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BAUTISTA, Coleen Joyce Q.

INSURANCE: Sat 3-6; Sun 9-12

Lim v Sunlife G.R. No. L-15774 November 29, 1920 The general rule concerning the agent's receipt pending approval or issuance of
policy is in several points, according to Joyce:
J. Malcolm 2. Where an agreement is made between the applicant and the agent whether by
signing an application containing such condition, or otherwise, that no liability
Facts: shall attach until the principal approves the risk and a receipt is given buy the
Luis Lim of Zamboanga applied for a Sun Life policy for Php 5,000. He agent, such acceptance is merely conditional, and it subordinated to the act of
designated his wife, Pilar, as beneficiary. The first premium of P433 was paid by the company in approving or rejecting; so in life insurance a "binding slip" or
Lim, then the company issued a "provisional policy." Lim died after the issuance "binding receipt" does not insure of itself.
of the provisional policy but before approval of the application. The court held that this second point applied to the case.
Pilar brought an action to recover from Sun Life the sum of P5,000, the amount American jurisprudence tells us of such examples.
named in the provisional policy. She lost in the trial court hence this appeal. Steinle vs. New York Life Insurance Co.- the amount of the first premium had
The "provisional policy" reads as follows: been paid to an insurance agent and a receipt was given. The paper declared that
The above-mentioned life is to be assured in accordance with the terms and if the application was accepted by the company, the insurance shall take effect
conditions contained or inserted by the Company in the policy which may be from the date of the application but that if the application was not accepted, the
granted by it in this particular case for four months only from the date of money shall be returned. The court held that there was no perfection of the
the application, provided that the Company shall confirm this agreement by contract.
issuing a policy on said application when the same shall be submitted to Cooksey vs. Mutual Life Insurance Co.- the person applying for the life
the Head Office in Montreal. Should the Company not issue such a policy, then insurance paid and amount equal to the first premium, but the application and
this agreement shall be null and void ab initio, and the Company shall be held the receipt for the money paid, stipulated that the insurance was to become
not to have been on the risk at all, but in such case the amount herein effective only when the application was approved and the policy issued. There
acknowledged shall be returned. was also no perfection.
A binding receipt is a custom where temporary insurance pending the
Issue: WON there was a perfected contract of insurance consideration of the application was given until the policy be issued or
the application rejected, and such contracts are upheld and enforced when the
Held: No. Petition dismissed. applicant dies before the issuance of a policy or final rejection of the application.
However, there was no perfected contract because of the clause in
Ratio: the application and the receipt stipulate expressly that the insurance shall
The policy for four months is expressly made subjected to the affirmative become effective only when the "application shall be approved and the policy
condition that "the company shall confirm this agreement by issuing a policy on duly signed by the secretary at the head office of the company and issued." The
said application when the same shall be submitted to the head office in premium of 433 must be returned.
Should the company not issue such a policy, then this agreement shall be null Enriquez v Sunlife November 29, 1920 G.R. No. L-15895
and void ab initio, and the company shall be held not to have been on the risk."
This means that the agreement should not go into effect until the home office of Malcolm, J.:
the company should confirm it by issuing a policy. The provisional policy
amounts to nothing but an acknowledgment on behalf of the company, that it has Facts:
received from the person named therein the sum of money agreed upon as the This is an action brought by the plaintiff ad administrator of the estate of the late
first year's premium upon a policy to be issued upon the application, if Joaquin Ma. Herrer to recover from the defendant life insurance company the
the application is accepted by the company. sum of pesos 6,000 paid by the deceased for a life annuity. The trial court gave
There can be no contract of insurance unless the minds of the parties have met in judgment for the defendant. Plaintiff appeals.
agreement. In this case, the contract of insurance was not consummated by the Joaquin Herrer made application to the Sun Life Assurance Company of Canada
parties. 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.
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
The application was given to the head office in Canada. The oofice gave Civil code, if there be any, would be controlling. In the Civil Code is found
acceptance by cable on November 26, 1917. The policy was issued on December article 1262 providing that “Consent is shown by the concurrence of offer and
4. acceptance with respect to the thing and the consideration which are to constitute
The attorney, Mr. Torres then wrote to the Manila office of the company stating the contract. An acceptance made by letter shall not bind the person making the
that Herrer desired to withdraw his application. The following day the local offer except from the time it came to his knowledge. The contract, in such case,
office replied to Mr. Torres, stating that the policy had been issued, and called is presumed to have been entered into at the place where the offer was made.”
attention to the notification. This letter was received by Mr. Torres on the The Civil Code rule, that an acceptance made by letter shall bind the person
morning of December 21, 1917 and Mr. Herrer died on December 20, 1917. making the offer only from the date it came to his knowledge avoids uncertainty
(Whether on the same day the cable was received notice was sent by the Manila and tends to security.
office of Herrer that the application had been accepted, is a disputed point, Also, U.S. jurisprudence states that the courts who take this view have expressly
which will be discussed later.) 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
Issue: WON Herrer received notice of acceptance of his application. 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
Held: No. Judgment reversed. 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.
Ratio: Also, that according to the provisional receipt, three things had to be
Sunlife averred that that they prepared the letter on November 26, 1917, and accomplished by the insurance company before there was a contract: (1) There
handed it to the local manager for signature. The manager said that he received had to be a medical examination of the applicant; (2) there had to be approval of
the application November 26, 1917. He said that on the same day he signed a the application by the head office of the company; and (3) this approval had in
letter notifying Mr. Herrer of this acceptance. They said that these letters, after some way to be communicated by the company to the applicant. The further
being signed, were sent to the chief clerk and placed on the mailing desk for admitted facts are that the head office in Montreal did accept the application, did
transmission. The witness could not tell if the letter had every actually been cable the Manila office to that effect, did actually issue the policy and did
placed in the mails. actually write the letter of notification and place it in the usual channels for
The plaintiff’s attorney testified to having prepared Herrer’s will, and his client transmission to the addressee.
mentioned his application for a life annuity. He said that the only document The fact as to the letter of notification thus fails to concur with the essential
relating to the transaction in his possession was the provisional receipt. Rafael elements of the general rule pertaining to the mailing and delivery of mail matter
Enriquez, the administrator of the estate, testified that he had gone through the as announced by the American courts, namely, when a letter or other mail matter
effects of the deceased and had found no letter of notification from the is addressed and mailed with postage prepaid there is a rebuttable presumption
insurance company to Mr. Herrer. of fact that it was received by the addressee as soon as it could have been
Our deduction from the evidence on this issue must be that the letter of transmitted to him in the ordinary course of the mails. But if any one of these
November 26, 1917, notifying Mr. Herrer that his application had been accepted, elemental facts fails to appear, it is fatal to the presumption. For instance, a letter
prepared, and signed in the local office of the insurance company and was placed will not be presumed to have been received by the addressee unless it is shown
in the ordinary channels for transmission. But this was never actually mailed and that it was deposited in the post-office, properly addressed and stamped.
thus was never received by the applicant. The contract for a life annuity was not perfected because it has not been proved
The law that applies here is the Civil Code Art 1802, because the Insurance Act satisfactorily that the acceptance of the application ever came to the knowledge
is silent as to the methods followed to createa contract of insurance. Article of the applicant.
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. Perez v CA G.R. No. 112329. January 28, 2000
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 J. Ynares-Santiago
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 Facts:
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation Perez’s application was subject to the acceptance of private respondent BF
for P20,000.00. Sometime in October 1987, an agent of the insurance Lifeman Insurance Corporation. The perfection of the contract of insurance
corporation, visited Perez in Quezon and convinced him to apply for additional between the deceased and respondent corporation was further conditioned with
insurance coverage of P50,000.00. Virginia A. Perez, Primitivo’s wife, paid the following requisites stated in the application form:
P2,075.00 to the agent. The receipt issued indicated the amount received was a "there shall be no contract of insurance unless and until a policy is issued on
"deposit." Unfortunately, the agent lost the application form accomplished by this application and that the said policy shall not take effect until the premium
Perez and he asked the latter to fill up another application form. The agent sent has been paid and the policy delivered to and accepted by me/us in person while
the application for additional insurance of Perez to the Quezon office. Such was I/We, am/are in good health."
supposed to forwarded to the Manila office. BF Lifeman didn’t give its assent when it merely received the application
Perez drowned. His application papers for the additional insurance of form and all the requisite supporting papers of the applicant. This happens only
P50,000.00 were still with the Quezon. It was only after some time that when it gives a policy.
the papers were brought to Manila. Without knowing that Perez died, BF It is not disputed, however, that when Primitivo died on November 25, 1987,
Lifeman Insurance Corporation approved the application and issued the his application papers for additional insurance coverage were still with
corresponding policy for the P50,000.00. the branch office of respondent corporation in Quezon. Consequently, there was
Petitioner Virginia Perez went to Manila to claim the benefits under the absolutely no way the acceptance of the application could have been
insurance policies of the deceased. She was paid P40,000.00 under the first communicated to the applicant for the latter to accept inasmuch as the applicant
insurance policy for P20,000.00 but the insurance company refused to pay the at the time was already dead.
claim under the additional policy coverage of P50,000.00, the proceeds of which Petitioner insists that the condition imposed by BF that a policy must have been
amount to P150,000.00. delivered to and accepted by the proposed insured in good health is potestative,
The insurance company maintained that the insurance for P50,000.00 had not being dependent upon the will of the corporation and is therefore void. The court
been perfected at the time of the death of Primitivo Perez. Consequently, the didn’t agree. A potestative condition depends upon the exclusive will of one of
insurance company refunded the amount paid. the parties and is considered void. The Civil Code states: When the fulfillment
