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MANILA STEAMSHIP CO. v. INSA ABDULHAMAN

100 Phil 32 (1956)

Facts:

Insa Abdulhaman together with his wife and five children boarded M/L Consuelo
V in Zamboanga City. The said ship was bound for Siokon under the command of Faustino
Macrohon. On that same night, M/S Bowline Knot was navigating from Marijoboc
towards Zamboanga.

Around 9:30 to 10:00 in the evening of May 4, 1948, while some of the passengers
of the M/L Consuelo V were then sleeping and some lying down awake, a shocking
collision suddenly occurred. The ship that collided was later on identified as the M/V
Bowline Knot. M/L Consuelo V capsized that resulted to the death of 9 passengers and
the loss of the cargoes on board.

The Court ruled that the owners of both vessels are solidarily liable to
Abdulhaman for damages caused to the latter under Article 827 of the Code of
Commerce but exempted defendant Lim Hong To, owner of M/L Consuelo V, from
liability due to the sinking and total loss of his vessel. While Manila steamship, owner
of the Bowline Knot was ordered to pay all of plaintiff’s damages.

Petitioner Manila Steamship Co. pleads that it is exempt from any liability under
Article 1903 of the Civil Code because it had exercised the diligence of a good father
of a family in the selection of its employees, particularly the officer in command of the
M/S Bowline Knot.

Issue:

Whether or not petitioner Manila Steamship Co. is exempt from any liability
under Art. 1903 of the Civil Code?

Ruling:

The Supreme Court ruled in the negative. It held that Manila Steamship Co. is
not exempted from liabilities. While it is true that plaintiff’s action against petitioner
is based on a tort or quasi delict, the tort in question is not a civil tort under the Civil
Code but a maritime tort resulting in a collision at sea, governed by Articles 826-939 of
the Code of Commerce. Under Art. 827 of the Code of Commerce, in case of collision
between two vessels imputable to both of them, each vessel shall suffer her own
damage and both shall be solidarily liable for the damages occasioned to their cargoes.
The shipowner is directly and primarily responsible in tort resulting in a collision at sea,
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and it may not escape liability on the ground that exercised due diligence in the
selection and supervision of the vessel’s officers and crew.

WHEREFORE, petitioner Manila Steamship Co. is liable.

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ABOITIZ SHIPPING CORPORATION, vs. NEW INDIA ASSURANCE COMPANY, LTD.

488 SCRA 563 (2006)

Facts:

Textile cargo owned by General Textile was shipped to Manila using M/V P.
Aboitiz. Before departing, the vessel was advised that it was safe to travel to its
destination, but while at sea, the vessel received a report of a typhoon moving within
its path. It was at the edge of a typhoon when its hull leaker. The vessel sank, but the
captain and his crew were saved.

General Textile lodged a claim with respondent for the amount of its loss.
Respondent paid General Textile and was subrogated to the rights of the latter.

After investigation, it was found that the cause was the vessel’s
unsearworthiness. General Textile filed a complaint with Aboitiz and the trial court
consequently ruled in favor of the former.

Petitioner elevated the case to the Court of Appeals, which in turn, affirmed the
trial court’s decision. It moved for reconsideration but the same was denied. Hence,
this petition for review

Issue:

Whether or not the limited liability doctrine applies in this case

Ruling:

The Supreme Court ruled in the negative. It thus ruled that where the shipowner
fails to overcome the presumption of negligence, the doctrine of limited liability cannot
be applied.

From the nature of their business and for reasons of public policy, common
carriers are bound to observe extraordinary diligence over the goods they transport
according to all the circumstances of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers are responsible, unless they can
prove that the loss, destruction or deterioration was brought about by the causes
specified in Article 1734 of the Civil Code. In all other cases, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence. Moreover, where the vessel is found
unseaworthy, the shipowner is also presumed to be negligent since it is tasked with the
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maintenance of its vessel. Though this duty can be delegated, still, the shipowner must
exercise close supervision over its men.

In the present case, petitioner has the burden of showing that it exercised
extraordinary diligence in the transport of the goods it had on board in order to invoke
the limited liability doctrine. Differently put, to limit its liability to the amount of the
insurance proceeds, petitioner has the burden of proving that the unseaworthiness of
its vessel was not due to its fault or negligence.

