disability of his left hand caused by the fractures of some fingers.

The
Ty v. Filipinas Compaia de Seguros - Insurance Policy provision is clear enough to inform the party entering into that contract that
the loss to be considered a disability entitled to indemnity, must be severance
or amputation of the affected member of the body of the insured
17 SCRA 364

Facts:
> Ty was employed as a mechanic operator by Braodway Cotton Factory at
Grace Park, Caloocan.
> In 1953, he took personal accident policies from 7 insurance companies (6
defendants), on different dates, effective for 12 mos.
> On Dec. 24. 1953, a fire broke out in the factory were Ty was working. A
hevy object fell on his hand when he was trying to put out the fire.
> From Dec. 1953 to Feb. 6, 1954 Ty received treatment at the Natl
Orthopedic Hospital for six listed injuries. The attending surgeon certified
that these injuries would cause the temporary total disability of Tys left hand.
> Insurance companies refused to pay Tys claim for compensation under the
policies by reason of said disability of his left hand. Ty filed a complaint in the
municipal court who decided in his favor.
> CFI reversed on the ground that under the uniform terms of the policies,
partial disability due to loss of either hand of the insured, to be compensable
must be the result of amputation.

Issue:
Whether or not Ty should be indemnified under his accident policies.

Held.
NO.
SC already ruled in the case of Ty v. FNSI that were the insurance policies
define partial disability as loss of either hand by amputation through the bones
of the wrist, the insured cannot recover under said policies for temporary
Fortune v CA G.R. No. 115278 May 23, 1995
J. Davide Jr.
Facts:
Producers Banks money was stolen while it was being transported from Pasay
to Makati. The people guarding the money were charged with the theft. The
bank filed a claim for the amount of Php 725,000, and such was refused by the
insurance corporation due to the stipulation:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in report of
(b) any loss caused by any dishonest, fraudulent or criminal act of the insured
or any officer, employee, partner, director, trustee or authorized representative
of the Insured whether acting alone or in conjunction with others. . . .
In the trial court, the bank claimed that the suspects were not any of the above
mentioned. They won the case. The appellatecourt affirmed on the basis that
the bank had no power to hire or dismiss the guard and could only ask for
replacements from the security agency.
Issue: Did the guards fall under the general exceptions clause of the insurance
policy and thus absolved the insurance company from liability?
They cited a case where an employee-employer relationship was governed by
(1) the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control
the employee's conduct.
The case was governed by Article 174 of the Insurance Code where it stated
that casualty insurance awarded an amount to loss cause by accident or
mishap.
The term "employee," should be read as a person who qualifies as such as
generally and universally understood, or jurisprudentially established in the
light of the four standards in the determination of the employer-employee
relationship, or as statutorily declared even in a limited sense as in the case of
Article 106 of the Labor Code which considers the employees under a "labor-
only" contract as employees of the party employing them and not of the party
who supplied them to the employer.
But even if the contracts were not labor-only, the bank entrusted the suspects
with the duty to safely transfer the money to its head office, thus, they were
representatives. According to the court, a representative is defined as one
who represents or stands in the place of another; one who represents others or
another in a special capacity, as an agent, and is interchangeable with agent.

Held: Yes to both. Petition granted.

Ratio:
The insurance agency contended that the guards automatically became the
authorized representatives of the bank when they cited International Timber
Corp. vs. NLRC where a contractor is a "labor-only" contractor in the sense
that there is an employer-employee relationship between the owner of the
project and the employees of the "labor-only" contractor.
They cited Art. 106. Of the Labor Code which said:
Contractor or subcontractor. There is "labor-only" contracting where the
person supplying workers to an employer doesnot have substantial capital or
investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such persons are
performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.
The bank asserted that the guards were not its employees since it had nothing
to do with their selection and engagement, the payment of their wages, their
dismissal, and the control of their conduct.
Del Rosario v. Equitable Insurance - Life Insurance Policy

118 PHIL 349

Facts:
> Equitable Insurance issued a life Insurance policy to del Rosario binding
itself to pay P1,000 to P3,000 as indemnity.
> Del Rosario died in a boating accident. The heirs filed a claim and
Equitable paid them P1,000.
> The heir filed a complaint for recovery of the balance of P2,000, claiming
that the insurere should pay him P3,000 as stated in the policy.

Issue:
Whether or not the heir is entitled to recover P3,000.

Held:
YES.
Generally accepted principles or ruling on insurance, enunciate that where
there is an ambiguity with respect to the terms and conditions of the policy,
the same shall be resolved against the one responsible thereof. The insured
has little, if any, participation in the preparation of the policy. The
interpretation of obscure stipulations in a contract should not favor the party
who cause the obscurity.
Misamis v Capital Insurance GR L-21380 May 20, 1966
En Banc

Facts:
Misamis Lumber Company insured its Ford Falcon to Capital Insurance for P
14,000. One day, the cars crank and flywheel broke when it passed over a
water hole in Aurora Boulevard. Misamis sent it to be repaired at the cost of
302 pesos. However, Capital did not want to pay the entire amount because
the repair limit in the contract stipulated up to 150 pesos only. Misamis filed
suit.
The lower court ruled against the insurance corporation because the company
did not show that the cost was excessive. Also , the court ruled that absolving
the company of the excess amount would make the contract one sided.

