INSURANCE LAW Atty. Sta.
Barbara 1
I. GENERAL CONCEPTS
RAFAEL ENRIQUEZ V. SUN LIFE INSURANCE CO. OF
CANADA
GR No. L-15895, November 29, 1920
Facts:
• September 24, 1917 - Joaquin Herrer made application to the Sun
Life Assurance Company of Canada through its office in Manila for
a life annuity. Two days later he paid the sum of P6,000 to the
manager of the company's Manila office and was given a receipt
• Nov. 26, 1917 - The application was accepted by the head office in
Montereal, Canada
• December 4, 1917 - the policy was issued at Montreal.
• December 18, 1917 - attorney Aurelio A. Torres wrote to the Manila
office of the company stating that Herrer desired to withdraw his
application.
• The following day the local office replied to Mr. Torres, stating that
the policy had been issued, and called attention to the notification of
November 26, 1917.
• This letter was received by Mr. Torres on the morning of December
21, 1917.
• Mr. Herrer died on December 20, 1917
• The chief clerk of the Manila office of the Sun Life Assurance
Company of Canada at the time of the trial testified that he prepared
the letter introduced in evidence as Exhibit 3, of date November 26,
1917, and handed it to the local manager, Mr. E. E. White, for
signature afterwhich, he new nothing of what became of it.
• Mr. White admitted having received the cablegram of the
application of Herrer, and signed the letter notifying Herrer of this
acceptance
• The witness further said that letters, after being signed, were sent to
the chief clerk and placed on the mailing desk for transmission. The
witness could not tell if the letter had every actually been placed in
the mails.
• Defense attorney testified that in Herrer’s will, he mentioned his
application for a life annuity, and that he said that the only document
relating to the transaction in his possession was the provisional
receipt.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
• Rafael Enriquez, the administrator of the estate, testified that he had
gone through the effects of the deceased and had found no letter of
notification from the insurance company to Mr. Herrer.
Issue: whether Herrer received notice of acceptance of his application.
Held:
• Our deduction from the evidence on this issue must be that the letter of
November 26, 1917, notifying Mr. Herrer that his application had been
accepted, was prepared and signed in the local office of the insurance
company, was placed in the ordinary channels for transmission, but as
far as we know, was never actually mailed and thus was never received
by the applicant.
• the Insurance Act deals with life insurance, it is silent as to the methods
to be followed in order that there may be a contract of insurance. On the
other hand, the Civil Code, in article 1802, not only describes a contact
of life annuity markedly similar to the one we are considering, but in
two other articles, gives strong clues as to the proper disposition of the
case.
• article 16 of the Civil Code provides that "In matters which are governed
by special laws, any deficiency of the latter shall be supplied by the
provisions of this Code." On the supposition, therefore, which is
incontestable, that the special law on the subject of insurance is deficient
in enunciating the principles governing acceptance, the subject-matter
of the Civil code, if there be any, would be controlling.
• In the Civil Code is found article 1262 providing that "Consent is shown
by the concurrence of offer and acceptance with respect to the thing and
the consideration which are to constitute the contract. An acceptance
made by letter shall not bind the person making the offer except from
the time it came to his knowledge. The contract, in such case, is
presumed to have been entered into at the place where the offer was
made." This latter article is in opposition to the provisions of article 54
of the Code of Commerce
• The Civil Code rule, that an acceptance made by letter shall bind the
person making the offer only from the date it came to his knowledge,
may not be the best expression of modern commercial usage. Still it
must be admitted that its enforcement avoids uncertainty and tends to
security. Not only this, but in order that the principle may not be taken
too lightly, let it be noticed that it is identical with the principles
announced by a considerable number of respectable courts in the United
States. The courts who take this view have expressly held that an
INSURANCE LAW Atty. Sta. Barbara
acceptance of an offer of insurance not actually or constructively
communicated to the proposer does not make a contract. Only the
mailing of acceptance, it has been said, completes the contract of
insurance, as the locus poenitentiae is ended when the acceptance
has passed beyond the control of the party.
• the law applicable to the case is found to be the second paragraph of
article 1262 of the Civil Code providing that an acceptance made by
letter shall not bind the person making the offer except from the time it
came to his knowledge. The pertinent fact is, that according to the
provisional receipt, three things had to be accomplished by the
insurance company before there was a contract: (1) There had to be a
medical examination of the applicant; (2) there had to be approval of the
application by the head office of the company; and (3) this approval had
in some way to be communicated by the company to the applicant.
• The fact as to the letter of notification thus fails to concur with the
essential elements of the general rule pertaining to the mailing and
delivery of mail matter as announced by the American courts, namely,
when a letter or other mail matter is addressed and mailed with postage
prepaid there is a rebuttable presumption of fact that it was received by
the addressee as soon as it could have been transmitted to him in the
ordinary course of the mails. But if any one of these elemental facts fails
to appear, it is fatal to the presumption. For instance, a letter will not be
presumed to have been received by the addressee unless it is shown that
it was deposited in the post-office, properly addressed and stamped.
• We hold that the contract for a life annuity in the case at bar was not
perfected because it has not been proved satisfactorily that the
acceptance of the application ever came to the knowledge of the
applicant.
ETERNAL GARDENS MEMORIAL PARK CORPORATION v.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
G.R. No. 166245 April 9, 2008
Facts:
• PHILAMLIFE entered into an agreement Creditor Group Life Policy
No. P-19202 with petitioner Eternal Gardens Memorial Park
Corporation (Eternal). Under the policy, the clients of Eternal who
purchased burial lots from it on installment basis would be insured by
Philamlife. The amount of insurance coverage depended upon the
existing balance of the purchased burial lots. The policy was to be
effective for a period of one year, renewable on a yearly basis.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
2
• Eternal was required under the policy to submit to Philamlife a list of
all new lot purchasers, together with a copy of the application of each
purchaser, and the amounts of the respective unpaid balances of all
insured lot purchasers. In relation to the instant petition, Eternal
complied by submitting a letter dated December 29, 1982, containing a
list of insurable balances of its lot buyers for October 1982.
• One of those included in the list as "new business" was a certain John
Chuang. His balance of payments was PhP 100,000. On August 2, 1984,
John Uy Chuang died.
• Eternal sent a letter dated August 20, 19845 to Philamlife, which served
as an insurance claim for Chuang’s death. Attached to the claim were
the following documents: (1) Chuang’s Certificate of Death; (2)
Identification Certificate stating that Chuang is a naturalized Filipino
Citizen; (3) Certificate of Claimant; (4) Certificate of Attending
Physician; and (5) Assured’s Certificate.
• Philamlife demanded more documents which was sent by Eternal. After
not hearing from Philamlife, Eternal demanded the payment of the
P100,000.00. Philamlife denied the claim, stating that no application for
Group Insurance was submitted to them prior to his death, but was
submitted after death on Nov. 15, 1984
• RTC Makati ruled in favor of Eternal stating that that due to Philamlife’s
inaction from the submission of the requirements of the group insurance
on December 29, 1982 to Chuang’s death on August 2, 1984, as well as
Philamlife’s acceptance of the premiums during the same period,
Philamlife was deemed to have approved Chuang’s application. The
RTC said that since the contract is a group life insurance, once proof of
death is submitted, payment must follow.
• CA reversed due to the fact that Chuang’s application was not enclosed
in Eternal’s letter dated December 29, 1982. It further ruled that the non-
accomplishment of the submitted application form violated Section 26
of the Insurance Code.
Issue:
1. WON there was a valid insurance coverage
2. WON there is a contract even if the insurance company did not act
upon it as soon as it got it
Held:
1. the factual findings of the RTC were reversed by the CA; thus, this Court
may review them.
INSURANCE LAW Atty. Sta. Barbara
• The fact of the matter is, the letter dated December 29, 1982, which
Philamlife stamped as received, states that the insurance forms for
the attached list of burial lot buyers were attached to the letter. Such
stamp of receipt has the effect of acknowledging receipt of the letter
together with the attachments. Such receipt is an admission by
Philamlife against its own interest. The burden of evidence has
shifted to Philamlife, which must prove that the letter did not contain
Chuang’s insurance application. However, Philamlife failed to do
so; thus, Philamlife is deemed to have received Chuang’s insurance
application.
• Philamlife’s allegation that Eternal’s witnesses ran out of credibility
and reliability due to inconsistencies is groundless. the witness
admitted not knowing where the original insurance application was,
but believed that the application was transmitted to Philamlife as an
attachment to a transmittal letter.
2. YES.
• In the agreement between Philamlife and Eternal, “The insurance of
any eligible Lot Purchaser shall be effective on the date he contracts
a loan with the Assured. However, there shall be no insurance if the
application of the Lot Purchaser is not approved by the Company.”
It is contradictory.
• It must be remembered that an insurance contract is a contract
of adhesion which must be construed liberally in favor of the
insured and strictly against the insurer in order to safeguard the
latter’s interest
• Clearly, the vague contractual provision, in Creditor Group Life
Policy No. P-1920 dated December 10, 1980, must be construed in
favor of the insured and in favor of the effectivity of the insurance
contract.
• On the other hand, the seemingly conflicting provisions must be
harmonized to mean that upon a party’s purchase of a memorial lot
on installment from Eternal, an insurance contract covering the lot
purchaser is created and the same is effective, valid, and binding
until terminated by Philamlife by disapproving the insurance
application.
• mere inaction of the insurer on the insurance application must not
work to prejudice the insured; it cannot be interpreted as a
termination of the insurance contract. The termination of the
insurance contract by the insurer must be explicit and unambiguous.
• As a final note, to characterize the insurer and the insured as
contracting parties on equal footing is inaccurate at best. Insurance
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
3
contracts are wholly prepared by the insurer with vast amounts of
experience in the industry purposefully used to its advantage. More
often than not, insurance contracts are contracts of adhesion
containing technical terms and conditions of the industry, confusing
if at all understandable to laypersons, that are imposed on those who
wish to avail of insurance. As such, insurance contracts are
imbued with public interest that must be considered whenever
the rights and obligations of the insurer and the insured are to
be delineated. Hence, in order to protect the interest of insurance
applicants, insurance companies must be obligated to act with haste
upon insurance applications, to either deny or approve the same, or
otherwise be bound to honor the application as a valid, binding, and
effective insurance contract.
• REVERSED
PHILAMCARE HEALTH SYSTEMS, INC., petitioner, vs. COURT
OF APPEALS and JULITA TRINOS, respondents.
[G.R. No. 125678. March 18, 2002]
Facts:
• Ernani Trinos, deceased husband of respondent Julita Trinos,
applied for a health care coverage with petitioner Philamcare Health
Systems, Inc. In the standard application form, he answered no to
the following question:
• Have you or any of your family members ever consulted or been
treated for high blood pressure, heart trouble, diabetes, cancer, liver
disease, asthma or peptic ulcer? (If Yes, give details)
• The application was approved for a period of one year from March
1, 1988 to March 1, 1989.Accordingly, he was issued Health Care
Agreement No. P010194. Under the agreement, respondents
husband was entitled to avail of hospitalization benefits, whether
ordinary or emergency, listed therein. He was also entitled to avail
of out-patient benefits such as annual physical examinations,
preventive health care and other out-patient services.
• The same was extended twice to June 1, 1990. The amount of
coverage was increased to max. P75,000.00 per disability.
• During the period of his coverage, Ernani suffered a heart attack and
was confined at the Manila Medical Center (MMC) for one month
beginning March 9, 1990. While her husband was in the hospital,
respondent tried to claim the benefits under the health care
agreement but was denied stating that the agreement was void.
INSURANCE LAW Atty. Sta. Barbara
• Doctors at the MMC allegedly discovered at the time of Ernanis
confinement that he was hypertensive, diabetic and asthmatic,
contrary to his answer in the application form. Thus, respondent
paid the hospitalization expenses herself, amounting to about
P76,000.00
• After some back and forth to the hospital, and because of financial
difficulty they were unable to confine Ernani. He died.
• Trinos went to the RTC for damages
• RTC – in favor of Trinos – actual, moral, exemplary damages and
attys fees
• CA – affirmed but deleted all awards for damages
Issue: WON CA was correct
Held:
Section 2 (1) of the Insurance Code defines a contract of insurance as an
agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent
event. An insurance contract exists where the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the
designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk;
and
5. In consideration of the insurers promise, the insured pays a
premium.
Section 3 of the Insurance Code states that any contingent or unknown event,
whether past or future, which may idemnify a person having an insurable
interest against him, may be insured against. Every person has an insurable
interest in the life and health of himself. Section 10 provides:
Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education
or support, or in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of
money, respecting property or service, of which death or illness
might delay or prevent the performance; and
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
4
(4) of any person upon whose life any estate or interest vested in him
depends.
• In the case at bar, the insurable interest of respondents husband
in obtaining the health care agreement was his own health. The
health care agreement was in the nature of non-life insurance,
which is primarily a contract of indemnity. Once the member
incurs hospital, medical or any other expense arising from
sickness, injury or other stipulated contingent, the health care
provider must pay for the same to the extent agreed upon under
the contract.
• Petitioner argues that respondents husband concealed a material
fact in his application. It appears that in the application for
health coverage, petitioners required respondents husband to
sign an express authorization for any person, organization or
entity that has any record or knowledge of his health to furnish
any and all information relative to any hospitalization,
consultation, treatment or any other medical advice or
examination.
• The answer assailed by petitioner was in response to the
question relating to the medical history of the applicant. This
largely depends on opinion rather than fact, especially coming
from respondents husband who was not a medical
doctor. Where matters of opinion or judgment are called for,
answers made in good faith and without intent to deceive will
not avoid a policy even though they are untrue
• (A)lthough false, a representation of the expectation, intention,
belief, opinion, or judgment of the insured will not avoid the
policy if there is no actual fraud in inducing the acceptance of
the risk, or its acceptance at a lower rate of premium, and this
is likewise the rule although the statement is material to the risk,
if the statement is obviously of the foregoing character, since in
such case the insurer is not justified in relying upon such
statement, but is obligated to make further inquiry. There is a
clear distinction between such a case and one in which the
insured is fraudulently and intentionally states to be true, as a
matter of expectation or belief, that which he then knows, to be
actually untrue, or the impossibility of which is shown by the
facts within his knowledge, since in such case the intent to
deceive the insurer is obvious and amounts to actual fraud
INSURANCE LAW Atty. Sta. Barbara
• The fraudulent intent on the part of the insured must be
established to warrant rescission of the insurance contract.
Concealment as a defense for the health care provider or insurer
to avoid liability is an affirmative defense and the duty to
establish such defense by satisfactory and convincing evidence
rests upon the provider or insurer
• In any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having
assumed a responsibility under the agreement, petitioner is
bound to answer the same to the extent agreed upon. In the end,
the liability of the health care provider attaches once the
member is hospitalized for the disease or injury covered by the
agreement or whenever he avails of the covered benefits which
he has prepaid.
