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FINMAN GENERAL ASSURANCE CORPORATION vs.

THE HONORABLE COURTOF APPEALS


213 SCRA 493, September 2, 1992NOCON, J.:

FACTS: On October 22, 1986, deceased, Carlie Surposa was insured with petitioner FinmanGeneral
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 uniusexclusioalterius"
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

RULING: 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. In the case at bar, it cannot be pretended that
Carlie Surposa died in the course of an assault or murder as a result of his voluntary act considering the
very nature of these crimes.

GEAGONIA vs. CA, COUNTRY BANKERS INSURANCE CORP., G.R. 114427, 2/6/95

FACTS: Armando Geagonia is the owner of Norman’s Mart and obtained from Country Bankers a fire
insurance policy which covered Stock-in-trade consisting of RTW dry goods. The policy contained a
provision where the insured must give notice to the insurer of any insurance or insurances already
affected or which may be subsequently be effected covering any of the property or properties consisting
of stocks in trade, goods in process and/or inventories already insured by such policy otherwise it shall be
deemed forfeited, provided that such condition does not apply when the total insurance or insurances in
force at the time of the loss is not more than 200k Subsequently, a fire broke out and destroyed
Geagonia’s stocks-in-trade. Country bankers denied the claim because it was found that at the time of the
loss, the stocks were likewise covered by two other fire insurances for 100k each by PFIC. It had a
mortgage clause which stated that loss, if any, shall be payable to Cebu Tesing Textiles.

ISSUE: WON there was double insurance to justify denial of the claim
HELD: NO (Country Bankers is liable). It is a cardinal rule on insurance that a policy or insurance contract
is to be interpreted liberally in favor of the insured and strictly against the company, the reason being,
undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he
applied for insurance. Provisions, conditions, or exceptions in policies which tend to work a forfeiture of
insurance policies should be construed most strictly against those for whose benefits they are inserted,
and most favorably toward those against whom they are intended to operate. The condition in the policy
is commonly known as the additional or “other insurance” clause and has been upheld as valid and as a
warranty that no other insurance exists. Its violation would thus avoid the policy. However, in order to
constitute a violation, the other insurance must be upon the same subject matter, the same insurable
interest, and the same risk. As to a mortgaged property, the mortgagor and the mortgagee have each an
independent insurable interest therein and both interests may be one policy, or each may take out a
separate policy covering his interest, either at the same or separate times. The mortgagor’s insurable
interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to
the full value of the property. The mortgagee’s insurable interest is to the extent of the debt, since the
property is relied upon as security thereof, and in insuring he is not insuring the property but his interest
or lien thereon. A double insurance exists where the same person is insured by several insurers separately
in respect of the same subject and cover the same interest. Since the two policies of the PFIC do not cover
the same interest as that covered by the policy in issue, no double insurance exists. The non-disclosure is
not fatal. 11. Fortune Insurance and Surety Co., Inc. v. Court of Appeals Facts: On June 29, 1987, Producer’s
Bank of the Philippines’ armored vehicle was robbed, in transit, of seven hundred twenty-five thousand
pesos (Php 725,000.00) that it was transferring from its branch in Pasay to its main branch in Makati. To
mitigate their loss, they claim the amount from their insurer, namely Fortune Insurance and Surety Co.
Fortune Insurance, however, assails that the general exemption clause in the Casualty Insurance coverage
had a general exemption clause, to wit:
GENERAL EXCEPTIONS: The company shall not be liable under this policy in respect of xxxxxxxxx (b) any
loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner,
director, trustee or authorized representative of the Insured whether acting alone or in conjunction with
others. . . . And, since the driver (Magalong) and security guard (Atiga) of the armored vehicle were
charged with three others as liable for the robbery, Fortune denies Producer’s Bank of its insurance claim.
The trial court and the court appeals ruled in favor of recovery, hence, the case at bar. Issue: Whether
recovery is precluded under the general exemption clause. Ruling: Yes, recovery is precluded under the
general exemption clause. Howsoever viewed, Producers entrusted the three with the specific duty to
safely transfer the money to its head office, with Alampay to be responsible for its custody in transit;
Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the needed
security for the money, the vehicle, and his two other companions. In short, for these particular tasks, the
three acted as agents of Producers. A "representative" is defined as one who represents or stands in the
place of another; one who represents others or another in a special capacity, as an agent, and is
interchangeable with "agent." In view of the foregoing, Fortune is exempt from liability under the general
exceptions clause of the insurance policy.

