Insurance Law (Case Digest)

JOHN WALTZ M. SUAN INSURANCE LAW ATTY.
NOREEN MANATAD-DILLEN
GEAGONIA VS CA
G.R. 114427
February 6, 1995
Petitioner ARMANDO GEAGONIA

Respondent COURT OF APPEALS and COUNTRY BANKERS INSURANCE
CORPORATION
Penned DAVIDE JR.
Topic Double Insurance
Doctrine A double insurance exists where the same person is
insured by several insurers separately in respect of the
same subject and interest.
Facts Geagonia, owner of a store, obtained from Country
Bankers fire insurance policy for P100,000.00.
The 1 year policy covered the stock trading of dry goods.

The policy noted the requirement that:
"3. The insured shall give notice to the Company of any

insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or
properties consisting of stocks in trade, goods in process
and/or inventories only hereby insured, and unless notice
be given and the particulars of such insurance or
insurances be stated therein or endorsed in this policy
pursuant to Section 50 of the Insurance Code, by or on
behalf of the Company before the occurrence of any loss
or damage, all benefits under this policy shall be deemed
forfeited, provided however, that this condition shall not
apply when the total insurance or insurances in force at the
time of the loss or damage is not more than P200,000.00."
The petitioners’ stocks were destroyed by fire. He then filed

a claim which was subsequently denied because the
petitioner’s stocks were covered by two other fire
insurance policies for Php 200,000 issued by PFIC. The
basis of the private respondent's denial was the petitioner's
alleged violation of Condition 3 of the policy.
Geagonia then filed a complaint against the private

respondent in the Insurance Commission for the recovery
of P100,000.00 under fire insurance policy and damages.
He claimed that he knew the existence of the other two
policies. But, he said that he had no knowledge of the
provision in the private respondent's policy requiring him
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JOHN WALTZ M. SUAN INSURANCE LAW ATTY. NOREEN MANATAD-DILLEN
to inform it of the prior policies and this requirement was

not mentioned to him by the private respondent's agent.
The Insurance Commission found that the petitioner did

not violate Condition 3 as he had no knowledge of the
existence of the two fire insurance policies obtained from
the PFIC; that it was Cebu Tesing Textiles w/c procured the
PFIC policies w/o informing him or securing his consent;
and that Cebu Tesing Textile, as his creditor, had insurable
interest on the stocks. The Insurance Commission then
ordered the respondent company to pay complainant the
sum of P100,000.00 with interest and attorney’s fees.
CA reversed the decision of the Insurance Commission

because it found that the petitioner knew of the existence
of the two other policies issued by the PFIC.
Issue WON there is a double insurance.
Held No double insurance exists.
Condition 3 of the subject policy is not totally free from

ambiguity and must, perforce, be meticulously analyzed.
Such analysis leads us to conclude that (a) the prohibition
applies only to double insurance, and (b) the nullity of the
policy shall only be to the extent exceeding P200,000.00
of the total policies obtained.
The first conclusion is supported by the portion of the

condition referring to other insurance "covering any of the
property or properties consisting of stocks in trade, goods
in process and/or inventories only hereby insured," and the
portion regarding the insured's declaration on the
subheading CO-INSURANCE that the co-insurer is
Mercantile Insurance Co., Inc. in the sum of P50,000.00. A
double insurance exists where the same person is insured
by several insurers separately in respect of the same
subject and interest. As earlier stated, the insurable
interests of a mortgagor and a mortgagee on the
mortgaged property are distinct and separate. Since the
two policies of the PFIC do not cover the same interest as
that covered by the policy of the private respondent, no
double insurance exists. The non- disclosure then of the
former policies was not fatal to the petitioner's right to
recover on the private respondent's policy.
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A double insurance exists where the same person is

insured by several insurers separately in respect of the
same subject and interest.
The rationale behind the incorporation of "other insurance"

clause in fire policies is to prevent over-insurance and thus
avert the perpetration of fraud. When a property owner
obtains insurance policies from two or more insurers in a
total amount that exceeds the property's value, the insured
may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as
the insurer is interested in preventing a situation in which
a fire would be profitable to the insured.
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PALILEO VS COSIO
G.R. L-7667
November 28, 1955
Plaintiff CHERIE PALILEO

Respondent BEATRIZ COSIO
Penned BAUTISTA ANGELO
Facts On Dec. 18, 1951, Palileo obtained from Cosio a loan of
P12T. To secure payment, Cosio required Palileo to sign a
document known as “conditional sale of residential
building”, purporting to convey to Cosio, with a right to
repurchase, a two-story building of strong materials
belonging to Palileo.
After execution of the document, Cosio insured the building

against fire with Associated Insurance & Surety Co.
(Associated) for 15,000.00. The insurance policy was
issued in the name of Cosio. The building was partly
destroyed by fire and Cosio was indemnified with P13,107
by the insurance company. Palileo demanded from Cosio
that she be credited with the necessary amount to pay her
obligation out of the insurance proceeds, but Cosio refused
to do so.
Trial Court found that the debt had an unpaid balance of

P12T. It declared the obligation of Palileo to Cosio fully
compensated by virtue of the proceeds collected by Cosio
and further held that the excess of P1,107 be refunded to
Palileo.
Issue Whether the trial court was justified in considering the
obligation of Palileo fully compensated by the insurance
amount that Cosio was able to collect from Associated
Insurance.
Held No
The lower court erred in declaring that the proceeds of the

insurance taken out by the defendant on the property
mortgaged inured to the benefit of the plaintiff and in
ordering said defendant to deliver to the plaintiff the
difference between her indebtedness and the amount of
P1.107.00 insurance received by the defendant.
The rule is that "where a mortgagee, independently of the

mortgagor, insures the mortgaged property in his own
name and for his own interest, he is entitled to the
insurance proceeds in case of loss, but in such case, he is
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not allowed to retain his claim against the mortgagor, but

is passed by subrogation to the insurer to the extent of the
money paid." (Vance on Insurance, 2d ed., p. 654)
The correct solution should be that the proceeds of the

insurance should be delivered to the defendant but that her
claim against the plaintiff should be considered assigned to
the insurance company who is deemed subrogated to the
rights of the defendant to the extent of the money paid as
indemnity.
We therefore modify the judgment of the lower court as

follows:... (2) that the proceeds of the insurance
amounting to P13,107.00 was properly collected by
defendant who is not required to account for it to the
plaintiff; (3) that the collection of said insurance proceeds
shall not be deemed to have compensated the obligation
of the plaintiff to the defendant, but bars the latter from
claiming its payment from the former...
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FFIC VS JAMILA
G.R. L-27427
April 7, 1976
Plaintiff FIREMAN'S FUND INSURANCE COMPANY and FIRESTONE

TIRE AND RUBBER COMPANY OF THE PHILIPPINES
Defendant JAMILA & COMPANY, INC. and FIRST QUEZON CITY
INSURANCE CO., INC.
Penned AQUINO
Facts Firestone suffered losses of properties due to the acts of
its employees and its security guards provided under
contract by Jamila & Co., Inc. The amount of loss was
recovered from its insurer, the Fireman’s Fund Insurance
Co. who, together with the insured, sued Jamila and its
surety, the First Quezon City Insurance Co., Inc. to recover
the amount of loss on the basis of legal subrogation. The
trial court dismissed the complaint as to Jamila on the
ground that the plaintiff had no cause of action against it
for lack of the debtor’s consent to the subrogation and as
to First Quezon City Insurance Co., Inc., on the ground of
res judicata. On a motion for reconsideration, plaintiff’s
contention that there was no res judicata was sustained.
Subsequent motions for reconsideration became
interminable thereby adding delay to the final adjudication
of the parties’ controversy.
Issue WON Fireman’s Fund can subrogate to the rights of Jamila.
Held YES.
Firestone is really a nominal party in this case as it had

already been indemnified for the loss which it had
sustained. It joined as a party-plaintiff in order to help
Fireman’s Fund to recover the amount of the loss from
Jamila and First Quezon City Insurance Co., Inc. The
Supreme Court held that sufficient ultimate facts were
alleged in the complaint to sustain the cause of action
against Jamila; that the action is sanctioned by Article
2207 of the Civil Code and that Fireman’s Fund, as the
insurer is entitled to go after the person or entity that
violated its contractual commitment to answer for the loss
insured against.
Article 2207 is a restatement of a settled principle of

American jurisprudence. Subrogation has been referred to
as the doctrine of substitution. It is an arm of equity that
may guide or even force one to pay a debt for which an
obligation was incurred but which was in whole or in part
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paid by another. Subrogation is founded on principles of

justice and equity, and its operation is governed by
principles of equity. It rests on the principle that
substantial justice should be attained regardless of form,
that is, its basis is the doing of complete, essential, and
perfect justice between all the parties without regard to
form. Subrogation is a normal incident of indemnity
insurance.
Upon payment of the loss, the insurer is entitled to be

subrogated pro tanto to any right of action which the
insured may have against the third person whose
negligence or wrongful act caused the loss. The right of
subrogation is of the highest equity. The loss in the first
instance is that of the insured but after reimbursement or
compensation, it becomes the loss of insurer. Although
many policies including policies in the standard form, now
provide for subrogation, and thus determine the rights of
the insurer in this respect, the equitable right of
subrogation as the legal effect of payment inures to the
insurer without any formal assignment or any express
stipulation to that effect in the policy.
Stated otherwise, when the insurance company pays for

the loss, such payment operates as an equitable
assignment to the insurer of the property and all remedies
which the insured may have for the recovery thereof. That
right is not dependent upon, nor does it grow out of, any
privity of contract, or upon written assignment of claim,
and payment to the insured makes the insurer an assignee
in equity.
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SPS. CHA AND UNITED VS CA AND CKS

G.R. 124520
August 18, 1997
Petitioners SPOUSES NILO CHA AND STELLA UY CHA, AND UNITED

