Section 83 End Cases

Sections 83-92 of the policy which provides that loss or damage caused by earthquake,
hurricane...etc., and damage which may follow after such earthquake etc., are
Paris-Manila v Phoenix Assurance not covered. Note that although sec6 covers loss or damage as a direct result of
the explosion itself, it does not cover in the exemption the fire occurring AFTER
Facts: Paris-Manila is a domestic corporation engaged in the manufacture of the explosion. Compare this with sec5 that exempts the loss or damage from
perfumery and toilet articles. Phoenix issued a fire insurance in favor of Paris. the earthquake, etc., as well as loss or damage arising after such earthquake.
With the knowledge of Phoenix, Paris also obtained fire insurance policies over
the same property with 2 other companies. Phoenix was able to pay the full But even if the fire resulted from the explosion, the burden of proof still
amount of the premium. rested with Phoenix. However, there is no competent evidence to prove that the
explosion caused the fire, or the fire caused the explosion.
The property covered by the insurance was totally destroyed by fire. Paris
filed its claim but Phoeniex refused to pay. Paris requested to have an arbitrator Hence, Phoenix having issued the policy and such policy is of legal force
appointed as stipulated in the policy but this was also rejected, hence, the filing and effect at the time of the loss, it is bound by the terms and conditions of the
of the suit. policy --- that is, to pay the loss.
Phoenix for its part admits all these facts. However, it alleges that
[important the policy does not cover loss caused by explosion and that the
property of Paris was burned by an explosion. Also, the policy was allegedly
actually issued to Peter Johnson as the proprietor of Paris and that it was not
the company who was the insured. It is also contended that the claim was Prats v Phoenix Assurance
fraudulent and that the loss was occasioned by the wilful act of Peter Johnson.
Facts: Prats & Co., a mercantile partnership, instituted an action to recover
from Phoenix Insurance P117k by reason of a loss it sustained from a fire, with
the said loss covered by a policy of insurance for P200k.
Issue: W/N Phoenix is liable to pay the loss?
Phoenix alleged that the fire had been set up by Prats, or with its connivance,
and that Prats had submitted under oath a fraudulent claim of loss, in
contravention of the terms of the policy.
Held: Yes. The cause of the fire cannot be actually determined. Peter
Johnson and Francisco Banta (who were both inside the building at the time the The trial court absolved Phoenix.
fire started) claim that they saw no explosion, but that they heard it. Afterwards,
they saw the fire and felt the heat already. Neither evidence nor competent Issue: W/N Phoenix is liable.
testimony was presented as to the origin of the fire.
Held: The insurance policy was held to have been avoided by the connivance
Note that the factory is filled with various kinds of essences and oils for the of the insured in setting the fire to insured goods and the submission by the
manufacture of perfumery. With the alcoholic nature of these products, and insured of fraudulent proof of loss.
being highly flammable, the fire may have started for a number of reasons. But
whatever the reason, the fact remains that there was a fire and the insured The fire which caused the loss was of incendiary origin and was set by the
properties were destroyed. Phoenix bears the burden of proving that the fire procurance or connivance of Prats to defraud the insurer.
originated from an explosion.
-Prats (Spanish), Hanna, & Bejar (Turkish nationals of unsavory reputation in
Phoenix relies on sec6 of the policy which provides that loss or damage insurance circles) set up 2 companies: Prats & Co. (PC) and Hanna, Bejar &
occasioned by the explosion are not covered. Paris answers this by citing sec5 Co. (HBC).
Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 1

Anbochi, Atillo, Weigand
- Prats, acting for HBC, purchased a one-story building, converting it into a Bachrach v British American Assurance
bodega to store merchandise. in
Facts: Bachrach insured a building and the goods thereat with British-American
- Before the fire, 9 policies were taken out by Prats under the name of HBC on against Fire.
merchandise with different insurance companies. However, when Prats applied
with Phoenix, the agent told him that if Hanna or Bejar had any interest in the A fire razed the building including the goods thereat. A claim by Bachrach was
stock, the policy could not be issued because of their bad reputation. Because made but the same was denied by British-American.
of this, the policy was made out to PC, and the other policies were subsequently
endorsed to PC. The denial of liability by respondent was premised on the following (1) that
petitioner maintained a paint and varnish shop at the second floor of the
- PC took out a marine insurance on fictitious 22 cases of silk from France, to building (2) that the petitioner assigned his interests to third persons to secure
be stored in the bodega. several obligations without the consent of respondent (3) petitioner willfully
placed a tank of gasoline in the second floor and he knew that the gasoline was
- Obscure manipulations were used in the storing of merchandise & removal of sipping out. Petitioner also willfully placed a fire lamp near the gasoline (4)
parts of the contents of the bodega before the fire (stocks were shipped to petitioner did not submit proof of losses within the required period of time in the
another office, new stocks subject of insurance were replaced by old stock with policy
lesser value)
For this part petitioner contends (1) that he was acquitted in an earlier criminal
- Carefully thought of plan to burn the bodega by Prats, Osete, and Romero. case for arson based on the same facts (2) that he no longer bothered to submit
Osete (firestarter) rented neighboring building, and bought 2 cans of petroleum proof of loss because when he sent an earlier notice of loss, respondent already
which disappeared on the night of the fire. When the fire occurred, he informed him that the policy was null and void and to provide proof of losses
instructed his muchacho to guard the fire alarm box and stop anyone who would only be a futile act.
attempted to turn on the alarm. The smoke issuing from the bodega was black,
suggesting combustion of inflammable material & there was the odor of
petroleum. Romero, who was also a neighbor, took his family to the home of
Prats before the fire but moved back immediately after. Romero paid the HELD: The Court ruled in favor of Bachrach. With respect to paint, gasoline and
neighbors who were affected P100 as gifts. alcohol. The presence of flammable oils within the insured premises does not
ipso facto avoid the policy even though there is an express prohibition therefore
Prats submitted a fraudulent claim to Phoenix when such oils are incidental to the business of the insured. In this case, the
alcohol and gasoline were used to produce varnish necessary for the furniture
- Prats submitted a claim for jewelry lost in the firs for P12k when the value was stored therein. The insured premise was a furniture store and the furniture
only P600 thereat was the one insured.
- Prats sought to recover the value of the goods which had been surreptiously With respect to the transfer of interest over the properties to third person without
withdrawn from the bodega prior to the fire. respondent’s consent. Remember that when one mortgages his property, he
does not lose his interest thereat. Only when mortgagor defaults and mortgagee
- Prats presented to the adjuster copies of supposed invoices in which the takes possession of the properties will there be a transfer of interest and
prices and expenses of the importation of a quantity of goods were stated at ownership.
double the true amount.
With respect to the accusation of arson. The question on arson having already
passed upon by a competent court, the element of res judicata kicks in and the
finding thereat cannot be contested anymore.

With respect to the proof of loss. The policy did not contain any requirement on (4) It must state which of the grounds mentioned in Sec 64 is relied upon and
proof of loss. Even if it did, respondent has already waived it after informing the that upon written request of the insured, the insurer will furnish the facts on
petitioner in a letter-reply to the latter’s notice of loss that the policy had been which cancellation is based
avoided
MICO claims it cancelled for non-payment of premium, but there is no proof that
the notice was actually mailed and received by Pinca. All MICO offered to show
is that it sent the notice, nothing more. If Pinca really received the notice, she
Malayan Insurance v Arnaldo would not have paid the premium on the original insurance, she would have
asked to be issued a new one.
Facts: Petitioner Malayan Insurance Co, Inc (MICO) issued a fire insurance
policy to Coronacion Pinca (private respondent) on her property for the amount MICO also assails the value claimed (no specifics were given on this matter).
of 100K, effective July 1981-1982. The valuation fixed in the policy is conclusive in case of total loss in the
absence of fraud. Loss may be determined on the basis of proof offered by the
October 1981, MICO allegedly cancelled the policy for non-payment of premium insured, which need not be of such persuasiveness required of judicial
and sent notice to Pinca. December 1981, Pinca paid the premium to Adora, proceedings. If the insured files notice and preliminary proof of loss and insurer
MICO’s agent. Adora paid remitted this to MICO but it refused to accept. fails to specify to the former the defects thereof and without unnecessary delay,
January 1982, Pinca’s property was burned. In due time, Pinca made the all objections to the notice and proof of loss are determined waived. The
requisite demands for payment which MICO rejected. Pinca went to the certification as to the amount of loss issued by the National Police is sufficient to
Insurance Commissioner, the latter sustained her claim. Hence this. prove loss.
Issue: W/N MICO is liable under the insurance
Held: Yes. Pacific Bank v CA
Procedurally, the petition cannot be granted because it was filed out of time. (i Facts: Paramount Shirt Manufacturing Co. (Paramount) was indebted to Pacific
won’t discuss na) Bank. At the same time, certain goods were held in trust by Paramount in favor
of Pacific as evidenced by trust receipts. Paramount then applied and was
On the merits, Sec 77 does not apply here, because there was indeed payment issued by Oriental Assurance Corporation a fire insurance policy covering the
before the fire occurred. MICO’s acknowledgement of Adora as its agent goods subject of the trust agreement.
authorizes him to receive payment. Also, under the law on agency, payment to
agent is payment to the principal. The fire insurance policy was indorsed to Pacific as the mortgagee and trustor
of the properties. And as agreed and consented to by Oriental, the loss shall be
MICO’s contention that the policy had been cancelled before the occurrence of payable to Pacific instead.
the loss is not acceptable. A valid cancellation must require the concurrence of
the ff: While the policy was in effect, the properties were burned. Pacific’s counsel
then sent a demand letter to Oriental to claim the indemnity. Oriental replied
(1) There must be prior notice of cancellation to the insured that they could not act on the claim yet because they were still waiting for the
report of H.H. Bayne Adjustment Company, the insurance adjuster. Bayne then
(2) The notice must be based on the occurrence, after the effective date of the notified Pacific’s counsel that Paramount had not filed any claim with it hence,
policy, of one or more of the grounds mentioned [See Sec 64] the liability of Oriental could not be determined yet. Oriental failed to pay the
claim.
(3) The notice must be in writing and mailed or delivered to the insured at the
address shown in the policy

Oriental alleges in its defense the lack of formal claim by Paramount (who is the present a claim giving the particulars of the properties destroyed (and their
insured) and the premature filing of the suit since neither Paramount nor Pacific amount) as well as other particulars.
submitted any proof of loss in which the insurer’s liability could be determined.
Both are supposedly violations of Condition 11 in the policy are. The evidence shows that 24days after the fire, Pacific merely wrote letters to
Oriental to serve as a notice of loss. Pacific did not furnish any document
During the hearing, Pacific presented a communication between Bayne and necessary to prove the loss. Since the required claim by Oriental was not
Asian Surety revealing that Wellington Insurance, Empire Surety and Asian complied with, could not be deemed to have finally rejected the claim and
Surety. However, the policy declares that Malayan, South Sea and Victory are therefore, there is no cause of action yet.
the co-insurers. Note that the defense of fraud in the form of non-declaration of
co-insurances (as provided in condition 3 of the policy) was not pleaded in the Compliance with condition No. 11 is a requirement sine qua non. Since Pacific
answer and in the motion to dismiss. violated has conditions 3 and 11 and such violation or want of performance has
not been waived by the insurer, Paramount cannot recover, much less Pacific.
RTC rendered Oriental liable. CA reversed.
Pacific Timber v CA
Issue: W/N Oriental was right in not addressing the claim?
Facts: Pacific Timber secured temporary insurance from Workmen’s Insurance
Company (WIC) for its exportation of Philippine Lauan and Apitong logs to be
shipped from Diapitan Bay to Japan. WIC issued a Cover Note on the cargo,
Held: Yes. The case should have been dismissed. which was 1,250,00 board feet.
It is not disputed that Paramount failed to reveal the three other insurances. The regular marine cargo policies were subsequently issued, the 1st was for
Had Oriental known that there were other insurers, it would not have entered 542 pieces of log (499k bd ft) and the 2nd for 853 pieces (695k bd ft), totaling
into the contract. Clearly, there is clear fraud. 1,195,498 bd ft.
On the other hand, Pacific contends that violation of condition3 does not defeat After the issuance of the Cover Note but before the issuance of the 2 marine
its right as mortgagee. However, the mortgage clause provides that the interest policies, some of the logs were lost during the loading operation on the SS
of the mortgagee may be invalidated by reason of fraud, misrepresentation or Woodlock (around 30 logs). Pacific informed WIC of the loss and demanded
arson which in this case exists. payment.
Pacific also contends that since this fraud was not pleaded as a defense, WIC denied the claim on the ground that the entire shipment of logs covered by
Oriental had already waived it. However, it is established that the Supreme the 2 marine insurance policies were received in good order at their point of
Court has ample authority to go beyond the pleadings in the interest of justice destination (in short, the loss of the 30 logs were not covered by the policies but
and the promotion of public policy. In other words, the Court can consider a fact they were covered by the Cover Note). The said loss may not be considered as
which surfaced only after trial proper. Note that the fact of fraud was tried with covered under the Cover Note because this had become null & void by virtue of
the implied consent of the parties. Plus, it is actually Pacific that presented the the issuance of the marine policies and for lack of valuable consideration. WIC
evidence to prove the fraud. also set up the defense of delay of Phoenix in giving notice of the loss.
Generally, cause of action on the policy accrues when the loss occurs. But Issue: W/N Pacific Timber can collect – YES
when the policy provides for a condition before a claim can be made, the cause
of action will accrue from the time such condition is complied with. In this case, W/N there was delay - NO
condition11 provides that notice shall be given and within 15days from the loss

On the Cover Note: The store was burned. Yap filed a claim. The claim was denied due to breach of
conditions and terms
The non-payment of premium on the Cover Note does not invalidate the claim
because no separate premiums are intended or required to be paid on the RTC and CA both ruled in favor of Yap
Cover Note. It is not a separate policy but should be integrated to the regular
policies; otherwise, the purpose & function of the Cover Note would be rendered The CA contends that Federal Insurance simply substituted Great American
meaningless. (the other co-insurer which was already declared by Yap in her policy with
Pioneer). Thus it did not increase the amount of the declared co-insurance
On Delay:
Issue: W/N Pioneer should be absolved from liability because of Yap’s violation
The law requires the ground of delay to be promptly and specifically asserted of the terms and conditions
when a claim on the insurance agreement is made. Instead of invoking this
ground, WIC took steps indicative that this ground for objection was never on its HELD: Pioneer wins.
mind. It had enough time to determine if Pacific was guilty of delay in
communicating the loss and should have raised it. But this they failed to do, No proof of substitution by Federal. Instead, records clearly show that Great
and the SC fails to find substantial signs thereof. But even assuming there was American was substituted by Northwest Insurance and not Federal.
a delay, waiver can be successfully raised against WIC under Sec. 84 of the
Insurance Act: The contention of the CA that Pioneer had waived its right to endorse the policy
of co-insurance because it failed to prove that it was not unaware of the
“Delay in the presentation to an insurer of notice of proof of loss is waived if substitution is untenable. This is because the burden of prove that Pioneer was
caused by any act of his or if he omits to take objection promptly and aware of the substitution was on Yap because it is her affirmative allegation.
specifically upon that ground.” This burden cannot be shifted to Pioneer.
The procurement of another insurance contrary to the provisions of the policy

ipso facto avoids the liability of Pioneer. Pioneer need not make any affirmative
Sections 93-98 act of election to make operative the clause avoiding the contract.
Pioneer Insurance v Yap Policy behind the law is to avoid over-insurance and avert the perpetration of
fraud. It seeks to prevent a situation in which fire would be profitable for the
Facts: Yap is the owner of a two storey building which she utilizes as a store to insured.
sell bags and foot wear. She obtained a 25,000 fire insurance policy for
everything inside her store (stock in trade, fixtures therein etc.) from Pioneer.
A stipulation in the policy obligated Yap to disclose whatever prior or Geagonia v CA (Bar Exam Question)
subsequent insurance covering the same properties otherwise, loss will not be
paid. Facts: Geagonia owns Norman’s Mart in Agusan. He obtained from Country
Bankers’ Insurance a fire insurance policy to cover stock in trade consisting
When the policy was issued, a notation was made therein indicating a prior primarily of dry goods such as men’s and women’s RTWs for 100K. He
insurance by Great American in the amount of 20,000. declared in the application that only Mercantile Insurance was also a co-insurer.
The policy also contained Condition 3 that requires notice to Country Bankers if
However, after the policy was issued, Yap obtained another 20,000 insurance Geagonia insures the same property with another insurer (double insurance),
from Federal Insurance without notice and written consent by Pioneer. but the condition will not apply when the total insurance/s in force at the time of
loss is not more than 200K.

