Name: Careyssa Mae I. Ipil carriage.

It does not, however, affect the relationship

Subject: INSURANCE LAW between the shipper and the insurer. The latter case is
TOPIC: CONTRACT OF INSURANCE governed by the Insurance Code.
MAYER STEEL PIPE CORPORATION and HONGKONG
GOVERNMENT SUPPLIES DEPARTMENT, petitioners, vs. The Filipino Merchants case is different from the case at
COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE bar. In Filipino Merchants, it was the insurer which filed a
CO., INC. and the CHARTER INSURANCE CORPORATION, claim against the carrier for reimbursement of the amount
respondents. it paid to the shipper. In the case at bar, it was the shipper
which filed a claim against the insurer. The basis of the
G.R. No. 124050 June 19, 1997 shipper’s claim is the “all risks” insurance policies issued by
the insurers to Mayer Steel.
FACTS:
The ruling in Filipino Merchants should apply only to suits
In 1983, Hongkong Government Supplies Department against the carrier filed either by the shipper, the
(HGSD) contracted Mayer Steel Pipe Corporation for the consignee or the insurer.
latter to manufacture and deliver various steel pipes and
fittings. Before Mayer Steel shipped the said pipes, it Name: Careyssa Mae I. Ipil
insured them with two insurance companies namely, Subject: INSURANCE LAW
South Sea Surety and Insurance Co., Inc. and Charter TOPIC: DOING OR TRANSACTING AN INSURANCE BUSINESS
Insurance Corporation – each insurer covering different PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF
portions of the shipment. The insurance policies cover “all INTERNAL REVENUE
risks” which include all causes of conceivable loss or
damage. GR. NO. 1677330 September 18, 2009

When the pipes reached Hongkong, the pipes were FACTS:

discovered to have been damaged. The insurance
companies refused to make payment. On April 17 1986, Petitioner is a domestic corporation whose primary
Mayer Steel sued the insurance companies. The case purpose is to establish, maintain, conduct and operate a
reached the Court of Appeals. The CA ruled that the case prepaid group practice health care delivery system or a
filed by Mayer Steel should be dismissed. It held that the health maintenance organization to take care of the sick
action is barred under Section 3(6) of the Carriage of and disabled persons enrolled in the health care plan and
Goods by Sea Act since it was filed only on April 17, 1986, to provide for the administrative, legal, and financial
more than two years from the time the goods were responsibilities of the organization. On January 27, 2000,
unloaded from the vessel. Section 3(6) of the Carriage of respondent CIR sent petitioner a formal deman letter and
Goods by Sea Act provides that “the carrier and the ship the corresponding assessment notices demanding the
shall be discharged from all liability in respect of loss or payment of deficiency taxes, including surcharges and
damage unless suit is brought within one year after delivery interest, for the taxable years 1996 and 1997 in the total
of the goods or the date when the goods should have amount of P224,702,641.18. The deficiency assessment was
been delivered.” The CA ruled that this provision applies imposed on petitioner’s health care agreement with the
not only to the carrier but also to the insurer, citing the case members of its health care program pursuant to Section
of Filipino Merchants Insurance Co., Inc. vs Alejandro. 185 of the 1997 Tax Code. Petitioner protested the
assessment in a letter dated February 23, 2000. As
ISSUE: respondent did not act on the protest, petitioner filed a
petition for review in the Court of Tax Appeals (CTA)
Whether or not the Court of Appeals is correct. seeking the cancellation of the deficiency VAT and DST
assessments. On April 5, 2002, the CTA rendered a decision,
HELD: ordering the petitioner to PAY the deficiency VAT
amounting to P22,054,831.75 inclusive of 25% surcharge
No. Section 3(6) of the Carriage of Goods by Sea Act plus 20% interest from January 20, 1997 until fully paid for
states that the carrier and the ship shall be discharged the 1996 VAT deficiency and P31,094,163.87 inclusive of
from all liability for loss or damage to the goods if no suit is 25% surcharge plus 20% interest from January 20, 1998 until
filed within one year after delivery of the goods or the date fully paid for the 1997 VAT deficiency. Accordingly, VAT
when they should have been delivered. Under this Ruling No. [231]-88 is declared void and without force and
provision, only the carrier’s liability is extinguished if no suit effect. The 1996 and 1997 deficiency DST assessment
is brought within one year. But the liability of the insurer is against petitioner is hereby CANCELLED AND SET ASIDE.
not extinguished because the insurer’s liability is based not Respondent is ORDERED to DESIST from collecting the said
on the contract of carriage but on the contract of DST deficiency tax. Respondent appealed the CTA
insurance. A close reading of the law reveals that the decision to the (CA) insofar as it cancelled the DST
Carriage of Goods by Sea Act governs the relationship assessment. He claimed that petitioner’s health care
between the carrier on the one hand and the shipper, the agreement was a contract of insurance subject to DST
consignee and/or the insurer on the other hand. It defines under Section 185 of the 1997 Tax Code.
the obligations of the carrier under the contract of
On August 16, 2004, the CA rendered its decision which Eternal Gardens Memorial Park Corporation vs. The
held that petitioner’s health care agreement was in the Philippine American Life Insurance Company
nature of a non-life insurance contract subject to DST.
Respondent is ordered to pay the deficiency G.R. No. 166245 April 9, 2008
Documentary Stamp Tax. Petitioner moved for
reconsideration but the CA denied it. Facts:

ISSUES: On December 10, 1980, respondent Philippine American

Life Insurance Company (Philamlife) entered into an
(1) Whether or not Philippine Health Care Providers, Inc. agreement denominated as Creditor Group Life Policy No.
engaged in insurance business. P-192 with petitioner Eternal Gardens Memorial Park
Corporation (Eternal). Under the policy, the clients of
(2) Whether or not the agreements between petitioner Eternal who purchased burial lots from it on installment
and its members possess all elements necessary in the basis would be insured by Philamlife. The amount of
insurance contract. insurance coverage depended upon the existing balance
of the purchased burial lots. The policy was to be effective
HELD: for a period of one year, renewable on a yearly basis.
Eternal sent a letter dated August 20, 1984 to Philamlife,
NO. Health Maintenance Organizations are not engaged which served as an insurance claim for Chuang’s death.
in the insurance business. The SC said in June 12, 2008 In reply, Philamlife wrote Eternal a letter on November 12,
decision that it is irrelevant that petitioner is an HMO and 1984, requiring Eternal to submit the following documents
not an insurer because its agreements are treated as relative to its insurance claim for Chuang’s death: (1)
insurance contracts and the DST is not a tax on the business Certificate of Claimant (with form attached); (2) Assured’s
but an excise on the privilege, opportunity or facility used Certificate (with form attached); (3) Application for
in the transaction of the business. Petitioner, however, Insurance accomplished and signed by the insured,
submits that it is of critical importance to characterize the Chuang, while still living; and (4) Statement of Account
business it is engaged in, that is, to determine whether it is showing the unpaid balance of Chuang before his
an HMO or an insurance company, as this distinction is [Link] transmitted the required documents
indispensable in turn to the issue of whether or not it is liable through a letter dated November 14, 1984, which was
for DST on its health care agreements. Petitioner is received by Philamlife on November 15, 1984.
admittedly an HMO. Under RA 7878 an HMO is “an entity
that provides, offers or arranges for coverage of After more than a year, Philamlife had not furnished Eternal
designated health services needed by plan members for with any reply to the latter’s insurance claim. This
a fixed prepaid premium. The payments do not vary with prompted Eternal to demand from Philamlife the payment
the extent, frequency or type of services provided. Section of the claim for PhP 100,000 on April 25, 1986. In response
2 (2) of PD 1460 enumerates what constitutes “doing an to Eternal’s demand, Philamlife denied Eternal’s insurance
insurance business” or “transacting an insurance claim in a letter dated May 20, 1986. The letter stated that
business”which are making or proposing to make, as no application for group insurance was transmitted prior to
insurer, any insurance contract; making or proposing to the death of Chuang but it was only submitted after the
make, as surety, any contract of suretyship as a vocation latter’s death thus, he is not covered under the Policy.
and not as merely incidental to any other legitimate Consequently, Eternal filed a case before the Makati City
business or activity of the surety; doing any kind of business, Regional Trial Court (RTC) for a sum of money against
including a reinsurance business, specifically recognized Philamlife.
as constituting the doing of an insurance business within
the meaning of this Code; doing or proposing to do any Issues:
business in substance equivalent to any of the foregoing in
a manner designed to evade the provisions of this Code. [Link] or not there was a valid insurance coverage.

Overall, petitioner appears to provide insurance-type [Link] or not Philamlife assumed the risk of loss without
benefits to its members (with respect to its curative approving the application.
medical services), but these are incidental to the principal
activity of providing them medical care. The “insurance- Ruling:
like” aspect of petitioner’s business is miniscule compared
to its noninsurance activities. Therefore, since it 1. Yes. The fact of the matter is, the letter dated
substantially provides health care services rather than December 29, 1982, which Philamlife stamped as
insurance services, it cannot be considered as being in the received, states that the insurance forms for the attached
insurance business. list of burial lot buyers were attached to the letter. Such
stamp of receipt has the effect of acknowledging receipt
Name: Careyssa Mae I. Ipil of the letter together with the attachments. Such receipt is
Subject: INSURANCE LAW an admission by Philamlife against its own interest. The
TOPIC: CONTRACT OF ADHESION OR FINE PRINT burden of evidence has shifted to Philamlife, which must
prove that the letter did not contain Chuang’s insurance
application. However, Philamlife failed to do so; thus, Held: Yes. The law provides that:
Philamlife is deemed to have received Chuang’s
insurance application. Section 1. Liability to the Public — Company will, subject to
the Limits of Liability, pay all sums necessary to discharge
2. Yes. This question must be answered in the liability of the insured in respect of —
affirmative. As earlier stated, Philamlife and Eternal
entered into an agreement denominated as Creditor (a) death of or bodily injury to or damage to property of
Group Life Policy No. P-1920 dated December 10, 1980. In any passenger as defined herein.
the policy, it is provided that: EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be
effective on the date he contracts a loan with the Assured.
However, there shall be no insurance if the application of There was also a schedule of indemnities that specified a
the Lot Purchaser is not approved by the Company. An certain amount for a certain type of injury as well as
examination of the above provision would show ambiguity hospital service payments.
between its two sentences. The first sentence appears to
state that the insurance coverage of the clients of Eternal In this case, the limits on the amount payable for certain
already became effective upon contracting a loan with kinds of expenses were not considered by the court as
Eternal while the second sentence appears to require “excluding liability for any other type of expense or
Philamlife to approve the insurance contract before the damage or loss even though actually sustained or incurred
same can become effective. It must be remembered that by the third party victim.”
an insurance contract is a contract of adhesion which
must be construed liberally in favor of the insured and The court noted that the limits of the liability was at 50,000
strictly against the insurer in order to safeguard the latter’s per person per accident. Construing this with section 1
interest. Clearly, the vague contractual provision, in means that all kinds of damages allowable by law were
Creditor Group Life Policy No. P-1920 dated December 10, also to be covered by the policy once it was shown that
1980, must be construed in favor of the insured and in favor liability has arisen.
of the effectivity of the insurance contract. On the other
hand, the seemingly conflicting provisions must be The schedule of indemnities was not a closed enumeration
harmonized to mean that upon a party’s purchase of a of the kinds of damages Western can award.
memorial lot on installment from Eternal, an insurance
contract covering the lot purchaser is created and the Western should have used far more specific language, not
same is effective, valid, and binding until terminated by the “pay all sums necessary to discharge liability” clause.
Philamlife by disapproving the insurance application. The
second sentence of Creditor Group Life Policy No. P-1920 Insurance contracts must be read by the courts with a
on the Effective Date of Benefit is in the nature of a jaundiced eye to prevent the insurer from escaping from
resolutory condition which would lead to the cessation of its obligation. Also, contracts of adhesion such as policies
the insurance contract. must be construed against the party who made them, in
this case western.
Name: Careyssa Mae I. Ipil
Subject: INSURANCE LAW Name: Careyssa Mae I. Ipil
TOPIC: Contract of Adhesion or Fine Print Rule Subject: INSURANCE LAW
Western Guaranty v CA, G.R. No. 91666 July 20, 1990 TOPIC: PARTIES IN THE INSURANCE CONTRACT: INSURER
AND INSURED
FACTS: TITLE: GREAT PACIFIC LIFE ASSURANCE CORP. VS CA, G.R.
No. 113899.
Priscilla Rodriguez was struck by a bus owned by De Dios.
She was hospitalized and her face was permanently FACTS:
disfigured. Western Guaranty, the insurance company of
the bus line, was obliged to pay due to the bodily injury A contract of group life insurance was executed between
caused by the bus. Rodriguez was able to earn a money petitioner Great Pacific Life Assurance Corporation
judgment from the court to the tune of 3000 for actual (hereinafter Grepalife) and Development Bank of the
damages, 1500 for loss of earning capacity, and 20000 for Philippines (hereinafter DBP). Grepalife agreed to insure
moral damages and attorney’s fees. De Dios filed a the lives of eligible housing loan mortgagors of DBP.
complaint against Western to indemnify the amount.
Western lost the case in the appellate court, hence this Dr. Wilfredo Leuterio, a physician and a housing debtor of
petition. DBP applied for membership in the group life insurance
plan. Subsequently, Grepalife issued Certificate No. B-
Issue: Is Western liable for paying loss of earnings, moral 18558, as insurance coverage of Dr. Leuterio, to the extent
damages and attorney's fees even if these items are not of his DBP mortgage indebtedness amounting to eighty-six
among those included in the Schedule of Indemnities set thousand, two hundred (P86,200.00) pesos.
forth in the insurance policy.
Dr. Wilfredo Leuterio, then died due to massive cerebral On June 7, 1981, the petitioner MALAYAN INSURANCE CO.,
hemorrhage. DBP submitted a death claim to INC. (hereinafter called (MICO) issued to the private
Grepalifebut denied such claim alleging that Dr. Leuterio respondent, Coronacion Pinca, Fire Insurance Policy No. F-
was not physically healthy when he applied for the 001-17212 on her property for the amount of P14,000.00
insurance which caused his death. Allegedly, such non- effective July 22, 1981, until July 22, 1982. 2
disclosure constituted concealment that justified the
denial of the claim. On October 15,1981, MICO allegedly cancelled the policy
for non-payment, of the premium and sent the
The widow of the late Dr. Leuterio filed with RTC against corresponding notice to Pinca. 3
Grepalife for specific performance with damages. RTC
and CA ruled in favor of the respondent. Hence, this On December 24, 1981, payment of the premium for Pinca
petition. was received by Domingo Adora, agent of MICO. 4

ISSUE: Whether or not Grepalife is liable to pay the On January 15, 1982, Adora remitted this payment to
insurance claim.. MICO,together with other payments. 5

RULING: Yes. Grepalife is liable to pay the insurance claim. On January 18, 1982, Pinca's property was completely
Medarda is a proper party in interest (note that it was burned. 6
Wilfredo who has been paying the premium, as the
insured, he is the real party in interest and this status was On February 5, 1982, Pinca's payment was returned by
transferred to his widow). The group life insurance or MICO to Adora on the ground that her policy had been
“mortgage redemption insurance” provides that DBP as cancelled earlier. But Adora refused to accept it.
the mortgagee is merely an assignee of Wilfredo; and that
in the event of Wilfredo’s death before his indebtedness to On April 25, 1982, it filed a motion for reconsideration,
DBP is paid, proceeds from the insurance shall first be which was denied on June 4, 1982. Insurance Commission
applied to the sum of the balance insured. But this does sustained the claim.
not cease Wilfredo to be a party to the in When DBP
submitted the insurance claim against petitioner, the latter Issue: Whether or not MICO is liable for the loss of property
denied payment thereof, interposing the defense of of the insured Pinca.
concealment committed by the insured. Thereafter, DBP
collected the debt from the mortgagor and took the Ruling:
necessary action of foreclosure on the residential lot of
private respondent.[11] In Gonzales La O vs. Yek Tong Lin Yes. We do not share MICO's view that there was no
Fire & Marine Ins. Co.[12] we held: existing insurance at the time of the loss sustained by Pinca
because her policy never became effective for non-
Insured, being the person with whom the contract was payment of premium. Payment was in fact made,
made, is primarily the proper person to bring suit thereon. rendering the policy operative as of June 22, 1981, and
* * * Subject to some exceptions, insured may thus sue, removing it from the provisions of Article 77, Thereafter, the
although the policy is taken wholly or in part for the benefit policy could be cancelled on any of the supervening
of another person named or unnamed, and although it is grounds enumerated in Article 64 (except "nonpayment of
expressly made payable to another as his interest may premium") provided the cancellation was made in
appear or otherwise. * * * Although a policy issued to a accordance therewith and with Article 65.
mortgagor is taken out for the benefit of the mortgagee
and is made payable to him, yet the mortgagor may sue A valid cancellation must, therefore, require concurrence
thereon in his own name, especially where the of the following conditions:
mortgagees interest is less than the full amount
recoverable under the policy insurance contract. (1) There must be prior notice of cancellation to the
insured;
Name: Careyssa Mae I. Ipil
Subject: INSURANCE LAW (2) The notice must be based on the occurrence, after
Topic: Aleatory Insurance the effective date of the policy, of one or more of the
MALAYAN INSURANCE CO., INC. (MICO), petitioner, grounds mentioned;
vs.
GREGORIA CRUZ ARNALDO, in her capacity as the (3) The notice must be (a) in writing, (b) mailed, or
INSURANCE COMMISSIONER, and CORONACION PINCA, delivered to the named insured, (c) at the address shown
respondents. in the policy;

