Insurance Case Digests E
28. Heirs of Ildefonso Coscolluela Sr vs Rico Gen Ins
(1989)
Facts:
The petitioner, Heirs of Ildefonso Coscoluella, was the
registered owner of an Isuzu pick-up truck that was insured with
Rico General Insurance Corporation (Rico Gen) for P100,000.
But an incident occurred at Hacienda Puyas, Barangay
Blumentritt, Murcia, Negros Occidental where the vehicle was
fired upon by a group of unidentified men. Four persons also
died at the same time. As a result of the incident, the insured
vehicle was rendered unserviceable. When petitioner sought to
collect from Rico Gen, the latter refused payment, pointing out
to an exception clause, which include an indirect consequence
of rebellion, insurrection or civil commotion.
Petitioner sued Rico Gen. The RTC dismissed the case
based on Rico Gens motion to dismiss based on lack of cause
of action. Thereafter, the RTC refused to transmit the records of
the case, saying that petitioners remedy should be petition for
review by way of certiorari and not a notice of appeal. But what
petitioner did was to file a petition for certiorari under Rule 65
before the CA. The CA affirmed the the dismissal, adding that
an ordinary appeal was the proper remedy and not a special civil
action for certioari.1
Issue: Whether or not petitioner has a cause of action.
Held: Yes. At the onset, it should be noted that Rico Gens
motion to dismiss based on lack of cause of action had the effect
of hypothetically admitting the facts stated by petitioner. We do
not find anything in the complaint which does not deserve
admission by the motion since there are no "conclusions or
interpretations of law" nor "allegations of fact the falsity of which
is subject to judicial notice." It is clear that the complaint does
no more and no less than state simply that the van was
damaged due to the firing by unidentified armed men. Since the
complaint does not explicitly state nor intimate civil strife which
private respondent insists to be the cause of the damage, the
motion to dismiss cannot go beyond the admission of the facts
stated and inferences reasonably deducible from them. Any
other assertion by the private respondent is subject to proof.
Meanwhile, the sufficiency of the petitioner's cause of action has
been shown since, admitting the facts alleged, a valid judgment
can be rendered. The private respondent's invocation of the
exceptions clause in the insurance policy as the basis for its non-
liability and the consequent dismissal of the complaint is without
merit. We also reiterate the established rule that when the terms
of an insurance contract contain limitations on liability, the court
"should construe them in such a way as to preclude the insurer
from non-compliance with his obligations." A policy of insurance
with a narration of exceptions tending to work a forfeiture of the
policy shall be interpreted liberally in favor of the insured and
strictly against the insurance company or the party for whose
benefit they are inserted.
29. Pacific Timber Corp vs CA (1982)
Facts:
1
The Supreme Court later on took note of this absurdity. The
CA reprimanded petitioner when the RTC was the one that
prevented petitioner from availing of an ordinary appeal.
Pacific Timber Export Corporation (Pacific) secured a
temporary insurance from the Workmens Insurance Co. for its
exportation from Quezon Province to Okinawa and Tokyo,
Japan. The insurance company issued a Cover Note insuring the
cargo. Thereafter, the insurance company issued two regular
marine cargo policies. But it was discovered that some of the
logs were missing during the loading operations. Apparently,
when the logs were alongside the vessel, bad weather
developed resulting in 75 pieces of log to break loose from each
other, with only 45 being saved. The insurance company refused
to pay for the loss, informing the Insurance Commissioner that
it was denying Pacifics claim on the ground that the cover note
is null and void for lack of valuable consideration.
Issue: Whether or not the cover note is null and void for lack of
valuable consideration.
Held: No. Petitioner contends that the Cover Note was issued
with a consideration when, by express stipulation, the cover
note is made subject to the terms and conditions of the marine
policies, and the payment of premiums is one of the terms of
the policies. From this undisputed fact, We uphold petitioner's
submission that the Cover Note was not without consideration
for which the respondent court held the Cover Note as null and
void, and denied recovery therefrom. The fact that no separate
premium was paid on the Cover Note before the loss insured
against occurred, does not militate against the validity of
petitioner's contention, for no such premium could have been
paid, since by the nature of the Cover Note, it did not contain,
as all Cover Notes do not contain particulars of the shipment
that would serve as basis for the computation of the premiums.
As a logical consequence, no separate premiums are intended
or required to be paid on a Cover Note. This is a fact admitted
by an official of respondent company, Juan Jose Camacho, in
charge of issuing cover notes of the respondent company (p.
33, tsn, September 24, 1965). At any rate, it is not disputed that
petitioner paid in full all the premiums as called for by the
statement issued by private respondent after the issuance of the
two regular marine insurance policies, thereby leaving no
account unpaid by petitioner due on the insurance coverage,
which must be deemed to include the Cover Note. If the Note is
to be treated as a separate policy instead of integrating it to the
regular policies subsequently issued, the purpose and function
of the Cover Note would be set at naught or rendered
meaningless, for it is in a real sense a contract, not a mere
application for insurance which is a mere offer.
