Simeon Del Rosario v Equitable Insurance and Casualty Co. Inc GR No.

L-16215 June 29, 1963

FACTS: Defendant Company issued a life insurance policy on the life of Francisco Del Rosario, son of plaintiff, binding it to pay P1, 000 to P3, 000 as indemnity for the death of the insured. Insured died by drowning when the vessel Islama caught fire in the waters of Jolo. Plaintiff filed a claim and received P1,000 indemnity, however, he, through his lawyer, asked for an additional P2,000 in view of the conditions in the insurance policy that the company will be liable for the death insured by drowning, but, said provision did not state the amount to be paid as indemnity. The company refused to pay by virtue of a letter of opinion from the Insurance Commissioner which fixed the amount of indemnity at P1, 000. ISSUE: How much should the indemnity be? HELD: Indemnity should be P3, 000. Under the proven facts and circumstances, the findings of the trial court, are well taken, for they are supported by generally accepted principles or rulings on insurance, which enunciate that where there is ambiguity with respect to the terms and conditions of the policy, the same will be resolved against the one responsible thereof. It should be recalled, that generally, the insured, has little, if any, participation in the preparation of the policy, together with the drafting of its terms and conditions. The interpretation of obscure stipulations in a contract should not favor the party who caused the obscurity (Article 1377, Civil Code), which, in the case at bar, is the insurance company.

Fieldmens Insurance Co. Inc. v Mercedes Vargas vda. De Songco, et al. and Court of Appeals September 23, 1968

FACTS: Petitioner 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 being issued upon the insistence of its agent who discounted fears of the insured that his privately owned vehicle might not fall within its terms, the insured moreover being a man of scant education, finishing only the first grade. So it was held in a decision of the lower court thereafter affirmed by the Court of Appeals.

ISSUE: Whether or not petitioner insurance company is liable to pay the insurance claim of private respondents, notwithstanding that the insured vehicle is a private jeepney but enrolled in a common carrier insurance policy. HELD: Yes. Where inequitable conduct is shown by an insurance firm, it is estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on the insured. An 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. Moreover, taking into account the well-known rule that ambiguities or obscurities must be strictly interpreted against the party that caused them. 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 more so for the latter, since its dominant bargaining position carries with it stricter responsibility.

Fe de Joya Landicho, et al. v Government Service Insurance System GR No. L-28866 March 17, 1972

FACTS: The GSIS issued in favor of Flaviano Landicho, husband of plaintiff, an optional life insurance in the sum of P7,900. While still working under the Bureau of Public Works, Flaviano met his death in an airplane crash in Mindoro. Mrs. Landicho filed a claim with the GSIS for P15, 800, as the double indemnity due under the policy. The GSIS denied the claim on the ground that the policy had never been in force because, pursuant to subdivision (e) of paragraph 7 of the application, the policy shall be effective on the first day of the month next following the month the first premium is paid, and no premium had ever been paid. Plaintiffs invoke the stipulation, especially subdivisions (c) and (d) of paragraph 7, stating that the same shall serve as a letter of authority to the Collecting Officer of our Office thru the GSIS to deduct from my salary the monthly premium of P33.36 beginning May 1964, and every month thereafter, and that failure to deduct monthly premiums shall not make the policy lapse, however, the premium account shall be considered indebtedness which, I the insuredbind myself to pay the System. The CFI rendered a decision in favor of plaintiffs. ISSUE: Whether or not the insurance policy in question has ever been in force, not a single premium having been paid thereon. HELD: Yes. The Civil Code provides: The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. This is because the insured usually has no voice in the selection or arrangement of words in the insurance contract. The foregoing view is bolstered up by two factors, namely: (a) the collecting officer of the Bureau of Public Works was not advised by the GSIS to make the deduction pursuant to said authority. This omission of the GSIS should not 2

inure to the benefit, and; (b) the GSIS impliedly induced the insured to believe that the policy was in force, having paid the dividends corresponding to said policy.

Paramount Insurance Corporation v Hon. Maximo Japzon, et al. GR No. L-68037 July 29, 1992

FACTS: Petitioner insurance company refuses to pay the claims for damages made by two persons (Jose Lara and Arsenio Paed), passengers of a jeepney which collided with a Ford truck insured by petitioner company, on the ground that the lower court has not validly acquired jurisdiction over its person, when a certain Atty. Segundo Gloria appeared for its behalf but was allegedly unauthorized to file an answer for it, and that petitioner company was not validly served with summons and a copy of the complaint, nor did it actually participate in the proceedings. ISSUE: Whether or not jurisdiction of the person of the petitioner insurance company have been validly acquired by the lower court. HELD: Yes. Jurisdiction over the person of the defendant in civil cases is acquired either by his voluntary appearance in court and his submission to its authority by service of summons. The service of summons is intended to give notice to the defendant that an action has been commenced against it. Petitioners contention that it was not properly served with summons and that Atty. Gloria was not authorized to appear for and in its behalf are untenable. Although petitioner questioned the propriety of the service of summons, it however, failed to substantiate its allegation that it was not properly served with summons. Hence, the disputable presumption that official duty has been regularly performed prevails.

Rafael (Rex) Verendia v Court of Appeals, et al. GR No. 75605 January 22, 1993

FACTS: Verendia insured a residential building located in Antipolo, Rizal, with Fidelity and Surety Insurance Company for P385, 000. The same building was also insured by two other companies, namely, Country Bankers Insurance and Development Insurance for P56, 000 and P400, 000, respectively. While the tree insurance policies were in force, the property was completely destroyed by fire on 8 December 1980. Fidelity was informed of the loss but refused payment, thus, prompting Verendia to file a complaint before the CFI. Fidelity averred that the policy was avoided by reason 3

of over-insurance and that Verendia maliciously represented that the building was leased to Robert Garcia, when it was actually Marcelo Garcia who was the lessee. ISSUE: Whether or not the contract of lease submitted by Verendia to support his claim on the fire insurance policy constitutes a false declaration which would forfeit his benefits under the policy. HELD: Yes. Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged lessee, inflated the value of the property by the alleged monthly rental of P6, 500 when in fact, the Provincial Assessor of Rizal had assessed the fair market value to be only P40, 300, insured the same with two other insurance companies for a total coverage of P900, 000, and created a dead-end for the adjuster by the disappearance or Robert Garcia. Basically, a contract of indemnity, an insurance contract is the law between the parties. Its terms and conditions constitute the measure of the insurers liability and compliance therewith is a condition precedent to the insureds right to recovery from the insurer. Having presented a false declaration, he forfeited all benefits in the policy, in the absence of proof that Fidelity waived such provision. Moreover, Verendia reprehensibly disregarded the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith.

