Insurance Case Digests

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-­‐
 1
 -­‐
 
G.R.
 No.
 L-­‐22375
 July
 18,
 1975
 
THE
 CAPITAL
 INSURANCE
 &
 SURETY
 CO.,
 INC.,
 petitioner,
 vs.
 PLASTIC
 ERA
 CO.,
 INC.,
 AND
 COURT
 OF
 
APPEALS,
 respondents.
 
FACTS:
 
On
 December
 17,
 1960,
 Capital
 Insurance
 (insurer)
 delivered
 to
 the
 Plastic
 Era
 (insured)
 its
 open
 Fire
 
Policy
 No.
 22760
 wherein
 the
 former
 undertook
 to
 insure
 the
 latter's
 building,
 equipment,
 raw
 materials,
 
products
 and
 accessories
 located
 at
 Sheridan
 Street,
 Mandaluyong,
 Rizal.
 The
 term
 of
 the
 policy
 (face
 
value
 =
 100,000)
 is
 December
 15,
 1960
 to
 December
 15,
 1961
 1
 o’clock
 in
 the
 afternoon.
 
 

 
When
 the
 policy
 was
 delivered,
 Plastic
 Era
 failed
 to
 pay
 the
 corresponding
 insurance
 premium.
 However,
 
through
 its
 duly
 authorized
 representative,
 it
 executed
 the
 an
 acknowledgment
 receipt.
 
On
 January
 8,
 1961,
 in
 partial
 payment
 of
 the
 insurance
 premium,
 Plastic
 Era
 delivered
 to
 Capital
 

 
Insurance,
 a
 check
  for
 the
 amount
 of
 P1,000.00
 postdated
 January
 16,
 1961
 payable
 to
 the
 order
 of
 the
 
latter
 and
 drawn
 against
 the
 Bank
 of
 America.
 However,
 Capital
 Insurance
 tried
 to
 deposit
 the
 check
 only
 
on
 February
 20,
 1961
 and
 the
 same
 was
 dishonored
 by
 the
 bank
 for
 lack
 of
 funds.
 The
 records
 show
 that
 
as
 of
 January
 19,
 1961
 Plastic
 Era
 had
 a
 balance
 of
 P1,193.41
 with
 the
 Bank
 of
 America.
 
On
 January
 18,
 1961
 or
 two
 days
 after
 the
 insurance
 premium
 became
 due,
 at
 about
 4:00
 to
 5:00
 o'clock
 
in
 the
 morning,
 the
 property
 insured
 by
 Plastic
 Era
 was
 destroyed
 by
 fire.
 
The
 loss
 and/or
 damage
 suffered
 by
 Plastic
 Era
 was
 estimated
 by
 the
 Manila
 Adjustment
 Company
 to
 be
 
P283,875.
 However,
 according
 to
 the
 records
 the
 same
 property
 has
 been
 insured
 by
 Plastic
 Era
 with
 the
 
Philamgen
 Insurance
 Company
 for
 P200,000.00.
 
In
 less
 than
 a
 month
 Plastic
 Era
 demanded
 from
 Capital
 Insurance
 the
 payment
 of
 the
 sum
 of
 P100,000.00
 
as
 indemnity
 for
 the
 loss
 of
 the
 insured
 property
 under
 Policy
 No.
 22760
 but
 the
 latter
 refused
 for
 the
 
reason
 that,
 among
 others,
 Plastic
 Era
 failed
 to
 pay
 the
 insurance
 premium.
 

 
Thus,
 Plastic
 Era
 filed
 a
 complaint
 against
 Capital
 Insurance
 for
 the
 recovery
 of
 the
 sum.
 

 
DECISION
 OF
 LOWER
 COURTS:
 
(1)
 Court
 of
 First
 Instance
 –
 Manila:
 pay
 Plastic
 Era
 88,325.63.
 
(2)
 Court
 of
 Appeals:
 affirmed
 CFI.
 

 
ISSUE:
 
Whether
 or
 not
 a
 contract
 of
 insurance
 has
 been
 duly
 perfected
 between
 the
 petitioner,
 Capital
 Insurance,
 
and
 respondent
 Plastic
 Era
 

 
RULING:
 
Yes,
 the
 contract
 has
 been
 perfected.
 

 
Capital
 Insurance
 accepted
 the
 promise
 of
 Plastic
 Era
 to
 pay
 the
 insurance
 premium
 within
 thirty
 (30)
 
days
 from
 the
 effective
 date
 of
 policy.
 By
 so
 doing,
 it
 has
 implicitly
 agreed
 to
 modify
 the
 tenor
 of
 the
 
insurance
 policy
 and
 in
 effect,
 waived
 the
 provision
 therein
 that
 it
 would
 only
 pay
 for
 the
 loss
 or
 damage
 
in
 case
 the
 same
 occurs
 after
 the
 payment
 of
 the
 premium.
 Considering
 that
 the
 insurance
 policy
 is
 silent
 
as
 to
 the
 mode
 of
 payment,
 Capital
 Insurance
 is
 deemed
 to
 have
 accepted
 the
 promissory
 note
 in
 payment
 
of
 the
 premium.
 This
 rendered
 the
 policy
 immediately
 operative
 on
 the
 date
 it
 was
 delivered.
 
The
 acknowledgment
 is
 deemed
 to
 be
 a
 promissory
 note.
 In
 other
 words,
 a
 requirement
 for
 the
 payment
 
of
 the
 first
 or
 initial
 premium
 in
 advance
 or
 actual
 cash
 may
 be
 waived
 by
 acceptance
 of
 a
 promissory
 
note
 

 
The
 fact
 that
 the
 check
 issued
 by
 Plastic
 Era
 in
 partial
 payment
 of
 the
 promissory
 note
 was
 later
 on
 
dishonored
 did
 not
 in
 any
 way
 operate
 as
 a
 forfeiture
 of
 its
 rights
 under
 the
 policy,
 there
 being
 no
 express
 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

stipulation
 therein
 to
 that
 effect.
 
If
 the
 check
 is
 accepted
 as
 payment
 of
 the
 premium
 even
 though
 it
 turns
 out
 to
 be
 worthless,
 there
 is
 
payment
 that
 will
 prevent
 forfeiture.
 
The
 payment
 of
 the
 premium
 on
 the
 insurance
 policy
 therefore
 became
 an
 independent
 obligation
 the
 
non-­‐fulfillment
 of
 which
 would
 entitle
 Capital
 Insurance
 to
 recover.
 It
 could
 just
 deduct
 the
 premium
 due
 
and
 unpaid
 upon
 the
 satisfaction
 of
 the
 loss
 under
 the
 policy.
 

 
-­‐
 2
 –
 
[G.R.
 No.
 150751.
 September
 20,
 2004]
 
CENTRAL
 SHIPPING
 COMPANY,
 INC.,
 petitioner,
 vs.
 INSURANCE
 COMPANY
 OF
 NORTH
 AMERICA,
 
respondent.
 

 
FACTS:
 
On
 July
 25,
 1990
 at
 Puerto
 Princesa,
 Palawan,
 Central
 Shipping
 Company
 received
 on
 board
 its
 vessel,
 the
 
M/V
 ‘Central
 Bohol’,
 376
 pieces
 [of]
 Philippine
 Apitong
 Round
 Logs
 and
 undertook
 to
 transport
 said
 
shipment
 to
 Manila
 for
 delivery
 to
 Alaska
 Lumber
 Co.,
 Inc.
 
“The
 cargo
 was
 insured
 for
 P3,000,000.00
 against
 total
 loss
 under
 Insurance
 Company
 of
 North
 America’s
 
Marine
 Cargo
 Policy
 No.
 MCPB-­‐
 00170.
 The
 vessel
 completely
 sank.
 Due
 to
 the
 sinking
 of
 the
 vessel,
 the
 
cargo
 was
 totally
 lost.
 The
 consignee,
 Alaska
 Lumber
 Co.
 Inc.,
 presented
 a
 claim
 for
 the
 value
 of
 the
 
shipment
 to
 Central
 Shipping
 but
 the
 latter
 failed
 and
 refused
 to
 settle
 the
 claim,
 hence
 Insurance
 
company,
 being
 the
 insurer,
 paid
 said
 claim
 and
 now
 seeks
 to
 be
 subrogated
 to
 all
 the
 rights
 and
 actions
 
of
 the
 consignee
 as
 against
 Central
 Shipping.
 Central
 Shipping
 raised
 as
 its
 main
 defense
 that
 the
 
proximate
 and
 only
 cause
 of
 the
 sinking
 of
 its
 vessel
 and
 the
 loss
 of
 its
 cargo
 was
 a
 natural
 disaster,
 a
 
tropical
 storm
 which
 neither
 Central
 Shipping
 nor
 the
 captain
 of
 its
 vessel
 could
 have
 foreseen.
 

