WEEK 2

1 Federal Express Corp. v. American Home Assurance Co.

(G.R. No. 150094)

2 Asian Terminals, Inc. v. First Lepanto-Taisho Insurance Corp.

(G.R. No. 185964)

3 Pan Malayan Insurance Co. v. Court of Appeals

(G.R. No. 77397)

4 Rizal Surety & Insurance Company v. Court of Appeals

(G.R. No. 112360)

5 Del Rosario v. Equitable Insurance & Casualty Co.

(G.R. No. L-16215)

6 American Home Assurance Company v.

Tantuco Enterprises, Inc.
(G.R. No. 138941)

7 Eternal Gardens Memorial Park v. Philamlife

(G.R. No. 166245)

8 White Gold Marine Services, Inc. v.

Pioneer Insurance and Surety Corp.
(G.R. No. 154514)
G.R. No. 150094 August 18, 2004
FEDERAL EXPRESS CORPORATION, petitioner, vs.
AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE
COMPANY, INC., respondents.

FACTS: On January 26, 1994, shipper SmithKline Beecham delivered to

carrier Burlington Air Express, an agent of petitioner FedEx, a cargo
shipment, insured with respondent which consist of 109 cartons of veterinary
biological for delivery to consignee SmithKline and French Overseas
Company in Makati City with the words, “REFRIGERATE WHEN NOT IN
TRANSIT” and “PERISHABLE” stamp marked on its face.

However, 12 days after the cargoes arrived in Manila, it was found out that
the same were stored only in a room with 2 air conditioners running in the
warehouse of Cargohaus Inc., to cool the place instead of a refrigerator.

As a consequence of the result of the veterinary biological test, SmithKline

abandoned the shipment and, declaring “total loss” for the unusable shipment,
filed a claim with American Home Assurance Company (AHAC) through
its representative in the Philippines, The PhilAm Insurance Co., Inc.,
(PhilAm) which recompensed SMITHKLINE for the whole insured amount.

Thereafter, PHILAM filed an action for damages against FedEx imputing

negligence on either or both of them in the handling of the cargo where it was
decided that FedEx is solidarily liable with Cargohaus Inc.

ISSUE: Whether or not FedEx is liable for damage to or loss of the insured
goods.

HELD: NO. Upon receipt of the insurance proceeds, the consignee

(SmithKline) executed a subrogation receipt in favor of respondents
authorizing them “to file claims and begin suit against any such carrier,
person, vessel, corporation or government.” Undeniably, the consignee had a
legal right to receive the goods in the same condition it was delivered for
transport to petitioner and if that right was violated, the consignee would have
a cause of action against the person responsible therefor.

In the exercise of its subrogatory right, an insurer may proceed against an

erring carrier and to all intents and purposes, it stands in the place and in
substitution of the consignee.
G.R. No. 185964 June 16, 2014
ASIAN TERMINALS, INC., Petitioner, vs.
FIRST LEPANTO-TAISHO INSURANCE CORPORATION, Respondent.

FACTS: On July 6, 1996,3 3,000 bags of sodium tripolyphosphate contained

in 100 plain jumbo bags complete and in good condition were loaded and
received on board MV Da Feng owned by China Ocean Shipping Co.
(COSCO) in favor of consignee, Grand Asian Sales, Inc. (GASI).

The shipment remained for quite some time at storage area of Asian
Terminals, Inc. (ATI) until it was withdrawn by broker, Proven Customs
Brokerage Corporation (PROVEN), on for delivery to the consignee.

Upon receipt of the shipment, it was found out that the delivered goods
incurred shortages and spillage for a loss/damage valued at Php 166,772.41.

GASI sought recompense from COSCO, thru its Philippine agent SMITH
BELL, ATI and PROVEN but was denied. Hence, it pursued indemnification
from the shipment’s insurer, FIRST LEPANTO.

As subrogee, FIRST LEPANTO demanded from COSCO, its shipping agency

in the Philippines, SMITH BELL, PROVEN and ATI, reimbursement of the
amount it paid to GASI. ATI and PROVEN denied liability for the
lost/damaged shipment and claimed that it exercised due diligence and care
in handling the same.

