Juriprudence On Insurance Code of 2013

The Insurance Code of 2013
Del Rosario vs. Equitable Ins. and Casualty Co., Inc., 8 SCRA 343, June
29, 1963
Insurance; Indemnity; Ambiguity in terms and conditions of a life

accident policy resolved against Insurance.-
Where there is an ambiguity with respect to the terms and conditions of a
policy, the same will be resolved against the one responsible thereof.
Generally, the insured, has little, if any, participation in the preparation of
the policy, together with the drafting of its terms and conditions. The
interpretation of obscure stipulations in a contract should not favor the party
who caused the obscurity (Art. 1377, N.C.C.) which, in the case at bar, is
the insurance company.
Fieldmen's Insurance Co., Inc. vs. Vda. de Songco, 25 SCRA

70, September 23, 1968
1. Insurance; Nature of contract.-
To borrow once again from the language of the Qua Chee Gan opinion: "The
contract of insurance is one of perfect good faith (uberrima fides) not for the
insured alone, but equally so for the insurer; in fact, it is more so for the
latter, since its dominant bargaining position carries with it stricter
responsibility."
2. Insurance; Where insurer is estopped from disclaiming responsibility;
Case at bar.-
The insurer knew all along that the insured owned a private vehicle and not
a common carrier. Its agents even discounted the fears of the latter, not
once but twice, that his privately owned vehicle might not fall within the
terms of the common carrier insurance policy. Held: This is a case where the
doctrine of estoppel undeniably calls for application. It is now beyond
question that where inequitable conduct is shown by an insurance firm, it is
"estopped from enforcing forfeitures in its f avor, in order to forestall fraud
or imposition on the insured." After petitioner had led the insured to believe
that he could qualify under the common carrier liability insurance policy, and
to enter into contract of insurance paying the premiums due, it could not,
thereafter, in any litigation arising out of such representation, be permitted
to change its stand to the detriment of the heirs of the insured. As estoppel
is primarily based on the doctrine of good faith and the avoidance of harm
that will befall the innocent party due to its injurious reliance, the failure to
apply it in this case would result in a gross travesty of justice.
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3. Insurance; Ambiguities in contract; Against whom and how

interpreted.-
It is a well-known rule that ambiguities or obscurities must be strictly
interpreted against the party that caused them. This rigid application of the
rule on ambiguities has become necessary in view of current business
practices. The courts cannot ignore that nowadays monopolies, cartels and
concentration of capital, endowed with overwhelming economic power,
manage to impose upon parties dealing with them cunningly prepared
'agreements' that the weaker party may not change one whit, his
participation in the 'agreement' being reduced to the alternative to 'take it or
leave it' labelled since Raymond Saleilees 'contracts by adherence' (contrats
d'adhesion), in contrast to those entered into by parties bargaining on an
equal f ooting, such contracts (of which policies of insurance and
international bills of lading are prime example) obviously call for greater
strictness and vigilance on the part of the court of justice with a view to
protecting the weaker party from abuses and imposition, and prevent their
becoming traps for the unwary. (Citing Qua Chee Gan case).
Landicho vs. Government Service Insurance System, 44 SCRA 7, March

17, 1972
1. Obligations and Contracts; Insurance Law; Where words in an

insurance contract are ambiguous.-
Where the language used in an insurance contract or application is such as
to create ambiguity, the same should be resolved against the party
responsible therefor, i.e., the insurance company which prepared the
contract. This is particularly true in insurance policies where a forfeiture is
involved 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
experts and legal advisers employed by, and acting exclusively in the
interest of the insurance company.
2. Obligations and Contracts; Insurance Law; Ambiguity in GSIS
insurance policy application.-
A provision in the application for insurance with the GSIS states this
condition: “That my policy shall be made effective on the first day of the
month next following the month the first premium is paid; provided, that it
is not more than ninety (90) days before or after the date of the medical
examination, was conducted if required.” An employee of the Bureau of
Public Works died in an airplane crash and thereafter his heirs filed a claim
with the GSIS for double indemnity due under policy issued to him. It
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appears, however, that the Bureau had not remitted to the GSIS even a
single premium because the collecting officer of the Bureau was not advised
by the GSIS to make the required deduction pursuant to the provision in the
application for GSIS insurance which states: “That this application serves as
a letter of authority to the Collecting Officer of our Office thru the GSIS to
deduct from my salary the monthly premium in the amount of P33.36,
beginning the month of May, 1964, and every month thereafter until notice
of its discontinuance shall have been received from the System.” Another
condition in said application provides “That failure to deduct from my salary
the monthly premiums shall not make the policy lapse, however, the
premium account shall be considered as indebtedness which, I bind myself
to pay the System.” HELD: Although it may not be entirely farfetched, the
view of the GSIS, in its denial of the claim of the deceased heirs, that the
policy for insurance has not yet taken effect in view of the fact that no pre-
mium had as yet been paid, is not likely to be in accord with the
understanding of the many, if not most, government employees who obtain
on optional additional life insurance policy. As a consequence, the actual
receipt by them of their full pay—without any deduction for premiums on
their optional additional life insurance policies—may not impart to them the
warning—which, otherwise, it would necessarily convey—that said policy is
not, as yet, in force, for they are liable to believe “that failure to deduct”
from the salary of the insured—“the monthly premiums shall not”—in the
language of the application—“make the policy lapse” and that “the premiums
account shall be considered as indebtedness,” to be paid or deducted later,
because, after all, the so-called “payment” of premiums is nothing but a
“paper” or “accounting” process, whereby funds are merely transferred, not
physically, but constructively, from one office of the government to another.
The ambiguity created by the operation of those conditions stated in the
application for GSIS insurance applied to the case at bar should be
interpreted adversely against the GSIS.
3. Insurance Law; Where a government employee was paid GSIS
dividends.-
By paying dividends to the deceased whom the GSIS claims does not
possess an effective policy, the GSIS had impliedly induced the insured to
believe that his policy was in force. Had the insured had the slightest inkling
that it was not as yet effective for non-payment of the first premium, he
would have, in all probability, caused the same to be forthwith satisfied.
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New Life Enterprises vs. Court of Appeals, 207 SCRA 669, March 31,

1992
1. Insurance; Contracts; Insured is specifically required to disclose to the

insurer any other insurance and its particulars which he may have effected
on the same subject matter.-
The terms of the contract are clear and unambiguous. The insured is
specifically required to disclose to the insurer any other insurance and its
particulars which he may have effected on the same subject matter. The
knowledge of such insurance by the insurer’s agents, even assuming the
acquisition thereof by the former, is not the “notice” that would estop the
insurers from denying the claim. Besides, the so-called theory of imputed
knowledge, that is, knowledge of the agent is knowledge of the principal,
aside from being of dubious applicability here has likewise been roundly
refuted by respondent court whose factual findings we find acceptable.
2. Insurance; Contracts; Statutory Construction; When the words and
language of documents are clear and plain or readily understandable by an
ordinary reader thereof, there is absolutely no room for interpretation or
construction anymore.-
Furthermore, when the words and language of documents are clear and
plain or readily understandable by an ordinary reader thereof, there is
absolutely no room for interpretation or construction anymore. Courts are
not allowed to make contracts for the parties; rather, they will intervene
only when the terms of the policy are ambiguous, equivocal, or uncertain.
The parties must abide by the terms of the contract because such terms
constitute the measure of the insurer’s liability and compliance therewith is a
condition precedent to the insured’s right of recovery from the insurer.
3. Insurance; Contracts; Statutory Construction; A policy or contract of
insurance is to be construed liberally in favor of the insured and strictly
against the insurer company, yet contracts of insurance like other contracts
are to be construed according to the sense and meaning of the terms which
the parties themselves have used.-
While it is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured and strictly
against the insurer company, yet contracts of insurance, like other
contracts, are to be construed according to the sense and meaning of the
terms which the parties themselves have used. If such terms are clear and
unambiguous, they must be taken and understood in their plain, ordinary
and popular sense. Moreover, obligations arising from contracts have the
force of law between the contracting parties and should be complied with in
good faith.
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4. Insurance; Contracts; Statutory Construction; The conformity of the

insured to the terms of the policy is implied from his failure to express any
disagreement with what is provided for.-
Petitioners should be aware of the fact that a party is not relieved of the
duty to exercise the ordinary care and prudence that would be exacted in
relation to other contracts. The conformity of the insured to the terms of the
policy is implied from his failure to express any disagreement with what is
provided for.
Paramount Insurance Corporation vs. Japzon, 211 SCRA 879, July 29,

1992
1. Civil Procedure; Jurisdiction over person how acquired.-
Jurisdiction over the person of the defendant in civil cases is acquired either by his
voluntary appearance in court and his submission to its authority or by service of
summons. The service of summons is intended to give notice to the defendant or
respondent that an action has been commenced against it. The defendant or
respondent is thus put on guard as to the demands of the plaintiff or the petitioner.
2. Civil Procedure; Attorneys; Presumption that lawyer is authorized by party.-
It strains credulity that a counsel who has no personal interest in the case would
fight for and defend a case with persistence and vigor if he has not been authorized
or employed by the party concerned.
3. Civil Procedure; Estoppel; Party estopped from questioning jurisdiction.-
To the mind of the Court, the instant petition is filed merely to derail its execution.
It took Paramount almost six years to question the jurisdiction of the lower court.
Moreover, as earlier adverted to, the controverted Decision of August 30, 1983,
became final and executory on October 20, 1983. In any event, it is axiomatic that
there is no justification in law and in fact for the reopening of a case which has long
become final and which in fact was already executed on July 18, 1984. Time and
again, this Court has said that the doctrine of finality of judgment is grounded on
fundamental considerations of public policy and sound practice and at the risk of
occasional error, the judgments of courts must become final at some definite date
fixed by law.
4. Insurance; Terms of contract constitute measure of insurer’s liability.-
However, there is merit in petitioner’s contention that its liability is limited only to
P50,000.00 as expressed in Insurance Policy No. CV-3466 issued on February 23,
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1978. The said insurance policy clearly and categorically placed the petitioner’s
liability for all damages arising out of death or bodily injury sustained by one
person as a result of any one accident at P50,000.00. Said amount complied with
the minimum fixed by law then prevailing, Section 377 of Presidential Decree No.
6123 (which was retained by P.D. No. 1460, the Insurance Code of 1978), which
provided that the liability of land transportation vehicle operators for bodily injuries
sustained by a passenger arising out of the use of their vehicles shall not be less
than P12,000.00. Since the petitioner’s liability under the insurance contract is
neither less than P12,000.00 nor contrary to law, morals, good customs, public
order or public policy, said stipulation must be upheld as effective and binding
between the parties. Therefore, the terms of the contract constitute the measure of
the insurer’s liability.
Verendia vs. Court of Appeals, 217 SCRA 417, January 22, 1993
Remedial Law; Appeals; Appellate court’s findings of fact are conclusive upon the Court; Exception.—
The appellate court’s findings of fact are, therefore, conclusive upon this Court except in the follow-ing
cases: (1) when the conclusion is a finding grounded entirely on speculation, surmises, or conjectures;
(2) when the inference made is manifestly absurd, mistaken, or impossible; (3) when there is grave
abuse of discretion in the appreciation of facts; (4) when the judgment is premised on a
misapprehension of facts; (5) when the findings of fact are conflicting; and (6) when the Court of
Appeals in making its findings went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee.
Insurance Law; 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.—Basically a contract of indemnity, an
insurance contract is the law between the parties (Pacific Banking Corporation vs. Court of Appeals, 168
SCRA 1 [1988]). 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 (Oriental
Assurance Corporation vs. Court of Appeals, 200 SCRA 459 [1991], citing Perla Compania de Seguros, Inc.
vs. Court of Appeals, 185 SCRA 741 [1991]). 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. Verendia vs. Court of Appeals, 217 SCRA 417, G.R. No. 75605, G.R. No. 76399 January
22, 1993
First Quezon City Insurance Co., Inc. vs. Court of Appeals, 218 SCRA
525, February 08, 1993
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1. Insurance; Civil Law; Contracts; Trial Court's interpretation of the insurance

