1.
WHITE GOLD VS PIONEER assessments, to the creation of a fund from which all
INSURANCE (G.R. NO. 154514.
JULY 28, 2005)
Facts: White Gold Marine Services, Inc. (White
Gold) procured a protection and indemnity coverage
for its vessels from The Steamship Mutual
Underwriting Association (Bermuda) Limited
(Steamship Mutual) through Pioneer Insurance and
Surety Corporation (Pioneer). Subsequently, White
Gold was issued a Certificate of Entry and
Acceptance. Pioneer also issued receipts evidencing
payments for the coverage. When White Gold failed
to fully pay its accounts, Steamship Mutual refused
to renew the coverage. Steamship Mutual thereafter
filed a case against White Gold for collection of sum
of money to recover the latter’s unpaid balance.
White Gold on the other hand, filed a complaint
before the Insurance Commission claiming that
Steamship Mutual violated Sections 186[4] and
187[5] of the Insurance Code, while Pioneer violated
Sections 299 300 and 301 in relation to Sections 302
and 303, thereof. The Insurance Commission
dismissed the complaint. It said that there was no
need for Steamship Mutual to secure a license
because it was not engaged in the insurance
business. It explained that Steamship Mutual was a
Protection and Indemnity Club (P & I Club). Likewise,
Pioneer need not obtain another license as
insurance agent and/or a broker for Steamship
Mutual because Steamship Mutual was not engaged
in the insurance business. Moreover, Pioneer was
already licensed, hence, a separate license solely as
agent/broker of Steamship Mutual was already
superfluous.
Issues: Whether or not the contract entered into by
the parties is an insurance contract.
Whether or not Pioneer is required to obtain a
separate license as an insurance agent.
RULING:
For the first issue, the court answered positively.
Section 2(2) of the Insurance Code enumerates what
constitutes doing an insurance business or
transacting an insurance business. These are:
(a) making or proposing to make, as
insurer, any insurance contract;
(b) making, or proposing to make, as
surety, any contract of suretyship as a
vocation and not as merely incidental to
any other legitimate business or activity
of the surety;
(c) doing any kind of business, including a
reinsurance business, specifically
recognized as constituting the doing of
an insurance business within the
meaning of this Code;
(d) doing or proposing to do any business in
substance equivalent to any of the
foregoing in a manner designed to
evade the provisions of this Code.
The test to determine if a contract is an insurance
contract or not, depends on the nature of the
promise, the act required to be performed, and the
exact nature of the agreement in the light of the
occurrence, contingency, or circumstances under
which the performance becomes requisite. It is not
by what it is called. In particular, a marine insurance
undertakes to indemnify the assured against marine
losses, such as the losses incident to a marine
adventure. Section 99[16] of the Insurance Code
enumerates the coverage of marine insurance.
Relatedly, a mutual insurance company is
a cooperative enterprise where the members are
both the insurer and insured. In it, the members all
contribute, by a system of premiums or
losses and liabilities are paid, and where the profits
are divided among themselves, in proportion to their
interest.[17]
Additionally, mutual insurance
associations, or clubs, provide three types of
coverage, namely, protection and indemnity, war
risks, and defense costs.
A P & I Club is a form of insurance against third party
liability, where the third party is anyone other than
the P & I Club and the members.[19] By definition
then, Steamship Mutual as a P & I Club is a mutual
insurance association engaged in the marine
insurance business.
The records reveal Steamship Mutual is
doing business in the country albeit without the
requisite certificate of authority mandated by Section
187[20] of the Insurance Code. It maintains a
resident agent in the Philippines to solicit insurance
and to collect payments in its behalf. We note that
Steamship Mutual even renewed its P & I Club cover
until it was cancelled due to non-payment of the
calls. Thus, to continue doing business here,
Steamship Mutual or through its agent Pioneer, must
secure a license from the Insurance Commission.
Since a contract of insurance involves public interest,
regulation by the State is necessary.
Thus, no insurer or insurance company is
allowed to engage in the insurance business without
a license or a certificate of authority from the
Insurance Commission.
For the second issue, the court ruled that
although Pioneer is already licensed as an insurance
company, it needs a separate license to act as
insurance agent for Steamship Mutual. Section 299
of the Insurance Code clearly states:
SEC. 299 . . .
No person shall act as an insurance agent or as an