Considering the evidence presented and the circumstances obtaining in this case,
we find that petitioner failed to discharge this burden. Both the trial and the appellate
courts, in this case, found that the sinking was not due to the typhoon but to its
unseaworthiness. Evidence on record showed that the weather was moderate when the
vessel sank. These factual findings of the Court of Appeals, affirming those of the trial
court are not to be disturbed on appeal, but must be accorded great weight. These
findings are conclusive not only on the parties but on this Court as well.
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RAFAEL ENRIQUEZ v. SUN LIFE ASSURANCE COMPANY OF CANADA

41 PHIL 269 (1920)

Facts:
On September 24, 1917, 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 immediately forwarded to the head office of the company
at Montreal, Canada. On November 26, 1917, the head office gave notice of acceptance
by cable to Manila. On December 4, 1917, the policy was issued at Montreal. On
December 18, 1917, attorney Aurelio A. Torres 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 of November 26, 1917. This letter was received by Mr.
Torres on the morning of December 21, 1917. Mr. Herrer died on December 20, 1917.

Issue:

Whether or not Herrer received notice of acceptance of his application and

thereby entitles his beneficiaries the right to receive the proceed of the insurance
policies.

Ruling:

The Supreme Court ruled in the negative. The contract for life annuity was not
perfected because it had not been proven with satisfaction that the acceptance of the
application ever came to the knowledge of the applicant. An acceptance of an offer of
insurance not\ actually or constructively communicated to the party proposing does not
make a contract of insurance, as the locus poenitentiae is ended when an acceptance
has passed beyond the control of the party.
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HILARIO GERCIO v. SUN LIFE ASSURANCE COMPANY of CANADA, ET AL.

48 PHIL 53 (1925)

Facts:

On January 29, 1910, the Sun Life Assurance Co. of Canada issued insurance
policy No. 161481 on the life of Hilario Gercio. The policy was what is known as a
twenty-year endowment policy. By its terms, the insurance company agreed to insure
the life of Hilario Gercio for the sum of P/2,000, to be paid him on February 1, 1930,
or if the insured should die before said date, then to his wife, Mrs. Andrea Zialcita,
should she survive him; otherwise to the executors, administrators, or assigns of the
insured. The policy also contained a schedule of reserves, amounts in cash, paid-up
policies, and renewed insurance, guaranteed. The policy did not include any provision
reserving to the insured the right to change the beneficiary.

On the date the policy was issued, Andrea Zialcita was the lawful wife of Hilario
Gercio. Towards the end of the year 1919, she was convicted of the crime of adultery.
On September 4, 1920, a decree of divorce was issued in civil case no. 17955, which
had the effect of completely dissolving the bonds of matrimony contracted by Hilario
Gercio and Andrea Zialcita.

On March 4, 1922, Hilario Gercio formally notified the Sun Life Assurance Co. of
Canada that he had revoked his donation in favor of Andrea Zialcita, and that he had
designated in her stead his present wife, Adela Garcia de Gercio, as the beneficiary of
the policy. Gercio requested the insurance company to eliminate Andrea Zialcita as
beneficiary. This, the insurance company has refused and still refuses to do.

Issue:

Whether or not the insured has the power to change the beneficiary and where
the policy of insurance does not expressly reserve to the insured the right to change
the beneficiary.

Ruling:

The Supreme Court ruled in the negative. It held that if the policy contains no
provision authorizing a change of beneficiary without the beneficiary’s consent, the
insured cannot make such change. It is held that a life insurance policy of a husband
made payable to his wife as a beneficiary is the separate property of the beneficiary
and beyond the control of the husband.

Moreover, we have gathered the rules which follow from the best considered
American authorities. In adopting these rules, we do so with the purpose of having the
Philippine Law of Insurance conform as nearly as possible to the modern Law of
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Insurance as found in the United States proper. It seems to be the settled doctrine,
with but slight dissent in the courts of this country, that a person who procures a policy
upon his own life, payable to a designated beneficiary, although he pays the premiums
himself, and keeps the policy in his exclusive possession, has no power to change the
beneficiary, unless the policy itself, or the charter of the insurance company, so
provides. In policy, although he has parted with nothing, and is simply the object of
another's bounty, has acquired a vested and irrevocable interest in the policy, which
he may keep alive for his own benefit by paying the premiums or assessments if the
person who effected the insurance fails or refuses to do so.

