CASE LIST
INSURANCE LAW
1.Eternal Gardens Memorial Park Corporation vs. Phil.
American Life Insurance Co., GR No. 166245, 09 April
2008
2. Philamcare Health Systems, Inc. vs. Court of Appeals,
379 SCRA 356, G.R. No. 125678, March 18, 2002
3. Asian Terminals, Inc. v. First Lepanto-Taisho
Insurance Corp., G.R. No. 185964, June 16, 2014
4. Cha vs. Court of Appeals, 277 SCRA 690, G.R. No.
124520, August 18, 1997
5. Gaisano Cagayan, Inc. vs. Insurance Company of
North America, 490 SCRA 286, G.R. No. 147839, June
8, 2006
6. Sun Life of Canada [Philippines], Inc. vs. Sibya, 793
SCRA 45, G.R. No. 211212 June 8, 2016
7. Geagonia vs. Court of Appeals, 241 SCRA 152, G.R.
No. 114427, February 6, 1995
8. The Insular Life Assurance Company, Ltd. v. Paz Y.
Khu, et al.
G.R. No. 195176; April 18, 2016
9. Sun Life of Canada (Phils.) vs. Sandra Tan Kit, G.R.
No. 183272, October 15, 2014
10. Tiu vs. Arriesgado (GR No. 138060, 01 September
2004)
11. Gaisano vs. Development Insurance and Surety
Corporation, 818 SCRA 603, G.R. No. 190702 February
27, 2017
12. Roque vs. Intermediate Appellate Court, 139 SCRA
596, No. L-66935
13. Manulife Philippines, Inc. vs. Ybañez, 810 SCRA
516, G.R. No. 204736 November 28, 2016
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14. Loadstar Shipping Company, Incorporated vs.
Malayan Insurance Company, Incorporated, 742 SCRA
627, G.R. No. 185565 November 26, 2014
15. Alpha Insurance and Surety Co. vs. Castor, 704
SCRA 550, G.R. No. 198174 September 2, 2013
16. Malayan Insurance vs. Lin, G.R. No. 207277,
January 16, 2017
17. The Insular Assurance Co., Ltd. vs. The Heirs of
Jose H. Alvarez, G.R. No. 207526, October 03, 201818.
18. H.H. Hollero vs. GSIS, GR No 152334, Sept 24,
2014
19. GSIS vs. Prudential Guarantee, G.R. No. 165585;
20. Equitable Insurance Corp vs. Transmodal
International, G.R. No. 223592, Aug 7, 2018,
21. Oriental Assurance Corporation vs. Manuel Ong,
G.R. No. 189524, Oct 11, 2017
22. White Gold Marine Services vs. Pioneer Insurance,
et al. (GR No. 154514, 28 July 2005)
23. Gulf Resorts Inc. vs. Philippine Charter Insurance
Corp. GR No. 155167, 16 May 2005
24. Lourdes v. Philam Plans, G.R. No. 186983, February
22, 2012
25. UCPB General Insurance vs. Masagana Telamart
(June 15, 1999); UCPB General Insurance vs.
Masagana Telamart (356 SCRA 307)
26. Sun Insurance Office Ltd. vs. CA (July 17, 1992)
27. Tio Khe Chio vs. CA (September 30, 1991)
1. Eternal Gardens Memorial Park Corp v. Phil. American Life Insurance Corporation
G.R. No. 166245, 9 April 2008, Velasco, Jr. J

FACTS:
Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy with petitioner Eternal
Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance
of the purchased burial lots.
The relevant provision of the policy is:

EFFECTIVE DATE OF BENEFIT

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

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, Chuang died.

Eternal sent a letter dated August 20, 19845 to Philamlife, which served as an insurance claim for Chuang’s death.

After more than a year, Philamlife had not furnished Eternal with any reply to the latter’s insurance claim. This prompted
Eternal to demand from Philamlife the payment of the claim for PhP 100,000 on April 25, 1986.

In response to Eternal’s demand, Philamlife denied Eternal’s insurance claim in a letter a portion of which reads:

The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial Park in
October 1982 for the total maximum insurable amount of P100,000.00 each.No application for Group Insurance was
submitted in our office prior to his death on August 2, 1984
Eternal filed a case with the RTC for a sum of money against Philamlife, which decided in favor of Eternal, ordering
Philamlife to pay the former 100K representing the proceeds of the policy.
CA reversed. Hence this petition.

ISSUE:
WON Philamlife should pay the 100K insurance proceeds

RULING:

YES. An examination of the provision of the POLICY under effective date of benefit, would show ambiguity between its
two sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the
insurance contract before the same can become effective.
It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of
the insured and strictly against the insurer in order to safeguard the latter’s interest.
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. The second sentence
of the Creditor Group Life Policy on the Effective Date of Benefit is in the nature of a resolutory condition which would lead
to the cessation of the insurance contract. Moreover, the 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.

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2. PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS and JULITA TRINOS
G.R. No. 125678 | March 18, 2002 | YNARES-SANTIAGO, J.:

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). 1

The application was approved for a period of one year and Ernani was issued Health Care Agreement No. P010194. Under
the agreement, Ernani 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 agreement was extend two more times, each agreement with one year period.

During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC).
While Ernani was in the hospital, Julita tried to claim the benefits under the health care agreement. However, Philamcare
denied her claim saying that the Health Care Agreement was void because of Ernani’s concealment regarding his medical
history. Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive, diabetic
and asthmatic, contrary to his answer in the application form. Thus, Julia paid the hospitalization expenses herself,
amounting to about P76,000.00.

Julia instituted an action for damages against Philamcare and its president, Dr. Benito Reverent. She asked for
reimbursement of her expenses plus moral damages and attorney’s fees.

ISSUE/S:
1) Whether or not health care agreement is an insurance contract;
2) Whether or not there is concealment of material fact in the application to justify rescission of the health care agreement.

RULING:

1) YES. Philamcare argues that: a) the agreement grants "living benefits," such as medical check-ups and hospitalization
which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-
year thereafter; b) only medical and hospitalization benefits are given under the agreement without any indemnification,
unlike in an insurance contract where the insured is indemnified for his loss; c) Health Care Agreements are only for a
period of one year, as compared to insurance contracts which last longer, arguing that the incontestability clause does
not apply, as the same requires an effectivity period of at least two years; d) it is not an insurance company, which is
governed by the Insurance Commission, but a Health Maintenance Organization under the authority of the Department
of Health.

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 when the insured has insurable interest, among others. Section 10 of the Insurance Code, on
the other hand, states that every person has an insurable interest in the life and health of himself. In the case at bar, the
insurable interest of respondent’s 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. 9 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.

2) NO. 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 respondent’s 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.

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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.

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3. ASIAN TERMINALS, INC. vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION
G.R. No. 185964; June 16, 2014; REYES, J.

FACTS:
A shipment of 3,000 bags of sodium tripolyphosphate were loaded and received on board M/V "Da Feng" owned by China
Ocean Shipping Co. (COSCO) in favor of consignee, Grand Asian Sales, Inc. (GASI). The shipment was insured against
all risks by GASI with FIRST LEPANTO for under a Marine Open Policy. Upon its arrival in Manila, the shipment was
discharged into the possession and custody of Asian Terminals, Inc. (ATI), a domestic corporation engaged in arrastre
business. The shipment remained for quite some time at ATI’s storage area until it was withdrawn by broker, PROVEN, for
delivery to the consignee. Upon receipt of the shipment, it was found out that the delivered goods incurred shortages and
spillage for a loss/damage valued at P166,772.41.

GASI sought recompense from COSCO, through its Philippine agent Smith Bell Shipping Lines, Inc. (SMITH BELL), ATI,
and PROVEN, but was denied. Hence, it pursued indemnification from the shipment’s insurer. FIRST LEPANTO paid GASI
the amount of ₱165,772.40 as insurance indemnity after the requisite investigation and adjustment. Thereafter, GASI
executed a Release of Claim discharging FIRST LEPANTO from any and all liabilities pertaining to the lost/damaged
shipment and subrogating it to all the rights of recovery and claims GASI may have against any person or corporation in
relation to the lost/damaged shipment.

FIRST LEPANTO, as subrogee, demanded from COSCO, its shipping agency in the Philippines, SMITH BELL, PROVEN,
ATI, reimbursement of the amount paid to GASI. FIRST LEPANTO filed a complaint for sum of money before the MeTC
when its demands were not heeded.

MeTC absolved ATI and PROVEN from any liability, but it still dismissed the case. Even if it ruled that COSCO is liable, a
foreign corportation like COSCO is not within the jurisdiction of MeTC. RTC reversed the trial court’s ruling and held ATI to
be liable.

ATI sought recourse with the CA challenging the RTC’s finding that FIRST LEPANTO was validly subrogated to the rights
of GASI with respect to the lost/damaged shipment. ATI argued that there was no valid subrogation because
FIRSTLEPANTO failed to present a valid, existing and enforceable Marine Open Policy or insurance contract. ATI reasoned
that the Certificate of Insurance or Marine Cover Note submitted by FIRST LEPANTO as evidence is not the same as an
actual insurance contract.

ISSUE:
Whether or not the non-presentation of an insurance contract will bar a subrogee from collecting reimbursement.

HELD:
As a general rule, the marine insurance policy needs to be presented in evidence before the insurer may recover the insured
value of the lost/damaged cargo in the exercise of its subrogatory right. Nevertheless, the rule is not inflexible. In certain
instances, the Court has admitted exceptions by declaring that a marine insurance policy is dispensable evidence in
reimbursement claims instituted by the insurer.

In Delsan Transport Lines, Inc. v. CA, the Court ruled that the right of subrogation accrues simply upon payment by the
insurance company of the insurance claim. Hence, presentation in evidence of the marine insurance policy is not
indispensable before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of
its subrogatory right. The subrogation receipt, by itself, was held sufficient to establish not only the relationship between the
insurer and consignee, but also the amount paid to settle the insurance claim. The presentation of the insurance contract
was deemed not fatal to the insurer’s cause of action because the loss of the cargo undoubtedly occurred while on board
the petitioner’s vessel.

Based on the attendant facts of the instant case, the application of the exception is warranted. As discussed above, it is
already settled that the loss/damage to the GASI’s shipment occurred while they were in ATI’s custody, possession and
control as arrastre operator. Verily, the Certificate of Insurance and the Release of Claim presented as evidence sufficiently
established FIRST LEPANTO’s right to collect reimbursement as the subrogee of the consignee, GASI. The payment by
the insurer to the insured operates as an equitable assignment to the insurer of all the remedies which the insured may
have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent
upon, nor does it grow out of any privity of contract or upon payment by the insurance company of the insurance claim. It
accrues simply upon payment by the insurance company of the insurance claim.

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4. Spouses Cha v. Court of Appeals
G.R. No. 124520, August 18, 1997, Padilla, J.

FACTS:
Petitioner-spouses Cha, as lessees, entered into a lease contract with private respondent CKS Development
Corporation (hereinafter CKS), as lessor. One of the stipulations (paragraph 18) in the lease contract provides that the
lessee shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or
space in the leased premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE
obtain(s) the insurance thereof without the consent of the LESSOR, then the policy is deemed assigned and transferred to
the LESSOR for its own benefit (automatic assignment clause). Notwithstanding such stipulation, the Cha spouses
insured against loss by fire their merchandise inside the leased premises with the United Insurance Co., Inc. (hereafter
United) without the written consent of CKS. On the day that the lease contract was to expire, fire broke out inside the
leased premises. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote
the insurer (United) a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and
United) be paid directly to CKS, based on its lease contract with Cha spouses. United refused to pay CKS. Hence, the
latter filed a complaint against the Cha spouses and United.

