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CONTRACT OF INSURANCE accordance with the licensing or other laws or 1997 VAT deficiency. Accordingly, VAT Ruling No.

regulations to drive the Motor Vehicle and is not [231]-88 is declared void and without force and effect.
ANDREW PALERMO vs. PYRAMID INSURANCE CO., INC. disqualified from driving such motor vehicle by order The 1996 and 1997 deficiency DST assessment
[G.R. No. L-36480 May 31, 1988] of a Court of Law or by reason of any enactment or
against petitioner is hereby CANCELLED AND SET
regulation in that behalf," applies only when the driver
Facts: "is driving on the insured's order or with his ASIDE. Respondent is ORDERED to DESIST from
Petitioner, having purchased a brand new Nissan permission." It does not apply when the person driving collecting the said DST deficiency tax. Respondent
Cedric de Luxe Sedan, insured the same with the is the insured himself. The main purpose of the appealed the CTA decision to the (CA) insofar as it
defendant insurance company against any loss or "authorized driver" clause, as may be seen from its cancelled the DST assessment. He claimed that
damage for P 20,000.00 and against third party text, is that a person other than the insured owner, petitioner’s health care agreement was a contract of
liability for P 10,000.00. Plaintiff paid the defendant P who drives the car on the insured's order, such as his insurance subject to DST under Section 185 of the
361.34 premium for one year The automobile was, regular driver, or with his permission, such as a friend
1997 Tax Code.
however, mortgaged by the plaintiff with the vendor, or member of the family or the employees of a car
Ng Sam Bok Motors Co., to secure the payment of the service or repair shop, must be duly licensed drivers On August 16, 2004, the CA rendered its decision
balance of the purchase price, which explains why the and have no disqualification to drive a motor vehicle. which held that petitioner’s health care agreement
registration certificate in the name of the plaintiff was in the nature of a non-life insurance contract
remains in the hands of the mortgagee, Ng Sam Bok PHILHEALTH CARE PROVIDERS INC. V CIR subject to DST. Respondent is ordered to pay the
Motors Co. while driving the automobile in question, deficiency Documentary Stamp Tax. Petitioner moved
the plaintiff met a violent accident. The insured, FACTS:Petitioner is a domestic corporation whose for reconsideration but the CA denied it.
Andrew Palermo, filed a complaint in the Court of First primary purpose is to establish, maintain, conduct and
Instance against Pyramid Insurance Co., Inc., for operate a prepaid group practice health care delivery
payment of his claim under a Private Car ISSUES:
system or a health maintenance organization to take
Comprehensive Policy issued by the defendant. In its
answer, Pyramid Insurance Co., Inc., alleged that it care of the sick and disabled persons enrolled in the (1) Whether or not Philippine Health Care Providers,
disallowed the claim because at the time of the health care plan and to provide for the administrative, Inc. engaged in insurance business.
accident, the insured was driving his car with an legal, and financial responsibilities of the organization.
expired driver's license. the court a quo rendered On January 27, 2000, respondent CIR sent petitioner (2) Whether or not the agreements between petitioner
judgment ordering the defendant to pay the plaintiff a formal demand letter and the corresponding and its members possess all elements necessary in
value of the insurance of the motor vehicle in question assessment notices demanding the payment of
and to pay the costs." the insurance contract.
deficiency taxes, including surcharges and interest,
Issue: for the taxable years 1996 and 1997 in the total HELD:
Whether the insured is considered an unauthorized amount of P224,702,641.18. The deficiency
driver if he has an expired driver’s license, thus the assessment was imposed on petitioner’s health care NO. Health Maintenance Organizations are not
insurer is not liable under the policy. agreement with the members of its health care engaged in the insurance business. One test that they
program pursuant to Section 185 of the 1997 Tax have applied is whether the assumption of risk and
Ruling: Code. Petitioner protested the assessment in a letter indemnification of loss (which are elements of an
There is no merit in the appellant's allegation that
the plaintiff was not authorized to drive the insured dated February 23, 2000. As respondent did not act insurance business) are the principal object and
motor vehicle because his driver's license had on the protest, petitioner filed a petition for review in purpose of the organization or whether they are
expired. The driver of the insured motor vehicle at the the Court of Tax Appeals (CTA) seeking the merely incidental to its business. If these are the
time of the accident was, the insured himself, hence cancellation of the deficiency VAT and DST principal objectives, the business is that of insurance.
