2006nr38 - Comm-Ins Cases

Narratives
Insurance Law (Commercial)

Michael Vernon Guerrero Mendiola
2006
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Verendia vs$ Court o* A&&eals +G' ,6#--. 22 /anuar0 1--#2 3$$$$$$$$$ 1
'i4al Suret0 5 Insurance Com&an0 vs$ Court o* A&&eals +G' 112#60. 16 /une 20002 3$$$$$$$$$ 2
%hilamcare 7ealth S0stems Inc$ vs$ Court o* A&&eals +G' 1286,6. 16 March 20022 3$$$$$$$$$ 9
:ortune Insurance and Suret0 Co$ Inc$ vs$ Court o* A&&eals +G' 1182,6. 2# Ma0 1--82 3$$$$$$$$$ 6
;nri<ue4 vs$ Sun Li*e Assurance Com&an0 o* Canada +G' 186-8. 2- Novemer 1-202 3$$$$$$$$$ ,
=evelo&ment >an" o* the %hili&&ines vs$ Court o* A&&eals +G' 10--#,. 21 March 1--92 3$$$$$$$$$ 6
Great %aci*ic Li*e Assurance Com&an0 vs$ Court o* A&&eals +G' L!#1698. #0 A&ril 1-,-2 3$$$$$$$$$ 10
S&ouses Cha vs$ Court o* A&&eals +G' 129820. 16 Au(ust 1--,2 3$$$$$$$$$ 11
Gea(onia vs$ Court o* A&&eals +G' 11992,. 6 :eruar0 1--82 3$$$$$$$$$ 12
'i4al Commercial >an"in( Cor&oration ('C>C) vs$ Court o* A&&eals +G' 1266##. 20 A&ril 1--62 3$$$$$$$$$ 19
Great %aci*ic Li*e Assurance Cor&$ vs$ Court o* A&&eals +G' 11#6--. 1# ?ctoer 1---2 3$$$$$$$$$ 1,
Sunli*e Assurance Com&an0 o* Canada vs$ Court o* A&&eals +G' 1081#8. 22 /une 1--82 3$$$$$$$$$ 16
Vda$ de Canilan( vs$ Court o* A&&eals +G' -29-2. 1, /une 1--#2 3$$$$$$$$$ 1-
)an vs$ Court o* A&&eals +G' 9609-. 2- /une 1-6-2 3$$$$$$$$$ 21
%aci*ic )imer ;@&ort Cor&oration vs$ Court o* A&&eals +G' L!#661#. 28 :eruar0 1-622 3$$$$$$$$$ 22
%hili&&ine American Li*e and General Insurance Com&an0 vs$ Valencia!>a(alacsa +G' 1#-,,6. 1 Au(ust 20022 3$$$$$$$$$ 2#
Ma"ati )uscan0 Condominium Cor&oration vs$ Court o* A&&eals +G' -8896. 6 Novemer 1--22 3$$$$$$$$$ 29
AC%> General Insurance vs$ Masa(ana )elamart Inc$ +G' 1#,1,2. 18 /une 1---2 3$$$$$$$$$ 26
AC%> General Insurance vs$ Masa(ana )elamart Inc$ +G' 1#,1,2. 19 A&ril 20012 3$$$$$$$$$ 2,
American 7ome Assurance Com&an0 vs$ Chua +G' 1#0921. 26 /une 1---2 3$$$$$$$$$ 26
)ia0 vs$ Court o* A&&eals +G' 11-688. 29 Ma0 1--62 3$$$$$$$$$ 2-
%hili&&ine %hoeni@ Suret0 5 Insurance Com&an0 vs$ Boodwor"s Inc$ +G' L!28#1,. 6 Au(ust 1-,-2 3$$$$$$$$$ #0
>oni*acio >rothers Inc$ vs$ Mora +G' L!2068#. 2- Ma0 1-6,2 3$$$$$$$$$ #1
)he Insular Li*e Assurance Com&an0 Ltd$ vs$ ;rado +G' L!9908-. 26 ?ctoer 1-,,2 3$$$$$$$$$ ##
Vda de Consue(ra vs$ Government Service Insurance S0stem +G' L!260-#. #0 /anuar0 1-,12 3$$$$$$$$$ #9
Go vs$ 'ed*ern +G' 9,,08. 28 A&ril 1-912 3$$$$$$$$$ #6
Countr0 >an"ers Insurance Cor&oration vs$ Lian(a >a0 and Communit0 Multi!%ur&ose Coo&erative Inc$
+G' 1#6-19. 28 /anuar0 20022 3$$$$$$$$$ #,
'o<ue vs$ Intermediate A&&ellate Court +G' L!66-#8. 11 Novemer 1-682 3$$$$$$$$$ #6
La 'a4on Social CGo )iaoco 0 7ermanosC vs$ Anion Insurance Societ0 o* Canton Ltd$ +G' 1#-6#. 1 Se&temer 1-1-2 3$$$$$$$$$ 90
Catha0 Insurance Co$ vs$ Court o* A&&eals +G' ,6198. #0 /une 1-6,2 3$$$$$$$$$ 91
:ili&ino Merchants Insurance Co$ Inc$ vs$ Court o* A&&eals +G' 68191. 26 Novemer 1-6-2 3$$$$$$$$$ 9#
?riental Assurance Cor&oration vs$ Court o* A&&eals +G' -9082. - Au(ust 1--12 3$$$$$$$$$ 98
:inman General Assurance Cor&oration vs$ Court o* A&&eals +G' 100-,0. 2 Se&temer 1--22 3$$$$$$$$$ 96
Sun Insurance ?**ice Ltd$ vs$ Court o* A&&eals +G' -2#6#. 1, /ul0 1--22 3$$$$$$$$$ 9,
Vda$ de Gariel vs$ Court o* A&&eals +G' 10#66#. 19 Novemer 1--62 3$$$$$$$$$ 96
Vda$ de Ma(lana vs$ Consolacion +G' 60806. 6 Au(ust 1--22 3$$$$$$$$$ 80
)io Dhe Chio vs$ Court o* A&&eals +G' ,6101!02. #0 Se&temer 1--12 3$$$$$$$$$ 82
:inman General Assurance Cor&oration vs$ Court o* A&&eals +G' 1#6,#,. 12 /ul0 20012 3$$$$$$$$$ 8#
This collection contains thirty eight (38) cases
summarized in this format by
Michael Vernon M. Guerrero (as a senior law student)
during the Second Semester school year !""#$!""%
in the &ommercial 'aw (e)iew class
under *tty. +arah Villanue)a$&astro
at the *rellano ,ni)ersity School of 'aw (*,S').
&om-iled as ./0 1uly !"22.
3erne Guerrero entered *,S' in 1une !""!
and e)entually graduated from *,S' in !""%.
4e -assed the .hili--ine bar e5aminations immediately after (*-ril !""6).
www$erne(uerrero$com
Narratives (Berne Guerrero)
1 Verendia vs. Court of Appeals [GR 76399 !! "anuar# 1993$% also Fidelity & Surety Co. of the
Philippines Inc. vs. Verendia [GR 75!5"
Third Division, Melo (J): 4 concur
&a'ts( Fidelity and Surety Insurance Co#pany of the Philippines issued its Fire Insurance Policy F$%&&7
effective 'et(een )* +une %,&! and )* +une %,&% coverin- Rafael .Re/0 Verendia1s residential 'uildin-
located at 2ulip 3rive4 5everly 6ills4 7ntipolo4 Ri8al in the a#ount of P*&54!!!.!!. 3esi-nated as
'eneficiary (as the 9onte de Piedad & Savin-s 5an:. Verendia also insured the sa#e 'uildin- (ith t(o other
co#panies4 na#ely4 2he Country 5an:ers Insurance for P54!!!.!! under Policy ;o. P35$&!$%,%* e/pirin-
on %) 9ay %,&%4 and 2he 3evelop#ent Insurance for P<!!4!!!.!! under Policy F$<&&7 e/pirin- on *! +une
%,&%. =hile the three fire insurance policies (ere in force4 the insured property (as co#pletely destroyed 'y
fire on the early #ornin- of )& 3ece#'er %,&!. Fidelity (as accordin-ly infor#ed of the loss and despite
de#ands4 refused pay#ent under its policy4 thus pro#ptin- Verendia to file a co#plaint (ith the then Court of
First Instance of >ue8on City4 prayin- for pay#ent of P*&54!!!.!!4 le-al interest thereon4 plus attorney1s fees
and liti-ation e/penses. 2he co#plaint (as later a#ended to include 9onte de Piedad as an ?un(illin-
defendant.? 7ns(erin- the co#plaint4 Fidelity4 a#on- other thin-s4 averred that the policy (as avoided 'y
reason of over$insurance4 that Verendia #aliciously represented that the 'uildin- at the ti#e of the fire (as
leased under a contract e/ecuted on )5 +une %,&! to a certain Ro'erto Garcia4 (hen actually it (as a 9arcelo
Garcia (ho (as the lessee. @n )< 9ay %,&*4 the trial court rendered a decision4 per +ud-e Rodolfo 7. @rti84
rulin- in favor of Fidelity. In sustainin- the defenses set up 'y Fidelity4 the trial court ruled that Para-raph *
of the policy (as also violated 'y Verendia in that the insured failed to infor# Fidelity of his other insurance
covera-es (ith Country 5an:ers Insurance and 3evelop#ent Insurance. Verendia appealed to the then
Inter#ediate 7ppellate Court and in a decision pro#ul-ated on *% 9arch %,&4 .C7$GR CV !)&,54 CoAuia4
Bosa4 5artolo#e4 and CDercito .P04 ++.04 the appellate court reversed for the follo(in- reasonsE .a0 there (as no
#isrepresentation concernin- the lease for the contract (as si-ned 'y 9arcelo Garcia in the na#e of Ro'erto
GarciaF and .'0 Para-raph * of the policy contract reAuirin- Verendia to -ive notice to Fidelity of other
contracts of insurance (as (aived 'y Fidelity as sho(n 'y its conduct in atte#ptin- to settle the clai# of
Verendia. Fidelity received a copy of the appellate court1s decision on < 7pril %,&4 'ut instead of directly
filin- a #otion for reconsideration (ithin %5 days therefro#4 Fidelity filed on )% 7pril %,&4 a #otion for
e/tension of * days (ithin (hich to file a #otion for reconsideration. 2he #otion for e/tension (as not filed
on %, 7pril %,& (hich (as the %5th day after receipt of the decision 'ecause said %5th day (as a Saturday
and of course4 the follo(in- day (as a Sunday. 2he #otion for e/tension (as -ranted 'y the appellate court
on *! 7pril %,&4 'ut Fidelity had in the #eanti#e filed its #otion for reconsideration on )< 7pril %,&.
Verendia filed a #otion to e/pun-e fro# the record Fidelity1s #otion for reconsideration on the -round that
the #otion for e/tension (as filed out of ti#e 'ecause the %5th day fro# receipt of the decision (hich fell on
a Saturday (as i-nored 'y Fidelity4 for indeed4 so Verendia contended4 the Inter#ediate 7ppellate Court has
personnel receivin- pleadin-s even on Saturdays. 2he #otion to e/pun-e (as denied on %7 +une %,& and
after a #otion for reconsideration (as si#ilarly 'rushed aside on )) +uly %,&4 a petition .GR 75!50 (as
initiated. Su'seAuently4 or #ore specifically on )% @cto'er %,&4 the appellate court denied Fidelity1s #otion
for reconsideration and account thereof. Fidelity filed on *% 9arch %,&4 the petition for revie( on certiorari
.GR 7*,,0. 2he t(o petitions4 inter$related as they are4 (ere consolidated and thereafter -iven due course.
)ssue( =hether Verandia forfeited all 'enefits due to his presentation of a false declaration to support his
clai#.
*eld( 2he contract of lease upon (hich Verendia relies to support his clai# for insurance 'enefits4 (as
entered into 'et(een hi# and one Ro'ert Garcia4 #arried to 6elen Ca(inian4 on )5 +une %,&!4 a couple of
days after the effectivity of the insurance policy. =hen the rented residential 'uildin- (as ra8ed to the -round
on )& 3ece#'er %,&!4 it appears that Ro'ert Garcia .or Ro'erto Garcia0 (as still (ithin the pre#ises.
6o(ever4 accordin- to the investi-ation report prepared 'y Pat. Cleuterio 9. 5uenviaDe of the 7ntipolo
police4 the 'uildin- appeared to have ?no occupant? and that 9r. Ro'erto Garcia (as ?rentin- on the otherside
Co++er'ial ,a- . )nsuran'e ,a- !//6 ( 1 )
.sic0 portion of said co#pound.?. 2hese pieces of evidence 'elie Verendia1s uncorro'orated testi#ony that
9arcelo Garcia (ho# he considered as the real lessee4 (as occupyin- the 'uildin- (hen it (as 'urned.
Ro'ert Garcia disappeared after the fire. It (as only on , @cto'er %,&% that an adDuster (as a'le to locate
hi#. Ro'ert Garcia then e/ecuted an affidavit 'efore the ;ational Intelli-ence and Security 7uthority .;IS70
to the effect that he (as not the lessee of Verendia1s house and that his si-nature on the contract of lease (as a
co#plete for-ery. 2hus4 on the stren-th of these facts4 the adDuster su'#itted a report dated < 3ece#'er %,&%
reco##endin- the denial of Verendia1s clai#. Ironically4 durin- the trial4 Verendia ad#itted that it (as not
Ro'ert Garcia (ho si-ned the lease contract. 7ccordin- to Verendia4 it (as si-ned 'y 9arcelo Garcia cousin
of Ro'ert4 (ho had 'een payin- the rentals all the (hile. Verendia4 ho(ever4 failed to e/plain (hy 9arcelo
had to si-n his cousin1s na#e (hen he in fact (as payin- for the rent and (hy Verendia hi#self4 the lessor4
allo(ed such a ruse. Fidelity1s conclusions on these proven facts appear4 therefore4 to have sufficient 'asesE
Verendia concocted the lease contract to deflect responsi'ility for the fire to(ards an alle-ed ?lessee?4 inflated
the value of the property 'y the alle-ed #onthly rental of P45!! (hen in fact4 the Provincial 7ssessor of
Ri8al had assessed the property1s fair #ar:et value to 'e only P<!4*!!.!!4 insured the sa#e property (ith t(o
other insurance co#panies for a total covera-e of around P,!!4!!!4 and created a dead$end for the adDuster 'y
the disappearance of Ro'ert Garcia. 5asically a contract of inde#nity4 an insurance contract is the la(
'et(een the parties. Its ter#s and conditions constitute the #easure of the insurer1s lia'ility and co#pliance
there(ith is a condition precedent to the insured1s ri-ht to recovery fro# the insurer. 7s it is also a contract of
adhesion4 an insurance contract should 'e li'erally construed in favor of the insured and strictly a-ainst the
insurer co#pany (hich usually prepares it. Considerin-4 ho(ever4 the fore-oin- discussion pointin- to the
fact that Verendia used a false lease contract to support his clai# under Fire Insurance Policy F$%&&74 the
ter#s of the policy should 'e strictly construed a-ainst the insured. Verendia failed to live 'y the ter#s of the
policy4 specifically Section %* thereof (hich is e/pressed in ter#s that are clear and una#'i-uous4 that all
'enefits under the policy shall 'e forfeited ?if the clai# 'e in any respect fraudulent4 or if any false
declaration 'e #ade or used in support thereof4 or if any fraudulent #eans or devises are used 'y the Insured
or anyone actin- in his 'ehalf to o'tain any 'enefit under the policy?. Verendia4 havin- presented a false
declaration to support his clai# for 'enefits in the for# of a fraudulent lease contract4 he forfeited all 'enefits
therein 'y virtue of Section %* of the policy in the a'sence of proof that Fidelity (aived such provision.
=orse yet4 'y presentin- a false lease contract4 Verendia reprehensi'ly disre-arded the principle that
insurance contracts are u'erri#ae fidae and de#and the #ost a'undant -ood faith.
! Ri0al 1uret# 2 )nsuran'e Co+pan# vs. Court of Appeals [GR 11!36/ 13 "une !///$
Third Division, Purisima (J): 4 concur
&a'ts( @n %* 9arch %,&!4 Ri8al Surety & Insurance Co#pany .Ri8al Insurance0 issued Fire Insurance Policy
<57)7 in favor of 2rans(orld Gnittin- 9ills4 Inc. .2rans(orld04 initially for P%4!!!4!!!.!! and eventually
increased to P%45!!4!!!.!!4 coverin- the period fro# %< 7u-ust %,&! to %* 9arch %,&%. 2he sa#e pieces of
property insured (ith Ri8al Insurance (ere also insured (ith ;e( India 7ssurance Co#pany4 Htd.4 .;e(
India0. @n %) +anuary %,&%4 fire 'ro:e out in the co#pound of 2rans(orld4 ra8in- the #iddle portion of its
four$span 'uildin- and partly -uttin- the left and ri-ht sections thereof. 7 t(o$storey 'uildin- .'ehind said
four$span 'uildin-0 (here fun and a#use#ent #achines and spare parts (ere stored4 (as also destroyed 'y
the fire. 2rans(orld filed its insurance clai#s (ith Ri8al Insurance and ;e( India 'ut to no avail. @n ) 9ay
%,&)4 2rans=orld 'rou-ht a-ainst the said insurance co#panies an action for collection of su# of #oney and
da#a-es .Civil Case <%!0 'efore 5ranch %% of the then Court of First Instance of Ri8alF prayin- for
Dud-#ent orderin- Ri8al Insurance and ;e( India to pay the a#ount of P)47<74&7.!! plus le-al interest4
P<!!4!!!.!! as attorney1s fees4 e/e#plary da#a-es4 e/penses of liti-ation of P5!4!!!.!! and costs of suit.
Ri8al Insurance countered that its fire insurance policy sued upon covered only the contents of the four$span
'uildin-4 (hich (as partly 'urned4 and not the da#a-e caused 'y the fire on the t(o$storey anne/ 'uildin-.
@n < +anuary %,,!4 the trial court rendered its decisionF dis#issin- the case as a-ainst ;e( IndiaF orderin-
Ri8al Insurance to pay 2rans(orld the a#ount of P&)45!!.!! representin- the actual value of the losses
suffered 'y itF and (ith cost a-ainst Ri8al Insurance. 5oth Ri8al Insurance and 2rans=orld (ent to the Court
Co++er'ial ,a- . )nsuran'e ,a- !//6 ( ! )
of 7ppeals4 (hich ca#e out (ith its decision of %5 +uly %,,*4 #odifyin- the lo(er court1s decision 'y
reAuirin- ;e( India to pay 2rans(orld the a#ount of P%4&%&4!<.%,F and Ri8al Surety to pay 2rans(orld
P<7!4*)&.74 'ased on the actual losses sustained 'y 2rans(orld in the fire4 totallin- P)47,!4*7.!! as a-ainst
the a#ounts of fire insurance covera-es respectively e/tended 'y ;e( India in the a#ount of P54&!!4!!!.!!
and Ri8al Surety and Insurance Co#pany in the a#ount of P%45!!4!!!.!!. @n )! 7u-ust %,,*4 fro# the
aforesaid Dud-#ent of the Court of 7ppeals4 ;e( India appealed to the Supre#e Court theori8in- inter alia
that the 2rans=orld could not 'e co#pensated for the loss of the fun and a#use#ent #achines and spare
parts stored at the t(o$storey 'uildin- 'ecause it .2rans(orld0 had no insura'le interest in said -oods or
ite#s. @n ) Fe'ruary %,,<4 the Court denied the appeal (ith finality in GR H$%%%%%& .;e( India 7ssurance
Co#pany Htd. vs. Court of 7ppeals0. Ri8al Insurance and 2rans=orld4 on the other hand4 interposed a 9otion
for Reconsideration 'efore the Court of 7ppeals4 and on )) @cto'er %,,*4 the Court of 7ppeals reconsidered
its decision of %5 +uly %,,*4 as re-ards the i#position of interest on the assess#ent a-ainst ;e( India on the
a#ount of P%4&%&4!<.%, and that a-ainst Ri8al Insurance on the a#ount of P<7!4*)&.74 co##ences fro#
) 9ay %,&) (hen the co#plaint (as filed until pay#ent is #ade. 2he rest of the said decision (as retained
in all other respects. Ri8al Insurance filed the petition for revie( on certiorari.
)ssue [1$( =hether the fire insurance policy liti-ated upon protected only the contents of the #ain 'uildin-
.four$span04 and did not include those stored in the t(o$storey anne/ 'uildin-F or (hether the so called
?anne/? (as not an anne/ 'ut (as actually an inte-ral part of the four$span 'uildin- and therefore4 the -oods
and ite#s stored therein (ere covered 'y the sa#e fire insurance policy.
*eld [1$( I;CHI3CS )$S2@RJ 7;;CK 5IIH3I;G. 2he stipulation in su'Dect fire insurance policy
re-ardin- its covera-e4 reads ?contained andLor stored durin- the currency of this Policy in the pre#ises
occupied 'y the# for#in- part of the 'uildin-s situated (ithin o(n Co#pound.? 2herefro#4 it can 'e -leaned
unerrin-ly that the fire insurance policy in Auestion did not li#it its covera-e to (hat (ere stored in the four$
span 'uildin-. 2he t(o$storey 'uildin- involved a per#anent structure4 (hich adDoins and interco##unicates
(ith the ?first ri-ht span of the lofty storey 'uildin-?4 for#ed part thereof4 and #eets the reAuisites for
co#pensa'ility under the fire insurance policy sued upon. So also4 considerin- that the t(o$storey 'uildin-
afore#entioned (as already e/istin- (hen su'Dect fire insurance policy contract (as entered into on %)
+anuary %,&%4 havin- 'een constructed so#eti#e in %,7&4 Ri8al Insurance should have specifically e/cluded
the said t(o$storey 'uildin- fro# the covera-e of the fire insurance if #inded to e/clude the sa#e 'ut it did
not4 and instead4 (ent on to provide that such fire insurance policy covers the products4 ra( #aterials and
supplies stored (ithin the pre#ises of 2rans(orld (hich (as an inte-ral part of the four$span 'uildin-
occupied 'y 2rans(orld4 :no(in- fully (ell the e/istence of such 'uildin- adDoinin- and interco##unicatin-
(ith the ri-ht section of the four$span 'uildin-.
)ssue [!$( =hether the a#'i-uity in fire insurance policy should 'e resolved a-ainst Ri8al Surety.
*eld [!$( JCS. 2he stipulation as to the covera-e of the fire insurance policy under controversy has created
a dou't re-ardin- the portions of the 'uildin- insured there'y. 7rticle %*77 of the ;e( Civil Code provides
that ?2he interpretation of o'scure (ords or stipulations in a contract shall not favor the party (ho caused the
o'scurity.? Confor#a'ly4 it stands to reason that the dou't should 'e resolved a-ainst Ri8al Insurance4 (hose
la(yer or #ana-ers drafted the fire insurance policy contract under scrutiny. Citin- the aforecited provision of
la( in point4 the Court in Handicho vs. Govern#ent Service Insurance Syste#4 ruled that ?as re-ards
insurance policies4 in respect of (hich it is settled that the 1ter#s in an insurance policy4 (hich are a#'i-uous4
eAuivocal4 or uncertain are to 'e construed strictly and #ost stron-ly a-ainst the insurer4 and li'erally in favor
of the insured so as to effect the do#inant purpose of inde#nity or pay#ent to the insured4 especially (here
forfeiture is involved1 .), 7#. +ur.4 %&%04 and the reason for this is that the 1insured usually has no voice in the
selection or arran-e#ent of the (ords e#ployed and that the lan-ua-e of the contract is selected (ith -reat
care and deli'eration 'y e/perts and le-al advisers e#ployed 'y4 and actin- e/clusively in the interest of4 the
insurance co#pany.1 .<< C.+.S.4 p. %%7<0.? CAually relevant is the follo(in- disAuisition of the Court in
Field#en1s Insurance Co#pany4 Inc. vs. Vda. 3e Son-co4 (here it (as held that the ?ri-id application of the
rule on a#'i-uities has 'eco#e necessary in vie( of current 'usiness practices. 2he courts cannot i-nore that
no(adays #onopolies4 cartels and concentration of capital4 endo(ed (ith over(hel#in- econo#ic po(er4
#ana-e to i#pose upon parties dealin- (ith the# cunnin-ly prepared 1a-ree#ents1 that the (ea:er party #ay
not chan-e one (hit4 his participation in the 1a-ree#ent1 'ein- reduced to the alternative to 1ta:e it or leave it1
la'elled since Ray#ond Saleilles 1contracts 'y adherence1 .contrats [sic" d1adhesion04 in contrast to these
entered into 'y parties 'ar-ainin- on an eAual footin-4 such contracts .of (hich policies of insurance and
international 'ills of ladin- are pri#e e/a#ple0 o'viously call for -reater strictness and vi-ilance on the part
of courts of Dustice (ith a vie( to protectin- the (ea:er party fro# a'uses and i#position4 and prevent their
'eco#in- traps for the un(ary.?
3 45ila+'are *ealt5 1#ste+s )n'. vs. Court of Appeals [GR 1!6673 13 7ar'5 !//!$
First Division, Ynares-Santiago (J): concur
See also case entry 13
&a'ts( Crnani 2rinos4 deceased hus'and of +ulita 2rinos4 applied for a health care covera-e (ith Phila#care
6ealth Syste#s4 Inc. In the standard application for#4 he ans(ered no to the follo(in- AuestionE ?6ave you
or any of your fa#ily #e#'ers ever consulted or 'een treated for hi-h 'lood pressure4 heart trou'le4 dia'etes4
cancer4 liver disease4 asth#a or peptic ulcerM .If Jes4 -ive details0. ? 2he application (as approved for a
period of one year fro# % 9arch %,&& to % 9arch %,&,. 7ccordin-ly4 he (as issued 6ealth Care 7-ree#ent
P!%!%,<. Inder the a-ree#ent4 2rinos1 hus'and (as entitled to avail of hospitali8ation 'enefits4 (hether
ordinary or e#er-ency4 listed therein. 6e (as also entitled to avail of ?out$patient 'enefits? such as annual
physical e/a#inations4 preventive health care and other out$patient services. Ipon the ter#ination of the
a-ree#ent4 the sa#e (as e/tended for another year fro# % 9arch %,&, to % 9arch %,,!4 then fro# % 9arch
%,,! to % +une %,,!. 2he a#ount of covera-e (as increased to a #a/i#u# su# of P754!!!.!! per disa'ility.
3urin- the period of his covera-e4 Crnani suffered a heart attac: and (as confined at the 9anila 9edical
Center .99C0 for one #onth 'e-innin- , 9arch %,,!. =hile her hus'and (as in the hospital4 2rinos tried to
clai# the 'enefits under the health care a-ree#ent. 6o(ever4 Phila#care denied her clai# sayin- that the
6ealth Care 7-ree#ent (as void. 7ccordin- to Phila#care4 there (as a conceal#ent re-ardin- Crnani1s
#edical history. 3octors at the 99C alle-edly discovered at the ti#e of Crnani1s confine#ent that he (as
hypertensive4 dia'etic and asth#atic4 contrary to his ans(er in the application for#. 2hus4 2rinos paid the
hospitali8ation e/penses herself4 a#ountin- to a'out P74!!!.!!. 7fter her hus'and (as dischar-ed fro# the
99C4 he (as attended 'y a physical therapist at ho#e. Hater4 he (as ad#itted at the Chinese General
6ospital. 3ue to financial difficulties4 ho(ever4 2rinos 'rou-ht her hus'and ho#e a-ain. In the #ornin- of
%* 7pril %,,!4 Crnani had fever and (as feelin- very (ea:. 2rinos (as constrained to 'rin- hi# 'ac: to the
Chinese General 6ospital (here he died on the sa#e day. @n )< +uly %,,!4 2rinos instituted (ith the
Re-ional 2rial Court of 9anila4 5ranch <<4 an action for da#a-es a-ainst Phila#care and its president4 3r.
5enito Reverente .Civil Case ,! 5*7,50. She as:ed for rei#'urse#ent of her e/penses plus #oral da#a-es
and attorney1s fees. 7fter trial4 the lo(er court ruled a-ainst Phila#care and Reverente4 orderin- the# to pay
and rei#'urse the #edical and hospital covera-e of the late Crnani 2rinos in the a#ount of P74!!!.!! plus
interest4 until the a#ount is fully paid to plaintiff (ho paid the sa#eF the reduced a#ount of #oral da#a-es of
P%!4!!!.!! to 2rinosF the reduced a#ount of P%!4!!!.!! as e/e#plary da#a-es to 2rinosF and the attorney1s
fees of P)!4!!!.!!4 plus costs of suit. @n appeal4 the Court of 7ppeals affir#ed the decision of the trial court
'ut deleted all a(ards for da#a-es and a'solved Reverente. Phila#care1s #otion for reconsideration (as
denied. 6ence4 Phila#care 'rou-ht the petition for revie(4 raisin- the pri#ary ar-u#ent that a health care
a-ree#ent is not an insurance contractF hence the ?incontesta'ility clause? under the Insurance Code does not
apply.
)ssue [1$( =hether a health care a-ree#ent 'et(een Phila#care and Crnani 2rinos is an insurance contract.
*eld [1$( JCS. Section ) .%0 of the Insurance Code defines a contract of insurance as an a-ree#ent (here'y
one underta:es for a consideration to inde#nify another a-ainst loss4 da#a-e or lia'ility arisin- fro# an
un:no(n or contin-ent event. 7n insurance contract e/ists (here the follo(in- ele#ents concurE .%0 2he
insured has an insura'le interestF .)0 2he insured is su'Dect to a ris: of loss 'y the happenin- of the desi-nated
perilF .*0 2he insurer assu#es the ris:F .<0 Such assu#ption of ris: is part of a -eneral sche#e to distri'ute
actual losses a#on- a lar-e -roup of persons 'earin- a si#ilar ris:F and .50 In consideration of the insurer1s
pro#ise4 the insured pays a pre#iu#. Section * of the Insurance Code states that any contin-ent or un:no(n
event4 (hether past or future4 (hich #ay da#nify a person havin- an insura'le interest a-ainst hi#4 #ay 'e
insured a-ainst. Cvery person has an insura'le interest in the life and health of hi#self. Section %! provides
that ?Cvery person has an insura'le interest in the life and healthE .%0 of hi#self4 of his spouse and of his
childrenF .)0 of any person on (ho# he depends (holly or in part for education or support4 or in (ho# he has
a pecuniary interestF .*0 of any person under a le-al o'li-ation to hi# for the pay#ent of #oney4 respectin-
property or service4 of (hich death or illness #i-ht delay or prevent the perfor#anceF and .<0 of any person
upon (hose life any estate or interest vested in hi# depends.? 6erein4 the insura'le interest of 2rinos1 hus'and
in o'tainin- the health care a-ree#ent (as his o(n health. 2he health care a-ree#ent (as in the nature of
non$life insurance4 (hich is pri#arily a contract of inde#nity. @nce the #e#'er incurs hospital4 #edical or
any other e/pense arisin- fro# sic:ness4 inDury or other stipulated contin-ent4 the health care provider #ust
pay for the sa#e to the e/tent a-reed upon under the contract.
)ssue [!$( =hether ans(ers #ade in -ood faith4 (here #atters of opinion or Dud-#ent are called for4 (ithout
intent to deceive (ill avoid a policy (hen they (ere untrue.
*eld [!$( ;@. =here #atters of opinion or Dud-#ent are called for4 ans(ers #ade in -ood faith and (ithout
intent to deceive (ill not avoid a policy even thou-h they are untrue. 2hus4 althou-h false4 a representation of
the e/pectation4 intention4 'elief4 opinion4 or Dud-#ent of the insured (ill not avoid the policy if there is no
actual fraud in inducin- the acceptance of the ris:4 or its acceptance at a lo(er rate of pre#iu#4 and this is
li:e(ise the rule althou-h the state#ent is #aterial to the ris:4 if the state#ent is o'viously of the fore-oin-
character4 since in such case the insurer is not Dustified in relyin- upon such state#ent4 'ut is o'li-ated to
#a:e further inAuiry. 2here is a clear distinction 'et(een such a case and one in (hich the insured is
fraudulently and intentionally states to 'e true4 as a #atter of e/pectation or 'elief4 that (hich he then :no(s4
to 'e actually untrue4 or the i#possi'ility of (hich is sho(n 'y the facts (ithin his :no(led-e4 since in such
case the intent to deceive the insurer is o'vious and a#ounts to actual fraud. 2he fraudulent intent on the part
of the insured #ust 'e esta'lished to (arrant rescission of the insurance contract. Conceal#ent as a defense
for the health care provider or insurer to avoid lia'ility is an affir#ative defense and the duty to esta'lish such
defense 'y satisfactory and convincin- evidence rests upon the provider or insurer. In any case4 (ith or
(ithout the authority to investi-ate4 Phila#care is lia'le for clai#s #ade under the contract. 6avin- assu#ed
a responsi'ility under the a-ree#ent4 Phila#care is 'ound to ans(er the sa#e to the e/tent a-reed upon. In
the end4 the lia'ility of the health care provider attaches once the #e#'er is hospitali8ed for the disease or
inDury covered 'y the a-ree#ent or (henever he avails of the covered 'enefits (hich he has prepaid.
)ssue [3$( =hether rescission #ust 'e e/ercised 'efore co##ence#ent of an action on the contract.
*eld [3$( JCS. Inder Section )7 of the Insurance Code4 ?a conceal#ent entitles the inDured party to rescind a
contract of insurance.? 2he ri-ht to rescind should 'e e/ercised previous to the co##ence#ent of an action
on the contract. 6erein4 no rescission (as #ade. 5esides4 the cancellation of health care a-ree#ents as in
insurance policies reAuire the concurrence of the follo(in- conditionsE .%0 Prior notice of cancellation to
insuredF .)0 ;otice #ust 'e 'ased on the occurrence after effective date of the policy of one or #ore of the
-rounds #entionedF .*0 9ust 'e in (ritin-4 #ailed or delivered to the insured at the address sho(n in the
policyF .<0 9ust state the -rounds relied upon provided in Section < of the Insurance Code and upon reAuest
of insured4 to furnish facts on (hich cancellation is 'ased. ;one of the a'ove pre$conditions (as fulfilled in
this case. =hen the ter#s of insurance contract contain li#itations on lia'ility4 courts should construe the# in
such a (ay as to preclude the insurer fro# non$co#pliance (ith his o'li-ation. 5ein- a contract of adhesion4
the ter#s of an insurance contract are to 'e construed strictly a-ainst the party (hich prepared the contract N
the insurer. 5y reason of the e/clusive control of the insurance co#pany over the ter#s and phraseolo-y of
the insurance contract4 a#'i-uity #ust 'e strictly interpreted a-ainst the insurer and li'erally in favor of the
insured4 especially to avoid forfeiture. 2his is eAually applica'le to 6ealth Care 7-ree#ents.
)ssue [8$( =hether the #e#'ership of the late 2rinos is no( incontesta'le.
*eld [8$( JCS. Inder the title Clai# procedures of e/penses4 Phila#care had t(elve #onths fro# the date of
issuance of the 7-ree#ent (ithin (hich to contest the #e#'ership of the patient if he had previous ail#ent of
asth#a4 and si/ #onths fro# the issuance of the a-ree#ent if the patient (as sic: of dia'etes or hypertension.
2he periods havin- e/pired4 the defense of conceal#ent or #isrepresentation no lon-er lie.
8 &ortune )nsuran'e and 1uret# Co. )n'. vs. Court of Appeals [GR 116!73 !3 7a# 1996$
First Division, Davide Jr (J): ! concur, " too# no $art, " on leave
&a'ts( Producers 5an: of the Philippines (as insured 'y the Fortune Insurance and Surety Co. Inc. and an
insurance policy (as issued. 7n ar#ored car of Producers4 (hile in the process of transferrin- cash in the su#
of P7)54!!!.!! under the custody of its teller4 9ari'eth 7la#pay4 fro# its Pasay 5ranch to its 6ead @ffice at
&7*7 Paseo de Ro/as4 9a:ati4 9etro 9anila on ), +une %,&74 (as ro''ed of the said cash. 2he ro''ery too:
place (hile the ar#ored car (as travelin- alon- 2aft 7venue in Pasay City. 2he said ar#ored car (as driven
'y 5enDa#in 9a-alon- y de Vera4 escorted 'y Security Guard Saturnino 7ti-a y Rosete. 3river 9a-alon-
(as assi-ned 'y PRC 9ana-e#ent Syste#s (ith Producers 'y virtue of an 7-ree#ent e/ecuted on 7 7u-ust
%,&*. 2he Security Guard 7ti-a (as assi-ned 'y Inicorn Security Services4 Inc. (ith Producers 'y virtue of
a contract of Security Service e/ecuted on )5 @cto'er %,&). 7fter an investi-ation conducted 'y the Pasay
police authorities4 the driver 9a-alon- and -uard 7ti-a (ere char-ed4 to-ether (ith Cdel#er 5anti-ue J
Culalio4 Reynaldo 7Auino and +ohn 3oe4 (ith violation of P3 5*) .7nti$6i-h(ay Ro''ery Ha(0 'efore the
Fiscal of Pasay City. 2he Fiscal of Pasay City then filed an infor#ation char-in- the aforesaid persons (ith
the said cri#e 'efore 5ranch %%) of the Re-ional 2rial Court of Pasay City. 2he case is still 'ein- tried as of
the date of filin- of the present case. 3e#ands (ere #ade 'y Producers upon Fortune to pay the a#ount of
the loss of P7)54!!!.!!4 'ut the latter refused to pay as the loss is e/cluded fro# the covera-e of the
insurance policy4 specifically under pa-e % thereof4 ?General C/ceptions? Section .'04 and (hich reads as
follo(sE ?GC;CR7H CKCCP2I@;S 2he co#pany shall not 'e lia'le under this policy in respect of /// .'0
any loss caused 'y any dishonest4 fraudulent or cri#inal act of the insured or any officer4 e#ployee4 partner4
director4 trustee or authori8ed representative of the Insured (hether actin- alone or in conDunction (ith
others...? Producers opposed the contention of Fortune and contended that 7ti-a and 9a-alon- are not its
?officer4 e#ployee4 trustee or authori8ed representative at the ti#e of the ro''ery. @n ) 7pril %,,!4 the trial
court rendered its decision in favor of Producers. It ordered Fortune to pay Producers the net a#ount of
P5<!4!!!.!! as lia'ility under Policy !)!7 .as #iti-ated 'y the P<!4!!!.!! special clause deduction and 'y
the recovered su# of P%<54!!!.!!04 (ith interest thereon at the le-al rate4 until fully paidF the su# of
P*!4!!!.!! as and for attorney1s feesF and to pay the costs of suit. Fortune appealed this decision to the Court
of 7ppeals .C7$GR CV *),<0. In its decision pro#ul-ated on * 9ay %,,<4 it affir#ed in toto the appealed
decision. @n )! +une %,,<4 Fortune filed the petition for revie( on certiorari.