INSURANCE CO., INC.
Respondents COURT OF APPEALS and CKS DEVELOPMENT
CORPORATION
Penned PADILLA
Topic INSURABLE INTEREST
Doctrine No contract or policy of insurance on property shall be
enforceable except for the benefit of some person having
an insurable interest in the property insured.
Facts Spouses Nilo Cha and Stella Uy-Cha and CKS Development
Corporation entered a 1 year lease contract with a
stipulation (par. 18 of the lease contract) not to insure
against fire the chattels, merchandise, textiles, goods and
effects placed at any stall or store or space in the leased
premises without first obtaining the written consent and
approval of the lessor. But it insured against loss by fire
their merchandise inside the leased premises for P500,000
with the United Insurance Co., Inc. without the written
consent of CKS.
On the day the lease contract was to expire, fire broke out
inside the leased premises and CKS learning that the
spouses procured an insurance wrote to United to have the
proceeds be paid directly to them. But United refused, so
CKS filed against Spouses Cha and United.
Issue WON the aforequoted paragraph 18 of the lease contract
entered into between CKS and the Cha spouses is valid
insofar as it provides that any fire insurance policy
obtained by the lessee (Cha spouses) over their
merchandise inside the leased premises is deemed
assigned or transferred to the lessor (CKS) if said policy is
obtained without the prior written consent of the latter.
Held NO.
Section. 18. No contract or policy of insurance on property

shall be enforceable except for the benefit of some person
having an insurable interest in the property insured.
Section 25. Every stipulation in a policy of Insurance for

the payment of loss, whether the person insured has or
has not any interest in the property insured, or that the
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policy shall be received as proof of such interest, and every

policy executed by way of gaming or wagering, is void.
Section 17. The measure of an insurable interest in

property is the extent to which the insured might be
damnified by loss of injury thereof.
It is basic in the law on contracts that the stipulations

contained in a contract cannot be contrary to law, morals,
good customs, public order or public policy.
In A non-life insurance policy such as the fire insurance

policy taken by petitioner-spouses over their merchandise
is primarily a contract of indemnity. Insurable interest in
the property insured must exist at the time the insurance
takes effect and at the time the loss occurs. The basis of
such requirement of insurable interest in property insured
is based on sound public policy: to prevent a person from
taking out an insurance policy on property upon which he
has no insurable interest and collecting the proceeds of
said policy in case of loss of the property.
In the present case, it cannot be denied that CKS has no

insurable interest in the goods and merchandise inside
the leased premises under the provisions of Section 17 of
the Insurance Code which provide.
The liability of the spouses to CKS for violating their lease

contract in that Cha spouses obtained a fire insurance
policy over their own merchandise, without the consent of
CKS, is a separate and distinct issue which we do not
resolve in this case.
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SPS. TIBAY VS CA
G.R. 119655
May 24, 1996
Petitioners SPS. ANTONIO A. TIBAY and VIOLETA R. TIBAY and

OFELIA M. RORALDO, VICTORINA M. RORALDO, VIRGILIO
M. RORALDO, MYRNA M. RORALDO and ROSABELLA M.
RORALDO
Respondents COURT OF APPEALS and FORTUNE LIFE AND GENERAL
INSURANCE CO., INC.
Penned BELLOSILLO
Topic Premium
Doctrine Non-payment of premium will lapse the insurance unless
the exceptions are present. When there is no payment of
full premiums yet, the amounts received by the insures are
considered as deposits.
Facts On 22 January 1987, private respondent Fortune Life and
General Insurance Co., Inc. (FORTUNE) issued Fire
Insurance Policy in favor of the petitioners Spouses Tibay,
et al and/or on their two-storey residential building located
at Makati City, together with all their personal effects
therein.
The insurance was for P600,000.00 covering the period

from 23 January 1987 to 23 January 1988. On 23 January
1987, of the total premium of P2,983.50, petitioner Violeta
Tibay only paid P600.00 thus leaving a considerable
balance unpaid.
On 8 March 1987 the insured building was completely

destroyed by fire. Two days, Violeta Tibay paid the balance
of the premium. On the same day, she filed with FORTUNE
a claim on the fire insurance policy.
Her claim was accordingly referred to its adjuster and she

was asked to furnish pertinent documents to process her
claims. Petitioner complied.
However, in a letter dated 11 June 1987, FORTUNE denied

the claim of Violeta for violation of Policy Condition No. 2
and of Sec. 77 of the Insurance Code. It was elevated to
the Insurance commission but the case was not settled.
Hence, Violets and the other petitioners sued FORTUNE

for damages.
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RTC:
The RTC ruled for petitioners and adjudged FORTUNE liable
for the total value of the insured building and personal
properties in the amount of P600,000.00 plus interest and
attorney's fees
CA:
The CA reversed the court a quo by declaring FORTUNE not
to be liable to plaintiff-appellees therein but ordering
defendant-appellant to return to the former the premium
of P2,983.50 plus 12% interest from 10 March 1987 until
full payment.
Issue Whether the fire insurance policy is valid, binding and
enforceable upon the mere partial payment of premium.
Held NO.
Insurance is a contract whereby one undertakes for a

consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event.
The consideration is the premium, which must be paid at

the time and in the way and manner specified in the policy,
and if not so paid, the policy will lapse and be forfeited by
its own terms.
This is fully supported by Sec. 77 of the Insurance Code

which provides —
Sec. 77. An insurer is entitled to payment of the premium as
soon as the thing insured is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no policy or
contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid,
except in the case of a life or an industrial life policy whenever
the grace period provision applies.
Apparently the crux of the controversy lies in the phrase

"unless and until the premium thereof has been paid."
This leads us to the manner of payment envisioned by the

law to make the insurance policy operative and binding.
Indeed, and far more importantly, the cardinal polestar in

the construction of an insurance contract is the intention
of the parties as expressed in the policy. Courts have no
other function but to enforce the same.
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The rule that contracts of insurance will be construed in

favor of the insured and most strongly against the insurer
should not be permitted to have the effect of making a
plain agreement ambiguous and then construe it in favor
of the insured.
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VILLANUEVA VS CA
G.R. 83122
October 19, 1990
Petitioners ARTURO P. VALENZUELA and HOSPITALITA N.

VALENZUELA
Respondents THE HONORABLE COURT OF APPEALS, BIENVENIDO M.
ARAGON, ROBERT E. PARNELL, CARLOS K. CATOLICO
and THE PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, INC.
Penned GUTIERREZ JR.
Facts Arturo Valenzuela is a General Agent of Philippine American
General Insurance (Philamgen) since 1965. He was
authorized to solicit and sell in behalf of Philamgen all kinds
of non-life insurance, and in consideration of services
rendered was entitled to receive the full agent's
commission of 32.5% from Philamgen under the scheduled
commission rates. From 1973 to 1975, Valenzuela solicited
marine insurance from one of his clients, the Delta Motors
in the amount of P4.4 Million from which he was entitled to
a commission of 32%. However, Valenzuela did not receive
his full commission which amounted to P1.6 Million from
the P4.4 Million insurance coverage of the Delta Motors. In
1977, Philamgen started to become interested in and
expressed its intent to share in the commission due
Valenzuela on a fifty-fifty basis. Because of the refusal of
Valenzuela, Philamgen terminated the General Agency
Agreement of Valenzuela.
Philamgen took drastic action against Valenzuela. They

reversed the commission due to him, threatened the
cancellation of policies issued by his agency and started to
leak out news that Valenzuela has a substantial debt with
Philamgen. His agency contract was terminated.
The petitioners sought relief by filing the complaint against

the private respondents. The trial court found out that the
principal cause of the termination as agent was his refusal
to share his Delta Commission.
The court considered these acts as harassment and

ordered the company to pay for the resulting damage in
the value of the commission. They also ordered the
company to pay 350,ooo in moral damages.
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The company appealed. The CA ordered Valenzuela to

pay the entire amount of the commission. Hence, this
appeal by Valenzuela
Issues WON The agency contract is coupled with interest on the
part of agent Valenzuela
WON Philamgen Can Be Held Liable For Damages Due To

The Termination Of The General Agency Agreement It
Entered Into With The Petitioners
WON Valenzuela Is Liable To Philamgen For The Unpaid

And Uncollected Premiums
Held
The Supreme Court affirmed and granted the petition.
In the event the principal’s power to revoke an agency at

will so so pervasive, that the Supreme Court has
consistently held that termination may be effected if the
principal acts in bad faith, subject only to the principal’s
liability for damages.
The Supreme court accorded great weight on the trial

court’s factual findings and found the cause of the conflict
to be VAlenzuela's refusal to share the
commission. Philamgen told the petitioner’s of its desire
to share the DELTA COMMISSION with them. It stated that
should DELTA back out from the agreement , the
petitioners would be charged interest through a reduced
commission after full payment by DELTA.
Philamgen proposed reducing the petitioner’s commissions

by 50% thus giving them an agents commission of
16.25%. The company insisted insisted on the reduction
scheme. The company pressured the agents to share the
income with the threat to terminate the agency. The
petitioners were also told that the DELTA Commissions
would not be credited to their account. The pressure
continued until the agency was terminated.
Records will show that the agency is one “coupled with an

interest” and therefore should not be freely revocable at
the unilateral will of the company. It will also sustain the
findings that private respondent started to covet a share
of the insurance business that Valenzuela had built up,
developed and nurtured. The company, appropriated the
entire insurance business of Valenzuela. Worse, despite
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the termination of the agency. Philamgen continued to

hold Valenzuela jointly and severally liable with the insured
for the unpaid premiums.
Under these circumstances, it is clear that Valenzuela had

interest in the continuation of the agency when it was
unceremoniously terminated not only because of the
commissions he acquired but also Philmgen’s stipulation
liability against him for unpaid premiums.
There is an exception to the principle that an agency is

revocable at will and that is when the agency has been
given not only for the interest of the principal but also for
the mutual interest of the principal and the agent. The
principal may not defeat the agent's right to
indemnification by a termination of the contract. Also, if
a principal violates a contractual or quasi-contractual duty
which he owes his agent the agent may as rule bring an
appropriate action for the breach of that duty
2ND ISSUE:
If a principal acts in bad faith and with abuse of right in

terminating the agency, then he is liable in damages. The
Civil Code says that “every person must in the exercise of
his rights in the performance of his duties act with justice,
give every one his due, and observe honesty and good
faith. (Art 19, Civil code), and every person who, contrary
to law, willfully or negligently causes damages to another,
shall indemnify the latter for the same. (Art 20, Civil Code)
3RD ISSUE:
NO, Under Section 77 of the Insurance Code, the remedy

for the non-payment of premiums is to put an end to and
render the insurance policy not binding. The non-payment
of premium does not merely suspend but puts an end to
an insurance contract since the time of the payment is
peculiarly of the essence of the contract. Unless premium
is paid, an insurance contract does not take effect. Since
admittedly the premiums have not been paid, the policies
issued have lapsed. The insurance coverage did not go into
effect or did not continue and the obligation of Philamgen
as insurer ceased. Valenzuela cannot be held liable for the
unpaid and uncollected premiums.
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UCPB VS MASAGANA
G.R. 137172
April 4, 2001
Petitioner UCPB GENERAL INSURANCE CO., INC.