insurance broker in the solicitation or procurement of
applications for insurance, or receive for services in
obtaining insurance, any commission or other
compensation from any insurance company doing
business in the Philippines or any agent thereof,
without first procuring a license so to act from the
Commissioner, which must be renewed annually on
the first day of January, or within six months
thereafter. . .
2. VERENDIA VS. COURT OF
APPEALS [GR 76399, 22 JANUARY
1993]; ALSO FIDELITY & SURETY
CO. OF THE PHILIPPINES INC. VS.
VERENDIA [GR 75605]
Third Division, Melo (J): 4 concur
Facts: Fidelity and Surety Insurance Company of
the Philippines issued its Fire Insurance Policy F-
18876 effective between 23 June 1980 and 23 June
1981 covering Rafael (Rex) Verendia's residential
building located at Tulip Drive, Beverly Hills, Antipolo,
Rizal in the amount of P385,000.00. Designated as
beneficiary was the Monte de Piedad & Savings
Bank. Verendia also insured the same building with
two other companies, namely, The Country Bankers
Insurance for P56,000.00 under Policy No. PDB-80-
1913 expiring on 12 May 1981, and The
Development Insurance for P400,000.00 under
Policy F-48867 expiring on 30 June 1981. While the
three fire insurance policies were in force, the
insured property was completely destroyed by fire on
the early morning of 28 December 1980. Fidelity was
accordingly informed of the loss and despite
demands, refused payment under its policy, thus
prompting Verendia to file a complaint with the then
Court of First Instance of Quezon City, praying for
payment of P385,000.00, legal interest thereon, plus
attorney's fees and litigation expenses. The
complaint was later amended to include Monte de
Piedad as an "unwilling defendant." Answering the
complaint, Fidelity, among other things, averred that
the policy was avoided by reason of over-insurance,
that Verendia maliciously represented that the
building at the time of the fire was leased under a
contract executed on 25 June 1980 to a certain
Roberto Garcia, when actually it was a Marcelo
Garcia who was the lessee. On 24 May 1983, the
trial court rendered a decision, per Judge Rodolfo A.
Ortiz, ruling in favor of Fidelity. In sustaining the
defenses set up by Fidelity, the trial court ruled that
Paragraph 3 of the policy was also violated by
Verendia in that the insured failed to inform Fidelity
of his other insurance coverages with Country
Bankers Insurance and Development Insurance.
Verendia appealed to the then Intermediate
Appellate Court and in a decision promulgated on 31
March 1986, (CA-GR CV 02895, Coquia, Zosa,
Bartolome, and Ejercito (P), JJ.), the appellate court
reversed for the following reasons: (a) there was no
misrepresentation concerning the lease for the
contract was signed by Marcelo Garcia in the name
of Roberto Garcia; and (b) Paragraph 3 of the policy
contract requiring Verendia to give notice to Fidelity
of other contracts of insurance was waived by
Fidelity as shown by its conduct in attempting to
settle the claim of Verendia. Fidelity received a copy
of the appellate court's decision on 4 April 1986, but
instead of directly filing a motion for reconsideration
within 15 days therefrom, Fidelity filed on 21 April
1986, a motion for extension of 3 days within which
to file a motion for reconsideration. The motion for
extension was not filed on 19 April 1986 which was
the 15th day after receipt of the decision because
said 15th day was a Saturday and of course, the
following day was a Sunday. The motion for
extension was granted by the appellate court on 30
April 1986, but Fidelity had in the meantime filed its
motion for reconsideration on 24 April 1986.
Verendia filed a motion to expunge from the record
Fidelity's motion for reconsideration on the ground
that the motion for extension was filed out of time
because the 15th day from receipt of the decision
which fell on a Saturday was ignored by Fidelity, for
indeed, so Verendia contended, the Intermediate
Appellate Court has personnel receiving pleadings
even on Saturdays. The motion to expunge was
denied on 17 June 1986 and after a motion for
reconsideration was similarly brushed aside on 22
July 1986, a petition (GR 75605) was initiated.
Subsequently, or more specifically on 21 October
1986, the appellate court denied Fidelity's motion for
reconsideration and account thereof. Fidelity filed on
31 March 1986, the petition for review on certiorari
(GR 76399). The two petitions, inter-related as they
are, were consolidated and thereafter given due
course.
Issue: Whether Verandia forfeited all benefits due to
his presentation of a false declaration to support his
claim.
Held: The contract of lease upon which Verendia
relies to support his claim for insurance benefits, was
entered into between him and one Robert Garcia,
married to Helen Cawinian, on 25 June 1980, a
couple of days after the effectivity of the insurance
policy. When the rented residential building was
