Perez v.

CA, 323 SCRA 613 (2000) - Lester Anonuevo

PEREZ VERSUS CA
GR No. 112329
January 28, 2000
FACTS: Primitivo Perez had been insured with BF Lifeman Insurance Corporation. Rodolfo
Lalog, the agent of the insurance, visited Perez in Guinayangan, Quezon and convinced him to
apply for additional insurance to avail of a promotional discount if the premium were paid
annually.
Primitivo, after filling the application form, through his wife, paid Lalog, and the latter indicated
that the amount received was a deposit. Lalog lost the application form accomplished by
Primitivo and later on asked to fill up another application form. Perez was also made to undergo
the required medical examination.
Lalog, pursuant to the procedures of the company, forwarded the application for additional
insurance of Perez, together with its supporting papers, to the office in Gumaca, Quezon which
was supposed to forward the papers to Manila.
Perez died in an accident while riding a banca capsized during a storm. At the time of his death,
the application was still in Gumaca. Without knowing that Perez died, BF Lifeman Insurance
approved the application and issued the corresponding policy.
Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies. She
was paid for the first but not with the additional policy coverage. According to the insurance
company, it was not perfected at the time of death of Primitivo and refunded the amount which
his wife paid. BF Lifeman filed a complaint against Perez seeking the rescission and declaration
of nullity of the insurance contract.
ISSUE:
1. Whether or not the insurance contract was perfected
2. Whether or not the condition imposed that the policy must have been delivered to and
accepted is null and void
HELD:
1. Insurance is a contract whereby for a stipulated consideration, one party undertakes to
compensate for the loss on a specified subject by specific perils. When Primitvo filed the
application for insurance, and paid partially the premium, and submitted the results of his
medical examination, his application was subject to the acceptance of BF Lifeman Insurance
Corporation.
The assent of BF Lifeman Insurance was not given when it merely received the application form
and all the supporting papers. Its assent was given when it issues a corresponding policy to the
applicant. It is only when the applicant pays the premium and receives and accepts the policy
while he is in good health that the contract is deemed to have been perfected.
2. The condition imposed by the corporation (a policy must have been issued, the premiums
paid and the policy must have been delivered to and accepted by applicant) can hardly be
considered potestative or facultative condition. The health of the applicant at the time of the
delivery of the policy is beyond the control/will of the insurance company. Rather, it is a
suspensive one whereby the acquisition of rights depends upon the happening of an event
which constitutes the condition.
A contract of insurance, like other contracts, must be assented to by both parties either in
person or by their agents. So long as an application for insurance has not been either accepted
or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from
the date of application, must have been a completed contract, one that leaves nothing to be
done, nothing to be completed, nothing to be passed upon, or determined, before it shall take
effect. There can be no contract of insurance unless the minds of the parties have met in
agreement.
Commissioner of Internal Revenue v. Lincoln Philippine Life Insurance Co., 379 SCRA423 Amiel Arada
Facts:

Private respondent Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance
Company, Inc.) is a domestic corporation registered with the Securities and Exchange
Commission and engaged in life insurance business. In the years prior to 1984, private
respondent issued a special kind of life insurance policy known as the Junior Estate Builder
Policy, the distinguishing feature of which is a clause providing for an automatic increase in
the amount of life insurance coverage upon attainment of a certain age by the insured without
the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary
stamp taxes due on the policy were paid by petitioner only on the initial sum assured.
In 1984, private respondent also issued 50,000 shares of stock dividends with a par value of
P100.00 per share or a total par value of P5,000,000.00. The actual value of said shares,
represented by its book value, was P19,307,500.00. Documentary stamp taxes were paid based
only on the par value of P5,000,000.00 and not on the book value.
Subsequently, petitioner issued deficiency documentary stamps tax assessment for the year
1984 in the amount of P464,898.75, corresponding to the amount of automatic increase of the
sum assured on the policy issued by respondent. On March 30, 1993, the Court of Tax Appeals
found no valid basis for the deficiency tax assessment on the insurance policy. Petitioner
appealed the CTAs decision to the Court of Appeals. On November 18, 1994, the Court of
Appeals promulgated a decision affirming the CTAs decision insofar as it nullified the deficiency
assessment on the insurance policy.
Issue:
Whether or not the "automatic increase clause" is separate and distinct from the main
agreement and involves another transaction.
Held:
Yes. Section 49, Title VI of the Insurance Code defines an insurance policy as the written
instrument in which a contract of insurance is set forth.Section 50 of the same Code provides
that the policy, which is required to be in printed form, may contain any word, phrase, clause,
mark, sign, symbol, signature, number, or word necessary to complete the contract of
insurance. It is thus clear that any rider, clause, warranty or endorsement pasted or attached to
the policy is considered part of such policy or contract of insurance.
The subject insurance policy at the time it was issued contained an automatic increase clause.
Although the clause was to take effect only in 1984, it was written into the policy at the time of
its issuance. The distinctive feature of the junior estate builder policy called the automatic
increase clause already formed part and parcel of the insurance contract, hence, there was no
need for an execution of a separate agreement for the increase in the coverage that took effect
in 1984 when the assured reached a certain age.
Here, although the automatic increase in the amount of life insurance coverage was to take
effect later on, the date of its effectivity, as well as the amount of the increase, was already
definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the
time of its issuance necessarily included the additional sum covered by the automatic increase
clause because it was already determinable at the time the transaction was entered into and
formed part of the policy.
The automatic increase clause in the policy is in the nature of a conditional obligation under
Article 1181, by which the increase of the insurance coverage shall depend upon the happening
of the event which constitutes the obligation. In the instant case, the additional insurance that
took effect in 1984 was an obligation subject to a suspensive obligation, but still a part of the
insurance sold to which private respondent was liable for the payment of the documentary
stamp tax.
The deficiency of documentary stamp tax imposed on private respondent is definitely not on the
amount of the original insurance coverage, but on the increase of the amount insured upon the
effectivity of the Junior Estate Builder Policy.
Lim Guan Sy v. Northern Assurance Co 55 Phil 248 - Ceazar Ryan Aquino
Doctrine: #HonestoPromise
Lim Cuan Sy vs The Northern Assurance Company

Facts:
Lim Cuan Sy instituted an action to claim P10,000 upon a policy of insurance from the Company
for the insured textiles damaged by fire in petitioners bodega in Urbiztondo, Manila. Defendant
Company set-up a general denial and defenses to include: false representation by the insured
with respect to the ownership of the policy, incendiarism on the part of the insured, and the
submission of false and fraudulent proof with respect to the amount and value of the destroyed
merchandise. The trial court ruled in favor of the petitioner.
The business used different names to include Hong Liong, Lim Cuan Sy, and Lim Cuan Sy
and Co. Though it is the latter that was used when it was registered. Because of the cramped
space, the stock was also placed in the store- there is a compartment in the quarters which
served as the bodega. The insurance was named after LIM CUAN SY (take note)
1:45 AM of December 28, 1946, fire razed the Poizat Bodega which included the petitioners.
The petitioner then sought to claim insurance for 155 box of textiles with alleged value of
P91,425.46. The defendants main allegation is: Misrepresentation by the insured as to the
nature and extent of his interest in the insured goods.
Issue: Was there misrepresentation on the part of plaintiff?
Held: SC believes there is none. A policy insuring merchandise against fire is not invalidated by
the fact that the name of the insured policy is incorrectly written Lim Cuan Sy instead of Lim
Cuan Sy and Co, the latter being the proper legal designation of the firm, where it appears that
the designation Lim Cuan Sy was commonly used as the name of the firm in its business
dealings and that the error in the designation of the insured in the policy was not due to
fraudulent intent on the part of the latter and did not mislead the insurer as to the extent of the
liability assumed.

