DBP Pool of Accredited insurance vs Radio Mindanao Network (January 27, 2006)

FACTS: In the evening of July 27, 1988, the radio station of Radio Mindanao Network located at the SSS
Building in Bacolod City was burned down causing damage in the amount of over one million pesos.
Respondent sought to recover under two insurance policies but the claims were denied on the basis that
the case of the loss was an excepted risk under condition no. 6 (c) and (d), to wit:
6. This insurance does not cover any loss or damage occasioned by or through or in consequence,
directly or indirectly, of any of the following consequences, namely:
(c) War, invasion, act of foreign enemies, hostilities, or warlike operations (whether war be declared or
not), civic war.
(d) Mutiny, riot, military or popular uprising, insurrection, rebellion, revolution, military or usurped
power.
The insurers maintained that based on witnesses and evidence gathered at the site, the fire was caused by
the members of the Communist Party of the Philippines/New Peoples Army. Hence the refusal to honor
their obligations.
The trial court and the CA found in favor of the respondent. In its findings, both courts mentioned the fact
that there was no credible evidence presented that the CCP/NPA did in fact cause the fire that gutted the
radio station in Bacolod.
ISSUE: Whether the insurance companies are liable to pay Radio Mindanao Network under the insurance
policies
RULING: Yes. The Court will not disturb the factual findings of the appellant and trial courts absent
compelling reason. Under this mode of review, the jurisdiction of the court is limited to reviewing only
errors of law. Particularly in cases of insurance disputes with regard to excepted risks, it is the insurance
companies which have the burden to prove that the loss comes within the purview of the exception or
limitation set up. It is sufficient for the insured to prove the fact of damage or loss. Once the insured
makes out a prima facie case in its favor, the duty or burden of evidence shifts to the insurer to controvert
said prima facie case.

PRUDENTIAL GUARANTEE and ASSURANCE INC., vs. TRANS-ASIA SHIPPING LINES,

INCG.R. No. 151890
June 20, 2006
FACTS: TRANS-ASIA is the owner of the vessel M/V Asia Korea. In consideration of payment of
premiums, PRUDENTIAL insured M/V Asia Korea for loss/damage of the hull and machinery arising
from perils, inter alia, of fire and explosion for the sum of P40 Million, beginning from the period of July
1, 1993 up to July 1, 1994.On October 25, 1993, while the policy was in force, a fire broke out while
[M/V Asia Korea was] undergoing repairs at the port of Cebu. On October26, 1993 TRANS-ASIA filed