)ssue( =hether Fortune is lia'le under the 9oney4 Security4 and Payroll Ro''ery policy it issued to the issued
to Producers or (hether recovery thereunder is precluded under the -eneral e/ceptions clause thereof.
*eld( It should 'e noted that the insurance policy entered into 'y the parties is a theft or ro''ery insurance
policy (hich is a for# of casualty insurance. Section %7< of the Insurance Code provides that ?Casualty
insurance is insurance coverin- loss or lia'ility arisin- fro# accident or #ishap4 e/cludin- certain types of
loss (hich 'y la( or custo# are considered as fallin- e/clusively (ithin the scope of insurance such as fire or
#arine. It includes4 'ut is not li#ited to4 e#ployer1s lia'ility insurance4 pu'lic lia'ility insurance4 #otor
vehicle lia'ility insurance4 plate -lass insurance4 'ur-lary and theft insurance4 personal accident and health
insurance as (ritten 'y non$life insurance co#panies4 and other su'stantially si#ilar :inds of insurance.?
C/cept (ith respect to co#pulsory #otor vehicle lia'ility insurance4 the Insurance Code contains no other
provisions applica'le to casualty insurance or to ro''ery insurance in particular. 2hese contracts are4
therefore4 -overned 'y the -eneral provisions applica'le to all types of insurance. @utside of these4 the ri-hts
and o'li-ations of the parties #ust 'e deter#ined 'y the ter#s of their contract4 ta:in- into consideration its
purpose and al(ays in accordance (ith the -eneral principles of insurance la(. It has 'een aptly o'served that
in 'ur-lary4 ro''ery4 and theft insurance4 ?the opportunity to defraud the insurer N the #oral ha8ard N is so
-reat that insurers have found it necessary to fill up their policies (ith countless restrictions4 #any desi-ned
to reduce this ha8ard. Seldo# does the insurer assu#e the ris: of all losses due to the ha8ards insured
a-ainst.? Persons freAuently e/cluded under such provisions are those in the insured1s service and
e#ploy#ent. 2he purpose of the e/ception is to -uard a-ainst lia'ility should the theft 'e co##itted 'y one
havin- unrestricted access to the property.? In such cases4 the ter#s specifyin- the e/cluded classes are to 'e
-iven their #eanin- as understood in co##on speech. 2he ter#s ?service? and ?e#ploy#ent? are -enerally
associated (ith the idea of selection4 control4 and co#pensation. 7 contract of insurance is a contract of
adhesion4 thus any a#'i-uity therein should 'e resolved a-ainst the insurer4 or it should 'e construed li'erally
in favor of the insured and strictly a-ainst the insurer. Hi#itations of lia'ility should 'e re-arded (ith e/tre#e
Dealousy and #ust 'e construed in such a (ay as to preclude the insurer fro# non$co#pliance (ith its
o'li-ation. It -oes (ithout sayin- then that if the ter#s of the contract are clear and una#'i-uous4 there is no
roo# construction and such ter#s cannot 'e enlar-ed or di#inished 'y Dudicial construction. 7n insurance
contract is a contract of inde#nity upon the ter#s and conditions specified therein. It is settled that the ter#s
of the policy constitute the #easure of the insurer1s lia'ility. In the a'sence of statutory prohi'ition to the
contrary4 insurance co#panies have the sa#e ri-hts as individuals to li#it their lia'ility and to i#pose
(hatever conditions they dee# 'est upon their o'li-ations not inconsistent (ith pu'lic policy. Insofar as
Fortune is concerned4 it (as its intention to e/clude and e/e#pt fro# protection and covera-e losses arisin-
fro# dishonest4 fraudulent4 or cri#inal acts of persons -ranted or havin- unrestricted access to Producers1
#oney or payroll. =hen it used then the ter# ?e#ployee4? it #ust have had in #ind any person (ho Aualifies
as such as -enerally and universally understood4 or Durisprudentially esta'lished in the li-ht of the four
standards in the deter#ination of the e#ployer$e#ployee relationship4 or as statutorily declared even in a
li#ited sense as in the case of 7rticle %! of the Ha'or Code (hich considers the e#ployees under a ?la'or$
only? contract as e#ployees of the party e#ployin- the# and not of the party (ho supplied the# to the
e#ployer. Still4 ho(soever vie(ed4 Producers entrusted the three (ith the specific duty to safely transfer the
#oney to its head office4 (ith 7la#pay to 'e responsi'le for its custody in transitF 9a-alon- to drive the
ar#ored vehicle (hich (ould carry the #oneyF and 7ti-a to provide the needed security for the #oney4 the
vehicle4 and his t(o other co#panions. In short4 for these particular tas:s4 the three acted as a-ents of
Producers. 7 ?representative? is defined as one (ho represents or stands in the place of anotherF one (ho
represents others or another in a special capacity4 as an a-ent4 and is interchan-ea'le (ith ?a-ent.? In vie( of
the fore-oin-4 Fortune is e/e#pt fro# lia'ility under the -eneral e/ceptions clause of the insurance policy.
6 9nri:ue0 vs. 1un ,ife Assuran'e Co+pan# of Canada [GR 16396 !9 Nove+;er 19!/$
%n &anc, Malcolm (J): 4 concur, " dissents
&a'ts( @n )< Septe#'er %,%74 +oaAuin 6errer #ade application to the Sun Hife 7ssurance Co#pany of
Canada throu-h its office in 9anila for a life annuity. 2(o days later he paid the su# of P4!!! to the
#ana-er of the co#pany1s 9anila office and (as -iven a receipt. 2he application (as i##ediately for(arded
to the head office of the co#pany at 9ontreal4 Canada. @n ) ;ove#'er %,%74 the head office -ave notice of
acceptance 'y ca'le to 9anila. .=hether on the sa#e day the ca'le (as received notice (as sent 'y the
9anila office to 6errer that the application had 'een accepted4 is a disputed point.0 @n < 3ece#'er %,%74 the
policy (as issued at 9ontreal. @n %& 3ece#'er %,%74 attorney 7urelio 7. 2orres (rote to the 9anila office
of the co#pany statin- that 6errer desired to (ithdra( his application. 2he follo(in- day the local office
replied to 9r. 2orres4 statin- that the policy had 'een issued4 and called attention to the notification of )
;ove#'er %,%7. 2his letter (as received 'y 9r. 2orres on the #ornin- of )% 3ece#'er %,%7. 9r. 6errer
died on )! 3ece#'er %,%7. 7n action (as 'rou-ht 'y Rafae: CnriAue8 as ad#inistrator of the estate of the
late +oaAuin 9a. 6errer to recover fro# Sun Hife 7ssurance Co#pany of Canada the su# of P4!!! paid 'y
the deceased for a life annuity. 2he trial court -ave Dud-#ent for Sun Hife. CnriAue8 appealed.
)ssue( =hether 6errer received notice of acceptance of his application4 to hold that the contract for a life
annuity (as perfected.
*eld( ;@. 2he letter of ) ;ove#'er %,%74 notifyin- 9r. Ferrer that his application had 'een accepted4 (as
prepared and si-ned in the local office of the insurance co#pany4 (as placed in the ordinary channels for
trans#ission4 'ut (as never actually #ailed and thus (as never received 'y the applicant. 2he Civil Code
rule4 that an acceptance #ade 'y letter shall 'ind the person #a:in- the offer only fro# the date it ca#e to his
:no(led-e4 #ay not 'e the 'est e/pression of #odern co##ercial usa-e. Still it #ust 'e ad#itted that its
enforce#ent avoids uncertainty and tends to security. ;ot only this4 'ut in order that the principle #ay not 'e
ta:en too li-htly4 it is identical (ith the principles announced 'y a considera'le nu#'er of respecta'le4 courts
in the Inited States. 2he courts (ho ta:e this vie( have e/pressly held that an acceptance of an offer of
insurance not actually or constructively co##unicated to the proposer does not #a:e a contract. @nly the
#ailin- of acceptance4 it has 'een said4 co#pletes the contract of insurance4 as the locus poienitentise is ended
(hen the acceptance has passed 'eyond the control of the party. In resu#e4 therefore4 the la( applica'le to the
case is found to 'e the second para-raph of article %)) of the Civil Code providin- that an acceptance #ade
'y letter shall not 'ind the person #a:in- the offer e/cept fro# the ti#e it ca#e to his :no(led-e. 2he
pertinent fact is4 that accordin- to the provisional receipt4 three thin-s had to 'e acco#plished 'y the
insurance co#pany 'efore there (as a contractE .%0 2here had to 'e a #edical e/a#ination of the applicantF
.)0 there had to 'e approval of the application 'y the head office of the co#panyF and .*0 this approval had in
so#e (ay to 'e co##unicated 'y the co#pany to the applicant. 2he further ad#itted facts are that the head
office in 9ontreal did accept the application4 did ca'le the 9anila office to that effect4 did actually issue the
policy and did4 throu-h its a-ent in 9anila4 actually (rite the letter of notification and place it in the usual
channels for trans#ission to the addressee. 2he fact as to the letter of notification thus fails to concur (ith the
essential ele#ents of the -eneral rule pertainin- to the #ailin- and delivery of #ail #atter as announced 'y
the 7#erican courts4 na#ely4 (hen a letter or other #ail #atter is addressed and #ailed (ith posta-e prepaid
there is a re'utta'le presu#ption of fact that it (as received 'y the addressee as soon as it could have 'een
trans#itted to hi# in the ordinary course of the #ails. 5ut if any one of these ele#ental facts fails to appear4 it
is fatal to the presu#ption. For instance4 a letter (ill not 'e presu#ed to have 'een received 'y the addressee
unless it is sho(n that it (as deposited in the post$office4 properly addressed and sta#ped. 2he contract for a
life annuity in the case at 'ar (as not perfected 'ecause it has not 'een proved satisfactorily that the
acceptance of the application ever ca#e to the :no(led-e of the applicant.
6 <evelop+ent Ban= of t5e 45ilippines vs. Court of Appeals [GR 1/9937 !1 7ar'5 1998$
First Division, 'uiason (J): 4 concur
&a'ts( In 9ay %,&74 +uan 5. 3ans4 to-ether (ith his (ife Candida4 his son and dau-hter$in$la(4 applied for a
loan of P5!!4!!!.!! (ith the 3evelop#ent 5an: of the Philippines .35P04 5asilan 5ranch. 7s the principal
#ort-a-or4 3ans4 then 7 years of a-e4 (as advised 'y 35P to o'tain a #ort-a-e rede#ption insurance
.9RI0 (ith the 35P 9ort-a-e Rede#ption Insurance Pool .35P 9RI Pool0. 7 loan4 in the reduced a#ount
of P*!!4!!!.!!4 (as approved 'y 35P on < 7u-ust %,&7 and released on %% 7u-ust %,&7. Fro# the proceeds
of the loan4 35P deducted the a#ount of P%4<7.!! as pay#ent for the 9RI pre#iu#. @n %5 7u-ust %,&74
3ans acco#plished and su'#itted the ?9RI 7pplication for Insurance? and the ?6ealth State#ent for 35P
9RI Pool.? @n )! 7u-ust %,&74 the 9RI pre#iu# of 3ans4 less the 35P service fee of %!O4 (as credited 'y
35P to the savin-s account of the 35P 9RI Pool. 7ccordin-ly4 the 35P 9RI Pool (as advised of the credit.
@n * Septe#'er %,&74 3ans died of cardiac arrest. 2he 35P4 upon notice4 relayed this infor#ation to the 35P
9RI Pool. @n )* Septe#'er %,&74 the 35P 9RI Pool notified 35P that 3ans (as not eli-i'le for 9RI
covera-e4 'ein- over the acceptance a-e li#it of ! years at the ti#e of application. @n )% @cto'er %,&74
35P apprised Candida 3ans of the disapproval of her late hus'and1s 9RI application. 2he 35P offered to
refund the pre#iu# of P%4<7.!! (hich the deceased had paid4 'ut Candida 3ans refused to accept the sa#e4
de#andin- pay#ent of the face value of the 9RI or an a#ount eAuivalent to the loan. She4 li:e(ise4 refused
to accept an e/ -ratia settle#ent of P*!4!!!.!!4 (hich the 35P later offered. @n %! Fe'ruary %,&,4 the Cstate
of the Hate +uan 5. 3ans4 throu-h Candida 3ans as ad#inistratri/4 filed a co#plaint (ith the Re-ional 2rial
Court4 5ranch I4 5asilan4 a-ainst 35P and the insurance pool for collection of Su# of 9oney (ith 3a#a-es.
@n %! 9arch %,,!4 the trial court rendered a decision in favor of the Cstate and a-ainst 35P. 2he 35P 9RI
Pool4 ho(ever4 (as a'solved fro# lia'ility4 after the trial court found no privity of contract 'et(een it and the
deceased. 2he trial court declared 35P in estoppel for havin- led 3ans into applyin- for 9RI and actually
collectin- the pre#iu# and the service fee4 despite :no(led-e of his a-e ineli-i'ility. 2he court ordered 35P
to return and rei#'urse the Cstate the a#ount of P%*,45!!.!! plus le-al rate of interest as a#orti8ation
pay#ent paid under protestF to consider the #ort-a-e loan of P*!!4!!!.!! includin- all interest accu#ulated
or other(ise to have 'een settled4 satisfied or set$off 'y virtue of the insurance covera-e of the late +uan 5.
3ansF to pay the Cstate the a#ount of P%!4!!!.!! as attorney1s feesF to pay the Cstate the a#ount of
P%!4!!!.!! as costs of liti-ation and other e/penses4 and other relief Dust and eAuita'le. 2he 35P appealed to
the Court of 7ppeals. In a decision dated 7 Septe#'er %,,)4 the appellate court affir#ed in toto the decision
of the trial court. 2he 35P1s #otion for reconsideration (as denied in a resolution dated )! 7pril %,,*. 35P
filed the petition for revie( on certiorari.
)ssue [1$( =hether there (as a perfected contract of insurance for 35P 9RI Pool to 'e held lia'le.
*eld [1$( ;@. =hen 3ans applied for 9RI4 he filled up and personally si-ned a ?6ealth State#ent for 35P
Pool? (ith the follo(in- declarationE ?I here'y declare and a-ree that all the state#ents and ans(ers
contained herein are true4 co#plete and correct to the 'est of #y :no(led-e and 'elief and for# part of #y
application for insurance. It is understood and a-reed that no insurance covera-e shall 'e effected unless and
until this application is approved and the full pre#iu# is paid durin- #y continued -ood health.? Inder the
afore#entioned provisions4 the 9RI covera-e shall ta:e effectE .%0 (hen the application shall 'e approved 'y
the insurance poolF and .)0 (hen the full pre#iu# is paid durin- the continued -ood health of the applicant.
2hese t(o conditions4 'ein- Doined conDunctively4 #ust concur. Indisputa'ly4 the po(er to approve 9RI
applications is lod-ed (ith the 35P 9RI Pool. 2he pool4 ho(ever4 did not approve the application of 3ans.
2here is also no sho(in- that it accepted the su# of P%4<7.!!4 (hich 35P credited to its account (ith full
:no(led-e that it (as pay#ent for 3an1s pre#iu#. 2here (as4 as a result4 no perfected contract of insuranceF
hence4 the 35P 9RI Pool cannot 'e held lia'le on a contract that does not e/ist.
)ssue [!$( =hether 35P is lia'le for the entire value of the insurance policy4 as it led 3ans to 'elieve that he
has fulfilled all the reAuire#ents for the 9RI and that the issuance of his policy (as forthco#in-.
*eld [!$( It (as 35P4 as a #atter of policy and practice4 that reAuired 3ans4 the 'orro(er4 to secure 9RI
covera-e. Instead of allo(in- 3ans to loo: for his o(n insurance carrier or so#e other for# of insurance
policy4 35P co#pelled hi# to apply (ith the 35P 9RI Pool for 9RI covera-e. =hen 3an1s loan (as
released on %% 7u-ust %,&74 35P already deducted fro# the proceeds thereof the 9RI pre#iu#. Four days
latter4 35P #ade 3ans fill up and si-n his application for 9RI4 as (ell as his health state#ent. 2he 35P later
su'#itted 'oth the application for# and health state#ent to the 35P 9RI Pool at the 35P 9ain 5uildin-4
9a:ati 9etro 9anila. 7s service fee4 35P deducted %!O of the pre#iu# collected 'y it fro# 3ans. In
dealin- (ith 3ans4 35P (as (earin- t(o le-al hatsE the first as a lender4 and the second as an insurance
a-ent. 7s an insurance a-ent4 35P #ade 3ans -o throu-h the #otion of applyin- for said insurance4 there'y
leadin- hi# and his fa#ily to 'elieve that they had already fulfilled all the reAuire#ents for the 9RI and that
the issuance of their policy (as forthco#in-. 7pparently4 35P had full :no(led-e that 3an1s application (as
never -oin- to 'e approved. 2he #a/i#u# a-e for 9RI acceptance is ! years as clearly and specifically
provided in 7rticle % of the Group 9ort-a-e Rede#ption Insurance Policy si-ned in %,&< 'y all the insurance
co#panies concerned. 2he 35P is not authori8ed to accept applications for 9RI (hen its clients are #ore
than ! years of a-e. Gno(in- all the (hile that 3ans (as ineli-i'le for 9RI covera-e 'ecause of his
advanced a-e4 35P e/ceeded the scope of its authority (hen it accepted 3an1s application for 9RI 'y
collectin- the insurance pre#iu#4 and deductin- its a-ent1s co##ission and service fee. 2he lia'ility of an
a-ent (ho e/ceeds the scope of his authority depends upon (hether the third person is a(are of the li#its of
the a-ent1s po(ers. 2here is no sho(in- that 3ans :ne( of the li#itation on 35P1s authority to solicit
applications for 9RI. If the third person dealin- (ith an a-ent is una(are of the li#its of the authority
conferred 'y the principal on the a-ent and he .third person0 has 'een deceived 'y the non$disclosure thereof
'y the a-ent4 then the latter is lia'le for da#a-es to hi#. 2he 35P1s lia'ility4 ho(ever4 cannot 'e for the entire
value of the insurance policy. 2o assu#e that (ere it not for 35P1s conceal#ent of the li#its of its authority4
3ans (ould have secured an 9RI fro# another insurance co#pany4 and therefore (ould have 'een fully
insured 'y the ti#e he died4 is hi-hly speculative. Considerin- his advanced a-e4 there is no a'solute certainty
that 3ans could o'tain an insurance covera-e fro# another co#pany. It #ust also 'e noted that 3ans died
al#ost i##ediately4 i.e.4 on the nineteenth day after applyin- for the 9RI4 and on the t(enty$third day fro#
the date of release of his loan.
7 Great 4a'ifi' ,ife Assuran'e Co+pan# vs. Court of Appeals [GR ,>31386 3/ April 1979$F also
9ondra-on vs. Court of 7ppeals [GR H$*%&7&"
First Division, De (astro (J): 4 concur, " too# no $art
See case entry 17
&a'ts( @n %< 9arch %,574 ;-o 6in- filed an application (ith the Great Pacific Hife 7ssurance Co#pany for
a )!$year endo(#ent policy in the a#ount of P5!4!!!.!! on the life of his one$year old dau-hter 6elen Go.
;-o 6in- supplied the essential data (hich Hapulapu 3. 9ondra-on4 5ranch 9ana-er of the Pacific Hife in
Ce'u City (rote on the correspondin- for# in his o(n hand(ritin- . 9ondra-on finally type$(rote the data
on the application for# (hich (as si-ned 'y ;-o 6in-. 2he latter paid the annual pre#iu#4 the su# of
P%4!77.75 -oin- over to the Co#pany4 'ut he retained the a#ount of P%4*%7.!! as his co##ission for 'ein- a
duly authori8ed a-ent of Pacific Hife. Ipon the pay#ent of the insurance pre#iu#4 the 'indin- deposit
receipt (as issued to ;-o 6in-. Hi:e(ise4 9ondra-on hand(rote at the 'otto# of the 'ac: pa-e of the
application for# his stron- reco##endation for the approval of the insurance application. 2hen on *! 7pril
%,574 9ondra-on received a letter fro# Pacific Hife disapprovin- the insurance application. 2he letter stated
that the said life insurance application for )!$year endo(#ent plan is not availa'le for #inors 'elo( 7 years
old4 'ut Pacific Hife can consider the sa#e under the +uvenile 2riple 7ction Plan4 and advised that if the offer
is accepta'le4 the +uvenile ;on$9edical 3eclaration 'e sent to the Co#pany. 2he non$acceptance of the
insurance plan 'y Pacific Hife (as alle-edly not co##unicated 'y 9ondra-on to ;-o 6in-. Instead4 on
9ay %,574 9ondra-on (rote 'ac: Pacific Hife a-ain stron-ly reco##endin- the approval of the )!$year
endo(#ent life insurance on the -round that Pacific Hife is the only insurance co#pany not sellin- the )!$
year endo(#ent insurance plan to children4 pointin- out that since %,5< the custo#ers4 especially the
Chinese4 (ere as:infor such covera-e. It (as (hen thin-s (ere in such state that on )& 9ay %,57 6elen Go
died of influen8a (ith co#plication of 'roncho$pneu#onia. 2hereupon4 ;-o 6in- sou-ht the pay#ent of the
proceeds of the insurance4 'ut havin- failed in his effort4 he filed the action for the recovery of the sa#e
'efore the Court of First Instance of Ce'u4 (hich rendered a decision a-ainst Pacific Hife and 9ondra-on4
orderi- the# to solidarily pay ;-o 6in- the a#ount of P5!4!!!.!! (ith interest at O fro# the date of the
filin- of the co#plaint4 and the su# of P%!4!!!.!! as attorney1s fees plus costs of suits. @n appeal4 the Court
of 7ppeals set aside the appealed decision of the Court of First Instance of Ce'u4 and a'solved Pacific Hife
and 9ondra-on fro# lia'ility on the insurance policy4 'ut ordered the rei#'urse#ent to ;-o 6in- the
a#ount of P%4!77.754 (ithout interest. @n reconsideration4 ho(ever4 the appellate court affir#ed in toto the
decision of the Court of First Instance of Ce'u4 orderin- Pacific Hife and 9ondra-on Dointly and severally to
pay ;-o 6in-. 2(o petitions for certiorari 'y (ay of appeal (ere filed 'y Pacific Hife and 9ondra-on. 2he
petitons (ere consolidated 'y the Supre#e Court in a resolution dated ), 7pril %,7!.
Co++er'ial ,a- . )nsuran'e ,a- !//6 ( 1/ )
)ssue( =hether the 'indin- deposit receipt constituted a te#porary contract of the life insurance in Auestion4
and thus ne-ate the clai# that the insurance contract (as perfected.
*eld( JCS. 2he provisions printed on the 'indin- deposit receipt sho( that the 'indin- deposit receipt is
intended to 'e #erely a provisional or te#porary insurance contract and only upon co#pliance of the
follo(in- conditionsE .%0 that the co#pany shall 'e satisfied that the applicant (as insura'le on standard
ratesF .)0 that if the co#pany does not accept the application and offers to issue a policy for a different plan4
the insurance contract shall not 'e 'indin- until the applicant accepts the policy offeredF other(ise4 the
deposit shall 'e refundedF and .*0 that if the applicant is not insura'le accordin- to the standard rates4 and the
co#pany disapproves the application4 the insurance applied for shall not 'e in force at any ti#e4 and the
pre#iu# paid shall 'e returned to the applicant. Clearly i#plied fro# the aforesaid conditions is that the
'indin- deposit receipt in Auestion is #erely an ac:no(led-#ent4 on 'ehalf of the co#pany4 that the latter1s
'ranch office had received fro# the applicant the insurance pre#iu# and had accepted the application su'Dect
for processin- 'y the insurance co#panyF and that the latter (ill either approve or reDect the sa#e on the 'asis
of (hether or not the applicant is ?insura'le on standard rates.? Since Pacific Hife disapproved the insurance
application of ;-o 6in-4 the 'indin- deposit receipt in Auestion had never 'eco#e in force at any ti#e. Ipon
this pre#ise4 the 'indin- deposit receipt is4 #anifestly4 #erely conditional and does not insure outri-ht. =here
an a-ree#ent is #ade 'et(een the applicant and the a-ent4 no lia'ility shall attach until the principal approves
the ris: and a receipt is -iven 'y the a-ent. 2he acceptance is #erely conditional4 and is su'ordinated to the
act of the co#pany in approvin- or reDectin- the application. 2hus4 in life insurance4 a ?'indin- slip? or
?'indin- receipt? does not insure 'y itself. It 'ears repeatin- that throu-h the intra$co#pany co##unication
of *! 7pril %,574 Pacific Hife disapproved the insurance application in Auestion on the -round that it is not
offerin- the )!$year endo(#ent insurance policy to children less than 7 years of a-e. =hat it offered instead
is another plan :no(n as the +uvenile 2riple 7ction4 (hich ;-o 6in- failed to accept. In the a'sence of a
#eetin- of the #inds 'et(een Pacific Hife and ;-o 6in- over the )!$year endo(#ent life insurance in the
a#ount of P5!4!!!.!! in favor of the latter1s one$year old dau-hter4 and (ith the non$co#pliance of the
a'oveAuoted conditions stated in the disputed 'indin- deposit receipt4 there could have 'een no insurance
contract duly perfected 'et(een the#. 7ccordin-ly4 the deposit paid 'y ;-o 6in- shall have to 'e refunded
'y Pacific Hife.
3 1pouses C5a vs. Court of Appeals [GR 1!86!/ 13 Au?ust 1997$
First Division, Padilla (J): 4 concur
&a'ts( Spouses ;ilo Cha and Stella Iy$Cha4 as lessees4 entered into a lease contract (ith CGS 3evelop#ent
Corporation4 as lessor4 on 5 @cto'er %,&&. @ne of the stipulations of the % year lease contract states that ?2he
HCSSCC shall not insure a-ainst fire the chattels4 #erchandise4 te/tiles4 -oods and effects placed at any stall
or store or space in the leased pre#ises (ithout first o'tainin- the (ritten consent and approval of the
HCSS@R. If the HCSSCC o'tain.s0 the insurance thereof (ithout the consent of the HCSS@R then the policy
is dee#ed assi-ned and transferred to the HCSS@R for its o(n 'enefit? ;ot(ithstandin- the a'ove stipulation
in the lease contract4 the Cha spouses insured a-ainst loss 'y fire their #erchandise inside the leased pre#ises
for P5!!4!!!.!! (ith the Inited Insurance Co.4 Inc. (ithout the (ritten consent of CGS. @n the day that the
lease contract (as to e/pire4 fire 'ro:e out inside the leased pre#ises. =hen CGS learned of the insurance
earlier procured 'y the Cha spouses .(ithout its consent04 it (rote the insurer .Inited0 a de#and letter as:in-
that the proceeds of the insurance contract .'et(een the Cha spouses and Inited0 'e paid directly to CGS4
'ased on its lease contract (ith the Cha spouses. Inited refused to pay CGS. 6ence4 the latter filed a
co#plaint a-ainst the Cha spouses and Inited. @n ) +une %,,)4 the Re-ional 2rial Court4 5ranch 4 9anila4
rendered a decision orderin- Inited to pay CGS the a#ount of P**54!*.%% and the Cha spouses to pay
P5!4!!!.!! as e/e#plary da#a-es4 P)!4!!!.!! as attorney1s fees and costs of suit. @n appeal4 the Court of
7ppeals in C7 GR CV *,*)& rendered a decision dated %% +anuary %,,4 affir#in- the trial court decision4
deletin- ho(ever the a(ards for e/e#plary da#a-es and attorney1s fees. 7 #otion for reconsideration 'y
Inited (as denied on ), 9arch %,,. 2he spouses Cha and Inited filed the petition for revie( on certiorari.
Issue: =hether para-raph %& of the lease contract entered into 'et(een CGS and the Cha spouses is valid
insofar as it provides that any fire insurance policy o'tained 'y the lessee .Cha spouses0 over their
#erchandise inside the leased pre#ises is dee#ed assi-ned or transferred to the lessor .CGS0 if said policy is
o'tained (ithout the prior (ritten consent of the latter.
*eld( ;@. It is 'asic in the la( on contracts that the stipulations contained in a contract cannot 'e contrary to
la(4 #orals4 -ood custo#s4 pu'lic order or pu'lic policy. Section %& of the Insurance Code provides that ?;o
contract or policy of insurance on property shall 'e enforcea'le e/cept for the 'enefit of so#e person havin-
an insura'le interest in the property insured.? 7 non$life insurance policy such as the fire insurance policy
ta:en 'y the spouses over their #erchandise is pri#arily a contract of inde#nity. Insura'le interest in the
property insured #ust e/ist at the ti#e the insurance ta:es effect and at the ti#e the loss occurs. 2he 'asis of
such reAuire#ent of insura'le interest in property insured is 'ased on sound pu'lic policyE to prevent a person
fro# ta:in- out an insurance policy on property upon (hich he has no insura'le interest and collectin- the
proceeds of said policy in case of loss of the property. In such a case4 the contract of insurance is a #ere
(a-er (hich is void under Section )5 of the Insurance Code4 (hich provides that ?Cvery stipulation in a
policy of Insurance for the pay#ent of loss (hether the person insured has or has not any interest in the
property insured4 or that the policy shall 'e received as proof of such interest4 and every policy e/ecuted 'y
(ay of -a#in- or (a-erin-4 is void.? 6erein4 it cannot 'e denied that CGS has no insura'le interest in the
-oods and #erchandise inside the leased pre#ises under the provisions of Section %7 of the Insurance Code
(hich provides that ?2he #easure of an insura'le interest in property is the e/tent to (hich the insured #i-ht
'e da#nified 'y loss of inDury thereof.? 2herefore4 CGS cannot4 under the Insurance Code N a special la( N
'e validly a 'eneficiary of the fire insurance policy ta:en 'y the spouses over their #erchandise. 2his
insura'le interest over said #erchandise re#ains (ith the insured4 the Cha spouses. 2he auto#atic assi-n#ent
of the policy to CGS under the provision of the lease contract previously Auoted is void for 'ein- contrary to
la( andLor pu'lic policy. 2he proceeds of the fire insurance policy thus ri-htfully 'elon- to the spouses ;ilo
Cha and Stella Iy$Cha. 2he insurer .Inited0 cannot 'e co#pelled to pay the proceeds of the fire insurance
policy to a person .CGS0 (ho has no insura'le interest in the property insured.
9 Gea?onia vs. Court of Appeals [GR 1188!7 6 &e;ruar# 1996$
First Division, Davide Jr) (J): 4 concur
&a'ts( 7r#ando Gea-onia is the o(ner of ;or#an1s 9art located in the pu'lic #ar:et of San Francisco4
7-usan del Sur. @n )) 3ece#'er %,&,4 he o'tained fro# Country 5an:ers Insurance Corporation fire
insurance policy ;o. F$%<)) ) for P%!!4!!!.!!. 2he period of the policy (as fro# )) 3ece#'er %,&, to ))
3ece#'er %,,! and covered the follo(in-E ?Stoc:$in$trade consistin- principally of dry -oods such as R2=1s
for #en and (o#en (ear and other usual to assured1s 'usiness.? Gea-onia declared in the policy under the
su'headin- entitled C@$I;SIR7;CC that 9ercantile Insurance Co.4 Inc. (as the co$insurer for P5!4!!!.!!.
Fro# %,&, to %,,!4 Gea-onia had in his inventory stoc:s a#ountin- to P*,)4%*!.5!4 ite#i8ed as follo(sE
Benco Sales4 Inc.4 P554,&.!!F F. He-aspi Gen. 9erchandise4 &4<*).5!F and Ce'u 2esin- 2e/tiles4
)5!4!!!.!! .on credit0F totallin- P*,)4%*!.5!. 2he policy contained the follo(in- condition4 that ?the insured
shall -ive notice to the Co#pany of any insurance or insurances already effected4 or (hich #ay su'seAuently
'e effected4 coverin- any of the property or properties consistin- of stoc:s in trade4 -oods in process andLor
inventories only here'y insured4 and unless notice 'e -iven and the particulars of such insurance or insurances
'e stated therein or endorsed in this policy pursuant to Section 5! of the Insurance Code4 'y or on 'ehalf of
the Co#pany 'efore the occurrence of any loss or da#a-e4 all 'enefits under this policy shall 'e dee#ed
forfeited4 provided ho(ever4 that this condition shall not apply (hen the total insurance or insurances in force
at the ti#e of the loss or da#a-e is not #ore than P)!!4!!!.!!.? @n )7 9ay %,,!4 fire of accidental ori-in
'ro:e out at around 7E*! p.#. at the pu'lic #ar:et of San Francisco4 7-usan del Sur. Gea-onia1s insured
stoc:s$in$trade (ere co#pletely destroyed pro#ptin- hi# to file (ith Country 5an:ers a clai# under the
policy. @n )& 3ece#'er %,,!4 Country 5an:ers denied the clai# 'ecause it found that at the ti#e of the loss
Co++er'ial ,a- . )nsuran'e ,a- !//6 ( 1! )
Gea-onia1s stoc:s$in$trade (ere li:e(ise covered 'y fire insurance policies G7$)&%< and G7$)&%<<4 for
P%!!4!!!.!! each4 issued 'y the Ce'u 5ranch of the Philippines First Insurance Co.4 Inc. .PFIC0. 2hese
policies indicate that the insured (as ?9essrs. 3iscount 9art .9r. 7r#ando Gea-onia4 Prop.0? (ith a
#ort-a-e clause readin- ??9@R2G7GCCE Hoss4 if any4 shall 'e paya'le to 9essrs. Ce'u 2esin- 2e/tiles4
Ce'u City as their interest #ay appear su'Dect to the ter#s of this policy. C@$I;SIR7;CC 3CCH7RC3E
P%!!4!!!. N Phils. First CC5LF$)<75&? 2he 'asis of Country 5an:ers1 denial (as Gea-onia1s alle-ed
violation of Condition * of the policy. Gea-onia then filed a co#plaint a-ainst Country 5an:ers (ith the
Insurance Co##ission .Case **<!0 for the recovery of P%!!4!!!.!! under fire insurance policy F$%<)) and
for attorney1s fees and costs of liti-ation. 6e attached his letter of %& +anuary %,,% (hich as:ed for the
reconsideration of the denial. 6e ad#itted in the said letter that at the ti#e he o'tained Country 5an:ers1s fire
insurance policy he :ne( that the t(o policies issued 'y the PFIC (ere already in e/istenceF ho(ever4 he had
no :no(led-e of the provision in Country 5an:ers1 policy reAuirin- hi# to infor# it of the prior policiesF this
reAuire#ent (as not #entioned to hi# 'y Country 5an:ers1 a-entF and had it 'een so #entioned4 he (ould
not have (ithheld such infor#ation. 6e further asserted that the total of the a#ounts clai#ed under the three
policies (as 'elo( the actual value of his stoc:s at the ti#e of loss4 (hich (as P%4!!!4!!!.!!. In its decision
of )% +une %,,*4 the Insurance Co##ission found that Gea-onia did not violate Condition * as he had no
:no(led-e of the e/istence of the t(o fire insurance policies o'tained fro# the PFICF that it (as Ce'u 2esin-
2e/tiles (hich procured the PFIC policies (ithout infor#in- hi# or securin- his consentF and that Ce'u
2esin- 2e/tile4 as his creditor4 had insura'le interest on the stoc:s. 2hese findin-s (ere 'ased on Gea-onia1s
testi#ony that he ca#e to :no( of the PFIC policies only (hen he filed his clai# (ith Country 5an:ers and
that Ce'u 2esin- 2e/tile o'tained the# and paid for their pre#iu#s (ithout infor#in- hi# thereof. 2he
Insurance Co##ission ordered Country 5an:ers to pay Gea-i'ua the su# of P%!!4!!!.!! (ith le-al interest
fro# the ti#e the co#plaint (as filed until fully satisfied plus the a#ount of P%!4!!!.!! as attorney1s fees.