 
DECISION
 OF
 LOWER
 COURTS:
 
(1)
 RTC:
 Central
 Shipping
 Liable.
 RTC
 was
 unconvinced
 that
 the
 sinking
 of
 M/V
 Central
 Bohol
 had
 been
 
caused
 by
 the
 weather
 or
 any
 other
 caso
 fortuito.
 It
 noted
 that
 monsoons,
 which
 were
 common
 
occurrences
 during
 the
 months
 of
 July
 to
 December,
 could
 have
 been
 foreseen
 and
 provided
 for
 by
 an
 
ocean-­‐going
 vessel.
 
(2)
 CA:
 affirmed
 RTC.
 Given
 the
 season
 of
 rains
 and
 monsoons,
 the
 ship
 captain
 and
 his
 crew
 should
 have
 
anticipated
 the
 perils
 of
 the
 sea.
 The
 CA
 found
 no
 merit
 in
 petitioner’s
 assertion
 of
 the
 vessel’s
 
seaworthiness.
 It
 held
 that
 the
 Certificates
 of
 Inspection
 and
 Drydocking
 were
 not
 conclusive
 proofs
 
thereof.
 In
 order
 to
 consider
 a
 vessel
 to
 be
 seaworthy,
 it
 must
 be
 fit
 to
 meet
 the
 perils
 of
 the
 sea.
 
ISSUES
 &
 RULING:
 
(1)
 Whether
 the
 carrier
 is
 liable
 for
 the
 loss
 of
 the
 cargo;
 and
 

 
Yes.
 
 
A
 common
 carrier
 is
 presumed
 to
 be
 at
 fault
 or
 negligent.
 It
 shall
 be
 liable
 for
 the
 loss,
 destruction
 or
 
deterioration
 of
 its
 cargo,
 unless
 it
 can
 prove
 that
 the
 sole
 and
 proximate
 cause
 of
 such
 event
 is
 one
 of
 the
 
causes
 enumerated
 in
 Article
 1734
 of
 the
 Civil
 Code,
 or
 that
 it
 exercised
 extraordinary
 diligence
 to
 
prevent
 or
 minimize
 the
 loss.
 In
 the
 present
 case,
 the
 weather
 condition
 encountered
 by
 petitioner’s
 
vessel
 was
 not
 a
 “storm”
 or
 a
 natural
 disaster
 comprehended
 in
 the
 law.
 Given
 the
 known
 weather
 
condition
 prevailing
 during
 the
 voyage,
 the
 manner
 of
 stowage
 employed
 by
 the
 carrier
 was
 insufficient
 
to
 secure
 the
 cargo
 from
 the
 rolling
 action
 of
 the
 sea.
 The
 carrier
 took
 a
 calculated
 risk
 in
 improperly
 
securing
 the
 cargo.
 Having
 lost
 that
 risk,
 it
 cannot
 now
 disclaim
 any
 liability
 for
 the
 loss.
 
Established
 is
 the
 fact
 that
 between
 10:00
 p.m.
 on
 July
 25,
 1990
 and
 1:25
 a.m.
 on
 July
 26,
 1990,
 M/V
 
Central
 Bohol
 encountered
 a
 southwestern
 monsoon
 in
 the
 course
 of
 its
 voyage.
 Having
 made
 such
 factual
 
representation
 in
 its
 Note
 of
 Marine
 Protest,
 petitioner
 cannot
 now
 be
 allowed
 to
 retreat
 and
 claim
 that
 
the
 southwestern
 monsoon
 was
 a
 “storm.”
 Normally
 expected
 on
 sea
 voyages,
 however,
 were
 such
 
monsoons,
 during
 which
 strong
 winds
 were
 not
 unusual.
 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 


 

 
According
 to
 PAGASA,
 a
 storm
 has
 a
 wind
 force
 of
 48
 to
 55
 knots, equivalent
 to
 55
 to
 63
 miles
 per
 hour
 or
 
10
 to
 11
 in
 the
 Beaufort
 Scale.
 The
 

  second
 mate
 of
 the
 vessel
 stated
 that
 the
 wind
 was
 blowing
 around
 
force
 7
 to
 8
 on
 the
 Beaufort
 Scale. Consequently,
 the
 strong
 winds
 accompanying
 the
 southwestern
 
monsoon
 could
 not
 be
 classified
 as
 a
 “storm.”
 Such
 winds
 are
 the
 ordinary
 vicissitudes
 of
 a
 sea
 voyage.
 

 
Also,
 even
 if
 it
 were
 a
 storm,
 it
 was
 not
 the
 proximate
 and
 only
 cause
 of
 the
 loss.
 The
 loss
 of
 the
 vessel
 was
 
caused
 not
 only
 by
 the
 southwestern
 monsoon,
 but
 also
 by
 the
 shifting
 of
 the
 logs
 in
 the
 hold.
 Such
 
shifting
 could
 been
 due
 only
 to
 improper
 stowage.
 

 
(2)
 Whether
 the
 doctrine
 of
 limited
 liability
 is
 applicable
 

 

 
No.
 The
 doctrine
 of
 limited
 liability
 under
 Article
 587
 of
 the
 Code
 of
 Commerce is
 not
 applicable
 to
 the
 
present
 case.
 This
 rule
 does
 not
 apply
 to
 situations
 in
 which
 the
 loss
 or
 the
 injury
 is
 due
 to
 the
 concurrent
 
negligence
 of
 the
 shipowner
 and
 the
 captain.
 
-­‐
 3
 -­‐
 
[G.R.
 No.
 137775.
 March
 31,
 2005]
 
FGU
 INSURANCE
 CORPORATION,
 petitioner,
 vs.
 THE
 COURT
 OF
 APPEALS,
 SAN
 MIGUEL
 
CORPORATION,
 and
 ESTATE
 OF
 ANG
 GUI,
 represented
 by
 LUCIO,
 JULIAN,
 and
 JAIME,
 all
 surnamed
 
ANG,
 and
 CO
 TO,
 respondents.
 

 
FACTS:
 
Anco
 Enterprises
 Company
 (ANCO),
 a
 partnership
 between
 Ang
 Gui
 and
 Co
 To,
 was
 engaged
 in
 the
 
shipping
 business.
 It
 owned
 the
 M/T
 ANCO
 tugboat
 and
 the
 D/B
 Lucio
 barge
 that
 were
 operated
 as
 
common
 carriers.
 Since
 the
 D/B
 Lucio
 had
 no
 engine
 of
 its
 own,
 it
 could
 not
 maneuver
 by
 itself
 and
 had
 to
 
be
 towed
 by
 a
 tugboat
 for
 it
 to
 move
 from
 one
 place
 to
 another.
 
On
 23
 September
 1979,
 San
 Miguel
 Corporation
 (SMC)
 shipped
 from
 Mandaue
 City,
 Cebu,
 on
 board
 the
 
D/B
 Lucio,
 for
 towage
 by
 M/T
 ANCO,
 when
 the
 barge
 and
 tugboat
 arrived
 at
 San
 Jose,
 Antique,
 in
 the
 
afternoon
 of
 30
 September
 1979,
 the
 clouds
 over
 the
 area
 were
 dark
 and
 the
 waves
 were
 already
 big.
 The
 
arrastre
 workers
 unloading
 the
 cargoes
 of
 SMC
 on
 board
 the
 D/B
 Lucio
 began
 to
 complain
 about
 their
 
difficulty
 in
 unloading
 the
 cargoes.
 SMC’s
 District
 Sales
 Supervisor,
 Fernando
 Macabuag,
 requested
 
ANCO’s
 representative
 to
 transfer
 the
 barge
 to
 a
 safer
 place
 because
 the
 vessel
 might
 not
 be
 able
 to
 
withstand
 the
 big
 waves.
 