(4) It must state (a) which of the grounds mentioned in

Section 64 is relied upon and (b) that upon written request
Facts: of the insured, the insurer will furnish the facts on which the
cancellation is based.
Name: Careyssa Mae I. Ipil Insurance Company of North America v. Elgin, Joliet &
Subject: INSURANCE LAW Eastern Railway Co., 229 F 2d 705 (1956)]. Similarly, where
Topic: Interpretation of Insurance Contracts the insurer pays the assured the value of the lost goods
PAN MALAYAN INSURANCE CORPORATION, vs. CA without notifying the carrier who has in good faith settled
G.R. No. 81026, April 3, 1990 the assured's claim for loss, the settlement is binding on
both the assured and the insurer, and the latter cannot
Facts: bring an action against the carrier on his right of
On December 10, 1985 PANMALAY filed a complaint for subrogation [McCarthy v. Barber Steamship Lines, Inc., 45
damages with the RTC of Makati against private Phil. 488 (1923)]. And where the insurer pays the assured for
respondents Erlinda Fabie and her driver. PANMALAY a loss which is not a risk covered by the policy, thereby
averred the following: that it insured a Mitsubishi Colt effecting "voluntary payment", the former has no right of
Lancer car with plate No. DDZ-431 and registered in the subrogation against the third party liable for the loss
name of Canlubang Automotive Resources Corporation
[CANLUBANG]; that on May 26, 1985, due to the Name: Careyssa Mae I. Ipil
"carelessness, recklessness, and imprudence" of the Subject: INSURANCE LAW
unknown driver of a pick-up with plate no. PCR-220, the TOPIC: CONTRACT IS CONSIDERED A RISK DISTRIBUTING
insured car was hit and suffered damages in the amount DEVICE
of P42,052.00; that PANMALAY defrayed the cost of repair Tibay v CA G.R. No. 119655. May 24, 1996
of the insured car and, therefore, was subrogated to the
rights of CANLUBANG against the driver of the pick-up and Facts:
his employer, Erlinda Fabie; and that, despite repeated
demands, defendants, failed and refused to pay the claim Fortune Life issued a fire insurance Policy to Tibay on her
of PANMALAY two-storey residential building at Zobel Street, Makati City.
The insurance was for P600,000.00 covering the period
On February 12, 1986, private respondents filed a Motion from January 23, 1987 to January 23, 1988. On January 23
to Dismiss alleging that PANMALAY had no cause of action 1987, Tibay only paid P600.00 of 3,000 peso premium and
against them. They argued that payment under the "own left a balance.
damage" clause of the insurance policy precluded
subrogation under Article 2207 of the Civil Code.
The insured building was completely destroyed by fire.
RTC dismissed petitioner's complaint. On appeal, the Court Tibay then paid the balance. On the same day, she filed
of Appeals upheld the decision of the RTC. Thus, the a claim on the policy. Her claim was accordingly referred
present petition. to the adjuster, Goodwill, which immediately wrote Violeta
requesting her to furnish it with the necessary documents
Issue: Whether or not the insurer PANMALAY may institute for the investigation and processing of her claim.
an action to recover the amount it had paid its assured in Petitioner complied, and she signed a non-waiver
settlement of an insurance claim against private agreement.
respondents as the parties allegedly responsible for the
damage caused to the insured vehicle Fortune denied the claim for violation of the Insurance
Code. Tibay sued for damages in the amount of
P600,000.00 representing the total coverage of the policy.
Ruling:
The trial court ruled for petitioners and made fortune liable
[Link] 2207 of the Civil Code is founded on the well-
for the total value of the insured building and personal
settled principle of subrogation. If the insured property is
properties. The Court of Appeals reversed the court by
destroyed or damaged through the fault or negligence of
removing liability from Fortune after returning the premium.
a party other than the assured, then the insurer, upon
Hence this petition for review.
payment to the assured, will be subrogated to the rights of
the assured to recover from the wrongdoer to the extent
The petitioner contended that Fortune remained liable
that the insurer has been obligated to pay. Payment by
under the subject fire insurance policy in spite of the failure
the insurer to the assured operates as an equitable
of petitioners to pay their premium in full.
assignment to the former of all remedies which the latter
may have against the third party whose negligence or
Issue: May a fire insurance policy be valid, binding and
wrongful act caused the loss. The right of subrogation is not
enforceable upon mere partial payment of premium?
dependent upon, nor does it grow out of, any privity of
contract or upon written assignment of claim. It accrues
Held: No. Petition dismissed.
simply upon payment of the insurance claim by the insurer,
The pertinent provisions read:

There are a few recognized exceptions to this rule. For This policy including any renewal thereof and/or any
instance, if the assured by his own act releases the endorsement thereon is not in force until the premium has
wrongdoer or third party liable for the loss or damage, from
liability, the insurer's right of subrogation is defeated;
been fully paid to and duly receipted by the Company in grace period applies, and when the insurer makes a
the manner provided herein. written acknowledgment of the receipt of premium to be
conclusive evidence of payment.
This policy shall be deemed effective, valid and binding
upon the Company only when the premiums therefor Hence, in the absence of clear waiver of prepayment in
have actually been paid in full and duly acknowledged in full by the insurer, the insured cannot collect on the
a receipt signed by any authorized official of the proceeds of the policy.
company. Where the premium has only been partially
paid and the balance paid only after the peril insured “The terms of the insurance policy constitute the measure
against has occurred, the insurance contract did not take of the insurer’s liability. In the absence of statutory
effect and the insured cannot collect at all on the policy. prohibition to the contrary, insurance companies have the
The Insurance Code which says that no policy or contract same rights as individuals to limit their liability and to
of insurance issued by an insurance company is valid and impose whatever conditions they deem best upon their
binding unless and until the premium has been paid. obligations not inconsistent with public policy.”

What does “unless and until the premium thereof has been Name: Careyssa Mae I. Ipil
paid” mean? Subject: INSURANCE LAW
TOPIC: UBERRIMA FIDES (PERFECT GOOD FAITH)
Escosura v. San Miguel- the legislative practice was to FIELDMEN’S INSURANCE v. MERCEDES VARGAS vda. DE
interpret “with pay” in accordance to the intention of SONGCO, et al. and CA
distinguish between full and partial payment, where the
modifying term is used. FACTS:

Petitioners used Philippine Phoenix v. Woodworks, where Federico Songco, a man of scant education [first grader],
partial payment of the premium made the policy effective owned a private jeepney. He was induced by Fieldmen’s
during the whole period of the policy. Insurance agent Benjamin Sambat to apply for a Common
Carrier’s Liability Insurance Policy covering his motor
vehicle. [As testified by Songco’s son Amor later,] Federico
he SC didn’t consider the 1967 Phoenix case as persuasive said that his vehicle is an ‘owner’ private vehicle and not
due to the different factual scenario. for passengers, but agent Sambat said that they can insure
whatever kind of vehicle because their company is not
owned by the government, so they could do what they
In Makati Tuscany v CA, the parties mutually agreed that please whenever they believe a vehicle is insurable.
the premiums could be paid in installments, hence, this Songco paid an annual premium and he was issued a
Court refused to invalidate the insurance policy. Common Carriers Accident Insurance Policy. After the
policy expired, he renewed the policy. During the
Nothing in Article 77 of the Code suggested that the effectivity of the renewed policy, the insured vehicle while
parties may not agree to allow payment of the premiums being driven by Rodolfo Songco [duly licensed driver and
in installment, or to consider the contract as valid and Federico’s son] collided with a car. As a result, Federico
binding upon payment of the first premium. Phoenix and and Rodolfo died, while Carlos (another son) and his wife
Tuscany demonstrated the waiver of prepayment in full by Angelita, and a family friend sustained physical injuries.
the insurer. In this case however, there was no waiver.
There was a stipulation that the policy wasn’t in force until The lower court held that Fieldmen’s Insurance cannot
the premium has been fully paid and receipted. escape liability under a common carrier insurance policy
on the pretext that what was insured was a private vehicle
and not a common carrier, the policy being issued upon
There was no juridical tie of indemnification from the the agent’s insistence. CA affirmed the lower court.
fractional payment of premium. The insurance contract
itself expressly provided that the policy would be effective
CA DECISION AFFIRMED; FIELDMEN’S INSURANCE IS LIABLE
only when the premium was paid in full.

Issue: WON the petitioner is liable under the insurance

Verily, it is elemental law that the payment of premium is
policy.
requisite to keep the policy of insurance in force. If the
premium is not paid in the manner prescribed in the policy
Ruling:
as intended by the parties the policy is ineffective. Partial
payment even when accepted as a partial payment will
From Qua Chee Gan v. Law Union and Rock Insurance –
not keep the policy alive.
Where inequitable conduct is shown by an insurance firm,
it is estopped from enforcing forfeitures in its favor, in order
South Sea v CA stipulated 2 exceptions to the requirement to forestall fraud or imposition on the insured. Estoppel is
of payment of the entire premium as a prerequisite to the primarily based on the doctrine of good faith and the
validity of the insurance contract. These are when in case
the insurance coverage relates to life or insurance when a
avoidance of harm that will befall the innocent party due RULING:
to its injurious reliance.
YES.
Fieldmen’s Insurance incurred legal liability under the
policy. Since some of the conditions in the policy were Section 2(2) of the Insurance Code enumerates
impossible to comply with under the existing conditions at what constitutes “doing an insurance business” or
the time and inconsistent with the known facts, the insurer transacting and insurance business”. There are: (a)
is estopped from asserting breach of such conditions. making or proposing to make, as insurer, any insurance
Except for the fact that the passengers were not fare- contract; (b) making or proposing to make, as surety, any
paying, their status as beneficiaries under the policy is contract of suretyship as a vocation and not as merely
recognized. Even if the be assumed that there was an incidental to any other legitimate business or activity of the
ambiguity, such must bestrictly interpreted against the surety; (c) doing any kind of business, including a
party that caused them. reinsurance business, specifically recognized as
constituting the doing of an insurance business within the
The contract of insurance is one of perfect good faith meaning of this Code; (d) doing or proposing to do any
(uberrima fides) not for the insured alone, but equally so business in substance equivalent to any of the foregoing in
for the insurer; in fact, it is more so for the latter, since its a manner designed to evade the provisions of this Code.
dominant bargaining position carries with it stricter Basically, an insurance contract is a contract of indemnity.
responsibility. In it, one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an
unknown or contingent event.
Name: Careyssa Mae I. Ipil
Subject: INSURANCE LAW In the case at bar, A P & I Club is a “form of
TOPIC: CONTRACT OF INDEMNITY insurance” against third party liability, where the third party
WHITE GOLD MARINE SERVICES, INC. VS. PIONEER is anyone other than the P & I Club and the members. By
INSURANCE AND SURETY CORP. AND definition then, Steamship Mutual as a P & I Club is a
mutual insurance associated engaged in the marine
THE STEAMSHIP MUTUAL UNDERWRITING ASSO. insurance business. Thus, to continue doing business here,
Steamship Mutual or through its agent Pioneer, must
FACTS: secure a license from the Insurance Commission.

White Gold Marine Services, Inc. (White Gold) Name: Careyssa Mae I. Ipil
procured a protection and indemnity coverage for its Subject: INSURANCE LAW
vessels from Steamship Mutual Underwriting Asso TOPIC: Personal Contract
(Steamship Mutual). Subsequently, White Gold was issued THE INSULAR LIVE ASSURANCE COMPANY, LTD. VS.
a Certificate of Entry and Acceptance. When White Gold CARPONIA T. EBRADO AND PASCUALA VDA. DE IBRADO
failed to fully pay its accounts, Steamship Mutual refused
to renew the coverage. FACTS:

Steamship Mutual thereafter filed a case against Buenaventura Cristor Ebrado was issued by The Life
White Gold for collection of sum of money to recover the Assurance Co., Ltd. on a whole-life with a rider for
latter’s unpaid balance. White Gold on the other hand Accidental Death. Buenaventura C. Ebrado designated
filed a complaint before the Insurance Commission Carponia T. Ebrado as the revocable beneficiary in the
claiming the Steamship Mutual violated Sections 186 and policy. Buenaventura C. Ebrado died, as the policy was in
187 of the Insurance Code, while Pioneer violated Secs. force, the Insular Life Assurance Co., Ltd. paid the
299, 300 and 301 in relation to Secs. 302 and 303 thereof. coverage. Carponia T. Ebrado filed with the insurer a
claim for the proceeds of the policy as the designated
The Insurance Commission dismissed the complaint beneficiary therein, although she admits that she and the
saying that there was no need for Steamship Mutual to insured Buenaventura Cristor Ebrado were merely living as
secure license because it was not engaged in the husband and wife without the benefit of marriage.
insurance business. Likewise, Pioneer need not obtain
another license as insurance agent and/or broker for Pascuala Vda. De Ebrado also filed her claim as the
Steamship Mutual because the latter is not involved in the widow of the deceased insured. She asserts that she is the
insurance business. Moreover, Pioneer was already on entitled to the insurance proceeds, not the common-
licensed, hence, a separate license solely as agent/broker law wife, Carponia T. Ebrado.
of Steamship Mutual was already superfluous.
ISSUE:
ISSUE:
Who is entitled to the insurance proceeds?
Is there a need for Steamship Mutual and Pioneer
to secure license? RULING:
 It is Pascuala Vda. De Ebrado, the widow of the Manila. Without knowing that Perez died, BF Lifeman
insured, and not Carponia T. Ebrado, the common-law Insurance Corporation approved the application and
wife, entitled to the insurance proceeds. issued the corresponding policy for the P50,000.00.
Petitioner Virginia Perez went to Manila to claim the
It is patent from the last paragraph of Art. 739 of benefits under the insurance policies of the deceased.
the Civil Code that a criminal conviction for adultery or She was paid P40,000.00 under the first insurance policy for
concubinage is not essential in order to establish the P20,000.00 but the insurance company refused to pay the
disqualification mentioned therein. Neither it is also claim under the additional policy coverage of P50,000.00,
necessary that a finding of such guilty or commission of the proceeds of which amount to P150,000.00.
those acts be made in a separate independent action
brought for the purpose. The guilt of the done The insurance company maintained that the insurance for
(beneficiary) may be proved by preponderance of P50,000.00 had not been perfected at the time of the
evidence in the same proceeding. It is, however, essential death of Primitivo Perez. Consequently, the insurance
that such adultery or concubinage exists at the time company refunded the amount paid.
defendant Carponia T. Ebrado was made beneficiary in BF Lifeman Insurance Corporation filed a complaint
the policy in question for the disqualification and against Virginia Perez seeking the rescission and
incapacity to exist and that it is only necessary that such declaration of nullity of the insurance contract in question.
fact be established by preponderance of evidence in the
trial. Since it is agreed in their stipulation that the Petitioner Virginia A. Perez, on the other hand, averred that
deceased insured and defendant Carponia T. Ebrado the deceased had fulfilled all his prestations under the
were living together as husband and wife without being contract and all the elements of a valid contract are
legally married and that the marriage of the insured with present. On October 25, 1991, the trial court rendered a
the other defendant Pascuala Vda. De Ebrado was valid decision in favor of petitioner ordering respondent to pay
and still existing at the time the insurance in question was 150,000 pesos. The Court of Appeals, however, reversed
purchased there is no question that defendant Carponia the decision of the trial court saying that the insurance
T. Ebrado is disqualified from becoming the beneficiary in contract for P50,000.00 could not have been perfected
the policy in question. It is quite unfortunate that the since at the time that the policy was issued, Primitivo was
Insurance Act or even the new Insurance Code does not already dead.
contain any specific provision grossly resolutory of the
prime question at hand. Rather the general rules of civil Petitioner’s motion for reconsideration having been
law should be applied to resolve this void in the Insurance denied by respondent court, the instant petition for
Law. certiorari was filed on the ground that there was a
consummated contract of insurance between the
deceased and BF Lifeman Insurance Corporation.
Name: Careyssa Mae I. Ipil
Subject: INSURANCE LAW ISSUE:
Name: Careyssa Mae I. Ipil WON the widow can receive the proceeds of the
Subject: INSURANCE LAW 2nd insurance policy
Topic: Perfection of the Contract of Insurance
RULING:
Title: Perez v CA No. Petition dismissed.
Citation: G.R. No. 112329. January 28, 2000
Perez’s application was subject to the acceptance of
FACTS: private respondent BF Lifeman Insurance Corporation. The
perfection of the contract of insurance between the
Primitivo B. Perez had been insured with the BF Lifeman deceased and respondent corporation was further
Insurance Corporation for P20,000.00. Sometime in conditioned with the following requisites stated in
October 1987, an agent of the insurance corporation, the application form:
visited Perez in Quezon and convinced him to apply for "there shall be no contract of insurance unless and until a
additional insurance coverage of P50,000.00. Virginia A. policy is issued on this application and that the said policy
Perez, Primitivo’s wife, paid P2,075.00 to the agent. The shall not take effect until the premium has been paid and
receipt issued indicated the amount received was a the policy delivered to and accepted by me/us in person
"deposit." Unfortunately, the agent lost the application while I/We, am/are in good health."
form accomplished by Perez and he asked the latter to fill BF Lifeman didn’t give its assent when it merely received
up another application form. The agent sent the the application form and all the requisite supporting
application for additional insurance of Perez to the papers of the applicant. This happens only when it gives a
Quezon office. Such was supposed to forward to the policy.
Manila office.
It is not disputed, however, that when Primitivo died on
Perez drowned. His application papers for the additional November 25, 1987, his application papers for additional
insurance of P50,000.00 were still with the Quezon. It was insurance coverage were still with the branch office of
only after some time that the papers were brought to respondent corporation in Quezon. Consequently, there
was absolutely no way the acceptance of the application blood pressure, heart trouble, diabetes, cancer, liver
could have been communicated to the applicant for the disease, asthma or peptic ulcer?
latter to accept inasmuch as the applicant at the time was
already dead. The application was approved for one year and he was
issued a Health Care Agreement. Trinos was entitled to
Petitioner insists that the condition imposed by BF that a avail of hospitalization benefits and “out-patient benefits”
policy must have been delivered to and accepted by the such as annual physical examinations and preventive
proposed insured in good health is potestative, being health care. The agreement was extended for 2 years. The
dependent upon the will of the corporation and is coverage was increased to P75,000.00 per disability.
therefore void. The court didn’t agree. A potestative
condition depends upon the exclusive will of one of the Ernani suffered a heart attack and was confined at the
parties and is considered void. The Civil Code states: When Manila Medical Center for one month. While her husband
the fulfillment of the condition depends upon the sole will was in the hospital, Julita Trinos tried to claim benefits
of the debtor, the conditional obligation shall be void. under the health care agreement. Philamcare denied her
claim and said that the Health Care Agreement was void
The following conditions were imposed by the respondent because of a concealment regarding Ernani’s medical
company for the perfection of the contract of insurance: history. Doctors at the MMC discovered at the time of
a policy must have been issued, the premiums paid, and Ernani’s confinement that he was hypertensive, diabetic
the policy must have been delivered to and accepted by and asthmatic.
the applicant while he is in good health.
The third condition isn’t potestative, because the health of Trinos paid the hospitalization expenses of P76,000. After
the applicant at the time of the delivery of the policy is her husband was discharged from the MMC, he was
beyond the control or will of the insurance company. attended by a physical therapist at home. Later, he was
Rather, the condition is a suspensive one whereby the admitted at the Chinese General Hospital. One morning,
acquisition of rights depends upon the happening of an Ernani had fever and died.
event which constitutes the condition. In this case, the
suspensive condition was the policy must have been On July 24, 1990, respondent instituted with the Regional
delivered and accepted by the applicant while he is in Trial Court of Manila an action for damages against
good health. There was non-fulfillment of the condition, Philamcare Health Systems and its president, Dr. Benito
because the applicant was already dead at the time the Reverente. She asked for reimbursement of her expenses
policy was issued. plus moral damages and attorney’s fees.

