1

G.R. No. L-8151 December 16, 1955

VIRGINIA CALANOC vs. COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE
INSURANCE CO.
PONENTE: BAUTISTA ANGELO, J .:
FACTS: Melencio Basilio was a watchman of the Manila Auto Supply and secured a life insurance
policy from the Philippine American Life Insurance Company in the amount of P2,000 to which was
attached a supplementary contract covering death by accident. Basilio died of a gunshot wound on the
occasion of a robbery committed in the house of Atty. Ojeda. His widow, was paid the face value of the
policy but when she demanded the payment of the additional sum representing the value of the
supplemental policy, the company refused alleging, that the deceased died because he was murdered
and while making an arrest which contingencies were expressly excluded in the contract and have the
effect of exempting the company from liability. The Municipal Court of Manila ruled in favor or
Calanoc but the Court of Appeals commented that the death of Basilio cannot be considered accidental,
as when he checked what the trouble was in Ojedas residence, he should have realized the danger to
which he was exposing himself.
ISSUE: WON the death of Basilio comes within the purview of the exception clause of the
supplementary policy and, hence, exempts the company from liability.
RULING: NO. The risk coming to Basilio when he chose to go with Atty. Ojeda to check the latters
house always existed it being inherent in the position he was holding. It should not be taken as a
capricious desire on his part to expose his life to danger considering the fact that the place he was in
duty-bound to guard was only a block away. These circumstances do not warrant the finding that the
death of the unfortunate victim comes within the purview of the exception clause, hence, do not exempt
the company from liability. The terms and phraseology of the exception clause be clearly expressed so
as to be within the easy grasp and understanding of the insured. If the terms are doubtful or obscure the
same must of necessity be interpreted or resolved aganst the one who has caused the obscurity. In case
of ambiguity, the contract is to be construed strictly against the insurer, and liberally in favor of the
insured so as to effect indemnity to the insured.
2

G.R. No. L-25579 March 29, 1972
EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T. BIAGTAN, GIL T. BIAGTAN
and GRACIA T. BIAGTAN vs THE INSULAR LIFE ASSURANCE COMPANY, LTD.
PONENTE: MAKALINTAL, J .:p
FACTS: Juan S. Biagtan was insured with InsularLife Assurance Company for the sum of P5,000.00
and, under a supplementary contract denominated "Accidental Death Benefit Clause, for an additional
sum of P5,000.00 if "the death of the Insured resulted directly from bodily injury effected solely
through external and violent means sustained in an accident ... and independently of all other causes."
The clause, however,expressly provided that it would not apply where death resulted from an
injury"intentionally inflicted by another party." During the first hours of the following day, the house
of Biagtan was robbed by a band of robbers. In committing the robbery, the robbers also killed Biagtan
by means of thrusts with sharp-pointed instruments wielded by the robbers. Plaintiffs, as beneficiaries
of the insured, filed a claim under the policy. The insurance company paid the basic amount of
P5,000.00 but refused to pay the additional sum of P5,000.00 under the accidental death benefit clause,
on the ground that the insured's death resulted from injuries intentionally inflicted by third parties and
therefore was not covered. Plaintiffs filed suit to recover, and after due hearing the court a
quo rendered judgment in their favor. Hence the present appeal by the insurer.
ISSUE: Whether under the facts are stipulated and found by the trial court the wounds received by the
insured at the hands of the robbers were inflicted intentionally.
RULING: YES. The exception in the accidental benefit clause invoked by the appellant does not speak
of the purpose of a third party in causing the injuries, but only of the fact that such injuries have been
"intentionally" inflicted. This construction is the basic idea expressed in the coverage of the clause
itself, namely, that "the death of the insured resulted directly from bodily injury effected solely through
external and violent means sustained in an accident ... and independently of all other causes." Whether
the robbers had the intent to kill or merely to scare the victim or to ward off any defense he might offer,
it cannot be denied that the act itself of inflicting the injuries was intentional. Where a gang of robbers
enter a house and coming face to face with the owner, even if unexpectedly, stab him repeatedly, it is
contrary to all reason and logic to say that his injuries are not intentionally inflicted, regardless of
whether they prove fatal or not.

3

G.R. No. 100970 September 2, 1992
FINMAN GENERAL ASSURANCE CORPORATION vs.
THE HONORABLE COURT OF APPEALS and JULIA SURPOSA
PONENTE:NOCON, J .:
FACTS: Carlie Surposa was insured with petitioner Finman General Assurance Corporation under
Finman General Teachers Protection Plan Master Policy with his parents, spouses Julia and Carlos
Surposa, and brothers Christopher, Charles, Chester and Clifton, all surnamed, Surposa, as
beneficiaries. While said insurance policy was in full force and effect, the insured, Carlie Surposa, died
as a result of a stab wound inflicted by one of the three (3) unidentified men without provocation and
warning on the part of the former as he and his cousin, Winston Surposa, were waiting for a ride on
their way home. 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. The Insurance
Commission ordered Finman General Assurance Corporation to pay Julia Surposa the proceeds of the
personal accident Insurance policy with interest.The Court of Appeals affirmed the Commissions
decision.
ISSUE: WON Surposas death was committed with deliberate intent which, by the very nature of a
personal accident insurance policy, cannot be indemnified.
RULING: NO. The terms "accident" and "accidental" as used in insurance contracts have been taken
to mean that which happen by chance or fortuitously, without intention and design, and which is
unexpected, unusual, and unforeseen. An accident is an event that takes place without one's foresight or
expectation an event that proceeds from an unknown cause, or is an unusual effect of a known cause
and, therefore, not expected. 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. The insured died from an event that took place without his foresight or expectation, an event
that proceeded from an unusual effect of a known cause and, therefore, not expected. Neither can it be
said that where 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. Furthermore, the personal accident
insurance policy involved herein specifically enumerated only ten (10) circumstances wherein no
liability attaches to petitioner insurance company for any injury, disability or loss suffered by the
insured as a result of any of the stimulated causes. In applying the principle of " expresso unius
exclusio alterius, the failure of the petitioner insurance company to include death resulting from
murder or assault among the prohibited risks leads inevitably to the conclusion that it did not intend to
limit or exempt itself from liability for such death. Also, contracts of insurance are to be construed
liberally in favor of the insured and strictly against the insurer. Thus ambiguity in the words of an
insurance contract should be interpreted in favor of its beneficiary.

4

G.R. No. 85296 May 14, 1990
ZENITH INSURANCE CORPORATION vs.
COURT OF APPEALS and LAWRENCE FERNANDEZ.
PONENTE: MEDIALDEA, J .:
FACTS: Lawrence Fernandez insured his car for "own damage" under private car Policy with
petitioner Zenith Insurance Corporation. the car figured in an accident. After allegedly being given a
run around by Zenith for two (2) months, Fernandez filed a complaint with the Regional Trial Court of
Cebu for sum of money and damages resulting from the refusal of Zenith to pay the amount claimed.
Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the terms and
conditions of the contract which, the private respondent rejected. Petitioner filed a petition
for certiorari with the Court of Appeals assailing the order of the trial court submitting the case for
decision without petitioner's evidence. The trial court issued an order on August 23, 1984 submitting
the case for decision without Zenith's evidence. the petition was denied due course. a decision was
rendered by the trial court in favor of private respondent Fernandez ordering to pay the plaintiff
P3,640.00 representing the damage incurred plus interest at the rate of twice the prevailing interest
rates plus damages. Petitioner filed a notice of appeal before the trial court. Petitioner contended that
lower court erred in awarding moral damages, attorneys fees and exemplary damages, and that the
court awarded damages, without factual or legal basis, more than what are prayed for in the complaint.
ISSUE: WON the award of moral damages, exemplary damages and attorney's fees is proper
RULING: It is clear that under the Insurance Code, in case of unreasonable delay in the payment of
the proceeds of an insurance policy, the damages that may be awarded are: 1) attorney's fees; 2) other
expenses incurred by the insured person by reason of such unreasonable denial or withholding of
payment; 3) interest at twice the ceiling prescribed by the Monetary Board of the amount of the claim
due the injured; and 4) the amount of the claim. As regards the award of moral and exemplary
damages, while it is true that no proof of pecuniary loss is necessary in order that moral damages may
be adjudicated, the assessment of which is left to the discretion of the court according to the
circumstances of each case. Also, in awarding moral damages in case of breach of contract, there must
be a showing that the breach was wanton and deliberately injurious or the one responsible acted
fraudently or in bad faith. In the instant case, there was a finding that private respondent was given a
"run-around" for two months, which is the basis for the award of the damages granted under the
Insurance Code for unreasonable delay in the payment of the claim. However, the act of petitioner of
delaying payment for two months cannot be considered as so wanton or malevolent to justify an award
of P20,000.00 as moral damages, taking into consideration also the fact that the actual damage on the
car was only P3,460. There was no total disclaimer by respondent. The reason for petitioner's failure to
indemnify private respondent within the two-month period was that the parties could not come to an
agreement as regards the amount of the actual damage on the car. The amount of P10,000.00 prayed for
by private respondent as moral damages is equitable. On the other hand, exemplary or corrective
damages are imposed by way of example or correction for the public good. The amount of P5,000.00
awarded as attomey's fees is justified under the circumstances of this case considering that there were
other petitions filed and defended by private respondent in connection with this case. As regards the
actual damages incurred by private respondent, it should be reduced to P10,000.00 and the award of
exemplary damages is hereby deleted.
5

G.R. No. 92383 July 17, 1992
SUN INSURANCE OFFICE, LTD. vs.
THE HON. COURT OF APPEALS and NERISSA LIM
PONENTE: CRUZ, J .:
FACTS: The petitioner issued Personal Accident Policy to Felix Lim, Jr. Two months later, he was
dead with a bullet wound in his head. As beneficiary, his wife Nerissa Lim sought payment on the
policy but her claim was rejected. The petitioner agreed that there was no suicide. It argued, however
that there was no accident either. According to Lim's secretary, the only eyewitness to his death, Lim
was in a happy mood (but not drunk) and was playing with his handgun, from which he had previously
removed the magazine. As she watched television, he stood in front of her and pointed the gun at her.
She pushed it aside and said it might he loaded. He assured her it was not and then pointed it to his
temple. The next moment there was an explosion and Lim slumped to the floor. He was dead before he
fell. The widow sued the petitioner and the latter was sentenced to pay her the face value of the policy,
with interest at the legal rate plus damages. The decision was affirmed on appeal, and the motion for
reconsideration was denied. The petitioner then came to the Supreme Court to fault the Court of
Appeals for approving the payment of the claim and the award of damages. . The petitioner says that
"there is no accident when a deliberate act is performed unless some additional, unexpected,
independent and unforeseen happening occurs which produces or brings about their injury or death."
The petitioner also stated that bodily injury xxx xxx xxx consequent upon the insured person
attempting to commit suicide or willfully exposing himself to needless peril except in an attempt to
save human life is one of the four exceptions provided for in the insurance contract and contends that
the private petitioner's claim is barred by such provision.
ISSUE: WON Lim would be considered as "willfully exposing himself to needless peril" within the
meaning of the exception in question.
RULING:. An accident is an event which happens without any human agency or, if happening through
human agency, an event which, under the circumstances, is unusual to and not expected by the person
to whom it happens. It has also been defined as an injury which happens by reason of some violence or
casualty to the injured without his design, consent, or voluntary co-operation. In light of these
definitions, the Court is convinced that the incident that resulted in Lim's death was indeed an accident.
As the secretary testified, Lim had removed the magazine from the gun and believed it was no longer
dangerous. He expressly assured her that the gun was not loaded. It is submitted that Lim did not
willfully expose himself to needless peril when he pointed the gun to his temple because the fact is that
he thought it was not unsafe to do so. The act was precisely intended to assure Nalagon that the gun
was indeed harmless.Lim was unquestionably negligent and that negligence cost him his own life. But
it should not prevent his widow from recovering from the insurance policy he obtained precisely
against accident. There is nothing in the policy that relieves the insurer of the responsibility to pay the
indemnity agreed upon if the insured is shown to have contributed to his own accident. Indeed, most
accidents are caused by negligence. There are only four exceptions expressly made in the contract to
relieve the insurer from liability, and none of these exceptions is applicable in the case at bar.

6

G.R. No. L-54171 October 28, 1980
JEWEL VILLACORTA, assisted by her husband, GUERRERO VILLACORTA vs.
THE INSURANCE COMMISSION and EMPIRE INSURANCE COMPANY
PONENTE: TEEHANKEE, Acting C.J .:
FACTS: Complainant [petitioner] was the owner of a Colt Lancer, Model 1976, insured with
respondent company Own Damage, Theft; and Third Party Liability. The vehicle was brought to the
Sunday Machine Works, Inc., for general check-up and repairs. While it was in the custody of the
Sunday Machine Works, the car was allegedly taken by six (6) persons and driven out to Montalban,
Rizal. While travelling at Montalban, Rizal, the car figured in an accident, hitting and bumping a gravel
and sand truck parked at the right side of the road going south. As a consequence, the gravel and sand
truck veered to the right side of the pavement going south and the car veered to the right side of the
pavement going north. The driver and one of the passengers died and the other four sustained physical
injuries. The car suffered extensive damage. Complainant filed a claim for total loss with the
respondent company but claim was denied. Hence, complainant, was compelled to institute the present
action. The comprehensive motor car insurance policy for P35,000.00 issued by respondent Empire
Insurance Company admittedly undertook to indemnify the petitioner-insured against loss or damage to
the car (a) by accidental collision or overturning, or collision or overturning consequent upon
mechanical breakdown or consequent upon wear and tear; (b) by fire, external explosion, self-ignition
or lightning or burglary, housebreaking or theft; and (c) by malicious act. Respondent insurance
commission sustained respondent insurer's contention that the accident did not fall within the
provisions of the policy either for the Own Damage or Theft coverage, invoking the policy provision
on "Authorized Driver" clause and that the car was not stolen and therefore not covered by the Theft
clause as withholding of the same, for a joy ride should not be construed to mean 'taking' under Art.
308 of the Revised Penal Code.
ISSUE: WON the insurer must indemnify the petitioner-owner for the total loss of the insured car
under the theft clause of the policy.
RULING: YES. Respondent commission's ruling that the person who drove the vehicle in the person
of Benito Mabasa, who, according to its finding, was one of the residents of the Sunday Machine
Works, Inc. to whom the car had been entrusted for general check-up and repairs was not an
"authorized driver" of petitioner-complainant is too restrictive and contrary to the established principle
that insurance contracts, being contracts of adhesion where the only participation of the other party is
the signing of his signature or his "adhesion" thereto, "obviously call for greater strictness and
vigilance on the part of courts of justice with a view of protecting the weaker party from abuse and
imposition, and prevent their becoming traps for the unwary.
Where the insured's car is wrongfully taken without the insured's consent from the car service and
repair shop to whom it had been entrusted for check-up and repairs (assuming that such taking was for
a joy ride, in the course of which it was totally smashed in an accident), respondent insurer is liable and
must pay insured for the total loss of the insured vehicle under the theft clause of the policy. when a car
is unlawfully taken, it is the theft clause, not the "authorized driver" clause, that applies), where a car is
admittedly as in this case unlawfully and wrongfully taken by some people, be they employees of the
car shop or not to whom it had been entrusted, and taken on a long trip to Montalban without the
7

owner's consent or knowledge, such taking constitutes or partakes of the nature of theft as defined in
Article 308 of the Revised Penal Code.

8

G.R. No. L-36480 May 31, 1988
ANDREW PALERMO vs.
PYRAMID INSURANCE CO., INC.
PONENTE: GRIO-AQUINO, J :
FACTS: The insured, appellee Andrew Palermo, insured his car with the defendant insurance company
against any loss or damage and against third party liability. Plaintiff paid the premium for one year.
While driving the automobile in question, the plaintiff met a violent accident and, as a consequence, the
plaintiff sustained physical injuries, his father, Cesar Palermo, was likewise seriously injured and died
shortly thereafter, and the car in question was totally wrecked. Plaintiff filed a complaint in the Court
of First Instance of Negros Occidental against Pyramid Insurance Co., Inc., for payment of his claim
under the Private Car Comprehensive Policy issued by the defendant. Pyramid Insurance Co., Inc.,
alleged that it disallowed the claim because at the time of the accident, the insured was driving his car
with an expired driver's license.The court a quo rendered judgment ordering the defendant "to pay the
plaintiff the sum of P20,000.00, value of the insurance of the motor vehicle in question and to pay the
costs. Plaintiff filed a "Motion for Immediate Execution Pending Appeal." It was opposed by the
defendant, but was granted by the trial court
ISSUE: WON the plaintiff was an authorized driver despite his expired drivers license which
entitles him to recover under the insurance policy.
RULING: There is no merit in the appellant's allegation that the plaintiff was not authorized to drive
the insured motor vehicle because his driver's license had expired. The driver of the insured motor
vehicle at the time of the accident was, the insured himself, hence an "authorized driver" under the
policy. While the Motor Vehicle Law prohibits a person from operating a motor vehicle on the
highway without a license or with an expired license, an infraction of the Motor Vehicle Law on the
part of the insured, is not a bar to recovery under the insurance contract. It however renders him subject
to the penal sanctions of the Motor Vehicle Law. The requirement that the driver be "permitted in
accordance with the licensing or other laws or regulations to drive the Motor Vehicle and is not
disqualified from driving such motor vehicle by order of a Court of Law or by reason of any enactment
or regulation in that behalf," applies only when the driver" is driving on the insured's order or with his
permission." It does not apply when the person driving is the insured himself.

9

G.R. No. 60506 August 6, 1992
FIGURACION VDA. DE MAGLANA, EDITHA M. CRUZ, ERLINDA M. MASESAR,
LEONILA M. MALLARI, GILDA ANTONIO and the minors LEAH, LOPE, JR., and ELVIRA,
all surnamed MAGLANA, herein represented by their mother, FIGURACION VDA. DE
MAGLANA vs.
HONORABLE FRANCISCO Z. CONSOLACION, Presiding Judge of Davao City, Branch II,
and AFISCO INSURANCE CORPORATION
PONENTE: ROMERO, J .:
FACTS: Lope Maglana was on his way to his work station, driving a motorcycle owned by the Bureau
of Customs when he met an accident that resulted in his death. The PUJ jeep, driven by Pepito Into,
operated and owned by defendant Destrajo, was overtaking another passenger jeep when it bumped the
motorcycle driven by the deceased. Lope Maglanas heirs filed an action for damages against operator
Patricio Destrajo and the Afisco Insurance Corporation. The lower court held that Destrajo had not
exercised sufficient diligence as the operator of the jeepney. The defendant insurance company is also
ordered to reimburse defendant Destrajo whatever amounts the latter shall have paid only up to the
extent of its insurance coverage. Petitioners contend that AFISCO's liability is "direct and primary
and/or jointly and severally with the operator of the vehicle, although only up to the extent of the
insurance coverage and that the coverage of the insurance policy issued by AFISCO, should have
been awarded in their favor. AFISCO argued that since the Insurance Code does not expressly provide
for a solidary obligation, the presumption is that the obligation is joint.
ISSUE: WON insurance company is directly and solidarily liable with the negligent operator up to the
extent of its insurance coverage.
RULING: The insurance policy provides that the Company will, subject to the Limits of Liability, pay
all sums necessary to discharge liability of the insured in respect of (a) death of or bodily injury to any
third party and that in the event of the death of any person entitled to indemnity under this Policy, the
Company will, in respect of the liability incurred to such person indemnify his personal representatives
in terms of, and subject to the terms and conditions hereof. This leads to no other conclusion but that
AFISCO can be held directly liable by petitioners. However, AFISCO cannot be solidarily liable with
Destrajo. While in solidary obligations, the creditor may enforce the entire obligation against one of the
solidary debtors, in an insurance contract, the insurer undertakes for a consideration to indemnify the
insured against loss, damage or liability arising from an unknown or contingent event. Thus, petitioner
therein, which, under the insurance contract is liable only up to P20,000.00, can not be made solidarily
liable with the insured for the entire obligation of P29,013.00 otherwise there would result "an evident
breach of the concept of solidary obligation. As such, petitioners have the option either to claim the
P15,000 from AFISCO and the balance from Destrajo or enforce the entire judgment from Destrajo
subject to reimbursement from AFISCO to the extent of the insurance coverage.
10

G.R. No. 78860 May 28, 1990
PERLA COMPANIA DE SEGUROS, INC. vs.
HONORABLE COURT OF APPEALS and MILAGROS CAYAS
PONENTE: FERNAN, C.J .:
FACTS: Milagros Cayas was the registered owner of a Mazda bus insured with Perla Compania de
Seguros, Inc. (PCSI). The bus figured in an accident in Naic, Cavite injuring several of its passengers.
One of them, Edgardo Perea, sued Milagros Cayas for damages while three others agreed to a
settlement. As Cayas was declare in default, the court rendered a decision in favor of Perea. When the
decision was about to be executed against her, Milagros Cayas filed a complaint against PCSI \ seeking
reimbursement of said amounts from the defendant, which notwithstanding the fact that her claim was
within its contractual liability under the insurance policy, refused to make such re-imbursement, and
praying that PCSI be ordered to pay for all the claims against her arising from the vehicular accident
plus legal and other expenses. Realizing her procedural mistake, she later withdrew said
complaint. Milagros Cayas filed a complaint against PCSI. The court dismissed the case. Milagros
Cayas moved for the reconsideration of the dismissal order, which was acted upon favorably by the
court. Milagros Cayas filed a motion to declare PCSI in default for its failure to file an answer. The
court rendered judgment ordering PCSI to pay Milagros Cayas compensation for the injured
passengers, moral damages and attorney's fees. Said decision was set aside after the PCSI filed a
motion therefor. In due course, the court promulgated a decision finding that theres proof that she was
compelled to engage the services of counsel to protect her rights under the insurance policy and
allowed attorney's fees. PCSI appealed to the Court of Appeals, which affirmed in toto the lower court's
decision. Its motion for reconsideration having been denied by said appellate court, PCSI filed the
instant petition charging the Court of Appeals with having erred in affirming in toto the decision of the
lower court.
ISSUE: Whether petitioner can limit its liability to the payment made by private respondent to Perea
and only up to the amount of P12,000.00
RULING:. The insurance policy involved explicitly limits petitioner's liability to P12,000.00 per
person and to P50,000.00 per accident. In this case, the insurance policy clearly and categorically
placed petitioner's liability for all damages arising out of death or bodily injury sustained by one person
as a result of any one accident at P12,000.00. Said amount complied with the minimum fixed by the
law then prevailing, Section 377 of Presidential Decree No. 612, which provided that the liability of
land transportation vehicle operators for bodily injuries sustained by a passenger arising out of the use
of their vehicles shall not be less than P12,000. In other words, under the law, the minimum liability is
P12,000 per passenger. Petitioner's liability under the insurance contract not being less than
P12,000.00, and therefore not contrary to law, morals, good customs, public order or public policy, said
stipulation must be upheld as effective, valid and binding as between the parties. Also, the condition
requiring Cayas to secure the written permission of petitioner before effecting any payment in
settlement of any claim against her as valid and binding upon private respondent. There is nothing
unreasonable, arbitrary or objectionable in this stipulation as would warrant its nullification. The same
was obviously designed to safeguard the insurer's interest against collusion between the insured and the
claimants. It being specifically required that petitioner's written consent be first secured before any
payment in settlement of any claim could be made, private respondent is precluded from seeking
11

reimbursement of the payments made to del Carmen, Magsarili and Antolin in view of her failure to
comply with the condition contained in the insurance policy.