Thus, the Court is correct in ruling that the insured has no power to change the
beneficiary and where the policy of insurance does not expressly reserve to the insured
the right to change the beneficiary.
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ANG GIOK CHIP v. SPRINGFIELD FIRE AND MARINE INSURANCE COMPANY

52 PHIL 375 (1931)

Facts:

Ang Giok Chip Ang insured his warehouse for the total value of Php 60,000. One
of these, amounting to 10,000, was with Springfield Insurance Company. His warehouse
burned down, then he attempted to recover 8,000 from Springfield for the indemnity.
The insurance company interposed its defense on a rider in the policy in the form of
Warranty F, fixing the amount of hazardous good that can be stored in a building to be
covered by the insurance. They claimed that Ang violated the 3 percent limit by placing
hazardous goods to as high as 39 percent of all the goods stored in the building. His suit
to recover was granted by the trial court. Hence, this appeal.

Issue:

Whether a warranty referred to in the policy as forming part of the contract of

insurance and in the form of a rider to the insurance policy, is null and void because
not complying with the Philippine Insurance Act.

Ruling:

The Supreme Court ruled in the negative. Thus, the warranty is valid. And the
petition shall be dismissed.

In ruling so, the Court held that Section 65 of the Insurance Act, taken from
California law, states that:

"Every express warranty, made at or before the execution of a policy, must be

contained in the policy itself, or in another instrument signed by the insured and
referred to in the policy, as making a part of it."

Warranty F, indemnifying for a value of Php 20,000 and pasted on the left margin
of the policy stated:

It is hereby declared and agreed that during the currency of this policy no
hazardous goods be stored in the Building to which this insurance applies or in any
building communicating therewith, provided, always, however, that the Insured be
permitted to stored a small quantity of the hazardous goods specified below, but not
exceeding in all 3 per cent of the total value of the whole of the goods or merchandise
contained in said warehouse, viz; . . ..

Also, the court stated a book that said, “any express warranty or condition is
always a part of the policy, but, like any other part of an express contract, may be
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written in the margin, or contained in proposals or documents expressly referred to in

the policy, and so made a part of it."

“It is well settled that a rider attached to a policy is a part of the contract, to
the same extent and with like effect as it actually embodied therein. In the second
place, it is equally well settled that an express warranty must appear upon the face of
the policy, or be clearly incorporated therein and made a part thereof by explicit
reference, or by words clearly evidencing such intention.”

The court concluded that Warranty F is contained in the policy itself, because by
the contract of insurance agreed to by the parties it was made to be a part. It wasn’t
aseparate instrument agreed to by the parties.

The receipt of the policy by the insured without objection binds him. It was his
duty to read the policy and know its terms. He also never chose to accept a different
policy by considering the earlier one as a mistake. Hence, the rider is valid.
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SEGUNDINA MUSNGI v. WEST COAST LIFE INSURANCE COMPANY

61 PHIL 864 (1935)

Facts:

The plaintiffs, as beneficiaries, brought suit against the defendant company to

recover the value of two life insurance policies in the sums of P5,000.00 and P10,000.00,
respectively. The defendant appealed from a judgment sentencing it to pay the
plaintiffs the amount of said policies, and the costs.

In both applications, the insured had to answer inquiries as to his state of health
and that of his family, which he did voluntarily. These answers of the insured as well
as his other statements contained in his applications were one of the causes or
considerations for the issuance of the policies, and they so positively appear therein.
After the death of the insured and as a result of the demand made by the beneficiaries
upon the defendant to pay the value of the policies, the latter discovered that the
aforementioned answers were false and fraudulent, because the truth was that the
insured, before answering and signing the applications and before the issuance of the
policies, had been treated in the General Hospital by Doctor Pilar V. Cruz for different
ailments. The defendant contended at the outset that the two policies did not create
any valid obligation because they were fraudulently obtained by the insured. The
appealed decision holds that the health of the insured before the acceptance of his
applications and the issuance of the policies could neither be discussed nor questioned
by the defendant, because the insured was examined by three physicians of the
company and all of them unanimously certified that he was in good health and that he
could be properly insured.

Issue:

Whether or not the answers given by the insured in his applications are false,
and if they were the cause, or one of the causes, which induced the defendant to issue
the policies

Ruling:

The insured knew that he had suffered from a number of ailments before
subscribing the applications, yet he concealed them and omitted the hospital where he
was confined as well as the name of the lady physician who treated him. This
concealment and the false statements constituted fraud, because the defendant by
reason thereof accepted the risk which it would otherwise have flatly refused.