Lim v. Sun Life Assurance Co of Canada 41 Phil 265 - KD Balintec

Lim vs Sun Life Assurance Company of Canada
G.R. No. L-15774 (November 29, 1920)
Malcolm, J.
http://www.lawphil.net/judjuris/juri1920/nov1920/gr_l-15774_1920.html
Facts:
Insured:
Insurer:
Beneficiary:

Luis Lim y Garcia

Sun Life Assurance Company of Canada
Pilar C. de Lim

16 Jul 1917 - Luis took an insurance policy in the sum of Php5,000 and paid Php433 as first
premium and upon such payment the company issued what was called a "provisional policy."
The provisional policy, among others, provide:
The above-mentioned life is to be assured in accordance with the terms and conditions
contained or inserted by the Company in the policy which may be granted by it in this particular
case for four months only from the date of the application, provided that the Company shall
confirm this agreement by issuing a policy on said application when the same shall be submitted
to the Head Office in Montreal. Should the Company not issue such a policy, then this
agreement shall be null and void ab initio, and the Company shall be held not to have been on
the risk at all, but in such case the amount herein acknowledged shall be returned.
23 Aug 1917 - Luis died before approval of the application by the home office of the insurance
company.
The action to recover the proceeds of the insurance policy was brought about by Pilar, which
the Court of First Instance of Zamboanga denied, hence, the appeal.
Issue:
Whether or not based on the terms/provisions of theprovisional policy, there was a
consummated contract of insurance.

Ruling:
No, the provisional policy did not bind Sun Life to pay for the insurance which Luis took on his
life with Pilar as the beneficiary, as there was no consummated contract of insurance. The
Court interpreted the provisions of the provisional policy in that it amounts to nothing but an
acknowledgment on behalf of the company, that it has received from the person named therein
the sum of money agreed upon as the first year's premium upon a policy to be issued upon the
application, if the application is accepted by the company.
While appellant contends that a preliminary contract for temporary insurance was entered into in
this instance (i.e., a custom in the insurance business wherein a binding receipt for temporary
insurance pending the consideration of the application, to last until the policy be issued or the
application rejected, and such contracts are upheld and enforced when the applicant dies before
the issuance of a policy or final rejection of the application), the Court did not agree. On the
contrary, the clause in the application and the receipt given by the solicitor, which are to be read
together, stipulate expressly that the insurance shall become effective only when the
"application shall be approved and the policy duly signed by the secretary at the head office of
the company and issued.
Corollary to this, the Court emphasized that a contract of insurance, like other contracts, must
be assented to by both parties either in person or by their agents, and that, so long as an
application for insurance has not been either accepted or rejected, it is merely an offer or
proposal to make a contract. The contract, to be binding from the date of the application, must
have been a completed contract, one that leaves nothing to be done, nothing to be completed,
nothing to be passed upon, or determined, before it shall take effect. There can be no contract
of insurance unless the minds of the parties have met in agreement.

Enriquez v Sun Life Assurance Co 41 Phil 269 - Regina Elim Perocillo Ballesteros-Arbison
FACTS:
Joaquin Herrer applied to the sun life assurance company of canada through its office in manila
for a life annuity on Sept. 24, 1917. He paid 6,000 to the manager of the company's Manila
office.
Nov 26, 1917: the head office gave notice of acceptance by cable to manila
dec. 4, 1917: policy was issued
Dec 18, 1917, Atty. Torres wrote to the Manila Office about the desire of Herrer to withdraw his
application. Local office replied by stating that a policy had already been issued and reminded
the notification made on Nov 26, 1917.
Dec 20, 1917, Herrer died
Dec 21, 1971, Atty. Torres received the reply.
Enriquez, the administrator brought this action to recover the payment of 6,000 made by Herrer.
During the trial, the administrator of Herrer testified that he had found no letter of notification
from the insurance company. Other witnesses testified that they prepared the letter of
notification although after preparing it, they knew nothing what became of it.
The deduction of the SC-that the letter notifying Mr. Herrer that his application had been
accepted was prepared and signed in the local office but was never actually mailed, thus was
never received by Herrer.
Issue:
Whether or not there has been a valid offer an acceptance
Held:
None. Under the Civil Code, art.1262, an acceptance made by letter shall bind the person
making the offer only from the date it came to his knowledge. Plus, according to the provisional
receipt given to herrer, 3 things should be accomplished by the insurance company before there
was a contract 1.) medical examination of the applicant;2.) approval of the application by the
head office; 3.) that approval must e comminicated to the applicant. In this case, there was no
letter of notification, no evidence of knowledge, thus the 6,000 must be returned plus interest.
Note: Civil Code was made to apply since the insurance code does not provide for law on the
principle of acceptance.
Development Bank of the Phils v CA 231 SCRA 370 - Noveanne Perez Banogon

FULL TEXT HERE: http://www.lawphil.net/judjuris/juri1994/mar1994/gr_l_109937_1994.html

DEVELOPMENT BANK OF THE PHILIPPINES v CA and estate of JUAN DANS
GR L-109937
March 21, 1994
*Liability of a Lender Bank who is also the Insurance Agent
FACTS:

Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a
loan of P500,000.00 with the DBP. As the principal mortgagor, Dans, then 76 years of age, was
advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage
Redemption Insurance Pool (DBP MRI Pool).

A loan, in the reduced amount of P300,000.00, was approved by DBP/ From the proceeds
of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. Dans
submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool."

The MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to
the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the
credit.

Dans died of cardiac arrest (19 days after MRI application). The DBP, upon notice, relayed
this information to the DBP MRI Pool.

The DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over
the acceptance age limit of 60 years at the time of application.

DBP apprised Candida Dans of the disapproval of her late husband's MRI application. The
DBP offered to refund the premium of P1,476.00 which the deceased had paid, but Candida
Dans refused to accept the same, demanding payment of the face value of the MRI or an
amount equivalent to the loan. She also refused an ex gratia of 30,000

Respondent Estate, through Candida Dans as administratrix, filed a complaint against DBP
and the insurance pool for "Collection of Sum of Money with Damages."
ISSUE:
(1)WHETHER THE DBP MRI POOL IS LIABLE
(2)WHETHER DBP IS LIABLE
RULING:
(1) NO. The MRI coverage shall take effect: (1) when the application shall be approved by the
insurance pool; and (2) when the full premium is paid during the continued good health of the
applicant. These two conditions, being joined conjunctively, must concur. Undisputably, the
power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not
approve the application of Dans. There is also no showing that it accepted the sum of
P1,476.00, which DBP credited to its account with full knowledge that it was payment for Dan's
premium. There was, as a result, no perfected contract of insurance; hence, the DBP MRI Pool
cannot be held liable on a contract that does not exist.
(2) YES. It was DBP, as a matter of policy and practice, that required Dans, the borrower, to
secure MRI coverage. Instead of allowing Dans to look for his own insurance carrier or some
other form of insurance policy, DBP compelled him to apply with the DBP MRI Pool for MRI
coverage. In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the
second as an insurance agent. As an insurance agent, DBP made Dans go through the motion
of applying for said insurance, thereby leading him and his family to believe that they had
already fulfilled all the requirements for the MRI and that the issuance of their policy was
forthcoming. Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as
such is not personally liable to the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such party sufficient notice of his
powers." The DBP is not authorized to accept applications for MRI when its clients are more
than 60 years of age. Knowing all the while that Dans was ineligible for MRI coverage because
of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's
application for MRI by collecting the insurance premium. The liability of an agent who exceeds
the scope of his authority depends upon whether the third person is aware of the limits of the
agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to
solicit applications for MRI.
FOR HOW MUCH IS DBP LIABLE?