ISSUE/S:
Whether or not the aforequoted paragraph 18 (automatic assignment clause) of the lease contract entered into between
CKS and the Cha spouses is valid.

RULING:
No. It is basic in the law on contracts that the stipulations contained in a contract cannot be contrary to law, morals, good
customs, public order or public policy. Specifically, under the Insurance Code of the Philippines, a non-life insurance
policy such as the fire insurance policy taken by Spouses Cha over their merchandise is primarily a contract of indemnity.
Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs.
Otherwise, the contract of insurance is a mere wager which is void. In the present case, it cannot be denied that CKS has
no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the
Insurance Code which provides that the measure of an insurable interest in property is the extent to which the insured
might be damnified by loss of injury thereof. Therefore, respondent CKS cannot, under the Insurance Code be validly a
beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest over
said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS under the
provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds of the
fire insurance policy thus rightfully belong to the Cha spouses The insurer (United) cannot be compelled to pay the
proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured.

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5. GAISANO CAGAYAN, INC. vs INSURANCE COMPANY OF NORTH AMERICA
G.R. No. 147839, June 8, 2006, Austria-Martinez J.
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. 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.

Gaisano Superstore Complex in Cagayan de Oro City, 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. Respondent filed a complaint for damages against the petitioner. It alleges that IMC and LSPI filed with
respondent their claims under their respective fire insurance policies with book debt endorsements; that respondent
paid the claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their rights against
petitioner; that respondent made several demands for payment upon petitioner but these went unheeded.
RTC – dismissed respondents complaint and held that the fire was purely accidental; that since the sales invoices
state that it is further agreed that merely for the purpose of securing the payment of the purchase price,
the 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.
CA - set aside the decision of the RTC. It held that the sales invoices are proofs of sale; that loss of the goods
in the fire must be borne by petitioner since the proviso contained in the sales invoices is an exception under Article
1504 (1) of the Civil Code

ISSUES:
1. Does a fire insurance policy on book debts one that covers the unpaid accounts of IMC and LSPI?
2. Does IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales
invoices that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the
above described merchandise remains the property of the vendor until the purchase price thereof is fully paid[?]"
3. Is the petitioner is liable for the unpaid accounts?
4. Has it been established that petitioner has outstanding accounts with IMC and LSPI.

RULING:
Petition partly granted.
1. No. Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the
goods sold and delivered to the customers and dealers of the insured. 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.
2. Petitioner argues that IMC bears the risk of loss because it expressly reserved ownership of the goods
by stipulating in the sales invoices that [i]t is further agreed that merely for purpose of securing the
payment of the purchase price the above described merchandise remains the property of the vendor until
the purchase price thereof is fully paid. Respondent counters that while ownership over the ready- made
clothing materials was transferred upon delivery to petitioner, IMC and LSPI have insurable interest over
said goods as creditors who stand to suffer direct pecuniary loss from its destruction by fire. The present
case clearly falls under paragraph (1), Article 1504 of the Civil Code: ART. 1504. Unless otherwise agreed,
the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that: (1) Where delivery of the goods has been made to the buyer or to a
bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the
seller merely to secure performance by the buyer of his obligations under the contract, the goods are at

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 the buyer's risk from the time of such delivery Thus, when the seller retains ownership only to insure that
the buyer will pay its debt, the risk of loss is borne by the buyer. Petitioner bears the risk of loss of the
goods delivered. IMC and LSPI had 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. Section 13 of our 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."
Parenthetically, under Section 14 of the same Code, 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. Anyone has an insurable interest in
property who derives a benefit from its existence or would suffer loss from its destruction. Indeed, a
vendor or seller retains an insurable interest in the property sold so long as he has any interest therein,
in other words, so long as he would suffer by its destruction, as where he has a vendor's lien. In this
case, the 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.
3. Yes. Petitioner's argument that it is not liable because the fire is a fortuitous event under the Civil Code
is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code. Moreover,
it must be stressed that 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. Accordingly, petitioner's obligation
is for the payment of money. As stated by the CA, 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 rationale for this is that the rule that an obligor should be held exempt from liability
when the loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery
of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. It
does not apply when the obligation is pecuniary in nature. Under Article 1263 of the Civil Code, "[i]n an
obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not
extinguish the obligation." This rule is based on the principle that the genus of a thing can never perish.
An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property
of the debtor.
4. With respect to IMC, the respondent has adequately established its claim. The claim has been proven.
The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer
and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation accrues
simply upon payment by the insurance company of the insurance claim Respondent's action against petitioner
is squarely sanctioned by Article 2207 of the Civil Code which provides: Art. 2207. If the plaintiff's property
has been insured, and he has received indemnity from the insurance company for the injury or loss arising
out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the
rights of the insured against the wrongdoer or the person who has violated the contract.

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6. Sun Life of Canada (Sun Life) vs. Sibya

FACTS:
Atty. Jesus Sibya, Jr. (insured) applied for life insurance with Sun Life. He indicated in his Application for Insurance that he
had sought advice for kidney problems.

On February 5, 2001, Sun Life approved insured’s application and issued Insurance Policy No. 031097335 (Insurance
Policy). Said policy indicated the respondents as beneficiaries and entitles them to a death benefit should insured dies on
or before February 5, 2021, or a sum of money if insured is still living on the endowment date.

On May 11, 2001, insured died due to a gunshot wound. His wife, Ma. Daisy filed a Claimant’s Statement with Sun Life to
see the death benefits indicated in his insurance policy. However, Sun Life denied the claim on the ground that details on
the insured’s medical history were not disclosed in his application.

Respondents reiterated their claim against Sun Life, but the latter still refused to heed to respondents’ requests and instead
file a Complaint for Rescission before the RTC. Sun Life alleged that insured failed to disclose in his insurance application
his previous medical treatment at NKTI. Had Sun Life known that insured was at a high risk medical condition, it would not
have issued the insurance policy in favor of insured.

RTC dismissed the complaint for lack of merit. It held that insured did not commit material concealment and
misrepresentation when he applied for life insurance with Sun Life. Given the disclosures and the waiver and authorization
to investigate executed by insured to Sun Life, the latter had all the means of ascertaining the facts allegedly concealed by
the applicant.

CA affirmed the decision of the RTC in ordering Sun Life to pay death benefits and damages in favor of the respondents. It
ruled that there was no fraudulent intent on the part of insured in submitting his insurance application.

ISSUE:
Was there concealment or misrepresentation when insured submitted his insurance application with Sun Life?

RULING:
No. The intent to defraud on the part of the insured must be ascertained to merit rescission on the insurance contract.
Concealment as a defense for the 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. Sun Life failed to clearly and satisfactorily
establish its allegations, and is therefore liable to pay the proceeds of the insurance. CA correctly observed that insured
admitted in his application his medical treatment for kidney ailment. As shown in the CA’s decision.

Records show that in the Application for Insurance, [Atty. Jesus Jr.] admitted that he had sought medical treatment
for kidney ailment. When asked to provide details on the said medication, [Atty. Jesus Jr.] indicated the following
information: year ("1987"), medical procedure ("undergone lithotripsy due to kidney stone"), length of confinement ("3
days"), attending physician ("Dr. Jesus Benjamin Mendoza") and the hospital ("National Kidney Institute"). Given the
express language of the Authorization, it cannot be said that [Atty. Jesus Jr.] concealed his medical history since [Sun
Life] had the means of ascertaining [Atty. Jesus Jr.'s] medical record. (SC also discussed and applied the
incontestability period)

If the insured dies within the two-year contestability period, the insurer is bound to make good its obligation under the policy,
regardless of the presence or lack of concealment or misrepresentation. After the two-year period lapses, or when the
insured dies within the period, the insurer must make good on the policy, even though the policy was obtained by
fraud, concealment, or misrepresentation. This is not to say that insurance fraud must be rewarded, but that insurers
who recklessly and indiscriminately solicit and obtain business must be penalized, for such recklessness and lack of
discrimination ultimately work to the detriment of bona fide takers of insurance and the public in general

In the present case, Sun Life issued Atty. Jesus Jr.'s policy on February 5, 2001. Thus, it has two years from its issuance,
to investigate and verify whether the policy was obtained by fraud, concealment, or misrepresentation. Upon the death of
Atty. Jesus Jr., however, on May 11, 2001, or a mere three months from the issuance of the policy, Sun Life loses its right
to rescind the policy. As discussed in Manila Bankers, the death of the insured within the two-year period will render the
right of the insurer to rescind the policy nugatory. As such, the incontestability period will now set in.

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7. GEAGONIA VS COURT OF APPEALS
G.R. No. 114427, February 6, 1995, Davide Jr., J.

FACTS:
Petitioner, Armando Geagonia is the owner of Norman's Mart located in the public market of San Francisco, Agusan del
Sur. On 22 December 1989, he obtained from the private respondent fire insurance policy for P100, 000.00. The period of
the policy was from 22 December 1989 to 22 December 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." 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.

The fire insurance 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 May 27 1990, a 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 fire insurance policy but it was denied on the ground that the claimant violated Condition 3 of the policy
arguing that it found out that at the time of the loss the petitioner's stocks-in-trade were likewise covered by two (2) fire
insurance policies for P100, 000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC).
These policies indicate that the insured was "Messrs. Discount Mart (Mr Armando Geagonia, Prop.)" with a mortgage clause
which states that in case there be 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.

Geogonia then filed a complaint against the private respondent with the Insurance Commission for the recovery of P100,
000.00 under fire insurance policy and for attorney's fees and costs of litigation. He attached as Annex thereof his letter
dated January 18 1991 which asked for the reconsideration of the denial. He admitted in the said letter that at the time he
obtained the private respondent's fire insurance policy he knew that the two policies issued by the PFIC were already in
existence, however, he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the
existing policies covering the insured subjects and that this requirement was not mentioned to him by the agent. That had
it been mentioned, he would not have withheld such information. He further asserted that the total of the amounts claimed
under the three policies was below the actual value of his stocks at the time of loss, which was P1,000,000.00. In its answer,
the private respondent specifically denied the allegations in the complaint and set up as its principal defense the violation
of Condition 3 of the policy.

ISSUE: WON Geogonia is a party to the two insurance policies.

RULING: No. 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.

A double insurance exists where the same person is insured by several insurers separately in respect of the same subject
and interest. 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. 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

10
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.

8. THE INSULAR LIFE ASSURANCE COMPANY vs. PAZ Y. KHU, FELIPE Y. KHU, JR., and FREDERICK Y. KHU
G.R. No. 195176

FACTS:
On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular Life under the latter’s Diamond
Jubilee Insurance Plan. Felipe accomplished the required medical questionnaire wherein he did not declare any illness or
adverse medical condition. Insular Life thereafter issued him Policy Number A000015683 with a face value of P1 million.
This took effect on June 22, 1997.

On June 23, 1999, Felipe’s policy lapsed due to non-payment of the premium covering the period from June 22, 1999 to
June 23, 2000. On September 7, 1999, Felipe applied for the reinstatement of his policy and paid P25,020.00 as premium.
Except for the change in his occupation of being self-employed to being the Municipal Mayor of Binuangan, Misamis
Oriental, all the other information submitted by Felipe in his application for reinstatement was virtually identical to those
mentioned in his original policy.

Insular Life advised Felipe that his application for reinstatement may only be considered if he agreed to certain conditions
such as payment of additional premium and the cancellation of the riders pertaining to premium waiver and accidental death
benefits. Felipe agreed to these conditions and on December 27, 1999 paid the agreed additional premium of P3,054.50.
On January 7, 2000, Insular Life issued Endorsement No. PNA000015683, which reads:

This certifies that as agreed by the Insured, the reinstatement of this policy has been approved by the Company on the
understanding that the following changes are made on the policy effective June 22, 1999:
1. The EXTRA PREMIUM is imposed; and
2. The ACCIDENTAL DEATH BENEFIT (ADB) and WAIVER OF PREMIUM DISABILITY (WPD) rider originally
attached to and forming parts of this policy [are] deleted.