Development Bank of the Philippines v Court of Appeals and the Estate of the late Juan B. Dans March 21, 1994

FACTS: In May 1987, Juan Dans, 76 years of age, together with his wife Candida, applied for a loan of P500, 000 with the DBP. The DBP advised him to obtain a mortgage redemption insurance (MRI) with the DBP MRI Pool. Aloan of P300, 000 was approved and released on 11 August 1987. From the proceeds of the loan, the DBP deducted P1, 476 as payment for the MRI premium. On 15 August 1987, Dans accomplished and submitted the MRI Application for Insurance and the Health Statement for DBP MRI Pool. On 20 August, The MRI premium was credited by DBP to the savings account of the DBP MRI Pool. On 3 September, Dans died. On 23 September, The DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the acceptance limit of 60 years at the time of the application. Candida, then, filed a complaint with the RTC for Collection of Sum of Money with Damages. The RTC ruled in favor of respondent Estate but absolved the DBP MRI Pool from liability. ISSUE: Whether or not DBP and DBP MRI Pool are equally liable.

HELD: No. Where there was no perfected contract of insurance, DBP MRI Pool cannot be held liable on the contract that does not exist. The liability of DBP is another matter. In dealing with Dans, DBP was wearing two legal hats: the first as lender and the second as insurance agent. The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dans application for MRI collecting the insurance premium, and deducting its agents commission and fee service.

Filipinas Compania de Seguros v Christern, Huenfeld and Co. GR No. L-2294 May 25, 1951

FACTS: On October 1, 1941, respondent, after payment of corresponding premium, obtained from the petitioner, a fire policy in the sum P100, 000, covering merchandise contained in a building. During the Japanese Occupation, the building and insured merchandise were burned. Respondent submitted to the petitioner its claim. The salvaged goods were sold at public auction and, after deducting their value, the total loss suffered was fixed at P92, 650. Petitioner refused to pay on the ground that the policy in favor of the respondent had ceased to be in force on the date the US declared war against Germany, the respondent corporation being controlled by German subjects and the petitioner being a company under American jurisdiction. Pursuant to an order of the Director of the Bureau of Financing, petitioner paid to respondent the sum of P92, 650 on April 19, 1943. Petitioner then filed an action in the CFI for the purpose of recovering the amount paid. The CFI dismissed the petition and the CA affirmed. ISSUE: Whether or not the insurance contract between petitioner and respondent, automatically ceased to be in force, upon the declaration of war by the US against Germany. HELD: Yes. 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.

Philippine National Bank v Court of Appeals, et al. GR No. L-43766 February 26, 1988

FACTS: On 10 January 1963, respondent Desiderio spouses applied for a retailers loan with the PNB, which was approved and secured by a chattel mortgage consisting of the inventory of stocks in the store of the spouses. In addition, the merchandise subject of the mortgage, were insured with the Cosmopolitan Insurance Co. for P4, 000, with the PNB as beneficiary. On 1 August 1964, the spouses paid P1, 089.60 as partial payment of the loan, however, the insured building and merchandise were totally destroyed by fire. The PNB sent several demand letters to the insurance company for the purpose of recovering the proceeds of the insurance but to no avail. Sometime in 1966, the said insurance company became the subject of liquidation. Seven years after the fire, the PNB filed a complaint for collection against the spouses. The City Court dismissed the petition and declared the amount of P1, 089.60 unrecoverable. The CFI and the CA affirmed. ISSUE: Whether the PNB, as attorney-in-fact of the spouses, is bound to successfully collect the insurance proceeds of the mortgaged property of the latter. HELD: No. The PNB could have collected the insurance proceeds if only it were not negligent. It had ample time and enough legal remedies to collect when the same became due, yet, it merely sent demand letters to the insurance company. It did not even file a suit for the recovery of the insurance proceeds against the insurance company before and even during the liquidation. Realizing that it could no longer collect from the insurance company, it directed the collection suit against the spouses whose obligation with the PNB had long been extinguished.

El Oriente Fabrica de Tabacos, Inc. v Juan Posadas GR No. 34774 September 21, 1931

FACTS: On 18 March 1925, plaintiff, in order to protect itself against the loss that it might suffer by reason of the death of its manager, A. Velhagen, procured from the Manufacturers Life Insurance Co., an insurance policy on the life of said manager for $50, 000. The plaintiff is designated as the sole beneficiary. The plaintiff charged as expenses of its business all the said premiums and deducted the same from its gross incomes as reported in its annual income tax returns, which deductions were allowed by defendant were allowed by defendant upon a showing made by the plaintiff that such premiums were legitimate expenses. Upon the death of Velhagen in 1929, plaintiff received the proceeds amounting P104, 957.88. Over the protest of the 6

plaintiff, which claimed exemption under Section 4 of the Income Tax Law, the defendant Collector of Internal Revenue assessed and levied the sum of P3, 148.74 as income tax on the proceeds of the insurance policy, which plaintiff paid under protest. ISSUE: Whether the proceeds of an insurance taken by a corporation on the life of an important official to indemnify it against loss in case of his death, are taxable as income under the Philippine Income Tax Law. HELD: No. It is true that the Income Tax Law, in exempting individual beneficiaries, speaks of the proceeds of life insurance policies as income, but this is a very slight indication of legislative intention. In reality, what the plaintiff received was in the nature of an indemnity for the loss which it actually suffered because of the death of its manager.

Insular Life Assurance Company v Carponia Ebrado, et al. GR No. L-44059 October 28, 1977

FACTS: Carponia Ebrado filed with the petitioner insurance company, a claim for the proceeds of the life insurance policy with a rider for accidental death, upon the death of Buenaventura Ebrado, insured. However, they lived as husband and wife without the benefit of marriage. Pascuala vda. De Ebrado also filed her claim as the widow of the deceased. She asserts that she is the one entitled to the insurance proceeds, not the common-law wife. In doubt as to whom the insurance proceeds shall be paid, the insurer commenced an action for Interpleader. The trial court rendered judgment declaring Carponia disqualified from becoming beneficiary and directing the payment of the insurance proceeds to the estate of the deceased insured. ISSUE: Can a common-law wife named as beneficiary in the life insurance policy of a legally married man claim proceeds thereof in case of death of the latter? HELD: No. According to Article 739 of the Civil Code, 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. As a consequence, the proscription in Article 739 of the Civil Code should equally operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation

Southern Luzon Employees Association v Juanita Golpeo, et al. GR No. L-6114 October 30, 1954

FACTS: Roman Concepcion put down as beneficiary the name of his common-law wife Aquilina Maloles and their children. Upon the formers death on 13 December 1950, three sets of claimants presented themselves, namely: Juanita Golpeo, legal wife and her children, and Elsie Hicban, another common-law wife, and her child. Plaintiff association instituted in the CFI an action for Interpleader against the three conflicting claimants as to which of the parties the amount of P2, 505 should be delivered to. After hearing, the CFI declared Maloles and her children the sole beneficiaries, defendant Golpeo and her children thereafter appealed to the Supreme Court. The Southern Luzon Employees Association, although not an insurance company, nevertheless, have for its purpose mutual aid for its members and their dependents in case of death. ISSUE: Whether or not the CFI erred in ruling Maloles and her children as the rightful beneficiaries upon the contention of Golpeo that designating a common-law wife as beneficiary is contrary to law, morals and public policy. HELD: No. The contract between the plaintiff and Roman Concepcion partook of the nature of an insurance and that, therefore, the amount in question belonged exclusively to the beneficiaries (Del Val v Del Val, 29 Phi 534). Moreover, appellant Golpeo, by her silence and actions, had acquiesced in the illicit relations between her husband and appellee Maloles.

Social Security System v Candelaria Davac, et al. GR No. L-21642 July 30, 1966

FACTS: Petronilo Davac became a member of the SSS in 1957 and designated respondent Candelaria Davac as his beneficiary and indicated his relationship to her as that of wife. He died in 1959 and, thereupon, respondents Candelaria Davac and Lourdes Tuplano filed their claims for death benefits with the SSS. It appears from their claims that the deceased contracted two marriages, the first, with claimant Lourdes Tuplano in 1946 and the second with Candelaria in 1949. The Social Security Commission passed a resolution declaring Candelaria as the person entitled to 8

receive the death benefits. Not satisfied with the said resolution, Lourdes appealed to the Supreme Court contending that the designation made to the second, and therefore, bigamous wife is null and void because (1) it contravenes the provisions of the Civil Code, and (2) it deprives the lawful wife of her share in the conjugal property as well as her own childs legitime in the inheritance. ISSUE: Whether or not the Social Security Commission acted correctly in declaring respondent Candelaria Davac as the person entitled to receive the death benefits inquestion. HELD: Yes. The disqualification mentioned in Article 739 is not applicable to Candelaria Davac because she was not guilty of concubinage, there being no proof that she had knowledge of the previous marriage of her husband Petronilo. Regarding the second point, the benefits accruing from membership in the SSS do not form part of the properties of the conjugal partnership of the covered member. They are disbursed from a public special fund created by Congress in pursuance to the declared policy of the Republic to develop, establish gradually and perfect a social security system which shall provide protection against the hazards of disability, sickness, old age and death. Moreover, if there is a named beneficiary and the designation is not invalid (as it is not so in this case), it is not the heirs of the employee who are entitled to receive the benefits (unless they are the designated beneficiaries themselves). It is only when there are no designated beneficiaries or when the designation is void, that the laws of succession are applicable. And it has already been held that the Social Security Act is not a law of succession.

Basilia Berdin Vda. De Consuegra, et al. v GSIS, et al. GR No. L-28093 January 30, 1971

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 Surigao del Norte. In his lifetime, he contracted two marriages, the first with respondent Rosario Diaz, and the second, which was contracted in good faith while the first marriage was subsisting, with petitioner, Basilia Berdin. Being a member of the GSIS when he died, the proceeds of his life insurance policy were paid to Basilia and her children who were the beneficiaries named in the policy. Having been in government service for more than 20 years, Consuegra was entitled to retirement insurance benefits worth P6, 304.47. Consuegra did not designate any beneficiary who would receive the retirement insurance benefits due to him. Respondent Rosario then filed a claim with the GSIS asking that the retirement insurance benefits be paid to her as the only legal heir, considering that the deceased did not designate any beneficiary with respect to his retirement insurance benefits. Petitioner Basilia and her children, likewise, filed a 9

similar claim, asserting that being the beneficiaries named in the life insurance policy, they are the only ones entitled to receive the retirement insurance benefits due. The GSIS ruled that the legal heirs were Rosario Diaz, who is entitled to 8/16 of the retirement insurance; and Basilia Berdin and her seven children, who are entitled to the remaining 8/16, each of them to receive an equal share of 1/16. Dissatisfied, Basilia filed a case before the CFI which, however, upheld the decision of the GSIS. ISSUE: (1) Whether or not the system of life insurance and the system of retirement insurance are complementary to each other such that whoever is named beneficiary in the life insurance is also the beneficiary in the retirement insurance when no such beneficiary is named in the retirement insurance. (2) To whom should the retirement benefits of Jose Consuegra be paid, because he did not, or failed to designate the beneficiary of his retirement insurance? HELD: No. Subsection (b) of Section 11 of Commonwealth 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 GSIS, and he should state in his application the beneficiary of his retirement 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 (Act 2427, as amended), 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 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. Therefore, the respondent GSIS had correctly acted when it ruled that the proceeds of the retirement insurance of the late Jose Consuegra should be divided equally between his first living wife Rosario Diaz, on the one hand, and his second wife Basilia Berdin and his children by her, on the other.

Hilario Gercio v Sun Life Assurance of Canada, et al. GR No. 23703 September 28, 1925

FACTS: Hilario Gercio, the insured, is the plaintiff. The Sun Life Assurance Co. of Canada, the insurer, and Andrea Zialcita, the beneficiary, are the defendants. The complaint is in the nature of mandamus. Its purpose is to compel the defendant Sun 10

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, with one Andrea Zialcita as beneficiary. The judgment of the trial court was in favor of the plaintiff without costs, and ordered the defendant company to eliminate from the insurance policy the name of Andrea Zialcita as beneficiary and to substitute therefor such name as the plaintiff might furnish to the defendant for that purpose. 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 the bonds of matrimony contracted by Hilario Gercio and Andrea Zialcita. On March 4, 1922, Hilario Gercio formally notified the Sun Life Assurance Co. of Canada that he had revoked his donation in favor of Andrea Zialcita, and that he had designated in her stead his present wife, Adela Garcia de Gercio, as the beneficiary of the policy. Gercio requested the insurance company to eliminate Andrea Zialcita as beneficiary. This, the insurance company has refused and still refuses to do. ISSUE: Whether 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 does not expressly reserve to the insured the right to change the beneficiary. HLED: No. The wife has an insurable interest in the life of her husband. The beneficiary has an absolute vested interest in the policy from the date of its issuance and delivery. So when a policy of life insurance is taken out by the husband in which the wife is named as beneficiary, she has a subsisting interest in the 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 provision authorizing a change of beneficiary 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. Also, 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.