On the other hand, a mortgagee may also secure a policy as a contracting party
(Here, the PFIC policies contain a loss payable clause in Cebu Tesing’s favour).
When a fire broke out, all of Geagonia’s stocks were destroyed and he filed a
claim with Country Bankers. The latter denied on the ground of violation of Remember that a policy is construed strictly against the insurer and forfeitures
condition 3, finding that the same property is also insured against fire by Phil. are not favoured. Condition 3 does not absolutely declare void any violation
First Insurance Co. (PFIC) under 2 policies, 100K each. thereof. It states explicitly that it shall not apply when the total insurance is not
more than 200K. Moreover, as implied by the provisions of condition 3, only a
Geagonia sued before the Insurance Commission, alleging that he did not know double insurance is covered. A double insurance requires that the same person
of the requirement in condition 3 and had he known, he would have declared is insured by several insurers separately in respect of the same subject and
the information. IC ruled for him, finding that it was Cebu Tesing Textiles same interest. As stated, insurable interests of a mortgagor and a mortgagee
(Geagonia’s creditor-mortgagee), who insured the same properties without are distinct and separate. Therefore, Geagonia must be allowed to claim.
Geagonia’s consent. On appeal to CA, it reversed, finding that Geagonia knew
of such requirement, and he violated condition 3. Hence this. Philamlife v Auditor General
Issue: W/N Geagonia is precluded from claiming proceeds of the insurance Facts: The Margin Law subjects foreign currency purchases to 40% margin fee.
The intent of the law is to regulate the demand for international currency.
Held: He can claim – there was no violation of the condition 3 because there
was no double insurance. Philamlife and American International Reinsurance Company (AIRCO – a
Panamanian company) entered into a re-insurance treaty whereby Philamlife
Although Geagonia did know of the existence of the PFIC policies and failed to would cede to AIRCO the excess (of Philam’s maximum limit of retention for life
notify Country Bankers, there was no violation of the condition that could avoid insurance) of policies issued by it which the latter obligates to accepts and re-
the policy. To constitute a violation, the other insurance must be on the same insure
subject matter, same interest and same risk.
Because of this, Philamlife paid AIRCO premium for the re-insurance. The
•There are two ways in which insurance may be taken out when there is a Central Bank consequently assessed and collected from Philamlife margin fees
mortgage existing in the property to be insured. (1) it can be taken out by the representing the remittances of premium from Philamlife to AIRCO.
mortgagor himself with loss payable to the mortgagee to the extent of his credit.
But any act by the mortgagor avoids the policy and also defeats the right of the Now, Philamlife wants to have the margin fees paid to be refunded. It contends
mortgagee.(2) the insurance may be taken out by the mortgagee himself with that, pursuant to the Monetary Board’s Legal Opinion, Re-insurance
the premium chargeable to the mortgagor. In this case, the insurance was taken contracts/treaties entered before July 17, 1959 are exempt from margin fee
by petitioner with a mortgage clause stating that loss is payable in favor of Cebu even if the remittances were made after July 17, 1959. This is because the
Textile. remittances were only made pursuant to a mother contract which is by itself
exempt. In this case the re-insurance treaty was entered into on January 1,
The case here is different – a mortgaged property was insured. The mortgagor 1950 – 9 years before the Margin Law took effect
and mortgagee each have an independent interest and these interests may be
contained in 1 policy or separately. The mortgagor’s insurable interest covers Despite this, Auditor of the Central Bank refuses
the whole value of the property, and the mortgagee’s insurable interest covers
the extent of the debt only. A mortgagor may take out an insurance for the HELD: The Auditor general wins.
benefit of a mortgagee – mortgagee may be the beneficiary by becoming the
assignee or pledgee, or the policy itself may contain a mortgage clause, or a Note that the re-insurance treaty only obligates Philamlife to re-insure when the
rider stating that the proceeds shall go to the mortgagee, etc. (Do note that in need to re-insure arises. This simply means that where there is no policy to re-
these cases, the mortgagee is a beneficiary only, not a party to the contract). insure then there will be no premium to be paid. It is a statement of probability
and not of reality. Thus, until a policy is ripe for re-insurace (which means that

when a policy exceeds Philam’s maximum retention limit) the re-insurance Petitioner now sues Wellington for the balance. But Wellington said that
treaty is not yet enforceable. THUS THERE IS A BIG DIFFERENCE BETWEEN petitioner should go after the re-insurer (Alexander & Alexander NYC).
A RE-INSURANCE TREATY AND A RE-INSURACE POLICY/RE-INSURANCE Wellington contends that petitioner should have understood that Wellington,
CESSION. being a corporation with a meager 500,000 paid up capital cannot in any way
indemnify a 13M loss. Thus petitioner impliedly agreed to run after the re-
A re-insurance policy is a contract of indemnity whereby a second insurer insurer instead.
obligates itself to protect a first insurer from the risk the latter had already
assumed. A re-insurance treaty is a contract to enter into re-insurance Issue: W/N it was proper for Artex to go after Wellington instead of the
business. Necessarily, a re-insurance treaty comes before a re-insurance reinsurers?
policy. The former may exist without the latter but the latter cannot exist without
the former. Held: Yes. Unless there is a specific grant in, or assignment of, reinsurance
contract in favor of the insured or a manifest intention of the contracting parties
Thus, unless the re-insurance policies/cessions were made before the effectivity to the insurance contrary to grant such benefit or favor to the insured , not being
of the Margin Law, all remittances made by Philamlife to AIRCO by virtue of re- privy to the reinsurance contract, has no cause of action against the reinsurer. It
insurance cessions will be subject to margin fees. is expressly provided in section 91 the Insurance Act that "(T)he original insured
has no interest in a contract of insurance."
The contention of Philamlife that the imposition of the margin fee will defeat
obligations arising from contract (which is prohibited by the constitution) is A reinsurance contract is a contract between a second insurer who obligates
untenable. Contract is always subordinate to Law especially when there is a himself to indemnify the first insurer for losses the latter sustained from the
valid exercise of police power. In this case, the intent of the law in imposing assumption of risks in an insurance policy. The insured is not privy to the
margin fee is to protect the international reserve of the Philippines and keep the contract of reinsurance absent a stipulation pour autrui.
value of peso high. The Margin Law is both valid and reasonable. Thus, it
should have been deemed to be an unwritten portion of every re-insurance Wellington also contends that the reinsurance contract contains a stipulation
contract. pour autrui in favor of Artex. Hence Artex has agreed that to claim indemnity, it
will only come after the reinsurers.
NOTE: why did Philamlife become liable for margin fees? Well, first, it needed
to pay premium to AIRCO for every re-insurance cession made. But payment The intention to benefit a 3rd person in a contract must be clearly expressed.
cannot be made in peso so Philamlife has to buy foreign exchange from CB to Since Artex was not privy to Wellington’s reinsurance contract, it could not
pay AIRCO. There is where the margin fee comes into play demand enforcement of such insurance contracts. • Artex has no business
with Alexander. It dealt directly with Wellington. Thus, it is Wellington who is
primarily liable to Artex for everything subject only to the former’s right of action
against Alexander – the reinsurer and with whom Wellingtons directly dealt with.
Artex Development Corp. v Wellington Insurance
Assuming that Artex could avail of the reinsurance contracts and directly sue
Facts: Petitioner obtained from respondent fire insurance in the amount of the reinsurers for payment of the loss, still such assumption would not in any
24.3M (thereafter increased for an additional amount of 833,000) and insurance way affect or cancel out Wellington’s direct contractual liability to Artex under
for losses arising from business interruptions amounting to 5.2M. the insurance policy to indemnify plaintiff for the property losses.
Petitioner’s equipment in its spinning department was burned. When a claim

was filed, the same was referred to an adjuster. The adjuster’s report
determined a loss of 10.1M from fire and 3M from business interruption.
Wellington made a partial payment 3.6 and 1.7M respectively. Thus leaving a
balance.

Sections 99-110 In order to make the insurer liable, there must be some casualty, something
which could not be foreseen as one of the necessary incidents of the adventure.
Go Tiaoco v. Union Insurance The purpose of the policy is to secure an indemnity against accidents which
may happen, not against events which must happen. In this case, the entry of
Facts: A policy if marine insurance was issued by the Union Insurance Society the seawater through the defective pipe was not due to any accident which
of Canton upon a cargo of rice belonging to the Go Tiaoco Brother, transported happened during the voyage, but to the failure of the ship’s owner to properly
on the steamship Hondagua from Saigon to Cebu. The policy insured the repair the defect.
cargo from “perils of the seas, men, of war, enemies, pirates, rovers, thieves,
jettisons…and of all other perils, losses and misfortunes that have or shall come Seaworthiness of the Ship
to the hurt, detriment, or damage of said goods.” Upon arrival, it was
discovered that 1,473 sacks had been damaged by seawater, resulting in a loss In every contract of insurance upon anything which is the subject of marine
amounting to P3k. insurance, a warranty is implied that the ship shall be seaworthy at the time of
the inception of the voyage. It is also well settled that a ship which is seaworthy
The trial court found that the inflow of the seawater during the voyage was due for the purpose of insurance upon the ship may yet be unseaworthy for the
to a defect in one of the drain pipes of the ship. The said pipe served as a purpose of insurance upon the cargo. In this case, the ship is unseaworthy with
discharge from the water closet and passed through the compartment where reference to the cargo.
the rice was stowed and then out to sea through the wall of the compartment.
The pipe’s elbow was of cast iron and had an opening because of corrosion.
The hole existed before the voyage and an attempt to repair it was made by
filling it with cement and bolting. However, the effect of loading the boat was to
submerge the pipe 2 feet below sea level; hence, sea water rose in the pipe,
washing out the cement filling and permitted the continuous flow of salt water
into the compartment of rice. The trial court concluded that the loss was not
covered by the insurance policy.
Issue: W/N the loss was covered by the policy.
Held: No.
Perils of the Sea v. Perils of the Ship
The insurer undertakes to insure against perils of the sea and similar perils, not
perils of the ship. The phrase “and all other perils, losses, and misfortune” is to
be interpreted as covering risks which are of like kind (ejusdem generis) with
particular risks which are enumerated in the preceding part of the same clause,
i.e, perils of the sea.
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. Rather, it is called the “peril of the ship.”

barge, Mable 10, logs (owned by petitioners) from Palawan to Manila. The logs
were insured against loss for 100k with Pioneer Insurance.
Sections 111-126
Manila Bay loaded the logs, but it never reached Manila because Mable 10
Madrigal v Hanson sank. It turns out that Mable was not seaworthy in that it had a leak. One of the
hatches was left open causing water to enter, and because Mable was not
Facts: Madrigal was the owner of the motor launch which was chartered by covered with the necessary tarpaulin, the waves of the sea brought more water
Hanson for 6 months with rental to be paid in the amount of 1,750 a month. It inside.
was agreed that the motor launch will be returned in good working condition and
with all the documents necessary for it to navigate. Petitioners wrote to Manila Bay demanding damages, and to Pioneer
demanding insurance proceeds, but this was ignored. Petitioners sued. Trial
The boat was dry docked at Malabon and thereafter at defendant’s dock to court ruled for petitioners. Only Pioneer appealed from the decision. IAC
undergo several repairs and improvement. modified the trial court ruling, absolving Pioneer from liability ruling that there
was a breach of implied warranty of seaworthiness on the part of petitioners and
The boat started its voyage manned by a crew/complement selected by Hanson the loss of the logs was caused by perils of the ship and not by perils of the sea.
but was subsequently sunk resulting in total loss.
Issues: W/N there was breach of warranty; W/N the damage was covered by
Madrigal sued. Hanson filed a counterclaim for unrealized profits and the cost of the marine insurance policy; and W/N there was barratry based on the finding
the repairs and improvements made on the vessel. that the crew was negligent.
Trial Court ruled in favor of Hanson for although there was delivery of the vessel Held: (1) W/N there was breach of the warranty – NO
to him, the vessel was unseaworthy.
Petitioners allege that the implied warranty of seaworthiness under the
Issue: W/N the vessel was seaworthy. insurance code refers only to the responsibility of the shipowner who must see
to it that the ship is fit to complete the voyage. They also claim that they’re
Held: The Court ruled in favor of Hanson. merely shippers of the cargo without control over the ship. They’re wrong. The
implied warranty under the law attaches to whoever is insuring the cargo
The preponderance of evidence points to the conclusion that the vessel was whether he be the shipowner or not. The fact that the unseaworthiness of the
unseaworthy. It matters not whether there was delivery of the vessel or it was ship was unknown to the shipper (petitioners) is immaterial and cannot be used
only given to Hanson for trial run. The fact remains that the vessel was not as a defense in order to recover from marine insurance policy. Because of the
seaworthy. First, it did not have the requisite license from both the Bureau of implied warranty, it becomes the obligation of a cargo owner to look for a
Customs and Bureau of Fisheries (for deep sea fishing). Second, the vessel did reliable common carrier. The shipper of the cargo may have no control over the
not encounter a typhoon or high waves or did not hit anything during its voyage. vessel, but he has full control over the choice of the common carrier that will
transport his goods. [or the shipper can enter into a contract of insurance where
The contention of Madrigal that the crew of the vessel was negligent in the insurer would answer not only for perils of the sea, but also perils of the
disproportionately positioning the loads of the vessel such that the vessel ship]
became uneven is untenable. The fact that the vessel sailed smoothly for 17
hours without mishap is testament that the unevenness was not the cause why (2) W/N the damage was covered by the marine insurance policy – NO and (3)
the vessel capsized. w/n there was barratry based on the finding that the crew was negligent – NO
Roque v IAC It is unmistakeable that the loss of the cargo was due to the perils of the ship,
not from perils of the sea. The loss was because of the leak. Clearly therefore, it
Facts: Manila Bay Lighterage Corp, a common carrier, entered into a contract is not covered. Petitioners also contend that barratry, against which the cargo
with petitioners (Roque and Chiong) whereby it would load and carry on its