In consequence thereof, the premium rates on this policy are adjusted to P28,000.00 annually, P14,843.00 semi-annually
and P7,557.00 quarterly, Philippine currency. On June 23, 2000, Felipe paid the annual premium in the amount of
P28,000.00 covering the period from June 22, 2000 to June 22, 2001. And on July 2, 2001, he also paid the same amount
as annual premium covering the period from June 22, 2001 to June 21, 2002.

On September 22, 2001, Felipe died. His Certificate of Death enumerated the following as causes of death:
Immediate cause: a. End stage renal failure, Hepatic failure
Antecedent cause: b. Congestive heart failure, Diffuse myocardial ischemia.
Underlying cause: c. Diabetes Neuropathy, Alcoholism, and Pneumonia.

On October 5, 2001, Paz Y. Khu, Felipe Y. Khu, Jr. and Frederick Y. Khu (collectively, Felipe’s beneficiaries or respondents)
filed with Insular Life a claim for benefit under the reinstated policy. This claim was denied. Instead, Insular Life advised
Felipe’s beneficiaries that it had decided to rescind the reinstated policy on the grounds of concealment and
misrepresentation by Felipe.
Hence, respondents instituted a complaint for specific performance with damages.

ISSUE:
Whether Felipe’s reinstated life insurance policy is already incontestable at the time of his death

RULING: YES

Sec 48 of the Insurance Code pertinently provides that:

Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must
be exercised previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the
insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the
policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his
agent.

11
The rationale for this provision was discussed by the Court in Manila Bankers Life Insurance Corporation v. Aban. Section
48 regulates both the actions of the insurers and prospective takers of life insurance. It gives insurers enough time to inquire
whether the policy was obtained by fraud, concealment, or misrepresentation; on the other hand, it forewarns scheming
individuals that their attempts at insurance fraud would be timely uncovered – thus deterring them from venturing into such
nefarious enterprise. At the same time, legitimate policy holders are absolutely protected from unwarranted denial of their
claims or delay in the collection of insurance proceeds occasioned by allegations of fraud, concealment, or
misrepresentation by insurers, claims which may no longer be set up after the two-year period expires as ordained under
the law.

In the instant case, Eulogio’s death rendered impossible full compliance with the conditions for reinstatement of Policy No.
9011992. True, Eulogio, before his death, managed to file his Application for Reinstatement and deposit the amount for
payment of his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 could only be considered
reinstated after the Application for Reinstatement had been processed and approved by Insular Life during Eulogio’s lifetime
and good health.31
Thus, it is settled that the reinstatement of an insurance policy should be reckoned from the date when the same was
approved by the insurer.

In this case, the parties differ as to when the reinstatement was actually approved. Insular Life claims that it approved the
reinstatement only on December 27, 1999. On the other hand, respondents contend that it was on June 22, 1999 that the
reinstatement took effect.

The resolution of this issue hinges on the following documents: 1) Letter of Acceptance; and 2) the Endorsement.

In the Letter of Acceptance, Khu declared that he was accepting "the imposition of an extra/additional x x x premium of
P5.00 a year per thousand of insurance; effective June 22, 1999". It is true that the phrase as used in this particular
paragraph does not refer explicitly to the effectivity of the reinstatement. But the Court notes that the reinstatement was
conditioned upon the payment of additional premium not only prospectively, that is, to cover the remainder of the annual
period of coverage, but also retroactively, that is for the period starting June 22, 1999. Hence, by paying the amount of
P3,054.50 on December 27, 1999 in addition to the P25,020.00 he had earlier paid on September 7, 1999, Khu had paid
for the insurance coverage starting June 22, 1999. At the very least, this circumstance has engendered a true lacuna.

In the Endorsement, the obscurity is patent. In the first sentence of the Endorsement, it is not entirely clear whether the
phrase "effective June 22, 1999" refers to the subject of the sentence, namely "the reinstatement of this policy," or to the
subsequent phrase "changes are made on the policy."

The court below is correct. Given the obscurity of the language, the construction favorable to the insured will be adopted by
the courts. Accordingly, the subject policy is deemed reinstated as of June 22, 1999. Thus, the period of contestability has
lapsed. 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.

12
9. SUN LIFE OF CANADA (PHILIPPINES), INC., vs SANDRA TAN KIT
G.R. No. 183272, October 15, 2014, DEL CASTILLO, J.

FACTS:
Respondent Tan Kit is the widow and designated beneficiary of Norberto Tan Kit (Norberto), who is a holder of a life
insurance policy granted on October 28, 1999. Norberto Tan Kit died of disseminated gastric carcinoma within the two-year
contestability period. Consequently, respondent Tan Kit filed a claim under the subject policy.
Petitioner denied respondent Tan Kit's claim on account of Norberto's failure to fully and faithfully disclose in his insurance
application certain material and relevant information about his health and smoking history. Specifically, Norberto answered
"No" to the question inquiring whether he had smoked cigarettes or cigars within the last 12 months prior to filling out said
application.

However, the medical report of Dr. Anna Chua (Dr. Chua), one of the several physicians that Norberto consulted for his
illness, reveals that he was a smoker and had only stopped smoking (Norberto admitted to his doctor) 2 months prior
(August 1999) from the approval of his application for insurance. According to petitioner, its underwriters would not have
approved Norberto's application for life insurance had they been given the correct information. Believing that the policy is
null and void, petitioner opined that its liability is limited to the refund of all the premiums paid. Accordingly, it enclosed in
the said letter a check for P13,080.93 representing the premium refund. Petitioner Sun Life of Canada filed a Complaint for
Rescission of Insurance Contract before the Regional Trial Court (RTC) of Makati City.

The CA thus held that Norberto is guilty of concealment which misled petitioner in forming its estimates of the risks of the
insurance policy. Petitioner was ordered to reimburse respondent the premiums paid by the insured with interest at the rate
of 12% per annum from the time of the death of the insured until fully paid.

Petitioner argues that no interest should have been imposed on the premium to be refunded because the CA Decision does
not provide any legal or factual basis therefor; that petitioner directly and timely tendered to respondents an amount
representing the premium refund but they rejected it since they opted to pursue their claim for the proceeds of the insurance
policy; that respondents should bear the consequence of their unsound decision of rejecting the refund tendered to them;
and, that petitioner is not guilty of delay or of invalid or unjust rescission as to make it liable for interest. Respondents, on
the other hand, contend that the reimbursement of premium is clearly a money obligation or one that arises from forbearance
of money, hence, the imposition of 12% interest per annum is just, proper and supported by jurisprudence. While they admit
that they refused the tender of payment of the premium refund, they aver that they only did so because they did not want to
abandon their claim for the proceeds of the insurance policy.

ISSUE/S:
Whether petitioner is liable to pay interest on the premium to be refunded to respondents.

RULING: NO
In this case, what is involved is an order for petitioner to refund to respondents the insurance premium paid by Norberto as
a consequence of the rescission of the insurance contract on account of the latter’s concealment of material information in
his insurance application. Moreover, petitioner did not unreasonably deny or withhold the insurance proceeds as it was
satisfactorily established that Norberto was guilty of concealment.

As a form of damages, compensatory interest is due only if the obligor is proven to have failed to comply with his obligation.

In this case, it is undisputed that simultaneous to its giving of notice to respondents that it was rescinding the policy due to
concealment, petitioner tendered the refund of premium by attaching to the said notice a check representing the amount of
refund. However, respondents refused to accept the same since they were seeking for the release of the proceeds of the
policy. Because of this discord, petitioner filed for judicial rescission of the contract. Petitioner, after receiving an adverse
judgment from the RTC, appealed to the CA. And as may be recalled, the appellate court found Norberto guilty of
concealment and thus upheld the rescission of the insurance contract and consequently decreed the obligation of petitioner
to return to respondents the premium paid by Norberto. Moreover, we find that petitioner did not incur delay or unjustifiably
deny the claim.

Based on the foregoing, we find that petitioner properly complied with its obligation under the law and contract. Hence, it
should not be made liable to pay compensatory interest.

13
10. Tiu vs. Arriesgado
G.R. No. 138060, September 01, 2004, Callejo, Sr. J.

FACTS:
This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision of the Court of Appeals
affirming with modification the Decision of the RTC for breach of contract of carriage, damages and attorney’s fees, and the
Resolution denying the motion for reconsideration thereof.

At about 10:00PM on March 15, 1987, when the cargo truck of Condor Hollow Blocks and General Merchandise passed
over a bridge in Sitio Aggies in Cebu, one of its rear tires exploded. The driver then parked along the right side of the national
highway, leaving the truck’s tail lights on and instructed his helper to place a spare tire to serve as warning for oncoming
vehicles. At about 4:45AM, D’ Rough Riders passenger bus cruised along the national highway of Sitio Aggies, they were
carrying the spouses Pedro and Felisa Arriesgado. Upon seeing the stalled truck, the driver applied the breaks and tried to
swerve to the left to avoid hitting the truck. However, it was too late and as a result of the collision, several passengers got
injured including the Spouses Arriesgado. The wife, Felisa, eventually died.

Pedro Arriesgado filed a complaint for breach of contract of carriage, damages and attorney’s fees against D’ Rough Riders’
bus operator William Tiu and his driver. Tiu, for their part, filed a Third-Party Complaint against Philippine Phoenix Surety
and Insurance, Inc. (PPSII), as the passenger bus was covered by a common carrier liability insurance issued by PPSII.
However, PPSII admitted that it had an existing contract with petitioner Tiu, but averred that it had already attended to and
settled the claims of those who were injured during the incident. It could not accede to the claim of Arriesgado, as such
claim was way beyond the scheduled indemnity as contained in the contract of insurance.

RTC ruled in favor of Arriesgado and held William Tiu solely liable for damages. The CA affirmed the decision of the RTC
with the modification of reducing the amount. The CA ruled that no evidence was presented against PPSII, and as such, it
could not be held liable for Arriesgado’s claim, nor for contribution, indemnification and/or reimbursement.

ISSUE/S:
Is PPSII liable as an insurer of the D’ Rough Riders?

RULING:
Yes. 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. In its Answer to the Third-Party Complaint, the
respondent PPSII admitted the existence of the contract of insurance, in view of its failure to specifically deny the same as
required under then Section 8(a), Rule 8 of the Rules of Court. In fact, respondent PPSII did not dispute the existence of
such contract, and admitted that it was liable thereon. 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.

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
P12,000, while the limit per accident was pegged at P50,000. 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 P12,000 for the death
of Felisa Arriesgado, and respondent Arriesgado’s hospitalization expenses of P1,113.80, 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, would not exceed the P50,000 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.

Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William Tiu are ORDERED to pay, jointly and
severally, respondent Pedro A. Arriesgado the total amount of P13,113.80;

14
11. GAISANO V. DEVELOPMENT INSURANCE AND SURETY CORP.
G.R. No. 190702; February 27, 2017; J. Jardeleza

FACTS:
Petitioner was the registered owner of a 1992 Mitsubishi Montero while respondent is a domestic corporation engaged in
the insurance business.

On September 27, 1996, respondent issued a comprehensive commercial vehicle policy to petitioner in the amount of
₱1,500,000.00 over the vehicle for a period of one year commencing on September 27, 1996 up to September 27, 1997.
Respondent also issued two other commercial vehicle policies to petitioner covering two other motor vehicles for the same
period.

