PACIFIC TIMBER EXPORT CORPORATION, petitioner, vs.

THE HONORABLE COURT OF

APPEALS and WORKMEN'S INSURANCE COMPANY, INC., respondents.|||

Facts: "On March 19, 1963, the plaintiff secured temporary insurance from the defendant for its
exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the
Diapitan Bay, Quezon Province to Okinawa and Tokyo, Japan. The defendant issued on said date
Cover Note No. 1010, insuring the said cargo of the plaintiff "Subject to the Terms and Conditions of
the WORKMEN'S INSURANCE COMPANY, INC. printed Marine Policy form as filed with and
approved by the Office of the Insurance Commissioner" (Exhibit A).
"The regular marine cargo policies were issued by the defendant in favor of the plaintiff on April 2,
1963. After the issuance of Cover Note No. 1010 (Exhibit A), but before the issuance of the two
marine policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be exported were
lost during loading operations in the Diapitan Bay. The logs were to be loaded on the 'SS Woodlock'
which Docked about 500 meters from the shortline of the Diapitan Bay. The plaintiff subsequently
submitted a 'Claim Statement' demanding payment of the loss under Policies Nos. 53 HO 1033, and
53 HO 1033, in the total amount of P19,286.79.
"On July 17, 1963, the defendant requested the First Philippine Adjustment Corporation to inspect
the loss and assess the damage. The adjustment company submitted its Report, the adjuster found
that 'the loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032 and 1033 inasmuch
as said policies covered the actual number of logs loaded on board the 'SS Woodlock'. However,
the loss of 30 pieces of logs is within the 1,250,000 bd. ft. covered by Cover Note No. 1010 insured
for $70,000.00. The defendant denied the claims of the plaintiff and it was further stated that the said
loss may not be considered as covered under Cover Note No. 1010 because the said Note had
become 'null and void by virtue of the issuance of Marine Policy Nos. 53 HO 1032 and 1033'

Issue: WON the CA erred in declaring the Cover note null and void for lack of valuable consideration.

Held: Petitioner contends that the Cover Note was issued with a consideration when, by express
stipulation, the cover note is made subject to the terms and conditions of the marine policies, and
the payment of premiums is one of the terms of the policies. From this undisputed fact, We uphold
petitioner's submission that the Cover Note was not without consideration for which the
respondent court held the Cover Note as null and void, and denied recovery therefrom. The fact
that no separate premium was paid on the Cover Note before the loss insured against
occurred, does not militate against the validity of petitioner's contention, for no such
premium could have been paid, since by the nature of the Cover Note, it did not contain, as
all Cover Notes do not contain particulars of the shipment that would serve as basis for the
computation of the premiums. As a logical consequence, no separate premiums are intended or
required to be paid on a Cover Note. This is a fact admitted by an official of respondent company,
Juan Jose Camacho, in charge of issuing cover notes of the respondent company. At any rate, it is
not disputed that petitioner paid in full all the premiums as called for by the statement issued by
private respondent after the issuance of the two regular marine insurance policies, thereby leaving
no account unpaid by petitioner due on the insurance coverage, which must be deemed to include
the Cover Note. If the Note is to be treated as a separate policy instead of integrating it to the
regular policies subsequently issued, the purpose and function of the Cover Note would be
set at naught or rendered meaningless, for it is in a real sense a contract, not a mere
application for insurance which is a mere offer.

2. The defense of delay as raised by private respondent in resisting the claim cannot be sustained.
The law requires this ground of delay to be promptly and specifically asserted when a claim on the
insurance agreement is made. The undisputed facts show that instead of invoking the ground of
delay in objecting to petitioner's claim of recovery on the cover note, it took steps clearly indicative
that this particular ground for objection to the claim was never in its mind. The nature of this specific
ground for resisting a claim places the insurer on duty to inquire when the loss took place, so that it
could determine whether delay would be a valid ground upon which to object to a claim against it.
As already stated earlier, private respondent's reaction upon receipt of the notice of loss,
which was on April 15, 1963, was to set in motion from July 1963 what would be necessary
to determine the cause and extent of the loss, with a view to the payment thereof on the
insurance agreement.

ASIAN TERMINALS, INC., petitioner, vs. FIRST LEPANTO-TAISHO INSURANCE

CORPORATION, respondent.

Facts: On July 6, 1996, 3 3,000 bags of sodium tripolyphosphate contained in 100 plain jumbo bags complete
and in good condition were loaded and received on board M/V "Da Feng" owned by China Ocean Shipping
Co. (COSCO) in favor of consignee, Grand Asian Sales, Inc. (GASI). Based on a Certificate of Insurance 4 dated
August 24, 1995, it appears that the shipment was insured against all risks by GASI with FIRST LEPANTO for
PhP7,959,550.50 under Marine Open Policy No. 0123.