was insured, existed when the crew improperly loaded the cargo and made a days after “MV Asilda” sank, an estimated 2,500 empty Coca-Cola plastic cases
mistake by turning lose the barge. Barratry is willful misconduct on the part of were recovered near the vicinity of the sinking. Considering that the ship’s
the master or crew in pursuance of an unlawful or fraudulent purpose without hatches were properly secured, the empty Coca-Cola cases recovered could
the consent of the owners and to the prejudice of the owners interest. It requires have come only from the vessel’s deck cargo. It is settled that carrying a deck
a intentional act in its commission. Mere negligence or lack of skill (as in this cargo raises the presumption of unseaworthiness unless it can be shown that
case) is not barratry. the deck cargo will not interfere with the proper management of the ship.
However, in this case it was established that “MV Asilda” was not designed to
Philamgen v CA carry substantial amount of cargo on deck. The inordinate loading of cargo
deck resulted in the decrease of the vessel’s metacentric height thus making it
Facts: On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board unstable. The strong winds and waves encountered by the vessel are but the
“MV Asilda,” a vessel owned and operated by respondent Felman Shipping ordinary vicissitudes of a sea voyage and as such merely contributed to its
Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to already unstable and unseaworthy condition.
be transported from Zamboanga City to Cebu City for consignee Coca-
Cola Bottlers Philippines, Inc., Cebu. The shipment was insured with The ship agent is liable for the negligent acts of the captain in the care of goods
petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN for loaded on the vessel. This liability however can be limited through
brevity), under Marine Open Policy No. 100367-PAG. The vessel left the port in abandonment of the vessel, its equipment and freightage as provided in Art.
Zamboanga, in fine weather, but the vessel sank the next day in the waters of 587. Nonetheless, there are exceptional circumstances wherein the ship
Zamboanga del Norte bringing down her entire cargo with her including the agent could still be held answerable despite the abandonment, as where the
subject 7,500 cases of 1-liter Coca-Cola softdrink bottles. Thus, Coca-cola filed loss or injury was due to the fault of the shipowner and the captain.[9] The
a claim with Felman’s insurance, which denied the claim. Coca-cola thus filed a international rule is to the effect that the right of abandonment of vessels, as a
claim an insurance claim with PHILAMGEN which paid its claim of legal limitation of a shipowner’s liability, does not apply to cases where the
P755,250.00. Claiming its right of subrogation PHILAMGEN sought recourse injury or average was occasioned by the shipowner’s own fault. It must be
against respondent FELMAN which disclaimed any liability for the loss. stressed at this point that Art. 587 speaks only of situations where the fault or
Consequently, on 29 November 1983 PHILAMGEN sued the shipowner for sum negligence is committed solely by the captain. Where the shipowner is likewise
of money and damages. In its complaint PHILAMGEN alleged that the sinking to be blamed, Art. 587 will not apply, and such situation will be covered by the
and total loss of “MV Asilda” and its cargo were due to the vessel’s provisions of the Civil Code on common carrier. It was already established at
unseaworthiness as she was put to sea in an unstable condition. It further the outset that the sinking of “MV Asilda” was due to its unseaworthiness even
alleged that the vessel was improperly manned and that its officers were at the time of its departure from the port of Zamboanga. It was top-heavy as an
grossly negligent in failing to take appropriate measures to proceed to a nearby excessive amount of cargo was loaded on deck. Closer supervision on the part
port or beach after the vessel started to list. The lower court ruled that the of the shipowner could have prevented this fatal miscalculation. As such,
vessel was not seaworthy, thus, Philamgen cannot claim from Felman’s also, FELMAN was equally negligent. It cannot therefore escape liability through the
even if the was sea worthy, Coca-cola had breached its implied warranty on the expedient of filing a notice of abandonment of the vessel by virtue of Art. 587 of
vessel’s seaworthiness. On appeal to the CA, the CA held that Philamgen could the Code of Commerce.
not claim as well.
It is generally held that in every marine insurance policy the assured impliedly
Issue: (a) W/N “MV Asilda” was seaworthy when it left the port of Zamboanga; warrants to the assurer that the vessel is seaworthy and such warranty is as
(b) W/N the limited liability under Art. 587 of the Code of Commerce should much a term of the contract as if expressly written on the face of the policy.
apply; and, (c) W/N PHILAMGEN was properly subrogated to the rights and Thus Sec. 113 of the Insurance Code provides that “(i)n every marine insurance
legal actions which the shipper had against FELMAN, the shipowner. 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.” Under Sec.
Held: The proximate cause of the sinking of “MV Asilda” was its being top- 114, a ship is “seaworthy when reasonably fit to perform the service, and to
heavy. Contrary to the ship captain’s allegations, evidence shows that encounter the ordinary perils of the voyage, contemplated by the parties
approximately 2,500 cases of softdrink bottles were stowed on deck. Several to the policy.” Thus it becomes the obligation of the cargo owner to look for a
reliable common carrier which keeps its vessels in seaworthy condition. He reconstruction and the subsequent placing of the hull in commission, Union
may have no control over the vessel but he has full control in the selection of alleged that the loss was not absolute or total and hence, it was not liable. The
the common carrier that will transport his goods. He also has full discretion in trial court ruled for Union.
the choice of assurer that will underwrite a particular venture. The marine policy
issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) Issue: W/N the loss was absolute or total.
instances has dispensed with the usual warranty of worthiness. Paragraph 15
of the Marine Open Policy No. 100367-PAG reads “(t)he liberties as per Held: Yes.A total loss may either be actual or constructive. The loss of the
Contract of Affreightment the presence of the Negligence Clause and/or Latent thing by sinking or being broken up is an actual loss. Any damage to the thing
Defect Clause in the Bill of Lading and/or Charter Party and/or Contract of which renders it valueless to the owner for the purposes for which he held it is
Affreightment as between the Assured and the Company shall not prejudice an actual loss or a “total destruction of the thing insured.” At the time the lighter
the insurance. The seaworthiness of the vessel as between the Assured and was sunk and at the bottom of the bay, it was of no value to the owner, since he
the Assurers is hereby admitted.” The result of the admission of seaworthiness was deprived of its use or the interest on its investment. To render it valueless,
by the assurer PHILAMGEN may mean one or two things: (a) that the warranty it is not necessary that there should be an actual or total loss or destruction of
of the seaworthiness is to be taken as fulfilled; or, (b) that the risk of all the different parts of the entire vessel.
unseaworthiness is assumed by the insurance company. The insertion of such
waiver clauses in cargo policies is in recognition of the realistic fact that cargo In English practice, a ship is a total loss when she has sustained such extensive
owners cannot control the state of the vessel. Thus it can be said that with such damage that it would not be reasonably practical to repair her. The ordinary
categorical waiver, PHILAMGEN has accepted the risk of unseaworthiness so measure of prudence which the courts have adopted is this: If the ship, when
that if the ship should sink by unseaworthiness, as what occurred in this case, repaired, will not be worth the sum which it would ne necessary to expend upon
PHILAMGEN is liable. The doctrine of subrogation has its roots in equity. It is her, the repairs are, practically speaking, impossible, and it is a case of total
designed to promote and to accomplish justice and is the mode which equity loss (The Great Western Insurance Co. v. Fogarty).
adopts to compel the ultimate payment of a debt by one who in justice, equity
and good conscience ought to pay. Therefore, the payment made by Malayan Insurance v CA
PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right
to bring an action as subrogee against FELMAN. Having failed to rebut the Facts: TKC was the owner/consignee of a shipment of soy bean meal. The
presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1- shipment was made from Brazil and destined for manila on board MV Al
liter Coca-Cola softdrink bottles is inevitable. Kaziemah. The cargo was insured by Malayan under 2 marine insurance
policies.
Sections 127 – 137:
En route to Manila, the vessel was seized and arrested by civil officials of
PMC v Union Insurance Durban South Africa allegedly because of questions on ownership.
Facts: PMC is a corporation that owned the steel tank lighter named Philmaco. Because of the arrest, TKC notified and claimed from Malayan but the latter
Union Insurance insured the lighter, warranting against absolute total loss only. refused saying that arrest was an excepted risk. It instead proposed
transshipping the cargo from Durban to Manila which meant extending the
coverage of the insurance. TKC agreed and paid the corresponding premium
for the transshipment. However, because of the perishable nature of the goods,
A typhoon hit and the lighter was sunk in Manila Bay. PMC notified Union that they were sold in South Africa as it was incapable of withstanding another 20
the lighter was of no value and offered to abandon the wreck as an absolute day voyage to Manila. Again, TKC lodged a claim but was denied for the same
loss. Union refused the offer and instructed PMC to salvage the wreck if reason (that arrest was an excepted risk)
possible. After several attempts, the storm-beaten hull was finally raised. The
cost of salvage, repair, and reconstruction was more than the original cost of RTC and CA ruled in favor of TKC. CA said that although arrest by judicial
the vessel or its value at the time the policy was issued. Because of the process was excepted under Clause 12 of the Institute Cargo Clause or F.C & S
Clause, the deletion of Clause 12 and the adoption Institute War Clauses FAO wrote a letter to Pan Malayan signifying its willingness to abandon the
removed arrest by judicial process as an excepted risk. The only risks that were proceeds of sale of the remaining good order bags, but Pan Malayan rejected
thereby excepted were arrests due to political or executive acts. Furthermore, this.
CA said that the loss could also be covered by Theft, Pilferage and Non-
Delivery Clause. FAO the sued Luzteveco and Pan. RTC ruled for FAO, ordering the defendants
to pay up. Only Pan Malayan appealed, but CA upheld RTC ruling. Hence this.
Issue: W/N TKC may claim from Malayan Insurance.
Issue: W/N Pan is liable for the full insured value of the rice seeds (considering
Held: TKC wins. The Court found that it was pointless for Malayan to maintain its allegation that there was only a partial loss)
its position that it only insures risks of "arrest" occasioned by executive or
political acts of government which is interpreted as not referring to those caused Held: Yes, Pan is liable for the whole amount. In case of total loss in marine
by ordinary legal processes as contained in the "Perils" Clause; deletes the F.C. insurance, the insured is entitled to recover from the insurer the whole amount
& S. Clause which excludes risks of arrest occasioned by executive or political of the insurance.
acts of the government and naturally, also those caused by ordinary legal
processes; and, thereafter incorporates the Institute War Clauses which now If there were some cargoes saved, FAO abandoned them. (these were sold for
includes in the coverage risks of arrest due to executive or political acts of a the benefit of Luzteveco and Pan) Notwithstanding the cargoes saved, there
government but then still excludes "arrests" occasioned by ordinary legal was total loss, because the rule is this: the complete physical destruction of the
processes when the Institute War Clauses should also have included "arrests" subject matter is not essential to constitute an actual total loss. Such a loss may
previously excluded from the coverage of the F.C. & S. Clause. exist where the form of the thing is destroyed, although the materials of which it
consisted still exist, as where the cargo by the process of decomposition or
Pan Malayan Insurance v CA other chemical agency no longer remains the same kind of thing as before.
Facts: The Food and Agricultural Organization of the UN (FAO), made Because there was actual total loss, it is no longer necessary to pass upon the
arrangements to send to Kampuchea 1,500 metric tons of IR-36 certified rice validity of abandonment made by FAO. Section 135 provides that in case of
seeds for seedling purposes. Luzon Stevedoring (Luzteveco) made an offer to actual total loss, the right of insured to claim the whole insurance is absolute,
FAO to deliver the rice seeds to Vietnam, which the latter accepted. without need of a notice of abandonment.
The cargo was thus loaded on board a Luzteveco Barge, consisting of 34,122 Sections 138 – 155:
bags of the rice seeds purchased from Bureau of Plant Industry for 4.6M. After
the loading was completed, Luzteveco issued its Bill of Lading for FAO and the Oriental Assurance v CA
latter secured a marine policy insurance from Pan Malayan in the amount of
5.25M. FAO gave instructions to Luzteveco to leave for Vietnam right away Facts: Panama Sawmill (Panama) hired Transpacific Towage to transport 2000
because the cargo, by its nature, cannot withstand delay because of inherent cubic meters of Apitong Logs from Palawan (where Panama bought the logs) to
risks of germination and spoilage. Later FAO was informed that the tugboat and Manila. The logs were insured by Oriental Assurance (Oriental). The policy
barge returned to Manila (hindi sinabi kung san nagpunta the first time na states that the insurance covers 2000cubic meters of Apitong logs and that the
umalis) and it again left for Vietnam this time with a different tug boat. Days insurance is for TOTAL LOSS ONLY.
after, FAO was advised that the barge sank in China Sea.
The logs were loaded onto 2separate barges each with a volume of 1000cubic
FAO filed a claim with Pan Malayan and Lusteveco. Both denied the claim. meters. As the barges were being towed, strong winds caused damage to the
Pan’s reason was its inability to recover the value of the shipment from barge resulting in the loss of more than ¾ of the logs in one barge.
Luzteveco and because its adjuster found out that 9K bags were in good order,
23.5K bags were wet and 900 bags were missing (in total, 78% loss) – in short,
there was only partial damage, hence it’s not compensable under the policy.
Panama demanded payment for loss from Assurance but the latter refused. Sections 156-166
Assurance contended that the insurance was for total loss only. Panama then
filed a complaint. RTC and CA rendered judgment against Assurance. Jarque v Smith Bell
Issue: W/N Assurance is liable to pay the loss. Facts: The plaintiff was the owner of the motorboat Pandan and held a marine
insurance policy for the sum of P45,000 on the boat, the policy being issued by
Held: NO. The contract is the means by which the insurer’s liability is the National Union Fire Insurance Company and according to the provisions of
measured. And whether a contract is entire or severable is a question of a "rider" attached to the policy, the insurance was against the "absolute total
intention to be interpreted from the language of the parties. The policy in this loss of the vessel only." On October 31, 1928, the ship ran into very heavy sea
case is clear that the subject matter insured was the entire shipment of off the Islands of Ticlin, and it became necessary to jettison a portion of the
2000cubic meters of logs. Even if the logs were loaded onto 2different barges, cargo. As a result of the jettison, the National Union Fire Insurance Company
this did not make the contract severable or divisible as to the items insured. was assessed in the sum of P2,610.86 as its contribution to the general
Remember that the logs on the 2barges were not separately insured; only one average. The insurance company, insisting that its obligation did not extend
premium was paid. The contract therefore, is indivisible. beyond the insurance of the "absolute total loss of the vessel only, and to pay
proportionate salvage of the declared value," refused to contribute to the
Notably, the insurer’s loss is for total loss only. Loss may be actual or settlement of the general average. The present action was thereupon instituted,
constructive. Actual loss is covered by Article 129 of the Insurance Code. and after trial the lower court rendered judgment in favor of the plaintiff and
Constructive Loss is covered by Article 139. Under Article 139, “A person ordered the defendant National Union Fire Insurance Company to pay the
insured... may abandon the thing insured... separately valued by the policy, or plaintiff the sum of P2,610.86 as its part of the indemnity for the general
otherwise separately insured...” average brought about by the jettison of cargo. The insurance company
appealed to this court and assigns as errors (1) "that the lower court erred in
CA treated the loss as a constructive one since more than ¾ of the logs were disregarding the typewritten clause endorsed upon the policy, Exhibit A,
lost in one barge (the logs in barge was treated separately from the logs in the expressly limiting insurer's liability thereunder of the total loss of the wooden
other barge). However, the SC is of the opinion that the requirements of Article vessel Pandan and to proportionate salvage charges," and (2) "that the lower
139 on constructive loss have not been met. court erred in concluding that defendant and appellant, National Union Fire
Insurance Company is liable to contribute to the general average resulting from
The logs were not separately valued nor separately insured. Hence, the number the jettison of a part of said vessel's cargo."
of logs lost in one barge cannot be made to determine whether more than ¾
were lost in relation to the entire subject matter insured. The logs were insured Issue: W/N the petitioner is entitled to his claim.
as one, so the basis for determining the existence of constructive loss must be
based on the totality of shipment. Using that as a basis, the number of logs lost Held: It is a well settled rule that in case repugnance exists between written and
did not exceed 75% (3/4) of the entire shipment. printed portions of a policy, the written portion prevails, and there can be no
question that as far as any inconsistency exists, the above-mentioned typed
In the absence of either actual or constructive loss, there can be no recovery of "rider" prevails over the printed clause it covers. Section 291 of the Code of Civil
Panama from Assurance. Procedure provides that "when an instrument consists partly of written words
and partly of a printed form and the two are inconsistent, the former controls the
Pan Malayan Ins. v CA (See previous case) latter."
In the absence of positive legislation to the contrary, the liability of the