To collect the premiums and other charges on the policies, respondent's agent, Trans-Pacific Underwriters Agency (Trans-
Pacific), issued a statement of account to petitioner's company, Noah's Ark Merchandising (Noah's Ark). Noah's Ark
immediately processed the payments and issued a Far East Bank check dated September 27, 1996 payable to Trans-
Pacific on the same day.

The check bearing the amount of ₱140,893.50 represents payment for the three insurance policies, with ₱55,620.60 for the
premium and other charges over the vehicle. However, nobody from Trans-Pacific picked up the check that day. Trans-
Pacific informed Noah's Ark that its messenger would get the check the next day, September 28.

In the evening of September 27, 1996, while under the official custody of Noah's Ark marketing manager Achilles Pacquing
(Pacquing) as a service company vehicle, the vehicle was stolen in the vicinity of SM Megamall at Ortigas, Mandaluyong
City. Despite search and retrieval efforts, the vehicle was not recovered.

Oblivious of the incident, Trans-Pacific picked up the check the next day, September 28, acknowledging the receipt of
₱55,620.60 for the premium and other charges over the vehicle. The check issued to Trans-Pacific for ₱140,893.50 was
deposited with Metrobank for encashment on October 1, 1996.

On October 1, 1996, Pacquing informed petitioner of the vehicle's loss. Thereafter, petitioner reported the loss and filed a
claim with respondent for the insurance proceeds of ₱1,500,000.00.18 After investigation, respondent denied petitioner's
claim on the ground that there was no insurance contract.

ISSUE:
Whether or not herein petitioner is entitled to insurance proceeds from respondent insurance company

RULING:
NO—The Court held that herein petitioner is not entitled to the insurance proceeds because no insurance policy became
effective for lack of premium payment at the time of the occurrence of the risk insured against. The general rule in insurance
laws is that unless the premium is paid, the insurance policy is not valid and binding.
In the present case, the notice of the availability of the check, by itself, does not produce the effect of payment of the
premium. Trans-Pacific could not be considered in delay in accepting the check because when it informed petitioner that it
will only be able to pick-up the check the next day, petitioner did not protest to this, but instead allowed Trans-Pacific to do
so. Thus, at the time of loss, there was no payment of premium yet to make the insurance policy effective.
Hence, no insurance policy in this case can be said to have taken effect and likewise, petitioner cannot be entitled to
insurance proceeds from respondent.

15
12. ISABELA ROQUE vs. CA and PIONEER INSURANCE AND SURETY CORPORATION
G.R. No. L-66935 November 11, 1985

FACTS:
On February 19, 1972, the Manila Bay Lighterage Corporation (Manila Bay) a common carrier, entered into a contract with
the petitioners whereby the former would load and carry on board its barge Mable 10 about 422.18 cubic meters of logs
from Malampaya Sound, Palawan to North Harbor, Manila. The petitioners insured the logs against loss for P100,000.00
with respondent Pioneer Insurance and Surety Corporation (Pioneer).

On February 29, 1972, the petitioners loaded on the barge, 811 pieces of logs at Malampaya Sound, Palawan for carriage
and delivery to North Harbor, Port of Manila, but the shipment never reached its destination because Mable 10 sank with
the 811 pieces of logs somewhere off Cabuli Point in Palawan on its way to Manila. As alleged by the petitioners in their
complaint and as found by both the trial and appellate courts, the barge where the logs were loaded was not seaworthy
such that it developed a leak. The appellate court further found that one of the hatches was left open causing water to enter
the barge and because the barge was not provided with the necessary cover or tarpaulin, the ordinary splash of sea waves
brought more water inside the barge.

On March 8, 1972, the petitioners wrote a letter to Manila Bay demanding payment of P150,000.00 for the loss of the
shipment plus P100,000.00 as unrealized profits but the latter ignored the demand. Another letter was sent to respondent
Pioneer claiming the full amount of P100,000.00 under the insurance policy but respondent refused to pay on the ground
that its liability depended upon the "Total loss by Total Loss of Vessel only". Hence, petitioners commenced Civil Case No.
86599 against Manila Bay and respondent Pioneer.

Trial court: ruled in favor of the petitioners

Intermediate Appellate Court: absolved the respondent insurance company from liability on the grounds that the vessel
carrying the insured cargo was unseaworthy and the loss of said cargo was caused not by the perils of the sea but by the
perils of the ship.

Petitioner’s Contentions:
- Implied warranty of seaworthiness provided for in the Insurance Code refers only to the responsibility of the
shipowner who must see to it that his ship is reasonably fit to make in safety the contemplated voyage.
- Caused by perils of the sea

ISSUES:
I. W/N a mere shipper of cargo, having no control over the ship, has nothing to do with its seaworthiness? NO
II. W/N the loss of the cargo was caused by the perils of the sea, not by the perils of the ship? NO

RULING:

I. The liability of the insurance company is governed by law. Section 113 of the Insurance Code provides:
"In every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of marine
insurance, a warranty is implied that the ship is seaworthy."
Section 99 of the same Code also provides in part.
'Marine insurance includes:
"(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, . . . ."

From the above-quoted provisions, there can be no mistaking the fact that the term "cargo" can be the subject of marine
insurance and that once it is so made, the implied warranty of seaworthiness immediately attaches to whoever is insuring
the cargo whether he be the shipowner or not. As we have ruled in the case of Go Tiaoco y Hermanos v. Union Insurance
Society of Canton (40 Phil. 40):
"The same conclusion must be reached if the question be discussed with reference to the seaworthiness of the ship.
It is universally accepted that in every contract of insurance upon anything which is the subject of marine insurance, a
warranty is implied that the ship shall be seaworthy at the time of the inception of the voyage. This rule is accepted in
our own Insurance Law (Act No. 2427, sec. 106). . . ."

16
 Since the law provides for an implied warranty of seaworthiness in every contract of ordinary marine insurance, it
becomes the obligation of a cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy
condition. The shipper of cargo may have no control over the vessel but he has full control in the choice of the common
carrier that will transport his goods. Or the cargo owner may enter into a contract of insurance which speci�cally provides
that the insurer answers not only for the perils of the sea but also provides for coverage of perils of the ship.

II. On the contention of the petitioners that the trial court found that the loss was occasioned by the perils of the sea
characterized by the "storm and waves" which buffeted the vessel, the records show that the court ruled otherwise. It
stated: xxx xxx xxx
" . . . The other affirmative defense of defendant Lighterage, 'That the supposed loss of the logs was occasioned
by force majeure . . . .', was not supported by the evidence. At the time Mable 10 sank, there was no typhoon
but ordinary strong wind and waves, a condition which is natural and normal in the open sea. The evidence
shows that the sinking of Mable 10 was due to improper loading of the logs on one side so that the barge was
tilting on one side and for that it did not navigate on even keel; that it was no longer seaworthy that was why it
developed leak; that the personnel of the tugboat and the barge committed a mistake when it turned loose the
barge from the tugboat east of Cabuli point where it was buffeted by storm and waves, while the tugboat
proceeded to west of Cabuli point where it was protected by the mountain side from the storm and waves
coming from the east direction. . . ."

In fact, in the petitioners' complaint, it is alleged that "the barge Mable 10 of defendant carrier developed a leak which
allowed water to come in and that one of the hatches of said barge was negligently left open by the person in charge
thereof causing more water to come in", and that "the loss of said plaintiffs' cargo was due to the fault, negligence,
and/or lack of skill of defendant carrier and/or defendant carrier's representatives on barge Mable 10."

It is quite unmistakable that the loss of the cargo was due to the perils of the ship rather than the perils of the sea. The
facts clearly negate the petitioners' claim under the insurance policy. In the case of Go Tiaoco y Hermanos v. Union Ins.
Society of Canton, supra, we had occasion to elaborate on the term "perils of the ship." We ruled:
"It must be considered to be settled, furthermore, that a loss which, in the ordinary course of events, results
from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the
negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under
ordinary conditions, is not a peril of the sea. Such a loss is rather due to what has been aptly called the 'peril
of the ship.' The insurer undertakes to insure against perils of the sea and similar perils, not against perils of
the ship. As was well said by Lord Herschell in Wilson, Sons & Co. v. Owners of Cargo per the Xantho ([1887],
12 A. C., 503, 509), there must, in order to make the insurer liable, be 'some casualty, something which could
not be foreseen as one of the necessary incidents of the adventure. The purpose of the policy is to secure an
indemnity against accidents which may happen, not against events which must happen.
"In the present case the entrance of the sea water into the ship's hold through the defective pipe already
described was not due to any accident which happened during the voyage, but to the failure of the ship's owner
properly to repair a defect of the existence of which he was apprised. The loss was therefore more analogous
to that which directly results from simple unseaworthiness than to that which results from perils of the sea. xxx
xxx xxx

"Suffice it to say that upon the authority of those cases there is no room to doubt the liability of the shipowner for such a
loss as occurred in this case. By parity of reasoning the insurer is not liable; for generally speaking, the shipowner excepts
the perils of the sea from his engagement under the bill of lading, while this is the very perils against which the insurer
intends to give protection. As applied to the present case it results that the owners of the damaged rice must look to the
shipowner for redress and not to the insurer. "

17
13. MANULIFE PHILIPPINES, INC. v. YBAÑEZ
G.R. No. 204736, November 28, 2016, Del Castillo, J.

FACTS:
Manulife issued two insurance policies in favor of Dr. Gumersindo Solidum Ybañez, who designated his wife, Hermenegilda,
as beneficiary. On December 10, 2003, Hermenegilda, now widow to the said insured, filed a Claimant's Statement-Death
Claim with respect to the subject insurance policies, attaching therein the insured’s death certificate. Said Death Certificate
stated that the insured had "Hepatocellular CA, Crd Stage 4, secondary to Uric Acid Nephropathy; SAM Nephropathy
recurrent malignant pleural effusion; NASCVC." This prompted Manulife to conduct an investigation into the circumstances
leading to the said insured's death, and thereafter came to the conclusion that the insured misrepresented or concealed
material facts at the time the subject insurance policies were applied for. Hence, Manulife accordingly denied
Hermenegilda's death claims and refunded the premiums that the insured paid on the subject insurance policies.

Manulife then filed a complaint for the rescission of the insurance contracts, alleging that the insured concealed the following
material facts: (1) insured's confinement at the Cebu Doctors' Hospital (CDH) wherein he underwent total parotidectomy
due to the swelling of his right parotid gland and the presence of a tumor, and was found to have had a history of being
hypertensive, and his kidneys have become atretic or shrunken; (2) insured's confinement at the CDH wherein he was
diagnosed to have acute pancreatitis, in addition to being hypertensive; and (3) insured's diagnosis for leptospirosis.
Manulife presented as its sole witness the Senior Manager of its Claims and Settlements Department to identify its
documentary evidence.

Aside from refuting the averments of Manulife, Hermenegilda posits the following: (1) in the form filled up by Manulife's
company physician, the insured checked the column which says "yes" to the following questions: “Have you had
electrocardiograms, when, why, result?” (to which Manulife's company physician wrote the answer which stated that result
was normal), and “Have you seen a doctor, or had treatment operation on hospital case during the last five years?” (2) it is
strange that the insured's parotidectomy was not included in the report when the scar of that operation (which caused a
disfigurement in the right side of his face in front and below his ear) is too obvious to be overlooked by Manulife's company
physician who examined and interviewed the insured before accepting the policy; (3) Manulife had the option to inquire
further into the insured's physical condition, because the insured had given it authority to do so; (4) the company physician
commented that the physical condition of the then prospective insurance policy holder was "below average." Thus, at the
time when both insurance policies in question were submitted for approval to Manulife, the latter had had all the forewarnings
that should have put it on guard or on notice that things were not what it wanted them to be, reason enough to bestir it into
exercising greater prudence and caution to further inquire into the health or medical history of the insured.