=ith costs. Its #otion for the reconsideration of the decision havin- 'een denied 'y the Insurance
Co##ission in its resolution of )! 7u-ust %,,*4 Country 5an:ers appealed to the Court of 7ppeals 'y (ay of
a petition for revie( .C7$GR SP *%,%0. In its decision of ), 3ece#'er %,,*4 the Court of 7ppeals reversed
the decision of the Insurance Co##ission 'ecause it found that Gea-onia :ne( of the e/istence of the t(o
other policies issued 'y the PFIC. 6is #otion to reconsider the adverse decision havin- 'een denied4
Gea-onia filed the petition for revie( on certiorari.
)ssue [1$( =hether the non$disclosure of other insurance policies violate condition * of the policy4 so as to
deny Gea-onia fro# recoverin- on the policy.
*eld [1$( Condition * of Country 5an:ers1s Policy F$%<)) is a condition (hich is not proscri'ed 'y la(. Its
incorporation in the policy is allo(ed 'y Section 75 of the Insurance Code4 Such a condition is a provision
(hich invaria'ly appears in fire insurance policies and is intended to prevent an increase in the #oral ha8ard.
It is co##only :no(n as the additional or ?other insurance? clause and has 'een upheld as valid and as a
(arranty that no other insurance e/ists. Its violation (ould thus avoid the policy. 6o(ever4 in order to
constitute a violation4 the other insurance #ust 'e upon the sa#e su'Dect #atter4 the sa#e interest therein4 and
the sa#e ris:. 2he fire insurance policies issued 'y the PFIC na#e Gea-onia as the assured and contain a
#ort-a-e clause (hich readsE ?Hoss4 if any4 shall 'e paya'le to 9CSSRS. 2CSI;G 2CK2IHCS4 Ce'u City as
their interest #ay appear su'Dect to the ter#s of the policy.? 2his is clearly a si#ple loss paya'le clause4 not a
standard #ort-a-e clause. 2he Court concludes that .a0 the prohi'ition in Condition * of the su'Dect policy
applies only to dou'le insurance4 and .'0 the nullity of the policy shall only 'e to the e/tent e/ceedin-
P)!!4!!!.!! of the total policies o'tained. 2he first conclusion is supported 'y the portion of the condition
referrin- to other insurance ?coverin- any of the property or properties consistin- of stoc:s in trade4 -oods in
process andLor inventories only here'y insured4? and the portion re-ardin- the insured1s declaration on the
su'headin- C@$I;SIR7;CC that the co$insurer is 9ercantile Insurance Co.4 Inc. in the su# of P5!4!!!.!!.
7 dou'le insurance e/ists (here the sa#e person is insured 'y several insurers separately in respect of the
sa#e su'Dect and interest. Since the insura'le interests of a #ort-a-or and a #ort-a-ee on the #ort-a-ed
property are distinct and separateF the t(o policies of the PFIC do not cover the sa#e interest as that covered
'y the policy of Country 5an:ers4 no dou'le insurance e/ists. 2he non$disclosure then of the for#er policies
(as not fatal to Gea-onia1s ri-ht to recover on Country 5an:ers1 policy.
)ssue [!$( =hether the violation of Condition * of the policy renders the policy void.
*eld [!$( Inli:e the ?other insurance? clauses involved in General Insurance and Surety Corp. vs. ;- 6ua4
%! Phil. %%%7 [%,!"4 or in Pioneer Insurance & Surety Corp. vs. Jap4 % SCR7 <) [%,7<" (hich reads
?2he insured shall -ive notice to the co#pany of any insurance or insurances already effected4 or (hich #ay
su'seAuently 'e effected coverin- any of the property here'y insured4 and unless such notice 'e -iven and the
particulars of such insurance or insurances 'e stated in or endorsed on this Policy 'y or on 'ehalf of the
Co#pany 'efore the occurrence of any loss or da#a-e4 all 'enefits under this Policy shall 'e forfeited?F or in
the %,*! case of Santa 7na vs. Co##ercial Inion 7ssurance Co.4 55 Phil. *),4 **< [%,*!"4 (hich provided
?that any outstandin- insurance upon the (hole or a portion of the o'Dects there'y assured #ust 'e declared
'y the insured in (ritin- and he #ust cause the co#pany to add or insert it in the policy4 (ithout (hich such
policy shall 'e null and void4 and the insured (ill not 'e entitled to inde#nity in case of loss4? Condition * in
Country 5an:ers1 policy F$%<)) does not a'solutely declare void any violation thereof. It e/pressly provides
that the condition ?shall not apply (hen the total insurance or insurances in force at the ti#e of the loss or
da#a-e is not #ore than P)!!4!!!.!!.? 5y statin- (ithin Condition * itself that such condition shall not
apply if the total insurance in force at the ti#e of loss does not e/ceed P)!!4!!!.!!4 Country 5an:ers (as
a#ena'le to assu#e a co$insurer1s lia'ility up to a loss not e/ceedin- P)!!4!!!.!!. =hat it had in #ind (as
to discoura-e over$insurance. Indeed4 the rationale 'ehind the incorporation of ?other insurance? clause in fire
policies is to prevent over$insurance and thus avert the perpetration of fraud. =hen a property o(ner o'tains
insurance policies fro# t(o or #ore insurers in a total a#ount that e/ceeds the property1s value4 the insured
#ay have an induce#ent to destroy the property for the purpose of collectin- the insurance. 2he pu'lic as
(ell as the insurer is interested in preventin- a situation in (hich a fire (ould 'e profita'le to the insured.
1/ Ri0al Co++er'ial Ban=in? Corporation (RCBC) vs. Court of Appeals [GR 1!3333 !/ April 1993$F
also RC5C vs. Court of 7ppeals [GR %)&&*<"
Second Division, Melo (J): 4 concur
&a'ts( Goyu & Sons4 Inc. .Goyu0 applied for credit facilities and acco##odations (ith Ri8al Co##ercial
5an:in- Corporation .RC5C0 at its 5inondo 5ranch. 7fter due evaluation4 RC5C 5inondo 5ranch4 throu-h
its :ey officers4 petitioners Iy Chun 5in- and Cli 3. Hao4 reco##ended Goyu1s application for approval 'y
RC5C1s e/ecutive co##ittee. 7 credit facility in the a#ount of P*! #illion (as initially -ranted. Ipon
Goyu1s application and Iy1s and Hao1s reco##endation4 RC5C1s e/ecutive co##ittee increased Goyu1s credit
facility to P5! #illion4 then to P,! #illion4 and finally to P%%7 #illion. 7s security for its credit facilities (ith
RC5C4 Goyu e/ecuted t(o real estate #ort-a-es and t(o chattel #ort-a-es in favor of RC5C4 (hich (ere
re-istered (ith the Re-istry of 3eeds at Valen8uela4 9etro 9anila. Inder each of these four #ort-a-e
contracts4 Goyu co##itted itself to insure the #ort-a-ed property (ith an insurance co#pany approved 'y
RC5C4 and su'seAuently4 to endorse and deliver the insurance policies to RC5C. Goyu o'tained in its na#e a
total of %! insurance policies fro# 9IC@. In Fe'ruary %,,)4 7lchester Insurance 7-ency4 Inc.4 the insurance
a-ent (here Goyu o'tained the 9alayan insurance policies4 issued , endorse#ents in favor of RC5C
see#in-ly upon instructions of Goyu. @n )7 7pril %,,)4 one of Goyu1s factory 'uildin-s in Valen8uela (as
-utted 'y fire. ConseAuently4 Goyu su'#itted its clai# for inde#nity on account of the loss insured a-ainst.
9IC@ denied the clai# on the -round that the insurance policies (ere either attached pursuant to (rits of
attach#entsL-arnish#ents issued 'y various courts or that the insurance proceeds (ere also clai#ed 'y other
creditors of Goyu alle-in- 'etter ri-hts to the proceeds than the insured. Goyu filed a co#plaint for specific
perfor#ance and da#a-es (hich (as doc:eted at the Re-ional 2rial Court of the ;ational Capital +udicial
Re-ion .9anila4 5ranch *0 as Civil Case ,*$5<<). RC5C4 one of Goyu1s creditors4 also filed (ith 9IC@ its
for#al clai# over the proceeds of the insurance policies4 'ut said clai#s (ere also denied for the sa#e
reasons that 7GC@ denied Goyu1s clai#s. In an interlocutory order dated %) @cto'er %,,*4 the Re-ional 2rial
Court of 9anila .5ranch *04 confir#ed that Goyu1s other creditors4 na#ely4 Ir'an 5an:4 7lfredo Se'astian4
and Philippine 2rust Co#pany o'tained their respective (rits of attach#ents fro# various courts4 coverin- an
a--re-ate a#ount of P%<4,*&4!&!.)*4 and ordered that the proceeds of the %! insurance policies 'e deposited
(ith the said court #inus the afore#entioned P%<4,*&4!&!.)*. 7ccordin-ly4 on 7 +anuary %,,<4 9IC@
deposited the a#ount of P5!45!545,<.! (ith 5ranch * of the 9anila R2C. In the #eanti#e4 another notice of
-arnish#ent (as handed do(n 'y another 9anila R2C sala .5ranch )&0 for the a#ount of P&4,4&*&.75.
7fter trial4 5ranch * of the 9anila R2C rendered Dud-#ent in a favor of Goyu4 orderin- 9alayan to pay Goyu
its fire loss clai#s in the total a#ount of P7<4!<!45%&.5& less the a#ount of P5!4!!!4!!!.!! (hich is
deposited (ith the CourtF da#a-es 'y (ay of interest for the duration of the delay since )7 +uly %,,) .,! days
after 9alayan1s receipt of the reAuired proof of loss and notice of loss0 at the rate of t(ice the ceilin-
prescri'ed 'y the 9onetary 5oard4 on the a#ounts of .%0 P5!4!!!4!!!.!! fro# )7 +uly %,,) up to the ti#e
said a#ount (as deposited (ith the Court on 7 +anuary %,,<F and .)0 P)<4!<!45%&.5& N fro# %7 +uly %,,)
up to the ti#e (hen the (rits of attach#ents (ere received 'y 9alayan. 2he court also ordered RC5C to pay
Goyu actual and co#pensatory da#a-es in the a#ount of P)4!!!4!!!.!!4 and 'oth 9alayan and RC5C to
solidarily pay Goyu .%0 P%4!!!4!!!.!! as e/e#plary da#a-esF .)0 P%4!!!4!!!.!! as4 and for4 attorneys feesF
and .*0 Costs of suit. 2he Court4 on the Counterclai# of RC5C4 ordered Goyu to pay its loan o'li-ations (ith
RC5C in the a#ount of P&47&54!,.!<4 as of )7 7pril %,,)4 (ith interest thereon at the rate stipulated in the
respective pro#issory notes .(ithout surchar-es and penalties0. Fro# this Dud-#ent4 all parties interposed
their respective appeals. Goyu (as unsatisfied (ith the a#ounts a(arded in its favor. 9IC@ and RC5C
disputed the trial court1s findin-s of lia'ility on their part. 2he Court of 7ppeals partly -ranted Goyu1s appeal4
'ut sustained the findin-s of the trial court (ith respect to 9IC@ and RC5C1s lia'ilities. 2he appellate court
#odified the decision 'y orderin- 9alayan to pay Goyu its fire loss clai# in the total a#ount of
P7<4!<!45%&.5& less than the a#ount of P5!45!545<,.! .per @.R. ;o. *<,)&50 plus deposited in court and
da#a-es 'y (ay of interest co##encin- )7 +uly %,,) until the ti#e Goyu receives the said a#ount at the rate
of *7O per annu# (hich is t(ice the ceilin- prescri'ed 'y the 9onetary 5oardF orderin- RC5C to pay Goyu
actual and co#pensatory da#a-es in the a#ount of P54!!!4!!!.!!F and 9alayan and RC5C4 Iy Chun 5in-
and Cli Hao to pay Goyu solidarily in the a#ounts of .%0 P%45!!4!!!.!! as e/e#plary da#a-esF and .)0
P%45!!4!!!.!! as and for attorney1s fees. 2he Court4 on RC5C1s Counterclai#4 ordered Goyuto pay its loan
o'li-ation (ith RC5C in the a#ount of P&47&5.!,.!< as of )7 7pril %,,) (ithout any interest4 surchar-es
and penalties. RC5C and 9alayan appealed separately 'ut4 in vie( of the co##on facts and issues involved4
their individual petitions (ere consolidated.
)ssue [1$( =hether RC5C4 as #ort-a-ee4 has any ri-ht over the insurance policies ta:en 'y Goyu4 the
#ort-a-or4 in case of the occurrence of loss.
*eld [1$( JCS. It is settled that a #ort-a-or and a #ort-a-ee have separate and distinct insura'le interests in
the sa#e #ort-a-ed property4 such that each one of the# #ay insure the sa#e property for his o(n sole
'enefit. 2here is no Auestion that Goyu could insure the #ort-a-ed property for its o(n e/clusive 'enefit.
6erein4 althou-h it appears that Goyu o'tained the su'Dect insurance policies na#in- itself as the sole payee4
the intentions of the parties as sho(n 'y their conte#poraneous acts4 #ust 'e -iven due consideration in order
to 'etter serve the interest of Dustice and eAuity. It is to 'e noted that nine endorse#ent docu#ents (ere
prepared 'y 7lchester in favor of RC5C. 2he Court is in a Auandary ho( 7lchester could arrive at the idea of
endorsin- any specific insurance policy in favor of any particular 'eneficiary or payee other than the insured
had not such na#ed payee or 'eneficiary 'een specifically disclosed 'y the insured itself. It is also si-nificant
that Goyu voluntarily and purposely too: the insurance policies fro# 9IC@4 a sister co#pany of RC5C4 and
not Dust fro# any other insurance co#pany. 7lchester (ould not have found out that the su'Dect pieces of
property (ere #ort-a-ed to RC5C had not such infor#ation 'een voluntarily disclosed 'y Goyu itself. 6ad it
not 'een for Goyu4 7lchester (ould not have :no(n of Goyu1s intention of o'tainin- insurance covera-e in
co#pliance (ith its underta:inin the #ort-a-e contracts (ith RC5C4 and verify4 7lchester (ould not have
endorsed the policies to RC5C had it not 'een so directed 'y Goyu. @n eAuita'le principles4 particularly on
the -round of estoppel4 the Court is constrained to rule in favor of #ort-a-or RC5C. RC5C4 in -ood faith4
relied upon the endorse#ent docu#ents sent to it as this (as only pursuant to the stipulation in the #ort-a-e
contracts. Such reliance is Dustified under the circu#stances of the case. Goyu failed to seasona'ly repudiate
the authority of the person or persons (ho prepared such endorse#ents. @ver and a'ove this4 Goyu
continued4 in the #eanti#e4 to enDoy the 'enefits of the credit facilities e/tended to it 'y RC5C. 7fter the
occurrence of the loss insured a-ainst4 it (as too late for Goyu to diso(n the endorse#ents for any i#a-ined
or contrived lac: of authority of 7lchester to prepare and issue said endorse#ents. If there had not 'een
actually an i#plied ratification of said endorse#ents 'y virtue of Goyu1s inaction in this case4 Goyu is at the
very least estopped fro# assailin- their operative effects. 2o per#it Goyu to capitali8e on its non$
confir#ation of these endorse#ents (hile it continued to enDoy the 'enefits of the credit facilities of RC5C
(hich 'elieved in -ood faith that there (as due endorse#ent pursuant to their #ort-a-e contracts4 is to
countenance -rave contravention of pu'lic policy4 fair dealin-4 -ood faith4 and Dustice. Such an unDust
situation4 the Court cannot sanction. Inder the peculiar circu#stances4 the Court is 'ound to reco-ni8e
RC5C1s ri-ht to the proceeds of the insurance policies if not for the actual endorse#ent of the policies4 at least
on the 'asis of the eAuita'le principle of estoppel.
)ssue [!$( =hether Goyu can insist that the proceeds of insurance shall e/clusively apply to the interest of the
person in (hose na#e or for (hose 'enefit it is #ade.
*eld [!$( ;@. Goyu cannot see: relief under Section 5* of the Insurance Code (hich provides that the
proceeds of insurance shall e/clusively apply to the interest of the person in (hose na#e or for (hose 'enefit
it is #ade. 2he peculiarity of the circu#stances o'tainin- in the instant case presents a Dustification to ta:e
e/ception to the strict application of said provision4 it havin- 'een sufficiently esta'lished that it (as the
intention of the parties to desi-nate RC5C as the party for (hose 'enefit the insurance policies (ere ta:en
out. Consider thus the follo(in-E .%0 It is undisputed that the insured pieces of property (ere the su'Dect of
#ort-a-e contracts entered into 'et(een RC5C and Goyu in consideration of and for securin- Goyu1s credit
facilities fro# RC5C. 2he #ort-a-e contracts contained co##on provisions (here'y Goyu4 as #ort-a-or4
undertoo: to have the #ort-a-ed property properly covered a-ainst any loss 'y an insurance co#pany
accepta'le to RC5C. .)0 Goyu voluntarily procured insurance policies to cover the #ort-a-ed property fro#
9IC@4 no less than a sister co#pany of RC5C and definitely an accepta'le insurance co#pany to RC5C. .*0
Cndorse#ent docu#ents (ere prepared 'y 9IC@1s under(riter4 7lchester Insurance 7-ency4 Inc.4 and copies
thereof (ere sent to Goyu4 9IC@ and RC5C. Goyu did not assail4 until of late4 the validity of said
endorse#ents. .<0 Goyu continued until the occurrence of the fire4 to enDoy the 'enefits of the credit facilities
e/tended 'y RC5C (hich (as conditioned upon the endorse#ent of the insurance policies to 'e ta:en 'y
Goyu to cover the #ort-a-ed properties. 2he fact that upon receivin- its copies of the endorse#ent
docu#ents prepared 'y 7lchester4 Goyu4 despite the a'sence (ritten confor#ity thereto4 o'viously considered
said endorse#ent to 'e sufficient co#pliance (ith its o'li-ation under the #ort-a-e contracts since RC5C
accordin-ly continued to e/tend the 'enefits of its credit facilities and Goyu continued to 'enefit therefro#.
+ust as plain too is the intention of the parties to constitute RC5C as the 'eneficiary of the various insurance
policies o'tained 'y Goyu. 2he intention of the parties (ill have to 'e -iven full force and effect in this
particular case. 2he insurance proceeds #ay4 therefore4 'e e/clusively applied to RC5C4 (hich under the
factual circu#stances of the case4 is truly the person or entity for (hose 'enefit the policies (ere clearly
intended. 9oreover4 the la(1s evident intention to protect the interests of the #ort-a-ee upon the #ort-a-ed
property is e/pressed in 7rticle )%)7 of the Civil Code. 2he proceeds of the & insurance policies endorsed to
RC5C a--re-ate to P&,4,7<4<&&.*. 5ein- e/clusively paya'le to RC5C 'y reason of the endorse#ent 'y
7lchester to RC5C4 (hich (e already ruled to have the force and effect of an endorse#ent 'y Goyu itself4
these & policies can not 'e attached 'y Goyu1s other creditors up to the e/tent of the Goyu1s outstandin-
o'li-ation in RC5C1s favor. Section 5* of the Insurance Code ordains that the insurance proceeds of the
endorsed policies shall 'e applied e/clusively to the proper interest of the person for (hose 'enefit it (as
#ade. In this case4 to the e/tent of Goyu1s o'li-ation (ith RC5C4 the interest of Goyu in the su'Dect policies
had 'een transferred to RC5C effective as of the ti#e of the endorse#ent. 2hese policies #ay no lon-er 'e
attached 'y the other creditors of Goyu4 li:e 7lfredo Se'astian in GR %)&&*<4 (hich #ay nonetheless
forth(ith 'e dis#issed for 'ein- #oot and acade#ic in vie( of the results reached herein. @nly the t(o other
policies a#ountin- to P%,4<4))<.,) #ay 'e validly attached4 -arnished4 and levied upon 'y Goyu1s other
creditors. 2o the e/tent of Goyu1s outstandin- o'li-ation (ith RC5C4 all the rest of the other insurance
policies (hich (ere endorsed to RC5C4 are4 therefore4 to 'e released fro# attach#ent4 -arnish#ent4 and levy
'y the other creditors of Goyu.
11 Great 4a'ifi' ,ife Assuran'e Corp. vs. Court of Appeals [GR 113399 13 @'to;er 1999$
Second Division, 'uisum*ing (J): concur, " on o++icial leave
&a'ts( 7 contract of -roup life insurance (as e/ecuted 'et(een Great Pacific Hife 7ssurance Corporation
.Grepalife0 and 3evelop#ent 5an: of the Philippines .35P0. Grepalife a-reed to insure the lives of eli-i'le
housin- loan #ort-a-ors of 35P. @n %% ;ove#'er %,&*4 3r. =ilfredo Heuterio4 a physician and a housin-
de'tor of 35P applied for #e#'ership in the -roup life insurance plan. In an application for#4 3r. Heuterio
ans(ered Auestions concernin- his health condition as follo(sE ?7. 6ave you ever had4 or consulted4 a
physician for a heart condition4 hi-h 'lood pressure4 cancer4 dia'etes4 lun-4 :idney or sto#ach disorder or any
other physical i#pair#entM 7ns(erE ;o. If so -ive details PPPPPPPPPPP. &. 7re you no(4 to the 'est of your
:no(led-e4 in -ood healthM 7ns(erE [ / " Jes [ " ;o.? @n %5 ;ove#'er %,&*4 Grepalife issued Certificate
5$%&55&4 as insurance covera-e of 3r. Heuterio4 to the e/tent of his 35P #ort-a-e inde'tedness a#ountin- to
P&4)!!.!!. @n 7u-ust %,&<4 3r. Heuterio died due to ?#assive cere'ral he#orrha-e.? ConseAuently4 35P
su'#itted a death clai# to Grepalife. Grepalife denied the clai# alle-in- that 3r. Heuterio (as not physically
healthy (hen he applied for an insurance covera-e on %5 ;ove#'er %,&*. Grepalife insisted that 3r. Heuterio
did not disclose he had 'een sufferin- fro# hypertension4 (hich caused his death. 7lle-edly4 such non$
disclosure constituted conceal#ent that Dustified the denial of the clai#. @n )! @cto'er %,&4 the (ido( of
the late 3r. Heuterio4 9edarda V. Heuterio4 filed a co#plaint (ith the Re-ional 2rial Court of 9isa#is
@riental4 5ranch %&4 a-ainst Grepalife for ?Specific Perfor#ance (ith 3a#a-es.? 3urin- the trial4 3r.
6ernando 9eDia4 (ho issued the death certificate4 (as called to testify. 3r. 9eDiaQs findin-s4 'ased partly fro#
the infor#ation -iven 'y the (ido(4 stated that 3r. Heuterio co#plained of headaches presu#a'ly due to hi-h
'lood pressure. 2he inference (as not conclusive 'ecause 3r. Heuterio (as not autopsied4 hence4 other causes
(ere not ruled out. @n )) Fe'ruary %,&&4 the trial court rendered a decision in favor of the (ido( and a-ainst
Grepalife. @n %7 9ay %,,*4 the Court of 7ppeals sustained the trial courtQs decision. Grepalife filed the
petition for revie(.
)ssue( =hether 3r. Heuterio failed to disclose that he had hypertension4 (hich #i-ht have caused his death4
and thus conceal#ent can 'e interposed 'y Grepalife as a defense to annul the insurance contract.
*eld( Conceal#ent e/ists (here the assured had :no(led-e of a fact #aterial to the ris:4 and honesty4 -ood
faith4 and fair dealin- reAuires that he should co##unicate it to the assured4 'ut he desi-nedly and
intentionally (ithholds the sa#e. Grepalife #erely relied on the testi#ony of the attendin- physician4 3r.
6ernando 9eDia4 as supported 'y the infor#ation -iven 'y the (ido( of the decedent. Grepalife asserts that
3r. 9eDiaQs technical dia-nosis of the cause of death of 3r. Heuterio (as a duly docu#ented hospital record4
and that the (ido(Qs declaration that her hus'and had ?possi'le hypertension several years a-o? should not 'e
considered as hearsay4 'ut as part of res -estae. @n the contrary4 the #edical findin-s (ere not conclusive
'ecause 3r. 9eDia did not conduct an autopsy on the 'ody of the decedent. 7s the attendin- physician4 3r.
9eDia stated that he had no :no(led-e of 3r. HeuterioQs any previous hospital confine#ent. 3r. HeuterioQs
death certificate stated that hypertension (as only ?the possi'le cause of death.? 2he (ido(Qs state#ent4 as to
the #edical history of her hus'and4 (as due to her unrelia'le recollection of events. 6ence4 the state#ent of
the physician (as properly considered 'y the trial court as hearsay. 2he insured4 3r. Heuterio4 had ans(ered in
his insurance application that he (as in -ood health and that he had not consulted a doctor or any of the
enu#erated ail#ents4 includin- hypertensionF (hen he died the attendin- physician had certified in the death
certificate that the for#er died of cere'ral he#orrha-e4 pro'a'ly secondary to hypertension. Contrary to
GrepalifeQs alle-ations4 there (as no sufficient proof that the insured had suffered fro# hypertension. 7side
fro# the state#ent of the insuredQs (ido( (ho (as not even sure if the #edicines ta:en 'y 3r. Heuterio (ere
for hypertension4 Grepalife had not proven nor produced any (itness (ho could attest to 3r. HeuterioQs
#edical history. Grepalife had failed to esta'lish that there (as conceal#ent #ade 'y the insured4 hence4 it
cannot refuse pay#ent of the clai#. 2he fraudulent intent on the part of the insured #ust 'e esta'lished to
entitle the insurer to rescind the contract. 9isrepresentation as a defense of the insurer to avoid lia'ility is an
affir#ative defense and the duty to esta'lish such defense 'y satisfactory and convincin- evidence rests upon
the insurer. 6erein4 Grepalife failed to clearly and satisfactorily esta'lish its defense4 and is therefore lia'le to
pay the proceeds of the insurance.
1! 1unlife Assuran'e Co+pan# of Canada vs. Court of Appeals [GR 1/6136 !! "une 1996$
First Division, 'uiason (J): 4 concur
&a'ts( @n %5 7pril %,&4 Ro'ert +ohn 5. 5acani procured a life insurance contract for hi#self fro# Sunlife
7ssurance Co#pany of Canada. 6e (as issued Policy *$,!*$7$K valued P%!!4!!!.!!4 (ith dou'le
inde#nity in case of accidental death. 2he desi-nated 'eneficiary (as his #other4 5ernarda 5acani. @n )
+une %,&74 the insured died in a plane crash. 5ernarda 5acani filed a clai# (ith Sunlife4 see:in- the 'enefits
of the insurance policy ta:en 'y her son. Sunlife conducted an investi-ation and its findin-s pro#pted it to
reDect the clai#. In its letter4 Sunlife infor#ed 5acani4 that the insured did not disclosed #aterial facts relevant
to the issuance of the policy4 thus renderin- the contract of insurance voida'le. 7 chec: representin- the total
pre#iu#s paid in the a#ount of P%!4%7).!! (as attached to said letter. Sunlife clai#ed that the insured -ave
false state#ents in his application (hen he ans(ered the follo(in- AuestionsE ?5. =ithin the past 5 years have
youE a0 consulted any doctor or other health practitionerM '0 su'#itted toE CCGM K$raysM 'lood testsM other
testsM c0 attended or 'een ad#itted to any hospital or other #edical facilityM . 6ave you ever had or sou-ht
advice forE /// '0 urine4 :idney or 'ladder disorderM? 2he deceased ans(ered Auestions ;o. 5.a0 in the
affir#ative 'ut li#ited his ans(er to a consultation (ith a certain 3r. Reinaldo 3. Ray#undo of the Chinese
General 6ospital on Fe'ruary %,&4 for cou-h and flu co#plications. 2he other Auestions (ere ans(ered in
the ne-ative. Sunlife discovered that t(o (ee:s prior to his application for insurance4 the insured (as
e/a#ined and confined at the Hun- Center of the Philippines4 (here he (as dia-nosed for renal failure.
3urin- his confine#ent4 the deceased (as su'Dected to urinalysis4 ultra$sono-raphy and he#atolo-y tests. @n
%7 ;ove#'er %,&&4 5ernarda 5acani and her hus'and4 respondent Rolando 5acani4 filed an action for
specific perfor#ance a-ainst Sunlife (ith the Re-ional 2rial Court4 5ranch %,%4 Valen8uela4 9etro 9anila.
Sunlife filed its ans(er (ith counterclai# and a list off e/hi'its consistin- of #edical records furnished 'y the
Hun- Center of the Philippines. @n %< +anuary %,,!4 5acani filed a ?Proposed Stipulation (ith Prayer for
Su##ary +ud-#ent? (here they #anifested that they ?have no evidence to refute the docu#entary evidence
of conceal#entL#isrepresentation 'y the decedent of his health condition.? Sunlife filed its ReAuest for
7d#issions relative to the authenticity and due e/ecution of several docu#ents as (ell as alle-ations
re-ardin- the health of the insured. 2he 5acanis failed to oppose said reAuest or reply thereto4 there'y
renderin- an ad#ission of the #atters alle-ed. Sunlife then #oved for a su##ary Dud-#ent and the trial court
decided in favor of the 5acanis4 orderin- Sunlife to pay the for#er the a#ount of P%!!4!!!.!! the face value
of insured1s Insurance Policy *,!*74 and the 7ccidental 3eath 5enefit in the a#ount of P%!!4!!!.!! and
further su# of P54!!!.!! in the concept of reasona'le attorney1s fees and the costs of the suit. Sunlife1s
counterclai# (as dis#issed. Sunlife appealed to the Court of 7ppeals4 (hich affir#ed the decision of the trial
court. Sunlife1s #otion for reconsideration (as denied4 hence4 Sunlife filed the petition for revie( on
certiorari.
)ssue [1$( =hether -ood faith is a defense in conceal#ent.
*eld [1$( ;@. Section ) of the Insurance Code is e/plicit in reAuirin- a party to a contract of insurance to
co##unicate to the other4 in -ood faith4 all facts (ithin his :no(led-e (hich are #aterial to the contract and
as to (hich he #a:es no (arranty4 and (hich the other has no #eans of ascertainin-. Said Section provides
that ?a ne-lect to co##unicate that (hich a party :no(s and ou-ht to co##unicate4 is called conceal#ent.?
9ateriality is to 'e deter#ined not 'y the event4 'ut solely 'y the pro'a'le and reasona'le influence of the
facts upon the party to (ho# co##unication is due4 in for#in- his esti#ate of the disadvanta-es of the
proposed contract or in #a:in- his inAuiries. 2he ter#s of the contract are clear. 2he insured is specifically
reAuired to disclose to the insurer #atters relatin- to his health. 2he infor#ation (hich the insured failed to
disclose (ere #aterial and relevant to the approval and the issuance of the insurance policy. 2he #atters
concealed (ould have definitely affected 5acani1s action on his application4 either 'y approvin- it (ith the
correspondin- adDust#ent for a hi-her pre#iu# or reDectin- the sa#e. 9oreover4 a disclosure #ay have
(arranted a #edical e/a#ination of the insured 'y Sunlife in order for it to reasona'ly assess the ris:
involved in acceptin- the application. In Vda. de Canilan- v. Court of 7ppeals4 ))* SCR7 <<* .%,,*04 the
Court held that #ateriality of the infor#ation (ithheld does not depend on the state of #ind of the insured.
;either does it depend on the actual or physical events (hich ensue. 2hus4 ?-ood faith? is no defense in
conceal#ent. 2he insured1s failure to disclose the fact that he (as hospitali8ed for t(o (ee:s prior to filin-
his application for insurance4 raises -rave dou'ts a'out his 'onafides. It appears that such conceal#ent (as
deli'erate on his part.
)ssue [!$( =hether Sunlife1s (aiver of the #edical e/a#ination of the insured de'un:s the #ateriality of the
facts concealed.
*eld [!$( ;@. 2he ar-u#ent4 that Sunlife1s (aiver of the #edical e/a#ination of the insured de'un:s the
#ateriality of the facts concealed4 is untena'le. In Saturnino v. Philippine 7#erican Hife Insurance Co#pany4
7 SCR7 *% .%,*04 the Court held that ?the (aiver of a #edical e/a#ination [in a non$#edical insurance
contract" renders even #ore #aterial the infor#ation reAuired of the applicant concernin- previous condition
of health and diseases suffered4 for such infor#ation necessarily constitutes an i#portant factor (hich the
insurer ta:es into consideration in decidin- (hether to issue the policy or not.? 9oreover4 such ar-u#ent
(ould #a:e Section )7 of the Insurance Code4 (hich allo(s the inDured party to rescind a contract of
insurance (here there is conceal#ent4 ineffective. 7nent the findin- that the facts concealed had no 'earin- to
the cause of death of the insured4 it is (ell settled that the insured need not die of the disease he had failed to
disclose to the insurer. It is sufficient that his non$disclosure #isled the insurer in for#in- his esti#ates of the
ris:s of the proposed insurance policy or in #a:in- inAuiries.
13 Philamcare Health Systems Ioc..vs. CA (379 SCRA 35!
see case entry 3
18 Vda. de Canilan? vs. Court of Appeals [GR 9!89! 17 "une 1993$
Third Division, Feliciano (J): 4 concur
&a'ts( @n %& +une %,&)4 +ai#e Canilan- consulted 3r. =ilfredo 5. Claudio and (as dia-nosed as sufferin-
fro# ?sinus tachycardia.? 2he doctor prescri'ed the follo(infor hi#E 2ra8epa#4 a tranAuili8erF and 7ptin4 a
'eta$'loc:er dru-. 9r. Canilan- consulted the sa#e doctor a-ain on * 7u-ust %,&) and this ti#e (as found to
have ?acute 'ronchitis.? @n the ne/t day4 < 7u-ust %,&)4 +ai#e Canilan- applied for a ?non$#edical?
insurance policy (ith Great Pacific Hife 7ssurance Co#pany .Grepalife0 na#in- his (ife4 2hel#a Canilan-4
as his 'eneficiary. +ai#e Canilan- (as issued ordinary life insurance Policy *<5%*4 (ith the face value of
P%,47!!4 effective as of , 7u-ust %,&). @n 5 7u-ust %,&*4 +ai#e Canilan- died of ?con-estive heart failure4?
?ane#ia4? and ?chronic ane#ia.? Vda. de Canilan-4 (ido( and 'eneficiary of the insured4 filed a clai# (ith
Grepalife (hich the insurer denied on 5 3ece#'er %,&* upon the -round that the insured had concealed
#aterial infor#ation fro# it.
Vda. de Canilan- then filed a co#plaint a-ainst Grepalife (ith the Insurance Co##ission for recovery of the
insurance proceeds. 3urin- the hearin- called 'y the Insurance Co##issioner4 Vda. de Canilan- testified that
she (as not a(are of any serious illness suffered 'y her late hus'and and that4 as far as she :ne(4 her hus'and
had died 'ecause of a :idney disorder. 7 deposition -iven 'y 3r. =ilfredo Claudio (as presented 'y Vda. de
Canilan-. 2here 3r. Claudio stated that he (as the fa#ily physician of the deceased +ai#e Canilan- and that
he had previously treated hi# for ?sinus tachycardia? and ?acute 'ronchitis.? Grepalife for its part presented
3r. Csperan8a >uis#orio4 a physician and a #edical under(riter (or:infor Grepalife. She testified that the
deceased1s insurance application had 'een approved on the 'asis of his #edical declaration. She e/plained
that as a rule4 #edical e/a#inations are reAuired only in cases (here the applicant has indicated in his
application for insurance covera-e that he has previously under-one #edical consultation and hospitali8ation.
In a decision dated 5 ;ove#'er %,&54 Insurance Co##issioner 7r#ando 7nsaldo ordered Grepalife to pay
P%,47!!.!! plus le-al interest and P)4!!!.!! as attorney1s fees. @n appeal 'y Grepalife4 the Court of 7ppeals
reversed and set aside the decision of the Insurance Co##issioner and dis#issed 2hel#a Canilan-1s
co#plaint and Grepalife1s counterclai#. 2he Court of 7ppeals found that the use of the (ord ?intentionally?
'y the Insurance Co##issioner in definin- and resolvin- the issue a-reed upon 'y the parties at pre$trial
'efore the Insurance Co##issioner (as not supported 'y the evidenceF that the issue a-reed upon 'y the
parties had 'een (hether the deceased insured4 +ai#e Canilan-4 #ade a #aterial conceal#ent as to the state of
his health at the ti#e of the filin- of insurance application4 Dustifyin- Grepalife1s denial of the clai#. Vda. de
Canilan- 2hel#a Canilan- filed the petition for revie( on certiorari.
)ssue [1$( =hether the infor#ation Canilan- failed to disclose (as #aterial to the a'ility of Grepalife to
esti#ate the pro'a'le ris: he presented as a su'Dect of life insurance.
*eld [1$( JCS. 2he infor#ation (hich +ai#e Canilan- failed to disclose (as #aterial to the a'ility of
Grepalife to esti#ate the pro'a'le ris: he presented as a su'Dect of life insurance. 6ad Canilan- disclosed his
visits to his doctor4 the dia-nosis #ade and the #edicines prescri'ed 'y such doctor4 in the insurance
application4 it #ay 'e reasona'ly assu#ed that Grepalife (ould have #ade further inAuiries and (ould have
pro'a'ly refused to issue a non$#edical insurance policy or4 at the very least4 reAuired a hi-her pre#iu# for
the sa#e covera-e. 2he #ateriality of the infor#ation (ithheld 'y Grepalife did not depend upon the state of
#ind of +ai#e Canilan-. 7 #an1s state of #ind or su'Dective 'elief is not capa'le of proof in our Dudicial
process4 e/cept throu-h proof of e/ternal acts or failure to act fro# (hich inferences as to his su'Dective
'elief #ay 'e reasona'ly dra(n. ;either does #ateriality depend upon the actual or physical events (hich
ensue. 9ateriality relates rather to the ?pro'a'le and reasona'le influence of the facts? upon the party to
(ho# the co##unication should have 'een #ade4 in assessin- the ris: involved in #a:in- or o#ittin- to
#a:e further inAuiries and in acceptin- the application for insuranceF that ?pro'a'le and reasona'le influence
of the facts? concealed #ust4 of course4 'e deter#ined o'Dectively4 'y the Dud-e ulti#ately.
