Insurance Case

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Spouses Cha v Court of Appeals 227 SCRA 690 PADILLA, J. Facts: Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with CKS Development Corporation (CKS), as lessor. One of the stipulations of the one (1) year lease contract states: "18. . . . The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit; . . ." Notwithstanding the above stipulation, the Cha spouses insured against loss by fire their merchandise inside the leased premises for Five Hundred Thousand (P500,000.00) with the United Insurance without the written consent CKS. On the day that the lease contract was to expire, fire broke out inside the leased premises. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the United a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS, based on its lease contract with the Cha spouses. United refused to pay CKS, alleging that the latter had no insurable interest. Hence, the latter filed a complaint against the Cha spouses and United.

Issue: Whether or not CKS can claim the proceeds of the fire insurance. Ruling: NO. CKS has no insurable interest. Sec. 18 of the Insurance Code provides: "Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured." A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. The basis of 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 has no insurable interest and collecting the proceeds of said policy in case of loss of the property. In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code which provide: "Section 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof."

Therefore, CKS cannot, under the Insurance Code — a special law — be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured. Great Pacific Life Insurance Corp. v Court of Appeals 316 SCRA 677 MALCOLM, J. Facts: A contract of group life insurance was executed between petitioner Great Pacific Life Assurance Corporation (hereinafter Grepalife) and Development Bank of the Philippines (hereinafter DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. In Nov. 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan. In an application form, Dr. Leuterio answered Qs concerning his health condition as follows: Q: Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment? No. Q: Are you now, to the best of your knowledge, in good health? Yes. Grepalife issued an insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness of P86,200.00. In Aug. 1984, Dr. Leuterio died due to "massive cerebral hemorrhage." DBP submitted a death claim to Grepalife. Grepalife denied the claim because Dr. Leuterio was not physically healthy when he applied for an insurance. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim. Herein respondent Medarda Leuterio, widow, filed a complaint with RTC against Grepalife for "Specific Performance with Damages." Dr. Mejia, who issued the death certificate, testified that Dr. Leuterio complained of headaches presumably due to high blood pressure. The inference was not conclusive because Dr. Leuterio was not autopsied, hence, other causes were not ruled out. RTC ruled in favor of respondent widow and against Grepalife. CA sustained the RTC decision. Hence, the present petition. Issue: WON CA erred in holding petitioner liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor. Ruling: NO. Insured, being the person with whom the contract was made, is primarily the proper person to bring suit. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. Although a policy

issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor may sue thereon in his own name, especially where the mortgagee's interest is less than the full amount recoverable under the policy. (See Sec. 8, Insurance Code) Harvardian Colleges of San Fernando, Pampanga, Inc. v Country Bankers Insurance Corp. CA CV No. 03771 Facts: Harvardian College is a family corporation owned by spouses Yap and their children. They insured the school building, per advice of an insurance agent. During the effectivity of the policy, the school building was totally burned. They tried to claim from the insurance company but they were denied on the ground that the building and land it was constructed on was owned by Ildefonso Yap and not by Harvadian Colleges. Ruling: Any title to, or interest in property, legal or equitable, will support a contract of fire insurance, and even when the insured had no title the contract will be upheld if his interest, or his relation to, the property is such that he will, or may be benefited by its continued existence or suffer a direct pecuniary loss from its destruction or injury. The plaintiff in this case has long been using and possessing the building for several years with both the consent and knowledge of Ildefonso Yap. As such, it is reasonable to assume that had the building not been burned, plaintiff would have been allowed the continued use of the same in its operation of an educational institution.

Ang Ka Yu v Phoenix Assurance Co. Ltd. 1 SCRA 704 Facts: Ang Ka Yu had a piece of property in his possession. He insured it with Phoenix. The property was lost, so Ang Ka Yu sought to claim the proceeds. Phoenix denied liability on the ground that Ang was not the owner but a mere possessor and as such, had no insurable interest over the property. Issue: Whether or not a mere possessor has insurable interest over the property. Ruling: A person having a mere right or possession of property may insure it to its full value and in his own name, even when he is not responsible for its safekeeping. The reason is that even if a person is NOT interested in the safety and preservation of material in his possession because they belong to 3rd parties, said person still has insurable interest, because he stands either to benefit from their continued existence or to be prejudiced by their destruction. Insular Life Assurance Corp. v Feliciano 73 Phil 201 OZAETA, J. Facts: Evaristo Feliciano was issued an insurance policy by Insular Life. In September 1935, he died. His heirs filed an insurance claim but Insular Life denied the application as it averred that

Feliciano’s application was attended by fraud. It was later found in court that the insurance agent and the medical examiner of Insular Life who assisted Feliciano in signing the application knew that Feliciano was already suffering from tuberculosis; that they were aware of the true medical condition of Feliciano yet they still made it appear that he was healthy in the insurance application form; that Feliciano signed the application in blank and the agent filled the information for him. Issue: Whether or not Insular Life can avoid the insurance policy by reason of the fact that its agent knowingly and intentionally wrote down the answers in the application differing from those made by Feliciano hence instead of serving the interests of his principal, acts in his own or another’s interest and adversely to that of his principal, the said principal is not bound by said acts of the agent. Ruling: No. Insular Life must pay the insurance policy. The weight of authority is that if an agent of the insurer, after obtaining from an applicant for insurance a correct and truthful answer to interrogatories contained in the application for insurance, without knowledge of the applicant fills in false answers, either fraudulently or otherwise, the insurer cannot assert the falsity of such answers as a defense to liability on the policy, and this is true generally without regard to the subject matter of the answers or the nature of the agent’s duties or limitations on his authority, at least if not brought to the attention of the applicant. The fact that the insured did not read the application which he signed, is not indicative of bad faith. It has been held that it is not negligence for the insured to sign an application without first reading it if the insurer by its conduct in appointing the agent influenced the insured to place trust and confidence in the agent.