its notice of claim for damage sustained by the vessel evidenced by a letter/formal claim. TRANS-ASIA
reserved its right to subsequently notify PRUDENTIAL as to the full amount of the claim upon final
survey and determination by average adjuster Richard Hogg International (Phil.) of the damage sustained
by reason of fire. TRANS-ASIA executed a document denominated "Loan and Trust receipt", a portion of
which states that Received from Prudential Guarantee and Assurance, Inc., the sum of PESOS THREE
MILLION ONLY (P3,000,000.00) as a loan without interest under Policy No. MH 93/1353
[sic],repayable only in the event and to the extent that any net recovery is made by Trans-Asia Shipping
Corporation, from any person or persons, corporation or corporations, or other parties, on account of loss
by any casualty for which they may be liable occasioned by the 25 October 1993: Fire on
Board."PRUDENTIAL later on denied Trans-Asias claim in stated in a letter that "After a careful review
and evaluation of your claim arising from the above-captioned incident, it has been ascertained that you
are in breach of policy conditions, among them "WARRANTED VESSEL CLASSEDAND CLASS
MAINTAINED". Accordingly, we regret to advise that your claim is not compensable and hereby
DENIED." and asked for the return of the 3,000,000.TRANS-ASIA filed a Complaint for Sum of Money
against PRUDENTIAL with the RTC of Cebu City, wherein TRANS-ASIA sought the amount of
P8,395,072.26 from PRUDENTIAL, alleging that the same represents the balance of the indemnity due
upon the insurance policy in the total amount of P11,395,072.26. TRANS-ASIA similarly sought interest
at 42% per annum citing Section 243 of Presidential Decree No. 1460,otherwise known as the "Insurance
Code," as amended. PRUDENTIAL denied the material allegations of the Complaint and
interposed the defense that TRANS-ASIA breached insurance policy conditions, in particular:
PRUDENTIAL posits that TRANS-ASIA violated an express and material warranty in the subject
insurance contract, i.e., Marine Insurance Policy No. MH93/1363, specifically Warranty Clause No. 5
thereof, which stipulates that the insured vessel, "M/V ASIA KOREA" is required to be CLASSED AND
CLASS MAINTAINED. According to PRUDENTIAL, on 25 October 1993, or at the time of the
occurrence of the fire, "M/V ASIA KOREA" was in violation of the warranty as it was not CLASSED
AND CLASS MAINTAINED. PRUDENTIAL submits that Warranty Clause No. 5 was a condition
precedent to the recovery of TRANS-ASIA under the policy, the violation of which entitled
PRUDENTIAL to rescind the contract under Sec. 74 of the Insurance Code. By way of a counterclaim,
PRUDENTIAL sought a refund of P3,000,000.00, which it allegedly advanced to TRANS-ASIA by way
of a loan without interest and without prejudice to the final evaluation of the claim, including the amounts
of P500,000.00, for survey fees and P200,000.00, representing attorneys fees. Trial court ruled in favor
of Prudential. It ruled that a determination of the parties liabilities hinged on whether TRANS-ASIA
violated and breached the policy conditions on WARRANTED VESSEL CLASSED AND CLASS
MAINTAINED. It interpreted the provision to mean that TRANS-ASIA is required to maintain the vessel
at a certain class at all times pertinent during the life of the policy. According to the court a quo, TRANSASIA failed to prove compliance of the terms of the warranty, the violation thereof entitled
PRUDENTIAL to rescind the contract. The court of appeals reversed the decision. It ruled that
PRUDENTIAL, as the party asserting the non-compensability of the loss had the burden of proof to show
that TRANS-ASIA breached the warranty, which burden it failed to discharge. PRUDENTIAL cannot
rely on the lack of certification to the effect that TRANS-ASIA was CLASSED AND CLASS
MAINTAINED as its sole basis for reaching the conclusion that the warranty was breached. It opined that
the lack of a certification does not necessarily mean that the warranty was breached by TRANS-ASIA.
Instead, it considered PRUDENTIALs admission that at the time the insurance contract was entered into
between the parties, the vessel was properly classed by Bureau Veritas, a classification society recognized

by the industry. It similarly gave weight to the fact that it was the responsibility of Richards Hogg
International (Phils.) Inc., the average adjuster hired by PRUDENTIAL, to secure a copy of such
certification to support its conclusion that mere absence of a certification does not warrant denial of
TRANS-ASIAs claim under the insurance policy.
ISSUE: Whether Trans-Asia breached the warranty stated in the insurance policy, thus absolving
Prudential from paying Trans-Asia
RULING: NO, As found by the Court of Appeals and as supported by the records, Bureau Veritas is a
classification society recognized in the marine industry. As it is undisputed that TRANS-ASIA was
properly classed at the time the contract of insurance was entered into, thus, it becomes incumbent upon
PRUDENTIAL to show evidence that the status of TRANS-ASIA as being properly CLASSED by
Bureau Veritas had shifted in violation of the warranty. Unfortunately, PRUDENTIAL failed to support
the allegation
The lack of a certification in PRUDENTIALs records to the effect that TRANS-ASIAs "M/V Asia
Korea" was CLASSED AND CLASSMAINTAINED at the time of the occurrence of the fire cannot be
tantamount to the conclusion that TRANS-ASIA in fact breached the warranty contained in the policy. It
was likewise the responsibility of the average adjuster, Richards Hogg International (Phils.), Inc., to
secure a copy of such certification, and the alleged breach of TRANS-ASIA cannot be gleaned from the
average adjusters survey report, or adjustment of particular average per "M/V Asia Korea" of the 25
October 1993 fire on board. The Supreme Court is not unmindful of the clear language of Sec. 74 of the
Insurance Code which provides that, "the violation of a material warranty, or other material provision of a
policy on the part of either party thereto, entitles the other to rescind." It is generally accepted that "a
warranty is a statement or promise set forth in the policy, or by reference incorporated therein, the untruth
or non-fulfillment of which in any respect, and without reference to whether the insurer was in fact
prejudiced by such untruth or non-fulfillment, renders the policy voidable by the insurer." However, it is
similarly indubitable that for the breach of a warranty to avoid a policy, the same must be duly shown by
the party alleging the same. We cannot sustain an allegation that is unfounded. Consequently,
PRUDENTIAL, not having shown that TRANS-ASIA breached the warranty condition, CLASSED AND
CLASS MAINTAINED, it remains that TRANS-ASIA must be allowed to recover its rightful claims on
the policy. Assuming arguendo that TRANS-ASIA violated the policy condition on WARRANTED
VESSEL CLASSED AND CLASS MAINTAINED,PRUDENTIAL made a valid waiver of the same.
PRUDENTIAL can be deemed to have made a valid waiver of TRANS-ASIAs breach of warranty as
alleged. Because after the loss, Prudential renewed the insurance policy of Trans-Asia for two (2)
consecutive years, from noon of 01 July 1994 to noon of 01 July 1995, and then again until noon of 01
July 1996. This renewal is deemed a waiver of any breach of warranty. PRUDENTIAL, in renewing
TRANS-ASIAs insurance policy for two consecutive years after the loss covered by Policy No.
MH93/1363, was considered to have waived TRANS-ASIAs breach of the subject warranty, if any.
Breach of a warranty or of a condition renders the contract defeasible at the option of the insurer; but if he
so elects, he may waive his privilege and power to rescind by the mere expression of an intention so to
do. In that event his liability under the policy continues as before. There can be no clearer intention of the
waiver of the alleged breach than the renewal of the policy insurance granted by PRUDENTIAL to
TRANS-ASIA in MH94/1595 and MH95/1788, issued in the years 1994 and 1995,respectively

