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1. Perez v CA G.R. No. 112329.

January 28, 2000

J. Ynares-Santiago

Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for P20,000.00. Sometime in October 1987, an
agent of the insurance corporation, visited Perez in Quezon and convinced him to apply for additional insurance coverage of
P50,000.00. Virginia A. Perez, Primitivos wife, paid P2,075.00 to the agent. The receipt issued indicated the amount received
was a "deposit." Unfortunately, the agent lost the application form accomplished by Perez and he asked the latter to fill up
another application form. The agent sent the application for additional insurance of Perez to the Quezon office. Such was
supposed to forwarded to the Manila office.
Perez drowned. His application papers for the additional insurance of P50,000.00 were still with the Quezon. It was only after
some time that the papers were brought to Manila. Without knowing that Perez died, BF Lifeman Insurance Corporation
approved the application and issued the corresponding policy for the P50,000.00.
Petitioner Virginia Perez 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 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.
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 paid.
BF Lifeman Insurance Corporation filed a complaint against Virginia Perez seeking the rescission and declaration of nullity of the
insurance contract in question.
Petitioner Virginia A. 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.
On October 25, 1991, the trial court rendered a decision in favor of petitioner ordering respondent to pay 150,000 pesos. The
Court of Appeals, however, reversed the decision of the trial court saying that the insurance contract for P50,000.00 could not
have been perfected since at the time that the policy was issued, Primitivo was already dead.
Petitioners motion for reconsideration having been denied by respondent court, the instant petition for certiorari was filed on the
ground that there was a consummated contract of insurance between the deceased and BF Lifeman Insurance Corporation.
Issue: WON the widow can receive the proceeds of the 2 insurance policy

Held: No. Petition dismissed.

Perezs 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 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
BF Lifeman didnt give its assent when it merely received the application form and all the requisite supporting papers of
the applicant. This happens only when it gives a policy.
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 Quezon. 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.
Petitioner insists that the condition imposed by BF that a policy must have been delivered to and accepted by the proposed
insured in good health is potestative, being dependent upon the will of the corporation and is therefore void. The court didnt
agree. A potestative condition depends upon the exclusive will of one of the parties and is considered void. The Civil Code states:
When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void.
The following conditions were imposed by the respondent company for the perfection of the contract of insurance: a policy must
have been issued, the premiums paid, and the policy must have been delivered to and accepted by the applicant while he is in
good health.
The third condition isnt potestative, because the health of the applicant at the time of the delivery of the policy is beyond the
control or will of the insurance company. Rather, the condition is a suspensive one whereby the acquisition of rights depends
upon the happening of an event which constitutes the condition. In this case, the suspensive condition was the policy must have
been delivered and accepted by the applicant while he is in good health. There was non-fulfillment of the condition, because
the applicant was already dead at the time the policy was issued.
As stated above, 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 application, must have been a completed contract.
The insurance company wasnt negligent because delay in acting on the application does not constitute acceptance even after
payment. The corporation may not be penalized for the delay in the processing of the application papers due to the fact that
process in a week wasnt the usual timeframe in fixing the application. Delay could not be deemed unreasonable so as to
constitute gross negligence.


G.R. No. L-109937 March 21, 1994
Facts: In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of P500,000.00
with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor, Dans, then 76 years of age,
was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool
(DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and released on August 11, 1987.
From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. On August 15, 1987,
Dans accomplished and submitted the MRI Application for Insurance and the Health Statement for DBP MRI Pool.
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to the savings
account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI Pool. On
September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the acceptance
age limit of 60 years at the time of application.
On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late husbands MRI application. The DBP offered
to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the same, demanding
payment of the face value of the MRI or an amount equivalent to the loan. She, likewise, refused to accept an ex gratia settlement
of P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a complaint with the Regional Trial
Court, Branch I, Basilan, against DBP and the insurance pool for Collection of Sum of Money with Damages. Respondent
Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of Dans age at the time of
application, required him to apply for MRI, and later collected the insurance premium thereon. Respondent Estate therefore
prayed: (1) that the sum of P139,500.00, which it paid under protest for the loan, be reimbursed; (2) that the mortgage debt of the
deceased be declared fully paid; and (3) that damages be awarded.
On March 10, 1990, the trial court rendered a decision in favor of respondent Estate and against DBP. The DBP MRI Pool,
however, was absolved from liability, after the trial court found no privity of contract between it and the deceased. The trial court
declared DBP in estoppel for having led Dans into applying for MRI and actually collecting the premium and the service fee,
despite knowledge of his age ineligibility.
Issue: 1) Whether or not there is a contract made between DBP MRI Pool and the late Juan Dans;
2) Whether or not DBP should be held liable.
Held: 1) No. When Dans applied for MRI, he filled up and personally signed a Health Statement for DBP MRI Pool (Exh.
5-Bank) with the following declaration:
I hereby declare and agree that all the statements and answers contained herein are true, complete and correct to the best of my
knowledge and belief and form part of my application for insurance. It is understood and agreed that no insurance coverage shall
be effected unless and until this application is approved and the full premium is paid during my continued good health (Records,
p. 40).
Under the aforementioned provisions, the MRI coverage shall take effect: (1) when the application shall be approved by the
insurance pool; and (2) when the full premium is paid during the continued good health of the applicant. These two conditions,
being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not approve
the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP credited to its account with
full knowledge that it was payment for Dans premium. There was, as a result, no perfected contract of insurance; hence, the
DBP MRI Pool cannot be held liable on a contract that does not exist.
2) Yes. As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading him and
his family to believe that they had already fulfilled all the requirements for the MRI and that the issuance of their policy was
forthcoming. Apparently, DBP had full knowledge that Dans application was never going to be approved. The maximum age for
MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the Group Mortgage Redemption Insurance Policy
signed in 1984 by all the insurance companies concerned (Exh. 1-Pool).
Under Article 1987 of the Civil Code of the Philippines, the agent who acts as such is not personally liable to the party with
whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient
notice of his powers.
The DBPs liability, however, cannot be for the entire value of the insurance policy. To assume that were it not for DBPs
concealment of the limits of its authority, Dans would have secured an MRI from another insurance company, and therefore
would have been fully insured by the time he died, is highly speculative. Considering his advanced age, there is no absolute
certainty that Dans could obtain an insurance coverage from another company. It must also be noted that Dans died almost
immediately, i.e., on the nineteenth day after applying for the MRI, and on the twenty-third day from the date of release of his
One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved (Civil Code of
the Philippines, Art. 2199).
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of Juan B. Dans the
amount of P1,476.00 with legal interest from the date of the filing of the complaint until fully paid; and (2) to PAY said Estate the
amount of Fifty Thousand Pesos (P50,000.00) as moral damages and the amount of Ten Thousand Pesos (P10,000.00) as
attorneys fees. With costs against petitioner.

