G.R. No.

92383 July 17, 1992

fortuitously, without intention or design, and

which is unexpected, unusual, and unforeseen.
The definition that has usually been adopted by
the courts is that an accident is an event that
takes place without one's foresight or
expectation an event that proceeds from an
unknown cause, or is an unusual effect of a
known case, and therefore not expected. 4

SUN INSURANCE OFFICE, LTD., petitioner,

vs.
THE HON. COURT OF APPEALS and
NERISSA LIM, respondents.

An accident is an event which happens without

any human agency or, if happening through
human agency, an event which, under the
circumstances, is unusual to and not expected
by the person to whom it happens. It has also
been defined as an injury which happens by
reason of some violence or casualty to the
injured without his design, consent, or
voluntary co-operation. 5

CRUZ, J.:
The petitioner issued Personal Accident Policy
No. 05687 to Felix Lim, Jr. with a face value of
P200,000.00. Two months later, he was dead
with a bullet wound in his head. As beneficiary,
his wife Nerissa Lim sought payment on the
policy but her claim was rejected. The
petitioner agreed that there was no suicide. It
argued, however that there was no accident
either.

In light of these definitions, the Court is

convinced that the incident that resulted in
Lim's death was indeed an accident. The
petitioner, invoking the case of De la Cruz v.
Capital Insurance, 6 says that "there is no
accident when a deliberate act is performed
unless
some
additional,
unexpected,
independent and unforeseen happening occurs
which produces or brings about their injury or
death." There was such a happening. This was
the firing of the gun, which was the additional
unexpected and independent and unforeseen
occurrence that led to the insured person's
death.

Pilar Nalagon, Lim's secretary, was the only

eyewitness to his death. It happened on
October 6, 1982, at about 10 o'clock in the
evening, after his mother's birthday party.
According to Nalagon, Lim was in a happy
mood (but not drunk) and was playing with his
handgun, from which he had previously
removed the magazine. As she watched
television, he stood in front of her and pointed
the gun at her. She pushed it aside and said it
might he loaded. He assured her it was not and
then pointed it to his temple. The next moment
there was an explosion and Lim slumped to the
floor. He was dead before he fell. 1

The petitioner also cites one of the four

exceptions provided for in the insurance
contract and contends that the private
petitioner's claim is barred by such provision. It
is there stated:

The widow sued the petitioner in the Regional

Trial Court of Zamboanga City and was
sustained. 2 The petitioner was sentenced to
pay her P200,000.00, representing the face
value of the policy, with interest at the legal
rate; P10,000.00 as moral damages; P5,000.00
as exemplary damages; P5,000.00 as actual
and compensatory damages; and P5,000.00 as
attorney's fees, plus the costs of the suit. This
decision was affirmed on appeal, and the
motion for reconsideration was denied. 3 The
petitioner then came to this Court to fault the
Court of Appeals for approving the payment of
the claim and the award of damages.

Exceptions
The company shall not be liable in respect of
1. Bodily injury
xxx xxx xxx
b. consequent upon
i) The insured person attempting
to commit suicide or willfully
exposing himself to needless
peril except in an attempt to
save human life.

The term "accident" has been defined as

follows:
The words "accident" and "accidental" have
never acquired any technical signification in
law, and when used in an insurance contract
are to be construed and considered according
to the ordinary understanding and common
usage and speech of people generally. Insubstance, the courts are practically agreed
that the words "accident" and "accidental"
mean that which happens by chance or

To repeat, the parties agree that Lim did not

commit suicide. Nevertheless, the petitioner
contends that the insured willfully exposed
himself to needless peril and thus removed
himself from the coverage of the insurance
policy.

It should be noted at the outset that suicide

and willful exposure to needless peril are in
pari materia because they both signify a
disregard for one's life. The only difference is in
degree, as suicide imports a positive act of
ending such life whereas the second act
indicates a reckless risking of it that is almost
suicidal in intent. To illustrate, a person who
walks a tightrope one thousand meters above
the ground and without any safety device may
not actually be intending to commit suicide, but
his act is nonetheless suicidal. He would thus
be considered as "willfully exposing himself to
needless peril" within the meaning of the
exception in question.

insurance people to death. We also agree that

under
the
circumstances
narrated,
his
beneficiary would not be able to collect on the
insurance policy for it is clear that when he
braved
the
currents
below,
he deliberately exposed
himself
to
a known peril.

The petitioner maintains that by the mere act

of pointing the gun to hip temple, Lim had
willfully exposed himself to needless peril and
so came under the exception. The theory is
that a gun is per se dangerous and should
therefore be handled cautiously in every case.

Lim was unquestionably negligent and that

negligence cost him his own life. But it should
not prevent his widow from recovering from the
insurance policy he obtained precisely against
accident. There is nothing in the policy that
relieves the insurer of the responsibility to pay
the indemnity agreed upon if the insured is
shown to have contributed to his own accident.
Indeed, most accidents are caused by
negligence. There are only four exceptions
expressly made in the contract to relieve the
insurer from liability, and none of these
exceptions is applicable in the case at bar. **

The private respondent maintains that Lim did

not. That is where she says the analogy fails.
The petitioner's hypothetical swimmer knew
when he dived off the Quezon Bridge that the
currents below were dangerous. By contrast,
Lim did not know that the gun he put to his
head was loaded.

That posture is arguable. But what is not is

that, as the secretary testified, Lim had
removed the magazine from the gun and
believed it was no longer dangerous. He
expressly assured her that the gun was not
loaded. It is submitted that Lim did not willfully
expose himself to needless peril when he
pointed the gun to his temple because the fact
is that he thought it was not unsafe to do so.
The act was precisely intended to assure
Nalagon that the gun was indeed harmless.
The contrary view
petitioner thus:

is

expressed

by

It bears noting that insurance contracts are as

a rule supposed to be interpreted liberally in
favor of the assured. There is no reason to
deviate from this rule, especially in view of the
circumstances of this case as above analyzed.

the

On the second assigned error, however, the

Court must rule in favor of the petitioner. The
basic issue raised in this case is, as the
petitioner correctly observed, one of first
impression. It is evident that the petitioner was
acting in good faith then it resisted the private
respondent's claim on the ground that the
death of the insured was covered by the
exception. The issue was indeed debatable and
was clearly not raised only for the purpose of
evading a legitimate obligation. We hold
therefore that the award of moral and
exemplary damages and of attorney's fees is
unjust and so must be disapproved.

Accident insurance policies were

never intended to reward the
insured for his tendency to show
off or for his miscalculations.
They were intended to provide
for contingencies. Hence, when I
miscalculate and jump from the
Quezon Bridge into the Pasig
River in the belief that I can
overcome the current, I have
wilfully exposed myself to peril
and
must
accept
the
consequences of my act. If I
drown I cannot go to the
insurance company to ask them
to compensate me for my failure
to swim as well as I thought I
could. The insured in the case at
bar deliberately put the gun to
his head and pulled the trigger.
He wilfully exposed himself to
peril.