12

G.R. No. 114427 February 6, 1995
ARMANDO GEAGONIA vs.
COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION
PONENTE: DAVIDE, JR., J .:
FACTS: Petitioner obtained from the private respondent fire insurance policy covering Stock-in-trade
consisting principally of dry goods such as RTW's for men and women wear and other usual to
assured's business. The petitioner declared in the policy under the subheading entitled CO-
INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer. The policy contained a condition
that the insured shall give notice to the Company of any insurance or insurances already affected, or
which may subsequently be effected, covering any of the property or properties consisting of stocks in
trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the
particulars of such insurance or insurances be stated therein, all benefits shall be deemed forfeited. A
fire of accidental origin broke out at the public market and the petitioner's insured stock-in-trade were
completely destroyed prompting him to file with the private respondent a claim under the policy.
Private respondent denied the claim because it found that at the time of the loss the petitioner's stocks-
in-trade were likewise covered by two other fire insurance policies issued by the Cebu Branch of the
Philippines First Insurance Co., Inc. (PFIC) with a loss payable clause. The basis of the private
respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. The petitioner
asserted that the total of the amounts claimed under the three policies was below the actual value of his
stocks at the time of loss, which was P1,000,000.00.
ISSUE: Whether petitioner is precluded from recovering from the fire insurance policy from the
private respondent for violating the condition of the policy.
RULING: No. Condition 3 of the subject policy is not totally free from ambiguity. The prohibition
applies only to double insurance, and the nullity of the policy shall only be to the extent exceeding
P200,000.00 of the total policies obtained. Since the two policies of the PFIC do not cover the same
interest as that covered by the policy of the private respondent, no double insurance exists. The non-
disclosure then of the former policies was not fatal to the petitioner's right to recover on the private
respondent's policy. Condition 3 of the private respondent's Policy is a condition which is not
proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code which
provides that "[a] policy may declare that a violation of specified provisions thereof shall avoid it,
otherwise the breach of an immaterial provision does not avoid the policy." Also, in order to constitute
a violation, the other insurance must be upon same subject matter, the same interest therein, and the
same risk.In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as
his interest may appear, the mortgagee is only a beneficiary under the contract, and recognized as such
by the insurer but not made a party to the contract himself. It is a cardinal rule on insurance that a
policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the
company, the reason being, undoubtedly, to afford the greatest protection which the insured was
endeavoring to secure when he applied for insurance. Provisions,conditions or exceptions in policies
which tend to work a forfeiture of insurance policies should be construed most strictly against those for
whose benefits they are inserted, and most favorably toward those against whom they are intended to
operate.

13

G.R. No. 115278 May 23, 1995
FORTUNE INSURANCE AND SURETY CO., INC. vs.
COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES
DAVIDE, JR., J .:
FACTS: The plaintiff was insured by the defendants and an insurance policy was issued. An armored
car of the plaintiff, while in the process of transferring cash under the custody of its teller, Maribeth
Alampay was robbed while the it was traveling along Taft Avenue in Pasay City. After an investigation
conducted by the Pasay police authorities, the driver Magalong and guard Atiga were charged, together
with Edelmer Bantigue, Reynaldo Aquino and John Doe, with violation of P.D. 532 (Anti-Highway
Robbery Law). Demands were made by the insured upon the plaintiff to pay the amount of the loss of
P725,000.00, but the latter refused to pay as the loss is excluded from the coverage of the insurance
policy, since under the general exceptions clause, the insurance company shall not be liable for any loss
caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner,
director, trustee or authorized representative of the Insured whether acting alone or in conjunction with
others. The plaintiff opposes the contention of the defendant and contends that Atiga and Magalong are
not its "officer, employee, . . . trustee or authorized representative . . . at the time of the robbery.
ISSUE: Whether recovery thereunder is precluded under the general exceptions clause thereof.

RULING: The insurance policy entered into by the parties is a theft or robbery insurance policy which
is a form of casualty insurance. Insofar as Fortune is concerned, it was its intention to exclude and
exempt from protection and coverage losses arising from dishonest, fraudulent, or criminal acts of
persons granted or having unrestricted access to Producers' money or payroll. Magalong and Atiga
were, in respect of the transfer of Producer's money from its Pasay City branch to its head office in
Makati, its "authorized representatives" who served as such with its teller Maribeth Alampay.
Producers entrusted the three with the specific duty to safely transfer the money to its head office. For
these particular tasks, the three acted as agents of Producers. A "representative" is defined as one who
represents or stands in the place of another; one who represents others or another in a special capacity,
as an agent, and is interchangeable with "agent." Fortune is exempt from liability under the general
exceptions clause of the insurance policy.When it used the term "employee," it must have had in mind
any person who qualifies as such as generally and universally understood, or jurisprudentially
established in the light of the four standards in the determination of the employer-employee
relationship, or as statutorily declared even in a limited sense.

14

G.R. No. L-34200 September 30, 1982
REGINA L. EDILLON, as assisted by her husband, MARCIAL EDILLON vs.
MANILA BANKERS LIFE INSURANCE CORPORATION and the COURT OF FIRST
INSTANCE OF RIZAL, BRANCH V, QUEZON CITY
VASQUEZ, J .:
FACTS: Carmen O, Lapuz applied with respondent insurance corporation for insurance coverage
against accident and injuries. She filled up the blank application form given to her and filed the same
with the respondent insurance corporation. In the said application form, she gave the date of her birth
and paid the sum representing the premium for which she was issued the corresponding receipt signed
by an authorized agent of the respondent insurance corporation. The respondent insurance corporation
issued to Lapuz its Certificate of Insurance. The policy was to be effective for a period of 90 days.
During the effectivity of the insurance, Lapuz died in a vehicular accident. Regina L. Edillon, sister of
the insured and the named beneficiary in the policy, filed her claim for the proceeds of the insurance,
submitting all the necessary papers and other requisites with the private respondent. Her claim having
been denied, Edillon instituted this action in the Court of First Instance of Rizal. The respondent
insurance corporation relies on a provision contained in the Certificate of Insurance, excluding its
liability to pay claims under the policy in behalf of "persons who are under the age of sixteen (16) years
of age or over the age of sixty (60) years ..." It is pointed out that the insured being over sixty (60)
years of age when she applied for the insurance coverage, the policy was null and void, and no risk on
the part of the respondent insurance corporation had arisen therefrom.
ISSUE: Whether the acceptance by the private respondent insurance corporation of the premium and
the issuance of the corresponding certificate of insurance should be deemed a waiver of the
exclusionary condition of overage stated in the said certificate of insurance.
RULING: Yes. The age of the insured Carmen 0. Lapuz was not concealed. Her application for
insurance coverage which was on a printed form furnished by private respondent and which contained
very few items of information clearly indicated her age of the time of filing the same to be almost 65
years of age. 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 accident which resulted in the death of the insured, a risk covered by
the policy, occurred 45 days after the insurance coverage was applied for. There was sufficient time for
the private respondent to process the application and to notice that the applicant was over 60 years of
age and thereby cancel the policy on that ground if it was minded to do so. If the private respondent
failed to act, it is either because it was willing to waive such disqualification; or, through the
negligence or incompetence of its employees for which it has only itself to blame, it simply overlooked
such fact. Under the circumstances, the insurance corporation is already deemed in estoppel. It inaction
to revoke the policy despite a departure from the exclusionary condition contained in the said policy
constituted a waiver of such condition

15

G.R. No. 96452 May 7, 1992
PERLA COMPANIA DE SEGUROS, INC. vs.
THE COURT OF APPEALS, HERMINIO LIM and EVELYN LIM
PONENTE: NOCON, J .:
FACTS: Spouses Herminio and Evelyn Lim executed a promissory note in favor Supercars, Inc.
payable in monthly installments and secured by a chattel mortgage which is registered under the name
of Herminio Lim and insured with the petitioner Perla Compania de Seguros, Inc. (Perlay) for
comprehensive coverage. Supercars, Inc., with notice to respondents, assigned to petitioner FCP Credit
Corporation (FCP) its rights, title and interest on said promissory note and chattel mortgage as shown
by the Deed of Assignment. Said vehicle was carnapped. Private respondent filed a claim for loss with
the petitioner Perla but said claim was denied on the ground that Evelyn Lim, who was using the
vehicle before it was carnapped, was in possession of an expired driver's license at the time of the loss
of said vehicle which is in violation of the authorized driver clause of the insurance policy. Private
respondents requested from FCP for a suspension of payment on the monthly amortization agreed upon
due to the loss of the vehicle and, since the carnapped vehicle insured with petitioner Perla, said
insurance company should be made to pay the remaining balance of the promissory note and the chattel
mortgage contract. Perla denied private respondents' claim. FCP demanded that private respondents
pay the whole balance of the promissory note or to return the vehicle but the latter refused. FCP filed a
complaint against private respondents, who in turn filed an amended third party complaint against
petitioner Perla.

ISSUE: Whether or not the private respondents violated the insurance contract because the authorized
driver clause is not applicable to the "Theft" clause of said Contract.

RULING: The comprehensive motor car insurance policy issued by petitioner Perla undertook to
indemnify the private respondents against loss or damage to the car (a) by accidental collision or
overturning, or collision or overturning consequent upon mechanical breakdown or consequent upon
wear and tear; (b) by fire, external explosion, self-ignition or lightning or burglary, housebreaking
or theft; and (c) by malicious act. Where a car is admittedly, as in this case, unlawfully and wrongfully
taken without the owner's consent or knowledge, such taking constitutes theft, and, therefore, it is the
"THEFT"' clause, and not the "AUTHORIZED DRIVER" clause that should apply. The loss of the
insured vehicle was caused by theft, the commission of which was attended by intent. It is worthy to
note that there is no causal connection between the possession of a valid driver's license and the loss of
a vehicle. To rule otherwise would render car insurance practically a sham since an insurance company
can easily escape liability by citing restrictions which are not applicable or germane to the claim,
thereby reducing indemnity to a shadow. The Court of Appeals did not err in requiring petitioner Perla
to indemnify private respondents for the loss of their insured vehicle.

16

G.R. No. L-39419 April 12, 1982
MAPALAD AISPORNA vs.
THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES
PONENTE: DE CASTRO, J .:
FACTS: Rodolfo S. Aisporna was duly licensed by Insurance Commission as agent to Perla Compania
de Seguros. Personal Accident Policy was issued by Perla thru its author representative, Rodolfo S.
Aisporna with beneficiary as Ana M. Isidro. Insured died by violence during lifetime of policy. An
information was filed by Fiscal charging wife of Rodolfo with violation of Sec. 189 of Insurance Law
for having, wilfully, unlawfully, and feloniously acted, "as agent in the solicitation for insurance by
soliciting therefore the application of one Eugenio S. Isidro for and in behalf of Perla Compaa de
Seguros, ... without said accused having first secured a certificate of authority to act as such agent from
the office of the Insurance Commission, Republic of the Philippines." Mapalad Aisporna contended
that she naturally helped her husband in his work, as clerk, and that policy was merely a renewal and
was issued because Isidro had called by telephone to renew, and at that time, her husband, Rodolfo,
was absent and so she left a note on top of her husband's desk to renew. The trial court found petitioner
guilty as charged. The trial court's decision was affirmed by the respondent appellate court finding the
petitioner guilty of a violation of the first paragraph of Section 189 of the Insurance Act.
ISSUE: Whether or not the agent mentioned in the first paragraph of of Section 189 of the Insurance
Act is governed by the definition of an insurance agent found on its second paragraph.
RULING: First paragraph of the Section 189 of the Insurance Act prohibits a person from acting as
agent, sub-agent or broker in the solicitation or procurement of applications for insurance without first
procuring a certificate of authority so to act from the Insurance Commissioner, while its second
paragraph defines who is an insurance agent within the intent of this section and, finally, the third
paragraph thereof prescribes the penalty to be imposed for its violation. It is explicitly provided that the
definition of an insurance agent is any person who for compensation ... shall be an insurance agent
within the intent of the section. To receive a compensation by the agent is an essential element for a
violation of the first paragraph of the aforesaid section. Petitioner-accused did not receive any
compensation for the issuance of the insurance policy of Eugenio Isidro. The information in this case
does not allege that the negotiation of an insurance contracts by the accused with Eugenio Isidro was
one for compensation. This allegation is essential, and having been omitted, a conviction of the accused
could not be sustained. To warrant conviction, every element of the crime must be alleged and proved.
After going over the records of this case, the court is convinced that accused did not violate Section
189 of the Insurance Act.

17

[G.R. No. 136914. January 25, 2002]
COUNTRY BANKERS INSURANCE CORPORATION vs.
LIANGA BAY AND COMMUNITY MULTI-PURPOSE COOPERATIVE, INC
PONENTE: DE LEON, JR., J .:
FACTS: The petitioner is a corporation principally engaged in the insurance business wherein it
undertakes, for a consideration, to indemnify another against loss, damage or liability from an unknown
or contingent event including fire. Respondent is a duly registered cooperative judicially declared
insolvent. The petitioner and the respondent entered into a contract of fire insurance. Under a fire
insurance policy, the petitioner insured the respondents stocks-in-trade against fire loss, damage or
liability. Respondents was gutted by fire and reduced to ashes, resulting in the total loss of the
respondents stocks-in-trade, pieces of furnitures and fixtures, equipments and records. The respondent
filed an insurance claim with the petitioner under its insurance policy. The petitioner denied the
insurance claim on the ground that the building was set on fire by two (2) NPA rebels who wanted to
obtain canned goods, rice and medicines as provisions for their comrades in the forest, and that such
loss was an excepted risk under paragraph No. 6 of the policy conditions of Fire Insurance Policy No.
which provides:This insurance does not cover any loss or damage occasioned by or through or in
consequence, directly or indirectly, of any of the following occurrences, namely: xxx (d) Mutiny, riot,
military or popular uprising, insurrection, rebellion, revolution, military or usurped power. The
respondent instituted a complaint for recovery of loss, damage or liability against petitioner. The
petitioner answered the complaint and reiterated the ground that the loss was due to NPA rebels, an
excepted risk under the fire insurance policy.
ISSUE: Whether or not the respondent can recover by virtue of the fire insurance policy from
petitioner

RULING: Yes. Each party must prove his own affirmative allegations by the amount of evidence
required by law which in civil cases, as in this case, is preponderance of evidence, to obtain a favorable
judgment. Since the petitioner in this case is defending on the ground of non-coverage and relying upon
an exemption or exception clause in the fire insurance policy, it has the burden of proving the facts
upon which such excepted risk is based, by a preponderance of evidence. But petitioner failed to do so.
The statements that hes basing his contention on are considered hearsay and cannot be admissible as
evidence.The petitioners evidence to prove its defense is sadly wanting and thus, gives rise to its
liability to the respondent under Fire Insurance Policy. Nonetheless, the Court does not sustain the trial
courts imposition of twelve percent (12%) interest on the insurance claim as well as the monetary
award for actual and exemplary damages, litigation expenses and attorneys fees for lack of legal and
valid basis. Considering the foregoing, the insurance claim in this case is evidently not a forbearance of
money, goods or credit, and thus the interest rate should be as it is hereby fixed at six percent (6%)
computed from the date of filing of the complaint. Also, the court finds no justification for the award of
actual damages and exemplary damages.

18

[G.R. No. 138941. October 8, 2001]
AMERICAN HOME ASSURANCE COMPANY vs. TANTUCO ENTERPRISES, INC.
PONENTE: PUNO, J .:
FACTS: Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining
industry. Respondent commenced its business operations with only one oil mill. In 1988, it started
operating its second oil mill. The latter came to be commonly referred to as the new oil mill. Both are
located at its factory compound at Lucena City. The two oil mills were separately covered by fire
insurance policies issued by petitioner American Home Assurance Co. The first oil mill was insured for
three million pesos (P3,000,000.00) while the new oil mill was insured for six million pesos
(P6,000,000.00) both for the period March 1, 1991 to 1992. Official receipts indicating payment for the
full amount of the premium were issued by the petitioner's agent. A fire broke out in the early morning
of September 30,1991 and gutted and consumed the new oil mill. Respondent immediately notified the
petitioner of the incident. The latter then sent its appraisers who inspected the burned premises and the
properties destroyed. Thereafter, petitioner rejected respondents claim for the insurance proceeds on
the ground that no policy was issued by it covering the burned oil mill. It stated that the description of
the insured establishment referred to another building. A complaint for specific performance and
damages was consequently instituted by the respondent. After trial, the lower court rendered a Decision
finding the petitioner liable on the insurance policy.

ISSUE:
1. Whether or not the burned oil mill is covered by any insurance policy
2. Whether or not respondent breached the warranty rendering the insurance void.
RULING:
1. In construing the words used descriptive of a building insured, the greatest liberality is shown by
the courts in giving effect to the insurance. In view of the custom of insurance agents to examine
buildings before writing policies upon them, the policy of insurance covers any building which the
parties manifestly intended to insure, however inaccurate the description may be. Notwithstanding the
misdescription in the policy, it is beyond dispute that what the parties manifestly intended to insure was
the new oil mill. This is obvious from the categorical statement embodied in the policy, extending its
protection. If the parties really intended to protect the first oil mill, then there is no need to specify it
as new. It would be absurd to assume that respondent would protect its first oil mill for different
amounts and leave uncovered its second one. The imperfection in the description of the insured oil
mills boundaries can be attributed to a misunderstanding between the petitioners general agent and its
policy issuing clerk, who made the error of copying the boundaries of the first oil mill when typing the
policy to be issued for the new one. The object in construing a contract is to ascertain the intent of the
parties to the contract and to enforce the agreement which the parties have entered into, keeping in
mind always, however, the prime rule that in the event of doubt, this doubt is to be resolved against the
insurer.
2. What the warranty mandates is that respondent should maintain in efficient working condition
within the premises of the insured property, fire fighting equipments such as, but not limited to, those
identified in the list, which will serve as the oil mills first line of defense in case any part of it bursts
into flame. Respondent was able to comply with the warranty. Within the vicinity of the new oil mill
can be found the following devices: numerous portable fire extinguishers, two fire hoses, fire hydrant,
19

and an emergency fire engine. All of these equipments were in efficient working order when the fire
occurred. Not only are warranties strictly construed against the insurer, but they should, likewise, by
themselves be reasonably interpreted.

