WHITE GOLD VS PIONEER INSURANCE (G.R. NO. 154514.

JULY 28, 2005)
White Gold Marine Services Inc. Vs Pioneer Insurance and Surety Corporation
G.R. No. 154514. July 28, 2005
Facts: 
White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity
coverage for its vessels from The Steamship Mutual Underwriting Association
(Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety
Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and
Acceptance. Pioneer also issued receipts evidencing payments for the coverage. When
White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the
coverage.Steamship Mutual thereafter filed a case against White Gold for collection of
sum of money to recover the latter’s unpaid balance. White Gold on the other hand, filed
a complaint before the Insurance Commission claiming that Steamship Mutual violated
Sections 186[4] and 187[5] of the Insurance Code, while Pioneer violated Sections 299
300 and 301 in relation to Sections 302 and 303, thereof. The Insurance Commission
dismissed the complaint. It said that there was no need for Steamship Mutual to secure
a license because it was not engaged in the insurance business. It explained that
Steamship Mutual was a Protection and Indemnity Club (P & I Club). Likewise, Pioneer
need not obtain another license as insurance agent and/or a broker for Steamship
Mutual because Steamship Mutual was not engaged in the insurance business.
Moreover, Pioneer was already licensed, hence, a separate license solely as
agent/broker of Steamship Mutual was already superfluous.
Issues: Whether or not the contract entered into by the parties is an insurance contract.
Whether or not Pioneer is required to obtain a separate license as an insurance agent.
Held: Yes. The test to determine if a contract is an insurance contract or not, depends
on the nature of the promise, the act required to be performed, and the exact nature of
the agreement in the light of the occurrence, contingency, or circumstances under which
the performance becomes requisite. It is not by what it is called.
Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a
consideration to indemnify another against loss, damage or liability arising from an
unknown or contingent event.
In particular, a marine insurance undertakes to indemnify the assured against marine
losses, such as the losses incident to a marine adventure. Section 99 of the Insurance
Code enumerates the coverage of marine insurance.
Relatedly, a mutual insurance company is a cooperative enterprise where the members
are both the insurer and insured. In it, the members all contribute, by a system of
premiums or assessments, to the creation of a fund from which all losses and liabilities
are paid, and where the profits are divided among themselves, in proportion to their
interest. Additionally, mutual insurance associations, or clubs, provide three types of
coverage, namely, protection and indemnity, war risks, and defense costs.
A P & I Club is a form of insurance against third party liability, where the third party is
anyone other than the P & I Club and the members. By definition then, Steamship
Mutual as a P & I Club is a mutual insurance association engaged in the marine
insurance business.
Since a contract of insurance involves public interest, regulation by the State is
necessary. Thus, no insurer or insurance company is allowed to engage in the
insurance business without a license or a certificate of authority from the Insurance
Commission.
Yes. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate
of registration[22] issued by the Insurance Commission. It has been licensed to do or
transact insurance business by virtue of the certificate of authority issued by the same
agency. However, a Certification from the Commission states that Pioneer does not
have a separate license to be an agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a separate
license to act as insurance agent for Steamship Mutual. Section 299 of the Insurance
Code clearly states:
No person shall act as an insurance agent or as an insurance broker in the solicitation
or procurement of applications for insurance, or receive for services in obtaining
insurance, any commission or other compensation from any insurance company doing
business in the Philippines or any agent thereof, without first procuring a license so to
act from the Commissioner, which must be renewed annually on the first day of
January, or within six months thereafter.
Verendia v. CA - Insurance Policy
217 SCRA 1993
Facts:
>  Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. F-
18876 effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex)
Verendia's residential in the amount of P385,000.00. Designated as beneficiary was the
Monte de Piedad & Savings Bank.
>  Verendia also insured the same building with two other companies, namely, The
Country Bankers Insurance for P56,000.00 and The Development Insurance for
P400,000.00.
>  While the three fire insurance policies were in force, the insured property was
completely destroyed by fire.
>  Fidelity appraised the damage amounting to 385,000 when it was accordingly
informed of the loss. Despite demands, Fidelity refused payment under its policy, thus
prompting Verendia to file a complaint for the recovery of 385,000
>  Fidelity, averred that the policy was avoided by reason of over-insurance, that
Verendia maliciously represented that the building at the time of the fire was leased
under a contract executed on June 25, 1980 to a certain Roberto Garcia, when actually
it was a Marcelo Garcia who was the lessee.

