIA filed its notice
of claim for damage sustained by the vessel. This is
evidenced by a letter/formal claim of even date. Trans Asia
reserved its right to subsequently notify defendant
PRUDENTIAL as to the full amount of the claim upon final
survey and determination by average adjuster Richard Hogg
International (Phil.) of the damage sustained by reason of fire
On May 29, 1995, TRANS-ASIA executed a document
denominated "Loan and Trust receipt", a portion of which
read: "Received from Prudential Guarantee and Assurance,
Inc., the sum of PESOS THREE MILLION ONLY (P3,000,000.00)
as a loan without interest under Policy, repayable only in the
event and to the extent that any net recovery is made by
Trans-Asia Shipping Corporation, from any person or persons,
corporation or corporations, or other parties, on account of
loss by any casualty for which they may be liable occasioned
by the 25 October 1993
In a letter dated 21 April 1997, PRUDENTIAL denied plaintiffs
claim from the fire incident due to the latters breach of policy
conditions, among them is "WARRANTED VESSEL CLASSED
AND CLASS MAINTAINED". Which was followed by defendants
letter dated 21 July 1997 requesting the return or payment of
the P3,000,000.00 within a period of ten (10) days from
receipt of the letter.
TRANS-ASIA then filed a Complaint5 for Sum of Money against
PRUDENTIAL with the RTC of Cebu City, wherein TRANS-ASIA
sought the amount of P8,395,072.26 from PRUDENTIAL,
alleging that the same represents the balance of the
indemnity due upon the insurance policy in the total amount
of P11,395,072.26. TRANS-ASIA similarly sought interest at
42% per annum citing Section 243 6 of Presidential Decreee
No. 1460, otherwise known as the "Insurance Code," as
amended.
The RTC dismissed the complaint for its failure to prove a
cause of action because Trans Asia failed to prove compliance
of the terms of the warranty, the violation thereof entitled the
Prudential, the insured party to rescind the contract. On
appeal the CA reversed the decision of RTC.
Issue: WON Trans-Asia breached a material warranty that the
vessel is classed and class maintained.
Held: No. The Supreme Court held that Trans Asia did not
breach a material warranty that the vessel is classed and
class maintained. Prudential Guaranty was not successful in
discharging the burden of evidence that Trans Asia breached
the subject policy condition on CLASSED AND CLASS
MAINTAINED. Foremost, Prudential, through the Senior
Manager of its Marine and Aviation Division, Lucio Fernandez,
made a categorical admission that at the time of the
procurement of the insurance, Trans Asias vessel, MV Asia
Korea was properly classed by Bureau Veritas, a classification
society recognized in the marine industry.
As it is undisputed that Trans Asia was properly classed at the
time the contract of insurance was entered into, thus, it
becomes incumbent upon Prudential to show evidence that
the status of Trans Asia being properly classed by Bureau of
Veritas had shifted in violation of the warranty. Unfortunately,
Prudential failed to support allegation
Consequently, PRUDENTIAL, not having shown that TRANS-
ASIA breached the warranty condition, CLASSED AND CLASS
MAINTAINED, it remains that TRANS-ASIA must be allowed to
recover its rightful claims on the policy.
1. PRUDENTIAL is DIRECTED to PAY TRANS-ASIA the
amount of P8,395,072.26, representing the balance of
the loss suffered by TRANS-ASIA and covered by
Marine Policy No. MH93/1363;
2. PRUDENTIAL is DIRECTED further to PAY TRANS-
ASIA damages in the form of attorneys fees
equivalent to 10% of the amount of P8,395,072.26;
3. The aggregate amount (P8,395,072.26 plus 10%
thereof as attorneys fees) shall be imposed double
interest at the rate of 24% per annum to be computed
from 13 September 1996 until fully paid; and
4. An interest of 12% per annum is similarly imposed
on the TOTAL amount of liability adjudged as
abovestated in paragraphs (1), (2), and (3) herein,
computed from the time of finality of judgment until
the full satisfaction thereof.
