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Mayer Steel Pipe vs Court of Appeals

273 SCRA 432 (1997)

Hong Kong Government Supplies Department contracted Mayer Steel Pipe Corporation to
manufacture and supply various steel pipes and fittings. Prior to the shipping, Mayer insured
these pipes and fittings against all risks with South Sea Surety and Insurance Co., Inc. and
Charter Insurance Corp., with Industrial Inspection Inc. appointed as third-party inspector.
After examining the pipes and fittings, Industrial Inspection certified that they are in good
order condition. However, when the goods reached Hong Kong , it was discovered that a
substantial portion thereof was damaged.
The trial court found in favor of the insured. However, when the case was elevated to the CA,
it set aside the decision of the trial court and dismissed the complaint on the ground of
prescription. It held that the action was barred under Sec. 3(6) of the Carriage of Goods by
Sea Act (COGSA) since it was filed only on April 17, 1986, more than two years from the time
the goods were unloaded from the vessel.

Whether or not the action is barred by prescription

SC Ruling:
Sec. 3(6) of the Carriage of Goods by Sea Act that the carrier and the ship shall be
discharged from all liability for loss or damage to the goods if no suit is filed within one year
after delivery of the goods or the date when they should have been delivered. Under this
provision, only the carriers liability is extinguished if no suit is brought within one year. But
the liability of the insurer is not extinguished because the insurers liability is based not on the
contract of carriage but on the contract of insurance.
An insurance contract is a contract whereby one party, for a consideration known as the
premium, agrees to indemnify another for loss or damage which he may suffer from a specified
peril. An all risks insurance policy covers all kinds of loss other than those due to willful and
fraudulent act of the insured. Thus, when private respondents issued the all risks policies to
Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods
insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New
Civil Code.

Insurance Case Digest:

Guingon V. Del Monte, 20 SCRA 1043 (1967)
Julio Aguilar owner and operator of several jeepneys insured them with Capital Insurance&
Surety Co., Inc.

February 20, 1961: Along the intersection of Juan Luna and Moro streets, City of Manila,
the jeepneys operated by Aguilar driven by Iluminado del Monte and Gervacio Guingon bumped
and Guingon died some days after

Iluminado del Monte was charged with homicide thru reckless imprudence and was penalized 4
months imprisonment

The heirs of Gervacio Guingon filed an action for damages praying that P82,771.80 be paid to
them jointly and severally by the driver del Monte, owner and operator Aguilar, and the Capital
Insurance & Surety Co., Inc.

CFI: Iluminado del Monte and Julio Aguilar jointly and severally to pay plaintiffs the sum
of P8,572.95 as damages for the death of their father, plus P1,000.00 for attorney's fees plus

Capital Insurance and Surety Co., Inc. is hereby sentenced to pay P5,000 plus P500 as
attorney's fees and costs to be applied in partial satisfaction of the judgment rendered
against Iluminado del Monte and Julio Aguilar in this case
ISSUE:1. W/N there a stipulation pour autriu to enable that will enable the heirs to sue
against Capital Insurance and Surety Co., Inc.? YES
HELD: Affirmed in toto.1. YES
policy: the insurer agreed to indemnify the insured "against all sums . . . which the Insured
shall become legally liable to pay in respect of: a. death of or bodily injury to any person . . .." indemnity against liability

Where the contract provides for indemnity against liability to third persons, then third
persons to whom the insured is liable, CAN sue the insurer. Where the contract is for
indemnity against actual loss or payment, then third persons CANNOT proceed against the
insurer, the contract being solely to reimburse the insured for liability actually discharged by
him thru payment to third persons, said third persons' recourse being thus limited to the
insured alone.

Insurance Case Digest:

Bonifacio Bros., Inc. V. Mora (1967)
G.R. No. L-20853
May 29, 1967
Lessons Applicable: stipulation pour autrui (Insurance)

Enrique Mora, owner of Oldsmobile sedan model 1956, mortgaged it to H.S. Reyes, Inc.,
with the condition that they would be the beneficiary of its insurance

June 23, 1959: The sedan was insured with State Bonding & Insurance Co., Inc

During the period of effectivity, the sedan met an accident and it was appraised

by Bayne Adjustment Co. and repaired it with Bonifacio Bros. and the parts were supplied
by Ayala Auto Parts Co. This was all done without the knowledge of H.S. Reyes. Enrique was
billed P2,102.73 through Bayne. The insurance company drew a check deducting P100 for
franchise and entrusted it to Bayne payable to Enrique or H.S. Reyes.
Still unpaid, the sedan was delivered to Enrique without the Knowledge of H.S. Reyes
Bonifacio Bros and Ayala Auto filed in the MTC on the theory that the insurance
proceeds should be paid directly to them
CFI affirmed MTC: H.S. Reyes, Inc. as having a better right