It may be true that the marine insurance policies issued
were for logs no longer including those which had been lost
during loading operations. This had to be so because the risk
insured against is not for loss during operations anymore, but
for loss during transit, the logs having already been safely
placed aboard. This would make no difference, however, insofar
as the liability on the cover note is concerned, for the number
or volume of logs lost can be determined independently as in
fact it had been so ascertained at the instance of private
respondent itself when it sent its own adjuster to investigate and
assess the loss, after the issuance of the marine insurance
policies. The adjuster went as far as submitting his report to
respondent, as well as its computation of respondent's liability
on the insurance coverage. This coverage could not have been
no other than what was stipulated in the Cover Note, for no loss
or damage had to be assessed on the coverage arising from the
marine insurance policies. For obvious reasons, it was not
necessary to ask petitioner to pay premium on the Cover Note,
for the loss insured against having already occurred, the more
practical procedure is simply to deduct the premium from the
amount due the petitioner on the Cover Note. The non-payment
of premium on the Cover Note is, therefore, no cause for the
petitioner to lose what is due it as if there had been payment of
premium, for non-payment by it was not chargeable against its
fault. Had all the logs been lost during the loading operations,
but after the issuance of the Cover Note, liability on the note
would have already arisen even before payment of premium.
This is how the cover note as a "binder" should legally operate
otherwise, it would serve no practical purpose in the realm of
commerce, and is supported by the doctrine that where a policy
is delivered without requiring payment of the premium, the
presumption is that a credit was intended and policy is valid.
30. Great Pacific Life Assurance Co vs CA (1979)
Facts:
Ngo Hing filed an application with the Great Pacific for a
twenty-year endowment policy in the amount of P50,000.00 on
the life of his one-year old daughter Helen. He supplied the
essential data which petitioner Mondragon, the Branch Manager,
wrote on the form. The latter paid the annual premium the sum
of P1,077.75 going over to the Company, but he retained the
amount of P1,317.00 as his commission for being a duly
authorized agent of Pacific Life. Upon the payment of the
insurance premium, the binding deposit receipt was issued Ngo
Hing. Likewise, petitioner Mondragon handwrote at the bottom
of the back page of the application form his strong
recommendation for the approval of the insurance application.
Then Mondragon received a letter from Pacific Life disapproving
the insurance application. The letter stated that the said life
insurance application for 20-year endowment plan is not
available for minors below seven years old, but Pacific Life can
consider the same under the Juvenile Triple Action Plan, and
advised that if the offer is acceptable, the Juvenile Non-Medical
Declaration be sent to the company. The non-acceptance of the
insurance plan by Pacific Life was allegedly not communicated
by petitioner Mondragon to private respondent Ngo Hing.
Instead, on May 6, 1957, Mondragon wrote back Pacific Life
again strongly recommending the approval of the 20-year
endowment insurance plan to children, pointing out that since
the customers were asking for such coverage. Helen Go died of
influenza. Ngo Hing sought the payment of the proceeds of the
insurance, but having failed in his effort, he filed the action for
the recovery before the Court of First Instance of Cebu, which
ruled against him.
Issue: Whether the binding deposit receipt constituted a
temporary contract of the life insurance in question.
Held: No. The receipt was intended to be merely a provisional
insurance contract. Its perfection was subject to compliance of
the following conditions: (1) that the company shall be satisfied
that the applicant was insurable on standard rates; (2) that if
the company does not accept the application and offers to issue
a policy for a different plan, the insurance contract shall not be
binding until the applicant accepts the policy offered; otherwise,
the deposit shall be refunded; and (3) that if the company
disapproves the application, the insurance applied for shall not
be in force at any time, and the premium paid shall be returned
to the applicant. The receipt is merely an acknowledgment that
the latter's branch office had received from the applicant the
insurance premium and had accepted the application subject for
processing by the insurance company. There was still approval
or rejection the same on the basis of whether or not the
applicant is "insurable on standard rates." Since Pacific Life
disapproved the insurance application of respondent Ngo Hing,
the binding deposit receipt in question had never become in
force at any time. The binding deposit receipt is conditional and
does not insure outright.
31. RCBC vs CA (1998)
Facts:
Goyu & Sons applied for credit facilities/accommodations
with RCBC. It was granted for an initial amount of P30 million
which later on increased to P117 million. As security, Goyu
executed two REMs and two chattel mortgages in favor of RCBC.
It also committed itself to insure the mortgaged property with
Malayan Insurance Co I (Mico). Goyu obtained in its name a
total of ten insurance policies from Mico. Thereafter, Alchester
Insurance Agency Inc, the agent where Goyu obtained the
Malayan insurance policies, issued nine endorsements in favor
of RCBC seemingly upon instructions of Goyu.