In order that a person may be

made liable to the payment of
moral damages, the law requires
that his act be wrongful. The
adverse result of an action does
not per se make the act wrongful
and subject the act or to the
payment of moral damages. The
law could not have meant to
impose a penalty on the right to
litigate; such right is so precious
that moral damages may not be
charged on those who may

The Court certainly agrees that a drowned man

cannot go to the insurance company to ask for
compensation.
That might
frighten the

exercise it erroneously. For these

the law taxes costs. 7

Eduardo de la Cruz, employed as a mucker in

the Itogon-Suyoc Mines, Inc. in Baguio, was the
holder of an accident insurance policy (No. ITOBFE-170) underwritten by the Capital Insurance
& Surety Co., Inc., for the period beginning
November 13, 1956 to November 12, 1957. On
January 1, 1957, in connection with the
celebration of the New Year, the Itogon-Suyoc
Mines, Inc. sponsored a boxing contest for
general entertainment wherein the insured
Eduardo de la Cruz, a non-professional boxer
participated. In the course of his bout with
another person, likewise a non-professional, of
the same height, weight, and size, Eduardo
slipped and was hit by his opponent on the left
part of the back of the head, causing Eduardo
to fall, with his head hitting the rope of the ring.
He was brought to the Baguio General Hospital
the following day. The cause of death was
reported as hemorrhage, intracranial, left.

The fact that the results of the

trial were adverse to Barreto did
not alone make his act in
bringing the action wrongful
because in most cases one party
will lose; we would be imposing
an unjust condition or limitation
on the right to litigate. We hold
that the award of moral damages
in the case at bar is not justified
by the facts had circumstances
as well as the law.
If a party wins, he cannot, as a
rule, recover attorney's fees and
litigation expenses, since it is not
the fact of winning alone that
entitles him to recover such
damages of the exceptional
circumstances enumerated in
Art. 2208. Otherwise, every time
a defendant wins, automatically
the plaintiff must pay attorney's
fees thereby putting a premium
on the right to litigate which
should not be so. For those
expenses, the law deems the
award of costs as sufficient. 8

Simon de la Cruz, the father of the insured and

who was named beneficiary under the policy,
thereupon filed a claim with the insurance
company for payment of the indemnity under
the insurance policy. As the claim was denied,
De la Cruz instituted the action in the Court of
First Instance of Pangasinan for specific
performance. Defendant insurer set up the
defense that the death of the insured, caused
by his participation in a boxing contest, was not
accidental and, therefore, not covered by
insurance. After due hearing the court rendered
the decision in favor of the plaintiff which is the
subject of the present appeal.

WHEREFORE, the challenged decision of the

Court of Appeals is AFFIRMED in so far as it
holds the petitioner liable to the private
respondent in the sum of P200,000.00
representing the face value of the insurance
contract, with interest at the legal rate from the
date of the filing of the complaint until the full
amount is paid, but MODIFIED with the deletion
of all awards for damages, including attorney's
fees, except the costs of the suit.
G.R. No. L-21574

It is not disputed that during the ring fight with

another
non-professional
boxer,
Eduardo
slipped, which was unintentional. At this
opportunity, his opponent landed on Eduardo's
head a blow, which sent the latter to the ropes.
That must have caused the cranial injury that
led to his death. Eduardo was insured "against
death or disability caused by accidental
means". Appellant insurer now contends that
while the death of the insured was due to head
injury, said injury was sustained because of his
voluntary participation in the contest. It is
claimed that the participation in the boxing
contest was the "means" that produced the
injury which, in turn, caused the death of the
insured. And, since his inclusion in the boxing
card was voluntary on the part of the insured,
he cannot be considered to have met his death
by "accidental means".1wph1.t

June 30, 1966

SIMON DE LA CRUZ, plaintiff and appellee,

vs.
THE CAPITAL INSURANCE and SURETY CO.,
INC., defendant and appellant.
Achacoso, Nera and Ocampo for defendant and
appellant.
Agustin M. Gramata for plaintiff and appellee.
BARRERA, J.:

The terms "accident" and "accidental", as used

in insurance contracts, have not acquired any
technical meaning, and are construed by the
courts in their ordinary and common
acceptation. Thus, the terms have been taken
to mean that which happen by chance or
fortuitously, without intention and design, and
which is unexpected, unusual, and unforeseen.

This is an appeal by the Capital Insurance &

Surety Company, Inc., from the decision of the
Court of First Instance of Pangasinan (in Civ
Case No. U-265), ordering it to indemnify
therein plaintiff Simon de la Cruz for the death
of the latter's son, to pay the burial expenses,
and attorney's fees.

An accident is an event that takes place

without one's foresight or expectation an
event that proceeds from an unknown cause, or
is an unusual effect of a known cause and,
therefore, not expected.1

(e) Death or disablement consequent

upon the Insured engaging in football,
hunting, pigsticking, steeplechasing,
polo-playing, racing of any kind,
mountaineering, or motorcycling.

Appellant however, would like to make a

distinction between "accident or accidental"
and "accidental means", which is the term used
in the insurance policy involved here. It is
argued that to be considered within the
protection of the policy, what is required to be
accidental is the means that caused or brought
the death and not the death itself. It may be
mentioned in this connection, that the
tendency of court decisions in the United States
in recent years is to eliminate the fine
distinction between the terms "accidental" and
"accidental means" and to consider them as
legally synonymous.2 But, even if we take
appellant's theory, the death of the insured in
the case at bar would still be entitled to
indemnification under the policy. The generally
accepted rule is that, death or injury does not
result from accident or accidental means within
the
terms
of
an
accident-policy if it is the natural result of the
insured's voluntary act, unaccompanied by
anything unforeseen except the death or
injury.3 There is no accident when a deliberate
act is performed unless some additional,
unexpected, independent, and unforeseen
happening occurs which produces or brings
about the result of injury or death.4 In other
words, where the death or injury is not the
natural or probable result of the insured's
voluntary act, or if something unforeseen
occurs in the doing of the act which produces
the injury, the resulting death is within the
protection of policies insuring against death or
injury from accident.

Death
or
disablement
resulting
from
engagement in boxing contests was not
declared outside of the protection of the
insurance contract. Failure of the defendant
insurance company to include death resulting
from a boxing match or other sports among the
prohibitive risks leads inevitably to the
conclusion that it did not intend to limit or
exempt itself from liability for such death.5
Wherefore,
in
view
of
the
foregoing
considerations, the decision appealed from is
hereby affirmed, with costs against appellant.
so ordered.
G.R. No. 100970 September 2, 1992
FINMAN
GENERAL
ASSURANCE
CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and
JULIA SURPOSA, respondents.
Aquino and Associates for petitioner.
Public Attorney's Office for private respondent.

NOCON, J.:
This is a petition for certiorari with a prayer for
the issuance of a restraining order and
preliminary mandatory injunction to annul and
set aside the decision of the Court of Appeals
dated July 11, 1991, 1 affirming the decision
dated March 20, 1990 of the Insurance
Commission 2 in ordering petitioner Finman
General Assurance Corporation to pay private
respondent Julia Surposa the proceeds of the
personal accident Insurance policy with
interest.