3. Zenith Insurance Corporation v. The Insurance Commission- Insurable Interest

87 OG 6249

> Zenith entered into an insurance contract, denominated as Equipment Floater Policy covering a Kato Bachoe including its
accessories and appurtenances thereof, from loss of damage. Complainant paid the stipulated premiums therefore.
> Within the period of effectivity of the policy, the two pieces of hydraulic wheel gear pumps, which are considered
appurtenances and/or parts attached to and/or installed in the Kato BAchoe were lost, stolen and/or illegally detached by
unknown thieves or malefactors
> Despite repeated assurances by Zeniths soliciting agent, it refused and failed to settle and pay complainants insurance claim.
> Complainant seeks not only the payment of said insurance claim of 70T plus legal interest, attys fees, and litigation expenses,
but also the revocation or cancellation of the license of Zenith to do insurance business.
> Zenith on the other hand contends that:
o Complainant is not the real party in interest since the policy carries with it a designated loss payee, the BA Finance Corp
o The policy insures against loss or damage caused by fire and lightning, etc, while theft or robbery is NOT insured against in
the policy, it not having been expressly mentioned
o Loss nevertheless is excluded under the exception of infidelity exclusion by the operator who left it unguarded, unattended
and deserted while entrusted to him, and for failure to give timely notice of loss
o Complainant and/or BA Finance is guilty of concealment and misrepresentation at the time they secured the policy, because
at the time it became operative, the complainant was NOT yet the owner of the property insured, the property still hot having
been delivered to him, and BA finance had no insurable interest yet, henceforth, the contract of insurance was VOID AB
INITIO for lack of insurable interest at the time the insurance took effect.

Issues and Resolutions:

(1) Whether or not the loss through theft or robbery claimed is within the coverage of the policy.
The Insurance Commissioner, as reiterated by the SC, found for the complainant in this wise: While the policy enumerated the
risks covered, it does NOT, however, in its express terms, limit compensability to that stated in the enumeration. The
enumerated risks excluded did not include theft or robbery committed or perpetrated by an unidentified culprit, hence the
complainants claim for damages is compensable.

The foregoing policy is supported by the long time honored doctrine of contra proferentem: which provides that: any ambiguity
in the policy shall be resolved in favor of the insured and against the insurer. This is true because insurance contracts are
essentially contracts of adhesion and applicants for insurance have no choice but to accept the terms and conditions in the policy
even if they are not in full accord therewith.

(2) Whether or not the complainant was with insurable interest therein when the said policy contract was procured.
The complainant has insurable interest in the insured property at the time of the procurement of the insurance policy. As the CC
provides, the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price, and Sec. 15 of the IC allows the insurance of a mere contingent or expectant interest in anything if
the same is founded on an actual right to the thing, or upon any valid contract.

As this is the case, mere possession of an equitable title, like that pertaining to the buyer, gives rise to insurable interest in the
property in which such title inheres. Furthermore, considering that Zeniths agent had been fully apprised of the circumstances
prior to the actual issuance of the policy and the endorsement, it cannot now allege that complainant has no insurable interest on
the property insured. Zenith is now precluded by the equitable principle of estoppel from impugning and dishonoring the very
insurance policy contract it issued and the endorsement and increase in the coverage made through its duly authorized agent.

4. Insular v Ebrado G.R. No. L-44059 October 28, 1977

J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider for Accidental Death.
He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay the coverage in the total
amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional benefits
for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiary therein, although she admited
that she and the insured were merely living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the
insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given the proceeds. The
court declared Carponia as disqualified.

Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally married man can claim the
proceeds in case of death of the latter?

Held: No. Petition

Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively to the proper interest of the person
in whose name it is made"
The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a contract of
insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships especially on property
and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules
of the civil law regulating contracts. And under Article 2012 of the same Code, any person who is forbidden from receiving any
donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to
him. Common-law spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were guilty of adultery or concubinage at the time
of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones should
be enforced in life insurance policies since the same are based on similar consideration. So long as marriage remains the
threshold of family laws, reason and morality dictate that the impediments imposed upon married couple should likewise be
imposed upon extra-marital relationship.
A conviction for adultery or concubinage isnt required exacted before the disabilities mentioned in Article 739 may effectuate.
The article says that in the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the
donor or donee; and the guilty of the donee may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. The law plainly states
that the guilt of the party may be proved in the same acting for declaration of nullity of donation. And, it would be sufficient if
evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was also living in with his common-
law wife with whom he has two children.