)ssue [!$( =hether Grepalife had (aived inAuiry into the conceal#ent 'y issuin- the insurance policy
not(ithstandin- Canilan-1s failure to set out ans(ers to so#e of the Auestions in the insurance application.
*eld [!$( ;@. 2he insurance applied for (as a ?non$#edical? insurance policy. In Saturnino v. Philippine$
7#erican Hife Insurance Co#pany4 the Court held that ?if anythin-4 the (aiver of #edical e/a#ination [in a
non$#edical insurance contract" renders even #ore #aterial the infor#ation reAuired of the applicant
concernin- previous condition of health and diseases suffered4 for such infor#ation necessarily constitutes an
i#portant factor (hich the insurer ta:es into consideration in decidin- (hether to issue the policy or not.? It
cannot 'e e/cused that that the failure of Canilan- to convey certain infor#ation to the insurer (as not
intentional in nature. Section )7 of the Insurance Code of %,7& is properly read as referrin- to ?any
conceal#ent? (ithout re-ard to (hether such conceal#ent is intentional or unintentional. 2he phrase
?(hether intentional or unintentional? (as in fact superfluous. 2he deletion of the phrase ?(hether intentional
or unintentional? could not have had the effect of i#posin- an affir#ative reAuire#ent that a conceal#ent
#ust 'e intentional if it is to entitle the inDured party to rescind a contract of insurance. 2he restoration in
%,&5 'y 5P &7< of the phrase ?(hether intentional or unintentional? #erely underscored the fact that all
throu-hout .fro# %,%< to %,&504 the statute did not reAuire proof that conceal#ent #ust 'e ?intentional? in
order to authori8e rescission 'y the inDured party. In any case4 herein4 the nature of the facts not conveyed to
the insurer (as such that the failure to co##unicate #ust have 'een intentional rather than #erely
Co++er'ial ,a- . )nsuran'e ,a- !//6 ( !/ )
inadvertent. For +ai#e Canilan- could not have 'een una(are that this heart 'eat (ould at ti#es rise to hi-h
and alar#in- levels and that he had consulted a doctor t(ice in the ) #onths 'efore applyin- for non$#edical
insurance. Indeed4 the last #edical consultation too: place Dust the day 'efore the insurance application (as
filed. In all pro'a'ility4 +ai#e Canilan- (ent to visit his doctor precisely 'ecause of the disco#fort and
concern 'rou-ht a'out 'y his e/periencin- ?sinus tachycardia.? Grepalife had not (aived inAuiry into the
conceal#ent 'y issuin- the insurance policy not(ithstandin- Canilan-1s failure to set out ans(ers to so#e of
the Auestions in the insurance application. Such failure precisely constituted conceal#ent on the part of
Canilan-. Vda. de Canilan-1s ar-u#ent4 if accepted4 (ould o'viously erase Section )7 fro# the Insurance
Code of %,7&.
16 Aan vs. Court of Appeals [GR 83/89 !9 "une 1939$
Third Division, ,utierre- Jr) (J): concur, " too# no $art
&a'ts( @n )* Septe#'er %,7*4 2an Hee Sion-4 father of C#ilio4 +uanito4 7l'erto4 and 7rturo 2an4 applied for
life insurance in the a#ount of P&!4!!!.!! (ith the Philippine 7#erican Hife Insurance Co#pany
.Phila#life0. Said application (as approved and Policy %!&)<7 (as issued effective ;ove#'er %,7*4 (ith
C#ilio 2an4 et al. as 'eneficiaries. @n ) 7pril %,754 2an Hee Sion- died of hepato#a. C#ilio 2an4 et al. then
filed (ith Phila#life their clai# for the proceeds of the life insurance policy. 6o(ever4 in a letter dated %%
Septe#'er %,754 Phila#life denied C#ilio 2an et al.1s clai# and rescinded the policy 'y reason of the alle-ed
#isrepresentation and conceal#ent of #aterial facts #ade 'y the deceased 2an Hee Sion- in his application
for insurance. 2he pre#iu#s paid on the policy (ere thereupon refunded. 7lle-in- that Phila#life1s refusal to
pay the# the proceeds of the policy (as unDustified and unreasona'le4 C#ilio 2an et al. filed on )7 ;ove#'er
%,754 a co#plaint a-ainst the for#er (ith the @ffice of the Insurance Co##issioner .I.C. Case )%&0. 7fter
hearin- the evidence of 'oth parties4 the Insurance Co##issioner rendered Dud-#ent on * 7u-ust *4 %,774
dis#issin- the co#plaint. 2he Court of 7ppeals dis#issed their appeal fro# the Insurance Co##issioner1s
decision for lac: of #erit. C#ilio 2an et al. filed the petition for revie( on certiorari.
)ssue( =hether Phila#life no lon-er had the ri-ht to rescind the contract of insurance as rescission #ust
alle-edly 'e done durin- the lifeti#e of the insured (ithin t(o years and prior to the co##ence#ent of
action.
*eld( ;@. Section <& of the Insurance Code provides that ?=henever a ri-ht to rescind a contract of
insurance is -iven to the insurer 'y any provision of this chapter4 such ri-ht #ust 'e e/ercised previous to the
co##ence#ent of an action on the contract. ?7fter a policy of life insurance #ade paya'le on the death of the
insured shall have 'een in force durin- the lifeti#e of the insured for a period of t(o years fro# the date of its
issue or of its last reinstate#ent4 the insurer cannot prove that the policy is void a' initio or is rescindi'le 'y
reason of the fraudulent conceal#ent or #isrepresentation of the insured or his a-ent.? 6erein4 the policy (as
issued on ;ove#'er %,7* and the insured died on ) 7pril %,75. 2he policy (as thus in force for a period
of only one year and five #onths. Considerin- that the insured died 'efore the t(o$year period had lapsed4
Phila#life is not4 therefore4 'arred fro# provin- that the policy is void a' initio 'y reason of the insured1s
fraudulent conceal#ent or #isrepresentation. 9oreover4 Phila#life rescinded the contract of insurance and
refunded the pre#iu#s paid on %% Septe#'er %,754 previous to the co##ence#ent of this action on )7
;ove#'er %,75. Inder the ?incontesta'ility clause4? the insurer has t(o years fro# the date of issuance of
the insurance contract or of its last reinstate#ent (ithin (hich to contest the policy4 (hether or not4 the
insured still lives (ithin such period. 7fter t(o years4 the defenses of conceal#ent or #isrepresentation4 no
#atter ho( patent or (ell founded4 no lon-er lie. Con-ress felt this (as a sufficient ans(er to the various
tactics e#ployed 'y insurance co#panies to avoid lia'ility. 2he interpretation of C#ilio 2an et al. to said
provision $$ that the Insurance Ha( (as a#ended and the second para-raph of Section <& added to prevent the
insurance co#pany fro# e/ercisin- a ri-ht to rescind after the death of the insuredF that the so$called
?incontesta'ility clause? precludes the insurer fro# raisin- the defenses of false representations or
conceal#ent of #aterial facts insofar as health and previous diseases are concerned if the insurance has 'een
Co++er'ial ,a- . )nsuran'e ,a- !//6 ( !1 )
in force for at least t(o years durin- the insured1s lifeti#eF and that the phrase ?durin- the lifeti#e? found in
Section <& si#ply #eans that the policy is no lon-er considered in force after the insured has died. 2he :ey
phrase in the second para-raph of Section <& is ?for a period of t(o years? $$ (ould -ive rise to the
incon-ruous situation (here the 'eneficiaries of an insured (ho dies ri-ht after ta:in- out and payin- for a
life insurance policy4 (ould 'e allo(ed to collect on the policy even if the insured fraudulently concealed
#aterial facts.
16 4a'ifi' Ai+;er 9Bport Corporation vs. Court of Appeals [GR ,>33613 !6 &e;ruar# 193!$
First Division, De (astro (J): . concur
&a'ts( @n %, 9arch %,*4 the Pacific 2i#'er C/port Corporation .P2CC0 secured te#porary insurance fro#
the =or:#en1s Insurance Co#pany Inc. .=ICI0 for its e/portation of %4)5!4!!! 'oard feet of Philippine
Hauan and 7piton- lo-s to 'e shipped fro# the 3iapitan 5ay4 >ue8on Province to @:ina(a and 2o:yo4 +apan.
=ICI issued on said date Cover ;ote %!%!4 insurin- the said car-o of P2CC ?Su'Dect to the 2er#s and
Conditions of the =@RG9C;1S I;SIR7;CC C@9P7;J4 I;C. printed 9arine Policy for# as filed (ith
and approved 'y the @ffice of the Insurance Co##issioner.? 2he re-ular #arine car-o policies (ere issued
'y =ICI in favor of P2CC on ) 7pril %,*. 2he t(o #arine policies 'ore the nu#'ers of 5* 6@ %!*) and 5*
6@ %!**. Policy 5* 6@ %!*) (as for 5<) pieces of lo-s eAuivalent to <,,4,5! 'oard feet. Policy 5* 6@ %!**
(as for &5* pieces of lo-s eAuivalent to ,54 5<& 'oard feet. 2he total car-o insured under the t(o #arine
policies accordin-ly consisted of %4*,5 lo-s4 or the eAuivalent of %4%,54<,& 'd. ft. 7fter the issuance of Cover
;ote %!%!4 'ut 'efore the issuance of the t(o #arine policies 5* 6@ %!*) and 5* 6@ %!**4 so#e of the lo-s
intended to 'e e/ported (ere lost durin- loadin- operations in the 3iapitan 5ay. 2he lo-s (ere to 'e loaded
on the 1SS =oodloc:1 (hich doc:ed a'out 5!! #eters fro# the shortline of the 3iapitan 5ay. 2he lo-s (ere
ta:en fro# the lo- pond of P2CC and fro# (hich they (ere to(ed in rafts to the vessel. 7t a'out %!E!! a.#.
on ), 9arch %,*4 (hile the lo-s (ere alon-side the vessel4 'ad (eather developed resultin- in 75 pieces of
lo-s (hich (ere rafted to-ether to 'rea: loose fro# each other <5 pieces of lo-s (ere salva-ed4 'ut *! pieces
(ere verified to have 'een lost or (ashed a(ay as a result of the accident. In a letter dated < 7pril %,*4
P2CC infor#ed =ICI a'out the loss of appro/i#ately *) pieces of lo-s durin- loadin- of the SS =oodloc:.
7lthou-h dated < 7pril %,*4 the letter (as received in the office of =ICI only on %5 7pril %,*. P2CC
su'seAuently su'#itted a Clai# State#ent de#andin- pay#ent of the loss under Policies 5* 6@ %!**4 and 5*
6@ %!**4 in the total a#ount of P%,4)&.7,. @n %7 +uly %,*4 =ICI reAuested the First Philippine
7dDust#ent Corporation to inspect the loss and assess the da#a-e. 2he adDust#ent co#pany su'#itted its
Report on )* 7u-ust %,*. In said report4 the adDuster found that 1the loss of *! pieces of lo-s is not covered
'y Policies 5* 6@ %!*) and %!** inas#uch as said policies covered the actual nu#'er of lo-s loaded on
'oard the SS =oodloc:. 6o(ever4 the loss of *! pieces of lo-s is (ithin the %4)5!4!!! 'd. ft. covered 'y
Cover ;ote %!%! insured for R7!4!!!.!!. @n %< Septe#'er %,*4 the adDust#ent co#pany su'#itted a
co#putation of =ICI1s pro'a'le lia'ility on the loss sustained 'y the ship#ent4 in the total a#ount of
P%%4!<).!<. @n %* +anuary %,<4 =ICI (rote P2CC denyin- the latter1s clai#4 on the -round that its
investi-ation revealed that the entire ship#ent of lo-s covered 'y the t(o #arine policies 5* 6@ %!*) and 5*
6@ %!** (ere received in -ood order at their point of destination. It (as further stated that the said loss #ay
not 'e considered as covered under Cover ;ote %!%! 'ecause the said ;ote had 'eco#e null and void 'y
virtue of the issuance of 9arine Policies 5* 6@ %!*) and %!**. 2he denial of the clai# 'y =ICI (as 'rou-ht
'y P2CC to the attention of the Insurance Co##issioner 'y #eans of a letter dated )% 9arch %,<. In a reply
letter dated *! 9arch %,<4 Insurance Co##issioner Francisco J. 9andanas o'served that it is only fair and
eAuita'le to inde#nify the insured under Cover ;ote %!%!4 and advised early settle#ent of the said #arine
loss and salva-e clai#. @n ) +une %,<4 =ICI infor#ed the Insurance Co##issioner that4 on advice of their
attorneys4 the clai# of P2CC is 'ein- denied on the -round that the cover note is null and void for lac: of
valua'le consideration. 2he Court of First Instance of 9anila ruled in favor of P2CC and a-ainst =ICI (hich
ordered the latter to pay the su# of P%%4!<).!< (ith interest at the rate of %)O interest fro# receipt of notice
of loss on %5 7pril %,* up to the co#plete pay#ent4 the su# of P*4!!!.!! as attorney1s fees and the costs.
2he Court of 7ppeals4 ho(ever4 reversed the decision of the trial court and thus dis#issed P2CC1s co#plaint
Co++er'ial ,a- . )nsuran'e ,a- !//6 ( !! )
(ith costs. P2CC filed the petition for revie(.
)ssue( =hether the Cover ;ote is (ithout consideration4 is null and void4 and thus recovery cannot 'e #ade
thereon.
*eld( ;@. 2he Cover ;ote (as not (ithout consideration. 2he fact that no separate pre#iu# (as paid on the
Cover ;ote 'efore the loss insured a-ainst occurred4 does not #ilitate a-ainst the validity of P2CC1s
contention4 for no such pre#iu# could have 'een paid4 since 'y the nature of the Cover ;ote4 it did not
contain4 as all Cover ;otes do not contain particulars of the ship#ent that (ould serve as 'asis for the
co#putation of the pre#iu#s. 7s a lo-ical conseAuence4 no separate pre#iu#s are intended or reAuired to 'e
paid on a Cover ;ote. 2his is a fact ad#itted 'y an official of =ICI4 +uan +ose Ca#acho4 in char-e of issuin-
cover notes of =ICI. 7t any rate4 it is not disputed that P2CC paid in full all the pre#iu#s as called for 'y the
state#ent issued 'y =ICI after the issuance of the t(o re-ular #arine insurance policies4 there'y leavin- no
account unpaid 'y P2CC due on the insurance covera-e4 (hich #ust 'e dee#ed to include the Cover ;ote. If
the ;ote is to 'e treated as a separate policy instead of inte-ratin- it to the re-ular policies su'seAuently
issued4 the purpose and function of the Cover ;ote (ould 'e set at nau-ht or rendered #eanin-less4 for it is in
a real sense a contract4 not a #ere application for insurance (hich is a #ere offer. It #ay 'e true that the
#arine insurance policies issued (ere for lo-s no lon-er includin- those (hich had 'een lost durin- loadin-
operations. 2his had to 'e so 'ecause the ris: insured a-ainst is not for loss durin- loadin- operations
any#ore4 'ut for loss durin- transit4 the lo-s havin- already 'een safely placed a'oard. 2his (ould #a:e no
difference4 ho(ever4 insofar as the lia'ility on the cover note is concerned4 for the nu#'er or volu#e of lo-s
lost can 'e deter#ined independently4 as in fact it had 'een so ascertained at the instance of =ICI itself (hen
it sent its o(n adDuster to investi-ate and assess the loss4 after the issuance of the #arine insurance policies.
2he adDuster (ent as far as su'#ittin- his report to =ICI4 as (ell as its co#putation of =ICI1s lia'ility on the
insurance covera-e. 2his covera-e could not have 'een no other than (hat (as stipulated in the Cover ;ote4
for no loss or da#a-e had to 'e assessed on the covera-e arisin- fro# the #arine insurance policies. For
o'vious reasons4 it (as not necessary to as: P2CC to pay pre#iu# on the Cover ;ote4 for the loss insured
a-ainst havin- already occurred4 the #ore practical procedure is si#ply to deduct the pre#iu# fro# the
a#ount due P2CC on the Cover ;ote. 2he non$pay#ent of pre#iu# on the Cover ;ote is4 therefore4 no cause
for P2CC to lose (hat is due it as if there had 'een pay#ent of pre#iu#4 for non$pay#ent 'y it (as not
char-ea'le a-ainst its fault. 6ad all the lo-s 'een lost durin- the loadin- operations4 'ut after the issuance of
the Cover ;ote4 lia'ility on the note (ould have already arisen even 'efore pay#ent of pre#iu#. 2his is ho(
the cover note as a ?'inder? should le-ally operateF other(ise4 it (ould serve no practical purpose in the real#
of co##erce4 and is supported 'y the doctrine that (here a policy is delivered (ithout reAuirin- pay#ent of
the pre#iu#4 the presu#ption is that a credit (as intended and policy is valid.
17 "reat Paci#ic $i#e Assurance Cor%oration vs. CA& '9 SCRA 5(3
see case entry 7
13 45ilippine A+eri'an ,ife and General )nsuran'e Co+pan# vs. Valen'ia>Ba?ala'sa [GR 139776 1
Au?ust !//!$
First Division, /ustria-Martine- (J): 4 concur
&a'ts( @n )! +une %,,54 Cduardo4 Celso and Ru'en B. Hu#anio-4 as le-iti#ate children and forced heirs of
their late father4 Faustino Hu#anio-4 filed (ith the Re-ional 2rial Court of Hi'#anan4 Ca#arines Sur4 a
co#plaint for recovery of su# of #oney a-ainst the Philippine 7#erican Hife and General Insurance
Co#pany .Phila#life0 alle-in- thatE their father (as insured 'y Phila#life under Hife Insurance Policy
%*!5<& (ith a face value of P5!4!!!.!!F their father died of ?coronary thro#'osis? on )5 ;ove#'er %,&!F
on )) +une %,&%4 they clai#ed and continuously clai#ed for all the proceeds and interests under the life
insurance policy in the a#ount of P<%4!!!.!!4 despite repeated de#ands for pay#ent andLor settle#ent of
the clai# due fro# Phila#life4 the last of (hich is on % 3ece#'er %,,<4 Phila#life finally refused or
disallo(ed said clai# on %< Fe'ruary %,,5F and so4 they filed their co#plaint. Phila#life filed an 7ns(er
(ith Counterclai# and 9otion to 3is#iss4 contendin- that the cause of action had prescri'ed and that the
Hu#anio-s are -uilty of lachesF that it had denied the latter1s clai# in a letter dated %) 9arch %,&)4 si-ned 'y
its then 7ssistant Vice President4 7#ado 3i#alanta4 on -round of conceal#ent on the part of the deceased
insured Faustino (hen he asserted in his application for insurance covera-e that he had not 'een treated for
indication of ?chest pain4 palpitation4 hi-h 'lood pressure4 rheu#atic fever4 heart #ur#ur4 heart attac: or other
disorder of the heart or 'lood vessel? (hen in fact he (as a :no(n hypertensive since %,7<F that the
Hu#anio-s sent a letter dated )5 9ay %,&* reAuestin- for reconsideration of the denialF in a letter dated %%
+uly %,&*4 it reiterated its decision to deny the clai# for pay#ent of the proceedsF #ore than %! years later4 or
on % 3ece#'er %,,<4 it received a letter fro# +ose C. Claro4 a provincial 'oard #e#'er of the province of
Ca#arines Sur4 reiteratin- the early reAuest for reconsideration (hich it denied in a letter dated %< Fe'ruary
%,,5. 2he Hu#anio-s opposed the #otion to dis#iss. @n 7 +une %,,4 the R2C issued an @rder as to the
necessity of trial on #erits. Phila#life1s #otion for reconsideration (as denied 'y the R2C in its @rder dated
)) 3ece#'er %,,7 upholdin- ho(ever in the sa#e @rder the clai# of the Hu#anio-s1 counsel that the
runnin- of the %!$year period (as ?stopped? on )5 9ay %,&* (hen they reAuested for a reconsideration of the
denial and it (as only on %< Fe'ruary %,,5 (hen Phila#life finally decided to deny their clai# that the %!$
year period 'e-an to run. Phila#life filed a petition for certiorari .C7$GR <7&&50 in the Court of 7ppeals and
after the co##ent of the Hu#anio-s and reply of Phila#life4 the appellate court rendered its 3ecision4 dated
*! 7pril %,,,4 dis#issed the petition for lac: of #erit. Phila#life filed the petition for revie( on certiorari.
)ssue( =hether the co#plaint filed 'y the Hu#anio-s for pay#ent of life insurance proceeds is already 'arred
'y prescription of action4 or (hether an e/traDudicial de#and #ade after an action has prescri'ed shall cause
the revival of the action.
*eld( ;@ 3C2CR9I;72I@;. Phila#life had specifically alle-ed in the 7ns(er that it had denied the
Hu#anio-s1 clai# per its letter dated %% +uly %,&*. 6ence4 due process de#ands that it 'e -iven the
opportunity to prove that the Hu#anio-s had received said letter. Said letter is crucial to Phila#life1s defense
that the filin- of the co#plaint for recovery of su# of #oney in +une %,,5 is 'eyond the %!$year prescriptive
period. 2he R2C co##itted a -rave a'use of discretion (hen4 in resolvin- the #otion for reconsideration of
Phila#life4 it ar'itrarily ruled in its @rder dated %) 3ece#'er %,,74 that the period of %! years had not yet
lapsed. It 'ased its findin- on a #ere e/planation of the Hu#anio-s1 counsel and not on evidence presented 'y
the parties as to the date (hen to rec:on the prescriptive period. 2he rulin- of the R2C that the cause of action
of the Hu#anio-s had not prescri'ed4 is ar'itrary and patently erroneous for not 'ein- founded on evidence on
record4 and therefore4 the sa#e is void. ConseAuently4 (hile the Court of 7ppeals did not err in upholdin- the
7 +une %,& @rder of the R2C4 it co##itted a reversi'le error (hen it declared that the R2C did not co##it
any -rave a'use of discretion in issuin- the @rder dated %) 3ece#'er %,,7. 2he Supre#e Court thus partially
-ranted the petition4 settin- aside the decision of the Court of 7ppeals dated *! 7pril %,,, insofar only as it
upheld the R2C @rder dated %) 3ece#'er %,,7. 7 ne( Dud-#ent (as entered reversin- and settin- aside the
@rder dated %) 3ece#'er %,,7 of the Re-ional 2rial Court of Hi'#anan4 Ca#arines Sur .5ranch 50 and
affir#in- its @rder dated )! +une %,,5. Said R2C (as directed to proceed (ith dispatch (ith Civil Case H$
7&7.
19 7a=ati Aus'an# Condo+iniu+ Corporation vs. Court of Appeals [GR 96686 6 Nove+;er 199!$
First Division, &ellosillo (J): concur, " on leave
&a'ts( So#eti#e in early %,&)4 7#erican 6o#e 7ssurance Co. .767C04 represented 'y 7#erican
International Inder(riters .Phils.04 Inc.4 .7III0 issued in favor of 9a:ati 2uscany Condo#iniu# Corporation
.2uscany0 Insurance Policy 76$CPP$,)%!<5) on the latter1s 'uildin- and pre#ises4 for a period 'e-innin- %
9arch %,&) and endin- % 9arch %,&*4 (ith a total pre#iu# of P<4%!*.!5. 2he pre#iu# (as paid on
install#ents on %) 9arch %,&)4 )! 9ay %,&)4 )% +une %,&) and % ;ove#'er %,&)4 all of (hich (ere
accepted 'y 767C. @n %! Fe'ruary %,&*4 767C issued to 2uscany Insurance Policy ;o. 76$CPP$,)%!5,4
(hich replaced and rene(ed the previous policy4 for a ter# coverin- % 9arch %,!* to % 9arch %,&<. 2he
pre#iu# in the a#ount of P<4%!*.!5 (as a-ain paid on install#ents on %* 7pril %,&*4 %* +uly %,&*4 *
7u-ust %,&*4 , Septe#'er %,&*4 and )% ;ove#'er %,&*. 7ll pay#ents (ere li:e(ise accepted 'y 767C. @n
)! +anuary %,&<4 the policy (as a-ain rene(ed and 767C issued to 2uscany Insurance Policy 76$CPP$
,)%!5% for the period % 9arch %,&< to % 9arch %,&5. @n this rene(ed policy4 2uscany #ade t(o
install#ent pay#ents4 'oth accepted 'y 767C4 the first on Fe'ruary %,&< for P5)4!!!.!! and the second4
on +une %,&< for P%!!4!!!.!!. 2hereafter4 2uscany refused to pay the 'alance of the pre#iu#.
ConseAuently4 767C filed an action to recover the unpaid 'alance of P*%<4%!*.!5 for Insurance Policy 76$
CPP$,)%!5%. In its ans(er (ith counterclai#4 2uscany ad#itted the issuance of Insurance Policy 76$CPP$
,)%!5%. It e/plained that it discontinued the pay#ent of pre#iu#s 'ecause the policy did not contain a
credit clause in its favor and the receipts for the install#ent pay#ents coverin- the policy for %,&<$&54 as (ell
as the t(o .)0 previous policies4 stated the follo(in- reservationsE .)0 7cceptance of this pay#ent shall not
(aive any of the co#pany ri-hts to deny lia'ility on any clai# under the policy arisin- 'efore such pay#ents
or after the e/piration of the credit clause of the policyF and .*0 Su'Dect to no loss prior to pre#iu# pay#ent.
If there 'e any loss such is not covered. 2uscany further clai#ed that the policy (as never 'indin- and valid4
and no ris: attached to the policy. It then pleaded a counterclai# for P%5)4!!!.!! for the pre#iu#s already
paid for %,&<$&54 and in its ans(er (ith a#ended counterclai#4 sou-ht the refund of P,)<4)!.%!
representin- the pre#iu# pay#ents for %,&)$&5. 7fter so#e incidents4 2uscany and 767C #oved for
su##ary Dud-#ent. @n & @cto'er %,&74 the trial court dis#issed the co#plaint and the counterclai#. 5oth
parties appealed fro# the Dud-#ent of the trial court. 2hereafter4 the Court of 7ppeals rendered a decision
#odifyin- that of the trial court 'y orderin- 2uscany to pay the 'alance of the pre#iu#s due on Policy 76$
CPP$,)%$5%4 or P*%<4%!*.!5 plus le-al interest until fully paid4 and affir#in- the denial of the counterclai#.
2uscany filed the petition.
)ssue( =hether pay#ent 'y install#ent of the pre#iu#s due on an insurance policy invalidates the contract
of insurance.
*eld( ;@. 2he su'Dect policies are valid even if the pre#iu#s (ere paid on install#ents. 2he records clearly
sho( that 2uscany and 767C intended su'Dect insurance policies to 'e 'indin- and effective not(ithstandin-
the sta--ered pay#ent of the pre#iu#s. 2he initial insurance contract entered into in %,&) (as rene(ed in
%,&*4 then in %,&<. In those * years4 the insurer accepted all the install#ent pay#ents. Such acceptance of
pay#ents spea:s loudly of the insurer1s intention to honor the policies it issued to 2uscany. Certainly4 'asic
principles of eAuity and fairness (ould not allo( the insurer to continue collectin- and acceptin- the
pre#iu#s4 althou-h paid on install#ents4 and later deny lia'ility on the la#e e/cuse that the pre#iu#s (ere
not prepaid in full. 2hus4 (hile the i#port of Section 77 is that prepay#ent of pre#iu#s is strictly reAuired as
a condition to the validity of the contract4 the Court (as not prepared to rule that the reAuest to #a:e
install#ent pay#ents duly approved 'y the insurer4 (ould prevent the entire contract of insurance fro# -oin-
into effect despite pay#ent and acceptance of the initial pre#iu# or first install#ent. Section 7& of the
Insurance Code in effect allo(s (aiver 'y the insurer of the condition of prepay#ent 'y #a:in- an
ac:no(led-#ent in the insurance policy of receipt of pre#iu# as conclusive evidence of pay#ent so far as to
#a:e the policy 'indin- despite the fact that pre#iu# is actually unpaid. Section 77 #erely precludes the
parties fro# stipulatin- that the policy is valid even if pre#iu#s are not paid4 'ut does not e/pressly prohi'it
an a-ree#ent -rantin- credit e/tension4 and such an a-ree#ent is not contrary to #orals4 -ood custo#s4
pu'lic order or pu'lic policy. So is an understandin- to allo( insured to pay pre#iu#s in install#ents not so
proscri'ed. 7t the very least4 'oth parties should 'e dee#ed in estoppel to Auestion the arran-e#ent they have
voluntarily accepted. It appearin- fro# the peculiar circu#stances that the parties actually intended to #a:e
the three .*0 insurance contracts valid4 effective and 'indin-4 2uscany #ay not 'e allo(ed to rene-e on its
o'li-ation to pay the 'alance of the pre#iu# after the e/piration of the (hole ter# of the third policy .76$
CPP$,)%!5%0 in 9arch %,&5. 9oreover4 (here the ris: is entire and the contract is indivisi'le4 the insured is
not entitled to a refund of the pre#iu#s paid if the insurer (as e/posed to the ris: insured for any period4
ho(ever 'rief or #o#entary.
!/ CC4B General )nsuran'e vs. 7asa?ana Aela+art )n'. [GR 13717! 16 "une 1999$
First Division, Pardo (J): 4 concur
&a'ts( @n %5 7pril %,,%4 ICP5 General Insurance Co. Inc. .ICP5Gen0 issued 5 insurance policies coverin-
9asa-ana 2ela#art4 Inc.1s various property descri'ed therein a-ainst fire4 for the period fro# )) 9ay %,,% to
)) 9ay %,,). In 9arch %,,)4 ICP5Gen evaluated the policies and decided not to rene( the# upon
e/piration of their ter#s on )) 9ay %,,). ICP5Gen advised 9asa-ana1s 'ro:er4 Buelli- Insurance 5ro:ers4
Inc. of its intention not to rene( the policies. @n 7pril %,,)4 ICP5Gen -ave (ritten notice to 9asa-ana of
the non$rene(al of the policies at the address stated in the policies. @n %* +une %,,)4 fire ra8ed 9asa-ana1s
property covered 'y three of the insurance policies ICP5Gen issued. @n %* +uly %,,)4 9asa-ana presented
to ICP5Gen1s cashier at its head office 5 #ana-er1s chec:s in the total a#ount of P))5475*.,54 representin-
pre#iu# for the rene(al of the policies fro# )) 9ay %,,) to )) 9ay %,,*. ;o notice of loss (as filed 'y
9asa-ana under the policies prior to %< +uly %,,). @n %< +uly %,,)4 9asa-ana filed (ith ICP5Gen its
for#al clai# for inde#nification of the insured property ra8ed 'y fire. @n the sa#e day4 %< +uly %,,)4
ICP5Gen returned to 9asa-ana the 5 #ana-er1s chec:s that it tendered4 and at the sa#e ti#e reDected
9asa-ana1s clai# for the reasons .a0 that the policies had e/pired and (ere not rene(ed4 and .'0 that the fire
occurred on %* +une %,,)4 'efore 9asa-ana1s tender of pre#iu# pay#ent. @n )% +uly %,,)4 9asa-ana filed
(ith the Re-ional 2rial Court4 5ranch 5&4 9a:ati City4 a civil co#plaint a-ainst ICP5Gen for recovery of
P%&4<54!!!.!!4 representin- the face value of the policies coverin- 9asa-ana1s insured property ra8ed 'y
fire4 and for attorney1s fees. @n )* @cto'er %,,)4 after its #otion to dis#iss had 'een denied4 ICP5Gen filed
an ans(er to the co#plaint. It alle-ed that the co#plaint ?fails to state a cause of action?F that ICP5Gen (as
not lia'le to 9asa-ana for insurance proceeds under the policies 'ecause at the ti#e of the loss of 9asa-ana1s
property due to fire4 the policies had lon- e/pired and (ere not rene(ed. 7fter due trial4 on %! 9arch %,,*4
the Re-ional 2rial Court4 5ranch 5&4 9a:ati4 rendered decision4 .%0 authori8in- and allo(in- 9asa-ana to
consi-nLdeposit (ith this Court the su# of P))5475*.,5 .refused 'y ICP5Gen0 as full pay#ent of the
correspondin- pre#iu#s for the replace#ent$rene(al policiesF .)0 declarin- 9asa-ana to have fully co#plied
(ith its o'li-ation to pay the pre#iu# there'y renderin- the replace#ent$rene(al policy effective and
'indin- for the duration )) 9ay %,,) until )) 9ay %,,*F and4 orderin- ICP5Gen to deliver forth(ith to
9asa-ana the said replace#ent$rene(al policiesF .*0 declarin- t(o of the policies in force fro# )) 7u-ust
%,,% up to )* 7u-ust %,,) and , 7u-ust %,,% to , 7u-ust %,,)4 respectivelyF and .<0 orderin- ICP5Gen to
pay 9asa-ana the su#s ofE .a0 P%&4<54!!!.!! representin- the latter1s clai# for inde#nity under three
policies andLor its replace#ent$rene(al policiesF .'0 )5O of the total a#ount due as and for attorney1s feesF
.c0 P)54!!!.!! as necessary liti-ation e/pensesF and4 .d0 the costs of suit. In due ti#e4 ICP5Gen appealed to
the Court of 7ppeals. @n 7 Septe#'er %,,&4 the Court of 7ppeals pro#ul-ated its decision affir#in- that of
the Re-ional 2rial Court (ith the #odification that ite# * of the dispositive portion (as deleted4 and the
a(ard of attorney1s fees (as reduced to %!O of the total a#ount due. 2he Court of 7ppeals held that
follo(in- previous practise4 9asa-ana (as allo(ed a ! to ,! day credit ter# for the rene(al of its policies4
and that the acceptance of the late pre#iu# pay#ent su--ested an understandin- that pay#ent could 'e #ade
later. ICP5Gen appealed.
)ssue( =hether the fire insurance policies issued 'y ICP5Gen to the 9asa-ana coverin- the period )) 9ay
%,,% to )) 9ay %,,)4 had e/pired on the latter date or had 'een e/tended or rene(ed 'y an i#plied credit
arran-e#ent thou-h actual pay#ent of pre#iu# (as tendered on a latter date after the occurrence of the ris:
.fire0 insured a-ainst.
*eld( 2he ans(er is easily found in the Insurance Code. ;o4 an insurance policy4 other than life4 issued
ori-inally or on rene(al4 is not valid and 'indin- until actual pay#ent of the pre#iu#. 7ny a-ree#ent to the
contrary is void. 2he parties #ay not a-ree e/pressly or i#pliedly on the e/tension of credit or ti#e to pay the
pre#iu# and consider the policy 'indin- 'efore actual pay#ent. 2he case of 9alayan Insurance Co.4 Inc. vs.
Cru8$7rnaldo is not applica'le. In that case4 pay#ent of the pre#iu# (as in fact actually #ade on )<
3ece#'er %,&%4 and the fire occurred on %& +anuary %,&). 6ere4 the pay#ent of the pre#iu# for rene(al of
the policies (as tendered on %* +uly %,,)4 a #onth after the fire occurred on %* +une %,,). 2he assured did
not even -ive the insurer a notice of loss (ithin a reasona'le ti#e after occurrence of the fire. 6ence4 the
Supre#e Court reversed and set aside the decision of the Court of 7ppeals in C7$GR CV <)*)%. In lieu
thereof4 the Court rendered Dud-#ent dis#issin- 9asa-ana1s co#plaint and ICP5Gen1s counterclai#s
thereto filed (ith the Re-ional 2rial Court4 5ranch 5&4 9a:ati City4 in Civil Case ,)$)!)*4 (ithout costs.
!1 CC4B General )nsuran'e vs. 7asa?ana Aela+art )n'. [GR 13717! 18 April !//1$
0esolution %n &anc, Davide Jr ((J): 1 concur, ! +ile se$arate dissenting o$inions to 2hich 3oined
&a'ts( In the Supre#e Court1s decision of %5 +une %,,,4 it reversed and set aside the decision of the Court of
7ppeals4 (hich affir#ed (ith #odification the Dud-#ent of the trial court .a0 allo(in- 9asa-ana to consi-n
the su# of P))5475*.,5 as full pay#ent of the pre#iu#s for the rene(al of the five insurance policies on
9asa-ana1s propertiesF .'0 declarin- the replace#ent$rene(al policies effective and 'indin- fro# )) 9ay
%,,) until )) 9ay %,,*F and .c0 orderin- ICP5Gen to pay 9asa-ana P%&4<54!!!.!! as inde#nity for the
'urned properties covered 'y the rene(al$replace#ent policies. 2he #odification consisted in the .%0 deletion
of the trial court1s declaration that three of the policies (ere in force fro# 7u-ust %,,% to 7u-ust %,,)F and
.)0 reduction of the a(ard of the attorney1s fees fro# )5O to %!O of the total a#ount due the 9asa-ana.
9asa-ana seasona'ly filed a #otion for the reconsideration of the adverse verdict.
)ssue [1$( =hether there are e/ceptions to Section 774 to allo( 9asa-ana to recover fro# ICP5Gen.