As stated above, a contract of insurance, like other RTC: Judged in favor of Julita Trinos and ordered
contracts, must be assented to by both parties either in Philamcare Health Systems to pay and reimburse the
person or by their agents. So long as an application for medical and hospital coverage of the late Ernani Trinos
insurance has not been either accepted or rejected, it is worth P76,000 plus interest, moral damages of P10,000,
merely an offer or proposal to make a contract. The P10,000.00 as exemplary damages, attorney’s fees of
contract, to be binding from the date of application, must P20,000.00, plus costs of suit.
have been a completed contract.
CA: Affirmed the decision of the trial court but deleted all
The insurance company wasn’t negligent because delay awards for damages and absolved president Reverente.
in acting on the application does not constitute
acceptance even after payment. The corporation may Petitioner’s arguments
not be penalized for the delay in the processing of the A health care agreement is not an insurance contract;
application papers due to the fact that process in a week hence the “incontestability clause” under the Insurance
wasn’t the usual timeframe in fixing the application. Delay Code does not apply. The agreement grants “living
could not be deemed unreasonable so as to constitute benefits,” such as medical check-ups and hospitalization
gross negligence. which a member may immediately enjoy so long as he is
alive upon effectivity of the agreement until its expiration.
Name: Careyssa Mae I. Ipil Only medical and hospitalization benefits are given under
Subject: INSURANCE LAW the agreement without any indemnification. Petitioner
Topic: Concealment argues that it is not an insurance company but a Health
Maintenance Organization under the Department of
Title: Philamcare Health Systems vs CA and Julita Trinos Health.
Citation: GR No. 125678, March 18, 2002
ISSUE:
FACTS:
Is a health care agreement an insurance contract? Yes
Ernani Trinos applied for a health care coverage with
Philamcare Health Systems. In the application form, he RULING:
answered no to the question: Have you or any of your
family members ever consulted or been treated for high
Section 2 (1) of the Insurance Code defines a contract of The fraudulent intent on the part of the insured must be
insurance as an agreement where one undertakes for a established to warrant rescission of the insurance contract.
consideration to indemnify another against loss, damage Concealment as a defense for the health care provider or
or liability arising from an unknown or contingent event. An insurer to avoid liability is an affirmative defense and the
insurance contract exists where the following elements duty to establish such defense by satisfactory and
concur: (1) The insured has an insurable interest; (2) The convincing evidence rests upon the provider or insurer. In
insured is subject to a risk of loss by the happening of the any case, with or without the authority to investigate,
designated peril; (3) The insurer assumes the risk; (4) Such petitioner is liable for claims made under the contract.
assumption of risk is part of a general scheme to distribute Having assumed a responsibility under the agreement,
actual losses among a large group of persons bearing a petitioner is bound to answer the same to the extent
similar risk; and (5) In consideration of the insurer’s promise, agreed upon. In the end, the liability of the health care
the insured pays a premium. provider attaches once the member is hospitalized for the
disease or injury covered by the agreement or whenever
Section 3 of the Insurance Code states that any he avails of the covered benefits which he has prepaid.
contingent or unknown event, whether past or future,
which may damnify a person having an insurable interest Under Section 27 of the Insurance Code, “concealment
against him, may be insured against. Every person has an entitles the injured party to rescind a contract of
insurable interest in the life and health of himself. insurance.” The right to rescind should be exercised
previous to the commencement of an action on the
Section 10 provides: Every person has an insurable interest contract. In this case, no rescission was made. The
in the life and health: (1) of himself, of his spouse and of his cancellation of health care agreements as in insurance
children; (2) of any person on whom he depends wholly or policies require the concurrence of the following
in part for education or support, or in whom he has a conditions: (1) Prior notice of cancellation to insured; (2)
pecuniary interest; (3) of any person under a legal Notice must be based on the occurrence after effective
obligation to him for the payment of money, respecting date of the policy of one or more of the grounds
property or service, of which death or illness might delay or mentioned; (3) Must be in writing, mailed or delivered to
prevent the performance; and (4) of any person upon the insured at the address shown in the policy; (4) Must
whose life any estate or interest vested in him depends. state the grounds relied upon provided in Section 64 of the
Insurance Code and upon request of insured, to furnish
In the case at bar, the insurable interest of respondent’s facts on which cancellation is based. None of the above
husband in obtaining the health care agreement was his pre-conditions was fulfilled in this case.
own health. The health care agreement was in the nature
of non-life insurance, which is primarily a contract of When the terms of insurance contract contain limitations
indemnity. Once the member incurs hospital, medical or on liability, courts should construe them in such a way as
any other expense arising from sickness, injury or other to preclude the insurer from non-compliance with his
stipulated contingent, the health care provider must pay obligation. Being a contract of adhesion, the terms of an
for the same to the extent agreed upon under the insurance contract are to be construed strictly against the
contract. party which prepared the contract – the insurer. Ambiguity
must be strictly interpreted against the insurer and liberally
The answer assailed by petitioner was in response to the in favor of the insured, especially to avoid forfeiture. This is
question relating to the medical history of the applicant. equally applicable to Health Care Agreements. The
This largely depends on opinion rather than fact, especially phraseology used in medical or hospital service contracts
coming from respondent’s husband who was not a must be liberally construed in favor of the subscriber, and
medical doctor. Where matters of opinion or judgment should be strictly construed against the provider.
are called for, answers made in good faith and without
intent to deceive will not avoid a policy even though they Philamcare Health Systems Inc. had twelve months from
are untrue. Thus, although false, a representation of the the date of issuance of the Agreement to contest the
expectation, intention, belief, opinion, or judgment of the membership of the patient if he had previous ailment of
insured will not avoid the policy if there is no actual fraud asthma, and six months from the issuance of the
in inducing the acceptance of the risk, or its acceptance agreement if the patient was sick of diabetes or
at a lower rate of premium. In such case the insurer is not hypertension. The periods expired, so the defense of
justified in relying upon such statement, but is obligated to concealment or misrepresentation no longer lie.
make further inquiry. There is a clear distinction between
such a case and one in which the insured is fraudulently The health care agreement is in the nature of a contract
and intentionally states to be true, as a matter of of indemnity. Hence, payment should be made to the
expectation or belief, that which he then knows, to be party who incurred the expenses. Respondent paid all
actually untrue, or the impossibility of which is shown by the hospital and medical expenses. She is entitled to
facts within his knowledge, since in such case the intent to reimbursement.
deceive the insurer is obvious and amounts to actual
fraud. Dispositive: The decision of the Court of Appeals is
affirmed.
Name: Careyssa Mae I. Ipil The terms of the contract are clear. The insured is
Subject: INSURANCE LAW specifically required to disclose to the insurer matters
Topic: Concealment relating to his health. The information which the insured
failed to disclose were material and relevant to the
Title: SUN LIFE V. CA approval and the issuance of the insurance policy. The
Citation: 245 SCRA 268 (1995) matters concealed would have definitely affected
petitioner's action on his application, either by approving
FACTS: it with the corresponding adjustment for a higher premium
or rejecting the same. Moreover, a disclosure may have
On April 15, 1986, Bacani procured a life insurance warranted a medical examination of the insured by
contract for himself from Sun Life. He was issued a life petitioner in order for it to reasonably assess the risk
insurance policy with double indemnity in case of involved in accepting the application.
accidental death. The designated beneficiary was his
mother, Bernarda. On June 26, 1987, the insured died in a Thus, "good faith" is no defense in concealment. The
plane crash. Bernarda Bacani filed a claim with Sun Life, insured's failure to disclose the fact that he was
seeking the benefits of the insurance. Sun Life conducted hospitalized for two weeks prior to filing his application for
an investigation and its findings prompted it to reject the insurance, raises grave doubts about his bonafides. It
claim. appears that such concealment was deliberate on his
part.
Sun Life discovered that 2 weeks prior to his application,
Bacani was examined and confined at the Lung Center of Name: Careyssa Mae I. Ipil
the Philippines, where he was diagnosed for renal failure. Subject: INSURANCE LAW
During his confinement, the deceased was subjected to Topic: Waiver & Estoppel
urinalysis, ultra-sonography and hematology tests. He did
not reveal such fact in his application. Title: Edillon v Manila Bankers Life
Citation: G.R. No. L-34200 September 30, 1982
In its letter, Sun Life informed Berarda, that the insured did
not disclosed material facts relevant to the issuance of the FACTS:
policy, thus rendering the contract of insurance voidable.
A check representing the total premiums paid in the Carmen O, Lapuz applied with Manila Bankers for
amount of P10,172.00 was attached to said letter. insurance coverage against accident andinjuries. She
Bernarda and her husband, filed an action for specific gave the date of her birth as July 11, 1904. She paid
performance against Sun Life. RTC ruled for Bernarda the sum of P20.00 representing the premium for which she
holding that the facts concealed by the insured were was issued the corresponding receipt. The policy was to be
made in good faith and under the belief that they need effective for 90 days. During the effectivity, Carmen O.
not be disclosed. Moreover, it held that the health history Lapuz died in a vehicular accident in the North Diversion
of the insured was immaterial since the insurance policy Road.
was "non-medical." CA affirmed. Petitioner Regina L. Edillon, a sister of the insured and the
beneficiary in the policy, filed her claim for the proceeds
ISSUE: of the insurance. Her claim having been denied, Regina L.
Edillon instituted this action in the trial court.
Whether or not the beneficiary can claim despite the
concealment. The insurance corporation relies on a provision contained
in the contract excluding its liability to pay claims under
RULING: the policy in behalf of "persons who are under the age of
sixteen (16) years of age or over the age of sixty (60) years"
NOPE. They pointed out that the insured was over sixty (60) years
Section 26 of the Insurance Code is explicit in requiring a of age when she applied for the insurance coverage,
party to a contract of insurance to communicate to the hence the policy became void. The trial court dismissed
other, in good faith, all facts within his knowledge which the complaint and ordered edillon to pay P1000. The
are material to the contract and as to which he makes no reason was that a policy of insurance being a contract
warranty, and which the other has no means of of adhesion, it was the duty of the insured to know the
ascertaining. terms of the contract he or she is entering into.
The insured could not have been qualified under the
Materiality is to be determined not by the event, but solely conditions stated in said contract and should have asked
by the probable and reasonable influence of the facts for a refund of the premium.
upon the party to whom communication is due, in forming
his estimate of the disadvantages of the proposed ISSUE:
contract or in making his inquiries (The Insurance Code,
Sec 31) Whether or not the acceptance by the insurance
corporation of the premium and the issuance of the
corresponding certificate of insurance should be deemed
a waiver of the exclusionary condition of coverage stated Title: Perla Cia. De Seguros, Inc. v. CA
in the policy. Citation: 208 SCRA 487 (1992)

RULING: FACTS:

Yes. Petition granted. Spouses Lim purchased a brand new red Ford Laser car
from Supercars, Inc. in a sale by installment secured by
The age of Lapuz was not concealed to the insurance achattel mortgage. The same car is insured with Perla
company. Her application clearly indicated her age of the Compania de Seguros (Perla). On the same day,
time of filing the same to be almost 65 years of age. Supercars, Inc. assigned its rights, title and interest to FCP
Despite such information which could hardly be Credit Corporation (FCP).
overlooked, the insurance corporation received her On a later date, the vehicle was carnapped. Spouses Lim
payment of premium and issued the filed a claim for loss with Perla but this was denied on the
corresponding certificate of insurance without question. ground that Evelyn Lim, who was using the vehicle before
There was sufficient time for the private respondent to it was carnapped, was in possession of an expired driver’s
process the application and to notice that the applicant license at the time of the loss, in violation of the authorized
was over 60 years of age and cancel the policy. driver clause of the insurance policy.
Under the circumstances, the insurance corporation is
already deemed in estoppel. It inaction to revoke the ISSUE:
policy despite a departure from the exclusionary condition  Whether or not Perla is liable despite the alleged
contained in the said policy constituted a waiver of such violation of the authorized driver clause in
condition, similar to Que Chee Gan vs. Law Union theinsurance contract
Insurance.
RULING:
The insurance company was aware, even before the
policies were issued, that in the premises insured there The Supreme Court held that Perla is liable to pay
were only two fire hydrants contrary to the requirements of the insurance claim.
the warranty in question. It is usually held that where the The comprehensive motor car insurance policy issued by
insurer, at the time of the issuance of a policy of insurance, Perla covered loss or damage to the car: (a) xxx; (b) by
has knowledge of existing facts which, if insisted on, would fire, external explosion, self-ignition or lightning or burglary,
invalidate the contract from its very inception, such housebreaking or theft; (c) xxx.
knowledge constitutes a waiver of conditions in the
contract inconsistent with the known facts, and the insurer Where a car is admittedly unlawfully and wrongfully taken
is stopped thereafter from asserting the breach of such without the owner’s consent or knowledge, such taking
conditions. To allow a company to accept one's money constitutes theft, and therefore, it is the “THEFT” clause, and
for a policy of insurance which it then knows to be void not the “AUTHORIZED DRIVER” clause that should apply.
and of no effect, though it knows as it must, that the The Court of Appeals was correct in holding that:
assured believes it to be valid and binding, is so contrary
to the dictates of honesty and fair dealing. “…Theft is an entirely different legal concept from that of
accident. Theft is committed by a person with the intent to
Capital Insurance & Surety Co., Inc. vs. - involved a gain or, to put it in another way, with the concurrence of
violation of the provision of the policy requiring the the doer’s will. On the other hand, accident, although it
payment of premiums before the insurance shall become may proceed or result from negligence, is the
effective. The company issued the policy upon the happening of an event without the concurrence of the will
execution of a promissory note for the payment of the of the person by whose agency it was caused. (Bouvier’s
premium. A check given subsequent by the insured as Law Dictionary).
partial payment of the premium was dishonored for lack Clearly, the risk against accident is distinct from the risk
of funds. Despite such deviation from the terms of the against theft. The “authorized driver clause” in a typical
policy, the insurer was held liable. “... is that although one insurance policy is in contemplation or anticipation of
of conditions of an insurance policy is that "it shall not be accident in the legal sense in which it should be
valid or binding until the first premium is paid", if it is silent understood, and not in contemplation or anticipation of
as to the mode of payment, promissory notes received by an event such as theft. The distinction – often seized upon
the company must be deemed to have been accepted by insurance companies in resisting claims from their
in payment of the premium. In other words, a requirement assureds – between death occurring as a result of
for the payment of the first or initial premium in advance accident and death occurring as a result of intent may, by
or actual cash may be waived by acceptance of analogy, apply to the case at bar. Thus, if the insured
a promissory note...” vehicle had figured in an accident at the time she drove
it with an expired license, then, appellee Perla Compania
Name: Careyssa Mae I. Ipil could properly resist appellant’s claim for indemnification
Subject: INSURANCE LAW for the loss or destruction of the vehicle resulting from the
Topic: Warranties – Effect of Breach of warranty accident. But in the present case, the loss of the insured
vehicle did not result from an accident where intent was
involved; the loss in the present case was caused by
theft, the commission of which was attended by intent.” injured passengers Rosario del Carmen, Ricardo Magsarili
and Charlie Antolin in the amount of P4,000.00 each or a
There is no causal connection between the possession of total of P12,[Link] insurance policy involved explicitly
a valid driver’s license and the loss of a vehicle. To rule limits PCSI's liability to P12,000.00 per person and
otherwise would render car insurance practically a sham toP50,000.00 per accident. We have ruled in Stokes vs.
since an insurance company can easily escape liability by Malayan Insurance Co., Inc., that the terms of the contract
citing restrictions which are not applicable or germane constitute the measure of the insurer's liability and
to the claim, thereby reducing indemnity to a shadow. compliance therewith is a condition precedent to the
insured's right of recovery from the insurer. In the case at
Name: Careyssa Mae I. Ipil bar, the insurance policy clearly and categorically placed
Subject: INSURANCE LAW PCSI's liability for all damages arising out of death or bodily
Topic: Theft Clause injury sustained by one person as a result of any one
accident atP12,000.00. Said amount complied with the
Title: Perla Compania de Seguros, Inc. vs Honorable Court minimum fixed by the law then prevailing, Section 377
of Appeals and Milagros Cayas of Presidential Decree No. 612 (which was retained by P.D.
Citation: 208 SCRA 487 (1992) No. 1460, the Insurance Code of 1978),
which provided that the liability of land transportation ve
FACTS: hicle operators for bodily injuries sustained by a passenge
r arising out of the use of their vehicles shall not be less than
Milagros Cayas was the registered owner of a Mazda bus. P12,000. In other words, under the law, the
Said passenger vehicle was insured with Perla Compania minimum liability is P12,000 per passenger. PCSI's liability
de Seguros, Inc. (PCSI) under a policy issued on February under the insurance contract
3, 1978. On December 17, 1978, the bus figured in an not being less than P12,000.00, and therefore not contrary
accident in Naic, Cavite injuring several of its passengers. to law, morals, good customs, public order or public
One of them,19-year old Edgardo Perea, sued Milagros policy, said stipulation must be upheld as effective, valid
Cayas for damages in the Court of First Instance; while and binding as between the parties. In like manner, we
three others, namely: Rosario del Carmen, Ricardo rule as valid and binding upon Cayas the condition in the
Magsarili and Charlie Antolin, agreed to a settlement policy in requiring her to secure the written permission of
of P4,000.00 each. At the pre-trial, Milagros Cayas failed to PCSI before effecting any payment in settlement of any
appear and hence, she was declared as in default. After claim against her. There is nothing unreasonable, arbitrary
trial, the court rendered a decision in favor of Perea to or objectionable in this stipulation as would warrant its
compensate the Perea with damages of Pl0,000.00 nullification. The same was obviously designed to
for medical fees; P10,000.00 for exemplary safeguard the insurer's interest against collusion between
damages; P5,000.00 for moral damages;P7,000.00 for the insured and the claimants. In her cross-examination
Attorney's fees. On November 11, 1981, Milagros Cayas before the trial court, Milagros Cayas admitted that PCSI
filed a complaint for a sum of money and damages did not give any written authority that Cayas were
against PCSI in the Court of First Instance. Milagros Cayas supposed to pay those claims. It being specifically
filed a motion to declare PCSI in default for its failure to file required that PCSI's written consent be first secured before
an answer. The motion was granted and Cayas was any payment in settlement of any claim could be made,
allowed to adduce evidence ex-parte. Cayas is precluded from seeking reimbursement of the
On July 13, 1982, the court rendered judgment by default payments made to del Carmen, Magsarili and Antolin in
ordering PCSI to pay Milagros Cayas P50,000 as view of her failure to comply with the condition contained
compensation for the injured passengers, P5,000 as in the insurance policy. Clearly, the fundamental principle
moral damages and P5,000 as attorney's fees. Said that contracts are respected as the law between the
decision was set aside after the PCSI filed a motion contracting parties finds application in the present
therefor. In due course, the court promulgated a case. Thus, it was error on the part of the trial and
decision in favor of Cayas, but removed the award of appellate courts to have disregarded the stipulations of
moral damages. PCSI appealed to the Court of Appeals, the parties and to have substituted their own interpretation
which, in its decision of May 8, 1987 the lower court's of the insurance policy. We observe that although Milagros
decision. Its motion for reconsideration having been Cayas was able to prove a total loss of only P44,000.00,
denied, PCSI filed the instant petition charging the Court PCSI was made liable for the amount of P50,000.00, the
of Appeals with having erred in affirming in toto the maximum liability per accident stipulated in the policy.
decision of the lower court. This is patent error. An insurance indemnity, being merely
ISSUE: an assistance or restitution insofar as can be fairly
Whether or not the amount of award of damages was ascertained, cannot be availed of by any accident victim
proper. or claimant as an instrument of enrichment by reason of
an accident. WHEREFORE, the decision of the Court of
RULING: Appeals is hereby modified in that petitioner
NO. PCSI seeks to limit its liability only to the payment made shall pay Milagros Cayas the amount of Twelve Thousand
by Cayas to Perea and only up to the a mount of Pesos (P12,000. 00) plus legal interest from the promulgati
P12,000.00. It altogether denies liability for the payments on of the decision of the lower court until it is fully paid
made by Cayas to the other three (3)
and attorney's fees in the amount of P5,000.00. No RULING:
pronouncement as to costs Yes Country bankers is liable. The petitioner does not
dispute that the respondent’s stocks-in-trade were insured
Name: Careyssa Mae I. Ipil against fire loss, damage or liability under Fire Insurance
Subject: INSURANCE LAW Policy and that the respondent lost its stocks-in-trade in a
Topic: DEVICES TO DELIMIT SUBJECT MATTER OF fire that occurred within the duration of said fire insurance.
INSURANCE - Exception The petitioner, however, posits the view that the cause of
the loss was an excepted risk under the terms of the fire
Title: COUNTRY BANKERS INSURANCE CORPORATION, vs. insurance policy. Where a risk is excepted by the terms of
LIANGA BAY AND COMMUNITY MULTI-PURPOSE a policy which insures against other perils or hazards, loss
COOPERATIVE from such a risk constitutes a defense which the insurer
Citation: G.R. No. 136914 January 25, 2002 may urge, since it has not assumed that risk, and from this
it follows that an insurer seeking to defeat a claim because
FACTS: of an exception or limitation in the policy has the burden
The petitioner is a domestic corporation principally of proving that the loss comes within the purview of the
engaged in the insurance business wherein it undertakes, exception or limitation set up. If a proof is made of a loss
for a consideration, to indemnify another against loss, apparently within a contract of insurance, the burden is
damage or liability from an unknown or contingent event upon the insurer to prove that the loss arose from a cause
including fire while the respondent is a duly registered of loss which is excepted or for which it is not liable, or from
cooperative judicially declared insolvent and represented a cause which limits its liability. Stated else wise, since the
by the elected assignee, Cornelio Jamero. Sometime petitioner in this case is defending on the ground of non-
in1989, the petitioner and the respondent entered into coverage and relying upon an exemption or exception
a contract of fire insurance, Fire Insurance Policy No. F- clause in the fire insurance policy, it has the burden of
1397. Under Fire Insurance, the petitioner insured the proving the facts upon which such excepted risk is based,
respondent’s stocks-in-trade against fire loss, damage or by a preponderance of evidence. But petitioner failed to
liability during the period starting from June 20, 1989 to do so. The petitioner relies on the Sworn Statements of Jose
June 20, 1990 for the sum of Two Hundred Thousand Pesos. Lomocso and Ernesto Urbiztondo and on the Spot Report
On July 1, 1989, the respondent’s building located at of Pfc. Arturo V. Juarbal specifically that:
Surigao del Sur was gutted by fire and reduced to ashes, “investigation revealed by Jose Lomocso that those
resulting in the total loss of the respondent’s stocks-in- armed men wanted to get can goods and rice for their
trade, pieces of furniture and fixtures, equipments and consumption in the forest PD investigation further disclosed
records. Due to the loss, the respondent filed an insurance that the perpetrator are members of the NPA”
claim with the petitioner under its Fire Insurance. The .Such testimony is considered hearsay and may not be
petitioner, however, denied the insurance claim on the received as proof of the truth of what he has learned. Such
ground that, based on the submitted documents, the is the hearsay rule which applies not only to oral testimony
building was set on fire by two NPA rebels who wanted to or statements but also to written evidence as well. The
obtain canned goods, rice and medicines as provisions for petitioner’s evidence to prove its defense is sadly wanting
their comrades in the forest, and that such loss was and thus, gives rise to its liability to the respondent under
an excepted risk under the policy conditions of Fire Fire Insurance Policy. A witness can testify only to those
Insurance Policy which provides: This insurance does not facts which he knows of his personal knowledge,
cover any loss or damage occasioned by or through or in which means those facts which are derived from his
consequence, directly or indirectly, of any of the following perception. Consequently, a witness may not testify as to
occurrences, namely:(d) Mutiny, riot, military or popular what he merely learned from others either because he
uprising, insurrection, rebellion, revolution, military or was told or read or heard the same. Such testimony is
usurped power. Respondent then instituted in the trial considered hearsay and may not be received as proof
court the complaint for recovery of "loss, damage of the truth of what he has learned. Such is the hearsay rule
or liability" against petitioner. The petitioner answered the which applies not only to oral testimony or statements but
complaint and reiterated the ground it earlier cited to also to written evidence as well. Thus, the Sworn
deny the insurance claim. The trial court rendered its Statements of Jose Lomocso and Ernesto Urbiztondo are
Decision in favor of the respondent declaring that inadmissible in evidence, for being hearsay, inasmuch as
the defendant-Country Bankers was liable to plaintiff- they did not take the witness stand and could not
Insolvent Cooperative and to fully pay the insurance claim therefore be cross-examined. There are exceptions to the
for the loss the insured-plaintiff sustained as a result of the hearsay rule, among which are entries in official records.
fire under its Fire Insurance in its full face value of P To be admissible in evidence, however, three (3) requisites
200,000.00 with interest of 12% per annum from date of must concur, to wit:(a) that the entry was made by a
filing of the complaint until the same is fully paid. Petitioner public officer, or by another person specially enjoined by
appealed to the Court of Appeals which affirmed the law to do so;(b) that it was made by the public officer in
decision of the trial court in its entirety. Hence, this petition. the performance of his duties, or by such other person in
the performance of a duty specially enjoined by law;
ISSUE: and(c) that the public officer or other person had sufficient
Whether Country Bankers in liable knowledge of the facts by him stated, which must have
been acquired by him personally or through official
information. The third requisite was not met in this case Pacific’s contention, for no such premium could have
since no investigation, independent of the statements been paid, since by the nature of the cover note, it did not
gathered from Jose Lomocso, was conducted by Pfc. contain, as all cover notes do not contain, particulars of
Arturo V. Juarbal. In fact, as the petitioner itself pointed the shipment that would serve as basis for the
out, citing the testimony of computation of the premiums. As a logical consequence,
Pfc. Arturo Juarbal, the latter’s Spot Report " was based no separate premiums are required to be paid on a cover
on the personal knowledge of the caretaker Jose note.
Lomocso who witnessed every single incident surrounding
the facts and circumstances of the case If the note is to be treated as a separate policy instead of
."Nonetheless, we do not sustain the trial court’s imposition integrating it to the regular policies subsequently issued, its
of twelve percent (12%) interest on the insurance claim as purpose would be meaningless for it is in a real sense a
well as the monetary award for actual and exemplary contract, not a mere application.
damages, litigation expenses and attorney’s fees for lack
of legal and valid basis. The insurance claim in this case Name: Careyssa Mae I. Ipil
is evidently not a forbearance of money, goods or credit, Subject: INSURANCE LAW
and thus the interest rate should be as it is hereby fixed at Topic: Aleatory Insurance
six percent (6%) computed from the date of filing of the
complaint. Title: Malayan Insurance Co., Inc. v. Arnaldo
WHEREFORE, the appealed Decision is MODIFIED. The rate Citation: G.R. No. L-67835 October 12, 1987
of interest on the adjudged principal amount of Two
Hundred Thousand Pesos (P200,000.00) shall be six percent FACTS:
(6%) per annum computed from the date of filing of the June 7, 1981: Malayan insurance co., inc. (MICO) issued to
Complaint in the trial court. The awards in the amounts of Coronacion Pinca, Fire Insurance Policy for her property
Fifty Thousand Pesos (P50,000.00) as actual damages, Fifty effective July 22, 1981, until July 22, 1982. October 15,1981:
Thousand Pesos(P50,000.00) as exemplary damages, Five MICO allegedly cancelled the policy for non-payment, of
Thousand Pesos (P5,000.00) as litigation expenses, and Ten the premium and sent the corresponding notice to Pinca
Thousand Pesos(P10,000.00) as attorney’s fees are hereby December 24, 1981: payment of the premium for Pinca
DELETED. Costs against the [Link] ORDERED was received by Domingo Adora, agent of MICO. January
15, 1982: Adora remitted this payment to MICO,together
Name: Careyssa Mae I. Ipil with other payments. January 18, 1982: Pinca's property
Subject: INSURANCE LAW was completely burned. February 5, 1982: Pinca's payment
Topic: THE POLICY OF INSURANCE – Policy Defined was returned by MICO to Adora on the ground that her
policy had been cancelled earlier but Adora refused to
Title: PACIFIC TIMBER V. CA accept it and instead demanded for payment
Citation: 112 SCRA 199 Under Section 416 of the Insurance Code, the period for
appeal is thirty days from notice of the decision of the
FACTS: Insurance Commission. The petitioner filed its motion for
On March 13, 1963, Pacific secured temporary insurance reconsideration on April 25, 1981, or fifteen days such
from the Workemen’s Insurance Co. for its exportation of notice, and the reglementary period began to run again
logs to Japan. Workmen issued on said date Cover Note after June 13, 1981, date of its receipt of notice of the
1010 insuring said cargo. The regular marine policies were denial of the said motion for reconsideration. As the herein
issued by the company in favor of Pacific on Apr 2, 1963. petition was filed on July 2, 1981, or nineteen days later,
The 2 marine policies bore the number 53H01032 and there is no question that it is tardy by four days.
53H01033. Insurance Commission: favored Pinca
After the issuance of the cover note but BEFORE the MICO appealed
issuance of the 2 policies, some of the logs intended to be
exported were lost due to a typhoon. Pacific filed its claim ISSUE:
with the company, but the latter refused, contending that Whether or not MICO should be liable because its agent
said loss may not be considered as covered under the Adora was authorized to receive it
cover note because such became null and void by virtue
of the issuance of the marine policies. RULING:
YES. petition is DENIED
ISSUE: SEC. 77. An insurer is entitled to payment of the premium
Whether or not the cover not was without consideration, as soon as the thing is exposed to the peril insured against.
thus null and void. Notwithstanding any agreement to the contrary, no policy
or contract of insurance issued by an insurance company
RULING: is valid and binding unless and until the premium thereof
It was with consideration. has been paid, except in the case of a life or an industrial
SC upheld Pacific’s contention that said cover not was life policy whenever the grace period provision applies.
with consideration. The fact that no separate premium SEC. 306. xxx xxx xxx
was paid on the cover note before the loss was insured Any insurance company which delivers to an insurance
against occurred does not militate against the validity of agant or insurance broker a policy or contract of
insurance shall be demmed to have authorized such Incidentally, Adora had not been informed of the
agent or broker to receive on its behalf payment of any cancellation either and saw no reason not to accept the
premium which is due on such policy or contract of said payment
insurance at the time of its issuance or delivery or which Although Pinca's payment was remitted to MICO's by its
becomes due thereon. agent on January 15, 1982, MICO sought to return it to
Payment to an agent having authority to receive or collect Adora only on February 5, 1982, after it presumably had
payment is equivalent to payment to the principal himself; learned of the occurrence of the loss insured against on
such payment is complete when the money delivered is January 18, 1982 make the motives of MICO highly
into the agent's hands and is a discharge of the suspicious.
indebtedness owing to the principal.
SEC. 64. No policy of insurance other than life shall be Name: Careyssa Mae I. Ipil
cancelled by the insurer except upon prior notice thereof Subject: INSURANCE LAW
to the insured, and no notice of cancellation shall be Topic: Contract is considered a risk-distributing device
effective unless it is based on the occurrence, after the
effective date of the policy, of one or more of the Title: Tibay, et. al v Court of Appeals
following: Citation: GR No. 119655, 24 May 1996
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing
the hazard insured against; FACTS:
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions In January 22 1987, the Petitioner Violeta Tibay (and
increasing the hazard insured against; Nicolas Roralso) obtained a fire insurance policy for their 2-
(e) physical changes in the property insured which result storey from the Private Respondent Fortune Life Insurance
in the property becoming uninsurable;or Co. The said policy covers the period from January 23,
(f) a determination by the Commissioner that the 1987 until January 23, 1988 or one year for P600, 000 and
continuation of the policy would violate or would place at the agreed premium of P2, 983.50. On January 23 or the
the insurer in violation of this Code. next day, petitioner made a partial payment of the
As for the method of cancellation, Section 65 provides as premium with P600.
follows:
SEC. 65. All notices of cancellation mentioned in the Unfortunately, on March 8 1987, the said building was
preceding section shall be in writing, mailed or delivered burned to the ground. It was only two days after the fire
to the named insured at the address shown in the policy, that Petitioner Violeta advanced the full payment of the
and shall state (a) which of the grounds set forth in section policy premium which was accepted by the insurer. On
sixty-four is relied upon and (b) that, upon written request this same day, petitioner likewise filed the claim that was
of the named insured, the insurer will furnish the facts on then referred to the insurer's adjuster. Investigation of the
which the cancellation is based. cause of fire commenced and the petitioner submitted
A valid cancellation must, therefore, require concurrence the required proof of loss.
of the following conditions:
(1) There must be prior notice of cancellation to the Despite that, the private respondent Fortune refused to
insured; pay the insurance claim saying it as not liable due to the
(2) The notice must be based on the occurrence, after non-payment by petitioner of the full amount of the
the effective date of the policy, of one or more of the premium as stated in the policy.
grounds mentioned;
(3) The notice must be (a) in writing, (b) mailed, or The petitioner then brought the matter to the Insurance
delivered to the named insured, (c) at the address shown Commission but nothing good came out. Hence this case
in the policy; filed. The trial court rule in favor of the petitioner. Upon
(4) It must state (a) which of the grounds mentioned in appeal, the Court of Appeals reversed the lower court's
Section 64 is relied upon and (b) that upon written request decision and held that Fortune is not liable but ordered it
of the insured, the insurer will furnish the facts on which the to return the premium paid with interest to the petitioner.
cancellation is based. Hence, this petition for review.
All MICO's offers to show that the cancellation was
communicated to the insured is its employee's testimony ISSUE:
that the said cancellation was sent "by mail through our Whether or not the partial payment of the premium
mailing section." without more rendered the insurance policy ineffective?
It stands to reason that if Pinca had really received the said
notice, she would not have made payment on the original RULING:
policy on December 24, 1981. Instead, she would have
asked for a new insurance, effective on that date and until YES.
one year later, and so taken advantage of the extended 1. Insurance is a contract whereby one undertakes for a
period. 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, way and manner as stated in the policy, and if respondent because the respondent paid by way of
not so paid as in this case, the policy is therefore forfeited check a day before the fire occurred and that the other
by its own terms. In this case, the policy taken out by the insurance companies promptly paid the claims. American
petitioner provides for payment of premium in full. Since homes was made to pay 750,000 in damages.
the petitioner only made partial payment with the
remaining balance paid only after the fire or peril insured The Court of Appeals found that respondent’s claim was
against has occurred, the insurance contract therefore substantially proved and petitioner’s unjustified refusal to
did not take effect barring the insured from claiming or pay the claim entitled respondent to the award of
collecting from the loss of her building. damages. American Home filed the petition reiterating its
stand that there was no existing insurance contract
2. Under Section 77 of the Insurance Code (Philippine), between the parties. It invoked Section 77 of the
it provides therein that "An insurer is entitled to payment of Insurance Code, which provides that no policy or contract
the premium as soon as the thing insured is exposed to the of insurance issued by an insurance company is valid and
peril insured against. Notwithstanding any agreement to binding unless and until the premium thereof has been
the contrary, no policy or contract of insurance issued by paid and the case of Arce v. Capital Insurance that until
an insurance company is valid and binding unless and until the premium is paid there is no insurance.
the premium thereof has been paid, except in the case of
a life or an industrial life policy whenever the grace period ISSUES:
provision applies." Herein case, the controversy is on the
payment of the premium. It cannot be disputed that 1. Whether there was a valid payment of premium,
premium is the elixir vitae of the insurance business considering that respondent’s check was cashed after the
because the insurer is required by law to maintain a occurrence of the fire
reserve fund to meet its contingent obligations to the 2. Whether respondent violated the policy by his
public. Due to this, it is imperative that the premium is paid submission of fraudulent documents and non-disclosure of
fully and promptly. To allow the possibility of paying the the other existing insurance contracts
premium even after the peril has ensued will surely 3. Whether respondent is entitled to the award of
undermine the foundation of the insurance business. damages.