an "authorized driver" under the policy. While the assessments. On April 5, 2002, the CTA rendered a But if they are merely incidental and service is the
Motor Vehicle Law prohibits a person from operating a decision, ordering the petitioner to PAY the deficiency principal purpose, then the business is not insurance.
motor vehicle on the highway without a license or with
VAT amounting to P22,054,831.75 inclusive of 25% Petitioner is admittedly an HMO. Under RA 7878 an
an expired license, an infraction of the Motor Vehicle
Law on the part of the insured, is not a bar to recovery surcharge plus 20% interest from January 20, 1997 HMO is “an entity that provides, offers or arranges for
under the insurance contract. It however renders him until fully paid for the 1996 VAT deficiency and coverage of designated health services needed by
subject to the penal sanctions of the Motor Vehicle P31,094,163.87 inclusive of 25% surcharge plus 20% plan members for a fixed prepaid premium. The
Law. The requirement that the driver be "permitted in interest from January 20, 1998 until fully paid for the payments do not vary with the extent, frequency or
type of services provided. Section 2 (2) of PD 1460 certain John Chuang. His balance of payments was application of the Lot Purchaser is not approved by
enumerates what constitutes “doing an insurance PhP 100,000. On August 2, 1984, Chuang died. the Company.
business” or “transacting an insurance
Eternal sent a letter dated August 20, 19845 to An examination of the above provision would show
business”which are making or proposing to make, as
Philamlife, which served as an insurance claim for ambiguity between its two sentences. The first
insurer, any insurance contract; making or proposing Chuang's death. sentence appears to state that the insurance
to make, as surety, any contract of suretyship as a After more than a year, Philamlife had not furnished coverage of the clients of Eternal already became
vocation and not as merely incidental to any other Eternal with any reply to the latter's insurance claim. effective upon contracting a loan with Eternal while
legitimate business or activity of the surety; doing any This prompted Eternal to demand from Philamlife the the second sentence appears to require Philamlife to
kind of business, including a reinsurance business, payment of the claim for PhP 100,000 on April 25, approve the insurance contract before the same can
specifically recognized as constituting the doing of an 1986.8 become effective.
insurance business within the meaning of this Code;
In response to Eternal's demand, Philamlife denied It must be remembered that an insurance contract is a
doing or proposing to do any business in substance Eternal's insurance claim in a letter dated May 20, contract of adhesion which must be construed liberally
equivalent to any of the foregoing in a manner 1986. Consequently, Eternal filed a case before the in favor of the insured and strictly against the insurer
designed to evade the provisions of this Code. Makati City Regional Trial Court (RTC). in order to safeguard the latter's interest.

Overall, petitioner appears to provide insurance-type DECISION OF LOWER COURTS: The fact of the matter is, the letter dated December
benefits to its members (with respect to its curative (1) RTC : in favor of Eternal. due to Philamlife's 29, 1982, which Philamlife stamped as received,
inaction from the submission of the requirements of states that the insurance forms for the attached list of
medical services), but these are incidental to the
the group insurance on December 29, 1982 to burial lot buyers were attached to the letter. Such
principal activity of providing them medical care. The Chuang's death on August 2, 1984, as well as stamp of receipt has the effect of acknowledging
“insurance-like” aspect of petitioner’s business is Philamlife's acceptance of the premiums during the receipt of the letter together with the attachments.
miniscule compared to its noninsurance activities. same period, Philamlife was deemed to have Such receipt is an admission by Philamlife against its
Therefore, since it substantially provides health care approved Chuang's application. The RTC said that own interest.13 The burden of evidence has shifted to
services rather than insurance services, it cannot be since the contract is a group life insurance, once proof Philamlife, which must prove that the letter did not
considered as being in the insurance business. of death is submitted, payment must follow. contain Chuang's insurance application. However,
(2) CA : in favor of Philamlife. there being no Philamlife failed to do so; thus, Philamlife is deemed
application form, Chuang was not covered by to have received Chuang's insurance application.
