INSURANCE CODE / PD 612 as amended by RA 10607 The Court of Appeals reversed the decision of the trial court.

Court of Appeals reversed the decision of the trial court. It contends that Prudential had the
burden to show that there was a breach in the warranty and which it failed to do so. The Court
1. History of Insurance Law in the Philippines considered Prudential's admission that, at the time the insurance contract was entered into, the
a. Prudential Guarantee and Assurance Inc. v. Trans-Asia Shipping Lines Inc. vessel was properly classed by the Bureau Veritas, a classification recignized by the industry. It
b. Constantino v. Asia Life Inc. further contends that then subject warranty was in a form of a rider, hence, such contract should
be counstrued against Prudential. Finally, it interpreted the transaction between the parties as one
2. Contract of Insurance (Sec 2-5) of subrogation, instead of a loan. Thus, the amount given to Trans Asia was considered to be a
a. Travellers Insurance and Surety Corporation v. CA partial payment to its claim under the policy.

2.1. Rules on Construing Insurance Code Issue/s:

2.2. Rules on Construing Insurance Policy 1.) WON there was a breach in the warranty of the contract.
2.) WON such contract partakes the nature of a loan.
3. Elements of an Insurance Contract
a. Gulf Resorts, Inc. v. Philippine Charter Insurance Corp. Held:
The Supreme Court held that:
4. Characteristics of Insurance Contracts 1.) Prudential failed to establish that Trans Asia had violated and breached the policy condition
a. New World International Dev. (Phils), Inc v. NYK-FilJapan Shipping Corp provided in the insurance contract. The latter was able to establish proof of loss and coverage of
b. Loadstar Shipping Co, Inc. v. Malayan Insurance Co. Inc. the loss. Prudential also made a categorical admission at the time of the procurement of the
insurance contract that the vessel was properly classified by the Bureau Veritas.
5. Doing an Insurance Business Assuming that there was a breach in the policy, the renewal of the insurance policy for two
a. White Gold Marine Services, Inc v. Poineer Insurance and Surety Corp. consecutive years after the loss is deemed as a waiver on the part of Prudential. Breach of a
warranty or of a condition renders the contract defeasible at the option of the insurer; but if he so
5.1. Principle of Subrogation elects, he may waive his privilege and power to rescind by the mere expression of an intention so
to do.
6. Public Interest in the Insurance Business
a. Republic v. Del Monte Motors, Inc. 2.) the amount granted by Prudential to Trans Asia, evidenced by a document denominated as a
"Loan and Trust Receipt", constitued partial payment on the policy. Under said agreement,
7. Insurance v. Health Maintenance Organizations (HMOs) Prudential is obligated to hand over to Trans Asia "whatever recovery the latter may make" and
a. Philippine Healthcare Providers, Inc. v. CIR the latter to deliver to the former "all document necessary to prove its interest in the said property."
b. Fortune Medicare, Inc. v. Amorin Prudential was given the right of subrogation to whatever net recovery Trans Asia may obtain from
third parties resulting from the fire.
8. Parties to the Contract of Insurance (Sec 6-9)
a. Philippine Healthcare Providers, Inc v. CIR PETITION DENIED.