The RTC found no merit at all in Manulife's Complaint for rescission of the subject insurance policies, which the CA affirmed.
The CA also denied Manulife’s motion for reconsideration. Hence, this present petition.

ISSUE:
Is rescission of the insurance contracts proper?

RULING:
NO. Adopting the findings of fact by the RTC, as affirmed by the CA, Manulife's Complaint for rescission of the insurance
policies in question was totally bereft of factual and legal bases because it had utterly failed to prove that the insured had
committed the alleged misrepresentation/s or concealment/s of material facts imputed against him.

The RTC correctly held that the CDH's medical records that might have established the insured's purported
misrepresentation/s or concealment/s was inadmissible for being hearsay, given the fact that Manulife failed to present the
physician or any responsible official of the CDH who could confirm or attest to the due execution and authenticity of the
alleged medical records. Manulife had utterly failed to prove by convincing evidence that it had been beguiled, inveigled, or
cajoled into selling the insurance to the insured who purportedly with malice and deceit passed himself off as thoroughly
sound and healthy, and thus a fit and proper applicant for life insurance. Manulife's sole witness gave no evidence at all
relative to the particulars of the purported concealment or misrepresentation allegedly perpetrated by the insured. In fact,
Victoriano merely perfunctorily identified the documentary exhibits adduced by Manulife; she never testified in regard to the
circumstances attending the execution of these documentary exhibits much less in regard to its contents. Of course, the
mere mechanical act of identifying these documentary exhibits, without the testimonies of the actual participating parties
thereto, adds up to nothing. These documentary exhibits did not automatically validate or explain themselves.

18
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." For failure of Manulife to prove intent to defraud
on the part of the insured, it cannot validly sue for rescission of insurance contracts.

19
14. Loadstar Shipping Company, Inc. and Loadstar International Shipping v. Malayan Insurance Company Inc.
G.R. No. 185565 , November 26, 2014, Reyes, J.

FACTS:
This is a petition for Review on Certiorari filed by the petitioners against Malayan Insurance Company, Incorporated seeking
to set aside the decision of the Court of Appeals which reversed and set aside the decision of the RTC dismissing the
complaint as well as the counterclaim.

Petitioner Loadstar Shipping and Philippine Associated Smelting and Refining Corporation entered into a Contract of
Affreightment for domestic bulk transport of the latter’s copper concentrates. 5,065.47 wet metric tons of copper
concentrates were loaded in Cargo Hold Nos. 1 and 2 of MV "Bobcat", a marine vessel owned by Loadstar International
Shipping Co., Inc. The cargo was insured with Malayan Insurance Company, Inc. MV "Bobcat" sailed from Poro Point, San
Fernando, La Union bound for Isabel, Leyte. While in the vicinity of Cresta de Gallo, the vessel’s chief officer on routine
inspection found a crack on starboard side of the main deck which caused seawater to enter and wet the cargo inside Cargo
Hold No. 2 forward/aft. In its preliminary report, the Elite Adjusters and Surveyor, Inc. confirmed that samples of copper
concentrates from Cargo Hold No. 2 were contaminated by seawater. Consequently, PASAR rejected 750 MT of the 2,300
MT cargo discharged from Cargo Hold No. 2. Thereafter, PASAR sent a formal notice of claim to Loadstar Shipping. Malayan
paid PASAR.

Meanwhile, Malayan wrote Loadstar Shipping informing the latter of a prospective buyer for the damaged copper
concentrates and the opportunity to nominate/refer other salvage buyers to PASAR. Then, Malayan wrote Loadstar Shipping
informing the latter of the acceptance of PASAR’s proposal to take the damaged copper concentrates. Thereafter, PASAR
signed a subrogation receipt in favor of Malayan. To recover the amount paid and in the exercise of its right of subrogation,
Malayan demanded reimbursement from Loadstar Shipping, which refused to comply prompting Malayan to institute with
the RTC a complaint for damages. Malayan mainly alleged that as a direct and natural consequence of the unseaworthiness
of the vessel, PASAR suffered loss of the cargo. Petitioners filed their answer with counterclaim, denying plaintiff appellant’s
allegations and averring that the vessel was seaworthy and defendants-appellees exercised the required diligence under
the law and that the entry of water into Cargo Hold No. 2 must have been caused by force majeureor heavy weather.

The RTC rendered a judgment dismissing the complaint as well as the counterclaim. The RTC was convinced that the
vessel was seaworthy at the time of loading and that the damage was attributable to the perils of the sea and not due to the
fault or negligence of Loadstar Shipping. On appeal, the CA set aside the RTC’s judgment ordered defendants-appellees
to pay plaintiff-appellant actual damages.

ISSUE:
Whether or not Malayan is automatically entitled to right of recovery by virtue of subrogation on the basis of PASAR’s
fraudulent claim.

HELD:
No. Under Article 365 of the Code of Commerce “If, in consequence of the damage, the goods are rendered useless for
sale and consumption for the purposes for which they are properly destined, the consignee shall not be bound to receive
them, and he may have them in the hands of the carrier, demanding of the latter their value at the current price on that day.”
Malayan, as the insurer of PASAR, neither stated nor proved that the goods are rendered useless or unfit for the purpose
intended by PASAR due to contamination with seawater. Hence, there is no basis for the goods’ rejection. Clearly, it is
erroneous for Malayan to reimburse PASAR as though the latter suffered from total loss of goods in the absence of proof
that PASAR sustained such kind of loss. Otherwise, there will be no difference in the indemnification of goods which were
not delivered at all; or delivered but rendered useless, compared against those which were delivered albeit, there is
diminution in value.

Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he who
is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. The rights
to which the subrogee succeeds are the same as, but not greater than, those of the person for whom he is substituted, that
is, he cannot acquire any claim, security or remedy the subrogor did not have. In other words, a subrogee cannot succeed
to a right not possessed by the subrogor. A subrogee in effect steps into the shoes of the insured and can recover only if
the insured likewise, could have recovered. Consequently, an insurer indemnifies the insured based on the loss or injury
the latter actually suffered from. If there is no loss or injury, then there is no obligation on the part of the insurer to indemnify
the insured. Should the insurer pay the insured and it turns out that indemnification is not due, or if due, the amount paid is
excessive, the insurer takes the risk of not being able to seek recompense from the alleged wrongdoer.

20
This is because the supposed subrogor did not possessthe right to be indemnified and therefore, no right to collect is passed
on to the subrogee. As regards the determination of actual damages, "[i]t is axiomatic that actual damages must be proved
with reasonable degree of certainty and a party is entitled only to such compensation for the pecuniary loss that was duly
proven. Therefore, Malayan is not entitled to recover by virtue of subrogation.

21
15. ALPHA INSURANCE AND SURETY CO. VS CASTOR
G.R. No. 198174 September 2, 2013 | J. PERALTA
TOPIC: Contracts of Adhesion

FACTS:
• Respondent entered into a contract of insurance, Motor Car Policy No. MAND/CV-00186, with petitioner, involving
her motor vehicle, a Toyota Revo DLX DSL.
• The contract of insurance obligates the petitioner to pay the respondent the amount of P630K in case of loss or
damage to said vehicle during the period covered, which is from February 26, 2007 to February 26, 2008.
• On April 16, 2007, at about 9:00 a.m., respondent instructed her driver, Lanuza, to bring the vehicle to a nearby
auto-shop for a tune-up. However, Lanuza no longer returned the motor vehicle to respondent and despite diligent efforts
to locate the same, said efforts proved futile.
• Respondent promptly reported the incident to the police and concomitantly notified petitioner of the said loss and
demanded payment of the insurance proceeds in the total sum of P630K.
• In a letter dated July 5, 2007, petitioner denied the insurance claim of respondent, stating among others, thus: Upon
verification of the documents submitted, particularly the Police Report and your Affidavit, which states that the culprit, who
stole the Insured unit, is employed with you. We would like to invite you on the provision of the Policy under Exceptions to
Section-III.

ISSUE: Whether respondent Castor is entitled to the insurance policy for the loss of her car by her driver?

HELD: YES. It is a basic rule in the interpretation of contracts that the terms of a contract are to be construed according to
the sense and meaning of the terms which the parties thereto have used.

In the case of property insurance policies, the evident intention of the contracting parties, i.e., the insurer and the
assured, determine the import of the various terms and provisions embodied in the policy. However, when the
terms of the insurance policy are ambiguous, equivocal or uncertain, such that the parties themselves disagree
about the meaning of particular provisions, the policy will be construed by the courts liberally in favor of the
assured and strictly against the insurer.

A contract of insurance is a contract of adhesion. So, when the terms of the insurance contract contain limitations on liability,
courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation.

Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein
in favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being a contract of
adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be
construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with
extreme jealousy and must be construed in such a way as to preclude the insurer from non-compliance with its obligations.

Theft perpetrated by the driver of the insured is not an exception to the coverage from the insurance policy, since Section
III thereof did not qualify as to who would commit the theft.

Petitioner cannot exclude the loss of respondent’s vehicle under the insurance policy under paragraph 4 of “Exceptions to
Section III,” since the same refers only to “malicious damage,” or more specifically, “injury” to the motor vehicle caused by
a person under the insured’s service. Paragraph 4 clearly does not contemplate “loss of property,” as what happened in the
instant case. PETITION DENIED.

22
16. Malayan Insurance Co. v. Lin
G.R. No. 207277 January 16, 2017
Del Castillo, J.

FACTS:
Emma Concepcion L. Lin filed a Complaint for Collection of Sum of Money with Damages against Malayan Insurance Co.,
Inc. Lin alleged that she obtained various loans from RCBC secured by six clustered warehouses located at Plaridel,
Bulacan; that the five warehouses were insured with Malayan against fire for ₱56 million while the remaining warehouse
was insured for ₱2 million; that on February 24, 2008, the five warehouses were gutted by fire; that on April 8, 2008 the
Bureau of Fire Protection issued a Fire Clearance Certification to her after having determined that the cause of fire was
accidental; that despite the foregoing, her demand for payment of her insurance claim was denied since the forensic
investigators hired by Malayan claimed that the cause of the fire was arson and not accidental; that she sought assistance
from the Insurance Commission (IC) which, after a meeting among the parties and a conduct of reinvestigation into the
cause/s of the fire, recommended that Malayan pay Lin's insurance claim and/or accord great weight to the BFP's
findings; that in defiance thereof, Malayan still denied or refused to pay her insurance claim; and that for these reasons,
Malayan's corporate officers should also be held liable for acquiescing to Malayan's unjustified refusal to pay her
insurance claim.

As against RCBC, Lin averred that notwithstanding the loss of the mortgaged properties, the bank refused to go after
Malayan and instead insisted that she herself must pay the loans to RCBC, otherwise, foreclosure proceedings would
ensue; and that to add insult to injury, RCBC has been compounding the interest on her loans, despite RCBC's failure or
refusal to go after Malayan.

Lin filed before the IC an administrative case against Malayan, In this administrative case, Lin claimed that since it had
been conclusively found that the cause of the fire was "accidental," the only issue left to be resolved is whether Malayan
should be held liable for unfair claim settlement practice under Section 241 in relation to Section 247 of the Insurance
Code due to its unjustified refusal to settle her claim; and that in consequence of the foregoing failings, Malayan's license
to operate as a non-life insurance company should be revoked or suspended, until such time that it fully complies with the
IC Resolution ordering it to accord more weight to the BFP's findings.

Malayan filed a motion to dismiss based on forum shopping. It argued that the administrative case was instituted to
prompt or incite IC into ordering Malayan to pay her insurance claim; that the elements of forum shopping are present in
these two cases.