• Under Section 27 of the Insurance Code, a concealment entitles
the injured party to rescind a contract of insurance. The right to
rescind should be exercised previous to the commencement of
an action on the contract.[17] In this case, no rescission was
made. Besides, the cancellation of health care agreements as in
insurance policies require the concurrence of the following
conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the
policy of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address
shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the
Insurance Code and upon request of insured, to furnish facts on
which cancellation is based.[
• None of the conditions was fulfilled in this case.
• Petitioner also contends that respondent is not the legal wife having
at the time of their marriage, the deceased was married to another
woman. The health care agreement is in the nature of a contract of
indemnity. Hence, payment should be made to the party who
incurred the expenses. It is not controverted that respondent paid all
the hospital and medical expenses. She is therefore entitled to
reimbursement. The records adequately prove the expenses incurred
by respondent for the deceaseds hospitalization, medication and the
professional fees of the attending physicians
• CA affirmed.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
5
PHILIPPINE HEALTH CARE PROVIDERS INC. V. CIR
GR No. 167330, September 18, 2009
Facts:
• Philippine Health Care Providers is a domestic corporation whose
primary purpose is [t]o establish, maintain, conduct and operate a
prepaid group practice health care delivery system or a health
maintenance organization to take care of the sick and disabled
persons enrolled in the health care plan and to provide for the
administrative, legal, and financial responsibilities of the
organization.
• Individuals enrolled in its health care programs pay an annual
membership fee and are entitled to various preventive, diagnostic
and curative medical services provided by its duly licensed
physicians, specialists and other professional technical staff
participating in the group practice health delivery system at a
hospital or clinic owned, operated or accredited by it.
• CIR sent a formal demand letter demanding payment of deficiency
taxes plus interest and surcharges from 1996-1997 for
P224,702,641.18 pursuant to Sec. 185 of the 1997 Tax Code
• Petitioner protested the assessment. CIR did not act on it. Petitioner
filed a petition for review in the CTA which partially granted the
petition. Ordering to desist from the payment of the DST deficiency
tax, but pay the VAT
• Respondent appealed to CA stating that the DST is a contract of
insurance. CA rendered its decision holding that petitioners health
care agreement was in the nature of a non-life insurance contract
subject to DST.
• In a decision dated June 12, 2008, the Court denied the petition and
affirmed the CAs decision. We held that petitioners health care
agreement during the pertinent period was in the nature of non-life
insurance which is a contract of indemnity,
• We also ruled that petitioners contention that it is a health
maintenance organization (HMO) and not an insurance company is
irrelevant because contracts between companies like petitioner and
the beneficiaries under their plans are treated as insurance
contracts. Moreover, DST is not a tax on the business transacted but
an excise on the privilege, opportunity or facility offered at
exchanges for the transaction of the business.
• This is a Motion for Reconsideration
INSURANCE LAW Atty. Sta. Barbara
Issue: WON petitioner was an HMO engaged in insurance during the taxable
year assailed
Held: NO.
I.
Nature of petitioner’s business:
It is engaged in preventive, diagnostic, and curative medical services.
Individuals enrolled in its health care program pay an annual membership fee.
Membership is on a year-to-year basis. To avail of petitioners health care
programs, the individual members are required to sign and execute a standard
health care agreement embodying the terms and conditions for the provision
of the health care services. The same agreement contains the various health
care services that can be engaged by the enrolled member. Except for the
curative aspect of the medical service offered, the enrolled member may
actually make use of the health care services being offered by petitioner at
any time.
Previous decision: it is irrelevant that petitioner is an HMO and not an
insurer because its agreements are treated as insurance contracts and the DST
is not a tax on the business but an excise on the privilege, opportunity or
facility used in the transaction of the business.
Petitioner’s contention: it is of critical importance to characterize the
business it is engaged in, that is, to determine whether it is an HMO or an
insurance company, as this distinction is indispensable in turn to the issue of
whether or not it is liable for DST on its health care agreements.
SC’s new stand:
Sec. 185 NIRC 1997:
Section 185. Stamp tax on fidelity bonds and other insurance policies. On
all policies of insurance or bonds or obligations of the nature of indemnity
for loss, damage, or liability made or renewed by any person, association
or company or corporation transacting the business of accident, fidelity,
employers liability, plate, glass, steam boiler, burglar, elevator, automatic
sprinkler, or other branch of insurance (except life, marine, inland, and
fire insurance) …
Applying statcon, Ut magis valeat quam pereat, that is, we choose the
interpretation which gives effect to the whole of the statute its every word.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
6
From the language of Section 185, it is evident that two requisites must
concur before the DST can apply, namely:
(1) the document must be a policy of insurance or an obligation in the
nature of indemnity and
(2) the maker should be transacting the business of accident, fidelity,
employers liability, plate, glass, steam boiler, burglar, elevator, automatic
sprinkler, or other branch of insurance (except life, marine, inland, and fire
insurance).
• Petitioner is an HMO. Under RA 7875 (or The National Health Insurance
Act of 1995), an HMO is an entity that provides, offers or arranges for
coverage of designated health services needed by plan members for a
fixed prepaid premium.
• Citing Sec. 2 of the Insurance Code, and American jurisprudenc, have
determined that an HMO is not in the insurance business. One test that
they have applied is whether the assumption of risk and indemnification
of loss (which are elements of an insurance business) are the principal
object and purpose of the organization or whether they are merely
incidental to its business. If these are the principal objectives, the business
is that of insurance. But if they are merely incidental and service is the
principal purpose, then the business is not insurance.
• Citing Jordan v. Group Health Association (Am jurisprudence) the Court
of Appeals of the District of Columbia Circuit held that Group Health
Association should not be considered as engaged in insurance activities
since it was created primarily for the distribution of health care
services rather than the assumption of insurance risk.
Insurance HMO
are concerned primarily, if not cooperative is concerned
exclusively, with risk and the principally with getting service
consequences of its descent, not rendered to its members and doing
with service, or its extension in so at lower prices made possible by
kind, quantity or distribution; with quantity purchasing and economies
the unusual occurrence, not the in operation.
daily routine of living. Hazard is Its primary purpose is to reduce the
predominant. cost rather than the risk of medical
care; to broaden the service to the
individual in kind and quantity; to
enlarge the number receiving it; to
regularize it as an everyday incident
of living, like purchasing food and
clothing or oil and gas, rather than
INSURANCE LAW Atty. Sta. Barbara
merely protecting against the
financial loss caused by 2.
extraordinary and unusual
occurrences, such as death, disaster
at sea, fire and tornado
To summarize, the distinctive features of the cooperative are the
rendering of service, its extension, the bringing of physician and patient
together, the preventive features, the regularization of service as well as 3.
payment, the substantial reduction in cost by quantity purchasing in
short, getting the medical job done and paid for; not, except incidentally
to these features, the indemnification for cost after the services is
rendered. Except the last, these are not distinctive or generally 4.
characteristic of the insurance arrangement.
obviously it was not the purpose of the insurance statutes to regulate all
arrangements for assumption or distribution of risk. That view would cause
them to engulf practically all contracts, particularly conditional sales and
contingent service agreements. The fallacy is in looking only at the risk
element, to the exclusion of all others present or their subordination to
it. The question turns, not on whether risk is involved or assumed, but
on whether that or something else to which it is related in the particular
plan is its principal object purpose
II. 5.
As an HMO, it is its obligation to maintain the good health of its members.
Accordingly, its health care programs are designed to prevent or to
minimize the possibility of any assumption of risk on its part. Thus, its
undertaking under its agreements is not to indemnify its members against any
loss or damage arising from a medical condition but, on the contrary, to
provide the health and medical services needed to prevent such loss or
damage.
Section 185 states that DST is imposed on all policies of insurance or
obligations of the nature of indemnity for loss, damage, or liability. HMO
not an insurance contract contemplated under Sec. 185 of NIRC 1997.
Citing Sec 2 of the Insurance Code
1. The insured has an insurable interest;
- even if a contract contains all the elements of an insurance
contract, if its primary purpose is the rendering of service, it is
not a contract of insurance
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
7
The insured is subject to a risk of loss by the happening of the
designed peril;
- there is no loss, damage or liability on the part of the member
that should be indemnified by petitioner as an HMO. Under the
agreement, the member pays petitioner a predetermined
consideration in exchange for the services
The insurer assumes the risk;
- A member can avail of the services even in the absence of any
peril, loss or damage on his or her part.
Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk
and
- In case of emergency, petitioner is obliged to reimburse the
member who receives care from a non-participating physician
or hospital. However, this is only a very minor part of the list of
services available. The assumption of the expense by petitioner
is not confined to the happening of a contingency but includes
incidents even in the absence of illness or injury.
- This is not the focal point of the agreement but an extension of
the medical services
In consideration of the insurers promise, the insured pays a
premium.
- Although risk is a primary element of an insurance contract, it
is not necessarily true that risk alone is sufficient to establish
it. Almost anyone who undertakes a contractual obligation
always bears a certain degree of financial risk. Consequently,
there is a need to distinguish prepaid service contracts (like
those of petitioner) from the usual insurance contracts.
- INSURANCE RISK: a.k.a. Actuarial risk
- is the risk that the cost of insurance claims might be higher
than the premiums paid. The amount of premium is calculated
on the basis of assumptions made relative to the insured.
- HMO: assuming that petitioners commitment to provide
medical services to its members can be construed as an
acceptance of the risk that it will shell out more than the prepaid
fees, it still will not qualify as an insurance contract because
petitioners objective is to provide medical services at reduced
cost, not to distribute risk like an insurer.
INSURANCE LAW Atty. Sta. Barbara
III.
There was no legislative intent to impose DST on Health Care Agreements
of HMO
We can clearly see from these two histories (of the DST on the one hand and
HMOs on the other) that when the law imposing the DST was first passed,
HMOs were yet unknown in the Philippines. However, when the various
amendments to the DST law were enacted, they were already in existence in
the Philippines and the term had in fact already been defined by RA 7875. If
it had been the intent of the legislature to impose DST on health care
agreements, it could have done so in clear and categorical terms. It had many
opportunities to do so. But it did not. The fact that the NIRC contained no
specific provision on the DST liability of health care agreements of HMOs at
a time they were already known as such, belies any legislative intent to
impose it on them. As a matter of fact, petitioner was assessed its DST
liability only on January 27, 2000, after more than a decade in the
business as an HMO.
NOTE: Petitioner’s tax liability was extinguished by RA 9840 Sec 6(a)
granting it tax amnesty
MR is granted.
FORTUNE INSURANCE AND SURETY CO., INC. vs.
COURT OF APPEALS and PRODUCERS BANK OF THE
PHILIPPINES
G.R. No. 115278 May 23, 1995
Facts:
• plaintiff was insured by the defendants and an insurance policy was
issued
• An armored car of the plaintiff, while in the process of transferring cash
in the sum of P725,000.00 under the custody of its teller, Maribeth
Alampay, from its Pasay Branch to its Head Office at 8737 Paseo de
Roxas, Makati, Metro Manila on June 29, 1987, was robbed of the said
cash. The robbery took place while the armored car was traveling along
Taft Avenue in Pasay City;
• armored car was driven by Benjamin Magalong Y de Vera, escorted by
Security Guard Saturnino Atiga Y Rosete (assigned by Unicorn Security
Services, Inc.) Driver Magalong was assigned by PRC Management
Systems
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
8
• After an investigation conducted by the Pasay police authorities, the
driver Magalong and guard Atiga were charged, together with Edelmer
Bantigue Y Eulalio, Reynaldo Aquino and John Doe, with violation of
P.D. 532 (Anti-Highway Robbery Law) before the Fiscal of Pasay City.
• Demands were made by the plaintiff upon the defendant to pay the
amount of the loss of P725,000.00, but the latter refused to pay as the
loss is excluded from the coverage of the insurance policy, “(b) any loss
caused by any dishonest, fraudulent or criminal act of the insured or any
officer, employee, partner, director, trustee or authorized
representative of the Insured whether acting alone or in conjunction
with others. . . .”
• plaintiff opposes the contention of the defendant and contends that Atiga
and Magalong are not its "officer, employee, . . . trustee or authorized
representative . . . at the time of the robbery.
• RTC ruled in favor Producers Bank
• CA affirmed
Issue: WON CA’s decision is right
Held:
• It should be noted that the insurance policy entered into by the parties is
a theft or robbery insurance policy which is a form of casualty insurance.
Section 174 of the Insurance Code provides:
• Sec. 174. Casualty insurance is insurance covering loss or liability
arising from accident or mishap, excluding certain types of loss which
by law or custom are considered as falling exclusively within the scope
of insurance such as fire or marine. It includes, but is not limited to,
employer's liability insurance, public liability insurance, motor vehicle
liability insurance, plate glass insurance, burglary and theft insurance,
personal accident and health insurance as written by non-life insurance
companies, and other substantially similar kinds of insurance.
• Except with respect to compulsory motor vehicle liability insurance, the
Insurance Code contains no other provisions applicable to casualty
insurance or to robbery insurance in particular. These contracts are,
therefore, governed by the general provisions applicable to all types of
insurance. Outside of these, the rights and obligations of the parties must
be determined by the terms of their contract, taking into consideration
its purpose and always in accordance with the general principles of
insurance law
• Persons frequently excluded under such provisions are those in the
insured's service and employment. The purpose of the exception is to
INSURANCE LAW Atty. Sta. Barbara
guard against liability should the theft be committed by one having
unrestricted access to the property. In such cases, the terms specifying
the excluded classes are to be given their meaning as understood in
common speech. The terms "service" and "employment" are generally
associated with the idea of selection, control, and compensation.
• A contract of insurance is a contract of adhesion, thus any ambiguity
therein should be resolved against the insurer, or it should be construed
liberally in favor of the insured and strictly against the insurer.
Limitations of liability should be regarded with extreme jealousy and
must be construed
in such a way, as to preclude the insurer from non-compliance with its
obligation. It goes without saying then that if the terms of the contract
are clear and unambiguous, there is no room for construction and such
terms cannot be enlarged or diminished by judicial construction.
• An insurance contract is a contract of indemnity upon the terms and
conditions specified therein. It is settled that the terms of the policy
constitute the measure of the insurer's liability. In the absence of
statutory prohibition to the contrary, insurance companies have the same
rights as individuals to limit their liability and to impose whatever
conditions they deem best upon their obligations not inconsistent with
public policy.