BF Lifeman Insurance Corporation filed a complaint against Virginia Perez of the condition depends upon the sole will of the debtor,
seeking the rescission and declaration of nullity of the insurance contract in the conditional obligation shall be void.
question. The following conditions were imposed by the respondent company for the
Petitioner Virginia A. Perez, on the other hand, averred that the deceased had perfection of the contract of insurance: a policy must have been issued, the
fulfilled all his prestations under the contract and all the elements of a valid premiums paid, and the policy must have been delivered to and accepted by the
contract are present. applicant while he is in good health.
On October 25, 1991, the trial court rendered a decision in favor of petitioner The third condition isn’t potestative, because the health of the applicant at the
ordering respondent to pay 150,000 pesos. The Court of Appeals, however, time of the delivery of the policy is beyond the control or will of the
reversed the decision of the trial court saying that the insurance contract for insurance company. Rather, the condition is a suspensive one whereby the
P50,000.00 could not have been perfected since at the time that the policy was acquisition of rights depends upon the happening of an event which constitutes
issued, Primitivo was already dead. the condition. In this case, the suspensive condition was the policy must have
Petitioner’s motion for reconsideration having been denied by respondent court, been delivered and accepted by the applicant while he is in good health. There
the instant petition for certiorari was filed on the ground that there was a was non-fulfillment of the condition, because the applicant was already dead at
consummated contract of insurance between the deceased and BF Lifeman the time the policy was issued.
Insurance Corporation. As stated above, a contract of insurance, like other contracts, must be assented to
by both parties either in person or by their agents. So long as an application for
Issue: WON the widow can receive the proceeds of the 2nd insurance policy insurance has not been either accepted or rejected, it is merely an offer or
proposal to make a contract. The contract, to be binding from the date
Held: No. Petition dismissed. of application, must have been a completed contract.
The insurance company wasn’t negligent because delay in acting on
Ratio: the application does not constitute acceptance even after payment. The
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
corporation may not be penalized for the delay in the processing of (1) that the sum of P139,500.00, which it paid under protest for the loan, be
the application papers due to the fact that process in a week wasn’t the usual reimbursed; (2) that the mortgage debt of the deceased be declared fully paid;
timeframe in fixing the application. Delay could not be deemed unreasonable so and (3) that damages be awarded.
as to constitute gross negligence. On March 10, 1990, the trial court rendered a decision in favor of
respondent Estate and against DBP. The DBP MRI Pool, however, was
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, absolved from liability, after the trial court found no privity of contract
vs. between it and the deceased. The trial court declared DBP in estoppel for
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, having led Dans into applying for MRI and actually collecting the premium and
represented by CANDIDA G. DANS, and the DBP MORTGAGE the service fee, despite knowledge of his age ineligibility.
REDEMPTION INSURANCE POOL, respondents. Issue: 1) Whether or not there is a contract made between DBP MRI Pool and
G.R. No. L-109937 March 21, 1994 the late Juan Dans;
QUIASON, J. 2) Whether or not DBP should be held liable.
Facts: In May 1987, Juan B. Dans, together with his wife Candida, his son Held: 1) No. When Dans applied for MRI, he filled up and personally signed a
and daughter-in-law, applied for a loan of P500,000.00 with the “Health Statement for DBP MRI Pool” (Exh. “5-Bank”) with the following
Development Bank of the Philippines (DBP), Basilan Branch. As the declaration:
principal mortgagor, Dans, then 76 years of age, was advised by DBP to I hereby declare and agree that all the statements and answers contained herein
obtain a mortgage redemption insurance (MRI) with the DBP Mortgage are true, complete and correct to the best of my knowledge and belief and form
Redemption Insurance Pool (DBP MRI Pool). part of my application for insurance. It is understood and agreed that no
A loan, in the reduced amount of P300,000.00, was approved by DBP on insurance coverage shall be effected unless and until this application is approved
August 4, 1987 and released on August 11, 1987. From the proceeds of the and the full premium is paid during my continued good health (Records, p. 40).
loan, DBP deducted the amount of P1,476.00 as payment for the MRI Under the aforementioned provisions, the MRI coverage shall take effect: (1)
premium. On August 15, 1987, Dans accomplished and submitted the “MRI when the application shall be approved by the insurance pool; and (2) when
Application for Insurance” and the “Health Statement for DBP MRI Pool.” the full premium is paid during the continued good health of the applicant.
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 These two conditions, being joined conjunctively, must concur.
percent, was credited by DBP to the savings account of the DBP MRI Pool. Undisputably, the power to approve MRI applications is lodged with the
Accordingly, the DBP MRI Pool was advised of the credit. DBP MRI Pool. The pool, however, did not approve the application of Dans.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, There is also no showing that it accepted the sum of P1,476.00, which DBP
relayed this information to the DBP MRI Pool. On September 23, 1987, the credited to its account with full knowledge that it was payment for Dan’s
DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, premium. There was, as a result, no perfected contract of insurance; hence, the
being over the acceptance age limit of 60 years at the time of application. DBP MRI Pool cannot be held liable on a contract that does not exist.
On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late 2) Yes. As an insurance agent, DBP made Dans go through the motion of
husband’s MRI application. The DBP offered to refund the premium of applying for said insurance, thereby leading him and his family to believe
P1,476.00 which the deceased had paid, but Candida Dans refused to accept the that they had already fulfilled all the requirements for the MRI and that the
same, demanding payment of the face value of the MRI or an amount equivalent issuance of their policy was forthcoming. Apparently, DBP had full
to the loan. She, likewise, refused to accept an ex gratia settlement of knowledge that Dan’s application was never going to be approved. The
P30,000.00, which the DBP later offered. maximum age for MRI acceptance is 60 years as clearly and specifically
On February 10, 1989, respondent Estate, through Candida Dans as provided in Article 1 of the Group Mortgage Redemption Insurance Policy
administratrix, filed a complaint with the Regional Trial Court, Branch I, signed in 1984 by all the insurance companies concerned (Exh. “1-Pool”).
Basilan, against DBP and the insurance pool for “Collection of Sum of Under Article 1987 of the Civil Code of the Philippines, “the agent who acts as
Money with Damages.” Respondent Estate alleged that Dans became such is not personally liable to the party with whom he contracts, unless he
insured by the DBP MRI Pool when DBP, with full knowledge of Dans’ age expressly binds himself or exceeds the limits of his authority without giving
at the time of application, required him to apply for MRI, and later such party sufficient notice of his powers.”
collected the insurance premium thereon. Respondent Estate therefore prayed:
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
The DBP’s liability, however, cannot be for the entire value of the insurance HELD:
policy. To assume that were it not for DBP’s concealment of the limits of its The decision of the lower court is modified to which, the moral damages is
authority, Dans would have secured an MRI from another insurance company, reduced to 10,000 and the award of exemplary damages is deleted
and therefore would have been fully insured by the time he died, is highly
speculative. Considering his advanced age, there is no absolute certainty In case of unreasonable delay in the payment of the proceeds of an insurance
that Dans could obtain an insurance coverage from another company. It policy, the damages that may be awarded are: 1) attorney's fees; 2) other
must also be noted that Dans died almost immediately, i.e., on the nineteenth expenses incurred by the insured person by reason of such unreasonable denial
day after applying for the MRI, and on the twenty-third day from the date of or withholding of payment; 3) interest at twice the ceiling prescribed by the
release of his loan. Monetary Board of the amount of the claim due the injured; and 4) the amount
One is entitled to an adequate compensation only for such pecuniary loss of the claim. (Insurance Code Sec. 244)
suffered by him as he has duly proved (Civil Code of the Philippines, Art.
2199). In awarding moral damages in case of breach of contract, there must be a
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV showing that the breach was wanton and deliberately injurious or the one
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to responsible acted fraudently or in bad faith.The act of petitioner of delaying
REIMBURSE respondent Estate of Juan B. Dans the amount of P1,476.00 with payment for two months cannot be considered as so wanton or malevolent to
legal interest from the date of the filing of the complaint until fully paid; and (2) justify an award of P20,000.00 as moral damages, taking into consideration the
to PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as moral actual damage. The reason for petitioner's failure to indemnify private
damages and the amount of Ten Thousand Pesos (P10,000.00) as attorney’s fees. respondent within the two-month period was that the parties could not come to
With costs against petitioner. an agreement as regards the amount of the actual damage on the car.
85296 May 14, 1990 On the other hand, exemplary or corrective damages are imposed by way of
example or correction for the public good (Art. 2229, NCC). In the case of Noda
FACTS: v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987; 151 SCRA 227, exemplary
On January 25, 1983, private respondent Lawrence Fernandez insured with the damages were not awarded as the insurance company had not acted in wanton,
insurer his car for "own damage". The car figured in an accident and suffered oppressive or malevolent manner. The same is true in the case at bar.
actual damages in the amount of P3,640.00. The insurer offered to pay the claim
of Fernandez pursuant to the terms and conditions of the contract which, the Insular v Ebrado G.R. No. L-44059 October 28, 1977
private respondent rejected. After allegedly being given a run around by Zenith
for two (2) months, Fernandez filed a complaint with the Regional Trial Court Facts:
for sum of money and damages resulting from the refusal of Zenith to pay the J. Martin:
amount claimed. Aside from actual damages and interests, Fernandez also Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for
prayed for moral damages in the amount of P10,000.00, exemplary damages of P5,882.00 with a rider for Accidental Death. He designated Carponia T. Ebrado
P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00. as the revocable beneficiary in his policy. He referred to her as his wife.
On June 4, 1986, a decision was rendered by the trial court ordered the insurance Cristor was killed when he was hit by a failing branch of a tree. Insular Life was
company to pay the insured the damage incurred plus interest at the rate of twice made liable to pay the coverage in the total amount of P11,745.73, representing
the prevailing interest rates, moral damages (20,000, that is twice the amount the face value of the policy in the amount of P5,882.00 plus the additional
the insured prayed for), exemplary damages, attorney's fees, litigation expenses benefits for accidental death.
and costs. The CA affiremed the decision of the trial court. Carponia T. Ebrado filed with the insurer a claim for the proceeds as the
designated beneficiary therein, although she admited that she and the insured
ISSUE: were merely living as husband and wife without the benefit of marriage.
Whether the insurer is liable to the insured for moral and exemplary damages as Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased
ordered by the trial court insured. She asserts that she is the one entitled to the insurance proceeds.

