Biagtan vs. The Insular Life Assurance Company, Ltd.

44
SCRA 58
Unlike the ruling in the case of Calanoc vs. Court of Appeals, where
the killing of the victim was held as accidental and thus covered by
the insurance policy, the Supreme Court held that in the instant
case, the insured was killed intentionally. The term intentional
implies the exercise of the reasoning faculties, consciousness and
volition.
BIAGTAN vs. INSULAR LIFE ASSURANCE Co.
FACTS: Juan Biagtan was insured with Insular for P5k and a
supplementary contract Accidental Death Benefit clause for
another P5k if the death of the Insured resulted directly from bodily
injury effected solely through external and violent means sustained
in an accident . . . and independently 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 under the Accidental Death
Benefit clause. Insular refused on the ground that the death resulted
from injuries intentionally inflicted by 3rd parties and was therefore
not covered. Biagtans filed against Insular. CFI ruled in favor of
Biagtans.
ISSUE: WON the injuries were intentionally inflicted by a third
party?
HELD: Whether the robbers had the intent to kill or merely to scare
the victim or to ward off any defense he might offer, it cannot be
denied that the act itself of inflicting the injuries was intentional.
The exception in the accidental benefit clause invoked by the
appellant does not speak of the purposewhether homicidal or not
of a third party in causing the injuries, but only of the fact that
such injuries have been "intentionally" inflicted this obviously to
distinguish them from injuries which, although received at the hands
of a third party, are purely accidental.
In Calanoc vs. 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 injured inflicted with bladed weapons at close range
cannot conceivably be considered as innocent insofar as such intent
is concerned.
Gaisano v Insurance G.R. No. 147839 June 8, 2006
Facts: IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained
from respondent fire insurance policies with book debt
endorsements. The insurance policies provide for coverage on "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."
The policies 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." The policies also provide
for the following conditions:
1. Warranted that the Company shall not be 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.
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 from their customers and
dealers.
Gaisano 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 delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano.
It alleges that IMC and LSPI were paid for their claims and that the
unpaid accounts of petitioner on the sale and delivery of readymade clothing materials with IMC was P2,119,205.00 while with LSPI
it was P535,613.00.
The RTC rendered its decision dismissing Insurance'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. Also, it said
that IMC and LSPI retained ownership of the delivered goods and
must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It
ordered Gaisano to pay Insurance the P 2 million and the P 500,000
the latter paid to IMC and Levi Strauss.
Hence this petition.

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 purpose of securing
the payment of the purchase price the above described
merchandise remains the property of the vendor until the
purchase price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding
accounts with IMC and LSPI.
Held: Petition partly granted.
1. No. 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.
Thus, what were insured against were the accounts of IMC and
LSPI with petitioner which remained unpaid 45 days after the
loss through fire, and not the loss or destruction of the goods
delivered.
2. Yes. 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, 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. 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. Petitioner bears the risk of loss of the goods
delivered. IMC and LSPI had an insurable interest until full
payment of the value of the delivered goods. Unlike the civil
law concept of res perit 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, whether real or
personal, or any relation thereto, or liability 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.
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 retains an insurable
interest in the 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 117432 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. As
correctly stated by the CA, 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 event only holds true when the
obligation consists in the delivery of a determinate thing and
there is no stipulation holding him liable even in case of
fortuitous event. It does not apply when the obligation is
pecuniary in nature. Under Article 1263 of the Civil Code, "[i]n
an obligation to deliver a generic thing, the loss or destruction
of anything of the same kind does not extinguish the
obligation." This rule is based on the principle that the genus
of a thing can never perish. An obligation to pay money is
generic; therefore, it is not excused by fortuitous loss of any
specific property of the debtor.

4. Yes but account with LSPI unsubstantiated. With respect to

IMC, the respondent has adequately established its claim. The
P 3 m claim has been proven. The subrogation 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. 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. As to LSPI, respondent failed to present sufficient
evidence to prove its cause of action. There was no evidence
that respondent has been subrogated to any right which LSPI
may have against petitioner. Failure to substantiate the claim
of subrogation is fatal to petitioner's case for recovery of
P535,613.00.

