INSURANCE LAW (CASE DIGESTS FOR COMMREV)

White Gold Marine Services vs. Pioneer Insurance, et al. (GR No. 154514, 28 July 2005);
FACTS: Mutual through Respondent Pioneer. Certificates and receipts thus were given. However, Petitioner failed to fulfill
its payments thus Steamship refused to renew its coverage. Steamship then filed for collection against Petitioner for
recovery of unpaid balance. Thereafter, Petitioner also filed a complaint against Steamship and Respondent before the
Insurance Commission for violations (186,187 for Steamship and 299,300,301 in relation to 302 and 303 for Respondent)
of the Insurance Code-license requirements as an Insurance company for the former and as insurance agent for the latter.
Said commission dismissed the complaint which decision was affirmed by the CA.

ISSUE: Whether or not Steamship Mutual is a Protection and Indemnity Club engaged in the insurance business in the
Philippines

HELD: Steamship Mutual as a P & I Club is a mutual insurance company engaged in the marine insurance business.

An insurance contract is a contract of indemnity. This means that one party undertakes for a consideration to indemnify
another party against loss, damage, or liability arising from an unknown or contingent event. While to determine if a
contract is an insurance contract we can look at the nature of the promise, the act to be performed, exact nature of the
agreement in view of the entire occurrence, contingency or circumstance where the performance is mandated. The label
is not controlling. While under Section 2(2) of the Insurance Code the phrase “doing an insurance business” constitutes
the following: 1) making or proposing to make, as insurer, any insurance contract; 2) making or proposing to make, as
surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of
the surety; 3) doing any kind of business, including a reinsurance business, specifically recognized as constituting the
doing of an insurance business within the meaning of this code; 4) doing or proposing to do any business in substance to
any of the foregoing in a manner designed to evade the provision of this code.

Taking all of these in to consideration, Steamship Mutual engaged in marine insurance business undertook to indemnify
Petitioner White Gold against marine losses as enumerated under sec. 99 of the Insurance Code. It is immaterial whether
profit is derived from making insurance contract and that no separate or direct consideration is received since these does
not preclude the existence of an insurance business.

Philamcare Health Systems Inc. vs. CA (379 SCRA 356);

FACTS: Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc. To the question ‘Have you
or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer,
liver disease, asthma or peptic ulcer?’, Ernani answered ‘No’. Under the agreement, Ernani is entitled to avail of
hospitalization benefits and out-patient benefits. The coverage was approved for a period of one year from March 1, 1988
to March 1, 1989. The agreement was however extended yearly until June 1, 1990 which increased the amount of
coverage to a maximum sum of P75,000 per disability.

During the period of said coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC)
for one month. While in the hospital, his wife Julita tried to claim the benefits under the health care agreement. However,
the Philamcare denied her claim alleging that the agreement was void because Ernani concealed his medical history.
Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive, diabetic and
asthmatic, contrary to his answer in the application form. Thus, Julita paid for all the hospitalization expenses.

After Ernani was discharged from the MMC, he was attended by a physical therapist at home. Later, he was admitted at
the Chinese General Hospital. Due to financial difficulties, however, respondent brought her husband home again. In the
morning of April 13, 1990, Ernani had fever and was feeling very weak. Respondent was constrained to bring him back to
the Chinese General Hospital where he died on the same day.

Julita filed an action for damages and reimbursement of her expenses plus moral damages attorney’s fees against

Page 1 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

Philamcare and its president, Dr. Benito Reverente..

ISSUE: Whether or not the health care agreement is not an insurance contract

HELD: YES. Section2 (1)of the Insurance Code defines a contract of insurance as an agreement whereby one
undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or
contingent event.

Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which my damnify a
person having an insurable against him, may be insured against. Every person has an insurable interest in the life and
health of himself. Section 10 provides that every person has an insurable interest in the life and health (1) of himself, of
his spouse and of his children. The insurable interest of respondent’s husband in obtaining the health care agreement was
his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of
indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other
stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.

Gulf Resorts Inc. vs. Philippine Charter Insurance Corp. GR No. 155167, 16 May 2005;
FACTS: Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company which includes loss
or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of
earthquake. July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties and 2 swimming
pools in its Agoo Playa Resort were damaged. August 23, 1990: Gulf's claim was denied on the ground that its insurance
policy only afforded earthquake shock coverage to the two swimming pools of the resort. Petitioner contends that
pursuant to this rider, no qualifications were placed on the scope of the earthquake shock coverage. Thus, the policy
extended earthquake shock coverage to all of the insured properties. RTC favored American Home, saying
that endorsement rider means that only the two swimming pools were insured against earthquake shock.

ISSUE: Whether or not Gulf can claim for its properties aside from the 2 swimming pools

HELD: No.
It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each
other. All its parts are reflective of the true intent of the parties. An insurance premium is the consideration paid an insurer
for undertaking to indemnify the insured against a specified peril. In the subject policy, no premium payments were made
with regard to earthquake shock coverage, except on the two swimming pools.

Eternal Gardens Memorial Park Corporation vs. Phil. American Life Insurance Co., GR No. 166245, 09 April 2008
FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy with petitioner
Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots
from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the
existing balance of the purchased burial lots.

The relevant provisions of the policy are:

EFFECTIVE DATE OF BENEFIT: The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a
loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the
Company.

Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a copy of the
application of each purchaser, and the amounts of the respective unpaid balances of all insured lot purchasers. Eternal
complied by submitting a letter dated December 29, 1982, containing a list of insurable balances of its lot buyers for
October 1982. One of those included in the list as “new business” was a certain John Chuang. His balance of payments
Page 2 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

was 100K. on August 2, 1984, Chuang died.

Eternal sent a letter dated to Philamlife, which served as an insurance claim for Chuang’s death. Attached to the claim
were certain documents. In reply, Philamlife wrote Eternal a letter requiring Eternal to submit the additional documents
relative to its insurance claim for Chuang’s death. Eternal transmitted the required documents through a letter which was
received by Philamlife.

After more than a year, Philamlife had not furnished Eternal with any reply to the latter’s insurance claim. This prompted
Eternal to demand from Philamlife the payment of the claim for PhP 100,000.
In response to Eternal’s demand, Philamlife denied Eternal’s insurance claim saying that no application for Group
Insurance was submitted in its office prior to Chuang’s death.

ISSUE: WON Philamlife should pay the 100K insurance proceeds

HELD: YES

An examination of the provision of the POLICY under effective date of benefit, would show ambiguity between its two
sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the
insurance contract before the same can become effective. t must be remembered that an insurance contract is a contract
of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard
the latter’s interest

On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a party’s purchase of a
memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is
effective, valid, and binding until terminated by Philamlife by disapproving the insurance application. The second sentence
of the Creditor Group Life Policy on the Effective Date of Benefit is in the nature of a resolutory condition which would lead
to the cessation of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must
not work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination of
the insurance contract by the insurer must be explicit and unambiguous.