ISSUE: Whether or not the non-presentation of an insurance contract will bar

a subrogee from collecting reimbursement.

HELD: NO. Non-presentation of the insurance contract is not fatal to FIRST

LEPANTO’s cause of action for reimbursement as subrogee.

Subrogation is the substitution of one person in the place of another with

reference to a lawful claim or right, so that he who is substituted succeeds to
the rights of the other in relation to a debt or claim, including its remedies or
securities.

In this case, the Court observed that it is obvious from the records that ATI
put in issue the submission of the insurance contract for the first time before
the appellate court. Despite opportunity to study FIRST LEPANTO’s
complaint before the trial court, ATI failed to allege in its answer the
necessity of the insurance contract. Neither was the same considered during
pre-trial as one of the decisive matters in the case.
Further, ATI never challenged the materiality of the Certificate of Insurance
presented by FIRST LEPANTO as evidence during trial as proof of its right to
be subrogated in the consignee’s stead. Since it was not agreed during the
pre-trial proceedings that FIRST LEPANTO will have to prove its subrogation
rights by presenting a copy of the insurance contract, ATI is barred from
pleading the absence of such contract in its appeal.

It is imperative for the parties to disclose during pre-trial all issues they intend
to raise during the trial because, they are bound by the delimitation of such
issues. The determination of issues during the pre-trial conference bars the
consideration of other questions, whether during trial or on appeal.
G.R. No. 81026 April 3, 1990
PAN MALAYAN INSURANCE CORPORATION, petitioner, vs.
COURT OF APPEALS, ERLINDA FABIE AND HER UNKNOWN
DRIVER, respondents.

FACTS: Petitioner Pan Malayan Insurance Company (PANMALAY) filed a

complaint for damages with the RTC of Makati against private respondents
Erlinda Fabie and her driver.

PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car
and registered in the name of Canlubang Automotive Resources
Corporation (CANLUBANG). Due to the carelessness, recklessness, and
imprudence of the unknown driver of a pick-up, the insured car was hit and
suffered damages in the amount of Php 42,052.00.

PANMALAY paid the cost of repair of the insured car, and therefore was
subrogated to the rights of Canlubang against the driver of the pick-up and
his employer, Erlinda Fabie.

Despite repeated demands, defendants, herein respondents, failed and

refused to pay the claim of PANMALAY. Herein respondents alleged that
PANMALAY had no cause of action against them because payment under the
“own damage” clause of the insurance policy precluded subrogation under
Article 2207 of the Civil Code, since indemnification thereunder was made on
the assumption that there was no wrongdoer or no third party at fault. The
trial court dismissed the case for no cause of action and denied its motion for
reconsideration. The appellate court affirmed the trial court’s decision.

ISSUE:
Whether or not the insurer may recover the amount it had paid its assured in
settlement of an insurance claim against private respondents.

HELD: YES. The Court affirmed the contention of PANMALAY that its cause
of action against private respondents was anchored upon Article 2207 of the
Civil Code:

If the plaintiffs property has been insured, and he has received

indemnity from the insurance company for the injury or loss arising out
of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract…

If the insured property is destroyed or damaged through the fault or

negligence of a party other than the assured, then the insurer, upon payment
to the assured, will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operates as an equitable assignment
to the former of all remedies, which the latter may have against the third party
whose negligence or wrongful act caused the loss.

The right of subrogation is not dependent upon, nor does it grow out of any
privity of contract or upon written assignment of claim. It accrues simply upon
payment of the insurance claim by the insurer.
G.R. No. 112360 July 18, 2000
RIZAL SURETY & INSURANCE COMPANY, petitioner, vs.
COURT OF APPEALS and TRANSWORLD KNITTING MILLS,
INC., respondents.

FACTS: On March 13, 1980, Rizal Surety & Insurance Company (Rizal
Insurance) issued a 1-million-peso (Php 1,000,000.00) fire insurance policy
with Transworld Knitting Mills, Inc. (Transworld). This was increased to
Php 1,500,00.00.

On January 12, 1981, fire broke out in the compound of Transworld, razing
the middle portion of its four-span building and partly gutting the left and right
sections thereof. A two-storey building (behind said four-span building) where
fun and amusement machines and spare parts were stored, was also
destroyed by the fire.