20

II. Perfection of Insurance Contract

G.R. No. L-15895 November 29, 1920
Enriquez v. Sun Life Assurance Co. of Canada, 41 Phil 269

MALCOLM, J .:
FACTS: Joaquin Herrer applied to Sun Life Assurance Company of Canada, through its office in
Manila, for a life annuity. Two days later he paid the sum of P6,000 to the manager of the company's
Manila office and was given a receipt. The application was immediately forwarded to the head office of
the company at Montreal, Canada. The head office gave notice of acceptance by cable to Manila. The
policy was issued at Montreal. Attorney Aurelio A. Torres wrote to the Manila office of the company
stating that Herrer desired to withdraw his application. The following day, the local office replied to
Mr. Torres, stating that the policy had been issued, and called attention to the notification of November
26, 1917. This letter was received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer
died on December 20, 1917.
ISSUE: Whether or not there was perfection of the contract for a life annuity.
RULING: NO. The letter of November 26, 1917, notifying Mr. Herrer that his application had been
accepted, prepared and signed in the local office of the insurance company, was placed in the ordinary
channels for transmission, but was never actually mailed and thus was never received by the applicant.
Article 1262 (2) of the Civil Code provides that an acceptance made by letter shall not bind the person
making the offer except from the time it came to his knowledge. The pertinent fact is, that according to
the provisional receipt, three things had to be accomplished by the insurance company before there was
a contract: (1) There had to be a medical examination of the applicant; (2) there had to be approval of
the application by the head office of the company; and (3) this approval had in some way to be
communicated by the company to the applicant. The fact as to the letter of notification fails to concur
with the essential elements of the general rule pertaining to the mailing and delivery of mail matter as
announced by the American courts, namely, when a letter or other mail matter is addressed and mailed
with postage prepaid there is a rebuttable presumption of fact that it was received by the addressee as
soon as it could have been transmitted to him in the ordinary course of the mails. But if any one of
these elemental facts fails to appear, it is fatal to the presumption. The contract for a life annuity in the
case was not perfected because it has not been proved satisfactorily that the acceptance of the
application ever came to the knowledge of the applicant.



21

A. GREAT PACIFIC LIFE ASSURANCE CO. VS HON. CA, 89 SCRA 543
G.R. No. L-31845 April 30, 1979
PONENTE: DE CASTRO, J .:
FACTS: Ngo Hing filed an application with the Great Pacific Life Assurance Company (hereinafter
referred to as Pacific Life) for a twenty-year endownment policy on the life of his one-year old
daughter Helen Go. Respondent supplied the essential data which petitioner Lapulapu D. Mondragon,
Branch Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own
handwriting. Mondragon finally type-wrote the data on the application form which was signed by
private respondent Ngo Hing. The latter paid the annual premuim going over to the Company, but he
retained his commission for being a duly authorized agent of Pacific Life. Upon the payment of the
insurance premium, the binding deposit receipt was issued to private respondent Ngo Hing. Likewise,
petitioner Mondragon handwrote at the bottom of the back page of the application form his strong
recommendation for the approval of the insurance application. Mondragon received a letter from
Pacific Life disapproving the insurance application. The letter stated that the said life insurance
application for 20-year endowment plan is not available for minors below seven years old, but Pacific
Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is
acceptable, the Juvenile Non-Medical Declaration be sent to the company. The non-acceptance of the
insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private
respondent Ngo Hing. Instead, Mondragon wrote back Pacific Life again strongly recommending the
approval of the 20-year endowment insurance plan to children, pointing out that since 1954 the
customers, especially the Chinese, were asking for such coverage. Helen Go died of influenza with
complication of bronchopneumonia. Thereupon, private respondent sought the payment of the proceeds
of the insurance, but having failed in his effort, he filed the action for the recovery of the same before
the Court of First Instance of Cebu, which rendered the adverse decision as earlier refered to against
both petitioners.
ISSUE:
1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question; and
2. Whether private respondent Ngo Hing concealed the state of health and physical condition of Helen
Go, which rendered void the receipt.
RULING:
1. No. At the back of the deposit receipt are condition precedents required before a deposit is
considered a BINDING RECEIPT. The provisions printed show that the binding deposit receipt is
intended to be merely a provisional or temporary insurance contract and only upon compliance of the
following conditions: (1) that the company shall be satisfied that the applicant was insurable on
standard rates; (2) that if the company does not accept the application and offers to issue a policy for a
different plan, the insurance contract shall not be binding until the applicant accepts the policy offered;
otherwise, the deposit shall be reftmded; and (3) that if the applicant is not ble according to the
standard rates, and the company disapproves the application, the insurance applied for shall not be in
force at any time, and the premium paid shall be returned to the applicant. Clearly, the binding deposit
receipt in question is merely an acknowledgment, on behalf of the company, that the latter's branch
office had received from the applicant the insurance premium and had accepted the application subject
for processing by the insurance company; and that the latter will either approve or reject the same on
22

the basis of whether or not the applicant is "insurable on standard rates." The binding deposit receipt is,
manifestly, merely conditional and does not insure outright. Thus, in life insurance, a "binding slip" or
"binding receipt" does not insure by itself. In the absence of a meeting of the minds between petitioner
Pacific Life and private respondent Ngo Hing over the 20-year endowment life insurance in the amount
of P50,000.00 in favor of the latter's one-year old daughter, and with the non-compliance of the
abovequoted conditions stated in the disputed binding deposit receipt, there could have been no
insurance contract duly perfected between them. Accordingly, the deposit paid by private respondent
shall have to be refunded by Pacific Life.
2. Yes. Concealment is a neglect to communicate that which a party knows and ought to communicate.
The Court believes that private respondent had deliberately concealed the state of health and physical
condition of his daughter Helen Go. When Ng Hing supplied the required essential data for the
insurance application form, he was fully aware that his one-year old daughter is a mongoloid child.
Such a congenital physical defect could never be ensconced nor disguised. Private respondent, in
apparent bad faith, withheld the fact materal to the risk to be assumed by the insurance compary. Had
he disclosed the said significant fact in the insurance application form, Pacific Life would have verified
the same and would have had no choice but to disapprove the application outright.Whether intentional
or unintentional the concealment entitles the insurer to rescind the contract of insurance. We are thus
constrained to hold that no insurance contract was perfected between the parties with the
noncompliance of the conditions provided in the binding receipt, and concealment, as legally defined,
having been comraitted by herein private respondent.

23

GREAT PACIFIC LIFE INSURANCE CORP. VS CA
G.R. No. L-57308 April 23, 1990
PONENTE: GRIO-AQUINO, J .:
FACTS: Teodoro Cortez, upon the solicitation of Margarita Siega an underwriter for the petitioner
Great Pacific Insurance Corporation, applied for a 20-year endowment policy for P30,000. His
application, with the requisite medical examination, was accepted and approved by the company and in
due course, Endowment Policy No. 221944 was issued in his name. It was released for delivery on
January 24, 1973, and was actually delivered to him by Siega on January 25, 1973. The effective date
indicated on the face of the policy in question was December 25, 1972. The annual premium was
P1,416.60. Siega assured him that the first premium may be paid within the grace period of thirty (30)
days from date of delivery of the policy. The first premium of P1,416.60 was paid by him in three (3)
installments. In a letter dated June 1, 1973, defendant advised plaintiff that Policy No. 221944 was not
in force. To make it enforceable and operative, plaintiff was asked to remit the balance of P1,015.60 to
complete his initial annual premium due December 15, 1972, and to see Dr. Felipe V. Remollo for
another full medical examination at his own expense. Cortez' reaction to the company's act was to
immediately inform it that he was cancelling the policy and he demanded the return of his premium
plus damages. When the company ignored his demand, Cortez filed on August 14, 1973, a complaint
for damages in the Court of First Instance of Negros Oriental .
ISSUE: Whether there was no perfection of the contract and thus entitles Cortez to a refund of his
premium
RULING: Yes. The petitioner committed a serious breach of the contract of insurance when the
petitioner advised private respondent on June 1, 1973, four months after he had paid the first premium,
that his policy had never been in force, and that he must pay another premium and undergo another
medical examination to make the policy effective. Petitioner should have informed Cortez of the
deadline for paying the first premium before or at least upon delivery of the policy to him, so he could
have complied with what was needed and would not have been misled into believing that his life and
his family were protected by the policy, when actually they were not. And, if the premium paid by
Cortez was unacceptable for being late, it was the company's duty to return it. By accepting his
premiums without giving him the corresponding protection, the company acted in bad faith. Sections
79, 81 and 82 of P.D. 612 of the Insurance Code of 1978 provide when the insured is entitled to the
return of premium paid. Since his policy was in fact inoperative or ineffectual from the beginning, the
company was never at risk, hence, it is not entitled to keep the premium.



24

DEVELOPMENT BANK OF THE PHILS. V. CA, 231 SCRA 370 (1994)
G.R. No. L-109937 March 21, 1994
PONENTE: QUIASON, J .:
FACTS: Juan B. Dans, his wife Candida, son and daughter-in-law, applied for a loan with the
Development Bank of the Philippines (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). The loan was approved and thereafter released by DBP.
From the proceeds of the loan, DBP deducted the payment for the MRI premium. Dans accomplished
and submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool."
The MRI premium of Dans was credited by DBP to the savings account of the DBP MRI Pool. The
DBP MRI Pool was advised of the credit. Dans died of cardiac arrest. The DBP 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. The DBP
offered to refund the premium 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 to accept an ex
gratia settlement which the DBP later offered. Respondent Estate filed a complaint against DBP and
the insurance pool for "Collection of Sum of Money with Damages alleging that Dans became insured
by the DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of application, required
him to apply for MRI, and later collected the insurance premium thereon.
ISSUE: Whether the contract of insurance has been perfected
RULING: NO. When Dans applied for MRI, he filled up and personally signed a "Health Statement
for DBP MRI Pool." Under the aforementioned provisions, 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 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.

25

VIRGINIA PEREZ V. CA, 323 SCRA 613, 28 JANUARY 2000
G.R. No. 112329 January 28, 2000
PONENTE: YNARES-SANTIAGO, J .:
FACTS: Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation (BF
Lifeman). Lalog, an agent of the insurance corporation convinced him to apply for additional insurance
coverage to avail of the ongoing promotional discount if the premium were paid annually. Primitivo
accomplished an application form for the additional insurance coverage. Virginia A. Perez, Primitivo's
wife, paid P2,075.00 to Lalog. The receipt issued by Lalog indicated the amount received was a
"deposit." Unfortunately, Lalog lost the application form accomplished by Perez and so he asked the
latter to fill up another application form. Lalog forwarded the application for additional insurance of
Perez, together with all its supporting papers, to the office of BF Lifeman at Gumaca, Quezon which
was supposed to forward the papers to the Manila office. Perez died in an accident. At the time of his
death, his application papers for the additional insurance were still with the Gumaca office. Lalog
personally brought the papers to the Manila office of BF Lifeman. Without knowing that Perez died,
BF Lifeman Insurance Corporation approved the application and issued the corresponding policy.
Petitioner went to Manila to claim the benefits under the insurance policies of the deceased. She was
paid under the first insurance policy but the insurance company refused to pay the claim under the
additional policy coverage. The insurance company maintained that the same had not been perfected at
the time of the death of Primitivo Perez. Consequently, the insurance company refunded the amount
which Virginia Perez had paid.
ISSUE: Whether there was a consummated contract of insurance between the deceased and BF
Lifeman Insurance Corporation
RULING: A contract is a meeting of the minds between two persons whereby one binds himself, with
respect to the other to give something or to render some service.Consent must be manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute.When Primitivo filed an application for
insurance, paid P2,075.00 and submitted the results of his medical examination, his application was
subject to the acceptance of private respondent BF Lifeman Insurance Corporation. The assent of
private respondent BF Lifeman Insurance Corporation therefore was not given when it merely received
the application form and all the requisite supporting papers of the applicant. Its assent was given when
it issues a corresponding policy to the applicant. Under the abovementioned provision, it is only when
the applicant pays the premium and receives and accepts the policy while he is in good health that the
contract of insurance is deemed to have been perfected. Consequently, there was absolutely no way the
acceptance of the application could have been communicated to the applicant for the latter to accept
inasmuch as the applicant at the time was already dead. Hence, the non-fulfillment of the condition
resulted in the non-perfection of the contract. Respondent corporation cannot be held liable for gross
negligence. An application is a mere offer which requires the overt act of the insurer for it to ripen into
a contract. Delay in acting on the application does not constitute acceptance even though the insured
has forwarded his first premium with his application.



26

MALAYAN INSURANCE CO. V. CA, 165 SCRA 536
G.R. No. L-36413 September 26, 1988
PONENTE: PADILLA, J .:
FACTS: Malayan Insurance Co., Inc., issued in favor of private respondent Sio Choy a private car
comprehensive covering a Willys jeep. The insurance coverage was for "own damage" not to exceed
P600.00 and "third-party liability" in the amount of P20,000.00. During the effectivity of said insurance
policy, the insured jeep, while being driven by Juan P. Campollo an employee of the respondent San
Leon Rice Mill, Inc., collided with a passenger bus belonging to the respondent Pangasinan
Transportation Co., Inc. (PANTRANCO, for short) at the national highway in Barrio San Pedro,
Rosales, Pangasinan, causing damage to the insured vehicle and injuries to the driver, Juan P.
Campollo, and the respondent Martin C. Vallejos, who was riding in the ill-fated jeep. As a result,
Martin C. Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc. and the
PANTRANCO
ISSUE:
1. Whether petitioner and respondents Sio Choy and San Leon Rice Mill, Inc. are "solidarily
liable" to respondent Vallejos; and
2. Whether petitioner is entitled to be reimbursed by respondent San Leon Rice Mill, Inc. for
whatever amount petitioner has been adjudged to pay respondent Vallejos on its insurance
policy.
RULING:
1. Only respondents Sio Choy and San Leon Rice Mill, Inc. are solidarily liable to the respondent
Martin C. Vallejos for the amount of P29,103.00. Vallejos may enforce the entire obligation on
only one of said solidary debtors. If Sio Choy as solidary debtor is made to pay for the entire
obligation and petitioner, as insurer of Sio Choy, is compelled to pay P20,000.00 of said entire
obligation, petitioner would be entitled, as subrogee of Sio Choy as against San Leon Rice
Mills, Inc., to be reimbursed by the latter in the amount of P14,551.50 (which is 1/2 of
P29,103.00 )
2. Yes, by virtue of the principle of subrogation in insurance contracts. Article 1217 of the Civil
Code gives to a solidary debtor who has paid the entire obligation the right to be reimbursed by
his co-debtors for the share which corresponds to each. It follows that petitioner, upon paying
respondent Vallejos the amount of riot exceeding P20,000.00, shall become the subrogee of the
insured, the respondent Sio Choy; as such, it is subrogated to whatever rights the latter has
against respondent San Leon Rice Mill, Inc. In accordance with Article 1217, petitioner, upon
payment to respondent Vallejos and thereby becoming the subrogee of solidary debtor Sio Choy,
is entitled to reimbursement from respondent San Leon Rice Mill, Inc.


27

MANILA MAHOGANY V. CA, 154 SCRA 650
G.R. No. L-52756 October 12, 1987
PONENTE: PADILLA, J :
FACTS: Petitioner insured its Mercedes Benz 4-door sedan with respondent insurance company. The
insured vehicle was bumped and damaged by a truck owned by San Miguel Corporation. For the
damage caused, respondent company paid petitioner five thousand pesos (P5,000.00) in amicable
settlement. Petitioner's general manager executed a Release of Claim, subrogating respondent company
to all its right to action against San Miguel Corporation. Respondent company wrote Insurance
Adjusters, Inc. to demand reimbursement from San Miguel Corporation of the amount it had paid
petitioner. Insurance Adjusters, Inc. refused reimbursement, alleging that San Miguel Corporation had
already paid petitioner the damages to petitioner's motor vehicle. Respondent insurance company
demanded from petitioner reimbursement of the sum paid by San Miguel Corporation. Petitioner
refused. Respondent company filed suit in the City Court of Manila for the recovery of P4,500.00. The
City Court ordered petitioner to pay respondent P4,500.00. On appeal the Court of First Instance of
Manila affirmed the City Court's decision in toto, which CFI decision was affirmed by the Court of
Appeals, with the modification that petitioner was to pay respondent the total amount of P5,000.00 that
it had earlier received from the respondent insurance company.
ISSUE: Whether insurer can recover from petitioner
RULING: Yes. When Manila Mahogany executed another release claim discharging San Miguel
Corporation from "all actions, claims, demands and rights of action that now exist or hereafter arising
out of or as a consequence of the accident" after the insurer had paid the proceeds of the policy- the
compromise agreement of P5,000.00 being based on the insurance policy, the insurer is entitled to
recover from the insured the amount of insurance money paid. Since petitioner released San Miguel
Corporation, thereby defeating private respondents, the right of subrogation, the right of action of
petitioner against the insurer was also nullified. Private respondent may recover the sum of P5,000.00 it
had earlier paid to petitioner. Petitioner is entitled to keep the sum paid by San Miguel Corporation
under its clear right to file a deficiency claim for damages incurred, against the wrongdoer, should the
insurance company not fully pay for the injury caused. However, when petitioner released San Miguel
Corporation from any liability, petitioner's right to retain the sum of P5,000.00 no longer existed,
thereby entitling private respondent to recover the same. Since the insurer can be subrogated to only
such rights as the insured may have, should the insured, after receiving payment from the insurer,
release the wrongdoer who caused the loss, the insurer loses his rights against the latter. But in such a
case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless
the release was made with the consent of the insurer.



28

PAN MALAYAN INSURANCE CORP. V. CA, 184 SCRA 54
G.R. No. 81026 April 3, 1990
PONENTE: CORTES, J .:
FACTS: PANMALAY filed a complaint for damages with the RTC of Makati against private
respondents Erlinda Fabie and her driver. PANMALAY averred that it insured a Mitsubishi Colt
Lancer car registered in the name of Canlubang Automotive Resources Corporation [CANLUBANG];
that due to the "carelessness, recklessness, and imprudence" of the unknown driver of a pick-up, the
insured car was hit and suffered damages; that PANMALAY defrayed the cost of repair of the insured
car and, therefore, was subrogated to the rights of CANLUBANG against the driver of the pick-up and
his employer, Erlinda Fabie; and that, despite repeated demands, defendants, failed and refused to pay
the claim of PANMALAY. Private respondents filed a Motion for Bill of Particulars and a
supplemental motion thereto. PANMALAY clarified that the damage caused to the insured car was
settled under the "own damage", coverage of the insurance policy, and that the driver of the insured car
was, at the time of the accident, an authorized driver duly licensed to drive the vehicle. PANMALAY
also submitted a copy of the insurance policy and the Release of Claim and Subrogation Receipt
executed by CANLUBANG in favor of PANMALAY. Private respondents filed a Motion to Dismiss
alleging that PANMALAY had no cause of action against them. They argued that payment under the
"own damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil
Code, since indemnification thereunder was made on the assumption that there was no wrongdoer or no
third party at fault. RTC issued an order dismissing PANMALAY's complaint for no cause of action.
RTC likewise denied PANMALAY's motion for reconsideration. On appeal taken by PANMALAY,
these orders were upheld by the Court of Appeals. Consequently, PANMALAY filed the present
petition for review.
ISSUE: Whether or not the insurer PANMALAY may institute an action to recover the amount it had
paid its assured in settlement of the insurance claim

RULING: Yes. The right of subrogation is not dependent upon, nor does it grow out of, any privity of
contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim
by the insurer. A perusal of the provisions of the insurance policy reveals that damage to, or loss of, the
insured vehicle due to negligent or careless acts of third parties is not listed under the general and
specific exceptions to the coverage of insured risks which are enumerated in detail in the insurance
policy itself. Dismissal of PANMALAY's complaint against private respondents for no cause of action
would be a grave error of law. However, PANMALAY isnt left without recourse. The insurer who
may have no rights of subrogation due to "voluntary" payment may nevertheless recover from the third
party responsible for the damage to the insured property under Article 1236 of the Civil Code. Having
thus shown from the above discussion that PANMALAY has a cause of action against third parties
whose negligence may have caused damage to CANLUBANG's car, the Court holds that there is no
legal obstacle to the filing by PANMALAY of a complaint for damages against private respondents as
the third parties allegedly responsible for the damage.



