Digests In Insurance.docx

I.

INTRODUCTION

incidentally it may discourage, and hence, eliminate unfair competition, through underrating, which in itself is eventually injurious to the public

RAFAEL ENRIQUEZ vs. SUN LIFE ASSURANCE COMPANY OF CANADA G.R. No. L-15895 November 29, 1920 Facts: On September 24, 1917, Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of the company's Manila office and was given a receipt. On November 26, 1917, the head office gave notice of acceptance by cable to Manila. On December 4, 1917, the policy was issued at Montreal. On December 18, 1917, attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application. The following day the local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917. This letter was received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer died on December 20, 1917.

WHITE GOLD MARINE SERVICES, INC., vs. PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD G.R. No. 154514. July 28, 2005 Facts: White Gold procured a protection and indemnity coverage for its vessels from Steamship Mutual through Pioneer Insurance. Subsequently, White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage. 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 latter’s unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 1864 and 1875 of the Insurance Code, while Pioneer violated Sections 299, 3007 and 3018 in relation to Sections 302 and 303.

Issue: Whether Herrer received notice of acceptance of his application Rule: No. An acceptance of an offer of insurance not actually or constructively communicated to the proposer does not make a contract. Only the mailing of acceptance, it has been said, completes the contract of insurance, as the locus poenitentiae is ended when the acceptance has passed beyond the control of the party.

Issue: 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? Rule:

The law applicable to the case is found to be the second paragraph of article 1262 of the Civil Code providing that an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge.

THE INSULAR LIFE ASSURANCE COMPANY, LTD vs. CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO G.R. No. L-44059 October 28, 1977 Facts: Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd. on a whole-life for P5,882.00 with a, rider for Accidental Death for the same amount Buenaventura C. Ebrado designated Carpiona T. Ebrado as the revocable beneficiary in his policy, he to her as his wife. Buenaventura C. Ebrado died as a result of an accident when he was hit by a failing branch of a tree. Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado 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 and asserts that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado. The Insular Life Assurance Co., Ltd. commenced an action for Interpleader before the Court of First Instance of Rizal. Issue: Can a common-law wife named as beneficiary in the life insurance policy of a legally married man claim the proceeds thereof in case of death of the latter? Rule: No. Under Article 2012 of the New Civil Code, "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. Commonlaw spouses are, definitely, barred from receiving donations from each other. A beneficiary in a life insurance policy is no different from a donee. Both are recipients of pure beneficence. So long as manage 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. If legitimate relationship is circumscribed by these legal disabilities, with more reason should an illicit relationship be restricted by these disabilities. FILIPINAS COMPAÑIA DE SEGUROS, ET AL vs. HON. FRANCISCO Y. MANDANAS G.R. No. L-19638 June 20, 1966 Facts: This is a special civil action for a declaratory relief Thirty-nine (39) non-life insurance companies instituted it, in the Court of First Instance of Manila, to secure a declaration of legality of Article 22 of the Constitution of the Philippine Rating Bureau, of which they are members, inasmuch as respondent Insurance Commissioner assails its validity upon the ground that it constitutes an illegal or undue restraint of trade. Said court rendered judgment declaring that the aforementioned Article 22 is neither contrary to law nor against public policy, and that, accordingly, petitioners herein, as well as the intervenors and other members of the aforementioned Bureau, may lawfully observe and enforce said Article, and are bound to comply with the provisions thereof.

1. Yes Section 2(2) of the Insurance Code enumerates what constitutes "doing an insurance business" or "transacting an insurance business". These are: (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. 2. Yes Section 299 of the Insurance Code clearly states: 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, which must be renewed annually on the first day of January, or within six months thereafter. PHILIPPINE HEALTH CARE PROVIDERS, INC. vs. COMMISSIONER OF INTERNAL REVENUE G.R. No. 167330 June 12, 2008 Facts: Philippine Health Care is a domestic corporation whose primary purpose is "to establish, maintain, conduct and operate a prepaid group practice health care delivery system or a health maintenance organization to take care of the sick and disabled persons enrolled in the health care plan and to provide for the administrative, legal, and financial responsibilities of the organization." Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by its duly licensed physicians, specialists and other professional technical staff participating in the group practice health delivery system at a hospital or clinic owned, operated or accredited by it. Commissioner of Internal Revenue sent Philippine Health a formal demand letter and the corresponding assessment notices demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years 1996 and 1997. Issue: Whether a health care agreement in the nature of an insurance contract subject to the documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax Code of 1997 Rule: Yes. Under the law, a contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. The event insured against must be designated in the contract and must either be unknown or contingent. Contracts between companies like Philippine Health and the beneficiaries under their plans are treated as insurance contracts.

Issue: Whether Article 22 of the Constitution of the Philippines is valid Rule: We find nothing unlawful, or immoral, or unreasonable, or contrary to public policy either in the objectives thus sought to be attained by the Bureau, or in the means availed of to achieve said objectives, or in the consequences of the accomplishment thereof. The purpose of said Article 22 is not to eliminate competition, but to promote ethical practices among non-life insurance companies, although, Page 1 of 12

DST is not a tax on the business transacted but an excise on the privilege, opportunity, or facility offered at exchanges for the transaction of the business. It is an excise on the facilities used in the transaction of the business, separate and apart from the business itself.

RIZAL SURETY & INSURANCE COMPANY vs. COURT OF APPEALS and TRANSWORLD KNITTING MILLS, INC. G.R. No. 112360. July 18, 2000 Facts: Rizal Insurance issued Fire insurance policy to Transworld, on the buildings covering the period from August 14, 1980 to March 13, 1981. Same pieces of property were also insured with New India. On January 12, 1981, fire broke out in the compound of Transworld, razing the middle portion of its four-span building and partly gutting the left and right sections thereof. A two-storey building (behind said four-span building) where fun and amusement machines and spare parts were stored, was also destroyed by the fire. Transworld filed its insurance claims with Rizal Surety & Insurance Company and New India Assurance Company but to no avail Issue: Whether Transworld has an insurable interest in the fun and amusement machines and spare parts, which entitles it to be indemnified for the loss Rule: The 'terms in an insurance policy, which are ambiguous, equivocal, or uncertain x x x are to be construed strictly and most strongly 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 forfeiture is involved' (29 Am. Jur., 181), and the reason for this 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 experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company.' BLUE CROSS HEALTH CARE, INC., vs. NEOMI* and DANILO OLIVARES G.R. No. 169737 February 12, 2008 Facts: Neomi T. Olivares applied for a health care program with petitioner Blue Cross Health Care, Inc., a health maintenance firm for the period October 16, 2002 to October 15, 2003. She also availed of the additional service of limitless consultations and paid the amounts in full on October 17, 2002 and the application was approved on October 22, 2002. In the health care agreement, ailments due to "preexisting conditions" were excluded from the coverage.

Facts: Gulf Resort is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured originally with the American Home Assurance Company (AHAC-AIU). In the first four insurance policies issued the risk of loss from earthquake shock was extended only to plaintiff’s two swimming pools. On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and Gulf’s properties including the two swimming pools in its Agoo Playa Resort were damaged. Issue: Whether there is ambiguity in the contract Rule: No. 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. Through the years, the courts have held that in these type of contracts, the parties do not bargain on equal footing, the weaker party's participation being reduced to the alternative to take it or leave it. Thus, these contracts are viewed as traps for the weaker party whom the courts of justice must protect. Consequently, any ambiguity therein is resolved against the insurer, or construed liberally in favor of the insured. There is no ambiguity in the terms of the contract and its riders. Gulf Resort 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. ETERNAL GARDENS MEMORIAL PARK CORPORATION vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY G.R. No. 166245 April 9, 2008 Facts: Philamlife entered into an agreement denominated with Eternal Gardens. Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis.

On November 30, 2002, Neomi suffered a stroke and was admitted at the Medical City which was one of the hospitals accredited by Blue Cross. During her confinement, she underwent several laboratory tests. and incurred hospital expenses amounting to P34,217.20. Consequently, she requested from the representative of Blue Cross at Medical City a letter of authorization in order to settle her medical bills but refused to issue the letter and suspended payment pending the submission of a certification from her attending physician that the stroke she suffered was not caused by a pre-existing condition.

Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a copy of the application of each purchaser, and the amounts of the respective unpaid balances of all insured lot purchasers. In relation to the instant petition, Eternal complied by submitting a letter dated December 29, 1982, containing a list of insurable balances of its lot buyers for October 1982. One of those included in the list as "new business" was a certain John Chuang. His balance of payments was PhP 100,000. On August 2, 1984, Chuang died. After more than a year, Philamlife had not furnished Eternal with any reply to the latter’s insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000 on April 25, 1986.

Issue: Whether Neomi's stroke was caused by a pre-existing condition and therefore was excluded from the coverage of the health care agreement

Issue: Whether Philamlife assumed the risk of loss without approving the application.