ANCO’s
 representative
 did
 not
 heed
 the
 request
 because
 he
 was
 confident
 that
 the
 barge
 could
 withstand
 
the
 waves.
 At
 around
 midnight,
 the
 barge
 run
 aground
 and
 was
 broken
 and
 the
 cargoes
 of
 beer
 in
 the
 
barge
 were
 swept
 away.
 
As
 a
 consequence
 of
 the
 incident,
 SMC
 filed
 a
 complaint
 for
 Breach
 of
 Contract
 of
 Carriage
 and
 Damages
 
against
 ANCO.
 ANCO
 admitted
 that
 the
 cases
 of
 beer
 Pale
 Pilsen
 and
 Cerveza
 Negra
 mentioned
 in
 the
 
complaint
 were
 indeed
 loaded
 on
 the
 vessel
 belonging
 to
 ANCO.
 It
 claimed
 however
 that
 it
 had
 an
 
agreement
 with
 SMC
 that
 ANCO
 would
 not
 be
 liable
 for
 any
 losses
 or
 damages
 resulting
 to
 the
 cargoes
 by
 
reason
 of
 fortuitous
 event.
 Third-­‐party
 defendant
 FGU
 admitted
 the
 existence
 of
 the
 Insurance
 Policy
 
under
 Marine
 Cover
 Note
 No.
 29591
 but
 maintained
 that
 the
 alleged
 loss
 of
 the
 cargoes
 covered
 by
 the
 
said
 insurance
 policy
 cannot
 be
 attributed
 directly
 or
 indirectly
 to
 any
 of
 the
 risks
 insured
 against
 in
 the
 
said
 insurance
 policy.
 

 
DECISION
 OF
 LOWER
 COURTS:
 
(1)
 RTC-­‐Cebu:
 The
 estate
 of
 Ang
 Gui
 and
 Co
 To
 is
 liable
 to
 SMC
 for
 the
 amount
 of
 the
 lost
 shipment.
 With
 
respect
 to
 the
 Third-­‐Party
 complaint,
 the
 court
 a
 quo
 found
 FGU
 liable
 to
 bear
 Fifty-­‐Three
 Percent
 (53%)
 
of
 the
 amount
 of
 the
 lost
 cargoes.
 While
 the
 cargoes
 were
 indeed
 lost
 due
 to
 fortuitous
 event,
 there
 was
 
failure
 on
 ANCO’s
 part,
 through
 their
 representatives,
 to
 observe
 the
 degree
 of
 diligence
 required
 that
 
would
 exonerate
 them
 from
 liability.
 

 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

(2)
 CA:
 affirmed
 RTC
 in
 toto.
 

 
ISSUES:
 
 
(1)
 Whether
 ANCO’s
 representatives
 was
 able
 to
 exercise
 the
 extraordinary
 degree
 of
 diligence
 required
 
by
 the
 law
 to
 exculpate
 them
 from
 liability
 for
 the
 loss
 of
 the
 cargoes.
 
(2)
 Whether
 or
 not
 FGU
 can
 be
 held
 liable
 under
 the
 insurance
 policy
 to
 reimburse
 ANCO
 for
 the
 loss
 of
 
the
 cargoes
 despite
 the
 findings
 of
 the
 respondent
 court
 that
 such
 loss
 was
 occasioned
 by
 the
 blatant
 
negligence
 of
 the
 latter’s
 employees.
 
RULING:
 
(1)
 No.
 
 
In
 this
 case,
 the
 calamity
 that
 caused
 the
 loss
 of
 the
 cargoes
 was
 not
 unforeseen
 nor
 was
 it
 unavoidable.
 In
 
fact,
 the
 other
 vessels
 in
 the
 port
 of
 San
 Jose,
 Antique,
 managed
 to
 transfer
 to
 another
 place,
 a
 
circumstance
 which
 prompted
 SMC’s
 District
 Sales
 Supervisor
 to
 request
 that
 the
 D/B
 Lucio
 be
 likewise
 
transferred,
 but
 to
 no
 avail.
 The
 D/B
 Lucio
 had
 no
 engine
 and
 could
 not
 maneuver
 by
 itself.
 Even
 if
 
ANCO’s
 representatives
 wanted
 to
 transfer
 it,
 they
 no
 longer
 had
 any
 means
 to
 do
 so
 as
 the
 tugboat
 M/T
 
ANCO
 had
 already
 departed,
 leaving
 the
 barge
 to
 its
 own
 devices.
 The
 captain
 of
 the
 tugboat
 should
 have
 
had
 the
 foresight
 not
 to
 leave
 the
 barge
 alone
 considering
 the
 pending
 storm.
 
(2)
 No,
 FGU
 is
 not
 liable.
 

 
The
 ordinary
 negligence
 of
 the
 insured
 and
 his
 agents
 has
 long
 been
 held
 as
 a
 part
 of
 the
 risk
 which
 the
 
insurer
 takes
 upon
 himself,
 and
 the
 existence
 of
 which,
 where
 it
 is
 the
 proximate
 cause
 of
 the
 loss,
 does
 
not
 absolve
 the
 insurer
 from
 liability.
 But
 willful
 exposure,
 gross
 negligence,
 negligence
 amounting
 to
 
misconduct,
 etc.,
 have
 often
 been
 held
 to
 release
 the
 insurer
 from
 such
 liability.
 
In
 the
 case
 at
 bar,
 both
 the
 trial
 court
 and
 the
 appellate
 court
 had
 concluded
 from
 the
 evidence
 that
 the
 
crewmembers
 of
 both
 the
 D/B
 Lucio
 and
 the
 M/T
 ANCO
 were
 blatantly
 negligent.
 To
 wit:
 There
 was
 
blatant
 negligence
 on
 the
 part
 of
 the
 employees
 of
 defendants-­‐appellants
 when
 the
 patron
 (operator)
 of
 
the
 tug
 boat
 immediately
 left
 the
 barge
 at
 the
 San
 Jose,
 Antique
 wharf
 despite
 the
 looming
 bad
 weather.
 
The
 negligence
 of
 the
 defendants-­‐
 appellants
 is
 proved
 by
 the
 fact
 that
 on
 01
 October
 1979,
 the
 only
 simple
 
vessel
 left
 at
 the
 wharf
 in
 San
 Jose
 was
 the
 D/B
 Lucio.
 
This
 Court,
 taking
 into
 account
 the
 circumstances
 present
 in
 the
 instant
 case,
 concludes
 that
 the
 blatant
 
negligence
 of
 ANCO’s
 employees
 is
 of
 such
 gross
 character
 that
 it
 amounts
 to
 a
 wrongful
 act
 that
 must
 
exonerate
 FGU
 from
 liability
 under
 the
 insurance
 contract.
 
-­‐
 4
 -­‐
 
G.R.
 No.
 95546
 November
 6,
 1992
 
MAKATI
 TUSCANY
 CONDOMINIUM
 CORPORATION,
 petitioner,
 vs.
 THE
 COURT
 OF
 APPEALS,
 
AMERICAN
 HOME
 ASSURANCE
 CO.,
 represented
 by
 American
 International
 Underwriters
 (Phils.),
 
Inc.,
 respondent.
 
FACTS:
 
Sometime
 in
 early
 1982,
 private
 respondent
 American
 Home
 Assurance
 Co.
 (AHAC),
 represented
 by
 
American
 International
 Underwriters
 (Phils.),
 Inc.,
 issued
 in
 favor
 of
 petitioner
 Makati
 Tuscany
 
Condominium
 Corporation
 (TUSCANY)
 Insurance
 Policy
 No.
 AH-­‐CPP-­‐9210452
 on
 the
 latter's
 building
 and
 
premises,
 for
 a
 period
 beginning
 1
 March
 1982
 and
 ending
 1
 March
 1983,
 with
 a
 total
 premium
 of
 
P466,103.05.
 The
 premium
 was
 paid
 on
 installments
 on
 12
 March
 1982,
 20
 May
 1982,
 21
 June
 1982
 and
 
16
 November
 1982,
 all
 of
 which
 were
 accepted
 by
 private
 respondent.
 
Successive
 renewals
 of
 the
 policies
 were
 made
 in
 the
 same
 manner.
 On
 1984,
 the
 policy
 was
 again
 
renewed
 and
 petitioner
 made
 two
 installment
 payments,
 both
 accepted
 by
 private
 respondent,
 the
 first
 
on
 6
 February
 1984
 for
 P52,000.00
 and
 the
 second,
 on
 6
 June
 1984
 for
 P100,000.00.
 Thereafter,
 
petitioner
 refused
 to
 pay
 the
 balance
 of
 the
 premium.
 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

Private
 respondent
 filed
 an
 action
 to
 recover
 the
 unpaid
 balance
 of
 P314,103.05
 for
 Insurance
 Policy.
 