Lampano V. Jose (1915)

FACTS: Mariano R. Barretto, constructed a house for Placida A. Jose
sold the house to Antonina Lampano for P6,000. The house was
destroyed by fire during which Lampano still owed Jose P2,000 as
evidenced by a promissory note. Jose also owed Barretto P2,000 for
the construction.
After the completion of the house and before it was destroyed,
Mariano R. Barretto took out an insurance policy upon it in his own
name, with the consent of Placida A. Jose, for the sum of P4,000.
After its destruction, he collected P3,600 from the insurance
company, having paid in premiums the sum of P301.50. Lampano
filed a complaint against Barreto and Jose alleging that Jose in a
verbal agreement told her that the policy will be delivered to her so
she should collected P3,600 from each of them
RTC: favored Jose ordering Barreto to pay him P1,298.50 and
offsetting the P2,000. Barreto alone appealed
ISSUE: W/N Barreto had insurable interest in the house and could
insure it for his it for his own protection

HELD: YES. reversed and Barretto is absolved. Where different

persons have different interests in the same property, the insurance
taken by one in his own right and in his own interest does not in any
way insure to the benefit of another. A contract of insurance made
for the insurer's (insured) indemnity only, as where there is no
agreement, express or implied, that it shall be for the benefit of a
third person, does not attach to or run with the title to the insured
property on a transfer thereof personal as between the insurer and
the insured. Barretto had an insurable interest in the house. He
construed the building, furnishing all the materials and supplies, and
insured it after it had been completed.

Lopez v. Del Rosario 44 PHIL 98

Facts: Benita Quiogue de V. del Rosario (Mrs. del Rosario), owner of
a bonded warehouse where Froilan Lopez, holder or 14 waehouse
receipts and Elias Zamora had their copra deposited
The warehouse recipts states an insurance of 1% their declared
value which can be increase or decrease by giving 1 month's notice
in writing
Lopez paid the insurance to May 18, 1920, but not thereafter
June 6, 1920: the warehouse was destroyed by fire. Only copra
worth P49,985 was salvaged. At that time Lopez was still liable for
the storage and insurance of P315.90
Mrs. Del Rosario submitted the insurance with the arbitrators and
seems to have satisfied all of the persons who had copra stored in
her warehouse, including the stockholders in the Compaia Coprera
de Tayabas (whose stock she took over), with the exception of
Froilan Lopez
Ineffectual attempts by Mrs. Del Rosario to effect a compromise with
Lopez first for P71,994, later raised to P72,724, and finally reduced
to P17,000, were made. But Lopez stubbornly contended, or, at
least, his attorney contended for him, that he should receive not a
centavo less than P88,595.43 (from originally P107,990.40)
Issue:
1. W/N Del Rosario acted as the agent of Lopez in taking out the
insurance on the contents of the warehouse or whether she
acted as the reinsurer of the copra.
2. W/N Mrs. Del Rosario should be held liable to Lopez even if he
has not paid the insurance at the time of the fire
Held:
1. She acted as the agent of Lopez. The agency can be deduced
from the warehouse receipts, the insurance policies and the
circumstances surrounding the transaction. Under any aspect,
Del Rosario is liable. The law is that a policy effected by a

bailee and covering by its terms in his own property and

property held in trust, inures, in the event of loss, equally and
proportionately to the benefit of all owners of the property
insured. Even if one secured insurance covering his own
goods and goods stored with him, and even if the owner of the
stored goods did not request or know the insurance, and did
not ratify it before the payment of the loss, it has been held by
a reputable court that the warehouseman is liable to the
owner of such stored goods for his share. In a case of
contributing policies, adjustments of loss made by an expert
or by a board of arbitrators may be submitted to the court
NOT as evidence of the facts stated therein, or as obligatory,
but for the purpose of assisting the court in calculating the
amount of liability.
2. YES. Entitled to P88,595.43 minus P7,185.88, his share of the
expenses, minus P315.90, due for insurance and storage, or
approximately a net amount of P81,093.65, with legal interest