Rule: A health care agreement is in the nature of a non-life insurance. It is an established rule in insurance contracts that when their terms contain limitations on liability, they should be construed strictly against the insurer. These are contracts of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract. This doctrine is equally applicable to health care agreements.

Rule: Yes. Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.

FORTUNE INSURANCE AND SURETY CO., INC.vs. COURT OF APPEALS G.R. No. 115278 May 23, 1995 Facts: A complaint was filed for the recovery of the sum of P725,000.00 under the policy issued by Fortune. The sum was allegedly lost during a robbery of Producer's armored vehicle while it was in transit to transfer the money from its Pasay City Branch to its head office in Makati. The said armored car was driven by Benjamin Magalong Y de Vera, escorted by Security Guard Saturnino Atiga Y Rosete. Issue: Whether the Fortune Insurance is liable to the Producers Bank under the general exception clause of the policy Rule: No. It has been aptly observed that in burglary, robbery, and theft insurance, "the opportunity to defraud the insurer — the moral hazard — is so great that insurers have found it necessary to fill up their policies with countless restrictions, many designed to reduce this hazard. Seldom does the insurer assume the risk of all losses due to the hazards insured against." Persons frequently excluded under such provisions are those in the insured's service and employment. 11 The purpose of the exception is to guard against liability should the theft be committed by one having unrestricted access to the property. A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the insurer, or it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way, as to preclude the insurer from non-compliance with its obligation. GULF RESORTS, INC vs. PHILIPPINE CHARTER INSURANCE CORPORATION G.R. No. 156167 May 16, 2005 Page 2 of 12

insurance contracts are imbued with public interest that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. Hence, in order to protect the interest of insurance applicants, insurance companies must be obligated to act with haste upon insurance applications, to either deny or approve the same, or otherwise be bound to honor the application as a valid, binding, and effective insurance contract. MANILA BANKERS LIFE INSURANCE CORPORATION vs. CRESENCIA P. ABAN G.R. No. 175666 July 29, 2013 Facts: Delia Sotero took out a life insurance policy from Bankers Life designating Cresencia P. Aban, her niece, as her beneficiary. Bankers Life issued a policy after the requisite medical examination and payment of the insurance premium. When the insurance policy had been in force for more than two years and seven months, Sotero died. Aban filed a claim for the insurance proceeds. Bankers Life conducted an investigation finding that the insurance policy was obtained under fraudulent circumstances. Issue: Whether the policy was obtained by fraud, concealment and/or misrepresentation under the Insurance Code, which thus renders it voidable under Article 139013 of the Civil Code Rule: Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under the provision, an insurer is given two years – from the effectivity of a life insurance contract and while the insured is alive – to discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured dies within the period, the insurer must make

good on the policy, even though the policy was obtained by fraud, concealment, or misrepresentation. This is not to say that insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business must be penalized, for such recklessness and lack of discrimination ultimately work to the detriment of bona fide takers of insurance and the public in general. Life insurance policies that pass the statutory two-year period are essentially treated as legitimate and beyond question, and the individuals who wield them are made secure by the thought that they will be paid promptly upon claim. RAFAEL (REX) VERENDIA vs. COURT OF APPEALS and FIDELITY & SURETY CO. OF THE PHILIPPINES Facts: Fire insurance policy was issued effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex) Verendia's residential building. Designated as beneficiary was the Monte de Piedad & Savings Bank. Verendia also insured the same building with two other companies, namely, The Country Bankers and The Development Insurance. While the three fire insurance policies were in force, the insured property was completely destroyed by fire on the early morning of December 28, 1980. Fidelity was accordingly informed of the loss and despite demands, refused payment under its policy on the ground 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 the contract of lease submitted by Verendia to support his claim on the fire insurance policy constitutes a false declaration which would forfeit his benefits under Section 13 of the policy Rule: 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 insurer. 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. PHILAMCARE HEALTH SYSTEMS, INC vs. COURT OF APPEALS and JULITA TRINOS G.R. No. 125678 March 18, 2002 Facts: Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage with petitioner Philamcare 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? The application was approved. 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, Trino 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 petitioner because 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. Issue: Whether there was concealment Rule: (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.16 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. MANILA MAHOGANY MANUFACTURING CORPORATION vs. COURT OF APPEALS AND ZENITH INSURANCE CORPORATION G.R. No. L-52756 October 12, 1987

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Facts: From 6 March 1970 to 6 March 1971, Manila Mahogany insured its Mercedes Benz 4-door sedan with respondent insurance company. On 4 May 1970 the insured vehicle was bumped and damaged by a truck owned by San Miguel Corporation. For the damage caused, respondent company paid petitioner five thousand pesos (P5,000.00) in amicable settlement. Manila Mahogany’s general manager executed a Release of Claim, subrogating Zenith to all its right to action against San Miguel Corporation. Zenith wrote Insurance Adjusters, Inc. to demand reimbursement from San Miguel Corporation of the amount it had paid petitioner. Insurance Adjusters, Inc. refused reimbursement, alleging that San Miguel Corporation had already paid petitioner P4,500.00 for the damages to petitioner's motor vehicle. Issue: Whether Manila Mahogany should reimburse private respondent Zenith Insurance on the ground that San Miguel Corporation already paid the former Rule: The right of subrogation can only exist after the insurer has paid the otherwise the insured will be deprived of his right to full indemnity. If the insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may sue the party responsible for the damage for the the [sic] remainder. To the extent of the amount he has already received from the insurer enjoy's [sic] the right of subrogation. 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 loses 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. FEDERAL EXPRESS CORPORATION vs. AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE COMPANY, INC G.R. No. 150094 August 18, 2004 Facts: Burlington, an agent of [Petitioner] Federal Express Corporation, insured the cargoes with American Home Assurance Company (AHAC) and turned over the custody of said cargoes to Federal Express which transported the same to Manila. Prior to the arrival of the cargoes, Federal Express informed GETC Cargo International Corporation, the customs broker hired by the consignee to facilitate the release of its cargoes from the Bureau of Customs, of the impending arrival of its client’s cargoes. The shipment was declared ‘total loss’ for the unusable shipment. Thereafter, [respondents] filed an action for damages against the [petitioner] imputing negligence on either or both (Burlington and Federal Express) of them in the handling of the cargo. Issue: Whether Federal Express is liable for damage to or loss of the insured goods. Rule: In the exercise of its subrogatory right, an insurer may proceed against an erring carrier. To all intents and purposes, it stands in the place and in substitution of the consignee. A fortiori, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading. PIONEER INSURANCE AND SURETY CORPORATION vs. KEPPEL CEBU SHIPYARD, INC. G.R. Nos. 180880-81 Facts: KCSI and WG&A Jebsens Shipmanagement, Inc. (WG&A) executed a Shiprepair Agreement wherein KCSI would renovate and reconstruct WG&As M/V Superferry 3 using its dry docking facilities pursuant to its restrictive safety and security rules and regulations. Prior to the execution of the Shiprepair Agreement, Superferry 3 was already insured by WG&A with Pioneer. In the course of its repair, M/V Superferry 3 was gutted by fire. Claiming that the extent of the damage was pervasive, WG&A declared the vessels damage as a total constructive loss and, hence, filed an insurance claim with Pioneer. Issue: Whether the subrogation covers total constructive loss of Superferry 3 Rule: In marine insurance, a constructive total loss occurs under any of the conditions set forth in Section 139 of the Insurance Code, which provides: Sec. 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion hereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril insured against: (a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril; (b) If it is injured to such an extent as to reduce its value more than three-fourths MALAYAN INSURANCE CO., INC vs. RODELIO ALBERTO and ENRICO ALBERTO REYES G.R. No. 194320 February 1, 2012 Facts: At around 5 o’clock in the morning of December 17, 1995, an accident occurred at the corner of EDSA and Ayala Avenue, Makati City, involving four (4) vehicles, to wit: (1) a Nissan Bus operated by Aladdin Transit; (2) an Isuzu Tanker; (3) a Fuzo Cargo Truck; and (4) a Mitsubishi Galant.