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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
Insular commenced an action for Interpleader before the trial court as to who The insured was married to Pascuala Ebrado with whom she has six legitimate
should be given the proceeds. The court declared Carponia as disqualified. children. He was also living in with his common-law wife with whom he has
two children.
Issue: WON a common-law wife named as beneficiary in the life insurance
policy of a legally married man can claim the proceeds in case of death of the 5. GULF RESORTS INC vs PHILIPPINE CHARTER INSURANCE
latter? CORPORATION (2005)

Held: No. Petition FACTS: 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
Ratio: property insured by this Policy occasioned by or through or in consequence of
Section 50 of the Insurance Act which provides that "the insurance shall be earthquake
applied exclusively to the proper interest of the person in whose name it is
made" July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the
The word "interest" highly suggests that the provision refers only to the properties and 2 swimming pools in its Agoo Playa Resort were damaged
"insured" and not to the beneficiary, since a contract of insurance is personal in
character. Otherwise, the prohibitory laws against illicit relationships especially August 23, 1990: Gulf's claim was denied on the ground that its insurance policy
on property and descent will be rendered nugatory, as the same could easily be only afforded earthquake shock coverage to the two swimming pools of the
circumvented by modes of insurance. resort
When not otherwise specifically provided for by the Insurance Law, the contract
of life insurance is governed by the general rules of the civil law regulating Petitioner insists that the parties have intended to extend the coverage
contracts. And under Article 2012 of the same Code, any person who is through the attachment of the phrase "Subject to: Other Insurance Clause,
forbidden from receiving any donation under Article 739 cannot be named Typhoon Endorsement, Earthquake Shock Endorsement, Extended
beneficiary of a fife insurance policy by the person who cannot make a donation Coverage Endorsement, FEA Warranty & Annual Payment Agreement on
to him. Common-law spouses are barred from receiving donations from each Long Term Policies" to the insurance policy.
Article 739 provides that void donations are those made between persons who ISSUE: Whether or not the insurance policy earthquake shock coverage extends
were guilty of adultery or concubinage at the time of donation. to other property aside from the two swimming pools.
There is every reason to hold that the bar in donations between legitimate
spouses and those between illegitimate ones should be enforced in life insurance HELD: NO. Petitioner cannot focus on the earthquake shock endorsement to the
policies since the same are based on similar consideration. So long as marriage exclusion of the other provisions. All the provisions and riders, taken and
remains the threshold of family laws, reason and morality dictate that the interpreted together, indubitably show the intention of the parties to extend
impediments imposed upon married couple should likewise be imposed upon earthquake shock coverage to the two swimming pools only.
extra-marital relationship.
A conviction for adultery or concubinage isn’t required exacted before the A careful examination of the premium recapitulation will show that it is the clear
disabilities mentioned in Article 739 may effectuate. The article says that in the intent of the parties to extend earthquake shock coverage only to the two
case referred to in No. 1, the action for declaration of nullity may be brought by swimming pools.
the spouse of the donor or donee; and the guilty of the donee may be proved by
preponderance of evidence in the same action. In the subject policy, no premium payments were made with regard to
The underscored clause neatly conveys that no criminal conviction for the earthquake shock coverage, except on the two swimming pools. There is no
offense is a condition precedent. The law plainly states that the guilt of the party mention of any premium payable for the other resort properties with regard to
may be proved “in the same acting for declaration of nullity of donation.” And, earthquake shock. This is consistent with the history of petitioner’s previous
it would be sufficient if evidence preponderates. insurance policies from AHAC-AIU.

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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
In sum, there is no ambiguity in the terms of the contract and its riders. PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF
Petitioner cannot rely on the general rule that insurance contracts are contracts of APPEALS, ERLINDA FABIE AND
adhesion which should be liberally construed in favor of the insured and strictly HER UNKNOWN DRIVER, respondents.
against the insurer company which usually prepares it. A contract of adhesion is
xxx FACTS:
On December 10, 1985, PANMALAY filed a complaint for damages with the
We cannot apply the general rule on contracts of adhesion to the case at RTC of Makati against private respondents Erlinda Fabie and her driver.
bar. Petitioner cannot claim it did not know the provisions of the policy. From PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car
the inception of the policy, petitioner had required the respondent to copy with plate No. DDZ-431 and registered in the name of Canlubang Automotive
verbatim the provisions and terms of its latest insurance policy from AHAC- Resources Corporation [CANLUBANG]; that on May 26, 1985, due to the
AIU. "carelessness, recklessness, and imprudence" of the unknown driver of a pick-up
with plate no. PCR-220, the insured car was hit and suffered damages in the
DOCTRINE: amount of P42,052.00; that PANMALAY defrayed the cost of repair of the
It is basic that all the provisions of the insurance policy should be examined and insured car and, therefore, was subrogated to the rights of CANLUBANG
interpreted in consonance with each other. All its parts are reflective of the true against the driver of the pick-up and his employer, Erlinda Fabie; and that,
intent of the parties. The policy cannot be construed piecemeal. Certain despite repeated demands, defendants, failed and refused to pay the claim of
stipulations cannot be segregated and then made to control; neither do particular PANMALAY. private respondents filed a Motion to Dismiss alleging that
words or phrases necessarily determine its character. PANMALAY had no cause of action against them. They argued that payment
under the "own damage" clause of the insurance policy precluded subrogation
Section 2(1) of the Insurance Code defines a contract of insurance as an under Article 2207 of the Civil Code, since indemnification thereunder was
agreement whereby one undertakes for a consideration to indemnify another made on the assumption that there was no wrongdoer or no third party at fault.
against loss, damage or liability arising from an unknown or contingent event.
Thus, an insurance contract exists where the following elements concur: DECISION OF LOWER COURTS:
1. The insured has an insurable interest; (1) Trial Court: dismissed for no cause of action PANMALAY's complaint for
2. The insured is subject to a risk of loss by the happening of the designated damages against private respondents Erlinda Fabie and her driver
peril; (2) CA: affirmed trial court.
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses
among a large group of persons bearing a similar risk; and ISSUE:
5. In consideration of the insurer's promise, the insured pays a premium. Whether or not the insurer PANMALAY may institute an action to recover the
An insurance premium is the consideration paid an insurer for undertaking to amount it had paid its assured in settlement of an insurance claim against private
indemnify the insured against a specified peril. In fire, casualty, and marine respondents as the parties allegedly responsible for the damage caused to the
insurance, the premium payable becomes a debt as soon as the risk attaches. insured vehicle.