Respondent MASAGANA TELAMART, INC.
Penned DAVIDE JR.
Topic Premium
Doctrine Exception to the General Rule that payment of premium is
necessary for the policy or insurance contract to take effect
is extension of credit. Such that if the loss occurred even
after the due date of premium and payment was made
after, the insured would still be allowed to recover if the
loss was incurred before the expiration of the term.
Granting of credit term also causes the insurer to be
estopped from denying the validity of the insurance
contract by reason of non-payment of premiums during the
due date of such.
Facts Masagana obtained from UCPB 5 insurance on its
properties in Pasay City and Manila. All five (5) policies
reflect on their face the effectivity term from May 22, 1991
to May 22, 1992. On July 13, 1992, the properties located
at Taft Avenue, Pasay City were razed by fire. Masagana
tendered, and UCPB accepted 5 Equitable Bank Manager's
Checks in the total amount of P225,753.45 as renewal
premium payments. Masagana made its formal demand for
indemnification for the burned insured properties. On the
same day, defendant returned the five (5) manager's
checks stating in its letter that it was rejecting Masagana's
claim on the ground that said policies expired and were not
renewed for another term.
The Court of Appeals disagreed with Petitioner's stand that
Respondent's tender of payment of the premiums on 13
July 1992 did not result in the renewal of the policies,
having been made beyond the effective date of renewal as
provided under Policy Condition No. 26. Both the Court of
Appeals and the trial court found that sufficient proof exists
that Respondent, which had procured insurance coverage
from Petitioner for a number of years, had been granted a
60 to 90-day credit term for the renewal of the policies.
Such a practice had existed up to the time the claims were
filed.
In a previous decision, the court on whether the fire
insurance policies issued by petitioner to the respondent
had been extended or renewed by an implied credit
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arrangement though actual payment of premium was

tendered on a later date and after the occurrence of the
(fire) risk insured against, the issue was ruled in the
negative in view of Section 77 of the Insurance Code. This
prompted the respondent to file a motion for
reconsideration.
Issue Whether Section 77 of the Insurance Code of 1978 (P.D.
No. 1460) must be strictly applied to Petitioner's
advantage despite its practice of granting a 60- to 90-day
credit term for the payment of premiums
Held NO.
Section 77 of the Insurance Code of 1978 provides:

SECTION 77. An insurer is entitled to payment of the
premium as soon as the thing insured is exposed to
the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid
and binding unless and until the premium thereof has
been paid, except in the case of a life or an industrial
life policy whenever the grace period provision
applies.
This Section is a reproduction of Section 77 of P.D. No. 612
(The Insurance Code) promulgated on 18 December 1974.
In turn, this Section has its source in Section 72 of Act No.
2427 otherwise known as the Insurance Act as amended
by R.A. No. 3540, approved on 21 June 1963, which read:
SECTION 72. An insurer is entitled to payment of
the peril insured against, unless there is clear
agreement to grant the insured credit extension of
the premium due. No policy issued by an insurance
company is valid and binding unless and until the
premium thereof has been paid. (Emphasis supplied)
It can be seen at once that Section 77 does not restate the
portion of Section 72 expressly permitting an agreement
to extend the period to pay the premium.
But there are exceptions to Sec. 77:
1. In case of life/industrial life policy where the grace
period provision applies;
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2. When the parties agreed to pay the payment of premium

in installments;
3. When the insurer grants credit extension for payment of
premium;
4. Estoppel.
Moreover, there is nothing in Section 77 which prohibits
the parties in an insurance contract to provide a credit term
within which to pay the premiums. That agreement is not
against the law, morals, good customs, public order or
public policy. The agreement binds the parties. Article
1306 of the Civil Code provides:
ARTICLE 1306. The contracting parties may establish such
stipulations clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
Finally in the instant case, it would be unjust and
inequitable if recovery on the policy would not be permitted
against Petitioner, which had consistently granted a 60- to
90-day credit term for the payment of premiums despite
its full awareness of Section 77. Estoppel bars it from
taking refuge under said Section, since Respondent relied
in good faith on such practice.
CASE DIGEST
MAKATI TUSCANY CONDOMINIUM CORP. VS CA

G.R. 95546
November 6, 1992
Petitioner MAKATI TUSCANY CONDOMINIUM CORPORATION

Respondent THE COURT OF APPEALS, AMERICAN HOME ASSURANCE
CO., REPRESENTED BY AMERICAN INTERNATIONAL
UNDERWRITERS (PHILS.), INC.
Penned BELLOSILLO
Topic Premium
Doctrine Insurance policy will be effective notwithstanding non-
payment of premiums but it does not preclude the
insurance policy from taking effect if there was a credit
extension or that it was agreed upon that payment of
premiums shall be in instalments and there was partial
payments. As such, insurer can sue the insured for non-
payment as there was already a perfected contract.
Facts Sometime in 1982, respondent American Home Assurance
Co. (AHAC) represented by American International
Underwriters Inc. (Phils.) issued in favor of petitioner an
insurance policy covering the latter’s building and premises
from March 1982-March 1983 with a total premium of
P466,103.05. It was paid on installments from March
1982-November 1982 which AHAC accepted. It was
renewed on February 1983 for the period of March 1983-
March 1984 and the premium of the same amount was paid
in installments again which AHAC accepted. On January
1984, it was again renewed for the period of March 1984-
March 1985. Here, petitioner only made 2 installment
payments – first one for P52,000 and the second one for
P100,000. After that, petitioner refused to pay the balance
of the premium. AHAC filed an action to recover the unpaid
balance of P314,103.05. Petitioner admitted that there was
an existing insurance policy and reasoned out that he
discontinued the payment of premiums because the policy
didn’t contain a credit clause in its favor. It further claimed
that the policy was never binding and valid and no risk
attached to the policy. It further sought the refund of all
the premium payments he made from 1982-1985.
The trial court dismissed the complaint and stated that

Makati Tuscany Condo Corp.’s premium payments cannot
be refunded because there was a risk attached under the
policies; and in view of the reservation in the receipts by
AHAC, AHAC has no right to demand payment and Tuscany
is justified in not paying it. Both appealed and Tuscany was
CASE DIGEST
ordered to pay the balance of the premiums due on the

existing policy with legal interest . Petitioner now asserts
that its payment by installment of the premium invalidated
insurance policies from 1982-1984 because of Sec. 77 of
the Insurance Code which provides “An insurer is entitled
to the payment of the premium as soon as the thing is
exposed to the peril insured against. Notwithstanding any
insurance issued by an insurance company is valid and
binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies."
Issue Whether payment by installment of the premiums due on
an insurance policy invalidates the contract of insurance in
view of Sec. 77 of the Insurance Code.
Held NO.
The Court held that the subject policies are valid even if
the premiums were paid on installments. It was clearly
shown that petitioner and private respondent intended the
policies to be binding and effective notwithstanding the
payment on installment of the premiums. The contracts
were even renewed and the insurance company also
accepted that way of paying the premiums. It would defy
the basic principles of equity and fairness if the insurer
would be allowed to accept payments and later on deny
liability because the premiums were not paid in full.
As correctly stated by the Court of Appeals –
While the import of Section 77 is that prepayment of

premiums is strictly required as a condition to the validity
of the contract, We are not prepared to rule that the
request to make installment payments duly approved by
the insurer, would prevent the entire contract of insurance
from going into effect despite payment and acceptance of
the initial premium or first installment.
xxx
Section 77 merely precludes the parties from stipulating
that the policy is valid even if the premiums are not paid,
but does not expressly prohibit an agreement granting
credit extension, and such an agreement is not contrary to
morals, good customs, public order, or public policy (De
Leon, the Insurance Code, at p. 175)
CASE DIGEST
xxx
At the very least, both parties should be deemed in
estoppel to question the arrangement they have
voluntarily accepted.
It appearing from the circumstances that the parties

actually intended to make the 3 insurance contracts valid
and binding, petitioner must pay the balance. Also, where
the risk is entire and contract is indivisible, the insured is
not entitled to a refund of the premiums already paid if the
insurer was exposed to the risk insured for any period,
however brief or momentary.
CASE DIGEST
ARCE VS CAPITAL INSURANCE

