G.R. No.
181132 June 5, 2009 the insurance policies designating the children of Loreto with Eva as beneficiaries pursuant to
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.
This is a petition1 for review on certiorari under Rule 45 of the Rules, 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 case stems from a petition3 filed against respondents with the Regional Trial Court, Branch 29,
for 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.
The petition alleged that: (1) petitioners were the legitimate wife and children of Loreto Maramag
(Loreto), while respondents were Loretos illegitimate family; (2) Eva de Guzman Maramag (Eva) 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)4 and Great
Pacific Life Assurance Corporation (Grepalife);5 (3) 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 (4) petitioners could not be deprived of their legitimes, which
should be satisfied first.
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 320,000.00
as actual litigation expenses and attorneys fees.
In answer,6 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 as such in Policy No. A001544070 and it disqualified her in Policy No.
A001693029; 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
Section 53 of the Insurance Code.
In its own answer7 with compulsory counterclaim, 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
whether the complaint itself was proper or not and that the designation of a beneficiary is an act
of liberality or a donation and, therefore, subject to the provisions of Articles 752 8 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 when it ascertained that Loreto was legally
married to Vicenta Pangilinan Maramag.
On September 21, 2004, the trial court issued a Resolution, the dispositive portion of which reads
WHEREFORE, the motion to dismiss incorporated in the answer of defendants Insular Life and
Grepalife is granted with respect to defendants Odessa, Karl Brian and Trisha Maramag. The action
shall proceed with respect to the other defendants Eva Verna de Guzman, Insular Life and Grepalife.
SO ORDERED.10
In so ruling, the trial court ratiocinated thus
Art. 2011 of the Civil Code provides that the contract of insurance is governed by the (sic) special
laws. Matters not expressly provided for in such special laws shall be regulated by this Code. The
principal law on insurance is the Insurance Code, as amended. Only in case of deficiency in the
Insurance Code that the Civil Code may be resorted to. (Enriquez v. Sun Life Assurance Co., 41 Phil.
269.)
The Insurance Code, as amended, contains a provision regarding to whom the insurance proceeds
shall be paid. It is very clear under Sec. 53 thereof that 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. Since the defendants are the ones named as the primary
beneficiary (sic) in the insurances (sic) taken by the deceased Loreto C. Maramag and there is no
showing that herein plaintiffs were also included as beneficiary (sic) therein the insurance proceeds
shall exclusively be paid to them. This is because the beneficiary has a vested right to the indemnity,
unless the insured reserves the right to change the beneficiary. (Grecio v. Sunlife Assurance Co. of
Canada, 48 Phil. [sic] 63).
Neither could the plaintiffs invoked (sic) the law on donations or the rules on testamentary
succession in order to defeat the right of herein defendants to collect the insurance indemnity. The
beneficiary in a contract of insurance is not the donee spoken in the law of donation. The rules on
testamentary succession cannot apply here, for the insurance indemnity does not partake of a
donation. As such, the insurance indemnity cannot be considered as an advance of the inheritance
which can be subject to collation (Del Val v. Del Val, 29 Phil. 534). In the case of Southern Luzon
Employees Association v. Juanita Golpeo, et al., the Honorable Supreme Court made the following
pronouncements[:]
"With the finding of the trial court that the proceeds to the Life Insurance Policy belongs exclusively
to the defendant as his individual and separate property, we agree that the proceeds of an insurance
policy belong exclusively to the beneficiary and not to the estate of the person whose life was
insured, and that such proceeds are the separate and individual property of the beneficiary and not
of the heirs of the person whose life was insured, is the doctrine in America. We believe that the
same doctrine obtains in these Islands by virtue of Section 428 of the Code of Commerce x x x."
In [the] light of the above pronouncements, it is very clear that the plaintiffs has (sic) no sufficient
cause of action against defendants Odessa, Karl Brian and Trisha Angelie Maramag for the reduction
and/or declaration of inofficiousness of donation as primary beneficiary (sic) in the insurances (sic)
of the late Loreto C. Maramag.
However, herein plaintiffs are not totally bereft of any cause of action. One of the named beneficiary
(sic) in the insurances (sic) taken by the late Loreto C. Maramag is his concubine Eva Verna De
Guzman. Any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a life insurance policy of the person who cannot make any donation to him,
according to said article (Art. 2012, Civil Code). If a concubine is made the beneficiary, it is believed
that the insurance contract will still remain valid, but the indemnity must go to the legal heirs and
not to the concubine, for evidently, what is prohibited under Art. 2012 is the naming of the improper
beneficiary. In such case, the action for the declaration of nullity may be brought by the spouse of
the donor or donee, and the guilt of the donor and donee may be proved by preponderance of
evidence in the same action (Comment of Edgardo L. Paras, Civil Code of the Philippines, page 897).
Since the designation of defendant Eva Verna de Guzman as one of the primary beneficiary (sic) in
the insurances (sic) taken by the late Loreto C. Maramag is void under Art. 739 of the Civil Code, the
insurance indemnity that should be paid to her must go to the legal heirs of the deceased which this
court may properly take cognizance as the action for the declaration for the nullity of a void
donation falls within the general jurisdiction of this Court.11
Insular12 and Grepalife13 filed their respective motions for reconsideration, arguing, in the main, that
the petition failed to state a cause of action. Insular further averred that the proceeds were divided
among the three children as the remaining named beneficiaries. Grepalife, for its part, also alleged
that the premiums paid had already been refunded.
Petitioners, in their comment, reiterated their earlier arguments and posited that whether the
complaint may be dismissed for failure to state a cause of action must be determined solely on the
basis of the allegations in the complaint, such that the defenses of Insular and Grepalife would be
better threshed out during trial.1avvphi1
On June 16, 2005, the trial court issued a Resolution, disposing, as follows:
WHEREFORE, in view of the foregoing disquisitions, the Motions for Reconsideration filed by
defendants Grepalife and Insular Life are hereby GRANTED. Accordingly, the portion of the
Resolution of this Court dated 21 September 2004 which ordered the prosecution of the case against
defendant Eva Verna De Guzman, Grepalife and Insular Life is hereby SET ASIDE, and the case against
them is hereby ordered DISMISSED.