Later on, Goyus factory buildings in Valenzuela was gutted
by fire. When it claimed from Mico, the latter denied on the
ground that the insurance policies were either attached
pursuant to writs of attachments/garnishments issued by
various courts or that the insurance proceeds were also claimed
by other creditors of Goyu alleging better rights to the proceeds
than the insured. Goyu filed a complaint for specific performance
against Mico. It was later revealed that Goyu had other creditors
that obtained their respective writs of attachments from various
courts covering an aggregate amount of P14,938,080.23, and
the RTC ordered that the proceeds of the ten insurance policies
be deposited with the court. Hence, Mico deposited the amount
of around P50 million with the RTC.
Goyu invoked Sec. 53 of the Insurance Code which
provides: The insurance proceeds shall be applied exclusively
to the proper interest of the person in whose name or for whose
benefit it is made unless otherwise specified in the policy.
The RTC ruled in favor of Goyu and ordered Mico and RCBC
to pay damages. The CA sustained the findings of the RTC with
respect to the liability of Mico and RCBC.
Issue: whether or not RCBC, as mortgagee, has any right over
the insurance policies taken by Goyu, the mortgagor, in case of
the occurrence of loss.
Held: Yes. It is settled that a mortgagor and a mortgagee have
separate and distinct insurable interests in the same mortgaged
property, such that each one of them may insure the same
property for his own sole benefit. There is no question that
GOYU could insure the mortgaged property for its own exclusive
benefit. In the present case, although it appears that GOYU
obtained the subject insurance policies naming itself as the sole
payee, the intentions of the parties as shown by their
contemporaneous acts, must be given due consideration in
order to better serve the interest of justice and equity.
It is to be noted that nine endorsement documents were
prepared by Alchester in favor of RCBC. The Court is in a
quandary how Alchester could arrive at the idea of endorsing
any specific insurance policy in favor of any particular
beneficiary or payee other than the insured had not such named
payee or beneficiary been specifically disclosed by the insured
itself. It is also significant that GOYU voluntarily and purposely
took the insurance policies from MICO, a sister company of
RCBC, and not just from any other insurance company.
Alchester would not have found out that the subject pieces of
property were mortgaged to RCBC had not such information
been voluntarily disclosed by GOYU itself. Had it not been for
GOYU, Alchester would not have known of GOYUs intention of
obtaining insurance coverage in compliance with its undertaking
in the mortgage contracts with RCBC, and verily, Alchester
would not have endorsed the policies to RCBC had it not been
so directed by GOYU. On equitable principles, particularly on the
ground of estoppel, the Court is constrained to rule in favor of
mortgagor RCBC.
GOYU cannot seek relief under Section 53 of the Insurance
Code which provides that the proceeds of insurance shall
exclusively apply to the interest of the person in whose name or
for whose benefit it is made. The peculiarity of the
circumstances obtaining in the instant case presents a
justification to take exception to the strict application of said
provision, it having been sufficiently established that it was the
intention of the parties to designate RCBC as the party for whose
benefit the insurance policies were taken out. The Court
considered the following: (1.) It is undisputed that the insured
pieces of property were the subject of mortgage contracts
entered into between RCBC and GOYU in consideration of and
for securing GOYUs credit facilities from RCBC. The mortgage
contracts contained common provisions whereby GOYU, as
mortgagor, undertook to have the mortgaged property properly
covered against any loss by an insurance company acceptable
to RCBC. (2.) GOYU voluntarily procured insurance policies to
cover the mortgaged property from MICO, no less than a sister
company of RCBC and definitely an acceptable insurance
company to RCBC. (3.) Endorsement documents were prepared
by MICOs underwriter, Alchester Insurance Agency, Inc., and
copies thereof were sent to GOYU, MICO, and RCBC. GOYU did
not assail, until of late, the validity of said endorsements. (4.)
GOYU continued until the occurrence of the fire, to enjoy the
benefits of the credit facilities extended by RCBC which was
conditioned upon the endorsement of the insurance policies to
be taken by GOYU to cover the mortgaged properties.
Significantly, the Court notes that out of the 10 insurance
policies subject of this case, only 8 of them appear to have been
subject of the endorsements prepared and delivered by
Alchester for and upon instructions of GOYU. The proceeds of
the 8 insurance policies endorsed to RCBC aggregate to
P89,974,488.36. Being exclusively payable to RCBC by reason
of the endorsement by Alchester to RCBC, which we already
ruled to have the force and effect of an endorsement by GOYU
itself, these 8 policies can not be attached by GOYUs other
creditors up to the extent of the GOYUs outstanding obligation
in RCBCs favor. Section 53 of the Insurance Code ordains that
the insurance proceeds of the endorsed policies shall be applied
exclusively to the proper interest of the person for whose benefit
it was made. In this case, to the extent of GOYUs obligation with
RCBC, the interest of GOYU in the subject policies had been
transferred to RCBC effective as of the time of the endorsement.
