SAN BEDA COLLEGE

ALABANG SCHOOL OF LAW

Alabang Hills Village

INSURANCE LAW
CASE DIGEST
COMPILATION

SUBMITTED TO:
ATTY. TIMOTEO B. AQUINO

SUBMITTED BY:
COMMERCIAL LAW REVIEW
4B
 TABLE OF CONTENTS
Henson, Jr. v. UCPB General Alteza, Eryn Kate
Insurance Page 1

Philam Insurance Co. Inc. v. Andamo, Phoebe Maxine

Parc Chateau Condominium Unit Page 2
Owners Association

Keihin-Everett Forwarding Co., Balagsa, Jennifer

Inc. v. Tokio Marine Malayan Page 3
Ins.

Industrial Personnel and Basaran, Mariel

Management Services, Inc. v. Page 4
Country Bankers Insurance
Corp.

The Insular Life Assurance Co. Bellosillo, Quinn Jay

Ltd. v. Heirs of Jose Alvarez Page 5

Enriquez v. Mercantile Calsas, Jose Jr.

Insurance, Co. Inc. Mendoza, Sarah Pauline
(mentioned twice) Page 6 and 7

Steamship Mutual v. Sulpicio Canlas, Mari Louise

Lines, Inc. Page 8

Equitable Insurance Corp. v. Conanan, Jeffrey Raymond

Transmodal International, Inc. Page 9

Medicard Philippines, Inc. v. CIR Daniel, Zen Deane Danielle

Page 10

Gaisano v. Development Deiparine, Ralph Lorenz

Insurance and Surety Corp Page 11
 TABLE OF CONTENTS
Communication and Del Rosario, Gemilano
Information Systems Corp. v. Abelardo
Mark Sensing Austrial PTY Page 12

Malayan Insurance Co. v. Lin Dominguez, Jeralyn

Page 13

The Insular Life Assurance Co. Ebuna, Ma. Samantha

Ltd. v. Paz Y. Khu Louise
Page 14

Sun Life of Canada v. Sibya Enriquez, Ma. Celine

Page 15

Bank of Philippines Islands v. Esmero, Glenn Marie

Laingo Page 16

Paramount Life & General Espidol, Corinne Marie

Insurance Corporation v. Castro Page 17

Capital Insurance and Surety Francia, Natasha Felicia

Co., Inc. v. Del Monte Motor Page 18
Works, Inc.

Loadstar Shipping Company v. Gagajena, Arvin Stephen

Malayan Insurance Company Page 19

Sun Life of Canada v. Sandra Garcia, Julrey Florence

Tan Kit Page 20

Alvarez II v. Sun Life of Canada Murallos, Clara Angela

Page 21
 TABLE OF CONTENTS

H.H. Hollero Construction v. Generillo, Celestine Jeanne

GSIS Page 22

Fortune Medicare, Inc. v. Geroy, Rina Cerie

Amorin Page 23

Mitsubishi Motors Philippines Gonzales, Exequiela

Salaried Employees Union v. Page 24
Mitsubishi Motors Philippines
Corporation

Vector Shipping Corp. v. Gonzales, Karla Bernadette

American Home Assurance Page 25
Corp.

Asian Terminals, Inc. v. Philam Jimenez, Maria Kriselda

Insurance Co., Inc. Page 26

Manila Bankers Life Insurance Joson, Angelie Sarah

Corp. v. Aban Page 27

Malayan Insurance Co., Inc. v. Lamado, Camille

PAP Co, Ltd. Page 28

Alpha Insurance and Surety Co. Lapina, Maria Claribel

v. Castor Page 29

First Lepanto-Taisho Insurance Libo-on, Jonnalyn

Corp. v. Chevron Philippines Page 30

Florendo v. Philams Plans, Inc. Macatangay, Jose Angelo

Page 31
 TABLE OF CONTENTS
Malayan Insurance Co., Inc. v. Cabel, Jose Emmanuel
Philippine First Insurance Page 32

United Merchants Corp. v. Maramot, John Paul

Country Bankers Insurance Page 33

Paramount Insurance Corp. v. Maravilla, Aya Mae

Remondeulaz Page 34

Country Bankers Insurance Mendoza, Sarah Pauline

Corp. v. Lagman Page 35

New World International Molina, Marceliano III

Development (Phils.) Inc. v. Page 36
NYK-FilJapan Shipping Corp.

The Heirs of George Y. Poe v. Murallos, Clara Angela

Malayan Insurance Page 37

Heirs of Loreto C. Maramag v. Nuyda, Romaine

Maramag Page 38

Lalican v. The Insular Life Ortigoza, Beatriz Anne

Assurance Co. Ltd Page 39

Eastern Shipping Lines, Inc. v. Pacada, Rebirose Erlwin

Prudential Guarantee and Page 40
Assurance

Philippine Health Care Palo, Maria Claire Nina

Providers, Inc. v. CIR Page 41

Keppel Cebu Shipyard, Inc. v. Pascual, Feliz Khristine

Pioneer Insurance Page 42
 TABLE OF CONTENTS
Blue Cross Health Care, Inc. v. Paz, Faye Trixia
Olivares Page 43

Eternal Gardens Memorial Park Peras, Ariel Ruth

Corp. v. Philippine American Page 44
Life Insurance Company

International Container Plata, Jerome

Terminal Services, Inc. v. FGU Page 45
Insurance

Edillon v. Manila Bankers Life Reyes, Luigi Nico

Insurance Page 46

Vda. de Canilang v. Court of Romano, Patrick Jon

Appeals Page 47

Ng Gan Zee v. Asian Cruzader Saquisame, Amiel

Life Assurance Corp. Page 48

Verandia v. Court of Appeals Sambrana, Kristel Mae

Page 49

Finman General Assurance Saranza, Rhena

Corporation v. Court of Appeals Page 50

Tan v. Court of Appeals Sy, Jezreel Joseph

Page 51

Mayer Steel Pipe Corporation v. Tagoc, Vincit Immanuel

Court of Appeals Page 52

Cebu Shipyard Engineering Tolentino, Ma. Micaela

Works v. William Line Santana
Page 53
HENSON VS UCPB GENERAL INSURANCE CO., INC.
G.R. No. 223134
August 14, 2019

Facts: Copylandia moved in the ground floor of a the property, then owned by petitioner, and
leased by NASCL. In 2006, a water leak occurred in the building, and damaged Copylandia's
equipment, amounting to P2,062,640.00. These were insured with respondent, so Copylandia
filed a claim with the former. The parties settled, in the same year, for
P1,326,342.76. Respondent subrogated to the rights of Copylandia over all claims and demands
from the incident. In 2010, respondent, as subrogee to Copylandia's rights, demanded from, inter
alia, NASCL the payment of the claim, but failed. Thus, it filed a complaint for damages. Later,
petitioner transferred the ownership of the building to CHI. In 2011, respondent filed an
Amended Complaint impleading CHI as a party-defendant. In 2014, respondent filed a Motion to
Admit Attached Amended Complaint and Pre-Trial Brief, praying that petitioner, the owner
during the water leak, instead of CHI, be impleaded as a party-defendant.

Issue: Whether or not the respondent’s claim has yet to prescribe.

Held: NO. Following the principles of subrogation, the insurer only steps into the shoes of the
insured and therefore, for purposes of prescription, inherits only the remaining period within
which the insured may file an action against the wrongdoer. The Court must abandon the ruling
in the Vector case that an insurer may file an action against the tortfeasor within ten years from
the time the insurer indemnifies the insured. However, it must be recognized that the prevailing
rule applicable to the pertinent events of this case is Vector. It was even relied upon by the courts
a quo, and as such, it would still be applied in this case. Thus, as the Amended Complaint was
filed in 2014, which is within ten years from the indemnification of Copylandia for its injury/loss,
the claim cannot be said to have prescribed under Vector.
PHILAM INSURANCE CO. INC VS UCPB GENERAL INSURANCE, INC.,
G.R. No. 201116
March 4, 2019

Facts: The parties negotiated for a 90-day payment term of the insurance premium. It includes
Jumbo Risk Provision which provided that if any of the scheduled payments are not received in
full on or before stated dates, the insurance shall be deemed to have ceased at 4 p.m. of such
date, and the policy shall automatically become void and ineffective. Parc Association found the
terms unacceptable and verbally informed Philam. No premiums were paid. Philam made oral
and written demands upon Parc Association. Philam filed a complaint for recovery and argues
that the case is an exception to the general rule.

Issue: Whether or not the case falls under the exception in Makati Tuscany case.

Held: NO. The Makati Tuscany case provides that if the insurer has granted the insured a credit
term for the payment of the premium, it is an exception to the general rule that premium must
first be paid before the effectivity of an insurance contract.
The following are the exceptions: (1) grace period provision in life or industrial life policy; (2)
acknowledgment in a policy or contract or the receipt of premium is conclusive evidence of its
payment; (3) in installment, when partial payment was made at the time of loss; (4) if the insurer
granted the insured a credit term for the payment of the premium; and (5) estoppel when insurer
had consistently granted a credit term for the payment of premium despite full awareness of
Section 77.
Parc Association's failure to pay on the first due date resulted in a void and ineffective policy.
Hence, there is no credit extension to consider as the Jumbo Risk Provision itself expressly cuts
off the inception of the insurance policy in case of default. After establishing that none of the
exceptions are applicable, the general rule applies.
KELHIN-EVERETT FORWARDING CO., INC VS PARC CHATEAU CONDOMINIUM UNIT
OWNDERS ASSOCIATION
G.R. No. 212107
January 28, 2019

Facts: Honda Trading ordered 80 bundles of Aluminum Alloy Ingots from PT Molten and
insured it with Tokio Marine & Nichido Fire Insurance. It also contracted Keihin-Everett to
transport and deliver the goods to its warehouse in Laguna.
Keihin-Everett had an Accreditation Agreement with Sunfreight Forwarders whereby the latter
undertook to render common carrier services for the former and to transport inland goods
within the Philippines. The shipment arrived in Manila and turned over to Sunfreight
Forwarders for delivery. En route to Honda Trading's warehouse, the truck was hijacked and
one of the container vans was reportedly taken away. Honda Trading suffered losses. Tokyo
Marine allegedly paid Honda Trading's insurance claim for loss and filed a complaint for
damages against the petitioner alleging that it had been subrogated to all the rights and causes
of action pertaining to Honda Trading. Keihin-Everett denied liability on the ground that the
loss of the shipment occurred while it was in the possession of Sunfreight Forwarders.

Issue: Whether or not Keihin-Everett was liable to Tokio Marine?

Held: YES. Article 2207 of the Civil Code provides that if the plaintiffs property has been
insured, and he has received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has violated
the contract. The Court also ruled in the case of Equitable Insurance Corp. vs. Transmodal
International, Inc. that the payment by the insurance company to the insured operates as an
equitable assignment to the former of all the remedies which the insured may have against the
one whose negligence or wrongful act caused the loss. The right of subrogation does not depend
upon the privity of contract but upon payment by the insurance company of the insurance
claim.
In this case, the insurance claim was paid by Tokio Marine as proven by the Subrogation
Receipt which shows the fact of payment. This fact of payment grants Tokio Marine subrogatory
right which enables it to exercise legal remedies that would otherwise be available to Honda
Trading as owner of the hijacked cargoes as against the petitioner. In short, the right of
subrogation accrues simply upon payment by the insurance company of the insurance
claim. Thus, Keihin-Everett is liable to Tokio Marine under the latter’s exercise of its legal right
of subrogation.
INDUSTRIAL PERSONNEL AND MANAGEMENT SERVICES, INC VS COUNTRY
BANKERS INSURANCE CORP
G.R. No. 194126
October 17, 2018

Facts: In 2000, Industrial Personnel and Management Services, Inc. (IPAMS) began recruiting
registered nurses for work deployment in the United States of America (U.S.).
Because of the advances made to the nurse applicants, the latter were required to post a surety
bond. The Country Bankers Insurance Corporation (Country Bankers for brevity) and IPAMS
agreed to provide bonds for the said nurses. Under the agreement of IPAMS and Country
Bankers, the latter will provide surety bonds and the premiums therefore were paid by IPAMS
on behalf of the nurse applicants. According to IPAMS, starting 2004, some of its claims were
not anymore settled by Country Bankers. Due to the unwillingness of Country Bankers to settle
the claims of IPAMS, the latter sought the intervention of the IC, through a letter-complaint dated
February 9, 2007.

Issue: Whether or not the CA erred in issuing its assailed Decision which reversed and set aside
the rulings of the IC, DOF, and OP?

Held: YES. The subject agreement of the parties indubitably contemplates a surety agreement,
which is governed mainly by the Insurance Code, considering that a contract of suretyship shall
be deemed an insurance contract within the contemplation of the Insurance Code if made by a
surety which is doing an insurance business. In this case, the surety, i.e., respondent Country
Bankers, is admittedly an insurance company engaged in the business of insurance. In fact, the
CA itself in its assailed Decision mentioned that a contract of suretyship is defined and covered
by the Insurance Code.

