Rafael Enriquez vs Sun Life Assurance Company of Canada

G.R no L-15895 November 29, 1920

Malcolm, J.: General Concepts

Perfection of Contract of insurance; history of insurance
law; application of civil and commercial law in insurance
contracts

FACTS:

September 24,1917 - Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in
Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of the company's Manila office and
was given a receipt. The application was immediately forwarded to the head office of the company at Montreal, Canada.
November 26, 1917 - the head office gave notice of acceptance by cable to Manila.
December 4, 1917 - the policy was issued at Montreal.
December 18, 1917 - attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to
withdraw his application.
December 19, 1917 - the local office replied to Mr. Torres, stating that the policy had been issued, and called attention to
the notification of November 26, 1917. This letter was received by Mr. Torres on the morning of December 21, 1917.
December 20, 1917 – Mr. Herrera died.

This is an action brought by the plaintiff ad administrator of the estate of the late Joaquin Ma. Herrer to recover from the
defendant life insurance company the sum of pesos 6,000 paid by the deceased for a life annuity.

ISSUE/S:

WON the contract of insurance is perfected?

NO.

DOCTRINES | HELD:

Until quite recently, all of the provisions concerning life insurance in the Philippines were found in the Code of Commerce and
the Civil Code. On the after July 1, 1915, there was, however, in force the Insurance Act. No. 2427. Chapter IV of this Act
concerns life and health insurance. The Act expressly repealed Title VIII of Book II and Section III of Title III of Book III of the
code of Commerce. The law of insurance is consequently now found in the Insurance Act and the Civil Code.

While, as just noticed, the Insurance Act deals with life insurance, it is silent as to the methods to be followed in order that
there may be a contract of insurance. On the other hand, the Civil Code, in article 1802, not only describes a contact of life
annuity markedly similar to the one we are considering, but in two other articles, gives strong clues as to the proper
disposition of the case. For instance, article 16 of the Civil Code provides that "In matters which are governed by special laws,
any deficiency of the latter shall be supplied by the provisions of this Code." On the supposition, therefore, which is
incontestable, that the special law on the subject of insurance is deficient in enunciating the principles governing acceptance,
the subject-matter of the Civil code, if there be any, would be controlling. In the Civil Code is found article 1262 providing that
"Consent is shown by the concurrence of offer and acceptance with respect to the thing and the consideration which are to
constitute the contract. An acceptance made by letter shall not bind the person making the offer except from the time it came
to his knowledge. The contract, in such case, is presumed to have been entered into at the place where the offer was made."
This latter article is in opposition to the provisions of article 54 of the Code of Commerce.

The legislature in its wisdom having enacted a new law on insurance, and expressly repealed the provisions in the Code of
Commerce on the same subject, and having thus left a void in the commercial law, it would seem logical to make use of the
only pertinent provision of law found in the Civil code, closely related to the chapter concerning life annuities.

The Civil Code rule, that an acceptance made by letter shall bind the person making the offer only from the date it came to his
knowledge. US courts held that, an acceptance of an offer of insurance not actually or constructively communicated to the
proposer does not make a contract. Only the mailing of acceptance, it has been said, completes the contract of insurance, as
the locus poenitentiae is ended when the acceptance has passed beyond the control of the party. (I Joyce, The Law of
Insurance, pp. 235, 244.)

Therefore, the law applicable to the case is found to be the second paragraph of article 1262 of the Civil Code providing that

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an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge. The
pertinent fact is, that according to the provisional receipt, three 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; (2) there had to be approval of the
application by the head office of the company; and (3) this approval had in some way to be communicated by the company to
the applicant. The further admitted facts are that the head office in Montreal did accept the application, did cable the Manila
office to that effect, did actually issue the policy and did, through its agent in Manila, actually write the letter of notification and
place it in the usual channels for transmission to the addressee. The fact as to the letter of notification thus fails to concur with
the essential elements of the general rule pertaining to the mailing and delivery of mail matter as announced by the American
courts, namely, when a letter or other mail matter is addressed and mailed with postage prepaid there is a rebuttable
presumption of fact that it was received by the addressee as soon as it could have been transmitted to him in the ordinary
course of the mails. But if any one of these elemental facts fails to appear, it is fatal to the presumption. For instance, a letter
will not be presumed to have been received by the addressee unless it is shown that it was deposited in the post-office,
properly addressed and stamped. (See 22 C.J., 96, and 49 L. R. A. [N. S.], pp. 458, et seq., notes.)

