WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER INSURANCE Pioneer is its resident agent.
esident agent. This relationship is reflected in the
AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL
UNDERWRITING ASSOCIATION (BERMUDA) LTD., respondents.
[G.R. No. 154514. July 28, 2005]
FACTS:
White Gold Marine Services, Inc. (White Gold) procured a protection and
indemnity coverage for its vessels from The Steamship Mutual Underwriting
Association (Bermuda) Limited (Steamship Mutual) through Pioneer
Insurance and Surety Corporation (Pioneer). Subsequently, White Gold was
issued a Certificate of Entry and Acceptance. Pioneer also issued receipts
evidencing payments for the coverage. 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 latter’s unpaid balance.
DECISION OF LOWER COURTS:
(1) Insurance Commissioner: dismissed the complaint. There was no
violation of the Insurance Code and the respondents do not need
license as insurer and insurance agent/broker because it was not
engaged in the insurance business. It explained that Steamship
Mutual was a Protection and Indemnity Club (P & I Club). Moreover,
Pioneer was already licensed, hence, a separate license solely as
agent/broker of Steamship Mutual was already superfluous.
(2) CA: affirmed Insurance Commissioner.
ISSUES:
(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?
RULING:
(1) Yes. 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.
The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual
admits it does not have a license to do business in the Philippines although
certifications issued by the Insurance Commission.
It cites the definition of a P & I Club in Hyopsung Maritime Co., Ltd. v. Court
of Appeals 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 ship owning that the members incur in
favor of third parties.”
The test to determine if a contract is an insurance contract or not, depends
on the nature of the promise, the act required to be performed, and the
exact nature of the agreement in the light of the occurrence, contingency,
or circumstances under which the performance becomes requisite. It is not
by what it is called.
Relatedly, a mutual insurance company is a cooperative enterprise where
the members are both the insurer and insured. In it, the members all
contribute, by a system of premiums or assessments, to the creation of a
fund from which all losses and liabilities are paid, and where the profits are
divided among themselves, in proportion to their interest. Additionally,
mutual insurance associations, or clubs, provide three types of coverage,
namely, protection and indemnity, war risks, and defense costs. 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.
(2) Yes. 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 Commissioner,
which must be renewed annually on the first day of January, or within six
months thereafter.
Verendia v. CA - Insurance Policy
217 SCRA 1993
Facts:
> Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance
Policy No. F-18876 effective between June 23, 1980 and June 23, 1981
covering Rafael (Rex) Verendia's residential in the amount of P385,000.00.
Designated as beneficiary was the Monte de Piedad & Savings Bank.
> Verendia also insured the same building with two other companies,
namely, The Country Bankers Insurance for P56,000.00 and The
Development Insurance for P400,000.00.
> While the three fire insurance policies were in force, the insured property
was completely destroyed by fire.
> Fidelity appraised the damage amounting to 385,000 when it was
accordingly informed of the loss. Despite demands, Fidelity refused
payment under its policy, thus prompting Verendia to file a complaint for
the recovery of 385,000
> Fidelity, averred that the policy was avoided by reason of over-insurance,
that Verendia maliciously represented that the building at the time of the
fire was leased under a contract executed on June 25, 1980 to a certain
Roberto Garcia, when actually it was a Marcelo Garcia who was the lessee.
Issue:
Whether or not Verendia can claim on the insurance despite the
misrepresentation as to the lessee and the overinsurance.
Held:
NOPE.
The contract of lease upon which Verendia relies to support his claim for
insurance benefits, was entered into between him and one Robert Garcia, a
couple of days after the effectivity of the insurance policy. When the rented
residential building was razed to the ground, it appears that Robert Garcia
was still within the premises. However, according to the investigation by the
police, the building appeared to have "no occupants" and that Mr. Roberto
Garcia was "renting on the otherside of said compound" These pieces of
evidence belie Verendia's uncorroborated testimony that Marcelo Garcia
whom he considered as the real lessee, was occupying the building when it
was burned.
Ironically, during the trial, Verendia admitted that it was not Robert Garcia
who signed the lease contract but it was Marcelo Garcia cousin of Robert,
who had also been paying the rentals all the while. Verendia, however,
failed to explain why Marcelo had to sign his cousin's name when he in fact
he was paying for the rent and why he (Verendia) himself, the lessor,
allowed such a ruse. Fidelity's conclusions on these proven facts appear,
therefore, to have sufficient bases: Verendia concocted the lease contract to
deflect responsibility for the fire towards an alleged "lessee", inflated the
value of the property by the alleged monthly rental of P6,500) when in fact,
the Provincial Assessor of Rizal had assessed the property's fair market value
to be only P40,300.00, insured the same property with two other insurance
companies for a total coverage of around P900,000, and created a dead-end
for the adjuster by the disappearance of Robert Garcia.
Basically a contract of indemnity, an insurance contract is the law between
the parties. Its terms and conditions constitute the measure of the insurer's
liability and compliance therewith is a condition precedent to the insured's
right to recovery from the. As it is also a contract of adhesion, an insurance
contract should be liberally construed in favor of the insured and strictly
against the insurer company which usually prepares it
.
Considering, however, the foregoing discussion pointing to the fact that
Verendia used a false lease contract to support his claim under Fire
Insurance Policy, the terms of the policy should be strictly construed against
the insured. Verendia failed to live by the terms of the policy, specifically
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". Verendia, having presented a false declaration to support his claim
for benefits in the form of a fraudulent lease contract, he forfeited all
benefits therein by virtue of Section 13 of the policy in the absence of proof
that Fidelity waived such provision.
There is also no reason to conclude that by submitting the subrogation
receipt as evidence in court, Fidelity bound itself to a "mutual agreement"
to settle Verendia's claims in consideration of the amount of P142,685`.77.
While the said receipt appears to have been a filled-up form of Fidelity, no
representative of Fidelity had signed it. It is even incomplete as the blank
spaces for a witness and his address are not filled up. More significantly, the
same receipt states that Verendia had received the aforesaid amount.
However, that Verendia had not received the amount stated therein, is
proven by the fact that Verendia himself filed the complaint for the full
amount of P385,000.00 stated in the policy. It might be that there had been
efforts to settle Verendia's claims, but surely, the subrogation receipt by
itself does not prove that a settlement had been arrived at and enforced.
Thus, to interpret Fidelity's presentation of the subrogation receipt in
evidence as indicative of its accession to its "terms" is not only wanting in
rational basis but would be substituting the will of the Court for that of the
parties
Rizal Surety v CA G.R. No. 112360. July 18, 2000
J. Purisima
Facts:
Rizal Surety issued a 1 million peso fire insurance policy with Transworld.
This was increased to 1.5 million. A four span building was part of the policy.
A fire broke out and gutted the building, together with a two storey building
behind it were gaming machines were stored. The company filed its claims
but to no avail. Hence, it brought a suit in court. It aimed to make Rizal pay
for almost 3 million including legal interest and damages. Rizal claimed that
the policy only covered damage on the four span building and not the two
storey building. The trial court ruled in Transworld’s favor and ordered Rizal
to pay actual damages only. The court of appeals increased the damages.
The insurance company filed a MFR. The CA answered by modifying
the imposition of interest. Not satisfied, the insurance company petitioned
to the Supreme Court.
Issue:
WON Rizal Surety is liable for loss of the two-storey building considering
that the fire insurance policy sued upon covered only the contents of the
four-span building.
Held: Yes. Petition dismissed.
Ratio:
The policy had clauses on the building coverage that read:
"contained and/or stored during the currency of this Policy in the premises
occupied by them forming part of the buildings situated within own
Compound"
"First, said properties must be contained and/or stored in the areas
occupied by Transworld and second, said areas must form part of the
building described in the policy xxx"
This generally means that the policy didn’t limit its coverage to what was
stored in the four-span building.
As to questions of fact, both the trial court and the Court of Appeals found
that the so called "annex " was not an annex building but an integral part of
the four-span building described in the policy and consequently, the
machines and spare parts stored were covered by the fire insurance.
A report said: "Two-storey building constructed of partly timber and partly
concrete hollow blocks under g.i. roof which is adjoining and
intercommunicating with the repair of the first right span of the lofty storey
building and thence by property fence wall."
"Art.1377. The interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity"
Landicho v GSIS- the 'terms in an insurance policy, which are ambiguous,
equivocal, or uncertain are to be construed strictly and most strongly
against the insurer, and liberally in favor of the insured so as to effect the
dominant purpose of indemnity or payment to the insured’
The issue of whether or not Transworld has an insurable interest in the fun
and amusement machines and spare parts, which entitles it to be
indemnified for the loss thereof, had been settled in another SC case.