---PREMIUM
*When Insured Entitled to Return of Premium Paid
ARCE vs. THE CAPITAL INSURANCE & SURETY CO., INC.,
FACTS:
In Civil Case No. 66466 of the Court of First Instance of Manila,
the Capital Insurance and Surety Co., Inc., (COMPANY) was
ordered to pay Pedro Arce (INSURED) the proceeds of a fire
insurance policy. Not satisfied with the decision, the company
appealed to this Court on questions of law.
The INSURED was the owner of a residential house in Tondo,
Manila, which had been insured with the COMPANY since 1961
under Fire Policy No. 24204. On November 27, 1965, the
COMPANY sent to the INSURED Renewal Certificate No. 47302
to cover the period December 5, 1965 to December 5, 1966.
The COMPANY also requested payment of the corresponding
premium in the amount of P 38.10.
Anticipating that the premium could not be paid on time, the
INSURED, thru his wife, promised to pay it on January 4, 1966.
The COMPANY accepted the promise but the premium was not
paid on January 4, 1966. On January 8, 1966, the house of the
INSURED was totally destroyed by fire.
On January 10, 1966, INSURED's wife presented a claim for
indemnity to the COMPANY. She was told that no indemnity
was due because the premium on the policy was not paid.
Nonetheless the COMPANY tendered a check for P300.00 as
financial aid which was received by the INSURED's daughter,
Evelina R. Arce. The COMPANY reiterated that the check was
given "not as an obligation, but as a concession" because the
renewal premium had not been paid, The INSURED cashed the
check but then sued the COMPANY on the policy.
ISSUE:
Whether the petitioners are entitled to claim from their policy
despite non-payment of their premium.
RULING:
SEC. 72. An insurer is entitled to payment of premium as soon
as the thing insured is exposed to the perils insured against,
unless there is clear agreement to grant credit extension for
the premium due. No policy issued by an insurance company
is valid and binding unless and until the premium thereof has
been paid "
Morever, the parties in this case had stipulated:
IT IS HEREBY DECLARED AND AGREED that not. withstanding
anything to the contrary contained in the within policy, this
insurance will be deemed valid and binding upon the
Company only when the premium and documentary stamps
therefor have actually been paid in full and duly
acknowledged in an official receipt signed by an authorized
official/representative of the Company, "
It is obvious from both the Insurance Act, as amended, and
the stipulation of the parties that time is of the essence in
respect of the payment of the insurance premium so that if it
is not paid the contract does not take effect unless there is
still another stipulation to the contrary. In the instant case, the
INSURED was given a grace period to pay the premium but
the period having expired with no payment made, he cannot
insist that the COMPANY is nonetheless obligated to him.
Philippine Phoenix Surety & Insurance Co. V.
Woodworks Inc
FACTS:
Woodworks, Inc. was issued a fire policy for its
building machinery and equipment by Philippine Phoenix
Surety & Insurance Co. on July 21, 1960 for P500,000.00
covering July 21, 1960 to July 21, 1961. Woodworks did not
pay the premium totalling to P10,593.36. WOODWORKS then
failed pay the premium stipulated in the Policy when it was
issued nor at any time thereafter. On April 19, 1961 it was
alleged that Woodworks notified Philippine Phoenix the
cancellation of the Policy so Philippine
Phoenix credited P3,110.25 for the unexpired period of 94
days and demanded in writing the payment
of P7,483.11. Woodworks refused stating that it need not pay
premium "because the Insurer did not stand liable for any
indemnity during the period the premiums were not paid".
Philippine Phoenix filed with the CFI to recover its earned
premium of P7,483.11. The CFI favored Philippine Phoenix
ISSUE:
WON there was a valid insurance contract despite no
premium payment was paid?
HELD:
NO. The Courts findings are buttressed by Section 77 of the
Insurance Code (Presidential Decree No. 612, promulgated on
December 18, 1974), which now provides that no contract of
insurance issued by an insurance company is valid and
binding unless and until the premium thereof has been paid,
notwithstanding any agreement to the contrary.
Since the premium had not been paid, the policy must be
deemed to have lapsed.
