WEEK 2
INSURANCE
E. Essential Elements
GULF RESORTS INC vs PHILIPPINE CHARTER INSURANCE
CORPORATION (2005)
FACTS: Gulf Resorts, Inc at Agoo, La Union was insured with American Home
Assurance Company which includes loss or damage to shock to any of the
property insured by this Policy occasioned by or through or in consequence of
earthquake
July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the
properties and 2 swimming pools in its Agoo Playa Resort were damaged
August 23, 1990: Gulf's claim was denied on the ground that its insurance
policy only afforded earthquake shock coverage to the two swimming pools of
the resort
Petitioner insists that the parties have intended to extend the coverage through
the attachment of the phrase "Subject to: Other Insurance Clause, Typhoon
Endorsement, Earthquake Shock Endorsement, Extended Coverage
Endorsement, FEA Warranty & Annual Payment Agreement on Long Term
Policies" to the insurance policy.
ISSUE: Whether or not the insurance policy earthquake shock coverage
extends to other property aside from the two swimming pools.
HELD: NO. Petitioner cannot focus on the earthquake shock endorsement to
the exclusion of the other provisions. All the provisions and riders, taken and
interpreted together, indubitably show the intention of the parties to extend
earthquake shock coverage to the two swimming pools only.
A careful examination of the premium recapitulation will show that it is the
clear intent of the parties to extend earthquake shock coverage only to the two
swimming pools.
In the subject policy, no premium payments were made with regard to
earthquake shock coverage, except on the two swimming pools. There is no
mention of any premium payable for the other resort properties with regard to
earthquake shock. This is consistent with the history of petitioner’s previous
insurance policies from AHAC-AIU.
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In sum, there is no ambiguity in the terms of the contract and its riders.
Petitioner cannot rely on the general rule that insurance contracts are contracts
of adhesion which should be liberally construed in favor of the insured and
strictly against the insurer company which usually prepares it. A contract of
adhesion is xxx
We cannot apply the general rule on contracts of adhesion to the case at bar.
Petitioner cannot claim it did not know the provisions of the policy. From the
inception of the policy, petitioner had required the respondent to copy verbatim
the provisions and terms of its latest insurance policy from AHAC-AIU.
DOCTRINE:
It is basic that all the provisions of the insurance policy should be examined
and interpreted in consonance with each other. All its parts are reflective of the
true intent of the parties. The policy cannot be construed piecemeal. Certain
stipulations cannot be segregated and then made to control; neither do
particular words or phrases necessarily determine its character.
Section 2(1) of the Insurance Code defines a contract of insurance as an
agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event.
Thus, an insurance contract exists where the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designated
peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual
losses among a large group of persons bearing a similar risk; and
5. In consideration of the insurer's promise, the insured pays a premium.
An insurance premium is the consideration paid an insurer for undertaking to
indemnify the insured against a specified peril. In fire, casualty, and marine
insurance, the premium payable becomes a debt as soon as the risk attaches.
A contract of adhesion is one wherein a party, usually a corporation, prepares
the stipulations in the contract, while the other party merely affixes his
signature or his "adhesion" thereto. Consequently, any ambiguity therein is
resolved against the insurer, or construed liberally in favor of the insured.
PHILAMCARE HEALTH SYSTEMS, INC., vs. COURT OF APPEALS and
JULITA TRINOS
G.R. No. 125678 March 18, 2002
YNARES-SANTIAGO, J.:
Facts:ErnaniTrinos, deceased husband of JulitaTrinos, applied for a health care
coverage withPhilamcare Health Systems, Inc. In the standard application
form, he answered “NO” to the following question:
Have you or any of your family members ever consulted or been treated for
high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or
peptic ulcer? (If Yes, give details).
Coverage of the health care agreement (HCA):
approved for a period of one year, Renewed 3 times yearly: March 1, 1988 -
March 1, 1990; March 1, 1990 – June 1, 1990. The amount of coverage was
increased to a maximum sum of P75,000.00 per disability.
Ernani’s entitlement under HCA:
hospitalization benefits, whether ordinary or emergency, listed therein
out-patient benefits" such as annual physical examinations, preventive health
care and other out-patient services.
Ernaniwas subsequently confined. HISTORY (everything happened within the
period of coverage):
Ernani suffered a heart attack and was confined at the Manila Medical Center
(MMC) for one month beginning March 9, 1990.
Julita tried to claim the benefits under the health care agreement.
Philamdenied her claim saying that the Health Care Agreement was void. there
was a concealment regarding Ernani’s medical history. Doctors at the MMC
allegedly discovered at the time of Ernani’s confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the application
form.
Julita paid the hospitalization expenses herself, amounting to about P76,000.00
Ernani was discharged at MMC
He was attended by a physical therapist at home.
Again he was admitted at the Chinese General Hospital.
Julita brought her husband home again due to financial difficulties.
In the morning of April 13, 1990, Ernani had fever and was feeling very weak.
Julita was constrained to bring him back to the Chinese General Hospital where
he died on the same day.
On July 24, 1990, respondent instituted with the Regional Trial Court of Manila,
Branch 44, an action for damages against Philam and its president, Dr. Benito
Reverente, She asked for reimbursement of her expenses plus moral damages
and attorney’s fees. After trial, the lower court ruled against Philam, ordered:
1. Defendants to pay and reimburse the medical and hospital coverage of the
late ErnaniTrinos in the amount of P76,000.00 plus interest, until the amount is
fully paid to plaintiff who paid the same;
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2. Defendants to pay the reduced amount of moral damages of P10,000.00 to
plaintiff;
3. Defendants to pay the reduced amount ofP10,000.00 as exemplary damages
to plaintiff;
4. Defendants to pay attorney’s fees of P20,000.00, plus costs of suit.
CA: affirmed the decision of the trial court but deleted all awards for damages
and absolved petitioner Reverente.Denied MR.
Issues:
Whether health care agreements are considered insurance contracts.
Whether there was concealment of material facts on the part of Ernani that
rendered the HCA void by virtue of the "Invalidation of agreement" contained
in the contract.
Suppose there was concealment, what are the steps Philam should have done?
Ruling:
YES, it is an insurance contract.
Section 2 (1) of the Insurance Code defines a contract of insurance as an
agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event.
An insurance contract exists where the following elements concur:
(1) The insured has an insurable interest;
(2) The insured is subject to a risk of loss by the happening of the designated
peril;
(3) The insurer assumes the risk;
(4) Such assumption of risk is part of a general scheme to distribute actual
losses among a large group of persons bearing a similar risk; and
(5) In consideration of the insurer’s promise, the insured pays a premium.
Section 3 of the Insurance Code states that any contingent or unknown event,
whether past or future, which may damnify a person having an insurable
interest against him, may be insured against. Every person has an insurable
interest in the life and health of himself. Section 10 provides:
Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of money,
respecting property or service, of which death or illness might delay or prevent
the performance; and
(4) of any person upon whose life any estate or interest vested in him depends.
In the case at bar, the insurable interest of respondent’s husband in obtaining
the health care agreement was his own health. The health care agreement was
in the nature of non-life insurance, which is primarily a contract of indemnity.
Once the member incurs hospital, medical or any other expense arising from
sickness, injury or other stipulated contingent, the health care provider must
pay for the same to the extent agreed upon under the contract.
NONE, there was no concealment of material facts.
Petitioner cannot rely on the stipulation regarding "Invalidation of agreement"
which reads:
Failure to disclose or misrepresentation of any material information by the
member in the application or medical examination, whether intentional or
unintentional, shall automatically invalidate the Agreement from the very
beginning and liability of Philamcare shall be limited to return of all Membership
Fees paid. An undisclosed or misrepresented information is deemed material if
its revelation would have resulted in the declination of the applicant by
Philamcare or the assessment of a higher Membership Fee for the benefit or
benefits applied for.
The answer assailed by petitioner was in response to the question relating to
the medical history of the applicant. This largely depends on opinion rather
than fact, especially coming from respondent’s husband who was not a medical
doctor. Where matters of opinion or judgment are called for, answers made in
good faith and without intent to deceive will not avoid a policy even though
they are untrue. Thus,
(A)lthough false, a representation of the expectation, intention, belief, opinion,
or judgment of the insured will not avoid the policy if there is no actual fraud in
inducing the acceptance of the risk, or its acceptance at a lower rate of
premium, and this is likewise the rule although the statement is material to the
risk, if the statement is obviously of the foregoing character, since in such case
the insurer is not justified in relying upon such statement, but is obligated to
make further inquiry. There is a clear distinction between such a case and one
in which the insured is fraudulently and intentionally states to be true, as a
matter of expectation or belief, that which he then knows, to be actually
untrue, or the impossibility of which is shown by the facts within his
knowledge, since in such case the intent to deceive the insurer is obvious and
amounts to actual fraud. (Underscoring ours)
The fraudulent intent on the part of the insured must be established to warrant
rescission of the insurance contract. Concealment as a defense for the health
care provider or insurer to avoid liability is an affirmative defense and the duty
to establish such defense by satisfactory and convincing evidence rests upon
the provider or insurer. In any case, with or without the authority to
investigate, petitioner is liable for claims made under the contract. Having
assumed a responsibility under the agreement, petitioner is bound to answer
the same to the extent agreed upon. In the end, the liability of the health care
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provider attaches once the member is hospitalized for the disease or injury
covered by the agreement or whenever he avails of the covered benefits which
he has prepaid.
Philamshloud have followed Section 27 of the Insurance Code:
"a concealment entitles the injured party to rescind a contract of insurance."
The right to rescind should be exercised previous to the commencement of an
action on the contract.In this case, no rescission was made. Besides, the
cancellation of health care agreements as in insurance policies require the
concurrence of the following conditions:
Prior notice of cancellation to insured;
Notice must be based on the occurrence after effective date of the policy of one
or more of the grounds mentioned;
Must be in writing, mailed or delivered to the insured at the address shown in
the policy;
Must state the grounds relied upon provided in Section 64 of the Insurance
Code and upon request of insured, to furnish facts on which cancellation is
based.
None of the above pre-conditions was fulfilled in this case.
Anent the incontestability of the membership of respondent’s husband, we
quote with approval the following findings of the trial court:
(U)nder the title Claim procedures of expenses, the defendant Philamcare
Health Systems Inc. had twelve months from the date of issuance of the
Agreement within which to contest the membership of the patient if he had
previous ailment of asthma, and six months from the issuance of the
agreement if the patient was sick of diabetes or hypertension. The periods
having expired, the defense of concealment or misrepresentation no longer lie.
F. Applicability of Civil Code
Art. 2011. The contract of insurance is governed by special laws. Matters not
expressly provided for in such special laws shall be regulated by this Code. (n)
Art. 2012. Any person who is forbidden from receiving any donation under
Article 739 cannot be named beneficiary of a life insurance policy by the person
who cannot make any donation to him, according to said article. (n)
Art. 739. The following donations shall be void:
(1) Those made between persons who were guilty of adultery or concubinage
at the time of the donation;
(2) Those made between persons found guilty of the same criminal offense, in
consideration thereof;
(3) Those made to a public officer or his wife, descedants and ascendants, by
reason of his office.
In the case referred to in No. 1, the action for declaration of nullity may be
brought by the spouse of the donor or donee; and the guilt of the donor and
donee may be proved by preponderance of evidence in the same action. (n)
INSULAR V EBRADO G.R. NO. L-44059 OCTOBER 28, 1977
Facts:
J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for
P5,882.00 with a rider for Accidental Death. He designated Carponia T. Ebrado
as the revocable beneficiary in his policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was
made liable to pay the coverage in the total amount of P11,745.73,
representing the face value of the policy in the amount of P5,882.00 plus the
additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the
designated beneficiary therein, although she admited that she and the insured
were merely living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased
insured. She asserts that she is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who
should be given the proceeds. The court declared Carponia as disqualified.
Issue: WON a common-law wife named as beneficiary in the life insurance
policy of a legally married man can claim the proceeds in case of death of the
latter?
Held: No. Petition
Ratio:
Section 50 of the Insurance Act which provides that "the insurance shall be
applied exclusively to the proper interest of the person in whose name it is
made"
The word "interest" highly suggests that the provision refers only to the
"insured" and not to the beneficiary, since a contract of insurance is personal in
character. Otherwise, the prohibitory laws against illicit relationships especially
on property and descent will be rendered nugatory, as the same could easily be
circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract
of life insurance is governed by the general rules of the civil law regulating
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contracts. And under Article 2012 of the same Code, any person who is
forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a fife insurance policy by the person who cannot make a
donation to him. Common-law spouses are barred from
receiving donations from each other.
Article 739 provides that void donations are those made between persons who
were guilty of adultery or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate
spouses and those between illegitimate ones should be enforced in life
insurance policies since the same are based on similar consideration. So long
as marriage remains the threshold of family laws, reason and
morality dictate that the impediments imposed upon married couple should
likewise be imposed upon extra-marital relationship.
A conviction for adultery or concubinage isn’t required exacted before
the disabilities mentioned in Article 739 may effectuate. The article says that in
the case referred to in No. 1, the action for declaration of nullity may be
brought by the spouse of the donor or donee; and the guilty of the donee may
be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the
offense is a condition precedent. The law plainly states that the guilt of the
party may be proved “in the same acting for declaration of nullity of donation.”
And, it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate
children. He was also living in with his common-law wife with whom he has two
children.
ZENITH INSURANCE CORPORATION V. THE INSURANCE COMMISSION-
INSURABLE INTEREST
Facts:
> Zenith entered into an insurance contract, denominated as Equipment
Floater Policy covering a Kato Bachoe including its accessories and
appurtenances thereof, from loss of damage. Complainant paid the stipulated
premiums therefore.
> Within the period of effectivity of the policy, the two pieces of hydraulic
wheel gear pumps, which are considered appurtenances and/or parts attached
to and/or installed in the Kato BAchoe were lost, stolen and/or illegally
detached by unknown thieves or malefactors
> Despite repeated assurances by Zenith’s soliciting agent, it refused and
failed to settle and pay complainant’s insurance claim.
> Complainant seeks not only the payment of said insurance claim of 70T plus
legal interest, atty’s fees, and litigation expenses, but also the revocation or
cancellation of the license of Zenith to do insurance business.
> Zenith on the other hand contends that:
o Complainant is not the real party in interest since the policy carries with it
a designated loss payee, the BA Finance Corp
o The policy insures against loss or damage caused by fire and lightning, etc,
while theft or robbery is NOT insured against in the policy, it not having been
expressly mentioned
o Loss nevertheless is excluded under the exception of “infidelity exclusion”
by the operator who left it unguarded, unattended and deserted while
entrusted to him, and for failure to give timely notice of loss
o Complainant and/or BA Finance is guilty of concealment and
misrepresentation at the time they secured the policy, because at the time it
became operative, the complainant was NOT yet the owner of the property
insured, the property still hot having been delivered to him, and BA finance had
no insurable interest yet, henceforth, the contract of insurance was VOID AB
INITIO for lack of insurable interest at the time the insurance took effect.
Issues and Resolutions:
(1) Whether or not the loss through theft or robbery claimed is within the
coverage of the policy.
The Insurance Commissioner, as reiterated by the SC, found for the
complainant in this wise: While the policy enumerated the risks covered, it
does NOT, however, in its express terms, limit compensability to that stated in
the enumeration. The enumerated risks excluded did not include theft or
robbery committed or perpetrated by an unidentified culprit, hence the
complainant’s claim for damages is compensable.
The foregoing policy is supported by the long time honored doctrine of “contra
proferentem: which provides that: “any ambiguity in the policy shall be
resolved in favor of the insured and against the insurer”. This is true because
insurance contracts are essentially contracts of adhesion and applicants for
insurance have no choice but to accept the terms and conditions in the policy
even if they are not in full accord therewith.
(2) Whether or not the complainant was with insurable interest therein when
the said policy contract was procured.
The complainant has insurable interest in the insured property at the time of
the procurement of the insurance policy. As the CC provides, “the contract of
sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price,” and Sec. 15 of the IC
allows the insurance of a mere contingent or expectant interest in anything if
the same is founded on an actual right to the thing, or upon any valid contract.
As this is the case, mere possession of an equitable title, like that pertaining to
the buyer, gives rise to insurable interest in the property in which such title
inheres. Furthermore, considering that Zenith’s agent had been fully apprised
of the circumstances prior to the actual issuance of the policy and the
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endorsement, it cannot now allege that complainant has no insurable interest
on the property insured. Zenith is now precluded by the equitable principle of
estoppel from impugning and dishonoring the very insurance policy contract it
issued and the endorsement and increase in the coverage made through its
duly authorized agent.
G. Subrogation
Art. 2027. No annuity shall be claimed without first proving the existence of the
person upon whose life the annuity is constituted.
FIREMAN’S FUND INSURANCE COMPANY and FIRESTONE TIRE AND RU
BBER COMPANY OF THE PHILIPPINES vs. JAMILA & COMPANY, INC.
and FIRST QUEZON CITY INSURANCE CO., INC
SUMMARY: Jamila supplies security guards to Firestone and assumes their
responsibility. When some properties of Firestone were lost due to connivance
of some security guards, Fireman’s Fund as insurer paid Firestone the value of
such and is now subrogated to Firestone’s right to reimbursement. They filed
complaint to recover money when Jamila failed to pay. CFI dismissed complaint
as to Jamila citing that there is no cause of action as the latter did not consent
to subrogation and there are no allegations in the complaint that Firestone
investigated the loss. Subsequent MRs, F&F argue that their cause of action is
on the basis of legal subrogation.
SC: There was cause of action on the part of Fireman’s Fund pursuant to Art.
2207. Payment by the assurer to the assured operates as an equitable
assignment to the assurer of all the remedies which the assured may have
against the third party whose negligence or wrongful act caused the loss.
DOCTRINE: Loss or injury for risk must be covered by the policy – Under
Article 2207, the cause of the loss or injury must be a risk covered by the
policy to entitle the insurer to the subrogation. Thus, where the insurer pays
the insured for a loss which is not a risk covered by the policy, thereby
effecting “voluntary payment,” the insurer has no right of subrogation against
the third party liable for the loss. Nevertheless, the insurer may recover from
the third party responsible for the damage to the insured property under Article
1236 of the Civil Code.
FACTS:
Jamila or the Veterans Philippine Scouts Security Agency contracted to supply
security guards to Firestone. Jamila assumed responsibility for the acts of its
security guards
First Quezon City Insurance Co., Inc. executed a bond in the sum of P20k to
guarantee Jamila’s obligations under that contract
May 18, 1963: Properties of Firestone valued at Php 11,925 were lost allegedly
due to the acts of its employees who connived with Jamila’s security guard
Fireman’s Fund, as insurer, paid to Firestone the amount of the loss and is
now subrogated to Firestone’s right to get reimbursement from Jamila
Jamila and its surety, First Quezon City Insurance Co., Inc., failed to pay the
amount of the loss in spite of repeated demands.
Fireman’s Fund and Firestone Tire and Rubber Co instituted this complaint
against Jamila for the recovery of the sum of Php 11,925.00 plus interest,
damages and attorney’s fees
Jamila moved to dismiss the complaint on the ground of lack of cause of action
(1) complaint did not allege that Firestone, pursuant to the contractual
stipulation quoted in the complaint, had investigated the loss and that Jamila
was represented in the investigation and
(2) Jamila did not consent to the subrogation of Fireman’s Fund to
Firestone’s right to get reimbursement from Jamilaand its surety.
CFI: Dismissed the complaint as to Jamila on the second ground that there
wasno allegation that it had consented to the subrogation and, therefore,
Fireman’s Fund had no cause of action against it.
Also dismissed the complaint as to First Quezon City Insurance Co., Inc. on the
ground of res judicata as the same action was previously filed in a civil case
which was dismissed because of the failure of the same plaintiffs and their
counsel to appear at the pre-trial.
Firestone and Fireman’s Fund filed MR
CFI on F&F’s MR: Set aside its order of dismissal.
No res judicata as to First Quezon City Insurance Co., because civil case
was dismissed without prejudice
However, due to inadvertence, the lower court did not state in its order of
September 3, 1966 why it set aside its prior order dismissing the
complaint with respect to Jamila.
First Quezon City Insurance Co., Inc. filed its answer to the complaint.
Jamila, upon noticing that the order had obliterated its victory without any
reason therefor, filed MR reconsideration
Invoked the first ground in its original motion to dismiss which had never
been passed upon by the lower court that complaint did not allege that
Firestone, pursuant to the contractual stipulation quoted in the complaint,
had investigated the loss and that Jamila was represented in the
investigation
CFI on Jamila’s MR: Granted Jamila’s MR. However, it completely ignored the
1st ground but reverted to the second ground (no consent to subrogation thus
no cause of action).
It did not mention Firestone, the co-plaintiff of Fireman’s Fund.
Firestone and Fireman’s Fund filed MR on the ground that Fireman’s Fund
Insurance Company was suing on the basis of legal subrogation whereas
CFI erroneously predicated its dismissal order on the theory that there was no
conventional subrogation because the debtor’s consent was lacking.
Cited NCC 2207 which provides that “if the plaintiff’s property has been
insured, and he has received indemnity from the insurance company for the
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injury or loss arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract”.
CFI on F&F MR: Denied motion
F&F filed 2nd MR and called CFI’s attention to the fact that the issue of
subrogation was of no moment because Firestone, the subrogor (??), is a
party-plaintiff and could sue directly Jamila in its own right.
CFI on F&F’S 2nd MR:Denied 2nd MR without resolving contention
Appeal to SC
F&F: CFI’s dismissal of their complaint is contrary to Article 2207 which
provides for legal subrogation.
JAMILA: Legal subrogation under Art. 2207 requires the debtor’s consent
o Legal subrogation takes place in the cases mentioned in NCC 1302 and the
instant case is not among the 3 cases enumerated in that article
o There could be no subrogation in this case because according to F&F, the
contract between Jamila and Firestone was entered into on June
1, 1965 but the loss complained of occurred on May 18, 1963.
ISSUES:
1) Whether the complaint of Firestone as subrogor (???) states a cause of
action against Jamila? (Not really)
2) Whether the complaint of Fireman’s Fund as subrogee states a cause of
action against Jamila? (YES)
3) Whether Jamila should reimburse Fireman’s Fund? (Not decided here)
HELD:
CFI Decision’s order of dismissal is legally untenable so SET ASIDE with costs
against Jamila & Co., Inc.
RATIO:
[F&F’s counsel gratuitously alleged in their brief that Firestone and Jamila
entered into a “contract of guard services” on June 1, ‘65.That allegation was
uncalled for because it is not found in the complaint and so created confusion
which did not exist. No copy of the contract was annexed to the complaint.
That confusing statement was an obvious error since it was expressly alleged in
the complaint that the loss occurred on May 18, ‘63. The fact that such an
error was committed is another instance substantiating the observation
that F&F’s counsel had not exercised due care in the presentation of his case.]
1) Firestone is really a nominal party in this case as it had already been
indemnified for the loss which it had sustained. It joined as a party-plaintiff in
order to help Fireman’s Fund to recover the amount of the loss from Jamila and
First Quezon City Insurance Co., Inc. Firestone had tacitly assigned to
Fireman’s Fund its cause of action against Jamila for breach of contract.
Sufficient ultimate facts are alleged in the complaint to sustain that cause of
action.
2) Fireman’s Fund’s action against Jamila is squarely sanctioned by article PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF
2207. As the insurer, Fireman’s Fund is entitled to go after the person or entity APPEALS, ERLINDA FABIE AND HER UNKNOWN DRIVER,
that violated its contractual commitment to answer for the loss insured
against (PAL vs. Heald Lumber Co).
FACTS:
CFI erred in applying to this case the rules on novation. F&F in alleging in their
1. Petitioner Panmalay was an insurer of the car of CANLUBANG AUTOMOTIVE
complaint that Fireman’s Fund “became a party ininterest in this case by virtue
RESOURCE CORP. which was bumpt and damaged by the private respondent
of a subrogation right given in its favor by” Firestone, were not relying on the
through its negligent driver.
novation by changeof creditors as contemplated in NCC 1291 and 1300 to
2. Petitioner PANMALAy paid the amount of insurance to the insured.
1303 but rather on NCC 2207.
3. Subrogated on the rights of the insured, petitioner demand payment from
the private respondent who refused to pay the claim of the petitioner.
Article 2207 is a restatement of a settled principle of American jurisprudence.
4. Petitioner filed a complaint against private respondent before the RTC.
Subrogation has been referred to as the doctrine of substitution. It “is an arm
5. Private respondent filed a motion to dismiss arguing that payment under the
of EQUITY that may guide or even force one to pay a debt for which
“own damage” clause of the insurance policy precluded subrogation under
an obligation was incurred but whichwas in whole or in part paid by another”
Article 2207 of the Civil Code, since indemnification thereunder was made on
(83 C.J.S. 576).
the assumption that there was no wrongdoer or no third party at fault.
“Subrogation is founded on principles of JUSTICE AND EQUITY, and its
6. The RTC dismissed the complaint aswell as the motion for reconsideration
operation is governed by principles of equity. It rests onthe principle that
and this was affirmed by the CA.
substantial justice should be attained regardless of form, that is, its basis is the
doing of complete, essential, andperfect justice between all the parties
ISSUE:
without regard to form”(83 C.J.S. 579- 80)
WHETHER OR NOT, THE PETITIONER IS ALLOWED TO RECOVERED THE
Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co. vs
AMOUNT OF INSURANCE IT HAD PAID TO THE INSURED FROM PRIVATE
Moses). Upon payment of the loss, the insurer is entitled to be
RESPONDENT.
subrogate pro tanto to any right of action which the insured may have
against the third person whosenegligence or wrongful act caused the
RULING:
loss (44 Am. Jur. 2nd 745).
According to the Supreme Court, Art. 2207 of the Civil Code states that, “If the
plaintiffs property has been insured, and he has received indemnity from the
The right of subrogation is of the highest EQUITY. The LOSS IN THE FIRST
insurance company for the injury or loss arising out of the wrong or breach of
INSTANCE is that of the INSURED but AFTERreimbursement or compensation,
contract complained of, the insurance company shall be subrogated to the
it becomes the LOSS OF THE INSURER (44 Am. Jur. 2d 746).
rights of the insured against the wrongdoer or the person who has violated the
“Although many policies including policies in the standard form, now provide
contract.”
for subrogation, and thus determine the rights of theinsurer in this respect, the
This was founded on the well-settled principle of subrogation. If the insured
equitable right of subrogation as the legal effect of payment inures to the
property is destroyed or damaged through the fault or negligence of a party
insurer without any formalassignment or any express stipulation to that
other than the assured, the insurer, upon payment to the assured, will be
effect in the policy” (44 Am. Jur. 2nd 746).
subrogated to the rights of the assured to recover from the wrongdoer to the
extent that the insurer has been obligated to pay. Payment by the insurer to
Stated otherwise, when the insurance company pays for the loss,
the assured operates as an equitable assignment to the former of all remedies
such payment operates as an equitable assignment to the insurer of the
which the latter may have against the third party whose negligence or wrongful
property and all remedies which the insured may have for the recovery
act caused the loss.
thereof. That right is not dependent upon, nor does it grow out of, any privity
WHEREFORE, in view of the foregoing, the present petition is GRANTED.
of contract, or upon written assignment of claim, and payment to the insured
Petitioner’s complaint for damages against private respondents is reinstated.
makes the insurer an assignee in equity (Shambley v. Jobe-Blackley Plumbing
So the case was remanded to the Trial Court for the trial of the merit.
and Heating Co).3) Whether the plaintiffs would be able to prove their cause of
In the pertinent case of Sveriges Angfartygs Assurans Forening v. Qua Chee
action against Jamila is another question.
Gan, supra.,the Court ruled that the insurer who may have no rights of
subrogation due to “voluntary” payment may nevertheless recover from the