In the present case, while the participation of

the insured in the boxing contest is voluntary,
the injury was sustained when he slid, giving
occasion to the infliction by his opponent of the
blow that threw him to the ropes of the ring.
Without this unfortunate incident, that is, the
unintentional slipping of the deceased, perhaps
he could not have received that blow in the
head and would not have died. The fact that
boxing is attended with some risks of external
injuries does not make any injuries received in
the course of the game not accidental. In
boxing as in other equally physically rigorous
sports, such as basketball or baseball, death is
not ordinarily anticipated to result. If, therefore,
it ever does, the injury or death can only be
accidental or produced by some unforeseen
happening or event as what occurred in this
case.

It appears on record that on October 22, 1986,

deceased, Carlie Surposa was insured with
petitioner
Finman
General
Assurance
Corporation under Finman General Teachers
Protection Plan Master Policy No. 2005 and
Individual Policy No. 08924 with his parents,
spouses Julia and Carlos Surposa, and brothers
Christopher, Charles, Chester and Clifton, all
surnamed, Surposa, as beneficiaries. 3
While said insurance policy was in full force and
effect, the insured, Carlie Surposa, died on
October 18, 1988 as a result of a stab wound

Furthermore, the policy involved herein

specifically excluded from its coverage

inflicted by one of the three (3) unidentified

men without provocation and warning on the
part of the former as he and his cousin,
Winston Surposa, were waiting for a ride on
their way home along Rizal-Locsin Streets,
Bacolod City after attending the celebration of
the "Maskarra Annual Festival."

The
terms
"accident"
and
"accidental" as used in insurance
contracts have not acquired any
technical meaning, and are
construed by the courts in their
ordinary
and
common
acceptation. Thus, the terms
have been taken to mean that
which happen by chance or
fortuitously, without intention
and design, and which is
unexpected,
unusual,
and
unforeseen. An accident is an
event that takes place without
one's foresight or expectation
an event that proceeds from an
unknown cause, or is an unusual
effect of a known cause and,
therefore, not expected.

Thereafter, private respondent and the other

beneficiaries of said insurance policy filed a
written notice of claim with the petitioner
insurance company which denied said claim
contending that murder and assault are not
within the scope of the coverage of the
insurance policy.
On February 24, 1989, private respondent filed
a complaint with the Insurance Commission
which subsequently rendered a decision, the
pertinent portion of which reads:

. . . The generally accepted rule

is that, death or injury does not
result from accident or accidental
means within the terms of an
accident-policy if it is the natural
result of the insured's voluntary
act, unaccompanied by anything
unforeseen except the death or
injury. There is no accident when
a deliberate act is performed
unless
some
additional,
unexpected, independent, and
unforeseen happening occurs
which produces or brings about
the result of injury or death. In
other words, where the death or
injury is not the natural or
probable result of the insured's
voluntary act, or if something
unforeseen occurs in the doing of
the act which produces the
injury, the resulting death is
within the protection of the
policies insuring against death or
injury from accident. 5

In the light of the foregoing. we

find respondent liable to pay
complainant
the
sum
of
P15,000.00
representing
the
proceeds of the policy with
interest. As no evidence was
submitted to prove the claim for
mortuary aid in the sum of
P1,000.00, the same cannot be
entertained.
WHEREFORE, judgment is hereby
rendered ordering respondent to
pay complainant the sum of
P15,000.00 with legal interest
from the date of the filing of the
complaint until fully satisfied.
With costs. 4
On July 11, 1991, the appellate court affirmed
said decision.
Hence, petitioner filed this petition alleging
grove abuse of discretion on the part of the
appellate court in applying the principle of
"expresso unius exclusio alterius" in a personal
accident insurance policy since death resulting
from murder and/or assault are impliedly
excluded in said insurance policy considering
that the cause of death of the insured was not
accidental but rather a deliberate and
intentional act of the assailant in killing the
former as indicated by the location of the lone
stab wound on the insured. Therefore, said
death was committed with deliberate intent
which, by the very nature of a personal
accident
insurance
policy,
cannot
be
indemnified.

As correctly pointed out by the respondent

appellate court in its decision:
In the case at bar, it cannot be
pretended that Carlie Surposa
died in the course of an assault
or murder as a result of his
voluntary act considering the
very nature of these crimes. In
the first place, the insured and
his companion were on their way
home from attending a festival.
They
were
confronted
by
unidentified persons. The record
is barren of any circumstance
showing how the stab wound was
inflicted. Nor can it be pretended
that the malefactor aimed at the

We do not agree.

insured precisely because the

killer wanted to take his life. In
any event, while the act may not
exempt the unknown perpetrator
from criminal liability, the fact
remains that the happening was
a pure accident on the part of the
victim. The insured died from an
event that took place without his
foresight or expectation, an
event that proceeded from an
unusual effect of a known cause
and, therefore, not expected.
Neither can it be said that where
was a capricious desire on the
part of the accused to expose his
life to danger considering that he
was just going home after
attending a festival. 6

WHEREFORE, finding no irreversible error in the

decision of the respondent Court of Appeals,
the petition forcertiorari with restraining order
and preliminary injunction is hereby DENIED for
lack of merit.
G.R. No. L-12189

April 29, 1960

FRANCISCA
GALLARDO, plaintiff-appellee,
vs.
HERMENEGILDA S. MORALES, defendantappellant.
Cajulis
and
Dolorfino
Filemon Cajator for appellant.

for

appellee.

CONCEPCION, J.:
The issue before us is whether a personal
accident insurance which "insures for injuries
and/or death as a result of murder or assault or
attempt thereat" is a life insurance, within the
purview of Rule 39, section 12, subdivision (k)
of the Rules of Court, exempting from
execution.

Furthermore, the personal accident insurance

policy involved herein specifically enumerated
only ten (10) circumstances wherein no liability
attaches to petitioner insurance company for
any injury, disability or loss suffered by the
insured as a result of any of the stimulated
causes. The principle of " expresso unius
exclusio alterius" the mention of one thing
implies the exclusion of another thing is
therefore applicable in the instant case since
murder and assault, not having been expressly
included
in
the
enumeration
of
the
circumstances that would negate liability in
said insurance policy cannot be considered by
implication
to
discharge
the
petitioner
insurance company from liability for, any injury,
disability or loss suffered by the insured. Thus,
the failure of the petitioner insurance company
to include death resulting from murder or
assault among the prohibited risks leads
inevitably to the conclusion that it did not
intend to limit or exempt itself from liability for
such death.