Issue: Is the insurance company liable for more than the amount in the repair
limit?

Held: No. Insurance company only ordered to pay 150 pesos.

Ratio:
Paragraph 4, subpar a. of the insurance contract is clear and specific. It
authorizes up to 150 pesos only as a repair limit.
The lower court did not heed the express stipulation in the agreement. The
policy specifically noted the mechanics for repair in par. 2 and the limits of the
liability in par 4. The company didnt notify the insurance provider before it
did the repairs. Also, even if the contract is onerous, this doesnt justify its
abrogation.
Verendia v CA
Lessons Applicable: Exception to Ambiguous Provisions Interpreted Against
Insurer (Insurance)

FACTS:
Rafael (Rex) Verendia's residential building was insured with Fidelity and
Surety Insurance Company, Country Bankers Insurance and
Development Insurance with Monte de Piedad & Savings Bank as
beneficiary
December 28, 1980 early morning: the building was completely destroyed
by fire
Fidelity refused the claim stating that there was a misrepresentation since
the lessee was not Roberto Garcia but Marcelo Garcia
trial court: favored Fidelity
CA: reversed
ISSUE: W/N there was false declaration which would forfeit his benefits
under Section 13 of the policy

HELD: YES.
Section 13 thereof which is expressed in terms that are clear and
unambiguous, that all benefits under the policy shall be forfeited "If the
claim be in any respect fraudulent, or if any false declaration be made or
used in support thereof, or if any fraudulent means or devises are used by
the Insured or anyone acting in his behalf to obtain any benefit under the
policy"
Robert Garcia then executed an affidavit before the National Intelligence
and Security Authority (NISA) to the effect that he was not the lessee of
Verendia's house and that his signature on the contract of lease was a
complete forgery.
Worse yet, by presenting a false lease contract, Verendia, reprehensibly
disregarded the principle that insurance contracts are uberrimae fidae and
demand the most abundant good faith
Qua Chee Gan v. Law Union Rock - Breach of Warranty
98 PHIL 85
Facts:
> Qua Chee Gan, a merchant, owned 4 warehouses in Albay which were used
for the storage or copra and hemp in which the appelle deals with exclusively.
> The warehouses together with the contents were insured with Law Union
since 1937 and the loss made payable to PNB as mortgagee of the hemp and
copra.
> A fire of undetermined cause broke out in July 21, 1940 and lasted for
almost 1 whole week.
> Bodegas 1, 3, and 4 including the merchandise stored were destroyed
completely.
> Insured then informed insurer of the unfortunate event and submitted the
corresponding fire claims, which were later reduced to P370T.
> Insurer refused to pay claiming violations of the warranties and conditions,
filing of fraudulent claims and that the fire had been deliberately caused by the
insured.
> Insured filed an action before CFI which rendered a decision in favor of the
insured.
Issues and Resolutions:
(1) Whether or not the policies should be avoided for the reason that there was a breach of
warranty.
Under the Memorandum of Warranty, there should be no less than 1 hydrant
for each 150 feet of external wall measurements of the compound, and since
bodegas insured had an external wall per meter of 1640 feet, the insured
should have 11 hydrants in the compound. But he only had 2.
Even so, the insurer is barred by estoppel to claim violation of the fire
hydrants warranty, because knowing that the number of hydrants it demanded
never existed from the very beginning, appellant nevertheless issued the
policies subject to such warranty and received the corresponding
premiums. The insurance company was aware, even before the policies were
issued, that in the premises there were only 2 hydrants and 2 others were
owned by the Municipality, contrary to the requirements of the warranties in
question.
It should be close to conniving at fraud upon the insured to allow the insurer
to claim now as void the policies it issued to the insured, without warning him
of the fatal defect, of which the insurer was informed, and after it had misled
the insured into believing that the policies were effective.
Accdg to American Jurisprudence: It is a well-settled rule that the insurer at
the time of the issuance of a policy has the knowledge of existing facts, which
if insisted on, would invalidate the contract from its very inception, such
knowledge constitutes a waiver of conditions in the contract inconsistent with
known facts, and the insurer is stopped thereafter from asserting the breach of
such conditions. The reason for the rule is: To allow a company to accept
ones money for a policy of insurance which it knows to be void and of no
effect, though it knows as it must that the insured believes it to be valid and
binding is so contrary to the dictates of honesty and fair dealing, as so closely
related to positive fraud, as to be abhorrent to fair-minded men. It would be
to allow the company to treat the policy as valid long enough to get the
premium on it, and leave it at liberty to repudiate it the next moment.
Moreover, taking into account the well-known rule that ambiguities or
obscurities must strictly be interpreted against the party that cause them, the
memorandum of warranty invoked by the insurer bars the latter from
questioning the existence of the appliances called for, since its initial
expression the undernoted appliances for the extinction of fire being kept on
the premises insured hereby.. admits of the interpretation as an admission of
the existence of such appliances which insurer cannot now contradict, should
the parole evidence apply.
(2) Whether or not the insured violated the hemp warranty provision against the storage of
gasoline since insured admitted there were 36 cans of gasoline in Bodega 2 which was a
separate structure and not affected by the fire.