razed to the ground on 28 December 1980, it
appears that Robert Garcia (or Roberto Garcia) was
still within the premises. However, according to the
investigation report prepared by Pat. Eleuterio M.
Buenviaje of the Antipolo police, the building
appeared to have "no occupant" and that Mr.
Roberto Garcia was "renting on the otherside (sic)
portion of said compound.". These pieces of
evidence belie Verendia's uncorroborated testimony
that Marcelo Garcia whom he considered as the real
lessee, was occupying the building when it was
burned. Robert Garcia disappeared after the fire. It
was only on 9 October 1981 that an adjuster was
able to locate him. Robert Garcia then executed an
affidavit before the National Intelligence and Security
Authority (NISA) to the effect that he was not the
lessee of Verendia's house and that his signature on
the contract of lease was a complete forgery. Thus,
on the strength of these facts, the adjuster submitted
a report dated 4 December 1981 recommending the
denial of Verendia's claim. Ironically, during the trial,
Verendia admitted that it was not Robert Garcia who
signed the lease contract. According to Verendia, it
was signed by Marcelo Garcia cousin of Robert, who
had been paying the rentals all the while. Verendia,
however, failed to explain why Marcelo had to sign
his cousin's name when he in fact was paying for the
rent and why Verendia himself, the lessor, allowed
such a ruse. Fidelity's conclusions on these proven
facts appear, therefore, to have sufficient bases:
Verendia concocted the lease contract to deflect
responsibility for the fire towards an alleged "lessee",
inflated the value of the property by the alleged
monthly rental of P6,500 when in fact, the Provincial
Assessor of Rizal had assessed the property's fair
market value to be only P40,300.00, insured the
same property with two other insurance companies
for a total coverage of around P900,000, and created
a dead-end for the adjuster by the disappearance of
Robert Garcia. Basically a contract of indemnity, an
insurance contract is the law between the parties. Its
terms and conditions constitute the measure of the
insurer's liability and compliance therewith is a
condition precedent to the insured's right to recovery
from the insurer. As it is also a contract of adhesion,
an insurance contract should be liberally construed in
favor of the insured and strictly against the insurer
company which usually prepares it. Considering,
however, the foregoing discussion pointing to the fact
that Verendia used a false lease contract to support
his claim under Fire Insurance Policy F-18876, the
terms of the policy should be strictly construed
against the insured. Verendia failed to live by the
terms of the policy, specifically Section 13 thereof
which is expressed in terms that are clear and
unambiguous, that all benefits under the policy shall
be forfeited "if the claim be in any respect fraudulent,
or if any false declaration be made or used in support
thereof, or if any fraudulent means or devises are
used by the Insured or anyone acting in his behalf to
obtain any benefit under the policy". Verendia,
having presented a false declaration to support his
claim for benefits in the form of a fraudulent lease
contract, he forfeited all benefits therein by virtue of
Section 13 of the policy in the absence of proof that
Fidelity waived such provision. Worse yet, by
presenting a false lease contract, Verendia
reprehensibly disregarded the principle that
insurance contracts are uberrimae fidae and demand
the most abundant good faith.
3. PHILAMCARE HEALTH
SYSTEMS INC. VS. COURT OF
APPEALS [GR 125678, 18
MARCH 2002]
First Division, Ynares-Santiago (J): 3 concur
Facts: Ernani Trinos, deceased husband of Julita
Trinos, applied for a health care coverage with
Philamcare Health Systems, Inc. In the standard
application form, he answered no to the following
question: "Have you or any of your family members
ever consulted or been treated for high blood
pressure, heart trouble, diabetes, cancer, liver
disease, asthma or peptic ulcer? (If Yes, give
details). " The application was approved for a period
of one year from 1 March 1988 to 1 March 1989.
Accordingly, he was issued Health Care Agreement
P010194. Under the agreement, Trinos' husband
was entitled to avail of hospitalization benefits,
whether ordinary or emergency, listed therein. He
was also entitled to avail of "out-patient benefits"
such as annual physical examinations, preventive
health care and other out-patient services. Upon the
termination of the agreement, the same was
extended for another year from 1 March 1989 to 1
March 1990, then from 1 March 1990 to 1 June
1990. The amount of coverage was increased to a
maximum sum of P75,000.00 per disability. During
the period of his coverage, Ernani suffered a heart
attack and was confined at the Manila Medical
Center (MMC) for one month beginning 9 March