29

CEBU SHIPYARD AND ENGINEERING WORKS, INC. V. WILLIAM LINES, 306 SCRA 762
(1999)
G.R. No. 132607 May 5, 1999
PONENTE: PURISIMA, J .:
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. Its the owner of M/V
Manila City which caught fire and sank resulting to its eventual total loss. At the time of the
unfortunate occurrence sued upon, subject vessel was insured with Prudential for P45,000,000.00 pesos
for hull and machinery. The Hull Policy included an "Additional Perils (INCHMAREE)" Clause
covering loss of or damage to the vessel through the negligence of, among others, ship repairmen,
provided such loss or damage has not resulted from want of due diligence by the Assured, the Owners
or Managers of the Vessel, of any of them Masters, Officers, Crew or Pilots are not to be considered
Owners within the meaning of this Clause should they hold shares in the Vessel. Petitioner CSEW was
also insured by Prudential for third party liability under a Shiprepairer's Legal Liability Insurance
Policy. The policy was for P10 million only, under the limited liability clause. William Lines, Inc. filed
a complaint for damages against CSEW, alleging that the fire was caused by CSEW's negligence and
lack of care. Prudential paid William Lines, Inc. the value of the hull and machinery insurance on the
M/V Manila City. As a result, Prudential was subrogated to the claim representing the value of the said
insurance it paid. The trial court a quo came out with a judgment against CSEW. CSEW appealed to
the Court of Appeals. During the pendency of the appeal, CSEW and William Lines presented a "Joint
Motion for Partial Dismissal" with prejudice, on the basis of the amicable settlement inked between
Cebu Shipyard and William Lines only. The Court of Appeals ordered the partial dismissal of the case
insofar as CSEW and William Lines were concerned. The Court of Appeals ordered the defendant,
Cebu Shipyard and Engineering Works, Inc. to pay the plaintiff Prudential Guarantee and Assurance,
Inc., the subrogee. CSEW filed to the Court the present petition.
ISSUE:
1. Whether Prudential has the right of subrogation against its own insured
2. Assuming arguendo that Prudential has the right of subrogation and that CSEW was negligent in the
performance of its obligations under the shiprepair contracts, whether the contractual provisions
limiting CSEW's liability for negligence to a maximum of P1 million is not valid, contrary to the
applicable rulings of this honorable court.
RULING:
1. 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. 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.
2. If CSEW was deemed a co-assured under the policy, it would nullify any claim of William
Lines, Inc. from Prudential for any loss or damage caused by the negligence of CSEW. the fact
that negligence on the part of petitioner has been sufficiently proven, it would indeed be unfair
and inequitable to limit the liability of petitioner to One Million Pesos only. As aptly held by the
30

trial court, "it is rather unconscionable if not overstrained." To allow CSEW to limit its liability
to One Million Pesos notwithstanding the fact that the total loss suffered by the assured and paid
for by Prudential amounted to Forty Five Million (P45,000,000.00) Pesos would sanction the
exercise of a degree of diligence short of what is ordinarily required because, then, it would not
be difficult for petitioner to escape liability by the simple expedient of paying an amount very
much lower than the actual damage or loss suffered by William Lines, Inc.

31

SPS. NILO AND STELLA CHA V. CA, 227 SCRA 690 (1997)
G.R. No. 124520 August 18, 1997
PONENTE: PADILLA, J .:
FACTS: Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with private respondent
CKS Development Corporation (hereinafter CKS), the lessor. One of the stipulations of the one (1)
year lease contract states that (18.) The lessee shall not insure against fire the chattels, merchandise,
textiles, goods and effects placed at any stall or store or space in the leased premises without first
obtaining the written consent and approval of the lessor. If the lessee obtain(s) the insurance thereof
without the consent of the lessor then the policy is deemed assigned and transferred to the lessor for its
own benefit. Notwithstanding the above stipulation in the lease contract, the Cha spouses insured
against loss by fire the merchandise inside the leased premises with the United Insurance Co., Inc.
(hereinafter United) without the written consent of private respondent CKS. On the day that the lease
contract was to expire, fire broke out inside the leased premises. When CKS learned of the insurance
earlier procured by the Cha spouses (without its consent), it wrote United a demand letter asking that
the proceeds of the insurance contract be paid directly to CKS, based on its lease contract with the Cha
spouses. United refused to pay CKS. Hence, the latter filed a complaint against the Cha spouses and
United.
ISSUE: Whether CKS has right over the insurance proceeds
RULING: No. Sec. 18 of the Insurance Code provides: Sec. 18. No contract or policy of insurance on
property shall be enforceable except for the benefit of some person having an insurable interest in the
property insured. A non-life insurance policy such as the fire insurance policy taken by petitioner-
spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property
insured must exist at the time the insurance takes effect and at the time the loss occurs.Otherwise, the
contract is a mere wager which is void under Section 25 of the Insurance Code. In the present case, it
cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased
premises. United cannot be compelled to pay the proceeds of the fire insurance policy to a person
(CKS) who has no insurable interest in the property insured. This insurable interest over said
merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to
CKS under the provision of the lease contract previously quoted is void for being contrary to law
and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the co-
petitioners. The liability of the Cha spouses to CKS for violating their lease contract in that the Cha
spouses obtained a fire insurance policy over their own merchandise, without the consent of CKS, is a
separate and distinct issue which the Court did not resolve in this case.



32

GREAT PACIFIC LIFE ASSURANCE CORP VS CA AND MEDARDA V. LEUTERIO
G.R. No. 113899 October 13, 1999
PONENTE: QUISUMBING, J .:
FACTS: Great Pacific Life Assurance Corporation (hereinafter Grepalife) and Development Bank of
the Philippines (hereinafter DBP) executed a contract of group life insurance. Grepalife agreed to
insure the lives of eligible housing loan mortgagors of DBP. Wilfredo Leuterio, a physician and a
housing debtor of DBP applied for membership in the group life insurance plan. In an application form,
Dr. Leuterio answered questions concerning his health condition stating that hes never had, or
consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung; kidney or
stomach disorder or any other physical impairment and that he is, to the best of his knowledge, in good
health. Grepalife issued a certificate, as insurance coverage of Dr. Leuterio, to the extent of his DBP
mortgage indebtedness. Dr. Leuterio died due to "massive cerebral hemorrhage." Consequently, DBP
submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not
physically healthy when he applied for an insurance coverage. Grepalife insisted that Dr. Leuterio did
not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-
disclosure constituted concealment that justified the denial of the claim. The widow of the late Dr.
Leuterio filed a complaint with the trial court against Grepalife for "Specific Performance with
Damages." During the trial, Dr. Hernando Mejia, who issued the death certificate, was called to testify.
Dr. Mejia's findings, based partly from the information given by the respondent widow, stated that Dr.
Leuterio complained of headaches presumably due to high blood pressure. The inference was not
conclusive because Dr. Leuterio was not autopsied, hence, other causes were not ruled out.
ISSUE:
1. Whether petitioner is liable to DBP as beneficiary in a group life insurance contract from a
complaint filed by the widow of the decedent/mortgagor?
2. Whether Dr. Leuterio concealed that he had hypertension, which would vitiate the insurance
contract?
RULING:
1. The rationale of a group insurance policy of mortgagors, otherwise known as the "mortgage
redemption insurance," is a device for the protection of both the mortgagee and the mortgagor.
The insured private respondent did not cede to the mortgagee all his rights or interests in the
insurance, the policy stating that: "In the event of the debtor's death before his indebtedness with
the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness
shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be
paid to the beneficiary/ies designated by the debtor." When DBP submitted the insurance claim
against petitioner, the latter denied payment thereof, interposing the defense of concealment
committed by the insured. Insured may be regarded as the real party in interest, although he has
assigned the policy for the purpose of collection, or has assigned as collateral security any
judgment he may obtain. Since a policy of insurance upon life or health may pass by transfer,
will or succession to any person, whether he has an insurable interest or not, and such person
may recover it whatever the insured might have recovered, the widow of the decedent Dr.
Leuterio may file the suit against the insurer, Grepalife.
33




34

HARVARDIAN COLLEGES V. COUNTRY BANKERS INSURANCE CORP.
1 CARA 2
FACTS: Harvardian is a family corporation, the stockholders of which are Ildefonso Yap, Virginia
King Yap and their children. Prior to Aug. 9, 1979, an agent of Country Bankers proposed to
Harvardian to insure its school building. Although at first reluctant, Harvardian agreed. Country Banks
sent an inspector to inspect the school building and agreed to insure the same for P500,000 for which
Harvardian paid an annual premium of P2,500. On Aug. 9, 1979, Country Bankers issued to
Harvardian a fire insurance policy. On March 12, 1980, (39 days before I was born hehehehe
)during the effectivity of said insurance policy, the insured property was totally burned rendering it a
total loss. A claim was made by plaintiff upon defendant but defendant denied it contending that
plaintiff had no insurable interest over the building constructed on the piece of land in the name of the
late Ildefonso Yap as owner. It was contended that both the lot and the building were owned by
Ildefonso Yap and NOT by the Harvardian Colleges.
ISSUE: Whether or not Harvardian colleges has a right to the proceeds.
RULING: Harvardian has a right to the proceeds. Regardless of the nature of the title of the insured or
even if he did not have title to the property insured, the contract of fire insurance should still be upheld
if his interest in or his relation to the property is such that he will be benefited in its continued existence
or suffer a direct pecuniary loss from its destruction or injury. The test in determining insurable
interest in property is whether one will derive pecuniary benefit or advantage from its preservation, or
will suffer pecuniary loss or damage from its destruction, termination or injury by the happening of the
event insured against. Here Harvardian was not only in possession of the building but was in fact using
the same for several years with the knowledge and consent of Ildefonso Yap. It is reasonably fair to
assume that had the building not been burned, Harvardian would have been allowed the continued use
of the same as the site of its operation as an educational institution. Harvardian therefore would have
been directly benefited by the preservation of the property, and certainly suffered a pecuniary loss by
its being burned.

35

G.R. No. L-47593 September 13, 1941
THE INSULAR LIFE ASSURANCE CO., LTD. vs.
SERAFIN D. FELICIANO and ANGEL, FLORENDA, EUGENIO, HERMINIO and LETICIA,
all surnamed FELICIANO, represented by SERAFIN D. FELICIANO
PONENTE: LAUREL, J .:
FACTS: Evaristo Feliciano applied for insurance with the petitioner upon the solicitation of one of its
agents. Two insurance policies to the aggregate amount of P25,000 were issued to him. Feliciano died.
The defendant company refused to pay on the ground that the policies were fraudulently obtained, the
insured having given false answers and statements in the application as well as in the medical report.
The lower court rendered judgment in favor of the plaintiffs and found that when Feliciano filed his
application and at the time he was subjected to physical examination by the medical examiner of the
herein petitioner, he was already suffering from tuberculosis. This fact appears in the negative both in
the application and in the medical report. It also found that blank spaces in the examiners report were
filled in by the agent and the medical examiner, who made it appear therein that Feliciano was a fit
subject for insurance. Also, neither the insured nor any member of his family concealed the real state of
health of the insured. That as a matter of fact the insured, as well as the members of his family, told the
agent and the medical examiner that the applicant had been sick and coughing for sometime and that he
had also gone three times to the Santol Sanatarium. Court of Appeals sustained the finding of the trial
court.

ISSUE: Whether the petitioner has the right to avoid the policy, where its agent knowingly and
intentionally wrote down the answers in the application differing from those made by the insured for
his own benefit, as it is not bound by the acts of its agent.

RULING: No. The situation is one in which one of two innocent parties must bear a loss for his
reliance upon a third person. In this case, it was the insurer who gave the agent authority to deal with
the applicant. It was the one who selected the agent, thus implying that the insured could put his trust
on him. It was the one who drafted and accepted the policy and consummated the contract. It seems
reasonable that as between the two of them, the one who employed and gave character to the third
person as its agent should be the one to bear the loss. The company received the money of the applicant
as the price of the risk to be taken by it. If the policy should be avoided, it must be because it was void
from the very beginning, and the result would be that the insurer, while it received the money, never
assumed any risk. If an agent of the insurer, without knowledge of the applicant fills in false answers,
either fraudulently or otherwise, the insurer cannot assert the falsity of such answers as a defense to
liability on the policy. The fact that the insured did not read the application which he signed, is not
indicative of bad faith. It has been held that it is not negligence for the insured to sign an application
without first reading it if the insurer by its conduct in appointing the agent influenced the insured to
place trust and confidence in the agent.

36

G.R. No. L-47593 December 29, 1943
THE INSULAR LIFE ASSURANCE CO., LTD. vs.
SERAFIN D. FELICIANO ET AL.
PONENTE: OZAETA, J .:
FACTS: Evaristo Feliciano, who died, was suffering with advanced pulmonary tuberculosis when he
signed his applications for insurance with the petitioner. Nevertheless the question contained in the
application "Have you ever suffered from any ailment or disease of the lungs, pleurisy, pneumonia
or asthma?" appears to have been answered , "No". Also, above the signature of the applicant, he
has attested to the truthfulness of his answers. The false answer was written by the insurance
companys soliciting agent, Romulo David, in collusion with the medical examiner Dr. Gregorio
Valdez in order that approval of the insurance policy will give credit to the agent. Despite the fact that
the insured and his family told the agent that the former had been sick for some time and has gone to a
hospital three times to have his X-ray taken, the agent and the medical examiner told them that the
applicant was a fit subject for insurance. Petitioner denies liability as the policy and application
contains a provision stating that only the President, or the Manager, acting jointly with the Secretary or
Assistant Secretary have the power to issue permits or modify the contract and that the Company shall
not be bound by any promise or representation heretofore or hereafter given by any person other than
the above-named officials, and by them only in writing and signed conjointly

ISSUE: Whether the beneficiaries are entitled to the proceeds of the insurance policy contracted by the
respondent

RULING: No. The facts of the case the policies in question are null and void ab initio and that all that
the respondents are entitled to is the refund of the premiums paid thereon. When Evaristo Feliciano, the
applicant for insurance, signed the application in blank and authorized the soliciting agent and/or
medical examiner of the Company to write the answers for him, he made them his own agents for that
purpose, and he was responsible for their acts in that connection. If they falsified the answers for him,
he could not evade the responsibility for he falsification. He was not supposed to sign the application in
blank. He knew that the answers to the questions therein contained would be "the basis of the policy,"
and for that every reason he was required with his signature to vouch for truth thereof. Also, he must
have noticed that the answers to the questions therein asked concerning his clinical history were false,
and yet he accepted the first policy and applied for another. By accepting the policy he became charged
with knowledge of its contents, whether he actually read it or not. He could not ostrich-like hide his
head from it in order to avoid his part of the bargain and at the same time claim the benefit thereof. The
insured was a coparticipant, and coresponsible with Agent David and Medical Examiner Valdez, in the
fraudulent procurement of the policies in question and that by reason thereof said policies are void ab
initio.




37

G.R. No. 105135 June 22, 1995
SUNLIFE ASSURANCE COMPANY OF CANADA vs.
The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA BACANI
PONENTE: QUIASON, J .:
FACTS: Robert John B. Bacani procured a life insurance contract for himself from petitioner. He was
issued a policy with double indemnity in case of accidental death. The designated beneficiary was his
mother, respondent Bernarda Bacani. The insured died in a plane crash. Bernarda Bacani filed a claim
with petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner conducted an
investigation then rejected the claim on the gorund that the insured did not disclose material facts
relevant to the issuance of the policy, thus rendering the contract of insurance voidable. Petitioner
claimed that the insured gave false statements when he answered that hes only had a consultations
with a certain doctor for cough and flu complications but was not submitted to any medical test nor
admitted to any hospital nor sought advice for a urine, kidney or bladder disorder, when in fact the
insured was examined and confined at the Lung Center as he was diagnosed for renal failure and was
also subjected to urinalysis, ultrasonography and hematology tests. A check representing the total
premiums paid was attached to said letter. The trial court decided in favor of private respondents
concluding that the facts concealed by the insured were made in good faith and under a belief that they
need not be disclosed and that the health history of the insured was immaterial since the insurance
policy was "non-medical. Court of Appeals affirmed the trial courts decision.

ISSUE: Whether there was concealment and misrepresentation on the part of the insured.

RULING: Yes. Concealment is a neglect to communicate that which a party knows and ought to
communicate. 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 communication is due, in forming his
estimate of the disadvantages of the proposed contract or in making his inquiries. The information
which the insured failed to disclose were material and relevant to the approval and issuance of the
insurance policy. The matters concealed would have definitely affected petitioner's action on his
application, either by approving it with the corresponding adjustment for a higher premium or rejecting
the same. Good faith" also is no defense in concealment. The insured's failure to disclose the fact that
he was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts
about his bonafides. It appears that such concealment was deliberate on his part. Even though the facts
concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not
die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled
the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries.
Thus, petitioner properly exercised its right to rescind the contract of insurance by reason of the
concealment employed by the insured. It must be emphasized that rescission was exercised within the
two-year contestability period as recognized in Section 48 of The Insurance Code.

38

G.R. No. 92492 June 17, 1993
THELMA VDA. DE CANILANG vs.
HON. COURT OF APPEALS and GREAT PACIFIC LIFE ASSURANCE CORPORATION
PONENTE: FELI CI ANO, J .:
FACTS: Jaime Canilang consulted Dr. Wilfredo B. Claudio and was diagnosed as suffering from
"sinus tachycardia." The doctor prescribed Trazepam, a tranquilizer; and Aptin, a beta-blocker drug.
Mr. Canilang consulted the same doctor again and was found to have "acute bronchitis." On next day,
Jaime Canilang applied for a "non-medical" insurance policy with respondent Great Pacific Life
Assurance Company ("Great Pacific") naming his wife, Thelma Canilang, as his beneficiary. Jaime
Canilang was issued ordinary life insurance Policy. Jaime Canilang died of "congestive heart failure,"
"anemia," and "chronic anemia." 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. The Insurance Commissioner Armando Ansaldo ordered Great Pacific to pay
canilang holding that even if the ailment of Jaime Canilang had been disclosed, it would not have
affected Great Pacific's decision to insure him; that Great Pacific had waived its right to inquire into the
health condition of the applicant by the issuance of the policy despite the lack of answers to "some of
the pertinent questions" in the insurance application; that there was no intentional concealment on the
part of the insured as he had thought that he was merely suffering from a minor ailment and simple
cold; and BP 847 which voids an insurance contract, whether or not concealment was intentionally
made, was not applicable as it became effective after Canilangs death. Court of Appeals reversed the
decision of the Insurance Commissioner.
ISSUE: Whether there was concealment on the part of the insured, thus, entitling the respondent to
rescind the contract
RULING: Yes. Jaime Canilang failed to disclose was material to the ability of Great Pacific to
estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits
to his doctor, the diagnosis made and medicines prescribed by such doctor, in the insurance application,
it may be reasonably assumed that Great Pacific would have made further inquiries and would have
probably refused to issue a non-medical insurance policy or, at the very least, required a higher
premium for the same coverage. The materiality of the information withheld by Great Pacific did not
depend upon the state of mind of Jaime Canilang. Materiality relates rather to the "probable and
reasonable influence of the facts" upon the party to whom the communication should have been made,
in assessing the risk involved in making or omitting to make further inquiries and in accepting the
application for insurance; that "probable and reasonable influence of the facts" concealed must, of
course, be determined objectively, by the judge ultimately.