G.R. L-28501
September 30, 1982
Plaintiff PEDRO ARCE

Defendant THE CAPITAL INSURANCE & SURETY CO., INC.
Penned ABAD SANTOS
Topic Premium
Doctrine An insurer is entitled to payment of premium as soon as
the thing insured is exposed to the perils insured against,
unless there is clear agreement to grant credit extension
for the premium due. No policy issued by an insurance
company is valid and binding unless and until the premium
thereof has been paid.
Facts 1. The petitioner, the insured, was the owner of a
residential house in Tondo, Manila, which had been
insured with the Capital insurance since 1961under
Fire Policy No. 24204.
2. On November 27, 1965, the COMPANY sent to the

petitioner Renewal Certificate No. 47302 to cover the
period December 5, 1965 to December 5, 1966. The
respondent also requested payment of the
corresponding premium in the amount of P38.10.
3. Anticipating that the premium could not be paid on

time, the petitioner, thru his wife, promised to pay it
on January 4, 1966. The respondent accepted the
promise but the premium was not paid on January 4,
1966.
4. When the petitioner’s house was ravaged with fire,

the petitioner’s wife presented a claim for indemnity
to the respondent. She was told that no indemnity
was due because the premium on the policy was not
paid.
5. Nonetheless the respondent tendered a check

forP300.00 as financial aid which was received by the
petitioner's daughter. The respondent reiterated that
the check was given "not as an obligation, but as a
concession" because the renewal premium had not
been paid. The petitioner cashed the check but then
sued the respondent on the policy.
CASE DIGEST
CFI: Capital Insurance and Surety Co., Inc. was ordered to

pay Pedro Arce the proceeds of a fire insurance policy.
Issue WON the petitioners are entitled to claim from their policy
despite non-payment of their premium.
Held NO.
It is obvious from both the Insurance Act, as amended, and

the stipulation of the parties that time is of the essence
in respect of the payment of the insurance premium
so that if it is not paid the contract does not take effect
unless there is still another stipulation to the contrary. In
the instant case, the petitioner was given a grace period to
pay the premium but the period having expired with no
payment made; he cannot insist that the respondent is
nonetheless obligated to him.
Moreover, the parties in this case had stipulated:
“This insurance will be deemed valid and binding

upon the respondent (Capital Assurance) only when the
premium and documentary stamps therefor have actually
been paid in full and duly acknowledged in an official
receipt signed by an authorized official/representative of
the respondent (Capital Assurance).”
CASE DIGEST
VELASCO VS APOSTOL
G.R. L-44588
May 9, 1989
Petitioners LAURA VELASCO and GRETA ACOSTA

Respondent HON. SERGIO A. F. APOSTOL and MAHARLIKA
INSURANCE CO., INC.
Penned REGALADO
Facts
Petitioners Laura Velasco and Greta Acosta were the
plaintiffs in Civil Case, which public respondent Hon. Sergio
A. F. Apostol was the presiding judge.
In that case:
On November 27, 1973 plaintiffs were riding in their

Mercury car, owned by plaintiff Laura Velasco, and driven
by their driver Restitute Guarra collided with an N/S
taxicab driven by defendant Dominador Santos
Thereafter, private respondent Maharlika Insurance Co.,

Inc. was impleaded as a defendant with an allegation that
the N/S taxicab involved was insured against third party
liability for P20,000.00 with private respondent at the time
of the accident.
RESPONDENT MAHARLIKA INSURANCE ANSWERED:

that there was no cause of action against it because at the
time of the accident, the alleged insurance policy was not
in force due to non-payment of the premium thereon.
It further averred that even if the taxicab had been
insured, the complaint would still be premature since the
policy provides that the insurer would be liable only when
the insured becomes legally liable.
PETITIONERS:
asserted that private respondent had agreed to grant the

then prospective insured a credit extension for the
premium due and shall liable under the Old Insurance law
Act No. 2427, as emended.
The former insurance law, which applies to the case under

consideration, provided that:
An insurer is entitled to the payment of premium as soon

as the thing insured is exposed to the peril insured against,
unless there is clear agreement to grant the insured credit
CASE DIGEST
extension of the premium due. No policy issued by an

insurance company is valid and binding unless and until
the premium thereof has been paid.
Thus, according to the old insurance law, the insurance

policy in question would be valid and binding
notwithstanding the non-payment of the premium if:
“there was a clear agreement to grant to the insured

credit extension.”
Such agreement may be express or implied."
Moreoever, the Intial premium was paid on December 11,

1973, days after the incident occurred, and the policy was
delivered to the petitioners on March 28, 1974.
Petitioners maintain that in spite of this late payment, the

policy is nevertheless binding because there was an implied
agreement to grant a credit extension so as to make the
policy effective. To them,
The subsequent acceptance of the premium and delivery

of the policy estops the respondent company from
asserting that the policy is ineffective.
Issue Whether there was an agreement to grant the insured

credit extension of the premium due and made maharlika
insurance liable
Held NO.
The court see no cogent proof of any such implied

agreement of credit extention.
The delivery of the policy made on March 28, 1974 and

only because the premium was had been paid not because
of the credit extension of the premium due, in fact, the
premium was paid 3 months before the delivery which is
on December 11, 1973.
Had there really been a credit extension, the insured would

not have had any apprehension or hesitation to inform the
respondent insurance company at the time of or before the
payment of the premium that an accident for which the
insurer may be held liable had already happened.
In fact, there is authority to hold that under such

circumstances, notice alone is necessary and the insured
CASE DIGEST
need not pay the premium because whatever premium

may have been due may already be deducted upon the
satisfaction of the loss under the policy.
AMENDMENT OF INSURANCE CODE OF 1978
in the present law, Section 77 of the Insurance Code of

1978 19
has deleted the clause "unless there is clear
agreement to grant the insured credit extension of the
premium due" which was then involved in this controversy.
However, Ra 10607
"Section 77. An insurer is entitled to payment of the

the peril insured against. Notwithstanding any
insurance issued by an insurance company is valid
and binding unless and until the premium thereof has
been paid, except in the case of a life or an industrial
life policy whenever the grace period provision
applies, or whenever under the broker and agency
agreements with duly licensed intermediaries, a
ninety (90)-day credit extension is given. No credit
extension to a duly licensed intermediary should
exceed ninety (90) days from date of issuance of the
policy
There is no need to elaborate on the finding of the lower

court that there was concealment by therein defendants of
a material fact, although legal effects of pertinence to this
case could be drawn therefrom. The fact withheld could not
in any event have influenced the respondent company in
entering into the supposed contract or in estimating the
character of the risk or in fixing the rate premium, for the
simple reason that no such contract existed between the
defendants and the company at the time of the accident.
Accordingly, there was nothing to rescind at that point in

time. What should be apparent from such actuations of
therein defendants, however, is the presence of bad faith
on their part, a reprehensible disregard of the principle
that insurance contracts are uberrimae fidae and demand
the most abundant good faith.
CASE DIGEST
ACME SHOE RUBBER VS CA

G.R. 56718
January 17, 1985
Petitioner ACME SHOE RUBBER & PLASTIC CORPORATION

Respondents THE COURT OF APPEALS and DOMESTIC INSURANCE
COMPANY OF THE PHILIPPINES
Penned MELENCIO-HERRERA
Facts ACME had been insuring yearly against fire its properties
with Domestic Insurance Company of the Philippines. It
continued the insurance for period of May 15, 1962 up to
May 15, 1963. On January 8, 1964, ACME only paid
P3,331.26, which DICP applied as renewal premium for the
period May 15, 1963 to May 15, 1964. Then, ACME,
through its President, signed a promissory note on May 26,
1964 promising to pay DICP within 90 days from the
effective date of the Policy the premium and documentary
stamps and failure to pay when due, it is agreed that said
policy should stand automatically cancelled.
ACME’s properties were completely destroyed by fire on

October 13, 1964. ACME filed its insurance claim but the
DICP disclaimed liability on the ground that as of the date
of loss, the properties burned were not covered by
insurance.
ACME sued on the policy before the CFI of Rizal Branch XII,
Caloocan City, for the collection of the insurance proceeds
and for damages in the form of lost profits by reason of the
delay in payment.
The trial court found DICP liable. The Appellate Court

reversed the Trial Court’s decision and dismissed the suit
on the ground that, as of the moment of loss, ACME's
properties were not insured and the INSURER could not be
held liable for any indemnity as a result of the loss.
Issue Whether there was no insurance contract since
respondent insurer accepted a one-year premium on
January 8, 1964.
Held There was no insurance contract. By the express terms of
the Promissory Note signed by its President, ACME was
fully aware that the policy would be automatically
cancelled on August 13, 1964, the 90th day from March
14, 1964, if it did not pay the premium before the former
date. There is also evidence to the effect that various
reminders by the INSURER for payment remained
CASE DIGEST
unheeded. Not having paid the 1964-1965 premium

within the extension granted, and pursuant to R.A. No.
3540, the policy was automatically cancelled and there
was no insurance coverage to speak of as of the date of
the fire on October 13, 1964.
CASE DIGEST
AFP GIC VS MOLINA

G.R. 151153
June 30, 2008
Petitioner AFP GENERAL INSURANCE CORPORATION

Respondents NOEL MOLINA, JUANITO ARQUEZA, LEODY VENANCIO,
JOSE OLAT, ANGEL CORTEZ, PANCRASIO SIMPAO,
CONRADO CALAPON AND NATIONAL LABOR RELATIONS
COMMISSION (FIRST DIVISION)
Penned QUISUMBING
Topic SURETY BOND
Doctrine Surety bond is covered by the provisions of suretyship and
under such, a surety bond once accepted remains valid and
enforceable regardless of payment of premiums.
Facts The private respondents are the complainants in a case for
illegal dismissal, docketed as NLRC NCR Case No. 02-
00672-90, filed against Radon Security & Allied Services
Agency and/or Raquel Aquias and Ever Emporium, Inc.
Radon Security appealed the Labor Arbiter’s decision to

public respondent NLRC and posted a supersedeas bond,
issued by herein petitioner AFPGIC as surety.
AFPGIC entered the fray by filing before the Labor Arbiter

an Omnibus Motion to Quash Notice/Writ of Garnishment
and to Discharge AFPGIC's Appeal Bond on the ground that
said bond "has been cancelled and thus non-existent in
view of the failure of Radon Security to pay the yearly
premiums. The petitioner contends that under Section 64
of the Insurance Code, which is deemed written into every
insurance contract or contract of surety, an insurer may
cancel a policy upon non-payment of the premium.
according to petitioner, the Court of Appeals committed a
reversible error in not holding that under Section 77 of the
Insurance Code, the surety bond between it and Radon
Security was not valid and binding for non-payment of
premiums, even as against a third person who was
intended to benefit therefrom.
Issue WON the Court of Appeals seriously erred in sustaining the
decision of the public respondent NLRC although the latter
gravely abused its discretion when it arbitrarily ignored the
fact that subject appeal bond was already cancelled for
non-payment of premium and thus it could not be subject
of execution or garnishment.
Held NO
CASE DIGEST
The filing of a cash or surety bond is a jurisdictional

requirement in an appeal involving monetary award, and
the bond shall be in effect until the final disposition of the
case. A surety bond, once accepted by the obligee (the
employee to whom money benefits were due), becomes
valid and enforceable, irrespective of whether or not the
premiums thereon have been paid by the obligor (the
employer liable for payment).
The petitioner’s reliance on Sections 64 and 77 of the