The DBP's liability, however, cannot be for the entire value of the insurance policy. To assume
that were it not for DBP's concealment of the limits of its authority, Dans would have secured an
MRI from another insurance company, and therefore would have been fully insured by the time
he died, is highly speculative. Considering his advanced age, there is no absolute certainty that
Dans could obtain an insurance coverage from another company. It must also be noted that
Dans died almost immediately, i.e., on the nineteenth day after applying for the MRI, and on the
twenty-third day from the date of release of his loan. One is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved (Civil Code of
the Philippines, Art. 2199).
DBP is ORDERED: (1) to REIMBURSE respondent Estate of Juan B. Dans the amount of
P1,476.00 with legal interest from the date of the filing of the complaint until fully paid; and (2) to
PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as moral damages and the
amount of Ten Thousand Pesos (P10,000.00) as attorney's fees.
Ang Giok Chip v. Springfield 56 Phil 375 - Josephine Billedo
7. Ang Giok Chip vs. Springfield Fire & Marine Insurance Company
GR No. L-33637
December 31, 1931
FULL TEXT: http://www.lawphil.net/judjuris/juri1931/dec1931/gr_l-33637_1931.html
Doctrine:
Section 50:
xxx Any rider, clause, warranty or endorsement purporting to be part of the contract of
insurance and which is pasted or attached to said policy is not binding on the insured, unless
the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned and
written on the blank spaces provided in the policy. xxx
FACTS

Ang Giok Chip , doing business under the name and style of Hua Bee Kong Si, was the
owner of a warehouse at Manila. The contents of the warehouse were insured with 3 insurance
companies for the total value of Php 60,000. One insurance policy, in the amount of Php10,000
was taken out with the Springfield Fire and Marine Insurance (SF&MI) Company.

The warehouse was destroyed by fire on January 11, 1928, while the policy issued by
SF&MI was in force.

Ang Giok Chip instituted an action against SF&MI to recover a proportional part of the
loss amounting to Php8,170.59. The trial court gave judgment in favor of Ang Giok Chip for the
sum of Php8,188.74. Hence this appeal.

The insurance company interposed its defense on a rider in the policy in the form of
Warranty F-- fixing the amount of hazardous good that can be stored in a building to be covered
by the insurance.

xxx provided, always, however that the Insured be permitted to stored a small quantity of
hazardous goods xxx BUT NOT EXCEEDING IN ALL 3 PERCENT OF THE TOTAL VALUE OF
THE WHOLE OF THE GOODS OR MERCHANDISE CONTAINED IN SAID WAREHOUSE xxx

They claimed that Ang violated the 3 percent limit by placing hazardous goods to as high
as 39 percent of all the goods stored in the building.
ISSUE
Whether a warranty referred to in the policy as forming part of the contract of insurance and
in the form of a rider to the insurance policy, is null and void because not complying with the
Philippine Insurance Act
RULING:
1. No, it is NOT null and void. The Warranty F is valid. Reversed the judgment appealed from
and to order the dismissal of the complaint.
Warranty F, a rider attached to the face of the insurance policy is valid and sufficient under
Section 65 of the insurance act Every express warranty, made at or before the execution of
the policy, must be contained in the policy itself, or in another instrument signed by the insured
and referred to in the policy, as making a part of it..

It is well settled that a rider attached to a policy is a part of the contract, to the same extent and
with like effect as it actually embodied therein. In the second place, it is equally well settled that
an express warranty must appear upon the face of the policy, or be clearly incorporated therein
and made a part thereof by explicit reference, or by words clearly evidencing such intention.
The court concluded that Warranty F is contained in the policy itself, because by the contract of
insurance agreed to by the parties it was made to be a part. It was not a separate instrument
agreed to by the parties. The receipt of the policy by the insured without objection binds him. It
was his duty to read the policy and know its terms. He also never chose to accept a different
policy by considering the earlier one as a mistake. Hence, the rider is valid.
Also, the court referred to a passage found on Philips on Insurance that states: "any express
warranty or condition is always a part of the policy, but, like any other part of an express
contract, may be written in the margin, or contained in proposals or documents expressly
referred to in the policy, and so made a part of it."

Sindayen v Insular Life 62 Phil 9 - Jane Calipay

G.R. No. 41702
September 4, 1935
FORTUNATA LUCERO VIUDA DE SINDAYEN vs. THE INSULAR LIFE ASSURANCE CO.,
LTD.,
Facts:

Arturo Sindayen, up to the time of his death on January 19, 1933, was employed as a
linotype operator in the Bureau of Printing at Manila

He and his wife went to Camiling, Tarlac, to spend the Christmas vacation with his aunt,
Felicidad Estrada.

While there he made a written application on December 26, 1932, to the defendant
Insular Life Assurance Co., Ltd., through its agent, Cristobal Mendoza, for a policy of insurance
on his life in the sum of P1,000 and he paid to the agent P15 cash as part of the first premium.

It was agreed with the agent that the policy, when and if issued, should be delivered to his
aunt. Felicidad Estrada, with whom Sindayen left the sum of P26.06 to complete the payment of
the first annual premium of P40.06.

On January 1, 1933, Sindayen, who was then twenty-nine years of age, was examined by
the company's doctor who made a favorable report, to the company.

On January 11, 1933, The company accepted the risk and issued policy No. 47710 dated
back to December 1, 1932, and mailed the same to its agent, Cristobal Mendoza, in Camiling,
Tarlac, for delivery to the insured.

On January 16, 1933 Mendoza received the policy.

On January 11, 1933, Sindayen was at work in the Bureau of Printing. On January 12, he
complained of a severe headache and remained at home. On January 15, he called a physician
who found that he was suffering from acute nephritis and uremia.

On January 18, 1933, Mendoza delivered the policy to Felicidad Estrada. The agent
asked if her nephew was in good health and she replied that she believed so because she had
no information that he was sick and he thereupon delivered to her the policy

On January 19, 1933, he died.

The application which the insured signed in Camiling, Tarlac, on December 26, 1932,
contained among others the following provisions:
o 2. That if this application is accepted and a policy issued in my favor, I bind myself to accept
the same and to pay at least the first year's premium thereon in the City of Manila.
o 3. That the said policy shall not take effect until the first premium has been paid and the
policy has been delivered to and accepted by me, while I am in good health.
o 4. That the agent taking this application has no authority to make, modify or discharge
contracts, or to waive any of the Company's right or requirements.".
ISSUE:

WON the policy never took effect because of paragraph 3 of the application
HELD:
YES. A number of these cases go to the of holding that the delivery of the policy by the agent to
the insured consummates the contract even though the agent knew that the insured was not in
good health at the time, the theory being that his knowledge is the company's knowledge and
his delivery of the policy is the company's delivery; that when the delivery is made
notwithstanding this knowledge of the defect, the company is deemed to have waived the
defect.
Mendoza had the authority, given him by the company, to withhold the delivery of the policy to
the insured "until the first premium has been paid and the policy has been delivered to and
accepted by me (the insured) while I am in good health". Whether that condition had been met
or not plainly calls for the exercise of discretion. Granted that Mendoza's decision that the
condition had been met by the insured and that it was proper to make a delivery of the policy to
him is just as binding on the company as if the decision had been made by its board of
directors. Granted that Mendoza made a mistake of judgement because he acted on insufficient
evidence as to the state of health of the insured. But it is not charged that the mistake was
induced by any misconduct or omission of duty of the insured