Issue:
Whether or not Verendia can claim on the insurance despite the misrepresentation as to
the lessee and the overinsurance.

Held:
NOPE.
The contract of lease upon which Verendia relies to support his claim for insurance
benefits, was entered into between him and one Robert Garcia, a couple of days after
the effectivity of the insurance policy. When the rented residential building was razed to
the ground, it appears that Robert Garcia was still within the premises. However,
according to the investigation by the police, the building appeared to have "no
occupants" and that Mr. Roberto Garcia was "renting on the otherside of said
compound" These pieces of evidence belie Verendia's uncorroborated testimony that
Marcelo Garcia whom he considered as the real lessee, was occupying the building
when it was burned.

Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed
the lease contract but it was Marcelo Garcia cousin of Robert, who had also been
paying the rentals all the while. Verendia, however, failed to explain why Marcelo had to
sign his cousin's name when he in fact he was paying for the rent and why he
(Verendia) himself, the lessor, allowed such a ruse. Fidelity's conclusions on these
proven facts appear, therefore, to have sufficient bases: Verendia concocted the lease
contract to deflect responsibility for the fire towards an alleged "lessee", inflated the
value of the property by the alleged monthly rental of P6,500) when in fact, the
Provincial Assessor of Rizal had assessed the property's fair market value to be only
P40,300.00, insured the same property with two other insurance companies for a total
coverage of around P900,000, and created a dead-end for the adjuster by the
disappearance of Robert Garcia.

Basically a contract of indemnity, an insurance contract is the law between the parties.
Its terms and conditions constitute the measure of the insurer's liability and compliance
therewith is a condition precedent to the insured's right to recovery from the. As it is also
a contract of adhesion, an insurance contract should be liberally construed in favor of
the insured and strictly against the insurer company which usually prepares it
.
Considering, however, the foregoing discussion pointing to the fact that Verendia used a
false lease contract to support his claim under Fire Insurance Policy, the terms of the
policy should be strictly construed against the insured. Verendia failed to live by the
terms of the policy, specifically Section 13 thereof which is expressed in terms that are
clear and unambiguous, that all benefits under the policy shall be forfeited "if the claim
be in any respect fraudulent, or if any false declaration be made or used in support
thereof, or if any fraudulent means or devises are used by the Insured or anyone acting
in his behalf to obtain any benefit under the policy". Verendia, having presented a false
declaration to support his claim for benefits in the form of a fraudulent lease contract, he
forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof
that Fidelity waived such provision
There is also no reason to conclude that by submitting the subrogation receipt as
evidence in court, Fidelity bound itself to a "mutual agreement" to settle Verendia's
claims in consideration of the amount of P142,685.77. While the said receipt appears to
have been a filled-up form of Fidelity, no representative of Fidelity had signed it. It is
even incomplete as the blank spaces for a witness and his address are not filled up.
More significantly, the same receipt states that Verendia had received the aforesaid
amount. However, that Verendia had not received the amount stated therein, is proven
by the fact that Verendia himself filed the complaint for the full amount of P385,000.00
stated in the policy. It might be that there had been efforts to settle Verendia's claims,
but surely, the subrogation receipt by itself does not prove that a settlement had been
arrived at and enforced. Thus, to interpret Fidelity's presentation of the subrogation
receipt in evidence as indicative of its accession to its "terms" is not only wanting in
rational basis but would be substituting the will of the Court for that of the parties

Rizal Surety v CA G.R. No. 112360. July 18, 2000

J. Purisima

Facts:
Rizal Surety issued a 1 million peso fire insurance policy with Transworld. This
was increased to 1.5 million. A four span building was part of the policy. A fire broke out
and gutted the building, together with a two storey building behind it were gaming
machines were stored. The company filed its claims but to no avail. Hence, it brought a
suit in court. It aimed to make Rizal pay for almost 3 million including legal interest and
damages. Rizal claimed that the policy only covered damage on the four span building
and not the two storey building. The trial court ruled in Transworld’s favor and ordered
Rizal to pay actual damages only. The court of appeals increased the damages.
The insurance company filed a MFR. The CA answered by modifying the imposition of
interest. Not satisfied, the insurance company petitioned to the Supreme Court.