The non-payment of premiums does not merely suspend but
put, an end to an insurance contract, since the time of the
payment is peculiarly of the essence of the contract.
In fact, if the peril insured against had occurred, PHIL.
PHOENIX, as insurer, would have had a valid defense against
recovery under the Policy it had issued. Explicit in the Policy
itself is PHIL. PHOENIXs agreement to indemnify
WOODWORKS for loss by fire only after payment of
premium, Compliance by the insured with the terms of the
contract is a condition precedent to the right of recovery.
The burden is on an insured to keep a policy in force by the
payment of premiums, rather than on the insurer to exert
every effort to prevent the insured from allowing a policy to
elapse through a failure to make premium payments. The
continuance of the insurers obligation is conditional upon the
payment of premiums, so that no recovery can be had upon a
lapsed policy, the contractual relation between the parties
having ceased.
Moreover, an insurer cannot treat a contract as valid for the
purpose of collecting premiums and invalid for the purpose of
indemnity.
[G.R. No. L-34768. February 24, 1984.]
JAMES STOKES, as Attorney-in-Fact of Daniel Stephen
Adolfson and DANIEL STEPHEN ADOLFSON, Plaintiffs-
Appellees, v. MALAYAN INSURANCE CO.,
INC., Defendant
Facts:
Adolfson had a subsisting MALAYAN car insurance policy with
the above coverage on November 23, 1969 when his car
collided with a car owned by Cesar Poblete, resulting in
damage to both vehicles. At the time of the accident,
Adolfsons car was being driven by James Stokes, who was
authorized to do so by Adolfson. Stokes, an Irish citizen who
had been in the Philippines as a tourist for more than ninety
days, had a valid and subsisting Irish drivers license but
without a Philippine drivers license.
After the collision, Adolfson filed a claim with MALAYAN but
the latter refused to pay, contending that Stokes was not an
authorized driver under the "Authorized Driver" clause of the
insurance policy in relation to Section 21 of the Land
Transportation and Traffic Code.
Under the insurance policy, "authorized driver" refers to
"(a) The insured
"(b) Any person driving on the insureds order or with his
permission.
"PROVIDED that the person driving is permitted in accordance
with the licensing or other laws or regulations to drive the
motor vehicle and is not disqualified from driving such motor
vehicle by order of a court of law or by reason of any
enactment or regulation in that behalf." virtua1aw library
The cited Section 21 of the Land Transportation and Traffic
Code provides:jgc
"Operation of motor vehicles by tourists. Bona fide tourists
and similar transients who are duly licensed to operate motor
vehicles in their respective countries may be allowed to
operate motor vehicles during but not after ninety days of
their sojourn in the Philippines.
"After ninety days, any tourist or transient desiring to operate
motor vehicles shall pay fees and obtain and carry a license
as hereinafter provided." (Emphasis supplied.)
Unable to convince MALAYAN to pay, Stokes and Adolfson
brought suit before the Court of First Instance of Manila and
succeeded in getting a favorable judgment, although Stokes
had ceased to be authorized to drive a motor vehicle in the
Philippines at the time of the accident, he having stayed
therein as a tourist for over 90 days without having obtained
a Philippine drivers license.
The Court held that Stokes lack of a Philippine drivers license
was not fatal to the enforcement of the insurance policy; and
the MALAYAN was estopped from denying liability under the
insurance policy because it accepted premium payment made
by the insured one day after the accident. It said:
"Defendant cannot evade liability under the policy by virtue of
the above provision of the Land Transportation and Traffic
Code. This is an insurance case. The basis of insurance
contracts is good faith and trust between the insurer and the
insured. The matter of the failure on the part of Stokes to
have a Philippine drivers license is not such a defect that can
be considered as fatal to the contract of insurance, because
the fact is that Stokes still had a valid and unexpired Irish
license. As a matter of fact, the traffic officer who investigated
the incident gave Stokes a traffic violation receipt and not a
ticket for driving without license.