Malayan Insurance issued Car Insurance Policy in favor of First Malayan Leasing and Finance Corporation (the assured), insuring the Mitsubishi Galant against third party liability, own damage and theft, among others. Having insured the vehicle against such risks, Malayan Insurance claimed in its Complaint that it paid the damages sustained by the assured amounting to PhP 700,000. Malayan Insurance sent several demand letters to Rodelio Alberto (Alberto) and Enrico Alberto Reyes (Reyes), the registered owner and the driver, respectively, of the Fuzo Cargo Truck, requiring them to pay the amount it had paid to the assured but to no avail. Issue: Whether there was a valid subrogation Rule: Yes. Subrogation is the substitution of one person by another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. The principle covers a situation wherein an insurer has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy. It contemplates full substitution such that it places the party subrogated in the shoes of the creditor, and he may use all means that the creditor could employ to enforce payment. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract. It accrues simply upon payment by the insurance company of the insurance claim. ASIAN TERMINALS, INC vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION G.R. No. 185964 June 16, 2014 Facts: 3,000 bags of sodium tripolyphosphate contained in 100 plain jumbo bags complete and in good condition were loaded and received on board M/V "Da Feng" owned COSCO in favor of consignee, Grand Asian Sales, Inc. (GASI). Based on a Certificate of Insurance it appears that the shipment was insured against all risks by GASI with FIRST LEPANTO. The shipment arrived in Manila and was discharged into the possession and custody of ATI, a domestic corporation engaged in arrastre business. The shipment remained for quite some time at ATI’s storage area until it was withdrawn by broker, Proven Customs Brokerage Corporation (PROVEN) for delivery to the consignee. Upon receipt of the shipment, GASI subjected the same to inspection and found that the delivered goods incurred shortages and spillage. Issue: Whether non-presentation of the insurance contract is fatal to FIRST LEPANTO’s cause of action for reimbursement of subrogee Rule: No. As a general rule, the marine insurance policy needs to be presented in evidence before the insurer may recover the insured value of the lost/damaged cargo in the exercise of its subrogatory right. Nevertheless, the rule is not inflexible. In certain instances, the Court has admitted exceptions by declaring that a marine insurance policy is dispensable evidence in reimbursement claims instituted by the insurer. II.

CONTRACT OF INSURANCE

DBP vs. CA – see notes of Engr. Development Bank of the Philippines v. Court of Appeals G.R. No. L-109937 March 21, 1994 FACTS: Juan B. Dans applied for a loan with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). A reduced amount of loan was approved and released by DBP, and deducted the amount of P1,476.00 payment for the MRI premium. Days after, Dans died of cardiac arrest. DBP informed his wife that her husband was not eligible of MRI, being over the acceptance age limit of 60 years at the time of application and offered the return of premium. The wife as administratrix of the estate, filed a complaint against DBP, which was later sustained in toto by the appellate court.

FACTS: Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of the company's Manila office and was given a receipt. The pertinent fact is, that according to the provisional receipt, three things had to be accomplished by the insurance company before there was a contract: (1) There had to be a medical examination of the applicant; (2) there had to be approval of the application by the head office of the company; and (3) this approval had in some way to be communicated by the company to the applicant. The application was immediately forwarded to the head office of the company at Montreal, Canada. On December 4, 1917, the policy was issued at Montreal. On December 18, 1917, Attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application. The following day the local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917. This letter was received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer died on December 20, 1917. ISSUE: Whether or not there was a perfected contract of insurance RULING: NO. The law applicable to the case is found to be the second paragraph of article 1262 of the (old) Civil Code providing that an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge. The further admitted facts are that the head office in Montreal did accept the application, did cable the Manila office to that effect, did actually issue the policy and did, through its agent in Manila, actually write the letter of notification and place it in the usual channels for transmission to the addressee. The fact as to the letter of notification thus fails to concur with the essential elements of the general rule pertaining to the mailing and delivery of mail matter as announced by the American courts, namely, when a letter or other mail matter is addressed and mailed with postage prepaid there is a rebuttable presumption of fact that it was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mails. But if any one of these elemental facts fails to appear, it is fatal to the presumption. For instance, a letter will not be presumed to have been received by the addressee unless it is shown that it was deposited in the post-office, properly addressed and stamped. Great Pacific Life vs. CA – see notes of Engr. Great Pacific Life Assurance Company v. Court of Appeals G.R. No. L-31845 April 30, 1979 FACTS: Private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year endowment policy on the life of his one-year old daughter Helen Go and received a binding deposit receipt with 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 applicant is not insurable according to the standard rates, and 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 application was disapproved. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private respondent Ngo Hing. Helen Go died. Thereupon, private respondent sought the payment of the proceeds of the insurance, but having failed in his effort, he filed the action for the recovery of the same before the Court of First Instance of Cebu, which rendered the adverse decision as earlier referred to against both petitioners. ISSUE: Whether or not the binding deposit receipt constituted a temporary contract of life insurance

ISSUE: Whether or not there is a perfected contract of insurance RULING NO. The MRI coverage shall take effect: (1) when the application shall be approved by the insurance pool; and (2) when the full premium is paid during the continued good health of the applicant. These two conditions, being joined conjunctively, must concur. Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP credited to its account with full knowledge that it was payment for Dan's premium. There was, as a result, no perfected contract of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that does not exist.

RULING: NO. Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an acknowledgment, on behalf of the company, 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; and that the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. Insular Life vs. Ebrado – see in Chapter 2 III.

INSURABLE INTEREST

Enriquez vs. Sun Life – see notes of Engr. Gaisano vs. Insurance Co – see notes of Engr. Enriquez v. Sun Life Assurance Company of Canada G.R. No. L-15895. November 29, 1920 Page 4 of 12

Gaisano Cagayan, Inc. v. Insurance Company of North America

G.R. No. 147839. June 8, 2006 FACTS: Respondent paid the fire insurance claims of Intercapitol Marketing Corporation (IMC), the maker of Wrangler Blue Jeans and Levi Strauss (Phils.) Inc. (LSPI). 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. Respondent filed a complaint for damages against petitioner because of the fire incident. In its Answer with Counter Claim, petitioner contends that it could not be held liable because the property covered by the insurance policies were destroyed due to fortuitous event or force majeure. Petitioner also avers that despite delivery of the goods to them, IMC and LSPI assumed the risk of loss when they secured fire insurance policies over the goods. ISSUE: Whether or not there is an insurable interest on book debts

in its name a total of ten insurance policies from Malayan Insurance (MICO) thru Alchester, its insurance agent. GOYU’s factory buildings in Valenzuela were later gutted by fire. Consequently, GOYU submitted its claim for indemnity on account of the loss insured against. MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by other creditors of GOYU alleging better rights to the proceeds than the insured. GOYU filed a complaint for specific performance and damages. RCBC, one of GOYU’s creditors, also filed with MICO its formal claim over the proceeds of the insurance policies, but said claims were also denied for the same reasons that MICO denied GOYU’s claims. Both the Trial Court and Court of Appeals sustained MICO and RCBC’s liabilities. ISSUE: Whether or not RCBC, as mortgagee, has any right over the insurance policies taken by GOYU, the mortgagor, in case of the occurrence of loss

RULING: YES. 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. Therefore, 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, 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. 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 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, and the petitioner is liable for such unpaid accounts.

RULING: YES. RCBC has preferential rights over the MICO insurance policies. It is basic and fundamental that the first mortgagee has superior rights over junior mortgagees or attaching creditors. It is also settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such that each one of them may insure the same property for his own sole benefit. There is no question that GOYU could insure the mortgaged property for its own exclusive benefit. In the present case, although it appears that GOYU obtained the subject insurance policies naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts, must be given due consideration in order to better serve the interest of justice and equity. GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision, it having been sufficiently established that it was the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were taken out.

Geagonia vs. CA – see notes of Engr.

Spouses Cha v. Court of Appeals G.R. No. 124520. August 18, 1997

Geagonia v. Court of Appeals G.R. No. 114427. February 6, 1995 FACTS: The petitioner is the owner of Norman's Mart located in the public market who obtained from the private respondent fire insurance policy which covered: "Stock-in-trade consisting principally of dry goods such as RTW's for men and women wear and other usual to assured's business." The policy required the insured to notify the insurer of any other existing insurance. Otherwise, all benefits under said policy shall be deemed forfeited, provided that the condition shall not apply when loss or damage is not more than P200,000.00. Fire of accidental origin broke out and the petitioner's insured stockin-trade were completely destroyed prompting him to file with the private respondent a claim under the policy. The private respondent denied the claim because it found that at the time of the loss the petitioner's stocks-in-trade were likewise covered by other fire insurance policies for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC). The basis of the private respondent's denial was the petitioner's alleged violation of the policy condition referring to “double insurance”. ISSUE: Whether or not there is a violation of “double insurance” RULING: NO. The insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate. Since the two policies of the PFIC do not cover the same interest as that covered by the policy of the private respondent, no double insurance exists. The non-disclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy. By stating within the policy itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage overinsurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent overinsurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured. RCBC vs. CA – see notes of Engr. RCBC, et al. v. Court of Appeals G.R. No. 128833. April 20, 1998 FACTS: Goyu and Sons, Inc. (GOYU) applied for credit facilities and accommodations with Rizal Commercial Banking Corporation (RCBC). As security, GOYU executed two real estate mortgages and two chattel mortgages in favor of RCBC. Under each of these four mortgage contracts, GOYU committed itself to insure the mortgaged property with an insurance company approved by RCBC, and subsequently, to endorse and deliver the insurance policies to RCBC. GOYU obtained Page 5 of 12

Spouses Cha vs. CA – see notes of Engr.