39

G.R. No. 125678 March 18, 2002
PHILAMCARE HEALTH SYSTEMS, INC. vs.
COURT OF APPEALS and JULITA TRINOS.
PONENTE: YNARES-SANTIAGO, J .:
FACTS: Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care
coverage with petitioner Philamcare Health Systems, Inc. In the standard application form, he
represented that he and his family has never been consulted or treated for high blood pressure, heart
trouble, diabetes, cancer, liver disease, asthma or peptic ulcer. The application was approved and he
was issued a health care agreement. Under the agreement, Ernani was entitled to avail of
hospitalization benefits, whether ordinary or emergency, listed therein. He was also entitled to avail of
"out-patient benefits" such as annual physical examinations, preventive health care and other out-
patient services. Upon the termination of the agreement, the same was extended for another year. The
amount of coverage was increased. During the period of his coverage, Ernani suffered a heart attack
and was confined at the Manila Medical Center (MMC) for one month. Respondent tried to claim the
benefits under the health care agreement. Petitioner denied her claim saying that the said agreement
was void as there was a concealment regarding Ernanis medical history. Doctors at the MMC
allegedly discovered at the time of Ernanis confinement that he was hypertensive, diabetic and
asthmatic, contrary to his answer in the application form. Ernani was admitted again but due to
financial difficulties, respondent brought him home again. Ernanis condition went worse and then he
died. Respondent instituted an action for damages against petitioner and sought for reimbursement of
her expenses plus moral damages and attorneys fees. The lower court ruled against petitioners. Court
of Appeals affirmed the decision of the trial court but deleted all awards for damages and absolved
petitioner companys President. Petitioners motion for reconsideration was denied.

ISSUE: Whether there was concealment on the part of the insured.
RULING:
1. No. An undisclosed or misrepresented information is deemed material if its revelation would have
resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership
Fee for the benefit or benefits applied for. The answer assailed by petitioner, relating to the medical
history of the applicant, largely depends on opinion rather than fact, especially coming from
respondents husband who was not a medical doctor. Where matters of opinion or judgment are called
for, answers made in good faith and without intent to deceive will not avoid a policy even though they
are untrue and this is likewise the rule although the statement is material to the risk, if the statement is
obviously of the foregoing character, since in such case the insurer is not justified in relying upon such
statement, but is obligated to make further inquiry. As to the incontestability, Philamcare Health
Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest
the membership of the patient and six months from the issuance of the agreement if the patient was sick
of diabetes or hypertension. The periods having expired, the defense of concealment or
misrepresentation no longer lie.

40

G.R. No. L-20853 May 29, 1967
BONIFACIO BROS., INC., ET AL. vs.
ENRIQUE MORA, ET AL.
PONENTE: CASTRO, J .:
FACTS: Enrique Mora, owner of 1956 Oldsmobile sedan, mortgaged the same to the H.S. Reyes, Inc.,
with the condition that the former would insure the automobile with the latter as beneficiary. The
automobile was thereafter insured with the State Bonding & Insurance Co., Inc., and a motor car
insurance policy was issued to Mora. During the effectivity of the insurance contract, the car met with
an accident. The insurance company then assigned the accident to the Bayne Adjustment Co. for
investigation and appraisal of the damage. Enrique Mora, without the knowledge and consent of the
H.S. Reyes, Inc., authorized the Bonifacio Bros. Inc. to furnish the labor and materials, some of which
were supplied by the Ayala Auto Parts Co. For the cost of labor and materials, Enrique Mora was billed
through the H.H. Bayne Adjustment Co. The insurance company drew a check as proceeds of the
insurance policy, payable to the order of Enrique Mora or H.S. Reyes,. Inc., and entrusted the check to
the H.H. Bayne Adjustment Co. for disposition and delivery to the proper party. In the meantime, the
car was delivered to Enrique Mora without the consent of the H.S. Reyes, Inc., and without payment to
the Bonifacio Bros. Inc. and the Ayala Auto Parts Co. of the cost of repairs and materials. Upon the
theory that the insurance proceeds should be paid directly to them, the Bonifacio Bros. Inc. and the
Ayala Auto Parts Co. filed a complaint with the Municipal Court of Manila against Enrique Mora and
the State Bonding & Insurance Co., Inc. Municipal Court rendered a decision declaring the H.S. Reyes,
Inc. as having a better right and ordered the insurer to pay H.S. Reyes. The appellate court affirmed the
decision of the Municipal Court. The Bonifacio Bros. Inc. and the Ayala Auto Parts Co. moved for
reconsideration of the decision, but the trial court denied the motion.
ISSUE: Whether Bonifacio Bros. Inc. is entitled to recover under the policy
RULING: No. It is fundamental that contracts take effect only between the parties thereto, except in
some specific instances provided by law where the contract contains some stipulation in favor of a third
person.Such stipulation is known as stipulation pour autrui or a provision in favor of a third person not
a pay to the contract. Under this doctrine, a third person is allowed to avail himself of a benefit granted
to him by the terms of the contract, provided that the contracting parties have clearly and deliberately
conferred a favor upon such person. In the instant case the insurance contract does not contain any
words or clauses to disclose an intent to give any benefit to any repairmen or materialmen in case of
repair of the car in question. On the other hand, the "loss payable" clause of the insurance policy
stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes,
Inc. which they intended to benefit. If it were the intention of the insurance company to make itself
liable to the repair shop or materialmen, it could have easily inserted in the contract a stipulation to that
effect. No cause of action exists in favor of the appellants in so far as the proceeds of insurance are
concerned. The appellants' claim is merely equitable in nature and must be made effective through
Enrique Mora who entered into a contract with the Bonifacio Bros. Inc.
41

FIRST INTEGRATED BONDING & INSURANCE COMPANY, INC. vs.
HON. HAROLD M. HERNANDO, VICTORINO ADVINCULA, ROMANA ADVINCULA,
SILVERIO BLANCO & THE SHERIFF OF MANILA and his DEPUTY SHERIFFS
PONENTE: MEDIALDEA, J .:p
FACTS: Silverio Blanco was the owner of a passenger jeepney which he insured against liabilities for
death and injuries to third persons with First Integrated Bonding and Insurance Company, Inc. (First
Insurance) under a motor vehicle policy. The said jeepney driven by Blanco himself bumped a five-
year old child, Deogracias Advincula, causing the latter's death. A complaint for damages was brought
by the child's parents, the Advincula spouses, against Blanco impleading First Insurance as the insurer.
Judgment was rendered by the trial court in favor of the Advinculas. Upon motion of the Advincula
spouses, the decision was amended which, in addition to the damages granted in the original decision,
awarded damages to Silverio Blanco. First Insurance filed a petition for relief from judgment in the
same case but it was denied. First Insurances motion for reconsideration was likewise denied.

ISSUE: Whether the Advinculas are entitled to recover from First Insurance

RULING: Yes. Where the insurance contract provides for indemnity against liability to a third party,
such third party can directly sue the insurer. However, because the Advicnulas are not parties to the
contract, the liability of the insurer to them is based on contract while the liability of the insured to the
third party is based on tort. The injured for whom the contract of insurance is intended can sue directly
the insurer. The general purpose of statutes enabling an injured person to proceed directly against the
insurer is to protect injured persons against the insolvency of the insured who causes such injury, and
to give such injured person a certain beneficial interest in the proceeds of the policy, and statutes are to
be liberally construed so that their intended purpose may be accomplished. Such a provision creates a
contractual relation which inures to the benefit of any and every person who may be negligently injured
by the named insured as if such injured person were specifically named in the policy. Not even a "no
action" clause under the policy which requires that a final judgment be first obtained against the
insured and that only thereafter can the person insured recover on the policy can prevail over the Rules
of Court provisions aimed at avoiding multiplicity of suits. First Insurance cannot evade its liability as
insurer by hiding under the cloak of the insured. Its liability is primary and not dependent on the
recovery of judgment from the insured. Compulsory Motor Vehicle Liability Insurance (third party
liability, or TPL) is primarily intended to provide compensation for the death or bodily injuries suffered
by innocent third parties or passengers as a result of a negligent operation and use of motor vehicles.
The victims and/or their dependents are assured of immediate financial assistance, regardless of the
financial capacity of the motor vehicle owners. The insurer's liability accrues immediately upon the
occurrence of the injury or event upon which the liability depends, and does not depend on the
recovery of judgment by the injured party against the insured .

42

G.R. No. 78848 November 14, 1988
SHERMAN SHAFER vs.
HON. JUDGE, REGIONAL TRIAL COURT OF OLONGAPO CITY, BRANCH 75, and
MAKATI INSURANCE COMPANY, INC.
PONENTE: PADILLA, J .:
FACTS: Sherman Shafer obtained a private car policy over his Ford Laser car from Makati Insurance
Company, Inc., for third party liability (TPL). During the effectivity of the policy, an information for
reckless imprudence resulting in damage to property and serious physical injuries was filed against
petitioner when he hit and bump a Volkswagen car owned and driven by Felino llano y Legaspi. The
owner of the damaged Volkswagen car filed a separate civil action against petitioner for damages,
while Jovencio Poblete, Sr., who was a passenger in the Volkswagen car when allegedly hit and
bumped by the car driven by petitioner, did not reserve his right to file a separate civil action for
damages. Petitioner was granted by the trial court to file a third party complaint against Makati
Insurance Company, Inc. Said insurance company, however, moved to vacate the order granting leave
to petitioner to file a third party complaint against it and/or to dismiss the same. The insurance
company submits that a third party complaint is available only if the defendant has a right to demand
contribution, indemnity, subrogation or any other relief in respect of plaintiff's claim, to minimize the
number of lawsuits and avoid the necessity of bringing two (2) or more suits involving the same subject
matter.
ISSUE: Whether petitioner has cause of action against the insurer
RULING: Yes. The liability of the insurance company under the Compulsory Motor Vehicle Liability
Insurance is for loss or damage. Where an insurance policy insures directly against liability, the
insurer's liability accrues immediately upon the occurrence of the injury or event upon which the
liability depends, and does not depend on the recovery of judgment by the injured party against the
insured. There is no need on the part of the insured to wait for the decision of the trial court finding him
guilty of reckless imprudence. The occurrence of the injury to the third party immediately gave rise to
the liability of the insurer under its policy.

43

G.R. No. 48049 June 29, 1989
EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN vs.
THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE
COMPANY
PONENTE: GUTIERREZ, JR., J .:
FACTS: Tan Lee Siong, father of herein petitioners, applied for life insurance with respondent
company. Said application was approved and a policy was issued effective with petitioners as the
beneficiaries thereof. Tan Lee Siong died of hepatoma. Petitioners then filed with respondent company
their claim for the proceeds of the life insurance policy. However, respondent company denied
petitioners' claim and rescinded the policy by reason of the alleged misrepresentation and concealment
of material facts made by the deceased Tan Lee Siong in his application for insurance. The premiums
paid on the policy were thereupon refunded .Alleging that respondent company's refusal to pay them
the proceeds of the policy was unjustified and unreasonable, petitioners filed, a complaint against the
former with the Office of the Insurance Commissioner. Insurance Commissioner rendered judgment
dismissing petitioners' complaint. The Court of Appeals dismissed ' the petitioners' appeal from the
Insurance Commissioner's decision for lack of merit. The petitioners contend that the respondent
company no longer had the right to rescind the contract of insurance as rescission must allegedly be
done during the lifetime of the insured within two years and prior to the commencement of action.
ISSUE: Whether the respondent company had the right to rescind the contract of insurance.
RULING: Yes. The so-called "incontestability clause" precludes the insurer from raising the defenses
of false representations or concealment of material facts insofar as health and previous diseases are
concerned if the insurance has been in force for at least two years during the insured's lifetime. The
phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered
in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a
period of two years." The policy was thus in force for a period of only one year and five months.
Considering that the insured died before the two-year period had lapsed, respondent company is not,
therefore, barred from proving that the policy is void ab initio by reason of the insured's fraudulent
concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance
and refunded the premiums paid previous to the commencement of the petitioners action.


44

G.R. No. 71360 July 16, 1986
DEVELOPMENT INSURANCE CORPORATION vs.
INTERMEDIATE APPELLATE COURT, and PHILIPPINE UNION REALTY
DEVELOPMENT CORPORATION
PONENTE: CRUZ, J .:
FACTS: A fire occurred in the building of the private respondent and it sued for recovery of damages
from the petitioner on the basis of an insurance contract between them. The petitioner allegedly failed
to answer on time and was declared in default by the trial court. A judgment of default was
subsequently rendered on the strength of the evidence submitted ex parte by the private respondent,
which was allowed full recovery of its claimed damages. Petitioner moved to lift the order of default,
invoking excusable neglect, and to vacate the judgment by default. Its motion was denied. It then went
to the respondent court, which affirmed the decision of the trial court in toto.
ISSUE: What is the amount of indemnity due to the private respondent?

RULING: The Court notes that Policy RY/F-082 is an open policy and is subject to the express
condition that in the event of loss, whether total or partial, it is understood that the amount of the loss
shall be subject to appraisal and the liability of the company, if established, shall be limited to the
actual loss, subject to the applicable terms, conditions, warranties and clauses of this Policy, and in no
case shall exceed the amount of the policy. The actual loss has been ascertained in this case and, to
repeat, this Court will respect such factual determination in the absence of proof that it was arrived at
arbitrarily. There is no such showing. There is no evidence on record that the building was worth
P5,800,000.00 at the time of the loss; only the petitioner says so and it does not back up its self-serving
estimate with any independent corroboration. On the contrary, the building was insured at
P2,500,000.00, and this must be considered, by agreement of the insurer and the insured, the actual
value of the property insured on the day the fire occurred. This valuation becomes even more
believable if it is remembered that at the time the building was burned it was still under construction
and not yet completed. Hence, applying the open policy clause as expressly agreed upon by the parties
in their contract, we hold that the private respondent is entitled to the payment of indemnity under the
said contract in the total amount of P508,867.00.

45

G.R. No. 89741 March 13, 1991
SUN INSURANCE OFFICE, LTD. vs.
COURT OF APPEALS and EMILIO TAN
PONENTE: PARAS, J .:p
FACTS: On August 15, 1983, Emilio Tan took from petitioner a P300,000.00 property insurance
policy to cover his interest in the electrical supply store of his brother housed in a building in Iloilo
City. Four (4) days after the issuance of the policy, the building was burned including the insured store.
On August 20, 1983, Tan filed his claim for fire loss with petitioner, but on February 29, 1984,
petitioner wrote Tan denying the latter's claim. On April 3, 1984, Tan wrote petitioner, seeking
reconsideration of the denial of his claim. On September 3, 1985, Tan's counsel wrote the Insurer
inquiring about the status of his April 3, 1984 request for reconsideration. Petitioner answered the letter
on October 11, 1985, advising Tan's counsel that the Insurer's denial of Tan's claim remained
unchanged, enclosing copies of petitioners' letters of February 29, 1984 and May 17, 1985 (response to
petition for reconsideration). On November 20, 1985, Tan filed a case with the Regional Trial Court of
Iloilo but petitioner filed a motion to dismiss on the alleged ground that the action had already
prescribed. Said motion was denied. Petitioner's motion for reconsideration was also denied.
ISSUES: Whether or not the filing of a motion for reconsideration interrupts the twelve (12) months
prescriptive period to contest the denial of the insurance claim; and
RULING: No. Contracts of insurance, like other contracts, are to be construed according to the sense
and meaning of the terms which the parties themselves have used. If such terms are clear and
unambiguous, they must be taken and understood in their plain, ordinary and popular sense. Condition
27 of the Insurance Policy is clear and free from any ambiguity as it reads: If a claim be made and
rejected and an action or suit be not commenced either in the Insurance Commission or in any court of
competent jurisdiction within twelve (12) months from receipt of notice of such rejection, or in case of
arbitration taking place as provided herein, within twelve (12) months after due notice of the award
made by the arbitrator or arbitrators or umpire, then the claim shall for all purposes be deemed to have
been abandoned and shall not thereafter be recoverable hereunder. Respondent Tan admitted that he
received a copy of the letter of rejection on April 2, 1984. Thus, the 12-month prescriptive period
started to run from the said date of April 2, 1984, for such is the plain meaning and intention of Section
27 of the insurance policy.

46

G.R. No. 103883 November 14, 1996
JACQUELINE JIMENEZ VDA. DE GABRIEL vs.
HON. COURT OF APPEALS and FORTUNE INSURANCE & SURETY COMPANY, INC.
PONENTE: VITUG, J .:
FACTS: Marcelino Gabriel, the insured, was employed by Emerald Construction & Development
Corporation ("ECDC") at its construction project in Iraq. He was covered by a personal accident
insurance in the amount of P100,000.00 under a group policy procured from private respondent by
ECDC for its overseas workers. The insured risk was for "(b)odily injury caused by violent accidental
external and visible means which injury (would) solely and independently of any other cause" result in
death or disability. Within the life of the policy, Gabriel died in Iraq. A year later, or on 12 July 1983,
ECDC reported Gabriel's death to private respondent by telephone. Among the documents thereafter
submitted to private respondent were a copy of the death certificate, where reason of death is
unknown, issued by the Ministry of Health of the Republic of Iraq and an autopsy report of the
National Bureau of Investigation ("NBI") to the effect that cause of death (could) not be
determined." Private respondent referred the insurance claim to Mission Adjustment Service, Inc. On
22 September 1983, respondent ultimately denied the claim of ECDC on the ground of
prescription. Petitioner went to the Regional Trial Court of Manila. In her complaint against ECDC
and private respondent, she averred that her husband died of electrocution while in the performance of
his work and prayed for the indemnification and of various other sums by way of actual, moral, and
exemplary damages, plus attorney's fees and costs of suit. Private respondent alleged that since both the
death certificate issued by the Iraqi Ministry of Health and the autopsy report of the NBI failed to
disclose the cause of Gabriel's death, it denied liability under the policy, and raised the defense of
"prescription," invoking Section 384 of the Insurance Code. With regard to the defense of prescription,
the court considered the complaint to have been timely filed or within one (1) year from private
respondent's denial of the claim. The Court of Appeals reversed the decision of the lower court.
ISSUE: Whether petitioners action has prescribed

RULING: Yes. On the issue of "prescription," Section 384 of the Insurance Code states that any person
having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay,
present to the insurance company concerned a written notice of claim setting forth the nature, extent
and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be
filed within six months from date of the accident, otherwise, the claim shall be deemed waived. Action
or suit for recovery of damage due to loss or injury must be brought, in proper cases, with the
Commissioner or the Courts within one year from denial of the claim, otherwise, the claimant's right of
action shall prescribe. The notice of death was given to private respondent, concededly, more than a
year after the death of petitioner's husband. Private respondent, in invoking prescription, referred to the
written notice of claim that had to be submitted within six months from the time of the accident.

47

G.R. No. L-67835 October 12, 1987
MALAYAN INSURANCE CO., INC. (MICO) vs.
GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER, and
CORONACION PINCA
PONENTE: CRUZ, J .:
FACTS: The petitioner (hereinafter called (MICO) issued to the private respondent, Coronacion Pinca,
a fire insurance policy on her property for the amount of P14,000.00 effective July 22, 1981, until July
22, 1982. MICO allegedly cancelled the policy for non-payment, of the premium and sent the
corresponding notice to Pinca. Payment of the premium for Pinca was received by DomingoAdora,
agent of MICO. Adora remitted this payment to MICO,together with other payments. Pinca's property
was completely burned. Pinca's payment was returned by MICO to Adora on the ground that her policy
had been cancelled earlier. But Adora refused to accept it. In due time, Pinca made the requisite
demands for payment, which MICO rejected. She then went to the Insurance Commission. Insurance
Commisioner ultimately sustained the public respondents contention.
ISSUE:
1. Whether there was payment of premium.
2. Whether there was existing insurance at the time of loss.

RULING:
1. Yes. MICO's arguments that there was no payment of premium and that the policy had been
cancelled before the occurence of the loss are not acceptable. Notably, the premium invoice issued to
Pinca at the time of the delivery of the policy on June 7, 1981 was stamped "Payment Received" of the
amoung of P930.60 on "12-24-81" by Domingo Adora. This suggests an understanding between MICO
and the insured that such payment could be made later, as agent Adora had assured Pinca. In any event,
it is not denied that this payment was actually made by Pinca to Adora, who remitted the same to
MICO.Section 77 of the Insurance Code is not applicable because payment of the premium was in fact
eventually made in this case. The payment was made on December 24, 1981, and the fire occured on
January 18, 1982. As to the validity of Pinca's payment and of Adora's authority to receive it, MICO's
acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the
premium payment on its behalf. It is a well-known principle under the law of agency that: Payment to
an agent having authority to receive or collect payment is equivalent to payment to the principal
himself; such payment is complete when the money delivered is into the agent's hands and is a
discharge of the indebtedness owing to the principal.
2. Yes. There was existing insurance at the time of the loss sustained by Pinca. Payment was in fact
made, rendering the policy operative as of June 22, 1981. The cancellation as MICO repeatedly claims
is not valid because of lack of notice to Pinca. The Court finds that if Pinca did pay on that date, it was
because she honestly believed that the policy was still in effect and she was willing to make her
payment retroact to July 22, 1981, its stipulated commencement date. As it has not been shown that
there was a valid cancellation of the policy, there was consequently no need to renew it but to pay the
premium thereon. Payment was thus legally made on the original transaction and it could be, and was,
validly received on behalf of the insurer by its agent Adora. Adora. incidentally, had not been informed
of the cancellation either and saw no reason not to accept the said payment.