"Then the Court believes that defendant is in estoppel in this
case because it allowed the plaintiff to pay the insurance
premium even after the accident occurred. Admitting for the
sake of argument that there was a violation of the terms of
the policy before the incident, the admission or acceptance by
the insurance company of the premium should be considered
as a waiver on its part to contest the claim of the plaintiffs."
library
ISSUE: WON Malayan Insurance is liable to pay the insurance
claimed by Adolfson
Held: NO. A contract of insurance is a contract of
indemnity upon the terms and conditions specified therein.
When the insurer is called upon to pay in case of loss or
damage, he has the right to insist upon compliance with the
terms of the contract. If the insured cannot bring himself
within the terms and conditions of the contract, he is not
entitled as a rule to recover for the loss or damage suffered.
For the terms of the contract constitute the measure of the
insurers liability, and compliance therewith is a condition
precedent to the right of recovery. At the time of the accident,
Stokes had been in the Philippines for more than 90 days.
Hence, under the law, he could not drive a motor vehicle
without a Philippine drivers license. He was therefore not an
authorized driver under the terms of the insurance policy in
question, and Malayan was right in denying the claim of the
insured. Acceptance of premium within the stipulated period
for payment thereof, including the agreed period of grace,
merely assures continued effectivity of the insurance policy in
accordance with its terms. Such acceptance does not
estopped the insurer from interposing any valid defense
under the terms of the insurance policy. The principle of
estoppel is an equitable principle rooted upon natural justice
which prevents a person from going back on his own acts and
representations to the prejudice of another whom he has led
to rely upon them. The principle does not apply to the instant
case. In accepting the premium payment of the insured,
Malayan was not guilty of any inequitable act or
representation. There is nothing inconsistent between
acceptance of premium due under an insurance policy and
the enforcement of its terms. WHEREFORE, the appealed
judgment is reversed. The complaint is dismissed. Costs
against appellees
G.R. No. L-22375 July 18, 1975
THE CAPITAL INSURANCE & SURETY CO.,
INC., petitioner, vs. PLASTIC ERA CO., INC., AND COURT
OF APPEALS, respondents.
Facts:
On December 17, 1960, petitioner, Capital Insurance
delivered to the respondent Plastic Era its open Fire Policy No.
22760 wherein the former undertook to insure the latter's
building, equipments, raw materials, products and accessories
located at Sheridan Street, Mandaluyong, Rizal. The policy
expressly provides that if the property insured would be
destroyed or damaged by fire after the payment of the
premiums, at any time between the 15th day of December
1960 and one o'clock in the afternoon of the 15th day of
December 1961, the insurance company shall make good all
such loss or damage in an amount not exceeding P100,
000.00. When the policy was delivered, Plastic Era failed to
pay the corresponding insurance premium. However, through
its duly authorized representative, it executed the following
acknowledgment receipt:
This acknowledged receipt of Fire Policy) NO.
22760 Premium
x x x x x) (I promise to pay)
(P2,220.00) (has been paid)
THIRTY DAYS AFTER on effective date
---------------------
(Date)
On January 8, 1961, in partial payment of the insurance
premium, Plastic Era delivered to Capital Insurance, a
check for the amount of P1,000.00 postdated January 16,
1961 payable to the order of the latter and drawn against the
Bank of America. However, Capital Insurance tried to deposit
the check only on February 20, 1961 and the same was
dishonored by the bank for lack of funds. The records
show that as of January 19, 1961 Plastic Era had a balance of
P1,193.41 with the Bank of America.
On January 18, 1961 or two days after the insurance premium
became due, at about 4:00 to 5:00 o'clock in the morning, the
property insured by Plastic Era was destroyed by fire. In due
time, the latter notified Capital Insurance of the loss of the
insured property by fire 3 and accordingly filed its claim for
indemnity thru the Manila Adjustment Company. 4 The loss
and/or damage suffered by Plastic Era was estimated by the
Manila Adjustment Company to be P283,875. However,
according to the records the same property has been insured
by Plastic Era with the Philamgen Insurance Company for
P200,000.00.
In less than a month Plastic Era demanded from Capital
Insurance the payment of the sum of P100,000.00 as
indemnity for the loss of the insured property under Policy No.