The seemingly conflicting provisions must be
FACTS: ISSUE: harmonized to mean that upon a party's purchase of a
May the inaction of the insurer on the insurance memorial lot on installment from Eternal, an insurance
Philamlife entered into an agreement denominated as application be considered as approval of the contract covering the lot purchaser is created and the
Creditor Group Life Policy No. P-19202 with petitioner application? same is effective, valid, and binding until terminated
Eternal Gardens Memorial Park Corporation (Eternal). by Philamlife by disapproving the insurance
Under the policy, the clients of Eternal who purchased RULING: application. The second sentence of Creditor Group
burial lots from it on installment basis would be Life Policy No. P-1920 on the Effective Date of Benefit
insured by Philamlife. The amount of insurance YES is in the nature of a resolutory condition which would
coverage depended upon the existing balance of the lead to the cessation of the insurance contract.
purchased burial lots. As earlier stated, Philamlife and Eternal entered into Moreover, the mere inaction of the insurer on the
an agreement denominated as Creditor Group Life insurance application must not work to prejudice the
Eternal was required under the policy to submit to Policy No. P-1920 dated December 10, 1980. In the insured; it cannot be interpreted as a termination of
Philamlife a list of all new lot purchasers, together with policy, it is provided that: the insurance contract. The termination of the
a copy of the application of each purchaser, and the insurance contract by the insurer must be explicit and
amounts of the respective unpaid balances of all EFFECTIVE DATE OF BENEFIT. unambiguous.
insured lot purchasers. In relation to the instant
petition, Eternal complied by submitting a letter dated The insurance of any eligible Lot Purchaser shall be
December 29, 1982,4 containing a list of insurable effective on the date he contracts a loan with the
balances of its lot buyers for October 1982. One of Assured. However, there shall be no insurance if the
those included in the list as "new business" was a
PARTIES TO A CONTRACT OF INSURANCE resolved against the insurer, or construed liberally in
GULF RESORTS INC vs PHILIPPINE CHARTER In sum, there is no ambiguity. Petitioner cannot rely favor of the insured.
INSURANCE CORPORATION (2005) on the general rule that insurance contracts are WHITE GOLD INSURANCE V PIONEER
contracts of adhesion which should be liberally
FACTS: construed in favor of the insured and strictly against Facts:
Gulf Resorts, Inc at Agoo, La Union was insured with the insurer company which usually prepares it. White Gold procured a protection and
American Home Assurance Company which includes indemnity coverage for its vessels from The
loss or damage to shock to any of the property We cannot apply the general rule on contracts of Steamship Mutual through Pioneer Insurance and
insured by this policy occasioned by or through or in adhesion to the case at bar. Petitioner cannot claim it Surety Corporation. White Gold was issued a
consequence of earthquake. In July 1990 an did not know the provisions of the policy from the Certificate of Entry and Acceptance. Pioneer also
earthquake struck Central Luzon and Northern Luzon inception of the policy, petitioner had required the issued receipts. When White Gold failed to fully pay
so the properties and 2 swimming pools in its Agoo respondent to copy verbatim the provisions and terms its accounts, Steamship Mutual refused to renew
Playa Resort were damaged August 1990 Gulf’ss of its latest insurance policy from AHAC-AIU. the coverage. Steamship Mutual thereafter filed a
claim was denied on the ground that its insurance case against White Gold for collection of sum of
policy only afforded earthquake shock coverage to the DOCTRINE: money to recover the unpaid balance. White Gold on
two swimming pools of the resort. It is basic that all the provisions of the insurance the other hand, filed a complaint before the Insurance
policy should be examined and interpreted in Commission claiming that Steamship Mutual and
Petitioner insists that the parties have intended to consonance with each other. All its parts are reflective Pioneer violated provisions of the Insurance Code.
extend the coverage through the attachment of the of the true intent of the parties. The policy cannot be The Insurance Commission dismissed the complaint.
phrase “ Subject to: Other Insurance Clause, Typhoon construed piecemeal. Certain stipulations cannot be It said that there was no need for Steamship Mutual to
Endorsment, Earthquake Shock Endorsement, segregated and then made to control; neither do secure a license because it was not engaged in the
Extended Coverage Endorsement, FEA Warranty and particular words nor phrases necessarily determine its insurance business and that it was a P & I club.
Annual Payment Agreement on Long Term Policies” character. Pioneer was not required to obtain another license as
to the insurance policy. insurance agent because Steamship Mutual was not
Section 2(6) of the Insurance Code defInes a contract engaged in the insurance business. The Court
ISSUE: of insurance as an agreement whereby one of Appeals affirmed the decision of the Insurance
WON the insurance policy earthquake shock undertakes for a consideration to indemnify another Commissioner. In its decision, the appellate
coverage extends to other property aside from the two against loss, damage or liability arising from an court distinguished between P & I Clubs vis-à-vis
swimming pools. unknown or contingent event. Thus, an insurance conventional insurance. The appellate court also held
contract exists where the following elements concur: that Pioneer merely acted as a collection agent of
HELD:  The insured has an insurable interest Steamship Mutual.