Sun Life Assurance Corp. of Canada v Court of Appeals 245 SCRA 268 Facts: Bacani procured a life insurance contract for himself from Sunlife Assurance. Specifically, the policy included a double indemnity in case of accidental death, designating his mother as beneficiary. Later, Bacani died in a plane crash and so the mother filed a claim. After investigation, Sunlife rejected the claim on ground of non-disclosure of material facts. They said that Bacani did not mention that two weeks prior to his insuranceapplication he was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. The trial court ruled that the facts concealed by the insured were made in good faith and under the belief that they need not be disclosed. Also, it held that the health history of the insured was immaterial since the insurance policy was “non-medical.” The CA affirmed, stating that the cause of death was unrelated to the facts concealed by the insured. Issue: Whether or not the concealment made by Bacani warranted the rejection of the insurance claim Ruling: The Supreme Court reversed the decision of the CA and ruled that rescission of the insurance contract was proper. Disclosure of Material Facts required Under sec. 26 of the Insurance Code, a party to a contract of insurance is required to

communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. (The Insurance Code, sec. 31) The information which the insured failed to disclose was material and relevant to the approval and issuance of the insurance policy. The matters concealed would have definitely affected petitioner’s action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by the petitioner in order for it to reasonably assess the risk involved in accepting the application. Good Faith not a defense Materiality of the information withheld does not depend on the state of mind of the insured. Neither does it depend on the actual or physical events which ensue. Thus, “good faith” is no defense in concealment. Waiver of Medical Examination not a defense The waiver of the medical examination of the insured does not mean that material facts need not be disclosed. In fact, it renders even more material the information required of the applicant concerning previous condition of health anddiseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. Cause of Death It is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries. Thelma vda. de Camiling v Court of Appeals 223 SCRA 443 Facts: Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus tachycardia." Mr. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis." On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance policy with Grepalife naming his wife, as his beneficiary. Canilang was issued ordinary life insurance with the face value of P19,700. On 5 August 1983, Canilang died of "congestive heart failure," "anemia," and "chronic anemia." The wife as beneficiary, filed a claim with Grepalife which the insurer denied on the ground that the insured had concealed material information from it. Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife contending that as far as she knows her husband was not suffering from any disorder and that he died of kidney disorder. Grepalife was ordered to pay the widow by the Insurance Commissioner holding that there was no intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into the health condition of the

applicant by the issuance of the policy despite the lack of answers to "some of the pertinent questions" in the insurance application. CA reversed. Issue: Whether or not Grepalife is liable. Ruling: SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. Under the relevant provisions of the Insurance Code, the information concealed must be information which the concealing party knew and "ought to [have] communicate[d]," that is to say, information which was "material to the contract. The information which Canilang failed to disclose was material to the ability of Grepalife to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Grepalife would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of mind of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that "probable and reasonable influence of the facts" concealed must, of course, be determined objectively, by the judge ultimately. SC found it difficult to take seriously the argument that Grepalife had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in the insurance application. Such failure precisely constituted concealment on the part of Canilang. Petitioner's argument, if accepted, would obviously erase Section 27 from the Insurance Code of 1978. Philamcare Health Systems, Inc. v Court of Appeals and Julita Trinos 379 SCRA 356 YNARES-SANTIAGO, J. Facts: Ernani TRINOS, deceased husband of respondent Julita, applied for a health care coverage with Philamcare Health Systems, Inc. In the standard application form, he answered no to the 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? (If Yes, give details).” The application was approved for period of one year; upon termination, it was extended for another 2 years. Amount of coverage was increased to a maximum sum of P75T per disability. During this period, Ernani suffered a HEART ATTACK and was confined at the Manila Medical Center (MMC) for one month. While her husband was in the hospital, Julita tried to claim the hospitalization benefits. Petitioner treated the Health Care Agreement (HCA) as void since there was a concealment regarding Ernani’s medical history. Doctors at the MMC allegedly discovered at the time of his confinement, he was hypertensive, diabetic and asthmatic. Julita then paid the hospitalization expenses herself, amounting to about P76T. After her husband died, Julita instituted action for damages against Philamcare and its Pres. After trial, the lower court ruled in her favor and ordered Philamcare to reimburse medical and hospital

coverage amounting to P76T plus interest, until fully paid; pay moral damages of P10T; pay exemplary damages of P10T; atty’s fees of P20T. CA affirmed the decision of the trial court but deleted all awards for damages and absolved petitioner Reverente. Issue: WON a health care agreement is an insurance contract (If so, “incontestability clause” under the Insurance Code is applicable) Ruling: Yes. Every person has an insurable interest in the life and health of himself. 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.