Page 7 of 47
third party responsible for the damage to the insured property under Article
1236 of the Civil Code.
In the pertinent case of Sveriges Angfartygs Assurans Forening v. Qua
Chee Gan, supra., the Court ruled that the insurer who may have no
rights of subrogation due to “voluntary” payment may nevertheless
recover from the third party responsible for the damage to the insured
property under Article 1236 of the Civil Code.
SVERIGES ANFARTYGS ASSURANCE VS QUA CHEE GAN (full case)
On August 23 and 24, 1947, defendant Qua Chee Gan, a sole proprietorship,
shipped on board the S.S. NAGARA as per bills of lading Exhs. A and B
2,032,000 kilos of bulk copra at Siain, Quezon, consigned to DAL International
Trading Co., in Gdynia, Poland. The vessel first called at the port
of Karlshamn, Sweden, where it unloaded 696,419 kilos of bulk copra. Then, it
proceeded to Gdynia where it unloaded the remaining copra shipment. The
actual outturn weights in the latter port showed that only 1,569,429 kilos were
discharged.
Because of the alleged confirmed cargo shortage, the Polish cargo insurers had
to indemnify the consignee for the value thereof. Thereafter, the former sued
the ship-owner, the Swedish East Asia Company, in Gothenburg, Swe-
den. The latter, in turn, sued defendant and had it summoned to
Gothenburg. Defendant However refused to submit to that court's jurisdiction
and its objection was sustained.
In March, 1951, a settlement was effected between the Polish cargo insurers
and the ship owner. Plaintiff, as the indemnity insurer for the latter, paid
approximately $60,733.53 to the Polish insurers. On August 16, 1954,
claiming to have been subrogated to the rights of the carrier, plaintiff sued
defendant before the Court of First Instance of Manila to
recover U.S. $60,733.53 plus 17% exchange tax, with legal interest, as the
value of the alleged cargo short shipment and P10,000 as attorney's
fees. Defendant answered in due time and countered with a
P15,000 counterclaim for attorney's fees.
On August 1, 1955, defendant filed a motion to dismiss on the ground of
prescription under the Carriage of Goods by Sea Act. The lowercourt sustained
the motion and plaintiff appealed here. We reversed the order of dismissals
and remanded the case for further proceedings.[1]
After trial the lower court September 28, 1963, rendered its decisions
dismissing the complaint and awarding P10,000 as attorney's fees to
defendant. It ruled (a) that there was no shortshipment on defendant's part
Page 8 of 47
(b) that plaintiff's insurance policy did not cover the shortshipment and (c)
defendant was merely acting as an agent of Louis Dreyfus & Co., who was the
real shipper.
Taking issue with all the foregoing, plaintiff has interposed the present appeal
to Us on questions of fact and law, the amount involved exceeding
P200,000.00.
Issue:
Was the non-presentation of the insurance policy fatal to plaintiff's case? The
lower court ruled so, reasoning that unless the same as the best evidence were
presented, it could not be conclusively determined if "liability for short
shipment" was a covered risk. And the rule is that an insurer who pays the
insured for loss or liability not covered by the policy is not subrogated to the
latter.[2] However, even assuming that there was unwarranted - or "volunteer"
- payment, plaintiff could still recover what it paid - in effect - to the carrier
from defendants shipper under Art. 1236 of the Civil Code which allows a third
person who pays on behalf of another to recover from the latter, although
there is no subrogation. But since the payment here was without the
knowledge and consent of defendant, plaintiff's right of recovery
is defeasible by the former's defenses since the Code is clear that the recovery
only up to the amount by which the defendant was benefited.
This brings Us to the crux of them case: Was there a shortshipment? To
support its case, plaintiff theorizes that defendant had two
shipments at Siain, Quezon province: (1) 812,800 kilos for Karlshamn and (2)
2,032,000 kilos for Gdynia. The Karlshamn shipment was asserted to have
been covered by a separate bill of lading which however was allegedly lost
subsequently. Thus, the 696,419 kilos of copra unloaded in Karlshamn was not
part of the Gdynia shipment and cannot explain the confirmed shortage at the
latter port.
Plaintiff's cause of action suffers from several fatal defects and
inconsistencies. The alleged shipment of 812,800 kilos for Karlshamn is
contradicted by plaintiff's admission in paragraphs 2 and 3 of its complaint that
defendant shipped only 2,032,000 kilos copra
at Siain, purportedly for both Gdynia and Karlshamn.[3] Needless to state,
plaintiff is bound by such judicial admission.[4] Moreover, the alleged existence
of the Karlshamn bills of lading is negative by the fact that Exhibits A and B -
the bills of lading presented by plaintiff - show that the 2,032,000 kilos of
copra loaded in Siain were for Gdynia only. Further destroying its case is the
testimony of plaintiff's own witness, Mr. Claro Pasicolan, who on direct
examination affirmed[5] that these two exhibits constituted the complete set of
documents which them shipping agent in charge of the vessel
S.S. NAGARA issued covering the copra cargo loaded at Slain. In view of
this admission and for want of evidentiary support, plaintiff's belated claim that
there is another complete set of documents can not be seriously taken.
Lastly, if there really was a separate bill of lading for the Karlshamn shipment,
plaintiff could not have failed to present a copy thereof. Mr. Pasicolan testi-
fied[6] that the shipping agent makes 20 copies of the documents of which
three signed ones are given to the shipper and the rest, marked as non-
negotiable bills of lading - like Exhibits A and B - are kept on its file. For the
three signed copies to be lost,We may believe, but not for all the remaining 17
other copies. Under the circumstances, it his more reasonable to hold that
there was no separate shipment intended for Karlshamn, Sweden.
As a corollary to the foregoing conclusion, it stands to reason that the copra
unloaded in Karlshamn formed part of the same - and only - shipment of
defendant intended for Gdynia. Now the fact that the sum total of the cargo
unloaded at Karlshamn and Gdynia would exceed what appears to have been
loaded at Sian by as much as 233,848 kilos can only show that defendant
really overshipped, not shortshipped. And while this would not tally with
defendant's claim of having weighed the copra cargo 100% at Siain, thus
exposing a flaw in defendant's case, yet it is elementary that plaintiff must rely
on the strength of it own case to recover, and not bank on the weakness of the
defense. Plaintiff here failed to establish its case by preponderance on
evidence.
On the question whether defendant is the real shipped or merely an agent of
Louis Dreyfus & Co., suffice it to say that although on Exhibit A and B his name
appears as the shipper, yet the very loading certificate, Exhibit 3 [5-Deposition
of Horle], issued and signed by the Chief Mate, and Master of the S.S. NAGARA
shows that defendant was acting merely for account of Louis Dreyfus &
Co. The other documentary exhibits[7] confirm this. Anyway, in whatever
capacity defendant is considered, it cannot be liable since
no shortshipment was shown.
Plaintiff's action against defendant cannot, however, be considered as clearly
unfounded as to warrant an award of attorney's fees as damages to defendant
under par. 4, Art. 2208 of the Civil Code. The facts do not show that plaintiff's
cause of action was so frivolous or untenably as to amount to
gross and evident bad faith.[8]
WHEREFORE, but for the award of attorney's fees to defendant which is
eliminated, the decision appealed from is, in all other respects, hereby
affirmed. Costs against plaintiff-appellant.
Page 9 of 47
RIZAL SURETY AND INSURANCE CO. vs. MANILA RAILROAD CO. AND
MANILA PORT SERVICE
Facts:
On Nov 29, 1960, a vessel named SS Flying Trader, loaded on board a cargo
which is an offset press machine, from Italy to Manila. Upon reaching the port
of destination and upon unloading it, it was dropped b the crane which resulted
to damages of the machine. The plaintiff as the insurer had paid the consignee,
Suter, Inc. the amount of P16.5k for the machine and P180.70 for the
International Adjustment Bureau as adjuster’s fee. However, the arrastre
charges in this particular shipment was paid on the weight or measurement
basis whichever is higher, and not on the value thereof.
Issue:
Can the insurance get an amount greater than what was declared?
Held:
Plaintiff Insurance Company cannot recover from defendants an amount
greater than that to which the consignee could lawfully lay claim. The
management contract is clear, the amount is limited to P500.
If the plaintiff’s property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the
right of the insured against the wrong-doer or the person who has violated the
contract. If the amount paid by the insurance company doer not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the deficiency
from the person causing the loss or injury.
The insurance have no greater right than the party in interest thereof.
PAUL FIRE & MARINE INSURANCE v MACONDRAY & CO
Facts:
-Winthrop Products, Inc., of New York shipped aboard the SS “Tai Ping”, owned
and operated by Wilhelm Wilhelmsen218 cartons and drums of drugs and
medicine with Winthrop-Stearns Inc., Manila, Philippines as consingee.
BarberSteamship Lines, Inc., agent of Wilhelm Wilhelmsen issued Bill of Lading
No. 34, in the name of Winthrop Products.
-The shipment was insured by the shipper against loss and/or damage with the
St. Paul Fire & Marine InsuranceCompany.
-“Tai Ping” arrived at the Port of Manila.
-The said shipment was discharged complete and in good order with the
exception of one (1) drum and several cartonswhich were in bad condition.
-Because consignee failed to receive the whole shipment and as several cartons
of medicine were received in badorder condition, Winthrop-Sterns Philippines
filed the corresponding claim in the amount of Pl,109.67 representingthe C.I.F.
value of the damaged drum and cartons of medicine with the carrier and the
arrestre.
-However, both refused to pay.
-Winthrop-Sterns Philippines filed its claim with the insurer, St. Paul Fire &
Marine insurance.
-The insurance company, on the basis of such claim, paid to the consignee the
insured value of the lost and damagedgoods, including other expenses in
connection therewith, in the total amount of $1,134.46.
-As subrogee of the rights of the shipper and/or consignee, the insurer, St.
Paul Fire & Marine Insurance Co., instituted with the Court of First Instance the
present action against the defendants for the recovery of said amount
of $1,134.46, plus costs.
-The Lower court rendered judgment ordering defendants Macondray & Co.,
Inc., Barber Steamship Lines, Inc. andWilhelm Wilhelmsen to pay to
the plaintiff P300.00. It also held defendants Manila Railroad Company
and Manila PortService to pay to plaintiff, jointly and severally, the sum
of P809.67.
-The Insurer, , contending that it should recover the amount of $1,134.46 or
its equivalent in pesos (the rate of P3.90,instead of P2.00, for every US$1.00),
filed a motion for reconsideration, but this was denied.
-The Insurer argues that, as subrogee of the consignee, it should be entitled to
recover from the defendants-appelleesthe amount of $1,134.46 which it
actually paid to the consignee and which represents the value of the lost
anddamaged shipment as well as other legitimate expenses such as the duties
and cost of survey of said shipment, andthat the exchange rate on the date
of the judgment, which was P3.90 for every US$1.00.
-Defendants-appellees countered that:
o Their liability is limited to the C.I.F. value of the goods, pursuant to contract
of sea carriage embodied in the bill of lading that the consignee’s (Winthrop-
Stearns Inc.) claim against the carrier (Macondray & Co., Inc.,Barber
Steamship Lines, Inc., Wilhelm Wilhelmsen and the arrastre operators (Manila
Port Service and Manila Railroad Company) was only for the sum of Pl,109.67
ISSUE(S):
1.Whether or not, in case of loss or damage, the liability of the carrier to the
consignee is limited to the C.I.F value of the goods which were lost or damaged
2.Whether the insurer who has paid the claim in dollars to the consignee should
be reimbursed in its peso equivalent on the date of discharge of the cargo or on
the date of the decision.
HELD:
The appeal is without merit and the judgement of the lower court is affirmed.
-The purpose of the bill of lading is to provide for the rights and liabilities of the
parties in reference to the contract tocarry.
Page 10 of 47
-The stipulation in the bill of lading limiting the common carrier’s liability to the
value of the goods appearing in thebill, unless the shipper or owner declares a
greater value, is valid and binding.
-This limitation of the carrier’s liability is sanctioned by the freedom of the
contracting parties to establish suchstipulations, clauses, terms, or conditions
as they may deem convenient, provided they are not contrary to law,morals,
good customs and public policy.
-A stipulation fixing or limiting the sum that may be recovered from the carrier
on the loss or deterioration of the goods is valid, provided it is:
(a) reasonable and just under the circumstances, and
(b) has been fairly and freely agreed upon.
-In the case at bar, the liabilities of the defendants- appellees with respect to
the lost or damaged shipments areexpressly limited to the C.I.F. value of the
goods as per contract of sea carriage embodied in the bill of lading,
whichreads:
o Whenever the value of the goods is less than $500 per package or other
freight unit, their value in the calculation and adjustment of claims for which
the Carrier may be liable shall for the purpose of avoiding uncertainties and
difficulties in fixing value be deemed to be the invoice value, plus freight and
insurance if paid, irrespective of whether any other value is greater or less.
NATIONAL UNION FIRE INSURANCE VS. STOLT NIELSEN
EMERGENCY RECIT: United Coconut Chemicals (SHIPPER) shipped distilled
fatty acid on board MT “StoltSceptre” (CARRIER). The shipment was insured
under a marine cargo policy with National Union Fire Insurance Co (INSURER).
Upon receipt of the cargo by the consignee in Netherlands, it was totally
contaminated. Hence, claim was made on the INSURER of the cargo. The
INSURER as subrogee filed a claim for damages against the CARRIER with RTC
Manila. The CARRIER invoked that arbitration must be done pursuant to the
Charter. The INSURER opposed, arguing that the provision on arbitration was
not included in the Bill of Lading. SC: The INSURER cannot avoid the binding
effect of the arbitration clause. By subrogation, it became privy to the Charter
Party as fully as the SHIPPER before the latter was indemnified, because as
subrogee it stepped into the shoes of the SHIPPER and is subrogated merely to
the latter's rights.
FACTS:
 On 9 January 1985, United Coconut Chemicals, Inc. shipped 404.774
metric tons of distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a
tanker owned by Stolt-Nielsen Philippines Inc., from Bauan, Batangas,
Philippines, consigned to "Nieuwe Matex" at Rotterdam, Netherlands,
covered by Tanker Bill of Lading BL No. BAT-1.
  The shipment was insured under a marine cargo policy with Petitioner
National Union Fire Insurance Company of Pittsburg (hereinafter referred
to as INSURER), a non-life American insurance corporation, through its
settling agent in the Philippines, the American International Underwriters
(Philippines), Inc., the other petitioner herein.
 Upon receipt of the cargo by the consignee in the Netherlands, it was
found to be discoloured and totally contaminated. Hence, a claim was
made on the Insurer of the cargo. The insurer as subrogee filed a claim
for damages against the carrier with the RTC of Manila.
 The carrier filed a motion to dismiss on the ground that the case was
arbritrable and pursuant to the charter party as embodied in the bill of
lading, arbitration must be done. The insurer opposed the motion by
arguing that the provision on arbitration was not included in the bill of
lading and even if it was included, it was nevertheless unjust and
unreasonable.
 The RTC denied the motion but upon reconsideration, the resolution on
the motion to dismiss was suspended or deferred.
 The carrier then filed a petition for review on certiorari with preliminary
injunction/TRO which was granted by the CA.
ISSUE: Are the terms of the Charter Party, particularly the provision on
arbitration, binding on the INSURER?
HELD: Yes. The pertinent portion of the Bill of Lading in issue provides in part:
xxx [A]ll the terms whatsoever of the said Charter except the rate and
payment of freight specified therein apply to and govern the rights of the
parties concerned in this shipment.xxx
The provision on arbitration in the Charter Party reads:
4. Arbitration. Any dispute arising from the making, performance or
termination of this Charter Party shall be settled in New York, Owner and
Charterer each appointing an arbitrator, who shall be a merchant, broker
or individual experienced in the shipping business; the two thus chosen,
if they cannot agree, shall nominate a third arbitrator who shall be an
admiralty lawyer. Such arbitration shall be conducted in conformity with
the provisions and procedure of the United States arbitration act, and a
judgment of the court shall be entered upon any award made by said
arbitrator. Nothing in this clause shall be deemed to waive Owner's right
to lien on the cargo for freight, deed of freight, or demurrage.
Clearly, the Bill of Lading incorporates by reference the terms of the Charter
Party. It is settled law that the charter may be made part of the contract under
which the goods are carried by an appropriate reference in the Bill of Lading. As
Page 11 of 47
the respondent Appellate Court found, the INSURER "cannot feign ignorance of
the arbitration clause since it was already charged with notice of the existence
of the charter party due to an appropriate reference thereof in the bill of lading
and, by the exercise of ordinary diligence, it could have easily obtained a copy
thereof either from the shipper or the charterer.
We hold, therefore, that the INSURER cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the Charter Party as fully
as the SHIPPER before the latter was indemnified, because as subrogee it
stepped into the shoes of the SHIPPER-ASSURED and is subrogated merely to
the latter's rights. It can recover only the amount that is recoverable by the
assured. And since the right of action of the SHIPPER-ASSURED is governed by
the provisions of the Bill of Lading, which includes by reference the terms of the
Charter Party, necessarily, a suit by the INSURER is subject to the same
agreements. It has not been shown that the arbitral clause in question is null
and void, inoperative, or incapable of being performed. Nor has any conflict been
pointed out between the Charter Party and the Bill of Lading.
CEBU SHIPYARD V WILLIAM LINES
Nature of Case: Petition for Review on Certiorari
Digest maker: Erika Potian
SUMMARY: William Lines insured its M/V Manila City under
Prudential Guarantee for hull and machinery. Policy contained clause
providing that loss/damage caused by negligence of charterers or
repairers are excluded from coverage. William Lines brought the
vessel to Cebu Shipyard for annual dry-docking and repair. The two
executed contracts stipulating the liabilities of both parties, including
that the insurance on the vessel should be maintained by the owner
during period of the contract. After the vessel was transferred to the
docking quay, it caught fire and sank, resulting to its eventual total
loss. Cebu Shipyard claims that it is a co-assured under the Marine
Hull Insurance Policy by virtue of Clause 20, and therefore no
subrogation can be made by Prudential. SC held that it is not and the
petition was denied.
DOCTRINE: Intention of parties to make each other co-assured is to
be gleaned from the insurance policy itself and not from any other
contract because the policy denominates the assured and the
beneficiaries.
FACTS:
 Cebu Shipyard and Engineering Works, Inc. (CSEW) is engaged in the
business of dry-docking and repairing of marine vessels while the
 Prudential Guarantee and Assurance, Inc. (Prudential) is in the non-life
insurance business.
 William Lines, Inc. is in the shipping business. It was the owner of M/V
Manila City, a luxury passenger-cargo vessel, which caught fire and sank.
 At the time of the unfortunate occurrence sued upon, subject vessel was
insured with Prudential for P45M for hull and machinery. The Hull Policy
included an “Additional Perils (INCHMAREE)” Clause covering loss of or
damage to the vessel through the negligence of, among others, ship
repairmen
 Petitioner CSEW was also insured by Prudential for third party liability