Transworld filed its claims but to no avail. Hence, it brought a suit in court.
It aimed to make Rizal Insurance pay for almost Php 3,000,000.00 including
legal interest and damages.

Rizal Insurance claimed that the policy only covered damage on the four
span building and not the two storey building.

The trial court ruled in Transworld’s favor and ordered Rizal to pay actual
damages only. The court of appeals increased the damages. The appellate
court answered by modifying the imposition of interest.

Issue:
Whether or not Rizal Insurance is liable for loss of the two-storey building.

HELD: YES. The policy had clauses on the building coverage that read:

"contained and/or stored during the currency of this Policy in the

premises occupied by them forming part of the buildings situated within
own Compound"

"First, said properties must be contained and/or stored in the areas

occupied by Transworld and second, said areas must form part of the
building described in the policy xxx"
This generally means that the policy didn’t limit its coverage to what was
stored in the four-span building.

As to questions of fact, both the trial court and the Court of Appeals found
that the so called "annex " was not an annex building but an integral part of
the four-span building described in the policy and consequently, the machines
and spare parts stored were covered by the fire insurance.

A report said:

"Two-storey building constructed of partly timber and

partly concrete hollow blocks under galvanized iron roof which
is adjoining and intercommunicating with the repair of the first
right span of the lofty storey building and thence by
property fence wall."

"Art.1377. The interpretation of obscure words or stipulations in a

contract shall not favor the party who caused the obscurity"

The Court in Landicho vs. Government Service Insurance System, held that:

‘terms in an insurance policy, which are ambiguous, equivocal, or

uncertain are to be construed strictly and most strongly against the
insurer, and liberally in favor of the insured so as to effect
the dominant purpose of indemnity or payment to the insured.’

The issue of whether or not Transworld has an insurable interest in the fun
and amusement machines and spare parts, which entitles it to be indemnified
for the loss thereof, had been settled in another Court case.
G.R. No. L-16215 June 29, 1963
SIMEON DEL ROSARIO, plaintiff-appellee, vs.
THE EQUITABLE INSURANCE AND CASUALTY CO., INC., defendant-
appellant.

FACTS:On February 7, 1957, the defendant, Equitable Insurance and

Casualty Co., Inc. (Equitable), issued Personal Accident Policy No. 7136 on
the life of Francisco del Rosario, alias Paquito Bolero, son of herein plaintiff-
appellee, Simeon del Rosario, binding itself to pay the sum of Php 1,000.00
to Php 3,000.00, as indemnity for the death of the insured.

On February 24, 1957, the insured Francisco while on board the motor launch
"ISLAMA" together with 33 others, including his beneficiary in the Policy,
Remedios Jayme, were forced to jump off said launch on account of fire which
broke out on said vessel, resulting in the death of drowning, of the insured
and beneficiary.

The insurer, Equitable, agreed to pay Php 1,000.00 as the claim for an
accident. However, Simeon’s attorney contended that the amount should be
P1,500.00 under the provision of Section 2, part 1 of the policy, based on the
rule of pari materia as the death of the insured occurred under the
circumstances similar to that provided under the aforecited section.

The issue was resolved in the Insurance Commission, where it was held that
Section 1, under the provisions applied. (Php 1,000.00 as indemnity) The
lawyer still didn’t agree and instituted a suit.

The trail court held that the company had the discretion to pay from Php
1,000.00 to Php 3,00.000 for death by drowning since there was no fixed
amount for this type of death. The amended decision ordered the company to
pay Php 2,000.00.

ISSUE: Whether or not Equitable is liable to pay the additional Php 2,000.00.

HELD: YES. The interpretation of obscure stipulations in a contract should not

favor the party who cause the obscurity.

“it has been generally held that the "terms in an insurance policy, which
are ambiguous, equivocal or uncertain . . . are to be construed strictly
against, the insurer, and liberally in favor of the insured so as to effect
the dominant purpose of indemnity or payment to the insured, especially
where a forfeiture is involved," (29 Am. Jur. 181) and the reason for this
rule is that the "insured usually has no voice in the selection or
arrangement of the words employed and that the language of the
 contract is selected with great care and deliberation by expert and legal
advisers employed by, and acting exclusively in the interest of, the
insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et
al., G.R. No. L-8151, Dec. 16, 1955.”