-----------------------------------------
Paz Lopez De Constantino vs Asia Life Insurance Company
Prudential Guarantee Assurance Inc. vs. Trans Asia Shipping Lines 87 Phil. 248
G.R. No. 151890
June 20, 2006 Facts: Appeal consolidates two cases. Asia life insurance Company (ALIC) was incorporated in
Delaware. For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No.
Facts: 93912 whereby it insured the life of Arcadio Constantino for 20 years for P3T with Paz Constantino
Trans Asia is the owner of the vessel M/V Asia Korea. Prudential Guarantee and Assurance Inc. as beneficiary.
insured said vessel for loss/damage of the hull and machinery arising from perils of fire and
explosion beginning from the period of July 1, 1993 until July 1, 1994. While the policy was in
First premium covered the period up to Sept. 26, 1942. No further premiums were paid after
force, a fire broke out. Trans Asia file its notice of claim for damages sustained by the vessel. It
the first premium and Arcadio died on Sept. 22, 1944.
also reserved its right to subsequently notify Prudential as to the full amount of the claim upon
Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945. On Aug.
final survey and determination by the average adjuster Richard Hogg International of the damage
1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and Agustina
sustained by the reason of fire. Trans Asia executed a document denominated "Loan and Trust
Peralta for the sum of P3T for 20 years. The annual premium stipulated was regularly paid from
Receipt" amounting to Php 3,000,000. Prudential Guarantee and Assurance Inc. denied the
Aug. 1, 1938 up to and including Sept. 30, 1940.
former's claim and requested for the return of the said amount. The insurance company contends
that there was a breach in the policy conditions, specifically, "Warranted Vessel Classed and Class
Maintained".  Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly
and such quarterly premiums were paid until Nov. 18, 1941.
The trial court held that Trans Asia failed to prove its compliance with the terms of the warranty. It
further explained that the concealment made by Trans Asia is sufficient to avoid the policy.  Last payment covered the period until Jan. 31, 1942.
Prudential, as the injured party, is entitled to rescind to rescind the contract. The trial court  Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary.
dismissed the complaint and directed Trans Asia to return the "loan" extended by Prudential.
 Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC. Aside
from this the insured borrowed from the policy P234.00 such that the cash surrender value of the
policy was sufficient to maintain the policy in force only up to Sept. 7, 1942.
Both policies contained this provision: All premiums are due in advance and any unpunctuality
in making such payment shall cause this policy to lapse unless and except as kept in force by the
grace period condition.
Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive the
proceeds of the policies less all sums due for premiums in arrears. They also allege that non-
payment of the premiums were caused by the closing of ALIC’s offices during the war and the
impossible circumstances by the war, therefore, they should be excused and the policies should
not be forfeited.
Lower court ruled in favor of ALIC.
Issue: May a beneficiary in a life insurance policy recover the amount thereof although the insured
died after repeatedly failing to pay the stipulated premiums, such failure being caused by war?
Held: NO. Due to the express terms of the policy, non-payment of the premium produces its
avoidance. In Glaraga v. Sun Life, it was held that a life policy was avoided because the premium
had not been paid within the time fixed; since by its express terms, non-payment of any premium
when due or within the 31 day grace period ipso facto caused the policy to lapse.
When the life insurance policy provides that non-payment of premiums will cause its forfeiture,
war does NOT excuse non-payment and does not avoid forfeiture. Essentially, the reason why
punctual payments are important is that the insurer calculates on the basis of the prompt
payments. Otherwise, malulugi sila.
It should be noted that the parties contracted not only as to peace time conditions but also as to
war-time conditions since the policies contained provisions applicable expressly to wartime
days. The logical inference therefore is that the parties contemplated the uninterrupted operation
of the contract even if armed conflict should ensue.
FACTS:
Case 1:
 The life of Arcadio Constantino was insured with Asia Life Insurance Company (Asia) for a
term of 20 years with Paz Lopez de Constantino as beneficiary. The first premium covered
the period up to September 26, 1942.
 After the first premium, no further premiums were paid. The insured died on September 22,
1944.
 Asia Life Insurance Company, being an American Corp., had to close its branch office in
Manila by reason of the Japanese occupation, i.e. from January 2, 1942, until the year
1945.
Case 2:
 Spouses Tomas Ruiz and Agustina Peralta. Their premium were initially annually but
subsequently changed to quarterly. The last quarterly premium was delivered on
November 18, 1941 and it covered the period until January 31, 1942.
 Upon the Japanese occupation, the insurer and insured were not able to deal with each
other
 Because the insured had borrowed on the policy P234.00 in January, 1941, the cash
surrender value of the policy was sufficient to maintain the policy in force only up to
September 7, 1942.
 Tomas Ruiz died on February 16, 1945 with Agustina Peralta as beneficiary. Her demand
for payment was refused on the ground of non-payment of the premiums.
 Plaintiffs: As beneficiaries, they are entitled to receive the proceeds of the policies minus all
sums due for premiums in arrears. The non-payment of the premiums was caused by the
closing of Asia's offices in Manila during the Japanese occupation and the impossible
circumstances created by war.
 lower court: absolved Asia
ISSUE: W/N the insurers still have a right to claim.
HELD: YES. lower court affirmed.
 it would seem that pursuant to the express terms of the policy, non-payment of premium
produces its avoidance
 Forfeitures of insurance policies are not favored, but courts cannot for that reason alone
refuse to enforce an insurance contract according to its meaning.
 Nevertheless, inasmuch as the non-payment of premium was the consequence of war, it
should be excused and should not cause the forfeiture of the policy
 3 Rules in case of war:
 Connecticut Rule
 2 elements in the consideration for which the annual premium is paid:
 mere protection for the year
 privilege of renewing the contract for each succeeding year by paying the premium for that
year at the time agreed upon
 payment of premiums is a condition precedent, the non-performance would be illegal
necessarily defeats the right to renew the contract
 New York Rule - greatly followed by a number of cases
 war between states in which the parties reside merely suspends the contracts of the life
insurance, and that, upon tender of all premiums due by the insured or his representatives
after the war has terminated, the contract revives and becomes fully operative
 United States Rule
 contract is not merely suspended, but is abrogated by reason of non-payments is peculiarly
of the essence of the contract
 it would be unjust to allow the insurer to retain the reserve value of the policy, which is the
excess of the premiums paid over the actual risk carried during the years when the policy
had been in force
 The business of insurance is founded on the law of average; that of life insurance
eminently so
 contract of insurance is sui generis
 Whether the insured will continue it or not is optional with him. There being no obligation to
pay for the premium, they did not constitute a debt.
 It should be noted that the parties contracted not only for peacetime conditions but also for
times of war, because the policies contained provisions applicable expressly to wartime
days. The logical inference, therefore, is that the parties contemplated uninterrupted
operation of the contract even if armed conflict should ensue.
 the fundamental character of the undertaking to pay premiums and the high importance of
the defense of non-payment thereof, was specifically recognized
 adopt the United States Rule: first policy had no reserve value, and that the equitable
values of the second had been practically returned to the insured in the form of loan and
advance for premium
[G.R. No. 82036. May 22, 1997]
Travellers Insurance & Surety Corporation vs. Hon. Court of Appeals & Vicente Mendoza
Facts:
Vicente Mendoza, Jr. as heir of his mother (Feliza Vineza de Mendoza) who was killed in a
vehicular accident, filed an action for damages against the erring taxicab driver (Rodrigo Dumlao),
the owner (Armando Abellon) of the taxicab (Lady Love Taxi with Plate No. 438-HA Pilipinas Taxi
1980) and the alleged insurer of the vehicle which featured in the vehicular accident. The erring
taxicab was allegedly covered by a third-party liability insurance policy issued by petitioner
Travellers Insurance & Surety Corporation. Petitioner was included in the complaint as the
compulsory insurer of the said taxicab under Certificate of Cover No. 1447785-3.
The trial court rendered judgment in favor of private respondent and ordered Rodrigo Dumlao,
Armando Abellon and petitioner to pay private respondent death indemnity, moral damages,
exemplary damages, attorney’s fees and other litigation expenses, jointly and severally.
The decision was affirmed by the CA and the subsequent MR was denied.
Hence this petition.
ISSUE: Whether petitioner is liable to private respondent?
insured, the beneficiary or any person claiming under an insurance contract. This ruling is
premised upon the compliance by the persons suing under an insurance contract, with the
indispensable requirement of having filed the written claim mandated by Section 384 of the
Insurance Code before and after its amendment. Absent such written claim filed by the person
suing under an insurance contract, no cause of action accrues under such insurance contract,
considering that it is the rejection of that claim that triggers the running of the one-year prescriptive
period to bring suit in court, and there can be no opportunity for the insurer to even reject a claim
if none has been filed in the first place, as in the instant case.
WHEREFORE, the instant petition is HEREBY GRANTED.