Tan v. Court of Appeals 174 SCRA 403 GUTIERREZ, J. Facts: Tan Lee Siong was issued a policy by Philamlife on Nov. 6, 1973. On Aprl 26, 1975, Tan died of hepatoma. His beneficiaries then filed a claim with Philamlife for the proceeds of the insurance. Philamlife wrote the beneficiaries in Sep. 1975 denying their claim and rescinding the contract on the ground of misrepresentation. The beneficiaries contend that Philamlife can no longer rescind the contract on the ground of misrepresentation as rescission must allegedly be done “during the lifetime of the insured” within two years and prior to the commencement of the action following the wording of Sec. 48, par. 2. Issue: Whether or not Philamlife can rescind the contract. Ruling: YES. The phrase “during the lifetime” found in Sec. 48 simply means that the policy is no longer in force after the insured has died. The key phrase in the second paragraph is “for a period of two years”. The period to consider in a life insurance poiicy is “two years” from the date of issue or of the last reinstatement. So if for example the policy was issued/reinstated on Jan 1, 2000, the insurer can still exercise his right to rescind up to Jan. 1, 2003 or two years from the date of issue/reinstatement, REGARDLESS of whether the insured died before or after Jan. 1, 2003. Development Insurance Corp. v. Intermediate Appellate Court 143 SCRA 62 CRUZ, J. Facts: A fire occurred in the building of the private respondent and it sued for recovery of damages from the petitioner on the basis of an insurance contract between them. The petitioner allegedly failed to answer on time and was declared in default by TC. A judgment of default was rendered on the strength of the evidence submitted ex parte by the private respondent, which was allowed full recovery of its claimed damages. On learning of this decision, the petitioner moved

to lift the order of default, invoking excusable neglect, and to vacate the judgment by default. Its motion was denied. On appeal, IAC affirmed the TC decision in toto. Issue: WON default of petitioner is based on excusable neglect. Ruling: NO. Summons was served through its vice-president. There were even several extensions to the original period to answer. As a consequence, the TC, on motion of the private respondent filed declared the petitioner in default. This was done almost one month later. Even so, the petitioner made no move at all for two months thereafter. It was only more than one month after the judgment of default was rendered by the TC that it filed a motion to lift the order of default and vacate the judgment by default. There is a pattern of inexcusable neglect. Sun Insurance Office Ltd. v. Court of Appeals 195 SCRA 193 Paras, J. Facts: Private respondent Emilio Tan took from the petitioner a Peso 300,000 property insurance policy to cover his interest in the electrical insurance store of his brother housed in a building in Iloilo City on August 15, 1983. Four days after the issuance of the policy, the building including the insured store burned. On August 20, 1983, Tan filed his claim for fire loss. Sun Insurance, on February 29, 1984, wrote the private respondent denying the claim. On April 3, 1984, private respondent wrote another letter to the insurance company requesting reconsideration of the denial. Tan’s lawyer wrote another letter to the insurance company inquiring about the April 3 letter which sought for a reconsideration of the denial. In its reply to the lawyer’s letter, Sun Insurance reiterated its denial of the claim and enclosed therein copies of the two previous denials dated February 29, 1984 and May 17, 1985. On November 20, 1985, Tan filed a civil case with the RTC. Petition filed a motion to dismiss on the alleged ground that the action has already prescribed based on Condition 27 of the Insurance Policy which stated that the window to file the appropriate action with either the Insurance Commission or in any court of competent jurisdiction is twelve months from the rejection of the claim. RTC denied the motion and the subsequent motion for reconsideration. The CA likewise denied the petition of Sun Insurance. Issue: WON the court the filing of a motion for reconsideration interrupts the 12 months prescription period to contest the denial of the insurance claim. Ruling: NO. The SC held that Condition 27 of the Insurance policy is very clear and free from any doubt or ambiguity. It has to be taken in its plain, ordinary, and popular sense. The rejection letter of February 29, 1984 was clear and plain. The Court noted that the one year period is likewise in accord with Section 23 of the Insurance Code which states that any condition which limits the time for commencing an action to a period of less than one year when the cause of action accrues is void. The right of action, according to the SC, accrues at the time that the claim is rejected at the first instance. A request for reconsideration of the denial cannot suspend the running of the prescriptive period. The Court noted that the rationale for the one year period is to ensure that the evidence as to the origin and cause of the destruction have not yet disappeared.

Jacqueline Jimenez Vda. De Gabriel v. Court of Appeals 264 SCRA 137 VITUG, J. Facts: The petition for review on certiorari in this case seeks the reversal of the decision of the Court of Appeals setting aside the judgment of the Regional Trial Court of Manila, Branch 55, which has ordered private respondent Fortune Insurance & Surety Company, Inc., to pay petitioner Jacqueline Jimenez vda. de Gabriel, the surviving spouse and beneficiary in an accident (group) insurance of her deceased husband, the amount of P100,000.00, plus legal interest. Marcelino Gabriel, the insured, was employed by Emerald Construction & Development Corporation (“ECDC”) at its construction project in Iraq. He was covered by a personal accident insurance in the amount of P100,000.00 under a group policy procured from private respondent by ECDC for its overseas workers. The insured risk was for “(b)odily injury caused by violent accidental external and visible means which injury (would) solely and independently of any other cause” result in death or disability. On 22 May 1982, within the life of the policy, Gabriel died in Iraq. A year later, or on 12 July 1983, ECDC reported Gabriel’s death to private respondent by telephone. Among the documents thereafter submitted to private respondent were a copy of the death certificate issued by the Ministry of Health of the Republic of Iraq — which stated “REASON OF DEATH: UNDER EXAMINATION NOW — NOT YET KNOWN”— and an autopsy report of the National Bureau of Investigation (“NBI”) to the effect that “(d)ue to advanced state of postmortem decomposition, cause of death (could) not be determined.” Private respondent referred the insurance claim to Mission Adjustment Service, Inc. Following a series of communications between petitioner and private respondent, the latter, on 22 September 1983, ultimately denied the claim of ECDC on the ground of prescription. Petitioner went to the Regional Trial Court of Manila. In her complaint against ECDC and private respondent, she averred that her husband died of electrocution while in the performance of his work and prayed for the recovery of P100,000.00 for insurance indemnification and of various other sums by way of actual, moral, and exemplary damages, plus attorney’s fees and costs of suit. Private respondent filed its answer, which was not verified, admitting the genuineness and due execution of the insurance policy; it alleged, however, that since both the death certificate issued by the Iraqi Ministry of Health and the autopsy report of the NBI failed to disclose the cause of Gabriel’s death, it denied liability under the policy. In addition, private respondent raised the defense of “prescription,” invoking Section 384 of the Insurance Code. Later, private respondent filed an amended answer, still unverified, reiterating its original defenses but, this time, additionally putting up a counterclaim and a crossclaim.

