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FACTS: Gulf Resorts, Inc at Agoo, La Union was A careful examination of the premium recapitulation
insured with American Home Assurance Company will show that it is the clear intent of the parties to
which includes loss or damage to shock to any of the extend earthquake shock coverage only to the two
property insured by this Policy occasioned by or swimming pools.
through or in consequence of earthquake
In the subject policy, no premium payments were
July 16, 1990: an earthquake struck Central Luzon made with regard to earthquake shock coverage,
and Northern Luzon so the properties and 2 swimming except on the two swimming pools. There is no
pools in its Agoo Playa Resort were damaged mention of any premium payable for the other resort
properties with regard to earthquake shock. This is
August 23, 1990: Gulf's claim was denied on the consistent with the history of petitioner’s previous
ground that its insurance policy only afforded insurance policies from AHAC-AIU.
earthquake shock coverage to the two swimming
pools of the resort In sum, there is no ambiguity in the terms of the
contract and its riders. Petitioner cannot rely on the
Petitioner insists that the parties have intended to general rule that insurance contracts are contracts of
extend the coverage through the attachment of the adhesion which should be liberally construed in favor
phrase "Subject to: Other Insurance Clause, Typhoon of the insured and strictly against the insurer
Endorsement, Earthquake Shock Endorsement,
company which usually prepares it. A contract of
Extended Coverage Endorsement, FEA Warranty &
adhesion is xxx
Annual Payment Agreement on Long Term Policies" to
the insurance policy. We cannot apply the general rule on contracts of
adhesion to the case at bar. Petitioner cannot claim it
ISSUE: Whether or not the insurance policy did not know the provisions of the policy. From the
earthquake shock coverage extends to other property inception of the policy, petitioner had required the
aside from the two swimming pools.
Page 1 of 81
respondent to copy verbatim the provisions and terms A contract of adhesion is one wherein a party, usually
of its latest insurance policy from AHAC-AIU. a corporation, prepares the stipulations in the
contract, while the other party merely affixes his
DOCTRINE: signature or his "adhesion" thereto. Consequently,
It is basic that all the provisions of the insurance any ambiguity therein is resolved against the insurer,
policy should be examined and interpreted in or construed liberally in favor of the insured.
consonance with each other. All its parts are reflective
PHILAMCARE HEALTH SYSTEMS, INC., vs. COURT
of the true intent of the parties. The policy cannot be
OF APPEALS and JULITA TRINOS
construed piecemeal. Certain stipulations cannot be
G.R. No. 125678 March 18, 2002
segregated and then made to control; neither do
YNARES-SANTIAGO, J.:
particular words or phrases necessarily determine its
character.
Facts:ErnaniTrinos, deceased husband of JulitaTrinos,
applied for a health care coverage withPhilamcare
Section 2(1) of the Insurance Code defines a contract
Health Systems, Inc. In the standard application form,
of insurance as an agreement whereby one
he answered “NO” to the following question:
undertakes for a consideration to indemnify another
against loss, damage or liability arising from an
Have you or any of your family members ever
unknown or contingent event. Thus, an insurance
consulted or been treated for high blood pressure,
contract exists where the following elements concur:
heart trouble, diabetes, cancer, liver disease, asthma
1. The insured has an insurable interest;
or peptic ulcer? (If Yes, give details).
2. The insured is subject to a risk of loss by the
happening of the designated peril;
Coverage of the health care agreement (HCA):
3. The insurer assumes the risk;
approved for a period of one year, Renewed 3 times
4. Such assumption of risk is part of a general scheme
yearly: March 1, 1988 - March 1, 1990; March 1,
to distribute actual losses among a large group of
1990 – June 1, 1990. The amount of coverage was
persons bearing a similar risk; and
increased to a maximum sum of P75,000.00 per
5. In consideration of the insurer's promise, the
disability.
insured pays a premium.
An insurance premium is the consideration paid an
Ernani’s entitlement under HCA:
insurer for undertaking to indemnify the insured
hospitalization benefits, whether ordinary or
against a specified peril. In fire, casualty, and marine emergency, listed therein
insurance, the premium payable becomes a debt as out-patient benefits" such as annual physical
soon as the risk attaches. examinations, preventive health care and other out-
patient services.
Page 2 of 81
After trial, the lower court ruled against Philam,
Ernaniwas subsequently confined. HISTORY ordered:
(everything happened within the period of coverage): 1. Defendants to pay and reimburse the medical and
Ernani suffered a heart attack and was confined at the hospital coverage of the late ErnaniTrinos in the
Manila Medical Center (MMC) for one month beginning amount of P76,000.00 plus interest, until the amount
March 9, 1990. is fully paid to plaintiff who paid the same;
Julita tried to claim the benefits under the health care 2. Defendants to pay the reduced amount of moral
agreement. damages of P10,000.00 to plaintiff;
Philamdenied her claim saying that the Health Care 3. Defendants to pay the reduced amount
Agreement was void. there was a concealment ofP10,000.00 as exemplary damages to plaintiff;
regarding Ernani’s medical history. Doctors at the 4. Defendants to pay attorney’s fees of P20,000.00,
MMC allegedly discovered at the time of Ernani’s plus costs of suit.
confinement that he was hypertensive, diabetic and
asthmatic, contrary to his answer in the application CA: affirmed the decision of the trial court but deleted
form. all awards for damages and absolved petitioner
Julita paid the hospitalization expenses herself, Reverente.Denied MR.
amounting to about P76,000.00
Ernani was discharged at MMC Issues:
He was attended by a physical therapist at home. Whether health care agreements are considered
Again he was admitted at the Chinese General insurance contracts.
Hospital. Whether there was concealment of material facts on
Julita brought her husband home again due to the part of Ernani that rendered the HCA void by
financial difficulties. virtue of the "Invalidation of agreement" contained in
In the morning of April 13, 1990, Ernani had fever and the contract.
was feeling very weak. Suppose there was concealment, what are the steps
Julita was constrained to bring him back to the Philam should have done?
Chinese General Hospital where he died on the same
day. Ruling:
YES, it is an insurance contract.
On July 24, 1990, respondent instituted with the Section 2 (1) of the Insurance Code defines a contract
Regional Trial Court of Manila, Branch 44, an action of insurance as an agreement whereby one
for damages against Philam and its president, Dr. undertakes for a consideration to indemnify another
Benito Reverente, She asked for reimbursement of against loss, damage or liability arising from an
her expenses plus moral damages and attorney’s fees. unknown or contingent event. An insurance contract
exists where the following elements concur:
Page 3 of 81
(1) The insured has an insurable interest; arising from sickness, injury or other stipulated
(2) The insured is subject to a risk of loss by the contingent, the health care provider must pay for the
happening of the designated peril; same to the extent agreed upon under the contract.
(3) The insurer assumes the risk;
(4) Such assumption of risk is part of a general NONE, there was no concealment of material facts.
scheme to distribute actual losses among a large Petitioner cannot rely on the stipulation regarding
group of persons bearing a similar risk; and "Invalidation of agreement" which reads:
(5) In consideration of the insurer’s promise, the Failure to disclose or misrepresentation of any
insured pays a premium. material information by the member in the application
or medical examination, whether intentional or
Section 3 of the Insurance Code states that any unintentional, shall automatically invalidate the
contingent or unknown event, whether past or future, Agreement from the very beginning and liability of
which may damnify a person having an insurable Philamcare shall be limited to return of all
interest against him, may be insured against. Every Membership Fees paid. An undisclosed or
person has an insurable interest in the life and health misrepresented information is deemed material if its
of himself. Section 10 provides: revelation would have resulted in the declination of
the applicant by Philamcare or the assessment of a
Every person has an insurable interest in the life and higher Membership Fee for the benefit or benefits
health: applied for.
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in The answer assailed by petitioner was in response to
part for education or support, or in whom he has a the question relating to the medical history of the
pecuniary interest; applicant. This largely depends on opinion rather than
(3) of any person under a legal obligation to him for fact, especially coming from respondent’s husband
the payment of money, respecting property or who was not a medical doctor. Where matters of
service, of which death or illness might delay or opinion or judgment are called for, answers made in
prevent the performance; and good faith and without intent to deceive will not avoid
(4) of any person upon whose life any estate or a policy even though they are untrue. Thus,
interest vested in him depends.
In the case at bar, the insurable interest of (A)lthough false, a representation of the expectation,
respondent’s husband in obtaining the health care intention, belief, opinion, or judgment of the insured
agreement was his own health. The health care will not avoid the policy if there is no actual fraud in
agreement was in the nature of non-life insurance, inducing the acceptance of the risk, or its acceptance
which is primarily a contract of indemnity. Once the at a lower rate of premium, and this is likewise the
member incurs hospital, medical or any other expense rule although the statement is material to the risk, if
Page 4 of 81
the statement is obviously of the foregoing character, Besides, the cancellation of health care agreements as
since in such case the insurer is not justified in relying in insurance policies require the concurrence of the
upon such statement, but is obligated to make further following conditions:
inquiry. There is a clear distinction between such a Prior notice of cancellation to insured;
case and one in which the insured is fraudulently and Notice must be based on the occurrence after
intentionally states to be true, as a matter of effective date of the policy of one or more of the
expectation or belief, that which he then knows, to be grounds mentioned;
actually untrue, or the impossibility of which is shown Must be in writing, mailed or delivered to the insured
by the facts within his knowledge, since in such case at the address shown in the policy;
the intent to deceive the insurer is obvious and Must state the grounds relied upon provided in
amounts to actual fraud. (Underscoring ours) Section 64 of the Insurance Code and upon request of
insured, to furnish facts on which cancellation is
The fraudulent intent on the part of the insured must based.
be established to warrant rescission of the insurance None of the above pre-conditions was fulfilled in this
contract. Concealment as a defense for the health case.
care provider or insurer to avoid liability is an
affirmative defense and the duty to establish such Anent the incontestability of the membership of
defense by satisfactory and convincing evidence rests respondent’s husband, we quote with approval the
upon the provider or insurer. In any case, with or following findings of the trial court:
without the authority to investigate, petitioner is liable
for claims made under the contract. Having assumed (U)nder the title Claim procedures of expenses, the
a responsibility under the agreement, petitioner is defendant Philamcare Health Systems Inc. had twelve
bound to answer the same to the extent agreed upon. months from the date of issuance of the Agreement
In the end, the liability of the health care provider within which to contest the membership of the patient
attaches once the member is hospitalized for the if he had previous ailment of asthma, and six months
disease or injury covered by the agreement or from the issuance of the agreement if the patient was
whenever he avails of the covered benefits which he sick of diabetes or hypertension. The periods having
has prepaid. expired, the defense of concealment or
misrepresentation no longer lie.
Philamshloud have followed Section 27 of the
Insurance Code:
"a concealment entitles the injured party to rescind a F. Applicability of Civil Code
contract of insurance." The right to rescind should be
exercised previous to the commencement of an action
on the contract.In this case, no rescission was made.
Page 5 of 81
Art. 2011. The contract of insurance is governed by Cristor was killed when he was hit by a failing branch
special laws. Matters not expressly provided for in of a tree. Insular Life was made liable to pay
such special laws shall be regulated by this Code. (n) the coverage in the total amount of P11,745.73,
representing the face value of the policy in
Art. 2012. Any person who is forbidden from the amount of P5,882.00 plus the additional benefits
receiving any donation under Article 739 cannot be for accidental death.
named beneficiary of a life insurance policy by the Carponia T. Ebrado filed with the insurer a claim for
person who cannot make any donation to him, the proceeds as the designated beneficiary therein,
according to said article. (n) although she admited that she and the insured were
merely living as husband and wife without the benefit
Art. 739. The following donations shall be void: of marriage.
Pascuala Vda. de Ebrado also filed her claim as the
(1) Those made between persons who were guilty of widow of the deceased insured. She asserts that she
adultery or concubinage at the time of the donation; is the one entitled to the insurance proceeds.
(2) Those made between persons found guilty of the Insular commenced an action for Interpleader before
same criminal offense, in consideration thereof; the trial court as to who should be given the proceeds.
(3) Those made to a public officer or his wife, The court declared Carponia as disqualified.
descedants and ascendants, by reason of his office.
In the case referred to in No. 1, the action for Issue: WON a common-law wife named
declaration of nullity may be brought by the spouse of as beneficiary in the life insurance policy of a legally
the donor or donee; and the guilt of the donor and married man can claim the proceeds in case of death
donee may be proved by preponderance of evidence of the latter?
in the same action. (n)
Held: No. Petition
INSULAR V EBRADO G.R. NO. L-44059 OCTOBER Ratio:
28, 1977 Section 50 of the Insurance Act which provides that
"the insurance shall be applied exclusively to the
Facts: proper interest of the person in whose name it is
J. Martin: made"
Cristor Ebrado was issued by The Life Assurance Co., The word "interest" highly suggests that the provision
Ltd., a policy for P5,882.00 with a rider for Accidental refers only to the "insured" and not to the beneficiary,
Death. He designated Carponia T. Ebrado as the since a contract of insurance is personal in character.
revocable beneficiary in his policy. He referred to her Otherwise, the prohibitory laws against illicit
as his wife. relationships especially on property and descent will
Page 6 of 81
be rendered nugatory, as the same could easily be for declaration of nullity of donation.” And, it would be
circumvented by modes of insurance. sufficient if evidence preponderates.
When not otherwise specifically provided for by the The insured was married to Pascuala Ebrado with
Insurance Law, the contract of life insurance is whom she has six legitimate children. He was also
governed by the general rules of the civil law living in with his common-law wife with whom he has
regulating contracts. And under Article 2012 of the two children.
same Code, any person who is forbidden from
receiving any donation under Article 739 cannot be ZENITH INSURANCE CORPORATION V. THE
named beneficiary of a fife insurance policy by the INSURANCE COMMISSION- INSURABLE
person who cannot make a donation to him. Common- INTEREST
law spouses are barred from receiving donations from
each other. Facts:
Article 739 provides that void donations are those > Zenith entered into an insurance contract,
made between persons who were guilty of adultery or denominated as Equipment Floater Policy covering a
concubinage at the time of donation. Kato Bachoe including its accessories and
There is every reason to hold that the bar appurtenances thereof, from loss of damage.
in donations between legitimate spouses and those Complainant paid the stipulated premiums therefore.
between illegitimate ones should be enforced in life > Within the period of effectivity of the policy, the
insurance policies since the same are based on similar two pieces of hydraulic wheel gear pumps, which are
consideration. So long as marriage remains the considered appurtenances and/or parts attached to
threshold of family laws, reason and and/or installed in the Kato BAchoe were lost, stolen
morality dictate that the impediments imposed upon and/or illegally detached by unknown thieves or
married couple should likewise be imposed upon malefactors
extra-marital relationship. > Despite repeated assurances by Zenith’s soliciting
A conviction for adultery or concubinage isn’t required agent, it refused and failed to settle and pay
exacted before the disabilities mentioned in Article complainant’s insurance claim.
739 may effectuate. The article says that in the case > Complainant seeks not only the payment of said
referred to in No. 1, the action for declaration of insurance claim of 70T plus legal interest, atty’s fees,
nullity may be brought by the spouse of the donor or and litigation expenses, but also the revocation or
donee; and the guilty of the donee may be proved by cancellation of the license of Zenith to do insurance
preponderance of evidence in the same action. business.
The underscored clause neatly conveys that > Zenith on the other hand contends that:
no criminal conviction for the offense is a condition o Complainant is not the real party in interest since
precedent. The law plainly states that the guilt of the the policy carries with it a designated loss payee, the
party may be proved “in the same acting BA Finance Corp
Page 7 of 81
o The policy insures against loss or damage caused essentially contracts of adhesion and applicants for
by fire and lightning, etc, while theft or robbery is insurance have no choice but to accept the terms and
NOT insured against in the policy, it not having been conditions in the policy even if they are not in full
expressly mentioned accord therewith.
o Loss nevertheless is excluded under the exception
of “infidelity exclusion” by the operator who left it (2) Whether or not the complainant was with
unguarded, unattended and deserted while entrusted insurable interest therein when the said policy
to him, and for failure to give timely notice of loss contract was procured.
o Complainant and/or BA Finance is guilty of The complainant has insurable interest in the insured
concealment and misrepresentation at the time they property at the time of the procurement of the
secured the policy, because at the time it became insurance policy. As the CC provides, “the contract of
operative, the complainant was NOT yet the owner of sale is perfected at the moment there is a meeting of
the property insured, the property still hot having minds upon the thing which is the object of the
been delivered to him, and BA finance had no contract and upon the price,” and Sec. 15 of the IC
insurable interest yet, henceforth, the contract of allows the insurance of a mere contingent or
insurance was VOID AB INITIO for lack of insurable expectant interest in anything if the same is founded
interest at the time the insurance took effect. on an actual right to the thing, or upon any valid
contract.
Issues and Resolutions:
(1) Whether or not the loss through theft or robbery As this is the case, mere possession of an equitable
claimed is within the coverage of the policy. title, like that pertaining to the buyer, gives rise to
The Insurance Commissioner, as reiterated by the SC, insurable interest in the property in which such title
found for the complainant in this wise: While the inheres. Furthermore, considering that Zenith’s agent
policy enumerated the risks covered, it does NOT, had been fully apprised of the circumstances prior to
however, in its express terms, limit compensability to the actual issuance of the policy and the
that stated in the enumeration. The enumerated risks endorsement, it cannot now allege that complainant
excluded did not include theft or robbery committed has no insurable interest on the property insured.
or perpetrated by an unidentified culprit, hence the Zenith is now precluded by the equitable principle of
complainant’s claim for damages is compensable. estoppel from impugning and dishonoring the very
insurance policy contract it issued and the
The foregoing policy is supported by the long time endorsement and increase in the coverage made
honored doctrine of “contra proferentem: which through its duly authorized agent.
provides that: “any ambiguity in the policy shall be
resolved in favor of the insured and against the G. Subrogation
insurer”. This is true because insurance contracts are
Page 8 of 81
Art. 2027. No annuity shall be claimed without first payment,” the insurer has no right of subrogation
proving the existence of the person upon whose life against the third party liable for the loss.
the annuity is constituted. Nevertheless, the insurer may recover from the third
party responsible for the damage to the insured
FIREMAN’S FUND INSURANCE COMPANY and FIR property under Article 1236 of the Civil Code.