under a Shiprepairer’s Legal Liability Insurance Policy. The policy was for
P10 million only, under the limited liability clause
 On Feb. 5, 1991, William Lines, Inc. brought its vessel, M/V Manila City,
to the Cebu Shipyard in Lapulapu City for annual dry-docking and repair.
 On Feb. 6, 1991, an arrival conference was held between representatives
of William Lines, Inc. and CSEW to discuss the work to be undertaken on
the M/V Manila City. The contracts, denominated as Work Orders, were
signed thereafter., with the following stipulations:
o 10. The Contractor shall replace at its own work and at its own
cost any work or material which can be shown to be defective and
which is communicated in writing
o 20. The insurance on the vessel should be maintained by the
customer and/or owner of the vessel during the period the contract
is in effect.
o The total liability of the Contractor to the Customer or of any sub-
contractor shall be limited in respect of any defect or event to the
sum of 1M.
 While the M/V Manila City was undergoing dry-docking and repairs within
the premises of CSEW, the master, officers and crew of M/V Manila City
stayed in the vessel, using their cabins as living quarters. Other
employees hired by William Lines to do repairs and maintenance work on
the vessel were also present during the dry-docking.
 On February 16, 1991, after subject vessel was transferred to the docking
quay, it caught fire and sank, resulting to its eventual total loss
 On February 21, 1991, William Lines, Inc. filed a complaint for damages
against CSEW, alleging that the fire which broke out in M/V Manila City
was caused by CSEWs negligence and lack of care.
 Prudential was impleaded as co-plaintiff, after it paid William Lines, Inc.
the value of the hull and machinery insurance on the M/V Manila City. As
a result of such payment Prudential was subrogated to the claim of P45
million, representing the value of the said insurance it paid.
 Trial Court: CSEW to pay William Lines and Prudential (45M)
 CA: Affirmed TC. Ordered the partial dismissal of the case insofar as
CSEW and William Lines were concerned.
Page 12 of 47
 CSEW claims that the insurance policy does not cover loss resulting from
the fault of negligent charterers that are assured in the same policy and
by virtue of clause 20, it is deemed a co-assured.
ISSUE/S & RATIO:
1. WON CSEW is co-assured, thus losses caused by it are not covered
by the policy- NO
a. The fact that clause 20 benefited petitioner, does not automatically
make it a co-assured of William Lines.
b. Intention of parties to make each other co-assured is to be gleaned
from the insurance policy itself and not from any other contract
because the policy denominates the assured and the beneficiaries.
c. Prudential named only William Lines, Inc. as the assured. There
was no manifestation of any intention of William Lines Inc to make
CSEW a co-assured. When the terms of a contract are clear, its
stipulations control.
d. If CSEW were deemed co-assured, it would nullify any claim of
William Lines Inc. No shipowner would agree to make shiprepairer
a co-assured because any claim it has under the policy would be
invalidated. Such result could not have been intended by William
Lines Inc.
2. WON CSEW had “management and supervisory control“ of the ship at the
time the fire broke out- YES
a. The factual findings by the CA are conclusive on the parties and
are not reviewable by this Court.
3. WON the doctrine of res ipsa loquitur applies against the crew- YES
a. For the doctrine of res ipsa loquitur to apply to a given situation,
the following conditions must concur: (1) the accident was of a
kind which does not ordinarily occur unless someone is negligent;
and (2) that the instrumentality or agency which caused the injury
was under the exclusive control of the person charged with
negligence.
b. The facts and evidence reveal the presence of these conditions.
First, the fire would not have happened in the ordinary course of
things if reasonable care and diligence had been exercised.
4. WON the provisions limiting CSEW’s liability for negligence to a maximum
of Php 1 million are valid- NO
a. Although contracts of adhesion have been consistently upheld as
valid, reliance on such contracts cannot be favored especially
where the facts and circumstances warrant that subject
stipulations be disregarded. Tthe facts and circumstances vis-a-
vis the nature of the provision sought to be enforced should be
considered, bearing in mind the principles of equity and fair play.
RULING: Petition denied.
MANILA MAHOGANY V CA
FACTS:
Petitioner insured its Mercedes Benz 4-door sedan with respondent insurance
company . The insured vehicle was bumped and damaged by a truck owned by
San Miguel Corporation (SMC). For the damage caused, respondent company
paid petitioner ₱ 5,000.00 in amicable settlement. Petitioner’s general manager
executed a Release of Claim, subrogating respondent company to all its right to
action against San Miguel Corp. Respondent company wrote the Insurer
Adjusters, Inc. to demand reimbursements from San Miguel Corporation of the
amount it had paid petitioner. Insurer Adjusters, Inc. refused reimbursement
alleging that SMC had already paid petitioner ₱ 4,500.00 for the damages to
petitioner’s motor vehicle, as evidenced by a cash voucher and Release of Claim
executed by the General Manager of petitioner discharging SMC from “ all
actions, claims, demands the right of action that now exist or hereafter develop
arising out of or as a consequence of the accident.
Respondent demanded the ₱ 4,500.00 amount from petitioner. Petitioner
refused. Suit was filed for recovery. City Court ordered petitioner to pay
respondent. CFI affirmed. CA affirmed with modification that petitioner was to
pay respondent the total amount of ₱ 5,000.00 it had received from respondent.
Petitioner’s argument: Since the total damages were valued at P9,486.43 and
only ₱ 5,000.00 was received by petitioner from respondent, petitioner argues
that it was entitled to go after SMC to claim the additional which was eventually
paid to it.
Respondent’s argument: No qualification to its right of subrogation.
ISSUE:
Whether or not the insured should pay the insurer despite that the subrogation
in the Release of Claim was conditioned on recovery of the total amount of
damages that the insured has sustained.
RULING:
NO. Supreme Court said there being no other evidence to support its allegation
that a gentleman’s agreement existed between the parties, not embodied in the
Release of Claim, such Release of Claim must be taken as the best evidence of
Page 13 of 47
the intent and purpose of the parties. CA was correct in holding petitioner should
reimburse respondent ₱ 5,000.00.
When Manila Mahogany executed another release claim discharging SMC from
all rights of action after the insurer had paid the proceeds of the policy – the
compromise agreement of ₱ 5,000.00– the insurer is entitled to recover from the
insured the amount of insurance money paid. Petitioner by its own acts released
SMC, thereby defeating respondent’s right of subrogation, the right of action
against the insurer was also nullified.
Since the insurer can be subrogated to only such rights as the insured may have,
should the insured, after receiving payment from the insurer, release the
wrongdoer who caused the loss, the insurer losses his rights against the latter.
But in such a case, the insurer will be entitled to recover from the insured
whatever it has paid to the latter, unless the release was made with the consent
of the insurer.
FF CRUZ AND CO vs. CA
Facts:
A fire broke up from the furniture shop of the petitioner in Caloocan city early
September 6, 1974. Prior to that, neighbor of the said shop requested that the
petitioner should build a firewall but failed to do so. The cause of the fire was
never discovered. Private respondent got P35k from the insurance on their
house and contents thereof.
Issue:
Whether or not the 35k be deducted from the damages thereof
Ruling:
Since P35k had already been claimed by the respondents, the court held that
such amount should be deducted from the award of damages in accordance
with Art 2207 NCC
Art. 2207. If the plaintiff’s property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the insurance company
does not fully cover the injury or loss, the aggrieved party shall be entitled to
recover the deficiency from the person causing the loss or injury.
Having been indemnified by their insurer, private respondents are entitled only
to recover the deficiency from the petitioner.
Whether or not the insurer should exercise the rights of the insured to which it
had been subrogated lies solely within the former’s sound discretion. Since the
insurer is not a party to the case, its identity is not of record and no claim is
made on its behalf, the private respondent’s insurer has to claim his right to
reimbursement of the P35,000.00 paid to the insured.
WEEK 3
Dela Cruz vs. Capital Insurance & Surety Co.
FACTS: 1.
Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines, Inc. in
Baguio, was the holder of an accident insurance policy (No. ITO-BFE-170)
underwritten by the Capital Insurance & Surety Co., Inc., for the period
beginning November 13, 1956 to November 12, 1957.
2. On January 1, 1957, the Itogon-Suyoc Mines, Inc. sponsored a boxing
contest for general entertainment.
3. Insured Eduardo de la Cruz, a non-professional boxer participated.
4.In the course of his bout with another person, likewise a non-professional, of
the same height, weight, and size, Eduardo slipped and was hit by his
opponent on the left part of the back of the head, causing Eduardo to fall, with
his head hitting the rope of the ring.
5. He was brought to the Baguio General Hospital the following day. The cause
of death was reported as hemorrhage, intracranial, left.
6. Simon de la Cruz, the father of the insured and who was named beneficiary
under the policy, filed a claim with the insurance company for payment of the
indemnity under the insurance policy.
7. As the claim was denied, De la Cruz instituted the action in the Court of First
Instance of Pangasinan for specific performance.
8. Defendant insurer set up the defense that the death of the insured, caused
by his participation in a boxing contest, was not accidental and, therefore, not
covered by insurance.
9. After due hearing the court rendered the decision in favor of the plaintiff
which is the subject of the present appeal.
10. Eduardo was insured "against death or disability caused by accidental
means".
11. Appellant insurer now contends that while the death of the insured was due
to head injury, said injury was sustained because of his voluntary participation
in the contest.
12. It is claimed that the participation in the boxing contest was the "means"
that produced the injury which, in turn, caused the death of the insured. And,
since his inclusion in the boxing card was voluntary on the part of the insured,
he cannot be considered to have met his death by "accidental means".
ISSUE: 1. WON the death of Eduardo de la Cruz is covered by accident
insurance policy.
Page 14 of 47
HELD: 1.Yes. While the participation of the insured in the boxing contest is
voluntary, the injury was sustained when he slid, giving occasion to the
infliction by his opponent of the blow that threw him to the ropes of the ring.
RATIO: 1. The terms "accident" and "accidental", as used in insurance
contracts, have not acquired any technical meaning, and are construed by the
courts in their ordinary and common acceptation. Thus, the terms have been
taken to mean that which happen by chance or fortuitously, without intention
and design, and which is unexpected, unusual, and unforeseen. An accident is
an event that takes place without one's foresight or expectation
—
an event that proceeds from an unknown cause, or is an unusual effect of a
known cause and, therefore, not expected.
2. The generally accepted rule is that, death or injury does not result from
accident or accidental means within the terms of an accident-policy if it is the
natural result of the insured's voluntary act, unaccompanied by anything
unforeseen except the death or injury.
3. Death or disablement resulting from engagement in boxing contests was
not declared outside of the protection of the insurance contract. Failure of the
defendant insurance company to include death resulting from a boxing match
or other sports among the prohibitive risks leads inevitably to the conclusion
that it did not intend to limit or exempt itself from liability for such death.
DOCTRINE
In other words, where the death or injury is not the natural or probable result
of the insured's voluntary act, or if something unforeseen occurs in the doing of
the act which produces the injury, the resulting death is within the protection
of policies insuring against death or injury from accident.
Sun v CA G.R. No. 92383 July 17, 1992
J. Cruz
Facts:
Lim accidentally killed himself with his gun after removing the magazine,
showing off, pointing the gun at his secretary, and pointing the gun at his
temple. The widow, the beneficiary, sued the petitioner and won 200,000 as
indemnity with additional amounts for other damages and attorney’s fees. This
was sustained in the Court of Appeals then sent to the Supreme court by the
insurance company.
Issue:
1. Was Lim’s widow eligible to receive the benefits?
2. Were the other damages valid?
Held:
1. Yes 2. No
Ratio: 1. There was an accident.
De la Cruz v. Capital Insurance says that "there is no accident when a
deliberate act is performed unless some additional, unexpected, independent
and unforeseen happening occurs which produces or brings about their injury
or death." This was true when he fired the gun.
Under the insurance contract, the company wasn’t liable for bodily injury
caused by attempted suicide or by one needlessly exposing himself to danger
except to save another’s life.
Lim wasn’t thought to needlessly expose himself to danger due to the witness
testimony that he took steps to ensure that the gun wasn’t loaded. He even
assured his secretary that the gun was loaded.
There is nothing in the policy that relieves the insurer of the responsibility to
pay the indemnity agreed upon if the insured is shown to have contributed to
his own accident.
2. “In order that a person may be made liable to the payment of moral
damages, the law requires that his act be wrongful. The adverse result of an
action does not per se make the act wrongful and subject the act or to the
payment of moral damages. The law could not have meant to impose a penalty
on the right to litigate; such right is so precious that moral damages may not
be charged on those who may exercise it erroneously. For these the law taxes
costs.”
If a party wins, he cannot, as a rule, recover attorney's fees and litigation
expenses, since it is not the fact of winning alone that entitles him to recover
such damages of the exceptional circumstances enumerated in Art. 2208.
Otherwise, every time a defendant wins, automatically the plaintiff must pay
attorney's fees thereby putting a premium on the right to litigate which should
not be so. For those expenses, the law deems the award of costs as sufficient.”
Ty v. Filipinas Compañia de Seguros - Insurance Policy
17 SCRA 364
Facts:
> Ty was employed as a mechanic operator by Braodway Cotton Factory at
Grace Park, Caloocan.
> In 1953, he took personal accident policies from 7 insurance companies (6
defendants), on different dates, effective for 12 mos.
> On Dec. 24. 1953, a fire broke out in the factory were Ty was working. A
hevy object fell on his hand when he was trying to put out the fire.
> From Dec. 1953 to Feb. 6, 1954 Ty received treatment at the Nat’l
Orthopedic Hospital for six listed injuries. The attending surgeon certified that
these injuries would cause the temporary total disability of Ty’s left hand.
> Insurance companies refused to pay Ty’s claim for compensation under the
policies by reason of said disability of his left hand. Ty filed a complaint in the
municipal court who decided in his favor.
> CFI reversed on the ground that under the uniform terms of the policies,
partial disability due to loss of either hand of the insured, to be compensable
must be the result of amputation.
Issue:
Whether or not Ty should be indemnified under his accident policies.
Page 15 of 47
Held.
NO.
SC already ruled in the case of Ty v. FNSI that were the insurance policies
define partial disability as loss of either hand by amputation through the bones
of the wrist, the insured cannot recover under said policies for temporary
disability of his left hand caused by the fractures of some fingers. The
provision is clear enough to inform the party entering into that contract that
the loss to be considered a disability entitled to indemnity, must be severance
or amputation of the affected member of the body of the insured.
Calanoc v. CAG.R. No. L-8151 December 16, 1955J.
Bautista Angelo
Doctrine: In case of ambiguity in an insurance contract covering accidental
death, the Supreme Court held that such terms shall be construed strictly
against the insurer and liberally in favor of the insured in order to effect the
purpose of indemnity.
Facts: Melencio Basilio, a watchman of the Manila Auto Supply, secured a life
insurance policy from the Philippine American Insurance Company in the
amount of P2,000 to which was attached a supplemental contract covering
death by accident. He later died from a gunshot wound on the occasion of a
robbery committed; subsequently, his widow was paid P2,000 representing the
face value of the policy. The widow demanded the payment of the additional
sum of P2,000 representing the value of the supplemental policy which the
company refused because the deceased died by murder during the robbery and
while making an arrest as an officer of the law which were expressly excluded
in the contract. The company’s contention which was upheld by the Court of
Appeals provides that
The circumstances surrounding Basilio’s death was caused by one of the risks
excluded by the supplementary contract which exempts the company from
liability.
Issue: Is the Philippine American Life Insurance Co. liable to the petitioner for
the amount covered by the supplemental contract?
Held: Yes.
The circumstances of Basilio’s death cannot be taken as purely intentional on
the part of Basilio to expose himself to the danger. There is no proof that his
death was the result of intentional killing because there is the possibility that
the malefactor had fired the shot merely to scare away the
people around. In this case, the company’s defense points out that Basilio’s is
included among the risks excluded in the supplementary contract; however,
the terms and phraseology of the exception clause should be clearly expressed
within the understanding of the insured. Art. 1377 of the New Civil Code
provides that in case ambiguity, uncertainty or obscurity in the interpretation
of the terms of the contract, it shall be construed against the party who caused
such obscurity. Applying this to the situation, the ambiguous or obscure terms
in the insurance policy are to be construed strictly against the insurer and
liberally in favor of the insured party. The reason is to ensure the protection of
the insured since these insurance contracts are usually arranged and employed
by experts and legal advisers acting exclusively in the interest of the insurance
company. As long as insurance companies insist upon the use of ambiguous,
intricate and technical provisions, which conceal their own intentions, the
courts must, in fairness to those who purchase insurance, construe every
ambiguity in favor of the insured.
Biagtan vs. The Insular Life Assurance Company, Ltd. (winner) 44 SCRA
58
Facts:
Juan S. Biagtan was insured with defendant Insular Life Assurance Company
under Policy No. 398075 for the sum of P5,000.00 and, under a supplementary
contract denominated "Accidental Death Benefit Clause, for an additional sum
of P5,000.00 if "the death of the Insured resulted directly from bodily injury
effected solely through external and violent means sustained in an accident . . .
and independently of all other causes." The clause, however, expressly
provided that it would not apply where death resulted from an injury
"intentionally inflicted by a third party."library
On the night of May 20, 1964 or during the first hours of the following day a
band of robbers entered the house of the insured Juan S. Biagtan.
Issue:
Whether the wounds received by the insured at the hands of the robbers were
inflicted intentionally.
Held:
Yes. But where a gang of robbers enter a house and coming face to face with
the owner, even if unexpectedly, stab him repeatedly, it is contrary to all
reason and logic to say that his injuries are not intentionally inflicted,
regardless of whether they prove fatal or not. As it was, in the present case
they did prove fatal, and the robbers have been accused and convicted of the
crime of robbery with homicide. Under the circumstance, the insurance
company was correct in refusing to pay the additional sum of P2,000.00 under