Issue: Whether or not the case has already prescribed.

Ruling: Yes. Private respondent correctly invoked Section 384 of the Insurance Code; viz: “Sec. 384. Any person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must be brought, in proper cases, with the Commissioner or the Courts within one year from denial of the claim, otherwise, the claimant’s right of action shall prescribe.” The notice of death was given to private respondent, concededly, more than a year after the death of petitioner’s husband. Private respondent, in invoking prescription, was not referring to the one-year period from the denial of the claim within which to file an action against an insurer but obviously to the written notice of claim that had to be submitted within six months from the time of the accident.

Malayan Insurance Co., Inc. v. Gregorio Cruz Arnaldo 154 SCRA 672 CRUZ, J. Facts: On June 7, 1981, Malayan Insurance Co. (MICO), issued fire insurance for the amount of P14,000 on the property of private respondent, Pinca, effective July 1981-1982. MICO later allegedly cancelled the policy for non-payment of the premium and sent a notice to Pinca. On Dec. 24 Adora, an agent of MICO, received Pinca’s payment, which was remitted to MICO. On Jan. 18, 1982, Pinca’s property was completely burned. On Feb. 5, MICO returned Pinca’s payment to Adora on the ground that her policy had been cancelled; the latter refused to accept it. Her demand for payment having been rejected by MICO, Pinca went to the Insurance Commission. Public respondent Arnaldo, the Insurance Commissioner, sustained Pinca, hence this petition from MICO. Records show MICO received Arnaldo’s decision on April 10; MICO filed a MFR on April 25 which was denied on June 4; MICO received notice of this denial on June 14; instant petition was filed on July 2. Issue: WON there was a valid insurance contract at the time of the loss. Ruling: YES. A valid cancellation requires the following conditions based on Sections 64-65 of the Code: prior notice which must be based on the occurrence of one or more of the grounds mentioned in Sec 64 (in this case, non-payment of premium), after the effective date of the policy; the notice must be written and mailed to the address on the policy; it must state the ground(s) for cancellation and the insurer must furnish details upon the request of the insured. It is undisputed that payment of premium was made. Petitioner relies heavily on Sec 77 of the Insurance Code to contest this, the said provision requiring payment of premium as soon as the thing is exposed to the peril insured against and that the policy is invalid without it. However, this is not applicable in the instant case as payment was eventually made. It is to be noted that the premium invoice was stamped “Payment Received”, indicating an understanding between the parties that payment could be made later. This is furthered by the fact that Adora had earlier told her to call him anytime she was ready with her payment. The Court also finds it strange that

MICO only sought to return Pinca’s Jan. 15 payment only on Feb. 5, long after her house had burned down—this makes petitioner’s motives highly suspect.

Makati Tuscany Condominium Corp. v. Court of Appeals 215 SCRA 462 BELLOSILLO, J. Facts: Sometime in early 1982, American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., (AIUI) issued in favor of Makati Tuscany CondominiumCorporation (Tuscany) Insurance Policy 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 AHAC. On 10 February 1983, AHAC issued to Tuscany Insurance Policy No. AH-CPP9210596,which replaced and renewed the previous policy, for a term covering 1 March 1903 to 1 March 1984. The premium in the amount of P466,103.05 was again paid on installments on 13 April 1983, 13 July 1983, 3 August 1983, 9 September 1983, and 21 November 1983. All payments were likewise accepted by AHAC. On 20 January 1984, the policy was again renewed and AHAC issued to Tuscany Insurance Policy AH-CPP-9210651 for the period 1 March 1984 to 1 March 1985. On this renewed policy, Tuscany made two installment payments, both accepted by AHAC, the first on 6 February 1984 for P52,000.00 and the second, on 6 June 1984 for P100,000.00. Thereafter, Tuscany refused to pay the balance of the premium. Consequently, AHAC filed an action to recover the unpaid balance of P314,103.05 forInsurance Policy AH-CPP-9210651. In its answer with counterclaim, Tuscany admitted the issuance of Insurance Policy AH-CPP-9210651. It explained that it discontinued the payment of premiums because the policy did not contain a credit clause in its favor and the receipts for the installment payments covering the policy for 1984-85, as well as the two (2) previous policies, stated the followingreservations: (2) Acceptance of this payment shall not waive any of the company rights to deny liability on any claim under the policy arising before such payments or after the expiration of the credit clause of the policy; and (3) Subject to no loss prior to premiumpayment. If there be any loss such is not covered. Tuscany 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. After some incidents, Tuscany and AHAC moved for summary judgment. On 8 October 1987, the trial court dismissed the complaint and the counterclaim. Both parties appealed from the judgment of the trial court. Thereafter, the Court of Appeals rendered a decision modifying that of the trial court by ordering Tuscany to pay the balance of the premiums due on Policy AH-CPP-921-651, or P314,103.05 plus legal interest until fully paid, and affirming the denial of the counterclaim. Tuscany filed the petition. Issue: Whether payment by installment of the premiums due on aninsurance policy invalidates the contract of insurance.