9. Pacific Timber Export Corporation v. CA 112 SCRA 199 - Pao Dela Rama
Insurance Law The Policy Separate Premiums Not Required for Cover Notes
In 1963, Pacific Timber Export Corporation (PTEC) applied for a temporary marine insurance
from Workmens Insurance Company (WIC) in order for the latter to insure 1,250,000 board feet
of logs to be exported to Japan. In March 1963, WIC issued a cover note to PTEC for the said
logs. On April 2, 1963, WIC issued two policies for the logs. However, the total board feet
covered this time is only 1,195,498. On April 4, 1963, while the logs were in transit to Japan,
bad weather prevailed and this caused the loss of 32 pieces of logs.
WIC then asked an adjuster to investigate the loss. The adjuster submitted that the logs lost
were not covered by the two policies issued on April 2, 1963 but said logs were included in the
cover note earlier issued.
WIC however denied the insurance claim of PTEC as it averred that the cover note became null
and void when the two policies were subsequently issued. The Court of Appeals ruled that the
cover note is void for lack of valuable consideration as it appeared that no premium payment
therefor was made by PTEC.
ISSUE: Whether or not a separate premium is needed for cover notes.
HELD: No. The Cover Note was not without consideration for which the Court of Appeals held
the Cover Note as null and void, and denied recovery therefrom. The fact that no separate
premium was paid on the Cover Note before the loss insured against occurred, does not militate
against the validity of PTECs contention, for no such premium could have been paid, since by
the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of
the shipment that would serve as basis for the computation of the premiums. As a logical
consequence, no separate premiums are intended or required to be paid on a Cover Note.
At any rate, it is not disputed that PTEC paid in full all the premiums as called for by the
statement issued by WIC after the issuance of the two regular marine insurance policies,
thereby leaving no account unpaid by PTEC due on the insurance coverage, which must be
deemed to include the Cover Note. If the Note is to be treated as a separate policy instead of
integrating it to the regular policies subsequently issued, the purpose and function of the Cover
Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a
mere application for insurance which is a mere offer.

Gloria v. Philamlife Insurance Co., 73 OG 8660 - Camille Anne Delos Reyes

GLORIA V. PHILAMLIFE INSURANCE CO. 73 OG 8660
Facts:
> In 1966, Roberto Narito applied for a 100T life insurance policy with Philamlife Insurance
Company. Narito was examined by Dra. Vergel de dios, the insurers medical examiner.
> She opined that Narito was insurable. Her opinion was confirmed by Dr. Orobia, the
Associate Medical Director of the insurer.
> On Oc. 31, 1966, an agent of the insured prepared an application for the life insurance whose
annual premium was P1,178. On the same date, the application was signed by Narito.
> Narito paid the first annual premium on the policy applied for. The insurers application form
contained a so-called Binding Receipt which was detachable.
> It is not sure whether or not Narito was given the Binding Receipt upon his payment of the
first premium, but what is certain that he was handed a Cashiers Receipt.
> From the time the insured received the application form its agent on Nov. 5, 1966, up to Dec.
6, 1966, it did not take any action with regard to the controverted insurance coverage.
> On Dec. 6, 1966, Narito was shot and killed. The beneficiaries submitted a claim to the
insurer. After an underwriting analysis conducted by the insurer, it found out that Narito was
unacceptable as an insurance risk. The claim was denied.
Issue:
Whether or not the beneficiaries can claim.
Held:
YES.
The application for insurance signed by the deceased contained the following stipulation: The
binding receipt must NOT be issued unless a binding deposit is paid which must be at least
equal to the first full premium. The preponderance of evidence is to the effect that the binding
receipt was not issued to the deceased when he paid the companys agent, the first annual
premium of P1,178. Hence the rights of the beneficiaries and the obligation of the company
have to be determined solely in the application for insurance an in the Cashiers receipt.
The application for insurance contained the following clause: There shall be no contract of
insurance unless a policy is issued on this application and the full first premium thereon actually
paid. It should be conceded that there shall be a contract of insurance once the first premium
is paid and a policy is issued. There is no question that the first premium was paid.
The problem is to resolve whether or not it can be said that the policy has been issued. IN this
connection, what may be noted is that, in contrast to the requirement of actual payment of the
premium, it was NOT required that the policy be actually issued. An assuming that no policy
had indeed been issued, it should still be held that the application for insurance was approved
by the company, with the actual issuance of the policy being a mere technicality. When an
insurer accepts and retains the first premium for an unreasonable length of time, it should be
presumed that the insurer had assumed the risk. It should therefore be liable for loss before the
application is subsequently rejected. In the case at bar, the company did NOT act on the
application for insurance, one way or the other, from Nov. 2 to Dec. 5, 1966, and no justification
for the delay had been proven.
Hence, it should be held that the application for insurance of the deceased had been approved
prior to his death, although the policy had not actually been issued, for which reason, the
company should be liable to the beneficiaries.
Del Val v Del Val - Richard Enriquez
Francisco Del Val, ET AL vs. Andres Del Val
GR No. L-9374
February 16, 1915

FACTS: Francisco, ET AL and Andres are brother and sisters and are the only heirs and of
Gregorio del Val who died intestate. Gregorio took out insurance on his life for the sum of
P40,000 and made it payable to private respondents as sole beneficiary. After Gregorios death,
Andres collected the proceeds of the policy. Out of the proceeds received, Andres paid P18,000
to redeem some real property which Gregorio had sold to third persons during his lifetime. Said
redemption of the property was made by Andres laywer in the name of Andres and the
petitioners ( Sabi ni Andres, yung redemption in the name of Petitioners and himself was without
his knowledge and that since the redemption, petitioners have been in possession of the
property). Now, petitioners contend that the amount of the insurance policy belonged to the
estate of the deceased and not to Andres personally. (Kasali daw dapat sa hatian ung 40,000
na kinuha ni Andres dahil the sabi nila proceeds of insurance policy should be considered as
donation or gifts at according sa CC gifts made to children which are not betterments shall be
considered as part of their legal portions) Petioners filed a complaint for partition of property
including the insurance proceeds. Andres claims that he is the sole owner of the proceeds and
prayed that he be declared: 1.Sole owner of the real property, redeemed with the use of the
insurance proceeds and its remainder; 2.Petitioners to account for the use and occupation of
the premises.
ISSUE: Whether or not the petitioners have a right to the insurance proceeds?
HELD: The contract of life insurance is a special contract and the destination of the proceeds
thereof is determined by special laws which deal exclusively with the subject. Our civil code has
no provisions which relate directly and specifically to life-insurance contracts of to the
destination of life-insurance proceeds that subject is regulated exclusively by the Code of
Commerce. Thus, contention of petitioners that proceeds should be considered as a dontation
or gift and should be included in the estate of the deceased is UNTENABLE.
Since the repurchase has been made n the names of all the heirs instead of the defendant
alone, petitioners claim that the property belongs to the heirs in common and not to the
defendant alone. The SC held that if it is established by evidence that that was his intention and
that the real estate was delivered to the plaintiffs with that understanding, then it is probable that
their contention is correct and that they are entitled to share equally with the defendant.
HOWEVER, it appears from the evidence that the conveyances were taken in the name of the
plaintiffs without the knowledge and consent of Andres, or that it was not his intention to make a
gift to them of real estate, when it belongs to him.