5. Gulf Resorts Inc. V. Philippine Charter Insurance Corp. (2005)

Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company which includes loss or damage
to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake
July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties and 2 swimming pools in its Agoo
Playa Resort were damaged
August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only afforded earthquake shock coverage to
the two swimming pools of the resort
Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the earthquake shock
coverage. Thus, the policy extended earthquake shock coverage to all of the insured properties.
RTC: Favored American Home - endorsement rider means that only the two swimming pools were insured against
earthquake shock
CA: affirmed RTC
ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools

HELD: YES. Affirmed.

It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each other.
All its parts are reflective of the true intent of the parties.
Insurance Code
Section 2(1)
contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event
An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril.
In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on the two
swimming pools.

6. Pan Malayan Insurance Corporation v CA (Insurance)

G.R. No. 81026 April 3, 1990

HER UNKNOWN DRIVER, respondents.

On December 10, 1985, PANMALAY filed a complaint for damages with the RTC of Makati against private respondents
Erlinda Fabie and her driver. PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car with plate No.
DDZ-431 and registered in the name of Canlubang Automotive Resources Corporation [CANLUBANG]; that on May 26, 1985,
due to the "carelessness, recklessness, and imprudence" of the unknown driver of a pick-up with plate no. PCR-220, the insured
car was hit and suffered damages in the amount of P42,052.00; that PANMALAY defrayed the cost of repair of the insured car
and, therefore, was subrogated to the rights of CANLUBANG against the driver of the pick-up and his employer, Erlinda Fabie;
and that, despite repeated demands, defendants, failed and refused to pay the claim of PANMALAY. private respondents filed a
Motion to Dismiss alleging that PANMALAY had no cause of action against them. They argued that payment under the "own
damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code, since indemnification
thereunder was made on the assumption that there was no wrongdoer or no third party at fault.


(1) Trial Court: dismissed for no cause of action PANMALAY's complaint for damages against private respondents Erlinda Fabie
and her driver
(2) CA: affirmed trial court.

Whether or not the insurer PANMALAY may institute an action to recover the amount it had paid its assured in settlement of an
insurance claim against private respondents as the parties allegedly responsible for the damage caused to the insured vehicle.
PANMALAY is correct.
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is destroyed or
damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured, will be
subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operates as an equitable that the insurer has been obligated to pay. Payment by the insurer
to the assured operates as an equitable or negligence of a third party. CANLUBANG is apparently of the same understanding.
Based on a police report assignment to the former of all remedies that the latter may have against the third party whose
negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of
contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.
The exceptions are:
(1) if the assured by his own act releases the wrongdoer or third party liable for the loss or damage, from liability, the insurer's
right of subrogation is defeated
(2) where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the
assured's claim for loss, the settlement is binding on both the assured and the insurer, and the latter cannot bring an action against
the carrier on his right of subrogation
(3) where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary payment",
the former has no right of subrogation against the third party liable for the loss
None of the exceptions are availing in the present case.
Also, even if under the above circumstances PANMALAY could not be deemed subrogated to the rights of its assured under
Article 2207 of the Civil Code, PANMALAY would still have a cause of action against private respondents. In the pertinent case
of Sveriges Angfartygs Assurans Forening v. Qua Chee Gan, supra., the Court ruled that the insurer who may have no rights of
subrogation due to "voluntary" payment may nevertheless recover from the third party responsible for the damage to the insured
property under Article 1236 of the Civil Code.
WHEREFORE, in view of the foregoing, the present petition is GRANTED. Petitioner's complaint for damages against private
respondents is hereby REINSTATED. Let the case be remanded to the lower court for trial on the merits.