SO ORDERED.14
In granting the motions for reconsideration of Insular and Grepalife, the trial court considered the
allegations of Insular that Loreto revoked the designation of Eva in one policy and that Insular
disqualified her as a beneficiary in the other policy such that the entire proceeds would be paid to
the illegitimate children of Loreto with Eva pursuant to Section 53 of the Insurance Code. It ruled
that it is only in cases where there are no beneficiaries designated, or when the only designated
beneficiary is disqualified, that the proceeds should be paid to the estate of the insured. As to the
claim that the proceeds to be paid to Loretos illegitimate children should be reduced based on the
rules on legitime, the trial court held that the distribution of the insurance proceeds is governed
primarily by the Insurance Code, and the provisions of the Civil Code are irrelevant and inapplicable.
With respect to the Grepalife policy, the trial court noted that Eva was never designated as a
beneficiary, but only Odessa, Karl Brian, and Trisha Angelie; thus, it upheld the dismissal of the case
as to the illegitimate children. It further held that the matter of Loretos misrepresentation was
premature; the appropriate action may be filed only upon denial of the claim of the named
beneficiaries for the insurance proceeds by Grepalife.
Petitioners appealed the June 16, 2005 Resolution to the CA, but it dismissed the appeal for lack of
jurisdiction, holding that the decision of the trial court dismissing the complaint for failure to state a
cause of action involved a pure question of law. The appellate court also noted that petitioners did
not file within the reglementary period a motion for reconsideration of the trial courts Resolution,
dated September 21, 2004, dismissing the complaint as against Odessa, Karl Brian, and Trisha
Angelie; thus, the said Resolution had already attained finality.
Hence, this petition raising the following issues:
a. In determining the merits of a motion to dismiss for failure to state a cause of action, may the
Court consider matters which were not alleged in the Complaint, particularly the defenses put up by
the defendants in their Answer?
b. In granting a motion for reconsideration of a motion to dismiss for failure to state a cause of
action, did not the Regional Trial Court engage in the examination and determination of what were
the facts and their probative value, or the truth thereof, when it premised the dismissal on
allegations of the defendants in their answer which had not been proven?
c. x x x (A)re the members of the legitimate family entitled to the proceeds of the insurance for the
concubine?15
In essence, petitioners posit that their petition before the trial court should not have been dismissed
for failure to state a cause of action because the finding that Eva was either disqualified as a
beneficiary by the insurance companies or that her designation was revoked by Loreto,
hypothetically admitted as true, was raised only in the answers and motions for reconsideration of
both Insular and Grepalife. They argue that for a motion to dismiss to prosper on that ground, only
the allegations in the complaint should be considered. They further contend that, even assuming
Insular disqualified Eva as a beneficiary, her share should not have been distributed to her children
with Loreto but, instead, awarded to them, being the legitimate heirs of the insured deceased, in
accordance with law and jurisprudence.
The petition should be denied.
The grant of the motion to dismiss was based on the trial courts finding that the petition failed to
state a cause of action, as provided in Rule 16, Section 1(g), of the Rules of Court, which reads
SECTION 1. Grounds. Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:
xxxx
(g) That the pleading asserting the claim states no cause of action.
A cause of action is the act or omission by which a party violates a right of another. 16 A complaint
states a cause of action when it contains the three (3) elements of a cause of action(1) the legal
right of the plaintiff; (2) the correlative obligation of the defendant; and (3) the act or omission of
the defendant in violation of the legal right. If any of these elements is absent, the complaint
becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action. 17
When a motion to dismiss is premised on this ground, the ruling thereon should be based only on
the facts alleged in the complaint. The court must resolve the issue on the strength of such
allegations, assuming them to be true. The test of sufficiency of a cause of action rests on whether,
hypothetically admitting the facts alleged in the complaint to be true, the court can render a valid
judgment upon the same, in accordance with the prayer in the complaint. This is the general rule.
However, this rule is subject to well-recognized exceptions, such that there is no hypothetical
admission of the veracity of the allegations if:
1. the falsity of the allegations is subject to judicial notice;
2. such allegations are legally impossible;
3. the allegations refer to facts which are inadmissible in evidence;
4. by the record or document in the pleading, the allegations appear unfounded; or
5. there is evidence which has been presented to the court by stipulation of the parties or in the
course of the hearings related to the case.18
In this case, 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. The basis of petitioners claim is that Eva, being a concubine of Loreto and a
suspect in his murder, is disqualified from being designated as beneficiary of the insurance policies,
and that Evas children with Loreto, being illegitimate children, are entitled to a lesser share of the
proceeds of the policies. They also argued that pursuant to Section 12 of the Insurance Code, 19 Evas
share in the proceeds should be forfeited in their favor, the former having brought about the death
of Loreto. Thus, they prayed that the share of Eva and portions of the shares of Loretos illegitimate
children should be awarded to them, being the legitimate heirs of Loreto entitled to their respective
legitimes.
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
SECTION 53. 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.20 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. 21
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,22 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,23 or when the designated beneficiary is disqualified by law to receive the
proceeds,24 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. 25
WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
G.R. No. 198174 September 2, 2013
ALPHA INSURANCE AND SURETY CO., PETITIONER,
vs.
ARSENIA SONIA CASTOR, RESPONDENT.
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision1 dated May 31, 2011 and Resolution2 dated August 10, 2011 of the Court of Appeals
(CA) in CA-G.R. CV No. 93027.
The facts follow.
On February 21, 2007, respondent entered into a contract of insurance, Motor Car Policy No.
MAND/CV-00186, with petitioner, involving her motor vehicle, a Toyota Revo DLX DSL. The
contract of insurance obligates the petitioner to pay the respondent the amount of Six
Hundred Thirty Thousand Pesos (630,000.00) in case of loss or damage to said vehicle during
the period covered, which is from February 26, 2007 to February 26, 2008.
On April 16, 2007, at about 9:00 a.m., respondent instructed her driver, Jose Joel Salazar
Lanuza (Lanuza), to bring the above-described vehicle to a nearby auto-shop for a tune-up.
However, Lanuza no longer returned the motor vehicle to respondent and despite diligent
efforts to locate the same, said efforts proved futile. Resultantly, respondent promptly
reported the incident to the police and concomitantly notified petitioner of the said loss and
demanded payment of the insurance proceeds in the total sum of 630,000.00.