Bonifacio Bros. v. Mora, 20 SCRA 262 - Maral Angel Espanol

FULLTEXT HERE: http://www.lawphil.net/judjuris/juri1967/may1967/gr_l-20853_1967.html
Bonifacio Bros., Inc., et al. vs. Enrique Mora, et al
G.R. No. L-20853
May 29, 1967
Related Provision:
Sec. 53 The insurance proceeds shall be applied exclusively to the proper interest of the
person in whose name or for whose benefit it is made unless otherwise specified in the policy.
FACTS
Enrique Mora (Mora) mortgaged his Odlsmobile sedan model 1956 car to HS Reyes, Inc. (HS
Reyes) with the condition that Mora would insure the car with HS Reyes as beneficiary. The car
was then insured with State Bonding and Insurance Company (State Insurance) and the policy
was delivered to Mora.
During the effectivity of the insurance contract, the car met an accident so State Insurance
assigned the accident to the Bayne Adjustment Co. (Bayne) for investigation and appraisal of
the damage.
Mora, without the knowledge and consent of HS Reyes, authorized Bonifacio Bros. to furnish
the labor and materials for the car repair, using some materials supplied by Ayala Auto Parts
Company (Ayala). Mora was billed P2,102.73 for the costs and the said bill was sent to the
Bayne. State Insurance then drew a check in the amount of the insurance proceeds and
entrusted the check to Bayne for delivery to the proper party. The car was in the meantime
delivered to Mora without the consent of HS Reyes, and without payment to Bonifacio Bros. and
Ayala.

 Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio Bros.
and Ayala filed a complaint against Mora and State Insurance for the collection of P2,102.73.
State Insurance filed its answer with a counterclaim for interpleader, requiring Bonifacio and HS
Reyes to interplead in order to determine who has a better right to the proceeds.

ISSUE
Whether or not there is privity of contract between Bonifacio Bros. and Ayala on one hand and
State Insurance on the other which will entitle the former to benefit from the proceeds of the
subject insurance policy.
HELD
None. The insurance contract between State Insurance Company and Enrique Mora does not
contain any words or clauses effecting the intention of the parties to give any benefit to any
repairmen or material men in case of repair of the subject car, in contrast with the principle of a
"stipulation pour autrui" where a contract contains a provision in favor of a third person not a
party to the contract. As a matter of fact, the parties to the insurance contract in question
omitted such stipulation. Moreover, the "loss payable" clause of the insurance policy provides
that "Loss, if any, is payable to H.S. Reyes, Inc." manifesting the clear intention of the parties to
benefit only H.S. Reyes and no one else.
Pursuant to Sec. 50 (now Sec. 53) of the Insurance Code, "A policy of insurance is a distinct
and independent contract between the insured and insurer, and third persons have no right
either in a court of equity, or in a court of law, to the proceeds of it, unless there be some
contract of trust, expressed or implied, by the insured and third person." In this case, no contract
of trust, expressed or implied exists. There is therefore no cause of action that exists in favor of
the appellants (Bonifacio & Ayala) in so far as the proceeds of insurance are concerned. The
appellant's claim, if at all, is merely equitable in nature and must be made effective through
Mora who entered into a contract with the Bonifacio Bros. This conclusion is deducible not only
from the principle governing the operation and effect of insurance contracts in general, but is
clearly covered by the express provisions of section 50 of the Insurance Act (now Sec. 53).

Coquia v. Fieldmens Insurance, 26 SCRA 172 - Ariane Kae Espina

MELECIO COQUIA, MARIA ESPANUEVA and MANILA YELLOW TAXICAB CO., INC. vs.
FIELDMEN'S INSURANCE CO., INC
G.R. No. L-23276
November 29, 1968
FACTS: On December 1, 1961, Fieldmens Insurance Company issued in favor of Manila
Yellow Taxicab a common carrier accident insurance policy covering the period of December 1,
1961 to December 1, 1962. While the policy was in force, or on February 10, 1962, a taxicab of
the Insured, driven by Carlito Coquia, met a vehicular accident at Mangaldan, Pangasinan, in
consequence of which Carlito died. The Insured filed therefor a claim for P5,000.00 to which the
Company replied with an offer to pay P2,000.00, by way of compromise. The Insured rejected
the same and made a counter-offer for P4,000.00, but the Company did not accept it. Hence, on
September 18, 1962, the Insured and Carlito's parents, namely, Melecio Coquia and Maria
Espanueva hereinafter referred to as the Coquias filed a complaint against the Company
to collect the proceeds of the aforementioned policy. In its answer, the Company admitted the
existence thereof, but pleaded lack of cause of action on the part of the plaintiffs. RTC ruled in
favor of Coquias. CA ruled in favor of Coquias again.
ISSUE: Whether or not plaintiffs have the right of action to collect on policy
RULING: Yes. Athough, in general, only parties to a contract may bring an action based
thereon, this rule is subject to exceptions, one of which is found in the second paragraph of
Article 1311 of the Civil Code of the Philippines, reading: "If a contract should contain some
stipulation in favor of a third person, he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a
person is not sufficient. The contracting parties must have clearly and deliberately conferred a
favor upon a third person." This is but the restatement of a well-known principle concerning
contracts pour autrui, the enforcement of which may be demanded by a third party for whose
benefit it was made, although not a party to the contract, before the stipulation in his favor has
been revoked by the contracting parties

In the case at bar, the policy under consideration is typical of contracts pour autrui this character
being made more manifest by the fact that the deceased driver paid fifty percent (50%) of the
corresponding premiums, which were deducted from his weekly commissions. Under these
conditions, it is clear that the Coquias who, admittedly, are the sole heirs of the deceased
have a direct cause of action against the Company, and, since they could have maintained this
action by themselves, without the assistance of the insured it goes without saying that they
could and did properly join the latter in filing the complaint herein.
Guingon v. Del Monte 20 SCRA 1043 - Derick Mallari
Guingon vs. Del Monte
No. L-22042. August 17, 1967.
BENGZON, J.P., J.:
Facts:
Julio Aguilar owned and operated several jeepneys in the City of Manila among which was one
with plate number PUJ-206-Manila, 1961. He entered into a contract with the Capital Insurance
& Surety Co., Inc. insuring the operation of his jeepneys against accidents with third-party
liability. As a consequence thereof an insurance policy was executed by the Capital Insurance &
Surety Co., Inc., the pertinent provisions of which in so far as this case is concerned contains
the following:
"Section IILIABILITY TO THE PUBLIC
"1. The Company, will, subject to the limits of liability, indemnify the Insured in the event of
accident caused by or arising out of the use of the Motor Vehicle/s or in connection with the
loading or unloading of the Motor Vehicle/s, against all sums including claimant's costs and
expenses which the Insured shall become legally liable to pay in respect of:
"a. death of or bodily injury to any person
"b. damage to property"
During the effectivity of such insurance policy on February 20, 1961 Iluminado del Monte, one of
the drivers of the jeepneys operated by Aguilar, while driving along the intersection of Juan
Luna and Moro streets, City of Manila, bumped with the jeepney abovementioned one Gervacio
Guingon who had just alighted from another jeepney and as a consequence the latter died
some days thereafter.
A corresponding information for homicide thru reckless imprudence was filed against Iluminado
del Monte, who pleaded guilty. A penalty of four months imprisonment was imposed on him.
As a corollary to such action, the heirs of Gervacio Guingon filed an action for damages praying
that the sum of P82,771.80 be paid to them jointly and severally by the defendants, driver
Iluminado del Monte, owner and operator Julio Aguilar, and the Capital Insurance & Surety Co.,
Inc. For failure to answer the complaint, Del Monte and Aguilar were declared in default. Capital
Insurance & Surety Co., Inc. answered, alleging that the plaintiff has no cause of action against
it. During the trial the following facts were stipulated:
'COURT: The Court wants to find if there is a stipulation in the policy whereby the insured is
insured against liability to third persons who are not passengers of jeeps.
"ALMARIO: As far as I know, in my honest belief, there is no particularization as to the
passengers, whether the passengers of the jeep insured or a passenger of another jeep or
whether it is a pedestrian. With those, we can submit the stipulation.
"SIMBULAN: I admit that."
In the discussion of the points thus raised, what is paramount is the interpretation of the
insurance contract with the aim in view of attaining the objectives for which the insurance was
taken. The Rules of Court provide that parties may be joined either as plaintiffs or defendants,
as the right to relief in respect to or arising out of the same transactions is alleged to exist (Sec.
6, Rule 3). The policy, on the other hand, contains a clause stating:

"E. Action Against Company

No action shall lie against the Company unless, as a condition precedent thereto, the Insured
shall have fully complied with all of the terms of this Policy, nor until the amount of the Insured's
obligation to pay shall have been finally determined either by judgment against the Insured after
actual trial or by written agreement of the Insured, the claimant, and the Company.
Any person or organization or the legal representative thereof who has secured such judgment
or written agreement shall thereafter be entitled to recover under this policy to the extent of the
insurance afforded by the Policy. Nothing contained in this policy shall give any person or
organization any right to join the Company as a co-defendant in any action against the Insured
to determine the Insured's liability. Bankruptcy or insolvency of the Insured or of the Insured's
estate shall not relieve the Company of any of its obligations hereunder."
Appellant contends that the "no action'' clause in the policy closes the avenue to any third party
which may be injured in an accident wherein the jeepney of the insured might have been the
cause of the injury of third persons, alleging the freedom of contracts.
Issue:
Whether or not the mere fact that such "no action" clause was agreed upon by the parties in an
insurance policy shall prevail over the Rules of Court which authorizes the joining of parties
plaintiffs or defendants?
Held:
No, "no action" clause in insurance policy cannot prevail over procedural rule as to joinder of
parties.Where the insurer agreed to indemnify the insured "against all sums x x x which the
Insured shall become legally liable to pay in respect of: a death of or bodily injury to any
person", the insurance is one for indemnity against liability, From the f act then that the insured
is liable to the third-person, such third-person is entitled to sue the insurer. The "no action"
clause in the policy of insurance cannot prevail over the Rules of Court provision aimed at
avoiding multiplicity of suits.
The right of the person injured to sue the insurer of the party at fault (insured) depends on
whether the contract of insurance is intended to benefit third persons also or only the insured.
The test applied is this: Where the contract provides for indemnity against liability to third
persons, then third persons to whom the insured is liable. can sue the insurer. Where the
contract is for indemnity against actual loss or payment, then third persons cannot proceed
against the insurer, the contract being solely to reimburse the insured for liability actually
discharged by him through payment to third persons, said third persons' recourse being thus
limited to the insured alone.
The policy in the present case, as aforequoted, is one whereby the insurer agreed to indemnify
the insured "against all sums x x x which the Insured shall become legally Iiable to pay in
respect of: a. death of or bodily injury to any person x x x." Clearly, therefore, it is one for
indemnity against liability; from the fact then that the insured is liable to the third person, such
third person is entitled to sue the insurer.
RCBC v. CA, 289 SCRA 292 (1998) - Pauline Ollero
[G.R. Nos. 128833. April 20, 1998]
RIZAL COMMERCIAL BANKING CORPORATION, UY CHUN BING AND ELI D. LAO,
petitioners, vs. COURT OF APPEALS and GOYU & SONS, INC., respondents.
[G.R. No. 128834. April 20, 1998]
RIZAL COMMERCIAL BANKING CORPORATION, petitioners, vs. COURT OF APPEALS,
ALFREDO C. SEBASTIAN, GOYU & SONS, INC., GO SONG HIAP, SPOUSES GO TENG
KOK and BETTY CHIU SUK YING alias BETTY GO, respondents.
[G.R. No. 128866. April 20, 1998]
MALAYAN INSURANCE INC., petitioner, vs. GOYU & SONS, INC. respondent.
FACTS:
The issues relevant to the herein three consolidated petitions revolve around the fire loss claims
of respondent Goyu & Sons, Inc. (GOYU) with petitioner Malayan Insurance Company, Inc.
(MICO) in connection with the mortgage contracts entered into by and between Rizal
Commercial Banking Corporation (RCBC) and GOYU.

GOYU applied for credit facilities and accommodations with RCBC at its Binondo Branch. After
due evaluation, a credit facility in the amount of P30 million was initially granted. Upon GOYUs
application and Uys and Laos recommendation, RCBCs executive committee increased
GOYUs credit facility to P50 million, then to P90 million, and finally to P117 million.
As security for its credit facilities with RCBC, GOYU executed two real estate mortgages and
two chattel mortgages in favor of RCBC. GOYU committed itself to insure the mortgaged
property with an insurance company approved by RCBC, and subsequently, to endorse and
deliver the insurance policies to RCBC.
GOYU obtained in its name a total of ten insurance policies from MICO. Alchester Insurance
Agency, Inc., the insurance agent where GOYU obtained the Malayan insurance policies,
issued nine endorsements in favor of RCBC seemingly upon instructions of GOYU.
One of GOYUs factory buildings in Valenzuela was gutted by fire. Consequently, GOYU
submitted its claim for indemnity on account of the loss insured against. MICO denied the claim
on the ground that the insurance policies were either attached pursuant to writs of
attachments/garnishments issued by various courts or that the insurance proceeds were also
claimed by other creditors of GOYU alleging better rights to the proceeds than the insured.
RCBC, one of GOYUs creditors, also filed with MICO its formal claim over the proceeds of the
insurance policies, but said claims were also denied for the same reasons that MICO denied
GOYUs claims.
ISSUE:
Whether or not RCBC, as mortgagee, has any right over the insurance policies taken by GOYU,
the mortgagor, in case of the occurrence of loss.
Up to what extent is GOYUs outstanding obligation with RCBC which the proceeds of the 8
insurance policies will discharge and liquidate, or put differently, the actual amount of GOYUs
liability to RCBC.
HELD:
It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in
the same mortgaged property, such that each one of them may insure the same property for his
own sole benefit.
It is to be noted that nine endorsement documents were prepared by Alchester in favor of
RCBC. It is also significant that GOYU voluntarily and purposely took the insurance policies
from MICO, a sister company of RCBC, and not just from any other insurance company. Had it
not been for GOYU, Alchester would not have known of GOYUs intention of obtaining
insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC,
and verily, Alchester would not have endorsed the policies to RCBC had it not been so directed
by GOYU. On equitable principles, particularly on the ground of estoppel, the Court is
constrained to rule in favor of mortgagor RCBC.
RCBC, in good faith, relied upon the endorsement documents sent to it as this was only
pursuant to the stipulation in the mortgage contracts. Over and above this, GOYU continued, in
the meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. After the
occurrence of the loss insured against, it was too late for GOYU to disown the endorsements for
any imagined or contrived lack of authority of Alchester to prepare and issue said
endorsements.
GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the
proceeds of insurance shall exclusively apply to the interest of the person in whose name or for
whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case
presents a justification to take exception to the strict application of said provision, it having been
sufficiently established that it was the intention of the parties to designate RCBC as the party for
whose benefit the insurance policies were taken out. Consider thus the following:
1.
It is undisputed that the insured pieces of property were the subject of mortgage
contracts entered into between RCBC and GOYU in consideration of and for securing GOYUs
credit facilities from RCBC. The mortgage contracts contained common provisions whereby
GOYU, as mortgagor, undertook to have the mortgaged property properly covered against any
loss by an insurance company acceptable to RCBC.
2.
GOYU voluntarily procured insurance policies to cover the mortgaged property from
MICO, no less than a sister company of RCBC and definitely an acceptable insurance company
to RCBC.
3.
Endorsement documents were prepared by MICOs underwriter, Alchester Insurance
Agency, Inc., and copies thereof were sent to GOYU, MICO, and RCBC. GOYU did not assail,
until of late, the validity of said endorsements.
4.
GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit
facilities extended by RCBC which was conditioned upon the endorsement of the insurance
policies to be taken by GOYU to cover the mortgaged properties.