Segundina Musngi, et al. v West Coast Life Insurance Co.

11

GR No. L-41794 August 30, 1935

FACTS: Arsenio Garcia was insured by the defendant company in the sum of P5, 000 effective as of 25 July 1931. He was again insured by the same company for P10, 000 effective as of 20 October 1931. The two policies were valid and subsisting at the time of his death on 30 December 1932. However, the claim of the beneficiaries Segundina Musngi and Buenaventura Garcia were denied by the defendant company on the ground that the latter discovered that the insureds answers in the policy regarding his state of health were false and fraudulent, because the truth was that the insured, before answering and signing that applications and before the issuance of the policies, he had been treated in the General Hospital by Dr. Pilar Cruz for different ailments. Defendant contended that at the outset that the two policies did not create any valid obligation because they were fraudulently obtained by the insured. ISSUE: Whether the answers given by the insured in his applications are false, and if they were the cause, or one of the causes, which induced the defendant to issue the policies. HELD: Yes. The insured knew that he had suffered from a number of ailments, including incipient pulmonary tuberculosis, before subscribing the applications, yet he concealed them and omitted the hospital where he was confined as well as the name of the lady physician who treated him. That this concealment and the false statements constituted fraud, is likewise clear, because the defendant by reason thereof accepted the risk which it would otherwise have flatly refused. When not otherwise specially provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regarding contracts. Article 1261 of the Civil Code provides that there is no contract unless there should be, in addition to consent and a definite object, a consideration for the obligation established. And article 1276 provides that the statement of a false consideration shall render the contract void. The two answers being one of the considerations of the policies, and it appearing that they are false and fraudulent, it is evident that the insurance contracts were null and void and did not give rise to any right to recover their value or amount. Moreover, 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". Concealment exists where the assured has knowledge of a fact material to the risk, and honesty, good faith and fair dealing requires that he should communicate it to the assured, but he designedly and intentionally withholds the same.

12

Francisca Eguaras v The Great Eastern Life Assurance Company, Ltd., et al. GR No. L-10436 January 24, 1916

FACTS: On 14 October 1912, through the efforts of the defendant companys agent, Ponciano Remigio, Dominador Albay got the insurance company to insure his life fr P5, 000 and that through the representations made by said Dominador in his application and favorable medical examination made by Dr. Jose Vidal, the company agreed to the life insurance sought, the value whereof was payable to his mother-inlaw, Francisca Eguaras. One month after said insurance policy was issued, or on 12 December 1912, the insured died of intestinal occlusion, according to the certificate of Dr. R. Kamatoy, after an illness of three days, with medical attendance. The defendant company, despite having received satisfactory proofs of the death of the insured, refused to pay the amount of the insurance, alleging that it had been secured through fraud and deceit and was therefore illegal and void. The fraud consisted in the fact that a healthy and robust person was substituted in place of insured invalid when Dr. Vidal made the physical examination of the one who seeking to be insured, for the real person who desired to be insured and who ought to have been examined was in bad health on and before the date of executing the insurance contract of which facts the insured Dominador Albay and the insurance agent Ponciano Remigio had full knowledge. HELD: It is unquestionable that the person who on October 14, 1912, presented himself to Dr. Vidal to be examined under the name of Dominador Albay, and who signed the supplementary application before said physician, was not the real Dominador Albay; that the person whom he examined and who signed the application with the name of Dominador Albay, if he were not mistaken, was the individual he saw before him, the accused Castor Garcia. Wherefore, it is plain that the insurance contract between the defendant and Dominador Albay is null and void because it is false, fraudulent and illegal.

Bernardo Argente v West Coast Life Insurance Co. GR No. L-24899 March 19, 1928

FACTS: On February 9, 1925, Bernardo Argente signed an application for joint insurance with his wife in the sum of P2,000. The wife, Vicenta de Ocampo, signed a 13

like application for the same policy. Both applications, with the exception of the names and the signatures of the applicants, were written by Jose Geronimo del Rosario, an agent for the West Coast Life Insurance Co. But all the information contained in the applications was furnished the agent by Bernardo Argente. Pursuant to his application, Bernardo Argente was examined by Dr. Cesareo Sta. Ana, a medical examiner for the West Coast Life Insurance Co., on February 10, 1925, in the office of the Customs House. The result of such examination was recorded in the Medical Examiner's Report, and with the exception of the signature of Bernardo Argente, was in the hand-writing of Doctor Sta. Ana. But the information or answers to the questions contained on the face of the Medical Examiner's Report were furnished the doctor by the applicant, Bernardo Argente. Pursuant to her application, Vicenta de Ocampo, wife of the plaintiff, was examined by Dr. Cesareo Sta. Ana on February 10, 1925, at her residence in Manila. The result of the medical examination, including among other things, the answers given by Vicenta de Ocampo to the questions propounded to her by the physician, appears in the Medical Examiner's Report. On May 9, 1925, Bernardo Argente and his wife submitted to the West Coast Life Insurance Co. an amended application for insurance, increasing the amount thereof to P15,000, and asked that the policy be dated May 15, 1925. The amended application was accompanied by the documents entitled "Short Form Medical Report." In both of these documents appear certain questions and answers. A temporary policy for P15,000 was issued to Bernardo Argente and his wife as of May 15, but it was not delivered to Bernardo Argente until July 2, 1925, when the first quarterly premium on the policy was paid. 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 Argente presented a claim in due form to the West Coast Life Insurance Co. for the payment of the sum of P15,000 the amount of the joint life Insurance policy. Following investigation 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 medical examinations with regard to their health and previous illness and medical attendance were untrue. For that reason, the West Coast Life Insurance Co. refused to pay the claim of Bernardo Argente, and on May 25, 1926, wrote him to the effect that the claim was rejected because the insurance was obtained through fraud and misrepresentation. ISSUE: Whether or not the alleged concealment was immaterial and insufficient to avoid the policy. HELD: No. 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 conclusively shows that the answers to questions concerning diseases were untrue, the truth or falsity of the answers become the determining factor.