In a letter dated July 5, 2007, petitioner denied the insurance claim of respondent, stating
among others, thus:
Upon verification of the documents submitted, particularly the Police Report and your Affidavit,
which states that the culprit, who stole the Insure[d] unit, is employed with you. We would like
to invite you on the provision of the Policy under Exceptions to Section-III, which we quote:
1.) The Company shall not be liable for:
xxxx
(4) Any malicious damage caused by the Insured, any member of his family or by "A PERSON IN
THE INSUREDS SERVICE."
In view [of] the foregoing, we regret that we cannot act favorably on your claim.
In letters dated July 12, 2007 and August 3, 2007, respondent reiterated her claim and argued
that the exception refers to damage of the motor vehicle and not to its loss. However,
petitioners denial of respondents insured claim remains firm.
Accordingly, respondent filed a Complaint for Sum of Money with Damages against petitioner
before the Regional Trial Court (RTC) of Quezon City on September 10, 2007.
In a Decision dated December 19, 2008, the RTC of Quezon City ruled in favor of respondent in
this wise:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendant ordering the latter as follows:
To pay plaintiff the amount of 466,000.00 plus legal interest of 6% per annum from the time Simply, the core issue boils down to whether or not the loss of respondents vehicle is excluded
of demand up to the time the amount is fully settled; under the insurance policy.

To pay attorneys fees in the sum of 65,000.00; and We rule in the negative.

To pay the costs of suit. Significant portions of Section III of the Insurance Policy states:

All other claims not granted are hereby denied for lack of legal and factual basis. 3 SECTION III LOSS OR DAMAGE

Aggrieved, petitioner filed an appeal with the CA. The Company will, subject to the Limits of Liability, indemnify the Insured against loss of or
damage to the Schedule Vehicle and its accessories and spare parts whilst thereon:
On May 31, 2011, the CA rendered a Decision affirming in toto the RTC of Quezon Citys
decision. The fallo reads: (a)

WHEREFORE, in view of all the foregoing, the appeal is DENIED. Accordingly, the Decision, by accidental collision or overturning, or collision or overturning consequent upon mechanical
dated December 19, 2008, of Branch 215 of the Regional Trial Court of Quezon City, in Civil breakdown or consequent upon wear and tear;
Case No. Q-07-61099, is hereby AFFIRMED in toto.
(b)
SO ORDERED.4
by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft;
Petitioner filed a Motion for Reconsideration against said decision, but the same was denied in
a Resolution dated August 10, 2011. (c)

Hence, the present petition wherein petitioner raises the following grounds for the allowance by malicious act;
of its petition:
(d)
WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, IT ERRED
AND GROSSLY OR GRAVELY ABUSED ITS DISCRETION WHEN IT ADJUDGED whilst in transit (including the processes of loading and unloading) incidental to such transit by
IN FAVOR OF THE PRIVATE RESPONDENT AND AGAINST THE PETITIONER road, rail, inland waterway, lift or elevator.
AND RULED THAT EXCEPTION DOES NOT COVER LOSS BUT ONLY DAMAGE
BECAUSE THE TERMS OF THE INSURANCE POLICY ARE [AMBIGUOUS] xxxx
EQUIVOCAL OR UNCERTAIN, SUCH THAT THE PARTIES THEMSELVES
DISAGREE ABOUT THE MEANING OF PARTICULAR PROVISIONS, THE POLICY
EXCEPTIONS TO SECTION III
WILL BE CONSTRUED BY THE COURTS LIBERALLY IN FAVOR OF THE
ASSURED AND STRICTLY AGAINST THE INSURER.
The Company shall not be liable to pay for:

WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, IT ERRED

Loss or Damage in respect of any claim or series of claims arising out of one event, the first
AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT [AFFIRMED] IN
amount of each and every loss for each and every vehicle insured by this Policy, such amount
TOTO THE JUDGMENT OF THE TRIAL COURT.5
being equal to one percent (1.00%) of the Insureds estimate of Fair Market Value as shown in
the Policy Schedule with a minimum deductible amount of Php3,000.00;
Consequential loss, depreciation, wear and tear, mechanical or electrical breakdowns, failures
or breakages;
Damage to tires, unless the Schedule Vehicle is damaged at the same time;
Any malicious damage caused by the Insured, any member of his family or by a person in the
Insureds service.6
In denying respondents claim, petitioner takes exception by arguing that the word "damage,"
under paragraph 4 of "Exceptions to Section III," means loss due to injury or harm to person,
property or reputation, and should be construed to cover malicious "loss" as in "theft." Thus, it
asserts that the loss of respondents vehicle as a result of it being stolen by the latters driver is
excluded from the policy.
We do not agree.
Ruling in favor of respondent, the RTC of Quezon City scrupulously elaborated that theft
perpetrated by the driver of the insured is not an exception to the coverage from the insurance
policy, since Section III thereof did not qualify as to who would commit the theft. Thus:
Theft perpetrated by a driver of the insured is not an exception to the coverage from the
insurance policy subject of this case. This is evident from the very provision of Section III
"Loss or Damage." The insurance company, subject to the limits of liability, is obligated to
indemnify the insured against theft. Said provision does not qualify as to who would commit
the theft. Thus, even if the same is committed by the driver of the insured, there being no
categorical declaration of exception, the same must be covered. As correctly pointed out by
the plaintiff, "(A)n insurance contract should be interpreted as to carry out the purpose for
which the parties entered into the contract which is to insure against risks of loss or damage to
the goods. Such interpretation should result from the natural and reasonable meaning of
language in the policy. Where restrictive provisions are open to two interpretations, that which
is most favorable to the insured is adopted." The defendant would argue that if the person
employed by the insured would commit the theft and the insurer would be held liable, then
this would result to an absurd situation where the insurer would also be held liable if the
insured would commit the theft. This argument is certainly flawed. Of course, if the theft
would be committed by the insured himself, the same would be an exception to the coverage
since in that case there would be fraud on the part of the insured or breach of material
warranty under Section 69 of the Insurance Code.7
Moreover, contracts of insurance, like other contracts, are to be construed according to the
sense and meaning of the terms which the parties themselves have used. If such terms are
clear and unambiguous, they must be taken and understood in their plain, ordinary and
popular sense.8 Accordingly, in interpreting the exclusions in an insurance contract, the terms
used specifying the excluded classes therein are to be given their meaning as understood in
common speech.9
Adverse to petitioners claim, the words "loss" and "damage" mean different things in common
ordinary usage. The word "loss" refers to the act or fact of losing, or failure to keep possession,
while the word "damage" means deterioration or injury to property.1wphi1
Therefore, petitioner cannot exclude the loss of respondents vehicle under the insurance
policy under paragraph 4 of "Exceptions to Section III," since the same refers only to "malicious
damage," or more specifically, "injury" to the motor vehicle caused by a person under the
insureds service. Paragraph 4 clearly does not contemplate "loss of property," as what
happened in the instant case.