ETERNAL VS. PHILAMLIFE G.R. No. 166245 April 09, 2008

FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy
with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of
Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The
amount of insurance coverage depended upon the existing balance of the purchased burial lots.
The relevant provisions of the policy are: EFFECTIVE DATE OF BENEFIT. The insurance of any
eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However,
there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.
Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with
a copy of the application of each purchaser, and the amounts of the respective unpaid balances of all
insured lot purchasers. Eternal complied by submitting a letter dated December 29, 1982, containing a list
of insurable balances of its lot buyers for October 1982. One of those included in the list as new
business was a certain John Chuang. His balance of payments was 100K. on August 2, 1984, Chuang
died.
Eternal sent a letter dated to Philamlife, which served as an insurance claim for Chuangs death. Attached
to the claim were certain documents. In reply, Philamlife wrote Eternal a letter requiring Eternal to submit
the additional documents relative to its insurance claim for Chuangs death. Eternal transmitted the
required documents through a letter which was received by Philamlife. After more than a year, Philamlife
had not furnished Eternal with any reply to the latters insurance claim. This prompted Eternal to demand
from
Philamlife
the
payment
of
the
claim
for
PhP
100,000.
In response to Eternals demand, Philamlife denied Eternals insurance claim in a letter a portion of which
reads:
The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens
Memorial Park in October 1982 for the total maximum insurable amount of P100,000.00 each. No
application for Group Insurance was submitted in our office prior to his death on August 2, 1984
Eternal filed a case with the RTC for a sum of money against Philamlife, which decided in favor of
Eternal, ordering Philamlife to pay the former 100K representing the proceeds of the policy.
CA reversed. Hence this petition.
ISSUE: WON Philamlife should pay the 100K insurance proceeds
RULING: Petition granted. YES. An examination of the provision of the POLICY under effective date
of benefit, would show ambiguity between its two sentences. The first sentence appears to state that the
insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal
while the second sentence appears to require Philamlife to approve the insurance contract before the same
can become effective.