Enriquez vs. Sun Life Insurance of Canada (G.R. No. 15895, Nov. 29, 1920);
FACTS: On Sept. 24, 1917, Herrer made an application to SunLife through its office in Manila for life annuity. 2 days
later, he paid the sum of 6 thousand to the company’s manager in its Manila office and was given a receipt. On Nov. 26,
1917, the head office gave notice of acceptance by cable to Manila. On the same date, the Manila office prepared a letter
notifying Herrer that his application has been accepted and this was placed in the ordinary channels of transmission, but
as far as known was never actually mailed and never received by Herrer. Herrer died on Dec. 20, 1917. The plaintiff as
administrator of Herrer’s estate brought this action to recover the 6T paid by the deceased.

ISSUE: Whether or not the insurance contract was perfected.

HELD: No. The contract for life annuity was NOT perfected because it had NOT been proved satisfactorily that the
acceptance of the application ever came to the knowledge of the applicant. An acceptance of an offer of insurance NOT
actually or constructively communicated to the proposer does NOT make a contract of insurane, as the locus
poenitentiae is ended when an acceptance has passed beyond the control of the party. Life annuity is the opposite of a
life insurance. In life annuity, a big amount is given to the insurance company, and if after a certain period of time the
insured is still living, he is entitled to regular smaller amounts for the rest of his life. Examples of Life annuity are
pensions. Life Insurance on the other hand, the insured during the period of the coverage makes small regular payments
and upon his death, the insurer pays a big amount to his beneficiaries.

Great Pacific Life Assurance Co. vs. CA (G.R. Nos. 31845 & 31873, April 30, 1979)
FACTS: Respondent Ngo Hing filed an application with petitioner Great Pacific Life Assurance Company (Pacific Life) for
Page 3 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

a twenty-year endowment policy in the life of Helen Go, his one year old daughter. Petitioner Lapulapu D. Mondragon, the
branch manager, prepared application form using the essential data supplied by respondent. The latter paid the annual
premium and Mondragon retained a portion of it as his commission. The binding deposit receipt was issued to
respondent. Mondragon wrote his strong recommendation for the approval of the insurance application. However, Pacific
Life disapproved the application since the plan was not available for minors below 7 years old but it can consider the
same under another plan. The non-acceptance of the insurance plan was allegedly not communicated by Mondragon to
respondent. Mondragon again asserted his strong recommendation. Helen Go died of influenza. Thereupon, respondent
sought the payment of the proceeds of the insurance, but having failed in his effort, he filed an action for the recovery of
the same. Hence the case at bar.

ISSUE: Whether or not the insurance contract has been perfected on the ground that a binding receipt has been issued?

HELD: NO, it was not perfected. The binding deposit receipt is merely an acknowledgement, on behalf of the company,
that the latter’s branch office had received from the applicant the insurance premium and had accepted the application
subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of
whether or not the applicant is insurable on standard rates. The binding deposit receipt is merely conditional and does not
insure outright. Where an agreement is made between the applicant and the agent, no liability shall attach until the
principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional, and is subordinated
to the act of the company in approving or rejecting the application. Thus, in life insurance, a ‘binding slip’ or ‘binding
receipt’ does not insure by itself.

Spouses Cha vs. CA, (August 18, 1997);

FACTS: Petitioner spouses Nilo Cha and Stella Uy-Cha, as lessees entered into a lease contract with private respondent
CKS Development Corporation as lessor. A stipulation of the lease contract provides that the Lessee is not allowed to
insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in
the leased premises without first obtaining the written consent and approval of the Lessor. If the Lessee violates this the
policy is deemed assigned and transferred to the Lessor for his own benefit.

Petitioner took out a policy of fire insurance over the merchandise inside the leased premises with United Insurance
without consent of CKS.

On the day the lease contract was to expire a fire broke out inside the leased premises. CKS, wrote a letter to United
asking that the proceeds of the fire insurance be paid directly to CKS. United refused. Hence, the latter filed a complaint
against the Cha spouses and United.

RTC ruled in favor of CKS. CA affirmed, hence the petition.

ISSUE: Whether or not CKS can recover from the insurance policy.

HELD: No. Section 18 of the Insurance Code provides that: “No contract or policy of insurance on property shall be
enforceable except for the benefit of some person having an insurable interest in the property insured.”

In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside
the leased premises under the provisions of Section 17 of the Insurance Code: “The measure of an insurable interest in
property is the extent to which the insured might be damnified by loss or injury thereof.” Therefore, CKS cannot be validly
a beneficiary of the fire insurance policy taken by petitioner-spouses. The insurable interest remains with the Cha
spouses.

The stipulation in the lease contract is void for being contrary to law and public policy. This is in keeping with the provision
under Sec. 25 of the Insurance Code that: Every stipulation in a policy of Insurance for the payment of loss, whether the
person insured has or has not any interest in the property insured or that the policy shall be received as proof of such
interest and every policy executed by way of gaming or wagering is void.”

Geagonia vs. CA, February 6, 1995);

FACTS: Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1 year

Page 4 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

policy covered the stock trading of dry goods. The policy noted the requirement that "3. The insured shall give notice to
the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of
the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and
unless notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy
pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or
damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply
when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00." The
petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied because the petitioner’s
stocks were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis of the private
respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. Geagonia then filed a complaint
against the private respondent in the Insurance Commission for the recovery of P100,000.00 under fire insurance policy
and damages. He claimed that he knew the existence of the other two policies. But, he said that he had no knowledge of
the provision in the private respondent's policy requiring him to inform it of the prior policies and this requirement was not
mentioned to him by the private respondent's agent. The Insurance Commission found that the petitioner did not violate
Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was
Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing
Textile, as his creditor, had insurable interest on the stocks. The Insurance Commission then ordered the respondent
company to pay complainant the sum of P100,000.00 with interest and attorney’s fees. CA reversed the decision of the
Insurance Commission because it found that the petitioner knew of the existence of the two other policies issued by the
PFIC.

Issue:
Whether or not the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and
thereby violated Condition 3 of the policy.

Held:
Yes. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of 18
January 1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary before the
Insurance Commissioner and which the latter relied upon cannot prevail over a written admission made ante litem motam.
It was, indeed, incredible that he did not know about the prior policies since these policies were not new or original.

Gaisano Cagayan, Inc. vs. Insurance Company of North America, G.R. No. 147839 (June 8, 2006).
FACTS:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire insurance policies with book debt
endorsements. The insurance policies provide for coverage on "book debts in connection with ready-made clothing
materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after
the time of the loss covered under this Policy."

Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore
Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in
the fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI.

Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC and LSPI were paid for their
claims and that the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was
P2,119,205.00 while with LSPI it was P535,613.00.

The RTC rendered its decision dismissing Insurance's complaint. It held that the fire was purely accidental; that the cause
of the fire was not attributable to the negligence of the petitioner. Also, it said that IMC and LSPI retained ownership of the
delivered goods and must bear the loss.

ISSUE:
WON the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and
LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner

Page 5 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

HELD:
No. Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the goods sold and
delivered to the customers and dealers of the insured. Thus, what were insured against were the accounts of IMC and
LSPI with petitioner which remained unpaid 45 days after the loss through fire, and not the loss or destruction of the
goods delivered.

Great Pacific Life Assurance vs. CA (316 SCRA 678);

FACTS: Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with
Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan
mortgagors of DBP.

One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning his
test, attesting among others that he does not have any heart conditions and that he is in good health to the best of his
knowledge.
However, after about a year, Dr. Leuterio died due to “massive cerebral hemorrhage.” When DBP submitted a death claim
to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose he had been suffering from
hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of
the claim.

Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for “Specific Performance with Damages.”
Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP.

ISSUE: Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract from a
complaint filed by the widow of the decedent/mortgagor

HELD: The rationale of a group of insurance policy of mortgagors, otherwise known as the “mortgage redemption
insurance,” is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to
enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of
the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby
relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor
under such a concept so that in the event of death, the mortgage obligation will be extinguished by the application of the
insurance proceeds to the mortgage indebtedness. In this type of policy insurance, the mortgagee is simply an appointee
of the insurance fund. Such loss-payable clause does not make the mortgagee a party to the contract.

The insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon.
Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another
person, such as a mortgagee.

And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has
an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the
decedent Dr. Leuterio may file the suit against the insurer, Grepalife.

Sunlife Assurance Co. of Canada v. Court of Appeals, 245 SCRA 268 [1995]
FACTS: Bacani procured a life insurance contract for himself from Sunlife Assurance. Specifically, the policy included a
double indemnity in case of accidental death, designating his mother as beneficiary. Later, Bacani died in a plane crash
and so the mother filed a claim. After investigation, Sunlife rejected the claim on ground of non-disclosure of material
facts. They said that Bacani did not mention that two weeks prior to his insurance application he was examined and
confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. The trial court ruled that the facts
concealed by the insured were made in good faith and under the belief that they need not be disclosed. Also, it held that
the health history of the insured was immaterial since the insurance policy was “non-medical.” The CA affirmed, stating
that the cause of death was unrelated to the facts concealed by the insured.

ISSUE: Whether or not the concealment made by Bacani warranted the rejection of the insurance claim

Page 6 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

HELD: The Supreme Court reversed the decision of the CA and ruled that rescission of the insurance contract was
proper.

Disclosure of Material Facts required. Under sec. 26 of the Insurance Code, a party to a contract of insurance is required
to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to
which he makes no warranty, and which the other has no means of ascertaining.

Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the
party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making
his inquiries. (The Insurance Code, sec. 31). The information which the insured failed to disclose was material and
relevant to the approval and issuance of the insurance policy. The matters concealed would have definitely affected
petitioner’s action on his application, either by approving it with the corresponding adjustment for a higher premium or
rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by the petitioner in
order for it to reasonably assess the risk involved in accepting the application.

Philam Care Health Systems, Inc. v. Court of Appeals, 379 SCRA 356 [2002]

FACTS: Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc. To the question ‘Have you
or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer,
liver disease, asthma or peptic ulcer?’, Ernani answered ‘No’. Under the agreement, Ernani is entitled to avail of
hospitalization benefits and out-patient benefits. The coverage was approved for a period of one year from March 1, 1988
to March 1, 1989. The agreement was however extended yearly until June 1, 1990 which increased the amount of
coverage to a maximum sum of P75,000 per disability.

During the period of said coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC)
for one month. While in the hospital, his wife Julita tried to claim the benefits under the health care agreement. However,
the Philamcare denied her claim alleging that the agreement was void because Ernani concealed his medical history.
Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive, diabetic and
asthmatic, contrary to his answer in the application form. Thus, Julita paid for all the hospitalization expenses.

After Ernani was discharged from the MMC, he was attended by a physical therapist at home. Later, he was admitted at
the Chinese General Hospital. Due to financial difficulties, however, respondent brought her husband home again. In the
morning of April 13, 1990, Ernani had fever and was feeling very weak. Respondent was constrained to bring him back to
the Chinese General Hospital where he died on the same day.

Julita filed an action for damages and reimbursement of her expenses plus moral damages attorney’s fees against
Philamcare and its president, Dr. Benito Reverente..

ISSUES: Whether or not the health care agreement is not an insurance contract

HELD: YES. Section2 (1)of the Insurance Code defines a contract of insurance as an agreement whereby one
undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or
contingent event.

Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which my damnify a
person having an insurable against him, may be insured against. Every person has an insurable interest in the life and
health of himself. Section 10 provides that every person has an insurable interest in the life and health (1) of himself, of
his spouse and of his children. The insurable interest of respondent’s husband in obtaining the health care agreement was
his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of
indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other
Page 7 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.

Thelma Vda. De Canilang v. Court of Appeals, 223 SCRA 443 [1993]

FACTS: Jaime Canilang applied for a “non-medical” insurance policy with respondent Great Pacific Life Assurance
Company naming his wife, Thelma Canilang as his beneficiary. But he did not disclose the fact that he was diagnosed as
suffering from sinus tachycardia and that he has consulted a doctor twice. Jaime was issued an ordinary life insurance
policy with the face value of P19,700.00. Jaime died of “congestive heart failure”, “anemia”, and “chronic anemia”.
Petitioner widow and beneficiary of the insured, filed a claim with Great Pacific which the insurer denied upon the ground
that the insured had concealed material information from it. Hence, Thelma filed a complaint against Great Pacific with the
Insurance Commission for recovery of the insurance proceeds.

ISSUE: Whether or not the non-disclosure of certain facts about the insured’s previous health conditions is material to
warrant the denial of the claims of Thelma Canilang

HELD: YES. The SC agreed with the Court of Appeals that the information which Jaime Canilang failed to disclose was
material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had
Canilang disclosed his visits to his doctor, the diagnosis made and medicines prescribed by such doctor, in the insurance
application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably
refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage.
The materiality of the information withheld by Great Pacific did not depend upon the state of mind of Jaime Canilang. A
man’s state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external
acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality
depend upon the actual or physical events which ensure. Materiality relates rather to the “probable and reasonable
influence of the facts” upon the party to whom the communication should have been made, in assessing the risk involved
in making or omitting to make further inquiries and in accepting the application for insurance; that “probable and
reasonable influence of the facts” concealed must, of course, be determined objectively, by the judge ultimately.
WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the Court of Appeals dated 16
October 1989 in C.A.-G.R. SP No. 08696 is hereby AFFIRMED. No pronouncement as to the costs.