Petitioner
 explained
 that
 it
 discontinued
 the
 payment
 of
 premiums
 because
 the
 policy
 did
 not
 contain
 a
 
credit
 clause
 in
 its
 favor.
 Petitioner
 further
 claimed
 that
 the
 policy
 was
 never
 binding
 and
 valid,
 and
 no
 
risk
 attached
 to
 the
 policy.
 It
 then
 pleaded
 a
 counterclaim
 for
 P152,000.00
 for
 the
 premiums
 already
 paid
 
for
 1984-­‐85,
 and
 in
 its
 answer
 with
 amended
 counterclaim,
 sought
 the
 refund
 of
 P924,206.10
 
representing
 the
 premium
 payments
 for
 1982-­‐85.
 
DECISION
 OF
 LOWER
 COURTS:
 
(1)
 Trial
 Court:
 dismissed
 the
 complaint
 and
 counterclaim
 
(2)
 CA:
 ordering
 herein
 petitioner
 to
 pay
 the
 balance
 of
 the
 premiums
 due
 

 
ISSUE:
 
Whether
 payment
 by
 installment
 of
 the
 premiums
 due
 on
 an
 insurance
 policy
 invalidates
 the
 contract
 of
 
insurance,
 in
 view
 of
 Sec.
 77
 of
 P.D.
 612,
 otherwise
 known
 as
 the
 Insurance
 Code,
 as
 amended,
 which
 
provides:
 
Sec.
 77.
 An
 insurer
 is
 entitled
 to
 the
 payment
 of
 the
 premium
 as
 soon
 as
 the
 thing
 is
 exposed
 to
 the
 peril
 
insured
 against.
 Notwithstanding
 any
 agreement
 to
 the
 contrary,
 no
 policy
 or
 contract
 of
 insurance
 issued
 
by
 an
 insurance
 company
 is
 valid
 and
 binding
 unless
 and
 until
 the
 premium
 thereof
 has
 been
 paid,
 except
 in
 
the
 case
 of
 a
 life
 or
 an
 industrial
 life
 policy
 whenever
 the
 grace
 period
 provision
 applies.
 
RULING:
 
No,
 the
 contract
 remains
 valid
 even
 if
 the
 premiums
 were
 paid
 on
 installments.
 Certainly,
 basic
 principles
 
of
 equity
 and
 fairness
 would
 not
 allow
 the
 insurer
 to
 continue
 collecting
 and
 accepting
 the
 premiums,
 
although
 paid
 on
 installments,
 and
 later
 deny
 liability
 on
 the
 lame
 excuse
 that
 the
 premiums
 were
 not
 
prepared
 in
 full.
 
At
 the
 very
 least,
 both
 parties
 should
 be
 deemed
 in
 estoppel
 to
 question
 the
 arrangement
 they
 have
 
voluntarily
 accepted.
 
Moreover,
 as
 correctly
 observed
 by
 the
 appellate
 court,
 where
 the
 risk
 is
 entire
 and
 the
 contract
 is
 
indivisible,
 the
 insured
 is
 not
 entitled
 to
 a
 refund
 of
 the
 premiums
 paid
 if
 the
 insurer
 was
 exposed
 to
 the
 
risk
 insured
 for
 any
 period,
 however
 brief
 or
 momentary.
 The
 obligation
 to
 pay
 premiums
 when
 due
 is
 
ordinarily
 as
 indivisible
 obligation
 to
 pay
 the
 entire
 premium.
 
-­‐
 5
 –
 
G.R.
 No.
 L-­‐67835
 October
 12,
 1987
 
MALAYAN
 INSURANCE
 CO.,
 INC.
 (MICO),
 petitioner,
 vs.
 GREGORIA
 CRUZ
 ARNALDO,
 in
 her
 capacity
 as
 
the
 INSURANCE
 COMMISSIONER,
 and
 CORONACION
 PINCA,
 respondents.
 
FACTS:
 
On
 June
 7,
 1981,
 the
 petitioner
 (hereinafter
 called
 (MICO)
 issued
 to
 the
 private
 respondent,
 Coronacion
 
Pinca,
 Fire
 Insurance
 Policy
 No.
 F-­‐001-­‐17212
 on
 her
 property
 for
 the
 amount
 of
 P14,000.00
 effective
 July
 
22,
 1981,
 until
 July
 22,
 1982.
 
 
On
 October
 15,1981,
 MICO
 allegedly
 cancelled
 the
 policy
 for
 non-­‐payment,
 of
 the
 premium
 and
 sent
 the
 
corresponding
 notice
 to
 Pinca.
 
 
On
 December
 24,
 1981,
 payment
 of
 the
 premium
 for
 Pinca
 was
 received
 by
 Domingo
 Adora,
 agent
 of
 
MICO.
 On
 January
 15,
 1982,
 Adora
 remitted
 this
 payment
 to
 MICO,
 together
 with
 other
 payments.
 On
 
January
 18,
 1982,
 Pinca's
 property
 was
 completely
 burned.
 
 

 

 
DECISION
 OF
 LOWER
 COURTS:
 
(1)
 Insurance
 Commission:
 granted
 claim
 for
 compensation
 for
 burned
 property.
 

 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

ISSUE:
 
Whether
 there
 was
 a
 valid
 insurance
 contract
 at
 the
 time
 of
 the
 loss.
 
RULING:
 
Yes.
 
A
 valid
 cancellation
 must,
 therefore,
 require
 concurrence
 of
 the
 following
 conditions:
 
 
(1)
 There
 must
 be
 prior
 notice
 of
 cancellation
 to
 the
 insured;
 
(2)
 The
 notice
 must
 be
 based
 on
 the
 occurrence,
 after
 the
 effective
 date
 of
 the
 policy,
 of
 one
 or
 more
 of
 the
 
grounds
 mentioned;
 
(3)
 The
 notice
 must
 be
 
 
(a)
 in
 writing,
 
 
(b)
 mailed,
 or
 delivered
 to
 the
 named
 insured,
 
 
(c)
 at
 the
 address
 shown
 in
 the
 policy;
 
(4)
 It
 must
 state
 
 
(a)
 which
 of
 the
 grounds
 mentioned
 in
 Section
 64
 is
 relied
 upon
 and
 
 
(b)
 that
 upon
 written
 request
 of
 the
 insured,
 the
 insurer
 will
 furnish
 the
 facts
 on
 which
 the
 cancellation
 is
 
based.
 
MICO's
 claims
 it
 cancelled
 the
 policy
 in
 question
 on
 October
 15,
 1981,
 for
 non-­‐payment
 of
 premium.
 To
 
support
 this
 assertion,
 it
 presented
 one
 of
 its
 employees,
 who
 testified
 that
 "the
 original
 of
 the
 
endorsement
 and
 credit
 memo"
 —presumably
 meaning
 the
 alleged
 cancellation
 —
 "were
 sent
 the
 

 
assured
 by
 mail
 through
 our
 mailing
 section" However,
 there
 is
 no
 proof
 that
 the
 notice,
 assuming
 it
 
complied
 with
 the
 other
 requisites
 mentioned
 above,
 was
 actually
 mailed
 to
 and
 received
 by
 Pinca.
 
We
 also
 look
 askance
 at
 the
 alleged
 cancellation,
 of
 which
 the
 insured
 and
 MICO's
 agent
 himself
 had
 no
 
knowledge,
 and
 the
 curious
 fact
 that
 although
 Pinca's
 payment
 was
 remitted
 to
 MICO's
 by
 its
 agent
 on
 
January
 15,
 1982,
 MICO
 sought
 to
 return
 it
 to
 Adora
 only
 on
 February
 5,
 1982,
 after
 it
 presumably
 had
 
learned
 of
 the
 occurrence
 of
 the
 loss
 insured
 against
 on
 January
 18,
 1982.
 These
 circumstances
 make
 the
 
motives
 of
 the
 petitioner
 highly
 suspect,
 to
 say
 the
 least,
 and
 cast
 serious
 doubts
 upon
 its
 candor
 and
 
bona
 fides.
 