ESTONE TIRE AND RUBBER COMPANY OF THE PH
ILIPPINES vs. JAMILA & COMPANY, INC. FACTS:
and FIRST QUEZON CITY INSURANCE CO., INC Jamila or the Veterans Philippine Scouts Security
Agency contracted to supply security guards to
SUMMARY: Jamila supplies security guards to Firestone. Jamila assumed responsibility for the acts
Firestone and assumes their responsibility. When of its security guards
some properties of Firestone were lost due to First Quezon City Insurance Co., Inc. executed a
connivance of some security guards, Fireman’s Fund bond in the sum of P20k to guarantee Jamila’s
as insurer paid Firestone the value of such and is now obligations under that contract
subrogated to Firestone’s right to reimbursement. May 18, 1963: Properties of Firestone valued at Php
They filed complaint to recover money when Jamila 11,925 were lost allegedly due to the acts of its
failed to pay. CFI dismissed complaint as to Jamila employees who connived with Jamila’s security guard
citing that there is no cause of action as the latter did Fireman’s Fund, as insurer, paid to Firestone
not consent to subrogation and there are no the amount of the loss and is
allegations in the complaint that Firestone now subrogated to Firestone’s right to get
investigated the loss. Subsequent MRs, F&F argue that reimbursement from Jamila
their cause of action is on the basis of legal Jamila and its surety, First Quezon City Insurance Co.,
subrogation. Inc., failed to pay the amount of the loss in spite of
SC: There was cause of action on the part of repeated demands.
Fireman’s Fund pursuant to Art. 2207. Payment by the Fireman’s Fund and Firestone Tire and Rubber Co
assurer to the assured operates as an equitable instituted this complaint against Jamila for the
assignment to the assurer of all the remedies which recovery of the sum of Php 11,925.00 plus interest,
the assured may have against the third party whose damages and attorney’s fees
negligence or wrongful act caused the loss. Jamila moved to dismiss the complaint on the ground
DOCTRINE: Loss or injury for risk must be covered of lack of cause of action
by the policy – Under Article 2207, the cause of the (1) complaint did not allege that Firestone,
loss or injury must be a risk covered by the policy to pursuant to the contractual stipulation quoted in the
entitle the insurer to the subrogation. Thus, where the complaint, had investigated the loss and that Jamila
insurer pays the insured for a loss which is not a risk was represented in the investigation and
covered by the policy, thereby effecting “voluntary
Page 9 of 81
(2) Jamila did not consent to the subrogation of CFI on Jamila’s MR: Granted Jamila’s MR. However,
Fireman’s Fund to Firestone’s right to get it completely ignored the 1st ground but reverted to
reimbursement from Jamilaand its surety. the second ground (no consent to subrogation thus
CFI: Dismissed the complaint as to Jamila on the no cause of action).
second ground that there wasno allegation that it It did not mention Firestone, the co-plaintiff of
had consented to the subrogation and, therefore, Fireman’s Fund.
Fireman’s Fund had no cause of action against it. Firestone and Fireman’s Fund filed MR on the ground
Also dismissed the complaint as to First Quezon City that Fireman’s Fund Insurance Company was suing on
Insurance Co., Inc. on the ground of res judicata as the basis of legal subrogation whereas CFI
the same action was previously filed in a civil case erroneously predicated its dismissal order on the
which was dismissed because of the failure of the theory that there was no conventional subrogation
same plaintiffs and their counsel to appear at the pre- because the debtor’s consent was lacking.
trial. Cited NCC 2207 which provides that “if the plaintiff’s
Firestone and Fireman’s Fund filed MR property has been insured, and he has received
CFI on F&F’s MR: Set aside its order of dismissal. indemnity from the insurance company for the injury
No res judicata as to First Quezon City Insurance or loss arising out of the wrong or breach of contract
Co., because civil case was dismissed without complained of, the insurance company shall be
prejudice subrogated to the rights of the insured against the
However, due to inadvertence, the lower court did not wrongdoer or the person who has violated the
state in its order of September 3, 1966 why it set contract”.
aside its prior order dismissing the complaint with CFI on F&F MR: Denied motion
respect to Jamila. F&F filed 2nd MR and called CFI’s attention to the fact
First Quezon City Insurance Co., Inc. filed its that the issue of subrogation was of no moment
answer to the complaint. because Firestone, the subrogor (??), is a party-
Jamila, upon noticing that the order had obliterated its plaintiff and could sue directly Jamila in its own right.
victory without any reason therefor, filed MR CFI on F&F’S 2nd MR:Denied 2nd MR without
reconsideration resolving contention
Invoked the first ground in its original motion Appeal to SC
to dismiss which had never been passed upon by the F&F: CFI’s dismissal of their complaint is contrary to
lower court that complaint did not allege that Article 2207 which provides for legal subrogation.
Firestone, pursuant to the contractual stipulation JAMILA: Legal subrogation under Art. 2207 requires
quoted in the complaint, had investigated the the debtor’s consent
loss and that Jamila was represented in the o Legal subrogation takes place in the cases
investigation mentioned in NCC 1302 and the instant case is not
among the 3 cases enumerated in that article
Page 10 of 81
o There could be no subrogation in this case because sustained. It joined as a party-plaintiff in order to help
according to F&F, the contract between Jamila and Fireman’s Fund to recover the amount of the loss from
Firestone was entered into on June 1, 1965 but Jamila and First Quezon City Insurance Co., Inc.
the loss complained of occurred on May Firestone had tacitly assigned to Fireman’s Fund its
18, 1963. cause of action against Jamila for breach of contract.
Sufficient ultimate facts are alleged in the complaint
ISSUES: to sustain that cause of action.
1) Whether the complaint of Firestone as subrogor 2) Fireman’s Fund’s action against Jamila is squarely
(???) states a cause of action against Jamila? (Not sanctioned by article 2207. As the insurer, Fireman’s
really) Fund is entitled to go after the person or entity
2) Whether the complaint of Fireman’s Fund as that violated its contractual commitment to answer for
subrogee states a cause of action against Jamila? the loss insured against (PAL vs. Heald Lumber Co).
(YES) CFI erred in applying to this case the rules on
3) Whether Jamila should reimburse Fireman’s novation. F&F in alleging in their complaint that
Fund? (Not decided here) Fireman’s Fund “became a party ininterest in this case
by virtue of a subrogation right given in its favor by”
HELD: Firestone, were not relying on the novation by
CFI Decision’s order of dismissal is legally untenable changeof creditors as contemplated in NCC 1291
so SET ASIDE with costs against Jamila & Co., Inc. and 1300 to 1303 but rather on NCC 2207.
RATIO:
[F&F’s counsel gratuitously alleged in their brief that Article 2207 is a restatement of a settled principle
Firestone and Jamila entered into a “contract of guard of American jurisprudence. Subrogation has been
services” on June 1, ‘65.That allegation was uncalled referred to as the doctrine of substitution. It “is an
for because it is not found in the complaint and so arm of EQUITY that may guide or even force one to
created confusion which did not exist. No copy of the pay a debt for which an obligation was incurred but
contract was annexed to the complaint. whichwas in whole or in part paid by another” (83
That confusing statement was an obvious error C.J.S. 576).
since it was expressly alleged in the complaint that “Subrogation is founded on principles of JUSTICE AND
the loss occurred on May 18, ‘63. The fact that such EQUITY, and its operation is governed by principles of
an error was committed is another instance equity. It rests onthe principle that substantial justice
substantiating the observation that F&F’s counsel had should be attained regardless of form, that is, its basis
not exercised due care in the presentation of is the doing of complete, essential, andperfect justice
his case.] between all the parties without regard to form”(83
1) Firestone is really a nominal party in this case as it C.J.S. 579- 80)
had already been indemnified for the loss which it had
Page 11 of 81
Subrogation is a normal incident of indemnity PAN MALAYAN INSURANCE CORPORATION,
insurance (Aetna L. Ins. Co. vs Moses). Upon petitioner, vs. COURT OF APPEALS, ERLINDA
payment of the loss, the insurer is entitled to be FABIE AND HER UNKNOWN DRIVER,
subrogate pro tanto to any right of action which
the insured may have against the third person FACTS:
whosenegligence or wrongful act caused the 1. Petitioner Panmalay was an insurer of the car of
loss (44 Am. Jur. 2nd 745). CANLUBANG AUTOMOTIVE RESOURCE CORP. which
was bumpt and damaged by the private respondent
The right of subrogation is of the highest EQUITY. The through its negligent driver.
LOSS IN THE FIRST INSTANCE is that of the INSURED 2. Petitioner PANMALAy paid the amount of insurance
but AFTERreimbursement or compensation, it to the insured.
becomes the LOSS OF THE INSURER (44 Am. Jur. 2d 3. Subrogated on the rights of the insured, petitioner
746). demand payment from the private respondent who
“Although many policies including policies in the refused to pay the claim of the petitioner.
standard form, now provide for subrogation, and thus 4. Petitioner filed a complaint against private
determine the rights of theinsurer in this respect, the respondent before the RTC.
equitable right of subrogation as the legal effect of 5. Private respondent filed a motion to dismiss
payment inures to the insurer without any arguing that payment under the “own damage” clause
formalassignment or any express stipulation to of the insurance policy precluded subrogation under
that effect in the policy” (44 Am. Jur. 2nd 746). Article 2207 of the Civil Code, since indemnification
thereunder was made on the assumption that there
Stated otherwise, when the insurance company pays was no wrongdoer or no third party at fault.
for the loss, such payment operates as an 6. The RTC dismissed the complaint aswell as the
equitable assignment to the insurer of the motion for reconsideration and this was affirmed by
property and all remedies which the insured may the CA.
have for the recovery thereof. That right is not
dependent upon, nor does it grow out of, any privity ISSUE:
of contract, or upon written assignment of claim, and WHETHER OR NOT, THE PETITIONER IS ALLOWED TO
payment to the insured makes the insurer an assignee RECOVERED THE AMOUNT OF INSURANCE IT HAD
in equity (Shambley v. Jobe-Blackley Plumbing and PAID TO THE INSURED FROM PRIVATE RESPONDENT.
Heating Co).3) Whether the plaintiffs would be able to
prove their cause of action against Jamila is another RULING:
question. According to the Supreme Court, Art. 2207 of the Civil
Code states that, “If the plaintiffs property has been
insured, and he has received indemnity from the
Page 12 of 81
insurance company for the injury or loss arising out of
the wrong or breach of contract complained of, the SVERIGES ANFARTYGS ASSURANCE VS QUA
insurance company shall be subrogated to the rights CHEE GAN (full case)
of the insured against the wrongdoer or the person
who has violated the contract.” On August 23 and 24, 1947, defendant
This was founded on the well-settled principle of Qua Chee Gan, a sole proprietorship, shipped on
subrogation. If the insured property is destroyed or board the S.S. NAGARA as per bills of lading Exhs. A
damaged through the fault or negligence of a party and B 2,032,000 kilos of bulk copra at Siain, Quezon,
other than the assured, the insurer, upon payment to consigned to DAL International Trading Co., in Gdynia,
the assured, will be subrogated to the rights of the Poland. The vessel first called at the port
assured to recover from the wrongdoer to the extent of Karlshamn, Sweden, where it unloaded 696,419
that the insurer has been obligated to pay. Payment kilos of bulk copra. Then, it proceeded
by the insurer to the assured operates as an equitable to Gdynia where it unloaded the remaining copra
assignment to the former of all remedies which the
shipment. The actual outturn weights in the latter
latter may have against the third party whose
port showed that only 1,569,429 kilos were
negligence or wrongful act caused the loss.
WHEREFORE, in view of the foregoing, the present discharged.
petition is GRANTED. Petitioner’s complaint for Because of the alleged confirmed cargo shortage, the
damages against private respondents is reinstated. So Polish cargo insurers had to indemnify the consignee
the case was remanded to the Trial Court for the trial for the value thereof. Thereafter, the former sued the
of the merit.
ship-owner, the Swedish East Asia
In the pertinent case of Sveriges Angfartygs Assurans
Company, in Gothenburg, Sweden. The latter, in
Forening v. Qua Chee Gan, supra.,the Court ruled that
turn, sued defendant and had it summoned to
the insurer who may have no rights of subrogation
due to “voluntary” payment may nevertheless recover Gothenburg. Defendant However refused to submit to
from the third party responsible for the damage to the that court's jurisdiction and its objection was
insured property under Article 1236 of the Civil Code. sustained.
In the pertinent case of Sveriges Angfartygs In March, 1951, a settlement was effected between
Assurans Forening v. Qua Chee Gan, supra., the
the Polish cargo insurers and the ship
Court ruled that the insurer who may have no
owner. Plaintiff, as the indemnity insurer for the
rights of subrogation due to “voluntary”
latter, paid approximately $60,733.53 to the Polish
payment may nevertheless recover from the
third party responsible for the damage to the insurers. On August 16, 1954, claiming to have been
insured property under Article 1236 of the Civil subrogated to the rights of the carrier, plaintiff sued
Code. defendant before the Court of First Instance of Manila
Page 13 of 81
to recover U.S. $60,733.53 plus 17% exchange tax, insured for loss or liability not covered by the policy
with legal interest, as the value of the alleged is not subrogated to the latter.[2] However, even
cargo short shipment and P10,000 as attorney's assuming that there was unwarranted - or "volunteer"
fees. Defendant answered in due time and countered - payment, plaintiff could still recover what it paid - in
with a P15,000 counterclaim for attorney's fees. effect - to the carrier from defendants shipper under
Art. 1236 of the Civil Code which allows a third person
On August 1, 1955, defendant filed a motion to
who pays on behalf of another to recover from the
dismiss on the ground of prescription under the
latter, although there is no subrogation. But since the
Carriage of Goods by Sea Act. The lowercourt
payment here was without the knowledge and consent
sustained the motion and plaintiff appealed here. We
of defendant, plaintiff's right of recovery
reversed the order of dismissals and remanded the
is defeasible by the former's defenses since the Code
case for further proceedings.[1]
is clear that the recovery only up to the amount by
After trial the lower court September 28, 1963, which the defendant was benefited.
rendered its decisions dismissing the complaint and
This brings Us to the crux of them case: Was there
awarding P10,000 as attorney's fees to defendant. It
a shortshipment? To support its case, plaintiff
ruled (a) that there was no shortshipment on
theorizes that defendant had two
defendant's part (b) that plaintiff's insurance policy
shipments at Siain, Quezon province: (1) 812,800
did not cover the shortshipment and (c)
kilos for Karlshamn and (2) 2,032,000 kilos
defendant was merely acting as an agent of
for Gdynia. The Karlshamn shipment was asserted to
Louis Dreyfus & Co., who was the real shipper.
have been covered by a separate bill of lading which
Taking issue with all the foregoing, plaintiff has however was allegedly lost
interposed the present appeal to Us on questions of subsequently. Thus, the 696,419 kilos of copra
fact and law, the amount involved exceeding unloaded in Karlshamn was not part of
P200,000.00. the Gdynia shipment and cannot explain the
confirmed shortage at the latter port.
Issue:
Plaintiff's cause of action suffers from several fatal
Was the non-presentation of the insurance policy fatal
defects and inconsistencies. The alleged shipment of
to plaintiff's case? The lower court ruled so, reasoning
812,800 kilos for Karlshamn is contradicted by
that unless the same as the best evidence were
plaintiff's admission in paragraphs 2 and 3 of its
presented, it could not be conclusively determined if
complaint that defendant shipped only 2,032,000 kilos
"liability for short shipment" was a covered
copra
risk. And the rule is that an insurer who pays the
at Siain, purportedly for both Gdynia and Karlshamn.
Page 14 of 81
[3]
Needless to state, plaintiff is bound by such judicial of the cargo unloaded at Karlshamn and Gdynia would
admission.[4] Moreover, the alleged existence of exceed what appears to have been loaded at Sian by
the Karlshamn bills of lading is negative by the fact as much as 233,848 kilos can only show that
that Exhibits A and B - the bills of lading presented by defendant really overshipped, not shortshipped. And
plaintiff - show that the 2,032,000 kilos of copra while this would not tally with defendant's claim of
loaded in Siain were for Gdynia only. Further having weighed the copra cargo 100% at Siain, thus
destroying its case is the testimony of plaintiff's own exposing a flaw in defendant's case, yet it is
witness, Mr. Claro Pasicolan, who on direct elementary that plaintiff must rely on the strength of
examination affirmed[5] that these two exhibits it own case to recover, and not bank on the weakness
constituted the complete set of documents which of the defense. Plaintiff here failed to establish its
them shipping agent in charge of the vessel case by preponderance on evidence.
S.S. NAGARA issued covering the copra cargo loaded
On the question whether defendant is the real shipped
at Slain. In view of this admission and for want of
or merely an agent of Louis Dreyfus & Co., suffice it to
evidentiary support, plaintiff's belated claim that there
say that although on Exhibit A and B his name
is another complete set of documents can not be
appears as the shipper, yet the very loading
seriously taken.
certificate, Exhibit 3 [5-Deposition of Horle], issued
Lastly, if there really was a separate bill of lading for and signed by the Chief Mate, and Master of the S.S.
the Karlshamn shipment, plaintiff could not have NAGARA shows that defendant was acting merely for
failed to present a copy thereof. Mr. Pasicolan testi- account of Louis Dreyfus & Co. The other
fied[6] that the shipping agent makes 20 copies of the documentary exhibits[7] confirm this. Anyway, in
documents of which three signed ones are given to whatever capacity defendant is considered, it cannot
the shipper and the rest, marked as non-negotiable be liable since no shortshipment was shown.
bills of lading - like Exhibits A and B - are kept on its
Plaintiff's action against defendant cannot, however,
file. For the three signed copies to be lost,We may
be considered as clearly unfounded as to warrant an
believe, but not for all the remaining 17 other
award of attorney's fees as damages to defendant
copies. Under the circumstances, it his
under par. 4, Art. 2208 of the Civil Code. The facts do
more reasonable to hold that there was no separate
not show that plaintiff's cause of action was so
shipment intended for Karlshamn, Sweden.
frivolous or untenably as to amount to
As a corollary to the foregoing conclusion, it stands to gross and evident bad faith.[8]
reason that the copra unloaded in Karlshamn formed
WHEREFORE, but for the award of attorney's fees to
part of the same - and only - shipment of defendant
defendant which is eliminated, the decision appealed
intended for Gdynia. Now the fact that the sum total
Page 15 of 81
from is, in all other respects, hereby affirmed. Costs wrong-doer or the person who has violated the
against plaintiff-appellant. contract. If the amount paid by the insurance
company doer not fully cover the injury or loss, the
RIZAL SURETY AND INSURANCE CO. vs. MANILA aggrieved party shall be entitled to recover the
RAILROAD CO. AND MANILA PORT SERVICE deficiency from the person causing the loss or injury.
The insurance have no greater right than the party in
Facts: interest thereof.
On Nov 29, 1960, a vessel named SS Flying Trader,
loaded on board a cargo which is an offset press PAUL FIRE & MARINE INSURANCE v
machine, from Italy to Manila. Upon reaching the port MACONDRAY & CO
of destination and upon unloading it, it was dropped b
the crane which resulted to damages of the machine. Facts:
The plaintiff as the insurer had paid the consignee, -Winthrop Products, Inc., of New York shipped aboard
Suter, Inc. the amount of P16.5k for the machine and the SS “Tai Ping”, owned and operated by Wilhelm
P180.70 for the International Adjustment Bureau as Wilhelmsen218 cartons and drums of drugs and
adjuster’s fee. However, the arrastre charges in this medicine with Winthrop-Stearns Inc., Manila,
particular shipment was paid on the weight or Philippines as consingee. BarberSteamship Lines, Inc.,
measurement basis whichever is higher, and not on agent of Wilhelm Wilhelmsen issued Bill of Lading No.
the value thereof. 34, in the name of Winthrop Products.