ENRIQUEZ V SUN LIFE OF CANADA 41 Phil 269

FACTS: September 24, 1917: Joaquin Herrera made application to the Sun Life Assurance Company of
Canada through its office in Manila for a life annuity 2 days later: he paid P6,000 to the manager of the
company's Manila office and was given a receipt According to the provisional receipt, 3 things had to be
accomplished by the insurance company before there was a contract: (1) There had to be a medical
examination of the applicant; -check (2) there had to be approval of the application by the head office of
the company; and - check (3) this approval had in some way to be communicated by the company to the
applicant November 26, 1917: The head office at Montreal, Canada gave notice of acceptance by cable to
Manila but this was not mailed December 4, 1917: policy was issued at Montreal December 18, 1917:
attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrera desired to
withdraw his application December 19, 1917: local office replied to Mr. Torres, stating that the policy had
been issued, and called attention to the notification of November 26, 1917 December 21, 1917 morning:
received by Mr. Torres December 20, 1917: Mr. Herrera died Rafael Enriquez, as administrator of the
estate of the late Joaquin Ma. Herrera filed to recover from Sun Life Assurance Company of Canada
through its office in Manila for a life annuity RTC: favored Sun Life Insurance

ISSUE: WON Mr. Herrera received notice of acceptance of his application thereby perfecting his life
annuity

RULING: NO. Not perfected because it has not been proved satisfactorily that the acceptance of the
application ever came to the knowledge of the applicant. Art. 1319. Consent is manifested by the meeting
of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed to have been entered into in the place where the
offer was made. Judgment is reversed, and the Enriquez shall have and recover from the Sun Life the sum
of P6,000 with legal interest from November 20, 1918, until paid, without special finding as to costs in
either instance. So ordered.

PEREZ V. CA

FACTS: Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for P20,000.00.
Sometime in October 1987, an agent of the insurance corporation, visited Perez in Quezon and convinced
him to apply for additional insurance coverage of P50,000.00. Virginia A. Perez, Primitivo’s wife, paid
P2,075.00 to the agent. The receipt issued indicated the amount received was a "deposit." Unfortunately,
the agent lost the application form accomplished by Perez and he asked the latter to fill up another
application form. The agent sent the application for additional insurance of Perez to the Quezon office.
Such was supposed to forwarded to the Manila office. Perez drowned. His application papers for the
additional insurance of P50,000.00 were still with the Quezon. It was only after some time that the papers
were brought to Manila. Without knowing that Perez died, BF Lifeman Insurance Corporation approved
the application and issued the corresponding policy for the P50,000.00. Petitioner Virginia Perez went to
Manila to claim the benefits under the insurance policies of the deceased. She was paid P40,000.00 under
the first insurance policy for P20,000.00 but the insurance company refused to pay the claim under the
additional policy coverage of P50,000.00, the proceeds of which amount to P150,000.00. The insurance
company maintained that the insurance for P50,000.00 had not been perfected at the time of the death
of Primitivo Perez. Consequently, the insurance company refunded the amount paid. BF Lifeman
Insurance Corporation filed a complaint against Virginia Perez seeking the rescission and declaration of
nullity of the insurance contract in question. Petitioner Virginia A. Perez, on the other hand, averred that
the deceased had fulfilled all his prestations under the contract and all the elements of a valid contract
are present. On October 25, 1991, the trial court rendered a decision in favor of petitioner ordering
respondent to pay 150,000 pesos. The Court of Appeals, however, reversed the decision of the trial court
saying that the insurance contract for P50,000.00 could not have been perfected since at the time that
the policy was issued, Primitivo was already dead. Petitioner’s motion for reconsideration having been
denied by respondent court, the instant petition for certiorari was filed on the ground that there was a
consummated contract of insurance between the deceased and BF Lifeman Insurance Corporation.

ISSUE: WON the widow can receive the proceeds of the 2nd insurance policy

HELD: No. Petition dismissed.