defendant insurance company on its policy would, perhaps, be limited to
"absolute loss of the vessel only, and to pay proportionate salvage of the
declared value." But the policy was executed in this jurisdiction and "warranted
to trade within the waters of the Philippine Archipelago only." Here the liability
for contribution in general average is not based on the express terms of the informed him that the policy was null and void and to provide proof of losses
policy, but rest upon the theory that from the relation of the parties and for their would only be a futile act.
benefit, a quasi contract is implied by law. Article 859 of the Code of Commerce
is still in force and reads as follows: Issue: W/N petitioner may recover for his loss.
“ART. 859. The underwriters of the vessel, of the freight, and of the cargo shall Held: Yes. With respect to paint, gasoline and alcohol. The presence of
be obliged to pay for the indemnity of the gross average in so far as is required flammable oils within the insured premises does not ipso facto avoid the policy
of each one of these objects respectively.” even though there is an express prohibition therefore when such oils are
incidental to the business of the insured. In this case, the alcohol and gasoline
The article is mandatory in its terms, and the insurers, whether for the vessel or were used to produce varnish necessary for the furniture stored therein. The
for the freight or for the cargo, are bound to contribute to the indemnity of the insured premise was a furniture store and the furniture thereat was the one
general average. And there is nothing unfair in that provisions; it simply places insured. With respect to the transfer of interest over the properties to third
the insurer on the same footing as other persons who have an interest in the person without respondent’s consent. Remember that when one mortgages his
vessel, or the cargo therein at the time of the occurrence of the general average property, he does not lose his interest thereat. Only when mortgagor defaults
and who are compelled to contribute (art. 812, Code of Commerce). In the and mortgagee takes possession of the properties will there be a transfer of
present case it is not disputed that the ship was in grave peril and that the interest and ownership. With respect to the accusation of arson. The question
jettison of part of the cargo was necessary. If the cargo was in peril to the extent on arson having already passed upon by a competent court, the element of res
of call for general average, the ship must also have been in great danger, judicata kicks in and the finding thereat cannot be contested anymore. With
possibly sufficient to cause its absolute loss. The jettison was therefore as much respect to the proof of loss. The policy did not contain any requirement on proof
to the benefit of the underwriter as to the owner of the cargo. The latter was of loss. Even if it did, respondent has already waived it after informing the
compelled to contribute to the indemnity; why should not the insurer be required petitioner in a letter-reply to the latter’s notice of loss that the policy had been
to do likewise? If no jettison had take place and if the ship by reason thereof avoided.
had foundered, the underwriter's loss would have been many times as large as
the contribution now demanded. Judgment affirmed. Ong Guan Can v Century Insurance
Sections 167-173 Facts: Petitioner is the owner of a building and the merchandise stored therein
which were insured with Century for the sum of 30,000 and 15,000 respectively.
Bachrach v British American Assurance The building was completely razed by fire. Ong Guan filed a claim from Century,
but the latter averred that under Clause 14 of the policy, it may rebuild the
Facts: Bachrach insured a building and the goods thereat with British-American house burnt, and although the house may be smaller, it would be sufficient
against Fire. A fire razed the building including the goods thereat. A claim by indemnity to the insured for the actual loss suffered. Instead of paying indemnity
Bachrach was made but the same was denied by British-American. The denial in accordance with the policy, Century insisted on rebuilding the structure.
of liability by respondent was premised on the following (1) that petitioner Century relied on Clause 14 of its policy which reads: “The Company may at its
maintained a paint and varnish shop at the second floor of the building (2) that option reinstate or replace the property damaged or destroyed, or any part
the petitioner assigned his interests to third persons to secure several thereof, instead of paying the amount of the loss of damages, or may join with
obligations without the consent of respondent (3) petitioner willfully placed a any other Company or insurers in so doing, but the Company shall not be
tank of gasoline in the second floor and he knew that the gasoline was sipping bound to reinstate exactly or completely, but only as circumstances permit and
out. Petitioner also willfully placed a fire lamp near the gasoline (4) petitioner did in reasonable sufficient manner, and in no case shall the Company be bound to
not submit proof of losses within the required period of time in the policy. For expend more in reinstatement that it would have cost to reinstate such property
this part petitioner contends (1) that he was acquitted in an earlier criminal case as it was at the time of the occurrence of such loss or damage, nor more than
for arson based on the same facts (2) that he no longer bothered to submit the sum insured by the Company thereon. “ RTC ruled in favor of petitioner.
proof of loss because when he sent an earlier notice of loss, respondent already
Issue: W/N Century may choose to rebuild the structure.
Held: No. The policy actually provides that “the company [century] may at its memory and with the assistance of his brother. State Assurance presented
option reinstate or replace the property damaged... instead of paying the various witnesses who testified, as appraisers, that the total value of the articles
amount of loss... but the company shall not be bound to reinstate exactly or burned was 1000 – 1500 which is the most liberal estimate. RTC ruled saying
completely, but only as circumstances permit... and in no case shall the that petitioner was not a qualified appraiser. It also dismissed the testimony of
company be bound to expend more in reinstatement than it would have cost to the witnesses in favor of State Assurance but nevertheless found that the
reinstate such property as it was at the time of the occurrence of such loss...nor articles were worth 1,500 because it was the amount allegedly offered by State
more than the sum insured by the company....” If this clause is valid, the effect Assurance to petitioner as compromise. This offer, according to the RTC, was
would be to make the insurer’s obligation alternative – either pay the value or presented as evidence but was not excepted to by State Assurance thus, it is
rebuild it. This is a clear case of alternative obligations by a debtor: pay the bound by it.
indemnity or rebuild the house. In case of alternative obligations, the Civil Code
requires the debtor to notify the creditor of the choice which obligation to Issue: How much really is the value of the articles?
perform. The object of the notice is to give the creditor an opportunity to consent
to or impugn the election. In this case, no notice was given Note however that in Held: The value of the articles was reasonable and was not over-valued.
alternative obligations, the debtor (Century) must notify creditor (Ong Guan) of Petitioner was a man of wealth; having inherited 15,000 from his father, being
his choice, pursuant to Art 1133, CC. The purpose of the notice is to give the an administrator of his father’s estate, having stockholdings in a company from
creditor a chance to give his consent or to impugn the debtor’s choice. Only which he regularly derives dividends. There is no question therefore, that he
after this notice shall the choice take legal effect, when creditor consents or if he can afford expensive articles which were burnt by the fire. The reasoning of the
impugns it, when declared proper by a court. The problem here is Century trial court that petitioner was not an appraiser is untenable. The articles that
never gave a formal notice of its choice to rebuild, and while there was a were burnt consisted mainly of furniture, wardrobe etc which an ordinary man,
proposition to do so (according to witnesses), Ong Guan never assented to it, more so if he was the one who purchased it, would readily know of its value. No
because the new house would be smaller and of lesser quality. It would be expert is needed to determine the value of the effects that were lost. In this
inequitable and unjust to compel Ong Guan to accept the rebuilding, without case, since the insurance coverage was only for 3,000 but the total value of the
being offered additional indemnity for the difference in size between the 2 effects lost after deducting the value of the salvaged articles was 4,300, the
houses, or without tendering the insured value of the merchandise lost. insurer must bear a portion of the loss represented by a fraction the numerator
Therefore, the election made by Century to rebuild is improper. Further, even if of which is the amount of the insurance and the denominator of which is the
notice was given petitioner vehemently impugns the election of Century simply value of the property at the time of the fire. This entitles the insured to a
because the building to be re-constructed is admittedly smaller and of judgment against the insurer for 2,919.92.
substandard materials. Century also was not willing to pay for the difference in
the size.
Galian v State Assurance
Facts: Petitioner insured the properties inside his house with State Assurance
for 3,000. Thereafter a fire razed the building. However, with respect to the
effects inside the house which were the subject of insurance, there was no total
loss. In fact, petitioner was able to sell at public auction the salvaged effects.
Petitioner now claims from State Assurance saying that the effects that were
burned totaled 4,000. petitioner claims 2,000 from State Assurance (this was
after the proceeds for the sale of the salvaged effects had been deducted) State
Assurance disclaims liability on the ground of (1) fraudulent claim (2) not all the
listed articles on that were supposedly burned were inside the house when the
fire occurred and (3) over-valuation of the effects. Petitioner counters by saying
that he immediately prepared the list of the articles burned after the fire from
Section 174 to restore the car claiming that the driver was not an authorized driver. Thus,
Robes sued. RTC ruled in favor of Robes ordering the payment by CCC of the
Tanco v Phil. Guaranty cost of the repair, towing and impounding and damages. CA sustained the trial
court. CCC contends that the driver is not an authorized driver because he is
Facts: Tanco’s automobile, while being driven by his brother Manuel, figured in illiterate.
a collision with a pick-up delivery van, resulting in damage to both vehicles.
Tanco paid for repairs and filed a claim with Philippine Guaranty under a car Issue: W/N CCC is liable for the claim.
insurance policy it issued.
Held: Yes. There are two classes of authorized drivers. The first is the insurer
The policy covers, to a certain extent, los or damage to the insured vehicle as himself and the second is anyone operating the vehicle under the owner’s
well as damage to property of 3rd persons as a consequence of or incident to permission PROVIDED such operator is a holder of a valid and subsisting
the operation of the vehicle. There is an exception clause which provides that driver’s license. In this case, the driver is admittedly illiterate but nevertheless
the company shall not be liable in respect of any accident, loss, etc. while the he was able to obtain a valid driver’s license without taking the requisite
vehicle is being driven by anyone other than an Authorized Driver, which is the examination. The driver only paid 25 pesos to a certain person to obtain the
insured himself and any person driving on the Insured’s order or with his license. Notwithstanding this fact, the CA found that the license was genuine
permission, provided that the person driving is permitted in accordance with and no proof to the contrary was presented by CCC. In short, the license was
licensing or other laws to drive the vehicle, or has been permitted and is not apparently genuine upon which Robes’ is entitled to rely on. The fact that the
disqualified by order of a court or enactment of law (as defined in the policy). Cavite Motor Vehicle Office manifested that it did not issue the questioned
driver’s license does not militate against the driver because for all we know, the
Phil. Guaranty refused based on the exclusion clause. At that time, Manuel did license was not issued at the Cavite MVO after all. As the law stands during that
not have a valid license, not having renewed it (required by Sec. 31 of the Motor time, an examination is not mandatory but only permissive. According to Sec 26
Vehicle Law). He was not an authorized driver and hence, Phil. Guaranty is not of the Revised Motor Vehicles Law, the Chief of the MVO may issue the license
liable under the policy. if he is convince of the driving abilities of an applicant even without an
examination.
Tanco filed suit in court. The CFI ruled in his favor since there was no evidence
that Manuel had been disqualified by order of a court or law from driving such Villacorta v Insurance Commissioner
vehicle. Any ambiguity in the definition of “authorized driver” in the policy
should be construed in Tanco’s favor, the policy having been prepared in its Facts: Villacorta owned a Colt Lancer, insured with Empire Insurance for 35K-
entirety by Phil. Guaranty. own damage; 30k – theft; and 30k – third party liability. The car was brought to
Sunday Machine Works for general check up and repairs. While the car was in
Issue: W/N Phil. Guaranty should pay. custody of Sunday, it was taken by 6 men for a drive to Montalban, Rizal. It
figured in an accident, hitting a gravel truck, and sustained bad damage. Driver
Held: No. The exclusion clause in the contract is clear. It should be was Benito Mabasa, a person unknown to Villacorta and his wife. Empire
implemented as is, and need not be interpreted. The car was being driven by denied Villacorta’s claim. The policy actually undertook to indemnify the insured
an un-authorized driver, which exempts Phil. Guaranty from liability under the against loss/damage by accidental collision, overturning upon mechanical
exception clause in the policy. breakdown or upon wear and tear, damage by fire, external explosion, self-
ignition, burglary, housebreaking or theft and by malicious act. Insurance
CCC Ins. v CA Commission dismissed Villacorta’s complaint for recovery, averring that the
accident did not fall within the provisions of the policy either under the Own
Facts: Carlos Robes took out an insurance from CCC on his Dodge Kingsway Damage or Theft coverage, invoking the “Authorized Driver” clause which
for 8,000 against loss or damage arising from accident. The car, driven by provides that only the insured or any person driving under the insured’s order or
Robes’ driver, figured into an accident. The repairs for the damaged car with his permission, in accordance with licensing laws are considered
amounted to 5,300. CCC disclaimed liability and refused to either indemnify or authorized drivers [if driver is unauthorized, insurer is under no liability].
Respondent also said that the claim does not fall under the “Theft” clause, Catiben taking the vehicle for a joyride constitutes theft within the RPC and of
because the element of taking under art. 308, RPC, requires that the intent to the policy.
deprive the owner of the thing must be permanent, and since it was merely a
joyride, the element of taking is absent. There is no need for prior conviction for the crime of theft before the insurer
is made liable under the theft clause of the policy. The act of Catiben which
Issue: W/N Empire is liable to Villacorta. ultimately caused damage to the car is an act of theft within the policy
insurance. In civil cases, only preponderance of evidence is needed. Besides,
Held: Yes. IC ruling is wrong. Remember that Insurance Contracts are contracts the policy does not require that there be prior conviction for the crime of theft,
of adhesion – they must be liberally construed in favour of the insured. A car before the insured can recover his loss.
owner who entrusts his car to a car service and repair shop necessarily entrusts
his key to the shop and its employees who are presumed to have permission to Stokes v Malayan Insurance
drive the car for legitimate purposes (checking, testing). That the employees
diverted the use of the car for illicit or unlawful purposes does not mean that the Facts: Adolfson had a subsisting Malayan car insurance policy when his car
“Authorized Driver” clause was violated so as to bar recovery, provided that collided with another car owned by Poblete. At the time of the accident,
such employee has a valid license. Even so, when a car is unlawfully taken, it is Adolfson’s car was being driven by James Stokes (with authority from
the “Theft” clause, not the “Authorized Driver” clause that applies. The taking of Adolfson), an Irish citizen who had been in the Philippines as a tourist for more
the car here was without owner’s consent or knowledge, and such partakes of than 90 days, had a valid Irish driver’s license but without a Philippine driver’s
the taking required by art 308, RPC (there was intent to gain, no violence nor license. Adolfson filed a claim with Malayan but the latter refused to pay,
force used). It matters not whether taking was permanent or temporary. Finally, contending that Stokes was not an authorized driver under the “Authorized
it wasn’t a joy ride. After the accident, the driver was searched, and from his Driver” clause of the policy in relation to Sec. 21 of the Land Transportation and
body was found a .45 caliber and a grenade. Traffic Code. Under the said Code, bona fide tourists who are duly licensed in
their countries may operate motor vehicles in the Philippines, but not after 90
Association of Baptists v Fieldmen’s Insurance days during their stay. If they desire to operate MVs after 90 days, then they
should obtain a Philippine license. Adolfson brought suit before the CFI and
Facts: Association of Baptists for World Evangelism is a religious corporation. succeeded in getting a favorable judgment. The CFI held that Stoke’s lack of a
Assoc. Of Baptists, having an insurable property over the Chevrolet Carry-all Philippine driver’s license was not fatal to the enforcement of the insurance
owned by Reverend Clinton Bonnel, had it insured with Fieldmen’s Insurance policy, and that Malayan was estopped from denying liability because it
Company. Fieldmen’s issued a Private Car Comprehensive Policy against loss accepted premium payment made one day after the accident.
or damage up to the amount of P5K. Dr. Antonio Lim, Assoc. Of Baptists
representative, placed the Chevrolet at the Jones Monument Mobilgas Service Issues: W/N Malayan is liable to Adolfson.
Station. The Chevrolet was placed under the Mobilgas’ operator, Rene Te so
that the Chevrolet could be displayed as being for sale. Later, Romeo Catiben W/N Malayan is estopped from denying liability.
who is a boy at the service station and wo is also the nephew of Rene Te’s wife
took the Chevrolet for a joyride. Such taking of the car was without the prior Held: Both no.
permission of Assoc. of Baptists, Dr. Lim and Rene Te. On the way back to the
service station, the vehicle bumped an electric post due to some mechanical Not an Authorized Driver: When the insurer is called upon to pay in case of loss
defect. or damage, he has the right to insist upon compliance with the terms &
conditions of the contract. This is a condition precedent to the right of recovery.
Issue: W/N Fieldmen’s is liable. Under the “authorized driver” clause, an authorized driver must not only be
permitted to drive by the insured. It is essential that he is permitted under the
Held: Yes. The Comprehensive Policy issued by Fieldmen’s includes loss or law to drive the MV and is not disqualified. Under the law, Stokes could not
damage to the motor vehicle by “burglary or theft”. In this case, the act of drive an MV without a Philippine license, already staying for more than 90 days.
Hence, he is not an authorized driver under the policy.
any person driving on the insured’s order, or with his permission, provided that
the person driving is permitted in accordance with licensing laws to drive the
Not Estopped: Acceptance of premium within the stipulated period for payment vehicle are considered authorized. Because the Lims couldn’t pay the PN
(including grace period) merely assures continued effectivity of the policy. Such issued to FCP, it sued them. They filed a third party complaint against Perla.
acceptance does not estop the insurer from interposing a valid defense. The Trial court ruled that spouses Lim should pay FCP. On appeal to CA, it
principle of estoppel is a principle of equity. In accepting premium payment, reversed. Hence this action.
Malayan was not guilty of any inequitable act. There is nothing inconsistent
between acceptance of premium due and the enforcement of the policy’s terms. Issue: W/N Perla is liable to the spouses Lim. [Perla contends that the
“authorized driver clause” was violated, hence it can’t be made liable; it also
Palermo v Pyramid Insurance avers that the said clause cannot apply to the “theft” clause]
Facts: Andrew Palermo bought a new Nissan Cedric De Luxe Sedan from Ng Held: Yes, Perla is liable. The Comprehensive Motor Car Insurance Policy
Sam Bok Motors. He had it insured with Pyramid for 20,000 against loss or issued by Perla undertook to indemnify spouses Lim against loss or damage to
damages and 10,000 against third party liability. The car was however, the car by accidental collision, overturning upon mechanical breakdown or upon
mortgaged with Ng Sam Bok as security for the balance of the purchase price wear and tear, damage by fire, external explosion, self-ignition, burglary,
which explains why the registration certificate was in the possession of Ng Sam housebreaking or theft and by malicious act. Where a car is unlawfully taken
Bok. One day, the car driven by Andrew figured a vehicular accident causing without owner’s consent or knowledge, such taking constitutes theft, hence it is
the total wreckage of the car, injuries on himself and death of his father- the “theft” clause that applies here, not the authorized driver clause. As correctly