-The shipment was insured by the shipper against loss
Issue: and/or damage with the St. Paul Fire & Marine
Can the insurance get an amount greater than what InsuranceCompany.
was declared? -“Tai Ping” arrived at the Port of Manila.
-The said shipment was discharged complete and in
Held: good order with the exception of one (1) drum and
Plaintiff Insurance Company cannot recover from several cartonswhich were in bad condition.
defendants an amount greater than that to which the -Because consignee failed to receive the whole
consignee could lawfully lay claim. The management shipment and as several cartons of medicine were
contract is clear, the amount is limited to P500. received in badorder condition, Winthrop-Sterns
If the plaintiff’s property has been insured, and he has Philippines filed the corresponding claim in the
received indemnity from the insurance company for amount of Pl,109.67 representingthe C.I.F. value of
the injury or loss arising out of the wrong or breach of the damaged drum and cartons of medicine with the
contract complained of, the insurance company shall carrier and the arrestre.
be subrogated to the right of the insured against the -However, both refused to pay.
Page 16 of 81
-Winthrop-Sterns Philippines filed its claim with the Stearns Inc.) claim against the carrier (Macondray &
insurer, St. Paul Fire & Marine insurance. Co., Inc.,Barber Steamship Lines, Inc., Wilhelm
-The insurance company, on the basis of such claim, Wilhelmsen and the arrastre operators (Manila Port
paid to the consignee the insured value of the lost and Service and Manila Railroad Company) was only
damagedgoods, including other expenses in for the sum of Pl,109.67
connection therewith, in the total amount
of $1,134.46. ISSUE(S):
-As subrogee of the rights of the shipper 1.Whether or not, in case of loss or damage, the
and/or consignee, the insurer, St. Paul Fire & Marine liability of the carrier to the consignee is limited to the
Insurance Co., instituted with the Court of First C.I.F value of the goods which were lost or damaged
Instance the present action against the defendants for 2.Whether the insurer who has paid the claim in
the recovery of said amount of $1,134.46, plus costs. dollars to the consignee should be reimbursed in its
-The Lower court rendered judgment ordering peso equivalent on the date of discharge of the cargo
defendants Macondray & Co., Inc., Barber Steamship or on the date of the decision.
Lines, Inc. andWilhelm Wilhelmsen to pay to
the plaintiff P300.00. It also held defendants Manila HELD:
Railroad Company and Manila PortService to pay to The appeal is without merit and the judgement of the
plaintiff, jointly and severally, the sum of P809.67. lower court is affirmed.
-The Insurer, , contending that it should recover the -The purpose of the bill of lading is to provide for the
amount of $1,134.46 or its equivalent in pesos (the rights and liabilities of the parties in reference to the
rate of P3.90,instead of P2.00, for every US$1.00), contract tocarry.
filed a motion for reconsideration, but this was denied. -The stipulation in the bill of lading limiting the
-The Insurer argues that, as subrogee of the common carrier’s liability to the value of the goods
consignee, it should be entitled to recover from the appearing in thebill, unless the shipper or owner
defendants-appelleesthe amount of $1,134.46 which declares a greater value, is valid and binding.
it actually paid to the consignee and which represents -This limitation of the carrier’s liability is sanctioned
the value of the lost anddamaged shipment as well as by the freedom of the contracting parties to establish
other legitimate expenses such as the duties and cost suchstipulations, clauses, terms, or conditions as they
of survey of said shipment, andthat the exchange rate may deem convenient, provided they are not contrary
on the date of the judgment, which was P3.90 for to law,morals, good customs and public policy.
every US$1.00. -A stipulation fixing or limiting the sum that may be
-Defendants-appellees countered that: recovered from the carrier on the loss or deterioration
o Their liability is limited to the C.I.F. value of the of the goods is valid, provided it is:
goods, pursuant to contract of sea carriage embodied (a) reasonable and just under the circumstances, and
in the bill of lading that the consignee’s (Winthrop- (b) has been fairly and freely agreed upon.
Page 17 of 81
-In the case at bar, the liabilities of the defendants- shoes of the SHIPPER and is subrogated merely to the
appellees with respect to the lost or damaged latter's rights.
shipments areexpressly limited to the C.I.F. value of
the goods as per contract of sea carriage embodied in FACTS:
the bill of lading, whichreads: On 9 January 1985, United Coconut Chemicals,
o Whenever the value of the goods is less than $500 Inc. shipped 404.774 metric tons of distilled C6-
per package or other freight unit, their value in the C18 fatty acid on board MT "Stolt Sceptre," a
calculation and adjustment of claims for which the tanker owned by Stolt-Nielsen Philippines Inc.,
Carrier may be liable shall for the purpose of avoiding from Bauan, Batangas, Philippines, consigned to
uncertainties and difficulties in fixing value be deemed "Nieuwe Matex" at Rotterdam, Netherlands,
to be the invoice value, plus freight and insurance covered by Tanker Bill of Lading BL No. BAT-1.
if paid, irrespective of whether any other value is
greater or less. The shipment was insured under a marine cargo
policy with Petitioner National Union Fire
NATIONAL UNION FIRE INSURANCE VS. STOLT Insurance Company of Pittsburg (hereinafter
NIELSEN referred to as INSURER), a non-life American
insurance corporation, through its settling agent
EMERGENCY RECIT: United Coconut Chemicals in the Philippines, the American International
(SHIPPER) shipped distilled fatty acid on board MT Underwriters (Philippines), Inc., the other
“StoltSceptre” (CARRIER). The shipment was insured petitioner herein.
under a marine cargo policy with National Union Fire
Upon receipt of the cargo by the consignee in
Insurance Co (INSURER). Upon receipt of the cargo by the Netherlands, it was found to be discoloured
the consignee in Netherlands, it was totally and totally contaminated. Hence, a claim was
contaminated. Hence, claim was made on the made on the Insurer of the cargo. The insurer
INSURER of the cargo. The INSURER as subrogee filed as subrogee filed a claim for damages against
a claim for damages against the CARRIER with RTC the carrier with the RTC of Manila.
Manila. The CARRIER invoked that arbitration must be
done pursuant to the Charter. The INSURER opposed, The carrier filed a motion to dismiss on the
arguing that the provision on arbitration was not ground that the case was arbritrable and
pursuant to the charter party as embodied in
included in the Bill of Lading. SC: The INSURER
the bill of lading, arbitration must be done. The
cannot avoid the binding effect of the arbitration
insurer opposed the motion by arguing that the
clause. By subrogation, it became privy to the Charter
provision on arbitration was not included in the
Party as fully as the SHIPPER before the latter was
indemnified, because as subrogee it stepped into the
Page 18 of 81
bill of lading and even if it was included, it was procedure of the United States arbitration act,
nevertheless unjust and unreasonable. and a judgment of the court shall be entered
upon any award made by said arbitrator.
The RTC denied the motion but upon
Nothing in this clause shall be deemed to waive
reconsideration, the resolution on the motion to
Owner's right to lien on the cargo for freight,
dismiss was suspended or deferred.
deed of freight, or demurrage.
The carrier then filed a petition for review on
Clearly, the Bill of Lading incorporates by reference
certiorari with preliminary injunction/TRO which
was granted by the CA. the terms of the Charter Party. It is settled law that
the charter may be made part of the contract under
ISSUE: Are the terms of the Charter Party, which the goods are carried by an appropriate
particularly the provision on arbitration, binding on reference in the Bill of Lading. As the respondent
the INSURER? Appellate Court found, the INSURER "cannot feign
ignorance of the arbitration clause since it was already
HELD: Yes. The pertinent portion of the Bill of Lading
charged with notice of the existence of the charter
in issue provides in part:
party due to an appropriate reference thereof in the
xxx [A]ll the terms whatsoever of the said bill of lading and, by the exercise of ordinary
Charter except the rate and payment of freight diligence, it could have easily obtained a copy thereof
specified therein apply to and govern the rights either from the shipper or the charterer.
of the parties concerned in this shipment.xxx
We hold, therefore, that the INSURER cannot avoid
The provision on arbitration in the Charter Party the binding effect of the arbitration clause. By
reads: subrogation, it became privy to the Charter Party as
fully as the SHIPPER before the latter was
4. Arbitration. Any dispute arising from the
indemnified, because as subrogee it stepped into the
making, performance or termination of this
shoes of the SHIPPER-ASSURED and is subrogated
Charter Party shall be settled in New York,
merely to the latter's rights. It can recover only the
Owner and Charterer each appointing an
amount that is recoverable by the assured. And since
arbitrator, who shall be a merchant, broker or
the right of action of the SHIPPER-ASSURED is
individual experienced in the shipping business;
governed by the provisions of the Bill of Lading, which
the two thus chosen, if they cannot agree, shall
includes by reference the terms of the Charter Party,
nominate a third arbitrator who shall be an
necessarily, a suit by the INSURER is subject to the
admiralty lawyer. Such arbitration shall be
same agreements. It has not been shown that the
conducted in conformity with the provisions and
arbitral clause in question is null and void,
Page 19 of 81
inoperative, or incapable of being performed. Nor has docking and repairing of marine vessels while
any conflict been pointed out between the Charter the Prudential Guarantee and Assurance, Inc.
Party and the Bill of Lading. (Prudential) is in the non-life insurance
business.
CEBU SHIPYARD V WILLIAM LINES William Lines, Inc. is in the shipping business. It
Nature of Case: Petition for Review on Certiorari was the owner of M/V Manila City, a luxury
passenger-cargo vessel, which caught fire and
Digest maker: Erika Potian sank.
At the time of the unfortunate occurrence sued
SUMMARY: William Lines insured its M/V Manila upon, subject vessel was insured with Prudential
City under Prudential Guarantee for hull and for P45M for hull and machinery. The Hull Policy
machinery. Policy contained clause providing that included an “Additional Perils (INCHMAREE)”
loss/damage caused by negligence of charterers or Clause covering loss of or damage to the vessel
repairers are excluded from coverage. William Lines through the negligence of, among others, ship
brought the vessel to Cebu Shipyard for annual dry- repairmen
docking and repair. The two executed contracts Petitioner CSEW was also insured by Prudential
stipulating the liabilities of both parties, including for third party liability under a Shiprepairer’s
that the insurance on the vessel should be Legal Liability Insurance Policy. The policy was
maintained by the owner during period of the for P10 million only, under the limited liability
contract. After the vessel was transferred to the clause
docking quay, it caught fire and sank, resulting to On Feb. 5, 1991, William Lines, Inc. brought its
its eventual total loss. Cebu Shipyard claims that it vessel, M/V Manila City, to the Cebu Shipyard in
is a co-assured under the Marine Hull Insurance Lapulapu City for annual dry-docking and repair.
Policy by virtue of Clause 20, and therefore no On Feb. 6, 1991, an arrival conference was held
subrogation can be made by Prudential. SC held that between representatives of William Lines, Inc.
it is not and the petition was denied. and CSEW to discuss the work to be undertaken
DOCTRINE: Intention of parties to make each other on the M/V Manila City. The contracts,
co-assured is to be gleaned from the insurance denominated as Work Orders, were signed
policy itself and not from any other contract because thereafter., with the following stipulations:
the policy denominates the assured and the
beneficiaries. o 10. The Contractor shall replace at its own
work and at its own cost any work or
FACTS: material which can be shown to be
Cebu Shipyard and Engineering Works, Inc. defective and which is communicated in
(CSEW) is engaged in the business of dry- writing
Page 20 of 81
o 20. The insurance on the vessel should be Trial Court: CSEW to pay William Lines and
maintained by the customer and/or owner Prudential (45M)
of the vessel during the period the
contract is in effect. CA: Affirmed TC. Ordered the partial dismissal
of the case insofar as CSEW and William Lines
o The total liability of the Contractor to the were concerned.
Customer or of any sub-contractor shall
CSEW claims that the insurance policy does not
be limited in respect of any defect or
cover loss resulting from the fault of negligent
event to the sum of 1M.
charterers that are assured in the same policy
While the M/V Manila City was undergoing dry- and by virtue of clause 20, it is deemed a co-
docking and repairs within the premises of assured.
CSEW, the master, officers and crew of M/V ISSUE/S & RATIO:
Manila City stayed in the vessel, using their
cabins as living quarters. Other employees hired 1. WON CSEW is co-assured, thus losses
by William Lines to do repairs and maintenance caused by it are not covered by the policy-
work on the vessel were also present during the NO
dry-docking. a. The fact that clause 20 benefited
petitioner, does not automatically make it
On February 16, 1991, after subject vessel was a co-assured of William Lines.
transferred to the docking quay, it caught fire b. Intention of parties to make each other
and sank, resulting to its eventual total loss co-assured is to be gleaned from the
insurance policy itself and not from any
On February 21, 1991, William Lines, Inc. filed a
other contract because the policy
complaint for damages against CSEW, alleging
denominates the assured and the
that the fire which broke out in M/V Manila City
beneficiaries.
was caused by CSEWs negligence and lack of
c. Prudential named only William Lines, Inc.
care.
as the assured. There was no
Prudential was impleaded as co-plaintiff, after it manifestation of any intention of William
paid William Lines, Inc. the value of the hull and Lines Inc to make CSEW a co-assured.
machinery insurance on the M/V Manila City. As When the terms of a contract are clear, its
a result of such payment Prudential was stipulations control.
subrogated to the claim of P45 million, d. If CSEW were deemed co-assured, it
representing the value of the said insurance it would nullify any claim of William Lines
paid. Inc. No shipowner would agree to make
Page 21 of 81
shiprepairer a co-assured because any circumstances vis-a-vis the nature of the
claim it has under the policy would be provision sought to be enforced should be
invalidated. Such result could not have considered, bearing in mind the principles
been intended by William Lines Inc. of equity and fair play.
2. WON CSEW had “management and supervisory
control“ of the ship at the time the fire broke RULING: Petition denied.
out- YES
a. The factual findings by the CA are MANILA MAHOGANY V CA
conclusive on the parties and are not
reviewable by this Court. FACTS:
3. WON the doctrine of res ipsa loquitur applies
against the crew- YES Petitioner insured its Mercedes Benz 4-door sedan
a. For the doctrine of res ipsa loquitur to with respondent insurance company . The insured
apply to a given situation, the following vehicle was bumped and damaged by a truck owned
conditions must concur: (1) the accident by San Miguel Corporation (SMC). For the damage
was of a kind which does not ordinarily caused, respondent company paid petitioner ₱
occur unless someone is negligent; and 5,000.00 in amicable settlement. Petitioner’s general
(2) that the instrumentality or agency manager executed a Release of Claim, subrogating
which caused the injury was under the respondent company to all its right to action against
exclusive control of the person charged San Miguel Corp. Respondent company wrote the
with negligence. Insurer Adjusters, Inc. to demand reimbursements
b. The facts and evidence reveal from San Miguel Corporation of the amount it had
the presence of these conditions. First, the paid petitioner. Insurer Adjusters, Inc. refused
fire would not have happened in the reimbursement alleging that SMC had already paid
ordinary course of things if reasonable petitioner ₱ 4,500.00 for the damages to petitioner’s
care and diligence had been exercised. motor vehicle, as evidenced by a cash voucher and
4. WON the provisions limiting CSEW’s liability for Release of Claim executed by the General Manager of
negligence to a maximum of Php 1 million are petitioner discharging SMC from “ all actions, claims,
valid- NO demands the right of action that now exist or
a. Although contracts of adhesion have been hereafter develop arising out of or as a consequence
consistently upheld as valid, reliance on of the accident.
such contracts cannot be favored
especially where the facts and Respondent demanded the ₱ 4,500.00 amount from
circumstances warrant that subject petitioner. Petitioner refused. Suit was filed for
stipulations be disregarded. Tthe facts and recovery. City Court ordered petitioner to pay
Page 22 of 81
respondent. CFI affirmed. CA affirmed with entitled to recover from the insured the amount of
modification that petitioner was to pay respondent the insurance money paid. Petitioner by its own acts
total amount of ₱ 5,000.00 it had received from released SMC, thereby defeating respondent’s right of
respondent. subrogation, the right of action against the insurer
was also nullified.
Petitioner’s argument: Since the total damages were
valued at P9,486.43 and only ₱ 5,000.00 was received Since the insurer can be subrogated to only such
by petitioner from respondent, petitioner argues that rights as the insured may have, should the insured,
it was entitled to go after SMC to claim the additional after receiving payment from the insurer, release the
which was eventually paid to it. wrongdoer who caused the loss, the insurer losses his
rights against the latter. But in such a case, the
Respondent’s argument: No qualification to its right of insurer will be entitled to recover from the insured
subrogation. whatever it has paid to the latter, unless the release
was made with the consent of the insurer.
ISSUE:
FF CRUZ AND CO vs. CA
Whether or not the insured should pay the insurer
despite that the subrogation in the Release of Claim
Facts:
was conditioned on recovery of the total amount of
A fire broke up from the furniture shop of the
damages that the insured has sustained.
petitioner in Caloocan city early September 6, 1974.
Prior to that, neighbor of the said shop requested that
RULING:
the petitioner should build a firewall but failed to do
so. The cause of the fire was never discovered. Private
NO. Supreme Court said there being no other
respondent got P35k from the insurance on their
evidence to support its allegation that a gentleman’s
house and contents thereof.
agreement existed between the parties, not embodied
in the Release of Claim, such Release of Claim must
Issue:
be taken as the best evidence of the intent and
Whether or not the 35k be deducted from the
purpose of the parties. CA was correct in holding
damages thereof
petitioner should reimburse respondent ₱ 5,000.00.
Ruling:
When Manila Mahogany executed another release
Since P35k had already been claimed by the
claim discharging SMC from all rights of action after
respondents, the court held that such amount should
the insurer had paid the proceeds of the policy – the
compromise agreement of ₱ 5,000.00– the insurer is
Page 23 of 81
be deducted from the award of damages in Inc., for the period beginning November 13, 1956 to
accordance with Art 2207 NCC November 12, 1957.