All moneys, benefits, privileges, or

annuities accruing or in any manner
growing out of any life insurance, if the
annual premiums paid do not exceed
five hundred pesos, and if they exceed
that sum a like exemption shall exist
which shall bear the same proportion to
the moneys, benefits, privileges, and
annuities so accruing or growing out of
such insurance that said five hundred
pesos bears to the whole annual
premiums paid.
In accordance with a compromise agreement
between the parties in the above-entitled case,
a decision was rendered therein by the Court of
First Instance of Manila, on February 3, 1956,
sentencing defendant Hermenegilda S. Morales
to pay to plaintiff Francisca Gallardo the sum of
Seven Thousand Pesos (P7,000.00). In due
course, the corresponding writ of execution was
issued and delivered to the Sheriff of Manila,
who, on August 8, 1956, garnished and levied
execution on the sum of P7,000.00, out of the
P30,000.00 a due from the Capital Insurance &
Surety Co., Inc., to said defendant, as
beneficiary under a personal accident policy
issued by said company to defendant's
husband, Luis Morales, who died, on August 26,
1950, by assassination. Invoking the abovequoted provision of the Rules of Court,
defendant asked the sheriff to quash and lift
said garnishment or levy on execution. Upon
denial of this request by the sheriff, defendant
filed a motion praying that the aforementioned
sum of P7,000.00 be declared exempt from
execution under said provision of the Rules of

Article 1377 of the Civil Code of the Philippines

provides that:
The interpretation of obscure
words or stipulations in a
contract shall not favor the party
who caused the obscurity.
Moreover,
it is well settled that contracts of
insurance are to be construed
liberally in favor of the insured
and strictly against the insurer.
Thus ambiguity in the words of
an insurance contract should be
interpreted in favor of its
beneficiary. 7

Court, and that the Sheriff of Manila be ordered

to quash or lift said garnishment or levy on
execution. This motion was denied by an order
dated October 18, 1956. Hence, the present
appeal by the defendant, who maintains that
the policy in question is a life insurance policy,
within the purview of the aforementioned
exemption, for it insured her husband ". . . for
injuries and/or death as a result of murder or
assault or attempt thereat."

quoted by the oppositor, this Court is

fully convinced that an accident policy is
fundamentally different from a life
insurance policy, especially if this Court
takes into account that accident
insurance is an indemnity or casualty
contract, while life insurance is an
investment contract.
It is not disputed that a life insurance is,
generally speaking, distinct and different from
an accident insurance. However, when one of
the risks insured in the latter is the death of the
insured by accident, then there are authorities
to the effect that such accident insurance may,
also, be regarded as a life insurance.

In its order denying the claim for exemption set

up by the defendant, the lower court expressed
itself as follows:
Upon a perusal of the authorities cited
by the parties, this Court is fully
convinced that there is a fundamental
distinction between life insurance, and
accident insurance, and the insurance
policy issued to Luis G. Morales,
husband of herein defendant, was
undoubtedly an accident insurance, as
distinguished from a life insurance. As
conceded by the facts appearing in the
pleadings, the personal accident policy,
part of the proceeds of which is under
garnishment, was for P50,000.00 and
yet the annual premium was for P15.00.
If it were an ordinary life insurance
policy, taking into account that the
insured, Luis G. Morales, was 38 years of
age and the amount of the policy was
for P50,000.00 the annual premium
would have been around P1,206.00.
Besides, the period for the policy was
stipulated
for
one
year,
and
considerations as to age, health,
occupation
and
other
personal
circumstances were not taken into
account in an accident insurance policy.
Even the certification issued by the
insurance commissioner on August 23,
1956, marked as Annex "1" of the
opposition, shows that the Capital
Insurance and Surety Company Inc. is a
non-life insurance company and that the
only authority granted to it to transact
business covers fire, marine, surety,
fidelity, accident, motor car, and
miscellaneous insurance, except life
insurance. From this circumstance
alone, not to mention many others,
there are abundant indications that
there exists a fundamental distinction
between life insurance and accident
insurance. As counsel for oppositor has
clearly pointed out, an accident policy
merely insures the person from injury
and or death resulting from murder,
assault, or an attempt thereat, while in
life insurance policy, what is insured is
the life of the subject for a definite
number of years. From the authorities

"Life insurance" is a contract whereby

one party insures a person against loss
by the death of another. Petition of
Robbins, 140 A. 366, 367, 126 Me. 555.
An insurance on life is a contract by
which the insurer, for a stipulated sum,
engages to pay a certain amount of
money if another dies within the time
limited by the policy. Cason vs. Owens,
26 S. E. 75, 76, 100 Ga. 142.
Life insurance includes in which the
payment of the insurance money is
contingent upon the loss of life.
Bowless vs. Mutual
Ben.
Health
&
Accident Ass'n, C.C.A. Va. 99F. 2d 44. 48,
49.
A contract for life insurance is really a
contract for insurance for one year in
consideration of an advanced premium,
with the right of assured to continue it
from year to year upon payment of a
premium as stipulated. Mutual Life Ins.
Co. 100 Pa 172, 180.
In its broader sense, "life insurance"
includes accident insurance, since life is
insured under either contract. American
Trust & Banking Co. vs. Lessly, 106 S.W.
2d. 551, 552, 171 Tenn. 561, 111 A.L.R.
59.
Under statute providing that 'any life
insurance' on life of husband shall insure
to benefit of widow and children exempt
from husband's debt, proceeds of policy
insuring against death by accident
insured to widow's benefit free from
husband's debts. Code 1932, B 8456.
American Trust & Banking Co. vs. Lessly,
106 S.W. 2d 551, 171 Tenn. 511 III A.L.R.
59.

Insurance policy, providing for payment

in case of accidental death, is "life
insurance policy" to such extent within
state statue prescribing in-contestable
period for policies. Code S.C. 1932 ss
7986, 7987. Pacific Mut. Life Ins. Co. of
California vs. Parker, C.C.A.S.C., 71 F. 2d
872, 875.

Assurance Society covered loss of life

from natural as well as external and
accidental
causes,
and
was
life
insurance. The mere addition of the
double indemnity clause providing for
increased insurance upon proof of death
by accident did not divest the policy of
its character of insurance on life, or
make the contract other than life
insurance,for insurance on life includes
all policies of insurance in which the
payment of the insurance money is
contingent upon the loss of life.
Logan vs. Fidelity & Casualty Co., 146
Mo. 114, 47 S.W. 948. See also
Johnson vs. Fidelity & Guaranty Co., 148
Mich. 406, 151 N.W. 593, L.R.A. 1916A,
475; Zimmer vs. Central Accidental Co.,
207
Pa.
472,
56
A.
1003;
Wright vs. Fraternities Health & Accident
Ass'n. 107 Me. 418, 78A. 475, 32 L.R.A.
(N.S.)461;
Metropolitan
Life
Ins.
Co. vs. Ins. Com'r 208 Mass. 386, 94
N.E. 477; Standard Life & Accident Ins.
Co. vs. Caroll, 86 F. 567, 41 L.R.A. 194;
Wahl vs. Interstate
Business
Men's
Accident Ass'n 201 Iowa; 1355, 207 N.W.
395, 50 A.L.R. 1377." (Provident Life &
Accident Ins. Co. vs. Rimmer, 12 S. W.
2d Series, 365, 367.)

"Life insurance" includes all policies of

insurance
in
which
payment
of
insurance money is contingent upon
loss of life. . . . Smith vs. Equitable Life
Assur. Soc. of U.S., 89 S.W. 2d 165, 167,
169 Tenn. 477.
Insurance policy including a death
benefit and a health or accident
disability benefit constituted a "life
insurance policy" within meaning of laws
1926, c. 118, S. 134, imposing privilege
tax on insurance companies with
different rates as between life insurance
companies and other companies, in
view of provisions of Code 1906, ss
2576, 2598 (Hemingway's Code 1927,
ss 5830, 5856), and Law 1924, c. 191, s
I (Hemingway's Code 1927, s 5995); it
being immaterial that in some policy
forms the health and disability feature
was more valuable asent a showing that
death provision was inserted to avoid
the higher tax. Universal Life Ins.
Co. vs. State, 121 So. 849, 850, 155
Miss. 358." (25 Words & Phrases 260,
261, 262.)