A contract of adhesion is one wherein a party, usually a corporation, prepares the RULING:
stipulations in the contract, while the other party merely affixes his signature or PANMALAY is correct.
his "adhesion" thereto. Consequently, any ambiguity therein is resolved against Article 2207 of the Civil Code is founded on the well-settled principle of
the insurer, or construed liberally in favor of the insured. subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon payment to
Pan Malayan Insurance Corporation v CA (Insurance) the assured, will be subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay. Payment by
G.R. No. 81026 April 3, 1990 the insurer to the assured operates as an equitable that the insurer has been
obligated to pay. Payment by the insurer to the assured operates as an equitable
Page 7 of 21
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
or negligence of a third party. CANLUBANG is apparently of the same Thereafter, respondent company wrote Insurance Adjusters, Inc. to demand
understanding. Based on a police report assignment to the former of all remedies reimbursement from San Miguel Corporation of the amount it had paid
that the latter may have against the third party whose negligence or wrongful act petitioner. Insurance Adjusters, Inc. refused reimbursement, alleging that San
caused the loss. The right of subrogation is not dependent upon, nor does it grow Miguel Corporation had already paid petitioner P4,500.00 for the damages to
out of, any privity of contract or upon written assignment of claim. It accrues petitioner’s motor vehicle, as evidenced by a cash voucher and a Release of
simply upon payment of the insurance claim by the insurer. Claim executed by the General Manager of petitioner discharging San Miguel
The exceptions are: Corporation from "all actions, claims, demands the rights of action that now
(1) if the assured by his own act releases the wrongdoer or third party liable for exist or hereafter develop arising out of or as a consequence of the accident."
the loss or damage, from liability, the insurer's right of subrogation is defeated Respondent insurance company thus demanded from petitioner reimbursement
(2) where the insurer pays the assured the value of the lost goods without of the sum of P4,500.00 paid by San Miguel Corporation. Petitioner refused;
notifying the carrier who has in good faith settled the assured's claim for loss, the hence, the instant case.
settlement is binding on both the assured and the insurer, and the latter cannot ISSUE:
bring an action against the carrier on his right of subrogation Whether or not the respondent insurance company is subrogated to the rights of
(3) where the insurer pays the assured for a loss which is not a risk covered by the petitioner against San Miguel Corporation.
the policy, thereby effecting "voluntary payment", the former has no right of HELD:
subrogation against the third party liable for the loss YES
None of the exceptions are availing in the present case. RULING:
Also, even if under the above circumstances PANMALAY could not be deemed The Supreme Court held that if a property is insured and the owner receives the
subrogated to the rights of its assured under Article 2207 of the Civil Code, indemnity from the insurer, it is provided in [Article 2207 of the New Civil
PANMALAY would still have a cause of action against private respondents. In Code] that the insurer is deemed subrogated to the rights of the insured against
the pertinent case of Sveriges Angfartygs Assurans Forening v. Qua Chee Gan, the wrongdoer and if the amount paid by the insurer does not fully cover the
supra., the Court ruled that the insurer who may have no rights of subrogation loss, then the aggrieved party is the one entitled to recover the deficiency. Under
due to "voluntary" payment may nevertheless recover from the third party this legal provision, the real party in interest with regard to the portion of the
responsible for the damage to the insured property under Article 1236 of the indemnity paid is the insurer and not the insured.
Civil Code. Hence, petitioner is entitled to keep the sum of P4,500.00 paid by San Miguel
WHEREFORE, in view of the foregoing, the present petition is GRANTED. Corporation under its clear right to file a deficiency claim for damages incurred,
Petitioner's complaint for damages against private respondents is hereby against the wrongdoer, should the insurance company not fully pay for the injury
REINSTATED. Let the case be remanded to the lower court for trial on the caused (Article 2207, New Civil Code).
merits. However, when petitioner released San Miguel Corporation from any liability,
petitioner's right to retain the sum of P5,000.00 no longer existed, thereby
MANILA MAHOGANY MANUFACTURING CORPORATION vs. COURT entitling private respondent to recover the same.
OF APPEALS AND The right of subrogation can only exist after the insurer has paid the insured
ZENITH INSURANCE CORPORATION (G.R. No. L-52756 (October 12, otherwise the insured will be deprived of his right to full indemnity. If the
1987) insurance proceeds are not sufficient to cover the damages suffered by the
FACTS: insured, then he may sue the party responsible for the damage for the remainder.
Petitioner Manila Mahogany Manufacturing Corporation insured its Mercedes To the extent of the amount he has already received from, the insurer enjoys the
Benz 4-door sedan with respondent Zenith Insurance Corporation. The insured right of subrogation.
vehicle was bumped and damaged by a truck owned by San Miguel Corporation. Since the insurer can be subrogated to only such rights as the insured may have,
For the damage caused, respondent company paid petitioner five thousand pesos should the insured, after receiving payment from the insurer, release the
(P5,000.00) in amicable settlement. Petitioner's general manager executed a wrongdoer who caused the loss, the insurer loses his rights against the latter. But
Release of Claim, subrogating respondent company to all its right to action in such a case, the insurer will be entitled to recover from the insured whatever
against San Miguel Corporation. it has paid to the latter, unless the release was made with the consent of the
Page 8 of 21
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
HELD: petition granted. Assailed decision reversed insofar as it pertains to
G.R. No. 150094 August 18, 2004 Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has
FACTS: Shipper SMITHKLINE USA delivered to carrier Burlington Air tirelessly pointed out that respondents’ claim and right of action are already
Express (BURLINGTON), an agent of [Petitioner] Federal Express Corporation, barred. Indeed, this fact has never been denied by respondents and is plainly
a shipment of 109 cartons of veterinary biologicals for delivery to consignee evident from the records.
SMITHKLINE and French Overseas Company in Makati City. The shipment Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
was covered by Burlington Airway Bill No. 11263825 with the words, “6. No action shall be maintained in the case of damage to or partial loss of
‘REFRIGERATE WHEN NOT IN TRANSIT’ and ‘PERISHABLE’ stamp the shipment unless a written notice, sufficiently describing the goods
marked on its face. That same day, Burlington insured the cargoes with concerned, the approximate date of the damage or loss, and the details of the
American Home Assurance Company (AHAC). The following day, Burlington claim, is presented by shipper or consignee to an office of Burlington within (14)
turned over the custody of said cargoes to FEDEX which transported the same to days from the date the goods are placed at the disposal of the person entitled to
Manila. delivery, or in the case of total loss (including non-delivery) unless presented
The shipments arrived in Manila and was immediately stored at [Cargohaus within (120) days from the date of issue of the [Airway Bill]. xxx
Inc.’s] warehouse. Prior to the arrival of the cargoes, FEDEX informed GETC Relevantly, petitioner’s airway bill states:
Cargo International Corporation, the customs broker hired by the consignee to “12./12.1 The person entitled to delivery must make a complaint to the carrier
facilitate the release of its cargoes from the Bureau of Customs, of the in writing in the case:
impending arrival of its client’s cargoes. 12.1.1 of visible damage to the goods, immediately after discovery of the
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed damage and at the latest within fourteen (14) days from receipt of the
custom’s broker who was assigned by GETC, found out, while he was about to goods; xxx
cause the release of the said cargoes, that the same [were] stored only in a room Article 26 of the Warsaw Convention, on the other hand, provides:
with 2 air conditioners running, to cool the place instead of a Xxx (2) In case of damage, the person entitled to delivery must complain to
refrigerator. DIONEDA, upon instructions from GETC, did not proceed with the carrier forthwith after the discovery of the damage, and, at the latest, within 3
the withdrawal of the vaccines and instead, samples of the same were taken and days from the date of receipt in the case of baggage and 7 days from the date of
brought to the Bureau of Animal Industry of the Department of Agriculture in receipt in the case of goods. xx
the Philippines by SMITHKLINE for examination wherein it was discovered (3) Every complaint must be made in writing upon the document of
that the ‘ELISA reading of vaccinates sera are below the positive reference transportation or by separate notice in writing dispatched within the times
serum.’ aforesaid.
As a consequence of the foregoing result of the veterinary biologics test, (4) Failing complaint within the times aforesaid, no action shall lie against the
SMITHKLINE abandoned the shipment and, declaring ‘total loss’ for the carrier, save in the case of fraud on his part.” xxx
unusable shipment, filed a claim with AHAC through its representative in the Condition Precedent
Philippines, the Philam Insurance Co., Inc. (PHILAM) which recompensed In this jurisdiction, the filing of a claim with the carrier within the time
SMITHKLINE for the whole insured amount. Thereafter, PHILAM filed an limitation therefor actually constitutes a condition precedent to the accrual of a
action for damages against the FEDEX imputing negligence on either or both of right of action against a carrier for loss of or damage to the goods. The shipper
them in the handling of the cargo. or consignee must allege and prove the fulfillment of the condition. If it fails to
Trial ensued and ultimately concluded with the FEDEX being held solidarily do so, no right of action against the carrier can accrue in favor of the
liable for the loss. Aggrieved, petitioner appealed to the CA. The appellate court former. The aforementioned requirement is a reasonable condition precedent; it
ruled in favor of PHILAM and held that the shipping Receipts were a prima does not constitute a limitation of action.
facie proof that the goods had indeed been delivered to the carrier in good The requirement of giving notice of loss of or injury to the goods is not an empty
condition. formalism. The fundamental reasons for such a stipulation are (1) to inform the
ISSUE: Is FEDEX liable for damage to or loss of the insured goods 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
Page 9 of 21
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
extent of the injury. “This protects the carrier by affording it an opportunity to 1,569,429 kilos were discharged. Because of the alleged confirmed cargo
make an investigation of a claim while the matter is fresh and easily investigated shortage, the Polish cargo insurers had to indemnify the consignee for the value
so as to safeguard itself from false and fraudulent claims. thereof. Thereafter, the former sued the shipowner, the Swedish East Asia
NOTES: as to proper payee: Company, in Gothenburg, Sweden. The latter, in turn sued, defendant and had it
The Certificate specifies that loss of or damage to the insured cargo is “payable summoned to Gothenburg. A settlement was effected between the Polish cargo
to order x x x upon surrender of this Certificate.” Such wording conveys the insurers and the shipowner. Plaintiff, as the indemnity insurer for the latter, paid
right of collecting on any such damage or loss, as fully as if the property were approximately $60,733.53 to the Polish insurers. Claiming to have been
covered by a special policy in the name of the holder itself. At the back of the subrogated to the rights of the carrier, plaintiff sued defendant before the CFI of
Certificate appears the signature of the representative of Burlington. This Manila to recover U.S. $60,733.53 plus 17% exchange tax, with legal interest, as
document has thus been duly indorsed in blank and is deemed a bearer the value of the alleged cargo short shipment. Defendant filed a motion to
instrument. dismiss on the ground of prescription under the Carriage of Goods by Sea Act.
Since the Certificate was in the possession of Smithkline, the latter had the right The lower court ruled that plaintiff's insurance policy did not cover the short
of collecting or of being indemnified for loss of or damage to the insured shipment, reasoning that unless the same — as the best evidence — were
shipment, as fully as if the property were covered by a special policy in the name presented, it could not be conclusively determined if "liability for short
of the holder. Hence, being the holder of the Certificate and having an insurable shipment" was a covered risk.
interest in the goods, Smithkline was the proper payee of the insurance proceeds.
ISSUE: WON plaintiff is subrogated to the rights of the carrier.
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a RULING: NO. [T]he rule is that an insurer who pays the insured for loss or
subrogation Receipt in favor of respondents. The latter were thus authorized “to liability not covered by the policy is not subrogated to the latter. However, even
file claims and begin suit against any such carrier, vessel, person, corporation or assuming that there was unwarranted — or "volunteer" — payment, plaintiff
government.” Undeniably, the consignee had a legal right to receive the goods in could still recover what it paid — in effect — to the carrier from defendant
the same condition it was delivered for transport to petitioner. If that right was shipper under Art. 1236 of the Civil Code which allows a third person who pays
violated, the consignee would have a cause of action against the person on behalf of another to recover from the latter, although there is no subrogation.
responsible therefor. But since the payment here was without the knowledge and consent of
defendant, plaintiff's right of recovery is defeasible by the former's defenses
SVERIGES ANGFARTYGS ASSURANS FORENIN vs. GAN (1967). –Olive since the Code is clear that the recovery is only up to the amount by which the
Cachapero defendant was benefited.
Topic: Subrogation Article 2027, Civil Code
DOCTRINE: [A]n insurer who pays the insured for loss or liability not covered Topic: Subrogation (Art. 2027 NCC)
by the policy is not subrogated to the latter. However, even assuming that there
was unwarranted — or "volunteer" — payment, plaintiff could still recover what DOCTRINE: Insurer after paying the claim of the insured for damages under the
it paid — in effect — to the carrier from defendant shipper under Art. 1236 of insurance is subrogated merely to the rights of the insured and therefore can
the Civil Code which allows a third person who pays on behalf of another to necessarily recover only that to what was recoverable by the insured.
recover from the latter, although there is no subrogation.
FACTS: On or about November 29, 1960, the vessel, SS Flying trader, loaded
FACTS: Defendant Qua Chee Gan shipped on board the S.S. NAGARA, as per on board at Genoa, Italy for shipment to Manila, among other cargoes, 6 cases
bills of lading Exhs. A and B, 2,032,000 kilos of bulk copra at Siain, Quezon, OMH Special Single Colour Offset Press machine, for which Bill of Lading No.
consigned to DAL International Trading Co., in Gdynia, Poland. The vessel first 1 was issued, consigned to Suter, Inc. On or about January 16, 1961, the vessel
called at the port of Karlshamn, Sweden, where it unloaded 969,419 kilos of arrived in Manila and subsequently discharged complete and in good order the
bulk copra. Then, it proceeded to Gdynia where it unloaded the remaining copra aforementioned shipment into the custody of defendant Manila Port Service as
shipment. The actual outturn weights in the latter port showed that only arrastre operator. While one of the six cases was being lifted and loaded by the
Page 10 of 21
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
crane of Manila Port Service into the consignee’s truck, it was dropped by the FACTS: United Coconut Chemicals, Inc. shipped 404.774 metric tons of
crane and as a consequence the machine was heavily damaged. The plaintiff, as distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by
the insurer, paid the consignee the amount of P16,500 representing damages by Stolt-Nielsen Philippines Inc. , from Bauan, Batangas, Philippines, consigned to
way of costs of replacement parts and repairs to put the machine on a working "Nieuwe Matex" at Rotterdam, Netherlands, covered by Tanker Bill of Lading
condition. The plaintiff also paid P16,680.70 to the International Adjustment BL No. BAT-1. The shipment was insured under a marine cargo policy with
Bureau as adjuster’s fee. Petitioner National Union Fire Insurance Company of Pittsburg, a non-life
The paragraph 15 of the management contract between the Bureau of Customs American insurance corporation, through its settling agent in the Philippines, the
and Manila Port Service states that the Company’s liability is limited to P500.00 American International Underwriters (Philippines), Inc. A Bill of Lading was
per package unless the value of the goods is otherwise, specified, declared or present , containing a general statement of incorporation of the terms of a
manifested and the corresponding arrastre has been paid. The lower court Charter Party between the Shipper, namely, United Coconut Chemicals Inc., and
ordered the defendants, jointly and severally to pay the plaintiff the amount of Parcel Tankers, Inc., entered into in Greenwich, Connecticut, U.S.A. Upon
P500.00. on appeal, it was stated that the plaintiff could recover in full based on receipt of the goods in Netherlands, they were found to be discolored. The
Article 2207 of the Civil Code. insurer indemnified the shipper because of this. As a subrogee of the shipper, the
insurer filed suit against the carrier, Stolt-Nielsen. The latter moved to dismiss
ISSUE: Whether or not the insurance company can collect more than what was the case, as they claim it is an arbitrable one, the Bill of Lading being its basis
stipulated in the Management Contract? which contained provisions relating to a Charter Party. The RTC deferred the
motion, and the appellate court reversed the RTC, and ordered the case for
RULING: No. The literal language of Article 2207, however, does not warrant arbitration.
such an interpretation. It is there made clear that in the event that the property
has been insured and the Insurance Company has paid the indemnity for the ISSUE: WON the claim of the insurer against the carrier is an arbitrable one.
injury or loss sustained, it "shall be subrogated to the rights of the insured
against the wrong-doer or the person who has violated the contract." Plaintiff- RULING: We hold, therefore, that the INSURER cannot avoid the binding
appellant Insurance Company, therefore, cannot recover from defendants an effect of the arbitration clause. By subrogation, it became privy to the Charter
amount greater than that to which the consignee could lawfully lay claim. The Party as fully as the SHIPPER before the latter was indemnified, because as
management contract is clear. The amount is limited to Five Hundred Pesos subrogee it stepped into the shoes of the SHIPPER-ASSURED and is subrogated
(P500.00). Plaintiff-appellant Rizal Surety and Insurance Company, having been merely to the latter's rights. It can recover only the amount that is recoverable by
subrogated merely to the rights of the consignee, its recovery necessarily should the assured. And since the right of action of the SHIPPER-ASSURED is
be limited to what was recoverable by the insured. The lower court therefore did governed by the provisions of the Bill of Lading, which includes by reference
not err when in the decision appealed from, it limited the amount which the terms of the Charter Party, necessarily, a suit by the INSURER is subject to
defendants were jointly and severally to pay plaintiff-appellants to "Five the same agreements
Hundred Pesos (P500.00) with legal interest thereon from January 31, 1962, the
date of the filing of the complaint, . . . ." DISPOSITIVE: Yes, the case is an arbitrable one, Stolt-Nielsen wins the case, as
DISPOSITIVE: The Decision appealed from is affirmed it cannot escape liability arising from the Charter Party Provisions included in
the Bill of Lading as it is a subrogee of the rights of the shipper.
Patrick Mendoza Topic: Subrogation ST. PAUL FIRE & MARINE INSURANCE CO. VS. MACONDRAY & CO.,
INC. (1976) Author: Carlo Guevara Topic: Subrogation, Article 2027 Civil
DOCTRINE:: By subrogation, it became privy to the Charter Party as fully as Code.
the SHIPPER before the latter was indemnified, because as subrogee it stepped
into the shoes of the SHIPPER-ASSURED and is subrogated merely to the DOCTRINE: Insurance carrier is subrogated merely to rights of the assured and
latter's rights. It can recover only the amount that is recoverable by the assured. can recover from common carrier only the amount recoverable by the latter.