Tan v. Court of Appeals, 174 SCRA 403

FACTS: Tan Lee Siong was issued a policy by Philamlife on Nov. 6, 1973. On Aprl 26, 1975, Tan died of hepatoma. His
beneficiaries then filed a claim with Philamlife for the proceeds of the insurance. Philamlife wrote the beneficiaries in Sep.
1975 denying their claim and rescinding the contract on the ground of misrepresentation. The beneficiaries contend that
Philamlife can no longer rescind the contract on the ground of misrepresentation as rescission must allegedly be done
“during the lifetime of the insured” within two years and prior to the commencement of the action following the wording of
Sec. 48, par. 2.

ISSUE: Whether or not Philamlife can rescind the contract.

HELD: YES. The phrase “during the lifetime” found in Sec. 48 simply means that the policy is no longer in force after the
insured has died. The key phrase in the second paragraph is “for a period of two years”. The period to consider in a life
insurance poiicy is “two years” from the date of issue or of the last reinstatement. So if for example the policy was
issued/reinstated on Jan 1, 2000, the insurer can still exercise his right to rescind up to Jan. 1, 2003 or two years from the
date of issue/reinstatement, REGARDLESS of whether the insured died before or after Jan. 1, 2003.
Prudential Guarantee vs. Trans-Asia Shipping Lines, Inc. G.R. No. 151890, 20 June 2006

FACTS: Trans Asia is the owner of the vessel M/V Asia Korea. Prudential Guarantee and Assurance Inc. insured said
vessel for loss/damage of the hull and machinery arising from perils of fire and explosion beginning from the period of July
1, 1993 until July 1, 1994. While the policy was in force, a fire broke out. Trans Asia file its notice of claim for damages
sustained by the vessel. It also reserved its right to subsequently notify Prudential as to the full amount of the claim upon
final survey and determination by the average adjuster Richard Hogg International of the damage sustained by the reason
of fire. Trans Asia executed a document denominated "Loan and Trust Receipt" amounting to Php 3,000,000. Prudential
Guarantee and Assurance Inc. denied the former's claim and requested for the return of the said amount. The insurance
Page 8 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

company contends that there was a breach in the policy conditions, specifically, "Warranted Vessel Classed and Class
Maintained". The trial court held that Trans Asia failed to prove its compliance with the terms of the warranty. It further
explained that the concealment made by Trans Asia is sufficient to avoid the policy. Prudential, as the injured party, is
entitled to rescind to rescind the contract. The trial court dismissed the complaint and directed Trans Asia to return the
"loan" extended by Prudential. The Court of Appeals reversed the decision of the trial court. It contends that Prudential
had the burden to show that there was a breach in the warranty and which it failed to do so. The Court considered
Prudential's admission that, at the time the insurance contract was entered into, the vessel was properly classed by the
Bureau Veritas, a classification recignized by the industry. It further contends that then subject warranty was in a form of a
rider, hence, such contract should be counstrued against Prudential. Finally, it interpreted the transaction between the
parties as one of subrogation, instead of a loan. Thus, the amount given to Trans Asia was considered to be a partial
payment to its claim under the policy.

ISSUE:
WON there was a breach in the warranty of the contract.

HELD: The Supreme Court held that Prudential failed to establish that Trans Asia had violated and breached the policy
condition provided in the insurance contract. The latter was able to establish proof of loss and coverage of the loss.
Prudential also made a categorical admission at the time of the procurement of the insurance contract that the vessel was
properly classified by the Bureau Veritas. Assuming that there was a breach in the policy, the renewal of the insurance
policy for two consecutive years after the loss is deemed as a waiver on the part of Prudential. Breach of a warranty or of
a condition renders the contract defeasible at the option of the insurer; but if he so elects, he may waive his privilege and
power to rescind by the mere expression of an intention so to do.
Lourdes Florendo v. Philam Plans, G.R. No. 186983, February 22, 2012

FACTS:

Manuel Florendo filed an application for comprehensive pension plan with respondent Philam Plans, Inc. (Philam Plans)
Manuel signed the application and left to Perla the task of supplying the information needed in the application.
Respondent Ma. Celeste Abcede, Perla’s daughter, signed the application as sales counselor. Philam Plans issued
Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S. Florendo, his wife, as beneficiary. In time, Manuel paid
his quarterly premiums. Eleven months later, Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with
Philam Plans for the payment of the benefits under her husband’s plan but Philam Plans declined her claim prompting her
to file the present action against the pension plan company before the Regional Trial Court (RTC) of Quezon City and
ruled in favor of Ma. Lourdes. However, the Court of Appeals then reversed the RTC decision. Hence this appeal.

ISSUE:

Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband under the insurance plan despite
consideration that her husband Manuel concealed the true condition of his health.

RULING:

The Supreme Court answers this to the negative and the AFFIRMED in its entirety the decision of the Court of Appeals.

The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. It states:

VIII. INCONTESTABILITY

After this Agreement has remained in force for one (1) year, we can no longer contest for health reasons any claim for
insurance under this Agreement, except for the reason that installment has not been paid (lapsed), or that you are not
insurable at the time you bought this pension program by reason of age. If this Agreement lapses but is reinstated
afterwards, the one (1) year contestability period shall start again on the date of approval of your request for
reinstatement.

The above incontestability clause precludes the insurer from disowning liability under the policy it issued on the ground

Page 9 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

of concealment or misrepresentation regarding the health of the insured after a year of its issuance.

Since Manuel died on the eleventh month following the issuance of his plan, the one year incontestability period has not
yet set in. Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits of her
husband’s pension plan.
Pacific Timber Export Corporation vs. CA (112 SCRA 199)

FACTS:
On March 13, 1963, Pacific secured temporary insurance from the Workemen’s Insurance Co. for its exportation of logs to
Japan. Workmen issued on said date Cover Note 1010 insuring said cargo. The regular marine policies were issued by
the company in favor of Pacific on Apr 2, 1963. The 2 marine policies bore the number 53H01032 and 53H01033. After
the issuance of the cover note but BEFORE the issuance of the 2 policies, some of the logs intended to be exported were
lost due to a typhoon. Pacific filed its claim with the company, but the latter refused, contending that said loss may not be
considered as covered under the cover note because such became null and void by virtue of the issuance of the marine
policies.

ISSUE:
Whether or not the cover not was without consideration, thus null and void.