7. Federal Express vs. American Home Assurance

FACTS: Shipper SMITHKLINE USA delivered to carrier Burlington Air Express (BURLINGTON), an agent of [Petitioner]
Federal Express Corporation, a shipment of 109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and
French Overseas Company in Makati City. The shipment was covered by Burlington Airway Bill No. 11263825 with the words,
REFRIGERATE WHEN NOT IN TRANSIT and PERISHABLE stamp marked on its face. That same day, Burlington
insured the cargoes with American Home Assurance Company (AHAC). The following day, Burlington turned over the custody
of said cargoes to FEDEX which transported the same to Manila.
The shipments arrived in Manila and was immediately stored at [Cargohaus Inc.s] warehouse. Prior to the arrival of the cargoes,
FEDEX informed GETC Cargo International Corporation, the customs broker hired by the consignee to facilitate the release of
its cargoes from the Bureau of Customs, of the impending arrival of its clients cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed customs broker who was assigned by GETC, found out,
while he was about to cause the release of the said cargoes, that the same [were] stored only in a room with 2 air conditioners
running, to cool the place instead of a refrigerator. DIONEDA, upon instructions from GETC, did not proceed with the
withdrawal of the vaccines and instead, samples of the same were taken and brought to the Bureau of Animal Industry of the
Department of Agriculture in the Philippines by SMITHKLINE for examination wherein it was discovered that the ELISA
reading of vaccinates sera are below the positive reference serum.
As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the shipment and, declaring
total loss for the unusable shipment, filed a claim with AHAC through its representative in the Philippines, the Philam Insurance
Co., Inc. (PHILAM) which recompensed SMITHKLINE for the whole insured amount. Thereafter, PHILAM filed an action
for damages against the FEDEX imputing negligence on either or both of them in the handling of the cargo.
Trial ensued and ultimately concluded with the FEDEX being held solidarily liable for the loss. Aggrieved, petitioner appealed to
the CA. The appellate court ruled in favor of PHILAM and held that the shipping Receipts were a prima facie proof that the
goods had indeed been delivered to the carrier in good condition.
ISSUE: Is FEDEX liable for damage to or loss of the insured goods
HELD: petition granted. Assailed decision reversed insofar as it pertains to FEDEX
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that respondents claim and
right of action are already barred. Indeed, this fact has never been denied by respondents and is plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice, sufficiently
describing the goods concerned, the approximate date of the damage or loss, and the details of the claim, is presented by shipper
or consignee to an office of Burlington within (14) days from the date the goods are placed at the disposal of the person entitled
to delivery, or in the case of total loss (including non-delivery) unless presented within (120) days from the date of issue of the
[Airway Bill]. xxx
Relevantly, petitioners airway bill states:
12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen (14) days from
receipt of the goods; xxx
Article 26 of the Warsaw Convention, on the other hand, provides:
Xxx (2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the
damage, and, at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the
case of goods. xx
(3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched
within the times aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part. xxx
Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition
precedent to the accrual of a right of action against a carrier for loss of or damage to the goods. The shipper or consignee must
allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the
former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.
The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a
stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor; and (2)
to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to
make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent
NOTES: as to proper payee:
The Certificate specifies that loss of or damage to the insured cargo is payable to order x x x upon surrender of this Certificate.
Such wording conveys the right of collecting on any such damage or loss, as fully as if the property were covered by a special
policy in the name of the holder itself. At the back of the Certificate appears the signature of the representative of
Burlington. This document has thus been duly indorsed in blank and is deemed a bearer instrument.
Since the Certificate was in the possession of Smithkline, the latter had the right of collecting or of being indemnified for loss of
or damage to the insured shipment, as fully as if the property were covered by a special policy in the name of the holder. Hence,
being the holder of the Certificate and having an insurable interest in the goods, Smithkline was the proper payee of the insurance
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt in favor of respondents. The
latter were thus authorized to file claims and begin suit against any such carrier, vessel, person, corporation or government.
Undeniably, the consignee had a legal right to receive the goods in the same condition it was delivered for transport to
petitioner. If that right was violated, the consignee would have a cause of action against the person responsible therefor.

8. Cebu Shipyard v William G.R. No. 132607. May 5, 1999

J. Purisima

Cebu Shipyard and Engineering Works, Inc. repaired marine vessels while the Prudential is in the non-life insurance business.
William Lines, Inc., the owner of M/V Manila City, a luxury passenger-cargo vessel, which caught fire and sank. At the time of
the incident, subject vessel was insured with Prudential for P45M for hull and machinery. CSEW was insured for only Php 10
million for the shiprepairers liability policy. They entered into a contract where negligence was the only factor that could make
CSEW liable for damages. Moreover, liability of CSEW was limited to only Php 1million for damages. The Hull Policy included
an Additional Perils (INCHMAREE) Clause covering loss of or damage to the vessel through the negligence of, among others,
ship repairmen.
William brought Manila City to the dry dock of CSEW for repairs. The officers and cabin crew stayed at the ship while it was
being repaired. After the vessel was transferred to the docking quay, it caught fire and sank, resulting to its total loss.
William brought suit against CSEW alleging that it was through the latters negligence that the ship caught fire and sank.
Prudential was impleaded as co-plaintiff after it had paid the value of insured items. It was subrogated to 45 million, or the value it
claimed to indemnify.
The trial court brought judgment against CSEW 45 million for the ship indemnity, 65 million for loss of income, and more than
13 million in other damages. The CA affirmed the TC decision.
CSEW contended that the cause of the fire was due to Williams hotworks on the said portion of the ship which they didnt ask
CSEW permission for.
Prudential, on the other hand, blamed the negligence of the CSEW workers in the instance when they didnt mind rubber
insulation wire coming out of the air-conditioning unit that was already burning.
Hence this MFR.

1. WON CSEW had management and supervisory control of the ship at the time the fire broke out
2. WON the doctrine of res ipsa loquitur applies against the crew
3. WON Prudential has the right of subrogation against its own insured
4. WON the provisions limiting CSEWs liability for negligence to a maximum of Php 1 million are valid

Held: Yes. Yes. Yes. No. Petition denied.