When not otherwise specially provided for by the Insurance Law, the contract of life
insurance is governed by the general rules of the civil law regarding contracts. Article
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1261 of the Civil Code provides that there is no contract unless there should be, in
addition to consent and a definite object, a consideration for the obligation established,
and Article 1276 provides that the statement of a false consideration shall render the
contract void.
The two answers being one of the considerations of the policies, and it appearing
that they are false and fraudulent, it is evident that the insurance contracts were null
and void and did not give rise to any right to recover their value or amount.
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VIRGINIA CALANOC v. CA and THE PHILIPPINE AMERICAN LIFE INSURANCE

G.R. No. L-8151, December 16, 1955

Facts:

Melencio Basilio was a watchman of the Manila Auto Supply located at the corner
of Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine
American Life Insurance Company in the amount of P2,000 to which was attached a
supplementary contract covering death by accident. On January 25, 1951, he died of a
gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at
the corner of Oroquieta and Zurbaran streets. Virginia Calanoc, the widow, was paid
the sum of P2,000, face value of the policy, but when she demanded the payment of
the additional sum of P2,000 representing the value of the supplemental policy, the
company refused alleging, as main defense, that the deceased died because he was
murdered by a person who took part in the commission of the robbery and while making
an arrest as an officer of the law which contingencies were expressly excluded in the
contract and have the effect of exempting the company from liability.

Issue:

Whether or not the death of the insured was a risk excluded by the
supplementary contract which exempts the company from liability.

Ruling:

The circumstance that he was a mere watchman and had no duty to heed the
call o should not be taken as a capricious desire on his part to expose his life to danger
considering the fact that the place he was in duty-bound to guard was only a block
away. In volunteering to extend help under the situation, he might have thought, rightly
or wrongly, that to know the truth was in the interest of his employer it being a matter
that affects the security of the neighborhood. No doubt there was some risk coming to
him in pursuing that errand, but that risk always existed it being inherent in the position
he was holding. He cannot therefore be blamed solely for doing what he believed was
in keeping with his duty as a watchman and as a citizen. He cannot be considered as
making an arrest as an officer of the law, as contended, simply because he went with
the traffic policeman, for certainly he did not go there for that purpose nor was he
asked to do so by the policeman.

It has been generally held that the "terms in an insurance policy, which are
ambiguous, equivacal, 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, especially where a forfeiture is
involved" and the reason for this rule is that he "insured usually has no voice in the
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selection or arrangement of the words employed and that the language of the contract
is selected with great care and deliberation by experts and legal advisers employed by,
and acting exclusively in the interest of, the insurance company."

Insurance is, in its nature, complex and difficult for the layman to understand.
Policies are prepared by experts who know and can anticipate the bearings and possible
complications of every contingency. So long as insurance companies insist upon the use
of ambiguous, intricate and technical provisions, which conceal rather than frankly
disclose, their own intentions, the courts must, in fairness to those who purchase
insurance, construe every ambiguity in favor of the insured. (Algoe vs. Pacific Mut. L.
Ins. Co., 91 Wash. 324, LRA 1917A, 1237.)
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QUA CHEE GAN v. LAW UNION and ROCK INSURANCE CO., LTD.
98 PHIL 85 (1955)

Facts:

Qua Chee Gan, Qua owned 4 warehouses used for the storage of copra and hemp.
They were insured with the Law Union. Fire broke out and destroyed 3 bodegas. The
plaintiff submitted claims totalling P398,562.81. The Insurance Company resisted
payment on the grounds that the fire had been deliberately caused by the insured or
by other persons in connivance with him.

Que Chee Gan and his brother were tried for arson, but were acquitted by the
trial court. As regards the insurance claim, the trial court ruled in favor of Qua and
entitled him to recover more than Php 300,000 for indemnities from the insurance
company. Hence, the company appealed to the SC.

In its first assignment of error, the insurance company alleged that the trial Court
should have held that the policies were avoided for breach of warranty. The contract
noted that fire hydrants were required in a particular measurement of space (every 150
feet). Hence, they argued that since the bodegas insured had an external wall
perimeter of 500 meters, the appellee should have 11 fire hydrants in the compound,
and that he actually had only 2, with a further pair.