the accidental death benefit clause which expressly provided that it would not
apply where death resulted from an injury "intentionally" inflicted by a third
party.
FINMAN GENERAL ASSURANCE CORPORATION v. CA, GR No. 100970,
1992-09-02
Facts:
October 22, 1986, deceased Carlie Surposa was insured with petitioner Finman
General Assurance Corporation under Finman General Teachers Protection Plan
Page 16 of 47
Master Policy No. 2005 and Individual Policy No. 08924 with his parents,
spouses
Julia and Carlos Surposa and brothers Christopher, Charles, Chester and
Clifton, all surnamed Surposa, as beneficiaries.
While said insurance policy was in full force and effect, the insured Carlie
Surposa, died on October 18, 1988 as a result of a stab wound inflicted by one
of the three (3) unidentified men without provocation and warning on the part
of the former as... he and his cousin, Winston Surposa, were waiting for a ride
on their way home along Rizal-Locsin Streets, Bacolod City after attending the
celebration of the "Maskarra Annual Festival."... private respondent and the
other beneficiaries of said insurance policy filed a written notice of claim with
the petitioner insurance company which denied said claim contending that
murder and assault are not within the scope of the coverage of the insurance...
policy.
Insurance Commission ruled in favor of insured/beneficiaries
On February 24, 1989, private respondent filed a complaint with the Insurance
Commission
"In the light of the foregoing, we find respondent liable to pay complainant the
sum of P15,000.00 representing the proceeds of the policy with interest. As no
evidence was submitted to prove the claim for mortuary aid in the sum of
P1,000.00, the same... cannot be entertained.
On July 11, 1991, the appellate court affirmed said decision.
petitioner filed this petition alleging grave abuse of discretion on the part of the
appellate court in applying the principle of "expresso unius exclusion alterius"
in a personal accident insurance policy... since death resulting from murder
and/or assault are impliedly excluded in said insurance policy considering that
the cause of death of the insured was not accidental but rather a deliberate and
intentional act of the assailant in killing the former as indicated by the
location... of the lone stab wound on the insured.
Therefore, said death was committed with deliberate intent which, by the very
nature of a personal accident insurance policy, cannot be indemnified.
Issues:
WON the death of the insured was committed...... with deliberate intent which,
by the very nature of a personal accident insurance policy, cannot be
indemnified
Ruling:
We do not agree.
In the case at bar, it cannot, be pretended that Carlie Surposa died in the
course of an assault or murder as a result of his voluntary act considering the
very nature of these crimes.
the personal accident insurance policy, involved herein specifically enumerated
only ten (10) circumstances wherein no liability attaches to petitioner insurance
company for any injury, disability or loss suffered by the insured as a result of
any of the... stipulated causes. The principle of "expresso unius exclusio
alterius" -- the mention of one thing implies the exclusion of another thing -- is
therefore applicable in the instant case since murder and assault, not having
been expressly included in the enumeration of the... circumstances that would
negate liability in said insurance policy cannot be considered by implication to
discharge the petitioner insurance company from liability for any injury,
disability Or loss suffered by the insured.
Thus, the failure of the petitioner insurance company... to include death
resulting from murder or assault among the prohibited risks leads inevitably to
the conclusion that it did not intend to limit or exempt itself from liability for
such death.
Principles:
The terms 'accident' and 'accidental', as used in insurance contracts have not
acquired any technical meaning, and are construed by the courts in their
ordinary and common acceptation. Thus, the terms have been taken to mean
that which happen by chance or... fortuitously, without intention and design,
and which is unexpected, unusual, and unforeseen. An accident is an event
that takes place without one's foresight or expectation -- an event that
proceeds from an unknown cause, or is an unusual effect of a known cause
and, therefore,... not expected."
The generally accepted rule is that, death or injury does not result from
accident or accidental means within the terms of an accident-policy if it is the
natural result of the insured's voluntary act, unaccompanied by anything
unforeseen except the death or... injury.
Qua Chee Gan v. Law Union Rock - Breach of Warranty
98 PHIL 85
Facts:
> Qua Chee Gan, a merchant, owned 4 warehouses in Albay which were used
for the storage or copra and hemp in which the appelle deals with exclusively.
> The warehouses together with the contents were insured with Law Union
since 1937 and the loss made payable to PNB as mortgagee of the hemp and
copra.
> A fire of undetermined cause broke out in July 21, 1940 and lasted for
almost 1 whole week.
> Bodegas 1, 3, and 4 including the merchandise stored were destroyed
completely.
> Insured then informed insurer of the unfortunate event and submitted the
corresponding fire claims, which were later reduced to P370T.
> Insurer refused to pay claiming violations of the warranties and conditions,
filing of fraudulent claims and that the fire had been deliberately caused by the
insured.
> Insured filed an action before CFI which rendered a decision in favor of the
insured.
Issues and Resolutions:
Page 17 of 47
(1) Whether or not the policies should be avoided for the reason that there was
a breach of warranty.
Under the Memorandum of Warranty, there should be no less than 1 hydrant
for each 150 feet of external wall measurements of the compound, and since
bodegas insured had an external wall per meter of 1640 feet, the insured
should have 11 hydrants in the compound. But he only had 2.
Even so, the insurer is barred by estoppel to claim violation of the fire hydrants
warranty, because knowing that the number of hydrants it demanded never
existed from the very beginning, appellant nevertheless issued the policies
subject to such warranty and received the corresponding premiums. The
insurance company was aware, even before the policies were issued, that in
the premises there were only 2 hydrants and 2 others were owned by the
Municipality, contrary to the requirements of the warranties in question.
It should be close to conniving at fraud upon the insured to allow the insurer to
claim now as void the policies it issued to the insured, without warning him of
the fatal defect, of which the insurer was informed, and after it had misled the
insured into believing that the policies were effective.
Accdg to American Jurisprudence: It is a well-settled rule that the insurer at
the time of the issuance of a policy has the knowledge of existing facts, which
if insisted on, would invalidate the contract from its very inception, such
knowledge constitutes a waiver of conditions in the contract inconsistent with
known facts, and the insurer is stopped thereafter from asserting the breach of
such conditions. The reason for the rule is: To allow a company to accept one’s
money for a policy of insurance which it knows to be void and of no effect,
though it knows as it must that the insured believes it to be valid and binding is
so contrary to the dictates of honesty and fair dealing, as 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.
Moreover, taking into account the well-known rule that ambiguities or
obscurities must strictly be interpreted against the party that cause them, the
memorandum of warranty invoked by the insurer bars the latter from
questioning the existence of the appliances called for, since its initial
expression “the undernoted appliances for the extinction of fire being kept on
the premises insured hereby..” admits of the interpretation as an admission of
the existence of such appliances which insurer cannot now contradict, should
the parole evidence apply.
(2) Whether or not the insured violated the hemp warranty provision against
the storage of gasoline since insured admitted there were 36 cans of gasoline
in Bodega 2 which was a separate structure and not affected by the fire.
It is well to note that gasoline is not specifically mentioned among the
prohibited articles listed in the so-called hemp warranty. The clause relied
upon by the insurer speaks of “oils”. Ordinarily, oils mean lubricants and not
gasoline or kerosene. Here again, by reason of the exclusive control of the
insurance company over the terms of the contract, the ambiguity must be held
strictly against the insurer and liberally in favor of the insured, specially to
avoid a forfeiture.
Furthermore, the gasoline kept was only incidental to the insured’s business. It
is a well settled rule that keeping of inflammable oils in the premises though
prohibited by the policy does NOT void it if such keeping is incidental to the
business. Also, the hemp warranty forbade the storage only in the building to
which the insurance applies, and/or in any building communicating therewith;
and it is undisputed that no gasoline was stored in the burnt bodegas and that
Bodega No. 2 which was where the gasoline was found stood isolated from the
other bodegas.
Del Rosario v. Equitable Insurance - Life Insurance Policy
118 PHIL 349
Facts:
> Equitable Insurance issued a life Insurance policy to del Rosario binding
itself to pay P1,000 to P3,000 as indemnity.
> Del Rosario died in a boating accident. The heirs filed a claim and Equitable
paid them P1,000.
> The heir filed a complaint for recovery of the balance of P2,000, claiming
that the insurere should pay him P3,000 as stated in the policy.
Issue:
Whether or not the heir is entitled to recover P3,000.
Held:
YES.
Generally accepted principles or ruling on insurance, enunciate that where
there is an ambiguity with respect to the terms and conditions of the policy, the
same shall be resolved against the one responsible thereof. The insured has
little, if any, participation in the preparation of the policy. The interpretation of
obscure stipulations in a contract should not favor the party who cause the
obscurity.
Insurance Case Digest: Del Rosario v. Equitable Ins. and Casualty Co.,
Inc. (1963)
G.R. No. L-16215 June 29, 1963
Page 18 of 47
Lessons Applicable: Ambiguous Provisions Interpreted Against Insurer
(Insurance)
FACTS:
April 13, 1957: Simeon del Rosario, father of the insured who died from
drowning filed a claim for payment with Equitable Ins. and Casualty Co., Inc.
but it refused to pay more than P1,000 php so a case was filed with the RTC for
the P2,000 balance stating that under the policy they are entitled to P1,000 to
P3,000 as indemnity
RTC: entitled to recover P3,000 - policy does not positively state any definite
amount, there is an ambiguity in this respect in the policy, which ambiguity
must be interpreted in favor of the insured and strictly against the insurer so as
to allow greater indemnity
ISSUE: W/N Simeon is entitled to recover P3,000
HELD: YES.
terms in an insurance policy, which are ambiguous, equivocal or uncertain are
to be construed strictly against, the insurer, and liberally in favor of the insured
so as to effect the dominant purpose of indemnity or payment to the insured,
especially where a forfeiture is involved
reason for this rule is that the "insured usually has no voice in the selection or
arrangement of the words employed and that the language of the contract is
selected with great care and deliberation by expert and legal advisers
employed by, and acting exclusively in the interest of, the insurance company
Verendia v. CA - Insurance Policy
217 SCRA 1993
Facts:
> Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance
Policy No. F-18876 effective between June 23, 1980 and June 23, 1981
covering Rafael (Rex) Verendia's residential in the amount of P385,000.00.
Designated as beneficiary was the Monte de Piedad & Savings Bank.
> Verendia also insured the same building with two other companies, namely,
The Country Bankers Insurance for P56,000.00 and The Development
Insurance for P400,000.00.
> While the three fire insurance policies were in force, the insured property
was completely destroyed by fire.
> Fidelity appraised the damage amounting to 385,000 when it was
accordingly informed of the loss. Despite demands, Fidelity refused payment
under its policy, thus prompting Verendia to file a complaint for the recovery of
385,000
> Fidelity, averred that the policy was avoided by reason of over-insurance,
that Verendia maliciously represented that the building at the time of the fire
was leased under a contract executed on June 25, 1980 to a certain Roberto
Garcia, when actually it was a Marcelo Garcia who was the lessee.
Issue:
Whether or not Verendia can claim on the insurance despite the
misrepresentation as to the lessee and the overinsurance.
Held:
NOPE.
The contract of lease upon which Verendia relies to support his claim for
insurance benefits, was entered into between him and one Robert Garcia, a
couple of days after the effectivity of the insurance policy. When the rented
residential building was razed to the ground, it appears that Robert Garcia was
still within the premises. However, according to the investigation by the police,
the building appeared to have "no occupants" and that Mr. Roberto Garcia was
"renting on the otherside of said compound" These pieces of evidence belie
Verendia's uncorroborated testimony that Marcelo Garcia whom he considered
as the real lessee, was occupying the building when it was burned.
Ironically, during the trial, Verendia admitted that it was not Robert Garcia who
signed the lease contract but it was Marcelo Garcia cousin of Robert, who had
also been paying the rentals all the while. Verendia, however, failed to explain
why Marcelo had to sign his cousin's name when he in fact he was paying for
the rent and why he (Verendia) himself, the lessor, allowed such a ruse.
Fidelity's conclusions on these proven facts appear, therefore, to have sufficient
bases: Verendia concocted the lease contract to deflect responsibility for the
fire towards an alleged "lessee", inflated the value of the property by the
alleged monthly rental of P6,500) when in fact, the Provincial Assessor of Rizal
had assessed the property's fair market value to be only P40,300.00, insured
the same property with two other insurance companies for a total coverage of
around P900,000, and created a dead-end for the adjuster by the
disappearance of Robert Garcia.
Basically a contract of indemnity, an insurance contract is the law between the
parties. Its terms and conditions constitute the measure of the insurer's liability
and compliance therewith is a condition precedent to the insured's right to
recovery from the. As it is also a contract of adhesion, an insurance contract
should be liberally construed in favor of the insured and strictly against the
insurer company which usually prepares it.
Considering, however, the foregoing discussion pointing to the fact that
Verendia used a false lease contract to support his claim under Fire Insurance
Policy, the terms of the policy should be strictly construed against the insured.
Verendia failed to live by the terms of the policy, specifically Section 13 thereof
which is expressed in terms that are clear and unambiguous, that all benefits
under the policy shall be forfeited "if the claim be in any respect fraudulent, or
if any false declaration be made or used in support thereof, or if any fraudulent
means or devises are used by the Insured or anyone acting in his behalf to
obtain any benefit under the policy". Verendia, having presented a false
declaration to support his claim for benefits in the form of a fraudulent lease
contract, he forfeited all benefits therein by virtue of Section 13 of the policy in
the absence of proof that Fidelity waived such provision
Page 19 of 47
There is also no reason to conclude that by submitting the subrogation receipt
as evidence in court, Fidelity bound itself to a "mutual agreement" to settle
Verendia's claims in consideration of the amount of P142,685.77. While the
said receipt appears to have been a filled-up form of Fidelity, no representative
of Fidelity had signed it. It is even incomplete as the blank spaces for a witness
and his address are not filled up. More significantly, the same receipt states
that Verendia had received the aforesaid amount. However, that Verendia had
not received the amount stated therein, is proven by the fact that Verendia
himself filed the complaint for the full amount of P385,000.00 stated in the
policy. It might be that there had been efforts to settle Verendia's claims, but
surely, the subrogation receipt by itself does not prove that a settlement had
been arrived at and enforced. Thus, to interpret Fidelity's presentation of the
subrogation receipt in evidence as indicative of its accession to its "terms" is
not only wanting in rational basis but would be substituting the will of the Court
for that of the parties
Fortune Insurance And Surety Co., Inc. V. CA
Lessons Applicable: Stipulations Cannot Be Segregated (Insurance)
FACTS:
 Producers Bank of the Philippines insured with Fortune Insurance and Surety
Co. P725,000 which was lost during a robbery of Producer's armored
vehicle while it was in transit from Pasay City City to its Makati head office.
 The armored car was driven by Benjamin Magalong Y de Vera, escorted by
Security Guard Saturnino Atiga Y Rosete.
 After an investigation conducted by the Pasay police authorities, the driver
Magalong and guard Atiga were charged, together with Edelmer Bantigue Y
Eulalio, Reynaldo Aquino and John Doe, with violation of P.D. 532 (Anti-
Highway Robbery Law)
 Upon claiming, Fortune refused stating that it is not liable since under the
general exceptions of the policy:
 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  Misamis Lumber Corporation (Misamis), formerly Lanao Timber Mills, Inc.,
others. . . . insured its Ford Falcon motor car with Capital Insurance & Surety Company
 RTC: favored Producers Bank since Driver and Security Guard were merely (Capital)
assigned  November 25, 1961 11 pm: The car broke when it hit a hollow block lying
 CA: Affirmed RTC alongside the water hole which the driver did not see because the on-coming
ISSUE: W/N the driver and security guard are employees under the general car did not dim its light
exception  The car was towed and repaired by Morosi Motors costing P302.27
 November 29, 1961: After the repairs were made, Misamis made a report to
HELD: YES. Petition is granted. Capital who only admits liability of P150
 It is clear to us that insofar as Fortune is concerned, it was its intention to  CFI: paragraph 4 of the policy is clear and specific and leaves no room for
exclude and exempt from protection and coverage losses arising from interpretation that the repair liability is limited to P150
dishonest, fraudulent, or criminal acts of persons granted or having ISSUE: W/N Misamis is entitled to an amount exceeding P150
unrestricted access to Producers' money or payroll. When it used then the
term "employee," it must have had in mind any person who qualifies as such HELD: NO.
as generally and universally understood, or jurisprudentially established in  insurance contract may be rather onerous (one-sided) but that in itself does
the light of the four standards in the determination of the employer-employee not justify the abrogation of its express terms, terms which the insured
relationship, 21 or as statutorily declared even in a limited sense as in the accepted or adhered to and which is the law between the contracting parties
case of Article 106 of the Labor Code which considers the employees under Misamis Lumber vs. Capital Insurance, G.R. L-21380, May 20, 1966
a "labor-only" contract as employees of the party employing them and not of
the party who supplied them to the employer Facts:
 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 The vehicle owned by the petitioner was covered by an insurance policy issued by the
transit; Magalong to drive the armored vehicle which would carry the money; respondent. In such policy it contained instructions and details on how to proceed with
and Atiga to provide the needed security for the money, the vehicle, and his the claim for repairs.
two other companions.
 A "representative" is defined as one who represents or stands in the place of When the time came for the vehicle to be repaired, the petitioner took it upon himself to
another; one who represents others or another in a special capacity, as an have the vehicle repaired without the authority from the insurer, in the policy if such an
agent, and is interchangeable with "agent." event is to occur, and a repair was done without the authority of the insurer, its liability
is limited only to 150 pesos. The repair bill exceeded such amount.
Misamis Lumber Corp. V. Capital Ins. And Surety Co.,