HELD: NO.
I. The right of the person injured to sue the insurer of the party at fault (insured), depends on
whether the contract of insurance is intended to benefit third persons also or on the insured. And
the test applied has been this: Where the contract provides for indemnity against liability to third
persons, then third persons to whom the insured is liable can sue the insurer. Where the contract
is for indemnity against actual loss or payment, then third persons cannot proceed against the
insurer, the contract being solely to reimburse the insured for liability actually discharged by him
thru payment to third persons, said third persons’ recourse being thus limited to the insured alone.”
The trial court did not distinguish between the private respondent’s cause of action against the
owner and the driver of the Lady Love taxicab and his cause of action against petitioner. The
former is based on torts and quasi-delicts while the latter is based on contract. Confusing these
two sources of obligations as they arise from the same act of the taxicab fatally hitting private
respondent’s mother, and in the face of overwhelming evidence of the reckless imprudence of the
driver of the Lady Love taxicab, the trial court brushed aside its ignorance of the terms and
conditions of the insurance contract and forthwith found all three - the driver of the taxicab, the
owner of the taxicab, and the alleged insurer of the taxicab - jointly and severally liable for actual,
moral and exemplary damages as well as attorney’s fees and litigation expenses. This is clearly
a misapplication of the law by the trial court, and respondent appellate court grievously erred in
not having reversed the trial court on this ground.

“While it is true that where the insurance contract provides for indemnity against liability to third
persons, such third persons can directly sue the insurer, however, the direct liability of the insurer
under indemnity contracts against third-party liability does not mean that the insurer can be held
solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer
is based on contract; that of the insured is based on tort.”

II. At the time of the vehicular incident which resulted in the death of private respondent’s mother,
during which time the Insurance Code had not yet been amended by Batas Pambansa (B.P.) Blg.
874, Section 384 provided as follows:

“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 amount of his loss, and/or 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 Commission or the Courts within
one year from date of accident, otherwise the claimant’s right of action shall prescribe” [emphasis
and underscoring supplied].

It is significant to note that the aforecited Section 384 was amended by B.P. Blg. 874 to
categorically provide that “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” [emphasis ours].