Art. 2207. If the plaintiff’s property has been insured, 2. On January 1, 1957, the Itogon-Suyoc Mines, Inc.
and he has received indemnity from the insurance sponsored a boxing contest for general entertainment.
company for the injury or loss arising out of the wrong 3. Insured Eduardo de la Cruz, a non-professional
or breach of contract complained of, the insurance boxer participated.
company shall be subrogated to the rights of the 4.In the course of his bout with another person,
insured against the wrongdoer or the person who has likewise a non-professional, of the same height,
violated the contract. If the amount paid by the weight, and size, Eduardo slipped and was hit by his
insurance company does not fully cover the injury or opponent on the left part of the back of the head,
loss, the aggrieved party shall be entitled to recover causing Eduardo to fall, with his head hitting the rope
the deficiency from the person causing the loss or of the ring.
injury. 5. He was brought to the Baguio General Hospital the
Having been indemnified by their insurer, private following day. The cause of death was reported as
respondents are entitled only to recover the deficiency hemorrhage, intracranial, left.
from the petitioner. 6. Simon de la Cruz, the father of the insured and
Whether or not the insurer should exercise the rights who was named beneficiary under the policy, filed a
of the insured to which it had been subrogated lies claim with the insurance company for payment of the
solely within the former’s sound discretion. Since the indemnity under the insurance policy.
insurer is not a party to the case, its identity is not of 7. As the claim was denied, De la Cruz instituted the
record and no claim is made on its behalf, the private action in the Court of First Instance of Pangasinan for
respondent’s insurer has to claim his right to specific performance.
reimbursement of the P35,000.00 paid to the insured. 8. Defendant insurer set up the defense that the
death of the insured, caused by his participation in a
boxing contest, was not accidental and, therefore, not
covered by insurance.
WEEK 3 9. After due hearing the court rendered the decision in
favor of the plaintiff which is the subject of the
Dela Cruz vs. Capital Insurance & Surety Co. present appeal.
10. Eduardo was insured "against death or disability
FACTS: 1. caused by accidental means".
Eduardo de la Cruz, employed as a mucker in the 11. Appellant insurer now contends that while the
Itogon-Suyoc Mines, Inc. in Baguio, was the holder of death of the insured was due to head injury, said
an accident insurance policy (No. ITO-BFE-170) injury was sustained because of his voluntary
underwritten by the Capital Insurance & Surety Co., participation in the contest.
Page 24 of 81
12. It is claimed that the participation in the boxing defendant insurance company to include death
contest was the "means" that produced the injury resulting from a boxing match or other sports among
which, in turn, caused the death of the insured. And, the prohibitive risks leads inevitably to the conclusion
since his inclusion in the boxing card was voluntary on that it did not intend to limit or exempt itself from
the part of the insured, he cannot be considered to liability for such death.
have met his death by "accidental means". DOCTRINE
ISSUE: 1. WON the death of Eduardo de la Cruz is In other words, where the death or injury is not the
covered by accident insurance policy. natural or probable result of the insured's voluntary
HELD: 1.Yes. While the participation of the insured in act, or if something unforeseen occurs in the doing of
the boxing contest is voluntary, the injury was the act which produces the injury, the resulting death
sustained when he slid, giving occasion to the is within the protection of policies insuring against
infliction by his opponent of the blow that threw him death or injury from accident.
to the ropes of the ring.
RATIO: 1. The terms "accident" and "accidental", as Sun v CA G.R. No. 92383 July 17, 1992
used in insurance contracts, have not acquired any J. Cruz
technical meaning, and are construed by the courts in Facts:
their ordinary and common acceptation. Thus, the Lim accidentally killed himself with his gun after
terms have been taken to mean that which happen by removing the magazine, showing off, pointing the gun
chance or fortuitously, without intention and design, at his secretary, and pointing the gun at his temple.
and which is unexpected, unusual, and unforeseen. An The widow, the beneficiary, sued the petitioner and
accident is an event that takes place without one's won 200,000 as indemnity with additional amounts for
foresight or expectation other damages and attorney’s fees. This was
— sustained in the Court of Appeals then sent to the
an event that proceeds from an unknown cause, or is Supreme court by the insurance company.
an unusual effect of a known cause and, therefore, Issue:
not expected. 1. Was Lim’s widow eligible to receive the benefits?
2. The generally accepted rule is that, death or injury 2. Were the other damages valid?
does not result from accident or accidental means Held:
within the terms of an accident-policy if it is the 1. Yes 2. No
natural result of the insured's voluntary act, Ratio: 1. There was an accident.
unaccompanied by anything unforeseen except the De la Cruz v. Capital Insurance says that "there is no
death or injury. accident when a deliberate act is performed unless
3. Death or disablement resulting from engagement some additional, unexpected, independent and
in boxing contests was not declared outside of the unforeseen happening occurs which produces or
protection of the insurance contract. Failure of the
Page 25 of 81
brings about their injury or death." This was true Ty v. Filipinas Compañia de Seguros - Insurance
when he fired the gun. Policy
Under the insurance contract, the company wasn’t 17 SCRA 364
liable for bodily injury caused by attempted suicide or Facts:
by one needlessly exposing himself to danger except > Ty was employed as a mechanic operator by
to save another’s life. Braodway Cotton Factory at Grace Park, Caloocan.
Lim wasn’t thought to needlessly expose himself to > In 1953, he took personal accident policies from 7
danger due to the witness testimony that he took insurance companies (6 defendants), on different
steps to ensure that the gun wasn’t loaded. He even dates, effective for 12 mos.
assured his secretary that the gun was loaded. > On Dec. 24. 1953, a fire broke out in the factory
There is nothing in the policy that relieves the insurer were Ty was working. A hevy object fell on his hand
of the responsibility to pay the indemnity agreed upon when he was trying to put out the fire.
if the insured is shown to have contributed to his own > From Dec. 1953 to Feb. 6, 1954 Ty received
accident. treatment at the Nat’l Orthopedic Hospital for six
2. “In order that a person may be made liable to the listed injuries. The attending surgeon certified that
payment of moral damages, the law requires that his these injuries would cause the temporary total
act be wrongful. The adverse result of an action does disability of Ty’s left hand.
not per se make the act wrongful and subject the act > Insurance companies refused to pay Ty’s claim for
or to the payment of moral damages. The law could compensation under the policies by reason of said
not have meant to impose a penalty on the right to disability of his left hand. Ty filed a complaint in the
litigate; such right is so precious that moral damages municipal court who decided in his favor.
may not be charged on those who may exercise it > CFI reversed on the ground that under the uniform
erroneously. For these the law taxes costs.” terms of the policies, partial disability due to loss of
If a party wins, he cannot, as a rule, recover either hand of the insured, to be compensable must
attorney's fees and litigation expenses, since it is not be the result of amputation.
the fact of winning alone that entitles him to recover Issue:
such damages of the exceptional circumstances Whether or not Ty should be indemnified under his
enumerated in Art. 2208. Otherwise, every time a accident policies.
defendant wins, automatically the plaintiff must pay Held.
attorney's fees thereby putting a premium on the NO.
right to litigate which should not be so. For those SC already ruled in the case of Ty v. FNSI that were
expenses, the law deems the award of costs as the insurance policies define partial disability as loss
sufficient.” of either hand by amputation through the bones of the
wrist, the insured cannot recover under said policies
for temporary disability of his left hand caused by the
Page 26 of 81
fractures of some fingers. The provision is clear
enough to inform the party entering into that contract Issue: Is the Philippine American Life Insurance Co.
that the loss to be considered a disability entitled to liable to the petitioner for the amount covered by the
indemnity, must be severance or amputation of the supplemental contract?
affected member of the body of the insured.
Held: Yes.
Calanoc v. CAG.R. No. L-8151 December 16, The circumstances of Basilio’s death cannot be taken
1955J. as purely intentional on the part of Basilio to expose
himself to the danger. There is no proof that his death
Bautista Angelo was the result of intentional killing because there is
Doctrine: In case of ambiguity in an insurance the possibility that the malefactor had fired the shot
contract covering accidental death, the Supreme merely to scare away the
Court held that such terms shall be construed strictly people around. In this case, the company’s defense
against the insurer and liberally in favor of the insured points out that Basilio’s is included among the risks
in order to effect the purpose of indemnity. excluded in the supplementary contract; however, the
Facts: Melencio Basilio, a watchman of the Manila terms and phraseology of the exception clause should
Auto Supply, secured a life insurance policy from the be clearly expressed within the understanding of the
Philippine American Insurance Company in the insured. Art. 1377 of the New Civil Code provides that
amount of P2,000 to which was attached a in case ambiguity, uncertainty or obscurity in the
supplemental contract covering death by accident. He interpretation of the terms of the contract, it shall be
later died from a gunshot wound on the occasion of a construed against the party who caused such
robbery committed; subsequently, his widow was paid obscurity. Applying this to the situation, the
P2,000 representing the face value of the policy. The ambiguous or obscure terms in the insurance policy
widow demanded the payment of the additional sum are to be construed strictly against the insurer and
of P2,000 representing the value of the supplemental liberally in favor of the insured party. The reason is to
policy which the company refused because the ensure the protection of the insured since these
deceased died by murder during the robbery and insurance contracts are usually arranged and
while making an arrest as an officer of the law which employed by experts and legal advisers acting
were expressly excluded in the contract. The exclusively in the interest of the insurance company.
company’s contention which was upheld by the Court As long as insurance companies insist upon the use of
of Appeals provides that ambiguous, intricate and technical provisions, which
The circumstances surrounding Basilio’s death was conceal their own intentions, the courts must, in
caused by one of the risks excluded by the fairness to those who purchase insurance, construe
supplementary contract which exempts the company every ambiguity in favor of the insured.
from liability.
Page 27 of 81
where death resulted from an injury "intentionally"
Biagtan vs. The Insular Life Assurance Company, inflicted by a third party.
Ltd. (winner) 44 SCRA 58
Facts: FINMAN GENERAL ASSURANCE CORPORATION v.
Juan S. Biagtan was insured with defendant Insular CA, GR No. 100970, 1992-09-02
Life Assurance Company under Policy No. 398075 for Facts:
the sum of P5,000.00 and, under a supplementary October 22, 1986, deceased Carlie Surposa was
contract denominated "Accidental Death Benefit insured with petitioner Finman General Assurance
Clause, for an additional sum of P5,000.00 if "the Corporation under Finman General Teachers
death of the Insured resulted directly from bodily Protection Plan Master Policy No. 2005 and Individual
injury effected solely through external and violent Policy No. 08924 with his parents, spouses
means sustained in an accident . . . and independently Julia and Carlos Surposa and brothers Christopher,
of all other causes." The clause, however, expressly Charles, Chester and Clifton, all surnamed Surposa, as
provided that it would not apply where death resulted beneficiaries.
from an injury "intentionally inflicted by a third While said insurance policy was in full force and effect,
party."library the insured Carlie Surposa, died on October 18, 1988
On the night of May 20, 1964 or during the first as a result of a stab wound inflicted by one of the
hours of the following day a band of robbers entered three (3) unidentified men without provocation and
the house of the insured Juan S. Biagtan. warning on the part of the former as... he and his
Issue: cousin, Winston Surposa, were waiting for a ride on
Whether the wounds received by the insured at the their way home along Rizal-Locsin Streets, Bacolod
hands of the robbers were inflicted intentionally. City after attending the celebration of the "Maskarra
Held: Annual Festival."... private respondent and the other
Yes. But where a gang of robbers enter a house and beneficiaries of said insurance policy filed a written
coming face to face with the owner, even if notice of claim with the petitioner insurance company
unexpectedly, stab him repeatedly, it is contrary to all which denied said claim contending that murder and
reason and logic to say that his injuries are not assault are not within the scope of the coverage of the
intentionally inflicted, regardless of whether they insurance... policy.
prove fatal or not. As it was, in the present case they Insurance Commission ruled in favor of
did prove fatal, and the robbers have been accused insured/beneficiaries
and convicted of the crime of robbery with homicide. On February 24, 1989, private respondent filed a
Under the circumstance, the insurance company was complaint with the Insurance Commission
correct in refusing to pay the additional sum of "In the light of the foregoing, we find respondent
P2,000.00 under the accidental death benefit clause liable to pay complainant the sum of P15,000.00
which expressly provided that it would not apply representing the proceeds of the policy with interest.
Page 28 of 81
As no evidence was submitted to prove the claim for alterius" -- the mention of one thing implies the
mortuary aid in the sum of P1,000.00, the same... exclusion of another thing -- is therefore applicable in
cannot be entertained. the instant case since murder and assault, not having
On July 11, 1991, the appellate court affirmed said been expressly included in the enumeration of the...
decision. circumstances that would negate liability in said
petitioner filed this petition alleging grave abuse of insurance policy cannot be considered by implication
discretion on the part of the appellate court in to discharge the petitioner insurance company from
applying the principle of "expresso unius exclusion liability for any injury, disability Or loss suffered by
alterius" in a personal accident insurance policy... the insured.
since death resulting from murder and/or assault are Thus, the failure of the petitioner insurance
impliedly excluded in said insurance policy considering company... to include death resulting from murder or
that the cause of death of the insured was not assault among the prohibited risks leads inevitably to
accidental but rather a deliberate and intentional act the conclusion that it did not intend to limit or exempt
of the assailant in killing the former as indicated by itself from liability for such death.
the location... of the lone stab wound on the insured. Principles:
Therefore, said death was committed with deliberate The terms 'accident' and 'accidental', as used in
intent which, by the very nature of a personal insurance contracts have not acquired any technical
accident insurance policy, cannot be indemnified. meaning, and are construed by the courts in their
Issues: ordinary and common acceptation. Thus, the terms
WON the death of the insured was committed...... have been taken to mean that which happen by
with deliberate intent which, by the very nature of a chance or... fortuitously, without intention and design,
personal accident insurance policy, cannot be and which is unexpected, unusual, and unforeseen. An
indemnified accident is an event that takes place without one's
Ruling: foresight or expectation -- an event that proceeds
We do not agree. from an unknown cause, or is an unusual effect of a
In the case at bar, it cannot, be pretended that Carlie known cause and, therefore,... not expected."
Surposa died in the course of an assault or murder as The generally accepted rule is that, death or injury
a result of his voluntary act considering the very does not result from accident or accidental means
nature of these crimes. within the terms of an accident-policy if it is the
the personal accident insurance policy, involved herein natural result of the insured's voluntary act,
specifically enumerated only ten (10) circumstances unaccompanied by anything unforeseen except the
wherein no liability attaches to petitioner insurance death or... injury.
company for any injury, disability or loss suffered by
the insured as a result of any of the... stipulated Qua Chee Gan v. Law Union Rock - Breach of
causes. The principle of "expresso unius exclusio Warranty
Page 29 of 81
98 PHIL 85 knowing that the number of hydrants it demanded
Facts: never existed from the very beginning, appellant
> Qua Chee Gan, a merchant, owned 4 warehouses nevertheless issued the policies subject to such
in Albay which were used for the storage or copra and warranty and received the corresponding premiums.
hemp in which the appelle deals with exclusively. The insurance company was aware, even before the
> The warehouses together with the contents were policies were issued, that in the premises there were
insured with Law Union since 1937 and the loss made only 2 hydrants and 2 others were owned by the
payable to PNB as mortgagee of the hemp and copra. Municipality, contrary to the requirements of the
> A fire of undetermined cause broke out in July 21, warranties in question.
1940 and lasted for almost 1 whole week.
> Bodegas 1, 3, and 4 including the merchandise It should be close to conniving at fraud upon the
stored were destroyed completely. insured to allow the insurer to claim now as void the
> Insured then informed insurer of the unfortunate policies it issued to the insured, without warning him
event and submitted the corresponding fire claims, of the fatal defect, of which the insurer was informed,
which were later reduced to P370T. and after it had misled the insured into believing that
> Insurer refused to pay claiming violations of the the policies were effective.
warranties and conditions, filing of fraudulent claims
and that the fire had been deliberately caused by the Accdg to American Jurisprudence: It is a well-settled
insured. rule that the insurer at the time of the issuance of a
> Insured filed an action before CFI which rendered a policy has the knowledge of existing facts, which if
decision in favor of the insured. insisted on, would invalidate the contract from its very
inception, such knowledge constitutes a waiver of
Issues and Resolutions: conditions in the contract inconsistent with known
(1) Whether or not the policies should be avoided for facts, and the insurer is stopped thereafter from
the reason that there was a breach of warranty. asserting the breach of such conditions. The reason
for the rule is: To allow a company to accept one’s
Under the Memorandum of Warranty, there should be money for a policy of insurance which it knows to be
no less than 1 hydrant for each 150 feet of external void and of no effect, though it knows as it must that
wall measurements of the compound, and since the insured believes it to be valid and binding is so
bodegas insured had an external wall per meter of contrary to the dictates of honesty and fair dealing, as
1640 feet, the insured should have 11 hydrants in the so closely related to positive fraud, as to be abhorrent
compound. But he only had 2. to fair-minded men. It would be to allow the
company to treat the policy as valid long enough to
Even so, the insurer is barred by estoppel to claim get the premium on it, and leave it at liberty to
violation of the fire hydrants warranty, because repudiate it the next moment.
Page 30 of 81
warranty forbade the storage only in the building to
Moreover, taking into account the well-known rule which the insurance applies, and/or in any building
that ambiguities or obscurities must strictly be communicating therewith; and it is undisputed that no
interpreted against the party that cause them, the gasoline was stored in the burnt bodegas and that
memorandum of warranty invoked by the insurer bars Bodega No. 2 which was where the gasoline was
the latter from questioning the existence of the found stood isolated from the other bodegas.
appliances called for, since its initial expression “the
undernoted appliances for the extinction of fire being Del Rosario v. Equitable Insurance - Life Insurance
kept on the premises insured hereby..” admits of the Policy
interpretation as an admission of the existence of 118 PHIL 349
such appliances which insurer cannot now contradict, Facts:
should the parole evidence apply. > Equitable Insurance issued a life Insurance policy
to del Rosario binding itself to pay P1,000 to P3,000
(2) Whether or not the insured violated the hemp as indemnity.
warranty provision against the storage of gasoline > Del Rosario died in a boating accident. The heirs
since insured admitted there were 36 cans of gasoline filed a claim and Equitable paid them P1,000.
in Bodega 2 which was a separate structure and not > The heir filed a complaint for recovery of the
affected by the fire. balance of P2,000, claiming that the insurere should
pay him P3,000 as stated in the policy.