HELD:
It was with consideration.
SC upheld Pacific’s contention that said cover not was with consideration. The fact that no separate premium was paid
on the cover note before the loss was insured against occurred does not militate against the validity of Pacific’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 required to be paid on a cover note.

If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, its
purpose would be meaningless for it is in a real sense a contract, not a mere application.

Asian Terminals, Inc. v. First Lepanto-Taisho Insurance Corp., G.R. No. 185964, June 16, 2014, 2002)

FACTS: A shipment of 3,000 bags of sodium tripolyphosphate arrived in Manila through COSCO and was discharged into
the possession and custody of ATI, a domestic corporation engaged in arrastre business. The shipment remained for quit
e some time at ATI’s storage area until it was withdrawn by broker, PROVEN, on for delivery to the consignee. Upon recei
pt of the shipment, it was found out that the delivered goods incurred shortages and spillage for a loss/damage valued at
P166,772.41. GASI sought recompense from COSCO, thru its Philippine agent SMITH BELL, ATI and PROVEN but was
denied. Hence, it pursued indemnification from the shipment’s insurer, FIRST LEPANTO. As subrogee, FIRST LEPANTO
demanded from COSCO, its shipping agency in the Philippines, SMITH BELL, PROVEN and ATI, reimbursement of the a
mount it paid to GASI. ATI and PROVEN denied liability for the lost/damaged shipment and claimed that it exercised due
diligence and care in handling the same.

MeTC dismissed the case. On appeal, the Regional Trial Court (RTC) reversed the MeTC’s findings. ATI sought recourse
with the CA challenging the RTC’s finding that FIRST LEPANTO was validly subrogated to the rights of GASI with respect
to the lost/damaged shipment. ATI argued that there was no valid subrogation because FIRSTLEPANTO failed to present
a valid, existing and enforceable Marine Open Policy or insurance contract. ATI reasoned that the Certificate of Insurance
or Marine Cover Note submitted by FIRST LEPANTO as evidence is not the same as an actual insurance contract.

ISSUE:
W/N the non-presentation of an insurance contract will bar a subrogee from collecting reimbursement.

HELD:
No.

Non_presentation of the insurance contract is not fatal to FIRST LEPANTO’s cause of action for reimbursement as subrog
ee. Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he
who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities.
Page 10 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

In the case at bar, the Supreme Court observed that it is conspicuous from the records that ATI put in issue the submissio
n of the insurance contract for the first time before the CA. Despite opportunity to study FIRST LEPANTO’s complaint befo
re the MeTC, ATI failed to allege in its answer the necessity of the insurance contract. Neither was the same conside
red during pretrial as one of the decisive matters in the case. Further, ATI never challenged the relevancy or materiality o
f the Certificate of Insurance presented by FIRST LEPANTO as evidence during trial as proof of its right to be subrogated
in the consignee’s stead. Since it was not agreed during the pretrial proceedings that FIRST LEPANTO will have to prove
its subrogation rights by presenting a copy of the insurance contract, ATI is barred from pleading the absence of such con
tract in its appeal. It is imperative for the parties to disclose during pretrial all issues they intend to raise during the trial
because they are bound by the delimitation of such issues. The determination of issues during the pre-
trial conference bars the consideration of other questions, whether during trial or on appeal.
Makati Tuscany Condominium Corp. vs. CA (215 SCRA 462);

FACTS: Insurer, AHAC, issued an insurance policy on Tuscany’s building and premises covering a one-year period.
Payment was agreed by both parties to be staggered (5 installments). The 1982 and 1983 policies had been fully paid.
For the 1984 policy, Insured paid only 2 installments and refused to pay the balance on the ground that the policy did not
contain a credit clause in its favor, that it was not binding and risk never attached, thus, demanded for refund of the
premiums paid. But insurer wants to recover the unpaid balances.

Trial Court: Dismissed Insurer’s action to recover as well as Insured’s counterclaim for refund. On appeal, the CA held
that the insurance contract became valid and binding upon payment of the first premium, and the Insurer could not have
denied liability on the ground that payment was not made in full, for the reason that it agreed to accept installment
payment.

Tuscany appealed to SC on the ground: There cannot be a perfected contract of insurance upon mere partial payment of
the premiums because under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the
premium thereof has been paid, notwithstanding any agreement to the contrary.

ISSUE: Whether payment by installment of the premiums due on an insurance policy invalidates the contract of
insurance.

HELD: No, the contract remains valid even if the premiums were paid on installments. Certainly, basic principles of equity
and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments,
and later deny liability on the lame excuse that the premiums were not prepared in full. At the very least, both parties
should be deemed in estoppel to question the arrangement they have voluntarily accepted. Moreover, as correctly
observed by the appellate court, where the risk is entire and the contract is indivisible, the insured is not entitled to a
refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary.
The obligation to pay premiums when due is ordinarily as indivisible obligation to pay the entire premium
UCPB General Insurance vs. Masagana Telamart (June 15, 1999);

FACTS
In 1991, UCPB issued 5 fire insurance policies covering Masagana Telamart’s various properties for the period
from 22 May 1991 to 22 May 1992.

On March 1992~2 months before policy expiration], UCPB evaluated the policies and decided not to renew them upon
expiration of their terms on 22 May 1992. UCPB advised Masagana’s broker of its intention not to renew the policies.
On April 1992 [~1 month before policy expiration], UCPB gave written notice to Masagana of the non-renewal of the
policies. On June 1992 [policy already expired], Masagana’s propertycovered by 3 UCPB-issued policies was razed by
fire.
On 13 July 1992, Masagana presented to UCPB’s cashier 5 manager’s checks, representing premium for the renewal of
the policies for another year.

It was only on the following day, 14 July 1992, when Masagana filed with UCPB a formal claim for indemnification of the
insured property razed by fire. On the same day, UCPB returned the 5 manager’s checks, and rejected Masagana’s

Page 11 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

claim since the policies had expired and were not renewed, and the fire occurred on 13 June 1992 (or before tender of
premium payment).

Masagana filed a civil complaint for recovery of the face value of the policies covering the insured property razed by
fire. RTC ruled in favor of Masagana, as it found it to have complied with the obligation to pay the premium; hence,
the replacement-renewal policy of these policies are effective and binding for another year [22 May 1992 – 22 May 1993].

CA affirmed RTC, holding that following previous practice, Masagana was allowed a 60-90 day credit term for the renewal
of its policies, and that the acceptance of the late premium payment suggested that payment could be made later.

ISSUE:
WON the fire insurance policies had expired on 22 May 1992, or had been extended or renewed by an implied credit
arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk insured
against [fire].