Ruling of RTC and CA: No forum shopping

ISSUE:
WON Forum shopping is present

RULING:
No. "The settled rule is that criminal and civil cases are altogether different from administrative matters, such that the
disposition in the first two will not inevitably govern the third and vice versa."33In the context of the case at bar, matters
handled by the IC are delineated as either regulatory or adjudicatory, both of which have distinct characteristics. The
adjudicatory authority of the Insurance Commissioner is generally described in Section 416 of the Insurance Code.
In Go v. Office of the Ombudsman the principles enunciating that a civil case before the trial court involving recovery of
payment of the insured's insurance claim plus damages, can proceed simultaneously with an administrative case before
the IC.

23
17. THE INSULAR ASSURANCE CO., LTD., Petitioner, v. THE HEIRS OF JOSE H. ALVAREZ, Respondents.
G.R. No. 207526, October 03, 2018

UNION BANK OF THE PHILIPPINES, Petitioner, v. HEIRS OF JOSE H. ALVAREZ, Respondents.

G.R. No. 210156, October 3, 2018

FACTS:
Alvarez and his wife, Adelina, owned a residential lot with improvements covered by Transfer Certificate of Title (TCT) No.
C-315023 and registered in the Caloocan City Registry of Deeds. On June 18, 1997, Alvarez applied for and was granted
a housing loan by UnionBank in the amount of P648,000.00. This loan was secured by a promissory note, a real estate
mortgage over the lot, and a mortgage redemption insurance taken on the life of Alvarez with UnionBank as beneficiary.
Alvarez was among the mortgagors included in the list of qualified debtors covered by the Group Mortgage Redemption
Insurance that UnionBank had with Insular Life.

Alvarez passed away on April 17, 1998. In May 1998, UnionBank filed with Insular Life a death claim under Alvarez's
name pursuant to the Group Mortgage Redemption Insurance. Insular Life denied the claim after determining that Alvarez
was not eligible for coverage as he was supposedly more than 60 years old at the time of his loan's approval. With the
claim's denial, the monthly amortizations of the loan stood unpaid. UnionBank sent the Heirs of Alvarez a demand letter,
giving them 10 days to vacate the lot. Subsequently, on October 4, 1999, the lot was foreclosed and sold at a public auction
with UnionBank as the highest bidder.

On February 14, 2001, the Heirs of Alvarez filed a Complaint for Declaration of Nullity of Contract and Damages against
UnionBank, a certain Alfonso P. Miranda (Miranda), who supposedly benefitted from the loan, and the insurer which was
identified only as John Doe. The Complaint was later amended and converted into one for specific performance to include
a demand against Insular Life to fulfill its obligation as an insurer under the Group Mortgage Redemption Insurance.

In its defense, UnionBank asserted that the Heirs of Alvarez could not feign ignorance over the existence of the
loan and mortgage considering the Special Power of Attorney executed by Adelina in favor of her late husband, which
authorized him to apply for a housing loan with UnionBank. For its part, Insular Life maintained that based on the
documents submitted by UnionBank, Alvarez was no longer eligible under the Group Mortgage Redemption Insurance
since he was more than 60 years old when his loan was approved.

ISSUE:
Is the Insular Life Assurance Co., Ltd. is obliged to pay Union Bank of the Philippines the balance of Jose H. Alvarez's
loan given the claim that he lied about his age at the time of the approval of his loan?

RULING:
YES. Section 26 of the Insurance Code defines concealment as "[a] neglect to communicate that which a party knows and
ought to communicate." However, Alvarez did not withhold information on or neglect to state his age. He made an actual
declaration and assertion about it. What this case involves, instead, is an allegedly false representation.

Section 44 of the Insurance Code states, "A representation is to be deemed false when the facts fail to correspond with its
assertions or stipulations." If indeed Alvarez misdeclared his age such that his assertion fails to correspond with his factual
age, he made a false representation, not a concealment.

The Insurance Code dispenses with proof of fraudulent intent in cases of rescission due to concealment, but not
so in cases of rescission due to false representations. When an abundance of available documentary evidence can
be referenced to demonstrate a design to defraud, presenting a singular document with an erroneous entry does
not qualify as clear and convincing proof of fraudulent intent. Neither does belatedly invoking just one other
document, which was not even authored by the alleged miscreant.

Here, Insular Life had all the opportunity to demonstrate Alvarez's pattern of consistently indicating erroneous entries for
his age. All it needed to do was to inventory the documents submitted by Alvarez and note the statements he made
concerning his age. This was not a cumbersome task, yet it failed at it. Hence, the Insular Life Assurance Co., Ltd. is obliged
to pay Union Bank of the Philippines the balance of Jose H. Alvarez's loan given the claim that he lied about his age at the
time of the approval of his loan.

24
18. H.H. Hollero v. GSIS
G.R. No. 152334, September 24 2014, Perlas-Bernabe, J.

FACTS:
H.H. Hollero Construction and GSIS entered into a Project Agreement whereby the latter undertook the development of a
GSIS housing project. It also obligated itself to insure the Project, including all the improvements, upon the execution of
the Agreement under a Contractors’ All Risks Insurance. Under the policies, it was provided that all benefits thereunder
shall be forfeited if no action is instituted within twelve (12) months after the rejection of the claim for loss, damage or
liability.

Under both policies, it was provided that: (a) there must be prior notice of claim for loss, damage or liability within fourteen
(14) days from the occurrence of the loss or damage; (b) all benefits thereunder shall be forfeited if no action is instituted
within twelve(12) months after the rejection of the claim for loss, damage or liability; and (c) if the sum insured is found to
be less than the amount required to be insured, the amount recoverable shall be reduced to such proportion before taking
into account the deductibles stated in the schedule (average clause provision).

During the construction, three typhoons hit the country which caused considerable damage to the Project. Accordingly,
petitioner filed several claims for indemnity with the GSIS, however, GSIS rejected it. Thus, petitioner filed a Complaint for
Sum of Money and Damages before the RTC on September 27, 1991. GSIS filed a Motion to Dismiss on the ground that
the causes of action stated therein are barred by the twelve-month limitation provided under the policies.

ISSUE/S:
Whether or not H.H. Hollero’s cause of action has prescribed

RULING:
YES, petitioner’s cause of action has prescribed.
Here, petitioner insists that the GSIS’s letters dated April 26, 1990 and June 21, 1990 did not amount to a "final rejection"
of its claims, arguing that they were mere tentative resolutions pending further action on petitioner’s part or submission of
proof in refutation of the reasons for rejection. Hence, its causes of action for indemnity did not accrue on those dates.

The Court does not agree.

A perusal of the letter dated April 26, 1990 shows that the GSIS denied petitioner’s indemnity claims wrought by
Typhoons Biring and Huaning, it appearing that no amount was recoverable under the policies. While the GSIS gave
petitioner the opportunity to dispute its findings, neither of the parties pursued any further action on the matter; this
logically shows that they deemed the said letter as a rejection of the claims.

The same conclusion obtains for the letter dated June 21, 1990 denying petitioner’s indemnity claim caused by Typhoon
Saling on a "no loss" basis due to the non-renewal of the policies therefor before the onset of the said typhoon.

As correctly observed by the CA, "final rejection" simply means denial by the insurer of the claims of the insured and not
the rejection or denial by the insurer of the insured’s motion or request for reconsideration. The rejection referred to
should be construed as the rejection in the first instance, as in the two instances above-discussed.

Prescinding from the foregoing, the crucial issue in this case is: When does the cause of action accrue?
the case of Eagle Star Insurance Co.vs.Chia Yu ([supra note 41]), where the Court held:
The right of the insured to the payment of his loss accrues from the happening of the loss. However, the cause of action
in an insurance contract does not accrue until the insured’s claim is finally rejected by the insurer. This is because
before such final rejection there is no real necessity for bringing suit.
Indisputably, the above-cited pronouncements of this Court may be taken to mean that the insured' s cause of action or his
right to file a claim either in the Insurance Commission or in a court of competent jurisdiction [as in this case] commences
from the time of the denial of his claim by the Insurer, either expressly or impliedly.

25
19. GSIS v. Prudential Guarantee
G.R. No. 165585, November 20, 2013

FACTS:
The National Electrification Administration (NEA) entered into a Memorandum of Agreement (MOA) with GSIS insuring all
real and personal properties mortgaged to it by electrical cooperatives under an Industrial All Risks Policy ( sum insured
16.7B).

Out of the total sum insured, 95% which was reinsured by GSIS with PGAI for a period of one year. GSIS agreed to pay
PGAI reinsurance premiums in the amount of ₱32.8 M per quarter. GSIS failed to pay the fourth and last reinsurance
premium due despite demands. This prompted PGAI to file a complaint for sum of money against GSIS before the RTC.
In its complaint, PGAI alleged, among others, the policy remained in full force and effect for the entire insurable period and,
in fact, the losses/damages on various risks reinsured by PGAI were paid and accordingly settled by it.

In its Answer, GSIS argued that the complaint states no cause of action against GSIS because the non-payment of the last
reinsurance premium only renders the reinsurance contract ineffective, and does not give PGAI a right of action to collect.
RTC granted PGAI’s motion for judgment on the pleadings and ordered GSIS to pay PGAI. The CA ruled that judgment on
the pleadings was proper since GSIS did not specifically deny the genuineness, due execution, and perfection of its
reinsurance contract with PGAI.

ISSUE:
Whether or not the non-payment of the premium renders the reinsurance contract ineffective?

HELD:
No. We therefore sustain the Court of Appeals. We quote with approval the well-reasoned findings and conclusion of the
appellate court contained in its Resolution denying the motion to reconsider its Decision —
While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract,
We are not prepared to rule that the request to make installment payments duly approved by the insurer, would prevent the
entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment.
Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an
acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the
policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that
the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension,
and such an agreement is not contrary to morals, good customs, public order or public policy. So is an understanding to
allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel
to question the arrangement they have voluntarily accepted. Thus, owing to the identical complexion of Makati Tuscany
Condominium Corp. vs CA with the present case, the Court upholds PGAI’s right to be paid by GSIS the amount of the
fourth and last reinsurance premium pursuant to the reinsurance contract between them.

26
20. EQUITABLE INSURANCE CORP. VS. TRANSMODAL INTERNATIONAL, INC.
G.R. No. 223592, August 7, 2017, Peralta, J.

FACTS:
This is a Petition for Review on Certiorari (Rule 45) by petitioner. The facts are:Sytengco Enterprises Corp. hired Transmodal
to clear from the customs authorities and withdraw, transport, and deliver to its warehouse, cargoes consisting of 200
cartons of gum Arabic with a total weight of 5,000 kilograms valued at US21,750.00. The said cargoes arrived in Manila and
were brought to Ocean Links Container Terminal Center, Inc. pending their release by the Bureau of Customs (BOC) and
on September 2, 2004, respondent Transmodal withdrew the same cargoes and delivered them to Sytengco's warehouse.
It was noted in the delivery receipt that all the containers were wet. On November 2, 2004, Sytengco demanded from
Transmodal the payment of P1,457,424.00 as compensation for total loss of shipment. On that same date, petitioner, as
insurer of the cargoes paid Sytengco's claim for P728,712.00 as evidenced by a subrogation receipt. The petitioner filed a
complaint for damages against Transmodal, praying the payment of P728,712.00 actual damages with 6% interest from the
date of the filing of the complaint until full payment, plus attorney's fees and cost of suit, and averred that Transmodal's fault
and gross negligence were the causes of the damages sustained by Sytengco's shipment. Transmodal denied the claim,
saying that Sytengco did not immediately receive the cargoes which then caused it to be wet, and that Sytengco only made
a claim after more than 14 days. RTC ruled in favor of the petitioner, but CA reversed it for lack of proof of insurance since
the contract was neither attached in the complaint nor offered in evidence.