Philamcare vs. CA
Contract – Health Care Agreement is an Insurance Contract
Facts:
In 1988, Ernani Trinos applied for a health care insurance under the
Philamcare Health Systems, Inc. He was asked if he was ever treated for
high blood, heart trouble, diabetes, cancer, liver disease, asthma, or peptic
ulcer; he answered no. His application was approved and it was effective for
one year. His coverage was subsequently renewed twice for one year each.
While the coverage was still in force in 1990, Ernani suffered a heart attack
for which he was hospitalized. The cost of the hospitalization amounted to
P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare for
the latter to pay the hospitalization cost. Philamcare refused to pay as it
alleged that Ernani failed to disclose the fact that he was diabetic,
hypertensive, and asthmatic. Julita ended up paying the hospital expenses.
Ernani eventually died. In July 1990, Julita sued Philamcare for damages.
Philamcare alleged that the health coverage is not an insurance contract;
that the concealment made by Ernani voided the agreement.
ISSUE: Whether or not Philamcare can avoid the health coverage
agreement.
HELD: No. The health coverage agreement (health care agreement) entered
upon by Ernani with Philamcare is a non-life insurance contract and is
covered by the Insurance Law. It is primarily a contract of indemnity. Once
the member incurs hospital, medical or any other expense arising from
sickness, injury or other stipulated contingent, the health care provider
must pay for the same to the extent agreed upon under the contract. There
is no concealment on the part of Ernani. He answered the question with
good faith. He was not a medical doctor hence his statement in answering
the question asked of him when he was applying is an opinion rather than a
fact. Answers made in good faith will not void the policy.
Further, Philamcare, in believing there was concealment, should have taken
the necessary steps to void the health coverage agreement prior to the filing
of the suit by Julita. Philamcare never gave notice to Julita of the fact that
they are voiding the agreement. Therefore, Philamcare should pay the
expenses paid by Julita.
FEDEX vs. AHAC and PHILAM INSURANCE COMPANY, INC
G.R. No. 150094
August 18, 2004
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 client’s cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed
custom’s 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, petitioner’s 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
claims.

Philamcare v CA G.R. No. 125678. March 18, 2002
J. Ynares-Santiago
Facts:
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.
Ratio:
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 didn’t 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 husband’s 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 Members.”
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 isn’t valid.
They can’t 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 insured’s opinion. He wasn’t a medical doctor, so he
can’t 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.”
Fortune v CA G.R. No. 115278 May 23, 1995
J. Davide Jr.
Facts:
Producers Bank’s 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?
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 does not 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.
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. 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 Case Digest: Gulf Resorts Inc. V. Philippine Charter Insurance
Insurance Code
Section 2(1)
Corp. (2005)
contract of insurance as an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising
G.R. No. 156167 May 16, 2005
from an unknown or contingent event
Lessons Applicable: Stipulations Cannot Be Segregated (Insurance)
 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
FACTS:
earthquake shock coverage, except on the two swimming pools.
 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. MANILA MAHOGANY MANUFACTURING CORPORATION
VS. COURT OF APPEALS
 RTC: Favored American Home - endorsement rider means that only the 154 SCRA 650 (G.R. NO. 52756)
OCTOBER 12 1987
two swimming pools were insured against earthquake shock Petitioner: Manila Mahogany Manufacturing Corporation
Respondent: Court of Appeals and Zenith Insurance Corporation
 CA: affirmed RTC J. Padilla:
FACTS:
ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming Petitioner company
insurance insured . its
TheMercedes
insured vehicle
Benzwas
4-door sedan with respondent
bumped caused,
damage and damaged
respondent
by a truck
company
ownedpaid
by San Miguel Corporation. For the
pools petitionera₱Release
executed 5,000.00
of Claim,
in amicable
subrogating
settlement. Petitioner’s general manager
respondent company to all its right to action against San Miguel Corp..
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ETERNAL VS. PHILAMLIFE
G.R. No. 166245
April 09, 2008
FACTS: Respondent Philamlife entered into an agreement denominated as
Creditor Group Life Policy with petitioner Eternal Gardens Memorial Park
Corporation (Eternal). Under the policy, the clients of Eternal who
purchased burial lots from it on installment basis would be insured by
Philamlife. The amount of insurance coverage depended upon the existing
balance of the purchased burial lots.
The relevant provisions of the policy are:
ELIGIBILITY.
EVIDENCE OF INSURABILITY.
LIFE INSURANCE BENEFIT.
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on the date
he contracts a loan with the Assured. However, there shall be no insurance
if the application of the Lot Purchaser is not approved by the Company.
Eternal was required under the policy to submit to Philamlife a list of all new
lot purchasers, together with a copy of the application of each purchaser,
and the amounts of the respective unpaid balances of all insured lot
purchasers. Eternal complied by submitting a letter dated December 29,
1982, containing a list of insurable balances of its lot buyers for October
1982. One of those included in the list as “new business” was a certain John
Chuang. His balance of payments was 100K. on August 2, 1984, Chuang
died.
Eternal sent a letter dated to Philamlife, which served as an insurance claim
for Chuang’s death. Attached to the claim were certain documents. In reply,
Philamlife wrote Eternal a letter requiring Eternal to submit the additional
documents relative to its insurance claim for Chuang’s death. Eternal
transmitted the required documents through a letter which was received by
Philamlife.
After more than a year, Philamlife had not furnished Eternal with any reply
to the latter’s insurance claim. This prompted Eternal to demand from
Philamlife the payment of the claim for PhP 100,000.
In response to Eternal’s demand, Philamlife denied Eternal’s insurance claim
in a letter a portion of which reads:
The deceased was 59 years old when he entered into Contract #9558 and
9529 with Eternal Gardens Memorial Park in October 1982 for the total
maximum insurable amount of P100,000.00 each. No application for Group
Insurance was submitted in our office prior to his death on August 2, 1984
Eternal filed a case with the RTC for a sum of money against Philamlife,
which decided in favor of Eternal, ordering Philamlife to pay the former
100K representing the proceeds of the policy.
CA reversed. Hence this petition.
ISSUE: WON Philamlife should pay the 100K insurance proceeds
HELD: petition granted.
YES.
An examination of the provision of the POLICY under effective date of
benefit, would show ambiguity between its two sentences. The first
sentence appears to state that the insurance coverage of the clients of
Eternal already became effective upon contracting a loan with Eternal while
the second sentence appears to require Philamlife to approve the insurance
contract before the same can become effective.
It must be remembered that an insurance contract is a contract of adhesion
which must be construed liberally in favor of the insured and strictly against
the insurer in order to safeguard the latter’s interest
On the other hand, the seemingly conflicting provisions must be
harmonized to mean that upon a party’s purchase of a memorial lot on
installment from Eternal, an insurance contract covering the lot purchaser is
created and the same is effective, valid, and binding until terminated by
Philamlife by disapproving the insurance application. The second sentence
of the Creditor Group Life Policy on the Effective Date of Benefit is in the
nature of a resolutory condition which would lead to the cessation of the
insurance contract. Moreover, the mere inaction of the insurer on the
insurance application must not work to prejudice the insured; it cannot be
interpreted as a termination of the insurance contract. The termination of
the insurance contract by the insurer must be explicit and unambiguous.
Enriquez v Sunlife November 29, 1920 G.R. No. L-15895
Malcolm, J.:
Facts:
This is an action brought by the plaintiff ad administrator of the estate of
the late Joaquin Ma. Herrer to recover from the defendant life insurance
company the sum of pesos 6,000 paid by the deceased for a life annuity. The
trial court gave judgment for the defendant. Plaintiff appeals.
Joaquin Herrer made application to the Sun Life Assurance Company of
Canada through its office in Manila for a life annuity. Two days later he paid
the sum of P6,000 to the manager of the company’s Manila office and was
given a receipt. The application was given to the head office in Canada. The
oofice gave acceptance by cable on November 26, 1917. The policy was
issued on December 4.
The attorney, Mr. Torres then wrote to the Manila office of the company
stating that Herrer desired to withdraw his application. The following day
the local office replied to Mr. Torres, stating that the policy had been issued,
and called attention to the notification. This letter was received by Mr.
Torres on the morning of December 21, 1917 and Mr. Herrer died on
December 20, 1917.
(Whether on the same day the cable was received notice was sent by the
Manila office of Herrer that the application had been accepted, is a disputed
point, which will be discussed later.)
Issue: WON Herrer received notice of acceptance of his application.
Held: No. Judgment reversed.
Ratio:
Sunlife averred that that they prepared the letter on November 26, 1917,
and handed it to the local manager for signature. The manager said that he
received the application November 26, 1917. He said that on the same day
he signed a letter notifying Mr. Herrer of this acceptance. They said that
these letters, after being signed, were sent to the chief clerk and placed on
the mailing desk for transmission. The witness could not tell if the letter had
every actually been placed in the mails.