HELD:
FIRE INSURANCE POLICIES HAD EXPIRED
An insurance policy, other than life is not valid and binding until actual payment of the premium. Any agreement to the
contrary is void.The parties may not agree expressly or impliedly on the extension of credit or time to pay the premium
and consider the policy binding before actual payment.
The case of Malayan Insurance v. Cruz-Arnaldocited by the CA is not applicable. In that case, payment of the premium
was made on before the occurrence of the fire. In the present case, the payment of the premium for renewal of the
policies was tendered a month after the fire occurred. Masagana did not even give UCPB a notice of loss within a
reasonable time after occurrence of the fire.
CA DECISION REVERSED

UCPB General Insurance Co. Inc. vs. Masagana Telemart, Inc., 356 SCRA 307 [2001]

Facts: Insurer issued 5 fire insurance policies covering various properties of the Insured (covering the period May 22,
1991-May 22, 1992). Before the expiration of the policy (March 1992), Insurer evaluated the policy and decided not to
renew them. Thus, Insurer issued a notice of non-renewal to Insured’s broker Zuellig (on April 1992). After the expiration
of the policy (or on June 13, 2012), fire razed Insured’s property covered by 3 policies. A month later, Insured presented 5
checks to the Insurer’s cashier as payment for the renewal of the policy (from May 1192-May 1993), however, no notice of
loss was ever filed by Insured. Insurer refused to pay on the ground that the policies had already expired and were not
renewed, and that the fire occurred before payment of the premium (for renewal).

Issue: Whether the fire insurance policies issued by Insurer to Insured had expired on May 1992 or had been extended or
renewed by an implied credit arrangement (even though actual tender of payment was made after the occurrence of the
fire).

Held: No, the insurance policies had not been renewed.

An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the
premium. Any agreement to the contrary is void.

The parties may not agree expressly or impliedly on the extension of creditor time to pay the premium and consider the
policy binding before actual payment.

Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire
occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after
occurrence of the fire.
Bonifacio Bros. Inc. vs. Mora (May 29, 1967);

FACTS: Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. with the condition that Mora would insure
Page 12 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

the car with HS Reyes as beneficiary. The car was then insured with State Insurance Company and the policy delivered to
Mora. During the effectivity of the insurance contract, the car figured in an accident. The company then assigned the
accident to an insurance appraiser for investigation and appraisal of the damage. Mora without the knowledge and
consent of HS Reyes, authorized Bonifacio Bros to fix the car, using materials supplied by the Ayala Auto Parts Company.

For the cost of Labor and materials, Mora was billed P2,102.73. The bill was sent to the insurer’s appraiser. The
insurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser for
delivery to the proper party. The car was delivered to Mora without the consent of HS Reyes, and without payment to
Bonifacio Bros and Ayala.

Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio and Ayala filed a complaint against
Mora and the insurer with the municipal court for the collection of P2,102.73. The insurance company filed its answer with
a counterclaim for interpleader, requiring Bonifacio and HS Reyes to interplead in order to determine who has a better
right to the proceeds.

ISSUE:

Whether or not there is privity of contract between Bonficacio and Ayala on one hand and State Insurance on the other.

HELD:

NONE. It is fundamental that contracts take effect only between the parties thereto, except in some specific instance
provided by law where the contract contains some stipulation in favor of a third person. Such stipulation is known as a
stipulation pour autrui; or a provision in favor of a third person not a party to the contract.

Under this doctrine, a third person is permitted to avail himself of a benefit granted to him by the terms of the contract,
provided that the contracting parties have clearly and deliberately conferred a favor upon such person. Consequently, a
third person NOT a party to the contract has NO action against the parties thereto, and cannot generally demand the
enforcement of the same.

In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit
to any repairmen or material men in case of repair of the car in question. The parties to the insurance contract omitted
such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "loss payable" clause
of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S.
Reyes, Inc. which they intended to benefit.

The Insular Life Assurance vs. Ebrado, 80 SCRA 181;

FACTS:
Buenaventura Ebrado was issued al life plan by Insular Company. He designated Capriona as his beneficiary, referring to
her as his wife.The insured then died and Carponia tried to claim the proceeds of the said plan. She admitted to being
only the common law wife of the insured.

Pascuala, the legal wife, also filed a claim asserting her right as the legal wife. The company then filed an action for
interpleader.

ISSUE:
Whether or not the common law wife named as beneficiary can collect the proceeds.

HELD:
NO. The civil code prohibitions on donations made between persons guilty of adulterous concubinage applies to
insurance contracts. On matters not specifically provided for by the Insurance Law, the general rules on Civil law shall
apply. A life insurance policy is no different from a civil donation as far as the beneficiary is concerned, since both are
founded on liberality.

Page 13 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

It is true that SC went against Sec. 53. However, Sec. 53 is NOT the only provision that the SC had to consider. Art. 739
and 2012 of the civil code prohibit persons who are guilty of adultery or concubinage from being beneficiaries of the life
insurance policies of the persons with whom they committed adultery or concubinage. If the SC used only Sec. 53, it
would have gone against Art. 739 and 2012.
Vda. de Consuegra vs. GSIS (37 SCRA 315);

FACTS:
Jose Consuegra was employed as a shop foreman of the Office of the District Engineer in Surigao Del Norte. When he
was still alive, he contracted two marriages:
o First – Rosario Diaz; 2 children = Jose Consuegra Jr. and Pedro but both predeceased him
o 2nd – Basilia Berdin; 7 children. (this was contracted in GF while the first marriage subsisted)

Being a GSIS member when he died, the proceeds of his life insurance were paid by the GSIS to Berdin and her children
who were the beneficiaries named in the policy. Since he was in the gov’t service for 22.5 years, he was entitled to
retirement insurance benefits, for which no beneficiary was designated. Both families filed their claims with the GSIS,
which ruled that the legal heirs were Diaz who is entitled to one-half or 8/16 of the retirement benefits and Berdin and her
children were entitled to the remaining half, each to receive an equal share of 1/16. Berdin went to CFI on appeal. CFI
affirmed GSIS decision.

ISSUE:
To whom should the retirement insurance benefits be paid?

HELD:
Both families are entitled to half of the retirement benefits.
The beneficiary named in the life insurance does NOT automatically become the beneficiary in the retirement
insurance. When Consuegra, during the early part of 1943, or before 1943, designated his beneficiaries in his life
insurance, he could NOT have intended those beneficiaries of his life insurance as also the beneficiaries of his retirement
insurance because the provisions on retirement insurance under the GSIS came about only when CA 186 was amended
by RA 660 on June 18, 1951.

Sec. 11(b) clearly indicates that there is need for the employee to file an application for retirement insurance benefits
when he becomes a GSIS member and to state his beneficiary. The life insurance and the retirement insurance are two
separate and distinct systems of benefits paid out from 2 separate and distinct funds.