Further, the CA aptly ruled that "malicious damage," as provided for in the subject policy as
one of the exceptions from coverage, is the damage that is the direct result from the deliberate
or willful act of the insured, members of his family, and any person in the insureds service,
whose clear plan or purpose was to cause damage to the insured vehicle for purposes of
defrauding the insurer, viz.:
This interpretation by the Court is bolstered by the observation that the subject policy appears
to clearly delineate between the terms "loss" and "damage" by using both terms throughout
the said policy. x x x
xxxx
If the intention of the defendant-appellant was to include the term "loss" within the term
"damage" then logic dictates that it should have used the term "damage" alone in the entire
policy or otherwise included a clear definition of the said term as part of the provisions of the
said insurance contract. Which is why the Court finds it puzzling that in the said policys
provision detailing the exceptions to the policys coverage in Section III thereof, which is one of
the crucial parts in the insurance contract, the insurer, after liberally using the words "loss" and
"damage" in the entire policy, suddenly went specific by using the word "damage" only in the
policys exception regarding "malicious damage." Now, the defendant-appellant would like this
Court to believe that it really intended the word "damage" in the term "malicious damage" to
include the theft of the insured vehicle.
The Court does not find the particular contention to be well taken.
True, it is a basic rule in the interpretation of contracts that the terms of a contract are to be
construed according to the sense and meaning of the terms which the parties thereto have
used. In the case of property insurance policies, the evident intention of the contracting parties,
i.e., the insurer and the assured, determine the import of the various terms and provisions
embodied in the policy. However, when the terms of the insurance policy are ambiguous,
equivocal or uncertain, such that the parties themselves disagree about the meaning of
particular provisions, the policy will be construed by the courts liberally in favor of the assured
and strictly against the insurer.10
Lastly, a contract of insurance is a contract of adhesion. So, when the terms of the insurance
contract contain limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. Thus, in Eternal Gardens
Memorial Park Corporation v. Philippine American Life Insurance Company,11 this Court ruled
It must be remembered that an insurance contract is a contract of adhesion which must be
construed liberally in favor of the insured and strictly against the insurer in order to safeguard
the latters interest. Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court
held that:
Indemnity and liability insurance policies are construed in accordance with the general rule of
resolving any ambiguity therein in favor of the insured, where the contract or policy is
prepared by the insurer. A contract of insurance, being a contract of adhesion, par excellence,
any ambiguity therein should be resolved against the insurer; in other words, it should be
construed liberally in favor of the insured and strictly against the insurer. Limitations of liability
should be regarded with extreme jealousy and must be construed in such a way as to preclude
the insurer from non-compliance with its obligations.
In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals, we reiterated
the above ruling, stating that:
When the terms of insurance contract contain limitations on liability, courts should construe
them in such a way as to preclude the insurer from non-compliance with his obligation. Being a
contract of adhesion, the terms of an insurance contract are to be construed strictly against
the party which prepared the contract, the insurer. By reason of the exclusive control of the
insurance company over the terms and phraseology of the insurance contract, ambiguity must
be strictly interpreted against the insurer and liberally in favor of the insured, especially to
avoid forfeiture.12
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is DENIED.
Accordingly, the Decision dated May 31, 2011 and Resolution dated August 10, 2011 of the
Court of Appeals are hereby AFFIRMED.
SO ORDERED.
Fortune Insurance and Surety Co., Inc. v. CA and Producers Bank of the Philippines
G.R. No. 115278 May 23, 1995
Davide, Jr., J.
FACTS:
Producers Bank was insured by Fortune Insurance.
Producers Bank filed against Fortune Insurance a complaint for recovery of the sum of
P725,000.00 under the policy issued by Fortune. The sum was allegedly lost during a robbery
of Producers armored vehicle while it was in transit to transfer the money from its Pasay
City Branch to its head office in Makati
The said armored vehicle was robbed by its driver Benjamin Magalong and security guard
Saturnino Atiga tasked to man the same. Both of them are not Producers Banks
employees but were merely assigned by and affiliated with PRC Management Systems and
Unicorn Security Services.
Fortune Insurance refused to pay the amount as the loss, according to it, is excluded from
the coverage of the insurance policy. General Exceptions provides: The company shall not
be liable under this policy in report of x x x (b) any loss caused by any dishonest, fraudulent
or criminal act of the insured or any officer, employee, partner, director, trustee or
authorized representative of the Insured whether acting alone or in conjunction with
others
Producers Bank opposed the contention of Fortune Insurance and contends that Atiga and
Magalong are not its officer, employee, trustee, or authorized representative at the time of
the robbery.
According to Fortune Insurance, when Producers commissioned a guard and a driver to
transfer its funds from one branch to another, they effectively and necessarily became its
authorized representatives in the care and custody of the money. Assuming that they could
not be considered authorized representatives, they were, nevertheless, employees of
Producers.
ISSUE: WON Magalong and Atiga qualify as employees or authorized representatives of
Producers under paragraph (b) of the general exceptions clause of the insurance policy as to
exempt Fortune Insurance from liability to pay Producers Bank under said policy
HELD: Yes.
Employer-employee relationship depends upon four standards: (1) the manner of selection
and engagement of the putative employee; (2) the mode of payment of wages; (3) the
presence or absence of a power to dismiss; and (4) the presence and absence of a power to
control the putative employees conduct
The power of control over Magalong and Atiga was vested in and exercised by Producers
Bank; hence, an employer-employee relationship exists between Magalong and Atiga and
Producers Bank.