We have certainly ruled with consistency that the prescriptive period to bring suit in court under
an insurance policy, begins to run from the date of the insurer’s rejection of the claim filed by the
  On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose captain
filed a sea protest on arrival at the Manila South Harbor on October 5, 1993 respecting the
loss and damage that the goods on board his vessel suffered.
 Marina the Manila South Harbor arrastre or cargo-handling operator, received the shipment
on October 7, 1993. Upon inspection of the three container vans separately carrying the
generator sets, two vans bore signs of external damage while the third van appeared
unscathed. The shipment remained at Pier 3’s Container Yard under Marina’s care pending
clearance from the Bureau of Customs.
 Eventually, on October 20, 1993 customs authorities allowed petitioner’s customs broker,
Serbros Carrier Corporation, to withdraw the shipment and deliver the same to petitioner
New World’s job site in Makati City.
 An examination of the three generator sets in the presence of petitioner New World’s
representatives, Federal Builders (the project contractor) and surveyors of petitioner New
World’s insurer, Seaboard–Eastern Insurance Company (Seaboard), revealed that all three
sets suffered extensive damage and could no longer be repaired. For these reasons, New
World demanded recompense for its loss from respondents NYK, DMT, Advatech, LEP
Profit, LEP International Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK
acknowledged receipt of the demand, both denied liability for the loss.
 Since Seaboard covered the goods with a marine insurance policy, petitioner New World
sent it a formal claim dated November 16, 1993. Replying on February 14, 1994, Seaboard
required petitioner New World to submit to it an itemized list of the damaged units, parts,
and accessories, with corresponding values, for the processing of the claim. But petitioner
New World did not submit what was required of it, insisting that the insurance policy did not
include the submission of such a list in connection with an insurance claim. Reacting to
this, Seaboard refused to process the claim.
G.R. No. 171468 August 24, 2011
NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC., Petitioner, vs.
 On October 11, 1994 petitioner New World filed an action for specific performance and
NYK-FILJAPAN SHIPPING CORP., LEP PROFIT INTERNATIONAL, INC. (ORD), LEP
damages against all the respondents before the Regional Trial Court (RTC) of Makati City,
INTERNATIONAL PHILIPPINES, INC., DMT CORP., ADVATECH INDUSTRIES, INC.,
Branch 62, in Civil Case 94-2770
MARINA PORT SERVICES, INC., SERBROS CARRIER CORPORATION, and SEABOARD-
EASTERN INSURANCE CO., INC., Respondents.
RTC:
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 174241  RTC rendered a decision absolving the various respondents from liability with the exception
NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC., Petitioner, vs. of NYK.
SEABOARD-EASTERN INSURANCE CO., INC., Respondent. NYK’s liability
 The RTC found that the generator sets were damaged during transit while in the care of
PARTIES: NYK’s vessel, ACX Ruby. The latter failed to exercise the degree of diligence required of it
New World International Development – buyer in the face of a foretold raging typhoon in its path.
DMT Corporation – seller  The RTC ruled, however, that petitioner New World filed its claim against the vessel owner
Advatech – agent of seller NYK beyond the one year provided under the Carriage of Goods by Sea Act (COGSA).
LEP Profit International – New World filed its complaint on October 11, 1994 when the deadline for filing the action
NYK Fil Japan Shipping Corporation (NYK) – shipper, common carrier (on or before October 7, 1994) had already lapsed. The RTC held that the one-year period
ACX Ruby – ship should be counted from the date the goods were delivered to the arrastre operator and not
Marina Port Services, Inc. - arrastre from the date they were delivered to petitioner’s job site.
Serbros Carrier Corporation – customs broker
Seaboard–Eastern Insurance Company – Insurer! Seabord’s liability (insurer) - none
 As regards petitioner New World’s claim against Seaboard, its insurer, the RTC held that
FACTS: the latter cannot be faulted for denying the claim against it since New World refused to
 Petitioner New World bought from DMT through its agent, Advatech three emergency submit the itemized list that Seaboard needed for assessing the damage to the shipment.
generator sets worth US$721,500.00. Likewise, the belated filing of the complaint prejudiced Seaboard’s right to pursue a claim
 DMT shipped the generator sets by truck from Wisconsin, United States, to LEP Profit in against NYK in the event of subrogation.
Chicago, Illinois. From there, the shipment went by train to Oakland, California, where it
was loaded on S/S California Luna V59, owned and operated by NYK for delivery to CA:
petitioner New World in Manila. NYK issued a bill of lading, declaring that it received the  Affirmed RTC except with respect to Insurer Seabord’s liability
goods in good condition.  The CA held that petitioner New World can still recoup its loss from Seaboard’s marine
 NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72 that insurance policy, considering
it also owned and operated. a. that the submission of the itemized listing is an unreasonable imposition and
 b. that the one-year prescriptive period under the COGSA did not affect New World’s
right under the insurance policy since it was the Insurance Code that governed the
relation between the insurer and the insured.
Although petitioner New World promptly filed a petition for review of the CA decision before the
Court in G.R. 171468, Seaboard chose to file a motion for reconsideration of that decision.
On August 17, 2006 the CA rendered an amended decision, reversing itself as regards the
claim against Seaboard.
 The CA held that the submission of the itemized listing was a reasonable requirement
that Seaboard asked of New World.
 Further, the CA held that the one-year prescriptive period for maritime claims applied
to Seaboard, as insurer and subrogee of New World’s right against the vessel owner.
 New World’s failure to comply promptly with what was required of it prejudiced such
right.
Instead of filing a motion for reconsideration, petitioner instituted a second petition for review
before the Court in G.R. 174241, assailing the CA’s amended decision.
ISSUES:
G.R. 171468
1. Was the release from liability of DMT, Advatech, LEP, LEP Profit, Marina, and Serbros
who were at one time or another involved in handling the shipment, proper? – YES
G.R. 174241
1) whether or not the Seaboard’s request from petitioner New World for an itemized list is
a reasonable imposition and did not violate the insurance contract between them - NO
2) whether or not the the one-year COGSA prescriptive period for marine claims applies
to petitioner New World’s prosecution of its claim against Seaboard, its insurer.
SUPREME COURT:
G.R. 171468
Petitioner New World asserts that the roles of respondents DMT, Advatech, LEP, LEP Profit,
Marina and Serbros in handling and transporting its shipment from Wisconsin to Manila
collectively resulted in the damage to the same, rendering such respondents solidarily liable
with NYK, the vessel owner.
But the issue regarding which of the parties to a dispute incurred negligence is factual and is not
a proper subject of a petition for review on certiorari. And petitioner New World has been unable
to make out an exception to this rule.
Consequently, the Court will not disturb the finding of the RTC, affirmed by the CA, that the
generator sets were totally damaged during the typhoon which beset the vessel’s voyage from
Hong Kong to Manila and that it was her negligence in continuing with that journey despite the
adverse condition which caused petitioner New World’s loss.
That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil
Code, does not automatically relieve the common carrier of liability.
The latter (NYK common carrier) had the burden of proving that the typhoon was the proximate
and only cause of loss and that it exercised due diligence to prevent or minimize such loss
before, during, and after the disastrous typhoon. As found by the RTC and the CA, NYK failed to
discharge this burden.
G.R. 174241
1. UNREASONABLE!
The Court does not regard as substantial the question of reasonableness of Seaboard’s