Ratio: Perez’s application was subject to the acceptance of private respondent BF LifemanInsurance
Corporation. The perfection of the contract of insurance between the deceased and respondent
corporation was further conditioned with the following requisites stated in the application form: "there
shall be no contract of insurance unless and until a policy is issued on this application and that the said
policy shall not take effect until the premium has been paid and the policy delivered to and accepted by
me/us in person while I/We, am/are in good health." BF Lifeman didn’t give its assent when it merely
received the application form and all the requisite supporting papers of the applicant. This happens only
when it gives a policy. It is not disputed, however, that when Primitivo died on November 25, 1987, his
application papers for additional insurance coverage were still with the branch office of respondent
corporation in Quezon. Consequently, there was absolutely no way the acceptance of the application
could have been communicated to the applicant for the latter to accept inasmuch as the applicant at the
time was already dead. Petitioner insists that the condition imposed by BF that a policy must have been
delivered to and accepted by the proposed insured in good health is potestative, being dependent upon
the will of the corporation and is therefore void. The court didn’t agree. A potestative condition depends
upon the exclusive will of one of the parties and is considered void. The Civil Code states: When the
fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be
void. The following conditions were imposed by the respondent company for the perfection of the
contract of insurance: a policy must have been issued, the premiums paid, and the policy must have been
delivered to and accepted by the applicant while he is in good health. The third condition isn’t potestative,
because the health of the applicant at the time of the delivery of the policy is beyond the control or will
of the insurance company. Rather, the condition is a suspensive one whereby the acquisition of rights
depends upon the happening of an event which constitutes the condition. In this case, the suspensive
condition was the policy must have been delivered and accepted by the applicant while he is in good
health. There was nonfulfillment of the condition, because the applicant was already dead at the time the
policy was issued. As stated above, a contract of insurance, like other contracts, must be assented to by
both parties either in person or by their agents. So long as an application for insurance has not been either
accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from
the date of application, must have been a completed contract. The insurance company wasn’t negligent
because delay in acting on the application does not constitute acceptance even after payment. The
corporation may not be penalized for the delay in the processing of the application papers due to the fact
that process in a week wasn’t the usual timeframe in fixing the application. Delay could not be deemed
unreasonable so as to constitute gross negligence.
THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs. CARPONIA T. EBRADO and PASCUALA VDA. DE
EBRADO, G.R. No. L-44059, [October 28, 1977]

FACTS: On September 1, 1968, Buenaventura Cristor Ebrado was issued by the Insular Life Assurance Co.,
Ltd., a policy on a whole-life plan for P5,882 with a rider for Accidental Death Benefits for the same
amount. He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He referred to her
as his wife. On October 21, 1969, Buenventura C. Ebrado died as a result of an accident when he was hit
by a falling branch of a tree. As the insurance policy was in force, The Insular Life Assurance Co., Ltd. stands
liable to pay the coverage of the policy in an amount of P11,745.73, representing the face value of the
policy in the amount of P5,882.00 plus the additional benefits for accidental death also in the amount of
P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the unpaid
premiums and interest thereon due for January and February, 1969, in the sum of P36.27. Carponia filed
with the insurer a claim for the proceeds of the policy as the designated beneficiary therein, although she
admits that she and the insured Buenaventura were merely living as husband and wife without the benefit
of marriage. Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She
asserts that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia.

ISSUE: Can the common-law wife, Carponia Ebrado, named as beneficiary in the life insurance policy of a
legally married man claim the proceeds thereof in case of death of the latter?

HELD: NO. The general rules of civil law should be applied to resolve matters not specifically provided in
the Insurance Law. Article 2011 of the New Civil Code states: The contract of insurance is governed by
special laws. Matters not expressly provided for in such special laws shall be regulated by this Code. And
under Article 2012 of the same Code: Any person who is forbidden from receiving any donation under
Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a
donation to him. Common-law spouses are, definitely, barred from receiving donations from each other.
Also, conviction for adultery or concubinage is not required as only preponderance of evidence is
necessary. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary
is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee,
because the premiums of the policy which the insured pays out of liberality, the beneficiary will receive
the proceeds or profits of said insurance.

CALANOC VS. COURT OF APPEALS, 98 Phil. 79 [1955]

FACTS: Melencio Basilio, a watchman and, secured a life insurance policy from the Philippine American
Insurance Company in the amount of P2,000 which had a supplemental contract covering death by
accident. He later died from a gunshot wound on the occasion of a robbery committed; his widow was
paid P2,000 for the face value of the policy but the company refused to give the other 2000 for the death
by accident because the deceased died by murder during the robbery and while making an arrest as an
officer of the law which were expressly excluded in the contract. The Court of Appeals upheld the
Company and said that the circumstances surrounding Basilio’s death was caused by one of the risks
excluded by the supplementary contract which exempts the company from liability.