For this reason, and because the above-quoted

provision of the Rules of Court makes reference
to "any life insurance," we are inclined to
believe that the exemption there established
applies to ordinary life insurance contracts, as
well as to those which, although intended
primarily to indemnify for risks arising from
accident, likewise, insure against loss of life
due, either to accidental causes, or to the
willful and criminal act of another, which, as
such, is not strictly accidental in nature.
Indeed, it has been held that statutes of this
nature seek to enable the head of the family to
secure his widow and children from becoming a
burden upon the community and, accordingly,
should merit a liberal interpretation.

When the application was made, Harris

W. Rimmer carried life insurance with
the Equitable Life Assurance Society, for
$10,000, payable upon proof of death,
with a provision that upon death by
accident the amount of insurance
payable would be increased to $20,000.
The plaintiff insisted that this was life
insurance, a disclosure of which was not
called for in question 10, while the
defendant insisted it was accident
insurance that should have been
disclosed and further insisted that, it
being a fact material to the risk the
failure to disclose the policy in the
Equitable
Life
Assurance
Society
rendered the policy issued to the
applicant void. . . .

The object of this statue was to enable a

husband, when death deprived wife and
children of his support, to secure them
from want and to prevent them from
becoming a charge upon the public.
Necessities of the wife and children and
the public interest are none the less if
the death of the husband be brought
about by accident rather than by
disease. The intent of the legislature in
the enactment of this statute would not
be advanced by the construction of the
law upon which the petitioners insist.
(American Trust & Banking Co. vs.Lessly
et al., Supreme Court of Tenn., 106 S.W.
2d, 551, 552.)

The court might have gone further and

held that the failure of the applicant to
characterize the insurance in the
Equitable Life Assurance Society as
accident insurance did not constitute a
false answer to the inquiry of what
accident or health insurance he was
carrying. The policy in the Equitable Life

Court of Appeals in CA-G.R. SP No. 22950 1 and

its Resolution denying the petitioners' motion
for reconsideration. 2 The challenged decision
modified the decision of the Insurance
Commission
in
IC
Case
No. RD-058. 3

Under statutes providing to that effect,

the proceeds of life insurance are
exempt from the claims of creditors, a
limitation being sometimes imposed as
to amount, see infra Sec. 40, or as to
the
beneficiaries entitled to the
exemption, see infra subdivision of this
section.
Statutes
exempting
life
insurance are regarded as exemption
laws, and not as part of the insurance
from law of the state, nor as designed
simply to protect insurer from harassing
litigation. Such statutes should be
construed liberally and in the light of,
and to give effect to, their purpose of
enabling an individual to provide a fund
after his death for his family which will
be free from the claims of creditors. The
exemption privilege is created not by
contract but by legislative grant, and
grounds for the exemption of the
proceeds of insurance policies must be
found in the statutes. (35 C.J.S. pp. 5354.)

The petitioners were the complainants in IC

Case No. RD-058, an administrative complaint
against
private
respondent
Insular
Life
Assurance Company, Ltd. (hereinafter Insular
Life), which was filed with the Insurance
Commission on 20 September 1989. 4 They
prayed therein that after due proceedings,
Insular Life "be ordered to pay the claimants
their insurance claims" and that "proper
sanctions/penalties be imposed on" it "for its
deliberate, feckless violation of its contractual
obligations to the complainants, and of the
Insurance Code." 5 Insular Life's motion to
dismiss the complaint on the ground that "the
claims of complainants are all respectively
beyond the jurisdiction of the Insurance
Commission as provided in Section 416 of the
Insurance Code," 6 having been denied in the
Order of 14 November 1989, 7 it filed its answer
on 5 December 1989. 8 Thereafter, hearings
were conducted on various dates.

By weight of authority, exemption

statutes
or
rules
should
be liberally construed with a view to
giving effect to their beneficent and
humane purpose. To this end, every
reasonable doubt as to whether a given
property is or is not exempt should be
resolved
in
favor
of
exemption.
(Comments on the Rules of Court by
Moran [1957 ed.] Vol. 1, p. 564.)

On 20 June 1990, the Commission rendered its

decision 9 in favor of the complainants, the
dispositive portion of which reads as follows:
WHEREFORE, this Commission
merely orders the respondent
company to:

Wherefore, the order appealed from is

reversed, and the garnishment in dispute
hereby set aside and quashed, with the costs of
this instance against plaintiff Francisca
Gallardo. It is so ordered.

a) Pay a fine of FIVE HUNDRED

PESOS (P500.00) a day from the
receipt of a copy of this Decision
until actual payment thereof;

G.R. No. 105562 September 27, 1993

b) Pay and settle the claims of

DINA AYO and LUCIA LONTOK, for
P50,000.00
and
P40,000.00,
respectively;

LUZ PINEDA, MARILOU MONTENEGRO,

VIRGINIA ALARCON, DINA LORENA AYO,
CELIA
CALUMBAG
and
LUCIA
LONTOK, petitioners,
vs.
HON. COURT OF APPEALS and THE
INSULAR LIFE ASSURANCE COMPANY,
LIMITED, respondents.

c) Notify henceforth it should

notify individual beneficiaries
designated under any Group
Policy, in the event of the death
of
insured(s),
where
the
corresponding claims are filed by
the Policyholder;

Mariano V. Ampil, Jr. for petitioners.

Ramon S. Caguiao for private respondent.

d) Show cause within ten days

why its other responsible officers
who have handled this case
should not be subjected to
disciplinary
and
other
administrative
sanctions
for
deliberately releasing to Capt.
Nuval the check intended for

DAVIDE, JR., J.:

This is an appeal by certiorari to review and set
aside the Decision of the public respondent

spouses
ALARCON,
in
the
absence of any Special Power of
Attorney for that matter, and for
negligence with respect to the
release of the other five checks.
SO ORDERED.

for minor beneficiary Marissa

Lontok, daughter of another
complainant Lucia Lontok, there
being no showing of any court
authorization presented or the
requisite bond posted.

10

Section 180 is quotes [sic] partly

as follows:

In holding for the petitioners, the Insurance

Commission made the following findings and
conclusions:

. . . In the absence
of
a
judicial
guardian,
the
father, or in the
latter's absence or
incapacity,
the
mother
of
any
minor, who is an
insured
or
a
beneficiary under
a contract of life,
health or accident
insurance,
may
exercise, in behalf
of said minor, any
right, under the
policy,
without
necessity of court
authority or the
giving
of
a
bond where
the
interest
of
the
minor
in
the
particular
act
involved does not
exceed
twenty
thousand
pesos . . . . 11

After taking into consideration

the evidences [sic], testimonial
and
documentary
for
the
complainants
and
the
respondent,
the
Commission
finds that; First: The respondent
erred in appreciating that the
powers of attorney executed by
five
(5)
of
the
several
beneficiaries convey absolute
authority to Capt. Nuval, to
demand, receive, receipt and
take
delivery
of
insurance
proceeds from respondent Insular
Life. A cursory reading of the
questioned powers of authority
would disclosed [sic] that they do
not contain in unequivocal and
clear terms authority to Capt.
Nuval to obtain, receive, receipt
from
respondent
company
insurance proceeds arising from
the death of the seaman-insured.
On the contrary, the said powers
of attorney are couched in terms
which
could
easily
arouse
suspicion
of
an
ordinary
man. . . .