additional requirement of an itemized listing of the damage that the generator sets suffered. The
record shows that petitioner New World complied with the documentary requirements evidencing
damage to its generator sets.
The marine open policy that Seaboard issued to New World was an all-risk policy. Such a policy
insured against all causes of conceivable loss or damage except when otherwise excluded or
when the loss or damage was due to fraud or intentional misconduct committed by the insured.
The policy covered all losses during the voyage whether or not arising from a marine peril.
Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice, delay in
voyage, or vessels unseaworthiness, among others. But
 Seaboard had been unable to show that petitioner New World’s loss or damage fell
within some or one of the enumerated exceptions.
 What is more, Seaboard had been unable to explain how it could not verify the
damage that New World’s goods suffered going by the documents that it already
submitted
 Seaboard cannot pretend that the documents are inadequate since they were
precisely the documents listed in its insurance policy.
Being a contract of adhesion, an insurance policy is construed strongly against the insurer who
prepared it. The Court cannot read a requirement in the policy that was not there.
Further, it appears from the exchanges of communications between Seaboard and Advatech
that submission of the requested itemized listing was incumbent on the latter as the seller DMT’s
local agent. Petitioner New World should not be made to suffer for Advatech’s shortcomings.
2..
Section 3(6) of the COGSA provides that the carrier and the ship shall be discharged from all
liability in case of loss or damage unless the suit is brought within one year after delivery of the
goods or the date when the goods should have been delivered.
But whose fault was it that the suit against NYK, the common carrier, was not brought to court
on time? The last day for filing such a suit fell on October 7, 1994.
 New World filed its formal claim for its loss with Seaboard as early as November 16, 1993
or about 11 months before the suit against NYK would have fallen due.
 if Seaboard had processed that claim and paid the same, Seaboard would have been
subrogated to New World’s right to recover from NYK. And it could have then filed the suit
as a subrogee.
 But, Seaboard made an unreasonable demand on February 14, 1994 for an itemized list
when it appeared settled that New World’s loss was total and when the insurance policy did
not require the production of such a list in the event of a claim.
Ultimately, the fault for the delayed court suit could be brought to Seaboard’s doorstep.
Section 241 of the Insurance Code provides that no insurance company doing business in the
Philippines shall refuse without just cause to pay or settle claims arising under coverages
provided by its policies.
under Section 243, the insurer has 30 days after proof of loss is received and ascertainment of
the loss or damage within which to pay the claim. If such ascertainment is not had within 60 days
from receipt of evidence of loss, the insurer has 90 days to pay or settle the claim. And, in case
the insurer refuses or fails to pay within the prescribed time, the insured shall be entitled to
interest on the proceeds of the policy for the duration of delay at the rate of twice the ceiling
prescribed by the Monetary Board.
Under Section 244, a prima facie evidence of unreasonable delay in payment of the claim is
created by the failure of the insurer to pay the claim within the time fixed in Section 243.
WHEREFORE,
the Court DENIES the petition in G.R. 171468 and AFFIRMS the Court of Appeals decision of
January 31, 2006 insofar as petitioner New World International Development (Phils.), Inc. is not
allowed to recover against respondents DMT Corporation, Advatech Industries, Inc., LEP
International Philippines, Inc., LEP Profit International, Inc., Marina Port Services, Inc. and
Serbros Carrier Corporation.
With respect to G.R. 174241, the Court GRANTS the petition and REVERSES and SETS ASIDE
the Court of Appeals Amended Decision of August 17, 2006.
 The Court DIRECTS Seaboard-Eastern Insurance Company, Inc. to pay petitioner New
World International Development (Phils.), Inc.
o US$721,500.00 under Policy MA-HO-000266,
o with 24% interest per annum for the duration of delay in accordance with Sections 243
and 244 of the Insurance Code and
o attorney’s fees equivalent to 10% of the insurance proceeds.
o Seaboard shall also pay, from finality of judgment, a 12% interest per annum on the
total amount due to petitioner until its full satisfaction.
SO ORDERED.
G.R. No. 185565, November 26, 2014
LOADSTAR SHIPPING COMPANY, INCORPORATED AND LOADSTAR INTERNATIONAL
SHIPPING COMPANY, INCORPORATED, Petitioners, v. MALAYAN INSURANCE COMPANY,
INCORPORATED, Respondent.
Facts:
Loadstar International Shipping, Inc. (Loadstar Shipping) and Philippine Associated Smelting and
Refining Corporation (PASAR) entered into a Contract of Affreightment for domestic bulk transport
of the latter’s copper concentrates which were loaded in Cargo Hold Nos. 1 and 2 of MV “Bobcat”,
a marine vessel owned by Loadstar International Shipping Co., Inc. (Loadstar International) and
operated by Loadstar Shipping under a charter party agreement. The cargo was insured with
Malayan Insurance Company, Inc. (Malayan).
The vessel’s chief officer on routine inspection found a crack on starboard side of the main deck
which caused seawater to enter and wet the cargo. Upon inspection, the Elite Adjusters and
Surveyor, Inc. (Elite Surveyor) confirmed that samples of copper concentrates from Cargo Hold
No. 2 were contaminated by seawater.
PASAR sent a formal notice of claim in the amount of [P]37,477,361.31 to Loadstar Shipping. On
the basis of the Elite Surveyor’s recommendation, Malayan paid PASAR the amount of
[P]32,351,102.32. PASAR signed a subrogation receipt in favor of Malayan. To recover the
amount paid and in the exercise of its right of subrogation, Malayan demanded reimbursement
from Loadstar Shipping, which refused to comply. Consequently, on September 19, 2001,
Malayan instituted with the RTC a complaint for damages. In its complaint, Malayan mainly alleged
that as a direct and natural consequence of the unseaworthiness of the vessel, PASAR suffered
loss of the cargo. Loadstar Shipping and Loadstar International denied respondent’s allegations
and averred that respondent’s payment to PASAR, on the basis of the latter’s fraudulent claim,
does not entitle respondent automatic right of recovery by virtue of subrogation.
Issue:
WON respondent is entitled to the right of recovery by virtue of subrogation against petitioners, on
the basis of PASAR’s claim.
Ruling:
Malayan’s claim against the petitioners is based on subrogation to the rights possessed by PASAR
as consignee of the allegedly damaged goods. The right of subrogation stems from Article 2207
of the New Civil Code. The rights of a subrogee cannot be superior to the rights possessed by a
subrogor. In other words, a subrogee cannot succeed to a right not possessed by the subrogor.
A subrogee in effect steps into the shoes of the insured and can recover only if the insured likewise
could have recovered. Consequently, an insurer indemnifies the insured based on the loss or
injury the latter actually suffered from. If there is no loss or injury, then there is no obligation on
the part of the insurer to indemnify the insured. Should the insurer pay the insured and it turns out
that indemnification is not due, or if due, the amount paid is excessive, the insurer takes the risk
of not being able to seek recompense from the alleged wrongdoer. This is because the supposed
subrogor did not possess the right to be indemnified and therefore, no right to collect is passed on
to the subrogee.
As regards the determination of actual damages, “[i]t is axiomatic that actual damages must be
proved with reasonable degree of certainty and a party is entitled only to such compensation for
the pecuniary loss that was duly proven. As Malayan is claiming for actual damages, it bears the
burden of proof to substantiate its claim. Actual damages are not presumed. The claimant must
prove the actual amount of loss with a reasonable degree of certainty premised upon competent
proof and on the best evidence obtainable. Specific facts that could afford a basis for measuring