48

G.R. No. 95546 November 6, 1992
MAKATI TUSCANY CONDOMINIUM CORPORATION vs.
THE COURT OF APPEALS & AMERICAN HOME ASSURANCE CO.
PONENTE: BELLOSILLO, J .:
FACTS: American Home Assurance Co. (AHAC), represented by American International
Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation
(TUSCANY) an insurance policy on the latter's building and premises. The premium was paid on
installments on 12 March 1982, 20 May 1982, 21 June 1982 and 16 November 1982, all of which were
accepted by private respondent. Private respondent issued to petitioner another insurance policy which
replaced and renewed the previous policy. The premium was again paid on installments. All payments
were likewise accepted by private respondent. The policy was again renewed and petitioner made two
installment payments, both accepted by private respondent. Thereafter, petitioner refused to pay the
balance of the premium. Private respondent filed an action to recover the unpaid balance. Petitioner
explained that it discontinued the payment of premiums because the policy did not contain a credit
clause in its favor and the receipts for the installment payments covering the latest policy as well as the
two (2) previous policies. Petitioner further claimed that the policy was never binding and valid, and no
risk attached to the policy. Petitioner and private respondent moved for summary judgment. The trial
court dismissed the complaint and the counterclaim. Court of Appeals rendered a decision ordering
herein petitioner to pay the balance of the premiums due.
ISSUE: Whether payment by installment of the premiums due on an insurance policy invalidates the
contract of insurance

RULING: No. The insurance contract became valid and binding upon payment of the first premium,
and the plaintiff could not have denied liability on the ground that payment was not made in full, for
the reason that it agreed to accept installment payment. The subject policies are valid even if the
premiums were paid on installments. The records clearly show that petitioner and private respondent
intended subject insurance policies to be binding and effective notwithstanding the staggered payment
of the premiums. The insurer accepted all the installment payments. Such acceptance of payments
speaks loudly of the insurer's intention to honor the policies it issued to petitioner. Certainly, basic
principles of equity and fairness would not allow the insurer to continue collecting and accepting the
premiums, although paid on installments, and later deny liability on the lame excuse that the premiums
were not prepared in full. Section 77 merely precludes the parties from stipulating that the policy is
valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit
extension, and such an agreement is not contrary to morals, good customs, public order or public
policy. So is an understanding to allow insured to pay premiums in installments not so proscribed. At
the very least, both parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted. Where the risk is entire and the contract is indivisible, the insured is not entitled
to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however
brief or momentary.

49

G.R. No. 102253 June 2, 1995
SOUTH SEA SURETY AND INSURANCE COMPANY, INC. vs.
HON. COURT OF APPEALS and VALENZUELA HARDWOOD AND INDUSTRIAL
SUPPLY, INC.
PONENTE: VITUG, J .:
FACTS: Valenzuela Hardwood and Industrial Supply, Inc. entered into an agreement with the
defendant Seven Brothers whereby the latter undertook to load on board its vessel M/V Seven
Ambassador the former's lauan round at the port of Maconacon, Isabela for shipment to Manila.
Plaintiff insured the logs, against loss and/or, damage with defendant South Sea Surety and Insurance
Co., Inc. and the latter issued a marine cargo insurance policy. The plaintiff gave the check in payment
of the premium on the insurance policy to Mr. Victorio Chua. M/V Seven Ambassador sank resulting
in the loss of the plaintiffs insured logs. A check to cover payment of the premium and documentary
stamps due on the policy was tendered to the insurer but was not accepted. Instead, the South Sea
Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of inception for
non-payment of the premium due in accordance with Section 77 of the Insurance Code. Plaintiff
demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the
policy but the latter denied liability under the policy.
ISSUE: Whether Mr. Chua acted as an agent of the surety company or of the insured when he received
the check for insurance premiums.
RULING: Section 77 of the Insurance Code explicitly provides that notwithstanding any agreement to
the contrary, no policy issued by an insurance company is valid and binding unless and until premium
thereof has been paid. It is therefore important to determine whether at the time of the loss, the
premium was already paid. When the appellant South Sea Surety and Insurance Co., Inc. delivered to
Mr. Chua the marine cargo insurance policy for the plaintiffs logs, he is deemed to have been
authorized by the South Sea Surety and Insurance Co., Inc. to receive the premium which is due on its
behalf. When therefore the insured logs were lost, the insured had already paid the premium to an agent
of the South Sea Surety and Insurance Co., Inc., which is consequently liable to pay the insurance
proceeds under the policy it issued to the insured.

50

G.R. No. 119655 May 24, 1996
SPS. ANTONIO A. TIBAY and VIOLETA R. TIBAY and OFELIA M. RORALDO,
VICTORINA M. RORALDO, VIRGILIO M. RORALDO, MYRNA M. RORALDO and
ROSABELLA M. RORALDO vs.
COURT OF APPEALS and FORTUNE LIFE AND GENERAL INSURANCE CO., INC
PONENTE: BELLOSILLO, J .:p
FACTS: Fortune Life and General Insurance Co., Inc. (FORTUNE) issued Fire Insurance Policy in
favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential building together with
all their personal effects therein. On 23 January 1987, of the total premium of P2,983.50, petitioner
Violeta Tibay only paid P600.00 thus leaving a considerable balance unpaid. The insured building was
completely destroyed by fire. Two days after the fire, Violeta Tibay paid the balance of the premium
and filed with FORTUNE a claim on the fire insurance policy. Her claim was accordingly referred to
its adjuster, Goodwill Adjustment Services, Inc. (GASI). Violeta furnished the necessary documents
for the investigation and processing of her claim and signed a non-waiver agreement with GASI.
FORTUNE denied the claim of Violeta for violation of Policy Condition No. 2 and of Sec. 77 of the
Insurance Code. Trial court ruled for petitioners and adjudged FORTUNE liable for the total value of
the insured building and personal properties therein. Court of Appeals reversed the court a quo by
declaring FORTUNE not to be liable to plaintiff-appellees therein but ordering defendant-appellant to
return to the former the premium.
ISSUE: May a fire insurance policy be valid, binding and enforceable upon mere partial payment of
premium?
RULING: No. Insurance is a contract whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event. The consideration is the
premium, which must be paid at the time and in the way and manner specified in the policy, and if not
so paid, the policy will lapse and be forfeited by its own terms. The Policy contracted by the parties
provides for payment of premium in full. Accordingly, where the premium has only been partially paid
and the balance paid only after the peril insured against has occurred, the insurance contract did not
take effect and the insured cannot collect at all on the policy. In conjunction with Sec. 77 of the
Insurance Code the payment of partial premium by the assured in this particular instance should not be
considered the payment required by the law and the stipulation of the parties. Rather, it must be taken
in the concept of a deposit to be held in trust by the insurer until such time that the full amount has
been tendered and duly receipted for. In other words, as expressly agreed upon in the contract, full
payment must be made before the risk occurs for the policy to be considered effective and in force.

51

G.R. No. 137172 June 15, 1999
UCPB GENERAL INSURANCE CO., INC. vs.
MASAGANA TELAMART, INC.
PONENTE: PARDO, J .:
FACTS: Petitioner issued five (5) insurance policies covering respondent's various property described
therein against fire. Petitioner evaluated the policies and decided not to renew them upon expiration of
their terms. Petitioner advised respondent's broker, Zuellig Insurance Brokers, Inc. of its intention not
to renew the policies and gave written notice to respondent of the non-renewal of the policies at the
address stated in the policies. Fire razed respondent's property covered by three of the insurance
policies petitioner issued. Respondent presented to petitioner five (5) manager's checks representing
premium for the renewal of the policies. No notice of loss was filed by respondent. Also, respondent
filed with petitioner its formal claim for indemnification of the insured property razed by fire.
Petitioner returned to respondent the five (5) manager's checks that it tendered, and at the same time
rejected respondent's claim because the policies had expired and were not renewed, and the fire
occurred before respondent's tender of premium payment. Respondent filed with the RTC Makati City,
a complaint against petitioner for recovery of the face value of the policies covering respondent's
insured property razed by fire. After due trial, the trial court rendered a judgment in favor of
respondent. The Court of Appeals held that respondent was allowed a sixty (60) to ninety (90) day
credit term for the renewal of its policies, and that the acceptance of the late premium payment
suggested an understanding that payment could be made later. Hence, this appeal.
ISSUE: Whether the fire insurance policies issued by petitioner to the respondent had expired or had
been extended or renewed by an implied credit arrangement though actual payment of premium was
tendered on a later date after the occurrence of the risk (fire) insured against.
RULING: No insurance policy, other than life, issued originally or on renewal, is not valid and binding
until actual payment of the premium. Any agreement to the contrary is void. The parties may not agree
expressly or impliedly on the extension of creditor time to pay the premium and consider the policy
binding before actual payment. The payment of the premium for renewal of the policies was tendered
on July 13, 1992, a month after the fire occurred on June 13, 1992. The assured did not even give the
insurer a notice of loss within a reasonable time after occurrence of the fire.

52

G.R. No. 137172 April 4, 2001
UCPB GENERAL INSURANCE CO., INC. vs.
MASAGANA TELAMART, INC.
PONENTE: DAVIDE, JR., C.J .:
FACTS: Respondent obtained from Petitioner five (5) insurance policies on its properties. All five (5)
policies reflect on their face the effectivity term: "from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22
May 1992." Respondents properties were razed by fire. On July 13, 1992, respondent tendered, and
petitioner accepted, five (5) Equitable Bank Manager's checks as renewal premium payments for which
Official Receipt Direct Premium was issued by defendant. Masagana made its formal demand for
indemnification for the burned insured properties. Petitioner returned the five (5) manager's checks
stating that it was rejecting Masagana's claim because a) said policies expired and were not renewed for
another term; b) petitioner had put respondent and its alleged broker on notice of non-renewal earlier;
and c) the properties covered by the said policies were burned in a fire before tender of premium
payment."
ISSUE: Whether the policy is valid notwithstanding the non-payment of premium.

RULING: Yes. The first exception is provided by Section 77 itself, and that is, in case of a life or
industrial life policy whenever the grace period provision applies. The premiums for the policies in
question in the aggregate amount of P225,753.95 were paid by Respondent within the 60- to 90-day
credit term and were duly accepted and received by Petitioner's cashier. Also, Section 77 may not apply
if the parties have agreed to the payment in installments of the premium and partial payment has been
made at the time of loss. Basic principles of equity and fairness would not allow the insurer to continue
collecting and accepting the premiums, although paid on installments, and later deny liability on the
lame excuse that the premiums were not prepaid in full. The fourth exception to Section 77 is that the
insurer may grant credit extension for the payment of the premium. if the insurer has granted the
insured a credit term for the payment of the premium and loss occurs before the expiration of the term,
recovery on the policy should be allowed even though the premium is paid after the loss but within the
credit term. There is nothing in Section 77 which prohibits the parties in an insurance contract to
provide a credit term within which to pay the premiums. That agreement is not against the law, morals,
good customs, public order or public policy. The agreement binds the parties. It would be unjust and
inequitable if recovery on the policy would not be permitted against Petitioner, which had consistently
granted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Section
77. Estoppel bars it from taking refuge under said Section, since Respondent relied in good faith on
such practice.

53

G.R. No. 130421 June 28, 1999
AMERICAN HOME ASSURANCE COMPANY vs.
ANTONIO CHUA
PONENTE: DAVIDE, J R. C.J .:
FACTS: Petitioner is a engaged in the insurance business. Respondent obtained from petitioner a fire
insurance covering the stock-in-trade of his business, Moonlight Enterprises. Respondent issued a
check to petitioner's agent, James Uy, as payment for the renewal of the policy. In turn, the latter
delivered a renewal certificate to respondent. The check was drawn against a Manila bank and
deposited in petitioner's bank account in Cagayan de Oro City. The corresponding official receipt was
issued. Subsequently, a new insurance policy was issued, whereby petitioner undertook to indemnify
respondent for any damage or loss arising from fire. Moonlight Enterprises was completely razed by
fire. Respondent filed an insurance claim with petitioner and four other co-insurers. Petitioner refused
to honor the claim notwithstanding several demands by respondent, thus, the latter filed an action
against petitioner before the trial court. Petitioner claimed there was no existing insurance contract
when the fire occurred since respondent did not pay the premium. It also alleged that even assuming
there was a contract, respondent violated several conditions of the policy, particularly: (1) his
submission of fraudulent income tax return and financial statements; (2) his failure to establish the
actual loss; and (3) his failure to notify to petitioner of any insurance already effected to cover the
insured goods. The trial court ruled in favor of respondent. The decision was affirmed in toto by the
Court of Appeals. The Court of Appeals found that respondent's claim was substantially proved and
petitioner's unjustified refusal to pay the claim entitled respondent to the award of damages.
ISSUE: Whether there was a valid payment of premium, considering that respondent's check was
cashed after the occurrence of the fire
RULING: The general rule in insurance laws is that unless the premium is paid the insurance policy is
not valid and binding. The only exceptions are life and industrial life insurance. Whether payment was
indeed made is a question of fact which is best determined by the trial court. The trial court found that
there was a valid check payment by respondent to petitioner. The court sees no reason to depart from
this ruling. It is not disputed that the check drawn by respondent in favor of petitioner and delivered to
its agent was honored when presented and petitioner forthwith issued its official receipt to respondent.
Section 306 of the Insurance Code provides that any insurance company which delivers a policy or
contract of insurance to an insurance agent or insurance broker shall be deemed to have authorized
such agent or broker to receive on its behalf payment of any premium which is due on such policy or
contract of insurance at the time of its issuance or delivery or which becomes due thereon. In the
instant case, the best evidence of such authority is the fact that petitioner accepted the check and issued
the official receipt for the payment. It is, as well, bound by its agent's acknowledgment of receipt of
payment.


54

G.R. No. L-36232 December 19, 1974
PIONEER INSURANCE AND SURETY CORPORATION vs.
OLIVA YAP
PONENTE: FERNANDEZ, J .:p
FACTS: Oliva Yap was the owner of a store, where in 1962 she sold shopping bags and footwear, such
as shoes, sandals and step-ins. Chua Soon Poon Oliva Yap's son-in-law, was in charge of the store. Yap
took out a fire insurance policy from petitioner Pioneer Insurance & Surety Corporation covering her
stocks, office furniture, fixtures and fittings of every kind and description. Among the conditions in the
policy is that the Insured shall give notice to the Company of any insurance or insurances already
effected, or which may subsequently be effected, covering any of the property hereby insured,
and unless such notice be given and the particulars of such insurance or insurances be stated in, or
endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage,
all benefits under this Policy shall be forfeited. Also, any false declaration or breach or this condition
will render this policy null and void. An insurance policy issued by the Great American Insurance
Company covering the same properties was noted on said policy as co-insurance. Still later, respondent
Oliva Yap took out another fire insurance policy covering the same properties, this time from the
Federal Insurance Company, Inc., which new policy was, however, procured without notice to and the
written consent of petitioner Pioneer Insurance & Surety Corporation and, therefore, was not noted as a
co-insurance in the first policy. A fire broke out in the building housing respondent Yap's above-
mentioned store, and the said store was burned. Yap filed an insurance claim, but the same was denied
on the ground of "breach and/or violation of any and/or all terms and conditions. The trial court
decided for plaintiff Oliva Yap; and its judgment was affirmed in full by the Court of Appeals.
ISSUE: Whether or not petitioner should be absolved from liability on account of any violation by
respondent Yap of the co-insurance clause therein.
RULING: There was a violation by respondent Oliva Yap of the co-insurance clause contained in the
policy that resulted in the avoidance of petitioner's liability. By the plain terms of the policy, other
insurance without the consent of petitioner would ipso facto avoid the contract. It required no
affirmative act of election on the part of the company to make operative the clause avoiding the
contract, wherever the specified conditions should occur. Its obligations ceased, unless, being informed
of the fact, it consented to the additional insurance. The obvious purpose of the aforesaid requirement
in the policy is to prevent over-insurance and thus avert the perpetration of fraud. The public, as well as
the insurer, is interested in preventing the situation in which a fire would be profitable to the insured.
The insured has no right to complain, for he assents to comply with all the stipulation on his side, in
order to entitle himself to the benefit of the contract, which, upon reason or principle, he has no right to
ask the court to dispense with the performance of his own part of the agreement, and yet to bind the
other party to obligations, which, but for those stipulation would not have been entered into."

55

G.R. No. L-27932 October 30, 1972
UNION MANUFACTURING CO., INC. and REPUBLIC BANK vs.
PHILIPPINE GUARANTY CO., INC..
PONENTE: FERNANDO, J .:p
FACTS: Union Manufacturing Co., Inc. obtained certain loans, overdrafts and other credit
accommodations from the Republic Bank and to secure the payment thereof, said Union Manufacturing
Co., Inc. executed a real and chattel mortgages on certain properties, which are more particularly
described and listed at the back of the mortgage contract Union Manufacturing Co., Inc. undertook to
secure insurance coverage over the mortgaged properties. Union Manufacturing Co., Inc. failed to
secure insurance coverage on the mortgaged properties despite the fact that Cua Tok, its general
manager, was reminded of said requirement. Republic Bank procured from the defendant, Philippine
Guaranty Co., Inc. an insurance coverage on loss against fire over the properties of the Union
Manufacturing Co., Inc., as described in defendant's 'Cover Note' with the annotation that loss or
damage, if any, is payable to Republic Bank as its interest may appear, subject however to the printed
conditions of said defendant's Fire Insurance Policy Form. A Fire Insurance Policy was issued in favor
of the assured, Union Manufacturing Co., Inc., for which the corresponding premium, was paid by the
Republic Bank to the defendant. upon the expiration of said fire policy, the same was renewed by the
Republic Bank upon payment of the corresponding premium. It appears that although said renewal
premium was paid by the Republic Bank, such payment was for the account of Union Manufacturing
Co., Inc. And that the cash voucher for the payment of the first premium was paid also by the Republic
Bank but for the account Union Manufacturing Co., Inc. A fire occurred in the premises of the Union
Manufacturing Co., Inc. Union Manufacturing Co., Inc. filed its fire claim with the defendant thru its
adjuster, H. H. Bayne Adjustment Co., which was denied by said defendant on the groundsthat the
policy violated because Union did not give notice to defendant the other insurance which it had taken
and the defendant became aware of those insurances only after the fire and were not endorsed on the
first policy.
ISSUE: Whether Union manufacturing can recover from defendant

RULING: Union Manufacturing Co., Inc. has violated the condition of the policy to the effect that it
did not reveal the existence of other insurance policies over the same properties, as required by the
warranty appearing on the face of the policy issued by the defendant and that on the other hand said
Union Manufacturing Co., Inc. represented that there were no other insurance policies at the time of the
issuance of said defendant's policy, and it appearing furthermore that while the policy of the defendant
was in full force and effect the Union Manufacturing Co., Inc. secured other fire insurance policies
without the written consent of the defendant endorsed on the policy. Such misrepresentation is
fatal.Both the Republic Bank and Union Manufacturing Co., Inc. cannot recover from the same policy
of the defendant because the same is null and void. The annotation then, must be deemed to be a
warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to
rescind.