It is well to note that gasoline is not specifically mentioned among the

prohibited articles listed in the so-called hemp warranty. The clause relied
upon by the insurer speaks of oils. Ordinarily, oils mean lubricants and not
gasoline or kerosene. Here again, by reason of the exclusive control of the
insurance company over the terms of the contract, the ambiguity must be held
strictly against the insurer and liberally in favor of the insured, specially to
avoid a forfeiture.

Furthermore, the gasoline kept was only incidental to the insureds business. It
is a well settled rule that keeping of inflammable oils in the premises though
prohibited by the policy does NOT void it if such keeping is incidental to the
business. Also, the hemp warranty forbade the storage only in the building to
which the insurance applies, and/or in any building communicating therewith;
and it is undisputed that no gasoline was stored in the burnt bodegas and that
Bodega No. 2 which was where the gasoline was found stood isolated from the
other bodegas.
G.R. No. 173773 November 28, 2012 there being intent to gain asthe use of the thing unlawfully taken constitutes gain. Also, in
Malayan Insurance Co., Inc. v. Court of Appeals
PARAMOUNT INSURANCE CORPORATION, ,
Petitioner,vs. 9
SPOUSES YVES and MARIA TERESA REMONDEULAZ, this Court held that the taking of a vehicleby another person without the permission or authority
Respondents. from the owner thereof is sufficient to place it
FACTS: within the ambit of the word theft
On May 26, 1994, respondents insured with petitioner their 1994 Toyota Corolla sedan under as contemplated in the policy, and is therefore, compensable.Records would show that
acomprehensive motor vehicle insurance policy for one year. During the effectivity of said respondents entrusted possession of their vehicle only to the extent thatSales will introduce repairs
insurance,respon and improvements thereon, and not to permanently deprive them of possession thereof. Since,
dents car was unlawfully taken. R Theft can also be committed through misappropriation, the fact that Sales
espondents alleged that a certain Ricardo Sales (Sales) tookpossession of the subject vehicle to add failed to return the subject vehicle to respondents constitutes Qualified Theft. Hence, since
accessories and improvements thereon, however, Sales failedto return the subject vehicle within repondents
the agreed three-day period. Then, respondents notified petitioner toclaim for the reimbursement car is undeniably covered by a
of their lost vehicle. However, petitioner refused to pay. Accordingly, respondents Comprehensive Motor Vehicle Insurance Policy
lodged a complaint for a sum of money against petitioner before the that allows for recovery in cases of theft
RegionalTrial Court of Makati City but dismissed the complaint filed by respondents. Not in , petitioner is lia
conformity with the ble under the policy for the loss of respondents vehicle
trial courts Order, respondents under the "theft clause."
filed an appeal to the Court of Appeals and in its decision the appellatecourt reversed and set aside
the Order issued by the trial court. Petitioner, thereafter, filed a motion for reconsideration against
said Decision, but the same was denied by the appellate court.Hence this Petition for Review on
Certiorari.
ISSUE:
Whether or not Paramount Insurance Corporation is liable under the insurance policy for the loss
of
respondents vehicle.

RULING:
The Supreme Court DENIED the motion of Paramount Insurance Company and
AFFIRMED theDecision of the Court of Appeals entirely.Paramount Insurance Corporation is
liable under the insurance policy.In
People v. Bustinera
,
8
this Court had the occasion to interpret the
"theft clause" of an insurancepolicy
. In this case, the Court explained that when one takes the motor vehicle of another without the
latters consent even if the motor vehicle is later returned, there is theft

Calanoc v CA The terms and phraseology of the exception clause be clearly expressed so as to
FACTS be within the easy grasp and understanding of the insured, for if the terms are
Basilio was a watchman of the Manila Auto Supply, secured a life insurance doubtful or obscure the same must of necessity be interpreted or resolved
policy from the Philippine American Life Insurance Company in the amount of against the one who has caused the obscurity.
P2,000 to which was attached a supplementary contract covering death by
accident. On January 25, 1951, he died of a gunshot wound on the occasion of
a robbery committed in the house of Atty. Ojeda (he was on the site, few blocks
away from the premises of the Manila Auto Supply because of the policemans
invitation to accompany them in checking the lawyers house which the lawyer
suspected of being robbed). Virginia, the widow, was paid the sum of P2,000,
face value of the policy, but when she demanded the payment of the additional
sum of P2,000 representing the value of the supplemental policy, the company
refused alleging that the deceased died because he was murdered by a person
who took part in the commission of the robbery and while making an arrest as
an officer of the law which contingencies were expressly excluded in the contract
and have the effect of exempting the company from liability.