. . . . Where two interpretations, equally fair, of languages used in an

insurance policy may be made, that which allows the greater indemnity
will prevail. (L'Engel v. Scotish Union & Nat. F. Ins. Co., 48 Fla. 82, 37
So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749).

Trial court ruling are well considered because they are supported by doctrines
on insurance resolving cases against the party who caused the ambiguity in
the wording of the contract’s terms. This was also due to the fact that the
insured didn’t have much of a say in formulating the contract.
G.R. No. 138941 October 8, 2001
AMERICAN HOME ASSURANCE COMPANY, petitioner, vs.
TANTUCO ENTERPRISES, INC., respondent.

FACTS: Respondent TANTUCO Enterprises, Inc. is engaged in the coconut

oil milling and refining industry. It owns two oil mills. Both are located at
factory compound at Iyam, Lucena City. It appears that respondent
commenced its business operations with only one oil mill. In 1988, it started
operating its second oil mill. The latter came to be commonly referred to as
the new oil mill.

The two oil mills were separately covered by fire insurance policies issued
by petitioner American Home Assurance Co., Philippine Branch.

The first oil mill was insured for three million pesos (Php 3,000,000.00)
under Policy No. 306-7432324-3 for the period March 1, 1991 to 1992.
The new oil mill was insured for six million pesos (P6,000,000.00) under
Policy No. 306-7432321-9 for the same term.

Official receipts indicating payment for the full amount of the premium were
issued by the petitioner's agent.

On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil mill.
American Home rejected the claim for the insurance proceeds on the ground
that no policy was issued by it covering the burned oil mill. It stated that the
new oil mill was under Building No. 15 while the insurance coverage extended
only to the oil mill under Building No. 5.

ISSUE: Whether or not the new oil mill is covered by the fire insurance policy

HELD: YES. In construing the words used descriptive of a building insured,

the greatest liberality is shown by the courts in giving effect to the insurance.
In view of the custom of insurance agents to examine buildings before writing
policies upon them, and since a mistake as to the identity and character of
the building is extremely unlikely, the courts are inclined to consider the policy
of insurance covers any building which the parties manifestly intended to
insure, however inaccurate the description may be.

Notwithstanding, therefore, the misdescription in the policy, it is beyond

dispute, to our mind, that what the parties manifestly intended to insure was
the new oil mill. This is obvious from the categorical statement embodied in
the policy, extending its protection:
 "On machineries and equipment with complete accessories usual to a
coconut oil mill including stocks of copra, copra cake and copra mills
whilst contained in the new oil mill building, situate (sic) at UNNO.
ALONG NATIONAL HIGH WAY, BO. IYAM, LUCENA CITY UNBLOCKED.''

If the parties really intended to protect the first oil mill, then there is no need
to specify it as new.

Indeed, it would be absurd to assume that the respondent would protect its
first oil mill for different amounts and leave uncovered its second one.

In a further attempt to avoid liability, petitioner claims that respondent

forfeited the renewal policy for its failure to pay the full amount of the
premium and breach of the Fire Extinguishing Appliances Warranty.
The amount of the premium stated on the face of the policy was P89,770.20.
From the admission of respondent's own witness, Mr. Borja, which the
petitioner cited, the former only paid it P75,147.00, leaving a difference of
P14,623.20. The deficiency, petitioner argues, suffices to invalidate the
policy, in accordance with Section 77 of the Insurance Code.

The Court of Appeals refused to consider this contention of the petitioner. It

held that this issue was raised for the first time on appeal, hence, beyond its
jurisdiction to resolve, pursuant to Rule 46, Section 18 of the Rules of Court.
G.R. No. 166245 April 9, 2008
ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner, vs.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondent.

FACTS: On December 10, 1980, respondent Philippine American Life

Insurance Company (Philamlife) entered into an agreement denominated
as Creditor Group Life Policy with petitioner Eternal Gardens Memorial Park
Corporation (Eternal).

Under the policy, the clients of Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife. The amount of insurance
coverage depended upon the existing balance of the purchased burial lots.