FACTS: Petitioner-spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with private respondent CKS Development Corporation (hereinafter CKS), as lessor. One of the stipulations of the one (1) year lease contract states: “18. . . . The LESSEE shall not 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. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit; . . .” Notwithstanding the above stipulation in the lease contract, the Cha spouses insured against loss by fire the merchandise inside the leased premises. On the day that the lease contract was to expire, fire broke out inside the leased premises. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the insurer (United) a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS, based on its lease contract with the Cha spouses. United refused to pay CKS. Hence, the latter filed a complaint against the Cha spouses and United. ISSUE: Whether or not the a stipulation in the lease contract may validly assign/transfer the proceeds of insurance to CKS RULING: NO. CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of the Insurance Code. Respondent CKS cannot, under the Insurance Code, be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest over said merchandise remains with the insured, the Cha spouses. 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 Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured.

IV.

DEVICES FOR ASCERTAINING RISK

SUNLIFE ASSURANCE COMPANY OF CANADA vs. The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA BACANI GR 105135, June 22, 1995 Facts: Robert John B. Bacani procured a life insurance contract for himself from Sunlife Assurance. The insured died in a plane crash. Bernarda Bacani filed a claim with Sunlife, seeking the benefits of the insurance policy taken by her son. Sunlife conducted an investigation and its findings prompted it to reject the claim and informed Bernarda Bacani that the insured did not disclose material facts relevant to the issuance of the policy and gave false statements in his application regarding his medical history, thus rendering the contract of insurance voidable.

Bernarda Bacani and her husband, Rolando Bacani, filed an action for specific performance against Sunlife with the Regional Trial Court and decided in their favor that that the facts concealed by the insured were made in good faith and under a belief that they need not be disclosed. Moreover, it held that the health history of the insured was immaterial since the insurance policy was "non-medical". The Court of Appeals affirmed. Issue: Whether there was concealment on the part of the insured. Rule: Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. Said Section provides: A neglect to communicate that which a party knows and ought to communicate, is called concealment. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries (The Insurance Code, Sec. 31). THELMA VDA. DE CANILANG vs. HON. COURT OF APPEALS and GREAT PACIFIC LIFE ASSURANCE CORPORATION G.R. No. 92492 June 17, 1993 Facts: Jaime Canilang applied for a "non-medical" insurance policy with Great Pacific Life Assurance Company ("Great Pacific") naming his wife, Thelma Canilang, as his beneficiary and was then issued ordinary life insurance policy. Jaime Canilang died of "congestive heart failure," "anemia," and "chronic anemia." Thelma, widow and beneficiary of the insured, filed a claim with Great Pacific which the insurer denied upon the ground that the insured had concealed material information from it. Thelma then filed a complaint against Great Pacific with the Insurance Commission for recovery of the insurance proceeds. During the hearing called by the Insurance Commissioner, Thelma testified that she was not aware of any serious illness suffered by her late husband and that, as far as she knew, her husband had died because of a kidney disorder. The Insurance Commissioner ruled in favor of Thelma holding that the ailment of Jaime Canilang was not so serious that, even if it had been disclosed, it would not have affected Great Pacific's decision to insure him and that there was no intentional concealment on the part of the insured Jaime Canilang. The Court of Appeals reversed the decision. Issue: Whether the deceased insured, Jaime Canilang, made a material concealment as the state of his health at the time of the filing of insurance application, justifying Great Pacific’s denial of the claim. Rule: Yes. Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment. Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all factors within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN vs. THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY G.R. No. 48049 June 29, 1989 Facts: Tan Lee Siong, father of herein petitioners, applied for life insurance with Philippine American Life (PhilAm Life). Tan Lee Siong died of hepatoma. His children then filed with PhilAm Life their claim for the proceeds of the life insurance policy but was denied and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Siong in his application for insurance. The premiums paid on the policy were thereupon refunded. The petitioners contend that PhilAm Life no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action. The Insurance Commissioner dismissed the complaint and was likewise affirmed by the Court of Appeals. Issue: Whether there was concealment Rule: Yes. Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. Page 6 of 12

After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. The phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years."

V.

POLICY

PACIFIC TIMBER EXPORT CORPORATION vs. THE HONORABLE COURT OF APPEALS and WORKMEN’S INSURANCE COMPANY, INC., GR L-38613. February 25, 1982 Facts: Pacific Timber secured temporary insurance from Workmen’s Insurance for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan Bay, Quezon Province to Okinawa and Tokyo, Japan. Workmen’s Insurance then issued a Cover Note insuring the said cargo. After the issuance of Cover Note but before the issuance of the two marine policies some of the logs intended to be exported were lost during loading operations in the Diapitan Bay. Pacific Timber informed the Workmen’s Insurance about the loss of ‘approximately 32 pieces of logs’ during loading of the ‘SS Woodlock’. Workemen’s Insurance denied the claim on the ground the entire shipment of logs covered by the two marines policies were received in good order at their point of destination and that said loss may not be considered as covered under the Cover Note because it had become null and void by virtue of the issuance of Marine Policy. Issue: Whether the Cover Note issued in advance of the issuance of a marine policy is binding as an insurance contract although no separate premium was paid therefor. Rule: Yes. The fact that no separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner’s contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are intended or required to be paid on a Cover Note. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer. Philippine American Life and General Insurance Company vs. ValenciaBagalacsa and EDUARDO Z. LUMANIOG, CELSO Z. LUMANIOG and RUBEN Z. LUMANIOG G.R. No. 139776. August 1, 2002 Facts: Legitimate children and forced heirs of their late father, Faustino sLumaniog, filed with the RTC, a complaint for recovery of sum of money against PhilAm Life alleging that: their father was insured under life insurance policy; their father died of “coronary thrombosis” on November 25, 1980; on June 22, 1981, they claimed and continuously claimed for all the proceeds and interests under the life insurance policy, despite repeated demands for payment and/or settlement of the claim due from PhilAm Life, the last of which is on December 1, 1994, it finally refused or disallowed said claim on February 14, 1995 on the ground that the cause of action had prescribed and that they are guilty of laches so they filed their complaint on June 20, 1995. It also contends that the deceased insured Faustino was guilty of concealment when he asserted in his application for insurance coverage that he had not been treated for indication of “chest pain, palpitation, high blood pressure, rheumatic fever, heart murmur, heart attack or other disorder of the heart or blood vessel” when in fact he was a known hypertensive since 1974. Issue: Whether the complaint filed for payment of life insurance proceeds is already barred by prescription of action. Rule: No determination. Philamlife had specifically alleged in the Answer that it had denied the Lumaniogs' claim per its letter dated 11 July 1983. Hence, due process demands that it be given the opportunity to prove that the Lumaniogs had received said letter. Said letter is crucial to Philamlife's defense that the filing of the complaint for recovery of sum of money in June 1995 is beyond the 10-year prescriptive period. The RTC committed a grave abuse of discretion when, in resolving the motion for reconsideration of Philamlife, it arbitrarily ruled in its Order dated 12 December 1997, that the period of 10 years had not yet lapsed. It based its finding on a mere explanation of the Lumaniogs' counsel and not on evidence presented by the parties as to the date when to reckon the prescriptive period. The ruling of the RTC that the cause of action of the Lumaniogs had not prescribed, is arbitrary and patently erroneous for not being founded on evidence on record, and therefore, the same is void. Consequently, while the Court of Appeals did not err in upholding the 7 June 1986 Order of the RTC, it committed a reversible error when it declared that the RTC did not commit any grave abuse of discretion in issuing

the Order dated 12 December 1997. The Supreme Court thus partially granted the petition, setting aside the decision of the Court of Appeals dated 30 April 1999 insofar only as it upheld the RTC Order dated 12 December 1997. A new judgment was entered reversing and setting aside the Order dated 12 December 1997 of the Regional Trial Court of Libmanan, Camarines Sur (Branch 56) and affirming its Order dated 20 June 1995. Said RTC was directed to proceed with dispatch with Civil Case L787.

the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term. Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties. American Home vs. Chua – see notes of Engr.

VI.