contract was the correct interpretation.-
The bus company may not recover from the insurance company (herein petitioner)
more than P12,000.00 per passenger killed or injured, or fifty thousand
(P50,000.00) pesos per accident even if under the judgment of the court, the erring
bus operator will have to pay more than P12,000.00 to each injured passenger.
'The trial court's interpretation of the insurance contract was the correct
interpretation.
Development Bank of the Philippines vs. Court of Appeals, 231 SCRA

370, March 21, 1994
1. Civil Law; Contracts; Insurance; Where there was no perfected contract of

insurance, DBP MRI Pool cannot be held liable on the contract that does not exist.-
Undisputably, the power to approve MRI applications is lodged with the DBP MRI
Pool. The pool, however, did not approve the application of Dans. There is also no
showing that it accepted the sum of P1,476.00, which DBP credited to its account
with full knowledge that it was payment for Dans’s premium. There was, as a
result, no perfected contract of insurance; hence, the DBP MRI Pool cannot be held
liable on a contract that does not exist.
2. Civil Law; Agency; Obligation of the Agent; Agent acting as such is not
personally liable unless he expressly binds himself or exceeds his authority.-
Under Article 1897 of the Civil Code of the Philippines, “the agent who acts as such
is not personally liable to the party with whom he contracts, unless he expressly
binds himself or exceeds the limits of his authority without giving such party
sufficient notice of his powers.”
3. Civil Law; Agency; Obligation of the Agent; Liability of the agent who
exceeds the scope of his authority depends upon whether the 3rd person is aware
of the limits of agent’s powers.-
The liability of an agent who exceeds the scope of his authority depends upon
whether the third person is aware of the limits of the agent’s powers. There is no
showing that Dans knew of the limitation on DBP’s authority to solicit applications
for MRI.
4. Civil Law; Agency; Obligation of the Agent; If the third person dealing with
an agent is unaware of the limits of the authority conferred by the principal on the
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agent and the third person has been deceived by the non-disclosure by the agent,
then the latter is liable for damages to him.-
If the third person dealing with an agent is unaware of the limits of the authority
conferred by the principal on the agent and he (third person) has been deceived by
the non-disclosure thereof by the agent, then the latter is liable for damages to him
(V Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines,
p. 422 [1992], citing Sentencia [Cuba] of September 25, 1907). The rule that the
agent is liable when he acts without authority is founded upon the supposition that
there has been some wrong or omission on his part either in misrepresenting, or in
affirming, or concealing the authority under which he assumes to act (Francisco, V.,
Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y. 70, 75). Inasmuch as the
non-disclosure of the limits of the agency carries with it the implication that a
deception was perpetrated on the unsuspecting client, the provisions of Articles 19,
20 and 21 of the Civil Code of the Philippines come into play.
5. Civil Law; Damages; One is entitled to an adequate compensation only for

such pecuniary loss suffered by him as he has duly proved.-
One is entitled to an adequate compensation only for such pecuniary loss suffered
by him as he has duly proved (Civil Code of the Philippines, Art. 2199). Damages,
to be recoverable, must not only be capable of proof, but must be actually proved
with a reasonable degree of certainty (Refractories Corporation v. Intermediate
Appellate Court, 176 SCRA 539 [1989]; Choa Tek Hee v. Philippine Publishing Co.,
34 Phil. 447 [1916]). Speculative damages are too remote to be included in an
accurate estimate of damages (Sun Life Assurance v. Rueda Hermanos, 37 Phil.
844 [1918]).
6. Civil Law; Damages; No proof of pecuniary loss is required in the assessment

of moral damages.-
While Dans is not entitled to compensatory damages, he is entitled to moral

damages. No proof of pecuniary loss is required in the assessment of said kind of
damages (Civil Code of the Philippines, Art. 2216). The same may be recovered in
acts referred to in Article 2219 of the Civil Code.
Rizal Surety & Insurance Company vs. Court of Appeals, 336 SCRA
12, July 18, 2000
1. Evidence; Appeals; The Supreme Court is mindful of the well-entrenched

doctrine that factual findings by the Court of Appeals are conclusive on the parties
and not reviewable by the Supreme Court.-
Page 8 of 38
The Court is mindful of the well-entrenched doctrine that factual findings by the
Court of Appeals are conclusive on the parties and not reviewable by this Court,
and the same carry even more weight when the Court of Appeals has affirmed the
findings of fact arrived at by the lower court.
2. Contracts; Insurance Law; Interpretation of Contracts; Terms in an

insurance policy, which are ambiguous, equivocal or uncertain are to be construed
strictly and most strongly against the insurer.-
Indeed, the stipulation as to the coverage of the fire insurance policy under
controversy has created a doubt regarding the portions of the building insured
thereby. Article 1377 of the New Civil Code provides: “Art. 1377. The interpretation
of obscure words or stipulations in a contract shall not favor the party who caused
the obscurity.” Conformably, it stands to reason that the doubt should be resolved
against the petitioner, Rizal Surety Insurance Company, whose lawyer or managers
drafted the fire insurance policy contract under scrutiny. Citing the aforecited
provision of law in point, the Court in Landicho vs. Government Service Insurance
System, ruled: “This is particularly true as regards insurance policies, in respect of
which it is settled that the ‘terms in an insurance policy, which are ambiguous,
equivocal, or uncertain x x x 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, especially where forfeiture is
involved’ (29 Am. Jur., 181), and the reason for this 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 experts and
legal advisers employed by, and acting exclusively in the interest of, the insurance
company.’ (44 C.J.S., p. 1174).”
3. Judgments; Res Judicata; The rule on conclusiveness of judgment, which

obtains under the premises, precludes the relitigation of a particular fact or issue in
another action between the same parties based on a different claim or cause of
action.-
The rule on conclusiveness of judgment, which obtains under the premises,

precludes the relitigation of a particular fact or issue in another action between the
same parties based on a different claim or cause of action, “x x x the judgment in
the prior action operates as estoppel only as to those matters in issue or points
controverted, upon the determination of which the finding or judgment was
rendered. In fine, the previous judgment is conclusive in the second case, only as
those matters actually and directly controverted and determined and not as to
matters merely involved therein.”
4. Judgments; Res Judicata; Where a party’s insurable interest in, and

compensability for the loss of certain articles had been adjudicated, settled and
sustained by the Court of Appeals and by the Supreme Court, the same can no
longer be relitigated and passed upon in another case.-
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The controversy at bar is on all fours with the aforecited case. Considering that
private respondent’s insurable interest in, and compensability for the loss of subject
fun and amusement machines and spare parts, had been adjudicated, settled and
sustained by the Court of Appeals in CA-G.R CV NO 28779, and by this Court in
G.R. No. L-111118, in a Resolution, dated February 2, 1994, the same can no
longer be relitigated and passed upon in the present case. Ineluctably, the
petitioner, Rizal Surety Insurance Company is bound by the ruling of the Court of
Appeals and of this Court that the private respondent has an insurable interest in
the aforesaid fun and amusement machines and spare parts; and should be
indemnified for the loss of the same.
Fil. Cía. de Seguros vs. Christern, Huenefeld & Co., Inc., 89 Phil. 54, May
25, 1951
1. CORPORATIONS J NATIONALITY OF PRIVATE CORPORATION; CONTROL

TEST.-
The nationality of a private corporation is determined by the character or

citizenship of its controlling stockholders.
2. CORPORATIONS J NATIONALITY OF PRIVATE

CORPORATION; INTERNATIONAL LAW; EFFECT OF WAR.-
Where majority of the stockholders of a corporation were German subjects, the

corporation became an enemy corporation upon the outbreak of the war between
the United States and Germany.
3. INSURANCE; TERMINATION OF POLICY OF PUBLIC ENEMY.-
As the Philippine Insurance Law (Act No. 2427, as amended), in its section 8,
provides that "anyone except a public enemy may be insured," an insurance policy
ceases to be allowable as soon as an insured becomes a public enemy.
4. INSURANCE; RETURN OF PREMIUMS UPON TERMINATION OF POLICY BY

