DIFFERENT KINDS OF NON-LIFE INSURANCE
Section 101. Marine Insurance includes:
CHAPTER II
CLASSES OF INSURANCE
TITLE I: MARINE INSURANCE
Section 101. Marine Insurance includes:
(a) Insurance against loss of or damage to:
(1) Vessels, craft, aircraft, vehicles, goods, freights,
cargoes, merchandise, effects, disbursements,
profits, moneys, securities, choses in action,
instruments of debts, 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,
transhipment, or reshipment incident thereto,
including war risks, marine builder’s risks, and all
personal property floater risks;
(2) 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
ownership, maintenance, or use of automobiles);
(3) Precious stones, jewels, jewelry, precious metals,
whether in course of transportation or otherwise; and
(4) 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.
QUESTION: WHAT IS COVERED?
Answer:
The perils covered are the perils of the sea or perils of
navigation, which are casualties due to unusual violence or
extraordinary action of wind and wave or other extraordinary
causes connected with navigation. Such peril must be the
PROXIMATE CAUSE. Perils of the ship are NOT covered.
QUESTION: WHAT IS MEANT BY PERIL OF THE SEA?
Rule: Perils of the sea or perils of navigation embrace all kinds
of marine casualties, such as shipwreck, foundering, stranding,
collision and every specie of damage done to the ship or goods
at sea by the violent action of the winds or waves.
Exception: They do not embrace all loses happening on the
sea. A peril whose only connection with the sea is that it
arises aboard ship is not necessarily a peril of the sea; the
peril must be of the sea and not merely one accruing on the sea.
(Choa Tiek Seng v. Court of Appeals; G.R. 84507)
xxx
(b) 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
of 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.
QUESTION:
DIFFERENTIATE PERIL OF THE SHIP VS. PERIL OF THE
SEA
✓ Roque v. IAC – sinking of barge without extra-ordinary
circumstances. – Peril of the Ship
✓ Go Tiaco v. Union – loss results from natural and
inevitable action of the sea, from the ordinary wear and
tear of the ship or from negligence of owner to provide
with proper equipment. -- Peril of the Ship
✓ Cathay v. CA – rusting of steel pipes in the course of
the voyage in view of the toll on cargo of wind, water
and salt conditions. -- Peril of the Sea
Perils of the sea must be natural and inevitable causes like
winds and waves.
QUESTION: WHAT IS AN INSURABLE INTEREST?
SECTION 13 [Insurance Code] - Insurable interest is:
Every interest in property, whether real or personal, or any
relation thereto, or liability in respect thereof, of such nature that
a contemplated peril might directly damnify the insured.
In principle, anyone has an insurable interest in property who
derives a benefit from its existence or would suffer loss from its
destruction whether he has or has not any title in, or lien upon
or possession of the property.
SECTION 14 [Insurance Code]
Insurable interest in property may consist in
(a) an existing interest.
(b) an inchoate interest founded on an existing interest; or
(c) an expectancy coupled with an existing interest in that
out of which the expectancy arises.
Section 102. The owner of a ship has in all cases an
insurable interest in it, even when it has been chartered by
one who covenants to pay him its value in case of
loss: Provided, That in this case the insurer shall be liable for
only that part of the loss which the insured cannot recover
from the charterer.
REVIEW:
CHARTER PARTY
✓ A contract by virtue of which the owner or agent binds
himself to transport merchandise or persons for a fixed
price.
✓ A contract by which an entire ship, or some principal
part thereof is let/leased by the owner to another
person for a specified time or use.
Classes:
1. Bareboat or demise – The shipowner leases to the
charterer the whole vessel, transferring to the latter the
entire command, possession and consequent control over
the vessel’s navigation, including the master and the crew,
who thereby become the charter’s servants. It transforms
a common carrier into a private carrier.
2. Contract of Affreightment – A contract whereby the
owner of the vessel leases part or all of its space to haul
goods for others.
Insurance of owner – full value of property but recovery shall
be limited to amount not paid by charterer
Insurance of charterer – extent of his liability in case of loss
Illustration: A and B enter into a charter agreement. A's vessel
is valued at P1 Million. Per agreement, B‟s insurer shall be liable
up to P500,000 in case of loss. A has an insurance of P1 M.
In case of loss:
A’s insurer = P500,000
B’s insurer = P500,000
“If the vessel is chartered, in case of loss, the ship owner’s
insurer is liable but only for part of the loss which the insured
cannot recover from charterer“
Section 103. The insurable interest of the owner of the ship
hypothecated by bottomry is only the excess of its value
over the amount secured by bottomry.
LOAN ON BOTTOMRY LOAN ON RESPONDENTIA
Loan made by shipowner or ship Loan taken on security of the
agent guaranteed by the vessel cargo laden on a vessel, and
itself and repayable upon arrival repayable upon safe arrival of
of vessel at destination (Art. 719) cargo at destination (Art. 719).
Only the shipowner or ship agent Only the owner of the cargo may
may contract said loan. Outside contract said loan.
of the owners – the captain.
MEANING: EXCESS OF ITS VALUE
Where a vessel is bottomed, the owner has an insurable interest
only in the excess of its value over the amount of the bottomry
loan. (Sec. 101.) The insurable interest of the lender on bottomry
in the vessel given as security is to the extent of the loan
EXAMPLE: If the value of the vessel of X is P2,000,000.00, and
he borrows from Y by way of loan on bottomry, P800,000.00,
then he may effect insurance on it for only P1,200,000.00, as
this difference or excess of its value is the extent of his insurable
interest. On the other hand, Y has an insurable interest in the
ship given as security for the loan up to the amount thereof of
P800,000.00, as the happening of the loss by a marine peril
exposes him to the danger of not being able to recover the said
amount. The contract of loan is similar to a marine insurance
except that the money is given in advance.
Section 104. Freightage, in the sense of a policy of marine
insurance, signifies all the benefits derived by the owner,
either from the chartering of the ship or its employment for
the carriage of his own goods or those of others.
Section 105. The owner of a ship has an insurable interest
in expected freightage which according to the ordinary and
probable course of things he would have earned but for the
intervention of a peril insured against or other peril incident
to the voyage.
Section 106. The interest mentioned in the last section
exists, in case of a charter party, when the ship has broken
ground on the chartered voyage. If a price is to be paid for
the carriage of goods it exists when they are actually on
board, or there is some contract for putting them on board,
and both ship and goods are ready for the specified voyage.
Section 107. One who has an interest in the thing from which
profits are expected to proceed has an insurable interest in
the profits.
Section 108. The charterer of a ship has an insurable
interest in it, to the extent that he is liable to be damnified by
its loss.
ME A SU RE OF IND E MN IT Y
Section 158. A valuation in a policy of marine insurance is
conclusive between the parties thereto in the adjustment of
either a partial or total loss, if the insured has some interest
at risk, and there is no fraud on his part; except that when a
thing has been hypothecated by bottomry or respondentia,
before its insurance, and without the knowledge of the person
actually procuring the insurance, he may show the real value.
But a valuation fraudulent in fact, entitles the insurer to
rescind the contract.
MALAYAN v. CA
Malayan Insurance Corp vs CA G.R. 119599 March 20, 1997
J. Romero
Facts:
TKC Marketing imported 3,000 metric tons of soya from Brazil
to Manila. It was insured by Malayan at the value of almost 20
million pesos. The vessel, however, was stranded on South
Africa because of a lawsuit regarding the possession of the
soya. TKC consulted Malayan on recovery of the amount, but
the latter claimed that it wasn’t covered by the policy. The soya
was sold in Africa for Php 10 million, but TKC wanted Malayan
to shoulder the remaining value of 10 million as well.
Petitioner filed suit due to Malayan’s reticence to pay. Malayan
claimed that arrest by civil authorities wasn’t covered by the
policy. The trial court ruled in TKC’s favor with damages to boot.
The appellate court affirmed the decision under the reason that
clause 12 of the policy regarding an excepted risk due to arrest
by civil authorities was deleted by Section 1.1 of the Institute
War Clauses which covered ordinary arrests by civil authorities.
Failure of the cargo to arrive was also covered by the Theft,
Pilferage, and Non-delivery Clause of the contract. Hence this
petition.
Issues:
1. WON the arrest of the vessel was a risk covered under the
subject insurance policies.
2. WON the insurance policies must be strictly construed
against the insurer.
Held: Yes. Petition dismissed.
Ratio:
The resolution of this controversy hinges on the interpretation of
the "Perils" clause of the subject policies in relation to the
excluded risks or warranty specifically stated therein.
The subject policies contain the "Perils" clause which is a
standard form in any marine insurance policy.
That "arrest" caused by ordinary judicial process is deemed
included among the covered risks. This interpretation becomes
inevitable when subsection 1.1 of Section 1 of the Institute War
Clauses provided that "this insurance covers the risks excluded
from the Standard Form of English Marine Policy by the clause
'Warranted free of capture, seizure, arrest, etc. x x x'" or the F.C.
& S. Clause. Jurisprudentially, "arrests" caused by ordinary
judicial process is also a risk excluded from the Standard Form
of English Marine Policy by the F.C. & S. Clause.
Petitioner cannot adopt the argument that the "arrest" caused by
ordinary judicial process is not included in the covered risk
simply because the F.C. & S. Clause under the Institute War
Clauses can only be operative in case of hostilities or warlike
operations on account of its heading "Institute War Clauses."
This Court agrees with the Court of Appeals when it held that
"Although the F.C. & S. Clause may have originally been
inserted in marine policies to protect against risks of war, (see
generally G. Gilmore & C. Black, The Law of Admiralty Section
2-9, at 71-73 [2d Ed. 1975]), its interpretation in recent years to
include seizure or detention by civil authorities seems consistent
with the general purposes of the clause, x x x" In fact, petitioner
itself averred that subsection 1.1 of Section 1 of the Institute War
Clauses included "arrest" even if it were not a result of hostilities
or warlike operations. In this regard, since what was also
excluded in the deleted F.C. & S. Clause was "arrest"
occasioned by ordinary judicial process, logically, such "arrest"
would now become a covered risk under subsection 1.1 of
Section 1 of the Institute War Clauses, regardless of whether or
not said "arrest" by civil authorities occurred in a state of war.