passenger. The claim against Pyramid was denied because Andrew allegedly stated by CA: had the vehicle figure in an accident at the time she drove it with
violated the authorized driver clause for driving with an expired driver’s license her expired license, then Perla could properly resist the claim; but the case is
different, it was stolen. Moreover, it is worthy to note that there is no causal
Issue: W/N Palermo is entitled to his claim. connection between the possession of a valid license and the loss of a vehicle.
To rule otherwise would render car insurance a sham, because then, the insurer
Held: Yes. The requirement of a valid and subsisting driver’s license found in can escape liability by citing restrictions which are not germane to the claim.
many authorized driver clauses only pertains to drivers other than the insured
himself who operates the vehicles with the owner’s consent. It does not apply to [side note: on FCP’s claim: it is only right that the spouses be not excused from
the insured who is himself an authorized driver with or without license. While the paying the loan just because the mortgaged property was stolen]
Motor Vehicle Law prohibits a person from operating a motor vehicle on the
highway without a license or with an expired license, an infraction of the Motor Sun Ins. v CA
Vehicle Law on the part of the insured, is not a bar to recovery under the
insurance contract. It however renders him subject to the penal sanctions of the Facts: Sun Insurance issued a personal accident policy to Felix Lim, Jr. With his
Motor Vehicle Law. wife Nerissa as beneficiary. Felix Lim died with a bullet wound to his head.
When Nerissa tried to claim payment from Sun Insurance, the latter refused.
Perla Cia. De Seguros v CA Nerissa argued there was no suicide but Sun Insurance countered that there
was no accident either. The only witness to Felix’s death was his secretary,
Facts: Spouses Lim executed a promissory note in favour of Supercars for Pilar Nalagon. According to Nalagon, Felix was actually in happy mood
77.9K secured by a chattel mortgage over a brand new Ford Laser, which was (although note, not drunk) after his mother’s birthday party. He was playing with
insured with Perla. Supercars assigned to FCP Credit Corp all its rights and his handgun, the magazine of which he had earlier removed. While Nalagon
interests over the PN. Car was carnapped while parked at the back of was watching TV, Felix pointed the gun at her. Nalagon pushed the gun aside
Broadway Centrum. It was Mrs. Evelyn Lim who drove the car before it was and said it might be loaded. Felix assured her that it was not then pointed it to
stolen. The Lims filed a claim for loss with Perla, but it denied on the ground his temple.. Suddenly, there was an explosion and Felix was dead with a bullet
that Evelyn had an expired driver’s license at the time of loss, which violated the wound to his head. RTC and CA held Sun Insurance to be liable for the
“authorized driver clause” of the policy, which provides that only the insured or payment of the insurance policy.
Issue: W/N Sun Ins. is liable.
Held: Yes. Accident and accidental mean that which happens by chance or The beneficiaries filed a written notice of claim with Finman which denied it,
fortuitously, without intention or design and which is unexpected, unusual or contending that the murder and assault are not within the coverage of the
unforeseen. It is an event that is not expected. It happens without any human insurance policy. They filed a complaint with the Insurance Commission, which
intervention or, if it happens through a human agency, it is unusual and is not ordered Finman to pay. This was confirmed by the CA. Hence, Finman filed a
expected by the person through whom it happens. By reason of these petition with the SC alleging grave abuse of discretion on the part of the CA for
definitions, the SC holds that Felix Lim died of an accident. Sun Insurance applying the principle of “expresso unius exclusio alterius” in a personal
counters that there is no accident when a deliberate act is performed unless accident insurance policy, since death resulting from murder and/or assault are
some additional and unexpected or independent happening occurs which impliedly excluded, considering that the cause of death was not accidental but
produces the death or injury. In this case, the SC thinks that the firing of the gun rather a deliberate and intentional act of the assailant.
was the additional yet unexpected and independent act which produced Felix’s
death. Sun Insurance also cites the provision in the insurance policy wherein Issue: W/N Finman is liable.
the insurer shall not be liable for bodily injury brought upon by the insured
attempting to commit suicide or wilfully exposing himself to needless peril Held: Yes.
except to save life. Note that the parties have agreed that Felix did not commit
suicide. However, Sun Insurance argues that still, Felix placed himself in Accident: The term “accident” or “accidental” as used in insurance contracts
needless peril. Hence, the insurer cannot be made liable. Sun Insurance have not acquired any technical meaning and are construed in their ordinary
maintains that the mere act of pointing the gun to his temple, Felix had already and common acceptation. An accident is an event that takes place without
wilfully exposed himself to needless peril. However, this theory stems from an one’s foresight or expectation (unforeseen, unexpected, unusual, without
assumption that a gun is per se dangerous. This assumption is at best intention and design, by chance or fortuitously).
arguable. However, recalling the eyewitness testimony, Felix had removed the
magazine from the gun and actually believed it was no longer dangerous. Felix The generally accepted rule is that death or injury does not result from accident
pointed the gun to his temple, NOT to expose himself to needless peril but to if it is the natural result of the insured’s voluntary act, unaccompanied by
assure Nalagon that it was really harmless. Felix case is compared to a man anything unforeseen except death or injury. Where the death or injury is not the
jumping to a river which he knew had a strong current. According the SC, the natural or probable result of the insured’s voluntary act, or if something
man who jumped to a river knowing that the current was strong needlessly unforeseen occurs in the doing of the act which produces the injury, the
exposed himself to peril. However, Felix’s case is different since he did not resulting death is within the protection of the policies insuring against death or
know that the gun was loaded. There is no doubt that Felix was negligent and injury from accident.
that such negligence caused his death. However, such negligence will not bar
his beneficiary from receiving the proceeds of the policy. Nothing in the policy In this case, the event was a pure accident on the victim’s part. He died from
exempts the insurer from cases wherein it is shown that the insured contributed an event that took place without his foresight or expectation, an even that
to his injury. In fact, most accidents are caused by negligence. proceeded from an unusual effect.
Finman General Insurance v CA Expresso Unis Exclusio Alterius: Furthermore, the personal accident insurance
policy enumerated only 10 circumstances wherein no liability attaches to
Facts: Deceased Carlie Surposa was insured with Finman General under Finman. The principle of “expresso unis exclusio alterius” (the mention of one
Finman General Teachers Protection Plan (Master and Individual Policies), with thing excludes another thing) is applicable, since murder and assault, not
his parents, spouse, & brothers as beneficiaries. During the effectivity of the having been expressly included in the enumeration of the circumstances that
policy, Carlie died as a result of a stab wound inflicted by one of 3 unidentified would negate liability in the policy cannot be considered to discharge Finman
men without provocation and warning on his part. This happened when he was from liability. It is well-settled that contracts of insurance are to be construed
waiting for a ride on his way home from the Maskarra Annual Festival liberally in favor of the insured and strictly against the insurer.
(Bacolod).
Facts: Sherman Shafer obtained a private car policy over his Ford Laser from
Makati Insurance for third party liability (TPL). While driving his car, he hit a
Volkswagen owned by Felino Ilano, causing damages to the car (hindi sinabi
kung sa Ford or Volkswagen, pero malamang pareho) and physical injuries to a
Fortune Insurance v CA passenger of the Volkswagen. A criminal case for reckless imprudence resulting
in damage to property and serious physical injuries was filed against Shafer.
Facts: An armored vehicle of Producer’s bank containing 750,000 was robbed Owner of Volkswagen filed a separate civil action for damages. Shafer filed a
while in transit from the Pasay Branch to its Head Office in Makati City. The third party complaint against Makati Insurance. The trial court (through herein
money was insured by Fortune The armored car was driven by Magalong, respondent Judge) dismissed the third party complaint on the ground that it was
secured by Atiga. Accompanying them was the teller Maribeth Alampay. Both premature and without cause of action until Shafer is found guilty and
Magalong and Atiga were provided by their agencies to Producer’s bank by sentenced to pay indemnity. Hence this action.
virtue of service agreements that latter had with the former. After investigation,
an information was filed against Magalong, Atiga and three others for violation Issue: W/N the insured can bring a third party complaint against insurer while
of the Anti-Highway Robbery Law. Fortune disclaims the liability on the ground his liability is yet to be determined [Shafer contends: the dismissal of the third
that it was an excepted risk; that the coverage of the insurance did not include party complaint amounts to a denial of his right to defend himself as regards the
“any loss caused by any dishonest, fraudulent or criminal act of the insured or civil aspect of the case. Makati Insurance contends: Shafer has no cause of
any officer, employee , partner, director, trustee or authorized representative of action until his liability is determined by final judgment]
the Insured whether acting alone or in conjunction with others. . .” Insisting on
the claim, Producer’s contend that Magalong and Atiga were not any of the Held: Yes. Compulsory Motor Vehicle Liability (also TPL) is intended to provide
person’s above mentioned. In fact, Magalong anf Atiga were not their compensation for injuries/death suffered by innocent third persons as a result of
(producer’s employees) as they are properly the employees of their respective the negligent use of motor vehicles. This way, the victims would be assured of
agencies. RTC and CA ruled in favor of Producer’s bank saying that Magalong immediate financial assistance, regardless of the financial capability of motor
and Atiga were not the former’s employees or authorized representatives. vehicle owners.
Held: Fortune wins. Magalong and Atiga were, in respect of the transfer of Where an insurance policy insures directly against liability, the insurer’s liability
Producer's money from its Pasay City branch to its head office in Makati, its accrues immediately upon the occurrence of the injury or the event upon which
"authorized representatives" who served as such with its teller Maribeth the liability depends. It does not depend on the recovery of judgment by the
Alampay. Howsoever viewed, Producers entrusted the three with the specific injured party against the insured. The injured can directly sue the insurer. The
duty to safely transfer the money to its head office, with Alampay to be purpose of statutes that allow this is to protect injured persons against the
responsible for its custody in transit; Magalong to drive the armored vehicle insolvency of the insured who caused such injury. There is created a
which would carry the money; and Atiga to provide the needed security for the contractual relation which inures to the benefit of any person who may be
money, the vehicle, and his two other companions. In short, for these particular injured by the insured, as if such injured person were specifically named in the
tasks, the three acted as agents of Producers. A "representative" is defined as policy. And in the event that the injured fails to include the insurer as a party
one who represents or stands in the place of another; one who represents defendant, the insured is not prevented to avail of procedural rules intended to
others or another in a special capacity, as an agent, and is interchangeable with avoid multiplicity of suits, as in this case, the third party complaint.
"agent." What’s the rationale behind excepting losses arising from an
employee’s (etc) dishonesty from the coverage of an insurance? To avoid fraud! The lower court erred in dismissing the third party complaint. There was no
Hiring dishonest employees so that later on the employer can claim indemnity is need to wait for the decision finding the insured guilty of reckless imprudence.
a circumvention of the law. The occurrence of injury to the third party/injured immediately gave rise to
Makati’s liability.
Sections 373-389
Shafer v Judge, RTC Olongapo
Perla Cia de Seguros v Ancheta It doesn’t matter if such vehicle was not the cause of the accident. This is
because under Sec.378, the insurer who pays may still recover from the owner
Facts: The Superlines Bus involved in this case is insured by Perla Compania of the vehicle that caused the accident. This is the very reason why we have
for passenger liability and 3rd party liability. The vehicle of PR (Private the “no fault indemnity” insurance. This was introduced into our laws to provide
respondents: Ramos, Abcede, Mago et al.) was insured by Malayan Insurance victims of vehicular accidents, although in a limited amount, compensation until
Co. The Superlines Bus and the vehicle of PR were involved in a collision final determination of who is really responsible for the accident.
resulting to physical injuries to the PR. PR filed a complaint for damages
against the bus and its insurer. However, even before summons could be GSIS v CA
served, respondent judge Ancheta issued an order directing Perla Compania to
pay indemnity under the no fault clause of the Insurance Code after the Facts: National Food Authority (NFA) was the owner of a Chevy truck which
submission of the requisite documents. Perla Compania denied its liabililty. It was insured against liabilities for death of and injuries to third persons with the
argued that under Sec.378 of the Insurance Code, it is the insurer (Malayan) of GSIS. The truck, driven by Corbeta, collided with a Toyota Tamaraw (public
the PR, and not the insurer (Perla) of the bus company that should pay the utility vehicle) owned by Victory Uy. 5 passengers of the Tamaraw died while
indemnity. 10 sustained injuries (respondents). Three cases were filed and consolidated:
1) Civil case for quasi-delict with damages commenced by Uy against NFA and
Corbeta, 2) Civil case for damages filed by an injured passenger against Uy and
insurer Mabuhay Insurance, and 3) Civil case by respondents against NFA and
Issue: Who is the real insurer liable? Is it the insurer of the bus company or Corbeta for damages due to quasi-delict, GSIS as an insurer for the truck, Uy
the insurer of the PR? for breach of contract of carriage, and Mabuhay Insurance as insurer of the
Tamaraw.
The findings of the trial courts stated that the truck which crossed over to the
Held: Malayan – insurer of PR’s vehicle – is liable. other lane was speeding because after the collision, it traveled for about 50
meters and fell into a ravine. If both vehicles had traveled in their proper lanes,
Sec.378 is quite straightforward. The following are the rules for the no fault the incident would not have occurred. The RTC awarded: 1) damages to Uy, 2)
indemnity provision: dismissed the case against Uy and ordered Mabuhay, Corbeta and NFA to pay
the injured passenger, and 3) damages to respondents. The CA affirmed.
1) Claim may be made against one motor vehicle only;
Only GSIS filed a petition for review. It denies solidary liability with the NFA and
2) If the injured party is an occupant of a vehicle, the claim should be made negligent operator of the truck because it claims that they are liable under
against the insurer of the vehicle IN WHICH HE IS RIDING, MOUNTING OR different obligations. It asserts that NFA’s liability is based on a quasi-delict
DISMOUNTING FROM; while its liability is based on the contract of insurance. It asserted that when
there are 2 or more debtors or creditors, the obligation as a general rule, is joint.
3) In any other case (such as when the victim is not an occupant of the It also contends that it cannot be held liable without proof nor allegations that
vehicle), claim shall be made against the insurer of the offending vehicle; respondents filed a notice of claim within 6 months from the date of the
accident. This requirement gives the insurer the opportunity to investigate the
4) In all cases, the right of party making payment to recover from the owner of veracity of the claim, and non-compliance therewith constitutes waiver.
the vehicle responsible for accident is maintained.
Clearly then, the claim shall lie against the insurer of the vehicle in which the
occupant is riding. The claimant has not option which insurer to go after. The Issues: W/N GSIS should be held solidarily liable with the negligent
law makes it mandatory that the claim of the injured party who is an occupant of insured/owner-operator of the Chevy truck for damages.
a vehicle, should be made agains the insurer of the vehicle he is riding
(mounting or dismounting).
Secs. 175-177:
W/N GSIS’s contention with respect to the required notice is tenable. Security-Pacific v Tria-Infante
Facts: Anzures filed a complaint against Villaluz for violation of BP 22in the RTC
of Manila. He requested the said court to issue a writ of preliminary attachment
Held: No to both. on the properties of Villaluz, pending the outcome of the said case. The court
granted the same, upon “complainant’s posting of a bond which is hereby fixed
Separate Liability: GSIS’s position insofar as joint liability is concerned is not at P2,123,400.00 and the Court’s approval of the same under the condition
tenable. It is now established that the injured or the heirs of a deceased victim prescribed by Sec. 4 of Rule 57 of the Rules of Court….” An attachment bond
of a vehicular accident may sue directly the insurer of the vehicle. Common was later on posted by Anzures, and the sheriff attached certain properties of
carriers are required to secure Compulsory Motor Vehicle Liability Insurance Villaluz, which were duly annotated on the corresponding certificates of title.
coverage under Sec. 374 of the Insurance Code, precisely for the benefit of Villaluz was later on acquitted of the BP 22 violation, but she was ordered to
victims of vehicular accidents and to extend them immediate relief. pay Anzures P2,123,400.00. appeal was made to the CA, which affirmed the
lower court’s ruling. When the case was elevated to the SC, Villaluz posted a
Although the victim may proceed against the insurer for indemnity, the third counter-bond in the amount of P2,500,000.00 issued by petitioner Security
party liability is only up to the extent of the insurance policy and those required Pacific Assurance Corporation, with urgent motion to discharge attachment. The
by law. The direct liability of the insurer under indemnity contracts against third SC upheld the CA’s decision, thus the trial court issued a writ of execution. The
party liability does not mean that the insurer can be held solidarily liable with the sheriff tried to reach Villaluz at her address, but she no longer resided there, so
insured. This is because the liability of the insured is based on contract, while he sent a notice of granishment to Security Pacific, by virtue of Villaluz’s
that of the insured carrier is based on tort (Art. 2180 of the NCC). The insurer counter-bond, but it refused to assume its obligation. Pending appeal to the SC,
could be held liable only up to the extent of what was provided for by the petitioner and the spouses Reynaldo and Zenaida Anzures executed a
contract of insurance. Memorandum of Understanding (MOU). In it, it was stipulated that as of said
date, the total amount garnished from petitioner had amounted to
Notice of Loss: Records reveal that respondents did send a notice of loss to P1,541,063.85, and so the remaining amount still sought to be executed was
GSIS informing it of the accident. They stressed further that GSIS did not deny P958,936.15. Petitioner tendered and paid the amount of P300,000.00 upon
receipts of the notice of claim during trial. Alleged delay in reporting the loss by signing of the MOU, and the balance of P658,936.15 was to be paid in
the insured and/or beneficiaries must be promptly raised by the insurer in installment at P100,000.00 at the end of each month from February 2001 up to
objecting to the claims. In this case, GSIS failed to do so. They merely waited July 2001. At the end of August 2001, the amount of P58,936.00 would have to
for the victims or beneficiaries to file their complaint. be paid. This would make the aggregate amount paid to the private
respondents P2,500,000.00. There was, however, a proviso in the MOU which
states that “this contract shall not be construed as a waiver or abandonment of
the appellate review pending before the Supreme Court and that it will be
subject to all such interim orders and final outcome of said case.”
Issue: W/N Security Pacific is liable on the bond.
Held: Petitioner asserts that the agreement between it and Villaluz is not a
suretyship agreement in the sense that petitioner has become an additional
debtor in relation to private respondents. It is merely waiving its right of
excussion that would ordinarily apply to counter-bond guarantors as originally
contemplated in Section 12, Rule 57 of the 1997 Rules.
The SC upheld the rulings of the CA granting the motion to proceed with the liable for the cost of the work to be completed as of July 20, 1962 plus
garnishment. Petitioner does not deny that the contract between it and Villaluz damages. The work was completed by NPC, and it notified Philamgen that Far
is one of surety. However, it points out that the kind of surety agreement Eastern had an outstanding obligation in the amount of PhP75,019.85,
between them is one that merely waives its right of excussion. This cannot be exclusive of interest and damages, and demanded the remittance of he amount