Tai Tong Chua Che v. Insurance com GR L-55397

Lessons Applicable: When Insurable Interest Must Exist (Insurance)
FACTS:

Azucena Palomo bought a parcel of land and building

from Rolando Gonzales and assumed a mortgage of the building
in favor of S.S.S. which was insured with S.S.S. Accredited Group
of Insurers
April 19, 1975: Azucena Palomo obtained a loan from Tai Tong
Chuache Inc. in the amount of P100,000 and to secure it, the
land and building was mortgaged
June 11, 1975: Pedro Palomo secured a Fire Insurance
Policy covering the building for P50,000 with Zenith Insurance
Corporation
July 16, 1975: another Fire Insurance policy was procured from
Philippine British Assurance Company, covering the same
building for P50,000 and the contents thereof for P70,000
Before the occurrence of the peril insured against the Palomos
had already paid their credit due the
July 31, 1975: building and the contents were totally razed by
fire
Palomo was able to claim P41,546.79 from Philippine British
Assurance Co., P11,877.14 from Zenith Insurance Corporation

and P5,936.57 from S.S.S. Group of Accredited Insurers

but Travellers Multi-Indemnity refused so it demanded the
balance from the other three but they refused so they filed
against them

Insurance Commission, CFI: absolved Travellers on the basis

that Arsenio Cua was claiming and NOT Tai Tong Chuache

Palomo Appealed

Travellers reasoned that the policy is endorsed

to Arsenio Chua, mortgage creditor

Tai Tong Chuache & Co. filed a complaint in intervention

claiming the proceeds of the fire Insurance Policy issued by
travellers

affirmative defense of lack of insurable interest that

before the occurrence of the peril insured against the Palomos
had already paid their credit due the petitioner
ISSUE: W/N Tai Tong Chuache & Co. has insurable interest
HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong
Chuache & Co.

when the creditor is in possession of the document of credit,

he need not prove non-payment for it is presumed
The validity of the insurance policy taken b petitioner
was not assailed by private respondent. Moreover, petitioner's
claim that the loan extended to the Palomos has not yet been
paid was corroborated by Azucena Palomo who testified that they
are still indebted to herein petitioner
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
Upon its failure to prove the allegation of lack of insurable
interest on the part of the petitioner, Travellers must be held
liable

Great Pacific Life vs. CA GR L-31845

Facts: A contract of group life insurance was executed between
Grepalife and DBP. The former agreed to insure the lives of eligible
housing loan mortgagors of DBP. Dr. Leuterio applied membership in
the group life insurance plan. He answered in the application form

that he has never consulted a physician for heart condition, high

blood pressure, cancer, diabetes, lung, kidney, or stomach disorder
or any other physical impairment, and that to the best of his
knowledge he is in good condition. During the subsistence of the
insurance he died from massive cerebral hemorrhage. Grepalife
denied the claim because of concealment since it was discovered
that he had high blood. His widow filed a claim.
Issue: Whether or not there was misrepresentaion so as to warrant
denial of claim; Whether or not the widow of Leuterio is a real party
in interest
Held: The Supreme Court ruled that there was no sufficient proof
that the insured suffered from hypertension. It is a well-settled ruled
that the fraudulent intent on the part of the insured must be
established to entitle the insurer to rescind the contract. As regards
the second issue, the widow can be regarded as real party in
interest because in mortgage redemption insurance the mortgagor
and not the mortgagee is the contracting party. The mortgagor
merely assigns the proceeds to the mortgagee. Therefore, since by
principle of succession the widow may claim.