Petitioner itself seems to be confused about the application of
the F.C. & S. Clause as well as that of subsection 1.1 of Section
1 of the Institute War Clauses (Cargo). It stated that "the F.C. &
S. Clause was "originally incorporated in insurance policies to
eliminate... the risks of warlike operations". It also averred that
the F.C. & S. Clause applies even if there be no war or warlike
operations x x x". In the same vein, it contended that subsection
1.1 of Section 1 of the Institute War Clauses (Cargo)
"pertained... exclusively to warlike operations" and yet it also
stated that "the deletion of the F.C. & S. Clause and the
consequent incorporation of subsection 1.1 of Section 1 of the
Institute War Clauses (Cargo) was to include "arrest, etc. even
if it were not a result of hostilities... or warlike operations."
This Court cannot help the impression that petitioner is overly
straining its interpretation of the provisions of the policy in order
to avoid being liable for private respondent's claim.
This Court finds it pointless for petitioner to maintain its position
that it only insures risks of "arrest" occasioned by executive or
political acts of government which is interpreted as not referring
to those caused by ordinary legal processes as contained in the
"Perils" Clause; deletes the F.C. & S. Clause which excludes
risks of arrest occasioned by executive or political acts of the
government and naturally, also those caused by ordinary legal
processes; and, thereafter incorporates subsection 1.1 of
Section 1 of the Institute War Clauses which now includes in the
coverage risks of arrest due to executive or political acts of a
government but then still excludes "arrests" occasioned by
ordinary legal processes when subsection 1.1 of Section 1 of
said Clauses should also have included "arrests" previously
excluded from the coverage of the F.C. & S. Clause.
It has been held that a strained interpretation which is unnatural
and forced, as to lead to an absurd conclusion or to render the
policy nonsensical, should, by all means, be avoided. Likewise,
it must be borne in mind that such contracts are invariably
prepared by the companies and must be accepted by the
insured in the form in which they are written. Any construction of
a marine policy rendering it void should be avoided. Such
policies will, therefore, be construed strictly... against the
company in order to avoid a forfeiture, unless no other result is
possible from the language used.
If a marine insurance company desires to limit or restrict the
operation of the general provisions of its contract by special
proviso, exception, or exemption, it should express such
limitation in clear and unmistakable language. Obviously, the
deletion of the F.C. & S. Clause and the consequent
incorporation of subsection 1.1 of Section 1 of the Institute War
Clauses (Cargo) gave rise to ambiguity. If the risk of arrest
occasioned by ordinary judicial process was expressly indicated
as an exception in the subject policies there would have been
no controversy with respect to the interpretation of the subject
clauses.
Be that as it may, exceptions to the general coverage are
construed most strongly against the company. Even an express
exception in a policy is to be construed against the underwriters
by whom the policy is framed, and for whose benefit the
exception is introduced.
An insurance contract should be so interpreted as to carry out
the purpose for which the parties entered into the contract which
is, to insure against risks of loss or damage to the goods. Such
interpretation should result from the natural and reasonable
meaning of language in the policy. Where restrictive provisions
are open to two interpretations, that which is most favorable to
the insured is adopted.
Indemnity and liability insurance policies are construed in
accordance with the general rule of resolving any ambiguity
therein in favor of the insured, where the contract or policy is
prepared by the insurer. A contract of insurance, being a
contract of adhesion, par excellence, any ambiguity therein
should be resolved against the insurer; in other words, it should
be construed liberally in favor of the insured and strictly against
the insurer. Limitations of liability should be regarded with
extreme jealousy and must be construed in such a way as to
preclude the insurer from noncompliance with its obligations.
CATHAY v. CA
FACTS:
A complaint was filed by private respondent corporation against
petitioner (then defendant) company seeking collection of the
sum of P868,339.15 representing private respondent's losses
and damages incurred in a shipment of seamless steel pipes
under an insurance contract in favor of the said private
respondent as the insured, consignee or importer of aforesaid
merchandise while in transit from Japan to the Philippines on
board vessel SS "Eastern Mariner." The total value of the
shipment was P2,894,463.83 at the prevailing rate of P7.95 to a
dollar in June and July 1984, when the shipment was made. The
trial court decided in favor of private respondent corporation by
ordering petitioner to pay it the sum of P866,339.15 as its
recoverable insured loss equivalent to 30% of the value of the
seamless steel pipes; ordering petitioner to pay private
respondent interest on the aforecited amount at the rate of 34%
or double the ceiling prescribed by the Monetary Board per
annum from February 3, 1982 or 90 days from private
respondent's submission of proof of loss to petitioner until paid
as provided in the settlement of claim provision of the policy; and
ordering petitioner to pay private respondent certain amounts for
marine surveyor's fee, attorney's fees and costs of the suit.
ISSUE: WON the rusting of steel pipes in the course of a voyage
is a "peril of the sea" in view of the toll on the cargo of wind,
water, and salt conditions.
RULING:
There is no question that the rusting of steel pipes in the course
of a voyage is a "peril of the sea" in view of the toll on the cargo
of wind, water, and salt conditions. At any rate if the insurer
cannot be held accountable therefor, We would fail to observe a
cardinal rule in the interpretation of contracts, namely, that any
ambiguity therein should be construed against the
maker/issuer/drafter thereof, namely, the insurer. Besides the
precise purpose of insuring cargo during a voyage would be
rendered fruitless. Be it noted that any attack of the 15-day
clause in the policy was foreclosed right in the pre-trial
conference.
CHOA v. CA
The insurance policy covers all loss or damage to the cargo
except those caused by delay or inherent vice or nature of the
cargo insured. It is the duty of the respondent insurance
company to establish that said loss or damage falls within the
exceptions provided for by law, otherwise it is liable therefor.
FACTS:
Petitioner imported some lactose crystals from Holland which
involved 15 metric tons packed in 600 6-ply paper bags. The
goods were loaded at the port at Rotterdam in sea vans on
board the vessel "MS Benalder" as the mother vessel and
aboard the feeder vessel "wesser Broker V-25" of respondent
Ben Lines Container. Such goods were insured by the
respondent Filipino Merchants' Insurance Co. against all risks
under the terms of the insurance cargo policy.
Upon arrival in the Manila port, the cargo was discharged into
the custody of the arrastre operator respondent E.Razon, Inc.
(broker) prior to the delivery to petitioner through his broker. Out
of 600 bags delivered, 403 were in bad order which suffered
spillage and loss valued at P33,117.63 Petitioner filed a claim
for the loss against respondent insurance company. The
Insurance company rejected such claim alleging that "assuming
that spillage took place while the goods were in transit, petitioner
and his agent failed to minimize the loss by failing to recover
spillage from the sea van which violates the terms of the
insurance policy; assuming that spillage did not occur while the
cargo was in transit, the 400 bags were loaded in bad order
since the van did not carry any evidence of spillage".
The Insurance company then filed a third-party complaint
against respondents Ben Lines and broker.
ISSUE:
Whether or not Filipino Merchant's is liable to indemnify the
petitioner for the loss he encountered
due to the spillage of the goods?
RULING:
YES. An "All risk" insurance policy insures against all causes of
conceivable loss or damage, except when excluded in the policy
due to fraud or intentional misconduct on the part of the insured.
It covers all losses during voyage whether arising from a marine
peril or not, including pilferage losses during the war.
The "all risks" clause of the policy sued in this case upon reads
as follows:
5. This insurance is against all risks of loss or damage to the
subject matter insured but shall in no case be deemed to extend
to cover loss, damage, or expense proximately caused by delay
or inherent vice or nature of the subject matter insured. Claims
recoverable hereunder shall be payable irrespective of
percentage
The terms of the policy are so clear and require no interpretation.
The insurance policy covers all loss or damage to the cargo
except those caused by delay or inherent vice or nature of the
cargo insured. It is the duty of the respondent insurance
company to establish that said loss or damage falls within the
exceptions provided for by law, otherwise it is liable therefor.
An "all risks" provision of a marine policy creates a special type
of insurance which extends coverage to risks not usually
contemplated and avoids putting upon the insured the burden of
establishing that the loss was due to peril falling within the
policy's coverage. The insurer can avoid coverage upon
demonstrating that a specific provision expressly excludes the
loss from coverage.
FILIPINO v. CA
Section 13 of the Insurance Code defines insurable interest in
property as every interest in property, whether real or personal,
or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the
insured. As vendee/consignee of the goods in transit, Choa
has such existing interest. His interest over the goods is based
on the perfected contract of sale. The perfected contract of
sale between him and the shipper of the goods operates to
vest in him an equitable title even before delivery or before be
performed the conditions of the sale.
FACTS:
Choa Tiek Seng, consignee of the shipment of fishmeal loaded,
insured in "all risks policy" 600 metric tons of fishmeal in new
gunny bags of 90 kilos each from Bangkok, Thailand to Manila
against all risks under warehouse to warehouse terms but only
59.940 metric tons was imported.
When it was unloaded unto the arrastre contractor E. Razon,
Inc. and Filipino Merchants's surveyor ascertained and certified
that in such discharge 105 bags were in bad order condition
which was reflected in the survey report of Bad Order cargoes.
Before delivery to Choa, E. Razon's Bad Order Certificate
showed that a total of 227 bags in bad order condition. Choa
brought an action against Filipino Merchants Insurance Co. who
brought a third party complaint against Compagnie Maritime
Des Chargeurs Reunis and/or E. Razon, Inc.
Filipino Merchants contended that Chao has no insurable
interest and therefore the policy should be void and that it was
fraud that it did not disclose of such fact.
ISSUE:
Whether or not Choa Tiek Seng as consignee of the shipment,
has insurable interest?
RULING:
YES. Section 13 of the Insurance Code defines insurable
interest in property as every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of
such nature that a contemplated peril might directly damnify the
insured.
As vendee/consignee of the goods in transit, Choa has such
existing interest. His interest over the goods is based on the
perfected contract of sale. The perfected contract of sale
between him and the shipper of the goods operates to vest in
him an equitable title even before delivery or before be
performed the conditions of the sale. The contract of shipment,
whether under F.O.B., C.I.F., or C. & F. as in this case, is
immaterial in the determination of whether the vendee has an
insurable interest or not in the goods in transit.
Article 1523 of the Civil Code provides that where, in pursuance
of a contract of sale, the seller is authorized or required to send
the goods to the buyer, delivery of the goods to a carrier,
whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the
goods to the buyer. The exceptions to said rule not obtaining in
the present case. The Court has heretofore ruled that the
delivery of the goods on board the carrying vessels partake of
the nature of actual delivery since, from that time, the foreign
buyers assumed the risks of loss of the goods and paid the
insurance premium covering them.
C & F contracts are shipment contracts. The term means that
the price fixed includes in a lump sum the cost of the goods and
freight to the named destination. It simply means that the seller
must pay the costs and freight necessary to bring the goods to
the named destination but the risk of loss or damage to the
goods is transferred from the seller to the buyer when the goods
pass the ship's rail in the port of shipment. Moreover, the issue
of lack of insurable interest was not among the defenses
averred in petitioners answer.
CALTEX v. SULPICIO
Facts:
On December 20, 1987, motor tanker MV Vector, carrying
petroleum products of Caltex, collided in the open sea with
passenger ship MV Doña Paz, causing the death of all but 25 of
the latter’s passengers. Among those who died were Sebastian
Canezal and his daughter Corazon Canezal. On March 22,
1988, the board of marine inquiry found that Vector Shipping
Corporation was at fault. On February 13, 1989, Teresita
Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and
mother respectively, filed with the Regional Trial Court of Manila
a complaint for damages arising from breach of contract of
carriage against Sulpicio Lines. Sulpicio filed a third-party
complaint against Vector and Caltex. The trial court dismissed
the complaint against Caltex, but the Court of Appeals included
the same in the liability. Hence, Caltex filed this petition.
Issue:
Is the charterer of a sea vessel liable for damages resulting from
a collision between the chartered vessel and a passenger ship?
Held:
First: The charterer has no liability for damages under Philippine
Maritime laws.
Petitioner and Vector entered into a contract of affreightment,
also known as a voyage charter.
A charter party is a contract by which an entire ship, or some
principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment is one by which
the owner of a ship or other vessel lets the whole or part of her
to a merchant or other person for the conveyance of goods, on
a particular voyage, in consideration of the payment of freight. A
contract of affreightment may be either time charter, wherein the
leased vessel is leased to the charterer for a fixed period of time,
or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of
the vessel only, either for a determinate period of time or for a
single or consecutive voyage, the ship owner to supply the ship’s
store, pay for the wages of the master of the crew, and defray
the expenses for the maintenance of the ship. If the charter is a
contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and
the responsibilities of ownership rest on the owner. The
charterer is free from liability to third persons in respect of the
ship.
Second: MT Vector is a common carrier
The charter party agreement did not convert the common carrier
into a private carrier. The parties entered into a voyage charter,
which retains the character of the vessel as a common carrier.
It is imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel
by one or more persons, provided the charter is limited to the
ship only, as in the case of a time-charter or voyage charter. It
is only when the charter includes both the vessel and its crew,
as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a ship-owner in a time
or voyage charter retains possession and control of the ship,
although her holds may, for the moment, be the property of the
charterer. A common carrier is a person or corporation whose
regular business is to carry passengers or property for all
persons who may choose to employ and to remunerate him. 16
MT Vector fits the definition of a common carrier under Article
1732 of the Civil Code.
The public must of necessity rely on the care and skill of
common carriers in the vigilance over the goods and safety of
the passengers, especially because with the modern
development of science and invention, transportation has
become more rapid, more complicated and somehow more
hazardous. For these reasons, a passenger or a shipper of
goods is under no obligation to conduct an inspection of the ship
and its crew, the carrier being obliged by law to impliedly warrant
its seaworthiness.
Third: Is Caltex liable for damages under the Civil Code?
The charterer of a vessel has no obligation before transporting
its cargo to ensure that the vessel it chartered complied with all
legal requirements. The duty rests upon the common carrier
simply for being engaged in "public service." The relationship
between the parties in this case is governed by special laws.
Because of the implied warranty of seaworthiness, shippers of
goods, when transacting with common carriers, are not
expected to inquire into the vessel’s seaworthiness,
genuineness of its licenses and compliance with all maritime
laws. To demand more from shippers and hold them liable in
case of failure exhibits nothing but the futility of our maritime
laws insofar as the protection of the public in general is
concerned. Such a practice would be an absurdity in a business
where time is always of the essence. Considering the nature of
transportation business, passengers and shippers alike
customarily presume that common carriers possess all the legal
requisites in its operation.
MAYER v. CA
The Filipino Merchants case is different from the case at bar. In
Filipino Merchants, it was the insurer which filed a claim against
the carrier for reimbursement of the amount it paid to the
shipper. In the case at bar, it was the shipper which filed a claim
against the insurer. The basis of the shipper's claim is the "all
risks" insurance policies issued by private respondents to
petitioner Mayer.
FACTS:
Defendant contracted with petitioner to manufacture and supply
various steel pipes and fittings. Mayer shipped the pipes and
fittings to Hongkong. Prior to the shipping, Mayer insured the
pipes and fittings against all risks with private respondents. It
was certified that the pipes and fittings were in good condition
before they were loaded in the vessel.
Nonetheless, when the goods reached Hongkong, it was
discovered that a substantial portion thereof was damaged.
Mayer filed a claim for indemnity under the insurance contract.
Private respondents refused to pay because the insurance
surveyor's report allegedly showed that the damage is a factory
defect.
The trial court ruled in favor of Mayer. It found that the damage
to the goods is not due to manufacturing defects. It also noted
that the insurance contracts executed by Mayer and private
respondents are "all risks" policies which insure against all
causes of conceivable loss or damage. The only exceptions are
those excluded in the policy, or those sustained due to fraud or
intentional misconduct on the part of the insured.
CA affirmed the ruling of the RTC (on factory defect) but set
aside the complaint on the ground of prescription. It held that the
action is barred under Section 3(6) of the Carriage of Goods by
Sea Act since it was filed more than two years from the time the
goods were unloaded from the vessel.
Respondent court ruled that this provision applies not only to the
carrier but also to the insurer, citing Filipino Merchants
Insurance Co., Inc. v. Alejandro.
ISSUE:
Whether or not the CA was correct in applying the case of
Filipino Merchants Insurance Co., Inc. and in dismissing the
complaint?
RULING:
NO. Section 3(6) of the Carriage of Goods by Sea Act states that
the carrier and the ship shall be discharged from all liability for
loss or damage to the goods if no suit is filed within one year
after delivery of the goods or the date when they should have
been delivered. Under this provision, only the carrier's liability is
extinguished if no suit is brought within one year. But the liability
of the insurer is not extinguished because the insurer's liability
is based not on the contract of carriage but on the contract of
insurance.
A close reading of the law reveals that the Carriage of Goods by
Sea Act governs the relationship between the carrier on the one
hand and the shipper, the consignee and/or the insurer on the
other hand. It defines the obligations of the carrier under the
contract of carriage. It does not, however, affect the relationship
between the shipper and the insurer. The latter case is governed
by the Insurance Code. The Filipino Merchants case is different
from the case at bar. In Filipino Merchants, it was the insurer
which filed a claim against the carrier for reimbursement of the
amount it paid to the shipper.
In the case at bar, it was the shipper which filed a claim against
the insurer. The basis of the shipper's claim is the "all risks"
insurance policies issued by private respondents to petitioner
Mayer.
An insurance contract is a contract whereby one party, for a
consideration known as the premium, agrees to indemnify
another for loss or damage which he may suffer from a specified
peril. An "all risks" insurance policy covers all kinds of loss other
than those due to willful and fraudulent act of the insured. Thus,
when private respondents issued the "all risks" policies to
petitioner Mayer, they bound themselves to indemnify the latter
in case of loss or damage to the goods insured. Such obligation
prescribes in ten years, in accordance with Article 1144 of the
New Civil Code.
FIRE INSURANCE
SEC. 169. As used in this Code, the term fire insurance shall
include insurance against loss by fire, lightning, windstorm,
tornado or earthquake and other allied risks, when such risks
are covered by extension to fire insurance policies or under
separate policies.
 SEC. 173. If there is no valuation in the policy, the measure - A clause in a fire insurance policy that if the building or
of indemnity in an insurance against fire is the expense it any part thereof falls, except as a result of fire, all
would be to the insured at the time of the commencement of insurance by the policy shall immediately cease.
the fire to replace the thing lost or injured in the condition in
which it was at the time of the injury; but if there is a valuation Option to rebuild clause
in a policy of fire insurance, the effect shall be the same as - A clause giving the insurer the option to reinstate or