Another issue: WON Magalong and Atiga are employees/authorized
representatives falling under the general exception clause
• It is clear to us that insofar as Fortune is concerned, it was its intention
to exclude and exempt from protection and coverage losses arising from
dishonest, fraudulent, or criminal acts of persons granted or having
unrestricted access to Producers' money or payroll. When it used then
the term "employee," it must have had in mind any person who qualifies
as such as generally and universally understood, or jurisprudentially
established in the light of the four standards in the determination of the
employer-employee relationship, 21 or as statutorily declared even in a
limited sense as in the case of Article 106 of the Labor Code which
considers the employees under a "labor-only" contract as employees of
the party employing them and not of the party who supplied them to the
employer.
• But even granting for the sake of argument that these contracts were not
"labor-only" contracts, and PRC Management Systems and Unicorn
Security Services were truly independent contractors, we are satisfied
that Magalong and Atiga were, in respect of the transfer of Producer's
money from its Pasay City branch to its head office in Makati, its
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
9
"authorized representatives" for these particular tasks, the three acted as
agents of Producers. A "representative" is defined as one who represents
or stands in the place of another; one who represents others or another
in a special capacity, as an agent, and is interchangeable with "agent."
• In view of the foregoing, Fortune is exempt from liability under the
general exceptions clause of the insurance policy. Petition is granted.
SUN INSURANCE OFFICE, LTD., vs. CA
G.R. No. 92383 July 17, 1992
FACTS:
• Sun Insurance issued Personal Accident Policy No. 05687 to Felix
Lim, Jr. with a face value of P200,000.00. Two months later, he was
dead with a bullet wound in his head. As beneficiary, his wife
Nerissa Lim sought payment on the policy but her claim was
rejected. The petitioner agreed that there was no suicide. It
argued, however that there was no accident either.
• Pilar Nalagon, Lim's secretary, was the only eyewitness to his death
which happened after his mother's birthday party. According to
Nalagon, Lim was in a happy mood (but not drunk) and was playing
with his handgun, from which he had previously removed the
magazine. As she watched television, he stood in front of her and
pointed the gun at her. She pushed it aside and said it might he
loaded. He assured her it was not and then pointed it to his temple.
The next moment there was an explosion and Lim slumped to the
floor. He was dead before he fell
• The widow sued the petitioner in the RTC and was sustained. The
petitioner was sentenced to pay her P200,000.00, representing the
face value of the policy together with award of damages. This
decision was affirmed on appeal, and the motion for reconsideration
was denied.
• The petitioner then came to this Court to fault the Court of Appeals
for approving the payment of the claim and the award of damages.
ISSUE:
1. WON Lim’s death was an accident
INSURANCE LAW Atty. Sta. Barbara
Accident- happens by chance or fortuitously, without intention or design, and
which is unexpected, unusual, and unforeseen. It is an event that takes place
without one's foresight or expectation — an event that proceeds from an
unknown cause, or is an unusual effect of a known case, and therefore not
expected.
In light of these definitions, the Court is convinced that the incident that
resulted in Lim's death was indeed an accident. "there is no accident when
a deliberate act is performed unless some additional, unexpected, independent
and unforeseen happening occurs which produces or brings about their injury
or death." There was such a happening. This was the firing of the gun,
which was the additional unexpected and independent and unforeseen
occurrence that led to the insured person's death.
The petitioner also cites one of the four exceptions provided for in the
insurance contract and contends that the private petitioner's claim is barred
by such provision. It is there stated:
The company shall not be liable in respect of
1. Bodily injury
b. consequent upon
i) The insured person attempting to commit suicide or
willfully exposing himself to needless peril except in an
attempt to save human life.
2. WON Sun Insurance is liable
To repeat, the parties agree that Lim did not commit suicide. Nevertheless,
the petitioner contends that the insured willfully exposed himself to
needless peril and thus removed himself from the coverage of the
insurance policy.
It should be noted at the outset that suicide and willful exposure to needless
peril are in pari materia because they both signify a disregard for one's life.
The only difference is in degree, as suicide imports a positive act of ending
such life whereas the second act indicates a reckless risking of it that is almost
suicidal in intent.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
10
The petitioner maintains that by the mere act of pointing the gun to hip
temple, Lim had willfully exposed himself to needless peril and so came
under the exception. The theory is that a gun is per se dangerous and
should therefore be handled cautiously in every case.
However, Lim had removed the magazine from the gun and believed it was
no longer dangerous. He expressly assured her that the gun was not loaded.
It is submitted that Lim did not willfully expose himself to needless peril
when he pointed the gun to his temple because the fact is that he thought it
was not unsafe to do so. The act was precisely intended to assure Nalagon
that the gun was indeed harmless.
Lim was unquestionably negligent and that negligence cost him his own
life. But it should not prevent his widow from recovering from the
insurance policy he obtained precisely against accident. There is nothing
in the policy that relieves the insurer of the responsibility to pay the indemnity
agreed upon if the insured is shown to have contributed to his own accident.
Indeed, most accidents are caused by negligence. There are only four
exceptions expressly made in the contract to relieve the insurer from
liability, and none of these exceptions is applicable in the case at bar. **
It bears noting that insurance contracts are as a rule supposed to be interpreted
liberally in favor of the assured. There is no reason to deviate from this rule,
especially in view of the circumstances of this case as above analyzed.
Nerissa Lim is not entitled to damages because Sun Insurance acted in good
faith when it rejected the Insurance claim. The rejection of Nerissa’s claim
was not raised for the purpose of evading a legitimate obligation.
TIU vs ARRIEGADO
FACTS:
• Cargo truck marked "Condor Hollow Blocks and General
Merchandise" was loaded with firewood in Bogo, Cebu and left
for Cebu City.
• Jjust as the truck passed over a bridge, one of its rear tires
exploded. The driver, Sergio Pedrano, then parked along the right
side of the national highway and removed the damaged tire to have
INSURANCE LAW Atty. Sta. Barbara
it vulcanized at a nearby shop. Pedrano left his helper, Jose
Mitante, Jr. to keep watch over the stalled vehicle, and instructed the
latter to place a spare tire six fathoms away behind the stalled truck
to serve as a warning for oncoming vehicles. The truck’s tail lights
were also left on.
• As the D’ Rough Riders passenger driven by Virgilio Te Laspiñas
was crossing the bridge, Laspiñas saw the stalled truck, which was
then about 25 meters away. He applied the breaks and tried to
swerve to the left to avoid hitting the truck. But it was too late; the
bus rammed into the truck’s left rear. The impact damaged the
right side of the bus and left several passengers injured.
Passenger Pedro Arriesgado lost consciousness and suffered a
fracture in his right colles. His wife, Felisa, was brought to the the
hospital and died shortly thereafter.
• Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorney’s fees before the RTC against the
petitioners. The respondent alleged that the passenger bus in
question was cruising at a fast and high speed along the national
road, and that petitioner Laspiñas did not take precautionary
measures to avoid the accident.
• The petitioners, for their part, filed a Third-Party Complaint
against the following: respondent Philippine Phoenix Surety and
Insurance, Inc. (PPSII), petitioner Tiu’s insurer; respondent
Benjamin Condor, the registered owner of the cargo truck; and
respondent Sergio Pedrano, the driver of the truck.
• It was alleged that the driver of the the vehicular accident in
question, and Benjamin Condor, as the registered owner of the cargo
truck who failed to exercise due diligence in the selection and
supervision of third-party defendant Sergio Pedrano, are jointly and
severally liable to the third-party plaintiffs for whatever liability that
may be adjudged against said third-party plaintiffs or are directly
liable of (sic) the alleged death of plaintiff’s wife
• That the aforesaid passenger bus, owned and operated by William
Tiu, is covered by a common carrier liability insurance by Philippine
Phoenix Surety and Insurance, Inc., in favor of William Tiu and that
the said insurance coverage was valid, binding and subsisting
during the time of the aforementioned incident and that after the
aforesaid alleged incident, third-party plaintiff notified third-party
defendant Philippine Phoenix Surety and Insurance, Inc., of the
alleged incident hereto mentioned, but to no avail;
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
11
• After the parties presented their respective evidence, the trial
court ruled in favor of respondent Arriesgado and concluded
that petitioner Laspiñas was negligent. After the petitioner’s
motion for reconsideration of the said decision was denied, the
petitioners elevated the case to the CA contending among others if
Philippine Phoenix Surety and Insurance Inc. is liable to William
Tiu. CA affirmed the trial court’s decision ruling that no evidence
was presented against the respondent PPSII, and as such, it
could not be held liable for respondent Arriesgado’s claim, nor
for contribution, indemnification and/or reimbursement in case
the petitioners were adjudged liable.
ISSUE: WON Philippine Phoenix Surety and Insurance liable to
Arriesgado and Tiu as insurer
HELD: No.
A perusal of the records will show that when the petitioners filed the Third-
Party Complaint against respondent PPSII, they failed to attach a copy of the
terms of the insurance contract itself. Only Certificate of Cover issued in
favor of "Mr. William Tiu, was appended to the third-party complaint. The
date of issuance, July 22, 1986, the period of insurance, from July 22, 1986
to July 22, 1987
In fact, respondent PPSII did not dispute the existence of such contract, and
admitted that it was liable thereon. It claimed, however, that it had attended
to and settled the claims of other passengers who were injured during
the incident. With respect to the claim of plaintiff, herein answering third
party defendant through its authorized insurance adjuster attended to said
claim. Only that it cannot accede to the demand of said claimant
considering that the claim was way beyond the scheduled indemnity as
per contract entered into with third party plaintiff William Tiu and
Philippine Phoenix Surety and Insurance, Inc
Considering the admissions made by respondent PPSII, the existence of the
insurance contract and the salient terms thereof cannot be dispatched. It
must be noted that after filing its answer, respondent PPSII no longer
objected to the presentation of evidence by respondent Arriesgado and
the insured petitioner Tiu.
INSURANCE LAW Atty. Sta. Barbara
As can be gleaned from the Certificate of Cover, such insurance contract
was issued pursuant to the Compulsory Motor Vehicle Liability
Insurance Law. It was expressly provided therein that the limit of the
insurer’s liability for each person was ₱12,000, while the limit per
accident was pegged at ₱50,000.
An insurer in an indemnity contract for third party liability is directly liable
to the injured party up to the extent specified in the agreement but it
cannot be held solidarily liable beyond that amount. The respondent
PPSII could not then just deny petitioner Tiu’s claim; it should have paid
₱12,000 for the death of Felisa Arriesgado, and respondent Arriesgado’s
hospitalization expenses of ₱1,113.80, which the trial court found to have
been duly supported by receipts. The total amount of the claims, even when
added to that of the other injured passengers which the respondent PPSII
claimed to have settled,60 would not exceed the ₱50,000 limit under the
insurance agreement.
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is
such that it is primarily intended to provide compensation for the death
or bodily injuries suffered by innocent third parties or passengers as a
result of the negligent operation and use of motor vehicles. The victims
and/or their dependents are assured of immediate financial assistance,
regardless of the financial capacity of motor vehicle owners.
However, although the victim may proceed directly against the insurer for
indemnity, the third party liability is only up to the extent of the insurance
policy and those required by law. While it is true that where the insurance
contract provides for indemnity against liability to third persons, and such
persons can directly sue the insurer, the direct liability of the insurer under
indemnity contracts against third party liability does not mean that the insurer
can be held liable in solidum with the insured and/or the other parties found
at fault. For the liability of the insurer is based on contract; that of the
insured carrier or vehicle owner is based on tort. Obviously, the insurer
could be held liable only up to the extent of what was provided for by the
contract of insurance, in accordance with the CMVLI law.
FIGURACION VDA. DE MAGLANA vs HONORABLE FRANCISCO
Z. CONSOLACION
G.R. No. 60506 August 6, 1992
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
12
FACTS:
• Early morning, Lope Maglana while on his way to his work station,
driving a motorcycle owned by the Bureau of Customs, met an
accident that resulted in his death. He died on the spot. The PUJ jeep
that bumped the deceased was driven by Pepito Into, operated and
owned by defendant Destrajo.
• The PUJ jeep was overtaking another passenger jeep that was going
towards the city poblacion. While overtaking, the PUJ jeep of
defendant Destrajo running abreast with the overtaken jeep,
bumped the motorcycle driven by the deceased who was thrown
from the road and met his untimely death.
• The heirs of Maglana filed an action for damages and attorney's fees
against operator Patricio Destrajo and AFISCO. An information for
homicide thru reckless imprudence was also filed against Pepito
Into.
• During the pendency of the civil case, Into was sentenced to
imprisonment and to indemnify the heirs of Lope Maglana, Sr.
• The lower court rendered a decision finding that Destrajo had not
exercised sufficient diligence as the operator of the jeepney. The
defendant insurance company is ordered to reimburse
defendant Destrajo whatever amounts the latter shall have paid
only up to the extent of its insurance coverage.
• Petitioners filed a motion for the reconsideration of the second
paragraph of the dispositive portion of the decision contending that
AFISCO should not merely be held secondarily liable because
the Insurance Code provides that the insurer's liability is "direct
and primary and/or jointly and severally with the operator of
the vehicle, although only up to the extent of the insurance
coverage."
• In its comment on the motion for reconsideration, AFISCO argued
that since the Insurance Code does not expressly provide for a
solidary obligation, the presumption is that the obligation is
joint.
• The lower court denied the motion for reconsideration ruling that
since the insurance contract "is in the nature of suretyship, then the
liability of the insurer is secondary only up to the extent of the
insurance coverage."
INSURANCE LAW Atty. Sta. Barbara
ISSUE: WON insurance company is directly and solidarily liable with the
negligent operator up to the extent of its insurance coverage.
HELD:
Sec. 1 — LIABILITY TO THE PUBLIC
. The Company will, subject to the Limits of Liability, pay all sums necessary
to discharge liability of the insured in respect of
a) death of or bodily injury to any THIRD PARTY
3. In the event of the death of any person entitled to indemnity under
this Policy, the Company will, in respect of the liability incurred to such
person indemnify his personal representatives in terms of, and subject to the
terms and conditions hereof. 7
• The above-quoted provision leads to no other conclusion but that
AFISCO can be held directly liable by petitioners. As this Court
ruled in Shafer vs. Judge, RTC of Olongapo City, Br. 75, "[w]here
an insurance policy insures directly against liability, the insurer's
liability accrues immediately upon the occurrence of the injury or
even upon which the liability depends, and does not depend on the
recovery of judgment by the injured party against the insured." The
underlying reason behind the third party liability (TPL) of the
Compulsory Motor Vehicle Liability Insurance is "to protect injured
persons against the insolvency of the insured who causes such
injury, and to give such injured person a certain beneficial interest
in the proceeds of the policy . . ." 9 Since petitioners had received
from AFISCO the sum of P5,000.00 under the no-fault clause,
AFISCO's liability is now limited to P15,000.00.
• However, the court does not agree that AFISCO is likewise
solidarily liable with Destrajo.