RULING:

We hold that the contract for a life annuity in the case at bar was not perfected because it has not been proved satisfactorily
that the acceptance of the application ever came to the knowledge of the applicant.

Judgment is reversed, and the plaintiff shall have and recover from the defendant 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.

NOTES:
(Testimonies that proved the acceptance letter was not mailed)
The local manager, Mr. White, testified to having received the cablegram accepting the application of Mr. Herrer from the
home office on November 26, 1917. He said that on the same day he signed a letter notifying Mr. Herrer of this
acceptance. The witness further said that letters, after being signed, were sent to the chief clerk and placed on the
mailing desk for transmission. The witness could not tell if the letter had every actually been placed in the mails. Mr.
Tuason, who was the chief clerk, on November 26, 1917, was not called as a witness. For the defense, attorney Manuel
Torres testified to having prepared the will of Joaquin Ma. Herrer, that on this occasion, Mr. Herrer mentioned his
application for a life annuity, and that he said that the only document relating to the transaction in his possession was the
provisional receipt. Rafael Enriquez, the administrator of the estate, testified that he had gone through the effects of the
deceased and had found no letter of notification from the insurance company to Mr. Herrer.

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Willian Tiu vs. Pedro Arriesgado

G.R. no 13060 September 1, 2004

Callejo, Sr., J General Concepts

FACTS:

March 15, 1987 10PM - the cargo truck marked Condor Hollow Blocks and General Merchandise bearing plate number
GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires exploded. The driver, Sergio Pedrano, then
parked along the right side of the national highway and removed the damaged tire to have it vulcanized at a nearby shop,
about 700 meters away. Pedrano left his helper, Jose Mitante, Jr. to keep watch over the stalled vehicle, and instructed
the latter to place a spare tire six fathoms away behind the stalled truck to serve as a warning for oncoming vehicles. The
trucks tail lights were also left on. It was about 12:00 a.m., March 16, 1987.

March 16, 1987 4:45 a.m. - D Rough Riders passenger bus with plate number PBP-724 driven by Virgilio Te Laspias was
cruising along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu, and had come from Maya,
Daanbantayan, Cebu. Among its passengers were the Spouses Pedro A. Arriesgado and Felisa Pepito Arriesgado, who
were seated at the right side of the bus, about three (3) or four (4) places from the front seat.

As the bus was approaching the bridge, Laspias saw the stalled truck, which was then about 25 meters away. He applied
the breaks and tried to swerve to the left to avoid hitting the truck. But it was too late; the bus rammed into the trucks left
rear. The impact damaged the right side of the bus and left several passengers injured. Pedro Arriesgado lost
consciousness and suffered a fracture in his right colles. His wife, Felisa, was brought to the Danao City Hospital. She
was later transferred to the Southern Island Medical Center where she died shortly thereafter.

Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage, damages and attorneys fees
before the Regional Trial Court of Cebu City, Branch 20, against the petitioners, D Rough Riders bus operator William Tiu
and his driver, Virgilio Te Laspias on May 27, 1987. The respondent alleged that the passenger bus in question was
cruising at a fast and high speed along the national road, and that petitioner Laspias did not take precautionary measures
to avoid the accident.

The petitioners, for their part, filed a Third-Party Complaint on August 21, 1987 against the following: respondent Philippine
Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tius insurer; respondent Benjamin Condor, the registered owner of
the cargo truck; and respondent Sergio Pedrano, the driver of the truck.

Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner Tiu, it settled all the claims of those
injured in accordance with the insurance contract. It further avers that it did not deny respondent Arriesgados claim, and
emphasizes that its liability should be within the scheduled limits of indemnity under the said contract. The respondent
concludes that while it is true that insurance contracts are contracts of indemnity, the measure of the insurers liability is
determined by the insureds compliance with the terms thereof.

ISSUE/S:

WON third party defendant Philippine Phoenix Surety and Insurance Inc. liable.

YES.

DOCTRINES | HELD:

The nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily intended to provide compensation for
the death or bodily injuries suffered by innocent third parties or passengers as a result of the negligent operation and use of
motor vehicles. The victims and/or their dependents are assured of immediate financial assistance, regardless of the financial
capacity of motor vehicle owners. As the Court, speaking through Associate Justice Leonardo A. Quisumbing, explained in
Government Service Insurance System v. Court of Appeals.

