10.

PARAMOUNT INSURANCE CORPORATION, Petitioner,

vs.
SPOUSES YVES and MARIA TERESA REMONDEULAZ, Respondents.

FACTS:

On May 26, 1994, respondents insured with petitioner their 1994 Toyota Corolla sedan under a
comprehensive motor vehicle insurance policy for one year. During the effectivity of said
insurance, respondents’ car was unlawfully taken. Respondents alleged that a certain Ricardo
Sales (Sales) took possession of the subject vehicle to add accessories and improvements
thereon, however, Sales failed to return the subject vehicle within the agreed three-day period.
Then, respondents notified petitioner to claim for the reimbursement of their lost vehicle.
However, petitioner refused to pay.

Accordingly, respondents lodged a complaint for a sum of money against petitioner before the
Regional Trial Court of Makati City but dismissed the complaint filed by respondents. Not in
conformity with the trial court’s Order, respondents filed an appeal to the Court of Appeals and
in its decision the appellate court reversed and set aside the Order issued by the trial court.
Petitioner, thereafter, filed a motion for reconsideration against said Decision, but the same was
denied by the appellate court.

Hence this Petition for Review on Certiorari.

ISSUE:

Whether or not Paramount Insurance Corporation is liable under the insurance policy for the
loss of respondents’ vehicle.

RULING:

The Supreme Court DENIED the motion of Paramount Insurance Company and AFFIRMED the
Decision of the Court of Appeals entirely.

Paramount Insurance Corporation is liable under the insurance policy.

In People v. Bustinera,8 this Court had the occasion to interpret the "theft clause" of an
insurance policy. In this case, the Court explained that when one takes the motor vehicle of
another without the latter’s consent even if the motor vehicle is later returned, there is theft –
there being intent to gain as the use of the thing unlawfully taken constitutes gain.

Also, in Malayan Insurance Co., Inc. v. Court of Appeals,9 this Court held that the taking of a
vehicle by another person without the permission or authority from the owner thereof is sufficient
to place it within the ambit of the word theft as contemplated in the policy, and is therefore,
compensable.

Records would show that respondents entrusted possession of their vehicle only to the extent
that Sales will introduce repairs and improvements thereon, and not to permanently deprive them
of possession thereof. Since, Theft can also be committed through misappropriation, the fact
that Sales failed to return the subject vehicle to respondents constitutes Qualified Theft. Hence,
since repondents’ car is undeniably covered by a Comprehensive Motor Vehicle Insurance
Policy that allows for recovery in cases of theft, petitioner is liable under the policy for the
loss of respondents’ vehicle under the "theft clause."
11. United Merchants Corp vs Country Bankers Insurance Corp

Facts:

United Merchants was a manufacturer and retailer of Christmas lights. It insured (fire
policy) its Christmas lights stored in the warehouse with Country Bankers. The warehouse was
burned down hence United sought indemnity from Country. Country rejected the claim on the
ground of Condition 15 of the policy which states that “If the claim be in any respect fraudulent,
or if any false declaration be made or used in support thereof, or if any fraudulent means or
devices are used by the Insured or anyone acting in his behalf to obtain any benefit under this
Policy; or if the loss or damage be occasioned by the wilful act, or with the connivance of the
Insured, all the benefits under this Policy shall be forfeited”. CBIC alleged that UMC’s claim was
fraudulent because UMC’s Statement of Inventory showed that it had no stocks in trade as of
31 December 1995, and that UMC’s suspicious purchases for the year 1996 did not even amount
to P25,000,000.00. UMC’s GIS and Financial Reports further revealed that it had insufficient
capital, which meant UMC could not afford the allegedP50,000,000.00 worth of stocks in trade.
United answered back saying that they have a certificate from the Bureau of Fire Protection
which states that : “The Bureau further certifies that no evidence was gathered to prove that the
establishment was wilfully, feloniously and intentionally set on fire.”

Issue:

Whether UMC is entitled to claim from CBIC the full coverage of its fire insurance policy.