REASON OF WAR.-
Where an insurance policy ceases to be effective by reason of war, which has made
the insured an enemy, the premiums paid for the period covered by the policy from
the date war is declared, should be returned.
Page 10 of 38
Geagonia vs. Court of Appeals, 241 SCRA 152, February 06, 1995
Remedial Law; Evidence; Petitioner's letter of reconsideration having been made an integral part of the
complaint has attained the status of a judicial admission and since its due execution and authenticity
was not denied by the other party, the petitioner is bound by it even if it were not introduced as an
independent evidence.—The second ground, which is based on the Court of Appeals' reliance on the
petitioner's letter of reconsideration of 18 January 1991, is without merit. The petitioner claims that the
said letter was not offered in evidence and thus should not have been considered in deciding the case.
However, as correctly pointed out by the Court of Appeals, a copy of this letter was attached to the
petitioner's complaint in I.C. Case No. 3340 as Annex "M" thereof and made an integral part of the
complaint. It has attained the status of a judicial admission and since its due execution and authenticity
was not denied by the other party, the petitioner is bound by it even if it were not introduced as an
independent evidence.
Same; Same; Appeals; The divergent findings of fact constitute an exception to the general rule that in
petitions for review under Rule 45, only questions of law are involved and findings of fact by the Court of
Appeals are conclusive and binding upon this Court.—As to the first issue, the Insurance Commission
found that the petitioner had no knowledge of the previous two policies. The Court of Appeals disagreed
and found otherwise in view of the explicit admission by the petitioner in his letter to the private
respondent of 18 January 1991, which was quoted in the challenged decision of the Court of Appeals.
These divergent findings of fact constitute an exception to the general rule that in petitions for review
under Rule 45, only questions of law are involved and findings of fact by the Court of Appeals are
conclusive and binding upon this Court.
Insurance; The incorporation of Condition 3 in the policy is allowed by Section 75 of the Insurance Code.
—Condition 3 of the private respondent's Policy No. F-14622 is a condition which is not proscribed by
law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code which provides that
"[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the
breach of an immaterial provision does not avoid the policy." Such a condition is a provision which
invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It
is commonly known as the additional or "other insurance" clause and has been upheld as valid and as a
warranty that no other insurance exists. Its violation would thus avoid the policy. However, in order to
constitute a violation, the other insurance must be upon the same subject matter, the same interest
therein, and the same risk.
Same; Same; Separate insurances covering different insurable interests may be obtained by the
mortgagor and the mortgagee.—As to a mortgaged property, the mortgagor and the mortgagee have
each an independent insurable interest therein and both interests may be covered by one policy, or
each may take out a separate policy covering his interest, either at the same or at separate times. The
mortgagor's insurable interest covers the full value of the mortgaged property, even though the
mortgage debt is equivalent to the full value of the property. The mortgagee's insurable interest is to
the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not
insuring the property but his interest or lien thereon. His insurable interest is prima facie the value
mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged
Page 11 of 38
property. Thus, separate insurances covering different insurable interests may be obtained by the
mortgagor and the mortgagee.
Same; A policy or insurance contract is to be interpreted liberally in favor of the insured and strictly
against the company.—It is a cardinal rule on insurance that a policy or insurance contract is to be
interpreted liberally in favor of the insured and strictly against the company, the reason being,
undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he
applied for insurance. It is also a cardinal principle of law that forfeitures are not favored and that any
construction which would result in the forfeiture of the policy benefits for the person claiming
thereunder, will be avoided, if it is possible to construe the policy in a manner which would permit
recovery, as, for example, by finding a waiver for such forfeiture.
Same; Double Insurance; A double insurance exists where the same person is insured by several insurers
separately in respect of the same subject and interest.—A double insurance exists where the same
person is insured by several insurers separately in respect of the same subject and interest. As earlier
stated, the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct
and separate. Since the two policies of the PFIC do not cover the same interest as that covered by the
policy of the private respondent, no double insurance exists. The non-disclosure then of the former
policies was not fatal to the petitioner's right to recover on the private respondent's policy.
Same; Same; The rationale behind the incorporation of "other insurance" clause in fire policies is to
prevent over-insurance and thus avert the perpetration of fraud.—Furthermore, by stating within
Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss
does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up
to a loss not exceeding P200,000.00. What it had in mind was to discourage overinsurance. Indeed, the
rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-
insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies
from two or more insurers in a total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the insurance. The public as well as the
insurer is interested in preventing a situation in which a fire would be profitable to the insured.
Rizal Commercial Banking Corporation vs. Court of Appeals, 289 SCRA

292, April 20, 1998
Civil Law; Insurance Law; Mortgages; It is settled that a mort-gagor and a mortgagee have separate and
distinct insurable interests in the same mortgaged property, such that each one of them may insure the
same property for his own sole benefit; The intentions of the parties as shown by their
contemporaneous acts, must be given due consideration in order to better serve the interest of justice
and equity.—It is settled that a mortgagor and a mortgagee have separate and distinct insurable
interests in the same mortgaged property, such that each one of them may insure the same property for
his own sole benefit. There is no question that GOYU could insure the mortgaged property for its own
exclusive benefit. In the present case, although it appears that GOYU obtained the subject insurance
Page 12 of 38
policies naming itself as the sole payee, the intentions of the parties as shown by their
contemporaneous acts, must be given due consideration in order to better serve the interest of justice
and equity.
Same; Same; Same; It is basic and fundamental that the first mortgagee has superior rights over junior
mortgagees or attaching creditors.—Anent the right of RCBC to intervene in Civil Case No. 1073, before
the Zamboanga Regional Trial Court, since it has been determined that RCBC has the right to the
insurance proceeds, the subject matter of intervention is rendered moot and academic. Respondent
Sebastian must, however, yield to the preferential right of RCBC over the MICO insurance policies. It is
basic and fundamental that the first mortgagee has superior rights over junior mortgagees or attaching
creditors.
Same; Same; Section 53 of the Insurance Code ordains that the insurance proceeds of the endorsed
policies shall be applied exclusively to the proper interest of the person for whose benefit it was made.
—The proceeds of the 8 insurance policies endorsed to RCBC aggregate to P89,974,488.36. Being
exclusively payable to RCBC by reason of the endorsement by Alchester to RCBC, which we already ruled
to have the force and effect of an endorsement by GOYU itself, these 8 policies can not be attached by
GOYU’s other creditors up to the extent of the GOYU’s outstanding obligation in RCBC’s favor. Section 53
of the Insurance Code ordains that the insurance proceeds of the endorsed policies shall be applied
exclusively to the proper interest of the person for whose benefit it was made. In this case, to the extent
of GOYU’s obligation with RCBC, the interest of GOYU in the subject policies had been transferred to
RCBC effective as of the time of the endorsement.
Same; Same; For an insurance company to be held liable for unreasonably delaying and withholding
payment of insurance proceeds, the delay must be wanton, oppressive, or malevolent.—For an
insurance company to be held liable for unreasonably delaying and withholding payment of insurance
proceeds, the delay must be wanton, oppressive, or malevolent (Zenith Insurance Corporation vs. CA,
185 SCRA 403 [1990]). It is generally agreed, however, that an insurer may in good faith and honesty
entertain a difference of opinion as to its liability. Accordingly, the statutory penalty for vexatious refusal
of an insurer to pay a claim should not be inflicted unless the evidence and circumstances show that
such refusal was willful and without reasonable cause as the facts appear to a reasonable and prudent
man (Buffalo Ins. Co. vs. Bommarito [CCA 8th] 42 F [2d] 53, 70 ALR 1211; Phoenix Ins. Co. vs. Clay, 101
Ga. 331, 28 SE 853, 65 Am St Rep 307; Kusnetsky vs. Security Ins. Co., 313 Mo. 143, 281 SW 47, 45 ALR
189). The case at bar does not show that MICO wantonly and in bad faith delayed the release of the
proceeds.
Same; Same; Interests; The essence or rationale for the payment of interest or cost of money is separate
and distinct from that of surcharges and penalties; Court fails to find justification for the Court of
Appeals’ outright deletion of the payment of interest as agreed upon in the respective promissory notes.
—The essence or rationale for the payment of interest or cost of money is separate and distinct from
that of surcharges and penalties. What may justify a court in not allowing the creditor to charge
surcharges and penalties despite express stipulation therefor in a valid agreement, may not equally
justify non-payment of interest. The charging of interest for loans forms a very essential and
fundamental element of the banking business, which may truly be considered to be at the very core of
its existence or being. It is inconceivable for a bank to grant loans for which it will not charge any
Page 13 of 38
interest at all. We fail to find justification for the Court of Appeals’ outright deletion of the payment of
interest as agreed upon in the respective promissory notes. This constitutes gross error.
The Insular Life Assurance Company, Ltd. vs. Ebrado, 80 SCRA

181, October 28, 1977
1. Commercial Law; Insurance; Insurance Code; Word “Interest” in Sec. 50 of

Insurance Act which provides that insurance shall be applied exclusively to the
proper interest of the person in whose name it is made refers only to the insured
and not to the beneficiary; contract of insurance personal in character.-
Section 50 of the Insurance Act which provides that “(t)he insurance shall be
applied exclusively to the proper interest of the person in whose name it is made”
cannot be validly seized upon to hold that the same includes the beneficiary. The
word “interest” highly suggests that the provision refers only to the “insured” and
not the beneficiary, since a contract of insurance is personal in character.
Otherwise, the prohibitory laws against illicit relationships especially on property
and descent will be rendered nugatory, as the same could easily be circumvented
by modes of insurance.
2. Commercial Law; Insurance; On matters not otherwise specifically provided

for by the Insurance Law, the contract of life insurance is governed by general rules
of civil law.-
Rather the general rules of civil law should be applied to resolve this void in the
Insurance Law. Article 2011 of the New Civil Code states: “The contract of
insurance is governed by special laws. Matters not expressly provided for in such
special laws shall be regulated by this Code.” When not otherwise specifically
provided for by the Insurance Law, the contract of life insurance is governed by the
general rules of the civil law regulating contracts. And under Article 2012 of the
same Code, “any person who is forbiden from receiving any donation under Article
739 cannot be named beneficiary of a life insurance policy by the person who
cannot make a donation to him.” Common-law spouses are, definitely, barred from
receiving donations from each other.
3. Commercial Law; Insurance; Life Insurance policy no different from civil

donation as far as beneficiary is concerned; Both are founded on liberality;
Common-law spouses designated as beneficiary barred from receiving life insurance
proceeds from a legally married person; Reasons therefor.-
In essence, a life insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration: liberality.
Page 14 of 38
A beneficiary is like a donee, because from the premiums of the policy which the
insured pays out of liberality, the beneficiary will receive the proceeds or profits of
said insurance. As a consequence, the proscription in Article 739 of the new Civil
Code should equally operate in life insurance contracts. The mandate of Article
2012 cannot be laid aside: any person who cannot receive a donation cannot be
named as beneficiary in the life insurance policy of the person who cannot make
the donation. Under American law, a policy of life insurance is considered as a
testament and in construing it, the courts will, so far as possible treat it as a will
and determine the effect of a clause designating the beneficiary by rules under
which wills are interpreted.
4. Commercial Law; Insurance; Conviction for adultery or concubinage for those

barred from receiving donations or life insurance not required as only
preponderance of evidence is necessary.-
We do not think that a conviction for adultery or concubinage is exacted before the
disabilities mentioned in Article 739 may effectuate. More specifically, with regard
to the disability on “persons who were guilty of adultery or concubinage at the time
of the donation,” x x x The underscored clause neatly conveys that no criminal
conviction for the disqualifying offense is a condition precedent. In fact, it cannot
even be gleaned from the aforequoted provision that a criminal prosecution is
needed. On the contrary, the law plainly states that the guilt of the party may be
proved “in the same action” for declaration of nullity of donation. And, it would be
sufficient if evidence preponderates upon the guilt of the consort for the offense
indicated. The quantum of proof in criminal cases is not demanded.
5. Commercial Law; Insurance; Remedial Law; Evidence; Requisite proof of

common-law relationship between insured and beneficiary supplied by stipulations
of parties at pre-trial conference; Considered judicial admissions, of which
judgment may be validly rendered without rigors of trial to prove illicit
relationship.-
In the case before Us, the requisite proof of common-law relationship between the
insured and the beneficiary has been conveniently supplied by the stipulations
between the parties in the pre-trial conference of the case. It was agreed upon and
stipulated therein that the deceased insured Buenaventura C. Ebrado was married
to Pascuala Ebrado with whom she has six legitimate children; that during his
lifetime, the deceased insured was living with his common-law wife, Carponia
Ebrado, with whom he has two children. These stipulations are nothing less than
judicial admission which, as a consequence, no longer require proof and cannot be
contradicted. A fortiori, on the basis of these admissions, a judgment may be
validly rendered without going through the rigors of a trial for the sole purpose of
proving the illicit liason between the insured and the beneficiary. In fact, in that
pre-trial, the parties even agreed “that a decision be rendered based on this
agreement and stipulation of facts as to who among the two claimants is entitled to
the policy.”
Page 15 of 38
Southern Luzon Employees' Ass. vs. Golpeo, et al., 96 Phil. 83, October