Page 11 of 21
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
FACTS: Winthrop Products, Inc., of U.S.A., shipped aboard the SS "Tai Ping", ISSUE: WON the insurance carrier can recover the said amount claimed.
owned and operated by Wilhelm Wilhelmsen, 218 cartons and drums of drugs
and medicine, with the freight prepaid, which were consigned to Winthrop- RULING: YES, the plaintiff-appellant, as insurer, after paying the claim of the
Stearns Inc., Manila, Philippines. The shipment was insured by the shipper insured for damages under the insurance, is subrogated merely to the rights of
against loss and/or damage with the St. Paul Fire & Marine Insurance Company. the assured. As subrogee, it can recover only the amount that is recoverable by
The SS "Tai Ping" arrived at the Port of Manila and discharged its shipment into the latter. Since the right of the assured, in case of loss or damage to the goods,
the custody of Manila Port Service, the arrastre contractor for the Port of Manila. is limited or restricted by the provisions in the bill of lading, a suit by the insurer
The said shipment was discharged complete and in good order with the as subrogee necessarily is subject to like limitations and restrictions.
exception of one (1) drum and several cartons which were in bad order
condition. Hence, the consignee filed a claim in the amount of P1,109.67 DISPOSITIVE: Respondent Won. Decision is affirmed.
representing the C.I.F. value of the damaged drum and cartons of medicine with
the carrier, herein defendants-appellees and the Manila Port Service. Both CEBU SHIPYARD V. WILLIAM LINES, INC. Author: Geloace Topic:
refused to pay the claim. Consequently, the consignee filed its claim with the Subrogation
insurer, St. Paul Fire & Marine Insurance Co., and the insurance company, on
the basis of such claim, paid to the consignee the insured value of the lost and DOCTRINE: When the insurer, after due verification of the merit and validity of
damaged goods, including other expenses in connection therewith, in the total the insurance claim of the assured, pays the latter the total amount covered by its
amount of $1,134.46 As subrogee of the rights of the shipper and/or consignee, insurance policy, it becomes subrogated to the right of the latter to recover the
the insurer, St. Paul Fire & Marine Insurance Co., instituted with the CFI the insured loss from the liable party.
present action against the defendants for the recovery of said amount plus costs.
Defendants resisted the action, contending that the whole cargo was delivered to FACTS:
the consignee in the same condition in which it was received from the carrying 1. Cebu Shipyard is a domestic corporation engaged in the business of dry-
vessel; that their rights, duties and obligations as arrastre contractor at the Port of docking and repairing of marine vessels while the private respondent
Manila are governed by and subject to the terms, conditions and limitations Prudential, a domestic corporation, is in the business of non-life insurance.
contained in the Management Contract between the Bureau of Customs and 2. William Lines, Inc. is in the shipping business. It was the owner of M/V
Manila Port Service, and their liability is limited to the invoice value of the Manila City, a luxury passenger-cargo vessel, which caught fire and sank.
goods, but in no case more than P500.00 per package, pursuant to the said At the time of the accident, the vessel as insured with Prudential for P45M.
Management Contract; and that they are not the agents of the carrying vessel in 3. Petitioner was also insured by Prudential for 3rd party liability under a Ship
the receipt and delivery of cargoes in the Port of Manila. The defendants repairer’s Legal Liability for Insurance Policy, such was for P10M.
Macondray & Co., Inc., Barber Steamship Lines, Inc. and Wilhelm Wilhelmsen William Lines, Inc. brought its vessel to the Cebu Shipyard for annual dry-
also contested the claim alleging that if any damage was sustained by the docking and repair. After the subject vessel was transferred to the docking
shipment while it was under the control of the vessel, such damage was caused quay, it caught fire and sank resulting to its loss.
by insufficiency of packing, force majeure and/or perils of the sea, and that they, 4. William Lines, Inc. filed a complaint for damages against petitioner
in good faith and for the purpose only of avoiding litigation without admitting alleging that the fire which broke out was the result of CSEW’s negligence
liability to the consignee, offered to settle the latter's claim in full by paying the and lack of care. An amended complaint was filed impleading Prudential as
corresponding C.I.F. value, but their offer was declined by the consignee and/or co-plaintiff after the latter had paid William Lines, Inc. the value of the hull
the plaintiff. The lower court rendered judgment ordering the defendants to pay and machinery insurance on the M/V Manila City. As a result of the
to the plaintiff, jointly and severally. Plaintiff-appellant argues that, as subrogee payment, Prudential was subrogated to the claim of P45 million,
of the consignee, it should be entitled to recover from the defendants appellees representing the value of the insurance it paid.
the amount of $1,134.46 which it actually paid to the consignee and which 5. The trial court issued a decision against petitioner Cebu Shipyards. The
represents the value of the lost and damaged shipment as well as other legitimate Court of Appeals affirmed the said decision.
expenses. Defendants appellees are not insurers of the goods, and as such they 6. Petitioner claims that Prudential is not entitled to be subrogated to the
should not be made to pay the insured value. rights of William Lines, Inc. theorizing that (1) the fire which gutted M/V