Issues:

Whether or not the insurance company can void the policies it had issued

Whether or not the insured violated the "Hemp Warranty" provisions of the policy
against the storage of gasoline

Whether or not the insured planned the destruction of the bodega

Ruling:

In all the issues, the Supreme Court answered in the negative.

On the first issue, the Court held that the insurer, who at the time of issuance,
has knowledge of existing facts which would invalidate the contract from the beginning,
such constitutes a waiver of conditions in the contract inconsistent with the facts, and
the insurer is stopped thereafter from asserting the breach of such conditions. Also, an
insurance company intends to executed a valid contract in return for the premium
received; and when the policy contains a condition which renders it voidable at its
inception, and this result is known to the insurer, it will be presumed to have intended
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to waive the conditions and to execute a binding contract, rather than to have deceived
the insured into thinking he is insured when in fact he is not.

The appellant is barred estoppel to claim violation of the so-called fire hydrants
warranty, because it knew the number of hydrants demanded therein never existed
from the very beginning and issued the policies.

To allow a company to accept one's money for a policy of insurance which it then
knows to be void and of no effect, though it knows as it must, that the assured believes
it to be valid and binding, is so contrary to the dictates of honesty and fair dealing, and
so closely related to positive fraud, as to the abhorrent to fair-minded men.

The appellant company so worded the policies that while exacting the greater
number of fire hydrants and appliances, it kept the premium discount at the minimum
of 2 1/2%, thereby giving the insurance company a double benefit. Such abnormal
treatment of the insured strongly points at an abuse of the insurance company's
selection of the words and terms of the contract, over which it had absolute control.

Receipt of Premiums or Assessments after Cause for Forfeiture Other than

Nonpayment. — It is a well settled rule of law that an insurer which with knowledge of
facts entitling it to treat a policy as no longer in force, receives and accepts a premium
on the policy, estopped to take advantage of the forfeiture. It cannot treat the policy
as void for the purpose of defense to an action to recover for a loss thereafter occurring
and at the same time treat it as valid for the purpose of earning and collecting further
premiums.

Moreover, taking into account the well known rule that ambiguities or obscurities
must be strictly interpreted against the party that caused them, the "memo of warranty"
invoked by appellant bars the latter from questioning the existence of the appliances
called for in the insured premises.

On the second issue, the Court held that the ambiguity must be held strictly
against the insurer and liberally in favor of the insured, specially to avoid a forfeiture.
So long as insurance companies insist upon the use of ambiguous, intricate and technical
provisions, which conceal rather than frankly disclose, their own intentions, the courts
must, in fairness to those who purchase insurance, construe every ambiguity in favor of
the insured.

Appellee admitted that there were 36 cans of gasoline in the building designed.
It However, gasoline is not specifically mentioned among the prohibited articles listed
in the so-called "hemp warranty." The cause relied upon by the insurer speaks of "oils",
and is uncertain because, "Oils" usually mean "lubricants" and not gasoline or kerosene.
If the company intended to rely upon a condition of that character, it ought to
have been plainly expressed in the policy.
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The contract of insurance is one of perfect good faith not for the insured alone,
but equally so for the insurer; in fact, it is mere so for the latter, since its dominant
bargaining position carries with it stricter responsibility.

Also, the gasoline kept in Bodega No. 2 was only incidental to his business, being
no more than a customary 2 day's supply for the five or six motor vehicles used for
transporting of the stored merchandise. "It is well settled that the keeping of
inflammable oils on the premises though prohibited by the policy does not void it if such
keeping is incidental to the business."
On the third issue, it ruled that it was unlikely that Qua burned the warehouse
to defraud the company because he had the resources to pay off the National Bank in a
short time. Also, no motive appears for attempt to defraud the insurer. While the
acquittal of the insured in the arson case is not res judicata on the present civil action,
the insurer's evidence, to judge from the decision in the criminal case, is practically
identical in both cases and must lead to the same result, since the proof to establish
the defense of connivance at the fire in order to defraud the insurer "cannot be
materially less convincing than that required in order to convict the insured of the crime
of arson."