It bears stressing that respondent Country Bankers, after undergoing an evaluation of the total
number of claims of petitioner IPAMS, undertook the settlement of such claims even without the
submission of official receipts. Accordingly, under Section 92 of the Insurance Code, the failure
to attach official receipts and other documents evidencing the expenses incurred by petitioner
IPAMS, even assuming that it can be considered a defect on the required proof of loss, is therefore
considered waived as ground for objecting the claims of petitioner IPAMS
THE INSULAR LIFE ASSURANCE CO vs. THE HEIRS OF JOSE H. ALVAREZ
G.R. No. 207526
October 3, 2018.

Facts: Jose H. Alvarez applied for and was granted a housing loan by UnionBank. This loan was
secured by a Group Mortgage Redemption Insurance with Insular Life taken on the life of Alvarez
with UnionBank as beneficiary. Alvarez passed away. UnionBank filed with Insular Life a death
claim under Alvarez's name pursuant to the Group Mortgage Redemption Insurance. Insular Life
denied the claim after determining that Alvarez was not eligible for coverage as he was supposedly
more than 60 years old at the time of his loan's approval.

Issue: Whether or not Alvarez fraudulent misrepresentation would warrant the rescission of the
Group Mortgage Redemption Insurance

Held: NO. It will not warrant rescission. Section 45 which states that: If a representation is false
in a material point, whether affirmative or promissory, the injured party is entitled to rescind the
contract from the time when the representation becomes false. Rescission under Section 45
remains subject to the basic precept of fraud having to be proven by clear and convincing
evidence. A single piece of evidence hardly qualifies as clear and convincing. Its contents could
just as easily have been an isolated mistake.

Insular Life comes before this Court pleading nothing but just one instance when Alvarez
supposedly declared himself to have been 55 years old. It claims that it did not rely solely on
Alvarez's Health Statement Form but also on his Background Checking Report. Reliance on this
report is problematic. It was not prepared by Alvarez himself. Rather, it was accomplished by a
UnionBank employee following the conduct of credit investigation. Insular Life notes a statement
by UnionBank's Josefina Barte that all information in the Background Checking Report was
supplied by Alvarez. But this is a self-serving statement, wholly reliant on the assumption of that
employee's flawless performance of her duty to record findings. In the context of so many other
documents being available to ascertain the error, a mere dual occurrence does not definitively
establish a fraudulent scheme.
MILAGROS ENRIQUEZ VS THE MERCANTILE INSURANCE CO., INC (Calsas, Jose Jr.)
G.R. No. 210950
August 15, 2018

Facts: Petitioner filed a replevin case against Wilfred Asuten for the recovery of the Toyota Hi-
Ace van valued at P300,000. She applied for a bond of P600,000 with the respondent in Asuten's
favor. The RTC approved the bond and ordered the sheriff to recover the van from Asuten and to
deliver it to the petitioner. The RTC dismissed the case and ordered the petitioner to restore the
van to Asuten but failed to do so. The RTC directed the respondent to pay Asuten the amount of
the bond. Respondent filed a separate collection suit against the petitioner. The RTC ruled in its
favor and affirmed by the CA.

Issue: Whether petitioner was liable for the full amount of the bond.

Held: YES. Basic is the principle that "a contract is law between the parties" for as long as it is
"not contrary to law, morals, good customs, public order, or public policy." Under their Indemnity
Agreement, the petitioner held herself liable for any payment made by the respondent by virtue
of the replevin bond. A contract of insurance is, by default, a contract of adhesion. It is prepared
by the insurance company and might contain terms and conditions too vague for a layperson to
understand; hence, they are construed liberally in favor of the insured.

Here, respondent, does not seek to recover an amount which exceeds the amount of the bond or
any "damages and expenses of whatever kind and nature," all of which it could have sought
under the Indemnity Agreement. It only seeks to recover from the petitioner the amount of the
bond, or P600,000.

Lastly, petitioner is now made liable for the replevin bond because she failed to appeal its
forfeiture. Thus, she is liable for the full amount of the bond.
MILAGROS ENRIQUEZ VS THE MERCANTILE INSURANCE CO., INC (Mendoza, Sarah Pauline)
G.R. No. 210950
August 15, 2018

Facts: Enriquez filed a complaint for replevin against Austen for recovery of her van, valued at
P300,000. Austen allegedly refused to return her van, claiming that it was given by Enriquez’s
son as a consequence of a gambling deal. So, Enriquez applied for a replevin bond from
Mercantile Insurance amounting to P600,000.

Further, Enriquez also executed an indemnity agreement with Mercantile Insurance, where she
agreed to indemnify the latter for all damages, payments, advances, losses, costs, taxes,
penalties, charges, attorney’s fees, and expenses of whatever kind and nature that it would incur
as surety of the replevin bond.

Subsequently, Enriquez surrendered the van to BPI, but did not comply with the sheriff when
the latter ordered its return. Thus, the RTC declared the bond forfeited and Mercantile Insurance
was given 10 days to produce the van or to show cause why judgment should not be rendered
against it for the amount of the bond.

Mercantile Insurance, then, requested for the remittance of the P600,000 from Enriquez, which
should be paid on the replevin bond. However, Enriquez claimed that it was her daughter-in-law
who filed the complaint in her name, and that the same forged her signature in the indemnity
agreement.

Issue: Being a contract of adhesion, is the insurance contract in this case valid?

Held: Yes. According to Rizal Surety and Insurance Co., Insurance is a contract of adhesion
considering that most of the terms of the contract do not result from mutual negotiations between
the parties as they are prescribed by the insurer in printed form to which the insured may adhere
if the chooses but which he cannot change.

In this case, under their indemnity agreement, the petitioner held herself liable for any payment
made by respondent by virtue of the replevin bond. Further, the petitioner contends that the
indemnity agreement was a contract of adhesion since respondent made the extent of liability so
comprehensive and all-encompassing to the point of being ambiguous. However, it is a basic
principle that a contract of insurance is, by default, a contract of adhesion.

Thus, regardless of being a contract of adhesion, the insurance contract in this case is valid.
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD. VS SULPICIO
LINES, INC.,
GR NO. 196072
September 20, 2017

Facts: Sulpicio insured its fleet of inter-island vessels with Steamship for Protection & Indemnity
risks. One of its insured vessels, M/V Princess of the World, was gutted by fire while on voyage
from Iloilo to Zamboanga City, resulting in total loss of its cargoes. Sulpicio claimed indemnity
from Steamship but Steamship denied the claim and subsequently rescinded the insurance
coverage of Sulpicio's other vessels on the ground that "Sulpicio was grossly negligent in
conducting its business regarding safety, maintaining the seaworthiness of its vessels as well as
proper training of its crew." Thereafter, Sulpicio filed a Complaint against Steamship for specific
performance and damages. Steamship filed its Motion to Dismiss and/or to Refer Case to
Arbitration pursuant to the ADR Law, and to Rule 47 of the 2005/2006 Club Rules, which
supposedly provided for arbitration in London of disputes between Steamship and its members.
Sulpicio contends that there was no valid arbitration agreement between them, and if there were,
it was not aware of it. The Court of Appeals even ruled that the arbitration agreement in the
2005/2006 Club Rules is not valid because it was not signed by the parties.

Issue: Whether there is a valid and binding arbitration agreement between Steamship Mutual
Underwriting (Bermuda) Limited and Sulpicio Lines, Inc.

Held: YES, there is a valid and binding arbitration agreement. The court, in BF Corp. v. Court
of Appeals, ruled that a contract may be encompassed in several instruments even though every
instrument is not signed by the parties, since it is sufficient if the unsigned instruments are
clearly identified or referred to and made part of the signed instrument or instruments.

The contract between Sulpicio and Steamship is more than a contract of insurance between a
marine insurer and a shipowner. By entering its vessels in Steamship, Sulpicio not only obtains
insurance coverage for its vessels but also becomes a member of Steamship. A shipowner wishing
to enter its fleet of vessels to Steamship must fill in an application for entry form. Steamship
then issues a Certificate of Entry and Acceptance of the vessels, showing its acceptance of the
entry. Thus, a contract of insurance is perfected between the parties upon Steamship's issuance
of the Certificate of Entry and Acceptance. Sulpicio's acceptance of the Certificate of Entry and
Acceptance manifests its acquiescence to all its provisions.
Thus, an arbitration agreement that was not embodied in the main agreement but set forth in
another document is binding upon the parties, where the document was incorporated by
reference to the main agreement. The arbitration agreement contained in the Club Rules, which
in turn was referred to in the Certificate of Entry and Acceptance, is binding upon Sulpicio even
though there was no specific stipulation on dispute resolution in this Certificate. Sulpicio cannot
feign ignorance of the arbitration clause since it was already charged with notice of the Club
Rules as referenced in the Certificate of Entry and Acceptance. Assuming that its contentions
that it was not furnished a copy of the 2005/2006 Club Rules were true, by the exercise of
ordinary diligence, it could have easily obtained a copy of them from the local insurance agents,
Pioneer Insurance or Seaboard-Eastern. Sulpicio is also estopped from denying knowledge of the
Rulebook by its own acts and representations, as evidenced by its various letters to Steamship,
showing its familiarity with the Rulebook and its provision
EQUITABLE INSURANCE CORPORATION VS. TRANSMODAL INTERNATIONAL, INC.
G.R. No. 223592
August 07, 2017

Facts: Transmodal, respondent, was hired by Syntengco Enterprise to clear its 200 cargo.
Respondent withdrew the cargoes and delivered them to Sytengco’s warehouse noting in the
delivery receipt that all the containers were wet. Elite Surveyors computed loss at P728,712 after
adjustment of 50% loss allowance. Syntengco demanded from respondent the payment of
P1,457,424 as compensation for total loss of shipment. Petitioner, as insurer of the cargoes per
Marine Open Policy, paid Syntengco’s claim for P728,712.00. Sytengco subrogated its rights in
favor of petitioner. Petitioner demanded from respondent the reimbursement of the payment as
subrogee. Respondent denied knowledge of an insurance policy claiming that petitioner has no
cause of action because the damages to the cargoes were not due to its fault or gross negligence.
RTC ruled in favor of Petitioner. CA set aside the ruling of the RTC.

Issue: Whether or not the Petitioner has the right of subrogation even with the non-presentation
of the insurance contract?

Held: YES. Art. 2207 of the Civil Code provides that the insurance company shall be subrogated
to the rights of the insured against the person who has violated the contract upon payment of
indemnity. In Malayan Insurance Co. v. Regis brokerage, the court held that the non-presentation
of the insurance contract is not fatal to its cause of action. Petitioner likewise failed to raise the
issue of the non-presentation of insurance policy during the pre-trial. Here, the petitioner was
able to present as evidence the marine open policy that vested upon it, its right as subrogee.
Hence, the petitioner was able to prove their right to institute this actions as subrogee of the
insured as the defendant did not present any evidence or witness to contradict plaintiffs
allegation.
MEDICARD PHILIPPINES, INC. vs. CIR
G.R. No. 222743
April 5, 2017

Facts: MEDICARD is a Health Management Organization (HMO) providing prepaid health and
medical insurance coverage to its clients. It filed its 1st, 2nd, 3rd and 4th quarterly VAT returns
for the year 2006. Upon finding some discrepancies between MEDICARD’s Income Tax Returns
(ITR) and VAT Returns, the CIR informed MEDICARD and issued a Preliminary Assessment
Notice (PAN) for its deficiency VAT for the year 2006 in the total amount of Pl96,614,476.69
inclusive of penalties.
The CIR contends that since MEDICARD does not actually provide medical and/or hospital
services, but merely arranges for the same, its services are not VAT exempt. MEDICARD argues
that the services it renders is not limited merely to arranging for the provision of medical and/or
hospital services by hospitals and/or clinics but includes actual and direct rendition of medical
and laboratory services.

Issue: Whether MEDICARD is engaged in the business of insurance

Held: NO. According to the Supreme Court in the case of Philippine Health Care Providers, Inc.
vs. CIR, an HMO engaged in preventive, diagnostic and curative medical services is not engaged
in the business of insurance.
In sum, the Court said that the main difference between an HMO and an insurance company is
that HMOs undertake to provide or arrange for the provision of medical services through
participating physicians while insurance companies simply undertake to indemnify the insured
for medical expenses incurred up to a pre-agreed limit.
In the present case, the VAT is a tax on the value added by the performance of the service by the
taxpayer. It is, thus, this service and the value charged thereof by the taxpayer that is taxable
under the NIRC.
JAIME T. GAISANO VS DEVELOPMENT INSURANCE AND SURETY CORPORATION
G.R. No. 190702
Feb 27, 2017

Facts: In 1996, respondent DISC issued a commercial vehicle insurance policy to petitioner
Gaisano. In line with this, petitioner issued a check on Sept. 27 to respondent’s agent Trans-
Pacific, but Trans-Pacific informed petitioner that it would pick up the check the next day (Sept.
28). However, on the same day of issuance, the vehicle was stolen. Oblivious of the incident,
Trans-Pacific picked up the check on Sept. 28 and issued an official receipt to petitioner. When
petitioner was informed of the vehicle’s loss, he filed a claim with respondent, but respondent
denied petitioner’s claim on the ground that there was no insurance contract. RTC rules in favor
of petitioner. It considered the premium paid as of September 27, even if the check was received
only on September 28. However, on appeal, CA rules in favor of respondent, finding that the
premium was not yet paid at the time of the loss, but only a day after, when the check was picked
up by Trans-Pacific. Hence petitioner filed this petition.