whatever compensatory or actual damages are borne must be pointed out. Actual damages
cannot be anchored on mere surmises, speculations or conjectures.
It is not disputed that the copper concentrates carried by M/V Bobcat from Poro Point, La Union
to Isabel, Leyte were indeed contaminated with seawater. The issue lies on whether such
contamination resulted to damage, and the costs thereof, if any, incurred by the insured PASAR.
In this case, Malayan, as the insurer of PASAR, neither stated nor proved that the goods are
rendered useless or unfit for the purpose intended by PASAR due to contamination with seawater.
Hence, there is no basis for the goods’ rejection under Article 365 of the Code of Commerce.
Clearly, it is erroneous for Malayan to reimburse PASAR as though the latter suffered from total
loss of goods in the absence of proof that PASAR sustained such kind of loss.
White Gold Marine Services, Inc. V. Pioneer Insurance Surety Corp. (2005)
G.R.No. 154514 July 28, 2005
FACTS: (White Gold > Pioneer > Steamship Mutual)
 White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity
coverage for its vessels from The Steamship Mutual Underwriting Association
(Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety
Corporation (Pioneer)
 When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew
the coverage
 Steamship Mutual thereafter filed a case against White Gold for collection of sum of
money to recover the latter’s unpaid balance
 White Gold filed a complaint before the Insurance Commission
 Steamship Mutual violated Sections 186[4] and 187[5] of the Insurance Code
 Pioneer violated Sections 299,[6] 300[7] and 301[8] in relation to Sections 302 and
303, thereof
 Insurance Commission: dismissed the complaint
 no need for Steamship Mutual to secure a license because it was a Protection and
Indemnity Club (P & I Club) (NOT engaged in the insurance business)
 Pioneer need not obtain another license as insurance agent and/or a broker for
Steamship Mutual because Steamship Mutual was not engaged in the insurance
business
 Moreover, Pioneer was already licensed
 CA: affirmed Insurance Commission
ISSUE:
1. W/N Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines -
YES.
2. W/N Pioneer as resident agent of Steamship Mutual is required to obtain a license as an
insurance agent/broker - YES
HELD: petition is PARTIALLY GRANTED. CA affirmed. the revocation of Pioneer’s Certificate of
Authority and removal of its directors and officers, is DENIED
1. YES
Insurance Code
Sec. 2(2)
(2) The term "doing an insurance business" or "transacting an insurance business", within the
meaning of this Code, shall include:
(a) making or proposing to make, as insurer, any insurance contract;
(b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety;
(c) doing any kind of business, including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this Code.
In the application of the provisions of this Code the fact that no profit is derived from the making
of insurance contracts, agreements or transactions or that no separate or direct consideration is
received therefor, shall not be deemed conclusive to show that the making thereof does not
constitute the doing or transacting of an insurance business.
 The test to determine if a contract is an insurance contract or not, depends on the nature
of the promise, the act required to be performed, and the exact nature of the agreement
in the light of the occurrence, contingency, or circumstances under which the
performance becomes requisite
 a marine insurance undertakes to indemnify the assured against marine losses, such
as the losses incident to a marine adventure
 a mutual insurance company is a cooperative enterprise where the members are both
the insurer and insured
 the members all contribute, by a system of premiums or assessments, to the creation
of a fund from which all losses and liabilities are paid, and where the profits are divided
among themselves, in proportion to their interest
 provide 3 types of coverage:
 protection and indemnity
 war risks
 defense costs
 P & I Club
 a form of insurance against third party liability, where the third party is anyone other
than the P & I Club and the members
 Steamship Mutual as a P & I Club is a mutual insurance association engaged in the
marine insurance business
 Since a contract of insurance involves public interest, regulation by the State is
necessary. Thus, no insurer or insurance company is allowed to engage in the
insurance business without a license or a certificate of authority from the Insurance
Commission
2. YES.
Although Pioneer is already licensed as an insurance company, it needs a separate license to act
as insurance agent for Steamship Mutual.
Insurance Code
Sec. 299. No insurance company doing business in the Philippines, nor any agent thereof, shall
pay any commission or other compensation to any person for services in obtaining insurance,
unless such person shall have first procured from the Commissioner a license to act as an
insurance agent of such company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or
procurement of applications for insurance, or receive for services in obtaining insurance, any
commission or other compensation from any insurance company doing business in the
Philippines, or any agent thereof, without first procuring a license to act from the Commissioner,
which must be renewed annually on the first day of January, or within six months thereafter. Such
license shall be issued by the Commissioner only upon the written application of the person
desiring it, such application if for a license to act as insurance agent, being approved and
countersigned by the company such person desires to represent, and shall be upon a form
prescribed by the Commissioner giving such information as he may require, and upon payment of
the corresponding fee hereinafter prescribed. The Commissioner shall satisfy himself as to
competence and trustworthiness of the applicant and shall have the right to refuse to issue or
renew and to suspend or revoke any such license in his discretion. No such license shall be valid
after the thirtieth day of June of the year following its issuance unless it is renewed.
REPUBLIC OF THE PHILIPPINES vs. DEL MONTE MOTORS, INC.
504 SCRA 53 / October 9, 2006
FACTS:
The RTC rendered a Decision finding the defendants (Vilfran Liner, Inc., Hilaria Villegas and
Maura Villegas) jointly and severally liable to pay Del Monte Motors, Inc., P11,835,375.50
representing the balance of Vilfran Liner’s service contracts with respondent. The trial court further
ordered the execution of the Decision against the counterbond posted by Vilfran Liner and issued
by Capital Insurance and Surety Co., Inc. (CISCO).
CISCO opposed the Motion for Execution, in that the respondent had no record or document
regarding the alleged issuance of the counterbond; thus, the bond was not valid and enforceable.
The RTC granted the Motion for Execution and issued the corresponding Writ. Sheriff Paguyo
then proceeded to levy on the properties of CISCO. He also issued a Notice of Garnishment on
several depository banks of the insurance company. He also served a similar notice on the
Insurance Commission to enforce the Writ on the security deposit filed by CISCO with the
Commission in accordance with Sec. 203 of the Insurance Code.
The RTC ruled that Commissioner Malinis of the Office of the Insurance Commission is hereby
ordered to comply with its obligations under the Insurance Code. The office is ordered to withdraw
from the security deposit of CISCO the amount of P11,835.50 to be paid to Sheriff Paguyo in
satisfaction of the Notice of Garnishment.
However, respondent moved to cite Insurance Commissioner Malinis in contempt of court for his
refusal to obey the Resolution of the RTC.
The RTC held him in contempt of court for his refusal to implement its Order, saying that he has
no legal justification for his refusal to allow the withdrawal of CISCO’s security deposit.
ISSUE:
Whether or not the security deposit held by the Insurance Commissioner pursuant to Sec. 203 of
the Insurance Code may be levied or garnished in favor of only one insured.
HELD:
Petition is meritorious.
Sec. 203 of the Insurance Code provides:
Sec. 203. Every domestic insurance company shall, to the extent of an amount equal in value to
twenty-five per centum of the minimum paid-up capital required under section one hundred eighty-
eight, invest its funds only in securities, satisfactory to the Commissioner, consisting of bonds or