ISSUE: Is the Philippine American Life Insurance Co. liable to the petitioner for the amount covered by the
supplemental contract?
HELD: Yes. The circumstances of Basilio’s death cannot be taken as purely intentional on the part of Basilio
to expose himself to the danger. No proof that his death was the result of intentional killing because there
is the possibility that the malefactor had fired the shot merely to scare away the people around. The terms
and phraseology of the exception clause should be clearly expressed within the understanding of the
insured. Art. 1377 of the New Civil Code provides that in case ambiguity in the terms of the contract, it
will be construed against the party who caused such obscurity. Therefore ambiguous or obscure terms in
the insurance policy are to be construed strictly against the insurer and liberally in favor of the insured
party to ensure the protection of the insured since these insurance contracts are usually arranged and
employed by experts and legal advisers acting exclusively in the interest of the insurance company.

HEIRS OF MARAMAG V. MARAMAG G.R. No. 181132 , June 5, 2009

FACTS: The case stems from a petition filed against respondents with the RTC for revocation and/or
reduction of insurance proceeds for being void and/or inofficious. The petition alleged that: (1) petitioners
were the legitimate wife and children of Loreto Maramag (Loreto), while respondents were Loreto’s
illegitimate family; (2) Eva de Guzman Maramag (Eva) was a concubine of Loreto and a suspect in the
killing of the latter, thus, she is disqualified to receive any proceeds from his insurance policies from Insular
Life Assurance Company, Ltd. (Insular) and Great Pacific Life Assurance Corporation (Grepalife) (3) the
illegitimate children of Loreto—Odessa, Karl Brian, and Trisha Angelie—were entitled only to one-half of
the legitime of the legitimate children, thus, the proceeds released to Odessa and those to be released to
Karl Brian and Trisha Angelie were inofficious and should be reduced; and (4) petitioners could not be
deprived of their legitimes, which should be satisfied first. Insular admitted that Loreto misrepresented
Eva as his legitimate wife and Odessa, Karl Brian, and Trisha Angelie as his legitimate children, and that
they filed their claims for the insurance proceeds of the insurance policies; that when it ascertained that
Eva was not the legal wife of Loreto, it disqualified her as a beneficiary and divided the proceeds among
Odessa, Karl Brian, and Trisha Angelie, as the remaining designated beneficiaries; and that it released
Odessa’s share as she was of age, but withheld the release of the shares of minors Karl Brian and Trisha
Angelie pending submission of letters of guardianship. Insular alleged that the complaint or petition failed
to state a cause of action insofar as it sought to declare as void the designation of Eva as beneficiary,
because Loreto revoked her designation as such in Policy No. A001544070 and it disqualified her in Policy
No. A001693029; and insofar as it sought to declare as inofficious the shares of Odessa, Karl Brian, and
Trisha Angelie, considering that no settlement of Loreto’s estate had been filed nor had the respective
shares of the heirs been determined. Insular further claimed that it was bound to honor the insurance
policies designating the children of Loreto with Eva as beneficiaries pursuant to Section 53 of the
Insurance Code. Grepalife alleged that Eva was not designated as an insurance policy beneficiary; that the
claims filed by Odessa, Karl Brian, and Trisha Angelie were denied because Loreto was ineligible for
insurance due to a misrepresentation in his application form that he was born on December 10, 1936 and,
thus, not more than 65 years old when he signed it in September 2001; that the case was premature,
there being no claim filed by the legitimate family of Loreto; and that the law on succession does not apply
where the designation of insurance beneficiaries is clear.

ISSUE: Whether or not illegitimate children can be beneficiaries in an insurance contract.

RULING: Yes. Section 53 of the Insurance Code states that 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. Pursuant thereto, it is obvious that the only persons entitled to claim
the insurance proceeds are either the insured, if still alive; or the beneficiary, if the insured is already
deceased, upon the maturation of the policy. The exception to this rule is a situation where the insurance
contract was intended to benefit third persons who are not parties to the same in the form of favorable
stipulations or indemnity. In such a case, third parties may directly sue and claim from the insurer.
Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus, are not
entitled to the proceeds thereof. Accordingly, respondents Insular and Grepalife have no legal obligation
to turn over the insurance proceeds to petitioners. The revocation of Eva as a beneficiary in one policy
and her disqualification as such in another are of no moment considering that the designation of the
illegitimate children as beneficiaries in Loreto’s insurance policies remains valid. Because no legal
proscription exists in naming as beneficiaries the children of illicit relationships by the insured, the shares
of Eva in the insurance proceeds, whether forfeited by the court in view of the prohibition on donations
under Article 739 of the Civil Code or by the insurers themselves for reasons based on the insurance
contracts, must be awarded to the said illegitimate children, the designated beneficiaries, to the exclusion
of petitioners. It is only in cases where the insured has not designated any beneficiary, or when the
designated beneficiary is disqualified by law to receive the proceeds, that the insurance policy proceeds
shall redound to the benefit of the estate of the insured.