Insurance Code is misplaced. The said provisions refer to
insurance contracts in general. The instant case pertains to
a surety bond; thus, the applicable provision of the
Insurance Code is Section 179. Section 179 of the
Insurance Code (RA 10607), which specifically governs
suretyship. It provides that a surety bond, once accepted
by the obligee becomes valid and enforceable, irrespective
of whether or not the premium has been paid by the...
obligor. The private respondents, the obligees here,
accepted the bond posted by Radon Security and issued by
the petitioner. Hence, the bond is both valid and
enforceable.
CASE DIGEST
LALICAN VS INSULAR LIFE

G.R. 183526
August 25, 2009
Petitioner VIOLETA R. LALICAN

Respondent THE INSULAR LIFE ASSURANCE COMPANY LIMITED, AS
REPRESENTED BY THE PRESIDENT VICENTE R. AVILON
Penned CHICO-NAZARIO
Topic INSURABLE INTEREST
Doctrine The right to have the policy be reinstated is not absolute
as such is subject to the provisions of the agreement
between the parties.
Facts Violeta is the widow of the deceased Eulogio C. Lalican
(Eulogio). During his lifetime, Eulogio applied for an
insurance policy with Insular Life. On 24 April 1997, Insular
Life, through Josephine Malaluan (Malaluan), its agent in
Gapan City, issued in favor of Eulogio Policy No. 9011992,
which contained a 20-Year Endowment Variable Income
Package Flexi Plan worth ₱500,000.00, with two riders
valued at ₱500,000.00 each. Thus, the value of the policy
amounted to ₱1,500,000.00. Violeta was named as the
primary beneficiary.
Under the terms of Policy No. 9011992, Eulogio has to pay

the premiums on a quarterly basis in the amount of
₱8,062.00, payable every 24 April, 24 July, 24 October and
24 January of each year, until the end of the 20-year period
of the policy. According to the Policy Contract, there was a
grace period of 31 days for the payment of each premium
subsequent to the first. If any premium was not paid on or
before the due date, the policy would be in default, and if
the premium remained unpaid until the end of the grace
period, the policy would automatically lapse and become
void.
Eulogio paid the premiums due on 24 July 1997 and 24

October 1997. However, he failed to pay the premium due
on 24 January 1998, even after the lapse of the grace
period of 31 days. Policy No. 9011992, therefore, lapsed
and became void. Eulogio submitted to the Cabanatuan
District Office of Insular Life, through Malaluan, on 26 May
1998, an Application for Reinstatement of Policy No.
9011992, together with the amount of ₱8,062.00 to pay
for the premium due on 24 January 1998. In a letter dated
17 July 1998, Insular Life notified Eulogio that his
Application for Reinstatement could not be fully processed
CASE DIGEST
because, although he already deposited ₱8,062.00 as

payment for the 24 January 1998 premium, he left unpaid
the overdue interest thereon amounting to ₱322.48. Thus,
Insular Life instructed Eulogio to pay the amount of interest
and to file another application for reinstatement. Eulogio
was likewise advised by Malaluan to pay the premiums that
subsequently became due on 24 April 1998 and 24 July
1998, plus interest.
On 17 September 1998, Eulogio went to Malaluan’s house

and submitted a second Application for Reinstatement of
Policy No. 9011992, including the amount of ₱17,500.00,
representing payments for the overdue interest on the
premium for 24 January 1998, and the premiums which
became due on 24 April 1998 and 24 July 1998. As
Malaluan was away on a business errand, her husband
received Eulogio’s second Application for Reinstatement
and issued a receipt for the amount Eulogio deposited. A
while later, on the same day, 17 September 1998, Eulogio
died of cardio-respiratory arrest secondary to
electrocution.
Issue Whether or not Eulogio had an existing insurable interest
in his own life until the day of his death in order to have
the insurance policy validly reinstated.
Held No
An insurable interest is one of the most basic and essential

requirements in an insurance contract. In general, an
insurable interest is that interest which a person is deemed
to have in the subject matter insured, where he has a
relation or connection with or concern in it, such that the
person will derive pecuniary benefit or advantage from the
preservation of the subject matter insured and will suffer
pecuniary loss or damage from its destruction,
termination, or injury by the happening of the event
insured against. The existence of an insurable interest
gives a person the legal right to insure the subject matter
of the policy of insurance.
Section 10 of the Insurance Code indeed provides that

every person has an insurable interest in his own life.
Section 19 of the Insurance Code also states that an
interest in the life or health of a person insured must exist
when the insurance takes effect, but need not exist
thereafter or when the loss occurs.
CASE DIGEST
In the instant case, Eulogio’s death rendered impossible

full compliance with the conditions for reinstatement of
Policy No. 9011992. True, Eulogio, before his death,
managed to file his Application for Reinstatement and
deposit the amount for payment of his overdue premiums
and interests thereon with Malaluan; but Policy No.
9011992 could only be considered reinstated after the
Application for Reinstatement had been processed and
approved by Insular Life during Eulogio’s lifetime and good
health.
"The stipulation in a life insurance policy giving the insured

the privilege to reinstate it upon written application does
not give the insured absolute right to such reinstatement
by the mere filing of an application. The insurer has the
right to deny the reinstatement if it is not satisfied as to
the insurability of the insured and if the latter does not pay
all overdue premium and all other indebtedness to the
insurer. After the death of the insured the insurance
Company cannot be compelled to entertain an application
for reinstatement of the policy because the conditions
precedent to reinstatement can no longer be determined
and satisfied."
Malaluan did not have the authority to approve Eulogio’s

Application for Reinstatement. Malaluan still had to turn
over to Insular Life Eulogio’s Application for Reinstatement
and accompanying deposits, for processing and approval
by the latter.
Violeta did not adduce any evidence that Eulogio might

have failed to fully understand the import and meaning of
the provisions of his Policy Contract and/or Application for
Reinstatement, both of which he voluntarily signed. While
it is a cardinal principle of insurance law that a policy or
contract of insurance is to be construed liberally in favor of
the insured and strictly as against the insurer company,
yet, contracts of insurance, like other contracts, are to be
construed according to the sense and meaning of the
terms, which the parties themselves have used. If such
terms are clear and unambiguous, they must be taken and
understood in their plain, ordinary and popular sense.
CASE DIGEST
GREPA VS CA
G.R. L-57308
April 23, 1990
Petitioner GREAT PACIFIC LIFE INSURANCE CORPORATION

Respondent THE HON. COURT OF APPEALS and TEODORO CORTEZ
Penned GRIÑO-AQUINO
Facts
Private respondent Teodoro Cortez, upon the solicitation of
Margarita Siega an underwriter for the petitioner Great Life
Pacific Insurance, applied for a 20-year endowment policy
of P30,000. His application, with the required medical
examination, was accepted and approved by the company
and in due course, Endowment Policy No. 221944 was
issued in his name. The policy was released for delivery
and was actually delivered to Cortez by Siega on January
25, 1973. The effective date indicated on the face of the
policy in question was December 25, 1972 with an annual
premium of P1,416.60. Mrs. Siega assured him that the
premium may be paid within the grace period of thirty (30)
days from the date of delivery of the policy. The first
premium of P1,416 was paid by him in three (3)
installments: (a) P400 – 05 February 1973; (b) P350 – 17
February 1973; (c) P666.60 – 21 February 1973.
However, Cortez was advised that his policy was not in

force and that he was asked to remit the balance of
P1,015.60 to complete his initial annual premium due on
December 15, 1972 and to take another full medical
examination at his own expense. Thus, Cortez immediately
informed the company that he was cancelling the policy
and he demanded the return of his premium plus damages.
The company ignored the demand. Thus, Cortez filed a

complaint for damages in the CFI of Negros Oriental and
prayed for the refund of the insurance premium of
P1,416.60 which he paid.
RTC: ruled in favor of Cortez and ordered the return of the

premium paid
CA: reduced the amount of moral damages
Issue WON Cortez is entitled to a refund of his premium

Held
Yes
CASE DIGEST
The Court affirmed CA’s ruling:
The premium was fully paid on 21 February 1973 or within

the grace period. Thus, the policy was already enforceable
and the company had sufficient time to examine the result
of their medical examination on the Cortez. They would not
have delivered the policy on 24 January 1973 if Cortez was
unacceptable. Moreover, the three (3) installment
payments were paid for within 30-days period and all three
(3) partial payments were officially acknowledged by the
company. To the mind of this Court, these
acknowledgments are the most eloquent proofs that at
such time the policy was already in full force and effect.
There was a breach of the contract of insurance when

Cortez was informed that his policy had never been in force
and that he must pay another premium and undergo
another medical examination to make the policy effective.
Cortez was not informed of the deadline of the payment of

the first premium so he could have complied with it. The
company, by accepting his premiums without giving him
the corresponding protection, acted in bad faith.
Sections 79, 81, 82 of PD 612 of the Insurance Code of