ISSUE:
Whether the insurer is liable to the insured under the supplementary contract

HELD:

Yes the insurer is liable under the supplementary contract .The circumstance
that he was a mere watchman and had no duty to heed the call of Atty. Ojeda
should not be taken as a capricious desire on his part to expose his life to danger
considering the fact that the place he was in duty-bound to guard was only a
block away. In volunteering to extend help under the situation, he might have
thought, rightly or wrongly, that to know the truth was in the interest of his
employer it being a matter that affects the security of the neighborhood. He
cannot therefore be blamed solely for doing what he believed was in keeping
with his duty as a watchman and as a citizen. And he cannot be considered as
making an arrest as an officer of the law for certainly he did not go there for that
purpose nor was he asked to do so by the policeman. Much less can it be
pretended that Basilio died in the course of an assault or murder considering the
very nature of these crimes. It cannot be said be said that the killing was
intentional for there is the possibility that the malefactor had fired the shot
merely to scare away the people around for his own protection and not
necessarily to kill or hit the victim. In any event, the fact remains that the
happening was a pure accident on the part of the victim.
Biagtan v. Insular Life by the insured or any other person, etc., implies the exercise of the reasoning
FACTS faculties, consciousness and volition. Where a provision of the policy excludes
Juan S. Biagtan was insured with defendant Insular Life for the sum of P5,000.00 intentional injury, it is the intention of the person inflicting the injury that is
and, under a supplementary contract denominated "Accidental Death Benefit controlling. If the injuries suffered by the insured clearly resulted from the
Clause, for an additional sum of P5,000.00 if the death of the Insured resulted intentional act of a third person the insurer is relieved from liability as stipulated.
directly from bodily injury effected solely through external and violent means
sustained in an accident ... and independently of all other causes. The clause,
however, expressly provided that it would not apply where death resulted from
an injury intentionally inflicted by another party.

On May 20, 1964, the house of the insuredwas robbed by a band of robbers
who were charged in and convicted for robbery with homicide; that in
committing the robbery, the robbers, on reaching the staircase landing on the
second floor, rushed towards the door of the second floor room, where they
suddenly met the insured near the door of one of the rooms who received
thrusts from their sharp-pointed instruments resulting in his death. The
insurance company paid the basic amount of P5,000.00 but refused to pay the
additional sum under the accidental death benefit clause, on the ground that the
insured's death resulted from injuries intentionally inflicted by third parties and
therefore was not covered.

ISSUE:
Whether wounds received by the insured at the hands of the robbers were
inflicted intentionally thereby exempting the insurer from liability under the
supplementary contract

RULING:
Yes, the wounds received by the insured at the hands of the robbers were
inflicted intentionally thereby exempting the insurer from liability under the
supplementary contract

Nine wounds were inflicted upon the deceased. This is a physical fact as to which
there is no dispute. So is the fact that five of those wounds caused the death of
the insured. Whether the robbers had the intent to kill or merely to scare the
victim or to ward off any defense he might offer, it cannot be denied that the
act itself of inflicting the injuries was intentional.

The exception in the accidental benefit clause invoked by the appellant does not
speak of the purpose whether homicidal or not of a third party in causing
the injuries, but only of the fact that such injuries have been "intentionally".
Intentional as used in an accident policy excepting intentional injuries inflicted
Finman General Assurance v. CA
FACTS:
On October 22, 1986, deceased, Carlie Surposa was insured with under Finman
General Teachers Protection Plan (an accident insurance) and Individual Policy
with his parents, spouses Julia and Carlos Surposa, and brothers Christopher,
Charles, Chester and Clifton, all surnamed, Surposa, as beneficiaries.
result of any of the stipulated causes. The principle of " expresso unius exclusio
alterius" is therefore applicable in the instant case since murder and assault, not
having been expressly included in the enumeration of the circumstances that
would negate liability in said insurance policy, cannot be considered by
implication to discharge the petitioner insurance company from liability for, any
injury, disability or loss suffered by the insured.

The insured died on October 18, 1988 as a result of a stab wound inflicted by
one of the 3 unidentified men as he and his cousin, Winston Surposa, were
waiting for a ride on their way home along Rizal-Locsin Streets, Bacolod City.
Private respondent and the other beneficiaries of said insurance policy filed a
written notice of claim with the insurance company which denied said claim
contending that murder and assault are not within the scope of the coverage of
the insurance policy.
The interpretation of obscure words or stipulations in a contract shall not favor
the party who caused the obscurity (NCC 1377). Moreover,it is well settled that
contracts of insurance are to be construed liberally in favor of the insured and
strictly against the insurer. Thus ambiguity in the words of an insurance contract
should be interpreted in favor of its beneficiary.