Ng Gan Zee vs. Asian Crusader GR L-47593

122 SCRA 461 Mercantile Law Insurance Law Concealment
Misrepresentation Duty of Insurance Company to Make Inquiry
In May 1962, Kwong Nam applied for a 20-year endowment
policy with Asian Crusader Life Assurance Corporation. Asian
Crusader asked the following question:
Has any life insurance company ever refused your application for
insurance or for reinstatement of a lapsed policy or offered you a
policy different from that applied for? If, so, name company and
date.
Kwong Nam answered No to the above question.
Kwong Nam was also examined by Asian Crusaders medical
examiner to whom he disclosed that he was once operated and a
tumor was removed from his stomach and such was associated
with ulcer of the stomach.
Kwong Nams application was approved. In May 1963, he died. His
widow, Ng Gan Zee, filed an insurance claim but Asian Crusader

refused her claim as it insisted that Kwong Nam concealed material

facts from them when he was applying for the insurance; that he
misrepresented the fact that he was actually denied application by
Insular Life when he was renewing his application with them; that
Kwong Nam was actually operated for peptic ulcer.
ISSUE: Whether or not Ng Gan Zee can collect the insurance claim.
HELD: Yes. Asian Crusader was not able to prove that Kwong Nams
statement that Insular Life did not deny his insurance renewal with
them is untrue. In fact, evidence showed that in April 1962, Insular
Life approved Kwong Nams request of reinstatement only with the
condition that Kwong Nams plan will be lowered from P50,000.00 to
P20,000.00 considering his medical history.
Kwong Nam did not conceal anything from Asian Crusader. His
statement that his operation, in which a tumor the size of a hens
egg was removed from his stomach, was only associated with ulcer
of the stomach and not peptic ulcer can be considered 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 Asian
Crusader.
While it may be conceded that, from the viewpoint of a medical
expert, the information communicated was imperfect, the same was
nevertheless sufficient to have induced Asian Crusader to make
further inquiries about the ailment and operation of Kwong Nam. 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.

Insular Life v. Feliciano - Concealment

73 PHIL 201
Facts:
> Evaristo Feliciano filed an application with Insular Life upon the
solicitation of one of its agents.

> It appears that during that time, Evaristo was already suffering
from tuberculosis. Such fact appeared during the medical exam, but
the examiner and the companys agent ignored it.
> After that, Evaristo was made to sign an application form and
thereafter the blank spaces were filled by the medical examiner and
the agent making it appear that Evaristo was a fit subject of
insurance. (Evaristo could not read and understand English)
> When Evaristo died, Insular life refused to pay the proceeds
because of concealment.

Issue:
Whether or not Insular Life was bound by their agents acts.

Held:
Yes.
The insurance business has grown so vast and lucrative within the
past century. Nowadays, even people of modest means enter into
insurance contracts. Agents who solicit contracts are paid large
commissions on the policies secured by them. They act as general
representatives of insurance companies.

IN the case at bar, the true state of health of the insured was
concealed by the agents of the insurer. The insurers medical
examiner approved the application knowing fully well that the
applicant was sick. The situation is one in which of two innocent
parties must bear a loss for his reliance upon a third person. In this
case, it is the one who drafted and accepted the policy and
consummated the contract. It seems reasonable that as between
the two of them, the one who employed and gave character to the
third person as its agent should be the one to bear the loss. Hence,
Insular is liable to the beneficiaries.

Perez v. CA- Perfection of the Contract of Insurance

323 SCRA 613 (2000)
Facts:
> Primitivo Perez had been insured with the BF Lifeman Insurance
Corporation since 1980 for P20,000.00.
> In October 1987, an agent of Lifeman, Rodolfo Lalog, visited
Perez in Quezon and convinced him to apply for additional insurance
coverage of P50,000.00, to avail of the ongoing promotional
discount of P400.00 if the premium were paid annually.
> Primitivo B. Perez accomplished an application form for the
additional insurance coverage. Virginia A. Perez, his wife, paid
P2,075.00 to Lalog. The receipt issued by Lalog indicated the
amount received was a "deposit."
> Unfortunately, Lalog lost the application form accomplished by
Perez and so on October 28, 1987, he asked the latter to fill up
another application form. On November 1, 1987, Perez was made to
undergo the required medical examination, which he passed.
> Lalog forwarded the application for additional insurance of Perez,
together with all its supporting papers, to the office of BF Lifeman
Insurance Corporationn in Quezon which office was supposed to
forward the papers to the Manila office.
> On November 25, 1987, Perez died while he was riding a banca
which capsized during a storm.
> At the time of his death, his application papers for the additional
insurance were still with the Quezon office. Lalog testified that when
he went to follow up the papers, he found them still in the Quezon
office and so he personally brought the papers to the Manila office
of BF Lifeman Insurance Corporation. It was only on November 27,
1987 that said papers were received in Manila.
> Without knowing that Perez died on November 25, 1987, BF
Lifeman Insurance Corporation approved the application and issued
the corresponding policy for the P50,000.00 on December 2, 1987
> Virginia went to Manila to claim the benefits under the insurance
policies of the deceased. She was paid P40,000.00 under the first
insurance policy for P20,000.00 (double indemnity in case of
accident) but the insurance company refused to pay the claim under