Issue: Whether or not there is a binding insurance contract between petitioner and respondent.

Held: NO. Petition is denied. Section 77 of the Insurance Code provides that: “An insurer is
entitled to payment of the premium as soon as the thing insured is exposed to the peril insured
against. X x x no policy or contract of insurance issued by an insurance company is valid and
binding unless and until the premium thereof has been paid...” Here, the check was delivered to
respondent’s agent Trans-Pacific, only on September 28; no payment of premium had thus been
made at the time of the loss of the vehicle on September 27. Thus, at the time of loss, there was
no payment of premium yet to make the insurance policy effective. Thus, we find that petitioner
is not entitled to the insurance proceeds because no insurance policy became effective for lack
of premium payment.
COMMUNICATION AND INFORMATION SYSTEMS CORP. VS. MARK SENSING AUSTRALIA
PTY. LTD.
G.R. No. 192159
January 25, 2017

Facts: Communication and Information Systems Corporation (CISC) and Mark Sensing Australia
Pty. Ltd. (MSAPL) entered into a Memorandum of Agreement whereby MSAPL appointed CISC as
the agent of MSAPL to the Philippine Charity Sweepstakes Office (PCSO) for the thermal paper
supply contract between the PCSO and MSAPL. MSAPL agreed to pay CISC a commission for its
services. MSAPL stopped remitting commissions. CISC filed a complaint before the RTC against
MSAPL and prayed that a writ of preliminary attachment be issued. The RTC issued a writ of
preliminary attachment. CJSC posted a bond in the amount of ₱113 Million (M) through Plaridel
Surety and Insurance Company (Plaridel) in favor of MSAPL. MSAPL moved to recall and set
aside the approval of the attachment bond on the ground that Plaridel had no capacity to
underwrite the bond pursuant to Section 215 of the old Insurance Code because its net worth
was only ₱214M and could therefore only underwrite up to ₱42M.

Issue: Whether or not the RTC committed grave abuse of discretion when it approved the
attachment bond whose face amount exceeded the retention limit of the surety?

Held: NO. Section 215 of the old Insurance Code limits the amount of risk that insurance
companies can retain to a maximum of 20% of its net worth. However, in computing the retention
limit, risks that have been ceded to authorized reinsurers are ipso jure deducted. The amount of
retained risk is computed by deducting ceded/reinsured risk from insurable risk. If the resulting
amount is below 20% of the insurer's net worth, then the retention limit is not breached. In this
case, Plaridel's net worth is ₱289M. Plaridel's retention limit is therefore ₱57M, which is below
the ₱113M face value of the attachment bond. However, it only retained an insurable risk of ₱l7M
because the remaining amount of ₱98M was ceded to other insurance companies. Thus, the risk
retained by Plaridel is actually ₱40M below its maximum retention limit. Therefore, the approval
of the attachment bond by the RTC was in order.

Contrary to MSAPL's contention that the RTC acted with grave abuse of discretion, we find that
the RTC not only correctly applied the law but also acted judiciously when it required Plaridel to
submit proof of its reinsurance contracts after MSAPL questioned Plaridel's capacity to
underwrite the attachment bond. Apparently, MSAPL failed to appreciate that by dividing the
risk through reinsurance, Plaridel's attachment bond actually became more reliable as it is no
longer dependent on the financial stability of one company and therefore more beneficial to
MSAPL.

A contract of reinsurance is one by which an insurer (the "direct insurer" or "cedant") procures
a third person (the "reinsurer") to insure him against loss or liability by reason of such original
insurance. It is a separate and distinct arrangement from the original contract of insurance,
whose contracted risk is insured in the reinsurance agreement. The reinsurer's contractual
relationship is with the direct insurer, not the original insured, and the latter has no interest in
and is generally not privy to the contract of reinsurance. Simply, reinsurance is the "insurance
of an insurance." Thus, the RTC did not commit grave abuse of discretion.
MALAYAN INSURANCE CO. VS LIN
G. R. No. 207277
January 16, 2017

Facts: A collection of sum of money was filed by the Emma Concepcion Lin (Lin) against Malayan
Insurance Co., Inc. (Malayan). Lin alleged that she obtained various loans from RCBC secured
by six warehouses. The five warehouses were insured with Malayan against fire. Unfortunately,
on 24th of February 2008, five warehouses were gutted by fire upon investigation of the Bureau
of Fire protection who issued a Fire Clearance Certification showing that the cause of the fire
was accidental. Hence, Lin demanded for payment of her insurance claim but was denied on the
basis that the forensic investigator hired by Malayan claimed that the cause of the fire was arson
and not accidental. After several demands, Malayan still denied or refused to pay her insurance
claim hence five months later, Lin filed before the Insurance Commission an administrative case
against Malayan claiming that the same should be liable for unfair claim settlement to its
unjustified refusal to settle her claim. Thus, Malayan filed a motion to dismiss based on forum
shopping.

Issue: Whether or not Lin is guilty of forum shopping

Held: NO. Lin is not guilty of forum shopping The essence of forum shopping is the filing of
multiple suits involving the same parties for the same cause of action, either simultaneously or
successively, for the purpose of obtaining favorable judgment. The settled rule is that criminal
and civil cases are altogether different from administrative matters. In this case, matters handled
by the Insurance Commission (IC) are delineated as either regulatory or adjudicatory, both of
which have different characteristics. Among the several regulatory duties of IC is the authority
to issue, or refuse issuance of, a Certificate of Authority and to revoke or suspend the same. The
adjudicatory authority is generally described in Section 416 of the Insurance Code “…The
authority to adjudicate granted to the Commissioner under this section shall be concurrent with
that of the civil courts”. In addition in the case of Go vs. Office of the Ombudsman, wherein the
Supreme Court ruled that a civil case before a trial court involving recovery of payment of the
insured’s insurance claim plus damages, can proceed simultaneously with an administrative
case before the IC.

In this case, applying the doctrine above, Lin cannot be held guilty of forum shopping since she
can file simultaneously with the Insurance Commission, while there may be conflicting
resolutions on the same issue, the finding or conclusion of one would not necessarily be binding
on the other given the difference in the issues involved, the quantum of evidence required and
the procedure to be followed.
THE INSULAR LIFE ASSURANCE COMPANY, LTD., Petitioner, vs. PAZ Y. KHU, FELIPE Y.
KHU, JR., and FREDERICK Y. KHU, Respondents.
G.R. No. 195176
April 18, 2016

Facts: Felipe N. Khu, Sr. applied for a life insurance policy with Insular Life wherein the former
did not declare any illness or adverse medical condition. Insular Life thereafter issued him a
policy with a face value of P1 million. As Felipe’s policy lapsed due to non-payment of the
premium, this prompted him to file for the reinstatement of his policy and paid the amount of
P25, 020.00 as premium

Subsequently, Felipe died. His Certificate of Death enumerated Congestive heart failure and
Diabetes Neuropathy as one of the causes of death. The beneficiaries of Felipe thereafter filed
with Petitioner a claim for benefit under the reinstated policy. This claim was denied. Instead,
Insular Life advised Felipe’s beneficiaries that it had decided to rescind the reinstated policy on
the grounds of concealment and misrepresentation by Felipe by not disclosing the ailments that
he had already prior to his application for reinstatement of his insurance policy and that it would
not have reinstated the insurance policy had Felipe disclosed the material information on his
adverse health condition.

Issue: Whether or not Felipe’s reinstated life insurance policy is already incontestable at the time
of his death.

Held: YES. Section 48 of the Insurance Code provides that after a policy of life insurance
made payable on the death of the insured shall have been in force during the lifetime of the
insured for a period of two (2) years reckoned from the date of its issue or of its last reinstatement,
the insurer is barred from raising the defense that the policy is void ab initio or is rescindable by
reason of concealment or misrepresentation on the part of the insured or his agent.

In the case at bar, Eulogio’s death rendered impossible full compliance with the conditions for
reinstatement of the Policy. The Policy could only be considered reinstated after the Application
for Reinstatement had been processed and approved by Insular Life during Eulogio’s lifetime and
good health. Thus, it is settled that the reinstatement of an insurance policy should be reckoned
from the date when the same was approved by the insurer.
SUN LIFE OF CANADA VS. SIBYA
G.R. No. 211212
June 8, 2016

Facts: Atty. Jesus Sibya Jr. applied for a life insurance with Sun Life on Jan. 10, 2001, disclosing
facts that he sought advice for his kidney problems. 3 months after the approval and issuance
of the insurance policy, Atty. Sibya died as a result of a gunshot wound. This prompted the
respondent heirs, who were indicated as beneficiaries, to file a claim on the insurance policy
against Sun Life. However, Sun Life denied the claim on the ground that Atty. Sibya failed to
disclose his medical history and issued a check representing the refund of Atty. Sibya’s
premiums. The respondents reiterated their claim but Sun Life denied it again and instead filed
a Complaint for Rescission of Insurance Policy with the RTC on the ground that Atty. Sibya did
not disclose his previous medical treatment at the NKTI in May and August of 1994.

Issue: Did Atty. Sibya commit concealment and misrepresentation in his insurance application
with Sun Life?

Held: NO. The Supreme Court, in its ruling in Manila Bankers Life Insurance Corp. v Aban held
that if the insured died within the two-year contestability period, the insurer is bound to make
good its obligation under the policy, regardless of the presence or lack of concealment or
misrepresentation.

In the present case, Sun Life issued Atty. Sibya 's policy on February 5, 2001. Thus, it has two
years from its issuance, to investigate and verify whether the policy was obtained by fraud,
concealment, or misrepresentation. Upon the death of Atty. Sibya, however, on May 11, 2001, or
a mere three months from the issuance of the policy, Sun Life loses its right to rescind the policy.

As correctly observed by the CA, Atty. Sibya admitted in his application his medical treatment
for kidney ailment. Moreover, he executed an authorization in favor of Sun Life to conduct
investigation in reference with his medical history. Therefore, Atty. Sibya did not commit any
concealment and misrepresentation in his insurance application with Sun Life.
BANK OF PHILIPPINE ISLANDS VS LAINGO
G.R. No. 205206
March 16, 2016

Facts: Laingo opened a Platinum 2-in-1 Savings and Insurance account with BPI. Said account
is where depositors are automatically covered by an insurance policy against disability or death,
which is issued by FGU Insurance, which is now known as BPI/MS Insurance Corporation.
Laingo died and his sister, Rhealyn found the Personal Accident Insurance Coverage Certificate
and so she filed a claim as beneficiary of the former. BPI denied the claim and said that she
should have filed the claim within 3 calendar months from the death of Laingo.

Issue: Whether Rhealyn can claim from the insurance

Held: YES. In a contract of agency, there is the doctrine of representation. This means that
notice to the agent is notice to the principal. BPI was already informed of Laingo’s death by his
family. As such, BPI, being the agent of FGU Insurance, being notified, can be considered as a
notice to FGI Insurance as well. The latter cannot now justify the denial for the claim on the
ground that it was filed out of time since they were already notified within a few days from
Laingo’s death. BPI had time to inform Laingo’s family about the insurance policy, his death was
published in a newspaper, a representative of Laingo inquired about the account, and an
employee of BPI went to the wake to process documents. As such, BPI and FGU Insurance shall
bear the loss and must compensate Laingo for the actual damages suffered by her family plus
attorney’s fees. FGU Insurance shall also pay the insurance proceeds.
PARAMOUNT LIFE GENERAL INSURANCE CORPORATION V. CASTRO
G.R No. 195728
April 19, 2016

Facts: Philippine Postal Savings Bank, Incorporated (PPSBI) obtained from Petitioner Paramount
a Group Master Policy which provides, among others, that "all death benefits shall be payable to
the creditor, PPSBI." Virgilio Castro, father of respondents, obtained a housing loan from PPSBI.

PPSBI required Virgilio to apply for a mortgage redemption insurance (MRI) from Paramount to
cover the loan. In his application for the said insurance policy, Virgilio named the respondents
as beneficiaries. Petitioner Paramount issued an MRI subject to the terms and conditions of
Group Master Policy obtained by PPSBI. After some time, Virgilio died. Thus, a claim was filed
for death benefits under the individual insurance coverage issued under the group policy.
Paramount, however, denied the claim because of failure of Virgilio to disclose material
information pertaining to his health condition. Paramount then filed a Complaint praying that
the individual insurance of Virgilio be declared null and void. The respondents filed a motion to
include the PPSBI as an indispensable party-defendant. To which the RTC denied.