The Insurance Commission rendered a decision holding the insurer is liable to

pay the proceeds of the policy which was affirmed by the CA.

ISSUE:
Whether the death of the insured was committed with deliberate intent which,
by the very nature of a personal accident insurance policy, cannot be indemnified

RULING:

No, the death of the insured was no commited with deliberate intent.

The generally accepted rule is that, death or injury does not result from accident
or accidental means within the terms of an accident-policy if it is the natural
result of the insured's voluntary act, unaccompanied by anything unforeseen
except the death or injury. The happening, on the part of the insured is a pure
accident. The insured died from an event that took place without his foresight
or expectation, an event that proceeded from an unusual effect of a known cause
and, therefore, not expected. Neither can it be said that where was a capricious
desire on the part of the accused to expose his life to danger considering that he
was just going home after attending a festival.

Furthermore, the personal accident insurance policy involved herein specifically

enumerated only ten (10) circumstances wherein no liability attaches to
insurance company for any injury, disability or loss suffered by the insured as a
Sun Insurance v. CA
FACTS:
The petitoner issued personal accident insurance policy to Felix Lim Jr with
face value of P200,000. Lim died two months later. It was on October 6,
1982, Lim, on a happy mood, was playing with his handgun from which he had
previously removed the magazine. He pointed the gun to his secretary who
pushes it aside saying that it might be loaded. Lim assured her its not and pointed
to his temple. The next moment there was an explosion and Lim slumped to the
floor. He was dead before he fell. As beneficiary, his wife Nerissa Lim sought
payment on the policy but her claim was rejected. The petitioner agreed that
there was no suicide. It argued, however that there was no accident either.

The widow sued the petitioner in the Regional Trial Court of Zamboanga City
and was sustained. The trial court rendered a decision in favor of private
respondent.

ISSUE:
Whether the insurer is liable to the insured under the insurance contract

HELD:
YES. An accident is an event that takes place without one's foresight or
expectation an event that proceeds from an unknown cause, or is an unusual
effect of a known case, and therefore not expected. An accident is an event
which happens without any human agency or, if happening through human
agency, an event which, under the circumstances, is unusual to and not expected
by the person to whom it happens. It has also been defined as an injury which
happens by reason of some violence or casualty to the injured without his design,
consent, or voluntary co-operation. In light of these definitions, the Court is
convinced that the incident that resulted in Lim's death was indeed an accident.

Lim was unquestionably negligent and that negligence cost him his own life. But
it should not prevent his widow from recovering from the insurance policy he
obtained precisely against accident. There is nothing in the policy that relieves
the insurer of the responsibility to pay the indemnity agreed upon if the insured
is shown to have contributed to his own accident. Indeed, most accidents are
caused by negligence. It bears noting that insurance contracts are as a rule
supposed to be interpreted liberally in favor of the assured.
G.R. No. 116940 Case Digest
G.R. No. 116940 June 11, 1997
The Phil. American Gen. Insurance Co., Inc.
vs Court of Appeals and Felman Shipping Lines
Ponente: Bellosillo
Facts:
July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by
Felman, 7,500 cases of 1-liter Coca-Cola soft drink bottles to be transported to
Zamboanga City to Cebu. The shipment was insured with Philamgen.
July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a claim
with respondent Felman for recovery of damages. Felman denied thus
prompted cocacola to file an insurance claim with Philamgen. Philamgen later
on claimed its right of subrogation against Felman which disclaimed any liability
for the loss.
Philamgen alleged that the sinking and loss were due to the vessel's
unseaworthiness, that the vessel was improperly manned and its officers were
grossly negligent. Felman filed a motion to dismiss saying that there is no right
of subrogation in favor of Philamgen was transmitted by the shipper.
RTC dismissed the complaint of Philamgen. CA set aside the dismissal and
remanded the case to the lower court for trial on the merits. Felman filed a
petition for certiorari but was denied.
RTC rendered judgment in favor of Felman. it ruled that the vessel was
seaworthy when it left the port of Zamboanga as evidenced by the certificate
issued by the Phil. Coast Guard and the ship owners surveyor. Thus, the loss is
due to a fortuitous event, in which, no liability should attach unless there is
stipulation or negligence.
On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo
for being top-heavy and the cocacola bottles were also improperly stored on
deck. Nonetheless, the CA denied the claim of Philamgen, saying that Philamgen
was not properly subrogated to the rights and interests of the shipper plus the
filing of notice of abandonment had absolved the ship owner from liability
under the limited liability rule.
Issues: (a) Whether the vessel was seaworthy, (b) whether limited liability rule
should apply and (c) whether Philamgen was properly subrogated to the rights
against Felman.
Ruling:
(a) The vessel was unseaworthy. The proximate cause thru the findings of the
Elite Adjusters, Inc., is the vessel's being top-heavy. Evidence shows that days
after the sinking coca-cola bottles were found near the vicinity of the sinking
which would mean that the bottles were in fact stowed on deck which the vessel
was not designed to carry substantial amount of cargo on deck. The inordinate
loading of cargo deck resulted in the decrease of the vessel's metacentric height
thus making it unstable.
(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for
the negligent acts of the captain in the care of the goods. This liability however
can be limited through abandonment of the vessel, its equipment and freightage.
Nonetheless, there are exceptions wherein the ship agent could still be held
answerable despite the abandonment, as where the loss or injury was due to the
fault of the ship owner and the captain. The international rule is that the right
of abandonment of vessels, as legal limitation of liability, does not apply to cases
where the injury was occasioned by the fault of the ship owner. Felman was
negligent, it cannot therefore escape liability.
 Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers
Philippines, Inc., gave the former the right to bring an action as subrogee against
(c) Generally, in marine insurance policy, the assured impliedly warrants to the FELMAN. Having failed to rebut the presumption of fault, the liability of
assurer that the vessel is seaworthy and such warranty is as much a term of the FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola soft drink bottles
contract as if expressly written on the face of the policy. However, the implied is inevitable.
warranty of seaworthiness can be excluded by terms in writing in the policy of
the clearest language. The marine policy issued by Philamgen to cocacola has
dispensed that the "seaworthiness of the vessel as between the assured and the
underwriters in hereby admitted."
WHEREFORE, the petition is GRANTED. Respondent FELMAN
SHIPPING LINES is ordered to pay petitioner PHILIPPINE AMERICAN
The result of the admission of seaworthiness by Philamgen may mean two GENERAL INSURANCE CO., INC.
things: (1) the warranty of seaworthiness is fulfilled and (2) the risk of
unseaworthiness is assumed by the insurance company. This waiver clause
would mean that Philamgen has accepted the risk of unseaworthiness, therefore
Philamgen is liable.