the additional policy coverage of P50,000.00, the proceeds of which

amount to P150,000.00 in view of a triple indemnity rider on the
insurance policy.
> In its letter of January 29, 1988 to Virginia A. Perez, the insurance
company maintained that the insurance for P50,000.00 had not
been perfected at the time of the death of Primitivo Perez.
Consequently, the insurance company refunded the amount of
P2,075.00 which Virginia Perez had paid
> Lifeman filed for the rescission and the declaration of nullity.
Perez, on the other hand, averred that the deceased had fulfilled all
his prestations under the contract and all the elements of a valid
contract are present.
> RTC ruled in favor of Perez. CA reversed.

Issue:
Whether or not there was a perfected additional insurance contract.

Held:
The contract was not perfected.
Insurance is a contract whereby, for a stipulated consideration, one
party undertakes to compensate the other for loss on a specified
subject by specified perils. A contract, on the other hand, is a
meeting of the minds between two persons whereby one binds
himself, with respect to the other to give something or to render
some service.

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
absolute. When Primitivo filed an application for insurance, paid
P2,075.00 and submitted the results of his medical examination, his
application was subject to the acceptance of private respondent BF
Lifeman Insurance Corporation. The perfection of the contract of
insurance between the deceased and respondent corporation was

further conditioned upon compliance with the following requisites

stated in the application form:
"there shall be no contract of insurance unless and until a policy is
issued on this application and that the said policy shall not take
effect until the premium has been paid and the policy delivered to
and accepted by me/us in person while I/We, am/are in good
health."
The assent of private respondent BF Lifeman Insurance Corporation
therefore was not given when it merely received the application
form and all the requisite supporting papers of the applicant. Its
assent was given when it issues a corresponding policy to the
applicant. Under the abovementioned provision, it is only when the
applicant pays the premium and receives and accepts the policy
while he is in good health that the contract of insurance is deemed
to have been perfected.

It is not disputed, however, that when Primitivo died on November

25, 1987, his application papers for additional insurance coverage
were still with the branch office of respondent corporation in
Gumaca and it was only two days later, or on November 27, 1987,
when Lalog personally delivered the application papers to the head
office in Manila. Consequently, there was absolutely no way the
acceptance of the application could have been communicated to the
applicant for the latter to accept inasmuch as the applicant at the
time was already dead.

Insurance Case Digest: Del Rosario V. Equitable Ins. And Casualty

Co., Inc. (1963)
G.R. No. L-16215
June 29, 1963
Lessons Applicable: Ambiguous Provisions Interpreted Against
Insurer (Insurance)

FACTS:

April 13, 1957: Simeon del Rosario, father of the insured who
died from drowning filed a claim for payment with Equitable Ins.
and Casualty Co., Inc. but it refused to pay more than P1,000 php
so a case was filed with the RTC for the P2,000 balance stating

that under the policy they are entitled to P1,000 to P3,000 as

indemnity

RTC: entitled to recover P3,000 - policy does not positively

state any definite amount, 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 greater
indemnity
ISSUE: W/N Simeon is entitled to recover P3,000

HELD: YES.