These policies may no longer be attached by the other creditors
of GOYU, like Alfredo Sebastian in the present G.R. No. 128834,
which may nonetheless forthwith be dismissed for being moot
and academic in view of the results reached herein. Only the
two other policies amounting to P19,646,224.92 may be validly
attached, garnished, and levied upon by GOYUs other creditors.
To the extent of GOYUs outstanding obligation with RCBC, all
the rest of the other insurance policies above-listed which were
endorsed to RCBC, are, therefore, to be released from
attachment, garnishment, and levy by the other creditors of
GOYU.
32. Aboitiz Shipping Corp vs Philamgen Insurance Co
(1989)
Facts:
Marinduque Mining Industrial Corp (Marinduque) shipped
on board SS Arthur Maersk from Boston a shipment of one skid
carton parts for valves. When the cargo arrived in Manila, it was
received and deposited in the office of Aboitiz Shipping Corp in
Manila for transshipment to Nonoc Island. But thereafter, the
cargo was pilfered on a rainy night at the Aboitiz terminal. Of
the total value of around $42,000, only $7,000 remains.
Philamgen paid Marinduque P246,430 as insurer of the cargo.
And thereafter, Philamgen sued Aboitiz.
Aboitiz contended that the insurance policy covering the
cargo was issued at the time when the cargo was already
pilfered and that the coverage under the Marine Policy No.
100105 PAG never began and that Marine Policy No. 100184 did
not attach to the shipment, because the shipment was never
loaded on any vessel of the defendant.
The RTC ruled in favor of Aboitiz, the CA reversed. Hence,
this petition.
Issue: Whether or not Aboitiz is liable.
Held: Yes. The records of this case show that private respondent
executed a continuous and open insurance coverage covering
goods of Marinduque imported into and exported from the
Philippines which took effect after September 1, 1975, as
contained in Marine Open Policy No. 100184. A similar insurance
coverage was also executed by petitioner in favor of Marinduque
for all its goods shipped or moved within the territorial limits of
the Philippines also effective after September 1, 1975 and
contained in Marine Open Policy No. 100185. The questioned
shipment is covered by this continuing open insurance coverage
from the time it was loaded aboard the SS Arthur Maersk in
Boston, U.S.A. to the time it was delivered to the possession of
petitioner at its offices at Pier 4 in Manila until it was pilfered
when the great majority of the cargo was lost on July 3, 1980.
The trial court in dismissing the complaint apparently relied on
Marine Risk Note No. 017545 which was issued by private
respondent only on July 28, 1980 after the shipment in question
was already pilfered. Obviously the trial court mistook said
Marine Risk Note as an insurance policy when it is not. It is only
an acknowledgment or declaration of the private respondent
confirming the specific shipment covered by its Marine Open
Policy, the evaluation of the cargo and the chargeable premium.
The contention of the petitioner that it could not be liable for
the pilferage of the cargo as it was stolen even before it was
loaded on its vessel is untenable. Petitioner received the cargo
when it arrived in Manila at its offices at Pier 4, North Harbor
and it was while in its possession and before loading it in its
vessel that the cargo was pilfered. Its liability is clear.
33. Development Insurance Corp vs IAC (1986)
Facts:
Private respondent Philippine Union Realty Development
Corporations building was insured by petitioner Development
Insurance Corp. A fire occurred in the building of the private
respondent and it sued for recovery of damages from the
petitioner on the basis of an insurance contract between them.
The petitioner allegedly failed to answer on time and was
declared in default by the trial court. A judgment of default was
subsequently rendered on the strength of the evidence
submitted ex parte by the private respondent, which was
allowed full recovery of its claimed damages. On learning of this
decision, the petitioner moved to lift the order of default,
invoking excusable neglect, and to vacate the judgment by
default. Its motion was denied. It then went to the respondent
court, which affirmed the decision of the trial court in toto. The
petitioner is now before us, hoping presumably that it will fare
better here than before the trial court and the Intermediate
Appellate Court. We shall see.
The only remaining question to be settled is the amount of
the indemnity due to the private respondent under its insurance
contract with the petitioner. This will require an examination of
this contract, Policy No. RY/F-082, as renewed, by virtue of
which the petitioner insured the private respondent's building
against fire for P2,500,000.00. The petitioner argues that since
at the time of the fire the building insured was worth
P5,800,000.00, the private respondent should be considered its
own insurer for the difference between that amount and the
face value of the policy and should share pro rata in the loss
sustained. Accordingly, the private respondent is entitled to an
indemnity of only P67,629.31, the rest of the loss to be
shouldered by it alone. In support of this contention, the
petitioner cites Condition 17 of the policy, which provides: If
the property hereby insured shall, at the breaking out of any
fire, be collectively of greater value than the sum insured
thereon then the insured shall be considered as being his own
insurer for the difference, and shall bear a ratable proportion of
the loss accordingly. Every item, if more than one, of the policy
shall be separately subject to this condition.