30, 1954
1. ASSOCIATIONS; MUTUAL BENEFIT ASSOCIATIONS; DEATH BENEFIT

ANALOGOUS TO INSURANCE.-
The plaintiff association is com- posed of laborers and employees and one of its
purposes is mutual aid of its members and their dependents in case of death. The
association adopted a resolution allowing a member to name as his beneficiaries his
common law wife and/ or children had with her. In this case, the deceased member
listed as his beneficiaries his common law wife and the latter's children. Held, that
said beneficiaries are exclusively entitled to the death benefit, the agreement
between the deceased member and the association being analogous to an
insurance.
Social Security System vs. Davac, et al., 17 SCRA 863, July 30, 1966
1. Social Security Act; Non-transferability of benefits.-
Construing Section 15, Republic Act No. 2658, amending Republic Act No. 1161, if
there is a named beneficiary and the designation is not invalid (as it is not so in this
case, notwithstanding the fact that the beneficiary designated appears to be the
bigamous wife of the deceased), it is not the heirs of the employee who are entitled
to receive the benefits (unless they are the designated beneficiaries themselves). It
is only when there are no designated beneficiaries or when the designation is void,
that the laws of succession are applicable. And we have already held that the Social
Security Act is not a law of succession. (Tecson vs. Social Security System, L-
13798, Dec. 28, 1961).
2. Concubinage; Donation; Where donation was not made to a concubine.-
Article 739 of the New Civil Code does not apply to a case where the concubine did
not know that.the man was married, To be guilty of concubinage, the woman must
know the man to be married (5 Viada, Codigo. Penal, 217).
3. Social Security System; Nature of benefit.-
The benefit receivable under the Social Security Act is in the nature of a special
privilege or an arrangement secured by the law pursuant to the policy of the State
to provide social security to working- men. The amount received by the members
cannot be considered property earned by him. It is not his conjugal property.
Page 16 of 38
Vda. de Consuegra vs. Government Service Insurance System, 37 SCRA

315, January 30, 1971
Government Service Insurance System; Designation of beneficiaries in life insurance differs from that in
retirement insurance.—When Consuegra designated his beneficiaries in his life insurance he could not
have intended those beneficiaries of his life insurance as also the beneficiaries of his retirement
insurance because the provisions on retirement insurance under the_GSIS came about only when Com.
Act 186 was amended by Rep. Act 660 on June 16, 1951. Hence, it cannot be said that because
appellants were designated beneficiaries in Consuegra’s life insurance they automatically became the
beneficiaries also of his retirement insurance. The provisions of subsection (b) of Section 11 of
Commonwealth Act 186, as amended by Rep. Act 660, clearly indicate that there is need for the
employee to file an application for retirement insurance benefits when he becomes a member of the
GSIS, and he should state in his application the beneficiary of his retirement insurance. Hence, the
beneficiary named in the life insurance does not automatically become the beneficiary in the retirement
insurance unless the same beneficiary in the life insurance is so designated in the application for
retirement insurance.
Same; Benefits offered to members.—The GSIS offers two separate and distinct systems of benefits to
its members—one is the life insurance and the other is the retirement insurance. These two distinct
systems of benefits are paid out from two distinct and separate funds that are maintained by the GSIS.
Same; Beneficiaries in life insurance.—In the case of the proceeds of a life insurance, the same are paid
to whoever is named the beneficiary in the life insurance policy. As in the case of life insurance provided
for in the Insurance Act (Act 2427, as amended), the beneficiary in a life insurance under the GSIS may
not necessarily be an heir of the insured. The insured in a life insurance may designate any person as
beneficiary unless disqualified to be so under the provisions of the Civil Code. And in the absence of any
beneficiary named in the life insurance policy, the proceeds of the insurance will go to the estate of the
insured.
Same; Beneficiaries in retirement insurance.—Retirement insurance is primarily intended for the benefit
of the employee—to provide for his old age, or incapacity, after rendering service in the government for
a required number of years. If the employee reaches the age of retirement, he gets the retirement
benefits even to the exclusion of the beneficiary or beneficiaries named in his application for retirement
insurance. The beneficiary of the retirement insurance can only claim the proceeds of the retirement
insurance if the employee dies before retirement. If the employee failed or -overlooked to state the
beneficiary of his retirement insurance, the retirement benefits will accrue to his estate and will be given
to his legal heirs in accordance with law, as in the case of a life insurance if no beneficiary is named in
the insurance policy.
Civil law; Succession; Rights to retirement benefits when there exists two marriages.—The respondent
GSIS had correctly acted when it ruled that the proceeds of the retirement insurance of the late Jose
Consuegra should be divided equally between his first living wife Rosario Diaz, on the one hand, and his
second wife Basilia Berdin and his children by her on the other; and the lower court did not commit
error when it affirmed the action of the GSIS, it being accepted as a fact that the second marriage of Jose
Consuegra to Basilia Berdin was contracted in good faith. The Supreme Court, in construing the rights of
Page 17 of 38
two women who were married to the same man, held “that since the defendant’s first marriage has not
been dissolved or declared void the conjugal partnership established by that marriage has not ceased.
Nor has the first wife lost or relinquished her status as putative heir of her husband under the new Civil
Code, entitled to share in his estate upon his death should she survive him. Consequently, whether as
conjugal partner in a still subsisting marriage or as such putative heir she has an interest in the
husband’s share in the property in dispute.” And with respect, to the right of the second wife, this Court
observed that although the second marriage can be presumed to be void ab initio as it was celebrated
while the first marriage was still subsisting, still there is need for judicial declaration of its nullity. And
inasmuch as the conjugal partnership formed by the second marriage was dissolved before judicial
declaration of its nullity, “the only just and equitable solution in this case would be to recognize the right
of the second wife to her share of one-half in the property acquired by her husband, and consider the
other half as pertaining to the conjugal partnership of the first marriage.”
Picar vs. Government Service Insurance System, 33 SCRA 324, May 29,
1970
1. Insurance law; Life insurance; Beneficiary; When beneficiary is not entitled

to proceeds of insurance.-
It is true that under general principles in the law of insurance, if a policy provides
that the proceeds shall be payable to the assured, if he lives to a certain date, and,
in case of his death before that date, then they shall be payable to the beneficiary
designated, the benefit of the policy will inure to such beneficiary in case the
assured dies before the need of the period designated in the policy, and, generally,
that the proceeds of a life insurance in which a third person is named beneficiary
belong exclusively to such beneficiary as an individual, they are not the property of
the heirs of the insured, are not subject to administration and cannot properly be
claimed or received by the administrator of other legal representative of the
insured as assets of his estate. However, such general principles are not applicable
to the life insurance of government employees which is governed by specific law,
namely Section 26 of Commonwealth Act 186, which specifically provides that in
life insurance policies issued by the GSIS in favor of government employees, the
proceeds shall be liable to attachment, garnishment and other legal processes,
when obligations or indebtedness to the GSIS and the employer are concerned.
2. Government Service Insurance System; Insurance proceeds; GSIS may

require beneficiaries of insurance policies to present necessary clearance from
money and property accountabilities of deceased government employee; Reason.-
The Government Service Insurance System has the right to require the benef
iciaries to submit the necessary clearance from money and property
Page 18 of 38
accountabilities of the deceased government employee whose insurance policy is

involved, before paying them the proceeds of the policy concerned.
3. Government Service Insurance System; Insurance proceeds; Subject to

attachment in favor of Government.-
Under Section 26 of Commonwealth Act 186, insurance proceeds of insurance

policies issued to government employees are exempt from attachment or liens
except when obligations or indebtedness to the GSIS and the employer are
concerned.
Filipino Merchants Insurance Co., Inc. vs. Court of Appeals, 179 SCRA
638, November 28, 1989
1. Insurance; An “all risks” policy covers all losses other than those caused by the
wilful and fraudulent act of insured.-
The very nature of the term “all risks” must be given a broad and comprehensive
meaning as covering any loss other than a wilful and fraudulent act of the insured.
This is pursuant to the very purpose of an “all risks” insurance to give protection to
the insured in those cases where difficulties of logical explanation or some mystery
surround the loss or damage to property. An “all risks” policy has been evolved to
grant greater protection than that afforded by the “perils clause,” in order to assure
that no loss can happen through the incidence of a cause neither insured against
nor creating liability in the ship; it is written against all losses, that is, attributable
to external causes.
2. Insurance; Insurer has burden of proof to show that loss is caused by an

excepted risk.-
Generally, the burden of proof is upon the insured to show that a loss arose from a
covered peril, but under an “all risks”, policy the burden is not on the insured to
prove the precise cause of loss or damage for which it seeks compensation. The
insured under an “all risks insurance policy” has the initial burden of proving that
the cargo was in good condition when the policy attached and that the cargo was
damaged when unloaded from the vessel; thereafter, the burden then shifts to the
insurer to show the exception to the coverage. As we held in Paris-Manila
Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is that the insurance
company has the burden of proving that the loss is caused by the risks excepted
and for want of such proof, the company is liable.
Page 19 of 38
3. Insurance; Insurable Interest; Perfected contract of sale even without

delivery vests in the vendee, an equitable title, an existing interest over the goods
sufficient to be subject of insurance.-
Herein private respondent, as vendee/consignee of the goods in transit has such

existing interest therein as may be the subject of a valid contract of insurance. 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 he 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. The perfected contract of sale even without
delivery vests in the vendee an equitable title, an existing interest over the goods
sufficient to be the subject of insurance.
4. Insurance; Marine Insurance; Obligations and