The shipment arrived in Manila on July 18, 1996 and was discharged into the possession and custody of ATI,
a domestic corporation engaged in arrastre business. The shipment remained for quite some time at ATI's
storage area until it was withdrawn by broker, Proven Customs Brokerage Corporation (PROVEN), on August
8 and 9, 1996 for delivery to the consignee. Upon receipt of the shipment, GASI subjected the same to
inspection and found that the delivered goods incurred shortages of 8,600 kilograms and spillage of 3,315 kg
for a total of 11,915 kg of loss/damage valued at PhP166,772.41. GASI sought recompense from COSCO, thru
its Philippine agent Smith Bell Shipping Lines, Inc. (SMITH BELL), ATI and PROVEN but was denied. Hence, it
pursued indemnification from the shipment's insurer.

As such subrogee, FIRST LEPANTO demanded from COSCO, its shipping agency in the Philippines, SMITH BELL,
PROVEN and ATI, reimbursement of the amount it paid to GASI. When FIRST LEPANTO's demands were not
heeded, it filed on May 29, 1997 a Complaint for sum of money before the Metropolitan Trial Court (MeTC)
of Manila, Branch 3. FIRST LEPANTO sought that it be reimbursed the amount of PhP166,772.41, twenty-five
percent (25%) thereof as attorney's fees, and costs of suit.

ATI denied liability for the lost/damaged shipment and claimed that it exercised due diligence and care in
handling the same. ATI averred that upon arrival of the shipment, SMITH BELL requested for its inspection
and it was discovered that one jumbo bag thereof sustained loss/damage while in the custody of COSCO as
evidenced by Turn Over Survey of Bad Order Cargo No. 47890 dated August 6, 1996 15 jointly executed by
the respective representatives of ATI and COSCO. During the withdrawal of the shipment by PROVEN from
ATI's warehouse, the entire shipment was re-examined and it was found to be exactly in the same condition
as when it was turned over to ATI such that one jumbo bag was damaged.

PROVEN denied any liability for the lost/damaged shipment and averred that the complaint alleged no
specific acts or omissions that makes it liable for damages. PROVEN claimed that the damages in the shipment
were sustained before they were withdrawn from ATI's custody under which the shipment was left in an
open area exposed to the elements, thieves and vandals. PROVEN contended that it exercised due diligence
and prudence in handling the shipment. PROVEN also filed a counterclaim for attorney's fees and damages.

Issue: Whether or not the non-presentation of an insurance contract will bar a subrogee from collecting
reimbursement.

Held: Non-presentation of the insurance contract is not fatal to FIRST LEPANTO's cause of action for
reimbursement as subrogee. It is conspicuous from the records that ATI put in issue the submission of the
insurance contract for the first time before the CA. Despite opportunity to study FIRST LEPANTO's complaint
before the MeTC, ATI failed to allege in its answer the necessity of the insurance contract. Neither was the
same considered during pre-trial as one of the decisive matters in the case. Further, ATI never challenged the
relevancy or materiality of the Certificate of Insurance presented by FIRST LEPANTO as evidence during trial
as proof of its right to be subrogated in the consignee's stead.

As a general rule, the marine insurance policy needs to be presented in evidence before the insurer may
recover the insured value of the lost/damaged cargo in the exercise of its subrogatory right. In Malayan
Insurance Co., Inc. v. Regis Brokerage Corp., the Court stated that the presentation of the contract
constitutive of the insurance relationship between the consignee and insurer is critical because it is the legal
basis of the latter's right to subrogation. Based on the attendant facts of the instant case, the application of
the exception is warranted. As discussed above, it is already settled that the loss/damage to the GASI's
shipment occurred while they were in ATI's custody, possession and control as arrastre operator. Verily, the
Certificate of Insurance and the Release of Claim presented as evidence sufficiently established FIRST
LEPANTO's right to collect reimbursement as the subrogee of the consignee, GASI.

With ATI's liability having been positively established, to strictly require the presentation of the insurance
contract will run counter to the principle of equity upon which the doctrine of subrogation is premised.
Subrogation is designed to promote and to accomplish justice and is the mode which equity adopts to compel
the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay. The payment
by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies which
the insured may have against the third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of any privity of contract or upon payment by the
insurance company of the insurance claim. It accrues simply upon payment by the insurance company of the
insurance claim.