Upon filing of claim the insurer refused payment in excess of 150 pesos.
Lessons Applicable: Judicial Construction Cannot Alter Terms (Insurance)

Issue(s):
FACTS:
Page 20 of 47

1.) Can the respondent be made to reimburse the petitioner for the actual cost of repairs
which exceed the repair limit amount?
Ruling:
The lower court’s recourse to legal hermeneutics is not called for because paragraph 4 of
the policy is clear and specific and leaves no room for interpretation. The interpretation
is even unjustified because it opposes what was specifically stipulated. Thus it will be
observed that the policy drew out not only the limits of the insurer’s liability but also the
mechanics that the insured had to follow to be entitled to full indemnity for repairs. The
option to undertake repairs is accorded to the insurance company per paragraph 2. The
said company was deprived of the option because the insured took it upon itself to have
the repairs made, and only notified the insurer when the repairs are done. As a
consequence, paragraph 4, which limits the company’s liability to P150.00 appliesWEEK
4 the specific purpose of providing insurance cover on a mutual basis against
White Gold v Pioneer G.R. No. 154514. July 28, 2005
Facts:
White Gold procured a protection and indemnity coverage for its vessels from
The Steamship Mutual through Pioneer Insurance and Surety
Corporation. White Gold was issued a Certificate of Entry and Acceptance.
Pioneer also issued receipts. When White Gold failed to fully pay its accounts,
Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum
of money to recover the unpaid balance. White Gold on the other hand, filed a
complaint before the Insurance Commission claiming that Steamship Mutual and
Pioneer violated provisions of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no
need for Steamship Mutual to secure a license because it was not engaged in the
insurance business and that it was a P & I club. Pioneer was not required to
obtain another license as insurance agent because Steamship Mutual was not
engaged in the insurance business.
Page 21 of 47
The Court of Appeals affirmed the decision of the Insurance Commissioner. In
its decision, the appellate court distinguished between P & I Clubs vis-à-vis
conventional insurance. The appellate court also held that Pioneer merely acted
as a collection agent of Steamship Mutual.
Hence this petition by White Gold.
Issues:
1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the
Philippines?
2. Does Pioneer need a license as an insurance agent/broker for Steamship
Mutual?
Held: Yes. Petition granted.
Ratio:
White Gold insists that Steamship Mutual as a P & I Club is engaged in the
insurance business. To buttress its assertion, it cites the definition as “an
association composed of shipowners in general who band together for
liabilities incidental to shipowning that the members incur in favor of third
parties.”
They argued that Steamship Mutual’s primary purpose is to solicit and provide
protection and indemnity coverage and for this purpose, it has engaged the
services of Pioneer to act as its agent.
Respondents contended that although Steamship Mutual is a P & I Club, it is not
engaged in the insurance business in the Philippines. It is merely an association
of vessel owners who have come together to provide mutual protection against
liabilities incidental to shipowning.
Is Steamship Mutual engaged in the insurance business?
A P & I Club is “a form of insurance against third party liability, where the third
party is anyone other than the P & I Club and the members.” By definition then,
Steamship Mutual as a P & I Club is a mutual insurance association engaged in
the marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit
without the requisite certificate of authority mandated by Section 187 of the
Insurance Code. It maintains a resident agent in the Philippines to solicit
insurance and to collect payments in its behalf. Steamship Mutual even renewed
its P & I Club cover until it was cancelled due to non-payment of the calls. Thus,
to continue doing business here, Steamship Mutual or through its agent Pioneer,
must secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is
necessary. Thus, no insurer or insurance company is allowed to engage in the
insurance business without a license or a certificate of authority from the
Insurance Commission.
2. Pioneer is the resident agent of Steamship Mutual as evidenced by the
certificate of registration issued by the Insurance Commission. It has been
licensed to do or transact insurance business by virtue of the certificate of
authority issued by the same agency. However, a Certification from the
Commission states that Pioneer does not have a separate license to be
an agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a
separate license to act as insurance agent for Steamship Mutual. Section 299 of
the Insurance Code clearly states:
SEC. 299 No person shall act as an insurance agent or as an insurance broker in
the solicitation or procurement of applications for insurance, or receive for
services in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines or any agent thereof,
without first procuring a license so to act from the Commissioner…
Philam v Arnaldo G.R. No. 76452 July 26, 1994
Facts:
One Ramon Paterno complained about the unfair practices committed by the
company against its agents, employees and consumers.
The Commissioner called for a hearing where Paterno was required to specify
which acts were illegal. Paterno then specified that the fees and charges stated
in the Contract of Agency between Philam and its agents be declared void.
Philam, on the other hand, averred that there Paterno must submit a verified
formal complaint and that his letter didn’t contain information Philam was
seeking from him. Philam then questioned the Insurance Commission’s
jurisdiction over the matter and submitted a motion to quash.
The commissioner denied this. Hence this petition.
Issue: Whether or not the resolution of the legality of the Contract of Agency
falls within the jurisdiction of the Insurance Commissioner.
Page 22 of 47
Held: No. Petition granted.
Ratio:
According to the Insurance code, the Insurance Commissioner was authorized to
suspend, directors, officers, and agents of insurance companies. In general, he
was tasked to regulate the insurance business, which includes:
(2) The term "doing an insurance business" or "transacting an insurance
business," within the meaning of this Code, shall include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate business or activity
of the surety; (c) doing any kind of business, including a reinsurance business,
specifically recognized as constituting the doing of an insurance business within
the meaning of this Code; (d) doing or proposing to do any business in
substance equivalent to any of the foregoing in a manner designed to evade the
provisions of this Code. (Insurance Code, Sec. 2[2])
The contract of agency between Philamlife and its agents wasn’t included with
the Commissoner’s power to regulate the business. Hence, the
Insurance commissioner wasn’t vested with jurisidiction under the rule “expresio
unius est exclusionalterius”.
The respondent contended that the commissioner had the quasi-judicial power
to adjudicate under Section 416 of the Code. It stated:
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 suretyship, or for which a reinsurer may be used
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 interest, costs 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.
This was, however, regarding complaints filed by the insured against the
Insurance company.
Also, the insurance code only discusses the licensing requirements for agents
and brokers. The Insurance Code does not have provisions governing the
relations between insurance companies and their agents.
Investment Planning Corporation of the Philippines v. Social Security
Commission- “that an insurance company may have two classes of agents who
sell its insurance policies: (1) salaried employees who keep definite hours and
work under the control and supervision of the company; and (2) registered
representatives, who work on commission basis.”
The agents under the 2nd sentence are governed by the Civil Code laws on
agency. This means that the regular courts have jurisdiction over this category.
FILIPINAS COMPANIA DE SEGUROS vs. CHRISTERN HUENEFELD and
CO., INC. 89 Phil 54
FACTS:
On October 1, 1941, the respondent corporation, Christern Huenefeld and Co.,
Inc., after payment of corresponding premium, obtained from the petitioner,
Filipinas Cia de Seguros fire policy covering merchandise contained in a building
located at Binondo, Manila. On February 27, 1942 or during the Japanese military
occupation, the building and insured merchandise were burned. In due time, the
respondent submitted to the petitioner its claim under the policy. The petitioner
refused to pay the claim on the ground that the policy in favor of the respondent
that ceased to be a force on the date the United States declared war against
Germany, the respondent corporation (through organized under and by virtue of
the laws of Philippines) being controlled by German subjects and the petitioner
being a company under American jurisdiction when said policy was issued on
October 1, 1941. The theory of the petitioner is that the insured merchandise
was burned after the policy issued in 1941 had ceased to be effective because
the outbreak of the war between United States and Germany on December 10,
1941, and that the payment made by the petitioner to the respondent
corporation during the Japanese military occupation was under pressure.
ISSUE:
Whether or not the respondent corporation is a corporation of public enemy.
RULING:
Since the majority of stockholders of the respondent corporation were German
subjects, the respondent became an enemy of the state upon the outbreak of
the war between US and Germany. The English and American cases relied upon
by the Court of Appeals lost in force upon the latest decision of the Supreme
Court of US in which the control test has adopted.
Page 23 of 47
Since World War I, the determination of enemy nationality of corporations has
been discussed in many countries, belligerent and neutral. A corporation was
subject to enemy legislation when it was controlled by enemies, namely managed
under the influence of individuals or corporations themselves considered as
enemies…
The Philippine Insurance Law (Act No 2427, as amended), in Section 8, provides
that “anyone except a public enemy may be insured”. It stands to reason that
an insurance policy ceases to be allowable as soon as an insured becomes a
public enemy.
The respondent having an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner had
ceased to be valid and enforceable, and since the insured good were burned
during the war, the respondent was not entitled to any indemnity under said
policy from the petitioner. However, elementary rule of justice (in the absence
of specific provisions in the Insurance Law) require that the premium paid by the
respondent for the period covered by its policy from December 11, 1941, should
be returned by the petitioner.
Sales De Gonzaga V. Crown Life Insurance Co.
FACTS:
 September 26, 1939: Crown Life Insurance Co. whose home office is based
in Toronto, Canada issued to Ramon Gonzaga through its branch office in
Manila a 20-year endowment policy for P15,000 which had an annual
premium of P591.
 Payment was only until September 6, 1941 because of the outbreak of the
war since Crown is an enemy corp. order to be closed during the Japanese
occupation. However, despite that it offered a privilege to accept premium
payments in the place of its employee in Ermita but of which Gonzaga did
not avail.
 Through the automatic premium loan clause, it continued until June 12, 1943
 May 1, 1945: It reopened but still Gonzaga did not pay although there was a
reinstatement clause providing certain conditions within three years from the
date of lapse on application of the insured
 June 27, 1945: Gonzaga died from an accident
 Crown refused to pay because of the lapse of premium payment
 RTC: against Gonzaga  RTC: it is a loan with equitable mortgage so the insurance proceeds should
ISSUE: W/N Gonzaga's widow can claim despite the absence of premium be credited to the loan and refund the overpayment.
payment during the outbreak of the war ISSUE: W/N Cosio as mortgagee is entitled to the insurance proceeds for her
own benefit
HELD: NO. Affirmed
HELD: YES. Modify. collection of insurance proceeds shall not be deemed to
 Non-payment at the day involves absolute forfeiture is such be the terms of have compensated the obligation of the Palileo to Cosio, but bars the Cosio from
the contract claiming its payment from the Palileo; and Cosio shall pay to Palileo P810
 failure to notify the postal address during the war is not an excuse representing the overpayment made by Palileo by way of interest on the loan.
 There is no duty when the law forbids and there is no obligation without  When the the mortgagee may insure his interest in the property
corresponding right enjoyed by another independently of the mortgagor , upon the destruction of the property the
 opening of an interim office partook of the nature of the privilege to the policy insurance money paid to the mortgagee will not inure to the benefit of the
holders to keep their policies operative rather than a duty to them under the mortgagor, and the amount due under the mortgage debt remains
contract unchanged. The mortgagee, however, is not allowed to retain his claim
against the mortgagor, but it passes by subrogation to the insurer, to the
WEEK 5 extent of the insurance money paid
 It is true that there are authorities which hold that "If a mortgagee procures
Palileo V. Cosio (1955) insurance on his separate interest at his own expense and for his own benefit,
without any agreement with the mortgagor with respect thereto, the
FACTS:
mortgagor has no interest in the policy, and is not entitled to have the
insurance proceeds applied in reduction of the mortgage debt" But these
 Cherie Palileo (debtor-mortgagor) filed a complaint against Beatriz Cosio
authorities merely represent the minority view
(creditor-mortgagee) praying that their transaction be one of a loan with an
equitable mortgage to secure the payment of the loan. The original counsel
San Miguel Brewery V. Law Union And Rock Insurance
of Cosio Atty. Guerrero being appointed Undersecretary of Foreign Affairs so
she forgot the date of the trial and she was substituted.
 it is a loan of P12,000 secured by a "Conditional Sale of Residential Building" Lessons Applicable:
with right to repurchase. After the execution of the contract, Cosio insured in  Mortgagor (Insurance)
her name the building with Associated Insurance & Surety Co. against fire.  Measure of Insurable Interest (Insurance)
 The building was partly destroyed by fire so she claimed an indemnity of  Effect of Change of Interest in Thing Insured (Insurance)
P13,107  Effect of transfer of thing insured (Insurance)
 Palileo demanded that the amount of insurance proceeds be credited to her Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of
loan the Insurance Code (all old law)

Page 24 of 47
  the mere transfer of a thing insured does not transfer the policy, but
FACTS: suspends it until the same person becomes the owner of both the policy and
 In the contract of mortgage, the owner P.D. Dunn had agreed, at his own the thing insured
expense, to insure the mortgaged property for its full value and to indorse  Undoubtedly these policies of insurance might have been so framed as to
the policies in such manner as to authorize the Brewery Company to receive have been "payable to the San Miguel Brewery, mortgagee, as its interest
the proceeds in case of loss and to retain such part thereof as might be may appear, remainder to whomsoever, during the continuance of the risk,
necessary to satisfy the remainder then due upon the mortgage debt. may become the owner of the interest insured." (Sec 54, Act No. 2427.) Such
Instead, however, of effecting the insurance himself Dunn authorized and a clause would have proved an intention to insure the entire interest in the
requested the Brewery Company to procure insurance on the property in the property, not merely the insurable interest of the San Miguel Brewery, and
amount of P15,000 at Dunn's expense. would have shown exactly to whom the money, in case of loss, should be
 San Miguel insured the property only as mortgagee. paid. But the policies are not so written.
 Dunn sold the propert to Henry Harding. The insurance was not assigned by  The blame for the situation thus created rests, however, with the Brewery
Dunn to Harding. rather than with the insurance companies, and there is nothing in the record
 When it was destroyed by fire, the two companies settled with San Miguelto to indicate that the insurance companies were requested to write insurance
the extent of the mortgage credit. upon the insurable interest of the owner or intended to make themselves
 RTC: Absolved the 2 companies from the difference. Henry Harding is liable to that extent
not entitled to the difference between the mortgage credit and the face value  If by inadvertence, accident, or mistake the terms of the contract were not
of the policies. fully set forth in the policy, the parties are entitled to have it reformed. But
 Henry Harding appealed. to justify the reformation of a contract, the proof must be of the most
ISSUE: satisfactory character, and it must clearly appear that the contract failed to
1. W/N San Miguel has insurable interest as mortgagor only to the extent of the express the real agreement between the parties
mortgage credit - YES  In the case now before us the proof is entirely insufficient to authorize
2. W/N Harding has insurable interest as owner - NO reformation.

Gonzalez Lao v. Yek Tong Lin Fire & Marine Insurance - Insurance
HELD: affirmed
 section 19 of the Insurance Act: Premiums
 a change of interest in any part of a thing insured unaccompanied by a
Facts:
corresponding change of interest in the insurance, suspends the insurance to
an equivalent extent, until the interest in the thing and the interest in the
> Gonzales was issued 2 fire insurance policies by Yek for 100T covering his leaf
insurance are vested in the same person
tobacco prducts.
 section 55:

Page 25 of 47

> They were stored in Gonzales’ building on Soler St., which on Jan. 11, 1928,
burned down.
> Art. 3 of the Insurance policies provided that: “Any insurance in force upon
all or part of the things unsured must be declared in writing by the insured and
he (insured) should cause the company to insert or mention it in the policy.
Without such requisite, such policy will be regarded as null and void and the
insured will be deprived of all rights of indemnity in case of loss.”
> Notwithstanding said provision, Gonzales entered into other insurance
contracts. When he sought to claim from Yek after the fire, the latter denied any
liability on the ground of violation of Art. 3 of the said policies.
> Gonzales however proved that the insurer knew of the other insurance policies
obtained by him long efore the fire, and the insurer did NOT rescind the insurance
polices in question but demanded and collected from the insured the premiums.
Issue:
Whether or not Yek is still entitled to annul the contract.
Held:
NO.
The action by the insurance company of taking the premiums of the insured
notwithstanding knowledge of violations of the provisions of the policies
amounted to waiver of the right to annul the contract of insurance.
Geagonia vs. Court of Appeals, 241 SCRA 152
Facts: Geagonia, owner of a store, obtained from Country Bankers 1year fire
insurance covering the stock trading of dry goods. The policy noted the
requirement that"
3. The insured shall give notice to the Company of any insurance or insurances
already effected, or which may subsequently be effected, covering any of
Page 26 of 47
the property or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, xxx
The petitioners’ stocks were destroyed by fire. He then filed a claim which was
subsequently denied because the petitioner’s stocks were covered by two other
fire insurance policies issued by PFIC. The basis of the private respondent's
denial was the petitioner's alleged violation of Condition 3 of the policy. The
Insurance Commission found that the petitioner did not violate Condition 3 as he
had no knowledge of the existence of the two fire insurance policies obtained
from the PFIC; that it was Cebu Tesing Textiles which procured the PFIC policies
w/o informing him or securing his consent; and that Cebu Tesing Textile, as his
creditor, had insurable interest on the stocks.
Issue: Whether or not Geagonia is prohibited from recovering from the Country
Bankers ?
Held: A policy may declare that a violation of specified provisions thereof shall
avoid it,otherwise, the breach of an immaterial provision does not avoid the
policy. To constitute a violation of the “other insurance” clause, the other
insurance must be upon the same subject matter, the same interest therein, and
the same risk
Saura Import & Export Co., Inc. V. Philippine International Surety Co.,
Inc. (1963)
Lessons Applicable: Mortgagor (Insurance)
Laws Applicable:
FACTS:
 Saura Import & Export Co Inc., mortgaged to the Phil. National Bank, a
parcel of land.
 The mortgage was amended to guarantee an increased amount, bringing
the total mortgaged debt to P37,000
 On the land mortgage is a building owned by Saura Import & Export Co Inc.
which was insured with Philippine International Surety (Insurer) even
before the mortgage contract so it was required to endorse to mortgagee
PNB
 October 15, 1954: Barely 13 days after the issuance of the fire insurance
policy, the insurer cancelled it. Notice of the cancellation was given to PNB
(mortgagee). But Saura (insured) was not informed.
 April 6, 1955: The building and all its contents worth P40,685.69 were
burned so Saura filed a claim with the Insurer and mortgagee Bank
 RTC: dismissed
ISSUE: W/N Philippine International Surety should be held liable for the claim
because notice to only the mortgagee is not substantial
HELD:YES. Appealed from is hereby reversed. Philippine International Surety
Co., Inc., to pay Saura Import & Export Co., Inc., P29,000
 It was the primary duty of Philippine International Surety to notify the
insured, but it did not
 If a mortgage or lien exists against the property insured, and the policy
contains a clause stating that loss, if any, shall be payable to such
mortgagee or the holder of such lien as interest may appear, notice of
cancellation to the mortgagee or lienholder alone is ineffective as a
cancellation of the policy to the owner of the property.
 liability attached principally the insurance company, for its failure to give
notice of the cancellation of the policy to Saura
 it is unnecessary to discuss the errors assigned against appellee bank
PNB V CA
Violeta Lalican
vs The Insular Life Insurance Company
Ponente: Chico-Nazario
Facts:
Violeta is the widow of the Eulogio Lalican. During his lifetime, Eulogio applied
for an insurance policy with Insular Life on April 24, 1997 which contained a 20-
year endowment variable income package flexi plan worth P500k with two riders
worth P500k each. Violeta was named the primary beneficiary.
Under the terms, Eulogio was to pay premiums on a quarterly basin in the
amount of P8,062 with a grace period of 31 days for the payment of each
premium subsequent to the first. If any premium was not paid on or before the
Page 27 of 47
due date, the policy would be in default, and if the premium remained unpaid
until the end of the grace period, the policy would automatically lapse and
become void.
Eulogio paid the premiums, however he failed to pay the premium due on
January 24, 1998, even after the lapse of the grace period of 31 days. Therefore,
lapsed and become void. Eulogio submitted to the Cabanatuan District Office of
Insular Life an application for reinstatement together with the payment of the
premium due on January 24. Insular Life notified Eulogio that his application for
reinstatement could not be fully processed because of the unpaid interest
thereon. Eulogio was likewise advised by Malaluan (insurance agent) to pay the
premiums that subsequently became due April 1998 and July 1998, plus interest.
September 17, 1998. Eulogio went to Malaluan's house and paid for the interest
which was received by Malaluan's husband. Later that day, Eulogio died. Without
the knowledge of Eulogio's death, Malaluan forwarded to the Insular Life the
application for reinstatement and the payment made by Eulogio. However,
Insular Life did not act upon such reinstatement for they knew already of
Eulogio's death.
September 28, 1998, Violeta filed for the insurance claim. Insular Life then
informed Violeta in a letter that her claim could not be processed because the
insurance policy had lapsed already and that Eulogio failed to reinstate the same
and the payment made done thru Malaluan's husband was, under the insurance
policy, was considered a deposit only until approval of the said application.
Enclosed to this letter was a check representing the full refund of the past
payments made by Eulogio, amounting to P25,417.
Violeta requested for a reconsideration of her claim and returned the check to
Insular Life. Insular Life agreed to conduct a re-evaluation of Violeta's claim.
Without waiting for the result of the re-evaluation, Violeta filed with the RTC a
complaint for death claim benefit alleging the Insular Life was engaged in unfair
claim settlement practice and deliberately failed to act with reasonable
promptness on her insurance claim. Violeta claims for the P1.5M insurance, plus
interest, attorney's fees and cost of suit.
Insular Life filed with the RTC an answer with counterclaim saying that the
insurance claim was rendered void due to non-payment of the premium and
countered that Violeta should be ordered to pay attorney's fees and expenses of
litigation incurred by Insular Life.
RTC declared that Violeta failed to establish by preponderance of evidence her
cause of action against the defendant. Violeta failed to establish that the receipt
of payment by Malaluan amounted to the reinstatement of the insurance policy.
Violeta filed for motion for reconsideration but was denied as well; hence she
elevated her case for review on Certiorari.
Issues: (a) Whether the decision of the court can still be reviewed despite having
allegedly attained finality and despite the mode of appeal of Violeta erroneous.
(b) Whether the RTC has decided the case on a question of law not in accord
with law and applicable decisions of the Supreme Court.
Ruling:
Petition lacks merit.
RTC's decision has long acquired finality for Violeta failed to file a notice of appeal
more than five months after the decision was rendered.
As to the substantial claim of whether there is insurable interest, the Court says
that the matter of insurable interest is entirely irrelevant and the real point of
contention herein is whether Eulogio was able to reinstate the lapsed insurance
policy on his life before his death.
The Court rules in the negative, for the insurance policy is clear on the procedure
of the reinstatement of the insurance contract, of which Eulogio has failed to
accomplish before his death. As provided by the policy, insurance shall be
deemed reinstated upon the approval of the insurance policy of the application
for reinstatement. The approval should be made during the lifetime of the
insured, in the case at bar, it wasn’t.
El Oriente Fabrica de Tabacos, Inc. vs. Juan Posadas, Collector of Internal
Revenue,G.R. No. 34774, September 21, 1931
Topic:
Insurable Interest in life and health (Section 10)
Facts:
Insurer: Manufacturers Life Insurance Co., of Toronto, Canada,
thru its local agent E.E.ElserInsured: A. Velhagen (manager of El
Oriente)Beneficiary: El Oriente Fabrica de Tabacos, Inc.El Oriente, in order to
protect itself against the loss that it might suffer by reason of the death of its
manager, whose death would be a serious loss to El Oriente procured fromthe
Insurer an insurance policy on the life of the said manager for the sum of 50,000
USD withElOriente as
the designated sole beneficiary. The insured has no int
e r e s t o r participation in the proceeds of said life insurance policy.El Oriente
charged as expenses of its business all the said premiums and deducted
the same from its gross incomes as reported in its
a n n u a l i n c o m e t a x r e t u r n s , w h i c h deductions were allowed by
Page 28 of 47
Posadas (Collector of Internal Revenue) upon showing by ElOriente that
such premiums were legitimate expenses of the business.U p o n t h e d e a t h o f
the manager, El Oriente received all the proceeds of the
l i f e insurance policy together with the interest and the dividends accruing
thereon, aggregatingP104,957.88. Posadas assessed and levied the sum
of P3,148.74 as income tax on theproceeds of the insurance policy,
which was paid by El Oriente under protest. El Orienteclaiming exemption
under Section 4 of the Income Tax Law.
Issue:
Whether or not the proceeds of insurance taken by a corporation on
the life of animportant official to indemnify it against loss in case of
his death, are taxable as incomeunder the Philippine Income Tax Law?
Ruling:
The Income Tax Law for the Philippines is Act No. 2833, as amended. In chapter
IOn Individuals, is to be found section 4
which provides that, "The following incomes shallbe exempt from the provisions
of this law:
(a) The proceeds of life insurance policies paid tobeneficiaries upon the death
of the insured ... ." The Chapter on Corporations does notprovide as above. It is
certain that the proceeds of life insurance policies are exempt. It isnot so
certain that the proceeds of life insurance policies paid to corporate
beneficiariesupon the death of the insured are likewise exempt.T h e
situation will be better elucidated by a brief reference to laws
on the samesubject in the United States. The Income Tax Law
of 1916 extended to the PhilippineL e g i s l a t u r e , w h e n i t c
ame to enact Act No. 2833, to copy the American
s t a t u t e . Subsequently, the Congress of the United States enacted
its Income Tax Law of 1919, in which certain doubtful subjects were clarified.
Thus, as to the point before us, it was madeclear, when not only in the part of
the law concerning individuals were exemptions providedfor beneficiaries, but
also in the part concerning corporations, specific reference was
madet o t h e e x e m p t i o n s i n f a v o r o f i n d i v i d u a l s , t h e r e b y
m a k i n g t h e s a m e a p p l i c a b l e t o corporations.
This was authoritatively pointed out and decided by the Unite
d S t a t e s Supreme Court in the case of United States
vs
. Supplee-Biddle Hardware Co. ( [1924], 265U.S., 189), which involved facts
quite similar to those before us.To quote the exact words in the cited case of
Chief Justice Taft delivering the opinionof the court:It is earnestly pressed
upon us that proceeds of life insurance paid on the death of the insured
are in fact capital, and cannot be taxed as income … that proceeds of al i f e
insurance policy paid on the death of the insured are not
usually
c l a s s e d a s income.C o n s i d e r i n g , t h e r e f o r e , t h e p u r p o r t o f t h
e s t i p u l a t e d f a c t s , c o n s i d e r i n g t h e uncertainty of Philippine law,
and considering the lack of express legislative intention to taxthe proceeds of life
insurance policies paid to corporate beneficiaries, particularly when inthe
exemption in favor of individual beneficiaries in the chapter on this subject,
the clause isi n s e r t e d " e x e m p t f r o m t h e
provisions of this law," we deem it reasonable to hold thepro
ceeds of the life insurance policy in question as representing
a n i n d e m n i t y a n d n o t taxable
income.T h e f o r e g o i n g p r o n o u n c e m e n t w i l l r e s u l t i n t h e j u d g m e
n t b e i n g r e v e r s e d a n d i n another judgment being rendered in favor of
El Oriente.
El Oriente v. Posadas - Taxability of Insurance Proceeds
56 PHIL 147 (1931)
Facts:
> El Oriente in order to protect itself against the loss that it might suffer by
reason of the death of its manager, A. Velhagen, who had had more than thirty-
five (35) years of experience in the manufacture of cigars in the Philippines,
procured from the Manufacturers Life Insurance Co., of Toronto, Canada, thru
its local agent E. E. Elser, an insurance policy on the life of the said A. Velhagen
for the sum of $50,000, United States currency designating itself as the
beneficiary.
> El Oriente paid for the premiums due thereon and charged as expenses of its
business all the said premiums and deducted the same from its gross incomes
as reported in its annual income tax returns, which deductions were allowed upon
a showing that such premiums were legitimate expenses of its business.
> Upon the death of A. Velhagen in 1929, the El Oriente received all the
proceeds of the said life insurance policy, together with the interests and the
dividends accruing thereon, aggregating P104,957.88
> CIR assessed El Oriente for deficiency taxes because El Oriente did not include
as income the proceeds received from the insurance.
Issue:
Whether or not the proceeds of insurance taken by a corporation on the life of
an important official to indemnify it against loss in case of his death, are taxable
as income under the Philippine Income Tax Law
Held:
NOT TAXABLE.
In Chapter I of the Tax Code, is to be found section 4 which provides that, "The
following incomes shall be exempt from the provisions of this law: (a) The
Page 29 of 47
proceeds of life insurance policies paid to beneficiaries upon the death of the
insured . . ." Section 10, as amended, in Chapter II On Corporations, provides
that, "There shall be levied, assessed, collected, and paid annually upon the total
net income received in the preceding calendar year from all sources by every
corporation . . .a tax of three per centum upon such income . . ." Section 11 in
the same chapter, provides the exemptions under the law, but neither here nor
in any other section is reference made to the provisions of section 4 in Chapter
I.
Under the view we take of the case, it is sufficient for our purposes to direct
attention to the anomalous and vague condition of the law. It is certain that the
proceeds of life insurance policies paid to individual beneficiaries upon the death
of the insured are exempt. It is not so certain that the proceeds of life insurance
policies paid to corporate beneficiaries upon the death of the insured are likewise
exempt. But at least, it may be said that the law is indefinite in phraseology and
does not permit us unequivocally to hold that the proceeds of life insurance
policies received by corporations constitute income which is taxable
It will be recalled that El Oriente, took out the insurance on the life of its
manager, who had had more than thirty-five years' experience in the
manufacture of cigars in the Philippines, to protect itself against the loss it might
suffer by reason of the death of its manager. We do not believe that this fact
signifies that when the plaintiff received P104,957.88 from the insurance on the
life of its manager, it thereby realized a net profit in this amount. It is true that
the Income Tax Law, in exempting individual beneficiaries, speaks of the
proceeds of life insurance policies as income, but this is a very slight indication
of legislative intention. In reality, what the plaintiff received was in the nature of
an indemnity for the loss which it actually suffered because of the death of its
manager.
Insular Life vs. Ebrado
80 SCRA 181
Facts:
> Buenaventura Ebrado was issued al life plan by Insular Company. He
designated Capriona as his beneficiary, referring to her as his wife.
> The insured then died and Carponia tried to claim the proceeds of the said
plan.
> She admitted to being only the common law wife of the insured.
> Pascuala, the legal wife, also filed a claim asserting her right as the legal
wife. The company then filed an action for interpleader.