• While it is true that where the insurance contract provides for
indemnity against liability to third persons, such third persons can
directly sue the insurer, however, the direct liability of the insurer
under indemnity contracts against third party liability does not
mean that the insurer can be held solidarily liable with the insured
and/or the other parties found at fault. The liability of the insurer is
based on contract; that of the insured is based on tort.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
13
• The Court then proceeded to distinguish the extent of the liability
and manner of enforcing the same in ordinary contracts from
that of insurance contracts. While in solidary obligations, the
creditor may enforce the entire obligation against one of the solidary
debtors, in an insurance contract, the insurer undertakes for a
consideration to indemnify the insured against loss, damage or
liability arising from an unknown or contingent event. Thus,
petitioner therein, which, under the insurance contract is liable only
up to P20,000.00, can not be made solidarily liable with the insured
for the entire obligation of P29,013.00 otherwise there would result
"an evident breach of the concept of solidary obligation."
The liability of AFISCO based on the insurance contract is direct, but
not solidary with that of Destrajo which is based on Article 2180 of the
Civil Code. As such, petitioners have the option either to claim the P15,000
from AFISCO and the balance from Destrajo or enforce the entire judgment
from Destrajo subject to reimbursement from AFISCO to the extent of the
insurance coverage.
JEWEL VILLACORTA vs.THE INSURANCE COMMISSION
G.R. No. L-54171 October 28, 1980
FACTS:
• Complainant was the owner of a Colt Lancer, Model 1976, insured
with respondent company
• The vehicle was brought to the Sunday Machine Works, Inc., for
general check-up and repairs. On May 11, 1978, while it was in the
custody of the Sunday Machine Works, the car was allegedly taken
by six (6) persons and driven out to Montalban, Rizal.
• While travelling, the car figured in an accident, hitting and
bumping a gravel and sand truck parked at the right side of the road
going south. As a consequence, the gravel and sand truck veered to
the right side of the pavement going south and the car veered to the
right side of the pavement going north.
• The driver, Benito Mabasa, and one of the passengers died and
the other four sustained physical injuries. The car, as well,
suffered extensive damage. Complainant, thereafter, filed a claim
for total loss with the respondent company but claim was denied.
Hence, complainant, was compelled to institute the present action.
INSURANCE LAW Atty. Sta. Barbara
• Respondent insurance commission, however, invoked the policy on
Authorized Driver clause and dismissed petitioner's complaint
because the accident did not fall within the provisions of the
policy either for the Own Damage or Theft coverage
• Respondent commission upheld private respondent's contention on
the "Authorized Driver" clause in this wise: "It must be observed
that under the above-quoted provisions, the policy limits the use of
the insured vehicle to two (2) persons only, namely: the insured
himself or any person on his (insured's) permission. Under the
second category, it is to be noted that the words "any person' is
qualified by the phrase
• Respondent commission likewise upheld private respondent's
assertion that the car was not stolen and therefore not covered
by the Theft clause
• The fact that the car was taken by one of the residents of the
Sunday Machine Works, and the withholding of the same, for a
joy ride should not be construed to mean 'taking' under Art. 308
of the Revised Penal Code. If at all there was a 'taking', the same
was merely temporary in nature. A temporary taking is held not a
taking insured against
o The Court finds respondent commission's dismissal of the
complaint to be contrary to the evidence and the law.
ISSUES:
1. WON authorized driver clause may be properly invoked
Court held that is too restrictive and contrary to the established principle that
insurance contracts, being contracts of adhesion where the only participation
of the other party is the signing of his signature or his "adhesion" thereto,
"obviously call for greater strictness and vigilance on the part of courts
of justice with a view of protecting the weaker party from abuse and
imposition, and prevent their becoming traps for the unwary.
The main purpose of the "authorized driver" clause, is that a person other
than the insured owner, who drives the car on the insured's order, such as
his regular driver, or with his permission, such as a friend or member of the
family or the employees of a car service or repair shop must be duly licensed
drivers and have no disqualification to drive a motor vehicle.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
14
A car owner who entrusts his car to an established car service and repair shop
necessarily entrusts his car key to the shop owner and employees who
are presumed to have the insured's permission to drive the car for
legitimate purposes of checking or road-testing the car. The mere
happenstance that the employee(s) of the shop owner diverts the use of the
car to his own illicit or unauthorized purpose in violation of the trust reposed
in the shop by the insured car owner does not mean that the "authorized
driver" clause has been violated such as to bar recovery, provided that such
employee is duly qualified to drive under a valid driver's license.
2. WON the car was not stolen, therefore it should not be covered
by the Theft Clause
The Court rejects respondent commission's premise that there must be an
intent on the part of the taker of the car "permanently to deprive the insured
of his car" and that since the taking here was for a "joy ride" and "merely
temporary in nature," a "temporary taking is held not a taking insured
against."
The evidence does not warrant respondent commission's findings that it was
a mere "joy ride". From the very investigator's report cited in its
comment, 3 the police found from the waist of the car driver Benito Mabasa
Bartolome who smashed the car and was found dead right after the incident
"one cal. 45 Colt. and one apple type grenade," hardly the materials one
would bring along on a "joy ride". Then, again, it is equally evident that the
taking proved to be quite permanent rather than temporary, for the car
was totally smashed in the fatal accident and was never returned in
serviceable and useful condition to petitioner-owner.
Assuming, despite the totally inadequate evidence, that the taking was
"temporary" and for a "joy ride", the Court sustains as the better view that
which holds that when a person, either with the object of going to a certain
place, or learning how to drive, or enjoying a free ride, takes possession
of a vehicle belonging to another, without the consent of its owner, he is
guilty of theft because by taking possession of the personal property
belonging to another and using it, his intent to gain is evident since he
derives therefrom utility, satisfaction, enjoyment and pleasure.
The insurer must therefore indemnify the petitioner-owner for the total loss
of the insured car in the sum of P35,000.00 under the theft clause of the
INSURANCE LAW Atty. Sta. Barbara
policy, subject to the filing of such claim for reimbursement or payment as it
may have as subrogee against the Sunday Machine Works, Inc.
PALERMO vs. PYRAMID INSURANCE CO., INC.
Facts:
- After purchasing Nissan Cedric de Luxe Sedan car from the Ng Sam
Bok Motors Co., Andrew Palermo insured the same with the defendant
against any loss or damage for P 20k and against third party liability
for P 10k. Defendant then issued Private Car Comprehensive Policy
No. MV-1251.
- The automobile was, however, mortgaged by the plaintiff with the
vendor, Ng Sam Bok Motors Co., to secure the payment of the balance
of the purchase price.
- While driving the automobile, the plaintiff met a violent accident. The
La Carlota City fire engine crashed head on, and as a consequence, the
plaintiff sustained physical injuries, his father, Cesar Palermo, who
eventually died while the car was totally wrecked.
- The defendant was immediately notified of the occurrence, and upon
its orders.
- The insurance policy, grants an option unto the defendant, in case of
accident either (1) to indemnify the plaintiff for loss/damage to the car
in cash or (2) to replace the damaged car. The defendant, however,
refused to take either of the above-mentioned alternatives for the
reason as alleged, that the insured himself had violated the terms of the
policy when he drove the car in question with an expired driver's
license.
- Andrew Palermo, filed a complaint in the CFI of Negros Occidental
against Pyramid Insurance Co., Inc. (PICI) for payment of his claim
Court a quo ordered PICI to pay plaintiff the value of insurance of
vehicle.
- Appellant alleges that the trial court erred in interpreting the following
provision of the Private Car Comprehensive Policy MV-1251:
AUTHORIZED DRIVER:
Any of the following:
(a) The Insured.
(b) Any person driving on the Insured's order or with his
permission. Provided that the person driving is
permitted in accordance with the licensing or other
laws or regulations to drive the Motor Vehicle and is
not disqualified from driving such motor vehicle by
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
15
order of a Court of law or by reason of any enactment
or regulation in that behalf.
Issue: W/N Palermo was entitled to payment of his claim
Held: Yes.
- There is no merit in the appellant's allegation that the plaintiff was not
authorized to drive the insured motor vehicle because his driver's
license had expired. The driver of the insured motor vehicle at the time
of the accident was, the insured himself, hence an "authorized driver"
under the policy.
- While the Motor Vehicle Law prohibits a person from operating a
motor vehicle on the highway without a license or with an expired
license, an infraction of the Motor Vehicle Law on the part of the
insured, is not a bar to recovery under the insurance contract. It
however renders him subject to the penal sanctions of the Motor
Vehicle Law.
- The requirement that the driver be "permitted in accordance with the
licensing or other laws or regulations to drive the Motor Vehicle and is
not disqualified from driving such motor vehicle by order of a Court of
Law or by reason of any enactment or regulation in that behalf," applies
only when the driver" is driving on the insured's order or with his
permission." It does not apply when the person driving is the insured
himself.
SUMMIT GUARANTY & INSURANCE COMPANY, INC. vs. HON.
ARNALDO
Note: Important ang dates, because prescription ang topic.
Facts:
- On November 26, 1976, Ford Pick-up owned by Marcos Olaso was
bumped by a cargo truck owned by Alberto Floralde. FGU Insurance
Corp. by reason of a vehicle insurance paid Olaso P 2,817.50 as its
share in the repair cost of vehicle.
- FGU, having been subrogated to rights of Olaso, formally demanded
payment of said amount from Floralde and attempted to verify
Floralde's insurance carrier however later failed to reveal his insurance
carrier.
- Then, FGU was able to ascertain the Identity of Floralde's insurance
carrier to be Summit. FGU wrote to the insurance commissioner
requesting for a conference with Summit and demanded from Summit
INSURANCE LAW Atty. Sta. Barbara
through counsel the payment of the damages sustained by the car of
Olaso but to no avail.
- On May 22, 1978, FGU filed a case against Summit for recovery of
said amount
- A motion to dismiss was filed by Summit on May 30,1978 on the
ground of prescription under Section 384 of PD No. 612.
Sec. 384. Any person having any claim upon the policy issued
pursuant to this chapter shall, without any unnecessary delay,
present to the insurance company concerned a written notice of
claim setting forth the amount of his loss, and/or the nature, extent
and duration of the injuries sustained as certified by a duly licensed
physician. Notice of claim must be filed within six months from date
of the accident, otherwise, the claim shall be deemed waived. Action
or suit for recovery of damage due to loss or injury must be brought,
in proper cases, with the Commissioner or the Courts within one
year from date of accident, otherwise, the claimant's right of action
shall prescribe.
- In the motion to dismiss, accordingly, the accident happened on
November 26, 1976 while the complaint was filed on May 22,1978
beyond the one-year period from the time of the accident provided for
by the aforecited provision.
- FGU, however, contends that the said one-year prescriptive period
cannot apply to it because it was merely subrogated to the rights of
Olaso; that the prescriptive period of its cause of action is 10 years
being one arising from a written contract; that said provision apply only
to the claim directly filed by a person against the insurance company
for the loss he sustained; and that the claim of FGU is one for
reimbursement as subrogee of its assured Marcos Olaso against
petitioner for the third party liability insurance coverage the latter
issued in favor of Floralde.
- While, Commissioner in turn argues that the cause of action of FGU
was shown and arose only from the date it paid Olaso for the damages
suffered and not from the date of the accident; and that the period set
forth in Section 384 of PD 612 begins to run only from the time the
party against whom the right is to be asserted is Identified. In this case
FGU was able to Identify petitioner only in 1978 after all efforts were
undertaken to verify its Identity. FGU paid Marcos Olaso on Dec.
9,1976. Further, she invites attention to the phrase "in proper cases" in
Section 384 of PD 612 and argues that the prescriptive period was
interrupted upon the extrajudicial demand for payment made by FGU
on petitioner
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
16
Issue: W/N claim was deemed waived for being beyond prescribed
prescriptive period of Section 384, PD No. 612. (Insurance Code)
Held: No.
- Citing Summit Guaranty & Insurance Co., Inc. vs. The Hon. Jose C. de
Guzman, etc., et al., Summit Guaranty & Insurance Co., Inc. vs. The
Hon. Gregoria C. Arnaldo, etc., and Summit Guaranty & Insurance
Co., Inc. vs. The Hon. Ramon B. Jabson etc:
It is very obvious that petitioner company is trying to use Section
384 of the Insurance Code as a cloak to hide itself from its
liabilities. The facts of these cases evidently reflect the deliberate
efforts of petitioner company to prevent the filing of a formal
action against it. Bearing in mind that if it succeeds in doing so
until one year lapses from the date of the accident it could set up
the defense of prescription, petitioner company made private
respondents believe that their claims would be settled in order
that the latter will not find it necessary to immediately bring suit.
In violation of its duties to adopt and implement reasonable
standards for the prompt investigation of claims and to effectuate
prompt, fair and equitable settlement of claims, and with manifest
bad faith, petitioner company devised means and ways of stalling
the settlement proceedings.
xxx xxx xxx
The one-year period should instead be counted from the date of
rejection by the insurer as this is the time when the cause of action
accrues. Since in these cases there has yet been no accrual of cause
of action, we hold that prescription has not yet set in.
- In the present case, it is not denied that an extrajudicial demand for
payment was made by respondent FGU on petitioner but petitioner
failed to respond to the same. Nevertheless, the complaint was filed
even before a denial of the claim was made by petitioner. For all legal
purposes, the one-year prescriptive period provided for in Section 384
of the Insurance Code has not begun to run. The cause of action arises
only and starts to run upon the denial of the claim by the insurance
company.
- The court takes note of the dilatory tactics employed by petitioner in
this as in the several cases aforecited to avoid payment of its liabilities.
We now put a finis to this case and express extreme disapproval of such
actuations of petitioner.
INSURANCE LAW Atty. Sta. Barbara
GUTIERREZ vs. CAPITAL INSURANCE & SURETY CO., INC.
Facts:
- Capital Insurance & Surety Co., Inc. insured for on 12/07/61 for one
year the jeepney of Agapito Gutierrez against passenger and third-party
liability. The passenger liability would not exceed P5k for any one
person
- The policy provides in item 13 that: the authorized driver must be the
holder of a valid and subsisting professional driver's license. "A driver
with an expired Traffic Violation Receipt or expired Temporary
Operator's Permit is not considered an authorized driver."
- Item 13 is part of the "declarations" which formed part of the policy
and had a promissory nature and effect and constituted "the basis of the
policy"
- Then, insured jeepney figured in an accident at Buendia Avenue,
Makati, Rizal. As a result, Agatonico Ballega (passenger) fell off the
vehicle and died
- Teofilo Ventura, the jeepney driver, was duly licensed for the years
1962 and 1963. However, at the time of the accident he did not have
the license. Instead, he had a carbon copy of a traffic violation report
(summons) issued by a policeman on February 22, 1962, with the
notation that he had committed the violation: "Inattentive to driving.”