NO.  The insured is subject to a risk of loss by Hence this petition by White Gold.
Petitioner cannot focus on the earthquake shock the happening of the designated peril
endorsement to the exclusion of the other provisions.  The insurer assumes the risk Issues:
All the provisions and riders, taken and interpreted  Such assumption of risk is part of a general 1. Is Steamship Mutual, a P & I Club, engaged in the
together, indubitably show the intention of the parties scheme to distribute actual losses among a insurance business in the Philippines?
to extend earthquake shock coverage to the two large group of persons bearing a similar risk 2. Does Pioneer need a license as an insurance
swimming pools only.  In consideration of the promise, the insured agent/broker for Steamship Mutual?
pays premium
A careful examination of the premium recapitulation Held: Yes. Petition granted.
will show that it is the clear intent of the parties to An insurance premium is the consideration paid an
extend earthquake shock coverage only to the two insurer for undertaking to indemnify the insured Ratio:
swimming pools. In the subject policy, against a specified peril. In fire, casualty, and marine
no premium payments were made with regard to insurance, the premium payable becomes a debt as Yes.
earthquake shock coverage, except on the 2 soon as the risk attaches. A contract of adhesion is
swimming pools. There is no mention of any premium one wherein a party, usually a corporation, prepares
payable for the other resort properties with regard to the stipulations in the contract, while the other party Section 2(2) of the Insurance Code enumerates what
earthquake shock. This is consistent with the history merely attaches his signature or his /adhesion/ constitutes "doing an insurance business" or
of petitioners previous insurance policies from AHAC- thereto. Consequently, any ambiguity therein is "transacting an insurance business". These are:
(a) making or proposing to make, as insurer, any A P & I Club is a form of insurance against third party insurance agent for Steamship Mutual. Section 299
insurance contract; liability, where the third party is anyone other than the of the Insurance Code clearly states:
P & I Club and the members. By definition then, SEC. 299 No person shall act as an insurance agent
Steamship Mutual as a P & I Club is a mutual or as an insurance broker in the solicitation or
(b) making, or proposing to make, as surety, any
insurance association engaged in the marine procurement of applications for insurance, or receive
contract of suretyship as a vocation and not as merely
insurance business. for services in obtaining insurance, any commission or
incidental to any other legitimate business or activity
other compensation from any insurance
of the surety;
company doing business in the Philippines or any
Since a contract of insurance involves public interest,
agent thereof, without first procuring a license so to
regulation by the State is necessary. Thus, no insurer
(c) doing any kind of business, including a act from the Commissioner…
or insurance company is allowed to engage in the
reinsurance business, specifically recognized as
insurance business without a license or a certificate of
constituting the doing of an insurance business within FILIPINAS COMPANIA V CHRISTERN
authority from the Insurance Commission.
the meaning of this Code;
Is Steamship Mutual engaged in the insurance
(d) doing or proposing to do any business in
business? Christern Huenefeld Corporation bought a fire
substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this insurance policy from Filipinas Compania de Seguros
A P & I Club is “a form of insurance against third party to cover merchandise contained in a building. During
liability, where the third party is anyone other than the the Japanese military occupation, this same
P & I Club and the members.” By definition then, merchandise and the building were burned, so
The test to determine if a contract is an insurance Steamship Mutual as a P & I Club is a mutual Huenefeld filed a claim under the policy.
contract or not, depends on the nature of the promise, insurance association engaged in the marine
the act required to be performed, and the exact nature insurance business. Filipinas Compania refused to pay, alleging that the
of the agreement in the light of the occurrence, The records reveal Steamship Mutual is doing policy had ceased to be in force when the US
contingency, or circumstances under which the business in the country albeit without the requisite declared war against Germany. Filipinas Compania
performance becomes requisite. It is not by what it is certificate of authority mandated by Section 187 of the contended that Huenefeld, although organized and
called. Insurance Code. It maintains a resident agent in the created under Philippine laws, is a German subject,
Philippines to solicit insurance and to collect and hence, a public enemy, since majority of its
payments in its behalf. Steamship Mutual even stockholders are Germans. On the other hand,
Basically, an insurance contract is a contract of renewed its P & I Club cover until it was cancelled due
indemnity. In it, one undertakes for a consideration to Filipinas Compania is under American jurisdiction.