ANG GIOK CHIP V SPRINGFIELD G.R. No. L-33637 December 31, 1931 J. Malcolm

FACTS: Ang insured his warehouse for the total value of Php 60,000. One of these, amounting to 10,000,
was with Springfield Insurance Company. His warehouse burned down, then he attempted to recover
8,000 from Springfield for the indemnity. The insurance company interposed its defense on a rider in the
policy in the form of Warranty F, fixing the amount of hazardous good that can be stored in a building to
be covered by the insurance. They claimed that Ang violated the 3 percent limit by placing hazardous
goods to as high as 39 percent of all the goods stored in the building. His suit to recover was granted by
the trial court. Hence, this appeal.

ISSUE: Whether a warranty referred to in the policy as forming part of the contract of insurance and in
the form of a rider to the insurance policy, is null and void because not complying with the Philippine
Insurance Act.

HELD: No. The warranty is valid. Petition dismissed. Ratio: The Insurance Act, Section 65, taken from
California law, states: "Every express warranty, made at or before the execution of a policy, must be
contained in the policy itself, or in another instrument signed by the insured and referred to in the policy,
as making a part of it." Warranty F, indemnifying for a value of Php 20,000 and pasted on the left margin
of the policy stated: It is hereby declared and agreed that during the currency of this policy no hazardous
goods be stored in the Building to which this insurance applies or in any building communicating
therewith, provided, always, however, that the Insured be permitted to stored a small quantity of the
hazardous goods specified below, but not exceeding in all 3 per cent of the total value of the whole of the
goods or merchandise contained in said warehouse, viz; . . . . Also, the court stated a book that said, "any
express warranty or condition is always a part of the policy, but, like any other part of an express contract,
may be written in the margin, or contained in proposals or documents expressly referred to in the policy,
and so made a part of it." “It is well settled that a rider attached to a policy is a part of the contract, to the
same extent and with like effect as it actually embodied therein. In the second place, it is equally well
settled that an express warranty must appear upon the face of the policy, or be clearly incorporated
therein and made a part thereof by explicit reference, or by words clearly evidencing such intention.” The
court concluded that Warranty F is contained in the policy itself, because by the contract of insurance
agreed to by the parties it was made to be a part. It wasn’t a separate instrument agreed to by the parties.
The receipt of the policy by the insured without objection binds him. It was his duty to read the policy and
know its terms. He also never chose to accept a different policy by considering the earlier one as a mistake.
Hence, the rider is valid.

FIELDMEN'S INSURANCE CO., INC. vs. VDA. DE SONGCO, ET AL. 25 SCRA 70 [G.R. No. L-24833; September
23, 1968]

Nature of the Case: The lower court held that Fieldmen’s Insurance Co., petitioner cannot escape liability
under a common carrier insurance policy on the pretext that what was insured was a private vehicle and
not a common carrier, the policy being issued upon the agent’s insistence. CA affirmed the lower court.
Petitioner files for the review of the above decision of respondent Court of Appeals but the Supreme Court
sustained the Court of Appeals’ decision.

FACTS: Federico Songco of Floridablanca, Pampanga, a man of scant education being only a first grader,
owned a private jeepney. He was induced by Fieldmen's Insurance Company Pampanga agent Benjamin
Sambat to apply for a Common Carrier's Liability Insurance Policy covering his motor vehicle. Upon paying
the annual premium, Fieldmen's Insurance Company, Inc. issued a Common Carriers Accident Insurance
Policy covering one year. Federico said that his vehicle is an ‘owner’ private vehicle and not for passengers,
despite the latter being initially adamant, was made to believe that his vehicle qualifies under the common
carrier liability insurance policy. Songco paid an annual premium and he was issued a Common Carriers
Accident Insurance Policy. After the lapse of one year, and upon payment of the corresponding premium,
the policy was renewed extending the coverage for another year During the effectivity of the renewed
policy, the insured vehicle while being driven by Rodolfo Songco [duly licensed driver and Federico’s son
collided with a car. As a result, Federico and Rodolfo died, while Carlos (another son) and his wife Angelita,
and a family friend sustained physical injuries. The Court of Appeals rendered a decision in favor of the
claimants. It held that where inequitable conduct is shown by an insurance firm, it is estopped from
enforcing forfeitures in its favor, in order to forestall fraud or imposition on the insured. After Fieldmen's
Insurance Co. had led the insured Songco to believe that he could qualify under the common carrier
liability insurance policy, it could not, thereafter, be permitted to change its stand to the detriment of the
heirs of the insured. The failure to apply the Doctrine of Estoppel in this case would result in a gross
travesty of justice.