1990. While her husband was in the hospital, Trinos
tried to claim the benefits under the health care
agreement. However, Philamcare denied her claim
saying that the Health Care Agreement was void.
According to Philamcare, there was a concealment
regarding Ernani's medical history. Doctors at the
MMC allegedly discovered at the time of Ernani's
confinement that he was hypertensive, diabetic and
asthmatic, contrary to his answer in the application
form. Thus, Trinos paid the hospitalization expenses
herself, amounting to about P76,000.00. After her
husband was discharged from the MMC, he was
attended by a physical therapist at home. Later, he
was admitted at the Chinese General Hospital. Due
to financial difficulties, however, Trinos brought her
husband home again. In the morning of 13 April
1990, Ernani had fever and was feeling very weak.
Trinos was constrained to bring him back to the
Chinese General Hospital where he died on the
same day. On 24 July 1990, Trinos instituted with the
Regional Trial Court of Manila, Branch 44, an action
for damages against Philamcare and its president,
Dr. Benito Reverente (Civil Case 90 53795). She
asked for reimbursement of her expenses plus moral
damages and attorney's fees. After trial, the lower
court ruled against Philamcare and Reverente,
ordering them to pay and reimburse the medical and
hospital coverage of the late Ernani Trinos in the
amount of P76,000.00 plus interest, until the amount
is fully paid to plaintiff who paid the same; the
reduced amount of moral damages of P10,000.00 to
Trinos; the reduced amount of P10,000.00 as
exemplary damages to Trinos; and the attorney's
fees of P20,000.00, plus costs of suit. On appeal, the
Court of Appeals affirmed the decision of the trial
court but deleted all awards for damages and
absolved Reverente. Philamcare's motion for
reconsideration was denied. Hence, Philamcare
brought the petition for review, raising the primary
argument that a health care agreement is not an
insurance contract; hence the "incontestability
clause" under the Insurance Code does not apply.
Issue [1]: Whether a health care agreement
between Philamcare and Ernani Trinos is an
insurance contract.
Held [1]: YES. Section 2 (1) of the Insurance Code
defines a contract of insurance as an agreement
whereby one undertakes for a consideration to
indemnify another against loss, damage or liability
arising from an unknown or contingent event. An
insurance contract exists where the following
elements concur: (1) The insured has an insurable
interest; (2) The insured is subject to a risk of loss by
the happening of the designated peril; (3) The insurer
assumes the risk; (4) Such assumption of risk is part
of a general scheme to distribute actual losses
among a large group of persons bearing a similar
risk; and (5) In consideration of the insurer's promise,
the insured pays a premium. Section 3 of the
Insurance Code states that any contingent or
unknown event, whether past or future, which may
damnify a person having an insurable interest
against him, may be insured against. Every person
has an insurable interest in the life and health of
himself. Section 10 provides that "Every person has
an insurable interest in the life and health: (1) of
himself, of his spouse and of his children; (2) of any
person on whom he depends wholly or in part for
education or support, or in whom he has a pecuniary
interest; (3) of any person under a legal obligation to
him for the payment of money, respecting property or
service, of which death or illness might delay or
prevent the performance; and (4) of any person upon
whose life any estate or interest vested in him
depends." Herein, the insurable interest of Trinos'
husband in obtaining the health care agreement was
his own health. The health care agreement was in
the nature of non-life insurance, which is primarily a
contract of indemnity. Once the member incurs
hospital, medical or any other expense arising from
sickness, injury or other stipulated contingent, the
health care provider must pay for the same to the
extent agreed upon under the contract.
Issue [2]: Whether answers made in good faith,
where matters of opinion or judgment are called for,
without intent to deceive will avoid a policy when they
were untrue.
Held [2]: NO. Where matters of opinion or judgment
are called for, answers made in good faith and
without intent to deceive will not avoid a policy even
though they are untrue. Thus, although false, a
representation of the expectation, intention, belief,
opinion, or judgment of the insured will not avoid the
policy if there is no actual fraud in inducing the
acceptance of the risk, or its acceptance at a lower
rate of premium, and this is likewise the rule although
the statement is material to the risk, if the statement
is obviously of the foregoing character, since in such
case the insurer is not justified in relying upon such