THELMA VDA. DE CANILANG, petitioner, vs. HON. COURT

OF APPEALS and GREAT PACIFIC LIFE INSURANCE
CORPORATION, respondents.
Facts: On 18 June 1982, Jaime Canilang consulted Dr. Wilfredo B. Claudio and was diagnosed as
suffering from "sinus tachycardia." The doctor prescribed the following for him: Trazepam, a
tranquilizer; and Aptin, a beta-blocker drug. Mr. Canilang consulted the same doctor again on 3
August 1982 and this time was found to have "acute bronchitis." On the next day, Jaime Canilang
applied for a "non-medical" insurance policy with respondent Great Pacific Life Assurance Company
("Great Pacific") naming his wife, petitioner Thelma Canilang, as his beneficiary. Jaime Canilang
was issued ordinary life insurance Policy No. 345163, with the face value of P19,700, effective as of
9 August 1982. On 5 August 1983, Jaime Canilang died of "congestive heart failure," "anemia," and
"chronic anemia." Petitioner, widow and beneficiary of the insured, filed a claim with Great Pacific
which the insurer denied on 5 December 1983 upon the ground that the insured had concealed
material information from it. Petitioner then filed a complaint against Great Pacific with the Insurance
Commission for recovery of the insurance proceeds. During the hearing called by the Insurance
Commissioner, petitioner testified that she was not aware of any serious illness suffered by her late
husband and that, as far as she knew, her husband had died because of a kidney disorder. Pacific
for its part presented Dr. Esperanza Quismorio, a physician and a medical underwriter working for
Great Pacific. She testified that the deceased's insurance application had been approved on the
basis of his medical declaration. She explained that as a rule, medical examinations are required
only in cases where the applicant has indicated in his application for insurance coverage that he has
previously undergone medical consultation and hospitalization.

Issue: whether or not Jaime Canilang `intentionally' made material concealment in stating his state
of health.
Held: We agree with the Court of Appeals that the information which Jaime Canilang failed to
discloses was material to the ability of Great Pacific to estimate the probable risk he presented as a
subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and the
medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed
that Great Pacific would have made further inquiries and would have probably refused to issue a
non-medical insurance policy or, at the very least, required a higher premium for the same coverage.
15 The materiality of the information withheld by Great Pacific did not depend upon the state of mind
of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial
process, except through proof of external acts or failure to act from which inferences as to his
subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or
physical events which ensue. Materiality relates rather to the "probable and reasonable influence of
the facts" upon the party to whom the communication should have been made, in assessing the risk
involved in making or omitting to make further inquiries and in accepting the application for insurance;
that "probable and reasonable influence of the facts" concealed must, of course, be determined
objectively, by the judge ultimately.

In any case, in the case at bar, the nature of the facts not conveyed to the insurer was such that the
failure to communicate must have been intentional rather than merely inadvertent. For Jaime
Canilang could not have been unaware that this heart beat would at times rise to high and alarming
levels and that he had consulted a doctor twice in the two (2) months before applying for non-medical
insurance. Indeed, the last medical consultation took place just the day before the insurance
application was filed. In all probability, Jaime Canilang went to visit his doctor precisely because of
the discomfort and concern brought about by his experiencing "sinus tachycardia.

PRUDENTIAL GUARANTEE and ASSURANCE INC., petitioner, vs. TRANS-ASIA SHIPPING

LINES, 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. While the policy was in force, a fire broke out while [M/V Asia Korea was]
undergoing repairs at the port of Cebu. Plaintiff [TRANS-ASIA] filed its notice of claim for damage
sustained by the vessel. This is evidenced by a letter/formal claim of even date. Plaintiff [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. An adjuster's report on the fire in question was submitted
by Richard Hogg International together with the U-Marine Surveyor Report.

Defendant denied the claim stating that "After a careful review and evaluation of your claim arising
from the above-captioned incident, it has been ascertained that you are in breach of policy
conditions, among them "WARRANTED VESSEL CLASSED AND CLASS MAINTAINED".
Accordingly, we regret to advise that your claim is not compensable and hereby DENIED. and, that
its claim has been effectively waived and/or abandoned, or it is estopped from pursuing the same.
By way of a counterclaim, PRUDENTIAL sought a refund of P3,000,000.00, which it allegedly
advanced to TRANS-ASIA by way of a loan without interest and without prejudice to the final
evaluation of the claim, including the amounts of P500,000.00, for survey fees and P200,000.00,
representing attorney's fees.

Issue: WON Trans-Asia breached the warranty stated in the insurance policy, thus absolving
Prudential from paying the former.

Held: At the outset, it must be emphasized that the party which alleges a fact as a matter of
defense has the burden of proving it. PRUDENTIAL, as the party which asserted the claim
that TRANS-ASIA breached the warranty in the policy, has the burden of evidence to establish
the same. Hence, on the part of PRUDENTIAL lies the initiative to show proof in support of its
defense; otherwise, failing to establish the same, it remains self-serving. Clearly, if no evidence on
the alleged breach of TRANS-ASIA of the subject warranty is shown, a fortiori, TRANS-ASIA would
be successful in claiming on the policy. It follows that PRUDENTIAL bears the burden of evidence
to establish the fact of breach.In our rule on evidence, TRANS-ASIA, as the plaintiff below,
necessarily has the burden of proof to show proof of loss, and the coverage thereof, in the subject
insurance policy. However, in the course of trial in a civil case, once plaintiff makes out a prima facie
case in his favor, the duty or the burden of evidence shifts to defendant to controvert plaintiff's prima
facie case, otherwise, a verdict must be returned in favor of plaintiff. 23 TRANS-ASIA was able to
establish proof of loss and the coverage of the loss, i.e., 25 October 1993: Fire on Board. Thereafter,
the burden of evidence shifted to PRUDENTIAL to counter TRANS-ASIA's case, and to prove its
special and affirmative defense that TRANS-ASIA was in violation of the particular condition on
CLASSED AND CLASS MAINTAINED.