It is, however, the intention of the parties to constitute RCBC as the beneficiary of the various
insurance policies obtained by GOYU. The intention of the parties will have to be given full
force and effect in this particular case. The insurance proceeds may, therefore, be exclusively
applied to RCBC, which under the factual circumstances of the case, is truly the person or entity
for whose benefit the policies were clearly intended.
Significantly, the Court notes that out of the 10 insurance policies subject of this case, only 8 of
them appear to have been subject of the endorsements prepared and delivered by Alchester for
and upon instructions of GOYU. Being exclusively payable to RCBC by reason of the
endorsement by Alchester to RCBC, which we already ruled to have the force and effect of an
endorsement by GOYU itself, these 8 policies cannot be attached by GOYUs other creditors up
to the extent of the GOYUs outstanding obligation in RCBCs favor. Section 53 of the
Insurance Code ordains that the insurance proceeds of the endorsed policies shall be applied
exclusively to the proper interest of the person for whose benefit it was made. In this case, to
the extent of GOYUs obligation with RCBC, the interest of GOYU in the subject policies had
been transferred to RCBC effective as of the time of the endorsement. These policies may no
longer be attached by the other creditors of GOYU, like Alfredo Sebastian in the present G.R.
No. 128834, which may nonetheless forthwith be dismissed for being moot and academic in
view of the results reached herein. Only the two other policies amounting to P19,646,224.92
may be validly attached, garnished, and levied upon by GOYUs other creditors. To the extent
of GOYUs outstanding obligation with RCBC, all the rest of the other insurance policies abovelisted which were endorsed to RCBC, are, therefore, to be released from attachment,
garnishment, and levy by the other creditors of GOYU.
2.
Aside from its judicial admission of having received all the proceeds of the 29
promissory notes as hereinabove quoted, GOYU also offered and admitted to RCBC that its
obligation be fixed at P116,301,992.60 as shown in its letter.
The two courts below erred in failing to see that the promissory notes which they ruled should
be excluded for bearing dates which are after that of the fire, are mere renewals of previous
ones. The proceeds of the loan represented by these promissory notes were admittedly
received by GOYU. There is ample factual and legal basis for giving GOYUs judicial admission
of liability in the amount of P116,301,992.60 full force and effect
It should, however, be quickly added that whatever amount RCBC may have recovered from the
other insurers of the mortgaged property will, nonetheless, have to be applied as payment
against GOYUs obligation.
Ang v. Fulton Fire Ins Co 2 SCRA 945 - Krystle Rosales
ANG vs. FULTON FIRE INSURANCE CO., ET AL.
G.R. No. L-15862.
July 31, 1961
LABRADOR, J.:
FACTS: Sps. Paulo & Sally Ang insured their department store with Fulton Fire Insurance Co.
(Fulton) and Paramount Surety & Insurance Co., Inc. (Paramount) until Sept. 31, 1955. On Dec.
17, 1954, fire gutted Angs store. On Dec. 30, 1954, Ang filed a claim with Fultons adjuster,
Mla. Adjustment Co. Fulton denied the claim while Paulo Ang & ten others were charged with
arson however, the CFI acquitted Paulo Ang. On May 5, 1958, Sps. Ang filed a case against
Fulton & Paramount but the latter was dropped from the complaint. In its Answer, Fulton alleged
that the Angs received the notice of denial on April 18, 1956 and their action was brought only
on May 5, 1958 which is beyond the period stipulated under par. 13 of the insurance policy
which provides that if the loss or damage is occasioned by the willful act of the insured, or if the
claim is made and rejected but no action is commenced within 12 months after such rejection,
all benefits under the policy would be forfeited. Sps. Ang contended that their action was filed
within the prescribed period since they instituted a civil case against Paramount in the CFI on
May 11, 1956 to assert their claim which was dismissed without prejudice on Sept. 3, 1957. The
CFI ruled in favor of Ang holding that the latter timely filed its claim in May 1958 because the
1956 civil suit tolled the running period within which to file an action.
ISSUE: Whether or not the action filed by Ang against Fultons agent, Paramount, tolled the
prescriptive period within which to file a claim against the insurance policy?
HELD: NO. The case brought by Ang against the agent of the insurer, Paramount has no legal
effect as there was no stipulation in the policy that the action must be filed against the agent. In
E. Macias & Co. vs. China Fire Insurance & Co., 46 Phil., the Court declared that the contractual
station in an insurance policy prevails over the statutory limitation and held that their contract is
the law between the parties, and their agreement that an action on a claim denied by the insurer
must be brought within one year from the denial, governs, not the rules on the prescription of
actions.

The Court set aside the judgment of the lower court and dismissed the case with costs against
Ang.
Eagle Star Ins Co Ltd v Chia Yu 96 Phil 966 - Maria Jennifer Santos
G.R. No. L-5915
March 31, 1955
Case doctrine - SEC. 63. A condition, stipulation, or agreement in any policy of insurance,
limiting the time for commencing an action thereunder to a period of less than one (1) year from
the time when the cause of action accrues, is void." (61-A in prior amendment as stated in this
case)
FACTS:
On January 15, 1946, Atkin, Kroll & Co., loaded on the S. S. Roeph Silverlight owned and
operated by Leigh Hoegh & Co., A/S, of San Francisco California, 14 bales of assorted
underwear valued at P8,085.23 consigned to Chia Yu in the City of Manila. The shipment was
insured against all risks by Eagle Star Ins. Co. of San Francisco, California, under a policy
issued to the shipper and by the latter assigned to the consignee.
The vessel arrived in Manila on February 10, 1946, and on March 4 started discharging its
cargo.
Out of the 14 bales consigned to Chia Yu only 10 were delivered to him: remaining 3 could
not be found; and 3 of those delivered were also found damaged to the extent of 50%
Chia Yu claimed indemnity for the missing and damaged bales. But the claim was declined,
first, by the carrier and afterward by the insurer, whereupon Chia Yu brought the present action
against both, including their respective agents in the Philippines.
Commenced in the Court of First Instance of Manila on November 16, 1948, or more than
two years after delivery of the damaged bales and the date when the missing bales should have
been delivered, the action was resisted by the defendants (carrier and insurer) principally on the
ground of prescription.
Despite resistance of defendants, trial court found for plaintiff and rendered judgment in his
favor for the sum claimed plus legal interest and costs. The judgment was affirmed by the Court
of Appeals, and the case is now on appeal by certiorari on SC.
ISSUE: WON plaintiff's (Chia Yu's) action has prescribed.
Carrier: YES. The Court held that plaintiff's failure to bring his action "within one year after the
delivery of the goods or the date when the goods should have been delivered (as stipulated in
the bill of lading)" discharged the carrier from all liability.
Insurer: NO. The case for the insurer stands on a different footing, for its claim of prescription is
founded upon the terms of the policy and not upon the bill of lading. Under our law the time limit
for bringing a civil action upon a written contract is ten years after the right of action accrues.
(Sec. 43, Act 190; Art. 1144, New Civil Code.)
The insurer averred that, based on the policy, No suit action on this Policy, for the recovery of
any claim, shall be sustainable in any Court of law or equity unless the insured shall have fully
complied with all the terms and conditions of this Policy nor unless commenced with twelve (12)
months next after the happening of the loss.
In a previously decided case relied upon by the insurer, this Court held that a clause in an
insurance policy providing that an action upon the policy by the insured must be brought within a
certain time is, if reasonable, valid and will prevail over statutory limitations of the action. That
decision, however, was rendered before the passage of Act 4101, which amended the
Insurance Act by inserting the following section in chapter one thereof: "SEC. 61-A. Any
condition, stipulation or agreement in any policy of insurance, limiting the time for commencing
an action thereunder to a period of less than one year from the time when the cause of action
accrues, is void." As "matters respecting a remedy, such as the bringing of suit, admissibility of
evidence, and statute of limitations, depend upon the law of the place where the suit is brought"
(Insular Government vs. Frank, 13 Phil. 236), any policy clause repugnant to this amendment to
the Insurance Act cannot be given effect in an action in our courts.
Examining the policy sued upon in the present case, we find that its prescriptive clause, if given
effect in accordance with the terms of the policy, would reduce the period allowed the insured
for bringing his action to less than one year. This is so because the said clause makes the
prescriptive period begin from the happening of the loss and at the same time provides that the
no suit on the policy shall be sustainable in any court unless the insured shall have first fully