Ruling: NO. The subject policies are valid even if the premiums were paid on installments. The records clearly show that Tuscany and AHAC intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those 3 years, the insurer accepted all the installmentpayments. Such acceptance of payments speaks loudly of the insurer's intention to honor the policies it issued to Tuscany. 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 prepaid in full. Thus, while the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, the Court was not prepared to rule that the request to make installment payments duly approved by the insurer, would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy. So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. It appearing from the peculiar circumstances that the parties actually intended to make the three (3) insurance contracts valid, effective and binding, Tuscany may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy (AH-CPP-9210651) in March 1985. Moreover, where the risk is entire and the contract is indivisible, the insured is not entitled to a refundof the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary.

South Sea Surety & Insurance Co. Inc. v. Court of Appeals 244 SCRA 744 VITUG, J. Facts: Hardwood entered into agreement with Seven Bros Shipping, where latter undertook to load the former’s logs on vessel. Hardwood insured the logs with South Sea Surety which issued Marine Cargo Insurance Policy. The vessel sank Jan 25, 1984. Hardwood filed claim with South Sea and Seven Bros. Trial Court favored Hardwood. CA decided against South Sea, but absolved Seven Bros. South Sea filed this instant petition. Issue: WON the insurance contract was already in effect when the vessel sank. Ruling: YES. It is already in effect because Hardwood has already paid the insurance premium. It delivered the check to Victorio Chua before the vessel sank, but Victorio Chua was only to deliver the check to South Sea five days after the vessel sank. Appellant argues that Chua was not its broker, but it was found that Chua was authorized by South Sea to receive the premium on its behalf.

Sps. Antonio Tibay and Violeta Tibay et al. v. Court of Appeals 257 SCRA 126 BELLOSILLO, J. Facts: On 22 January 1987 Fortune Life and General Insurance Co., Inc. (FORTUNE) issued Fire Insurance Policy No. 136171 in favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential building located at 5855 Zobel Street, Makati City, together with all their personal effects therein. The insurance was for P600,000 covering the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the total premium of P2,983.50, Violeta Tibay only paid P600 thus leaving a considerable balance unpaid. On 8 March 1987 the insured building was completely destroyed by fire. Two days later, Violeta Tibay paid the balance of the premium. On the same day, she filed with FORTUNE a claim on the fire insurance policy. Her claim was accordingly referred to its adjuster, Goodwill Adjustment Services, Inc. (GASI), which immediately wrote Violeta requesting her to furnish it with the necessary documents for the investigation and processing of her claim. Petitioner forthwith complied. On 28 March 1987 she signed a nonwaiver agreement with GASI to the effect that any action taken by the companies shall not be, or be claimed to be, an admission of liability. FORTUNE denied the claim of Violeta for violation of Policy Condition No. 2 and of Sec. 77 of the Insurance Code. Efforts to settle the case before the Insurance Commission proved futile. On 3 March 1988 Violeta and the other petitioners sued FORTUNE for damages in the amount of P600,000 representing the total coverage of the fire insurance policy plus 12% interest per annum, P100,000 moral damages, and attorney's fees equivalent to 20% of the total claim. The trial court ruled for petitioners. CA reversed. Issue: WON a fire insurance policy is valid, binding and enforceable upon mere partial payment of premium Ruling: NO. Where the insurer and the insured expressly stipulated that the policy is not in force until the premium has been fully paid the payment of partial premium by the assured in this particular instance should not be considered the payment required by the law and the stipulation of the parties. Rather, it must be taken in the concept of a deposit to be held in trust by the insurer until such time that the full amount has been tendered and duly receipted for.

UCPB General Insurance Co., Inc. v. Masagana Telemart, Inc. 356 SCRA 307 DAVIDE, JR., C.J. Facts: Plaintiff obtained from defendant fire insurance policies on its property effective from May 1991 - 1992. On June 1992, plaintiff's properties were raged by fire. On the same date plaintiff tendered, and defendant accepted five checks as renewal premium paymentsfor which a receipt was issued. Masagana made a claim which was denied. the checks were then returned to

plaintiff. According to defendant, the claim cannot be entertained for properties were burned before the tender of premium. Issue: Whether or not section 77 of the insurance code must be strictly applied to petitioner’s advantage despite its practice of granting 60 to 70 day credit term for the payment of its premium Ruling: The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace period provision applies. The second is that covered by Section 78 of the Insurance Code, which provides: SECTION 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of itspayment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid. A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals, wherein we ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss. Tuscany case has provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the paymentof the premium. This simply means that if the insurer has granted theinsured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term. Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties. Article 1306 of the Civil Code provides: ARTICLE 1306. The contracting parties may establish such stipulations clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Finally in the instant case, it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for thepayment of premiums despite its full awareness of Section 77. Estoppel bars it from taking refuge under said Section, since Respondent relied in good faith on such practice. Estoppel then is the fifth exception to Section 77.

UCPB General Insurance Co., Inc. v. Masagana Telemart, Inc. 308 SCRA 259 PARDO, J. Facts: On April 15, 1991, petitioner issued five (5) insurance policies covering respondent's various property described therein against fire, for the period from May 22, 1991 to May 22, 1992. In March 1992, petitioner evaluated the policies and decided not to renew them upon expiration of their terms on May 22, 1992. Petitioner advised respondent's broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies. On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in the policies. On June 13, 1992, fire razed respondent's property covered by three of the insurance policies petitioner issued. On July 13, 1992, respondent presented to petitioner's cashier at its head office five (5) manager's checks in the total amount of P225,753.95, representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14, 1992. On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by fire. On the same day, petitioner returned to respondent the five manager's checks that it tendered, and at the same time rejected respondent's claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the fire occurred on June 13, 1992, before respondent's tender of premium payment. On July, 21, 1992, respondent filed with the Regional Trial Court, Branch 58, Makati City, a civil complaint against petitioner for recovery, of P18.645,000.00, representing the face value of the policies covering respondent's insured property razed by fire, and for attorney's fees. On October 23, 1992, after its motion to dismiss had been denied, petitioner filed an answer to the complaint. It alleged that the complaint "fails to state a cause of action"; that petitioner was not liable to -respondent for insurance proceeds under the policies because at the time of the loss of respondent's property due to fire, the policies had long expired and were not renewed. Issue: WON the fire insurance policies issued by petitioner to the respondent covering the period May 22, 1991 to May 22, 1992, had expired on the latter date or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk (fire) insured against Ruling: NO. An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium. Any agreement to the contrary is void. The parties may not agree expressly or impliedly on the extension of credit or time to pay the premium and consider the policy binding before actual payment. American Home Assurance Co. v. Antonio Chua 309 SCRA 250 DAVIDE, JR. C.J. Facts: April 5, 1990: Antonio Chua renewed the fire insurance for its stock-in-trade of his business, Moonlight Enterprises with American Home Assurance Companyby issuing a check

