Insurance Digests
Content
iNsuRanCe
A2010
Dean Carale
pAgE 1 ABOITIZ SHIPPING SHIPPING CORPORATION CORPORATION V NEW INDIA ASSURANCE COMPANY, LTD. [CITATION] QUISUMBING; May 2, 2006
HELD NO Rat Ratio io Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability cannot be applied.
NATURE Petition for review on certiorari
-Reasoning From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible, unless they can prove that the loss, destruction or deterioration was brought about by the causes specified in Article 1734 17 34 1 of the Civi Civill Code. In all other cases, common carriers are presumed to have been at fault or to have acted negligen negligently, tly, unless they prove that they observed observed extraordin extra ordinary ary diligence. Moreover, Moreover, where the vessel is found unseaworthy, unseaworthy, the shipowner is also presumed to be negligent since it is tasked with the maintenance of its vessel. Though this duty can be delegated, still, the shipowner must exercis exercise e close supervision over its men. - In the present present case, case, pet petiti itione onerr has the bur burden den of showin showing g that that it exerci exercised sed extraordinary diligence in the transport of the goods it had on board in order to invoke the limited liability doctrine. doctrine. Differently put, to limit its lliability iability to the amount of the
FACTS - Societe Francaise Des Colloides Colloides loaded a cargo of textiles and auxil auxiliary iary chemical chemicals s from France on board a vessel owned by Franco-Belgian Services, Inc. - The cargo was consig consigned ned to General General Texti Textile, le, Inc., in Manila Manila and ins insure ured d by respondent New India Assurance Company, Ltd. - While in Hongkong, the cargo was transferred to M/V P. Aboitiz for for transshipment to Manila. - Before departing, the vessel was advised that it was safe to travel to its destination, but while at sea, the vessel received a report of a typhoon moving within its path. - To avoid the typhoon, the vessel vessel changed its cou course. rse. However, However, it was still at the fringe of the typhoon when its hull leaked.
- On October 31, 1980, the vessel sank, but the captain and his crew were saved. - On November 3, 1980, the captain of M/V P. Aboitiz filed filed his “Marine Protest”, stating that that the wind forc force e was at 10 to 15 knots at the time time the ship foun founder dered ed and described the weather as “moderate breeze, small waves, becoming longer, fairly frequent white horse - Petitioner notified the consignee of the total loss of the vessel and all of its cargoes. - General Textile, lodged a claim with respondent for the amount of its loss. - Respondent paid General Textile and was subrogated to the rights of the latter. - Respondent hired a surveyor to investigate, and the same concluded that the cause wa was s the the fl floo oodi ding ng of the the hold holds s brou brough ghtt abou aboutt by th the e ve vess ssel el’s ’s ques questi tion onab able le seaworthiness. - Respondent filed a complaint for damages against petitioner Aboitiz, Franco-Belgian Services and the latter’s local agent, F.E. Zuellig, Inc. (Zuellig) (Zuellig) - On November 20, 1989, the trial trial court ruled ruled in favor of respondent respondent and and held petitioner Aboitiz liable for the total value of the lost cargo plus legal interest - The complaint with respect to Franco and Zuellig was dismissed - Petitioner elevated the case to the Court of Appeals, which in turn, affirmed in toto the trial court’s decision. - Petitioner moved for reconsideration but the same was denied. - Hence, this petition for review Petitioner’s Claim > Petitioner contends that respondent’s claim for damages should only be against the insurance proceeds and limited to its pro-rata share in view of the doctrine of limited liability Respondent’s Comments > Respondent counters that the doctrine of real and hypothecary nature of maritime law is not applicable in the present case because petitioner was found to have been negligent. negli gent. Hence, according according to respondent, respondent, petitioner petitioner should be held liable liable for the total value of the lost cargo ISSUE WON the limited liability doctrine applies in this case
insurance proceeds, petitioner has the burden of proving that the unseaworthiness of its vessel was not due to its fault or negligence. - Considering the evidence presented and the circumstances obtaining in this case, we find that petitioner petitioner faile failed d to discharge this burden. Both the trial and the appellat appellate e courts, in this case, found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence on record showed that the weather was moderate when the vessel sank. These factual findings of the Court of Appeals, affirming affirming those of the trial court are not to be disturbed on appeal, but must be accorded great weight. These findings are conclusive not only on the parties but on this Court as well. Disposition Petition Petition is denied for lack of merit.
PHILAMCARE HEALTH SYSTEMS, INC. V CA (TRINOS) 379 SCRA 357 YNARES-SANTIAGO; March March 18, 2002 NATURE Petition for review of CA decision FACTS - Ernani TRINOS, deceased husband husband of respo respondent ndent Julita, Julita, applied for a health care coverage with Philamcare Health Systems, Inc. In the standard application form, he answered answered no to the question: 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).” 1
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, or other natural disaster (2) Act of the public enemy inlightning, war, whether international or civil;or calamity; (3) Act of omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.
iNsuRanCe
A2010
Dean Carale
pAgE 2 - The application application was approved for period of one year; upon termination, 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
contract ct of ins insura urance nce3 is an ag agre reem emen entt wher whereb eby y on one e unde undert rtak akes es for for a - A contra consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. - An insurance contract exists where the following elements concur: (a) The insured has an insurable interest;
to claim hospitalization benefits. -tried Petition Peti tioner er the trea treated ted the Health Care Agreement (HCA) as (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. Petitioner’s Claims (1) (1) Agre Agreem emen entt gran grants ts “livi such as medi medica call ch chec eckk-up ups s and and living ng benefits benefits” such
(b) The The insurer insuredassumes is subjectthe to risk; a risk of loss by the happening of the peril; (c) (d) Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and (e) In consideration of the insurer’s promise, the insured pays a premium. 2. NO matters of opini opinion on or judgme judgment nt are calle called d for, answers answers made in good Ratio Where matters faith and without intent to deceive will not avoid a policy even though they are untrue; since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. Reasoning - The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. The right to rescind should be exercised previous to the commencement of an action on action on the contract. No rescission was made. Besides, the cancellation of health care agreements as in insurance policies requires: requires:
hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration. (2) Only medical and hospitalization benefits are given under the agreement without unlike ike in an ins insura urance nce contra contract ct whe where re the insur insured ed is any indemnificatio indemnification n, unl indemnified for his loss. loss . (3) HCAs are only for a period of one year; therefore, incontestability clause does not apply, as it requires effectivity period of at least 2 yrs. (4) It is not an insurance company, governed by Insurance Commission, but a Health Maintenance Organization Organization under the authority of DOH . (5) Trinos concealed a material fact in his application. (6) Julita was not the legal wife since at the time of their marri marriage, age, the deceas deceased ed was previously married to another woman who was still alive.*
(a) Prior notice of cancellation to insured; (b) Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned; (c) Must be in writing, mailed or delivered to the insured at the address shown in the policy; (d) Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based. - These conditions have not been met. When met. When the terms of insurance contract contain limitation limit ations s on liabilit liability, y, court courts s shoul should d const construe rue them in such a way as to preclude insurer from non-compliance of obligation. Being a contract of adhesion, terms of an insurance contract are to be construed strictly against the party which prepared it – the insurer. - Also, Philamcare had 12 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. indemnity. Hence, * The health care agreement is in the nature of a contract of indemnity. paymentt should be made to the party who incurred the expenses. paymen expenses. It is clear that respon responden dentt paid paid all the hospit hospital al and medica medicall bil bills; ls; thus, she is entitl entitled ed to reimbursement. Disposition Petition DENIED.
ISSUES 1. WON a health care agreement is an insurance contract (If so, “incontestability clause” under the Insurance Code is applicable) 2. WON the HCA can be invalidated on the basis of alleged concealment HELD YES Ratio Every person has an insurable interest in the life and health of himself 2. The health care agreement was in the nature of non-life insurance, which is primarily a contract contra ct of indemn indemnity. ity. 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. Reasoning 2
Sec.10. Every person has an insurable interest in the life and health:
(1) of of any himself, of his and of his children; (2) person on spouse whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; (3) of any person under a legal obligation to him for the payment of money, respecting property or service, of which death or illness might delay or prevent the performance; and (4) of any person upon whose life any estate or interest vested in him depends.
PINEDA V CA (INSULAR LIFE INSURANCE COMPANY) 226 SCRA 755 DAVIDE; September 27, 1993 NATURE Appeal by certiorari for review and set aside the Decision of the public respondent Court of Appeals and its Resolution denying the petitioners' motion for reconsideration 3
Section 2 (1) of the Insurance Code
iNsuRanCe
A2010
Dean Carale
pAgE 3 FACTS - In 1983, Prime Marine Services, Inc. (PMSI) procured a group policy from Insular Life to provide life insurance coverage to its sea-based employees enrolled under the plan. During the effectivity of the policy, 6 covered employees perished at sea. They were survived by complainants-appellees, the beneficiaries under the policy.
eyes to the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the principal the true condition of affairs. Reasoning - The execution by the principals of special powers of attorney, which clearly appeared to be in prepared forms and only had to be filled up with their names,
-Capt. complainant compla inants-appe sought to claim death benefits due themspecial and approached approa ched Robert Roberto os-appellees Nuval, Nuvalllees , President Presid ent and GM of PMSI, then executed powers of attorney authorizing Capt. Nuval to “follow up, ask, demand, collect and receive” for their benefit indemnities of sums of money due them…” - Unknown to the complainants, PMSI filed with Insular Life claims for and in behalf of them through Capt. Nuval, even using the 5 special powers of attorney that they executed as documents. Insular Life then released 6 checks, payable to the order of the complainant-app complainant-appellee ellees, s, to the treasurer treasurer of PMSI (who happened happened to be Capt. Nuval’s son-in-law). Capt. Nuval then endorsed and deposited these checks (which were for the complainants) in his bank account. - 3 years after, the complainant complainants-appe s-appellees llees found out that they were entitled, entitled, as beneficiaries, to life insular benefits under a group policy with respondent-appellant so they sought to recover these benefits from Insular Life. Insular Life denied the claim, saying that their liability to complainants was already extinguished upon delivery to and receipt by PMSI of the 6 checks issued in the complainants’ names. Complainants
residences, dates of execution, dates of acknowledgement others,agency. excludes any intent to grant a general power of attorney or to constitute aand universal Being special powers of attorney, they must be strictly construed. Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection and receipt of such proceeds was a deviation from its practice with respect to group policies (that the employer-policyholder is the agent of the insurer). - The employer acts as a functionary in the collection and payment of premiums and in performing related duties. Likewise falling within the ambit of administration of a group policy policy is the disbu disbursemen rsementt of insurance insurance payments by the employ employer er to the employees. Most policies, such as the one in in this case, require an employee to pay a portion of the premium, which the employer deducts from wages while the remainder is paid by the employer. This is known as a contributor contributory y plan as compared to a noncontributory plan where the premiums are solely paid by the employer. - the labor of the employees is the true source of the benefits, which are a form of additional compensation to them. employer yer is the agent of the insurer insurer in performi performing ng the duties duties of - the emplo administering group insurance policies. It cannot be said that the employer acts entire entirely ly for its own benefi benefitt or for the bene benefit fit of its employ employees ees in unde underta rtakin king g administrative functions. While a reduced premium m ay result if the employer relieves the insurer of these tasks, and this, of course, is advantageous to both the employer and the emp employ loyees ees,, the ins insure urerr also also enjoys enjoys signif significa icant nt adv advant antage ages s from from the arrang arrangeme ement. nt. The reduct reduction ion in the pre premiu mium m which which result results s fro from m empl employe oyerradministrat admini stration ion permits the insur insurer er to realize a larger volume of sales, sales, insure insurerr to realize a larger volume of sales, and at the same time the insurer's own administrative costs are markedly reduced. - the employee has no knowledge of or control over the employer's actions in handling the policy or its administration. An agency relationship is based upon consent by one person that another shall act in his behalf and be subject to his control. It is clear from the evidence evidence regar regarding ding procedural technique techniques s here that the insur insurer-empl er-employer oyer relationship meets this agency test with regard to the administration of the policy, whereas that between the employer and its employees fails to reflect true agency. The insurer directs the performance of the employer's administrative acts, and if these duties are not undertaken properly the insurer is in a position to exercise more constricted control over the employer's conduct. - ON GROUP INSUR INSURANC ANCE: E: Group insu insuran rance ce is essen essentiall tially y a single single insurance insurance contract that provides coverage for many individuals. In its original and most common form, group insurance provides life or health insurance coverage for the he coverage terms f o orr group insurance are employees empl oyees of one employer . T he usually stated in a master agreement or policy that is issued by the insurer to a representative of the group or to an administrator of the insurance program, such as an employer. employer. Altho Although ugh the empl employe oyerr may be the titular titular or named insur insured, ed, the insurance is actually related to the life and health of the employee . Indeed, the employee is in the position of a real party to the master policy, and even in a noncontributory plan, the payment by the employer of the entire premium is a part of the
filed case with the Insurance Commission which decided in their favor. - Ins Insura urance nce Commis Commissio sion n held held that that the specia speciall pow powers ers of attorn attorney ey execut executed ed by complainants in favor of the complainants do not contain in unequivocal and clear terms authority to Capt. Nuval to obtain, receive, receipt from respondent company insurance proceeds arising from the death of the seaman-insured; also, that Insular Life did not convincingly refuted the claim of Mrs. Alarcon that neither she nor her husband executed a special power of authority in favor of Capt. Nuval (and therefore, the company should have not released the check to Capt. Nuval-PMSI); and that it did not observe Sec 180(3), as repealed by Art. 225 of the Family Code, when it released the benefits due to the minor children of Ayo and Lontok, when the said complainants did not post a bond as required - Ins Insula ularr Lif Life e appeal appealed ed to the CA; CA modi modifie fied d the decis decision ion of the Insuranc Insurance e Commission, eliminating the award to the Lontoks and Ayo ISSUES 1. WON Insular Life should be liable to the complainants when they relied on the special powers of attorney, which Capt. Nuval presented as documents, when they released the checks to the latter 2. WON Insular Life should be liable to the complainants when they released the check in favor of Ayo and LOntok, even if no bond was posted as required HELD 1. YES Ratio Third persons deal with agents at their peril and are bound to inquire as to the extent of the power of the agent with whom they contract. The person dealing with an agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the suggestions of probable limitations be of such a clear and reasonable quality, or if the character assumed by the agent is of
such a suspicious suspicious or unreasonable unreasonable nature, or if the authority authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may not shut his
total compensation paid for the services of the employee. employee. 2. YES Ratio Regardless of the value of the unemancipated common child's property, the fatherr and mother ipso jure become the legal guard fathe guardian ian of the child's prope property. rty.
iNsuRanCe
A2010
Dean Carale
pAgE 4 However, if the market value of the prope However, property rty or the annual inco income me of the child exceeds P50,000,00, a bond has to be posted by the parents concerned to guarantee the performance of the obligations of a general guardian. Reasoning - Sec 180, Insurance Code: 'In the absence of a judicial guardian, the father, or in
- On Feb. 5, 1991, William Lines, Inc. brought its vessel, vessel, M/V Manila City, to the Cebu Shipyard in Lapulapu City for annual dry-docking and repair. - On Feb. 6, 1991, an arrival conference was held between representatives of William Lines, Inc. and CSEW to discuss the work to be undertaken on the M/V Manila City. The contracts, denominated as Work Orders, were signed thereafter., with the following
the latter's absence or incapacity, mother of any minor, who ismay an insured or in a beneficiary under a contract of life,the health or accident insurance, exercise, behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond where the interest of the minor in the particular act involved does not exceed twenty thousand pesos " - …repealed by Art. 225, Family Code: "ART. 225. The father and the mother shall jointly exercise legal guardianship over the property of their unemancipated common child without without the necessity necessity of a court appointment. appointment. In case of disagreement, disagreement, the father's decision shall prevail, unless there is judicial order to the contrary. Where the market value of the property or the annual income of the child exceeds P50,000, the parent concerned shall be required to furnish a bond in such amount as the court may determine, but not less than ten per centum (10%) of the value of the pro proper perty ty or annual annual inc income, ome, to gua guaran rantee tee the perfor performan mance ce of the obliga obligatio tions ns prescribed for general guardians." -"ma "mark rket et val value ue of the propert property y or the annual annual income income of the chil child": d": the aggregate of the child's property or annual income; if this exceeds P50,000.00, a bond is required - There is no evidence that the share of each of the minors in the proceeds of the group policy in question is the minor's only property. Without such evidence, it would not be safe to conclude that, indeed, that is his only property. Disposition the instant petition is GRANTED. The Decision of 10 October 1991 and the Resolution of 19 May 1992 of the public respondent in CA-G.R. SP No. 22950 are SET ASIDE and the Decision of the Insurance Commission in IC Case No. RD-058 is REINSTATED. Costs against the private respondent. SO ORDERED.
FACTS - Cebu Shipyard Shipyard and Engineering Engineering Works, Inc. (CSEW) is engaged in the business of dry-docking dry-do cking and repai repairing ring of marine marine vessels vessels while the Prude Prudential ntial Guarante Guarantee e and Assurance, Inc. (Prudential) is in the non-life insurance business. - William Lines, Inc. is in the shipping business. business. It was the owner of M/V Manila City, a luxury passenger-cargo vessel, which caught fire and sank on Feb. 16, 1991. At the time of the unfortuna unfortunate te occurrence sued upon, subject subject vessel was insur insured ed with Prudential for P45M for hull and machinery. The Hull Policy included an “Additional Perils Peril s (INCHMAREE) (INCHMAREE)” ” Clause coveri covering ng loss of or damage to the vessel through through the
stipulations: “10. The Contractor Contractor shall shall replace at its own work and at its own cost any work or material which can be shown to be defective and which is communicated iin n writing within one (1) month of redelivery of the vessel or if the vessel was not in the Contractor’s Possession, the withdrawal of the Contractor’s workmen, or at its option to pay a sum equal to the cost of such replacement at its own works. These conditions shall apply to any such replacements. 11. Save as provided in Clause 10, the Contractor shall not be under any liability to the Customer either in contract or for delict or quasi-delict or otherwise except for negligence negli gence and such liabili liability ty shall itself be subje subject ct to the following overridi overriding ng limitations and exceptions, namely: (a) The total liability of the Contractor to the Customer (over and above the liability to replace under Clause 10) or of any sub-contractor shall be limited limited in respect of any defectt or event (and a seri defec series es of accide accidents nts aris arising ing out of the same defe defect ct or event shall constitute one defect or event) to the sum of Pesos Philippine Currency One Million only. x x x 20. The insurance on the vessel should be maintained by the customer and/or owner of the vessel during the period the contract is in effect.” - While the M/V Manila City was undergo undergoing ing dry-docking dry-docking and repairs repairs within the premises of CSEW, the master, officers and crew of M/V Manila City stayed in the vessel, using their cabins as living quarters. Other employees hired by William Lines to do repairs and maintenance work on the vessel were also present during the drydocking. - On February 16, 1991, after subjec subjectt vessel was trans transferre ferred d to the docki docking ng quay, it caught fire and sank, resulting to its eventual total loss. - On February 21, 1991, William Lines, Inc. filed a complaint for damages against CSEW, alleging that the fire which broke out in M/V Manila City was caused by CSEW’s negligence and lack of care. - On July 15, 1991 was filed an Amended Compla Complaint int impleading impleading Pruden Prudential tial as coplaintiff, plain tiff, afte afterr the latter had paid William William Lines Lines,, Inc. the value of the hull and machinery insurance on the M/V Manila City. As a result of such payment Prudential was subrogated subrogated to the claim of P45 millio million, n, represe representing nting the valu value e of the said insurance it paid. On June 10, 1994, the trial court a quo came quo came out with a judgment against C CSEW: SEW: 1. To pay unto plaintiff Prudential Guarantee and Assurance, Inc., the subrogee, the amount of P45M, with interest at the legal rate until full payment is made; the amount of P56,715,000 representing loss of income of M/V MANILA CITY, with interest at the legal rate until full payment is made; 2. To pay unto plaintif plaintiff, f, William Lines, Inc. the amount of P11M as paymen payment, t, in addition to what it received from the insurance company to fully cover the injury injury or loss, in order to replace the M/V MANILA CITY, with interest at the legal rate until full payment is made; the sum of P927,039 for the loss of fuel and lub oil on board the vessel when she was completely gutted by fire at defendant, Cebu Shipyar Shipyard’s d’s quay,
negligence of,CSEW amongwas others, repairmen - Petitioner Petitioner alsoship insured by Prudential Prudential for third party liability liability under a Shiprepairer’s Legal Liability Insurance Policy. The policy was for P10 million only, under the limited liability clause, to wit:
with interest at the legal rate until full payment is made; the sum of P3,054,677.95 as payment for the spare parts and materials used in the M/V MANILA CITY during drydocking with interest at the legal rate until full payment is made; P500,000 in moral damages;the amount of P10Min attorney’s fees; and to pay the costs of this suit.
CE CEBU BU SH SHIP IPYA YARD RD EN ENGI GINE NEER ERIN ING G WORK WORKS, S, INC. INC. V WILL WILLIA IAM M LINES,, INC. and PRUDENTIA LINES PRUDENTIAL L GUAR GUARANTEE ANTEE and ASSUR ASSURANCE ANCE COMPANY, INC. [CITATION]
PURISIMA; May 5, 1999 NATURE Petition for review on certiorari
iNsuRanCe
A2010
Dean Carale
pAgE 5 - On September 3, 1997, the Court of Appeals affirmed the appealed decision of the trial court, court, ordering ordering CSEW to pay Prudential Prudential,, the subrogee, the sum of P45 Milli Million, on, with interest at the legal rate until full payment is made. CSEW’s version: On Feb. 13, 1991, the CSEW completed the drydocking of M/V Manila City at its gr grave ave
1. WON CSEW had “management and supervisory supervisory control“ of the m/v manila city at the time the fire broke out 2. WON the doctrine of res ipsa loquitur applies against the crew 3. WON CSEW’S expert evidence is admissible admissible or of probative value 4. WON Pruden Prudentia tiall has the right right of sub subrog rogati ation on aga agains instt its own ins insure ured d THE
dock. was then to the docking quay of CSEW where repair to be Itdone was transferred the replati replating ng of the top o of f Water Ballast Ballast Ta Tank nkthe No.remaining 12 which was was subcontract subcon tracted ed by CSEW to JNB General General Ser Services vices.. Tank Top N No. o. 12 was at tthe he rear section of the vessel, on level with the flooring of the crew cabins located on the vessel’s second deck. At around 7AM of Feb. 16, 1991, the JNB workers trimmed and cleaned the tank top framing framin g which involved involved minor hotworks (welding/cutt (welding/cutting ing works). The said work was completed at about 10AM. The JNB workers then proceeded to rig the steel plates, after which they had their lunch break. The rigging was resumed at 1PM While in the process of rigging the second steel plate, the JNB workers noticed smoke coming from the passageway along the crew cabins. When one of the workers, Mr. Casas, proceeded to the passageway to ascertain the origin of the smoke, he noticed that smoke was gathering on the ceiling of the passageway but did not see any fire as the crew cabins on either either side of the passageway were locked. locked. He immediat immediately ely sought out the proprietor of JNB, Mr. Buenavista, and the Safety Officer of CSEW, Mr. Aves, who sounded sounded the fire alarm. alarm. CSEW’s fire fire brigade imm immediat ediately ely respon responded ded as well as the other fire fighting units in Metro Cebu. However, However, there were no WLI representative, officer or crew to guide the firemen inside the vessel. - Despite the combined efforts of the firemen of the Lapulapu City Fire Dept., Mandaue Fire Dept., Cordova Fire Dept. Emergency Rescue Unit Foundation, and fire brigade of CSEW, the fire was not controlled until 2AM of the following day. - On the early morning of Feb. 17, 1991, gusty winds rekindled the flames on the vessel and fire fire again broke out. Then the huge amounts amounts of water pumped into the vessel, coupled with the strong current, current, caused the vessel to tilt until it capsized capsized and sank - When M/V Manila City capsized, steel and angle bars were noticed to have been newly welded along the port side of the hull of the vessel, at the level of the crew cabins. William Lines did not previously apply for a per permit mit to do hotworks on the said portion of the ship as it should have done pursuant to its work order with CSEW.
CONTRACTUAL 5.p1 5. 5. 5.are WON the pr provisions ovisions limiting csew’s liability liability for negligence to a maximum of million valid HELD 1. YES - The that factual findings by the CA are conclusive on the parties and are not reviewable by this Court. They are entitled to great weight and respect, even finality, especially when, as in this case, the CA affirmed the factual findings arrived at by the trial court. When supported by sufficient evidence, findings of fact by the CA affirming those of the trial court court,, are not to be disturbe disturbed d on appeal. appeal. The ratio rationale nale behind this doctrine doctr ine is that review review of th the e findin findings gs of fact of the CA is not a func function tion tha thatt the Supreme Court normally undertakes. - The CA and the Cebu RTC are agreed that the fire which caused the total loss of subject M/V Manila City was due to the negligence of the employees and workers of CSEW. Both courts found that the M/V Manila City was under the custody and control of petitioner CSEW, when the ill-fated vessel caught fire. The decisions of both the lower court and the CA set forth clearl clearly y the evidence sustai sustaining ning their finding of actionable actio nable negli negligence gence on the part of CSEW. This factual factual finding is accord accorded ed great weight and is conclusive on the parties. The court discerns no basis for disturbing such finding firmly anchored on enough evidence. - Furthermore, in petitions for review on certiorari certiorari,, only questions of law may be put into issue. Questions of fact cannot be entertained. The finding of negligence by the CA is a question which this Court cannot look into as it would entail going into factual matters on which the finding of negligence was based. Such an approach cannot be allowed by this Court in the absence of clear showing that the case falls under any of the exceptions to the well-established principle. The finding by the trial court and the Court of Appeals that M/V Manila City caught fire and sank by reason of the negligence of the workers of CSEW, when the said vessel was under the exclusive custody and control of CSEW is accordingly upheld.
Prudential’s version > At around 7AM of Feb. 16, 1991, the Chief Mate of M/V Manila City was inspecting inspecting the various works being done by CSEW on the vessel, when he saw that some workers of CSEW were cropping out steel plates on Tank Top No. 12 using acetylene, oxygen and welding torch. He also observed that the rubber insulation wire coming out of the air-conditioning unit was already burning, prompting him to scold the workers. > At 2:45 PM of the same day, witnesses witnesses saw smoke coming from Tank No. 12. The vessel’s vessel ’s reeferman reported such occurence to the Chief Mate who immediate immediately ly assembled assemb led the crew members to put out out the fire. When it was too hot for for them to stay on board and seeing that the fire cannot be controlled, the vessel’s crew were forced to withdraw from CSEW’s docking quay. - In the morning of Feb. 17, 1991, M/V Manila City City sank. As the vessel was ins insured ured with Prudential Guarantee, William Lines filed a claim for constructive total loss, and after a thoro thorough ugh investigat investigation ion of the surrounding surrounding circu circumstanc mstances es of the tragedy, Prudential Pruden tial found the said insurance insurance claim to be meritorious meritorious and issued a check in
2. YESthe doctrine of res ipsa loquitur to apply to a given situation, the following - For conditions must concur: (1) the accident was of a kind which does not ordinarily occur occur unless someone is negligent; and (2) that the instrumentality or agency which caused the injury was under the exclusive control of the person charged with negligence. The facts and evidence on record reveal the concurrence of said conditions in the case under scrutiny. First, the fire that occurred and consumed M/V Manila City would not have happened in the ordinary course of things if reasonable care and diligence had been exercised. In other words, some negligence must have occurred. Second, the agency charged with negligence, as found by the trial court and the CA and as shown by the records, is the herein petitioner, CSEW, which had control over subject vessel when whe n it was dock docked ed for annual annual repa repairs irs.. So also, as found by the RTC, RTC, “other “other responsibl respo nsible e causes causes,, inclu including ding the condu conduct ct of the plaint plaintiff, iff, and third persons, persons, are sufficiently eliminated by the evidence.” What is more, in the present case the trial court found direct evidence to prove that
favor of William Lines in the amount of P45 million pesos representing the total value of M/V Manila City’s hull and machinery insurance.
the workers and/or employees of CSEW were remiss in their duty of exercising due dil dilige igence nce in the care care of sub subjec jectt vessel vessel.. The dir direct ect evi eviden dence ce sub substa stanti ntiate ates s the conclusion that CSEW was really really negligent. Thus, even without applying the doctrine of res ipsa loquitur, in light of the direct evidence on record, the ineluctable conclusion
ISSUES
iNsuRanCe
A2010
Dean Carale
pAgE 6 is that CSEW was negligent and consequently liable for damages to the respondent, William Lines, Inc. 3. NO - Petitioner maintains that the CA erred in disregarding the testimonies of the fire experts, Messrs. David Grey and Gregory Michael Southeard, who testified on the
20 20.. The The insur insuran ance ce on th the e ves vesse sell shoul should d be mai maint ntai aine ned d by the cu cust stom omer er an and/ d/or or owner of the vessel during the period the contract is in effect. - According to petitioner, under the aforecited clause, William Lines, Inc., agreed to assume the risk of loss of the vessel while under drydock or repair and to such extent, it is benefited and effectively constituted as a co-assured under the policy.
probable origin ofinthe fireopinion in M/V that Manila Petitioner avers in that said Top fire experts were one their theCity. fire did not originate thesince area the of Tank No. 12 where the JNB workers were doing hotworks but on the crew accommodation cabins on the portside No. 2 deck, the RTC and the CA should have given weight to such finding based on the testimonies of fire experts; petitioner argues. But courts are not bound by the testimonies of expert witnesses. Although they may have probative probative value, value, reception reception in evidence evidence of expert testi testimonies monies is withi within n the discretion of the court, under Section 49, Rule 130 of the Revised Rules of Court. It is never mandatory for judges to give substantial weight to expert testimonies. If from the facts and evidence on record, a conclusion is readily ascertainable, there is no need need for the jud judge ge to resort resort to exp expert ert opinion opinion evi eviden dence. ce. In the case under consideration, the testimonies of the fire experts were not the only available evidence on the probable cause and origin of the fire. There were witnesses who were actually on board the vessel whe when n the fire occurred. occurred. Between the testi testimonies monies of the fire exp expert erts s who mere merely ly based based their their fin findin dings gs and opinio opinions ns on int interv erview iews s and the testimonies of those present during the fire, the latter are of more probative value.
4. YES - Petitioner contends that Prudential is not entitled to be subrogated to the rights of William Lines, Inc., theorizing that (1) the fire which gutted M/V Manila City was an excluded risk and (2) it is a co-assured under the Marine Hull Insurance Policy. - It is petitioner’s submission that the loss of M/V Manila City or damage thereto is expressly excluded from the coverage of the insurance because the same resulted from “want of due diligence diligence by the Assured, Assured, Owners or Managers” Managers” which is not included in the risks insured against. Again, this theory of petitioner is bereft of any factual or legal basis. It proceeds from a wrong premise that the fire which gutted subject vessel was caused by the negligence of the employees of William Lines, Inc.
- This theory petitioner is devoid merit. Clause 20 of theinsurance Work Order in question is of clear in the sense thatof it sustainable requires William Lines to maintain on the vessel during the period of dry-docking or repair. Concededly, such a stipulation stipulation works to the benefi benefitt of CSEW as the shipre shiprepaire pairer. r. However, the fact that CSEW benefits from the said stipulation does not automatically make it as a co-assured of William Lines. The intention of the parties to make each other a co-assured under an insurance policy is to be gleaned principally from the insurance contract or policy itself and not from any other contract or agreement because the insurance policy denominates denomi nates the assur assured ed and the beneficia beneficiaries ries of the insurance insurance.. The hull and machinery machin ery insurance procure procured d by William Lines, Inc. from Pruden Prudential tial named only “William Lines, Inc.” as the assured. assured. There was no manifestation of any intention of William William Lines, Inc. to constit constitute ute CSEW as a co-ass co-assured ured under subj subject ect policy policy.. It is axiomatic that when the terms of a contract are clear its stipulations control. i] Thus, when the insurance policy involved named only William Lines, Inc. as the assured thereunder, the claim of CSEW that it is a co-assured is unfounded. - Then too, in the Additional Perils Clause of the same Marine Insurance Policy, it is provided that: Subject to the conditions of this Policy, this insurance also covers loss of or damage to vessel directly caused by the following: xxx Negligence of Charterers and/or Repairers, provided such Charterers and/or Repairers are not an Assured hereunder. - As correct correctly ly pointe pointed d out by respondent Prudentia Prudential, l, if CSEW were deemed a coass assure ured d under under the policy, policy, it would would nullif nullify y any claim of Wil Willia liam m Lines, Lines, Inc. fro from m Prudential for any loss or damage caused by the negligence of CSEW. Certainly, no shipowner would agree to make a shiprepairer a co-assured under such insurance policy; otherwise, any claim for loss or damage under the policy would be invalidated. Such result could not have been intended by William Lines, Inc. 5. NO
To repeat, the issue of Upon who between the parties negligent hasiam already resolved resol ved against CSEW. proof of payment by was Prudential Pruden tial to William Will Lines, been Inc., the former was subrogated to the right of the latter to indemnification indemnification from CSEW. As aptly ruled by the Court of Appeals, the law on the matter is succinct and clear, to wit: - Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing causing the loss or injury. - Thus, Thus, when when Pruden Prudentia tial, l, after after due verif verifica icatio tion n of the merit and valid validity ity of the insurance claim of William Lines, Inc., paid the latter the total amount covered by its insurance policy, it was subrogated to the right of the latter to recover the insured loss from the liable party, CSEW.
-valid Although in as this jurisdiction, of adhesion consistently upheld as per se; binding as an contracts ordinary contract, the have Courtbeen recognizes instances when relian reliance ce on such such contra contracts cts cannot cannot be favore favored d esp especi eciall ally y where where the facts facts and circumstances warrant that subject stipulations be disregarded. Thus, in ruling on the validity and applicability of the stipulation limiting limiting the liability of CSEW for negligence to P1M only, the facts and circumstances vis-a-vis the nature of the provision sought to be enforced should be considered, bearing in mind the principles of equity and fair play. - It is worth worthy y to note that M/V Manila City was insure insured d with Prudenti Prudential al for P45M. To determine the validity and sustainability of the claim of William Lines, Inc., for a total loss, Prudential conducted its own inquiry. Upon thorough investigation by its hull surveyor, M/V Manila City was found to be beyond economical salvage and repair. The evaluation of the average adjuster also reported a constructive total loss. The said claim of William Lines, Inc., was then found to be valid and compensable such that Prudential paid the latter the total value of its insurance claim. Furthermore, it was
- Petitioner theorizes further that there can be no right of subrogation as it is deemed a co-assured under the subject insurance policy. To buttress its stance that it is a coassured, petitioner placed reliance on Clause 20 of the Work Order which states:
ascertained that the replacement cost of the vessel (the price of a vessel similar to M/V Manila City), amounts to P55M. - Considering the aforestated circumstances, let alone the fact that negligence on the part of petitioner petitioner has been sufficientl sufficiently y proven, it would indeed indeed be unfair and
iNsuRanCe
A2010
Dean Carale
pAgE 7 inequitable to limit the liability of petitioner to One Million Pesos only. As aptly held by the trial court, “it is rather unconscionable if not overstrained.” To allow CSEW to limit its liability to P1M notwithstanding the fact that the total loss suffered by the assured and paid for by Prudential amounted to P45M would sanction the exercise of a degree of diligence short of what is ordinarily required because, then, it would not be difficult
"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 or properties prope rties consist consisting ing of stocks in trade, goods in process process and/or invent inventories ories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed on this policy pursuant to Section 50 of
for petitioner to escape liability by or theloss simple expedient of paying much lower than the actual damage suffered by William Lines, an Inc.amount very Disposition Petition is DENIED. Resolution of the CA is AFFIRMED.
the Insurance by under or on behalf of the Company before the occurrence ofhowever, any loss or damage, allCode, benefits this policy shall be deemed forfeited, provided that this condition shall not apply when the total insurance or insurances in force at the time of loss or damage is not more than P200,000.00." Petitioner’s comments > Petitioners contend that they are not to be blamed for the omissions, alleging that insurance agent Leon Alvarez (for Western) and Yap Kam Chuan (for Reliance and Equitable) Equit able) knew about the exist existence ence of the additiona additionall insur insurance ance coverage and that they were not informed about the requirement that such other or additional insurance should be stated in the policy, as they have not even read said policies.
NEW LIFE ENTERPRISES V CA 207 SCRA 669 REGALADO; March 31, 1992 NATURE Appeal by certiorari FACTS - The antecedents of this case show that Julian Sy and Jose Sy Bang have formed a business partnership in the City of Lucena. Under the business name of New Life Enterprises, the partnership engaged in the sale of construction materials at its place of business, a two storey building situated at Iyam, Lucena City. The facts show that Julian Sy insured the stocks in trade of New Life Enterprises with Western Guaranty Corpor Corporati ation, on, Relian Reliance ce Sur Surety ety and Ins Insura urance nce Co. Inc Inc., ., and Equ Equita itable ble Ins Insura urance nce Corporation. - On May 15, 1981, Western Guaranty Corporation issued Fire Insurance Policy No. 37201 in the amount of P350,000.00. This policy was renewed on May 13, 1982. - On July 30, 1981, Reliance Reliance Surety and Insu Insurance rance Co., Co., Inc. issued Fire Insurance Insurance Policy No. 69135 in the amount of P300,000.00 (Renewed under Renewal Certificate No. 41997). An additional insurance was issued by the same company on November 12, 1981 under Fire Insurance Policy No. 71547 in the amount of P700,000.00. - On February 8, 1982, Equitable Insurance Corporation Corporation issued Fire Insurance Policy Policy No. 39328 in the amount of P200,000.00. - Thus when the building occupied by the New Life Enterprises was gutted by fire at
about 2:00 o'clock in the morning of October 19, 1982, the stocks in trade inside said building were insured against fire in the total amount of P1,550,000.00. According to the certificat certification ion issued issued by the Headq Headquarter uarters, s, Phili Philippine ppine Const Constabular abulary/Inte y/Integrate grated d National Police, Camp Crame, the cause of fire was electrical in nature. According to the plaintiffs, the building and the stocks inside were burned. After the fire, Julian Sy went to the agent of Reliance Insurance whom he asked to accompany him to the office of the company so that he can file his claim. He averred that in support of his claim, he submitted the fire clearance, the insurance policies and inventory of stocks. He further testified that the three insurance companies are sister companies, and as a matter of fact when he was following-up his claim with Equitable Insurance, the Claims Manager told him to go first to Reliance Insurance and if said company agrees to pay, they would also pay. The same treatment was given him by the other insurance companies. compani es. Ultimately, Ultimately, the three insuranc insurance e compani companies es denie denied d plaintiff plaintiffs' s' claim for payment. Respondent’s comments > Western Guaranty Corporation through Claims Manager Bernard S. Razon told the plaintiff that his claim 'is denied for breach of policy conditions.' Reliance Insurance purveyed the same message as well as Equitable Insurance Corporation. - The said policy in question follows:
ISSUE WON New Life Enterprises’ claim for payment be denied HELD YES Ratio Furthermore, when the words and language of documents are clear and plain or readily understandable by an ordinary reader thereof, there is absolutely no room for interpretation or construction anymore. Courts are not allowed to make contracts for the parties; parties; rathe rather, r, they they will will int interv ervene ene only whe when n the terms of the polic policy y are ambiguous, ambigu ous, equivocal equivocal,, or uncertai uncertain. n. The part parties ies must abi abide de by the terms of the contract contr act because such terms constit constitute ute the measur measure e of the insurer' insurer's s liabi liability lity and compliance therewith is a condition precedent to the insured's right of recovery from the insurer. - While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer company, compan y, yet contracts contracts of insur insurance, ance, like other contra contracts, cts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in
their plain, ordinary popular Moreover, obligations arising from contracts have the force of lawand between thesense. contracting parties and should be complied with in good faith. Reasoning a. The terms of the cont contract ract are clear and unambiguous. The insured is specifically required requi red to discl disclose ose to the insurer any other insura insurance nce and its particul particulars ars which he may have effected on the same subject matter. The knowledge of such insurance by the insurer's agents, even assuming the acquisition thereof by the former, is not the "notice" that would stop the insurers from denying the claim. Besides, the so-called theory of imputed knowledge, that is, knowledge of the agent is knowledge of the principal, aside from being of dubious applicability here has likewise been roundly refuted by respondent court whose factual findings we find acceptable. b. Petitioners should be aware of the fact that a party is not reliev relieved ed of the duty to exercise exerc ise the ordina ordinary ry care and prudence that would be exacted exacted in relat relation ion to other contracts. The conformity of the insured to the terms of the policy is implied from his failure to express any disagreement with what is provided for.
iNsuRanCe
A2010
Dean Carale
pAgE 8 FIRS FIRST T
QU QUEZ EZON ON CI CITY TY INSU INSURA RANC NCE E MARIKINA TRANSPORT CO) 218 SCRA 526 GRINO-AQUINO; February 28, 1993
CO CO..
v.
CA
(DE (DE
DI DIOS OS
NATURE PETITION for review of the decision of the Court of Appeals. FQCIC seeks to limit to P12000, the amount specified in the insurance contract, it’s liability to indemnify the respomdemt DMTC, for the damages suffered by a passenger, who accidentally fell off the bug. FACTS - After sending off certain seamen at the departure area of MIA, Jose V. del Rosario proceeded to the public utility bus stop. While at the bus stop, the plaintiff saw a DMTC bus. While moving at a crawling pace, it was taking several passengers, all of whom managed to board the bus while it was already at the bus stop; plaintiff was the last one to board the bus. While the plaintiff was still on the bus with his hand on the bus door, the slowly moving bus sped forward at a high speed, as a result of which, the plaintiff lost balance and fell from the bus. As plaintiff clung instinctively to the handle bar, he was dragged by the bus along the asphalted road. The bus driver, Gil Agpalo, abruptly stopped the bus. Then fled from the scene, leaving the bus and the injured plaintiff behind. - The plaintiff was brought to the Manila Sanitarium and Hospital where the doctors performed 2 major surgical operations on plaintiffs right leg. - Plaintiff was confined at the hospital for (40) days, from June 10, 1984 to August 26, 198 1984. 4. Medi Medical cal exp expens enses es tot totale aled d the amount amount of P69,44 P69,444.41 4.41.. Plaint Plaintiff iff’s ’s medical medical expenses were advanced by his employer Maglines but he was required to reimburse Maglines on a staggered basis by way of salary deductions. After his release from the hospital, he returned to the hospital for further treatment and checkup. The injuries had left plaintiff with a huge scar on his right leg. Also, the plaintiff incurred lost earning by way of unearned salaries amounting to P7,500.00 due to said physical injuries and the consequent hospital confinement.
HELD YES - The insurance policy clearly placed the maximum limit of the petitioner's liability for damages arising from death or bodily injury at P12,000.00 per passenger and its
maximum liability per accidentliability at (P50,000.00. Since only one passenger was injured in the accident, the insurer's for the damages suffered by said passenger is pegged to the amount of P12,000.00 only. - The limit of P50,000.00 per accident means that the insurer's maximum liability for any single accident accident will will not exceed exceed P50,00 P50,000.00 0.00 regard regardles less s of the number number of passengers killed or injured therein. The bus company may not recover from the insurance company more than P12,000.00 per passenger killed or injured, or (P50,000.00) per accident even if under the judgment judgment of the court court,, the errin erring g bus oper operato atorr will will have have to pay more than P12,000.00 to each injured passenger. The trial court's interpretation of the insurance contract was the correct interpretation. Dispositi Disp osition on petition for review is GRANTED. The decision promulgated by the CA, ordering the third party defendent, First Quezon City Insurance Co., Inc. to indemnify theI private private respondent, respondent, (DMTC) (DMTC),, the sum of P50,000.0 P50,000.00 0 for the damages of the passenger, Jose V. Del Rosario, is hereby modified by reducing the award to 12,000.00 only. Costs against the private respondent De Dios Marikina Transportation Co., Inc.
TY V FIRST NATIONAL SURETY 1 SCRA 1324 LABRADOR; April 29, 1961 FACTS - At differ different ent times with within in a per period iod of two months months pri prior or to 24 Decembe Decemberr 1953, 1953, Diosdado C. Ty, employed as operator mechanic foreman in the Broadway Cotton Factory insured himself in 18 local insurance companies, among which being the 8 above-named defendants, which issued to him personal accident policies. Plaintiff’s beneficiary was his employer, Broadway Cotton Factory, which paid the insurance premiums. premi ums. On 24 December 1953, a fire broke out which totally destro destroyed yed the
- Plaintiff filed on 26, defendant 1985 the complaint and its driver. was later dropped as June a party because against he couldDMTC not be served withAgpalo summons. Upon filing its answer, answer, defendant defendant DMTC filed a thirdp thirdparty arty complaint complaint against First Quezon City Insurance Co., Inc. September 17, 1985, third-party third-party defendant filed its answer to the third-party complaint. - TC held DMTC complaint dismissed for lack of merit and as regards the third-party complaint First Quezon City Insurance Co., Inc. was to indemnify third-party plaintiff DMTC in the sum of P12,000.00 with interest. There being no satisfactory warrant the court dismissed the rest of the claims in the complaint and third-party complaint. - The bus company appealed to the CA, which modified the dispositive as regards the third-party complaint, that the third-party defendant First Quezon City Insurance Co., Inc. be ordered to indemnify third-party plaintiff DMTC the SUM of P50,000.00 with legal interest. Insurance company filed a MFR which was denied. Hence, this petition for review, assailing the appellate courts' interpretation of the provision of the insurance contract on the limit of the insurer's liability.
Broadway Cotton Factory. hiswas way brought out of the plaintiff was University injured on the left hand by a heavy Fighting object. He to factory, the Manila Central hospital, and after receiving first-aid, he went to the National Orthopedic Hospital for treatment of his injuries (fractures in index, middle, fourth, and fifth fingers of left hand). From 26 December 1953 to 8 February 1954, he underwent medical treatment in the hospital. The above-described physical injuries have caused temporary total disability of plaintiff’s left hand. Plaintiff filed the corresponding notice of accident and not notice ice of claim claim with with all of the abo above-n ve-name amed d def defend endant ants s to recove recoverr ind indemni emnity. ty. Defendants rejected plaintiff’s claim for indemnity for the reason that there being no severance sever ance of amputa amputation tion of the left hand, the disab disabilit ility y suffe suffered red by him was not covered by his policy. - Plaintiff sued the defendants in the Municipality Court of this City, which dismissed his complaints. Thereafter, the plaintiff appealed to the Court of First Instance Manila, presided presi ded by Judge Gregorio S. Narvasa, Narvasa, which absolv absolved ed the defend defendants ants from the complaints. Hence, the appeal.
ISSUE WON the CA erred in the interpretation of the insurance contract on the limit of the insurer’s liability
ISSUE WON Diosdado Ty is entitled to indemnity under the insura insurance nce policy for the disability of his left hand
iNsuRanCe
A2010
Dean Carale
pAgE 9 HELD - The agreement contained in the insurance policies is the law between the parties. As the terms of the policie policies s are clear, express and specific that only amputation of the left hand should be considered as a loss thereof, an interpretation that would include
the mere be fracture or other In temporary nottocovered by the policies would certainly unwarranted. the case disability at bar, due the clarity of the stipulation, distinction between “temporary disability” and “total disability” need not be made in relation to one’s occupation means that the condition of the insurance is such that common prudence requires him to desist from transacting his business or renders him incapable of working. While the Court sympathizes with the plaintiff or his employer, for whose benefit the policies were issued, it can not go beyond the clear and express conditions of the insurance policies, all of which define partial disability as loss of either hand by a amputation through the bones of the wrist.” There was no such amputation in the case at bar. - The Supreme Court affirmed the appealed decision, with costs against the plaintiffappellant.
MISAMIS LUMBER V CAPITAL INSURANCE
17 SCRA 288 REYES; May 20, 1966 NATURE Direct appeal on a point of law from the judgment of the Court of First Instance of Manila FACTS - Misamis Misamis Lumber Corporation, Corporation, under its former name, Lanao Timber Mills, Inc., insured its Ford Falcon motor car for the amount of P14,000 with Capital Insurance & Surety Company, Inc. The pertinent provisions of the policy provided, as follows: 1. The Company will subject to the Limits of Liability indemnify the Insured against loss or damage to the Motor Vehicle and its accessories and spare parts whilst thereon.
2. (a) by accidental collision or overturning or collision or overturning consequent when mechanical breakdown or consequent upon wear and tear. 3. At its option, the Company may pay in cash the amount of the loss or damage or may repair repair,, reinst reinstate ate or replac replace e the Motor Veh Vehicl icle e or any part thereo thereoff or its accessories or spare parts. The liability of the Company shall not exceed the value of the parts lost or damaged and the reasonable cost of fitting such parts or the value of the Motor Vehicle at the time of the loss or damage whichever is the loss. The Insured's estimate of value stated in the schedule shall be the maximum amount payable by the Company in respect of any claim for loss or damage. 4. The Insure Insured d may autho authorize rize the repair of the Motor Vehicle necessitated necessitated by damage for which the Company may be liable under this policy provided that: (a) the estimated cost of such repair does not exceed the authorized Repair Limit. (b) a detailed estimate of the cost is forwarded to the Company without delay and providing also that the authorized repair limit is P150 .00. - One night, the insured car, while traveling along in Aurora Boulevard, passed over a water hole which the driver did not see because an oncoming car did not dim its light. The crankcase and flywheel housing of the car broke when it hit a hollow block lying alongside the water hole. The car was towed and repaired by Morosi Motors at a total cost of P302.27.
- When the repairs on the car had already been made, Misamis made a report of the accident to Capital Insurance. - Since Capital refused to pay for the total cost of to wage and repairs, suit was filed in the municipal court originally. - The defendant-appellant admits liability in the amount of P150, but not for any excess thereof. The lower court did not render exoner exonerate ate said appellant the excess because the company's absolution would the the insurance contract for one-sided and that the said insurer had not shown that the cost of repairs in the sum of P302.27 is unreasonable, excessive or padded, nor had it shown that it could have undertaken the repairs itself at less expense. ISSUE WON Capital Insurance can be made to pay more than P150 HELD NO - The insurance policy stipulated in paragraph 4 that if the insured authorizes the repair the liability of the insurer, per its sub-paragraph (a), is limited to P150.00. The literal meaning of this stipulation must control, it being the actual contract, expressly and plainly provided for in the policy. - Recourse to legal hermeneutics is not called for because paragraph 4 of the policy is clear and specific and leaves no room for interpretation. - The opti option on to under undertake take the repai repairs rs is accord accorded ed to the insuranc insurance e company per paragraph 2. The said company was deprived of the option because the insured took it upon itself to have the repairs made, and only notified the insurer when the repairs were done. As a consequence, paragraph 4, which limits the company's liability to P150.00, applies. - The insurance contract may be rather onerous ("one-sided", as the lower court put it), but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the contracting parties. - To require the insurer to prove that the cost of the repairs ordered by the insured is unreasonable, when the insurer was not given an opportunity to inspect and assess the damage before the repai repairs rs were made, is contr contrary ary to elementary elementary justice and
equity.
SUN INSURANCE OFFICE LTD. V CA (TAN) 195 SCRA 193 PARAS; March 13, 1991 NATURE Petition for certiorari to review the decision of the CA FACTS - Privat Private e respondent Emil Emilio io Tan took from the petit petitioner ioner a Peso 300,000 property 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 priva private te respo respondent ndent denying denying the claim. On April 3, 1984, priva private te respondent wrote another letter to the insurance company requesting reconsideration of the denial. Tan’s lawyer wrote another letter to the insurance company inquiring
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pAgE 10 about the April 3 letter which sought for a reconsideration of the denial. In its reply to the lawyer’s letter, Sun Insurance Insurance reiterat reiterated ed its denial of the claim and enclosed enclosed therein copies of the two previous denials dated February 29, 1984 and May 17, 1985. - On November 20, 1985, Tan filed a civil civil case with the RTC. Petition filed a motion to dismiss dismis s on the alleged ground that the action has already already prescribe prescribed d based on
head office in Makati under under the custody of its teller, Maribeth Alampay. The armored car was dri driven ven by Benjam Benjamin in Mag Magalo along ng Y de Vera, Vera, escort escorted ed by Sec Securi urity ty Guard Guard Saturn Saturnino ino Atiga Atiga Y Rosete Rosete.. Driver Driver Mag Magalo along ng was ass assign igned ed by PRC Manage Managemen mentt Systems. - After an investigation by the Pasay police, driver Magalong and guard Atiga were
Condit Con dition ion 27 of the Insur ance e Policy Pol icy which stated that fil file e the appropriate action withInsuranc either the Insurance Commission or inthe anywindow court of to 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.
charged, together Law) with Batigue , Aquino and John Doe, with violation of P.D. 532 (AntiHighway Robbery - Demands were made by the Producers upon the Fortune to pay the amount of the loss of P725,000.00 but the latter refused to pay as the loss is excluded from the coverage of the insurance policy specifically under "G eneral Exceptions" > The company shall not be liable under this policy in respect of x x x (b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee or authorized representative of the Insured whether acting alone or in c onjunction with others. - Fortune opposes the contention of Producers that Atiga and Magalong are not its "officer, employee, x x x trustee or authorized representative x x x at the time of the robbery - Trial Court > On being “EMPLOYEES” Magalong Magal ong and Atiga were not employees or repres representat entatives ives of Produ Producers cers as their services as armored car driver and as security guard having been merely offered by PRC Management and by Unicorn Security and which latter firms assigned them to plaintiff. The wages and salaries of both Magalong and Ati Atiga ga are presumably paid by their respective firms, which alone wields the power to dismiss them > On being “AUTHORIZED REPRESENTATIVE” They were merely an assigned armored car driver and security guard for the money transfer. It was teller Maribeth Alampay who had "custody" of the P725,000.00 cash being transferred along a specified money route - Court of Appeals > affirmed in toto > A policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurance company (New Life Enterprises vs. Court of Appeals; Sun Insurance Office, Ltd. vs. Court of Appeals). Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which
ISSUE 1. WON the court the filing of a motion for reconsideration interrupts the 12 months prescription period to contest the denial of the insurance claim 2. WON the rejection of the claim shall be deemed final only if it contains words to the effect that the denial is final
HELD 1. 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 reconsideration of the denial cannot suspend suspend the running running of the prescriptive 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. 2. NO - The Court clarified its ruling in Eagle Star Insurance Co. vs Chia Yu where it ruled that “the cause of action in an insurance contract does not accrue until the Insured’s claim is finally rejected by the Insurer” by stating the use of the word “finally” cannot be
constr construed ued mean isthe a petit petition for reconsidera recons ideration. tion. What the court referred to to in effect therejection rejection of in the firstion instance as claimed by Sun Insurance Disposition The decision of the CA is reversed and set aside. The case is dismissed
FORTUNE INSURANCE AND SURETY (PRODUCERS BANK OF THE PHILIPPINES) 244 SCRA 308 DAVIDE; May 23, 1995
CO.
INC.V
CA
NATURE Petition for Review on certiorari of CA decision FACTS -Surety Producers Produc ers Inc. Bank the Philippines Philippi nes filed a complaint compla Fortune and Co., forofrecovery of P725,000.00 under int theagainst policy issued byInsurance Fortune. The sum was allegedly allegedly lost on June 29, 1987 during during a robbe robbery ry of Producer's Producer's armored vehicle while it was in transit to transfer the money from its Pasay City Branch to its
the themselves have used. If such terms are clear and unambiguous, mustparties be taken and understood in their plain, ordinary and popular sense (Newthey Life Enterprises Case; Sun Insurance Office). > The language used by Fortune in the policy is plain, ordinary and simple. No other interpretation is necessary. The word "employee" should be taken to mean in the ordina ordinary ry sense. sense. The Labor Code is a specia speciall law specific specificall ally y dea dealin ling g with/a with/and nd specifical speci fically ly designed designed to prote protect ct labor and theref therefore ore its definition definition as to employeremployee emplo yee relat relationsh ionships ips insofar as the appli applicatio cation/enfo n/enforcemen rcementt of said Code is concerned must necessarily be inapplicable to an insurance contract. Had it intended to apply the Labor Code in defining what the word "employee" refers to, it must/ should shoul d have so state stated d expressly in the insuranc insurance e policy. Said driver driver and securi security ty guard cannot be considered as employees of Producers bank because it has no power to hire or to dismiss said driver and security guard under the contracts except only to ask for their replacements from the contractors. - Fortune’s Contention > when Producers commissioned a guard and a driver to transfer its funds from one bra branch nch to anothe another, r, they they effect effective ively ly and nece necessa ssaril rily y bec became ame its author authorize ized d representatives in the care and custody of the money. Assuming that they could not be consi considered dered authorized representative representatives, s, they were, nevert nevertheless heless,, emplo employees yees of
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pAgE 11 Producers. It asserts Producers. asserts that the existence existence of an employer-emp employer-employee loyee relation relationship ship "is determined by law and being such, it cannot be the subject of agreement." Thus, if there was in reality an employer-employee relationship between Producers, on the one hand, and Magalong and Atiga, on the other, the provisions in the contracts of Producers Produc ers with PRC Management System for Magal Magalong ong and with Unicorn Security Security
HELD NO Ratio A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the insurer, or it should be construed liberally in favor of
Services Servi ces for Atiga which state Producers Produc ers isnot not their employer emplo yer and that it is absolved from any liability as an that employer, would obliterate the relationship. > an employer-employee relationship depends upon four standards: (1) the manner of selection and engagement of the putative employee (2) the mode of payment of wages (3) the presence or absence of a power to dismiss and (4) the presence and absence of a power to control the putative employee's conduct. > Of the four, the right-of-control test has been held to be the decisive factor. It ass assert erts s that that the power of contro controll ove overr Magalo Magalong ng and Atiga was ves vested ted in and exercised by Producers. Fortune further insists that PRC Management System and Unicorn Security Services are but "labor-only" contractors under Article 106 of the Labor Code which provides: Art. 106. Contractor or subcontractor. - There is "labor-only" contracting where the person perso n supplying supplying workers to an employer does not have substant substantial ial capital or investment in the form of tools, equipment, machineries, work premises, among others,, and the workers recruited and placed by such persons are performi others performing ng activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. > International Timber Corp. vs. NLRC - a "labor-only" contractor is equivalent to a finding that there is an employer-employee relationship between the owner of the project and the employee of the "labor-only" contractor - Producer’s Contention > Magalong and Atiga were not its employees since it had nothing to do with their selection selec tion and engage engagement, ment, the payment of their wages, their dismissal, dismissal, and the control of their conduct. > International Timber Corp. is not applicable to all cases but only when it becomes necessary necess ary to preven preventt any violation violation or circumvention circumvention of the Labor Code, a social
the and strictlyand against insurer. Limitations of liability should be regarded withinsured extreme jealousy must the be construed in such a way as to preclude the insurer from non-compliance with its obligation. It goes without saying then that if the terms of the contract are clear and unambiguous, there is no room for construction and such terms cannot be enlarged or diminished by judicial construction. - An insurance contract is a contract of indemnity upon the terms and conditions specified therein. It is settled that the terms of the policy constitute the measure of the insurer's liability. In the absence of statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever whate ver condi conditions tions they deem best upon their oblig obligation ations s not inconsist inconsistent ent with public policy. Reasoning - It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance policy which is a form of casualty insurance. Section 174 of the Insurance Code provides: Sec. 174. Casua Casualty lty insurance is insur insurance ance covering loss or liabi liability lity arising from accident or mishap, excluding certain types of loss which by law or custom are considered consi dered as failing failing exclusivel exclusively y within within the scope of insurance such as fire or marine.. It includes, but is not limit marine limited ed to, employer' employer's s liabi liability lity insurance, insurance, public liability insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal accident and health insurance as written by non-life insurance insur ance compan companies, ies, and other substanti substantially ally simil similar ar kinds of insurance. insurance. (italics supplied) - Except with respect to compulsory motor vehicle liability insurance, the Insurance Code contains no other provis provisions ions applicable applicable to casualty insuranc insurance e or to robbery robbery insurance insur ance in parti particular cular.. These contract contracts s are, therefore therefore,, gover governed ned by the general provisions provi sions applicable applicable to all types of insur insurance. ance. Outsid Outside e of these, the right rights s and obligations of the parties must be determined by the terms of their contract, taking into consideration its purpose and always in accordance with the general principles of
legislation whose provisions mayman. set aside contracts entered into by parties in order to give protection to the working > American President Lines vs. Clave should be applied which stated In deter determining mining the existence existence of employer-empl employer-employee oyee relat relationsh ionship, ip, the following following elements elemen ts are generally generally considered, considered, namely: (1) the selection selection and engagement engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. - Since under Producers' contract with PRC Management Systems it is the latter which assigned Magalong as the driver of Producers' armored car and was responsible for his faithful faith ful discharge of his duties and responsibiliti responsibilities, es, and since Producers Producers paid the monthly compensation of P1,400.00 per driver to PRC Management Systems and not to Magalong, it is clear that Magalong was not Producers' employee. As to Atiga, Producers relies on the provision of its contract with Unicorn Security Services which provides that the guards of the latter "are in no sense employees of the CLIENT."
-insurance With the law. foregoing principles in mind, it may now be asked whether Magalong and Atiga qualify as employees or authorized representatives has been aptly observed that in burglary, robbery, and theft insurance, "the opportunity to defraud the insurer the moral hazard - is so great that insurers have found it necessary to fill up their policies with countless restrictions, many designed to reduce this hazard. Seldom does the insurer assume the risk of all losses due to the hazards insured against." Persons frequently frequ ently excluded under such provi provisions sions are those in the insur insured's ed's service and employment. The purpose of the exception is to guard against liability should the theft be committed by one having unrestricted access to the property. In such cases, the terms specifying the excluded classes are to be given their meaning as understood in common speech. The terms "service" and "employment" are generally associated with the idea of selection, control, and compensation. - There is marked disagreement between the parties on the correct meaning of the terms "employee" and "authorized representatives." It is clear to us that insofar as Fortune is concerned, it was its intention to exclude and exempt from protection and coverage losses arising from dishonest, fraudulent, or criminal acts of persons granted or having unrestricted access to Producers' money or payroll. When it used then the term "employee," it must have had in mind any person
ISSUE WON Fortune Insurance and Surety Co. Inc. is liable under the Money, Security, and Payroll Robbery policy it issued to Producers Bank of the Philippines or WON recovery is precluded under the general exceptions clause of the policy
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pAgE 12 who qualifies as such as generally and universally understood, or jurisprudentially established establ ished in the light of the four standards standards in the determination determination of the employeremployee relationship or as statutorily declared even in a limited sense as in the case of Article 106 of the Labor Code which considers the employees under a "labor-only" contract contra ct as employees employees of the party employing employing the them m and not of the party who
HELD 1. NO he parties, Verendia is deemed Ratio As the insurance contract is the law between tthe to have forfeited his right to claim by the misrepresentation he made. Reasoning
supplied them to the employer. - But even granting for the sake of argument that these contracts were not "laboronly" contracts, and PRC Management Systems and Unicorn Security Services were truly independent independent contractors, contractors, we are satisfied that Magalong and Atiga were, in respect of the transfer of Producer's money from its Pasay City branch to its head office in Makati, its "authorized representatives" who served as such with its teller Maribeth Alampay. Howsoever viewed, Producers entrusted the three with the specific duty to safely transfer the money to its head office, with Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the needed security for the money, the vehicle, and his two other companions. In short, for these particular tasks, the three acted as agents of Producers. A "representative" is defined as one who represents or stands in the place of another; one who represents others or another in a special capacity, as an agent, and is interchangeable with "agent." instant nt petition is hereby hereby GRANTED. GRANTED. CA decisi decision on and RTC Makati Disposition insta decision are REVERSED and SET ASIDE. Civil Case is DISMISSED.
- the court reviewed the factual findings of the courts below, since it appears that there was a misapprehension of the facts by the CA. - Verendia is found to have concocted the lease contract to deflect responsibility for the fire towards an alleged lessee, even making it appear that the alleged lessee had disappeared, inflated the value of the property, and insured same property with two other companies. - An insura insurance nce contract is the law betwe between en the parti parties, es, its terms and conditi conditions ons constitute const itute the measure of the insurer’s liabil liability ity and compli compliance ance therewith therewith is a condition precedent to the insured’s right to recovery from the insurer. - As it is also a contract of adhesi adhesion, on, an insur insurance ance contrac contractt should be liber liberally ally construed const rued in favor of the insured and stric strictly tly against the insur insurer er company which usually prepares it. - Considering, however, the fact that Verendia used a false lease contract to support his claim, the terms of the policy should be strictly strictly construed again against st the insur insured. ed. Verendia failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits under the policy shall be forfeited “If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy”. polic y”. Verendia, having presented a false declara declaration tion to suppo support rt his claim for benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision. Worse yet, by presenting a false lease contract, Verendia reprehensibly disregarded disre garded the princ principle iple that insur insurance ance contract contracts s are uberrimae fidae fidae and demand the most abundant good faith. Disposition Decision of CA reversed, and that of RTC is reinstated.
VERENDIA V CA (FIDELITY & SURETY CO. OF THE PHILS) 217 SCRA 417 MELO; January 22, 1993 NATURE Petition to review decision of the CA FACTS - Fidelity Co. issued a Fire Insurance Policy covering Verendia’s residential building in the amount of P385k. P385k. Verend Verendia ia also also ins insure ured d the same bui buildi lding ng with with two other companies compani es (Coun (Country try Bankers Insurance Insurance for P56k, and Development Development Insurance for
P400k). - While all 3 policies were in force, the insured property was completely destroyed by fire. Verendia filed a claim against Fidelity, but the latter refused payment, thus a complaint was filed in the RTC. Fidelity’s reason for refusal: the policy was avoided by reason of over-insurance, and that Verendia maliciously represented that the building was under lease to a Roberto Garcia, when it was actually a Marcelo Garcia who was the lessee. - RTC: policy was violated by Verendia when it failed to inform Fidelity of his other insurance coverages, thus no need to pay. - CA: reversed decision ISSUE (There (Ther e is a proce procedural dural issue involved involved here, but is irrelevant irrelevant to our discussion. discussion. It conc concer erns ns the the fi fili ling ng of a mo moti tion on for for exte extens nsio ion n of time time to fi file le a moti motion on fo forr reconsideration, where the court said that although it now prohibits filing of such motion, the instant motion was filed before the effectivity of this rule, thus allowing the adjudication of the case) WON Fidelity was liable to pay Verendia considering the circumstances
FIELDMEN'S INSURANCE CO. INC V VDA. DE SONGCO 25 SCRA 20 FERNANDO; 1968 FACTS - An insurance firm, petitioner Fieldmen's Insurance Co., Inc., was not allowed to escape liability under a common carrier insurance policy on the pretext that what was insured, not once but twice, was a private vehicle and not a common carrier, the policy polic y being issue issued d upon the insiste insistence nce of its agent who disco discounted unted fears of the insured insur ed that his privately owned vehicle might not fall within its terms terms,, the insured moreover moreov er being "a man of scant education," education," finish finishing ing only the first grade. So it was held in a decisi decision on of the lower court thereafter thereafter affirmed by respo respondent ndent Court of Appeals. Petitioner in seeking the review of the above decision of respondent Court of Appeals cannot be so sanguine as to entertain the belief that a different outcome could be expected. To be more explicit, we sustain the Court of Appeals. - The facts as found by respondent Court of Appeals, binding upon us, follow: "This is a peculiar case. Federico Songco of Floridablanca, Pampanga, a man of scant education
being only a first grader ..., owned a private jeepney with Plate No. 41-289 for the year 1960. On September 15, 1960, as such private vehicle owner, he was induced by Fieldmen's Field men's Insuranc Insurance e Compan Company y Pampang Pampanga a agent Benjamin Sambat to apply for a Common Carrier's Liability Insurance Policy covering his motor vehicle ... Upon paying
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pAgE 13 an annual premium of P16.50, defendant Fieldmen's Insurance Company, Inc. issued on September 19, 1960, Common Carriers Accident Accident Insurance Policy No. 45-HO4254 ... the duration of which will be for one (1) year, effective September 15, 1960 to September 15, 1961. On September 22, 1961, the defendant company, upon payment of the corresponding premium, renewed the policy by extending the coverage from
the policy 5 was inescapable was set forth in the decision of respondent Court of Appeals. Thus: "Since some of the conditions contained in the policy issued by the defendant-appellant were impossible to comply with under the existing conditions at the time and 'inco 'inconsist nsistent ent with the known facts,' the insurer 'is estopped from asserting breach of such conditions.' From this jurisprudence, we find no valid reason
October 15, 1961 to October 15, 1962. This time Federico Songco's private jeepney carrie carried d Plate Plate No. J-68136 J-68136-Pam -Pampan pangaga-196 1961. 1. ... On Octobe Octoberr 29, 196 1961, 1, dur during ing the effectivity effect ivity of the renewed policy, the insured insured vehic vehicle le while being driven by Rodol Rodolfo fo Songco, a duly licensed driver and son of Federico (the vehicle owner) collided with a car in the municipality of Calumpit, province of Bulacan, as a result of which mishap Federico Songco (father) and Rodolfo Songco (son) died, Carlos Songco (another son), the latter's wife, Angelita Songco, and a family friend by the name of Jose Manuel sustained physical injuries of varying degree." 1 - It was further shown according to the decision of respondent Court of Appeals: "Amor Songco, 42-year-old son of deceased Federico Songco, testifying as witness, declared that when insurance agent Benjamin Sambat was inducing his father to insure his vehicle, he butted in saying: 'That cannot be, Mr. Sambat, because our vehicle is an "owner"" privat "owner private e vehicle vehicle and not for passengers,' passengers,' to which agent Sambat replied: 'whether 'whet her our vehic vehicle le was an "owner" type or for passengers passengers it could be insured because their company is not owned by the Government and the Government has nothing to do with their company. So they could do what they please whenever they believe a vehicle is insurable' ... In spite of the fact that the present case was filed and tried in the CFI of Pampanga, the defendant company did not even care to rebut Amor Songco's Songco 's testimony by calling calling on the witness-sta witness-stand nd agent Benjami Benjamin n Sambat, Sambat, its Pampanga Field Representative." 2 - The plaintiffs in the lower court, likewise respondents here, were the surviving widow and children of the deceased Federico Songco as well as the injured passenger Jose Manuel. On the above facts they prevailed, as had been mentioned, in the lower court and in the respondent Court of Appeals.1awphîl.nèt Appeals.1awphîl.nèt - The basis for the favorable judgment is the doctrine announced in Qua Chee Gan v. Law Union and Rock Insurance Co., Ltd., Ltd. , 3 with Justice J. B. L. Reyes speaking for the Court. It is now beyond question that where inequitable conduct is shown by an insurance insur ance firm, it is "estopped from enforcing forfeitures forfeitures in its favor, in order to forestall fraud or imposition on the insured." 4
to deviate and consequently hold that the decision appealed from should be affirmed. The injured parties, to wit, Carlos Songco, Angelito Songco and J ose Manuel, for whose hospital and medical expenses the defendant company was being made liable, were passengers of the jeepney at the time of the occurrence, and Rodolfo Songco, for whose burial burial expen expenses ses the defend defendant ant company was also being made liable was the driver of the vehicle in question. Except for the fact, that they were not fare paying passengers, their status as beneficiaries under the policy is recognized therein." 6 - Even if it be assumed that there was an ambiguity, an excerpt from the Qua Chee Gan Gan decisi decision on would reveal anew the weakne weakness ss of petitione petitioner's r's contentio contention. n. Thus: "Moreover, taking into account the well known rule that ambiguities or obscurities mustt be str mus strict ictly ly int interp erpret reted ed agains againstt the party that that caused caused them, the 'memo of warranty' invoked by appellant bars the latter from questioning the existence of the applia appliance nces s called called for in the ins insure ured d pre premis mises, es, since since its ini initia tiall exp expres ressio sion, n, 'the 'the undernoted appliances for the extinction of fire being fire being kept on the premises insured hereby , ... it is hereby warranted ...,' admits of interpretation as an admission of the existence of such appliances which appellant cannot now contradict, should the parol evidence rule apply." 7 - To the same effect is the following citation from the same leading case: "This rigid applicatio appli cation n of the rule on ambiguit ambiguities ies has become necessa necessary ry in view of current current business practices. The courts cannot ignore that nowadays monopolies, cartels and concentration of capital, endowed with overwhelming economic power, manage to impose impos e upon parties dealing with them cunningl cunningly y prepar prepared ed 'agreements 'agreements'' that the weaker party may not change one whit, his participation in the 'agreement' being reduced reduc ed to the alternat alternative ive to 'take it or leave it' labelle labelled d since Raymon Raymond d Saleilles 'contracts by adherence' (contrats (contrats d'adhesion), d'adhesion), in contrast to those entered into by parties bargaining on an equal footing, such contracts (of which policies of insurance and international international bills of ladin lading g are prime exampl examples) es) obviously call for greate greaterr strictness and vigilance on the part of courts of justice with a view to protecting the weaker party from abuses and imposition, and prevent their becoming traps for the
- As doctrine much, if not much more so than the Gan decision, Gan decision, this is a case where the of estoppel undeniably callsQua for Chee application. After petitioner Fieldmen's Insurance Insura nce Co., Inc. had led the insured Federico Federico Songco to belie believe ve that he could qualify under the common carrier liability insurance policy, and to enter into contract of insurance paying the premiums due, it could not, thereafter, in any litigation arising out of such representation, be permitted to change its stand to the detriment of the heirs of the insured. As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall the innocent party due to its injurious reliance, the failure to apply it in this case would result in a gross travesty of justice. - That is all that needs be said insofar as the first alleged error of respondent Court of Appeals is concerned, petitioner being adamant in its far-from-reasonable plea that estoppel could not be invoked by the heirs of the insured as a bar to the alleged breach of warranty and condition in the policy. lt would now rely on the fact that the insured owned a private vehicle, not a common carrier, something which it knew all along when not once but twice its agent, no doubt without any objection in its part, exerted the utmost pressure on the insured, a man of scant education, to enter into such a contract. - Nor is there any merit to the second alleged error of respondent Court that no legal liability was incurred under the policy by petitioner. Why liability under the terms of
8 Code. Article 24; Sent. of Supreme Court of Spain, 13 Dec. 1934, 27 unwary Civil February(New 1942)." - The last error assigned which would find fault with the decision of respondent Court of Appeals insofar as it affirmed the lower court award for exemplary damages as well as attorney's fees is, on its face, of no persuasive force at all. - The conclusion that inescapably emerges from the above is the correctness of the decision of respondent Court of Appeals sought to be reviewed. For, to borrow once again from the language of the Qua Chee Gan opinion: "The contract of insurance is one of perfect good faith (uberima ( uberima fides) fides) not for the insured alone,but equally so for the insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility." 9 - This is merely to stress that while the morality of the business world is not the morality of institutions of rectitude like the pulpit and the academe, it cannot descend so low as to be another name for guile or deception. Moreover, should it happen thus, no court of justice should allow itself to lend its approval and support.1awphîl.nèt support. 1awphîl.nèt - We have no choice choice but to recognize the monetary respo responsibil nsibility ity of petit petitioner ioner Fieldmen's Field men's Insura Insurance nce Co., Inc. It did not succeed in its persist persistent ent effort to avoid complying with its obligation in the lower court and the Court of Appeals. Much less
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pAgE 14 should it find any receptivity should receptivity from us for its unwarrant unwarranted ed and unjustified unjustified plea to escape from its liability.
MALAYAN INSURANCE CORP. V CA (TKC MARKETING CORP.) 270 SCRA 242 ROMERO; March 20, 1997
proferentum. Risk policies should be construed reasonably and in a manner as to make effective the intentions and expectations of the parties. - the policies clearly stipulate that they cover the risks of non-delivery of an entire package and that it was petitioner itself that invited and granted the extensions and collected premiums thereon.