Issue: Whether or not petitioners contention is tenable.
Held: No! there is no evidence on record that the building was
worth P5,800,000.00 at the time of the loss; only the petitioner
says so and it does not back up its self-serving estimate with
any independent corroboration. On the contrary, the building
was insured at P2,500,000.00, and this must be considered, by
agreement of the insurer and the insured, the actual value of
the property insured on the day the fire occurred. This valuation
becomes even more believable if it is remembered that at the
time the building was burned it was still under construction and
not yet completed. The Court notes that Policy RY/F-082 is an
open policy and is subject to the express condition that: Open
Policy This is an open policy as defined in Section 57 of the
Insurance Act. In the event of loss, whether total or partial, it is
understood that the amount of the loss shall be subject to
appraisal and the liability of the company, if established, shall
be limited to the actual loss, subject to the applicable terms,
conditions, warranties and clauses of this Policy, and in no case
shall exceed the amount of the policy. As defined in the
aforestated provision, which is now Section 60 of the Insurance
Code, "an open policy is one in which the value of the thing
insured is not agreed upon but is left to be ascertained in case
of loss. " This means that the actual loss, as determined, will
represent the total indemnity due the insured from the insurer
except only that the total indemnity shall not exceed the face
value of the policy.
The actual loss has been ascertained in this case and, to
repeat, this Court will respect such factual determination in the
absence of proof that it was arrived at arbitrarily. There is no
such showing. Hence, applying the open policy clause as
expressly agreed upon by the parties in their contract, we hold
that the private respondent is entitled to the payment of
indemnity under the said contract in the total amount of
P508,867.00.
34. Eagle Star Insurance Co vs Yu (1955)
Facts:
Atkin, Kroll & Co., loaded on the S. S. Roeph Silverlight
owned and operated by Leigh Hoegh & Co., A/S, of San
Francisco California, 14 bales of assorted underwear valued at
P8,085.23 consigned to Chia Yu in the City of Manila. The
shipment was insured against all risks by Eagle Star Ins. Co. of
San Francisco, California, under a policy issued to the shipper
and by the latter assigned to the consignee. The vessel arrived
in Manila on February 10, 1946, and on March 4 started
discharging its cargo into the custody of the Manila Terminal
Co., Inc., which was then operating the arrastre service for the
Bureau of Customs. But the 14 bales consigned to Chia Yu only
10 were delivered to him as the remaining 3 could not be found.
Three of those delivered were also found damaged to the extent
of 50 per cent. Chia Yu claimed indemnity for the missing and
damaged bales. But the claim was declined, first, by the carrier
and afterward by the insurer, whereupon Chia Yu brought the
present action against both, including their respective agents in
the Philippines on Nov. 16, 1948.
Both interposed the defense of prescription. The RTC and
CA ruled in favor of plaintiff.
Issue: Whether or not the action has prescribed.
Held: As to the shipping company, yes it has prescribed for being
filed more than one year (more than two years).
As to the insurer, no. The case for the insurer stands on a
different footing, for its claim of prescription is founded upon
the terms of the policy and not upon the bill of lading. Under
our law the time limit for bringing a civil action upon a written
contract is ten years after the right of action accrues. (Sec. 43,
Act 190; Art. 1144, New Civil Code.) But counsel for the insurer
claim that this statutory in the policy: No suit action on this
Policy, for the recovery of any claim, shall be sustainable in any
Court of law or equity unless the insured shall have fully
complied with all the terms and conditions of this Policy nor
unless commenced with twelve (12) months next after the
happening of the loss . . . To this we cannot agree.
SEC. 61-A. Any condition, stipulation or agreement in any
policy of insurance, 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 may perhaps be suggested that the policy clause relied
on by the insurer for defeating plaintiff's action should be given
the construction that would harmonize it with section 61-A of
the Insurance Act by taking it to mean that the time given the
insured for bringing his suit is twelve months after the cause of
action accrues. But the question then would be: When did the
cause of action accrue? On that question we agree with the
court below that plaintiff's cause of action did not accrue until
his claim was finally rejected by the insurance company. This is
because, before such final rejection, there was no real necessity
for bringing suit. As the policy provides that the insured should
file his claim, first, with the carrier and then with the insurer, he
had a right to wait for his claim to be finally decided before going
to court. The law does not encourages unnecessary litigation. At
this junction it should be explained that while the decision of the
Court of Appeals states that the claim against the insurance
company "was finally rejected o April 22, 1947, as correctly
concluded by the court below," it is obvious from the context
and we find it to be a fact that the date meant was April 22,
1948, for this was the date when, according to the finding of the
trial court, the insurance company in London rejected the claim.