56

G.R. No. 94052 August 9, 1991
ORIENTAL ASSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS AND PANAMA SAW MILL CO., INC., respondents.
PONENTE: MELENCIO-HERRERA, J :
FACTS: Panama Sawmill Co., Inc. (Panama) bought 1,208 pieces of apitong logs. It hired Transpacific
Towage, Inc., to transport the logs by sea to Manila and insured it against loss for P1-M with petitioner
Oriental Assurance Corporation (Oriental Assurance). There is a claim by Panama that the insurance
coverage should have been for P3-M were it not for the fraudulent act of one Benito Sy Yee Long to
whom it had entrusted the amount of P6,000.00 for the payment of the premium for a P3-M policy.
Oriental Assurance issued Marine Insurance Policy. The logs were loaded on two barges. The two
barges were towed by one tug-boat, the MT 'Seminole' But, as fate would have it, during the voyage,
rough seas and strong winds caused damage to one barge resulting in the loss of 497 pieces of logs out
of the 598 pieces loaded thereon. Panama demanded payment for the loss but Oriental Assurance
refuse on the ground that its contracted liability was for "TOTAL LOSS ONLY." The rejection was
upon the recommendation of the Tan Gatue Adjustment Company. Panama filed a Complaint for
Damages against Ever Insurance Agency, Benito Sy Lee Yong and Oriental Assurance, before the
Regional Trial Court. After trial on the merit, the RTC rendered its Decision in favor of Panama
ordering the petitoner to pay plaintiff Panama Saw Mill Inc. the insurance indemnity and Panama to
pay Ever Insurance Agency or Antonio Sy Lee Yong damages. Appellate Court affirmed the lower
Court judgment.
ISSUE: Whether Oriental Assurance can be held liable under its marine insurance policy based on the
theory of a divisible contract of insurance and, consequently, a constructive total loss.
RULING: No liability attaches.The terms of the contract constitute the measure of the insurer liability
and compliance therewith is a condition precedent to the insured's right to recovery from the insurer.
Whether a contract is entire or severable is a question of intention to be determined by the language
employed by the parties. The fact that the logs were loaded on two different barges did not make the
contract several and divisible as to the items insured. The logs on the two barges were not separately
valued or separately insured. Only one premium was paid for the entire shipment, making for only one
cause or consideration. The insurance contract must, therefore, be considered indivisible. The
requirements for the application of Section 139 of the Insurance Code as the logs involved, although
placed in two barges, were not separately valued by the policy, nor separately insured. Resultantly, the
logs lost in one of the barges in relation to the total number of logs loaded on the same barge can not be
made the basis for determining constructive total loss. The logs having been insured as one inseparable
unit, the correct basis for determining the existence of constructive total loss is the totality of the
shipment of logs. In the absence of either actual or constructive total loss, there can be no recovery by
the insured Panama against the insurer, Oriental Assurance.
57

G.R. No. L-66935 November 11, 1985
ISABELA ROQUE, and ONG CHIONG vs.
HON. INTERMEDIATE APPELATE COURT and PIONEER INSURANCE AND SURETY
CORPORATION
PONENTE: GUTIERREZ, JR., J .:
FACTS: Manila Bay Lighterage Corporation (Manila Bay), a common carrier, entered into a contract
with the petitioners whereby the former would load and carry on board its barge about 422.18 cubic
meters of logs from Malampaya Sound, Palawan to North Harbor, Manila. The petitioners insured the
logs against loss with respondent Pioneer Insurance and Surety Corporation (Pioneer). The petitioners
loaded on the barge, 811 pieces of logs at Malampaya Sound, Palawan for carriage and delivery to
North Harbor, Port of Manila, but the shipment never reached its destination because Mable 10 sank
with the 811 pieces of logs somewhere off Cabuli Point in Palawan on its way to Manila. As found by
both the trial and appellate courts, the barge where the logs were loaded was not seaworthy such that it
developed a leak. The appellate court further found that one of the hatches was left open causing water
to enter the barge and because the barge was not provided with the necessary cover or tarpaulin, the
ordinary splash of sea waves brought more water inside the barge. Petitioners wrote a letter to Manila
Bay demanding payment for the loss of the shipment plus unrealized profits but the latter ignored the
demand. Another letter was sent to Pioneer but respondent refused to pay on the ground that its hability
depended upon the "Total loss by Total Loss of Vessel only". The trial court found in favor of the
petitioners. Appellate court absolved Pioneer from liability after finding that there was a breach of
implied warranty of seaworthiness on the part of the petitioners and that the loss of the insured cargo
was caused by the "perils of the ship" and not by the "perils of the sea". It ruled that the loss is not
covered by the marine insurance policy. Appellate court denied petitioners motion for reconsideration.
ISSUES:
1. Whether the implied warranty of seaworthiness provided for in the Insurance Code refers only to the
responsibility of the shipowner
2. Whether the loss of the cargo in this case was caused by "perils of the ship" or by "perils of the sea."
RULING:

1. No. In consonance with Section 99 of the Insurance Code, the term "cargo" can be the subject of
marine insurance and that once it is so made, the implied warranty of seaworthiness immediately
attaches to whoever is insuring the cargo whether he be the shipowner or not. The fact that the
unseaworthiness of the ship was unknown to the insured is immaterial in ordinary marine insurance and
may not be used by him as a defense in order to recover on the marine insurance policy.
2. The loss of the cargo was due to the perils of the ship rather than the perils of the sea. The facts
clearly negate the petitioners' claim under the insurance policy. The entrance of the sea water into the
ship's hold through the defective pipe already described was not due to any accident which happened
during the voyage, but to the failure of the ship's owner properly to repair a defect of the existence of
which he was apprised. Barratry cant also be alleged as there is no finding that the loss was occasioned
by the willful or fraudulent acts of the vessel's crew. There was only simple negligence or lack of skill.
58


59

G.R. No. 85141 November 28, 1989
FILIPINO MERCHANTS INSURANCE CO., INC. vs.
COURT OF APPEALS and CHOA TIEK SENG
PONENTE: REGALADO, J .:
FACTS: Consignee of the shipment of fishmeal loaded on board the vessel SS Bougainville seeks to
recover from the defendant insurance company the damages to said shipment which has been insured
by the defendant insurance company under Policy No. M-2678. The defendant brought a third party
complaint against third party defendants Compagnie Maritime Des Chargeurs Reunis and/or E. Razon,
Inc. seeking judgment against the defendants in case Judgment is rendered against the third party
plaintiff. Plaintiff insured said shipment with defendant insurance company under a cargo policy for the
goods described as 600 metric tons of fishmeal in new gunny bags of 90 kilos each from Bangkok,
Thailand to Manila against all risks under warehouse to warehouse terms when actually, what was
imported was 59.940 metric tons not 600 tons at $395.42 a ton CNF Manila. The fishmeal in 666 new
gunny bags were unloaded from the ship at Manila unto the arrastre contractor E. Razon, Inc. and
defendant's surveyor ascertained and certified that in such discharge 105 bags were in bad order
condition as jointly surveyed by the ship's agent and the arrastre contractor. The condition of the bad
order was reflected in the turn over survey report of Bad Order cargoes. The cargo was also surveyed
by the arrastre contractor before delivery of the cargo to the consignee and the condition of the cargo
on such delivery was reflected in E. Razon's Bad Order Certificates covering a total of 227 bags in bad
order condition. Defendant's surveyor has conducted a final and detailed survey of the cargo in the
warehouse for which he prepared a survey report with the findings on the extent of shortage or loss on
the bad order bags totalling 227 bags amounting to 12,148 kilos. Based on said computation the
plaintiff made a formal claim against the Filipino Merchants Insurance Company for P51,568.62. A
formal claim statement was also presented by the plaintiff against the vessel but the Filipino Merchants
Insurance Company refused to pay the claim. Consequently, the plaintiff brought an action against said
defendant as adverted to above and defendant presented a third party complaint against the vessel and
the arrastre contractor. After trial, the court rendered judgment in favor of private respindents. Court of
Appeals affirmed the decision of the lower court.
ISSUE: Whether the respondent court erred in its interpretation and application of the all-risks clause
of the marine insurance policy
RULING: No. An "all risks policy" should be read literally as meaning all risks whatsoever and
covering all losses by an accidental cause of any kind. The terms "accident" and "accidental", are
construed to be that which happens by chance or fortuitously, without intention and design, and which
is unexpected, unusual and unforeseen. The insured under an "all risks insurance policy" has the initial
burden of proving that the cargo was in good condition when the policy attached and that the cargo was
damaged when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the
exception to the coverage. There has been no showing that the loss was caused by any of the excepted
perils, the insurer is liable under the policy. Had there been such a showing that spillage would have
been a certainty, there may have been good reason to plead that there was no risk covered by the
policy.. Under an 'all risks' policy, it was sufficient to show that there was damage occasioned by some
accidental cause of any kind, and there is no necessity to point to any particular cause.

60

G.R. No. 84507 March 15, 1990
CHOA TIEK SENG of SENG'S COMMERCIAL ENTERPRISES vs.
HON. COURT OF APPEALS, FILIPINO MERCHANTS' INSURANCE COMPANY, INC.,
BEN LINES CONTAINER, LTD. AND E. RAZON, INC
PONENTE: GANCAYCO, J .:
FACTS: Petitioner imported some lactose crystals from Holland. The importation involved 15 metric
tons packed in 600 6-ply paper bags with polythelene inner bags, each bag at 25 kilos net. The goods
were loaded at the port at Rotterdam in sea vans on board the vessel "MS Benalder' as the mother
vessel, and thereafter aboard the feeder vessel "Wesser Broker V-25" of respondent Ben Lines
Container, Ltd. (Ben Lines for short). The goods were insured by the respondent Filipino Merchants'
Insurance Co., Inc. against all risks under the terms of the insurance cargo policy. Upon arrival at the
port of Manila, the cargo was discharged into the custody of the arrastre operator respondent E. Razon,
Inc. (broker for short), prior to the delivery to petitioner through his broker. Of the 600 bags delivered
to petitioner, 403 were in bad order. The surveys showed that the bad order bags suffered spillage and
loss. Petitioner filed a claim for said loss against respondent insurance company. Respondent insurance
company rejected the claim alleging that assuming that spillage took place while the goods were in
transit, petitioner and his agent failed to avert or minimize the loss by failing to recover spillage from
the sea van, thus violating the terms of the insurance policy sued upon; and that assuming that the
spillage did not occur while the cargo was in transit, the said 400 bags were loaded in bad order, and
that in any case, the van did not carry any evidence of spillage. Petitioner filed the complaint in the
Regional Trial Court of Manila against respondent insurance company seeking damages. Respondent
insurance company denied all the material allegations of the complaint and raised several special
defenses as well as a compulsory counterclaim. Respondent insurance company filed a third-party
complaint against respondents Ben Lines and broker. Respondent broker denied liability and argued
that the petitioner has no valid cause of action against it. The court a quo dismissed the complaint, the
counterclaim and the third-party complaint with costs against the petitioner. The Court of Appeals
affirmed the judgment of the trial court. A motion for reconsideration was denied.
ISSUES:
1. Whether the insured shipment sustained any damage/loss
2. Whether the "all risks" coverage covers only losses occasioned by or resulting from "extra and
fortuitous events"
RULING:
1. Yes. Respondent insurance company, in its letter dated May 26, 1977 to petitioner, admitted in no
uncertain terms the fact that out of the 600 bags shipment 403 bags appeared to be in bad order or in
damaged condition as indicated in the survey report of the vessel surveyor. This admission even
standing alone is sufficient proof of loss or damage to the cargo.
2. In the present case, the terms of the policy are so clear and require no interpretation. The insurance
policy covers all loss or damage to the cargo except those caused by delay or inherent vice or nature of
the cargo insured. It is the duty of the respondent insurance company to establish that said loss or
damage falls within the exceptions provided for by law, otherwise it is liable therefor. An "all risks"
provision of a marine policy creates a special type of insurance which extends coverage to risks not
usually contemplated and avoids putting upon the insured the burden of establishing that the loss was
due to peril falling within the policy's coverage. The insurer can avoid coverage upon demonstrating
61

that a specific provision expressly excludes the loss from coverage. The damage caused to the cargo
has not been attributed to any of the exceptions provided for nor is there any pretension to this effect.
Thus, the liability of respondent insurance company is clear.

62

G.R. No. 127897 November 15, 2001
DELSAN TRANSPORT LINES, INC. vs.
THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE CORPORATION
PONENTE: DE LEON, JR., J .:
FACTS: Caltex Philippines (Caltex) entered into a contract of affreightment with the petitioner, Delsan
Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport
Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under
the contract, petitioner took on board its vessel, MT Maysun 2,277.314 kiloliters of industrial fuel oil
of Caltex to be delivered to the Zamboanga City. The shipment was insured with the private
respondent, American Home Assurance Corporation. MT Maysum set sail from Batangas for
Zamboanga City but it sank taking with it the entire cargo of fuel oil. Private respondent paid Caltex
the sum representing the insured value of the lost cargo. Exercising its right of subrogation, the private
respondent demanded of the petitioner the same amount it paid to Caltex. Due to its failure to collect
from the petitioner despite prior demand, private respondent filed a complaint for collection of a sum of
money. The trial court dismissed the complaint against petitioner. The trial court found that MT
Maysum was seaworthy and that the incident was caused by unexpected inclement weather condition
or force majeure, thus exempting the common carrier (herein petitioner) from liability for the loss of its
cargo. The Court of Appeals reversed the trial courts decision. Subsequent motion for reconsideration
of petitioner was denied by the appellate court.
ISSUE: Whether or not the payment made by the private respondent to Caltex for the insured value of
the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for
recovery against the petitioner.
RULING: No. The payment made by the private respondent for the insured value of the lost cargo
operates as waiver of private respondents right to enforce the term of the implied warranty against
Caltex under the marine insurance policy. This cannot be validly interpreted as an automatic admission
of the vessels seaworthiness by the private respondent as to foreclose recourse against the petitioner
for any liability under its contractual obligation as a common carrier. The fact of payment grants the
private respondent subrogatory right which enables it to exercise legal remedies that would otherwise
be available to Caltex as owner of the lost cargo against the petitioner common carrier. Also, there was
no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank.MT
Maysun, sank with its entire cargo for the reason that it was not seaworthy. Seaworthiness relates to a
vessels actual condition. Neither the granting of classification or the issuance of certificates
established seaworthiness. Petitioner is liable for the insured value of the lost cargo of industrial fuel oil
belonging to Caltex for its failure to rebut the presumption of fault or negligence as common
carrier occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.

63

G.R. No. L-9374 February 16, 1915
FRANCISCO DEL VAL, ET AL. vs.
ANDRES DEL VAL
PONENTE: MORELAND, J .:
FACTS: Plaintiffs and defendant are brother and sisters. They are the only heirs at law and next of kin
of Gregorio Nacianceno del Val. An administrator was appointed for the estate of the deceased, and,
after a partial administration, it was closed and the administrator was discharged by order of court.
During the lifetime of the deceased, he took out insurance on his life and made it payable to the
defendant as sole beneficiary. After his death, the defendant collected the face of the policy. Of said
policy he paid the a certain sum to redeem certain real estate which the decedent had sold to third
persons with a right to repurchase. The redemption of said premises was made by the attorney of the
defendant in the name of the plaintiff and the defendant as heirs of the deceased vendor. They have had
the use and benefit of the redemption of said premises and plaintiffs also paid no taxes and made no
repairs. Defendant, on the death of the deceased, took possession of most of his personal property,
which he still has in his possession, and he has also the balance on said insurance policy. Plaintiffs
contend that the amount of the insurance policy belonged to the estate of the deceased and not to the
defendant personally and that they are also entitled to a partition of the life insurance. The defendant
denies the material allegations of the complaint and sets up as special defense and counterclaim that the
redemption of the real estate sold by his father was made in the name of the plaintiffs and himself
instead of in his name alone without his knowledge or consent; and that it was not his intention to use
the proceeds of the insurance policy for the benefit of any person but himself. He alleged that he was
and is the sole owner thereof and that it is his individual property and asked that he be declared the
owner of the real estate redeemed by the payment of the remaining balance of the insurance policy. The
trial court refused to give relief to either party and dismissed the action.
ISSUE: Who is entitled to the proceeds of the life insurance policy?

RULING: None of the property was actually divided among the heirs in the administration proceeding
and that they remain coowners and tenants-in- common thereof at the present time. To maintain an
action to partition real or personal property it is necessary to show only that it is owned in common.
The proceeds of the life-insurance policy belong exclusively to the defendant as his individual and
separate property. The proceeds of an insurance policy belong exclusively to the beneficiary and not to
the estate of the person whose life was insured. Such proceeds are the separate and individual property
of the beneficiary, and not of the heirs of the person whose life was insured. 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 that subject. The Civil Code has no provisions which relate directly and
specifically to life- insurance contracts or to the destination of life insurance proceeds.

64

G.R. No. L-34583 October 22, 1931
THE BANK OF THE PHILIPPINE ISLANDS vs.
JUAN POSADAS, JR., Collector of Internal Revenue
PONENTE: VILLA-REAL, J .:
FACTS: Rosario Gelano Vda. de Schuetze, window of the late Adolphe Oscar Schuetze (Adolphe),
was actually residing and living in Germany. Adolphe Schuetze drew a general power appointing Bank
of the Philippine Islands (BPI) as her attorney-in-fact. Adolphe, coming from Java, and with the
intention of going to Bremen, landed in the Philippines where he met his death. While in Germany,
Adolphe executed a will wherein plaintiff was named his universal heir. BPI was appointed
administrator of the deceaseds estate. Among the personal property of the deceased was a life-
insurance policy issued by the Sun Life Assurance Company of Canada (Sun Life) where his estate was
named as beneficiary. For five consecutive years, Adolphe paid the premiums of said policy to Sun
Life. Sun Life transferred said policy to its London branch. At the time of the death of the deceased, the
policy was in the hands of the Head Office of the Sun Life at Montreal, Canada. BPI received the
proceeds of the insurance policy which it delivered later to the plaintiff. Defendant imposed an
inheritance tax upon the transmission of the proceeds of the policy. BPI paid the defendant under
protest. Defendant refused to refund what BPI paid.
ISSUE: Whether a life-insurance policy was, by reason of its ownership, subject to the inheritance tax.
RULING: It needs to be settled first whether the amount thereof is paraphernal or community property.
With the exception of the premium for the first year, all the money used for paying the premiums, is
conjugal property inasmuch as it does not appear to have exclusively belonged to him or to his wife. As
the sum in controversy is a product of such premium it must also be deemed community property.
Thus, the proceeds of a life-insurance policy whereon the premiums were paid with conjugal money,
belong to the conjugal partnership. As all the premiums on the life-insurance policy taken out by the
late Adolphe, were paid out of the conjugal funds, with the exceptions of the first, the proceeds of the
policy constitute community property, notwithstanding the fact that the policy was made payable to the
deceased's estate, so that one-half of said proceeds belongs to the estate, and the other half to the
deceased's widow.

65

G.R. No. L-44059 October 28, 1977
THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO
PONENTE: MARTIN, J .:
FACTS: Buenaventura Cristor Ebrado was issued by petitioner a policy on a whole-life with a rider for
Accidental Death for the same amount. Buenaventura C. Ebrado designated T. Ebrado as the revocable
beneficiary in his policy. He to her as his wife. Buenaventura C. Ebrado died when he was hit by a
failing branch of a tree. As the policy was in force, The Insular Life Assurance Co., Ltd. paid the
coverage representing the face value of the policy plus the additional benefits for accidental death and
the refund paid for the premium. Carponia T. Ebrado, although admitting that she and the insured were
merely living together as husband and wife outside of marriage, filed with the insurer a claim for the
proceeds of the Policy as the designated beneficiary therein. Pascuala Vda. de Ebrado, the widow of the
deceased, also filed a claim and asserts that she is the one entitled to the insurance proceeds. The
Insular Life Assurance Co., Ltd. commenced an action for Interpleader. Te trial court rendered
judgment declaring Carponia T. Ebrado disqualified from becoming beneficiary of the insured
Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of the
deceased insured. Carponia T. Ebrado appealed to the Court of Appeals and the latter certified the case
to Supreme Court as involving only questions of law.
ISSUE: Can a common-law wife named as beneficiary in the life insurance policy of a legally married
man claim the proceeds thereof in case of death of the latter?
RULING: No. Section 50 of the Insurance Act which provides that "(t)he insurance shall be applied
exclusively to the proper interest of the person in whose name it is made". The word "interest" highly
suggests that the provision refers only to the "insured" and not to the beneficiary, since a contract of
insurance is personal in character. In essence, a life insurance policy is no different from a civil
donation insofar as the beneficiary is concerned. Both are founded upon the same consideration:
liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured
pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. Under
Article 2012 of the same Code, "any person who is forbidden from receiving any donation under
Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a
donation to him. Common-law spouses are, definitely, barred from receiving donations from each
other. Otherwise, the prohibitory laws against illicit relationships especially on property and descent
will be rendered nugatory, as the same could easily be circumvented by modes of insurance.