Issue:
Whether or not the common law wife named as beneficiary can collect the
proceeds.
Held:
NO.
The civil code prohibitions on donations made between persons guilty of
adulterous concubinage applies to insurance contracts. On matters not
specifically provided for by the Insurance Law, the general rules on Civil law shall
apply. A life insurance policy is no different from a civil donation as far as the
beneficiary is concerned, since both are founded on liberality.
DOCTRINE:General rules of civil law should be applied to resolve any void in the
Insurance Law, aspronounced in Article 2011 of the NCC.A contract of insurance
is personal in character.FACTS:Buenaventura Cristor Ebrado was married to
Pascuala Ebrado. During his lifetime, he was livingwith his common-law wife,
Carponia Ebrado, although he was not legally separated from his legalwife.
Buenaventura was issued by The Insular Life Assurance Co., Ltd., Policy No.
009929 on a whole-life plan for PhP 5,8882.00 with a rider for Accidental Death
Benefits for the same amount.Buenaventura designated Carponia Ebrado as the
revocable beneficiary in his policy. Buenaventura died as a result of an accident
when he was hit by a falling branch of a tree. As the insurance policy was still in
force, The Insular Life Assurance Co., Ltd stands liable to pay the coverage.
Carponia Ebrado, his common-law wife, filed with the insurer a claim for the
proceeds of the policy as the designated beneficiary therein. Pascuala Vda. de
Ebrado also filed her claim as the widowof the deceased insured. She asserts
that she is the one entitled to the insurance proceeds, not the common-law wife.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The
Insular Life AssuranceCo., Ltd, commenced an action for Interpleader before the
CFI of Rizal.
ISSUE: Can a common-law wife of a man who was not legally separated from
his legal wife be a beneficiary of his life insurance plan?
HELD/RULING
No.The Insurance Act (RA 2327, as amended) or even the new Insurance Code
(PD No. 612, asamended) does not contain any specific provision grossly
resolutory to the question at hand.Section 50 of the Insurance Act, which
provides that “(t)he insurance shall be applied exclusively tothe proper interest
of the person in whose name it is made,” cannot be interpreted that it includesthe
beneficiary because a contract of insurance is personal in character. The general
rules of civillaw should be applied to resolve this void in the Insurance Law.Article
2011 of the New Civil Code states: “The contract of insurance is governed by
Page 30 of 47
special laws.Matters not expressly provided for in such special laws shall
be regulated by this Code.”Article 2012 of the same Code states that, “any
person who is forbidden from receiving any donation under Article 739 cannot
be named beneficiary of a life insurance policy by the person who cannot make
a donation to him.” Therefore, common-law spouses are barred from
receivingdonations from each other.Article 739 provides:“The following
donations shall be void:Those made between persons who were guilty of adultery
or concubinage at the time of thedonation;Those made between persons found
guilty of the same criminal offense, in consideration thereof;Those made to a
public officer or his wife, descendants or ascendants by reason of his office.
In the case referred to in No. 1, the action for declaration of nullity may be
brought by thespouse of the donor or donee; and the guilt of the donee may be
proved by preponderance ofevidence in the same action.”In essence, a life
insurance policy is no different from a civil donation insofar as the beneficiary
isconcerned. Both are founded upon the same consideration: liberality. As a
consequence, theproscription in Art. 739 of the New Civil Code should equally
operate in life insurance contracts.In the case at bar, the requisite proof of
common-law relationship between the insured and thebeneficiary has
been supplied by the stipulations between the parties in the pre-trial conference.
Itwas agreed an stipulated that the deceased insured Buenaventura Ebrado was
married toPascuala Ebrado and that, during the lifetime of the deceased insured,
he was living with hiscommon-law wife, Carponia Ebrado. Based on the
foregoing, Carponia Ebrado is hereby declareddisqualified to be the beneficiary
of the late Buenaventura Ebrado in his life insurance policy. Theproceeds of the
policy are hereby held payable to the estate of the deceased insured.
Vda. de Consuegra vs. GSIS, DPWH, Rosario Diaz 37 SCRA 315 [1971]MAIN
POINT:
FACTS:
The late Jose Consuegra, at the time of his death, was employed as a shop foreman of DPWH
in the province ofSurigao del Norte. In his lifetime, he contracted 2 marriages, the first with
respondent Rosario Diaz, solemnized in the parish church of San Nicolas de Tolentino, Surigao,
on July 15, 1937 bearing 2 children, Jose Consuegra, Jr. and Pedro Consuegra, but both
predeceased their father; and the second with herein petitioner Basilia Berdin, which
was contracted in good faith while the first marriage was subsisting, on May 1, 1957 in the
same parish and municipality, out of which marriage
were born seven children, namely, Juliana, Pacita, Maria Lourdes, Jose, Rodrigo,
Lenida and Luz *(Luis) all surnamedConsuegra.When Consuegra died the proceeds of
his life insurance were paid by the GSIS to petitioner Basilia Berdin and her children who were
the beneficiaries named in the policy. Having been in the service of the government for
22.5028 years, Consuegra was entitled to retirement insurance benefits in the sum of P6,
304.47, however, he did not designate any beneficiary who would receive the retirement
insurance benefits due to him. Respondent Diaz, the widow (1st), filed a claim with the GSIS
asking that the retirement insurance benefits be paid to her as the only legal heir. Petitioner
Berdin and her children, likewise, filed a similar claim with the GSIS, asserting that being the
beneficiaries named in the life insurance policy,they are the only ones entitled
to receive the retirement insurance benefits due the deceased. GSIS: Diaz is entitled to
one-half, or 8/16, of the retirement insurance benefits while Berdin and their 7 children are
entitled to the remaining one-half, or 8/16, each of them to receive an equal share of
1/16.Dissatisfied, Berdin and her children filed a petition for mandamus with preliminary
injunction in the CFI of Surigao, against the respondents praying that they be declared the
legal heirs and exclusive beneficiaries of the retirement insurance. CFI confirmed the action of
GSIS. Hence the present appeal by herein petitioners-appellants, Basilia Berdin and her
children contending that because the deceased failed to designate the beneficiaries in his
retirement insurance, they being beneficiaries named in the life insurance should automatically
be considered the beneficiaries to receive the retirement insurance benefits, to the exclusion
of Diaz.
ISSUES:
(a) Is the contention tenable?(b) To whom should this retirement insurance benefits be paid?
RULING:
A.NO. The contention of appellants is untenable.When Consuegra designated his beneficiaries
in his life insurance he could not have intended those beneficiaries of his lifeinsurance as also
the beneficiaries of his retirement insurance because the provisions on retirement insurance
under theGSIS came about only when Com. Act 186 was amended by Rep. Act 660 on June
16, 1951. Hence, it cannot be said that
because appellants were designated beneficiaries in Consuegra’s
life insurance they automatically became the beneficiaries
also of his retirement insurance.
The provisions clearly indicate that there is need for the employee to file an
applicationfor retirement insurance benefits when he becomes a member of
the GSIS, and he should state in his application thebeneficiary of his retirement
insurance. Hence, the beneficiary named in the life insurance does not
automaticallybecome the beneficiary in the retirement insurance unless the same
beneficiary in the life insurance is so designatedin the application for retirement
insurance.
The GSIS offers two separate and distinct systems of benefits to its members
paid out from two distinct and separate funds:
(1) Life insurance- proceeds are paid to whoever is named the beneficiary in the
life insurance policy as provided forin the Insurance Act (Act 2427, as amended), the
beneficiary in a life insurance under the GSIS may not necessarily be an heir of the
insured. The insured in a life insurance may designate any person as beneficiary
unless disqualified to be so under the provisions of the Civil Code. And in the absence of
any beneficiary named in the life insurance policy, the proceeds of the insurance will
go to the estate of the insured.
(2) Retirement insurance- primarily intended for the benefit of the employee to
provide for his old age, or incapacity, after rendering service in the government for a
required number of years. If the employee reaches the age of retirement, he gets the
retirement benefits even to the exclusion of the beneficiary or beneficiaries named in his
Page 31 of 47
application for retirement insurance. The beneficiary of the retirement insurance can only claim
the proceeds of the retirement insurance if the employee dies before retirement.
If the employee failed or overlooked to state the beneficiary of his retirement
insurance, the retirement benefits will accrue to his estate and will be given to
his legal heirs in accordance with law, as in the case of a life insurance if no
beneficiary is named in the insurance policy.
B.BOTH.
The proceeds of the retirement insurance of the late Jose Consuegra should be divided equally
between Rosario Diaz and his second wife Basilia Berdin and his children by her. The fact that
the second marriage was contracted in good faith, the only just and equitable solution
in this case would be to recognize the right of the second wife to her share of
one-half in the property acquired by her and her husband, and consider the other
half as pertaining to the conjugal partnership of the first marriage.
The decision appealed from is affirmed
Southert Luzon Employee’s Association v. Golpeo - Insurance
Beneficiaries
96 PHIL 83
Facts:
> SLEA is composed of laborers and employees of the LTBC and BTC (now BLTB
Co.), and one of its purposes is mutual aid of its members and their dependents
in case of death.
> Roman Concepcion was a member until his death in 1950.
> In 1949, SLEA adopted a resolution providing that: A member may, if he
chooses, put down his common law wife and/or children he had with her as his
beneficiaries; and such person so named by the member will be the sole persons
to be recognized by SLEA regarding claims for condolence contributions.
> Roman listed as his beneficiaries Aquilina Maloles and their 4 children. After
his death, SLEA was able to collect voluntary contribution from its members
amounting to P2,205.
> Three sets of claimants to the amount presented themselves to the association
namely:
o Juanita Golpeo, legal wife, and her children
o Aquilina Maloles, the common law wife, and her children
o Elsie Hicban, another common law wife of Roman, and her child.
> SLEA then filed an action for interpleader against the 3 conflicting claimants.
> Trial court rendered a decision declaring Maloles and her children the sole
beneficiaries of the amount citing Del Val v. Del Val.
> Only Golpeo appealed. She argues that:
> The insurance code does not apply since the association is not an insurance
company but a mutual benefit association.
> The stipulation between SLEA and Roman was void for being contrary to law,
public morals and public policy, pursuant to Art. 739 of the CC ( donations
between persons guilty of concubinage at the time of donation are void)
Issue:
Whether or not Golpeo, the legal wife is entitled to the amount.
Held:
NO.
First of all, the lower court did not consider the association as a regular insurance
company, but merely ruled that the death benefit in question is analogous to
insurance. Besides, even the Administrative Code describes a mutual benefit
company as one which provides any method of life insurance among its members
out of dues or assessments collected from its membership.
Secondly, without considering the intimation in the brief for Maloles that Golpeo,
by her silence and actions had acquiesced in the illicit relations between her
husband and Maloles, Golpeo’s argument would certainly NOT apply to the
children of Maloles likewise named beneficiaries by the deceased. As a matter
of fact, the NCC recognizes certain successional rights of illegitimate children.
Heirs of Maramag v. Maramag
G.R. No. 181132 , June 5, 2009
FACTS:
The case stems from a petition filed against respondents with the RTC
for revocation and/or reduction of insurance proceeds for being void and/or
inofficious. The petition alleged that: (1) petitioners were the legitimate wife and
children of Loreto Maramag (Loreto), while respondents were Loreto’s
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) and Great Pacific Life Assurance Corporation (Grepalife) (3) the
illegitimate children of Loreto—Odessa, Karl Brian, and Trisha Angelie—were
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. 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 Odessa’s share as she
Page 32 of 47
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
Loreto’s 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. 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.
ISSUE:
Whether or not illegitimate children can be beneficiaries in an insurance contract.
RULING:
Yes. Section 53 of the Insurance Code states 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. 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 Loreto’s
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.
Philamcare v. CA- Health Care Agreement
379 SCRA 356 (2002)
Facts:
> Ernani Trinos, applied for a health care coverage with Philamcare. In the
standard application form, he answered NO to the following question: “Have you
or any of your family members ever consulted or been treated for high blood
pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer?
(If Yes, give details)”
> The application was approved for a period of one year from March 1, 1988 to
March 1, 1989. He was a issued Health Care Agreement, and under such, he
was entitled to avail of hospitalization benefits, whether ordinary or emergency,
listed therein. He was also entitled to avail of "out-patient benefits" such as
annual physical examinations, preventive health care and other out-patient
services.
> Upon the termination of the agreement, the same was extended for another
year from March 1, 1989 to March 1, 1990, then from March 1, 1990 to June 1,
1990. The amount of coverage was increased to a maximum sum of P75,000.00
per disability.
> During the period of his coverage, Ernani suffered a heart attack and was
confined at the Manila Medical Center (MMC) for one month beginning March 9,
1990.
> While her husband was in the hospital, Julita tried to claim the benefits under
the health care agreement. However, Philamcare denied her claim saying that
the Health Care Agreement was void.
> According to Philamcare, there was concealment regarding Ernani's medical
history.
Doctors at the MMC allegedly discovered at the time of Ernani's confinement that
he was hypertensive, diabetic and asthmatic, contrary to his answer in the
application form.
> Julita had no choice but to pay the hospitalization expenses herself,
amounting to about P76,000.00
> After her husband was discharged from the MMC, he was attended by a
physical therapist at home. Later, he was admitted at the Chinese General
Hospital (CGH). Due to financial difficulties, Julita brought her husband home
again. In the morning of April 13, 1990, Ernani had fever and was feeling very
weak. Julita was constrained to bring him back to the CGH where he died on the
same day.
> Julita instituted, an action for damages against Philamcare. She asked for
reimbursement of her expenses plus moral damages and attorney's fees. RTC
decided in favor of Julita. CA affirmed.
Page 33 of 47
Issues and Resolutions:
Philamcare brought the instant petition for review, raising the primary argument
that a health care agreement is not an insurance contract; hence the
"incontestability clause" under the Insurance Code Title 6, Sec. 48 does not
apply.
SC held that in the case at bar, the insurable interest of respondent's husband
in obtaining the health care agreement was his own health. The health care
agreement was in the nature of non-life insurance, which is primarily a contract
of indemnity. Once the member incurs hospital, medical or any other expense
arising from sickness, injury or other stipulated contingent, the health care
provider must pay for the same to the extent agreed upon under the contract.
Under the title Claim procedures of expenses, Philamcare. had 12 mos from the
date of issuance of the Agreement within which to contest the membership of
the patient if he had previous ailment of asthma, and six months from the
issuance of the agreement if the patient was sick of diabetes or hypertension.
The periods having expired, the defense of concealment or misrepresentation no
longer lie.
Petitioner argues that respondent's husband concealed a material fact in his
application. It appears that in the application for health coverage, petitioners
required respondent's husband to sign an express authorization for any person,
organization or entity that has any record or knowledge of his health to furnish
any and all information relative to any hospitalization, consultation, treatment or
any other medical advice or examination.
Philamcare cannot rely on the stipulation regarding "Invalidation of agreement"
which reads:
Failure to disclose or misrepresentation of any material information by the
member in the application or medical examination, whether intentional or
unintentional, shall automatically invalidate the Agreement from the very
beginning and liability of Philamcare shall be limited to return of all Membership
Fees paid. An undisclosed or misrepresented information is deemed material if
its revelation would have resulted in the declination of the applicant by
Philamcare or the assessment of a higher Membership Fee for the benefit or
benefits applied for.
The answer assailed by petitioner was in response to the question relating to the
medical history of the applicant. This largely depends on opinion rather than fact,
especially coming from respondent's husband who was not a medical doctor.
Where matters of opinion or judgment are called for, answers made in good faith
and without intent to deceive will not avoid a policy even though they are untrue.
Thus,
(A)lthough false, a representation of the expectation, intention, belief, opinion,
or judgment of the insured will not avoid the policy if there is no actual fraud in
inducing the acceptance of the risk, or its acceptance at a lower rate of premium,
and this is likewise the rule although the statement is material to the risk, if the
statement is obviously of the foregoing character, since in such case the insurer
is not justified in relying upon such statement, but is obligated to make further
inquiry. There is a clear distinction between such a case and one in which the
insured is fraudulently and intentionally states to be true, as a matter of
expectation or belief, that which he then knows, to be actually untrue, or the
impossibility of which is shown by the facts within his knowledge, since in such
case the intent to deceive the insurer is obvious and amounts to actual fraud.
The fraudulent intent on the part of the insured must be established to warrant
rescission of the insurance contract. Concealment as a defense for the health
care provider or insurer to avoid liability is an affirmative defense and the duty
to establish such defense by satisfactory and convincing evidence rests upon the
provider or insurer. In any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to answer the same to
the extent agreed upon. In the end, the liability of the health care provider
attaches once the member is hospitalized for the disease or injury covered by
the agreement or whenever he avails of the covered benefits which he has
prepaid.
Under Section 27 of the Insurance Code, "a concealment entitles the injured
party to rescind a contract of insurance." The right to rescind should be exercised
previous to the commencement of an action on the contract. In this case, no
rescission was made. Besides, the cancellation of health care agreements as in
insurance policies require the concurrence of the following conditions:
Prior notice of cancellation to insured;
Notice must be based on the occurrence after effective date of the policy of one
or more of the grounds mentioned;
Must be in writing, mailed or delivered to the insured at the address shown in
the policy;
Must state the grounds relied upon provided in Section 64 of the Insurance Code
and upon request of insured, to furnish facts on which cancellation is based.
None of the above pre-conditions was fulfilled in this case. 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. This is equally applicable to Health Care Agreements. The
phraseology used in medical or hospital service contracts, such as the one at
Page 34 of 47
bar, must be liberally construed in favor of the subscriber, and if doubtful or
reasonably susceptible of two interpretations the construction conferring
coverage is to be adopted, and exclusionary clauses of doubtful import should
be strictly construed against the provider.
Nario V. Philippine American Life Insurance Co. Of Canada (1967)
G.R. No. L-22796 June 26, 1967
Lessons Applicable: Irrevocable Designation (Insurance)
FACTS:
June 12, 1959: Philippine American Life Insurance Co. issued a life insurance
to Mrs. Alejandra Santos-Mario a life insurance policy under a 20-year
endowment plan, with a face value of P5,000 designating her husband Delfin
Nario and their unemancipation son Ernesto Nario, as her irrevocable
beneficiaries
June, 1963: She submitted her loan application to the life insurance co. with
signature of her husband in two capacities:
irrevocable beneficiaries
father-guardian of minor irrevocable beneficiary Ernesto
Insurance Co. denied asking that the legal guardian must be authorized by the
court in a competent guardianship proceeding
Upon denial, she opted to surrender her insurance policy in exchange of its cash
surrender value of P520 but it was also denied on the same ground
September 10, 1963: Mrs. Alejandra Santos-Nario and her husband, Delfin
Nario, brought suit against the Philippine American Life Insurance Co
RTC: favored the insurance company
CA: vested interest or right of the beneficiaries in the policy should be measured
on its full face value and not on its cash surrender value, for in case of death of
the insured, said beneficiaries are paid on the basis of its face value and in case
the insured should discontinue paying premiums, the beneficiaries may continue
paying it and are entitled to automatic extended term or paid-up insurance
options, etc. and that said vested right under the policy cannot be divisible at
any given time. policy loan and surrender of policy constitute acts of disposition
or alienation of property rights and not merely of management or administration
because they involve the incurring or termination of contractual obligations
ISSUE: W/N parents as guardians can enter into transactions for the benefit
of minor irrevocable beneficiaries.
HELD: NO. Affirmed.
SEC. 7. Parents as guardians. — When the property of the child under parental
authority is worth two thousand pesos or less, the father or the mother, without
the necessity of court appointment, shall be his legal guardian. When the
property of the child is worth more than two thousand pesos, the father or the
mother shall be considered guardian of the child's property, with the duties and
obligations of guardians under these rules, and shall file the petition required by
Section 2 hereof. For good reasons the court may, however, appoint another
suitable person.
even if worth less than P2,000 parent's authority over the estate of the ward as
a legal-guardian would not extend to acts of encumbrance or disposition, as
distinguished from acts of management or administration.
Villanueva V. Oro (1948)
G.R. No. L-2227 August 31, 1948
Lessons Applicable: Insured Outlives Policy (Insurance)
Laws Applicable:
FACTS:
West Coast Life Insurance Company issued 2 policies of insurance on the life of
Esperanza J. Villanueva:
2,000 php - maturing on April 1, 1943
if living, on the 1st day of April 1943 - to insured
upon death during the continuance of this policy - to the beneficiary Bartolome
Villanueva, father of the insured, with right on the part of the insured to change
the beneficiary
1940: Bartolome Villanueva died, Mariano J. Villanueva duly substituted as
beneficiary, a brother of the insured
3,000 php - maturing on March 31, 1943
Esperanza J. Villanueva survived the insurance period, for she died only on
October 15, 1944, without, however, collecting the insurance proceeds.
CFI: estate of the insured Esperanza is entitled to the insurance proceeds
ISSUE: W/N the estate of insured Esperanza should be entitled to the insurance
proceeds since she outlived the insurance policy
HELD: YES. appealed order is, therefore, hereby affirmed
To sustain the beneficiary's claim would be altogether eliminate from the policies
the condition that the insurer "agrees to pay . . . to the insured hereunder, if
living
Upon the insured's death, within the period, the beneficiary will take, as against
the personal representative or the assignee of the insured. Upon the other hand,
if the insured survives the endowment period, the benefits are payable to him or
to his assignee, notwithstanding a beneficiary is designated in the policy
Villanueva v. Oro - Insurance Proceeds
81 PHIL 464
Facts:
Page 35 of 47
> West Coast Life Insurance Company issued two policies of insurance on the
life of Esperanza Villanueva, one for 2T, maturing April 1, 1943; and other for 3T
maturing Mar. 31, 1943.
> In both policies, West agreed to pay 2T either to Esperanza if still living on
Apr 1, 1943; or to beneficiary Bartolome Villanueva, or the father of the insured
immediately upon receipt of the proof of death of Esperanza.
> The policy also gave her the right to change the beneficiary.
> In 1940, Bartolome died, and he was substituted as beneficiary under the
policies by Mariano, Esparanza’s brother.
> Esperanza died in 1944 without having collected the insurance
proceeds. Adverse claims for the proceeds were presented by the estate of
Esperanza on one hand and by Mariano on the other.
> CFI held that the estate of Esperanza was entitled to the proceeds to the
exclusion of the beneficiary.
Issue:
Whether or not the beneficiary is entitled to the proceeds.
Held:
NO.