Eternal was required under the policy to submit to Philamlife a list of all new
lot purchasers, together with a copy of the application of each purchaser, and
the amounts of the respective unpaid balances of all insured lot purchasers.
Eternal complied by submitting a letter containing a list of insurable balances
of its lot buyers. One of those included in the list as “new business” was a
certain John Chuang. His balance of payments was Php 100,000.00. on
August 2, 1984, Chuang died.

Eternal sent a letter dated to Philamlife, which served as an insurance claim

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

After more than a year, Philamlife had not furnished Eternal with any reply
to the latter’s insurance claim. This prompted Eternal to demand from
Philamlife the payment of the claim for PhP 100,000. In response to Eternal’s
demand, Philamlife denied Eternal’s insurance claim in a letter a portion of
which reads:

The deceased was 59 years old when he entered into Contract #9558
and 9529 with Eternal Gardens Memorial Park in October 1982 for the
total maximum insurable amount of P100,000.00 each. No application
for Group Insurance was submitted in our office prior to his death
on August 2, 1984

Eternal filed a case with the RTC for a sum of money against Philamlife, which
decided in favor of Eternal, ordering Philamlife to pay the former 100K
representing the proceeds of the policy.
ISSUE: Whether or not Philamlife assumed the risk of loss without approving
the application

HELD: YES. As earlier stated, Philamlife and Eternal entered into an

agreement denominated as Creditor Group Life Policy No. P-1920 dated
December 10, 1980. In the policy, it is provided that:

EFFECTIVE DATE OF BENEFIT.

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

An examination of the above provision would show ambiguity between its two
sentences. The first sentence appears to state that the insurance coverage of
the clients of Eternal already became effective upon contracting a loan with
Eternal while the second sentence appears to require Philamlife to approve
the insurance contract before the same can become effective.

It must be remembered that an insurance contract is a contract of

adhesion which must be construed liberally in favor of the insured and
strictly against the insurer in order to safeguard the latter’s interest.
Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court held
that:

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.
G.R. No. 154514. July 28, 2005
WHITE GOLD MARINE SERVICES, INC., Petitioners, vs.
PIONEER INSURANCE AND SURETY CORPORATION AND THE
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA)
LTD., Respondents.

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)
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 thereafter filed a case of collection of sums of money for the

unpaid balance of the petitioner while the latter filed before the Insurance
Commissioner a case against Steamship for violating Sections 186 and 187 of
the Insurance Code, while Pioneer violated Sections 299, 300 and 301 in
relation to Sections 302 and 303, thereof.

The Insurance Commissioner dismissed the complaint and said that there
is no need for the Steamship to procure license because it was not engaged
in insurance business and was only a protection and indemnity club (P&I
Club). Likewise, it ruled that Pioneer need not secure another license as an
insurance agent and/or a broker of Steamship Mutual because it was not
engaged in insurance business and Pioneer already had a license hence
procurement of separate license as an insurance agent would only be
superfluous. The appellate court affirmed the decision of Insurance
Commissioner.

ISSUE:
Whether or not Steamship, a P&I Club, is engaged in the insurance business
in the Philippines.
Whether or not Pioneer needs a license as an insurance agent/broker for
Steamship.

HELD:
For the first issue, YES. 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 assessments, to the creation of a fund from which
all losses and liabilities are paid, and where the profits are divided among
themselves, in proportion to their interest. Additionally, mutual insurance
associations, or clubs, provide three types of coverage, namely, protection
and indemnity, war risks, and defense costs.

A P&I Club is a form of insurance against third party liability, where the third
party is anyone other than the P & I Club and the members. By definition then,
Steamship Mutual as a P & I Club is a mutual insurance association engaged
in the marine insurance business.

The records reveal Steamship Mutual is doing business in the country albeit
without the requisite certificate of authority mandated by Section 187 of the
Insurance Code. It maintains a resident agent in the Philippines to solicit
insurance and to collect payments in its behalf. We note that Steamship
Mutual even renewed its P & I Club cover until it was cancelled due to non-
payment of the calls. 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, YES. Pioneer needs a license as an insurance
agent/broker for Steamship.

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. . .