- It was stated that the TVR would "serve as a temporary operator's
permit for 15 days from receipt hereof". It is indisputable that at the
time of the accident (May 29, 1962), Ventura was holding an "expired
Temporary Operator's Permit."
- Gutierrez paid P4k to the passenger's widow, Rosalina
- As Capital Insurance refused to make any reimbursement, he filed an
action for specific performance and damages.
Issue: W/N respondent is liable to pay the reimbursement
Held: No.
- We hold that paragraph 13 of the policy is decisive and controlling in
this case. It plainly provides, and we repeat, that "a driver with an
expired Traffic Violation Receipt or expired Temporary Operator's
permit is not considered an authorized driver within the meaning" of
the policy. Obviously, Ventura was not an authorized driver. His
temporary operator's permit had expired. The expiration bars recovery
under the policy.
- In liability insurance, "the parties are bound by the terms of the policy
and the right of insured to recover is governed thereby"
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
17
- It may be that for purposes of the Motor Vehicle Law the TVR is
coterminous with the confiscated license. That is why the Acting
Administrator of the Motor Vehicles Office and the Manila deputy
chief of police ventured the opinion that a TVR does not suspend the
erring driver's license, that it serves as a temporary license and that it
may be renewed but should in no case extend beyond the expiration
date of the original license
- But the instant case deals with an insurance policy which definitively
fixed the meaning of "authorized driver". That stipulation cannot be
disregarded or rendered meaningless. It is binding on the insured.
- It means that to be entitled to recovery the insured should see to it that
his driver is authorized as envisaged in paragraph 13 of the policy
which is the law between the parties.
II. THE PARTIES
FILIPINAS COMPANIA DE SEGUROS vs. CHRISTERN,
HUENEFELD & CO., INC.
Facts:
- On 10/01/41, respondent CHCI after payment of corresponding
premium, obtained from the petitioner, fire policy No. 29333 in the
sum of P1M, covering merchandise contained in a building located at
Binondo, Manila.
- During the Japanese military occupation, the building and insured
merchandise were burned.
- In due time the respondent submitted to the petitioner its claim under
the policy. The salvage goods were sold at public auction and, after
deducting their value, the total loss suffered by the respondent was
fixed at P92,650.
- The petitioner refused to pay the claim on the ground that the policy in
favor of the respondent had ceased to be in force on the date the US
declared war against Germany, the respondent Corporation (though
organized under and by virtue of the laws of the Philippines) being
controlled by the German subjects and the petitioner being a company
under American jurisdiction when said policy was issued.
- FCDS, however, in pursuance of the order of the Director of Bureau of
Financing, Philippine Executive Commission, paid the loss at P92,650
- An action was then filed for the purpose of recovering from the
respondent the sum of P92,650 –– accordingly, the insured
merchandise were burned up after the policy issued in 1941 in favor of
INSURANCE LAW Atty. Sta. Barbara
the respondent corporation has ceased to be effective because of the
outbreak of the war between the US and Germany, and that the
payment made by the petitioner to the respondent corporation during
the Japanese military occupation was under pressure.
- CFI: Dismissed the action without pronouncement as to costs.
- CA: Affirmed, with costs –– Overruled the contention of the petitioner
that the CHCI became an enemy when the US declared war against
Germany, relying on English and American cases which held that a
corporation is a citizen of the country or state by and under the laws of
which it was created or organized. It rejected the theory that nationality
of private corporation is determined by the character or citizenship of
its controlling stockholders.
Issue: W/N Christern, Huenefeld & Co., Inc. is an enemy corporation and
therefore cannot be insured
Held: Yes. (But note “However” clause)
- There is no question that majority of the stockholders of the respondent
corporation were German subjects. This being so, we have to rule that
said respondent became an enemy corporation upon the outbreak of the
war.
- The Philippine Insurance Law (Act No. 2427, as amended,) in section
8, provides that "anyone except a public enemy may be insured." It
stands to reason that an insurance policy ceases to be allowable as soon
as an insured becomes a public enemy.
- The respondent having become an enemy corporation on December 10,
1941, the insurance policy issued in its favor on October 1, 1941, by
the petitioner (a Philippine corporation) had ceased to be valid and
enforceable, and since the insured goods were burned after December
10, 1941, and during the war, the respondent was not entitled to any
indemnity under said policy from the petitioner. HOWEVER,
elementary rules of justice (in the absence of specific provision in the
Insurance Law) require that the premium paid by the respondent for the
period covered by its policy from December 11, 1941, should be
returned by the petitioner.
- It results that the petitioner is entitled to recover what paid to the
respondent under the circumstances on this case. However, the
petitioner will be entitled to recover only the equivalent, in actual
Philippines currency of P92,650 paid on April 19, 1943, in accordance
with the rate fixed in the Ballantyne scale.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
18
GULF RESORTS, INC. v. PHILIPPINE CHARTER INSURANCE
CORPORATION
G.R. No. 15167 May 16, 2005
FACTS:
• Petitioner is the owner of the Plaza Resort situated at Agoo, La
Union and had its properties in said resort insured originally with
the American Home Assurance Company (AHAC-AIU). In the first
four insurance policies issued by the latter, the risk of loss from the
earthquake shock was extended only to the two (2) swimming pools
(Policy No. 206-4182383-0. Upon expiration, the plaintiff renewed
its policy with AHAC (AIU) for the periof of March 14, 1989 to
March 14, 1990 – adding the following properties, but not limited
to: (1) the clubhouse, (2) furniture I the clubhouse, (3) a tilter house,
(4) a power house and a (5) house shed.
• Plaintiff agreed to insure with defendant the properties covered by
AHAC (AIU) Policy No. 206-4568061-9, provided that the policy
wording and rates in said policy be copied in the policy to be issued
by defendant; that defendant issued Policy No. 31944 to plaintiff
covering the period of March 14, 1990 to March 14, 1991.
• On July 16, 1990, an earthquake struck Central Luzon and Northern
Luzon and plaintiff’s properties covered by Policy No. 31944,
including the two swimming pools in its Agoo Playa Resort were
damaged.
• After the earthquake, petitioner advised respondent that it would be
making a claim under its Insurance Policy No. 31944 for damages
on its properties. Respondent instructed petitioner to file a formal
claim, then assigned the investigation of the claim to an independent
claims adjuster, Bayne Adjusters and Surveyors, Inc. On July 30,
1990, respondent, through its adjuster, requested petitioner to submit
various documents in support of its claim. On August 7, 1990,
Bayne Adjusters and Surveyors, Inc., through its Vice-President
A.R. de Leon, rendered a preliminary report5 finding extensive
damage caused by the earthquake to the clubhouse and to the two
swimming pools. Mr. de Leon stated that "except for the swimming
pools, all affected items have no coverage for earthquake shocks."
• On August 11, 1990, petitioner filed its formal demand for
settlement of the damage to all its properties in the Agoo Playa
Resort. On August 23, 1990, respondent denied petitioner’s claim
on the ground that its insurance policy only afforded earthquake
shock coverage to the two swimming pools of the resort. Petitioner
INSURANCE LAW Atty. Sta. Barbara
and respondent failed to arrive at a settlement. Hence, petitioner
filed a complaint with the RTC-Pasig praying for payment of
damages.
• The RTC held that only the two swimming pools were insured
against earthquake shock. (Note: A policy of insurance is a contract
of adhesion. Hence, 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.) Because
it is the finding of the Court as stated in the immediately preceding
paragraph that defendant is liable only for the damage caused to the
two (2) swimming pools and that defendant has made known to
plaintiff its willingness and readiness to settle said liability, there is
no basis for the grant of the other damages prayed for by plaintiff.
ISSUE: WON the CA correctly held that under Insurance Policy No. 31944,
only the two swimming pools, rather than all the properties covered
thereunder, are insured against the risk of earthquake shock.
HELD: NO.
In Insurance Policy No. 31944, four key items are important in the resolution
of the case at bar.
First, in the designation of location of risk, only the two swimming pools
were specified as included, viz:
ITEM 3 – 393,000.00 – On the two (2) swimming pools only
(against the peril of earthquake shock only.
Second, under the breakdown for premium payment, it was stated that:
PREMIUM RECAPITULATION
ITEM NOS. AMOUNT RATES
xxx
3 393,000.00 0.100%-E/S
Third, Policy Condition No. 6 stated:
6. This insurance does not cover any loss or damage occasioned by
or through or in consequence, directly or indirectly of any of the
following occurrences, namely:--
(a) Earthquake, volcanic eruption or other convulsion of
nature.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
19
Furthermore, petitioner contends that pursuant to the rider attached to the
policy, titled “Extended Coverage Endorsement (To Include the Perils of
Explosion, Aircraft, Vehicle and Smoke), no qualifications were placed on
the scope of the earthquake shock coverage. Thus, arguing that the policy
extended earthquake shock coverage to all of the insured properties.
It is basic that all the provisions of the insurance policy should be examined
and interpreted in consonance with each other. All its parts are reflective of
the true intent of the parties. The policy cannot be construed piecemeal.
Certain stipulations cannot be segregated and then made to control; neither
do particular words or phrases necessarily determine its character. Petitioner
cannot focus on the earthquake shock endorsement to the exclusion of the
other provisions. All the provisions and riders, taken and interpreted together,
indubitably show the intention of the parties to extend earthquake shock
coverage to the two swimming pools only.
NOTE: An insurance premium is the consideration paid an insurer for
undertaking to indemnify the insured against a specified peril. In fire,
casualty, and marine insurance, the premium payable becomes a debt as soon
as the risk attaches. In the subject policy, no premium payments were made
with regard to earthquake shock coverage, except on the two swimming
pools. This is consistent with the history of petitioner’s previous insurance
policies from AHAC-AIU.
WHITE GOLD v. PIONEER INSURANCE
G.R. No. 154514 July 28, 2005
FACTS:
• White Gold Marine Services, Inc. (White Gold) procured a
PREMIUM
protection and indemnity coverage for its vessels from The
Steamship Mutual Underwriting Association (Bermuda) Limited
(Steamship
393.00 Mutual) through Pioneer Insurance and Surety
Corporation (Pioneer). Subsequently, White Gold was issued a
Certificate of Entry and Acceptance. Pioneer also issued receipts
evidencing payments for the coverage. When White Gold failed to
fully pay its accounts, Steamship Mutual refused to renew the
coverage.
• Steamship Mutual thereafter filed a case against White Gold for
collection of sum of money to recover the latters unpaid balance.
White Gold on the other hand, filed a complaint before the Insurance
Commission claiming that Steamship Mutual violated Sections 186
INSURANCE LAW Atty. Sta. Barbara
and 187 of the Insurance Code, while Pioneer violated Sections 299,
300 and 303 in relation to Sections 302 and 303, thereof.
To wit:
SEC. 186. No person, partnership, or association of persons
shall transact any insurance business in the Philippines
except as agent of a person or corporation authorized to do
the business of insurance in the Philippines, unless possessed
of the capital and assets required of an insurance
corporation doing the same kind of business in the
Philippines and invested in the same manner; nor unless the
Commissioner shall have granted to him or them a certificate
to the effect that he or they have complied with all the
provisions of law which an insurance corporation doing
business in the Philippines is required to observe.
Every person, partnership, or association receiving any such
certificate of authority shall be subject to the insurance laws
of the Philippines and to the jurisdiction and supervision of
the Commissioner in the same manner as if an insurance
corporation authorized by the laws of the Philippines to
engage in the business of insurance specified in the
certificate.
SEC. 187. No Insurance Company shall transact any
insurance business in the Philippines until after it shall have
obtained a certificate of authority for that purpose from the
Commissioner upon application therefor and payment by the
company concerned of the fees hereinafter prescribed.
SEC. 299. No insurance company doing business in the
Philippines, nor any agent thereof, shall pay any commission
or other compensation to any person for services in obtaining
insurance, unless such person shall have first procured from
the Commissioner a license to act as an insurance agent of
such company or as an insurance broker as hereinafter
provided.
No person shall act as an insurance agent or as an insurance
broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any
commission or other compensation from any insurance
company doing business in the Philippines or any agent
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
20
thereof, without first procuring a license so to act from the
Commissioner, . . .
SEC. 300. Any person who for compensation solicits or
obtains insurance on behalf of any insurance company or
transmits for a person other than himself an application for
a policy or contract of insurance to or from such company or
offers or assumes to act in the negotiating of such insurance
shall be an insurance agent within the intent of this section
and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance
agent is subject.
SEC. 301. Any person who for any compensation,
commission or other thing of value acts or aids in any manner
in soliciting, negotiating or procuring the making of any
insurance contract or in placing risk or taking out insurance,
on behalf of an insured other than himself, shall be an
insurance broker within the intent of this Code, and shall
thereby become liable to all the duties, requirements,
liabilities and penalties to which an insurance broker is
subject.
• The Insurance Commission dismissed the complaint. It said that
there was no need for Steamship Mutual to secure a license because
it was not engaged in the insurance business. It explained that
Steamship Mutual was a Protection and Indemnity Club (P & I
Club). Likewise, Pioneer need not obtain another license as
insurance agent and/or a broker for Steamship Mutual because
Steamship Mutual was not engaged in the insurance business.
Moreover, Pioneer was already licensed, hence, a separate license
solely as agent/broker of Steamship Mutual was already
superfluous.
• The Court of Appeals affirmed the decision of the Insurance
Commissioner. In its decision, the appellate court distinguished
between P & I Clubs vis--vis conventional insurance. The appellate
court also held that Pioneer merely acted as a collection agent of
Steamship Mutual.
ISSUE: WON Steamship Mutual, a P & I Club is engaged in the insurance
business in the Philippines.
HELD:
INSURANCE LAW Atty. Sta. Barbara
Section 2(2) of the Insurance Code enumerates what constitutes doing
an insurance business or transacting an insurance business. These are:
(a) Making or proposing to make, as insurer, any insurance contract;
(b) Making, or proposing to make, as surety, any contract of suretyship
as a vocation and not as merely incidental to any other legitimate
business or activity of the surety;
(c) Doing any kind of business, including a reinsurance business,
specifically recognized as constituting the doing of an insurance
business within the meaning of this Code;
(d) Doing or proposing to do any business in substance equivalent to
any of the foregoing in a manner designed to evade the provisions
of this Code.
The same provision also provides, the fact that no profit is derived from
the making of insurance contracts, agreements or transactions, or that no
separate or direct consideration is received therefor, shall not preclude the
existence of an insurance business.
The test to determine if a contract is an insurance contract or not,
depends on the nature of the promise, the act required to be performed, and
the exact nature of the agreement in the light of the occurrence, contingency,
or circumstances under which the performance becomes requisite. It is not by
what it is called.
Basically, an insurance contract is a contract of indemnity.