35. ACCFA vs Alpha Insurance (1968)
Facts:
-To guarantee the Asingan Farmers' Cooperative Marketing
Association, Inc. (FACOMA) against loss on account of personal
dishonesty, amounting to larceny/estafa of its Secretary-
Treasurer, Ladines, appellee Alpha Insurance & Surety Company
had issued, on 14 February 1958, its bond with Ladines as
principal and the appellee as solidary surety. On the same date,
the Asingan FACOMA assigned its rights to the appellant,
Agricultural Credit Cooperative and Financing Administration
(ACCFA) with approval of the principal and the surety. During
the effectivity of the bond, Ladines converted and
misappropriated, to his personal benefit, some of the FACOMA
funds, of which a part belonged to the ACCFA. Upon discovery
of the loss, ACCFA immediately notified in writing the survey
company on 10 October 1958, and presented the proof of loss
within the period fixed in the bond; but despite repeated
demands the surety company refused and failed to pay. ACCFA
filed suit against appellee on 30 May 1960. Defendant Alpha
Insurance & Surety Co., Inc., (now appellee) moved to dismiss
the complaint as it was filed more than one year after plaintiff
made claim for loss, contrary to the eighth condition of the bond
At first, the Court of First Instance denied dismissal; but, upon
reconsideration, the court reversed its original stand, and
dismissed the complaint on the ground that the action was filed
beyond the contractual limitation period. Hence, this appeal.
Issue: WON the provision of a fidelity bond that no action shall
be had or maintained thereon unless commenced within one
year from the making of a claim for the loss upon which the
action is based, is valid, in view of Section 61-A of the Insurance
Act invalidating stipulations limiting the time for commencing an
action thereon to less than one year from the time the cause of
action accrues?
Held: No. A fidelity bond is, in the nature of a contract of
insurance against loss from misconduct, and is governed by the
same principles of interpretation. Consequently, the condition of
the bond in question, limiting the period for bringing action is
subject to the provisions of Section 61-A of the Insurance Act
(No. 2427), as amended by Act 4101 of the pre-Commonwealth
Philippine Legislature, prescribing that: SEC. 61-A: A condition,
stipulation or agreement in any policy of insurance, 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. - Since a "cause of action" requires, as essential
elements, not only a legal right of the plaintiff and a correlative
obligation of the defendant but also "an act or omission of the
defendant in violation of said legal right," the cause of action
does not accrue until the party obligated refuses, expressly or
impliedly, to comply with its duty (in this case, to pay the
amount of the bond). -The year for instituting action in court
must be reckoned from the time of appellee's refusal to comply
with its bond. It cant be counted from the creditor's filing of the
claim of loss, for that does not import that the surety company
will refuse to pay. -In so far, therefore, as condition eight of the
bond requires action to be filed within one year from the filing
of the claim for loss, such stipulation contradicts the public policy
expressed in Section 61-A of the Philippine Insurance Act. -
Condition eight of the bond, therefore, is null and void, and the
appellant is not bound to comply with its provisions. The
discouraging of unnecessary litigation must be deemed a rule of
public policy, considering the unrelieved congestion in the
courts. -As a consequence, the action may be brought within
the statutory period of limitation for written contracts (New Civil
Code, Article 1144).
36. Travellers Insurance & Surety Corp vs CA (1997)
Facts:
A 78-year-old woman named Feliza Mendoza was on her
way to hear mass at the Tayuman Cathedral when she was ran
over by a speeding taxi driven by Rodrigo Dumlao and owned
by Armando Abellon. She died as a result of the accident.
Thereafter, her son, Vicente Mendoza, sued Armando
Abellon and Rodrigo Dumalo for damages. He amended his
complaint to include petitioner Travellers Insurance as the
compulsory insurer of the said taxicab.
Petitioner mainly contends that it did not issue an insurance
policy as compulsory insurer of the Lady Love Taxi and that,
assuming arguendo that it had indeed covered said taxicab for
third-party liability insurance, private respondent failed to file a
written notice of claim with petitioner as required by Section 384
of P.D. No. 612, otherwise known as the Insurance Code.
The RTC and CA ruled against petitioner.
Issue: Whether or not petitioners contention is meritorious.
Held: Yes. It is significant to point out at this juncture that the
right of a third person to sue the insurer depends on whether
the contract of insurance is intended to benefit third persons
also or only the insured. Since private respondent failed to
attach a copy of the insurance contract to his complaint, the trial
court could not have been able to apprise itself of the real nature
and pecuniary limits of petitioners liability. More importantly, the
trial court could not have possibly ascertained the right of
private respondent as third person to sue petitioner as insurer
of the Lady Love taxicab because the trial court never saw nor
read the insurance contract and learned of its terms and
conditions.