In case of failure to name a beneficiary in an insurance policy, the proceeds will accrue to the estate of the insured. And
when there exists two marriages, each family will be entitled to one-half of the estate.

Roque vs. IAC (139 SCRA 596);

FACTS:
On February 19, 1972, the Manila Bay Lighterage Corporation (Manila Bay), a common carrier, entered into a contract
with the petitioners whereby the former would load and carry on board its barge Mable 10 about 422.18 cubic meters of
logs from Malampaya Sound, Palawan to North Harbor, Manila. The petitioners insured the logs against loss for
P100,000.00 with respondent Pioneer Insurance and Surety Corporation (Pioneer).

On February 29, 1972, the petitioners loaded on the barge, 811 pieces of logs at Malampaya Sound, Palawan for carriage
and delivery to North Harbor, Port of Manila, but the shipment never reached its destination because Mable 10 sank with
the 811 pieces of logs somewhere off Cabuli Point in Palawan on its way to Manila.
Hence, petitioners commenced Civil Case No. 86599 against Manila Bay and respondent Pioneer.

ISSUE:
W/N The IAC erred in holding that in cases of marine cargo insurance, there is a warranty of seaworthiness by the cargo
owner.

HELD:

Page 14 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

No. The IAC is correct.

There can be no mistake in the fact that the term "cargo" can be the subject of marine insurance and that once it is so
made, the implied warranty of seaworthiness immediately attaches to whoever is insuring the cargo whether he be the
shipowner or not.

Since the law provides for an implied warranty of seaworthiness in every contract of ordinary marine insurance, it
becomes the obligation of a cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy
condition. The shipper of cargo may have no control over the vessel but he has full control in the choice of the common
carrier that will transport his goods. Or the cargo owner may enter into a contract of insurance which specifically provides
that the insurer answers not only for the perils of the sea but also provides for coverage of perils of the ship.

Oriental Assurance Corporation vs. CA (200 SCRA 459)

FACTS:
Panama Sawmill shipped 1208 pieces of apitog logs to Manila and insured the logs with Oriental for the value of
Php 1 million. Two barges were loaded with 610 and 598 logs. At sea, typhoons ravaged one of the barges,
resulting in the loss of 497 of 598 of the logs. The Insurance contract provided for indemnity under the following
conditions:

Warranted that this Insurance is against TOTAL LOSS ONLY. Subject to the following clauses:
— Civil Code Article 1250 Waiver clause
— Typhoon warranty clause
— Omnibus clause.

Oriental didn’t give an indemnity because there wasn’t total loss of the shipment. The sawmill filed a civil case
against Oriental and the court ordered it to pay 410,000 as value for the missing logs. The CA affirmed the lower
court judgment but reduced the legal interest. Hence this appeal by Oriental.

ISSUE:
Whether or not Oriental Assurance can be held liable under its marine insurance policy based on the theory of a
divisible contract of insurance and, consequently, a constructive total loss.

HELD:

No. The terms of the contract constitute the measure of the insurer liability and compliance therewith is a condition
precedent to the insured's right to recovery from the insurer.

“Whether a contract is entire or severable is a question of intention to be determined by the language employed by
the parties. The policy in question shows that the subject matter insured was the entire shipment of 2,000 cubic
meters of apitong logs. The fact that the logs were loaded on two different barges did not make the contract
several and divisible as to the items insured. The logs on the two barges were not separately valued or separately
insured. Only one premium was paid for the entire shipment, making for only one cause or consideration. The
insurance contract must, therefore, be considered indivisible.”
Also, the insurer's liability was for "total loss only" as stipulated. A total loss may be either actual or constructive. A
constructive total loss, gives to a person insured a right to abandon and it means if more than 3/4 thereof in value is
actually lost, or would have to be expended to recover it from the peril;

The SC said that although the logs were placed in two barges, they were not separately valued by the policy, nor
separately insured. Of the entirety of 1,208, pieces of logs, only 497 pieces thereof were lost or 41.45% of the entire
shipment. Since the cost of those 497 pieces does not exceed 75% of the value of all 1,208 pieces of logs, the
shipment can not be said to have sustained a constructive total loss under Section 139(a) of the Insurance Code.

Finman General Assurance Co. vs. CA (September 2, 1992);

Page 15 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

FACTS: On October 22, 1986, deceased, Carlie Surposa was insured with petitioner Finman General Assurance
Corporation with his parents, spouses Julia and Carlos Surposa, and brothers Christopher, Charles, Chester and Clifton,
all surnamed, Surposa, as beneficiaries. 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 inflicted by one of the three (3) unidentified men. 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. Private respondent filed a complaint with the Insurance Commission which rendered a favorable
response for the respondent. The appellate court ruled likewise. Petitioner filed this petition alleging grave 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. Therefore, said death was committed with deliberate intent which, by the very nature of a personal accident
insurance policy, cannot be indemnified.

ISSUE: Whether or not the insurer is liable for the payment of the insurance premiums

HELD: Yes, the insurer is still liable. 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.
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. 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.

Sun Insurance Office Ltd. vs. CA (July 17, 1992);

FACTS: Sun Insurance Office Ltd. issued Personal Accident Policy 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. Sun Insurance agreed that there was no suicide. It argued, however,
that there was no accident either. Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It happened on 6
October 1982, at about 10 p.m., 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 the
television, he stood in front of her and pointed the gun at her. She pushed it aside and said it might be loaded. He assured
her it was not and then pointed it to his temple. The next moment there was an explosion and Lim slumped to the floor. He
was dead before he fell. The widow sued Sun Insurance in the Regional Trial Court of Zamboanga City and was
sustained. Sun Insurance 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; P50,000.00 as actual and
compensatory damages; and P5,000.00 as attorney's fees, plus the cost of the suit. This decision was affirmed on appeal,
and the motion for reconsideration was denied. Sun Insurance then came to the Supreme Court.

ISSUE: Whether the insured willfully exposed himself to needless peril and thus removed himself from the coverage of the
insurance policy.