-­‐
 6
 -­‐
 
G.R.
 No.
 81026
 April
 3,
 1990
 
PAN
 MALAYAN
 INSURANCE
 CORPORATION,
 petitioner,
 vs.
 COURT
 OF
 APPEALS,
 ERLINDA
 FABIE
 AND
 
HER
 UNKNOWN
 DRIVER,
 respondents.
 

 
FACTS:
 

 
On
 December
 10,
 1985,
 PANMALAY
 filed
 a
 complaint
 for
 damages
 with
 the
 RTC
 of
 Makati
 against
 private
 
respondents
 Erlinda
 Fabie
 and
 her
 driver.
 PANMALAY
 averred
 the
 following:
 that
 it
 insured
 a
 Mitsubishi
 
Colt
 Lancer
 car
 with
 plate
 No.
 DDZ-­‐431
 and
 registered
 in
 the
 name
 of
 Canlubang
 Automotive
 Resources
 
Corporation
 [CANLUBANG];
 that
 on
 May
 26,
 1985,
 due
 to
 the
 "carelessness,
 recklessness,
 and
 
imprudence"
 of
 the
 unknown
 driver
 of
 a
 pick-­‐up
 with
 plate
 no.
 PCR-­‐220,
 the
 insured
 car
 was
 hit
 and
 
suffered
 damages
 in
 the
 amount
 of
 P42,052.00;
 that
 PANMALAY
 defrayed
 the
 cost
 of
 repair
 of
 the
 insured
 
car
 and,
 therefore,
 was
 subrogated
 to
 the
 rights
 of
 CANLUBANG
 against
 the
 driver
 of
 the
 pick-­‐up
 and
 his
 
employer,
 Erlinda
 Fabie;
 and
 that,
 despite
 repeated
 demands,
 defendants,
 failed
 and
 refused
 to
 pay
 the
 
claim
 of
 PANMALAY.
 private
 respondents
 filed
 a
 Motion
 to
 Dismiss
 alleging
 that
 PANMALAY
 had
 no
 cause
 
of
 action
 against
 them.
 They
 argued
 that
 payment
 under
 the
 "own
 damage"
 clause
 of
 the
 insurance
 policy
 
precluded
 subrogation
 under
 Article
 2207
 of
 the
 Civil
 Code,
 since
 indemnification
 thereunder
 was
 made
 
on
 the
 assumption
 that
 there
 was
 no
 wrongdoer
 or
 no
 third
 party
 at
 fault.
 

 
DECISION
 OF
 LOWER
 COURTS:
 
(1)
 Trial
 Court:
 dismissed
 for
 no
 cause
 of
 action
 PANMALAY's
 complaint
 for
 damages
 against
 private
 
respondents
 Erlinda
 Fabie
 and
 her
 driver
 
(2)
 CA:
 affirmed
 trial
 court.
 

 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

ISSUE:
 
Whether
 or
 not
 the
 insurer
 PANMALAY
 may
 institute
 an
 action
 to
 recover
 the
 amount
 it
 had
 paid
 its
 
assured
 in
 settlement
 of
 an
 insurance
 claim
 against
 private
 respondents
 as
 the
 parties
 allegedly
 
responsible
 for
 the
 damage
 caused
 to
 the
 insured
 vehicle.
 
RULING:
 

 
PANMALAY
 is
 correct.
 
Article
 2207
 of
 the
 Civil
 Code
 is
 founded
 on
 the
 well-­‐settled
 principle
 of
 subrogation.
 If
 the
 insured
 
property
 is
 destroyed
 or
 damaged
 through
 the
 fault
 or
 negligence
 of
 a
 party
 other
 than
 the
 assured,
 then
 
the
 insurer,
 upon
 payment
 to
 the
 assured,
 will
 be
 subrogated
 to
 the
 rights
 of
 the
 assured
 to
 recover
 from
 
the
 wrongdoer
 to
 the
 extent
 that
 the
 insurer
 has
 been
 obligated
 to
 pay.
 Payment
 by
 the
 insurer
 to
 the
 
assured
 operates
 as
 an
 equitable
 that
 the
 insurer
 has
 been
 obligated
 to
 pay.
 Payment
 by
 the
 insurer
 to
 the
 
assured
 operates
 as
 an
 equitable
 or
 negligence
 of
 a
 third
 party.
 CANLUBANG
 is
 apparently
 of
 the
 same
 
understanding.
 Based
 on
 a
 police
 report
 assignment
 to
 the
 former
 of
 all
 remedies
 that
 the
 latter
 may
 have
 
against
 the
 third
 party
 whose
 negligence
 or
 wrongful
 act
 caused
 the
 loss.
 The
 right
 of
 subrogation
 is
 not
 
dependent
 upon,
 nor
 does
 it
 grow
 out
 of,
 any
 privity
 of
 contract
 or
 upon
 written
 assignment
 of
 claim.
 It
 
accrues
 simply
 upon
 payment
 of
 the
 insurance
 claim
 by
 the
 insurer.
 

 
The
 exceptions
 are:
 
(1)
 if
 the
 assured
 by
 his
 own
 act
 releases
 the
 wrongdoer
 or
 third
 party
 liable
 for
 the
 loss
 or
 damage,
 from
 
liability,
 the
 insurer's
 right
 of
 subrogation
 is
 defeated
 
(2)
 where
 the
 insurer
 pays
 the
 assured
 the
 value
 of
 the
 lost
 goods
 without
 notifying
 the
 carrier
 who
 has
 in
 
good
 faith
 settled
 the
 assured's
 claim
 for
 loss,
 the
 settlement
 is
 binding
 on
 both
 the
 assured
 and
 the
 
insurer,
 and
 the
 latter
 cannot
 bring
 an
 action
 against
 the
 carrier
 on
 his
 right
 of
 subrogation
 
(3)
 where
 the
 insurer
 pays
 the
 assured
 for
 a
 loss
 which
 is
 not
 a
 risk
 covered
 by
 the
 policy,
 thereby
 
effecting
 "voluntary
 payment",
 the
 former
 has
 no
 right
 of
 subrogation
 against
 the
 third
 party
 liable
 for
 the
 
loss
 
None
 of
 the
 exceptions
 are
 availing
 in
 the
 present
 case.
 
Also,
 even
 if
 under
 the
 above
 circumstances
 PANMALAY
 could
 not
 be
 deemed
 subrogated
 to
 the
 rights
 of
 
its
 assured
 under
 Article
 2207
 of
 the
 Civil
 Code,
 PANMALAY
 would
 still
 have
 a
 cause
 of
 action
 against
 
private
 respondents.
 In
 the
 pertinent
 case
 of
 Sveriges
 Angfartygs
 Assurans
 Forening
 v.
 Qua
 Chee
 Gan,
 
supra.,
 the
 Court
 ruled
 that
 the
 insurer
 who
 may
 have
 no
 rights
 of
 subrogation
 due
 to
 "voluntary"
 
payment
 may
 nevertheless
 recover
 from
 the
 third
 party
 responsible
 for
 the
 damage
 to
 the
 insured
 
property
 under
 Article
 1236
 of
 the
 Civil
 Code.
 

 
WHEREFORE,
 in
 view
 of
 the
 foregoing,
 the
 present
 petition
 is
 GRANTED.
 Petitioner's
 complaint
 for
 
damages
 against
 private
 respondents
 is
 hereby
 REINSTATED.
 Let
 the
 case
 be
 remanded
 to
 the
 lower
 
court
 for
 trial
 on
 the
 merits.
 
-­‐
 7
 -­‐
 
[G.R.
 No.
 125678.
 March
 18,
 2002]
 
PHILAMCARE
 HEALTH
 SYSTEMS,
 INC.,
 petitioner,
 vs.
 COURT
 OF
 APPEALS
 and
 JULITA
 TRINOS,
 
respondents.
 