Issue: Whether or not PPSBI is an indispensable party in the present case.

Held: Yes. According to Great Pacific Life Assurance Corp. v. Court of Appeals, mortgage
redemption insurance is a device for the protection of both the mortgagee and the mortgagor. It
protects the mortgagee, because the insurance policy ensures that the mortgage debt will be
satisfied from the proceeds of the insurance in the event of the death of the mortgagor.
Conversely, it gives protection to the mortgagor in that in the event of his death, the mortgage
obligation will be extinguished by the application of the proceeds to the indebtedness. This
relieves the mortgagor’s beneficiaries. In this case, should Paramount succeed in nullifying the
individual insurance policy of Virgilio, PPSBI shall then proceed against the respondents and
this would contradict the provisions of the group insurance policy that ensure the direct payment
by Paramount to PPSBI. In allowing the inclusion of the PPSBI as a third-party defendant, the
Court recognizes the inseparable interest of the bank (as policyholder of the group policy) in the
validity of the individual insurance certificates issued by Paramount.
CAPITAL INSURANCE AND SURETY CO, INC. VS MOTOR WORKS
G.R. No. 159979
December 9, 2015

Facts: Petitioners were found liable and such, the sheriff levied against their personal properties
as well as also a service of garnishment against the security deposit of the petitioner in the
Insurance Commission. The Insurance Commissioner was thus ordered to withdraw from the
security deposit of petitioner to satisfy the Notice of Garnishment

Issue: W/N the securities deposited in an insurance company may be the subject of a levy?

Held: No. Security deposits are immune from levy or execution.

Section 203 of the Insurance Code provides

“…no judgment creditor or other claimant shall have the right to levy upon any securities of the
insurer held on deposit under this section or held on deposit pursuant to the requirement of the
Commissioner.”

Furthermore, the Insurance Commissioner’s refusal to release such funds is legally justified. His
legal duty is to hold the security deposit for ALL policy holders, not just one of them. An implied
trust is created by the law for the benefit of all claimants under subsisting insurance contracts
issued by the insurance company.
LOADSTAR SHIPPING COMPANY V. MALAYAN INSURANCE COMPANY
G.R. No. 185565
November 26, 2014

Facts: Loadstar Shipping and PASAR entered into a Contract of Affreightment for domestic bulk
transport of the latter’s copper concentrates which were loaded in MV Bobcat a marine vessel
owned by Loadstar International. The cargo was insured with Malayan Insurance Co, Inc. A
routine inspection was conducted and found a crack on starboard side of the main deck which
caused seawater to enter and wet the cargo. PASAR sent a formal notice of claim to Loadstar
Shipping and on the basis of the Elite Surveyor’s recommendation Malayan paid PASAR. To
recover the amount paid and in the exercise of its right of subrogation Malayan demanded
reimbursement from Loadstar Shipping which refused to comply.

Issue: Is the respondent entitled to right of recovery by virtue of subrogation against the
petitioners?

Held: NO, Under the right of subrogation which stems from Art. 2207 of the New Civil Code. The
rights of a subrogee cannot be superior to the rights possessed by a subrogor. A subrogee in
effect steps into the shoes of the insured and can recover only if the insured likewise could have
recovered. Should the insurer pay the insured and it turns out that indemnification is not proper,
the insurer takes the risk of not being able to seek recompense from the wrongdoer. In this case
the issue lies on whether such contamination resulted to damage and the cost thereof if any
incurred by the PASAR. Malayan, as the insurer of PASAR, neither stated nor proved that the
goods are rendered useless or unfit for the purpose intended by PASAR due to the contamination.
Hence, there is no basis for the goods rejection under Art. 365 of the Code of Commerce. It is
clear that Malayan erroneously reimbursed PASAR as though the latter suffered from total loss
of goods in the absence of proof that PASAR sustained such kind of loss.
SUN LIFE OF CANADA (PHILIPPINES), INC. vs. SANDRA TAN KIT
G.R. No. 183272
October 15, 2014

Facts: Respondent Sandra is the designated beneficiary of Norberto Tan Kit in a life insurance
policy granted by petitioner. Within the two-year contestability period, Norberto died.
Consequently, Sandra filed a claim under the subject policy. Petitioner denied Sandra’s claim on
account of Norberto’s concealment of material information in his insurance application. Believing
that the policy is null and void, petitioner opined to its letter that its liability is limited to the
refund of all the premiums paid, and attached a check for P13,080.93 representing the said
refund. Sandra refused to accept the refund and insisted on the payment of the insurance
proceeds. However, the lower court ruled that the petitioner should only pay Sandra the
premiums paid but with 12% interest per annum from the time of insured’s death until fully
paid.

Issue: Whether the petitioner is liable to pay interest on the premium to be refunded to
respondents.

Held: No, the petitioner is not liable to pay interest. Under our laws, there are two types of
interest – monetary and compensatory. Monetary interest is paid if there is an express agreement
in writing between the parties for the compensation of the use or forbearance of money. While
compensatory is paid as a form of damages if the obligor is proven to have failed to comply with
his obligation.

In this case, there is no written agreement as to the payment of monetary interest. The petitioner
also did not incur any delay nor unjustifiably deny respondent’s claim after it has tendered the
refund of premium by attaching a check with its letter.

Hence, the petitioner should not be made liable to pay interest on the premium to be refunded
to respondents.
ERLINDA V. ALVAREZ II vs. SUN LIFE OF CANADA
G.R. No. 206674
September 29, 2014

Facts: Sun Life of Canada issued a Participating Life Insurance Policy to the petitioner, which
covers the life of her mother. This policy has a face value of P500,000, payable upon the death
of the insured. Here, the mother was classified as a high-risk due to her high blood pressure.

When the insured passed away, Sun Life sent a letter requiring the submission of documents to
facilitate her claim. However, Sun Life discovered that several medical conditions were pre-dated,
and that the insured sought consultations with the University of Santo Tomas Hospital and AIM
Imaging Medical Services, which diagnosed the insured to be suffering from stable angina,
atherosclerosis, and lateral wall ischemia.

Due to this, Sun Life declared the policy void, thus denying the petitioner’s claim.

Issue: Is there concealment on the ground that the insured was unable to disclose her general
condition, thus giving Sun Life the right to rescind the policy applied for?

Held: Yes. According to Section 27 of the Insurance Code, a concealment, whether intentional or
unintentional, entitles the injured party to rescind the contract of insurance. Further, the same
Code reiterates that concealment is a neglect to communicate that which a party knows and
ought to communicate. Thus, a party to an insurance contract is obliged to communicate all
facts within his knowledge which are material to the same, to be determined by the probable and
reasonable influence of the facts upon the party whom the communication is due, in forming his
estimate of the disadvantages of the proposed contract.

In this case, it was clear that it was the intention of the insured – subsequently, the deceased –
to not disclose facts of her consultations with the other two hospitals. These facts, as noted by
the appellate court, was material to the contract in view of its effect on the respondent in forming
its estimate of whether to deny or approve the application, and in prescribing the amount of
premium thereon.

Thus, this concealment effectively entitled Sun Life to rescind the contract of insurance.
H.H. HOLLERO CONSTRUCTION, INC., vs GSIS and POOL OF MACHINERY INSURERS
G.R. No. 152334
September 24, 2014

Facts: Petitioner secured two Contractors’ All Risks (CAR) insurance policies with GSIS for a
housing project. Under both policies, it was provided that: (b) all benefits thereunder shall be
forfeited if no action is instituted within 12 months after the rejection of the claim for loss,
damage or liability. During the construction, three (3) typhoons hit the country causing
considerable damage to the project. Petitioner filed several claims for indemnity with the GSIS.
In a letter dated April 26, 1990, GSIS rejected the claims for the damages wrought by Typhoons
Biring and Huaning, since no amount is recoverable pursuant to the average clause provision
under the policies. In a letter dated June 21, 1990, the GSIS similarly rejected the claim for
damages wrought by Typhoon Saling on a "no loss" basis. On September 27, 1991, petitioner
filed a Complaint for Sum of Money and Damages before the RTC which GSIS opposed on the
ground of prescription.

Issue: Is the action barred by prescription?

Held: Yes. Contracts of insurance are to be construed according to the sense and meaning of
the terms which the parties themselves have used. If such terms are clear and unambiguous,
they must be taken and understood in their plain, ordinary, and popular sense. Case law
illumines that the prescriptive period for the insured’s action for indemnity should be reckoned
from the "final rejection" or denial by the insurer of the claims of the insured and should be
construed as the rejection in the first instance, in this case, the two letters sent by GSIS.
Petitioner's causes of action for indemnity respectively accrued from its receipt of the letters
dated April 26, 1990 and June 21, 1990. Consequently, since (12) months had lapsed, its causes
of action had already prescribed.
FORTUNE MEDICARE INC. vs. AMORIN
G.R. No. 195872
March 12, 2014

Facts: David Amorin was a cardholder/member of Fortune Care, a corporation engaged in

providing health maintenance services to its members. While on vacation in Honolulu, Hawaii,
Amorin underwent an emergency surgery, specifically appendectomy causing him to incur
professional and hospitalization expenses. He attempted to recover from Fortune Care the full
amount thereof, but the company merely approved a reimbursement of P12,151.36, an amount
that was based on the average cost of appendectomy, net of medicare deduction, if the procedure
were performed in an accredited hospital in Metro Manila. Amorin received under protest the
approved amount, but asked for its adjustment to cover the total amount of professional fees
which he had paid, and eighty percent (80%) of the approved standard charges based on
"American standard", considering that the emergency procedure occurred in the U.S.A. This
claim is on the basis of Section 3, Article V of the Benefits and Coverages of the Health Care
Contract. The relevant provision states in part: “However, if the emergency confinement occurs
in a foreign territory, Fortune Care will be obligated to reimburse or pay eighty (80%) percent of
the approved standard charges which shall cover the hospitalization costs and professional fees”

Issue: Does the phrase “approved standard charges” automatically means Philippine Standard?

Held: No. Being a contract of adhesion, the terms of an insurance contract are to be construed
strictly against the party which prepared the contract — the insurer. The word "standard" as
used in the cited stipulation was vague and ambiguous, as it could be susceptible of different
meanings. Contrary to Fortune Care's argument, from nowhere in the Health Care Contract could
it be reasonably deduced that these "standard charges" referred to the "Philippine standard", or
that cost which would have been incurred if the medical services were performed in an accredited
hospital situated in the Philippines. All told, in the absence of any qualifying word that clearly
limited Fortune Care's liability to costs that are applicable in the Philippines, the amount payable
by Fortune Care should not be limited to the cost of treatment in the Philippines, as to do so
would result in the clear disadvantage of its member.
MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION (MMPSEU) V
MITSUBISHI MOTORS PHILIPPINES
G.R. No. 175773
June 17, 2013

Facts: The CBA of MMPSEU and Mitsubishi Corp. provides that the company shall shoulder the
hospitalization expenses of the dependents of covered employees subject to certain limitations
and restrictions. The CBA has provided for MMPC’s limited liability which extends only up to the
amount to be paid to the hospital and doctor by the employees’ dependents. The conflict arose
when a portion of the hospitalization expenses of the covered employees’ dependents were paid
by their own health insurance. While the company refused to pay the portion already shouldered
by the insurance, the union insists that they are entitled to the whole and undiminished amount
of the said hospital expenses.

Issue: Are the employees entitled to full reimbursement of medical expenses incurred based on
the CBA with their employer notwithstanding recovery from their own insurance companies

Held: No. The subject CBA provision is an insurance contract, the rights and obligations of the
parties must be determined in accordance with the general principles of insurance law. Being in
the nature of a non-life insurance contract and essentially a contract of indemnity, the CBA
provision obligates MMPC to indemnify the covered employees’ medical expenses incurred by
their dependents but only up to the extent of the expenses actually incurred. This is consistent
with the principle of indemnity which proscribes the insured from recovering greater than the
loss. Indeed, to profit from a loss will lead to unjust enrichment and therefore should not be
countenanced. To allow reimbursement of amounts paid under other insurance policies shall
constitute double recovery which is not sanctioned by law.
VECTOR SHIPPING CORP. VS. AMERICAN HOME ASSURANCE CORP.
G.R. No. 159213
July 3, 2013

Facts: On September 30, 1987, Caltex entered into a contract of affreightment with Vector
Shipping Corporation (Vector) for the transport of Caltex's petroleum cargo through the M/T
Vector. Caltex insured the petroleum cargo with respondent American Home Assurance Corp.
for P7 million pesos under a marine open policy. In the evening of December 20, 1987, the M/T
Vector and the M/V Doña Paz, a vessel owned by Sulpicio Lines, Inc., collided in the open sea
between the Marinduque and Oriental Mindoro. The collision led to the sinking of both vessels
with the entire petroleum cargo of Caltex. On July 12, 1988, respondent indemnified Caltex for
the loss of the petroleum cargo in the full amount of P7 million pesos. On March 5, 1992,
respondent filed a complaint against Vector, Soriano, and Sulpicio Lines, Inc. to recover the full
amount it paid to Caltex.