so. The counter-bond itself states that the parties jointly and severally bind of the surety bond to answer for the cost of the completion of the work.
themselves to secure the payment of any judgment that the plaintiff may Philamgen did not pay a demanded but contended that its liability under the
recover against the defendant in the action. A surety is considered in law as bond has expired on September 20, 1964, and claimed that no notice of any
being the same party as the debtor in relation to whatever is adjudged touching obligation of the surety was made within 30 days after the expiration. The trial
the obligation of the latter, and their liabilities are interwoven as to be court ruled in favor of NPC, and held both Far Eastern and Philamgen liable.
inseparable. Suretyship is a contractual relation resulting from an agreement
whereby one person, the surety, engages to be answerable for the debt, default Issue: W/N Philamgen was absolved from liability because of failure of NPC to
or miscarriage of another, known as the principal. The surety’s obligation is not notify it within 30 days from the expiration of the surety bond.
an original and direct one for the performance of his own act, but merely
accessory or collateral to the obligation contracted by the principal. Held: No. Philamgen is liable, as the notice sent by NPC informing Philamgen
Nevertheless, although the contract of a surety is in essence secondary only to that it was taking over the construction was sufficient notice.
a valid principal obligation, his liability to the creditor or promise of the principal
is said to be direct, primary and absolute; in other words, he is directly and As correctly assessed by the trial court, the evidence on record shows that as
equally bound with the principal. The surety therefore becomes liable for the early as May 30, 1963, Philamgen was duly informed of the failure of its
debt or duty of another although he possesses no direct or personal interest principal to comply with its undertaking. In fact, said notice of failure was also
over the obligations nor does he receive any benefit therefrom. In view of the signed by its Assistant Vice President. On July 19, 1963, when FEEI informed
nature and purpose of a surety agreement, petitioner, thus, is barred from NPC that it was abandoning the construction job, the latter forthwith informed
disclaiming liability. Philamgen of the fact on the same date. Moreover, on August 1, 1963, the fact
that Philamgen was seasonably notified, was even bolstered by its request from
Napocor v CA NPC for information of the percentage completed by the bond principal prior to
the relinquishment of the job to the latter and the reason for said relinquishment.
Facts: NPC entered into a contract with Far Eastern Electric for the erection of The 30-day notice adverted to in the surety bond applies to the completion of
the Angat Balintawak 115-KW-3-Phase transmission lines for the angat the work by the contractor. This completion by the contractor never
Hydroelectric Project. Far Eatern agreed to aomplete the work in 120 days from materialized.
the signing of the contract, otherwise it would pay NPC PhP200.00 per calendar
day as liquidated damages. NPC agreed to pay Far Eastern PhP97,829.00 as The surety bond must be read in its entirety and together with the contract
consideration. Philamgen issued a surety bond in the amount of PhP30,672.00 between NPC and the contractors. The provisions must be construed together
for the faithful compliance of Far Eastern with its obligations. The bond to arrive at their true meaning. Certain stipulations cannot be segregated and
contained a proviso, stating: The liability of the PHILIPPINE AMERICAN then made to control.
GENERAL INSURANCE COMPANY, INC. under this bond will expire One (1)
year from final Completion and Acceptance and said bond will be cancelled 30 Furthermore, it is well settled that contracts of insurance are to be construed
days after its expiration, unless surety is notified of any existing obligation liberally in favor of the insured and strictly against the insurer. Thus ambiguity in
thereunder. Construction was started, but on May 30, 1963, bot Far Eastern the words of an insurance contract should be interpreted in favor of its
and Philamgen wrote NPC requesting assistance to complete the project due to beneficiary. In the case at bar, it cannot be denied that the breach of contract in
unavailability of the equipment of Far Eastern. The work was later on this case, that is, the abandonment of the unfinished work of the transmission
abandoned and the construction remained unfinished. Philamgen and Far line of the petitioner by the contractor Far Eastern Electric, Inc. was within the
Eastern informed NPC that they were giving up the construction due to financial effective date of the contract and the surety bond. Such abandonment gave rise
difficulties. NPC wrote Philamgen informing it of he withdrawal of Far Eastern to the continuing liability of the bond as provided for in the contract which is
from its work, and formally holding both parties (Far Eastern and Philamgen)
deemed incorporated in the surety bond executed for its completion. To rule
therefore that private respondent was not properly notified would be gross error.
Phil Pryce Assurance v CA
Facts: A complaint for collection of a sum of money was filed by Gegroco, Inc.
against Interworld Assurance Corporation (now Phil. Pryce Assurance) pursuant
to 2 surety bonds issued by it. These bonds were issued on behalf of the
principal, Sagum Gen. merchandise for PhP500,000 and PhP1,000,000.00.
Pryce admitted executing the bonds, but denied liability thereon, as it alleged
that the checks which were used to pay the premiums on the bonds bounced nd
were dishonored, thus there is no contract to speak of between the petitioner
and its supposed principal, and that the bonds were merely to guarantee
payment of its principal’s obligation, thus excussion is necessary. Because of
several repeated absences and failure to shos up at the pretrial conferences,
rd
Pryce was declared in default. Prior to such, its 3 party complaint against
Sagum was admitted the lower court ruled in favor of Gegroco holding Pryce
liable, which was affirmed by the CA.
Issue: W/N Pryce is liable.
Held: Yes.
There is reason to believe that petitioner does not really have a good defense.
Petitioner hinges its defense on two arguments, namely: a) that the checks
issued by its principal which were supposed to pay for the premiums, bounced,
hence there is no contract of surety to speak of; and 2) that as early as 1986
and covering the time of the Surety Bond, Interworld Assurance Company (now
Phil. Pryce) was not yet authorized by the insurance Commission to issue such
st
bonds. Section 177 outrightly negates its 1 defense. Section 177 provides that
where the obligee has accepted the bond, the bond becomes valid and
enforceable irrespective of whether or not the premium has been paid by the
obligor to the surety. In a desperate attempt to escape liability, petitioner further
asserts that the above provision is not applicable because the respondent
allegedly had not accepted the surety bond, hence could not have delivered the
goods to Sagum Enterprises. This statement clearly intends to muddle the facts
as found by the trial court and which are on record. Petitioner admitted having
issued the bonds in its answer. On the other hand, petitioner's defense that it
did not have authority to issue a Surety Bond when it did is an admission of
fraud committed against respondent. No person can claim benefit from the
wrong he himself committed. A representation made is rendered conclusive
upon the person making it and cannot be denied or disproved as against the
person relying thereon.
Sections 179-183 contract for life insurance is really a contract for insurance for one year in
consideration of an advanced premium, with the right of assured to continue it
Gallardo v Morales from year to year upon payment of a premium as stipulated. In its broader
sense, "life insurance" includes accident insurance, since life is insured under
Facts: In a case between the plaintiff and the defendant, a compromise either contract. Insurance policy, providing for payment in case of accidental
agreement was entered into, and in accordance therewith, the defendant was death, is "life insurance policy" to such extent within state statue prescribing in-
sentenced to pay the plaintiff the amount of PhP7,000.00. A writ of execution contestable period for policies. "Life insurance" includes all policies of insurance
was issued and delivered to the Sheriff, who garnished and levied execution on in which payment of insurance money is contingent upon loss of life. . . . For this
the sum of PhP7,000.00, out of the PhP30,000.00 due from the Capital reason, and because the above-quoted provision of the Rules of Court makes
Insurance & Surety Co., Inc., to said defendant, as beneficiary under a personal reference to "any life insurance," we are inclined to believe that the exemption
accident policy issued by said company to defendant's husband, Luis Morales, there established applies to ordinary life insurance contracts, as well as to those
who died, on August 26, 1950, by assassination. Morales contended that the which, although intended primarily to indemnify for risks arising from accident,
said amount is money which accrued out of a life insurance policy, which, likewise, insure against loss of life due, either to accidental causes, or to the
according to the Rules of Court, is exempt from execution if the sum of the willful and criminal act of another, which, as such, is not strictly accidental in
premiums on the said insurance does not exceed PhP500.00. Morales asked nature. Indeed, it has been held that statutes of this nature seek to enable the
the Sheriff to lift the garnishment, but such was denied, thus, the defendant filed head of the family to secure his widow and children from becoming a burden
a motion praying that the aforementioned sum of P7,000.00 be declared exempt upon the community and, accordingly, should merit a liberal interpretation. The
from execution under said provision of the Rules of Court, and that the Sheriff of object of this statue was to enable a husband, when death deprived wife and
Manila be ordered to quash or lift said garnishment or levy on execution. This children of his support, to secure them from want and to prevent them from
motion was denied by an order dated October 18, 1956. Hence, the present becoming a charge upon the public. Necessities of the wife and children and the
appeal by the defendant, who maintains that the policy in question is a life public interest are none the less if the death of the husband be brought about by
insurance policy, within the purview of the aforementioned exemption, for it accident rather than by disease. The intent of the legislature in the enactment of
insured her husband ". . . for injuries and/or death as a result of murder or this statute would not be advanced by the construction of the law upon which
assault or attempt thereat." the petitioners insist.
Issue: W/N a personal accident insurance which "insures for injuries and/or Calanoc v CA
death as a result of murder or assault or attempt thereat" is a life insurance,
within the purview of Rule 39, section 12, subdivision (k) of the Rules of Court, Facts: Basilio was a watchman of the Manila Auto Supplu, secured by a life
exempting from execution. insurance policy from Philamlife for PhP2,000.00, to which was attached a
supplementary contract covering his death by accident, for an additional amount
Held: The SC ordered that the garnishment be dissolved, on the ground that the of PhP2,000.00. One night, he was killed while on duty. Atty. Ojeda’s house,
insurance policy from which the amount garnished came from was a life which was a block away from Manila Auto, was being robbed and Ojeda asked
insurance policy, and thus exempt from execution. for help, thinking that Basilio was a policeman because he was in a khaki
uniform. Basilio refused, and suggested that Ojeda ask instead a traffic
It is not disputed that a life insurance is, generally speaking, distinct and policeman on duty nearby. Policeman agreed, and invited Basilio to come with
different from an accident insurance. However, when one of the risks insured in them to the house. He assented. All 3 of them stood before the main gate when
the latter is the death of the insured by accident, then there are authorities to a shot was fired from inside the premises, hitting Basilio in the abdomen,
the effect that such accident insurance may, also, be regarded as a life causing his death.
insurance. "Life insurance" is a contract whereby one party insures a person
against loss by the death of another. An insurance on life is a contract by which Calanoc, his widow, claimed from Philam Life, but was only given 2k. She
the insurer, for a stipulated sum, engages to pay a certain amount of money if demanded for the additional 2k, contending that the death was due to an
another dies within the time limited by the policy. Life insurance includes in accident. Philam refused, alleging that the death was due to “assault or murder”
which the payment of the insurance money is contingent upon the loss of life. A or “making an arrest as an officer of the law”, both of which exempt the
company from liability. The lower court ruled for Philam on the ff grounds: Held: Yes to both. Capital is incorrect in its contention that because Eduardo
Basilio, being on duty, was not supposed to have left his place. His death was joined the contest voluntarily, it is not an accident. The policy insured Eduardo
not an accident, because when he joined the policeman and Ojeda, he knew against death or disability caused by accidental means. The terms “accident”
the danger he was exposing himself to. and “accidental” have not acquired technical meaning and are used in
insurance contracts in their generic sense. It means that which may happen
Issue: W/N the death was an accident, and W/N Philamlife is liable to pay the fortuitously, without intention and design, and which is unexpected, unusual and
additional PhP2,000 indicated in the supplementary contract. unforeseen.
Held: Yes to both. No doubt, he knew that there was risk coming to him, but that Capital seems to want a distinction be made – to be considered within the
risk always existed, it being inherent in his job. In volunteering to help under the protection of the policy, what is required to be accidental is that the means that
situation, he might have thought that it was in the interest of his employment, it caused the death, not death itself. However, [US] jurisprudence treats
being a matter that affects the neighbourhood. He cannot be blamed for doing “accidental” and “accidental means” as legally synonymous.
what he believed was in keeping with his duty as a watchman and as a citizen.
Where the death or injury is not the natural or probable result of the insured’s
He cannot be considered making an arrest, because he did not go to the house voluntary act, or if something unforeseen occurs in the doing of an act which
for that purpose, nor was he asked to do so by the policeman. Nor was he killed produces the injury, the resulting death is within the protection of policies
by assault or murder. There was no proof that he died as a result of either crime insuring against death or injury from accident. In this case, while the
(not yet sure how the shot was fired, not sure if shot was intentional). The fact is participation in the boxing was voluntary, the injury was sustained when he slid.
that it was purely an accident on the part of the victim. The victim could have Without this unintentional slipping, perhaps he would not have died. The fact
either been the policeman or Ojeda. that boxing is attended with some risks of external injuries does not make
injuries received during the game not accidental. Like in all other sports, death
Parties may limit that coverage of an insurance policy to certain accidents only is ordinarily not anticipated to result.
and make an exception for the others. It is needed that the terms of the
exceptions be clearly expressed so as to be within the understanding of the Finally, death or disability resulting from engaging in boxing contests is not
insured, because if the terms are doubtful, it will be resolved against the insurer. among those specifically excluded from the coverage of the policy (e.g. football,
hunting, pigsticking, steeplechasing, polo-playing, racing, mountaineering).
Dela Cruz v Capital Insurance Failure of Philam to include it leads to the conclusion that it did not intend to
limit or exempt itself from liability for such death.
Facts: Eduardo de la Cruz was employed in the Itogon-Suyoc Mines and had an
accident insurance policy underwritten by Capital Insurance. In connection with Pineda v CA
the New Year celebration, the Itogon-Suyoc Mines sponsored a boxing contest
where Eduardo, a non-pro boxer, participated. In the middle of the bout, he Facts: Prime Marine Services (PMSI) procured a Group Policy from Insular Life
slipped, and was hit by his opponent at the back of his head, causing him to fall, Assurance to provide life insurance coverage to its sea-based employees
with his head hitting the rope of the ring. After being brought to the hospital, he enrolled under its plan. During the effectivity of the policy, 6 covered employees
shortly died of intracranial hemorrhage. of PMSI died at sea when their vessel M/V Nemos, sank somewhere in
Morocco, and were survived by the complainant-appellees, the beneficiaries
Simon De la Cruz, his father and insurance beneficiary, filed a claim with under the policy. They sought to claim death benefits due them, and for this
Capital. It was denied and Simon sued. Trial court ruled for Simon. Capital now purpose, they approached the President and GM of PMSI, Capt. Roberto Nuval.
assails this ruling, contending that the death was not accidental. They were made to execute SPAs authorizing Capt. Nuval to, among others,
“follow-up, ask, demand, collect and receive for their benefit indemnities of
Issue: W/N the death was accidental and W/N Capital is liable. sums of money due them relative to the sinking of M/V Nemos. They were able
to obtain the death benefits due. But, unknown to them, PMSI, in its capacity as
employer and policyholder of the life insurance of its deceased workers, filed
with Insular Life, formal claims for and in behalf of the beneficiaries, through its the employer, although the employee may be the titular or named insured, the
president, Capt. Nuval. Among the documents submitted by the latter for insurance is actually related to the life and health of the employee. Indeed, the
processing of the claims, were the 5 SPAs executed by the complainant- employee is in the position of a real party to the master policy, and even in a
appellees. Insular Life later paid Capt. Nuval based on these SPAs. Capt. non-contributory plan, the payment by the employer of the entire premium is a
Nuval, upon receipt of these checks form the treasurer, who happened to be his part of the total compensation paid for the services of the employee. Put
son-in-law, endorsed and deposited them in his account with the Commercial differently, the labor of the employees is the true source of the benefits which
Bank of Manila, no Boston Bank. The complainant-appellees learned that they are a form of additional compensation to them.
were beneficiaries to the life insurance benefits under a group policy with
Insular Life, thus they sought to recover these benefits from Insular Life but the As to the shares of the minor children, these were not intended to be delivered
rd
latter denied their claim on the ground that the liability to them was already to their mothers. Art. 225 of the Family Code, which repealed the 3 paragraph
extinguished upon delivery to and receipt by PMSI. of Section 180, provides that regardless of the value of the unemancipated
common child’s property, the father and mother ipso jure become the legal
Issues: W/N the SPAs in favor of Capt Nuval provide him with sufficient guardian of the child’s property. However, if the market value of the property or
authority to claim the proceeds of the group life insurance. annual income of the child exceeds PhP50,000, a bond has to be posted but he
parents concerned to guarantee that performance of the obligations of a general
nd
W/N the mothers of the minor children of the deceased workers can validly guardian. It must be noted, however, that the 2 paragraph of art. 225 speaks
receive the minors’ shares without posting of a bond. of the “market value of the property or the annual income of the child” which
means, therefore, that the aggregate of the child’s property or annual income, if
Held: No to both. this exceeds PhP50,000, a bond is required. There is no evidence that the
share of each child in this case in the proceeds of the group policy in question is
As to the SPA in favor of Capt. Nuval, the SPAs are couched in terms which the minor’s only property. Without evidence of the totality of the property of
could easily arouse the suspicions of an ordinary man. The execution of the income of the children, it would not be safe to conclude that, that it is indeed
SPAs, which clearly appeared to be in prepared forms and only had to be filled their only property.
up with names, residences, dates, etc. excludes any intent to grant a general
power of attorney or to constitute a universal agency. Being special powers of Edralin v Insular Life
attorney, they must be strictly construed. It would be imprudent to read into
them the power to collect and receive the insurance proceeds due the Facts: Insular Life issued an insurance policy on the life of Josefina Edralin
petitioners from the Group Policy. Insular Life knew that a power of attorney in Montilla with a face value of PhP10,000.00 with additional accidental benefit of
favor of Capt. Nuval for the collection and receipt of the proceeds was a PhP10,000. The policy also contained the following provision: Should the
deviation from its practice with respect to the group policies. Group insurance is insured commit suicide within 2 years from the date of issue of reinstatement of
essentially a single insurance contract that provides coverage for many the policy, whether the insured be sane or insane, the liability of the Company
individuals. In its original and most common form, group insurance provides life under the policy shall be the return of the premiums paid from the date of issue
or health insurance coverage for the employees of one employer. The coverage or reinstatement up to the time of death. Plaintiffs Fiolologo, Cristeta and Jose