*eld [1$( JCS. 2he first e/ception is provided 'y Section 77 itself4 and that is4 in case of a life or industrial
life policy (henever the -race period provision applies. 2he second is that covered 'y Section 7& of the
Insurance Code4 (hich provides that ?7ny ac:no(led-#ent in a policy or contract of insurance of the receipt
of pre#iu# is conclusive evidence of its pay#ent4 so far as to #a:e the policy 'indin-4 not(ithstandin- any
stipulation therein that it shall not 'e 'indin- until pre#iu# is actually paid.? 7 third e/ception (as laid do(n
in 9a:ati 2uscany Condo#iniu# Corporation vs. Court of 7ppeals4 5 (herein the Court ruled that Section 77
#ay not apply if the parties have a-reed to the pay#ent in install#ents of the pre#iu# and partial pay#ent
has 'een #ade at the ti#e of loss. Further4 in 2uscany4 the Court also Auoted (ith approval the follo(in-
pronounce#ent of the Court of 7ppeals in its Resolution denyin- the #otion for reconsideration of its
decision that ?=hile the i#port of Section 77 is that prepay#ent of pre#iu#s is strictly reAuired as a
condition to the validity of the contract4 =e are not prepared to rule that the reAuest to #a:e install#ent
pay#ents duly approved 'y the insurer (ould prevent the entire contract of insurance fro# -oin- into effect
despite pay#ent and acceptance of the initial pre#iu# or first install#ent. Section 7& of the Insurance Code
in effect allo(s (aiver 'y the insurer of the condition of prepay#ent 'y #a:in- an ac:no(led-#ent in the
insurance policy of receipt of pre#iu# as conclusive evidence of pay#ent so far as to #a:e the policy
'indin- despite the fact that pre#iu# is actually unpaid. Section 77 #erely precludes the parties fro#
stipulatin- that the policy is valid even if pre#iu#s are not paid4 'ut does not e/pressly prohi'it an a-ree#ent
-rantin- credit e/tension4 and such an a-ree#ent is not contrary to #orals4 -ood custo#s4 pu'lic order or
pu'lic policy .3e Heon4 2he Insurance Code4 p. %750. So is an understandin- to allo( insured to pay
pre#iu#s in install#ents not so prescri'ed. 7t the very least4 'oth parties should 'e dee#ed in estoppel to
Auestion the arran-e#ent they have voluntarily accepted.? 5y the approval of the aforeAuoted findin-s and
conclusion of the Court of 7ppeals4 2uscany has also provided a fourth e/ception to Section 774 na#ely4 that
the insurer #ay -rant credit e/tension for the pay#ent of the pre#iu#. 2his si#ply #eans that if the insurer
has -ranted the insured a credit ter# for the pay#ent of the pre#iu# and loss occurs 'efore the e/piration of
the ter#4 recovery on the policy should 'e allo(ed even thou-h the pre#iu# is paid after the loss 'ut (ithin
the credit ter#. 9oreover4 there is nothin- in Section 77 (hich prohi'its the parties in an insurance contract to
provide a credit ter# (ithin (hich to pay the pre#iu#s. 2hat a-ree#ent is not a-ainst the la(4 #orals4 -ood
custo#s4 pu'lic order or pu'lic policy. 2he a-ree#ent 'inds the parties. 6erein4 it (ould 'e unDust and
ineAuita'le if recovery on the policy (ould not 'e per#itted a-ainst ICP5Gen4 (hich had consistently
-ranted a !$ to ,!$day credit ter# for the pay#ent of pre#iu#s despite its full a(areness of Section 77.
Cstoppel 'ars it fro# ta:in- refu-e under said Section4 since 9asa-ana relied in -ood faith on such practice.
Cstoppel then is the fifth e/ception to Section 77.
!! A+eri'an *o+e Assuran'e Co+pan# vs. C5ua [GR 13/8!1 !3 "une 1999$
First Division, Davide Jr) ((J): 4 concur
&a'ts( 7#erican 6o#e 7ssurance Co#pany .767C0 is a do#estic corporation en-a-ed in the insurance
'usiness. So#eti#e in %,,!4 7ntonio Chua o'tained fro# 767C a fire insurance coverin- the stoc:$in$trade
of his 'usiness4 9oonli-ht Cnterprises4 located at Valencia4 5u:idnon. 2he insurance (as due to e/pire on )5
9arch %,,!. @n 5 7pril %,,! Chua issued PCI5an: Chec: *5)%)* in the a#ount of P)4,&*.5! to 767CQs
a-ent4 +a#es Iy4 as pay#ent for the rene(al of the policy. In turn4 the latter delivered Rene(al Certificate
!!!,,!<7 to Chua. 2he chec: (as dra(n a-ainst a 9anila 'an: and deposited in 767CQs 'an: account in
Ca-ayan de @ro City. 2he correspondin- official receipt (as issued on %! 7pril. Su'seAuently4 a ne(
insurance policy4 Policy )!$<)*<<,&$74 (as issued4 (here'y 767C undertoo: to inde#nify Chua for any
da#a-e or loss arisin- fro# fire up to P)!!4!!! for the period )5 9arch %,,! to )5 9arch %,,%. @n 7pril
%,,! 9oonli-ht Cnterprises (as co#pletely ra8ed 'y fire. 2otal loss (as esti#ated 'et(een P<4!!!4!!! and
P54!!!4!!!. Chua filed an insurance clai# (ith 767C and four other co$insurers4 na#ely4 Pioneer Insurance
and Surety Corporation4 Prudential Guarantee and 7ssurance4 Inc.4 Filipino 9erchants Insurance Co. and
3o#estic Insurance Co#pany of the Philippines. 767C refused to honor the clai# not(ithstandin- several
de#ands 'y Chua4 thus4 the latter filed an action a-ainst 767C 'efore the trial court. In its defense4 767C
clai#ed there (as no e/istin- insurance contract (hen the fire occurred since Chua did not pay the pre#iu#.
It also alle-ed that even assu#in- there (as a contract4 Chua violated several conditions of the policy4
particularlyE .%0 his su'#ission of fraudulent inco#e ta/ return and financial state#entsF .)0 his failure to
esta'lish the actual loss4 (hich 767C assessed at P7!4!!!F and .*0 his failure to notify to 767C of any
insurance already effected to cover the insured -oods. 2hese violations4 767C insisted4 Dustified the denial of
the clai#. 2he trial court ruled in favor of Chua. It found that Chua paid 'y (ay of chec: a day 'efore the fire
occurred. 2he chec:4 (hich (as deposited in 767CQs 'an: account4 (as even ac:no(led-ed in the rene(al
certificate issued 'y 767CQs a-ent. It declared that the alle-ed fraudulent docu#ents (ere li#ited to the
disparity 'et(een the official receipts issued 'y the 5ureau of Internal Revenue .5IR0 and the inco#e ta/
returns for the years %,&7 to %,&,. 7ll the other docu#ents (ere found to 'e -enuine. ;onetheless4 it -ave
credence to the 5IR certification that Chua paid the correspondin- ta/es due for the Auestioned years. 7s to
ChuaQs failure to notify 767C of the other insurance contracts coverin- the sa#e -oods4 the trial court held
that 767C failed to sho( that such o#ission (as intentional and fraudulent. Finally4 it noted that 767CQs
investi-ation of Chua1s clai# (as done in colla'oration (ith the representatives of other insurance co#panies
(ho found no irre-ularity therein. In fact4 Pioneer Insurance and Surety Corporation and Prudential Guarantee
and 7ssurance4 Inc. pro#ptly paid the clai#s filed 'y Chua. 2he trial court ordered 767C to pay Chua
P)!!4!!!.!!4 representin- the a#ount of the insurance4 plus le-al interest fro# the date of filin- of the caseF
P)!!4!!!.!! as #oral da#a-esF P)!!4!!!.!! as loss of profitF P%!!4!!!.!! as e/e#plary da#a-esF
P5!4!!!.!! as attorneyQs feesF and Cost of suit. @n appeal4 the assailed decision (as affir#ed in toto 'y the
Court of 7ppeals. 2he Court of 7ppeals found that ChuaQs clai# (as su'stantially proved and 767CQs
unDustified refusal to pay the clai# entitled Chua to the a(ard of da#a-es. Its #otion for reconsideration of
the Dud-#ent havin- 'een denied4 767C filed the petition for revie( on certiorari.
)ssue( =hether there (as a valid pay#ent of pre#iu#4 considerin- that ChuaQs chec: (as cashed after the
occurrence of the fire.
*eld( JCS. 2he -eneral rule in insurance la(s is that unless the pre#iu# is paid the insurance policy is not
valid and 'indin-. 2he only e/ceptions are life and industrial life insurance. =hether pay#ent (as indeed
#ade is a Auestion of fact (hich is 'est deter#ined 'y the trial court. 2he trial court found4 as affir#ed 'y the
Court of 7ppeals4 that there (as a valid chec: pay#ent 'y Chua to 767C. =ell$settled is the rule that the
factual findin-s and conclusions of the trial court and the Court of 7ppeals are entitled to -reat (ei-ht and
respect4 and (ill not 'e distur'ed on appeal in the a'sence of any clear sho(in- that the trial court overloo:ed
certain facts or circu#stances (hich (ould su'stantially affect the disposition of the case. 2he Supre#e Cpurt
sees no reason to depart fro# this rulin-. 7ccordin- to the trial court the rene(al certificate issued to Chua
contained the ac:no(led-#ent that pre#iu# had 'een paid. It is not disputed that the chec: dra(n 'y Chua
in favor of 767C and delivered to its a-ent (as honored (hen presented and 767C forth(ith issued its
official receipt to Chua on %! 7pril %,,!. Section *! of the Insurance Code provides that any insurance
co#pany (hich delivers a policy or contract of insurance to an insurance a-ent or insurance 'ro:er shall 'e
dee#ed to have authori8ed such a-ent or 'ro:er to receive on its 'ehalf pay#ent of any pre#iu# (hich is
due on such policy or contract of insurance at the ti#e of its issuance or delivery or (hich 'eco#es due
thereon. 6erein4 the 'est evidence of such authority is the fact that 767C accepted the chec: and issued the
official receipt for the pay#ent. It is4 as (ell4 'ound 'y its a-entQs ac:no(led-#ent of receipt of pay#ent.
Section 7& of the Insurance Code e/plicitly provides that ?7n ac:no(led-#ent in a policy or contract of
insurance of the receipt of pre#iu# is conclusive evidence of its pay#ent4 so far as to #a:e the policy
'indin-4 not(ithstandin- any stipulation therein that it shall not 'e 'indin- until the pre#iu# is actually
paid.? 2his Section esta'lishes a le-al fiction of pay#ent and should 'e interpreted as an e/ception to Section
77.
!3 Ai;a# vs. Court of Appeals [GR 119666 !8 7a# 1996$
First Division, &ellosillo (J): ! concur, " +iled a se$arate o$inion to 2hich " 3oined
&a'ts( @n )) +anuary %,&74 Fortune Hife and General Insurance Co.4 Inc. .Fortune0 issued Fire Insurance
Policy %*%7% in favor of Violeta R. 2i'ay andLor ;icolas Roraldo on their t(o$storey residential 'uildin-
located at 5&55 Bo'el Street4 9a:ati City4 to-ether (ith all their personal effects therein. 2he insurance (as
for P!!4!!!.!! coverin- the period fro# )* +anuary %,&7 to )* +anuary %,&&. @n )* +anuary %,&74 of the
total pre#iu# of P)4,&*.5!4 petitioner Violeta 2i'ay only paid P!!.!! thus leavin- a considera'le 'alance
unpaid. @n & 9arch %,&7 the insured 'uildin- (as co#pletely destroyed 'y fire. 2(o days later or on %!
9arch %,&7 Violeta 2i'ay paid the 'alance of the pre#iu#. @n the sa#e day4 she filed (ith Fortune a clai#
on the fire insurance policy. 6er clai# (as accordin-ly referred to its adDuster4 Good(ill 7dDust#ent Services4
Inc. .G7SI04 (hich i##ediately (rote Violeta reAuestin- her to furnish it (ith the necessary docu#ents for
the investi-ation and processin- of her clai#. Petitioner forth(ith co#plied. @n )& 9arch %,&7 she si-ned a
non$(aiver a-ree#ent (ith G7SI to the effect that any action ta:en 'y the co#panies or their representatives
in investi-atin- the clai# #ade 'y the clai#ant for his loss (hich occurred at 5&55 Bo'el Ro/as4 9a:ati on &
9arch %,&74 or in the investi-atin- or ascertain#ent of the a#ount of actual cash value and loss4 shall not
(aive or invalidate any condition of the policies of such co#panies held 'y said clai#ant4 nor the ri-hts of
either or any of the parties to this a-ree#ent4 and such action shall not 'e4 or 'e clai#ed to 'e4 an ad#ission
of lia'ility on the part of said co#panies or any of the#. In a letter dated %% +une %,&7 Fortune denied the
clai# of Violeta for violation of Policy Condition ) and of Section 77 of the Insurance Code. Cfforts to settle
the case 'efore the Insurance Co##ission proved futile. @n * 9arch %,&& Violeta and the other petitioners
.7ntonio 2i'ay4 @felia 9. Roraldo4 Victorina 9. Roraldo4 Vir-ilio 9. Roraldo4 9yrna 9. Roraldo4 and
Rosa'ella 9. Roraldo0 sued Fortune for da#a-es in the a#ount of P!!4!!!.!! representin- the total
covera-e of the fire insurance policy plus %)O interest per annu#4 P%!!4!!!.!! #oral da#a-es4 and
attorney1s fees eAuivalent to )!O of the total clai#. @n %, +uly %,,! the trial court ruled for 2i'ay4 et al. and
adDud-ed Fortune lia'le for the total value of the insured 'uildin- and personal properties in the a#ount of
P!!4!!!.!! plus interest at the le-al rate of O per annu# fro# the filin- of the co#plaint until full
pay#ent4 and attorney1s fees eAuivalent to )!O of the total a#ount clai#ed plus costs of suit. @n )< 9arch
%,,5 the Court of 7ppeals reversed the court a Auo 'y declarin- Fortune not to 'e lia'le to 2i'ay et al. 'ut
orderin- Fortune to return to the for#er the pre#iu# of P)4,&*.5! plus %)O interest fro# %! 9arch %,&7
until full pay#ent. 2i'ay4 et al. filed the petition for revie(.
)ssue( =hether a fire insurance policy 'e valid4 'indin- and enforcea'le upon #ere partial pay#ent of
pre#iu#.
*eld( ;@. Insurance is a contract (here'y one underta:es for a consideration to inde#nify another a-ainst
loss4 da#a-e or lia'ility arisin- fro# an un:no(n or contin-ent event. 2he consideration is the pre#iu#4
(hich #ust 'e paid at the ti#e and in the (ay and #anner specified in the policy4 and if not so paid4 the
policy (ill lapse and 'e forfeited 'y its o(n ter#s. 2he Policy provides for pay#ent of pre#iu# in full.
7ccordin-ly4 (here the pre#iu# has only 'een partially paid and the 'alance paid only after the peril insured
a-ainst has occurred4 the insurance contract did not ta:e effect and the insured cannot collect at all on the
policy. 2his is fully supported 'y Section 77 of the Insurance Code (hich provides that ?7n insurer is entitled
to pay#ent of the pre#iu# as soon as the thin- insured is e/posed to the peril insured a-ainst.
;ot(ithstandin- any a-ree#ent to the contrary4 no policy or contract of insurance issued 'y an insurance
co#pany is valid and 'indin- unless and until the pre#iu# thereof has 'een paid4 e/cept in the case of a life
or an industrial life policy (henever the -race period provision applies.? 7pparently the cru/ of the
controversy lies in the phrase ?unless and until the pre#iu# thereof has 'een paid.? 2his leads us to the
#anner of pay#ent envisioned 'y the la( to #a:e the insurance policy operative and 'indin-. For (hatever
Dudicial construction #ay 'e accorded the disputed phrase #ust ulti#ately yield to the clear #andate of the
la(. 2he principle that (here the la( does not distin-uish the court should neither distin-uish assu#es that
the le-islature #ade no Aualification on the use of a -eneral (ord or e/pression. It cannot 'e disputed that
pre#iu# is the eli/ir vitae of the insurance 'usiness 'ecause 'y la( the insurer #ust #aintain a le-al reserve
fund to #eet its contin-ent o'li-ations to the pu'lic4 hence4 the i#perative need for its pro#pt pay#ent and
full satisfaction. It #ust 'e e#phasi8ed here that all actuarial calculations and various ta'ulations of
pro'a'ilities of losses under the ris:s insured a-ainst are 'ased on the sound hypothesis of pro#pt pay#ent of
pre#iu#s. Ipon this 'edroc: insurance fir#s are ena'led to offer the assurance of security to the pu'lic at
favora'le rates. 5ut once pay#ent of pre#iu# is left to the (hi# and caprice of the insured4 as (hen the
courts tolerate the pay#ent of a #ere P!!.!! as partial underta:in- out of the stipulated total pre#iu# of
P)4,&*.5! and the 'alance to 'e paid even after the ris: insured a-ainst has occurred4 as 2i'ay et al. have done
in this case4 on the principle that the stren-th of the vinculu# Duris is not #easured 'y any specific a#ount of
pre#iu# pay#ent4 (e (ill surely (rea: havoc on the 'usiness and set to nau-ht (hat has ta:en actuarians
centuries to devise to arrive at a fair and eAuita'le distri'ution of ris:s and 'enefits 'et(een the insurer and
the insured.
!8 45ilippine 45oeniB 1uret# 2 )nsuran'e Co+pan# vs. Dood-or=s )n'. [GR ,>!6317 6 Au?ust 1979$
First Division, Melencio-4errera (J): 4 concur, " a*road)
&a'ts( @n )% +uly %,!4 upon =ood(or:s Inc.1s application4 Philippine Phoeni/ Surety & Insurance
Co#pany .Phoeni/0 issued in its favor Fire Insurance Policy ,7<, for P5!!4!!!.!! (here'y Phoeni/ insured
=ood(or:s Inc.1s 'uildin-4 #achinery and eAuip#ent for a ter# of one year fro# )% +uly %,! to )% +uly
%,% a-ainst loss 'y fire. 2he pre#iu# and other char-es includin- the #ar-in fee surchar-e of P5,!.7 and
the docu#entary sta#ps in the a#ount of P%5.! affi/ed on the Policy4 a#ounted to P%!45,*.*.
=ood(or:s Inc. did not pay the pre#iu# stipulated in the Policy (hen it (as issued nor at any ti#e
thereafter. @n %, 7pril %,%4 or 'efore the e/piration of the one$year ter#4 Phoeni/ notified =ood(or:s Inc.4
throu-h its Indorse#ent F$,*L%4 of the cancellation of the Policy alle-edly upon reAuest of =ood(or:s
Inc. 2he latter has denied havin- #ade such a reAuest. In said Indorse#ent4 Phoeni/ credited =ood(or:s Inc.
(ith the a#ount of P*4%%!.)5 for the une/pired period of ,< days4 and clai#ed the 'alance of P74<&*.%%
representin- ?earned pre#iu# fro# )% +uly %,! to %& 7pril %,% or4 say )7% days. @n +uly %,%4 Phoeni/
de#anded in (ritin- for the pay#ent of said a#ount. =ood(or:s Inc.4 throu-h counsel4 disclai#ed any
lia'ility in its reply$letter of %5 7u-ust %,%4 contendin-4 in essence4 that it need not pay pre#iu# ?'ecause
the Insurer did not stand lia'le for any inde#nity durin- the period the pre#iu#s (ere not paid.? @n *!
+anuary %,)4 Phoeni/ co##enced action in the Court of First Instance of 9anila4 5ranch IV .Civil Case
<,<&04 to recover the a#ount of P74<&*.%% as ?earned pre#iu#.? =ood(or:s Inc. controverted 'asically on
the theory that its failure ?to pay the pre#iu# after the issuance of the policy put an end to the insurance
contract and rendered the policy unenforcea'le.? @n %* Septe#'er %,)4 Dud-#ent (as rendered in Phoeni/1s
favor ?orderin- =ood(or:s Inc. to pay Phoeni/ the su# of P74<&*.%%4 (ith interest thereon at the rate of O
per annu# fro# *! +anuary %,)4 until the principal shall have 'een fully paid4 plus the su# of P7!!.!! as
attorney1s fees of the Phoeni/4 and the costs of the suit.? Fro# this adverse 3ecision4 =ood(or:s Inc.
appealed to the Court of 7ppeals (hich certified the case to the Supre#e Court on a Auestion of la(.
)ssue( =hether the Fire Insurance Policy (as a 'indin- contract even if the pre#iu# stated in the policy has
not 'een paid.
*eld( Insurance is ?a contract (here'y one underta:es for a consideration to inde#nify another a-ainst loss4
da#a-e or lia'ility arisin- fro# an un:no(n or contin-ent event.? 2he consideration is the ?pre#iu#?. ?2he
pre#iu# #ust 'e paid at the ti#e and in the (ay and #anner specified in the policy and4 if not so paid4 the
policy (ill lapse and 'e forfeited 'y its o(n ter#s.? 2he Policy provides for pre$pay#ent of pre#iu#.
7ccordin-ly4 ?(hen the policy is tendered the insured #ust pay the pre#iu# unless credit is -iven or there is
a (aiver4 or so#e a-ree#ent o'viatin- the necessity for prepay#ent.? 2o constitute an e/tension of credit
there #ust 'e a clear and e/press a-ree#ent therefor. Fro# the Policy provisions4 there (as no clear
a-ree#ent that a credit e/tension (as accorded =ood(or:s Inc. 7nd even if it (ere to 'e presu#ed that
Phoeni/ had e/tended credit fro# the circu#stances of the unconditional delivery of the Policy (ithout
prepay#ent of the pre#iu#4 yet it is o'vious that =ood(or:s Inc. had not accepted the insurer1s offer to
e/tend credit4 (hich is essential for the validity of such a-ree#ent. 7n acceptance of an offer to allo( credit4
if one (as #ade4 is as essential to #a:e a valid a-ree#ent for credit4 to chan-e a conditional delivery of an
insurance policy to an unconditional delivery4 as it is to #a:e any other contract. Such an acceptance could
not 'e #erely a #ental act or state of #ind4 'ut (ould reAuire a pro#ise to pay #ade :no(n in so#e #anner
to =ood(or:s Inc. In this respect4 the present case differs fro# that involvin- the sa#e parties (here
recovery of the 'alance of the unpaid pre#iu# (as allo(ed inas#uch as in that case ?there (as not only a
perfected contract of insurance 'ut a partially perfor#ed one as far as the pay#ent of the a-reed pre#iu# (as
concerned.? 2his is not the situation o'tainin- here (here no partial pay#ent of pre#iu#s has 'een #ade
(hatsoever. Since the pre#iu# had not 'een paid4 the policy #ust 'e dee#ed to have lapsed. 2he non$
pay#ent of pre#iu#s does not #erely suspend 'ut puts an end to an insurance contract4 since the ti#e of the
pay#ent is peculiarly of the essence of the contract. 2he rule is that under policy provisions that upon the
failure to #a:e a pay#ent of a pre#iu# or assess#ent at the ti#e provided for4 the policy shall 'eco#e void
or forfeited4 or the o'li-ation of the insurer shall cease4 or (ords to li:e effect4 'ecause the contract so
prescri'es and 'ecause such a stipulation is a #aterial and essential part of the contract. 2his is true4 for
instance4 in the case of life4 health and accident4 fire and hail insurance policies. In fact4 if the peril insured
a-ainst had occurred4 Phoeni/4 as insurer4 (ould have had a valid defense a-ainst recovery under the Policy it
had issued. C/plicit in the Policy itself is Phoeni/1s a-ree#ent to inde#nify =ood(or:s Inc. for loss 'y fire
only ?after pay#ent of pre#iu#. Co#pliance 'y the insured (ith the ter#s of the contract is a condition
precedent to the ri-ht of recovery. 2he 'urden is on an insured to :eep a policy in force 'y the pay#ent of
pre#iu#s4 rather than on the insurer to e/ert every effort to prevent the insured fro# allo(in- a policy to
elapse throu-h a failure to #a:e pre#iu# pay#ents. 2he continuance of the insurer1s o'li-ation is conditional
upon the pay#ent of pre#iu#s4 so that no recovery can 'e had upon a lapsed policy4 the contractual relation
'et(een the parties havin- ceased. 9oreover4 an insurer cannot treat a contract as valid for the purpose of
collectin- pre#iu#s and invalid for the purpose of inde#nity. 2he fore-oin- findin-s are 'uttressed 'y
section 77 of the Insurance Code .Presidential 3ecree ;o. %)4 pro#ul-ated on 3ece#'er %&4 %,7<04 (hich
no( provides that no contract of insurance issued 'y an insurance co#pany is valid and 'indin- unless and
until the pre#iu# thereof has 'een paid4 not(ithstandin- any a-ree#ent to the contrary.
!6 Bonifa'io Brot5ers )n'. vs. 7ora [GR ,>!/363 !9 7a# 1967$
%n &anc, (astro (J): 1 concur
&a'ts( CnriAue 9ora is the o(ner of an @lds#o'ile sedan #odel %,54 'earin- plate >C $ &!&&. 6e
#ort-a-ed the sa#e to the 6.S. Reyes4 Inc.4 (ith the condition that the for#er (ould insure the auto#o'ile4
(ith the latter as 'eneficiary. 2he auto#o'ile (as thereafter insured on )* +une %,5, (ith the State 5ondin-
& Insurance Co. Inc.4 and #otor car insurance policy 7$!%5 (as issued to 9ora. 3urin- the effectivity of an
insurance contract4 the car #et (ith an accident. 2he insurance co#pany then assi-ned the accident to the
6.6. 5ayne 7dDust#ent Co. for investi-ation and appraisal of the da#a-e. 9ora4 (ithout the :no(led-e and
consent of the 6.S. Reyes4 Inc.4 authori8ed the 5onifacio 5ros. Inc. to furnish the la'or and #aterials4 so#e of
(hich (ere supplied 'y the 7yala 7uto Parts Co. For the cost of la'or and #aterials4 9ora (as 'illed at
P)4%!).7* throu-h the 6. 6. 5ayne 7dDust#ent Co. 2he insurance co#pany4 after clai#in- a franchise in the
a#ount of P%!!4 dre( a chec: in the a#ount of P)4!!).7*4 as proceeds of the insurance policy4 paya'le to the
order of 9ora or 6.S. Reyes4 Inc.4 and entrusted the chec: to the 6.6. 5ayne 7dDust#ent Co. for disposition
and delivery to the proper party. In the #eanti#e4 the car (as delivered to 9ora (ithout the consent of the
6.S. Reyes4 Inc.4 and (ithout pay#ent to the 5onifacio 5ros. Inc. and 7yala 7uto Parts Co. of the cost of
repairs and #aterials. Ipon the theory that the insurance proceeds should 'e paid directly to the#4 the
5onifacio 5ros. Inc. and the 7yala 7uto Parts Co. filed on & 9ay %,% a co#plaint (ith the 9unicipal Court
of 9anila a-ainst 9ora and the State 5ondin- & Insurance Co. Inc. for the collection of the su# of
P)4!!).7*. 2he insurance co#pany filed its ans(er (ith a counterclai# for interpleader4 reAuirin- the
5onifacio 5ros. Inc. and the 6.S. Reyes4 Inc. to interplead in order to deter#ine (ho has a 'etter ri-ht to the
insurance proceeds in Auestion. 9ora (as declared in default for failure to appear at the hearin-4 and evidence
a-ainst hi# (as received e/ parte. 6o(ever4 the counsel for the 5onifacio 5ros. Inc.4 7yala 7uto Parts Co.
and State 5ondin- & Insurance Co. Inc. su'#itted a stipulation of facts4 on the 'asis of (hich the 9unicipal
Court rendered a decision declarin- the 6.S. Reyes4 Inc. as havin- a 'etter ri-ht to the disputed a#ount4 and
orderin- the State 5ondin- & Insurance Co. Inc. to pay to the 6.S Reyes4 Inc. the said su# of P)4!!).7*.
Fro# this decision4 5onifacio 5ros. Inc. et al. elevated the case to the Court of First Instance of 9anila 'efore
(hich the stipulation of facts (as reproduced. @n %, @cto'er %,) the latter court rendered a decision4
affir#in- the decision of the 9unicipal Court. 2he 5onifacio 5ros. Inc. and the 7yala 7uto Parts Co. #oved
for reconsideration of the decision4 'ut the trial court denied the #otion. 5onifacio 5ros. Inc. et al. appealed.
)ssue( =hether 5onifacio 5ros. has any cause of action to clai# inde#nity fro# the insurance contract
entered 'y State 5ondin- & Insurance Co. and 9ora.
*eld( 2he insurance contract does not contain any (ords or clauses to disclose an intent to -ive any 'enefit to
any repair#en or #aterial #en in case of repair of the car in Auestion. 2he parties to the insurance contract
o#itted such stipulation4 (hich is a circu#stance that supports the said conclusion. @n the other hand4 the
?loss paya'le? clause of the insurance policy stipulates that ?Hoss4 if any4 is paya'le to 6.S. Reyes4 Inc.?
indicatin- that it (as only the 6.S. Reyes4 Inc. (hich they intended to 'enefit. It is li:e(ise o'served fro# the
'rief of the State 5ondin- & Insurance Co#pany that it has vehe#ently opposed the assertion or pretension
of 5onifacio 5ros. that they are privy to the contract. If it (ere the intention of the Insurance Co#pany to
#a:e itself lia'le to the repair shop or #aterial #en4 it could have easily inserted in the contract a stipulation
to that effect. 2o hold no( that the ori-inal parties to the insurance contract intended to confer upon 5onifacio
5ros. the 'enefit clai#ed 'y the# (ould reAuire as to i-nore the indispensa'le reAuisite that a stipulation pour
autrui #ust 'e clearly e/pressed 'y the parties4 (hich the Court cannot do. 7s re-ards para-raph < of the
insurance contract4 a perusal thereof (ould sho( that instead of esta'lishin- privity 'et(een 5onifacio 5ros.
and the insurance co#pany4 such stipulation #erely esta'lishes the procedure that the insured has to follo( in
order to 'e entitled to inde#nity for repair. 2his para-raph therefore should not 'e construed as 'rin-in- into
e/istence in favor of 5onifacio 5ros. a ri-ht of action a-ainst the insurance co#pany as such intention can
never 'e inferred therefro#. 7nother co-ent reason for not reco-ni8in- a ri-ht of action 'y 5onifacio 5ros.
a-ainst the insurance co#pany is that ?a policy of insurance is a distinct and independent contract 'et(een the
insured and insurer4 and third persons have no ri-ht either in a court of eAuity4 or in a court of la(4 to the
proceeds of it4 unless there 'e so#e contract of trust4 e/pressed or i#plied4 'y the insured and third person.?
6erein4 no contract of trust4 e/pressed or i#plied e/ists. 2hus4 no cause of action e/ists in favor of 5onifacio
5ros. in so far as the proceeds of insurance are concerned. 5onifacio 5ros.1 clai#4 if at all4 is #erely eAuita'le
in nature and #ust 'e #ade effective throu-h CnriAue 9ora (ho entered into a contract (ith the 5onifacio
5ros Inc. 2his conclusion is deduci'le not only fro# the principle -overnin- the operation and effect of
insurance contracts in -eneral4 'ut is clearly covered 'y the e/press provisions of section 5! of the Insurance
7ct (hich read that ?the insurance shall 'e applied e/clusively to the proper interest of the person in (hose
na#e it is #ade unless other(ise specified in the policy.?
!6 A5e )nsular ,ife Assuran'e Co+pan# ,td. vs. 9;rado [GR ,>88/69 !3 @'to;er 1977$
First Division, Martin (J): 5 concur
&a'ts( @n % Septe#'er %,&4 5uenaventura Cristor C'rado (as issued 'y the Insular Hife 7ssurance Co.4
Htd.4 Policy !!,,), on a (hole$life plan for P54&&).!! (ith a rider for 7ccidental 3eath 5enefits for the sa#e
a#ount. 5uenaventura C. C'rado desi-nated Carponia 2. C'rado as the revoca'le 'eneficiary in his policy.
6e referred to her as his (ife. @n )% @cto'er %,,4 5uenventura C. C'rado died as a result of an accident
(hen he (as hit 'y a fallin- 'ranch of a tree. 7s the insurance policy (as in force4 Insular Hife stands lia'le
to pay the covera-e of the policy in an a#ount of P%%47<5.7*4 representin- the face value of the policy in the
a#ount of P54&&).!! plus the additional 'enefits for accidental death also in the a#ount of P54&&).!! and the
refund of P%&.!! paid for the pre#iu# due ;ove#'er4 %,,4 #inus the unpaid pre#iu#s and interest thereon
due for +anuary and Fe'ruary4 %,,4 in the su# of P*.)7. Carponia 2. C'rado filed (ith the insurer a clai#
for the proceeds of the policy as the desi-nated 'eneficiary therein4 althou-h she ad#its that she and the
insured 5uenaventura C. C'rado (ere #erely livin- as hus'and and (ife (ithout the 'enefit of #arria-e.
Pascuala Vda. de C'rado also filed her clai# as the (ido( of the deceased insured. She asserts that she is the
one entitled to the insurance proceeds4 not the co##on$la( (ife4 Carponia 2. C'rado. In dou't as to (ho#
the insurance proceeds shall 'e paid4 the insurer co##enced an action for Interpleader 'efore the Court of
First Instance of Ri8al on ), 7pril %,7!. @n )5 Septe#'er %,7)4 the trial court rendered Dud-#ent declarin-4
a#on- others4 Carponia 2. C'rado disAualified fro# 'eco#in- 'eneficiary of the insured 5uenaventura
Cristor C'rado and directin- the pay#ent of the insurance proceeds to the estate of the deceased insured.
Fro# this Dud-#ent4 Carponia 2. C'rado appealed to the Court of 7ppeals4 'ut on %% +uly %,74 the 7ppellate
Court certified the case to the Supre#e Court as involvin- only Auestions of la(.
)ssue [1$( =hether a co##on$la( (ife na#ed as 'eneficiary in the life insurance policy of a le-ally #arried
#an can clai# the proceeds thereof in case of death of the latter.
*eld[1$( ;@. It is Auite unfortunate that the Insurance 7ct .R7 )*)74 as a#ended0 or even the ne( Insurance
Code .P3 %)4 as a#ended0 does not contain any specific provision -rossly resolutory of the pri#e Auestion
at hand. Section 5! of the Insurance 7ct (hich provides that ?.t0he insurance shall 'e applied e/clusively to
the proper interest of the person in (hose na#e it is #ade? cannot 'e validly sei8ed upon to hold that the
sa#e includes the 'eneficiary. 2he (ord ?interest? hi-hly su--ests that the provision refers only to the insured
and not to the 'eneficiary4 since a contract of insurance is personal in character. @ther(ise4 the prohi'itory
la(s a-ainst illicit relationships especially on property and descent (ill 'e rendered nu-atory4 as the sa#e
could easily 'e circu#vented 'y #odes of insurance. Rather4 the -eneral rules of civil la( should 'e applied
to resolve this void in the Insurance Ha(. 7rticle )!%% of the ;e( Civil Code statesE ?2he contract of
insurance is -overned 'y special la(s. 9atters not e/pressly provided for in such special la(s shall 'e
re-ulated 'y this Code.? =hen not other(ise specifically provided for 'y the Insurance Ha(4 the contract of
life insurance is -overned 'y the -eneral rules of the civil la( re-ulatin- contracts. 7nd under 7rticle )!%) of
the sa#e Code4 ?any person (ho is for'idden fro# receivin- any donation under 7rticle 7*, cannot 'e na#ed
'eneficiary of a life insurance policy 'y the person (ho cannot #a:e a donation to hi#.? Co##on$la(
spouses are4 definitely4 'arred fro# receivin- donations fro# each other. 7rticle 7*, of the ne( Civil Code
provides that ?the follo(in- donations shall 'e voidE .%0 2hose #ade 'et(een persons (ho (ere -uilty of
adultery or concu'ina-e at the ti#e of donationF .)0 2hose #ade 'et(een persons found -uilty of the sa#e
cri#inal offense4 in consideration thereofF .*0 2hose #ade to a pu'lic officer or his (ife4 descendants or
ascendants 'y reason of his office. In the case referred to in ;o. %4 the action for declaration of nullity #ay 'e
'rou-ht 'y the spouse of the donor or doneeF and the -uilt of the donee #ay 'e proved 'y preponderance of
evidence in the sa#e action.? In essence4 a life insurance policy is no different fro# a civil donation insofar as
the 'eneficiary is concerned. 5oth are founded upon the sa#e considerationE li'erality. 7 'eneficiary is li:e a
donee4 'ecause fro# the pre#iu#s of the policy (hich the insured pays out of li'erality4 the 'eneficiary (ill
receive the proceeds or profits of said insurance. 7s a conseAuence4 the proscription in 7rticle 7*, of the ne(
Civil Code should eAually operate in life insurance contracts. 2he #andate of 7rticle )!%) cannot 'e laid
asideE any person (ho cannot receive a donation cannot 'e na#ed as 'eneficiary in the life insurance policy
of the person (ho cannot #a:e the donation. Inder 7#erican la(4 a policy of life insurance is considered as
a testa#ent and in construin- it4 the courts (ill4 so far as possi'le treat it as a (ill and deter#ine the effect of
a clause desi-natin- the 'eneficiary 'y rules under (hich (ills are interpreted. Policy considerations and
dictates of #orality ri-htly Dustify the institution of a 'arrier 'et(een co##on$la( spouses in re-ard to
property relations since such relationship ulti#ately encroaches upon the nuptial and filial ri-hts of the
le-iti#ate fa#ily. 2here is every reason to hold that the 'ar in donations 'et(een le-iti#ate spouses and those
'et(een ille-iti#ate ones should 'e enforced in life insurance policies since the sa#e are 'ased on si#ilar
consideration. 7s pointed out4 a 'eneficiary in a life insurance policy is no different fro# a donee. 5oth the
recipients of pure 'eneficence. So lon- as #arria-e re#ains the threshold of fa#ily la(s4 reason and #orality
dictate that the i#pedi#ents i#posed upon #arried couple should li:e(ise 'e i#posed upon e/tra$#arital
relationship. If le-iti#ate relationship is circu#scri'ed 'y these le-al disa'ilities4 (ith #ore reason should an
illicit relationship 'e restricted 'y these disa'ilities.