Issue:
WON Rizal Surety is liable for loss of the two-storey building considering that the
fire insurance policy sued upon covered only the contents of the four-span building.

Held: Yes. Petition dismissed.

Ratio:
The policy had clauses on the building coverage that read:
"contained and/or stored during the currency of this Policy in the premises occupied by
them forming part of the buildings situated within own Compound"
"First, said properties must be contained and/or stored in the areas occupied by
Transworld and second, said areas must form part of the building described in the policy
xxx"
This generally means that the policy didn’t limit its coverage to what was stored in the
four-span building.
As to questions of fact, both the trial court and the Court of Appeals found that the so
called "annex " was not an annex building but an integral part of the four-span building
described in the policy and consequently, the machines and spare parts stored were
covered by the fire insurance.
A report said: "Two-storey building constructed of partly timber and partly concrete
hollow blocks under g.i. roof which is adjoining and intercommunicating with the
repair of the first right span of the lofty storey building and thence by
property fence wall."
"Art.1377. The interpretation of obscure words or stipulations in a contract shall not
favor the party who caused the obscurity"
Landicho v GSIS- the 'terms in an insurance policy, which are ambiguous, equivocal, or
uncertain are to be construed strictly and most strongly against the insurer, and liberally
in favor of the insured so as to effect the dominant purpose of indemnity or payment to
the insured’
The issue of whether or not Transworld has an insurable interest in the fun and
amusement machines and spare parts, which entitles it to be indemnified for the loss
thereof, had been settled in another SC case.

Philamcare v CA G.R. No. 125678. March 18, 2002

J. Ynares-Santiago

Facts:
Ernani Trinos applied for a health care coverage with Philam. He answered no to a
question asking if he or his family members were treated to heart
trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits and
out-patient benefits. After the period expired, he was given an expanded coverage for
Php 75,000. During the period, he suffered from heart attack and was confined at MMC.
The wife tried to claim the benefits but the petitioner denied it saying that he concealed
his medical history by answering no to the aforementioned question. She had to pay for
the hospital bills amounting to 76,000. Her husband subsequently passed away. She
filed a case in the trial court for the collection of the amount plus damages. She
was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but deleted
awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the
“incontestability clause” under the Insurance Code does not apply.

Held: No. Petition dismissed.