Insular Life appealed the decision to the public

respondent which docketed the case as CA-G.R.
SP No. 22950. The appeal urged the appellate
court to reverse the decision because the
Insurance Commission (a) had no jurisdiction
over the case considering that the claims
exceeded
P100,000.00,
(b) erred in holding that the powers of attorney
relied upon by Insular Life were insufficient to
convey absolute authority to Capt. Nuval to
demand, receive and take delivery of the
insurance
proceeds
pertaining
to
the
petitioners, (c) erred in not giving credit to the
version of Insular Life that the power of
attorney supposed to have been executed in
favor of the Alarcons was missing, and
(d) erred in holding that Insular Life was liable
for violating Section 180 of the Insurance Code
for having released to the surviving mothers
the insurance proceeds pertaining to the
beneficiaries who were still minors despite the
failure of the former to obtain a court
authorization or to post a bond.

Second: The testimony of the

complainants' rebuttal witness,
Mrs.
Trinidad
Alarcon,
who
declared in no uncertain terms
that neither she nor her husband,
executed a special power of
attorney in favor of Captain
Rosendo Nuval, authorizing him
to claim, receive, receipt and
take delivery of any insurance
proceeds from Insular Life arising
out of the death of their
insured/seaman son, is not
convincingly refuted.
Third: Respondent Insular Life did
not observe Section 180 of the
Insurance Code, when it issued
or released two checks in the
amount of P150,000.00 for the
three minor children (P50,000.00
each) of complainant, Dina Ayo
and another check of P40,000.00

10

On 10 October 1991, the public respondent

rendered a decision, 12 the decretal portion of
which reads:

Unknown to them, however, the

PMSI, in its capacity as employer
and policyholder of the life
insurance
of
its
deceased
workers, filed with respondentappellant formal claims for and in
behalf of the beneficiaries,
through its President, Capt.
Nuval. Among the documents
submitted by the latter for the
processing of the claims were
five special powers of attorney
executed
by
complainantsappellees. On the basis of these
and
other
documents
duly
submitted, respondent-appellant
drew against its account with the
Bank of the Philippine Islands on
27 May 1986 six (6) checks, four
for P200,00.00 each, one for
P50,000.00 and another for
P40,00.00, payable to the order
of complainants-appellees. These
checks were released to the
treasurer
of
PMSI
upon
instructions
of
Capt. Nuval over the phone to
Mr. Mariano Urbano, Assistant
Department Manager for Group
Administration Department of
respondent-appellant.
Capt.
Nuval, upon receipt of these
checks from the treasurer, who
happened to be his son-in-law,
endorsed and deposited them in
his account with the Commercial
Bank of Manila, now Boston
Bank.

WHEREFORE,
the
decision
appealed from is modified by
eliminating therefrom the award
to Dina Ayo and Lucia Lontok in
the amounts of P50,000.00 and
P40,000.00, respectively. 13
It found the following facts to have been duly
established:
It appears that on 23 September
1983, Prime Marine Services, Inc.
(PMSI,
for
brevity),
a
crewing/manning outfit, procured
Group
PoIicy
No. G-004694 from respondentappellant Insular Life Assurance
Co., Ltd. to provide life insurance
coverage
to
its
sea-based
employees enrolled under the
plan. On 17 February 1986,
during the effectivity of the
policy, six covered employees of
the PMSI perished at sea when
their vessel, M/V Nemos, a Greek
cargo vessel, sunk somewhere in
El Jadida, Morocco. They were
survived
by
complainantsappellees,
the
beneficiaries
under the policy.
Following the tragic demise of
their loved ones, complainantsappellees sought to claim death
benefits due them and, for this
purpose, they approached the
President and General Manager
of PMSI, Capt. Roberto Nuval. The
latter evinced willingness to
assist complainants-appellees to
recover
Overseas
Workers
Welfare Administration (OWWA)
benefits from the POEA and to
work for the increase of their
PANDIMAN and other benefits
arising from the deaths of their
husbands/sons. They were thus
made to execute, with the
exception of the spouses Alarcon,
special
powers
of
attorney
authorizing Capt. Nuval to,
among others, "follow up, ask,
demand, collect and receive" for
their benefit indemnities of sums
of money due them relative to
the sinking of M/V Nemos. By
virtue of these written powers of
attorney, complainants-appellees
were able to receive their
respective
death
benefits.

On
3
July
1989,
after
complainants-appellees learned
that they were entitled, as
beneficiaries, to life insurance
benefits under a group policy
with respondent-appellant, they
sought to recover these benefits
from Insular Life but the latter
denied their claim on the ground
that the liability to complainantsappellees
was
already
extinguished upon delivery to
and receipt by PMSI of the six (6)
checks issued in their names. 14
On the basis thereof, the public respondent
held that the Insurance Commission had
jurisdiction over the case on the ground that
although
some
of
the
claims
exceed
P100,000.00, the petitioners had asked for
administrative sanctions against Insular Life
which are within the Commission's jurisdiction
to grant; hence, "there was merely a misjoinder
of causes of action . . . and, like misjoinder of
parties, it is not a ground for the dismissal of

11

the action as it does not affect the other reliefs

prayed for." 15 It also rejected Insular Life's
claim that the Alarcons had submitted a special
power of attorney which they (Insular Life) later
misplaced.

death benefits cannot prejudice

the insurance company which
relied on the terms of the powers
of attorney which on their face
do not disclose such limitation.
Under the circumstances, it
appearing that complainantsappellees have failed to point to
a positive provision of law or
stipulation in the policy requiring
a specific power of attorney to be
presented,
respondentsappellant's
reliance
on
the
written powers was in order and
it cannot be penalized for such
an act. 16

On the other hand, the public respondent ruled

that the powers of attorney, Exhibits "1" to "5,"
relied upon by Insular Life were sufficient to
authorize Capt. Nuval to receive the proceeds
of the insurance pertaining to the beneficiaries.
It stated:
When the officers of respondentappellant read these written
powers, they must have assumed
Capt. Nuval indeed had authority
to collect the insurance proceeds
in behalf of the beneficiaries who
duly affixed their signatures
therein. The written power is
specific enough to define the
authority of the agent to collect
any sum of money pertaining to
the sinking of the fatal vessel.
Respondent-appellant
interpreted this power to include
the
collection
of
insurance
proceeds in behalf of the
beneficiaries
concerned.
We
believe this is a reasonable
interpretation even by an officer
of
respondent-appellant
unschooled in the law. Had
respondent appellant, consulted
its legal department it would not
have received a contrary view.
There is nothing in the law which
mandates a specific or special
power of attorney to be executed
to collect insurance proceeds.
Such authority is not included in
the enumeration of Art. 1878 of
the New Civil Code. Neither do
we
perceive
collection
of
insurance claims as an act of
strict dominion as to require a
special
power
of
attorney.
Moreover, respondent-appellant
had no reason to doubt Capt.
Nuval. Not only was he armed
with
a
seemingly
genuine
authorization, he also appeared
to be the proper person to deal
with respondent-appellant being
the
President
and
General
Manager of the PMSI, the
policyholder
with
whom
respondent-appellant
always
dealt. The fact that there was a
verbal
agreement
between
complainants-appellees
and
Capt. Nuval limiting the authority
of the latter to claiming specified