1. The that factual findings by the CA are conclusive on the parties and are not reviewable by this Court. They are entitled to
great weight and respect when the CA affirmed the factual findings arrived at by the trial court.
The CA and the Cebu RTC are agreed that the fire which caused the total loss of subject M/V Manila City was due to the
negligence of the employees and workers of CSEW.
Furthermore, in petitions for review on certiorari, only questions of law may be put into issue. Questions of fact cannot be
2. For the doctrine of res ipsa loquitur to apply to a given situation, the following conditions must concur: (1) the accident was of a
kind which does not ordinarily occur unless someone is negligent; and (2) that the instrumentality or agency which caused the
injury was under the exclusive control of the person charged with negligence.
The facts and evidence reveal the presence of these conditions. First, the fire would not have happened in the ordinary course of
things if reasonable care and diligence had been exercised.
Second, the agency charged with negligence, as found by the trial court and the CA and as shown by the records, is CSEW,
which had control over subject vessel when it was docked for annual repairs.
What is more, in the present case the trial court found direct evidence to prove that the workers didnt exercise due diligence in
the care of subject vessel. The direct evidence substantiates the conclusion that CSEW was really negligent even without applying
such doctrine.
3. Petitioner contends that Prudential is not entitled to be subrogated to the rights of William Lines, Inc., theorizing that (1) the
fire which gutted M/V Manila City was an excluded risk and (2) it is a co-assured under the Marine Hull Insurance Policy. This
was wrong. The one who caused the fire has already been adjudicated by the courts as CSEW.
Upon proof of payment by Prudential to William Lines, Inc., the former was subrogated to the right of the latter to
indemnification from CSEW. As aptly ruled by the Court of Appeals, the law says:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury
or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of
the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does
not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or
When Prudential paid the latter the total amount covered by its insurance policy, it was subrogated to the right of the latter to
recover the insured loss from the liable party, CSEW.
Petitioner theorizes further that there can be no right of subrogation as it is deemed a co-assured under the subject insurance
policy with reliance on Clause 20 of the Work Order which states:
20. The insurance on the vessel should be maintained by the customer and/or owner of the vessel during the period the contract
is in effect.
Clause 20 of the Work Order in question is clear in the sense that it requires William Lines to maintain insurance on the vessel
during the period of dry-docking or repair. However, the fact that CSEW benefits from the said stipulation does not
automatically make it as a co-assured of William Lines. The intention of the parties to make each other a co-assured under an
insurance policy is to be read from the insurance contract or policy itself and not from any other contract or agreement because
the insurance policy denominates the beneficiaries of the insurance. The hull and machinery insurance procured by William
Lines, Inc. from Prudential named only William Lines, Inc. as the assured. There was no manifestation of any intention of
William Lines, Inc. to constitute CSEW as a co-assured under subject policy. The claim of CSEW that it is a co-assured is
Then too, in the Additional Perils Clause of the same Marine Insurance Policy, it is provided that this insurance also covers loss
of or damage to vessel directly caused by the negligence of charterers and repairers who are not assured.
As correctly pointed out by respondent Prudential, if CSEW were deemed a co-assured under the policy, it would nullify any
claim of William Lines, Inc. from Prudential for any loss or damage caused by the negligence of CSEW. Certainly, no shipowner
would agree to make a shiprepairer a co-assured under such insurance policy; otherwise, any claim for loss or damage under the
policy would be invalidated.
4. Although in this jurisdiction, contracts of adhesion have been consistently upheld as valid per se; as binding as an ordinary
contract, the Court recognizes instances when reliance on such contracts cannot be favored especially where the facts and
circumstances warrant that subject stipulations be disregarded. Thus, in ruling on the validity and applicability of the stipulation
limiting the liability of CSEW for negligence to P1M only, the facts and circumstances vis-a-vis the nature of the provision sought
to be enforced should be considered, bearing in mind the principles of equity and fair play.
It is worthy to note that M/V Manila City was insured with Prudential for P45M. Upon thorough investigation by its hull
surveyor, M/V Manila City was found to be beyond economical salvage and repair. The evaluation of the average adjusteralso
reported a constructive total loss. The said claim of William Lines, Inc., was then found to be valid and compensable such that
Prudential paid the latter the total value of its insurance claim. Furthermore, it was ascertained that the replacement cost of the
vessel, amounts to P55M.
Considering the circumstances, it would unfair to limit the liability of petitioner to One Million Pesos only. To allow CSEW to
limit its liability to P1M notwithstanding the fact that the total loss suffered by the assured and paid for by Prudential amounted to
P45M would sanction the exercise of a degree of diligence short of what is ordinarily required because, then, it would not be
difficult for petitioner to escape liability by the simple expedient of paying an amount very much lower than the actual damage
suffered by William.

9. White Gold v Pioneer G.R. No. 154514. July 28, 2005

J. Quisimbing

White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual through Pioneer Insurance
and Surety Corporation. White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts. When
White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the
unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship
Mutual and Pioneer violated provisions of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license
because it was not engaged in the insurance business and that it was a P & I club. Pioneer was not required to obtain another
license as insurance agent because Steamship Mutual was not engaged in the insurance business.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished
between P & I Clubs vis--vis conventional insurance. The appellate court also held that Pioneer merely acted as a collection
agent of Steamship Mutual.
Hence this petition by White Gold.

1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
Held: Yes. Petition granted.

White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To buttress its assertion, it cites
the definition as an association composed of shipowners in general who band together for the specific purpose of providing
insurance cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of third parties.
They argued that Steamship Mutuals primary purpose is to solicit and provide protection and indemnity coverage and for this
purpose, it has engaged the services of Pioneer to act as its agent.
Respondents contended that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel owners who have come together to provide mutual protection against
liabilities incidental to shipowning.
Is Steamship Mutual engaged in the insurance business?
A P & I Club is a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the
members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine
insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority
mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to
collect payments in its behalf. Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of
the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the
Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company
is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission.
2. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance
Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the same
agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an agent/broker
of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship
Mutual. Section 299 of the Insurance Code clearly states:
SEC. 299 No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement
of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the


G.R. No. 113899
October 13, 1999
FACTS: A contract of group life insurance was executed between petitioner Grepalife and DBP. Grepalife agreed to insure the
lives of eligible housing loan mortgagors of DBP.
Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan. In an application
form,. Leuterio answered questions concerning his health condition as follows:
7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung; kidney or
stomach disorder or any other physical impairment?
Answer: No. If so give details _____________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [x] Yes [ ] NO.
Grepalife then issued a Certificate, as insurance coverage of Leuterio, to the extent of his DBP mortgage indebtedness
amounting to P86,200.00
Later, Leuterio died due to massive cerebral hemorrhage. Consequently, DBP submitted a death claim to Grepalife. Grepalife
denied the claim alleging that. Leuterio was not physically healthy when he applied for an insurance coverage. Grepalife insisted
that Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure
constituted concealment that justified the denial of the claim.
Tthe widow of the. Leuterio, respondent Medarda, filed a complaint with the RTC, against Grepalife for Specific Performance
with Damages. During the trial, Dr. Mejia, who issued the death certificate, was called to testify. Dr. Mejias findings, based partly
from the information given by the respondent widow, stated that Leuterio complained of headaches presumably due to high
blood pressure. The inference was not conclusive because Leuterio was not autopsied, hence, other causes were not ruled out.
The trial court rendered a decision in favor of respondent widow and against Grepalife. The CA sustained the trial courts
decision. Hence, the present petition.