HELD: No. An accident is an event which happens without any human agency or, if happening through human agency, an
event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also been
defined as an injury which happens by reason of some violence or casualty to the insured without his design, consent, or
voluntary co-operation. Herein, the incident that resulted in Lim's death was indeed an accident. On the other hand, the
parties agree that Lim did not commit suicide. Nevertheless, Sun Insurance 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. The posture -- that by the mere act of pointing the gun to his temple,
Lim had willfully exposed himself to needless peril and so came under the exception -- is arguable. But what is not is that
Lim had removed the magazine from the gun and believed it was no longer dangerous. He expressed 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

Page 16 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

Nalagon that the gun was indeed harmless. 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 present case. 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 the case.
Biagtan vs. The Insular Life Assurance Co., Ltd., (44 SCRA 58)

FACTS: Juan Biagtan was insured with Insular for P5k and a supplementary contract “Accidental Death Benefit” clause
for another P5k if "the death of the Insured resulted directly from bodily injury effected solely through external and violent
means sustained in an accident . . . and independently of all other causes." The clause, however, expressly provided that
it would not apply where death resulted from an injury "intentionally inflicted by a third party." One night, a band of robbers
entered their house. Juan went out of his room and he was met with 9 knife stabs. He died. The robbers were convicted of
robbery with homicide. The family was claiming the additional P5k from Insular under the Accidental Death Benefit
clause. Insular refused on the ground that the death resulted from injuries intentionally inflicted by 3rd parties and was
therefore not covered. Biagtans filed against Insular. CFI ruled in favor of Biagtans.

ISSUE: Whether or not the injuries were intentionally inflicted by a third party?

HELD: Yes. Whether the robbers had the intent to kill or merely to scare the victim or to ward off any defense he might
offer, it cannot be denied that the act itself of inflicting the injuries was intentional. The exception in the accidental benefit
clause invoked by the appellant does not speak of the purpose — whether homicidal or not — of a third party in causing
the injuries, but only of the fact that such injuries have been "intentionally" inflicted — this obviously to distinguish them
from injuries which, although received at the hands of a third party, are purely accidental.
Vda. de Maglana vs. Hon. Consolacion (August 6, 1992);

FACTS: Lope Maglana was an employee of the Bureau of Customs whose work station was at Lasa, Davao City. One
early morning, Lope Maglana was on his way to his work station, driving a motorcycle owned by the Bureau of Customs.
At Km. 7, Lanang, he met an accident that resulted in his death. He died on the spot. The PUJ jeep that bumped the
deceased was driven by Pepito Into, operated and owned by Destrajo. The point of impact was on the lane of the
motorcycle and the deceased was thrown from the road and met his untimely death. Consequently, the heirs of Lope
Maglana, Sr., filed an action for damages and attorney's fees against operator Patricio Destrajo and the Afisco Insurance
Corporation (AFISCO) before the then Court of First Instance of Davao, Branch II. An information for homicide thru
reckless imprudence was also filed against Pepito Into. During the pendency of the civil case, Into was sentenced
convicted and ordered to indemnify the heirs of Lope Maglana, Sr. in the amount of P12,000.00 with subsidiary
imprisonment in case of insolvency, plus P5,000.00 in the concept of moral and exemplary damages with costs.

Sometine thereafter, the lower court rendered a decision finding that Destrajo had not exercised sufficient diligence as the
operator of the jeepney. The court ordered Destrajo to pay the heirs of Maglana the sum of P28,000.00 for loss of income;
the sum of P5,901.70 representing funeral and burial expenses of the deceased; the sum of P5,000.00 as moral damages
; the sum of P3,000.00 as attorney's fees and to pay the costs of suit. The court ordered the insurance company to
reimburse Destrajo whatever amounts the latter shall have paid only up to the extent of its insurance coverage. The heirs
of Maglana filed a motion for the reconsideration of the second paragraph of the dispositive portion of the decision
contending that AFISCO should not merely be held secondarily liable because the Insurance Code provides that the
insurer's liability is "direct and primary and/or jointly and severally with the operator of the vehicle, although only up to the
extent of the insurance coverage."

The lower court denied the motion for reconsideration ruling that since the insurance contract "is in the nature of
suretyship, then the liability of the insurer is secondary only up to the extent of the insurance coverage." The heirs filed a
second motion for reconsideration reiterating that the liability of the insurer is direct, primary and solidary with the jeepney
operator because the petitioners became direct beneficiaries under the provision of the policy which, in effect, is a
stipulation pour autrui.

ISSUE : Whether or not AFISCO is primarily liable, not secondarily liable, on the insurance policy.

HELD: The particular provision of the insurance policy on which the heirs base their claim provides "SECTION 1 —
Page 17 of 18
INSURANCE LAW (CASE DIGESTS FOR COMMREV)

LIABILITY TO THE PUBLIC 1. The Company will, subject to the Limits of Liability, pay all sums necessary to discharge
liability of the insured in respect of. (a) death of or bodily injury to any THIRD PARTY; xxx 3. In the event of the death of
any person entitled to indemnity under this Policy, the Company will, in respect of the liability incurred to such person
indemnify his personal representatives in terms of, and subject to the terms and conditions hereof." The above-quoted
provision leads to no other conclusion but that AFISCO can be held directly liable by the heirs. As the Court ruled in
Shafer vs. Judge, RTC of Olongapo Cit, "where an insurance policy insures directly against liability, the insurer's liability
accrues immediately upon the occurrence of the injury or event upon which the liability depends, and does not depend on
the recovery of judgment by the injured party against the insured." The underlying reason behind the third party liability
(TPL) of the Compulsory Motor Vehicle Liability Insurance is "to protect injured persons against the insolvency of the
insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy."
Since the heirs had received from AFISCO the sum of P5,000.00 under the no-fault clause, AFISCO's liability is now
limited to P15,000.00.

Tiu vs. Arriesgado (GR No. 138060, 01 September 2004)

FACTS:
Spouses Arriesgado were passengers of a bus owned by the petitioner. The respondents sustained injures when the bus
collided with a cargo truck. Respondent then filed a complaint for breach of contract of carriage, damages and
attorney’s fees before the RTC-Cebu City against the petitioners.

The petitioners, for their part, filed a Third-Party Complaint against respondent Philippine Phoenix Surety and
Insurance, Inc. (PPSII), petitioner Tiu’s insurer; respondent Benjamin Condor, the registered owner of the cargo
truck; and respondent Sergio Pedrano, the driver of the truck. Petitioner Tiu is insisting that PPSII is liable to him for
contribution, indemnification and/or reimbursement.

ISSUE:
In third-party liability insurance, would it be possible for a third party to sue the insurer directly?
Would it be possible for an insurance company to be held jointly and severally liable with the insured?

HELD:
Yes. This is an exception to the rule on mutuality of contract. Whenever a contract contains stipulation for the benefit of a
third person and the moment the third person communicates his assent thereto, the contract becomes binding upon him.
The fact that a third person demands fulfillment of the insurance policy may be reasonably construed as an assent on his
part to the benefit provided in the policy. This provision arms him with the requisite legal personality to bring an action on
the insurance policy. (stipulation pour artrui)

No. The basis of cause of action is different. The cause of action against the insurer is based on contract while the cause
of action against the insured is based on torts. Considering that there are two different causes of action, it will be legally
impossible for them to be made as jointly and severally liable to the injured third party.

Page 18 of 18