The plaintiff’s attorney testified to having prepared Herrer’s will, and his
client mentioned his application for a life annuity. He said that the only
document relating to the transaction in his possession was
the provisional receipt. Rafael Enriquez, the administrator of the estate,
testified that he had gone through the effects of the deceased and had
found no letter of notification from the insurance company to Mr. Herrer.
Our deduction from the evidence on this issue must be that the letter of
November 26, 1917, notifying Mr. Herrer that his application had been
accepted, prepared, and signed in the local office of the insurance company
and was placed in the ordinary channels for transmission. But this was never
actually mailed and thus was never received by the applicant.
The law that applies here is the Civil Code Art 1802, because the Insurance
Act is silent as to the methods followed to createa contract of insurance.
Article 1802, not only describes a contact of life annuity, but but in two
other articles, also gives strong clues as to the proper disposition of the
case.
For instance, article 16 of the Civil Code provides that “In matters which are
governed by special laws, any deficiency of the latter shall be supplied by
the provisions of this Code.” The special law on the subject of insurance is
deficient in enunciating the principles governing acceptance, the subject-
matter of the Civil code, if there be any, would be controlling. In the Civil
Code is found article 1262 providing that “Consent is shown by
the concurrence of offer and acceptance with respect to the thing and the
consideration which are to constitute the contract. An acceptance made by
letter shall not bind the person making the offer except from the time it
came to his knowledge. The contract, in such case, is presumed to have
been entered into at the place where the offer was made.”
The Civil Code rule, that an acceptance made by letter shall bind the person
making the offer only from the date it came to his knowledge avoids
uncertainty and tends to security.
Also, U.S. jurisprudence states that the courts who take this view have
expressly held that an acceptance of an offer of insurance not actually or
constructively communicated to the proposer does not make a contract.
Only the mailing of acceptance, it has been said, completes the contract of
insurance.
The law applicable to the case is found to be the second paragraph of article
1262 of the Civil Code providing that an acceptance made by letter shall not
bind the person making the offer except from the time it came to his
knowledge. Also, that according to the provisional receipt, three things had
to be accomplished by the insurance company before there was a contract:
(1) There had to be a medical examination of the applicant; (2) there had to
be approval of the application by the head office of the company; and (3)
this approval had in some way to be communicated by the company to the
applicant. The further admitted facts are that the head office in Montreal
did accept the application, did cable the Manila office to that effect, did
actually issue the policy and did actually write the letter of notification and
place it in the usual channels for transmission to the addressee.
The fact as to the letter of notification thus fails to concur with the essential
elements of the general rule pertaining to the mailing and delivery of mail
matter as announced by the American courts, namely, when a letter or
other mail matter is addressed and mailed with postage prepaid there is a
rebuttable presumption of fact that it was received by the addressee as
soon as it could have been transmitted to him in the ordinary course of the
mails. But if any one of these elemental facts fails to appear, it is fatal to the
presumption. For instance, a letter will not be presumed to have been
received by the addressee unless it is shown that it was deposited in the
post-office, properly addressed and stamped.
The contract for a life annuity was not perfected because it has not been
proved satisfactorily that the acceptance of the application ever came to the
knowledge of the applicant.
Development Bank of the Philippines vs. Court of Appeals [GR 109937, 21
March 1994]
First Division, Quiason (J): 4 concur
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 4 August 1987 and released on 11
August 1987. From the proceeds
of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI
premium. On 15 August 1987,
Dans accomplished and submitted the "MRI Application for Insurance" and
the "Health Statement for DBP
MRI Pool." On 20 August 1987, the MRI premium of Dans, less the DBP
service fee of 10%, was credited by
DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI
Pool was advised of the credit.
On 3 September 1987, Dans died of cardiac arrest. The DBP, upon notice,
relayed this information to the DBP MRI Pool. On 23 September 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 21 October 1987, DBP apprised Candida Dans of the disapproval of her
late husband's 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 10 February 1989, the Estate
of the Late Juan B. Dans, 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.
On 10 March 1990, the trial court rendered a decision in favor of the 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. The court ordered DBP
to return and reimburse the Estate the amount of P139,500.00 plus legal
rate of interest as amortization
payment paid under protest; to consider the mortgage loan of P300,000.00
including all interest accumulated
or otherwise to have been settled, satisfied or set-off by virtue of the
insurance coverage of the late Juan B.
Dans; to pay the Estate the amount of P10,000.00 as attorney's fees; to pay
the Estate the amount of
P10,000.00 as costs of litigation and other expenses, and other relief just
and equitable. The DBP appealed to
the Court of Appeals. In a decision dated 7 September 1992, the appellate
court affirmed in toto the decision
of the trial court. The DBP's motion for reconsideration was denied in a
resolution dated 20 April 1993. DBP
filed the petition for review on certiorari.
Issue [1]: Whether there was a perfected contract of insurance for DBP MRI
Pool to be held liable.
Held [1]: NO. When Dans applied for MRI, he filled up and personally signed
a "Health Statement for DBP
Pool" 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." 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 Dan's 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.
Issue [2]: Whether DBP is liable for the entire value of the insurance policy,
as it led Dans to believe that he has fulfilled all the requirements for the MRI
and that the issuance of his policy was forthcoming.
Held [2]: It was DBP, as a matter of policy and practice, that required Dans,
the borrower, to secure MRI coverage. Instead of allowing Dans to look for
his own insurance carrier or some other form of insurance
policy, DBP compelled him to apply with the DBP MRI Pool for MRI
coverage. When Dan's loan was
released on 11 August 1987, DBP already deducted from the proceeds
thereof the MRI premium. Four days
latter, DBP made Dans fill up and sign his application for MRI, as well as his
health statement. The DBP later
submitted both the application form and health statement to the DBP MRI
Pool at the DBP Main Building,
Makati Metro Manila. As service fee, DBP deducted 10% of the premium
collected by it from Dans. In
dealing with Dans, DBP was wearing two legal hats: the first as a lender, and
the second as an insurance
agent. 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 Dan's 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
Commercial Law – Insurance Law, 2006 ( 9 )
Narratives (Berne Guerrero)
companies concerned. The DBP is not authorized to accept applications for
MRI when its clients are more
than 60 years of age. Knowing all the while that Dans was ineligible for MRI
coverage because of his
advanced age, DBP exceeded the scope of its authority when it accepted
Dan's application for MRI by
collecting the insurance premium, and deducting its agent's commission and
service fee. The liability of an
agent who exceeds the scope of his authority depends upon whether the
third person is aware of the limits of
the agent's powers. There is no showing that Dans knew of the limitation on
DBP's authority to solicit
applications for MRI. If the third person dealing with an agent is unaware of
the limits of the authority
conferred by the principal on the agent and he (third person) has been
deceived by the non-disclosure thereof
by the agent, then the latter is liable for damages to him. The DBP's liability,
however, cannot be for the entire
value of the insurance policy. To assume that were it not for DBP's
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 loan.
Great Pacific Life ASSURANCE COMPANY vs. HONORABLE COURT OF
APPEALS
[G.R. No. L-31845; April 30, 1979]
FACTS:
Private respondent Ngo Hing filed an application with the Great P
acific Life Assurance Company on the life of his one-year old daughter
Helen Go. Upon the payment of the insurance premium to Lapulapu D.
Mondragon, Branch Manager of the Pacific Life, the binding deposit receipt
was issued to private respondent Ngo Hing. Mondragon received a letter
from Pacific Life disapproving the insurance application. The non-
acceptance of the insurance plan by Pacific Life was not communicated by
petitioner Mondragon to private respondent Ngo Hing. Helen Go died of
influenza with complication of bronchopneumonia. Thereupon, private
respondent sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery of the same.
ISSUES:
(1) whether the binding deposit receipt (Exhibit E) constituted a t
emporary contract of the life insurance in question;
(2) whether private respondent Ngo Hing concealed the state
of health and physical condition of Helen Go, which rendered void the
aforesaid Exhibit E.
HELD:
The binding deposit receipt in question is merely an acknowledgment, on
behalf of the company, that the latter’s branch office had received from the
applicant the insurance premium and had accepted the application subject
for processing by the insurance company; and that the latter will either
approve or reject the same on the basis of whether or not the applicant is
“insurable on standard rates.” Since petitioner Pacific Life disapproved the
insurance application of respondent Ngo Hing, the binding deposit receipt in
question had never become in force at any time. In life insurance, a “binding
slip” or “binding receipt” does not insure by itself. Private respondent had
deliberately concealed the state of health and physical condition of his
daughter Helen Go.
When private respondent supplied the required essential data for
the insurance application form, he was fully aware that his one-year
old daughter is typically a mongoloid child. Such a congenital physical
defect could never be ensconced nor disguised. Nonetheless, private
respondent, in apparent bad faith, withheld the fact material to the risk to
be assumed by the insurance company. As an insurance agent of Pacific Life,
he ought to know, as he surely must have known his duty and
responsibility to such a material fact. Had he diamond said significant
fact in the insurance application form Pacific Life would have verified the
same and would have had no choice but to disapprove the application
outright.