1. who is the proper party to bring the suit, the widow or the mortgagee (DBP)?

2. WON there was concealment as to justify Grepalifes non-payment of the insurance proceeds

HELD: petition denied

1. 1. WIDOW

To resolve the issue, we must consider the insurable interest in mortgaged properties and the parties to this type of contract.
The rationale of a group insurance policy of mortgagors, otherwise known as the mortgage redemption insurance, is a device
for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of
contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the
proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor
from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event
of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness.
Consequently, where the mortgagor pays the insurance premium under the group insurance policy, making the loss payable to
the mortgagee, the insurance is on the mortgagors interest, and the mortgagor continues to be a party to the contract. In this type
of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the
mortgagee a party to the contract.
Sec. 8 of the Insurance Code provides:
Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be
payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the
mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise
avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under
the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the
same effect as if it had been performed by the mortgagor.
the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the mortgagee a party to the
Sec. 8 of the Insurance Code provides:
Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be
payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the
mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise
avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under
the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the
same effect as if it had been performed by the mortgagor.
The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that:
In the event of the debtors death before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount to pay
the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid
to the beneficiary/ies designated by the debtor. When DBP submitted the insurance claim against petitioner, the latter denied
payment thereof, interposing the defense of concealment committed by the insured. Thereafter, DBP collected the debt from the
mortgagor and took the necessary action of foreclosure on the residential lot of private respondent.
And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an
insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent
Dr. Leuterio may file the suit against the insurer, Grepalife.
2. The second assigned error refers to an alleged concealment that the petitioner interposed as its defense to annul the insurance
contract. Petitioner contends that Dr. Leuterio failed to disclose that he had hypertension, which might have caused his death.
Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing
requires that he should communicate it to the assured, but he designedly and intentionally withholds the same.

Petitioner merely relied on the testimony of the attending physician, Dr. Hernando Mejia, as supported by the information given
by the widow of the decedent
On the contrary the medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on the body of the
decedent. Hence, the statement of the physician was properly considered by the trial court as hearsay.
The CAs stand is that contrary to appellants allegations, there was no sufficient proof that the insured had suffered from

Appellant insurance company had failed to establish that there was concealment made by the insured, hence, it cannot refuse
payment of the claim

The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the
contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such
defense by satisfactory and convincing evidence rests upon the insurer. In the case at bar, the petitioner failed to clearly and
satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance.

And that brings us to the last point in the review of the case at bar. Petitioner claims that there was no evidence as to the amount
of Dr. Leuterios outstanding indebtedness to DBP at the time of the mortgagors death. Hence, for private respondents failure
to establish the same, the action for specific performance should be dismissed. Petitioners claim is without merit. A life insurance
policy is a valued policy. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of
indemnity under a policy of insurance upon life or health is the sum fixed in the policy. The mortgagor paid the premium
according to the coverage of his insurance which states that:
The policy states that upon receipt of due proof of the Debtors death during the terms of this insurance, a death benefit in the
amount of P86,200.00 shall be paid.
In the event of the debtors death before his indebtedness with the creditor shall have been fully paid, an amount to pay the
outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be paid
to the beneficiary/ies designated by the debtor.
However, we noted that the CA decision was promulgated in 1993. In private respondents memorandum, she states that DBP
foreclosed in 1995 their residential lot, in satisfaction of mortgagors outstanding loan. Considering this supervening event, the
insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. Equity dictates that DBP
should not unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio protest). Hence, it cannot collect the
insurance proceeds, after it already foreclosed on the mortgage. The proceeds now rightly belong to Leuterios heirs represented
by his widow.
11. Lalican vs The Insular Life Assurance Company Limited
G.R. No. 183526 August 25, 2009
Facts: Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio). During his lifetime, Eulogio applied for an insurance
policy with Insular Life. On 24 April 1997, Insular Life, through Josephine Malaluan (Malaluan), its agent in Gapan City, issued
in favor of Eulogio Policy No. 9011992, which contained a 20-Year Endowment Variable Income Package Flexi Plan worth
P500,000.00, with two riders valued at P 500,000.00 each. Thus, the value of the policy amounted to P1,500,000.00. Violeta was
named as the primary beneficiary. P Under the terms of Policy No. 9011992, Eulogio was to pay the premiums on a quarterly
basis in the amount of 8,062.00, payable every 24 April, 24 July, 24 October and 24 January of each year, until the end of the 20-
year period of the policy. According to the Policy Contract, there was a grace period of 31 days for the payment of each premium
subsequent to the first. If any premium was not paid on or before the due date, the policy would be in default, and if the
premium remained unpaid until the end of the grace period, the policy would automatically lapse and become void. Eulogio
paid the premiums due on 24 July 1997 and 24 October 1997. However, he failed to pay the premium due on 24 January 1998,
even after the lapse of the grace period of 31 days. Policy No. 9011992, therefore, lapsed and became void. Eulogio submitted to
the Cabanatuan District Office of Insular Life, through Malaluan, on 26 May 1998, an Application for Reinstatement of Policy
No. 9011992, together with the amount of P 8,062.00 to pay for the premium due on 24 January 1998. In a letter dated 17 July
1998, Insular Life notified Eulogio that his Application for Reinstatement could not be fully processed because, although he
already deposited P8,062.00 as payment for the 24 January 1998 premium, he left unpaid the overdue interest thereon
amounting to P322.48. Thus, Insular Life instructed Eulogio to pay the amount of interest and to file another application for
reinstatement. Eulogio was likewise advised by Malaluan to pay the premiums that subsequently became due on 24 April 1998
and 24 July 1998, plus interest. On 17 September 1998, Eulogio went to Malaluans house and submitted a second Application
for Reinstatement of Policy No. 9011992, including the amount of P17,500.00, representing payments for the overdue interest on
the premium for 24 January 1998, and the premiums which became due on 24 April 1998 and 24 July 1998. As Malaluan was
away on a business errand, her husband received Eulogios second Application for Reinstatement and issued a receipt for the
amount Eulogio deposited. A while later, on the same day, 17 September 1998, Eulogio died of cardio-respiratory arrest
secondary to electrocution.