Ratio:
 Petitioner claimed that it granted benefits only when the insured is alive during the one-
year duration. It contended that there was no indemnification unlike in insurance
contracts. It supported this claim by saying that it is a health maintenance organization
covered by the DOH and not the Insurance Commission. Lastly, it claimed that the
Incontestability clause didn’t apply because two-year and not one-year effectivity
periods were required.  
Section 2 (1) of the Insurance Code defines a contract of insurance as “an agreement
whereby one undertakes for a consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event.”
Section 3 states: every person has an insurable interest in the life and health:
(1)     of himself, of his spouse and of his children.
In this case, the husband’s health was the insurable interest. The health care
agreement was in the nature of non-life insurance, which is primarily a contract of
indemnity. The provider must pay for the medical expenses resulting from sickness or
injury.
While petitioner contended that the husband concealed materialfact of his sickness, the
contract stated that:
“that any physician is, by these presents, expressly authorized to disclose or give
testimony at anytime relative to any information acquired by him in his professional
capacity upon any question affecting the eligibility for health care coverage of the
Proposed Members.”
This meant that the petitioners required him to sign authorization to furnish reports
about his medical condition. The contract also authorized Philam to inquire directly to
his medical history.
Hence, the contention of concealment isn’t valid.
They can’t also invoke the “Invalidation of agreement” clause where failure of the
insured to disclose information was a grounds for revocation simply because the answer
assailed by the company was the heart condition question based on the insured’s
opinion. He wasn’t a medical doctor, so he can’t accurately gauge his condition.
Henrick v Fire-  “in such case the insurer is not justified in relying upon such statement,
but is obligated to make further inquiry.”
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the
provider.
“Having assumed a responsibility under the agreement, petitioner is bound to answer
the same to the extent agreed upon.  In the end, the liability of the health care provider
attaches once the member is hospitalized for the disease or injury covered by the
agreement or whenever he avails of the covered benefits which he has prepaid.”
Section 27 of the Insurance Code- “a concealment entitles the injured party to rescind a
contract of insurance.”
As to cancellation procedure- Cancellation requires certain conditions:
1.       Prior notice of cancellation to insured;
2.       Notice must be based on the occurrence after effective date of the policy of one
or more of the grounds mentioned;
3.       Must be in writing, mailed or delivered to the insured at the address shown in the
policy;
4.       Must state the grounds relied upon provided in Section 64 of the Insurance Code
and upon request of insured, to furnish facts on which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that “under the title Claim procedures of
expenses, the defendant Philamcare Health Systems Inc. had twelve months from the
date of issuance of the Agreement within which to contest the membership of the
patient if he had previous ailment of asthma, and six months from the issuance of the
agreement if the patient was sick of diabetes or hypertension. The periods having
expired, the defense of concealment or misrepresentation no longer lie.”
FORTUNE INSURANCE AND SURETY CO., INC., petitioner,
vs.
COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES, respondents.
G.R. No. 115278. May 23, 1995.
DAVIDE, JR., J.
Rule Synopsis
Manpower supplied by agencies may be considered employees or authorized
representatives of the employer for purposes of construing exceptions to a robbery and
theft policy exempting the insurer from liability for any loss caused by any dishonest,
fraudulent or criminal act of its employees or authorized representatives, among others.
Case Summary
Producers Bank had a Money, Security, and Payroll Robbery policy with Fortune
Insurance and Surety Co., Inc. The policy states that the insurer shall not be liable for:
“any loss caused by any dishonest, fraudulent or criminal act of the insured or any
officer, employee, partner, director, trustee or authorized representative of the Insured
whether acting alone or in conjunction with others.” Producers then allegedly lost a sum
of P725k during a robbery of its armored vehicle while it was in transit to transfer the
money from Pasay to Makati. The vehicle was driven by one Magalong (assigned by
PRC Management Systems). The security guard, Atiga, was assigned by Unicorn
Security Services, Inc. The driver and the security guard, along with others, were
charged with highway robbery. The criminal case was still pending as of writing of this
decision. Producers filed a claim Fortune. Fortune denied on the ground that the
robbery was due to the acts of Producers’ own employees, thus an excluded loss under
the general exceptions in the policy.
Producers filed a case against Fortune for the recovery of the insurance proceeds.
The trial court ruled in favor of Producers Bank. The CA affirmed. The lower courts
found that both Magalong and Atiga were not employees of the Bank. The SC reversed.
Issues resolved —
Was Fortune Insurance liable under the Money, Security, and Payroll Robbery policy it
issued to Producers Bank or was the recovery thereunder is precluded under the
general exceptions clause thereof?
HELD – RECOVERY PRECLUDED. FORTUNE NOT LIABLE.
On the applicable law. The Court said that theft or robbery insurance policy, as with the
case at bar, is a form of casualty insurance governed by Sec. 174 of the Insurance
Code. The Court also noted that the Code contains no provisions specifically applicable
to casualty insurance. Thus, this shall be governed by the general provisions applicable
to all types of insurance.
On the usual exceptions in robbery and theft policies. The numerous restrictions in the
robbery and theft policies were intended to reduce the moral hazard. It was noted that in
these types of insurance, the opportunity to defraud the insurer is so great (e.g. through
conspiracy, etc.). Usually, losses occasioned on the acts of the persons under the
insured’s service and employment, are excepted risks. The purpose of the exception is
to guard against liability should the theft be committed by one having unrestricted
access to the property. “Service” and “employment” in this case are to be understood in
their ordinary sense.
On whether Magalong and Atiga were Producers’ employees, given that they were
merely supplied by agencies. The Court held that Magalong and Atiga may be
considered employees of Producers. This is under the assumption that the contract of
Producers with the providers of concerned manpower were “labor-only.” And under the
Labor Code, employees under labor-only contract are considered employees of the
party employing them and not of the party who supplied them to the employer, the
former merely acting as an agent for the latter.
However, the Court noted that there was still lack of evidence as to the real nature of
the contract between producers and its suppliers of manpower, since the parties merely
entered into stipulation without submitting additional evidence other than the insurance
policy. Nevertheless, the Court held that even if Magalong and Atiga were not to be
considered employees of Producers, then may still be deemed its authorized
representatives for purposes of transferring the money in question. For the said
particular task, the subject employees acted as agents of Producers.