PREMIUM

Makati Tuscany vs. CA – see notes of Engr. Makati Tuscany Condominium Corp. v. Court of Appeals G.R. No. 95546. November 6, 1992 FACTS: Sometime in early 1982, private respondent American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation (TUSCANY) Insurance Policy #1 on the latter's building and premises, for a period beginning 1 March 1982 and ending 1 March 1983, with a total premium of P466,103.05. The premium was paid on installments, all of which were accepted by private respondent. On 10 February 1983, private respondent issued to petitioner Insurance Policy #2, which replaced and renewed the previous policy, for a term covering 1 March 1983 to 1 March 1984. The premium in the same amount was again paid on installments. All payments were likewise accepted by private respondent. On 20 January 1984, the policy was again renewed and private respondent issued to petitioner Insurance Policy #3 for the period 1 March 1984 to 1 March 1985. On this renewed policy, petitioner made two installment payments, both accepted by private respondent, P52,000.00 and P100,000.00. Thereafter, petitioner refused to pay the balance of the premium. Consequently, private respondent filed an action to recover the unpaid balance of P314,103.05 for last Insurance Policy #3. ISSUE: Whether or not payment by installment of the premiums due on an insurance policy invalidates the contract of insurance RULING: NO. The subject policies are valid even if the premiums were paid on installments. The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of the insurer's intention to honor the policies it issued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were not prepared in full. It appearing from the peculiar circumstances that the parties actually intended to make three (3) insurance contracts valid, effective and binding, petitioner may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy in March 1985. Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary. UCPB vs. Masagana – see notes of Engr. UCPB General Insurance Co., Inc. v. Masagana Telemart, Inc. [G.R. No. 137172. April 4, 2001] FACTS: In the Supreme Court’s decision (between the same parties) of 15 June 1999, the main issue “whether the fire insurance policies issued by petitioner to the respondentO had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date and after the occurrence of the (fire) risk insured against.” was resolved in the negative in view of Section 77 of the Insurance Code. It reversed and set aside the decision of the Court of Appeals. In the motion filed, petitioner questions the ruling and posits that Sec.77 of Insurance Code which states that “Hno policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid...” admits of exceptions as in this case. ISSUE: Whether or not Sec. 77 of the Insurance Code admits of exceptions in property insurance RULING: YES. The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace period provision applies. The second is that covered by Section 78 of the Insurance Code, which provides: “Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid.” A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals, wherein the Court ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss; that the subject policies are valid even if the premiums were paid on installments. Tuscany also provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply means that if the insurer has granted Page 7 of 12

American Home Assurance Co. v. Chua [G.R. No. 130421. June 28, 1999] FACTS: Petitioner is a domestic corporation engaged in the insurance business. Respondent obtained from petitioner a fire insurance covering the stock-in-trade of his business, Moonlight Enterprises, located at Valencia, Bukidnon. The insurance was due to expire on 25 March 1990. On 5 April 1990 respondent issued PCIBank Check to petitioner’s agent, James Uy, as payment for the renewal of the policy. In turn, the latter delivered Renewal Certificate to respondent. The check was drawn against a Manila bank and deposited in petitioner’s bank account in Cagayan de Oro City. The corresponding official receipt was issued on 10 April. Subsequently, a new insurance policy was issued for the period 25 March 1990 to 25 March 1991. On 6 April 1990 Moonlight Enterprises was completely razed by fire. Respondent filed an insurance claim with petitioner and four other co-insurers. Petitioner refused to honor the claim notwithstanding several demands by respondent, thus, the latter filed an action against petitioner before the trial court. In its defense, petitioner claimed there was no existing insurance contract when the fire occurred since respondent did not pay the premium. ISSUE: Whether or not there was a valid payment of premium that would result to a valid and binding contract of insurance, considering respondent’s checks was cashed after the occurrence of fire RULING: YES. Section 78 (now Section 79) of the Insurance Code explicitly provides: “An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid.” This Section establishes a legal fiction of payment and should be interpreted as an exception to Section 77. Here, according to the trial court, the renewal certificate issued to respondent contained the acknowledgment that premium had been paid. It is not disputed that the check drawn by respondent in favor of petitioner and delivered to its agent was honored when presented and petitioner forthwith issued its official receipt. The best evidence of such authority is the fact that petitioner accepted the check and issued the official receipt for the payment. It is, as well, bound by its agent’s acknowledgment of receipt of payment. Since there was a valid payment of premium, then there is a valid and binding contract of insurance that would hold herein insurer liable. Spouses Tibay vs. CA – see notes of Engr. Spouses Tibay v. Court of Appeals [G.R. No. 119655, May 24, 1996] FACTS Private respondent Fortune Life and General Insurance Co., Inc. (FORTUNE) issued Fire Insurance Policy in favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential building located at Makati City, together with all their personal effects therein, with provision that “(t)his policy xxx is not in force until the premium has been fully paid and duly receipted by the Company x x x”. Petitioner Violeta Tibay only paid P600.00 leaving a considerable balance unpaid. The insured building was completely destroyed by fire. Two days later Violeta Tibay paid the balance of the premium. On the same day, she filed with FORTUNE a claim on the fire insurance policy. FORTUNE denied the claim of Violeta for violation of Policy Condition No. 2 and of Sec. 77 of the Insurance Code. Violeta and the other petitioners sued FORTUNE for damages. The trial court ruled for petitioners. The Court of Appeals reversed the court a quo by declaring FORTUNE not to be liable to plaintiff-appellees therein but ordering defendant-appellant to return to the former the premium plus interest until full payment. ISSUE Whether or not fire insurance policy is valid, binding and enforceable upon mere partial payment of premium. RULING NO. The Policy provides for payment of premium in full. Premium is the elixir vitae of the insurance business because by law the insurer must maintain a legal reserve fund to meet its contingent obligations to the public, hence, the imperative need for its prompt payment and full satisfaction. Accordingly, where the premium has only been partially paid and the balance paid only after the peril insured against has occurred, the insurance contract did not take effect and the insured cannot collect at all on the policy. This is fully supported by Sec. 77 of the Insurance Code. Thus, no vinculum juris whereby the insurer bound itself to indemnify the assured according to law ever resulted from the fractional payment of premium. The insurance contract itself expressly provided that the policy would be effective only when

the premium was paid in full. It would have been altogether different were it not so stipulated. Ergo, petitioners had absolute freedom of choice whether or not to be insured by FORTUNE under the terms of its policy and they freely opted to adhere thereto.

entrusted the check to the H.H. Bayne Adjustment Co. for disposition and delivery to the proper party. In the meantime, the car was delivered to Enrique Mora without the consent of the H.S. Reyes, Inc., and without payment to the Bonifacio Bros. Inc. and the Ayala Auto Parts Co. of the cost of repairs and materials.

A maxim of recognized practicality is the rule that the expressed exception or exemption excludes others. Exceptio firm at regulim in casibus non exceptis. The express mention of exceptions operates to exclude other exceptions; conversely, those which are not within the enumerated exceptions are deemed included in the general rule. Thus, under Sec. 77, as well as Sec. 78 (now Sec.79), until the premium is paid, and the law has not expressly excepted partial payments, there is no valid and binding contract. Hence, in the absence of clear waiver of prepayment in full by the insurer, the insured cannot collect on the proceeds of the policy.

ISSUE Who among the following has better right over the insurance proceeds: Enrique Mora, H.S. Reyes, Inc., Bonifacio Bros., Inc. or Ayala Auto Parts Company?

Phil Phoenix vs. Woodworks – see notes of Engr. Philippine Phoenix Surety & Insurance , Inc. v. Woodworks, Inc. [G.R. No. L-22684, August 31, 1967] FACTS Plaintiff-appellee Philippine Phoenix Surety & Insurance Co., Inc. issued to defendant a fire policy; that the premiums of said policy amounted to P6,051.95; the margin fee pursuant to the adopted plan as an implementation of Republic Act 2609 amounted to P363.72; the documentary stamps attached to the policy was P96.42; that the defendant-appellant Woodworks, Inc. paid P3,000.00 under official receipt of plaintiff; Plaintiff-appellee commenced an action for specific performance seeking payment of the remaining balance in premiums. Defendant-appellant argued that non-payment of premium produced cancellation of the contract of insurance. ISSUE Whether or not there is a perfected contract of insurance upon partial payment of premium. RULING YES. There is, consequently, no doubt at all that, as between the insurer and the insured, there was not only a perfected contract of insurance but a partially performed one as far as the payment of the agreed premium was concerned. Thereafter the obligation of the insurer to pay the insured the amount for which the policy was issued in case the conditions therefor had been complied with, arose and became binding upon it, while the obligation of the insured to pay the remainder of the total amount of the premium due became demandable. Appellant’s theory that non-payment by it of the premium due, produced the cancellation of the contract of insurance. Such theory would place exclusively in the hands of one of the contracting parties the right to decide whether the contract should stand or not. Rather the correct view would be that the contract had become perfected, the parties could demand from each other the performance of whatever obligations they had assumed. In the case of the insurer, it is obvious that it had the right to demand from the insured the completion of the payment of the premium due or sue for the rescission of the contract. As it chose to demand specific performance of the insured’s obligation to pay the balance of the premium, the latter’s duty to pay is indeed indubitable.

VII.