Issue: Whether or not Eulogio had an existing insurable interest in his own life until the day of his death in order to have the
insurance policy validly reinstated.
Held: No. An insurable interest is one of the most basic and essential requirements in an insurance contract. In general, an
insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation or
connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the
subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of
the event insured against. The existence of an insurable interest gives a person the legal right to insure the subject matter of the
policy of insurance. Section 10 of the Insurance Code indeed provides that every person has an insurable interest in his own life.
Section 19 of the same code also states that an interest in the life or health of a person insured must exist when the insurance
takes effect, but need not exist thereafter or when the loss occurs.

In the instant case, Eulogios death rendered impossible full compliance with the conditions for reinstatement of Policy No.
9011992. True, Eulogio, before his death, managed to file his Application for Reinstatement and deposit the amount for payment
of his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 could only be considered reinstated after
the Application for Reinstatement had been processed and approved by Insular Life during Eulogios lifetime and good health.

The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon written application does not give the
insured absolute right to such reinstatement by the mere filing of an application. The insurer has the right to deny the
reinstatement if it is not satisfied as to the insurability of the insured and if the latter does not pay all overdue premium and all
other indebtedness to the insurer. After the death of the insured the insurance Company cannot be compelled to entertain an
application for reinstatement of the policy because the conditions precedent to reinstatement can no longer be determined and
Malaluan did not have the authority to approve Eulogios Application for Reinstatement. Malaluan still had to turn over to Insular
Life Eulogios Application for Reinstatement and accompanying deposits, for processing and approval by the latter.

Violeta did not adduce any evidence that Eulogio might have failed to fully understand the import and meaning of the provisions
of his Policy Contract and/or Application for Reinstatement, both of which he voluntarily signed. While it is a cardinal principle
of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly as against the
insurer company, yet, contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the
terms, which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in
their plain, ordinary and popular sense.

12. Philam v Pineda G.R. No. L-54216 July 19, 1989

J. Paras

Pineda procured an ordinary life insurance policy from the petitioner company and designated his wife and children as
irrevocable beneficiaries.
He then filed a petition to amend the designation of the beneficiaries in his life policy from irrevocable to revocable.
The judge granted the request.
Petitioner promptly filed a motion but was denied. Hence, this petition.

1. WON the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the irrevocable
2. WON the irrevocable minor beneficiaries could give consent to the change in designation

Held: No to both. Petition dismissed.

Under the Insurance Act, the beneficiary designated in a life insurance contract cannot be changed without the consent of the
beneficiary because he has a vested interest in the policy.
There was an express stipulation to this effect: It is hereby understood and agreed that, notwithstanding the provisions of this
policy to the contrary, inasmuch as the designation of the primary/contingent beneficiary/beneficiaries in this Policy has been
made without reserving the right to change said beneficiary/ beneficiaries, such designation may not be surrendered to the
Company, released or assigned; and no right or privilege under the Policy may be exercised, or agreement made with the
Company to any change in or amendment to the Policy, without the consent of the said beneficiary/beneficiaries.
The alleged acquiescence of the six (6) children beneficiaries of the policy cannot be considered an effective ratification due to
the fact that they were minors. Neither could they act through their father insured since their interests are quite divergent from
one another.
Therefore, the parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract, for otherwise, the
vested rights of the irrevocable beneficiaries would be rendered inconsequential.
Of equal importance is the well-settled rule that the contract between the parties is the law binding on both of them and for so
many times, this court has consistently issued pronouncements upholding the validity and effectivity of contracts. Likewise,
contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations,
for contracts are obligatory, no matter in what form they may be, whenever the essential requisites for their validity are present
The change in the designation of was not within the contemplation of the parties. The lower court instead made a new contract
for them. It acted in excess of its authority when it did so.