Insofar as the minor children of Dina Ayo and

Lucia Lontok were concerned, it ruled that the
requirement in Section 180 of the Insurance
Code which provides in part that:
In the absence of a judicial
guardian, the father, or in the
latter's absence or incapacity,
the mother, of any minor, who is
an insured or a beneficiary under
a contract of life, health or
accident
insurance,
may
exercise, in behalf of said minor,
any right under the policy,
without
necessity
of
court
authority or the giving of a bond,
where the interest of the minor in
the particular act involved does
not exceed twenty thousand
pesos. Such a right, may include,
but shall not be limited to,
obtaining
a
policy
loan,
surrendering the policy, receiving
the proceeds of the policy, and
giving the minor's consent to any
transaction on the policy.
has been amended by the Family
Code 17 which grants the father and
mother joint legal guardianship over the
property
of
their
unemancipated
common child without the necessity of a
court appointment; however, when the
market value of the property or the
annual income of the child exceeds
P50,000.00, the parent concerned shall
be required to put up a bond in such
amount as the court may determine.
Hence,
this
petition
for
review
on certiorari which we gave due course after
the private respondent had filed the required
comment thereon and the petitioners their
reply to the comment.
We rule for the petitioners.

12

We have carefully examined the specific

powers of attorney, Exhibits "1" to "5," which
were executed by petitioners Luz Pineda, Lucia
B. Lontok, Dina Ayo, Celia Calumag, and
Marilyn Montenegro, respectively, on 14 May
1986 18and uniformly granted to Capt. Rosendo
Nuval the following powers:

Certainly, it would be highly imprudent to read

into the special powers of attorney in question
the power to collect and receive the insurance
proceeds due the petitioners from Group Policy
No. G-004694. Insular Life knew that a power of
attorney in favor of Capt. Nuval for the
collection and receipt of such proceeds was a
deviation from its practice with respect to
group policies. Such practice was testified to by
Mr. Marciano Urbano, Insular Life's Assistant
Manager
of
the
Group
Administrative
Department, thus:

To
follow-up,
ask,
demand,
collect and receipt for my benefit
indemnities or sum of money due
me relative to the sinking of M.V.
NEMOS in the vicinity of El
Jadida, Casablanca, Morocco on
the evening of February 17,
1986; and

ATTY. CAGUIOA:Can you explain to us why in

this case, the claim was filed by a certain Capt.
Noval [sic]?

To sign receipts, documents,

pertinent waivers of indemnities
or other writings of whatsoever
nature with any and all third
persons, concerns and entities,
upon
terms and conditions
acceptable to my said attorney.

WITNESS: a The practice of our company in

claim pertaining to group insurance, the
policyholder is the one who files the claim for
the beneficiaries of the deceased. At that time,
Capt. Noval [sic] is the President and General
Manager of Prime Marine.
q What is the reason why policyholders are the
ones who file the claim and not the designated
beneficiaries of the employees of the
policyholders?

We agree with the Insurance Commission that

the special powers of attorney "do not contain
in unequivocal and clear terms authority to
Capt. Nuval to obtain, receive, receipt from
respondent company insurance proceeds
arising from the death of the seaman-insured.
On the contrary, the said powers of attorney
are couched in terms which could easily arouse
suspicion of an ordinary man." 19 The holding of
the public respondent to the contrary is
principally premised on its opinion that:

a Yes because group insurance is normally

taken by the employer as an employee-benefit
program and as such, the benefit should be
awarded by the policyholder to make it appear
that the benefit really is given by the
employer. 20
On
cross-examination,
Urbano
further
elaborated that even payments, among other
things, are coursed through the policyholder:

[t]here is nothing in the law

which mandates a specific or
special power of attorney to be
executed to collect insurance
proceeds. Such authority is not
included in the enumeration of
art. 1878 of the New Civil Code.
Neither do we perceive collection
of insurance claims as an act of
strict dominion as to require a
special power of attorney.

q What is the corporate concept of group

insurance insofar as Insular Life is concerned?
WITNESS:
a Group insurance is a contract where a group
of individuals are covered under one master
contract.
The
individual
underwriting
characteristics of each individual is not
considered in the determination of whether the
individual is insurable or not. The contract is
between the policyholder and the insurance
company. In our case, it is Prime Marine and
Insular Life. We do not have contractual
obligations with the individual employees; it is
between Prime Marine and Insular Life.

If this be so, then they could not have

been meant to be a general power of
attorney since Exhibits "1" to "5"
are special powers of attorney. The
execution by the principals of special
powers of attorney, which clearly
appeared to be in prepared forms and
only had to be filled up with their
names, residences, dates of execution,
dates of acknowledgment and others,
excludes any intent to grant a general
power of attorney or to constitute a
universal agency. Being special powers
of attorney, they must be strictly
construed.

q And so it is part of that concept that all

inquiries, follow-up, payment of claims,
premium billings, etc. should always be
coursed thru the policyholder?
a Yes that is our practice.

13

q And when you say claim payments should

always be coursed thru the policyholder, do
you require a power of attorney to be
presented by the policyholder or not?

q Not directly to the designated beneficiaries?

a Yes, Sir. 21This practice is usual in the group
insurance business and is consistent with the
jurisprudence thereon in the State of California
from whose laws our Insurance Code has
been mainly patterned which holds that the
employer-policyholder is the agent of the
insurer.

a Not necessarily.
q In other words, under a group insurance
policy like the one in this case, Insular Life
could pay the claims to the policyholder himself
even without the presentation of any power of
attorney from the designated beneficiaries?

Group insurance is a comparatively new form of

insurance. In the United States, the first
modern group insurance policies appear to
have been issued in 1911 by the Equitable Life
Assurance
Society. 22 Group
insurance
is
essentially a single insurance contract that
provides coverage for many individuals. In its
original and most common form, group
insurance provides life or health insurance
coverage for the employees of one employer.

xxx xxx xxx

WITNESS:
a No. Sir.
ATTY. AMPIL:

The coverage terms for group insurance are

usually stated in a master agreement or policy
that is issued by the insurer to a representative
of the group or to an administrator of the
insurance program, such as an employer. 23The
employer acts as a functionary in the collection
and payment of premiums and in performing
related duties. Likewise falling within the ambit
of administration of a group policy is the
disbursement of insurance payments by the
employer to the employees. 24 Most policies,
such as the one in this case, require an
employee to pay a portion of the premium,
which the employer deducts from wages while
the remainder is paid by the employer. This is
known as a contributory plan as compared to a
non-contributory plan where the premiums are
solely paid by the employer.

q Why? Is this case, the present case different

from the cases which you answered that no
power of attorney is necessary in claims
payments?
WITNESS:
a We did not pay Prime Marine; we paid the
beneficiaries.
q Will you now tell the Honorable Commission
why you did not pay Prime Marine and instead
paid
the
beneficiaries,
the
designated
beneficiaries?
xxx xxx xxx
ATTY. AMPIL:

Although the employer may be the titular or

named insured, the insurance is actually
related to the life and health of the employee.
Indeed, the employee is in the position of a real
party to the master policy, and even in a noncontributory plan, the payment by the
employer of the entire premium is a part of the
total compensation paid for the services of the
employee. 25 Put differently, the labor of the
employees is the true source of the benefits,
which are a form of additional compensation to
them.