PRC Management System and Unicorn Security Services are but labor-only contractors
(not employers) under Article 106 of the Labor Code which provides: There is labor-only
contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing activities
which are directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be
 responsible to the workers in the same manner and extent as if the latter were directly
employed by him.
Magalong and Atiga were, in respect of the transfer of Producers Banks money from its
Pasay City branch to its head office in Makati, its authorized representatives who served
as such with its teller Maribeth Alampay. Howsoever viewed, Producers entrusted the three
with the specific duty to safely transfer the money to its head office, with Alampay to be
responsible for its custody in transit; Magalong to drive the armored vehicle which would
carry the money; and Atiga to provide the needed security for the money, the vehicle, and
his two other companions. In short, for these particular tasks, the three acted as agents of
Producers. A representative is defined as one who represents or stands in the place of
another; one who represents others or another in a special capacity, as an agent, and is
interchangeable with agent.
MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION (MMPSEU)
vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION
G.R. No. 175773
June 17, 2013
FACTS:
The Collective Bargaining Agreement (CBA) of the parties in this case provides that the
company shoulder the hospitalization expenses of the dependents of covered employees
subject to certain limitations and restrictions. Accordingly, covered employees pay part of the
hospitalization insurance premium through monthly salary deduction while the company, upon
hospitalization of the covered employees' dependents, shall pay the hospitalization expenses
incurred for the same.
Each employee shall pay one hundred pesos (P100.00) per month through salary deduction as
his share in the payment of the insurance premium for the above coverage with the balance of
the premium to be paid by the COMPANY. If the COMPANY is self-insured the one hundred
pesos (P100.00) per employee monthly contribution shall be given to the COMPANY which
shall shoulder the expenses subject to the above level of benefits and subject to the same
limitations and restrictions provided for in Annex "B" hereof.
The hospitalization expenses must be covered by actual hospital and doctors bills and any
amount in excess of the above mentioned level of benefits will be for the account of the
employee.
When the first CBA expired, the parties executed another CBA incorporating the same
provisions on dependents hospitalization insurance benefits but in the increased amount of
P50,000.00. The room and board expenses, as well as the doctors call fees, were also
increased to P375.00.
On separate occasions, three members of MMPSEU, namely, Ernesto Calida, Hermie Juan
Oabel and Jocelyn Martin, filed claims for reimbursement of hospitalization expenses of their
dependents.
MMPC paid only a portion of their hospitalization insurance claims, not the full amount. In the
case of Calida, his wife, Lanie, was confined at Sto. Tomas University Hospital from September
4 to 9, 1998 due to Thyroidectomy. The medical expenses incurred totalled P29,967.10. Of this
amount, P9,000.00 representing professional fees was paid by MEDICard Philippines, Inc.
which provides health maintenance to Lanie. MMPC only paid P12,148.63. It did not pay the
P9,000.00 already paid by MEDICard and the P6,278.47 not covered by official receipts. It
refused to give to Calida the difference between the amount of medical expenses of
P27,427.10 which he claimed to be entitled to under the CBA and the P12,148.63 which MMPC
directly paid to the hospital.
In the case of Martin, his father, Jose, was admitted at The Medical City from March 26 to 27,
2000 due to Acid Peptic Disease and incurred medical expenses amounting to P9,101.30.
MEDICard paid P8,496.00. Consequently, MMPC only paid P288.40, after deducting from the
total medical expenses the amount paid by MEDICard and the P316.90 discount given by the
hospital.
Claiming that under the CBA, they are entitled to hospital benefits amounting to P27,427.10,
P6,769.35 and P8,123.80, respectively, which should not be reduced by the amounts paid by
MEDICard and by Prosper, Calida, Oabel and Martin asked for reimbursement from MMPC.
However, MMPC denied the claims contending that double insurance would result if the said
employees would receive from the company the full amount of hospitalization expenses
despite having already received payment of portions thereof from other health insurance
providers.
This prompted the MMPSEU President to write the MMPC President demanding full payment
of the hospitalization benefits.
MMPC clarified that the claims of the said MMPSEU members have already been paid on the
basis of official receipts submitted.
MMPSEU referred the dispute to the National Conciliation and Mediation Board and requested
for preventive mediation.
MMPSEU alleged that there is nothing in the CBA which prohibits an employee from obtaining
other insurance or declares that medical expenses can be reimbursed only upon presentation
of original official receipts. It stressed that the hospitalization benefits should be computed
based on the formula indicated in the CBA without deducting the benefits derived from other
insurance providers. Besides, if reduction is permitted, MMPC would be unjustly benefited
from the monthly premium contributed by the employees through salary deduction. MMPSEU
added that its members had legitimate claims under the CBA and that any doubt as to any of
its provisions should be resolved in favor of its members. Moreover, any ambiguity should be
resolved in favor of labor.
On the other hand, MMPC argued that the reimbursement of the entire amounts being
claimed by the covered employees, including those already paid by other insurance companies,
would constitute double indemnity or double insurance, which is circumscribed under the
Insurance Code. Moreover, a contract of insurance is a contract of indemnity and the
employees cannot be allowed to profit from their dependents loss.
The Voluntary Arbitrator rendered a Decision finding MMPC liable to pay or reimburse the
amount of hospitalization expenses already paid by other health insurance companies. The
Voluntary Arbitrator held that the employees may demand simultaneous payment from both
the CBA and their dependents separate health insurance without resulting to double insurance,
since separate premiums were paid for each contract. He also noted that the CBA does not
prohibit reimbursement in case there are other health insurers.
MMPC filed a Petition for Review before the CA. It claimed that the Voluntary Arbitrator
committed grave abuse of discretion in not finding that recovery under both insurance policies
constitutes double insurance as both had the same subject matter, interest insured and risk or
peril insured against; in relying solely on the unauthorized legal opinion of Atty. Funk; and in
not finding that the employees will be benefited twice for the same loss.
On March 31, 2006, the CA found merit in MMPCs Petition. It ruled that despite the lack of a
provision which bars recovery in case of payment by other insurers, the wordings of the
subject provision of the CBA showed that the parties intended to make MMPC liable only for
expenses actually incurred by an employees qualified dependent. In particular, the provision
stipulates that payment should be made directly to the hospital and that the claim should be
supported by actual hospital and doctors bills.