Held:

No. If loss is proved apparently within a contract of insurance, the burden is upon the
insurer to establish that the loss arose from a cause of loss which is excepted or for which it is
not liable, or from a cause which limits its liability. In the present case, CBIC failed to discharge
its primordial burden of establishing that the damage or loss was caused by arson, a limitation
in the policy. Nevertheless just because the defense failed to prove arson does not mean that
fraud does not exist. In fact, fraud exists in this case. The Court ruled that the submission of
false invoices to the adjusters establishes a clear case of fraud and misrepresentation which
voids the insurer’s liability as per condition of the policy. A fraudulent discrepancy between the
actual loss and that claimed in the proof of loss voids the insurance policy. Mere filing of such a
claim will exonerate the insurer. Considering that all the circumstances point to the inevitable
conclusion that UMC padded its claim and was guilty of fraud, UMC violated Condition No.
15 of the Insurance Policy. Thus, UMC forfeited whatever benefits it may be entitled under
the Insurance Policy, including its insurance claim.
12. Insurance Case Digest: Malayan Insurance Co., Inc. V. Arnaldo (1987)

Lessons Applicable: Authority to Receive Payment/Effect of Payment (Insurance)

Laws Applicable: Article 64, Article 65, Section 77, Section 306 of the Insurance Code

FACTS:

 June 7, 1981: Malayan insurance co., inc. (MICO) issued to Coronacion Pinca, Fire
Insurance Policy for her property effective July 22, 1981, until July 22, 1982
October 15,1981: MICO allegedly cancelled the policy for non-payment, of the premium and
sent the corresponding notice to Pinca
 December 24, 1981: payment of the premium for Pinca was received by Domingo Adora,
agent of MICO
 January 15, 1982: Adora remitted this payment to MICO,together with other payments
 January 18, 1982: Pinca's property was completely burned
 February 5, 1982: Pinca's payment was returned by MICO to Adora on the ground that her
policy had been cancelled earlier but Adora refused to accept it and instead demanded for
payment
 Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of
the decision of the Insurance Commission. The petitioner filed its motion for reconsideration
on April 25, 1981, or fifteen days such notice, and the reglementary period began to run
again after June 13, 1981, date of its receipt of notice of the denial of the said motion for
reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days later, there
is no question that it is tardy by four days.
 Insurance Commission: favored Pinca
 MICO appealed
ISSUE: W/N MICO should be liable because its agent Adora was authorized to receive it

HELD: YES. petition is DENIED

 SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed
to the peril insured against. Notwithstanding any agreement to the contrary, no policy or
contract of insurance issued by an insurance company is valid and binding unless and until
the premium thereof has been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies.
 SEC. 306. xxx xxx xxx

Any insurance company which delivers to an insurance agant or insurance broker a policy or
contract of insurance shall be demmed to have authorized such agent or broker to receive on its
behalf payment of any premium which is due on such policy or contract of insurance at the time
of its issuance or delivery or which becomes due thereon.
 Payment to an agent having authority to receive or collect payment is equivalent to payment
to the principal himself; such payment is complete when the money delivered is into the
agent's hands and is a discharge of the indebtedness owing to the principal.
 SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except
upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless
it is based on the occurrence, after the effective date of the policy, of one or more of the
following:

(a) non-payment of premium;

(b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) discovery of fraud or material misrepresentation
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
(e) physical changes in the property insured which result in the property becoming
uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy would violate or
would place the insurer in violation of this Code.

As for the method of cancellation, Section 65 provides as follows:

 SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing,
mailed or delivered to the named insured at the address shown in the policy, and shall state
 (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written
request of the named insured, the insurer will furnish the facts on which the cancellation is
based.
 A valid cancellation must, therefore, require concurrence of the following conditions:

(1) There must be prior notice of cancellation to the insured;

(2) The notice must be based on the occurrence, after the effective date of the policy, of one
or more of the grounds mentioned;

(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the
address shown in the policy;

(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that
upon written request of the insured, the insurer will furnish the facts on which the cancellation is
based.
 All MICO's offers to show that the cancellation was communicated to the insured is its
employee's testimony that the said cancellation was sent "by mail through our mailing
section." without more
 It stands to reason that if Pinca had really received the said notice, she would not have made
payment on the original policy on December 24, 1981. Instead, she would have asked for a
new insurance, effective on that date and until one year later, and so taken advantage of the
extended period.
 Incidentally, Adora had not been informed of the cancellation either and saw no reason not
to accept the said payment
 Although Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO
sought to return it to Adora only on February 5, 1982, after it presumably had learned of the
ocurrence of the loss insured against on January 18, 1982 make the motives of MIC

including its insurance claim