Contracts; Delivery; Delivery of goods on board the carrying vessels partake of
the nature of actual delivery.-
Further, 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.
Cha vs. Court of Appeals, 277 SCRA 690, August 18, 1997
Contracts; Stipulations contained in a contract cannot be contrary to law, morals, good customs, public
order or public policy.—The core issue to be resolved in this case is whether or not the aforequoted
paragraph 18 of the lease contract entered into between CKS and the Cha spouses is valid insofar as it
provides that any fire insurance policy obtained by the lessee (Cha spouses) over their merchandise
inside the leased premises is deemed assigned or transferred to the lessor (CKS) if said policy is obtained
without the prior written consent of the latter. It is, of course, basic in the law on contracts that the
stipulations contained in a contract cannot be contrary to law, morals, good customs, public order or
public policy.
Same; Insurance; No contract or policy of insurance on property shall be enforceable except for the
benefit of some person having an insurable interest in the property insured.—Sec. 18 of the Insurance
Page 20 of 38
Code provides: “Sec. 18. No contract or policy of insurance on property shall be enforceable except for
the benefit of some person having an insurable interest in the property insured.” A non-life insurance
policy such as the fire insurance policy taken by petitionerspouses over their merchandise is primarily a
contract of indemnity. Insurable interest in the property insured must exist at the time the insurance
takes effect and at the time the loss occurs. The basis of such requirement of insurable interest in
property insured is based on sound public policy: to prevent a person from taking out an insurance
policy on property upon which he has no insurable interest and collecting the proceeds of said policy in
case of loss of the property. In such a case, the contract of insurance is a mere wager which is void
under Section 25 of the Insurance Code.
Same; Same; Leases; The lessor cannot be validly a beneficiary of a fire insurance policy taken by a
lessee over his merchandise, and the provision in the lease contract providing for such automatic
assignment is void for being contrary to law and/or public policy—the insurer cannot be compelled to
pay the proceeds of the policy to a person who has no insurable interest in the property insured.—
Therefore, respondent CKS cannot, under the Insurance Code—a special law—be validly a beneficiary of
the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest
over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the
policy to CKS under the provision of the lease contract previously quoted is void for being contrary to
law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses
Nilo Cha and Stella Uy-Cha (herein co-petitioners.) The insurer (United) cannot be compelled to pay the
proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property
insured.
Tai Tong Chuache & Co. vs. Insurance Commission, 158 SCRA
366, February 29, 1988
1. Insurance; Evidence; Each party must prove his own affirmative allegations.-
It is a well known postulate that the case of a party is constituted by his own
affirmative allegations. Under Section 1, Rule 131 each party must prove his own
affirmative allegations by the amount of evidence required by law which in civil
cases as in the present case is preponderance of evidence. The party, whether
plaintiff or defendant, who asserts the affirmative of the issue has the burden of
presenting at the trial such amount of evidence as required by law to obtain a
favorable judgment. Thus, petitioner who is claiming a right over the insurance
must prove its case. Likewise. respondent insurance company to avoid liability
under the policy by setting up an affirmative defense of lack of insurable interest on
the part of the petitioner must prove its own affirmative allegations.
Page 21 of 38
2. Insurance; Evidence; Respondent having admitted the material allegations in

the complaint has the burden of proof to show that petitioner has no insurable
interest over the insured property at the time the contingency took place.-
It will be recalled that respondent insurance company did not assail the validity of
the insurance policy taken out by petitioner over the mortgaged property. Neither
did it deny that the said property was totally razed by fire within the period covered
by the insurance. Respondent, as mentioned earlier advanced an affirmative
defense of lack of insurance interest on the part of the petitioner alleging that
before the occurrence of the peril insured against the Palomos had already paid
their credit due the petitioner. Respondent having admitted the material allegations
in the complaint, has the burden of proof to show that petitioner has no insurable
interest over the insured property at the time the contingency took place. Upon
that point, there is a failure of proof. Respondent, it will be noted, exerted no effort
to present any evidence to substantiate its claim, while petitioner did. For said
respondent's failure, the decision must be adverse to it.
3. Insurance; Evidence; Court cannot sanction respondent Commission's findings

based upon a mere inference.-
However, as adverted to earlier, respondent Insurance Commission absolved

respondent insurance company from liability on the basis of the certification issued
by the then Court of First Instance of Davao, Branch II, that in a certain civil action
against the Palomos, Arsenio Lopez Chua stands as the complainant and not Tai
Tong Chuache. From said evidence respondent commission inferred that the credit
extended by herein petitioner to the Palomos secured by the insured property must
have been paid. Such is a glaring error which this Court cannot sanction.
Respondent Commission's findings are based upon a mere inference.
4. Insurance; Insurance company bound by the term s and conditions of the

policy which is of legal force and effect at the time of the fire.-
The respondent insurance company having issued a policy in favor of herein

petitioner which policy was of legal force and effect at the time of the fire, it is
bound by its terms and conditions. Upon its failure to prove the allegation of lack of
insurable interest on the part of the petitioner, respondent insurance company is
and must be held liable.
5. Civil Law; Loan; Presumption of non-payment when creditor is in possession of

the document of credit.-
The record of the case shows that the petitioner to support its claim for the
insurance proceeds offered as evidence the contract of mortgage (Exh. 1) which
has not been cancelled nor released. It has been held in a long line of cases that
when the creditor is in possession of the document of credit, he need not prove
non-payment for it is presumed. The validity of the insurance policy taken by
petitioner was not assailed by private respondent. Moreover, petitioner's claim that
Page 22 of 38
the loan extended to the Palomos has not yet been paid was corroborated by
Azucena Palomo who testified that they are still indebted to herein petitioner.
6. Civil Procedure; Party in interest; Actions; Partnership; Action must be

brought in the name of the real party in interest; A partnership may sue and be
sued in its name or by its duly authorized representative-
Public respondent argues however, that if the civil case really stemmed from the
loan granted to Azucena Palomo by petitioner the same should have been brought
by Tai Tong Chuache or by its representative in its own behalf. From the above
premise respondent concluded that the obligation secured by the insured property
must have been paid. The premise is correct but the conclusion is wrong. Citing
Rule 3, Sec. 2 respondent pointed out that the action must be brought in the name
of the real party in interest. We agree. However, it should be borne in mind that
petitioner being a partnership may sue and be sued in its name or by its duly
authorized representative. The fact that Arsenio Lopez Chua is the representative of
petitioner is not questioned. Petitioner s declaration that Ar senio Lopez Chua acts
as the managing partner of the partnership was corroborated by respondent
insurance company. Thus Chua as the managing partner of the partnership may
execute all acts of administration including the right to sue debtors of the
partnership in case of their failure to pay their obligations when it became due and
demandable. Or at the very least, Chua being a partner of petitioner Tai Tong
Chuache Company is an agent of the partnership. Being an agent, it is understood
that he acted for and in behalf of the firm. Public respondent's allegation that the
civil case filed by Arsenio Chua was in his capacity as personal creditor of spouses
Palomo has no basis.
Great Pacific Life Assurance Company vs. Court of Appeals, 89 SCRA
543, April 30, 1979
1. Insurance; Binding deposit receipt; Concept and Nature; When binding

deposit receipt not effective.-
Clearly implied from the aforesaid conditions is that the binding deposit receipt in
question is merely an acknowledgment, on behalf of the company, that the latter’s
branch office had received from the applicant the insurance premium and had
accepted the application subject for processing by the insurance company; and that
the latter will either approve or reject the same on the basis of whether or not the
applicant is “insurable on standard rates.” Since petitioner Pacific Life disapproved
the insurance application of respondent Ngo Hing, the binding deposit receipt in
question had never become in force at any time. Upon this premise, the binding
deposit receipt (Exhibit E) is, manifestly, merely conditional and does not insure
Page 23 of 38
outright. As held by this Court, where an agreement is made between the applicant
and the agent, no liability shall attach until the principal approves the risk and a
receipt is given by the agent. The acceptance is merely conditional, and is
subordinated to the act of the company in approving or rejecting the application.
Thus, in life insurance, a “binding slip” or “binding receipt” does not insure by itself.
2. Insurance; Binding deposit receipt; No insurance contract between private

person and insurance company for non-acceptance of alternative insurance plan of
the company and non-compliance of conditions in binding deposit receipt; Refund
of deposit proper.-
It bears repeating that through the intra-company communication of April 30, 1957
(Exhibit 3-M), Pacific Life disapproved the insurance application in question on the
ground that it is not offering the twenty-year endowment insurance policy to
children less than seven years of age. What it offered instead is another plan
known as the Juvenile Triple Action, which private respondent failed to accept. In
the absence of a meeting of the minds between petitioner Pacific Life and private
respondent Ngo Hing over the 20-year endowment life insurance in the amount of
P50,000.00 in favor of the latter’s one-year old daughter, and with the non-
compliance of the abovequoted conditions stated in the disputed binding deposit
receipt, there could have been no insurance contract duly perfected between them.
Accordingly, the deposit paid by private respondent shall have to be refunded by
Pacific Life.
3. Insurance; Binding deposit receipt; Completed Contract; Concept

Of; Contract of insurance must be completed contract to be binding.-
As held in De Lim vs. Sun Life Assurance Company of Canada, supra, “a contract of
insurance, like otter contracts, must be asserted to by both parties either in parson
or by their agents. x x x. The contract, to be binding from the date of the
application, must have been a completed contract, one that leaves nothing to be
done, nothing to be completed, nothing to be passed upon, or determined, before it
shall take effect. There can be no contract of insurance unless the minds of the
parties have met in agreement.”
4. Insurance; Concealment; Nature and kind of concealment which renders

ineffective application for insurance coverage; Duties required of insurance
agents.-
Relative to the second issue of alleged concealment, this Court is of the firm belief
that private respondent had deliberately concealed the state of health and physical
condition of his daughter Helen Go. When private respondent supplied the required
essential data for the insurance application form, he was fully aware that his one-
year old daughter is typically a mongoloid child. Such a congenital physical defect
could never be ensconced nor disguised. Nonetheless, private respondent, in
apparent bad faith, withheld the fact material to the risk to be assumed by the
insurance company. As an insurance agent of Pacific Life, he ought to know, as he
Page 24 of 38
surely must have known, his duty and responsibility to supply such a material fact.
Had he divulged said significant fact in the insurance application form. Pacific Life
would have verified the same and would have had no choice but to disapprove the
application outright.
5. Insurance; Concealment; Nature and effect of concealment on insurance

contract.-
The contract of insurance is one of perfect good faith (uberrima fides meaning good
faith; absolute and perfect candor or openness and honesty; the absence of any
concealment or deception, however slight [Black’s Law Dictionary, 2nd Edition], not
for the insured alone but equally so for the insurer Fieldman’s Insurance Co., Inc.
vs. Vda. de Songco, 25 SCRA 70). Concealment is a neglect to communicate that
which a party known and ought to communicate (Section 25, Act No. 2427).
Whether intentional or unintentional, the concealment entitles the insurer to rescind
the contract of insurance (Section 26, Id.; Yu Pang Cheng vs. Court of Appeals, et
al., 105 Phil. 930; Saturnino vs. Philippine American Life Insurance Company, 7
SCRA 316). Private respondent appears guilty thereof.
Sunlife Assurance Company of Canada vs. Court of Appeals, 245 SCRA