No insurance contract was perfected between the parties with the
noncompliance of the conditions provided in the binding receipt, and
concealment, as legally defined, having been committed by private
respondent.
Spouses CHA and UNITED v. CA and CKS
GR no. 124520
August 18, 1997
FACTS: Petitioner-spouses, as lessess, entered into a lease contract with
private respondent CKS Development Corporation (CKS), as lessor. One of
the stipulations of the one (1) year lease contract states:
18. x x x. The LESSEE shall not insure against fire the chattels, merchandise,
textiles, goods and effects placed at any stall or store or space in the leased
premises without first obtaining the written consent and approval of the
LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of
the LESSOR then the policy is deemed assigned and transferred to the
LESSOR for its own benefit; x x
Notwithstanding the above stipulation in the lease contract, the spouses
insured against loss by fire their merchandise inside the leased premises for
500K with the United Insurance Co., Inc. (United) without the written
consent of private respondents CKS.
On the day that the lease contract was to expire, fire broke out inside the
leased premises.
When CKS learned of the insurance earlier procured by the spouses (without
its consent), it wrote the United a demand letter asking that the proceeds of
the insurance contract (between the Cha spouses and United) be paid
directly to CKS, based on its lease contract with Cha spouses.
United refused to pay CKS. Hence, the latter filed a complaint against the
spouses and United.
The RTC rendered a decision ordering United to pay CKS . the CA affirmed
the trial court decision. MR denied, hence this petition
ISSUE: WON the aforequoted paragraph 18 of the lease contract entered
into between CKS and the spouses is valid insofar as it provides that any fire
insurance policy obtained by the spouses is deemed assigned or transferred
to the CKS if said policy is obtained without the prior written of the latter.
HELD: NO; the provision is void, as against public policy
It is basic in the law on contracts that the stipulations contained in a
contract cannot be contrary to law, morals, good customs, public order or
public policy.
Sec. 18 of the Insurance Code provides:
Sec. 18. No contract or policy of insurance on property shall be enforceable
except for the benefit of some person having an insurable interest in the
property insured.
A non-life insurance policy such as the fire insurance policy taken by
petitioner-spouses over their merchandise is primarily a contract of
indemnity. Insurable interest in the property insured must exist at the time
the insurance takes effect and at the time the loss occurs. The basis of such
requirement of insurable interest in property insured is based on sound
public policy: to prevent a person from taking out an insurance policy on
property upon which he has no insurable interest and collecting the
proceeds of said policy in case of loss of the property. In such a case, the
contract of insurance is a mere wager which is void under Section 25 of the
Insurance Code, which provides:
SECTION 25. Every stipulation in a policy of Insurance for the payment of
loss, whether the person insured has or has not any interest in the property
insured, or that the policy shall be received as proof of such interest, and
every policy executed by way of gaming or wagering, is void.
In the present case, it cannot be denied that CKS has no insurable interest in
the goods and merchandise inside the leased premises under the provisions
of Section 17 of the Insurance Code which provide.
Section 17. The measure of an insurable interest in property is the extent to
which the insured might be damnified by loss of injury thereof.”
United) cannot be compelled to pay the proceeds of the fire insurance
policy to a person (CKS) who has no insurable interest in the property
insured
The liability of the spouses to CKS for violating their lease contract in that
Cha spouses obtained a fire insurance policy over their own merchandise,
without the consent of CKS, is a separate and distinct issue which we do not
resolve in this case.
Geagonia v CA G.R. No. 114427 February 6, 1995
Facts:
Geagonia, owner of a store, obtained from Country Bankers fire insurance
policy for P100,000.00. The 1 year policy and covered thestock trading of
dry goods. The policy noted the requirement that "3. The insured shall give
notice to the Company of any insurance or insurances already effected, or
which may subsequently be effected, covering any of the property or
properties consisting of stocks in trade, goods in process and/or inventories
only hereby insured, and unless notice be given and the particulars of such
insurance or insurances be stated therein or endorsed in this policy
pursuant to Section 50 of the Insurance Code, by or on behalf of the
Company before the occurrence of any loss or damage, all benefits under
this policy shall be deemed forfeited, provided however, that this condition
shall not apply when the total insurance or insurances in force at the time of
the loss or damage is not more than P200,000.00." The petitioners’ stocks
were destroyed by fire. He then filed a claim which was subsequently
denied because the petitioner’s stocks were covered by two other fire
insurance policies for Php 200,000 issued by PFIC. The basis of the private
respondent's denial was the petitioner's alleged violation of Condition 3 of
the policy. Geagonia then filed a complaint against the private respondent
in the Insurance Commission for the recovery of P100,000.00 under fire
insurance policy and damages. He claimed that he knew the existence of the
other two policies. But, he said that he had no knowledge of the provision in
the private respondent's policy requiring him to inform it of the prior
policies and this requirement was not mentioned to him by the private
respondent's agent. The Insurance Commission found that the petitioner did
not violate Condition 3 as he had no knowledge of the existence of the two
fire insurance policies obtained from the PFIC; that it was Cebu Tesing
Textiles w/c procured the PFIC policies w/o informing him or securing his
consent; and that Cebu Tesing Textile, as his creditor, had insurable interest
on the stocks. The Insurance Commission then ordered the respondent
company to pay complainant the sum of P100,000.00 with interest and
attorney’s fees. CA reversed the decision of the Insurance Commission
because it found that the petitioner knew of the existence of the two other
policies issued by the PFIC.
Issues:
1. WON the petitioner had not disclosed the two insurance policies when he
obtained the fire insurance and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering
Held: Yes. No. Petition Granted
Ratio:
1. The court agreed with the CA that the petitioner knew of the prior
policies issued by the PFIC. His letter of 18 January 1991 to the private
respondent conclusively proves this knowledge. His testimony to the
contrary before the Insurance Commissioner and which the latter relied
upon cannot prevail over a written admission made ante litem motam. It
was, indeed, incredible that he did not know about the prior policies since
these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which
tend to work a forfeiture of insurance policies should be construed most
strictly against those for whose benefits they are inserted, and most
favorably toward those against whom they are intended to operate. With
these principles in mind, Condition 3 of the subject policy is not totally free
from ambiguity and must be meticulously analyzed. Such analysis leads us
to conclude that (a) the prohibition applies only to double insurance, and (b)
the nullity of the policy shall only be to the extent exceeding P200,000.00 of
the total policies obtained. Furthermore, by stating within Condition 3 itself
that such condition shall not apply if the total insurance in force at the time
of loss does not exceed P200,000.00, the private respondent was amenable
to assume a co-insurer's liability up to a loss not exceeding P200,000.00.
What it had in mind was to discourage over-insurance. Indeed, the rationale
behind the incorporation of "other insurance" clause in fire policies is to
prevent over-insurance and thus avert the perpetration of fraud. When a
property owner obtains insurance policies from two or more insurers in a
total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the
insurance. The public as well as the insurer is interested in preventing a
situation in which a fire would be profitable to the insured.
RCBC, et al. v. Court of Appeals
G.R. No. 128833. April 20, 1998
FACTS
Goyu and Sons, Inc. (GOYU) applied for credit facilities and accommodations
with Rizal Commercial Banking Corporation (RCBC). As security, GOYU
executed two real estate mortgages and two chattel mortgages in favor of
RCBC. Under each of these four mortgage contracts, GOYU committed itself
to insure the mortgaged property with an insurance company approved by
RCBC, and subsequently, to endorse and deliver the insurance policies to
RCBC.
GOYU obtained in its name a total of ten insurance policies from Malayan
Insurance (MICO) thru Alchester, its insurance agent. GOYU’s factory
buildings in Valenzuela were later gutted by fire. Consequently, GOYU
submitted its claim for indemnity on account of the loss insured against.
MICO denied the claim on the ground that the insurance policies were
either attached pursuant to writs of attachments/garnishments issued by
various courts or that the insurance proceeds were also claimed by other
creditors of GOYU alleging better rights to the proceeds than the insured.
GOYU filed a complaint for specific performance and damages. RCBC, one of
GOYU’s creditors, also filed with MICO its formal claim over the proceeds of
the insurance policies, but said claims were also denied for the same
reasons that MICO denied GOYU’s claims. Both the Trial Court and Court of
Appeals sustained MICO and RCBC’s liabilities.
ISSUE
Whether or not RCBC, as mortgagee, has any right over the insurance
policies taken by GOYU, the mortgagor, in case of the occurrence of loss.