66

G.R. No. L-2910 June 29, 1951
THE MANUFACTURERS LIFE INSURANCE CO. vs.
BIBIANO L. MEER
PONENTE: BENGZON, J .:
FACTS: The plaintiff is duly registered and licensed to engage in life insurance business in the
Philippines, and maintains a branch office in Manila. Due to the exigencies of the war, it closed the
branch office at Manila during 1942 up to September 1945. In the course of its operations before the
war, plaintiff issued a number of life insurance policies in the Philippines containing stipulations
referred to as non-forfeiture clauses. For failure of the insured under the above policies to pay the
corresponding premiums for one or more years, the plaintiff's head office of Toronto, applied the
provision of the automatic premium loan clauses; and the net amount of premiums so advanced or
loaned. On this sum the defendant Collector of Internal Revenue assessed taxes on insurance premiums
which plaintiff paid supra protest. Plaintiff's contends that when it made premium loans or premium
advances by virtue of the non-forfeiture clauses, it did not collect premiums and therefore it is not
amendable to the tax therein provided.
ISSUE: Whether or not premium advances made by plaintiff-appellant under the automatic premium
loan clause of its policies are "premium collected" by the Company subject to tax;

RULING: There was an increase, in the amount of the assets of plaintiff-appellant after the application
of the automatic premium loan clause. There was the new credit for the advances made. The plaintiff
could not sue the insured to enforce that credit but it has means of satisfaction out of the cash surrender
value. Cash surrender value "as applied to life insurance policy, is the amount of money the company
agrees to pay to the holder of the policy if he surrenders it and releases his claims upon it. The more
premiums the insured has paid the greater will be the surrender value; but the surrender value is always
a lesser sum than the total amount of premiums paid." The cash value or cash surrender value is an
amount which the insurance company holds in trust for the insured to be delivered to him upon
demand. It is a liability of the company to the insured. The insurer agreed to consider the premium paid
on the strength of the automatic loan. The premium was therefore paid by means of a "note" or "credit"
or "other substitute for money" and the taxes due.
.

67

G.R. No. L-109937 March 21, 1994
DEVELOPMENT BANK OF THE PHILIPPINES vs.
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, and the DBP
MORTGAGE REDEMPTION INSURANCE POOL
PONENTE: QUIASON, J .:
FACTS: Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan
with the Development Bank of the Philippines (DBP). As the principal mortgagor, Dans was advised
by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool). A loan was approved and released by DBP. From the proceeds of the
loan, DBP deducted a amount as payment for the MRI premium. Dans accomplished and 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, an
information DBP relayed 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 which the deceased had paid and an ex gratia settlement, but both
Candida Dans refused to accept and demanded payment of the face value of the MRI or an amount
equivalent to the loan. The trial court ruled in favor of respondent Estate and against DBP. The DBP
MRI Pool, however, was absolved from liability, after the trial court found no privity of contract
between it and the deceased. The trial court declared DBP in estoppel for having led Dans into
applying for MRI and actually collecting the premium and the service fee, despite knowledge of his age
ineligibility.
ISSUE: WON DBP and DBP MRI POOL are liable on the insurance policy.
RULING: No. Under the Health Statement signed by Dans, 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. The pool 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.

68

G.R. No. 76101-02 September 30, 1991
TIO KHE CHIO vs.
THE HONORABLE COURT OF APPEALS and EASTERN ASSURANCE AND SURETY
CORPORATION
PONENTE: FERNAN, C.J .:p
FACTS: Tio Khe Chio imported one thousand (1,000) bags of fishmeal from Agro Impex, U.S.A. The
goods were insured with respondent EASCO and shipped on board the M/V Peskov, a vessel owned by
Far Eastern Shipping Company. When the goods reached Manila, they were found to have been
damaged by sea water which rendered the fishmeal useless. Petitioner filed a claim with EASCO and
Far Eastern Shipping. Both refused to pay. Whereupon, petitioner sued them before the then Court of
First Instance of Cebu. The trial court rendered judgment ordering EASCO and Far Eastern Shipping to
pay petitioner solidarily. EASCO after appealing to the Court of Appeals was absolved from liability.

ISSUE: Whether the legal rate of interest to be imposed in actions for damages arising from unpaid
insurance claims should be 12%

RULING: No. Sections 243 and 244 of the Insurance Code apply only when the court finds an
unreasonable delay or refusal in the payment of the claims. The applicable law is Article 2209 of the
Civil Code stating that if the obligation consists in the payment of a sum of money and the debtor
incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the
payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six per
cent per annum. Also, contending parties did not allege the rate of interest stipulated in the insurance
contract. Thus, the legal interest was properly pegged by the Appellate Court at six (6%) per cent.

69

G.R. No. 138737 July 12, 2001
FINMAN GENERAL ASSURANCE CORPORATION vs.
COURT OF APPEALS and USIPHIL INCORPORATED
PONENTE: KAPUNAN, J .:
FACTS: Private respondent obtained a fire insurance policy from petitioner (then doing business under
the name Summa Insurance Corporation) covering certain properties, e.g., office, furniture, fixtures,
shop machinery and other trade equipment. Under the policy issued to private respondent, petitioner
undertook to indemnify private respondent for any damage to or loss of said properties arising from
fire. Private respondent filed with petitioner an insurance claim for the loss of the insured properties
due to fire. Petitioner appointed Adjuster H.H. Bayne to undertake the valuation and adjustment of the
loss who then required private respondent to file a formal claim and submit proof of loss. Private
respondent complied with the requirements and likewise submitted a proof of loss. Despite repeated
demands by private respondent, petitioner refused to pay the insurance claim. Private respondent was
constrained to file a complaint against petitioner for the unpaid insurance claim. Petitioner maintained
that the claim of private respondent could not be allowed because it failed to comply with Policy
Condition No. 13 regarding the submission of certain documents to prove the loss. The trial court
rendered ordering to pay the plaintiff the principal amount and to pay 24% interest per annum from
February 28, 1985 until fully paid. CA substantially affirmed the decision of the trial court.
ISSUE: Whether petitioner is liable to pay Usiphil, Inc., an interest of 24% per annum in addition to the
principal amount
RULING: Well-settled is the rule that factual findings and conclusions of the trial court and the CA are
entitled to great weight and respect, and will not be disturbed on appeal in the absence of any clear
showing that the trial court overlooked certain facts or circumstances which would substantially affect
the disposition of the case. There is no cogent reason to deviate from this salutary rule in the present
case. Both the trial court and the CA concur in holding that private respondent had substantially
complied with Policy Condition No. 13. Furthermore, the payment of 24% interest per annum
computed until fully paid is authorized by Sections 243 and 244 of the Insurance Code. Section 29 of
the policy, the settlement of claim clause, provides for the payment of such interest within thirty days
after proof of loss is received by the company and ascertainment of the loss or damage is made either in
an agreement between the insured and the company or by arbitration. Refusal or failure to pay the loss
or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds
of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary
Board, unless such failure or refusal to pay is based on the grounds

70

G.R. No. L-49699 August 8, 1988
PERLA COMPANIA de SEGUROS, INC. vs.
HON. CONSTANTE A. ANCHETA, et. al.
PONENTE: CORTES, J .:
FACTS: In a collision between the IH Scout in which private respondents were riding and a Superlines
bus along the national highway in Sta. Elena, Camarines Norte, private respondents sustained physics
injuries in varying degrees of gravity. Thus, they filed with the Court of First Instance of Camarines
Norte a complaint for damages against Superlines, the bus driver and petitioner, the insurer of the bus.
The bus was insured with petitioner, for passenger liability and for third party liability. The vehicle in
which private respondents were riding was insured with Malayan Insurance Co. Petitioner denied its
alleged liability under the "no fault indemnity" provision saying that under Sec. 378 of the Insurance
Code, the insurer liable to pay is the insurer of the vehicle in which private respondents were riding,
not petitioner. Respondent judge denied reconsideration. A second motion for reconsideration was
filed by petitioner but was also denid.
ISSUE: Whether or not petitioner is the insurer liable to indemnify private respondents under Sec. 378
of the Insurance Code.
RULING: From a reading of Sec. 378, which is couched in straight-forward and unambiguous
language, where proof of fault or negligence is not necessary for payment of any claim for death or
injury to a passenger or a third party, under the "no fault indemnity" provision, a claim may be made
against one motor vehicle only; if the victim is an occupant of a vehicle, the claim shall lie against the
insurer of the vehicle. in which he is riding, mounting or dismounting from; in any other case, the claim
shall lie against the insurer of the directly offending vehicle; and in all cases, the right of the party
paying the claim to recover against the owner of the vehicle responsible for the accident shall be
maintained. The claim shall lie against the insurer of the vehicle in which the "occupant" is riding, and
no other, irrespective of whether or not fault or negligence lies with the driver of the Superlines bus.
The claimant is not free to choose from which insurer he will claim the "no fault indemnity," as the
law, by using the word "shall, makes it mandatory that the claim be made against the insurer of the
vehicle in which the occupant is riding, mounting or dismounting from.

71

G.R. No. 98414 February 8, 1993
FIRST QUEZON CITY INSURANCE COMPANY, INC. vs.
THE HON. COURT OF APPEALS and DE DIOS MARIKINA TRANSPORTATION CO.
PONENTE: GRIO-AQUINO, J .:
FACTS: After sending off certain seamen at the departure area of Manila International Airport (MIA),
Plaintiff Jose V. del Rosario proceeded to the loading and unloading zone for public utility bus stop,
which was located in front of the MIA, to wait for a passenger bus bound for Quezon City. Plaintiff
saw a DMTC bus which was plying the Pasay to Quezon City route and tries to board it. While the
plaintiff was still on the bus' running board with his hand on the bus door's handle bar, the slowly
moving bus sped forward at a high speed, as a result of which, the plaintiff lost his balance and fell
from the bus. As plaintiff clung instinctively to the handle bar, he was dragged by the bus along the
road. Plaintiff was brought to the hospital where he was given immediate medical treatment and a
major surgical operation on his right leg. Plaintiff was confined at the hospital for 40 days, incurring
medical expenses. Plaintiff's medical expenses were advanced by his employer Maglines but he was
required to reimburse Maglines on a staggered basis by way of salary deductions. After his release
from the hospital, he returned to the hospital from time to time for further treatment and checkup. The
injuries had left plaintiff with a huge, ugly scar running almost the entire length of his right leg. Also,
the plaintiff incurred lost earning by way of unearned salaries due to said physical injuries and the
consequent hospital confinement. Plaintiff filed on June 26, 1985 the aforesaid complaint against
DMTC and its driver, Gil Agpalo. DMTC filed a third-party complaint against First Quezon City
Insurance Co. Inc. the court a quo ordered DMTC to pay plaintiff Jose V. del Rosario and ordered First
Quezon City Insurance Co., Inc. to indemnify DMTC. The bus company appealed to the Court of
Appeals. The now petitioner filed a motion for reconsideration which was denied in a resolution.
ISSUE: Whether the amount of the insurance companys liability can be limited to Php 12,000.00
RULING: Yes. The insurance company clearly passed the maximum limit of the petitioner's liability
for damages arising from death or bodily injury at P12,000.00 per passenger and its maximum liability
per accident at P50,000.00. Since only one passenger was injured in the accident, the insurer's liability
for the damages suffered by said passenger is pegged to the amount of P12,000.00 only. The limit of
P50,000.00 per accident means that the insurer's liability for any single accident will not exceed
P50,000.00 regardless of the number of passengers killed or injured therein. For example, if ten (10)
passengers had been injured by the operation of the insured bus, the insurer's liability for the accident
would not be P120,000.00 (at the rate of P12,000.00 per passenger) but would be limited to only
P50,000.00 for the entire accident, as provided in the insurance contract. The bus company may not
recover from the insurance company more than P 12,000.00 per passenger killed or injured, or fifty
thousand (P50,000.00) pesos per accident even if under the judgment of the court, the erring bus
operator will have to pay more than P12,000.00 to each injured passenger.

72

G.R. No. L-60887 November 13, 1991
PERLA COMPANIA DE SEGUROS, INC. vs.
HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES, HONORATO BORBON, SR.,
OFFICE OF THE PROVINCIAL SHERIFF, PROVINCE OF CEBU
PONENTE: FELICIANO, J .:p
FACTS: While passing through Liloan, Cebu, A PUJ owned and registered in the name of Nelia
Enriquez driven by Cosme Casas, collided with a private jeep owned by the late Calixto Palmes
(husband of private respondent Primitiva Palmes) who was then driving the private jeep. The private
jeep was flung away and then fell on its right side pinning down Calixto Palmes. He died as a result of
cardio-respiratory arrest due to a crushed chest. The accident also caused physical injuries on the part
of Adeudatus Borbon, 2 years old. Primitiva Palmes and Honorato Borbon, Sr. (father of minor
Adeudatus Borbon) filed a complaint against Cosme Casas and Nelia Enriquez (assisted by her
husband Leonardo Enriquez) before the then Court of First Instance of Cebu claiming actual, moral,
nominal and exemplary damages as a result of the accident. Jose R. Ramolete ordered the Borbon
claim excluded from the complaint, without prejudice to its being filed with the proper inferior court.
Court of First Instance rendered a Decision in favor of Primitiva Palmes, ordering common carrier
Nelia Enriquez to pay her damages for the death of Calixto Palmes. The judgment of the trial court
became final and executory and a writ of execution was thereafter issued. The writ of execution was,
however, returned unsatisfied. Consequently, Nelia Enriquez declared under oath that the PUJ
registered in her name was covered by a third-party liability insurance policy issued by petitioner Perla.
Palmes filed a motion for garnishment against the insurance policy issued by petitioner in favor of the
judgment debtor. Respondent Judge issued an order directing the Provincial Sheriff or his deputy to
garnish the third-party liability insurance policy. Petitioner moved for reconsideration but was denied.
ISSUE: Whether an insurance contract can be subjected to garnishment or execution to satisfy a
judgment in a civil case
RULING: Yes. Every interest which the judgment debtor may have in property may be subjected to
execution. In the instant case, the judgment debtor Nelia Enriquez clearly had an interest in the
proceeds of the third-party liability insurance contract. In a third-party liability insurance contract, the
insurer assumes the obligation of paying the injured third party to whom the insured is liable. From the
moment that the insured became liable to the third person, the insured acquired an interest in the
insurance contract, which interest may be garnished like any other credit. Also, it is not necessary that
summons be served in order that the trial court may validly acquire jurisdiction to bind the person of
the garnishee. All that is necessary for the trial court lawfully to bind the person of the garnishee or any
person who has in his possession credits belonging to the judgment debtor is service upon him of the
writ of garnishment. Through service of the writ of garnishment, the garnishee becomes a "virtual
party" to, or a "forced intervenor" in, the case and the trial court thereby acquires jurisdiction to bind
him to compliance with all orders and processes of the trial court with a view to the complete
satisfaction of the judgment of the court. In the present case, the trial court actually acquired
jurisdiction over petitioner Perla when it was served with the writ of garnishment of the third-party
liability insurance policy it had issued in favor of judgment debtor Nelia Enriquez. Perla cannot
successfully evade liability thereon.

73

G.R. No. 101439 June 21, 1999
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) vs.
COURT OF APPEALS, VICTORIA JAIME VDA. DE KHO, et. al.
PONENTE: QUISUMBING, J .:p
FACTS: National Food Authority (NFA) was the owner of a Chevrolet truck which was insured against
liabilities for death of and injuries to third persons with the GSIS. The said truck driven by Guillermo
Corbeta collided with a public utility vehicle, a Toyota Tamaraw. The Toyota Tamaraw was owned and
operated by Victor Uy, under the name and style of "Victory Line." The Tamaraw was a total wreck.
All the collision victims were passengers of the Toyota Tamaraw. Five passengers died while ten (10)
others sustained bodily injuries. Among those injured were private respondents. Three (3) cases were
filed with the Court of First Instance of Agusan del Norte and Butuan City for quasi-delict, damages
and attorney's fees. The cases were consolidated and partially tried. These cases were later on
transferred to Butuan City. Trial court rendered its decision holding that Corbeta's negligence was the
proximate cause of the collision. The findings of the trial court stated that the truck which crossed over
to the other lane was speeding because after the collision, its left front wheel was detached and the
truck traveled for about fifty (50) meters before falling into a ravine. Likewise, the court concluded that
if both vehicles had traveled in their respective lanes, the incident would not have occurred. However,
the Chevy cargo truck had crossed over to the other lane which, under traffic rules, was the lane of the
Toyota Tamaraw. Damages were likewise awarded. Corbeta, GSIS, and NFA appealed the decisions all
to no avail.
ISSUE:
1. Whether GSIS is solidarily liable with the negligent insured/owner-operator of the Chevrolet truck
for damages awarded to private respondents which are beyond the limitations of the insurance policy
and the Insurance Memorandum Circular No. 5-78.
2. Whether the private respondents have a cause of action against the petitioner
RULING:
1. No. It is now established that the injured or the heirs of a deceased victim of a vehicular accident
may sue directly the insurer of the vehicle. Note that common carriers are required to secure
Compulsory Motor Vehicle Liability Insurance [CMVLI] coverage as provided under Sec. 374 of the
Insurance Code, precisely for the benefit of victims of vehicular accidents and to extend them
immediate relief. although the victim may proceed directly against the insurer for indemnity, the third
party liability is only up to the extent of the insurance policy and those required by law. The direct
liability of the insurer under indemnity contracts against third party liability does not mean that the
insurer can be held liable in solidum with the insured and/or the other parties found at fault. For the
liability of the insurer is based on contract; that of the insured carrier or vehicle owner is based on
tort. The liability of GSIS based on the insurance contract is direct and not dependent on the recovery
of judgment from the insured, but not solidary with that of the NFA. The latter's liability is based
separately on Article 2180 of the Civil Code. The insurer could be held liable only up to the extent of
what was provided for by the contract of insurance, in accordance with CMVLI law. The maximum
indemnity for death was twelve thousand (P12,000.00) pesos per victim.
74

2. Records reveal that the private respondents sent a notice of loss to the petitioner informing the latter
of the accident. This notice constitutes evidence of the loss they suffered by reason of the vehicular
collision. The alleged delay in reporting the loss by the insured and/or by the beneficiaries must be
promptly raised by the insurer in objecting to the claims. When the insured presented proof of loss
before the trial court, the insurer failed to object to said presentation. The petitioner should have
promptly interposed the defense of delay, or belated compliance, concerning the notice of claim.
Moreover, the petitioner merely waited for the victims or beneficiaries to file their complaint. As
matters stand now, the defense of laches or prescription is deemed waived because of petitioner's
failure to raise it not only before but also during the hearing.

75

G.R. No. 76452 July 26, 1994
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS REYES
vs.
HON. ARMANDO ANSALDO, and RAMON MONTILLA PATERNO, JR.
PONENTE: QUIASON, J .:
FACRS: A letter-complaint of Ramon M. Paterno, Jr. was sent to respondent Commissioner, alleging
certain problems encountered by agents, supervisors, managers and public consumers of the Philippine
American Life Insurance Company (Philamlife) as a result of certain practices by said company.
Commissioner requested petitioner Rodrigo de los Reyes, in his capacity as Philamlife's president, to
comment on respondent Paterno's letter. A hearing on the letter-complaint was held by respondent
Commissioner on the validity of the Contract of Agency complained of by private respondent. Private
respondent was required by respondent Commissioner to specify the provisions of the agency contract
which he claimed to be illegal. Private respondent submitted a letter of specification to respondent
Commissioner. Respondent Commissioner furnished petitioner De los Reyes with a copy of private
respondent's letter of July 31, 1986, and requested his answer thereto. Manuel Ortega, Philamlife's
Senior Assistant Vice-President and Executive Assistant to the President, asked that respondent
Commission first rule on the questions of the jurisdiction of the Insurance Commissioner over the
subject matter of the letters-complaint and the legal standing of private respondent. Ortega filed a
Motion to Quash Subpoena/Notice. Commissioner denied the Motion to Quash.
ISSUE: Whether or not the resolution of the legality of the Contract of Agency falls within the
jurisdiction of the Insurance Commissioner.
RULING: No. As described in Section 414 of the Insurance Code, the Insurance Commissioner has the
authority to regulate the business of insurance. Since the contract of agency entered into between
Philamlife and its agents is not included within the meaning of an insurance business, Section 2 of the
Insurance Code cannot be invoked to give jurisdiction over the same to the Insurance
Commissioner. Expressio unius est exclusio alterius. With regard to private respondent's contention
that the quasi-judicial power of the Insurance Commissioner under Section 416 of the Insurance Code
applies in his case, the Court likewise ruled in the negative. The quasi-judicial power of the Insurance
Commissioner is limited by law "to claims and complaints involving any loss, damage or liability for
which an insurer may be answerable under any kind of policy or contract of insurance, . . ." Hence, this
power does not cover the relationship affecting the insurance company and its agents but is limited to
adjudicating claims and complaints filed by the insured against the insurance company. The Insurance
Commissioner cannot, in the exercise of its quasi-judicial powers, assume jurisdiction over
controversies between the insurance companies and their agents.