Petition granted. Judgment on appeal reversed and set aside.

Insurance Case Digest: Gulf Resorts Inc. V. Philippine Charter Insurance Corp. (2005)
FACTS:
Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance
Company which includes loss or damage to shock to any of the property insured by this
Policy occasioned by or through or in consequence of earthquake 
July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the
properties and 2 swimming pools in its Agoo Playa Resort were damaged
August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only
afforded earthquake shock coverage to the two swimming pools of the resort
Petitioner contends that pursuant to this rider, no qualifications were placed on the
scope of the earthquake shock coverage.  Thus, the policy extended earthquake shock
coverage to all of the insured properties.
RTC: Favored American Home - endorsement rider means that only the two swimming
pools were insured against earthquake shock 
CA: affirmed RTC
ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools

HELD: YES. Affirmed.

It is basic that all the provisions of the insurance policy should be examined and
interpreted in consonance with each other.
All its parts are reflective of the true intent of the parties.
Insurance Code
 Section 2(1)
contract of insurance as an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or
contingent event
An insurance premium is the consideration paid an insurer for undertaking to indemnify
the insured against a specified peril.
In the subject policy, no premium payments were made with regard to earthquake shock
coverage, except on the two swimming pools.  

7. Manila Mahogany Manufacturing Corporation v. CA and Zenith Insurance

Corporation (1987) Padilla, J. I.

Facts:

Manila Mahogany (petitioner) insured its Mercedes Benz 4-door sedan with Zenith
Insurance Corporation (respondent) from March 6 1970 to March 1971. On May 4,
1970, the sedan was bumped and damaged by a truck owned by San Miguel
Corporation. For the damage, Zenith Insurance paid Mahogany 5,000 pesos. Mahogany
then executed a Release of Claim, subrogating Zenith to all its right to action against
San Miguel. December 11, 1972 - Zenith Insurance wrote to Insurance Adjusters, Inc. to
demand reimbursement from San Miguel of the 5k it gave to Mahogany. Insurance
Adjusters refused, saying that San Miguel already paid Mahogany 4,500 pesos for the
damages as evidenced by a Release of Claim executed by Mahogany’s General
Manager discharging San Miguel from “all actions, claims, demands the rights of action
that now exist or hereafter develop arising out of or as a consequence of the accident.”
Zenith then demanded from Mahogany the reimbursement of the 4,500 pesos that San
Miguel paid. The latter refused; hence, Zenith filed a suit in the City Court of Manila for
the recovery of the money. City Court ruled in favor of Zenith. CFI affirmed the decision.
CA also affirmed with the modification that Mahogany was supposed to pay the total of
5,000 — the amount it received from Zenith. II.

Issue: W/N Manila Mahogany is bound to pay 4,500 - 5,000 pesos to Zenith Insurance.
NO

III.

Rationale:

Manila Mahogany contends that it is not bound to pay Zenith as the subrogation in the
Release of Claim was conditioned on recovery of the total amount of the damages that
the former sustained. Since the total value of the damages amounted to 9, 486.43 and
Zenith only gave 5,000 to Mahogany, the latter argues now that it is still entitled to go
after San Miguel for the 4,500. Zenith argues that in the Release of Claim executed by
the petitioner, there were no qualifications to its right of subrogation. The contents of the
deed expressed all the intents and purposes of the parties. Petitioner Mahogany then
alleged that its right not to return the 4,500 paid by San Miguel is supported by Article
2207 and 1304 of the Civil Code. SC found petitioner’s arguments to be untenable and
without merit. It says that in the absence of any other evidence to support its allegation
that a gentlemen's agreement existed between it and respondent, not embodied in the
Release of Claim, such Release of Claim must be taken as the best evidence of the
intent and purpose of the parties. Since Mahogany, by its own acts, released San
Miguel Corporation, thereby defeating the right of subrogation of Zenith Insurance,
Mahogany’s right of action against Zenith was also nullified. With this, Zenith is now
entitled to recover the 5,000 pesos that it earlier paid to Mahogany. IV.