Apparently, the trial court did not distinguish between the
private respondents cause of action against the owner and the
driver of the Lady Love taxicab and his cause of action against
petitioner. The former is based on torts and quasi-delicts while
the latter is based on contract. Confusing these two sources of
obligations as they arise from the same act of the taxicab fatally
hitting private respondents mother, and in the face of
overwhelming evidence of the reckless imprudence of the driver
of the Lady Love taxicab, the trial court brushed aside its
ignorance of the terms and conditions of the insurance contract
and forthwith found all three - the driver of the taxicab, the
owner of the taxicab, and the alleged insurer of the taxicab -
jointly and severally liable for actual, moral and exemplary
damages as well as attorneys fees and litigation expenses. This
is clearly a misapplication of the law by the trial court, and
respondent appellate court grievously erred in not having
reversed the trial court on this ground.
 While it is true that where the insurance contract provides
for indemnity against liability to third persons, such third
persons can directly sue the insurer, however, the direct liability
of the insurer under indemnity contracts against third-party
liability does not mean that the insurer can be held solidarily
liable with the insured and/or the other parties found at fault.
The liability of the insurer is based on contract; that of the
insured is based on tort.
The above principles take on more significance in the light
of the counterallegation of petitioner that, assuming arguendo
that it is the insurer of the Lady Love taxicab in question, its
liability is limited to onlyP50,000.00, this being its standard
amount of coverage in vehicle insurance policies. It bears
repeating that no copy of the insurance contract was ever
proffered before the trial court by the private respondent,
notwithstanding knowledge of the fact that the latters complaint
against petitioner is one under a written contract. Thus, the trial
court proceeded to hold petitioner liable for an award of
damages exceeding its limited liability of P50,000.00. This only
shows beyond doubt that the trial court was under the
erroneous presumption that petitioner could be found liable
absent proof of the contract and based merely on the proof of
reckless imprudence on the part of the driver of the Lady Love
taxicab that fatally hit private respondents mother.
With regard to the issue of failure to file a claim. When
petitioner asseverates, thus, that no written claim was filed by
private respondent and rejected by petitioner, and private
respondent does not dispute such asseveration through a denial
in his pleadings, we are constrained to rule that respondent
appellate court committed reversible error in finding petitioner
liable under an insurance contract the existence of which had
not at all been proven in court.Even if there were such a
contract, private respondents cause of action can not prevail
because he failed to file the written claim mandated by Section
384 of the Insurance Code. He is deemed, under this legal
provision, to have waived his rights as against petitioner-insurer.
37. Coastwise Lighterage Corp vs CA and Philamgen
(1995)
Facts:
Pag-asa Sales Inc. entered into a contract to transport
molasses from the province of Negros to Manila with Coastwise
Lighterage Corporation (Coastwise for brevity), using the latter's
dumb barges. The barges were towed in tandem by the tugboat
MT Marica, which is likewise owned by Coastwise. Upon
reaching Manila Bay, one of the barges, "Coastwise 9", struck
an unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a
hole "two inches wide and twenty-two inches long". As a
consequence, the molasses at the cargo tanks were
contaminated. Pag-asa filed a claim against Philippine General
Insurance Company, the insurer of its cargo. Philgen paid
P700,000 for the value of the molasses lost. Philgen then filed
an action against Coastwise to recover the money it paid,
claiming to be subrogated to the claims which the consignee
may have against the carrier. Both the trial court and the Court
of Appeals ruled against Coastwise.
Issues: (1) Whether Coastwise was transformed into a private
carrier by virtue of the contract it entered into with Pag-asa, and
whether it exercised the required degree of diligence; (2)
Whether Philgen was subrogated into the rights of the consignee
against the carrier.
Held: (1) Pag-asa Sales, Inc. only leased three of petitioner's
vessels, in order to carry cargo from one point to another, but
the possession, command mid navigation of the vessels
remained with petitioner Coastwise Lighterage. Coastwise
Lighterage, by the contract of affreightment, was not converted
into a private carrier, but remained a common carrier and was
still liable as such. The law and jurisprudence on common
carriers both hold that the mere proof of delivery of goods in
good order to a carrier and the subsequent arrival of the same
goods at the place of destination in bad order makes for a prima
facie case against the carrier. It follows then that the
presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated,
applies to the petitioner. This presumption, which is overcome
only by proof of the exercise of extraordinary diligence,
remained unrebutted in this case. Jesus R. Constantino, the
patron of the vessel "Coastwise 9" admitted that he was not
licensed. Coastwise Lighterage cannot safely claim to have
exercised extraordinary diligence, by placing a person whose
navigational skills are questionable, at the helm of the vessel
which eventually met the fateful accident. It may also logically,
follow that a person without license to navigate, lacks not just
the skill to do so, but also the utmost familiarity with the usual
and safe routes taken by seasoned and legally authorized ones.