NATURE Petition for review on certiorari
ISSUES 1. WON the arres arrestt of the vessel was a risk covere covered d under the subje subject ct insuranc insurance e policies 2. WON insurance policies should be strictly construed against the insurer
FACTS - TKC Marketing Corp. was the owner/consignee of some 3,189.171 metric tons of soya bean meal which was loaded on board the ship MV Al Kaziemah for carriage from the port of Rio del Grande, Brazil, to the port of Manila. Said cargo was insured against the risk of loss by petitioner Malayan Insurance Corporation for which it issued two (2) Marine Cargo Policies. - While the vessel was docked in Durban, South Africa the civil authorities authorities arrested and detained it because of a lawsuit on a question of ownership and possession. TKC Marketing notified Malayan of the arrest of the vessel and made a formal claim for the dollar equivalent on the policies (US$916,886.66) for non-delivery of the cargo. It likewise sought the assistance of Malayan on what to do with the cargo. - Malayan replied that the arrest of the vessel vessel by civil autho authority rity was not a peril peril covered by the policies. TKC advised Malayan that it might tranship the cargo and requested reques ted an exten extension sion of the insurance coverage until actual transhipmen transhipment, t, which ext extens ension ion was approv approved ed upo upon n payment payment of additi additiona onall pre premiu mium. m. The ins insura urance nce coverage covera ge was exten extended ded under the same terms and condi conditions tions embodied embodied in the original policies while in the process of making arrangements for the transhipment of the cargo from Durban to Manila. However the cargo was sold in Durban, South Africa, for US$154.40 per metric ton or a total of P10,304,231.75 due to its perishable nature which could no longer stand a voyage of twenty days to Manila and another twenty days for the discharge thereof. It reduced its claim to US$448,806.09 (or its peso equivalent of P9,879,928.89 at the exchange rate of P22.0138 per $1.00) representing its loss after the proceeds of the sale were deducted from the original claim.Malayan
HELD 1.YES - With the incorporation incorporation of subsecti subsection on 1.1 of Section 1 of the Insti Institute tute War Clauses, "arrest" caused by ordinary judicial process is deemed included among the covered risks. This interpretation becomes inevitable when subsection 1.1 of Section 1 of the Institute War Clauses provided that "this insurance covers the risks excluded from the Standard Stand ard Form of English Marine Policy by the clause 'Warrant 'Warranted ed free of capture, seizure, arrest, etc. x x x'" or the F.C. & S. Clause. Jurisprudentially, "arrests" caused by ordinary judicial process is also a risk excluded from the Standard Form of English Marine Policy by the F.C. & S. Clause. - Petitioner cannot adopt the argument that the "arrest" caused by ordinary judicial process is not included in the covered risk simply because the F.C. & S. Clause under the Institute Institute War Clauses can only be operative in case of hostilit hostilities ies or warli warlike ke operations on account of its heading "Institute War Clauses." 2. YES Insurance nce Policie Policies s should be construed liber liberally ally in favor of the insured insured and Ratio Insura strictly against the insurer. Reasoning - An insurance contract should be so interpreted as to carry out the purpose for which the parties entered into the contract which is, to insure against risks of loss or damage to the goods goods.. Such interpretatio interpretation n shoul should d result result from the natur natural al and reasonable reasonable meaning meani ng of language language in the policy. Where restrictive restrictive provisi provisions ons are open to two interpretations, that which is most favorable to the insured is adopted.
maintained position that the arrest of the the marine vessel by civil authorities of ownershipitswas an excepted risk under insurance policies. on a question Petitioners Claim - an arrest by civil authority is not compensable since the term "arrest" refers to "political or executive acts" and does not include a loss caused by riot or by ordinary judicial process as in this case - the deletion of the Free from Capture or Seizure Clause would leave the assured covered solely for the perils specified by the wording of the policy itself - the rationale for the exclusion of an arrest pursuant to judicial authorities is to eliminate collusion between unscrupulous assured and civil authorities. - any loss which private respondent may have incurred was in the nature and form of unrecovered acquisition value brought about by a voluntary sacrifice sale and not by arrest, detention or seizure of the ship. - its act of rejecting the claim was a result of its honest belief that the arrest of the vessel was not a compensable risk under the policies issued Respondents Comments - petiti petitione oner, r, being being the sole sole author author of the polici policies, es, "ar "arres rests" ts" should should be str strict ictly ly interpreted against it because the rule is that any ambiguity is to be taken contra
Indemnity and liability insurancetherein policiesinare construed in accordance the general rule of resolving any ambiguity favor of the insured, wherewith the contract or policy policy is pre prepar pared ed by the insurer. insurer. A contra contract ct of ins insura urance nce,, bei being ng a contra contract ct of adhesion, adhes ion, par excel excellence, lence, any ambig ambiguity uity therein should be resol resolved ved against against the insurer.Limitations of liability should be regarded with extreme jealousy and must be construed const rued in such a way as to preclude the insurer from noncomplia noncompliance nce with its obligations - It mus mustt be bor borne ne in mind that that such such contra contracts cts are inv invari ariabl ably y pre prepar pared ed by the companies and must be accepted by the insured in the form in which they are written. Any construction of a marine policy rendering it void should be avoided. Such policies will, therefore, be construed strictly against the company in order to avoid a forfeiture, unless no other result is possible from the language used. - If a marine insurance company desires to limit or restrict the operation of the general provisions provi sions of its contract by speci special al provi proviso, so, exception, or exempt exemption, ion, it shoul should d express such limitation in clear and unmistakable language. Be that as it may, exceptions to the general coverage are construed most strongly against the company. Even an express exception in a policy is to be construed against the underwriters by whom the policy is framed, and for whose benefit the exception is introduced.
iNsuRanCe
A2010
Dean Carale
pAgE 15 WESTERN GUARANTY CORPORATION V CA (RODRIGUEZ, and DE DIOS TRANSPORTATION CO) 187 SCRA 652
FELICIANO; July 20, 1990 FACTS - At around 4:30 in the afternoon of 27 March 1982, while crossing Airport Road on a pedestrian lane on her way to work, respondent Priscilla E. Rodriguez was struck by a De Dios passenger bus owned by respondent De Dios Transportation Co., Inc., then driven by one Walter Saga y Aspero. The bus driver disregarded the stop signal given by a traffic policeman to allow pedestrians to cross the road. Priscilla was thrown to the ground, hitting her forehead. She was treated at the Protacio Emergency Hospital and later on hospitalized at the San Juan De Dios Hospital. Her face was permanently disfigured, causing her serious anxiety and moral distress. - Respondent bus company was insured with petitioner Western Guaranty Corporation ("Western") ("West ern") under its Master Policy which enumerated enumerated speci specific fic liabilities liabilities of the insurance company and ended with a clause to clarify the limitations of the amount
which could be granted as indemnity. - Respondent Respondent Priscilla Priscilla Rodri Rodriguez guez filed a complaint complaint for damages damages before the Regio Regional nal Trial Court of Makati against De Dios Transportation Co. and Walter A. Saga. Respondent De Dios Transportation Co., in turn, filed a third-party complaint against its insurance carrier, petitioner Western. - On 6 August 1985, the trial court rendered a decision in favor of respondent Priscilla E. Rodriguez, - On appeal, the Court of Appeals affirmed in toto the decision of the trial court. Petitioner Petit ioner moved for the reconsidera reconsideration tion of the appellate court's decision. decision. In a Resolution Resol ution dated 10 Januar January y 1990, the Court of Appeals Appeals denie denied d the motion for reconsideration for lack of merit. Petitioner Western is now before us on a Petition for Review alleging that the Court of Appeals erred in holding petitioner liable to pay beyond the limits set forth in the Schedule Indemnities and in finding Western liable for loss of earnings, earnings, moral damages and attor attorney's ney's fees. Succinct Succinctly ly stated, it is petitioner Western's position that it cannot be held liable for loss of earnings, moral damages and attorney's fees because these items are not among those included in the Schedule Indemnities set forth in the insurance policy. - Petitioner Western in effect contends before this Court, as it did before the Court of Appeals, Appeal s, that because because the Schedule of Indemnities Indemnities limits the amount payable for certain kinds of expenses "hospital room", "surgical expenses", "an aesthesiologists' fee", "operati "operating ng room" and and "medical "medical expenses" expenses" that Schedule Schedule s should hould be read as excluding exclu ding liabili liability ty for any other type of expense or damage or loss even though actually sustained or incurred by the third party victim. We are not persuaded by Western's contention. ISSUE WON the Schedule Schedule of ind indemn emniti ities es as sta stated ted in the insuranc insurance e policy policy should should be construed strictly to exclude all others not explicitly stated therein
Ratio An insurance policy being in the nature of an adhesion contract is to be strictly construed against the insurer and liberally in favor of the insured. Reasoning - Firstly, the Schedule of Indemnities does not purport to restrict the kinds of damages that may be awarded against Western once liability has arisen. Section 1, quoted
above, does refer to certain "Limits of Liability" which in the case of the third party liability section of the Master Policy, is apparently P50,000.00 per person per accident. Within this over-all quantitat quantitative ive limit, all kinds of damages allowable allowable by law "actual or compen compensator satory y damages"; damages"; "moral damages"; "nominal damages"; "temperate "temperate or moderate modera te d damages" amages";; "liquidat "liquidated ed da damages"; mages"; and "exempl "exemplary ary damages" damages" may be awarded by a competent court against the insurer once liability is shown to have arisen, and the essential requisites or conditions for grant of each species of damages are present. It appears to us self-evident that the Schedule of Indemnities was not intended to be an enumeration, much less a closed enumeration, of the specific kinds of damages which may be awarded under the Master Policy Western has issued. - Secondly, the reading urged by Western of the Schedule of Indemnities comes too close to working fraud upon both the insured and the third party beneficiary of Section 1, quoted above. For Western's reading would drastically and without warning limit the otherw otherwise ise unlimi unlimited ted (sa (save ve for the over-a over-all ll qua quanti ntitat tative ive limit limit of lia liabil bility ity of P50,000.00 per person per accident) and comprehensive scope of liability assumed by the insurer Western under Section 1: "all sums necessary to discharge liability of the insured insur ed in respect respect of [bo [bodily dily injury injury to a tthird hird p party] arty]". ". This result result which iis s not essentially different from taking away with the left hand what had been given with the right hand we must avoid as obviously obviously repugnant to public public policy. If what Western now urges is what Western intended to achieve by its Schedule of Indemnities, it was incumbent upon Western to use language far more specific and precise than that used in fact by Western, so that the insured, and potential purchasers of its Master Policy, and the Office of the Insurance Commissioner, may be properly informed and act accordingly. - Petiti Petitione onerr Wes Wester tern n would would have have us constr construe ue the Schedu Schedule le of Inde Indemni mnitie ties s as comp compri risi sing ng cont contra ract ctua uall limi limita tati tion ons s of liab liabil ilit ity y whic which, h, as alre alread ady y note noted, d, is comprehensively defined in Section 1 "Liability to the Public" of the Master Policy. It is well-s well-settle ettled, d, however, however, that contractua contractuall limit limitation ations s of liabi liability lity found in insur insurance ance contracts should be regarded by courts with a jaundiced eye and extreme care and should be so construed as to preclude the insurer from evading compliance with its just obligations. - Finally, an insurance contract is a contract of adhesion. The rule is well entrenched in our jurisprudence that the terms of such contract are to be construed strictly against the party which prepared the contract, which in this case happens to be petitioner Western.
QUA CHEE GAN V LAW UNION AND ROCK INSURANCE CO., LTD. 96 PHIL 85 REYES; December 17, 1955 NATURE
An appeal by defendant insurance company from the decision of CFI in favor of the plaintiff HELD NO
FACTS
iNsuRanCe
A2010
Dean Carale
pAgE 16 - before the last war, plaintiff-appellee owned 4 warehouses or bodegas in Tabaco, Albay, used for the storage of stocks of copra and of hemp, baled and loose, in which the appellee dealt extensively. They had been, with their contents, insured with the defend defendant ant Com Compan pany y since since 193 1937, 7, and the loose loose mad made e payabl payable e to the Philip Philippin pine e National Bank as mortgage of the hemp and crops, to the extent of its interest.
3. WON the insured connived at the loss and fraudulently inflated the quantity of the insured stock in the burnt bodegas
- Fire of undetermined origin that broke out in the early morning of July 21, 1940, and lasted almost one week, gutted and completely destroyed Bodegas Nos. 1, 2 and 4, with the mercha merchandise ndise stored therein. Plaintiff-appell Plaintiff-appellee ee infor informed med the insurer by telegram teleg ram on the same date; and on the next day, the fire adjusters adjusters engaged by appellant insurance company arrived and proceeded to examine and photograph the pre premis mises, es, pored pored ove overr the boo books ks of the insure insured d and conduc conducted ted an extens extensive ive investigation. The plaintiff having submitted the corresponding fire claims, totalling P398,56 P398 ,562.8 2.81 1 (but (but reduce reduced d to the ful fulll amo amount unt of the insuranc insurance, e, P370 P370,00 ,000), 0), the Insurance Company resisted payment, claiming violation of warranties and conditions, filin filing g of fraudulent fraudulent claims claims,, and that the fire had been deliberatel deliberately y caused by the insured or by other persons in connivance with him. - Que Chee Gan, with his brother, Qua Chee Pao, and some employees of his, were indicted and tried in 1940 for the crime of arson, it being claimed that they had set fire to the destroyed destroyed warehouses warehouses to colle collect ct the insur insurance. ance. They were, however, however, acquitted by the trial court. - the civil suit to collect the insurance money proceeded to its trial with the CFI holding that: judgment is rendered for the plaintiff and against the defendant condemning the latter to pay the former — (a) Under the first cause of action, the sum of P146,394.48; (b) Under the second cause of action, the sum of P150,000; (c) Under the third cause of action, the sum of P5,000; (d) Under the fourth cause of action, the sum of P15,000; and (e) Under the fifth cause of action, the sum of P40,000; all of which shall bear int intere erest st at the rate of 8% per annum annum in accordan accordance ce with Sectio Section n 91 (b) of the Insurance Act from September 26, 1940, until each is paid, with costs against the defendant. - In its first assignment assignment of error, the insurance insurance company company alleges that the trial Court should have held that the policies were avoided for breach of warranty, specifically the one appearing on a rider pasted (with other similar riders) on the face of the policies.4 - It is argued that since the bodegas insured had an external wall perimeter of 500
Ratio It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has knowledge of existing facts which, if insisted on, would invalidate the contract from its very inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with the facts, and the insurer is stopped thereafter from asserting the breach of such conditions. The law is charitable enough to assume, in the absence of any showing to the contrary, that an insurance company intends to executed a valid contract in return for the premium received; and when the policy contains a condition which renders it voidable at its inception, and this result is known to the insurer, it will be presumed to have intended to waive the conditions and to execute a binding contract, rather than to have deceived the insured into thinking he is insured when in fact he is not, and to have taken his money without consideration. Reasoning - The appellant is barred estoppel to claim violation of the so-called fire hydrants warranty, for the reason that knowing fully all that the number of hydrants demanded therein never existed from the very beginning, the appellant neverthless issued the policies polic ies in questi question on subject to such warra warranty, nty, and recei received ved the corre correspondi sponding ng premiums. The insurance company was aware, even before the policies were issued, that in the premises insured there were only two fire hydrants installed by Qua Chee Gan and two others nearby, owned by the municipality of Tabaco, contrary to the requirements of the warranty in question - The plain, human justice of this doctrine is perfectly apparent. To allow a company comp any to accept accept one's one's mone money y for a policy policy of insurance insurance which which it then knows to be void and of no effect, though it knows as it must, that the assured believes it to be valid and binding, is so contrary to the dictates of honesty and fair dealing, and so closely related to positive fraud, as to the abhorrent to fair-minded men. It would be to allow the company to treat the policy as valid long enough to get the premium on it, and leave it at liberty to repudiate it the next moment. This cannot be deemed to be the real intentio inte ntion n of the parties. parties. To hold that a literal literal construct construction ion of the policy
meters 1,640 had feet,only the 2, appellee should pair havenearby, 11 fire belonging hydrants intothe and that he or actually with a further thecompound, municipality of Tabaco.
expressed expr essed purposes the true and intentio intedesigns ntion n ofwhich the company comp any would beit to indict it,of. for fraudulent we cannot believe to be guilty - The appellan appellantt compan company y so worded worded the policies that while exacting the greate greaterr number of fire hydrants and appliances, it kept the premium discount at the minimum of 2 1/2%, thereby giving the insurance company a double benefit. Such abnormal treatment treat ment of the insured strongl strongly y point points s at an abuse of the insuranc insurance e company's selection of the words and terms of the contract, over which it had absolute control. - Receip Receiptt of Premiu Premiums ms or Ass Assess essmen ments ts after after Cause Cause for For Forfei feitur ture e Other Other than than Nonpayment . — It is a well settled rule of law that an insurer which with knowledge of facts facts entitl entitling ing it to treat treat a pol policy icy as no longer in force, force, recei receives ves and accept accepts s a premium on the policy, estopped to take advantage of the forfeiture. It cannot treat the policy as void for the purpose of defense to an action to recover for a loss thereafter occurring and at the same time treat it as valid for the purpose of earning and collecting further premiums. - Moreover, taking into account the well known rule that ambiguities or obscurities must be stric strictly tly interpret interpreted ed against the party that caused them, the "memo of warranty" invoked by appellant bars the latter from questioning the existence of the appliances called for in the insured premises
ISSUES 1. WON the defendant-appellant can claim the policies it had issued as void ab initio 2. WON the insured violate violated d the "Hemp Warranty" Warranty" provisions provisions of Policy Policy No. 2637165 against the storage of gasoline 4
Memo. of Warranty . — The undernoted Appliances for the extinction of fire being kept on the premises insured hereby, and it being declared and understood that there is an ample and constant water supply with sufficient pressure available at all seasons for the same, it is hereby warr ante anted d that the said appliances shall be maintained in efficient working order during the currency of this policy, by reason whereof a discount of 2 1/2 per cent is allowed on the premium chargeable under this policy. Hydrants in Hydrants in the compound, not less in number than one for each 150 feet of external wall measurement of building, protected, with not less than 100 feet of hose piping and nozzles for every two hydrants kept under cover in convenient places, the hydrants being supplied with water pressure by a pumping engine, or from some other source, capable of discharging at the rate of not less than 200 gallons of water per minute into the upper story of the highest building protected, and a trained brigade of not less than 20 men to work the same.'
HELD 1. NO
iNsuRanCe
A2010
Dean Carale
pAgE 17 On the alleged violations of the plaintiff The alleged violation of the warranty of 100 feet of fire hose for every two hydrants, must be equally rejected, since the appellant's argument thereon is based on the assumption that the insured was bound to maintain no less than eleven hydrants, hydrants, which requirement requirement appellant appellant is estop estopped ped from enforcing.
date they needed is proved by the fact that the adjuster Alexander Stewart was able to prepare his own balan balance ce sheet that did not diffe differr from that submitte submitted d by the insured except for the valuation of the merchandise, as expressly found by the Court in the criminal case for arson. 3. NO
- As to maintenance of a trained fire brigade of 20 men, the record is preponderant that the same was organized, and drilled, from time to give, although not maintained as a permanently separate unit, which the warranty did not require. 2. NO Ratio Here, again, by reason of the exclusive control of the insurance company over the terms and phraseology of the contract, the ambiguity must be held strictly against the insurer and liber liberally ally in favor of the insured, specia specially lly to avoid a forfei forfeiture. ture. Ins Insura urance nce is, in its nat natur ure, e, comple complex x and difficul difficultt for the layman layman to understand. Policies are prepared by experts who know and can anticipate the hearing and possible possible complica complication tions s of every cont continge ingency. ncy. So long as insura insurance nce com compan panies ies insist insist upon upon the use of ambigu ambiguous ous,, intric intricate ate and technical provisions, which conceal rather than frankly disclose, their own intentions, the courts must, in fairness to those who purchase insurance, construe every ambiguity in favor of the insured. An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very purpose for which the policy was procured. Reasoning - Appellee admitted that there were 36 cans of gasoline in the building designed. It However, gasoline is not specifically mentioned among the prohibited articles listed in the so-called "hemp warranty." The cause relied upon by the insurer speaks of "oils (animall and/or (anima and/or vegetable vegetable and/or mineral and/or their liquid product products s having having a flash point below 300 Fahrenheit Fahrenheit)", )", and is decidedly decidedly ambiguous and uncertain; uncertain; for in ordinary parlance, "Oils" mean "lubricants" and not gasoline or kerosene. And how many insured, it may well be wondered, are in a position to understand or determine "flash point below 300 Fahrenheit. - If the company intended to rely upon a condition of that character, it ought to have been plainly expressed in the policy. - The contract of insurance is one of perfect good faith not for the insured alone, but equally so for the insurer; in fact, it is mere so for the latter, since its dominant
Ratio Both defenses are predicted on the assumption that the insured was in financial difficulties and set the fire to defraud the insurance company, presumably in order to pay off the Philippine National Bank, to which most of the insured hemp and copra was pledged. Both defenses defenses are fatally undermin undermined ed by the established established fact that, notwithstanding the insurer's refusal to pay the value of the policies the extensive resources of the insured enabled him to pay off the National Bank in a short time; and if he was able to do so, no motive appears for attempt to defraud the insurer. While the acquittal of the insured in the arson case is not res judicata on judicata on the present civil action, actio n, the insur insurer's er's evidenc evidence, e, to judge from the decisi decision on in the criminal case, is practically identical in both cases and must lead to the same result, since the proof to establish the defense of connivance at the fire in order to defraud the insurer "cannot be materially less convincing than that required in order to convict the insured of the crime of arson." - As to the defen defense se that the burned bodegas could not possibly have contained contained the quantities of copra and hemp stated in the fire claims, the insurer's case rests almost exclusively on the estimates, inferences and conclusions of its adjuster investigator who examined the premises during and after the fire. His testimony, however, was based on inferences from the photographs and traces found after the fire, and must yield to the contradictory testimony of those who actually saw the contents of the bodegas shortly before the fire, while inspecting them for the mortgagee Bank. Disposition We find no reversible error in the judgment appealed from, wherefore the same is hereby affirmed.
bargaining position withofit the stricter responsibility. - Another point thatcarries is in favor insured is that the gasoline kept in Bodega No. 2 was only incidental to his business, being no more than a customary 2 day's supply for the five or six motor vehicles used for transporting of the stored merchandise. "It is well settled that the keeping of inflammable oils on the premises though prohibited by the policy does not void it if such keeping is incidental to the business." On the submission of books, voucbers, etc. The charge that the insured failed or refused to submit to the examiners of the insurer the books, vouchers, etc. demanded by them was found unsubstantiated by the trial Court, and no reason has been shown to alter this finding. The insured gave the insurance examiner all the date he asked for, and the examiner even kept and photographed some of the examined books in his possession. What does appear to have been rejected by the insured was the demand that he should submit "a list of of all books, all books, vouchers, receipts and receipts and other records", but the refusal of the insured in this instance was well justified, since the demand for a list of all the vouchers (which were not in use by the insured) and receipts was positively unreasonable, considering that such listing was superfluous because the insurer was not denied access to the records, that the volume of Qua Chee Gan's business ran into millions, and that the demand was made just after the fire when everything was in turmoil. That the representatives of the insurance company were able to secure all the
Appeal from judgment of CFI Rizal
DEL ROSARIO V EQUITABLE INSURANCE & CASUALTY CO., INC 8 SCRA 343 PAREDES; June 29, 1963 NATURE
FACTS - Francisco del Rosario was insured by Equitable Insurance and Casualty Co. Inc under Personal Accident Policy no. 7136. The Company bound itself to pay P1000 to P3000 as indemnity for the death of the insured. - Under the policy: Part I. Indemnity for Death If the insured sustains any bodily injury which is effected solely through violent, viole nt, externa external, l, visible and accide accidental ntal means, and which shall resu result, lt, ind indepe epende ndentl ntly y of all other causes causes and within within sixty day days s fro from m the occurrence thereof, in the Death of the Insured, the Company shall pay the amount set opposite such injury:
Sectio Section n 1. Inj Injury ury sustai sustained ned other other than than those those specif specified ied bel below ow unless unless exce except pted ed he here rein inaf afte terr P100 P1000 0 Section Secti on 2. Injur Injury y sustaine sustained d by the wrecking or disabl disablement ement of a railroad passenger car or street railway car in or on which the Insured is traveling as a farepaying passenger P1500
iNsuRanCe
A2010
Dean Carale
pAgE 18 Section 3. Injury sustained by the burni Section burning ng of a church, theatre, public library or municipal administration building while the Insured is therein at the the com commen mence ceme ment nt of of the the fire fire P2000 P2000 Section Sectio n 4. Injury Injury sustained sustained by the wrecking wrecking or disablement disablement of a regular passen passenger ger elevator elevator car in which which the Insured Insured is being being convey conveyed ed as a passen passenger ger (Eleva (Elevator tor in mines mines exl exluded uded)) P250 P2500 0 Section Sectio n 5. Injury Injury su sustain stained ed by a stroke stroke of of lightnin lightning g or by a cycl cyclone one P3000 xxxx xxxx xxxx Part VI. Exceptions This policy shall not cover disappearance of the I nsured nor shall it cover Death, Disability, Hospital fees, or Loss of time, caused to the insured: x x x (h) By dro drowni wning ng except as a conseq consequen uence ce of the wrecking wrecking or disablement in the Philippine waters of a passenger steam or motor vessel in which the Insured is traveling as a farepaying passenger; x x x - A rider to the Policy contained the following; IV. DROWNING It is hereby declared and agreed that exemption clause Letter (h) in PART VI of the policy is hereby waived by the company, and to form a part of the provision covered by the policy. - Feb 24, 1957, Francisco Francisco del Rosario while on board the motor launch ISLAMA, with his beneficiary to the policy, Remedios Jayme, were forced to jump off said launch on account of fire which broke out on said vessel, resulting in the death by drowning of the insured and his beneficiary. - Sim Simeon eon del Rosario, Rosario, the insur insured’ ed’s s father father,, fil filed ed a claim claim for paymen paymentt with with the company. The company paid him P1000 pursuant to section 1 Part I of the policy. - On the same date, Atty. Francisco wrote to the company acknowledging receipt by his client of the P1000 but informing said company that said amount was not the correct one. He claimed that the amount payable should be P1500 under the provision of Section 2 Part I, based on the rule of pari materia. - The company referred the matter to the Insurance Coomissioner, who was of the opinion that the liability of the company was only P1000. thus the company refused to pay more that P1000. Atty. Francisco wrote a subsequent letter to company asking for p3000, which the company refused to pay. - A complaint for recovery of the balance of P2000 was instituted with the CFI Rizal, praying costs. for a further sum of P10000 as attorney’s fees, expenses of litigation and - CFI ruled in favor of petitioner, ordering the company to pay P2000 to del Rosario. ISSUE How much should the indemnity be HELD - All the parties agree that indemnity has to be paid, but the conflict centers on how much it should be. - Where there is ambiguity with respect to the terms and conditions of the policy, the same will be resolved against the one responsible thereof. Generally, the insured has little, if any, participation in the preparation of the policy, together with the drafting of its terms and conditions. conditions. The interpretation interpretation of obscure obscure stipu stipulatio lations ns in a contract contract should not favor the party who caused the obscurity. - SC agreed with the ruling of the lower court: x x x death by drowning is a ground for recovery apart from the bodily injury because death by bodily injury is covered by Part I of the policy while death by drowning is covered by Part VI thereof. But while the policy mentions specific
amounts that may be recov amounts recovered ered for death for bodily injury, yet, there is not specific amount mentioned in the policy for death thru drowning although the latter is, under Part VI of the policy, a ground for recovery thereunder. Since the defendant defend ant has bound itself to pay P1000 to P3000 as indemn indemnity ity for the death of the insured but the policy does not positively state any definite amount that may be recovered in case of death by drowning, there is an ambiguity in this respect in the policy, which ambiguity must be interpreted in favor of the insured and strictly against the insurer so as to allow a greater iindemnity. ndemnity. x x x plaintiff is therefore entitled to recover P3000. Disposition Judgment appealed from is affirmed.
GEAGONIA v. CA (COUNTRY BANKERS INSURANCE) 8 SCRA 343 DAVIDE; February 6 1995 FACTS -Geagonia is the owner of Norman's Mart locat located ed in the public market of San Francisco, Agusan del Sur. On 22 Dec 1989, he obtained from the private respondent fire insurance policy for P100,000.00. The period of the policy was from 22 Dec 1989 to 22 Dec 1990 and covered the ff: "Stock-in-trade consisting principally of dry goods such as RTW's for men and women wear and other usual to assured's business. -The policy contained the following condition: "3. The insure insured d shall give notice to the Company of any insur insurance ance or insuranc insurances es already effected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00." -On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San Francisco, Agusan del Sur. The petitioner's insured stocks-in-trade were
completely destroyed prompting him torespondent file w/ the denied private the respondent a claim under the policy. On 28 Dec 1990, the private claim because it found that at the time of the loss the petitioner's stocks-in-trade were likewise covered by two fire insurance policies for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC). -The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. - Geagonia then filed a complaint against the private respondent w/ the Insurance Commission for the recovery of P100,000.00 under fire insurance policy, for attorney's fees, fees, and costs of litiga litigatio tion. n. He claims claims that the time he obt obtain ained ed the priva private te respondent's fire insurance policy he knew that the two policies issued by the PFIC were already in existence; however, however, he had no knowledge of the provision provision in the private priva te respondent's respondent's policy requiring him to inform it of the prior polici policies; es; this requirement was not mentioned to him by the private respondent's agent; and had it been so mentioned, he would not have withheld such information. He further asserted that the total of the amounts claimed under the three policies was below the actual value of his stocks at the time of loss, w/c was P1M. - The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the
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pAgE 19 PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These findings were based on the petitioner's testimony that he came to know of the PFIC policies only when he filed his claim with the private respondent and that Cebu Tesing Textile obtained them and paid for their premiums
forfeiture of insurance policies should be construed most strictly against those for whose benefits they are inserted, and most favorably toward those that,, except against whom they are intended to operate. The reason for this is that for riders which may later be inserted, the insured sees the contract already in its final form and has had no voice in the selection or arrangement of the words employed
w/o informing him. The Insurance Commission then ordered the respondent company to pay complainant the sum of P100,000.00 with legal interest from the time the complaint was filed until fully satisfied plus the amount of P10,000.00 as attorney's fees. -CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the existence of the two other policies issued by the PFIC
therein. On the other hand, the language of the contract was carefully chosen and deliberate delib erated d upon by experts experts and legal advisers who had acted exclusively exclusively in the interest inter est of the insurers and the techni technical cal language employed therei therein n is rarely understood by ordinary laymen. - With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not totally free from ambiguity and must be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. - Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding excee ding P200,000.00 P200,000.00.. What it had in mind was to discourage over-in over-insuranc surance. e. Indeed,, the rational Indeed rationale e behin behind d the incorporation incorporation of "othe "otherr insur insurance" ance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's property's value, value, the insured may have an induc inducement ement to destr destroy oy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured. Disposition Petition granted. The decision of the Court of Appeals in CA-G.R. SP No. 31916 is SET ASIDE and the decision of the Insurance Commission in Case No. 3340 is REINSTATED.
ISSUES 1. WON the petitioner had prior knowledge of the two insurance policies issued by the PFIC when he obtained the fire insurance policy from the private respondent, thereby, for not disclosing such fact, violating Condition 3 of the policy 2. if he had, WON he is precluded from recovering recovering therefrom HELD 1. YES - We agree w/ the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of 18 January 1991 to the private private respondent conclusivel conclusively y prove proves s this knowledge. His testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior policies since these policies were not new or original. 2. NO - It must, however, be underscored that unlike the "other insurance" clauses involved in General Insurance and Surety Corp. Corp. vs. Ng Hua or in Pioneer Insurance & Surety Corp. vs. Yap, which read: "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 or occurrenc occurrence of any loss damage, damage all benefit benefits s under this Assurance Policy shallCo. be forfeited." in the e 1930 case of or Santa Ana, vs. Commercial Union which provided provided "that any outstanding outstanding insurance upon the whole or a portion portion of the objects thereby assured must be declared by the insured in writing and he must cause the company to add or insert it in the policy, without which such policy shall be null and void, and the insured will not be entitled to indemnity in case of loss," Condition 3 in the private respondent's policy No. F-14622 does not absolutely declare void any violation thereof. It expressly provides that the condition "shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00." - Interpretation: Interpretation: It is a cardinal rule on insurance that a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the company, the reason being, undoubtedly, to afford the greatest protection which the insured was endeavor endeavoring ing to sec secure ure when he applie applied d for insuranc insurance. e. It is also also a cardin cardinal al principle of law that forfeitures are not favored and that any construction which would result in the forfeiture of the policy benefits for the person claiming thereunder, will be avoided, avoid ed, if it is possi possible ble to construe construe the policy policy in a manner which would permit recovery, as, for example, by finding a waiver for such forfeiture. Stated differently, differently, provisions, con condit dition ions s or exc except eption ions s in polici policies es which which tend to wor work k a
SUN INSURANCE OFFICE, LTD. V CA (LIM) 211 SCRA 554 CRUZ; July 17, 1992 NATURE Petition for review from the decision of the Court of Appeals FACTS - Felix Lim was issued a Personal Accident Policy insurance with petitioner company with a face value of P200,000. His beneficiary was his wife Neri Nerissa. ssa. - October 6, 1982 – Felix accidentally shot himself in the head with his own gun. - He was playing with the handgun after he had removed the gun’s magazine ( kasi naman…). naman… ). - He pointed the gun at his secretary and only witness Pilar Nalagon as a joke and assured her that the gun was not loaded (are (are you sure…). sure…). - He then put the gun to his temple and fired it (haaay, ( haaay, sabi ko na nga ba). ba). - Both parties are in agreement that there was no suicide. - Nerissa claimed as Felix’s beneficiary but Sun Insurance would not grant her claim,
saying that her husband’s death was notthe an accident. - Nerissa sued Sun Insurance and won case. Sun Insurance was ordered to pay her P200,000 representing the face value of the claim along with moral, exemplary and compensatory damages and attorney’s attorney’s fees. The decision was affirmed by the CA.
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pAgE 20 Petitioners’ Claim - Sun Insurance cites one of the four exceptions in the contract of insurance which includes inclu des bodily injury injury consequent consequent upon the insured person attempting to commit suicide or willfully exposing himself to needless peril in an attempt to save a human life.
RIZAL SURETY SURET Y & INSURANCE COMPANY V CA ( TRANSWORLD TRANSWOR LD KNITTING MILLS, INC.) 336 SCRA 12 PURISIMA; July 18, 2000
- There mere act of pointing the gun to his temple showed that Felix willfully exposed himself to danger because a gun should always be handled with caution. Respondents’ Comments - Felix believed the gun to be safe because he had removed the magazine. - He repeatedly assured his secretary that the gun was not loaded.
NATURE Petition for Review on Certiorari Certiorari under under Rule 45 of the Rules of Court
ISSUES 1. WON Felix Lim’s death was an accident, thus making his widow Nerissa liable to claim the accident insurance 2. WON the award of damages to Nerissa Lim was justified HELD 1. YES, Felix Lim’s death was an accident. Ratio There is no accident when a deliberate act is performed unless some additional, unexpected, independent and unforeseen happening occurs which produces or brings bout their injury or death. Reasoning - An accident has been defined to be that which happens by chance or fortuitously without intention or design and which is unexpected, unusual and unforeseen. It an eve event nt that that tak takes es pace pace withou withoutt one’s one’s foresi foresight ght or exp expect ectast astion ion – an eve event nt that that pro procee ceeds ds from an unknown unknown cause or is an unu unusua suall effect effect of a kno known wn case case and therefore there fore not expect expected. ed. It happens without without any human agen agency, cy, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. - The firing of the gun was deemed to be the unexpected and independent and unforeseen occurrence that led to the insured person’s death. - There was no willful exposure exposure to needless peril for the part of Felix. Suici Suicide de and exposure to needless peril are similar in the sense that both signify disregard for one’s life. Suicide Suicide imparts a positive act of ending ending one’s life whereas the latte latterr indicates
that is almost suicidal in intent. -recklessness Accident insurance policies were never meant to reward the insured for his tendency to show off or for his miscalc miscalcula ulatio tions. ns. The They y were were int intend ended ed to pro provid vide e for contingencies. - Lim was unquesti unquestiona onably bly negligen negligentt but it should should not pre preven ventt his widow from recovering from the insurance policy he obtained precisely against accident. - Insurance contracts are, as a rule, supposed to be interpreted liberally in favor of the assured. 2. NO, the claim for damages should not be granted for being unjust. Ratio Rati o A person may be made liable to the payment of moral damages if his act is wrongful. The adverse result of an action does not per se make the act wrongful and subject the act or to the payment of moral damages. Reasoning - Petitioner was acting in good faith when it resisted the private respondent’s claim on the ground that the death of the insured was covered by the exception. - The issue was debatable and was clearly not raised only for the purpose of evading a legitimate obligation.
FACTS - Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy No. 45727 in favor of Transworld Knitting Mills, Inc. (Transworld). - Pertinent portions of subject policy on the buildings insured, and location thereof, read: "‘On stocks of finished and/or unfinished products, raw materials and supplies of every kind and description, the properties of the Insureds and/or held by them in trust, on commission or on joint account with others and/or for which they (sic) responsible in case of loss whilst contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the
buildings build ingsPASIG, situate (sic) within Compound at MAGDALO UGONG, METRO MANILA,own PHILIPPINES, BLOCK NO. 601.’ STREET, BARRIO xxx...............xxx...............xxx ‘Said building of four-span lofty one storey in height with mezzanine portions is constructe const ructed d of reinf reinforced orced concrete and hollow hollow block blocks s and/or concrete under galvanized galva nized iron roof and occupied as hosie hosiery ry mills, garme garment nt and lingerie factory, transistor-stereo assembly plant, offices, warehouse and caretaker's quarters. 'Bounds in front partly by one-storey concrete building under galvanized iron roof occupied as canteen and guardhouse, partly by building of two and partly one storey constructed of concrete below, timber above undergalvanized iron roo rooff occupi occupied ed as gar garage age and qua quarte rters rs and partl partly y by ope open n space space and/or and/or tracking/ packing, beyond which is the aforementioned Magdalo Street; on its rig right ht and left by dri drivew veway, ay, thence thence ope open n spaces spaces,, and at the rear by ope open n spaces.'" - The same pieces of property insured with the petitioner were also insured with New India Assurance Company, Ltd., (New India). - Fire broke out in the compound of Transworld, razing the middle portion of its fourspan building and partly gutting the left and right sections thereof. A two-storey building (behind said four-span building) where fun and amusement machines and spare parts were stored, was also destroyed by the fire. - Transworld filed its insurance claims with Rizal Surety & Insurance Company and New India Assurance Company but to no avail. - Private respondent brought against the said insurance companies an action for collection of sum of money and damages. - Petit Petitioner ioner Rizal Insurance counte countered red that its fire insur insurance ance policy sued upon covered only the contents of the four-span building, which was partly burned, and not the damage caused by the fire on the two-storey annex building. - The trial court dismissed the case as against The New India Assurance Co., Ltd. but ordered defendant Rizal Surety And Insurance Company to pay Transwrold (sic) Knitting Mills, Inc. - Both the petitioner, Rizal Insurance Company, and private respondent, Transworld Knitti Knitting ng Mil Mills, ls, Inc., Inc., wen wentt to the Cou Court rt of Appeal Appeals, s, which which requir required ed New India
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pAgE 21 Assurance Company to pay plaintiff-appellant the amount of P1,818,604.19 while the Rizal Surety has to pay the plaintiff-appellant P470,328.67. - New India appeal appealed ed to the Court theorizing theorizing inter alia that the private respondent could not be compensated for the loss of the fun and amusement machines and spare parts stored at the two-storey building building because it (Tran (Transworl sworld) d) had no
supplies stored within the premises of respondent Transworld which was an integral part of the four-span building occupied by Transworld, knowing fully well the existence of such building adjoining and intercommunicating with the right section of the fourspan building. - Ind Indeed eed,, the stipulat stipulation ion as to the cover coverage age of the fire ins insura urance nce pol policy icy under
insurable interest in said goods or items. - The Court denied the appeal with finality. - Petitioner Rizal Insurance and private respondent Transworld, interposed a Motion for Reconsideration before the Court of Appeals, which reconsidered its decision of July 15, 1993, as regards the imposition of interest. - Undaunted, petitioner Rizal Surety & Insurance Company found its way to the Court.
controvers contr oversy y has created a doubt regardi regarding ng the portions of the building insured thereby. Article 1377 of the New Civil Code provides: "Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity" - Conformably, it stands to reason that the doubt should be resolved against the petitioner, petit ioner, Rizal Surety Insurance Company, whose lawyer or managers drafted the fire insurance policy contract under scrutiny. Citing the aforecited provision of law in point, the Court in Landicho vs. Government Service Insurance System, System, ruled: "This is particularly true as regards insurance policies, in respect of which it is settled that the 'terms in an insurance policy, which are ambiguous, equivocal, or uncertain x x x are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where forfeiture is involved' and the reason for this is that the 'insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company.' " - Equally relevant relevant is the followi following ng disquisi disquisition tion of the Court in Fieldmen's Insurance Company, Inc. vs. Vda. De Songco, to Songco, to wit: "'This rigid application of the rule on ambiguities has become necessary in view of curren currentt bus busine iness ss pra practi ctices ces.. The courts courts cannot cannot ignore ignore that that now nowada adays ys monopolies monop olies,, cartel cartels s and concentrat concentration ion of capit capital, al, endowe endowed d with overwhelming overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared 'agreements' that the weaker party may not change one whit, his participation in the 'agreement' being reduced to the alternative to 'take it or leave it' labelled since Raymond Saleilles 'contracts by adherence' (contrats [sic] d'adhesion), in contrast to these entered into by parties bargaining on an equal footing, footi ng, such contr contracts acts (of which polici policies es of insurance insurance and inter internatio national nal bills of lading are prime example) obviously call for greater strictness and vigilance on
ISSUE WON the fire insurance policy litigated upon protected only the contents of the main building (four-span), and did not include those stored in the two-storey annex building HELD NO - Resolution of the issue posited hinges on the proper interpretation of the stipulation in subject fire insurance policy regarding its coverage, which reads: "xxx contained contained and/o and/orr stored during the currency currency of this Policy in the premis premises es occupied by them forming part of the buildings situate (sic) within own Compound xxx" - It can be gleaned unerringly that the fire insurance policy in question did not limit its coverage to what were stored in the four-span building. As opined by the trial court of origin, origi n, two requirements requirements must concur in order that the said fun and amuse amusement ment machines and spare parts would be deemed protected by the fire insurance policy under scrutiny, to wit: "First,, said properties "First properties must be contained and/or stored in the areas occupi occupied ed by Transworld and second, said areas must form part of the building described in the policy xxx" - Said building building of four-span lofty one storey storey in height with mezzanine mezzanine portions is constr construct ucted ed of reinfo reinforce rced d concre concrete te and hol hollow low blo blocks cks and/or and/or concre concrete te under under
galvanized galva nized iron roof and occupied occupied as hosie hosiery ry mills, mills, garmen garmentt and lingerie factory, transistor-stereo assembly plant, offices, ware house and caretaker's quarter. - The Court is mindful of the well-entrenched doctrine that factual findings by the Court of Appeals are conclusive on the parties and not reviewable by this Court, and the same carry even more weight when the Court of Appeals has affirmed the findings of fact arrived at by the lower court. - In the case under consideration, both the trial court and the Court of Appeals found that the so called "annex " was not an annex building but an integral and inseparable part of the four-span building described in the policy and consequently, the machines and spare parts stored therein were covered by the fire insurance in dispute. - Verily, Verily, the two-storey building building involved, involved, a permanent permanent structure which adjoins and intercommunicates with the "first right span of the lofty storey building", formed part thereof, and meets the requisites for compensability under the fire insurance policy sued upon. - So also, considerin considering g that the two-st two-storey orey building aforementione aforementioned d was already existing exist ing when subje subject ct fire insurance insurance policy contract was entere entered d into, petitio petitioner ner should have specifically excluded the said two-storey building from the coverage of the fire insurance if minded to exclude the same but if did not, and instead, went on to provide that such fire insurance policy covers the products, raw materials and
the part of courts of justice with a view to protecting the weaker party from abuses and imposition, and prevent their becom ing traps for the unwary.'" - The issue of whether or not Transworld has an insurable interest in the fun and amusement machines and spare parts, which entitles it to be indemnified for the loss thereo thereof, f, had been settl settled ed in G.R. G.R. No. L-111118, L-111118, entit entitled led New India Assur Assurance ance Company, Ltd., vs. Court of Appeals, Appeals , where the appeal of New India from the decision of the Court of Appeals under review, was denied with finality by this Court on February 2, 1994. - The rule rule on conclu conclusiv sivene eness ss of jud judgmen gment, t, which which obt obtain ains s under under the pre premis mises, es, precludes the relitigation of a particular fact or issue in another action between the same parties based on a different claim or cause of action. "xxx the judgment in the pri prior or action action opera operates tes as estopp estoppel el only only as to those those matter matters s in issue issue or poi points nts controverted, upon the determination of which the finding or judgment was rendered. In fine, the previous judgment is conclusive in the second case, only as those matters actually actua lly and directly directly controver controverted ted and determined determined and not as to matters merel merely y involved therein." Decision, on, and the Resoluti Resolution on of the CA WERE AFFIRMED in toto. toto. No Disposition Decisi Disposition pronouncement as to costs.
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pAgE 22 PA PAN N MALA MALAYA YAN N IN INSU SURA RANC NCE E CO CORP RPOR ORAT ATIO ION N vs. COURT OF APPEALS (ERLINDA FABIE & HER UNKNOWN DRIVER) 184 SCRA 55; G.R. No. 81026 CORTES; April 3, 1990 FACTS - 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 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, 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. PANMALAY clarified that the damage caused to the insured car was settled settled under the "own damage", coverage of the insuranc insurance e policy.
- Private filed a Motion to Dismiss alleging that PANMALAY had no cause of action respondents against them. RTC dismissed PANMALAY's complaint for no cause of action and denied PANMALAY's motion for reconsideration. CA affirmed. Hence, this petition for review. ISSUE WON 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 HELD YES - 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. - Gene General ral Rule: Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence negligence or wrongf wrongful ul act cause caused d the loss. The right of subrogati subrogation on is not dependent dependent upon, nor does it grow out of, any privity privity of contr contract act or upon writt written en assignment of claim. It accrues simply upon payment of the insurance claim by the insurer. - Exceptions: a.) if the assured by his own act releases the wrongdoer or third party liable for the loss or damage, from liability b.) where the insurer pays the assured the value of the lost goods without notifying the carrier who has in g ood faith settled the assured's claim for loss c.) where the insurer pays the assured for a loss which is not a risk covered by the
effecting "voluntary -policy, None thereby of the exceptions are availingpayment" in the present case. - When PANMALAY utilized the phrase "own damage" — a phrase which, incidentally, is not found found in the ins insura urance nce policy policy — to define the basis for its settlem settlement ent of
CANLUBANG' CANLUBA NG's s claim claim under under the polic policy, y, it simply simply meant that it had assum assumed ed to reimburse the costs for repairing the damage the damage to the insured vehicle. - It is a basic rule in the interpretation of contracts that the terms of a contract are to be construed according to the sense and meaning of the terms which the parties thereto have used. In the case of property insurance policies, the evident intention of the contracting parties, i.e., the insurer and the assured, determine the import of the various terms and provisions embodied in the policy. It is only when the terms of the policy are ambiguous, equivocal or uncertain, such that the parties themselves disagree about the meaning of particular provisions, that the courts will intervene. In such an event, the policy will be construed by the courts liberally in favor of the assured and strictly against the insurer . - Considering that the very parties to the policy were not shown to be in disagreement regarding regar ding the meani meaning ng and coverage of Section Section III-1, specifica specifically lly sub-paragr sub-paragraph aph (a) thereof, it was improper for the appellate court to indulge in contract construction, to apply the ejusdem generis rule, generis rule, and to ascribe meaning contrary to the clear intention and understanding of these parties. - Although the terms "accident" or "accidental" as used in insurance contracts have not acquired a technical meaning, the Court has on several occasions defined these terms to mean that which takes place "without one's foresight or expectation, an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected." The concept "accident" is not necessarily synonymous with the concept of "no fault". It may be utilized simply to distinguish intentional or malicious acts from negligent or careless acts of man. - Obiter Dicta: Even Dicta: 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. 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. Disposition Petition is GRANTED. Petitioner's complaint for damages against private respondents is REINSTATED. Case remanded to the lower court for trial on the merits.
AMER AM ERIC ICAN AN
HOME HOME
AS ASSU SURA RANC NCE E
COMP COMPAN ANY Y
V
TANT TANTUC UCO O
ENTERPRISES 366 SCRA 740 PUNO; October 8, 2001 NATURE Petition for Review on Certiorari assailing the Decision of the Court of Appeals. FACTS - Respo Respondent ndent Tantuco Enterprises Enterprises,, Inc. is engaged engaged in the coconut oil milli milling ng and refining industry. It owns two oil oil mills. Both are located at its factory compound at Iyam, Lucena City. Respondent commenced its business business operations with only only one oil mill. In 1988, it started operating its seco second nd oil mill ( the new oil mill). - The two oil mills were separately covere covered d by fire insurance policies policies issued by petitioner American Home Assurance Co. The first oil mill was insured Policy No. 306-
7432324-3 for the period March 1991term. to 1992.The new oil mill was insured under Policy No. 306-7432321-9 for the1,same Official receipts indicating payment for the full amount of the premium were issued by the petitioner's agent. - Policy description:
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Dean Carale
pAgE 23 Front: by a driveway thence at 18 meters dis distance tance by Bldg. No. 2. Right: by an open space thence by Bldg. No. 4. Left: Adjoining thence an imperfect wall by Bldg. No. 4. Rear: by an an open space thence thence at 8 meters distance.” distance.” - A fir fire e that that bro broke ke out in the early early mornin morning g of Septem September ber 30,1991 30,1991 gutted and consumed the new oil mill. Petitioner rejected respondent’s claim for the insurance proceeds on the ground that no policy policy was issued by it covering the bur burned ned oil mill. It stated that the description of the insured establishment referred to another building. Petitioner’s Claim The policies referred to the old mill, as stated in the description contained in the policy. ISSUE WON new oil mill is insured by fire insurance policy HELD YES, new oil mill is insured. Ratio Ratio In construing the words used descriptive of a building insured, the greatest liberality liber ality is shown by the courts in giving effect to the insur insurance. ance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely, unlik ely, the courts courts are inclined to consider that the policy of insurance insurance covers any building build ing which the parties manifestly manifestly inten intended ded to insur insure, e, howeve howeverr inaccurate inaccurate the description may be. Reasoning - The parties manifestly intended to insure the new oil mill. “On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of copra, copra cake and copra mills whilst contained in the new oil mill building, situate (sic) at UNNO. ALONG NATIONAL HIGH WAY, BO. IYAM, LUCENA CITY UNBLOCKED.” - If the parties really intended to protect the first oil mill, then there is no need to specify it as new. It would be absurd to assume that respondent would protect its first oil mill for different amounts and leave uncovered its second one. - As may be gleaned from the testimony of the petitioner’s employee, the source of the discrepancy happened during the preparation of the written contract.
- Respondent Respondent is not estopped estopped from claiming claiming that the policy policy descriptio description n is wrong. Evidence on record reveals that respondent’s operating manager, Mr. Edison Tantuco, notified notif ied the petit petitioner ioner’s ’s agent with whom respondent negotiated negotiated for the contract about the inaccurate inaccurate descriptio description n in the policy. policy. Howeve However, r, Mr. Borja assured Mr. Tantuco that the use of the adjective new will distinguish the insured property. - Regarding Regarding policy requirement requirements s that fire extinguishm extinguishment ent appliances should be available avail able and in good working working condition, warranty warranty did not requir require e respondent to provide for all the fire extinguishing extinguishing appliances enumerated therein. Neither did it require that the appliances are restricted to those mentioned in the warranty. (Within the vicinity of the new oil mill can be found the following devices: numerous portable fire extinguishers, two fire hoses, fire hydrant, and an emergency fire engine.) - The object object of the court in construin construing g a contra contract ct is to ascertain ascertain the intent of the parties to the contract and to enforce the agreement which the parties have entered into. In determining what the parties intended, the courts will read and construe the policy as a whole and if possible, give effect to all the parts of the contract. Disposition Petition is dismissed.
PE PERL RLA A COMP COMPAN ANIA IA DE SEGU SEGURO ROS, S, IN INC. C. v, CA (M (MIL ILAG AGRO ROS S CAYAS) 185 SCRA 741 FERNAN; May 28, 1990 NATURE Petition for review on certiorari certiorari of of a decision of the Court of Appeals FACTS - Private respondent Milagros Cayas was the registered owner of a Mazda bus, insured with Perla Compania de Seguros, Inc. (PCSI) under a policy issued on February 3, 1978. - On December 17, 1978, the bus figured in an accident in Naic, Cavite injuring several of its passengers. - One of them, 19-year old Edgardo Perea, sued Milagros Cayas for damages in the CFI of Cavite, while three others agreed to a settlement of P4,000.00 each. - After trial, the court rende rendered red a decision decision in favor of Perea, ordering Cayas to compen com pensat sate e him, him, with with an award award of exe exempl mplary ary and moral moral dam damage ages, s, as wel welll as attorney’s fees. ( P32,000 total) - On November 11, 1981, Milagros Cayas filed a complaint for a sum of money and damages against PCSI in the Court of First Instance of Cavite. - In view of Milagros Cayas' Cayas' failure to prosecute prosecute the case, the court motu propio ordered its dismissal without prejudice. - Alleging that she had not received a copy of the answer to the complaint, and that "out of sportsmanship", she did not file a motion to hold PCSI in default, Milagros Cayas Cayas mov moved ed for the recons reconside iderat ration ion of the dis dismis missal sal ord order. er. Sai Said d motion motion for reconsideration was acted upon favorably by the court. - About two months later, Milagros Cayas filed a motion to declare PCSI in default for its failure to file an answer. - The motion was granted and plaintiff was allowed to adduce evidence ex-parte ex-parte.. - On July 13, 1982, the court rendered judgment by default ordering PCSI to pay Milagros Cayas P50,000 as compensation for the injured passengers, P5,000 as moral damages and P5,000 as attorney's fees.
- Said decision was set aside after the PCSI filed a motion therefor. Trial of the case ensued. - In due course, the court promulgated a decision ordering defendant Perla Compania de Seguros, Inc. to pay plainti plaintiff ff Milagros Cayas the sum of P50,000.00 P50,000.00 under its maximum liability as provided for in the insurance policy; and the sum of P5,000.00 as reasonable attorney's fee - PCSI appealed to the Court of Appeals, Appeals, which affirmed in toto toto the lower court's decision. - Its motion for reconsideration having been denied by said appellate court, PCSI filed this petition ISSUE WON, as maintained by petitioner, its liability is limited only to the payment made by private respondent to Perea and only up to the amount of P12,000.00 HELD YES - The insurance policy involved explicitly limits petitioner's liability to P12,000.00 per person and to P50,000.00 per accident.
iNsuRanCe
A2010
Dean Carale
pAgE 24 - IIn n Stoke Stokes s vs. Malay Malayan an Insurance Co., Inc., the Court held that the ter terms ms of the contract constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from the insurer. - In the case at bar, the insurance policy clearly and categorically placed petitioner's liability for all damages arising out of death or bodily injury sustained by one person
CHICO-NAZARIO; March 5, 2007
as a result of any one accident at P12,000.00. - Said amount complied with the minimum fixed by the law then prevailing, Section 377 of Presid President ential ial Decree No. 612 612,, which which pro provid vided ed that that the liabi liabilit lity y of land land transportation vehicle operators for bodily injuries sustained by a passenger arising out of the use of their vehicles shall not be less than P12,000. - In other other wor words, ds, under under the law, law, the minimu minimum m liabi liability lity is P12,000 per passenger. passenger. Petitioner's liability under the insurance contract not being less than P12,000.00, and therefore not contrary to law, morals, good customs, public order or public policy, said stipulation must be upheld as effective, valid and binding as between the parties. - In like manner, we rule as valid and binding upon private respondent the condition requiring requi ring her to secure the written permissi permission on of petitioner petitioner before effectin effecting g any payment in settlement of any claim against her. - There is nothing unreasonable, arbitrary or objectionable in this stipulation as would warrant its nullification. The same was obviously designed to safeguard the insurer's interest against collusion between the insured and the claimants. - It being specifically required that petitioner's written consent be first secured before any paymen paymentt in set settle tlemen mentt of any claim could could be made, made, pri privat vate e respon responden dentt is precluded precl uded from seeking seeking reimb reimburseme ursement nt of the payments made to the three three other passangers passa ngers in view of her failure failure to comply with the condi condition tion contained contained in the insurance policy. - Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case. - It was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance policy. - In Phil. American General Insurance Co., Inc vs. Mutuc, Mutuc, we we ruled that contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are obligatory, no matter
FACTS - Petitioners Petitioners POLTAN obtai obtained ned a loan evidenc evidenced ed by a promissory note from the MANTRADE Dev’t Corp. This was secured by a chattel mortgage over a 1-unit Nissan Sentra vehicle. - Wit With h notice notice to pet petiti itione oners, rs, MANTR MANTRADE ADE assig assigned ned to BPI, by way of a Deed of Assignment, Assig nment, all its right rights, s, title and interest to the promissor promissory y note and chattel chattel mortgage. - Petitioners defaulted and so BPI demanded the whole balance of P286.5T including accrue accrued d int intere erest, st, or to retur return n to BPI the poss possess ession ion of the motor vehicle vehicle for foreclosur forec losure. e. It is specifica specifically lly provided in the promissory note and chattel chattel mortgage that failure to pay any installment when due shall make subsequent installments and the entire balance of the obligation due and payable. - After they refused to do so, BPI then filed complaint. - Petitioners claimed that BPI required them to obtain a motor vehicle insurance policy
what form they may be, whenever the essential essential requisites requisites for their validity validity are present. - In Pacific Oxygen & Acetylene Co. vs. Central Bank ," ," it was stated that the first and fundamental duty of the courts is the application of the law according to its express terms, interpretation being called for only when such literal application is impossible. - We observe that although Milagros Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable for the amount of P50,000.00, the maximum liability liabi lity per accident accident stipulated stipulated in the policy. policy. This is paten patentt error error.. An insurance insurance ind indemn emnity ity,, being being merely merely an ass assist istanc ance e or restit restituti ution on ins insofa ofarr as can be fairly fairly ascertained, cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason of an accident. Disposition Petition granted. The decision of the Court of Appeals is modified in that petitioner shall pay Milagros Cayas the amount of Twelve Thousand Pesos (P12,000. 00) plus legal interest from the promulgation of the decision of the lower court until it is fully paid and attorney's fees in the amount of P5,000.00.
POLTAN v. BPI & JOHN DOE G.R. No. 164307
NATURE Petition for review of CA decision
from FGU paying Insurance (FGU Insurance). This is auntil sister company They had been theCorporation monthly installments on the vehicle it figured in of anBPI. accident where it became a total wreck. Under the terms of the insuran insurance ce policy from FGU Insurance, the vehicle had to be replaced or its value paid to them. Due to the failure and refusal of FGU Insurance to replace the vehicle or pay its value, they stopped payment of the monthly installments. - RTC ordered POLTANS to pay BPI the said amount. - CA reversed and remanded case to RTC for trial on the merits. - RTC again ruled in favor of BPI. CA affirmed. ISSUES 1. WON contra contracts cts pre presen sented ted in evi eviden dence ce by BPI were were unjust unjust and unacce unaccepta ptable ble contracts of adhesion 2. WON the terms and conditions of the comprehensive car insurance policy issued by FGU should be deemed as having automat automaticall ically y operated in favor of BPI as the assured mortgagee, and if so, it should be deemed as resulting in the extinguishment of petitioner’s obligation HELD 1. NO Ratio A contract of adhesion is one in which one of the parties imposes a readymade form of contract, which the other party may accept or reject, but which the latter cannot modify. It is just as binding as ordinary contracts. Reasoning - Petitioners failed to show that they were under duress or forced to sign the loan documents. docume nts. The natura naturall presu presumption mption is that one does not sign a docume document nt without first informing himself of i ts contents an d consequences. - Contracts of adhesion are not entirely prohibited even as the courts remain careful in scr scruti utiniz nizing ing the factua factuall cir circum cumsta stance nces s underl underlyin ying g each each case case to det determ ermine ine the
respective claims of contending parties on their efficacy. 2. NO Reasoning - Petitioners failed to show any provision in the insurance policy or mortgage contract providing that the loss of the mortgaged vehicle extinguishes their principal obligation
iNsuRanCe
A2010
Dean Carale
pAgE 25 to BP I. - While it is true that the proceeds from the insurance policy over the mortgaged chattel chatt el is for the benefit of BPI, this will result in partial or full satisfacti satisfaction on of the obligation oblig ation only if the insurer pays the mortgagee, BPI, or if the insurance proceeds were paid to BPI. In this case, upon the loss of the vehicle due to total wreck, the
Phoenix Phoeni x Assurance Co., Ltd. the basic rule is that the insurance company has the burden of proving that the loss is caused by the risk excepted and for want of such proof, the company is liable. In the present case, there being no showing that the loss was caused by any of the excepted perils, the insurer is liable under the policy. 2. YES
petitioner petit ioners s filed a claim under the insurance insurance policy, collected collected and received received the pro procee ceeds ds thereo thereof, f, but did not set settle tle their their obliga obligatio tion n with with BPI which which remaine remained d outstanding despite the loss of the vehicle. modification that the interest rate be Disposition CA decision AFFIRMED with the modification reduced to 12% per annum from 24 May 1994 until fully paid, and the award of attorney’s fees be reduced to P50T.
- Section 13 of the Insurance Code defines insurable interest in property as every interest inter est in prope property, rty, whether real or personal, or any relation thereto thereto,, or liabilit liability y in respect thereof, of such nature that a contemplated peril might directly damnify the insured. insur ed. In principle, principle, anyone has an insur insurable able interes interestt in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property y. 16 Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. - Respondent’s interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale. - Further, Article 1523 of the Civil Code provi provides des that where, in pursu pursuance ance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for, the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining in the present case. The Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake of the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of the goods and paid the insurance premium covering them - Moreover, the issue of lack of insur insurable able intere interest st was not raised in petitione petitioner’s r’s answer. Disposition Petition denied Disposition
FILIPINO MERCHANTS INS. v. CA (CHOA TIEK SENG) 179 SCRA 638 REGALADO; November 28, 1989 NATURE Review of the decision of the CA FACTS - Plaintiff insured said shipment with defendant insurance company under said cargo for the goods described as 600 metric tons of fishmeal in new gunny bags of 90 kilos each each fro from m Bangko Bangkok, k, Thaila Thailand nd to Manila Manila agains againstt all ris risks ks und under er war wareho ehouse use to warehouse terms. - Some of the goods arrived in bad condition. Plaintiff made a claim against Filipino Merchants Insurance Company. The latter refused to pay. Plaintiff brought an action againstt them. The defendant agains defendant insurance company presented a third party complaint against the vessel and the arrastre contractor. - Jud Judgme gment nt was render rendered ed agains againstt the ins insura urance nce com compan pany. y. On the third third party party complaint, the third party defendants were ordered to pay the third party plaintiffs. The CA affirmed, but modified the same with regard to the adjudication of the thirdparty complaint ISSUES 1. WON some fortuity, casualty or accidental cause is needed to be proved despite the “all risks” policy (as asserted by the insurance company) 2. WON the respondent has an insurable interest HELD 1. NO - The very nature of the term "all risks" must be given a broad and comprehensive comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. 7 This is pursuant to the very purpose of an "all risks" insurance to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property. - Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The insured under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vessel; thereafter, thereafter, the burden then shifts to the insurer to show the exception exception to the coverage. coverage. As we held in Paris-Manila Perfumery Co. vs.
GAISANO CAGAYAN v. INSURANCE Co. OF NORTH AMERICA 490 SCRA 296 Austria-Martinez; June 8, 2006 NATURE Petition for review on certiorari certiorari of of the Decision of the Court of Appeals FACTS - Interc Intercapitol apitol Market Marketing ing Corporati Corporation on (IMC) is the maker of Wrangl Wrangler er Blue Jeans. Levi Strauss Strau ss (Phils.) Inc. (LSPI) is the local distr distributo ibutorr of products products bearing trademarks owned by Levi Strauss & Co.. Co.. IMC and LSPI separately obtained from respondent fire insurance policies with with book debt endorsements. The insurance poli policies cies provide for coverage cover age on “book debts in connection connection with ready-made clothin clothing g materi materials als which have been sold or delivered to various customers and dealers of the Insured anywhere in the Phili Philippines ppines.” .” The policies policies defined book debts as the “unpai “unpaid d accoun accountt still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy.” The policies also provide for the following conditions: 1. Warranted that the the Company shall not be liable liable for any unpaid account in respect of the merchandise sold and delivered by the Insured which are outstanding at the date of loss for a period in excess of six (6) months from the date of the covering invoice or actual delivery of the merchandise whichever shall first occur.
iNsuRanCe
A2010
Dean Carale
pAgE 26 2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month all amount shown in their books of accounts as unpaid and thus become receivable item item from their customers customers and dealers. x x x - Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing materials sold and and delivered by IMC and LSPI. On February 4, 1992, respondent filed a complaint for damages against petitioner. It alleges that IMC and LSPI filed with respondent their claims under their respective respective fire insur insurance ance policies polic ies with book debt endorse endorsements; ments; that as of Februa February ry 25, 1991, the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their rights against petitioner; that respondent made several demands for payment upon petitioner petit ioner but these went unheeded. unheeded. In its Answer Answer with Counter Claim dated July 4, 1995, petitioner petitioner contends that it could not be held liable because the property covered covere d by the insurance insurance policies were destroyed destroyed due to fortuities fortuities event or force majeure;; that respondent’s right of subrogation has no basis inasmuch as there was majeure no breach of contract committed by it since the loss was due to fire which it could not prevent or foresee; that IMC and LSPI never communicated to it that they insured their properties; that it never consented to paying the claim of the insured. - At the pre-trial conference the parties failed to arrive at an amicable settlement. Thus, trial on the merits ensued. On August 31, 1998, the RTC rendered its decision dismissing respondent’s complaint. It held that the fire was purely accidental; that the cause of the fire was not attributable to the negligence of the petitioner; that it has not been established that petitioner is the debtor of IMC and LSPI; that since the sales invoices invoi ces state that “it is further further agreed that merely merely for purpose of securing securing the payment of purchase price, the above-described merchandise remains the property of the vendor until the purchase price is fully paid”, IMC and LSPI retained ownership of the delivered goods and must bear the loss. Dissatisfied, petitioner appealed to the CA. On October 11, 2000, the CA rendered its decision setting aside the decision of the RTC. The CA held held that that the sales invoices invoices are pro proofs ofs of sal sale, e, being being detail detailed ed statements of the nature, quantity and cost of the thing sold; that loss of the goods in the fire must be borne by petitioner since the proviso proviso contained contained in the sales invoices is an exception under Article 1504 (1) of the Civil Code, to the general rule that if the thing is lost by a fortuitous event, the risk is borne by the owner of the thing at the time the loss under the principle of res perit domino; domino; that petitioner’s obligation to IMC and LSPI is not the delivery of the lost goods but the payment of its unpaid account and as such the obligation to pay is not extinguished, even if the fire is considered a fortui fortuitou tous s eve event; nt; that that by subrog subrogati ation, on, the ins insure urerr has the rig right ht to go agains againstt petitioner petit ioner;; that, being a fire insurance insurance with book debt endor endorsement sements, s, what was ins insure ured d was the ven vendor dor’s ’s int intere erest st as a cre credit ditor. or. Petiti Petitione onerr fil filed ed a motion motion for reconsideration but it was denied by the CA in its Resolution dated April 11, 2001. ISSUES 1. WON the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner. 2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales invoices that “[i]t is further agreed that merely for pur purpos pose e of sec securi uring ng the paymen paymentt of the pur purcha chase se pri price ce the above above descri described bed merchandise remains the property of the vendor until the purchase price thereof is fully paid.”
3. WON the petitioner liable for the unpaid accounts HELD 1. NO - It is well-settled that when the words of a contract are plain and readily understood,
there is no room for construction. construction. In this case, the quest questioned ioned insurance insurance policies provide coverage for “book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines.”; and defined book debts as the “unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy.” Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the goods sold and delivered to the customers and dealers of the insured. - Indeed, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. Thus, what wer were e ins insure ured d aga agains instt were were the accounts accounts of IMC and LSPI with pet petiti itione onerr which which remained unpaid 45 days after the loss through fire, and not the loss or destruction of the goods delivered. 2. NO - The present case clearly falls under paragraph (1), Article 1504 of the Civil Code: ART. 1504. Unless otherwise agreed, the goods remain at the seller’s risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer’s risk whether actual delivery has been made or not, not, except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer’s risk from the time of such delivery; (Emphasis supplied) - Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the buyer. Accordingly, petitioner bears the risk of loss of the goods delivered. - IMC and LSPI did not lose complete complete interest over the goods. They have an insurable interest until full payment interest payment of the value of the deliv delivered ered goods. Unlike the civil law conceptt of res perit domino concep domino,, where ownership is the basis for consideration of who bears the risk of loss, in property insurance, one’s interest is not determined by concept of title, but whether insured has substantial economic interest in the property. - Section 13 of our Insurance Code defines insurable interest as “every interest in property, prope rty, whether real or perso personal, nal, or any relation thereto, thereto, or liabilit liability y in respect thereof, of such nature that a contemplated peril might directly damnify the insured.” Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. - Therefore, an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of, the subject matter of the insurance, and neither neith er the title title nor a benefi beneficial cial intere interest st is requi requisite site to the exist existence ence of such an interest, it is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured. Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction. Indeed, a vendor or seller
iNsuRanCe
A2010
Dean Carale
pAgE 27 retains an insur retains insurable able interes interestt in the property property sold so long as he has any interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor’s lien. In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of the loss covered by the policies. 3. YES - Petitioner’s argument that it is not liable because the fire is a fortuitous event under Article 1174 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code. - Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner’s accounts with IMC and LSPI that remained unpaid 45 days after the fire. Accordingly, petitioner’s obligation is for the payment of money. Where the obligation consists in the payment of money, the failure of the debtor to make the payment even by reason of a fortuitous event shall not relieve him of his liability. The rationale for this is that the rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous fortuitous event only holds true when the obligatio obligation n consists in the delivery of a determinate thing and there is no stipulation holding him liable liabl e even in case of fortuitous fortuitous event. It does not apply when the obl obligati igation on is pecuniary in nature.
Levi’s products products in the amount of P535,613 P535,613.00 .00 in the fire that razed petit petitioner ioner’s ’s building on February 25, 1991. - Moreover, there is no proof of full settlement of the insurance claim of LSPI; no subrog subrogati ation on receip receiptt was offere offered d in evi eviden dence. ce. Thu Thus, s, there there is no evi eviden dence ce tha thatt respondent has been subrogated to any right which LSPI may have against petitioner. Failure Failu re to subst substantiat antiate e the claim of subrogati subrogation on is fatal to petit petitioner’ ioner’s s case for recovery of the amount of P535,613.00. Petition ion is partly GRANTED . The assailed Decisio Decision n dated October 11, Disposition Petit 2000 and Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV No. 61848 are AFFIRMED with the MODIFICATION that the order to pay the amount of P535,613.00 to respondent is DELETED for lack of factual basis.
-loss Under Article 1263ofofanything the Civilof Code, “[i]n an obligation deliver a generic thing, the or destruction the same kind does nottoextinguish the obligation.” If the obligation is generic in the sense that the object thereof is designated merely by its class or genus without any particular designation or physical segregation from all others of the same class, the loss or destruction of anything of the same kind even without the debtor’s fault and before he has incurred in delay will not have the effect of extinguishing the obligation. This rule is based on the principle that the genus of a thing thing can never peri perish. sh. Genus nunquan perit . An obligation obligation to pay money is generic; gener ic; therefore, therefore, it is not excused by fortuito fortuitous us loss of any specific property of the debtor. - Thus, whether fire is a fortuitous fortuitous event or petit petitioner ioner was negligent are matters immaterial to this case. What is relevant here is whether it has been established that petitioner has outstanding accounts with IMC and LSPI. - With respect to IMC, the respondent has adequately established its claim. Petitioner has an outstanding account with IMC in the amount of P2,119,205.00, check voucher
Petition for review on certiorari of the decision of the Insurance Comm ission
evi eviden dencin cing g paymen paymentt to IMC, subrogat subrogation ion receip receiptt exe execut cuted ed by IMC in favor favor of respondent upon receipt of the insurance proceeds. All these documents have been properly proper ly identif identified, ied, present presented ed and marked as exhibit exhibits s in court court.. The subroga subrogation tion receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. Respondent’s action against petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides: Art. Art. 220 2207. 7. If the pla plaint intiff iff’s ’s proper property ty has been been ins insure ured, d, and he has receiv received ed indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. x x x - Petitioner failed to refute respondent’s evidence. - As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. No evidentiary weight can be given to Exhibit “F Levi Stra Strauss”, uss”, a letter dated April 23, 1991 from petitioner’s General Manager, Stephen S. Gaisano, Jr., since it is not an admission of petitioner’s petitioner’s unpaid account with LSPI. It only confirms the loss of
TAI TONG CHUACHE & CO v. INSURANCE COMMISSION and TRAVELLERS MULTI-INDEMNITY CORPORATION 158 SCRA 366 GANCAYCO; February 29, 1988 NATURE
FACTS - Complainants Palomo acquired a parcel of land and a building located in Davao City. They assumed the mortgage of the building in favor of SSS, which building was insured with respondent SSS Accredited Group of Insurers for P25K. - On April 19, 1975, Azucena Palomo obtai obtained ned a P100K loan from Tai Tong Chuach Chuache e Inc. Inc. (TTCC) (TTCC) and executed a mortgage over the land and the building in favor of Tai Tong Chuache & Co. as security of payment .On April 25, 1975, Arsenio Chua, representat repre sentative ive of TTCC insured the latter's interest with Travellers Multi-Indemnity Corporation (Travellers) for P100K (P70K for bldg and P30K for the contents thereof) - On June 11, 1975, Pedro Palomo secured a Fire Insuran Insurance ce Policy, coveri covering ng the building for P50K with respondent Zenith Insurance Corporation (ZIC). Another Fire Insurance Insura nce Policy was later procured from respon respondent dent Philippin Philippine e British British Assur Assurance ance Company (PBAC), covering the same building for P50K and contents thereof for P70K. On July 31, 1975, the building and the contents were totally razed by fire. - Based on the computation of the loss, including the Travellers, respondents, ZIC, PBAC, and SSS paid their corresponding shares of the loss. Complainants were paid the followin following: g: P41,546 P41,546.79 .79 by PBAC PBAC,, P11, P11,877 877.14 .14 by ZIC ZIC,, and P5,936 P5,936.57 .57 by SSS SSS.. Demand was made from respondent Traveller Travellers s for its share in the loss but was refused. Hence, complainants demanded from the other 3 respondents the balance of each share in the loss based on the computation excluding Travellers Multi-Indemnity in the amount of P30,894.31 (P5,732.79-ZIC: P22,294.62, PBAC: and P2,866.90, SSS) but was refused, hence, this action. ISSUE WON petitioner Tai Tong has insurable interest in the said policy HELD
YES - First First,, respo respondent ndent insurance insurance commi commission ssion based its findi findings ngs on mere inference. Respondent Respo ndent Insurance Insurance Commis Commission sion absol absolved ved respondent respondent insurance insurance compan company y from liability on the basis of the certification issued by the then CFI, that in a certain civil action actio n against the Palomo Palomos, s, Arsenio Lopez Chua stands as the complain complainant ant and not
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pAgE 28 Tai Tong Chuache. From said evidence respondent commission inferred that the credit extended by herein petitioner to the Palomos secured by the insured property must have been paid. Such is a glaring error which this Court cannot sanction. - Second Second,, it has been held in a long long lin line e of cases that when the credi creditor tor is in posses possessio sion n of the document document of credit credit,, he need need not prove non-p non-paym ayment ent for it is presumed. The validity of the insurance policy taken b petitioner was not assailed by private priva te respondent respondent.. Moreover, Moreover, petitioner's petitioner's claim that the loan extended extended to the Palomos has not yet been paid was corroborated by Azucena Palomo who testified that they are still indebted to herein petitioner. So at the time of the fire, petitioner as mortgagee still had insurable interest therein. - And third, petitioner's petitioner's declara declaration tion that Arsenio Lopez Chua acts as the managing partner of the partnership was corroborated by respondent insurance company. Thus Chua Chua as the the mana managi ging ng part partne nerr of the the part partne ners rshi hip p may may exec execut ute e all all acts acts of administration including the right to sue debtors of the partnership in case of their failure to pay their obligations when it became due and demandable. Or at the least, Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an agent, it is understood that he acted for and in behalf of the firm. Disposition Appealed decision SET ASIDE and ANOTHER judgment is rendered order private respondent Travellers pay petitioner therespondent. face value of Fire Insurance Policy in the amount of P100K. Costs to against said private
- On Septe September mber 21, 1990, BF filed a complaint against Mrs. Perez seeking recission recission and declaration of nullity of the insurance contract in question. Mrs. Perez filed a conterclaim for the collection of Php150,000 plus damages. ISSUE WON there was a consummated contract of insurance between Perez and BF HELD NO - An essential requisite of a valid contract is consent. Consent must be manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. - The offer must be certain and the acceptance acceptance absolut absolute. e. When Perez filed the applicatio appli cation, n, it was subject to the acceptance of BF. The perfe perfection ction was also further conditioned upon (1) the issuance of the policy, policy, (2) the payment of the premium, and (3) the delivery to and acceptance by the applicant in good health. - The delivery and acceptance by the applicant was a suspensive condition which was
NATURE Petition for review on certiorari
not fulfilled inasmuch as the applicant was already dead at the time the policy was issued. The non-fulfillment of the condition resulted in the non-perfection of the contract. - An application for insurance is merely an offer which requires the overt act of the insurer insur er for it to ripen to a contra contract. ct. Delay in acting on the applicati application on does not constitute acceptance even though the insured has forwarded his first premium with his application. Delay, in this case, does not constitute gross negligence because the application was granted within the normal processing time. Disposition Decision of CA affirmed in so far as it declared the insurance policy for Php50,000 issued by BF null and void (no recission because it presupposes a valid contract)
FACTS - Primitivo Perez has been insured with the BF Lifeman Insurance Corporation (BF hereafter) since 1980 for Php20,000.
VDA. DE SINDAYEN v. INSULAR 62 Phil 51
Sometime in 1987, Rodolfo Lalog (agent of BF) convinced him to apply for additional insurance coverage of Php50,000. Perez Perez accomp accomplis lished hed the applic applicati ation on form form and passed passed the requir required ed medi medical cal examination. He also paid Php2,075 premium) to Lalog. - On November 25, 1987, Perez died while riding a banca which capsized during a storm. During this time his application papers for the additional insurance coverage was still with the Gumaca, Quezon office of BF. - Without knowing that Perez died on November November 25, 1987, BF approved Perez's application and issued the corresponding policy for the Php50,000 on December 2, 1987. - Virginia Virginia Perez (wife of the decea deceased) sed) claimed the benefi benefits ts under the insuranc insurance e policies of the deceased, but she was only able to receive Php40,000 under the first insurance policy. BF refused to pay the proceeds amounting to Php150,000 under the additional policy covera coverage ge of Php50,0 Php50,000 00 becaus because e they they mainta maintain in that that such such policy policy had not been been perfected.