RULING:
Name: Careyssa Mae I. Ipil
Subject: INSURANCE LAW Yes. No. Yes, but not all damages valid. Petition granted.
Topic: Payment of premium by check Damages modified.

Title: American Home v Chua Ratio:

Citation: G.R. No. 130421. June 28, 1999 1. The trial court found, as affirmed by the Court of
Appeals, that there was a valid check payment by
FACTS: respondent to petitioner. The court respected this.
The renewal certificate issued to respondent contained
Chua obtained from American Home a fire the acknowledgment that premium had been paid. In
insurance covering the stock-in-trade of his business. The the instant case, the best evidence of such authority is the
insurance was due to expire on March 25, 1990. On April 5, fact that petitioner accepted the check and issued the
1990, Chua issued a check for P2,983.50 to American official receipt for the payment. It is, as well, bound by its
Home’s agent, James Uy, as payment for the renewal of agent’s acknowledgment of receipt of payment.
the policy. The official receipt was issued on April 10. In
turn, the latter a renewal certificate. A new insurance Section 78 of the Insurance Code explicitly provides:
policy was issued where petitioner undertook to indemnify An acknowledgment in a policy or contract of insurance
respondent for any damage or loss arising from fire up to of the receipt of premium is conclusive evidence of its
P200,000 March 20, 1990 to March 25, 1991. payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be
On April 6, 1990, the business was completely razed by binding until the premium is actually paid.
fire. Total loss was estimated between P4,000,000 and
P5,000,000. Respondent filed an insurance claim with 2. Submission of the alleged fraudulent documents
petitioner and four other co-insurers, namely, Pioneer pertained to respondent’s income tax returns for 1987 to
Insurance, Prudential Guarantee, Filipino Merchants and 1989. Respondent, however, presented a BIR certification
Domestic Insurance. Petitioner refused to honor the claim that he had paid the proper taxes for the said years. Since
hence, the respondent filed an action in the trial court. this is a question of fact, the finding is conclusive.
American Home claimed there was no existing contract Ordinarily, where the insurance policy specifies as a
because respondent did not pay the premium. Even with condition the disclosure of existing co-insurers, non-
a contract, they contended that he was ineligible disclosure is a violation that entitles the insurer to avoid the
because of his fraudulent tax returns, his failure to establish policy. The purpose for the inclusion of this clause is to
the actual loss and his failure to notify to petitioner of any prevent an increase in the moral hazard. The relevant
insurance already effected. The trial court ruled in favor of provision is Section 75, which provides that:
 to discharge the COMPANY's aforesaid liability irrespective
A policy may declare that a violation of specified of whether or not payment has actually been made by the
provisions thereof shall avoid it, otherwise the breach of an COMPANY, the COMPANY for the protection of its interest
immaterial provision does not avoid the policy. may forthwith proceed against the undersigned or either
Respondent acquired several co-insurers and he failed to of them by court action or otherwise to enforce payment
disclose this information to petitioner. Nonetheless, even prior to making payment to the obligee which may
petitioner is estopped from invoking this argument due to hereafter be done by the COMPANY.
the loss adjuster’s admission of previous knowledge of the
co-insurers. Tordesillas and Torres in their official capacities and
the defendants executed another indemnity agreement
It cannot be said that petitioner was deceived by with the plaintiff in consideration of the surety
respondent by the latter’s non-disclosure of the bond (MERICO Bond No. G (16) 0030. In the indemnity
other insurance contracts when petitioner actually had agreement the same provisions of paragraph 3 is found.
prior knowledge thereof. The loss adjuster, being an
employee of petitioner, is deemed a representative of the Later on, the amount of the Bond was reduced by
latter whose awareness of the other insurance P40,000.00 so that the total liability of the plaintiff to
contracts binds petitioner. the Philippine National Bank in view of the aforesaid
reduction is P100,000.00, P60,000.00 on Surety Bond No.
3. Petitioner is liable to pay the loss. But there is merit in 0007 plus P40,000.00 on Surety Bond No. 0030.
petitioner’s grievance against the damages and
attorney’s fees awarded. There was no basis for an award The defendants failed to pay the overdraft and credit
for loss of profit. This cannot be shouldered by petitioner line with the Philippine National Bank demanded from
whose obligation is limited to the object of insurance. Mercantil, settlement of its obligation under surety
bonds No. (G-16)-0007 for P 60,000.00 which expired on
There was no fraud to justify moral damages. Exemplary March 6, 1970 and No. G (-16)- 0030 for P 40,000.00 which
damages can’t be awarded because the expired since September 4, 1968 (Exh. P) Attached to
defendant never acted in a reckless manner to claim the demand letter is a statement of account.
insurance. Attorney’s fees can’t be recovered as part of
damages because no premium should be placed on the By letter of December 17, 1970, plaintiff company wrote a
right to litigate. letter of demand to the defendants regarding the letter of
demand of the Philippine National Bank sent to the
Name: Careyssa Mae I. Ipil plaintiff and demanding from the defendants the
Subject: INSURANCE LAW settlement of said account. The defendants failed to settle
Topic: Payment of premium by installments their obligation with the Philippine National Bank, on
February 10, 1971, plaintiff brought the present action.
Title: Mercantile Insurance vs Felipe Ysmael Jr
Citation: 169 SCRA 66 Lower court dismissed case for lack of cause of action, the
plaintiff has paid nothing in the surety bonds, therefore,
FACTS: they have not suffered any actual damage and held that
paragraph 3 of contract is void. Defendants argued that
Felipe Ysmael, Jr. & Co., Inc. and Magdalena Estate, lnc. to allow surety to receive indemnity or compensation for
represented by Felipe Ysmael, Jr. as president and in his something it has not paid in its capacity as surety would
personal capacity executed with the plaintiff Mercantile constitute unjust enrichment at the expense of another.
Insurance Co., Inc. an indemnity agreement.
The defendants Felipe Ysmael, Jr. & Co., Inc. and Felipe ISSUE:
Ysmael, Jr. bound jointly and severally to indemnify the
plaintiff, from and against any and all payments, Whether or not surety can be allowed indemnification
damages, costs, losses, penalties, charges and expenses from the defendants-appellants, upon the latter's default
which said company as surety (MERICO Bond No. 0007) even before the former has paid to the creditor.
shall incur or become liable to pay.
RULING:
Paragraph 3 of the indemnity agreement expressly
provides: The overdraft line of Php1M and the credit line of Php1M
applied for by the defendant was granted by
3) ACCRUAL OF ACTION: Notwithstanding the provisions of the Philippine National Bank on the strength of the
the next preceding paragraph, where the obligation two surety bonds denominated as Bond No. G(16) 0007
involves a liquidated amount for the payment of which the and Bond No. G(16) 0030.
company has become legally liable under the terms of the
obligation and its suretyship undertaking or by the As security and in consideration of the execution of
demand of the obligee or otherwise and the latter has the surety bonds, the defendants executed with the
merely allowed the COMPANY a term or extension for plaintiff identical indemnity agreements which provide
payment of the latter's demand the full amount necessary that payment of indemnity or compensation may be
claimed whether or not plaintiff company has actually CA: following previous practice, Insured was allowed a 60-
paid the same as provided in paragraph 3 of contract. 90 day credit term for the renewal of its policy, and that
the acceptance of the late premium payment suggested
The cause of action was derived from the terms of the an understanding that payment could be made later, and
Indemnity Agreement, paragraph 3 thereof. By virtue of that no timely notice of non-renewal was sent.
the provisions of the Indemnity Agreement, defendants-
appellants have undertaken to hold plaintiff-appellee free ISSUE:
and harmless from any suit, damage or liability which may Whether the fire insurance policies issued by Insurer to
be incurred by reason of non-performance by the Insured had expired on May 1992 or had been extended
defendants-appellants of their obligation with or renewed by an implied credit arrangement (even
the Philippine National Bank. The Indemnity Agreement is though actual tender of payment was made after the
principally entered into as security of plaintiff-appellee in occurrence of the fire).
case of default of defendants-appellants; and the liability RULING:
of the parties under the surety bonds is joint and several, so No, the insurance policies had not been renewed.
that the obligee PNB may proceed against either of them An insurance policy, other than life, issued originally or on
for the satisfaction of the obligation. renewal, is not valid and binding until actual payment of
the premium. Any agreement to the contrary is void. The
There is no dispute as to meaning of the terms of the parties may not agree expressly or impliedly on the
Indemnity Agreement. Having voluntarily entered into extension of creditor time to pay the premium and
such contract, the appellants cannot now be heard to consider the policy binding before actual payment.
complain. Their indemnity agreement have the force and Here, the payment of the premium for renewal of the
effect of law. policies was tendered on July 13, 1992, a month after the
fire occurred on June 13, 1992. The assured did not even
The principal debtors, defendants-appellants herein, are give the insurer a notice of loss within a reasonable time
the same persons who executed the Indemnity after occurrence of the fire.
Agreement. Thus, the position occupied by them is that of
a principal debtor and indemnitor at the same time, and Name: Careyssa Mae I. Ipil
their liability being joint and several with the plaintiff- Subject: INSURANCE LAW
appellee's, the Philippine National Bank may proceed Topic: Effect of payments of premium through agent
against either for fulfillment of the obligation as covered
by the surety bonds. There is no principle of guaranty Title: South Sea Surety vs CA
involved and, therefore, the provision of Article 2071 of the Citation: 244 SCRA 744 (1995)
Civil Code does not apply. There is no more need for the
plaintiff-appellee to exhaust all the properties of the
principal debtor before it may proceed FACTS:
against defendants-appellants.
Jan. 16, 1984 – Valenzuela Hardwood and Industrial
Name: Careyssa Mae I. Ipil Supply, Inc. (HARDWOOD) entered into an agreement
Subject: INSURANCE LAW with Seven Brothers whereby the latter undertook to load
Topic: Payment of premium by installments on board its vessel M/V Seven Ambassador the former's
940 lauan round logs at the port of Maconacon, Isabela
Title: UCPB Gen. Insurance Co. vs Masagana Telemart for shipment to Manila.
Citation: G.R. No. 137172 June 15, 1999
Jan. 20, 1984 – Hardwood insured said logs with South Sea
Surety and Insurance Company, Inc. (INSURER) for P2MM
FACTS: to which the latter issued its Marine Cargo Insurance Policy
Insurer issued 5 fire insurance policies covering various No. 84/24229 for the same amount on said date.
properties of the Insured (covering the period May 22,
1991-May 22, 1992). Before the expiration of the policy Jan 24, 1984 – Hardwood gave its check payment
(March 1992), Insurer evaluated the policy and decided amounting to P5,625 to Mr. Victorio Chua XXXXXX
not to renew them. Thus, Insurer issued a notice of non-
renewal to Insured’s broker Zuellig (on April 1992). After the Jan 25, 1984 – the vessel sank resulting in the loss of the
expiration of the policy (or on June 13, 2012), fire razed insured logs.
Insured’s property covered by 3 policies. A month later,
Insured presented 5 checks to the Insurer’s cashier as Jan 30, 1984 – the check to cover the premium and doc
payment for the renewal of the policy (from May 1192-May stamps due on the policy was tendered to the insurer but
1993), however, no notice of loss was ever filed by Insured. was not accepted. Instead, the latter cancelled the
Insurer refused to pay on the ground that the policies had insurance policy it issued as of the date of inception for
already expired and were not renewed, and that the fire non-payment of the premium due in accordance with
occurred before payment of the premium (for renewal). Section 77 of the Insurance Code.
RTC: Insured fully complied with its duty to pay premium.
Feb 2, 1984 – Hardwood demanded from the insurer the Insurance Brokers, Ltd. And therefore, Mr. Chua, having
payment of the proceeds of the policy but the latter received the insurance premiums as an agent of the
denied liability under the policy. Hardwood likewise filed Columbia Insurance Broker, acted as an agent of the
a formal claim with defendant Seven Brothers Shipping insured under Section 301 of the Insurance Code which
Corporation for the value of the lost logs but the latter provides as follows:
denied the claim. Thus, a complaint for the recovery of
the value of lost logs and freight charges from Seven Sec. 301. Any person who for any compensation,
Brothers Shipping Corporation or, to the extent of its commission or other thing of value, acts, or aids in
alleged insurance cover, from South Sea Surety and soliciting, negotiating or procuring the making of
insurance Company was filed by Hardwood with the RTC. any insurance contract or in placing risk or taking
out insurance, on behalf of an insured other than
May 11, 1988 – trial court rendered judgment in favour of himself, shall be an insurance broker within the
Hardwood. intent of this Code, and shall thereby become
liable to all the duties requirements, liabilities and
On appeal by the shipping firm and insurer, the CA penalties to which an insurance broker is subject.
affirmed the judgment of the trial court only against the
insurer. However, it absolved the shipping company, Hardwood on the other hand claim that the second
based on the stipulation in the charter party that the ship paragraph of Section 306 of the Insurance Code provide
owner would be exempted from liability in case of loss. It as follows:
relied on the decision of the SC in the case of Home
Insurance Company, Inc. vs. American Steamship Sec. 306. . . . Any insurance company which
Agencies, Inc. where it was held that a common carrier delivers to an insurance agent or insurance broker
undertaking to carry a special or chartered to a special a policy or contract of insurance shall be deemed
person only, becomes a private carrier, and as such, a to have authorized such agent or broker to
stipulation exempting the owner from liability even for the receive on its behalf payment of any premium
negligence of its agent is valid. The shipping corporation which is due on such policy of contract of
should not therefore be held liable for the loss of the logs. insurance at the time of its issuance or delivery or
which becomes due thereon.
Insurer filed a petition of certiorari before the SC alleging
that it likewise should have been freed from any liability to Mr. Chua testified that the marine cargo insurance policy
Hardwood. It faults the appellate court (a) for having for the Hardwood's logs was delivered to him on 21
supposedly disregarded Section 77 of the insurance Code January 1984 at his office to be delivered to the
and (b) for holding Victorio Chua to have been an Hardwood.
authorized representative of the insurer.
When the [appellant] insurer delivered to Mr. Chua the
ISSUE: marine cargo insurance policy for Hardwood’s logs, he is
deemed to have been authorized by the former to receive
WON Mr. Chua acted as an agent of the surety the premium which is due on its behalf.
company or of the insured when he received the check
for insurance premiums. When therefore the insured logs were lost, Hardwood [the
insured] had already paid the premium to an agent of the
RULING: insurer, which is consequently liable to pay the insurance
proceeds under the policy it issued to the insured.
Yes, Mr. Chua is deemed an agent of the insurer pursuant
to Sec. 306 of the Insurance Code. PETITION DENIED.