other evidences of debt of the Government of the Philippines or its political subdivisions or
instrumentalities, or of government-owned or controlled corporations and entities, including the
Central Bank of the Philippines: Provided, That such investments shall at all times be maintained
free from any lien or encumbrance; and Provided, further, That such securities shall be deposited
with and held by the Commissioner for the faithful performance by the depositing insurer of all its
obligations under its insurance contracts. The provisions of section one hundred ninety-two shall,
so far as practicable, apply to the securities deposited under this section.
Except as otherwise provided in this Code, no judgment creditor or other claimant shall have the
right to levy upon any of the securities of the insurer held on deposit pursuant to the requirement
of the Commissioner.
As worded, the law expressly and clearly states that the security deposit shall be (1) answerable
for all the obligations of the depositing insurer under its insurance contracts; (2) at all times free
from any liens or encumbrance; and (3) exempt from levy by any claimant.
To be sure, CISCO, though presently under conservatorship, has valid outstanding policies. Its
policyholders have a right under the law to be equally protected by its security deposit. To allow
the garnishment of that deposit would impair the fund by decreasing it to less than the percentage
of paid-up capital that the law requires to be maintained. Further, this move would create, in favor
of respondent, a preference of credit over the other policy holders and beneficiaries.
Basic is the statutory construction rule that provisions of a statute should be construed in
accordance with the purpose for which it was enacted. That is, the securities are held as a
contingency fund to answer for the claims against the insurance company by all its policyholders
and their beneficiaries.
This step is taken in the event that the company becomes insolvent or otherwise unable to satisfy
the claims against it. Thus, a single claimant may not lay stake on the securities to the exclusion
of all others. The other parties may have their own claims against the insurance company under
other insurance contracts it has entered into.
Philippine Health Care Providers vs. CIR (2009)
G.R. No. 167330 | 2009-09-18
Facts:
This is a Motion for Reconsideration (MR) of the Supreme Court’s decision.
Petitioner Philippine Health Care Providers (PHCP) is a domestic corporation whose primary
purpose is “[t]o establish, maintain, conduct and operate a prepaid group practice health care
delivery system or a health maintenance organization to take care of the sick and disabled persons
enrolled in the health care plan and to provide for the administrative, legal, and financial
responsibilities of the organization.” Its members pay an annual membership fee and are entitled
to various preventive, diagnostic and curative medical services.
Commissioner of Internal Revenue (CIR) assessed PHCP deficiency documentary stamp taxes
(DST) for the years 1996 and 1997 and these were imposed on the health care agreement with
its members. VAT was also assessed. PHCP protested but because the CIR did not act on it,
petitioner filed a petition for review with the Court of Tax Appeals (CTA) seeking cancellation of
the deficiency VAT and DST.
CTA ruled that PHCP was liable for VAT but DST was cancelled. CIR appealed in so far as the
cancellation of the DST claiming that PHCP’s health care agreement was a contract of insurance
subject to DST under Sec. 185 of the 1997 Tax Code.
SC ruled that petitioner’s health care agreement during the pertinent period was in the nature of
non-life insurance which is a contract of indemnity, and that it is liable for DST, because DST is
not a tax on the business transacted but an excise on the privilege, opportunity or facility offered
at exchanges for the transaction of the business.
In its MR, petitioner reveals for the first time that it availed of a tax amnesty under RA 9480.
Held:
Statutory Construction; Surplusages
1. It is a cardinal rule in statutory construction that no word, clause, sentence, provision or part of
a statute shall be considered surplusage or superfluous, meaningless, void and insignificant. To
this end, a construction which renders every word operative is preferred over that which makes
some words idle and nugatory. This principle is expressed in the maxim Ut magis valeat quam
pereat, that is, we choose the interpretation which gives effect to the whole of the statute – its
every word.
Health Maintenance Organization (HMO) is not engaged in the insurance business
2. Applying the “principal object and purpose test,” there is significant American case law
supporting the argument that a corporation (such as an HMO, whether or not organized for profit),
whose main object is to provide the members of a group with health services, is not engaged in
the insurance business.
3. The functions of such an organization are not identical with those of insurance or indemnity
companies. The latter are concerned primarily, if not exclusively, with risk and the consequences
of its descent, not with service, or its extension in kind, quantity or distribution; with the unusual
occurrence, not the daily routine of living. Hazard is predominant. On the other hand, the
cooperative is concerned principally with getting service rendered to its members and doing so at
lower prices made possible by quantity purchasing and economies in operation. Its primary
purpose is to reduce the cost rather than the risk of medical care; to broaden the service to the
individual in kind and quantity; to enlarge the number receiving it; to regularize it as an everyday
incident of living, like purchasing food and clothing or oil and gas, rather than merely protecting
against the financial loss caused by extraordinary and unusual occurrences, such as death,
disaster at sea, fire and tornado. It is, in this instance, to take care of colds, ordinary aches and
pains, minor ills and all the temporary bodily discomforts as well as the more serious and unusual
illness. To summarize, the distinctive features of the cooperative (HMO) are the rendering of
service, its extension, the bringing of physician and patient together, the preventive features, the
regularization of service as well as payment, the substantial reduction in cost by quantity
purchasing in short, getting the medical job done and paid for; not, except incidentally to these
features, the indemnification for cost after the services is rendered. Except the last, these are not
distinctive or generally characteristic of the insurance arrangement. There is, therefore, a
substantial difference between contracting in this way for the rendering of service, even on the
contingency that it be needed, and contracting merely to stand its cost when or after it is rendered.
4. American courts have pointed out that the main difference between an HMO and an insurance
company is that HMOs undertake to provide or arrange for the provision of medical services
through participating physicians while insurance companies simply undertake to indemnify the
insured for medical expenses incurred up to a pre-agreed limit.
Concept of Insurance
5. Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby
one undertakes for a consideration to indemnify another against loss, damage or liability arising
from an unknown or contingent event. An insurance contract exists where the following elements
concur:
(a) The insured has an insurable interest;
(b) The insured is subject to a risk of loss by the happening of the designed peril;
(c) The insurer assumes the risk;
(d) Such assumption of risk is part of a general scheme to distribute actual losses among a large
group of persons bearing a similar risk and
(e) In consideration of the insurer’s promise, the insured pays a premium
6. Not all the necessary elements of a contract of insurance are present in petitioner’s agreements.
To begin with, there is no loss, damage or liability on the part of the member that should be
indemnified by petitioner as an HMO. Under the agreement, the member pays petitioner a
predetermined consideration in exchange for the hospital, medical and professional services
rendered by the petitioner’s physician or affiliated physician to him.
FORTUNE MEDICARE, INC. vs. DAVID ROBERT U. AMORIN
G.R. No. 195872, 12 March 2014