Dispositive: Petition DENIED. CA decision is AFFIRMED.

8. FEDEX vs. AHAC and PHILAM INSURANCE COMPANY, INC

G.R. No. 150094
 August 18, 2004
 FACTS: Shipper SMITHKLINE USA delivered to carrier Burlington Air Express
(BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a shipment of
109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French
Overseas Company in Makati City. The shipment was covered by Burlington Airway Bill
No. 11263825 with the words, ‘REFRIGERATE WHEN NOT IN TRANSIT’ and
‘PERISHABLE’ stamp marked on its face.  That same day, Burlington insured the
cargoes with American Home Assurance Company (AHAC).  The following day,
Burlington turned over the custody of said cargoes to FEDEX which transported the
same to Manila.
The  shipments arrived in Manila and was immediately stored at [Cargohaus Inc.’s]
warehouse.  Prior to the arrival of the cargoes, FEDEX informed GETC Cargo
International Corporation, the customs broker hired by the consignee to facilitate the
release of its cargoes from the Bureau of Customs, of the impending arrival of its client’s
cargoes.
12 days after the cargoes arrived in Manila, DIONEDA,  a non-licensed custom’s broker
who was assigned by GETC, found out, while he was about to cause the release of the
said cargoes, that the same [were] stored only in a room with 2 air conditioners running,
to cool the place instead of a refrigerator.  DIONEDA, upon instructions from GETC, did
not proceed with the withdrawal of the vaccines and instead, samples of the same were
taken and brought to the Bureau of Animal Industry of the Department of Agriculture in
the Philippines by SMITHKLINE for examination wherein it was discovered that the
‘ELISA reading of vaccinates sera are below the positive reference serum.’
As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE
abandoned the shipment and, declaring ‘total loss’ for the unusable shipment, filed a
claim with AHAC through its representative in the Philippines, the Philam Insurance Co.,
Inc. (PHILAM) which recompensed SMITHKLINE for the whole insured amount.
Thereafter, PHILAM filed an action for damages against the FEDEX imputing
negligence on either or both of them in the handling of the cargo.
Trial ensued and ultimately concluded with the FEDEX being held solidarily liable for the
loss. Aggrieved, petitioner appealed to the CA. The appellate court ruled in favor of
PHILAM and held that the shipping Receipts were a prima facie proof that the goods
had indeed been delivered to the carrier in good condition.
ISSUE: Is FEDEX liable for damage to or loss of the insured goods
 HELD: petition granted. Assailed decision reversed insofar as it pertains to FEDEX
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has tirelessly
pointed out that respondents’ claim and right of action are already barred.   Indeed, this
fact has never been denied by respondents and is plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
“6.     No action shall be maintained in the case of damage to or partial loss of the
shipment unless a written notice, sufficiently describing the goods concerned, the
approximate date of the damage or loss, and the details of the claim, is presented by
shipper or consignee to an office of Burlington within (14) days from the date the goods
are placed at the disposal of the person entitled to delivery, or in the   case of total loss
(including non-delivery) unless presented within (120) days from the date of issue of the
[Airway Bill].  xxx
Relevantly, petitioner’s airway bill states:
“12./12.1 The person entitled to delivery must make a complaint to the carrier
in writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the damage and
at the latest within fourteen (14) days from receipt of the goods;   xxx
Article 26 of the Warsaw Convention, on the other hand, provides:
Xxx (2)     In case of damage, the person entitled to delivery must complain to the
carrier forthwith after the discovery of the damage, and, at the latest, within 3 days from
the date of receipt in the case of baggage and 7 days from the date of receipt in the
case of goods.  xx
(3)     Every complaint must be made in writing upon the document of transportation or
by separate notice in writing dispatched within the times aforesaid.
(4)     Failing complaint within the times aforesaid, no action shall lie against the carrier,
save in the case of fraud on his part.” xxx
Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor
actually constitutes a condition precedent to the accrual of a right of action against a
carrier for loss of or damage to the goods. The shipper or consignee must allege and
prove the fulfillment of the condition.  If it fails to do so, no right of action against the
carrier can accrue in favor of the former.  The aforementioned requirement is a
reasonable condition precedent; it does not constitute a limitation of action.
The requirement of giving notice of loss of or injury to the goods is not an empty
formalism.  The fundamental reasons for such a stipulation are (1) to inform the carrier
that the cargo has been damaged, and that it is being charged with liability therefor; and
(2) to give it an opportunity to examine the nature and extent of the injury. “This protects
the carrier by affording it an opportunity to make an investigation of a claim while the
matter is fresh and easily investigated so as to safeguard itself from false and fraudulent
claims.
NOTES: as to proper payee:
The Certificate specifies that loss of or damage to the insured cargo is “payable to order
x x x upon surrender of this Certificate.” Such wording conveys the right of collecting on
any such damage or loss, as fully as if the property were covered by a special policy in
the name of the holder itself.  At the back of the Certificate appears the signature of the
representative of Burlington.  This document has thus been duly indorsed in blank and
is deemed a bearer instrument.
Since the Certificate was in the possession of Smithkline, the latter had the right of
collecting or of being indemnified for loss of or damage to the insured shipment, as fully
as if the property were covered by a special policy in the name of the holder.  Hence,
being the holder of the Certificate and having an insurable interest in the goods,
Smithkline was the proper payee of the insurance proceeds.
Subrogation
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a
subrogation Receipt in favor of respondents.  The latter were thus authorized “to file
claims and begin suit against any such carrier, vessel, person, corporation or
government.” Undeniably, the consignee had a legal right to receive the goods in the
same condition it was delivered for transport to petitioner.  If that right was violated, the
consignee would have a cause of action against the person responsible therefor.
9. ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner,
vs.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondent.
GR No. 166245
09 April 2008