)ssue [!$( =hether a conviction for adultery or concu'ina-e is e/acted 'efore the disa'ilities #entioned in
7rticle 7*, #ay effectuate.
*eld [!$( ;@. 7 conviction for adultery or concu'ina-e is not e/acted 'efore the disa'ilities #entioned in
7rticle 7*, #ay effectuate. 9ore specifically4 (ith re-ard to the disa'ility on ?persons (ho (ere -uilty of
adultery or concu'ina-e at the ti#e of the donation4? 7rticle 7*, itself provides that ?In the case referred to in
;o. %4 the action for declaration of nullity #ay 'e 'rou-ht 'y the spouse of the donor or doneeF and the -uilt
of the donee #ay 'e proved 'y preponderance of evidence in the sa#e action.? 2he underscored clause neatly
conveys that no cri#inal conviction for the disAualifyin- offense is a condition precedent. In fact4 it cannot
even 'e -leaned fro# the aforeAuoted provision that a cri#inal prosecution is needed. @n the contrary4 the
la( plainly states that the -uilt of the party #ay 'e proved ?in the sa#e action? for declaration of nullity of
donation. 7nd4 it (ould 'e sufficient if evidence preponderates upon the -uilt of the consort for the offense
indicated. 2he Auantu# of proof in cri#inal cases is not de#anded. 6erein4 the reAuisite proof of co##on$
la( relationship 'et(een the insured and the 'eneficiary has 'een conveniently supplied 'y the stipulations
'et(een the parties in the pre$trial conference of the case. It (as a-reed upon and stipulated therein that the
deceased insured 5uenaventura C. C'rado (as #arried to Pascuala C'rado (ith (ho# she has si/ le-iti#ate
childrenF that durin- his lifeti#e4 the deceased insured (as livin- (ith his co##on$la( (ife4 Carponia
C'rado4 (ith (ho# he has t(o children. 2hese stipulations are nothin- less than Dudicial ad#issions (hich4 as
a conseAuence4 no lon-er reAuire proof and cannot 'e contradicted. 7 fortiori4 on the 'asis of these
ad#issions4 a Dud-#ent #ay 'e validly rendered (ithout -oin- throu-h the ri-ors of a trial for the sole
purpose of provin- the illicit liaison 'et(een the insured and the 'eneficiary.
!7 Vda de Consue?ra vs. Govern+ent 1ervi'e )nsuran'e 1#ste+ [GR ,>!3/93 3/ "anuar# 1971$
%n &anc, 6aldivar (J): "7 concur
&a'ts( 2he late +ose Consue-ra4 at the ti#e of his death4 (as e#ployed as a shop fore#an of the office of the
3istrict Cn-ineer in the province of Suri-ao$del ;orte. In his lifeti#e4 Consue-ra contracted t(o #arria-es4
the first (ith Rosario 3ia84 sole#ni8ed in the parish church of San ;icolas de 2olentino4 Suri-ao4 Suri-ao4 on
%5 +uly %,*74 out of (hich #arria-e (ere 'orn t(o children4 na#ely4 +ose Consue-ra4 +r. and Pedro
Consue-ra4 'ut 'oth predeceased their fatherF and the second4 (hich (as contracted in -ood faith (hile the
first #arria-e (as su'sistin-4 (ith 5asilia 5erdin4 on % 9ay %,57 in the sa#e parish and #unicipality4 out of
(hich #arria-e (ere 'orn seven children4 na#ely4 +uliana4 Pacita4 9aria Hourdes4 +ose4 Rodri-o4 Henida and
Hu84 S all surna#ed Consue-ra. 5ein- a #e#'er of the Govern#ent Service Insurance Syste# .GSIS0 (hen
Consue-ra died on ) Septe#'er %,54 the proceeds of his life insurance under policy !%&!% (ere paid 'y
the GSIS to 5asilia 5erdin and her children (ho (ere the 'eneficiaries na#ed in the policy. 6avin- 'een in
the service of the -overn#ent for )).5!)& years4 Consue-ra (as entitled to retire#ent insurance 'enefits in
the su# of P4*!<.<7 pursuant to Section %).c0 of Co##on(ealth 7ct %& as a#ended 'y Repu'lic 7cts
%% and *&*. Consue-ra did not desi-nate any 'eneficiary (ho (ould receive the retire#ent insurance
'enefits due to hi#. Rosario 3ia84 the (ido( 'y the first #arria-e4 filed a clai# (ith the GSIS as:in- that the
retire#ent insurance 'enefits 'e paid to her as the only le-al heir of Consue-ra4 considerin- that the deceased
did not desi-nate any 'eneficiary (ith respect to his retire#ent insurance 'enefits. 5asilia 5erdin and her
children4 li:e(ise4 filed a si#ilar clai# (ith the GSIS4 assertin- that 'ein- the 'eneficiaries na#ed in the life
insurance policy of Consue-ra4 they are the only ones entitled to receive the retire#ent insurance 'enefits due
the deceased Consue-ra. Resolvin- the conflictin- clai#s4 the GSIS ruled that the le-al heirs of the late +ose
Consue-ra (ere Rosario 3ia84 his (ido( 'y his first #arria-e (ho is entitled to one$half4 or &L%4 of the
retire#ent insurance 'enefits4 on the one handF and 5asilia 5erdin4 his (ido( 'y the second #arria-e and
their seven children4 on the other hand4 (ho are entitled to the re#ainin- one$half4 or &L%4 each of the# to
receive an eAual share of %L%. 3issatisfied (ith the fore-oin- rulin- and apportion#ent #ade 'y the GSIS4
5asilia 5erdin and her children filed on %! @cto'er %, a petition for #anda#us (ith preli#inary inDunction
in the Court of First Instance of Suri-ao del ;orte .Special Proceedin- %7)!0 na#inas respondents the
GSIS4 the Co##issioner of Pu'lic 6i-h(ays4 the 6i-h(ay 3istrict Cn-ineer of Suri-ao del ;orte4 the
Co##issioner of Civil Service4 and Rosario 3ia84 prayin- that they .5asilia 5erdin4 et al.0 'e declared the
le-al heirs and e/clusive 'eneficiaries of the retire#ent insurance of the late +ose Consue-ra4 and that (rit of
preli#inary inDunction 'e issued restrainin- i#ple#entation of the adDudication #ade 'y the GSIS. @n 7
9arch %,74 the court of First Instance of Suri-ao rendered Dud-#ent4 holdin- that (hen t(o (o#en
innocently and in -ood faith are le-ally united in holy #atri#ony to the sa#e #an4 they and their children4
'orn of said (edloc:4 (ill 'e re-arded as le-iti#ate children and each fa#ily 'e entitled to one half of the
estate. 2he court thus declared that 5asilia 5erdin Vda. de Consue-ra and +uliana4 Pacita4 9aria Hourdes4 +ose
+r.4 Rodri-o4 Henida and Huis4 all surna#ed Consue-ra4 'eneficiary and entitled to %L) of the retire#ent
'enefit in the a#ount of P4*!<.<70 due to the deceased +ose Consue-ra fro# the GSIS or the a#ount of
P*4%5).)*5 to 'e divided eAually a#on- the# in the proportional a#ount of %L% each. Hi:e(ise4 Rosario
3ia8 Vda. de Consue-ra is here'y declared 'eneficiary and entitled to the other half of the retire#ent 'enefit
of the late +ose Consue-ra or the a#ount of P*4%5).)*5. 5asilia 5erdin and her children appealed .on purely
Auestions of la(0.
)ssue [1$( =hether 5asilia 5erdin Vda. de Consue-ra. (ho (ere the 'eneficiaries na#ed in the life insurance
should auto#atically 'e considered the 'eneficiaries to receive the retire#ent insurance 'enefits4 to the
e/clusion of Rosario 3ia84 (hen the deceased +ose Consue-ra failed to desi-nate the 'eneficiaries in his
retire#ent insurance.
*eld [1$( ;@. If Consue-ra had )).5!)& years of service in the -overn#ent (hen he died on ) Septe#'er
%,54 it follo(s that he started in the -overn#ent service so#eti#e durin- the early part of %,<*4 or 'efore
%,<*. In %,<*4 Co##on(ealth 7ct %& (as not yet a#ended4 and the only 'enefits then provided for in said
7ct (ere those that proceed fro# a life insurance. Ipon enterin- the -overn#ent service Consue-ra 'eca#e a
co#pulsory #e#'er of the GSIS4 'ein- auto#atically insured on his life4 pursuant to the provisions of C7
%& (hich (as in force at the ti#e. 3urin- %,<* the operation of the GSIS (as suspended 'ecause of the (ar4
and the operation (as resu#ed so#eti#e in %,<. =hen Consue-ra desi-nated his 'eneficiaries in his life
insurance he could not have intended those 'eneficiaries of his life insurance s also the 'eneficiaries of his
retire#ent insurance 'ecause the provisions on retire#ent insurance under the GSIS ca#e a'out only (hen
C7 %& (as a#ended 'y R7 ! on % +une %,5%. 6ence4 it cannot 'e said that cause 5asilia 5erdin et al.
(ere desi-nated 'eneficiaries Consue-ra1s life insurance they auto#atically 'eca#e 'eneficiaries also of his
retire#ent insurance.
)ssue [!$( =hether the GSIS and the trial court are correct in rulin- that each of the (ives (ho contracted
#arria-e to the sa#e #an in -ood faith are each entitled to half of the retire#ent insurance 'enefits.
*eld [!$( JCS. In the case of the proceeds of a life insurance4 the sa#e are paid to (hoever is na#ed the
'eneficiary in the life insurance policy. 7s in the case of a life insurance provided for in the Insurance 7ct
.7ct )<)74 as a#ended04 the 'eneficiary in a life insurance under the GSIS #ay not necessarily 'e an heir of
the insured. 2he insured in a life insurance #ay desi-nate any person as 'eneficiary unless disAualified to 'e
so under the provisions of the Civil Code. 7nd in the a'sence of any 'eneficiary na#ed in the life insurance
policy4 the proceeds of the insurance (ill -o to the estate of the insured. Retire#ent insurance is pri#arily
intended for the 'enefit of the e#ployee N to provide for his old a-e4 or incapacity4 after renderin- service in
the -overn#ent for a reAuired nu#'er of years. If the e#ployee reaches the a-e of retire#ent4 he -ets the
retire#ent 'enefits even to the e/clusion of the 'eneficiary or 'eneficiaries na#ed in his application for
retire#ent insurance. 2he 'eneficiary of the retire#ent insurance can only clai# the proceeds of the
retire#ent insurance if the e#ployee dies 'efore retire#ent. If the e#ployee failed or overloo:ed to state the
'eneficiary of his retire#ent insurance4 the retire#ent 'enefits (ill accrue his estate and (ill 'e -iven to his
le-al heirs in accordance (ith la(4 as in the case of a life insurance if no 'eneficiary is na#ed in the insurance
policy. 2he GSIS4 therefore4 had correctly acted (hen it ruled that the proceeds of the retire#ent insurance of
the late +ose Consue-ra should divided eAually 'et(een his first livin- (ife Rosario on the one hand4 and his
second (ife 5asilia 5erdin his children 'y her4 on the otherF and the lo(er court did not co##it error (hen it
confir#ed the action of the GSIS4 it 'ein- accepted as a fact that the second #arria-e of +ose Consue-ra to
5asilia 5erdin (as contracted in -ood faith. 2he lo(er court has correctly applied the rulin- of this Court in
the case of Hao4 et al. vs. 3ee 2i#4 et al.4 <5 Phil. 7*,. In the recent case of Go#e8 vs. Hipana4 H$)*)%<4 +une
*!4 %,7!4 the Court4 in construin- the ri-hts of t(o (o#en (ho (ere #arried to the sa#e #an N a situation
#ore or less si#ilar to the case of 5asilia 5erdin and Rosario 3ia8 N held ?that since the defendant1s first
#arria-e has not 'een dissolved or declared void the conDu-al partnership esta'lished 'y that #arria-e has not
ceased. ;or has the first (ife lost or relinAuished her status as putative heir of her hus'and under the ne(
Civil Code4 entitled to share in his estate upon his death should she survive hi#. ConseAuently4 (hether as
conDu-al partner in a still su'sistin- #arria-e or as such putative heir she has an interest in the hus'and1s share
in the property here in dispute. ? 7nd (ith respect to the ri-ht of the second (ife4 this Court o'served that
althou-h the second #arria-e can 'e presu#ed to 'e void a' initio as it (as cele'rated (hile the first
#arria-e (as still su'sistin-4 still there is need for Dudicial declaration of such nullity. 7nd inas#uch as the
conDu-al partnership for#ed 'y the second #arria-e (as dissolved 'efore Dudicial declaration of its nullity4
?[t"he only Dust and eAuita'le solution in this case (ould 'e to reco-ni8e the ri-ht of the second (ife to her
share of one$half in the property acAuired 'y her and her hus'and4 and consider the other half as pertainin- to
the conDu-al partnership of the first #arria-e.?
!3 Go vs. Redfern [GR 877/6 !6 April 1981$
Second Division, 4orrilleno (J): 4 concur
)ecision in S%anish 80ough translation, accurac9 unveri+ied:
&a'ts( In @cto'er %,*74 Cd(ard G. Redfern o'tained an insurance policy a-ainst accidents fro# the
International 7ssurance Co4 Htd. @n *% 7u-ust %,*&4 Redfern died fro# an accident. 2he #other of the
deceased4 presentin- the necessary evidence of the death of Redfern4 sou-ht to clai# the proceeds of the
insurance policy fro# the assurance co#pany. 2he co#pany4 ho(ever4 denied such clai#4 on the -round that
the insurance policy (as a#ended on )) ;ove#'er %,*7 to include another 'eneficiary4 Concordia Go.
6ence4 an action (as filed to deter#ine (ho has the ri-ht to collect the insurance proceeds of the deceased
Redfern. 2he #other clai#ed that the addition of the co$'eneficiary is ille-al. Go4 on her part4 alle-ed the
contrary. 2he trial court ruled in favor of 7n-ela Redfern4 the #other. Go appealed.
)ssue( =hether the addition of GoQs na#e as co$'eneficiary can 'e allo(ed for her share in the insurance
proceeds.
*eld( =hen desi-nated in a policy4 the 'eneficiary acAuires a ri-ht of (hich he cannot 'e deprived of (ithout
his consent4 unless the ri-ht has 'een reserved specifically to the insured to #odify the policy. 2he sa#e
doctrine (as enunciated 'y the Court in the cases of Gercio vs. Sun Hife 7ssurance Co. of Canada .<& Phil.
550 and Insular Hife vs. Suva .*< @ff. Ga8. &%0. 2hus4 unless the insured has reserved specifically the ri-ht
to chan-e or to #odify the policy4 (ith respect to the 'eneficiary4 said policy constitutes an acAuired ri-ht of
the 'eneficiary4 (hich cannot 'e #odified e/cept (ith the consent of the latter. 6erein4 it is ad#itted that
Redfern did not reserve e/pressly his ri-ht to chan-e or #odify the policy. Chan-e i#plies the idea of an
alteration. 2he addition of Go1s na#e as one of the 'eneficiaries of the policy constitutes chan-e as all
addition is an alteration. 2he addition of Go1s na#e chan-ed the policy inas#uch as there are t(o
'eneficiaries instead of one4 and thus in effect the ori-inal 'eneficiary cannot recieve the full a#ount of the
policy. 2he Supre#e Court affir#ed the appealed Dud-#ent in all of its parts4 (ith costs a-ainst Go.
!9 Countr# Ban=ers )nsuran'e Corporation vs. ,ian?a Ba# and Co++unit# 7ulti>4urpose
Cooperative )n'. [GR 136918 !6 "anuar# !//!$
Second Division, De ;eon Jr) (J): 4 concur
&a'ts( Country 5an:ers Insurance Corporation .C5IC0 is a do#estic corporation principally en-a-ed in the
insurance 'usiness (herein it underta:es4 for a consideration4 to inde#nify another a-ainst loss4 da#a-e or
lia'ility fro# an un:no(n or contin-ent event includin- fire (hile Hian-a 5aya and Co##unity 9ulti$
purpose Cooperative Inc. .H5C9CI0 is a duly re-istered cooperative Dudicially declared insolvent and
represented 'y the elected assi-nee4 Cornelio +a#ero. It appears that so#eti#e in %,&,4 the C5IC and
H5C9CI entered into a contract of fire insurance. Inder Fire Insurance Policy F$%*,74 C5IC insured
H5C9CI1s stoc:s$in$trade a-ainst fire loss4 da#a-e or lia'ility durin- the period startin- fro# )! +une %,&,
at <E!! p.#. to )! +une %,,! at <E!! p.#.4 for the su# of P)!!4!!!.!!. @n % +uly %,&,4 at or a'out %)E<! a.#.4
H5C9CI1s 'uildin- located at 5aran-ay 3iata-on4 Hian-a4 Suri-ao del Sur (as -utted 'y fire and reduced to
ashes4 resultin- in the total loss of H5C9CI1s stoc:s$in$trade4 pieces of furniture and fi/tures4 eAuip#ents and
records. 3ue to the loss4 H5C9CI filed an insurance clai# (ith C5IC under its Fire Insurance Policy F$%*,74
su'#ittin-E .a0 the Spot Report of Pfc. 7rturo V. +uar'al4 I;P Investi-ator4 dated % +uly %,&,F .'0 the S(orn
State#ent of +ose Ho#ocsoF and .c0 the S(orn State#ent of Crnesto Ir'i8tondo. C5IC4 ho(ever4 denied the
insurance clai# on the -round that4 'ased on the su'#itted docu#ents4 the 'uildin- (as set on fire 'y ) ;P7
re'els (ho (anted to o'tain canned -oods4 rice and #edicines as provisions for their co#rades in the forest4
and that such loss (as an e/cepted ris: under para-raph of the policy conditions of Fire Insurance Policy F$
%*,74 (hich provides that ?2his insurance does not cover any loss or da#a-e occasioned 'y or throu-h or in
conseAuence4 directly or indirectly4 of any of the follo(in- occurrences4 na#elyE /// .d0 9utiny4 riot4 #ilitary
or popular uprisin-4 insurrection4 re'ellion4 revolution4 #ilitary or usurped po(er. 7ny loss or da#a-e
happenin- durin- the e/istence of a'nor#al conditions .(hether physical or other(ise0 (hich are occasioned
'y or throu-h or in conseAuence4 directly or indirectly4 of any of said occurrences shall 'e dee#ed to 'e loss
or da#a-e (hich is not covered 'y this insurance4 e/cept to the e/tent that the Insured shall prove that such
loss or da#a-e happened independently of the e/istence of such a'nor#al conditions.? Findin- the denial of
its clai# unaccepta'le4 H5C9CI then instituted in the trial court the co#plaint for recovery of ?loss4 da#a-e
or lia'ility? a-ainst C5IC. In due ti#e4 the trial court rendered its 3ecision dated ) 3ece#'er %,,% in favor
of H5C9CI4 orderin- C5IC to pay H5C9CI to fully pay the insurance clai# for the loss H5C9CI sustained
as a result of the fire under its Fire Insurance Policy F$%*,7 in its full face value of P)!!4!!!.!! (ith interest
of %)O per annu# fro# date of filin- of the co#plaint until the sa#e is fully paidF to pay as and in the
concept of actual or co#pensatory da#a-es in the total su# of P5!4!!!.!!F to pay as and in the concept of
e/e#plary da#a-es in the total su# of P5!4!!!.!!F to pay in the concept of liti-ation e/penses the su# of
P54!!!.!!F to pay 'y (ay of rei#'urse#ent the attorney1s fees in the su# of P%!4!!!.!!F and to pay the costs
of the suit. C5IC interposed an appeal to the Court of 7ppeals. @n ), 3ece#'er %,,&4 the appellate court
affir#ed the challen-ed decision of the trial court in its entirety. C5IC filed the petition for revie( on
certiorari.
)ssue( =hether the 'urden of proof of loss in this case is upon the insurer4 and not the insured.
*eld( JCS. C5IC does not dispute that H5C9CI1s stoc:s$in$trade (ere insured a-ainst fire loss4 da#a-e or
lia'ility under Fire Insurance Policy F$%*,7 and that H5C9CI lost its stoc:s$in$trade in a fire that occurred
on % +uly %,&,4 (ithin the duration of said fire insurance. C5IC4 ho(ever4 posits the vie( that the cause of the
loss (as an e/cepted ris: under the ter#s of the fire insurance policy. =here a ris: is e/cepted 'y the ter#s of
a policy (hich insures a-ainst other perils or ha8ards4 loss fro# such a ris: constitutes a defense (hich the
insurer #ay ur-e4 since it has not assu#ed that ris:4 and fro# this it follo(s that an insurer see:in- to defeat a
clai# 'ecause of an e/ception or li#itation in the policy has the 'urden of provin- that the loss co#es (ithin
the purvie( of the e/ception or li#itation set up. If a proof is #ade of a loss apparently (ithin a contract of
insurance4 the 'urden is upon the insurer to prove that the loss arose fro# a cause of loss (hich is e/cepted or
for (hich it is not lia'le4 or fro# a cause (hich li#its its lia'ility. Stated else(ise4 since C5IC in this case is
defendin- on the -round of non$covera-e and relyin- upon an e/e#ption or e/ception clause in the fire
insurance policy4 it has the 'urden of provin- the facts upon (hich such e/cepted ris: is 'ased4 'y a
preponderance of evidence. 5ut C5IC failed to do so. C5IC relies on the S(orn State#ents of +ose Ho#ocso
and Crnesto Ir'i8tondo as (ell as on the Spot Report of Pfc. 7rturo V. +uar'al dated % +uly %,&,. 2he S(orn
State#ents of +ose Ho#ocso and Crnesto Ir'i8tondo are inad#issi'le in evidence4 for 'ein- hearsay4
inas#uch as they did not ta:e the (itness stand and could not therefore 'e cross$e/a#ined. C5IC1s evidence
to prove its defense is sadly (antin- and thus4 -ives rise to its lia'ility to H5C9CI under Fire Insurance
Policy F$%*,7.
3/ Ro:ue vs. )nter+ediate Appellate Court [GR ,>66936 11 Nove+;er 1936$
First Division, ,utierre- (J): 5 concur, " on leave
&a'ts( @n %, Fe'ruary %,7)4 the 9anila 5ay Hi-htera-e Corporation .95HC0 a co##on carrier4 entered into
a contract (ith Isa'ela RoAue .doin- 'usiness under the na#e and style of Isa'ela RoAue 2i#'er Cnterprises0
and @n- Chion- (here'y the for#er (ould load and carry on 'oard its 'ar-e 9a'le %! a'out <)).%& cu'ic
#eters of lo-s fro# 9ala#paya Sound4 Pala(an to ;orth 6ar'or4 9anila. RoAue and @n- insured the lo-s
a-ainst loss for P%!!4!!!.!! (ith the Pioneer Insurance and Surety Corporation .Pioneer0. @n ), Fe'ruary
%,7)4 RoAue and @n- loaded on the 'ar-e4 &%% pieces of lo-s at 9ala#paya Sound4 Pala(an for carria-e and
delivery to ;orth 6ar'or4 Port of 9anila4 'ut the ship#ent never reached its destination 'ecause 9a'le %!
san: (ith the &%% pieces of lo-s so#e(here off Ca'uli Point in Pala(an on its (ay to 9anila. 2he 'ar-e
(here the lo-s (ere loaded (as apparently not sea(orthy such that it developed a lea:. @ne of the hatches
(as left open causin- (ater to enter the 'ar-e and 'ecause the 'ar-e (as not provided (ith the necessary
cover or tarpaulin4 the ordinary splash of sea (aves 'rou-ht #ore (ater inside the 'ar-e. @n & 9arch %,7)4
RoAue and @n- (rote a letter to 95HC de#andin- pay#ent of P%5!4!!!.!! for the loss of the ship#ent plus
P%!!4!!!.!! as unreali8ed profits 'ut the latter i-nored the de#and. 7nother letter (as sent to Pioneer
clai#in- the full a#ount of P%!!4!!!.!! under the insurance policy 'ut Pioneer refused to pay on the -round
that its lia'ility depended upon the ?2otal loss 'y 2otal Hoss of Vessel only?. 6ence4 RoAue and @n-
co##enced Civil Case &5,, a-ainst 95HC and Pioneer Pioneer. 3urin- the initial sta-es of the hearin-4
95HC infor#ed the trial court that it had salva-ed part of the lo-s. 2he court ordered the# to 'e sold to the
hi-hest 'idder (ith the funds to 'e deposited in a 'an: in the na#e of Civil Case &5,,. 7fter hearin-4 the
trial court found in favor of RoAue and @n-4 conde#nin- 95HC and Pioneer to pay RoAue and @n-4 Dointly
and severally4 the su# of P%!!4!!!.!!F sentencin- 95HC to pay RoAue and @n-4 in addition4 the su# of
P5!4!!!.!!4 plus P%)45!!.!!4 that the latter advanced to the for#er as do(n pay#ent for transportin- the lo-s
in AuestionF orderin- the counterclai# of Pioneer a-ainst RoAue and @n-4 dis#issed4 for lac: of #erit4 'ut as
to its cross$clai# a-ainst its 95HC4 the latter is ordered to rei#'urse the for#er for (hatever a#ount it #ay
pay RoAue and @n- as such suretyF orderin- the counterclai# of 95HC a-ainst RoAue and @n-4 dis#issed
for lac: of #eritF dis#issin- RoAue1s and @n-1s clai# of not less than P%!!4!!!.!! and P754!!!.!! as
e/e#plary da#a-es4 for lac: of #eritF -rantin- RoAue1s and @n-1s clai# for attorney1s fees in the su# of
P%!4!!!.!!F orderin- 95HC and Pioneer to pay the costsF and holdin- that the su# of P%5!4!!!.!! a(ard to
RoAue and @n-4 shall 'ear interest of O fro# )5 9arch %,754 until a#ount is fully paid. Pioneer appealed to
the Inter#ediate 7ppellate Court. 95HC did not appeal4 as alle-edly4 the transportation co#pany is no lon-er
doin- 'usiness and is (ithout funds. @n *! +anuary %,&<4 the appellate court #odified the trial court1s
decision and a'solved Pioneer fro# lia'ility after findin- that there (as a 'reach of i#plied (arranty of
sea(orthiness on the part of RoAue and @n- and that the loss of the insured car-o (as caused 'y the ?perils of
the ship? and not 'y the ?perils of the sea?. It ruled that the loss is not covered 'y the #arine insurance policy.
7fter the appellate court denied their #otion for reconsideration4 RoAue and @n- filed the petition for
certiorari.
)ssue [1$( =hether there is a (arranty of sea(orthiness 'y the car-o o(ner in cases of #arine car-o
insurance.
*eld [1$( JCS. 2here is no dispute over the lia'ility of the co##on carrier 95HC. In fact4 it did not 'other to
appeal the Auestioned decision. 6o(ever4 RoAue and @n- state that 95HC has ceased operatin- as a fir# and
nothin- #ay 'e recovered fro# it. 2hey are4 therefore4 tryin- to recover their losses fro# the insurer. 2he
lia'ility of the insurance co#pany is -overned 'y la(. Section %%* of the Insurance Code provides that ?In
every #arine insurance upon a ship or frei-ht4 or frei-hta-e4 or upon any thin- (hich is the su'Dect of #arine
insurance4 a (arranty is i#plied that the ship is sea(orthy.? Section ,, of the sa#e Code also provides in part
that ?9arine insurance includesE .%0 Insurance a-ainst loss of or da#a-e toE .a0 Vessels4 craft4 aircraft4
vehicles4 -oods4 frei-hts4 car-oes4 #erchandise...? Fro# the a'ove$Auoted provisions4 there can 'e no
#ista:in- the fact that the ter# ?car-o? can 'e the su'Dect of #arine insurance and that once it is so #ade4 the
i#plied (arranty of sea(orthiness i##ediately attaches to (hoever is insurin- the car-o (hether he 'e the
shipo(ner or not. 7s ruled in the case of Go 2iaoco y 6er#anos v. Inion Insurance Society of Canton .<!
Phil. <!04 ?it is universally accepted that in every contract of insurance upon anythin- (hich is the su'Dect of
#arine insurance4 a (arranty is i#plied that the ship shall 'e sea(orthy at the ti#e of the inception of the
voya-e. 2his rule is accepted in our o(n Insurance Ha( .7ct ;o. )<)74 sec. %!0.? 9oreover4 the fact that the
unsea(orthiness of the ship (as un:no(n to the insured is i##aterial in ordinary #arine insurance and #ay
not 'e used 'y hi# as a defense in order to recover on the #arine insurance policy. 7s (as held in Richelieu
and @ntario ;av. Co. v. 5oston 9arine4 Inc.4 Co. .%* I.S. <!04 ?the e/ception of losses occasioned 'y
unsea(orthiness (as in effect a (arranty that a loss should not 'e so occasioned4 and (hether the fact of
unsea(orthiness (ere :no(n or un:no(n (ould 'e i##aterial.? Since the la( provides for an i#plied
(arranty of sea(orthiness in every contract of ordinary #arine insurance4 it 'eco#es the o'li-ation of a car-o
o(ner to loo: for a relia'le co##on carrier (hich :eeps its vessels in sea(orthy condition. 2he shipper of
car-o #ay have no control over the vessel 'ut he has full control in the choice of the co##on carrier that (ill
transport his -oods. @r the car-o o(ner #ay enter into a contract of insurance (hich specifically provides
that the insurer ans(ers not only for the perils of the sea 'ut also provides for covera-e of perils of the ship.
2he Court (as constrained to apply Section %%* of the Insurance Code to the facts of this case. ?In #arine
cases4 the ris:s insured a-ainst are 1perils of the sea1 .Chute v. ;orth River Ins. Co.4 9inn. )%< ;= <7)4 55
7HR ,**0. 2he purpose of such insurance is protection a-ainst contin-encies and a-ainst possi'le da#a-es
and such a policy does not cover a loss or inDury (hich #ust inevita'ly ta:e place in the ordinary course of
thin-s. 2here is no dou't that the ter# 1perils of the sea1 e/tends only to losses caused 'y sea da#a-e4 or 'y
the violence of the ele#ents4 and does not e#'race all losses happenin- at sea. 2hey insure a-ainst losses
fro# e/traordinary occurrences only4 such as stress of (eather4 (inds and (aves4 li-htnin-4 te#pests4 roc:s
and the li:e. 2hese are understood to 'e the 1perils of the sea1 referred in the policy4 and not those ordinary
perils (hich every vessel #ust encounter. 1Perils of the sea1 has 'een said to include only such losses as are of
e/traordinary nature4 or arise fro# so#e over(hel#in- po(er4 (hich cannot 'e -uarded a-ainst 'y the
ordinary e/ertion of hu#an s:ill and prudence. 3a#a-e done to a vessel 'y perils of the sea includes every
species of da#a-es done to a vessel at sea4 as distin-uished fro# the ordinary (ear and tear of the voya-e4
and distinct fro# inDuries suffered 'y the vessel in conseAuence of her not 'ein- sea(orthy at the outset of her
voya-e .as in this case0. It is also the -eneral rule that everythin- (hich happens thru the inherent vice of the
thin-4 or 'y the act of the o(ners4 #aster or shipper4 shall not 'e reputed a peril4 if not other(ise 'orne in the
policy. .%< RCH on 1Insurance14 Sec. *&<4 pp. %)!*$%)!<F Cia. de ;ave-acion v. Fire#en1s Fund Ins. Co.4 )77
IS 4 7) H. ed. 7&74 <& S. Ct. <5,0.?
)ssue [!$( =hether the loss of the car-o (as due to the perils of the ship rather than the perils of the sea.
*eld [!$( PCRIHS @F 26C S6IP. 7t the ti#e 9a'le %! san:4 there (as no typhoon 'ut ordinary stron- (ind
and (aves4 a condition (hich is natural and nor#al in the open sea. 2he evidence sho(s that the sin:in- of
9a'le %! (as due to i#proper loadin- of the lo-s on one side so that the 'ar-e (as tiltin- on one side and for
that it did not navi-ate on even :eelF that it (as no lon-er sea(orthy that (as (hy it developed lea:F that the
personnel of the tu-'oat and the 'ar-e co##itted a #ista:e (hen it turned loose the 'ar-e fro# the tu-'oat
east of Ca'uli point (here it (as 'uffeted 'y stor# and (aves4 (hile the tu-'oat proceeded to (est of Ca'uli
point (here it (as protected 'y the #ountain side fro# the stor# and (aves co#in- fro# the east direction.
In fact4 in RoAue1s and @n-1s co#plaint4 it is alle-ed that the 'ar-e 9a'le %! of 95HC developed a lea:
(hich allo(ed (ater to co#e in and that one of the hatches of said 'ar-e (as ne-li-ently left open 'y the
person in char-e thereof causin- #ore (ater to co#e in?4 and that ?he loss of their car-o (as due to the fault4
ne-li-ence4 andLor lac: of s:ill of 95HC andLor 95HC1s representatives on 'ar-e 9a'le %!. It is Auite
un#ista:a'le that the loss of the car-o (as due to the perils of the ship rather than the perils of the sea. 2he
facts clearly ne-ate RoAue1s and @n-1s clai# under the insurance policy. In the case of Go 2iaoco y 6er#anos
v. Inion Ins. Society of Canton4 the Court had occasion to ela'orate on the ter# ?perils of the ship? (hen it
ruled that ?It #ust 'e considered to 'e settled4 further#ore4 that a loss (hich4 in the ordinary course of events4
results fro# the natural and inevita'le action of the sea4 fro# the ordinary (ear and tear of the ship4 or fro#
the ne-li-ent failure of the ship1s o(ner to provide the vessel (ith proper eAuip#ent to convey the car-o
under ordinary conditions4 is not a peril of the sea. Such a loss is rather due to (hat has 'een aptly called the
1peril of the ship.1 2he insurer underta:es to insure a-ainst perils of the sea and si#ilar perils4 not a-ainst
perils of the ship. 7s (as (ell said 'y Hord 6erschell in =ilson4 Sons & Co. v. @(ners of Car-o per the
Kantho .[%&&7"4 %) 7. C.4 5!*4 5!,04 there #ust4 in order to #a:e the insurer lia'le4 'e 1so#e casualty4
so#ethin- (hich could not 'e foreseen as one of the necessary incidents of the adventure. 2he purpose of the
policy is to secure an inde#nity a-ainst accidents (hich #ay happen4 not a-ainst events (hich #ust happen.T
31 ,a Ra0on 1o'ial EGo Aiao'o # *er+anosE vs. Cnion )nsuran'e 1o'iet# of Canton ,td. [GR 13933
1 1epte+;er 1919$
First Division, Street (J): . concur, " dissents
&a'ts( 7 car-o of rice 'elon-in- to the Go 2iaoco 5rothers4 (as transported in the early days of 9ay4 %,%54
on the stea#ship 6onda-ua fro# the port of Sai-on to Ce'u. @n dischar-in- the rice fro# one of the
co#part#ents in the after hold4 upon arrival at Ce'u4 it (as discovered that %4<7* sac:s had 'een da#a-ed 'y
sea (ater. 2he loss so resultin- to the o(ners of rice4 after proper deduction had 'een #ade for the portion
saved4 (as P*4&75. 2he policy of insurance4 coverin- the ship#ent4 (as si-ned upon a for# lon- in use
a#on- co#panies en-a-ed in #ariti#e insurance. It purports to insure the car-o fro# the follo(in- a#on-
other ris:sE ?Perils . . . of the seas4 #en4 of (ar4 fire4 ene#ies4 pirates4 rovers4 thieves4 .Dettisons4 . . . 'arratry of
the #aster and #ariners4 and of all other perils4 losses4 and #isfortunes that have or shall co#e to the hurt4
detri#ent4 or da#a-e of the said -oods and #erchandise or any part thereof.? It (as found out that the drain
pipe (hich served as a dischar-e fro# the (ater closet passed do(n throu-h the co#part#ent (here the rice
in Auestion (as sto(ed and thence out to sea throu-h the (all of the co#part#ent4 (hich (as a part of the
(all of the ship. 2he Doint or el'o( (here the pipe chan-ed its direction (as of cast ironF and in course of
ti#e it had 'eco#e corroded and a'raded until a lon-itudinal openin- had appeared in the pipe a'out one inch
in len-th. 2his hole had 'een in e/istence 'efore the voya-e (as 'e-un4 and an atte#pt had 'een #ade to
repair it 'y fillin- (ith ce#ent and 'oltin- over it a strip of iron. 2he effect of loadin- the 'oat (as to
su'#er-e the vent4 or orifice4 of the pipe until it (as a'out %& inches or ) feet 'elo( the level of the sea. 7s a
conseAuence the sea (ater rose in the pipe. ;avi-ation under these conditions resulted in the (ashin- out of
the ce#ent$fillin- fro# the action of the sea (ater4 thus per#ittin- the continued flo( of the salt (ater into
the co#part#ent of rice. 7n action on a policy of #arine insurance issued 'y the Inion Insurance Society of
Canton4 Htd.4 upon the car-o of rice 'elon-in- to the Go 2iaoco 5rothers (as filed. 2he trial court found that
the inflo( of the sea (ater durin- the voya-e (as due to a defect in one of the drain pipes of the ship and
concluded that the loss (as not covered 'y the policy of insurance. +ud-#ent (as accordin-ly entered in
favor of Inion Insurance and Go 2iaoco 5rothers appealed.