As to the defense that the burned bodegas could not possibly have contained the
quantities of copra and hemp stated in the fire claims, the insurer relied on its adjuster
investigator who examined the premises during and after the fire. His testimony,
however, was based on inferences from the photographs and traces found after the fire,
and must yield to the contradictory testimony of those who actually saw the contents
of the bodegas shortly before the fire, while inspecting them for the mortgagee Bank.
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SIMEON DEL ROSARIO v. THE EQUITABLE INSURANCE and CASUALTY CO., INC.
188 PHIL 349 (1963)

Facts:

On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc.,
issued Personal Accident Policy No. 7136 on the life of Francisco del Rosario, alias
Paquito Bolero, son of Simeon Del Rosario, binding itself to pay the sum of P1,000.00
to P3,000.00, as indemnity for the death of the insured. On February 24, 1957, the
insured Francisco del Rosario, alias Paquito Bolero, while on board the motor launch
"ISLAMA" together with 33 others, including his beneficiary in the Policy, Remedios
Jayme, were forced to jump off said launch on account of fire which broke out on said
vessel, resulting in the death of drowning, of the insured and beneficiary in the waters
of Jolo. On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole
heir, filed a claim for payment with defendant company, and on September 13, 1957,
defendant company paid to him (plaintiff) the sum of P1,000.00, pursuant to Section 1
of Part I of the policy. Defendant insurance company refused to pay more than
P1,000.00. Hence, a complaint for the recovery of the balance of P2,000.00 was
instituted. The trial court ruled in favour of Del Rosario.

Issue:

Whether or not the heir is entitled to recover the balance of P2,000.00

Ruling:

The Supreme Court ruled in the affirmative. It should be recalled in this

connection, that generally, the insured, has little, if any, participation in the
preparation of the policy, together with the drafting of its terms and Conditions. The
interpretation of obscure stipulations in a contract should not favor the party who cause
the obscurity (Art. 1377, N.C.C.), which, in the case at bar, is the insurance company.

The interpretation of obscure stipulations in a contract should not favor the party
who cause the obscurity.

“Ambigious terms in a policy are to be construed strictly against, the insurer,

and liberally in favor of the insured for the payment of indemnity where forfeiture is
involved. The company takes great care in the wording and has legal advisers who
create the contracts to the benefit of the company.

Trial court ruling are well considered because they are supported by doctrines
on insurance resolving cases against the party who caused the ambiguity in the wording
of the contract’s terms. This was also due to the fact that the insured didn’t have much
of a say in formulating the contract.
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MISAMIS LUMBER CORPORATION v. CAPITAL INSURANCE and SURETY CO., INC,

G.R. No. L-21380, May 20, 1966

Facts:

Plaintiff-appellee Misamis Lumber Corporation, under its former name, Lanao

Timber Mills, Inc., insured its Ford Falcon motor car for the amount of P14,000 with the
defendant-appellant,

Capital Insurance & Surety Company, Inc. At around eleven o'clock in the evening
of 25 November 1961, the insured car, while traveling along in Aurora Boulevard in front
of the PepsiCola plant in Quezon City, passed over a water hole which the driver did
not see because an oncoming car did not dim its light. The crankcase and flywheel
housing of the car broke when it hit a hollow block lying alongside the water hole. At
the instance of the plaintiff-appellee, the car was towed and repaired by Morosi Motors
at its shop at 1906 Taft Avenue Extension at a total cost of P302.27. On 29 November
1961, when the repairs on the car had already been made, the plaintiff-appellee made
a report of the accident to the defendant-appellant Capital Insurance & Surety
Company. Since the defendant-appellant refused to pay for the total cost of to wage
and repairs, suit was filed in the municipal court originally.

Issue:

Whether or not the insurance company liable for more than the amount in the
repair limit.

Ruling:

The Supreme Court ruled in the negative. It held that the insurance policy
stipulated in paragraph 4 that if the insured authorizes the repair the liability of the
insurer, per its sub-paragraph (a), is limited to P150.00. The literal meaning of this
stipulation must control, it being the actual contract, expressly and plainly provided
for in the policy. It will be observed that the policy drew out not only the limits of the
insurer's liability but also the mechanics that the insured had to follow to be entitled
to full indemnity of repairs. The option to undertake the repairs is accorded to the
insurance company per paragraph 2. The said company was deprived of the option
because the insured took it upon itself to have the repairs made, and only notified the
insurer when the repairs were done. As a consequence, paragraph 4, which limits the
company's liability to P150.00, applies. The insurance contract may be rather onerous
("one-sided", as the lower court put it), but that in itself does not justify the abrogation
of its express terms, terms which the insured accepted or adhered to and which is the
law between the contracting parties.
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DIOSDADO C. TY v. FIRST NATIONAL SURETY and ASSURANCE CO., INC.