ISSUE/S:
Does the petitioner have the right to subrogation arising from the insurance contract?

RULING:
Yes. respondent had the opportunity to examine the said documents or to object to its presentation as pieces of evidence.
The records also show that respondent was able to cross-examine petitioner's witness regarding the said documents. Thus,
it was well established that petitioner has the right to step into the shoes of the insured who has a direct cause of action
against herein respondent on account of the damages sustained by the cargoes. "Subrogation is the substitution of one
person in the place of another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights
of the other in relation to a debt or claim, including its remedies or securities. The records further show that petitioner was
able to accomplish its obligation under the insurance policy as it has paid the assured of its insurance claim. The payment
by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies which the insured may
have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent
upon, nor does it grow out of any privity of contract or upon payment by the insurance company of the insurance claim. It
accrues simply upon payment by the insurance company of the insurance claim. As a general rule, the marine insurance
policy needs to be presented in evidence before the insurer may recover the insured value of the lost/damaged cargo in the
exercise of its subrogatory right. Nevertheless, the rule is not inflexible. In certain instances, the Court has admitted
exceptions by declaring that a marine insurance policy is dispensable evidence in reimbursement claims instituted by the
insurer. The subrogation receipt, by itself, was held sufficient to establish not only the relationship between the insurer and
consignee, but also the amount paid to settle the insurance claim. The presentation of the insurance contract was deemed
not fatal to the insurer's cause of action because the loss of the cargo undoubtedly occurred while on board the petitioner's
vessel. In Malayan Insurance Co. v. Regis Brokerage, Malayan did not submit the copy of the insurance contract or policy
and the subrogation was denied. Here, the petitioner submitted the copy of the insurance contract. In fact, the non-
presentation of the insurance contract is not fatal to its cause of action. Hence, this petition is granted, and Transmodal is
ordered to pay the petitioner as subrogee.

27
21. ORIENTAL ASSURANCE CORPORATION vs. MANUEL ONG
G.R. No. 189524, October 11, 2017; LEONEN, J.:

FACTS:
JEA Steel Industries, Inc. (JEA Steel) imported from South Korea 72 aluminum-zinc-alloy-coated steel sheets in coils. Upon
arrival of the vessel at the Manila South Harbor the 72 coils were discharged and stored in Pier 9 under the custody of the
arrastre contractor, Asian Terminals, Inc. (Asian Terminals). From the storage compound of Asian Terminals, the coils were
loaded on the trucks of Manuel Ong (Ong) and delivered to JEA Steel's plant in Barangay Lapidario, Trece Martirez,
Cavite. Eleven of these coils ''were found to be in damaged condition, dented or their normal round shape deformed." 8

JEA Steel filed a claim with Oriental for the value of the 11 damaged coils, pursuant to Marine Insurance Policy No. OAC/M-
12292. Oriental paid JEA Steel the sum of P521,530.16 and subsequently demanded indemnity from Ong and Asian
Terminals (respondents), but they refused to pay. Oriental filed a Complaint before the Regional Trial Court of Manila for
sum of money against respondents.12

Ong countered that the 11 coils were already damaged when they were loaded on board his trucks and transported to the
consignee. For its part, Asian Terminals claimed that it exercised due diligence in handling the cargo, that the cargo was
released to the consignee's representative in the same condition as when received from the vessel, and that the damages
were sustained while in the custody of the vessel or the customs broker. Asian Terminals further argued that Oriental's claim
was barred for the latter's failure to file a notice of claim within the 15-day period provided in the Gate Pass and in Article
VII, Section 7.01 of the Contract for Cargo Handling Services (Management Contract) between the Philippine Ports Authority
and Asian Terminals The Gate Pass was signed by the consignee's representative to acknowledge the delivery and receipt
of the shipment. Asian Terminals added that its liability, if any, should not exceed P5,000.00, pursuant to said Section 7.01.18

ISSUE:
Whether petitioner, who was not a party to the Gate Pass or Management Contract, is bound by the 15-day prescriptive
period fixed in them to file a claim against the arrastre operator

HELD:
The fact that Oriental is not a party to the Gate Pass and the Management Contract does not mean that it cannot be bound
by their provisions. Oriental is subrogated to the rights of the consignee simply upon its payment of the insurance claim.

This Court explained the principle of subrogation in insurance contracts:

Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property
is destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon
payment to the assured, will be subrogated to the rights of the assured to recover from the wrongdoer to the extent
that the insurer has been obligated to pay. Payment by the insurer to the assured operates as an equitable
assignment to the former of all remedies which the latter may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of
contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.

As subrogee, petitioner merely stepped into the shoes of the consignee and may only exercise those rights that the
consignee may have against the wrongdoer who caused the damage. "It can recover only the amount that is recoverable
by the assured."56 And since the right of action of the consignee is subject to a precedent condition stipulated in the Gate
Pass, which includes by reference the terms of the Management Contract, necessarily a suit by the insurer is subject to the
same precedent condition.

Petitioner's assertion that the 15-day prescriptive period could not be enforced upon it to defeat its claim since the Gate
Pass was pro forma and it was not given notice of the Management Contract 58 is untenable.
As stated earlier, the dorsal side of the Gate Pass signed by the consignee's representative upon receipt of the cargo
expressly refers to the Management Contract between the Philippine Ports Authority and Asian Terminals. Hence, the
consignee and its subrogee, petitioner insurance company, are deemed to have notice of this Management Contract. 59

28
22. WHITE GOLD MARINE SERVICES vs. PIONEER INSURANCE
GR No. 154514; July 28, 2005
Quisimbing, J.

DOCTRINE: The test to determine if a contract is an insurance contract or not, depends on the nature of the promise and
the act required to be performed in the light of the circumstances under which the performance becomes requisite. It is not
by what it is called. Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or contingent event.

FACTS: White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from
The Steamship Mutual Underwriting Association Limited through Pioneer Insurance and Surety Corporation. Subsequently,
White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the
coverage. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.

Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter's unpaid
balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual
violated Sections 186 and 187 of the Insurance Code, while Pioneer violated Sections 299, 300 and 301 in relation to
Sections 302 and 303, thereof.

IC Ruling: 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.

CA Ruling: The decision of the IC is affirmed.

Petitioner insists that Steamship Mutual as a P & I Club is engaged in the insurance business. It stresses that as a P & I
Club, Steamship Mutual's primary purpose is to solicit and provide protection and indemnity coverage and for this purpose,
it has engaged the services of Pioneer to act as its agent.

Respondents contend that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel owners who have come together to provide mutual protection against
liabilities incidental to shipowning.

ISSUES:
(1) whether or not Steamship Mutual is engaged in the insurance business in the Philippines;
(2) whether or not Steamship Mutual is required to secure a license to engage in its business; and
(3) whether or not Pioneer needs a license as an insurance agent/broker for Steamship Mutual

HELD:
(1) YES. The test to determine if a contract is an insurance contract or not, depends on the nature of the promise and the
act required to be performed in the light of the circumstances under which the performance becomes requisite. It is not by
what it is called. Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or contingent event. In particular, a marine
insurance undertakes to indemnify the assured against marine losses.

Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured.
In it, the members all contribute, by a system of premiums or assessments, to the creation of a fund from which all losses
and liabilities are paid, and where the profits are divided among themselves, in proportion to their interest. Additionally,
mutual insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and
defense costs.

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

29
(2) YES. The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of
authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance
and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled
due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer,
must secure a license from the Insurance Commission.

(3) YES. 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.

SEC. 299 reads: “No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of
applications for insurance xxx without first procuring a license so to act from the Commissioner, which must be renewed
annually xxx”

30
23. GULF RESORTS, INC. vs. PHILIPPINE CHARTER INSURANCE CORPORATION
G.R. No. 156167, May 16, 2005, PUNO, J.

FACTS:
In this petition for certiorari, the parties sought for the review of their interpretations regarding the scope of the insurance
company’s liability for earthquake damage to petitioner’s properties. Petitioner avers that, pursuant to its earthquake
shock endorsement rider, Insurance Policy No. 31944 covers all damages to the properties within its resort caused by
earthquake. Respondent contends that the rider limits its liability for loss to the two swimming pools of petitioner.

Plaintiff is the owner of the Plaza Resort in 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, the risk of loss from earthquake
shock was extended only to plaintiff’s two swimming pools. Subsequently, AHAC(AIU) issued another Policy wherein the
earthquake endorsement clause was deleted and the entry issue read that plaintiff renewed its policy with AHAC (AIU). In
consideration of the payment by the insured to the company of the sum included additional premium the Company
agrees, notwithstanding what is stated in the printed conditions of this policy due to the contrary, that this insurance
covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence
of earthquake.

In 1990, an earthquake struck and plaintiff’s properties covered by Policy ant, 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 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. A
preliminary report found extensive damage caused by the earthquake to the clubhouse and to the two swimming pools.
Petitioner filed its formal demand for settlement of the damage but 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 and
respondent failed to arrive at a settlement. Thus, a complaint was filed with the RTC of Pasig. The Court found that only
the two (2) swimming pools had earthquake shock coverage and were heavily damaged by the earthquake. Defendant
having admitted that the damage to the swimming pools was appraised by defendant’s adjuster at P386,000.00,
defendant must, by virtue of the contract of insurance, pay plaintiff said amount.

ISSUE #1:
Was the CA correct in holding that under the policy, only 2 swimming pools, rather than all properties, are
insured against risk of earthquake shock?

RULING: Yes, an examination of the policy shows the clear intent of the parties to extend earthquake shock coverage
only to the two swimming pools. 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. 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. In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on the
two swimming pools. There is no mention of any premium payable for the other resort properties with regard to
earthquake shock. This is consistent with the history of petitioner’s previous insurance policies from AHAC-AIU. We also
hold that no significance can be placed on the deletion of the qualification limiting the coverage to the two swimming
pools.

ISSUE #2:
Should the general rule on contracts of adhesion be applied in case at bar?

RULING: No, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot rely on the general rule
that insurance contracts are contracts of adhesion which should be liberally construed in favor of the insured and strictly
against the insurer company which usually prepares it. This Court will only rule out blind adherence to terms where facts
and circumstances will show that they are basically one-sided. Petitioner cannot claim it did not know the provisions of the
policy. From the inception of the policy, petitioner had required the respondent to copy verbatim the provisions and terms
of its latest insurance policy from AHAC-AIU. It is true that there was variance in some terms, specifically in the
replacement cost endorsement, but the principal provisions of the policy remained essentially similar to AHAC-AIU’s
policy. Consequently, we cannot apply the "fine print" or "contract of adhesion" rule in this case as the parties’ intent to
limit the coverage of the policy to the two swimming pools only is not ambiguous.

31
24. MA. LOURDES S. FLORENDO vs.PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE
G.R. No. 186983, February 22, 2012, Abad, J

FACTS:
On October 23, 1997 Manuel Florendo filed an application for comprehensive pension plan with respondent Philam Plans,
Inc. (Philam Plans) after some convincing by respondent Perla Abcede. The plan had a pre-need price of ₱997,050.00,
payable in 10 years, and had a maturity value of ₱2,890,000.00 after 20 years. Manuel signed the application and left to
Perla the task of supplying the information needed in the application. Aside from pension benefits, the comprehensive
pension plan also provided life insurance coverage to Florendo.

This was covered by a Group Master Policy that Philam Life issued to Philam Plans. Under the master policy, Philam Life
was to automatically provide life insurance coverage, including accidental death, to all who signed up for Philam Plans’
comprehensive pension plan. If the plan holder died before the maturity of the plan, his beneficiary was to instead receive
the proceeds of the life insurance, equivalent to the pre-need price.