On the matter of subrogation, it is provided that;

Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract. If the amount paid by the insurance company does
not fully cover the injury or loss, the aggrieved party shall be entitled to recover
the deficiency from the person causing the loss or injury.

Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent
upon, nor does it grow out of any privity of contract or upon payment by the
insurance company of the insurance claim. It accrues simply upon payment by
the insurance company of the insurance claim.
 SECOND DIVISION
[G.R. No. 127897. November 15, 2001]
DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON.
COURT OF APPEALS and AMERICAN HOME ASSURANCE
CORPORATION, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision[1] of the Court
of Appeals in CA-G.R. CV No. 39836 promulgated on June 17, 1996, reversing
the decision of the Regional Trial Court of Makati City, Branch 137, ordering
petitioner to pay private respondent the sum of Five Million Ninety-Six
Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos
(P5,096,635.57) and costs and the Resolution[2] dated January 21, 1997 which
denied the subsequent motion for reconsideration.
The facts show that Caltex Philippines (Caltex for brevity) entered into a
contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for
a period of one year whereby the said common carrier agreed to transport
Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts
of the country. Under the contract, petitioner took on board its vessel, MT
Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the
Caltex Oil Terminal in Zamboanga City. The shipment was insured with the
private respondent, American Home Assurance Corporation.
On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga
City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near
Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.
Subsequently, private respondent paid Caltex the sum of Five Million
Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven
Centavos (P5,096,635.57) representing the insured value of the lost
cargo. Exercising its right of subrogation under Article 2207 of the New Civil
Code, the private respondent demanded of the petitioner the same amount it
paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand,
private respondent filed a complaint with the Regional Trial Court of Makati
City, Branch 137, for collection of a sum of money. After the trial and upon
analyzing the evidence adduced, the trial court rendered a decision on
November 29, 1990 dismissing the complaint against herein petitioner without
pronouncement as to cost. The trial court found that the vessel, MT Maysun,
was seaworthy to undertake the voyage as determined by the Philippine Coast
Guard per Survey Certificate Report No. M5-016-MH upon inspection during
its annual dry-docking and that the incident was caused by unexpected inclement
weather condition or force majeure, thus exempting the common carrier (herein
petitioner) from liability for the loss of its cargo.[3]
The decision of the trial court, however, was reversed, on appeal, by the
Court of Appeals. The appellate court gave credence to the weather report
issued by the Philippine Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA for brevity) which showed that from 2:00 oclock to
8:00 oclock in the morning on August 16, 1986, the wind speed remained at 10
to 20 knots per hour while the waves measured from .7 to two (2) meters in
height only in the vicinity of the Panay Gulf where the subject vessel sank, in
contrast to herein petitioners allegation that the waves were twenty (20) feet
high. In the absence of any explanation as to what may have caused the sinking
of the vessel coupled with the finding that the same was improperly manned,
the appellate court ruled that the petitioner is liable on its obligation as common
carrier[4] to herein private respondent insurance company as subrogee of
Caltex. The subsequent motion for reconsideration of herein petitioner was
denied by the appellate court.
Petitioner raised the following assignments of error in support of the
instant petition,[5] to wit:
I
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION
OF THE REGIONAL TRIAL COURT.
II
THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN
REBUTTING THE LEGAL PRESUMPTION THAT THE VESSEL MT
MAYSUN WAS SEAWORTHY.
III
THE COURT OF APPEALS ERRED IN NOT APPLYING THE
DOCTRINE OF THE SUPREME COURT IN THE CASE OF HOME
INSURANCE CORPORATION V. COURT OF APPEALS.
Petitioner Delsan Transport Lines, Inc. invokes the provision of Section
113 of the Insurance Code of the Philippines, which states that in every marine
insurance upon a ship or freight, or freightage, or upon any thing which is the
subject of marine insurance there is an implied warranty by the shipper that the
ship is seaworthy. Consequently, the insurer will not be liable to the assured for
any loss under the policy in case the vessel would later on be found as not
seaworthy at the inception of the insurance. It theorized that when private
respondent paid Caltex the value of its lost cargo, the act of the private