22760 but the latter refused for the reason that, among
others, Plastic Era failed to pay the insurance premium.
On August 25, 1961, Plastic Era filed its complaint against
Capital Insurance for the recovery of the sum of P100,000.00
plus P25,000.00 for attorney's fees and P20,000.00 for
additional expenses. Capital Insurance filed a counterclaim of
P25,000.00 as and for attorney's fees.
The Trial court favored Plastic Era. Capital Insurance appealed
to the Court of Appeals.
On December 5, 1963, the Court of Appeals rendered its
decision affirming that of the trial court. Hence, this petition
for review by certiorari to this Court.

ISSUE: WON a contract of insurance has been duly perfected

between Capital Insurance and Plastic Era because there
was an extension of credit despite failing to encash the check
payment

HELD: Yes. The contract of insurance has been duly

perfected between the parties. Pursuant to Article *Liability of Insurer for Loss Due to Willful Act;
1249 of the NCC: The delivery of promissory notes Due to Negligence
payable to order, or bills of exchange or other
mercantile documents shall produce the effect of
[G.R. No. 136914. January 25, 2002]
payment only when they have been cashed, or when
through the fault of the creditor they have been
impaired. COUNTRY BANKERS INSURANCE
CORPORATION, petitioner, vs. LIANGA BAY AND
COMMUNITY MULTI-PURPOSE COOPERATIVE,
Under this provision the mere delivery of a bill of exchange in
INC., respondent.
payment of a debt does not immediately effect payment. It
simply suspends the action arising from the original obligation
in satisfaction of which it was delivered, until payment is Facts:
accomplished either actually or presumptively. The petitioner is a domestic corporation principally
engaged in the insurance business wherein it undertakes, for
a consideration, to indemnify another against loss, damage or
In the case at hand, the Capital Insurance accepted the
liability from an unknown or contingent event including fire
promise of Plastic Era to pay the insurance premium within
while the respondent is a duly registered cooperative
thirty (30) days from the effective date of policy. By so doing,
judicially declared insolvent and represented by the elected
it has implicitly agreed to modify the tenor of the insurance
assignee, Cornelio Jamero.
policy and in effect, waived the provision therein that it would
only pay for the loss or damage in case the same occurs after
It appears that sometime in 1989, the petitioner and the
the payment of the premium. Considering that the insurance
respondent entered into a contract of fire insurance. Under
policy is silent as to the mode of payment, Capital Insurance
Fire Insurance Policy No. F-1397, the petitioner insured the
is deemed to have accepted the promissory note in payment
respondents stocks-in-trade against fire loss, damage or
of the premium. This rendered the policy immediately
liability during the period starting from June 20, 1989 at 4:00
operative on the date it was delivered.
p.m. to June 20, 1990 at 4:00 p.m., for the sum of Two
Hundred Thousand Pesos (P200,000.00).
Precisely, this was what actually happened when the Capital
Insurance accepted the acknowledgment receipt of the Plastic
On July 1, 1989, at or about 12:40 a.m., the respondents
Era promising to pay the insurance premium within thirty (30)
building located at Barangay Diatagon, Lianga, Surigao del
days from December 17, 1960. Hence, when the damage or
Sur was gutted by fire and reduced to ashes, resulting in the
loss of the insured property occurred, the insurance policy
total loss of the respondents stocks-in-trade, pieces of
was in full force and effect. The fact that the check issued by
furnitures and fixtures, equipments and records.
Plastic Era in partial payment of the promissory note was later
on dishonored did not in any way operate as a forfeiture of its
rights under the policy, there being no express stipulation Due to the loss, the respondent filed an insurance claim
therein to that effect. with the petitioner under its Fire Insurance Policy No. F-1397.

By accepting its promise to pay the insurance premium within
thirty (30) days from the effectivity date of the policy
December 17, 1960 Capital Insurance had in effect extended
credit to Plastic Era. The payment of the premium on the
insurance policy therefore became an independent obligation
the non-fulfillment of which would entitle Capital Insurance to
recover. It could just deduct the premium due and unpaid
upon the satisfaction of the loss under the policy. 10 It did not
have the right to cancel the policy for nonpayment of the
premium except by putting Plastic Era in default and giving it
personal notice to that effect.