BUTTE; September 4, 1935
PEREZ v. CA (BF LIFEMAN INSURANCE CORP.) 323 SCRA 613 YNARES-SANTIAGO; January 28, 2000 2000
FACTS - Arturo Sindayen, up to the time of his death on January 19, 1933, was employed as a linotype operator in the Bureau of Printing at Manila and had been such for eleven years prior thereto. While there he made a written application on December 26, 1932, to the def defend endant ant Ins Insula ularr Lif Life e Assura Assurance nce Co. Co.,, Ltd Ltd., ., throug through h its age agent, nt, Cri Cristo stobal bal Mendoza, for a policy of insurance on his life in the sum of P1,000 and he paid to the agent P15 cash as part of the first premium. It was agreed with the agent that the policy, when and if issued, should be delivered to his aunt. Felicidad Estrada, with whom Sindayen left the sum of P26.06 to complete the payment of the first annual premium of P40.06. - On Januar January y 1, 1933, 1933, Sin Sinday dayen, en, who was then twenty twenty-nin -nine e years years of age age,, was examined by the company's doctor who made a favorable report, to the company. On January 11, 1933, The company accepted the risk and issued policy No. 47710 dated back to December 1, 1932, and mailed the same to its agent, Cristobal Mendoz Mendoza, a, in Camiling, Tarlac, for delivery to the insured. -On January 11, 1933, Sindayen was at work in the Bureau of Printing. On January 12, he complained of a severe headache
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pAgE 29 and remained at home. On January 15, he called called a physi physician cian who found that he was suffering from acute nephritis and uremia and on January 19, 1933, he died. - On January 18, 1933, the agent, in accordance with his agreement with the insured, delivered the policy to Felicidad Estrada upon her payment of the balance of the first year's annual premium. The agent asked Felicidad Estrada if her nephew was in good health and she replied that she believed so because she had no information that he was sick and he thereupon delivered to her the policy. - On January 20, 1933, the agent learned of the death of Arturo Sindayen and called on Felicidad Estrada and asked her to return the policy. But he did not return or offer to return the premium paid. Felicidad Estrada on his aforesaid statement gave him the policy. - On February 4, 1933 Insular Life obtained from the beneficiary, Sindayen’s wife, her signature signat ure to a legal document entitled entitled "ACCORD, "ACCORD, SATISFACTION SATISFACTION AND RELEASE" RELEASE" whereby in consideration of the sum of P40.06 paid to her by a check of the company, she "assigns, releases and forever discharges said Isular Life Assurance Co., Ltd., its successors and assigns, of all claims, obligation in or indebtedness. The said check for P40.06 was never cashed but returned to the company and appears in the record of this case as Exhibit D. Thereupon this action was brought to enforce payment of the policy.
a case of waiver or of estoppel, but a case where the local agents, in the exercise of the powers lodged in them, accepted the premium and delivered the policy. That act binds their principal, the defendant.” - Mendoza was duly licensed by the Insurance Commissioner to act as the agent of the defendant insurance company. The well known custom of the insurance business and the evidence in this case prove that Mendoza was not regarded by the company as a mere conduit or automaton for the performance of the physical act of placing the policy in the hands of the insured - Granted that Mendoza's decision that the condition had been met by the insured and that it was proper to make a delivery of the policy to him is just as binding on the company as if the decision had been made by its board of directors. Granted that Mendoza made a mistake of judgement because he acted on insufficient evidence as to the state of health of the insured. But it is not charged that the mistake was induced by any misconduct or omission of duty of the insured. - It is the interest not only the applicant but of all insurance companies as well that there should be some act which gives the appli applicant cant the defini definite te assurance that the contract has been consummated. This sense of security and of peace of mind that one's defendants are provided for without risk either of loss or of litigation is the bedrock of life insurance. When the policy is issued and delivered, in the absence of
By the terms of theyear, policy, annual premium of P40.06 due on thecovering first daythe of December of each thean first premium already paid by is the insured period from December 1, 1932. It is to December 1, 1933. It is to be noted that the policy was not issued and the company assumed no actual risk prior to January 11, 1933.The application which the insured signed in Camiling, Tarlac, on December 26, 1932, contained among others the following provisions: “3 That the said policy shall not take effect until the first premium has been paid and the policy has been delivered to and accepted by me, while I am in good health.” -Main defense of the company in this case, namely, that the said policy never took effect because of paragraph 3 of the application above quoted, for at the time of its delivery by the agent as aforesaid the insured was not in good health
fraud or other grounds rescission, it is held plainly within of the that tha t there the re should sho uld befor any que questi stions ons hel d innot abe abeyan yance cetheorintention reserv reserved ed for parties future determination that leave the very existence of the contract in suspense and doubt. - It is theref therefore ore in the public interes interest, t, for the public is profo profoundly undly and generally interested in life insurance, as well as in the interest of the insurance companies themselves by giving certainly and security to their policies, that we are constrained to hold, as we, do, that the delivery of the policy to the insured by an agent of the company who is authorized to make delivery or without delivery is the final act which binds the company (and the insured as well) in the absence of fraud or other legal ground for rescission - The company therefor therefore e havin having g decided decided that all the conditi conditions ons precedent to the taking effect of the policy had been complied with and having accepted the premium and delivered the policy thereafter to the insured, the company is now estopped to assert that it never intended that the policy should take effect.
ISSUE WON the insurance policy is valid HELD YES - There is one line of cases which holds that the stipulation contained in paragraph 3 is in the nature of a condition precedent, that is to say, that there can be no valid delivery to the insured insured unl unless ess he is in good health at the time; that this condition precedent goes to the very essence of the contract and cannot be waived by the agent making delivery of the policy - On the other hand, a number of American decisions hold that an agent to whom a life insurance policy similar to the one here involved was sent with instructions to deliver it to the insured has authority to bind the company by making such delivery, although the insured was not in good health at the time of delivery, on the theory that the delivery of the policy being the final act to the consummation of the contract, the condition as to the insurer's good health was waived by the company. - we are inclined to the view that it is more consonant with the well known practice of life insurance companies and the evidence in the present case to rest our decision on the proposition that Mendoza was authorized by the company to make the delivery of the policy when he received the payment of the first premium and he was satisfied that the insured insured was in good health. As was well said in the case of MeLaurin vs. Mutual Life Insurance Co. “It is plain, therefore, that upon the facts it is not necessarily
SEPARATE OPINION IMPERIAL [dissent] - "A local agent of an insurance company, whose only power is to solicit applications for insurance, and forward them to the company for approval, when, if approved to the insured, has no power to waive any of the provision of the policy so delivered." - It is clear, therefore, that the delivery of the policy by Mendoza does not bind the defendant, nor is the defendant estopped from alleging its defense, for the simple reason that Mendoza was not an agent with authority to issue policies or to accept risks in the name of his principle. -There is another ground upon which the majority opinion is based, namely, that the defendant waived the defense it now invokes, by reason of the delivery of the policy by its invokes, by reason of the delivery of the policy by its agent. It is admitted that if the delivery of the policy was due to fraud, legally there could have been no waiver. In view of the facts established and admitted, there is no doubt, as to the existence of the fraud. -Estrada, -Estrada, as a repres representat entative ive of the insured was not only bound to give a truthful information on the state of health of the insured, but it was her duty to find out it his true state of health in order to give true and correct information. When she
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pAgE 30 gave Mendoza an incorrect incorrect information information tending tending to creat create e the impressio impression n that the ins insure ured d was well when in fact fact he was ser seriou iously sly ill, there there is no doubt doubt that she committed fraud and imparted a deceitful information to the defendant agent
FACTS - On September 24, 1917, Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of the company's Manila office and was given a receipt.
Reasoning - Until quite recently, all of the provisions concerning life insurance in the Philippines were found in the Code of Commerce and the Civil Code. After July 1, 1915, there was, however, in force the Insurance Act. No. 2427. Chapter IV of this Act concerns life and health insurance. The Act expressly repealed Title VIII of Book II and Section III of Title III of Book III of the code of Commerce. The law of insurance is consequently now found in the Insurance Act and the Civil Code. - While, as just noticed, the Insurance Act deals with life insurance, it is silent as to the methods to be followed in order that there may be a contract of insurance. On the other hand, the Civil Code, in article 1802, not only describes a contact of life annuity markedly similar to the one we are considering, but in two other articles, gives strong clues as to the proper disposition of the case. For instance, article 16 of the Civil Code provides provi des that "In matters which are gover governed ned by special special laws, any deficien deficiency cy of the latter shall be supplied by the provisions of this Code." On the supposition, therefore, which is incontestable, that the special law on the subject of insurance is deficient in enunciating the principles governing acceptance, the subject-matter of the Civil code, if there be any, would be controlling. In the Civil Code is found article 1262 providing that "Consent is shown by the concurrence of offer and acceptance with respect to the thing and the consideration which are to constitute the contract. An acceptance made
- The applic application ation was immediately immediatel y forwarded forwa rded theoffice headgave office of the company ny at Montreal, Canada. On November 26, 1917, the to head notice of compa acceptance by cable to Manila. (Whether on the same day the cable was received, notice was sent by the Manila office of Herrera that the application had been accepted, is a disputed point, which will be discussed later.) On December 4, 1917, the policy was issued at Montreal. On December 18, 1917, attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application. The following day the local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917. This letter was received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer died on December 20, 1917. - The chief clerk of the Manila Manila office of Sun Life testifie testified d that he prepared the letter and handed it to the local manager, Mr. E. E. White, for signature. The local manager, Mr. White, testified to having received the cablegram accepting the application of Mr. Herrer from the home office on November 26, 1917. He said that on the same day he
by letter shall not bind the person making the offer except from the time it came to his knowledge. - According to the provisional receipt, three things had to be accomplished by the insurance insur ance company before there was a contract: contract: (1) There had to be a medical examinatio exami nation n of the appli applicant; cant; (2) there had to be approv approval al of the application application by the he head ad offi office ce of the the comp compan any; y; and and (3) (3) this this ap appr prov oval al had had in so some me wa way y to be communicated by the company to the applicant. The further admitted facts are that the head office in Montreal did accept the application, did cable the Manila office to that effect, did actually issue the policy and did, through its agent in Manila, actually write the letter of notification and place it in the usual channels for transmission to the addressee. - The contract for a life annuity in the case at bar was not perfected because it has not been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant. Disposition Judgment is reversed, and the plaintiff shall have and recover from the
signed a letter notifying Mr. Herrer of this acceptance. The witness further said that letters, after being signed, were sent to the chief clerk and placed on the mailing desk for transmission. Mr. Tuason, who was the chief clerk on November 26, 1917, was not called as a witness. - For the defense, attorney Manuel Torres testified to having prepared the will of Joaquin Ma. Herrer. That on this occasion, Mr. Herrer mentioned his application for a life annuity, and that he said that the only document relating to the transaction in his possession posse ssion was the provisional provisional receipt. Rafael Enriq Enriquez, uez, the administrat administrator or of the estate, testified that he had gone through the effects of the deceased and had found no letter of notification from the insurance company to Mr. Herrer.
defendant the sum of P6,000 with legal interest from November 20, 1918, until paid, without special finding as to costs in either instance.
ENRIQUEZ v. SUN LIFE OF CANADA 41 PHIL 269 MALCOLM; November 29, 1920 NATURE Appeal from judgment of trial court denying plaintiff’s (administrator of the estate of the late Joaquin Joaquin Ma. Herrer) action to recover recover from the defendant defendant life insurance company the sum of pesos 6,000 paid by the deceased for a life annuity.
ISSUE WON there exists a contract for life annuity between Herrer and defendant HELD NO Ratio The law applicable to the case is found to be the second paragraph of article 1262 of the Civil Code providing that an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge.
VELA VELASC SCO O an and d AC ACOS OSTA TA INSURANCE CO., INC. 173 SCRA 228 REGALADO.; May 9, 1989
v.
AP APOS OSTO TOL L
an and d
MAHA MAHARL RLIK IKA A
NATURE Petition for review on certiorari FACTS - Petitioners were plaintiffs in a civil case of which public respondent Hon. Apostol was the judge. - The case was an offshoot of an incident: plaintiffs were riding in their car, when a
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pAgE 31 taxicab taxic ab crossed a center center isla island nd in the road and collided collided with their car. Private Private respondent Maharlika was eventually impleaded as a defendant in this case, with an allegation alleg ation that the taxic taxicab ab involved involved was insured insured against third party liabili liability ty for P20,000.00 with private respondent at the time of the accident - Maharlika claimed there was no cause of action against it because at the time of the accident, the alleged insurance policy was not in force due to the non-payment of the premium thereon. Also, even if the cab had been insured, the complaint would be premature since the policy provides that the insurer would be liable only when the insured becomes legally liable. - Trial court ruled in favor of the plaintiff, holding the defendants liable for repair of the car, medical expenses, etc. BUT Maharlike was exonerated on the gnd that the policy was not in force. - Petitioner Petitioners s elevated elevated this case to this court, court, fault faulting ing the respondent respondent judge for considering the defense of late payment of premium when “the same was waived at the pre-trial”, hence the evidence of late payment should be disregarded supposedly because the private respondent had admitted that such fact was not in issue. - (More pertinent to this class: ) petitioners assert that the private respondent had agreed to grant the then prospective insured a credit extension of the premium due. - This controversy arose under the old insurance law, Act No. 2427. -both The before accident occurred in 1973. The complaint wasno. filed on the July subsequent 20, 1974. insurance the effectivity of Presidential Decree 612, law which repealed its predecessor - The former insurance insurance law, which applies applies to the case here, provi provided: ded: An insurer insurer is entitled to the payment of premium as soon as the thing insured is exposed to the peril insured insured against, against, unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid.
ISSUE WON the insurance insurance policy would be valid and binding notwithstandi notwithstanding ng the nonpayment of the premium HELD NO Ratio Act No. 2427: an insurance policy would be valid and binding notwithstanding the non-payment non-payment of the premium if there was a clear agreement agreement to grant to the insured credit extension. Such agreement may be express or implied. Reasoning - Petitioners maintain that in spite of their late payment, the policy is binding because there was an implied agreement to grant a credit extension so as to make the policy effective. To them, the subsequent acceptance of the premium and delivery of the policy estops the respondent company from asserting that the policy is ineffective. The court however sees no proof of any such implied agreement. The purported nexus between the delivery of the policy and the grant of credit extension is too tenuous to support the conclusion for which petitioners contend. Parenthetically mention: in the present law, Section 77 of the Insurance Code of 1978 has deleted the clause "unless there is clear agreement to grant the insured credit extension of the premium due" which was then involved in this controversy. Dispo Dispositio sition n Fnding no reversible error, the judgment appealed from is hereby hereby AFFIRMED.
TIBAY v. CA (FORTUNE LIFE & GENERAL INSURANCE) 257 SCRA 126
BELLOSILLO; May 24, 1996 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 two-storey residentia residentiall build building ing located at 5855 Zobel Stree Street, t, Makati City, together toget her 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 premium of P2,9 P2,983. 83.50, 50, Violet Violeta a Tib Tibay ay only only pai paid d P600 thus leavin leaving g 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 Adjustment Servi Services, ces, Inc. (GASI) (GASI),, which immediately 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. Sec. 77 of the Insur Insuranc ance e Cod Code. e. Eff Effort orts s to settle settle the case case bef before ore the Ins Insura urance nce 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 attorn attorney' ey's s fees fees equ equiva ivalen lentt to 20% of the total claim claim.. The trial court ruled for petitioners. CA reversed. ISSUE WON a fire insuran insurance ce policy is valid, valid, binding binding and enforceable enforceable upon mere partial payment of premium HELD NO Ratio 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 parti partial al 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. Reasoning Reasoning - As expressly agreed upon in the contract, full payment must be made before the risk occurs for the policy to be considered effective and in force. Thus, no vinculum juris whereby where by the insurer bound itself to indemnify indemnify the assur assured ed according to law ever resulted resul ted from the fractiona fractionall paymen paymentt of premiu premium. m. The insurance contrac contractt itsel itselff expressly provided that the policy would be effective only when the premium was paid in ful full. l. It wou would ld have have bee been n altoge altogethe therr dif differ ferent ent were it not so sti stipul pulate ated. d. Erg Ergo, o, ♪
This policy including any renewal thereof and/or any endorsement thereon is not in force until the premium has been fully paid to and duly receipted by the Company in the manner provided herein.
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pAgE 32 petitioners had absolute freedom of choice whether or not to be insured by FORTUNE under the terms of its policy and they freely opted to adhere thereto. - Indeed, Indeed, and far more importantly, importantly, the cardin cardinal al polesta polestarr in the const constructi ruction on of an insurance insur ance contract is the intention intention of the parties as expres expressed sed in the policy. Courts have no other function but to enforce the same. The rule that contracts of insurance will be construed in favor of the insured and most strongly against the insurer should not be permitted to have the effect of making a plain agreement ambiguous and then construe it in favor of the insured. Verily, it is elemental law that the payment of premium is requisite to keep the policy of insurance in force. If the premium is not paid in the manner prescribed in the policy as intended by the parties the policy is ineffective ineff ective.. Parti Partial al payment even when accepted as a parti partial al payment will not keep the policy alive even for such fractional part of the year as the part payment bears to the whole payment. Disposition Petition is DENIED. Decision of the CA is AFFIRMED. Disposition
SEPARATE OPINION VITUG [dissent] - The law neither requires, nor measures the strength of the vinculum juris by, any specific amount of premium payment. It should thus be enough that payment on the premium, partly or in full, is made by the insured which the insurer accepts. In fine, it is either that a juridical tie exists (by such payment) or that it is not extant at all (by an absence thereof). Once the juridical relation comes into being, the full efficacy, not merely pro tanto, of the insurance contract naturally follows. Verily, not only is there an insurance perfected perfected but also a partially partially performed contract. contract. In case of loss, recove recovery ry on the basis of the full contra contract ct val value, ue, less the unpai unpaid d pre premiu mium m can accord according ingly ly be had; had; conver conversel sely, y, if no los loss s occurs occurs,, the insurer insurer can demand demand the payment of the unpaid balance of the premium. The insured, on the one hand, cannot avoid the obligation of paying the balance of the premium while the insurer, upon the other hand, cannot treat the contract as valid only for the purpose of collecting collecting premiums and as invalid for the purpose of indemnity.
MAKATI TUSCANY v. CA ( AMERICAN HOME ASSURANCE CO.) 215 SCRA 462 BELLOSILLO; November 6, 1992
- A third policy was again issued for the period 1 March 1984 to 1 March 1985. For this, petitioner made two installment payments, both accepted by AHAC. Thereafter, petitioner refused to pay the balance of the premium. AHAC filed an action to recover the unpaid balance of P314,103.05. - Petiti Petitioner oner explaine explained d that it disco discontinue ntinued d the payment of premiu premiums ms 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 following reservations: 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 premium payment. If there be any loss such is not covered. - Petitioner further claimed that the policy was never binding and valid, and no risk attached to the policy. It then pleaded a counterclaim for P152k 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. - Trial court dismissed the complaint and the counterclaim upon the following findings: (1) payment of the premiums of the three policies were made during the term of said policies, hence, it could be said, the reservations, no reservation risk attached under the policies; (2) asnot regards theinspite unpaidofpremiums, in viewthat of the in the receipts ordinarily ordinarily issued by AHAC on premiu premium m paymen payments ts the only plausi plausible ble conclusion is that AHAC has no right to demand their payment after the lapse of the term of said policy on March 1, 1985. Therefore, Tuscany was justified in refusing to pay the same. - CA modified the decision by ordering Tuscany to pay the balance of the premiums due on the third policy plus legal interest until fully paid, and affirming the denial of the counterclaim. Petitioner’s Claims Petitioner argues that where the premiums is not actually paid in full, the policy would only be effective if there is an acknowledgment in the policy of the receipt of premium purs pursua uant nt to Se Sec. c. 78 of the the Insu Insura ranc nce e Co Code de.. The The ab abse senc nce e of an ex expr pres ess s acknowledgme acknow ledgment nt in the polic policies ies of such receipt of the correspon corresponding ding premium payments, and petitioner's failure to pay said premiums on or before the effective dates of said policies rendered them invalid. invalid. Petitione Petitionerr thus concludes that there cannot be a perfec perfected ted contract of insuranc insurance e upon mere partial payment payment of the premiums because under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreement to the contrary.
NATURE Appeal from decision of the CA
ISSUE WON payment by installment of the premiums due on an insurance policy invalidates the contract of insurance
FACTS - American American Home Assurance Co. (AHAC), (AHAC), repres represented ented by America American n Internationa Internationall Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation an insurance policy on the latter's latter's building and premises, for the period 1 March 1982 to1 March 1983. The premium was paid on installments all of which were accepted by AHAC. - A secon second d policy was issued issued to renew the first one, this time cover covering ing the period 1 March 1983 to 1 March 1984. This was also pain in installment basis.
HELD Ratio 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. Reasoning - The obligation to pay premiums when due is ordinarily as indivisible obligation to pay the entire premium. Here, the parties herein agreed to make the premiums payable in installments, and there is no pretense that the parties never envisioned to make the
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pAgE 33 insurance contract binding between them. And the insured never informed the insurer that it was terminating the policy because the terms were unacceptable. - There is nothing in Section 77 which suggests that the parties may not agree to allow payment of the premiums in installment, or to consider the contract as valid and binding upon payment of the first premium. - The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. Acceptance of payments speaks loudly of the insurer's intention to honor the policies it issued to petitioner. Section n 78 of the Insurance Code in effect allows waiver by the insurer of the - Sectio 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 expressly prohibit an agreement agreement granting credit extension extension,, and such an agreement is not contrary to m orals, good customs, public order or public policy. - At the very least, least, both partie parties s should should be deemed deemed in estopp estoppel el to que questi stion on the arrangement they have voluntarily accepted. Disposition Judgment affirmed. Costs against petitioner.
SOUTH SEA SUR SOUTH SURETY ETY AND INSURA INSURANCE NCE v. CA (VALEN (VALENZUE ZUELA LA HARDWOOD) 244 SCRA 744 VITUG; June 2, 1995 NATURE Petition for review on certiorari 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. Policy. The vessel sank Jan 25, 1984.
- Hardwood filed claim withSea, South and Seven Bros. Trial Court favored Hardwood. CA decided against South butSea absolved Seven Bros. South Sea filed this instant petition. ISSUES WON the insurance contract was already in effect when the vessel sank HELD 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.
AREOLA v. CA (PRU AREOLA (PRUDENTI DENTIAL AL GUARANTEE GUARANTEE AND ASSURANCE, ASSURANCE, INC.) 236 SCRA 643
ROMERO; September 22, 1994 NATURE CERTIORARI FACTS - June 29, 1985- 7 months after the issuance of Santos Areola's Personal Accident Insurance Policy No. PA-20015 (covering a period of one year), Prudential unilaterally cancelled the same since company records revealed that Areola failed to pay his premiums. o Under the terms of the statement of account issued by Prudential, Areola was supposed suppos ed to pay the total amount of P1,609.65 which included the premium of P1,470.00, documentary stamp of P110.25 and 2% premium tax of P29.40. o The statement of account stated that it must not be considered a receipt as an official receipt will be issued upon payment of the account. And if payment was made to a representative, the client must demand for a Provisional Receipt and if Official Receipts aren’t received within 7 days, Prudential should be notified. If payment is made to their office, clients should demand for an OR. - August 3, 1985- Prudenti Prudential al offered to reins reinstate tate same polic policy y it had previ previously ously cancelled and even proposed to extend its lifetime to December 17, 1985, upon a
finding that the cancellation was erroneous and that the premiums were paid in full by Areola but were not remitted by Teofilo M. Malapit, Prudential's branch manager. Petitioners’ Claims - The fra fraudul udulent ent act of in misapp misapprop ropria riatin ting g Areola Areola’s ’s pre premiu mium m paymen payments ts is the proximate cause of the cancellation of the insurance policy. - Areola theorized that Malapit's Malapit's act of signing and even sending the notice of cancellation himself, notwithstanding his personal knowledge of petitioner-insured's full payment of premiums, further reinforces the allegation of bad faith. - Such fraudulent act committed by Malapit is attributable to Prudential. - Malapit's actuations are therefore not separate and distinct from that of Prudential’s. It must, therefore, bear the consequences of the erroneous cancellation of subject insurance policy caused by the non-remittance by its own employee of the premiums paid. - Sub Subseq sequen uentt reinst reinstate atement ment could could not pos possib sibly ly abs absolv olve e respon responden dentt ins insura urance nce company from liability, there being an obvious breach of contract. After all damage had already been inflicted on him and no amount of rectification could remedy the same. Respondent’s Argument - Pruden Prudential tial argues that where reinstat reinstatement, ement, the equita equitable ble relief sough soughtt by Areola Areola was granted at an opportune moment, i.e. prior to the filing of the complaint, Areola is left without a cause of action on which to predicate his claim for damages. - Reinstatement effectively restored Areola to all his rights under the policy. ISSUES 1. WON the erroneous act of canceling canceling subject insura insurance nce policy entitl entitle e petitione petitionerrinsured to payment of damages 2. WON the subsequent act of reinstating the wrongfully cancelled insurance policy obliterate whatever liability for damages Prudential has HELD 1. YES 2. NO Reasoning
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pAgE 34 - Malapit's fraudulent act of misappropriating the premiums paid by petitioner-insured is beyond doubt directly imputable to P rudential. - A corpor corporati ation, on, such such as res respon ponden dentt ins insura urance nce com compan pany, y, acts acts sol solely ely thru thru its employees. The latter’s acts are considered as its own for which it can be held to account. - The facts are clear as to the relationship between private respondent insurance company and Malapit. His act of receiving the premiums collected is well within the province of his authority as manager. Thus, his receipt of said premiums is receipt by private priva te respondent respondent insurance insurance company company who, by provi provision sion of law, particularly particularly under Article 1910 of the Civil Code, is bound by the acts of its agent. - Article 1910 thus reads: Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. - Malapit's failure to remit the premiums he received cannot constitute a defense for private priva te respondent respondent insurance company; no exoneration exoneration from liability liability could result result therefrom. - Prudential Prudential’s ’s earlier earlier act of reins reinstatin tating g the insurance policy policy can not oblit obliterate erate the injury inflicted petitioner-insured. - Respondent Respo ndent on company should be remin reminded ded that a contr contract act of insurance insurance creates reciprocal obligations for both insurer and insured. - Reciprocal obligations are those which arise from the same cause and in which each party is both a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. - Under the circumstances of instant case, the relationship as creditor and debtor between the parties arose from a common cause: i.e., by reason of their agreement to enter into a contract of insurance under whose terms, Prudential promised to extend protection prote ction to Areola against the risk insured for a considerati consideration on in the form of premiums to be paid by the latter. - Under the law governing reciprocal obligations, particularly the second paragraph of Articl Article e 1191 1191,, the inj injure ured d party, party, Areola in this this case, case, is giv given en a cho choice ice betwe between en ful fulfil fillme lment nt or rescis rescissio sion n of the oblig obligati ation on in case case one of the obligo obligors, rs, such as respondent insurance company, fails to comply with what is incumbent upon him. - However, said article entitles the injured party to payment of damages, regardless of whether he demands fulfillment or rescission of the obligation. - Untenable Untenable then is reinstateme reinstatement nt insur insurance ance company's argument, namely, that reinstateme reins tatement nt being equivalent equivalent to fulfillment fulfillment of its obligation, obligation, dives divests ts petit petitionerionerinsured of a rightful claim for payment of damages. Such a claim finds no support in our laws on obligations and contracts. DAMAGES: - The nature of damages to be awarded, however, would be in the form of nominal damages - Although the erroneous cancellation of the insurance policy constituted a breach of contra contract, ct, Pruden Prudentia tiall within within a reason reasonabl able e time time too took k ste steps ps to rectif rectify y the wrong wrong committed by reinstating the insurance policy of petitioner. - Moreover, no actual or substantial damage or injury was inflicted on petitioner Areola at the time the insurance policy was cancelled. - Nominal damages are "recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind, or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown.
on certiorari is hereby GRANTED. GRANTED. RTC’ s DECISION Disposition Petition for review on
is
REINSTATED.
UC UCPB PB
GE GENE NERA RAL L
INSU INSURA RANC NCE E
CO CO., .,
INC. INC.
v.
MASA MASAGA GANA NA
TELAMART, INC. 308 SCRA 259 PARDO; June 15, 1999 NATURE Petition for review on certiorari of a decision of the Court of Appeals. 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, Zu Zuel elli lig g Insu Insura ranc nce e Brok Broker ers, s, Inc. Inc. of its its inte intent ntio ion n not not to rene renew w the the po poli lici cies es..
- 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 insur insured ed pro proper perty ty razed razed by fir fire. e. On the same day day,, pet petiti itione onerr return returned ed 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 respon respondent' dent's s insured insured prope property rty razed by fire, and for attorney's fees. - On October 23, 1992, after its motion to dismiss had been denied, petitioner filed an answerr to the complain answe complaint. t. It alleg alleged ed that the complain complaintt "fails to state a cause of action"; that petitioner was not liable to -respondent for insurance proceeds under the policies polic ies because at the time of the loss of respo respondent' ndent's s property due to fire, the policies had long expired and were not renewed. After due trial, on March 10, 1993, the Regio Regional nal Trial Court, Branch 58, Makati, rendered decision, the dispositive portion of which reads: "WHEREFORE, "WHER EFORE, premises considered, considered, judgment is hereby rendere rendered d in favor of the plaintiff and agai n s t the defendant, as follows. "(1) Authorizing and allowing the plaintiff to consign/deposit with this Court the sum of P225,7 P225,753.9 53.95 5 (refus (refused ed by the def defend endant ant)) as ful fulll pay payment ment of the corres correspon pondin ding g premiums for the policies foroblig Exhibits C, D and E; "(2) Decla Declaring ring plaintiff plainti ff replacement-renewal to have fully complied with its obligation ationA,toB,pay the premium thereb thereby y render rendering ing the replac replaceme ement-r nt-rene enewal wal pol policy icy of Exh Exhibi ibits ts A, B, C, D and E effective and binding for the duration May 22, 1992 until May 22, 1993; and, ordering defendant to deliver forthwith to plaintiff the said replacement-renewal policies; "(3)
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pAgE 35 Declaring Exhibits A & B, in force from August 22, 1991 up to August 23, 1992 and August 9, 1991 to August 9, 1992, respectively; and "(4) Ordering the defendant to pay plaintiff plaintiff the sums of. (a) P18,645,000.00 P18,645,000.00 represe representing nting the latter's claim for indemnity under Exhibits A, B & C and/or its replacement-renewal policies; (b) 25% of the total amount due as and for attorney's fees; (c) P25,000.00 as necessary litigation expenses; and, (d) the costs of suit. “xxx ” - In due time, petitioner appealed to the Court of Appeals (CA). The CA promulgated its decision affirming that of the Regional Trial Court with the modification that item No. 3 of the dispositive portion was deleted, and the award of attorney's fees was reduced to 10% of the total amount due. It held that following previous practice, respondent was allowed a 60- to 90-day credit term for the renewal of its policies, and that the acceptance of the late premium payment suggested an understanding that payment could be made later. Hence, this appeal. ISSUE 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 was or renewed implied credit though payment of premium tenderedby onan a later date afterarrangement the occurrence of theactual risk (fire) insured against
arrangement though actual payment of premium was tender arrangement tendered ed on a later date and after the occurrence of the (fire) risk insured against.” The Court resolved this issue in the negative negative in view view of Sec Sectio tion n 77 of the Ins Insura urance nce Code and its dec decisi isions ons in Valenzuela v. Court of Appeals; Appeals ; South Sea Surety and Insurance Insurance Co., Inc. v. Court of Appeals;; and Appeals and Tibay v. Court of Appeals. Appeals. Accordingly, it reversed and set aside the decision of the Court of Appeals. - Respondent seasonably filed a motion for the reconsideration of the adverse verdict. It alleges in the motion that the SC had made in the decision its own findings of facts, which are not in accord accord with those of the trial court court and the Court of Appeals Appeals.. The courts below correctly found that no notice of non-renewal was made within 45 days before 22 May 1992, or before the expiration expiration date of the fire insurance insurance policies. Thus, the policies in question were renewed by operation of law and were effective and valid on 30 June 1992 when the fire occurred, since the premiums were paid within the 60to 90-day credit term. - Respo Respondent ndent likewise likewise disagr disagrees ees with its ruling that parti parties es may neither neither agree expressly or impliedly on the extension of credit or time to pay the premium nor consider a policy binding before actual payment. It urges the Court to take judicial notice of the fact that despite the express provision of Section 77 of the Insurance Code, extension of credit terms in premium payment has been the prevalent practice
NATURE Motion for reconsideration of the decision of the Supreme Court.
in the terms insur insurance ance industr industry. y. Most insura nce companies companies, including ding Petitio Petitioner, ner, extend credit because Section 77 ofinsurance the Insurance Code ,is inclu not a prohibitive injunction but is merely designed for the protection of the parties to an an insurance contract. The Code itself, in Section 78, authorizes the validity of a policy notwithstanding nonpayment of premiums. - Respondent also asserts that the principle of estoppel applies to Petitioner. Despite its awareness of Section 77 Petitioner persuaded and induced Respondent to believe that payment of premium on the 60- to 90-day credit term was perfectly alright; in fact it accepted accepted payments wit within hin 60 to 90 days after the due dates dates.. By extending extending creditt and habit credi habitually ually accepting accepting payments 60 to 90 days from the effect effective ive dates of the policies, it has implicitly agreed to modify the tenor of the insurance policy and in effect waived the provision therein that it would pay only for the loss or damage in case the same occurred after payment of the premium. - Petitioner Petitioner filed an oppos opposition ition to the Respondent’s Respondent’s motion for reconsid reconsiderati eration. on. It argues that both the trial court and the Court of Appeals overlooked the fact that on 6 April 1992 Petitioner sent by ordinary mail to Respondent a notice of non-renewal and sent by personal delivery a copy copy thereof to Respondent’s broker, Zuellig. Both courts likewise likew ise ignored the fact that Respondent Respondent was fully aware of the notice of nonrenewal. A reading of Section 66 of the Insurance Code readily shows that in order for an insured to be entitled to a renewal of a non-life policy, payment of the premium due on the effective effective date of renewal should first be made. Respondent’s argument that Section 77 is not a prohibitive provision finds no authoritative support. - The following facts, as found by the trial court and the Court of Appeals, are indeed duly established: 1. For years, Petit Petitioner ioner had been issui issuing ng fire policie policies s to the Respon Respondent, dent, and these policies were annually renewed. 2. Petitioner had been granting Respondent Respondent a 60- to 90-day credit term within within which to pay the premiums on the renewed policies. 3. There was no valid notice of non-renewal of the policies policies in question, as there
FACTS - In its decision of 15 June 1999, the SC defined the main issue to be “whether the fire insurance policies issued by petitioner to the respondent covering the period from May 22, 1991 to May 22, 1992 had been extended or renewed by an implied credit
is no pro proof of and at all notice sent by ord ry mail receive ived d by Respondent, thethat copythe thereof allegedly sentordina toinary Zuellig waswas ever rece transmitted to Respondent. 4. The premiums premiums for the poli policies cies in quest question ion in the aggre aggregate gate amou amount nt of P225,753.95 were paid by Respondent within the 60- to 90-day credit term and
HELD
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. Disposition Judgment reversed and set aside
UC UCPB PB GE GENE NERA RAL L INSU INSURA RANC NCE E TELAMART, INC. (EN BANC) 356 SCRA 307 DAVIDE; April 4, 2001
CO CO., .,
INC. INC.
v.
MASA MASAGA GANA NA
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pAgE 36 were duly accepted and received by Petitioner’s cashier. ISSUE WON Sec. 77 of the Insurance Code of 1978 must be strictly applied to Petitioner’s advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums HELD NO - Section 77 of the Insurance Code of 1978 provides: SEC. 77. An insurer insurer is entitle entitled d to payment of the premi premium um as soon as the thing insured is exposed to the peril insured 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. - This Section is a reproduction of Section 77 of P.D. No. 612 (The Insurance Code) promulgated on 18 December 1974. In turn, this Section has its source iin n Section 72 of Act No. 2427 otherwise known as the Insurance Act as amended by R.A. No. 3540, approved on 21 June 1963, which read: SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured
is exposed to the peril insured against, unless there clear issu agreement to insurance grant the insur insured ed credit extension exten sion of the premium due. No ispolicy issued ed by an company is valid and binding unless and until the premium thereof has been paid. (Underscoring supplied) - It can be seen at once that Section 77 does not restate the portion of Section 72 expressly expres sly permit permitting ting an agreement to extend the period to pay the premium. But there are exceptions to Section 77. 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: SEC. 78. Any acknowledgment in a policy or contract of insurance of the receipt of pre premiu mium m is conclu conclusiv sive e evi eviden dence ce of its payme payment, nt, so far as to make the policy policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid. - A third exception exception was laid down in Makati Tuscany Condominium Condominium Corpor Corporation ation vs. Court of Appeals, 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. Tuscan Tuscany y has provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term. Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit credit term within which to pay the premiums. That agreement is not against the law, law, morals, good customs, customs, public order order or public policy. policy. The agreement binds the parties. Article 1306 of the Civil Code p provides: rovides: ART. 1306. The contracting parties parties may establish such stipulations clauses, terms terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good public order, or public policy.on the policy would not be - Finally, it would becustoms, unjust and inequitable if recovery permitted permit ted against against Petiti Petitioner, oner, which had consistently consistently granted a 60- to 90-day credit term for the payment of premiums despite its full 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 excepti exception on to Section 77. Disposition Judgment reconsidered and set aside, that of the Court of Appeals affirmed in toto.
SEPARATE OPINION VITUG - An essential charact characterist eristic ic of an insurance is its being synall synallagmati agmatic, c, a highly reciprocal contract reciprocal contract where the right rights s and obligati obligations ons of the parties correlate correlate and mutually correspond. - By weight of authority, estoppel cannot create a contract of insurance, neither can it be successfully successfully invoked to create create a primar primary y liability, liability, nor can it give validity validity to what the law so procribes as a matter of public policy.
PARDO [dissent] - An assur assured’s ed’s failure to give notice of the fire immediately immediately upon its occurre occurrence nce blatantly showed the fraudulent character of its claims. Respondent is required by law and by express terms of the policy to give immediate written notice of loss. This must be complied with in the utmost good faith. - Assuming arguendo that the 60- to 90-day credit has been agreed between the parties, parti es, respondent respondent could not still invoke estoppel to back up its claim. Estoppel cannot give validity to an act that is prohibited by law or against public policy. The actual payment of premiums is a condition precedent to the validity of an insurance contract other than life insurance policy. Any agreement to the contrary is void as against law and public policy.
ACME SHOE ACME SHOE RUB RUBBER BER & PLASTI PLASTIC C COR CORP. P. v. CA (DOMES (DOMESTIC TIC INSURANCE COMPANY OF THE PHILS.) 134 SCRA 155 MELENCIO-HERRERA; January 17, 1985. NATURE Petition for Review on Certiorari of the Decision of the then Court of Appeals (CA-G. R. No. 589 5891717-R), R), den denyin ying g recove recovery ry on an ins insura urance nce pol policy icy,, thereb thereby y revers reversing ing the judgment of the Court of First Instance of Rizal, Branch XII, at Caloocan City, which had allowed such recovery. FACTS - ACME Shoe Rubber and Plastic Corporation (ACME) had been insuring yearly against fir fire e its bui buildi lding, ng, machin machines es and gen genera erall mercha merchandi ndise se with with Dome Domesti stic c Ins Insura urance nce Company Compa ny (INSURER) since 1946. On May 14, 1962, ACME continue continued d to insure insure its properties with INSURER in the amount of P200,000 for the period May 15, 1962 up to May 15, 1963. - On May 14, 1963, INSURER issued Renewal Receipt to cover the period May 15, 1963 to May 15, 1964. - On January 8, 1964, ACME paid P3,331.26 as premium. The INSURER applied the
payment premiumissued for theaperiod of May 15, 1963 toperiod May 15, - On May as 15,renewal 1964, INSURER Renewal Receipt for the of 1964. May 15, 1964 to May 15, 1965 (for renewal premium of P3,331.26 yet to be paid) with a stamped note that says that the insurance will be deemed valid and binding only when the pre premiu mium m and docume documenta ntary ry sta stamps mps have have actual actually ly bee been n pai paid d in ful fulll and duly
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A2010
Dean Carale
pAgE 37 acknowledged in an official receipt. ACME was given 90 days to pay otherwise the policy polic y would automatically automatically become void and ineffective. ineffective. (ACME should pay short period premium for 90 days before the period expires. If they are able to pay the whole amount before the 90-day period, the automatic automatic terminati termination on won’t apply anymore). - On May 26, 1964, ACME, through its President, signed a promissory note saying that they they pro promis mise e to pay the premiu premium m and document documentary ary stamp stamps s and agree agreed d to the automatic cancellation penalty for not complying. - On October 13, 1964, ACME’s properties properties were completely completely destroy destroyed ed by fire. ACME filed insurance claim but the INSURER disclaimed liability on the ground that as of the date of loss, the properties burned were not covered by insurance. - ACME claims that the January 8, 1964 payment was for the period 1964-1965 and that INSURER had no right to apply it to the period 1963-1964 because under RA 3540, the policy was void and INSURER could have validly disclaimed liability for loss had one occurred then. - TC found INSURER liable for P200k and opined that there was a clear intention on the INSURER's part to grant ACME a credit extension for the payment of the premium due; and that to allow the INSURER to apply the premium ACME paid on January 8, 1964. CA reversed TC and dismissed the suit on the ground that, as of the moment of loss, ACME's properties were not loss. insured and the INSURER could not be held liable for any indemnity as a result of the ISSUE WON the premium payment for 1964-1965 was paid HELD NO - Not having paid the 1964-1965 premium within the extension granted, and pursuant to R.A. No. 3540, the policy was automatically cancelled and there was no insurance coverage to speak of as of the date of the fire on October 13, 1964. - The pertinent provision of Republic Act No. 3540 reads: "Sec. 72. An insurer insurer is entitled entitled to payment of the pre premium mium as soon as the thing thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid." - RA 3540 was approved on June 20, 2963 and was put into effect on Oct 1, 1963. It could not be applied retroactively to the renewal of the policy for the 1963-1964 period because said policy was renewed on May 14, 1963. (Laws have no retroactive effect unless the contrary is provided.) Therefore, Therefore, the Jan 8, 1964 payment was properly applied to the 1963-1964 premium. The Trial Court's opinion that there was a clear agreement to grant ACME credit extension for 1964-1965 is negated by ACME's Promissory Note binding itself to pay within ninety days from the effective date of this policy, 15th May, 1964. The credit extension was granted for 90 days only. (So wala na by August 16, 1964.) - If ACME was granted credit extensions in the past, the promissory note it signed did away with such credit arrangement arrangement.. Also, before RA 3540, the Renewal Receipts issued by INSURER did not contain the auto-cancellation after 90 days note. By 1964, no policy could be however, situation hadand changed the passagethereof of the RA: valid andthe binding unless untilby the premium had been paid. - What became automatically cancelled by R.A. No. 3540 was the 1964-1965 policy for ACME's failure failure to pay the premium premium within within the 90-day extension granted, granted, and in accordance with the express terms of the Promissory Note that it had signed.
Disposition The judgment under review is hereby affirmed. Without pronouncement as to costs.
PEDRO ARCE v. THE CAPITAL INSURANCE & SURETY CO., INC.
11 SCRA 63 ABAD SANTOS; September 30, 1982. NATURE Appeal from CFI decision on question of law. FACTS - Arce (INSURED) owned a residential house which was insured with the appellant COMPANY since since 1961. In Novem November ber 1965, the COMPANY sent to the INSURED a Renewal Certificate to cover the period from December 5, 1965 to December 5,1966, and requested payment of the corresponding premium. Anticipating that the premium could not be paid on time, the INSURED asked for an extension which was granted by the COMPANY. After the lapse of the requested extension, INSURED still failed to pay the premium. Thereafter, the house of the INSURED was totally destroyed by fire. Upon INSURED's presentation of claim for indemnity, he was told that no indemnity was due because the premium was not paid. The INSURED sued the COMPANY for indemnity. - The trial court held the COMPANY liable to indemnify the INSURED on the ground that since the COMPANY could have demanded payment of the premium, mutuality of obligation required that it should be liable on the policy. ISSUE WON the COMPANY can be held liable on its policy HELD NO. - The Court commiserates with the INSURED. They are well aware that many insurance companies have fallen into the condemnable practice of collecting premiums promptly but resort to all kinds of excuses to deny or delay payment of just claims. Unhappily
the instant case is one where the insurer has the law on its side. - Sec. 72 of the Insurance Act, as amended by R.A. No. 3540 reads: "SEC. 72. An insurer is entitled to payment of premium premium as soon as the thing insured is exposed to the perils insured insured against, unless there is clear agreeme agreement nt to grant credit extension for the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid. " - It is obvious from both the Insurance Act, as amended, and the stipulation of the partie parties s that that time time is of the essence essence in respec respectt of the payme payment nt of the insur insuranc ance e premium so that if it is not paid the contract does not take effect unless there is still another stipulation to the contrary. In the instant case, the INSURED was given a grace period to pay the premium but the period having expired with no payment made, he cannot insist that the COMPANY is nonetheless obligated to him. - Prior to the amendment (italicized (italicized portion above), an insurance insurance contract was effective even if the premium had not been paid so that an insurer was obligated to pay indemnity indemnity in case of loss and corre correlativ latively ely he had also the right to sue for payment of the premium. But the amendment to Sec. 72 has radically changed the legal regime in that unless the p remium is paid there is no insurance. Disposition The decision of the cour courtt a quo is reversed; tthe he appellee's complaint is dismissed. No special pronouncement as to costs.
iNsuRanCe
A2010
Dean Carale
pAgE 38 - Irrelevant facts: The premium costs P38.10. After the fire, the COMPANY issued a check for P300 to Arce as donation. donation. Arce accepted the check, but still sued the company.
CAPITAL INC. v. PLASTIC ERA CO.
65 SCRA July 134 18, 1975 MARTIN; NATURE Petition for review of a decision of the CA affirming the decision of the CFI of Manila FACTS - On December 17, 1960, petitioner Capital Insurance & Surety Co., Inc. delivered to the respondent Plastic Era Manufacturing Co., Inc., its open Fire Policy No. 22760 wherein wherei n the former undert undertook ook to insure insure the latter's buildin building, g, equipm equipments, ents, raw materials, products and accessories located at Sheridan Street, Mandaluyong, Rizal. The policy expressly provides that if the property insured would be destroyed or damaged by fire after the payment of the premiums, at anytime between the 15th day of December 1960 and one o'clock in the afternoon of the 15th day of December 1961, the insurance company shall make good all such loss or damage in an amount not exceeding P100,000.00. When the policy was delivered, Plastic Era failed to pay the corresponding insurance premium. 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. 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. - 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. In less than a month Plastic Plastic Era demanded demanded from Capital Insuranc Insurance e the payment 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. ISSUES
1. WON a contract contract of insurance insurance has been duly perfected perfected between petitioner petitioner and respondent 2. WON the dishonored check constituted payment HELD 1. YES - Tender Tender of dra draft ft or che check ck in order to effect effect payment payment that that wou would ld extin extingui guish sh the debtor's liability should be actually cashed. If the delivery of the check of Plastic Era to Capital Insurance were to be viewed in the light of the foregoing, no payment of the premium had been effected. Significantly, Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within 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. 2. YES
- Although the check was due for payment on January 16, 1961 and Plastic Era had sufficient funds to cover it as of January 19, 1961, Capital Insurance decided to hold the same for thirty-five (35) days before presenting it for payment. Having held the check for such an unreasonable period of time, Capital Insurance was estopped from claimi claiming ng a forfei forfeitur ture e of its policy policy for non-payme non-payment nt eve even n if the check check had been dishonored later. Where the check is held for an unreasonable time before presenting it for payment, the insurer may be held estopped from claiming a forfeiture if the check is dishonored. toto. Disposition The decision of the CA is AFFIRMED in toto.
MALAYAN INSURANCE CO., INC. v. ARNALDO and PINCA 154 SCRA 672 CRUZ; October 12, 1987 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 reject rejected ed by MICO MICO,, Pinca Pinca went went to the Ins Insura urance nce Comm Commiss ission ion.. Publ Public ic respon responden dentt 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. ISSUES Procedural 1. WON the petition should be dismissed dismissed for late filing Substantive 2. WON there was a valid insurance contract contract at the time of the loss
3. WON Adora was authorized to receive such payment 4. WON an adjuster is indispensable in the valuation of the loss HELD Procedural 1. YES - Petitioner invokes Sec 416 of the Insurance Code which grants it 30 days from notice of the Insurance Commission within which to appeal by certiorari with the Court. MICO filed its MFR on April 25, 15 days after the notice; the reglementary period began to run again after June 13. Since the petition was filed only on July 2, it was tardy by 4 days. Alternative Alternatively ly it invokes invokes Rule 45 of the Rules of Court for certiora certiorari ri but the petition still exceeds the 15 day limit from the June 13 notice. -Respondents, on the other hand, invoke Sec. 39 of B.P. 129 which pegs the period for appeal from decisions of any court in all cases at 15 days from the notice of the decision appealed from. Since the MFR was filed only 15 days after receiving notice of the decision, decision, it was alrea already dy 18 days late by July 2. So whichever whichever is appli applied, ed, the petition is still late. Substantive 2. YES
iNsuRanCe
A2010
Dean Carale
pAgE 39 - 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 groun ds mentioned in Sec 64 (in this case, non-payment non-payment of premium), 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 polic y is invalid invalid without it. However, However, this is not appli applicable cable in the instant instant case as paymen paymentt was eventual eventually ly made. made. It is to be not noted ed that that the premi premium um inv invoic oice e 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. - MICO claims to have sent a notice to Pinca, who flatly denied receiving one. Pinca did not have to prove this since the strict language of Sec 64 requires that MICO ensure the cancellation was actually sent to and received by the insured.
1941. But due to the exigencies of the war It closed the branch office at Manila during 1942 up to September 1945. - Plain Plaintiff tiff issued a number of life insuranc insurance e policies in the Philippin Philippines es containin containing g stipulations referred to as NONFORFEITURE CLAUSES 5 - From January 1, 1942 to December 31, 1946, Plaintiff head office at Toronto applied the provisions provisions of the automatic premium loan clauses upon the nonpay nonpayment ment of the corresponding premiums by the people who subscribed to the insurance. The net amountt of premiums advanced amoun advanced (by the company) or loaned loaned (to the insured) as payment for the premium due totaled P1,069,254.98. - Meer, the Collector of the National Internal Revenue assessed the net amount of premium at P17,917.12 pursuant to SEC.255, National Internal Revenue Code6 - Company protested the assessment, but paid the taxes anyway. Then they filed a complaint to recover money paid under protest for taxes - CFI: Dissmiss complaint - PLAINTIFF’s MAIN CONTENTION: when it made premium loans or premium advances by virtue of the non-forfeiture clauses, it did not collect premiums within the meaning of the above sections of the law, and therefore it is not amenable to the tax therein provided.
-the MICO also suggests Pinca knew the policy had been and was paying premium in orderthat to renew the policy. A close studycancelled of the transcripts show, however, that Pinca only meant to renew the policy had it been cancelled but not if it was still in effect—it was conditional. Payment was thus legally made on the original transaction trans action and validly received received by Adora, who was not informed of the alleged cancellation and thus saw no reason to reject the payment. 3. YES - Sec. 306 of the Insurance Code provides that any insurance company that delivers a policy to its agent is deemed to have authorized such agent to receive payment of premium premiu m on its behalf. It is a well-known well-known princi principle ple under the law of agency that payment to an authorized agent is equivalent to payment to the principal himself. MICO’s acknowledgement of Adora as its agent thus defeats its contention that he was not authorized to receive payments on its behalf. 4. NO - In absence of fraud, the amount of the loss may be determined on the basis of such proof offered by the insured. Here. The certification of the Integrated National Police as the extent of the loss should suffice. Disposition petition is DENIED
ISSUES 1. WON premium advances made by plaintiff-appellant under the automatic premium loan clause of its policies are premiums collected' by the Company subject to tax 2. WON WON,, in the appli applicat cation ion of the automatic automatic premiu premium m loan loan clause clause of pla plaint intiff iff-appellant's policies, there is 'payment in money, notes, credits, or any substitutes for money 3. WON the collection of the alleged deficiency premium taxes constitutes double taxation 4. WON the making of premiu premium m advan advances, ces, granting granting for the sake of argume argument nt that it amounted to collection of premiums, were done in Toronto, Canada 5. WON the fact that plaintiff-appellant was not doing business in the Philippines during the period from January 1, 1942 to September 30, 1945, inclusive, exempts it from payment of premium taxes corresponding to said period
MANUFACT URERS LIF MANUFACTURERS LIFE E INSURANCE CO. v. MEER 89 PHIL 351 BENGZON, June 29, 1951
HELD NOTE (exa (example mple given by the plaintiff): plaintiff): "Suppose that 'A', 30 years of age, secures a 20-year endowment policy for P5,000 from plaintiff-appellant Company and pays an annual premium of P250. 'A' pays the first ten yearly premiums amounting to P2,500 and on this amount plaintiff plaintiff-appel -appellant lant pays the correspon corresponding ding taxes under 5"'8. Automatic Premium Loan.-This Policy shall not lapse for non-payment of any premium after it has been three full years in force, it, at the due date of such premium, the Cash Value of this Policy and of any bonus additions and dividends left on accumulation (after deducting any indebtedness to the company and the interest accrued thereon) shall exceed the amount of said premium. In which event the company will, without further request, treat the premium then due as paid, and the amount of such premium, with interest from its actual due date at six per cent per annum, compounded
NATURE APPEAL from a judgment of the Court of First Instance of Manila
yearly, and one per cent, compounded yearly, for expenses, shall be a first lien on this Policy in the Company's favour in priority to the claim of any assignee or any other person. The accumulated lien
FACTS (this is a tax case. What’s really important here is the definition of CASH SURRENDER VALUE). - Manufacturers Life Insurance Company is a duly organized corporation which has its head office at Toronto. It is duly registered and licensed to engage in life insurance business in the Philippines, and, maintains a branch office in Manila. It was engaged in such business in the Philippines for more than five years before and including the year
'10. Cash and Paid-Up Insurance Values.-At the end of the third policy year or thereafter, upon the legal surrender of this Policy to the Company while there is nodefault in premium payments or within
may at any time, while the Policy is in force, be paid in whole or in part. 'When the premium falls due and is not paid in cash within the month's grace, if the Cash Value of this policy and of any bonus additions and dividends left on accumulation (after deducting ng any accumulated indebtedness) be less than the premium then due, the Company will, without further requests, continue this insurance in force for a period * * *.
two months after the due date of the premium in default, the Company will (1) grant a cash value as specified in Column (A) increased by the cash value of any bonus additions and dividends left on accumulation, which hav e been alloted to this Policy, less all indebtedness to the Company on this Polley an the date of ouch surren der, or (2) endorse this Policy as a Non-Participating Paid-up Polley for the amount as specified In Column (B) of the Table of Guaranteed Values * * *. '11. Extended Insurance-After the premiums for three or more full years have been paid hereunder in cash, if any subsequent premium is not paid when due, and there is no indebtedness to the Company on the writte n request of the insured * * *."
6"SEC. 255. Taxes on insurance premiums.-There shall be collected from every person, company, or corporation (except purely cooperativ e companies or associations) doing insurance business of any sort in the Philippines a tax of one per centum of the total premiums collected * * * whether such permiums are paid in money, notes, credits, or any substitute for money but premiums refunded within six months after payment on account of rejection of risk or returned for other reason to person insured shall not be included in the taxable receipts * * *."
iNsuRanCe
A2010
Dean Carale
pAgE 40 section 255 of the National Internal Revenue Code. Suppose also that the cash value of said policy after the payment of the 10th annual premium amounts to P1,000." When on the eleventh year the annual premium fell due and the insured remitted no money within the mouth grace, the insurer treated the premium then over due as paid from the cash value, value, the amount being a loan to the policyholder1 who could discharge it at any time with interest at 6 per cent. The insurance contract, therefore, continued in force for the eleventh year. 1. YES - Based on the example given by the plaintiff, the insurer collected the amount of P250 as the annual premium for the eleventh year on the said policy when it loaned to “A” the sum of P250. The insurer “became a creditor” creditor” of the loan loan,, but not of the (advanced by the insurer) insurer).. The insurer is pre premi mium um that had already been paid (advanced entitled to collect interest on the loan, not on the premium. "A" paid the premium for the eleventh year; but in turn he became a debtor of the company for the sum of P250. This debt he could repay either by later remitting the money to the insurer or by letting the cash value compensate for it. The debt may also be deducted from the amount of the policy should "A" die thereafter during the continuance of the policy. - ON ARGUMENT THAT THE ASSETS OF THE INSURER REMAINED THE SAME AFTER THE APPLICATION OF THE AUTOMATIC increase in assets in the form of CREDI CREDIT T for the PREMIUM LOAN CLAUSE: there was an increase
affirm it Disposition finding no prejudicial error in the appealed decision, we hereby affirm with costs.
ANDRES v. CROWN LIFE INSURANCE 102 Phil. 919 REYES, J.B.L., Jan.28, 1958 NATURE Appeal from judgment of CFI FACTS
th
made the example, the OF P250 for the 11 year). -advances ON ARGUMENT THAT(in IF THE CREDIT IS PAID OUT THE THE CASH SURRENDER VALUE, THERE WERE NO NEW FUNDS ADDED Cash surrender value "as applied to a life insurance policy, is the amount of money the company agrees to pay to the holder of the policy if he surrenders it and releases his claims upon it. The more premiums the insured has paid the greater will be the surrender value; but the surrender value is always a lesser sum than the total amount of premiums paid." (Cyclopedia Law Dictionary 3d. ed. 1077.) The cash value or cash surrender value is therefore an amount which the insurance company holds In trust for the insured to be delivered to him upon demand. It is therefore a liability of the company to the insured. Now then, when the company's credit for advances is paid out of the cash value or cash surrender value, that value and the company's liability is thereby diminished pro tanto. 2. YES - the insurer agreed to consider the premium paid on the strength of the automatic loan. The premium was therefore paid by means of a "note" or "credit" or "other substitute for money" and the tax is due because section 255 above quoted levies tax taxes es accordi according ng to the tot total al pre premiu miums ms collec collected ted by the ins insure urerr "wh "wheth ether er such such premiums are paid in money, notes, credits or any substitute for money. 3. NO - No constitutional prohibition against double taxation. 4. NO - The loans are made to policyholders in the Philippines, who in turn pay therewith the premium to the insurer thru the Manila branch. Approval of appellant's position will enable foreign foreign insurers to evade the tax by contriving contriving to requi require re that premiu premium m payments shall be made at their head offices. What is important, the law does not contemplate premiums collected in the Philippines. It is enough that the insurer is doing doing ins insura urance nce bus busine iness ss in the Philip Philippin pines, es, irr irresp espect ective ive of the pla place ce of its organization or establishment. 5. NO TO THE COMPANY 'S ASSETS”:
- Although during years appellant was not for operating new business because its branch office wasthose closed, stillthe it was practically andopen legally, in this country by collecting premiums on its outstanding policies, incurring the risks and/or enjoying the benefits consequent thereto, without having previously taken any steps indicating withdrawal in good faith from this field of economic activity.
-insur Feb. 13, policy 1950: For the name sum ofofP5,000, defendant-appellee Crown an insurance ance in the plaintiff plaintiff-appell -appellant ant Rufino and his Life wife,issued with the stipulation that the premiums are to be paid semi-annually. - The premiums for the 1st and 2nd semester of the 1st year, in the amount of P165.15 were paid by Rufino but the premium for the third semester, in the same amount, was not paid. - Jan. 6, 1951, Crown Life, through its branch secretary, wrote to Mr. and Mrs. Andres advising them that their insurance policy lapsed on Dec. 26, 1950 and the amount of P165.1 P165.15 5 was over overdue, due, givi giving ng them them 60 day days s fro from m the date of lapse lapse to file file an application for reinstatement. Crown Life later sent another letter telling the spouses Andres that their insurance policy was no longer in force. - Feb. 1951: Plaintiff and his wife executed a Statement of Health and application for reinstatement of the aforesaid policy. - Feb. 20, 1951: Plaintiff wrote a letter to the defendant, enclosed with a money order for P100. P100. Upo Upon n accept acceptanc ance, e, def defend endant ant adv advise ised d Rufino Rufino that that its main main off office ice had approved the application and that the reinstatement of the lapsed policy was subject to the payment of the remaining premium balance of P65.15. - May 3, 1951: Severa Andres died of dystocia, contracted pelvis. - May 5, 1951: Plaintiff sent a letter enclosed with a money order in the amount of P65, for the remaining balance due. - May 15, 1951: Defendant sent a letter with official receipt of the P165.15 paid by Rufino as well as a Certificate of Reinstatement. - June 7, 1951: Rufino presented a death claim as survivor-beneficiary of his deceased wife. Payment was denied by the defendant. - April 1952: Rufino filed a complaint in CFI against Crown Life for the recovery of the amount of P5,000 as the face value of a joint 20-year endowment insurance policy issued by defendant in favor of plaintiff and his wife, on Feb. 13, 1950. In its answer, Crow Crown n Life Life di disc scla laim imed ed liab liabil ilit ity y and and se sett fort forth h the the sp spec ecia iall de defe fens nse e that that the the aforementioned policy had already lapsed. - Aug. 5, 1954: CFI rendered a decision absolving the defendant company from any liability on the ground that the policy had lapsed and it was not reinstated at the time of the plaintiff’s wife’s death. Plaintiff later appealed to the CA but the same was certified by the CA to the SC for having no question of fact.
iNsuRanCe
A2010
Dean Carale
pAgE 41 ISSUE WON the insurance policy, which has been in a state of lapse before May 3, 1951, has been validly validly and compl completely etely reinstat reinstated ed after said said date (Was ther there e a perfecte perfected d contract of reinstatement after the policy lapsed due to non-payment of premiums?)
191 SCRA 1 GUTIERREZ; October 19, 1990
HELD NO Ratio Ratio The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon written application does not give the insured absolute right to such reinstatement by the mere filing of an application. The Company has the right to deny the reinstatement if it is not satisfied as to the insurability of the insured and if the latter does not pay all overdue premiums and all other indebtedness to the Company. After the death of the insured the insurance insurance Company cannot be compel compelled led to entertain enter tain an appli applicatio cation n for reinstatement reinstatement of the policy policy becaus because e the conditions precedent to reinstatement can no longer be determined and satisfied. Reasoning - The stipulations of facts render it undisputable that the original policy lapsed for non-payment of premiums on Dec. 26, 1950, upon expiration of the 31-day grace period.
Petition for review of the decision of theca.
-asAsprovided found byinthe lower court,itself the conditions set forth (A) in the policy for shall reinstatement the contract are the following: application be made within 3 years from the date of lapse; (B) there should be a production of evidence of the good health of the insured; (C) if the rate of premium depends upon the age of the Beneficiary Benefi ciary,, there should likewise likewise be a productio production n of evidence evidence of his or her good health; (D) there should be presented such other evidence of insurability at the date of application for reinstatement; (E) there should be no change which has taken place in such good health and insurability subsequent to the date of such application and before the policy is reinstated; and (F) all overdue premiums and other indebtedness in respect of the policy, together with interest at 6%, compounded annually, should first be paid. - The plaintiff did not comply with the last condition; for he only paid P100 before his wife’s death; and despite the Company’s reminders, he only remitted the balance of P65.15 two days after his wife died. On the face of such facts, the Company had the right to treat the contract as lapsed and refuse payment of the policy. - Rufino contends that the condition regarding payment of the premium was waived by the insurance Company through its letters, wherein it made statements such as: “If you are unable to pay the full amount immediately, send as large amount as possible and advise us how soon you expect to be able to pay the balance; we will work out an adjustment most beneficial to you.” The Court found the statements to be too vague and indefinite to indicate an intention on the insurer’s part to waive the full payment as prerequisite to the reinstatement of the lapsed policy. The Court reiterated the rule that a waiver must be clear and positi positive, ve, the intent to waive shown clearly clearly and convincingl convi ncingly. y. On the other hand, It found subsequent subsequent letters letters sent by defendant indicating that they insisted on full payment of the premium before the policy was reinst reinstate ated d and that that defend defendant ant did not con consid sider er partia partiall payment payment as suffic sufficien ientt consideration for the reinstatement. Plaintiff-Appellant’s failure to remit the balance before the death of his wife operated to deprive him of any right to waive the policy and recover the face value thereof. Disposition Judgment appealed from is affirmed.
VALE VALENZ NZUE UELA LA v. CA (PHI (PHILI LIPP PPIN INE E INSURANCE COMPANY, INC.)
AM AMER ERIC ICAN AN
GE GENE NERA RAL L
NATURE
FACTS - Petitioner Arturo P. Valenzuela is a General Agent of private respondent Philippine American General Insurance Company, Inc. (Philamgen for short) since 1965. As such, he was author authorized ized to solicit and sell in behalf of Philamgen all kinds of non-life non-life insurance, and in consideration of services rendered was entitled to receive the full agent's commission of 32.5% from Philamgen under the scheduled commission rates. - From 1973 to 1975, Valen Valenzuela zuela solici solicited ted marine insuranc insurance e from one of his clients, clients, the Delta Motors, Inc. (Division of Electronics Airconditioning and Refrigeration) in the amount of P4.4 Million from which he was entitled to a commission of 32%. However, Valenzuela did not receive his full commission which amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta Motors. During the period 1976 to 197 1978, 8, pre premiu mium m pay payment ments s amo amount unting ing to P1,946, P1,946,886 886.00 .00 were were pai paid d dir direct ectly ly to Philam Philamgen gen and Valenz Valenzuel uela's a's com commis missio sion n to which which he is ent entitl itled ed amo amount unted ed to P632,737.00. - In 1977, Philamgen started to become interested in and expressed its intent to share in the commission due Valenzuela on a fifty-fifty basis. Valenzuela refused. - Because of the refusal of Valenzuela, Philamgen and its officers took drastic action against Valenzuela. They: (a) reversed the commission due him by not crediting in his account the commission earned from the Delta Motors, Inc. insurance ; (b) placed agency transactions transactions on a cash-a cash-and-car nd-carry ry basis; basis; (c) threatened the cancel cancellatio lation n of policies issued by his agency; and (d) started to leak out news that Valenzuela has a substantial account with Philamgen. All of these acts resulted in the decline of his business as insurance agent. - Then on December 27, 1978, Philamgen terminated the General Agency Agreement of Valenzuela. - Lower court: the termination of Valenzuela as General Agent was improper because the record will show the principal cause of the termination of the plaintiff as General
Agent of any defendant Philamgen was power his refusal to share Deltaat commission. event the principal's to revoke an his agency will is so pervasive, - CA: In that the Supreme Court has consistently held that termination may be effected even if the principal acts in bad faith, subject only to the principal's liability for damages. (CA ordered Valenzuela to pay Philamgen the amount of One Million Nine Hundred Thirty Two Thousand Five Hundred Thirty-Two and 17/100 Pesos (P1,932,532.17) with legal interest) ISSUES 1. WON whether or not Philamgen and/or its officers can be held liable for damages due to the termination of the General Agency Agreement it entered into with the petitioners 2. WON petitioners are liable to Philamgen for the unpaid and uncollected premiums HELD 1. YES - If a principal acts in bad faith and with abuse of right in terminating the agency, then he is liable in damages.
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pAgE 42 - There is an exception to the principle that an agency is revocable at will and that is when the agency has been given not only for the interest of the principal but for the interest of third persons or for the mutual interest of the principal and the agent. In these cases, it is evident that the agency ceases to be freely revocable by the sole will of the principal (PROCEDURAL: Where the findings of the Court of Appeals and the trial court are contrary to each other, this Court may scrutinize the evidence on record - After a painstaking review of the entire records of the case and the findings of facts of both the court a quo and respondent appellate court, the Court affirmed the trial court’s findings.) - The principal cause of the termination of Valenzuela as General Agent of Philamgen arose arose fro from m his refusal refusal to share share his Delta commis commissio sion. n. The record records s sustai sustain n the conclusions of the trial court on the apparent bad faith of the private respondents in terminating the General Agency Agreement of petitioners. - It is also evident from the records that the agency involving petitioner and private respondent is one "coupled with an interest," and, therefore, should not be freely revocable at the unilateral will of the latter. - The private respondents by the simple expedient of terminating the General Agency Agreement Agreeme nt appropriat appropriated ed the entire insurance insurance business of Valenz Valenzuela. uela. With the
CHAPTER CHAPTE R V – THE POLIC POLICY, Y, PARTIE PARTIES S THERET THERETO, O, & RIGHTS THEREON
termination of the General Agency Agreement, Valenzuela would no longer be entitled to commission on the renewal of insurance policies of clients sourced from his agency. Worse, despite the termination of the agency, Philamgen continued to hold Valenzuela jointly and severally liable with the insured for unpaid premiums. Under these circumstances, it is clear that Valenzuela had an interest in the continuation of the agency when it was unceremoniously terminated not only because of the commissions he should continue to receive from the insurance insurance business he has solicited solicited and procured but also for the fact that by the very acts of the respondents, he was made liable to Philamgen in the event the insured fail to pay the premiums due. They are estopped by their own positive averments and claims for damages. - "The principal may not defeat the agent's right to indemnification by a termination of the contract of agency (Erskine v. Chevrolet Motors Co. 185 NC 479, 117 SE 706, 32 ALR 196). - For the pivotal factor rendering Philamgen and the other private respondents liable in damages is that the termination by them of the General Agency Agreement was tainted tainted with bad faith. This is in accordance with the precepts in Human Relations enshrined in our Civil Code. 2. NO. The respondent court erred in holding Valenzuela liable. There was no factual and legal legal basis for the award. Under Under Secti Section on 77 of the Insurance Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding - " Sec. 77 . . . [N]otwithstanding any agreement to the contrary, no policy or contract of insurance is valid and binding unless and until the premiums thereof have been paid except in the case of a life or industrial life policy whenever the grace period provision applies (P.D. 612, as amended otherwise known as the Insurance Code of 1974) - This is buttressed by Section 776 of the Insurance Code (Presidential Decree No. 612, promulgated on December 18, 1974), which now provides that no contract of Insurance by an insurance company is valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary."
191 1917, 7, after after the issua issuance nce of the provi provisio sional nal polic policy y but before approval approval of the applicatio appli cation n by the home office office of the insurance insurance compan company. y. Pilar de Lim brought an action action to recove recoverr fro from m the Sun Life sum of P5,0 P5,000, 00, the amo amount unt named in the provisional policy. - The "provisional policy" reads: "Received (subject to the following stipulations and agreements) the sum of P433, being the amount of the first year's premium for a Life Assurance Policy on the life of Mr. Luis D. Lim of Zamboanga for P5,000, for which an application dated the 6th day of July, 1917, has been made to the Sun Life Assurance Company of Canada. - The above above-men -mentio tioned ned life is to be assure assured d in acc accord ordanc ance e with with the terms and conditions contained or inserted by the Company in the policy which may be granted by it in this particular case for four months only from the date of the application, provided that provided that the Company shall confirm this agreement by issuing a policy on said application when the same shall be submitted to the Head Office in Montreal. Should the Company not issue such a policy, then this agreement shall be null and void ab initio,, and the Company shall be held not to have been on the risk at all, but in such initio case the amount herein acknowledged shall be returned.
Disposition with Disposition Petition is GRANTED. CA And decision SETcontractual ASIDE. Therelationship decision ofbetween the TC REINSTATED the MODIFICATIONS. that the Arturo P. Valenzuela and Philippine American General Insurance Company shall be deemed terminated upon the satisfaction of the judgment as modified.
shall be submitted the- head office in Montreal. re-enforce the same there follows the negative negat ive condition condito tion "Shou "Should ld the company companyTonot issu issue e such a polic policy, y, then this agreement shall be null and void ab initio, and the company shall be held not to have been on the risks." Certainly language could hardly be used which would more clearly stipulate that the agreement should not go into effect until the home office of the
DE LIM v. SUN LIFE ASSURANCE COMPANY OF CANADA 41 PHIL 263 MALCOLM; November 29, 1920 NATURE Appeal from an order of the CFI of Zamboanga sustaining a demurrer to plaintiff's complaint upon the ground that it fails to state a cause of action. FACTS - On July 6, 1917, Luis Lim of Zamboanga made application to the Sun Life Assurance Company of Canada for a policy of insurance on his life in the sum of P5,000. In his applic applicati ation on Lim des design ignate ated d his wife, Pilar Pilar de Lim, Lim, the plain plaintif tifff herein herein,, as the beneficiary. The first premium of P433 was paid by Lim, and upon such payment the company issued what was called a ''provisional policy." Luis Lim died on August 23,
ISSUE WON the contract of insurance between Luis Lim and Sun Life Assurance Company of Canada was perfected HELD NO. - The document it is to be a provisional policy "for four months only from the date of this application." Immediately following the words fixing the four months period comes the word "provided" which has the meaning of "if." Otherwi Otherwise se stated, the policy policy for four months is expressly made subject to the affirmative condition that the company shall confirm this agreement by issuing a policy on said application when the same
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pAgE 43 company should confirm it by issuing a policy. As we read and understand the socalled provisional policy, it amounts to nothing but an acknow acknowledgme ledgment nt on behalf of the company, that it has received from the person named therein the sum of money agreed agreed upon as the first first yea year's r's premium premium upon a policy policy to be issued issued upo upon n the application, if the application is accepted by the company. - It is of course a primary rule that a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. agents. So long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date of the application must have been a completed contract, one that leaves nothing to be done, nothing nothi ng to be completed completed,, nothi nothing ng to be passed upon, or determined, determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement . Our view is, that that a contra contract ct of ins insura urance nce was not here consummated by the parties. - The trial court committed no error in sustaining the demurrer and dismissing the case. It is to be noted, however that counsel for appellee admits the liability of the company for the return of the first premium to the estate of the deceased.
GREAT PACIFIC LIFE v. CA (LEUTERIO) 316 SCRA 677 QUISUMBING; October 13, 1999 NATURE Petition for Review of CA decision FACTS - A contract of group life insurance was executed between petitioner Great Pacific Life Ass Assura urance nce Corpor Corporati ation on (herei (hereinaf nafter ter Gre Grepal palife ife)) and Develo Developmen pmentt Ban Bank k 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, consulted, a physicia physician n for a heart con conditio dition, n, 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 mortga mortgage ge ind indebt ebtedn edness ess of P86, P86,200 200.00 .00.. In Aug Aug.. 198 1984, 4, Dr. Leuter Leuterio io die died d 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. insurance. Grepal Grepalife ife insisted that Dr. Leuterio Leuterio did not disclos disclose e 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 respondent Medarda Leuteri Leuterio, o, widow, filed a complaint complaint with RTC against Grepalife for "Specific Performance with Damages." Dr. Mejia, who issued the death certificate certi ficate,, testified testified that Dr. Leuterio Leuterio complained complained of headaches headaches presumably 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.
ISSUES 1. 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 2. WON CA erred in not finding that Dr. Leuterio concealed that he had hypertension, which would vitiate the insurance contract 3. WON CA erred in holding Grepalife liable for P86,200.00 without proof of the actual outstanding mortgage payable by the mortgagor to DBP HELD 1. NO Ratio Insured, being the person with whom the contract was made, is primarily the properr person to bring suit. Subject prope Subject to some except exceptions, ions, 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) Reasoning [a] The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: “In the event of the debtor's death before his indebtedness with the Creditor (DBP) shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor.” When DBP submitted the insurance claim against Grepalife, the latter denied payment thereof, interposing the defense of concealment committed by the ins insure ured. d. The Therea reafte fter, r, DBP collec collected ted the deb debtt fro from m the mortga mortgagor gor and too took k the necessary action of foreclosure on the residential lot of private respondent. [b] Since a policy of insurance upon life or health may pass by transfer transfer,, will or succession succes sion to any person, whether he has an insur insurable able interes interestt or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife. 2. NO Ratio The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance. Reasoning [a] The insured, Dr. Leuterio, had answered in his insurance application that he was in good good health health and that that he had not consu consulte lted d a doc doctor tor or any of the enumerat enumerated ed ailments, including hypertension; when he died the attending physician had certified in the death certificate certificate that the former died of cerebral hemorrhag hemorrhage, e, probably probably secondary to hypertension. From this report, petitioner Grepalife refused to pay the insurance insur ance claim. It alleg alleged ed that the insured had concealed concealed the fact that he had hypertension. Contrary to Grepalife’s allegations, there was no sufficient proof that the insured [b] had suffered from hypertension. Aside from the statement of the insured's widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension, the
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pAgE 44 appellant had not proven nor produced any witness who could attest to Dr. Leuterio's medical history. [c] Grepalife had failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim. 3. NO - Considering the supervening event that DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagor's outstanding loan, the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries beneficiaries.. Equit Equity y dicta dictates tes that DBP should not unjustly enrich itself at the expense of another. Hence, it cannot collect colle ct the insur insurance ance proceeds, proceeds, after it already foreclosed foreclosed on the mortga mortgage. ge. The proceeds now rightly belong to Dr. Leuterio's heirs represented by his widow, herein private respondent. - The Court ruled this issue based on the clear provisions of the policy. The mortgagor paid the premium according to the coverage of his insurance, which states that: "The policy states that upon receipt of due proof of the Debtor's death during the terms of this insurance, a death benefit in the amount of P86,200.00 shall be paid… In the event of the debtor's death before his indebtedness with the creditor shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be paid to the beneficiary/ies designated by the debtor." From this, it is clear that Grepalife is liable and that Dr. Leuterio’s heirs must get the proceeds. Disposition Petition DENIED. CA Decision AFFIRMED with modification. Disposition
- On January 13, 1964 - the defendant wrote the pl plaintiff aintiff denying the latter's claim, claim, on the ground that defendant's investigation revealed that the entire shipment of logs covered by the two marines policies were received in good order at their point of destination. It was further stated that the said loss may not be considered as covered under cover note because the said note had become 'null and void by virtue of the issuance of two marine policies. - The CFI of Manila ruled in favour of the petitioner. - The Court of Appeals reversed the decision of the CFI. ISSUES 1. WON the cover note is null and void for lack of valuable consideration because no separate premiums are collected by private respondent on all its cover notes 2. WON the court of appeals erred in holding that private respondent was released from liability under the cover note due to unreasonable delay in giving notice of loss because becaus e the court disreg disregarded arded the proven fact that private responden respondentt did not promptly and specifically object to the claim on the ground of delay in giving notice of loss and, consequently, objections on that ground are waived under section 84 of the insurance act
FACTS - March 19, 1963 - the plaintiff secured secured temporary insurance from the defendant for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan Bay, Quezon to Okinawa and Tokyo, Japan. The defendant issued issue d on said date Cover Note No. 1010, insuring insuring the said cargo of the plaintiff plaintiff "Subject to the Terms and Conditions of the WORKMEN'S INSURANCE COMPANY, INC. printed Marine Policy form as filed with and approved by the Office of the Insurance Commissioner. - April April 2, 196 1963 3 - The two (2) regular regular marine marine car cargo go poli policie cies s wer were e issued by the defendant defend ant in favor of the plaintiff. plaintiff. The total cargo insured under the two marine policies accordingly consisted of 1,395 logs, or the equivalent of 1,195,498 bd. ft. - After the issuance of cover note but before the issuance of the two marine policies policies some of the logs intended to be exported were lost during loading operations in the Diapitan Bay due to bad weather. - April 4, 1963 - The plaintiff informed the defendant about the loss of 'approximately 32 pieces of logs' during loading through a letter. - The plaintiff subsequently submitted submitted a 'Claim Statement' demanding payment of the loss under the second marine cargo policy. - July 17, 1963 - the defendant requested the the First Philippine Adjustment Corporation
HELD 1. NO Ratio Cover note is issued with a consideration when, by express stipulation, the cover note is made subject to the terms and conditions of the marine policies, and the payment of premiums is one of the terms of the policies. Reasoning a. the cover note in question is subject to the terms and conditions of the marine policies b. Nature o off the Cover N Note: ote: The fact th that at no sepa separate rate pre premium mium was pai paid d on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner's contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are intended or required to be paid on a Cover Note. c. The petitioner paid in full all the premiums as called called for by the statement issued by private priva te respo respondent ndent after the issua issuance nce of the two regul regular ar marine insur insurance ance policies policies,, thereby leaving no account unpaid by petitioner due on the insurance coverage, which must be deemed to include the Cover Note. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer. Had all the logs been lost during the loading operations, but after the issuance of the Cover Note, liabi liabilit lity y on the note would would have have alread already y arisen arisen even before before payment of premium. This is how the cover note as a "binder" should legally operate; otherwise, other wise, it would serve no practical purpo purpose se in the realm of commer commerce, ce, and is supported by the doctrine that where a policy is delivered without requiring payment of the premium, the presumption is that a credit was intended and policy is valid. 2. NO
to inspect the 1963 loss and assess the - August Augus t 23, - the adju adjuster sterdamage. reported reported that that 'the los loss s of 30 pieces of log logs s is not covered by the two policies inasmuch as said policies covered the actual number of logs loaded on board. But it is covered by Cover Note. Note.