It must be remembered that an insurance contract is a contract of adhesion which must be construed
liberally in favor of the insured and strictly against the insurer in order to safeguard the latters interest
On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a partys
purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser
is created and the same is effective, valid, and binding until terminated by Philamlife by disapproving the
insurance application. The second sentence of the Creditor Group Life Policy on the Effective Date of
Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance
contract. Moreover, the mere inaction of the insurer on the insurance application must not work to
prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination
of the insurance contract by the insurer must be explicit and unambiguous.
Blue Cross Healthcare v. Olivares February 12, 2008
FACTS:
Neomi T. Olivares applied for a health care program with petitioner Blue Cross Health Care, Inc.,
a health maintenance firm. On November 30, 2002, or barely 38 days from the effectivity of her
health insurance, respondent Neomi suffered a stroke and was admitted at the Medical City which
was one of the hospitals accredited by petitioner.
Her attending physician informed her that she could not be discharged from the hospital due to
hospital expenses amounting to P34, 217.20. She requested from the representative of petitioner
at Medical City a letter of authorization in order to settle her medical bills. But petitioner refused
to issue the letter and suspended payment.
ISSUE:
WON petitioner was able to prove that respondent Neomi's stroke was caused by a pre-existing
condition and therefore was excluded from the coverage of the health care agreement and,
RULING:
No. The health care agreement defined a pre-existing condition as: a disability which existed
before the commencement date of membership whose natural history can be clinically
determined, whether or not the Member was aware of such illness or condition.
Under this provision, disabilities which existed before the commencement of the agreement are
excluded from its coverage if they become manifest within one year from its effectivity. Stated
otherwise, petitioner is not liable for pre-existing conditions if they occur within one year from
the time the agreement takes effect.
International Container Terminal Services Inc. vs. FGU Insurance Corp (2008)
FACTS:
Petitioner insists that the Marine Open Policy under which the shipment was insured was no
longer in force at the time it was loaded on board as provided in the Endorsement portion of the
policy.
FGU, on the other hand, insists that it was under Marine Risk Note which was executed on an
earlier date that said shipment was covered.
ISSUE:
Whether the marine open policy should be upheld
RULING:
YES. A marine risk note is not an insurance policy. It is only an acknowledgment or declaration
of the insurer confirming the specific shipment covered by its marine open policy, the evaluation
of the cargo and the chargeable premium. It is the marine open policy which is the main insurance
contract. Prior to the cancellation by FGU of Marine Open Policy, it had already undertaken to

insure the shipment of the 400 kgs. of silver nitrate, specially since RAGC had already paid the
premium on the insurance of said shipment.
Marine insurance policy needs to be presented in evidence before the trial court or even belatedly
before the appellate court.

AFP General Insurance vs. Molina (June 30, 2008)

Facts:
The private respondents are the complainants in a case for illegal dismissal, filed against Radon
Security. Labor Arbiter ruled in favor of private respondents. Radon Security appealed to NLRC
and posted asupersedeasbond, issued by herein petitioner AFPGIC as surety. NLRC affirmed
Labor Arbiters decision. NLRC became final and executory and issued a Notice of
Garnishmentagainst the supersedeas bond
AFPGIC filed before the Labor Arbiter an Omnibus Motion to Quash Notice/Writ of Garnishment
and to Discharge AFPGICs Appeal contending that an insurer may cancel a policy upon nonpayment of the premium.Said cancellation is binding upon the beneficiary as the right of a
beneficiary is subordinate to that of the insured. Hence, the surety bond between it and Radon
Security was not valid and binding for non-payment of premiums, even as against a third person
who was intended to benefit therefrom.
Issue:
Whether the appeal bond is valid.
Ruling:
YES. The petitioners reliance on Sections 64 and 77 of the Insurance Code is misplaced. The
said provisions refer to insurance contracts in general. The instant case pertains to a surety bond;
thus, the applicable provision of the Insurance Code is Section 177, which specifically
governs suretyship.It provides that a surety bond, once accepted by the obligee becomes valid
and enforceable, irrespective of whether or not the premium has been paid by the obligor. The
private respondents, the obligees here, accepted the bond posted by Radon Security and issued by
the petitioner.Hence, the bond is both valid and enforceable.
However, AFPGIC is not devoid of remedies against Radon Security.Under Section 176 of the
Insurance Code, the liability of petitioner and Radon Security is solidary in nature. There is
solidary liability only when the obligation expressly so states, or when the law so provides, or
when the nature of the obligation so requires.Since the law provides that the liability of the surety
company and the obligor or principal is joint and several, then either or both of them may be
proceeded against for the money award.