I will rephrase the question.

q Will you tell the Commission what
circumstances led you to pay the designated
beneficiaries, the complainants in this case,
instead of the policyholder when as you
answered a while ago, it is your practice in
group insurance that claims payments, etc., are
coursed thru the policyholder?
WITNESS:

It has been stated that every problem

concerning group insurance presented to a
court should be approached with the purpose of
giving to it every legitimate opportunity of
becoming a social agency of real consequence
considering that the primary aim is to provide
the employer with a means of procuring
insurance protection for his employees and
their families at the lowest possible cost, and in
so doing, the employer creates goodwill with
his employees, enables the employees to carry

a It is coursed but, it is not paid to the

policyholder.
q And so in this case, you gave the checks to
the policyholder only coursing them thru said
policyholder?
a That is right, Sir.

14

a larger amount of insurance than they could

otherwise, and helps to attract and hold a
permanent class of employees. 26

In Neider
Company,
held that:

In Elfstrom vs. New York Life Insurance

Company, 27 the California Supreme Court
explicitly ruled that in group insurance policies,
the employer is the agent of the insurer. Thus:

28

vs. Continental
Assurance
which was cited in Elfstrom, it was

[t]he employer owes to the

employee the duty of good faith
and due care in attending to the
policy, and that the employer
should make clear to the
employee anything required of
him to keep the policy in effect,
and the time that the obligations
are due. In its position as
administrator of the policy, we
feel also that the employer
should be considered as the
agent of the insurer, and any
omission of duty to the employee
in its administration should
be attributable to the insurer.

We are convinced that the

employer is the agent of the
insurer in performing the duties
of administering group insurance
policies. It cannot be said that
the employer acts entirely for its
own benefit or for the benefit of
its employees in undertaking
administrative functions. While a
reduced premium may result if
the employer relieves the insurer
of these tasks, and this, of
course, is advantageous to both
the
employer
and
the
employees, the insurer also
enjoys significant advantages
from the arrangement. The
reduction in the premium which
results
from
employeradministration
permits
the
insurer to realize a larger volume
of sales, and at the same time
the insurer's own administrative
costs are markedly reduced.

The
ruling
in Elfstrom was
subsequently
reiterated in the cases of Bass vs. John
Hancock
Mutual
Life
Insurance
Co. 29 and Metropolitan
Life
Insurance
Co. vs. State Board of Equalization. 30
In the light of the above disquisitions and after
an examination of the facts of this case, we
hold that PMSI, through its President and
General Manager, Capt. Nuval, acted as the
agent of Insular Life. The latter is thus bound
by the misconduct of its agent.

xxx xxx xxx

Insular Life, however, likewise recognized Capt.

Nuval as the attorney-in-fact of the petitioners.
Unfortunately, through its official, Mr. Urbano, it
acted imprudently and negligently in the
premises by relying without question on the
special
power
of
attorney.
In Strong
vs. Repide, 31 this Court ruled that it is among
the established principles in the civil law of
Europe as well as the common law of American
that third persons deal with agents at their peril
and are bound to inquire as to the extent of the
power of the agent with whom they contract.
And
in Harry
E. Keller
Electric
Co. vs. Rodriguez,32 this
Court,
quoting Mechem on Agency, 33 stated that:

The most persuasive rationale for

adopting the view that the
employer acts as the agent of
the insurer, however, is that the
employee has no knowledge of
or control over the employer's
actions in handling the policy or
its administration. An agency
relationship
is
based
upon
consent by one person that
another shall act in his behalf
and be subject to his control. It is
clear
from
the
evidence
regarding procedural techniques
here that the insurer-employer
relationship meets this agency
test
with
regard
to
the
administration of the policy,
whereas
that
between
the
employer and its employees fails
to reflect true agency. The
insurer directs the performance
of the employer's administrative
acts, and if these duties are not
undertaken properly the insurer
is in a position to exercise more
constricted control over the
employer's conduct.

The person dealing with an agent

must also act with ordinary
prudence
and
reasonable
diligence. Obviously, if he knows
or has good reason to believe
that the agent is exceeding his
authority,
he
cannot
claim
protection. So if the suggestions
of probable limitations be of such
a clear and reasonable quality, or
if the character assumed by the
agent is of such a suspicious or
unreasonable nature, or if the
authority which he seeks to

15

exercise is of such an unusual or

improbable character, as would
suffice to put an ordinarily
prudent man upon his guard, the
party dealing with him may not
shut his eyes to the real state of
the case, but should either refuse
to deal with the agent at all, or
should
ascertain
from
the
principal the true condition of
affairs. (emphasis supplied)

performance of the obligations of a general

guardian.
It must, however, be noted that the second
paragraph of Article 225 of the Family Code
speaks of the "market value of the property or
the annual income of the child," which means,
therefore, the aggregate of the child's property
or annual income; if this exceeds P50,000.00, a
bond is required. There is no evidence that the
share of each of the minors in the proceeds of
the group policy in question is the minor's only
property. Without such evidence, it would not
be safe to conclude that, indeed, that is his
only property.

Even granting for the sake of argument that the

special powers of attorney were in due form,
Insular Life was grossly negligent in delivering
the checks, drawn in favor of the petitioners, to
a party who is not the agent mentioned in the
special power of attorney.

WHEREFORE, the instant petition is GRANTED.

The
Decision
of
10 October 1991 and the Resolution of 19 May
1992 of the public respondent in CA-G.R. SP No.
22950 are SET ASIDE and the Decision of the
Insurance Commission in IC Case No. RD-058 is
REINSTATED.

Nor can we agree with the opinion of the public

respondent that since the shares of the minors
in the insurance proceeds are less than
P50,000.00, then under Article 225 of the
Family Code their mothers could receive such
shares
without
need
of
either
court
appointments as guardian or the posting of a
bond. It is of the view that said Article had
repealed the third paragraph of Section 180 of
the Insurance Code. 34 The pertinent portion of
Article 225 of the Family Code reads as follows:

Costs against the private respondent.

Art. 225. The father and the

mother shall jointly exercise legal
guardianship over the property of
their unemancipated common
child without the necessity of a
court appointment. In case of
disagreement,
the
father's
decision shall prevail, unless
there is judicial order to the
contrary.
Where the market value of the
property or the annual income of
the child exceeds P50,000, the
parent
concerned
shall
be
required to furnish a bond in
such amount as the court may
determine, but not less than ten
per centum (10%) of the value of
the property or annual income,
to guarantee the performance of
the obligations prescribed for
general guardians.
It is clear from the said Article that regardless
of the value of the unemancipated common
child's property, the father and mother ipso
jure become the legal guardian of the child's
property. However, if the market value of the
property or the annual income of the child
exceeds P50,000.00, a bond has to be posted
by the parents concerned to guarantee the

16