QUESTION: Are member-employees entitled to full payment of the hospital expenses
incurred by their dependents, including the amounts already paid by other health insurance
companies from MITSUBISHI under their CBA?
ANSWER: NO. The Voluntary Arbitrator based his ruling on the opinion of Atty. Funk that the
employees may recover benefits from different insurance providers without regard to the
amount of benefits paid by each. Atty. Funk erred in applying thecollateral source rule.
Under this rule, if an injured person receives compensation for his injuries from a source
wholly independent of the tortfeasor, the payment should not be deducted from the damages
which he would otherwise collect from the tortfeasor. In a recent Decision by the Illinois
Supreme Court, the rule has been described as "an established exception to the general rule
that damages in negligence actions must be compensatory." The Court went on to explain that
although the rule appears to allow a double recovery, the collateral source will have a lien or
subrogation right to prevent such a double recovery.
The collateral source rule is predicated on the theory that a tortfeasor has no interest in, and
therefore no right to benefit from monies received by the injured person from sources
unconnected with the defendant. According to the collateral source rule, a tortfeasor has no
right to any mitigation of damages because of payments or compensation received by the
injured person from an independent source.
As seen, the collateral source rule applies in order to place the responsibility for losses on the
party causing them. Its application is justified so that "'the wrongdoer should not benefit from
the expenditures made by the injured party or take advantage of contracts or other relations
that may exist between the injured party and third persons." Thus, it finds no application to
cases involving no-fault insurances under which the insured is indemnified for losses by
insurance companies, regardless of who was at fault in the incident generating the losses.
Here, it is clear that MMPC is a no-fault insurer. Hence, it cannot be obliged to pay the
hospitalization expenses of the dependents of its employees which had already been paid by
separate health insurance providers of said dependents.
The conditions set forth in the CBA provision indicate an intention to limit MMPCs liability only
to actual expenses incurred by the employees dependents, that is, excluding the amounts paid
by dependents other health insurance providers.
The condition that payment should be direct to the hospital and doctor implies that MMPC is
only liable to pay medical expenses actually shouldered by the employees dependents. It
follows that MMPCs liability is limited, that is, it does not include the amounts paid by other
health insurance providers. This condition is obviously intended to thwart not only fraudulent
claims but also double claims for the same loss of the dependents of covered employees.
It is well to note at this point that the CBA constitutes a contract between the parties and as
such, it should be strictly construed for the purpose of limiting the amount of the employers
liability.
To allow reimbursement of amounts paid under other insurance policies shall
constitute double recovery which is not sanctioned by law.
The CBA has provided for MMPCs limited liability which extends only up to the amount to be
paid to the hospital and doctor by the employees dependents, excluding those paid by other
insurers. Consequently, the covered employees will not receive more than what is due them;
neither is MMPC under any obligation to give more than what is due under the CBA.
Moreover, since the subject CBA provision is an insurance contract, the rights and obligations
of the parties must be determined in accordance with the general principles of insurance law.
Being in the nature of a non-life insurance contract and essentially a contract of indemnity, the
CBA provision obligates MMPC to indemnify the covered employees medical expenses
incurred by their dependents but only up to the extent of the expenses actually incurred. This
is consistent with the principle of indemnity which proscribes the insured from recovering
greater than the loss. Indeed, to profit from a loss will lead to unjust enrichment and therefore
should not be countenanced.
G.R. No.72878 April 15, 1988
ALMENDRAS MINING CORPORATION, petitioner,
vs.
OFFICE OF THE INSURANCE COMMISSION and COUNTRY BANKERS INSURANCE
CORPORATION, respondents.
At about two-thirty in the morning of 3 September 1984, the marine cargo vessel LCT "Don
Paulo," while on a voyage from Davao to Mariveles, Bataan, was forced ground somewhere in
the vicinity of Sogod, Tablas Island, Romblon after having been hit by strong winds and tidal
waves brought about by tropical typhoon "Nitang." Later that same day, petitioner Almendras
Mining Corporation ("Almendras"), owner of the vessel, executed and filed the corresponding
Marine Protest. 1Subsequently, in a letter dated 6 September 1984, 2 petitioner Almendras
formally notified the vessel's insurer, private respondent Country Bankers Insurance
Corporation ("Bankers"), of its intention to file a provisional claim for indemnity for damages
sustained by the vessel. 3
Immediately following the marine casualty, private respondent Bankers commissioned the
services of Audemus Adjustment Corporation, which estimated the insurer's liability at
P2,187,983.00, or the equivalent of seventy percent (70%) of all expenses necessary for the
repair of the vessel. Private respondent accepted and approved this estimate.
Salvage operations on the LCT "Don Paulo" were commenced on 5 September 1984. By 24
September 1984, the vessel had been towed to and docked at the Philippine National Oil
Corporation (PNOC) marine facility in Bauan, Batangas where repair work on the same was
subsequently performed by the PNOC Marine Corporation.
Delay, however, overtook the repair work on the LCT 'Don Paulo.' Private respondent Bankers
explained that the delay was due to the unavailability of spare parts needed in the repair of the
vessel's four (4) damaged engines. Notwithstanding this explanation, petitioner Almendras, on
18 April 1985, filed with the public respondent office of the Insurance Commission an
administrative complaint 4 (docketed as Administrative Case No. 006) against private
respondent Bankers. In its complaint, petitioner Almendras sought (1) revocation or
suspension of private respondent Bankers' Certificate of Authority to engage in the insurance
business; (2) an administrative directive ordering immediate completion of all repair work on
and delivery to petitioner of the LCT "Don Paulo;" and (3) damages.
At the initial hearings on Administrative Case No. 006 held before public respondent
Commission, private respondent Bankers agreed to replace the four (4) damaged engines of
the LCT "Don Paulo" with one (1) brand new engine and three (3) reconditioned engines. This
entailed a total additional cost of P3,000,000.00, seventy percent (70%) of which private
respondent Bankers had previously obligated itself, as insurer, to shoulder. For its part,
petitioner Almendras agreed to pay a thirty percent (30%) share in the cost, but only after it
had inspected one of the proposed replacement engines a brand new Caterpillar D-3408
marine engine which petitioner had claimed was not a suitable replacement for the vessel's
damaged main engine.