terms in an insurance policy, which are ambiguous, equivocal

or uncertain are to be construed strictly 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 a forfeiture is involved

reason for this rule 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 expert and legal advisers employed by, and
acting exclusively in the interest of, the insurance company
Misamis Lumber vs Capital Insurance GR L-21380
Lessons Applicable: Judicial Construction Cannot Alter Terms
(Insurance)

FACTS:

Misamis Lumber Corporation (Misamis), formerly Lanao Timber

Mills, Inc., insured its Ford Falcon motor car with Capital
Insurance & Surety Company (Capital)

November 25, 1961 11 pm: The car broke when it hit a hollow
block lying alongside the water hole which the driver did not see
because the on-coming car did not dim its light

The car was towed and repaired by Morosi Motors

costing P302.27

November 29, 1961: After the repairs were made, Misamis

made a report to Capital who only admits liability of P150

CFI: paragraph 4 of the policy is clear and specific and leaves

no room for interpretation that the repair liability is limited to
P150

ISSUE: W/N Misamis is entitled to an amount exceeding P150

HELD: NO.

insurance contract may be rather onerous (one-sided) 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

FILIPINAS DE COMPANIA DE SEGUROS vs. CHRISTERN, HUENFELD &

CO
FACTS:
Christern, Huenefeld and Company, a German company, obtained a
fire insurance policy from Filipinas Compaia for the merchandise
contained in a building located in Binondo, Manila in the sum of
P100,000. Filipinas Compaia is an American controlled company.
The building and the insured merchandise were burned during the
Japanese occupation. Christern filed its claim amounting to
P92,650.00 but Filipinas Compaia refused to pay alleging that
Christern is a corporation whose majority stockholders are Germans
and that during the Japanese occupation, America declared war
against Germany hence the insurance policy ceased to be effective
because the insured has become an enemy. Filipinas Compaia was
eventually ordered to pay Christern as ordered by the Japanese
government.
ISSUE:
Whether or not Christern, Huenefeld and Co is entitled to receive the
proceeds from the insurance claim.
HELD:
NO. There is no question that majority of the stockholders of
Christern were German subjects. This being so, Christern became an

enemy corporation upon the outbreak of the war between the

United States and Germany. 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.
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 had ceased to be valid and enforceable, 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
(alternative digest)
Filipinas Compania de Seguros v. Christern Huenefeld
G.R. No. L-2294, May 25, 1951

A corporation borrows its citizenship from the citizenship of

majority of its stockholders, regardless of the country under
whose laws it was organized and created.

FACTS:
Christern Huenefeld Corporation bought a fire insurance policy from
Filipinas Compania de Seguros to cover merchandise contained in a
building. During the Japanese military occupation, this same
merchandise and the building were burned, so Huenefeld filed a
claim under the policy.
Filipinas Compania refused to pay, alleging that the policy had
ceased to be in force when the US declared war against Germany.
Filipinas Compania contended that Huenefeld, although organized
and created under Philippine laws, is a German subject, and hence,
a public enemy, since majority of its stockholders are Germans. On
the other hand, Filipinas Compania is under American jurisdiction.
However, the Director of Bureau of Financing, Philippine Executive
Commission ordered Filipinas Compania to pay, so Filipinas
Compania did pay. The case at bar is about the recovery of that sum

paid.
ISSUES:

W/N Christern Huenefeld is a German subject because

majority of its stockholders are under German jurisdiction,
despite the fact that it was organized and created under
Philippine laws

If so, W/N the fire insurance policy is enforceable against an

enemy state

HELD:
The Court of Appeals ruled that a private corporation is a citizen of
the country or state by and under the laws of which it was created
or organized. It rejected the theory that nationality of a private
corporation is determined by the character or citizenship of its
controlling stockholders.
But the Supreme Court held that Christern Huenefeld is an enemy
corporation since majority of its stockholders are German subjects.
The two American cases relied up by the Court of Appeals have lost
their force in view of a newer case where the control test was
adopted.
The Philippine Insurance Law 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 the insured becomes a public
enemy.
Since Christern Huenefeld became a public enemy on Dec. 10, 1941,
then the policy has ceased to be enforcible and therefore Huenefeld
is not entitled to indemnity. However, elementary rules of justice
require that the premium paid from Dec. 11, 1941 should be
returned.
Thus, Filipinas Compania is allowed to recover the sum paid but only
its equivalent in actual Philippine currency, minus the premium that
Huenefeld paid after Dec. 11.