A P & I Club is a form of insurance against third party liability, where the
third party is anyone other than the P & I Club and the members. By definition
then, Steamship Mutual as a P & I Club is a mutual insurance association
engaged in the marine insurance business.
Pioneer is the resident agent of Steamship Mutual as evidenced by the
certificate of registration issued by the Insurance Commission. It has been
licensed to do or transact insurance business by virtue of the certificate of
authority issued by the same agency. However, a Certification from the
Commission states that Pioneer does not have a separate license to be an
agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs
a separate license to act as insurance agent for Steamship Mutual. Section 299
of the Insurance Code clearly states:
SEC. 299 . . .
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
21
No person shall act as an insurance agent or as an insurance broker
in the solicitation or procurement of applications for insurance, or
receive for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the
Philippines or any agent thereof, without first procuring a license so
to act from the Commissioner, which must be renewed annually on
the first day of January, or within six months thereafter. . .
GREAT PACIFIC LIFE ASSURANCE CORP v. COURT OF
APPEALS
G.R. No. 113899 October 13, 1999
FACTS:
• A contract of group life insurance was executed between petitioner
Great Pacific Life Assurance Corporation (hereinafter Grepalife)
and Development Bank of the Philippines (hereinafter
DBP). Grepalife agreed to insure the lives of eligible housing loan
mortgagors of DBP.
• On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a
housing debtor of DBP applied for membership in the group life
insurance plan. In an application form, Dr. Leuterio answered
questions concerning his health condition as follows:
7. Have you ever had, or consulted, a physician for a heart
condition, high blood pressure, cancer, diabetes, lung, kidney
or stomach disorder or any other physical impairment?
Answer: No. If so give details ___________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [ x ] Yes [ ] No.
• On November 15, 1983, Grepalife issued Certificate No. B-18558,
as insurance coverage of Dr. Leuterio, to the extent of his DBP
mortgage indebtedness amounting to eighty-six thousand, two
hundred (P86,200.00) pesos.
• On August 6, 1984, Dr. Leuterio died due to massive cerebral
hemorrhage. Consequently, DBP submitted a death claim to
Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was
not physically healthy when he applied for an insurance coverage on
November 15, 1983. Grepalife insisted that Dr. Leuterio did not
disclose he had been suffering from hypertension, which caused his
INSURANCE LAW Atty. Sta. Barbara
death. Allegedly, such non-disclosure constituted concealment that
justified the denial of the claim.
• On October 20, 1986, the widow of the late Dr. Leuterio, respondent
Medarda V. Leuterio, filed a complaint with the Regional Trial
Court of Misamis Oriental, Branch 18, against Grepalife for Specific
Performance with Damages. During the trial, Dr. Hernando Mejia,
who issued the death certificate, was called to testify. Dr. Mejias
findings, based partly from the information given by the respondent
widow, stated that Dr. Leuterio complained of headaches
presumably due to high blood pressure. The inference was not
conclusive because Dr. Leuterio was not autopsied, hence, other
causes were not ruled out.
ISSUES:
1. WON the CA erred in holding petitioner liable to DBP as
beneficiary In a group life insurance contract from a complaint filed
by the widow of the decedent/mortgagor.
2. WON the CA erred in not finding that Dr. Leuterio concealed that
he had hypertension, which would vitiate the contract.
HELD: NO to both.
1. Petitioner alleges that the complaint was instituted by the widow of Dr.
Leuterio, not the real party in interest, hence the trial court acquired no
jurisdiction over the case. It argues that when the Court of Appeals affirmed
the trial court’s judgment, Grepalife was held liable to pay the proceeds of
insurance contract in favor of DBP, the indispensable party who was not
joined in the suit.
The insured private respondent did not cede to the mortgagee all his rights or
interests in the insurance, the policy stating that: “In the event of the debtor’s
death before his indebtedness with the Creditor [DBP] shall have been fully
paid, an amount to pay the outstanding indebtedness shall first be paid to the
creditor and the balance of sum assured, if there is any, shall then be paid to
the beneficiary/ies designated by the debtor.” When DBP’s claim was denied,
it collected the debt from the mortgagor and took the necessary action of
foreclosure on the residential lot of private respondent.
Gonzales vs. Yek Tong Lin- Insured, being the person with whom
the contract was made, is primarily the proper person to bring suit
thereon. Insured may thus sue, although the policy is taken wholly or in part
for the benefit of another person named or unnamed, and although it is
expressly made payable to another as his interest may appear or
otherwise. Although a policy issued to a mortgagor is taken out for the
benefit of the mortgagee and is made payable to him, yet the mortgagor may
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
22
sue thereon in his own name, especially where the mortgagee’s interest is less
than the full amount recoverable under the policy. Insured may be regarded
as the real party in interest, although he has assigned the policy for the
purpose of collection, or has assigned as collateral security any judgment he
may obtain.
And since a policy of insurance upon life or health may pass by transfer, will
or succession to any person, whether he has an insurable interest or not, and
such person may recover it whatever the insured might have recovered,[14]
the widow of the decedent Dr. Leuterio may file the suit against the insurer,
Grepalife.
2. The medical findings were not conclusive because Dr. Mejia did not
conduct an autopsy on the body of the decedent. Themedical
certificate stated that hypertension was “the possible cause of death.” Hence,
the statement of the physician was properly considered by the trial court as
hearsay.
Contrary to appellant’s allegations, there was no sufficient proof that the
insured had suffered from hypertension. Aside from the statement of the
insured’s widow who was not even sure if the medicines taken by Dr.
Leuterio were for hypertension, the appellant had not proven nor produced
any witness who could attest to Dr. Leuterio’s medical history.
Appellant insurance company had failed to establish that there was
concealment made by the insured, hence, it cannot refuse payment of the
claim.”
The fraudulent intent on the part of the insured must be established to entitle
the insurer to rescind the contract. Misrepresentation as a defense of the
insurer to avoid liability is an affirmative defense and the duty to establish
such defense by satisfactory and convincing evidence rests upon the insurer.
GEAGONIA v. Court of Appeals, Country Bankers Insurance
Corporation
G.R. No. 114427 February 6, 1995
FACTS: Petitioner is the owner of the Norman’s Mart located in the public
market of San Francisco, Agusan del Sur. On December 22, 1989, he
obtained from the private respondent Fire Insurance Policy No. F-14622 for
P100,00.00. The period of the policy was from December 22, 1989 to
December 22, 1990 and covered the following: "Stock-in-trade consisting
principally of dry goods such as RTW's for men and women wear and other
usual to assured's business."
INSURANCE LAW Atty. Sta. Barbara
The petitioner declared in the policy under the subheading entitled CO-
INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for
P50,000.00. From 1989 to 1990, the petitioner had in his inventory stocks
amounting to P392,130.50, itemized as follows:
Zenco Sales, Inc. P55,698.00
F. Legaspi Gen. Merchandise 86,432.50
Cebu Tesing Textiles 250,000.00 (on credit)
—————
P392,130.50
The policy contained the following condition:
3. The insured shall give notice to the Company of any insurance
or insurances already affected, or which may subsequently be
effected, covering any of the property or properties consisting of
stocks in trade, goods in process and/or inventories only hereby
insured, and unless such notice be given and the particulars of
such insurance or insurances be stated therein or endorsed in this
policy pursuant to Section 50 of the Insurance Code, by or on
behalf of the Company before the occurrence of any loss or
damage, all benefits under this policy shall be deemed
forfeited, provided however, that this condition shall not apply
when the total insurance or insurances in force at the time of the
loss or damage is not more than P200,000.00.
On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at
the public market of San Francisco, Agusan del Sur. The petitioner's insured
stock-in-trade were completely destroyed prompting him to file with the
private respondent a claim under the policy. On 28 December 1990, the
private respondent denied the claim because it found that at the time of the
loss the petitioner's stocks-in-trade were likewise covered by fire insurance
policies No. GA-28146 and No. GA-28144, for P100,000.00 each, issued by
the Cebu Branch of the Philippines First Insurance Co., Inc.
(hereinafter PFIC). These policies indicate that the insured was "Messrs.
Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage clause
reading:
MORTGAGE: Loss, if any shall be payable to Messrs.
Cebu Tesing Textiles, Cebu City as their interest may
appear subject to the terms of this policy. CO-
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
23
INSURANCE DECLARED: P100,000. — Phils. First
CEB/F 24758.
The basis of the private respondent's denial was the petitioner's alleged
violation of Condition 3 of the policy.
Geagonia then filed a complaint against the private respondent in the
Insurance Commission for the recovery of P100,000.00 under fire insurance
policy and damages. He claimed that he knew the existence of the other two
policies. But, he said that he had no knowledge of the provision in the private
respondent's policy requiring him to inform it of the prior policies and this
requirement was not mentioned to him by the private respondent's agent.
The Insurance Commission found that the petitioner did not violate Condition
3 as he had no knowledge of the existence of the two fire insurance policies
obtained from the PFIC; that it was Cebu Tesing Textiles w/c procured the
PFIC policies w/o informing him or securing his consent; and that Cebu
Tesing Textile, as his creditor, had insurable interest on the stocks. The
Insurance Commission then ordered the respondent company to pay
complainant the sum of P100,000.00 with interest and attorney’s fees.
CA reversed the decision of the Insurance Commission because it found that
the petitioner knew of the existence of the two other policies issued by the
PFIC.
ISSUE:
1. WON the petitioner had prior knowledge of the two insurance policies
issued by the PFIC when he obtained the fire insurance policy from the
private respondent, thereby, for not disclosing such fact, violating Condition
3 of the policy.
HELD:
YES. The Court agrees with the CA that the petitioner knew of the prior
policies issued by the PFIC. His letter of 18 January 1991 to the private
respondent conclusively proves this knowledge. His testimony to the contrary
before the Insurance Commissioner and which the latter relied upon cannot
prevail over a written admission made ante litem motam. It was, indeed,
incredible that he did not know about the prior policies since these policies
were not new or original. NOTE HOWEVER THAT:
In order to constitute a violation, the other insurance must be upon
same subject matter, the same interest therein, and the same risk.
INSURANCE LAW Atty. Sta. Barbara
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 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.
As to a mortgaged property, the mortgagor and the mortgagee have each an
independent insurable interest therein and both interests may be 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 property. Thus,
separate insurances covering different insurable interests may be obtained by
the mortgagor and the mortgagee.
The fire insurance policies issued by the PFIC name the petitioner as the
assured and contain a mortgage clause which reads:
Loss, if any, shall be payable to MESSRS. TESING
TEXTILES, Cebu City as their interest may appear subject
to the terms of this policy.
This is clearly a simple loss payable clause, not a standard mortgage clause.
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. With this
principle in mind, we are of the opinion that Condition 3 of the subject policy
is not totally free from ambiguity and must, perforce, be meticulously
analyzed. Such analysis leads us to conclude that (a) the prohibition applies
only to double insurance, and (b) the nullity of the policy shall only be to the
extent exceeding P200,000.00 of the total policies obtained.
The first conclusion is supported by the portion of the condition referring to
other insurance "covering any of the property or properties consisting of
stocks in trade, goods in process and/or inventories only hereby insured," and
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
24
the portion regarding the insured's declaration on the subheading CO-
INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum
of P50,000.00. 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.
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 over-insurance. 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
TOPIC: INSURABLE INTEREST OF MORTGAGE
Palileo v. Cosio
Parties: Cherie Palileo v. Beatriz Cosio
Facts:
• Plaintiff filed a complaint against defendant in CFI Manila praying
that:
(1) the transaction entered into between them on December 18,
1951 be declared as one of loan, and the document executed
covering the transaction as one of equitable mortgage to secure
the payment of said loan;
(2) the defendant be ordered to credit to the plaintiff with the
necessary amount from the sum received by the defendant
from the Associated Insurance & Surety Co., Inc. and to
apply the same to the payment of plaintiff's obligation thus
considering it as fully paid; and
INSURANCE LAW Atty. Sta. Barbara
(3) the defendant be ordered to pay to plaintiff the difference
between the alleged indebtedness of plaintiff and the sum
received by defendant from the aforementioned insurance
company, plus the sum allegedly paid to defendant as interest
on the alleged indebtedness.
• Defendant filed an answer setting up the defense that the transaction
is one of pacto de retro sale (sale with right of repurchase)
• (Procedural facts: Na set na yung date for trial pero postponed parati
tapos hanggang sa di nagpakita si defendant at counsel, nagrender
ng decision ang court in favor of plaintiff based on the evidence
presented lang. Napalitan yung 1st counsel ni defendant, sabi ni 2nd
counsel na void daw yung judgment tapos pinapaopen niya ulit yung
case kasi may excusable justification daw bat wala si defendant
nung trial)
• Pursuant to their agreement, plaintiff paid to defendant as interest on
the loan a total of P2,250.00 corresponding to nine months on the
basis of P250.00 a month, which is more than the maximum interest
authorized by law. To secure the payment of the aforesaid loan,
defendant required plaintiff to sign a document known as
"Conditional Sale of Residential Building", purporting to convey to
defendant, with right to repurchase, a two-story building of strong
materials belonging to plaintiff.
• After the execution of the aforesaid document, defendant insured
the building against fire with the Associated Insurance & Surety
Co., Inc. for the sum of P15,000, the insurance policy having been
issued in the name of defendant. The building was partly destroyed
by fire and, after proper demand, defendant collected from the
insurance company an indemnity of P13,107.00.
• Plaintiff demanded from defendant that she be credited with the
necessary amount to pay her obligation out of the insurance
proceeds but defendant refused to do so.
• TRIAL COURT: transaction is an equitable mortgage; ordered the
defendant to credit the sum of P13,107 received by the defendant
from the Associated Insurance & surety Co., Inc. to the payment of
plaintiff's obligation in the sum of P12,000.00 as stated in the
complaint
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
25
Issue: Is the trial court justified in considering the obligation of plaintiff fully
compensated by the insurance amount and in ordering defendant to refund to
plaintiff the sum of P1,107 representing the difference of the loan of P12,000
and the sum of P13,107 collected by said defendant from the insurance
company notwithstanding the fact that it was not proven that the insurance
was taken for the benefit of the mortgagor?
Held: NO.
• The rule is that "where a mortgagee, independently of the
mortgagor, insures the mortgaged property in his own name and for
his own interest, he is entitled to the insurance proceeds in case of
loss, but in such case, he is not allowed to retain his claim against
the mortgagor, but is passed by subrogation to the insurer to the
extent of the money paid."
• "the mortgagee may insure his interest in the property
independently of the mortgagor. In that event, upon the
destruction of the property the insurance money paid to the
mortgagee will not inure to the benefit of the mortgagor, and the
amount due under the mortgage debt remains unchanged. The
mortgagee, however, is not allowed to retain his claim against the
mortgagor, but it passes by subrogation to the insurer, to the
extent of the insurance money paid."