It is well to note that gasoline is not specifically Issue:
mentioned among the prohibited articles listed in the Whether or not the heir is entitled to recover P3,000.
so-called hemp warranty. The clause relied upon by Held:
the insurer speaks of “oils”. Ordinarily, oils mean YES.
lubricants and not gasoline or kerosene. Here again, Generally accepted principles or ruling on insurance,
by reason of the exclusive control of the insurance enunciate that where there is an ambiguity with
company over the terms of the contract, the respect to the terms and conditions of the policy, the
ambiguity must be held strictly against the insurer same shall be resolved against the one responsible
and liberally in favor of the insured, specially to avoid thereof. The insured has little, if any, participation in
a forfeiture. the preparation of the policy. The interpretation of
obscure stipulations in a contract should not favor the
Furthermore, the gasoline kept was only incidental to party who cause the obscurity.
the insured’s business. It is a well settled rule that
keeping of inflammable oils in the premises though Insurance Case Digest: Del Rosario v. Equitable
prohibited by the policy does NOT void it if such Ins. and Casualty Co., Inc. (1963)
keeping is incidental to the business. Also, the hemp G.R. No. L-16215 June 29, 1963
Page 31 of 81
Lessons Applicable: Ambiguous Provisions Interpreted > Fidelity and Surety Insurance Company (Fidelity)
Against Insurer (Insurance) issued Fire Insurance Policy No. F-18876 effective
FACTS: between June 23, 1980 and June 23, 1981 covering
April 13, 1957: Simeon del Rosario, father of the Rafael (Rex) Verendia's residential in the amount of
insured who died from drowning filed a claim for P385,000.00. Designated as beneficiary was the
payment with Equitable Ins. and Casualty Co., Inc. Monte de Piedad & Savings Bank.
but it refused to pay more than P1,000 php so a case > Verendia also insured the same building with two
was filed with the RTC for the P2,000 balance stating other companies, namely, The Country Bankers
that under the policy they are entitled to P1,000 to Insurance for P56,000.00 and The Development
P3,000 as indemnity Insurance for P400,000.00.
RTC: entitled to recover P3,000 - policy does not > While the three fire insurance policies were in
positively state any definite amount, there is an force, the insured property was completely destroyed
ambiguity in this respect in the policy, which by fire.
ambiguity must be interpreted in favor of the insured > Fidelity appraised the damage amounting to
and strictly against the insurer so as to allow greater 385,000 when it was accordingly informed of the loss.
indemnity Despite demands, Fidelity refused payment under its
ISSUE: W/N Simeon is entitled to recover P3,000 policy, thus prompting Verendia to file a complaint for
HELD: YES. the recovery of 385,000
terms in an insurance policy, which are ambiguous, > Fidelity, averred that the policy was avoided by
equivocal or uncertain are to be construed strictly reason of over-insurance, that Verendia maliciously
against, the insurer, and liberally in favor of the represented that the building at the time of the fire
insured so as to effect the dominant purpose of was leased under a contract executed on June 25,
indemnity or payment to the insured, especially where 1980 to a certain Roberto Garcia, when actually it was
a forfeiture is involved a Marcelo Garcia who was the lessee.
reason for this rule is that the "insured usually has no
voice in the selection or arrangement of the words Issue:
employed and that the language of the contract is Whether or not Verendia can claim on the insurance
selected with great care and deliberation by expert despite the misrepresentation as to the lessee and the
and legal advisers employed by, and acting overinsurance.
exclusively in the interest of, the insurance company
Held:
Verendia v. CA - Insurance Policy NOPE.
217 SCRA 1993 The contract of lease upon which Verendia relies to
Facts: support his claim for insurance benefits, was entered
into between him and one Robert Garcia, a couple of
Page 32 of 81
days after the effectivity of the insurance policy. When As it is also a contract of adhesion, an insurance
the rented residential building was razed to the contract should be liberally construed in favor of the
ground, it appears that Robert Garcia was still within insured and strictly against the insurer company which
the premises. However, according to the investigation usually prepares it.
by the police, the building appeared to have "no Considering, however, the foregoing discussion
occupants" and that Mr. Roberto Garcia was "renting pointing to the fact that Verendia used a false lease
on the otherside of said compound" These pieces of contract to support his claim under Fire Insurance
evidence belie Verendia's uncorroborated testimony Policy, the terms of the policy should be strictly
that Marcelo Garcia whom he considered as the real construed against the insured. Verendia failed to live
lessee, was occupying the building when it was by the terms of the policy, specifically Section 13
burned. thereof which is expressed in terms that are clear and
Ironically, during the trial, Verendia admitted that it unambiguous, that all benefits under the policy shall
was not Robert Garcia who signed the lease contract be forfeited "if the claim be in any respect fraudulent,
but it was Marcelo Garcia cousin of Robert, who had or if any false declaration be made or used in support
also been paying the rentals all the while. Verendia, thereof, or if any fraudulent means or devises are
however, failed to explain why Marcelo had to sign his used by the Insured or anyone acting in his behalf to
cousin's name when he in fact he was paying for the obtain any benefit under the policy". Verendia, having
rent and why he (Verendia) himself, the lessor, presented a false declaration to support his claim for
allowed such a ruse. Fidelity's conclusions on these benefits in the form of a fraudulent lease contract, he
proven facts appear, therefore, to have sufficient forfeited all benefits therein by virtue of Section 13 of
bases: Verendia concocted the lease contract to the policy in the absence of proof that Fidelity waived
deflect responsibility for the fire towards an alleged such provision
"lessee", inflated the value of the property by the There is also no reason to conclude that by submitting
alleged monthly rental of P6,500) when in fact, the the subrogation receipt as evidence in court, Fidelity
Provincial Assessor of Rizal had assessed the bound itself to a "mutual agreement" to settle
property's fair market value to be only P40,300.00, Verendia's claims in consideration of the amount of
insured the same property with two other insurance P142,685.77. While the said receipt appears to have
companies for a total coverage of around P900,000, been a filled-up form of Fidelity, no representative of
and created a dead-end for the adjuster by the Fidelity had signed it. It is even incomplete as the
disappearance of Robert Garcia. blank spaces for a witness and his address are not
Basically a contract of indemnity, an insurance filled up. More significantly, the same receipt states
contract is the law between the parties. Its terms and that Verendia had received the aforesaid amount.
conditions constitute the measure of the insurer's However, that Verendia had not received the amount
liability and compliance therewith is a condition stated therein, is proven by the fact that Verendia
precedent to the insured's right to recovery from the. himself filed the complaint for the full amount of
Page 33 of 81
P385,000.00 stated in the policy. It might be that Upon claiming, Fortune refused stating that it is
there had been efforts to settle Verendia's claims, but not liable since under the general exceptions of the
surely, the subrogation receipt by itself does not policy:
prove that a settlement had been arrived at and
any loss caused by any dishonest,
enforced. Thus, to interpret Fidelity's presentation of
the subrogation receipt in evidence as indicative of its fraudulent or criminal act of the insured or any
accession to its "terms" is not only wanting in rational officer, employee, partner, director, trustee or
basis but would be substituting the will of the Court authorized representative of the Insured whether
for that of the parties acting alone or in conjunction with others. . . .
RTC: favored Producers Bank since Driver and
Security Guard were merely assigned
CA: Affirmed RTC
Fortune Insurance And Surety Co., Inc. V. CA ISSUE: W/N the driver and security guard are
employees under the general exception
Lessons Applicable: Stipulations Cannot Be
Segregated (Insurance) HELD: YES. Petition is granted.
It is clear to us that insofar as Fortune is
FACTS: concerned, it was its intention to exclude and
Producers Bank of the Philippines insured exempt from protection and coverage losses
with Fortune Insurance and Surety Co. P725,000 arising from dishonest, fraudulent, or criminal acts
which was lost during a robbery of Producer's of persons granted or having unrestricted access to
armored vehicle while it was in transit from Pasay Producers' money or payroll. When it used then the
City City to its Makati head office. term "employee," it must have had in mind any
The armored car was driven by Benjamin person who qualifies as such as generally and
Magalong Y de Vera, escorted by Security Guard universally understood, or jurisprudentially
Saturnino Atiga Y Rosete. established in the light of the four standards in the
After an investigation conducted by the Pasay determination of the employer-employee
police authorities, the driver Magalong and guard relationship, 21 or as statutorily declared even in a
Atiga were charged, together with Edelmer limited sense as in the case of Article 106 of the
Bantigue Y Eulalio, Reynaldo Aquino and John Doe, Labor Code which considers the employees under a
with violation of P.D. 532 (Anti-Highway Robbery "labor-only" contract as employees of the party
Law)
Page 34 of 81
employing them and not of the party who supplied The car was towed and repaired by Morosi
them to the employer Motors costing P302.27
Producers entrusted the three with the specific November 29, 1961: After the repairs were
duty to safely transfer the money to its head office, made, Misamis made a report to Capital who only
with Alampay to be responsible for its custody in admits liability of P150
transit; Magalong to drive the armored vehicle CFI: paragraph 4 of the policy is clear and
which would carry the money; and Atiga to provide specific and leaves no room for interpretation that
the needed security for the money, the vehicle, the repair liability is limited to P150
and his two other companions. ISSUE: W/N Misamis is entitled to an amount
A "representative" is defined as one who exceeding P150
represents or stands in the place of another; one
who represents others or another in a special HELD: NO.
capacity, as an agent, and is interchangeable with insurance contract may be rather onerous (one-
"agent." sided) but that in itself does not justify the
abrogation of its express terms, terms which the
Misamis Lumber Corp. V. Capital Ins. And Surety insured accepted or adhered to and which is the
Co., law between the contracting parties
Misamis Lumber vs. Capital Insurance, G.R. L-21380, May 20,
Lessons Applicable: Judicial Construction Cannot Alter 1966
Terms (Insurance)
Facts:
FACTS:
Misamis Lumber Corporation (Misamis), The vehicle owned by the petitioner was covered by an insurance
formerly Lanao Timber Mills, Inc., insured its Ford policy issued by the respondent. In such policy it contained
Falcon motor car with Capital Insurance & Surety instructions and details on how to proceed with the claim for
Company (Capital) repairs.
November 25, 1961 11 pm: The car broke when
it hit a hollow block lying alongside the water hole When the time came for the vehicle to be repaired, the petitioner
which the driver did not see because the on- took it upon himself to have the vehicle repaired without the
coming car did not dim its light authority from the insurer, in the policy if such an event is to
occur, and a repair was done without the authority of the insurer,
Page 35 of 81
its liability is limited only to 150 pesos. The repair bill exceeded White Gold procured a protection and indemnity
such amount. coverage for its vessels from The Steamship Mutual
through Pioneer Insurance and Surety
Upon filing of claim the insurer refused payment in excess of 150 Corporation. White Gold was issued a Certificate of
pesos.
Entry and Acceptance. Pioneer also issued receipts.
When White Gold failed to fully pay its accounts,
Steamship Mutual refused to renew the coverage.
Issue(s):
Steamship Mutual thereafter filed a case
1.) Can the respondent be made to reimburse the petitioner for against White Gold for collection of sum of money to
the actual cost of repairs which exceed the repair limit amount? recover the unpaid balance. White Gold on the other
hand, filed a complaint before the Insurance
Ruling: Commission claiming that Steamship Mutual and
Pioneer violated provisions of the Insurance Code.
The lower court’s recourse to legal hermeneutics is not called for The Insurance Commission dismissed the complaint.
because paragraph 4 of the policy is clear and specific and leaves It said that there was no need for Steamship Mutual
no room for interpretation. The interpretation is even unjustified to secure a license because it was not engaged in the
because it opposes what was specifically stipulated. Thus it will insurance business and that it was a P & I club.
be observed that the policy drew out not only the limits of the Pioneer was not required to obtain another license as
insurer’s liability but also the mechanics that the insured had to insurance agent because Steamship Mutual was not
follow to be entitled to full indemnity for repairs. The option to engaged in the insurance business.
undertake repairs is accorded to the insurance company per The Court of Appeals affirmed the decision of the
paragraph 2. The said company was deprived of the option Insurance Commissioner. In its decision,
because the insured took it upon itself to have the repairs made, the appellate court distinguished between P & I Clubs
and only notified the insurer when the repairs are done. As a vis-à-vis conventional insurance. The appellate court
consequence, paragraph 4, which limits the company’s liability to also held that Pioneer merely acted as a
P150.00 appliesWEEK 4 collection agent of Steamship Mutual.
White Gold v Pioneer G.R. No. 154514. July 28,
Hence this petition by White Gold.
2005
Facts: Issues:
Page 36 of 81
1. Is Steamship Mutual, a P & I Club, engaged in the the P & I Club and the members.” By definition then,
insurance business in the Philippines? Steamship Mutual as a P & I Club is a mutual
insurance association engaged in the marine
2. Does Pioneer need a license as an
insurance business.
insurance agent/broker for Steamship Mutual?
The records reveal Steamship Mutual is doing
Held: Yes. Petition granted.
business in the country albeit without the requisite
Ratio: certificate of authority mandated by Section 187 of
the Insurance Code. It maintains a resident agent in
White Gold insists that Steamship Mutual as a P & I
the Philippines to solicit insurance and to collect
Club is engaged in the insurance business. To
payments in its behalf. Steamship Mutual even
buttress its assertion, it cites the definition as “an
renewed its P & I Club cover until it was cancelled due
association composed of shipowners in general who
to non-payment of the calls. Thus, to continue doing
band together for the specific purpose of providing
business here, Steamship Mutual or through
insurance cover on a mutual basis against liabilities
its agent Pioneer, must secure a license from the
incidental to shipowning that the members incur in
Insurance Commission.
favor of third parties.”
Since a contract of insurance involves public interest,
They argued that Steamship Mutual’s primary purpose
regulation by the State is necessary. Thus, no insurer
is to solicit and provide protection and indemnity
or insurance company is allowed to engage in the
coverage and for this purpose, it has engaged the
insurance business without a license or a certificate of
services of Pioneer to act as its agent.
authority from the Insurance Commission.
Respondents contended that although Steamship
2. Pioneer is the resident agent of Steamship Mutual
Mutual is a P & I Club, it is not engaged in the
as evidenced by the certificate of registration issued
insurance business in the Philippines. It is merely an
by the Insurance Commission. It has been licensed to
association of vessel owners who have come together
do or transact insurance business by virtue of the
to provide mutual protection against liabilities
certificate of authority issued by the same agency.
incidental to shipowning.
However, a Certification from the Commission states
Is Steamship Mutual engaged in the insurance that Pioneer does not have a separate license to be
business? an agent/broker of Steamship Mutual.
A P & I Club is “a form of insurance against third party Although Pioneer is already licensed as an insurance
liability, where the third party is anyone other than company, it needs a separate license to act as
Page 37 of 81
insurance agent for Steamship Mutual. Section 299 of Held: No. Petition granted.
the Insurance Code clearly states:
Ratio:
SEC. 299 No person shall act as an insurance agent or
According to the Insurance code, the
as an insurance broker in the solicitation or
Insurance Commissioner was authorized to suspend,
procurement of applications for insurance, or receive
directors, officers, and agents of insurance companies.
for services in obtaining insurance, any commission or
In general, he was tasked to regulate the insurance
other compensation from any insurance company
business, which includes:
doing business in the Philippines or any agent thereof,
without first procuring a license so to act from (2) The term "doing an insurance business" or
the Commissioner… "transacting an insurance business," within the
meaning of this Code, shall include
Philam v Arnaldo G.R. No. 76452 July 26, 1994
(a) making or proposing to make, as insurer, any
Facts:
insurance contract;
One Ramon Paterno complained about the unfair
(b) making, or proposing to make, as surety, any
practices committed by the company against its
contract of suretyship as a vocation and not as
agents, employees and consumers.
merely incidental to any other legitimate business or
The Commissioner called for a hearing where Paterno
activity of the surety; (c) doing any kind of business,
was required to specify which acts were illegal.
including a reinsurance business, specifically
Paterno then specified that the fees and charges
recognized as constituting the doing of an insurance
stated in the Contract of Agency between Philam and
business within the meaning of this Code; (d) doing or
its agents be declared void. Philam, on the other
proposing to do any business in
hand, averred that there Paterno must submit a
substance equivalent to any of the foregoing in a
verified formal complaint and that his letter didn’t
manner designed to evade the provisions of this Code.
contain information Philam was seeking from him.
(Insurance Code, Sec. 2[2])
Philam then questioned the Insurance Commission’s
jurisdiction over the matter and submitted a motion to The contract of agency between Philamlife and its
quash. The commissioner denied this. Hence this agents wasn’t included with the Commissoner’s power
petition. to regulate the business. Hence, the
Insurance commissioner wasn’t vested with
Issue: Whether or not the resolution of the legality of
jurisidiction under the rule “expresio unius
the Contract of Agency falls within the jurisdiction of
est exclusionalterius”.
the Insurance Commissioner.
Page 38 of 81
The respondent contended that the commissioner had supervision of the company; and (2) registered
the quasi-judicial power to adjudicate under Section representatives, who work on commission basis.”
416 of the Code. It stated:
The agents under the 2nd sentence are governed by
The Commissioner shall have the power to adjudicate the Civil Code laws on agency. This means that the
claims and complaints involving any loss, damage or regular courts have jurisdiction over this category.
liability for which an insurer may be answerable under
any kind of policy or contract of insurance, or for
which such insurer may be liable under a contract of FILIPINAS COMPANIA DE SEGUROS vs.
suretyship, or for which a reinsurer may be used CHRISTERN HUENEFELD and CO., INC. 89 Phil 54
under any contract or reinsurance it may have
entered into, or for which a mutual benefit association FACTS:
may be held liable under the membership certificates
it has issued to its members, where the amount of
On October 1, 1941, the respondent corporation,
any such loss, damage or liability, excluding interest, Christern Huenefeld and Co., Inc., after payment of
costs and attorney's fees, being claimed or sued upon corresponding premium, obtained from the petitioner,
any kind of insurance, bond, reinsurance contract, Filipinas Cia de Seguros fire policy covering
or membership certificate does not exceed in any merchandise contained in a building located at
single claim one hundred thousand pesos. Binondo, Manila. On February 27, 1942 or during the
Japanese military occupation, the building and insured
This was, however, regarding complaints filed by the
merchandise were burned. In due time, the
insured against the Insurance company.
respondent submitted to the petitioner its claim under
Also, the insurance code only discusses the the policy. The petitioner refused to pay the claim on
licensing requirements for agents and brokers. The the ground that the policy in favor of the respondent
Insurance Code does not have provisions governing that ceased to be a force on the date the United
the relations between insurance companies and their States declared war against Germany, the respondent
corporation (through organized under and by virtue of
agents.
the laws of Philippines) being controlled by German
Investment Planning Corporation of the Philippines v. subjects and the petitioner being a company under
Social Security Commission- “that an insurance American jurisdiction when said policy was issued on
company may have two classes of agents who sell its October 1, 1941. The theory of the petitioner is that
insurance policies: (1) salaried employees who keep the insured merchandise was burned after the policy
definite hours and work under the control and issued in 1941 had ceased to be effective because the
outbreak of the war between United States and
Page 39 of 81
Germany on December 10, 1941, and that the respondent was not entitled to any indemnity under
payment made by the petitioner to the respondent said policy from the petitioner. However, elementary
corporation during the Japanese military occupation rule of justice (in the absence of specific provisions in
was under pressure. the Insurance Law) require that the premium paid by
ISSUE: the respondent for the period covered by its policy
from December 11, 1941, should be returned by the
Whether or not the respondent corporation is a petitioner.
corporation of public enemy.
RULING:
Sales De Gonzaga V. Crown Life Insurance Co.