14

The Insular Life Assurance Co., Ltd. V Serafin Feliciano, et al. GR No. L-47593 December 29, 1943

FACTS: The present case is a motion to reconsider and set aside the previous Supreme Court decision promulgated on 13 September 1941, wherein the latter ruled in favor of the respondents and against the petitioner for the sum of P25, 000, representing the value of two insurance policies issued by the petitioner on the life of Evaristo Feliciano. Evaristo Feliciano, who died on 29 September 1935, was suffering from advanced pulmonary tuberculosis when he signed his applications for insurance on 12 October 1934. On that same date Dr. Trepp, who took x-ray pictures of his lungs, informed respondent Dr. Serafin Feliciano, brother of Evaristo, that the latter was in very serious condition. Nevertheless the question contained in the application Have you suffered from any ailment or disease of the lungs?appears to have been answered, no. The false answer above referred to, as well as the others, was written by the Company's soliciting agent Romulo M. David, in collusion with the medical examiner Dr. Gregorio Valdez, for the purpose of securing the Company's approval of the application so that the policy to be issued thereon might be credited to said agent in connection with the inter-provincial contest which the Company was then holding among its soliciting agents to boost the sales of its policies. The petitioner insists that upon the facts of the case the policies in question are null and void ab initio and that all that the respondents are entitled to is the refund of the premiums paid thereon. HELD: Petitioners contention is correct. When Evaristo Feliciano, the applicant for insurance, signed the application in blank and authorized the soliciting agent and/or medical examiner of the Company to write the answers for him, he made them his own agents for that purpose, and he was responsible for their acts in that connection. Moreover, from the facts of the case we cannot escape the conclusion that the insured acted in connivance with the soliciting agent and the medical examiner of the Company in accepting the policies in question. In conclusion, the insured was a coparticipant in the fraudulent procurement of the policies in question and that by reason thereof said policies are void ab initio.

Ignacio Saturnino, et al. v The Philippine American Life Insurance Company GR No. L-16163 February 28, 1963 15

FACTS: A non-medical insurance policy was issued to Estefania Saturnino. This kind of policy dispenses with the medical examination of the applicant usually required in ordinary life policies. However, detailed information is called for in the application concerning the applicants health and medical history. The policy was issued on 16 November 1957. On 19 September 1958 Estefania died of pneumonia. Appellants, who are her surviving husband and minor child, demanded payment of the face value of the policy, however, the claim was rejected. It appears that on 9 September 1957, Estefania was operated on for cancer, involving complete removal of the right breast. Notwithstanding the fact of her operation, Estefania did not make a disclosure thereof in her application. Appellants contend that (1) the facts subject of the representation was not material in view of the non-medical nature of the insurance applied for and that (2) there was no fraudulent concealment of the truth inasmuch as the insured herself did not know, since the doctor never told her, that the disease for which she was operated on was cancer. HELD: (1) The contention is without merit. The waiver of medical examination 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 the policy or not. The Insurance Law (Section 30) provides that "materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the proposed contract, or in making his inquiries." (2) Concealment of the fact of the operation itself was fraudulent, as there could not have been any mistake about it, no matter what the ailment. Secondly, in order to avoid a policy it is not necessary to show actual fraud on the part of the insured. A concealment, whether intentional or unintentional, entitles the insurer to rescind the contract of insurance, concealment being defined as "negligence to communicate that which a party knows and ought to communicate" (Sections 24 & 26, Act No. 2427).

Ng Gan Zee v Asian Crusader Life Insurance Corporation GR No. L-30685 May 30, 1983

FACTS: Kwong Nam was insured for P20, 000, with his wife, Ng Gan Zee as beneficiary. After the insured died of cancer of the liver with metastasis, appellant company denied the beneficiarys claim for payment of the face value of the policy, on the ground that the answers given by the insured to the questions appearing in his application for life insurance were untrue; that the insured stated that he was operated on for a tumor (mayoma) of the stomach, associated with ulcer of the 16

stomach, when actually he was diagnosed with peptic ulcer for which, an operation, known as a sub-total gastric resection was performed on him. ISSUE: Was appellant, because of insureds aforesaid representation, misled or deceived into entering the contract or in accepting the risk at the rate of the premium agreed upon? HELD: No. Assuming that the answer given by the insured is false, as claimed by the appellant, Sec. 27 of the Insurance Law, nevertheless requires that fraudulent intent on the part of the insured be established to entitle the insurer to rescind the contract. It bears emphasis that Kwong Nam had informed the appellant's medical examiner that the tumor for which he was operated on was "associated with ulcer of the stomach." In the absence of evidence that the insured had sufficient medical knowledge as to enable 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 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. Tan Chay Heng v The West Coast Life Insurance Company GR No. L-27541 November 21, 1927

FACTS: In April 1925, the defendant company approved a life insurance policy in favor of Tan Ceang for P10, 000, in which the plaintiff was sole beneficiary. Tan Ceang died on 10 May 1925 and the following month, plaintiff submitted proofs of the death of Tan Ceang with a claim for the payment of the policy which the defendant refused to pay on the grounds of fraud and misrepresentation. The lower court ruled in favor of plaintiff which defendant appealed and held that the lower court erred in holding that an insurer cannot avoid a policy which had been procured by fraud unless he brings action to rescind it before he is sued thereon (Section 47 of the Insurance Act). ISSUE: Whether or not Section 47 of the Insurance Act applies in the case at bar. HELD: No. In the instant case, it will be noted that even in its prayer, the defendant does not seek to have the alleged insurance contract rescinded. It denies that it ever made any contract of insurance on the life 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 court based its decision in sustaining the demurrer does not apply. Therefore, Section 47 does not apply.

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Emilio Tan, et al. v Court of Appeals, et al. GR No. 48049 June 29, 1989

FACTS: On 23 September 1973, Tan Lee Siong applied for life insurance in the amount of P80, 000, effective 6 November 1973, with petitioners the beneficiaries thereof. On 26 April 1975, Tan Lee Siong died of hepatoma. On 11 September 1975, respondent company denied petitioners claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased. The premiums paid were thereupon refunded. Petitioners filed a complaint with the Office of the Insurance Commissioner, which was dismissed and affirmed by the Court of Appeals. ISSUE: Whether or not respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of the action. HELD: No. The pertinent section in the Insurance Code provides: Section 48. 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 to the commencement of an action on the contract. 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 initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. The socalled "incontestability clause" precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured's lifetime. The phrase "during the 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, barred from proving that the policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation.