Inspection of the Caterpillar D-3408 engine took place at the premises of the Actrade
Machinery Corporation (supplier of the engine) on 16 July 1985 in the presence of
representatives of both petitioner and private respondent. Engineers of the PNOC Marine
Corporation who conducted the inspection found said engine to have met the engineering
requirements of the LCT "Don Paulo;" private respondent Bankers thus anticipated a favorable
response in this regard from petitioner Almendras.
The following day, however, petitioner Almendras, reiterating its claim that the proposed
Caterpillar D-3408 engine was not at par with the vessel's original but damaged main engine,
demanded instead cash settlement of its insurance claim. This unexpected turn of events
moved the Insurance Commissioner to terminate the hearing then in progress and to require
private respondent Bankers to submit its Answer to the complaint of petitioner Almendras.
Meanwhile, on 13 August 1985, petitioner Almendras filed a separate civil action for damages
(docketed as Civil Case No. 3120-P) with the Regional Trial Court of Pasay City. 5
At the 23 August 1985 Commission hearing both parties agreed to submit Administrative Case
No. 006 for resolution on a single issuei.e,whether or not revocation or suspension of private
respondent Bankers' Certificate of Authority to engage in the insurance business was justified
and proper under the circumstances of this case.
On 23 October 1985, public respondent Commission, through the Insurance Commissioner,
issued a Resolution 6ordering the dismissal of petitioner Almendras' complaint. It was found by
the Insurance Commissioner that failure by private respondent Bankers to settle promptly and
expeditiously the insurance claim of petitioner Almendras was attributable to the latter's own
act of insisting on cash settlement thereof, even after the parties had already agreed upon
outright replacement of the vessel's damaged engines. The Insurance Commissioner also
stated in his resolution that, assuming that private respondent Bankers had incurred in delay in
the repair of the LCT "Don Paulo," nevertheless, there was nothing in the record of the case to
show that such delay was unreasonable or was the result of any unfair claim settlement
practice as defined under the Insurance Code, as amended as would warrant revocation
or suspension of private respondent's Certificate of Authority.
Petitioner Almendras' Motion for Reconsideration was denied for lack of merit by public
respondent Commission on 11 November 1985. 7
In the present Petition for certiorari filed with this Court on 28 November 1985, petitioner
Almendras presents only one issue for determination-i.e., whether or not there the valid and
substantial grounds to revoke or suspend private respondent Bankers' Certificate of Authority
to engage in the insurance business. Public respondent Commission would, however, raise as
an additional issue the argument that the present Petition for certiorari is improperly filed, that
appeal to the Secretary of Finance from public respondent Commission's disputed Resolution
and Order is the proper recourse for petitioner under the facts and circumstances of this
case. 8
Viewed in the light of the facts obtaining in Administrative Case No. 006 and the pertinent legal
provisions on the matter, we hold that the Court has no jurisdiction to try and decide the
instant Petition.
The provisions of the Insurance Code (Presidential Decree No. 1460), as amended, clearly
indicate that the Office of the Insurance Commission is an administrative agency vested
with regulatory power as well as with adjudicatoryauthority. Among the several regulatory or
non-quasi-judicial duties of the Insurance Commissioner under the Insurance Code is the
authority to issue, or refuse issuance of, a Certificate of Authority to a person or entity desirous
of engaging in insurance business in the Philippines, 9 and to revoke or suspend such
Certificate of Authority upon a finding of the existence of statutory grounds for such revocation
or suspension. The grounds for revocation or suspension of an insurer's Certificate of Authority
are set out in Section 241 10 and in Section 247 11 of the Insurance Code as amended. The
general regulatory authority of the Insurance Commissioneris described in Section 414 of the
Insurance Code, as amended, in the following terms:
Section 414. The Insurance Commissioner shall have the duty to see that all laws relating to
insurance, insurance companies and other insurance matters, mutual benefit associations, and
trusts for charitable uses are faithfully executed and to perform the duties imposed upon him
by this Code, and shall, not withstanding any existing laws to contrary, have sole and exclusive
authority to regulate the issuance and sale of variable contracts as defined in section two
hundred thirty-two and to provide for the licensing of persons selling such contracts, and to
issue such reasonable rules and regulations governing the same.
The Commissioner may issue such rulings, instructions, circulars, orders and decisions as he
may deem necessary to secure the enforcement of the provisions of this Code, subject to the
approval of the Secretary of Finance. Except as otherwise specified decisions made by the
Commissioner shall be appealable to the Secretary of Finance. (Emphasis supplied)
which Section also specifies the authority to which a decision of the Insurance Commissioner
rendered in the exercise of its regulatory function may be appealed.
The adjudicatory authority of the Insurance Commissioner is generally described in Section 416
of the Insurance Code, as amended, which reads as follows:
Sec. 416. The Commissioner shall have the power to adjudicate claims and complaints involving
any loss, damage or liability for which an insurer may be answerable under any kind of policy
or contract of insurance, or for which such insurer may be liable under a contract of
membership, or for which a reinsurer may be sued under any contract or reinsurance it may
have entered into, or for which a mutual benefit association may be held liable under the
membership certificates it has issued to its members, where the amount of any such loss,
damage or liability, excluding interests, cost and attorney's fees, being claimed or sued upon
any kind of insurance, bond, reinsurance contract, or membership certificate does not exceed
in any single claim one hundred thousand pesos.
xxx xxx xxx
The authority to adjudicate granted to the Commissioner under this section shall be concurrent
with that of the civil courts, but the filing of a complaint with the Commissioner shall preclude
the civil courts from taking cognizance of a suit involving the same subject matter. (Emphasis
supplied)
Continuing, Section 416 (as amended by B.P. Blg. 874) also specifies the authority to which
appeal may be taken from a final order or decision of the Commissioner given in the exercise of
his adjuclicatory or quasi-judicial power:
Any decision, order or ruling rendered by the Commissioner after a hearing shall have the force
and effect of a judgment. Any party may appeal from a final order, ruling or decision of the
Commissioner by filing with the Commissioner within thirty days from receipt of copy of such
order, ruling or decision a notice of appeal to the Intermediate Appellate Court (now the Court
of appeals) in the manner provided for in the Rules of Court for appeals from the Regional Trial
Court to the Intermediate Appellate Court (now the Court of Appeals).
xxx xxx xxx (Emphasis supplied)
It may be noted that under Section 9 (3) of B.P. Blg. 129, appeals from a final decision of the
Insurance Commissioner rendered in the exercise of his adjudicatory authority now fall within
the exclusive appellate jurisdiction of the Court of Appeals.