ISSUE: Whether or not the insurance claim is proper?

RULING: The Insurance claim is proper. The fact that the insured owned a private vehicle, not a common
carrier, was something which the company knew all along. In fact, it exerted the utmost pressure on the
insured, a man of scant education, to enter into the contract of insurance. The Court of Appeals also held
that since some of the conditions in the policy were impossible to comply with under the existing
conditions at the time and inconsistent with the known facts, the insurer is estopped from asserting
breach of such conditions. Except for the fact that the passengers were not fare-paying, their status as
beneficiaries under the policy is recognized. Even if the be assumed that there was an ambiguity, such
must be strictly interpreted against the party that caused them As estoppel is primarily based on the
doctrine of good faith and the avoidance of harm that will befall the innocent party due to its injurious
reliance, the failure to apply it in this case would result in a gross travesty of justice. Citing the case of Qua
Chee Gan vs. Law Union & Rock I n s u r a n c e "The contract of insurance is one of perfect good faith
(uberrima fides) not for the insured alone, but equally so for the insurer; in fact, it is more so for the latter,
since its dominant bargaining position carries with it stricter responsibility." :

SAN MIGUEL BREWERY V. LAW UNION AND ROCK INSURANCE CO. (1920) G.R. No. L-14300 January 19,
1920

Lessons Applicable: • Mortgagor (Insurance) • Measure of Insurable Interest (Insurance) • Effect of


Change of Interest in Thing Insured (Insurance) • Effect of transfer of thing insured (Insurance) Laws
Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of the Insurance Code (all old law)

FACTS: • In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to insure the
mortgaged property for its full value and to indorse the policies in such manner as to authorize the
Brewery Company to receive the proceeds in case of loss and to retain such part thereof as might be
necessary to satisfy the remainder then due upon the mortgage debt. Instead, however, of effecting the
insurance himself Dunn authorized and requested the Brewery Company to procure insurance on the
property in the amount of P15,000 at Dunn's expense. • San Miguel insured the property only as
mortgagee. • Dunn sold the property to Henry Harding. The insurance was not assigned by Dunn to
Harding. • When it was destroyed by fire, the two companies settled with San Miguel to the extent of the
mortgage credit. • RTC: Absolved the 2 companies from the difference. Henry Harding is not entitled to
the difference between the mortgage credit and the face value of the policies. • Henry Harding appealed.

ISSUES:
1. W/N San Miguel has insurable interest as mortgagor only to the extent of the mortgage credit - YES
2. W/N Harding has insurable interest as owner - NO

HELD: affirmed • section 19 of the Insurance Act: o a change of interest in any part of a thing insured
unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an
equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same
person • section 55: o the mere transfer of a thing insured does not transfer the policy, but suspends it
until the same person becomes the owner of both the policy and the thing insured • Undoubtedly these
policies of insurance might have been so framed as to have been "payable to the San Miguel Brewery,
mortgagee, as its interest may appear, remainder to whomsoever, during the continuance of the risk, may
become the owner of the interest insured." (Sec 54, Act No. 2427.) Such a clause would have proved an
intention to insure the entire interest in the property, not merely the insurable interest of the San Miguel
Brewery, and would have shown exactly to whom the money, in case of loss, should be paid. But the
policies are not so written. • The blame for the situation thus created rests, however, with the Brewery
rather than with the insurance companies, and there is nothing in the record to indicate that the insurance
companies were requested to write insurance upon the insurable interest of the owner or intended to
make themselves liable to that extent • If by inadvertence, accident, or mistake the terms of the contract
were not fully set forth in the policy, the parties are entitled to have it reformed. But to justify the
reformation of a contract, the proof must be of the most satisfactory character, and it must clearly appear
that the contract failed to express the real agreement between the parties • In the case now before us
the proof is entirely insufficient to authorize reformation.
FILIPINAS COMPANIA DE SEGUROS V. CHRISTERN HUENEFELD G.R. No. L-2294, May 25, 1951

A corporation borrows its citizenship from the citizenship of majority of its stockholders, regardless of the
country under whose laws it was organized and created.