268, June 22, 1995
1. Evidence; The rule that factual findings of the lower court and the appellate
court are binding on the Supreme Court is not absolute.-
The rule that factual findings of the lower court and the appellate court are binding
on this Court is not absolute and admits of exceptions, such as when the judgment
is based on a misappreciation of the facts (Geronimo v. Court of Appeals, 224 SCRA
494 [1993]).
2. Insurance Law; Concealment; Words and Phrases; A neglect to

communicate that which a party knows and ought to communicate is called
concealment.-
In weighing the evidence presented, the trial court concluded that indeed there was
concealment and misrepresenta- tion, however, the same was made in “good faith”
and the facts concealed or misrepresented were irrelevant since the policy was
“non-medical.” We disagree. Section 26 of The Insurance Code is explicit in
requiring a party to a contract of insurance to communicate to the other, in good
faith, all facts within his knowledge which are material to the contract and as to
which he makes no warranty, and which the other has no means of ascertaining.
Page 25 of 38
Said Section provides: “A neglect to communicate that which a party knows and
ought to communicate, is called concealment.”
3. Insurance Law; Concealment; Materiality; Matters relating to the health of

the insured are material and relevant to the approval and issuance of the life
insurance policy as these definitely affect the insurer’s action on the application.-
The terms of the contract are clear. The insured is specifically required to disclose
to the insurer matters relating to his health. The information which the insured
failed to disclose were material and relevant to the approval and issuance of the
insurance policy. The matters concealed would have definitely affected petitioner’s
action on his application, either by approving it with the corresponding adjustment
for a higher premium or rejecting the same. Moreover, a disclosure may have
warranted a medical examination of the insured by petitioner in order for it to
reasonably assess the risk involved in accepting the application.
4. Insurance Law; Concealment; Good faith is no defense in concealment.-
Thus, “good faith” is no defense in concealment. The insured’s failure to disclose

the fact that he was hospitalized for two weeks prior to filing his application for
insurance, raises grave doubts about his bona fides. It appears that such
concealment was deliberate on his part.
5. Insurance Law; Concealment; Non-Medical Insurance Contracts; The

waiver of a medical examination in a non-medical insurance contract renders even
more material the information required of the applicant concerning previous
condition of health and diseases suffered.-
The argument, that petitioner’s waiver of the medical examination of the insured
debunks the materiality of the facts concealed, is untenable. We reiterate our ruling
in Saturnino v. Philippine American Life Insurance Company, 7 SCRA 316 (1963),
that “x x x the waiver of a medical examination [in a non-medical insurance
contract] renders even more material the information required of the applicant
concerning previous condition of health and diseases suffered, for such information
necessarily constitutes an important factor which the insurer takes into
consideration in deciding whether to issue the policy or not x x x.”
6. Insurance Law; Concealment; It is well-settled that the insured need not die
of the disease he had failed to disclose to the insurer, as it is sufficient that his non-
disclosure misled the insurer in forming his estimates of the risks of the proposed
insurance policy or in making inquiries.-
Anent the finding that the facts concealed had no bearing to the cause of death of
the insured, it is well settled that the insured need not die of the disease he had
failed to disclose to the insurer. It is sufficient that his non-disclosure misled the
insurer in forming his estimates of the risks of the proposed insurance policy or in
making inquiries
Page 26 of 38
(Eguaras v. Great Eastern Life Ass. Co. 33 PHIL 263)
1. Actions; Pleadings and Practice; Forum Shopping; The rule on forum

shopping applies where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other; Res judicata applies
only where judgment on the merits is finally rendered on the first; Where the RTC
dismissed outright a petition for certiorari for failing to append certified copies of
the assailed orders of the MTC, there was as yet no judgment of the case on the
merits.-
The rule on forum shopping applies where the elements of litis pendentia are
present or where a final judgment in one case will amount to res judicata in the
other. Res judicata applies only where judgment on the merits is finally rendered
on the first. In this case, the RTC dismissed outright the private respondents’
petition for certiorari in Civil Case No; 36725 for failing to append certified copies of
the assailed orders of the MTC in Civil Case CV No. 20064. Hence, there, was as yet
no judgment of the case on the merits. Moreover, the respondents did not file a
second petition or complaint, but merely an urgent motion with the CA in CA-G.R.
CV No. 59872 for a temporary restraining order to enjoin the enforcement of the
writ of execution issued by the MTC in Civil Case No. 20064.
2. Actions; Injunctions; A writ of preliminary injunction will not issue if the acts
sought to be enjoined is a fait accompli.-
We agree with the petitioners that the CA imprudently issued a temporary

restraining order on February 16, 1999 and a writ of preliminary injunction on
March 15, 2000 to enjoin the enforcement of the writ of execution in Civil Case No.
20064. First. By then, the writ of execution had already been enforced and the
private respondents were evicted from the property, as the petitioners were placed
in possession, of the property on February 11, 1999. Case law has it that a writ of
preliminary injunction will not issue if the act sought to be enjoined is a fait
accompli.
3. Actions; Injunctions; Ejectment; By issuing a temporary restraining order

and writ of preliminary injunction enjoining the eviction of the respondents, the
Court of Appeals allowed the respondents to stay in the property despite the
mandatory provision of Section 19 of Rule 70 of the Rules of Court, as amended.-
The MTC issued a writ of execution ordering the eviction of the private respondents
for their refusal to file a supersedeas bond on appeal to stay the execution. The
MTC was, thus, mandated to issue a writ of execution, conformably to Section 19,
Page 27 of 38
Rule 70 of the Rules of Court, as amended. By issuing a temporary restraining

order and writ of preliminary injunction enjoining the eviction of the private
respondents, the CA allowed the former to stay in the property despite the
mandatory provision of Section 19 of Rule 70 of the Rules of Court, as amended.
4. Actions; Injunctions; Ejectment; The appellate court, in granting the

respondent’s plea for a writ of preliminary injunction, in effect, granted the same
injunctive relief which the latter failed to secure from the RTC due to their
procedural lapse.-
The remedy of the private respondents to nullify the order of the MTC in Civil Case
No. 20064 was via a petition for certiorari in the RTC under Section 4, Rule 65 of
the Rules of Court, as amended. The private respondents did file their petition for
certiorari in Civil Case No. 36725, but the same was, however, dismissed by the
RTC. It behooved the private respondents to refile the petition in the RTC with a
plea for a temporary restraining order or writ of preliminary injunction. They failed
to do so. Instead, they filed an Urgent Motion in the Court of Appeals in CA-G.R. CV
No. 59872. The appellate court, in granting the private respondents’ plea for a writ
of preliminary injunction, in effect, granted the same injunctive relief which the
latter failed to secure from the RTC due to their procedural lapse.
5. Actions; Injunctions; Ejectment; Under Section 21 of Rule 70 of the Rules of

Court, the decision of the RTC on appeal shall be immediately executory without
prejudice to a further appeal from the said decision.-
It bears stressing that under Section 21 of Rule 70 of the Rules of Court, the
decision of the RTC on appeal shall be immediately executory without prejudice to a
further appeal from the said decision: Sec. 21. Immediate execution on appeal to
the Court of Appeals or Supreme Court.—The judgment of the Regional Trial Court
shall be immediately executory, without prejudice to a further appeal that may be
taken therefrom. (10a)
Saturnino vs. Philippine American Life Ins. Co., 7 SCRA 316, February

28, 1963
1. Insurance; Non-medical insurance; Medical history material to insurability of

applicant.-
—In non-medical insurance, the waiver of medical examination renders even more
material the information required of the applicant concerning previous condition of
health and diseases suffered, for such information necessarily constitutes an
Page 28 of 38
important factor which the insurer takes into consideration in deciding whether to
issue the policy or not.
2. Same; Same; Concealment, whether intentional or unintentional; Ground

for rescission.-
—In this jurisdiction, a concealment, whether intentional or unintentional, entitles

the insurer to rescind the contract of insurance, concealment being defined as
“negligence to communicate that which a party knows and ought to communicate”
(Sections 24 and 26, Act No. 2427).
3. Same; Same; Concealment of previous operation.-
—The concealment of the fact of the operation itself is fraudulent, as there could
not have been any mistake about it, no matter what the ailment.
Great Pacific Life Assurance Company vs. Court of Appeals, 89 SCRA
543, April 30, 1979
1. Insurance; Binding deposit receipt; Concept and Nature; When binding

deposit receipt not effective.-
Clearly implied from the aforesaid conditions is that the binding deposit receipt in
question is merely an acknowledgment, on behalf of the company, that the latter’s
branch office had received from the applicant the insurance premium and had
accepted the application subject for processing by the insurance company; and that
the latter will either approve or reject the same on the basis of whether or not the
applicant is “insurable on standard rates.” Since petitioner Pacific Life disapproved
the insurance application of respondent Ngo Hing, the binding deposit receipt in
question had never become in force at any time. Upon this premise, the binding
deposit receipt (Exhibit E) is, manifestly, merely conditional and does not insure
outright. As held by this Court, where an agreement is made between the applicant
and the agent, no liability shall attach until the principal approves the risk and a
receipt is given by the agent. The acceptance is merely conditional, and is
subordinated to the act of the company in approving or rejecting the application.
Thus, in life insurance, a “binding slip” or “binding receipt” does not insure by itself.
2. Insurance; Binding deposit receipt; No insurance contract between private

person and insurance company for non-acceptance of alternative insurance plan of
the company and non-compliance of conditions in binding deposit receipt; Refund
of deposit proper.-
Page 29 of 38
It bears repeating that through the intra-company communication of April 30, 1957
(Exhibit 3-M), Pacific Life disapproved the insurance application in question on the
ground that it is not offering the twenty-year endowment insurance policy to
children less than seven years of age. What it offered instead is another plan
known as the Juvenile Triple Action, which private respondent failed to accept. In
the absence of a meeting of the minds between petitioner Pacific Life and private
respondent Ngo Hing over the 20-year endowment life insurance in the amount of
P50,000.00 in favor of the latter’s one-year old daughter, and with the non-
compliance of the abovequoted conditions stated in the disputed binding deposit
receipt, there could have been no insurance contract duly perfected between them.
Accordingly, the deposit paid by private respondent shall have to be refunded by
Pacific Life.
3. Insurance; Binding deposit receipt; Completed Contract; Concept