Had the patron been licensed he could be presumed to have
both the skill and the knowledge that would have prevented the
vessel's hitting the sunken derelict ship that lay on their way to
Pier 18. As a common carrier, petitioner is liable for breach of
the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of
goods it transported, by proof of its exercise of extraordinary
diligence.
(2) Article 2207 of the Civil Code is founded on the well-
settled principle of subrogation. If the insured property is
destroyed or damaged through the fault or negligence of a party
other than the assured, then the insurer, upon payment to the
assured will be subrogated to the rights of the assured to
recover from the wrongdoer to the extent that the insurer has
been obligated to pay. Payment by the insurer to the assured
operated as an equitable assignment to the former of all
remedies which the latter may have against the third party
whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of, any
private of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by the
insurer.
38. Servicewide Specialists Inc vs CA (1996)
Facts:
On August 1, 1983, private respondent spouses Ricardo and
Elisa Trinidad purchased one unit Isuzu Gemini car, 1983 model,
yellow in color, from Autoworld Sales Corporation. The price was
P98,156.00 payable in 24 equal monthly installments of
P4,089.00 every 15th of each month beginning September 1983
to August 15, 1985. To secure payment thereof, the Trinidads
executed on the same date a promissory note and a deed of
chattel mortgage on the subject car in favor of Autoworld Sales
Corporation. Autoworlds interest eventually passed to petitioner
Servicewide Specialists Inc.
On November 18, 1985, private respondent Ricardo
Trinidad received a demand letter from petitioner dated
November 8, 1985 stating that an assignment of credit had been
made by Filinvest in its favor and that the Trinidads had not paid
two successive installments on the car which had matured on
July 15 and August 15, 1985. No mention was made in the letter
that Filinvest had paid insurance premiums to Perla Compania
de Seguros to insure the car against loss and damage
corresponding to two years, i.e., from July 29, 1984 to July 29,
1985 and July 29, 1985 to July 29, 1986. Private respondents
were also never informed by Filinvest that their installment
payments on the car were converted to premium payments on
the insurance.

After informing private respondents that they failed to pay

the last two consecutive monthly installments, petitioner
demanded that either they pay the whole remaining balance of
P6,977.67, including accrued interest, or return possession of
the car to petitioner. When private respondents refused to pay
the amount demanded or to return the car, petitioner filed an
action for replevin and damages with the Metropolitan Trial
Court, Branch V, Manila. The sole issue resolved by the trial
court was whether private respondents were liable for the
payment of the insurance premiums effected by petitioner.

RTC and CA ruled against Servicewide.

Issue: Whether or not petitioner should have applied the

installment payments made by private respondents for the
payment of the car to the payment of the insurance premiums
without prior notice to private respondents.

Held: No. While it is true that the Chattel Mortgage does not say
that notice to the mortgagor of the renewal of the insurance
premium by the mortgagee is necessary, at the same time, there
is no provision that authorizes petitioner to apply the payments
made to it for the payment of the chattel to the payment of the
said premiums. From the records of the case, it is clear that
private respondents had fully paid for the car. This fact was
never rebutted by petitioner; it was the insurance premiums
pertaining to the two-year period from July 29, 1984 to July 29,
1986 that petitioner claims were not paid. Both the Regional
Trial Court and the Court of Appeals found that before the
mortgagee (petitioner) may effect the renewal of insurance, two
conditions must be met: (1) Default by the mortgagor (private
respondents) in effecting renewal of the insurance and (2)
failure to deliver the policy with endorsement to petitioner. The
Court notes an additional element of the provisions regarding
the renewal of the insurance; specifically, that petitioner was
under no obligation to effect the same. In other words,
petitioner as mortgagee was not duty-bound to renew the
insurance in the event that private respondents failed to do so;
it was merely optional on its part. The question now arises
whether private respondents were in default for failing to have
the car covered by insurance for the period in question. Private
respondents claim that the car was duly covered and the Court
finds no evidence on record showing this assertion to be false.
Petitioner has averred, however, that the insurance taken by
private respondents was only for third-party liability and not the
comprehensive insurance required. If petitioner was aware that
the insurance coverage was inadequate, why did it not inform
private respondent about it? After all, since petitioner was under
no obligation to effect renewal thereof, it is but logical that it
should relay to private respondents any defect of the insurance
coverage before itself assuming the same. Furthermore, even if
the car were not covered with the proper insurance, there is
nothing in the provisions of the Chattel Mortgage that authorizes
petitioner to apply previous payments for the car to the
insurance.