Issue: Is the action by the respondent already barred by prescription?

Held: No, the action is not yet barred by prescription. The legal provision governing this case
was not Article 1146 of the Civil Code, but Article 1144 (2).
The Court ruled that the present action was not upon a written contract, but upon an obligation
created by law. This is because the subrogation of respondent to the rights of Caltex as the
insured was by virtue of the express provision of law embodied in Article 2207.

The contract of affreightment that Caltex and Vector entered into did not give rise to the legal
obligation of Vector and Soriano to pay the demand for reimbursement by respondent because
it concerned only the agreement for the transport of Caltex's petroleum cargo.
Considering that the cause of action accrued as of the time respondent actually indemnified
Caltex in the full amount on July 12, 1988, the action was not yet barred by the time of the filing
of its complaint on March 5, 1992, which was well within the 10-year period prescribed by Article
1144 of the Civil Code.

Hence, the action is not yet barred by prescription.

ASIAN TERMINALS, INC. V. PHILAM INSURANCE CO., INC.,
G.R. No. 181163
July 24, 2013

Facts: Nichimen Corporation shipped to Universal Motors 219 packages containing Nissan
Pickup Truck. The shipment was insured with Philam against all risks under a Marine Policy.
When the shipment arrived in Manila and when it was unloaded by Asian Terminals Inc. (ATI),
it found out that one of the packages was in bad order. The shipment was withdrawn by Universal
Motors authorized broker and delivered it to the former’s warehouse. Universal Motors requested
a bad survey order and it was found that some of the shipments were deformed and misaligned.
Universal Motors declared them a total loss. Universal Motors filed a claim for damages against
Westwind (carrier), ATI (arrastre). Demands of Universal Motors were unheeded, thus, it sought
reparation from and was compensated by Philam. Philam as subrogee filed a Complaint for
Damages against Westwind, ATI. The court held Westwind and ATI jointly and severally liable to
Philam and absolve the broker.

Issue: Should Westwind and ATI be held liable for the damaged cargoes?

Held: Yes, both should be held liable. Under Article 2207 of the New Civil Code, when an insured
has received indemnity from the insurance company for the loss sustained, the insurance
company will be subrogated to the rights of the insured. It was also held in the case of Malayan
Insurance Co. Inc. v. Alberto, payment by the insurer to the insured operates as an equitable
assignment to the insurer of all the remedies that the insured may have against the guilty party.
In this case, Philam sufficiently established its claim against Westwind and ATI. Philam as an
insurer was subrogated to the rights of Universal Motors pursuant to the Subrogation Receipt
issued by the latter in favor of the latter.
MANILA BANKERS LIFE INSURANCE CORPORATION vs. ABAN
G.R. No. 175666
July 29, 2013

Facts: On 3 July 1993, Sotero took out a life insurance policy from the Petitioner, designating
Respondent, her niece, as her beneficiary. On 10 April 1996, when the insurance policy had been
in force for more than two years and seven months, Sotero died. Respondent filed a claim for the
insurance proceeds which was denied by the Petitioner. Subsequently, Petitioner filed a civil case
for rescission and/or annulment of the policy on the ground that the policy was obtained by
fraud, concealment and/or misrepresentation under the Insurance Code, which thus renders it
voidable under Article 139013 of the Civil Code.

Issue: Whether or not the action to rescind the policy on the ground that the said policy was
obtained by fraud may prosper, despite the fact that it was brought before the court only after
the lapse of two years?

Held: No. Under Section 48 of the Insurance code, an insurer is given two years – from the
effectivity of a life insurance contract and while the insured is alive – to discover or prove that
the policy is void ab initio or is rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period lapses, or when the
insured dies within the period, the insurer must make good on the policy, even though the policy
was obtained by fraud, concealment, or misrepresentation. In this case, the Petitioner filed the
action to rescind the policy after the lapse of two years and seven months and after the death of
the Sotero. Hence, the said action will not prosper.
MALAYAN INSURANCE CO., INC. V. PAP CO, LTD.
G.R. No. 200784
August 7, 2013

Facts: Petitioner issued a Fire insurance Policy for Respondent’s machineries and equipment for
a period of 1 year. The policy forbade the removal of the insured properties to any place other
than Sanyo Factory, unless sanctioned by Malayan. The policy was then renewed on an “as is”
basis, however, the subject properties were moved to the Pace Factory without the knowledge or
consent of Petitioner. Said transfer negatively affected the fire rating stated in the renewed policy.
Thereafter, during the effectivity of the renewed policy, a fire broke out which totally burned the
insured properties.

Issue: Whether or not Petitioner is entitled to rescind the contract.

Held: Yes. Section 27 of the Insurance Code provides that concealment entitles the injured party
to rescind the contract of insurance. Moreover, the insurer is entitled to rescind the contract
under Section 168 of the Insurance Code when the following conditions are present: 1) the policy
limits the use or condition of the thing insured; 2) there is an alteration in said use or condition;
3) the alteration is without the consent of the insurer; 4) the alteration is made by means within
the insured’s control; and 5) the alteration increases the risk of loss. In this case, all the
circumstances under section 168 are present. It was clearly established that the renewal policy
stipulated that the insured properties were located at the Sanyo factory; that PAP removed the
properties without the consent of Malayan; and that the alteration of the location increased the
risk of loss. Since the petitioner is the injured party entitled to rescind the contract under Section
27, and all the circumstance under 168 are present, the petitioner may rescind the contract of
insurance.
ALPHA INSURANCE AND SURETY VS. ARSENIA CASTOR
GR NO.198174
September 2, 2013

Facts: Arsenia entered into a contract of insurance with Alpha Insurance involving her motor
vehicle. While covered by said insurance, her car was stolen by her driver Jose when she
instructed him to send her car to a nearby shop for tune-up. Arsenia then filed an insurance
claim with the insurer. The insurer denied her claim on the ground that the theft of her motor
vehicle was excluded by her insurance policy which states that the Company shall not be liable
for “any malicious damage caused by the insured, any member of his family or by a person in
the insured’s service.” According to Alpha Insurance, the term “malicious damage” should also
cover malicious “loss” as in “theft.”

Issue: Whether Alpha Insurance is liable to pay Arsenia.

Held: Yes, because “malicious damage” does not contemplate “loss of property.” As held in the
case of Eternal Gardens Memorial Park Corporation v. Philippine American Life Insurance
Company, an insurance contract is a contract of adhesion therefore any ambiguity therein must
be construed liberally in favor of the insured and strictly against the insurer. Here, the contention
of the insurance company that “malicious damage” includes “loss of property” is not correct
because the terms “loss” and “damage” mean different things in ordinary usage. Where there are
restrictive provisions which are open to two interpretations, that which is more favorable to the
insured must be adopted. This being the case, Alpha Insurance cannot exclude the loss of
Arsenia’s vehicle under the insurance policy and therefore it is liable.
FIRST LEPANTO- TAISHO INSURANCE CORP. V. CHEVRON PHILIPPINES
G.R. No. 177839
January 18, 2012

Facts: Chevron Philippines sued First Lepanto- Taisho Insurance Corp. or the payment of unpaid
oil and petroleum purchases made by its distributor Fumitechniks Corporation. Fumitechniks
had applied for and was issued Surety Bond by petitioner. Fumitechniks defaulted on its
obligation. Consequently, petitioner advised respondent of the non-existence of the principal
agreement as confirmed by Fumitechniks. Petitioner explained that being an accessory contract,
the bond cannot exist without a principal agreement as it is essential that the copy of the basic
contract be submitted to the proposed surety for the appreciation of the extent of the obligation
to be covered by the bond applied for.

Issue: Whether or not the petitioner, as surety, is liable to Chevron in the absence of a written
contract with the principal

Held: No. Section 176 of the Insurance Code states: The liability of the surety or sureties shall
be joint and several with the obligor and shall be limited to the amount of the bond. It is
determined strictly by the terms of the contract of suretyship in relation to the principal contract
between the obligor and the obligee. A surety contract is merely a collateral one, its basis is the
principal contract or undertaking which it secures. Necessarily, the stipulations in such principal
agreement must at least be communicated or made known to the surety particularly in this case
where the bond expressly guarantees the payment of respondent's fuel products withdrawn by
Fumitechniks in accordance with the terms and conditions of their agreement. Having accepted
the bond, the respondent as creditor must be held bound by the recital in the surety bond that
the terms and conditions of its distributorship contract be reduced in writing or at the very least
communicated in writing to the surety.
MA. LOURDES S. FLORENDO vs. PHILAM PLANS, INC., PERLA ABCEDE and MA. CELESTE
ABCEDE
G.R. No. 186983
February 22, 2012

Facts: Manuel Florendo filed an application for comprehensive pension plan with respondent
Philam Plans, Inc. Manuel signed the application and left Perla Abcede the task of supplying the
information needed in the application. The comprehensive pension plan also provided life
insurance coverage to Manuel covered by a Group Master Policy. Under the master policy, if the
plan holder died before the maturity of the plan, his beneficiary was to instead receive the
proceeds of the life insurance. Philam Plans issued a Pension Plan Agreement to Manuel, with
Ma. Lourdes S. Florendo, his wife, as beneficiary. Manuel paid his quarterly premiums. Eleven
months later, Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with Philam
Plans but it was declined. Philam Life found that Manuel was on maintenance medicine for his
heart and had an implanted pacemaker. Furthermore, he suffered from diabetes mellitus and
was taking insulin before his death.

Issue: Whether or not Manuel is guilty of concealing his illness in the pension plan application.

Held: Yes. Section 27 of the Insurance Code states that a concealment whether intentional or
unintentional entitles the injured party to rescind a contract of insurance. Since Manuel signed
the application without filling in the details regarding his continuing treatments for heart
condition and diabetes, the assumption is that he has never been treated for the said illnesses in
the last five years preceding his application. However, this was untrue since he had been on
"Coumadin," a treatment for venous thrombosis, and insulin, a drug used in the treatment of
diabetes mellitus, when he submitted his pension plan application. That Manuel still had his
pacemaker when he applied for a pension plan is an admission that he remained under
treatment for irregular heartbeat within five years preceding that application. It is clear that
Manuel concealed his chronic heart ailment and diabetes from Philam Plans. Pursuant to Section
27 of the Insurance Code, Manuel’s concealment entitles Philam Plans to rescind its contract of
insurance with him.
MALAYAN INSURANCE CO, INC. VS PHILIPPINE FIRST INSURANCE CO, INC.
G.R. No. 184300
July 11, 2012

Facts: Wyeth secured a marine policy from respondent Philippines First Insurance. to secure its
interest over its own products. Subsequently Wyeth executed its annual contract of carriage with
Reputable. The contract also required Reputable to secure an insurance policy on Wyeth’s goods.
Reputable signed a Special Risk Insurance Policy with petitioner Malayan. During the effectivity
of the Marine Policy and SR Policy, Reputable received from Wyeth 1,000 boxes of Promil infant
formula to be delivered by Reputable to Mercury Drug Corporation Quezon City. Unfortunately,
the truck carrying Wyeth’s products was hijacked. Philippines First, pursuant to the Marine
Policy, paid Wyeth as indemnity. Philippines First then demanded reimbursement from
Reputable, having been subrogated to the rights of Wyeth by virtue of the payment. The latter,
however, ignored the demand. Subsequently, Reputable impleaded Malayan as third-party
defendant in an effort to collect the amount covered in the SR Policy. Malayan argued that under
Section 5 of the SR Policy, the insurance does not cover any loss or damage to property which at
the time of the happening of such loss or damage is insured by any marine policy and that the
SR Policy expressly excluded third-party liability.

Issue: Whether or not there is double insurance?