Page 12 of 21
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
Manila City was an excluded risk (2) it is a co-assured under the Marine 3. Later on Firestone’s properties valued at P11,925 were allegedly lost due to
Hull Insurance Policy. the acts of its employees who connived with Jamila’s security guard
4. Fireman’s Fund, as insurer paid to Firestone the amount of the loss and
ISSUE: WON Prudential was subrogated to the rights of William Lines, Inc. Fireman’s Fund was subrogated to Firestone’s right to get reimbursement
upon its payment of the total amount covered in the insurance policy. from Jamila. Jamila and its surety (First Quezon Insurance) failed to pay the
amount of the loss.
RULING: YES. Clause 20 of the Work Order in question is clear in the sense 5. Fireman invoked Article 2207, as the insurer Fireman’s Fund is entitled to
that it requires William Lines to maintain insurance on the vessel during the go after the person or entity that violated its contractual commitment to
period of dry-docking or repair. Concededly, such a stipulation works to the answer for the loss insured against.
benefit of CSEW as the ship repairer. However, the fact that CSEW benefits 6. Jamila contends that it did not consent to the subrogation of Fireman’s Fund
from the said stipulation does not automatically make it as a co-assured of to Firestone’s right to get reimbursement from Jamila and its surety. Further
William Lines. The intention of the parties to make each other a co-assured arguing that legal subrogation under Art 2207 of the Civil Code requires the
under an insurance policy is to be gleaned principally from the insurance debtor’s consent and that according to Art 1302, the instant case is not
contract or policy itself and not from any other contract or agreement because among the cases mentioned when legal subrogation can take place.
the insurance policy denominates the assured and the beneficiaries of the
insurance. The hull and machinery insurance procured by William Lines, Inc. ISSUE: WON Fireman’s Fund can subrogate to the rights of Jamilia?
from Prudential named only "William Lines, Inc." as the assured. There was no
manifestation of any intention of William Lines, Inc. to constitute CSEW as a RULING: YES! Article 2207 is a restatement of a settled principle of American
co-assured under subject policy. It is axiomatic that when the terms of a contract jurisprudence. Subrogation has been referred to as the doctrine of substitution. It
are clear its stipulations control. Thus, when the insurance policy involved „is an arm of equity that may guide or even force one to pay a debt for which an
named only William Lines, Inc. as the assured thereunder, the claim of CSEW obligation was incurred but which was in whole or in part paid by another.
that it is a co-assured is unfounded. Subrogation is founded on principles of justice and equity, and its operation is
governed by principles of equity. It rests on the principle that substantial justice
DISPOSITIVE: Petition was denied and petitioner was not allowed to limit its should be attained regardless of form, that is, its basis is the doing of complete,
liability based on the contract. essential, and perfect justice between all the parties without regard to form.
Subrogation is a normal incident of indemnity insurance. Upon payment of the
FIREMAN’S FUND INSURANCE COMPANY AND THE FIRESTONE TIRE loss, the insurer is entitled to be subrogated pro tanto to any right of action
AND RUBBER COMPANY OF THE PHILIPPINES v JAMILA & COMPANY which the insured may have against the third person whose negligence or
- Rebecca Flores Topic: Subrogation wrongful act caused the loss When the insurance company pays for the loss,
such payment operates as an equitable assignment to the insurer of the property
DOCTRINE: When the insurance company pays for the loss, such payment and all remedies which the insured may have for the recovery thereof. That right
operates as an equitable assignment to the insurer of the property and all is not dependent upon, nor does it grow out of, any privity of contract, or upon
remedies which the insured may have for the recovery thereof. That right is not written assignment of claim, and payment to the insured makes the insurer an
dependent upon, nor does it grow out of, any privity of contract, or upon written assignee in equity
assignment of claim, and payment to the insured makes the insurer an assignee
in equity. DIPOSITIVE: Costs against Jamila. Fireman Fund won!

FACTS F.F. Cruz v CA – Dennis Reyes Topic: Subrogation

1. Jamila/Veterans PH Scouts Security Agency contracted to supply security
guards to Firestone. Jamila assumed responsibility for the acts of its security DOCTRINE: in Article 2207. Upon payment of the loss incurred by the insured,
guards. the insurer is entitled to be subrogated pro tanto to any right of action which the
2. First Quezon City Insurance executed a bond for P20K to guarantee insured may have against the third person whose negligence or wrongful act
Jamila’s obligation under that contract. caused the loss.
Page 13 of 21
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
2. Petitioner sent to Macleod's private wharf LCT Nos. 1023 and 1025 which
FACTS: The furniture manufacturing shop of petitioner was situated adjacent to was manned by a patron to Get the cargo.
the residence of private respondents. Private respondent, Gregorio Mable, first 3. They issued a receipt which show that they have transported the cargo from
approached the petitioner's plant manager to request that a firewall be Davao to Manila for further transshipment to U,S,A.
constructed between the shop and private respondents' residence. The request
was repeated several times but they fell on deaf ears. A fire broke out in 4. One of the barge was sank resulting in the loss and damages of its cargo.
petitioner's shop. Petitioner's employees tried to put out the fire, but their efforts
proved futile. The fire spread to private respondents' house. Both the shop and 5. Macloud filed its claim of insurance which was paid by the insurance
the house were razed to the ground. The cause of the conflagration was never company.
discovered. Private respondents collected P35,000.00 on the insurance on their
house and the contents thereof. Private respondents filed an action for damages 6. Subrogated in the right of Macloud, the insurance company demand from the
against petitioner. Trial Court awarded damages in favor of the private petitioner its liability but the latter refused to comply.
respondent; Court of Appeals: affirmed the decision of the trial court
7. The insurance company filed a complaint against the petitioner before the trial
ISSUE: Even though the Respondent received a sum of money (P35,000) from court who order the petitioner to pay the plaintiff insurance company and this
the insurer, can the latter collect from the petitioner was affirmed by the CA.

RULING: The Court finds that petitioner is liable for damages to private ISSUE.
respondents, the fact that private respondents have been indemnified by their
insurer in the amount of P35,000.00 for the damage caused to their house and its Can the insurance company maintain this suit without proof of its personality to
contents has not escaped the attention of the Court. Hence, the Court holds that do so?
in accordance with Article 2207 of the Civil Code the amount of P35,000.00
should be deducted from the amount awarded as damages. Said article provides: According to the Supreme Court, since the contract between the shipper and the
carrier in this case was valid and properly established, when macloud suffered
Art. 2207. Xxx If the amount paid by the insurance company does not fully damages because of the doing of petitioner, the insurer who pay the insurance
cover the injury or loss, the aggrieved party shall be entitled to recover the claim was subrogated on behalf of Macloud giving the insurance company a
deficiency from the person causing the loss or injury. personality to institute this case.