Petitioner Almendras in his Complaint filed with the Insurance Commission, originally sought
remedies which would have required the Insurance Commissioner to adjudicate on matters
pertaining to performance and satisfaction by private respondent Bankers of its legal
obligations under its Contract of Insurance (policy No. MH-HO/84-305) with petitioner
Almendras. The Court observes, however, that both parties had agreed at the 23 August 1985
hearing before the Insurance Commissioner to submit the case for resolution on the sole issue
of whether or not revocation or suspension of private respondent Bankers' Certificate of
Authority to engage in insurance business was justified. The scope of the issues involved having
been so limited the Insurance Commissioner was left with the task of determining whether or
not private respondent Bankers was guilty of an act or acts constituting a statutory ground for
revocation or suspension of its Certificate of Authority. Clearly, therefore, the Insurance
Commissioner's disputed Resolution and Order was issued in the performance of
administrative and regulatory duties and fucntion and should have been appealed by
petitioner to the Office of the Secretary of Finance.
Petitioner Almendras in effect invoked only the Commissioner's regulatory authority to
determine whether or not private respondent Bankers had violated provisions of the Insurance
Code, as amended. Petitioner had chosen to litigate the substantive aspects of its insurance
claim against Bankers in a different forum a judicial one for it instituted a separate civil
action for damages before the Regional Trial Court of Pasay City, on 13 August 1985, that is,
after efforts at amicable settlement of Administrative Case No. 006 had failed. Petitioner
Almendras had in fact to go before a judicial forum and to limit the proceedings before the
Insurance Commissioner to regulatory, non-judicial, matters; the claim of petitioner Almendras
was in excess of P100,000.00 and, therefore, fen outside the quasi-judicial jurisdiction of the
Insurance Commissioner under Section 416 of the Insurance Code, as amended.
We conclude that petitioner Almendras remedy after its Motion for Reconsideration in
Administrative Case No. 006 had been denied by public respondent Commission was to
interpose an appeal to the Secretary of Finance. The present Petition for certiorari is neither
proper nor an appropriate substitute for such an appeal.
WHEREFORE, the Petition for certiorari is DISMISSED. Costs against petitioner.
SO ORDERED.
SOUTH AFRICAN CASE OF LORCOM VS. ZURICH INSURANCE
In the recent case of Lorcom Thirteen (Pty) Ltd v Zurich Insurance Company South Africa
an interesting factual scenario gave the Western Cape High Court an opportunity to assess the
correct approach to the question of insurable interest under South African law.
The case concerned the MFV Buccaneer, a fishing vessel lost at sea in 2008. Underwriters
repudiated the claim under the policy for lack of an insurable interest. The focal point of the
repudiation was that the insured, Lorcom, had no direct ownership interest in the subject
matter. At the time of the loss, the vessel was owned by Gansbaai Fishing Wholesalers (GWS),
a wholly owned subsidiary of Lorcom.
A further relevant feature of the case was that at the time of the loss, Lorcom was in the
process of being sold to a third party, subject to the condition that when the final instalment
had been paid, ownership of the vessel would be transferred from GWS to Lorcom. As a result,
there was an expectation that Lorcom would become the registered owner at some point in
the future.
Against this background, Lorcom asserted that its insurable interest was premised on four
points:
It was the sole shareholder of the company which owned the vessel;
It was to be vested with ownership of the vessel at a later date in terms of the sale
agreement;
It had the right of use of the vessel at the material time; and
It held the fishing permit for the vessel.
The policy covered hull and machinery, war and liability and was written subject to the
Institute Fishing Vessel Clauses. Moreover, the policy was subject to South African law, which
prompted the judge to delve into the origins of insurance law in the jurisdiction. Until 1977,
the Cape and Orange Free State provinces in South Africa applied English statutory law to
questions of insurable interest. At that time, the concept of insurable interest was a firm
feature of English insurance statutes, such as the Marine Insurance Act, which influenced the
direction taken by the South African courts on the matter.
From 1977, the law to be applied in the republic as a whole was Roman-Dutch law. The judge
remarked that it would be erroneous to assume, therefore, that South Africa inherited a body
of common law derived from English insurance law. Consequently, the proper context for
considering the question of insurable interest in South Africa is twofold. Under the common
law, an insurance contract which constitutes a gambling transaction is not illegal but is
nevertheless unenforceable. Further, unlike in England, there are no South African statutes
which lay down the need for an insurable interest.
The conclusion reached by the judge was that it is questionable whether there is a
self-standing requirement that the insured must have an insurable interest in the asset. He
preferred the view that 'insurable interest' is really an element of a broader inquiry into
whether the insured's interest in taking out the policy is an acceptable one which removes the
contract from the ambit of gambling.
Two important principles emerge from the case. The first is that South African cases on the
matter show that the courts have often approached the question of insurable interest quite
liberally, so as to enable the insured to recover what the policy promised.
The second is that the judge was prepared to take a flexible approach to the question of
shareholding in the asset-owning entity. This is in contrast to the conventional English law
approach laid down by the House of Lords in Macaura v Northern Assurance Co Ltd, which
held that a shareholder - even a 100% shareholder - does not have an insurable interest in the
assets of the company.
On the facts, the court found that Lorcom's 100% shareholding in GWF, taken together with its
right of use of the vessel and its expectancy of becoming owner, was sufficient interest to
render enforceable an insurance contract providing for payment of the loss of the market value
of the vessel.
This case sends a warning to insurers writing business in South Africa not to assume that
'insurable interest' is a self-standing requirement of South African insurance law, and to be
wary of adopting an overly strict or technical approach when taking a view on whether a policy
is enforceable in any given case.