complied with all the terms and conditions of the policy, among them that which requires that, as
so as the loss is determined, written claim therefor be filed with the carrier and that the letter to
the carrier and the latter's reply should be attached to the claim papers to be sent to the insurer.
It is obvious that compliance with this condition precedent will necessarily consume time and
thus shorten the period for bringing suit to less than one year if the period is to begin, as stated
in the policy, from "the happening of the loss." Being contrary to the law of the forum, such
stipulation cannot be given effect.
It may perhaps be suggested that the policy clause relied on by the insurer for defeating
plaintiff's action should be given the construction that would harmonize it with section 61-A of
the Insurance Act by taking it to mean that the time given the insured for bringing his suit is
twelve months after the cause of action accrues. SC agree with the court below that plaintiff's
cause of action did not accrue until his claim was finally rejected by the insurance company.
This is because, before such final rejection, there was no real necessity for bringing suit. As the
policy provides that the insured should file his claim, first, with the carrier and then with the
insurer, he had a right to wait for his claim to be finally decided before going to court. The law
does not encourages unnecessary litigation.
For the purpose of the present action, we should consider plaintiff's claim to have been finally
rejected by the insurer on April 22, 1948. Having been filed within twelve months from that date,
the action cannot be deemed to have prescribed even on the supposition that the period given
the insured for bringing suit under the prescriptive clause of the policy is twelve months after the
accrual of the cause of action.
In concluding, we may state that contractual limitations contained in insurance policies are
regarded with extreme jealousy by courts and will be strictly construed against the insurer and
should not be permitted to prevent a recovery when their just and honest application would not
produce that result. (46 C. J. S. 273.)
Wherefore, the judgment appealed from is reversed with respect to the carrier and its agents but
affirmed with respect to the insurance company and its agents, with costs against the latter.
Sun Life Office Ltd v CA 195 SCRA 193 - Miguel Sebastian C. Soller
SUN INSURANCE OFFICE LTD. V CA (TAN)
195 SCRA 193
PARAS; March 13, 1991
NATURE
Petition for certiorari to review the decision of the CA
FACTS
- Private respondent Emilio Tan took from the petitioner a Peso 300,000 property insurance
policy to cover his interest in the electrical insurance store of his brother housed in a building in
Iloilo City on August 15, 1983. Four days after the issuance of the policy, the building including
the insured store burned.
- On August 20, 1983, Tan filed his claim for fire loss. Sun Insurance, on February 29, 1984,
wrote the private respondent denying the claim. On April 3, 1984, private respondent wrote
another letter to the insurance company requesting reconsideration of the denial. Tans lawyer
wrote another letter to the insurance company inquiring about the April 3 letter which sought for
a reconsideration of the denial. In its reply to the lawyers letter, Sun Insurance reiterated its
denial of the claim and enclosed therein copies of the two previous denials dated February
29, 1984 and May 17, 1985.
- On November 20, 1985, Tan filed a civil case with the RTC. Petition filed a motion to dismiss
on the alleged ground that the action has already prescribed based on Condition 27 of the
Insurance Policy which stated that the window to file the appropriate action with either the
Insurance Commission or in any court of competent jurisdiction is twelve months from the
rejection of the claim. RTC denied the motion and the subsequent motion for reconsideration.
The CA likewise denied the petition of Sun Insurance.
ISSUE
1. WON the court the filing of a motion for reconsideration interrupts the 12 months prescription
period to contest the denial of the insurance claim
2. WON the rejection of the claim shall be deemed final only if it contains words to the effect that
the denial is final
HELD
1. NO
- The SC held that Condition 27 of the Insurance policy is very clear and free from any doubt or

ambiguity. It has to be taken in its plain, ordinary, and popular sense. The rejection letter of
February 29, 1984 was clear and plain. The Court noted that the one year period is likewise in
accord with Section 23 of the Insurance Code which states that any condition which limits the
time for commencing an action to a period of less than one year when the cause of action
accrues is void. The right of action, according to the SC, accrues at the time that the claim is
rejected at the first instance. A request for reconsideration of the denial cannot suspend the
running of the prescriptive period. The Court noted that the rationale for the one year period is to
ensure that the evidence as to the origin and cause of the destruction have not yet disappeared.
2. NO
- The Court clarified its ruling in Eagle Star Insurance Co. vs Chia Yu where it ruled that the
cause of action in an insurance contract does not accrue until the Insureds claim is finally
rejected by the Insurer by stating the use of the word finally cannot be construed to mean the
rejection of a petition for reconsideration. What the court referred to in effect is the rejection in
the first instance as claimed by Sun Insurance Disposition The decision of the CA is reversed
and set aside. The case is dismissed
Filipino Merchants Insurance Co Inc V CA 179 SCRA 638 - Arjay Uy
Mayer Steel Pipe Corporation V CA 274 SCRA 432 - Chris Val
Malayan Ins Co v. Cruz Arnaldo 154 SCRA 672 - ANONUEVO (2nd rotation)
MALAYAN INSURANCE VERSUS CRUZ ARNALDO
GR No. L-67835
October 12, 1987
FACTS: Malayan Insurance Co. issued a fire insurance policy to Coronacion Pinca. MICO, after
several months of alleged non-payment of the premium, cancelled the policy and sent the
corresponding notice to Pinca. Pinca paid Domingo Adora, agent of MICO,and later on remitted
this payment to the latter, together with other payments. Pincas property were completely
burned.
Pincas payment was returned by Adora on the ground that her policy had been earlier
cancelled. Hence the petition. Malayan Insurance, heavily relied on Section 77 of the Insurance
Code that an insurer is entitled to payment of the premium as soon as the thing is exposed to
peril insured against.
ISSUE: Whether or not there was an existing insurance at the time of the loss sustained by
Pinca
HELD: Payment was in fact made, rendering the policy operative and removing it from the
provisions of Section 77. Therafter, the policy could be cancelled on any of the supervening
grounds enumerated in Section 64 provided that the cancellation was made in accordance
therewith and with Article 65.
A valid cancellation must require the concurrence of the following conditions:
1. There must be prior notice of cancellation to the insured;
2. The notice must be based on the occurrence, after the effective date of the policy of one or
more of the grounds mentioned;
3. The notice must be in writing, mailed or delivered to the named insured at the address
shown in the policy; and
4. It must state which of the grounds in Section 64 is relied upon and that upon written
request of the insured, the insurer will furnish the facts on which the cancellation is based.
All Malayan Insurance Co. offers to show that the cancellation was communicated to the insured
is its employees testimony that the said communication was sent by mail through the mailing
section without more. It stands to reason that if Pinca had really received the notice, she would
not have made payment on the original policy and instead she would have asked for a new
insurance, effective on that date and until one year later and so taken advantage of the
extended period. There is an existing insurance at the time of the loss sustained by Pinca and
Malayan Insurance had not properly/duly cancelled the policy as prescribed by law.