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Pilar De Lim v Sun Life Assurance Company of Canada GR No. L-15774 November 29, 1920

FACTS: On July 6, 1917, Luis Lim y Garcia 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 application Lim designated his wife, Pilar C. de Lim, the plaintiff 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 y Garcia died on August 23, 1917, after the issuance of the provisional policy but before approval of the application by the home office of the insurance company. The instant action is brought by the beneficiary, Pilar C. de Lim, to recover from the Sun Life Assurance Company of Canada the sum of P5,000, the amount named in the provisional policy. ISSUE: Whether or not a contract was consummated upon the payment of the first premium and the issuance of a provisional policy. HELD: No. As we read and understand the so-called provisional policy it amounts to nothing but an acknowledgment on behalf of the company, that it has received from the person named therein the sum of money agreed upon as the first year's premium upon a policy to be issued upon 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. 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 to be completed, nothing to be passed upon, or 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 a contract of insurance was not here consummated by the parties.

Francisco Del Val, et al. v Andres Del Val GR No. L-9374 February 16, 1915

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FACTS: Plaintiffs and defendant are brothers and sisters. They are the only heirs at law of Gregorio Nacianceno Del Val, who died intestate on 4 August 1910. During the lifetime of the deceased he took out insurance on his life for the sum of P40, 000 and made it payable to the defendant as sole beneficiary. After his death the defendant collected the face of the policy; that of said policy 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; that the redemption of said premises was made by the attorney of the defendant in the name of the plaintiff and the defendant as heirs of the deceased vendor. 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 that sum be divided equally among the plaintiffs and defendant along with the other property of deceased. ISSUE: Whether or not life insurance proceeds form part of the legitime of the heirs of the deceased. HELD: No. The proceeds of the life-insurance policy belong exclusively to the defendant as his individual and separate property; 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 proceeds are the separate and individual property of the beneficiary, and not of the heirs of the person whose life was insured, is the doctrine in America. We believe that the same doctrine obtains in these Islands by virtue of section 428 of the Code of Commerce.

Development Insurance Corp. v Intermediate Appellate Court, et al. GR No. L-71360 July 16, 1986

FACTS: A fire occurred in the building of private respondent Philippine Union Realty Development Corp and it sued for recovery of damages from petitioner on the basis of an insurance contract between them. Petitioner claims that the insurance covered only the building and not the elevators; that said elevators were insured after the occurrence of the fire, and; that since at the time of the fire the building insured was worth P5, 800, 000, the private respondent should be considered its own insurer for the difference between that amount and the face value of the policy and should share pro rata in the loss sustained. Accordingly, the private respondent is entitled to an 20

indemnity of only P67, 629.31, the rest of the loss to be shouldered by it alone. In support of this contention, petitioner cites Condition 17 of the policy. ISSUE: Whether private respondent is entitled to an indemnity of P67, 629.31 only. HELD: No. There is no evidence that the building was worth P5, 800, 000 at the time of the loss; only the petitioner says so and it does not back up its self-serving estimate with any independent corroboration. On the contrary, the building was insured at P2, 500, 000, and this must be considered, by agreement of the insurer and insured, the actual value of the property insured on the day the fire occurred. Section 60 of the Insurance Code defines an open policy as 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 applying the open policy clause as expressly agreed upon by the parties in their contract, private respondent is entitled to the payment of indemnity in the total amount of P508, 867.

Philippine Phoenix Surety & Insurance Inc. v Woodworks Inc. GR No. L-22684 August 31, 1967

FACTS: Phoenix commenced an action to recover from Woodworks the sum of P3, 522.09 representing the unpaid balance of the premiums on a fire insurance policy issued by the former in favor of the latter for a term of 1 year. Woodworks argued that non-payment by it of the premium due produced the cancellation of the contract of insurance. ISSUE: Whether or not in a perfected contract of insurance non-payment of premium does not cancel the policy. HELD: Yes. As between the insurer and the insured, there was not only a perfected contract of insurance but a partially performed one as far as the payment of the agreed premium was concerned. Thereafter the obligation of the insurer to pay the insured the amount for which the policy was issued in case the conditions therefore had been complied with, arose and became binding upon it, while the obligation of the insured to pay the remainder of the total amount of the premium due became demandable. As the contract had become perfected, the parties could demand from each other the performance of whatever obligations they had assumed. In the case of the insurer, it is obvious that it had the right to demand from the insured the completion of the payment of the premium due or sue for the rescission of the 21

contract. As it chose to demand specific performance of the insured's obligation to pay the balance of the premium, the latter's duty to pay is indeed indubitable.

Francisco Aleja, et al. v Government Service Insurance System GR No. L-18529 February 26, 1965

FACTS: Deceased Rosauro Aleja was appointed as temporary classroom teacher in Nueva Ecija on 8 July 1958. A compulsory insurance policy was issued in his name by the GSIS to take effect on 1 February 1959. The corresponding premium therefore was deducted for the first time from his salary on 31 January 1959. Two days before that or on 29 January 1959, Aleja died of a gunshot wound inflicted by his own gun. Plaintiffs, as beneficiaries named in the policy, filed a claim with the GSIS to collect the proceeds of the said policy, but the same was denied allegedly because at the time of Alejas death, the policy was not yet effective and the latter was, therefore, not covered by the insurance. ISSUE: Whether or not the named beneficiaries in the insurance policy may collect the proceeds notwithstanding the date of effectivity of said policy. HELD: No. The policy issued and accepted by Aleja during his lifetime specifically provides that the effective date of the insurance contract is 1 February 1959. Additionally, it is not denied that the first premium on said insurance contract was deducted from Alejas salary only on 31 January 1959 or after his death. Clearly, at the time of his death, there was no existing contract between him and the GSIS, there baing no consideration for the risk sought to be enforced against the insurance system. The GSIS is ordered to return to the plaintiffs the amount deducted from the deceaseds salary in the form of premium.