)ssue [1$( =hether perils of the sea includes Uentrance of (ater into the shipQs hold throu-h a defective pipe.T
*eld [1$( ;@. It is deter#ined that the (ords ?all other perils4 losses4 and #isfortunes? are to 'e interpreted
as coverin- ris:s (hich are of li:e :ind .eDusde# -eneris0 (ith the particular ris:s (hich are enu#erated in
the precedin- part of the sa#e clause of the contract. 7ccordin- to the ordinary rules of construction these
(ords #ust 'e interpreted (ith reference to the (ords (hich i##ediately precede the#. 2hey (ere no dou't
inserted in order to prevent disputes founded on nice distinctions. 2heir office is to cover in ter#s (hatever
#ay 'e (ithin the spirit of the cases previously enu#erated4 and so they have a -reater or less effect as a
narro(er or 'roader vie( is ta:en of those cases. For e/a#ple4 if the e/pression ?perils of the seas? is -iven
its (idest sense the -eneral (ords have little or no effect as applied to that case. If on the other hand that
e/pression is to receive a li#ited construction and loss 'y perils of the seas is to 'e confined to loss e/ #arine
te#pestatis discri#ine4 the -eneral (ords 'eco#e #ost i#portant. 5ut still4 (hen they first 'eca#e the
su'Dect of Dudicial construction4 they have al(ays 'een held or assu#ed to 'e restricted to cases ?a:in to? or
?rese#'lin-? or ?of the sa#e :ind as? those specially #entioned. I see no reason for departin- fro# this
settled rule. In #arine insurance it is a'ove all thin-s necessary to a'ide 'y settled rules and to avoid anythin-
li:e novel refine#ents or a ne( departure. It #ust 'e considered to 'e settled4 further#ore4 that a loss (hich4
in the ordinary course of events4 results fro# the natural and inevita'le action of the sea4 fro# the ordinary
(ear and tear of the ship4 or fro# the ne-li-ent failure of the ship1s o(ner to provide the vessel (ith proper
eAuip#ent to convey the car-o under ordinary conditions4 is not a peril of the sea. Such a loss is rather due to
(hat has 'een aptly called the ?peril of the ship.? 2he insurer underta:es to insure a-ainst perils of the sea and
si#ilar perils4 not a-ainst perils of the ship. 2here #ust4 in order to #a:e the insurer lia'le4 'e ?so#e casualty4
so#ethin- (hich could not 'e foreseen as one of the necessary incidents of the adventure. 2he purpose of the
policy is to secure an inde#nity a-ainst accidents (hich #ay happen4 not a-ainst events (hich #ust happen.?
6erein4 the entrance of the sea (ater into the ship1s hold throu-h the defective pipe already descri'ed (as not
due to any accident (hich happened durin- the voya-e4 'ut to the failure of the ship1s o(ner properly to repair
a defect of the e/istence of (hich he (as apprised. 2he loss (as therefore #ore analo-ous to that (hich
directly results fro# si#ple unsea(orthiness than to that (hich results fro# perils of the sea.
)ssue [!$( =hether there is an i#plied (arranty on the sea(orthy of the vessel in every #arine insurance
contract.
*eld [!$( JCS. It is universally accepted that in every contract of insurance upon anythin- (hich is the
su'Dect of #arine insurance4 a (arranty is i#plied that the ship shall 'e sea(orthy at the ti#e of the inception
of the voya-e. 2his rule is accepted in our o(n Insurance Ha( .7ct ;o. )<)74 sec. %!0. It is also (ell settled
that a ship (hich is sea(orthy for the purpose of insurance upon the ship #ay yet 'e unsea(orthy for the
purpose of insurance upon the car-o .7ct ;o. )<)74 sec. %!0.
3! Cat5a# )nsuran'e Co. vs. Court of Appeals [GR 76186 3/ "une 1937$
Second Division, Paras (J): concur, ! too# no $art
&a'ts( 7 co#plaint (as filed 'y Re#in-ton Industrial Sales Corporation a-ainst Cathay Insurance Co.
see:in- collection of the su# of P&&4**,.%5 representin- Re#in-ton1s losses and da#a-es incurred in a
ship#ent of sea#less steel pipes under an insurance contract in favor of Re#in-ton as the insured4 consi-nee
or i#porter of aforesaid #erchandise (hile in transit fro# +apan to the Philippines on 'oard vessel SS
?Castern 9ariner.? 2he total value of the ship#ent (as P)4&,<4<*.&* at the prevailin- rate of P7.,5 to a
dollar in +une and +uly %,&<4 (hen the ship#ent (as #ade. 2he trial court decided in favor of Re#in-ton 'y
orderin- Cathay Insurance to pay it the su# of P&4**,.%5 as its recovera'le insured loss eAuivalent to *!O
of the value of the sea#less steel pipesF orderin- Cathay Insurance to pay Re#in-ton interest on the
aforecited a#ount at the rate of *<O or dou'le the ceilin- prescri'ed 'y the 9onetary 5oard per annu# fro#
* Fe'ruary %,&) or ,! days fro# Re#in-ton1s su'#ission of proof of loss to Cathay Insurance until paid as
provided in the settle#ent of clai# provision of the policyF and orderin- Cathay Insurance to pay Re#in-ton
certain a#ounts for #arine surveyor1s fee4 attorney1s fees and costs of the suit. @n appeal4 the Court of
7ppeals affir#ed the decision of the Re-ional 2rial Court ;ational Capital Re-ion .;CR0 9anila4 5ranch *&.
Cathay Insurance #oved for reconsideration4 'ut (as denied. It thus filed the petition for revie(.
Re#in-ton4 in its co##ent on the petition4 contends that .%0 Covera-e of Re#in-ton1s loss under the
insurance policy issued 'y Cathay Insurance is un#ista:a'leF .)0 7lle-ed contractual li#itations contained in
insurance policies are re-arded (ith e/tre#e caution 'y courts and are to 'e strictly construed a-ainst the
insurerF o'scure phrases and e/ceptions should not 'e allo(ed to defeat the very purpose for (hich the policy
(as procuredF .*0 Rust is not an inherent vice of the sea#less steel pipes (ithout interference of e/ternal
factorsF .<0 ;o #atter ho( Cathay Insurance #i-ht (ant it other(ise4 the %5$day clause of the policy had
'een foreclosed in the pre$trial order and it (as not even raised in Cathay Insurance1s ans(er to Re#in-ton1s
co#plaintF .50 2he decision (as correct in not holdin- that the heavy rustin- of the sea#less steel pipes did
not occur durin- the voya-e of 7 days fro# +uly % to +uly 74 %,&%F .0 2he alle-ed lac: of supposed 'ad order
survey fro# the arrastre capitali8ed on 'y Cathay Insurance (as #ore than clarified 'y no less than )
(itnessesF .70 2he placin- of notation ?rusty? in the (ay 'ills is not only Re#in-ton1s ri-ht 'ut a natural and
spontaneous reaction of (hoever received the sea#less steel pipes in a rusty condition at Re#in-ton1s
'ode-aF .&0 2he Court of 7ppeals did not en-a-e in any -uess(or: or speculation in concludin- a loss
allo(ance of *!O in the a#ount of P&&4**,.%5F and .,0 2he rate of *<O per annu# dou'le the ceilin-
prescri'ed 'y the 9onetary 5oard is the rate of interest fi/ed 'y the Insurance Policy itself and the Insurance
Code. Cathay Insurance ho(ever #aintains that .%0 Re#in-ton does not dispute the fact that4 contrary to the
findin- of the respondent Court .that Cathay Insurance has failed ?to present any evidence of any via'le
e/ception to the application of the policy?0 there is in fact an e/press e/ception to the application of the
policyF .)0 7s adverted to in the Petition for Revie(4 Re#in-ton has ad#itted that the Auestioned ship#ent is
not covered 'y a ?sAuare provision of the contract4? 'ut Re#in-ton clai#s i#plied covera-e fro# the phrase
?perils of the sea? #entioned in the openin- sentence of the policyF .*0 2he insistence of Re#in-ton that
rustin- is a peril of the sea is erroneousF .<0 Re#in-ton inaccurately invo:es the rule of strict construction
a-ainst insurer under the -uise of construction in order to i#part a non$e/istin- a#'i-uity or dou't into the
policy so as to resolve it a-ainst the insurerF .50 Re#in-ton (hile i#pliedly ad#ittin- that a loss occasioned
'y an inherent defect or vice in the insured article is not (ithin the ter#s of the policy4 erroneously insists that
rustin- is not an inherent vice or in the nature of steel pipesF .0 Rustin- is not a ris: insured a-ainst4 since a
ris: to 'e insured a-ainst should 'e a casualty or so#e casualty4 so#ethin- (hich could not 'e foreseen as
one of the necessary incidents of adventureF .70 7 fact capa'le of unAuestiona'le de#onstration or of pu'lic
:no(led-e needs no evidence. 2his fact of unAuestiona'le de#onstration or of pu'lic :no(led-e is that
heavy rustin- of steel or iron pipes cannot occur (ithin a period of a 7 day voya-e. 5esides4 Cathay Insurance
had introduced the clear car-o receipts or tally sheets indicatin- that there (as no da#a-e on the steel pipes
durin- the voya-eF and .&0 2he evidence of Re#in-ton 'etrays the fact that the account of P&&4**,.%5
a(arded 'y the respondent Court is founded on speculation4 sur#ises or conDectures and the a#ount of less
has not 'een proven 'y co#petent4 satisfactory and clear evidence.
)ssue( =hether the rustin- of steel pipes in the course of a voya-e is a ?peril of the sea4? and (hether rustin-
is a ris: insured a-ainst.
*eld( JCS. 2here is no Auestion that the rustin- of steel pipes in the course of a voya-e is a ?peril of the sea?
in vie( of the toll on the car-o of (ind4 (ater4 and salt conditions. 7t any rate if the insurer cannot 'e held
accounta'le therefor4 the Court (ould fail to o'serve a cardinal rule in the interpretation of contracts4 na#ely4
that any a#'i-uity therein should 'e construed a-ainst the #a:erLissuerLdrafter thereof4 na#ely4 the insurer.
5esides the precise purpose of insurin- car-o durin- a voya-e (ould 'e rendered fruitless.
33 &ilipino 7er'5ants )nsuran'e Co. )n'. vs. Court of Appeals [GR 36181 !3 Nove+;er 1939$
Second Division, 0egalado (J): concur, " on leave
&a'ts( In 3ece#'er %,74 Choa 2ie: Sen- insured said ship#ent (ith Filipino 9erchants Insurance
Co#pany .F9ICI0 under car-o Policy 9$)7& for the su# of P)745*.5, for the -oods descri'ed as !!
#etric tons of fish#eal in ne( -unny 'a-s of ,! :ilos each fro# 5an-:o:4 2hailand to 9anila a-ainst all
ris:s under (arehouse to (arehouse ter#s. 7ctually4 (hat (as i#ported (as 5,.,<! #etric tons not !! tons
at R*,5.<) a ton C;F 9anila. 2he fish#eal in ne( -unny 'a-s (ere unloaded fro# the ship on %%
3ece#'er %,7 at 9anila unto the arrastre contractor C. Ra8on4 Inc. and F9ICI1s surveyor ascertained and
certified that in such dischar-e %!5 'a-s (ere in 'ad order condition as Dointly surveyed 'y the ship1s a-ent
and the arrastre contractor. 2he condition of the 'ad order (as reflected in the turn over survey report of 5ad
@rder car-oes %)!*)! to %)!*))4 consistin- of * pa-es. 2he car-o (as also surveyed 'y the arrastre
contractor 'efore delivery of the car-o to the consi-nee and the condition of the car-o on such delivery (as
reflected in C. Ra8on1s 5ad @rder Certificates %<&5,4 %<&* and %<&, coverin- a total of ))7 'a-s in 'ad
order condition. F9ICI1s surveyor has conducted a final and detailed survey of the car-o in the (arehouse for
(hich he prepared a survey report (ith the findin-s on the e/tent of shorta-e or loss on the 'ad order 'a-s
totallin- ))7 'a-s a#ountin- to %)4%<& :ilos. 5ased on said co#putation4 Choa #ade a for#al clai# a-ainst
F9ICI for P5%45&.) the co#putation of (hich clai# is contained therein. 7 for#al clai# state#ent (as
also presented 'y the Choa a-ainst the vessel dated )% 3ece#'er %,74 'ut F9ICI refused to pay the clai#.
ConseAuently4 an action (as 'rou-ht 'y the consi-nee .Choa 2ie: Sen-0 of the ship#ent of fish#eal loaded
on 'oard the vessel SS 5ou-ainville and unloaded at the Port of 9anila on or a'out %% 3ece#'er %,7 and
see:s to recover fro# F9ICI the a#ount of P5%45&.) representin- da#a-es to said ship#ent (hich has
'een insured 'y F9ICI under Policy 9$)7&. F9ICI 'rou-ht a third party co#plaint a-ainst third party
defendants Co#pa-nie 9ariti#e 3es Char-eurs Reunis andLor C. Ra8on4 Inc. see:in- Dud-#ent a-ainst the
third party defendants in case Dud-#ent is rendered a-ainst F9ICI. 2he court 'elo(4 after trial on the #erits4
rendered Dud-#ent in favor of Choa4 orderin- F9ICI to pay Choa the su# of P5%45&.) (ith interest at le-al
rate fro# the date of the filin- of the co#plaintF and4 on the third party co#plaint4 the third party defendant
Co#pa-nie 9ariti#e 3es Char-eurs Reunis and third party defendant C. Ra8on4 Inc. are ordered to pay
F9ICI Dointly and severally rei#'urse#ent of the a#ounts paid 'y F9ICI (ith le-al interest fro# the date of
such pay#ent until the date of such rei#'urse#entF (ithout pronounce#ent as to costs. @n appeal4 and on %&
+uly %,&&4 the Court of 7ppeals affir#ed the decision of the lo(er court insofar as the a(ard on the co#plaint
is concerned and #odified the sa#e (ith re-ard to the adDudication of the third$party co#plaint. 7 #otion for
reconsideration of the aforesaid decision (as denied4 hence F9ICI filed the petition for revie(.
)ssue [1$( =hether an ?all ris:s? #arine policy has a technical #eanin- in insurance in that 'efore a clai# can
'e co#pensa'le it is essential that there #ust 'e ?so#e fortuity4? ?casualty? or ?accidental cause? to (hich the
alle-ed loss is attri'uta'le.
*eld [1$( ;@. 2he ?all ris:s clause? of the Institute Car-o Clauses read as follo(s ?5. 2his insurance is
a-ainst all ris:s of lo-s or da#a-e to the su'Dect$#atter insured 'ut shall in no case 'e dee#ed to e/tend to
cover loss4 da#a-e4 or e/pense pro/i#ately caused 'y delay or inherent vice or nature of the su'Dect$#atter
insured. Clai#s recovera'le hereunder shall 'e paya'le irrespective of percenta-e.? 7n ?all ris:s policy?
should 'e read literally as #eanin- all ris:s (hatsoever and coverin- all losses 'y an accidental cause of any
:ind. 2he ter#s ?accident? and ?accidental?4 as used in insurance contracts4 have not acAuired any technical
#eanin-. 2hey are construed 'y the courts in their ordinary and co##on acceptance. 2hus4 the ter#s have
'een ta:en to #ean that (hich happens 'y chance or fortuitously4 (ithout intention and desi-n4 and (hich is
une/pected4 unusual and unforeseen. 7n accident is an event that ta:es place (ithout one1s foresi-ht or
e/pectationF an event that proceeds fro# an un:no(n cause4 or is an unusual effect of a :no(n cause and4
therefore4 not e/pected. 2he very nature of the ter# ?all ris:s? #ust 'e -iven a 'road and co#prehensive
#eanin- as coverin- any loss other than a (ilful and fraudulent act of the insured. 2his is pursuant to the very
purpose of an ?all ris:s? insurance to -ive protection to the insured in those cases (here difficulties of lo-ical
e/planation or so#e #ystery surround the loss or da#a-e to property. 7n ?all ris:s? policy has 'een evolved
to -rant -reater protection than that afforded 'y the ?perils clause4? in order to assure that no loss can happen
throu-h the incidence of a cause neither insured a-ainst nor creatin- lia'ility in the shipF it is (ritten a-ainst
all losses4 that is4 attri'uta'le to e/ternal causes. 2he ter# ?all ris:s? cannot 'e -iven a strained technical
#eanin-4 the lan-ua-e of the clause under the Institute Car-o Clauses 'ein- uneAuivocal and clear4 to the
effect that it e/tends to all da#a-esLlosses suffered 'y the insured car-o e/cept .a0 loss or da#a-e or e/pense
pro/i#ately caused 'y delay4 and .'0 loss or da#a-e or e/pense pro/i#ately caused 'y the inherent vice or
nature of the su'Dect #atter insured.
)ssue [!$( =hether the failure of Choa to adduce evidence4 sho(in- that the alle-ed loss to the car-o in
Auestion (as due to a fortuitous event4 precludes his ri-ht to recover fro# the insurance policy.
*eld [!$( ;@. 7lthou-h -enerally4 the 'urden of proof is upon the insured to sho( that a loss arose fro# a
covered peril4 under an ?all ris:s? policy the 'urden is not on the insured to prove the precise cause of loss or
da#a-e for (hich it see:s co#pensation. 2he insured under an ?all ris:s insurance policy? has the initial
'urden of provin- that the car-o (as in -ood condition (hen the policy attached and that the car-o (as
da#a-ed (hen unloaded fro# the vesselF thereafter4 the 'urden then shifts to the insurer to sho( the
e/ception to the covera-e. 7s held in Paris$9anila Perfu#ery Co. vs. Phoeni/ 7ssurance Co.4 Htd. the 'asic
rule is that the insurance co#pany has the 'urden of provin- that the loss is caused 'y the ris:s e/cepted and
for (ant of such proof4 the co#pany is lia'le. Covera-e under an ?all ris:s? provision of a #arine insurance
policy creates a special type of insurance (hich e/tends covera-e to ris:s not usually conte#plated and
avoids puttin- upon the insured the 'urden of esta'lishin- that the loss (as due to the peril fallin- (ithin the
policy1s covera-eF the insurer can avoid covera-e upon de#onstratin- that a specific provision e/pressly
e/cludes the loss fro# covera-e. 7 #arine insurance policy providin- that the insurance (as to 'e ?a-ainst all
ris:s? #ust 'e construed as creatin- a special insurance and e/tendin- to other ris:s than are usually
conte#plated4 and covers all losses e/cept such as arise fro# the fraud of the insured. 2he 'urden of the
insured4 therefore4 is to prove #erely that the -oods he transported have 'een lost4 destroyed or deteriorated.
2hereafter4 the 'urden is shifted to the insurer to prove that the loss (as due to e/cepted perils. 2o i#pose on
the insured the 'urden of provin- the precise cause of the loss or da#a-e (ould 'e inconsistent (ith the
'road protective purpose of ?all ris:s? insurance.
)ssue [3$( =hether the insurer is lia'le
)ssue [8$( 2here 'ein- no sho(in- that the loss (as caused 'y any of the e/cepted perils4 the insurer is lia'le
under the policy. It is 'elieved that in the a'sence of any sho(in- that the lossesLda#a-es (ere caused 'y an
e/cepted peril4 i.e. delay or the inherent vice or nature of the su'Dect #atter insured4 and there is no such
sho(in-4 the loss (as covered 'y the policy. 6erein4 there is no evidence presented to sho( that the condition
of the -unny 'a-s in (hich the fish#eal (as pac:ed (as such that they could not hold their contents in the
course of the necessary transit4 #uch less any evidence that the 'a-s of car-o had 'urst as the result of the
(ea:ness of the 'a-s the#selves. 6ad there 'een such a sho(in- that spilla-e (ould have 'een a certainty4
there #ay have 'een -ood reason to plead that there (as no ris: covered 'y the policy .See 5er: vs. Style
[%,5" cited in 9arine Insurance Clai#s4 p. %)50. Inder an Uall ris:sT policy4 it (as sufficient to sho( that
there (as da#a-e occasioned 'y so#e accidental cause of any :ind4 and there is no necessity to point to any
particular cause. Contracts of insurance are contracts of inde#nity upon the ter#s and conditions specified in
the policy. 2he a-ree#ent has the force of la( 'et(een the parties. 2he ter#s of the policy constitute the
#easure of the insurer1s lia'ility. If such ter#s are clear and una#'i-uous4 they #ust 'e ta:en and understood
in their plain4 ordinary and popular sense.
)ssue [8$( =hether the consi-nee .Choa0 has an insura'le interest in said -oods.
*eld [8$( Choa4 as consi-nee of the -oods in transit under an invoice containin- the ter#s under ?C & F
9anila4? has insura'le interest in said -oods. Section %* of the Insurance Code defines insura'le interest in
property as every interest in property4 (hether real or personal4 or any relation thereto4 or lia'ility in respect
thereof4 of such nature that a conte#plated peril #i-ht directly da#nify the insured. In principle4 anyone has
an insura'le interest in property (ho derives a 'enefit fro# its e/istence or (ould suffer loss fro# its
destruction (hether he has or has not any title in4 or lien upon or possession of the property. Insura'le interest
in property #ay consist in .a0 an e/istin- interestF .'0 an inchoate interest founded on an e/istin- interestF or
.c0 an e/pectancy4 coupled (ith an e/istin- interest in that out of (hich the e/pectancy arises. 7s
vendeeLconsi-nee of the -oods in transit has such e/istin- interest therein as #ay 'e the su'Dect of a valid
contract of insurance. 6is interest over the -oods is 'ased on the perfected contract of sale. 2he perfected
contract of sale 'et(een hi# and the shipper of the -oods operates to vest in hi# an eAuita'le title even
'efore delivery or 'efore he perfor#ed the conditions of the sale. 2he contract of ship#ent4 (hether under
F.@.5.4 C.I.F.4 or C. & F. as in the present case4 is i##aterial in the deter#ination of (hether the vendee has
an insura'le interest or not in the -oods in transit. 2he perfected contract of sale even (ithout delivery vests
in the vendee an eAuita'le title4 an e/istin- interest over the -oods sufficient to 'e the su'Dect of insurance.
Further4 7rticle %5)* of the Civil Code provides that (here4 in pursuance of a contract of sale4 the seller is
authori8ed or reAuired to send the -oods to the 'uyer4 delivery of the -oods to a carrier4 (hether na#ed 'y the
'uyer or not4 for4 the purpose of trans#ission to the 'uyer is dee#ed to 'e a delivery of the -oods to the
'uyer4 the e/ceptions to said rule not o'tainin- in the present case. 2he Court has heretofore ruled that the
delivery of the -oods on 'oard the carryin- vessels parta:e of the nature of actual delivery since4 fro# that
ti#e4 the forei-n 'uyers assu#ed the ris:s of loss of the -oods and paid the insurance pre#iu# coverin-
the#. C & F contracts are ship#ent contracts. 2he ter# #eans that the price fi/ed includes in a lu#p su# the
cost of the -oods and frei-ht to the na#ed destination. It si#ply #eans that the seller #ust pay the costs and
frei-ht necessary to 'rin- the -oods to the na#ed destination 'ut the ris: of loss or da#a-e to the -oods is
transferred fro# the seller to the 'uyer (hen the -oods pass the ship1s rail in the port of ship#ent.
38 @riental Assuran'e Corporation vs. Court of Appeals [GR 98/6! 9 Au?ust 1991$
Second Division, Melencio-4errera (J): 4 concur
&a'ts( So#eti#e in +anuary %,&4 Pana#a Sa(#ill Co.4 Inc. .Pana#a0 'ou-ht4 in Pala(an4 %4)!& pieces of
apiton- lo-s4 (ith a total volu#e of )4!!! cu'ic #eters. It hired 2ranspacific 2o(a-e4 Inc.4 to transport the
lo-s 'y sea to 9anila and insured it a-ainst loss for PI9 (ith @riental 7ssurance Corporation .@riental
7ssurance0. 2here is a clai# 'y Pana#a4 ho(ever4 that the insurance covera-e should have 'een for P*9
(ere it not for the fraudulent act of one 5enito Sy Jee Hon- to (ho# it had entrusted the a#ount of
P4!!!.!! for the pay#ent of the pre#iu# for a P*9 policy. @riental 7ssurance issued 9arine Insurance
Policy @7C9$&L!!). 2he lo-s (ere loaded on ) 'ar-esE .%0 on 'ar-e PC27!!!4%! pieces of lo-s (ith a
volu#e f %4!!! cu'ic #etersF and .)0 on 5ar-e 2P7C$%!!!4 5,& pieces of lo-s4 also (ith a volu#e of %4!!!
cu'ic #eters. @n )& +anuary %,&4 the t(o 'ar-es (ere to(ed 'y one tu-'oat4 the 92 ?Se#inole.? 5ut4 as
fate (ould have it4 durin- the voya-e4 rou-h seas and stron- (inds caused da#a-e to 5ar-e 2P7C$%!!!
resultin- in the loss of <,7 pieces of lo-s out of the 5,& pieces loaded thereon. Pana#a de#anded pay#ent
for the loss 'ut @riental 7ssurance refuse on the -round that its contracted lia'ility (as for ?2@27H H@SS
@;HJ.? 2he reDection (as upon the reco##endation of the 2an Gatue 7dDust#ent Co#pany. Ina'le to
convince @riental 7ssurance to pay its clai#4 Pana#a filed a Co#plaint for 3a#a-es a-ainst Cver Insurance
7-ency .alle-edly4 also lia'le04 5enito Sy Hee Jon- and @riental 7ssurance4 'efore the Re-ional 2rial Court4
Galoo:an4 5ranch %)* .Civil Case C$%)!%0. 7fter trial on the #erit4 the R2C rendered its 3ecision4 orderin-
@riental 7ssurance to pay Pana#a the a#ount of P<%54!!!.!! as insurance inde#nity (ith interest at the rate
of %)O per annu# co#puted fro# the date of the filin- of the co#plaintF orderin- Pana#a to pay Cver
Insurance 7-ency or 7ntonio Sy Hee Jon-4 o(ner thereof .Cver 'ein- a sin-le proprietorship0 for the a#ount
of P)!4!!!.!! as attorney1s fee and another a#ount of P)!4!!!.!! as #oral da#a-esF and dis#issin- the
co#plaint a-ainst 5enito Sy Hee Jon-. @n appeal 'y 'oth parties4 the 7ppellate Court affir#ed the lo(er
Court Dud-#ent in all respects e/cept for the rate of interest4 (hich (as reduced fro# %)O to O per annu#.
@riental 7ssurance filed the petition for revie( on certiorari.
)ssue( =hether @riental 7ssurance can 'e held lia'le under its #arine insurance policy 'ased on the theory of
a divisi'le contract of insurance and4 conseAuently4 a constructive total loss.
*eld( ;@. ;o lia'ility attaches. 2he ter#s of the contract constitute the #easure of the insurer1s lia'ility and
co#pliance there(ith is a condition precedent to the insured1s ri-ht to recovery fro# the insurer .Perla
Co#pania de Se-uros4 Inc. v. Court of 7ppeals4 G.R. ;o. 7&&!4 9ay )&4 %,,!4 %&5 SCR7 7<%0. =hether a
contract is entire or severa'le is a Auestion of intention to 'e deter#ined 'y the lan-ua-e e#ployed 'y the
parties. 2he policy in Auestion sho(s that the su'Dect #atter insured (as the entire ship#ent of )4!!! cu'ic
#eters of apiton- lo-s. 2he fact that the lo-s (ere loaded on t(o different 'ar-es did not #a:e the contract
several and divisi'le as to the ite#s insured. 2he lo-s on the t(o 'ar-es (ere not separately valued or
separately insured. @nly one pre#iu# (as paid for the entire ship#ent4 #a:infor only one cause or
consideration. 2he insurance contract #ust4 therefore4 'e considered indivisi'le. 9ore i#portantly4 the
insurer1s lia'ility (as for ?total loss only.? 7 total loss #ay 'e either actual or constructive .Sec. %),4
Insurance Code0. 7n actual total loss is caused 'yE .a0 7 total destruction of the thin- insuredF .'0 2he
irretrieva'le loss of the thin- 'y sin:in-4 or 'y 'ein- 'ro:en upF .c0 7ny da#a-e to the thin- (hich renders it
valueless to the o(ner for the purpose for (hich he held itF or .d0 7ny other event (hich effectively deprives
the o(ner of the possession4 at the port of destination4 of the thin- insured.? .Section %*!4 Insurance Code0. 7
constructive total loss is one (hich -ives to a person insured a ri-ht to a'andon4 under Section %*, of the
Insurance Code4 (hich reads ?7 person insured 'y a contract of #arine insurance #ay a'andon the thin-
insured4 or any particular portion thereof separately valued 'y the policy4 or other(ise separately insured4 and
recover for a total loss thereof4 (hen the cause of the loss is a peril insured a-ainst. .a0 If #ore than three$
fourths thereof in value is actually lost4 or (ould have to 'e e/pended to recover it fro# the perilF .'0 If it is
inDured to such an e/tent as to reduce its value #ore than three$fourthsF ///? 2he reAuire#ents for the
application of Section %*, of the Insurance Code4 have not 'een #et. 2he lo-s involved4 althou-h placed in
t(o 'ar-es4 (ere not separately valued 'y the policy4 nor separately insured. Resultantly4 the lo-s lost in 'ar-e
2P7C$%!!! in relation to the total nu#'er of lo-s loaded on the sa#e 'ar-e can not 'e #ade the 'asis for
deter#inin- constructive total loss. 2he lo-s havin- 'een insured as one insepara'le unit4 the correct 'asis for
deter#inin- the e/istence of constructive total loss is the totality of the ship#ent of lo-s. @f the entirety of
%4)!&4 pieces of lo-s4 only <,7 pieces thereof (ere lost or <%.<5O of the entire ship#ent. Since the cost of
those <,7 pieces does not e/ceed 75O of the value of all %4)!& pieces of lo-s4 the ship#ent can not 'e said to
have sustained a constructive total loss under Section %*,.a0 of the Insurance Code. In the a'sence of either
actual or constructive total loss4 there can 'e no recovery 'y the insured Pana#a a-ainst the insurer4 @riental
7ssurance.
36 &in+an General Assuran'e Corporation vs. Court of Appeals [GR 1//97/ ! 1epte+;er 199!$
Second Division, <ocon (J): 4 concur
&a'ts( @n )) @cto'er %,&4 deceased Carlie Surposa (as insured (ith Fin#an General 7ssurance
Corporation under Fin#an General 2eachers Protection Plan 9aster Policy )!!5 and Individual Policy !&,)<
(ith his parents4 spouses +ulia and Carlos Surposa4 and 'rothers Christopher4 Charles4 Chester and Clifton4 all
surna#ed Surposa4 as 'eneficiaries. =hile said insurance policy (as in full force and effect4 the insured4
Carlie Surposa4 died on %& @cto'er %,&& as a result of a sta' (ound inflicted 'y one of * unidentified #en
(ithout provocation and (arnin- on the part of the for#er as he and his cousin4 =inston Surposa4 (ere
(aitin- for a ride on their (ay ho#e alon- Ri8al$Hocsin Streets4 5acolod City after attendin- the cele'ration
of the ?9as:arra 7nnual Festival.? 2hereafter4 +ulia Surposa and the other 'eneficiaries of said insurance
policy filed a (ritten notice of clai# (ith Fin#an (hich denied said clai# contendin- that #urder and assault
are not (ithin the scope of the covera-e of the insurance policy. @n )< Fe'ruary %,&,4 Surposa filed a
co#plaint (ith the Insurance Co##ission (hich su'seAuently rendered a decision4 orderin- Fin#an lia'le to
pay Surposa the su# of P%54!!!.!! representin- the proceeds of the policy (ith interest fro# the date of the
filin- of the co#plaint until fully satisfied. 7s no evidence (as su'#itted to prove the clai# for #ortuary aid
in the su# of P%4!!!.!!4 the sa#e (as not entertained. @n %% +uly %,,%4 the appellate court affir#ed said
decision. Fin#an filed the petition for certiorari.
)ssue( =hether the death (as co##itted (ith deli'erate intent (hich4 'y the very nature of a personal
accident insurance policy4 cannot 'e inde#nified.
*eld( ;@. 2he ter#s ?accident? and ?accidental4? as used in insurance contracts have not acAuired any
technical #eanin-4 and are construed 'y the courts in their ordinary and co##on acceptation. 2hus4 the ter#s
have 'een ta:en to #ean that (hich happen 'y chance or fortuitously4 (ithout intention and desi-n4 and
(hich is une/pected4 unusual4 and unforeseen. 7n accident is an event that ta:es place (ithout one1s foresi-ht
or e/pectation N an event that proceeds fro# an un:no(n cause4 or is an unusual effect of a :no(n cause
and4 therefore4 not e/pected. 2he -enerally accepted rule is that4 death or inDury does not result fro# accident
or accidental #eans (ithin the ter#s of an accident$policy if it is4 the natural result of the insured1s voluntary
act4 unacco#panied 'y anythin- unforeseen e/cept the death or inDury. 2here is no accident (hen a deli'erate
act is perfor#ed unless so#e additional4 une/pected4 independent4 and unforeseen happenin- occurs (hich
produces or 'rin-s a'out the result of inDury or death. In other (ords4 (here the death or inDury is not the
natural or pro'a'le result of the insured1s voluntary act4 or if so#ethin- unforeseen occurs in the doin- of the
act (hich produces the inDury4 the resultin- death is (ithin the protection of the policies insurin- a-ainst death
or inDury fro# accident. 6erein4 it cannot 'e pretended that Carlie Surposa died in the course of an assault or
#urder as a result of his voluntary act considerin- the very nature of these cri#es. In the first place4 the
insured and his co#panion (ere on their (ay ho#e fro# attendin- a festival. 2hey (ere confronted 'y
unidentified persons. 2he record is 'arren of any circu#stance sho(in- ho( the sta' (ound (as inflicted.
;or can it 'e pretended that the #alefactor ai#ed at the insured precisely 'ecause the :iller (anted to ta:e his
life. In any event4 (hile the act #ay not e/e#pt the un:no(n perpetrator fro# cri#inal lia'ility4 the fact
re#ains that the happenin- (as a pure accident on the part of the victi#. 2he insured died fro# an event that
too: place (ithout his foresi-ht or e/pectation4 an event that proceeded fro# an unusual effect of a :no(n
cause and4 therefore4 not e/pected. ;either can it 'e said that there (as a capricious desire on the part of the
accused to e/pose his life to dan-er considerin- that he (as Dust -oin- ho#e after attendin- a festival.
Further#ore4 the personal accident insurance policy involved specifically enu#erated only %! circu#stances
(herein no lia'ility attaches to Fina#n for any inDury4 disa'ility or loss suffered 'y the insured as a result of
any of the stipulated causes. 2he principle of ?e/presso unius e/clusio alterius? N the #ention of one thin-
i#plies the e/clusion of another thin- N is therefore applica'le in the present case since #urder and assault4
not havin- 'een e/pressly included in the enu#eration of the circu#stances that (ould ne-ate lia'ility in said
insurance policy cannot 'e considered 'y i#plication to dischar-e Fin#an fro# lia'ility for any inDury4
disa'ility or loss suffered 'y the insured. 2hus4 the failure of Fin#an to include death resultin- fro# #urder
or assault a#on- the prohi'ited ris:s leads inevita'ly to the conclusion that it did not intend to li#it or
e/e#pt itself fro# lia'ility for such death.
36 1un )nsuran'e @ffi'e ,td. vs. Court of Appeals [GR 9!333 17 "ul# 199!$
First Division, (ru- (J): concur
&a'ts( Sun Insurance @ffice Htd. issued Personal 7ccident Policy !5&7 to Feli/ Hi#4 +r. (ith a face value of
P)!!4!!!.!!. 2(o #onths later4 he (as dead (ith a 'ullet (ound in his head. 7s 'eneficiary4 his (ife ;erissa
Hi# sou-ht pay#ent on the policy 'ut her clai# (as reDected. Sun Insurance a-reed that there (as no suicide.
It ar-ued4 ho(ever4 that there (as no accident either. Pilar ;ala-on4 Hi#1s secretary4 (as the only eye(itness
to his death. It happened on @cto'er %,&)4 at a'out %! p.#.4 after his #other1s 'irthday party. 7ccordin- to
;ala-on4 Hi# (as in a happy #ood .'ut not drun:0 and (as playin- (ith his hand-un4 fro# (hich he had
previously re#oved the #a-a8ine. 7s she (atched the television4 he stood in front of her and pointed the -un
at her. She pushed it aside and said it #i-ht 'e loaded. 6e assured her it (as not and then pointed it to his
te#ple. 2he ne/t #o#ent there (as an e/plosion and Hi# slu#ped to the floor. 6e (as dead 'efore he fell.