We are not unmindful of the clear language of Sec. 74 of the Insurance Code which provides that,
"the violation of a material warranty, or other material provision of a policy on the part of either party
thereto, entitles the other to rescind." It is generally accepted that "[a] warranty is a statement or
promise set forth in the policy, or by reference incorporated therein, the untruth or non-fulfillment of
which in any respect, and without reference to whether the insurer was in fact prejudiced by such
untruth or non-fulfillment, renders the policy voidable by the insurer." 25 However, it is similarly
indubitable that for the breach of a warranty to avoid a policy, the same must be duly shown by the
party alleging the same. We cannot sustain an allegation that is unfounded. 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.

MA. LOURDES S. FLORENDO, petitioner, vs. PHILAM

PLANS, INC., PERLA ABCEDE and MA. CELESTE
ABCEDE, respondents.
Facts: Manuel Florendo filed an application for comprehensive pension plan with respondent Philam
Plans, Inc. (Philam Plans) after some convincing by respondent Perla Abcede. The plan had a pre-
need price of P997,050.00, payable in 10 years, and had a maturity value of P2,890,000.00 after 20
years. Manuel signed the application and left to Perla the task of supplying the information needed
in the application. Respondent Ma. Celeste Abcede, Perla's daughter, signed the application as
sales counselor.Aside from pension benefits, the comprehensive pension plan also provided life
insurance coverage to Florendo. This was covered by a Group Master Policy that Philippine
American Life Insurance Company (Philam Life) issued to Philam Plans. Under the master policy,
Philam Life was to automatically provide life insurance coverage, including accidental death, to all
who signed up for Philam Plans' comprehensive pension plan. If the plan holder died before the
maturity of the plan, his beneficiary was to instead receive the proceeds of the life insurance,
equivalent to the pre-need price. Further, the life insurance was to take care of any unpaid premium
until the pension plan matured, entitling the beneficiary to the maturity value of the pension plan.
On October 30, 1997 Philam Plans issued Pension Plan Agreement PP43005584 to Manuel, with
petitioner Ma. Lourdes S. Florendo, his wife, as beneficiary. In time, Manuel paid his quarterly
premiums. Eleven months later or on September 15, 1998, Manuel died of blood poisoning.
Subsequently, Lourdes filed a claim with Philam Plans for the payment of the benefits under her
husband's plan. Because Manuel died before his pension plan matured and his wife was to get only
the benefits of his life insurance, Philam Plans forwarded her claim to Philam Life. Philam Life found
that Manuel was on maintenance medicine for his heart and had an implanted pacemaker. Further,
he suffered from diabetes mellitus and was taking insulin. Lourdes renewed her demand for payment
under the plan but Philam Plans rejected it, prompting her to file the present action against the
pension plan company before the Regional Trial Court (RTC) of Quezon City.

Issue:
Held: Lourdes insists that Manuel had concealed nothing since Perla, the soliciting agent, knew that
Manuel had a pacemaker implanted on his chest in the 70s or about 20 years before he signed up
for the pension plan. 23 But by its tenor, the responsibility for preparing the application belonged to
Manuel. Nothing in it implies that someone else may provide the information that Philam Plans
needed. Manuel cannot sign the application and disown the responsibility for having it filled up. If he
furnished Perla the needed information and delegated to her the filling up of the application, then
she acted on his instruction, not on Philam Plans' instruction.

VIII. INCONTESTABILITY
After this Agreement has remained in force for one ( 1) year, we can no longer contest for health
reasons any claim for insurance under this Agreement, except for the reason that installment has
not been paid (lapsed), or that you are not insurable at the time you bought this pension program by
reason of age. If this Agreement lapses but is reinstated afterwards, the one (1) year contestability
period shall start again on the date of approval of your request for reinstatement.
The above incontestability clause precludes the insurer from disowning liability under the policy it
issued on the ground of concealment or misrepresentation regarding the health of the insured after
a year of its issuance.
Since Manuel died on the eleventh month following the issuance of his plan, 36 the one year
incontestability period has not yet set in. Consequently, Philam Plans was not barred from
questioning Lourdes' entitlement to the benefits of her husband's pension plan.