terms fro group insurance are usually stated in a master agreement or policy were the beneficiaries designated in the policy. On Oct. 30, 1966, while the
that is issued by the insurer to a representative of the group or to an policy was still in force, the insured died as a result of her inhalation of
administrator of the insurance program, such as an employer. The employer poisonous gas from the cooking stove in the kitchen at her residence, wchih
acts as a functionary in the collection and payment of the premiums and in was connected to the lines of gas supplied by the Manila Gas Corporation.
performing related duties. Likewise falling within the ambit of administration of a Contending that the insured died of accidental causes, the beneficiaries filed a
group policy is the disbursement of insurance payments by the employer to the claim against the insurer for the face value of the policy in the amount of
employees. Most policies, such as that in this case, require the employer to pay PhP20,000. Acting on the claim, the insurer processed the papers submitted by
a portion of the premium which the employer deducts from the wages, while the the beneficiaries, and conducted its own investigation into the circumstances
remainder is paid by the employer. This is known as a contributory plan, as surrounding the death of the insured. Insular contended that the insured died
opposed to a non-contributory plan, wherein the premiums are solely paid by “by her own hands”, meaning that she committed suicide, and hence its liability
was limited to a return of the premium payment in accordance with the policy. coverage and insisted that Dr. Leuterio did not disclose that he had been
The insurer made out a check for the sum of PhP302.60 to the beneficiaries, siffering from hypertension, which caused his death. Allegedly, such non-
representing premium payments made since reinstatement of the policy. disclosure constituted concealment that justified the denial of the claim. The
widow of the late Dr. Leuterio filed a complaint against Grepalife for Specific
Issue: W/N Josefina’s death was accidental. performance with damages. During trial, Dr. Mejia, who issued the death
certificate, was called in to testify. He said that his findings were based partly on
Held: Yes. The basic instinct of self-preservation militates against the the information given by the widow, who stated that Dr. leuterio complained of
commission of suicide. In this connection, it is incumbent upon a party alleging headaches presumably due to high blood pressure. The inference was not
suicide as a defense, especially in actions involving insurance policies, to prove conclusive because Dr. Leuterio was not autopsied, hence, other causes were
it by clear and convincing proof. the evidence of the defendant does not prove not ruled out. The RTC ruled in favor of the widow and against Grepalife.
that the insured died of suicide. All the witnesses came to the scene of the Grepalife appealed contending that the wife was not the proper party to file the
incident at the time when the insured was already unconscious. Not one of the suit, since it is DBP who insured the life of Dr. Leuterio.
maids who were, more or less, better and competent witnesses to the incident,
were presented by the parties. The testimony of the witness only tended to Issue: W/N the widow is the real party in interest, and not DBP, and has legal
show by circumstantial evidence that the insured purposely locked herself in the standing to file the suit.
kitchen with the gas stove on, and then the defendant concluded from such
circumstance that the insured committed suicide in the kitchen. The Held: Yes. TO resolve the conflict, the insurable interest in the mortgaged
circumstantial evidence submitted by the defendant, which were considered properties and the parties to the contract must be considered. The rationale of a
under the yardstick sufficient to establish the fact in issue do not resolve any group insurance policy of mortgagors, otherwise known as “mortgage
lingering doubts in that regard. It is a principle in law that the circumstances redemption insurance” is a device for the protection of both the mortgagee and
proves would be constitutive of an unbroken chain which leads to one fair and mortgagor. On the part of the mortgagee, it has to enter into such form of
reasonable conclusion, that is, the establishment of the fact in issue. Where the contract so that in the event of the unexpected demise of the mortgagor during
combination of circumstances produces 2 interpretations, one which is the subsistence of the mortgage contract, the proceeds from such insurance will
consistent with the establishment of the fact in issue, and the other contrary be applied to the payment of the mortgage debt, thereby relieving the heirs of
thereto, the fact in issue is deemed not to have been proved. Hence, as the the mortgagor form paying the obligation. In a similar vein, ample protection is
defendant has failed to establish beyond cavil that the insured was a victim of given the mortgagor under the policy in the event of death. The mortgage
self-destruction, it is liable to the beneficiaries for the amount dictated by the obligation will be extinguished by the application of the insurance proceeds to
policy. the mortgage indebtedness. Consequently, where the mortgagor pays the
insurance premium under the group insurance policy, making the loss payable
Grepalife v CA to the mortgagee, the insurance is on the mortgagor’s interest, and the
mortgagor continues to be a party to the contract. In this type of insurance, the
Facts: A contract of group life insurance was executed between Grepalife and mortgagee is simply an appointee of the insurance fund, such loss payable
DBP, wherein Grepalife agreed to insure the lives of eligible housing loan clause does not make the mortgagee a party to the contract. The insured
mortgagors of DBP. Dr. Wilfredo Leuterio, a physician and a housing debtor of private respondent here did not cede to the mortgagee all his rights or interest
DBP applied for membership in the group life insurance plan. In his application in the insurance, the policy stating that in the event of death of the debtor before
form, he answered questions concerning his health stating that he is in good the indebtedness to the creditor has been fully paid, an amount to pay the
health and has never consulted a physician for a heart condition, high blood outstanding indebtedness shall first be paid to the creditor and the balance, if
pressure, cancer, diabetes, lung, kidney or stomach disorder or any other any, shall be paid to the beneficiary designated in the policy by the debtor.
physical impairment. Grepalife issued the insurance policy of Dr. Leuterio to the When DBP submitted the insurance claim against the petitioner, the latter
extent of his DBP mortgage indebtedness amounting to PhP86,200.00. Dr. denied payment, alleging that there was concealment by the insured.
Leuterio later on died due to “massive cerebral hemorrhage”. Consequently, Thereafter, DBP collected the debt form the mortgagor and took the necessary
DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging action of foreclosure of the mortgaged property. And since a policy of insurance
that Dr. Leuterio was not physically healthy when he applied for an insurance upon life or health may pass by transfer, will or succession to any person
whether he has insurable interest or not, and such person may recover it it The auto increase clause is in the nature of a conditional obligation, by which
whatever the insured might have recovered. The widow of the deceased may the increase depends on the happening of a certain event. It’s still very much a
thus file suit against the insurer, Grpalife. There was also no sufficient proof of part of the insurance policy for which Lincoln should be liable for payment of
concealment in this case. DST. The assessment made was actually for the amount of the increase only.
To claim that the increase should not be included in the computation of DST
Commissioner of Internal Revenue v Lincoln Phil. Life would be a clear evasion of the law.
Facts: Lincoln Philippine Life Insurance issued a special kind of life insurance Sections 184 – 372
policy known as the “Junior Estate Builder Policy”, the distinguishing feature of
which is a clause providing for an automatic increase in the amount of life Smith Bell v CA
insurance coverage upon attainment of a certain age by the insured without the
need of issuing a new insurance policy. DSTs due on the policy were paid only Facts: Joseph Bengzon Chua, under the business name of Tic Hin Chiong ,
on the initial sum. Importer, bought and imported to the Philippines from the firm Chin Gact Co.,
Ltd. of Taipei , Taiwan , 50 metric tons of Dicalcium Phospate, valued at
Petitioner CIR issued deficiency DST assessment for 1984 amounting to 464K $13,000.00. These were contained in 1,250 bags and shipped from the Port of
corresponding to the amount of automatic increase of the sum assured on the Kaohsiung , Taiwan on Board S.S . ‘ GOLDEN WEALTH ‘ for the Port of
policy. Lincoln sought the cancellation of the assessments in a petition before Manila. On July 27, 1982 , the shipment was insured by the defendant First
the CTA. The CTA ruled in favour of Lincoln, and the CA upheld this, hence this Insurance Co . for $19,500.00 `against all risks ‘at port of departure under
appeal by CIR. Marine Policy No . 1000M82070033219, with the note `Claim , if any, payable
in U.S. currency at Manila and with defendant Smith, Bell, and Co. stamped at
Issue: W/N the automatic increase of the sum assured should be subjected to the lower left side of the policy as `Claim Agent.‘ The cargo arrived at the port of
DST [CIR contends that the “automatic increase clause” is separate from the Manila in apparent bad order condition. The shipment was brought to the
main agreement and it’s a different transaction.] Joseph, and upon inspection the contents of the damaged bags were found to
be 18,546.0 kg short. He thus filed a claim with Smith Bell a formal statement of
Held: The increase is taxable. Under the Insurance Code, any rider, clause, claim with proof of loss and a demand for settlement of the corresponding value
warranty, or endorsement pasted or attached to the policy is considered part of of the losses, in the sum of $7,357.78. After purportedly conveying the claim to
such policy. The “automatic increase clause” was already written into the policy its principal, Smith, Bell and Co. informed the Joseph by letter that its principal
since its issuance in 1984. It already formed part and parcel of the insurance offered only 50% of the claim or $3,616.17 as redress, on the alleged ground of
contract, hence there is no need to execute a separate agreement for the discrepancy between the amounts contained in the shipping agent‘s reply to the
increase in coverage. claimant of only $90.48 with that of Metroport‘s . The offer not being
acceptable to the plaintiff, the latter wrote Smith, Bell, & Co. expressing his
Under Sec 173, NIRC, payment of DST is made at the time the transaction is refusal to the `redress ‘ offer , contending that the discrepancy was a result of
done, and under Sec 183 thereof, the tax base is the amount insured by such loss from vessel to arrastre to consignees ‘ warehouse which losses were still
policy. Sec 183 of the Insurance Code provides that the measure of indemnity within the `all risk ‘ insurance cover . No settlement of the claim having been
under a life insurance policy is that fixed in the policy unless the interest of a made , the plaintiff then caused the instant case to be filed .
person is capable of exact pecuniary estimate.
Issue: W/N a local settling or claim agent of a disclosed principal - - a foreign
In this case, although the automatic increase in the amount of life insurance insurance company - can be held jointly and severally liable with said principal
coverage was to take effect later on, the date of its effectivity as well asthe under the latter ‘ s marine cargo insurance policy , given that the agent is not a
amount of increase was already definite at the time of issuance of the policy. party to the insurance contract
Thus, the amount insured necessarily included the additional sum because it
was already determinable. Held: No. Petitioner, undisputedly a settling agent acting within the scope of its
authority , cannot be held personally and / or solidarily liable for the obligations
of its disclosed principal merely because there is allegedly a need for a speedy various reinsurance treaties with various foreign insurance companies. It agree
settlement of the claim of private respondent . Petitioner is a settlement and to cede a portion of premiums received on original insurances underwritten by
adjustment agent of the foreign insurance company and that as such agent it its head office, subsidiaries, and branch offices throughout the world, in
has the authority to settle all the losses and claims that may arise under the consideration for assumption by the foreign insurance companies of an
policies that may be issued by or in behalf of said company in accordance with equivalent portion of the liability from such original insurances. Between 1952 to
the instructions it may receive from time to time from its principal , but we 1954, it ceded a total of PhP765,993.48, for which the CIR imposed a total of
disagree with counsel in his contention that as such adjustment and settlement PhP183,838.42 as withholding tax. In 1958, the BIR assessed Phoenix of
agent , the defendant has assumed personal liability under said policies , and , deficiency income tax, which resulted from the disallowance of a portion of the
therefore , it can be sued in its own right . An adjustment and settlement agent deduction claimed by Phoenix Assurance Co., Ltd. as head office expenses
is no different from any other agent from the point of view of his responsibilty, allocable to its business in the Philippines fixed by the Commissioner at 5% of
for he also acts in a representative capacity. Whenever he adjusts or settles a the net Philippine income instead of 5% of the gross Philippine income as
claim, he does it in behalf of his principal, and his action is binding not upon claimed in the returns. The Assessments were protested by Phoenix, but was
himself but upon his principal. And here again, the ordinary rule of agency denied by the CIR. The CTA allowed in full the decision claimed by Phoenix
applies. It, therefore, clearly appears that the scope and extent of the functions Assurance Co., Ltd. for 1950 as net addition to marine insurance reserve;
of an adjustment and settlement agent do not include personal liability. His determined the allowable head office expenses allocable to Philippine business
functions are merely to settle and adjusts claims in behalf of his principal if to be 5% of the net income in the Philippines; declared the right of the
those claims are proven and undisputed, and if the claim is disputed or is Commissioner of Internal Revenue to assess deficiency income tax for 1952 to
disapproved by the principal, like in the instant case, the agent does not have prescribed; absolved Phoenix Assurance Co., Ltd. from payment of the
assume any personal liability. The recourse of the insured is to press his claim statutory penalties for non-filing of withholding tax return, and ruled that the
against the principal.“ respective amounts of P75,966.42, P59,059.68 and P48,812.32, as withholding
tax for the years 1952, 1953 and 1954, and P2,847.00 as income tax for 1954,
The Insurance Code is quite clear as to the purpose and role of a resident or the total sum of P186,685.42 shall be paid within thirty (30) days from the
agent. Such agent, as a representative of the foreign insurance company , is date this decision becomes final. Upon the other hand, the CIR was ordered to
tasked only to receive legal processes on behalf of its principal and not to refund to petitioner the sum of P20,180.00 as overpaid income tax for 1953,
answer personally for any insurance claims. Whenever such service of notice, which sum is to be deducted from the total sum of P186,685.42 due as taxes.
proof of loss, summons, or other legal process shall be made upon the
Commissioner he must, within ten days thereafter, transmit by mail, postage Issues: (1) W/N reinsurance premiums ceded to foreign reinsurers not doing
paid, a copy of such notice, proof of loss, summons, or other legal process to business in the Philippines pursuant to reinsurance contracts executed abroad
the company at its home or principal office. The sending of such copy of the are subject to withholding tax;
Commissioner shall be necessary part of the service of the notice, proof of
loss, or other legal process.” (2) W/N the right of the CIR to assess deficiency income tax for the year 1952
against Phoenix has prescribed;
The cause of action of private respondent is based on a contract of insurance
which as already shown was not participated in by petitioner. It is not a “ person (3) W/N the deduction of claimed by the Phoenix as net addition to reserve for
who claims an interest adverse to the plaintiff“ nor is said respondent the year 1950 is excessive;
“necessary to a complete determination or settlement of the questions involved“
in the controversy. Petitioner is improperly impleaded for not being a real - party (4) W/N the deductions claimed by Phoenix Assurance Co., Ltd. for head office
- interest . It will not benefit or suffer in case the action prospers. expenses allocable to Philippine business for the years 1952, 1953 and 1954
are excessive.
Commissioner of Internal Revenue v Phoenix Assurance
Held: The question of whether or not reinsurance premiums ceded to foreign
Facts: Phoenix Assurance is a foreign insurance company licensed to do reinsurers not doing business in the Philippines pursuant to contracts executed
business in the Philippines. Through its head office in London, it entered into abroad are income from sources within the Philippines subject to withholding
tax under Sections 53 and 54 of the Tax Code has already been resolved in the Cathay insurance v CA
affirmative.
Facts: Emilia Chan Lugay insured her Cebu Filipina Press with 6 different
The running of the prescriptive period begins from the time the return is filed, insurance companies, one of them was with Cathay Insurance. The fire policies
but in this case, an amended return was filed, and thus, the period would only described the insured property as “stocks of printing materials, papers and
begin to run from such date when the amended return was filed. Thus, the general merchandise usual to the Assured’s trade” stored in a one-storey
action of the CIR had not yet prescribed. building of strong materials, housing the Cebu Filipina Press. The co-insurers
indicated in each of the policies that all, except that of Paramount, were
We next consider Phoenix Assurance Co., Ltd.'s claim for deduction of renewals of earlier policies on the same property. On Dec. 18, 1981, the Cebu
P37,147.04 for 1950 representing net addition to reserve computed at 40% of Filipina Press was razed by electrical fire together with all the stocks and
the marine insurance premiums received during the year. Treating said said merchandise stored in the premises. Mrs. Lugay the owner and operator of the
deduction to be excessive, the Commissioner of Internal Revenue reduced the Press, submitted sworn statements of loss and formal claims to the insurers,
same to P25,374.47 which is equivalent to 100% of all marine insurance through their adjusters. She claimed a total of 1099 of phP4,595,000. She
premiums received during the last months of the year. The reserve required for submitted proofs of loss required by the adjusters. After 10 months of waiting,
marine insurance is determined on two bases: 50% of premiums under policies she sued for collection on December 15, 1982. The insurance companies
on yearly risks and 100% of premiums under policies of marine risks not denied liability, alleging violations of certain conditions of the policy, to pay 50%
terminated during the year. Section 32 (a) of the Tax Code allows the full of her claim, but she insisted on full recovery. The RTC ruled in her favor and
amount of such reserve to be deducted from gross income. Section 186 of the was affirmed by the CA. The insurers appealed to the SC.
Insurance Law requires the setting up of reserves for liability on marine
insurance: Issue: W/N the insurers are absolved of liability.
SEC. 186. ... Provided, That for marine risks the insuring company shall be Held: No, they are still liable.
required to charge as the liability for reinsurance fifty per centum of the
premiums written in the policies upon yearly risks, and the full premiums written The finding of the RTC and the CA that the insured’s cause of action had
in the policies upon all other marine risks not terminated. The reserve called for already accrued before she filed her complaint is supported by Section 243 of
in Section 186 is a safeguard to the general public and should be strictly the Insurance Code which fixes a maximum period of 90 days after receipt of
followed not only because it is an express provision but also as a matter of the proofs of loss by the insurer for the latter to pay the insured’s claim. As the
public policy. However, for income tax purposes a taxpayer is free to deduct fire which destroyed the Press occurred on Dec. 19, 1981, and the proof of loss
from its gross income a lesser amount, or not to claim any deduction at all. were submitted from Jan. 15, 1982 through June 21, 1982 in compliance with
What is prohibited by the income tax law is to claim a deduction beyond the the adjuster’s numerous requests for various dcuments, payment should have
amount authorized therein. Phoenix's claim for deduction of P37,147.04 being been made within 90 days thereafter, or on or before Sept. 21, 1982. Hence,
less than the amount required in Section 186 of the Insurance Law, the same when the assured filed her complaint on Dec. 15, 1982, her cause of action had
cannot be and is not excessive, and should therefore be fully allowed. already accrued. The proofs submitted by the assured were more than ample
for the adjusters to make a just assessment of the fire claim. The trial court’s
The record shows that the gross income of Phoenix Assurance Co., Ltd. and the CA’s award of double interest on the claim is laful and justified under
consists of income from its Philippine business as well as reinsurance Sections 243 and 244 of the Code. Section 243 is in fact embodied in a
premiums received for its head office in London and reinsurance premiums provision in the policies. The petitioner’s contention that the charging of double