• the mortgagee, in case of loss, may only recover upon the policy to
the extent of his credit at the time of the loss. It was declared that
the mortgaged had no right of action against the mortgagee on the
policy. (San Miguel Brewery vs. Law Union)
III. INSURABLE INTEREST
TOPIC: DISQUALIFICATION OF BENEFICIARY
Insular Life Assurance v. Ebrado
Facts:
• Buenaventura Cristor Ebrado was issued by The Life Assurance
Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a,
rider for Accidental Death for the same amount.
• Buenaventura C. Ebrado designated Carponia T. Ebrado as the
revocable beneficiary in his policy. He to her as his wife.
INSURANCE LAW Atty. Sta. Barbara
• Buenaventura C. Ebrado died as a result when hit by a failing
branch of a tree
• As the policy was in force, The Insular Life Assurance Co., Ltd.
liable to pay the coverage in the total amount of P11,745.73,
representing the face value of the policy in the amount of P5,882.00
plus the additional benefits for accidental death also in the amount
of P5,882.00 and the refund of P18.00 paid for the premium due
November, 1969, minus the unpaid premiums and interest thereon
due for January and February, 1969, in the sum of P36.27.
• Carponia T. Ebrado filed with the insurer a claim for the proceeds
of the Policy as the designated beneficiary therein, although she
admits that she and the insured Buenaventura C. Ebrado were
merely living as husband and wife without the benefit of marriage.
• Pascuala Vda. de Ebrado also filed her claim as the widow of the
deceased insured. She asserts that she is the one entitled to the
insurance proceeds, not the common-law wife, Carponia T. Ebrado.
• In doubt as to whom the insurance proceeds shall be paid, the
insurer, The Insular Life Assurance Co., Ltd. commenced an action
for Interpleader before the CFI Rizal
• TC: It is patent from the last paragraph of Art. 739 of the Civil Code
that a criminal conviction for adultery or concubinage is not
essential in order to establish the disqualification mentioned therein.
It is, however, essential that such adultery or concubinage exists
at the time defendant Carponia T. Ebrado was made beneficiary
in the policy in question for the disqualification and incapacity
to exist and that it is only necessary that such fact be established by
preponderance of evidence in the trial. Since it is agreed in their
stipulation above-quoted that the deceased insured and defendant
Carponia T. Ebrado were living together as husband and wife
without being legally married and that the marriage of the insured
with the other defendant Pascuala Vda. de Ebrado was valid and still
existing at the time the insurance in question was purchased there is
no question that defendant Carponia T. Ebrado is disqualified
from becoming the beneficiary of the policy in question and as
such she is not entitled to the proceeds of the insurance upon the
death of the insured.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
26
Issue: Can a common-law wife named as beneficiary in the life insurance
policy of a legally married man claim the proceeds thereof in case of death of
the latter?
Held: NO.
• 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". The word "interest" highly
suggests that the provision refers only to the "insured" and not to 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. 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.
o And under Article 2012 of the same Code, "any person
who is forbidden 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.
o Common-law spouses are, definitely, barred from
receiving donations from each other. Article 739 of the new
Civil Code provides: ñé+.£ªwph!1
The following donations shall be void:
1. Those made between persons who were guilty of adultery
or concubinage at the time of donation
• 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. As a consequence, the
proscription in Article 739 of the new Civil Code should equally
operate in life insurance contracts.
INSURANCE LAW Atty. Sta. Barbara
• 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.
• There is every reason to hold that the bar in donations between
legitimate spouses and those between illegitimate ones should be
enforced in life insurance policies since the same are based on
similar consideration. So long as marriage remains the threshold of
family laws, reason and morality dictate that the impediments
imposed upon married couple should likewise be imposed upon
extra-marital relationship.
TOPIC: KINDS OF INSURABLE INTEREST
Filipino Merchants Insurance Co v. CA, Choa Tiek Seng
Insurance Company: Filipino Merchants Insurance Co
Private Respondent/Consignee/Plaintiff in TC: Choa Tiek Seng
Facts:
• This is an action (trial court) brought by the consignee (Choa Tiek
Seng) of the shipment of fishmeal loaded on board the vessel SS
Bougainville and unloaded at the Port of Manila and seeks to
recover from the defendant insurance company the amount of
P51,568.62 representing damages to said shipment which has been
insured by the defendant insurance company under Policy No. M-
2678.
• in December 1976, plaintiff insured said shipment with defendant
insurance company under said cargo Policy No. M-2678 for the
sum of P267,653.59 for the goods described as 600 metric tons of
fishmeal in new gunny bags of 90 kilos each from Bangkok,
Thailand to Manila against all risks under warehouse to warehouse
terms.
• Actually, what was imported was 59.940 metric tons not 600 tons at
$395.42 a ton CNF Manila. The fishmeal in 666 new gunny bags
were unloaded from the ship on December 11, 1976 at Manila unto
the arrastre contractor E. Razon, Inc. and defendant's surveyor
ascertained and certified that in such discharge 105 bags were in
bad order condition as jointly surveyed by the ship's agent and the
arrastre contractor.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
27
• Defendant's surveyor has conducted a final and detailed survey with
the findings on the extent of shortage or loss on the bad order bags
totalling 227 bags amounting to 12,148 kilos
• Based on said computation the plaintiff made a formal claim against
the defendant Filipino Merchants Insurance Company for
P51,568.62. A formal claim statement was also presented by the
plaintiff against the vessel but the defendant Filipino Merchants
Insurance Company refused to pay the claim. Consequently, the
plaintiff brought an action
• TC: ordered insurance company to pay. CA affirmed and denied
motion for reconsideration.
Issue: WON consignee has an insurable interest in the said goods
Held: Yes. Private respondent, as consignee of the goods in transit under an
invoice containing the terms under "C & F Manila," has insurable interest in
said goods.
• Section 13 of the Insurance Code defines insurable interest in
property as every interest in property, whether real or personal, or
any relation thereto, or liability in respect thereof, of such nature that
a contemplated peril might directly damnify the insured.
• Insurable interest in property may consist in:
(a) an existing interest;
(b) an inchoate interest founded on an existing interest; or
(c) an expectancy, coupled with an existing interest in that out
of which the expectancy arises
• 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 be (lawphil typo error ito na di ko gets) 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.
INSURANCE LAW Atty. Sta. Barbara
• 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.
GERCIO V. SUN LIFE ASSURANCE CANADA
Facts:
• Hilario Gercio, the insured, is the plaintiff. The Sun Life Assurance
Co. of Canada, the insurer, and Andrea Zialcita, the beneficiary, are
the defendants.
o The complaint is in the nature of mandamus. Its purpose is
to compel the defendant Sun Life Assurance Co. of Canada
to change the beneficiary in the policy issued by the
defendant company on the life of the plaintiff Hilario
Gercio, with one Andrea Zialcita as beneficiary.
• On January 29, 1910, the Sun Life Assurance Co. of Canada issued
insurance policy No. 161481 on the life of Hilario Gercio.. By its
terms, the insurance company agreed to insure the life of Hilario
Gercio for the sum of P/2,000, to be paid him on February 1, 1930,
or if the insured should die before said date, then to his wife, Mrs.
Andrea Zialcita. The policy did not include any provision reserving
to the insured the right to change the beneficiary.
• On the date the policy was issued, Andrea Zialcita was the lawful
wife of Hilario Gercio. Towards the end of the year 1919, she was
convicted of the crime of adultery. On September 4, 1920, a decree
of divorce was issued which had the effect of completely dissolving
the bonds of matrimony contracted by Hilario Gercio and Andrea
Zialcita.
• On March 4, 1922, Hilario Gercio formally notified the Sun Life
Assurance Co. of Canada that he had revoked his donation in favor
of Andrea Zialcita, and that he had designated in her stead his
present wife, Adela Garcia de Gercio, as the beneficiary of the
policy. Gercio requested the insurance company to eliminate
Andrea Zialcita as beneficiary. This, the insurance company has
refused and still refuses to do.
Issue: whether the insured — the husband — has the power to change the
beneficiary — the former wife — and to name instead his actual wife, where
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
28
the insured and the beneficiary have been divorced and where the policy of
insurance does not expressly reserve to the insured the right to change the
beneficiary?
Held: NO.
(Intro: this case is novel because this is the first time the court encountered
such problem. PH laws - Code of Commerce, the Civil Code, or the Insurance
Act – is deficient to answer the problem. The SC used modern Law of
Insurance as found in the United States proper.)
• In Yore vs. Booth, the SC of California: .. a person who procures a
policy upon his own life, payable to a designated beneficiary,
although he pays the premiums himself, and keeps the policy in his
exclusive possession, has no power to change the beneficiary,
unless the policy itself, or the charter of the insurance company,
so provides. In policy, although he (beneficiary) has parted with
nothing, and is simply the object of another's bounty, has acquired
a vested and irrevocable interest in the policy, which he may keep
alive for his own benefit by paying the premiums or assessments if
the person who effected the insurance fails or refuses to do so.
• In Central National Bank of Washington City vs. Hume: … It is
indeed the general rule that a policy, and the money to become due
under it, belong, the moment it is issued, to the person or persons
named in it as the beneficiary or beneficiaries, and that there is no
power in the person procuring the insurance, by any act of his, by
deed or by will, to transfer to any other person the interest of the
person named.
• In re Dreuil & Co. It was held that the wife has a vested interest in
the policy, of which she cannot be deprived without her consent.
• In Filley vs. Illinois Life Insurance Company , the SC of Kansas:
The benefit accruing from a policy of life insurance upon the life of
a married man, payable upon his death to his wife, naming her, is
payable to the surviving beneficiary named, although she may have
years thereafter secured a divorce from her husband, and he was
thereafter again married to one who sustained the relation of wife to
him at the time of his death.The rights of a beneficiary in an
ordinary life insurance policy become vested upon the issuance
of the policy, and can thereafter, during the life of the
beneficiary, be defeated only as provided by the terms of the
policy.
INSURANCE LAW Atty. Sta. Barbara
• On the admitted facts and the authorities supporting the nearly
universally accepted principles of insurance, we are irresistibly led
to the conclusion that the question at issue must be answered in the
negative.
ONG LIM SING v. FEB LEASING & FINANCE CORPORATION
Petitioner: Vicente Ong Lim Sing (Lim)
Respondent: FEB Leasing & Finance Corporation (FEB)
FACTS:
• March 9, 1995 - FEB entered into a lease of equipment and motor
vehicles with JVL Food Products (JVL). On the same date,
Vicente Ong Lim Sing, Jr. executed an Individual Guaranty
Agreementhttp://www.lawphil.net/judjuris/juri2007/jun2007/gr_16
8115_2007.html - fnt4 with FEB to guarantee the prompt
performance of the terms and conditions of the lease agreement.
• Under the contract, JVL was obliged to pay FEB an aggregate gross
monthly rental of Php 170, 494.
• JVL defaulted in the payment of the monthly rentals. On August 23,
2000, FEB sent a letter to JVL demanding payment of the said
amount, but to no avail.
• December 6, 2000 - FEB filed a Complaint before RTC Manila for
sum of money, damages, and replevin.
• JVL and Lim - admitted the existence of the lease agreement but
asserted that it is in reality a sale of equipment on installment basis,
with FEB acting as the financier. (1) They claimed that this intention
was apparent from the fact that they were made to believe that when
full payment was effected, a Deed of Sale will be executed by FEB
as vendor in favor of JVL and Lim as vendees. (2) They also
contended that the lease agreement is a contract of adhesion and
should, therefore, be construed in their favor.
• RTC – ruled in favor of JVL and Lim
o Stressed out the contradictory terms it found in the lease
agreement - Section 9– disclaiming warranty, it is stated
that the lessor is not the manufacturer nor the latter’s agent
and therefore does not guarantee any feature or aspect of
the object of the contract as to its merchantability.
o In property insurance against loss or other accidental
causes, the assured must have an insurable interest. The test
of insurable interest in property is whether the assured has
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
29
a right, title or interest therein that he will be benefited by
its preservation and continued existence or suffer a direct
pecuniary loss from its destruction or injury by the peril
insured against.
o Actual value of each object of the contract would be the
result after computing the monthly rentals by multiplying
the said rentals by the number of months specified when
the rentals ought to be paid.
o Existence in the records of a Deed of Absolute Sale by and
between the same parties, which was an exhibit of the
defendant where the plaintiff sold to the same defendants a
unit of 1995 Mitsubishi L-200 STRADA DC PICK UP and
in said Deed, the Court noticed that the same terms as in
the alleged lease were used in respect to warranty, as well
as liability in case of loss and other conditions
o There is no chattel mortgage on the thing sold. The plaintiff
can only recover the unpaid balance of the price because of
the previous payments made by the defendants for the
reasonable use of the units
• CA reversed the decision.
ISSUE: WON the Lim has an insurable interest over the property
HELD: Yes.
• Petitioner’s claim that the real intention of the parties was a contract
of sale of personal property on installment basis is more likely a
mere afterthought in order to defeat the rights of the respondent.
• FEB leased the subject equipment and motor vehicles to JVL in
consideration of a monthly periodic payment of ₱170,494.00. The
periodic payment by petitioner is sufficient to amortize at least 70%
of the purchase price or acquisition cost of the said movables in
accordance with the Lease Schedules with Delivery and Acceptance
Certificates. It is considered as a financial leasing within the purview
of RA 8556.
o A mode of extending credit through a non-cancelable lease
contract under which the lessor purchases or acquires, at
the instance of the lessee, property in consideration of the
periodic payment by the lessee of a fixed amount of money
sufficient to amortize at least seventy (70%) of the
purchase price or acquisition cost
INSURANCE LAW Atty. Sta. Barbara
• Section 14 of the lease contract, that the equipment shall be insured
at the cost and expense of the lessee against loss, damage, or
destruction from fire, theft, accident, or other insurable risk for the
full term of the lease, is a binding and valid stipulation. Petitioner,
as a lessee, has an insurable interest in the equipment and motor
vehicles leased.
o Section 17 of the Insurance Code provides that the measure
of an insurable interest in property is the extent to which
the insured might be damnified by loss or injury thereof.
• Likewise, the stipulation in Section 9.1 of the lease contract that the
lessor does not warrant the merchantability of the equipment is a
valid stipulation. FEB did not assume responsibility as to the quality,
merchantability, or capacity of the equipment. This stipulation
provides that, in case of defect of any kind that will be found by the
lessee in any of the equipment, recourse should be made to the
manufacturer.