RULING
YES. RCBC has preferential rights over the MICO insurance policies. It is basic
and fundamental that the first mortgagee has superior rights over junior
mortgagees or attaching creditors. It is also settled that a mortgagor and a
mortgagee have separate and distinct insurable interests in the same
mortgaged property, such that each one of them may insure the same
property for his own sole benefit. There is no question that GOYU could
insure the mortgaged property for its own exclusive benefit. In the present
case, although it appears that GOYU obtained the subject insurance policies
naming itself as the sole payee, the intentions of the parties as shown by
their contemporaneous acts, must be given due consideration in order to
better serve the interest of justice and equity. GOYU cannot seek relief
under Section 53 of the Insurance Code which provides that the proceeds of
insurance shall exclusively apply to the interest of the person in whose
name or for whose benefit it is made. The peculiarity of the circumstances
obtaining in the instant case presents a justification to take exception to the
strict application of said provision, it having been sufficiently established
that it was the intention of the parties to designate RCBC as the party for
whose benefit the insurance policies were taken out.
Great Pacific Life Assurance Corp. vs. Court of Appeals [GR 113899, 13
October 1999]
Second Division, Quisumbing (J): 3 concur, 1 on official leave
Facts: A contract of group life insurance was executed between Great Pacific
Life Assurance Corporation
(Grepalife) and Development Bank of the Philippines (DBP). Grepalife
agreed to insure the lives of eligible
housing loan mortgagors of DBP. On 11 November 1983, Dr. Wilfredo
Leuterio, a physician and a housing
debtor of DBP applied for membership in the group life insurance plan. In an
application form, Dr. 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." On 15 November 1983,
Grepalife issued Certificate
B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP
mortgage indebtedness amounting to
P86,200.00. On 6 August 1984, Dr. Leuterio died due to "massive cerebral
hemorrhage." Consequently, DBP
submitted a death claim to Grepalife. Grepalife denied the claim alleging
that Dr. Leuterio was not physically
healthy when he applied for an insurance coverage on 15 November 1983.
Grepalife insisted that Dr. Leuterio
did not disclose he had been suffering from hypertension, which caused his
death. Allegedly, such nondisclosure
constituted concealment that justified the denial of the claim. On 20
October 1986, the widow of
the late Dr. Leuterio, Medarda V. Leuterio, filed a complaint with the
Regional Trial Court of Misamis
Oriental, Branch 18, against Grepalife for "Specific Performance with
Damages." During the trial, Dr.
Hernando Mejia, who issued the death certificate, was called to testify. Dr.
Mejia’s findings, based partly from
the information given by the widow, stated that Dr. Leuterio complained of
headaches presumably due to high
blood pressure. The inference was not conclusive because Dr. Leuterio was
not autopsied, hence, other causes
were not ruled out. On 22 February 1988, the trial court rendered a decision
in favor of the widow and against
Grepalife. On 17 May 1993, the Court of Appeals sustained the trial court’s
decision. Grepalife filed the
petition for review.
Issue: Whether Dr. Leuterio failed to disclose that he had hypertension,
which might have caused his death,
and thus concealment can be interposed by Grepalife as a defense to annul
the insurance contract.
Held: 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. Grepalife merely relied on the testimony
of the attending physician, Dr.
Hernando Mejia, as supported by the information given by the widow of the
decedent. Grepalife asserts that
Dr. Mejia’s technical diagnosis of the cause of death of Dr. Leuterio was a
duly documented hospital record,
and that the widow’s declaration that her husband had "possible
hypertension several years ago" should not be
considered as hearsay, but as part of res gestae. On the contrary, the
medical findings were not conclusive
because Dr. Mejia did not conduct an autopsy on the body of the decedent.
As the attending physician, Dr.
Mejia stated that he had no knowledge of Dr. Leuterio’s any previous
hospital confinement. Dr. Leuterio’s
death certificate stated that hypertension was only "the possible cause of
death." The widow’s statement, as to
the medical history of her husband, was due to her unreliable recollection of
events. Hence, the statement of
the physician was properly considered by the trial court as hearsay. The
insured, Dr. Leuterio, had answered in
his insurance application that he was in good health and that he had not
consulted a doctor or any of the
enumerated ailments, including hypertension; when he died the attending
physician had certified in the death
certificate that the former died of cerebral hemorrhage, probably secondary
to hypertension. Contrary to
Grepalife’s allegations, there was no sufficient proof that the insured had
suffered from hypertension. Aside
Commercial Law – Insurance Law, 2006 ( 17 )
Narratives (Berne Guerrero)
from the statement of the insured’s widow who was not even sure if the
medicines taken by Dr. Leuterio were
for hypertension, Grepalife had not proven nor produced any witness who
could attest to Dr. Leuterio’s
medical history. Grepalife 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. Herein, Grepalife failed to clearly and satisfactorily establish its
defense, and is therefore liable to
pay the proceeds of the insurance.

Sunlife v CA G.R. No. 105135 June 22, 1995
J. Quiason
Facts:
Robert John B. Bacani procured a life insurance contract for himself from
Sunlife. He was issued a policy for P100,000.00, with double indemnity in
case of accidental death. The designated beneficiary was his mother,
Bernarda Bacani.
The insured died in a plane crash. Respondent Bernarda Bacani filed a claim
with petitioner, seeking the benefits of the insurance policy taken by her
son. Petitioner conducted an investigation and its findings prompted it to
reject the claim.
Sunlife informed Bacani that the insured did not disclose material facts
relevant to the issuance of the policy, thus rendering the contract of
insurance voidable. A check representing the total premiums paid in the
amount of P10,172.00 was attached to said letter.
Petitioner claimed that the insured gave false statements in his application.
The deceased answered claimed that he consulted a Dr. Raymundo of the
Chinese General Hospital for cough and flu complications. The other
questions were answered in the negative.
Petitioner discovered that two weeks prior to his application for insurance,
the insured was examined and confined at the Lung Center of the
Philippines, where he was diagnosed for renal failure. During
his confinement, the deceased was subjected to urinalysis tests.
Bernarda Bacani and her husband filed an action for specific performance
against petitioner with the RTC. The court ruled in favor of the spouses and
ordered Sunlife to pay P100,000.00.
In ruling for private respondents, the trial court concluded that the facts
concealed by the insured were made in good faith and under a belief that
they need not be disclosed. The court also held that the medial history was
irrelevant because it wasn’t medical insurance.
The Court of Appeals affirmed the decision of the trial court.
The appellate court ruled that petitioner cannot avoid its obligation by
claiming concealment because the cause of death was unrelated to the facts
concealed by the insured. Petitioner's motion for reconsideration was
denied. Hence, this petition.
Issue: WON the insured was guilty of misrepresentation which made the
contract void.
Held: Yes. Petition dismissed.
Ratio:
Section 26 of The Insurance Code required a party to a contract of insurance
to communicate to the other, in good faith, all facts within his knowledge
which are material to the contract and as to which he makes no warranty,
and which the other has no means of ascertaining.
“A neglect to communicate that which a party knows and ought to
communicate, is called concealment.”
“Materiality is to be determined not by the event, but solely by the probable
and reasonable influence of the facts upon the party to whom
communication is due, in forming his estimate of the disadvantages of the
proposed contract or in making his inquiries.”
The terms of the contract are clear. The insured is specifically required to
disclose to the insurer matters relating to his health.
The information which the insured failed to disclose were material and
relevant to the approval and issuance of the insurance policy. The matters
concealed would have definitely affected petitioner's action on his
application, either by approving it with the corresponding adjustment for a
higher premium or rejecting the same. Moreover, a disclosure may have
warranted a medical examination of the insured by petitioner in order for it
to reasonably assess the risk involved in accepting the application.
Vda. de Canilang v. Court of Appeals- materiality of the information
withheld does not depend on the state of mind of the insured. Neither does
it depend on the actual or physical events which ensue.
“Good faith" is no defense in concealment. The insured's failure to disclose
the fact that he was hospitalized raises grave doubts about his eligibility.
Such concealment was deliberate on his part.
The argument, that petitioner's waiver of the medical examination of the
insured debunks the materiality of the facts concealed, is untenable.
Saturnino v. Philippine American Life Insurance " . . . the waiver of a medical
examination [in a non-medical insurance contract] renders even more
material the information required of the applicant concerning previous
condition of health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into consideration in
deciding whether to issue the policy or not . . . "
Anent the finding that the facts concealed had no bearing to the cause of
death of the insured, it is well settled that the insured need not die of the
disease he had failed to disclose to the insurer. It is sufficient that his non-
disclosure misled the insurer in forming his estimates of the risks of the
proposed insurance policy or in making inquiries as held in Henson.
Philamcare Health Systems, Inc. vs Court of Appeals
In 1988, Ernani Trinos applied for a health care insurance under the
Philamcare Health Systems, Inc. He was asked if he was ever treated for
high blood, heart trouble, diabetes, cancer, liver disease, asthma, or peptic
ulcer; he answered no. His application was approved and it was effective for
one year. His coverage was subsequently renewed twice for one year each.