PERSONS ENTITLED TO RECOVER ON THE POLICY

Bonifacio Bros vs. Mora – see notes of Engr. Bonifacio Bros. Inc. et al. v. Mora et al. [G.R. No. L-20853, May 29, 1967] FACTS Enrique Mora, owner of Oldsmobile sedan model 1956, bearing plate No. QCmortgaged the same to the H.S. Reyes, Inc., with the condition that the former would insure the automobile with the latter as beneficiary. The automobile was thereafter insured on June 23, 1959 with the State Bonding & Insurance Co., Inc., and motor car insurance policy A-0615 was issued to Enrique Mora containing the clause: “4. The Insured may authorize the repair of the Motor Vehicle necessitated by damage for which the Company may be liable under this Policy provided that: — (a) The estimated cost of such repair does not exceed the Authorized Repair Limit, (b) A detailed estimate of the cost is forwarded to the Company without delay, subject to the condition that "Loss, if any is payable to H.S. Reyes, Inc.," by virtue of the fact that said Oldsmobile sedan was mortgaged in favor of the said H.S. Reyes, Inc. and that under a clause in said insurance policy, any loss was made payable to the H.S. Reyes, Inc. as Mortgagee;” During the effectivity of the insurance contract, the car met with an accident. The insurance company then assigned the accident to the Bayne Adjustment Co. for investigation and appraisal of the damage. Enrique Mora, without the knowledge and consent of the H.S. Reyes, Inc., authorized the Bonifacio Bros. Inc. to furnish the labor and materials, some of which were supplied by the Ayala Auto Parts Co. For the cost of labor and materials, Enrique Mora was billed at P2,102.73 through Bayne Adjustment Co. The insurance company after claiming a franchise in the amount of P100, drew a check in the amount of P2,002.73, as proceeds of the insurance policy, payable to the order of Enrique Mora or H.S. Reyes,. Inc., and Page 8 of 12

RULING It is H.S. Reyes, Inc. It is fundamental that contracts take effect only between the parties thereto, except in some specific instances provided by law where the contract contains some stipulation in favor of a third person. Such stipulation is known as stipulation pour autrui or a provision in favor of a third person not a pay to the contract. In this connection, the rule that the fairest test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract. In the instant case, the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or material men in case of repair of the car in question. The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to benefit. Vda de Consuegra vs. GSIS – see notes of Engr. Vda. De Consuegra v. GSIS [G.R. No. L-28093, January 30, 1971] FACTS The late Jose Consuegra, at the time of his death, was employed as a shop foreman of the office of the District Engineer in the province of Surigao del Norte. In his lifetime, Consuegra contracted two marriages, the first with herein respondent Rosario Diaz, out of which marriage were born two children; and the second, which was contracted in good faith while the first marriage was subsisting, with herein petitioner Basilia Berdin in the same parish and municipality, out of which marriage were born seven children. It is the contention of appellants that the designated beneficiaries in the life insurance of the late Jose Consuegra should also be the exclusive beneficiaries in the retirement insurance of said deceased. In other words, it is the submission of appellants that because the deceased Jose Consuegra failed to designate the beneficiaries in his retirement insurance, the appellants who were the beneficiaries named in the life insurance should automatically be considered the beneficiaries to receive the retirement insurance benefits. ISSUE Whether or not the designated life insurance beneficiaries of the late Jose Consuegra are also the exclusive beneficiaries in the retirement insurance of the said deceased. RULING NO. The beneficiary named in the life insurance does not automatically become the beneficiary in the retirement insurance unless the same beneficiary in the life insurance is so designated in the application for retirement insurance. In the case of the proceeds of a life insurance, the same are paid to whoever is named the beneficiary in the life insurance policy. As in the case of a life insurance provided for in the Insurance Act (Act 2427, as amended), the beneficiary in a life insurance under the GSIS may not necessarily be a 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. Retirement insurance is 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 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. Go vs. Redfern – see notes of Engr. Go v. Redfern [G.R. No. L-47705, April 25, 1941 FACTS Redfern obtained an insurance policy against accidents from the International Assurance Co, Ltd. Redfern later died from an accident. The mother of the deceased, presenting the necessary evidence of the death of Redfern, sought to claim the proceeds of the insurance policy from the insurance company. The company, however, denied such claim, on the ground that the insurance policy was amended in the lifetime of Redfern to include another beneficiary, Concordia Go. Hence, an

action was filed to determine who has the right to collect the insurance proceeds of the deceased Redfern. The mother claimed that the addition of the co-beneficiary is illegal. Go, on her part, alleged the contrary. The trial court ruled in favor of Angela Redfern, the mother. Go appealed. ISSUE Whether or not the addition of Concordia Go as co-beneficiary is valid RULING YES. When designated in a policy, the beneficiary acquires a right of which he cannot be deprived of without his consent, unless the right has been reserved specifically to the insured to modify the policy. Unless the insured has reserved specifically the right to change or to modify the policy, with respect to the beneficiary, said policy constitutes an acquired right of the beneficiary, which cannot be modified except with the consent of the latter. In this case, it is admitted that Redfern did not reserve expressly his right to change or modify the policy. Change implies the idea of an alteration. The addition of Go's name as one of the beneficiaries of the policy constitutes change as all addition is an alteration. The addition of Go's name changed the policy inasmuch as there are two beneficiaries instead of one, and thus in effect the original beneficiary cannot receive the full amount of the policy.

The trial court decided in favor of private respondent corporation. Issue: Whether rusting of steel pipes in the course of a voyage is a peril of the sea. Held: Yes, there is no question that the rusting of steel pipes in the course of a voyage is a “peril of the sea” in view of the toll on the cargo of wind, water, and salt conditions. At any rate if the insurer cannot be held accountable therefor, we would fail to observe a cardinal rule in the interpretation of contracts, namely, that any ambiguity therein should be construed against the maker/issuer/drafter thereof, namely, the insurer. Besides the precise purpose of insuring cargo during a voyage would be rendered fruitless. Be it noted that any attack of the 15-day clause in the policy was foreclosed right in the pre-trial conference. Filipino Merchants Insurance Co. Inc vs. CA and Choa Tiek Seng GR 85141, Nov 28, 1989 Facts: Choa insured 600 tons of fishmeal for the sum of P267,653.59 from Bangkok, Thailand to Manila against all risks under warehouse to warehouse terms. What was imported in the SS Bougainville was 59.940 metric tons at $395.42 a ton. The cargo was unloaded from the ship and 227 bags were found to be in bad condition by the arrastre.

Country Bankers vs. Lianga Bay – see notes of Engr. Country Bankers Insurance Corp. v. Lianga Bay and Community Multi-Purpose Cooperative, Inc. [G.R. No. L-47705, April 25, 1941] FACTS Petitioner and the respondent entered into a contract of fire insurance. Under Fire Insurance Policy, the petitioner insured the respondent’s stocks-in-trade against fire loss, damage or liability for one year from June 20, 1989 at 4:00 p.m. On July 1, 1989, the respondent’s building was gutted by fire and reduced to ashes, resulting in the total loss of the respondent’s stocks-in-trade, pieces of furnitures and fixtures, equipments and records. Due to the loss, the respondent filed an insurance claim with the petitioner under its Fire Insurance Policy. The petitioner, however, denied the insurance claim on the ground that the building was set on fire by two (2) NPA rebels who wanted to obtain canned goods, rice and medicines as provisions for their comrades in the forest, and that such loss was an excepted risk under paragraph No. 6 of the policy conditions of Fire Insurance Policy. Finding the denial of its claim unacceptable, the respondent then instituted in the trial court the complaint for recovery of “loss, damage or liability” against petitioner. In the course of trial, petitioner relied on what is declared later as “hearsay evidence”. ISSUE Whether or not petitioner is still liable despite express stipulation of excepted risk RULING YES. Where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss comes within the purview of the exception or limitation set up. If a proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability. Stated elsewise, since the petitioner in this case is defending on the ground of non-coverage and relying upon an exemption or exception clause in the fire insurance policy, it has the burden of proving the facts upon which such excepted risk is based, by a preponderance of evidence. In this case, petitioner failed to do so. Petitioner heavily relied on “hearsay evidence” where the witnesses have no personal knowledge and a police report that was never been a subject of an independent investigation. Petitioner’s evidence to prove its defense is sadly wanting and thus, gives rise to its liability to the respondent under Fire Insurance Policy. VIII.

DOUBLE INSURANCE

No cases. IX.