in a policy of marine insurance. replace the property damaged or destroyed or any part
thereof, instead of paying the amount of the loss or the
SEC. 174. Whenever the insured desires to have a valuation damage.
named in his policy, insuring any building or structure against - The insurer, after electing to rebuild, cannot be
fire, he may require such building or structure to be examined compelled to perform this undertaking by specific
by an independent appraiser and the value of the insured’s performance because this is an obligation to do, not to
interest therein may then be fixed as between the insurer and give. Remedy: Art. 1167, NCC.
the insured. The cost of such examination shall be paid for by -
the insured. A clause shall be inserted in such policy stating
substantially that the value of the insured’s interest in such DEL CASTILLO v. METROPOLITAN
building or structure has been thus fixed. In the absence of
any change increasing the risk without the consent of the
insurer or of fraud on the part of the insured, then in case of
FACTS:
a total loss under such policy, the whole amount so insured
upon the insured’s interest in such building or structure, as
This is an appeal taken from a decision of the Court of First
stated in the policy upon which the insurers have received a
Instance of Manila absolving the defendant Metropolitan
premium, shall be paid, and in case of a partial loss the full
Insurance Company from the complaint filed by Luis del Castillo
amount of the partial loss shall be so paid, and in case there
as administrator of the estate of the deceased Andres Grimalt y
are two (2) or more policies covering the insured’s interest
Pastor.
therein, each policy shall contribute pro rata to the payment
of such whole or partial loss. But in no case shall the insurer
The deceased Andres Grimalt y Pastor, was the owner of
be required to pay more than the amount thus stated in such
"Panaderia la Magdalena" situated between O’Donnel and
policy. This section shall not prevent the parties from
Misericordia Streets in the City of Manila which was insured
stipulating in such policies concerning the repairing,
against fire and lightning and covered by Policies Nos. 21489,
rebuilding or replacing of buildings or structures wholly or
21105 and 21106 issued by the Metropolitan Insurance
partially damaged or destroyed.
Company which were in full force and effect at the time said
property was partially destroyed by fire. Said policies have their
Prerequisites to recovery:
face value of P15,000, P30,000, and P40,000 respectively and
were worded identically there having been paid by the insured
1. Notice of loss – must be immediately given, unless delay is
to the defendant company as premiums the amounts of P300
waived expressly or impliedly by the insurer
for Policy No. 21489, P600 for Policy No. 21105 and P800 for
Policy No. 21106 for the period comprised between September
2. Proof of loss – according to best evidence obtainable. Delay
23, 1941, and September 23, 1942.
may also be waived expressly or impliedly by the insurer. Insurer
is liable
Paragraph 6 of each of these policies is as follows:
HOSTILE FIRE One that escapes from the place where it was
"This insurance does not cover any loss or damage which either
intended to burn and ought to be
in origin or extent is directly or indirectly, proximately or
remotely, occasioned by or contributed to by any of the following
FRIENDLY FIRE. One that burns in a place where it was
occurrences, or which, either in origin or extent directly or
intended to burn and ought to be. Insurer is not liable.
indirectly, proximately or remotely, arises out of or in connection
with any of such occurrences, namely:
Measure of Indemnity
"(1) Earthquake, volcanic eruption, typhoon, hurricane, tornado,
1. Open policy: only the expense necessary to replace
cyclone, or other convulsion of nature or atmospheric
the thing lost or injured in the condition it was at the
disturbance.
time of the injury.
2. Valued policy: the parties are bound by the valuation,
"(2) War, invasion, act of foreign enemy, hostilities or war-like
in the absence of fraud or mistake.
operations (whether war be declared or not), mutiny, riot, civil
commotion, insurrection, rebellion, revolution, conspiracy,
Note: It is very crucial to determine whether a marine vessel is
military naval or usurped power, martial law or state of siege, or
covered by a marine insurance or fire insurance. The
any of the events or causes which determine the proclamation
determination is important for 2 reasons:
or maintenance of martial law or state of siege.
1. Rules on constructive total loss and abandonment – applies
only to marine insurance;
"Any loss or damage happening during the existence of
2. Rule on co-insurance – applies primarily to marine insurance;
abnormal conditions (whether physical or otherwise), directly or
3. Rule on co-insurance applies to fire insurance only if
indirectly, proximately or remotely, occasioned by or contributed
expressly agreed upon. (Commercial Law Reviewer, Aguedo
to by or arising out of or in connection with any of the said
Agbayani, 1988 ed.)
occurrences shall be deemed to be loss or damage which is not
covered by this insurance, except to the extent that the Insured
Fall-of-building clause
shall prove that such loss or damage happened independently
of the existence of such abnormal conditions.
"In any action, suit or other proceeding, where the Company
alleges that by reason of the provisions of this condition any loss
or damage is not covered by this insurance, the burden of
proving that such loss or damage is covered shall be upon the
Insured."cralaw virtua1aw library
Early in the afternoon of January 2, 1942, a fire broke out in a
grocery store owned by Yu Dian Chiang, then being looted, and
caught and destroyed two doors of the "Panaderia la
Magdalena" building, thus causing a damage in the amount of
P62,000.
ISSUE: Whether or not the defendant, Metropolitan Insurance
Company, is liable for the damage thus caused to the bakery
above mentioned.
RULING:
As above indicated, one of the conditions stipulated in the
policies is that any loss or damage caused by war or invasion or
"any loss or damage happening during the existence of
abnormal conditions (whether physical or otherwise) directly or
indirectly, proximately or remotely, occasioned by or contributed
to by or arising out of or in connection with any of the said
occurrences shall be deemed to be loss or damage which is not
covered by this insurance" and that "where the company alleges
that by reason of the provisions of this condition any loss or
damage is not covered by this insurance, the burden of proving
that such loss or damage is covered shall be upon the Insured."
Insurance companies, generally, are willing to assume only
ordinary risks or losses that may happen under ordinary
conditions or in times of peace. Insurance companies are
entitled to protect themselves and maintain their stability in the
interest of the people whom they insure and accordingly they
should avoid assuming extraordinary risks due to unusual and
peculiarly destructive causes which are disproportionate to the
amount of premium paid. It is for this reason that extraordinary
causes of loss for which no augmented premium has been paid
are excluded from the coverage of the policies issued by the
defendant company.
On January 2, 1942, when the bakery owned by plaintiff was
destroyed partially by fire, the conditions in Manila were entirely
abnormal on account of the war. In the stipulation of facts
submitted by the parties, it is stated that in the City of Manila
from December 29, 1941 up to January 3, 1942, due
undoubtedly to the evacuation of the Philippine and U. S. Army
and to the imminence of Japanese invasion, the conditions of
peace and order were totally abnormal and beyond control for
they were characterized by panic and confusion and
accompanied by unchecked looting, uncontrolled mobs, and
outbreaks of fire. From December 8, 1941 to January 4, 1942
there had been at least 50 fires in Manila and on January 2, 1942
there had been at least 8 fires in the city. And on January 6, a
fire gutted the building opposite and directly in front of the bakery
owned by plaintiff. Since 2/3 of the population and 2/3 of the
police force of the city had evacuated to the provinces, many
houses were left without vigilance and were the subject of
general looting, and fire, in several instances, was the
consequence. Looting and robbery were rampant in the city
because only a handful of policemen were left and they were
generally ignored by the mob of looters. Fires breaking out in
houses being looted were beyond control because a great
portion of Manila’s firemen had also evacuated to the provinces
or failed to report for duty in fear of imminent danger and calls
for assistance received no response from the fire department.
The fire which destroyed partially the bakery in question, came
from a grocery that was being looted. Such fire was the effect of
abnormal conditions caused by war.
There is another reason why plaintiff’s action should be
dismissed. In paragraph thirteen (13) of the policies it is
stipulated that "if the claim is made and rejected and an action
or suit be not commenced within twelve (12) months after such
rejection . . . all benefit under this Policy shall be forfeited."
According to the stipulation of facts, plaintiff’s claim was rejected
on February 1942, and yet the complaint in this case was filed
on May 22, 1946. The action, therefore, is barred by the
limitation agreed upon by the parties.
Judgment is affirmed with costs against Appellant.
FILIPINAS v. TAN
FACTS:
The petitioner is a domestic insurance corporation licensed to
engage in the insurance business in the Philippines. The
respondent is the owner of a building located in the municipality
of Lucena, province of Tayabas, insured for P20,000 and
P10,000 in two policies issued by the petitioner.
During the term of the policies, the building insured was burned
and completely destroyed. Notice and proof of loss had been
duly made, but as the petitioner refused to pay, an action was
brought to recover on the policies. After trial, judgment was
rendered against the petitioner for the amount of the two policies
with legal interest from the date of the filing of the complaint. The
Court of Appeals affirmed the judgment.
Now, the petitioner raises in these proceedings three questions
(1) that, under article 8 which provides:
Under any of the following circumstances the insurance ceases
to attach as regards the property affected unless the insured,
before the occurrence of any loss or damage, obtains the
sanction of the company signified by endorsement upon the
policy, by or on behalf of the Company.
(a) If the trade or manufacture carried on be altered, or if the
nature of the occupation of or other circumstances affecting the
building insured or containing the insured property be changed
in such a way as to increase the risk of loss or damage by fire.
"the sealing of respondent's property by Japanese forces on
December 28, 1941 changed the nature of the occupation
thereof in a manner which increased the risk of loss, and that in
accordance with the provisions of Article 8 of the policies above
quoted, the insurance ceased to attach as of the aforesaid date
of December 28, 1941"; (2) that under article 6 of the insurance