While the coverage was still in force in 1990, Ernani suffered a heart attack
for which he was hospitalized. The cost of the hospitalization amounted to
P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare for
the latter to pay the hospitalization cost. Philamcare refused to pay as it
alleged that Ernani failed to disclose the fact that he was diabetic,
hypertensive, and asthmatic. Julita ended up paying the hospital expenses.
Ernani eventually died. In July 1990, Julita sued Philamcare for damages.
Philamcare alleged that the health coverage is not an insurance contract;
that the concealment made by Ernani voided the agreement.
ISSUE: Whether or not Philamcare can avoid the health coverage
agreement.
HELD: No. The health coverage agreement (health care agreement) entered
upon by Ernani with Philamcare is a non-life insurance contract and is
covered by the Insurance Law. It is primarily a contract of indemnity. Once
the member incurs hospital, medical or any other expense arising from
sickness, injury or other stipulated contingent, the health care provider
must pay for the same to the extent agreed upon under the contract. There
is no concealment on the part of Ernani. He answered the question with
good faith. He was not a medical doctor hence his statement in answering
the question asked of him when he was applying is an opinion rather than a
fact. Answers made in good faith will not void the policy.
Further, Philamcare, in believing there was concealment, should have taken
the necessary steps to void the health coverage agreement prior to the filing
of the suit by Julita. Philamcare never gave notice to Julita of the fact that
they are voiding the agreement. Therefore, Philamcare should pay the
expenses paid by Julita.
THELMA VDA. DE CANILANG vs. COURT OF APPEALS G.R. No. 92492, 17
June 1993
FACTS:
Jaime Canilang applied for a “non-medical” insurance policy with
respondent Great Pacific Life Assurance Company naming his wife, Thelma
Canilang as his beneficiary. But he did not disclose the fact that he was
diagnosed as suffering from sinus tachycardia and that he has consulted a
doctor twice. Jaime was issued an ordinary life insurance policy with the
face value of P19,700.00. Jaime died of “congestive heart failure”, “anemia”,
and “chronic anemia”. Petitioner widow and beneficiary of the insured, filed
a claim with Great Pacific which the insurer denied upon the ground that
the insured had concealed material information from it. Hence, Thelma filed
a complaint against Great Pacific with the Insurance Commission for
recovery of the insurance proceeds.
ISSUE: Whether or not the non-disclosure of certain facts about the
insured’s previous health conditions is material to warrant the denial of the
claims of Thelma Canilang
HELD: YES. The SC agreed with the Court of Appeals that the information
which Jaime Canilang failed to disclose was material to the ability of Great
Pacific to estimate the probable risk he presented as a subject of life
insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made
and medicines prescribed by such doctor, in the insurance application, it
may be reasonably assumed that Great Pacific would have made further
inquiries and would have probably refused to issue a non-medical insurance
policy or, at the very least, required a higher premium for the same
coverage. The materiality of the information withheld by Great Pacific did
not depend upon the state of mind of Jaime Canilang. A man’s state of mind
or subjective belief is not capable of proof in our judicial process, except
through proof of external acts or failure to act from which inferences as to
his subjective belief may be reasonably drawn. Neither does materiality
depend upon the actual or physical events which ensure. Materiality relates
rather to the “probable and reasonable influence of the facts” upon the
party to whom the communication should have been made, in assessing the
risk involved in making or omitting to make further inquiries and in
accepting the application for insurance; that “probable and reasonable
influence of the facts” concealed must, of course, be determined
objectively, by the judge ultimately. WHEREFORE, the Petition for Review is
DENIED for lack of merit and the Decision of the Court of Appeals dated 16
October 1989 in C.A.-G.R. SP No. 08696 is hereby AFFIRMED. No
pronouncement as to the costs.
Tan vs. Court of Appeals [GR 48049, 29 June 1989]
Third Division, Gutierrez Jr. (J): 3 concur, 1 took no part
Facts: On 23 September 1973, Tan Lee Siong, father of Emilio, Juanito,
Alberto, and Arturo Tan, applied for
life insurance in the amount of P80,000.00 with the Philippine American Life
Insurance Company
(Philamlife). Said application was approved and Policy 1082467 was issued
effective 6 November 1973, with
Emilio Tan, et al. as beneficiaries. On 26 April 1975, Tan Lee Siong died of
hepatoma. Emilio Tan, et al. then
filed with Philamlife their claim for the proceeds of the life insurance policy.
However, in a letter dated 11
September 1975, Philamlife denied Emilio Tan et al.'s claim and rescinded
the policy by reason of the alleged
misrepresentation and concealment of material facts made by the deceased
Tan Lee Siong in his application
for insurance. The premiums paid on the policy were thereupon refunded.
Alleging that Philamlife's refusal to
pay them the proceeds of the policy was unjustified and unreasonable,
Emilio Tan et al. filed on 27 November
1975, a complaint against the former with the Office of the Insurance
Commissioner (I.C. Case 218). After
hearing the evidence of both parties, the Insurance Commissioner rendered
judgment on 3 August 3, 1977,
dismissing the complaint. The Court of Appeals dismissed their appeal from
the Insurance Commissioner's
decision for lack of merit. Emilio Tan et al. filed the petition for review on
certiorari.
Issue: Whether Philamlife no longer had the right to rescind the contract of
insurance as rescission must
allegedly be done during the lifetime of the insured within two years and
prior to the commencement of
action.
Held: NO. Section 48 of the Insurance Code provides that "Whenever a right
to rescind a contract of
insurance is given to the insurer by any provision of this chapter, such right
must be exercised previous to the
commencement of an action on the contract. "After a policy of life
insurance made payable on the death of the
insured shall have been in force during the lifetime of the insured for a
period of two years from the date of its
issue or of its last reinstatement, the insurer cannot prove that the policy is
void ab initio or is rescindible by
reason of the fraudulent concealment or misrepresentation of the insured
or his agent." Herein, the policy was
issued on 6 November 1973 and the insured died on 26 April 1975. The
policy was thus in force for a period
of only one year and five months. Considering that the insured died before
the two-year period had lapsed,
Philamlife is not, therefore, barred from proving that the policy is void ab
initio by reason of the insured's
fraudulent concealment or misrepresentation. Moreover, Philamlife
rescinded the contract of insurance and
refunded the premiums paid on 11 September 1975, previous to the
commencement of this action on 27
November 1975. Under the "incontestability clause," the insurer has two
years from the date of issuance of
the insurance contract or of its last reinstatement within which to contest
the policy, whether or not, the
insured still lives within such period. After two years, the defenses of
concealment or misrepresentation, no
matter how patent or well founded, no longer lie. Congress felt this was a which could force the insured to file a case thus entitling him of attorney’s
sufficient answer to the various fees.