The petitioner, however, denied the insurance claim on
the ground that, based on the submitted documents, the
building was set on fire by two (2) NPA rebels who wanted to
obtain canned goods, rice and medicines as provisions for
their comrades in the forest, and that such loss was an
excepted risk under paragraph No. 6 of the policy conditions
of Fire Insurance Policy No. F-1397, which provides:
This insurance does not cover any loss or damage occasioned
by or through or in consequence, directly or indirectly, of any
of the following occurrences, namely:

Where credit is given by an insurance company for the
payment of the premium it has no right to cancel the policy
for nonpayment except by putting the insured in default and
giving him personal notice
(d) Mutiny, riot, military or popular uprising, insurrection,
rebellion, revolution, military or usurped power.
Any loss or damage happening during the existence of
abnormal conditions (whether physical or otherwise) which
are occasioned by or through or in consequence, directly or
indirectly, of any of said occurrences shall be deemed to be
loss or damage which is not covered by this insurance, except
to the extent that the Insured shall prove that such loss or
damage happened independently of the existence of such
abnormal conditions.
Finding the denial of its claim unacceptable, the
respondent then instituted in the trial court the complaint for
recovery of loss, damage or liability against petitioner. The
petitioner answered the complaint and reiterated the ground
it earlier cited to deny the insurance claim, that is, that the
loss was due to NPA rebels, an excepted risk under the fire
insurance policy.
In due time, the trial court rendered its Decision
dated December 26, 1991 in favor of the respondent,
Petitioner interposed an appeal to the Court of Appeals.
However, CA affirmed RTCs decision
Issue: WON the burden of proof of loss in this case is upon
the insurer and not the insured.
Held:
The burden of proof of loss in this case is upon the
insurer Country Bankers Insurance and not Lianga Bay.
A party is bound by his own affirmative allegations. In
Section 1 of Rule 131 of the Revised Rules of Court. Each
party must prove his own affirmative allegations by the
amount of evidence required by law which in civil cases, as in
this case, is preponderance of evidence, to obtain a favorable
judgment.[5]
In the instant case, the petitioner does not dispute that
the respondents stocks-in-trade were insured against fire loss,
damage or liability under Fire Insurance Policy No. F- 1397 and
that the respondent lost its stocks-in-trade in a fire that
occurred on July 1, 1989, within the duration of said fire
insurance. The petitioner, however, posits the view that the
cause of the loss was an excepted risk under the terms of the
fire insurance policy.
Where a risk is excepted by the terms of a policy
which insures against other perils or hazards, loss
from such a risk constitutes a defense which the
insurer may urge, since it has not assumed that risk,
and from this it follows that an insurer seeking to
defeat a claim because of an exception or limitation in
the policy has the burden of proving that the loss
comes within the purview of the exception or limitation
set up. If a proof is made of a loss apparently within a
contract of insurance, the burden is upon the insurer
to prove that the loss arose from a cause of loss which
is excepted or for which it is not liable, or from a cause
which limits its liability.[6]Stated elsewise, since the
petitioner in this case is defending on the ground of non-
coverage and relying upon an exemption or exception clause
in the fire insurance policy, it has the burden of proving the
facts upon which such excepted risk is based, by a
preponderance of evidence.[7]But petitioner failed to do so.
The petitioner relies on the Sworn Statements of Jose
Lomocso and Ernesto Urbiztondo as well as on the Spot
Report of Pfc. Arturo V. Juarbal dated July 1, 1989
The Sworn Statements of Jose Lomocso and Ernesto
Urbiztondo are inadmissible in evidence, for being hearsay,
inasmuch as they did not take the witness stand and could
not therefore be cross-examined.
The petitioners evidence to prove its defense is sadly
wanting and thus, gives rise to its liability to the respondent
under Fire Insurance Policy No. F-1397.