Under the policies, the insurer obligated itself to pay the insurance proceeds to:
(1) the insured if the latter lived on the dates of maturity; or (2) the beneficiary
if the insured died during the continuance of the policies. The first contingency
excludes the second, and vice versa. In other words, as the insured Esperanza
was living on April 1 and March 31, 1943, the proceeds are payable exclusively
to her or to her estate unless she had before her death otherwise assigned the
matured policies.
The beneficiary could be entitled to said proceeds only in default of the first
contingency. To sustain the beneficiary’s claim would be to altogether eliminate
from the policies the condition that the insurer “agrees to pay to the insured if
living.”
This conclusion tallies with American Authorities who say that: The interest of
the insured in the proceeds of the insurance depends upon his survival of the
expiration of the endowment period. Upon the insured’s death, within the period,
the beneficiary will take, as against the personal representatives the endowment
period, the benefits are payable to him or to his assignee, notwithstanding a
beneficiary is designated in the policy. (AmJur and Couch Cyclopedia of
Insurance Law)
WEEK 6
Harvardian Colleges v. Country Bankers Insurance Corp.
1 CARA 2
Facts:
> Harvardian is a family corporation, the stockholders of which are Ildefonso
Yap, Virginia King Yap and their children.
> Prior to Aug. 9, 1979, an agent of Country Bankers proposed to Harvardian
to insure its school building. Although at first reluctant, Harvardian agreed.
> Country Banks sent an inspector to inspect the school building and agreed to
insure the same for P500,000 for which Harvardian paid an annual premium of
P2,500.
> On Aug. 9, 1979, Country Bankers issued to Harvardian a fire insurance
policy. On March 12, 1980, (39 days before I was born… hehehehe )during the
effectivity of said insurance policy, the insured property was totally burned
rendering it a total loss.
> A claim was made by plaintiff upon defendant but defendant denied it
contending that plaintiff had no insurable interest over the building constructed
on the piece of land in the name of the late Ildefonso Yap as owner.
> It was contended that both the lot and the building were owned by Ildefonso
Yap and NOT by the Harvardian Colleges.
Issue:
Whether or not Harvardian colleges has a right to the proceeds.
Held:
Harvardian has a right to the proceeds.
Regardless of the nature of the title of the insured or even if he did not have title
to the property insured, the contract of fire insurance should still be upheld if his
interest in or his relation to the property is such that he will be benefited in its
continued existence or suffer a direct pecuniary loss from its destruction or
injury. The test in determining insurable interest in property is whether one will
derive pecuniary benefit or advantage from its preservation, or will suffer
pecuniary loss or damage from its destruction, termination or injury by the
happening of the event insured against.
Here Harvardian was not only in possession of the building but was in fact using
the same for several years with the knowledge and consent of Ildefonso Yap. It
is reasonably fair to assume that had the building not been burned, Harvardian
would have been allowed the continued use of the same as the site of its
operation as an educational institution. Harvardian therefore would have been
directly benefited by the preservation of the property, and certainly suffered a
pecuniary loss by its being burned.
Gaisano Cagayan, Inc. V. Insurance Company Of North America (2006)
G.R. No. 147839 June 8, 2006
Page 36 of 47
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil
Code, Section 13 of Insurance Code
FACTS:
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans.
while Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing
trademarks owned by Levi Strauss & Co
IMC and LSPI separately obtained from Insurance Company of North America fire
insurance policies for their book debt endorsements related to their ready-made
clothing materials which have been sold or delivered to various customers and
dealers of the Insured anywhere in the Philippines which are unpaid 45 days after
the time of the loss
February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned
by Gaisano Cagayan, Inc., containing the ready-made clothing materials sold
and delivered by IMC and LSPI was consumed by fire.
February 4, 1992: Insurance Company of North America filed a complaint for
damages against Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their
claims under their respective fire insurance policies which it paid thus it was
subrogated to their rights
Gaisano Cagayan, Inc: not be held liable because it was destroyed due to
fortuities event or force majeure
RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it
must bear the loss (res perit domino)
CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil
Code to res perit domino
ISSUE: W/N Insurance Company of North America can claim against Gaisano
Cagayan for the debt that was isnured
HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED
insurance policy is clear that the subject of the insurance is the book debts and
NOT goods sold and delivered to the customers and dealers of the insured
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until
the ownership therein is transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are at the buyer's risk whether
actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for
the buyer, in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's risk from the time
of such delivery;
IMC and LSPI did not lose complete interest over the goods. They have an
insurable interest until full payment of the value of the delivered goods. Unlike
the civil law concept of res perit domino, where ownership is the basis for
consideration of who bears the risk of loss, in property insurance, one's interest
is not determined by concept of title, but whether insured has substantial
economic interest in the property
Section 13 of our Insurance Code defines insurable interest as "every interest in
property, whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might directly damnify the
insured." Parenthetically, under Section 14 of the same Code, an insurable
interest in property may consist in: (a) an existing interest; (b) an inchoate
interest founded on existing interest; or (c) an expectancy, coupled with an
existing interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction.
it is sufficient that the insured is so situated with reference to the property that
he would be liable to loss should it be injured or destroyed by the peril against
which it is insured
an insurable interest in property does not necessarily imply a property interest
in, or a lien upon, or possession of, the subject
matter of the insurance, and neither the title nor a beneficial interest is requisite
to the existence of such an interest
insurance in this case is not for loss of goods by fire but for petitioner's accounts
with IMC and LSPI that remained unpaid 45 days after the fire - obligation is
pecuniary in nature
obligor should be held exempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case of
fortuitous event
Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss
or destruction of anything of the same kind does not extinguish the obligation
(Genus nunquan perit)
The subrogation receipt, by itself, is sufficient to establish not only the
relationship of respondent as insurer and IMC as the insured, but also the amount
paid to settle the insurance claim
Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract.
As to LSPI, no subrogation receipt was offered in evidence.
Failure to substantiate the claim of subrogation is fatal to petitioner's case for
recovery of the amount of P535,613
Gaisano v Insurance G.R. No. 147839 June 8, 2006
Page 37 of 47
J. Martinez
Facts:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent
fire insurance policies with book debt endorsements. The insurance policies
provide for coverage on "book debts in connection with ready-made clothing
materials which have been sold or delivered to various customers and dealers of
the Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book
of Account of the Insured 45 days after the time of the loss covered under this
Policy." The policies also provide for the following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in
respect of the merchandise sold and delivered by the Insured which are
outstanding at the date of loss for a period in excess of six (6) months from the
date of the covering invoice or actual delivery of the merchandise whichever shall
first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12)
days after the close of every calendar month all amount shown in their books of
accounts as unpaid and thus become receivable item from their customers and
dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February
25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by
petitioner, was consumed by fire. Included in the items lost or destroyed in the
fire were stocks of ready-made clothing materials sold and delivered by IMC and
LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges
that IMC and LSPI were paid for their claims and that the unpaid accounts of
petitioner on the sale and delivery of ready-made clothing materials with IMC
was P2,119,205.00 while with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that the
fire was purely accidental; that the cause of the fire was not attributable to the
negligence of the petitioner. Also, it said that IMC and LSPI retained ownership
of the delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered
Gaisano to pay Insurance the P 2 million and the P 500,000 the latter paid to
IMC and Levi Strauss.
Hence this petition.
Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as one
covering the unpaid accounts of IMC and LSPI since such insurance applies to
loss of the ready-made clothing materials sold and delivered to petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of
the goods by stipulating in the sales invoices that "[i]t is further agreed that
merely for purpose of securing the payment of the purchase price the above
described merchandise remains the property of the vendor until the purchase
price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with
IMC and LSPI.
Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly
granted.
Ratio:
1. Nowhere is it provided in the questioned insurance policies that the subject of
the insurance is the goods sold and delivered to the customers and dealers of
the insured.
Thus, what were insured against were the accounts of IMC and LSPI with
petitioner which remained unpaid 45 days after the loss through fire, and not the
loss or destruction of the goods delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil
Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until
the ownership therein is transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are at the buyer's risk whether
actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for
the buyer, in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's risk from the time
of such delivery
Thus, when the seller retains ownership only to insure that the buyer will pay its
debt, the risk of loss is borne by the buyer. Petitioner bears the risk of loss of
the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of the
delivered goods. Unlike the civil law concept of res perit domino, where
ownership is the basis for consideration of who bears the risk of loss, in property
insurance, one's interest is not determined by concept of title, but whether
insured has substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in
property, whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might directly damnify the
insured." Parenthetically, under Section 14 of the same Code, an insurable
interest in property may consist in: (a) an existing interest; (b) an inchoate
interest founded on existing interest; or (c) an expectancy, coupled with an
existing interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction. Indeed, a vendor or seller
retains an insurable interest in the property sold so long as he has any interest
Page 38 of 47
therein, in other words, so long as he would suffer by its destruction, as where
he has a vendor's lien. In this case, the insurable interest of IMC and LSPI pertain
to the unpaid accounts appearing in their Books of Account 45 days after the
time of the loss covered by the policies.
3. Petitioner's argument that it is not liable because the fire is a fortuitous event
under Article 117432 of the Civil Code is misplaced. As held earlier,
petitioner bears the loss under Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of
goods by fire but for petitioner's accounts with IMC and LSPI that remained
unpaid 45 days after the fire. Accordingly, petitioner's obligation is for the
payment of money. As correctly stated by the CA, where the obligation consists
in the payment of money, the failure of the debtor to make the payment even
by reason of a fortuitous event shall not relieve him of his liability. The rationale
for this is that the rule that an obligor should be held exempt from liability when
the loss occurs thru a fortuitous event only holds true when the obligation
consists in the delivery of a determinate thing and there is no stipulation holding
him liable even in case of fortuitous event. It does not apply when the obligation
is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing,
the loss or destruction of anything of the same kind does not extinguish the
obligation." This rule is based on the principle that the genus of a thing can never
perish. An obligation to pay money is generic; therefore, it is not excused by
fortuitous loss of any specific property of the debtor.
4. With respect to IMC, the respondent has adequately established its claim. The
P 3 m claim has been proven. The subrogation receipt, by itself, is sufficient to
establish not only the relationship of respondent as insurer and IMC as the
insured, but also the amount paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the insurance company of the
insurance claim Respondent's action against petitioner is squarely sanctioned by
Article 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of
action. There was no evidence that respondent has been subrogated to any right
which LSPI may have against petitioner. Failure to substantiate the claim of
subrogation is fatal to petitioner's case for recovery of P535,613.00.
Harding v Commerical Union August 10, 1918 G.R. No. L-12707
J. Fisher
Facts:
Smith Bell insured Mrs. Hardings’ Studebaker car for a premium of Php 150. It was insured
for Php 3,000, the value of the car. The car was destroyed by fire. Mrs. Harding furnished
the defendant the proofs of her loss, but the company didn’t pay. Evidence showed that
Hermanos sold the automobile to Canson for P3,200. Canson then sold the car to Harding
for Php 1,500. The car was then sold for P2,000. It was then resold to Harding. He gave the
car to his wife; Mrs. Henry E. Harding as a present. The automobile was repaired and
repainted at the Luneta Garage at P900.
The company averred that they gave false information, particularly that on the price of the
vehicle and the ownership of the car. Hence, they aimed to declare the policy void.
The trial court found that there was no fraud.
This was an action by plaintiffs to recover from defendant the sum of P3,000 and interest,
alleged to be due under the terms of a policy of insurance. The trial court gave plaintiffs
judgment for the amount demanded, with interest and costs, and from that decision the
defendant appealed.
Issue: Was the valuation of the car for P3000 done fraudulently, thereby making the policy
void?
Held: No.
Ratio:
The policy stated that
“That during the period above set forth and during any period for which the company may
agree to renew this policy the company will subject to the exception and conditions contained
herein or endorsed hereon indemnify the insured against loss of or damage to any motor car
described in the schedule by whatever cause such loss or damage may be occasioned and
will further indemnify the insured up to the value of the car or P3,000 whichever is the greater
against any claim at common law made by any person for loss of life or for accidental bodily
injury or damage to property caused by the said motor car including law costs payable in
connection with such claim when incurred with the consent of the company.”
Defendant contends that the statement regarding the cost of the automobile was a warranty,
that the statement was false, and that, therefore, the policy never attached to the risk.
The automobile had in fact cost more than the amount mentioned. The court below found,
and the evidence shows, that the automobile was bought by plaintiff’s husband a few weeks
before the issuance of the policy in question for the sum of P2,800, and that between that
time and the issuance of the policy some P900 was spent upon it in repairs and repainting.
The mechanic who testified told that the automobile was practically as good as new at the
time the insurance was effected.
The amount stated was less than the actual outlay which the automobile represented to Mr.
Harding, including repairs, when the insurance policy was issued. It would be unfair to hold
the policy void simply because the outlay represented by the automobile was made by the
plaintiff’s husband and not by his wife, to whom he had given the automobile.
The trial court found that Mrs. Harding, in fixing the value of the automobile at P3,000, acted
upon information given her by her husband and by Mr. Server, the manager of the Luneta
Garage. She merely repeated the information which had been given her by her husband,
and at the same time disclosed to defendant’s agent the source of her information. There is
no evidence to sustain the contention that this communication was made in bad faith.
Page 39 of 47
Under these circumstances, we do not think that the facts stated in the proposal can be held
as a warranty of the insured, even if it should have been shown that they were incorrect in
the absence of proof of willful misstatement. Under such circumstance, the proposal is to be
regarded as the act of the insurer and not of the insured.
The defendant, upon the information given by plaintiff, and after an inspection of the
automobile by its examiner, having agreed that it was worth P3,000, is bound by this
valuation in the absence of fraud on the part of the insured. All statements of value are, of
necessity, to a large extent matters of opinion, and it would be outrageous to hold that the
validity of all valued policies must depend upon the absolute correctness of such estimated
value.
Supreme Court v First National- The ordinary test of the value of property is the price it will
commend in the market if offered for sale. But that test cannot, in the very nature of the case,
be applied at the time application is made for insurance. Men may honestly differ about the
value of property, or as to what it will bring in the market; and such differences are often very
marked among those whose special business it is to buy and sell property of all kinds.
The assured could do no more than estimate such value; and that, it seems, was all that he
was required to do in this case. His duty was to deal fairly with the Company in making such
estimate.
Section 163 of the Insurance Law (Act No. 2427) provides that “the effect of a valuation in a
policy of fire insurance is the same as in a policy of marine insurance.”
By the terms of section 149 of the Act cited, the valuation in a policy of marine insurance is
conclusive if the insured had an insurable interest and was not guilty of fraud.
The valuation of the automobile, for the purposes of the insurance, is binding upon the
defendant corporation.
Insurance Case Digest: Lampano V. Jose (1915)
G.R. No. L-9401 March 30, 1915
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable:
FACTS:
 Mariano R. Barretto, constructed a house for Placida A. Jose sold the house
to Antonina Lampano for P6,000
 The house was destroyed by fire during which Lampano still owed Jose
P2,000 as evidenced by a promissory note. Jose also owed Barretto P2,000
for the construction.
 After the completion of the house and before it was destroyed, Mariano R. Barretto took
out an insurance policy upon it in his own name, with the consent of Placida A. Jose, for
 the sum of P4,000. After its destruction, he collected P3,600 from the insurance company,
having paid in premiums the sum of P301.50
 Lampano filed a complaint against Barreto and Jose alleging that Jose in a verbal
agreement told her that the policy will be delivered to her so she should collected P3,600
from each of them
 RTC: favored Jose ordering Barreto to pay him P1,298.50 and offsetting the
P2,000
 Barreto alone appealed
ISSUE: W/N Barreto had insurable interest in the house and could insure it for
his it for his own protection
HELD: YES. reversed and Barretto is absolved
 Where different persons have different interests in the same property, the insurance
taken by one in his own right and in his own interest does not in any way insure to the
benefit of another
 A contract of insurance made for the insurer's (insured) indemnity only, as where there is
no agreement, express or implied, that it shall be for the benefit of a third person, does not
attach to or run with the title to the insured property on a transfer thereof personal as
between the insurer and the insured.
 Barretto had an insurable interest in the house. He construed the building, furnishing all
the materials and supplies, and insured it after it had been completed
Insurance Case Digest: Ong Lim Sing V. FEB Leasing And Finance Corp. (2007)
G.R. No. 168115 June 8, 2007
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable:
FACTS:
 FEB Leasing and Finance Corporation (FEB) leased equipment and motor vehicles to JVL
Food Products with a monthly rental of P170,494
Page 40 of 47
 At the same date, Vicente Ong Lim Sing, Jr. (Lim) an executed an Individual
Guaranty Agreement with FEB to guarantee the prompt and faithful
performance of the terms and conditions of the lease agreement
 JVL defaulted in the payment of the monthly rentals resulting to arrears
of P3,414,468.75 and refused to pay despite demands
 FEB filed a complaint for damages and replevin against JVL, Lim and John
Doe
 JVL and Lim admitted the existence of the lease agreement but asserted that it is in reality
a sale of equipment on installment basis, with FEB acting as the financier
 RTC: Sale on installment and the FEB elected full payment of the obligation
so for the unreturned units and machineries the JVL and Lim are jointly and
severally liable to pay
 CA: granted FEB appeal that it is a financial lease agreement under Republic
Act (R.A.) No. 8556 and ordered JVL and Lim jointly and severally to
pay P3,414,468.75
ISSUE: W/N JVL and Lim should jointly and severally be liable for the insured
financial lease
HELD: YES. CA affirmed.
 contract of adhesion is as binding as any ordinary contract
 The Lease Contract with corresponding Lease Schedules with Delivery and Acceptance
Certificates is, in point of fact, a financial lease within the purview of R.A. No. 8556
 FEB leased the subject equipment and motor vehicles to JVL in consideration of a monthly
periodic payment of P170,494.00. The periodic payment by petitioner is sufficient to
amortize at least 70% of the purchase price or acquisition cost of the said movables in
accordance with the Lease Schedules with Delivery and Acceptance Certificates.
 JVL entered into the lease contract with full knowledge of its terms and conditions.
 Lim, as a lessee, has an insurable interest in the equipment and motor vehicles leased.
 In the financial lease agreement, FEB did not assume responsibility as to the quality,
merchantability, or capacity of the equipment. This stipulation provides that, in case of
defect of any kind that will be found by the lessee in any of the equipment, recourse
should be made to the manufacturer. “The financial lessor, being a financing company, i.e.,
an extender of credit rather than an ordinary equipment rental company, does not extend
a warranty of the fitness of the equipment for any particular use. Thus, the financial
lessee was precisely in a position to enforce such warranty directly against the supplier of
the equipment and not against the financial lessor. We find nothing contra legem or
contrary to public policy in such a contractual arrangement
Insurance Case Digest: Traders Insurance & Surety Co. V. Golangco, Et Al (1954)
G.R. No. L-6442 Sep 21, 1954
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable: Sec. 13 of the Insurance Code
FACTS:
 Tomas Lianco and the Archbishop entered into a contract of lease on a substantially complied with by Golangco when he made a full and clear
parcel of landowned by church statement of his interests to Trader's manager.
 As lessee, Lianco erected a building on the leased portion of the church’s  The contract between Lianco and the Archbishop only forbade Lianco from
land. transferring 'his rights as LESSEE but the contracts Lianco made in favor of
 Lianco transferred ownership of this building to Kaw Eng Kaw Eng Siand plaintiff Golangco did not transfer such rights; hence no
Si,who later transferred the same to Golangco. written consent thereto was necessary. At worst, the contract would be
 Transfers were made without the consent of the Archbishop voidable, but not a void contract, at the
 The Archbishop filed an ejectment case against Lianco, who appears to be option of the Archbishop and it does not appear that it was ever exercised
occupants of the premises building with others paying rent to Golangco.
 The right of Golangco to receive rent on the building was judicially
recognized in a case decided between Lianco and
others occupying the premises pursuant to a compromise agreement.
 The Archbishop did not exercise his option to question Golangco’s rights as
lessee Insurance Case Digest: Lopez V. Del Rosario And Quiogue (1922)
 April 7,1949: Golangco applied for fire insurance with Trader’s
Insurance and Surety Co.
 fire insurance policy states: "that all insurancecovered under said policy,
includes the 'rent or G.R. No. L-19189 November 27, 1922
othersubject matter of insurance in respect of or inconnection with any
building or any property contained in any building"
 June 5, 1949: the building premises was burned so Golangco requested Lessons Applicable: Carrier or Depositary (Insurance)
Trader’s Insurance to pay the insurance amount of 10,000 including the
amount of rent P1,100 monthly. Laws Applicable:
 Trader’s insurance refused to pay the insurance for the rent averring that
Golangco has no insurable interest
ISSUE: W/N Golangco has insurable interest FACTS:

on the rent of the building premises which may lawfully/validly be subject  Benita Quiogue de V. del Rosario (Mrs. del Rosario), owner of a bonded warehouse
of insurance? where Froilan Lopez, holder or 14 waehouse receipts and Elias Zamora had

HELD: YES. their copra deposited

 Sec. 13 of the Insurance Code:
Every interest in the property, whether real or personal, or any relation
thereto, or liability in respect thereof of such nature that a contemplated
peril might directly damnify the insured, is an insurable interest.
 Both at the time of the issuance of the policy and at the time of the fire,
Golangco was in legal possession of the premises, collecting rentals from its
occupant.
 The argument of Trader’s Insurance that a policy of insurance must specify
the interest of the insured in the property insured, if he is not the absolute
owner thereof, is not meritorious because it was the Trader’s, not
Golangco, who prepared that policy, and it cannot take advantage of its
own acts to plaintiff's detriment; and, in any case, this provisionwas
 The warehouse recipts states an insurance of 1% their declared value which
can be increase or decrease by giving 1 month's notice in writing
 Lopez paid the insurance to May 18, 1920, but not thereafter
 June 6, 1920: the warehouse was destroyed by fire. Only copra worth P49,985 was
salvaged. At that time Lopez was still liable for the storage and insurance
of P315.90
 Mrs. Del Rosario submitted the insurance with the arbitrators and seems to have satisfied
all of the persons who had copra stored in her warehouse, including the stockholders in
the Compañia Coprera de Tayabas (whose stock she took over), with the exception of
Froilan Lopez

Page 41 of 47
 Ineffectual attempts by Mrs. Del Rosario to effect a compromise with Lopez first for
P71,994, later raised to P72,724, and finally reduced to P17,000, were made. But Lopez
stubbornly contended, or, at least, his attorney contended for him, that he should receive
not a centavo less than P88,595.43 (from originally P107,990.40)
Issue:
Whether or not Del Rosario acted as the agent of Lopez in taking out the insurance on the
contents of the warehouse or whether she acted as the reinsurer of the copra.
Held:
She acted as the agent of Lopez.
The agency can be deduced from the warehouse receipts, the insurance policies and the
circumstances surrounding the transaction. Under any aspect, Del Rosario is liable. The
law is that a policy effected by a bailee and covering by its terms in his own property and
property held in trust, inures, in the event of loss, equally and proportionately to the benefit
of all owners of the property insured. Even if one secured insurance covering his own
goods and goods stored with him, and even if the owner of the stored goods did not
request or know the insurance, and did not ratify it before the payment of the loss, it has
been held by a reputable court that the warehouseman is liable to the owner of such stored
goods for his share.
In a case of contributing policies, adjustments of loss made by an expert or by a board of
arbitrators may be submitted to the court NOT as evidence of the facts stated therein, or as
obligatory, but for the purpose of assisting the court in calculating the amount of liability.
Insurance Case Digest: San Miguel Brewery V. Law Union And Rock Insurance Co.
(1920)
G.R. No. L-14300 January 19, 1920
Lessons Applicable:
 Mortgagor (Insurance)
 Measure of Insurable Interest (Insurance)
 Effect of Change of Interest in Thing Insured (Insurance)
 Effect of transfer of thing insured (Insurance)
Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of
the Insurance Code (all old law)
FACTS:
 In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to
insure the mortgaged property for its full value and to indorse the policies in such manner
as to authorize the Brewery Company to receive the proceeds in case of loss and to retain
such part thereof as might be necessary to satisfy the remainder then due upon the
mortgage debt. Instead, however, of effecting the insurance himself Dunn authorized and
Page 42 of 47
requested the Brewery Company to procure insurance on the property in the amount of
P15,000 at Dunn's expense.
 San Miguel insured the property only as mortgagee.
 Dunn sold the propert to Henry Harding. The insurance was not assigned by Dunn to
Harding.
 When it was destroyed by fire, the two companies settled with San Miguelto
the extent of the mortgage credit.
 RTC: Absolved the 2 companies from the difference. Henry Harding is
not entitled to the difference between the mortgage credit and the face
value of the policies.
 Henry Harding appealed.
ISSUE:
1. W/N San Miguel has insurable interest as mortgagor only to the extent of
the mortgage credit - YES
2. W/N Harding has insurable interest as owner - NO
HELD: affirmed
 section 19 of the Insurance Act:
 a change of interest in any part of a thing insured unaccompanied by a
corresponding change of interest in the insurance, suspends the insurance
to an equivalent extent, until the interest in the thing and the interest in
the insurance are vested in the same person
 section 55:
 the mere transfer of a thing insured does not transfer the policy, but suspends it until the
same person becomes the owner of both the policy and the thing insured
 Undoubtedly these policies of insurance might have been so framed as to
have been "payable to the San Miguel Brewery, mortgagee, as its interest
may appear, remainder to whomsoever, during the continuance of the risk,
may become the owner of the interest insured." (Sec 54, Act No. 2427.)
Such a clause would have proved an intention to insure the entire interest
in the property, not merely the insurable interest of the San Miguel
Brewery, and would have shown exactly to whom the money, in case of
loss, should be paid. But the policies are not so written.
 The blame for the situation thus created rests, however, with the Brewery rather than
with the insurance companies, and there is nothing in the record to indicate that the
insurance companies were requested to write insurance upon the insurable interest of the
owner or intended to make themselves liable to that extent
 If by inadvertence, accident, or mistake the terms of the contract were not
fully set forth in the policy, the parties are entitled to have it reformed. But
to justify the reformation of a contract, the proof must be of the most
satisfactory character, and it must clearly appear that the contract failed to
express the real agreement between the parties
 In the case now before us the proof is entirely insufficient to authorize reformation.

Insurance Case Digest: Cha V. CA (1997)
G.R. No. 124520 August 18, 1997
Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)
Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance Code
FACTS:
 Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation
entered a 1 year lease contract with a stipulation not to insure against fire
the chattels, merchandise, textiles, goods and effects placed at any stall or
store or space in the leased premises without first obtaining the written
consent and approval of the lessor. But it insured against loss by fire their
merchandise inside the leased premises for P500,000 with the United
Insurance Co., Inc. without the written consent of CKS
 On the day the lease contract was to expire, fire broke out inside the leased
premises and CKS learning that the spouses procured an insurance wrote to
United to have the proceeds be paid directly to them. But United refused so
CKS filed against Spouses Cha and United.
 RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to
pay P50,000 as exemplary damages, P20,000 as attorney’s fees and costs
of suit
 CA: deleted exemplary damages and attorney’s fees
ISSUE: W/N the CKS has insurable interest because the spouses Cha violated
the stipulation
HELD: NO. CA set aside. Awarding the proceeds to spouses Cha.
 Sec. 18. No contract or policy of insurance on property shall be enforceable
except for the benefit of some person having an insurable interest in the
property insured
 A non-life insurance policy such as the fire insurance policy taken by
petitioner-spouses over their merchandise is primarily a contract of
indemnity. Insurable interest in the property insured must exist a t the
time the insurance takes effect and at the time the loss occurs. The basis
of such requirement of insurable interest in property insured is based on
sound public policy: to prevent a person from taking out an insurance
policy on property upon which he has no insurable interest and collecting
the proceeds of said policy in case of loss of the property. In such a case,
Page 43 of 47
the contract of insurance is a mere wager which is void under Section 25 of
the Insurance Code.
 SECTION 25. Every stipulation in a policy of Insurance for the payment of
loss, whether the person insured has or has not any interest in the property
insured, or that the policy shall be received as proof of such interest, and
every policy executed by way of gaming or wagering, is void
 Section 17. The measure of an insurable interest in property is the extent
to which the insured might be damnified by loss of injury thereof
 The automatic assignment of the policy to CKS under the provision of the
lease contract previously quoted is void for being contrary to law and/or
public policy. The proceeds of the fire insurance policy thus rightfully
belong to the spouses. The liability of the Cha spouses to CKS for violating
their lease contract in that Cha spouses obtained a fire insurance policy
over their own merchandise, without the consent of CKS, is a separate and
distinct issue which we do not resolve in this case.
Insurance Case Digest: Tai Tong Chuache & Co. V. Insurance Commission (1988)
G.R. No. L-55397 February 29, 1988
Lessons Applicable: When Insurable Interest Must Exist (Insurance)
Laws Applicable:
FACTS:
 Azucena Palomo bought a parcel of land and building from Rolando Gonzales and
assumed a mortgage of the building in favor of S.S.S. which was insured
with S.S.S. Accredited Group of Insurers
 April 19, 1975: Azucena Palomo obtained a loan from Tai Tong Chuache Inc.
in the amount of P100,000 and to secure it, the land and building was
mortgaged
 June 11, 1975: Pedro Palomo secured a Fire Insurance Policy covering the building for
P50,000 with Zenith Insurance Corporation
 July 16, 1975: another Fire Insurance policy was procured from Philippine
British Assurance Company, covering the same building for P50,000 and
the contents thereof for P70,000
 Before the occurrence of the peril insured against the Palomos had already paid their
credit due the
 July 31, 1975: building and the contents were totally razed by fire
 Palomo was able to claim P41,546.79 from Philippine British Assurance Co.,
P11,877.14 from Zenith Insurance Corporation and P5,936.57 from S.S.S.
Group of Accredited Insurers but Travellers Multi-Indemnity refused so it
demanded the balance from the other three but they refused so they filed
against them
 Insurance Commission, CFI: absolved Travellers on the basis that Arsenio
Cua was claiming and NOT Tai Tong Chuache
 Palomo Appealed
 Travellers reasoned that the policy is endorsed to Arsenio Chua, mortgage creditor
 Tai Tong Chuache & Co. filed a complaint in intervention claiming the proceeds of the fire
Insurance Policy issued by travellers
 affirmative defense of lack of insurable interest that before the occurrence of the
peril insured against the Palomos had already paid their credit due the
petitioner
ISSUE: W/N Tai Tong Chuache & Co. has insurable interest
HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache &
Co.
 when the creditor is in possession of the document of credit, he need not prove non-
payment for it is presumed
 The validity of the insurance policy taken b petitioner was not assailed by private
respondent. Moreover, petitioner's claim that the loan extended to the Palomos has not
yet been paid was corroborated by Azucena Palomo who testified that they are still
indebted to herein petitioner
 Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the
partnership. Being an agent, it is understood that he acted for and in behalf of the firm
 Upon its failure to prove the allegation of lack of insurable interest on the part of the
petitioner, Travellers must be held liable
Insurance Case Digest: San Miguel Brewery V. Law Union And Rock Insurance Co.
(1920)
G.R. No. L-14300 January 19, 1920
Lessons Applicable:
 Mortgagor (Insurance)
 Measure of Insurable Interest (Insurance)
 Effect of Change of Interest in Thing Insured (Insurance)
 Effect of transfer of thing insured (Insurance)
Page 44 of 47
Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of
the Insurance Code (all old law)
FACTS:
 In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to
insure the mortgaged property for its full value and to indorse the policies in such manner
as to authorize the Brewery Company to receive the proceeds in case of loss and to retain
such part thereof as might be necessary to satisfy the remainder then due upon the
mortgage debt. Instead, however, of effecting the insurance himself Dunn authorized and
requested the Brewery Company to procure insurance on the property in the amount of
P15,000 at Dunn's expense.
 San Miguel insured the property only as mortgagee.
 Dunn sold the propert to Henry Harding. The insurance was not assigned by Dunn to
Harding.
 When it was destroyed by fire, the two companies settled with San Miguelto
the extent of the mortgage credit.
 RTC: Absolved the 2 companies from the difference. Henry Harding is
not entitled to the difference between the mortgage credit and the face
value of the policies.
 Henry Harding appealed.
ISSUE:
1. W/N San Miguel has insurable interest as mortgagor only to the extent of
the mortgage credit - YES
2. W/N Harding has insurable interest as owner - NO
HELD: affirmed
 section 19 of the Insurance Act:
 a change of interest in any part of a thing insured unaccompanied by a
corresponding change of interest in the insurance, suspends the insurance
to an equivalent extent, until the interest in the thing and the interest in
the insurance are vested in the same person
 section 55:
 the mere transfer of a thing insured does not transfer the policy, but suspends it until the
same person becomes the owner of both the policy and the thing insured
 Undoubtedly these policies of insurance might have been so framed as to
have been "payable to the San Miguel Brewery, mortgagee, as its interest
may appear, remainder to whomsoever, during the continuance of the risk,
may become the owner of the interest insured." (Sec 54, Act No. 2427.)
Such a clause would have proved an intention to insure the entire interest
in the property, not merely the insurable interest of the San Miguel
Brewery, and would have shown exactly to whom the money, in case of
loss, should be paid. But the policies are not so written.
 The blame for the situation thus created rests, however, with the Brewery rather than
with the insurance companies, and there is nothing in the record to indicate that the
insurance companies were requested to write insurance upon the insurable interest of the
owner or intended to make themselves liable to that extent
 If by inadvertence, accident, or mistake the terms of the contract were not
fully set forth in the policy, the parties are entitled to have it reformed. But
to justify the reformation of a contract, the proof must be of the most
satisfactory character, and it must clearly appear that the contract failed to
express the real agreement between the parties
 In the case now before us the proof is entirely insufficient to authorize reformation.
Insurance Case Digest: Bachrach V. British American Assurance Co. (1910)
G.R. No. L-5715 December 20, 1910
Lessons Applicable: Effect of Change of Interest in Thing Insured (Insurance)
Laws Applicable:
FACTS:
 E. M. Bachrach insured goods belonging to a general furniture store, such
as iron and brass bedsteads, toilet tables, chairs, ice boxes, bureaus,
washstands, mirrors, and sea-grass furniture stored in the ground floor and
first story of house and dwelling with an authorized agent of the British
American Assurance Company
 British American Assurance Company denied alleging that:
 property covered by the policy to H. W. Peabody & Co. to secure certain
indebtedness due and owing to said company
 interest in certain of the goods covered by the said policy is trasnferred to
Macke to secure certain obligations assumed by Macke and on behalf of
Bachrach
 willfully placed a gasoline can containing 10 gallons of gasoline close to the
insured goods
 made no proof of the loss with the time required by the condition
 RTC: British American Assurance Company liable to bACHRACH
ISSUE: W/N Bachrach can claim
HELD: YES. lower court affirmed
 keeping of inflammable oils on the premises, though prohibited by the
policy, does not void it if such keeping is incidental to the business
 It may be added that there was no provision in the policy prohibiting the
keeping of paints and varnishes upon the premises where the insured
Page 45 of 47
property was stored. If the company intended to rely upon a condition of
that character, it ought to have been plainly expressed in the policy.
 alienation clause - forfeiture if the interest in the property pass from the
insured
 there is no alienation within the meaning of the insurance law until the
mortgage acquires a right to take possession by default under the terms of
the mortgage. No such right is claimed to have accrued in the case at bar,
and the alienation clause is therefore inapplicable.
 we can not find that there is a preponderance of evidence showing that the
plaintiff did actually set fire or cause fire to be set to the goods in question
 It does not positively appear of record that the automobile in question was
not included in the other policies. It does appear that the automobile was
saved and was considered as a part of the salvaged. It is alleged that the
salvage amounted to P4,000, including the automobile. This amount
(P4,000) was distributed among the different insurers and the amount of
their responsibility was proportionately reduced. The defendant and
appellant in the present case made no objection at any time in the lower
court to that distribution of the salvage. The claim is now made for the first
time.
Argente v West Coast G.R. No. L-24899 March 19, 1928
J. Malcolm
Facts:
Bernardo Argente signed an application for joint insurance with his wife in the sum of P2,000.
The wife, Vicenta de Ocampo, signed for the same. All the information contained in the
applications was furnished the agent by Bernardo Argente.
Argente was examined by Dr. Sta. Ana, a medical examiner for the West Coast. The result
was recorded in the Medical Examiner's Report, and with the exception of the signature of
Bernardo Argente, was in the hand-writing of Doctor Sta. Ana. But the information or answers
to the questions contained on the face of the Medical Examiner's Report were furnished the
doctor by Argente.
Vicenta de Ocampo, wife of the plaintiff, was examined at her residence by the same doctor.
The spouses submitted to West Coast Life an amended application, increasing the amount
to P15,000, and asked that the policy be dated May 15, 1925. The amended application was
accompanied by the documents entitled "Short Form Medical Report." In both of these
documents appear certain questions and answers.
A temporary policy for P15,000 was issued to Bernardo Argente and his wife as of May 15,
but it was not delivered until the first quarterly premium on the policy was paid. More than
thirty days had elapsed since the applicants were examined. Each of them was required to
file a certificate of health before the policy was delivered.
Vicenta de Ocampo died of cerebral apoplexy. Argente presented a claim in due form to the
West Coast Life Insurance Co. for the payment of the sum of P15,000. It was apparently
disclosed that the answers given by the insured in their medical examinations with regard to
their health were untrue. West Coastrefused to pay the claim and wrote Argente to the effect
that the claim was rejected due to fraud.
The trial court held the policy null and void, hence this appeal.
Issue: WON Argente and Ocampo were guilty of concealment and thereby misled the insurer
into accepting the risk?
Held: Yes. Petition dismissed.
Ratio:
Vicenta de Ocampo, in response to the question asked by the medical examiner, answered
no to "Have you ever consulted a physician for or have you ever suffered from any ailment
or disease of the brain or nervous system?" She also answered “none” as to the question
whether she consumed alcohol of not.
To the question, "What physician or physicians, if any, not named above, have you consulted
or been treated by, within the last five years and for what illness or ailment?" she answered
"None."
But the facts show that she was taken to San Lazaro Hospital, her case was diagnosed by
the admitting physician as "alcoholism”, moreover, she was diagnosed with "phycho-
neurosis."
Section 25 of the Insurance Code defined concealment as "a neglect to communicate that
which a party knows and ought to communicate."
The court held that the alleged concealment was not immaterial and insufficient to avoid the
policy. In an action on a life insurance policy where the evidence conclusively shows that the
answers to questions concerning diseases were untrue, the truth of falsity of the answers
become the determining factor. If the true facts been disclosed by the assured, the insurance
would never have been granted.
Concealment must, in the absence of inquiries, be not only material, but fraudulent, or the
fact must have been intentionally withheld. If no inquiries are made and no fraud or design
to conceal enters into the concealment the contract is not avoided.
The assurer is entitled to know every material fact of which the assured has exclusive or
peculiar knowledge, as well as all material facts which directly tend to increase the hazard
or risk which are known by the assured, or which ought to be or are presumed to be known
by him. And a concealment of such facts vitiates the policy.
If the assured has exclusive knowledge of material facts, he should fully and fairly disclose
the same, whether he believes them material or not. The determination of the point whether
there has or has not been a material concealment must rest largely in all cases upon the
exact terms of the contract.
Great Pacific v CA G.R. No. L-31845 April 30, 1979
Page 46 of 47
J. De Castro
Facts:
Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in
the amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the
essential data which petitioner Mondragon, the Branch Manager, wrote on the form. 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 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 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 Non-
Medical 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 insurance plan to children, pointing out that since the customers were asking for
such coverage.
Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance,
but having failed in his effort, he filed the action for the recovery before the Court of First
Instance of Cebu, which ruled against him.
Issues:
1. Whether the binding deposit receipt constituted a temporary contract of the life insurance
in question
2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which
rendered void the policy
Held: No. Yes. Petition dismissed.
Ratio:
The receipt was intended to be merely a provisional insurance contract. Its perfection was
subject to compliance of the following conditions: (1) that the company shall be satisfied that
the applicant was insurable on standard rates; (2) that if the company does not accept the
application and offers to issue a policy for a different plan, the insurance contract shall not
be binding until the applicant accepts the policy offered; otherwise, the deposit shall be
refunded; and (3) that if the company disapproves the application, the insurance applied for
shall not be in force at any time, and the premium paid shall be returned to the applicant.
The receipt is merely an acknowledgment that the latter's branch office had received from
the applicant the insurance premium and had accepted the application subject for processing
by the insurance company. There was still approval or rejection the same on the basis of
whether or not the applicant is "insurable on standard rates." Since Pacific Life disapproved
the insurance application of respondent Ngo Hing, the binding deposit receipt in question
had never become in force at any time. The binding deposit receipt is conditional and does
not insure outright. This was held in Lim v Sun.
The deposit paid by private respondent shall have to be refunded by Pacific Life.
2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When
he supplied data, he was fully aware that his one-year old daughter is typically a mongoloid
child. He withheld the fact material to the risk insured.
“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
demotion, however slight.”
The concealment entitles the insurer to rescind the contract of insurance.

Page 47 of 47