statement, but is obligated to make further inquiry.
There is a clear distinction between such a case and
one in which the insured is fraudulently and
intentionally states to be true, as a matter of
expectation or belief, that which he then knows, to be
actually untrue, or the impossibility of which is shown
by the facts within his knowledge, since in such case
the intent to deceive the insurer is obvious and
amounts to actual fraud. The fraudulent intent on the
part of the insured must be established to warrant
rescission of the insurance contract. Concealment as
a defense for the health care provider or insurer to
avoid liability is an affirmative defense and the duty
to establish such defense by satisfactory and
convincing evidence rests upon the provider or
insurer. In any case, with or without the authority to
investigate, Philamcare is liable for claims made
under the contract. Having assumed a responsibility
under the agreement, Philamcare is bound to answer
the same to the extent agreed upon. In the end, the
liability of the health care provider attaches once the
member is hospitalized for the disease or injury
covered by the agreement or whenever he avails of
the covered benefits which he has prepaid.
Issue [3]: Whether rescission must be exercised
before commencement of an action on the contract.
Held [3]: YES. Under Section 27 of the Insurance
Code, "a concealment entitles the injured party to
rescind a contract of insurance." The right to rescind
should be exercised previous to the commencement
of an action on the contract. Herein, no rescission
was made. Besides, the cancellation of health care
agreements as in insurance policies require the
concurrence of the following conditions: (1) Prior
notice of cancellation to insured; (2) Notice must be
based on the occurrence after effective date of the
policy of one or more of the grounds mentioned; (3)
Must be in writing, mailed or delivered to the insured
at the address shown in the policy; (4) Must state the
grounds relied upon provided in Section 64 of the
Insurance Code and upon request of insured, to
furnish facts on which cancellation is based. None of
the above pre-conditions was fulfilled in this case.
When the terms of insurance contract contain
limitations on liability, courts should construe them in
such a way as to preclude the insurer from non-
compliance with his obligation. Being a contract of
adhesion, the terms of an insurance contract are to
be construed strictly against the party which
prepared the contract — the insurer. By reason of
the exclusive control of the insurance company over
the terms and phraseology of the insurance contract,
ambiguity must be strictly interpreted against the
insurer and liberally in favor of the insured, especially
to avoid forfeiture. This is equally applicable to
Health Care Agreements.
Issue [4]: Whether the membership of the late
Trinos is now incontestable.
Held [4]: YES. Under the title Claim procedures of
expenses, Philamcare had twelve months from the
date of issuance of the Agreement within which to
contest the membership of the patient if he had
previous ailment of asthma, and six months from the
issuance of the agreement if the patient was sick of
diabetes or hypertension. The periods having
expired, the defense of concealment or
misrepresentation no longer lie.
4. Fortune Insurance and Surety
Co. Inc. vs. Court of Appeals [GR
115278, 23 May 1995]
First Division, Davide Jr (J): 2 concur, 1 took no part,
1 on leave
Facts:
Producers Bank of the Philippines was insured by
the Fortune Insurance and Surety Co. Inc. and an
insurance policy was issued. An armored car of
Producers, while in the process of transferring cash
in the sum of P725,000.00 under the custody of its
teller, Maribeth Alampay, from its Pasay Branch to its
Head Office at 8737 Paseo de Roxas, Makati, Metro
Manila on 29 June 1987, was robbed of the said
cash. The robbery took place while the armored car
was traveling along Taft Avenue in Pasay City. The
said armored car was driven by Benjamin Magalong
y de Vera, escorted by Security Guard Saturnino
Atiga y Rosete. Driver Magalong was assigned by
PRC Management Systems with Producers by virtue
of an Agreement executed on 7 August 1983. The
Security Guard Atiga was assigned by Unicorn
Security Services, Inc. with Producers by virtue of a
contract of Security Service executed on 25 October
1982. After an investigation conducted by the Pasay
police authorities, the driver Magalong and guard
Atiga were charged, together with Edelmer Bantigue
Y Eulalio, Reynaldo Aquino and John Doe, with
violation of PD 532 (Anti-Highway Robbery Law)
before the Fiscal of Pasay City. The Fiscal of Pasay
City then filed an information charging the aforesaid
persons with the said crime before Branch 112 of the
Regional Trial Court of Pasay City. The case is still
being tried as of the date of filing of the present case.