of P2,983.50 to its agent James Uy who delivered the Renewal Certificate to him. April 6, 1990: Moonlight Enterprises was completely razed by fire with an est. loss of P4,000,000 to P5,000,000. April 10, 1990: An official receipt was issued and subsequently, a policy was issued covering March 25 1990 to March 25 1991. Antonio Chua filed an insurance claim with American Home and 4 other co-insurers (Pioneer Insurance and Surety Corporation, Prudential Guarantee and Assurance, Inc. and Filipino Merchants Insurance Co). American Home refused alleging the no premium was paid. RTC: favored Antonio Chua for paying by way of check a day before the fire occurred. CA: Affirmed Issue: Whether or not there was a valid payment of premium considering that the check was cashed after the occurrence of the fire since the renewal certificate issued containing the acknowledgement receipt. Ruling: YES. Section 77 of the Insurance Code

An insurer is entitled to payment of the premium as soon as the thing insured 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 life or an industrial life policy whenever the grace period provision applies

Section 66 of the Insurance Code - not applicable since not termination but renewal. Renewal certificate issued contained the acknowledgment that premium had been paid. Section 306 of the Insurance Code provides that any insurance company which delivers a policy or contract of insurance to an insurance agent or insurance broker shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon. Best evidence of such authority is the fact that petitioner accepted the check and issued the official receipt for the payment. It is, as well, bound by its agent’s acknowledgment of receipt of payment. Section 78 of the Insurance Code

An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid.

This Section establishes a legal fiction of payment and should be interpreted as an exception to Section 77.

Pioneer Insurance & Surety Corp. v. Oliva Yap 61 SCRA 426 FERNANDEZ, J. Facts: Yap owned a store in a 2 storey building, where she sold shopping bags and footwear. Her son-in-law was in charge of the store. April 19, 1962- Yap took out Fire Insurance Policy No. 4216 from Pioneer with a face value of P25,000 covering her stocks, office furniture, fixtures, etc. among the conditions set forth: The Insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in, or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this Policy shall be forfeited. (emphasis supplied) It is understood that, except as may be stated on the face of this policy there is no other insurance on the property hereby covered and no other insurance is allowed except by the consent of the Company endorsed hereon. Any false declaration or breach or this condition will render this policy null and void. At the time of insurance of Policy 4219(April 19, 1962), an insurance policy for P20,000 issued by the Great American Insurance Company covering the same properties was noted on said policy as co-insurance. August 29, 1962 : parties executed an endorsement on Policy 4219 stating: It is hereby declared and agreed that the co-insurance existing at present under this policy is as follows: P20,000.00 � Northwest Ins., and not as originally stated. (emphasis supplied) Except as varied by this endorsement, all other terms and conditions remain unchanged. September 26, 1962: Yap took out another fire insurance policy for P20,000 covering the same properties, from Federal Insurance Company. This policy was procured without notice to and the written consent of Pioneer, and was therefore not noted as a co-insurance in Policy 4219. December 19, 1962: Fire burned Yap’s store. Issue: WON petitioner should be absolved from liability on Fire insurance Policy No. 4219 on account of any violation by respondent Yap of the co-insurance clause therein. Ruling: YES. The petitioner should be absolved. There was a violation by Yap of the coinsurance clause contained in Policy No. 4219 which resulted in the avoidance of the pe titioner’s liability. By the plain terms of the policy, other insurance without the consent of petitioner would ipso facto avoid the contract. It required no affirmative act of election on the part of the company to make operative the clause avoiding the contract, wherever the specified conditions should occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance. The obvious purpose of the aforesaid requirement in the policy is to prevent over-

insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to the insured. According to Justice Story: "The insured has no right to complain, for he assents to comply with all the stipulation on his side, in order to entitle himself to the benefit of the contract, which, upon reason or principle, he has no right to ask the court to dispense with the performance of his own part of the agreement, and yet to bind the other party to obligations, which, but for those stipulation would not have been entered into."