-must The be priva private te respondent responde ntnot company never raised this Court groun ground dfails in the proceedings. proceedi ngs. because it did find any delay, as this to find a real andIt substantial sign thereof. But even on the assumption that there was delay, this Court is satisfied and convinced that as expressly provided by law, waiver can successfully
PACIFIC TIMBER EXPORT CORPORATION v. CA (WORKMEN’S INSURANCE CO) 112 SCRA 199 DE CASTRO; February 25, 1982
be raised against private respondent. Thus Section 84 of the Insurance Act provides:
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pAgE 45 "Section 84. - Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to take objection promptly and specifically upon that ground." - From what has been said, We find duly substantiated petitioner's assignments of error. Disposition The The appealed decision is set aside and the decision of the Court of First Instance is reinstated in toto with the affirmance of this Court.
DEVE DEVELO LOPM PMEN ENT T IN INSU SURA RANC NCE E DEVELOPMENT CORP) 143 SCRA 62 CRUZ; July 16, 1986
v. IAC IAC
(PHI (PHIL L
UNIO UNION N
RE REAL ALTY TY
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 1. WON default of petitioner is based on excusable neglect 2. What is the amount of indemnity due to the private respondent under its insurance contract? WON CFI was correct in interpreti interpreting ng the contract HELD 1. 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. 2. The policy is an open policy which means that the actual loss, as determined, will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not exceed the face value of the policy. - The petitioner argues that since at the time of the fire the building insured was worth P5,800,000.00, P5,800, 000.00, the private private respondent shoul should d be considered considered its own insurer insurer for the difference between that amount and the face value of the policy and should share pro rata in the loss sustained. sustained. Accordingly Accordingly,, the private respond respondent ent is entit entitled led to an indemnity of only P67,629.31, the rest of the loss to be shouldered by it alone. The petitioner cites Condition 17 of the policy, which provides: "If the property hereby insured shall, at the breaking out of any fire, be collectively
of value the sum insured thereon then thebear insured shall be considered as greater being his ownthan insurer for the difference, and shall a ratable proportion of the loss accordingly. Every item, if more than one, of the policy shall be separately subject to this condition."
- However, there is no evidence on record that the building was worth P5,800,000.00 at the time of the loss. On the contrary, the building was insured at P2,500,000.00, and this must be considered, by agreement, the actual value of the property insured on the day the fire occurred. This valuation becomes even more believable if it is remembered that at the time the building was burned it was still under construction and not yet completed. - The Court notes that the policy in this case is an open policy and is subject to the express condition that: "Open Policy. This is an open policy as defined in Sec57 of the Insurance Act. In the event of loss, whether total or partial, it is understood that the amount of the loss shall be subject to appraisal and the liability of the company, if established, shall be limited to the actual loss, subject to the applicable terms, conditions, warranties and clauses of this Policy, and in no case shall exceed the amount of the policy." - As defined in the aforestated provision, which is now Sec60 of the Insurance Code, "an open policy is one in which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss.". - The actual loss has been ascertained in this case and the Court will respect such factual determination in the absence of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy clause as expressly agreed upon by the parties in their contract, we hold that the private respondent is entitled to the payment of indemnity under the said contract in the total amount of P508,867.00. - The refusal of its vice-pres vice-president ident to receive receive the private responden respondent's t's complaint complaint,, as reported in the sheriff's return, was the first indication of the petitioner's intention to pro prolon long g this this case case and pos postpo tpone ne the dis discha charge rge of its obl obliga igatio tion n to the pri privat vate e respon responden dentt under under this this agr agreeme eement. nt. Tha Thatt int intent ention ion was reveal revealed ed fur furthe therr in its subsequent acts ---- or inaction ---- which indeed enabled it to avoid payment for more than five years from the filing of the claim against it in 1980. Dispositi Disp osition on The appealed decision is affirmed in full, with costs against the petitioner.
HARDING v. COMMERCIAL UNION ASSURANCE 38 PHIL 464 FISHER; August 10, 1918 FACTS - Mrs. Harding was the owner of a Studebaker automobile; in consideration of the payment to the defendant of the premium of P150, by said plaintiff, Mrs. Henry E. Harding, with the consent of her husband, the defendant by its duly authorized agent, Smith, Bell & Company (limited), made its policy of insurance in writing upon said automobile was set forth in said policy to be P3,000 that the value of said automobile was set forth in said policy to be P3,000; that on March 24, 1916, said automobile was totally destroyed by fire; that the loss thereby to plaintiffs was the sum of P3,000. - The defendant’s version is that by request of Mrs. Harding, it issued the policy of insurance on an automobile alleged by the said plaintiff to be her property. It was made by means of a proposal in writing signed and delivered by said plaintiff to the defendant, guaranteeing the truth of the statements contained therein which said proposal is referred to in the said policy of insurance made a part thereof; that certain of the statements and representations contained in said proposal and warranted by sai said d pla plaint intiff iff to be true, true, to wit: (a) the price paid by the propo proposer ser for the sai said d automobile; (b (b) the value of said automobile at the time of the execution and delivery of the said proposal and (c ( c) the ownership of said automobile, were false and known
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pAgE 46 to be false by the said plaintiff at the time of signing and delivering the said proposal and were made for the purpose of misleading misleading and deceivin deceiving g the defend defendant, ant, and inducing the defendant, relying upon the warranties, statements, and representations contained in the said proposal and believing the same to be true, issued the said policy of insurance. - The evi eviden dence ce shows shows that that Her Herman manos, os, the Manila Manila agents agents for the Studeb Studebake akerr automobile, automo bile, sold the automobile automobile to Canson Canson for P3,200 (testimony of Mr. Diehl); Diehl); who sold the said automobile to Henry Harding for the sum of P1,500. Harding sold the said automobile to J. Brannigan for the sum of P2,000 who sold the said automobile Henry Harding for the sum of P2,800; Henry Harding gave the said automobile to his wife as a present; that said automobile was repaired and repainted at the Luneta Garage at a cost of some P900; that while the said automobile was at the Luneta Garage;; the latter solicited Garage solicited of Mrs. Harding the insurance of said automobile automobile by the Company; that a proposal was filled out by the said agent and signed by the plaintiff Mrs Mrs.. Hen Henry ry E. Hardin Harding, g, and in sai said d propos proposal al und under er the headi heading ng "Price "Price paid paid by proposer," is the amount of "3,500" and under another heading "Present value" is the amount of "3,000". - After the said proposal was made a representative of the Manila agent of defendant went to the Luneta Garage and examined said automobile and Mr. Server, the General
HELD 1. NO - Article 1334 of the Civil Code which provides that "All gifts between spouses during the marriage shall be void. Moderate gifts which the spouses bestow on each other on festive days of the family are not included in this rule." - Even assuming that defendant might have invoked article 1334 as a defense, the burden would be upon it to show that the gift in question does not fall within the exception therein established. We cannot say, as a matter of law, that the gift of an automobile by a husband to his wife is not a moderate one. Whether it is or is not would depend upon the circumstances of the parties, as to which nothing is disclosed by the record. - We are of the opinion that it would be unfair to hold the policy void simply because the outlay represented by the automobile was made by the plaintiff's husband and not by his wife wife,, to whom he had given the automo automobil bile. e. It cannot cannot be ass assumed umed that
Manager of the Luneta Garage, an experienced automobile mechanic, testified that at the time this automobile was insured it was worth about P3,000, and the defendant, by and through its said agent Smith, Bell & Company (limited), thereafter issued a policy of insurance upon proposal in which policy the said automobile was described as of the "present value" of P3,000 and the said defendant charged the said plaintiff Mrs. Henry E. Harding as premium on said policy the sum of P150, or 5 per cent of the then estimated value of P3,000. - The "Schedule" in said policy of insurance describes the automobile here in question, and provides in part of follows: "That during the period above set forth and during any period for which the company may agree to renew renew this this policy policy the comp company any will subject subject to the excep exceptio tion n and conditions contained herein or endorsed hereon indemnify the insured against loss of or damage to any motor car described in the schedule hereto (including accessories) by whatever cause such loss or damage may be occasioned and will further indemnify the insured up to the value of the car or P3,000 whichever is the greater against any claim at common law made by any person (not being a person in the said motor car nor in the insured's service) for loss of life or for accidental bodily injury or damage to property caused by the said motor car including law costs payable in connection with such claim when incurred with the consent of the company." - On March 24, 1916, the said automobile was totally destroyed by fire, and that the iron and steel portions of said automobile which did not burn were taken into the possession of the defendant by and through its agent Smith, Bell & Company (limited), and sold by it for a small sum, which had never been tendered to the plaintiff prior to the trial of this case, but in open court during the trial the sum of P10 as the proceeds of such sale was tendered to plaintiff and refused. - Trial judge decided that there was no proof of fraud on the part of plaintiff in her statement of the value of the automobile, or with respect to its ownership; that she had an insurable interest therein; and that defendant, having agreed to the estimated value, P3,000, and having insured the automobile for that amount, upon the basis of
defendant should not have issued the policy unless it were strictly true that the price representing the cost of the machine had been paid by the insured and by no other person ? that it would no event insure an automobile acquired by gift, inheritance, person exchange, or any other title not requiring the owner to make a specific cash outlay for its acquisition. 2. NO - It has not been shown by the evidence that the statement was false; on the contrary we believe that it shows that the automobile had in fact cost more than the amount mentioned. The court below found, and the evidence shows, that the automobile was boughtt by plaintiff' bough plaintiff's s husband a few weeks before the issuance of the polic policy y in question quest ion for the sum of P2,800 P2,800,, and that between that time and the issuance issuance of the policy some P900 was spent upon it in repairs and repainting. - The witness Server, an expert automobile mechanic, testified that the automobile was practically as good as new at the time the insurance was effected. The form of proposal upon which the policy was issued does not call for a statement regarding the val value ue of the autom automobi obile le at the time of its acqui acquisit sition ion by the applican applicantt for the insurance, but merely a statement of its cost. The amount stated was less than the actuall outla actua outlay y which the automo automobile bile represented represented to Mr. Harding, including repairs, repairs, when the insurance policy was issued. - The court below found and the evidence shows, without dispute, that the proposal upon which the policy in question was issued was made out by defendant's agent by whom the insurance was solicited, and that appellee simply signed the same. It also appears that an examiner employed by the defendant made an inspection of the automobile before the acceptance of the risk, and that the sum after this examination. The trial court found that Mrs. Harding, in fixing the value of the automobile at P3 ,000, acted upon information given her by her husband and by Mr. Server, the manager of the Luneta Garage. She merely repeated the information which had been given her by her husband, and at the same time disclosed to defendant's agent the source of her information. There is no evidence to sustain the contention that this communication
which the premium was paid, is bound by it and must pay the loss in accordance with the stipulated insured value.
was made in bad faith. do noteven thinkifthat the facts the proposal be held as a warranty of theWe insured, it should havestated been in shown that theycan were incorrect incor rect in the absence of proof of willful willful misstatement. misstatement. Under such circumsta circumstance, nce, the proposal is to be regarded as the act of the insurer and not of the insured.
ISSUE
1. WON Mrs. Harding was not the owner of the automobile at the time of the issuance of the policy, and, therefore, had no insurable interest in it 2. WON the statement regarding the cost of the automobile was a warranty, that the statement was false, and that, therefore, the policy never attached to the risk
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pAgE 47 Plaintiff iff was the owner of the automobi automobile le in que questi stion on and had an Disposition Dispositio n Plaint insurable insur able interest interest therein; that there was no fraud on her part in procuring procuring the insurance; that the valuation of the automobile, for the purposes of the insurance, is binding upon the defendant corporation, and that the judgment of the court below is, therefore, correct and must be affirmed, with interest, the costs of this appeal to be paid by the appellant.
WHITE GOLD MARINE SERVICES v. PIONEER INSURANCE 464 SCRA 448 QUISUMBING; July 28, 2005 NATURE This petition for review assails the Decision of the Court of Appeals, affirming the Decision of the Insurance Commission. Both decisions held that there was no violation of the Insura Insurance nce Code and the respondents respondents do not need license license as insu insurer rer and insurance agent/broker. FACTS
-Steamship White Gold procured a Pioneer protection protection and indemnity covera coverage ge for Gold its vessels from Mutual through Insurance. Insurance. Subsequently, White was iissued ssued a Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its account accounts, s, Steamship Mutual refused to renew the coverage. - Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter’s unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186 and 187 of the Insurance Code, while Pioneer violated Sections 299, 300 and 301 in relation to Sections 302 and 303, thereof. - The Insurance Commission dismissed the complaint. complaint. It said that there was no need for Steamship Mutual to secure a license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club (P & I Club). Club). Likewi Likewise, se, Pioneer need not obtain anothe anotherr license as insuranc insurance e agent and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already licensed, hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous. - The Court of Appeals affirmed affirmed the decision of the Insurance Insurance Commissioner Commissioner.. In its decision, the appellate court distinguished between P & I Clubs vis-à-vis conventional insurance. insur ance. The appellate appellate court also held that Pioneer merely acted as a collecti collection on agent of Steamship Mutual. ISSUES 1. WON Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines 2. WON Pioneer needs a license as an insurance insurance agent/broker for Steamship Mutual HELD 1. YES - 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 performance bec becomes omes requisite requisite.. It is not by what it is called. called. Basica Basically, lly, an
to indemnify another against loss, damage or liability arising from an unknown or contingent event. - In parti particular cular,, a marin marine e insura insurance nce undertakes to indemn indemnify ify the assur assured ed against marine losses, such as the losses incident to a marine adventure. Section 99 of the Insurance Code enumerates the coverage of marine insurance. - Relat Relatedly, edly, a mutual insura insurance nce company is a coope cooperativ rative e enterp enterprise rise where the members member s are both the insurer and insured. insured. In it, the members all contribute, contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities liabilities are paid, and where the profits are divid divided ed among themselves, themselves, in proportion propo rtion to their interest interest.. Addit Additional ionally, ly, mutual insuranc insurance e assoc associatio iations, ns, or clubs clubs,, provide 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. - The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, 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. neces sary. Thus, no insurer or insurance compa company ny is allow allowed ed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission. 2. YES - SEC. 299 . . . - No per person son shal shalll act as an ins insura urance nce agent or as an ins insura urance nce broke brokerr in the solicitation or procurement of applications for insurance, or receive for services in obtaining obtai ning insurance, insurance, any commission commission or other compensat compensation ion from any insurance insurance compan com pany y doi doing ng bus busine iness ss in the Philip Philippin pines es or any age agent nt thereo thereof, f, withou withoutt fir first st 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. Disposition The petition is PARTIALLY GRANTED. The Decision dated July 30, 2002 Disposition of the Court of Appeals affirming the Decision dated May 3, 2000 of the Insurance Commission is hereby REVERSED AND SET ASIDE. The Steamship Mutual Underwriting Associatio Assoc iation n (Bermud (Bermuda) a) Ltd., and Pioneer Insura Insurance nce and Suret Surety y Corporation Corporation are ORDERED to obtain licenses and to secure proper authorizations to do business as insurer and insurance agent, respectively. The petitioner’s prayer for the revocation of Pioneer’s Certificate Certificate of Author Authority ity and removal removal of its directors directors and offic officers, ers, is DENIED.
PANDIMAN v. MARINE MANNING MNGT CORP. 460 SCRA 418 GARCIA; June 21, 2005 NATURE Petition for certiorari to review CA decision
insurance contract is a contract of indemnity. indemnity. In it, one undertakes for a consideration
FACTS
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pAgE 48 - Benito Singhid was hired as chief cook on board the vessel MV Sun Richie Five for a term of one year by Fullwin Maritime Limited through its Philippine agent, Marine Manning Mannin g and Management Management Corporation. Corporation. While the said vessel was on its way to Shanghai from Ho Chih Minh City, Benito suffered a heart attack and subsequently died on June 24, 1997. - Appare Apparentl ntly, y, the vesse vessell and the crew crew wer were e ins insure ured d with with Oce Ocean an Mar Marine ine Mutual Mutual Insurance Association Limited (OMMIAL), a Protective and Indemnity Club of which Sun Richie Five Bulkers S.A. is a member. Pandiman Philippines, the petitioner, is the local correspondent of OMMIAL. - Benito’s Benito’s widow, Rosita, filed a claim for death benefits with Marine which referred her to Pandima Pandiman. n. After her submission submission of the requi required red documentation, documentation, Pandiman recommended recomme nded payment of the death benefits benefits amoun amounting ting to $79,00 $79,000. 0. However, However, payment has not been made. - Rosita filed a complaint with the Labor Arbiter naming Marine, Pandiman, OMMIAL, and Ful Fullwi lwin n as respon responden dents. ts. The Arbite Arbiterr ord ordere ered d all the respon responden dents, ts, exc except ept Pandiman, to jointly and severally pay the widow the death benefits plus legal fees. The NLRC, on appeal by Marine, limited the liable parties to Pandiman and OMMIAL but maintained the money award. The CA sustained the decision of the NLRC. Hence this appeal.
ISSUE 1. WON Pandiman may be held liable for the death benefits 2. WON Marine and its foreign principal, Fullwin, should be absolved from the death claim liabilities HELD 1. NO - Pandiman is not an insurance agent as defined by Section 300 7 of the Insurance Code. Code. In this this case, case, there there was no showin showing g that that Pndima Pndiman n in fact negoti negotiate ated d the ins insura urance nce contra contract ct betwee between n Sun Richi Richie e Fiv Five e and the insur insurer er OMMI OMMIAL. AL. Even, Even, if Pandiman were an agent, payment for claims arising from peril insured against, to which the insurer is liable, is definitely not one of the liabilities of an insurance agent. Thus, there is no legal basis whatsoever for holding petitioner solidarily liable with insurer OMMIAL for the widow’s claim for death benefits. Also, Pandiman is not a party to the insurance contract and hence under Article 1311 of the Civil Code, it is not liable for the obligation arising out of the insurance contract. 2. NO - Fullwin, as Benito’s principal principal employer is liable under the employment employment contrac contract. t. Marine is also bound by its undertaking undertaking pursuant to the Rules and Regulations Regulations Governing Overseas Employment that “it shall assume joint and solidary liability with the employer for all the claims and liabilities which may arise in connection with the implementat implem entation ion of the contract, including including but not limited to the payment of wages, heath and disability compensation and repatriation”. In other words, both Fullwin and Marine should be held liable for whatever death benefits the widow of Benito may be entitled to. The petition is granted and the CA decision is reversed and set aside. Disposition The Disposition
7
Section 300. Any person who for compensation solicits or obtains on behalf of any insurance company transmits for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this
FILIPINAS COMPANIA DE SEGUROS V CHRISTERN, HUENEFELD AND CO INC 89 PHIL 54 PARAS; May 25, 1951 FACTS - October 1, 1941 - Christern Huenefeld, & Co., Inc., after payment of corresponding premium, premi um, obtained from the Filipinas Cia. de Seguros a fire policy in the sum of P1000,000, P1000, 000, covering merchandise merchandise contai contained ned in No. 711 Roman Street, Binondo Manila. - February 27, 1942 or during the Japanese military occupation - building and insured merchandise were burned. In due time the Huenefeld Co submitted to the Filipinas Cia its claim under the policy. The salvage goods were sold at public auction and, after deducting their value, the total loss suffered by the respondent was fixed at P92,650. - Filipinas Cia refused to pay the claim on the ground that the policy in favor of the respondent had ceased to be in force on the date the United States declared war against Germany, the respondent Corporation (though organized under and by virtue of the laws of the Philippines) Philippines) being control controlled led by the German subjects and the
Filipinas Cia being a company under American jurisdiction when said policy was issued on October 1, 1941. Filipinas Cia, however, in pursuance of the order of the Director of Bureau of Financing, Philippine Executive Commission, dated April 9, 1943, paid to the Huenefeld Co the sum of P92,650 on April 19, 1943. - August 6, 1946 – action filed in CFI Manila to recover from the Huenefeld Co the sum of P92,650 above mentioned. mentioned. The theor theory y of the Filipinas Filipinas Cia is that the insur insured ed merchandise were burned up after the policy issued in 1941 in favor of Huenefeld Co has ceased to be effective because of the outbreak of the war between the United States and Germany on December 10, 1941, and that the payment made by the Filipinas Filipinas Cia to Huenefeld Co durin during g the Japanese military occupati occupation on was under pressure. - CFI: dismissed the action without pronouncement pronouncement as to costs. - CA: CFI judgmen judgmentt affirmed, affirmed, with costs. The case is now before us on appeal by certiorari from certiorari from the decision of the Court of Appeals. ISSUE WON the policy in question became null and void upon the declaration of war between United States and Germany HELD YES Ratio Rati o The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy. > Effect of war, generally. generally. - All intercourse between citizens of belli belligerent gerent powers which is inconsistent with a state of war is prohibited by the law of nations. Such prohibition includes all negotiations, commerce, or trading with the enemy; all acts which which will will increa increase, se, or tend tend to increa increase, se, its income income or resour resources ces;; all acts of
voluntary submission to or it; or receiving its protection; also all thereto acts concerning the transmissi trans mission on of money goods goods; ; and all contra contracts cts relating are thereby nullified. It further prohibits insurance upon trade with or by the enemy, upon the life or lives of aliens engaged in service with the enemy; this for the reason that the
section and shall thereby become liable to all the duties, requirements, liabilities, and penalties to which an insurance agent is subject.
subjects of one country cannot be permitted to lend their assistance to protect by
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pAgE 49 insurance the commerce or property of belligerent, alien subjects, or to do anything detrimental too their country's interest. The purpose of war is to cripple the power and exhaust the resources of the enemy, and it is inconsistent that one country should destroy its enemy's property and repay in insurance the value of what has been so or destroyed, or aid, that it should such manner the resources of the enemy, ene my, render render it aid , and the in com commenc menceme ement nt increase of war determine determ ines, s, for like reasons, all trading intercourse with the enemy, which prior thereto may have been lawful. All individuals therefore, who compose the belligerent powers, exist, as to each other, in a state of utter exclusion, and are public enemies. (6 Couch, Cyc. of Ins. Law, pp. 5352-5353.) > In the case of an ordinary fire policy, which grants insurance only from year, or for some other other specif specified ied term it is pla plain in that that whe when n the parti parties es become become alien enemies, the contractual tie is broken and the contractual rights of the parties, so far as not ve sted. sted . lost. (Vance, the Law on Insurance, Sec. 44, p. 112.) 112.) Reasoning - The Court of Appeals overruled the contention of the petitioner that the respondent corporation became an enemy when the United States declared war against Germany, relying on English and American cases which held that a corporation is a citizen of the country countr y or state by and under the laws of which it was created or organized. organized. It rejected rejec ted the theor theory y that nationality nationality of priva private te corpo corporatio ration n is determined by the character or citizenship of its controlling stockholders. - There is no question that majority of the stockholders of the respondent corporation were German subjects. Therefore, Huenefeld Co became an enemy corporation upon the outbreak of the war between the United States and Germany. The English and American cases relied upon by the Court of Appeals have lost their force in view of the latest decision of the Supreme Court of the United States in Clark vs. vs. Uebersee Uebersee Finanz Korporatio Korpo ration, n, decided on Decemb December er 8, 1947, in which the controls controls test has been adopted. In "Enemy Corporation" by Martin Domke, a paper presented to the Second International Conference of the Legal Profession held at the Hague (Netherlands) in August. 1948 also discussed this dilemma > In Clark vs. Uebersee vs. Uebersee Finanz Korporation, A. G., dealing with a Swiss corporation allegedly alleg edly controll controlled ed by German interest, interest, the Court: "The property of all foreign interest was placed within the reach of the vesting power (of the Alien Property Custodian) not to appropriate friendly or neutral assets but to reach enemy interest which masqueraded under those innocent fronts. . . . The power of seizure and vesting was extended to all property of any foreign country or national so that no innocent appearing device could become a Trojan horse." - The respondent having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid and enforcible, and since the insured goods were burned after December 10, 1941, and during the war, the respondent was not entitled to any indemnity under said policy from the petitioner. However, elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium paid by the respondent for the period covered by its policy from December 11, 1941, should be returned by the petitioner. the appeal appealed ed decisi decision on is hereby hereby revers reversed ed and the respon responden dentt Dispositio Dispo sition n corporation corpor ation is ordered to pay to the petitioner petitioner the sum of P77,208.33, P77,208.33, Philippine Philippine currency, curren cy, less the amount amount of the premium, premium, in Phili Philippine ppine currency, currency, that shoul should d be returned the petitioner for the unexpired term of the policy in question, beginning Decemberby11, 1941.
INSULAR LIFE ASSURANCE CO. v. EBRADO 80 SCRA 181 MARTIN; October 28, 1977 NATURE Appeal from judgment of RTC. FACTS - Buenav Buenaventura entura Ebrado obtained obtained a wholewhole-life life insurance insurance polic policy y from Insular, for P5,882 P5,882.00 .00 with with a rider rider for accide accidenta ntall dea death th ben benefi efits ts for the sam same e amo amount unt.. He designated Carponia Ebrado as the revocable beneficiary, referring to her as the wife. - Afterwards, he died as a result of an accident when he was hit by a falling branch of a tree. Carponia filed a claim for the proceeds as the designated beneficiary in the policy, although she admits that she and Buenaventura were merely living as husband
and wife without of the marriage. The legal wife, Pascuala Vda De Ebrado, also filed her claim as the the benefit widow of deceased. - Insular then filed an inter interplead pleader er in court (CFI Rizal) to determine to whom the proceeds should be paid. CFI declared that Carponia was disqualified from becoming beneficiary of the insured and directing the Insular to pay the proceeds to the estate of Buenaventura. ISSUE 1. WON a common-law wife named as beneficiary in the insurance policy of a legally married man claim the proceeds of the same HELD 1. NO applies to Ratio The prohibition that husband and wife cannot donate to each other applies common-law relationships. As the appointment of a beneficiary in insurance may be considered a donation, one cannot name as beneficiary his common-law wife. Reasoning - It is qui quite te unfort unfortuna unate te that that the Insur Insuranc ance e Cod Code e doe does s not conta contain in any speci specific fic provision grossly resolutory of the prime question at hand. - Rather, general rules of civil law should be applied to resolve the issue. Art.2011, CC states: “The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code.” Code.” Thus, when not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. - Also, Art.201 Art.2012 2 “any perso person n who is forbidden forbidden from receiving receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation to him.” Common-law spouses are, definitely, barred from receiving donations from each other. - Art.739, CC: The following donations shall be void:
1. Those made between persons who were guilty of adultery or concubinage at the time of donation; - In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A
beneficiar benef iciary y is like a donee donee,, because from the premi premiums ums of the policy which the
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pAgE 50 insured pays out of liberalit insured liberality, y, the beneficia beneficiary ry will recei receive ve the proceeds proceeds or profi profits ts of said insurance. insurance. As a consequence consequence,, the proscription proscription in Art.739 Art.739 CC should equally operate in life insurance contracts. The mandate of Art.2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life
the one hand; and Basilia Berdin, his widow by the second marriage and their seven children, on the other hand, who are entitled to the remaining one-half, or 8/16, each of them to receive an equal share of 1/16. - Dissatisfied with the foregoing ruling and apportionment made by the GSIS, Basilia
policy of the and person who cannot make the donation. -insurance Policy considerations dictates of morality rightly justify the institution of a barrier between common-law spouses in regard to property relations since such relationship ultimately encroaches upon the nuptial and filial rights of the legitimate family. There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones should be enforced in life insurance policies since the same are based on similar consideration. - So long as marriage marriage remains the threshold of family laws, reason and morali morality ty dictate dicta te that the impediments impediments imposed upon married couple should should likewise likewise be imposed upon extra-marital relationship. If legitimate relationship is circumscribed by these legal disabilities, with more reason should an illicit relationship be restricted by these disabilities. Disposition Decision AFFIRMED.
Berdin Berdi n and injunction her childre children filed on of October 10, 1966 a petit petition ion for mandamus with preliminary innthe Court First Instance of Surigao. - The CFI of Surigao ruled in favor of respondent Rosario Diaz and upheld the ruling of GSIS in all aspect. Thus, Basilia Berdin and her children appealed said decision to the Supreme Court.
CONSUEGRA v. GSIS 37 SCRA 315 ZALDIVAR; January 30, 1971
ISSUE WON GSIS was correct in awarding half of the retirement benefit of the deceased to Rosario Diaz, the first wife, notwithstanding the fact that the petitioners were named as beneficiaries of the life insurance HELD YES - The GSIS offers two separate and distinct systems of benefits to its members, one is the life insur insurance ance and the other is the retir retirement ement insuran insurance. ce. These two distinct
FACTS - The late Jose Consuegra, at the time of his death, was employed as a shop foreman of the office of the District Engineer in the province of Surigao del Norte. In his lifetime, Consuegra contracted two marriages, the first with herein respondent Rosario Diaz, solemnized in the parish church of San Nicolas de Tolentino, Surigao, Surigao, on July 15, 1937, out of which marriage were born two children, namely, Jose Consuegra, Jr. and Pedro Consuegra, but both predeceased their father; and the second, which was contracted contracted in good faith while the first marriage was subsisting, subsisting, with herein herein petitioner Basilia Berdin, on May 1, 1957 in the same parish and municipality, out of which marriage were born seven children, namely, Juliana, Pacita, Maria Lourdes, Jose, Rodrigo, Lenida and Luz, all surnamed Consuegra. - Being a member of the Government Service Insurance System (GSIS, for short) when Consuegra Consu egra died on September September 26, 1965, the proceeds of his life insurance insurance under policy No. 601801 were paid by the GSIS to petitioner Basilia Berdin and her children who were the beneficiaries named in the policy. - However, However, Consu Consuegra egra did not designate any beneficiar beneficiary y who would receive receive the retirement insurance benefits due to him. Respondent Rosario Diaz, the widow by the first marriage, marriage, filed a claim with the GSIS asking that the retiremen retirementt insur insurance ance benefits benefi ts be paid to her as the only legal heir of Consuegra, Consuegra, consideri considering ng that the deceased did not designate any beneficiary with respect to his retirement insurance benefits. Petitioner Basilia Berdin and her children, likewise, filed a similar claim with
systems syste ms of benefits benefits are paid out from two disti distinct nct and separ separate ate funds that are maintained by the GSIS. Thus, it doesn’t necessarily mean that the beneficiaries in the life insurance are also the beneficiaries in the retirement insurance. - Consuegra started in the government service sometime during the early part of 1943, or before 1943. In 1943 Com. Act 186 was not yet amended, and the only benefits then provided for in said Com. Act 186 were those that proceed from a life insurance. Upon entering the government service Consuegra became a compulsory member mem ber of the GSIS, bei being ng automa automatic ticall ally y ins insure ured d on his lif life, e, pur pursua suant nt to the provisions of Com. Act 186 which was in force at the time. During 1943 the operation of the Government Service Insurance System was suspended because of the war, and the operation operation was resumed sometime in 1946. When Consuegra designa designated ted his beneficiaries in his life insurance he could not have intended those beneficiaries of his life insurance insurance as also the benefi beneficiari ciaries es of his retireme retirement nt insur insurance ance because the provisions on retirement insurance under the GSIS came about only w hen Com. Act 186 was amended by Rep. Act 660 on June 16, 1951. Hence, it cannot be said that because herein appellants were designated beneficiaries in Consuegra's life insurance they automatically became the beneficiaries also of his retirement insurance. - The provi provisio sions ns of sub subsec sectio tion n (b) of Sec Sectio tion n 11 of Comm Commonw onweal ealth th Act 186, as amended by Rep. Act 660, clearly indicate that there is need for the employee to file an application for retirement insurance benefits when he becomes a member of the GSI GSIS, S, and he should should sta state te in his app applic licati ation on the ben benefi eficia ciary ry of his retir retireme ement nt insurance. Hence, the beneficiary named in the life insurance does not automatically become the beneficiary in the retirement insurance unless the same beneficiary in the life insurance is so designated in the application for retirement insurance. - In the case of the proceeds of a life insurance, the same are paid to whoever is named the beneficiary in the life insurance policy. As in the case of a life insurance provided for in the Insurance Act, the beneficiary in a life insurance under the GSIS may not necessarily be an heir of the insured. The insured in a life insurance may designate any person as beneficiary unless disqualified to be so under the
the GSIS, asserting that being beneficiaries named insurance policy of Consu Consuegra, egra, they are the onlythe ones enti entitled tled to receive receiin ve the thelife retiremen retirement t insur insurance ance benefits due the deceased Consuegra. Resolving the conflicting claims, the GSIS ruled that the legal heirs of the late Jose Consuegra were Rosario Diaz, his widow by his first
provisions of the Civil Code. And in the absence of any beneficiary named in the life insurance policy, the proceeds of the insurance will go to the estate of the insured. - On the other hand, the beneficiary of the retirement insurance can only claim the proceeds of the retirement insurance if the employee dies before retirement. If the
NATURE Appeal from the decision of the Court of First Instance of Surigao del Norte awarding the 8/16 part of the proceeds of the deceased Consuegra’s retirement benefits to Rosario Diaz.
marriage who is entitled to one-half, or 8/16, of the retirement insurance benefits, on
employee failed or overlooked to state the beneficiary of his retirement insurance, the
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pAgE 51 retirement benefits will accrue to his estate and will be given to his legal heirs in accordance with law, as in the case of a life insurance if no beneficiary is named in the insurance policy. Disposition Petition Denied. It is Our view, therefore, that the respondent GSIS had
enforced enfor ced to the extent of contr contradicti adicting ng the very provisi provisions ons of said law conta contained ined in Section 13, thereof” - When the provisions of a law are clear and explicit, the courts can do nothing but apply its clear and explicit provisions (Velasco vs. Lopez)
correctly acted when ruled that the proceeds of the insurance of Diaz, the late Jose Consuegra shouldit be divided equally between his retirement first living wife Rosario on the one hand, and his second wife Basilia Berdin and his children by her.
NO disqualification mentioned in Article 739 is not applicable to herein appellee -2.The Candelaria Cande laria Davac because she was not guilty guilty of concubinage, concubinage, there being no proof that she had knowledge of the previous marriage of her husband Petronilo. ART. 2012. Any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make any donation to him according to said article. ART. 739. The following donations shall be void: (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation; (the court did not decide whether this partakes the nature of a life insurance policy) 3. NO - The benefit receivable under the Act is in the nature of a special privilege or an arrangement secured by the law pursuant to the policy of the State to provide social security secur ity to the workingmen. workingmen. The amoun amounts ts that may thus be received cannot be
SSS v. DAVAC 17 SCRA 863 BARRERA: July 30, 1966 NATURE APPEAL from a resolution Of the Social Security Commission. FACTS - Petronilo Davac, became a member of the Social Security System (SSS for short) on September 1, 1957. In the Member's Record he designated respondent, Candelaria
Davac as his beneficiary and indicated his relationship to her as that of "wife". - He died on April 5, 1959. It appears that the deceased contracted two marriages, the first, with Lourdes Tuplano on August 29, 1946, who bore him a child, Romeo Davac, and the second, with Candelaria Davac on January 18, 1949, with whom he had a minor daughter, Elizabeth Davac. Both filed their claims for death benefit with the SSS. - Social Security Commission issued the resolution declaring respondent Candelaria Davac as the person entitled to receive the death benefits payable for the death of Petronilo Davac. ISSUES 1. WON the Social Security Commission Candelaria Davac is entitled to receive the death benefits 2. WON a beneficiary under the Social Security System partakes of the nature of a beneficiary benefi ciary in a life insura insurance nce policy and, therefore the designation designation made in the person person DAVA DAVAC C as bigam bigamous ous wife is nul nulll and void, void, becaus because e it contr contrave avenes nes the provisions of the Civil Code 3. WON the benefits accruing from membership with SSS forms part of the conjugal property thus the resolution deprives the lawful wife of her share in the conjugal property as well as of her own and her child's legitime in the inheritance HELD 1. YES - Section 13, RA1161 provides that the beneficiary "as recorded" by the employee's employer is the one entitled to the death benefits. - Section 13, Republic Act No. 1161, as amended by Republic Act No. 1792, in force at the time of Petronilo Davac's death provides: provides: Upon Upon the covered employee's death or total and permanent disability under such conditions as the Commission may define, before becoming eligible for retirement and if either such death or disability is not
compensable under the Workmen's Compensation Act, he or. in case of his death, his beneficiaries, as recorded by his employer shall be entitled to the following benefit: - In Tecson vs. Social Security System. Section 13 was construed:"it may be true that the purpose of the coverage under the Social Security System is protection of the
considered as property earned by the member during his lifetime. His contribution to the fund constitute constitutes s only an insig insignific nificant ant portion thereof. Then, the benefits are specifically declared not transferable, transferable, and exempted from tax, legal processes processes,, and lie lien. n. Fur Furthe thermo rmore, re, in the set settle tlemen mentt of claims claims thereu thereunde nder, r, the pro proced cedure ure to be observ observed ed is governed governed not by the gener general al pro provis vision ions s of law, law, but by rules rules and regulation regul ations s promu promulgate lgated d by the Commis Commission. sion. Thus, if the money is payabl payable e to the estate of a deceased member, it is the Commission, not the probate or regular court that determines the person or persons to whom it is payable. - They are disbursed from a public special fund created by Congress.The sources of this special fund are the covered employee's contribution (equal to 2-1/2 per cent of the employee's monthly compensation) ; the employer's 'Contribution (equivalent to 3-1/2 per cent of the monthly compensation compensation of the cover covered ed employee) ;and the Government Gover nment contribution contribution which consi consists sts in yearl yearly y appropriat appropriation ion of publi public c funds to assure the maintenance of an adequate working balance of the funds of the System. Additionally, Section 21 of the Social Security Actprovides that the benefits prescribed in this Act shall not be dimini diminishe shed d and the Gov Govern ernment ment of the Repub Republic lic of the Philippines accepts general responsibility for the solvency of the System. - The benefits under the Social Security Act are not intended by the lawmaking body to form part of the estate of the covered –members. - Social Security Act is not a law of succession. Disposition Resolution of the Social Security Commission appealed is affirmed
FRANCISCO DEL VAL v. ANDRES DEL VAL 29 PHIL 534 MORELAND; February 16, 1915 NATURE Appeal from a judgment of the Court of First Instance of the city of Manila dismissing
the complaint with costs. FACTS
employee as well as of his family, but this purpose or intention of the law cannot be
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pAgE 52 - Plaintiffs and defendant are brothers and sisters; that they are the only heirs at law and next of kin of Gregorio Nacianceno del Val, who died in Manila on August 4, 1910, intestate - During the lifetime of the deceased he took out insurance on his life for the sum of
- The SC agreed with the finding of the trial court that the proceeds of the lifeinsurance policy belong exclusively to the defendant as his individual and separate property, we agree. That the proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose life was insured, and that such
P40,000 made payable the defendant ANDRES VAL as sole beneficiary. After his and death the itdefendant defenda ntto collected collect ed the face of the DEL policy policy. . From said polic policy y he paid the sum of P18,365.20 to redeem certain real estate which the decedent had sold to third persons with a right to repurchase. - The redemption of said premises was made by the attorney of defendant ANDRES in the name of the plaintiffs plaintiffs and the defendant defendant as heirs of the deceased deceased vendor. It further appears from the pleadings that the defendant, on the death of the deceased, took possession of most of his personal property, which he still has in his possession, and that he has also the balance on said insurance policy amounting to P21,634.80. - Plaintiffs contend that the amount of the insurance policy belonged to the estate of the deceased and not to the defendant personally; that, therefore, they are entitled to a partition not only of the real and personal property, but also of the P40,000 life insurance. The complaint prays a partition of all the property, both real and personal, left by the deceased; that the defendant account for P21,634.80, and that the sum be divided equally among the plaintiffs and defendant along with the other property of
proceeds are the separate and individual of the in beneficiary, and not ofthat the heirs of the person whose life was insured,property is the doctrine America. We believe the same doctrine obtains in these Islands by virtue of section 428 of the Code of Commerce, which reads: "Th "The e amount amounts s which which the underw underwrit riter er mus mustt del delive iverr to the perso person n ins insure ured, d, in fulfi fulfillmen llmentt of the contra contract, ct, shall be the propert property y of the latter, even against the claims of the legitimate heirs or creditors of any kind whatsoever of the person who effected the insurance in favor of the former." 2. NO - The contract of life insurance is a special contract and the destination of the proceeds proce eds thereof is deter determined mined by special special laws which deal exclusivel exclusively y with that subject. The Civil Code has no provisions which relate directly and specifically to lifeinsurance contracts or to the destination of life insurance proceeds. That subject is regulated exclusively by the Code of Commerce which provides for the terms of the contract, the relations of the parties and the destination of the proceeds of the policy.
deceased. - The defendant denies denies the materi material al allegations allegations of the complaint complaint and sets up as special defense and counterclaim that the redemption of the real estate sold by his father was made in the name of the plaintiffs and himself instead of in his name alone without his knowledge or consent. Andres contends that it was not his intention to use the proceeds of the insurance policy for the benefit of any person but himself, he alleging that he was and is the sole owner thereof and that it is his individual property. He, therefore, asks that he be declared the owner of the real estate redeemed by the payment of the P18,365.20, the owner of the remaining P21,634.80, the balance of the insurance policy, and that the plaintiffs account for the use and occupation of the premises so redeemed since the date of the redemption. - The trial court refused to give relief to either party and dismissed the action. In this appeal, it is claimed by the attorney for the plaintiffs that insurance provisions in the Code of Commerce Commerce are subordinate subordinated d to the provisions provisions of the Civil Code as found in article 1035. This article reads: "An heir by force of law surviving with others of the same character to a succession must bring into the hereditary estate the property or securities he may have received from the deceased during the life of the same, by way of dowry, gift, or for any good consideration, in order to compute it in fixing the legal portions and in the account of the division." - Counsel also claims that the proceeds of the insurance policy were a donation or gift made by the father during his lifetime to the defendant and that, as such, its ultimate destinatio desti nation n is determine determined d by those provi provisions sions of the Civil Code which relate to donations, especially article 819. This article provides that "gifts made to children which are not betterments shall be considered as part of their legal portion."
- Assuming that the proceeds of the life-insurance policy being the exclusive property of the defendant and he having used a portion thereof in the repurchase of the real estate sold by the decedent prior to his death with right to repurchase, and such repurchase having been made and the conveyance taken in the names of all of the heirs instead of the defendant alone, plaintiffs alone, plaintiffs claim that the property belongs to the heirs in common and not to the defendant alone. - The Court rejected this contention unless the fact appear or be shown that the defendant acted as he did with the intention that the other heirs should enjoy with him the ownership of the estate ---- in other words, that he proposed, in effect, to make a gift of the real estate to the other heirs. If it is established by the evidence that was his intention and that the real estate was delivered to the plaintiffs with that understanding, then it is probable that their contention is correct and that they are entitled to share equally with the defendant therein. If, however, it appears from the evidence in the case that the conveyances were taken in the name of the plaintiffs without his knowledge or consent, or that it was not his intention to make a gift to them of the real estate, then it belongs to him. If the facts are as stated, he has two remedies. The one is to compel the plaintiffs to reconvey to him and the other is to let the title stand with them and to recover from them the sum he paid on their behalf. - For the complete and proper determination of the questions at issue in this case, the Court was of the opinion that the cause should be returned to the trial court with instructions to permit the parties to frame such issues as will permit the settlement of all the questions involved and to introduce such evidence as may be necessary for the ful fulll determ determina inatio tion n of the issues issues fra framed med.. Upo Upon n such such issues issues and evi eviden dence ce taken taken thereunder the court will decide the questions involved according to the evidence, subord subordina inatin ting g his conclusi conclusions ons of law to the rules laid dow down n in this this opi opinio nion. n. REMANDED.
ISSUES 1. WON the insurance belongs to the defendant and not to the decedent’s estate 2. WON the Civil code provisions on succession prevail over any other law with respect
GERCIO v. SUN LIFE ASSURANCE OF CANADA
to the insurance
48 PHIL 53 September 28, 1925 MALCOLM;
HELD 1.
YES
NATURE
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pAgE 53 Mandamus to compel Sun Life Assurance Co. of Canada to change the beneficiary in the policy issued by the defendant company on the life of the plaintiff Hilario Gercio FACTS
2. NO Ratio The wife has an insurable interest in the life of her husband. The beneficiary has an absolute absolute vested interes interestt in the policy from the date of its issuance issuance and delivery. So when a policy of life insurance is taken out by the husband in which the
-pol On Canada issued an insurance policy icyJanuary on the29, life1910, of Hilari Hilthe ario oSun Gercio GerLife cio.. Assurance The poli policy cy Co. wasofwhat is kno known wn as a 2020-yea yearr endowment endowme nt policy. By its terms, the insurance insurance company agreed to insur insure e the life of Hilario Gercio for the sum of P2,000, to be paid him on February 1, 1930, or if the insured should die before said date, then to his wife, Mrs. Andrea Zialcita, should she survive him; otherwise to the executors, administrators, or assigns of the insured. The policy did not include any provision reserving to the insured the right to change the beneficiary. - On the date the policy was issued, Andrea Zialcita was the lawful wife of Hilario Gercio. Towards the end of the year 1919, she was convicted of the crime of adultery. On September 4, 1920, a decree of divorce was issued in civil case no. 17955, which had the effect of completely dissolving their bonds of matrimony - On March 4, 1922, Hilario Gercio formally notified the Sun Life that he had revoked his donation in favor of Andrea Zialcita, and that he had designated in her stead his pre presen sentt wife, wife, Adela Adela Garcia Garcia de Gercio Gercio,, as the benefi beneficia ciary ry of the policy. policy. Gercio Gercio
wife is named as beneficiary, she are has attached a subsisting policy. And cash this applies to a policy to which there the interest incidentsinofthe a loan value, surrender value, an automatic extension by premiums paid, and to an endowment policy, as well as to an ordinary life insurance policy. If the husband wishes to retain to himself the control and ownership of the policy he may so provide in the policy. But if the policy contains no provi provision sion authorizing authorizing a change of benefi beneficiary ciary without the beneficiary's consent, the insured cannot make such change. Accordingly, it is held that a life insurance policy of a husband made payable to the wife as beneficiary, is the separate property of the beneficiary and beyond the control of the husband. - Unlike the statutes of a few jurisdictions, there is no provision in the Philippine Law permitting the beneficiary in a policy for the benefit of the wife of the husband to be changed after a divorce. It must follow, therefore, in the absence of a statute to the contrary, that if a policy is taken out upon a husband's life the wife is named as beneficiary therein, a subsequent divorce does not destroy her rights under the policy. Reasoning
requested the insurance requested insurance company to eliminate Andrea Zialcita as beneficiary beneficiary.. This, This, the insurance company has refused and still refuses to do.
HELD 1. Whether the case be considered in the light of the Code of Commerce, the Civil Code, or the Insurance Act, the deficiencies in the law will have to be supplemented by the general principles prevailing on the subject. To that end, we have gathered the rules which follow from the best considered American authorities. In adopting these rules, we do so with the purpose of having the Philippine Law of Insurance conform as nearly as possible to the modern Law of Insurance as found in the United States proper. - Court’s first duty is to determine what law should be applied to the facts. The insurance policy was taken out in 1910, that the Insurance Act. No. 2427, became effective in 1914, and that the effort to change the beneficiary was made in 1922. - Code of Commerce- there can be found in it no provision either permitting or prohibiting the insured to change the beneficiary. - Civil Code- it would be most difficult, difficult, if indeed it is practic practicable, able, to test a life insurance policy by its provisions. In the case of Del Val vs. Del Val, it declined to consider consid er the proceeds proceeds of the insurance insurance policy as a donation or gift, saying "the contract of life insurance is a special contract and the destination of the proceeds
- Yore vs. Booth “. . . It seems to be the settled doctrine, with but slight dissent in the courts of this countr country, y, that that a per person son who pro procur cures es a pol policy icy upon his own life, payab payable le to a designated desig nated benefici beneficiary, ary, although he pays the premiu premiums ms himse himself, lf, and keeps the policy in his exclusive possession, has no power to change the beneficiary, unless the policy itself, or the charter of the insurance company, so provides. In policy, although he has parted with nothing, and is simply the object of another's bounty, has acquired a vested and irrevocable interest in the policy, which he may keep alive for his own benefit by paying the premiums or assessments if the person who effected the insurance fails or refuses to do so.” - Connecticu t Mutual Life Insura nce Company vs Schaef er “We do not hesitate to say, however, that a policy taken out in good faith and valid at its inception, is not avoided by the cessation of the insurable interest, unless such such be the necess necessary ary effec effectt of the pro provis vision ions s of the pol policy icy itse itself. lf... . . .In our judgment of life policy, originally valid, does not cease to be so by the cessation of the assured party's interest in the life insured.” - Central National Bank of Washington City vs. Hume “It is indeed the general rule that a policy, and the money to become due under it, belong, the moment it is issued, to the person or persons named in it as the beneficiary or beneficiaries, and that there is no power in the person procuring the insurance, by any act of his, by deed or by will, to transfer to any other person the interest of the person named.” - In re Dreuil & Co. “In so far as the law of Louisiana is concerned, it may also be considered settled that where a policy is of the semitontine variety, as in this case, the beneficiary has a vested right in the policy, of which she cannot be deprived without her consent” - Wallace vs Mutual Benefit Life Insurance Co. “ As soon as the policy was issued Mrs. Wallace acquired a vested interest therein, of which she could not be deprived without her consent, except under the terms of
thereof is determined by special laws which deal exclusively with that subject. The Civil Code has no provisions which relate directly and specifically to life-insurance contracts or to the destination of life-insurance proceeds. . . ." - Insurance Act- there is likewise no provision either permitting or prohibiting the
the contract with the insurance company. No right to change the beneficiary was reserved. reser ved. Her interest in the polic policy y was her individual individual propert property, y, subject to be divested only by her death, the lapse of time, or by the failure of the insured to pay the premiums. She could keep the policy alive by paying the premiums, if the
ISSUES 1. (Preliminary) WON the provisions of the Code of Commerce and the Civil Code shall be in force in 1910, or the provisions of the Insurance Act now in force, or the general principles of law, guide the c ourt in its decision 2. WON the insured, the husband, has the power to change the beneficiary, the former wife, and to name instead his actual wife, where the insured and the beneficiary have been divorced and where the policy of insurance insurance does not expres expressly sly reserve to the insured the right to change the beneficiary
insured to change the beneficiary.
insured did not do so. It was contingent upon these events, but it was free from the
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pAgE 54 control of her husband. He had no interest in her property in this policy, contingent or otherwise. Her interest was free from any claim on the part of the insured or his creditors. He could deprive her of her interest absolutely in but one way, by living more than twenty years.”
- Respon Responden dentt Jud Judge ge den denied ied pet petiti itione oner’s r’s Urg Urgent ent Motion Motion,, thus thus allowi allowing ng pri privat vate e respondent to adduc respondent adduce e evide evidence, nce, the conse consequence quence of which was the issua issuance nce of the questioned Order granting the petition. Petitioner then filed a MFR which was also denied hence this petition.
vs. I llinois Lif e from Insurance Co - Filley “The benefit accruing a policy ofmpany life insurance upon the life of a married man, payable upon his death to his wife, naming her, is payable to the surviving beneficiary named, although she may have years thereafter secured a divorce from her husband, husband, and he was thereaft thereafter er again again mar marrie ried d to one who sustai sustained ned the relation of wife to him at the time of his death. The rights of a beneficiary in an ordinary life insurance policy become vested upon the issuance of the policy, and can thereafter, during the life of the beneficiary, be defeated only as provided by the terms of the policy.” - On the admitted facts and the authorities supporting the nearly universally accepted principles of insurance, we are irresistibly led to the conclusion that the question at issue must be answered in the negative Disposition The judgment appealed from will be reversed and the complaint ordered dismissed as to the appellant.
ISSUE 1. WON the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the irrevocable beneficiaries 2. WON the irrevocable beneficiaries herein, one of whom is already deceased while the others are all minors could validly give consent to the change or amendment in the designation of the irrevocable beneficiaries
SEPARATE OPINION
- Sin Since ce the poli policy cy was procu procured red in 1968, 1968, the appli applicab cable le law in this case case is the Insurance Insura nce Act and under that law, the benefi beneficiary ciary designa designated ted in a life insur insurance ance contract cannot be changed without the consent of the beneficiary because he has a vested interest in the policy. - The Beneficiary Designation Indorsement in the policy in the name of Dimayuga states state s that the desig designatio nation n of the beneficia beneficiaries ries is irrev irrevocable ocable:: “no right or privilege under the Policy may be exercised, or agreement made with the Company to any chan change ge in or amen amendme dment nt to the the Poli Policy cy,, wi with thou outt the the cons consen entt of the the sa said id beneficiary/beneficiaries.” - Contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intentio intention n of the contra contracting cting parti parties, es, for contr contracts acts are obligatory, no matter in what form they may be, whenever the essential requisites for their validity are present. - Finally, the fact that the contract of insurance does not contain a contingency when the change in the designation of beneficiaries could be validly effected means that it was never within the contemplation of the parties. 2. NO - The parent-ins parent-insured ured cannot exercise rights and/or privileges privileges pertaining pertaining to the insurance insur ance contract, for other otherwise, wise, the veste vested d rights of the irrevocabl irrevocable e benefi beneficiari ciaries es would be render rendered ed inconsequential inconsequential.. The alleged acquiesce acquiescence nce of the 6 child children ren beneficiar benef iciaries ies cannot be considered an effect effective ive ratificat ratification ion to the change of the beneficiaries from irrevocable to revocable. They were minors at the time, and could not validly give consent. Neither could they act through their father-insured since their interests are quite divergent from one another. Disposition questioned Orders of respondent judge are nullified and set aside.
JOHNSON [concur] - I agree with the majority of the court, that the judgment of the lower court should be revoked, but for a different reason. The purpose of the petition is to have declared the rights of certain persons in an insurance policy which is not yet due and payable. It may never become due and payab payable. le. The pre premiu miums ms may not be paid, paid, thereb thereby y rendering the contract of insurance of non effect, and many other things may occur, before the policy becomes due, which would render it non effective. The plaintiff and the other parties who are claiming an interest in said policy should wait until there is something due them under the same. For the courts to declare now who are the persons entitled to receive the amounts due, if they ever become due and payable, is impossible, for the reason that nothing may ever become payable under the contract of insurance, and for many reasons such persons may never have a right to receive anything when the policy does become due and payable. In my judgment, the action is premature and should have been dismissed.
PHIL. AMERICAN LIFE INSURANCE v. PINEDA 175 SCRA 416 PARAS; July 19, 1989 NATURE Petition for review on certiorari the orders of CFI Judge Pineda FACTS - In 1968, Private Respondent Rodolfo Dimayuga procured an ordinary life insurance policy policy fro from m the petiti petitione onerr company company and design designate ated d his wife and chi childr ldren en as
irrevocable Onthe Feb.beneficiari 22, 1980, Dimayuga filed with a petition to amend the beneficiaries. designatio designation n of benefi ciaries es in his life policy poli cy the fromCFI irrevoca irrevocable ble to revocable. Petitioner filed an Urgent Motion to reset hearing as well as its comment and/or Opposition to the respondent’s petition.
HELD 1. NO - Based on the provision of their contract and the law applicable, it is only with the consen consentt of all the ben benefi eficia ciarie ries s that that any change change or ame amendme ndment nt in the pol policy icy concerning the irrevocable beneficiaries may be legally and validly effected. Both the law and the Policy do not provide for any other exception. Reasoning
SUN LIFE ASSURANCE v. INGERSOLL 41 PHIL 331 STREET; November 8, 1921 NATURE
Action of interpleader
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pAgE 55 FACTS - April 16, 1918, Sun Life Assurance Company of Canada (Sun Life), in consideration of the payment of a stipulated annual premium during the period of the policy, or until
which the insolvent might have exercised for his own benefit, and under subsection 5 the trustee acquires any property of the insolvent which the latter could by any means have assigned to another. The Insolvency Law here in force, in common with the predecessor laws above-mentioned, contains nothing similar to these provisions.
the premiums had been for twenty issued a of insurance on the life of Dy Poco forcompletely US$12,500,paid payable to theyears, said assured orpolicy his assigns on the 21st day of February, 1938, and if he should die before that date then to his legal representatives. - June 23, 1919, the assured, Dy Poco, was adjudged an involuntary insolvent by the CFI Manila, and Frank B. Ingersoll was appointed assignee of his estate. - July 10, 1919, Dy Poco died, and on August 21, 1919, Tan Sit, was duly appointed as the administratrix of his intestate estate. - By the terms of the policy it was provided that after the payment of three full pre premiu miums, ms, the assure assured d could could surren surrender der the policy policy to the company company for a "cash "cash surrender value," indicated in an annexed table; but inasmuch as no more than two premiums had been paid upon the policy now in question up to the time of the death of the assured, this provision had not become effective; and it does not appear that the company would in accordance with its own usage or otherwise have made any concession to the assured in the event he had desired, before his death, to surrender
On the of the Insolvency - Sec 32applicability of the Insolvency Law amongLaw other things, declares that the assignment to be made by the clerk of the court "shall operate to vest in the assignee all of the estate of the insolvent debtor not exempt by law from execution." Moreover, by section 24, the court is required, upon making an order adjudicating any person insolvent, to stay any civil proceedings pending against him; and it is declared in section 60 that no cred credit itor or whos whose e de debt bt is pr prov ovab able le unde underr the the Act Act shal shalll be allo allowe wed, d, afte afterr the the commencement commen cement of proce proceeding edings s in insolvency insolvency,, to prose prosecute cute to final judgmen judgmentt any action action theref therefor or aga agains instt the deb debtor tor.. In connec connectio tion n wit with h the for forego egoing ing may be mentioned subsections 1 and 2 of section 36, as well as the opening words of section 33, to the effect that the assignee shall have the right and power to recover and to take take int into o his posse possessi ssion, on, all of the estat estate, e, ass assets ets,, and claim claims s bel belong onging ing to the insolvent, except such as are exempt by law from execution. - These provisions clearly evince an intention to vest in the assignee, for the benefit of all the creditors of the insolvent, such elements of property and property right as
the policy. It must therefore be accepted that this policy had no cash surrender value, at the time of the assured's death, either by contract or by convention practice of the company in such cases. - Both Ingersoll, Ingersoll, as assignee, assignee, and Tan Sit, as administrat administratix ix of Dy Poco's estate, asserted claims to the proceeds of the policy. The lower court found that Ingersoll had a better right and ordered Sun Life to pay the insurance proceeds to him.
HELD NO On the Philippine Insolvency Law (Act No. 1956) - The property and interests of the insolvent which become vested in the assignee of the insolvent are specified in section 32 of the Insolvency Law which reads as follows: "SEC "SEC.. 32 32.. As soo soon n as an ass assig igne nee e is el elec ecte ted d or ap appo poin inte ted d an and d qu qual alif ifie ied, d, the the clerk of the court shall, by an instrument under his hand and seal of the court, assign and convey to the assignee all the real and personal property, estate, and effects of the debtor with all his deeds, books, and papers relating thereto, and such assignment shall relate back to the commencement commencement of the proceedings proceedings in insolvency insolvency,, and shall relate back to the acts upon which the adjudication was founded, and by operation of law shall vest the title to all such property, property, estate, and effects in the assigne assignee, e, although the same is then attached on mesne process, as the property of the debtor. Such assignment shall operate to vest in the assignee all of the estate of the insolvent debtor not exempt by law from execution." - the Insolvency Law is in great part a copy of the Insolvency Act of California, enacted in 1895, though it contains a few provisions from the American Bankruptcy Law of 1898 - Under each of said laws the assignee acquires all the real and personal property,
could be reached and subjected by process of law by any single creditor suing alone. And this is exactly as it should be: for it cannot be supposed that the Legislature would suppress the right of action of every individual creditor upon the adjudication of insolvency, and at the same time allow the insolvent debtor to retain anything subject to the payment of his debts in a normal state of solvency. - "leviable assets" and "assets in insolvency" are practically coextensive terms. Hence, in determining what elements of value constitute assets in insolvency, SC is at liberty to consider what elements of value are subject to be taken upon execution, and vice versa. On whether a policy of insurance having no cash surrender value, but payable to insured or his legal representative, is property that may be taken upon execution against him. - Philippine laws declare no exemption with respect to insurance policies; and this species of property is not enumerated, in section 48 of the Insolvency Law, among items items fro from m the owners ownership hip of which which the ass assign ignee ee is exclud excluded. ed. Moreov Moreover, er, all lif life e insurance policies are declared by law to be assignable, regardless of whether the assignee has an insurable interest in the life of the insured or not (Insurance Act No. 2427, sec. 166). - SC has held that insurance polici policies es having a present present cash surre surrender nder value are subject to be taken upon execution. (Misut Garcia vs. West Coast San Francisco Life Ins. Co.) - a policy devoid of a cash surrender value cannot be either "leviable assets" or "assets in insolvency." - the assignee in insolvency acquired no beneficial interest in the policy of insurance in question; that its proceeds are not liable for any of the debts provable against the insolvent in the pending proceedings, and that said proceeds should therefore be delivered to his administratrix. On applicable US case - In re McKinney: no beneficial interest in the policy had ever passed to the assignee
estate, estat e, and effects effects of the debtor, not exempt by law from execution, execution, with all deeds, books and papers relating thereto; and while this language is broad, it nevertheless lacks the comprehensiveness of section 70 (a) of the American Bankruptcy Law of
over and beyond what constituted the surrender value, and that the legal title to the policy polic y was vested vested in the assignee merely merely in order to make the surrend surrender er valueavailable to him. The assignee should surrender the policy upon the payment to him
ISSUE WON Ingersoll, as assignee, has a right to the proceeds of the insurance
1898 in at least two particulars; for under subsection 3 of section 70 (a) of the last mentioned law, the trustee in bankruptcy acquires the right to exercise any powers
of said value, as he was in fact directed to do. The assignee in bankruptcy had no right to keep the estate unsettled for an indefinite period, for the mere purpose of
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pAgE 56 speculating upon the chances of the bankrupt's death. As regards everything beyond the surrender value, the assignee in bankruptcy would, after the discharge of the bankrupt, have no insurable interest in the life of the bankrupt. - surrender value of a policy "arises from the fact that the fixed annual premiums is
commencement of proce commencement proceeding edings s in insolvency insolvency,, to prose prosecute cute to final judgmen judgmentt any action action theref therefor or aga agains instt the deb debtor tor.. In connec connectio tion n wit with h the for forego egoing ing may be mentioned subsections 1 and 2 of section 36, as well as the opening words of section 33, to the effect that the assignee shall have the right and power to recover and to
much necessary in excess of annual risk during the earlier years of the policy,toan excess made in the order to balance the deficiency of the same premium meet the annual risk during the latter years of the policy. This excess in the premium paid over the annual cost of insurance, with accumulations of interest, constitutes the surrender val value. ue. Though Though this exc excess ess of pre premiu miums ms paid paid is legall legally y the sole pro proper perty ty of the company,, still in practical company practical effect, effect, though though not in law, it is moneys of the assured deposited with the company in advance to make up the deficiency in later premiums to cover the annual cost of insurance, instead of being retained by the assured and paid by him to the company in the shape of greatly-increased premiums, when the risk is greatest. It is the 'net reserve' required by law to be kept by the company for the benefit of the assured, and to be maintained to the credit of the policy. So long as the policy remains in force the company has not practically any beneficial interest in it, except as its custodian, with the obligation to maintain it unimpaired and suitably invested for the benefit of the insured. This is the practical, though not the legal, relation of the company to this fund. "Upon the surrender of the policy before the death of the assured, assured, the company, company, to be relieved from all respo responsibi nsibility lity for the increased risk, which is represented by this accumulating reserve, could well afford to surrender a considerable part of it to the assured, or his representative. A return of a part in some form or other is now Usually made." (In re McKinney) - the stipulation stipulation providing for a cash surrender surrender value is a compar comparative atively ly recen recentt innovation in life insurance. Formerly the contracts provided — as they still commonly do in the policies issued by fraternal organizations and benefit societies — for the payment of a premium sufficient to keep the estimated risk covered; and in case of a lapse the policy-holder received nothing. Furthermore, the practice is common among insurance companies even now to concede nothing in the character of cash surrender value, until three full premiums have been paid, as in this case. - CONLUSION (from this case and other English and American cases cited following the same opinion): the assignee acquires no beneficial interest in insurance effected on the life of the insolvent, except to the extent that such insurance contains assets which can be realized upon as of the date when the petition of insolvency is filed. The explanation is to be found in the consideration that the destruction of a contract of life insurance is not only highly prejudicial to the insured and those dependent upon him, but is inimical to the interests of society. Insurance is a species of property that should be conse conserved rved and not dissipat dissipated. ed. As is well known, life insurance insurance is incre increasingl asingly y diffi difficult cult to obtain obtain with advanci advancing ng years, and even when procu procurable rable after the age of fifty, the cost is then so great as to be practically prohibitive to many. Insolvency is a disaster likely to overtake men in mature life; and one who has gone through the pro proces cess s of bankru bankruptc ptcy y usuall usually y fin finds ds him himsel selff in his declin declining ing yea years rs with with the accumulated savings of years swept away and earning power diminished. The courts are therefore practically unanimous in refusing to permit the assignee in insolvency to wrest wrest fro from m the insolven insolventt a policy policy of ins insura urance nce which contai contains ns in it no pre presen sentt realizable assets. On the applicability of the Insolvency Law - Sec 32 of the Insolvency Law among other things, declares that the assignment to be
take take int into o except his posse possessi ssion, on,are allexempt of theby estat estate, ass assets ets,, and claim claims s bel belong onging ing to the insolvent, such as law e, from execution. - These provisions clearly evince an intention to vest in the assignee, for the benefit of all the creditors of the insolvent, such elements of property and property right as could be reached and subjected by process of law by any single creditor suing alone. And this is exactly as it should be: for it cannot be supposed that the Legislature would suppress the right of action of every individual creditor upon the adjudication of insolvency, and at the same time allow the insolvent debtor to retain anything subject to the payment of his debts in a normal state of solvency. - "leviable assets" and "assets in insolvency" are practically coextensive terms. Hence, in determining what elements of value constitute assets in insolvency, SC is at liberty to consider what elements of value are subject to be taken upon execution, and vice versa. On whether a policy of insurance having no cash surrender value, but payable to the insured or his legal representative, is property that may be taken upon execution against him. - Philippine laws declare no exemption with respect to insurance policies; and this species of property is not enumerated, in section 48 of the Insolvency Law, among items items fro from m the owners ownership hip of which which the ass assign ignee ee is exclud excluded. ed. Moreov Moreover, er, all lif life e insurance policies are declared by law to be assignable, regardless of whether the assignee has an insurable interest in the life of the insured or not (Insurance Act No. 2427, sec. 166). - SC has held that insurance polici policies es having a present present cash surre surrender nder value are subject to be taken upon execution. (Misut Garcia vs. West Coast San Francisco Life Ins. Co., 41 Phil., 258.) - a policy devoid of a cash surrender value cannot be either "leviable assets" or "assets in insolvency." - the assignee in insolvency acquired no beneficial interest in the policy of insurance in question; that its proceeds are not liable for any of the debts provable against the insolvent in the pending proceedings, and that said proceeds should therefore be delivered to his administratrix. Judgment reversed. Sun L ife is directed to pay the proceeds of the policy Disposition Judgment Disposition to Tan Sit.
made by the clerk of the court "shall operate to vest in the assignee all of the estate of the insolvent debtor not exempt by law from execution." Moreover, by section 24, the court is required, upon making an order adjudicating any person insolvent, to stay
CHAPTER VI – RESCISSION OF INSURANCE CONTRACTS: CONCEALMENT, MISREPRESENTATION, & BREACH OF WARRANTIES NG v. ASIAN CRUSADER LIFE ASSURANCE CORP 122 SCRA 461 ESCOLIN; May 30, 1983 FACTS - On May 12, 1962, Kwong Nam applied for a 20-year endowment insurance on his life for the sum of P20,000, with his wife, Ng Gan Zee, as beneficiary.
any civil proceedings pending against him; and it is declared in section 60 that no cred credit itor or wh whos ose e debt debt is prov provab able le unde underr th the e Ac Actt sh shal alll be allo allowe wed, d, afte afterr th the e
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pAgE 57 - He died on Dec 1963 of cancer of the liver with metastasis. All premiums had been paid at the time of his death. - Ng presented a claim for payment of the face value of the policy. Appellant (Asian Crusader) denied the claim on the ground that the answers given by the insured to
good faith of his belief as to the nature of his ailment and operation. Indeed, such statement must be presumed to have been made by him without knowledge of its incorrectness and without any deliberate intent on his part to mislead the appellant. 3) Waiver:
the questions appearing hisguilty application for life insurance were untrue. -Appellant: the insured in was of misrepresentation when 1) he answered answered "No" to the question question (in the appli application cation)) of "Has any life insurance company ever refused your application for insurance or for reinstatement reinstatement of a lapsed policy or offered you a policy different from that applied for?" when for?" when in fact, Insular Life denied his application for reinstatement of his lapsed life insurance policy 2) he gave the appellant's medical examiner false and misleading information as to his ailment and previous operation when he said he was “op “opera erated ted on for a Tumor Tumor [mayom [mayoma] a] of the stomach… stomach… assoc associat iated ed with with ulc ulcer er of stomach. Tumor taken out was hard and of a hen's egg size. Operation was two years ago in Chinese Chinese General Hospital Hospital by Dr. Yap. Claims he is complete completely ly recovered.” recovered.” Medical report show that insured was operated on for "peptic ulcer", involving the excision of a portion of the stomach, not tumor.
Whi While le it may be conced conceded edwas that, from the viewpoi point nt of a medi medical cal sufficient expert, expert, the information communicated imperfect, theview same was nevertheless to have induced appellant to make further inquiries about the ailment and operation of the insured. Section 32 of Insurance Law [Act No. 2427] provides: “The right to information information of mater material ial facts may be waive waived d either either by the terms of insurance or by neglect to make inquiries as to such facts where they are distinctly implied in other facts of which information is communicated.” It has been held that where, "upon the face of the application, a question appears to be not answered at all or to be imperfectly answered, and the insurers issue a policy without any further inquiry, they waive the imperfection of the answer and render the omission to answer more fully immaterial. appealed from is hereby affirmed, with costs against Disposition the judgment appealed appellant
ISSUE WON there there was concea concealme lment nt (Was (Was appell appellant ant,, becaus because e of ins insure ured's d's afores aforesaid aid representation, misled or deceived into entering the contract or in accepting the risk at the rate of premium agreed upon?) HELD NO -"concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing requires that he should communicate it to the assurer, but he designedly and intentionally withholds the same." - It has also been held "that the concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld." Reasoning 1) The evidence evidence shows that the Insular Life Assurance Assurance Co., Ltd. approved Kwong Nam's request for reinstatement and amendment of his lapsed insurance policy on April April 24, 1962…. 1962…. It result results, s, theref therefore ore,, that that whe when n on May 12, 196 1962 2 Kwong Kwong Nam answered `No' to the question whether any life insurance company ever refused his application for reinstatement of a lapsed policy he did not misrepresent any fact. 8
2) Assuming that the aforesaid aforesaid answer given by the insured is false, Sec. 27 of th the e Insurance Law nevertheless requires that fraudulent intent on the part of the insured be established to entitle the insurer to rescind the contract. And as correctly observed by the lower court, "misrepresentation as a defense of the insurer to avoid liability is an `affirmative’ `affirmative’ defense. The duty to establish establish such a defense defense by satis satisfactor factory y and convincing evidence rests upon the defendant. The evidence before the Court does not clearly and satisfactorily establish that defense." -Kwong Nam had informed the appellant's medical examiner that the tumor for which he was operated on was ''associat ''associated ed with ulcer of the stomach." In the absence of evidence evide nce that the insured had sufficie sufficient nt medical knowledge as to enabl enable e him to distinguish between "peptic ulcer" and "a tumor", his statement that said tumor was "associated with ulcer of the stomach" should be construed as an expression made in 8
"Sec. 27. Such party to a contract of insurance must commu communicate nicate to the other, in good faith, all facts within his
CANILANG v. CA (GREAT PACIFIC LIFE ASSURANCE CORP.) 223 SCRA 443 FELICIANO; June 17, 1993 NATURE Petition for review on certiorari of the decision of the Court of Appeals FACTS - June 18, 1982 1982 – Jaime Jaime Canila Canilang ng was diagnos diagnosed ed by Dr. Claudio Claudio to have have sinus sinus tachycardia. He was directed by the doctor to take a tranquilizer (Trazepam) and a beta-blocker drug (Aptin). - August 3, 1982 – Jaime consulted Dr. Claudio again and was diagnosed to have acute bronchitis.
-Life August 4, 1982 – Jaime applied for ahis nonmedical insurance policy with Great Assurance Company. He named wife Thelma as his beneficiary. He wasPacific issue the policy with a face value of P19,700 effective August 9, 1982. - August 5, 1983 – Jaime died of congestive heart failure, anemia and chronic anemia. Thelma filed her claim but the insurance company refused to grant it on the ground that Jaime had concealed information. - Thelma filed a compla complaint int against Great Pacific to recove recoverr the insurance proceed proceeds. s. She testified that she was not aware of her husband’s ailments and that she thought he had died from a kidney disorder. - Great Pacific presented as witness Dr. Quismorio who testified that Jaime’s insurance applicatio appli cation n was the basis of his medical medical decla declaratio ration n and she expla explained ined that an applicant appli cant was requi required red to underg undergo o medical medical examin examination ation only if the applicant had dis disclo closed sed that he had previ previous ously ly bee been n consul consulted ted with with a doc doctor tor and had bee been n hospitalized. - The Insurance Commissioner ordered Great Pacific to pay Thelma the insurance proceeds, including attorney’s fees, holding that J aime’s illness was not that serious as to Great Pacific’s decision to insure him and that there was no concealment on the part of Jaime with regard to his illness.
knowledge which are material to the contract, and which the other has not the means of ascertaining, and as to which he makes no warranty."
Petitioners’ Claim: > Thelma argues that the non-disclosure of Jaime did not amount to fraud.
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pAgE 58 > She also argues that the CA erred in not holding that the issue in the case agreed upon between the parties before the Insurance Commission is whether or not Jaime 'intentionally' made material concealment in stating his state of health; Respondents’ Comments:
- Had Canilang disclosed his visits to h is doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refused to issue a non-med non-medical ical insurance insurance policy or, at the very least, require required d a highe higherr
> The'intentionally" CA reversed the Insurance Commissioner’s decision, holding that the use the word by the Insurance Commissioner in defining and resolving theof issue agreed upon by the parties at pre-trial pre-trial before the Insurance Insurance Commissio Commissioner ner was not supported by the evidence and that the issue agreed upon by the parties had been whether Jaime made a material concealment as to the state of his health at the time of the filing of insurance application, justifying the denial of the claim. > It also found that the failure of Jaime to disclose previous medical consultation and treatment constituted material information which should have been communicated to Great Pacific to enable the latter to make proper inquiries.
premium the case sameofcoverage. - As held for in the Saturnino vs. Philippine-American Life Insurance, “the Insurance, “the waiver of medical examination examination in a non-me non-medical dical insurance insurance contract renders even more material mater ial the informatio information n inqui inquired red of the applicant concernin concerning g previ previous ous condition of health health and dis diseas eases es suffer suffered, ed, for suc such h inf inform ormati ation on necess necessari arily ly consti constitut tutes es an important factor which the insurer takes into consideration in deciding whether to issue the policy or not.” Disposition the Petition for Review is DENIED for lack of merit and the Decision of the Court Court of Appeal Appeals s dat dated ed 16 Octobe Octoberr 1989 1989 in C.A.-G. C.A.-G.R. R. SP No. 08696 is hereby hereby AFFIRMED.