Since the majority of stockholders of the respondent
FACTS:
corporation were German subjects, the respondent
became an enemy of the state upon the outbreak of
September 26, 1939: Crown Life Insurance Co.
the war between US and Germany. The English and
American cases relied upon by the Court of Appeals whose home office is based in Toronto, Canada
lost in force upon the latest decision of the Supreme issued to Ramon Gonzaga through its branch office
Court of US in which the control test has adopted. in Manila a 20-year endowment policy for P15,000
Since World War I, the determination of enemy which had an annual premium of P591.
nationality of corporations has been discussed in Payment was only until September 6, 1941
many countries, belligerent and neutral. A corporation because of the outbreak of the war since Crown is
was subject to enemy legislation when it was
an enemy corp. order to be closed during the
controlled by enemies, namely managed under the
Japanese occupation. However, despite that it
influence of individuals or corporations themselves
considered as enemies… offered a privilege to accept premium payments in
The Philippine Insurance Law (Act No 2427, as the place of its employee in Ermita but of which
amended), in Section 8, provides that “anyone except Gonzaga did not avail.
a public enemy may be insured”. It stands to reason Through the automatic premium loan clause, it
that an insurance policy ceases to be allowable as continued until June 12, 1943
soon as an insured becomes a public enemy. May 1, 1945: It reopened but still Gonzaga did
The respondent having an enemy corporation on
not pay although there was a reinstatement clause
December 10, 1941, the insurance policy issued in its
favor on October 1, 1941, by the petitioner had providing certain conditions within three years
ceased to be valid and enforceable, and since the from the date of lapse on application of the insured
insured good were burned during the war, the June 27, 1945: Gonzaga died from an accident
Page 40 of 81
Crown refused to pay because of the lapse of payment of the loan. The original counsel of
premium payment Cosio Atty. Guerrero being appointed
RTC: against Gonzaga Undersecretary of Foreign Affairs so she forgot the
ISSUE: W/N Gonzaga's widow can claim despite the date of the trial and she was substituted.
absence of premium payment during the outbreak of it is a loan of P12,000 secured by a "Conditional
the war Sale of Residential Building" with right to
repurchase. After the execution of the contract,
HELD: NO. Affirmed Cosio insured in her name the building
with Associated Insurance & Surety Co. against
Non-payment at the day involves absolute fire.
forfeiture is such be the terms of the contract The building was partly destroyed by fire so she
failure to notify the postal address during the claimed an indemnity of P13,107
war is not an excuse Palileo demanded that the amount of insurance
There is no duty when the law forbids proceeds be credited to her loan
and there is no obligation without corresponding RTC: it is a loan with equitable mortgage so the
right enjoyed by another insurance proceeds should be credited to the loan
opening of an interim office partook of the and refund the overpayment.
nature of the privilege to the policy holders to keep ISSUE: W/N Cosio as mortgagee is entitled to the
their policies operative rather than a duty to them insurance proceeds for her own benefit
under the contract
HELD: YES. Modify. collection of insurance proceeds
WEEK 5 shall not be deemed to have compensated the
obligation of the Palileo to Cosio, but bars the Cosio
Palileo V. Cosio (1955) from claiming its payment from the Palileo; and Cosio
shall pay to Palileo P810 representing the
FACTS: overpayment made by Palileo by way of interest on
the loan.
Cherie Palileo (debtor-mortgagor) filed a
When the the mortgagee may insure his interest
complaint against Beatriz Cosio (creditor-
in the property independently of the mortgagor ,
mortgagee) praying that their transaction be one
upon the destruction of the property the insurance
of a loan with an equitable mortgage to secure the
money paid to the mortgagee will not inure to the
Page 41 of 81
benefit of the mortgagor, and the amount due In the contract of mortgage, the owner P.D.
under the mortgage debt remains unchanged. The Dunn had agreed, at his own expense, to insure
mortgagee, however, is not allowed to retain his the mortgaged property for its full value and to
claim against the mortgagor, but it passes by indorse the policies in such manner as to authorize
subrogation to the insurer, to the extent of the the Brewery Company to receive the proceeds in
insurance money paid case of loss and to retain such part thereof as
It is true that there are authorities which hold might be necessary to satisfy the remainder then
that "If a mortgagee procures insurance on his due upon the mortgage debt. Instead, however, of
separate interest at his own expense and for his effecting the insurance himself Dunn authorized
own benefit, without any agreement with the and requested the Brewery Company to procure
mortgagor with respect thereto, the mortgagor has insurance on the property in the amount of
no interest in the policy, and is not entitled to have P15,000 at Dunn's expense.
the insurance proceeds applied in reduction of the San Miguel insured the property only as
mortgage debt" But these authorities merely mortgagee.
represent the minority view Dunn sold the propert to Henry Harding. The
insurance was not assigned by Dunn to Harding.
San Miguel Brewery V. Law Union And Rock When it was destroyed by fire, the two
FACTS:
Page 42 of 81
HELD: affirmed insurable interest of the owner or intended to make
section 19 of the Insurance Act: themselves liable to that extent
a change of interest in any part of a thing If by inadvertence, accident, or mistake the
insured unaccompanied by a corresponding change terms of the contract were not fully set forth in the
of interest in the insurance, suspends the policy, the parties are entitled to have it reformed.
insurance to an equivalent extent, until the interest But to justify the reformation of a contract, the
in the thing and the interest in the insurance are proof must be of the most satisfactory character,
vested in the same person and it must clearly appear that the contract failed
section 55: to express the real agreement between the parties
the mere transfer of a thing insured does In the case now before us the proof is entirely
not transfer the policy, but suspends it until the insufficient to authorize reformation.
same person becomes the owner of both the policy
and the thing insured
Undoubtedly these policies of insurance might Gonzalez Lao v. Yek Tong Lin Fire & Marine
have been so framed as to have been "payable to
Insurance - Insurance Premiums
the San Miguel Brewery, mortgagee, as its interest
may appear, remainder to whomsoever, during the
Facts:
continuance of the risk, may become the owner of
the interest insured." (Sec 54, Act No. 2427.) Such > Gonzales was issued 2 fire insurance policies by
a clause would have proved an intention to insure Yek for 100T covering his leaf tobacco prducts.
the entire interest in the property, not merely the
insurable interest of the San Miguel Brewery, and > They were stored in Gonzales’ building on Soler
would have shown exactly to whom the money, in St., which on Jan. 11, 1928, burned down.
case of loss, should be paid. But the policies are > Art. 3 of the Insurance policies provided that: “Any
not so written.
insurance in force upon all or part of the things
The blame for the situation thus created rests,
unsured must be declared in writing by the insured
however, with the Brewery rather than with the
and he (insured) should cause the company to insert
insurance companies, and there is nothing in the
record to indicate that the insurance companies or mention it in the policy. Without such requisite,
were requested to write insurance upon the such policy will be regarded as null and void and the
Page 43 of 81
insured will be deprived of all rights of indemnity in
Facts: Geagonia, owner of a store, obtained from
case of loss.”
Country Bankers 1year fire insurance covering the
> Notwithstanding said provision, Gonzales entered stock trading of dry goods. The policy noted the
into other insurance contracts. When he sought to requirement that"
3. The insured shall give notice to the Company of any
claim from Yek after the fire, the latter denied any insurance or insurances already effected, or which
liability on the ground of violation of Art. 3 of the said may subsequently be effected, covering any of
policies. the property or properties consisting of stocks in
trade, goods in process and/or inventories only
> Gonzales however proved that the insurer knew of hereby insured, xxx
the other insurance policies obtained by him long
efore the fire, and the insurer did NOT rescind the The petitioners’ stocks were destroyed by fire. He
then filed a claim which was subsequently denied
insurance polices in question but demanded and
because the petitioner’s stocks were covered by two
collected from the insured the premiums. other
fire insurance policies issued by PFIC. The basis of the
Issue: private respondent's denial was the petitioner's
alleged violation of Condition 3 of the policy. The
Whether or not Yek is still entitled to annul the Insurance Commission found that the petitioner did
contract. not violate Condition 3 as he had no knowledge of the
existence of the two fire insurance policies obtained
Held: from the PFIC; that it was Cebu Tesing Textiles
which procured the PFIC policies w/o informing him or
NO. securing his consent; and that Cebu Tesing Textile, as
his creditor, had insurable interest on the stocks.
The action by the insurance company of taking the
premiums of the insured notwithstanding knowledge Issue: Whether or not Geagonia is prohibited from
of violations of the provisions of the policies amounted recovering from the Country Bankers ?
to waiver of the right to annul the contract of
Held: A policy may declare that a violation of
insurance.
specified provisions thereof shall avoid it,otherwise,
the breach of an immaterial provision does not avoid
the policy. To constitute a violation of the “other
Geagonia vs. Court of Appeals, 241 SCRA 152
insurance” clause, the other insurance must be
Page 44 of 81
upon the same subject matter, the same interest ISSUE: W/N Philippine International Surety should be
therein, and the same risk held liable for the claim because notice to only the
mortgagee is not substantial
Saura Import & Export Co., Inc. V. Philippine HELD:YES. Appealed from is hereby reversed.
Philippine International Surety Co., Inc., to pay Saura
International Surety Co., Inc. (1963)
Import & Export Co., Inc., P29,000
Lessons Applicable: Mortgagor (Insurance) It was the primary duty of Philippine
Laws Applicable: International Surety to notify the insured, but it did
not
FACTS: If a mortgage or lien exists against the property
insured, and the policy contains a clause stating
Saura Import & Export Co Inc., mortgaged to that loss, if any, shall be payable to such
the Phil. National Bank, a parcel of land. mortgagee or the holder of such lien as interest
The mortgage was amended to guarantee an may appear, notice of cancellation to the
increased amount, bringing the total mortgaged mortgagee or lienholder alone is ineffective as a
debt to P37,000 cancellation of the policy to the owner of the
On the land mortgage is a building owned property.
by Saura Import & Export Co Inc. which was liability attached principally the insurance
insured with Philippine International Surety company, for its failure to give notice of the
(Insurer) even before the mortgage contract so it cancellation of the policy to Saura
was required to endorse to mortgagee PNB it is unnecessary to discuss the errors assigned
October 15, 1954: Barely 13 days after the against appellee bank
issuance of the fire insurance policy, the insurer
cancelled it. Notice of the cancellation was given
PNB V CA
to PNB (mortgagee). But Saura (insured) was not
informed. Violeta Lalican
April 6, 1955: The building and all its contents vs The Insular Life Insurance Company
worth P40,685.69 were burned so Saura filed a Ponente: Chico-Nazario
claim with the Insurer and mortgagee Bank
RTC: dismissed Facts:
Page 45 of 81
Violeta is the widow of the Eulogio Lalican. During his reinstatement and the payment made by Eulogio.
lifetime, Eulogio applied for an insurance policy with However, Insular Life did not act upon such
Insular Life on April 24, 1997 which contained a 20- reinstatement for they knew already of Eulogio's
year endowment variable income package flexi plan death.
worth P500k with two riders worth P500k each.
Violeta was named the primary beneficiary. September 28, 1998, Violeta filed for the insurance
claim. Insular Life then informed Violeta in a letter
Under the terms, Eulogio was to pay premiums on a that her claim could not be processed because the
quarterly basin in the amount of P8,062 with a grace insurance policy had lapsed already and that Eulogio
period of 31 days for the payment of each premium failed to reinstate the same and the payment made
subsequent to the first. If any premium was not paid done thru Malaluan's husband was, under the
on or before the due date, the policy would be in insurance policy, was considered a deposit only until
default, and if the premium remained unpaid until the approval of the said application. Enclosed to this letter
end of the grace period, the policy would was a check representing the full refund of the past
automatically lapse and become void. payments made by Eulogio, amounting to P25,417.
Eulogio paid the premiums, however he failed to pay Violeta requested for a reconsideration of her claim
the premium due on January 24, 1998, even after the and returned the check to Insular Life. Insular Life
lapse of the grace period of 31 days. Therefore, agreed to conduct a re-evaluation of Violeta's claim.
lapsed and become void. Eulogio submitted to the Without waiting for the result of the re-evaluation,
Cabanatuan District Office of Insular Life an Violeta filed with the RTC a complaint for death claim
application for reinstatement together with the benefit alleging the Insular Life was engaged in unfair
payment of the premium due on January 24. Insular claim settlement practice and deliberately failed to act
Life notified Eulogio that his application for with reasonable promptness on her insurance claim.
reinstatement could not be fully processed because of Violeta claims for the P1.5M insurance, plus interest,
the unpaid interest thereon. Eulogio was likewise attorney's fees and cost of suit.
advised by Malaluan (insurance agent) to pay the
premiums that subsequently became due April 1998 Insular Life filed with the RTC an answer with
and July 1998, plus interest. counterclaim saying that the insurance claim was
rendered void due to non-payment of the premium
September 17, 1998. Eulogio went to Malaluan's and countered that Violeta should be ordered to pay
house and paid for the interest which was received by attorney's fees and expenses of litigation incurred by
Malaluan's husband. Later that day, Eulogio died. Insular Life.
Without the knowledge of Eulogio's death, Malaluan
forwarded to the Insular Life the application for
Page 46 of 81
RTC declared that Violeta failed to establish by approval of the insurance policy of the application for
preponderance of evidence her cause of action against reinstatement. The approval should be made during
the defendant. Violeta failed to establish that the the lifetime of the insured, in the case at bar, it
receipt of payment by Malaluan amounted to the wasn’t.
reinstatement of the insurance policy. Violeta filed for
motion for reconsideration but was denied as well; El Oriente Fabrica de Tabacos, Inc. vs. Juan Posadas,
hence she elevated her case for review on Certiorari. Collector of Internal Revenue,G.R. No. 34774,
September 21, 1931
Issues: (a) Whether the decision of the court can still Topic:
be reviewed despite having allegedly attained finality Insurable Interest in life and health (Section 10)
and despite the mode of appeal of Violeta erroneous. Facts:
(b) Whether the RTC has decided the case on a
question of law not in accord with law and applicable Insurer: Manufacturers Life Insurance Co.,
decisions of the Supreme Court. of Toronto, Canada, thru its
local agent E.E.ElserInsured: A. Velhagen (manager
Ruling: of El Oriente)Beneficiary: El Oriente Fabrica
Petition lacks merit. de Tabacos, Inc.El Oriente, in order to protect itself
against the loss that it might suffer by reason of the
RTC's decision has long acquired finality for Violeta death of its manager, whose death would be a serious
failed to file a notice of appeal more than five months loss to El Oriente procured fromthe Insurer an
after the decision was rendered. insurance policy on the life of the said manager for
the sum of 50,000 USD w i t h E l O r i e n t e a s
As to the substantial claim of whether there is the designated sole beneficiary. The ins
insurable interest, the Court says that the matter of u r e d h a s n o i n t e r e s t o r participation in the
insurable interest is entirely irrelevant and the real proceeds of said life insurance policy.El Oriente
point of contention herein is whether Eulogio was able charged as expenses of its business all the said
to reinstate the lapsed insurance policy on his life premiums and deducted
before his death. the same from its gross incomes as reporte
d in its annual income
t a x r e t u r n s , w h i c h deductions were allowed by
The Court rules in the negative, for the insurance Posadas (Collector of Internal Revenue) upon
policy is clear on the procedure of the reinstatement showing by ElOriente that such premiums were
of the insurance contract, of which Eulogio has failed legitimate expenses of the business.U p o n t h e
to accomplish before his death. As provided by the death of the manager, El Oriente received
policy, insurance shall be deemed reinstated upon the a l l t h e p r o c e e d s o f t h e l i f e insurance policy
Page 47 of 81
together with the interest and the dividends accruing 8 3 3 , t o c o p y t h e A m e r i c a n s t a t u t e . Su
thereon, aggregatingP104,957.88. Posadas bsequently, the Congress of the United States
assessed and levied the sum of P3,148.74 as enacted its Income Tax Law of 1919, in which
income tax on theproceeds of the insurance certain doubtful subjects were clarified. Thus, as to
policy, which was paid by El Oriente under the point before us, it was madeclear, when not only
protest. El Orienteclaiming exemption under Section in the part of the law concerning individuals were
4 of the Income Tax Law. exemptions providedfor beneficiaries, but also in the
part concerning corporations, specific reference was
madet o t h e e x e m p t i o n s i n f a v o r o f i n d i v i
duals, thereby making the same applica
Issue: b l e t o corporations.
Whether or not the proceeds of insurance taken This was authoritatively pointed out and de
by a corporation on the life of animportant c i d e d b y t h e U n i t e d S t a t e s Supreme Court in the
official to indemnify it against loss in case of his case of United States
death, are taxable as incomeunder the Philippine vs
Income Tax Law? . Supplee-Biddle Hardware Co. ( [1924], 265U.S.,
Ruling: 189), which involved facts quite similar to those
The Income Tax Law for the Philippines is Act No. before us.To quote the exact words in the cited case
2833, as amended. In chapter IOn Individuals, is to of Chief Justice Taft delivering the opinionof the
be found section 4 court:It is earnestly pressed upon us that
which provides that, "The following incomes shallbe proceeds of life insurance paid on the death
exempt from the provisions of this law: of the insured are in fact capital, and cannot be taxed
(a) The proceeds of life insurance policies paid as income … that proceeds of al i f e i n s u r a n c e
tobeneficiaries upon the death of the insured ... ." The policy paid on the death of the insured are
Chapter on Corporations does notprovide as above. It not usually
is certain that the proceeds of life insurance policies c l a s s e d a s income.C o n s i d e r i n g , t h e r e f o r e , t h
are exempt. It isnot so certain that the proceeds e purport of the stipulated facts, consid
of life insurance policies paid to corporate e r i n g t h e uncertainty of Philippine law, and
beneficiariesupon the death of the insured are considering the lack of express legislative intention to
likewise exempt.T h e s i t u a t i o n w i l l b e b e t t e r taxthe proceeds of life insurance policies paid to
elucidated by a brief reference to laws on corporate beneficiaries, particularly when inthe
the samesubject in the exemption in favor of individual beneficiaries in the
United States. The Income Tax Law chapter on this subject, the clause
of 1916 extended to the PhilippineL e g i s l a t isi n s e r t e d " e x e m p t f r o m t h e
ure, when it came to enact Act No. 2 provisions of this law," we deem it reasona
Page 48 of 81
ble to hold theproceeds of the life insuranc > CIR assessed El Oriente for deficiency taxes
e policy in question as representing an inde because El Oriente did not include as income the
m n i t y a n d n o t taxable proceeds received from the insurance.
income.T h e f o r e g o i n g p r o n o u n c e m e n t w i l l r e s
u l t i n t h e j u d g m e n t b e i n g r e v e r s e d a n d i n an Issue:
other judgment being rendered in favor of El Oriente. Whether or not the proceeds of insurance taken by a
corporation on the life of an important official to
indemnify it against loss in case of his death, are
El Oriente v. Posadas - Taxability of Insurance taxable as income under the Philippine Income Tax
Proceeds Law
56 PHIL 147 (1931)
Held:
Facts: NOT TAXABLE.