13. Gaisano Cagayan, Inc. V. Insurance Company Of North America (2006)

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. while Levi Strauss (Phils.) Inc. (LSPI) is the
local distributor of products bearing trademarks owned by Levi Strauss & Co
IMC and LSPI separately obtained from Insurance Company of North America fire insurance policies for their book debt
endorsements related to their ready-made clothing materials which have been sold or delivered to various customers and
dealers of the Insured anywhere in the Philippines which are unpaid 45 days after the time of the loss
February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned by Gaisano Cagayan, Inc., containing the
ready-made clothing materials sold and delivered by IMC and LSPI was consumed by fire.
February 4, 1992: Insurance Company of North America filed a complaint for damages against Gaisano Cagayan,
Inc. alleges that IMC and LSPI filed their claims under their respective fire insurance policies which it paid thus it was
subrogated to their rights
Gaisano Cagayan, Inc: not be held liable because it was destroyed due to fortuities event or force majeure
RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it must bear the loss (res perit domino)
CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil Code to res perit domino
ISSUE: W/N Insurance Company of North America can claim against Gaisano Cagayan for the debt that was isnured

HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED

insurance policy is clear that the subject of the insurance is the book debts and NOT goods sold and delivered to the
customers and dealers of the insured
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;
IMC and LSPI did not lose complete interest over the goods. They have 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
it is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured
or destroyed by the peril against which it is insured
an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of, the
matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest
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 - obligation is pecuniary in nature
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
Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or destruction of anything of the same kind
does not extinguish the obligation (Genus nunquan perit)
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
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, no subrogation receipt was offered in evidence.
Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of P535,613

14. Ong Lim Sing V. FEB Leasing And Finance Corp. (2007)
FEB Leasing and Finance Corporation (FEB) leased equipment and motor vehicles to JVL Food Products with a monthly
rental of P170,494
At the same date, Vicente Ong Lim Sing, Jr. (Lim) an executed an Individual Guaranty Agreement with FEB to guarantee
the prompt and faithful performance of the terms and conditions of the lease agreement
JVL defaulted in the payment of the monthly rentals resulting to arrears of P3,414,468.75 and refused to pay despite
FEB filed a complaint for damages and replevin against JVL, Lim and John Doe
JVL and Lim admitted the existence of the lease agreement but asserted that it is in reality a sale of equipment on installment
basis, with FEB acting as the financier
RTC: Sale on installment and the FEB elected full payment of the obligation so for the unreturned units and machineries the
JVL and Lim are jointly and severally liable to pay
CA: granted FEB appeal that it is a financial lease agreement under Republic Act (R.A.) No. 8556 and ordered JVL and
Lim jointly and severally to pay P3,414,468.75
ISSUE: W/N JVL and Lim should jointly and severally be liable for the insured financial lease

HELD: YES. CA affirmed.

contract of adhesion is as binding as any ordinary contract
The Lease Contract with corresponding Lease Schedules with Delivery and Acceptance Certificates is, in point of fact, a
financial lease within the purview of R.A. No. 8556
FEB leased the subject equipment and motor vehicles to JVL in consideration of a monthly periodic payment of
P170,494.00. The periodic payment by petitioner is sufficient to amortize at least 70% of the purchase price or acquisition
cost of the said movables in accordance with the Lease Schedules with Delivery and Acceptance Certificates.
JVL entered into the lease contract with full knowledge of its terms and conditions.
Lim, as a lessee, has an insurable interest in the equipment and motor vehicles leased.
In the financial lease agreement, FEB did not assume responsibility as to the quality, merchantability, or capacity of the
equipment. This stipulation provides that, in case of defect of any kind that will be found by the lessee in any of the
equipment, recourse should be made to the manufacturer. The financial lessor, being a financing company, i.e., an
extender of credit rather than an ordinary equipment rental company, does not extend a warranty of the fitness of the
equipment for any particular use. Thus, the financial lessee was precisely in a position to enforce such warranty directly
against the supplier of the equipment and not against the financial lessor. We find nothing contra legem or contrary to
public policy in such a contractual arrangement

15. Philamcare v CA G.R. No. 125678. March 18, 2002

J. Ynares-Santiago

Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he or his family members
were treated to heart trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits and out-patient benefits. After the period
expired, he was given an expanded coverage for Php 75,000. During the period, he suffered from heart attack and was confined
at MMC. The wife tried to claim the benefits but the petitioner denied it saying that he concealed his medical history by
answering no to the aforementioned question. She had to pay for the hospital bills amounting to 76,000. Her husband
subsequently passed away. She filed a case in the trial court for the collection of the amount plus damages. She was awarded
76,000 for the bills and 40,000 for damages. The CA affirmed but deleted awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the incontestability clause under the Insurance Code
does not apply.

Held: No. Petition dismissed.

Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It contended that there was
no indemnification unlike in insurance contracts. It supported this claim by saying that it is a health maintenance organization
covered by the DOH and not the Insurance Commission. Lastly, it claimed that the Incontestability clause didnt apply because
two-year and not one-year effectivity periods were required.
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration
to indemnify another against loss, damage or liability arising from an unknown or contingent event.
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husbands health was the insurable interest. The health care agreement was in the nature of non-life insurance,
which is primarily a contract of indemnity. The provider must pay for the medical expenses resulting from sickness or injury.
While petitioner contended that the husband concealed materialfact of his sickness, the contract stated that:
that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime relative to any information
acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed
This meant that the petitioners required him to sign authorization to furnish reports about his medical condition. The contract
also authorized Philam to inquire directly to his medical history.
Hence, the contention of concealment isnt valid.
They cant also invoke the Invalidation of agreement clause where failure of the insured to disclose information was a grounds
for revocation simply because the answer assailed by the company was the heart condition question based on the insureds
opinion. He wasnt a medical doctor, so he cant accurately gauge his condition.
Henrick v Fire- in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry.
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. In the
end, the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the
agreement or whenever he avails of the covered benefits which he has prepaid.
Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract of insurance.
As to cancellation procedure- Cancellation requires certain conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish
facts on which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that under the title Claim procedures of expenses, the defendant Philamcare Health
Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest the membershipof the
patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick
of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.