SC reiterated the factual findings of the CA:

Name: Careyssa Mae I. Ipil
Concerning the issue as to whether there is a valid Subject: INSURANCE LAW
contract of insurance between [Hardwood and Insurer], Topic: Period of Prescription
Section 77 of the Insurance Code explicitly provides that
notwithstanding any agreement to the contrary, no policy Title: Vda. De Gabriel v. CA
issued by an insurance company is valid and binding Citation: G.R. No. 103883 November 14, 1996
unless and until premium thereof has been paid. It is
therefore important to determine whether at the time of FACTS:
the loss, the premium was already paid. Marcelino Gabriel was employed by Emerald Construction
& Development Corporation (Emerald Construction for
Therefore, did Mr. Chua act as an agent when he received brevity) at its construction project in Iraq. He was covered
the check payment of Hardwood for the premiums due on by a personal accident insurance in the amount of
the insurance policy? P100,000.00 under a group policy procured from Fortune
Mr. Chua is an administrative assistant for the past ten Insurance & Surety Company (Fortune Insurance for
years and an agent for less than ten years of the Columbia brevity) by Emerald Construction for its overseas workers.
The insured risk was for bodily injury caused by violent which shall not be less than 10 days after service thereof,
accidental external and visible means which injury would or within such further time as the court may allow on
solely and independently of any other cause result in motion and notice, the party to whom the request is
death or disability. directed serves upon the party requesting the admission a
On 22 May 1982, within the life of the policy, Gabriel died sworn statement either denying specifically the matters of
in Iraq. On 12 July 1983, Emerald Construction reported which an admission is requested or setting forth in detail
Gabriel’s death to Fortune Insurance by telephone. the reasons why he cannot truthfully either admit or deny
Among the documents thereafter submitted to Fortune those matters; however, the verification, like in most cases
Insurance were a copy of the death certificate issued by required by the rules of procedure, is a formal, not
the Ministry of Health of the Republic of Iraq which stated jurisdictional, requirement, and mainly intended to secure
that an autopsy report by the National Bureau of an assurance that matters which are alleged are done in
Investigation was conducted to the effect that due to good faith or are true and correct and not of mere
advanced state of postmortem decomposition, the cause speculation. When circumstances warrant, the court may
of death of Gabriel could not be determined (emphasis simply order the correction of unverified pleadings or act
added). on it and waive strict compliance with the rules in order
Because of this development Fortune Insurance ultimately that the ends of justice may thereby be served. In the case
denied the claim of Emerald Construction on the ground of answers to written requests for admission particularly,
of prescription. Gabriel’s widow, Jacqueline Jimenez, the court can allow the party making the admission,
went to the to the lower court. In her complaint against whether made expressly or deemed to have been made
Emerald Construction and Fortune Insurance, she averred impliedly, to withdraw or amend it upon such terms as may
that her husband died of electrocution while in the be just.
performance of his work. The insurance policy expressly provided that to be
Fortune Insurance alleged that since both the death compensable, the injury or death should be caused by
certificate issued by the Iraqi Ministry of Health and the violent accidental external and visible means. In
autopsy report of the NBI failed to disclose the cause of attempting to prove the cause of her husband’s death, all
Gabriel’s death, it denied liability under the policy. In that vda. de Gabriel could submit were a letter sent to her
addition, private respondent raised the defense of by her husband’s co-worker, stating that Gabriel died
prescription, invoking Section 384 of the Insurance Code. when he tried to haul water out of a tank while its
submerged motor was still functioning, and vda. de
ISSUE: Gabriel’s sworn affidavit. The said affidavit, however,
Whether or not Jacqueline Jimenez vda. de Gabriel’s suffers from procedural infirmity as it was not even testified
claim against Fortune Insurance should be denied on the to or identified by vda. de Gabriel herself. This affidavit
ground of prescription. therefore is a mere hearsay under the law.
In like manner, the letter allegedly written by the
RULING: deceased’s co-worker which was never identified to in
Yes. Section 384 of the Insurance Code provides: court by the supposed author, suffers from the same
Sec. 384. Any person having any claim upon the policy defect as the affidavit of vda. de Gabriel. Not one of the
issued pursuant to this chapter shall, without any other documents submitted, to wit, the POEA decision, the
unnecessary delay, present to the insurance company death certificate issued by the Ministry of Health of Iraq
concerned a written notice of claim setting forth the and the NBI autopsy report, could give any probative
nature, extent and duration of the injuries sustained as value to vda. de Gabriel’s claim. The POEA decision did
certified by a duly licensed physician. Notice of claim must not make any categorical holding on the specific cause
be filed within six months from date of the accident, of Gabriel’s death.
otherwise, the claim shall be deemed waived. Action or In summary, evidence is utterly wanting to establish that
suit for recovery of damage due to loss or injury must be the insured suffered from an accidental death, the risk
brought, in proper cases, with the Commissioner or the covered by the policy.
Courts within one year from denial of the claim, otherwise,
the claimants right of action shall prescribe. Name: Careyssa Mae I. Ipil
The notice of death was given to Fortune Insurance, Subject: INSURANCE LAW
concededly, more than a year after the death of vda. de Topic: Interpretation of Insurance Contracts
Gabriel’s husband. Fortune Insurance, in invoking
prescription, was not referring to the one-year period from Title: Pan Malayan Insurance Corporation v. Court of
the denial of the claim within which to file an action Appeals
against an insurer but obviously to the written notice of Citation: G.R. No. 81026, April 3, 1990
claim that had to be submitted within six months from the
time of the accident. FACTS:
Vda. de Gabriel argues that Fortune Insurance must be
deemed to have waived its right to show that the cause of Canlubang Automotive Resources Corp. obtained from
death is an excepted peril, by failing to have its answers PanMalay a motor vehicle insurance policy for its
duly verified. It is true that a matter of which a written MitsubishiColt Lancer. While the policy was still in effect,
request for admission is made shall be deemed impliedly the insured car was allegedly hit by a pick-up owned by
admitted unless, within a period designated in the request,
ErlindaFabie butdriven by another person. The car suffered
damages in the amount of P42K. 1. where the assured by his own act releases the
wrongdoer or third party liable for the loss or
PanMalay defrayed the cost of repair of the insured car. It damage
then demanded reimbursement fromFabie and her driver 2. where the insurer pays the assured the value of
of said amount, but to no avail. PanMalay filed a the lost goods without notifying the carrier who
complaint for damages with the RTC of Makati against has in good faith settled the assured's claim for loss
Fabie and the driver. It averred that the damages caused 3. where the insurer pays the assured for a loss which
to the insured car was settled under the “own damage” is not a risk covered by the policy, thereby
coverage of the insurance policy. effecting "voluntary payment"

Private respondents filed a motion to dismiss alleging that None of these exceptions are present in this case.
PanMalay had no cause of action since the “won
damage” clause of the policy precluded subrogation As to the trial court’s ruling:
under Art. 2207 of the Civil [Link] contended that
indemnification under said article is on the assumption that When PanMalay utilized the phrase "own damage" — a
there was no wrongdoer or no 3rdparty at fault. The RTC phrase whichis not found in the insurance policy — to
dismissed PanMalay’s complaint and ruled that payment define the basis for its settlement of Canlubang's claim
under the “own damage” clause was an admission by the under the policy, it simply meant that it had assumed to
insurer that the damage was caused by the assured reimburse the costs for repairing the damage to the
and/or its representatives. insured vehicle. It is in this sense that the so-called "own
damage" coverage under Section III of the insurance
CA affirmed but on different ground. Applying the policy is differentiated from Sections I and IV-1 which refer
ejusdem generis rule, CA held that Section III-I of the policy, to "Third Party Liability" coverage (liabilities arising from the
which was the basis for the settlement of the claim against death of, or bodily injuries suffered by, third parties) and
insurance, didnot cover damage arising from collision or from Section IV-2 which refer to "Property Damage"
overturning due to the negligence of 3rdparties as one of coverage (liabilities arising from damage caused by the
the insurable risks. insured vehicle to the properties of third parties).

ISSUE: As to the Court of Appeals’ ruling:

The Court of Appeals' ruling on the coverage of insured
Was PanMalay subrogated to the rights of Canlubang risks stems from an erroneous interpretation of the
against the driver and his employer? provisions of the policy. It violates a fundamental rule on
the interpretation of property insurance contracts where
interpretation should be liberally in favor of the assured
Ruling: and strictly against the insurer in cases of disagreement
between the parties. The meaning advanced by
Yes. The Supreme Court remanded the case back to the PanMalay regarding the coverage of the policy is
trial court. undeniable more beneficial to Canlubang than that
insisted upon by the CA. In any case, the very parties to
the policy were not shown to be in disagreement
Right of Subrogation of the Insurer regarding the meaning and coverage of Section III-I.
Hence, it was improper for CA to assert its own
Article 2207 of the Civil Code is founded on the well-settled interpretation of the contract that is contrary to the clear
principle of subrogation. If the insured property is understanding and intention of the parties to it.
destroyed or damaged through the fault or negligence of
a party other than the assured, then the insurer, upon *Even assuming for the sake of argument that the
payment to the assured, will be subrogated to the rights of insurance policy does not cover damage to the insured
the assured to recover from the wrongdoer to the extent vehicle caused by negligent acts of third parties, and that
that the insurer has been obligated to pay. PanMalay's settlement of Canlubang's claim for damages
allegedly arising from a collision due to private
Payment by the insurer to the assured operates as an respondents' negligence would amount to unwarranted
equitable assignment to the former of all remedies which or "voluntary payment", insurer may still recover from the
the latter may have against the third party whose third party responsible for the damage to the insured
negligence or wrongful act caused the loss. property under Article 1236 of the Civil Code.

The right of subrogation is not dependent upon, nor does

it grow out of, any privity of contract or upon written Name: Careyssa Mae I. Ipil
assignment of claim. It accrues simply upon payment of Subject: INSURANCE LAW
the insurance claim by the insurer. Topic: Reinstatement of a Lapsed Policy of Life Insurance

There are three exceptions to this rule: Title: Rufino Andres vs. Crown Life Insurance Company
Citation: G.R. No. L-l0874 January 28, 1958
Title: Perla Compania de Seguros, Inc. vs. Honorable Court
FACTS: of Appeals and Milagros Cayas
Citation: G.R. No. 78860 May 28, 1990
Rufino wanted to Php 5,000 (face value of 20 year
endowment insurance after the death of his wife Severa) FACTS:
in February 13, 1950. Crown Life denied the claim because
policy already lapsed on December 25, 1950 and the Milagros Cayas was the registered owner of a Mazda bus.
amount overdue was Php 165.00 (giving them 60 day Said passenger vehicle was insured with Perla Compania
period from date of lapse). In February 1951- Rufino de Seguros, Inc. (PCSI) under a policy issued on February
executed a statement of Health which is the same time an 3, 1978. On December 17, 1978, the bus figured in an
application for reinstatement of the policy, enclosed accident in Naic, Cavite injuring several of its passengers.
therewith a money order of Php 100 lacking Php65.15. One of them,19-year old Edgardo Perea, sued Milagros
May 3, 1951 – Severa died of dystopia. 2 days later, the Cayas for damages in the Court of First Instance; while
petitioner paid the remaining Php 65.15. On June 7, 1951, three others, namely: Rosario del Carmen, Ricardo
plaintiff presented death claim. Magsarili and Charlie Antolin, agreed to a settlement of
P4,000.00 each. At the pre-trial, Milagros Cayas failed to
RTC: Defendant Crown Lie was absolved from liability appear and hence, she was declared as in default. After
because policy lapsed and wife died 2 days before full trial, the court rendered a decision in favor of Perea to
payment and reinstatement. compensate the Perea with damages of Pl0, 000.00 for
CA: Appealed. medical fees; P10, 000.00 for exemplary damages; P5,
000.00 for moral damages; P7, 000.00 for Attorney's fees.
ISSUES: On November 11, 1981, Milagros Cayas filed a complaint
for a sum of money and damages against PCSI in the
Whether or not policy which has been in a state of lapse Court of First Instance. Milagros Cayas filed a motion to
before May 3, 1951, has been validly and completely declare PCSI in default for its failure to file an answer. The
reinstated after such date. motion was granted and Cayas was allowed to adduce
evidence ex-parte. On July 13, 1982, the court rendered
RULING: judgment by default ordering PCSI to pay Milagros Cayas
P50, 000as compensation for the injured passengers, P5,
For reinstatement to apply: application must be made 000 as moral damages and P5, 000 as attorney's fees. Said
within 3 years after lapse, production of good health of the decision was set aside after the PCSI filed a motion
insured, rate of premium which depends upon the age of therefore.
the beneficiary, such other evidence of insurability of the
date of the application for reinstatement, no charge In due course, the court promulgated a decision in favor
which has been taken place in such good health and of Cayas, but removed the award of moral damages. PCSI
insurability subsequent to the date of such application and appealed to the Court of Appeals, which, in its decision of
before the policy is reinstated, and all overdue premiums May 8, 1987 the lower court’s decision. Its motion for
and other indebtedness in respect of the policy with 6% reconsideration having been denied, PCSI filed the instant
interest compounded annually, should be paid first. (THIS petition charging the Court of Appeals with having erred
WAS NOT PAID by the plaintiff at the time) in affirming in toto the decision of the lower court.