ceded to foreign reinsurance. Since the items of income not belonging to its interest was improper because no unreasonable delay in the processing of the
Philippine business are not taxable to its Philippine branch, they should be fire claim was proven is refuted by the trial court’s explicit finding that there was
excluded in determining the head office expenses allowable to said Philippine a delay that was not reasonable in the processing of the claim. Under Sec. 244,
branch. Consequently, the deficiency assessments for 1952, 1953 and 1954, a prima facie evidence of unreasonable delay in the payment of the claim is
resulting from partial disallowance of deduction representing head office created by the failure of the insurer to pay the claim within the time fixed in
expenses, are sustained. Secs. 243 and 244 fo the Code. Also, as provided by Sec. 244, by reason of the
delay and the consequent filing of the suit by the insured, the insurers shall be private respondent is PhP842,683.40. as to the payment of 24% interest pa,
adjudged to pay damages which shall consist of attorney’s fees and other from May 3, 1985 until full payment, such is authorized by Sections 243 and
expenses incurred by the insured. In view of the not unsubstantiated value of 244 of the Insurance Code. Under Section 244, a prima facie evidence of
the private respondent’s claims and the considerable time and effort expended unreasonable delay in payment of a claim is created by failure of the insurer to
by them and their counsel in prosecuting these claims for the past 8 years. The pay the claim within the time specified in both sections. The policy itself obliges
SC held that attorney’s fees were properly awarded to the respondents. the petitioner to pay the insurance claim within 30 days after proof of loss and
However, an award of 10% of the proceeds of the policies is more reasonable ascertainment of the loss is made in an agreement between the private
than the 20% awarded by the trial court and the CA. respondent and petitioner. In this case, as found by the CA, petitioner and
private respondent signed the agreement indicating the amount due
Finman v CA (PhP842,683.40) on April 2, 1985. Petitioner thus had only until May 2, 1985 to
pay the claim. Thus, for failure to do so, it may be made to pay 24% interest pa
Facts: USIPHIL obtained a fire insurance policy from Finman, then doing in accordance with the provisions previously mentioned.
business under the name of Summa Insurance, covering certain properties,
such as its office, furniture, fixtures, shop machinery and other trade equipment. Insurance Commissioner v Globe Assurance
Sometime in 1982, USIPHIL filed with Finman an insurance claim amounting to
PhP987,126.11 for the loss of the insured properties due to fire. Acting on the Facts: In January and February 1956, a representative of the Insurance
claim, Finman appointed Adjuster HH Bayne to undertake the valuation and Commissioner examined the records of respondent herein — a surety and
adjustment of the loss. HH Bayne then required USIPHIL to file a formal claim insurance corporation, to ascertain its financial condition and determine its
and submit proof of loss. USIPHIL thus submitted it sworn statement of loss and methods of doing business as an insurance firm. The result of the examination
formal claim, dated July 22, 1982 and its proof of loss. Despite repeated was set forth in a report submitted to the petitioner, and approved by him,
demands, by USIPHIL, Finman refused to pay the claim. Finman maintains that finding that respondent had committed several irregularities described in said
the claim cannot be allowed as USIPHIL failed to comply with Policy Condition report — some of which are hereinafter stated — and that, as of December 31,
No. 13 regarding submission of certain documents to prove loss. the trial court 1955, respondent had, as a consequence, P430,615.39 worth of assets, as
ruled in favor of USIPHIL, which was affirmed by the Ca, with modification that against total liabilities amounting to P173,794.60 and a paid-up capital of
the amount paid is to include interest. P500,000.00, which was accordingly, impaired to the extent of P243,179.21. On
March 10, 1956, petitioner wrote, therefore, the letter advising respondent of the
Issue: W/N USIPHIL complied with Condition No. 13 regarding the submission aforementioned findings and demanding that said impairment be covered up
of certain documents to prove loss, and as a corollary, W/N Finman is liable. and that the other requirements made in said letter and in previous
communications be complied with within five (5) days from notice. This demand
Held: USIPHIL complied with the condition and thus Finman is liable. not having been heeded, respondent's certificate of authority to transact
insurance business was suspended by virtue of another letter of petitioner
Both the trial court and the CA concur that the private respondent had herein dated March 26, 1956. Thus, on October 5, 1956, the petitioner filed with
substantially complied with the policy condition no. 13. A perusal of the records the CFI praying that respondent be required to show cause why it should not be
show that the respondent, after the occurrence of the fire, immediately notified liquidated, that, after due notice and hearing, an order be issued liquidating its
the petitioner thereof. thereafter, it submitted the following documents: 1) sworn corporate existence, and that, meanwhile, a writ of preliminary injunction be
statement of loss and formal claim; and 2) proof of loss. The submission of issued restraining respondent, as well as its officers and agents, from
these documents to the Court’s mind, constitutes substantial compliance with transacting business with the general public and from committing any act which
the above provision, indeed, as regards the submission of documents to rove may interfere with this proceedings or result in the wastage or disposition of its
loss, substantial, not strict as urged by the petitioner, compliance with the assets. Said writ of preliminary injunction was issued. The CFI ruled in favor of
requirements will always be deemed sufficient. petitioner, and ordered liquidation of respondent.
In any case, petitioner itself acknowledged its liability when through its Finance Issue: W/N the order of liquidation is valid.
Manager, Maghirang, it signed the document indicating that the amount due the
Held: Yes. Respondent does not deny the accuracy of any of the 5. Respondent's records did not even show that it had cash deposited in banks.
aforementioned findings, made by an examiner of the Government and Its daily collections were kept in the company's safe, a practice which is not in
approved and adopted by the petitioner, with respect to its precarious financial accordance with current sound business procedure.
condition. It maintains, however, that the lower court should not have ordered its
liquidation, for it was not bound to do so under the law, and that it should have In other words, the irregularities committed by respondent were such as to
granted, instead, the period of time requested by respondent to rehabilitate affect the faith and trust that insurance companies must command. Thus, public
itself, because, at any rate, its certificate of authority to transact business had interest demands the liquidation and dissolution of respondent herein.
been suspended by petitioner herein, and the lower court had enjoined
respondent from transacting its business, so that no danger to the public could Republic v Sun Life
possibly result from the granting of a period for its rehabilitation. Respondent's
pretense would, perhaps, have a semblance of validity if its aforementioned Facts: On October 20, 1997, Sun Life filed with the CIR its insurance premium
plan of rehabilitation offered a reasonable assurance of success. No such tax return for the third quarter of 1997 and paid the premium tax in the amount
assurance, however, is discernible for said plan. of PhP31,485,834.51. For the period covering August 21 to December 18,
1997, petitioner filed with the CIR its DST declaration returns and paid the total
To begin with, the same was — contrary to respondent's claim — disapproved amount of PhP30,000,000.00. The CTA rendered a decision in another case
by the petitioner, whose view carries weight, he being best qualified, by reason which held that mutual life insurance companies are purely cooperative
of his position and experience in the field of insurance, to pass upon the companies and are exempt from the payment of premium tax and DST. This
soundness of said plan. Secondly, said view was confirmed by subsequent pronouncement was later affirmed by the SC in CIR v. Insular Life Assurance
events. Indeed, respondent merely asked for 180 days from the filing of his Company, Ltd. Sun Life surmised that, being a mutual life insurance company,
answer, dated October 25, 1956, within which to complete its rehabilitation in it was likewise exempt from the payment of premium tax and DST. Hence, on
accordance with said plan. Yet, such rehabilitation was far from being an August 20, 1999, Sun Life filed with the CIR an administrative claim for tax
accomplished fact when — after several postponements granted upon credit of its alleged erroneously paid premium tax and DST for the aforestated
respondent's request — this case was eventually tried on August 1, 1957, or tax periods. The CIR failed to act on the claim, and with the 2-year period for
over 90 days after the expiration of said period. Then, too, respondent had been filing for refunds about to expire, Sun Life filed an action in the CTA, for the
found to have committed, inter alia, the following irregularities: issuance of a tax credit certificate for the erroneously paid premium tax and
DST, contending that it was a mutual life insurance company, vested with all the
1. It had granted loans without security, and mostly to its president and his wife; characteristic features and elements of a cooperative company or association
as defined in Section 121 of the Tax Code. Primarily, the management and
2. Several communications of the petitioner demanding that the granting of cash affairs of Sun Life were conducted by its members; secondly, it is operated with
advances and loans without security be stopped, were disregarded by money collected from its members; and, lastly, it has for its purpose the mutual
respondent. Worse still, the amounts of such cash advances and loans protection of its members and not for profit or gain. The CTA ruled in favor of
increased. Sun Life, and allowed their claim. The MR of the CIR was also later on denied,
and the CA upheld such ruling.
3. The company had issued numerous bonds in amounts ranging from
P60,000.00 to P275,000.00, or far in excess of its maximum writing capacity of Issue: W/N Sun Life is exempted from payment of tax on life insurance
P25,628.08; premiums and documentary stamp tax.”
4. Its cash on hand, as of December 31, 1955, was only P5,631.33, contrary to Held: Yes. The Tax Code defines a cooperative as an association “conducted
the provisions of Circular No. 57 of the Secretary of Finance approved on April by the members thereof with the money collected from among themselves and
6, 1955, pursuant to which, respondent must maintain at all times, free from all solely for their own protection and not for profit.” Without a doubt, respondent is
liens, cash in bank amounting, at least, to P50,000.00; a cooperative engaged in a mutual life insurance business. First, it is managed
by its members. Both the CA and the CTA found that the management and
affairs of respondent were conducted by its member-policyholders. Second, it is
operated with money collected from its members. Since respondent is Facts: Agricultural Fire Insurance & Surety wrote to the Philippine Rating
composed entirely of members who are also its policyholders, all premiums Bureau, of which it is a member, to have Article 22 of its Constitution repealed.
collected obviously come only from them. The member-policyholders constitute Said Article provides: “In respect to the classes of insurance specified in the
“both insurer and insured” who “contribute, by a system of premiums or Objects of the Bureau and for Philippine business only, the members of this
assessments, to the creation of a fund from which all losses and liabilities are Bureau agree not to represent nor to effect reinsurance with, nor to accept
paid.” The premiums pooled into this fund are earmarked for the payment of reinsurance from, any Company, Body, or Underwriter licensed to do business
their indemnity and benefit claims. Third, it is licensed for the mutual protection in the Philippines not a Member in good standing of this Bureau.” When it
of its members, not for the profit of anyone. A mutual life insurance company is inquired about its request, it was told by the Bureau that it was still under
conducted for the benefit of its member-policyholders, who pay into its capital consideration. Later on, the Insurance Commissioner informed the Bureau that
by way of premiums. To that extent, they are responsible for the payment of all the said Article, being an illegal agreement or combination in restraint of trade, it
its losses. “The cash paid in for premiums and the premium notes constitute should not be given force and effect. It was told that failure to comply with this
their assets x x x.” In the event that the company itself fails before the terms of requirement would compel Commissioner to suspend the license issued to the
the policies expire, the member-policyholders do not acquire the status of Bureau; and that the latter should circularize all of its members on this matter
creditors. Rather, they simply become debtors for whatever premiums that they and advise them that "violation of this requirement by any member of the
have originally agreed to pay the company, if they have not yet paid those Bureau" would also compel respondent "to suspend the certificate of authority
amounts in full, for “[m]utual companies x x x depend solely upon x x x of the company concerned to do business in the Philippines". Thereupon, or on
premiums.” Only when the premiums will have accumulated to a sum larger May 16, 1961, the present action was commenced for declaratory relief filed by
than that required to pay for company losses will the member-policyholders be (39) non-life insurance companies who are members of the Bureau, for the
entitled to a “pro rata division thereof as profits.” declaration of legality of Article 22 of the said Constitution of the Bureau.
Contributing to its capital, the member-policyholders of a mutual company are Issue: W/N the said Article 22 is illegal for being in restraint of trade.
obviously also its owners. Sustaining a dual relationship inter se, they not only
contribute to the payment of its losses, but are also entitled to a proportionate Held: No. The SC held that there is nothing unlawful, or immoral, or
share and participate alike in its profits and surplus. Where the insurance is unreasonable, or contrary to public policy either in the objectives thus sought to
taken at cost, it is important that the rates of premium charged by a mutual be attained by the Bureau, or in the means availed of to achieve said objectives,
company be larger than might reasonably be expected to carry the insurance, in or in the consequences of the accomplishment thereof. The purpose of said
order to constitute a margin of safety. The table of mortality used will show an Article 22 is not to eliminate competition, but to promote ethical practices among
admittedly higher death rate than will probably prevail; the assumed interest non-life insurance companies, although, incidentally it may discourage, and
rate on the investments of the company is made lower than is expected to be hence, eliminate unfair competition, through underrating, which in itself is
realized; and the provision for contingencies and expenses, made greater than eventually injurious to the public. The legality of an agreement or regulation
would ordinarily be necessary. This course of action is taken, because a mutual cannot be determined by so simple a test, as whether it restrains competition.
company has no capital stock and relies solely upon its premiums to meet Every agreement concerning trade, every regulation of trade, restrains. To bind,
unexpected losses, contingencies and expenses. to restrain, is of their very essence. The true test of legality is whether the
restraint imposed is such as merely regulates and promotes competition, or
Verily, a mutual life insurance corporation is a cooperative that promotes the whether it is such as may suppress or even destroy competition. To determine
welfare of its own members. It does not operate for profit, but for the mutual that question the court must ordinarily consider the facts peculiar to the
benefit of its member-policyholders. They receive their insurance at cost, while business to which the restraint is applied; its condition before and after the
reasonably and properly guarding and maintaining the stability and solvency of restraint was imposed; the nature of the restraint, and its effect, actual or
the company. probable. Testimony of the witness shows that the limitation upon reinsurance
contained in the aforementioned Article 22 does not affect the public at all, for,
Filipinas Cia. De Seguros v Hon. F. Mandanas whether there is reinsurance or not, the liability of the insurer in favor of the
insured is the same. Besides, there are sufficient foreign reinsurance
companies operating in the Philippines from which non-members of the Bureau
may secure reinsurance. What is more, whatever the Bureau may do in the Insurance Commissioner rendered in the exercise of its regulatory function may
matter of rate-fixing is not decisive insofar as the public is concerned, for no be appealed. The adjudicatory authority of the Insurance Commissioner is
insurance company in the Philippines may charge a rate of premium that has generally described in Section 416 of the Code. Such section also specifies that
not been approved by the Insurance Commissioner. the authority to which appeal may be taken from a final order or decision of the
Commissioner given in the exercise of his adjudicatory or quasi-judicial powers.
Sections 390 – end of Code Almendras, in its complaint filed with the Insurance Commissioner, originally
sought remedies which would have required the Insurance Commissioner to
Almendras Mining Corp. v OIC adjudicate on matters pertaining to performance and satisfaction by Bankers of
its legal obligations under the insurance contract with Almendras. It was agreed
Facts: M/V Don Paulo, while on a voyage from Davao to Bataan, was forced by both parties that the sole issue of W/N revocation or suspension of the
somewhere in the vicinity of Romblon after having been hit by strong winds and certificate of authority was justified, was to be submitted before the Insurance
tidal waves brought about by the typhoon “Nitang”. Later that day, petitioner Commissioner. The scope of the issues having been so limited, the Insurance
Almendras Mining, the owner of the vessel, executed and filed the Commissioner was left with the task of determining W/N Bankers was guilty og
corresponding marine protest. Almendras formally notified the insurer, Country an act/s constituting statutory ground for revocation of its Certificate of
Bankers, of its intention to file a provisional claim for indemnity for damages Authority. Clearly, the Insurance Commissioner’s resolution and order was
sustained by the vessel. Bankers commissioned the services of Audemus issued in the performance of administrative and regulatory duties and functions,
Adjustment Corp. which estimated the insurer’s liability to be PhP2,187,983 or and should have been appealed to the Office of the Secretary of Finance.
the equivalent of 70%, which was accepted by Almendras. Delay overtook the
repair of the damage sustained by the vessel. Bankers explained that the delay
was due to the unavoidability of the spare parts needed in the repair of the
vessel’s 4 damaged engines. Unsatisfied by this explanation, Almendras filed a
complaint with the Office of the Insurance Commissioner for revocation or
suspension of private respondent’s Certificate of Authority to engage in the
insurance business, and an administrative directive for the completion of all
repair work and delivery to petitioner of the vessel, and for damages. The
Insurance Commissioner held that the failure of the insurer to settle promptly
the claim of Almendras was attributable to the latter’s own act of insisting on
cash settlement thereof, even after the parties had already agreed to outright
replacement of the vessel’s damaged engines.
Issue: W/N the SC has jurisdiction to review the decision of the OIC.
Held: No.
The provisions of the Insurance Code clearly indicate that the OIC is an
administrative agency vested with regulatory powers as well as with
adjudicatory authority. Among the several regulatory or non-quasi-judicial duties
of the Insurance Commissioner is the authority to issue, or refuse to issue a
Certificate of Authority to a person or entity desirous of engaging in insurance
business in the Philippines, and to revoke or suspend such Certificate upon a
finding of the existence of statutory grounds for such revocation or suspension.
The general regulatory authority of the IC is described in Section 414 of the
Insurance Code, which also specifies the authority to which a decision of the

Section 83 End Cases

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Section 83 End Cases

Uploaded by

Copyright:

Available Formats

Sections 83-92 of the policy which provides that loss or damage caused by earthquake,

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 1

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 2

Issue: W/N MICO is liable under the insurance

Held: Yes. Pacific Bank v CA

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 3

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 4

The procurement of another insurance contrary to the provisions of the policy

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 5

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 6

Petitioner’s equipment in its spinning department was burned. When a claim

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 7

Issue: W/N the loss was covered by the policy.

Perils of the Sea v. Perils of the Ship

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 8

Taken from Rhys Alexei’s reviewer. Digests from upperbatch. INSURANCE – ATTY. QUIMSON 9

In the absence of positive legislation to the contrary, the liability of the

Galian v State Assurance

Shafer v Judge, RTC Olongapo

Issue: W/N Security Pacific is liable on the bond.

Phil Pryce Assurance v CA

Issue: W/N Pryce is liable.

You might also like