1978 provides when the insured is entitled to a return of
the premium paid.
SECTION 79. A person insured is entitled to a return of

premium, as follows:
(a) To the whole premium, if no part of his interest in the

thing insured be exposed to any of the perils insured
against.
(b) Where the insured is made for a definite period of time

and the insured surrenders his policy, to such portion of
the premium as corresponds with the unexpired time, at a
pro rata rate, unless a short period rate has been agreed
upon and appears on the face of the policy, after deducting
from the whole premium any claim for loss or damage
under the policy which has previously accrued: Provided,
That no holder of a life insurance policy may avail himself
of the privileges of this paragraph without sufficient causes
as otherwise provided by law.
CASE DIGEST
SECTION 81. A person insured is entitled to a return of the

premium when the contract is voidable on account of the
fraud or misrepresentation of the insurer or of his agent or
on account of facts the existence of which the insured was
ignorant without his fault; or when, by any default of the
insured other than actual fraud, the insurer never incurred
any liability under the policy.
SECTION 82. In case of an over-insurance by several

insurers, the insured is entitled to a ratable return of the
premium, proportioned to the amount by which the
aggregate sum insured in all the policies exceeds the
insurable value of the thing at risk.
Hence, the policy being inoperative or ineffectual from the

beginning, the company was never at risk. Thus, it is not
entitled to keep the premium.
CASE DIGEST
LUMIBAO VS CA
G.R. L-64677
September 13, 1990
Petitioner NORA LUMIBAO

Respondent THE HONORABLE INTERMEDIATE APPELLATE COURT AND
EUGENIO TRINIDAD
Penned CORTES
Facts
Petitioner, Nora Lumibao, a life insurance agent of Bescon
Insurance Agencies, Inc, representing the Manila Bankers
Life Insurance Corporation, convinced private respondent
Eugenio Trinidad, VP and GM of Victory Liners Inc., to take
out a life insurance policy with an annual premium of at
93,180 and a face value of 1M. Petitioner, Nora, offered to
return the amount corresponding to her commission out of
the first premium payment, equivalent to 50% thereof, so
the private respondent issued 2 postdated checks valued
at 46, 590 each or a total of 93, 180.
Nora then received her 51, 249 commission from Bescon

Insurance Agencies, Inc. but failed to pay 46, 590 to the
private respondent so the latter sent a demand letter. Nora
denied having a verbal promise to return to the private
respondent 50% of his premium. Trinidad instituted an
action against petitioner for specific performance and
damages but was dismissed because no relief can be
granted to the former as the agreement is contrary to the
Insurance Code and public policy. CA affirmed but later
ordered petitioner to pay 46, 590 to private respondent.
Hence, this petition for review before the SC.
Issue WON private respondent can recover rebate amounting to

46, 590.00 (50% of the premium paid by the insured) from
petitioner.
Held
NO
Trinidad cannot recover from Nora the amount of 46, 590

which constituted the latter’s promise of giving back 50%
of the premium paid by the insured. The Court held that
the agreement for rebate between the parties is a
prohibited transaction under Section 361 of Pres Decree
No. 961 (now Sec 370 of RA 10607).
CASE DIGEST
Pertinent law in question: Section 361 of Pres. Decree No.

961 (now Sec 370 of RA 10607) states:
No insurance company doing business in the

Philippines or any agent thereof,..or shall directly or
shall indirectly, by giving or sharing a commission or
in any manner whatsoever, pay or allow or offer to
pay or allow to the insured or to any employee of
such insured, either as an inducement to the making
of such insurance or after such insurance has been
effected, any rebate from the premium which is
specified in the policy, or any special favor or
advantage in the dividends or other benefits to
accrue thereon, or shall give or offer to give any
valuable consideration or inducement of any kind,
directly or indirectly, which is not specified in such
policy or contract of insurance…
The court holds that petitioner violated the provisions of

Section 361 of the Insurance Code of the Philippines, or
Pres. Decree No. 961(now Sec 370 of RA 10607). It is
evident that petitioner's promise to pay private respondent
an amount equivalent to 50% of the first premium
payment, which would be taken out of her commission on
the insurance policy, is covered squarely by the express
provisions of Section 361.
Section 361 of Pres. Decree No. 612 is similar to the so-

called "anti-discrimination" statutes found in other
jurisdictions which regulate the activities in the insurance
industry. The purpose of these statutes is the prevention
of unfair discriminatory practices by insurance companies,
agents and brokers in order to ensure that equal terms are
fixed for policyholders of the same insurable class and
equal expectation of life. In aid and furtherance of this
desirable policy, the statutes prohibit such practices
involving rebates or preferential treatment with respect to
the cost of the policy or the benefits allowed for the
premium.
It follows that to enforce contracts or agreements directly

forbidden under these statutes, thereby allowing recovery
thereunder, would be subversive of the very public policy
which the law was designed and intended to uphold. While
the statutes are addressed to the insurance companies,
agents and brokers, and are enacted for the protection of
CASE DIGEST
policyholders, the provisions are for the general body of

policyholders who would suffer by the enforcement of the
prohibited agreements, and not for those who have
entered into such agreements and are seeking to profit by
its terms.
CASE DIGEST
CHARTIS PHILIPPINES INSURANCE VS CYBER CITY TELESERVICES

G.R. 234299
March 3, 2021
Petitioner CHARTIS PHILIPPINES INSURANCE, INC. (NOW AIG

PHILIPPINES INSURANCE, INC.)
Respondent CYBER CITY TELESERVICES, LTD.
Penned CARANDANG
Facts Chartis is a domestic corporation engaged in the business
of insurance. Among the insurance products Chartis offers
are professional indemnity insurance and fidelity
insurance. CCTL is a call center agency specializing in CRM
services. Jardine Lloyd Thompson Insurance Brokers (JLT),
acting as broker and agent for CCTL, applied with Chartis
for quotations for professional indemnity insurance and
fidelity insurance. In September 2004, Chartis sent JLT the
quotations which were valid until October 6, 2004 for
professional indemnity insurance and until September 7,
2004, for the fidelity insurance.
On January 20, 2005, JLT transmitted "Placing

Instructions" to Chartis informing the latter that CCTL had
accepted the terms, one of which stated that the premium
payment terms is 90 days. As the 90-day period was
nearing its end, JLT requested extensions of the credit
term. Chartis agreed to give CCTL more time to pay the
premiums and the DST but to no avail. Chartis then issued
notices of cancellation which also declared that it was
crediting refund premiums for the two policies, inclusive of
tax. Still no payment having been made by then, Chartis
sued CCTL for payment of sum of money with damages.
Issue WON Chartis Philippines is entitled to payment of the
premiums.
Held
YES
The Court held that if the insured did not actually pay the
premium but the parties have agreed that the insurer's
liability has attached, then the insured is considered to
have extended credit on the premium. In this case, the
parties had agreed that Chartis was already liable to
indemnify CCTL if the contingencies occurred from January
20, 2005 onward, even though CCTL had not actually paid
the premium. CCTL was deemed to have paid the premium
on credit and was supposed to make actual payment within
CASE DIGEST
a 90-day period. This is evidenced by the Placing

Instructions.
It was through JTL that CCTL procured the insurance and

that the former, on behalf of the latter, requested a credit
extension four times through several email exchanges with
Chartis. However, Chartis could no longer bear the risk of
indemnifying a delinquent insured, so it cancelled the
policies on June 15, 2005. At that point, Chartis had been
at risk of indemnifying for five months. CCTL cannot renege
on its promise to pay the premiums after enjoying that
period of coverage.
CASE DIGEST
AMERICAN HOME ASSURANCE CO. VS CHUA

G.R. 130421
June 28, 1999
Petitioner AMERICAN HOME ASSURANCE COMPANY

Respondent ANTONIO CHUA
Penned DAVIDE JR.
Facts Petitioner is a domestic corporation engaged in the
insurance business. Sometime in 1990, respondent
obtained from petitionera fire insurance covering the
stock-in-trade of his business, Moonlight Enterprises,
located at Valencia, Bukidnon. The insurance was due to
expire on March 25 1990. On April 5 1990, respondent
issued a PCIBank Check in the amount of P2,983.50 to
petitioner’s agent, James Uy, as payment for the renewal
of the policy. In turn, the latter delivered a Renewal
Certificate to Respondent. The check was drawn against a
Manila bank and deposited in petitioner’s bank account in
Cagayan de Oro City. The corresponding official receipt was
issued on 10 April. Subsequently, a new insurance policy,
was issued, whereby petitioner undertook to indemnify
respondent for any damage or loss arising from fire up to
P200,000 for the period March 25 1990 to March 25 1991.
On April 6 1990, Moonlight Enterprises was completely

razed by fire. Total loss was estimated between
P4,000,000 and P5,000,000. Respondent filed an
insurance claim with petitioner and four other co-insurers.
Petitioner refused to honor the claim notwithstanding
several demands by respondent, thus, the latter filed an
action against petitioner before the trial court. In its
defense, petitioner claimed there was no existing insurance
contract when the fire occurred since respondent did not
pay the premium. Petitioner reiterates its stand that there
was no existing insurance contract between the parties. It
invokes Section 77 of the Insurance Code (now Section 77
of R.A No. 10607, which provides “An insurer is entitled to
payment of the premium as soon as the thing insured is
exposed to the peril insured against. Notwithstanding any
insurance issued by an insurance company is valid and
binding unless and until the premium thereof has been paid
except in the case of life or an industrial life policy
whenever the grace period provision applies.” Petitioner
emphasizes that when the fire occurred on 6 April 1990 the
insurance contract was not yet subsisting pursuant to
CASE DIGEST
Article 1249 of the Civil Code, which recognizes that a

check can only effect payment once it has been cashed.
Issue WON there was a valid payment of premium, considering
that respondent’s check was cashed after the occurrence
of the fire.
Held
YES
The general rule in insurance laws is that unless the

premium is paid, the insurance policy is not valid and
binding. The only exceptions are life and industrial life
insurance. The trial court found, as affirmed by the Court
of Appeals, that there was a valid check payment by
respondent to petitioner. The renewal certificate issued to
respondent contained the acknowledgment that premium
had been paid. It is not disputed that the check drawn by
respondent in favor of petitioner and delivered to its agent
was honored when presented and petitioner forthwith
issued its official receipt to respondent on 10 April 1990.
Section 315 of the Insurance Code provides that any

insurance company which delivers a policy or contract of
insurance to an insurance agent or insurance broker shall
be deemed to have authorized such agent or broker to
receive on its behalf payment of any premium which is due
on such policy or contract of insurance at the time of its
issuance or delivery or which becomes due thereon. In the
instant case, the best evidence of such authority is the fact
that petitioner accepted the check and issued the official
receipt for the payment. It is, as well, bound by its agent’s
acknowledgment of receipt of payment.
Section 79 of R.A No. 10607 (Section 78 in P.D No.612

before)
An acknowledgment in a policy or contract of insurance or

the receipt of premium is conclusive evidence of its
payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be
binding until the premium is actually paid.
This Section establishes a legal fiction of payment and
should be interpreted as an exception to Section 77 of R.A
No. 10607.
CASE DIGEST
STRONGHOLD INSURANCE VS PAMANA ISLAND

G.R. 174838
June 01, 2016
Petitioner STRONGHOLD INSURANCE CO., INC.