Republic Bank v. Phil. Guaranty Co., Inc. 47 SCRA 271 FERNANDO, J. Facts: In a suit arising from a fire insurance policy, the insurer, Philippine Guaranty Co., Inc., defendant in the lower court and now appellee, was able to avoid liability upon proof that there was a violation of a warranty. There was no denial thereof from the insured, Union Manufacturing Co., Inc. With such a legally crippling blow, the effort of the Republic Bank, the main plaintiff and now the sole appellant, to recover on such policy as mortgagee, by virtue of the cover note in the insurance policy providing that it is entitled to the payment of loss or damages as its interest may appear, was in vain. The defect being legally incurable, its appeal is likewise futile. Ruling: Why the appellant Republic Bank could not recover, as payee, in case of loss as its "interest may appear subject to the terms and conditions, clauses and warranties" of the policy was expressed in the appealed decision thus: "However, inasmuch as the Union Manufacturing Co., Inc. has violated the condition of the policy to the effect that it did not reveal the existence of other insurance policies over the same properties, as required by the warranty appearing on the face of the policy issued by the defendant and that on the other hand said Union Manufacturing Co., Inc. represented that there were no other insurance policies at the time of the issuance of said defendant's policy, and it appearing furthermore that while the policy of the defendant was in full force and effect the Union Manufacturing Co., Inc. secured other fire insurance policies without the written consent of the defendant endorsed on the policy, the conclusion is inevitable that both the Republic Bank and Union Manufacturing Co., Inc. cannot recover from the same policy of the defendant because the same is null and void." 5 The tone of confidence apparent in the above excerpts from the lower court decision is understandable. The conclusion reached by the lower court finds support in authoritative precedents. It is far from easy, therefore, for appellant Republic Bank to impute to such a decision a failure to abide by the law. Hence, as noted at the outset, the appeal cannot prosper. An affirmance is indicated.

Oriental Assurance Corp. v. Court of Appeals 200 SCRA 459 MELENCIO-HERRERA, J. Facts: Sometime in January 1986, private respondent Panama Sawmill Co., Inc. (Panama) bought, in Palawan, 1,208 pieces of apitong logs, with a total volume of 2,000 cubic meters. It hired Transpacific Towage, Inc., to transport the logs by sea to Manila and insured it against loss for P1-M with petitioner Oriental Assurance Corporation (Oriental Assurance). While the logs were being transported, rough seas and strong winds caused damage to one of the two barges resulting in the loss of 497 pieces of logs out of the 598 pieces loaded thereon. Panama demanded payment for the loss but Oriental Assurance refuse on the ground that its contracted liability was for "TOTAL LOSS ONLY." Unable to convince Oriental Assurance to pay its claim, Panama filed a Complaint for Damages against Oriental Assurance before the Regional Trial Court. RTC ordered Oriental Assurance to pay Panama with the view that the insurance contract should be liberally construed in order to avoid a denial of substantial justice; and that the logs loaded in the two barges should be treated separately such that the loss sustained by the shipment in one of them may be considered as "constructive total loss" and correspondingly compensable. CA affirmed in toto. Issue: WON Oriental Assurance can be held liable under its marine insurance policy based on the theory of a divisible contract of insurance and, consequently, a constructive total loss Held: NO. The terms of the contract constitute the measure of the insurer liability and compliance therewith is a condition precedent to the insured's right to recovery from the insurer. Whether a contract is entire or severable is a question of intention to be determined by the language employed by the parties. The policy in question shows that the subject matter insured was the entire shipment of 2,000 cubic meters of apitong logs. The fact that the logs were loaded on two different barges did not make the contract several and divisible as to the items insured. The logs on the two barges were not separately valued or separately insured. Only one premium was paid for the entire shipment, making for only one cause or consideration. The insurance contract must, therefore, be considered indivisible. More importantly, the insurer's liability was for "total loss only." A total loss may be either actual or constructive (Sec. 129, Insurance Code). An actual total loss is caused by: (a) A total destruction of the thing insured; (b) The irretrievable loss of the thing by sinking, or by being broken up; (c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or (d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. (Section 130, Insurance Code). A constructive total loss is one which gives to a person insured a right to abandon, under Section 139 of the Insurance Code. This provision reads:

SECTION 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril injured against, (a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril; (b) If it is injured to such an extent as to reduce its value more than three-fourths; xxx xxx xxx The requirements for the application of Section 139 of the Insurance Code, quoted above, have not been met. The logs involved, although placed in two barges, were not separately valued by the policy, nor separately insured. Resultantly, the logs lost in the damaged barge in relation to the total number of logs loaded on the same barge cannot be made the basis for determining constructive total loss. The logs having been insured as one inseparable unit, the correct basis for determining the existence of constructive total loss is the totality of the shipment of logs. Of the entirety of 1,208, pieces of logs, only 497 pieces thereof were lost or 41.45% of the entire shipment. Since the cost of those 497 pieces does not exceed 75% of the value of all 1,208 pieces of logs, the shipment cannot be said to have sustained a constructive total loss under Section 139(a) of the Insurance Code.

Roque v. Intermediate Appellate Court 139 SCRA 597 GUTIERREZ, JR., J. 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. As alleged by the petitioners in their complaint and as found by both the trial and appellate courts, the barge where the logs were loaded was not seaworthy such that it developed a leak. The appellate court further found that one of the hatches was left open causing water to enter the barge and because the barge was not provided with the necessary cover or tarpaulin, the ordinary splash of sea waves brought more water inside the barge. On March 8, 1972, the petitioners wrote a letter to Manila Bay demanding payment of P150,000.00 for the loss of the shipment plus P100,000.00 as unrealized profits but the latter

ignored the demand. Another letter was sent to respondent Pioneer claiming the full amount of P100,000.00 under the insurance policy but respondent refused to pay on the ground that its hability depended upon the "Total loss by Total Loss of Vessel only". Hence, petitioners commenced Civil Case No. 86599 against Manila Bay and respondent Pioneer. Issue: Whether or not the intermediate appellate court erred in holding that in cases of marine cargo insurance, there is a warranty of seaworthiness by the cargo owner. Ruling: In their first assignment of error, the petitioners contend that the implied warranty of seaworthiness provided for in the Insurance Code refers only to the responsibility of the shipowner who must see to it that his ship is reasonably fit to make in safety the contemplated voyage. The petitioners state that a mere shipper of cargo, having no control over the ship, has nothing to do with its seaworthiness. They argue that a cargo owner has no control over the structure of the ship, its cables, anchors, fuel and provisions, the manner of loading his cargo and the cargo of other shippers, and the hiring of a sufficient number of competent officers and seamen. The petitioners' arguments have no merit. There is no dispute over the liability of the common carrier Manila Bay. In fact, it did not bother to appeal the questioned decision. However, the petitioners state that Manila Bay has ceased operating as a firm and nothing may be recovered from it. They are, therefore, trying to recover their losses from the insurer. 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 which 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, ... 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.