Of; Contract of insurance must be completed contract to be binding.-
As held in De Lim vs. Sun Life Assurance Company of Canada, supra, “a contract of
insurance, like otter contracts, must be asserted to by both parties either in parson
or by their agents. x x x. The contract, to be binding from the date of the
application, must have been a completed contract, one that leaves nothing to be
done, nothing to be completed, nothing to be passed upon, or determined, before it
shall take effect. There can be no contract of insurance unless the minds of the
parties have met in agreement.”
4. Insurance; Concealment; Nature and kind of concealment which renders

ineffective application for insurance coverage; Duties required of insurance
agents.-
Relative to the second issue of alleged concealment, this Court is of the firm belief
that private respondent had deliberately concealed the state of health and physical
condition of his daughter Helen Go. When private respondent supplied the required
essential data for the insurance application form, he was fully aware that his one-
year old daughter is typically a mongoloid child. Such a congenital physical defect
could never be ensconced nor disguised. Nonetheless, private respondent, in
apparent bad faith, withheld the fact material to the risk to be assumed by the
insurance company. As an insurance agent of Pacific Life, he ought to know, as he
surely must have known, his duty and responsibility to supply such a material fact.
Had he divulged said significant fact in the insurance application form. Pacific Life
would have verified the same and would have had no choice but to disapprove the
application outright.
5. Insurance; Concealment; Nature and effect of concealment on insurance

contract.-
The contract of insurance is one of perfect good faith (uberrima fides meaning good
faith; absolute and perfect candor or openness and honesty; the absence of any
concealment or deception, however slight [Black’s Law Dictionary, 2nd Edition], not
Page 30 of 38
for the insured alone but equally so for the insurer Fieldman’s Insurance Co., Inc.
vs. Vda. de Songco, 25 SCRA 70). Concealment is a neglect to communicate that
which a party known and ought to communicate (Section 25, Act No. 2427).
Whether intentional or unintentional, the concealment entitles the insurer to rescind
the contract of insurance (Section 26, Id.; Yu Pang Cheng vs. Court of Appeals, et
al., 105 Phil. 930; Saturnino vs. Philippine American Life Insurance Company, 7
SCRA 316). Private respondent appears guilty thereof.
Vda. de Canilang vs. Court of Appeals, 223 SCRA 443, June 17, 1993
Insurance Law; Concealment; The information which Jaime Canilang failed to disclose was material to
the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance.—We
agree with the Court of Appeals that the information which Jaime Canilang failed to disclose was
material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life
insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and the medicines
prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific
would have made further inquiries and would have probably refused to issue a non-medical insurance
policy or, at the very least, required a higher premium for the same coverage. The materiality of the
information withheld by Great Pacific did not depend upon the state of mind of Jaime Canilang. A man’s
state of mind or subjective belief is not capable of proof in our judicial process, except through proof of
external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn.
Neither does materiality depend upon the actual or physical events which ensue. Materiality relates
rather to the “probable and reasonable influence of the facts” upon the party to whom the
communication should have been made, in assessing the risk involved in making or omitting to make
further inquiries and in accepting the application for insurance; that “probable and reasonable influence
of the facts” concealed must, of course, be determined objectively, by the judge ultimately.
Tang vs. Court of Appeals, 90 SCRA 236, May 25, 1979
Contracts; Insurance Law; Evidence; Where the insurer sought to avoid payment of life insurance policy
on the ground that insured concealed or misrepresented her state of health, said insurer is not obliged
to show under Art. 1332 of the Civil Code that the English terms of the contract were read and explained
to the insured, a Chinese. That duty devolves on the ones—the beneficiaries—who would like to enforce
the insurance agreement.—It should be noted that under Art. 1332 abovequoted, the obligation to
show that the terms of the contract had been fully explained to the party who is unable to read or
understand the language of the contract, when fraud or mistake is alleged, devolves on the party
seeking to enforce it. Here the insurance company is not seeking to enforce the contracts; on the
Page 31 of 38
contrary, it is seeking to avoid their performance. It is petitioner who is seeking to enforce them even as
fraud or mistake is not alleged. Accordingly, respondent company was under no obligation to prove that
the terms of the insurance contracts were fully explained to the other party. Even if we were to say that
the insurer is the one seeking the performance of the contracts by avoiding paying the claim, it has to be
noted as above stated that there has been no imputation of mistake or fraud by the illiterate insured
whose personality is represented by her beneficiary the petitioner herein. In sum, Art. 1332 is
inapplicable to the case at bar. Considering the findings of both the CFI and Court of Appeals that the
insured was guilty of concealment as to her state of health, we have to affirm.
Contracts; Insurance Law; Evidence; Insurance contracts are contracts “uberimae fidei.” Insured must
reveal all material facts within his knowledge.—In a contract of insurance each party “must
communicate to the other, in good faith, all facts within his knowledge which are material to the
contract, and which the other has not the means of ascertaining ***” (Section 27, Act 2427, as
amended. Italics supplied). As a general rule, a failure by the insured to disclose conditions affecting the
risk, of which he is aware makes the contract voidable at the option of the insurer (45 C.J.S. 153). The
reason for this rule is that insurance policies are traditionally contracts “uberimae fidei” which means
most abundant good faith; absolute and perfect candor or openness and honesty; the absence of any
concealment or deception however slight.
Pacific Timber Export Corp. vs. Court of Appeals, 112 SCRA

199, February 25, 1982
1. Insurance Law; A “Cover Note” issued in advance of the issuance of a marine

policy is binding as an insurance contract although no separate premium was paid
therefor.-
The fact that no separate premium was paid on the Cover Note before the loss
insured against occurred, does not militate against the validity of petitioner’s
contention, for no such premium could have been paid, since by the nature of the
Cover Note, it did not contain, as all Cover Notes do not contain particulars of the
shipment that would serve as basis for the computation of the premiums. As a
logical consequence, no separate premiums are intended or required to be paid on
a Cover Note. This is a fact admitted by an official of respondent company, Juan
Jose Camacho, in charge of issuing cover notes of the respondent company (p. 33,
tsn, September 24, 1965).
2. Insurance Law; Same.-
At any rate, it is not disputed that petitioner paid in full all the premiums as called
for by the statement issued by private respondent after the issuance of the two
regular marine insurance policies, thereby leaving no account unpaid by petitioner
due on the insurance coverage, which must be deemed to include the Cover Note.
Page 32 of 38
If the Note is to be treated as a separate policy instead of integrating it to the

regular policies subsequently issued, the purpose and function of the Cover Note
would be set at naught or rendered meaningless, for it is in a real sense a contract,
not a mere application for insurance which is a mere offer.
The non-payment of premium on the Cover Note is, therefore, no cause for the
petitioner to lose what is due it as if there had been payment of premium, for non-
payment by it was not chargeable against its fault. Had all the logs been lost during
the loading operations, but after the issuance of the Cover Note, liability on the
note would have already arisen even before payment of premium. This is how the
cover note as a “binder” should legally operate; otherwise, it would serve no
practical purpose in the realm of commerce, and is supported by the doctrine that
where a policy is delivered without requiring payment of the premium, the
presumption is that a credit was intended and policy is valid.
4. Insurance Law; Delay of insured in reporting the loss must be objected to

promptly by insurer. Sending of insurance adjuster to assess the loss amounts to
waiver of delay in giving notice of loss.+
In the proceedings that took place later in the Office of the Insurance
Commissioner, private respondent should then have raised this ground of delay to
avoid liability. It did not do so. It must be because it did not find any delay, as this
Court fails to find a real and substantial sign thereof. But even on the assumption
that there was delay, this Court is satisfied and convinced that as expressly
provided by law, waiver can successfully be raised against private respondent.
Bonifacio Bros., Inc. vs. Mora, 20 SCRA 261, May 29, 1967
1. Contracts; Contracts take effect only between the parties thereto; Exception.-
Contracts take effect only between the parties thereto, except in some specific
instances provided by law where the contract contains some stipulation in favor of
a third person which is known as a stipulation pour autrui or a provision in favor of
a third person not a party to the contract. Under this doctrine, a third person is
allowed to avail himself of a benef it granted to him by the terms of the contract,
provided that the contracting parties have clearly and deliberately conferred a favor
upon such person. Consequently, a third person, not a party to the contract, has no
Page 33 of 38
action against the parties thereto, and cannot generally demand the enforcement of
the same.
2. Contracts; Stipulation pour autrui; When a third person has an enforceable

interest in the contract.-
The question of whether a third person has an enforceable interest in a contract

must be settled by determining whether the contracting parties intended to tender
him such an interest by deliberately inserting terms in their agreement with the
avowed purpose of conferring a favor upon such third person. The fairest test to
determine whether the interest of a third person in a contract is a stipulation pour
autrui or merely an incidental interest, is to rely upon the intention of the parties as
disclosed by their contract.
3. Contracts; Insurance; Nature of insurance policy.-
A policy of insurance is a distinct and independent contract between the insured

and insurer. A third person has no right in law or equity to the proceeds of an
insurance unless there is a contract or trust, expressed or implied, between the
insured and third person.
4. Contracts; Interpretation of clause in insurance contract regarding repair of

damaged vehicle.-
The clause in an insurance policy, authorizing the owner of the damaged vehicle to
contract for its repair does not mean that the repairman is entitled to collect the
cost of repair out of the proceeds of the insurance. It merely establishes the
procedure that the insured has to follow in order to be entitled to indemnity for
repair.
5. Contracts; Meaning of loss in insurance.-
The word "loss" in insurance law embraces injury or damage. A loss may be total or
partial.
6. Contracts; When mortgagee of damaged car, as beneficiary, is preferred to the

repairman with respect to insurance proceeds.-
Where the mortgagee is the beneficiary in a car insurance, it has a better right than
the repairman to the insurance proceeds.
Guingon vs. Del Monte, 20 SCRA 1043, August 17, 1967
Page 34 of 38
1. Insurance; Right of injured person to sue insurer of party at

fault; Condition.-
The right of the person injured to sue the insurer of the party at fault (insured)
depends on whether the contract of insurance is intended to benefit third persons
also or only the insured. The test applied is this: Where the contract provides for
indemnity against liability to third persons, then third persons to whom the insured
is liable. can sue the insurer. Where the contract is for indemnity against actual loss
or payment, then third persons cannot proceed against the insurer, the contract
being solely to reimburse the insured for liability actually discharged by him
through payment to third persons, said third persons' recourse being thus limited to
the insured alone.
2. Insurance; Pleading and Practice; Joinder of parties; When "no action"

clause in insurance policy cannot prevail over procedural rule as to joinder of
parties.-
Where the insurer agreed to indemnify the insured "against all sums x x x which
the Insured shall become legally liable to pay in respect of: a death of or bodily
injury to any person", the insurance is one for indemnity against liability, From the
f act then that the insured is liable to the third-person, such third-person is entitled
to sue the insurer. The "no action" clause in the policy of insurance cannot prevail
over the Rules of Court provision aimed at avoiding multiplicity of suits.
Coquia vs. Fieldmen's Insurance Co., Inc., 26 SCRA 178, November 29,