DISPOSITIVE: WHEREFORE, the decision of the Court of Appeals is affirmed WHEREFORE, the decision appealed from is affirmed, with costs against
and modified and deducted the award since the insurer had already paid the a petitioner.
portion of the amount claimed
AMERICA G.R. No. L-18965 October 30, 1964. AN INSURANCE LAW
Basilio was a watchman of the Manila Auto Supply, secured a life insurance
FACTS. policy from the Philippine American Life Insurance Company in the amount of
1. Macleod and Company of the Philippines contracted by telephone the services P2,000 to which was attached a supplementary contract covering death by
of the Compañia Maritima, a shipping corporation, accident. On January 25, 1951, he died of a gunshot wound on the occasion of a
for the shipment of 2,645 bales of hemp from the former's Sasa private pier at robbery committed in the house of Atty. Ojeda (he was on the site, few blocks
Davao City to Manila and for their subsequent transhipment to Boston, away from the premises of the Manila Auto Supply because of the policeman’s
Massachusetts, U.S.A. on board the S.S. Steel Navigator. invitation to accompany them in checking the lawyers house which the lawyer
suspected of being robbed). Virginia, the widow, was paid the sum of P2,000,
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
face value of the policy, but when she demanded the payment of the additional it would not apply where death resulted from an injury "intentionally inflicted by
sum of P2,000 representing the value of the supplemental policy, the company another party."
refused alleging that the deceased died because he was murdered by a person On the night of May 20, 1964, or during the first hours of the following day a
who took part in the commission of the robbery and while making an arrest as an band of robbers entered the house of the insured Juan S. Biagtan.
officer of the law which contingencies were expressly excluded in the contract Biagtan was killed as his house was being robbed. The insurance company paid
and have the effect of exempting the company from liability. the basic amount of P5,000 but refused to pay the additional P5,000 under the
accidental death benefit clause, on the ground that his death was the result of
ISSUE: injuries intentionally inflicted by third parties and was not covered. The trial
Whether the insurer is liable to the insured under the supplementary contract court ruled that there was no proof that the robbers intended to kill Biagtan, or
just to scare him away by thrusting at him with their knives.
HELD: Issue: Whether or not, the wounds received by the insured at the hands of the
robbers were inflicted intentionally?
Yes the insurer is liable under the supplementary contract .The circumstance that Ruling: YES.
he was a mere watchman and had no duty to heed the call of Atty. Ojeda should Unlike the ruling in the case of Calanoc vs. Court of Appeals, where the killing
not be taken as a capricious desire on his part to expose his life to danger of the victim was held as accidental and thus covered by the insurance policy,
considering the fact that the place he was in duty-bound to guard was only a the Supreme Court held that in the instant case, the insured was killed
block away. In volunteering to extend help under the situation, he might have intentionally. The term “intentional” implies the exercise of the reasoning
thought, rightly or wrongly, that to know the truth was in the interest of his faculties, consciousness and volition.
employer it being a matter that affects the security of the neighborhood. He The Supreme Court held pointing out that there were nine wounds in all. The
cannot therefore be blamed solely for doing what he believed was in keeping exception in the accidental benefit clause does not speak of the purpose –
with his duty as a watchman and as a citizen. And he cannot be considered as whether homicidal or not – of a third party in causing the injuries, but only of the
making an arrest as an officer of the law for certainly he did not go there for that fact that such injuries have been intentionally inflicted. Nine wounds inflicted
purpose nor was he asked to do so by the policeman. Much less can it be with bladed weapons at close range cannot be considered innocent insofar as
pretended that Basilio died in the course of an assault or murder considering the intent is concerned. The manner of execution of the crime permits no other
very nature of these crimes. It cannot be said be said that the killing was conclusion.
intentional for there is the possibility that the malefactor had fired the shot Where a provision of the policy excludes intentional injury, it is the intention of
merely to scare away the people around for his own protection and not the person inflicting the injury that is controlling. If the injuries suffered by the
necessarily to kill or hit the victim. In any event, the fact remains that the insured clearly resulted from the intentional act of a third party the insurer is
happening was a pure accident on the part of the victim. relieved from liability.
Under the circumstance, the insurance company was correct in refusing to pay
The terms and phraseology of the exception clause be clearly expressed so as to the additional sum of P2,000.00 under the accidental death benefit clause which
be within the easy grasp and understanding of the insured, for if the terms are expressly provided that it would not apply where death resulted from an injury
doubtful or obscure the same must of necessity be interpreted or resolved against "intentionally" inflicted by a third party.
the one who has caused the obscurity.
Biagtan vs Insular Life Assurance Co., Ltd., 44 SCRA 58
Facts: FACTS:
Juan S. Biagtan was insured with defendant Insular Life Assurance Company Qua Chee Gan owns four warehouses in Albay. He was using these warehouses
under Policy No. 398075 for the sum of P5,000.00 and, under a supplementary to house crops like copra and hemp. All warehouses were insured by Law Union
contract denominated "Accidental Death Benefit Clause, for an additional sum and Rock Insurance for the amount of P370,000.00. The insurance states that
of P5,000.00 if "the death of the Insured resulted directly from bodily injury Qua Chee Gan should install 11 hydrants in the warehouses’ premises. Qua Chee
effected solely through external and violent means sustained in an accident and Gan installed only two, but Law Union nevertheless went on with the insurance
independently of all other causes." The clause, however, expressly provided that
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
policy and collected premiums from Qua Chee Gan. The insurance contract also • His injuries caused temporary total disability on his left hand
provides that “oil” should not be stored within the premises of the warehouses. so he filed a claim against all defendants who rejected the claim
In 1940, three of the warehouses were destroyed by fire. The damage caused reasoning that there it was not covered in his policy because there
amounted to P398k. Qua Chee Gan demanded insurance pay from Law Union was no severance of amputation of the left hand
but the latter refused as it alleged that after investigation from their part, they • Trial Court: absolved the defendants
found out that Qua Chee Gan caused the fire. Law Union in fact sued Qua Chee ISSUE: W/N Ty can claim
Gan for Arson.
Qua Chee Gan was acquitted in the arson case. He then demanded that Law HELD: NO. Affirmed.
Union pay up. This time, Law Union averred that the insurance contract is void • can not go beyond the clear and express conditions of the insurance
because Qua Chee Gan failed to install 11 hydrants; and that gasoline was found policies, all of which define partial disability as loss of either hand
in one of the warehouses. by amputation through the bones of the wrist
ISSUE: • Note that the disability of plaintiff's hand was merely temporary, having
Whether or not the insurance contract is void. been caused by fracture of the index, the middle and the fourth fingers of
HELD: the left hand
No. Law Union cannot exempt itself from paying Qua Chee Gan because it is • agreement contained in the insurance policies is the law between the
estopped from invoking the same. It is a well settled rule of law that an insurer parties
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
Also, gasoline is not one of those items specifically prohibited from the premises De La Cruz V. Capital Ins. & Surety Co, Inc. (1966)
of the warehouses. What was mentioned was the word “oil” which could mean G.R. No. L-21574 June 30, 1966
anything (from palm oil to lubricant and not gasoline or kerosene). This Lessons Applicable: Liability of Insurer for Suicide and Accidental Death
ambiguity is to be interpreted against Law Union because a contract of insurance (Insurance)
is a contract of adhesion. Further, oil is incidental to Qua Chee Gan’s business, it Laws Applicable:
being used for motor fuel.

Ty V. First National Surety And Assurance Co., Inc. (1961) FACTS:

G.R. No. L-16138 April 29, 1961 • Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines,
Lessons Applicable: Clear Provision Given Ordinary Meaning (Insurance) Inc. in Baguio, was the holder of an accident insurance policy "against
death or disability caused by accidental means"
FACTS: • January 1, 1957: For the celebration of the New Year, the Itogon-Suyoc
• 2 months prior to December 24, 1953: Diosdado C. Ty, Mines, Inc. sponsored a boxing contest for general entertainment wherein
employed as operator mechanic foreman in the Broadway Cotton Eduardo, a non-professional boxer participated
Factory insured himself in 18 local insurance companies • In the course of his bout with another non-professional boxer of the
with Broadway Cotton Factory as his beneficiary same height, weight, and size, Eduardo slipped and was hit by his opponent
• December 24, 1953: fire broke out at the Broadway Cotton on the left part of the back of the head, causing Eduardo to fall, with his
Factory where Ty, fighting his way out, injured his left hand by a head hitting the rope of the ring
heavy object. • He was brought to the Baguio General Hospital the following day. He
• He was brought to the Manila Central University hospital, and died due to hemorrhage, intracranial.
after receiving first aid there, he went to the National Orthopedic • Simon de la Cruz, the father of the insured and who was named
Hospital for treatment of his injuries. beneficiary under the policy, thereupon filed a claim with the insurance
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
• The Capital Insurance and Surety co., inc denied stating that the death
caused by his participation in a boxing contest was not accidental G.R.No. L-22375 July 18, 1975
• RTC: favored Simon Lessons Applicable: Estoppel and credit extension (Insurance)
ISSUE: W/N the cause of death was accident Laws Applicable: Article 1249 of the New Civil Code

• December 17, 1960: Capital Insurance & Surety Co., Inc. delivered to
• Eduardo slipped, which was unintentional the respondent Plastic Era Manufacturing Co., Inc. its open Fire
• The terms "accident" and "accidental" Policy insuring its building, equipments, raw materials, products and
• as used in insurance contracts, have not acquired any technical accessories located at Sheridan Street, Mandaluyong, Rizal
meaning and are construed by the courts in their ordinary and between December 15, 1960 1 pm - December 15, 1961 1 pm up
common acceptation to P100,000 but Plastic Era did not pay the premium
• happen by chance or fortuitously, without intention and • January 8, 1961: Plastic Era delivered to Capital Insurance its partial
design, and which is unexpected, unusual, and unforeseen payment through check P1,000 postdated January 16, 1961
• event that takes place without one's foresight or expectation • February 20, 1961: Capital Insurance tried to deposit the check but it
• event that proceeds from an unknown cause, or is an unusual was dishonored due to lack of funds. According to the records,
effect of a known cause and, therefore, not expected on January 19, 1961 Plastic Era has had a bank balance of P1,193.41
• where the death or injury is not the natural or probable result of the • January 18, 1961: Plastic Era's properties were destroyed by
insured's voluntary act, or if something unforeseen occurs in the doing of fire amounting to a loss of P283,875. The property was also insured
the act which produces the injury, the resulting death is within the to Philamgen Insurance Company for P200K.
protection of policies insuring against death or injury from accident
• while the participation of the insured in the boxing contest is voluntary, • Capital Insurance refused Plastic Era's claim for failing to pay the
the injury was sustained when he slid, giving occasion to the infliction by insurance premium
his opponent of the blow that threw him to the ropes of the ring is not • CFI: favored Capital Insurance
• The fact that boxing is attended with some risks of external injuries • CA: affirmed
does not make any injuries received in the course of the game not ISSUE: W/N there was a valid insurance contract because there was an extention
accidental of credit despite failing to encash the check payment
• In boxing as in other equally physically rigorous sports, such as
basketball or baseball, death is not ordinarily anticipated to result. If, HELD: YES. Affirmed
therefore, it ever does, the injury or death can only be accidental or
produced by some unforeseen happening or event as what occurred in this • Article 1249 of the New Civil Code
case • The delivery of promissory notes payable to order, or bills of
• Furthermore, the policy involved herein specifically excluded from its exchange or other mercantile documents shall produce the effect
coverage — of payment only when they have been cashed, or when through
the fault of the creditor they have been impaired
(e) Death or disablement consequent upon the Insured engaging in football, • Capital Insurance accepted the promise of Plastic Era to pay the
hunting, pigsticking, steeplechasing, polo-playing, racing of any kind, insurance premium within 30 days from the effective date of
mountaineering, or motorcycling. policy. Considering that the insurance policy is silent as to the mode of
• Death or disablement resulting from engagement in boxing payment, Capital Insurance is deemed to have accepted the promissory
contests was not declared outside of the protection of the note in payment of the premium. This rendered the policy immediately
insurance contract operative on the date it was delivered.