ISSUES 1. WON Jaime intentionally withheld information from Great Pacific 2. WON the information withheld would have been material to Great Pacific’s decision to grant Jaime the insurance policy HELD 1. YES Ratio Section 27 of the Insurance Code of 1978 is properly read as referring to "any concea concealme lment nt withou withoutt regard regard to whethe whetherr such such concea concealme lment nt is int intent ention ional al or unintention unint entional. al. The restor restoration ation in 1985 by B.P. Blg. 874 of the phrase "whet "whether her intentional or unintentional" merely underscored the fact that all throughout (from 191 1914 4 to 198 1985), 5), the sta statut tute e did not requir require e pro proof of that that concea concealme lment nt mus mustt be "intentional" in order to authorize rescission by the injured party. Reasoning - Art. 27 of the 1978 Insurance Code reads that “a concealment entitles the injured party to rescind a contract of insurance,” which does not include the words “whether intentional or unintentional” unintentional” from the previous statut statutes. es. The Insurance Commissioner relied relie d on this deleti deletion on in arguing arguing that the statu statute te intended to limit the kinds of concealment which generate a right to rescind on the part of the injured party to
-"intentional In the caseconcealments." at bar, the nature of the facts not conveyed to the insurer was such that the failur failure e to communi communicat cate e mus mustt have have been been int intent ention ional al rather rather than than mer merely ely inadvertent. > Jaime could not have been unaware that his heart beat would at times rise to high and alarming levels and that he had consulted consulted a doctor doctor twice two months before applying for non-medical insurance. > The last medical consultation consultation took place just the day before the insurance application was filed. 2. YES Materiality relate relates s rathe ratherr to the "probabl "probable e and reaso reasonable nable influence influence of the Ratio Materiality facts" facts" upon the party to whom whom the communica communicatio tion n should should have been been made 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 farts" farts" concea concealed led must, must, of course course,, be determ determine ined d object objective ively, ly, by the jud judge ge ultimately. Reasoning - The information which Jaime failed to disclose was material to the ability of Great
YU PANG PANG CHENG v v.. CA 105 PHIL 930 BAUTISTA ANGELO; May 29, 1959 FACTS - September 5, 1950: Yu Pang Eng submitted parts II and III of his application for insurance consisting of the medical declaration made by him to the medical examiner of defendant and the medical examiner's report - September 7: he submitted part I of his application which is the declaration made by him to an agent of defendant - September 8: defendant issued to the insured Policy No. 812858 - December 27, 1950: the insured entered St. Luke's Hospital for medical treatment but he died on February 27, 1951. - Accor According ding to the death certi certificat ficate, e, he died of "infiltra "infiltrating ting medullary medullary carcin carcinoma, oma, Grade 4, advanced cardiac and of lesser curvature, stomach metastases spleen." - Plain Plaintiff, tiff, brother and benef beneficiar iciary y of the insur insured, ed, demanded from defend defendant ant the payment of the proceeds of the insurance policy and when the demand was refused, he brought the present action. - The insured, in his application for insurance, particularly in his declarations to the examining physician, stated the following in answering the questions propounded to him: 14. Have you ever had any of the following diseases or symtoms? Each question must be read and answered "Yes" or "No.". "Gastritis, Ulcer of the Stomach or any disease of that organ? No. "Vertigo, Dizziness, Fainting-spells or Unconsciouness? No. "Cancer, Tumors or Ulcers of any kind? No. - 15. Have you ever consul consulted ted any phy physic sician ian riot included included in any of the above answers? Give names and address or physicians list ailments or accidents and date. No." - It appea appears rs that the insured entered the Chinese General Hospital Hospital for medica medicall treatment on January 29, 1950 having stayed there up to February 11, 1950. - An X-ray picture of his stomach was taken and the diagnosis made of him by his
doctors showed that his illness was "peptic ulcer, bleeding." ISSUE
Pacific to estimate the probable risk he presented as a subject of life insurance.
WON the insured insured is guilt guilty y of concealment concealment of some facts material to the risk insured against which has the effect of avoiding the policy as found by respondent court.
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pAgE 59 HELD - It should be noted that the insured's insured's confinement confinement in the Chinese General Hospital Hospital took place from January 29, 1950 to February February 11, 1950, whereas his application application for
insurance heofstated his answers to the questions propounded to him the examining wherein physician defendant was submitted to defendant on September 5, by 1950. - It is apparent apparent that when the insured gave his answers regarding regarding his previ previous ous ailment, particularly with regard to "Gastritis, Ulcer of the Stomach or any disease of that organ" and "Vertigo, Dizziness, Fainting-spells or Unconsciousness", he concealed the ailment of which he was treated in the Chinese General Hospital which precisely has direct connection with the subject of the questions propounded. - The negative answers given by the insured regarding his previous ailment, or his concealment of the fact that he was hospitalized and treated for sometime of peptic ulcer and had suffered from "dizziness, anemia, abdominal pains and tarry stools", deprived defendant of the opportunity to make the necessary inquiry as to the nature of his past illness so that it may form its estimate relative to the approval of his application. - Had defendant been given such opportunity, considering the previous illness of the insured as disclosed by the records of the Chinese General Hospital, defendant would probably proba bly had never consen consented ted to the issuance issuance of the policy in question. In fact, accord according ing to the death death certif certifica icate, te, the ins insure ured d died died of "infil "infiltra tratin ting g med medull ullary ary carcinoma, Grade, 4, advanced cardiac and of lesser curvature, stomach metastases spleen", which may have a direct connection with his previous illness. - Our Insurance Law provides that "A neglect to communicate that which a party knows and ought to communicate, is called concealment" (Section 25, Act No. 2427). Whether intentional or unintentional, the concealment entitles the insurer to rescind the contract of insurance (Section 26). - Our law even requires the insured to communicate to the insurer all facts within his knowledge which are material to the contract and which the other party has not the means of ascertaining (Section 27), and the materiality is to be determined not by the event but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due (Section 30). - Argente vs. West Coast Life Insurance Co.: "One ground for the rescission of a contract of themunica Insurance Actt iswhich 'ach concealment', which in section is define defined d insurance 'A neglec neglecttunder to com commun icate te that tha whi a party party kno knows ws and ought 25 to communicate.' Appellant argues that the concealment was immaterial and insufficient to avoid the policy. We cannot agree. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue, the truth or falsity of the answers become the determining factor. If the policy was procured by fraudulent representations, the contract of insurance apparently set forth therein was never legally existent. It can fairly be assumed that had the true facts been disclosed by the assured, the insurance would never have been granted." Disposition Decision affirmed.
PA PACI CIFI FIC C BANK BANKIN ING G CORPORATION) 168 SCRA 1
CORP CORP
v.
CA
(O (ORI RIEN ENTA TAL L
AS ASSU SURA RANC NCE E
PARAS; November 28, 1988 NATURE Petition for review on certiorari of the CA decision, which set aside the decision of CFI Manila, which had in turn granted the complaint for a sum of money in civil case filed by Pacific Banking against Oriental Assurance. FACTS - Octo Octobe berr 21,19 21,1963 63:: an op open en Fi Fire re Poli Policy cy was was issu issued ed to the the Paramo Paramoun untt Sh Shir irtt Manufacturing Co. (insured), by which Oriental Assurance Corporation bound itself to indemnify the insured for any loss or damage, not exceeding P61,000.00, caused by fire to its property consisting of stocks, materials and supplies usual to a shirt factory, including furniture, fixtures, machinery and equipment while contained in the ground, second and third floors of the building situated at number 256 Jaboneros St., San Nicolas, Manila, for a period of one year commencing from that date to October 21, 1964. - Insured was at the time of the issuance of the policy and is up to this time, a debtor of Pacific Banking in the amount of not less P800,000.00 and the goods described in the policy were held in trust by the insured for the Pacific Banking under thrust thrust receipts. - Said policy policy was duly endorsed endorsed to Pacifi Pacific c Bankin Banking g as mortga mortgagee/tr gee/trustor ustor of the properties prope rties insured insured,, with the knowle knowledge dge and consent consent of Orien Oriental tal Assurance to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation". - While the aforesaid policy was in full force and effect, a fire broke out on the subject premises destroying the goods contained in its ground and second floors. Counsel for the Pacific Banking sent a letter of demand to Oriental Assurance for indemnity due to the loss of property by fire. Oriental Assurance informed counsel that it was not yet ready to accede to the latter's demand as the former is awaiting the final report of the insurance adjuster, H.H. Bayne Adjustment Company.
-under Said the insurance adjuster notified counsel Pacific Banking that the insured policy had not filed any claim withfor it, the nor submitted proof of loss which is a clear violation of Policy Condition No.11, and for which reason, determination of the liability liabi lity of Oriental Oriental Assurance could not be had. Pacific Banking's counsel replied replied asking the insurance adjuster to verify from the records of the Bureau of Customs the entries of merchandise taken into the customs bonded warehouse razed by fire as a reliable proof of loss. - For failure of the insurance company to pay the loss as demanded, Pacific Banking field before CFI an action for a sum of money against the Oriental Assurance, in the principal sum of P61,000.00 issued in favor of Paramount Shirt Manufacturing Co. Oriental Assurance defenses (a) lack of formal claim by insured over the loss and (b) premature filing of the suit as neither plaintiff nor insured had submitted any proof of loss on the basis of which defendant would determine its liability and the amount thereof, either to the Oriental Assurance or its adjuster H.H. Bayne Adjustment Co. Pacific Banking > presented evidence that insured has undeclared co-insurances with the following: P30,00 P30,000.00 0.00 with with Wellin Wellingto gton n Ins Insura urance nce;; P25,000 P25,000.. 00 with with Empi Empire re Sur Surety ety and
GREAT PACIFIC LIFE v. CA (supra p.34)
P250,000.00 with Asian Surety ; undert P250,000.00 undertake aken n by ins insure ured d Par Paramo amount unt on the same property covered by its policy with Oriental Assurance whereas the only co-insurances
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pAgE 60 declared in the subject policy are those of P30,000.00 with Malayan, P50,000.00 with South Sea, and Sea, and P25.000.00 with Victory - NOTE: the defense of fraud and/or violation of non-declaration of co-insurances was not pleaded in the answer, also not pleaded in the Motion to Dismiss.
2. NO - Subject mortgage clause pecifically provides: “Loss, if any, under this policy, shall be payable payab le to the PACIFIC BANKING CORPORA CORPORATION TION Manila mortg mortgagee/t agee/trusto rustorr as its interest may appear, it being hereby understood and agreed that this insurance as to
-raised CFI denied motion on the ground since the defense was for the Oriental first time,Assurance's it must be deemed to have waivedthat the requirement of proof of loss. Case was submitted for decision. But upon MR, Oriental Asurance was allowed to present additional evidence, "in order to prove that 'insured has committed a violation of condition condition No. 3 of the policy in relation relation to the other Insura Insurance nce Clause.' " CFI eventually adjudged Oriental Assurance liable to the Pacific Banking under the said contract of insurance. - Court of Appeals reversed. Pacific Banking's MR denied.
HELD 1. YES - The crux of the controversy centers on two points: (a) unrevealed co-insurances which violated policy conditions No. 3; and (b) failure of the insured to file the required proof of loss prior to court action. - Policy Policy Condition Condition No. 3 explicitly explicitly provi provides: des: “The Insured shall give notic notice e to the Company of any insurance 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 benefit under this policy shall be forfeited.” - It is not disputed that the insured failed to reveal before the loss three other insurances. By reason of said unrevealed insurances, the insured had been guilty of a false declaration; a clear misrepresentation and a vital one because where the insured had been asked to reveal but did not, that was deception. Otherwise stated, had the insurer known that there were many co-insurances, it could have hesitated or plainly
the interest the only herein, noton be invalidated any or negle neg lect ct of except exc eptmortgagee/trustor fraud fraud or misrep misrepres resent entati ation, on, shall or arson ars of the mortga morby tgagor gor act or owner/trustee of the property insured; provided, that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium, the mortgagee/ trustor shall, on demand pay the same.” - The paragraph clearly states the exceptions to the general rule that insurance as to th the e inte intere rest st of the the mort mortga gage gee, e, cann cannot ot be inva invali lida date ted; d; namel namely: y: frau fraud, d, or misrepresentation or arson. - Concealment of the aforecited co-insurances can easily be fraud, or in the very least, misrepresen misre presentatio tation. n. It is but fair and just that where the insur insured ed who is primarily primarily enti entitl tled ed to re rece ceiv ive e the the pr proc ocee eeds ds of the the po poli licy cy has has by its its frau fraud d and/ and/or or misrepresen misre presentatio tation, n, forfe forfeited ited said right right,, with more reaso reason n Pacifi Pacific c Bankin Banking g which is merely claiming as indorsee of said insured, cannot be entitled to such proceeds. - The fact of fraud was tried by express or at least implied consent of the parties. Pacific Banking did not only object to the introduction of evidence but on the contrary, presented the very evidence that proved its existence. - Be that as it may, SC has ample authority to give beyond the pleadings where in the interest of justice and the promotion of public policy, there is a need to make its own finding to support its conclusion. Otherwise stated, the Court can consider a fact which surfaced only after trial proper. - Generally, the cause of action on the policy accrues when the loss occurs, but when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment. - In the case at bar, policy condition No. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the Oriental Assurance (a) a claim in writing giving particular account as to the articles or goods destroyed and the amountt of the loss or damage and (b) particular amoun particulars s of all other insura insurances, nces, if any.
desisted from entering into such contract. Hence, the insured was aguilty clear fraud. - Pacific Banking's contention that the allegation of fraud is but mereofinference or suspicion is untenable. Concrete evidence of fraud or false declaration by the insured was furnished by the Pacific Banking itself when the facts alleged in the policy under clauses clause s "Co-In "Co-Insuran surances ces Declar Declared" ed" and "Other "Other Insura Insurance nce Claus Clause" e" are materi materially ally different from the actual number of co-insurances taken over the subject property. Consequently, the whole foundation of the contract fails, the risk does not attach and the policy never becomes a contract between the parties. Representations of facts are the foundation of the contract and if the foundation does not exist, the superstructure does not arise. Falsehood in such representations is not shown to vary or add to the contract, or to terminate a contract which has once been made, but to show that no contract has ever existed (Tolentino). A void or inexistent contract is one which has no force and effect from the very beginning, as if it had never been entered into, and which cannot be validated either by time or by ratification. - As the insurance policy against fire expressly required that notice should be given by
Likewise, insured hisculars, owns,expense to produce, procure give to, the company all was suchrequired furthe furtherr "at parti particular plans, specific specification ations, s, books,and vouchers vouchers, invoices, duplicates or copies thereof, documents, proofs and information with respect to the claim". - Evidence adduced shows that 24 days after the fire, Pacifi Pacific c Banki Banking ng merely wrote letters to Oriental Assurance to serve as a notice of loss, thereafter, the former did not furnish furni sh the latte latterr whate whatever ver pertinent documen documents ts were necess necessary ary to prove and estimate its loss. Instead, Pacific Banking shifted upon Oriental Assurance the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. - Oriental Assurance and its adjuster notified Pacific Banking that insured had not yet filed a written claim nor submitted the supporting documents in compliance with the requirements set forth in the policy. Despite the notice, the latter remained unheedful. Since the requi required red claim by insured, insured, toget together her with the prelimina preliminary ry submi submittal ttal of relevant relev ant documents had not been compli complied ed with, it follo follows ws that Oriental Assura Assurance nce
the insured of other insurance upon the same property, the total absence of such notice nullifies the policy. - Argument Argument that notice of co-insurances co-insurances may be made orall orally y is preposter preposterous ous and
could not be deemed to have finally rejected Pacific Banking's claim and therefore the latter's cause of action had not yet arisen. Compliance with condition No. 11 is a requirement requi rement sine qua non non to the right to maintain an action as prior thereto no
ISSUES 1. WON insured is guilty of fraud 2. WON mortgagee/assignee can still claim from the insurance
nega negate tes s poli policy cy condi conditi tion on No No.. 20 wh whic ich h requ requir ires es communications to the insurer to be written or printed.
ever every y
no noti tice ce
an and d
othe otherr
violation of Pacific Banking's right can be attributable to Oriental Assurance. As before such final rejection, rejection, there was no real neces necessity sity for bringing bringing suit. Pacific Banking
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pAgE 61 should shoul d have endeavored endeavored to file the formal claim and procure all the documents, documents, papers, invent papers, inventory ory needed by Oriental Assurance or its adjuster to ascert ascertain ain the amount of loss and after compliance await the final rejection of its claim. Indeed, the law does not encourage unnecessary litigation. litigation .
Petitioner’s Claim > The insured did not disclose facts relevant to the issuance of the policy, thus rescission of the contract may be invoked by the insurance company. Respondents’ Comments
-under Pacific Banking prematurely filed civil case and dismissal thereoflaw was warranted the circumstances. While it isthe a cardinal principle of insurance that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly as against the insurer company yet, contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. - Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary. The agreem agreement ent has the force of law between between the parties. parties. The ter terms ms of the policy policy constitute the measure of the insurer's liability, and in order to recover, the insured must show himself within those terms. The compliance of the insured with the terms of the policy is a condition precedent to the light of recovery. - It appearing that insured has violated or failed to perform the conditions under No. 3 and 11 of the contract, and such violation or want of performance has not been waived waive d by the insur insurer, er, the insured insured cannot recover, much less the herein Pacific Banking. Courts are not permitted to make contracts for the parties; the function and duty of the courts is simply to enforce and carry out the contracts actually made. Disposition Petition dismissed. CA affirmed.
> The was actual causeinto of death not in relevant to the concealed information, and the policy entered by thewas insured good faith.
SUNLIFE ASSURANCE COMPANY v. CA (SPS. BACANI) 245 SCRA 268 QUIASON; June 22, 1995 NATURE A petition for review on certiorari. FACTS - April 15, 1986: Robert John B. Bacani procured a life insurance contract for himself from SUNLIFE (petitione (petitioner) r) valued valued at P100K. The design designated ated beneficiary beneficiary was his mother, Bernarda Bacani (respondent). - June 26, 1987: the insured died in a plane crash. Bernarda Bacani filed a claim with Sunlife, Sunli fe, seeking the benefits benefits of the insuran insurance ce policy taken by her son. Petitioner Petitioner conducted an investigation and its findings prompted it to reject the claim on the ground that the insured did not disclose facts material to the issuance of the policy. The insured gave false statements in the application when he answered in the negative to the question “ have you ever had or sought advice for urine, kidney, bladder disorder?” - Sunlife discovered that two weeks prior to the issuance, insured was diagnosed with renal failure, was confined, and underwent tests. - November 17, 1988: Bacani and her husband filed for specific performance against Sunlife. RTC granted the plea on the ground that that the facts concealed by the
insured made in good and under thethe belief that they need not be disclosed, and thatwere the disclosure was faith not material since policy was non-medical. - Sunlife appealed to the CA, but the latter denied the appeal on the ground that the
ISSUE WON the concealment renders the insurance policy rescissible HELD YES contract act are clear. The insur insured ed is speci specifical fically ly required to Ratio The terms of the contr disclose to the insurer matters relating to his health. Reasoning SEC. 26 (IC) A neglect to communicate that which a party knows and ought to communicate, is called a concealment. SEC. 31 (IC) Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries - The information which the insured failed to disclose was material and relevant to the approval and the issuance of the insurance policy. The matters concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. - Good faith is no defense in concealment. It appears that such concealment was deliberate on the part of the insured. - The waiver of a medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to
issue thethe policy or not. - Anent finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming formi ng his estima estimates tes of the risks of the proposed insur insurance ance policy or in making inquiries Disposition Petition is granted and the decision of CA is reversed and set aside.
EGUARAS v. GREAT EASTERN 33 PHIL. 263 TORRES.; January 24, 1916 1916 NATURE Appeal filed through bill of exceptions from the judgment of the CFI FACTS - Francisca Eguaras filed a written complaint in court, alleging as a cause of action
cause of death was unrelated to the facts concealed by the insured.
that her son-in-law Dominador Albay had applied in writing to the defendant insurance company to insure his life for the sum of P5,000, naming as the beneficiary in case of
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pAgE 62 his death the plaintiff Francisca Eguaras; that after compliance with the requisites and the investigation carried on by the defendant company, it accepted the application for insurance and issued the policy; that, said policy being in force, the insured died, and despite despit e the fact that the beneficiary beneficiary submitt submitted ed satisfacto satisfactory ry proofs proofs of his death and
- Qua Chee Gan informed the insurance company of the fire. Fire adjusters of the compan com pany y conduct conducted ed an extens extensive ive inv invest estiga igatio tion. n. Qua Che Chee e Gan sub submit mitted ted the corresponding fire claims, totaling P398,562.81 (but reduced to the full amount of the insurance, P370,000), the Insurance Company resisted payment, claiming violation of
that the investigated the event, still it refused and continues to refuse to defendant pay to the company plaintiff the value of the policy. - Defendant set forth in special defense that the insurance policy issued in the name of Dominad Dominador or Albay Albay had been obtain obtained ed throug through h fra fraud ud and deceit deceit known and consented to by the interested parties and is therefore completely illegal, void, and ineffective. - A crimi criminal nal case for frustrated frustrated estafa was file filed d by defendant against Ponciano Ponciano Remigio, Castor Garcia and Francisca Eguaras. They were acquitted, and claim that the judgment produces the effect of res judicata in judicata in the present suit.
warra warranties nties and condition conditions, filing of fraud fraudulent ulent claims, that the fire had been deliberately caused by thes,insured or by other persons in and connivance with him. - Qua Chee Gan, his brother and his employees were tried for arson, where counsel of the insurance company acted as a private prosecutor. They were acquitted. - This civil suit was then instituted to claim against the insurance company. The CFI ruled in favor of Qua Chee Gan and ordered Law Union Rock Co. to pay.
ISSUE WON the life insurance obtained by Dominador Albay was issued through fraud and deceit HELD YES Ratio In a contract where one of the contracting parties may have given his consent through error, violence, intimidation, or deceit, and in any of such cases the contract is void, even though, despite this nullity, no crime was committed. There may not have been estafa in the case at bar, but it was conclusively demonstrated by the trial that deceit entered into the insurance contract, fulfillment whereof is claimed, and therefore the conclusions reached by the court in the judgment it rendered in the criminal proceedings for estafa do not affect this suit, nor can they produce in the present suit the force of res adjudicata. adjudicata. Reasoning - It is proven that the signatures on the insurance applications reading "Dominado Albay" are false and forged; that the person who presented himself to Dr. Vidal to be examined was not the real real Dominador Albay, but Castor Garcia who was positively identified ident ified by Dr. Vidal; Vidal; that at the time of the application application for insurance and the
ISSUES 1. WON there was a breach of the fire hydrant warranty 2. WON the insured violated the Hemp warranty 3. WON Qua Chee Gan is guilty of overvaluation 4. WON Qua Chee Gan caused the fire 5. WON there was an error in the amount of copra and hemp lost 6. WON the claims contained false and fraudulent statements HELD 1. NO - It is argued that he should have 11 fire hydrants in the compound, but he only had 2. We are in agreement with the trial Court that the appellant is barred by waiver (or rather estoppel) to claim violation of the so-called fire hydrants warranty, for the reason that knowing fully all that the number of hydrants demanded therein never existed exist ed from the very beginnin beginning, g, the appellant nevertheless nevertheless issued the polic policies ies in question subject to such warranty, and received the corresponding premiums. 2. NO - The insurance company avers that the insured violated the hemp warranty when it admitted that it had 36 cans of gasoline in the building. It is well to note that gasoline is not speci specifical fically ly mentioned mentioned among the prohibite prohibited d articles articles listed in the so-called "hemp warranty." The cause relied upon by the insurer speaks of "oils (animal and/or vegetable and/or mineral and/or their liquid products having a flash point below 300o
FACTS - Qua Chee Gan insured 4 of his bodegas with Law Union & Rock Insurance Co in 1937. These bodegas were used for the storage of stocks of copra and of hemp, baled and
Fahrenheit", and is and decidedly ambiguous and uncertain; for in ordinary parlance, mean "lubricants" not gasoline or kerosene. And how many insured, it may"Oils" well be wondered, are in a posit position ion to under understand stand or determine "flash point below 003o Fahrenheit. Here, again, by reason of the exclusive control of the insurance company over the terms and phraseology of the contract, the ambiguity must be held strictly against the insurer and liberally in favor of the insured, especially to avoid a forfeiture - Another point that is in favor of the insured is that the gasoline kept in Bodega No. 2 was only incidental to his business, being no more than a customary 2 day's supply for the five or six motor vehicles used for transporting of the stored merchandise). "It is well settled that the keeping of inflammable oils on the premises though prohibited by the policy does not void it if such keeping is incidental to the business." (Bachrach vs. British American Ass. Co., 17 Phil. 555, 560) 3. NO - The charge that the insured failed or refused to submit to the examiners of the insurer the books, vouchers, etc. demanded by them was found unsubstantiated by
loose. - Fire of undetermined origin that broke out in the early morning of July 21, 1940, and lasted almost one week, gutted and completely destroyed Bodegas Nos. 1, 2 and 4,
the trial Court, and no reason has been shown to alter this finding. - In view of the discrepancy in the valuations between the insured and the adjuster Stewart for the insurer, the Court referred the controversy to a government auditor,
issuance of the of policy which is the subject of thisitsuit the real Dominador Albay was informed all those machinations, machinati ons,matter wherefore is plain that the insur insurance ance contract between the defendant and Dominador Albay is null and void because it is false, fraudulent and illegal. Disposition The judgment appealed from is reversed and the defendant absolved from the complaint without special finding as to the costs.
QUA CHEE GAN v. LAW UNION AND ROCK 98 PHIL 85 REYES; December 17, 1955
with the merchandise stored therein.
Apolonio Ramos; but the latter reached a different result from the other two. Not only that, but Ramos reported two different valuations that could be reached according to
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pAgE 63 the methods employed. Clearly then, the charge of fraudulent overvaluation cannot be seriously entertained. 4. NO - This defense defense is predicted predicted on the assumption assumption that the insur insured ed was in financial financial
cent) of the hemp stock; had the insur insured ed acted with fraudu fraudulent lent intent, intent, nothi nothing ng prevented him from increasing the value of all of his copra, hemp and buildings in the same proportion. This also applies to the alleged fraudulent claim for burned empty sacks, that was likewise explained to our satisfaction and that of the trial Court. The
difficulties set the National fire to defraud insurance presumably order to pay off theand Philippine Bank, the to which mostcompany, of the insured hemp in and copra was ple pledge dged. d. This This defens defense e is fatall fatally y und underm ermine ined d by the est establ ablish ished ed fact fact that, that, notwithstanding the insurer's refusal to pay the value of the policies the extensive resources of the insured enabled him to pay off the National Bank in a short time; and if he was able to do so, no motive appears for attempt to defraud the insurer. While the acquittal of the insured in the arson case is not res judicata on judicata on the present civil action, actio n, the insurer's insurer's evidence, evidence, to judge from the decision in the crimi criminal nal case, is practically identical in both cases and must lead to the same result, since the proof to establish the defense of connivance at the fire in order to defraud the insurer "cannot be materially less convincing than that required in order to convict the insured of the crime of arson. 5. NO - As to the defense that the burned bodegas could not possi possibly bly have contained the quantities of copra and hemp stated in the fire claims, the insurer's case rests almost exclusively on the estimates, inferences and conclusions of its adjuster investigator, Alexander Alexan der D. Stewart, Stewart, who examined examined the premis premises es during and after the fire. His testimony, however, was based on inferences from the photographs and traces found after the fire, and must yield yield to the contr contradict adictory ory testimony of engineer Andres Bolinas, and specially of the then Chief of the Loan Department of the National Bank's Legaspi branch, Porfirio Barrios, and of Bank Appraiser Loreto Samson, who actually saw the contents of the bodegas shortly before the fire, while inspecting them for the mortgagee Bank 6. NO - Appellant insurance company also contends that the claims filed by the insured contained false and fraudulent statements that avoided the insurance policy. But the trial Court found that the discrepancies discrepancies were a resul resultt of the insur insured's ed's erroneous erroneous interpretation of the provisions of the insurance policies and claim forms, caused by his imperfect knowledge of English, and that the misstatements were innocently made
rule is that to avoid a policy, the Of false swearing mustofbe willful and withwould intentnot to defraud which was not the cause. course, the lack fraudulent intent authorize the collection of the expected profit under the terms of the polices, and the trial Court correctly deducted the same from its award. Disposition Decision affirmed
ARGENTE v. WEST COAST LIFE 51 PHIL 725 MALCOLM; March 19, 1928 FACTS - This is an action upon a joint life insurance policy for P15,000 issued by the West Coast Life Insurance Co., on May 15, 1925, in favor of Bernardo Argente, and his wife, Vicenta de Ocampo, the latter having died on November 18, 1925. Fraud in obtaining
intent defraud. The trial court’s be upheld. Forwithout example, the to occurrence of previous firesruling in themust premises insured in 1939, altho -and omitted in the claims, Exhibits EE and FF, were nevertheless revealed by the insured in his claims Exhibits Q (filed simultaneously with them), KK and WW. Considering that all these claims were submitted to the smae agent, and that this same agent had paid the loss caused by the 1939 fire, we find no error in the trial Court's acceptance of the insured's explanation that the omission in Exhibits EE and FF was due to inadvertance, for the insured could hardly expect under such circumstances, that the 1939 would pass unnoticed by the insurance agents. Similarly, the 20 per cent overclaim on 70 per cent of the hemo stock, was explained by the insured as caused by his belief that he was entitled to include in the claim his expected profit on the 70 per cent of the hemp, because the same was already contracted for and sold to other parties before the fire occurred. Compared with other cases of over-valuation recorded in our judicial annals, the 20 per cent excess in the case of the insured is not by itself sufficient to establish fraudulent intent. Certainly, the insured's overclaim of 20 per cent in the
the policy was pleaded by way of special defense. On the issue thus suggested, the court adopted the theory of the defendant, and held the insurance policy null and void, with the result that the complaint was dismissed, with costs. -Bernardo Argente signed an application for joint insurance with his wife in the sum of P2,000. The wife, Vicenta de Ocampo, signed a like application for the same policy. - Bernardo Argente and his wife was examined by Dr. Cesareo Sta. Ana, a medical examiner for the West Coast Life Insurance Co. which did not show previous and existing health problems. - A temporary policy for P15,000 was issued to Bernardo Argente and his wife as of May 15, 1925. In view of the fact that more than thirty days had elapsed since the applicants were examined by the company's physician, each of them was required to file a certificate of health before the policy was delivered to them. - On November 18, 1925, Vicenta de Ocampo died of cerebral apoplexy. Thereafter Bernardo Bernar do Argente Argente prese presented nted a claim. Followin Following g invest investigati igation on conducted conducted by the Manager of the Manila office of the insurance company, it was apparently disclosed that the answers given by the insured in their medica medicall examinatio examinations ns with regar regard d to their health and previous illnesses and medical attendance were untrue. West Coast Life Insurance Co. refused to pay the claim of Bernardo Argente, and wrote him to the effect that the claim was rejected because the insurance was obtained through fraud and misrepresentation. - It is admitted that it appears in the Medical Examiner's Report that Bernardo Argente gave false responses. As well as with the Medical Examiner's Report that Vicenta de Ocampo. Ocampo. It is, howev however, er, not dis disput puted ed that that Vicent Vicenta a de Ocampo Ocampo was taken taken by a patrolman, at the request of her husband, Bernardo Argente, on May 19, 1924, to the Meisic Meisi c police police stati station, on, and from there was transf transferred erred to the San Lazaro Hospital Hospital.. In San Lazaro Hospital Hospital,, her case was dia diagno gnosed sed by the admitt admitting ing physic physician ian as "al "alcoh coholi olism," sm," but later later Doctor Doctor Domi Domingo ngo made a dia diagno gnosis sis of pro probabl bable e "manic "manic-depressive psychosis," and still, later in Mary Chiles Hospital, made a final diagnosis of "phycho-neurosis."
case at bar, duly explained by him to the Court a quo, quo, appears puny by comparison (compared to other cases cited by the court), and can not be regarded as "more than misstatement, more than inadvertence of mistake, more than a mere error in opinion,
- Bernardo Argente, while readily conceding most of the facts herein narrated, yet alleges that both he and his wife revealed to the company's physician, Doctor Sta. Ana, all the facts concerning their previous illnesses and medical attendance, but that
more than a slight exaggeration" that would entitle the insurer to avoid the policy. It is well to note that the overcharge of 20 per cent was claimed only on a part (70 per
Doctorr Sta. Ana, presum Docto presumably ably acting in collu collusion sion with the insur insurance ance agent, Jose Geronimo del Rosario, failed to record them in the medical reports. The evidence on
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pAgE 64 these points consists consists of the testi testimony mony of the plaintiff and his subor subordinat dinate e clerk clerk,, Apolonio Espiritu, on the one hand, and of the testimony of Doctor Sta. Ana and Jose Geronimo del Rosario on the other. This was rejected by the Trial Court. Trial judge found with the insurance company with regard to the question of fact. SC agrees.
"If the assured has exclusive knowledge of material facts, he should fully and fairly disclose the same, whether he believes them material or not. But notwithstanding this general rule it will not infrequently happen, especially in life risks, that the assured assur ed may have a knowledge knowledge actual or presu presumed med of materi material al facts, and yet
There appears no motive whatever on the part of Doctor Sta. Ana to falsify the Medical Examiner's Reports and thereby not only jeopardize his career as a physician, but also gravely implicate himself criminally.
HELD YES - Bernardo Argente and his wife applications’ were false with respect to their state of health during the period of five years preceding the date of such applications and that they knew the representations made by them in their applications were false. The question arises as to the state of the law in relation thereto. - One ground for the rescission of a contract of insurance under the Insurance Act is "a concealment," which in section 25 is defined as "A neglect to communicate that which a party knows and ought to communicate." In an action on a life insurance policy where the evidence evidence concl conclusive usively ly shows that the answers to quest questions ions concerning concerning diseases were untrue, the truth or falsity of the answers become the determining factor.. If the policy was procured factor procured by fraudulent fraudulent representat representations, ions, the contract of insurance insur ance apparently apparently set forth therei therein n was never legally legally existent. It can fairly be assumed that had the true facts been disclosed by the assured, the insurance would never have been granted. - In Joyce, The Law of Insurance, second edition, volume 3, Chapter LV, is found the following: "The basis of the rule vitiating vitiating the contra contract ct in cases of concealment concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed upon; The insurer, relying upon the belief that the assured will
entertain an honest belief that they are not material. . . . The determination of the point whether there has or has not been a material concealment must rest largely in all cases upon the form of the questions propounded and the exact terms of the contract. Thus, where in addition to specifically named diseases the insured was asked whether he had had any sickness within ten years, to which he answered 'No,' 'No,' and it was pro proven ven that within within that that per period iod he had had a slight slight atta attack ck of pha pharyn ryngit gitis, is, it was held a que questi stion on pro proper perly ly for the jury jury whe whethe therr such such an inflammation of the throat was a 'sickness' within the intent of the inquiry, and the court remarked on the appeal decision that if it could be held as a matter of law that the policy was thereby avoided, then it was a mere device on the part of insurance companies to obtain money without rendering themselves liable under the policy. . . . " . . . The question should be left to the jury whether the assured truly represented the state of his health so as not to mislead or deceive the insurer; and if he did not deal in good faith with the insurer in that matter, then the inquiry should be made, Did he know the state of his health so as to be able to furnish a proper answer to such questions questions as are propound propounded? ed? A Massac Massachuset husetts ts case, if construed as it is frequently cited, would be opposed to the above conclusion; but, on the contrary, it sustains it, for the reason that symptoms of consumption had so far developed themselves within a few months prior to effecting the insurance as to induce a reasonable belief that the applicant had that fatal disease, and we should further construe this case as establishing the rule that such a matter cannot rest alone upon the assured's belief irrespective of what is a reasonable belief, but that it ought to be judged by the criterion whether the belief is one fairly warranted by the circumstanc circu mstances. es. A case in India Indiana, na, however, holds that if the assured has some affection or ailment of one or more of the organs inquired about so well defined and marked as to materially derange for a time the functions of such organ, as in the case of Bright's disease, the policy will be avoided by a nondisclosure, irrespective of the fact whether the assured knew of such ailment or not. . . ."
disclose every material fact within his actual or presumed is misled into a belief that the circumstance withheld does not exist, andknowledge, he is thereby induced to estimate the risk upon a false basis that it does not exist. The principal question, therefore, must be, Was the assurer misled or deceived into entering a contract obligation oblig ation or in fixing fixing the premium of insurance insurance by a withh withholdin olding g of material information or facts within the assured's knowledge or presumed knowledge? "It therefore follows that the assurer in assuming a risk is entitled to know every material fact of which the assured has exclusive or peculiar knowledge, as well as all material facts which directly tend to increase the hazard or risk which are known by the assured, or which ought to be or are presumed to be known by him. And a concealment of such facts vitiates the policy. 'It does not seem to be necessary . . . that the . . . suppression of the truth should have been willful.' If it were but an inadvertent omission, yet if it were material to the risk and such as the plaintiff should have known to be so, it would render the policy void. But it is held that if untrue or false answers are given in respo response nse to inquiries inquiries and they relate to material facts the policy is avoided without regard to the knowledge or fraud of assured, although under the statute statements are representations which must be fraudulent fraudu lent to avoid the policy. So under certain certain codes the important inquiri inquiries es are
-the Lastly, appellant thatnow even the insurance had a right to rescind contract, such contends right cannot beifenforced in viewcompany of the provisions of section 47 of the Insurance Act providing "Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous previ ous to the commencement commencement of an action on the contract contract." ." This secti section on was derived from section 2583 of the California Civil Code, but in contrast thereto, makes use of the imperative "must" instead of the permissive "may." Nevertheless, there are two answers to the problem as propounded. The first is that the California law as constr construed ued by the cod code e examin examiners ers,, at whose whose recomm recommend endati ation on it was ado adopte pted, d, conceded conced ed that "A failure to exerc exercise ise the right right (of rescissi rescission), on), cannot, of cours course, e, prejudice any defense to the action which the concealment may furnish." (Codes of California Annotated; Tan Chay Heng vs. West Coast Life Insurance Company [1927], p. 80, ante.) The second answer is that the insurance company more than one month previous to the commencement of the present action wrote the plaintiff and informed him that the insur insurance ance contrac contractt was void because it had been procu procured red through fraudulent representations, and offered to refund to the plaintiff the premium which the latter had paid upon the return of the policy for cancellation. As held in California as to a fire insurance policy, where any of the material representations are false, the
ISSUE WON the contract of insurance may be rescinded
whether the concealment was willful and related to a matter material to the risk. xxx xxx xxx
insurer's tender of the premium and notice that the policy is canceled, before the
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pAgE 65 commencement of suit thereon, operate to rescind the contract of insurance. (Rankin vs. Amazon Insurance Co. [1891], 89 Cal., 203.) Disposition Judgment affirmed, with the costs of this instance against the appellant.
the principal approves the risk and a receipt is given by the agent; because private respondent failed to accept Pacific Life’s offer for the Juvenile Triple Action plan, there was no meeting of the minds and thus no contract. Also, being an authorized agent of Pacific Pacif ic Life, Ngo Hing must have known the compan company y did not offer the insur insurance ance
GREAT PACIFIC LIFE v. CA (NGO HING) 89 SCRA 543 DE CASTRO, J; April 30, 1979
applied for and merely took a chance on Mondragon’s recommendation. Disposition the decision appealed from is set aside, absolving Pacific Life from their civil liabilities
NATURE Petition for certiorari
EDILLON v. MANILA BANKERS LIFE 117 SCRA 187 VASQUEZ; September 30, 1982
FACTS - On March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Co. (Pacific Life) for a 20 year endowment policy of P50k on the life of his 1 year old daughter, Helen. Ngo Hing supplied the essetntial data which petitioner petit ioner Mondragon, Mondragon, branch manager of the Pacific Pacific Life in Cebu, wrote on the corresponding form in his own handwriting, later typing the data on an application form signed by Ngo Hing. The latter paid the P1077.75 annual premium but retained
P1,317 as commission commission as he was also a duly authorized authorized agent of Pacific Life. The binding deposit receipt was then issued to Ngo Hing; Mondragon handwrote his strong recommendation for the approval of the application on the back of the form. - On April 30, Mondragon received a letter from Pacific Life which stated that the 20 year endowment plan was not available for minors below 7, but that Pacific Life could consider the same under the Juvenile Triple Action Plan, advising that if the offer was acceptable, the Juvenile Non-Medical Declaration be sent to the company. -Mondra -Mon dragon gon all allege egedly dly failed failed to inf inform orm Ngo Hing Hing of the non non-ac -accept ceptanc ance e of the insurance plan, instead writing Pacific Life again, recommending the approval of the endowment plan to children since customers had been asking for such coverage since 1954. -On May 28, 1957, Helen died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but having failed to do so, filed an action for recovery with the CFI of Cebu. The Court ordered Pacific Life to pay P50k with 6% interest, hence this petition. ISSUE WON the binding deposit receipt constituted a temporary contract of the life insurance in question HELD NO - The bin bindin ding g deposi depositt receip receiptt is merely merely a pro provis vision ional al con contra tract ct and only upo upon n compliance with the ff conditions: (1) that the company be satisfied that the applicant was insurabl insurable e on sta standa ndard rd rates rates (2) that if the company company does does not accep acceptt the application and offers a different policy, the insurance contract shall not be binding until the applicant accepts the new policy (3) that if the applicant is not found to be insurable on standard rates and the application is disapproved, the insurance shall not be in force at any time and the premium be returned to the applicant.
-This implies implies the receipt receipt is merely an acknowledgement, acknowledgement, on behalf of the company, that the Cebu branch of Pacific Life had received the premium and had accepted the application subject to processing by the insurance company, which will approve or
NATURE Appeal from a decision of the CFI FACTS - Someti Sometime me in April 1969, Carmen O, Lapuz applie applied d with respond respondent ent insurance corporation for insurance coverage against accident and injuries. In the application
form which was dated April 15, 1969, she gave the date of her birth as July 11, 1904. On the same date, she paid the sum of P20.00 representing the premium for which she was issued issued the correspo corresponding nding receip receiptt signe signed d by an authorized authorized agent of the respondent insurance corporation. Upon the filing of said application and the payment of the premium on the policy applied for, the respondent insurance corporation issued to Carmen O. Lapuz its Certificate of Insurance. The policy was to be effective for a period of 90 days. - On May 31, 1969 or during the effectivity of the Insurance, Carmen O. Lapuz died in a vehicular accident. - On June 7, 1969, petitioner Regina L. Edillon, a sister of the insured and who was the named beneficiary in the policy, filed her claim for the proceeds of the insurance, submitting all the necessary papers and other requisites with the private respondent. Her claim having been denied, Regina L. Edillon instituted this action in the Court of First Instance of Rizal. - In resisting the claim of the petitioner, the respondent insurance corporation relies on a provision contained in the Certificate of Insurance, excluding its liability to pay claims under the policy in behalf of "persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years ..." It is pointed out that the insured being over sixty (60) years of age when she applied for the insurance coverage, the policy policy was null null and void, and no risk risk on the part of the respo responde ndent nt ins insura urance nce corporation had arisen therefrom. - RTC dismissed the complaint. ISSUE WON the acceptance by the private respondent insurance corporation of the premium and the issua issuance nce of the correspo corresponding nding certif certificate icate of insur insurance ance should be deemed a waiverr of the exclu waive exclusiona sionary ry condition of overa overage ge stated stated in the said certifi certificate cate of insurance HELD YES - The age of the ins insure ured d Carmen Carmen 0. Lap Lapuz uz was not conce conceale aled d to the ins insura urance nce
reject it depending on whether the applicant is insurable on standard rates. As such, the receipt was never in force—it does not insure outright. No liability attaches until
company. compan y. Her appli applicatio cation n for insuranc insurance e coverage which was on a print printed ed form furnished by private respondent and which contained very few items of information
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pAgE 66 clearly indicated her age of the time of filing the same to be almost 65 years of age. Despite Despit e such information information which could hardly hardly be overlooked in the application application form, considering its prominence thereon and its materiality to the coverage applied for, the respondent insurance corporation received her payment of premium and issued the
After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab ini initio tio or is resc rescin inda dabl ble e by reas reason on of the the frau fraudu dule lent nt conc concea ealm lmen entt or
corresponding certificate of insurance without question. The accident which resulted in the death of the insured, a risk covered by the policy, occurred on May 31, 1969 or FORTY-FIVE FORTY -FIVE (45) DAYS after the insuranc insurance e coverage coverage was applie applied d for. There was sufficient time for the private respondent to process the application and to notice that the applicant was over 60 years of age and thereby cancel the policy on that ground if it was minded to do so. If the private respondent failed to act, it is either because it was willing to waive such disqualification; or, through the negligence or incompetence of its employees for which it has only itself to blame, it simply overlooked such fact. Under the circumstances, the insurance corporation is already deemed in estoppel. Its inaction inact ion to revoke the policy policy despite despite a departure departure from the exclusionary exclusionary condition contained in the said policy constituted a waiver of such condition. Disposition Judgment appealed from is REVERSED and SET ASIDE and respondent Disposition insurance corporation is ordered to pay to the petitioner the proceeds of Insurance
misrepresentation of the insured or his agent. - According to the petit petitioner ioners, s, the Insura Insurance nce Law was amended and the secon second d paragraph of Section 48 added to prevent the insurance company from exercising a right to rescind after the death of the insured - The so-ca so-called lled "incontes "incontestabil tability ity clause" precludes the insurer insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases diseases are concer concerned ned if the insuranc insurance e has been in force for at least two years durin during g the insured's lifetime. lifetime. The phrase "during the lifetime" lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years." - The policy was issued on November 6,1973 and the insured died on April 26,1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, therefore, barred from proving that the policy is void ab initio by initio by reason of the insured's fraudulent concealment or misrepresentation. - Th The e pe peti titi tion oner ers s cont conten end d that that ther there e coul could d have have be been en no conc concea ealm lmen entt or misrepresentation by their late father because Tan Lee Siong did not have to buy insurance. He was only pressured by insistent salesmen to do so -The -The legi legisl slat ativ ive e answ answer er to the the argu argume ment nts s po pose sed d by the the pe peti titi tion oner ers s is the the "incontestability clause" added by the second paragraph of Section 48. The insurer has two years from the date of issua issuance nce of the insuranc insurance e contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives with within in such such pe peri riod od.. Afte Afterr two two year years, s, the the de defe fens nses es of conc concea ealm lmen entt or misrepresentation, no matter how patent or well founded, no longer lie
HARDING v. COMMERCIAL UNION (supra p.36) TAN TAN v. CA (PHIL PHILIP IPPI PINE NE COMPANY) 174 SCRA 403 GUTIERREZ; June 29, 1989
AM AMER ERIC ICAN AN
LIFE LI FE
IN INSU SURA RANC NCE E
NATURE Review on certiorari of the decision of the Court of Appeals affirming the decision of the Insurance Commissioner FACTS - On September 23,1973, Tan Lee Siong, father of herein petitioners, applied for life insurance insur ance in the amount of P 80,000.00 80,000.00 with respondent respondent company. Said application application
was approved and was issued effective November 6, 1973 - On April 26,1975, Tan Lee Siong died of hepatoma (Exhibit B). Petitioners then filed with respondent company their claim for the proceeds of the life insurance policy -respondent company denied petitioners' claim and rescinded the policy by reason of the all allege eged d misrep misrepres resent entati ation on and concea concealme lment nt of materi material al facts facts mad made e by the deceased deceas ed Tan Lee Siong in his applica application tion for insurance. insurance. The premiums paid on the policy were thereupon refunded - Petitioners filed on November 27, 1975, a complaint against the former with the Office Offic e of the Insurance Insurance Commissioner. Commissioner. Commissioner Commissioner denied petition. petition. CA affirmed affirmed Commissioners decision
TAN CHAY HENG v. WEST COAST LIFE INSURANCE 51 PHIL 80
JOHNS; November 21, 1927 1927
ISSUE WON according to Sec. 48 of the Insurance Code, insurance company is barred from rescinding contract
FACTS - Plaintiff alleges that defendant accepted and approved a life insurance policy of for the sum of P10,000 in which the plaintiff was the sole beneficiary; that the policy was issued issued upon the pay payment ment by the said Tan Ceang Ceang of the first first yea year's r's premi premium um amounting to P936; that in and by its terms, the defendant agreed to pay the plaintiff as beneficiary the amount of the policy upon the receipt of the proofs of the death of the insured while the policy was in force; that without any premium being due or unpaid, Tan Ceang died on May 10, 1925; that in June, 1925, plaintiff submitted the proofs of the death of Tan Ceang with a claim for the payment of the policy which the defendant refused to pay, for which he prays for a corresponding judgment, with legal interest from the date of the policy, and costs. - Defendant alleges that the insurance policy on the life of Tan Ceang, upon which plaintiff's action is based, was obtained by the plaintiff in confabulation with one Go
HELD - Section 48. Whenever a right to rescind a contract of insurance is given to the
Chulian, of Bacolod, Francisco Sanchez of the place; and Dr. V. S. Locsin Locsin, , of La Negros Carlota,Occidental; Negros Occident Occidental, al, thru fraud andsame deceit perpetrate perpetrated d against this defendant in the following manner, to wit:
insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract.
1. Go, Go, San Sanch chez ez a and nd Lo Locs csin in,, cau cause sed d Tan C Cae aeng ng to sig sign n an appl applic icat atio ion n for insurance with the defendant in the sum of P10,000, in which it was said that Tan
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pAgE 67 Ceang was single and was a merchant, and that the plaintiff Tan Chai Heng, the beneficiary, was his nephew, whereas in truth and in fact and as the plaintiff and his said coconspirators well knew, the said Tan Ceang was not single but was married and had several children; and was not a merchant but a mere employee
for some years previous to the dates above mentioned, were engaged in the illicit enterprise of procuring fraudulent life insurances from the present defendant, similar to the one in question, and which enterprise was capitalized by him by furnishing the funds with which to pay the premium on said fraudulent insurance; that the said Go
of Tan Quina from whom he received only a meager salary, and that plaintiff was not a nephew of the said Tan Ceang. 2. Tan Tan Ceang Ceang wa was s seri seriou ousl sly y il ill, l, s suff uffer erin ing g from from pulm pulmon onar ary y tube tuberc rcul ulos osis is o off about three years' duration, which illness was incurable and was well known to the plaintiff and his said coconspirators. 3. Locs Locsin in,, in hi his s capa capaci city ty as as med medic ical al exa exami mine nerr fo forr the the de defe fend ndan ant, t, p pre repa pare red d and falsified the necessary medical certificate, in which it was made to appear, among other things, that Tan Ceang had never used morphine, cocaine or any other other dru drug; g; that that he was then then in good health health and had never never consul consulted ted any physician; that he had never spit blood; and that there was no sign of either present or past disease of his lungs; whereas in truth and in fact, plaintiff and coconspirators well knew, Tan Ceang was addicted to morphine, cocaine, and opium and had been convicted and imprisoned therefor, and for about three year prior thereto had been suffering from pulmonary tuberculosis. 4. Pl Plai aint ntif ifff caus caused ed a co conf nfid iden enti tial al repo report rt to the defen defenda dant nt in insu sura ranc nce e company to be signed by one V. Sy Yock Kian, who was an employee of Go Chulian, in which it was falsely represented that Tan Ceang was worth about P40,000, had an annual income of from eight to ten thousand pesos net, had the appearance of good health, and never had tuberculosis. 5. Af Afte terr said said appli applica cati tion on for iins nsur uran ance ce,, medica medicall cer certi tifi fica cate te and co conf nfid iden enti tial al report had been prepared and falsified, plaintiff and coconspirators caused the same sam e to be forwar forwarded ded to the defendant defendant at its offi office ce in Man Manila ila,, the medical medical certificate thru the said Dr. V. S. Locsin as medical examiner, and said application for insurance insurance and confidential confidential report thru the said Francisco Francisco Sanchez in his capaci capacity ty as one of the agents agents of the defendan defendantt ins insura urance nce company company in the Provin Province ce of Occ Occide identa ntall Negros; Negros; that that the defend defendant ant,, believ believing ing that that the repres represent entati ations ons mad made e in sai said d docume document nt wer were e true, true, and relyin relying g thereo thereon, n, provisionally accepted the said application for insurance on the life of Tan Ceang in the sum of P10,000 and issued a temporary policy pending the final approval or
Chulian was the one who furnished the money with which to pay the first and only annual premium premium on the insur insurance ance here in question, amounti amounting ng to P936.50 P936.50;; that the said Go Chulian, on August 28, 1926, was convicted by the Court of First Instance of the City of Manila, in criminal case No. 31425 of that court, of the crime of falsification of private documents in connec connection tion with an fraud fraudulent ulent insuran insurance, ce, similar to the present, committed against this defendant in the month of September, 1924; that in the same case the said Francisco Sanchez was one of the coaccused of the said Go Chulian but was discharged from the complaint, because he offered himself and was utilized as a state's witness; that there is another civil action now pending against Go Chulian and Sanchez in the Court of First Instance of Manila (civil case No. 28680), in which the present defendant is the plaintiff, for the recovery of the amounts of two insurance policies aggregating P19,000, fraudulently obtained by the said Go Chulian and Sanchez. - To this, plaintiff filed a demurrer which was granted.
HELD NO Ra Rati tio o The word "rescind" has a well defined legal meaning, and as applied to contracts, it presupposes the existence of a contract to rescind. Reasoning - Plaintiff vigorously contends that section 47 of the Insurance Act should be applied, and that when so applied, defendant is barred and estopped to plead and set forth the matters alleged in its special defense. That section is as follows: Whenever a right to rescind a contract of insurance is given to the insurer by any prov provis isio ion n of this this chap chapte ter, r, su such ch righ rightt must must be ex exer erci cise sed d pr prev evio ious us to the the commencement of an action on the contract.
disapproval disap proval of said application applicati on byaldefendant's defend ant's home-office home-offi ce to in be Sanissued; Francisco, California Cali fornia, , where in case of approval approv a perman permanent ent policy was that such permanent policy was never delivered to the plaintiff because defendant discovered the fraud before its delivery. 6. That That the the ffir irst st a agr gree eed d an annu nual al p pre remi mium um on on the the insu insura ranc nce e in que quest stio ion n of P936.50 not having been paid within 60 days after medical examination of the applicant as required by the regulations of the defendant insurance company, plaintiff plain tiff and coconspirat coconspirators ors caused Tan Ceang to sign a health certif certificate icate for reinstatement; that the said temporary policy was delivered by defendant to the insured on April 10, 1925, in the belief that said statements and representations were true and in reliance thereon. 7. 2 ½ mont months hs aft after er tthe he sup suppo pose sed d me medi dica call exam examin inat atio ion n ab abov ove e refe referr rred ed to, to, and exactly 1 month after the date of the health certificate for reinstatement above set forth, Tan Ceang died in Valladolid, Occidental Negros, of pulmonary tuberculosis, the same illness from which suffering at the time it is supposed he was examined by Dr. V. S. Locsin, but that the plaintiff coconspirators, pursuant to their conspira conspiracy, cy, caused caused the said Dr. V. S. Locsin to sta state te falsel falsely y in the
-rescinded. It will be noted that that defendant notany seek to haveofthe alleged insurance It denies it everdoes made contract insurance on the lifecontract of Tan Ceang or that any such a contract ever existed, and that is the question which it seeks to have litigated by its special defense. In the very nature of things, if the defendant never made or entered into the contract in question, there is no contract to rescind, and, hence, section 47 upon which the lower based its decision in sustaining the demurrer does not apply. As stated, an action to rescind a contract is founded upon and presupposes the existence of the contract which is sought to be rescinded. If all of the material matters set forth and alleged in the defendant's special plea are true, there was no valid contract of insurance, for the simple reason that the minds of the parties never met and never agreed upon the terms and conditions of the contract. We are clearl clearly y of the opi opinio nion n that, that, if such such matter matters s are known to exist by a preponderance of the evidence, they would constitute a valid defense to plaintiff's cause of action. Upon the question as to whether or not they or are not true, we do not at this time have or express any opinion, but we are clear that section 47 does not apply apply to the allegat allegation ions s made in the answe answer, r, and that the trial trial court erred in sustaining the demurrer.
ISSUE WON defense is barred by Art. 47
certificate of death that the said Tan Ceang had died of cerebral hemorrhage. - Defendant also alleges that plaintiff was, like V. Sy Yock Kian, an employee of Go Chulian; that the latter was the ringleader of a gang of malefactors, who, during, and
Disposition The judgment of the lower court is reversed and the case is rem anded for such other and further proceedings as are not inconsistent with this opinion, with costs against the plaintiff.
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pAgE 68 PIONEER INSURANCE AND SURETY CORPORATION v. YAP 61 SCRA 426 FERNANDEZ; December 19, 1974 NATURE Appeal by certiorari from CA decision affirming a CFI decision which declared plaintiff Yap entitled to recover from defendant Pioneer Insurance and Surety Corp, the full amount of the damage inquired in Policy No. 4219 FACTS - Yap owned owned a sto store re in a 2 sto storey rey buildin building, g, where she sol sold d shoppi shopping ng 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. 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 allow ed except by the consent of the Company endorsed endorsed hereo hereon. n. 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 P20,00 P20,000 0 issued issued by the Gre Great at America American n Ins Insura urance nce Company Company coveri covering ng the same 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 polic y is as follows: follows: P20,000.0 P20,000.00 0 � Northwest Northwest Ins., and not as originall originally y stated stated.. (emphasis supplied) Except as varied varied by this endor endorsement sement,, all other terms and conditions conditions remain remain unchanged. - September 26, 1962: Yap took out another fire insurance policy for P20,000 covering the same proper properties, ties, from Federal Federal Insura Insurance nce Company. This policy was procur procured ed without notice to and the written consent of Pioneer, 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 HELD YES
- The petitioner should be absolved. Reasoning - There was a violation by Yap of the co-insurance clause contained in Policy No. 4219
- By the plain terms of the policy, other insurance without the consent of petitioner would ipso facto facto avoid the contrac contract. t. It requir required ed no affirmativ affirmative e 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 overinsurance 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." Disposition the appealed judgment of the Court of Appeals is reversed and set aside, and the petitioner absolved from all liability under the policy.
NEW LIFE ENTERPRISES v. CA
207 SCRA 609 REGALADO; March 31, 1992 FACTS - Jul Julian ian Sy and Jose Sy Bang Bang are part partner ners s engage engaged d in the bus busine iness ss of sel sellin ling g constructi const ruction on mater materials ials under the business name “New Life Enter Enterprise prises.” s.” Julia Julian n Sy insured against fire the stocks in trade of New Life Enterprises with Western Guaranty Corpor Corporati ation, on, Relian Reliance ce Sur Surety ety and Ins Insura urance nce Co. Inc., Inc., and Equ Equita itable ble Ins Insura urance nce Corporation in the aggregate amount of P1,550,000.00. When the building where New Life Enterprises Enterprises was located, along with the stocks in trade therein, were gutted by fire, petitioners filed an insurance claim against the three companies. The insurance companies all denied Julian Sy’s claim on the ground of “breach of policy condition,” (i.e., the “other insurance” clause which required New Life Enterprises to inform each of the insurance companies in case the former insures with another company the
same property already byclaims each of the insurance - Because of the denialinsured of their for payment bycompanies). the 3 insurance companies, petitioners filed separate civil actions against the former before the Regional Trial Court of Lucena City, which cases were consolidated for trial. The trial court ruled in favor of petitioner. However, the Court of Appeals reversed the trial court’s decision, found petitioner to have violated Clauses 3 and 27 of the separate insurance policies issued by the 3 companies, and exonerated the insurance companies from liability. ISSUE WON petitioners violated the “Other Insurance Clause” of the insurance policies HELD YES - Petiti Petitione oners rs adm admit it that that the respec respectiv tive e ins insura urance nce pol polici icies es issued issued by pri privat vate e respondents did not state or endorse thereon the other insurance coverage obtained or subsequen subsequently tly effected effected on the same sto stocks cks in trade trade for the los loss s of which compensatio compen sation n is claimed by petit petitioners ioners.. It is further admitted by petit petitioner ioners s that
which resulted in the avoidance of the petitioner’s liability.
Equitable s policy stated nil in the space thereon requiring indication of any co insurance although there were 3 policies subsisting on the same stocks in trade at the
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pAgE 69 time of the loss, namely namely,, that of Western Western in the amount of P350,000.00 and two 2 policies of Reliance in the total amount of P1,000,000.00. - The coverage by other insurance or co-insurance effected or subsequently arranged by petitioners petitioners were neither neither stated nor endorsed endorsed in the policie policies s of the 3 private respondents respo ndents,, warranting warranting forfeiture forfeiture of all benefits thereund thereunder er if we are to follo follow w the express stipulation in Policy Condition No. 3. - The terms of the contract are clear and unambiguous. The insured is specifically required requi red to discl disclose ose to the insurer any other insurance insurance and its particul particulars ars which he may have effected on the same subject matter. The knowledge of such insurance by the insurer's agents, even assuming the acquisition thereof by the former, is not the "notice" that would stop the insurers from denying the claim. Besides, the so-called theory of imputed knowledge, that is, knowledge of the agent is knowledge of the principal, aside from being of dubious applicability here has likewise been roundly refuted by respondent court whose factual findings we find acceptable. The mere fact that Yap Kam Chuan was an agent for both Reliance and Equitable does not justify the allegation alleg ation that the two are sister companies. companies. Availment of the services services of the same agents and adjusters by different companies is a common practice in the insurance business and such facts do not warrant the speculative conclusion of the trial court. - Considering the terms of the policy which required the insured to declare other insurances, the statement in question must be deemed to be a statement (warranty) binding bindi ng on both insurer and insured, that there were no other insurance on the property. The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitled the insurer to rescind. - The obvious purpose of the aforesaid requirement in the policy is to prevent overinsurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to the insured. The insured has no right to complain, for he assents to comply with all the stipulations on his side, in order to entitle himself to the benefit of the contract, which, upon reason or principle, 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 stipulations, would not nave been entered into. - It is not disputed that the insured failed to reveal before the loss three other insurances. By reason of said unrevealed insurances, the insured had been guilty of a falsebeen declaration; a clear vital one because where the had insured had asked to revealmisrepresentation but did not, that and was adeception. Otherwise stated, the insurer known that there were many co-insurances, it could have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud. - As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property, the total absence of such notice nullifies the policy. - Additionally, insofar as the liability of respondent Reliance is concerned, it is not denied that the complaint for recovery was filed in court by petitioners only on January 31, 1984, or after more than one (1) year had elapsed from petitioners' receipt of the insurers' letter of denial on November 29, 1982. - The condition contained in an insurance policy that claims must be presented within one year after rejection is not merely a procedural requirement but an important matter essential to a prompt settlement of claims against insurance companies as it demands that insurance suits be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared.
YOUNG v. MIDLAND TEXTILE INSURANCE CO. 30 PHIL 617 JOHNSON; March 31, 1915 1915 FACTS - K.S. Young had a candy and fruit store on the Escolta, Manila, and occupied a building build ing at 321 Calle Claveri Claveria, a, as a resid residence ence and bodega. The Midlan Midland d Textile Insurance Co. in consideration of the payment of a premium of P60, entered into a contract of insurance with Young by the terms of which the company, upon certain conditions, promised to pay Young the sum of P3,000 in case said residence and bodega and contents should be destroyed by fire. - One of the conditions of the contract is: "Warranty B – It is hereby declared and
agreed that during the pendency of this policy no hazardous goods be stored or kept for sale, and no hazardous trade or process be carried on, in the building to which this insurance applies, or in any building connected therewith." - Young placed in the residence residence and bodega three boxes boxes filled with firew fireworks. orks. Said residence and bodega and the contents thereof were partially destroyed by fire. - The fireworks had been given to Young by the former owner of the Luneta Candy Store. He intended to use tthem hem in the celebration of the Chinese New Year. However, the authorities authorities of the city of Manil Manila a had prohi prohibited bited the use of fireworks on said occasion, so Young then placed them in the bodega where they remained from the 4th or 5th of February, 1913 until after the fire of March 18, 1913. - Both parties agree that the fireworks come within the phrase "hazardous goods," mentioned in "Warranty B" of the policy; that the fireworks were found in a part of the building not destroyed by the fire and that they in no way contributed to the fire, or to the loss that resulted. - The lower court rendered rendered a judgment in favor of Young for the sum of P2,708.78, P2,708.78, and costs. ISSUE 1. WON the placing of the fireworks in the building insured, they being "hazardous goods," was a violation of the terms of the contract of insurance and especially of "Warranty B." HELD 1. YES. Reasoning It is admitted by both parties that the fireworks are hazardous goods. The defendant defen dant alleged that they were "stor "stored." ed." The plaintiff plaintiff contends that under all the facts and circumstances of the case, they were not “stored” in said building, and that the placing of them in the building was not a violation of the terms of the contract. - Whether a particular article is "stored" or not must, in some degree, depend upon
the intention of the parties. Nearly all of the cases cited by the lower court are cases where the article was being put to some reasonable and actual use, which might easily have been permitted by the terms of the policy, and within the intention of the
QUA CHEE GAN v. LAW UNION (supra p.48)
parties, and excepted from the operation of the warranty, like the present.
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pAgE 70 - (1) Where merchants have had or kept the "hazardous" articles in small quantities, and for actual daily use, for sale, such as gasoline, gunpowder, etc.; (2) Where such articles artic les have been brought brought on the premises for actual use thereon, and in small quantities, such as oil, paints, etc; and (3) Where such articles or goods were used for lighting purposes, and in small quantities. - In the present case no claim is made that the "hazardous goods" were placed in the bodega for present or daily use. It is admitted that they were placed in the bodega "for future use," or for future consumption, or for safe keeping. It seems clear to us that the "hazardous goods" in question were "stored" in the bodega, as that word is generally defined. That being true, suppose the defendant had made an examination of the premises, even in the absence of a fire, and had found the "hazardous goods" there, would it not have been justified in declaring the policy null and of no effect by reason of a violation of its terms? If it might, then may it not repudiate its liability, even after the fire? If the "warranty" is a term of the contract, will not its violation cause a breach and justify noncompliance or repudiation? - Contracts of insurance are contracts of indemnity, upon the terms and conditions specified therein. Parties have a right to impose such reasonable conditions at the time of the making of the contract as they deem wise and necessary. The rate of pre premiu mium m is measure measured d by the chara characte cterr of the risk assume assumed. d. The insur insurer, er, for a comparatively small consideration, undertakes to guarantee the insured against loss or damage, upon the terms and conditions agreed upon, and upon no other. When the insurer is called upon to pay, in case of loss, he may justly insist upon a fulfillment of the terms of the contract. contract. If the insured, insured, cannot bring himself within the terms and conditions condit ions of the contract, contract, he is not entitled to recover for any loss suffered. The terms of the contract constitute the measure of the insurer's liability. If the contract has been terminated, by a violation of its terms on the part of the insured, there can be no recovery. Compliance with the terms of the contract is a condition precedent to the right of recovery. - Young argues argues that since the "storing" "storing" of the fireworks fireworks on the premises premises did not contribute in any way to the damage occasioned by the fire, he should be permitted to recover. recove r. That argument, argument, however, is beside beside the question question,, if the "storing" "storing" was a violation of the terms of the contract. The violation of the terms of the contract, by virtue of the provisions of the policy itself, terminated, at the election of either party, the contractual - Young paid arelations. premium based upon the risk at the time the policy was issued. Certainly, the placing of the firecrackers in the building insured increased the risk. Young had not paid a premium based upon the increased risk, neither had the defendant issued a policy upon the theory of a different risk. He was enjoying, if his conten contentio tion n may be allowe allowed, d, the benefits benefits of an ins insura urance nce polic policy y upo upon n one risk, wherea whe reas, s, as a mat matter ter of fact, fact, it was issued issued upo upon n an entire entirely ly dif differ ferent ent risk. The defendant had neither been paid nor had issued a policy to cover the increased risk. An increase of risk which is substantial and which is continued for a considerable period of time, is a direct and certain injury to the insurer, and changes the basis upon which the contract of insurance rests. Disposition Decision of the lower court is REVERSED.
TAN v. CA (supra p.51) AREOLA v. CA (supra p.26)
FILIPINAS LIFE ASSURANCE v. NAVA 17 SCRA 210
BAUTISTA ANGELO; May 20, 1966 NATURE Petition for review of a decision of the Court of Appeals FACTS - Before the war, Nava entered into a contract of insurance with Insular Life Assurance Co., Ltd. (face value of P5k), and 17 separate contracts of life insurance with Filipinas Life Assurance Co. (total face value of P90k). Each and everyone of the 18 policies issued by defendants to plaintiff contains a loan clause of the following tenor: Policy Polic y loans. After three full years years'' premiums have been paid upon this Policy, Polic y, if no premium payment is in default, the Company, subject subject to its then existing rules, will advance on proper assignment and delivery of this Policy and on the sole security thereof a sum equal to, or at the option of the owner less than, the
cash specified the Schedule Policybalance Values, of less any existingfor indebtedness on orvalue secured by thisinPolicy and any of unpaid the premium the current policy-year; provided interest at six per centum per annum on the whole amount of the loan is paid in advance to the end of the current policy-year. At the end of the current policy-year interest at the same rate for one year in advance will be due and payable, payable, and annually annually thereaft thereafter, er, and if not so paid will be added to the principal and bear the same rate of interest. Failure to repay any such loan or interest inter est shall not avoid this Policy unless the total indebtedne indebtedness ss shall equal or exceed the full amount of the loan value available hereunder. Any indebtedness on this Policy shall first be deducted from any money payable or in any settlement under this Policy. - Nava had so far paid to Insular a total of P2,574; and to Filipinas Life, a total of P32,072.60. - April 28, 1948: Nava applied to the companies for a P5k loan in line with the loan clause clause,, but they they refuse refused d to gra grant nt it bec becaus ause e certai certain n regula regulatio tions ns issued issued by the Insurance Commissioner required the insurance companies to withhold the payments on premiums made during the Japanese occupation because the same shall be subject to future adjustments " as soon as debtor-creditor relationship is established" and because becaus e of such process of "withholding" "withholding" plaintiff plaintiff was not entit entitled led to borro borrow w any amount until such adjustment has been made. - Sept 30, 1948: Nava calle called d the atten attention tion of the insur insurance ance compani companies es to the SC decision (Haw (Haw Pia v. China Banking Corporati Corporation on)) establishing and recognizing the relationship of debtor and creditor with respect to payments in fiat currency made during the Japanese occupation on pre-war obligations. - Com Compan panies ies still refus refused ed say saying ing that the SC dec decisi ision on was not app applic licabl able e to transactions undertaken during Japanese occupation when they relate to life insurance policies. - Feb 4, 1949: Nava was again refused even if the total amount of the cash surrender values of the 18 policies reached the sum of P9,468.29. - Feb 10, 1949: Nava brought case to the CFI Manila praying for the rescission of the abovementioned 18 policies and for the refund to him of all the premiums so far paid by him to defendants defendants in the amount of P31,63 P31,633.80, 3.80, plus 6% inter interest est thereon as
TAN CHAY v. WEST COAST (supra p.51)
damages - Nov 28, 1951: companies passed a resolution which was approved by the Insurance Commissioner, giving full credit to all premium payments made by their policyholders
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pAgE 71 in fiat currency during the Japanese occupation on account of pre-war policies for which reason they filed an amended answer offering to pay plaintiff the amount of P9,468.29 which represents the aggregate cash surrender values of all the policies in question as of February 10, 1949, but apparently this offer was refused.
material warranty, or other material provision of a policy, on the part of either party thereto, entitles the other to rescind." - "The general rule is that a breach of the agreement to make the loan does not entitle the insured to rescind the contract," is not controlling in this jurisdiction. Firstly, it was
- CFI: (1) rescinded rescinded the insurance contr contracts; acts; (2) ordered defendant defendant Filipinas Filipinas Life Assurance Co. to pay plaintiff the amount of P32,072.60; and (3) ordered defendant Insular Life Assurance Co., Ltd. to pay plaintiff the amount of P2,574.00 - CA affirmed.
not shown that the insurance laws in the states where said ruling prevails contain a provision identical to Section 69 of our Insurance Law we quoted above, and secondly, the rule cited by Vance is not a rule uniformly followed by all states in the US, for on this matter there is a marked divergence of opinion. 2. NO - Considering that our Insurance Law does not contain an express provision as to what the court should do in cases of rescission of an insurance policy under Section 69, the provision that should apply is that embodied in Article 1225 of the old Civil Code, as postulated in Article 16 of the same Code, which provides that on matters which are not govern governed ed by specia speciall laws laws the pro provis vision ions s of sai said d Cod Code e shall shall sup supple plement ment its deficiency. And said Article 1295 provides: ART. 1295. Rescission makes necessary the return of the things which were the subject-matter of the contract, with their fruits, and of the price paid, with interest thereon. ...xxx - Said the petitioners: "Recovery of the full amount of the premium after the insurer has sustained for sometime the risk of the insurance and the insured has enjoyed the benefi benefitt of pro protec tectio tion n is obviou obviously sly unjust unjust and is so recogn recognize ized d by the better authorities." The ruling above quoted merely represents the minority rule in the US, the majority rule being that the insured can recover all premiums paid, in some cases with interest in case of wrongful cancellation, repudiation, termination or rescission of the contract of life insurance. - Contention that because respondent cannot restore to petitioners the "value of the benefit benef it of prote protection ction"" which he might have received under the 18 life insura insurance nce policies in question he is not entitled to rescind them under the provision of Article 1295 of the old Civil Code, is untenable because said article only contemplates a transaction whether material things are involved, and do not refer to intangible ones which cannot be the subject of restoration, for to interpret it otherwise would be to defeat the law itself with the result that rescission can never be had under Section 69 of our Insurance Law.
ISSUES 1. WON CA erred in ruling that as a consequence of the decision in the Haw Pia case petitioner petit ioners s violated violated the loan clause clause contained contained in the insurance policies thereby entitling respondent to their rescission 2. WON CA erred in rul ruling ing that by virtu virtue e of Artic Article le 1295 of the old Civil Code Code petitioners should refund to defendant all the premiums paid on his insurance policies as a consequence of their rescission 3. WON CA erred in not ruling that, even if respondent is entitled to the rescission of said insurance policies, he can only recover their cash surrender value at the time the complaint was filed HELD 1. NO. - Even assuming the validity of the Insurance Commissioner’s regulations, the fact however is that such requirement has already lost its legal effect and value when our Supreme Court rendered its decision in the Haw Pia case wherein it was declared, among others, that all payments made in fiat currency during the Japanese occupation in relation with any contractual obligation executed before the war were valid to all intents and purposes, and yet petitioners apparently did not give any importance to such decision for in their opinion it does not have any application to transactions which have any relation to payment of premiums on life insurance policies. - It cannot be denied that a life insurance policy involves a contractual obligation wherein the insured becomes duty bound to pay the premiums agreed upon, lest he runs the risk of having his insurance policy lapse if he fails to pay such premiums.
-years The fact that the hadcannot paid inbe full the premiums corresponding to cause the first of the lifeifof hisinsured policy he considered delinquent that would the3 lapse of his policy if the same contains an automatic premium payment clause cannot divest such policy of its contractual nature, for the result of such failure would only be for him to pay later the premium plus the corresponding interest depending upon the condition of the policy. But certainly it does not cease to be a contractual liability insofar as the payment of that premium is concerned for whether he likes it or not that premium has to be paid lest he allows the lapse of his policy. Consequently, the payment of premiums on the life insurance policies made by Nava before and during the war up to the time he applied for the loan in question with petitioners should be considered likewise as valid payments upon the theory that such insurance policies are in the nature of a contractual obligation within the meaning of the civil law. In effect, therefore, those payments were made by a debtor to a creditor within the meaning of the requirement of the regulations of the Insurance Commissioner and as such such they they can offer no exc excuse use to petiti petitione oners rs for refusi refusing ng to gra grant nt the loan loan as contemplated in the loan clause em bodied in the policies in question. - It is clear from the foregoing that the petitioners violated the loan clause embodied
-from It cannot be of denied that petitioners had turn already derived material benefits the use premiums paid to them byinrespondent before, during and after the last war from which they must have realized huge profits, and in this light alone petitioners petit ioners cannot claim prejudic prejudice e or unfairnes unfairness s if they are ordered to refun refund d the premiums paid by respondents. 3. NO. - Issue is corollary to preceding issue. No need to refute. Disposition Decision appealed from is AFFIRMED. Costs against petitioners
CHAPTER VII. RISKS AND COVERAGES VDA. DE BATACLAN v. MEDINA 102 PHIL 181 MONTEMAYOR; October 22, 1957 FACTS
in each of the 18 life insura insurance nce policies policies issued to respondent respondent to rescind all said policies under Section 69 of the Insurance Act, which provides: "The violation of a
- Juan Batacl Bataclan an rode Bus 30 of Medin Medina a Transport, Transport, driven by Saylon, shor shortly tly after midnight. The bus was running very fast. One of the front tires burst. Bus fell into
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pAgE 72 canal and turned turned turtle. 4 passengers couldn’t get out, including Bataclan. Gasoline began to leak from the overturned bus. 10 men came to to help. 1 carried a torch and when he approached the bus, fire started, killing the trapped passengers. - TC opined that proximate cause of Bataclan’s death was not the overturning of bus
- While said insurance policy was in full force and effect, the insured, Carlie Surposa, die died d on Octob October er 18, 1988 1988 as a result result of a stab stab wou wound nd infli inflicte cted d by one of the 3 unidentified men without provocation and warning on the part of the former as he and his cousin, Winston Surposa, were waiting for a ride on their way home after attending
but the fire. At the time fire started, started, Bataclan, though though injure injured, d, was still alive and damages were awarded, not for his death, but for physical injuries suffered.
the celebration of the "Maskarra Annual Festival." - Thereafter, Julia Surposa and the other beneficiaries of said insurance policy filed a written notice of claim with the FINMAN Corp which denied said claim contending that murder and assault are not within the scope of the coverage of the insurance policy. - Feb. 24, 1989: Surpo Surposa sa filed a compla complaint int with the Insur Insurance ance Commissi Commission on which subsequently ordered FINMAN to pay Surposa the proceeds of the policy with interest. - CA affirmed said decision.