> El Oriente in order to protect itself against the loss In Chapter I of the Tax Code, is to be found section 4
that it might suffer by reason of the death of its which provides that, "The following incomes shall be
manager, A. Velhagen, who had had more than thirty- exempt from the provisions of this law: (a) The
five (35) years of experience in the manufacture of proceeds of life insurance policies paid to beneficiaries
cigars in the Philippines, procured from the upon the death of the insured . . ." Section 10, as
Manufacturers Life Insurance Co., of Toronto, Canada, amended, in Chapter II On Corporations, provides
thru its local agent E. E. Elser, an insurance policy on that, "There shall be levied, assessed, collected, and
the life of the said A. Velhagen for the sum of paid annually upon the total net income received in
$50,000, United States currency designating itself as the preceding calendar year from all sources by every
the beneficiary. corporation . . .a tax of three per centum upon such
> El Oriente paid for the premiums due thereon and income . . ." Section 11 in the same chapter, provides
charged as expenses of its business all the said the exemptions under the law, but neither here nor in
premiums and deducted the same from its gross any other section is reference made to the provisions
incomes as reported in its annual income tax returns, of section 4 in Chapter I.
which deductions were allowed upon a showing that
such premiums were legitimate expenses of its Under the view we take of the case, it is sufficient for
business. our purposes to direct attention to the anomalous and
> Upon the death of A. Velhagen in 1929, the El vague condition of the law. It is certain that the
Oriente received all the proceeds of the said life proceeds of life insurance policies paid to individual
insurance policy, together with the interests and the beneficiaries upon the death of the insured are
dividends accruing thereon, aggregating P104,957.88 exempt. It is not so certain that the proceeds of life
insurance policies paid to corporate beneficiaries upon
Page 49 of 81
the death of the insured are likewise exempt. But at > The insured then died and Carponia tried to claim
least, it may be said that the law is indefinite in the proceeds of the said plan.
phraseology and does not permit us unequivocally to > She admitted to being only the common law wife of
hold that the proceeds of life insurance policies the insured.
received by corporations constitute income which is > Pascuala, the legal wife, also filed a claim asserting
taxable her right as the legal wife. The company then filed an
action for interpleader.
It will be recalled that El Oriente, took out the
insurance on the life of its manager, who had had Issue:
more than thirty-five years' experience in the
manufacture of cigars in the Philippines, to protect Whether or not the common law wife named as
itself against the loss it might suffer by reason of the beneficiary can collect the proceeds.
death of its manager. We do not believe that this fact
signifies that when the plaintiff received P104,957.88 Held:
from the insurance on the life of its manager, it NO.
thereby realized a net profit in this amount. It is true The civil code prohibitions on donations made
that the Income Tax Law, in exempting individual between persons guilty of adulterous concubinage
beneficiaries, speaks of the proceeds of life insurance applies to insurance contracts. On matters not
policies as income, but this is a very slight indication specifically provided for by the Insurance Law, the
of legislative intention. In reality, what the plaintiff general rules on Civil law shall apply. A life insurance
received was in the nature of an indemnity for the loss policy is no different from a civil donation as far as the
which it actually suffered because of the death of its beneficiary is concerned, since both are founded on
manager. liberality.
WEEK 6 Held:
Harvardian has a right to the proceeds.
Harvardian Colleges v. Country Bankers Regardless of the nature of the title of the insured or
Insurance Corp. even if he did not have title to the property insured,
1 CARA 2 the contract of fire insurance should still be upheld if
his interest in or his relation to the property is such
Facts: that he will be benefited in its continued existence or
> Harvardian is a family corporation, the suffer a direct pecuniary loss from its destruction or
stockholders of which are Ildefonso Yap, Virginia King injury. The test in determining insurable interest in
Yap and their children. property is whether one will derive pecuniary benefit
> Prior to Aug. 9, 1979, an agent of Country Bankers or advantage from its preservation, or will suffer
proposed to Harvardian to insure its school building. pecuniary loss or damage from its destruction,
Although at first reluctant, Harvardian agreed. termination or injury by the happening of the event
> Country Banks sent an inspector to inspect the insured against.
school building and agreed to insure the same for
Page 61 of 81
Here Harvardian was not only in possession of the February 25, 1991: Gaisano Superstore Complex in
building but was in fact using the same for several Cagayan de Oro City, owned by Gaisano Cagayan,
years with the knowledge and consent of Ildefonso Inc., containing the ready-made clothing materials
Yap. It is reasonably fair to assume that had the sold and delivered by IMC and LSPI was consumed by
building not been burned, Harvardian would have fire.
been allowed the continued use of the same as the February 4, 1992: Insurance Company of North
site of its operation as an educational institution. America filed a complaint for damages
Harvardian therefore would have been directly against Gaisano Cagayan, Inc. alleges that IMC and
benefited by the preservation of the property, and LSPI filed their claims under their respective fire
certainly suffered a pecuniary loss by its being insurance policies which it paid thus it was subrogated
burned. to their rights
Gaisano Cagayan, Inc: not be held liable because it
was destroyed due to fortuities event or force majeure
Gaisano Cagayan, Inc. V. Insurance Company Of RTC: IMC and LSPI retained ownership of the
North America (2006) delivered goods until fully paid, it must bear the loss
(res perit domino)
G.R. No. 147839 June 8, 2006 CA: Reversed - sales invoices is an exception under
Article 1504 (1) of the Civil Code to res perit domino
Lessons Applicable: Existing Interest (Insurance) ISSUE: W/N Insurance Company of North America can
Laws Applicable: Article 1504,Article 1263, Article claim against Gaisano Cagayan for the debt that was
2207 of the Civil Code, Section 13 of Insurance Code isnured
Page 64 of 81
4. WON it has been established that petitioner has IMC and LSPI had an insurable interest until full
outstanding accounts with IMC and LSPI. payment of the value of the delivered goods. Unlike
the civil law concept of res perit domino, where
Held: No. Yes. Yes. Yes but account with LSPI ownership is the basis for consideration of
unsubstantiated. Petition partly granted. who bears the risk of loss, in property insurance,
one's interest is not determined by concept of title,
Ratio: but whether insured has substantial economic interest
1. Nowhere is it provided in the questioned insurance in the property.
policies that the subject of the insurance is the goods Section 13 of our Insurance Code defines insurable
sold and delivered to the customers and dealers of the interest as "every interest in property, whether real or
insured. personal, or any relation thereto, or liability in respect
Thus, what were insured against were the accounts of thereof, of such nature that a contemplated peril
IMC and LSPI with petitioner which remained unpaid might directly damnify the insured." Parenthetically,
45 days after the loss through fire, and not the loss or under Section 14 of the same Code, an insurable
destruction of the goods delivered. interest in property may consist in: (a) an existing
2. The present case clearly falls under paragraph (1), interest; (b) an inchoate interest founded on existing
Article 1504 of the Civil Code: interest; or (c) an expectancy, coupled with an
ART. 1504. Unless otherwise agreed, the goods existing interest in that out of which the expectancy
remain at the seller's risk until the ownership therein arises.
is transferred to the buyer, but when the ownership Anyone has an insurable interest in property who
therein is transferred to the buyer the goods are at derives a benefit from its existence or would suffer
the buyer's risk whether actual delivery has been loss from its destruction. Indeed, a vendor or seller
made or not, except that: retains an insurable interest in the property sold so
(1) Where delivery of the goods has been made to the long as he has any interest therein, in other words, so
buyer or to a bailee for the buyer, in pursuance of the long as he would suffer by its destruction, as where
contract and the ownership in the goods has been he has a vendor's lien. In this case, the insurable
retained by the seller merely to secure performance interest of IMC and LSPI pertain to the unpaid
by the buyer of his obligations under the contract, the accounts appearing in their Books of Account 45 days
goods are at the buyer's risk from the time of such after the time of the loss covered by the policies.
delivery 3. Petitioner's argument that it is not liable because
Thus, when the seller retains ownership only to insure the fire is a fortuitous event under Article 117432 of
that the buyer will pay its debt, the risk of loss is the Civil Code is misplaced. As held earlier,
borne by the buyer. Petitioner bears the risk of loss of petitioner bears the loss under Article 1504 (1) of the
the goods delivered. Civil Code.
Page 65 of 81
Moreover, it must be stressed that the insurance in Art. 2207. If the plaintiff's property has been insured,
this case is not for loss of goods by fire but for and he has received indemnity from the insurance
petitioner's accounts with IMC and LSPI that remained company for the injury or loss arising out of the wrong
unpaid 45 days after the fire. Accordingly, petitioner's or breach of contract complained of, the insurance
obligation is for the payment of money. company shall be subrogated to the rights of the
As correctly stated by the CA, where the obligation insured against the wrongdoer or the person who has
consists in the payment of money, the failure of the violated the contract.
debtor to make the payment even by reason of a As to LSPI, respondent failed to present sufficient
fortuitous event shall not relieve him of his liability. evidence to prove its cause of action. There was no
The rationale for this is that the rule that an obligor evidence that respondent has been subrogated to any
should be held exempt from liability when the loss right which LSPI may have against petitioner. Failure
occurs thru a fortuitous event only holds true when to substantiate the claim of subrogation is fatal to
the obligation consists in the delivery of a determinate petitioner's case for recovery of P535,613.00.
thing and there is no stipulation holding him liable
even in case of fortuitous event. It does Harding v Commerical Union
not apply when the obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an August 10, 1918 G.R. No. L-12707
obligation to deliver a generic thing, the loss or J. Fisher
destruction of anything of the same kind does not Facts:
extinguish the obligation." This rule is based on the Smith Bell insured Mrs. Hardings’ Studebaker car for a premium of Php
principle that the genus of a thing can never perish. 150. It was insured for Php 3,000, the value of the car. The car was
An obligation to pay money is generic; therefore, it is destroyed by fire. Mrs. Harding furnished the defendant the proofs of
her loss, but the company didn’t pay. Evidence showed that Hermanos
not excused by fortuitous loss of any specific property
sold the automobile to Canson for P3,200. Canson then sold the car to
of the debtor. Harding for Php 1,500. The car was then sold for P2,000. It was then
4. With respect to IMC, the respondent has resold to Harding. He gave the car to his wife; Mrs. Henry E. Harding
adequately established its claim. The P 3 m claim has as a present. The automobile was repaired and repainted at the Luneta
been proven. The subrogation receipt, by itself, is Garage at P900.
The company averred that they gave false information, particularly that
sufficient to establish not only the relationship of
on the price of the vehicle and the ownership of the car. Hence, they
respondent as insurer and IMC as the insured, but aimed to declare the policy void.
also the amount paid to settle the insurance claim. The trial court found that there was no fraud.
The right of subrogation accrues simply upon payment This was an action by plaintiffs to recover from defendant the sum of
by the insurance company of the insurance claim P3,000 and interest, alleged to be due under the terms of a policy of
insurance. The trial court gave plaintiffs judgment for the amount
Respondent's action against petitioner is squarely demanded, with interest and costs, and from that decision the
sanctioned by Article 2207 of the Civil Code which defendant appealed.
provides:
Page 66 of 81
Issue: Was the valuation of the car for P3000 done fraudulently, Under these circumstances, we do not think that the facts stated in the
thereby making the policy void? proposal can be held as a warranty of the insured, even if it should
have been shown that they were incorrect in the absence of proof of
Held: No. willful misstatement. Under such circumstance, the proposal is to be
regarded as the act of the insurer and not of the insured.
Ratio: The defendant, upon the information given by plaintiff, and after an
The policy stated that inspection of the automobile by its examiner, having agreed that it was
“That during the period above set forth and during any period for which worth P3,000, is bound by this valuation in the absence of fraud on the
the company may agree to renew this policy the company will subject part of the insured. All statements of value are, of necessity, to a large
to the exception and conditions contained herein or endorsed hereon extent matters of opinion, and it would be outrageous to hold that the
indemnify the insured against loss of or damage to any motor car validity of all valued policies must depend upon the absolute
described in the schedule by whatever cause such loss or damage correctness of such estimated value.
may be occasioned and will further indemnify the insured up to the Supreme Court v First National- The ordinary test of the value of
value of the car or P3,000 whichever is the greater against any claim at property is the price it will commend in the market if offered for sale.
common law made by any person for loss of life or for accidental bodily But that test cannot, in the very nature of the case, be applied at the
injury or damage to property caused by the said motor car including time application is made for insurance. Men may honestly differ about
law costs payable in connection with such claim when incurred with the the value of property, or as to what it will bring in the market; and such
consent of the company.” differences are often very marked among those whose special
Defendant contends that the statement regarding the cost of the business it is to buy and sell property of all kinds.
automobile was a warranty, that the statement was false, and that, The assured could do no more than estimate such value; and that, it
therefore, the policy never attached to the risk. seems, was all that he was required to do in this case. His duty was to
The automobile had in fact cost more than the amount mentioned. The deal fairly with the Company in making such estimate.
court below found, and the evidence shows, that the automobile was Section 163 of the Insurance Law (Act No. 2427) provides that “the
bought by plaintiff’s husband a few weeks before the issuance of the effect of a valuation in a policy of fire insurance is the same as in a
policy in question for the sum of P2,800, and that between that time policy of marine insurance.”
and the issuance of the policy some P900 was spent upon it in repairs By the terms of section 149 of the Act cited, the valuation in a policy of
and repainting. The mechanic who testified told that the automobile marine insurance is conclusive if the insured had an insurable interest
was practically as good as new at the time the insurance was effected. and was not guilty of fraud.
The amount stated was less than the actual outlay which the The valuation of the automobile, for the purposes of the insurance, is
automobile represented to Mr. Harding, including repairs, when the binding upon the defendant corporation.
insurance policy was issued. It would be unfair to hold the policy void
simply because the outlay represented by the automobile was made by
the plaintiff’s husband and not by his wife, to whom he had given the
automobile.
The trial court found that Mrs. Harding, in fixing the value of the
automobile at P3,000, acted upon information given her by her
husband and by Mr. Server, the manager of the Luneta Garage. She
merely repeated the information which had been given her by her
husband, and at the same time disclosed to defendant’s agent the
source of her information. There is no evidence to sustain the
contention that this communication was made in bad faith.
Page 67 of 81
Insurance Case Digest:
Lampano V. Jose (1915)
G.R. No. L-9401 March 30, 1915
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable:
FACTS:
Page 69 of 81
JVL entered into the lease contract with full
knowledge of its terms and conditions. Insurance Case Digest: Traders Insurance & Surety Co. V.
Lim, as a lessee, has an insurable interest in the
equipment and motor vehicles leased. Golangco, Et Al (1954)
In the financial lease agreement, FEB did not assume
responsibility as to the quality, merchantability, or G.R. No. L-6442 Sep 21, 1954
capacity of the equipment. This stipulation provides Lessons Applicable: Existing Interest (Insurance)
that, in case of defect of any kind that will be found by Laws Applicable: Sec. 13 of the Insurance Code
the lessee in any of the equipment, recourse should be
made to the manufacturer. “The financial lessor, being FACTS:
a financing company, i.e., an extender of credit rather
than an ordinary equipment rental company, does not Tomas Lianco and the Archbishop entered into a
extend a warranty of the fitness of the equipment for contract of lease on a parcel of landowned by church
any particular use. Thus, the financial lessee was As lessee, Lianco erected a building on the leased
precisely in a position to enforce such warranty directly portion of the church’s land.
against the supplier of the equipment and not against Lianco transferred ownership of this building to Kaw
the financial lessor. We find nothing contra legem or Eng Si,who later transferred the same to Golangco.
contrary to public policy in such a contractual Transfers were made without the consent of the
arrangement Archbishop
The Archbishop filed an ejectment case against Lianco,
who appears to be occupants of the premises building with
others paying rent to Golangco.
The right of Golangco to receive rent on the
building was judicially recognized in a case decided
between Lianco and others occupying the premises
pursuant to a compromise agreement.
The Archbishop did not exercise his option to question
Golangco’s rights as lessee
April 7,1949: Golangco applied for fire insurance with
Trader’s Insurance and Surety Co.
fire insurance policy states: "that all
insurancecovered under said policy, includes the 'rent or
othersubject matter of insurance in respect of or inconnect
ion with any building or any property contained in any
building"
June 5, 1949: the building premises was burned so
Golangco requested
Trader’s Insurance to pay the insurance amount of 10,000
including the amount of rent P1,100 monthly.
Page 70 of 81
Trader’s insurance refused to pay the insurance
for the rent averring that Golangco has no insurable
interest
ISSUE: W/N Golangco has insurable interest
Insurance Case Digest: Lopez
on the rent of the building premises which may V. Del Rosario And Quiogue
lawfully/validly be subject of insurance?
(1922)
HELD: YES.
Sec. 13 of the Insurance Code:
Every interest in the property, whether real or personal, or
any relation thereto, or liability in respect thereof of such G.R. No. L-19189 November 27, 1922
nature that a contemplated peril might directly damnify
the insured, is an insurable interest.
Both at the time of the issuance of the policy and at Lessons Applicable: Carrier or Depositary (Insurance)
the time of the fire,
Golangco was in legal possession of the premises, Laws Applicable:
collecting rentals from its occupant.
The argument of Trader’s Insurance that a policy
FACTS:
of insurance must specify the interest of the insured in the
property insured, if he is not the absolute owner thereof, Benita Quiogue de V. del Rosario (Mrs. del Rosario),
is not meritorious because it was the Trader’s, not
Golangco, who prepared that policy, and it cannot take owner of a bonded warehouse where Froilan Lopez,
advantage of its own acts to plaintiff's detriment; and, in holder or 14 waehouse receipts and Elias Zamora had
any case, this provisionwas substantially complied with by their copra deposited
Golangco when he made a full and clear statement of his
The warehouse recipts states an insurance of 1%
interests to Trader's manager.
The contract between Lianco and the Archbishop their declared value which can be increase or decrease
only forbade Lianco from transferring 'his rights as LESSEE by giving 1 month's notice in writing
but the contracts Lianco made in favor of Kaw Eng Siand
Lopez paid the insurance to May 18, 1920, but not
plaintiff Golangco did not transfer such rights; hence no
written consent thereto was necessary. At worst, the thereafter
contract would be voidable, but not a void contract, at the June 6, 1920: the warehouse was destroyed by fire.
option of the Archbishop and it does not appear that it was Only copra worth P49,985 was salvaged. At that time
ever exercised
Lopez was still liable for the storage and insurance of
P315.90
Mrs. Del Rosario submitted the insurance with the
arbitrators and seems to have satisfied all of the
Page 71 of 81
persons who had copra stored in her warehouse, In a case of contributing policies, adjustments of loss made by
including the stockholders in the Compañia Coprera de an expert or by a board of arbitrators may be submitted to the
court NOT as evidence of the facts stated therein, or as
Tayabas (whose stock she took over), with the exception
obligatory, but for the purpose of assisting the court in
of Froilan Lopez calculating the amount of liability.