Demands were made by Producers upon Fortune to
pay the amount of the loss of P725,000.00, but the
latter refused to pay as the loss is excluded from the
coverage of the insurance policy, specifically under
page 1 thereof, "General Exceptions" Section (b),
and which reads as follows: "GENERAL
EXCEPTIONS The company shall not be liable under
this policy in respect of xxx (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..."
Producers opposed the contention of Fortune and
contended that Atiga and Magalong are not its
"officer, employee, trustee or authorized
representative at the time of the robbery. On 26 April
1990, the trial court rendered its decision in favor of
Producers. It ordered Fortune to pay Producers the
net amount of P540,000.00 as liability under Policy
0207 (as mitigated by the P40,000.00 special clause
deduction and by the recovered sum of
P145,000.00), with interest thereon at the legal rate,
until fully paid; the sum of P30,000.00 as and for
attorney's fees; and to pay the costs of suit. Fortune
appealed this decision to the Court of Appeals (CA-
GR CV 32946). In its decision promulgated on 3 May
1994, it affirmed in toto the appealed decision. On 20
June 1994, Fortune filed the petition for review on
certiorari.
Issue: Whether Fortune is liable under the Money,
Security, and Payroll Robbery policy it issued to the
issued to Producers or whether recovery thereunder
is precluded under the general exceptions clause
thereof.
Held:
It should be noted that the insurance policy entered
into by the parties is a theft or robbery insurance
policy which is a form of casualty insurance. Section
174 of the Insurance Code provides that "Casualty
insurance is insurance covering loss or liability
arising from accident or mishap, excluding certain
types of loss which by law or custom are considered
as falling exclusively within the scope of insurance
such as fire or marine. It includes, but is not limited
to, employer's liability insurance, public liability
insurance, motor vehicle liability insurance, plate
glass insurance, burglary and theft insurance,
personal accident and health insurance as written by
non-life insurance companies, and other substantially
similar kinds of insurance." Except with respect to
compulsory motor vehicle liability insurance, the
Insurance Code contains no other provisions
applicable to casualty insurance or to robbery
insurance in particular. These contracts are,
therefore, governed by the general provisions
applicable to all types of insurance. Outside of these,
the rights and obligations of the parties must be
determined by the terms of their contract, taking into
consideration its purpose and always in accordance
with the general principles of insurance law. 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. 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.
Limitations of liability should be regarded with
extreme jealousy and must be construed in such a
way as to preclude the insurer from non-compliance
with its obligation. It goes without saying then that if
the terms of the contract are clear and unambiguous,
there is no room construction and such terms cannot
be enlarged or diminished by judicial construction.
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. Insofar as Fortune is
concerned, it was its intention to exclude and exempt
from protection and coverage losses arising from
dishonest, fraudulent, or criminal acts of persons
granted or having unrestricted access to Producers'
money or payroll. When it used then the term
"employee," it must have had in mind any person
who qualifies as such as generally and universally
understood, or jurisprudentially established in the
light of the four standards in the determination of the
employer-employee relationship, or as statutorily
declared even in a limited sense as in the case of
Article 106 of the Labor Code which considers the
employees under a "labor- only" contract as
employees of the party employing them and not of
the party who supplied them to the employer. Still,
howsoever viewed, Producers entrusted the three
with the specific duty to safely transfer the money to
its head office, with Alampay to be responsible for its
custody in transit; Magalong to drive the armored
vehicle which would carry the money; and Atiga to
provide the needed security for the money, the
vehicle, and his two other companions. In short, for
these particular tasks, the three acted as agents of
Producers. A "representative" is defined as one who
represents or stands in the place of another; one
who represents others or another in a special
capacity, as an agent, and is interchangeable with
"agent." In view of the foregoing, Fortune is exempt
from liability under the general exceptions clause of
the insurance policy.
5. INSURANCE CASE DIGEST:
GULF RESORTS INC. V.
  An insurance premium is the consideration
PHILIPPINE CHARTER
paid an insurer for undertaking to indemnify the