respondent is equivalent to a tacit recognition that the ill-fated vessel was
seaworthy; otherwise, private respondent was not legally liable to Caltex due to
the latters breach of implied warranty under the marine insurance policy that the
vessel was seaworthy.
The petitioner also alleges that the Court of Appeals erred in ruling that
MT Maysun was not seaworthy on the ground that the marine officer who
served as the chief mate of the vessel, Francisco Berina, was allegedly not
qualified. Under Section 116 of the Insurance Code of the Philippines, the
implied warranty of seaworthiness of the vessel, which the private respondent
admitted as having been fulfilled by its payment of the insurance proceeds to
Caltex of its lost cargo, extends to the vessels complement. Besides, petitioner
avers that although Berina had merely a 2nd officers license, he was qualified to
act as the vessels chief officer under Chapter IV(403), Category III(a)(3)(ii)(aa)
of the Philippine Merchant Marine Rules and Regulations. In fact, all the crew
and officers of MT Maysun were exonerated in the administrative investigation
conducted by the Board of Marine Inquiry after the subject accident.[6]
In any event, petitioner further avers that private respondent failed, for
unknown reason, to present in evidence during the trial of the instant case the
subject marine cargo insurance policy it entered into with Caltex. By virtue of
the doctrine laid down in the case of Home Insurance Corporation vs. CA,[7] the
failure of the private respondent to present the insurance policy in evidence is
allegedly fatal to its claim inasmuch as there is no way to determine the rights of
the parties thereto.
Hence, the legal issues posed before the Court are:
I
Whether or not the payment made by the private respondent to Caltex for the
insured value of the lost cargo amounted to an admission that the vessel was
seaworthy, thus precluding any action for recovery against the petitioner.
II
Whether or not the non-presentation of the marine insurance policy bars the
complaint for recovery of sum of money for lack of cause of action.
We rule in the negative on both issues.
The payment made by the private respondent for the insured value of
the lost cargo operates as waiver of its (private respondent) right to enforce the
term of the implied warranty against Caltex under the marine insurance
policy. However, the same cannot be validly interpreted as an automatic
admission of the vessels seaworthiness by the private respondent as to foreclose
recourse against the petitioner for any liability under its contractual obligation
as a common carrier. The fact of payment grants the private respondent
subrogatory right which enables it to exercise legal remedies that would
otherwise be available to Caltex as owner of the lost cargo against the petitioner
common carrier.[8] Article 2207 of the New Civil Code provides that:
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 injury.
The right of subrogation has its roots in equity. It is designed to promote
and to accomplish justice and is the mode which equity adopts to compel the
ultimate payment of a debt by one who in justice and good conscience ought to
pay.[9] It 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 by the
insurance company of the insurance claim.[10] Consequently, the payment made
by the private respondent (insurer) to Caltex (assured) operates as an equitable
assignment to the former of all the remedies which the latter may have against
the petitioner.
From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of passengers transported by them, according
to all the circumstances of each case.[11] In the event of loss, destruction or
deterioration of the insured goods, common carriers shall be responsible unless
the same is brought about, among others, by flood, storm, earthquake, lightning
or other natural disaster or calamity.[12] In all other cases, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed extraordinary
diligence.[13]
In order to escape liability for the loss of its cargo of industrial fuel oil
belonging to Caltex, petitioner attributes the sinking of MT Maysun to fortuitous
event or force majeure. From the testimonies of Jaime Jarabe and Francisco Berina,
captain and chief mate, respectively of the ill-fated vessel, it appears that a
sudden and unexpected change of weather condition occurred in the early
morning of August 16, 1986; that at around 3:15 oclock in the morning a squall
(unos) carrying strong winds with an approximate velocity of 30 knots per hour
and big waves averaging eighteen (18) to twenty (20) feet high, repeatedly
buffeted MT Maysun causing it to tilt, take in water and eventually sink with its
cargo.[14] This tale of strong winds and big waves by the said officers of the
petitioner however, was effectively rebutted and belied by the weather
report[15] from the Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA), the independent government agency
charged with monitoring weather and sea conditions, showing that from 2:00
oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed
remained at ten (10) to twenty (20) knots per hour while the height of the waves
ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay
Gulf where the subject vessel sank. Thus, as the appellate court correctly ruled,
petitioners vessel, MT Maysun, sank with its entire cargo for the reason that it
was not seaworthy. There was no squall or bad weather or extremely poor sea
condition in the vicinity when the said vessel sank.
The appellate court also correctly opined that the petitioners witnesses,
Jaime Jarabe and Francisco Berina, ship captain and chief mate, respectively, of
the said vessel, could not be expected to testify against the interest of their
employer, the herein petitioner common carrier.
Neither may petitioner escape liability by presenting in evidence
certificates[16] that tend to show that at the time of dry-docking and inspection
by the Philippine Coast Guard, the vessel MT Maysun, was fit for voyage. These
pieces of evidence do not necessarily take into account the actual condition of
the vessel at the time of the commencement of the voyage. As correctly
observed by the Court of appeals:
At the time of dry-docking and inspection, the ship may have appeared fit. The
certificates issued, however, do not negate the presumption of
unseaworthiness triggered by an unexplained sinking. Of certificates issued in
this regard, authorities are likewise clear as to their probative value, (thus):
Seaworthiness relates to a vessels actual condition. Neither the granting of
classification or the issuance of certificates establishes seaworthiness. (2-A
Benedict on Admiralty, 7-3, Sec. 62)
And also:
Authorities are clear that diligence in securing certificates of seaworthiness
does not satisfy the vessel owners obligation. Also securing the approval of the
shipper of the cargo, or his surveyor, of the condition of the vessel or her
stowage does not establish due diligence if the vessel was in fact unseaworthy,
for the cargo owner has no obligation in relation to seaworthiness. (Ibid.)[17]
Additionally, the exoneration of MT Maysuns officers and crew by the
Board of Marine Inquiry merely concerns their respective administrative
liabilities. It does not in any way operate to absolve the petitioner common
carrier from its civil liability arising from its failure to observe extraordinary
diligence in the vigilance over the goods it was transporting and for the negligent
acts or omissions of its employees, the determination of which properly belongs
to the courts.[18] In the case at bar, petitioner is liable for the insured value of the
lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the
presumption of fault or negligence as common carrier[19] occasioned by the
unexplained sinking of its vessel, MT Maysun, while in transit.
Anent the second issue, it is our view and so hold that the presentation in
evidence of the marine insurance policy is not indispensable in this case before
the insurer may recover from the common carrier the insured value of the lost
cargo in the exercise of its subrogatory right. The subrogation receipt, by itself,
is sufficient to establish not only the relationship of herein private respondent
as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel
oil, but also the amount paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the insurance company of the
insurance claim.[20]
The presentation of the insurance policy was necessary in the case of Home
Insurance Corporation v. CA[21] (a case cited by petitioner) because the shipment
therein (hydraulic engines) passed through several stages with different parties
involved in each stage. First, from the shipper to the port of departure; second,
from the port of departure to the M/S Oriental Statesman; third, from the M/S
Oriental Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific
Conveyor to the port of arrival; fifth, from the port of arrival to the arrastre
operator; sixth, from the arrastre operator to the hauler, Mabuhay Brokerage
Co., Inc. (private respondent therein); and lastly, from the hauler to the
consignee. We emphasized in that case that in the absence of proof of
stipulations to the contrary, the hauler can be liable only for any damage that
occurred from the time it received the cargo until it finally delivered it to the
consignee. Ordinarily, it cannot be held responsible for the handling of the cargo
before it actually received it. The insurance contract, which was not presented
in evidence in that case would have indicated the scope of the insurers liability,
if any, since no evidence was adduced indicating at what stage in the handling
process the damage to the cargo was sustained.
Hence, our ruling on the presentation of the insurance policy in the said
case of Home Insurance Corporation is not applicable to the case at bar. In
contrast, there is no doubt that the cargo of industrial fuel oil belonging to
Caltex, in the case at bar, was lost while on board petitioners vessel, MT Maysun,
which sank while in transit in the vicinity of Panay Gulf and Cuyo East Pass in
the early morning of August 16, 1986.
WHEREFORE, the instant petition is DENIED. The Decision dated
June 17, 1996 of the Court of Appeals in CA-G.R. CV No. 39836 is
AFFIRMED. Costs against the petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.