 
FACTS:
 
Ernani
 Trinos,
 deceased
 husband
 of
 respondent
 Julita
 Trinos,
 applied
 for
 a
 health
 care
 coverage
 with
 
petitioner.
 
 Philamcare
 Health
 Systems,
 Inc.
 In
 the
 standard
 application
 form,
 he
 answered
 no
 to
 the
 
following
 question:
 Have
 you
 or
 any
 of
 your
 family
 members
 ever
 consulted
 or
 been
 treated
 for
 high
 
blood
 pressure,
 heart
 trouble,
 diabetes,
 cancer,
 liver
 disease,
 asthma
 or
 peptic
 ulcer?
 

 
The
 application
 was
 approved
 for
 a
 period
 of
 one
 year
 from
 March
 1,
 1988
 to
 March
 1,
 1989
 and
 was
 
renewed.
 During
 the
 period
 of
 his
 coverage,
 Ernani
 suffered
 a
 heart
 attack
 and
 was
 confined
 at
 the
 Manila
 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

Medical
 Center
 (MMC)
 for
 one
 month
 beginning
 March
 9,
 1990.
 While
 her
 husband
 was
 in
 the
 hospital,
 
respondent
 tried
 to
 claim
 the
 benefits
 under
 the
 health
 care
 agreement.
 However,
 petitioner
 denied
 her
 
claim
 saying
 that
 the
 Health
 Care
 Agreement
 was
 void.
 According
 to
 petitioner,
 there
 was
 a
 concealment
 
regarding
 Ernani’s
 medical
 history.
 Doctors
 at
 the
 MMC
 allegedly
 discovered
 at
 the
 time
 of
 Ernani’s
 
confinement
 that
 he
 was
 hypertensive,
 diabetic
 and
 asthmatic,
 contrary
 to
 his
 answer
 in
 the
 application
 
form.
 

 
In
 the
 morning
 of
 April
 13,
 1990,
 Ernani
 had
 fever
 and
 was
 feeling
 very
 weak.
 Respondent
 was
 
constrained
 to
 bring
 him
 back
 to
 the
 Chinese
 General
 Hospital
 where
 he
 died
 on
 the
 same
 day.
 On
 July
 24,
 
1990,
 respondent
 instituted
 with
 the
 Regional
 Trial
 Court
 of
 Manila,
 Branch
 44,
 an
 action
 for
 damages
 
against
 petitioner
 and
 its
 president,
 Dr.
 Benito
 Reverente,
 which
 was
 docketed
 as
 Civil
 Case
 No.
 90-­‐
 
53795.
 She
 asked
 for
 reimbursement
 of
 her
 expenses
 plus
 moral
 damages
 and
 attorney’s
 fees.
 
DECISION
 OF
 LOWER
 COURTS:
 
(1)
 RTC
 –
 Manila:
 rendered
 judgment
 in
 favor
 or
 Trinos.
 
(2)
 CA:
 affirmed
 RTC
 but
 deleted
 the
 awards
 for
 damages.
 
ISSUE:
 
Whether
 a
 health
 care
 agreement
 is
 an
 insurance
 contract;
 and
 whether
 hence
 the
 “incontestability
 
clause”
 under
 the
 Insurance
 Code
 applies
 

 
RULING:
 

 
Yes.
 The
 insurer
 is
 liable.
 

 
In
 the
 case
 at
 bar,
 the
 insurable
 interest
 of
 respondent’s
 husband
 in
 obtaining
 the
 health
 care
 agreement
 
was
 his
 own
 health.
 The
 health
 care
 agreement
 was
 in
 the
 nature
 of
 non-­‐life
 insurance,
 which
 is
 primarily
 

 
a
 contract
 of
 indemnity. Once
 the
 member
 incurs
 hospital,
 medical
 or
 any
 other
 expense
 arising
 from
 
sickness,
 injury
 or
 other
 stipulated
 contingent,
 the
 health
 care
 provider
 must
 pay
 for
 the
 same
 to
 the
 
extent
 agreed
 upon
 under
 the
 contract.
 
It
 appears
 that
 in
 the
 application
 for
 health
 coverage,
 petitioners
 required
 respondent’s
 husband
 to
 sign
 
an
 express
 authorization
 for
 any
 person,
 organization
 or
 entity
 that
 has
 any
 record
 or
 knowledge
 of
 his
 
health
 to
 furnish
 any
 and
 all
 information
 relative
 to
 any
 hospitalization,
 consultation,
 treatment
 or
 any
 
other
 medical
 advice
 or
 examination.
 
The
 answer
 assailed
 by
 petitioner
 was
 in
 response
 to
 the
 question
 relating
 to
 the
 medical
 history
 of
 the
 
applicant.
 This
 largely
 depends
 on
 opinion
 rather
 than
 fact,
 especially
 coming
 from
 respondent’s
 husband
 
who
 was
 not
 a
 medical
 doctor.
 Where
 matters
 of
 opinion
 or
 judgment
 are
 called
 for,
 answers
 made
 in
 
good
 faith
 and
 without
 intent
 to
 deceive
 will
 not
 avoid
 a
 policy
 even
 though
 they
 are
 untrue.
 
The
 fraudulent
 intent
 on
 the
 part
 of
 the
 insured
 must
 be
 established
 to
 warrant
 rescission
 of
 the
 

 
insurance
 contract. Concealment
 as
 a
 defense
 for
 the
 health
 care
 provider
 or
 insurer
 to
 avoid
 liability
 is
 
an
 affirmative
 defense
 and
 the
 duty
 to
 establish
 such
 defense
 by
 satisfactory
 and
 convincing
 evidence
 
rests
 upon
 the
 provider
 or
 insurer.
 In
 any
 case,
 with
 or
 without
 the
 authority
 to
 investigate,
 petitioner
 is
 
liable
 for
 claims
 made
 under
 the
 contract.
 Having
 assumed
 a
 responsibility
 under
 the
 agreement,
 
petitioner
 is
 bound
 to
 answer
 the
 same
 to
 the
 extent
 agreed
 upon.
 In
 the
 end,
 the
 liability
 of
 the
 health
 
care
 provider
 attaches
 once
 the
 member
 is
 hospitalized
 for
 the
 disease
 or
 injury
 covered
 by
 the
 
agreement
 or
 whenever
 he
 avails
 of
 the
 covered
 benefits
 that
 he
 has
 prepaid.
 
Anent
 the
 incontestability
 of
 the
 membership
 of
 respondent’s
 husband,
 we
 quote
 with
 approval
 the
 
following
 findings
 of
 the
 trial
 court:
 
(U)nder
 the
 title
 Claim
 procedures
 of
 expenses,
 the
 defendant
 Philamcare
 Health
 Systems
 Inc.
 had
 twelve
 
months
 from
 the
 date
 of
 issuance
 of
 the
 Agreement
 within
 which
 to
 contest
 the
 membership
 of
 the
 
patient
 if
 he
 had
 previous
 ailment
 of
 asthma,
 and
 six
 months
 from
 the
 issuance
 of
 the
 agreement
 if
 the
 
patient
 was
 sick
 of
 diabetes
 or
 hypertension.
 The
 periods
 having
 expired,
 the
 defense
 of
 concealment
 or
 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

misrepresentation
 no
 longer
 lie.
 
Finally,
 petitioner
 alleges
 that
 respondent
 was
 not
 the
 legal
 wife
 of
 the
 deceased
 member
 considering
 that
 
at
 the
 time
 of
 their
 marriage,
 the
 deceased
 was
 previously
 married
 to
 another
 woman
 who
 was
 still
 alive.
 
The
 health
 care
 agreement
 is
 in
 the
 nature
 of
 a
 contract
 of
 indemnity.
 Hence,
 payment
 should
 be
 made
 to
 
the
 party
 who
 incurred
 the
 expenses.
 It
 is
 not
 controverted
 that
 respondent
 paid
 all
 the
 hospital
 and
 
medical
 expenses.
 She
 is
 therefore
 entitled
 to
 reimbursement.
 