FACTS: Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania de
Seguros to cover merchandise contained in a building. During the Japanese military occupation, this same
merchandise and the building were burned, so Huenefeld filed a claim under the policy. Filipinas
Compania refused to pay, alleging that the policy had ceased to be in force when the US declared war
against Germany. Filipinas Compania contended that Huenefeld, although organized and created under
Philippine laws, is a German subject, and hence, a public enemy, since majority of its stockholders are
Germans. On the other hand, Filipinas Compania is under American jurisdiction. However, the Director of
Bureau of Financing, Philippine Executive Commission ordered Filipinas Compania to pay, so Filipinas
Compania did pay. The case at bar is about the recovery of that sum paid.

ISSUES:

W/N Christern Huenefeld is a German subject because majority of its stockholders are under German
jurisdiction, despite the fact that it was organized and created under Philippine laws If so, W/N the fire
insurance policy is enforceable against an enemy state

HELD: The Court of Appeals ruled that a private corporation is a citizen of the country or state by and
under the laws of which it was created or organized. It rejected the theory that nationality of a private
corporation is determined by the character or citizenship of its controlling stockholders. But the Supreme
Court held that Christern Huenefeld is an enemy corporation since majority of its stockholders are German
subjects. The two American cases relied up by the Court of Appeals have lost their force in view of a newer
case where the control test was adopted. The Philippine Insurance Law provides that anyone, except a
public enemy, may be insured. It stands to reason that an insurance policy ceases to be allowable as soon
as the insured becomes a public enemy. Since Christern Huenefeld became a public enemy on Dec. 10,
1941, then the policy has ceased to be enforcible and therefore Huenefeld is not entitled to indemnity.
However, elementary rules of justice require that the premium paid from Dec. 11, 1941 should be
returned. Thus, Filipinas Compania is allowed to recover the sum paid but only its equivalent in actual
Philippine currency, minus the premium that Huenefeld paid after Dec.
PALILEO V. COSIO (1955) G.R. No. L-7667 November 28, 1955

Lessons Applicable: Mortgagor (Insurance) Laws Applicable:

FACTS: • Cherie Palileo (debtor-mortgagor) filed a complaint against Beatriz Cosio (creditor-mortgagee)
praying that their transaction be one of a loan with an equitable mortgage to secure the payment of the
loan. The original counsel of Cosio Atty. Guerrero being appointed Undersecretary of Foreign Affairs so
she forgot the date of the trial and she was substituted. • it is a loan of P12,000 secured by a "Conditional
Sale of Residential Building" with right to repurchase. After the execution of the contract, Cosio insured
in her name the building with Associated Insurance & Surety Co. against fire. • The building was partly
destroyed by fire so she claimed an indemnity of P13,107 • Palileo demanded that the amount of
insurance proceeds be credited to her loan • RTC: it is a loan with equitable mortgage so the insurance
proceeds should be credited to the loan and refund the overpayment.

ISSUE: W/N Cosio as mortgagee is entitled to the insurance proceeds for her own benefit

HELD: YES. Modify. collection of insurance proceeds shall not be deemed to have compensated the
obligation of the Palileo to Cosio, but bars the Cosio from claiming its payment from the Palileo; and Cosio
shall pay to Palileo P810 representing the overpayment made by Palileo by way of interest on the loan. •
When the the mortgagee may insure his interest in the property independently of the mortgagor , upon
the destruction of the property the insurance money paid to the mortgagee will not inure to the benefit
of the mortgagor, and the amount due under the mortgage debt remains unchanged. The mortgagee,
however, is not allowed to retain his claim against the mortgagor, but it passes by subrogation to the
insurer, to the extent of the insurance money paid • It is true that there are authorities which hold that
"If a mortgagee procures insurance on his separate interest at his own expense and for his own benefit,
without any agreement with the mortgagor with respect thereto, the mortgagor has no interest in the
policy, and is not entitled to have the insurance proceeds applied in reduction of the mortgage debt" But
these authorities merely represent the minority view