tactics employed by insurance companies to avoid liability. The
interpretation of Emilio Tan et al. to said
provision -- that the Insurance Law was amended and the second paragraph
of Section 48 added to prevent the
insurance company from exercising a right to rescind after the death of the Facts:
insured; that the so-called
"incontestability clause" precludes the insurer from raising the defenses of TRANS-ASIA is the owner of the vessel M/V Asia Korea. In consideration of
false representations or payment of premiums, PRUDENTIAL insured M/V Asia Korea for
concealment of material facts insofar as health and previous diseases are loss/damage of the hull and machinery arising from perils, inter alia, of fire
concerned if the insurance has been and explosion for the sum of P40 Million, beginning from the period of July
Commercial Law – Insurance Law, 2006 ( 21 ) 1, 1993 up to July 1, 1994.On October 25, 1993, while the policy was in
Narratives (Berne Guerrero) force, a fire broke out while [M/V Asia Korea was] undergoing repairs at the
in force for at least two years during the insured's lifetime; and that the port of Cebu. On October 26, 1993 TRANS-ASIA filed its notice of claim for
phrase "during the lifetime" found in damage sustained by the vessel evidenced by a letter/formal claim. TRANS-
Section 48 simply means that the policy is no longer considered in force ASIA reserved its right to subsequently notify PRUDENTIAL as to the full
after the insured has died. The key amount of the claim upon final survey and determination by average
phrase in the second paragraph of Section 48 is "for a period of two years" -- adjuster Richard Hogg International (Phil.) of the damage sustained by
would give rise to the reason of fire. TRANS-ASIA executed a document denominated “Loan and
incongruous situation where the beneficiaries of an insured who dies right Trust receipt”, a portion of which states that “Received from Prudential
after taking out and paying for a Guarantee and Assurance, Inc., the sum of PESOS THREE MILLION ONLY
life insurance policy, would be allowed to collect on the policy even if the (P3,000,000.00) as a loan without interest under Policy No. MH 93/1353
insured fraudulently concealed [sic], repayable only in the event and to the extent that any net recovery is
material facts. made by Trans-Asia Shipping Corporation, from any person or persons,
corporation or corporations, or other parties, on account of loss by any
casualty for which they may be liable occasioned by the 25 October 1993:
Fire on Board. “PRUDENTIAL later on denied Trans-Asia’s claim in stated in a
letter that “After a careful review and evaluation of your claim arising from
the above-captioned incident, it has been ascertained that you are in breach
PRUDENTIAL GUARANTEE and ASSURANCE INC., vs. TRANS- of policy conditions, among them “WARRANTED VESSEL CLASSED AND
ASIA SHIPPING LINES, INC CLASS MAINTAINED”. Accordingly, we regret to advise that your claim is not
compensable and hereby DENIED.” and asked for the return of the
[G.R. No. 151890; June 20, 2006] 3,000,000. TRANS-ASIA filed a Complaint for Sum of Money against
PRUDENTIAL with the RTC of Cebu City, wherein TRANS-ASIA sought the
amount of P8,395,072.26 from PRUDENTIAL, alleging that the same
represents the balance of the indemnity due upon the insurance policy in
the total amount of P11,395,072.26. TRANS-ASIA similarly sought interest at
Principle found in the case: Section 343 and 344 applies when there 42% per annum citing Section 243 of Presidential Decree No. 1460,
is unreasonable delay or refusal in the payment of the insurance claims otherwise known as the “Insurance Code,” as amended. PRUDENTIAL
denied the material allegations of the Complaint and interposed the defense
that TRANS-ASIA breached
insurance policy conditions, in particular: PRUDENTIAL posits that TRANS-
ASIA violated an express and material warranty in the subject insurance
contract, i.e., Marine Insurance Policy No. MH93/1363,
specifically Warranty Clause No. 5 thereof, which stipulates that the
insured vessel, “M/V ASIA KOREA” is required to be CLASSED AND CLASS
MAINTAINED. According to PRUDENTIAL, on 25 October 1993, or at the time
of the occurrence of the fire, “M/V ASIA KOREA” was in violation of the
warranty as it was not CLASSED AND CLASS MAINTAINED. PRUDENTIAL
submits that Warranty Clause No. 5 was a condition precedent to the
recovery of TRANS-ASIA under the policy, the violation of which entitled
PRUDENTIAL to rescind the contract under Sec. 74 of the Insurance Code. By
way of a counterclaim, PRUDENTIAL sought a refund of P3,000,000.00,
which it allegedly advanced to TRANS-ASIA by way of a loan without interest
and without prejudice to the final evaluation of the claim, including the
amounts of P500,000.00, for survey fees and P200,000.00, representing
attorney’s fees. Trial court ruled in favor of Prudential. It ruled that a
determination of the parties’ liabilities hinged on whether TRANS-
ASIA violated and breached the policy conditions on WARRANTED VESSEL
CLASSED AND CLASS MAINTAINED. It interpreted the provision to mean that
TRANS-ASIA is required to maintain the vessel at a certain class at all times
pertinent during the life of the policy. According to the court a quo, TRANS-
ASIA failed to prove compliance of the terms of the warranty, the violation
thereof entitled PRUDENTIAL to rescind the contract. The court of appeals
reversed the decision. It ruled that PRUDENTIAL, as the party asserting the
non-compensability of the loss had the burden of proof to show that TRANS-
ASIA breached the warranty, which burden it failed
to discharge.It considered PRUDENTIAL’s admission that at the time the
insurance contract was entered into between the parties, the vessel
was properly classed by Bureau Veritas, a classification society recognized
by the industry. It similarly gave weight to the fact that it was the
responsibility of Richards Hogg International (Phils.) Inc., the average
adjuster hired by PRUDENTIAL, to secure a copy of such certification to
support its conclusion that mere absence of a certification does not warrant
denial of TRANS-ASIA’s claim under the insurance policy.Also the C.A. ruled
that TRANS-ASIA is entitled to the unpaid claims covered by Marine Policy,
or a total amount of P8,395,072.26 however even if there was unreasonable
denial or withholding of the payment of the claims due Trans-Asia is still
not entitled to pay for attorney’s fees for it can only be awarded in the cases
enumerated in Article 2208 of the Civil Code. But Trans-Asia is entitled to
double interest on the policy for the duration of the delay of payment of the
unpaid balance, citing Section 244 of the Insurance Code.
Issue:
WON Prudential should pay Trans-Asia the unpaid claims covered by the
marine policy including attorney’s fees.
Ruling:
Yes
Rationale:
Sec. 244 of the Insurance Code grants damages consisting of attorney’s fees
and other expenses incurred by the insured after a finding by the Insurance
Commissioner or the Court, as the case may be,of an unreasonable denial or
withholding of the payment of the claims due. Moreover, the law imposes
an interest of twice the ceiling prescribed by the Monetary Board on the
amount of the claim due the insured from the date following the time
prescribed in Section 242 or in Section 243, as the case may be,until the
claim is fully satisfied. Finally, Section 244 considers the failure to pay the
claims within the time prescribed in Sections 242 or 243, when applicable,
as prima facie evidence of unreasonable delay in payment.
To the mind of this Court, Section 244 does not require a showing of bad
faith in order that attorney’s fees be granted.As earlier stated, under
Section 244, a prima facie evidence of unreasonable delay in payment of the
claim is created by failure of the insurer to pay the claim within the time
fixed in both Sections 242 and 243 of the Insurance Code.
As established in Section 244, by reason of the delay and the consequent
filing of the suit by the insured, the insurers shall be adjudged to pay
damages which shall consist of attorney’s fees and other expenses incurred
by the insured.
Section 244 reads: satisfying TRANS-ASIA’s unpaid claims compelled the latter to file a suit for
collection.Succinctly, an award equivalent to ten percent (10%) of the
“In case of any litigation for the enforcement of any policy or contract of unpaid proceeds of the policy as attorney’s fees to TRANS-ASIA is
insurance, it shall be the duty of theCommissioner or the Court, as the case reasonable under the circumstances, or otherwise stated, ten percent (10%)
may be, to make a finding as to whether the payment of the claim of of P8,395,072.26. In the case of Cathay Insurance, Co., Inc. v. Court of
theinsured has been unreasonably denied or withheld; and in the Appeals, where a finding of an unreasonable delay under Section 244 of the
affirmative case, the insurance company shall beadjudged to pay damages Insurance Code was made by this Court, we grant an award of attorney’s
which shall consist of attorney’s fees and other expenses incurred by the fees equivalent to ten percent (10%) of the total proceeds. We find no
insured personby reason of such unreasonable denial or withholding of reason to deviate from this judicial precedent in the case at bar.
payment plus interest of twice the ceiling prescribed by theMonetary Board
of the amount of the claim due the insured, from the date following the
time prescribed in sectiontwo hundred forty-two or in section two hundred
forty-three, as the case may be, until the claim is fully satisfied;Provided,
That the failure to pay any such claim within the time prescribed in said
sections shall be considered primafacie evidence of unreasonable delay in
payment.”

Sections 243 and 244 of the Insurance Code apply when the court finds an
unreasonable delay or refusal in the payment of the insurance claims.

In the case at bar, the facts as found by the Court of Appeals, and confirmed
by the records show that there was an unreasonable delay by PRUDENTIAL
in the payment of the unpaid balance of P8,395,072.26 to TRANS-ASIA. On
26 October 1993, a day after the occurrence of the fire in “M/V Asia Korea”,
TRANS-ASIA filed its notice of claim. On 13 August 1996, the adjuster,
Richards Hogg International (Phils.), Inc., completed its survey report
recommending the amount of P11,395,072.26 as the total indemnity due to Pacific Timber Export Corporation vs Court of Appeals
TRANS-ASIA. On 21 April 1997, PRUDENTIAL, in a letter addressed to TRANS-
In 1963, Pacific Timber Export Corporation (PTEC) applied for a temporary
ASIA denied the latter’s claim for the amount of P8,395,072.26 representing
marine insurance from Workmen’s Insurance Company (WIC) in order for
the balance of thetotal indemnity. On 21 July 1997, PRUDENTIAL sent a
the latter to insure 1,250,000 board feet of logs to be exported to Japan. In
second letter to TRANS-ASIA seeking a return of the amount
March 1963, WIC issued a cover note to PTEC for the said logs. On April 2,
of P3,000,000.00. On 13 August 1997, TRANS-ASIA was constrained to file
1963, WIC issued two policies for the logs. However, the total board feet
a complaint for sum of money against PRUDENTIAL praying, inter alia, for
covered this time is only 1,195,498. On April 4, 1963, while the logs were in
the sum of P8,395,072.26 representing the balance of the proceeds of the
transit to Japan, bad weather prevailed and this caused the loss of 32 pieces
insurance claim.As can be gleaned from the foregoing, there was an
of logs.
unreasonable delay on the part of PRUDENTIAL to pay TRANS-ASIA, as in
fact, it refuted the latter’s right to the insurance claims, from the time proof WIC then asked an adjuster to investigate the loss. The adjuster submitted
of loss was shown and the ascertainment of the loss was made by the that the logs lost were not covered by the two policies issued on April 2,
insurance adjuster. Evidently, PRUDENTIAL’s unreasonable delay in 1963 but said logs were included in the cover note earlier issued.