FACTS:

While Amorin was on vacation in Hawaii, he underwent an emergency surgery, specifically

appendectomy, causing him to incur professional and hospitalization expenses of US$7,242.35
and US$1,777.79, respectively. Being a cardholder/member of Fortune Medicare, Inc. (Fortune
Care), a corporation engaged in providing health maintenance services to its members, he
attempted to recover the full amount upon his return to Manila. However, the company merely
approved a reimbursement of P12,151.36, an amount that was based on the average cost of
appendectomy, net of medicare deduction, if the procedure were performed in an accredited
hospital in Metro Manila. Amorin received under protest the approved amount, but asked for its
adjustment to cover the total amount of professional fees which he had paid, and eighty percent
(80%) of the approved standard charges based on “American standard”, considering that the
emergency procedure occurred in the U.S.A., citing provisions of the contract.

He then filed a complaint for breach of contract with damages but this was dismissed by the RTC.
It said that the parties intended to use the Philippine standard as basis. However, this was
reversed by the CA. The appellate court pointed out that, first, health care agreements such as
the subject Health Care Contract, being like insurance contracts, must be liberally construed in
favor of the subscriber. In case its provisions are doubtful or reasonably susceptible of two
interpretations, the construction conferring coverage is to be adopted and exclusionary clauses of
doubtful import should be strictly construed against the provider. Second, the CA explained that
there was nothing under the Health Care Contract which provided that the Philippine standard
should be used even in the event of an emergency confinement in a foreign territory.

ISSUE:
Whether or not a member of a health care provider can recover to the extent agreed in the contract.
Whether or not ambiguities should be taken in favor of the member.

HELD:

1) Yes. In the case at bar, the Supreme Court said that for purposes of determining the liability of
a health care provider to its members, jurisprudence holds that a health care agreement is in the
nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs
hospital, medical or any other expense arising from sickness, injury or other stipulated contingent,
the health care provider must pay for the same to the extent agreed upon under the contract.

2.) Yes. With regard the ambiguities in the contract, settled is the rule that they should be
interpreted against the party that caused the ambiguity. “Any ambiguity in a contract whose terms
are susceptible of different interpretations must be read against the party who drafted it.”
Furthermore, it affirmed the CA’s finding that Fortune Care’s liability to Amorin under the subject
Health Care Contract should be based on the expenses for hospital and professional fees which
he actually incurred, and should not be limited by the amount that he would have incurred had his
emergency treatment been performed in an accredited hospital in the Philippines.