to non-payment of the calls. Thus, to continue doing
indemnify another against loss, damage or liability business here, Steamship Mutual or through its agent
arising from an unknown or contingent event. However, the Director of Bureau of Financing,
Pioneer, must secure a license from the Insurance Philippine Executive Commission ordered Filipinas
Commission. Compania to pay, so Filipinas Compania did pay. The
In particular, a marine insurance undertakes to case at bar is about the recovery of that sum paid.
indemnify the assured against marine losses, such as Since a contract of insurance involves public interest,
the losses incident to a marine adventure. Section 99 regulation by the State is necessary. Thus, no insurer ISSUES:
of the Insurance Code enumerates the coverage of or insurance company is allowed to engage in the
marine insurance. insurance business without a license or a certificate of
authority from the Insurance Commission. W/N Christern Huenefeld is a German subject
2. Pioneer is the resident agent of Steamship Mutual because majority of its stockholders are under
Relatedly, a mutual insurance company is a as evidenced by the certificate of registration issued
cooperative enterprise where the members are both German jurisdiction, despite the fact that it was
by the Insurance Commission. It has been licensed to organized and created under Philippine laws
the insurer and insured. In it, the members all do or transact insurance business by virtue of the
contribute, by a system of premiums or assessments, If so, W/N the fire insurance policy is enforceable
certificate of authority issued by the same agency. against an enemy state
to the creation of a fund from which all losses and However, a Certification from the Commission states
liabilities are paid, and where the profits are divided that Pioneer does not have a separate license to be
among themselves, in proportion to their interest. HELD:
an agent/broker of Steamship Mutual.
Additionally, mutual insurance associations, or clubs, Although Pioneer is already licensed as an insurance
provide three types of coverage, namely, protection The Court of Appeals ruled that a private corporation
company, it needs a separate license to act as is a citizen of the country or state by and under the
and indemnity, war risks, and defense costs.
laws of which it was created or organized. It rejected also destroyed by the fire. arrangement of the words employed and that the
the theory that nationality of a private corporation is language of the contract is selected with great care
determined by the character or citizenship of its ISSUE: and deliberation by experts and legal advisers
controlling stockholders. employed by, and acting exclusively in the interest of,
o Whether or not Rizal Surety is liable for loss of the the insurance company.”
But the Supreme Court held that Christern Huenefeld two-storey building considering that the fire insurance
is an enemy corporation since majority of its policy sued upon covered only the contents of the PRINCIPLE OF SUBROGATION
stockholders are German subjects. The two American four-span building
cases relied up by the Court of Appeals have lost their MALAYAN INSURANCE CO., INC. VS. COURT OF
force in view of a newer case where the control test HELD: APPEALS
was adopted. (165 SCRA 536)
Both the trial court and the CA found that the so-
The Philippine Insurance Law provides that anyone, called “annex” as not an annex building but an integral FACTS:
except a public enemy, may be insured. It stands to and inseparable part of the four-span building Malayan Insurance Co. Inc. (MALAYAN) issued a
reason that an insurance policy ceases to be described in the policy and consequently, the Private Car Comprehensive Policy to SIO CHOY
allowable as soon as the insured becomes a public machines and spare parts stored therein were covering a Willys jeep. The insurance coverage was
enemy. covered by the fire insurance in dispute. for "own damage" not to exceed P600.00 and "third
party liability" in the amount of P20,000.00.
Since Christern Huenefeld became a public enemy on So also, considering that the two-storey building During the effectivity of the insurance policy, , the
Dec. 10, 1941, then the policy has ceased to be aforementioned was already existing when subject fire insured jeep, while being driven by one Juan P.