DOCTRINE:
Since an insurance contract is a contract of adhesion, it must be construed liberally in
favor of the insured, and strictly against the insurer, to safeguard the insured’s interest.
This is because of the exclusive control of the insurer over the terms and phraseology of
the contract, ambiguity must be interpreted against the insurer.
To characterize the insurer and the insured as contracting parties on equal footing is
inaccurate at best. Insurance contracts are wholly prepared by the insurer with vast
amounts of experience in the industry purposefully used to its advantage. More often
than not, insurance contracts are contracts of adhesion containing technical terms and
conditions of the industry, confusing if at all understandable to laypersons, that are
imposed on those who wish to avail of insurance. As such, insurance contracts are
imbued with public interest that must be considered whenever the rights and obligations
of the insurer and the insured are to be delineated. Hence, in order to protect the
interest of insurance applicants, insurance companies must be obligated to act with
haste upon insurance applications, to either deny or approve the same, or otherwise be
bound to honor the application as a valid, binding, and effective insurance contract.

FACTS:
Respondent Philippine American Life Insurance Company (Philamlife) entered into an
agreement, “Creditor Group Life Policy” with petitioner Eternal Gardens Memorial Park
Corporation wherein clients of Eternal who purchased burial lots on installment basis
will be insudered by Philamlife. The policy was for one year, renewable on a yearly
basis, with the amount of coverage to depend on the balance of the purchased burial
lots
The relevant provisions of the policy are
Eligibility – Any lot purchaser who is atleast 18-65 years old who has an unpaid balance
with Eternal Gardens, and is accepted for the coverage of the insurance, is eligible for
insurance under the Policy
Evidence of Insurability – no medical examinations are required for insurance up to
P50k; however, a declaration of good health shall be required for all lot purchasers as
part of the application; Philamlife may require further evidence of insurablity under the ff
Amount of insurance in excess of P50K
Any lot purchaser who is more than 55 years old
Life Insurance Benefit – the coverage of the insurance of the lot purchaser shall be the
unpaid balance of his loan OR P100K, whichever is smaller; such shall be paid to
Eternal if the lot purchaser dies while insured under this policy
Effective Date of Benefit – the insurance of any eligible lot purchaser shall be effective
on the date he contracts a loan w/ Eternal; however, there shall be no insurance if the
application is denied by the company
Eternal submitted a list of all new lot purchasers, their application and the amounts of
the unpaid balances. One of those included in the list as “new business” was John
Chuang, with balance of P100,000. On August 2, 1984, Chuang died. Thus, Eternal
claimed from Philamlife for Chuang’s death, as evidenced by (a) death certificate (b)
Identification that Chuang is a naturalized PH citizen (c) certificate of claimant (d)
certificate of attending physician (e) assured’s certificate
Philamlife required Eternal to submitted additional documents which Eternal complied
with. However, after more than one year, Philamlife had not furnished any reply to
Eternal, prompting Eternal to demand from Philamlife the claim for P100,000
Philamlife denied Eternal’s claim allegint that deceased Chuang was 59 years old when
he entered into a two contract w/ Eternal Gardens for the total insurable amount of
P100,000 each; that not application for group insurance was submitted to them prior to
Chuang’s death; that under ‘Evidence of Insurability’ provision, a declaration of good
health was required; and that since no application was submitted by Eternal for
Philamlife’s approval, Chuang was not covered under the policy
Philamlife further replies that even though they accepted premiums, these do not