Norman Noda v Hon. Gregoria Cruz-Arnaldo, et al. 22

GR No. L-57322 June 22, 1987

FACTS: Norman Noda obtained from respondent Zenith Insurance Corp. two fire insurance policies: (1) with a face value of P30, 000 covering stocks in his business establishment at the market site Mangagoy, Bislig, Surigao del Sur for the period from March 3, 1977 to March 3, 1978 and (2) with a face value in the aggregate amount of P100, 000 for the period from May 10, 1977 to May 10, 1978 consisting of personal effects and stocks situated in a two-storey building at 039 Barreda St., also in Bislig. While both policies were in force, fire destroyed petitioners 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 respondent Zenith, he filed a complaint with the Insurance Commission on October 6, 1978 praying that respondent company be ordered to pay him "the sum of P130,000 representing the value of the two [2] policies. Zenith interposed that petitioner had no cause of action; that policy (1) 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 (2), if any, was limited to P15,472.50 in view of the co-insurance. While the case was pending with the Insurance Commission, Zenith, on March 4, 1980, settled petitioner I s fire loss claim under Item 1 of Policy (2) in the amount of P15,472.50. While the case was pending with the Insurance Commission, Zenith, on March 4, 1980, settled petitioner first fire loss claim under Policy (2) in the amount of P15,472.50. On March 3, 1981, the Insurance Commissioner rendered the assailed decision, brushing aside as unfounded Zenith's allegation that Policy (2) was ineffectual because of non-payment of premium, respondent Commissioner allowed petitioner to recover under said policy and ordered Zenith to pay. As for petitioner's claim under Policy (2), she held that in view of the payment of P15,472.50 to petitioner, Zenith had fully discharged its liability under said policy. ISSUE: Whether or not petitioners claim under policy (2) which respondent commissioner rejected because petitioner allegedly relied merely on the report of Zeniths adjuster without bothering to produce supporting documents indicating that he had made several purchases and suffered immense losses by reason of the fire. HELD: We find that respondent Commissioner acted with grave abuse of discretion when she denied petitioner's claim for indemnity under Policy (2) because of what she perceived as insufficient proof. We are convinced that petitioner has satisfactorily established his claim for indemnity under Policy (2). In that respect, judgment was improperly rendered against him and the same must accordingly be modified.

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Pacific Banking Corp, et al. v Court of Appeals, et al. GR No. L-45656 May 5, 1989

FACTS: Joseph and Eleanor Hart, part owners of Insular Farms Inc., borrowed P250, 000 from Pacific Banking in July 1956 to cultivate fish and salt-making in tidewater land in Lingayen. Insular Farms executed a promissory note of P250, 000 payable to the bank in five equal installments, the first installment payable on or before July 1957. Said note provided that upon default, all other installments shall become due and payable. The business floundered, yet, Pacific Banking and its Executive VP Chester Babst did not for the payment of the obligation, but instead opted for more collateral. As the business further deteriorated, Hart pledged all stocks of Insular Farms to the bank in lieu of additional collateral and to insure an extension of the period to pay the July 1957 installment. On 4 March 1958, Babst wrote to Insular Farms giving the latter 48 hours to pay its entire obligation. For failure to pay the obligation, Insular Farms was sold at auction. Respondents contend that the sale of the shares of stock of Insular Farms was void on the ground that when said shares were pledged to the bank, it was done to cause an indefinite extension of time to pay their obligation under the promissory note. ISSUE: Whether or not there was an indefinite extension of time with respect to the payment of the loan when all stocks of Insular Farms was pledged to petitioner bank. HELD: Yes. The rule which states that there can be no valid extension of time by oral agreement unless the extension is for a definite time, is not absolute but admits of qualifications and exceptions. The pledge on the shares of stocks of Insular Farms was sufficient consideration for the extension, considering that this pledge was the additional collateral required by Pacific Banking.

Artex Development Co. Inc. v Wellington Insurance Co. Inc. GR No. L-29508 June 27, 1973

FACTS: Wellington Insurance Co. insured for P24, 346, 509.00 the buildings, stocks and machinery of Artex Development against loss or damage by fire or lightning, upon payment of the corresponding premiums. On 22 September 1963, the buildings, stocks and machinery of plaintiffs spinning department were burned. Total property 24

loss was computed at P10, 106, 554.40 and the total business interruption loss was P3, 000, 000.00. Defendant paid P6, 481, 870 for the property loss and P1, 864, 134 for business interruption loss leaving a balance of P3, 624, 683 and P1, 748, 460, respectively. Plaintiff filed a Manifestation that the only remaining liability subject of litigation shall be that proportion of the loss reinsured with or through Alexander and Alexander Inc. of NY, USA, namely, P397, 813the rest having been paid and settled. Defendant manifested that such document is true and correct. ISSUE: Whether or not plaintiff may collect against his insurance companys reinsurers, notwithstanding that the former is not privy to the contract of reinsurance between Wellington Insurance Co. and Alexander and Alexander Inc. HELD: No. A third party not privy to a contract that contains no stipulation pour autrui in its favor may not sue enforcement of the contract. In this case, the lower court ordered defendant-insurer to pay plaintiff-insured the balance of the insured property loss of P3, 624,683 and its ascertained business interruption loss of P1, 748, 460. The Supreme Court affirmed the correctness of the lower courts ruling that it is no defense for the insurer as against insured that the insurer had obtained reinsurance from other companies to cover its liability.

Cathay Insurance Co. v Court of Appeals, et al. GR No. 76145 June 30, 1987

FACTS: Private respondent Remington Industrial Sales Corp. filed against petitioner Cathay Insurance Co. a case seeking the collection of the sum of P868, 339.15 representing private respondents losses and damages incurred in a shipment of seamless steel pipes under an insurance in favor of said private respondent as the insured, consignee or importer of aforesaid merchandise while in transit from Japan to the Philippines on board vessel SS Eastern Mariner. The trial court decided in favor of respondent Corporation. ISSUE: Whether or not rusting (of the steel pipes) is a peril of the sea. HELD: Yes, 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.

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Isabela Roque v Intermediate Appellate Court, et al. GR No. L-66935 November 11, 1985

FACTS: Manila Bay Lighterage Corp., a common carrier, entered into a contract with the petitioners whereby the former would load and carry on board its barge Mable 10 logs from Palawan to Manila. The petitioners insured the logs against loss for P100, 000 with respondent Pioneer Insurance and Surety Corp. Unfortunately, the shipment never reached its destination because Mable 10 sank. It was found that the barge where the logs were loaded was not seaworthy such that it developed a leak and that one of the hatches was left open causing water to enter the barge and because the barge was not provided with the necessary cover or tarpaulin, the ordinary splash of sea waves brought more water inside the barge. Petitioners demanded payment from Manila Bay and Pioneer, however, the latter refused to pay. The trial court ruled in favor of petitioner while the appellate court modified it by absolving Pioneer from liability after finding that there was a breach of implied warranty of seaworthiness on the part of the petitioners and that the loss of the insured cargo was caused by perils of the ship and not by perils of the sea. ISSUE: Whether or not 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. HELD: No. Cargo can be the subject of marine insurance (Section 99, Insurance Code) and that once it is so made, the implied warranty of seaworthiness immediately attaches to whoever is insuring the cargo whether he be the shipowner or not. Moreover, the fact that the unseaworthiness of the ship was unknown to the insured 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 the cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy condition. The shipper of the cargo may not have control of the vessel but he has full control in the choice of the common carrier that will transport his goods.