Appellant’s defense: Condition of the payment of ISSUE: Whether or not the amount of award of damages
premium was waived in its letter stating that “if you are was proper.
unable to cover this amount in full, send us as big an
amount as you are able and we will work out an RULING: [Link] seeks to limit its liability only to the
adjustment most beneficial to you”. payment made by Cayas to Perea and only up to the
amount of P12, 000.00. It altogether denies liability for the
According to the CA, the waiver MUST be CLEAR and payments made by Cayas to the other three (3) injured
POSITIVE, and intent to waive must be shown clearly and passengers Rosario del Carmen, Ricardo Magsarili and
convincingly. (Fernandez vs. Sebido) Subsequent letters Charlie Antolin in the amount of P4,000.00 each or a total
made by the insurance company before the policy was of P12,[Link] insurance policy involved explicitly limits
reinstated did not consider partial payment as sufficient PCSI's liability to P12,000.00 per person and toP50,000.00
consideration for reinstatement. per accident. We have ruled in Stokes vs. Malayan
Insurance Co., Inc., that the terms of the contract
Appellant’s failure to remit the balance before the death constitute the measure of the insurer's liability and
of his wife operated to deprive him of any right to get the compliance therewith is a condition precedent to the
policy and recover the face value thereof. insured’s right of recovery from the insurer. In the case at
bar, the insurance policy clearly and categorically placed
Name: Careyssa Mae I. Ipil PCSI's liability for all damages arising out of death or bodily
Subject: INSURANCE LAW injury sustained by one person as a result of any one
Topic: Effect of Breach of Warranty accident atP12,000.00. Said amount complied with the
minimum fixed by the law then prevailing, Section 377 of Insurance Company granted to Areola Santos a Personal
Presidential Decree No. 612 (which was retained by P.D. Accident Insurance Policy which was cancelled due to
No. 1460, the Insurance Code of 1978), which provided nonpayment of premium 7 months after contract. On
that the liability of land transportation vehicle operators August 3, 1985, the insurance company admitted mistake
for bodily injuries sustained by a passenger arising out of of cancellation because payment was not forwarded by
the use of their vehicles shall not be less than P12,000. In the branch manager Mr. Malapit. A breach of contract
other words, under the law, the minimum liability is P12, 000 was raised by the insured in the RTC Dagupan.
per passenger. PCSI's liability under the insurance contract
not being less than P12,000.00, and therefore not RTC: The insured was granted actual, moral, exemplary,
contrary to law, morals, good customs, public order or attorney and other fees and damages to the insured.
public policy, said stipulation must be upheld as effective,
valid and binding as between the parties. In like manner, CA: Reversed the decision since there was no bad faith
we rule as valid and binding upon Cayas the condition in employed by the insurance company. The cancellation
the policy in requiring her to secure the written permission was based on existing record (absence of official receipt
of PCSI before effecting any payment in settlement of any issued to the petitioner-insured confirming payment of
claim against her. There is nothing unreasonable, arbitrary premiums)
or objectionable in this stipulation as would warrant its
nullification. The same was obviously designed to ISSUES:
safeguard the insurer's interest against collusion between Whether CA is guilty of grave abuse of discretion in not
the insured and the claimants. In her cross-examination holding the insurance company for the fraudulent / bad
before the trial court, Milagros Cayas admitted that PCSI faith of its officers?
did not give any written authority that Cayas were
supposed to pay those claims. It being specifically Can bad faith and honest mistake coexist with fraudulent
required that PCSI's written consent be first secured before act and bad faith? (The act of Mr Malapit, who committed
any payment in settlement of any claim could be made, fraud, who sent and signed the notice of cancellation)
Cayas is precluded from seeking reimbursement of the
payments made to Del Carmen, Magsarili and Antolin in RULING:
view of her failure to comply with the condition contained
in the insurance policy. Clearly, the fundamental principle Mr Malapit, the ranch manager and agent of the
that contracts are respected as the law between the insurance company, signed the cancellation despite
contracting parties finds application in the present case. knowledge of the full payment constitutes bad faith. Also,
Thus, it was error on the part of the trial and appellate the agent’s action is imputable to the insurance company
courts to have disregarded the stipulations of the parties as his role as manager receiving money is within his
and to have substituted their own interpretation of the authority according to Article 1910, agent-principal
insurance policy. We observe that although Milagros relationship. The bank was held liable in the case of
Cayas was able to prove a total loss of only P44, 000.00, McIntosh v. Dakota Trust Co.: A bank is liable for wrongful
PCSI was made liable for the amount of P50, 000.00, the acts of its officers done in the interests of the bank or in the
maximum liability per accident stipulated in the policy. This course of dealings of the officers in their representative
is patent error. An insurance indemnity, being merely an capacity but not for acts outside the scope of their
assistance or restitution insofar as can be fairly authority. A bank holding out its officers and agent as
ascertained, cannot be availed of by any accident victim worthy of confidence will not be permitted to profit by the
or claimant as an instrument of enrichment by reason of frauds they may thus be enabled to perpetrate in the
an accident. WHEREFORE, the decision of the Court of apparent scope of their employment; nor will it be
Appeals is hereby modified in that petitioner shall pay permitted to shirk its responsibility for such frauds, even
Milagros Cayas the amount of Twelve Thousand Pesos though no benefit may accrue to the bank there from.
(P12,000. 00) plus legal interest from the promulgation of Accordingly, a banking corporation is liable to innocent
the decision of the lower court until it is fully paid and third persons where the representation is made in the
attorney's fees in the amount of P5,000.00. No course of its business by an agent acting within the general
pronouncement as to costs. scope of his authority even though, in the particular case,
the agent is secretly abusing his authority and attempting
Name: Careyssa Mae I. Ipil to perpetrate a fraud upon his principal or some other
Subject: INSURANCE LAW person, for his own ultimate benefit.
Topic: Effect of nonpayment of premium, erroneous
canceling effect, bad faith of the branch manager binding Name: Careyssa Mae I. Ipil
with the insurance company Subject: INSURANCE LAW
Topic: Period of Prescription, Is it important for the petitioner
Title: Santos Areola vs. CA, Prudential Guarantee and to point out that insurance corporation also includes the
Assurance, Inc. 3rd party as beneficiary (herein the victim)
Citation: 236 SCRA 643
Title: Traveller’s Insurance and Surety Corporation vs. CA
FACTS: and Vicente Mendoza
Citation: 272 SCRA 536
 FACTS:
FACTS:
Armando Geagonia is the owner of Norman's Mart
In July 30, 1980, at 5:30am, a 78 year old woman was hit by located in the public market of San Francisco, Augustan
a taxi on her way to Tayuman Cathedral. She was sent to del Sur. On 22 December 1989, he obtained from Country
the hospital by Lopez, the driver of the passenger jeepney. Bankers Insurance Corporation fire insurance policy No. F-
The old woman later expired at 9am at UST Hospital. The 14622 2 for P100,000.00. The period of the policy was from
complainant lumped the erring taxi driver, owner of the 22 December 1989 to 22 December 1990 and covered the
taxi, and the insurance company insuring the vehicle following: "Stock-in-trade consisting principally of dry
which featured in the vehicular accident into one goods such as RTW's for men and women wear and other
complaint. The erring taxi cab was allegedly covered by a usual to assureds’ business." Geagonia declared in the
third party liability insurance policy issued by petitioner policy under the subheading entitled CO-INSURANCE that
Traveller’s Insurance and Surety Corporation. Mercantile Insurance Co., Inc. was the co-insurer for P50,
000.00. From 1989 to 1990, Geagonia had in his inventory
RTC: Award Mendoza, the beneficiary of the old woman stocks amounting to P392, 130.50, itemized as follows:
the following: death indemnity, moral damages, Zenco Sales, Inc., P55, 698.00; F. Legaspi Gen.
exemplary damages, attorney’s fees. Merchandise, 86,432.50; and Cebu Tesing Textiles,
CA: Appealed the decision of the RTC 250,000.00 (on credit); totalling P392, 130.50. The policy
contained the following condition, that "the insured shall
give notice to the Company of any insurance or
ISSUES: insurances already effected, or which may subsequently
be effected, covering any of the property or properties
Is it necessary to attach the copy of the insurance contract consisting of stocks in trade, goods in process and/or
in the complaint? Is it important to point out whether the inventories only hereby insured, and unless notice be given
insurance policy includes the 3rd party as beneficiary and the particulars of such insurance or insurances be
(herein the victim)? 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
RULING: under this policy shall be deemed forfeited, provided
however, that this condition shall not apply when the total
The right of the person injured to sue the insurer of the party insurance or insurances in force at the time of the loss or
at fault (insured), depends on whether the contract of damage is not more than P200,000.00." On 27 May 1990,
insurance is intended to benefit third persons also or on the fire of accidental origin broke out at around 7:30 p.m. at
insured. And the test applied has been this: Where the the public market of San Francisco; Agusan Del Sur.
contract provides for indemnity against liability to third Geagonia's insured stocks-in-trade were completely
persons, then third persons to whom the insured is liable destroyed prompting him to file with Country Bankers a
can sue the insurer. Where the contract is for indemnity claim under the policy. On 28 December 1990, Country
against actual loss or payment, then third persons cannot Bankers denied the claim because it found that at the time
proceed against the insurer, the contract being solely to of the loss Begonia’s stocks-in-trade were likewise covered
reimburse the insured for liability actually discharged by by fire insurance policies GA-28146 and GA-28144, for
him thru payment to third persons, said third persons’ P100,000.00 each, issued by the Cebu Branch of the
recourse being thus limited to the insured alone.” Philippines First Insurance Co., Inc. (PFIC). These policies
Since private respondent failed to attach a copy of the indicate that the insured was "Messrs. Discount Mart (Mr.
insurance contract to his complaint, the trial court could Armando Geagonia, Prop.)" with a mortgage clause
not have been able to appraise itself of the real nature reading ""MORTGAGEE: Loss, if any, shall be payable to
and pecuniary limits of petitioner’s liability. More Messrs. Cebu Tesing Textiles, Cebu City as their interest may
importantly, the trial court could not have possibly appear subject to the terms of this policy. CO-INSURANCE
ascertained the right of private respondent as third person DECLARED: P100, 000. — Phils. First CEB/F-24758" The basis
to sue petitioner as insurer of the Lady Love taxicab of Country Bankers' denial was Geagonia's alleged
because the trial court never saw nor read the insurance violation of Condition 3 of the policy. Geagonia then filed
contract and learned of its terms and conditions. a complaint against Country Bankers with the Insurance
Commission (Case 3340) for the recovery of P100, 000.00
under fire insurance policy F-14622 and for attorney's fees
REINSURANCE and costs of litigation. He attached his letter of 18 January
1991 which asked for the reconsideration of the denial. He
Name: Careyssa Mae I. Ipil admitted in the said letter that at the time he obtained
Subject: INSURANCE LAW Country Bankers’ fire insurance policy he knew that the
Topic: effects of double insurance two policies issued by the PFIC were already in existence;
however, he had no knowledge of the provision in Country
Title: Geagonia vs. Court of Appeals Bankers' policy requiring him to inform it of the prior
Citation: 241 SCRA 152 (1995) policies; this requirement was not mentioned to him by
Country Bankers' agent; and had it been so mentioned, he the prohibition in Condition 3 of the subject policy applies
would not have withheld such information. He further only to double insurance, and (b) the nullity of the policy
asserted that the total of the amounts claimed under the shall only be to the extent exceeding P200, 000.00 of the
three policies was below the actual value of his stocks at total policies obtained. The first conclusion is supported by
the time of loss, which was P1, 000,000.00. In its decision of the portion of the condition referring to other insurance
21 June 1993, the Insurance Commission found that "covering any of the property or properties consisting of
Geagonia did not violate Condition 3 as he had no stocks in trade, goods in process and/or inventories only
knowledge of the existence of the two fire insurance hereby insured," and the portion regarding the insured's
policies obtained from the PFIC; that it was Cebu Tesing declaration on the subheading CO-INSURANCE that the
Textiles which procured the PFIC policies without informing co-insurer is Mercantile Insurance Co., Inc. in the sum of
him or securing his consent; and that Cebu Tesing Textile, P50, 000.00. A double insurance exists where the same
as his creditor, had insurable interest on the stocks. These person is insured by several insurers separately in respect of
findings were based on Geagonia's testimony that he the same subject and interest. Since the insurable interests
came to know of the PFIC policies only when he filed his of a mortgagor and a mortgagee on the mortgaged
claim with Country Bankers and that Cebu Tesing Textile property are distinct and separate; the two policies of the
obtained them and paid for their premiums without PFIC do not cover the same interest as that covered by the
informing him thereof. The Insurance Commission ordered policy of Country Bankers, no double insurance exists. The
Country Bankers to pay Geagibua the sum of P100, 000.00 non-disclosure then of the former policies was not fatal to
with legal interest from the time the complaint was filed Geagonia's right to recover on Country Bankers' policy.
until fully satisfied plus the amount of P10, 000.00 as
attorney's fees. With costs. Its motion for the [2]: Unlike the "other insurance" clauses involved in General
reconsideration of the decision having been denied by Insurance and Surety Corp. vs. Ng Hue, 106 Phil. 1117
the Insurance Commission in its resolution of 20 August [1960], or in Pioneer Insurance & Surety Corp. vs. Yap, 61
1993, Country Bankers appealed to the Court of Appeals SCRA 426 [1974] which reads "The insured shall give notice
by way of a petition for review (CA-GR SP 31916). In its to the company of any insurance or insurances already
decision of 29 December 1993, the Court of Appeals effected, or which may subsequently be effected
reversed the decision of the Insurance Commission covering any of the property hereby insured, and unless
because it found that Geagonia knew of the existence of such notice be given and the particulars of such insurance
the two other policies issued by the PFIC. His motion to or insurances be stated in or endorsed on this Policy by or
reconsider the adverse decision having been denied, on behalf of the Company before the occurrence of any
Geagonia filed the petition for review on certiorari. loss or damage, all benefits under this Policy shall be
forfeited"; or in the 1930 case of Santa Ana vs. Commercial
ISSUE: Union Assurance Co., 55 Phil. 329, 334 [1930], which
provided "that any outstanding insurance upon the whole
Whether the non-disclosure of other insurance policies or a portion of the objects thereby assured must be
violate condition 3 of the policy, so as to deny Geagonia declared by the insured in writing and he must cause the
from recovering on the policy. company to add or insert it in the policy, without which
such policy shall be null and void, and the insured will not
Whether the violation of Condition 3 of the policy renders be entitled to indemnity in case of loss," Condition 3 in
the policy void. Country Bankers' policy F-14622 does not absolutely
declare void any violation thereof. It expressly provides
RULING: that the condition "shall not apply when the total
insurance or insurances in force at the time of the loss or
[1]: damage is not more than P200,000.00." By stating within
Condition 3 of Country Bankers's Policy F-14622 is a Condition 3 itself that such condition shall not apply if the
condition which is not proscribed by law. Its incorporation total insurance in force at the time of loss does not exceed
in the policy is allowed by Section 75 of the Insurance P200,000.00, Country Bankers was amenable to assume a
Code, Such a condition is a provision which invariably co-insurer's liability up to a loss not exceeding P200,000.00.
appears in fire insurance policies and is intended to What it had in mind was to discourage over-insurance.
prevent an increase in the moral hazard. It is commonly Indeed, the rationale behind the incorporation of "other
known as the additional or "other insurance" clause and insurance" clause in fire policies is to prevent over-
has been upheld as valid and as a warranty that no other insurance and thus avert the perpetration of fraud. When
insurance exists. Its violation would thus avoid the policy. a property owner obtains insurance policies from two or
However, in order to constitute a violation, the other more insurers in a total amount that exceeds the property's
insurance must be upon the same subject matter, the value, the insured may have an inducement to destroy the
same interest therein, and the same risk. The fire insurance property for the purpose of collecting the insurance. The
policies issued by the PFIC name Geagonia as the assured public as well as the insurer is interested in preventing a
and contain a mortgage clause which reads: "Loss, if any, situation in which a fire would be profitable to the insured.
shall be payable to MESSRS. TESING TEXTILES, Cebu City as
their interest may appear subject to the terms of the
policy." This is clearly a simple loss payable clause, not a Name: Careyssa Mae I. Ipil
standard mortgage clause. The Court concludes that (a) Subject: INSURANCE LAW
Topic: when is insurer liable to pay damages and interest (amended by P. D. 116) are applicable only to interest by
under section 243 to 244 way of compensation for the use or forbearance of
money; interest by way of damages is governed by Article
Title: Tio Khe Chio v. CA 2209 of the Civil Code.
Citation: GR No. 76101-02 September 30, 1991

FACTS: MARINE INSURANCE

Petitioner shipped bags of imported fishmeals and insured Name: Careyssa Mae I. Ipil
the same with respondent insurance company Eastern Subject: INSURANCE LAW
Assurance & Surety Corp (EASCO). During transit, the bags Topic: Implied Warranties
were found out to be damaged thus rendering the
fishmeals useless. Petitioner filed a claim before the EASCO Title: Philippine General Insurance Company vs. CA
which denied the same, prompting the former to sue the
latter at CFI Cebu who ordered EASCO to pay the
petitioner's claim for insurance with damages. Upon FACTS:
execution, respondent filed a petition for certiorari with the
CA who set aside the lower court's decision arguing that On July 6, 1983, Coca Cola transported 7,500 cases of soft
the latter has erred in fixing the legal interest on 12% per drinks on board MV Asilda. MV Asilda was operated and
annum rather than the mandated 6%. owned by FELMAN. The ship was from Zamboanga to
Cebu. The cargo was insured by PhilamGem. On its way to
ISSUE: Cebu, the ship sank.

What should the legal interest be for damages arising from Cebu Coca Cola filed damages against FELMAN but the
loss of property? latter denied the claim due to limited liability clause that
when cargos are lost due to fortuitous event, the same is
not liable. The consignee now proceeded against the
RULING: insurance of the cargo PhilamGem which paid Coca Cola
Plant Cebu Php 755,250. Now PhilamGen wanted to
The applicable law is Article 2209 of the Civil Code which recover the amount from FELMAN as the owner of the
reads that if the obligation consists in the payment of a sinking ship saying that it subrogated the rights of the
sum of money and the debtor incurs in delay, the insured to collect the damages.
indemnity for damages, there being no stipulation to the
contrary, shall be the payment of interest agreed upon, PhilamGen’s suit against FELMAN is on the ground of
and in the absence of stipulation, the legal interest which subrogation. Therefore it has the right to collect the
is 6% per annum. amount it paid to cover Coca Cola’s demand. Moroever,
it questioned the ship’s sea unworthiness and that the ship
The adjusted rate mentioned in the Circular No. 416, from was improperly manned by its officers. FELMAN Shipping
which the CFI based its decision, refers only to loans or on the other hand, on its affirmative defense, said that
forbearances of money, goods or credits and court there was no right of subrogation transmitted by the
judgments thereon but not to court judgments for shipper. Also, FELMAN abandoned its responsibility when it
damages arising from injury to persons and loss of property filled limited liability clause, limiting or extinguishing its
which does not involve a loan. responsibility under 587 Code of commerce.