WIC however denied the insurance claim of PTEC as it averred that the
cover note became null and void when the two policies were subsequently
issued. The Court of Appeals ruled that the cover note is void for lack of
valuable consideration as it appeared that no premium payment therefor
was made by PTEC.
ISSUE: Whether or not a separate premium is needed for cover notes.
HELD: No. The Cover Note was not without consideration for which the
Court of Appeals held the Cover Note as null and void, and denied recovery
therefrom. The fact that no separate premium was paid on the Cover Note
before the loss insured against occurred, does not militate against the
validity of PTEC’s contention, for no such premium could have been paid,
since by the nature of the Cover Note, it did not contain, as all Cover Notes
do not contain particulars of the shipment that would serve as basis for the
computation of the premiums. As a logical consequence, no separate
premiums are intended or required to be paid on a Cover Note.
At any rate, it is not disputed that PTEC paid in full all the premiums as
called for by the statement issued by WIC after the issuance of the two
regular marine insurance policies, thereby leaving no account unpaid by
PTEC due on the insurance coverage, which must be deemed to include the
Cover Note. If the Note is to be treated as a separate policy instead of
integrating it to the regular policies subsequently issued, the purpose and
function of the Cover Note would be set at naught or rendered meaningless,
for it is in a real sense a contract, not a mere application for insurance which
is a mere offer.
Grepalife v. CA
89 SCRA 543
Facts:
> On March 14, 1957, respondent Ngo Hing filed an application with
Grepalife for a 20-yr endowment policy for 50T on the life of his one year
old daughter Helen Go.
> All the essential data regarding Helen was supplied by Ngo to Lapu-Lapu
Mondragon, the branch manager of Grepalife-Cebu. Mondragon then typed
the data on the application form which was later signed by Ngo.
> Ngo then paid the insurance premium and a binding deposit receipt was
issued to him. The binding receipt contained the following provision: “If the
applicant shall not have been insurable xxx and the Company declines to
approve the application, the insurance applied for shall not have been in
force at any time and the sum paid shall be returned to the applicant upon
the surrender of this receipt.”
> Mondragon wrote on the bottom of the application form his strong
recommendation for the approval of the insurance application.
> On Apr 30, 1957, Mondragon received a letter from Grepalife Main office
disapproving the insurance application of Ngo for the simple reason that the
20yr endowment plan is not available for minors below 7 yrs old.
> Mondragon wrote back the main office again strongly recommending the
approval of the endowment plan on the life of Helen, adding that Grepalife
was the only insurance company NOT selling endowment plans to children.
> On may 1957, Helen died of influenza with complication of broncho
pneumonia. Ngo filed a claim with Gepalife, but the latter denied liability on
the ground that there was no contract between the insurer and the insured
and a binding receipt is NOT evidence of such contract.
Issue:
Whether or not the binding deposit receipt, constituted a temporary
contract of life insurance.
Held:
NO.
The binding receipt in question was merely an acknowledgement on behalf
of the company, that the latter’s branch office had received from the
applicant, the insurance premium and had accepted the application subject
for processing by the insurance company, and that the latter will either
approve or reject the same on the basis of whether or not the applicant is
insurable on standard rates.
Since Grepalife disapproved the insurance application of Ngo, the binding
deposit receipt had never became on force at any time, pursuant to par. E of
the said receipt. A binding receipt is manifestly merely conditional and does
NOT insure outright. Where an agreement is made between the applicant
and the agent, NO liability shall attach until the principal approves the risk
and a receipt is given by the agent.
The acceptance is merely conditional, and is subordinated to the act of the
company in approving or rejecting the application. Thus in life insurance, a
binding slip or binding receipt does NOT insure by itself.
Philippine American Life and General Insurance Company vs. Valencia-
Bagalacsa [GR 139776, 1
August 2002]
First Division, Austria-Martinez (J): 4 concur
Facts: On 20 June 1995, Eduardo, Celso and Ruben Z. Lumaniog, as
legitimate children and forced heirs of
their late father, Faustino Lumaniog, filed with the Regional Trial Court of
Libmanan, Camarines Sur, a
complaint for recovery of sum of money against the Philippine American Life
and General Insurance
Company (Philamlife) alleging that: their father was insured by Philamlife
under Life Insurance Policy
1305486 with a face value of P50,000.00; their father died of "coronary
thrombosis" on 25 November 1980;
on 22 June 1981, they claimed and continuously claimed for all the proceeds
and interests under the life
insurance policy in the amount of P641,000.00, despite repeated demands
for payment and/or settlement of
the claim due from Philamlife, the last of which is on 1 December 1994,
Philamlife finally refused or
Commercial Law – Insurance Law, 2006 ( 23 )
Narratives (Berne Guerrero)
disallowed said claim on 14 February 1995; and so, they filed their
complaint. Philamlife filed an Answer
with Counterclaim and Motion to Dismiss, contending that the cause of
action had prescribed and that the
Lumaniogs are guilty of laches; that it had denied the latter's claim in a
letter dated 12 March 1982, signed by
its then Assistant Vice President, Amado Dimalanta, on ground of
concealment on the part of the deceased
insured Faustino when he asserted in his application for insurance coverage
that he had not been treated for
indication of "chest pain, palpitation, high blood pressure, rheumatic fever,
heart murmur, heart attack or other
disorder of the heart or blood vessel" when in fact he was a known
hypertensive since 1974; that the
Lumaniogs sent a letter dated 25 May 1983 requesting for reconsideration
of the denial; in a letter dated 11
July 1983, it reiterated its decision to deny the claim for payment of the
proceeds; more than 10 years later, or
on 1 December 1994, it received a letter from Jose C. Claro, a provincial
board member of the province of
Camarines Sur, reiterating the early request for reconsideration which it
denied in a letter dated 14 February
1995. The Lumaniogs opposed the motion to dismiss. On 7 June 1996, the
RTC issued an Order as to the
necessity of trial on merits. Philamlife's motion for reconsideration was
denied by the RTC in its Order dated
22 December 1997 upholding however in the same Order the claim of the
Lumaniogs' counsel that the
running of the 10-year period was "stopped" on 25 May 1983 when they
requested for a reconsideration of the
denial and it was only on 14 February 1995 when Philamlife finally decided
to deny their claim that the 10-
year period began to run. Philamlife filed a petition for certiorari (CA-GR
47885) in the Court of Appeals and
after the comment of the Lumaniogs and reply of Philamlife, the appellate affirming its Order dated 20 June 1995. Said RTC was directed to proceed
court rendered its Decision, dated with dispatch with Civil Case L-
30 April 1999, dismissed the petition for lack of merit. Philamlife filed the 787.
petition for review on certiorari.
Issue: Whether the complaint filed by the Lumaniogs for payment of life
insurance proceeds is already barred
by prescription of action, or whether an extrajudicial demand made after an
action has prescribed shall cause
the revival of the action.
Held: NO DETERMINATION. Philamlife had specifically alleged in the Answer
that it had denied the
Lumaniogs' claim per its letter dated 11 July 1983. Hence, due process
demands that it be given the
opportunity to prove that the Lumaniogs had received said letter. Said letter
is crucial to Philamlife's defense
that the filing of the complaint for recovery of sum of money in June 1995 is
beyond the 10-year prescriptive
period. The RTC committed a grave abuse of discretion when, in resolving
the motion for reconsideration of
Philamlife, it arbitrarily ruled in its Order dated 12 December 1997, that the
period of 10 years had not yet
lapsed. It based its finding on a mere explanation of the Lumaniogs' counsel
and not on evidence presented by
the parties as to the date when to reckon the prescriptive period. The ruling
of the RTC that the cause of action
of the Lumaniogs had not prescribed, is arbitrary and patently erroneous for
not being founded on evidence on
record, and therefore, the same is void. Consequently, while the Court of
Appeals did not err in upholding the
7 June 1986 Order of the RTC, it committed a reversible error when it
declared that the RTC did not commit
any grave abuse of discretion in issuing the Order dated 12 December 1997.
The Supreme Court thus partially
granted the petition, setting aside the decision of the Court of Appeals
dated 30 April 1999 insofar only as it
upheld the RTC Order dated 12 December 1997. A new judgment was
entered reversing and setting aside the
Order dated 12 December 1997 of the Regional Trial Court of Libmanan,
Camarines Sur (Branch 56) and