However, although the victim may proceed directly against the insurer for indemnity, the third party liability is only up to the
extent of the insurance policy and those required by law. While it is true that where the insurance contract provides for
indemnity against liability to third persons, and such persons can directly sue the insurer, the direct liability of the insurer

3
under indemnity contracts against third party liability does not mean that the insurer can be held liable in solidum with the
insured and/or the other parties found at fault. For the liability of the insurer is based on contract; that of the insured carrier or
vehicle owner is based on tort.

As can be gleaned from the Certificate of Cover, such insurance contract was issued pursuant to the Compulsory Motor
Vehicle Liability Insurance Law. It was expressly provided therein that the limit of the insurers liability for each person was
P12,000, while the limit per accident was pegged at P50,000. An insurer in an indemnity contract for third party liability is
directly liable to the injured party up to the extent specified in the agreement but it cannot be held solidarily liable beyond that
amount. The respondent PPSII could not then just deny petitioner Tius claim; it should have paid P12,000 for the death of
Felisa Arriesgado, and respondent Arriesgados hospitalization expenses of P1,113.80, which the trial court found to have
been duly supported by receipts. The total amount of the claims, even when added to that of the other injured passengers
which the respondent PPSII claimed to have settled, would not exceed the P50,000 limit under the insurance agreement.
RULING:

The insurer could be held liable only up to the extent of what was provided for by the contract of insurance, in accordance
with the CMVLI law. At the time of the incident, the schedule of indemnities for death and bodily injuries, professional fees
and other charges payable under a CMVLI coverage was provided for under the Insurance Memorandum Circular (IMC)
No. 5-78 which was approved on November 10, 1978. As therein provided, the maximum indemnity for death was twelve
thousand (P12,000.00) pesos per victim. The schedules for medical expenses were also provided by said IMC,
specifically in paragraphs (C) to (G).

Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William Tiu are ORDERED to pay, jointly and
severally, respondent Pedro A. Arriesgado the total amount of P13,113.80;

NOTES:

Only Certificate of Cover No. 054940 issued in favor of Mr. William Tiu, Lahug, Cebu City signed by Cosme H. Boniel was
appended to the third-party complaint. The date of issuance, July 22, 1986, the period of insurance, from July 22, 1986 to
July 22, 1987.
SCHEDULED VEHICLE

MODEL MAKE TYPE OF BODY COLOR BLT FILE NO.

Isuzu Forward Bus blue mixed

PLATE NO. PBP- SERIAL/CHASSI MOTOR NO. AUTHORIZED UNLADEN

724 S NO. SER450- 677836 CAPACITY 50 WEIGHT 6Cyls.
1584124 Kgs.

SECTION 1/11 *LIMITS OF LIABILITY P50,000.00 PREMIUMS PAID

A. THIRD PARTY LIABILITY

B. PASSENGER LIABILITY Per Person Per Accident P540.0052

P12,000.00 P50,000

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White Gold Marine Services vs Pioneer Insurance and Surety Corp.

G.R. No. 154514 July 28, 2005

Quisumbing, J. The Parties

FACTS:

White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from The
Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and
Surety Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and Acceptance.[3] Pioneer
also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship
Mutual refused to renew the coverage.

Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latters unpaid
balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship
Mutual violated Sections 186[4] and 187[5] of the Insurance Code, while Pioneer violated Sections 299,[6] 300[7] and
301[8] in relation to Sections 302 and 303, thereof.

The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a
license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and
Indemnity Club (P & I Club). Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for
Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was
already licensed, hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous.

The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished
between P & I Clubs vis--vis conventional insurance. The appellate court also held that Pioneer merely acted as a
collection agent of Steamship Mutual.

ISSUE/S:

1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines? YES

2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual? YES
DOCTRINES | HELD:

Is Steamship Mutual engaged in the insurance business?

Section 2(2) of the Insurance Code enumerates what constitutes doing an insurance business or transacting an insurance
business. These are:

(a) making or proposing to make, as insurer, any insurance contract;

(b) 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;

(c) 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;

(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the
provisions of this Code.