policies issued "the inferential finding that the fire of January 5,
1942 was of accidental origin, without more, could not make
respondent's loss compensable, considering that the contract of
the parties specifically required respondent to prove that loss
happened independently of the abnormal conditions before he
could recover. In other words, that a consuming fire was
accidental is not proof of the fact that such fire was not the
remote or indirect result of, or contributed to, by the abnormal
conditions"; and (3) that, under article 13 of the insurance
policies which provides:
All benefits under this policy shall be forfeited:
(a) If the claim be in any respect fraudulent;
(b) If any false declaration be made or used in support thereof;
(c) If any fraudulent means or devices are used by the Insured
or anyone acting on his behalf to obtain any benefit under this
policy;
(d) If the loss or damage be occasioned by the willful act, or with
the connivance of the Insured;
(e) If the insured or anyone acting on his behalf shall hinder or
obstruct the Company in doing any of the acts referred to in
Article 1; (f) If the claim be made and rejected and an action or
suit be not commenced within twelve months after such
rejection, or (in case of an Arbitration taking place in pursuance
of Article 18 of this Policy) within twelve months after the
Arbitrator or Arbitrators or Umpire shall have made their award,
the respondent cannot recover, because he had made
fraudulent declaration in his claim submitted to the petitioner
denying that there had been a previous fire in the premises in
which the insured was interested, whereas at the trial he
admitted that there had been a previous fire in which he was an
interested party.
As to the first question, the Court of Appeals held:
As to the claim of the appellant that risk of fire or loss was
increased by the sealing of the building by the Japanese
Forces, the evidence of record discloses the following: The
Japanese Army entered Lucena at 5:30 a.m., on December 27,
1941. At that time appellee's building was closed. On
December 28, according to the testimony of the principal
witness for the defendant, all the stores along Quezon Avenue,
including the stores in the building of the appelee, were sealed
by the Japanese Army, except those which were open (t.s.n.,
p. 50). Japanese soldiers asked what were contained in the
stores, and, upon being informed, they ordered the placing of
posters prohibiting the taking away of materials from the said
stores under penalty of death (Id.). There were no disorders
during this period of time, that is, between the entry of the
Japanese Army and the burning of the building. Looting was
rampant until the end of December, but thereafter and up to
the date of the burning of the building, only sporadic looting
occurred in far away places. The Japanese soldiers patrolled
the streets and dispersed people seen in groups. They also
arrested and tied and punished people caught looting or
stealing.
The appellant and the amici curiae contend that the risk of fire
or loss, to which the building was exposed by the sealing
thereof, was considerably increased, and that the policies
thereupon ceased to attach; that the situation of the building
insured was changed in that it became a building containing
war materials, which it became the bounden duty of all loyal
forces, whether the regular USAFFE or the guerrilla elements
to destroy; that said sealing converted it into a veritable arsenal
of war materials, thereby increasing the risk and hazard to
which it was exposed. In passing upon this defense, the trial
court ruled that the stipulation between the parties that no
encounter of troops occurred in Lucena before or after its
occupation, and that the forces of one and the other side were
localized around the fortifications of Bataan and Corregidor,
had the effect of bringing the said municipality beyond the zone
of war operations at the time in question, for which reason no
increase resulted in the risk or hazard to which the building
insured was subjected to. Incidentally, it found that the stores
in the building insured were sealed, not because they belonged
to enemy nationals, but because they were abandoned by the
owners and precautionary measures had to be adopted to
prevent their being looted.
ISSUE: Whether or not the sealing can increase the risk or
hazard to which a building is exposed?
RULING:
The findings of the Court of Appeals (1) that the sealing of, and
the placing of posters on, the building by the Japanese forces
did not increase the hazard or risk to which the building was
exposed and, therefore, the insurance did not cease to attach
under article 8 of the policies; and (2) that the fire which
destroyed the building "was purely an ordinary and accidental
one, unrelated to war, invasion, civil commotion, or to the
abnormal conditions arising therefrom," are binding and
conclusive upon the Supreme Court.
BANCASSURANCE
SEC. 375. The term bancassurance shall mean the presentation
and sale to bank customers by an insurance company of its
insurance products within the premises of the head office of
such bank duly licensed by the Bangko Sentral ng Pilipinas or
any of its branches under such rules and regulations which the
Commissioner and the Bangko Sentral ng Pilipinas may
promulgate. To engage in bancassurance arrangement, a bank
is not required to have equity ownership of the insurance
company. No insurance company shall enter into a
bancassurance arrangement unless it possesses all the
requirements as may be prescribed by the Commissioner and
the Bangko Sentral ng Pilipinas.
No insurance product under this section, whether life or non-life,
shall be issued or delivered unless in the form previously
approved by the Commissioner.
SEC. 376. Personnel tasked to present and sell insurance
products within the bank premises shall be duly licensed by the
Commissioner and shall be subject to the rules and regulations
of this Act.
SEC. 377. The Commissioner and the Bangko Sentral ng
Pilipinas shall promulgate rules and regulations to effectively
supervise the business of bancassurance.
CASUALTY INSURANCE
SEC. 176. Casualty insurance is insurance covering
loss or liabil ity arising from accident or mishap,
excluding certain types of loss which by law or custom
are considered as falling exclusively within the scope
of other types of insurance such as fire or marine. It
includes, but is not limited to, employer’s liability
insurance, motor vehicle liability insurance, plate
glass insurance, burglary and theft insurance,
personal accident a nd health insurance as written by
non-life insurance companies, and other substantially
similar kinds of insurance.
- Insurance covering loss or liability arising from accident
or mishap, excluding those falling under other types of
insurance such as fire or marine. (Sec.174)
Classifications:
1. Insurance against specified perils which may affect the
person and/or property of the insured. (accident or
health insurance)
Examples: personal accident, robbery/theft insurance
2. Insurance against specified perils which may give rise to
liability on the part of the insured for claims for injuries to or
damage to property of others. (third party liability insurance)
Insurable interest is based on the interest of the insured in the
safety of persons, and their property, who may maintain an
action against him in case of their injury or destruction,
respectively.
Examples: workmen’s compensation,motor vehicle liability
In a third party liability (TPL) insurance contract, the insurer
assumes the obligation by paying the injured third party to whom
the insured is liable. Prior payment by the insured to the third
person is not necessary in order that the obligation may arise.
The moment the insured becomes liable to third persons, the
insured acquires an interest in the insurance contract which may
be garnished like any other credit. (Perla Comapnia de Seguro,
Inc vs. Ramolete, 205 SCRA 487)
✓ Aside from compulsory motor vehicle liability insurance, the
Insurance Code contains no other provisions applicable to
casualty insurance. Therefore, such casualty insurance are
governed by the general provisions applicable to all types
of insurance, and outside of such statutory provisions, the
rights and obligations of the parties must be determined by
their contract, taking into consideration its purpose and
always in accordance with the general principles of
insurance law.
FORTUNE INSURANCE VS CA
It has been aptly observed that in burglary, robbery, and theft
insurance, "the opportunity to defraud the insurer - the moral
hazard - is so great that insurers have found it necessary to fill
up their policies with countless restrictions, many designed to
reduce this hazard. Seldom does the insurer assume the risk of
all losses due to the hazards insured against."
FACTS:
Fortune issued a policy to Producers wherein it stipulated under
the General Exceptions Clause that “[t]he company shall not be
liable under this policy in respect of x x x (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. x x x"
An armored car of the bank was robbed of P725,000 while
transferring it to another branch. After an investigation
conducted by the Pasay police authorities, the driver Magalong
and guard Atiga (et. al.) were charged with violation of the Anti-
Highway Robbery Law. Petitioner claims that it was not liable
because the incident fell under the General Exception Clause.
Private respondent says otherwise.
ISSUE:
Whether or not the petitioner is liable under the Money, Security,
and Payroll Robbery policy it issued to the private respondent.
RULING:
NO.
A contract of insurance is a contract of adhesion, thus any
ambiguity therein should be resolved against the insurer, or it
should be construed liberally in favor of the insured and strictly
against the insurer. An insurance contract is a contract of
indemnity upon the terms and conditions specified therein.
It is settled that the terms of the policy constitute the measure of
the insurer's liability. In the absence of statutory prohibition to
the contrary, insurance companies have the same rights as
individuals to limit their liability and to impose whatever
conditions they deem best upon their obligations not
inconsistent with public policy.
It has been aptly observed that in burglary, robbery, and theft
insurance, "the opportunity to defraud the insurer - the moral
hazard - is so great that insurers have found it necessary to fill
up their policies with countless restrictions, many designed to
reduce this hazard. Seldom does the insurer assume the risk of
all losses due to the hazards insured against." Persons
frequently excluded under such provisions are those in the
insured's service and employment. The purpose of the
exception is to guard against liability should the theft be
committed by one having unrestricted access to the property. In
such cases, the terms specifying the excluded classes are to be
given their meaning as understood in common speech.
The terms "service" and "employment" are generally associated
with the idea of selection, control, and compensation. Magalong
and Atiga were, in respect of the transfer of Producer's money
from its Pasay City branch to its head office in Makati,
its"authorized representatives" who served as such with its teller
Maribeth Alampay.
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."
 SURETYSHIP obligor and the obligee. (Sec. 176)