REINSURANCE

Choa made a formal claim against Filipino Merchants Insurance Company (FMIC) for P51,568.62 He also presented a claim against the ship, but FMIC refused to pay the claim. The plaintiff brought an action against the company and presented a third-party complaint against the vessel and the arrastre contractor. The trial court rendered judgment in favor of Choa for the sum of P51,568.62 with interest at legal rate. The common carrier, Compagnie, was ordered to pay as a joint debtor. On appeal, the respondent court affirmed the decision of the lower court insofar as the award on the complaint is concerned and modified the same with regard to the adjudication of the third-party complaint. A motion for reconsideration of the aforesaid decision was denied. The AC made FMIC pay but absolved the common carrier, Compagnie. Hence this petition. Issue: Whether the "all risks" clause of the marine insurance policy held the petitioner liable to Choa for the partial loss of the cargo, notwithstanding the clear absence of proof of some fortuitous event, casualty, or accidental cause to which the loss is attributable. Held: An “all risks” policy covers all losses other than those caused by the willful and fraudulent act of insured. The very nature of the term “all risks” must be given a broad and comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. This is pursuant to the very purpose of an “all risks” insurance to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property. An “all risks” policy has been evolved to grant greater protection than that afforded by the “perils clause,” in order to assure that no loss can happen through the incidence of a cause neither insured against nor creating liability in the ship; it is written against all losses, that is, attributable to external causes. Oriental Assurance Corp vs. CA and Panama Saw Mill Co Inc GR 94052, Aug 9, 1991 Facts: Sometime in January 1986, Panama Sawmill Co., Inc. (Panama) bought, in Palawan, 1,208 pieces of apitong logs, with a total volume of 2,000 cubic meters. It hired Transpacific Towage, Inc., to transport the logs by sea to Manila and insured it against loss for P1M with Oriental Assurance Corporation (Oriental Assurance). There is a claim by Panama that the insurance coverage should have been for P3M were it not for the fraudulent act of one Benito Sy Yee Long to whom it had entrusted the amount of P6,000.00 for the payment of the premium for a P3M policy. On 28 January 1986, the two barges were towed by one tugboat, the MT “Seminole.” But, as fate would have it, during the voyage, rought seas and strong winds caused damage to Barge TPAC-1000 resulting in the loss of 497 pieces of logs out of the 598 pieces loaded thereon.

No cases. X.

MARINE INSURANCE

Cathay Insurance vs. CA and Remington Industrial Sales Corp GR L-76145, June 30, 1987 Facts: This was a complaint filed by Remington Industrial against Cathay Insurance seeking collection of the sum of P868,339.15 representing Remington’s losses and damages incurred in a shipment of seamless steel pipes under an insurance contract in favor of the Remington as the insured, consignee or importer of aforesaid merchandise while in transit from Japan to the Philippines on board vessel SS “Eastern Mariner.” The total value of the shipment was P2,894,463.83 at the prevailing rate of P7.95 to a dollar in June and July 1984, when the shipment was made. Page 9 of 12

Panama demanded payment for the loss but Oriental Assurance refuse on the ground that its contracted liability was for “TOTAL LOSS ONLY.” Issue: Whether Oriental Assurance is liable. Held: No, the terms of the contract constitute the measure of the insurer’s liability and compliance therewith is a condition precedent to the insured’s right to recovery from the insurer. Whether a contract is entire or severable is a question of intention to be determined by the language employed by the parties. The fact that the logs were loaded on two different barges did not make the contract several and divisible as to the items insured. Only one premium was paid for the entire shipment, making for only one

cause or consideration. The insurance contract must, therefore, be considered indivisible.

Malayan Insurance Co Inc v. PAP Co Ltd GR 200784, Aug 7, 2013

The insurer’s liability was for “total loss only.” A total loss may be either actual or constructive (Sec. 129, Insurance Code). A constructive total loss is one which gives to a person insured a right to abandon.

Facts: Malayan Insurance Company (Malayan) issued fire insurance policy to PAP Co., Ltd. (PAP Co.) for the latter’s machineries and equipment located at Sanyo Precision Phils. Bldg., Phase III, Lot 4, Block 15, PEZA, Rosario, Cavite (Sanyo Building) for Fifteen Million Pesos (P15,000,000.00) effective for a period of one (1) year and was procured by PAP Co. for Rizal Commercial Banking Corporation (RCBC), the mortgagee of the insured machineries and equipment.

In the absence of either actual or constructive total loss, there can be no recovery by the insured Panama against the insurer, Oriental Assurance. Isabela Roque vs. IAC and Pioneer Insurance & Surety Corp GR L-66935, Nov 11, 1985 Facts: Manila Bay Lighterage Corporation (Manila Bay) a common carrier, entered into a contract with the Isabela Roque whereby the former would load and carry OR board its barge Mable 10 about 422.18 cubic meters of logs from Malampaya Sound, Palawan to North Harbor, Manila. Roque insured the logs against loss for P100,000.00 with Pioneer Insurance and Surety Corporation (Pioneer). Roque loaded on the barge, 811 pieces of logs at Malampaya Sound, Palawan for carriage and delivery to North Harbor, Port of Manila, but the shipment never reached its destination because Mable 10 sank with the 811 pieces of logs somewhere off Cabuli Point in Palawan on its way to Manila. As alleged by Roque and as found by both the trial and appellate courts, the barge where the logs were loaded was not seaworthy such that it developed a leak. The appellate court further found that one of the hatches was left open causing water to enter the barge and because the barge was not provided with the necessary cover or tarpaulin, the ordinary splash of sea waves brought more water inside the barge. Roque demand payment from Manila Bay for unrealized profits but the latter ignored the demand. The RTC ruled in favor of Roque. Issue: Whether there is a warranty of seaworthiness by the cargo owner Held: In marine insurance (which includes cargo), the implied warranty of seaworthiness attaches to the shipper whether shipowner or not. There can be no mistaking the fact that the term "cargo" can be the subject of marine insurance and that once it is so made, the implied warranty of seaworthiness immediately attaches to whoever is insuring the cargo whether he be the shipowner or not. Moreover, the fact that the unseaworthiness of the ship was unknown to the insured is immaterial in ordinary marine insurance and may not be used by him as a defense in order to recover on the marine insurance policy. Go Tiaoco vs. Union Insurance Society of Canton, Ltd. GR 13983, Sep 1, 1919 Facts: The Union Insurance Society of Canton, Ltd., (Union Insurance) issued a policy of marine insurance upon a cargo of rice belonging to Go Tiaoco Brothers (Tiaoco), which was transported on the steamship Hondagua, from the port of Saigon to Cebu. On discharging the rice from one of the compartments in the after hold, upon arrival at Cebu, it was discovered that 1,473 sacks had been damaged by sea water. The loss so resulting to the owners of rice, after proper deduction had been made for the portion saved, was P3,875.25. The trial court found that the inflow of the sea water during the voyage was due to a defect in one of the drain pipes of the ship and concluded that the loss was not covered by the policy of insurance. Judgment was accordingly entered in favor of the Union Insurance in which Tiaoco appealed. Issue: Whether the insurer is liable on this policy for the loss caused. Held: No. A marine insurer upon a policy in the usual form is not liable for a loss which, in the ordinary course of events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions. In every contract of insurance upon anything which is the subject of marine insurance a warranty on the part of the insured is implied to the effect that the ship is (or was) seaworthy at the time of the inception of the voyage; and this means that the ship must be adequately equipped to carry the cargo which is the subject of insurance. x x x that a loss which, in the ordinary course of events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is rather due to what has been aptly called the "peril of the ship." There must, in order to make the insurer liable, be "some casualty, something which could not be foreseen as one of the necessary incidents of the adventure. The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen." XI. Page 10 of 12

FIRE INSURANCE

After the passage of almost a year but prior to the expiration of the insurance coverage, PAP Co. renewed the policy on an "as is" basis for the period May 13, 1997 to May 13, 1998. During the subsistence of the renewal policy, the insured machineries and equipment were totally lost by fire. PAP Co. filed a fire insurance claim with Malayan in the amount insured. Malayan denied the claim upon the ground that, at the time of the loss, the insured machineries and equipment were transferred by PAP Co. from the Sanyo Building to the Pace Pacific, a location different from that indicated in the policy. PAP Co. argued that Malayan cannot avoid liability as it was informed of the transfer by RCBC, the party duty-bound to relay such information. However, Malayan reiterated its denial of PAP Co.’s claim. Distraught, PAP Co. filed the complaint below against Malayan. Issue: Whether Malayan Insurance is liable for the loss of the insured machineries and equipment suffered by PAP Co Ltd. Held: No. Under Section 168 of the Insurance Code, the insurer is entitled to rescind the insurance contract in case of an alteration in the use or condition of the thing insured. Section 168 of the Insurance Code provides, as follows: Section 68. An alteration in the use or condition of a thing insured from that to which it is limited by the policy made without the consent of the insurer, by means within the control of the insured, and increasing the risks, entitles an insurer to rescind a contract of fire insurance. Accordingly, an insurer can exercise its right to rescind an insurance contract when the following conditions are present, to wit: 1) the policy limits the use or condition of the thing insured; 2) there is an alteration in said use or condition; 3) the alteration is without the consent of the insurer; 4)the alteration is made by means within the insured’s control; and 5) the alteration increases the risk of loss. XII.