1 SCRA 1324 (1961)

Facts:

At different times within a period of two months prior to December 24, 1953, the
plaintiff herein Diosdado C. Ty, employed as operator mechanic foreman in the
Broadway Cotton Factory, in Grace Park, Caloocan, Rizal, at a monthly salary of
P185.00, insured himself in 18 local insurance companies, among which being the eight
above named defendants, which issued to him personal accident policies, upon payment
of the premium of P8.12 for each policy. Plaintiff's beneficiary was his employer,
Broadway Cotton Factory, which paid the insurance premiums. On December 24, 1953,
a fire broke out which totally destroyed the Broadway Cotton Factory. Fighting his way
out of the factory, plaintiff was injured on the left hand by a heavy object. He was
brought to the Manila Central University hospital, and after receiving first aid there, he
went to the National Orthopedic Hospital for treatment of his injuries. Defendants
rejected plaintiff's claim for indemnity for the reason that there being no severance of
amputation of the left hand, the disability suffered by him was not covered by his
policy. Hence, plaintiff sued the defendants in the Municipal Court, and from the
decision of said Court dismissing his complaints, plaintiff appealed to this Court.

Issue:

Whether or not Ty can collect the sums even if there was no amputation

Ruling:

The Supreme Court ruled in the negative. It held that the insurance policies
clearly define loss of hand as amputation of the bones on the wrist. The injury was only
a “temporary total disability of plaintiff's left hand." This wasn’t covered by the
policies. While the court sympathize with the plaintiff or his employer, for whose
benefit the policies were issued, it cannot go beyond the clear and express conditions
of the insurance policies, all of which define partial disability as loss of either hand by
amputation through the bones of the wrist." There was no such amputation in the case
at bar. All that was found by the trial court, which is not disputed on appeal, was that
the physical injuries "caused temporary total disability of plaintiff's left hand."

Note that the disability of plaintiff's hand was merely temporary, having been
caused by fracture of the index, the middle and the fourth fingers of the left hand. The
agreement contained in the insurance policies is the law between the parties. As the
terms of the policies are clear, express and specific that only amputation of the left
hand should be considered as a loss thereof, an interpretation that would include the
mere fracture or other temporary disability not covered by the policies would certainly
be unwarranted.
 [Type here]

DIOSDADO C. TY v. FILIPINAS COMPANIA DE SEGUROS

17 SCRA 64 (1966)

Facts:
Plaintiff-appellant was an employee of Broadway Cotton Factory working as
mechanic-operator, with a monthly salary of P185.00. In the latter part of 1953, he
took Personal Accident Policies from several insurance companies, among which are
herein defendants-appellees, on different dates. During the effectivity of these
policies, or on December 24, 1953, a fire broke out in the factory where plaintiff was
working. As he was trying to put out said fire with the help of a fire extinguisher, a
heavy object fell upon his left hand. As the insurance companies refused to pay his
claim for compensation under the policies, by reason of the said disability of his left
hand, Ty filed actions in the Municipal Courts of Manila, which rendered favorable
decision. On appeal to the Court of First Instance by the insurance companies, the cases
were dismissed on the ground that under the uniform terms of the insurance policies,
partial disability of the insured caused by loss of either hand to be com pen sable, the
loss must result in the amputation of that hand.

Issue:
Whether or not the definition of what constitutes loss of hand ambiguous in the
insurance contract of plaintiff and defendant?

Ruling:
The Supreme Court ruled in the negative. It ruled that appellant himself has
already brought this matter to the attention of this Court in connection with the other
accident policies'-which he took and under which he had tried to collect indemnity, for
the identical injury that is the basis of the claims in these cases. The agreement
contained in the insurance policies is the law between the parties. As the terms of the
policies are clear, express and specific that only amputation of the left hand should be
considered as a loss thereof, an interpretation that would include- the mere fracture
or temporary disability not covered by the policies would certainly be unwarranted.
Plaintiff-appellant cannot come to the court and claim that he was misled by the terms
of the contract. The provision is clear enough to inform the party entering into that
contract that the loss to be considered a disability entitled to indemnity, must be
severance or amputation of that affected member from the body of the Insured. The
Supreme Court affirmed the decision of the Court of Appeals.