HEIRS OF LORETO MARAMAG v. DE GUZMAN-MARAMAG
Petitioners: Heirs of Loreto C. Maramag, represented by surviving spouse
Vicenta Pangilinan-Maramag
Respondents: Eva Verna De Guzman-Maramag, Odessa Maramag, Karl
Brian Maramag, Trisha Angelie Maramag, The Insular Life Assurance
Company, Ltd., (Insular Life) and Great Pacific Life Assurance Corporation
(Grepalife)
FACTS:
• The case stems from a petition filed against respondents with RTC
for revocation and/or reduction of insurance proceeds for being void
and/or inofficious, with prayer for a TRO and a writ of preliminary
injunction.
• The petition alleged that:
o petitioners were the legitimate wife and children of Loreto
Maramag while respondents were Loreto’s illegitimate
family;
o Eva de Guzman Maramag was a concubine of Loreto and
a suspect in the killing of the latter, thus, she is disqualified
to receive any proceeds from his insurance policies from
Insular Life and Grepalife
o the illegitimate children of Loreto—Odessa, Karl Brian,
and Trisha Angelie—were entitled only to one-half of the
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
30
legitime of the legitimate children, thus, the proceeds
released to Odessa and those to be released to Karl Brian
and Trisha Angelie were inofficious and should be
reduced;
o petitioners could not be deprived of their legitimes, which
should be satisfied first.
• A part of the insurance proceeds had already been released in favor
of Odessa, while the rest of the proceeds are to be released in favor
of Karl Brian and Trisha Angelie, both minors, upon the
appointment of their legal guardian.
• Insular Life - admitted that Loreto misrepresented Eva as his
legitimate wife and Odessa, Karl Brian, and Trisha Angelie as his
legitimate children, and that they filed their claims for the insurance
proceeds of the insurance policies; that when it ascertained that Eva
was not the legal wife of Loreto, it disqualified her as a beneficiary
and divided the proceeds among Odessa, Karl Brian, and Trisha
Angelie, as the remaining designated beneficiaries; and that it
released Odessa’s share as she was of age, but withheld the release
of the shares of minors Karl Brian and Trisha Angelie pending
submission of letters of guardianship. It was bound to honor the
insurance policies designating the children of Loreto with Eva as
beneficiaries pursuant to Section 53 of the Insurance Code.
• Grepalife - alleged that Eva was not designated as an insurance
policy beneficiary; that the claims filed by Odessa, Karl Brian, and
Trisha Angelie were denied because Loreto was ineligible for
insurance due to a misrepresentation in his application form.
• Insular and Grepalife countered that the insurance proceeds
belong exclusively to the designated beneficiaries in the policies, not
to the estate or to the heirs of the insured.
• RTC – dismissed the case as against the illegitimate children but tge
action shall proceed with respect to Eva, Insular Life and Grepalife.
It is very clear under Sec. 53, the insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name or for
whose benefit it is made, unless otherwise specified in the policy.
Since the defendants are the ones named as the primary beneficiaries
in the insurances (sic) taken by the deceased Loreto C. Maramag and
there is no showing that herein plaintiffs were also included as
beneficiary. Neither could the plaintiffs invoked (sic) the law on
donations or the rules on testamentary succession. . The rules on
testamentary succession cannot apply here, for the insurance
indemnity does not partake of a donation.
INSURANCE LAW Atty. Sta. Barbara
• Insular and Grepalife filed their respective motions for
reconsideration, arguing, in the main, that the petition failed to state
a cause of action. The same was granted. Hence this petition.
ISSUE: WON the plaintiffs are entitled to the shares in the insurance
proceeds
HELD:
• No. Although petitioners are the legitimate heirs of Loreto, they
were not named as beneficiaries in the insurance policies issued by
Insular and Grepalife.
• SECTION 53. The insurance proceeds shall be applied exclusively
to the proper interest of the person in whose name or for whose
benefit it is made unless otherwise specified in the policy.
• It is obvious that the only persons entitled to claim the insurance
proceeds are either the insured, if still alive; or the beneficiary, if the
insured is already deceased, upon the maturation of the policy.
o Exception: Where the insurance contract was intended to
benefit third persons who are not parties to the same in the
form of favorable stipulations or indemnity. In such a case,
third parties may directly sue and claim from the insurer.
• The revocation of Eva as a beneficiary in one policy and her
disqualification as such in another are of no moment considering
that the designation of the illegitimate children as beneficiaries in
Loreto’s insurance policies remains valid. Because no legal
proscription exists in naming as beneficiaries the children of illicit
relationships by the insured,22 the shares of Eva in the insurance
proceeds must be awarded to the illegitimate children.
• Cause of action is the act or omission by which a party violates a
right of another. A complaint states a cause of action when it
contains the three (3) elements of a cause of action—(1) the legal
right of the plaintiff; (2) the correlative obligation of the defendant;
and (3) the act or omission of the defendant in violation of the legal
right.
GAISANO CAGAYAN INC. v. INSURANCE COMPANY OF
NORTH AMERICA
Petitioner: Gaisano Cagayan Inc.
Respondent: Insurance Company of North America
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
31
FACTS:
• Intercapitol Marketing Corporation (IMC) is the maker of
Wrangler Blue Jeans. Levi Strauss Phils. Inc. (LSPI) is the local
distributor of products bearing trademarks owned by Levi Strauss &
Co.. IMC and LSPI separately obtained from respondent fire
insurance policies with book debt endorsements.
o The insurance policies provide for coverage on "book debts
in connection with ready-made clothing materials which
have been sold or delivered to various customers and
dealers of the Insured anywhere in the Philippines."
o The policies defined book debts as the "unpaid account
still appearing in the Book of Account of the Insured 45
days after the time of the loss covered under this Policy."
• Petitioner is a customer and dealer of the products of IMC and LSPI.
On February 25, 1991, the Gaisano Superstore Complex in CDO,
owned by petitioner, was consumed by fire. Included in the items
lost or destroyed in the fire were stocks of ready-made clothing
materials sold and delivered by IMC and LSPI.
• February 4, 1992 - respondent filed a complaint for damages against
petitioner. It alleges that IMC and LSPI filed with respondent their
claims under their respective fire insurance policies with book debt
endorsements; that the unpaid accounts of petitioner on the sale and
delivery of ready-made clothing materials with IMC was Php
2,119,205.00 while with LSPI it was Php 535,613.00.
• Petitioner - contends that it could not be held liable because the
property covered by the insurance policies were destroyed due to
fortuities event or force majeure; that respondent's right of
subrogation has no basis inasmuch as there was no breach of
contract committed by it since the loss was due to fire which it could
not prevent or foresee; that IMC and LSPI never communicated to
it that they insured their properties; and that it never consented to
paying the claim of the insured.
• RTC - rendered its decision dismissing respondent's complaint. It
held that the fire was purely accidental; that the cause of the fire was
not attributable to the negligence of the petitioner; and that since the
sales invoices state that "it is further agreed that merely for purpose
of securing the payment of purchase price, the above-described
merchandise remains the property of the vendor until the purchase
price is fully paid", IMC and LSPI retained ownership of the
delivered goods and must bear the loss.
INSURANCE LAW Atty. Sta. Barbara
• CA – reversed the decision. Sales invoices are proofs of sale, being
detailed statements of the nature, quantity and cost of the thing sold;
that loss of the goods in the fire must be borne by petitioner, the risk
is borne by the owner of the thing at the time the loss under the
principle of res perit domino; that by subrogation, the insurer has the
right to go against petitioner; that, being a fire insurance with book
debt endorsements, what was insured was the vendor's interest as a
creditor.
ISSUE: WON the IMC and LSPI still have an insurable interest over the
goods
HELD:
• Yes. Indeed, when the terms of the agreement are clear and explicit
that they do not justify an attempt to read into it any alleged intention
of the parties, the terms are to be understood literally just as they
appear on the face of the contract. Thus, what were insured against
were the accounts of IMC and LSPI with petitioner which remained
unpaid 45 days after the loss through fire, and not the loss or
destruction of the goods delivered.
• IMC and LSPI did not lose complete interest over the goods.
They have an insurable interest until full payment of the value of the
delivered goods. Unlike the civil law concept of res perit domino,
where ownership is the basis for consideration of who bears the risk
of loss, in property insurance, one's interest is not determined by
concept of title, but whether insured has substantial economic
interest in the property.
o Section 13 Insurance Code defines insurable interest as
"every interest in property, whether real or personal, or any
relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the
insured.”
o Section 14 - an insurable interest in property may consist
in: (a) an existing interest; (b) an inchoate interest founded
on existing interest; or (c) an expectancy, coupled with an
existing interest in that out of which the expectancy arises.
• It is sufficient that the insured is so situated with reference to the
property that he would be liable to loss should it be injured or
destroyed by the peril against which it is insured. Anyone has an
insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction. In this case, the
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
32
insurable interest of IMC and LSPI pertain to the unpaid accounts
appearing in their Books of Account 45 days after the time of the
loss covered by the policies.
• The insurance in this case is not for loss of goods by fire but for
petitioner's accounts with IMC and LSPI that remained unpaid 45
days after the fire.
o Where the obligation consists in the payment of money, the
failure of the debtor to make the payment even by reason
of a fortuitous event shall not relieve him of his liability.
(the genus of a thing can never perish)
• The right of subrogation accrues simply upon payment by the
insurance company of the insurance claim.
• However, there is no proof of full settlement of the insurance claim
of LSPI; no subrogation receipt was offered in evidence. Thus, there
is no evidence that respondent has been subrogated to any right
which LSPI may have against petitioner. Failure to substantiate the
claim of subrogation is fatal to petitioner's case for recovery.
RIZAL COMMERCIAL BANKING CORP. v. CA
Petitioner: RCBC
Respondents: CA, Goyu & Sons, Inc.
FACTS:
• GOYU applied for credit facilities and accommodations with
RCBC at its Binondo Branch. After due evaluation, RCBC Binondo
Branch, through its key officers, petitioners Uy Chun Bing and Eli
D. Lao, recommended GOYU's application for approval by RCBC's
executive committee. A credit facility in the amount of P30 million
was initially granted and it was thereafter increased to P117 million.
• As a security, GOYU executed 2 real estate mortgages and 2 chattel
mortgages in favor of RCBC, registered with Register of Deeds of
Valenzuela. Under each of these four mortgage contracts, GOYU
committed itself to insure the mortgaged property with an insurance
company approved by RCBC, and subsequently, to endorse and
deliver the insurance polices to RCBC. GOYU obtained in its name
a total of ten insurance policies from Malayan Insurance Co.
(MICO). Alchester Insurance Agency, Inc., the insurance agent
where GOYU obtained the Malayan insurance policies, issued 9
endorsements in favor of RCBC.
INSURANCE LAW Atty. Sta. Barbara
• April 27, 1992 - one of GOYU's factory buildings in Valenzuela was
gutted by fire. Consequently, GOYU submitted its claim for
indemnity on account of the loss insured against. MICO denied the
claim on the ground that the insurance policies were either attached
pursuant to writs of attachments/garnishments issued by various
courts or that the insurance proceeds were also claimed by other
creditors of GOYU alleging better rights to the proceeds than the
insured. RCBC, one of GOYU's creditors, also filed with MICO its
formal claim over the proceeds of the insurance policies, but said
claims were also denied
• RTC - confirmed that GOYU's other creditors, namely, Urban
Bank, Alfredo Sebastian, and Philippine Trust Company
obtained their respective writs of attachments from various courts,
covering an aggregate amount of P14,938,080.23. The Court
ordered that the proceeds of the ten insurance policies be deposited
with the said court minus the aforementioned amount. It rendered
judgment in favor of GOYU.
• CA - modified by increasing the damages in favor of GOYU
ISSUE 1: WON RCBC as mortgagee, has any right over the insurance
policies taken by GOYU, the mortgagor, in case of the occurrence of loss
HELD 1:
• Yes.
• It is settled that a mortgagor and a mortgagee have separated 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.
• It is to be noted that nine endorsement documents were prepared by
Alchester in favor of RCBC. It is also significant that GOYU
voluntarily and purposely took the insurance policies from MICO, a
sister company of RCBC, and not just from any other insurance
company. Alchester would not have found out that the subject pieces
of property were mortgaged to RCBC had not such information been
voluntarily disclosed by GOYU itself. Had it not been for GOYU,
Alchester would not have known of GOYU's intention of obtaining
insurance coverage in compliance with its undertaking in the
mortgage contracts with RCBC, and verily, Alchester would not
have endorsed the policies to RCBC had it not been so directed by
GOYU.
HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO
33
• RCBC, in good faith, relied upon the endorsement documents sent
to it as this was only pursuant to the stipulation in the mortgage
contracts. We find such reliance to be justified under the
circumstances of the case. GOYU failed to seasonably repudiate the
authority of the person or persons who prepared such endorsements.
• The Court is bound to recognize RCBC's right to the proceeds of the
insurance polices if not for the actual endorsement of the policies, at
least on the basis of the equitable principle of estoppel.
o GOYU cannot seek relief under Section 53 of the
Insurance Code which provides that the proceeds of
insurance shall exclusively apply to the interest of the
person in whose name or for whose benefit it is made. The
peculiarity of the circumstances obtaining in the instant
case presents a justification to take exception.
• The insurance proceeds may, therefore, be exclusively applied to
RCBC, which under the factual circumstances of the case, is truly
the person or entity for whose benefit the polices were clearly
intended.
(Will not discuss this further since the relevant issue was already settled in
Issue 1)
ISSUE 2: Extent of GOYU's outstanding obligation with RCBC
HELD 2:
• Note that one out of the 9 insurance policies was not endorsed.
• 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. These policies
may no longer be attached by the other creditors of GOYU. To the
extent of GOYU's outstanding obligation with RCBC, all the rest of
the other insurance policies above-listed which were endorsed to
RCBC, are, therefore, to be released from attachment, garnishment,
and levy by the other creditors of GOYU.
• The two courts below erred in failing to see that the promissory notes
which they ruled should be excluded for bearing dates which are
after that of the fire, are mere renewals of previous ones. The
proceeds of the loan represented by these promissory notes were
admittedly received by GOYU. There is ample factual and legal
basis for giving GOYU's judicial admission of liability in the
amount of P116,301,992.60 full force and effect.
INSURANCE LAW Atty. Sta. Barbara 34

• It should, however, be quickly added that whatever amount RCBC

may have recovered from the other insurers of the mortgage
property will, nonetheless, have to be applied as payment against
GOYU's obligation. The net obligation of GOYU, after deductions,
is thus reduced to P107,246,887.90 as of January 21, 1993, with
interest at the respective rates stipulated in each promissory note
from January 21, 1993 until finality of this judgment, and surcharges
at 2% and penalties at 3% from January 21, 1993 to March 9, 1993,
minus payments made by Malayan Insurance Company, Inc. and the
proceeds of the amount deposited with the trial court and its earned
interest.

HN Notes | ANDAL AUREA BACARRO HONRALES JORGIO MATEO PLANILLO