2he (ido( sued Sun Insurance in the Re-ional 2rial Court of Ba#'oan-a City and (as sustained. Sun
Insurance (as sentenced to pay her P)!!4!!!.!!4 representin- the face value of the policy4 (ith interest at the
le-al rateF P%!4!!!.!! as #oral da#a-esF P54!!!.!! as e/e#plary da#a-esF P5!4!!!.!! as actual and
co#pensatory da#a-esF and P54!!!.!! as attorney1s fees4 plus the cost of the suit. 2his decision (as affir#ed
on appeal4 and the #otion for reconsideration (as denied. Sun Insurance then ca#e to the Supre#e Court.
)ssue( =hether the insured (illfully e/posed hi#self to needless peril and thus re#oved hi#self fro# the
covera-e of the insurance policy.
*eld( ;@. 7n accident is an event (hich happens (ithout any hu#an a-ency or4 if happenin- throu-h hu#an
a-ency4 an event (hich4 under the circu#stances4 is unusual to and not e/pected 'y the person to (ho# it
happens. It has also 'een defined as an inDury (hich happens 'y reason of so#e violence or casualty to the
insured (ithout his desi-n4 consent4 or voluntary co$operation. 6erein4 the incident that resulted in Hi#1s
death (as indeed an accident. @n the other hand4 the parties a-ree that Hi# did not co##it suicide.
;evertheless4 Sun Insurance contends that the insured (illfully e/posed hi#self to needless peril and thus
re#oved hi#self fro# the covera-e of the insurance policy. It should 'e noted at the outset that suicide and
(illful e/posure to needless peril are in pari #ateria 'ecause they 'oth si-nify a disre-ard for one1s life. 2he
only difference is in de-ree4 as suicide i#ports a positive act of endin- such life (hereas the second act
indicates a rec:less ris:in- of it that is al#ost suicidal in intent. 2he posture $$ that 'y the #ere act of
pointin- the -un to his te#ple4 Hi# had (illfully e/posed hi#self to needless peril and so ca#e under the
e/ception $$ is ar-ua'le. 5ut (hat is not is that Hi# had re#oved the #a-a8ine fro# the -un and 'elieved it
(as no lon-er dan-erous. 6e e/pressed assured her that the -un (as not loaded. It is su'#itted that Hi# did
not (illfully e/pose hi#self to needless peril (hen he pointed the -un to his te#ple 'ecause the fact is that he
thou-ht it (as not unsafe to do so. 2he act (as precisely intended to assure ;ala-on that the -un (as indeed
har#less. Hi# (as unAuestiona'ly ne-li-ent and that ne-li-ence cost hi# his o(n life. 5ut it should not
prevent his (ido( fro# recoverin- fro# the insurance policy he o'tained precisely a-ainst accident. 2here is
nothin- in the policy that relieves the insurer of the responsi'ility to pay the inde#nity a-reed upon if the
insured is sho(n to have contri'uted to his o(n accident. Indeed4 #ost accidents are caused 'y ne-li-ence.
2here are only four e/ceptions e/pressly #ade in the contract to relieve the insurer fro# lia'ility4 and none of
these e/ceptions is applica'le in the present case. It 'ears notin- that insurance contracts are as a rule
supposed to 'e interpreted li'erally in favor of the assured. 2here is no reason to deviate fro# this rule4
especially in vie( of the circu#stances of the case.
37 Vda. de Ga;riel vs. Court of Appeals [GR 1/3333 18 Nove+;er 1996$
First Division, =itug (J): 4 concur
&a'ts( 9arcelino Ga'riel4 the insured4 (as e#ployed 'y C#erald Construction & 3evelop#ent Corporation
.CC3C0 at its construction proDect in IraA. 6e (as covered 'y a personal accident insurance in the a#ount of
P%!!4!!!.!! under a -roup policy procured fro# Fortune Insurance & Surety Co#pany Inc. 'y CC3C for its
overseas (or:ers. 2he insured ris: (as for ?'odily inDury caused 'y violent accidental e/ternal and visi'le
#eans (hich inDury (ould solely and independently of any other cause? result in death or disa'ility. @n ))
9ay %,&)4 (ithin the life of the policy4 Ga'riel died in IraA. 7 year later4 or on %) +uly %,&*4 CC3C reported
Ga'riel1s death to Fortune 'y telephone. 7#on- the docu#ents thereafter su'#itted to Fortune (ere a copy of
the death certificate 5 issued 'y the 9inistry of 6ealth of the Repu'lic of IraA N (hich stated ?RC7S@; @F
3C726E I;3CR CK79I;72I@; ;@= N ;@2 JC2 G;@=; ? and an autopsy report of the ;ational
5ureau of Investi-ation .;5I0 to the effect that ?due to advanced state of post#orte# deco#position4 cause of
death could not 'e deter#ined.? Fortune referred the insurance clai# to 9ission 7dDust#ent Service4 Inc.
Follo(in- a series of co##unications 'et(een +acAueline +i#ene8 vda. de Ga'riel and Fortune4 the latter4 on
)) Septe#'er %,&*4 ulti#ately denied the clai# of CC3C on the -round of prescription. Vda. 3e Ga'riel
(ent to the Re-ional 2rial Court of 9anila. In her co#plaint a-ainst CC3C and Fortune4 she averred that her
hus'and died of electrocution (hile in the perfor#ance of his (or: and prayed for the recovery of
P%!!4!!!.!! for insurance inde#nification and of various other su#s 'y (ay of actual4 #oral4 and e/e#plary
da#a-es4 plus attorney1s fees and costs of suit. Fortune filed its ans(er4 (hich (as not verified4 ad#ittin- the
-enuineness and due e/ecution of the insurance policyF it alle-ed4 ho(ever4 that since 'oth the death
certificate issued 'y the IraAi 9inistry of 6ealth and the autopsy report of the ;5I failed to disclose the cause
of Ga'riel1s death4 it denied lia'ility under the policy. In addition4 Fortune raised the defense of ?prescription4?
invo:in- Section *&< %! of the Insurance Code. Hater4 Fortune filed an a#ended ans(er4 still unverified4
reiteratin- its ori-inal defenses 'ut4 this ti#e4 additionally puttin- up a counterclai# and a crossclai#. 2he
trial court dis#issed the case a-ainst CC3C for the failure of Vda. de Ga'riel to ta:e steps to cause the
service of the fourth alias su##ons on CC3C. 2he dis#issal (as (ithout preDudice. 2he case proceeded
a-ainst Fortune alone. @n )& 9ay %,&74 the trial court rendered its decision in favor .partly0 of Vda. de
Ga'riel1s clai#. In arrivin- at its conclusion4 the trial court held that Fortune (as dee#ed to have (aived the
defense4 i.e.4 that the cause of Ga'riel1s death (as not covered 'y the policy4 (hen the latter failed to i#pu-n
'y evidence Vda. de Ga'riel1s aver#ent on the #atter. =ith re-ard to the defense of prescription4 the court
considered the co#plaint to have 'een ti#ely filed or (ithin % year fro# Fortune1s denial of the clai#. Vda.
de Ga'riel and Fortune 'oth appealed to the Court of 7ppeals. 2he Court of 7ppeals4 on %& Septe#'er %,,%4
reversed the decision of the lo(er court. 2he appellate court held that Vda. de Ga'riel had failed to
su'stantiate her alle-ation that her hus'and1s death (as caused 'y a ris: insured a-ainst. 2he #otion for
reconsideration (as denied. Vda. de Ga'riel filed the petition for revie( on certiorari.
)ssue [1$( =hether prescription (as properly invo:ed 'y Fortune in this case.
*eld [1$( JCS. @n the issue of ?prescription4? Fortune correctly invo:ed Section *&< of the Insurance Code
(hich provides that ?7ny person havin- any clai# upon the policy issued pursuant to this chapter shall4
(ithout any unnecessary delay4 present to the insurance co#pany concerned a (ritten notice of clai# settin-
forth the nature4 e/tent and duration of the inDuries sustained as certified 'y a duly licensed physician. ;otice
of clai# #ust 'e filed (ithin si/ #onths fro# date of the accident4 other(ise4 the clai# shall 'e dee#ed
(aived. 7ction or suit for recovery of da#a-e due to loss or inDury #ust 'e 'rou-ht4 in proper cases4 (ith the
Co##issioner or the Courts (ithin one year fro# denial of the clai#4 other(ise4 the clai#ant1s ri-ht of action
shall prescri'e.? 2he notice of death (as -iven to Fortune4 concededly4 #ore than a year after the death of
Vda. de Ga'riel1s hus'and. Fortune4 in invo:in- prescription4 (as not referrin- to the one$year period fro#
the denial of the clai# (ithin (hich to file an action a-ainst an insurer 'ut o'viously to the (ritten notice of
clai# that had to 'e su'#itted (ithin si/ #onths fro# the ti#e of the accident. @n the other hand4 there is
a'solutely no 'asis in fact and in la( to hold that the insurance co#pany (as dee#ed to have (aived $$ 'y
failin- to have its ans(ers .to the ReAuest for 7d#ission0 duly verified $$ the defense4 that the death of Vda.
de Ga'riel1s hus'and (as not caused 'y violent accidental e/ternal and visi'le #eans1 as conte#plated in the
insurance policy. 2he 3eath Certificate and the 7utopsy Report4 #ore than controverted the alle-ation of Vda.
de Ga'riel as to the cause of death of her hus'and.
)ssue [!$( =hether Vda. 3e Ga'riel is reAuired to present proof that the insuredQs de#ise (as fro# an
accidental death4 unli:e in ordinary life insurance (here the insured1s death4 re-ardless of the cause thereof4
(ould nor#ally 'e co#pensa'le.
*eld [!$( JCS. 2he insurance policy e/pressly provided that to 'e co#pensa'le4 the inDury or death should 'e
caused 'y ?violent accidental e/ternal and visi'le #eans.? In atte#ptin- to prove the cause of her hus'and1s
death4 all that Vda. de Ga'riel could su'#it (ere a letter sent to her 'y her hus'and1s co$(or:er4 statin- that
Ga'riel died (hen he tried to haul (ater out of a tan: (hile its su'#er-ed #otor (as still functionin-4 and
Vda. de Ga'riel1s sinu#paan- salaysay (hich #erely confir#ed the receipt and stated contents of the letter.
Said the appellate court in this re-ardE ?It #ust 'e noted that the only evidence presented 'y her to prove the
circu#stances surroundin- her hus'and1s death (ere her purported affidavit and the letter alle-edly (ritten 'y
the deceased co$(or:er in IraA. 2he said affidavit ho(ever suffers fro# procedural infir#ity as it (as not
even testified to or identified 'y the affiant .Vda. 3e Ga'riel0 herself. 2his self$servin- affidavit therefore is a
#ere hearsay under the rules. In li:e #anner4 the letter alle-edly (ritten 'y the deceased1s co$(or:er (hich
(as never identified to in court 'y the supposed author4 suffers fro# the sa#e defect as the affidavit of the
plaintiff$appellant.? ;ot one of the other docu#ents su'#itted4 to (it4 the P@C7 decision4 dated ! +une
%,&<4 the death certificate issued 'y the 9inistry of 6ealth of IraA and the ;5I autopsy report4 could -ive any
pro'ative value to Vda. de Ga'riel1s clai#. 2he P@C7 decision did not #a:e any cate-orical holdin- on the
specific cause of Ga'riel1s death. ;either did the death certificate issued 'y the health authorities in IraA nor
the ;5I autopsy report provide any clue on the cause of death. 7ll that appeared to 'e clear (as the fact of
Ga'riel1s de#ise on )) 9ay %,&) in IraA. Cvidence4 in fine4 is utterly (antin- to esta'lish that the insured
suffered fro# an accidental death4 the ris: covered 'y the policy. In an accident insurance4 the insured ?s
'eneficiary has the 'urden of proof in de#onstratin- that the cause of death is due to the covered peril. @nce
the fact is esta'lished4 the 'urden then shifts to the insurer to sho( any e/cepted peril that #ay have 'een
stipulated 'y the parties. 7n ?accident insurance? is not thus to 'e li:ened to an ordinary life insurance (here
the insured1s death4 re-ardless of the cause thereof4 (ould nor#ally 'e co#pensa'le. 2he latter is a:in in
property insurance to an ?all ris:? covera-e (here the insured4 on the aspect of 'urden of proof4 has #erely to
sho( the condition of the property insured (hen the policy attaches and the fact of loss or da#a-e durin- the
period of the policy and (here4 thereafter4 the 'urden (ould 'e on the insurer to sho( any ?e/cluded peril.?
=hen4 ho(ever4 the insured ris: is specified4 it lies (ith the clai#ant of the insurance proceeds to initially
prove that the loss is caused 'y the covered peril.
33 Vda. de 7a?lana vs. Consola'ion [GR 6/6/6 6 Au?ust 199!$
Third Division, 0omero (J): concur
&a'ts( Hope 9a-lana (as an e#ployee of the 5ureau of Custo#s (hose (or: station (as at Hasa4 in 3avao
City. @n )! 3ece#'er %,7&4 early #ornin-4 Hope 9a-lana (as on his (ay to his (or: station4 drivin- a
#otorcycle o(ned 'y the 5ureau of Custo#s. 7t G#. 74 Hanan-4 he #et an accident that resulted in his death.
6e died on the spot. 2he PI+ Deep that 'u#ped the deceased (as driven 'y Pepito Into4 operated and o(ned
'y 3estraDo. Fro# the investi-ation conducted 'y the traffic investi-ator4 the PI+ Deep (as overta:in- another
passen-er Deep that (as -oin- to(ards the city po'lacion. =hile overta:in-4 the PI+ Deep of 3estraDo runnin-
a'reast (ith the overta:en Deep4 'u#ped the #otorcycle driven 'y the deceased (ho (as -oin- to(ards the
direction of Hasa4 3avao City. 2he point of i#pact (as on the lane of the #otorcycle and the deceased (as
thro(n fro# the road and #et his unti#ely death. ConseAuently4 the heirs of Hope 9a-lana4 Sr.4 filed an
action for da#a-es and attorney1s fees a-ainst operator Patricio 3estraDo and the 7fisco Insurance Corporation
.7FISC@0 'efore the then Court of First Instance of 3avao4 5ranch II. 7n infor#ation for ho#icide thru
rec:less i#prudence (as also filed a-ainst Pepito Into. 3urin- the pendency of the civil case4 Into (as
sentenced to suffer an indeter#inate penalty of % year4 & #onths and % day of prision correccional4 as
#ini#u#4 to < years4 , #onths and %% days of prision correcional4 as #a/i#u#4 (ith all the accessory
penalties provided 'y la(4 and to inde#nify the heirs of Hope 9a-lana4 Sr. in the a#ount of P%)4!!!.!! (ith
su'sidiary i#prison#ent in case of insolvency4 plus P54!!!.!! in the concept of #oral and e/e#plary
da#a-es (ith costs. ;o appeal (as interposed 'y the accused (ho later applied for pro'ation. @n %<
3ece#'er %,&%4 the lo(er court rendered a decision findin- that 3estraDo had not e/ercised sufficient
dili-ence as the operator of the Deepney. 2he court ordered 3estraDo to pay the heirs of 9a-lana the su# of
P)&4!!!.!! for loss of inco#eF the su# of P%)4!!!.!! (hich a#ount shall 'e deducted in the event Dud-#ent
in Cri#inal Case *5)7$3 a-ainst the driver4 accused Into4 shall have 'een enforcedF the su# of P54,!%.7!
representin- funeral and 'urial e/penses of the deceasedF the su# of P54!!!.!! as #oral da#a-es (hich shall
'e deducted in the event Dud-#ent .sic0 in Cri#inal Case *5)7$3 a-ainst the driver4 accused IntoF the su# of
P*4!!!.!! as attorney1s fees and to pay the costs of suit. 2he court ordered the insurance co#pany is ordered
to rei#'urse 3estraDo (hatever a#ounts the latter shall have paid only up to the e/tent of its insurance
covera-e. 2he heirs of 9a-lana filed a #otion for the reconsideration of the second para-raph of the
dispositive portion of the decision contendin- that 7FISC@ should not #erely 'e held secondarily lia'le
'ecause the Insurance Code provides that the insurer1s lia'ility is ?direct and pri#ary andLor Dointly and
severally (ith the operator of the vehicle4 althou-h only up to the e/tent of the insurance covera-e.? In its
@rder of Fe'ruary ,4 %,&)4 the lo(er court denied the #otion for reconsideration rulin- that since the
insurance contract ?is in the nature of suretyship4 then the lia'ility of the insurer is secondary only up to the
e/tent of the insurance covera-e.? 2he heirs filed a second #otion for reconsideration reiteratin- that the
lia'ility of the insurer is direct4 pri#ary and solidary (ith the Deepney operator 'ecause the petitioners 'eca#e
direct 'eneficiaries under the provision of the policy (hich4 in effect4 is a stipulation pour autrui. 2his #otion
(as li:e(ise denied for lac: of #erit. 2he heirs filed the petition for certiorari.
)ssue [1$( =hether 7FISC@ is pri#arily lia'le4 not secondarily lia'le4 on the insurance policy.
*eld [1$( 2he particular provision of the insurance policy on (hich the heirs 'ase their clai# provides
?SCC2I@; % N HI75IHI2J 2@ 26C PI5HIC %. 2he Co#pany (ill4 su'Dect to the Hi#its of Hia'ility4 pay
all su#s necessary to dischar-e lia'ility of the insured in respect of. .a0 death of or 'odily inDury to any
26IR3 P7R2JF /// *. In the event of the death of any person entitled to inde#nity under this Policy4 the
Co#pany (ill4 in respect of the lia'ility incurred to such person inde#nify his personal representatives in
ter#s of4 and su'Dect to the ter#s and conditions hereof.? 2he a'ove$Auoted provision leads to no other
conclusion 'ut that 7FISC@ can 'e held directly lia'le 'y the heirs. 7s the Court ruled in Shafer vs. +ud-e4
R2C of @lon-apo City4 5r. 754 ?[("here an insurance policy insures directly a-ainst lia'ility4 the insurer1s
lia'ility accrues i##ediately upon the occurrence of the inDury or event upon (hich the lia'ility depends4 and
does not depend on the recovery of Dud-#ent 'y the inDured party a-ainst the insured.? 2he underlyin- reason
'ehind the third party lia'ility .2PH0 of the Co#pulsory 9otor Vehicle Hia'ility Insurance is ?to protect
inDured persons a-ainst the insolvency of the insured (ho causes such inDury4 and to -ive such inDured person
a certain 'eneficial interest in the proceeds of the policy.? Since the heirs had received fro# 7FISC@ the su#
of P54!!!.!! under the no$fault clause4 7FISC@1s lia'ility is no( li#ited to P%54!!!.!!.
)ssue [!$( =hether 7FISC@ is solidarily lia'le (ith 3estraDo.
*eld [!$( ;@. In 9alayan Insurance Co.4 Inc. v. Court of 7ppeals4 the Court had the opportunity to resolve
the issue as to the nature of the lia'ility of the insurer and the insured vis$a$vis the third party inDured in an
accident4 (here it ruled that ?=hile it is true that (here the insurance contract provides for inde#nity a-ainst
lia'ility to third persons4 such third persons can directly sue the insurer4 ho(ever4 the direct lia'ility of the
insurer under inde#nity contracts a-ainst third party lia'ility does not #ean that the insurer can 'e held
solidarily lia'le (ith the insured andLor the other parties found at fault. 2he lia'ility of the insurer is 'ased on
contractF that of the insured is 'ased on tort.? 2he Court then proceeded to distin-uish the e/tent of the
lia'ility and #anner of enforcin- the sa#e in ordinary contracts fro# that of insurance contracts. =hile in
solidary o'li-ations4 the creditor #ay enforce the entire o'li-ation a-ainst one of the solidary de'tors4 in an
insurance contract4 the insurer underta:es for a consideration to inde#nify the insured a-ainst loss4 da#a-e or
lia'ility arisin- fro# an un:no(n or contin-ent event.? 6erein4 the heirs cannot validly clai# that 7FISC@4
(hose lia'ility under the insurance policy is also P)!4!!!.!!4 can 'e held solidarily lia'le (ith 3estraDo for
the total a#ount of P5*4,!%.7! in accordance (ith the decision of the lo(er court. Since under 'oth the la(
and the insurance policy4 7FISC@1s lia'ility is only up to P)!4!!!.!!4 the second para-raph of the dispositive
portion of the decision in Auestion #ay have un(ittin-ly so(n confusion a#on- the heirs and their counsel.
=hat should have 'een clearly stressed as to leave no roo# for dou't (as the lia'ility of 7FISC@ under the
e/plicit ter#s of the insurance contract. 2he lia'ility of 7FISC@ 'ased on the insurance contract is direct4 'ut
not solidary (ith that of 3estraDo (hich is 'ased on 7rticle )%&! of the Civil Code. 7s such4 the heirs have
the option either to clai# the P%54!!! fro# 7FISC@ and the 'alance fro# 3estraDo or enforce the entire
Dud-#ent fro# 3estraDo su'Dect to rei#'urse#ent fro# 7FISC@ to the e/tent of the insurance covera-e.
39 Aio F5e C5io vs. Court of Appeals [GR 761/1>/! 3/ 1epte+;er 1991$
Third Division, Fernan (J): 4 concur
&a'ts( @n %& 3ece#'er %,7&4 2io Ghe Chio i#ported %4!!! 'a-s of fish#eal valued at R*4!!!.*! fro#
7-ro I#pe/4 S.7. 3allas4 2e/as4 I.S.7. 2he -oods (ere insured (ith Castern 7ssurance and Surety
Corporation .C7SC@0 and shipped on 'oard the 9LV Pes:ov4 a vessel o(ned 'y Far Castern Shippin-
Co#pany. =hen the -oods reached 9anila on )& +anuary %,7,4 they (ere found to have 'een da#a-ed 'y
sea (ater (hich rendered the fish#eal useless. 2io filed a clai# (ith C7SC@ and Far Castern Shippin-. 5oth
refused to pay. =hereupon4 2io sued the# 'efore the then Court of First Instance of Ce'u4 5ranch II for
da#a-es. C7SC@4 as the insurer4 filed a counterclai# a-ainst the 2io for the recovery of P%&4*&7.&
representin- the unpaid insurance pre#iu#s. @n *! +une %,&)4 the trial court rendered Dud-#ent orderin-
C7SC@ and Far Castern Shippin- to pay 2io solidarily the su# of P%!54,&.& less the a#ount of P%&4*&7.&
for unpaid pre#iu#s (ith interest at the le-al rate fro# the filin- of the co#plaint4 the su# of P%54!!!.!! as
attorney1s fees and the costs. 2he Dud-#ent 'eca#e final as to C7SC@ 'ut the shippin- co#pany appealed to
the Court of 7ppeals and (as a'solved fro# lia'ility 'y the said court in 7C$GR !!%%4 entitled ?2io Ghe
Chio vs. Castern 7ssurance and Surety Corporation.? 2he trial court4 upon #otion 'y 2io4 issued a (rit of
e/ecution a-ainst C7SC@. 2he sheriff enforcin- the (rit reportedly fi/ed the le-al rate of interest at %)O.
C7SC@ #oved to Auash the (rit alle-in- that the le-al interest to 'e co#puted should 'e O per annu# in
accordance (ith 7rticle ))!, of the Civil Code and not %)O as insisted upon 'y 2io1s counsel. In its order of
*! +uly %,&4 the trial court denied C7SC@1s #otion. C7SC@ then filed a petition for certiorari and
prohi'ition 'efore the Court of 7ppeals. @n *! +uly %,&4 the 7ppellate Court rendered Dud-#ent4 settin-
aside the order dated *! +uly %,& in so far as it fi/es the interest at %)O on the principal a#ount of
P&745,&.&) fro# the date of filin- of the co#plaint until the full pay#ent of the a#ount4 and the interest that
2io (as entitled to collect fro# C7SC@ (as reduced to O per annu#F (ithout pronounce#ent as to costs.
2io filed the petition for certiorari and prohi'ition.
)ssue [1$( =hether Sections )<* and )<<4 as to interest4 apply in the present case.
*eld [1$( ;@. Section )<* of the Insurance Code provides that ?the a#ount of any loss or da#a-e for (hich
an insurer #ay 'e lia'le4 under any policy other than life insurance policy4 shall 'e paid (ithin thirty days
after proof of loss is received 'y the insurer and ascertain#ent of the loss or da#a-e is #ade either 'y
a-ree#ent 'et(een the insured and the insurer or 'y ar'itrationF 'ut if such ascertain#ent is not had or #ade
(ithin si/ty days after such receipt 'y the insurer of the proof of loss4 then the loss or da#a-e shell 'e paid
(ithin ninety days after such receipt. Refusal or failure to pay the loss or da#a-e (ithin the ti#e prescri'ed
herein (ill entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at
the rate of t(ice the ceilin- prescri'ed 'y the 9onetary 5oard4 unless such failure or refusal to pay is 'ased
on the -round that the clai# is fraudulent.? Section )<< of the afore#entioned Code also provides that ?In
case of any liti-ation for the enforce#ent of any policy or contract of insurance4 it shall 'e the duty of the
Co##issioner or the Court4 as the case #ay 'e4 to #a:e a findin- as to (hether the pay#ent of the clai# of
the insured has 'een unreasona'ly denied or (ithheldF and in the affir#ative case4 the insurance co#pany
shall 'e adDud-ed to pay da#a-es (hich shall consist of attorney1s fees and other e/penses incurred 'y the
insured person 'y reason of such undenia'le denial or (ithholdin- of pay#ent plus interest of t(ice the
ceilin- prescri'ed 'y the 9onetary 5oard of the a#ount of the clai# due the insured4 fro# the date follo(in-
the ti#e prescri'ed in section t(o hundred forty$t(o or in section t(o hundred forty$three4 as the case #ay
'e4 until the clai# is fully satisfiedF Provided4 2hat the failure to pay any such clai# (ithin the ti#e
prescri'ed in said sections shall 'e considered pri#a facie evidence of unreasona'le delay in pay#ent.?
6erein4 there (as no unDustified refusal or (ithholdin- of pay#ent on 2io1s clai#. 2he aforecited sections of
the Insurance Code are not pertinent to the case4 as they apply only (hen the court finds an unreasona'le
delay or refusal in the pay#ent of the clai#s.
)ssue [!$( =hether the interest to 'e i#posed on clai#s 'ased on an insurance contract is O or %)O.
*eld [!$( O. 2he le-al rate of interest is O per annu#. Circular <% of the Central 5an: (hich too: effect
on ), +uly %,7< pursuant to Presidential 3ecree %% .Isury Ha(0 (hich raised the le-al rate of interest fro#
O to %)O cannot apply as the adDusted rate #entioned in the circular refers only to loans or for'earances of
#oney4 -oods or credits and court Dud-#ents thereon 'ut not to court Dud-#ents for da#a-es arisin- fro#
inDury to persons and loss of property (hich does not involve a loan. @n the other hand4 in the case of
Philippine Ra''it 5us Hines4 Inc. vs. Cru84 G.R. ;o. 7%!%74 +uly )&4 %,&4 %<* SCR7 %5&4 the Court declared
that the le-al rate of interest is O per annu#4 and not %)O4 (here a Dud-#ent a(ard is 'ased on an action for
da#a-es for personal inDury4 not use or for'earance of #oney4 -oods or credit. In the sa#e vein4 the Court
held in GSIS vs. Court of 7ppeals4 GR 5)<7&4 *! @cto'er %,&4 %<5 SCR7 *%%4 that the rates under the
Isury Ha( .a#ended 'y P3 %%0 are applica'le only to interest 'y (ay of co#pensation for the use or
for'earance of #oney4 interest 'y (ay of da#a-es is -overned 'y 7rticle ))!, of the Civil Code. Clearly4 the
applica'le la( is 7rticle ))!, of the Civil Code (hich reads ?If the o'li-ation consists in the pay#ent of a
su# of #oney and the de'tor incurs in delay4 the inde#nity for da#a-es4 there 'ein- no stipulation to the
contrary4 shall 'e the pay#ent of interest a-reed upon4 and in the a'sence of stipulation4 the le-al interest
(hich is si/ per cent per annu#.? 7nd in the li-ht of the fact that the contendin- parties did not alle-e the rate
of interest stipulated in the insurance contract4 the le-al interest (as properly pe--ed at O.
8/ &in+an General Assuran'e Corporation vs. Court of Appeals [GR 133737 1! "ul# !//1$
First Division, >a$unan (J): 4 concur
&a'ts( @n %5 Septe#'er %,&%4 Isiphil Incorporated o'tained a fire insurance policy fro# Fin#an General
7ssurance Corporation .then doin- 'usiness under the na#e Su##a Insurance Corporation0 coverin- certain
properties4 e.-.4 office4 furniture4 fi/tures4 shop #achinery and other trade eAuip#ent. Inder Policy F*%!!
issued to Isiphil4 Fin#an undertoo: to inde#nify Isiphil for any da#a-e to or loss of said properties arisin-
fro# fire. So#eti#e in %,&)4 Isiphil filed (ith Fin#an an insurance clai# a#ountin- to P,&74%).%% for the
loss of the insured properties due to fire. 7ctin- thereon4 Fin#an appointed 7dDuster 6.6. 5ayne to underta:e
the valuation and adDust#ent of the loss. 6.6. 5ayne then reAuired Isiphil to file a for#al clai# and su'#it
proof of loss. In co#pliance there(ith4 Isiphil su'#itted its S(orn State#ent of Hoss and For#al Clai#4
dated )) +uly %,&)4 si-ned 'y Reynaldo Cayetano4 Isiphil1s 9ana-er. Isiphil li:e(ise su'#itted Proof of
Hoss si-ned 'y its 7ccountin- 9ana-er Pedro Palallos and countersi-ned 'y 6.6. 5ayne1s 7dDuster F.C.
9edina. Palallos personally follo(ed$up Isiphil1s clai# (ith Fin#an1s President +oaAuin @rte-a. 3urin- their
#eetin-4 @rte-a instructed their Finance 9ana-er4 Rosauro 9a-hiran-4 to reconcile the records. 2hereafter4
9a-hiran- and Palallos si-ned a State#entL7-ree#ent4 dated )& Fe'ruary %,&54 (hich indicated that the
a#ount due Isiphil (as P&<)4&*.<!. 3espite repeated de#ands 'y Isiphil4 Fin#an refused to pay the
insurance clai#. 2hus4 Isiphil (as constrained to file a co#plaint a-ainst Fin#an for the unpaid insurance
clai#. In its 7ns(er4 Fin#an #aintained that the clai# of Isiphil could not 'e allo(ed 'ecause it failed to
co#ply (ith Policy Condition %* re-ardin- the su'#ission of certain docu#ents to prove the loss. 2rial
ensued. @n +uly %,,<4 the trial court rendered Dud-#ent in favor of Isiphil. It ordered Fin#an to pay
Isiphil the su# of P&<)4&*.<! and to pay )<O interest per annu# fro# )& Fe'ruary %,&5 until fully paidF
the su# eAuivalent to %!O of the principal o'li-ation as and for attorney1s fees4 plus P%45!!.!! per court
appearance of counselF the a#ount of P*!4!!!.!! as e/e#plary da#a-es in addition to the actual and
co#pensatory da#a-es a(arded. 2he court also dis#issed the clai# of P*!4!!!.!! for actual da#a-es under
par. < of the prayer4 since the actual da#a-es. has 'een a(arded under par. % of the decision1s dispositive
portionF dis#issed the clai# of interest under par. ) of the prayer4 there 'ein- no a-ree#ent to such effectF
dis#issed the counter$clai# for lac: of #eritF and ordered Fin#an to pay the cost of suit. @n appeal4 the C7
su'stantially affir#ed the decision of the trial court. 2he appellate court #odified the decision 'y orderin-
Fin#an to pay Isiphil the su# of P&<)4&*.<! and to pay )<O interest per annu# fro# * 9ay %,&5 until
fully paid. Fin#an filed the petition for revie( on certiorari.
)ssue [1$( =hether Isiphil has co#plied (ith Policy Condition %* in notifyin- Fin#an of the loss.
*eld [1$( JCS. Isiphil had su'stantially co#plied (ith Policy Condition %* (hich reads ?2he insured shall
-ive i##ediate (ritten notice to the Co#pany of any loss4 protect the property fro# further da#a-e4
forth(ith separate the da#a-ed and unda#a-ed personal property4 put it in the 'est possi'le order4 furnish a
co#plete inventory of the destroyed4 da#a-ed4 and unda#a-ed property4 sho(inin detail Auantities4 costs4
actual cash value and the a#ount of loss clai#edF 7;3 =I26I; SIK2J 37JS 7F2CR 26C H@SS4
I;HCSS SIC6 2I9C IS CK2C;3C3 I; =RI2I;G 5J 26C C@9P7;J4 26C I;SIRC3 S67HH
RC;3CR 2@ 26C C@9P7;J 7 PR@@F @F H@SS4 si-ned and s(orn to 'y the insured4 statin- the
:no(led-e and 'elief of the insured as to the follo(in-E the ti#e and ori-in of the loss4 the interest of the
insured and of all others in the property4 the actual cash value of each ite# thereof and the a#ount of loss
thereto4 all encu#'rances thereon4 all other contracts of insurance4 (hether valid or not4 coverin- any of said
property4 any chan-es in the title4 use4 occupation4 location4 possession or e/posures of said property since the
issuin- of this policy 'y (ho# and for (hat purpose any 'uildin-s herein descri'ed and the several parts
thereof (ere occupied at the ti#e of loss and (hether or not it then stood on leased -round4 and shall furnish a
copy of all the descriptions and schedules in all policies4 and if reAuired verified plans and specifications of
any 'uildin-4 fi/tures4 or #achinery destroyed or da#a-ed. 2he insured4 as often as #ay 'e reasona'ly
reAuired4 shall e/hi'it to any person desi-nated 'y the co#pany all that re#ains of any property herein
descri'ed4 and su'#it to e/a#ination under oath 'y any person na#ed 'y the Co#pany4 and su'scri'e the
sa#eF and4 as often as #ay 'e reasona'ly reAuired4 shall produce for e/a#ination all 'oo:s of account4 'ills4
invoices4 and other vouchers or certified copies thereof if ori-inals 'e lost4 at such reasona'le ti#e and place
as #ay 'e desi-nated 'y the Co#pany or its representative and shall per#it e/tracts and copies thereof to 'e
#ade. ;o clai# under this policy shall 'e paya'le unless the ter#s of this condition have 'een co#plied
(ith.? 7 perusal of the records sho(s that Isiphil4 after the occurrence of the fire4 i##ediately notified
Fin#an thereof. 2hereafter4 Isiphil su'#itted the follo(in- docu#entsE .%0 S(orn State#ent of Hoss and
For#al Clai# andF .)0 Proof of Hoss. 2he su'#ission of these docu#ents constitutes su'stantial co#pliance
(ith the a'ove provision. Indeed4 as re-ards the su'#ission of docu#ents to prove loss4 su'stantial4 not strict
as ur-ed 'y Fin#an4 co#pliance (ith the reAuire#ents (ill al(ays 'e dee#ed sufficient. In any case4 Fin#an
itself ac:no(led-ed its lia'ility (hen throu-h its Finance 9ana-er4 Rosauro 9a-hiran-4 it si-ned the
docu#ent indicatin- that the a#ount due Isiphil is P&<)4&*.<!.
)ssue [!$( =hether the pay#ent of )<O interest per annu# is authori8ed 'y Sections )<* and )<< of the
Insurance Code.
*eld [!$( JCS. 7nent the pay#ent of )<O interest per annu# co#puted fro# * 9ay %,&5 until fully paid4
the sa#e is authori8ed 'y Sections )<* and )<< of the Insurance Code. ;ota'ly4 under Section )<<4 a pri#a
facie evidence of unreasona'le delay in pay#ent of the clai# is created 'y the failure of the insurer to pay the
clai# (ithin the ti#e fi/ed in 'oth Sections )<* and )<<. Further4 Section ), of the policy itself provides for
the pay#ent of such interestE ?Settle#ent of clai# clause. 2he a#ount of any .loss or da#a-e for (hich the
co#pany #ay 'e lia'le4 under this policy shall 'e paid (ithin thirty days after proof of loss is received 'y the
co#pany and ascertain#ent of the loss or da#a-e is #ade either in an a-ree#ent 'et(een the insured and the
co#pany or 'y ar'itrationF 'ut if such ascertain#ent is not had or #ade (ithin si/ty days after such receipt 'y
the co#pany of the proof of loss4 then the loss or da#a-e shall 'e paid (ithin ninety days after such receipt.
Refusal or failure to pay the loss or da#a-e (ithin the ti#e prescri'ed herein (ill entitle the assured to collect
interest on the proceeds of the policy for the duration of the delay at the rate of t(ice the ceilin- prescri'ed 'y
the 9onetary 5oard. unless such failure or refusal to pay is 'ased on the -rounds .sic0 that the clai# is
fraudulent.? 2he policy itself o'li-es Fin#an to pay the insurance clai# (ithin *! days after proof of loss and
ascertain#ent of the loss #ade in an a-ree#ent 'et(een Isiphil and Fin#an. Fin#an and Isiphil si-ned the
a-ree#ent indicatin- that the a#ount due Isiphil (as P&<)4&*.<! on ) 7pril %,&5. Fin#an thus had until )
9ay %,&5 to pay Isiphil1s insurance. For its failure to do so4 the Court of 7ppeals and the trial court
ri-htfully directed Fin#an to pay4 inter alia4 )<O interest per annu# in accordance (ith the a'ove Auoted
provisions.

2006nr38 - Comm-Ins Cases

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2006nr38 - Comm-Ins Cases

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