Insurance Case Digest: Palileo V. Cosio (1955)

Lessons Applicable: Mortgagor (Insurance)

FACTS:
Cherie Palileo (debtor-mortgagor) filed a complaint against
Beatriz Cosio (creditor-mortgagee) praying that their transaction
be one of a loan with an equitable mortgage to secure the
payment of the loan. The original counsel of Cosio Atty. Guerrero
being appointed Undersecretary of Foreign Affairs so she forgot
the date of the trial and she was substituted.

it is a loan of P12,000 secured by a "Conditional Sale of

Residential Building" with right to repurchase. After the
execution of the contract, Cosio insured in her name the building
with Associated Insurance & Surety Co. against fire.

The building was partly destroyed by fire so she claimed an

indemnity of P13,107

Palileo demanded that the amount of insurance proceeds be

credited to her loan

RTC: it is a loan with equitable mortgage so the insurance

proceeds should be credited to the loan and refund the
overpayment.
ISSUE: W/N Cosio as mortgagee is entitled to the insurance
proceeds for her own benefit

HELD: YES. Modify. collection of insurance proceeds shall not be

deemed to have compensated the obligation of the Palileo to Cosio,
but bars the Cosio from claiming its payment from the Palileo; and
Cosio shall pay to Palileo P810 representing the overpayment made
by Palileo by way of interest on the loan.

When the the mortgagee may insure his interest in the

property independently of the mortgagor , upon the destruction
of the property the insurance money paid to the mortgagee will
not inure to the benefit of the mortgagor, and the amount due
under the mortgage debt remains unchanged. The mortgagee,
however, is not allowed to retain his claim against the
mortgagor, but it passes by subrogation to the insurer, to the
extent of the insurance money paid

It is true that there are authorities which hold that "If a

mortgagee procures insurance on his separate interest at his own
expense and for his own benefit, without any agreement with the
mortgagor with respect thereto, the mortgagor has no interest in
the policy, and is not entitled to have the insurance proceeds
applied in reduction of the mortgage debt" But these authorities
merely represent the minority view

Geagonia v CA G.R. No. 114427 February 6, 1995

Facts:
Geagonia, owner of a store, obtained from Country Bankers fire
insurance policy for P100,000.00. The 1 year policy and covered
thestock trading of dry goods.
The policy noted the requirement that
"3. 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 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."
The petitioners stocks were destroyed by fire. He then filed a claim
which was subsequently denied because the petitioners stocks
were covered by two other fire insurance policies for Php 200,000
issued by 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 in
the Insurance Commission for the recovery of P100,000.00 under
fire insurance policy and damages. He claimed that he knew the
existence of the other two policies. But, he said that he had no
knowledge of the provision in the private respondent's policy
requiring him to inform it of the prior policies and this requirement
was not mentioned to him by the private respondent's agent.
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 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.

The Insurance Commission then ordered the respondent company to

pay complainant the sum of P100,000.00 with interest and
attorneys 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.
Issues:
1. WON the petitioner had not disclosed the two insurance policies
when he obtained the fire insurance and thereby violated Condition
3 of the policy.
2. WON he is prohibited from recovering
Held: Yes. No. Petition Granted
Ratio:
1. The court agreed with the CA that the petitioner knew of the prior
policies issued by the PFIC. His letter of 18 January 1991 to the
private respondent conclusively proves 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. Stated differently, provisions, conditions or exceptions in policies
which tend to work a forfeiture of insurance policies should be
construed most strictly against those for whose benefits they are
inserted, and most favorably toward those against whom they are
intended to operate.
With these principles in mind, 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
P200,000.00. What it had in mind was to discourage over-insurance.
Indeed, the rationale behind the incorporation of "other insurance"
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 value, the insured may have an inducement to
destroy 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.