Tio Khe Chio vs. Court of Appeals RTC: PhilamGen’s motion dismissed. It cannot collect from
(202 SCRA 119)Circular No. 416 of the Central Bank which FELMAN
took effect on July 29, 1974 pursuant to Presidential Decree
No. 116 (Usury Law) raised the legal rate of interest from six CA: Case appealed, remanded back to lower court for
(6%) percent to twelve (12%) percent. The adjusted rate lack of merit, again, FELMAN won on February 28, 1992. MV
mentioned in the circular refers only to loans or Asilda was seaworthy when it left the port; the loss was due
forbearances of money, goods or credits and court to fortuitous event. Even if it was not seaworthy, it still
judgments thereon but not to court judgments for cannot claim damages since coca cola breached its
damages arising from injury to persons and loss of property implied warranty. As a conclusion, the payment of
which does not involve a loan. In the case of Philippine PhilamGen to Coca Cola was UNDUE, WRONG, and
Rabbit Bus Lines, Inc. vs. Cruz ,G.R. No. 71017, July 28, 1986, MISTAKEN PAYMENT.
143 SCRA 158, the Court declared that the legal rate of
interest is six (6%) percent per annum and not twelve (12%) Interestingly, the CA turned against FELMAN when it found
percent, where a judgment award is based on an action that MV Asilda was sea unworthy with respect to cargo,
for damages for personal injury, not use or forbearance despite seaworthy certificate.
of money, goods or credit. In the same vein, the Court held
in GSIS vs. Court of Appeals G.R. No. 52478, October30, ISSUES:
1986, 145 SCRA 311, that the rates under the Usury Law
Was the ship sea unworthy? wherein the ship agent could still be held answerable
Whether limited liability rule applies. despite the abandonment, as where the loss or injury was
Whether PhilamGen was subrogated and had rights due to the fault of the ship-owner and the captain.[9] The
against FELMAN international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a ship
owner’s liability, does not apply to cases where the injury
RULING: or average was occasioned by the ship owner’s own
fault.[10] It must be stressed at this point that Art. 587 speak
The Elite Adjusters, Inc. submitted a report regarding the only of situations where the fault or negligence is
sinking of “MV Asilda.” The report, which was adopted by committed solely by the captain. Where the ship-owner is
the Court of Appeals, reads – likewise to be blamed, Art. 587 will not apply, and such
situation will be covered by the provisions of the Civil Code
We found in the course of our investigation that a on common carrier.
reasonable explanation for the series of lists experienced 3) Under Art 1733 of the Civil Code, “(c)common
by the vessel that eventually led to her capsizing and carriers, from the nature of their business and for reasons of
sinking, was that the vessel was top-heavy which is to say public policy, are bound to observe extraordinary
that while the vessel may not have been overloaded, yet diligence in the vigilance over the goods and for the
the distribution or stowage of the cargo on board was safety of the passengers transported by them, according
done in such a manner that the vessel was in top-heavy to all the circumstances of each case x" In the event of
condition at the time of her departure and which loss of goods, common carriers are presumed to have
condition rendered her unstable and unseaworthy for that acted negligently. FELMAN, the ship-owner, was not able
particular voyage. to rebut this presumption.
4) In relation to the question of subrogation,
In this connection, we wish to call attention to the fact that respondent appellate court found “MV Asilda”
this vessel was designed as a fishing vessel x and it was not unseaworthy with reference to the cargo and therefore
designed to carry a substantial amount or quantity of ruled that there was breach of warranty of seaworthiness
cargo on deck. Therefore, we believe strongly that had that rendered the assured not entitled to the payment of
her cargo been confined to those that could have been is claim under the policy. Hence, when PHILAMGEN paid
accommodated under deck, her stability would not have the claim of the bottling firm there was in effect a
been affected and the vessel would not have been in any “voluntary payment” and no right of subrogation accrued
danger of capsizing, even given the prevailing weather in its favor. In other words, when PHILAMGEN paid it did so
conditions at that time of sinking. at its own risk.
5) The result of the admission of seaworthiness by the
But from the moment that the vessel was utilized to load assurer PHILAMGEN may mean one or two things: (a) that
heavy cargo on its deck, the vessel was rendered the warranty of the seaworthiness is to be taken as fulfilled;
unseaworthy for the purpose of carrying the type of cargo or, (b) that the risk of unseaworthiness is assumed by the
because the weight of the deck cargo so decreased the insurance company.[17] The insertion of such waiver
vessel’s metacentric height as to cause it to become clauses in cargo policies is in recognition of the realistic
unstable. fact that cargo owners cannot control the state of the
vessel. Thus it can be said that with such categorical
Finally, with regard to the allegation that the vessel waiver, PHILAMGEN has accepted the risk of
encountered big waves, it must be pointed out that ships unseaworthiness so that if the ship should sink by
are precisely designed to be able to navigate safely even unseaworthiness, as what occurred in this case,
during heavy weather and frequently we hear of ships PHILAMGEN is liable.
safely and successfully weathering encounters with 6) Having disposed of this matter, we move on to the
typhoons and although they may sustain some amount of legal basis for subrogation. PHILAMGEN’s action against
damage, the sinking of ship during heavy weather is not a FELMAN is squarely sanctioned by Art. 2207 of the Civil
frequent occurrence and is not likely to occur unless they Code which provides:
are inherently unstable and unseaworthy x x x x 7) Art. 2207. If the plaintiff’s property has been
insured, and he has received indemnity from the insurance
1) We believe, therefore, and so hold that the company for the injury or loss arising out of the wrong or
proximate cause of the sinking of the M/V “Asilda” was breach of contract complained of, the insurance
her condition of unseaworthiness arising from her having company shall be subrogated to the rights of the insured
been top-heavy when she departed from the Port of against the wrongdoer or the person who has violated the
Zamboanga. contract. If the amount paid by the insurance company
2) On the second issue, Art. 587 of the Code of does not fully cover the injury or loss, the aggrieved party
Commerce is not applicable to the case at bar.[8] Simply shall be entitled to recover the deficiency from the person
put, the ship agent is liable for the negligent acts of the causing the loss or injury.
captain in the care of goods loaded on the vessel. This
liability however can be limited through abandonment of
the vessel, its equipment and freightage as provided in Art. FIRE INSURANCE
587. Nonetheless, there are exceptional circumstances
Name: Careyssa Mae I. Ipil default are generally looked upon with disfavour," the
Subject: INSURANCE LAW default judgment in that case was set aside precisely
Topic: Measure of Indemnity because there was excusable neglect, Summons in that
case was served through "an employee in petitioners'
Title: DEVELOPMENT INSURANCE CORPORATION, office and not the person in-charge," whereas in the
vs. IAC, and PHILIPPINE UNION REALTY DEVELOPMENT present case summons was served on the vice-president
CORPORATION of the petitioner who however refused to accept it.
Citation: 143 SCRA 62 Furthermore, as Justice Guerrero noted, there was no
evidence showing that the petitioners in Trajano intended
FACTS: to unduly delay the case.

A fire occurred in the building of the private respondent The petitioner's claim that the insurance covered only the
and it sued for recovery of damages from the petitioner on building and not the elevators is absurd, to say the least.
the basis of an insurance contract between them. The This Court has little patience with puerile arguments that
petitioner allegedly failed to answer on time and was affront common sense, let alone basic legal principles with
declared in default by the trial court. A judgment of which even law students are familiar. The circumstance
default was subsequently rendered on the strength of the that the building insured is seven stories high and so had to
evidence submitted ex parte by the private respondent, be provided with elevators-a legal requirement known to
which was allowed full recovery of its claimed damages. the petitioner as insurance company-makes its contention
On learning of this decision, the petitioner moved to lift the all the more ridiculous.
order of default, invoking excusable neglect, and to
vacate the judgment by default. Its motion was denied. It The petitioner argues that since at the time of the fire the
then went to the respondent court, which affirmed the building insured was worth P5,800,000.00, the private
decision of the trial court in toto. The petitioner is now respondent should be considered its own insurer for the
before us, hoping presumably that it will fare better here difference between that amount and the face value of
than before the trial court and the Intermediate Appellate the policy and should share pro rata in the loss sustained.
Court. Accordingly, the private respondent is entitled to an
indemnity of only P67, 629.31, the rest of the loss to be
ISSUES: shouldered by it alone. In support of this contention, the
petitioner cites Condition 17 of the policy, which provides:
Was there default on the part of the petitioner?
Was there inexcusable negligence? If the property hereby insured shall, at the breaking out of
If the building is insured, will it cover the elevator? any fire, be collectively of greater value than the sum
What is the price of the building in line with insured thereon then the insured shall be considered as
indemnification? being his own insurer for the difference, and shall bear a
ratable proportion of the loss accordingly. Every item, if
more than one, of the policy shall be separately subject to
RULING: this condition.

On the question of default, the record argues mightily However, there is no evidence on record that the building
against it. It is indisputable that summons was served on it, was worth P5, 800,000.00 at the time of the loss; only the
through its senior vice-president, on June 19, 1980. On July petitioner says so and it does not back up its self-serving
14, 1980, ten days after the expiration of the original 15- estimate with any independent corroboration. On the
day period to answer (excluding July 4), its counsel filed an contrary, the building was insured at P2, 500,000.00, and
ex parte motion for an extension of five days within which this must be considered, by agreement of the insurer and
to file its answer. On July 18, 1980, the last day of the the insured, the actual value of the property insured on the
requested extension-which at the time had not yet been day the fire occurred. This valuation becomes even more
granted-the same counsel filed a second motion for believable if it is remembered that at the time the building
another 5-day extension, fourteen days after the expiry of was burned it was still under construction and not yet
the original period to file its answer. The trial court completed.
nevertheless gave it five days from July 14, 1980, or until
July 19, 1980, within which to file its answer. But it did not. It CASUALTY INSURANCE
did so only on July 26, 1980, after the expiry of the original
and extended periods, or twenty-one days after the July 5, Name: Careyssa Mae I. Ipil
deadline. As a consequence, the trial court, on motion of Subject: INSURANCE LAW
the private respondent filed on July 28, 1980, declared the
petitioner in default. Topic: the use of the term “intentional” vs. “accidental”

The pattern of inexcusable neglect, if not deliberate delay, Titile: Pan Malayan Ins. Corp. v. Court of Appeals
is all too clear. The petitioner has slumbered on its right and Citation: 184 SCRA 54
awakened too late. While it is true that in Trajano v. Cruz, 2
which it cites, this Court declared "that judgments by FACTS:
 whose negligence may have caused damage to
On December 10, 1985, PANMALAY filed a complaint for CANLUBANG's car; the Court holds that there is no legal
damages with the RTC of Makati against private obstacle to the filing by PANMALAY of a complaint for
respondents Erlinda Fabio and her driver. PANMALAY damages against private respondents as the third parties
averred the following: that it insured a Mitsubishi Colt allegedly responsible for the damage.
Lancer car with plate No. DDZ-431 and registered in the
name of Canlubang Automotive Resources Corporation Respondent Court of Appeals therefore committed
[CANLUBANG]; that on May 26, 1985, due to the reversible error in sustaining the lower court's order which
"carelessness, recklessness, and imprudence" of the dismissed PANMALAY's complaint against private
unknown driver of a pick-up with plate no. PCR-220, the respondents for no cause of action. Hence, it is now for the
insured car was hit and suffered damages in the amount trial court to determine if in fact the damage caused to
of P42, 052.00; that PANMALAY defrayed the cost of repair the insured vehicle was due to the "carelessness,
of the insured car and, therefore, was subrogated to the recklessness and imprudence" of the driver of private
rights of CANLUBANG against the driver of the pick-up and respondent Erlinda Fabie.
his employer, Erlinda Fabie; and that, despite repeated
demands, defendants, failed and refused to pay the claim Name: Careyssa Mae I. Ipil
of PANMALAY. Subject: INSURANCE LAW
Topic: Authorized Driver Clause
On February 12, 1986, private respondents filed a Motion
to dismiss alleging that PANMALAY had no cause of action Title: JEWEL VILLACORTA vs. THE INSURANCE COMMISSION
against them. They argued that payment under the "own Citation: G.R. No. L-54171, 28 October 1980 100 SCRA 467
damage" clause of the insurance policy precluded
subrogation under Article 2207 of the Civil Code, since FACTS:
indemnification there under was made on the assumption
that there was no wrongdoer or no third party at fault. Villacorta had her Colt Lancer car insured with Empire
Insurance Company against own damage, theft and 3rd
ISSUE: party liability. While the car was in the repair shop, one of
the employees of the said repair shop took it out for a
Whether or not the insurer PANMALAY may institute an joyride after which it figured in a vehicular accident. This
action to recover the amount it had paid it’s assured in resulted to the death of the driver and some of the
settlement of an insurance claim against private passengers as well as to extensive damage to the car.
respondents as the parties allegedly responsible for the Villacorta filed a claim for total loss with the said insurance
damage caused to the insured vehicle. company. However, it denied the claim on the ground
that the accident did not fall within the provisions of the
RULING: policy either for the Own Damage or Theft coverage,
invoking the policy provision on “Authorized Driver
It cannot be said that the meaning given by PANMALAY Clause”. This was upheld by the Insurance Commission
and CANLUBANG to the phrase "by accidental collision or further stating that the car was not stolen and therefore
overturning" found in the first paint of sub-paragraph (a) is not covered by the Theft Clause because it is not evident
untenable. Although the terms "accident" or "accidental" that the person who took the car for a joyride intends to
as used in insurance contracts have not acquired a permanently deprive the insured of his/ her car.
technical meaning, the Court has on several occasions
defined these terms to mean that which takes place ISSUE:
"without one's foresight or expectation, an event that
proceeds from an unknown cause, or is an unusual effect Whether or not the insurer company should pay the said
of a known cause and, therefore, not expected" [De la claim
Cruz v. The Capital Insurance & Surety Co., Inc.,]. Certainly,
it cannot be inferred from jurisprudence that these terms, RULING:
without qualification, exclude events resulting in damage
or loss due to the fault, recklessness or negligence of third Yes. Where the insured’s car is wrongfully taken without the
parties. The concept "accident" is not necessarily insured’s consent from thecar service and repair shop to
synonymous with the concept of "no fault". It may be whom it had been entrusted for check-up and repairs
utilized simply to distinguish intentional or malicious acts (assuming that such taking was for a joy ride, in the course
from negligent or careless acts of man. of which it was totally smashed in an accident),
respondent insurer is liable and must pay insured for the
It must be reiterated that in this present case, the insurer total loss of the insured vehicle under
PANMALAY as subrogee merely prays that it be allowed to the Theft Clause of the policy. Assuming, despite the totally
institute an action to recover from third parties who inadequate evidence, that the taking was “temporary”
allegedly caused damage to the insured vehicle, the and for a “joy ride”, the Court sustains as the better view
amount which it had paid its assured under the insurance that which holds that when a person, either
policy. Having thus shown from the above discussion that with the object of going to a certain place, or learning
PANMALAY has a cause of action against third parties how to drive, or enjoying a free ride, takes possession of a
vehicle belonging to another, without the consent of its Whether or not the amount of award of damages was
owner, he is guilty of theft because by taking possession of proper.
the personal property belonging to another and using it,
his intent to gain is evident since he derives there from RULING:
utility, satisfaction, enjoyment and pleasure.
ACCORDINGLY, the appealed decision is set aside and NO.
judgment is hereby rendered sentencing private
respondent to pay petitioner the sum of P35, 000.00 with PCSI seeks to limit its liability only to the payment made by
legal interest from the filing of the complaint until full Cays to Perea and only up to the amount of P12, 000.00. It
payment is made and to pay the costs of suit. altogether denies liability for the payments made by
Cayas to the other three (3) injured passengers Rosario del
Name: Careyssa Mae I. Ipil Carmen, Ricardo Magsarili and Charlie Antolin in the
Subject: INSURANCE LAW amount of P4,000.00 each or a total of P12,000.00. The
Topic: Theft Clause insurance policy involved explicitly limits PCSI's liability to
Title: Perla Compania de Seguros, Inc. vs Honourable Court P12, 000.00 per person and to P50, 000.00 per accident.
of Appeals and Milagros Cayas
Citation: G.R. No. 78860 May 28, 1990 We have ruled in Stokes vs. Malayan Insurance Co., Inc.,
that the terms of the contract constitute the measure of
the insurer's liability and compliance therewith is a
FACTS: condition precedent to the insured's right of recovery from
the insurer. In the case at bar, the insurance policy clearly
Milagros Cayas was the registered owner of a Mazda bus. and categorically placed PCSI's liability for all damages
Said passenger vehicle was insured with Perla Compania arising out of death or bodily injury sustained by one
de Seguros, Inc. (PCSI) under a policy issued on February person as a result of any one accident at P12,000.00. Said
3, 1978. On December 17, 1978, the bus figured in an amount complied with the minimum fixed by the law then
accident in Naic, Cavite injuring several of its passengers. prevailing, Section 377 of Presidential Decree No. 612
One of them, 19-year old Edgardo Perea, sued Milagros (which was retained by P.D. No. 1460, the Insurance Code
Cayas for damages in the Court of First Instance; while of 1978), which provided that the liability of land
three others, namely: Rosario del Carmen, Ricardo transportation vehicle operators for bodily injuries
Magsarili and Charlie Antolin, agreed to a settlement of sustained by a passenger arising out of the use of their
P4,000.00 each. At the pre-trial, Milagros Cayas failed to vehicles shall not be less than P12, 000. In other words,
appear and hence, she was declared as in default. After under the law, the minimum liability is P12, 000 per
trial, the court rendered a decision in favour of Perea to passenger. PCSI's liability under the insurance contract not
compensate the Perea with damages of Pl0, 000.00 for being less than P12,000.00, and therefore not contrary to
medical fees; P10, 000.00 for exemplary damages; P5, law, morals, good customs, public order or public policy,
000.00 for moral damages; P7, 000.00 for Attorney's fees. said stipulation must be upheld as effective, valid and
binding as between the parties.
On November 11, 1981, Milagros Cayas filed a complaint
for a sum of money and damages against PCSI in the In like manner, we rule as valid and binding upon Cayas
Court of First Instance. Milagros Cayas filed a motion to the condition in the policy in requiring her to secure the
declare PCSI in default for its failure to file an answer. The written permission of PCSI before effecting any payment in
motion was granted and Cayas was allowed to adduce settlement of any claim against her. There is nothing
evidence ex-parte. On July 13, 1982, the court rendered unreasonable, arbitrary or objectionable in this stipulation
judgment by default ordering PCSI to pay Milagros Cayas as would warrant its nullification. The same was obviously
P50, 000 as compensation for the injured passengers, P5, designed to safeguard the insurer's interest against
000 as moral damages and P5, 000 as attorney's fees. collusion between the insured and the claimants.

Said decision was set aside after the PCSI filed a motion In her cross-examination before the trial court, Milagros
therefore. In due course, the court promulgated a decision Cayas admitted that PCSI did not give any written
in favour of Cays, but removed the award of moral authority that Cayas were supposed to pay those claims.
damages.
It being specifically required that PCSI's written consent be
PCSI appealed to the Court of Appeals, which, in its first secured before any payment in settlement of any
decision of May 8, 1987 the lower court's decision. Its claim could be made, Cayas is precluded from seeking
motion for reconsideration having been denied, PCSI filed reimbursement of the payments made to del Carmen,
the instant petition charging the Court of Appeals with Magsarili and Antolin in view of her failure to comply with
having erred in affirming in toot the decision of the lower the condition contained in the insurance policy.
court.
Clearly, the fundamental principle that contracts are
ISSUE: respected as the law between the contracting parties
finds application in the present case. Thus, it was error on
the part of the trial and appellate courts to have
disregarded the stipulations of the parties and to have
substituted their own interpretation of the insurance policy.

We observe that although Milagros Cayas was able to

prove a total loss of only P44, 000.00, PCSI was made liable
for the amount of P50, 000.00, the maximum liability per
accident stipulated in the policy. This is patent error. An
insurance indemnity, being merely an assistance or
restitution insofar as can be fairly ascertained, cannot be
availed of by any accident victim or claimant as an
instrument of enrichment by reason of an accident.

WHEREFORE, the decision of the Court of Appeals is hereby

modified in that petitioner shall pay Milagros Cayas the
amount of Twelve Thousand Pesos (P12,000. 00) plus legal
interest from the promulgation of the decision of the lower
court until it is fully paid and attorney's fees in the amount
of P5,000.00. No pronouncement as to costs.

WHEREFORE, in view of the foregoing, the present petition

is GRANTED. Petitioner's complaint for damages against
private respondents is hereby REINSTATED. Let the case be
remanded to the lower court for trial on the merits.