Capital Insurance & Surety Co. Inc. V. Plastic Era Co. Inc (1975)
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
• By accepting its promise to pay the insurance premium within thirty • Court of Appeals found that the driver's license No. 271703 DP was
(30) days from the effectivity date of the policy — December 17, 1960 genuine
Capital Insurance had in effect extended credit to Plastic Era. • Domingo Reyes is in possession of a driver's license issued by
• Where credit is given by an insurance company for the payment of the the Motor Vehicles Office which on its face appears to have
premium it has no right to cancel the policy for nonpayment except by been regularly issued
putting the insured in default and giving him personal notice • Neither Gloria Presa nor the officer-in-charge Marciano A.
• Having held the check for such an unreasonable period of time, Capital Monzon was placed on the witness stand to be examined in
Insurance was estopped from claiming a forfeiture of its policy for non- order to determine whether said license is indeed void
payment even if the check had been dishonored later. • Section 24 of the Revised Motor Vehicles Law, Act 3992 of the
Philippine Legislature, as amended by Republic Acts Nos. 587, 1204 and
Ccc Insurance Corp. V. Ca (1970) 2863,1
G.R. No. L-25920 January 30, 1970

Lessons Applicable: Motor vehicle liability insurance - "Authoried Driver An examination or demonstration to show any applicant's ability to
Clause" (Insurance) operate motor vehicles may also be required in the discretion of the
Laws Applicable: Chief, Motor Vehicles Office or his deputies.
FACTS: • Section 26 of the Act prescribes further:
• Carlos F. Robes insured with the CCC Insurance Corporation his
Dodge Kingsway car against loss or damage through accident for an • SEC. 26. Issuance of chauffeur's license; professional badge: If, after
amount not exceeding P8,000 examination, or without the same, the Chief, Motor Vehicles Office or his
• June 25 1961: Carlos' driver Domingo Reyes met a vehicular collision deputies, believe the applicant to possess the necessary qualifications and
along Rizal Avenue Extension, Potrero, Malabon, Rizal knowledge, they shall issue to such applicant a license to operate as
• Ccc Insurance Corporation denied his claim reasoning that the driver chauffeur ...
was not an "authorized driver" • There is no proof that the owner of the automobile knew that the
• Reyes, who cannot read and write, who has never passed any circumstance surrounding such issuance showed that it was irregular
examination for drivers, and has not applied for a license from • the weight of authority is in favor of a liberal interpretation of the
the duly constituted government agency entrusted with the duty insurance policy for the benefit of the party insured, and strictly against
of licensing drivers, cannot be considered an authorized driver the insurer
Any of the following:
(a) The insured; FACTS:
(b) Any person driving on the Insured's order or with his Cayas was the registered owner of a Mazda bus which was insured with
permission, provided that the person driving is permitted in petitioner PERLA COMPANIA DE SEGUROS, INC (PCSI). The bus figured
accordance with licensing laws or regulations to drive the motor in an accident in Cavite, injuring several of its passengers. One of them,
vehicle covered by this Policy, or has been so permitted and is Perea, sued Cayas for damages in the CFI, while three others agreed to a
not disqualified by order of a court of law or by reason of any
settlement of P4,000.00 each with Cayas.
enactment or regulation from driving such Motor Vehicle.
After trial, the court rendered a decision in favor of Perea, Cayas ordered to
• RTC: favored Robes and CCC was order to pay
ISSUE: W/N Domingo Reyes was an authorized driver compensate the latter with damages. Cayas filed a complaint with the CFI,
seeking reimbursement from PCSI for the amounts she paid to ALL victims,
HELD: YES. CA affirmed alleging that the latter refused to make such reimbursement
notwithstanding the fact that her claim was within its contractual liability

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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
under the insurance policy. Facts:
The decision of the CA affirmed in toto the decision of the RTC of Cavite, On June 29, 1987, Producer’s Bank of the Philippines’ armored vehicle was
the dispositive portion of which states: robbed, in transit, of seven hundred twenty-five thousand pesos (Php
IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering 725,000.00) that it was transferring from its branch in Pasay to its main
defendant PCSI to pay plaintiff Cayas the sum of P50,000.00 under its branch in Makati. To mitigate their loss, they claim the amount from their
maximum liability as provided for in the insurance policy; … insurer, namely Fortune Insurance and Surety Co.
In this petition for review on certiorari, petitioner seeks to limit its liability Fortune Insurance, however, assails that the general exemption clause in the
only to the payment made by private respondent to Perea and only up to the Casualty Insurance coverage had a general exemption clause, to wit:
amount of P12,000.00. It altogether denies liability for the payments made
by private respondents to the other 3 injured passengers totaling P12,000.00. GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
ISSUE: xxx xxx xxx
How much should PCSI pay? (b) any loss caused by any dishonest, fraudulent or criminal act of the
insured or any officer, employee, partner, director, trustee or authorized
HELD: representative of the Insured whether acting alone or in conjunction with
The decision of the CA is modified, petitioner only to pay Cayas others. . . .
P12,000,000.00 And, since the driver (Magalong) and security guard (Atiga) of the armored
The insurance policy provides: vehicle were charged with three others as liable for the robbery, Fortune
5. No admission, offer, promise or payment shall be made by or on behalf of denies Producer’s Bank of its insurance claim.
the insured without the written consent of the Company … The trial court and the court appeals ruled in favor of recovery, hence, the
It being specifically required that petitioner’s written consent be first case at bar.
secured before any payment in settlement of any claim could be made,
private respondent is precluded from seeking reimbursement of the Issue:
payments made to the other 3 victims in view of her failure to comply with Whether recovery is precluded under the general exemption clause.
the condition contained in the insurance policy.
Also, the insurance policy involved explicitly limits petitioner’s liability to Ruling:
P12,000.00 per person and to P50,000.00 per accident Yes, recovery is precluded under the general exemption clause.
Clearly, the fundamental principle that contracts are respected as the law Howsoever viewed, Producers entrusted the three with the specific duty to
between the contracting parties finds application in the present case. Thus, safely transfer the money to its head office, with Alampay to be responsible
it was error on the part of the trial and appellate courts to have disregarded for its custody in transit; Magalong to drive thearmored vehicle which would
the stipulations of the parties and to have substituted their own carry the money; and Atiga to provide the needed security for the money, the
interpretation of the insurance policy. vehicle, and his two other companions. In short, for these particular tasks,
We observe that although Cayas was able to prove a total loss of only the three acted as agents of Producers. A "representative" is defined as one
P44,000.00, petitioner was made liable for the amount of P50,000.00, the who represents or stands in the place of another; one who represents others
maximum liability per accident stipulated in the policy. This is patent error. or another in a special capacity, as an agent, and is interchangeable with
An insurance indemnity, being merely an assistance or restitution insofar as "agent."
can be fairly ascertained, cannot be availed of by any accident victim or In view of the foregoing, Fortune is exempt from liability under the general
claimant as an instrument of enrichment by reason of an accident. exceptions clause of the insurance policy.

Fortune Insurance and Surety Co., Inc. v. Court of Appeals White Gold Marine vs Pioneer Insurance

Page 19 of 21
BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
Facts Thus, respondent paid the hospitalization expenses herself, amounting to
Petitioner procured a protection and indemnity coverage for its vessels from about P76,000.00.
The Steamship Mutual Underwriting Association Ltd. through Pioneer After her husband was discharged from the MMC, he was later admitted at
Insurance and Surety Corp. by virtue of a Certificate of Entry and the Chinese General Hospital. In the morning of April 13, 1990, Ernani had
Acceptance. When White Gold failed topay its account, Steamship Mutual fever and was feeling very weak; he died on the same day.
refused to renew its coverage so it filed a collection case against the latter. Respondent instituted with the Regional Trial Court (RTC) an action for
Petitioner contends in defense that it didn’t have the requisite certificate of damages against petitioner. The RTC ruled against petitioner, which was
authority from the Insurance Commissioner under Sec. 187 of the Insurance affirmed by the Court of Appeals.
Code. Petitioner filed a petition for review arguing that the agreement grants
"living benefits," such as medical check-ups and hospitalization which a
Issue member may immediately enjoy so long as he is alive upon effectivity of the
WON Pioneer still needs a license as an insurance agent/broker for agreement until its expiration one-year thereafter. Petitioner also points out
Steamship Mutual; that only medical and hospitalization benefits are given under the
WON Steamship Mutual’s Protection and Indemnity club is engaged in agreement without any indemnification, unlike in an insurance contract
insurance business in the Philippines. where the insured is indemnified for his loss. Moreover, since Health Care
Agreements are only for a period of one year, as compared to insurance
Ruling contracts which last longer,7 petitioner argues that the incontestability
YES on both issues. clause does not apply, as the same requires an effectivity period of at least
1) A Protection and Indemnity Club is a form of insurance against third party two years. Petitioner further argues that it is not an insurance company,
liability where the third party is anyone other than the P & I Club and the which is governed by the Insurance Commission, but a Health Maintenance
members. Steamship Mutual, as P&I club, is a mutual insurance association Organization under the authority of the Department of Health.
engaged in marine insurance business.
2) Although Pioneer is already a licensed insurance company, it still needs a Whether or not a health care agreement is not an insurance contract.
separate license to act as an insurance agent for Steamship Mutual as
provided by Section 299 of the Insurance Code Ruling:
A health care agreement is an insurance contract.
PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS and Under Section 2 of the Insurance Code defines a contract of insurance as an
JULITA TRINOS agreement whereby one undertakes for a consideration to indemnify another
G.R. No. 125678 | March 18, 2002 against loss, damage or liability arising from an unknown or contingent
event. An insurance contract exists where the following elements concur: (1)
Facts: The insured has an insurable interest; (2) The insured is subject to a risk of
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a loss by the happening of the designated peril; (3) The insurer assumes the
health care coverage with petitioner Philamcare Health Systems, Inc. risk; (4) Such assumption of risk is part of a general scheme to distribute
The application was approved for a period of one year from March 1, 1988 to actual losses among a large group of persons bearing a similar risk; and (5)
March 1, 1989 and extended until June 1, 1990. The amount of coverage was In consideration of the insurer’s promise, the insured pays a premium.
increased to a maximum sum of P75,000.00 per disability. Further, Section 10 of the Insurance Code provides that every person has an
During the period of his coverage, Ernani suffered a heart attack and was insurable interest in the life and health of himself.
confined for one month. While her husband was in the hospital, respondent In the case at bar, the insurable interest of respondent’s husband in
tried to claim the benefits under the health care agreement. However, obtaining the health care agreement was his own health. The health care
petitioner denied her claim saying that the Health Care Agreement was void. agreement was in the nature of non-life insurance, which is primarily a
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BAUTISTA, Coleen Joyce Q. INSURANCE: Sat 3-6; Sun 9-12
contract of indemnity.9 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.

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