connote approval per se of the coverage and these amounts are held in trust until the
prerequisites for insurance coverage are met. They also promised to return the
premiums which were paid on behalf of Chuang.
RTC: in favor of Eternal; ordered Eternal to pay P100,000 policy proceeds of Chuang
The RTC found out that Eternal submitted the application to Philamlife; that Philamlife’s
inaction from the submission of the group requirements to Chuang’s death, while
accepting the premiums they are deemed to have approved the application. Finally, that
since the contract is a group-life insurance, once proof of death is submitted, payment
must follow
CA: In favor of Philamlife; Eternal’s complaint dismissed
The CA based it’s decision on the fact that Chuang’s application was not enclosed in
Eternal’s letter when they submitted the list of lot purchasers to Philamlife; that the non-
accomplishment of the submitted application form violated Sec 26 of Insurance Code;
thus, since there’s no application form, Chuang is not covered.
ISSUE:
Whether or not Philamlife is liable to pay proceeds to Eternal.

HELD:
YES.
The letter containing the list of lot purchasers (w/c also contains their insurable interest)
had the insurance forms attached to it, were stamped as received by Philamlife. Such
stamp of receipt had the effect of acknowledging receipt of the letter, along with the
attachments. This is an admission by Philamlife against it’s own interest. Thus, the
burden now shifts to Philamlife to prove that Chuang’s application is not included. In this
case, Philamlife failed to do so, thus, they are deemed to have received the deceased’s
insurance application.
Philamlife had the duty to make sure that before a tramsittal letter is stamped as
received, the contents of the letter are correct and accounted for.
The fact is, Philamlife assumed the risk of loss without approving the application. The
provision on Effective Date of Benefit seems to be ambiguous. The first sentence
appears to state that the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second sentence appears to
require Philamlife to approve the insurance contract before the same can become
effective.
However, since an insurance contract is a contract of adhesion, it must be construed
liberally in favor of the insured, and strictly against the insurer, to safeguard the
insured’s interest. This is because of the exclusive control of the insurer over the terms
and phraseology of the contract, ambiguity must be interpreted against the insurer.
In this case, the vague contractual provision must be construed in favor of Eternal
Gardens. To harmonize the provision, such must mean that upon a party’s purchase of
a memorial lot on installment from Eternal, an insurance contract covering the lot
purchaser is created and the same is effective, valid, and binding until terminated by
Philamlife by disapproving the insurance application. Also, the mere inaction of the
insurer on the insurance application must not work to prejudice the insured; it cannot be
interpreted as a termination of the insurance contract. The termination of the insurance
contract by the insurer must be explicit and unambiguous.
To characterize the insurer and the insured as contracting parties on equal footing is
inaccurate at best. Insurance contracts are wholly prepared by the insurer with vast
amounts of experience in the industry purposefully used to its advantage. More often
than not, insurance contracts are contracts of adhesion containing technical terms and
conditions of the industry, confusing if at all understandable to laypersons, that are
imposed on those who wish to avail of insurance. As such, insurance contracts are
imbued with public interest that must be considered whenever the rights and obligations
of the insurer and the insured are to be delineated. Hence, in order to protect the
interest of insurance applicants, insurance companies must be obligated to act with
haste upon insurance applications, to either deny or approve the same, or otherwise be
bound to honor the application as a valid, binding, and effective insurance contract.