CASUALTY INSURANCE

Biagtan vs. Insular Life Assurance Company Ltd GR L-25579, March 29, 1972 Facts: Juan S. Biagtan was insured with defendant Insular life Assurance Company (Insular) 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 x x x 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.” On the night of May 20, 1964 or the first hours of May 21, 1964, while the said life policy and supplementary contract were in full force and effect, the house of insured Juan S. Biagtan was robbed by a band of robbers who were charged in and convicted by the Court of First Instance of Pangasinan for robbery with homicide; that in committing the robbery, the robbers, on reaching the staircase landing of the second floor, rushed towards the doors of the second floor room, where they suddenly met a person near the door of one of the rooms who turned out to be the insured Juan S. Biagtan who received thrusts from their sharp-pointed instruments, causing wounds on the body of said Juan S. Biagtan resulting in his death. Issue: Whether the wounds received by the insured at the hands of the robbers were inflicted intentionally. Held: No. Since the parties presented no evidence and submitted the case upon stipulation, there was no “proof that the act of receiving thrust (sic) from the sharp-pointed instrument of the robbers was intended to inflict injuries upon the person of the insured or any other person or merely to scare away any person so as to ward off any resistance or obstacle that might be offered in the pursuit of their main objective which was robbery.” It should be noted that the exception in the accidental benefit clause invoked by the appellant does not speak of the purpose—whether homicidal or not—of a third party in causing the injuries, but only of the fact that such injuries have been “intentionally” inflicted—this obviously to distinguish them

from injuries which, although received at the hands of a third party, are purely accidental. Finman General Assurance Corp. vs. CA and Julia Surposa GR 100970, Sep 2, 1992 Facts: Deceased Carlie Surposa was insured with Finman General Assurance Corp. (Finman) under Finman General Teachers Protection Plan and Individual Policy with his parents, spouses Julia and Carlos Surposa, and brothers Christopher, Charles and Clifton, all surnamed Surposa, as beneficiaries. While said insurance policy was in full force and effect, the insured Carlie died 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 St. Bacolod City after attending the “Maskarra Annual Festival.” Julia and other beneficiaries filed a written notice of claim with Finman but was denied contending that murder and assault are not within the scope of the coverage of the insurance policy. Issue: Whether death resulting from assault or murder is deemed included in terms “accident” and “accidental”

Issue: Whether the death of the insured is accidental Held: Yes. An accident is an event which happens without any human agency or, if happening through human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also been defined as an injury which happens by reason of some violence or casualty to the insured without his design, consent, or voluntary cooperation. The Court is convinced that the incident that resulted in Lim’s death was indeed an accident. This was the firing of the gun, which was the additional unexpected and independent and unforeseen occurrence that led to the insured person’s death. It cannot be said that Lim willfully exposed himself to needless peril. 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. Indeed, most accidents are caused by negligence.

Held: Yes. 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. There is no accident when a deliberate act is performed unless some additional, unexpected, independent, and unforeseen happening occurs which produces or brings about the result of injury or death. 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 the policies insuring against death or injury from accident.” 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. In the first place, the insured and his companion were on their way home from attending a festival. Paramount Insurance Corp. Remondeulaz GR 173773, Nov 28, 2012

her and pointed the gun at her. She pushed it aside and said it might be loaded. He assured her it was not and then pointed it to his temple. The next moment there was an explosion and Lim slumped on the floor. He was dead before he fell. As beneficiary, his wife Nerissa Lim sought payment on the policy but her claim was rejected and argued that there was no accident.

vs.

Spouses

Yves

XIII. No cases. XIV.

Issue: Whether Paramount is liable under the insurance policy for the loss of Remondeulaz’ vehicle.

LIFE INSURANCE

No cases. XV.

MICROINSURANCE

XVI.

CLAIM SETTLEMENT

No cases.

and Maria Teresa

Facts: Remondeulaz insured with Paramount Insurance Corp. (Paramount) their 1994 Toyota Corolla sedan under a comprehensive motor vehicle insurance policy for one year. During the effectivity of said insurance, Remondeulaz’ car was unlawfully taken and they immediately reported the theft to the Traffic Management Command of the PNP who made them accomplish a complaint sheet. In said complaint sheet, Remondeulaz alleged that a certain Ricardo Sales (Sales) took possession of the subject vehicle to add accessories and improvements thereon, however, Sales failed to return the subject vehicle within the agreed three-day period. As a result, Remondeulaz notified Paramount to claim for the reimbursement of their lost vehicle but it refused to pay maintaining that it is not liable for the loss on the ground that the car cannot be classified as stolen as Remondeulaz entrusted the possession to another person.

SURETYSHIP

Finman General Assurance vs. CA, GR 138737 – see under Casualty Insurance Prudential Guarantee and Assurance Inc. vs. Trans-Asia Shipping Lines Inc. GR 151890, June 20, 2006 Facts: Trans-Asia, is the owner of the vessel M/V Asia Korea. The vessel was insured with Prudential for loss/damage of the hull and machinery arising from perils of fire and explosion. While the policy was in force, a fire broke out while M/V Asia Korea was undergoing repairs at the port of Cebu. On August 13, 1997, Trans-Asia filed a claim for damages and executed a “Loan and Trust Receipt” in the sum of P3,000,000 as a loan without interest received from Prudential. However, Prudential denied the claim due to breach of policy condition, among them “WARRANTED VESSEL CLASSED AND CLASS MAINTAINED.” Again, Trans-Asia filed a Complaint for Sum of Money against Prudential and sought the amount P8,395,072.26 alleging the balance of indemnity due upon the insurance policy in the amount of P11,395,072.26 and similarly sought interest at 42% per annum citing Section 243 of PD 1460.

Held: Yes. In People v. Bustinera, this Court had the occasion to interpret the “theft clause” of an insurance policy. In this case, the Court explained that when one takes the motor vehicle of another without the latter’s consent even if the motor vehicle is later returned, there is theft—there being intent to gain as the use of the thing unlawfully taken constitutes gain. Also, in Malayan Insurance Co., Inc. v. Court of Appeals, this Court held that the taking of a vehicle by another person without the permission or authority from the owner thereof is sufficient to place it within the ambit of the word theft as contemplated in the policy, and is therefore, compensable. Records would show that Remondeulaz entrusted possession of their vehicle only to the extent that Sales will introduce repairs and improvements thereon, and not to permanently deprive them of possession thereof. Since, Theft can also be committed through misappropriation, the fact that Sales failed to return the subject vehicle to Remondeulaz constitutes Qualified Theft. Sun Insurance Office Ltd vs. CA and Nerissa Lim GR 92383 July 17, 1992 Facts: Sun Insurance Office Ltd issued a personal accident policy to Felix Lim, Jr. with a face value of P200,000. Two months later, he was dead with a bullet wound on his head. Pilar Nalagon, Lim’s secretary, was the only eyewitness to his death. It was after his mother’s birthday party. According to Nalagon, Lim was in a happy mood (but not drunk) and was playing with his handgun, from which he had previously removed the magazine. As she watched television, he stood up in front of Page 11 of 12

Issue: Whether Trans-Asia is entitled to collect interest on the proceeds for the duration of the delay at the rate twice the ceiling prescribed by the Monetary Board Held: Yes Sections 243 and 244 of the Insurance Code apply when the Court finds an unreasonable delay or refusal in the payment of the insurance claims. Under Section 243, the amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof of loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration; but if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. The term “double interest” must be interpreted to mean 24% per annum. It is settled that an award of double interest is lawful and justified under Sections 243 and 244 of the Insurance Code. Tio Khe Chio vs. Court of Appeals and Eastern Assurance and Surety Corp. GR 76101-02, Sep 30, 1991

Facts: Tio Khe Chio (Chio) imported bags of fishmeal from USA. The goods were insured with Eastern Assurance and Surety Corp. (EASCO) and shipped on board a vessel owned by Far Eastern Shipping Company (Far Eastern). When the goods reached Manila, they were found to have been damaged by sea water which rendered the fishmeal useless. Chio filed with EASCO and Far Eastern for damages. EASCO filed a counterclaim against Chio for the unpaid insurance premium. Chio claims that the legal rate of interest to be imposed in actions for damages arising from unpaid insurance claims should be twelve (12%) per cent pursuant to Articles 243 and 244 of the Insurance Code, while EASCO claims that is should be six (6%) per cent under Article 2209 of the Civil Code. Issue: Whether the legal rate of interest to be imposed in actions for damages arising from unpaid insurance claims is 6% or 12% Held: The legal rate of interest is six (6%) per annum because insurance claim is not a loan or forbearance of money. Sections 243 and 244 of the Insurance Code apply only when the Court finds an unreasonable delay or refusal in the payment of the claims. The adjusted rate mentioned in Circular No. 416 of the Central Bank refers only to loans or forbearance of money, goods or credits and court judgments thereon but not to court judgments for damages arising from injury to persons and loss of property which does not involve a loan. The rates under the Usury Law are applicable only to interest by way of compensation for the use or forbearance of money, interest by way of damages is governed by Article 2209 of the Civil Code which provides that: “If the obligation consists in the payment of a sum of money and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six per cent per annum.”

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