Held: No. There is no double insurance. Under Section 93 of the Insurance Code, double
insurance exists where the same person is insured by several insurers separately in respect to
the same subject and interest. The requisites in order for double insurance to arise are as
follows:1. The person insured is the same2. Two or more insurers insuring separately;3. There
is identity of subject matter;4. There is identity of interest insured; and5. There is identity of the
risk or peril insured against. Here, while it is true that the Marine Policy and the SR Policy were
both issued over the same subject matter, i.e. goods belonging to Wyeth, and both covered the
same peril insured against, it is, however, beyond cavil that the said policies were issued to two
different persons or entities. It is undisputed that Wyeth is the recognized insured of Philippines
First under its Marine Policy, while Reputable is the recognized insured of Malayan under the
SR Policy. Therefore, even though the two concerned insurance policies were issued over the
same goods and cover the same risk, there arises no double insurance since they were issued to
two different persons and entities having distinct insurable interests. Necessarily, over insurance
by double insurance cannot likewise exist.
UNITED MERCHANTS CORPORATION vs. COUNTRY BANKERS INSURANCE
CORPORATION
G.R. No. 198588
July 11, 2012

Facts: United Merchants Corporation (UMC) is engaged in the business of buying and selling
and manufacturing of Christmas lights. UMC insured its stocks in trade of Christmas lights
against fire with Country Bankers Insurance (CBIC) for P15,000,000.00 and was increased
to P50,000,000.00. In 1996, a fire gutted the warehouse rented by UMC. UMC submitted its
Formal claim with proof of its loss, and demanded for payment of its claim. CBIC rejected the
claim due to breach of Condition No. 15 of the Policy. CBIC alleged that UMC s claim was
fraudulent because UMC’s Statement of Inventory showed that it had no stocks in trade as of 31
Dec. 1995, and that UMC’s suspicious purchases for the year 1996 did not even amount
to P25,000,000.00.

Issue: whether UMC is entitled to claim from CBIC the full coverage of its fire insurance policy.

Held: NO. UMC is NOT entitled. It has long been settled that a false and material statement
made with an intent to deceive or defraud voids an insurance policy.
UMC’s Income Statement indicated that the purchases or costs of sales for 1995 and 1996
are in total of P1,936,860.00. Further, in its Financial Report, duly executed during the 2002
hearing, it had P1,050,862.71 as total assets and P167,058.47 as total liabilities. Thus, either
amount in UMC s Income Statement or Financial Reports is twenty-five times the claim UMC
seeks to enforce. Thus, in fire insurance policies, which contain provisions such as Condition
No. 15 of the Insurance Policy, a fraudulent discrepancy between the actual loss and that
claimed in the proof of loss voids the insurance policy. Mere filing of such a claim will exonerate
the insurer. Considering that all the circumstances point to the inevitable conclusion that UMC
padded its claim and was guilty of fraud, UMC violated Condition No. 15 of the Insurance Policy.
Thus, UMC forfeited whatever benefits it may be entitled under the Insurance Policy, including its
insurance claim.
In Yu Ban Chuan v. Fieldmen s Insurance, Co., Inc., the Court ruled that the submission
of false invoices to the adjusters establishes a clear case of fraud and misrepresentation which
voids the insurer's liability as per condition of the policy. Their falsity is the best evidence of the
fraudulent character of plaintiff s claim. Therefore, UMC is not entitled to the claim due to fraud.
PARAMOUNT INSURANCE CORPORATION vs. SPOUSES YVES and MARIA TERESA
REMONDEULAZ
G.R. No. 173773
November 28, 2012

Facts: In 1994, respondents insured with petitioner their Toyota Corolla sedan under a
comprehensive motor vehicle insurance policy for one year. During the effectivity of said
insurance, respondents’ car was unlawfully taken. They alleged that a certain Ricardo Sales
(Sales) took possession of the subject vehicle to add accessories and improvements thereon,
however, Sales failed to return the subject vehicle within the agreed three-day period. As a result,
respondents notified petitioner to claim for the reimbursement of their lost vehicle. However,
petitioner refused to pay. A complaint for a sum of money was filed against petitioner before the
trial court but the same was dismissed. On appeal, the appellate court reversed the lower court’s
ruling. Consequently, petitioner filed a petition for review on certiorari before this Court.
Petitioner now argues that the loss of respondents’ vehicle is not a peril covered by the policy. It
maintains that the car cannot be classified as stolen as respondents entrusted the possession
thereof to another person.

Issue: Should petitioner be liable under the insurance policy for the loss of respondents’ vehicle?

Held: Yes. The loss of respondents’ vehicle falls within the concept of the "theft clause" under the
insurance policy. In Malayan Insurance Co., Inc. v. Court of Appeals, this Court held that the
taking of a vehicle by another person without the permission or authority from the owner thereof
is sufficient to place it within the ambit of the word theft as contemplated in the policy. Here,
Sales’ act of depriving respondents of their motor vehicle at, or soon after the transfer of physical
possession of the movable property, constitutes theft under the insurance policy, which is
compensable.
COUNTRY BANKERS INSURANCE CORP. V. LAGMAN
G.R. No. 165487
July 13, 2011

Facts: Nelson Santos applied for a license with the National Food Authority to engage in the
business of storing not more than 30,000 sacks of palay in his warehouse at Tarlac. Under Act
No. 3893 or the General Bonded Warehouse Act, as amended, the approval for said license was
conditioned upon posting of a cash bond, a bond secured by real estate, or a bond signed by a
duly authorized bonding company, the amount of which shall be fixed by the NFA Administrator
at not less than 33 1/3% of the market value of the maximum quantity of rice to be received.
Country Bankers Insurance Corporation issued Warehouse Bond No. 03304 and Warehouse
Bond No. 02355 (1989 Bonds) through its agent, Antonio Lagman. Santos was the bond
principal, Lagman was the surety and the Republic of the Philippines, through the NFA was the
obligee. In consideration of these issuances, corresponding Indemnity Agreements were executed
by Santos, as bond principal, together with Ban Lee Lim Santos, Rhosemelita Reguine and
Lagman, as co-signors. The latter bound themselves jointly and severally liable to Country
Bankers; to reimburse Country Bankers of whatever amount it may pay or cause to be paid or
become liable to pay thereunder; and to pay interest at the rate of 12% per annum computed
and compounded monthly, as well as to pay attorney’s fees of 20% of the amount due it. Santos
then secured a loan using his warehouse receipts as collateral. When the loan matured, Santos
defaulted in his payment. The sacks of palay covered by the warehouse receipts were no longer
found in the bonded warehouse. By virtue of the surety bonds, Country Bankers was compelled
to pay. Consequently, Country Bankers filed a complaint for a sum of money before the RTC of
Manila. Lagman alleged that the 1989 Bonds were valid only for 1 year from the date of their
issuance, as evidenced by receipts; that the bonds were never renewed and revived by payment
of premiums; that in 1990, Country Bankers issued Warehouse Bond No. 03515 (1990 Bond)
which was also valid for one year and that no Indemnity Agreement was executed for the purpose;
and that the 1990 Bond supersedes, cancels, and renders no force and effect the 1989 Bonds.

Issue: Whether or not 1990 Bond replaced the 1989 Bonds and that the 1989 Bonds has already
expired.

Held: NO. Section 177 of the Insurance Code provides that “The surety is entitled to payment of
the premium as soon as the contract of suretyship or bond is perfected and delivered to the
obligor. No contract of suretyship or bonding shall be valid and binding unless and until the
premium therefor has been paid, except where the obligee has accepted the bond, in which case
the bond becomes valid and enforceable irrespective of whether or not the premium has been
paid by the obligor to the surety: Provided, That if the contract of suretyship or bond is not
accepted by, or filed with the obligee, the surety shall collect only reasonable amount, not
exceeding fifty per centum of the premium due thereon as service fee plus the cost of stamps or
other taxes imposed for the issuance of the contract or bond: Provided, however, That if the non-
acceptance of the bond be due to the fault or negligence of the surety, no such service fee, stamps
or taxes shall be collected.” The official receipts in question serve as proof of payment of the
premium for one year on each surety bond. It does not, however, automatically mean that the
surety bond is effective for only one (1) year. In fact, the effectivity of the bond is not wholly
dependent on the payment of premium.
NEW WORLD INTERNATIONAL DEVELOPMENT PHILS. INC. V. NYK-FILJAPAN
G.R. No. 171468
August 24, 2011

Facts: Petitioner New World bought three emergency generator sets which were damaged on its
way to Manila from the US. Thus, petitioner sent Seabord, its insurer, a formal claim but the
latter refused to process the claim because New World did not submit an itemized list of the
damaged units. Petitioner New World Filed its claim against the vessel owner NYK beyond the
one-year period provided under the Carriage of Goods by Sea Act.

Issue: Whether or not the one-year prescriptive period for marine claims does not apply to
Petitioner New World’s prosecution of its claim against Seaboard.

Held: Yes, the prescriptive period shall not apply to Petitioner New World. Under Section 241 of
the Insurance code, no insurance company doing business in the Philippines shall refuse
without just cause to pay or settle claims arising under coverages provided by its policies.
Here, the record shows that petitioner filed its formal claim for its loss with Seabord, its
insurer. If Seabord had processed that claim and paid the same, Seabord would have been
subrogated to petitioner New World’s right to recover from NYK. And it could have then filed the
suit as a subrogee. However, Seabord made an unreasonable demand for an itemized list of the
damage although the insurance policy did not require the production of such a list in the event
of claim. Hence, the delay being Seaboard’s fault, the prescriptive period shall not run against
the Petitioner.
THE HEIRS OF GEORGE Y. POE VS. MALAYAN INSURANCE CORPORATION, INC.
G.R. No. 156302
April 7, 2009

Facts: George Poe, was run over by the ten-wheeler truck owned by Rhoda Santos and by
Malayan Insurance. Later, the heirs of Poe filed for a complaint for damages against Santos and
Malayan Insurance. However, Malayan Insurance denied liability, averring that its liability would
only be based on the extent of Santos’ insurance coverage embodied in her policy. Despite this
contention, the trial court still found Malayan Insurance liable to solidarily pay damages with
Santos to the heirs of Poe.

Issue: Should Malayan Insurance be held solidarily liable with Santos on the ground that the
insurance policy was never presented in court?

Held: Yes. According to Vda. De Maglana vs. Consolacion, an insurer in an indemnity contract
for third-party liability is directly liable to the injured party up to the extent specified in the
agreement (insurance policy). Further, in civil cases, the party that alleges a fact has the burden
of proving it.

In this case, the insurance policy covering the truck involved in the accident which killed the
deceased was never presented as evidence in court. Without the presentation of such insurance
policy, the Court cannot determine the existence of any limitation on the liability of Malayan
Insurance under the said policy, and the extent or amount of such limitation.

Since Malayan Insurance failed to discharge this burden, the Court cannot rely on mere
allegations of limited liability sans proof. Thus, Malayan Insurance may be held solidarily liable
with Santos.
HEIRS OF LORETO C. MARAMAG VS. MARAMAG
G.R. No. 181132
June 5, 2009

Facts: Petitioners were the legitimate wife and children of Loreto, while respondents were his
illegitimate family. Eva was a concubine and a suspect in his killing, thus, she is disqualified to
receive any proceeds. Insular admitted that Loreto misrepresented Eva as his legitimate wife; it
disqualified her as a beneficiary and divided the proceeds among the illegitimate children as the
remaining designated beneficiaries. Insular further claimed that it was bound to honor the
designation of Loreto’s illegitimate children pursuant to Section 53 of the Insurance Code. Insular
and Grepalife claim that the insurance proceeds belong exclusively to the designated
beneficiaries, not to the estate or to the heirs of the insured.

Issue: Is the designation of the illegitimate children as beneficiaries valid?

Held: Yes. Under Section 53 of the Insurance Code, the only persons entitled to claim the
insurance proceeds are either the insured, if still alive, or the beneficiary. The exception is where
the insurance contract was intended to benefit third persons. It is only where the insured has
not designated any beneficiary, or when said beneficiary is disqualified by law, that the
insurance policy proceeds shall redound to the benefit of the estate of the insured.

The disqualification of Eva as a beneficiary is of no moment here, the clear designation of the
illegitimate children as beneficiaries in Loreto's insurance policies remains valid. Because no
legal proscription exists in naming as beneficiaries the children of illicit relationships by the
insured, the insurance proceeds must be awarded to the said illegitimate children as the
designated beneficiaries, to the exclusion of petitioners.
LALICAN vs. THE INSULAR LIFE ASSURANCE COMPANY LTD.
G.R. No. 183526
August 25, 2009

Facts: During his lifetime, Eulogio applied for an insurance policy with Insular Life. Violeta, his
wife, was named as the primary beneficiary. According to the Policy Contract, there was a grace
period of 31 days for the payment of each premium subsequent to the first. If any premium was
not paid on or before the due date, the policy would be in default, and if it remained unpaid until
the end of the grace period, the policy would automatically lapse and become void. Eulogio failed
to pay the premium due even after the lapse of the grace period. The policy thus lapsed and
became void. Eulogio went to Malaluan’s house and submitted an application for reinstatement
of his policy including the amount of representing payments for the overdue interest on the
premium paid late and the premiums which became due. As Malaluan was away on a business
errand, her husband received Eulogio’s application for reinstatement. A while later, on the same
day, Eulogio died of cardio-respiratory arrest secondary to electrocution. Without knowing of
Eulogio’s death, Malaluan forwarded to the Insular Life Regional Office Eulogio’s Application for
Reinstatement of his policy. However, Insular Life no longer acted upon Eulogio’s second
Application for Reinstatement, as Eulogio had already passed away. Violeta filed with Insular Life
a claim for payment of the full proceeds of the policy, however, Insular Life informed Violeta that
her claim could not be granted since, at the time of Eulogio’s death, Policy No. 9011992 had
already lapsed, and Eulogio failed to reinstate the same.