ISSUE/S WON the proximate cause is the overturning of the bus or the fire HELD - The proximate cause is the overturning overturning of the bus. - Ordin Ordinaril arily, y, when a bus overturns overturns and pins down passenger, passenger, merely causing him injuries. If through some event, unexpected and and extraordinary, the bus iis s set on fire, and passenger is burned to death, one might contend that the proximate cause was the fire and not the overturning of the vehicle. - But here, the proximate cause of Bataclan’s Bataclan’s death is the overturning of the bus, this for the reason that when the vehicle turned not only on its side but completely on its back, leaking of gasoline from the tank was not unnatural or unexpected. - The coming coming of the men with the torch was in response to the call for help, made only not by the passengers but even the driver and conductor, and because it was very dark, about 2:30 am, rescuers had to carry a light with them. Coming as they did from rural area where lanterns and flashlights were not available, they had to use a torch. What was more natural than that said rrescuers escuers should innocently approach the overturned vehicle to extend aid. - The coming coming of the men with the torch was to be expecte expected, d, and was a natural sequence of the overturning of the bus, the trapping of some of its passengers and the call for outside help. - The burning of bus can also in part be attributed to negligence of carrier, through its its driverr and conductor. drive conductor. They, or at least the driver, driver, should should have known that in the position in which the overturned bus was, gasoline could and must have leaked from the gasoline tank and soaked the area in and around the bus. Gasoline can be smelt and detected even from a distance, and yet neither the driver nor the conductor
would tonear havethe cautioned or taken steps to warn rescuers not to bring the lightedappear torch too bus.
FINM FINMAN AN GE GENE NERA RAL L ASSU ASSURA RANC NCE E (SURPOSA) 213 SCRA 493 NOCON; September 2, 1992
CO CORP RPOR ORAT ATIO ION N
v.
CA
NATURE Certiorari FACTS - Oct Oct.. 22, 198 1986: 6: Carlie Carlie Surposa Surposa was ins insure ured d with with Fin Finman man Genera Generall Ass Assura urance nce
Corporation under Finman General Teachers Protection Plan Master 2005 and Individual Policy No. 08924 with his parents, paren ts, spouses Julia and Policy Carlo Carlos s No. Surpo Surposa, sa, and brothers Christopher, Charles, Chester and Clifton, all surnamed, Surposa, as
ISSUE WON CA committed GAD in applying the principle of " expresso unius exclusio alterius" alterius " in a personal accident insurance policy (since death resulting from murder and/or assault are impliedly excluded in said insurance policy considering that the cause of death of the insured was not accidental but rather a deliberate and intentional act of the assailant in killing the former as indicated by the location of the lone stab wound on the insured) [TF they cannot be made to indemnify the Surposa heir heir s s]] HELD NO - The record is barren of any circumstance showing how the stab wound was inflicted. While the act may not exempt the unknown perpetrator from criminal liability, the fact remains that the happening was a pure accident on the part of the victim. The insured died from an event that took place without his foresight or expectation, an event that proceeded from an unusual effect of a known cause and, therefore, not expected. Reasoning - De la Cruz vs. Capital Insurance & Surety Co., Inc (1966)~ The terms "accident" and "accidental" as used in insurance contracts have not acquired any technical meaning , and are construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen by chance or fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen. An accident
is an event thatantakes placecause, place without one' s foresig foresight ht or expectat expectation an cause event and, that proceeds from unknown orone's is an unusual effect of a ion known therefore, not expected. Ratio The generally accepted rule is that, death or injury does not result from accident or accidental means within the terms of an accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except the death or injur injury. y. There is no accide accident nt when a delib deliberate erate act is perfo performed rmed unless some additional, unexpected, independent, and unforeseen happening occurs which produces or brings about the result of injury or death. In other words, where the death or injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in the doing of the act which produces the injury, the resulting death is within the protection of the policies insuring against death or injury from accident. - The personal accident insurance policy involved herein specifically enumerated only 10 circumstances wherein no liability attaches to FINMAN for any injury, disability or loss suffered by the insured as a result of any of the stimulated causes. -The principle principle of " expresso unius exclusio alterius" alterius" the mention of one thing implies
the exclusion of another thing is therefore applicable in the instant case since murder and assaul assault, t, not having been exp expres ressly sly includ included ed in the enumer enumerati ation on of the circumstances that would negate liability in said insurance policy: the failure of the
beneficiaries.
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pAgE 73 FINMAN to include death resulting from murder or assault among the prohibited risks leads inevitably to the conclusion that it did not intend to limit or exempt itself from liability for such death. - A1377 NCC: The interpretation of obscure words or stipulations in a contract shall
some risk coming to him in pursuing that errand, but that risk always existed it being inherent in the position he was holding. He cannot therefore be blamed solely for doing what he believed was in keeping with his duty as a watchman and as a citizen. And he cannot cannot be consid considere ered d as making an arrest arrest as an offic officer er of the law, as
not favor the party who caused the obscurity. - NPC vs. CA [19 [1986 86]~ It is well set settle tled d that that contra contracts cts of ins insura urance nce are to be construed constr ued liberally in favor of the insured and strictly strictly against the insur insurer. er. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its beneficiary. Disposition DENIED for lack of merit. Disposition
contended, simply because he went with the traffic policeman, for certainly he did not go there for that purpose nor was he asked to do so by the policeman. - Much less can it be pretended that Basilio died in the course of an assault or murder considering the very nature of these crimes. In the first place, there is no proof that the death of Basil Basilio io is the result of either crime for the record is barren of any circumstance showing how the fatal shot was fired. Perhaps this may be clarified in the criminal case now pending in court as regards the incident but before that is done anything that might be said on the point would be a mere conjecture. Nor can it be said that the killing was intentional for there is the possibility that the malefactor had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from liability for the damage done, the fact remains that the happening was a pure accident on the part of the victim. The victim could have been either the policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the deceased precisely because he wanted to take his life. Disposition Decision set aside
CALANOC v. CA 98 PHIL 79 BAUTISTA; December 16, 1955 FACTS - Basilio was a watchman of the Manila Auto Supply located at the corner of Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine American Life Life Insu Insura ranc nce e Compa Company ny in the the amou amount nt of P2,0 P2,000 00 to wh whic ich h was was atta attach ched ed a supplementary contract covering death by accident. On January 25, 1951, he died of a gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at the corner of Oroquieta and Zurbaran streets. Calanoc, the widow, was paid the sum of P2,000, face value of the policy, but when she demanded the payment of the additional addit ional sum of P2,000 representi representing ng the value of the supplemental supplemental policy, the company refused alleging, as main defense, that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law which contingencies were expressly excluded in the contract and have the effect of exempting the company from liability. - It is contended in behalf of the company that Basilio was killed which "making an arrest as an officer of the law" or as a result of an "assault or murder" committed in the place and therefore his death was caused by one of the risks excluded by the supplementa suppl ementary ry contra contract ct which exempts the company company from liability liability.. This contentio contention n
was upheld by the Court of Appeals. Hence, this petition. ISSUE WON the death of the victim comes within the purview of the exception clause of the supplementary policy and, hence, exempts the company from liability HELD NO - Basilio was a watchman of the Manila Auto Supply which was a block away from the house of Atty. Ojeda where something something suspicio suspicious us was happe happening ning which caused the latter to ask for help. While at first he declined the invitation of Atty. Ojeda to go with him to his residence to inquire into what was going on because he was not a regular policeman, polic eman, he later agreed to come along when prompted by the traffic policema policeman, n, and upon approa approachi ching ng the gate of the residenc residence e he was shot and died. The circumstance that he was a mere watchman and had no duty to heed the call of Atty. Ojeda should not be taken as a capricious desire on his part to expose his life to danger considering the fact that the place he was in duty-bound to guard was only a
BIAGTAN v. THE INSULAR LIFE ASSURANCE COMPANY, LTD. 44 SCRA 58 MAKALINTAL; March 29, 1972 NATURE Appeal from decision of CFI Pangasinan. FACTS - Juan Biagt Biagtan an was insured wit with h Insular for P5k and a supplem supplementary entary con contract tract “Accidental Death Benefit” clause for another P5k if "the "the death of the Insured resulted directly direc tly from bodil bodily y injury injury effect effected ed solel solely y through through external and viole violent nt means
sustained susta ined in an accide accident nt . . . and independent independently ly of all other causes." The clause, however, expressly provided that it would not apply where death resulted from an injury "intentionally inflicted by a third party." - One night, a band of robbers entered their house. Juan went out of his room and he was met with 9 knife stabs. He died. The robbers were convicted of robbery with homicide. - The family was claiming the additional P5k from Insular, Insular, under the Accidental Death Benefit clause. Insular refused on the ground that the death resulted from injuries rd intentiona inten tionally lly infli inflicted cted by 3 parti parties es and was therefor therefore e not covered. Biagtan Biagtans s filed against Insular. CFI ruled in favor of Biagtans. ISSUE WON the injuries were intentionally inflicted HELD YES - Whether the robbers had the intent to kill or merely to scare the victim or to ward off
block away. In volun volunteeri teering ng to extend extend help under the situa situation, tion, he might have thought, rightly or wrongly, that to know the truth was in the interest of his employer it being a matter that affects the security of the neighborhood. No doubt there was
any defense he might offer, it cannot be denied that the act itself of inflicting the injuries was intentional.
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pAgE 74 - The exception exception in the accidental accidental benefit benefit clause invoked invoked by the appellant appellant does not speak of the purpose — whether homicidal or not — of a third party in causing the injuries, injur ies, but only of the fact that such injuries have been "inte "intentiona ntionally" lly" inflict inflicted ed — this obviously to distinguish them from injuries which, although received at the hands
is unforeseen and unexpected by the insured. All the associated words and concepts in the policy plainly exclude the accidental death from the coverage of the policy only where the injuries are self-inflicted or attended by some proscribed act of the insured or are incur incurred red in some expressly expressly excluded calamity such as riot, war or atomic
of a third party, are purely accidental. - Examples of unintentional: >> A gun which discharges while being cleaned cleaned and kills a bystander; >> a hunter who shoots at his prey prey and hits a person instead; >> an athlete in a competitive game involving involving physical effort who collides wi with th an opponent and fatally injures him as a result. - In Calanoc vs. CA: CA: Where a shot was fired and it turned out afterwards that the watchman was hit in the abdomen, the wound causing his death, the Court held that it could not be said that the killing was intentional for there was the possibility that the malefactor had fired the shot to scare the people around for his own protection and not necessarily to kill or hit the victim. A similar possibility is clearly ruled out by the facts in this case. For while a single shot fired from a distance, and by a person who was not even seen aiming at the victim, could indeed have been fired without intent to kill or injure, nine wounds inflicted with bladed weapons at close range cannot conceivably be considered as innocent insofar as such intent is concerned. - In Hucthcraft's Ex'r vs. Travelers' Ins. Co. (US Co. (US case): where the insured was waylaid and assassinated for the purpose of robbery, the court rendered judgment for the insurance company and held that while the assassination of the insured was as to him an unforeseen event and therefore accidental, "the clause of the proviso that excludes the (insurer's) liability, in case death or injury is intentionally inflicted by any other person, applies to this case." Disposition CFI decision reversed.
explosion. - The untenability of insurer's claim that the insured's death fell within the exception is further heightened by the stipulated fact that two other insurance companies which likewise covered the insured for much larger sums under similar accidental death benefit clauses promptly paid the benefits thereof to plaintiffs beneficiaries.
SEPARATE OPINION TEEHANKEE [dissent] - Calanoc v. CA is controlling controlling in this case because the iinsurance nsurance company wasn’t able to prove that the killing was intentional intentional.. (Burden (Burden of proof is with the insurance insurance company) - Insurance, being contracts of adhesion, must be construed st strictly rictly against insurance company in cases of ambiguity. - The supplementary contract enumerated exceptions. The only exception which is not susceptible of classification is that provided in paragraph 5(e), the very exception herein involved, which would also except injuries "inflicted intentionally by a third party, either with or without provocation on the part of the insured, and whether or not the attack or the defense by the third party was caused by a violation of the law by the insured." - This ambiguous ambiguous clause conflicts conflicts with all the other four exceptions in the same paragraph paragr aph 5 particularl particularly y that immediately immediately preceding it in item (d) which excepts injuries received where the insured has violated the law or provoked the injury, while this clause, construed as the insurance company now claims, would seemingly except also all other injuries, injuries, intentionally intentionally inflicted inflicted by a thir third d party party,, regard regardless less of any violation of law or provocation by the insured, and defeat the very purpose of the policy of giving the insured double indemnity in case of accidental death by "external and violent means" — in the very language of the policy.'
SUN INSURANCE v. CA (LIM) 211 SCRA 554 CRUZ; July 17, 1992 FACTS - The petitioner issued Personal Accident Policy to Felix Lim, Jr. with a face value of P200,000.00. Two months later, he was dead with a bullet wound in his head. As
beneficiary, wife Nerissa Limthat sought on the policy but however, her claim that was rejected. Thehis petitioner agreed therepayment was no suicide. It argued, there was no accident either. Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. According to Nalagon, Lim was in a happy mood (but not drunk) and was playing with his handgun, from which he had previously removed the magazine. As she watched the television, he stood in front of her and pointed the gun at her. She pushed it aside and said it might be loaded. He assured her it was not and then pointed it to his temple. The next moment there was an explosion and Lim slumped to the floor. He was dead before he fell. - The term "accident" has been defined as follows: The words "accident" and "accidental" have never acquired any technical signification in law, and when used in an insurance contract are to be construed and considered according to the ordinary understanding and common usage and speech of people generally. In substance, the courts are practically agreed that the words "accident" and "accidental" mean that which happens by change or fortuitously, without intention or design, and which is unexpected, unusual, and unforeseen. The definition that has usually been adopted by the courts is that an accident is an event that takes place withou withoutt one's fores foresight ight or expect expectation ation — an event that proceeds from an unknown cause, or is an unusual effect of a known case, and therefore not expected. - An accident is an event which happens without any human agency or, if happening through human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also been defined as an injury which happens by reason of some violence or casualty to the insured without his design, consent, or voluntary co-operation. ISSUE WON what happened was an accident HELD YES
- It is obvious from the very classification of the exceptions and applying the rule of noscitus noscit us a socii sociis s, that that the double double-in -indem demnit nity y policy policy covers covers the insure insured d agains againstt accidental death, whether caused by fault, negligence or intent of a third party which
- The petit petition ioner, er, howev however, er, cites cites one of the four except exception ions s pro provid vided ed for in the insurance contract and contends that the private petitioner's claim is barred by such provision. It is there stated:
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pAgE 75 Exceptions —The company shall not be liable in respect of. 1. Bodily iin njury. xxx xxx xxx b. consequent upon.
unusual, and unforeseen. unusual, unforeseen. An accident is an event that takes place without one's foresight or expectation, an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected. - The generally accepted rule is that, death or injury does not result from accident or
i) Th The e insur insured ed pe pers rson ons s attem attempt ptin ing g to co comm mmit it suic suicid ide e or wilfu wilfull lly y expo exposi sing ng himself to needless peril except in an attempt to save human life. - To repeat, the parties agree that Lim did not commit suicide. Nevertheless, the petitioner petit ioner contends that the insured willfully exposed himself to needless needless peril and thus removed himself from the coverage of the insurance policy. That posture is arguable. But what is not is that, as the secretary testified, Lim had removed the magazine magazi ne from the gun and believed it was no longer dangerous dangerous.. He expressed assured her that the gun was not loaded. It is submitted that Lim did not willfully expose himself to needless peril when he pointed the gun to his temple because the fact is that he thought it was not unsafe to do so. The act was precisely intended to assure Nalagon that the gun was indeed harmless. Disposition CA Affirmed
accidental means within the terms of an accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except the death or inj injury ury.. The There re is no accide accident nt whe when n a del delibe iberat rate e act is per perfor formed med unless unless some additional addit ional,, unexp unexpected, ected, independent independent,, and unforeseen unforeseen happe happening ning occur occurs s which produces or brings about the result of injury or death. In other words, where the death or injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in the doing of the act which produces the injury, the resulting death is within the protection of policies insuring against death or injury from accident. - In the present case, while the participati participation on of the insured in the boxin boxing g contest is voluntary, the injury was sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw him to the ropes of the ring. - The fact that boxing is attended with some risks of external injuries does not make any injuries received in the course of the game not accidental. In boxing as in other equally equal ly physically physically rigor rigorous ous sports, such as basketball or baseba baseball, ll, death is not ordinarily anticipated to result. If, therefore, it ever does, the injury or death can only be accidental or produced by some unforeseen happening or event as what occurred in this case. - Furthermore, the policy involved herein specifically excluded from its coverage: (e) Death or disablement consequent upon the Insured engaging in football, hunting, pigstickin pigst icking, g, steep steeplechas lechasing, ing, polo-playi polo-playing, ng, racing racing of any kind, mounta mountaineer ineering, ing, or motorcycling. - Death or disablemen disablementt resul resulting ting from engagement in boxing contests was not declared outside of the protection of the insurance contract. Failure of the defendant insurance company to include death resulting from a boxing match or other sports among the prohibitive risks leads inevitably to the conclusion that it did not intend to limit or exempt itself from liability for such death. Disposition The decision appealed from is affirmed
DE LA CRUZ v. CAPITAL INSURANCE
17 SCRA 554 BARRERA; June 30, 1966 NATURE Appeal from the decision of the CFI of Pangasinan FACTS - Eduardo de la Cruz, employed in the Itogon-Suyoc Mines, Inc., was the holder of an accident insurance policy underwritten by the Capital Insurance & Surety Co., Inc., for the period beginning November 13, 1956 to November 12, 1957. - On Januar January y 1, 1957, the Itogon-Suy Itogon-Suyoc oc Mines, Inc. sponsored sponsored a boxing boxing contest wherein the insured Eduardo de la Cruz participated. - In the course of his bout, Eduardo slipped and was hit by his opponent on the left part of the back of the head, causing Eduardo to fall, with his head hitting the rope of
ring. -the He was bro brough ughtt to the Baguio Baguio General General Hospital Hospital,, but he die died d as a result result of hemorrhage, intracranial, left. - Simon de la Cruz, the father and named beneficiary of the insured, filed a claim with the insurance company for payment of the indemnity, but it was denied. - He instituted the action in the CFI of Pangasinan for specific performance. - Defendant insurer set up the defense that the death of the insured, caused by his participation in a boxing contest, was not accidental and, therefore, not covered by insurance - The court rendered the decision in favor of the plaintiff, hence, the present appeal. ISSUE WON the death of the insured insured was not accident accidental al and, theref therefore, ore, not covered by insurance HELD
NO - The terms "accident" and "accidental", as used in insurance contracts, have not
FORTUNE INSURANCE v. CA (supra p.7) PHIL HOME ASSURANCE CORP v. CA ( EASTERN SHIPPING) 257 SCRA 468 KAPUNAN; June 20, 1996 NATURE - Eastern Shipping Lines, Inc. loaded on board SS Eastern Explorer in Kobe, Japan, the following shipment for carriage to Manila and Cebu, freight pre-paid and in good order and condition: condition: (a) 2 boxes internal internal combustion combustion engine parts, consigne consigned d to Willi William am Lines, Inc.; (b) 10 metric tons (334 bags) ammonium chlori chloride, de, consigne consigned d to Orca' Orca's s Company; (c) 200 bags Glue 300, consigned to Pan Oriental Match Company; and (d) garments, consigned to Ding Velayo. All consignations were made by virtue of a Bill of
-Lading. While the vessel was off Okinawa, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine room. As the crew was
acquired any technical meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen by chance or fortu fortuitous itously, ly, without intention and design, design, and which is unexpected, unexpected,
trying to extinguish the fire, the cylinder suddenly exploded, thus causing death and severe injuries to the crew and instantly setting fire to the whole vessel. - SS Eastern Explorer was then found to be a constructive total loss and its voyage
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pAgE 76 was declared abandoned. - After the fire was extinguishe extinguished, d, the cargoe cargoes s which were saved were loaded to anotherr vessel for delivery anothe delivery to their original original ports of desti destinatio nation. n. ESLI charged charged the consignees several amounts corresponding to additional freight and salvage charges.
- There was no showing, and none was alleged by the parties, that the fire was caused by a natural disaster. On the contrary, there is strong evidence indicating that the acetylene cylinder caught fire because of the fault and negligence of respondent ESLI, its captain and its crew:
- The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees. consignees . PHAC, as subrogee of the consignees, then filed a complaint before the RTC of Manila, against ESLI to recover the sum paid under protest on the ground that the same were actually damages directly brought about by the fault, negligence, illegal act and/or breach of contract of ESLI. - ESLI contended contended that it exercised the diligence required required by law in the handlin handling, g, custody and carriage of the shipment; that the fire was caused by an unforeseen event; that the additional freight charges are due and demandable pursuant to the Bill of Lading; and that salvage salvage charge charges s are prope properly rly collecti collectible ble under Act No. 2616, known as the Salvage Law. - RTC: dismissed PHAC's complaint and ruled in favor of ESLI. - The burning of the vessel was not the fault or negligence of defendant but a natural disaster or calamity. Salvage operations conducted by Fukuda Salvage Company was perfectly a legal operation and charges made on the goods recovered were legitimate charges. Section 19 of Act No. 2616, the Salvage Law is applicable. With respect to the additional freight charged by defendant from the consignees of the goods, the same are also validly demandable. - The burning of "EASTERN "EASTERN EXPLORER" while off Okinaw Okinawa a rende rendered red it physi physically cally impossible for defendant to comply with its obligation of delivering the goods to their port of destination pursuant to the contract contract of carriage. Under Article 1266 of the Civil Code, the physical impossibility of the prestation extinguished defendant's obligation. - Note: The goods subject of the present controversy were neither lost nor damaged in transit transit by the fire that razed the carrier. carrier. In fact, these were all del delivere ivered d to the consignees, even if the transshipment transshipment took longer than than necessary. What is at issue issue ther theref efor ore e is not whethe whetherr or not the carrier carrier is liable liable for the loss, loss, damage, damage, or deterioration of the goods transported by them but who, among the carrier, consignee or insurer of the goods, is liable for the additional charges or expenses incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different different carrier. In absolving absolving responde respondent nt carrier of any liability, liability, CA sustained sustained the
(1) The acetylene cylinder which was fully loaded should not have been stored near the engine room where the heat gener generated ated therefr therefrom om could cause the acetylene cylinder to explode by reason of spontaneous spontaneous combustion. ESLI should have ea easily sily foreseen that the acetylene cylinder, containing highly inflammable material, was in a real danger of exploding. (2 (2)) ESLI ESLI sh shou ould ld have have known known that that by stor storin ing g the the acet acetyl ylen ene e cy cyli lind nder er in the the accommodati accomm odation on area supposed to be reserved reserved for passengers, passengers, it unnecessari unnecessarily ly exposed its passengers to grave danger and injury. (3) The fact that the acety acetylene lene cylinder was checked, tested and examined examined and subsequently certified as having complied with the safety measures and standards by qualified experts before it was loaded in the vessel only shows to a great extent that negligence was present in the handling of the acetylene cylinder after it was loaded and while it was on board the ship. - From the foregoing premises, it indubitably follows that the cargo consignees cannot be made liable to respondent carrier for additional freight and salvage charges. Disposition Judgment appealed from is REVERSED and SET ASIDE. Respondent Disposition Eastern Easte rn Shipp Shipping ing Lines, Inc. is ORDERED to return return to petitione petitionerr Phili Philippine ppine Home Assurance Corporation the amount it paid under protest in behalf of the consignees herein.
trial trial court' court's s fin findin ding g that that the fire that that gut gutted ted the ship was a natura naturall dis disast aster er or calamity. ISSUE WON the burning of the SS Eastern Explorer rendering it a constructive total loss was a natural disaster or calamity HELD NO Ratio In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises from some act of man or by human means. It cannot be an act of God unles unless s caused caused by lig lightn htning ing or a natura naturall dis disast aster er or casual casualty ty not attributable to human agency. Reasoning 9
Section 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall
PHILIPPIN PHILIP PINE E AMERIC AMERICAN AN LIFE LIFE INSUR INSURANC ANCE E COMPAN COMPANY Y v. THE AUDITOR GENERAL 22 SCRA 135 SANCHEZ, JANUARY 18, 1968 NATURE PETITION FOR REVIEW of a ruling of the Auditor General. FACTS - Philamlife, a domestic life insurance corp., and American International Reinsurance Company (Airco), a corporation organized under the laws of the Republic of Panama, entered into a REINSURANCE TREATY wherein Philamlife agrees to reinsure with Airco on January 1950. Philamlife agreed to pay premiums for all reinsurances on an annual premium basis. - In July 16, 1959, the Margin Law was approved and became effective, which exempts certain “obligations from payment of margin fees, particularly contractual obligations calling for payment of foreign exchange issued, approved and outstanding as of the date this Act takes place”.
have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage. Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to like reward.
- Central Bank of the Philippines collected P268,747.48 as foreign exchange margin on Philamlife Philamlife remittance remittances s to Airco purporte purportedly dly totalling totalling $610,998.63 and made subsequent to July 16, 1959. Philamlife filed a claim for refund on the ground that the
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pAgE 77 reinsu reinsuran rance ce pre premiu miums ms remitt remitted ed wer were e paid paid in pur pursua suant nt to the Januar January y 195 1950 0 reinsurance treaty, and therefore exempted. - Monetary Board exempted Philamlife from payment of margin fee. However, Auditor of CB refuse refused d to pass pass in audit audit Philam Philamlif life’s e’s claim claim for refund refund.. Philam Philamlif life e sou sought ght
-Rationale of Margin Law: to reduce the excessive demand on and prevent further decline of our international reserves; to provide the Central Bank with an additional instrument instr ument for effectively effectively coping with the problem and achiev achieving ing domestic and international stability of our currency; to reduce the excessive demand-for foreign
reconsideration but was denied, saying reinsurance treaty NOT EXEMPTED.
exchange. - implementation of Margin Law in accordance with police power 3. NO Reasoning - First, there is no concrete evidence that such imposition of the 25% margin fee is unreasonabl unrea sonable, e, Secon Second, d, if really really conti continuance nuance of the exist existing ing reinsuranc reinsurance e treat treaty y beco become mes s unbe unbear arab able le,, that that contra contract ct itself itself provi provides des tha thatt pet petiti itione oner r may potestatively write finis thereto on ninety days' written notice. Petitioner is not forced to continue its reinsurance treaty indefinitely with Airco. Disposition For the reasons given, the petition for review is hereby denied, and the ruling of the Auditor General of October 24, 1961 denying refund is hereby affirmed. Costs against petitioner. So ordered.
ISSUES 1. WON the premia remitted were in pursuance of the reinsurance treaty between Philamlife Phila mlife and Airco of January 1959, a contract antedating antedating the Margin Law, and therefore, Philamlife exempted from paying margin fee 2. WON Margin Law impairs the obligation of contract 3. WON reinsurance contracts abroad would be made impractical by the imposition of the 25% margin fee HELD 1. NO - For an exemption to come into play, there must be a reinsurance policy or, as in the reinsurance reins urance treaty provided, provided, a "rein "reinsuranc surance e cessi cession" on" which may be automa automatic tic or facultative. Ratio A reinsurance policy is thus a contract of indemnity one insurer makes with anothe anotherr to protect protect the fir first st insurer insurer from a ris risk k it has alread already y assumed assumed.. . . . In contra contradis distin tincti ction, on, a reinsurance treaty is merely an agreement between two insurance companies whereby one agrees to cede and the other to accept reinsurance business pursuant to provisions specified in the treaty. The practice of issuing policies by insurance companies includes, among other things, the issuance of reinsurance policies on standard risks and also on substandard risks under special arrangements. The lumping of the different agreements under a contract has resulted in the term known to the insurance world as 'treaties.' Such a treaty is, in fact, an agreement between insurance companies to cover the different situations described. Reinsurance treaties treat ies and reinsuranc reinsurance e policies policies are not synonymous. synonymous. Treaties are contracts for insurance; reinsurance policies or cessions are contracts of insurance. Reasoning - Even if reinsurance treaty preceded the Margin Law by over nine years, nothing in
the treaty obligates Philamlife to remit to Airco a fixed, certain, and obligatory sum by way of reinsurance premiums. The reinsurance treaty per se cannot give rise to a contractual obligation for the payment of foreign exchange. Philamlife’s obligation to remit reinsurance premiums becomes fixed and definite upon the execution of the reinsurance cession. It is only after a reinsurance cession is made that payment of reinsurance premium may be exacted, as it is only after Philamlife seeks to remit that reinsurance premium that the obligation to pay the margin fee arises. 2. NO Ratio. Existing laws form part of the contract "as the measure of the obligation to perform them by the one party and the right acquired by the other. If the obligation does not inhere and subsist in the contract contract itself, propio vigore vigore,, but in the law applicable to the contract.
Reasoning - . When petitioner entered into the reinsurance treaty of January 1, 1950 with Airco, it
FIEL FIELDM DMEN EN'S 'S
INSU INSURA RANC NCE E
CO
INC IN C
v.
AS ASIA IAN N
SU SURE RETY TY
&
INSURANCE CO INC 34 SCRA 36 MAKALINTAL; July 31, 1970 FACTS - On various various dates dates betwee between n April 11 11,, 1960 and Ja Jan. n. 9, 1961 the Asi Asian an Suret Surety y & Insurance Company, Inc. and the Fieldmen's Insurance Company, Inc. entered into 7 reinsurance agreements under which the former, as the ceding company undertook to cede to the latter, as the reinsuring company, a specified portion of the amount of insurance underwritten by ASIAN upon payment to FIELDMEN'S of a proportionate share of the gross rate of the premium applicable with respect to each cession after deducting deduct ing a commis commission. sion. Said agreements were to take effect from certai certain n speci specific fic dates and were to be in force until cancelled by either party upon previous notice of at least 3 months by registered mail to the other party, the cancellation to take effect as
of Dec. 31 of the year in which the notice was given. - On Sep. 19, 1961 FIELDMEN'S, by means of registered mail, served notice to ASIAN of the former's desire to be relieved from all participation in its various agreements with the latte latterr effect effective ive Dec. 31, 1961. This communica communication, tion, although admitte admittedly dly received by ASIAN on Sep. 25, 1961, did not elicit any reply from ASIAN. - On Dec. 7, 1961 FIELDMEN'S sent another letter to ASIAN expressing regrets at alleged violations committed by the latter with respect to the various agreements between them and reiterated its position that it would consider itself "no longer at risk for any reinsurance reinsurance and/or cession" given by ASIAN which might be in force on Dec. 31, 1961. Not having received any formal reply from ASIAN, FIELDMEN'S sent a new a letter on Feb. 17, 1962 reminding ASIAN of the cancellation of all the reinsurance treaties and cessions as of Dec. 31, 1961 and requested ASIAN to submit its final accounting of all cessions made to the former for the preceding months when the reinsurance agreements were in force. - Meanwhile one of the risks reinsured with FIELDMEN'S issued in favor of the GSIS became a liability when the insured property was burned on February 16, 1962. Since the policy was issued on July 1, 1961, it was supposed to expire on July 1, 1962. 2 The
did so with the understanding understanding that the municipal municipal laws of the Philippines Philippines at the time said treaty was executed, became an unwritten condition thereof. Such municipal laws constitute part of the obligation of contract.
next day, Feb. 17, ASIAN immediately notified FIELDMEN'S of said fire loss. - FIELDMEN'S, relying on the sufficiency of its notice of termination dated September 19, 1961 and obv obviou iously sly ben bentt on avo avoidi iding ng its liabilit liability y under under the reinsu reinsuran rance ce
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pAgE 78 agreements with ASIAN, filed a petition for declaratory relief with the CFI of Manila to seek a declaration that all the reinsurance contracts entered into between them had terminated as of December 31, 1961 and to obtain an order directing ASIAN to render final accounting of the transactions between them with respect to said reinsurance treaties as of the cut-off date. - In its answer below ASIAN denied having received FIELDMEN'S letter dated Sep 19, 1961, and argued that even assuming it did, FIELDMEN'S could not have terminated the reinsura reinsurance nce treaties treaties as of Dec 31, 196 1961 1 becaus because e the letter letter was merel merely y an expression of FIELDMEN'S desire to cancel the treaties and not a formal notice of cancellati cancel lation on as contemplated contemplated in their reinsuranc reinsurance e agreements. agreements. By way of special special defense Asian contended that even if the Sep. 19 letter were considered sufficient notice of cancellation — thereby rendering the reinsurance agreements terminated as of December 31, 1961 — the liability liability of FIELDMEN'S with respect to policies policies or cessio cessions ns issued issued under two of the said agreement agreements s pri prior or to their their cancel cancellat lation ion continued to have full force and effect until the stated expiry dates of such policies or cessions. - On Dec. 4, 1962, the trial court declared 6 of the 7 reinsurance agreements in question cancelled as of Dec 31, 1961. At the same time, it upheld ASIAN'S position that all cessions of reinsurance made by it to FIELDMEN'S prior to the cancellation of the reinsurance reinsurance treaties continued continued in full force and effect until expiry dates and ordered ordere d FIELDMEN'S to make an accounting accounting of its business transaction transactions s with ASIAN within 30 days. - On appeal to the CA, the decision of the trial court was substantially affirmed, with the slight modification that the order for accounting was eliminated, without prejudice to the filing of a proper action between the parties for that purpose. ISSUE WON the cancellation as of Dec. 31, 1961 of the reinsurance treaties had the effect of terminating also the liability of FIELDMEN'S as reinsurer with respect to policies or cessions cessi ons issued prior to the termin termination ation of the principal reinsurance reinsurance contrac contracts ts or treaties HELD
NO to the 2 reinsurance contracts - Of the 6 reinsurance contracts, 2 contain provisions, which clearly and expressly recognize recogn ize the continuing continuing effectivity effectivity of policies policies ceded under them for reinsurance reinsurance notwithstan notwi thstanding ding the cancellatio cancellation n of the contracts contracts themselves. themselves. The said treaties provide "that in the event of termination of this Agreement . . ., the liability of the Fieldmen's under current cessions shall continue in full force and effect until their natural expiry . . .;" and the 4th paragraph of Article VI of the Personal Accident Reinsurance Treaty states: "4. On the termination of this Agreement from any cause whatever, the liabil liability ity of the REINSURER (Fieldmen's) under any current cession including any amounts due to be ceded under the terms of this Agreement and which are not cancelled in the ordinary course of business shall continue in full force until their expiry unless the COMPANY (Asian) shall, prior to the thirty-first December next following such notice, elect to withdraw the existing cessions . . ." - Thus, insofar as the two reinsurance agreements are concerned, there is clearly no merit merit in FIE FIELDME LDMEN'S N'S claim claim that that their their cancel cancellat lation ion carrie carried d with with it ips ipso o facto facto the termination of all reinsurance cessions thereunder. Such cessions continued to be in
made, FIELDMEN'S cannot avoid liability which arose by reason of the burning of the insured property. - Wit With h respec respectt to the other other 4 agr agreem eement ents, s, it would seem that that the peti petitio tion n for declaratory relief is moot, and that no useful purpose would be served by defining the respective rights and obligations of the parties thereunder. The said agreements have been cancelled, and it does not appear that any claim by or liability in favor of the insured has actually arisen under any of the reinsurance cessions made prior to such cancellation. Future conflicts of the same nature as those which have motivated the pre presen sentt action action can of course course be obv obviat iated ed by using using more more pre precis cise e and defini definite te ter termin minolo ology gy in the reinsu reinsuran rance ce agr agreem eement ents s which which the partie parties s may enter enter int into o henceforth.
EQUITABLE INSURANCE v. RURAL INSURANCE 4 SCRA 343 BARRERA; January 31, 1962 FACTS - Plaintiff Equitable Insurance file a complaint with the CFI of Manila against defendant Rural Insurance alleging, as first cause of action, that they entered into a reciprocal facultativ facul tative e reins reinsurance urance agreemen agreement, t, where wherein in they agreed to cede to each other. Pursuant Pursu ant to said agreemen agreement, t, plain plaintiff tiff reinsur reinsured ed for P2k with defend defendant ant the stock covered by fire insurance Policy No. 5880 issued by plaintiff which was later burned; the share of the loss of defendant as per insurance agreement was computed at P2,024 for which plaintiff sent to defendant a statement of account for payment by the latter. Despite repeated demands by plaintiff, defendant refu refused sed to pay. - On the second cause of actio action, n, plaintiff reins reinsured ured for P2k with defenda defendant nt stock covered by fire insurance Policy No. 6062 which also burned. Again, defendant refused to pay its share of the loss of P1,334 hence said complaint. - Defendant filed a motion to dismiss on the ground that it states no cause of action, as pursuant to Art VIII of the Reinsurance Reinsurance Agreement betwee between n the parti parties, es, before a court action can be brought, the parties agreed to submit all disputes to a board of arbitrators. The Court denied the motion and required defendant to answer.
-liquidating Defendant filed its answer, alleging that the naturethe of reinsured the agreement is versa; “selfbetween the parties”, the reinsurer becoming and vice and that said agreement has not yet been abrogated so the liability of either to the other is not yet known. Defendant praye prayed d that the complai complaint nt be dismi dismissed ssed and plaintiff filed a motion for judgment on the pleadings which the court denied. - Instead of going into a formal hearing, the parties submitted their case for decision stipulating the ff facts: defendant admits the allegations of the complaint and that plaintiff admits that the issues of the complaint were not submitted to a Board of Arbitrators as provided in par VIII of the complaint, but instead referred it to the Insurance Commissioner. The CFI rendered judgment in favor of plaintiff. Hence this appeal. ISSUES 1. WON Equitable had no cause of actio action n as the matter was not referred to the decision of arbitrators
2. WON in a facultative obligation the right to choose an alternative remedy lies only with the debtor (here the defendant) under Art 1206
force force unt until il their their respec respectiv tive e dates dates of exp expira iratio tion. n. Sin Since ce it was under one of sai said d agreements that the reinsurance cession corresponding to the GSIS policy had been
HELD 1. NO
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pAgE 79 - The requirement of submission for decision to 2 arbitrators or an umpire the matter of losses by fire or the liability of the parties thereto under Art VIII of the agreement arises only if the same is disputed by one of the parties. In the instant case, there is no dispute between the parties; in the stipulation of facts defendant admitted that plaintiff had paid its liability and defendant likewise admitted that it ignored plaintiff’s demands for reimbursement for defendant’s failure to pay its share as reinsurer. As held in Maligad v United Assurance Co., if in the course of the settlement of a loss, the action of the company or its agents amounts to refusal to pay, the company will be deemed to have waived the condition condition precedent with referenc reference e to arbitration arbitration and a suit upon the policy will lie. 2. NO - There is no connection between Art 1206 NCC and the agreement of this action. The term “facultative” is used in reinsurance contracts, and it is so used in this particular case, case, merely merely to define define the rig right ht of the reinsu reinsurer rer to accept accept or not to accept accept participation in the risk insured. But once the share is accepted, as it was in the case at bar, bar, the oblig obligati ation on is absolu absolute te and the lia liabil bility ity assume assumed d thereu thereunde nderr can be discharged by only one way—the payment of the share of the losses. Disposition judgment appealed from the TC is affirmed
ARTEX DEVELOPMENT CO INC v. WELLINGTON INSURANCE CO INC 51 SCRA 352 TEEHANKEE; June 27, 1973 FACTS - Wellington Insurance Co. Inc. insured insured for P24,346,509.00 the buildings, stocks and machinery machin ery of plaintiff plaintiff Artex Developme Development nt Co. Inc. against loss or damage by fire or lighting light ing upon payment payment of the plaintiff plaintiff of the correspo corresponding nding premiums; premiums; that said properties were insured for an additional sum of P883,034.00; that defendant insured plaintiff plain tiff against against business business interrupti interruption on (use and occupancy) occupancy) for P5,200,000.00; P5,200,000.00; Wellington entered into a contract of reinsurance with Alexander and Alexander, Inc. of New York. USA. - The buildi buildings, ngs, stocks and machineries machineries of plaintif plaintiffs fs spinnin spinning g department were burned. - Notice of the loss and and damage was given the defendant; defendant; that that as per report of the adjusters, the total property loss of the plaintiff was the sum of P10,106,554.40 and the total business interruption loss was P3,000,000.00; - That defendant has paid to the plaintiff the sum of P6,481,870.07 of the property loss suffered by plaintiff and P1,864,134.08 on its business interruption loss, leaving a balance of P3,624,683.43 and P1,748,460.00, respectively. - The counsel counsel for Artex filed a Manifestation Manifestation saying saying that in view of the Deeds of Discharge and Collateral Agreement, the only remaining liability subject of litigation shall be the proportion of the loss reinsured with or through Alexander and Alexander, Inc. of New York, USA, namely, P397,813.00. - The document recited further that Artex Artex acknowledges receipt of the sum of P3.6M paid by the insurer in full and final settlement of all or any claims of Artex against its
insurer. It discharges its thereof. insurer from all actions, proceedings, claims, demands, costs and expenses in respect
WON the insured (Artex) has a cause of action against the reinsurer HELD NO - Unless there is a specific grant in, or assignment of, the reinsurance contract in favor of the insured or a manifest intention of the contracting parties to the reinsurance contract to grant such benefit or favor to the insured, the insured, not being privy to the reinsurance contract, has no cause of action against the reinsurer. It is expressly provided in Section 91 the Insurance Act 1 that "(T)he original insured has no interest in a contract of insurance."
PERLA COMPANIA DE SEGUROS v. CA(LIM) 208 SCRA 487 NOCON; May 7, 1992 NATURE Petition Petit ion for certi certiorari orari by Perla Compania de Segur Seguros os and FOC Credit Corporation Corporation seeking to annul and set aside CA decision revering the RTC decision for replevin and damages. FACTS - Private respondents spouses Herminio and Evelyn Lim executed a promissory note in favor of Supercars, Inc. in the sum of P77,940.00, payable in monthly installments according to the schedule of payment indicated in in said note, and secured by a chattel mortgage over a brand new red Ford Laser, which is registered under the name of private respondent Herminio Lim and insured with the petitioner Perla C Compania ompania de Seguros, Inc. (Perla for brevity) for comprehensive coverage. - On the same date, Superc Supercars, ars, Inc., with notic notice e to private private respondents respondents spouses, assigned to petitioner FCP Credit Corporation (FCP for brevity) its rights, title and interest inter est on said promis promissory sory note and chattel mortgage as shown by the Deed of Assignment. - At around 2:30pm Nov9, 1982, said vehicle was carnapped while parked at the back
of Broadway Lim, arnapping who was beforeeit Const was carnapped, immediately immedi ately Centrum. called up Evelyn the Anti-C Anti-Carnap pingdriving Unit ofsaid thecar Philippin Philippine Constabula abulary ry to report said incident and thereafter, went to the nearest police substation to make a police report regarding said incident. - On Nov10, 1982, Evelyn Lim reported said incident to the LTO in compliance with the ins insura urance nce requir requireme ement. nt. She also also filed filed a compla complaint int with with the Headqua Headquarte rters. rs. Constabulary Highway Patrol Group. - On Nov11, 1982, private respondent filed a claim for loss with the petitioner Perla but said claim was denied on Nov18, 1982 on the ground that Evelyn Lim, who was using the vehicle before it was carnapped, was in possession of an expired driver's license at the time of the loss of said vehicle which is in violation of the authorized driver clause of the insurance policy, which states, to wit: "AUTHORIZED DRIVER: Any of the following: (a) The Insured (b) Any person driving on the Insured's order, or with his permission. Provided that the person driving is permitted, in accordance with the licensing or other laws or regulations, to drive the Scheduled Vehicle, or has been permitted and is not disqualified by order of a Court of Law or by reason of
- With regard the balance unpaid, Wellington contends that Artex should have been directed against the reinsurers to cover the liability and not against Wellington. ISSUE
any enactment or regulation in that behalf." - On Nov17, 1982, private respondents requested from petitioner FCP for a suspension of payment on the monthly amortization agreed upon due to the loss of the vehicle
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pAgE 80 and, since the carnapped vehicle was insured with petitioner Perla, said insurance company should be made to pay the remaining balance of the promissory note and the chattel mortgage contract. - Perla, Perla, however, however, denied denied private private respo respondents ndents'' claim. claim. Conse Consequent quently, ly, petit petitioner ioner FCP demanded that private respondents pay the whole balance of the promissory note or to return the vehicle but the latter refused. - On July25, 1983, petitioner FCP filed a complaint against private respondents, who in turn filed an amended third party complaint against petitioner Perla on Dec8, 1983. After trial on the merits, TC ordered sps Lim to pay jointly and severally, plaintiff the sum of P55,055.93 plus interest thereon at the rate of 24% per annum from July 2, 1983 until fully paid; as well as the cost of suit. It also ordered the dismissal of the Third party complaint against Third-Party Defendant. - Upon appeal, CA reversed said decision - After petitioners' separate MFRs were denied by CA, petitioners filed these separate petitions for review on certiorari. ISSUE 1. WON there was grave abus abuse e of discretion discretion on the part of the appel appellate late court in holding that private respondents did not violate the insurance contract because the
access accessory ory contra contract ct to the pro promis missor sory y note. note. Being Being the pri princi ncipal pal contra contract, ct, the promissory note is unaffected by whatever befalls the subject matter of the accessory contract. - The unpa unpaid id balance balance on the promi promisso ssory ry note note should should be pai paid, d, and not jus justt the installments due and payable before the automobile was carnapped, as erronously held by the CA - However, this does not mean that private respondents are bound to pay the interest, litigation expenses and attorney's fees stipulated in the promissory note. Because of the peculiar relationship between the three contracts in this case, i. e., the promissory note, the chattel mortgage contract and the insurance policy, the Court is compelled to construe all three contract contracts s as intimatel intimately y inter interrelat related ed to each other other,, despit despite e the fact that at first glance there is no relations relationship hip whatsoeve whatsoeverr between the parties thereto. - Under the promis promissory sory note, Lim spous spouses es are oblig obliged ed to pay Supercar Supercars, s, Inc. the amount stated therein in accordance with the schedule provided for. To secure said promissory promi ssory note, privat private e respo respondents ndents constituted constituted a chatte chattell mortg mortgage age in favor of Supercars, Inc. over the automobile the former purchased from the latter. The chattel mortgage, in turn, required private respondents to insure the automobile and to make
authorized driver not applicable to the of said Contract 2. WON the loss clause of the is collateral exempted the"Theft" debtorclause from his admitted admitt ed obligations under the promi promissory ssory note particularl particularly y the payment payment of interest, interest, litigation litigation expens expenses es and attorney's fees HELD 1. NO - The com compre prehens hensive ive ins insura urance nce policy policy issued issued by petiti petitione onerr Per Perla la und undert ertook ook to ind indemn emnify ify the pri privat vate e respon responden dents ts agains againstt los loss s or damage damages s to the car (a) by accidental accide ntal collision or overturnin overturning, g, or collision collision or overt overturning urning consequen consequentt upon mechanical mechani cal breakdown or consequent consequent upon wear and tear; (b) by fire, externa externall explosion, explo sion, self-ignition self-ignition or lightning lightning or burglary, burglary, housebreaking housebreaking or theft; and (c) by malicious act. - Where a car is unlawfully and wrongfully wrongfully taken without the owner's owner's consent or knowledge, such taking constitutes theft, and, therefore, it is the "THEFT" clause, and
the proceeds payable to Supercars, Superc ars, The promissor promissory y the noteknowledge and chattel chattof el mortgage werethereof assigned by Supercars, Inc. toInc. petitioner FCP, with private priva te respo respondent ndents. s. Priva Private te respo respondents ndents were able to secure secure an insur insurance ance policy from petitioner Perla, and the same was made specifically payable to petitioner FCP. - From the abovementioned provision that upon the loss of the insured vehicle, the insurance insur ance company Perla undertakes undertakes to pay directly directly to the mortgagor or to their assignee, FCP, the outstanding balance of the mortgage at the time of said loss under the mortgage contract. If the claim on the insurance policy had been approved by petitioner Perla, it would have paid the proceeds thereof directly to petitioner FCP, and this would have had the effect of extinguishing private respondents' obligation to petitioner FCP. Therefore, private respondents were justified in asking petitioner FCP to demand the unpaid installments from petitioner Perla. - Beca Because use pet petiti itione onerr Perla Perla had unreas unreasona onably bly deni denied ed their their val valid id claim, claim, privat private e respon responden dents ts should should not be made made to pay the int intere erest, st, liq liquid uidate ated d damage damages s and attorney's fees as stipulated in the promissory note. As mentioned above, the contract
not the "AUTHORIZED DRIVER" clause, that should apply.The risk against accident is distinct from the risk against theft. The 'authorized driver clause' in a typical insurance policy as in contemplation or anticipation of accident in the legal sense in which it should be understood, and not in contemplation or anticipation of an event such as theft. The distinction often seized upon by insurance companies in resisting claims from their assureds between between death occurring occurring as a resul resultt of accid accident ent and death occurring as a result of intent may apply to the case at bar. - If the insured vehicle had figured in an accident at the time she drove it with an expired license, then, appellee Perla Compania could properly resist appellants' claim for indemnificatio indemnification n for the loss or destr destructio uction n of the vehicle vehicle resulting from the accident. But in the present case, the loss of the insured vehicle did not result from an accident where intent was involved; the loss in the present case was caused by theft, the commission of which was attended by intent." - There is no causal connection between the possession of a valid driver's license and the loss of a vehicle. To rule otherwise would render car insurance practically a sham since an insurance company can easily escape liability by citing restrictions which are
of indemnity was procured to insure the return of the money loaned from petitioner FCP, and the unjustified refusal of petitioner Perla to recognize the valid claim of the private respondents should not in any way prejudice the latter. - Private respondents can not be said to have unduly enriched themselves at the expense of FCP since they will be required to pay the latter the unpaid balance of its obligation under the promissory note. - In view of the foregoing discussion, We hold that the Court of Appeals did not err in requiring petitioner Perla to indemnify private respondents for the loss of their insured vehicle. vehic le. However, the latter latter shoul should d be ordered to pay petition petitioner er FCP the amount of P55,055.93, representing the unpaid installments from December 30, 1982 up to July 1, 1983, as shown in the statement of account prepared by peti petitioner tioner FCP, 18 plus legal interest from July 2, 1983 until fully paid. - As to the award of moral damages, exemplary damages and attorney's fees, private respondents are legally entitled to the same since Perla had acted in bad faith by unreasonabl unrea sonably y refus refusing ing to honor the insura insurance nce claim of the private responden respondents. ts. Besides, awards for moral and exemplary damages, as well as attorney's fees are left
not applicable or germane to the claim, thereby reducing indemnity to a shadow. 2. The court agrees with FCP that Lim spouses are not relieved of their o obligation bligation to pay the former the installments due on the promissory note on account of the loss of the automobile. automobile. The chattel mortgage constit constituted uted over the automobil automobile e is merely an
to the sound discretion of the Court. Such discretion, if well exercised, will not be disturbed on appeal. Disposition the assailed decision of the CA is hereby MODIFIED to require private respondents to pay petitioner FCP the amount of P55,055.93, with legal interest from
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pAgE 81 July 2, 1983 until fully paid. The decision appealed from is hereby affirmed as to all other respects. No pronouncement as to costs.
SHAFER v. JUDGE 167 SCRA 386 PADILLA; November 14, 1988 NATURE Petition for review on certiorari FACTS - Sherman Shafer obtained obtained a private private car polic policy y over his Ford Laser from Makati Insurance Company, Inc., for third party liability. During the effectivity of the policy, an information for reckless imprudence resulting in damage to property and serious physical injuries was filed against shafer. shafer. The information said that on or about the 17th day of May 1985, in the City of Olongapo. Shafer hit and bumped a Volkswagen car owned and driven by Felino llano y Legaspi, thereby causing damage in the total amount of P12,345.00 and as a result thereof one Jovencio Poblete, Sr. who was on board of the said Volkswagen Volkswagen car susta sustained ined physical injuri injuries es which injurie injuries s causi causing ng deformity deform ity on the face. The owner of the damaged Volkswage Volkswagen n car filed a separate civil action against petitioner for damages, while Jovencio Poblete, Sr., who was a passenger in the Volkswagen car, did not reserve his right to file a separate civil action for damages. Instead, in the course of the trial in the criminal case, Poblete, Sr. testified on his claim for damages for the serious physical injuries which he claimed to have sustained as a result of the accident. - The court issued an order dismissing the third party complaint on the ground that it was premature, based on the premise that unless the accused (herein petitioner) is found guilty and sentenced to pay the offended offended party (Poble (Poblete te Sr.) indem indemnity nity or damages, the third party complaint is without cause of action. The court further stated that the better procedure is for the accused (petitioner) to wait for the outcome of the criminal aspect of the case to determine whether or not the accused, also the third party party pla plaint intiff iff,, has a cause cause of action action again against st the third third party party defend defendant ant for the
enforcement of its ideration third ion party (TPL) but under themotion insurance Petitioner moved for reconsiderat recons ofliability said order, the wascontract. denied; denied; 6 hence, this petition. ISSUE WON the court a quo erred in dismis dismissing sing petiti petitioner's oner's third party complai complaint nt on the ground that petitioner had no cause of action yet against the insurance com pany HELD YES - There is no need on the part of the insured to wait for the decision of the trial court finding him guilty of reckless imprudence. The occurrence of the injury to the third party immediately gave rise to the liability of the insurer under its policy. Respondent insurance company's contention that the third party complaint involves extraneous matter which will only clutter, complicate and delay the criminal case is without merit. The civil aspect of the offense charged, i.e i.e., ., serious physical injuries allegedly suffered by Jovencio Poblete, Sr., was impliedly instituted with the criminal case. Petitioner
said third party, arose from the offense charged in the criminal case, from which the injured (Jovencio Poblete, Sr.) has sought to recover civil damages. Hence, such claim of petitioner against the insurance company cannot be regarded as not related to the criminal action. - A third party complaint is a device allowed by the rules of procedure by which the defendant can bring into the original suit a party against whom he will have a claim for indemnity or remuneration as a result of a liability established against him in the original suit. 13 Third party complaints are allowed to mini minimize mize the number of lawsuits and avoid the necessity of bringing two (2) or more actions involving the same subject matter matter.. The They y are predic predicate ated d on the need for expedi expedienc ency y and the avoidance avoidance of unnecessary lawsuits. If it appears probable that a second action will result if the plaintiff plain tiff prevail prevails, s, and that this result can be avoid avoided ed by allowing allowing the third party complaint to remain, then the motion to dismiss the third party complaint should be denied. - Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is primarily intended to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of a negligent operation and use of motor vehicles. The victims victims and/or their dependents dependents are assured of immediate financial financial regardless of the financial capacity motor vehicle owners. -assistance, The liability of the insurance company under of the Compulsory Motor Vehicle Liability Insurance Insura nce is for loss or damage. Where an insurance policy insure insures s directly against liability, the insurer's liability accrues immediately upon the occurrence of the injury or event upon which the liability liability depends, and does not depend on the recovery of judgment by the injured party against the insured. - The injured for whom the contract of insurance is intended can sue directly the insurer. insur er. The gener general al purpose of statutes statutes enabling an injured injured person to procee proceed d directly against the insurer is to protect injured persons against the insolvency of the insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy, and statutes are to b e liberally construed so that their intended intended purpose may be accomplishe accomplished. d. It has even been held that such a provision creates a contractual relation which inures to the benefit of any and every person who may be negligently injured by the named insured as if such injured person were specifically named in the policy. - In the event that the injured fails or refuses to include the insurer as party defendant in his claim for indemnity indemnity against the insur insured, ed, the latter latter is not prevente prevented d by law to avail of the procedural rules intended to avoid multiplicity of suits. Not even a "no action" clause under the policy-which requires that a final judgment be first obtained against again st the insur insured ed and that only thereafter can the perso person n insur insured ed recover on the policy can prevail over the Rules of Court provisions aimed at avoiding multiplicity of suits. questioned uestioned order dated 24 April 1987 Disposition instant petition is GRANTED. The q is SET ASIDE and a new one enter entered ed admitting petiti petitioner's oner's third party complai complaint nt against the private respondent Makati Insurance Company, Inc.
VDA DE MAGLANA v. CONSOLACION 212 SCRA 268 ROMERO; August 6, 1992 NATURE
may thus raise all defenses available to him insofar as the criminal and civil aspects of the case are concer concerned. ned. The claim of petitioner petitioner for payment of indemnity to the injured third party, under the insurance policy, for the alleged bodily injuries caused to
Petition for certiorari FACTS
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pAgE 82 - Lope Maglana was an employee of the Bureau of Customs whose work station was at Lasa, here in Davao City. One day, when he was on his way to his work, he met an accident that resulted in his death. He died on the spot. - The PUJ jeep that bumped the deceased was driven by Pepito Into, operated and own owned ed by defend defendant ant Destraj Destrajo. o. Fro From m the inv invest estiga igatio tion n conduct conducted ed by the traffi traffic c investigat inves tigator, or, the PUJ jeep was overtaking overtaking another passeng passenger er jeep that was going towards towar ds the city poblacion. poblacion. While overtaking, overtaking, the PUJ jeep of defendant defendant Destrajo running runni ng abreast with the overtaken overtaken jeep, bumped the motor motorcycle cycle driven by the deceased. The point of impact was on the lane of the motorcycle and the deceased was thrown from the road and met his untimely death. - Heirs of Lope Maglana, Maglana, Sr. filed an action for damages damages and attor attorney's ney's fees against operator operat or Patricio Patricio Destrajo and the Afisco Insurance Insurance Corpora Corporation tion (AFISC (AFISCO). O). An information for homicide thru reckless imprudence was also filed against Pepito Into. - During the pendency of the civil case, Into was sentenced to suffer an indeterminate penalty, with all the accessory penalties provided by law, and to indemnify the heirs of Lope Maglana, Maglana, Sr. in the amount of twe twelve lve thousa thousand nd pesos pesos with with subsid subsidiar iary y imprisonment in case of insolvency, plus five thousand pesos in the concept of moral and exemplary damages with costs. No appeal was interposed by accused who later
insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy . . ." Since petitioners had received from AFISCO the sum of P5,000.00 under the no-fault clause, AFISCO's liability is now limited to P15,000.00. - However, we cannot agree that AFISCO is likewise solidarily liable with Destrajo. In Malayan Insurance Co., Inc. v. Court of Appeals , this Court had the opportunity to resolve the issue as to the nature of the liability of the insurer and the insured vis-avis vis the the third party injured in an accident. We categorically ruled thus: thus: While it is true that where the insurance contrac contractt provi provides des for indemnity indemnity against liabili liability ty to third persons, such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault . The liability of the insurer is based on contract; that of the insured is based on tort . In the case at bar, petiti petitioner oner as insure insurerr of Sio Choy, is liable to respon respondent dent Vallejos (the injured third party), but it cannot, as incorrectly held by the trial court, be made "solidarily" liable with the two principal tortfeasors, namely respondents Sio Choy and San Leon Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said, two (2) respondents by reason of the indemnity contract against third party
applied for probation. - The lower court rendered a decision finding that Destrajo had not exercised sufficient diligence as the operator of the jeepney ordering him to pay plaintiffs the sum for loss of inc income ome;; fun funera erall and bur burial ial expenses expenses of the deceas deceased; ed; mor moral al dam damage ages, s, and attorney's attor ney's fees and costs of suit. The defendant defendant insurance insurance company is ordered ordered to reimburse defendant Destrajo whatever amounts the latter shall have paid only up to the extent of its insurance coverage. - Petitioners filed a motion for the reconsideration of the second paragraph of the decision contending that AFISCO should not merely be held secondarily liable because the Insurance Code provides that the insurer's liability is "direct and primary and/or jointly and severally with the operator of the vehicle, although only up to the extent of the insurance coverage." Hence, they argued that the P20,000.00 coverage of the insurance policy issued by AFISCO, should have been awarded in their favor. - AFISCO argued argued that since the Insurance Insurance Code does not expressly prov provide ide for a solidary obligation, the presumption is that the obligation is joint.
liability an insurer can be directlyobligation sued by aand third party this will result violationunder of thewhich principles underlying solidary insurance contracts contracts. . in a - While in solidary obligations, the creditor may enforce the entire obligation against one of the solidary debtors, in an insurance contract, the insurer undertakes for a consideration to indemnify the insured against loss, damage or liability arising from an unknown or contingent event. - Similarly, petitioners herein cannot validly claim that AFISCO, whose liability under the insurance policy is also P20,000.00, can be held solidarily liable with Destrajo for the total amount of P53,901.70 in accordance with the decision of the lower court. Since under both the law and the insurance policy, AFISCO's liability is only up to P20,000.00, P20,00 0.00, the second paragr paragraph aph of the dispositive dispositive portion of the decision in question quest ion may have unwittin unwittingly gly sown confusion confusion among the petit petitioner ioners s and their counsel. What should have been clearly stressed as to leave no room for doubt was the liability of AFISCO under the explicit terms of the insurance contract. presen sentt petiti petition on is hereby hereby GRANTE GRANTED. D. The award of P28,800 P28,800.00 .00 Disposition pre
- The lower court denied the motion for reconsideration ruling that since the insurance contract "is in the nature of suretyship, then the liability of the insurer is secondary only up to the extent of the insurance coverage." - Petitioners filed a second motion for reconsideration reiterating that the liability of the insurer is direct, primary and solidary with the jeepney operator because the petitioners became direct beneficiaries under the provision of the policy which, in effect, is a stipulation pour stipulation pour autrui. autrui. This This motion was likewise denied for lack of merit.
representing loss of income is INCREASED to P192,000.00 and the death indemnity of P12,000.00 to P50,000.00.
ISSUE WON AFISCO can be held directly liable
FAR EASTERN SURETY v. MISA 25 SCRA 663 REYES; October 26, 1968
HELD YES - As this Court ruled in Shafer vs. Judge, RTC of Olongapo City, Br. 75 , "[w]here an insurance insur ance policy policy insures insures direc directly tly again against st liabi liability lity,, the insur insurer's er's liability accrues immediately immedi ately upon the occurrence occurrence of the injury or even upon which the liability liability
NATURE Appeal by petition for review from a CA judgment
depends, and does not depend on the recovery of judgment by the injured party against the insured." - The underlying reason behind the third party liability (TPL) of the Compulsory Motor Vehicle Liability Insurance is "to protect injured persons against the insolvency of the
FACTS - Socorro Dancel Vda.de Misa and Araceli Pinto Pinto hired a taxi cab operate operated d by La Mallorca on September 3, 1957. The taxi they were riding in collided with a gravel and sand truck resulting to injuries to both Misa and Pinto.
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pAgE 83 - The two passengers instituted a suit for damages against La Mallorca who, while denying responsibility, instituted a third party complaint against Far Eastern Surety to recoup from the latter any award for damages damages that might be recovered by the passengers. - It would appear from the case that a sticker was placed in all the taxis of La Mallorca stating that passengers of the taxis were insured against accidents. This was done to entice the public into patronizing La Mallorca. - The trial court awarded to Misa and Pinto actual, moral and exemplary damages, and attorney’s fees payable by La Mallorca and sentenced Far Eastern to pay La Mallorca P10,000. on its third party liability insurance. - On appeal, the CA, while holding that the collision was due to the the fault of the driver of the gravel and sand truck, found the taxi company liable for damages to the passengers on the strength of its representation contained in the sticker above noted that the passengers were insured against accidents. In so ruling, the CA overruled the defense of the insurance company to the effect that it was responsible only if the insured, La Mallorca, was involved in accidents caused by, or arising out of, the use of the motor vehicle. A motion for reconsideration was filed in and dismissed by the CA. ISSUE WON Far Eastern Surety is liable to the insured on its insurance policy HELD NO - The award for damages made to the passengers was exclusively predicated on the repres represent entati ation on made made by La Mal Mallor lorca ca that that its passen passenger gers s wer were e ins insure ured d agains againstt accidents and not because it was at fault in causing the accident. Reasoning - In this case, the findings of the CA and the trial court that the causative factor of the mishap was the negligence of the gravel and truck driver would have been sufficient to relieve the taxi company of any liability arising from the accident. However, in view of the sticker in all of its taxicabs, La Mallorca has insured its passengers against accidents, whether it was at fault or not. In other words, La Mallorca accepted the responsibility for damages or injuries to passengers even if it had no fault at all.
- In the case of the insurance company, the SC ruled that it neither authorized nor consented conse nted to the representation representations s made by the taxi company to its passengers. passengers. As such, the liability of the said said insurance company based on its insurance insurance contract is limited limit ed to the recovery by the insur insured ed of all sums, cost and expens expenses es which the insured shall become legally liable. The insurance company therefore cannot be held liable for the award. - The taxi company is adjudged to to be the sole party responsible for the award. Disposition The decision of the CA is modified by eliminating the award against Far Disposition Eastern.
PEZA v. ALIKPALA 160 SCRA 31 NARVASA; April 15, 1988 NATURE
FACTS - vehicular accident with 2 children running across the path of a Chevrolet "Carry-All", belonging to a partnership known as Diman & Company driven by its driver, Perfecto Amar, as it was passing a national highway at barrio Makiling Calamba, Laguna. They were killed. It was insured insured with the Empir Empire e Insurance Co., Inc. under a so-called 'comprehensi 'compr ehensive ve coverage" policy, loss by theft excluded. excluded. The policy was in force at the time of the accident. - Placida Peza, the managing partner of Diman & Co. filed a claim with Empire, for payment of compensation to the family of the 2 children who died as a result of the accident. Empire refused to pay on the ground that the driver had no authority to operate the vehicle, a fact which it expressly excepted from liability under the policy. What Peza did was to negotiate directly with the deceased children father for an outof-court settlement. The father agreed to accept P6,200.00 in fun settlement of the liability of the vehicles owner and driver, and Peza paid him this sum. - Peza thereafter sued Empire to recover this sum of P6,200.00 as actual damages, as well as P20,000 P20,000.00 .00 as moral damages damages,, P10,000 P10,000.00 .00 as exempl exemplary ary damages, and P10,000.00 P10,00 0.00 as attor attorney's ney's fees. She amende amended d her complaint shortl shortly y there thereafter after to include Diman & Co. as alternative party plaintiff. basic - Empire's toofthe suit was anchored onthe the"authorized explicit requirement in the policy limiting thedefense operation the insured vehicle to driver" therein defined, namely, (a) the insured, or (b) any person driving on the insured order or with his permission, provided that... that the person driving is permited in accordance with the licensing or other laws or regulations regulations to drive the Motor vehicle or has been so permitted and is not dis disqua qualif lified ied by order order of the Cour Courtt of Law of by reason reason of any enact enactment ment or regulation in that behalf from driving such Motor Vehicle.- driver Perfecto Amar, only having a temporary operator's permit (TVR) [ already expired] his expired] his driver’s license having earlier been confiscated by an agent of the Land Transportation Commission for an alleged violation of Land Transportation and Traffic Rules, was not permitted by law and was in truth disqualified to operate any motor vehicle; Peza attempted to neutralize that fact by(1) the issuance of the TVR by the LTC officer officer to Amar Amar;; in proof of the proposit proposition ion that there there was no reason reason for confiscati confi scation on of Amar's license license (2) Amar's license had not expired, but had been
renewed. - Judge Alikpala did not admit such evidence ISSUES 1. WON Judge Alikapala Alikapala committed committed grave abuse of discret discretion ion in not admitti admitting ng evidence 2. WON confiscation of license and expiration of TVR of the driver would serve as bar for Peza in recovering from Empire HELD 1. NO - Even Even pos positi iting ng error error in the Judge's Judge's analys analysis is of the eviden evidence ce attemp attempted ted to be int introd roduce uced d and his reject rejection ion there thereof, of, it is clear that it was at most an error error of judgment, not such an error as may be branded a grave abuse of discretion, i.e., such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, against which the writ of certiorari will lie. In any event, the established principle is
Motion praying that Judge Alikpala be declared guilty of contempt of court for having decided the case on the merits despite the pendency in this Court of the certiorari action instituted by the plaintiffs
"that ruling of the trial court on procedural questions and on admissibility of evidence during the course of the trial are interlocutory in nature and may not be the subject of separate appeal or review on certiorari certiorari,, but are to be assigned as errors and reviewed
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pAgE 84 in the appeal properly taken from the decision rendered by the trial court on the merits of the case. - In the meantime, Judge Alikpala rendered judgment on the merits, since the case was then already ripe for adjudication. The judgment ordered dismissal of the case for failure on the part of the plaintiff to prove their cause of action against Empire. Notice of the judgment was served on the parties in due course. 2. YES - It would seem fairly obvious that whether the LTC agent was correct or not in his opinion that driver Amar had violated some traffic regulation warranting confiscation of his license and issuance of a TVR in lieu thereof, this would not alter the undisputed fact that Amar's licence had indeed been confiscated and a TVR issued to him, and the TVR had already expired at the time that the vehicle being operated by him killed two children by accident. Neither would proof of the renewal of Amar's license change the fact that it had really been earlier confiscated by the LTC agent. Disposition petition is DISMISSED for lack of merit
PERLA COMPANIA DE SEGUROS v. ANCHETA 164 SCRA 144 CORTES; August 8, 1988 NATURE Petition for certiorari and prohibition with prelim injunction to review orders of CFI Camarines Norte FACTS
-(it’s Perla was of the insurer Injured of a Superlines busof which figured in a collision with a III case) Scout a kind vehicle). passengers the latter (and respondents in this filed a complaint for damages against Superlines, the bus driver, and Perla (as insurer of the bus bus). ). CFI Jud Judge ge Anchet Ancheta a ordere ordered d that that Per Perla la sho should uld pay the respon responden dents ts immediately the P5000 under the “no fault clause” as provided in Sec. 378. Sec. 378: Any claim for death or injury to any passenger or 3 rd party pursuant to the provisions provi sions of this chapter chapter shall be paid without without the necessit necessity y of proving fault or negligence of any kind. Provided, That for purposes of this section (i) The indemnity in respect of any one person shall not exceed P5,000; (ii) The following following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim: (a) Police report of accident, and (b) Death certificate and evidence sufficient to establi establish, sh, the proper payee, or (c) Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed; (iii) Claim may be made against one motor vehicle only. In the case of an occupant of
claim to recover against the owner of the vehicle responsible for the accident shall be maintained. Perla denied its liability under the above provision and said that the insurer of the vehicle that the respondents were riding (Malayan Insurance in this case) should be liable. Its 2 MFRs denied, Perla filed this acti action on ISSUE WON Perla is the insurer liable to indemnify under Sec. 378 HELD NO Ratio The law is very clear – the claim shall lie against the insurer of the vehicle in which the “occupant xxx is riding,” and no other. The claimant is not free to choose from which insurer he will claim the “no fault indemnity,” as the law, by using the word “shall”, makes it mandatory that the claim be made against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. Reasoning - the rules on claims under the “no fault indemnity” provision, where proof of fault or
neglig negligenc ence e oristonot necessar sary y for payme payment nt of any claim for dea death th or inj injury ury to a passenger a 3rdneces party, are established: 1. A claim may be made against one motor vehicle only. 2. If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the vehicle in which he is riding, mounting or dismounting from. 3. In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall lie against the insurer of the directly offending vehicle. 4. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained. -That the vehicle ridden might not be the one that caused the accident is of no moment since the law itself provides that the party paying the claim under Sec. 378 may recover against the owner of the vehicle responsible for the accident. This is precisely the essence of “no fault indemnity” insurance which was introduced to and made part of our laws in order to provide victims of vehicular accidents or their heirs immediate compensation, although in a limited amount, pending final determination of who is responsible for the accident and liable for the victims' injuries or death. In turn, the “no fault indemnity” provision is part and parcel of the Code provisions on compulsory motor vehicle liability insurance and should be read together with the requirement for compulsory passenger and/or 3rd party liability insurance (Sec. 377) which was mandated in order to ensure ready compensation for victims of vehicular accidents. -Irrespective of whether or not fault or negligence lies with the driver of the Superlines bus, as respondents were not occupants of the bus, they cannot claim the “no fault indemnity” provided in Sec. 378 from Perla. The claim should be made against the insurer of the vehicle they were riding. Petition GRANTED. Orders of CFI ordering Perla to pay respondents respondents Disposition Petition immediately P5000 ANNULLED and SET ASIDE
WESTERN GUARANTY CORPORATION v. CA (RODRIGUEZ & DE DIOS TRANS)
a vehicle, claim shall lie against against the insurer insurer of the vehicle vehicle in which the occupant is riding, mounting or dismounting from. In from. In any other case, claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the
185 SCRA 652 FELICIANO; July 20, 1990 NATURE
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FACTS - Respondent Priscilla E. Rodriguez was struck by a De Dios passenger bus owned by respondent De Dios Transportation Co., Inc. Priscilla was thrown to the ground, hitting her forehead. She was treated treated at the Protacio Emergency Emergency Hospital and later on hospitalized at the San Juan De Dios Hospital. Her face was permanently disfigured, causing her serious anxiety and moral distress. Respondent bus company was insured with petitioner petitioner Western Western Guaranty Guaranty Corporatio Corporation n ("Western") ("Western") under its Master Master Policy which provided, among other things, for protection against third party liability, the relevant section reading as follows: Section 1. Liability to the Public ? Company will, subject to the Limits of Liability, pay all sums necessary to discharge liability of the insured in respect of ? (a) death of or bodily injury to or damage to property of any passenger as defined herein. (b) death of or bodily injury or damage to property of any THIRD PARTY as defined herein in any accident caused by or arising out of the use of the Schedule Vehicle,
generate liability for petitioner Western. A car accident may, for instance, result in injury to internal organs of a passenger or third party, without any accompanying amputation or loss of an external member (e.g., a foot or an arm or an eye). But such internal inter nal injuries injuries are surel surely y covered by Section Section I of the Maste Masterr Policy Policy,, since they certainly constitute bodily injuries. - The Schedule of Indemnities does not purport to restrict the kinds of damages that may be awarded against Western once liability has arisen. Section 1, quoted above, does refer to certain "Limits of Liability" which in the case of the third party liability section of the Master Policy, is apparently P50,000.00 per person per accident. Within this over-all over-all quanti quantitativ tative e limit, all kinds of damag damages es allowable allowable by law" actual or compensatory compen satory damages"; "moral damages'; "nominal damages"; damages"; "temperate "temperate or moderate modera te damages"; "liquida "liquidated ted damages"; and "exemplary "exemplary damages" ? may be awarded by a competent court against the insurer once liability is shown to have arisen, and the essential requisites or conditions for grant of each species of damages are present. It appears to us self-evident that the Schedule of Indemnities was not intended to be an enumeration, much less a closed enumeration, of the specific kinds of damages which may be awarded under the Master Policy Western has issued. - The reading urged by Western of the Schedule of Indemnities comes too close to
provided that the liability shall have first both been Section determined. no case, however, shall the Company's total payment under I and In Section 11 combined exceed the Limits of Liability set forth herein. With respect to death of or bodily injury to any third party or passenger, the company's payment per victim in any one accident accide nt shall not exceed the limits indicated in the Schedule of indemn indemnities ities provided for in this policy excluding the cost of additional medicines, and such other burial and funeral expenses that might have been incurred. - Respondent Respondent Priscilla Priscilla Rodri Rodriguez guez filed a complaint complaint for damages damages before the Regio Regional nal Trial Court of Makati against De Dios Transportation Co. and Walter A. Saga Respondent De Dios Transportation Co., in turn, filed a third-party complaint against its insurance carrier, petitioner Western. On 6 August 1985, the trial court rendered a decision in favor of respondent Priscilla E. Rodriguez, awarding moral damages, lossof earning and attorney's fees among others. - On appeal, the Court of Appeals affirmed in toto the decision of the trial court. - Petitioner contends that it cannot be held liable for loss of earnings, moral damages
workingabove. fraud For upon both thereading insuredwould and the third party of Section 1, quoted Western's drastically and beneficiary without warning limit the otherwise other wise unlimite unlimited d and comprehens comprehensive ive scope of liability liability assumed by the insurer Western under Section 1: "all sums necessary to discharge liability of the insured in respect of [bodily injury to a third party]". This result- which is not essentially different from taking away with the left hand what had been given with the right hand we must avoid as obviously repugnant to public policy. If what Western now urges is what Western intended to achieve by its Schedule of Indemnities, it was incumbent upon Western to use language far more specific and precise than that used in fact by Western, Weste rn, so that the insured, and poten potential tial purchas purchasers ers of its Master Policy, and the Office of the Insurance Commissioner, may be properly informed and act accordingly. - Mor Moreov eover, er, an ins insura urance nce contr contract act is a contra contract ct of adh adhesi esion. on. The rule rule is wel welll entrenched in our jurisprudence that the terms of such contract are to be construed strictly against the party which prepared the contract, which in this case happens to be petitioner Western.
Petition for review the decision of CA affirming in toto the damages awarded to private respondent by the trial court.
and attorn attorney' ey's s fees fees because because these these items items are not amo among ng those those inc includ luded ed in the Schedule of Indemnities set forth in the insurance policy.
Disposition Petition denied.