SURETYSHIP PROPERTY INSURANCE

SEC. 177. A contract of suretyship is an agreement whereby a 3 parties: surety, obligor and
party called the surety guarantees the performance by another obligee
party called the principal or obligor of an obligation or Credit accommodation
undertaking in favor of a third party called the obligee. It includes Surety can recover from
official recognizances, stipulations, bonds or undertakings principal
issued by any company by virtue of and under the provisions of
Bond can be cancelled only
Act No. 536, as amended by Act No. 2206.
with consent of obligee,
Commissioner or court
Requires acceptance of
SEC. 178. The liability of the surety or sureties shall be joint and obligee to be valid
several with the obligor and shall be limited to the amount of the Risk-shifting device;
bond. It is determined strictly by the terms of the contract of premium paid being in the
suretyship in relation to the principal contract between the nature of a service fee
obligor and the obligee.
2 parties: insurer and insured
Contract of indemnity
Insurer has no such right;
only right of subrogation
May be cancelled unilaterally
either by insured or insurer
on grounds provided by law
No need of acceptance by
any third party
Risk-distributing device;
premium paid as a ratable
contribution to a common
fund

SEC. 179. The surety is entitled to payment of the premium as

soon as the contract of suretyship or bond is perfected and
delivered to the obligor. No contract of suretyship or bonding
shall be valid and binding unless and until the premium therefor
has been paid, except where the obligee has accepted the bond,
in which case the bond becomes valid and enforceable
irrespective of whether or not the premium has been paid by the
obligor to the surety: Provided, That if the contract of suretyship
or bond is not accepted by, or filed with the obligee, the surety
shall collect only a reasonable amount, not exceeding fifty
percent (50%) of the premium due thereon as service fee plus
the cost of stamps or other taxes imposed for the issuance of
the contract or bond: Provided, however, That if the
nonacceptance of the bond be due to the fault or negligence of
the surety, no such service fee, stamps or taxes shall be
collected.
In the case of a continuing bond, the obligor shall pay the
subsequent annual premium as it falls due until the contract of
suretyship is cancelled by the obligee or by the Commissioner
or by a court of competent jurisdiction, as the case may be.
SEC. 180. Pertinent provisions of the Civil Code of the
Philippines shall be applied in a suppletory character whenever
necessary in interpreting the provisions of a contract of
suretyship.
SURETYSHIP is an agreement whereby a surety guarantees
the performance by the principal or obligor of an obligation or
undertaking in favor of an obligee. (Sec.175)
✓ It is essentially a credit accommodation.
✓ It is considered an insurance contract if it is executed by the
surety as a vocation, and not incidentally.
✓ When the contract is primarily drawn up by 1 party, the
benefit of doubt goes to the other party (insured/obligee) in
case of an ambiguity following the rule in contracts of
adhesion. Suretyship, especially in fidelity bonding, is thus
treated like non-life insurance in some respects.
Nature of liability of surety
1. Solidary;
2. Limited to the amount of the bond;
3. It is determined strictly by the terms of the contract of
suretyship in relation to the principal contract between the
MACHETTE v. HOSPICIO
FACTS:
1) In 1916, Romulo Machetti, agreed to construct a building in
Manila for the Hospicio de San Jose, for P64,000. One of the
conditions of the agreement was that the contractor should
obtain the "guarantee" of the Fidelity and Surety Company of the
Philippine Islands to the amount of P128,800. Said contract
read:
“For value received we hereby guarantee compliance with the
terms and conditions as outlined in the above contract. “
2) Thereafter Machetti constructed the building and, as the work
progressed, payments were made to him from time to time, until
the entire contract price, except the sum of P4,978.08, was
paid.
3) Later on it was found that the work had not been carried out
in accordance with the specifications which formed part of the
contract and that the workmanship was not of the standard
required, and thus the Hospicio presented a counterclaim for
damages for the partial noncompliance with the terms of the
agreement abovementioned, in the total sum of P71,350.
4) During the duration of the trial however, Machetti, declared
insolvent and an order was entered suspending the proceeding
in the present case. Thus, the Hospicio filed a motion asking that
the Fidelity and Surety Company be made cross-defendant to
the exclusion of Machetti and that the proceedings be continued
as to said company, which motion was granted and
subsequently, the Hospicio filed a complaint against the Fidelity
and Surety Company for a judgment against the company upon
its guaranty. The CFI rendered judgment against Fidelity
ISSUE: WON Fidelity is answerable to the Hospicio as guaranty
of Machetti?
RULING:
• Guarantor implies an undertaking of guaranty, as distinguished
from suretyship and in this case, it appears that the contract is
the guarantor's separate undertaking in which the principal does
not join, that it rests on a separate consideration moving from
the principal and that although it is written in continuation of the
contract for the construction of the building, it is a collateral
undertaking separate and distinct from the latter. All of these
circumstances are distinguishing features of contracts of
guaranty.

• On the other hand, a surety undertakes to pay if the principal
does not pay, the guarantor only binds himself to pay if the
principal cannot pay. The one is the insurer of the debt, the other
an insurer of the solvency of the debtor.
• This latter liability is what the Fidelity Company assumed in
this case. Thus, Fidelity having bound itself to pay only the event
its principal, cannot pay, it follows that it cannot be compelled to
pay until it is shown that Machetti is unable to pay. The judgment
appealed from is therefore reversed.
• Such ability may be proven by the return of a writ of execution
unsatisfied or by other means, but is not sufficiently established
by the mere fact that he has been declared insolvent in
insolvency proceedings under our statutes, in which the extent
of the insolvent's inability to pay is not determined until the final
liquidation of his estate.
PHIL PRYCE v. CA
The Insurance Code states that: "SECTION 177. The surety is
entitled to payment of the premium as soon as the contract of
suretyship or bond is perfected and delivered to the obligor. No
contract of suretyship or bonding shall be valid and binding
unless and until the premium therefor has been paid, except
where the obligee has accepted the bond, in which case the
bond becomes valid and enforceable irrespective of whether or
not the premium has been paid by the obligor to the surety. . . ."
The above provision outrightly negates petitioner’s first defense.
In a desperate attempt to escape liability, petitioner further
asserts that the above provision is not applicable because the
respondent allegedly had not accepted the surety bond, hence
could not have delivered the goods to Sagum Enterprises.
FACTS:
Petitioner, Interworld Assurance Corporation (the company now
carries the corporate name Philippine Pryce Assurance
Corporation), was the butt of the complaint for collection of sum
of money, filed on May 13, 1988 by respondent, Gegroco, Inc.
before the Makati Regional Trial Court, Branch 138. The
complaint alleged that petitioner issued two surety bonds (No.
0029, dated July 24, 1987 and No. 0037, dated October 7, 1987)
in behalf of its principal Sagum General Merchandise for FIVE
HUNDRED THOUSAND (P500,000.00) PESOS and ONE
MILLION (1,000,000.00) PESOS, respectively.
On June 16, 1988, summons, together with the copy of the
complaint, was served on petitioner. Within the reglementary
period, two successive motions were filed by petitioner praying
for a total of thirty (30) days extension within which to file a
responsive pleading.
In its Answer, dated July 29, 1988, but filed only on August 4,
1988, petitioner admitted having executed the said bonds, but
denied liability because allegedly 1) the checks which were to
pay for the premiums bounced and were dishonored hence
there is no contract to speak of between petitioner and its
supposed principal; and 2) that the bonds were merely to
guarantee payment of its principal’s obligation, thus, excussion
is necessary. After the issues had been joined, the case was set
for pre-trial conference on September 29, 1988. The petitioner
received its notice on September 9, 1988, while the notice
addressed to its counsel was returned to the trial court with the
notation "Return to Sender, Unclaimed."
On the scheduled date for pre-trial conference, only the counsel
for petitioner appeared while both the representative of
respondent and its counsel were present. The counsel for
petitioner manifested that he was unable to contract the Vice-
President for operations of petitioner, although his client
intended to file a third party complaint against its principal.
Hence, the pre-trial was re-set to October 14, 1988. On October
14, 1988, petitioner filed a "Motion with Leave to Admit Third-
Party Complaint" with the Third-Party Complaint attached. On
this same day, in the presence of the representative for both
petitioner and respondent and their respective counsel, the pre-
trial conference was re-set to December 1, 1988. Meanwhile on
November 29, 1988, the court admitted the Third Party
Complaint and ordered service of summons on third party
defendants.
On scheduled conference in December, petitioner and its
counsel did not appear notwithstanding their notice in open
court. The pre-trial was nevertheless re-set to February 1, 1989.
However, when the case was called for pre-trial conference on
February 1, 1989, petitioner was again not represented by its
officer or its counsel, despite being duly notified. Hence, upon
motion of respondent, petitioner was considered as in default
and respondent was allowed to present evidence ex-parte,
which was calendared on February 24, 1989. Petitioner received
a copy of the Order of Default and a copy of the Order setting
the reception of respondent’s evidence ex-parte, both dated
February 1, 1989, on February 15, 1989
ISSUE: Whether or not Interworld Assurance Corp. should be
liable for the surety bond that it issued as payment for the
premium (YES)
RULING:
There is reason to believe that petitioner does not really have a
good defense.
Petitioner hinges its defense on two arguments, namely:
a) that the checks issued by its principal which were supposed
to pay for the premiums, bounced, hence there is no contract of
surety to speak of; and b) that as early as 1986 and covering the
time of the Surety Bond, Interworld Assurance Company (now
Phil. Pryce) was not yet authorized by the Insurance
Commission to issue such bonds.
The Insurance Code states that: "SECTION 177. The surety is
entitled to payment of the premium as soon as the contract of
suretyship or bond is perfected and delivered to the obligor. No
contract of suretyship or bonding shall be valid and binding
unless and until the premium therefor has been paid, except
where the obligee has accepted the bond, in which case the
bond becomes valid and enforceable irrespective of whether or
not the premium has been paid by the obligor to the surety. . . ."
The above provision outrightly negates petitioner’s first defense.
In a desperate attempt to escape liability, petitioner further
asserts that the above provision is not applicable because the
respondent allegedly had not accepted the surety bond, hence
could not have delivered the goods to Sagum Enterprises. This
statement clearly intends to muddle the facts as found by the
trial court and which are on record.