enforcible and therefore Huenefeld is not entitled to insurance policy contract was entered into on Jan. 12, Campollo an employee of the respondent San Leon
indemnity. However, elementary rules of justice 1981, having been constructed some time in 1978, Rice Mill, Inc., (SAN LEON) collided
require that the premium paid from Dec. 11, 1941 petitioner should have specifically excluded the said with a passenger bus belonging to the respondent
should be returned. two-storey building from the coverage of the fire Pangasinan Transportation Co., Inc. (PANTRANCO)
insurance if minded to exclude the same but if did not, at the national highway in Barrio San Pedro, Rosales,
Thus, Filipinas Compania is allowed to recover the and instead, went on to provide that such fire Pangasinan, causing damage to the insured vehicle
sum paid but only its equivalent in actual Philippine insurance policy covers the products, raw materials and injuries to the driver, Juan P. Campollo, and the
currency, minus the premium that Huenefeld paid and supplies stored within the premises of Transworld respondent Martin C. Vallejos, who was riding in the
after Dec. 11. which was an integral part of the four-span building ill-fated jeep. Martin C. Vallejos filed an action for
occupied by Transworld, knowing fully well the damages against Sio Choy, Malayan Insurance Co.,
CONTRACT OF ADHESION existence of such building adjoining and Inc. and the PANTRANCO before the Court of First
intercommunicating with the right section of the four- Instance of Pangasinan. The trial court rendered
RIZAL SURETY V CA span building. judgment holding Sio Choy, SAN LEON, and
MALAYAN jointly and severally liable. However,
FACTS: Also, in case of doubt in the stipulation as to the MALAYAN’s liability will only be up to P20,000. On
coverage of the fire insurance policy, under Art. 1377 appeal, CA affirmed the decision of the trial court.
Rizal Surety & Insurance Company issued a fire of the New Civil Code, the doubt should be resolved However, it ruled that SAN LEON has no
insurance policy in favor of Transworld Knitting Mills, against the Rizal Surety, whose layer or managers obligation to indemnify or reimburse the petitioner
Inc. The subject policy stated that Rizal Surety is drafted the fire insurance policy contract under insurance company for whatever amount it has been
“responsible in case of loss whilst contained and/or scrutiny. ordered to pay on its policy, since the San Leon Rice
stored during the currency of this Policy in the Mill, Inc. is not a privy to the
premises occupied by them forming part of the In Landicho vs. Government Service Insurance contract of insurance between Sio Choy and the
buildings situated within own Compound xxx.” The System, the Court ruled that “the terms in an insurance company. MALAYAN appealed to the SC
policy also described therein the four-span building insurance policy, which are ambiguous, equivocal or by way of review on certiorari.
covered by the same. uncertain x x x are to be construed strictly and most
strongly against the insurer, and liberally in favor of ISSUE[1]:
On Jan. 12, 1981, fire broke out in the compound, the insured so as to effect the dominant purpose of Whether or not MALAYAN is solidarily liable to
razing the middle portion of its four-span building and indemnity or payment to the insured, especially where Vallejos, along with Sio Choy and SAN LEON
partly gutting the left and right sections thereof. A two- forfeiture is involved, and the reason for this is that the
storey building (behind said four-span building) was insured usually has no voice in the selection or ISSUE[2]:
Whether or not MALAYAN is entitled to be reimbursed caused to the insured car was settled under the “own 2. where the insurer pays the assured the value of the
by SAN LEON for whatever amount petitioner has damage” coverage of the insurance policy. Private lost goods without notifying the carrier who has in
been adjudged to pay respondent Vallejos on its respondents filed a motion to dismiss alleging that good faith settled the assured’s claim for loss;
insurance policy. Panmalay had no cause of action since the “own
damage” clause of the policy precluded subrogation 3. where the insurer pays the assured for a loss which
RULING[1]: under Art. 2207 of the CC. Indemnification under said is not a risk covered by the policy (voluntary
Only Sio Choy and SAN LEON are solidarily liable to article is on the assumption that there was no payment). None of the exceptions are availing in the
Vallejos for the award of damages. Sio Choy is liable wrongdoer or no 3rd party at fault. RTC dismissed present case.
as owner of the jeep pursuant to Article 2184, while Panmalay’s complaint. RTC held that payment by None of the exceptions are availing in the present
SAN LEON is liable as the employer of the driver of Panmalay under the “own damage” clause was an case.
the jeep at the time of the accident pursuant to Art admission by the insurer that the damage was caused
2180. MALAYAN’s liability, however, arose only out of by the assured and/or its representatives CA affirmed, CALANOC V CA
the insurance policywith Sio Choy. Petitioner as albeit on a somewhat different ground. Applying the
insurer of Sio Choy, is liable to respondent Vallejos, ejusdem generis rule, CA held that Section III-I of the Doctrine: In case of ambiguity in an insurance
but it cannot, as incorrectly held by the trial court, be policy, which was the basis for the settlement of the contract covering accidental death, the Supreme
made "solidarily" liable with the two principal claim against insurance, did not cover damage arising Courtheld that such terms shall be construed strictly
tortfeasors namely respondents Sio Choy and SAN from collision or overturning due to the negligence of against the insurer and liberally in favor of the insured
LEON.] 3rd parties as one of the insurable risks. Both inorder to effect the purpose of indemnity.