On October 30, 1997, Philam Plans issued Pension Plan Agreement to Manuel, with Ma. Lourdes S. Florendo, his wife,
as beneficiary.

On September 15, 1998, Manuel died of blood poisoning. Subsequently, Lourdes filed a claim for the benefits of his life
insurance but it was declined due to alleged failure on the part of Manuel to disclose conditions affecting the risk or his
state of health — he had a pacemaker implanted on his chest in the 70s or about 20 years before he signed up for the
pension plan. But Lourdes avers that Philam Plans never returned the form for completion or queried on Manuel’s health
and approved the plan.

ISSUE:
Whether or not the incontestability clause may apply in the case at bar

RULING:
YES. The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. It states: VIII.
INCONTESTABILITY: After this Agreement has remained in force for one (1) year, we can no longer contest for health
reasons any claim for insurance under this Agreement, except for the reason that installment has not been paid (lapsed),
or that you are not insurable at the time you bought this pension program by reason of age. If this Agreement lapses but is
reinstated afterwards, the one (1) year contestability period shall start again on the date of approval of your request for
reinstatement. The sais incontestability clause precludes the insurer from disowning liability under the policy it issued on
the ground of concealment or misrepresentation regarding the health of the insured after a year of its issuance.
Since Manuel died on the eleventh month following the issuance of his plan,the one year incontestability period has not
yet set in. Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits of her
husband’s pension plan.

32
25. UCPB GENERAL INSURANCE vs. MASAGANA TELAMART
GR No. 137172; June 15, 1999
Pardo, J.

FACTS:
On April 15, 1991, petitioner issued five (5) insurance policies covering respondent's various property described therein
against fire, for the period from May 22, 1991 to May 22, 1992. In March 1992, petitioner evaluated the policies and decided
not to renew them upon expiration of their terms on May 22, 1992. Petitioner advised respondent's broker, Zuellig Insurance
Brokers, Inc. of its intention not to renew the policies. On April 6, 1992, petitioner gave written notice to respondent of the
non-renewal of the policies at the address stated in the policies.

On June 13, 1992, fire razed respondent's property covered by three of the insurance policies petitioner issued. On July 13,
1992, respondent presented to petitioner's cashier five (5) manager's checks representing premium for the renewal of the
policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14,
1992. On July 14, 1992, respondent filed with petitioner its claim for indemnification of the insured property razed by fire.
On the same day, petitioner returned to respondent the manager's checks it tendered and at the same time rejected its
claim.

Respondent filed with RTC a civil complaint for recovery of the face value of the policies covering the respondent’s insured
property razed by fire. Petitioner alleged that the complaint failed to state a cause of action, that it was not liable to
respondent for insurance proceeds under the policies because at the time of the loss of respondent's property due to fire,
the policies had long expired and were not renewed. RTC ruled in favor of the respondent. CA affirmed.

Respondent submits that the Court of Appeals correctly ruled that no timely notice of non-renewal was sent. The notice of
non-renewal sent to broker Zuellig which claimed that it verbally notified the insurance agency but not respondent itself did
not suffice. Respondent submits further that the Court of Appeals did not err in finding that there existed a sixty (60) to ninety
(90) days credit agreement between UCPB and Masagana.

ISSUE:
Whether the fire insurance policies issued by petitioner to the respondent covering the period May 22, 1991 to May 22,
1992, had expired on the latter date or had been extended or renewed by an implied credit arrangement though actual
payment of premium was tendered on a latter date after the occurrence of the risk (fire) insured against.

HELD:
No. An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the
premium. Any agreement to the contrary is void. The parties may not agree expressly or impliedly on the extension of credit
or time to pay the premium and consider the policy binding before actual payment.

The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo, cited by the Court of Appeals, is not applicable. In that case,
payment of the premium was in fact actually made on December 24, 1981, and the fire occurred on January 18, 1982. Here,
the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire occurred on
June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after occurrence of the
fire.

33
25.5. UCPB GENERAL INSURANCE CO., INC., Petitioner, v. MASAGANA TELAMART, INC., Respondent.
[G.R. No. 137172. April 4, 2001.]
DAVIDE, JR., C.J.:

FACTS:
Respondent Masagana obtained from defendant UCPB five insurance policies on its properties [in Pasay City and Manila].
All five policies reflect on their face the effectivity term: "from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992." It
was established that for a number of years, Masagana had been granted a 60 to 90-day credit term for the renewal of the
policies. Thereafter, on July 13, 1992, properties of Masagana that were located at Taft Avenue, Pasay City were razed by
fire. On the same day, Masagana tendered, and UCPB accepted, five (5) Equitable Bank Manager’s Checks in the total
amount of P225,753.45 as renewal premium payments. When Masagana made its formal demand for indemnification for
the burned insured properties, UCPB rejected on the ground that: (a) said policies expired last May 22, 1992 and were not
renewed for another term; and (b) that the properties covered by the said policies were burned in a fire that took place last
June 13, 1992, or before tender of premium payment."

UCPB based its arguments on Section 77 of the insurance code which in essence provides that no policy or contract of
insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid.
Masagana, on the other hand, argues that principle of estoppel applies to UCPB. Despite its awareness of Section 77
Petitioner persuaded and induced Respondent to believe that payment of premium on the 60- to 90-day credit term was
perfectly alright.

ISSUE:
Is prepayment of premium strictly required as a condition to the validity of the contract?

RULING:
No. Prepayment of premium is not strictly required.
Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an
acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the
policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that
the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension,
and such an agreement is not contrary to morals, good customs, public order or public policy. Moreover, there is nothing in
Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums.
Hence, by virtue of the 60 to 90 day credit term, UCPB cannot deny liability.

34
26. SUN INSURANCE OFFICE, LTD. VS. THE HON. COURT OF APPEALS AND NERISSA LIM
Gr No. 92383; July 17, 1992
Cruz, J.

FACTS:
The petitioner 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. The incident happened when he was playing with his gun. He pointed
the gun at his temple and it accidentally fired off killing him. As beneficiary, his wife Nerissa Lim sought payment on the
policy but her claim was ejected. The petitioner agreed that there was no suicide. It argued, however that there was no
accident either. The petitioner, invoking the case of Dela Cruz vs. Capital Insurance, says that “there is no accident when a
deliberate act is performed unless some additional, unexpected, independent and unforeseen happening occurs which
produces or brings about the injury or death.” There was such a happening. This was firing of the gun, which was the
additional unexpected and independent and unforeseen occurrence that led to the insured person’s death.

ISSUES:
1. Whether or not there was accident.
2. Whether or not the insurer is liable.

HELD:
1. Yes, the death of Felix was an accident. An accident is an event which happens without any human agency or, if
happening through human agency, an event which, under the circumstances, is unusual to and not expected by the
person to whom it happens. It has also been defined as an injury which happens by reason of some violence or
casualty to the injured without his design, consent, or voluntary co-operation. The secretary testified, 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 he thought it was not unsafe to do so.
2. Yes, the insurer is liable. Lim was unquestionably negligent and that negligence cost him his own life. But it should
not prevent his widow from recovering from insurance policy he obtained precisely against the 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 contract to relieve the insurer from liability, and none of these exceptions is
applicable in the case at bar.

27. TIO KHE CHIO V. COURT OF APPEALS

G.R. No. 76101-02, 30 September 1991

Facts:

On December 18, 1978, petitioner Tio Khe Chio imported one thousand (1,000) bags of fishmeal. The goods were insured
with respondent Eastern Assurance and Surety Corporation (EASCO) and shipped on board the M/V Peskov, a vessel
owned by Far Eastern Shipping Company. When the goods reached Manila on January 28, 1979, they were found to have
been damaged by sea water which rendered the fishmeal useless. Petitioner filed a claim with EASCO and Far Eastern
Shipping. Both refused... to pay. On June 30, 1982, the trial court rendered judgment ordering EASCO and Far Eastern
Shipping to pay petitioner solidarily the sum of P105,986.68 less the amount of P18,387.86 for unpaid premiums with interest
at the legal rate from the filing of the complaint, the sum of P15,000.00 as attorney's fees... and the costs.

The judgment became final as to EASCO but the shipping company appealed to the Court of Appeals and was absolved
from liability by the said court. The trial court, upon motion by petitioner, issued a writ of execution against EASCO. The
sheriff enforcing the writ reportedly fixed the legal rate of interest at twelve (12%). Respondent EASCO moved to quash the
writ alleging that the legal interest to be computed... should be six (6%) per cent per annum in accordance with Article 2209
of the Civil Code and not twelve (12%) per cent as insisted upon by petitioner's counsel... the Appellate Court... rendered...

35
the... order... the interest that the private respondent is... entitled to collect from the petitioner is hereby reduced to 6% per
annum.

In disputing the aforesaid decision of the Court of Appeals, petitioner maintains that not only is it unjust and unfair but it is
also contrary to the correct interpretation of the fixing of interest rates under Sections 243 and 244 of the Insurance
Code. And since... petitioner's claim is based on an insurance contract, then it is the Insurance Code which must govern
and not the Civil Code.

Issues: Should the legal rate of interest to be imposed in actions for damages arising from unpaid insurance claims be six
(6%) per cent under Article 2209 of the Civil Code?

Ruling:

Yes. The legal rate of interest in the case at bar is six (6%) per annum as correctly held by the Appellate Court.

Section 243 of the Insurance Code provides:

"The amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy,
shall be paid within thirty days after proof of loss is received by the insurer and ascertainment of the loss or damage is made
either by... agreement between the insured and the insurer or by arbitration; but if such ascertainment is... not had or made
within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety
days after such receipt. Refusal or... failure to pay the loss or damage within the time prescribed herein will entitle the
assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed
by the Monetary Board, unless such failure or refusal to pay... is based on the ground that the claim is fraudulent."

Section 244 of the aforementioned Code also provides:

"In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the
Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured
has been unreasonably denied or... withheld; and in the affirmative case, the insurance company shall be adjudged to pay
damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such
undeniable denial or... withholding of payment plus interest of twice the ceiling... prescribed by the Monetary Board of the
amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in
section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to... pay
any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay
in payment."

In the case at bar, the Court of Appeals made no finding that there was an unjustified refusal or withholding of payment on
petitioner's claim. In fact, respondent court had this to say on EASCO's refusal to settle the claim of petitioner:

" x x x. EASCO's refusal to settle the claim of Tio Khe Chio was based on some ground which, while not sufficient to free
it from liability under its policy, nevertheless is sufficient to negate any assertion that in refusing to pay, it acted...
unjustifiably.

"x x x x x... x xxx

"The case posed some genuine issues of interpretation of the terms of the policy as to which persons may honestly
differ. This is the reason the trial court did not say EASCO's refusal was unjustified... the aforecited sections of the
Insurance Code are not pertinent to the instant case. They apply only when the court finds an unreasonable delay or
refusal in the payment of the claims.

Neither does Circular No. 416 of the Central Bank which took effect on July 29, 1974 pursuant to Presidential Decree No.
116 (Usury Law) which raised the legal rate of interest from six (6%) to twelve (12%) per cent apply to the case at bar as
contended by the petitioner.

36
The adjusted rate mentioned in the circular refers only to loans... forbearances of money, goods or credits and court
judgments thereon but not to court judgments for damages arising from injury to persons and loss of property which does
not involve a loan.[4]

Clearly, the applicable law is Article 2209 of the Civil Code which reads:

"If the obligation consists in the payment of a sum of money and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the
absence of stipulation, the legal interest... which is six per cent per annum."

And in the light of the fact that the contending parties did not allege the rate of interest stipulated in the insurance contract,
the legal... interest was properly pegged by the Appellate Court at six (6%) per cent.

37