The same provision also provides, the fact that no profit is derived from the making of insurance contracts, agreements or
transactions, or that no separate or direct consideration is received therefor, shall not preclude the existence of an insurance
business.

The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to
be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under
which the performance becomes requisite. It is not by what it is called.

5
Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event.

In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a
marine adventure. Section 99[16] of the Insurance Code enumerates the coverage of marine insurance.

Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured. In it,
the members all contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and
liabilities are paid, and where the profits are divided among themselves, in proportion to their interest.Additionally, mutual
insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense
costs.

A P & I Club is a form of insurance against third party liability, where the third party is anyone other than the P & I Club and
the members.

By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance
business. The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of
authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance
and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled
due to non-payment of the calls.

Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance
Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the
same agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an
agent/broker of Steamship Mutual.

Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for
Steamship Mutual.

RULING:

Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the
Insurance Commission. Since a contract of insurance involves public interest, regulation by the State is necessary. Thus,
no insurer or insurance company is allowed to engage in the insurance business without a license or a certificate of
authority from the Insurance Commission

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated July 30, 2002 of the Court of Appeals affirming
the Decision dated May 3, 2000 of the Insurance Commission is hereby REVERSED AND SET ASIDE. The Steamship
Mutual Underwriting Association (Bermuda) Ltd., and Pioneer Insurance and Surety Corporation are ORDERED to obtain
licenses and to secure proper authorizations to do business as insurer and insurance agent, respectively. The petitioners
prayer for the revocation of Pioneers Certificate of Authority and removal of its directors and officers, is DENIED. Costs
against respondents

NOTES:

[4] SEC. 186. No person, partnership, or association of persons shall transact any insurance business in the Philippines
except as agent of a person or corporation authorized to do the business of insurance in the Philippines, unless
possessed of the capital and assets required of an insurance corporation doing the same kind of business in the
Philippines and invested in the same manner; nor unless the Commissioner shall have granted to him or them a
certificate to the effect that he or they have complied with all the provisions of law which an insurance corporation
doing business in the Philippines is required to observe.
Every person, partnership, or association receiving any such certificate of authority shall be subject to the insurance laws of
the Philippines and to the jurisdiction and supervision of the Commissioner in the same manner as if an insurance
corporation authorized by the laws of the Philippines to engage in the business of insurance specified in the
certificate.

6
[5] SEC. 187. No Insurance Company shall transact any insurance business in the Philippines until after it shall have
obtained a certificate of authority for that purpose from the Commissioner upon application therefor and payment by
the company concerned of the fees hereinafter prescribed.
...
[6] SEC. 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or
other compensation to any person for services in obtaining insurance, unless such person shall have first procured
from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as
hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act
from the Commissioner, . . .
[7] SEC. 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or
transmits for a person other than himself an application for a policy or contract of insurance to or from such
company or offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the
intent of this section and shall thereby become liable to all the duties, requirements, liabilities and penalties to which
an insurance agent is subject.
[8] SEC. 301. Any person who for any compensation, commission or other thing of value acts or aids in any manner in
soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on
behalf of an insured other than himself, shall be an insurance broker within the intent of this Code, and shall
thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance broker is
subject.
[16] SEC. 99. Marine insurance includes:

(1) Insurance against loss of or damage to:

(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys,
securities, choses in action, evidences of debt, valuable papers, bottomry, and respondentia interests and all other kinds
of property and interests therein, in respect to, appertaining to or in connection with any and all risks or perils of
navigation, transit or transportation, or while being assembled, packed, crated, baled, compressed or similarly prepared
for shipment or while awaiting shipment, or during any delays, storage, trasshipment, or reshipment incident thereto,
including war risks, marine builders risks, and all personal property floater risks.

(b) Person or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance,
including liability for loss of or damage arising out of or in connection with the construction, repair, operation, maintenance
or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss
by reason of bodily injury to any person arising out of the ownership, maintenance, or use of automobiles).

(c) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise.

(d) Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and
furnishings, fixed contents and supplies held in storage); piers, wharves, docks and slips, and other aids to navigation
and transportation, including dry docks and marine railways, dams and appurtenant facilities for the control of waterways.

(2) Marine protection and indemnity insurance, meaning insurance against, or against legal liability of the insured for loss,
damage, or expense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel,
craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or
death or for loss of or damage to the property of another person.