Filipinas Merchants Insurance v. Court of Appeals 179 SCRA 638 REGALADO, J. Facts: In 1976, Choa Tiek Seng contracted Frota Oceanica Brasiliera for the latter to deliver goods. Choa Tiek Seng insured the goods with Filipino Merchants Insurnace Company. The goods left the port of Manila on December 13, 1976 and reached its point of destination on December 17, 1976. The goods were however damaged. Choa Tiek Seng then filed an insurance claim. Filipino Merchants refused to pay so in August 1977, it was sued by Choa Tiek Seng. In January 1978, Filipino Merchants filed a third party complaint against the carrier Frota Oceanica Brasiliera as it alleged that it is the carrier who is liable to pay damages to Choa Tiek Seng. Judge Jose Alejandro of the trial court ruled against Filipino Merchants. The Court of Appeals affirmed the ruling of the judge. The lower courts ruled that Filipino Merchants is already barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed “within one year after delivery of the goods or the date when the goods should have been delivered” or one year from December 17, 1976. The insurance company is already barred for it filed its third party complaint only in January 1978. Issue: Whether or not Filipino Merchants is precluded by the said time-bar rule. Ruling: Yes. The pertinent provision of the Carriage of Goods by Sea Act does not only apply to the shipper but alsoapplies to the insurer. The coverage of the Carriage of Goods by Sea Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the one year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year. This would be the result if the insurer can, at any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one year limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the carrier and the ship from fraudulent claims by having “matters affecting transportationof goods by sea be decided in as short a time as possible” and by avoiding incidents which would “unnecessarily extend the period and permit delays in the settlement of questions affecting the transportation.”

Choo Tek Seng v. Court of Appeals 183 SCRA 223 GANCAYO, J. Facts: Petitioner imported some lactose crystals from Holland. The importation involved fifteen (15) metric tons packed in 600 6-ply paper bags with polythelene inner bags, each bag at 25 kilos net. The goods were loaded at the port at Rotterdam in sea vans on board the vessel "MS Benalder' as the mother vessel, and thereafter aboard the feeder vessel "Wesser Broker V-25" of respondent Ben Lines Container, Ltd. (Ben Lines for short). The goods were insured by the respondent Filipino Merchants' Insurance Co., Inc. (insurance company for short) for the sum of P98,882.35, the equivalent of US$8,765.00 plus 50% mark-up or US $13,147.50, against all risks under the terms of the insurance cargo policy. Upon arrival at the port of Manila, the cargo was discharged into the custody of the arrastre operator respondent E. Razon, Inc. (broker for short), prior to the delivery to petitioner through his broker. Of the 600 bags delivered to petitioner, 403 were in bad order. The surveys showed that the bad order bags suffered spillage and loss later valued at P33,117.63. Petitioner filed a claim for said loss dated February 16, 1977 against respondent insurance company in the amount of P33,117.63 as the insured value of the loss. Respondent insurance company rejected the claim alleging that assuming that spillage took place while the goods were in transit, petitioner and his agent failed to avert or minimize the loss by failing to recover spillage from the sea van, thus violating the terms of the insurance policy sued upon; and that assuming that the spillage did not occur while the cargo was in transit, the said 400 bags were loaded in bad order, and that in any case, the van did not carry any evidence of spillage. Petitioner filed a complaint in the RTC against the insurance company seeking payment of the sum of P33,117.63 as damages plus attorney's fees and expenses of litigation. Insurance company denied all the material allegations of the complaint and raised several special defenses as well as a compulsory counterclaim. Insurance company filed a third-party complaint against respondents Ben Lines and broker. RTC dismissed the complaint, the counterclaim and the third-party complaint with costs against the petitioner. Appealed in CA but denied. MFR was denied as well. Issue: WON insurance company should be held liable even if the technical meaning in marine insurance of an “insurance against all risk" is applied. Ruling: YES. In Gloren Inc. vs. Filipinas Cia. de Seguros, 12 it was held that an all risk insurance policy insures against all causes of conceivable loss or damage, except as otherwise excluded in the policy or due to fraud or intentional misconduct on the part of the insured. It covers all losses during the voyage whether arising from a marine peril or not, including pilferage losses during the war. In the present case, the "all risks" clause of the policy sued upon reads as follows: "5. This insurance is against all risks of loss or damage to the subject matter insured but shall in no case be deemed to extend to cover loss, damage, or expense proximately caused by delay or inherent vice or nature of the subject matter insured. Claims recoverable hereunder shall be payable irrespective of percentage."

The terms of the policy are so clear and require no interpretation. The insurance policy covers all loss or damage to the cargo except those caused by delay or inherent vice or nature of the cargo insured. It is the duty of the respondent insurance company to establish that said loss or damage falls within the exceptions provided for by law, otherwise it is liable therefor. An "all risks" provision of a marine policy creates a special type of insurance which extends coverage to risks not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to peril falling within the policy's coverage. The insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from coverage. In this case, the damage caused to the cargo has not been attributed to any of the exceptions provided for nor is there any pretension to this effect. Thus, the liability of respondent insurance company is clear.

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