ISSUE: W/N there is privity between Bonifacio Bro and Ayala Auto against the insurance

HELD: NO. Judgment affirmed

GR: contracts take effect only between the parties thereto

EX: some specific instances provided by law where the contract contains some
stipulation in favor of a third person - stipulation pour autrui

provision in favor of a third person not a party to the contract

third person is allowed to avail himself of a benefit granted to him by the terms
of the contract, provided that the contracting parties have clearly and deliberately
conferred a favor upon such person

stipulation pour autrui must be clearly expressed - none here

"loss payable" clause of the insurance policy stipulates that "Loss, if any, is
payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they
intended to benefit.

stipulation merely establishes the procedure that the insured has to follow in
order to be entitled to indemnity for repair
a policy of insurance is a distinct and independent contract between the insured
and insurer, and third persons have no right either in a court of equity, or in a court of law,
to the proceeds of it, unless there be some contract of trust, expressed or implied
between the insured and third person
"loss" in insurance law embraces injury or damage
The injury or damage sustained by the insured in consequence of the happening
of one or more of the accidents or misfortune against which the insurer, in consideration of
the premium, has undertaken to indemnify the insured

Sun Insurance Office, Ltd. v. CA and Emilio Tan

G.R. No. 89741 March 13, 1991
Paras, J.
Emilio Tan took from Sun Insurance Office a P300,000.00 property insurance policy to cover
his interest in the electrical supply store of his brother. Four days after the issuance of the
policy, the building was burned including the insured store. On August 20, 1983,
Tan f i l e d h i s c l a i m f o r f i r e l o s s w i t h S u n
I n s u r a n c e O f f i c e , b u t o n F e b r u a r y 2 9 , 1 9 8 4 , S u n Insurance Office wrote Tan
denying the latters claim. On April 3, 1984, Tan wrote Sun Insurance Office,
seeking reconsideration of the denial of his claim. Sun Insurance Office answered
the letter, advising Tans counsel that the Insurers denial of Tans claim remained unchanged.
(1)WON the filing of a motion for reconsideration interrupts the 1
2 m o n t h s prescriptive period to contest the denial of the insurance claim; and(2)WON the
rejection of the claim shall be deemed final only of it contains words to the effect
that the denial is final;
(1) No. In this case, Condition 27 of the Insurance Policy of the parties reads:27.
Action or suit clause
- I f a c l a i m b e m a d e a n d r e j e c t e d a n d a n action or suit be not commenced either in
the Insurance Commission or in any court of competent jurisdiction within twelve (12) months
from receipt of notice of such rejection, or in case of arbitration taking place as provided
herein, within twelve (12) months after due notice of the award made by the arbitrator or
arbitrators or umpire, then the claim shall for all purposes be deemed to have been
abandoned and shall not thereafter be recoverable here under. As the terms are very clear and
free from any doubt or ambiguity whatsoever, it must be taken and understood in its plain,
ordinary and popular sense. Tan, in his letter addressed to Sun Insurance Office dated April 3,
1984, admitted
thath e r e c e i v e d a c o p y o f t h e l e t t e r o f r e j e c t i o n o n A p r i l 2 , 1 9 8 4 .
T h u s , t h e 1 2 - m o n t h prescriptive period started to run from the said date of
April 2, 1984, for such is the plain meaning and intention of Section 27 of the insurance
policy. The condition contained in an insurance policy that claims must be presented within one
year after rejection is not merely a procedural requirement but an important
matter essential to a prompt settlement of claims against insurance companies as it demands
that insurance suits be brought by the insured while the evidence as to the origin and cause
of destruction have not yet disappeared. It is apparent that Section 27 of the insurance
policy was stipulated pursuant to Section 63 of the Insurance Code, which states that:

S e c . 6 3 . A c o n d i t i o n , s t i p u l a t i o n o r a g r e e m e n t i n a n y p o l i c y o f insur
ance, limiting the time for commencing an action thereunder to a period of less than one
year from the time when the cause of action accrues, is void. It also begs to ask,
when does the cause of action accrue?
The insureds cause of a c t i o n o r h i s r i g h t t o f i l e a c l a i m e i t h e r i n t h e
I n s u r a n c e C o m m i s s i o n o r i n a c o u r t o f competent jurisdiction commences from the
time of the denial of his claim by the Insurer, either expressly or impliedly. But
the rejection referred to should be construed as the rejection in the first
instance (i.e. at the first occasion or for the first time), not rejection c o n v e y e d
in a resolution of a petition for reconsideration. Thus, to allow the filing
o f a motion for reconsideration to suspend the running of the
prescriptive period of twelvemonths, a whole new body of rules on the matter should be
promulgated so as to avoid any conflict that may be brought by it, such as:
a. whether the mere filing of a plea for reconsideration of a denial is sufficient or
must it be supported by arguments/affidavits/material evidence; b. how many petitions for
reconsideration should be permitted?
(2) No. The Eagle Star case cited by Tan to defend his theory that the rejection of the claim
shall be deemed final only of it contains words to the effect that the denial is final is
inapplicable in the
i n s t a n t c a s e . F i n a l r e j e c t i o n o r d e n i a l c a n n o t b e t a k e n t o m e a n t h e rejectio
n of a petition for reconsideration. The Insurance policy in the
Eagle Star
Case provides that the insured should file his claim, first, with the carrier and then
with the insurer. The final rejection being referred to in said case is the rejection by the
insurance company.