Respondent PAMANA ISLAND RESORT HOTEL AND MARINA CLUB,
INC.
Penned REYES
Facts
The case stems from an action for sum of money filed by
Pamana Island Resort Hotel and Marina Club, Inc.
(Pamana) and Flowtech Construction Corporation
(Flowtech) against Stronghold on the basis of a
Contractor's All Risk Bond of P9,047,960.14 obtained by
Flowtech in relation to the construction of Pamana's project
in Pamana Island, Subic Bay. On January 27, 1992, a fire
in the project burned down cottages being built by
Flowtech, resulting in losses to Pamana.
In a Decision dated October 14, 1999, the Regional Trial

5
Court (RTC) of Makati City, Branch 135 declared

Stronghold liable for the claim. Besides the award of
insurance proceeds, exemplary damages and attorney's
fees, the trial court ordered the payment of interest at
double the applicable rate, following Section 243 of the
Insurance Code which Stronghold was declared to have
violated, which reads.
"Section 249. The amount of any loss or damage for which

an insurer may be liable, under any policy other than life
insurance policy, shall be paid within thirty (30) days after
proof of loss is received by the insurer and ascertainment
of the loss or damage is made either by agreement
between the insured and the insurer or by arbitration; but
if such ascertainment is not had or made within sixty (60)
days after such receipt by the insurer of the proof of loss,
then the loss or damage shall be paid within ninety (90)
days after such receipt. Refusal or failure to pay the loss
or damage within the time prescribed herein will entitle the
assured to collect interest on the proceeds of the policy for
the duration of the delay at the rate of twice the ceiling
prescribed by the Monetary Board, unless such failure or
refusal to pay is based on the ground that the claim is
fraudulent.
CASE DIGEST
Ruling of the RTC
On November 22, 2005, the RTC rendered its Order 11
granting Stronghold's motion. Interest was substantially

reduced following the court's pronouncement that its
computation should be reckoned from the date of
promulgation of judgment until its finality and not from the
date of demand until full payment as enunciated in the
Decision dated October 14, 1999.
Ruling of the CA
On July 20, 2006, the CA rendered its Decision granting
Pamana's petition, explaining that the RTC Decision dated
October 14, 1999 had become final and executory, and
thus immutable and unalterable.
Issue WON the judgement rendered by the RTC has attained
finality.
Held
YES
The Court denies the petition. As correctly pointed out by

the CA, the RTC's order to implement carried substantial
changes in a judgment that had become final and
executory. These variations pertained to "(1) the date from
which the double rate of interest on the principal amount
of the claim, shall be computed; (2) up to when such
interest shall run; and (3) the applicable rate of interest."
16
Instead of "double the rate of interest [on the proceeds of

insurance] from the date of demand until fully paid," the
17
RTC's computation for purposes of execution was limited

to an interest rate of 6% per annum, resulting in a double
rate of only 12% per annum, to be reckoned from the date
of the trial court's judgment until it became final and
executory.
Applicable Rate of Interest
A disagreement, however, concerns the question of

whether an interest rate of 6% or 12% per annum should
apply in the computation, as this subject was not
specifically defined in the RTC judgment in the main case.
The Court agrees with the CA that given the provisions of

the Insurance Code, which is a special law, the applicable
rate of interest shall be that imposed in a loan or
forbearance of money as imposed by the Bangko Sentral
ng Pilipinas (BSP), even irrespective of the nature of
CASE DIGEST
Stronghold's liability. In the past years, this rate was at

12% per annum. However, in light of Circular No. 799
issued by the BSP on June 21, 2013 decreasing interest
on loans or forbearance of money, the CA's declared rate
of 12% per annum shall be reduced to 6% per annum
from the time of the circular's effectivity on July 1, 2013.
The Court explained in Nacar v. Gallery Frames that the
new rate imposed under the circular could only be applied
prospectively, and not retroactively.
CASE DIGEST
MARQUES VS FEBTC
G.R. 171379
January 10, 2011
Petitioner JOSE MARQUES and MAXILITE TECHNOLOGIES, INC.

Respondent FAR EAST BANK AND TRUST COMPANY, FAR EAST BANK
INSURANCE BROKERS, INC., and MAKATI INSURANCE
COMPANY
Penned CARPIO
Doctrine Absent any showing of its illegitimate and illegal functions,
a subsidiary ‘s separate exisence shall be respected, and
the liability of the parent corporation as well as the
subsidiary shall be confined to those arising in their
respective business.
Facts Maxilite Technologies, Inc. (Maxilite) is a domestic
corporation engaged in the importation and trading of
equipment for energy-efficiency systems. Jose N. Marques
(Marques) is the President and controlling stockholder of
Maxilite.
Far East Bank and Trust Co. (FEBTC) is a local bank which
handled the financing and related requirements of Marques
and Maxilite. Marques and Maxilite maintained accounts
with FEBTC. Accordingly, FEBTC financed Maxilite's capital
and operational... requirements through loans secured
with properties of Marques under the latter's name. Far
East Bank Insurance Brokers, Inc. (FEBIBI) is a local
insurance brokerage corporation while Makati Insurance
Company[7] is a local insurance company. Both companies
are subsidiaries of FEBTC.
On 17 June 1993, Maxilite and Marques entered into a trust
receipt transaction with FEBTC, in the sum of
US$80,765.00, for the shipment of various high-
technology equipment from the United States,[9] with the
merchandise serving as collateral.
Sometime in August 1993, FEBIBI, upon the advice of

FEBTC, facilitated the procurement and processing from
Makati Insurance Company of four separate and
independent fire insurance policies over the trust receipted
merchandise. Maxilite paid the premiums for these policies
through debit arrangement. FEBTC would debit Maxilite's
account for the premium payments, as reflected in
statements of accounts sent by FEBTC to Maxilite.
CASE DIGEST
On 19 August 1994, Insurance Policy No. 1024439,

covering the period 24 June 1994 to 24 June 1995, was
released to cover the trust receipted merchandise. the
policy including any renewal thereof and/or any
endorsement thereon is not in force until the premium has
been fully paid to and duly receipted by the Company
in the manner provided herein. Any supplementary
agreement seeking to amend this condition prepared by
agent, broker or Company official, shall be deemed invalid
and of no effect
Finding that Maxilite failed to pay the insurance premium
in the sum of P8,265.60 for Insurance Policy No. 1024439
covering the period 24 June 1994 to 24 June 1995, FEBIBI
sent written reminders to FEBTC, dated 19 October
1994,[16] 24 January 1995, and 6 March 1995, to debit
Maxilite's account.
On 24 and 26 October 1994, Maxilite fully settled its trust

receipt account. On 9 March 1995, a fire gutted the Aboitiz
Sea Transport Building along M.J. Cuenco Avenue, Cebu
City, where Maxilite’s office and warehouse were located.
As a result, Maxilite suffered losses amounting to at least
P2.1 million, which Maxilite claimed against the fire
insurance policy with Makati Insurance Company. Makati
Insurance Company denied the fire loss claim on the
ground of non-payment of premium. FEBTC and FEBIBI
disclaimed any responsibility for the denial of the claim.
Maxilite and Marques sued FEBTC, FEBIBI, and Makati
Insurance Company.
Maxilite and Marques sued FEBTC, FEBIBI, and Makati

Insurance Company. Maxilite prayed for (1) actual
damages totaling P2.3 million representing full insurance
coverage and “business opportunity losses,” (2) moral
damages, and (3) exemplary damages. On the other hand,
Marques sought payment of actual, moral and exemplary
damages, attorney’s fees, and litigation expenses.
Maxilite and Marques also sought the issuance of a
preliminary injunction or a temporary restraining to enjoin
FEBTC from (1) imposing penalties on their obligations;
(2) foreclosing the real estate mortage securing their
straight loan accounts; and (3) initiating actions to collect
their obligations. Ruling of the Trial Court... ruling in favor
of Maxilite and Marques.
The Court of Appeals affirmed the trial court's decision,
with modifications.
CASE DIGEST
Issue WON FEBTC, FEBIBI and Makati Insurance Company are

jointly and severally liable to pay respondents the full
coverage of the subject insurance policy.
Held
NO
Prior to the full settlement of the trust receipt account

on 24 and 26 October 1994, FEBTC had insurable
interest over the merchandise, and thus had greater
reason to debit Maxilite’s account. Further, as found by
the trial court, and apparently undisputed by FEBTC,
FEBIBI and Makati Insurance Company, Maxilite had
sufficient funds at the time the first reminder, dated 19
October 1994, was sent by FEBIBI to FEBTC to debit
Maxilite’s account for the payment of the insurance
premium. Since (1) FEBTC committed to debit Maxilite’s
account corresponding to the insurance premium; (2)
FEBTC had insurable interest over the property prior to the
settlement of the trust receipt account; and (3) Maxilite’s
bank account had sufficient funds to pay the insurance
premium prior to the settlement of the trust receipt
account, FEBTC should have debited Maxilite’s account as
what it had repeatedly done, as an established
practice, with respect to the previous insurance policies.
However, FEBTC failed to debit and instead disregarded the
written reminder from FEBIBI to debit Maxilite’s account.
FEBTC’s conduct clearly constitutes negligence in handling
Maxilite’s and Marques’ accounts. Negligence is defined as
“the omission to do something which a reasonable man,
guided upon those considerations which ordinarily regulate
the conduct of human affairs, would do, or the doing of
something which a prudent man and reasonable man could
not do.” As a consequence of its negligence, FEBTC must
be held liable for damages pursuant to Article 2176 of the
Civil Code which states “whoever by act or omission causes
damage to another, there being fault or negligence, is
obliged to pay for the damage done.” Indisputably, had the
insurance premium been paid, through the automatic debit
arrangement with FEBTC, Maxilite’s fire loss claim would
have been approved. Hence, Maxilite suffered damage to
the extent of the face value of the insurance policy or the
sum of P2.1 million. Contrary to Maxilite’s and Marques’
view, FEBTC is solely liable for the payment of the face
value of the insurance policy and the monetary awards
stated in the Court of Appeals’ decision. Suffice it to state
that FEBTC, FEBIBI, and Makati Insurance Company are
CASE DIGEST
independent and separate juridical entities, even if