tribunals concluded that Panmalay could not now
RULING[2]: invoke Art 2207 and claim reimbursement Facts:Melencio Basilio, a watchman of the Manila
MALAYAN is entitled to be reimbursed. Upon Auto Supply, secured a life insurance policy fromthe
payment of the loss, the insurer is entitled to be ISSUE: Philippine American Insurance Company in the
subrogated pro tanto to any right of action which the Whether or not Panmalay was subrogated to the amount of P2,000 to which was attached
insured may have against the third person whose rights of Canlubang against the driver and his asupplemental contract covering death by accident.
negligence or wrongful act caused the loss. When the employer He later died from a gunshot wound on the occasionof
insurance company pays for the loss, such payment a robbery committed; subsequently, his widow was
operates as an equitable assignment to the insurer of RULING: paid P2,000 representing the face value of thepolicy.
the property and all remedies which the insured may Yes. Article 2207 of the CC is founded on the well- The widow demanded the payment of the additional
have for the recovery thereof. That right is not settled principle of subrogation. If the insured property sum of P2,000 representing the value of
dependent upon, nor does it grow out of any privity of is destroyed or damages through the fault or thesupplemental policy which the company refused
contract or upon written assignment of claim, and negligence of a party other than the assured, because the deceased died by murder during
payment to the insured makes the insurer assignee in then the insurer, upon payment to the assured, will be therobbery and while making an arrest as an officer of
equity. subrogated to the right of the assured to recover from the law which were expressly excluded in the
the wrongdoer to the extent that the insurer has been contract. The company’s contention which was upheld
PAN MALAYAN INSURANCE CORP. VS. COURT obligated to pay. Payment by the insurer to the by the Court of Appeals provides that
OF APPEALS assured operates as an equitable assignment to the the
(184 SCRA 54) former of all the remedies which the latter may have circumstances surrounding Basilio’s death was
against the 3rd party whose negligence or wrongful caused by one of the risks excluded by the
FACTS: act caused the loss. The right of subrogation is not supplementary contract which exempts the company
Canlubang Automotive Resources Corp. obtained dependent upon any privity of contract or upon written from liability.
from PanMalay an insurance for its Mitsubishi Colt assignment of claim. It accrues simply upon payment
Lancer. While the policy was still in effect, the insured of the insurance claim by the insurer. Issue:Is the Philippine American Life Insurance Co.
car was hit by a pick-up owned by Erlinda Fabie but liable to the petitioner for the amount covered by
driven by another person. The car suffered damages There are exceptions to this rule: thesupplemental contract?
in the amount of P42K. Panmalay defrayed the cost of 1. if the assured by his own act releases the
repair of the insured car. It then demanded wrongdoer or 3rd party liable for the loss or damage, Held:Yes.
reimbursement from Fabie and her driver of said from liability; The circumstances of Basilio’s death cannot be taken
amount, but to no avail. Panmalay filed a complaint as purely intentional on the part of
for damages with the RTC of Makati against Fabie Basilio to expose himself to the danger. There is no
and the driver. Panmalay averred that the damages proof that his death was the result of intentionalkilling
because there is the possibility that the malefactor
had fired the shot merely to scare away the
people around. In this case, the company’s defense
points out that Basilio’s
is included among the risksexcluded in the
supplementary contract; however, the terms and
phraseology of the exception clauseshould be clearly
expressed within the understanding of the insured.
Art. 1377 of the New Civil Codeprovides that in case
ambiguity, uncertainty or obscurity in the interpretation
of the terms of thecontract, it shall be construed
against the party who caused such obscurity.
Applying this to thesituation, the ambiguous or
obscure terms in the insurance policy are to
be construed strictly against theinsurer and liberally in
favor of the insured party. The reason is to ensure the
protection of the insuredsince these insurance
contracts are usually arranged and employed by
experts and legal advisers actingexclusively in the
interest of the insurance company. As long as
insurance companies insist upon the useof
ambiguous, intricate and technical provisions, which
conceal their own intentions, the courts must,
infairness to those who purchase insurance, construe
every ambiguity in favor of the insured.