Ineffectual attempts by Mrs. Del Rosario to effect a
Insurance Case Digest: San Miguel Brewery V. Law Union
compromise with Lopez first for P71,994, later raised to And Rock Insurance Co. (1920)
P72,724, and finally reduced to P17,000, were made.
But Lopez stubbornly contended, or, at least, his G.R. No. L-14300 January 19, 1920
attorney contended for him, that he should receive not Lessons Applicable:
a centavo less than P88,595.43 (from Mortgagor (Insurance)
originally P107,990.40) Measure of Insurable Interest (Insurance)
Effect of Change of Interest in Thing Insured (Insurance)
Issue: Effect of transfer of thing insured (Insurance)
Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec.
Whether or not Del Rosario acted as the agent of Lopez in 50,sec.55 (now sec. 58) of the Insurance Code (all old law)
taking out the insurance on the contents of the warehouse or FACTS:
whether she acted as the reinsurer of the copra.
In the contract of mortgage, the owner P.D. Dunn
had agreed, at his own expense, to insure the
Held: mortgaged property for its full value and to indorse the
policies in such manner as to authorize the Brewery
She acted as the agent of Lopez. Company to receive the proceeds in case of loss and to
The agency can be deduced from the warehouse receipts, the retain such part thereof as might be necessary to satisfy
insurance policies and the circumstances surrounding the the remainder then due upon the mortgage debt.
transaction. Under any aspect, Del Rosario is liable. The law Instead, however, of effecting the insurance himself
is that a policy effected by a bailee and covering by its terms Dunn authorized and requested the Brewery Company
to procure insurance on the property in the amount of
in his own property and property held in trust, inures, in the
P15,000 at Dunn's expense.
event of loss, equally and proportionately to the benefit of all San Miguel insured the property only as mortgagee.
owners of the property insured. Even if one secured Dunn sold the propert to Henry Harding. The
insurance covering his own goods and goods stored with him, insurance was not assigned by Dunn to Harding.
and even if the owner of the stored goods did not request or When it was destroyed by fire, the two companies
know the insurance, and did not ratify it before the payment of settled with San Miguelto the extent of the mortgage
the loss, it has been held by a reputable court that the credit.
warehouseman is liable to the owner of such stored goods for RTC: Absolved the 2 companies from the difference.
his share. Henry Harding is not entitled to the difference between
the mortgage credit and the face value of the policies.
Page 72 of 81
Henry Harding appealed. parties are entitled to have it reformed. But to justify the
ISSUE: reformation of a contract, the proof must be of the
1. W/N San Miguel has insurable interest as mortgagor only to most satisfactory character, and it must clearly appear
the extent of the mortgage credit - YES that the contract failed to express the real agreement
2. W/N Harding has insurable interest as owner - NO between the parties
In the case now before us the proof is entirely
insufficient to authorize reformation.
HELD: affirmed
section 19 of the Insurance Act:
a change of interest in any part of a thing Insurance Case Digest: Cha V.
insured unaccompanied by a corresponding change of
interest in the insurance, suspends the insurance to an CA (1997)
equivalent extent, until the interest in the thing and the
interest in the insurance are vested in the same person
section 55:
the mere transfer of a thing insured does not G.R. No. 124520 August 18, 1997
transfer the policy, but suspends it until the same
person becomes the owner of both the policy and the
thing insured Lessons Applicable: Effect of Lack of Insurable Interest
Undoubtedly these policies of insurance might have
(Insurance)
been so framed as to have been "payable to the San
Miguel Brewery, mortgagee, as its interest may appear, Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance
remainder to whomsoever, during the continuance of the
risk, may become the owner of the interest insured." (Sec Code
54, Act No. 2427.) Such a clause would have proved an
intention to insure the entire interest in the property, not
merely the insurable interest of the San Miguel Brewery, FACTS:
and would have shown exactly to whom the money, in
case of loss, should be paid. But the policies are not so Spouses Nilo Cha and Stella Uy-Cha and CKS
written. Development Corporation entered a 1 year lease contract
The blame for the situation thus created rests, with a stipulation not to insure against fire the chattels,
however, with the Brewery rather than with the merchandise, textiles, goods and effects placed at any
insurance companies, and there is nothing in the record stall or store or space in the leased premises without first
to indicate that the insurance companies were obtaining the written consent and approval of the lessor.
requested to write insurance upon the insurable interest But it insured against loss by fire their merchandise inside
of the owner or intended to make themselves liable to the leased premises for P500,000 with the United
that extent Insurance Co., Inc. without the written consent of CKS
If by inadvertence, accident, or mistake the terms of On the day the lease contract was to expire, fire broke
the contract were not fully set forth in the policy, the out inside the leased premises and CKS learning that the
Page 73 of 81
spouses procured an insurance wrote to United to have proceeds of the fire insurance policy thus rightfully belong
the proceeds be paid directly to them. But United refused to the spouses. The liability of the Cha spouses to CKS for
so CKS filed against Spouses Cha and United. violating their lease contract in that Cha spouses obtained
RTC: United to pay CKS the amount of P335,063.11 a fire insurance policy over their own merchandise,
and Spouses Cha to pay P50,000 as exemplary damages, without the consent of CKS, is a separate and distinct
P20,000 as attorney’s fees and costs of suit issue which we do not resolve in this case.
CA: deleted exemplary damages and attorney’s fees
ISSUE: W/N the CKS has insurable interest because the
spouses Cha violated the stipulation
HELD: NO. CA set aside. Awarding the proceeds to spouses
Cha. Insurance Case Digest: Tai
Sec. 18. No contract or policy of insurance on property
shall be enforceable except for the benefit of some person Tong Chuache & Co. V.
having an insurable interest in the property insured
A non-life insurance policy such as the fire insurance Insurance Commission (1988)
policy taken by petitioner-spouses over their merchandise
is primarily a contract of indemnity. Insurable interest in
the property insured must exist a t the time the insurance
takes effect and at the time the loss occurs. The basis of G.R. No. L-55397 February 29, 1988
such requirement of insurable interest in property insured
is based on sound public policy: to prevent a person from
taking out an insurance policy on property upon which he Lessons Applicable: When Insurable Interest Must Exist (Insurance)
has no insurable interest and collecting the proceeds of
said policy in case of loss of the property. In such a case, Laws Applicable:
the contract of insurance is a mere wager which is void
under Section 25 of the Insurance Code.
SECTION 25. Every stipulation in a policy of Insurance
for the payment of loss, whether the person insured has
or has not any interest in the property insured, or that the FACTS:
policy shall be received as proof of such interest, and
every policy executed by way of gaming or wagering, is Azucena Palomo bought a parcel of land and building
void from Rolando Gonzales and assumed a mortgage of the
Section 17. The measure of an insurable interest in building in favor of S.S.S. which was insured with
property is the extent to which the insured might be S.S.S. Accredited Group of Insurers
damnified by loss of injury thereof April 19, 1975: Azucena Palomo obtained a loan from
The automatic assignment of the policy to CKS under Tai Tong Chuache Inc. in the amount of P100,000 and
the provision of the lease contract previously quoted is to secure it, the land and building was mortgaged
void for being contrary to law and/or public policy. The
Page 74 of 81
June 11, 1975: Pedro Palomo secured a Fire The validity of the insurance policy taken b
Insurance Policy covering the building for P50,000 petitioner was not assailed by private respondent.
with Zenith Insurance Corporation Moreover, petitioner's claim that the loan extended to
July 16, 1975: another Fire Insurance policy was the Palomos has not yet been paid was corroborated by
procured from Philippine British Assurance Company, Azucena Palomo who testified that they are still
covering the same building for P50,000 and the indebted to herein petitioner
contents thereof for P70,000 Chua being a partner of petitioner Tai Tong Chuache
Before the occurrence of the peril insured against the & Company is an agent of the partnership. Being an
Palomos had already paid their credit due the agent, it is understood that he acted for and in behalf of
July 31, 1975: building and the contents were totally the firm
Upon its failure to prove the allegation of lack of
razed by fire
insurable interest on the part of the petitioner,
Palomo was able to claim P41,546.79 from Philippine
Travellers must be held liable
British Assurance Co., P11,877.14 from Zenith
Insurance Corporation and P5,936.57 from S.S.S.
Group of Accredited Insurers but Travellers Multi-
Indemnity refused so it demanded the balance from the
other three but they refused so they filed against them
Insurance Commission, CFI: absolved Travellers on Insurance Case Digest: San Miguel Brewery V. Law Union
the basis that Arsenio Cua was claiming and NOT Tai
Tong Chuache And Rock Insurance Co. (1920)
Palomo Appealed
Travellers reasoned that the policy is endorsed G.R. No. L-14300 January 19, 1920
to Arsenio Chua, mortgage creditor
Tai Tong Chuache & Co. filed a complaint in Lessons Applicable:
intervention claiming the proceeds of the fire Insurance Mortgagor (Insurance)
Policy issued by travellers Measure of Insurable Interest (Insurance)
affirmative defense of lack of insurable Effect of Change of Interest in Thing Insured (Insurance)
interest that before the occurrence of the peril insured Effect of transfer of thing insured (Insurance)
against the Palomos had already paid their credit due Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec.
the petitioner 50,sec.55 (now sec. 58) of the Insurance Code (all old law)
ISSUE: W/N Tai Tong Chuache & Co. has insurable interest FACTS:
In the contract of mortgage, the owner P.D. Dunn
HELD: YES. Travellers Multi-Indemnity Corporation to pay had agreed, at his own expense, to insure the
Tai Tong Chuache & Co. mortgaged property for its full value and to indorse the
policies in such manner as to authorize the Brewery
when the creditor is in possession of the document Company to receive the proceeds in case of loss and to
of credit, he need not prove non-payment for it is retain such part thereof as might be necessary to satisfy
presumed the remainder then due upon the mortgage debt.
Page 75 of 81
Instead, however, of effecting the insurance himself case of loss, should be paid. But the policies are not so
Dunn authorized and requested the Brewery Company written.
to procure insurance on the property in the amount of The blame for the situation thus created rests,
P15,000 at Dunn's expense. however, with the Brewery rather than with the
San Miguel insured the property only as mortgagee. insurance companies, and there is nothing in the record
Dunn sold the propert to Henry Harding. The to indicate that the insurance companies were
insurance was not assigned by Dunn to Harding. requested to write insurance upon the insurable interest
When it was destroyed by fire, the two companies of the owner or intended to make themselves liable to
settled with San Miguelto the extent of the mortgage that extent
credit. If by inadvertence, accident, or mistake the terms of
RTC: Absolved the 2 companies from the difference. the contract were not fully set forth in the policy, the
Henry Harding is not entitled to the difference between parties are entitled to have it reformed. But to justify the
the mortgage credit and the face value of the policies. reformation of a contract, the proof must be of the
Henry Harding appealed. most satisfactory character, and it must clearly appear
ISSUE: that the contract failed to express the real agreement
1. W/N San Miguel has insurable interest as mortgagor only to between the parties
the extent of the mortgage credit - YES In the case now before us the proof is entirely
2. W/N Harding has insurable interest as owner - NO insufficient to authorize reformation.
HELD: affirmed
section 19 of the Insurance Act:
a change of interest in any part of a thing Insurance Case Digest:
insured unaccompanied by a corresponding change of
interest in the insurance, suspends the insurance to an Bachrach V. British American
equivalent extent, until the interest in the thing and the
interest in the insurance are vested in the same person Assurance Co. (1910)
section 55:
the mere transfer of a thing insured does not
transfer the policy, but suspends it until the same
person becomes the owner of both the policy and the G.R. No. L-5715 December 20, 1910
thing insured
Undoubtedly these policies of insurance might have
been so framed as to have been "payable to the San Lessons Applicable: Effect of Change of Interest in Thing
Miguel Brewery, mortgagee, as its interest may appear,
remainder to whomsoever, during the continuance of the Insured (Insurance)
risk, may become the owner of the interest insured." (Sec
Laws Applicable:
54, Act No. 2427.) Such a clause would have proved an
intention to insure the entire interest in the property, not
merely the insurable interest of the San Miguel Brewery,
and would have shown exactly to whom the money, in
Page 76 of 81
FACTS: there is no alienation within the meaning of the
insurance law until the mortgage acquires a right to take
E. M. Bachrach insured goods belonging to a general possession by default under the terms of the
furniture store, such as iron and brass bedsteads, toilet mortgage. No such right is claimed to have accrued in the
tables, chairs, ice boxes, bureaus, washstands, mirrors, case at bar, and the alienation clause is therefore
and sea-grass furniture stored in the ground floor and first inapplicable.
story of house and dwelling with an authorized agent of we can not find that there is a preponderance of
the British American Assurance Company evidence showing that the plaintiff did actually set fire or
British American Assurance Company denied alleging cause fire to be set to the goods in question
that: It does not positively appear of record that the
property covered by the policy to H. W. Peabody automobile in question was not included in the other
& Co. to secure certain indebtedness due and owing to policies. It does appear that the automobile was saved
said company and was considered as a part of the salvaged. It is alleged
interest in certain of the goods covered by the that the salvage amounted to P4,000, including the
said policy is trasnferred to Macke to secure certain automobile. This amount (P4,000) was distributed among
obligations assumed by Macke and on behalf of Bachrach the different insurers and the amount of their
willfully placed a gasoline can containing 10 responsibility was proportionately reduced. The defendant
gallons of gasoline close to the insured goods and appellant in the present case made no objection at
made no proof of the loss with the time required any time in the lower court to that distribution of the
by the condition salvage. The claim is now made for the first time.
RTC: British American Assurance Company liable to
bACHRACH
ISSUE: W/N Bachrach can claim Argente v West Coast G.R. No. L-
24899 March 19, 1928
J. Malcolm
HELD: YES. lower court affirmed
Section 25 of the Insurance Code defined concealment as "a neglect to Upon the payment of the insurance premium, the binding deposit
communicate that which a party knows and ought to communicate." receipt was issued Ngo Hing. Likewise, petitioner Mondragon
handwrote at the bottom of the back page of the application form his
Page 78 of 81
strong recommendation for the approval of the insurance application. shall not be in force at any time, and the premium paid shall be
Then Mondragon received a letter from Pacific Life disapproving the returned to the applicant.
insurance application. The letter stated that the said life insurance
application for 20-year endowment plan is not available for minors The receipt is merely an acknowledgment that the latter's branch office
below seven years old, but Pacific Life can consider the same under had received from the applicant the insurance premium and had
the Juvenile Triple Action Plan, and advised that if the offer is accepted the application subject for processing by the insurance
acceptable, the Juvenile Non-Medical Declaration be sent to the company. There was still approval or rejection the same on the basis of
company. whether or not the applicant is "insurable on standard rates." Since
Pacific Life disapproved the insurance application of respondent Ngo
The non-acceptance of the insurance plan by Pacific Life was allegedly Hing, the binding deposit receipt in question had never become in force
not communicated by petitioner Mondragon to private respondent Ngo at any time. The binding deposit receipt is conditional and does not
Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life insure outright. This was held in Lim v Sun.
again strongly recommending the approval of the 20-year endowment
insurance plan to children, pointing out that since the customers were The deposit paid by private respondent shall have to be refunded by
asking for such coverage. Pacific Life.
Helen Go died of influenza. Ngo Hing sought the payment of the 2. Ngo Hing had deliberately concealed the state of health of his
proceeds of the insurance, but having failed in his effort, he filed the daughter Helen Go. When he supplied data, he was fully aware that his
action for the recovery before the Court of First Instance of Cebu, one-year old daughter is typically a mongoloid child. He withheld the
which ruled against him. fact material to the risk insured.
“The contract of insurance is one of perfect good faith uberrima fides
meaning good faith, absolute and perfect candor or openness and
Issues: honesty; the absence of any concealment or demotion, however
slight.”
1. Whether the binding deposit receipt constituted a temporary contract
of the life insurance in question The concealment entitles the insurer to rescind the contract of
insurance.
2. Whether Ngo Hing concealed the state of health and physical
condition of Helen Go, which rendered void the policy
Page 79 of 81
The question to determine is: Are the facts then falsely
Saturnino v. Philamlife - False represented material? The Insurance Law provides that
Representation “materiality is to be determined not by the event, but solely by
the probable and reasonable influence of the facts upon the
party to whom the communication is due, in forming his
Facts: estimate of the proposed contract, or making his inquiries.
> 2 months prior to the insurance of the policy, Saturnino was
operated on for cancer, involving complete removal of the The contention of appellants is that the facts subject of the
right breast, including the pectoral muscles and the glands, representation were not material in view of the non-medical
found in the right armpit. nature of the insurance applied for, which does away with the
> Notwithstanding the fact of her operation, Saturnino did not usual requirement of medical examination before the policy is
make a disclosure thereof in her application for insurance. issued. The contention is without merit. If anything, the
> She stated therein that she did not have, nor had she ever waiver of medical examination renders even more material the
had, among others listed in the application, cancer or other information required of the applicant concerning previous
tumors; that she had not consulted any physician, undergone condition of health and diseases suffered, for such information
any operation or suffered any injury within the preceding 5 necessarily constitutes an important factor which the insurer
years. takes into consideration in deciding whether to issue the
> She also stated that she had never been treated for, nor did policy or not.
she ever have any illness or disease peculiar to her sex, Appellants also contend that there was no fraudulent
particularly of the breast, ovaries, uterus and menstrual concealment of the truth inasmuch as the insured herself did
disorders. not know, since her doctor never told her, that the disease for
> The application also recited that the declarations of which she had been operated on was cancer. In the first
Saturnino constituted a further basis for the issuance of the place, concealment of the fact of the operation itself was
policy. fraudulent, as there could not have been any mistake about it,
no matter what the ailment.
Issue: Secondly, in order to avoid a policy, it is not necessary to
Whether or not the insured made such false representation of show actual fraud on the part of the insured. In this
material facts as to avoid the policy. jurisdiction, concealment, whether intentional or unintentional
entitled the insurer to rescind the contract of insurance,
Held: concealment being defined as “negligence to communicate
YES. that which a party knows and ought to communicate.” The
There can be no dispute that the information given by her in basis of the rule vitiating the contract in cases of concealment
the application for insurance was false, namely, that she never is that it misleads or deceives the insurer into accepting the
had cancer or tumors or consulted any physician or risk, or accepting it at a rate of premium agreed upon. The
undergone any operation within the preceding period of 5 insurer, relying upon the belief that the insured will disclose
years. every material fact within his actual or presumed knowledge,
is misled into a belief that the circumstances withheld does
Page 80 of 81
not exist, and he is thereby induced to estimate the risk upon
a false basis that it does not exist.
Page 81 of 81