1968
1. Pleading and practice; Parties; Cause of action; Only parties to a

contract may bring an action thereon; Exception; Contracts pour autrui.-
Although, in general, only parties to a contract may bring an action based thereon,
this rule is subject to exceptions, one of which is .found in the second paragraph of
Article 1311 of the Civil Code of the Philippines, reading: "// a contract should
contain some stipulation in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not sufficient. The contracting
parties must have clearly and deliberately conferred a favor upon a third person."
2. Insurance law; Where an insurance policy is typical of a contract pour

autrui; Case at bar.-
Page 35 of 38
In the case at bar, the insurance policy contains stipulations pursuant to which the
insurance company "will indemnify any authorized Driver who is driving the Motor
Vehicle" of the Insured and, in the event of death of said driver, the Company shall,
likewise, "indemnify his personal representatives," and the Company "may, at its
option, make indemnity payable directly to the claimants or heirs of claimants x x x
it being the true intention of this Policy to protect x x x the liabilities of the Insured
towards the passengers of the Motor Vehicle and the Public" in other words, third
parties.
3. Insurance law; Where a condition in the policy concerning reference of

dispute to an arbitrator, as a condition precedent to a right of action or
suit upon a policy, was deemed waived; Case at bar.-
Section 17 of the policy under consideration reads: "If any difference or dispute
shall arise with respect to the amount of the Company's liability under this Policy,
the same shall be referred to the decision of a single arbitrator to be agreed upon
by both parties or failing such agreement of a single arbitrator, to the decision of
two arbitrators, one to be appointed in writing by each of the parties within one
calendar month after having been required in writing so to do by either of the
parties and in case of disagreement between the arbitrators, to the decision of an
umpire who shall have been appointed in writing by the arbitrators. before entering
on the reference and the costs of and incidental ,to the reference shall be dealt with
in the Award. And it is hereby expressly stipulated and declared that it shall be a
condition precedent to any right of action or suit upon this Policy that the award by
such arbitrator, arbitrators or umpire of the amount of the Company's liability
hereunder if disputed shall be first obtained."
Lopez vs. Filipinas Compañia de Seguros, 16 SCRA 855, April 30, 1966
1. Actions; Filing in court of a claim converts it into an action or suit.-
The terms “action” and “suit” are synonymous, and the determinative or operative
fact which converts a claim into an “action” or “suit” is the filing of the same with a
“court of justice.” Filed elsewhere, as with some other body or office not a court of
justice, the claim may not properly be categorized under either term.
2. Actions; Complaint filed with office of Insurance Commissioner is not an action

or suit.-
An “action or suit” is essentially “for the enforcement or protection of a right, or the

prevention or redress of wrong.” (Rule 2, Sec. 1, Rules of Court.) There is nothing
in the Insurance Law, Act No. 2427, as amended, or in any of its allied legislations,
Page 36 of 38
which empowers the Insurance Commissioner to adjudicate disputes relating to an

insurance company’s liability to an insured under a policy issued by the former to
the latter. The validity of an insured’s claim under a specific policy, its amount, and
all such other matters as might involve the interpretation and construction of the
insurance policy, are issues which only a regular court of justice may resolve and
settle. Consequently, a complaint filed by the insured with the Office of the
Insurance Commissioner is not an “action or suit.”
Finman General Assurance Corp. vs. Inocencio, 179 SCRA

480, November 15, 1989
1. Insurance; Conditions of a bond specified and required by a statute or

regulation are deemed incorporated into all bonds tendered under the statute
although not set out in printer’s ink.-
While petitioner Finman has refrained from attaching a copy of the bond it had
issued to its Petition for Certiorari, there can be no question that the conditions of
the Finman surety bond Pan Pacific had posted with the POEA include the
underscored portions of Section 4, Rule II, Book I quoted above. It is settled
doctrine that the conditions of a bond specified and required in the provisions of the
statute or regulation providing for the submission of the bond, are incorporated or
built into all bonds tendered under that statute or regulation, even though not there
set out in printer’ ink.
2. Civil Procedure; Parties; Indispensable Parties; Since the principal obligor

failed to respond to the complaint, his surety company is regarded as an
indispensable party in the proceedings before the POEA.-
We are not persuaded by this assertion. Clearly, petitioner Finman is a party-in-

interest in, certainly a proper party to, the proceedings private respondents had
initiated against Pan Pacific the principal obligor. Since Pan Pacific had thoughtfully
refrained from notifying the POEA of its new address and from responding to the
complaints, petitioner Finman may well be regarded as an indispensable party to
the proceedings before the POEA. Whether Finman was an indispensable or merely
a proper party to the proceedings, we believe and so hold that the POEA could
properly implead it as party respondent either upon the request of the private
respondents or, as it happened, motu proprio. Such is the situation under the
Revised Rules of Court and the application thereof, directly or by analogy, by the
POEA can certainly not be regarded as arbitrary, oppressive or capricious.
Page 37 of 38
3. Jurisdiction; POEA; Department of Labor; POEA and DOLE have the power
to compel surety to make good on its solidary undertaking in the same proceedings
where the liability of principal obligor is determined.-
The fundamental argument of Finman is that its liability under its own bond must
be determined and enforced, not by the POEA or the Secretary of Labor, but rather
by the Insurance Commission or by the regular courts. Once more, we are not
moved by petitioner’s argument. There appears nothing so special or unique about
the determination of a surety’s liability under its bond as to restrict that
determination to the Office of the Insurance Commissioner and to the regular
courts of justice exclusively. x x x Cash and surety bonds are required by the POEA
and its predecessor agencies from recruitment and employment companies
precisely as a means of ensuring prompt and effective recourse against such
companies when held liable for applicants’ or workers’ claims. Clearly that public
policy will be effectively negated if POEA and the Department of Labor and
Employment were held powerless to compel a surety company to make good on its
solidary undertaking in the same quasijudicial proceeding where the liability of the
principal obligor, the recruitment or employment agency, is determined and fixed
and where the surety is given reasonable opportunity to present any defenses it or
the principal obligor may be entitled to set up. Petitioner surety whose liability to
private respondents and the POEA is neither more nor less than that of Pan Pacific,
is not entitled to another or different procedure for determination or fixing of that
liability than that which Pan Pacific is entitled and subject to.
Page 38 of 38

Juriprudence On Insurance Code of 2013

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The Insurance Code of 2013

Insurance; Indemnity; Ambiguity in terms and conditions of a life

Fieldmen's Insurance Co., Inc. vs. Vda. de Songco, 25 SCRA

3. Insurance; Ambiguities in contract; Against whom and how

Landicho vs. Government Service Insurance System, 44 SCRA 7, March

1. Obligations and Contracts; Insurance Law; Where words in an

New Life Enterprises vs. Court of Appeals, 207 SCRA 669, March 31,

1. Insurance; Contracts; Insured is specifically required to disclose to the

4. Insurance; Contracts; Statutory Construction; The conformity of the

Paramount Insurance Corporation vs. Japzon, 211 SCRA 879, July 29,

1. Civil Procedure; Jurisdiction over person how acquired.-

2. Civil Procedure; Attorneys; Presumption that lawyer is authorized by party.-

3. Civil Procedure; Estoppel; Party estopped from questioning jurisdiction.-

4. Insurance; Terms of contract constitute measure of insurer’s liability.-

Verendia vs. Court of Appeals, 217 SCRA 417, January 22, 1993

1. Insurance; Civil Law; Contracts; Trial Court's interpretation of the insurance

Development Bank of the Philippines vs. Court of Appeals, 231 SCRA

1. Civil Law; Contracts; Insurance; Where there was no perfected contract of

5. Civil Law; Damages; One is entitled to an adequate compensation only for

6. Civil Law; Damages; No proof of pecuniary loss is required in the assessment

While Dans is not entitled to compensatory damages, he is entitled to moral

1. Evidence; Appeals; The Supreme Court is mindful of the well-entrenched

2. Contracts; Insurance Law; Interpretation of Contracts; Terms in an

3. Judgments; Res Judicata; The rule on conclusiveness of judgment, which

The rule on conclusiveness of judgment, which obtains under the premises,

4. Judgments; Res Judicata; Where a party’s insurable interest in, and

1. CORPORATIONS J NATIONALITY OF PRIVATE CORPORATION; CONTROL

The nationality of a private corporation is determined by the character or

2. CORPORATIONS J NATIONALITY OF PRIVATE

Where majority of the stockholders of a corporation were German subjects, the

3. INSURANCE; TERMINATION OF POLICY OF PUBLIC ENEMY.-

4. INSURANCE; RETURN OF PREMIUMS UPON TERMINATION OF POLICY BY

Geagonia vs. Court of Appeals, 241 SCRA 152, February 06, 1995

Rizal Commercial Banking Corporation vs. Court of Appeals, 289 SCRA

The Insular Life Assurance Company, Ltd. vs. Ebrado, 80 SCRA

1. Commercial Law; Insurance; Insurance Code; Word “Interest” in Sec. 50 of

2. Commercial Law; Insurance; On matters not otherwise specifically provided

3. Commercial Law; Insurance; Life Insurance policy no different from civil

4. Commercial Law; Insurance; Conviction for adultery or concubinage for those

5. Commercial Law; Insurance; Remedial Law; Evidence; Requisite proof of

Southern Luzon Employees' Ass. vs. Golpeo, et al., 96 Phil. 83, October

1. ASSOCIATIONS; MUTUAL BENEFIT ASSOCIATIONS; DEATH BENEFIT

1. Social Security Act; Non-transferability of benefits.-

2. Concubinage; Donation; Where donation was not made to a concubine.-

3. Social Security System; Nature of benefit.-

Vda. de Consuegra vs. Government Service Insurance System, 37 SCRA

1. Insurance law; Life insurance; Beneficiary; When beneficiary is not entitled

2. Government Service Insurance System; Insurance proceeds; GSIS may

accountabilities of the deceased government employee whose insurance policy is

3. Government Service Insurance System; Insurance proceeds; Subject to

Under Section 26 of Commonwealth Act 186, insurance proceeds of insurance

2. Insurance; Insurer has burden of proof to show that loss is caused by an

3. Insurance; Insurable Interest; Perfected contract of sale even without

Herein private respondent, as vendee/consignee of the goods in transit has such

4. Insurance; Marine Insurance; Obligations and

Cha vs. Court of Appeals, 277 SCRA 690, August 18, 1997

2. Insurance; Evidence; Respondent having admitted the material allegations in

3. Insurance; Evidence; Court cannot sanction respondent Commission's findings

However, as adverted to earlier, respondent Insurance Commission absolved

4. Insurance; Insurance company bound by the term s and conditions of the

The respondent insurance company having issued a policy in favor of herein

5. Civil Law; Loan; Presumption of non-payment when creditor is in possession of