Interpretation of insurance contracts

No. L-21574, June 30, 196617 SCRA 599

Eduardo de la Cruz, the son of herein petitioner, was the
holdero f a n a c c i d e n t i n s u r a n c e p o l i c y . I n c o n n e c t i o n w i t h
t h e c e l e b r a t i o n o f t h e N e w Y e a r , t h e i n s u r e d , a n o n - p r o f e s s i o n a l boxer,
participated in a boxing contest. In the course of his bout with another person, likewise a
non-professional, of the same h e i g h t , w e i g h t , a n d s i z e , E d u a r d o s l i p p e d a n d
was hit by
h i s o p p o n e n t o n t h e l e f t p a r t o f t h e b a c k o f t h e h e a d , c a u s i n g Eduard
o to fall, with his head hitting the rope of the ring. The insured died with the cause of
death reported as hemorrhage intercranial, left. The insurer refused to pay the
proceeds of the policy on the ground that the death of the insured, caused by his
participation in a boxing contest, was not accidental and, therefore, not covered by insurance.
ISSUE: Whether or not the death of the insured is covered by the policy
HELD: The terms accident and accidental as used in the
insurancec o n t r a c t , h a v e n o t a c q u i r e d a n y t e c h n i c a l m e a n i n g , a n d a r e c o n s t r
u e d b y t h e c o u r t s i n t h e i r o r d i n a r y a n d c o m m o n accep
t a t i o n . T h u s , t h e t e r m s h a v e b e e n t a k e n t o m e a n t h a t which happen by
chance or fortuitously, without intention and design, and which is unexpected, unusual,
and unforeseen. An accident is an event that proceeds from an unknown cause and, therefore,
not expected. Without the unintentional slipping of the deceased, perhaps he would not
have received the blow in t h e h e a d a n d w o u l d n o t h a v e d i e d . B o x i n g i s
a t t e n d e d w i t h some risks of external injuries, but any injury received in the
course of the game could be accidental. In boxing, as in
othere q u a l l y p h y s i c a l l y r i g o r o u s s p o r t s , s u c h a s b a s k e t b a l l o r
baseball, death is not ordinarily anticipated to result. If,t h
e r e f o r e , i t e v e r d o e s , t h e i n j u r y o r d e a t h c a n o n l y
b e accidental or produced by some unforeseen happening or event as what occurred in this
case. The insurer was liable.
W H E R E F O R E , i n v i e w o f t h e f o r e g o i n g , c o n s i d e r a t i o n s , t h e decision
appealed from is hereby affirmed, with costs against appellant, so ordered

Finman General Assurance Corp. vs. Court of Appeals, 213 SCRA 493
The terms accident and accidental are construed by the courts in their ordinary and
common acceptation. The terms have been taken to mean that which happen by
chance, without intention and design, and which is unexpected, unusual and
unforeseen. Where the death or injury is not the natural or probable result of the
insureds voluntary act, the resulting death is within the protection of the policies
insuring against death or injury from accident.

FACTS: The CFI of Manila sentenced defendant Morales to pay Gallardo the sum of Php
7,ooo. The sheriff of Manila, in enforcing the writ of execution, garnished and levied on Php 7,ooo
out of Php 30,000 from Capital Insurance as a beneficiary under a personal accident policy issued by
said company to defendant under a personal accident insurance policy issued by the said
company to defendants husband who died by assassination. Defendant questioned the
garnishment made arguing that the said proceeds same from a life insurance policy, thus, exempt
from execution.
Whether or not a personal accident insurance which insures injuries and/or death as a
result of assault or attempt thereat is a life insurance
HELD: Yes, the personal accident insurance policy is a life insurance policy. It is
not disputed that a life insurance policy is different from an accident insurance.
However, when one of the risks insured in the latter is the death of the insured
by accident, then the authorities are inclined o consider such insurance as a life
insurance policy. Although intended primarily for indemnity for risks arising from
accident and , likewise, insures against loss due to accidental causes or to the willful
and criminal act, as long as the nature if the insurance is to enable the head of the
family to secure his widow and children from becoming a burden to the community, it
should merit a liberal consideration