In the first place, Petitioner, in its answer, admitted to have
issued the bonds subject matter of the original action. Secondly,
the testimony of Mr. Leonardo T. Guzman, witness for the
respondent, reveals the following:
"Q. What are the conditions and terms of sales you extended to
Sagum General Merchandise?”
“A. First, we required him to submit to us Surety Bond to
guaranty payment of the spare parts to be purchased. Then we
sell to them on 90 days credit. Also, we required them to issue
post-dated checks.”
“Q. Did Sagum General Merchandise comply with your surety
bond requirement?
A. Yes. They submitted to us and which we have accepted two
surety bonds.”
“Q. Will you please present to us the aforesaid surety bonds?
A. Interworld Assurance Corp. Surety Bond No. 0029 for
P500,000 dated July 24, 1987 and Interworld Assurance Corp.
Surety Bond No. 0037 for P1,000.000 dated October 7, 1987."
Likewise attached to the record are exhibits C to C-18 21
consisting of delivery invoices addressed to Sagum General
Merchandise proving that parts were purchased, delivered and
received.
On the other hand, petitioner’s defense that it did not have
authority to issue a Surety Bond when it did is an admission of
fraud committed against Respondent. No person can claim
benefit from the wrong he himself committed. A representation
made is rendered conclusive upon the person making it and
cannot be denied or disproved as against the person relying
thereon
COMPULSORY MOTOR VEHICLE LIABILITY
SEC. 386. For purposes of this chapter:
(a) Motor Vehicle is any vehicle as defined in Section 3,
paragraph (a) of Republic Act No. 4136, otherwise known as the
‘Land Transportation and Traffic Code’
(b) Passenger is any fare paying person being transported and
conveyed in and by a motor vehicle for transportation of
passengers for compensation, including persons expressly
authorized by law or by the vehicle’s operator or his agents to
ride without fare.
(c) Third party is any person other than a passenger as defined
in this section and shall also exclude a member of the
household, or a member of the family within the second degree
of consanguinity or affinity, of a motor vehicle owner or land
transportation operator, as likewise defined herein, or his
employee in respect of death, bodily injury, or damage to
property arising out of and in the course of employment.
(d) Owner or motor vehicle owner means the actual legal owner
of a motor vehicle, in whose name such vehicle is duly
registered with the Land Transportation Office;
(e) Land transportation operator means the owner or owners of
motor vehicles for transportation of passengers for
compensation, including school buses.
(f) Insurance policy or Policy refers to a contract of insurance
against passenger and third-party liability for death or bodily
injuries and damage to property arising from motor vehicle
accidents.
SEC. 389. The Land Transportation Office shall not allow the
registration or renewal of registration of any motor vehicle
without first requiring from the land transportation operator or
motor vehicle owner concerned the presentation and filing of a
substantiating documentation in a form approved by the
Commissioner evidencing that the policy of insurance or
guaranty in cash or surety bond required by this chapter is in
effect.
TANCO v. PHIL GUARANTEE
FACTS:
While Tanco's automobile was driven by his brother Manuel
Tanco, who at the time didn't have a valid license since it was
not renewed until the next week, had a collision with a pick-up
delivery van at the southern approach of the Jones bridge.
The repairs cost P2,536.99 so he filed a claim against the
insurance company which was rejected.
He filed a claim in the Municipal Court of Manila and elevated to
the Court of First Instance of Manila on Appeal which favored
Tanco.
The policy provides an exception clause: "the company shall not
be liable in respect of any accident, loss, damage or liability
caused, sustained or incurred whilst (the insured vehicle) is
being driven by or is for the purpose of being driven by him in
the charge of any person other than an Authorized Driver. The
Authorized Driver must be the insured himself and "(b) any
person driving on the Insured's order or with his permission,
provided that the person driving is permitted in accordance with
the licensing or other laws or regulations to drive the Motor
Vehicle or has been permitted and is not disqualified by order of
a court of law or by reason of any enactment or regulation in that
behalf from driving such Motor Vehicle.
ISSUE: W/N the Tanco can claim because it was not covered by
the exemption clause
HELD: NO. decision is reversed, with costs.
To require a person to secure an operator's license and meet
certain requirements before driving an automobile is a regulation
for the protection of life and property, the wisdom of which can
scarcely be questioned. The Legislature has also provided that
every three years such licenses expire and may be renewed
under certain conditions. If one fails to comply with the
regulation, the statute says, he or she shall not drive a motor
vehicle upon the highway. Under the terms of the contract, while
under such statutory prohibition, plaintiff could not recover under
his policy. To permit such recovery, notwithstanding the lack of
a driver's license, would tend to undermine the protection
afforded the public by virtue of Act No
The exclusion clause in the contract invoked by appellant is
clear. It does not refer to violations of law in general, which
indeed would tend to render automobile insurance practically a
sham, but to a specific situation where a person other than the
insured himself, even upon his order or with his permission,
drives the motor vehicle without a license or with one that has
already expired. No principle of law or of public policy militates
against the validity of such a provision.
PAYMENT OF PROCEEDS AND FILING OF CLAIMS
IN LIFE INSURANCE
SEC. 248. The proceeds of a life insurance policy shall be paid
immediately upon maturity of the policy, unless such proceeds
are made payable in installments or as an annuity, in which case
the installments, or annuities shall be paid as they become due:
Provided, however, That in the case of a policy maturing by the
death of the insured, the proceeds thereof shall be paid within
sixty (60) days after presentation of the claim and filing of the
proof of death of the insured. Refusal or failure to pay the claim
within the time prescribed herein will entitle the beneficiary to
collect interest on the proceeds of the policy for the duration of
the delay at the rate of twice the ceiling prescribed by the
Monetary Board, unless such failure or refusal to pay is based
on the ground that the claim is fraudulent.
The proceeds of the policy maturing by the death of the insured
payable to the beneficiary shall include the discounted value of
all premiums paid in advance of their due dates, but are not due
and payable at maturity.
SEC. 182. An insurance upon life may be made payable on the
death of the person, or on his surviving a specified period, or
otherwise contingently on the continuance or cessation of life.
IN GENERAL
The payment must be made immediately upon maturity of the
policy like in the event of death, survival, cessation or
continuance of life.
DEATH AS A SUSPENSIVE CONDITION
However, proceeds are payable in installments or annuity if
maturity of the policy is due to death of the insured. Here, the
proceeds shall be paid within sixty (days) after presentation of
the claim and filing of the proof of death of the insured.
There must be proof of death such as death certificate. Mere
notice of death is not enough.
FERNANDEZ v. NATIONAL
FA C TS :
On July 15, 1944, the National Life Insurance Company of the
Philippines insured the life of Juan D. Fernandez for the sum of
P10,000 under Policy No. 16346 upon payment by the latter of
the amount of P444 for the period from July 15, 1944, to July 14,
1945, the beneficiaries thereof being his mother Teresa Duat
Vda. de Fernandez and his sisters Maria Teresa Fernandez and
Manuela Fernandez. The insured died on November 2, 1944, at
Muntinglupa, Rizal, while the policy was in force.
After a lapse of more than seven years, or on August 1st, 1952,
Atty. Alberto L. de la Torre, in representation of the beneficiaries,
wrote the company advising it that the insured had died in 1944,
and claimed the proceeds of the policy. On August 21, 1952, the
company answered Atty. De la Torre stating that inasmuch as
the status of the policies issued during the Japanese occupation
was still pending consideration before the courts, it would like to
know whether the beneficiaries represented by him were willing
to compute the value of their claim under the Ballantyne scale
of values. There was no reply to this inquiry, but on July 9, 1954,
the beneficiaries presented instead proofs of death of the
insured and at the same time filed Statement Exhibit G claiming
the amount of P10,000. On July 21, 1954, the company advised
the beneficiaries that inasmuch as the policy matured upon the
death of the insured on November 2, 1944, the proceeds should
be computed in accordance with the Ballantyne scale, which
amount only to P500. In view of this, the beneficiaries
commence suit on August 6, 1954, but the lower court sustained
the stand of the company and dismissed the complaint,
awarding however to plaintiffs the sum of P500 in Philippine
currency, without interest; hence the appeal.
Appellants vigorously maintain that the obligation of the
company to pay the proceeds of the insurance accrued not upon
the death of the insured on November 2, 1944, but only upon
receipt and approval by the company, at its Home Office, of
proof of death of the insured, which was on July 9, 1954, in
accordance with the provision of the policy which reads —
"National Life Insurance Company of the Philippines hereby
agrees to pay at its Home Office, Manila, Ten Thousand Pesos
to Juan D. Fernandez (hereinafter called the insured) on the
15th day of July, 1964, if the Insured is living and this Policy is
in force, or upon receipt and approval at its Home Office of due
proofs of the title of the claimant and of the prior death of the
Insured while this Policy is in force to Teresa Duat Vda. de
Fernandez, Maria T. and Manuela Fernandez, mother and
sisters respectively of the Insured (hereinafter called the
Beneficiary) subject to the right of the Insured to change the
beneficiary as stated on the second page of this Policy."cralaw
virtua1aw library
ISSUE: Whether or not the filing of proof of death by the
beneficiaries is a condition precedent to the demandability of the
obligation of the insurer to pay the proceeds.
NO. In life insurance, the policy matures either upon the
expiration of the term set forth therein in which case its proceeds
are immediately payable to the insured himself, or upon his
death occurring at any time prior to the expiration of such
stipulated term, in which case, the proceeds are payable to his
beneficiaries within sixty days after their filing of proof of death
(Sec. 91-A Insurance Law). In the case at bar, the policy
matured upon the death of the insured on November 2, 1944,
and the obligation of the insurer to pay arose as of that date. The
sixty-day period fixed by law within which to pay the proceeds
after presentation of proof of death is merely procedural in
nature, evidently to determine the exact amount to be paid and
the interest thereon to which the beneficiaries may be entitled to
collect on case of unwarranted refusal of the company to pay,
and also to enable the insurer to verify or check on the fact of
death which it may even validly waive. It is the happening of the
suspensive condition of death that renders a life policy mature
and not the filing of proof of death which, as above stated, is
merely procedural, for even if such proof were presented but it
turns out later that the insured is alive, such filing does not give
maturity to the policy. The insured having died on November 2,
1944, during the Japanese occupation, the proceeds of his
policy should be adjusted accordingly.
The delay in the presentation of proof of death does not make
any difference, for it does not alter the date of maturity of the
policy nor the ability of the company to pay the proceeds of the
insurance during the Japanese occupation. Moreover, it is
through no fault of the company that such delay was incurred.
At any rate, irrespective of whether there was delay or not in the
filing of proof of death, the hard fact remains that the policy
matured and was payable during the Japanese occupation, and
under the doctrine in the Valero v. Sycip case, supra, payment
should be adjusted in accordance with the Ballantyne scale of
values.
PROOF OF DEATH v. NOTICE OF DEATH
LONDRES v. NATIONAL
This is an appeal from a decision of the Court of First Instance
of Manila ordering defendant to pay to plaintiff the sum of
P3,000, Philippine currency, plus legal interest thereon from the
time of the filing of the complaint until its full payment.
FACTS:
On April 14, 1943, the National Life Insurance Company of the
Philippines issued a policy on the life of Jose C. Londres
whereby it undertook to pay its beneficiary upon his death the
sum of P3,000. All the premiums due under the policy were
actually paid on their dates of maturity and the policy was in
force when the insured died on February 7, 1945. Salvacion V.
Londres, as beneficiary, demanded from the company the
payment of the proceeds of the policy, and her demand having
been refused, she instituted the present action against the
company in the Court of First Instance of Manila.
Defendant and its answer denied, for lack of sufficient proof, the
allegation that the insured died on February 7, 1945, and set up
the following special defenses: (a) that plaintiff's claim is covered