ISSUE WON petitioner can be held liable for loss of earnings, moral damages and attorney's fees
SUMMIT GUARANTY & INSURANCE COMPANY v. ARNALDO 158 SCRA 332 GANCAYCO; February 29, 1988
HELD YES - The Schedule of Indemnities does not purport to restrict the kinds of damages that may be awarded against Western once liability has arisen. It was merely meant to set limits to the amounts the movant would be liable for in cases of claims for death, bodily injuries of, professional services and hospital charges, for services rendered to traffic traff ic accident accident victims,' and not necessarily necessarily exclude exclude claim claims s against against the insurance policy for other kinds of damages, such as those in question. - It will be seen that the above quoted Schedule of Indemniti Indemnities es establishes monetary
NATURE PETITION to review the order of the Insurance Commissioner. FACTS - On Nov. 26, 1976, a Ford Pick-up truck owned by Marcos Olasco was bumped by a cargo truck owned by Floralde. FGU Insurance Corporation (FG U) by reason of Motor Vehicle Insurance Policy No. ICVF-07185 VF-0718 5 paid Olaso the sum of P2,817.50 as its share in the repair cost of the said Ford Pick-up. Having been subrogated to the rights and causes of action of Olaso in
limits which Western may invoke in case of occurrence of the particular kinds of physical injury there listed. - It must be stressed, however, that the Schedule of Indemnities does not purport to limit, or to enumerate exhaustively, the species of bodily injury occurrence of which
the said amount FGU formally demanded payment of said amount from Floralde and attempted to verify Floralde's insurance carrier but failed to do so. In 1978 FGU was able able to ascert ascertain ain the ide identi ntity ty of Flo Floral ralde' de's s ins insura urance nce carrie carrierr to be the Sum Summit mit Guaranty Guaran ty and Insura Insurance nce Company, Inc. (Summi (Summit) t) and thus reque requested sted the insur insurance ance
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pAgE 86 commissioner for a conference with Summit and demanded from Summit through counsel on February 28, 1978 the payment of the damages sustained by the car of Olaso but to no avail. - Hence on May 22, 1978 FGU filed a case in the Insurance Commissioner's Office against Summit for recovery of said amount. - Summit filed a motion to dismiss on the ground of prescription under Section 384 of PD No. 612. Averring that the accident happened on November 26, 1976 while the complaint was filed on May 22, 1978 beyond the one-year period from the time of the accident provided for by the said provision. ISSUE WON the action must be dismissed on the ground of prescription under Section 384 of PD No. 612 HELD NO - The case do not fall within the meaning of proper cases' as contemplated in Section 384 of the Insurance Code.
reject rejection ion of sai said d claim claim was eve everr mad made e eve even n if pri privat vate e respon responden dentt had alrea already dy complied with all the requirements. - In G.R. No. L-48758-petitioner company even provided legal assistance to one of the private respondents in the criminal case filed against him leading Private respondents to believe that it was ready to pay. In the same case, petitioner company admits that it took no final action or adjudication of the claim. Worse still, in G.R. No. L-48679, assurances of payment were constantly given and petitioner company even said that a check was ready for release. This Court has made the obser observatio vation n that some insurance companies have been inventing excuses to avoid their just obligations and it is only the State that can give the protection which the insuring public needs from possible abuses of the insurers. In view of the foregoing, - It is not denied that an extrajudicial demand for payment was made by respondent FGU on petitioner petitioner but petitioner petitioner failed to respon respond d to the same. Neverth Nevertheless eless the complaint was filed even before a denial of the claim was made by petitioner. For all legal purposes, the one-year prescriptive period provided for in Section 384 of the Insurance Code has not begun to run.The cause of action arises only and starts to run upon the denial of the claim by the insurance company.The court takes note of the dilatory tactics employed by petitioner in this as in the several cases aforecited to avoid payment of its liabilities.
Reasoning - Section 384 of PD 612 (Insurance Code) Any person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the amount of his loss, and/or the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must be brought, brought, in proper cases, cases, with the Commissioner or the Courts within one year from date of accident, otherwise, the claimant's right of action shall prescribe. - It is very clear that the one-year perio period d is only requi required red In proper cases. cases. Had the lawmakers intended it to be the way Petitioner Company assumes it to be, then the
phrase 'in proper cases' would not have been inserted. - in Aisporna. vs. Court of Appeals: 'Legislative intent must be ascertained from a consideration of the statute as a whole. The particular words, clauses and phrases should not be studied as detached and isolated isolated expressions expressions,, but the whole and every part of the statute statute must be considered consid ered in fixing the meaning of any of its parts and in order to produce a harmonious whole. A statute must be so construed as to harmonize and give effect to all its provisions whenever possible.' - Petitioner company is trying to use Section 384 of the Insurance Code as a cloak to hide itself from its liabilities. The facts of these cases evidently reflect the deliberate efforts of petitioner company to prevent the filing of a formal action against it. Bearing in mind that if it succeeds in doing so until one year lapses from the date of the accident it could set up the defense of prescription, petitioner company made private respondents believe that their claims would be settled in order that the latter will not find it necessary to immediately bring suit. In violation of its duties to adopt and implement implem ent reasonable reasonable standards standards for the prompt investigation investigation of claim claims s and to
VILLACORTA v. THE INSURANCE COMMISSION 100 SCRA 467 TEEHANKEE; October 30, 30, 1980 FACTS - JEWEL VILLACORTA was the owner of a Colt Lancer, Model 1976, insured with respon responden dentt com compan pany y for P35, P35,000 000.00 .00 - Own Damage Damage;; P30,00 P30,000.00 0.00 - The Theft; ft; and P30,000.00 - Third Party Liability, effective May 16, 1977 to May 16, 1978. - On May 9, 1978, the vehicle was brought to the Sunday Machine Works, Inc., for general check-up and repairs. On May 11, 1978, while it was in the custody of the Sunday Machine Works, the car was allegedly taken by six (6) persons and driven out to Montalban, Rizal. While travelling along Mabini St., Sitio Palyasan, Barrio Burgos,
going North at Montalban, Rizal, the car figured in an accident, hitting and bumping a gra gravel vel and sand truck truck parked at the righ rightt side side of the road road goi going ng south. south. As a consequence, the gravel and sand truck veered to the right side of the pavement going south and the car veered to the right side of the pavement going north. The driver, Benito Mabasa, and one of the passengers died and the other four sustained phy physic sical al inj injuri uries. es. The car, car, as wel well, l, suffer suffered ed ext extens ensive ive dama damage. ge. Com Compla plaina inant, nt, thereafter, filed a claim for total loss with the respondent company but claim was denied. Hence, complainant was compelled to institute the present action." - The comprehensive motor car insurance policy for P35,000.00 issued by respondent Empire Insurance Company admittedly undertook to indemnify the petitioner-insured against loss or damage to the car (a) by accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear; tear; (b) by fir fire, e, ext extern ernal al exp explos losion ion,, sel self-ig f-ignit nition ion or lig lightn htning ing or bur burgla glary, ry, housebreaking or theft; and (c) by malicious act. - Respo Respondent ndent insurance commission, commission, howeve however, r, dismi dismissed ssed petit petitioner ioner's 's compl complaint aint for recovery recov ery of the total loss of the vehicle against private respondent, respondent, susta sustaining ining
effectuate prompt, fair and equitable settlement of claims, and with manifest bad faith, faith, petiti petitione onerr com compan pany y devise devised d mea means ns and way ways s of sta stalli lling ng the settle settlemen mentt proceedings. In G.R. No. L-50997, no steps were taken to process the claim and no
respondent insurer's contention that the accident did not fall within the provisions of the policy either for the Own Damage or Theft coverage, invoking the policy provision on "Authorized Driver" clause, which clause limits the use of the insured vehicle to two (2) persons only, namely: the insured himself or any person person on his (insured's) (insured's)
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pAgE 87 permission. Apparently, the Insurance commission sees the unauthorized taking of the vehicle for a joyride as a violation of the 'Authorized Driver' clause of the policy." - Respondent commission likewise upheld private respondent's assertion that the car was not stolen stolen and therefor therefore e not covered covered by the Theft clause, ruling that "(T)he element of 'taking' in Article 308 of the Revised Penal Code means that the act of depriving another of the possession and dominion of a movable thing is coupled . . . with the intention, at the time of the 'taking', of withholding it with the character of permanency ISSUE WON the Insurance commission’s findings are in accord with law HELD NO - First, respondent commission's ruling that the person who drove the vehicle in the person of Benito Mabasa, who, according to its own finding, was one of the residents of the Sunday Machine Works, Inc. to whom the car had been entrusted for general check-up and repairs was not an "authorized driver" of petitioner-complainant is too
restrictive contrary to the principle thatother insurance contracts, being contracts ofand adhesion where theestablished only participation of the party is the signing of his signature or his "adhesio "adhesion" n" thereto, thereto, "obviously call for greater greater strictness strictness and vigilance on the part of courts of justice with a view of protecting the weaker party from abuse and imposition, and prevent their becoming traps for the unwary." - The main purpose of the "authorized driver" clause, as may be seen from its text, supra, is that a person other than the insured owner, who drives the car on the insured's order, such as his regular driver, or with his permission, such as a friend or member of the family or the employees of a car service or repair shop must be duly licensed drivers and have no disqualification to drive a motor vehicle. A car owner who entrusts his car to an established car service and repair shop necessarily entrusts his car key to the shop owner and employees who are presumed to have the insured's permission to drive the car for legitimate purposes of checking or road-testing the car. The mere happenstance that the employee(s) of the shop owner diverts the use of the car to his own illicit or unauthorized purpose in violation of the trust reposed in the shop by the insured car owner does not mean that the "authorized driver" clause has been violated such as to bar recovery, provided that such employee is duly qualified to drive under a valid driver's license. - Secondly, and independently of the foregoing (since when a car is unlawfully taken, it is the theft clause, not the "authorized driver" clause, that applies), where a car is admittedly as in this case unlawfully and wrongfully taken by some people, be they employees of the car shop or not to whom it had been entrusted, and taken on a long trip to Montalban without the owner's consent or knowledge, such taking constitutes or partakes of the nature of theft as defined in Article 308 of the Revised Penal Code. - The Court rejects respondent commission's premise that there must be an intent on the part of the taker of the car "permanently to deprive the insured of his car" and that since the taking here was for a "joy ride" and "merely temporary in nature," a "temporary taking is held not a taking insured against." - The insurer must therefore indemnify the petitioner owner for the total loss of the insured car in the sum of P35,000.00 under the theft clause of the policy, subject to the filing of such claim for reimbursement or payment as it may have as subrogee
CHAPTER VIII. MARINE INSURANCE MAGSAYSAY INC v. AGAN 96 PHIL 504 REYES; January 31, 1955 FACTS - The S S "San Antonio", vessel owned and operated by plaintiff, left Manila on October 6, 1949, bound for Basco, Batanes, vis Aparri, Cagayan, with general cargo belonging to different shippers, among them the defendant. The vessel reached Aparri, but while still in the port, it ran aground at the mouth of the Cagayan river, and, attempts to refloat it under its own power having failed, plaintiff had it refloated by the Luzon Stevedoring Co. at an agreed compensation. Once afloat the vessel returned to Manila to refuel and then proceeded to Basco, the port of destination. There the cargoes were delivered to their respective owners or consignees, who, with the exception of defendant, made a deposit or signed a bond to answer for their contribution to the average. - On the theory that the expenses incurred in floating the vessel constitute general average to which both ship and cargo should contribute, plaintiff brought the present action action in the CFI of Man Manila ila to mak make e def defend endant ant pay his contr contribu ibutio tion, n, which, which, as determined by the average adjuster, amounts to P841.40. - Defen Defendant dant denies liabili liability ty to his amount, allegin alleging, g, among other thing things, s, that the stranding of the vessel was due to the fault, negligence and lack of skill of its master, that the expenses incurred in putting it afloat did not constitute general average, and that the liquidation of the average was not made in accordance with law. - The lower court found for plaintiff ISSUE WON the expenses incurred in floating a vessel so stranded should be considered general average and shared by the cargo owners HELD NO Ratio The law on averages is contained in the Code of Commerce. Under that law, averages avera ges are class classified ified into simple or particular and gener general al or gros gross. s. Genera Generally lly speaking, simple or particular averages include all expenses and damages caused to the vessel or cargo which have not inured to the common benefit (Art. 809), and are, therefore, to be borne only by the owner of the property gave rise to same (Art. 810); while general or gross averages include "all the damages and expenses which are deliberate delib erately ly caused in order to save the vesse vessel, l, its cargo, or both at the same time, from a real and known risk" (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812). Reasoning
- the stranding of plaintiff's vessel was due to the sudden shifting of the sandbars at the mouth of the river which the port pilot did not anticipate. The standing may, therefore, be regarded as accidental.
against the Sunday Machine Works, Inc.
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pAgE 88 - Tolentino, Tolentino, in his commentaries commentaries on the Code of Commerce, gives the following following requisites for general average: First , there must be a common danger. This means, that both the ship and the cargo, after has been loaded, are subject to the same danger, whether during the voyage, or in the port of loading or unloading; that the danger arises from the accidents of the sea, dispositions of the authority, or faults of men, provided that the circumstances producing the peril should be ascertained and imminent or may rationally be said to be certain and imminent. This last requirement exclude measures undertaken against a distant peril. Second,, that for the common safety part of the vessel or of the cargo or both is Second sacrificed deliberately. Third,, that from the expenses or damages caused follows the successful saving of the Third vessel and cargo. Fourth,, that the expenses or damages should have been incurred or inflicted after Fourth taking proper legal steps and authority. - With respect to the first requisite, the evidence does not disclose that the expenses sought to be recovered from defendant were incurred to save vessel and cargo from a common danger...it danger...it is the safety safety of the property, property, and not of the voyag voyage, e, which
- The insurance contract is printed in the English common form of marine policies. One of the clauses of the document originally read as follows: “Touching the Adventures and Perils which the said NUFIC is content to bear, and to take upon them in this Voyage; they are of the Seas, Men-of-War, Fire, Pirates, Thieves, Jettison, Letters of Mart and Countermart, Surprisals, and Takings at Sea. Arrests, Restraints and Detainments, of all Kings, Princes and People of what Nation, Condition or Quality soever; Barratry of the Master and Marines, and of all other Perils, Losses and Misfortunes, that have or shall come to the Hurt, Detriment, or Damage Dam age of the said Vessel Vessel or any part thereof thereof;; and in case case of any Loss Loss or Misfortunes, it shall be lawful for the Assured, his or their Factors, Servants, or assigns, to sue, labour and travel for, in and about the Defence. Safeguard, and recovery of the said Vessel or any part thereof, without Prejudice to this Insurance; to the Charges whereof the said Company, will contribute, according to the rate and quantity of the sum herein assured...” - Attached to the polic policy y over and above the said clause is a “rider” containing containing typewritten provisions, among which appears in capitalized type the following clause: “AGAINS “AGAINST T THE ABSOLUTE ABSOLUTE TOTAL LOSS OF THE VESSEL VESSEL ONLY, ONLY, AND TO PAY PROPORTIONATE SALVAGE CHARGES OF THE DECLARED VALUE.”
constitutes the truerequisite, foundation the general average. - As to the second weofneed only repeat that the expenses in question were not incurred for the common safety of vessel and cargo, since they, or at least the cargo, were not in imminent peril. - With respect to the third requisite, the salvage operation, it is true, was a success. But as the sacrifice was for the benefit of the vessel to enable it to proceed to destination and not for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to the expenses. - The final requisite has not been proved, for it does not appear that the expenses here in question were incurred after following the procedure laid down in article 813. Disposition Wherefore, the decision appealed from is reversed.
ISSUES 1. WON the lower court erred in disregarding the typewritten clause endorsed upon the policy, expressly limiting limiting insurer's insurer's liabili liability ty there thereunder under of the total loss of the wooden vessel Pandan and to proportionate salvage charges 2. WON lower court erred in concluding that defendant and appellant, NUFIC is liable to contribute to the general average resulting from the jettison of a part of said vessel's cargo
JARQUE v. SMITH, BELL & CO. CO. 56 PHIL 758
OSTRAND; November11, 1932 NATURE Appeal from judgment of the lower court
HELD 1. NO Ratio In case repugnance exists between written and printed portions of a policy, the written portion prevails. Reasoning Section on 291 of the Code of Civil Procedure provid provides es that “when an instrume instrument nt - Secti
consis consists ts par partly tly of writte written n words words and partl partly y of a pri printe nted d for form m and the two are inconsistent, the former controls the latter.”
FACTS - Plaintiff’s Plaintiff’s motorbo motorboat, at, “Pandan” was insured insured on a marin marine e insur insurance ance policy with National Union Fire Insurance Company (NUFIC) for P45K. According to the provisions of a “rider” attached to the policy, the insurance was against the “absolute total loss of the vessel only.” On Oct. 31, 1928, the ship ran into very heavy sea and it became necessary to jettison a portion of the cargo. As a result of the jettison, the NUFIC was assessed P2,610.86 as its contribution to the general average. - The insurance insurance company, insisting insisting that its obligat obligation ion did not extend beyond the insurance of the “absolute total loss of the vessel only, and to pay proportionate
2. NO Ratio Rati o The liability for contribution in general average is not based on the express terms of the policy, but rests upon the theory that from the relation of the parties and for their benefit, a quasi contract is implied by law. Reasoning - In the absence of positive legislation to the contrary, the liability of the defendant insurance insur ance company on its policy would, perhap perhaps, s, be limited limited to “abso “absolute lute loss of the vessel only, and to pay proportionate salvage of the declared value.” But the policy was executed in this jurisdiction and “warranted to trade within the waters of the Philippine Archipelago only.” Here, Art. 859 of the Code of Commerce is still in force:
salvage of the declared value,” refused to contribute to the settlement of the gen.
“ART. 859. Thefor underwriters of the vessel, the freight, of is the cargo shall be obliged to pay the indemnity of the grossofaverage in so and far as required of each
ave. The present present action was thereupon thereupon institut instituted, ed, and after trial the court below rendered judgment in favor of the plaintiff and ordered the defendant to pay the plaintiff P2,610.86 as its part of the indemnity for the gen. ave. brought about by the jettison of cargo. The insurance company then appealed to the SC.
one of these objects respectively.” - The article is mandatory in its terms, and the insurers (whether for the vessel or for the freight or for the cargo) are bound to contribute to the indemnity of the general average. The provision simply places the insurer on the same footing as other persons
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pAgE 89 who have an interest in the vessel, or the cargo therein, at the time of the occurrence of the gener general al average and who are compelled compelled to contr contribute ibute (Art. 812, Code of Commerce). - In the present case it is not disputed that the ship was in grave peril and that the jettison of part of the cargo was necessary. If the cargo was in peril to the extent of call for general average, the ship must also have been in great danger, possibly sufficient to cause its absolute loss. The jettison was therefore as much to the benefit of the under underwri writer ter as to the owner of the cargo. cargo. The latte latterr was compel compelled led to contribute to the indemnity; why should not the insurer be required to do likewise? If no jettison had taken place and if the ship by reason thereof had foundered, the underwrite under writer's r's loss would have been many times as large as the contr contributi ibution on now demanded. Disposition Appealed judgment is affirmed
GO TIACO v. UNION INSURANCE 40 PHIL 40 STREET; September 1, 1919 FACTS - Union Insurance Society of Canton, Ltd., issued a marine insurance policy upon a cargo of rice belonging to the Go Tiaoco Brothers, which was transported in the early days of May, 1915, on the steamship Hondagua from the port of Saigon to Cebu. - On discharging the rice from one of the compartments in the after hold, upon arrival at Cebu, it was discovered that 1473 sacks had been damaged by sea water. The loss was P3,875.25. - The trial court found that the inflow of the sea water during the voyage was due to a defect in one of the drain pipes of the ship and concluded that the loss was not covered by the policy of insurance. The trial court made the ff findings: The drain pipe which served as a discharge from the water closet passed down through throug h the compartment compartment where the rice in question was stowed and thence out to sea through the wall of the compartment, which was a part of the wall of the ship. The joint or elbow where the pipe changed its direction was of cast
iro iron; n; and in course course of time time it had become become corroded corroded and abrade abraded d unt until il a longitudinal opening had appeared in the pipe about one inch in length. This hole had been in existence before the voyage was begun, and an attempt had been made to repair it by filling with cement and bolting over it a strip of iron. The effect of loading the boat was to submerge the vent, or orifice, of the pipe unt until il it was about about 18 inc inches hes or 2 feet feet below below the level level of the sea. As a consequence the sea water rose in the pipe. Navigation under these conditions resulted in the washing out of the cement-filling from the action of the sea wa wate ter, r, thus thus perm permit itti ting ng the the cont contin inue ued d fl flow ow of th the e salt salt wa wate terr in into to th the e compartment of rice. - The court found in effect that the opening above described had resulted in course of time from ordinary wear and tear and not from the straining of the ship in rough weather on that voyage. The court also found that the repairs that had been made on the pipe were slovenly and defective and that, by reason of the condition of this pipe, the ship was not properly equipped to receive the rice at the time the voyage was begun. For this reason the court held that the ship was unseaworthy.
that have or shall come to the hurt, detriment, or damage of the said goods and merchandise or any part thereof."
ISSUE WON Union Insurance is liable for the loss of the Go Tiaco Brothers HELD NO - the words "all other perils, losses, and misfortunes" are to be interpreted as covering risks which are of like kind (ejusdem generis generis)) with the particul particular ar risks which are enumerated in the preceding part of the same clause of the contract. ''According to the ordinary rules of construction, these words must be interpreted with reference to the words which immediately precede them. They were no doubt inserted in order to prevent preve nt disputes founded on nice distinc distinctions tions.. X x x For exampl example, e, if the expression expression 'perils of the seas' is given its widest sense the general words have little or no effect as applied to that case. If on the other hand that expression is to receive a limited construction, as apparently it did in Cullen vs. Butler (5 M. & S., 461), and loss by
perils ofwords the seas is tomost be confined to Xloss marine and tempestatis discrimine, the general become important. x x"ex(Thames Mersey Marine Insurance Co. vs. Hamilton, Fraser & Co.) - a loss which, in the ordinary course of events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is rather due to what has been aptly called the " peril of the ship ." The insurer undertakes to insure against perils of the sea and similar perils, not against perils of the ship. There must, in order to make the insurer liable, be "some casualty, something which could not be foreseen as one of the necessary incidents of the adventure. The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen." (Wilson, Sons & Co. vs. Owners of Cargo per the Xantho) - 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 failu failure re of the ship's owner prope properly rly to repair a defect of the existence of which he was apprised. The loss was therefore more analogous to that which directly directly results results from simple unsea unseaworthi worthiness ness than to that which results from perils of the sea. - there is no room to doubt the liability of the shipowner for such a loss as occurred in this case. By parity of reasoning the insurer is not liable; for, generally speaking, the shipowner excepts the perils of the sea from his engagement under the bill of lading, while this is the very peril against which the insurer intends to give protection. As applied to the present case it results that the owners of the damaged rice must look to the shipowner for redress and not to the insurer. The same conclusion must be reached if the question be discussed with reference to the seaworthiness seaworthiness of the ship. It is univer universally sally accept accepted ed that in every contract of insurance insur ance upon anything which is the subject of marin marine e insur insurance, ance, a warran warranty ty is implied that the ship shall be seaworthy at the time of the inception of the voyage. This rule is accepted in our own Insurance Law (Act No.of2427, sec. 106). It is ship also may well settled that a ship which is seaworthy for the purpose insurance upon the
- The policy purports to insure the cargo from the following among other risks: "Perils . . . of the seas, men, of war, fire, enemies, pirates, rovers, thieves, .jettisons, . . . barratry of the master and mariners, and of all other perils, losses, and misfortunes
yet be unseaworthy for the purpose of insurance upon the cargo (Act No. 2427, sec. 106). Disposition Decision of trial court is affirmed Disposition
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pAgE 90 CATHAY CAT HAY INSURA INSURANCE NCE CO. v. CA (REMIN (REMINGTO GTON N IND INDUST USTRIA RIAL L SALES CORP.) 151 SCRA 710 PARAS; June 30 1987 FACTS - Remington Industrial Industrial Sales Sales Corp insured its shipme shipment nt of seamless steel pipes. pipes. It incurred losses and damages (I gather the steel pipes rusted during the voyage from Japan to the Phils. on board vessel SS "Eastern Mariner”) and filed complaint against Cathay Insurance Co seeking collection of the sum of P868,339.15 - TC decided for Remington. Cathay filed MR, which was denied. CA affirmed. - CA said (among other things): 1. Coverage of private respondent's respondent's loss under the insurance policy issued by petitioner is unmistakable; 2. Alleged contractual limitations contained in insurance policies are regarded with extreme extre me caution caution by courts courts and are to be strictly strictly construe construed d again against st the insur insurer; er; obscure phrases and exceptions should not be allowed to defeat the very purpose for which the policy was procured;
3. Rust is not an inherent vice of the seamless steel pipes without interference of external factors - Cathay contend (among other things): 1. private respondent has admitted that the questioned questi oned shipment is not covered covered by a "square provision provision of the contract," contract," but private priva te respondent claims implied implied coverage coverage from the phrase "perils of the sea" mentioned mentio ned in the opening opening se sentence ntence of of the policy; policy; 2. The insi insistenc stence e of privat private e respondent respo ndent that that rusting rusting is a peril of of the sea is err erroneou oneous; s; 3. Rusting Rusting is not a risk risk insured insur ed against, since a risk to be insured insured against shoul should d be a casualty or some casualty, something which could not be foreseen as one of the necessary incidents of adventure; 4. A fact capable of unquestionable unquestionable demonstration or of publi public c knowledge needs no evidence. This fact of unquestionable demonstration or of public knowledge is that heavy rusting of steel or iron pipes cannot occur within a period of a seven (7) day voyage. Besides, petitioner had introduced the clear cargo receipts or tally sheets indicating that there was no damage on the steel pipes during the voyage. ISSUE WON rusting is a “peril of the sea” HELD YES - There is no question that the rusting of steel pipes in the course of a voyage is a "peril of the sea" in view of the toll on the cargo of wind, water, and salt conditions. At any rate if the insurer cannot be held accountable therefor, We would fail to observe a cardinal rule in the interpretation of contracts, namely, that any ambiguity therein should be construed against the maker/issuer/drafter thereof, namely, the insurer. Besides the precise purpose of insuring cargo during a voyage would be rendered fruitless. Disposition WHEREFORE, this petition is hereby DENIED, and the assailed decision of the Court of Appeals is hereby AFFIRMED.
NATURE Petition for certiorari to review the decision of the IAC FACTS - February 19, 1972 – Common carrier Manila Bay Lighterage Corp. entered into a contract with Roque Timber Enterprises Enterprises and Chiong. The contract stated that Manila Bay would carry 422.18 cu. meters of logs on its vessel Mable 10 from Malampaya Sound, Sound, Palaw Palawan an to Manil Manila a North North Harbo Harbor. r. Roque Roque insur insured ed the log logs s with with Pionee Pioneerr Insurance for P100,000. - February 29, 1972 – 811 logs were loaded in Malampaya but en route to Manila, Mable 10 sank. - March 8,1972 – Roque and Chiong 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. - A letter was also sent to Pioneer, claiming the full amount of P100,000.00 under the insurance policy but Pioneer refused to pay on the ground that its liability depended upon the "Total Loss by Total Loss of Vessel only". - After hearing, the trial court favored Roque. Pioneer and Manila Bay were ordered to
pay Roque P100,000. Pioneerwas appealed thefrom decision. - January 30, 1984 – Pioneer absolved liability after finding that there was a breach breac h of implied warranty of seaworthi seaworthiness ness on the part of the petitio petitioners ners and that the loss of the insured cargo was caused by the "perils of the ship" and not by the "perils of the sea". It ruled that the loss is not covered by the marine insurance policy. - It was alleged that Mable 10 was not seaworthy and that it developed a leak - The IAC 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 splash of sea waves brought more water inside the barge. - 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 nothing to do with its seaworthiness. 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. ISSUE WON the loss should have been covered by the marine insurance policy HELD NO is universally accepted that in every contract of insurance upon anything Ratio It is which is the subject of marine insurance, a warranty is implied that the ship shall be seaworthy at the time of the inception inception of the voyage. In marine insurance, the risks insured against are classified as 'perils of the sea,’ which includes such losses that are of extraordinary nature, or arise from some overwhelming power, which cannot be guarded against by the ordinary exertion of human skill and prudence. Reasoning
- Based on Sec. 113insurance and Sec. and 99 ofthat the once Insuran Insurance Code, the the termimplied "cargo"warranty can be the subject of marine it ce is so made, of
ROQUE v. IAC (PIONEER INSURANCE AND SURETY CORP.) 139 SCRA 596 GUTIERREZ; November 11, 1985
seaworthiness immediately attaches to whoever is insuring the cargo whether he be the shipowner or not.
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pAgE 91 - The fact that the un-seaworthine un-seaworthiness ss of the ship was unknown to the insure insured d is immaterial in ordinary marine insurance and may not be used by him as a defense in order to recover on the marine insurance policy. - 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 my have no control over the vessel but he has full control in the choice of the common carrier that will transport his goods. - In marine cases, the risks insured insured against are 'peri 'perils ls of the sea.’ The term extends only to losses caused by sea damage, or by the violence of the elements, and does not embrace all losses happening at sea. - 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. - Loss which, in the ordinary course of events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions, is not a ‘peril of the sea’ but is called ‘peril of the ship.’
other perils, losses, and misfortunes," as used in the policy; the other has reference to the implied warranty, on the part of the insured, as to the seaworthiness of the ship. - The meaning of the expression "perils * * * of the seas * * * and all other perils, losses, and misfortunes," used in describing the risks covered by policies of marine insurance, insur ance, has been the subje subject ct of freque frequent nt discu discussion ssion;; and certain propositions propositions relative thereto are now so generally accepted as to be considered definitely settled. - The words "all other perils, perils, losses, and misfortunes" misfortunes" are to be interprete interpreted d as covering risks which are of like kind (ejusdem generis) with the particular risks which are enumerated in the preceding part of the same clause of the contract. - A loss which, in the ordinary course of events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is rather due to what has been aptly called the "peril of the ship." The insur insurer er undertakes to insure against perils of the sea and similar perils, not against perils of the ship. - As was said by Lord Herschell in Wilson, Sons & Co. vs. Owners of Cargo per the Xantho, there must, in order to make the insurer liable, be "some casualty, something which could not be foreseen as one of the necessary incidents of the adventure. The
Disposition Decision appealed from is affirmed. Disposition
purpose of the policy is tomust secure an indemnity against accidents which may happen, not against events which happen." - 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 directly results results from simple unsea unseaworthi worthiness ness than to that which results from perils of the sea. - It is universally accepted that in every contract of insurance upon anything which is the subject of marine insurance, a warranty is implied that the ship shall be seaworthy at the time of the inception of the voyage. This rule is accepted in our own Insurance Law (Act No. 2427, see. 106). - It is also well settle settled d that a ship which is seaworthy for the purpose purpose of insuran insurance ce upon the ship may yet be unseaworthy for the purpose of insurance upon the cargo (Act No. 2427, see. 106). Disposition Jjudgment affirmed.
LA RAZON v. UNION INSURANCE SOCIETY OF CANTON, LTD. 40 PHIL 40 STREET; September 1, 1919 FACTS - This is an action on a policy of marine insurance issued by the Union Insurance Society of Canton, Ltd., upon a cargo of rice belonging to the plaintiffs, Go Tiaoco Brothers, which was transported on the steamship Hondagua from the port of Saigon to Cebu. - On discharging the rice from one of the compartments in the after hold, upon arrival at Cebu, it was discovered that 1,473 sacks had been damaged by sea water. - The loss so resulting to the owners of rice, after proper deduction had been made for the portion saved, was P3,875.25. - The trial court found that the inflow of the sea water during the voyage was due to a defect in one of the drain pipes of the ship and concluded that the loss was not covered by the policy of insurance. Judgment was accordingly entered in favor of the defendant and the plaintiffs appealed. - The court found in effect that the opening above described had resulted in course of time from ordinary wear and tear and not from the straining of the ship in rough weather on that voyage. The court also found that the repairs that had been made on the pipe were slovenly and defective and that, by reason of the condition of this pipe, the ship was not properly equipped to receive the rice at the time the voyage was begun. For this reason the court held that the ship was unseaworthy. ISSUE WON the insurer is liable
MALAYAN INSURANCE v. CA (supra p.10) FILIPINO MERCHANTS INS. CO. v. CA ( supra p.19) COASTWISE LIGHTERAGE CORP v. CA (PHILIPPINE GENERAL INSURANCE COMPANY) 245 SCRA 796 FRANCISCO; July 12, 1995 NATURE
Petition Petit ion for revie review w of CA Decis Decision ion affirming decisi decision on of RTC Manila holding that
HELD - The question whether the insurer is liable on this policy for the loss caused in the manner above stated presents two phases which are in a manner involved with each other. One has reference to the meaning of the expression "perils of the seas and all
Coastwise is liable Coastwise liable to pay PhilGe PhilGen n Insura Insurance nce the amoun amountt of P700thou plus legal interest thereon, another sum of P100thou as attorney's fees and the cost of the suit. FACTS
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pAgE 92 - Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise, using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, also owned by Coastwise. Upon reaching Manila Bay, while approaching Pier 18, one of the barges struck an unknown sunken object.. The forward buoyancy compartment object compartment was damage damaged, d, and water gushed in through a hole "two inches wide and twenty-two inches long." - As a consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted consignee Pag-asa Sales to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales filed a formal claim with the insur insurer er of its lost cargo (PhilGen) (PhilGen) and again against st the carri carrier er (Coastwise). (Coastwise). Coastwise denied the claim and it was PhilGen which paid Pag-asa Sales the amount of P700k representing the value of the damaged cargo of molasses. - PhilGen then filed an action against Coastwise before the RTC Manila, seeking to recoverr the P700k which it paid to Pag-asa Sales for the latter' recove latter's s lost cargo. PhilGe PhilGen n now claims to be subrogated subrogated to all the contractual contractual rights and claims which the consignee consig nee may have against the carrier, carrier, which is presumed to have viola violated ted the contract of carriage. - RTC awarded the amount prayed for by PhilGen. CA affirmed. Hence, this petition.
- SC agrees with Coastwise's admission that the contract it entered into with the consignee consi gnee was one of affrei affreightmen ghtment. t. PagPag-asa asa Sales, Sales, Inc. only leased leased three three of petitioner' petit ioner's s vesse vessels, ls, in order to carry cargo from one point to another, but the possession posse ssion,, comman command d and navigatio navigation n of the vessels remained with Coastwise. Coastwise. As such, Coastwise, by the contract of affreightment, was not converted into a private carrier, but remained a common carrier and was still liable as such. - Therefore, the mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case against the carrie carrier. r. The presumptio presumption n of negligence that attaches attac hes to common carrie carriers, rs, once the goods it trans transports ports are lost, destr destroyed oyed or deteriorated, applies to Coastwise. This presumption, which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this case. - The damage to the barge which carried the cargo of molasses was caused by its hitting an unknown sunken object as it was heading for Pier 18. The object turned out to be a submerged derelict vessel. The evidence on record appeared that far from having rendered service with the greatest skill and utmost foresight, and being free from fault, the carrier was culpably remiss in the observance of its duties. - Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was
ISSUES 1. WON Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of affreightment which it entered into with the consignee, Pag-asa Sales, Inc. (Corollarily, if it were in fact transformed into a private carrier, did it exercise the ordinary diligence to which a private carrier is in turn bound?) 2. WON the insurer was subrogated subrogated into the rights rights of the consign consignee ee against the carrier, upon payment by the insurer of the value of the consignee's goods lost while on board one of the carrier's vessels HELD 1. NO - The distinction between the two kinds of charter parties (i.e (i.e.. bareboat or demise and contract contra ct of affreightme affreightment) nt) is more clearly clearly set out in the case of Puromines, Inc. vs. Court of Appeals, Appeals, wherein SC ruled: “Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for the voyage or service stipulated. The charterer mans man s the vessel vessel with his own people people and become becomes s the owner pro hac vice vice,, subject subje ct to liabi liability lity to others for damages damages caused by negli negligence. gence. To create a demise,, the owner of a vesse demise vessell must complete completely ly and exclusiv exclusively ely relinquis relinquish h possession, command and navigation thereof to the charterer, anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all. all. On the other hand a contract of affreightment is one in which the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire...
not licensed. The Code of Commerce, which subsidiarily common carriers (which are primarily governed by the provisions of the Civil governs Code) provides: “Art. 609. Captains, Capta ins, masters, or patro patrons ns of vessels vessels must be Filipinos, have legal capacity to contract in accordance with this code, and prove the skill capacity and qualifications necessary to command and direct the vessel, as established by marine and navigation laws, ordinances or regulations, and must not be disqualified according to the same for the discharge of the duties of the position.” - Clear Clearly, ly, Coastwise Lightera Lighterage's ge's embarking on a voyag voyage e with an unlic unlicensed ensed patron violates this rule. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful accident. It may also logically, follow that a person without witho ut license to navigate, navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had the patron been licensed, he could be presumed to have both the skill and the knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. - As a common carrier, Coastwise is liable for breach of the contract of carriage, having failed to overcome the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of extraordinary diligence. 2. YES - Coastwise is liable for breach of the contract of carriage it entered into with Pag-asa Sales, Sales, Inc. Howe However ver,, for the dama damage ge sustai sustained ned by the loss of the cargo which petitioner-carrier was transporting, it was not the carrier which paid the value thereof to Pag-asa Sales, Inc. but the latter's insurer, herein private respondent PhilGen. - Article 2207 of the Civil Code: If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breac breach h of contract complai complained ned of, the insuran insurance ce company shall be subrogated to the rights of the insured against the wrongdoer or the person who violated the contract.”
An owner who retains possession of the ship though the hold is the property of
- This legal provision is founded on the well-settled principle of subrogation. If the
the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo.” - Although a charter party may transform a common carrier into a private one, the same sam e howeve howeverr is not true true in a contra contract ct of affrei affreight ghtmen mentt on accoun accountt of the aforementioned distinctions between the two.
insured property is destroyed or damaged through the fault or negligence of a party other than the assured, then the insur insurer, er, upon paymen paymentt 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 obligated to pay. Payment by the insurer to the assured operated opera ted as an equitabl equitable e assignment assignment to the former of all remedi remedies es which the latte latterr
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pAgE 93 may have against the third party whose negligence or wrongful act caused the loss. 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. - Und Undoub oubted tedly, ly, upo upon n paymen paymentt by respon responden dentt ins insure urerr PhilGe PhilGen n of the amount of P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of molasses totally damaged while being transported by petitioner Coastwise Lighterage, the former was subrogated into all the rights which Pag-asa Sales, Inc. may have had against the carrier, herein petitioner Coastwise Lighterage. Disposition Petition denied. CA affrimed.
THE PHILIPPINE PHILIPPINE AMERICAN GENERAL GENERAL INSURANCE INSURANCE COMPANY COMPANY INC v. CA (FELMAN SHIPPING LINES) 273 SCRA 226 BELLOSILLO; June 11, 1997 FACTS
- CA ruled that “MV Asilda” was was unseaworthy for being top- heavy as 2,500 cases of Coca-Cola Coca-C ola softdrink softdrink bottle bottles s were improperly stow stowed ed on deck. Nonet Nonetheless heless,, the appellate court denied the claim of PHILAMGEN on the ground that the assured’s implied warranty of seaworthiness seaworthiness was not complied complied with. Perfunctorily, PHILAMGEN was not properly subrogated to the rights and and interests of the shipper. Furthermore, respondent respo ndent court held that the filing filing of notice notice of abando abandonment nment had absolv absolved ed the shipowner/agent from liability under the limited liability rule. ISSUES 1. WON “MV Asilda” was seaworthy when it left the port of Zamboanga 2. WON the limit limited ed liabil liability ity under Art. 587 of the Code of Commerce should apply 3. WON PHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against FELMAN, the shipowner HELD 1. YES - “MV Asilda” was unseaworthy when it left the port of Zamboanga. We subscribe tto o the findings of the Elite Adjusters, Inc., and the Court of Appeals that the proximate
- Coca-Cola Bottlers Philippines, Inc., loaded on board “MV Asilda,” a a vessel owned and operat operated ed by Fel Felman man 7,5 7,500 00 cases cases of 1-l 1-lite iterr Coca-C Coca-Cola ola softdr softdrink ink bottles bottles to be transporte trans ported d from Zamboa Zamboanga nga City to Cebu for consignee consignee Coca-Cola Coca-Cola Bottl Bottlers ers Philippines, Inc., Cebu. The shipment was insured with petitioner Philippine American General under Marine Open Policy. - The vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7 ,500 cases of 1-liter Coca-Cola softdrink bottles. - The consignee filed a claim with respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank with “MV Asilda.” Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim of P755,250.00. - Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability liability for the loss. Consequently, PHILAMGEN sued the shipowner for sum of money and damages. - PHILAMGEN alleged that the sinking and total loss of “MV Asilda” and its cargo were due to the vessel’s unseaworthiness as she was put to sea in an unstable unstable condition. It further alleged that the vessel was improperly manned and that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list. - FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and ownership over “MV Asilda” tog togeth ether er with with her fre freigh ightt and appurt appurtena enance nces s for the purpos purpose e of lim limiti iting ng and extinguishing its liability under Art. 587 of the Code of Commerce. - Trial court dismissed the the complaint of PHILAMGEN. On appeal the Court of Appeals set aside the dismissal and remanded the case to the lower court for trial on the merits. merit s. FELMAN filed filed a petiti petition on for certiorari certiorari with with this Court but it was subsequently denied on 13 February 1989. - Trial court rendered rendered judgment in favor of FELMAN. It ruled that “MV Asilda” was
cause of the sinking sinking “MVnce Asilda” was its appro beingximately top-he top-heavy. Contra Contrary ry of to softd the ship captain’s capta in’s allegatio allegations, ns, of evide evidence shows that approximat elyavy. 2,500 cases softdrink rink bottles bottl es were stowed stowed on de deck. ck. Sever Several al days after after “MV Asilda” sank, sank, an estimated 2,500 empty Coca-Cola plastic cases were recovered near the vicinity of the sinking. Considering that the ship’s hatches were properly secured, the empty Coca-Cola cases recovered recov ered could have have come only from the vessel vessel’s ’s deck cargo. It is settled tha thatt carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of the ship. However, in this case it was established that “MV Asilda” was was not designed to carry substantial amount of cargo on on deck. The inordinate loading of cargo deck resulted in the decrease of the vessel’s metacentric height thus making it it unstable. The strong winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage voyag e and as such merely contrib contributed uted to its already unstabl unstable e and unseawort unseaworthy hy condition. 2. NO - The ship agent is liable for the negligent acts of the captain in the care of goods loaded on the vessel. This liability liability howev however er can be limited through a abandonment bandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the captain. The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner’s liability, does not apply to cases where the injury or average was occasioned by the shipowner’s own fault. 3. YES - The doctrine of subrogation has its roots in equity. It is designed to promote and to accomplish accomp lish justi justice ce and is the mode which equity adopts to compel the ultimate ultimate payment of a debt by one who in justice, equity and good conscience ought to pay. Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, I nc., gave the former the right to bring an action as subrogee subrogee against FELMAN. Havin Having g
seaworthy when it left the port of Zamboanga as confirmed by certificates issued by
failed to rebut the presumption of fault, the liability of FELMAN for the loss of the
seaworthy when it left the port of Zamboanga as confirmed by certificates issued by the the Phil Philip ippi pine ne Coas Coastt Guar Guard d and and the the sh ship ipow owne ner’ r’s s su surv rvey eyor or atte attest stin ing g to its its seaworthine seawor thiness. ss. Thus the loss of the vessel and its enti entire re shipment could could only be attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew, in which case, Art. 587 of the Code of Commerce should apply.
failed cases to rebut the presumption of fault,bottles the liability of FELMAN for the loss of the 7,500 of 1-liter Coca-Cola softdrink is inevitable. - Sec. 113 of the Insurance Code provides that “(i)n every marine insurance upon a ship ship or fre freigh ight, t, or fre freigh ightag tage, e, or upo upon n anythi anything ng which which is the sub subjec jectt of marine marine insurance, a warranty is implied implied that the ship is seaworthy.” seaworthy.” Under Sec. 114, a ship is “seaworthy “seaw orthy wh when en reasonably reasonably fi fitt to perform perform the service, service, and to e encount ncounter er the
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pAgE 94 ordinary perils of the voyage, contemplated by the parties to the policy.” Thus it becomes the obligation of the cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy condition. He may have no control over the vessel but he has full control in the selection selection of the common carrier that will ttransport ransport his goods.. He also has full discretion goods discretion in the choic choice e of assurer that will underwri underwrite te a particular venture. - In policies where the law will generally imply a warranty of seaworthiness, it can only be excluded by terms in writing in the policy in the clearest language. And where the policy stipulates that the seaworthiness of the vessel as between the assured and the assurer assur er is admitted, admitted, the question question of seaworthine seaworthiness ss cannot be raise raised d by the assu assurer rer without showing concealment or misrepresentation by the assured. - PHILAMGEN’s action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code which provides: Art. 2207. If the plaintiff’s plaintiff’s property property has been insured, and he has recei received ved indemnity from the insurance company for the injury or loss arising out of the wrong or breac breach h of contract complained complained of, the insurance insurance company company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. contract. If the amount paid by the insurance company
would be required required to make the neces necessary sary repairs and install the new machinery before it could again be placed in commission. During that time the owner would be depriv deprived ed of the use of its vesse vessell or the inter interest est on its investme investment. nt. When those those questions are considered the testimony is conclusive that the cost of salvage, repair and reconstruction was more than the original cost of the ship at the time the policy was issued. As found by the trial court, “t is difficult to see how there could have been a more complete loss of the vessel than that which actually occurred”. Upon the facts shown here, any other construction would nullify the statute and as applied to the conditions existing in the Manila Bay, this kind of policy would be worthless, and there would not be any consideration for the premium. 2. NO - The defend defendant ant argues that the polic policy y contains the provision that it “shall “shall be of as force force and effect as the surest writi writing ng or pol policy icy of ins insura urance nce mad made e in London London”. ”. However, for such law to apply to our courts the existence of such law must be proven. prove n. It cannot apply when such proof is lacking. Nevertheless, Nevertheless, in the English practice, a ship is a total loss when she has sustained such extensive damages that it would not be reasonably practical to repair her. Disposition Decision reversed
does notthe fully cover the injury loss, the aggrieved party shall be entitled to recover deficiency from theor person causing the loss or injury. Disposition Petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., Seven Hundred Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) plus legal interest thereon counted from 29 November November 1983, the date of judicial demand, pursuant to Arts. 2212 and 2213 of the Civil Code.
PHILIP PHI LIPPIN PINE E MFTG. MFTG. CO CO.. v. UNION UNION INSURA INSURANCE NCE SOCIET SOCIETY Y OF CANTON 42 PHIL 378 JOHNS; November 22, 1921 1921 FACTS - The plaintiff’s steel tank lighter was insured by defendant company for absolute total loss. As a result of a typhoon, the lighter sunk in Manila Bay. The plaintiff demanded payment from the defendant insurance company but the latter refused. The company asked the plaintiff to salvage the ship, which it was able to do so. - With the plaintiff able to raise the lighter, reconstruct it and placed it in commission, the defendant insurance insurance company claims that it was only liable for a total absolute loss and that there was no total destruction of the lighter. - The trial court decided in favor of the defendant, saying that the policy only covered an actual total loss, not a constructive total loss. ISSUES 1. WON there was an absolute total loss that can be covered by the policy 2. WON the Marine Law of Great Britain applies
CHOA TIEK SENG v. CA (FILIPINO MERCHANTS INSURANCE) 183 SCRA 223 GANCAYO; March 15, 1990 NATURE Appeal from a decision of the Court of Appeals 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 Rotterdam in sea vans on board the vessel "MS Benald Benalder' er' as the mother vessel, and thereafter aboard the feeder vessel "Wesser Broker V-25" of respondent Ben Lines Container, Container, Ltd. (Ben Lines for short). The goods were insur insured ed by the respondent Filipino Merchants' Insurance Co., Inc. (insurance company for short) for the sum of P98,882.35, the equivale equivalent nt of US$8,765.00 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
HELD 1. YES - At the time that the lighter was at the bottom of the bay, it was of no value to the owner, thus there was an actual total loss. - The ship was sunk in July 1, 1918. After several futile attempts, it was finally raised on Sept. 20, 1918. It is faitr to assume that in its then condition much further time
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.
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pAgE 95 - Respondent Respondent insurance insurance company company rejected rejected the claim alleging alleging that assuming assuming that spillage took place while the goods were in transit, petitioner and his agent failed to avert or minimize the loss by failing failing to recover 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 Petitioner filed a complaint complaint in the RTC against the insurance 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 raise d several several special special defenses as well as a compul compulsory sory counterclaim. 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 insurance company should be held liable even if the technical technical meaning in marine insurance of an “insurance against all risk" is applied HELD YES - In Gloren Inc. vs. Filipinas Cia. de Seguros, 12 iitt was held that an all risk insurance 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 insurance is against against all risks of loss or damage to the subject matter matter insured but shall in no case be deemed to extend to cover loss, damage, or expense proximately proxi mately caused by delay or inherent vice or nature of the subje subject ct 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 vice or nature nature of the cargo insured insured.. It is the dut duty y of the respo responde ndent nt insuranc insurance e 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 exten ds covera coverage ge to risks not usually contemplated contemplated and avoid avoids s putti putting ng 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. Dispositio Dispo sition n the decision appealed from is hereby REVERSED AND SET ASIDE and another judgment is hereby rendered ordering the respondent Filipinas Merchants Insurance Company, Inc. to pay the sum of P33,117.63 as damages to petitioner with legal interest interest from the filing of the complaint, complaint, plus attor attorney's ney's fees and expens expenses es of
179 SCRA 357 GANCAYCO; October 5, 1989 NATURE Petition for review on certiorari FACTS - Marinduque Mining Industrial Corporation (Marinduque) shipped on board SS Arthur Maersk from Boston, U.S.A. a shipment of 1 skid carton parts for valves. The shipment was ordered from Jamesbury, Singapore PTE, LTD., which issued the cargo's packing list and Invoice number showing the contents of the carton. The Philippine Consulate in Singapore issued invoice for the shipment showing the contents and its total price of $39,419.60 and the freight and other charges of $2,791.73. When the cargo arrived in Manila, it was received and deposited in the office of Aboitiz Shipping Corporation (Aboitiz) for transhipment to Nonoc Island. - In July 1980, Marinduque, as consignee of the cargo, made a report that said cargo was pilfered on July 3, 1980 due to heavy rain at the Aboitiz terminal and that of the total value of the cargo of $42,209.33, only $7,412.00 worth remains of the cargo with the recommendation that the claim be made against Aboitiz. - The services of the Manil Manila a Adjus Adjusters ters and Surveyors Co. (Manila Adjusters) Adjusters) were engaged by the Phil-American General Insurance Co., Inc. (Phil Am) which came out with the report that the cargo in quest question, ion, when inspected, inspected, showe showed d that it was pilfered. A confirmatory report was submitted by the Manila Adjusters. - On August 11, 1980 Marinduque then filed a claim against Aboitiz in the amount of P246,4 P246,430.8 30.80 0 repres represent enting ing the val value ue of the pilfe pilfered red cargo. cargo. On the same day Marinduque filed a claim for the same amount against the Phil-Am on the latter's policy. Phil-Am paid Marinduque the sum of P246,430.80 as insurer of the cargo. - Phil-Am then filed a complaint in RTC Manila against Aboitiz for recovery of same amount alleging that it has been subrogated to the rights of Marinduque. Complaint dismissed and MFR denied. CA reversed. MFR thereof was denied. Hence, this petition. ISSUE
WON petitioner Aboitiz was properly held liable to the private respondent Phil-Am by the appellate court HELD YES - The questioned shipment is covered by a continuing open insurance coverage (which took effect after Sept. 1, 1975, as contained in Marine Open Policy No. 100184) from the time it was loaded aboard the SS Arthur Maersk in Boston, U.S.A. to the time it was delivered to the possession of petitioner at its offices at Pier 4 in Manila until it was pilfered when the great majority of the cargo was lost on July 3, 1980. Hence, petitioner Aboitiz was properly held liable to Phil-Am. Reasoning [a] Records of the case show that Phil-Am executed a continuous and open insurance covera coverage ge cov coveri ering ng goo goods ds of Marind Marinduqu uque e import imported ed int into o and exp export orted ed fro from m the Philippines which took effect after Sept. 1, 1975, as contained in Marine Open Policy
litigation in the amount of P10,000.00 as well as the costs of the suit.
FILIPINO MERCHANTS INS. CO. v. CA (supra p.19) ABOITIZ SHIPPING v. PHILAMGEN INSURANCE
No. 100184. A similar insurance coverage was also executed by petitioner in favor of Marinduque Marin duque for all its goods shipped or moved within the territorial territorial limits of the Philippines also effective after Sept. 1, 1975 and contained in Marine Open Policy No. 100185.
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pAgE 96 [b] TC in dismissing the complaint apparently relied on Marine Risk Note No. 017545 issued by private respondent Phil-Am only on July 28, 1980 after the shipment in question questi on was alrea already dy pilfered. Obviously Obviously TC misto mistook ok said Marin Marine e Risk Note as an insurance insur ance policy when it is NOT. It is only an acknowledg acknowledgment ment or declaration declaration of the private priva te respondent respondent confirming confirming the specific specific shipment covered by its Marine Open Policy, the evaluation of the cargo and the chargeable premium. [c] The contention of the Aboitiz that it could not be liable for the pilferage of the cargo as it was stolen even before it was loaded on its vessel is untenable. Aboitiz receiv received ed cargo cargo whe when n it arriv arrived ed in Manil Manila a at its off office ices, s, and it was while in its possession and before loading it in its vessel that the cargo was pilfered. Its liability is clear. Disposition Petition DISMISSED.
ORIENTAL ASSURANCE v. CA (PANAMA SAW MILL) 200 SCRA 459 MELENCIO-HERRERA; August 9, 1991 NATURE Petition for review on certiorari 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 insur ed it against against loss for P1-M with petitioner petitioner Oriental Oriental Assurance Corporation 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 demanded payment for the loss but Oriental Assurance 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 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, 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 susta sustained ined a const constructi ructive ve total loss under Section 139(a) of the Insurance Code. judgment under review is SET ASIDE Disposition judgment Disposition
PAN MALA ALAYAN IN INSU SURA RANC NCE E v. CA (TH THE E FOOD FOOD AN AND D AGRICULTURAL ORGANIZATION OF THE UNITED NATIONS) 201 SCRA 382 REGALADO; September 5, 1991 FACTS - The Food and Agricultural Organization of the United Nations (hereinafter referred to as FAO), ntended ntended and made arrangement arrangements s to send to Kampuchea Kampuchea 1,500 metric petitions petit ions of IR-36 certif certified ied rice seeds to be distr distribute ibuted d to the people for seedl seedling ing purposes
- The termstherewith of the contr contract act constitu constprecedent itute te the to measure measur e of theright insur insurer lia liabil bility ity from and compliance is a condition the insured's toerrecovery 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
-ofLUZTEVECO was to ship the cargo amounting to the US$83,325.92 in respect of onewas lot 1,500 metric petitions winch is the subject of present action. The cargo loaded on board LUZTEVECO Barge No. LC-3000 and consisted of 34,122 bags of IR-36 certif certified ied rice rice see seeds ds pur purcha chased sed by FAO fro from m the Bureau of Plant Plant Ind Indust ustry ry for P4,602,270.00
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pAgE 97 - FAO secured insurance coverage in the amount of P5,250,000.00 from petitioner, Pan Malayan Insurance Corporation - On June 16, 1980, FAO gave instructions to LUZTEVECO to leave for Vaung Tau, Vietnam to deliver the cargo which, by its nature, could not withstand delay because of the inherent risks of termination and/or spoilage. On the same date, the insurance premiums on the shipment was paid by FAO petitioner - On June 26, 1980, FAO was advised of the sinking of the barge in the China Sea, hence it informed informed petitioner petitioner thereo thereoff and, later, formally filed its claim under the marine insurance insurance policy. On July 29, 1980, FAO was infor informed med by LUSTEVE LUSTEVECO CO of the recovery recove ry of the lost shipment, for which reason reason FAO formal formally ly filed its claim with LUZTEVECO for compensation of damage to its cargo - LUZTEVECO failed and refused to pay. Pan Malayan likewise failed to pay for the losses and damages sustained by FAO by reason of its inability to recover the value of the shipment from LUZTEVECO - Pan Malayan claims that part of the cargo was recovered and thus the claim by FAO was unwarranted. This is evidenced by two surveys upon the cargo wherein it was found that only around 78% was lost. - FAO filed a civil case against both LUZTEVECO and Pan Malayan. Trial court found in
- the complete physical destruction of the subject matter is not essential to constitute an actual total loss. Such a loss may exist where the form and specie of the thing is destroyed, although the materials of which it consisted still exist (Great Western Ins. Co. vs. Fogarty, N.Y., 19 Wall 640, 22 L. Ed. 216), as where the cargo by the process of decomposition or other chemical agency no longer remains the same kind of thing as before (Williams vs. Cole, 16 Me. 207). - It is thus clear that FAO suffered actual total loss under Section 130 of the Insurance Code, specifically under paragraphs (c) and (d) thereof, recompense for which it has been denied up to the present -Section 135 of the I nsurance Code explicitly provides that "(u)pon an actual total loss, a person insured is entitled to payment without notice of abandonment." This is a statutory adoption of a long standing doctrine in maritime insurance law that in case of actual total loss, the right of the insured to claim the whole insurance is absolute, without need of a notice of abandonment
favor of FAO and ordered both to pay jointly and severally the full amount of the claim. This was affirmed by CA
344 SCRA 260 GONZAGA-REYES; November 15, 2000
PHILIPPINE PHIL IPPINE AMERICAN AMERICAN LIFE INSURANCE INSURANCE COMPANY COMPANY v. CA (ELIZA PULIDO)
ISSUE 1. WON respondent court committed a reversible error in holding that the trial court is correct in holding that there is a total loss of the shipment
NATURE This petition for review on certiorari seeks to reverse the Decision of the Special Second Division of the Court of Appeals
HELD 1. NO - The law classifies classifies loss into either tota totall or partial. partial. Total loss may be actual or absolute, or it may otherwise be constructive or technical. Petitioner submits that respondent court erred in ruling that there was total loss of the shipment despite the fact that only 27,922 bags of rice seeds out of 34,122 bags were rendered valueless to FAO and the shipment sustained only a loss of 78%. - FAO, however, claims that, for all intents and purposes, it has practically lost its total or entire shipment in this case, inclusive of expenses, premium fees, and so forth, despite the alleged recovery by defendant LUZTEVECO. As found by the court below and reproduced with approval by respondent court, FAO "has never been compensated for this total loss or damage, a fact which is not denied nor controverted - If there were some cargoes saved, by LUZTEVECO, private respondent abandoned it and the sam same e was sold or used used for the benefi benefitt of LUZTEV LUZTEVECO ECO or Pan Malayan Malayan Corporation. Under Sections 129 and 130 of the New Insurance Code, a total loss may either be actual or constructive. In case of total loss in Marine Insurance, the assured assured is entitled to recover from the underwriter the whole amount of his subscription - SEC. 130. An actual total loss is caused by: (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. -as said and proven, the seeds were of fragile nature. And the wetting of said seeds
FACTS - On January 9, 1989, petitioner received from one Florence Pulido an application for life insurance, insurance, dated December 16, 1988, in the amount of P100,000.00 which designated her sister, herein private respondent, as its its principal beneficiary. Because the insurance applied for was non-medical, non-medical, petit petitioner ioner did not require a medica medicall examination and issued a policy on the sole basis of the application on February 11, 1989. On April 1992, petitioner received received private respondent’s claim, which declared
that the insured, Florence Pulido, of acutethat pneumonia on claimed September 10, was 1991. - Petitioner withheld payment on died the ground the policy under void from the start for having been procured in fraud. It is petit petitioner ioner’s ’s contention contention that even before they received received priva private te respondent respondent’s ’s claim for death benefits benefits,, their investigation concerning the subject policy yielded the information that the insured, Florence Pulido, died in 1988, before the application for insurance on her life was made. While this was communicated to private respondent in a letter dated April 29, 1992, private respondent respondent had already filed her claim earlier that month. In anoth another er letter dated July 27, 1992, however, petitioner confirmed to private respondent receipt of the claim papers and assured her that her case was “being given preferent preferential ial attention and prompt action”. - Following the filing by private respondent of her claim, petitioner caused another investigation respecting the subject subject policy. Pursuant to the findings of this this second investigation, petitioner stood by its initial decision to treat the policy as void and not to honor the claim. On November 9, 1992, private respondent enli enlisted sted the services of
affected thewere staterecovered, of seeds. Thus them useless Although thereitwere bags which theserendering were “stained” and notfor in FAO. the same condition was bro brough ughtt in. in additi addition on to this, this, FAO did not receive receive any compensa compensatio tion n for said recovered bags as the same were distributed by LUZVETECO without authorization of FAO
counsel in reiterating her claim for death benefits. Petitioner still refused to make payment and thus, this action. - Petitioner : the results of its investigations having indicated that the insured was already alrea dy dead at the time the polic policy y was applied for. It also counter counterclaime claimed d for attorney’s fees. The first report, prepared by one Dr. Benedicto Briones, was dated April 1, 1992, and had attached to it a questionnaire, responded to by one Ramon
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pAgE 98 Piganto, who represented to be the brother-in-law of the insured and the barangay chairman of Cardiz, Bagulin, La Union. To the question “Where “Where does [Florence Pulido] reside now?”, Piganto had replied that Florence Pulido used to live in Cardiz, but was dead since 1988. Piganto’s statement was signed by him, and witnessed by his wife, Nenita Piganto. This report was petitioner’s basi basis s for treating treating the disputed policy as void since April 1992, even before receipt of private respondent’s claim. ISSUE WON there was fraud (whether the insured, Florence Pulido, was in fact dead before the application for insurance on her life was made) HELD NO - This the lower courts had effected ruled on, upon a preponderance of the evidence duly received received from both parti parties. es. We see no reversible reversible error in the finding of both respondent respo ndent court and the trial court in favor of the correctness correctness of the entries in Certificate of Death, duly registered with the Local Civil Registrar of Bagulin, La Union, which declared that Florence Pulido died of acute pneumonia on September 10, 1991.
Dr. Irineo Gutierrez, the Municipal Health Officer of Bagulin, La Union whose signature appeared in the death certificate, testified in addition that he ministered to the ailing Florence Flore nce Pulido for two days immediately immediately prior to her death. This fact is likewise likewise noted in the death certificate. - Death certificates, and notes by a municipal health officer prepared in the regular performance perfor mance of his duties, duties, are prima facie evidence facie evidence of facts therein stated. A dulyregistered death certificate is considered a public document and the entries found therein are presumed correct, unless the party who contests its accuracy can produce positive posit ive evidence evidence establ establishin ishing g otherwise. otherwise. Petit Petitioner ioner’s ’s conten contention tion that the death certificate is suspect because Dr. Gutierrez was not present when Florence Pulido died, and knew of Florence’s death only through Ramon Piganto, does not merit a conclusion of fraud. No motive was imputed to Dr. Gutierrez for seeking to perpetuate a falsity in public records. records. Petit Petitioner ioner was likewise likewise unable to make out any clear motive as to why Ramon Piganto would purposely lie. Mere allegations of fraud co could uld not substitute for the full and convincing evidence that is required to prove it. A failure to do so would leave intact the presumption presumption of good faith and regularity regularity in the performance of public duties, which was the basis of both respondent court and the trial court in finding finding the date of Flore Florence nce Pulido’s death to be as plaintiff-p plaintiff-privat rivate e respondent maintained. - We cannot likewise give credence to petitioner’s submission that the inconsistencies in the testimonies of the witnesses for plaintiff-private respondent are in themselves evidence of fraud. Such alleged inconsistencies are matters of credibility which had been ably passed upon by the lower court. - The absence of fraud, as a factual finding of the lower court adopted by the Court of Appeals, entirely consistent with the evidence on record, will not be reversed and, hence, is final and conclusive upon this Court. Disposition The instant petition is DENIED Disposition
CHAPTER
IX.
CLAIMS
SETTLEMENT
&
94 PHIL 627 BAUTISTA ANGELO; March 29, 1954 NATURE Appeal from a decision of the Court of First Instance of Manila ordering defendant to pay to plaintiff the sum of P3,000, Philippine currency, plus legal interest thereon from the time of the filing of the complaint until its full payment. FACTS - On April 14, 1943, the National Life Insurance Company of the Philippines issued a policy on the life of Jose C. Londres whereby it undertook to pay its beneficiary upon his death the sum of P3,000. All the premiums due under the policy were actually paid on their dates of maturity and the policy was in force when the insured died on February 7, 1945. Salvacion V. Londres, as beneficiary, demanded from the company the payment of the proceeds of the policy, and her demand having been refused, she instituted the present action against the company in the Court of First Instance of Manila.
-insured Defend Defendant ant in answer7, denied, of sufficient sufficien t proof proof, , the allegati allegation on that the died onits February 1945, for andlack set up the following special defenses: ( a) that plaintiff's claim is covered by the Moratorium Law; ( b) that the policy having been issued issue d during the Japanese occupation, occupation, it is presumed that its face value should be paid in Japanese currency, there being no provision in the policy from which can be inferred that the parties contemplated payment in any other currency; (c (c) that the money paid by the insured as premiu premiums, ms, together with the money receive received d from other policy-holders, was all deposited by the defendant in the Philippine National Bank and said deposit was declared without value by Executive Order No. 49 of the President Presid ent of the Philippi Philippines; nes; and (d) that that the polic policy y having having been issued issued under under abnormal circumstances, it should be considered in the light of equity which does not permit anyone to enrich himself at the expense of another. Defendant, however, as a proof of good faith, offered to pay the value of the policy in accordance with the Ballantyne scale of values, or the sum of P2,400, Philippine currency. - It appea appears rs that the deceased took up the policy under consider consideration ation on April 15, 1943 for the sum of P3,000. All the premiums due under the policy were actually paid on their dates of maturity and the policy was in force when the insured died on February 7, 1945. On said date, the battle of the liberation of the City of Manila was still raging. While the northern part may have been liberated, not so the southern part, as shown from the very affidavits submitted by appellee wherein it was stated that on the aforesaid date, the insured, Jose Londres, and his two sons were taken by the Japanese soldiers soldiers from their house at Singa Singalong long Street and were massacred by their captors. It may therefore be said that the policy became due when the City of Manila was still under the yoke of the enemy and became payable only after liberation which took place on March 10, 1945 when President Osmena issued Proclamation No. 6 following following the resto restoratio ration n of the civil govern government ment by General General Dougl Douglas as Mac Arthur Arthur.. And we say that the policy became payable only after liberation even if it matured sometime before, because before that eventuality the insurance company, appellant herein, was not yet in a position to pay the value of the policy for the simple reason that it had not yet reopened.
SUBROGATION LONDRES v. NATIONAL LIFE INSURANCE
ISSUE WON the amount of P3,000 which appellant bound itself to pay to the insured under the policy upon his death should be paid in accordance with the present currency or should be adjusted under the Ballantyne scale of values
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pAgE 99 HELD YES, present currency. Reasoning - In the case case of Rutter vs. Esteban, Esteban, 93 Phil., 68, the Moratorium Law was declared invalid and unconstitutional. - During those days of liberation, while the people were rejoicing because of the happy event, the banks, the insurance companies, and for that matter other commercial and business firms, were still feeling the adverse effects of the sudden fall of values and were uncertain and apprehensive as to the manner the readjustment would be made by the new Government. It is for this reason that the beneficiary, after realizing the truth about the death of her husband, and after gathering evidence to substantiate his death, had difficulty difficulty in effecting effecting the collection collection of her claim from the insurance insurance company com pany becau because se at that that time time it had not yet reopen reopened ed for busin business ess purposes. purposes. Although the record does not disclose the exact date on which the insurance company reopened for this purpose, this Court can take judicial notice that it only did so after liberation. At that time the legal tender was already the present currency. - As final plea, appellant invokes equity in its favor in view of the nullification of the
deposits made by it with the Philippine National Bank of all fiat money received from its policyholders, which money was declared without value by Executive Order No. 49 of the President of the Philippines. Appellant claims that, considering the unexpected circumstances that developed, the indemnity to be paid by it should be suffered by it under Article 307 of the Code of Commerce which provides: "When the deposits are of cash, with a specification of the coins constituting them, . . . the increase or reduction which their value may suffer shall be for the account of the depositor." Appellant, by entering into an insurance contract, cannot claim, if it suffers loss, that the beneficiary cannot enrich herself at its expense. This is a risk attendant to any wagering contract. One who gambles and loses cannot be heard to complain of his loss. To appellant, we can only repeat the following admonition: "The parties herein gambled and speculated on the date of the termination of the war and the liberation of the Philippines by the Americans. This can be gleaned from the stipulation stipulation about redemption, redemption, particularl particularly y that portion to the effect that redemption could be effected not before the expiration of one year from June 24, 1944. This kind of agreement agreement is permitted by law. We find nothing immoral or unlawful in it." (Gomez vs. Tabia) vs. Tabia) Dispositio Dispo sition n Wherefore, the decision appealed from is affirmed, with costs against appellant.
VDA. DE FERNANDEZ v. NATIONAL LIFE INSURANCE INSURANCE CO OF THE PHILS 105 PHIL 59 ENDENCIA; January 27, 1959
FACTS - National Life Insurance Company (NLIC) insured J. Fernandez’s life for P10,000 upon his payment of P444 from July 15, 1944 to July 14, 1945 - The insured died on November 2, 1944, while the policy was in force - After more than 7 years, in 1952, Atty de la Torre, representing the benficiaries of the policy, informed the company that Fernandez had died in 1944, and claimed the proceeds of the policy. The company said that the status of the policies issued during the Japanese occupation was still pending consideration before the courts. NLIC said that because the policy matured upon the insur insured’s ed’s death in Novemb November, er, 1944, they should compute the value of their claim under the Ballantyne scale of values (which would amount only to P500) - benefi beneficiari ciaries es commen commenced ced suit, and the lower court susta sustained ined the stand of the company, dismissed the complaint. - beneficiaries maintain that the obligation of the company to pay accrued not upon the death of Fernandez, but only upon the receipt and approval by the company, on proof of death of the insured, which was in 1954. The policy reads: National Life Insurance Life Insurance Company of the Philippine hereby agrees to pay at its Home Office, Manila, Ten Thousand Pesos to Juan D. Fernandez (hereinafter called the
insured) on the 15th day of July, 1964, 1964 , if the Insured is living and this Policy is in force,, or upon receipt and approved at its Office of due proofs of the title of the force claimant and of the prior death of the Insured while this Policy is in force to Teresa Duat Vda. De Fernandez, Maria T. and Manuela Fernandez Fernandez,, mother and sisters respectively of the Insured (Hereinafter called the Beneficiary) subject to the right of the Insured to change the beneficiary as stated on the second page of this Policy. - The above stipulation is apparently based on Sec. 91-A of the Insurance Law which provides as follows: The proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless such proceeds are made payable in installments or a as an annuity, in which case the installments or annuities shall be paid as they become due: Provided, however , That in case of a polic policy y maturing by the death of the insured, insured, the proceeds thereof shall be paid within sixty days after presentation of the claim and filing of the proof of the death of the insured. Refused to pay the claim within the time prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of six per centum per annum, unless such failure or refusal to pay is based on the ground that the claim is fraudulent . . . . - Based on the foregoing provision of law and the aforequoted stipulation as well as on the allegation allegation that the fili filing ng of proof of death by the beneficiaries beneficiaries is a condi condition tion precedent of the demandability of the obligation of the insurer to pay the proceeds, appellants appel lants claim that they shoul should d be paid P10,000 P10,000 in Philippin Philippine e currency and not under the Ballantyne scale of values. ISSUE WON the policy matured upon the death of the insured HELD YES Ratio In life insurance, the policy matures either upon the expiration of the term set
NATURE Appeal from CFI decision applying the Ballantyne scale of values upon the proceeds of life insurance taken and maturing during the Japanese occupation but claimed after liberation
forth therein, or in upon his case, deaththe occuring at prior tohis thebenefi expiration such stipulated stipu lated term, which procee proceeds dsany aretime payabl payable e to beneficiari ciaries esofwithin sixty days after their filing of proof of death. Reasoning - The sixty day period fixed by law within which to pay the proceeds after presentation of proof of death Is merely procedural in nature, evidently to determine the exact
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pAgE 100 amount to be paid and the interest thereon to which the beneficiaries may be entitled to collect in case of unwarranted refusal of the company to pay, and also to enable the insurer to verify or check on the fact of death which it may even validly waive. It is the happening of the suspensive condition of death that renders a life policy matured, and not ht efiling of proof of death which, as above stated, is merely procedural. The insured having died during the Japanese occupation, the proceeds of his policy should be adjusted accordingly, for “The rule is already settled that where a debtor could have paid his obligation at any time during the Japanese occupation, payment after liberation must be adjusted in accordance with the Ballantyne schedule (De Asis vs. Agdamag, Agdama g, among other cases). ( Collaboration Collaboration is defined as the acts of working together in a joint project. Disposition Judgment affirmed
TIO KHE CHIO v. CA (EASTERN ASSURANCE & SURETY) 202 SCRA 119 FERNAN; September 30, 1991 FACTS - Petitioner Tio Khe Chio imported 1,000 bags of fishmeal valued at $36,000.30 from Agro Impex, S.A. Dallas, Texas, U.S.A. The goods were insured with respondent EASCO and shipped on board the M/V Peskov, a vessel owned by Far Easte Eastern rn Shipping Company. When the goods reached Manila, they were found to have been damaged by sea water which rendered the fishmeal useless. Petitioner filed a claim with EASCO and Far Eastern Shipping. Both refused to pay. Whereupon, petitioner sued them before the then Court of First Instance of Cebu for damages. EASCO, as the insurer, filed a counterclai counterclaim m again against st the petitioner petitioner for the recovery of the unpaid insurance premiums. - The trial court rendered judgment in favor of petitioner. The judgment became final as to EASCO but the shipping company appealed to the Court of Appeals and was absolved from liability by the said court. - The trial court, upon motion by petitioner, issued a writ of execution against EASCO. The sheriff enforcing the writ reportedly fixed the legal rate of interest at 12%. Respondent EASCO moved to quash the writ alleging that the legal interest to be computed should be 6% per cent per annum in accordance with Article 2209 of the Civil Code. The trial court denied EASCO's motion. On appeal, the Court of Appeals reversed rever sed the trial court court’s ’s denial denial of EASCO’s motion and ruled that the appli applicable cable interest is 6% per annum. Hence, this petition. ISSUE WON the applicable rate of interest is 12% per annum HELD NO - Sections 243 and 244 of the Insurance Code apply only when there is an unjustified refusal or withholding of payment on the insured’s claim. In this case, EASCO's refusal to settle the claim to Tio Khe Chio was based on some ground which, while not
court judgments thereon but not to court judgments for damages arising from injury to persons and loss of property which does not involve a loan. Clearly, the applicable law is Article 2209 of the Civil Code. - And in the light of the fact that the contending parties did not allege the rate of interest stipulated in the insurance contract, the legal interest was properly pegged by the Appellate Court at 6% per cent.
CATHAY INSURANCE v. CA(LUGAY) 174 SCRA 11 GRINO-AQUINO; June 5, 1989 FACTS - Petitioners are 6 insurance companies that issued fire insurance policies for the total sum of P4,000,000 to the Cebu Filipina Press owned by Emilia Chan Lugay. The fire policies described the insured property as "stocks of Printing materials, papers and general merchandise usual to the Assured's trade" stored in a one-storey building of strong stron g materials materials housing the Cebu Filipin Filipina a Press located at UNNO Pres. Quiri Quirino no cor.
Don V. Sotto Sts., Mabolo, Cebu City. The co-insurers were indicated in each of the policies. All, except one policy (Paramount's), were renewals of earlier policies issued for the same property. - On December 18, 1981, the Cebu Filipina Press was razed by electrical fire together with all the stocks and merchandise merchandise stored stored in the premi premises. ses. On January 15, 1982, Lugay submitted sworn Statements of Loss and Formal Claims to the insurers, through their adjusters. She claimed a total loss of P4,595,000. - After nearly 10 months of waiting, she sued to collect on December 15, 1982. The insurance companies denied liability, alleging violation of certain conditions of the policy, misdeclaration, and even arson which was not seriously pressed for, come the pre-trial, the petitioners offered to pay 50% of her claim, but she insisted on full recovery. - Trial court rendered judgment in her favor ordering the insurers to pay her a total of P4,000,000 as indemnity, P48,000 representing expenses of the plaintiff, a separate amount of 20% of the P4,000,000 representing fees of counsel, interests at the rate of twice the ceiling being prescribed by the Monetary Board starting from the time when the case was filed, and finally, with costs. CA affirmed. ISSUES 1. WON the insured insured's 's cause of action had already accru accrued ed before she filed her complaint 2. WON sufficient proofs of loss had been presented by the insured 3. WON the private respondents claim for loss was inflated 4. WON lower court erred in awarding damages to the private respondent in the form of interest equivalent to double the interest ceiling set by the Monetary Board 5. WON attorney's fees awarded were exorbitant HELD 1. YES
sufficient toon free it from liability to under sufficient negate any asserti assertion that in refusing pay,itsit policy, acted nevertheless unjustifiably unjustifiably.. isSimpl Simply y put,tothe said provisions of the Insurance Code are not pertinent to the instant case. They apply only when the court finds an unreasonable delay or refusal in the payment of the claims. - Circular No. 416 of the Central Bank, which raised the legal rate of interest from 6% to 12% per annum refers only to loans or forbearances of money, goods or credits and
- As the the proofs fire which destroyed the Cebufrom Filipina Press15, occurred on December 1981 and of loss were submitted January 1982 through June 21,19, 1982 in compliance with the adjusters' numerous requests for various documents, payment should should have bee been n mad made e within within 90 day days s therea thereafte fterr (Se (Sec c 243 243), ), or on or before September 21, 1982. Hence, when the assured filed her complaint on December 15, 1982, her cause of action had already accrued.