Issue: Was Eulogio able to reinstate the lapsed insurance policy on his life before his death?

Held: No. To reinstate a policy means to restore the same to premium-paying status after it has
been permitted to lapse. Both the Policy Contract and the application for reinstatement provide
for specific conditions for the reinstatement of a lapsed policy. Additional conditions for
reinstatement were stated in the Application for which Eulogio signed and submitted, to wit:
“Policy shall not be considered reinstated until this application is approved by the Company
during my lifetime and good health and until all other Company requirements for the
reinstatement of said Policy are fully satisfied.” Eulogio’s death rendered impossible full
compliance with the conditions for reinstatement of his policy. True, Eulogio, before his death,
managed to file his application for reinstatement and deposit the amount for payment of his
overdue premiums and interests thereon with Malaluan; but the policy could only be considered
reinstated after the application for reinstatement had been processed and approved by Insular
Life during Eulogio’s lifetime and good health.
EASTERN SHIPPING LINES, INC. V. PRUDENTIAL GUARANTEE AND ASSURANCE, INC.,
G.R. No. 174116,
September 11, 2009.

Facts: Fifty-six cases of auto parts of Nissan motor vehicle was loaded on board M/V Apollo
Tujuh owned and operated by Petitioner Eastern Shipping Lines, Inc., set to be shipped from
Japan to Nissan Motor Philippines, Inc. Based on the survey report of the surveyor in Nissan
upon the arrival of the cargoes, there were shortage and damage sustained by the shipment due
to pilferage and improper handling while in the custody of the vessel and/or arrastre contractors.
Respondent Prudential Guarantee and Assurance inc., as insurer of the shipment paid Nissan
the sum of the value of damages. Prudential sued Eastern Shipping for reimbursement claiming
that it was subrogated to the rights of Nissan by virtue of said payment. It is the contention of
the petitioner that the respondent cannot sue based on its right of subrogation because the
insurance policy was never presented by the respondent.

Issue: Whether or not the petitioner can be held liable despite the fact that the insurance policy
was never presented

Held: No. Marine insurance policy needs to be presented in evidence before the trial court or
even belatedly before the appellate court. The presentation of the marine insurance policy was
necessary, as the issues raised therein arose from the very existence of an insurance contract
between the insurer and the insured. Presentation or attaching the insurance policy in a
complaint filed by the insurance company against another on account of its right of subrogation
is an indispensable requirement. The Court ruled that because of the inadequacy of the Marine
Cargo Risk Note for the proper exercise of the right of subrogation, it was incumbent on
respondent to present in evidence the Marine Insurance Policy, and having failed in doing so, its
claim of subrogation must necessarily fail and petitioner cannot be held liable.
PHILIPPINE HEALTH CARE PROVIDERS, INC. VS. COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 167330
September 18, 2009

Facts: Philippine Health Care Providers, Inc. has for its purpose the operating of a health
maintenance organization to take care of the sick and disabled who are enrolled in the health
care plan. CIR sent petitioner a formal demand letter and assessment notices demanding
payment of deficiency taxes. The deficiency assessment was imposed on petitioner’s health care
agreement with the members of its health care program pursuant to Sec. 185 of the 1997 Tax
Code. Petitioner protested the assessment. Respondent did not act on the protest. Petitioner filed
a Petition for Review in the CTA seeking cancellation of deficiency VAT and DST assessments.
CTA partially granted the petition, ordering petitioner to pay the deficiency VAT but cancelling
the deficiency DST assessment. Respondent appealed to the CA claiming that the health care
agreement was a contract of insurance subject to DST under Sec. 185. CA held the agreement
to be in the nature of a non-life insurance contract subject to DST.

Issue: Is Philippine Health Care Providers, Inc., as an HMO, engaged in the business of insurance
during the pertinent taxable years?

Held: NO, Health Maintenance Organizations are not engaged in the insurance business. Under
RA 7875 (The National Health Insurance Act of 1995), an HMO is an entity that provides, offers
or arranges for coverage of designated health services needed by plan members for a fixed prepaid
premium. To determine if an HMO is an insurance business, the principal object and purpose
must be determined. Whether the object and purpose is the assumption of risk and
indemnification of loss as that of an insurance business or whether it is merely incidental to its
business and thus, not an insurance business. The HMO’s principal object and purpose in this
case is service and not indemnity. Further, it is the DOH and not the IC which supervises
petitioner, as it is not part of the insurance industry. Hence, PHCPI is no engaged in the business
of insurance.
KEPPEL CEBU SHIPYARD, INC. V. PIONEER INSURANCE AND SURETY CORPORATION
G.R. Nos. 180880-81 G.R. Nos. 180896-97
September 25, 2009

Facts: Keppel and WG&A Jebsens Ship Management (WG&A) executed a ship repair agreement
wherein Keppel would reconstruct WG&A’s Superferry. Prior to the execution of such agreement,
the vessel was insured with Pioneer. The vessel was gutted by fire so WG&A declared the vessel’s
damage as a total constructive loss and filed an insurance claim with Pioneer which the latter
paid. WG&A executed a loss and subrogation receipt in favor of Pioneer so the latter tried to
collect from Keppel but Keppel denied responsibility. Pioneer filed for arbitration. Keppel and
WG&A reached an amicable settlement so Pioneer was the remaining claimant claiming that
Keppel is liable for the loss.

Issue: Is subrogation proper?

Held: Yes, subrogation was proper and Pioneer may claim the amount of loss against Keppel.

Under the law, the right of subrogation accrues upon payment by the insurer of the insurance
claim. Also, in Sec. 139 of the Insurance Code, “a person insured by a contract of marine
insurance may abandon the thing insured or any particular portion hereof separately valued by
the policy or otherwise separately insured, and recover for total loss thereof when the cause of
the loss is a peril insured against: a) if more than three-fourths thereof in value is actually lost
xxx”, and Sec. 131, “a constructive total loss is one which gives to a person insured a right to
abandon under Sec. 139”, must be read in harmony in determining a constructive total loss.

Evidence proved that the amount of loss exceeded three-fourths of the value of the vessel
amounting to a total constructive loss which gives WG&A the option to abandon or recover the
amount of loss. When WG&A opted to recover the amount, and upon payment by Pioneer of the
insurance claims, it worked as an assignment of the remedies that WG&A may have against
Keppel.

Thus, the fact that Pioneer already paid WG&A of its insurance claims, Pioneer is deemed
subrogated to WG&A’s rights against Keppel.
BLUE CROSS HEALTH CARE v. OLIVARES
544 SCRA 580
February 12, 2008

Facts: Neomi applied for a health care program with petitioner Blue Cross Health Care, Inc., a
health maintainance firm, and was approved. In the health care agreement, ailments due to “pre-
exising conditions” were excluded from the coverage. Neomi suffered a stroke and was admitted
at the Medical City, one of the hospistals accredited by the petitioner. She incurred hospital
expenses amounting to P34,217.20. She requested from the representative of petitioner at
Medical City a letter of authorization in order to settle her medical bills but petitioner refused on
the ground that the stroke she suffered was caused by a pre-existing condition.

Issue: Whether or not petitioner was able to prove the stroke of Neomi was caused by a pre-
existing condition and therefore was excluded from the coverage of the health care agreement.

Held: No. Section 3 (e), Rule 131 of the Rules of Court states that disputable presumptions are
satisfactory if uncontradicted, but may be contradicted and overcome by other evidence.
Petitioner never presented any evidence to prove that respondent Neomi's stroke was due to a
pre-existing condition. In Philamcare Health Systems, Inc. v. CA, the court ruled that a health
care agreement is in the nature of a non-life insurance. It is an established rule in insurance
contracts that when their terms contain limitations on liability, they should be construed strictly
against the insurer. These are contracts of adhesion the terms of which must be interpreted and
enforced stringently against the insurer which prepared the contract. This doctrine is equally
applicable to health care agreements.
ETERNAL GARDENS MEMORIAL PARK CORPORATION VS. THE PHILIPPINE AMERICAN
LIFE INSURANCE COMPANY
G.R. 166245
April 9, 2008

Facts: Philamlife and Eternal entered into a Creditor Group Life Policy. One of the provisions of
the policy states that: “The insurance of any eligible Lot Purchaser shall be effective on the date
he contracts a loan with the Assured. However, there shall be no insurance if the application of
the Lot Purchaser is not approved by the Company.” Eternal submitted a letter dated December
29, 1982 containing a list of insurable balances of its lot buyers that included John Chuang. On
August 2, 1984, Chuang died. When Eternal demanded for the insurance claim, Philamlife
denied the same as no application was submitted to their office prior to his death and that the
acceptance of the premiums do not connote their approval.

Issue: Whether or not the inaction of the insurer on the insurance application be considered as
approval of the application?

Held: Yes. In Malayan Insurance v. Court of Appeals, the Court ruled that a contract of
insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved
against the insurer; in other words, it should be construed liberally in favor of the insured and
strictly against the insurer.

An examination of the provision shows that there is an ambiguity between its two sentences so
it must be construed in favor of the insured and in favor of the effectivity of the insurance
contract. Upon a party’s purchase of a memorial lot on installment from Eternal, an insurance
contract covering the lot purchaser is created and the same is effective, valid, and binding until
terminated by Philamlife by disapproving the insurance application. Moreover, the mere inaction
of the insurer on the insurance application must not work to prejudice the insured; it cannot be
interpreted as a termination of the insurance contract. The termination of the insurance contract
by the insurer must be explicit and unambiguous.

Hence, to protect the interest of applicants, insurance companies must act with haste upon
insurance applications, or otherwise be bound to honor the application as a valid, binding and
effective insurance contract.
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. V. FGU INSURANCE
CORPORATION
G.R. No. 161539
June 27, 2008

Facts: Petitioner’s liability arose from a lost shipment by Hapag-Lloyd AG through the vessel
Hannover Express. Said shipment was insured by FGU Insurance Corporation (FGU). The
shipment was lost while in the custody and responsibility of petitioner. As insurer, FGU paid
RAGC the amount of P1,835,068.88. In turn, FGU sought reimbursement from petitioner, but
the latter refused. This constrained FGU to file with the RTC of Manila s Civil Case for a sum of
money. After trial, the RTC found the petitioner liable. Petitioner appealed to the Court of Appeals
(CA), which, affirmed the RTC Decision. Petitioner filed a motion for reconsideration which the
CA denied. Hence, the present petition for review on certiorari under Rule 45 of the Rules of
Court.

Issue: Whether or not PPA AO 10-81 should apply and limit the liability for the lost shipment to
P3,500.00 per package?

Held: No. In Summa Insurance Corporation v. Court of Appeals, the Court ruled that, “A
consignee who does not avail of the services of the arrastre operator is not bound by the
management contract. Such an exception to the rule does not obtain here as the consignee did
in fact accept delivery of the cargo from the arrastre operator.” The Court said that it is highly
unlikely that petitioner was not made aware of the actual value of the shipment, since it had to
examine the pertinent documents for stripping purposes and, later on, for the discharge of the
shipment to the consignee or its representative. By its own act of not charging the corresponding
arrastre fees based on the value of the shipment after it came to know of such declared value
from the marine insurance policy, petitioner cannot escape liability for the actual value of the
shipment. The value of the merchandise or shipment may be declared or stated not only in the
bill of lading or shipping manifest, but also in other documents required by law before the
shipment is cleared from the piers. Thus, the liability should not be limited to P3,500.00 per
package.
EDILLON V. MANILA BANKERS LIFE INSURANCE,
G.R. No. L-34200
September 30, 1982.

Facts: Lapuz applied with respondent insurance corporation for insurance coverage against
accidents and injuries. She filled the application form which clearly indicated that she was 65
years of age at that time. After submitting the application and paying the premium, the
respondent issued a certificate of insurance and the policy was effective for 90 days. After 45
days, Lapuz dies in an accident. When her beneficiaries filed a claim with respondent insurer,
the latter resisted the claim on the ground that the Policy contained a provision excluding the
insurer from liability if the insured is over 60 years of age.

Issue: Is the insurer estopped from raising concealment as a defense?