INSURANCE CORP. (2005) insured against a specified peril.

 In the subject policy, no premium

payments were made with regard to earthquake

G.R. No. 156167  May 16, 2005
shock coverage, except on the two swimming

pools.  
Lessons Applicable: Stipulations Cannot Be

Segregated (Insurance)

FACTS:
 Gulf Resorts, Inc at Agoo, La Union was 6. MANILA MAHOGANY V.
insured with American Home Assurance
COURT OF APPEALS (G.R. NO.
Company which includes loss or damage to

shock to any of the property insured by this L-52756, 12 OCTOBER 1987, 154
Policy occasioned by or through or in
SCRA 650)
consequence of earthquake 

 July 16, 1990: an earthquake struck

FACTS:
Central Luzon and Northern Luzon so the

properties and 2 swimming pools in its Agoo
Playa Resort were damaged
 August 23, 1990: Gulf's claim was denied
on the ground that its insurance policy only
afforded earthquake shock coverage to the two
swimming pools of the resort
 Petitioner contends
pursuant to this rider, no qualifications were
placed on the scope of the earthquake shock
coverage.  Thus, the policy
earthquake shock coverage to all of the insured
properties.
Petitioner insured its Mercedes Benz 4-door sedan
with respondent insurance company . The insured
vehicle was bumped and damaged by a truck owned
by San Miguel Corporation (SMC). For the damage
caused, respondent company paid petitioner ₱
5,000.00 in amicable settlement. Petitioner’s general
manager executed a Release of Claim, subrogating
respondent company to all its right to action against
San Miguel Corp. Respondent company wrote the
Insurer Adjusters, Inc. to demand reimbursements
from San Miguel Corporation of the amount it had
that paid petitioner. Insurer Adjusters, Inc. refused
reimbursement alleging that SMC had already paid
petitioner ₱ 4,500.00 for the damages to petitioner’s
motor vehicle, as evidenced by a cash voucher and
Release of Claim executed by the General Manager
extended of petitioner discharging SMC from “ all actions,
claims, demands the right of action that now exist or
hereafter develop arising out of or as a consequence
of the accident.

 RTC: Favored American Home Respondent demanded the ₱ 4,500.00 amount from
petitioner. Petitioner refused. Suit was filed for
- endorsement rider means that only the two recovery. City Court ordered petitioner to pay
respondent. CFI affirmed. CA affirmed with
swimming pools were insured against modification that petitioner was to pay respondent
the total amount of ₱ 5,000.00 it had received from
earthquake shock 
respondent.
 CA: affirmed RTC
Petitioner’s argument: Since the total damages were
valued at P9,486.43 and only ₱ 5,000.00 was
ISSUE: W/N Gulf can claim for its properties aside received by petitioner from respondent, petitioner
argues that it was entitled to go after SMC to claim
from the 2 swimming pools the additional which was eventually paid to it.

Respondent’s argument: No qualification to its right

HELD: YES. Affirmed. of subrogation.

 It is basic that all the provisions of the

ISSUE:
insurance policy should be examined and

interpreted in consonance with each other.
 All its parts are reflective of the
true intent of the parties.
Insurance Code
Section 2(1)
Contract of insurance as an agreement whereby one
undertakes for a consideration to indemnify another
against loss, damage or liability arising from an
unknown or contingent event
Whether or not the insured should pay the insurer
despite that the subrogation in the Release of Claim
was conditioned on recovery of the total amount of
damages that the insured has sustained.
RULING:
NO. Supreme Court said there being no other
evidence to support its allegation that a gentleman’s
agreement existed between the parties, not
embodied in the Release of Claim, such Release of
Claim must be taken as the best evidence of the In the exercise of its subrogatory right, an insurer
intent and purpose of the parties. CA was correct in may proceed against an erring carrier and to all
holding petitioner should reimburse respondent ₱ intents and purposes, it stands in the place and in
5,000.00. substitution of the consignee.