 

 
-­‐
 8
 -­‐
 
G.R.
 No.
 L-­‐66935
 November
 11,
 1985
 
ISABELA
 ROQUE,
 doing
 business
 under
 the
 name
 and
 style
 of
 Isabela
 Roque
 Timber
 Enterprises
 
and
 ONG
 CHIONG,
 petitioners,
 vs.
 HON.
 INTERMEDIATE
 APPELATE
 COURT
 and
 PIONEER
 INSURANCE
 
AND
 SURETY
 CORPORATION,
 respondent.
 
FACTS:
 

 
On
 February
 19,
 1972,
 the
 Manila
 Bay
 Lighterage
 Corporation
 (Manila
 Bay),
 a
 common
 carrier,
 entered
 
into
 a
 contract
 with
 the
 petitioners
 whereby
 the
 former
 would
 load
 and
 carry
 on
 board
 its
 barge
 Mable
 10
 
about
 422.18
 cubic
 meters
 of
 logs
 from
 Malampaya
 Sound,
 Palawan
 to
 North
 Harbor,
 Manila.
 The
 
petitioners
 insured
 the
 logs
 against
 loss
 for
 P100,000.00
 with
 respondent
 Pioneer
 Insurance
 and
 Surety
 
Corporation
 (Pioneer).
 
On
 February
 29,
 1972,
 the
 petitioners
 loaded
 on
 the
 barge,
 811
 pieces
 of
 logs
 at
 Malampaya
 Sound,
 
Palawan
 for
 carriage
 and
 delivery
 to
 North
 Harbor,
 Port
 of
 Manila,
 but
 the
 shipment
 never
 reached
 its
 
destination
 because
 Mable
 10
 sank
 with
 the
 811
 pieces
 of
 logs
 somewhere
 off
 Cabuli
 Point
 in
 Palawan
 on
 
its
 way
 to
 Manila.
 
Hence,
 petitioners
 commenced
 Civil
 Case
 No.
 86599
 against
 Manila
 Bay
 and
 respondent
 Pioneer.
 
DECISION
 OF
 LOWER
 COURTS:
 

 
(1)
 Trial
 Court:
 found
 in
 favor
 of
 petitioners.
 
(2)
 Intermediate
 Appellate
 Court:
 absolved
 the
 respondent
 insurance
 company
 from
 liability
 on
 the
 
grounds
 that
 the
 vessel
 carrying
 the
 insured
 cargo
 was
 unseaworthy
 and
 the
 loss
 of
 said
 cargo
 was
 
caused
 not
 by
 the
 perils
 of
 the
 sea
 but
 by
 the
 perils
 of
 the
 ship
 
ISSUES:
 
I.
 THE
 INTERMEDIATE
 APPELLATE
 COURT
 ERRED
 IN
 HOLDING
 THAT
 IN
 CASES
 OF
 MARINE
 CARGO
 
INSURANCE,
 THERE
 IS
 A
 WARRANTY
 OF
 SEAWORTHINESS
 BY
 THE
 CARGO
 OWNER.
 
II.
 THE
 INTERMEDIATE
 APPELLATE
 COURT
 ERRED
 IN
 HOLDING
 THAT
 THE
 LOSS
 OF
 THE
 CARGO
 IN
 
THIS
 CASE
 WAS
 CAUSED
 BY
 "PERILS
 OF
 THE
 SHIP"
 AND
 NOT
 BY
 "PERILS
 OF
 THE
 SEA.”
 

 
RULING:
 
I.
 
 No.
 The
 IAC
 is
 correct.
 
The
 liability
 of
 the
 insurance
 company
 is
 governed
 by
 law.
 Section
 113
 of
 the
 Insurance
 Code
 provides:
 
In
 every
 marine
 insurance
 upon
 a
 ship
 or
 freight,
 or
 freightage,
 or
 upon
 any
 thing
 that
 is
 the
 subject
 of
 
marine
 insurance,
 a
 warranty
 is
 implied
 that
 the
 ship
 is
 seaworthy.
 
Section
 99
 of
 the
 same
 Code
 also
 provides
 in
 part.
 Marine
 insurance
 includes:
 
(1)
 Insurance
 against
 loss
 of
 or
 damage
 to:
 
(a)
 Vessels,
 craft,
 aircraft,
 vehicles,
 goods,
 freights,
 cargoes,
 merchandise,
 ...
 

VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

From
 the
 above-­‐quoted
 provisions,
 there
 can
 be
 no
 mistaking
 the
 fact
 that
 the
 term
 "cargo"
 can
 be
 the
 
subject
 of
 marine
 insurance
 and
 that
 once
 it
 is
 so
 made,
 the
 implied
 warranty
 of
 seaworthiness
 
immediately
 attaches
 to
 whoever
 is
 insuring
 the
 cargo
 whether
 he
 be
 the
 shipowner
 or
 not.
 

 
Since
 the
 law
 provides
 for
 an
 implied
 warranty
 of
 seaworthiness
 in
 every
 contract
 of
 ordinary
 marine
 
insurance,
 it
 becomes
 the
 obligation
 of
 a
 cargo
 owner
 to
 look
 for
 a
 reliable
 common
 carrier
 which
 keeps
 
its
 vessels
 in
 seaworthy
 condition.
 The
 shipper
 of
 cargo
 may
 have
 no
 control
 over
 the
 vessel
 but
 he
 has
 
full
 control
 in
 the
 choice
 of
 the
 common
 carrier
 that
 will
 transport
 his
 goods.
 Or
 the
 cargo
 owner
 may
 
enter
 into
 a
 contract
 of
 insurance
 which
 specifically
 provides
 that
 the
 insurer
 answers
 not
 only
 for
 the
 
perils
 of
 the
 sea
 but
 also
 provides
 for
 coverage
 of
 perils
 of
 the
 ship.
 

 
II.
 No,
 the
 IAC
 is
 correct.
 
In
 marine
 cases,
 the
 risks
 insured
 against
 are
 "perils
 of
 the
 sea"
 
 
A
 policy
 does
 not
 cover
 a
 loss
 or
 injury
 that
 must
 inevitably
 take
 place
 in
 the
 ordinary
 course
 of
 things.
 
There
 is
 no
 doubt
 that
 the
 term
 'perils
 of
 the
 sea'
 extends
 only
 to
 losses
 caused
 by
 sea
 damage,
 or
 by
 the
 
violence
 of
 the
 elements,
 and
 does
 not
 embrace
 all
 losses
 happening
 at
 sea.
 They
 insure
 against
 losses
 
from
 extraordinary
 occurrences
 only,
 such
 as
 stress
 of
 weather,
 winds
 and
 waves,
 lightning,
 tempests,
 
rocks
 and
 the
 like.
 These
 are
 understood
 to
 be
 the
 "perils
 of
 the
 sea"
 referred
 in
 the
 policy,
 and
 not
 those
 
ordinary
 perils
 which
 every
 vessel
 must
 encounter.
 "Perils
 of
 the
 sea"
 has
 been
 said
 to
 include
 only
 such
 
losses
 as
 are
 of
 extraordinary
 nature,
 encounter.
 "Perils
 of
 the
 sea"
 has
 been
 said
 to
 include
 only
 such
 
losses
 as
 are
 of
 extraordinary
 nature,
 or
 arise
 from
 some
 overwhelming
 power,
 which
 cannot
 be
 guarded
 
against
 by
 the
 ordinary
 exertion
 of
 human
 skill
 and
 prudence.
 Damage
 done
 to
 a
 vessel
 by
 perils
 of
 the
 sea
 
includes
 every
 species
 of
 damages
 done
 to
 a
 vessel
 at
 sea,
 as
 distinguished
 from
 the
 ordinary
 wear
 and
 
tear
 of
 the
 voyage,
 and
 distinct
 from
 injuries
 suffered
 by
 the
 vessel
 in
 consequence
 of
 her
 not
 being
 
seaworthy
 at
 the
 outset
 of
 her
 voyage
 (as
 in
 this
 case).
 It
 is
 also
 the
 general
 rule
 that
 everything
 which
 
happens
 thru
 the
 inherent
 vice
 of
 the
 thing,
 or
 by
 the
 act
 of
 the
 owners,
 master
 or
 shipper,
 shall
 not
 be
 
reputed
 a
 peril,
 if
 not
 otherwise
 borne
 in
 the
 policy.
 