by the Moratorium Law; (b) that the policy having been issued
during the Japanese occupation, it is presumed that its face
value should be paid in Japanese currency, there being no
provision in the policy from which can be inferred that the parties
contemplated payment in any other currency; (c) that the money
paid by the insured as premiums, together with the money
received from other policy-holders, was all deposited by the
defendant in the Philippine National Bank and said deposit was
declared without value by Executive Order No. 49 of the
President of the Philippines; and (d) that the policy having been
issued under abnormal circumstances, it should be considered
in the light of equity which does not permit anyone to enrich
himself at the expense of another. Defendant, however, as a
proof of good faith, offered to pay the value of the policy in
accordance with the Ballantyne scale of values, or the sum of
P2,400, Philippine currency.
On April 15, 1952, plaintiff filed a motion for summary judgment
supported by an affidavit which contains a restatement of the
allegations of the complaint attaching thereto in support of the
motion certain annexes and affidavits which are intended to
substantiate and prove said allegations. Defendant, answering
this motion, stated that while it joins the plaintiff in her petition
for summary judgment, it does so only in so far as its defense of
moratorium is concerned, but not as regards the merits of the
case because its answer raises questions of fact which should
be established, not by mere affidavits, but by evidence duly
presented in court. And on May 15, 1952, the court rendered
decision not only on the question of moratorium but on the merits
of the case, apparently disregarding the issue raised by
defendant as regards the necessity of presenting evidence on
the facts controverted by it in its answer. From this decision, the
defendant has appealed.
One of the errors assigned by appellants refers to the fact that
the lower court rendered judgment on the merits by virtue merely
of the motion for summary judgment filed by appellee without
giving an opportunity to appellant to present evidence on the
facts which, it alleges, its answer and special defenses are
predicated. Appellant contends that the facts raised by its
special defenses are "triable issues of facts" which cannot be
the subject of summary judgment unless established by
sufficient evidence, and that those facts are material to sustain
its point of view that it can only be made to pay under the policy
an indemnity in the amount of P2,400.
When appellee filed a motion for summary judgment upon her
claim she attached thereto in support of the motion certain
annexes and affidavits which were intended to substantiate and
prove her allegations. Appellant failed not only to interpose
opposing affidavits but announced to the court that it was joining
the appellee in her petition for summary judgment although it
evinced its desire to present evidence with regard to the
questions of facts raised in its special defenses. And acting on
said motion, the lower court, after considering the pleadings and
affidavits submitted in support of the motion for summary
judgment, found that there was no substantial triable issue of
facts and concluded that the appellee was entitled to a judgment
as a matter of law. We find this to be in substantial compliance
with the rules (sections 1 and 2, Rule 36).
The material averments of the claim as regards the execution of
the policy, the payment of the premiums, and the death of the
insured, are not disputed. The only issues of fact which served
as basis for the opposition to the summary judgment are those
raised in the special defenses contained in the answer. But
these facts are not material for a decision on the merits, as
correctly stated by the lower court, for even if they are taken for
granted the result would not materially change the findings as to
the question affecting the main claim. We hold therefore that the
lower court did not err in rendering a summary judgment on the
merits of the case.
The issue of moratorium, which was decided against the stand
taken by appellant, and which is also raised as one of the errors,
has now moot in view of the ruling in the case of Rutter vs.
Esteban, 93 Phil., 68, wherein the Moratorium Law as declared
invalid and unconstitutional.
ISSUE:
The main question to be determined refers to the amount to be
paid by appellant under the policy by way of indemnity to the
insured. Stated in another way, the question to be determined is
whether the amount of P3,000 which appellant bound itself to
pay to the insured under the policy upon his death should be
paid in accordance with the present currency or should be
adjusted under the Ballantyne scale of values. The answer to
the question would depend upon the interpretation to be placed
on the facts surrounding the death of the insured.
RULING:
It appears that the deceased took up the policy under
consideration on April 15, 1943 for the sum of P3,000. All the
premiums due under the policy were actually paid on their dates
of maturity and the policy was in force when the insured died on
February 7, 1945. On said date, the battle of the liberation of the
City of Manila was still raging. While the northern part may have
been liberated, not so the southern part, as shown from the very
affidavits submitted by appellee wherein it was stated that on the
aforesaid date, the insured, Jose Londres, and his two sons
were taken by the Japanese soldiers from their house at
Singalong Street and were massacred by their captors. It may
therefore be said that the policy became due when the City of
Manila was still under the yoke of the enemy and became
payable only after liberation which took place on March 10, 1945
when President Osmeña issued Proclamation No. 6 following
the restoration of the civil government by General Douglas Mac
Arthur. And we say that the policy became payable only after
liberation even if it matured sometime before, because before
that eventuality the insurance company, appellant herein, was
not yet in a position to pay the value of the policy for the simple
reason that it had not yet reopened. This much the court can
take judicial notice of, for during those days of liberation, while
the people were rejoicing because of the happy event, the
banks, the insurance companies, and for that matter other
commercial and business firms, were still feeling the adverse
effects of the sudden fall of values and were uncertain and
apprehensive as to the manner the readjustment would be made
by the new Government. It is for this reason that the beneficiary,
after realizing the truth about the death of her husband, and after
gathering evidence to substantiate his death, had difficulty in
effecting the collection of her claim from the insurance company
because at that time it had not yet reopened for business
purposes. Although the record does not disclose the exact date
on which the insurance company reopened for this purpose, this
Court can take judicial notice that it only did so after liberation.
At that time the legal tender was already the present currency.
However, it is an undisputed fact that the beneficiary submitted
to the company formally her claim and demanded payment
thereof on May 16, 1949, attaching thereto sufficient proof of the
death of the insured, which claim however the company did not
entertain, not because the proof submitted was not sufficient in
contemplation of law, but because the policy was executed
during the occupation and the determination of its value has not
yet been passed upon by the Government. And following the
provisions of our Insurance Law to the effect that in case of
maturity by death, the conclusion is inescapable that from the
point of view of the insurance company, the proceeds of the
policy became payable only upon the expiration of that period.
(Insurance Law, Section 91-A). In this sense, this case may be
likened to those already decided by this Court wherein we said
in substance that, where the parties have agreed that the
payment of the obligation will be made in the currency that would
prevail by the end of the stipulated period, and this takes place
after liberation, the obligation shall be paid in accordance with
the currency then prevailing, or Philippine currency. (Roño vs.
Gomez, 83 Phil., 890, 46 Off. Gaz., Sup. 111, 339; Gomez vs.
Tabia, 84 Phi;., 269, 47, Off. Gaz., 641.) We are, therefore,
persuaded to conclude, on the strength of these authorities, that
the present claim should be paid in accordance with the present
legal tender, or the Philippine currency.
With regard to the sufficiency of the proof presented by appellee
as to the death of the insured, we find that the same has been
sufficiently established in view of the death certificate issued by
the Civil Register of Manila on April 15, 1952, which was
attached to the motion for summary judgment. This certificate
strengthens the proof submitted by appellee on May 16, 1949
and as such it can serve as basis for the determination of the
interest that the company should pay under the policy as
required by law. (Insurance Law, Section 91-A). However, the
lower court, contrary to the claim of appellant, only required said
appellant to pay legal interest from the filing of the complaint until
the payment of the judgment.
As final plea, appellant invokes equity in its favor in view of the
nullification of the deposits made by it with the Philippine
National Bank of all fiat money received from its policyholders,
which money was declared without value by Executive Order
No. 49 of the President of the Philippines. Appellant claims that,
considering the unexpected circumstances that developed, the
indemnity to be paid by it should be suffered by it under Article
307 of the Code of Commerce which provides: "When the
deposits are of cash, with a specification of the coins constituting
them, . . . the increase or reduction which their value may suffer
shall be for the account of the depositor." Moreover, appellant,
by entering into an insurance contract, cannot claim, if it suffers
loss, that the beneficiary cannot enrich herself at its expense.
This is a risk attendant to any wagering contract. One who
gambles and loses cannot be heard to complain of his loss. To
appellant, we can only repeat the following admonition:
"The parties herein gambled and speculated on the date of the
termination of the war and the liberation of the Philippines by the
Americans. This can be gleaned from the stipulation about
redemption, particularly that portion to the effect that redemption
could be effected not before the expiration of one year from June
24, 1944. This kind of agreement is permitted by law. We find
nothing immoral or unlawful in it." (Gomez vs. Tabia, supra.)
Wherefore, the decision appealed from is affirmed, with costs
against appellant.
FACILITY OF PAYMENT CLAUSE
SEC. 234 (f) A provision that any sum becoming due by reason
of death of the person insured shall be payable to the beneficiary
designated by the insured, subject to the provisions of the policy
in the event that there is no designated beneficiary, as to all or
any part of such sum, living at the death of the insured, and
subject to any right reserved by the insurer in the policy and set
forth in the certificate to pay at its option a part of such sum not
exceeding Five hundred pesos (P500.00) to any person
appearing to the insurer to be equitably entitled thereto by
reason of having incurred funeral or other expenses incident to
the last illness or, death of the person insured;
SEC. 236 (m) A space on the front or the back of the policy for
the name of the beneficiary designated by the insured with a
reservation of the insured’s right to designate or change the
beneficiary after the issuance of the policy. The policy may also
provide that no designation or change of beneficiary shall be
binding on the insurer until endorsed on the policy by the insurer,
and that the insurer may refuse to endorse the name of any
proposed beneficiary who does not appear to the insurer to have
an insurable interest in the life of the insured. Such policy may
also contain a provision that if the beneficiary designated in the
policy does not surrender the policy with due proof of death
within the period stated in the policy, which shall not be less than
thirty (30) days after the death of the insured, or if the beneficiary
is the estate of the insured, or is a minor, or dies before the
insured, or is not legally competent to give valid release, then
the insurer may make any payment thereunder to the executor
or administrator of the insured, or to any of the insured’s
relatives by blood or legal adoption or connections by marriage
or to any person appearing to the insurer to be equitably entitled
thereto by reason of having incurred expense for the
maintenance, medical attention or burial of the insured.

General rule: Payment is made to the designated beneficiaries.

Exception: Facility of payment clause in group life and industrial

life insurance.

Facility of payment: Group life insurance

✓ There is no designated beneficiary
✓ pay not exceeding P500.00
✓ to any person equitably entitled for incurring funeral or
other expenses incident to the last illness or death of
the insured (Sec 234, f)

Facility of payment: Industrial life

If the beneficiary:

✓ does not surrender policy with due proof of death

within the period stated in the policy OR
✓ is the estate of the insured OR
✓ is a minor OR
✓ dies before the insured OR
✓ is not legally competent to give valid release, proceeds
may be given to:
1. the executor or administrator of insured OR
2. any of insured’s relative by blood as legal
adoption or by marriage OR
3. any person who incurred expenses for
maintenance, medical attention or burial.