Philippine Manufacturing Co. v Union Insurance Society of Canton, Ltd.

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GR No. L-16473 November 22, 1921

FACTS: On July 1917, defendant insured the plaintiffs lighter, Philmaco, for the sum of P16, 000 for a term starting 6 July 1917 to 5 July 1918, provided that it was warranted only against the absolute total loss of the lighter only. On 1 July 1918, the lighter was sunk in the Manila Bay as a result of a typhoon. Plaintiff demanded payment but defendant denied its liability on the ground that there was no total destruction of the lighter; that it was floated and reconstructed and again placed in commission, having used a large portion of its hull in such reconstruction, defendant claims that the loss was not an absolute total loss under the terms and conditions of the policy. ISSUE: Whether, under the facts shown, the loss is an absolute total loss within the terms and provisions of the policy. HELD: Yes. Act No. 2427 provides: SEC. 120. A loss may be either total or partial; SEC. 121. Every loss which is not total is partial; SEC. 122. A total loss may be either actual or constructive; SEC. 123. An actual total loss is caused by: (a) A total destruction of the thing insured; (b) The 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. . . . Whatever may be the rule in other jurisdictions, the policy having been issued at Manila, it must be construed under the terms and provisions of those sections, and section 122 specifically says that "a total loss may be either actual or constructive," and that "the loss of the thing by sinking, or being broken up," is an actual loss or that "any damage to the thing which renders it valueless to the owner for the purposes for which he held it" is an actual loss. At the time the lighter was sunk and in the bottom of the bay under the conditions then there existing, it was of no value to the owner, and, if it was of no value to the owner, it would be an actual total loss. To render it valueless to the owner, it is not necessary that there should be an actual or total loss or destruction of all the different parts of the entire vessel. The question here is whether, under the conditions then and there existing, and as the lighter laid in the bottom of the bay, was it of any value to the owner. If it was not of any value to the owner, then there was an actual loss or a "total destruction of the thing insured" within the meaning of the above sections of Act No. 2427 of the insurance code.

Pan Malayan Insurance Corporation v Court of Appeals, et al. GR No. 95070 September 5, 1991 27

FACTS: The private respondent Food and Agricultural Organization of the United Nations (FAO) contracted with the Luzon Stevedoring Corporation (LUZTEVECO), whereby the latter was to deliver 1, 500 metric tons of IR-36 of rice seeds to Vaung Tau in Vietnam. The cargo was insured for P5, 250, 000 by petitioner Pan Malayan Insurance Corp. The FAO gave instructions to LUZTEVECO to leave for Vaung Tau to deliver the cargo which, by its nature, could not withstand the delay because of the inherent risks of termination and/or spoilage. The barge bearing the cargo, however, sunk in the South China Sea, prompting the FAO to claim the insurance proceeds from petitioner and damages from LUSTEVECO. Both were unable to pay for the losses and damages. Petitioner averred that when a survey was conducted by the Manila Adjusters and Surveyors Company, it found that 6, 200 bags were in good order condition and that 23, 510 bags had allegedly already been sold by LUZTEVECO. The FAO signified its willingness to abandon the proceeds of the sale of 23, 510 bags and the remaining good order bags, but petitioner rejected FAOs proposed abandonment. This prompted the FAO to institute a civil case against petitioner. The lower court rendered judgment in favor of FAO and was likewise affirmed by the CA. ISSUE: Whether or not there was a total loss of the shipment. HELD: Yes there is actual total loss. The law classifies loss into total or partial. Total loss may be actual or absolute, or it may otherwise be technical or constructive. It will be recalled that said rice seeds were treated and would germinate upon mere contact with water. The rule is that where the cargo by the process of decomposition or other chemical agency no longer remains the same kind of thing as before, an actual total loss has been suffered.

Oriental Assurance Corporation v Court of Appeals, et al. GR No. 94052 August 9, 1991

FACTS: In January 1986, private respondent Panama Sawmill Co., Inc. (Panama) bought, in Palawan, 1,208 pieces of apitong logs, with a total volume of 2,000 cubic meters. It hired Transpacific Towage, Inc., to transport the logs by sea to Manila and insured it against loss for P1-M with petitioner Oriental Assurance Corporation (Oriental Assurance). The logs were loaded on two (2) barges: (1) on barge PCT7000,610 pieces of logs with a volume of 1,000 cubicmeters; and (2) on Barge TPAC1000, 598 pieces of logs, also with a volume of 1,000 cubic meters. During the 28

voyage, rough seas and strong winds caused damage to Barge TPAC-1000 resulting in the loss of 497 pieces of logs out of the 598 pieces loaded thereon. Panama demanded payment for the loss but Oriental Assurance refuse on the ground that its contracted liability was for "TOTAL LOSS ONLY." ISSUE: Whether or not Oriental Assurance can be held liable under its maritime insurance policy based on the theory of a divisible contract of insurance and, consequently, a constructive total loss. HELD: No. The policy in question shows that the subject matter insured was the entire shipment of 2,000 cubic meters of apitong logs. The fact that the logs were loaded on two different barges did not make the contract several and divisible as to the items insured. The logs on the two barges were not separately valued or separately insured. Only one premium was paid for the entire shipment, making for only one cause or consideration. The insurance contract must, therefore, be considered indivisible. More importantly, the insurer's liability was for "total loss only." A total loss may be either actual or constructive (Sec. 129, Insurance Code). An actual total loss is caused by: (a) A total destruction of the thing insured; (b) The irretrievable loss of the thing by sinking, or by being broken up; (c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or (d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. (Section 130, Insurance Code). In the absence of either actual or constructive total loss, there can be no recovery by the insured Panama against the insurer, Oriental Assurance.

E. M. Bachrach v British American Assurance Company GR No. L-5715 December 20, 1910

FACTS: The plaintiff commenced an action against the defendant to recover the sum of P9, 841.50, the amount due, upon a fire insurance policy issued by the defendant to the plaintiff. Defendant alleged that it was released from all obligations under said policy on the ground that the plaintiff maintained a paint and varnish shop in the said building where all the goods which were insured were stored which greatly increased the risk of fire if not the cause of such fire. ISSUE: Whether or not the use of the building as a paint and varnish shop annulled the policy of insurance.

29

HELD: No. 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. It may be added that there was no provision in the policy prohibiting the keeping of paints and varnishes upon the premises where the insured property was stored. If the company intended to rely upon a condition of that character, it ought to have been plainly expressed in the policy.

30