When Manila Mahogany executed another release

claim discharging SMC from all rights of action after
the insurer had paid the proceeds of the policy – the
compromise agreement of ₱ 5,000.00– the insurer is
entitled to recover from the insured the amount of
insurance money paid. Petitioner by its own acts
8. INSURANCE CASE DIGEST:
released SMC, thereby defeating respondent’s right
of subrogation, the right of action against the insurer ETERNAL GARDENS MEMORIAL
was also nullified.

Since the insurer can be subrogated to only such PARK CORP. V. PHILIPPINE
rights as the insured may have, should the insured,
after receiving payment from the insurer, release the
wrongdoer who caused the loss, the insurer losses AMERICAN LIFE INSURANCE
his rights against the latter. But in such a case, the
insurer will be entitled to recover from the insured
whatever it has paid to the latter, unless the release CORP. (2008)
was made with the consent of the insurer.
G.R. No. 166245             April 9, 2008

Lessons Applicable:  Exception to Perfection

(Insurance)
7. FEDERAL EXPRESS
FACTS:
CORPORATION V. AMERICAN
 December 10, 1980: Philippine American
HOME ASSURANCE COMPANY Life Insurance Company (Philamlife) entered

into an agreement denominated as Creditor

G.R. No. 150094, 18 August 18 2004, 437 SCRA 50 Group Life Policy No. P-19202 with Eternal

FACTS: Gardens Memorial Park Corporation (Eternal)

 Under the policy (renewable

Shipper SMITHKLINE USA delivered to carrier
annually), the clients of Eternal who purchased
Burlington Air Express, an agent of herein petitioner,
a cargo shipment, insured with respondent which burial lots from it on installment basis would be
consist of 109 cartons of veterinary biological for
delivery to consignee SMITHKLINE and French insured by Philamlife
Overseas Company in Makati City with the words,
“REFRIGERATE WHEN NOT IN TRANSIT” and  amount of insurance
“PERISHABLE” stamp marked on its face. However,
12 days after the cargoes arrived in Manila, it was coverage depended upon the existing balance 
found out that the same were stored only in a room
 Eternal complied by submitting a letter
with 2 air conditioners running in the warehouse of
Cargohaus Inc., to cool the place instead of a dated December 29, 1982, a list of insurable
refrigerator.
balances of its lot buyers for October 1982
As a consequence of the result of the veterinary which includes John Chuang which was
biological test, SMITHKLINE abandoned the
shipment and, declaring “total loss” for the unusable stamped as received by Philam Life
shipment, filed a claim with AHAC through its
representative in the Philippines, The Philam  August 2, 1984, Chuang died with a
Insurance Co., Inc., (PHILAM) which recompensed
SMITHKLINE for the whole insured amount. balance of 100,000 php
Thereafter, PHILAM filed an action for damages  April 25, 1986: Philamlife had not furnished
against FEDEX imputing negligence on either or both
of them in the handling of the cargo where it was Eternal with any reply on its insurance claim so
decided that FEDEX is solidarily liable with
Cargohaus Inc. its demanded its claim

 According to Philam Life, since the

ISSUE:
application was submitted only on November
Whether or not FEDEX is liable for damage to or loss 15, 1984, after his death, Mr. John Uy Chuang
of the insured goods?
was not covered under the Policy since his
RULING: application was not approved.  Moreover, the

acceptance of the premiums are only in trust for

No. Upon receipt of the insurance proceeds, the
consignee (SMITHKLINE) executed a subrogation and not a sign of approval.
receipt in favor of respondents authorizing them “to
file claims and begin suit against any such carrier,  RTC: favored Eternal
person, vessel, corporation or government.”
Undeniably, the consignee had a legal right to  CA: Reversed RTC
receive the goods in the same condition it was ISSUE: W/N Philam's inaction or non-approval meant
delivered for transport to petitioner and if that right
was violated, the consignee would have a cause of the perfection of the insurance contract.
action against the person responsible therefor.
HELD: YES. CA reversed

 construed in favor of the insured and in

favor of the effectivity of the insurance contract

 Upon a party’s purchase of a memorial lot

on installment from Eternal, an insurance

contract covering the lot purchaser is created

and the same is effective, valid, and binding

until terminated by Philamlife by disapproving

the insurance application

 Moreover, the mere inaction of the insurer

on the insurance application must not work to

prejudice the insured

 The termination of the insurance contract

by the insurer must be explicit and

unambiguous