It
 is
 quite
 unmistakable
 that
 the
 loss
 of
 the
 cargo
 was
 due
 to
 the
 perils
 of
 the
 ship
 rather
 than
 the
 perils
 of
 
the
 sea.
 The
 facts
 clearly
 negate
 the
 petitioners'
 claim
 under
 the
 insurance
 policy.
 
In
 the
 present
 case
 the
 entrance
 of
 the
 sea
 water
 into
 the
 ship's
 hold
 through
 the
 defective
 pipe
 already
 
described
 was
 not
 due
 to
 any
 accident
 which
 happened
 during
 the
 voyage,
 but
 to
 the
 failure
 of
 the
 ship's
 
owner
 properly
 to
 repair
 a
 defect
 of
 the
 existence
 of
 which
 he
 was
 apprised.
 The
 loss
 was
 therefore
 more
 
analogous
 to
 that
 which
 directly
 results
 from
 simple
 unseaworthiness
 than
 to
 that
 which
 result
 from
 the
 
perils
 of
 the
 sea.
 
-­‐
 9
 -­‐
 
[G.R.
 No.
 154514.
 July
 28,
 2005]
 
WHITE
 GOLD
 MARINE
 SERVICES,
 INC.,
 petitioner,
 vs.
 PIONEER
 INSURANCE
 AND
 SURETY
 
CORPORATION
 AND
 THE
 STEAMSHIP
 MUTUAL
 UNDERWRITING
 ASSOCIATION
 (BERMUDA)
 LTD.,
 
respondents.
 
FACTS:
 
White
 Gold
 Marine
 Services,
 Inc.
 (White
 Gold)
 procured
 a
 protection
 and
 indemnity
 coverage
 for
 its
 
vessels
 from
 The
 Steamship
 Mutual
 Underwriting
 Association
 (Bermuda)
 Limited
 (Steamship
 Mutual)
 

  Corporation
 (Pioneer).
 Subsequently,
 White
 Gold
 was
 issued
 a
 
through
 Pioneer
 Insurance
 and
 Surety
 
Certificate
 of
 Entry
 and
 Acceptance. Pioneer
 also
 issued
 receipts
 evidencing
 payments
 for
 the
 coverage.
 
When
 White
 Gold
 failed
 to
 fully
 pay
 its
 accounts,
 Steamship
 Mutual
 refused
 to
 renew
 the
 coverage.
 
Steamship
 Mutual
 thereafter
 filed
 a
 case
 against
 White
 Gold
 for
 collection
 of
 sum
 of
 money
 to
 recover
 the
 
latter’s
 unpaid
 balance.
 

 

 
VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

DECISION
 OF
 LOWER
 COURTS:
 
(1)
 Insurance
 Commissioner:
 dismissed
 the
 complaint.
 There
 was
 no
 violation
 of
 the
 Insurance
 Code
 and
 
the
 respondents
 do
 not
 need
 license
 as
 insurer
 and
 insurance
 agent/broker
 because
 it
 was
 not
 engaged
 in
 
the
 insurance
 business.
 It
 explained
 that
 Steamship
 Mutual
 was
 a
 Protection
 and
 Indemnity
 Club
 (P
 &
 I
 
Club).
 Moreover,
 Pioneer
 was
 already
 licensed,
 hence,
 a
 separate
 license
 solely
 as
 agent/broker
 of
 
Steamship
 Mutual
 was
 already
 superfluous.
 
(2)
 CA:
 affirmed
 Insurance
 Commissioner.
 

 
ISSUES:
 
(1)
 Is
 Steamship
 Mutual,
 a
 P
 &
 I
 Club,
 engaged
 in
 the
 insurance
 business
 in
 the
 Philippines?
 
 
(2)
 Does
 Pioneer
 need
 a
 license
 as
 an
 insurance
 agent/broker
 for
 Steamship
 Mutual?
 

 
RULING:
 
(1)
 Yes.
 To
 continue
 doing
 business
 here,
 Steamship
 Mutual
 or
 through
 its
 agent
 Pioneer,
 must
 secure
 a
 
license
 from
 the
 Insurance
 Commission.
 
Since
 a
 contract
 of
 insurance
 involves
 public
 interest,
 regulation
 by
 the
 State
 is
 necessary.
 Thus,
 no
 
insurer
 or
 insurance
 company
 is
 allowed
 to
 engage
 in
 the
 insurance
 business
 without
 a
 license
 or
 a
 
certificate
 of
 authority
 from
 the
 Insurance
 Commission.
 
The
 parties
 admit
 that
 Steamship
 Mutual
 is
 a
 P
 &
 I
 Club.
 Steamship
 Mutual
 admits
 it
 does
 not
 have
 a
 
license
 to
 do
 business
 in
 the
 Philippines
 although
 Pioneer
 is
 its
 resident
 agent.
 This
 relationship
 is
 
reflected
 in
 the
 certifications
 issued
 by
 the
 Insurance
 Commission.
 

 
It
 cites
 the
 definition
 of
 a
 P
 &
 I
 Club
 in
 Hyopsung
 Maritime
 Co.,
 Ltd.
 v.
 Court
 of
 Appeals as
 “an
 association
 
composed
 of
 shipowners
 in
 general
 who
 band
 together
 for
 the
 specific
 purpose
 of
 providing
 insurance
 
cover
 on
 a
 mutual
 basis
 against
 liabilities
 incidental
 to
 shipowning
 that
 the
 members
 incur
 in
 favor
 of
 
third
 parties.”
 
The
 test
 to
 determine
 if
 a
 contract
 is
 an
 insurance
 contract
 or
 not,
 depends
 on
 the
 nature
 of
 the
 promise,
 
the
 act
 required
 to
 be
 performed,
 and
 the
 exact
 nature
 of
 the
 agreement
 in
 the
 light
 of
 the
 occurrence,
 
contingency,
 or
 circumstances
 under
 which
 the
 performance
 becomes
 requisite.
 It
 is
 not
 by
 what
 it
 is
 
called.
 
Relatedly,
 a
 mutual
 insurance
 company
 is
 a
 cooperative
 enterprise
 where
 the
 members
 are
 both
 the
 
insurer
 and
 insured.
 In
 it,
 the
 members
 all
 contribute,
 by
 a
 system
 of
 premiums
 or
 assessments,
 to
 the
 

  liabilities
 are
 paid,
 and
 where
 the
 profits
 are
 divided
 among
 
creation
 of
 a
 fund
 from
 which
 all
 losses
 and
 

  r
 clubs,
 provide
 
themselves,
 in
 proportion
 to
 their
 interest. Additionally,
 mutual
 insurance
 associations,
 o
three
 types
 of
 coverage,
 namely,
 protection
 and
 indemnity,
 war
 risks,
 and
 defense
 costs. A
 P
 &
 I
 Club
 is
 “a
 
form
 of
 insurance
 
  against
 third
 party
 liability,
 where
 the
 third
 party
 is
 anyone
 other
 than
 the
 P
 &
 I
 Club
 
and
 the
 members.” By
 definition
 then,
 Steamship
 Mutual
 as
 a
 P
 &
 I
 Club
 is
 a
 mutual
 insurance
 association
 
engaged
 in
 the
 marine
 insurance
 business.
 
(2)
 Yes.
 Although
 Pioneer
 is
 already
 licensed
 as
 an
 insurance
 company,
 it
 needs
 a
 separate
 license
 to
 act
 
as
 insurance
 agent
 for
 Steamship
 Mutual.
 Section
 299
 of
 the
 Insurance
 Code
 clearly
 states:
 
SEC.
 299
 .
 .
 .
 
No
 person
 shall
 act
 as
 an
 insurance
 agent
 or
 as
 an
 insurance
 broker
 in
 the
 solicitation
 or
 procurement
 of
 
applications
 for
 insurance,
 or
 receive
 for
 services
 in
 obtaining
 insurance,
 any
 commission
 or
 other
 
compensation
 from
 any
 insurance
 company
 doing
 business
 in
 the
 Philippines
 or
 any
 agent
 thereof,
 
without
 first
 procuring
 a
 license
 so
 to
 act
 from
 the
 Commissioner,
 which
 must
 be
 renewed
 annually
 on
 
the
 first
 day
 of
 January,
 or
 within
 six
 months
 thereafter.
 

 

VILLO,
 Viktoria
 Mary
 Antonette
 P.
 
Insurance
 Case
 Digests
 

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