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pAgE 101 2. YES - There There is no merit merit in the petit petition ioners ers'' conten contentio tion n that that the proof proofs s of loss loss wer were e insufficien insuff icientt because because Lugay faile failed d to comply with the adjuster's adjuster's request for the submission of her bank statements. Condition No. 13 of the policy does not require the insured to produce her bank statements. Therefore, the insured was not obligated to produce them and the insurers had no right to ask for them. Condition No. 13 was prepared by the insurers themselves, hence, it should be taken most strongly against them. 3. NO - Both the trial court and the CA noted that the proofs were ample and more than enough for defendant insurers to do a just assessment supporting the 1981 fire claim for an amount exceeding four million pesos. 4. NO - The award of double interest on the claim is lawful and justified under Sections 243 and 244 of the Insurance Code which provide: Sec. 243 Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary
- In 1977, Noda obtained from Zenith Insurance Corporation 2 fire insurance policies: [1] No. F-03724 with a face value of P30k covering the goods and stocks in trade in his business establishment at the market site in Mangagoy, Bislig, Surigao del Sur and [2] No. F-03734 with a face value in the aggregate amount of P100k and consisting of Item 1 for P40k on household furnitu furniture, re, fixtures, fittings and other personal personal effects, and Item 2 for P60k on stocks in trade usual to petitioner's retail business situated in a two-storey building at 039 Barreda St., Mangagoy, Bislig, Surigao del Sur. - While both policies were in force, fire destroyed petitioner's insured properties at the market site on September 5, 1977 and at Barreda St. on November 9, 1977. - When petitioner failed to obtain indemnity on his claims from Zenith, he filed a complaint with the Insurance Commission praying that Zenith be ordered to pay him P130kj representing the value of the 2 policies insured by respondent with interest at 12% per annum, plus damages, attorney's fees and other expenses of litigation. ... - Zenith interposed that petitioner had no cause of action; that Policy No. F-03724 was not in full force and effect at the time of the fire because the premium on the policy was not paid; that Zenith's liability under Policy No. F-03734, if any, was limited to P15,472.50 in view of the co-insurance; and that petitioner failed to substantiate his claim as to the value of the goods reputedly destroyed by fire.
Board. Sec. 244 In case of any litigation litigation for the enforcemen enforcementt of any policy or contract of insurance, insur ance, it shall be the duty of the Commissioner Commissioner or the Court, Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of claim due the insured. - The petitioners' petitioners' contention contention that the chargi charging ng of double interest interest was improp improper er because becaus e no unreasonabl unreasonable e delay in the processing processing of the fire claim was proven is refuted refut ed by the trial court's explicit explicit finding that "there was a delay that was not reasonable in processing the claim and doing payments". Under Section 244, a prima facie evidence of unreasonable delay in payment of the claim is created by the failure of the insurer to pay the claim within the time fixed in both Sec. 242 and 243 of the IC. - In view of the not insubstantial value of the private respondent's claims and the considerable time and effort expended by them and their counsel in prosecuting these claims for the past 8 years, attorney's fees were properly awarded to the private respondents.
- While the case was pending, Zenith settled petitioner’s fire loss claim under Item 1 of Policy No. 03734 in the amount of P15,472.50. - Insurance Commissioner allowed petitioner to recover under said policy and ordered Zenith to pay him the amount of P20k with legal interest from the date the complaint was filed, including including P1k as attorney' attorney's s fees but excluding the actual, moral and exemplary damages prayed for. As for petitioner's claim under Policy No. F-03734, she held held that that in view view of the paymen paymentt of P15,472 P15,472.50 .50 to pet petiti itione oner, r, Zenith Zenith had ful fully ly discharged its liability under said policy which covered furniture, fixtures, fittings and other personal belongings of petitioner. - In allowing recovery under Policy No. F-03734, Commissioner placed much weight on the final report prepared by Dela Merced Adjustment Corporation, an independent fire, marine and casualty adjuster contracted by Zenith to investigate the claims of its various vario us policyholders. policyholders. Said report conclu concluded ded that "the sound value of P26,666.67 repres represent ented ed the whole whole loss loss and dam damage age"" incurr incurred ed by pet petiti itione oner, r, but with with the application of the three-fourths loss clause, Zenith's liability was reduced to P20k.
5. YES - An award equivale equivalent nt to 10% of the pro procee ceeds ds of the polici policies es wou would ld be mor more e reasonable than the 20% awarded by the trial court and the CA. Disposition Decision of the CA AFFIRMED with MODIFICATION.
NODA v. CRUZ 151 SCRA 227 FERNAN; June 22, 1987
ISSUES 1. WON Insurance Commissioner erred in denying petitioner's demand for P60k under Item 2 of Policy No. F-03734 2. WON Insur Insuranc ance e Com Commis missio sioner ner erre erred d in not awardi awarding ng in favor of pet petiti itione onerr exemplary damages for Zenith's unjustified and wanton refusal to pay petitioner's claim under the said two insurance contracts HELD 1. YES - To prove the exi existe stence nce of the stocks stocks in trade cover covered ed by Policy Policy No. F-03 F-03734 734,, petitioner offered his testimony and that of his wife as well as documentary exhibits. The foregoing evidence for petitioner preponderantly showed the presence of some P590k worth of goods in his retail store during the fire of November 9, 1977.
-reject Whileproofs the insurer, the are Insurance Commissioner for that matter, have the right an to of lossand if they unsatisfactory, they may not set up for themselves arbitrary standard of satisfaction. Substantial compliance with the requirements will always be deemed sufficient. - Zenith introduced in evidence the final report on Policy No. F-03734 submitted by its own adjuster, adjuster, Dela Merced Adjustment Corpo Corporatio ration. n. Respo Respondent ndent Commissioner Commissioner
NATURE Petition to review decision of the Insurance Commissioner FACTS
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pAgE 102 however ignored such report, reasoning that with regard to Item 2 of Policy No. F03734 the claim for loss of the stocks in trade was not successfully proven in view of petitioner petit ioner's 's failure failure to present present evidence; evidence; that the adjus adjuster' ter's s repor reportt deser deserved ved scant
- RTC found that the vessel, MT Maysun, was seaworthy to undertake the voyage, and that the incident was caused by an unexpected inclement weather condition or force majeure, thus exempting the common carrier from liability for the loss of its cargo.
consid considerati on even sincemake the allegation alleg ations s there therein in for were not subst substantia antiated, ted, and that said report eration did not a recommendation payment. - A scrutiny scrutiny of the abovement abovementioned ioned adjuste adjuster's r's report reveals that together with the formal demand for full indemnity, petitioner submitted his income tax return for 1978, purchase purcha se invoices, certificatio certification n from his suppliers suppliers as to his purch purchases, ases, and other supporting suppor ting papers. The report even took into account the appra appraisals isals of the other adjusters and concluded that the total loss sustained by petitioner in his household effects and stocks and stocks in trade reached P379,302.12. But after apportioning said amount among petitioner's six different insurers [the co-insurance being known to Zenith], the liability of Zenith was placed at P60,592.10. It therefore recommended that Zenith pay the petitioner the amount of P60, 592.10. - Said document was offered as evidence by Zenith itself and could very well be considered as an admission of its liability up to the amount recommended. Being in the nature of an admission against interest, it is the best evidence which affords the greatest certainty of the facts in dispute. Respondent Commissioner should not have
- CAft.reversed RTC decision on ruled the basis evidence fromisPAG-ASA were no 20 waves in the area. CA thatofthe petitioner liable onthat its there obligation as common carrier to respondent insurance company as subrogee of Caltex. Petitioner’s Claim > In every marine insurance upon a ship or freight, or freightage, or upon any thing which is the subject of marine insurance there is an implied warranty by the shipper that the ship is seaworthy. 10 When private respondent paid Caltex the value of its lost cargo, the act of the private respondent is equivalent to a tacit recognition that the illfated vessel was seaworthy.
perfunctorily dismissed that particular evidence as a worthless piece of paper. 2. NO - There is no showing that Zenith, in contesting payment, had acted in a wanton, oppressive or malevolent manner to warrant the imposition of corrective damages. Disposition Zenith Insurance Corporation ordered to pay petitioner Norman R. Noda the sum of P60,592.10 with legal interest from the filing of the complaint until full payment, but deducting therefrom the amount of P15,472.50 which it had earlier paid to petitioner.
cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner 2. WON MT Maysun was seaworthy at the time of the voyage (outline topic) 3. WON non-pr non-presenta esentation tion of the marine insurance policy bars the complaint complaint for recovery of sum of money for lack of cause of action
DEL ELSA SAN N TR TRAN ANSP SPO ORT, RT, INC INC. ASSURANCE) 369 SCRA 24 DE LEON, JR; November 15, 2001
v.
CA
(AME (AMERI RIC CAN
HOME HOME
NATURE A petition for review on certiorari of the decision of CA. FACTS - Caltex entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc. (petitioner), for a period of one year whereby the said common carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Delsan took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboan Zamb oanga ga Cit City. y. The shipmen shipmentt was ins insure ured d by Ame Americ rican an Home Ass Assura urance nce Corporation (respondent). - August 14, 1986: MT Maysun set sail from Batangas for Zamboanga City. The vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.
Respondent’s Comment > American Home Assurance is entitled to payment by its right of subrogation. ISSUES 1. WON payment made by American Home to Caltex for the insured value of the lost
HELD 1. NO subrogatory gatory right which Ratio The fact of payment grants American Home the subro enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier. Reasoning Art. 2207. (Civil Code) If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. - The right of subrogation is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice and good conscience ought to pay. It is not dependent upon, nor does it grow out of, any privity of contract or upon written written assignment of claim. It accrues simply upon payment by the insurance company of the insurance claim. 2. NO vessel’s actual condition. Neither the granting of Ratio Seaworthiness relates to a vessel’s classification or the issuance of certificates establishes seaworthiness. Reasoning
-cargo. Respondent paid representing the of insured value the lost Exercising itsCaltex right ofP5,096,635.57 subrogation under Article 2207 the New CivilofCode, the private respondent demanded of the petitioner the same amount it paid to Caltex. Delsan refused to pay, forcing American home to file a case for collection in the RTC.
- Common carriers are safety boundof topassengers observe extraordinary the vigilance the goods and for the transporteddiligence by them,inaccording to allover the circumstances of each case. There is no liability if the loss, destruction or deterioration is by force majeure. majeure. 10
Sec. 113 Insurance Code
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pAgE 103 - The tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted and belied by the weather report from PAG-ASA. MT Maysun sank with its entire entire cargo for the reason that it was not seaworthy. seaworthy. There was no
ISSUE WON Finman can be held liable for complainants’ claims against Pan Pacific
squall bad weather or extremely poor sea condition in the vicinity when the said vessel or sank. - Petitioner may not escape liability by presenting in evidence certificates that tend to show that at the time of dry-docking and inspection by the Philippine Coast Guard MT Maysun,, was fit for voyage. These pieces Maysun pieces of evidence evidence do not necessaril necessarily y take into account the actual condition of the vessel at the time of the commencement of the voyage. At the time of dry-docking and inspection, the ship may have appeared fit. The certificates issued, however, do n ot negate the presumption of unseaworthiness triggered by an unexplained sinking. - Authorities are clear that diligence in securing certificates of seaworthiness does not satisfy the vessel owner’s obligation. obligation. Also securing the approval of tthe he shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage does not establish due diligence diligence if the vessel was in fact unseaworthy, unseaworthy, for the cargo owner has no obligation in relation to seaworthiness. 3. NO
HELD YES - Under Insurance Code, liability of surety iin n a surety bond is joint and s several everal with the principal obligor. - Conditions of a bond specified and rrequired equired in the provisions of a statute providing for submission submission of the bond, are incorporat incorporated ed into all bonds tendered under that statute even though not set out in printer’s ink. - POEA held and Secretary of Labor affirmed that Pan Pacific had violated Labor Code, and at least one of the conditions for the grant and continued use of the recruitment license. POEA and Secretary of Labor can require Pan Pacific to refund the placement fees and to impose the fine. - If Pan Pacific is liable, and if Finman is solidarily liable with Pan Pacific, then Finman is liable both to private respondents and to POEA. - Cash and surety surety bonds are require required d from recruitme recruitment nt compani companies es as means of
Ratio The The pres presen enta tati tion on in evid eviden ence ce of th the e mari marine ne in insu sura rance nce poli policy cy is no nott indispensa indis pensable ble in this case before the insurer insurer may recove recoverr from the common carrier the insured insured value of the lost cargo in the exercise of its subrogatory subrogatory right. The subrogatio subro gation n receipt, receipt, by itself, is sufficient sufficient to establ establish ish not only the relat relationsh ionship ip of respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fue fuell oil oil,, but also the amount paid to settle settle the insur insuranc ance e claim. claim. The righ rightt of subrogation accrues simply upon payment by the insurance company of the insurance claim. Disposition Petition is denied, and the decision of the CA is affirmed.
ensuring prompt and effective recourse against such companies when held liable. Public policy will be effectively negated if POEA and the DoLE were held powerless to compel a surety company to make good on its solidary undertaking.
EAGLE STAR INSURANCE CO LTD v. CHIA YU 96 PHIL 696 REYES; March 31, 1955 NATURE Certiorari FACTS Krolll & Co., loaded loaded on the S. S. Roeph Silverlight Silverlight owned and operated operated by - Atkin, Krol
FINMAN ASSURANCE CORP v. INOCENCIO 179 SCRAGENERAL 480 FELICIANO; November 15, 1989 FACTS - Pan Pacific is a recruitment and employment agency. It posted surety bond issued by Finman General Assurance and was granted license to operate by POEA. - Inocencio, Inocencio, Palero, Cardones, Hernandez Hernandez filed with POEA complaints complaints again against st Pan Pacifi Pacific c for violat violation ion of Labor Code and for refund refund of place placemen mentt fees. fees. POEA POEA Administrator motu propio impleaded Finman as surety for Pan Pacific. - Pan Pacific moved out and no notice of transfer was furnished to POEA as required. POEA considered that constructive service of complaints had been effected. - Finman denied liability and said that - POEA had no jurisdicti jurisdiction on over surety bonds; juris jurisdicti diction on is vested vested in Insurance Insurance
Leigh Hoegh & Co., A/S, of San Francisco California, 14 bales of assorted underwear valued at P8,085.23 consigned to Chia Yu in the City of Manila. - The shipment was insured against all risks by Eagle Star Ins. Co. of San Francisco, California California,, under a policy issued to the shipper and by the latter assigned assigned to the consignee. - The vessel arrived in Manila but of the 14 bales (a.k.a. freights =p) consigned to Chia Yu only 10 were delivered to him as the remaining 3 could not be found.3 of those delivered were also found damaged to the extent of 50 per cent. -Chia Yu claimed indemnity for the missing and damaged bales. But the claim was declined, first, by the carrier and afterward by the insurer, whereupon Chia Yu brought the present action against both, including their respective agents in the Philippines. - An action was filed at the CFI after more than 2 years after delivery of the damaged bales and the date when the missing bales should have been delivered, the action was resisted by the Atkins and Eagle Star principally on the ground of prescription. -TC favored Chia Yu and CA affirmed.
Commission - Finman had not violated Labor Code - Complainants have no cause of action action against Finman - Amounts claimed were paid as deposits deposits and not as placement fees. - POEA Administrator issued Order that that respondents should pay. Finman appealed to Secretary of Labor. Secretary upheld the POEA order.
*** CARRIER’s defense of prescription is made to rest on the following stipulation of the bill of lading: In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after the delivery of the goods or the date when the goods should have been delivered. (This stipulation is
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pAgE 104 but a repetition of a provision in the CA 65 which says that bills of lading covering shipments shipme nts from the US to the Phils should be brought w/in one year after the delivery of the goods or the date when the goods should have been delivered to the carrier liable.) ***hold INSURER’s claim of prescription is founded upon the terms of the policy and not upon the bill of lading. (But in our jurisdiction, as per A1144, prescription is 10 years after action accrues.) No suit action on this Policy, Policy, for the recovery of any claim, shall be sustainable sustainable in any Court of law or equity unless the insured shall have fully complied with all the terms and conditions of this Policy nor unless commenced with twelve (12) months next after the happening of the loss . . . ISSUE WON ATKIN’ s action has prescribed HELD NO - Being contrary to the law of the forum, the stipulation in the policy cannot be given
effect as it would reduce the period allowed the insured for bringing his action to less than one year (beca (because use the prescription prescription period period begins from the “happening “happening of the loss” and that before any suit could be sustained the insured shall have to comply with the terms and conditions of the policy first TF lessening the period to less than a year. ) - Insular Government vs vs.. Frank(13 Phil. 236)~ "matters respecting a remedy, such as the bringing of suit, admissibility of evidence, and statute of limitations, depend upon the law of the place where the suit is brought" TF any policy clause repugnant to this amendment to the Insurance Act cannot be given effect in an action in our courts. SEC. 61-A. (Insurance Code) ~ Any condition, stipulation or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues, is void. - The prescription clause could be harmonized with section 61-A of the Insurance Act by taking it to mean that the time given the insured for bringing his suit is twelve months after the cause of action accrues. - If so, when did the cause of action accrue? Chia Yu’s action did not accrue until his claim was finally rejected by the insurance company. This is because, before such final rejection, there was no real necessity for bringing suit. - As the policy provides that the insured should file his claim, first, with the carrier and then with the insurer, he had a right to wait for his claim to be finally decided before going to court. - Furthermore, there is nothing in the record to show that the claim was rejected in the year 1947, either by the insurance company in London or its settling agents in the Philippines. - For the purpose of this action, Chia Yu's claim was considered to have been finally rejected by the insurer on April 22, 1948. Having been filed within twelve months form that date, the action cannot be deemed to have prescribed even on the supposition that the period given the insured for bringing suit under the prescriptive clause of the policy is twelve months after the accrual of the cause of action.
ACCFA v. ALPHA INSURANCE 24 SCRA 151 REYES; July 29, 1968 FACTS - In order to guarantee the Asingan Farmers' Cooperative Marketing Association, Inc. (FACOMA) against loss on account of "personal dishonesty, amounting to larceny or estafa estaf a of its Secretary-T Secretary-Treasu reasurer, rer, Ladines, the appel appellee, lee, Alpha Insura Insurance nce & Suret Surety y Company had issued, on 14 February 1958, its bond, No. P-FID-15-58, for the sum of P5,000 with said Ladines as principal and the appellee as solidary surety. On the same date, the Asingan FACOMA assigned its rights to the appellant, Agricultural Credit Cooperativ Coope rative e and Financing Administ Administratio ration n (ACCF (ACCFA A for short), with approval of the
principal and effectivity the surety. of the bond, Ladines converted and misappropriated, to his - During the personal benefit, some P11,513.22 of the FACOMA funds, of which P6,307.33 belonged to the ACCFA. Upon discovery of the loss, ACCFA immediately notified in writing the survey surve y company on 10 October 1958, and prese presented nted the proof of loss within the period fixed in the bond; but despite repeated demands the surety company refused and failed to pay. Whereupon, ACCFA filed suit against appellee on 30 May 1960. - Defendant Alpha Insurance & Surety Co., Inc., (now appellee) moved to dismiss the complaint for failure to state a cause of action, giving as reason that (1) the same was filed more than one year after plaintiff made claim for loss, contrary to the eighth condition of the bond, providing as follows: EIG EIGHT HT LIMITAT LIMITATION ION OF ACT ACTION: ION: No action action,, suit suit or pro procee ceedin ding g shall shall be had or maintained upon this Bond unless the same be commenced within one year from the time of making claim for the loss upon which such action, suit or proceeding, is based, in accordance with the fourth section hereof. (2) the complaint failed to show that plaintiff had filed civil or criminal action against Ladines, as required by conditions 4 and 11 of the bond; and (3) that Ladines was a necessary and indispensable party but had not b een joined as such. - At first, the Court of First Instance denied dismissal; but, upon reconsideration, the court reversed its original stand, and dismissed the complaint on the ground that the action was filed beyond the contractual limitation period. Hence, this appeal. ISSUE WON the provision of a fidelity bond that no action shall be had or maintained thereon unless commenced within one year from the making of a claim for the loss upon which the action is based, is valid, in view of Section 61-A of the Insurance Act invalidating stipulations limiting the time for commencing an action thereon to less than one year from the time the cause of action accrues
- Contractual limitations contained in insurance policies are regarded with extreme jealousy by courts and will be strictly construed against the insurer and should not be permitted to prevent a recovery when their just and honest application would not produce that result. (46 C. J. S. 273.) Disposition Judgment appealed from is REVERSED with respect to the carrier and its agents but AFFIRMED with respect to the insurance company and its agents.
HELD NO - A fidelity bond is, in effect, in the nature of a contract of insurance against loss from misconduct, and is governed by the same principles of interpretation. Consequently, the condition of the bond in question, limiting the period for bringing action thereon, is
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pAgE 105 subject to the provisions of Section 61-A of the Insurance Act (No. 2427), as amended by Act 4101 of the pre-Commonwealth Philippine Legislature, prescribing that: SEC. 61-A: A condition, stipulation or agreement in any policy of insurance, limiting
WON the suit against the agent tolled the prescription period, such that the filing against Fulton was only 9 months after the claim was rejected
the time for commencing an action thereunder a period of less than one year from the time when the cause of action accrues is to void. - Since a "cause of action" requires, as essential elements, not only a legal right of the plaintiff and a correlative obligation of the defendant but also "an act or omission of the defendant in violation of said legal right," the cause of action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty (in this case, to pay the amount of the bond). The year for instituting action in court must be reckoned, therefore, from the time of appellee's refusal to comply with its bond; it can not be counted from the creditor's filing of the claim of loss, for that does not import that the surety company will refuse to pay. In so far, therefore, as condition eight of the bond requires action to be filed within one year from the filing of the claim for loss, such stipulation stipulation contradict contradicts s the public policy expressed in Secti Section on 61-A of the Philippine Insurance Act. - Condition eight of the bond, therefore, is null and void, and the appellant is not bound to comply with its provisions. The discouraging of unnecessary litigation must
HELD NO - The bringing of the action against the Paramount Surety & Insurance Company, the agent of the defendant company, cannot have any legal effect except that of notifying the agent of the claim. Beyond such notification, the filing of the action can serve no other purpose. There is no law giving any effect to such action upon the principal. Besides, there is no condition in the policy that the action must be filed against the agent, agent, and the Cour Courtt can not by int interp erpret retati ation on ext extend end the clear clear sco scope pe of the agreement beyond what is agreed upon by the parties. - Their contract is the law between the parties, and their agreement that an action on a claim denied by the insur insurer er must be broug brought ht within one year from the denial, denial, governs, not the rules on the prescription of actions. Disposition The judgment appealed from is hereby set aside and the case dismissed, with costs against plaintiffs-appellees.
be deemed a rule of public policy, considering the unrelieved congestion in the courts. As a consequence of the foregoing, action may be brought within the statutory period of limitation for written contracts (New Civil Code, Article 1144).
TRAVELLERS INSURANCE & SURETY CORP. v. CA (MENDOZA) 272 SCRA 536 HERMOSISIMA, JR; May 22, 1997
ANG v. FULTON FIRE INSURANCE CO. 2 SCRA 945 LABRADOR; July 31, 1961 NATURE Appeal from judgment of the CFI ordering the defendant Fulton Fire Insurance Co. to pay the plaintiffs plaintiffs the sum of P10,000.00, P10,000.00, with interest, and an additional additional sum of P2,000.00 as attorney's fees, and costs. FACTS - The stocks of general merchandise in the store of the Ang spouses are insured with Fulton. While the insurance was in force, fire destroyed the goods. The Angs filed their first claim immediately after the fire. - Their claim was denied on April 6, 1956. They received notice on April 19, 1956. - The Angs brought an action against the agent on May 11, 1956. The court denied the suit and the mfr on Sept. 3 and 12, 1957. - The Angs filed against Fulton on May 26, 1958. - There was a clause in the policy: 13.If the claim be in any respect fraudulent, fraudulent, or if any false declar declaration ation is made or used in support thereof, or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under this Policy, or, if the loss or damage be occasioned by the wilful act or with the connivance of the Ins Insure ured, d, or, if the claim be made and reject rejected ed and an action action or suit be not commenced commenc ed within within twelv twelve e months after such rejection rejection or (in case of arbitration
NATURE The petition herein seeks the review and reversal of the decision of respondent Court of Appeals affirming in toto the judgment of the Regional Trial Court in an action for damages filed by private respondent Vicente Mendoza, Jr. as heir of his mother who was killed in a vehicular accident. FACTS -an old lady was hit by a taxicab. The taxicab was later identified and a case was filed against the driver and owner. Later, an amendment was filed to include the insurance compan com pany. y. RTC and CA ordere ordered d that that the owner, owner, dri driver ver as wel welll as the insur insuranc ance e company be held solidarily liable. ISSUE WON RTC and CA erred HELD YES - Where the contract provides for indemnity against liability to third persons, then third persons to whom the insured is liable can sue the insurer. Where the contract is for indemnity against actual loss or payment, payment, then third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him thru payment to third persons, said third persons' recourse being being thus limi limited ted to the insu insured red alo alone. ne. But in the case at bar, ther there e was no contract shown. What then was the basis of the RTC and the CA to say that the insura insurance nce contra contract ct was a thi thirdrd-par party ty lia liabil bility ity in insur suranc ance e policy policy? ?
taking place in pursuance of the 18th condition this Policy) within twelve after the arbitrator or arbitrators or umpire shallofhave made their award all months benefit under this Policy shall be forfeited." forfeited ." ISSUE
Consequent Conse quently, ly, the trial court was confus confused ed as it did not distingu distinguish ish between the private respondent's cause of action against the owner and the driver of the Lady Love taxicab and his cause of action against petitioner. The former is based on torts and quasi-delicts while the latter is based on contract. - Even assuming arguendo that there was such a contract, private respondent's cause of action can not prevail because he failed to file the written claim mandated by
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pAgE 106 the Insurance Code (before it was amended-action must be brought within six months from date of the accident (this is what’s applicable here) ; after amendment- "action or suit for recovery of damage due to loss or injury must be
> It cites Art. 220711 and Art. 130412 of the Civil Code, and claims a preferred right to retain retai n the amount coming from San Miguel Miguel,, despi despite te the subro subrogatio gation n in favor of ZENITH.
broug brought prope proper r cases, with the Commissioner Court Courts s within one year from denialhtofinthe claim, otherwise the Commissi claimant'soner rightorofthe action shall prescribe" ) . He is deemed,, under this legal provision, deemed provision, to have waived his right rights s as against petition petitionererinsurer. Disposition petition granted
Respondent’s > There was noArguments qualifi qualificatio cation n to its right of subrogati subrogation on under the Relea Release se of Claim executed by petitioner, the contents having expressed all intents and purposes of the parties.
SUN INSURANCE v. CA (supra p.57) COASTWISE v. CA (supra p.70) CEBU SHIPYARD v. WILLIAM LINES (supra p.3) MANILA MANIL A MAHOGANY MAHOGANY MANUFACTURING MANUFACTURING CORP v. CA (ZENIT (ZENITH H INSURANCE CORP) 154 SCRA 652 PADILLA; October 12, 1987 NATURE Petition to review CA decision ordering Manila Mahogany Manufacturing Corporation to pay Zenith Insurance Corporation P5,000 with 6% annual interest, attorney's fees, and costs of suit FACTS - From 6 March 1970 to 6 March 1971, MLA MAHOGANY insured its Mercedes Benz 4door sedan with ZENITH. - On 4 May 1970, the insured vehicle was bumped and damaged by a truck owned by San Miguel Corporation. For the damage caused, ZENITH paid MLA MAHOGANY P5,000 in amicable settlement. settlement. MLA MAHOGAN MAHOGANY's Y's general manager executed a Release Release of Claim, subrogating respondent company to all its right to action against San Miguel Corporation. - On 11 Dec 1972, ZENITH wrote Insurance Adjusters, Inc. to demand reimbursement from San Miguel. Insurance Adjusters, Inc. refused reimbursement, alleging that San Miguel had already paid petitioner petitioner P4,500, as evidenced evidenced by a cash voucher and a Release of Claim executed by the General Manager of petitioner. - ZENITH thus demanded from petitioner reimbursement of the sum of P4,500 paid by San Miguel. - City Court ordered petitioner to pay respondent P4,500. - CFI affirmed the City Court's decision in decision in toto. toto. - CA affirned CFI, with the modification that petitioner was to pay the total amount of P5,000 it had earlier received from ZENITH. Petitioner’s Claims
ISSUE WON the insurer may recover the sum of P5,000 HELD YES Ratio Rati o Since the insurer can be subrogated to only such rights as the insured may have, should the insur insured, ed, after receiv receiving ing payment from the insurer, release the wrongdoer who caused the loss, the insurer loses his rights against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the release was made with the consent of the insurer. Reasoning - Although petitioner’s right to file a deficiency claim against San Miguel is with legal basis,, witho basis without ut preju prejudice dice to the insurer's right of subro subrogatio gation, n, nevert nevertheless heless,, when Manila Mahogany executed another release claim discharging San Miguel from "all actions, claims, demands and rights of action that now exist or hereafter arising out of or as a consequence consequence of the accident accident"" after the insur insurer er had paid the proceeds of the policy - the compromise agreement of P5,000 being based on the insurance policy the insurer is entitled to recover from the insured the amount of insurance money paid. Since petitioner by its own acts released San Miguel, thereby defeating private respondent’s right of subrogation, the right of action of petitioner against the insurer was also nullified. - As held in Phil. Air Lines v. Heald Lumbe Lumberr Co., under Art. 2207, the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured. SUBROGATION: The right of subrogation can only exist after the insurer has paid the insured, otherwise the insured will be deprived of his right to full indemnity. If the insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may sue the party responsible for the damage for the remainder. To the extent of the amount he has already received from the insurer enjoys the right of subrogation. Disposition Petition DENIED. Judgment appealed from is AFFIRMED with costs against petitioner.
PIONEER INSURANCE v. CA (BORDER MACHINERY & HEAVY EQUIPMENT INC) 175 SCRA 668 11
Article 2207: “If the plaintiff's property has been insured, and he has received indemnity from the insurance
> rogati It ation is on notinbound bou nd Releas to pay P4,500, 00,imand much muccuted h ed more, P5,000 ZENITH ZEN ITH as the subrog sub the Release e P4,5 of Cla Claim it execut exe in P5, favor fav000 or oftorespon res ponden dent t was conditioned on recovery of the total amount of damages petitioner had sustained. Since total damages were valued by petitioner at P9,486.43 and only P5,000 was received by petitioner, MLA MAHOGANY argues that it was entitled to go after San Miguel to claim the additional P4,500.
company for the injury or loss arising out of the wrong or breach of contract complained of the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.” 12
Article 1305: “A creditor, to whom partial payment has been made, may exercise his right for the remainder, and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit.”
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pAgE 107 GUTIERREZ, JR.; July 28, 1989 NATURE
Petitions for review on certiorari of a decision of the CA FACTS - In 1965, Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air Lines (SAL), a single proprietorship. -On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract for the sale and purchase of two (2) DC-3A Type aircrafts and one (1) set of necessary spare parts for the total agreed price of US $109,000.00 to be paid in installments. - On May 22, 1965, Pioneer Insurance and Surety Corporation, as surety, executed and issued its Surety Bond No. 6639 in favor of JDA, in behalf of its principal, Lim, for the balance price of the aircrafts and spare parts. -Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto Modest o Cervantes Cervantes (Cervantes (Cervanteses) es) and Const Constancio ancio Maglana contr contribute ibuted d some funds used in the purchase of the above aircrafts and spare parts. They executed two (2) separate separa te indemnity agreements agreements in favor of Pioneer, Pioneer, one signed by Maglana and the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses. - On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts. - Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety. - Pioneer paid a total sum of P298,626.12. - Pioneer Pioneer then filed a petition petition for the extrajudi extrajudicial cial foreclosure foreclosure of the said chatt chattel el mortgage before the Sheriff of Davao City. - The Cervanteses and Maglana, however, filed a third party claim alleging that they are co-owners of the aircrafts, - On July 19, 1966, Pioneer filed an action for judicial foreclosure with an application
for a writ ofand preliminary Bormaheco Maglana. attachment against Lim and respondents, the Cervanteses, **Maglana, **Magl ana, Bormaheco Bormaheco and the Cerva Cervanteses nteses filed cross-claim cross-claims s again against st Lim alleging alleging that they were not privies to the contracts signed by Lim and, by way of counterclaim, sought for damages for being exposed to litigation and for recovery of the sums of money they advanced advanced to Lim for the purchase purchase of the aircr aircrafts afts in question. (this (this constitutes consti tutes the second petition petition but will no longer be discussed discussed because it is not relevant to the topic) topic) - After After trial on the meri merits, ts, a decisi decision on was render rendered ed hold holding ing Lim liable liable to pay Pioneer but dismissed Pioneer's complaint against all other defendants. - CA modified the trial court's decision in that the plaintiff’s complaint against all the defendants (including Lim) was dismissed. ISSUE WON the petition of Pioneer Insurance and Surety Corporation against all defendants
reinsurance in the sum of P295,000, and paid with the said amount the bulk of its alleged liability to JDA under the said surety bond. The total amount paid by Pioneer to JDA is P299,666.29. Since Pioneer has collected P295,000.00 from the reinsurers, the uninsured what it paid JDA isPioneer the difference between the two amounts, or P3,666.28.portion This is of the amount fortowhich may sue defendants, assuming that the indemnity agreement is still valid and effective. But since the amount realized from the sale of the mortgaged chattels are P35,000.00 for one of the airplanes and P2,050.00 for a spare engine, or a total of P37,050.00, Pioneer is still overpaid by P33,383.72. Therefore, Pioneer has no more claim against defendants. - The payment to the petitioner made by the reinsurers was not disputed. Considering this admitted payment, the only question was the effect of payment made by the reinsurers to the petitioner - In general a reinsurer, on payment of a loss acquires the same rights by subrogation as are acquired in similar cases where the original insurer pays a loss (Universal Ins. Co. v. Old Time Molasses Co.). - The rules of pra practi ctice ce in action actions s on origin original al ins insura urance nce polic policies ies are in gene general ral applicable to actions or contracts of reinsurance (Delaware, Ins. Co. v. Pennsylvania Fire Ins. Co.). - Hence the applicable law is is Article 2207 of the new Civil Civil Code, to wit: Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury - If a property is insured and the owner receives the indemnity from the insurer, it is provided in said article that the insurer is deemed subrogated to the rights of the insured insur ed against the wrongdoer and if the amount paid by the insurer does not fully cover the loss, then the aggrieved party is the one entitled to recover the deficiency. Evidently, under this legal provision, the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured (. Air Lines, Inc. v. Heald Lumber Co Co., ., an an d Manila Mahogany Manufa Manufacturi cturing ng Corpo Corporatio ration n v. Court of Appeals) - It is clear from the records that Pioneer sued in its own name and not as an attorneyin-fact of the reinsurer. Accordingly, the appellate court did not commit a reversible error in dismi dismissing ssing the petit petitioner ioner's 's complaint as again against st the responden respondents ts for the reason that the petitioner was not the real party in interest in the complaint and, therefore, has no cause of action against the respondents. Disposition Petitions dismissed. Questioned decision of CA affirmed.
PAN MALAYAN INSURANCE CORPORATION v. CA (FABIE, HER UNKNOWN DRIVER) 184 SCRA 54 CORTES, April 3, 1990
was rightly dismissed
NATURE PETITION to review the decision of the Court of Appeals
HELD YES - Both the TC and CA made the finding that Pioneer reinsured its risk of liability under the surety bond it had executed in favor of JDA, collected collected the proce proceeds eds of such
FACTS - Pan Malayan Insurance Company (Panmalay) (Panmalay) insured the Mitsubishi Colt Lancer car registered in the name of Canlubang Automotive Resources Corporation (Canlubang)
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pAgE 108 under its motor vehicle insurance policy. Among the provisions of the policy was a “own-damage” clause whereby Panmalay agrees to indemnify Canlubang in cases of damage caused by “accidental collision or overturning, or collision or overturning
death death of or bod bodily ily injuries injuries suffered suffered by 3rd parties) parties) and from “Property “Property Damage” Damage” coverage (liabilities coverage (liabilities from damage caused by insur insured ed vehicle to prope properties rties of 3rd parties)
consequent upon mechanical breakdown or and consequent upon tear” . Erlinda - On 1985, the insured car was sideswept damaged by wear a car and owned by Fabie, driven by an unknown driver who fled the scene. Panmalay, in accordance with the policy, defrayed the cost of repair of the insured car and was subrogated to the rights of Canlubang against the driver and owner of the pick-up. Panmalay then filed a complaint compla int for damages with RTC Makati against Erlinda Erlinda Fabie and her driver on the grounds of subrogation, with the latter failing and refusing to pay their claim. Fabie filed a Motion for Bill of Particulars. - RTC: dismissed complaint for lack of cause of action (payment by PANMALAY of CANLUBANG's CANLUBA NG's claim under the "own damage" clause of the insurance insurance policy was an admission admiss ion by the insurer that the damage was caused caused by the assured and/or its representatives) – Panmalay appealed - CA: dismissed appeal, affirmed RTC (applying the ejusdem generis rule held that Section III-1 of the policy, which was the basis for settlement of CANLUBANG's claim, did not cover damage arising from collision or overturning due to the negligence of
ON CA: the CA: terms of which a contract are to thereto be construed according the of sense and meaning of the terms the parties have used. In theto case property insurance policies, the evident intention of the contracting parties, i.e., the insurer and the assured, determine the import of the various terms and provisions embodied in the policy. It is only when the terms of the policy are ambiguous, equiv equivocal ocal or uncertain, such that the parties themselves disagree about the meaning of particular provisions, that the courts will intervene. In such an event, the policy will be construed const rued by the courts liberally liberally in favor of the assured and strictl strictly y against the insurer - Both Panmalay and Canlubang had the same interpretation regarding the coverage of insured risk regarding “accidental collision or overturning…” to include damages caused by 3rd party to Canlubang Canlubang so it was improper for CA to ascribe ascribe meaning contrary to the clear intention and understanding of the parties. - Court on severa severall occasions defined “accide “accident” nt” or “acci “accidental dental” ” as taking place “without “without one’s foresi foresight ght or expectatio expectation, n, an event that proceeds from an unkno unknown wn
third parties as one of the insurable risk) ISSUE WON 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 parti es allegedly allegedly respons responsible ible for the damage caused to the insured vehicle vehicle,, in accordance with A2207, NCC HELD YES Ra Rati tio o Articl Article e 2207 of the Civil Code is founded on the well-settle well-settled d 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 assignment to the former of all remedies which 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 privi ty of contract contract or upon written assignment assignment of claim. It accrues accrues simply upon payment of the insurance claim by the insurer Exceptions (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
cause, or is an unusual effect of a known cause and, therefore, not expected” [Dela Cruz v. Capital Capital Insurance & Surety Co.] The concept concept "accid "accident" ent" is not necessari necessarily ly synonymous with the concept of "no fault". It may be utilized simply to distinguish intentional or malicious acts from negligent or careless acts of man. - dam damage age/lo /loss ss to ins insure ured d vehicl vehicle e due to neglig negligence ence of 3rd parti parties es not liste listed d as exceptions to coverage in the insurance policy - Interpretation given by Panmalay is more in keeping with rationale behind rules on interpretation of insurance contracts in favor of assured or beneficiary: indemnity or payment - EVEN if voluntarily voluntarily indemnifi indemnified ed Canlubang, as interpreted interpreted by TC: the insurer insurer who may have no rights of subrogation due to "voluntary" payment may never. theless recover from the third party responsible for the damage to the insured property under Article 1236 of the Civil Code. [Sveriges Angfartygs Assurans Forening v. Qua Chee Gan] GRANTED. D. Petit Petitioner ioner's 's compl complaint aint for damage damages s Dispositi Disp osition on the present petition is GRANTE against private respondents is hereby REINSTATED. Let the case be remanded to the lower court for trial on the merits.
FIRE FIREMA MAN' N'S S FUND FUND INSURA INSURANC NCE E COMPANY, INC. 70 SCRA 323 AQUINO; April 1976
COMP COMPAN ANY Y
v. JAMILA JAMILA &
FACTS - Jamila & Co., Inc. or the Veterans Philippine Scouts Security Agency contracted to supply security guards to Firestone. Jamila assumed responsibility for the acts of its security guards. The First Quezon City Insurance Co., Inc. executed a bond in the sum of P20,000 to guarantee J amila's obligations under that contract.
against the third party liable for the loss Reasoning - Both TC and CA are incorrect. “Own damage damage” ” (not (not found found in the insur insuranc ance e policy policy)) simply simply meant that that ON TC: “Own Panmalay had assumed to reimburse the cost for repairing the damage to the insured vehicle. It’s different from “Third Party Liability” coverage (liabilities arising from the
- On May 18, 1963 properties of Firestone Firestone valued at P11,925 were lost allegedly allegedly due to the acts of its employees who connived with Jamila's security guard. Fireman's Fund, as insurer, paid to Firestone Firestone the amount of the loss. Fireman's Fund was subrogated subro gated to Firestone's Firestone's righ rightt to get reimbursement reimbursement from Jami Jamila. la. Jamila and its surety, First Quezon City failed to pay the amount of the loss in spite of repeated demands.
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pAgE 109 - Upon defendant's motions, the lower court dismissed dismissed the complaint as to Jamila on on the ground that there was no allegation that it had consented to the subrogation and, therefore, Fireman's Fund had no cause of action against it. It also dismissed the
Article Article 2207 is a restatement restatement of a set settled tled pri principl nciple e of America American n jurisp jurisprudenc rudence. e. Subrogation has been referred to as the doctrine of substitution. It is an arm of equity that may guide or even force one to pay a debt for which an obligation was incurred
complaint aswas to First Quezonfiled Cityinon of reswas judicata. It appears that the same action previously a the civilground case which dismissed because of the failure of the same plaintiffs and their counsel to appear at the pre-trial. - Upon an MR, the lower cour courtt set aside its order of dismissal and sustained plaintiff's contention conten tion that there there was no res judicata judicata as to First Quezon City becaus because e the civil case was dismissed without prejudice. However, due to inadvertence, the lower court did not state in its order why it set aside its prior order dismissing the complaint with respect to Jamila. Jamilla had originally moved for the dismissal of the complaint on the ground of lack of cause of action. Its basis for its contention were: (1) that the complaint did not allege that Firestone, pursuant to the contractual stipulation quoted in the complaint, had investigated the loss and that Jamila was represented in the investigation and (2) that Jamila did not consent to the subrogation of Fireman's Fund to Firestone's right to get reimbursement from Jamila and its surety. The lower court in its order of dismissal had sustained the second ground. - Jamila in its MR invoked the first ground which had never been passed upon by the the
which was in is whole or in part paidiples by another. -but Subrog Subrogation ation founded founded on princ principles of just justice ice and equit equity, y, and its operati operation on is governed by principles governed principles of equity. equity. It rests on the principle that substanti substantial al justice justice should be attained regardless of form, that is, its basis is the doing of complete, essential, and perfect justice between all the parties without regard to form. - Subrogation is a normal incident of indemnity indemnity insurance. Upon payment of the loss, the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the third person whose negligence or wrongful act caused the loss. The right of subrogation is of the highest equity. The loss in the first instance is that of the insured but after reimbursement or compensation, it becomes the loss of the insurer. - Altho Although ugh many policies policies including including pol policies icies in the st standard andard fo form, rm, now provide provide for subrogation, and thus determine the rights of the insurer in this respect, the equitable right of subrogation as the legal effect of payment inures to the insurer without any formal assignment assignment or any express stipula stipulation tion to that effect in the policy. Stated
lowerr cour lowe court. t. But the the lo lowe werr cour courtt in its its or orde derr gran granti ting ng Jami Jamila la's 's mo moti tion on fo forr reconsideration, completely ignored that first ground. It reverted to the second ground which was relied upon in its order previous order. The lower court reiterated its order, stating that Fireman's Fund had no cause of action against Jamila because Jamila did not consent to the subrogation. The court did not mention Firestone, the co-plaintiff of Fireman's Fund. - Firestone and Fireman's Fund fi filed led an MR on the grou ground nd that Fireman's Fund was suing suing on the basis basis of legal legal subrog subrogati ation on whe wherea reas s the low lower er court court errone erroneous ously ly pre predic dicate ated d its dis dismis missal sal order on the theory theory that that there there was no conven conventio tional nal subrogation because the debtor's consent was lacking. The plai plaintiff ntiffs s cited article article 2207 2207 of the Civil Civil Code whi which ch provi provides des that "if "if the pla plaint intiff iff's 's pro proper perty ty has been been ins insure ured, d, and he has receiv received ed ind indemn emnity ity fro from m the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract". - The lower court denied plaintiff's motion. They filed filed a second MR, calling calling the lower court's attention to the fact that the issue of subrogation was of no moment because Firestone, the subrogor, is a party-plaintiff and could sue directly Jamila in its own right. Without resolving that contention, the lower court denied plaintiffs' second MR.
otherwise, when the insurance company pays for the loss, such payment operates as an equitable assignment to the insurer of the property and all remedies which the insured may have for the recovery thereof. That right is not dependent upon, nor does it grow out of, any privity of contract, or upon written assignm assignment ent of claim, claim, and payment to the insured makes the insurer an assignee in equity. - On the other hand, Firestone iis s really a nominal party in in this case. It had already been indemnified for the loss which it had sustained. Obviously, it joined as a partyplaintiff in order to help Fireman's Fund to recover the amount of the loss from Jamila and First Quezon City. Firestone had tacitly assigned to Fireman's Fund its cause of action against Jamila for breach of contract. Sufficient ultimate facts are alleged in the complaint to sustain that cause of action.
ISSUE WON the complaint of Firestone and Fireman's Fund states a cause of action against Jamila HELD YES - Fireman's Fund's action against Jamila is squarely squarely sanctioned by article 2207. As the insurer, Fireman's Fund is entitled to go after the person or entity that violated its contractual commitment to answer for the loss insured against.
TABACALERA v. NORTH FRONT SHIPPING 272 SCRA 527
BELLOSILLO; May 16, 1997 FACTS - 20,234 sacks of corn grains valued at P3.5M were shipped on board North Front 777, defendant’s vessel. The cargo was consigned to Republic Flour Mills Corp. under Bill of Lading No. 001 and insured with Tabacalera, Prudential Guarantee & Assurance, and New Zealand Insurance. - Republic Flour was advised of the vessel’s arrival in Manila, but did not immediately commence commen ce the unloading operati operations. ons. Unloading was sometimes sometimes stopped due to var varyin ying g weathe weatherr and som someti etimes mes for no app appare arent nt reason reason.. Unl Unload oading ing was only only completed 20 days after the arrival of the barge; by then, the cargo was short 26.333 metric tons and the rest was already moldy and deteriorating. - Analyses showed that the deterioration was caused by moisture content from salt water, which could be arrested by drying. However, Republic Flour rejected the entire
- The trial court erred in applying to to this case the rules on novation. The plaintiffs in alleging in their complaint that Fireman's Fund "became a party in interest in this case by virtue of a subrogation right given in its favor by" Firestone, were not relying on the novation by change of creditors as contemplated in articles 1291 and 1300 to 1303 of the Civil Code but rather on article 2207.
cargo anddemands demanded thatunheeded defendant North Shipping pay the damages suffered by it. The were and the Front insurance companies were obliged to pay Republic Flour P2,189,433 - By virtue of the insurance companies’ payment, they were subrogated to the rights of Republic Flour. Petitioners filed a complaint against North Front Shipping, claiming the loss was exclusiv exclusively ely attribut attributable able to the latter’s fault and negli negligence. gence. Having
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pAgE 110 surveyed the vessel, it was found that the barge had cracks in its bodega. The hatches on the crates of grain were not sealed and the tarpaulins used in covering them were not new, contrary contrary to North Front Shipping’s claims. North Front Shipp Shipping ing reiterated reiterated
1989. On April 1992, petitioner received received private respondent’s claim, which declared that the insured, Florence Pulido, died of acute pneumonia on September 10, 1991. - Petitioner withheld payment on the ground that the policy claimed under was void
that thetobarge was priorThey to loading foundthat seaworthy andwere werefarm issued permit sail by theinspected Coast Guard. furtherand averred the grains weta and not properly dried before loading. - The court dismissed the complaint, complaint, ruling that the contract entere entered d into was a charter-party agreement; as such, only ordinary diligence in the care of the goods was required of North Front Shipping.
from the startthey for having been procured inndent’s fraud. It is petit petitioner ’s contention contentio that even before received received priva private te respondent respo ’s claim for ioner’s death benefits benefits,,n their investigation concerning the subject policy yielded the information that the insured, Florence Pulido, died in 1988, before the application for insurance on her life was made. mad e. While While this this was comm communi unicat cated ed to pri privat vate e respon responden dentt in a letter letter,, pri privat vate e respondent had already filed her claim earlier that month. In another letter, however, petitioner confirmed to private respondent receipt of the claim papers and assured her that her case was “being given preferential attention and prompt action”. - Petitioner caused another another investigation res respecting pecting the subject policy. policy. Pursuant to the findings of this second investigation, petitioner stood by its initial decision to treat the policy policy as void and not to honor honor the clai claim. m. On Nove November mber 9, 1992, priv private ate respon responden dentt enlist enlisted ed the ser servic vices es of counse counsell in reiter reiterati ating ng her claim claim for dea death th benefitsPetitioner still refused to make payment and thus, this action.
ISSUE WON defendant is required to observe extraordinary diligence in its vigilance over the goods it transports HELD YES - As a corporation engaged in the business of transporting cargo offering its services indiscriminately to the public, it is without a doubt a common carrier. As such, it has the burden of proving that it observed extraordinary diligence to avoid responsibility for the lost cargo. The clean bill of lading it issued disprove the master of the vessel’s claim that the grains were farm wet when loaded. If they were wet, the master of the vessel should have known that the grains would eventually deteriorate when sealed in hot compartments in hatches of a ship and should have undertaken precautionary measures to avoid this. The arrival of the goods at the place of destination in bad order makes a prima facie case against the common carrier, which must prove its non-liability. - While petitioners presented evidence of the vessel’s bad shape and a laboratory analysis analy sis revealing that the grains were contaminated contaminated with salt water, defendan defendants ts failed to rebut said arguments or even endeavor to establish that the loss, destruction or deterioration was due to a fortuitous event; an act/omission of the owner of the goods; the character of the goods or defects in their packing; or an order or act of a competent public authority. - However, Republic Flour is also found to be guilty of contributory negligence for not immediately staring the unloading operations and for providing no explanation for the delay. As such, it should share at least 40% of the loss. Disposition The decision of the CA is REVERSED and SET ASIDE
PHILIP PHI LIPPIN PINE E AMERIC AMERICAN AN LIFE LIFE INSURA INSURANCE NCE COMPAN COMPANY Y v. CA (ELIZA PULIDO) 344 SCRA 360 GONZAGA-REYES; November 15, 2000 NATURE This petition for review on certiorari seeks to reverse the Decision of the Special Second Division of the Court of Appeals
ISSUE WON lower court erred in holding that there was no fraud HELD - The records bear out that since the onset of this case, the main issue has always been been whe whethe therr there there was fraud fraud in the obtainme obtainment nt of the dispu disputed ted policy, policy, or put dif differ ferent ently, ly, whet whether her the ins insure ured, d, Flo Floren rence ce Pulido Pulido,, was in fact fact dea dead d bef before ore the applicatio appli cation n for insurance on her life was made. This the lower courts had effect effected ed ruled on, upon a preponderance of the evidence duly received from both parties. We see no reversible error in the finding of both respondent court and the trial court in favor of the correctness of the entries in Certificate of Death, duly registered with the Local Civil Registrar of Bagulin, La Union, which declared that Florence Pulido died of acute pneumonia on September 10, 1991. Dr. Irineo Gutierrez, the Muni Municipal cipal Health Officer Offic er of Bagul Bagulin, in, La Union whose signatur signature e appea appeared red in the death certificat certificate, e, testified testi fied in addition addition that he ministered to the ailing Florence Pulido for two days immediately prior to her death. This fact is likewise noted in in the death certificate. - Death certificates, and notes by a municipal health officer prepared in the regular performance perfo rmance of his dutie duties, s, are prima facie facie evidence evidence of facts therein stated. A dulyregistered death certificate is considered a public document and the entries found therein are presumed correct, unless the party who contests its accuracy can produce positive posit ive eviden evidence ce estab establishi lishing ng other otherwise. wise. Petitioner Petitioner’s ’s conte contention ntion that the death certificate is suspect because Dr. Gutierrez was not present when Florence Pulido died, and knew of Florence’s death only through Ramon Piganto, does not merit a conclusion of fraud. No motive was imputed to Dr. Gutierrez for se seeking eking to perpetuate a falsity in public records. records. Petitioner Petitioner was likewi likewise se unable to make out any clear motive as to why Ramon Piganto Piganto would purposely lie. Mere allegations of fraud could not substitute for the full and convincing evidence that is required to prove it. A failure to do so would leave intact the presumption presumption of good faith and regularity regularity in the performance of public duties, which was the basis of both respondent court and the trial court in findi finding ng the date of Floren Florence ce Pulido’s death to be as plaintiffplaintiff-priva private te
FACTS - On January 9, 1989, petitioner received from one Florence Pulido an application for lif life e ins insura urance nce,, dated dated Decembe Decemberr 16, 198 1988, 8, in the amo amount unt of P100,0 P100,000.0 00.00 0 which which designated her sister, herein private respondent, as its principal principal beneficiary. Because the insurance applied for was non-medical, non-medical, petit petitioner ioner did not require a medica medicall examination and issued a policy on the sole basis of the application on February 11,
respondent maintained. - We cannot likewise give credence to petitioner’s submission that the inconsistencies in the testimonies of the witnesses for plaintiff-private respondent are in themselves evidence of fraud. Such alleged inconsistencies are matte matters rs of credibility which had been ably passed upon by the lower court. Disposition the instant petiti petition on is DENIED
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pAgE 111 ST.PAUL FIRE & MARINE INSURANCE CO v. MACONDRAY & CO INC 70 SCRA 122 ANTONIO; March 25, 1976 FACTS - Winthrop Products, Inc. shipped aboard the SS "Tai Ping", owned and operated by Wilhelm Wilhelmsen, 218 cartons and drums of drugs and medicine, with the freight prepaid, which were consigned to Winthrop-Stearns, Inc. Barber Steamship Lines, Inc., agent of Wilhelm Wilhelmsen issued Bill of Lading No. 34, in the name of Winthrop Products, Inc. as shipper, with arrival notice in-Manila to consignee Winthrop-Stearns, Inc. The shipment was insured by the shipper against loss and/or damage with the St. Paul Fire & Marine Insurance Company. - The SS "Tai Ping" arrived at the Port of Manila Manila and discharged its aforesaid shipment into the custody of Manila Port Service, the arrastre contractor for the Port of Manila. The said shipment was discharged complete and in good order with the exception of one (1) dru drum m and several several carton cartons s which which wer were e in bad order conditio condition. n. Becaus Because e consignee failed to receive the whole shipment and as several cartons of medicine were received in bad order condition, the consignee filed the corresponding claim in the amount of P1,109.67 representing representing the C.I.F. value of the damaged drum and cartons carto ns of medicine with the carrier carrier and the Manila Manila Port Service. Howeve However, r, both refused to pay such claim. Consequently, the consignee filed its claim with the insurer, St. Paul Fire & Marine Insurance Co., the insurance company, on the basis of such claim, paid to the consignee the insured value of the lost and damagcd goods goods,, including inclu ding other expenses in connection connection therewith, therewith, in the total amount of $1,134. $1,134.46 46 U.S. currency. - As subrogee of the rights of' the shipper and/or consignee, the iinsurer, nsurer, St. Paul Fire & Marine Insurance Co., instituted an action against the defendants for the recovery of said amount of $1,134.46, plus costs. - The defendants defendants resisted resisted the action. However, However, for the purpose only of avoiding
litigation without admitting liability to C.I.F. the consignee, the defendants offered to settle the latter’s claim in full by paying the value of the damaged cargo, but this offer was declined by the plaintiff. - The LC rendered judgment ordering ordering the defendants to pay the plaintiff the sum of P300.00.. The plaintiff P300.00 plaintiff filed a MFR contending contending that it should reco recover ver the amount of $1,134.46 or its equivalent in pesos at the rate of P3.90, instead of P2.00, but this was denied. Hence, this appeal. ISSUES 1. WON in case of loss or damage, the liability of the carrier to the consignee is limited to the C.I.F. value of the goods which were lost or damaged 2. WON the insurer who has paid the claim in dollars to the consignee should be reimbursed in its peso equivalent on the date of discharge of the cargo or on the date of the decision
limitation limit ation of the carrier' carrier's s liabi liability lity is sanctioned sanctioned by the freedom of the contracti contracting ng parties to establish such stipulations, clauses, terms, or conditions as they may deem convenient, provided they are not contrary to law, morals, good customs and public policy. A stipulation fixing oroflimiting the is sum that may be itrecovered from theand carrier on the loss or deterioration the goods valid, provided is (a) reasonable just under the circumstances, and (b) has been fairly and fre freely ely agreed upon. In the case at bar, the liabilities of the defendants-appellees with respect to the lost or damaged shipments are expressly limited to the C.I.F. value of the goods as per contract of sea carriage embodied in the bill of lading. - The plaintiff-appellant, as insurer, after paying the claim of the insured for damages under the insurance, is subrogated merely to the rights of the assured. As subrogee, it can recover only the amount that is recoverable by the latter. Since the right of the assured, assur ed, in case of loss or damage to the goods goods,, is limit limited ed or restricted restricted by the provisions in the bill of lading, a suit by the insurer as subrogee necessarily is subject to like limitations and restrictions. 2. On the date of the discharge of the cargo. The peso equiv equivalent alent was based by the consignee on the exchange rate of P2.015 to $1.00 which was the rate existing at that time.
PHILAM v. AUDITOR (supra p.59) FIELDMEN’S v. ASIAN SURETY (supra p.60) EQUITABLE v. RURAL INSURANCE (supra p.60) COQUIA v. FIELDMEN'S INSURANCE CO. INC. 26 SCRA 178 CONCEPCION; November 29, 1968 NATURE
Appeal from the decision of the CFI certified by CA FACTS - December 1, 1961, appellant Fieldmen's Insurance Company, Company, Inc. issued, in favor of the Manila Yellow Taxicab Co., Inc. a common carrier accide accident nt insurance policy policy,, covering the period from December 1, 1961 to December ,1962. It was stipulated in said policy that: "The Company will, subject to the Limits of Liability and under the Terms of this Policy, indemnify the Insured in the event of accident caused by or arising out of the use of Motor Vehicle against all sums which the Insured will become legally liable to pay in respect of: Death or bodily injury to any fare-paying passenger including the Driver, Conductor and/or Inspector who is riding in the Motor Vehicle insured at the time of accident or injury." - While the policy was in force, or on February 10, 1962, a taxicab of the Insured,
HELD 1. YES Ratio The purpose of the bill of lading is to provide for the rights and liabilities of the parties parti es in reference reference to the contract to carry. The stipu stipulati lation on in the bill of ladin lading g limiting the common carrier's liability to the value of the goods appearing in the bill, unless unles s the shipper shipper or owner declares declares a greater greater value, is valid and binding binding.. This
driven by Carlito Coquia, met a vehicular accident to which he died. The Insured filed therefor a claim for P5,000.00 to which the Company replied with an offer to pay P2,000.00, by way of compromise. The Insured rejected it and made a counter-offer for P4,000.00, but the Company did not accept it. - On September 18, 1962, the Insured and Carlito's parents filed a complaint against the Company to collect the proceeds of the policy. policy. In its answer, the Company
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pAgE 112 admitted the existence thereof, but pleaded lack of cause of action on the part of the plaintiffs. - TC rendered a decision sentencing the Company to pay to the plaintiffs the sum of
"If any difference or dispute shall arise with respect to the amount of the Company's liability under this Policy, the same shall be referred to the decision of a single arbitrator to be agreed upon by both parties or failing such agreement of a single
P4,000.00 andno the costs. this appeal by Coquias the Company, contends that plaintiffs have cause of Hence, action because: 1) the have nowhich contractual relation with the Company; and 2) the Insured has not complied with the provisions of the policy concerning arbitration.
arbitrator, to the decision of two arbitrators, one to bebeen appointed in writing by so each of the parties within one calendar month after having required in writing to do by either of the parties and in case of disagreement between the arbitrators, to the decision decision of an umpire who shall shall have bee been n appoin appointed ted in writin writing g by the arbitrators before entering on the reference and the costs of and incidental to the reference shall be dealt with in the Award. And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the award by such arbitrator, arbitrators or umpire of the amount of the Company's liability hereunder if disputed shall be first obtained." - The record shows that none of the parties to the contract invo invoked ked this section, or made any reference to arbitration, during the negotiations preceding the institution of the present case. In fact, counsel for both parti parties es stipulated, stipulated, in the trial court, that non none e of them them had, had, at any time dur during ing said negoti negotiati ations ons,, even even sug sugges gested ted the settlement of the issue between them by arbitration, as provided in said section. Their aforementioned acts or omissions had the effect of a waiver of their respective right to demand an arbitration. Disposition The decision appealed from should be as it is hereby affirmed in toto, with costs against the herein defendant-appellant, Fieldmen's Insurance Co., Inc.
ISSUES 1. WON there was contractual relations between the Coquias and the Company 2. WON the insured has not complied with the provisions of the policy concerning arbitration HELD 1. Although, in general, only parties to a contract may bring an action based thereon, this rule is subject to exceptions, one of which is found in the Art 1311 CC, reading: "If a contr contract act should contain contain some stipulation stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance of the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person." - Does the policy in question belong to such class of contracts pour autrui? In this connection, said policy provides, inter alia: "Secti "Section on I — Li Liabi abilit lity y to Passeng Passengers ers.. 1. The Com Compan pany y will, will, subjec subjectt to the Limi Limits ts of of Liability and under the Terms of this Policy, indemnify the Insured in the event of accident caused by or arising out of the use of Motor Vehicle against all sums which the Insured will become legally liable to pay in respect of: Death or bodily injury to any fare-paying passenger including the Driver. . . who is riding in the Motor Vehicle insured at the time of accident or injury. "Section II. — Liability to the Public "3 "3.. In term terms s of an and d sub subje ject ct to tthe he llim imit itat atio ions ns of a and nd for for the the purpo purpose ses s of this this Section, the Company will indemnify any authorized Driver who is driving the Motor
Vehicle . . . " "Conditions "7 "7.. In the the eve event nt of de deat ath h of any pe pers rson on enti entitl tled ed to in inde demni mnify fy un unde derr thi this s Pol Polic icy, y, the Company will, in respect of the liability incurred by such person, indemnify his personal perso nal representative representatives s in terms of and subject to the limitati limitations ons of this Policy, Policy, provided, that such representatives shall, as though they were the Insured, observe, fulfill and be subject to the Terms of this Policy insofar as they can apply. "8 "8.. The The Compa Company ny may, may, at iits ts opti option on,, mak make e indem indemni nity ty pa paya yabl ble e dir direc ectl tly y to the claimants claima nts or heirs of claimants, with or witho without ut securing the consent of or prior notification to the Insured, it being the true intention of this Policy to protect, to the extent herein specified and subject always to the Terms of this Policy, the liabilities of the Insured towards the passengers of the Motor Vehicle and the Public." - Thus, the policy under consideration is typical of contracts pour autrui, this character being made more manifest by the fact that the deceased driver paid fifty percent (50%) (50%) of the corres correspon pondin ding g pre premiu miums, ms, which which wer were e deduct deducted ed fro from m his wee weekly kly
COUNTRY BANKERS INSURANCE CORP v. LIANGA BAY DE LEON; January 25, 2002 NATURE Petition for review on certiorari FACTS - Lianga Bay is a duly registered cooperative judicially declared insolvent and is here represented by, Cornelio Jamero. Country Bankers Insurance and Lianga Bay entered into a contract of fire insurance. insurance. Country Bankers insured the respo respondent’s ndent’s stocks-intrade against fire loss, damage or liability during the period starting from June 20, 1989 at 4:00 p.m. to June 20, 1990 at 4:00 p.m., for the sum of P200,000.00. - On July 1, 1989, at or about 12:40 a.m., the respondent’s building at Barangay Diatagon, Lianga, Surigao del Sur was gutted by fire, resulting in the total loss of the respondent respo ndent’s ’s stock stocks-in-t s-in-trade, rade, piece pieces s of furnitures furnitures and fixtu fixtures, res, equip equipments ments and records. - Due to the loss, the respondent filed an insurance claim with the petitioner under its Fire Insurance Policy, submitting: (a) the Spot Report of Pfc. Arturo V. Juarbal, INP Investigator, dated July 1, 1989; (b) the Sworn Statement of Jose Lomocso; and (c) the Sworn Statement of Ernesto Urbiztondo. - The petitioner, however, denied the insurance claim on the ground that, based on the submitted documents, the building was set on fire by 2 NPA rebels who wanted to obtain obtai n canned goods, rice and medicine medicines s as provisio provisions ns for their comrade comrades s in the forest, and that such loss was an excepted risk under paragraph No. 6 of the policy
commissions. Under these conditions, it is clear that the Coquias — who, admittedly, are the sole heirs of the deceased — have a direct cause of action against the Company, and, since they could have maintained this action by themselves, without the assistance of the Insured, it goes without saying that they could and did properly join the latter in filing the complaint herein. 2. Based upon Section 17 of the policy:
conditions ofance Fire does Insurance Policyany No. loss F-1397, which provides: This insurance insur not cover or damage occas occasioned ioned by or through through or in consequence, directly or indirectly, of any of the following occurrences, namely: (d) Mutiny, riot, milit military ary or popular popular upris uprising, ing, insurrec insurrection, tion, rebelli rebellion, on, revol revolution ution,, military or usurped power.
iNsuRanCe
A2010
Dean Carale
pAgE 113 Any loss or damage happening during the existence of abnormal conditions (wh (wheth ether er phy physic sical al or otherw otherwise ise)) which which are occasione occasioned d by or throug through h or in consequence, directly or indirectly, of any of said occurrences shall be deemed to
- In the evening of July 27, 1988, the radio station of Radio Mindanao Network located at the SSS Building in Bacolod City was burned down causing damage in the amount of over one million pesos. Respondent sought to recover under two insurance policies
be or damage whichthat is not covered bydamage this insurance, except to theently extent theloss Insured shall prove such loss or happened independently independ ofthat the existence of such abnormal conditions. - Finding the denial of its claim unacceptable, Lianga Bay then instituted in the trial court court the comp complai laint nt for recove recovery ry of "loss, "loss, dam damage age or lia liabil bility ity"" agains againstt Countr Country y Bankers. - RTC ruled in favor of the cooperative. cooperative. CA affirmed.
but thecondition claims were on(d), thetobasis under no. 6denied (c) and wit: that the case of the loss was an excepted risk 6. This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of any of the following consequences, namely: (c) War, invasion, act of foreign enemies, hostilities, or warlike operations (whether war be declared or not), civic war. (d) Mutiny, riot, military or popular uprising, insurrection, rebellion, revolution, military or usurped power. - The insurers maintained that based on witnesses and evidence gathered at the site, the fire was caused by the members of the Commun Communist ist Party of the Philippi Philippines/N nes/New ew People’s Army. Hence the refusal to honor their obligations. - The trial court and the CA found in favor of the respondent. In its findings, both courts mentioned the fact that there was no credible evidence presented that the CCP/NPA did in fact cause the fire that gutted the radio station in Bacolod.
ISSUE WON the cause of the loss was an excepted risk under the terms of the fire insurance policy HELD - Where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss comes within the purview of the exception or limitation set up. If a proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability. Stated else wise, since Country bank here is defending on the ground of non-coverage and relying upon an exemption exempt ion or exception exception clause in the fire insurance insurance policy policy it has the burden of proving the facts upon which such excepted risk is based, by a preponderance of evidence. But petitioner failed to do so. - The petition petitioner er relies relies on the Sworn Statem Statement ents s of Jos Jose e Lomocso Lomocso and Ern Ernest esto o Urbiztondo Urbizt ondo as well as on the Spot Report of Pfc. Arturo V. Juarbal. A witness can testify testi fy only to those facts which he knows of his personal knowledge, knowledge, which means those facts which are derived from his perception. Consequently, a witness may not
ISSUE WON the insurance companies are liable to pay Radio Mindanao Network under the insurance policies HELD YES - The Court will not disturb the factual findings of the appellant and trial courts absent compelling reason. Under this mode of review, the jurisdiction of the court is limited to reviewing only errors of law. - Particularly in cases of insurance disputes with regard to excepted risks, it is the insurance companies which have the burden to prove that the loss comes within the purview of the exception or limitation set up. It is sufficient for the insured to prove the fact of damage or loss. Once the insured makes out a prima facie case in its favor, the duty or burden of evidence shifts to the insurer to controvert said prima facie
testify as to what Such he merely learned from others hearsay either because he not wasbe told or read or heard the same. testimony is considered and may received as proof of the truth of what he has learned. appealed Decision Decision is MODIFIED. The rate of int intere erest st on the Disposition the appealed Disposition adjudged principal amount of Two Hundred Thousand Pesos (P200,000.00) shall be six percent (6%) per annum computed from the date of filing of the Complaint in the trial court. The awards in the amounts of Fifty Thousand Pesos (P50,000.00) as actual damages, Fifty Thousand Pesos (P50,000.00) as exemplary damages, Five Thousand Pesos (P5,000.00) as litigation expenses, and Ten Thousand Pesos (P10,000.00) as attorney?s fees are hereby DELETED.
case. Disposition Petition dismissed. Decision of the CA is affirmed. Disposition
DBP POOL OF ACCREDITED INSURANCE v. RADIO MINDANAO NETWORK 480 SCRA 314
FACTS - Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries for the shipment of 900 metric tons of silica sand valued at P565,000. Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to
LEA MER INDUSTRIES v. MALAYAN INSURANCE 471 SCRA 698 PANGANIBAN; September 30, 2005 NATURE Petition for Review
Manila. The silica sand was placed on board board Judy Judy VII, VII , a barge leased by Lea Mer, the vessel sank, resulting in the loss of the cargo.
MARTINEZ; January 27, 2006 NATURE Petition for certiorari
ISSUE WON Lea Mer is liable for the loss of the cargo
FACTS
iNsuRanCe
A2010
Dean Carale
pAgE 114 HELD YES - Common carriers are bound to observe extraordinary diligence diligence in their vigilance over
- June 25, 1984 - Captain Montera Montera of M/V Weasel ordered Weasel ordered the vessel to be forced aground agrou nd which rendered the entire shipme shipment nt of cement as good as gone due to exposure expos ure to sea water water.. LOAST LOASTAR AR thus failed to deliv deliver er the goods to MARKET in
the goods andess theand safety the passengers as required by therequires nature of their busin business forof reasons of public publicthey policy. polictransport, y. Extrao Extraordin rdinary ary diligence requir es render rendering ing servi service ce with with the gre greate atest st skill skill and for foresi esight ght to avo avoid id dam damage age and destruction to the goods entrusted for carriage and delivery. - Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have transported transported.. This presumption presumption can be rebutted only by proof that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the following causes: “(1) Flood, storm, earthquake, lightning, or other natural disaster disaster or calamity; “(2) Act of the public enemy in war, whether international or civil; “(3) Act or omission of the shipper or owner of the goods; “(4) The character of the goods or defects in in the p packing acking or in the containers; “(5) Order or act of competent public public authority.” - To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and only cause of the loss. It should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the event. - Petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that the loss had been occasioned by a fortuitous event -- an exempting circumstance. - The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient. It was not enough for the common carrier to show that there was an unforeseen or unexpected occurrence. Petiti Petition on is DEN DENIED IED and the assail assailed ed Decisi Decision on and Resolu Resolutio tion n are Dispositio Dispo sition n
Manila. - MARKET demanded from LOADSTAR full reimbursement reimbursement of the cost of the lost shipment. LOADSTAR refused to reimburse the MARKET despite despite repeated demands. - March 11, 1985 – PIONEER paid the MARKET P1,400,000 plus an additional amount of P500,000, the value of the lost shipment of cement. In return, the MARKET executed a Loss Loss and Sub Subrog rogati ation on Receip Receiptt in favor favor of PION PIONEER EER concer concernin ning g the latter latter’s ’s subrogation rights against LOADSTAR. - October 15, 1986 – PIONEE PIONEER R filed a compla complaint int against LOADST LOADSTAR AR with the RTC Manila alleging that: (1) the M/V Weasel was Weasel was not seaworthy at the commencement of the voyage; (2) the weather and sea conditio conditions ns then prevai prevailing ling were usual and expected for that time of the year and as such, was an ordinary peril of the voyage for whic which h the the M/V Wease Weasell should should have been normal normally ly able to cope with; with; and (3) LOADSTAR was negligent in the selection and supervision of its agents and employees then manning the M/V Weasel. Weasel. - LOADSTAR alleged that no fault nor negligence could be attributed to it because it exercised due diligence to make the ship seaworthy, as well as properly manned and equipped and failure to deliver was due to force majeure. majeure. - February 15, 1993 - RTC decided in favor of PIONEER and that LOADSTAR , as a common carrier, bears the burden of proving that it exercised extraordinary diligence in its vigilance over the goods it transported. The trial court explained that in case of loss or destruction of the goods, a statutory presumption arises that the common carrier carri er was negli negligent gent unless it could prove that it had observed extrao extraordinar rdinary y diligence. LOADSTAR’S defense of force majeure was majeure was found bereft of factual basis as a PAG-ASA report that at the time of the incident, tropical storm “ Asiang “ Asiang” ” had moved away from the Philippines was presented. - October 15, 2002 – CA affirmed RTC Decision with modification
AFFIRMED. Costs against against petitioner.
LOADSTAR SHIPPING CO INC v. PIONE LOADSTAR PIONEER ER ASIA INSURANC INSURANCE E CORP GR No. 157481 QUISUMBING; January 24, 2006 NATURE Review on certiorari (1) the Decision dated October 15, 2002 and (2) the Resolution dated February 27, 2003 of CA FACTS - June 6, 1984 - Petitioner Loadstar Shipping Co., Inc. (LOADSTAR), registered owner and operator of the vessel M/V Weasel, Weasel, entered into a voyage-charter with Northern Mindanao Transport Company, Inc. for the carriage of 65,000 bags of cement from Iligan City to Manila. The shipper was Iligan Cement Corporation, while the consignee in Manila was Market Developers, Inc. (MARKET) - Jun June e 24, 1984 - 67,500 67,500 bags of ceme cement nt were loaded loaded on board board M/V Weasel Weasel and
ISSUES 1. WON LOADSTAR is a common carrier under Article Article 1732 CC
2. Assuming Assumi ng it isevent a common carr carrier, ier, WON proxi proximate causeof ofpetitioner the loss oftocargo was not a fortuitous but was allegedly due to mate the failure exercise extraordinary diligence HELD 1. YES - A1732 CC defines a “common carrier” as follows: Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. - LOADSTAR is a corporation engaged in the business of transporting cargo by water and for compen compensatio sation, n, offering its servi services ces indiscrimi indiscriminatel nately y to the publi public. c. Thus, without witho ut doubt, it is a common carr carrier. ier. Even if it entered into a voyage-char voyage-charter ter agreement with Northern Mindanao Transport Company, Inc, it did not in any way
stowed in the cargo holds for delivery to the consignee. The shipment was covered by
convert the common carrier into a private carrier.
petitioner’s Bill of Lading dated June 23, 1984. - Prior to the voyage, the consignee insured the shipment of cement with respondent Pioneerr Asia Insurance Pionee Insurance Corporatio Corporation n (PIONEER) (PIONEER) for P1,400,0 P1,400,000, 00, for which it issued issued Marine Open Policy No. MOP-006 dated September 17, 1980, covering all shipments made on or after September 30, 1980
Plante nters rs Produc Products, ts, Inc Inc.. v. CA - pu > Pla publ blic ic carr carrie ierr sh shal alll rema remain in as su such ch,, notwithsta notwi thstanding nding the charter of the whole or portion portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a timecharter or voyage-charter. It is only when the charter includes both the vessel and its its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned.
iNsuRanCe
A2010 pAgE 115
2. YES - As a common carrier, LOADSTAR is required to observe extraordinary diligence in the vigilance over the goods it transports. When the goods placed in its care are lost, LOADSTAR is presumed to have at faultextraordinary or to have have acted negligently. LOADSTAR has the burden of proving that been it observed diligence in order to avoid responsibility for the lost cargo. - Compania Maritima V CA - It requires common carriers to render service with the greatest skill and foresight and “to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires. - A1734 CC enumerates the instances when a carrier might be exempt from liability for the loss of the goods. (1) Flood, Flood, storm, earthquake, earthquake, lightni lightning, ng, or other natura naturall disaster or calamity; (2) Act of the public enemy in war, whether international international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The charact character er of the goods goods or defect defects s in the packing packing or in the containers; and (5) Order or act of competent public aut authority hority - LOADSTAR claims that the loss of the goods was due to a fortuitous event under paragraph 1. Yet, its claim is not substantiated. It is supported by evidence that the loss of the entire shipment of cement was due to the gross negligence of LOADSTAR - Records show that in the evening of June 24, 1984, the sea and weather conditions in the vicinity of Negros Occidental Occidental were calm. The records reveal reveal that LOADSTAR took a shortcut shortcut route, instead of the usual route, route, which expose exposed d the voyage voyage to unexpected hazard. LOADSTAR has only itself to blame for its misjudgment. Disposition petition is DENIED
Dean Carale
i