FEBIBI and Makati Insurance Company are subsidiaries
of FEBTC. Absent any showing of its illegitimate or illegal
functions, a subsidiary’s separate existence shall be
respected, and the liability of the parent corporation as well
as the subsidiary shall be confined to those arising in their
respective business. Besides, the records are bereft of any
evidence warranting the piercing of corporate veil in order
to treat FEBTC, FEBIBI, and Makati Insurance Company as
a single entity. Likewise, there is no evidence showing
FEBIBI’s and Makati Insurance Company’s negligence
as regards the non-payment of the insurance premium.
The Court agrees with the Court of Appeals in reducing the

interest rate from 12% to 6% as the obligation to pay
does not arise from a loan or forbearance of money.
In Eastern Shipping Lines, Inc. v. Court of Appeals, 234
SCRA 78 (1994), the Court laid down the following
guidelines for the application of the proper interest rates:
I. When an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages.
The provisions under Title XVIII on “Damages” of the Civil
Code govern in determining the measure of recoverable
damages. II. With regard particularly to an award of
interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows: 1. When the obligation is
breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest
due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial
or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code. 2. When an
obligation, not constituting a loan or forbearance of money,
is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially
CASE DIGEST
(Art. 1169, Civil Code) but when such certainty cannot be

so reasonably established at the time the demand is made,
the interest shall begin to run only from the date the
judgment of the court is made (at which time the
quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be . . . the
amount finally adjudged. 3. When the judgment of the
court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent
to forbearance of credit.
Essentially, Maxilite and Marques invoke estoppel in

claiming against FEBTC, FEBIBI, and Makati Insurance
Company the face value of the insurance policy. In their
complaint, Maxilite and Marques alleged they were led to
believe and they in fact believed that the settlement of
Maxilite's trust receipt account included the payment of the
insurance premium.
Maxilite and Marques faulted FEBTC "if it failed to transmit

the premium payments on subject insurance coverage
contrary to its represented standard operating procedure
of... solely handling the insurance coverage and past
practice of debiting [Maxilite's] account."
In estoppel, a party creating an appearance of fact, which
is false, is bound by that appearance as against another
person who acted in good faith on it.F Estoppel is based on
public policy, fair dealing, good faith and justice.
Its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one who
reasonably relied thereon. It springs from equity, and is
designed to aid the law in the administration of justice
where without its aid... injustice might result
Both trial and appellate courts basically agree that FEBTC
is estopped from claiming that the insurance premium has
been unpaid. That FEBTC induced Maxilite and Marques to
believe that the insurance premium has in fact been
debited from Maxilite's account is grounded on the
following facts:
(1) FEBTC represented and committed to handle Maxilite's
financing and capital requirements, including the related
CASE DIGEST
transactions such as the insurance of the trust receipted

merchandise;
(2) prior to the subject Insurance Policy No. 1024439, the
premiums for the... three separate fire insurance policies
had been paid through automatic debit arrangement;
(3) FEBIBI sent FEBTC, not Maxilite nor Marques, written
reminders dated 19 October 1994, 24 January 1995, and
6 March 1995 to debit Maxilite's account, establishing
FEBTC's obligation to... automatically debit Maxilite's
account for the premium amount;
(4) there was no written demand from FEBTC or Makati
Insurance Company for Maxilite or Marques to pay the
insurance premium;
(5) the subject insurance policy was released to Maxilite on
19 August 1994; and
(6) the... subject insurance policy remained uncancelled
despite the alleged non-payment of the premium, making
it appear that the insurance policy remained in force and
binding.
Moreover, prior to the full settlement of the trust receipt
account on 24 and 26 October 1994, FEBTC had insurable
interest over the merchandise, and thus had greater
reason to debit Maxilite's account. Further, as found by the
trial court, and apparently undisputed by FEBTC,... FEBIBI
and Makati Insurance Company, Maxilite had sufficient
funds at the time the first reminder, dated 19 October
1994, was sent by FEBIBI to FEBTC to debit Maxilite's
account for the payment of the insurance premium. Since
(1) FEBTC committed to debit Maxilite's account...
corresponding to the insurance premium; (2) FEBTC had
insurable interest over the property prior to the settlement
of the trust receipt account; and (3) Maxilite's bank
account had sufficient funds to pay the insurance premium
prior to the settlement of the trust receipt... account,
FEBTC should have debited Maxilite's account as what it
had repeatedly done, as an established practice, with
respect to the previous insurance policies. However, FEBTC
failed to debit and instead disregarded the written
reminder from FEBIBI to debit Maxilite's account.
FEBTC's conduct clearly constitutes negligence in handling
Maxilite's and Marques' accounts. Negligence is defined as
"the omission to do something which a reasonable man,
guided upon those considerations which ordinarily regulate
the conduct of human affairs, would do, or the... doing of
something which a prudent man and reasonable man could
not do."
CASE DIGEST
Contrary to Maxilite's and Marques' view, FEBTC is solely

liable for the payment of the face value of the insurance
policy and the monetary awards stated in the Court of
Appeals' decision. Suffice it to state that FEBTC, FEBIBI,
and Makati Insurance Company are independent and...
separate juridical entities, even if FEBIBI and Makati
Insurance Company are subsidiaries of FEBTC. Absent any
showing of its illegitimate or illegal functions, a subsidiary's
separate existence shall be respected, and the liability of
the parent corporation as well as the... subsidiary shall be
confined to those arising in their respective business.
Besides, the records are bereft of any evidence warranting
the piercing of corporate veil in order to treat FEBTC,
FEBIBI, and Makati Insurance Company as a single entity.
Likewise, there is no evidence showing FEBIBI's and Makati
Insurance Company's negligence as regards the non-
payment of the insurance premium.
CASE DIGEST

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JOHN WALTZ M. SUAN INSURANCE LAW ATTY.

Petitioner ARMANDO GEAGONIA

The 1 year policy covered the stock trading of dry goods.

"3. The insured shall give notice to the Company of any

The petitioners’ stocks were destroyed by fire. He then filed

Geagonia then filed a complaint against the private

to inform it of the prior policies and this requirement was

The Insurance Commission found that the petitioner did

CA reversed the decision of the Insurance Commission

Condition 3 of the subject policy is not totally free from

The first conclusion is supported by the portion of the

A double insurance exists where the same person is

The rationale behind the incorporation of "other insurance"

Plaintiff CHERIE PALILEO

After execution of the document, Cosio insured the building

Trial Court found that the debt had an unpaid balance of

The lower court erred in declaring that the proceeds of the

The rule is that "where a mortgagee, independently of the

not allowed to retain his claim against the mortgagor, but

The correct solution should be that the proceeds of the

We therefore modify the judgment of the lower court as

Plaintiff FIREMAN'S FUND INSURANCE COMPANY and FIRESTONE

Firestone is really a nominal party in this case as it had

Article 2207 is a restatement of a settled principle of

paid by another. Subrogation is founded on principles of

Upon payment of the loss, the insurer is entitled to be

Stated otherwise, when the insurance company pays for

SPS. CHA AND UNITED VS CA AND CKS

Petitioners SPOUSES NILO CHA AND STELLA UY CHA, AND UNITED

Section. 18. No contract or policy of insurance on property

Section 25. Every stipulation in a policy of Insurance for

policy shall be received as proof of such interest, and every

Section 17. The measure of an insurable interest in

It is basic in the law on contracts that the stipulations

In A non-life insurance policy such as the fire insurance

In the present case, it cannot be denied that CKS has no

The liability of the spouses to CKS for violating their lease

Petitioners SPS. ANTONIO A. TIBAY and VIOLETA R. TIBAY and

The insurance was for P600,000.00 covering the period

On 8 March 1987 the insured building was completely

Her claim was accordingly referred to its adjuster and she

However, in a letter dated 11 June 1987, FORTUNE denied

Hence, Violets and the other petitioners sued FORTUNE

Insurance is a contract whereby one undertakes for a

The consideration is the premium, which must be paid at

This is fully supported by Sec. 77 of the Insurance Code

Apparently the crux of the controversy lies in the phrase

This leads us to the manner of payment envisioned by the

Indeed, and far more importantly, the cardinal polestar in

The rule that contracts of insurance will be construed in

Petitioners ARTURO P. VALENZUELA and HOSPITALITA N.

Philamgen took drastic action against Valenzuela. They

The petitioners sought relief by filing the complaint against

The court considered these acts as harassment and

The company appealed. The CA ordered Valenzuela to

WON Philamgen Can Be Held Liable For Damages Due To

WON Valenzuela Is Liable To Philamgen For The Unpaid

In the event the principal’s power to revoke an agency at

The Supreme court accorded great weight on the trial

Philamgen proposed reducing the petitioner’s commissions

Records will show that the agency is one “coupled with an

the termination of the agency. Philamgen continued to

Under these circumstances, it is clear that Valenzuela had