Held: YES. The insurer is estopped from invoking concealment in order to avoid the contract.
Art. 1431. Of the New Civil Code: ‘Through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against the person
relying thereon’. Despite such information which could hardly be overlooked in the application
form, considering its prominence thereon and its materiality to the coverage applied for, the
respondent insurance corporation received her payment of premium and issued the
corresponding certificate of insurance without question. The insurer in this case had sufficient
time to review the application and notice that the applicant was over 60. It’s failure to notice can
only be attributed to its own negligence or negligence of its employees; or it chose to waive the
disqualification. Under the circumstances, the insurance corporation is already deemed in
estoppel. Therefore, the insurer in this case is liable to the beneficiaries under the policy as it is
estopped from raising the disqualification as a defense.
THELMA VDA. DE CANILANG VS. COURT OF APPEALS
G.R. No. 92492
June 17, 1993

Facts: Jaime Canilang applied for a "non-medical" insurance policy with respondent Great
Pacific Life Assurance Company. Jaime Canilang was issued ordinary life insurance Policy No.
345163, with the face value of P19,700. Jaime Canilang failed to disclose that prior to the
application for the insurance, he was diagnosed as suffering from "sinus tachycardia." The doctor
prescribed the following from him: Trazepam, a tranquilizer; and Aptin, a beta-blocker drug.
Jaime Canilang died of "congestive heart failure," "anemia," and "chronic anemia." Mr. Canilang
consulted the same doctor again and this time was found to have "acute bronchitis." Petitioner,
widow and beneficiary of the insured, filed a claim with Great Pacific which the insurer denied
upon the ground that the insured had concealed material information from it. Petitioner then
filed a complaint against Great Pacific with the Insurance Commission for recovery of the
insurance proceeds. The Insurance Commissioner ruled in favor of Petitioner ruling among
others that there was no material concealment and that there was no intentional concealment
on the part of the insured Jaime Canilang as he had thought that he was merely suffering from
a minor ailment and simple cold.

Issue:

1. Was there a concealment of an information material to the insurance contract?

2. Was the Insurance commissioner in ruling that the concealment must be intentional
based on the theory that by deleting the phrase "intentional or unintentional, the law
limits it to only those intentional.

Held:

1. Yes. the information concealed must be information which the concealing party knew and
"ought to have communicated," that is to say, information which was "material to the contract."
The test of materiality is contained in Sec. 31 of the Insurance Code which provides that
Materiality is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom the communication is due, in forming his estimate
of the disadvantages of the proposed contract, or in making his inquiries.

Sinus tachycardia is defined as sinus-initiated; heart rate faster than 100 beats per minute. It
is, among others, a common reaction to heart disease, including myocardial infarction, and heart
failure per se. The medication prescribed for treatment of Canilang's ailment indicates the
condition that said physician was trying to manage. Thus, he prescribed Trazepam, which is
anti-anxiety, anti-convulsant, muscle-relaxant; and Aptin, a cardiac drug, for palpitations and
nervous heart. Such treatment could have been a very material information to the insurer in
determining the action to be taken on Canilang's application for life insurance coverage.

2. No. As a simple matter of grammar, it may be noted that "intentional" and "unintentional"
cancel each other out. The net result therefore of the phrase "whether intentional or
unintentional" is precisely to leave unqualified the term "concealment."
NG GAN ZEE VS. ASIAN CRUSADER LIFE
G. R No. L-30685
May 20, 1983

Facts: Kwong Nam applied for a 20-year endowment insurance on his life for the sum of
P20,000.00, with his wife, appellee Ng Gan Zee as beneficiary, but in 1963, Kwong Nam died of
cancer of the liver with metastasis. All premiums had been religiously paid at the time of his
death. His widow Ng Gan Zee presented a claim in due form to appellant for payment of the face
value of the policy. On the same date, she submitted the required proof of death of the insured.
Asian Crusader denied the claim on the ground that the answers given by the insured to the
questions appealing in his application for life insurance were untrue, stating that the insured
was guilty of misrepresentation

Issue: Was appellant, because of insured's aforesaid representation, misled or deceived into
entering the contract or in accepting the risk at the rate of premium agreed upon?

Held: No. Section 27 of the Insurance Law [Act 2427] provides: “Such party a contract of
insurance must communicate to the other, in good faith, all facts within his knowledge which
are material to the contract, and which the other”

Sec. 27 of the Insurance Law, requires that fraudulent intent on the part of the insured be
established to entitle the insurer to rescind the contract. Kwong Nam had informed the
appellant's medical examiner that the tumor for which he was operated on was "associated with
ulcer of the stomach." In the absence of evidence that the insured had sufficient medical
knowledge as to enable him to distinguish between "peptic ulcer" and "a tumor", his statement
that said tumor was "associated with ulcer of the stomach, " should be construed as an
expression made in good faith of his belief as to the nature of his ailment and operation. Indeed,
such statement must be presumed to have been made by him without knowledge of its
incorrectness and without any deliberate intent on his part to mislead the appellant.
VERANDIA VS. COURT OF APPEALS AND FIDELITY & SURETY CO.
G.R. No. 75605
January 22, 1993

Facts: Rafael Verendia's residential building was insured with Fidelity and Surety Insurance
Company of the Philippines (Fidelity). Verendia also insured the same building with two other
companies, namely, The Country Bankers Insurance and The Development Insurance.

While the three fire insurance policies were in force, the insured property was completely
destroyed by fire. Fidelity was accordingly informed of the loss and despite demands, refused
payment under its policy. Fidelity averred that the policy was avoided because Verendia
maliciously represented that the building at the time of the fire was leased to a certain Roberto
Garcia, when actually it was Marcelo Garcia who was the lessee. Robert Garcia executed an
affidavit before the National Intelligence and Security Authority (NISA) to the effect that he was
not the lessee of Verendia's house and that his signature on the contract of lease was a complete
forgery.

Issue: Is there a false declaration which would forfeit Verendia’s benefits under the policy?

Held: YES. According to Western Guaranty Corporation vs. Court of Appeals, since an insurance
contract is a contract of adhesion, it should be liberally construed in favor of the insured and
strictly against the insurer company which usually prepares it. Considering, however, that
Verendia used a false lease contract to support his claim under Fire Insurance, the terms of the
policy should be strictly construed against the insured.

Verendia failed to live by the terms of the policy, specifically Section 13 thereof which is expressed
that all benefits under the policy shall be forfeited "If the claim be in any respect fraudulent, or
if any false declaration be made or used in support thereof, or if any fraudulent means or devises
are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy".

Verendia, having presented a false declaration to support his claim for benefits in the form of a
fraudulent lease contract, therefore forfeited all benefits. Worse yet, by presenting a false lease
contract, Verendia, reprehensibly disregarded the principle that insurance contracts are
uberrimae fidae and demand the most abundant good faith.
FINMAN GENERAL ASSURANCE CORP VS HONORABLE COURT OF APPEALS
213 SCRA 493,
September 2, 1992

Facts: Carlie Surposa was insured with petitioner Finman General Assurance Corporation with
his parents, spouses Julia and Carlos Surposa, and brothers all surnamed Surposa, as
beneficiaries. While said insurance policy was in full force and effect, the insured, Carlie Surposa,
died on October 18, 1988 as a result of a stab wound inflicted by one of the three (3) unidentified
men. Private respondent and the other beneficiaries of said insurance policy filed a written notice
of claim with the petitioner insurance company which denied said claim contending that murder
and assault are not within the scope of the coverage of the insurance policy.

Issue: Is the insurer liable for the payment of the insurance premiums?

Held: Yes, the insurer is liable. The law provides that where the death or injury is not the natural
or probable result of the insured's voluntary act, or if something unforeseen occurs in the doing
of the act which produces the injury, the resulting death is within the protection of the policies
insuring against death or injury from accident. In the case at bar, it cannot be pretended that
Carlie Surposa died in the course of an assault or murder as a result of his voluntary act
considering the very nature of these crimes. Neither can it be said that there was a capricious
desire on the part of the accused to expose his life to danger considering that he was just going
home after attending a festival. Thus, the insurance company is liable for the payment of the
insurance premiums.
TAN v. CA
G.R. No. L-48049
June 29, 1989

Facts: Tan Lee Siong applied for life insurance with private respondent PhilAm Life, with
petitioners as beneficiaries. An insurance policy was issued effective November 6, 1973. Upon
insured’s death on April 26, 1975 due to hepatoma, petitioners filed with respondent their claim
for the proceeds on the policy. Respondent, however denied the claim and rescinded the policy
because of alleged misrepresentation and concealment of material facts made by Tan Lee Siong
in his application. Petitioners filed a complaint against respondent with the Insurance
Commissioner, claiming that the latter’s refusal to pay the proceeds was unjustified and
unreasonable. Both the Insurance Commissioner and the CA ruled against petitioners.
Petitioners contend that respondent no longer had the right to rescind the policy because a valid
rescission must be done during the lifetime of the insured within two years and prior to the
commencement of action.

Issue: Was the rescission by respondent proper?

Held: Yes. The second paragraph of Sec. 48 of the Insurance Code refers to the incontestability
clause, which precludes the insurer from rescinding the life insurance policy by reason of
fraudulent concealment or misrepresentation insofar as health and previous diseases are
concerned if the policy has been in force for at least two years during the lifetime of the insured.
If the policy continues to be in effect after two years, the same grounds can no longer be used to
rescind the policy regardless of the fact. Since the policy was effective on November 6, 1973 and
the insured died on April 26, 1975, respondent may still rescind the policy by reason of
fraudulent concealment or misrepresentation since the same was in effect for only one year and
five months. Therefore, rescission by respondent was proper.
MAYER STEEL PIPE CORPORATION V. COURT OF APPEALS
G.R. No. 124050
June 19, 1997

Facts: Mayer Steel Pipe Corporation (Mayer) shipped pipes and fittings to Hongkong. The pipes
and fittings were insured by Mayer against all risks with South Sea Surety and Insurance Co.,
Inc. (SSSI) and Charter Insurance Corp. (Charter). The goods were examined by a third-party
inspector to be in good condition prior to loading in the vessel. When the vessel reached
Hongkong, a substantial portion of the pipes and fittings was damaged. Charter Insurance
refused to pay the full balance since the insurance surveyor’s report showed that the damage
was caused by factory defect.

An action for recovery of sum was filed by Mayer. SSSI and Charter claimed that they have no
obligation to pay since the damage was caused by factory defects which were not covered by the
insurance policies.

Issue: Are the insurers obligated to pay the damage caused by factory defects?

Held: Yes. As held in Filipino Merchants Insurance Co., Inc. v. CA, an “all risks” insurance policy
covers all kinds of loss other than those due to willful and fraudulent acts of the insured.
The insurers, by issuing “all risks” policies to Mayer, bound themselves to indemnify in all cases
other than those excluded by law and the policies. Damage caused by factory defects is covered
by an “all risks” policy.

Hence, SSSI and Charter are obligated to pay Mayer under the “all risks” insurance policy.
CEBU SHIPYARD AND ENGINEERING WORKS, INC. V. WILLIAM LINES, INC. AND
PRUDENTIAL GUARANTEE AND ASSURANCE COMPANY, INC.
G.R. No. 132607
May 5, 1999

Facts: Cebu Shipyard and Engineering Works, Inc. (CSEW) is a domestic corporation engaged
in the business of dry-docking and repairing of marine vessels while the private respondent,
Prudential Guarantee and Assurance, Inc. (Prudential), also a domestic corporation is in the
non-life insurance business. William Lines, Inc. (plaintiff below) is in the shipping business.

William Lines, Inc. brought its vessel, M/V Manila City, to the Cebu Shipyard in Lapulapu City
for annual dry-docking and repair. While the M/V Manila City was undergoing dry-docking and
repairs within the premises of CSEW, the master, officers and crew of M/V Manila City stayed in
the vessel using their cabins as living quarters. Other employees hired by William Lines to do
repairs and maintenance work on the vessel were also present during the dry-docking; after
subject vessel was transferred to the docking quay, it caught fire and sank, resulting to its
eventual total loss. William Lines, Inc. filed a complaint for damages against CSEW, alleging that
the fire which broke out in M/V Manila City was caused by CSEW's negligence and lack of care.
On July 15, 1991 was filed an Amended Complaint impleading Prudential as co-plaintiff, after
the latter had paid William Lines, Inc. the value of the hull and machinery insurance on the M/V
Manila City. As a result of such payment Prudential was subrogated to the claim of P45 million,
representing the value of the said insurance it paid.

Issue: Whether the Court of Appeals Committed reversible error in ruling that Prudential Has
the Right of Subrogation?

Held: No. Petitioner contends that Prudential is not entitled to be subrogated to the rights of
William Lines, Inc., theorizing that (1) the fire which gutted M/V Manila City was an excluded
risk and (2) it is a co-assured under the Marine Hull Insurance Policy. To repeat, the issue of
who between the parties was negligent has already been resolved against Cebu Shipyard and
Engineering Works, Inc. Upon proof of payment by Prudential to William Lines, Inc. the former
was subrogated to the right of the latter to indemnification from CSEW. As aptly ruled by the
Court of Appeals, the law on the manner is succinct and clear, to wit:

Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract
complained of the insurance company shall be subrogated to the rights of the insured against
the wrongdoer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss the aggrieved party shall be entitled to recover
the deficiency from the person causing the loss or injury.

Thus, when Prudential, after due verification of the merit and validity of the insurance claim of
William Lines, Inc., paid the latter the total amount covered by its insurance policy, it was
subrogated to the right of the latter to recover the insured loss from the liable party, CSEW.