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HEIRS OF LORETO C. MARAMAG V MARAMAG (2009) G.R. contract.

The company’s contention which was upheld by the


NO. 181132 JUNE 5, 2009 Court of Appeals provides that the circumstances surrounding
Lessons Applicable: To whom insurance proceeds payable Basilio’s death was caused by one of the risks excluded by the
(Insurance) supplementary contract which exempts the company from
liability.
FACTS:
 Loreto Maramag designated as beneficiary Issue: Is the Philippine American Life Insurance Co. liable to the
his concubine Eva de Guzman Maramag petitioner for the amount covered by the supplemental
 Vicenta Maramag and Odessa, Karl Brian, and Trisha contract?
Angelie (heirs of Loreto Maramag) and his concubine Eva
de Guzman Maramag, also suspected in the killing of Held: Yes.
Loreto and his illegitimate children are claiming for his
insurance. The circumstances of Basilio’s death cannot be taken as purely
 Vicenta alleges that Eva is disqualified from claiming intentional on the part of Basilio to expose himself to the
 RTC: Granted - civil code does NOT apply danger. There is no proof that his death was the result of
 CA: dismissed the case for lack of jurisdiction for filing intentional killing because there is the possibility that the
beyond reglementary period malefactor had fired the shot merely to scare away the people
around. In this case, the company’s defense points out that
ISSUE: W/N Eva can claim even though prohibited under the Basilio’s is included among the risks excluded in the
civil code against donation supplementary contract; however, the terms and phraseology
of the exception clause should be clearly expressed within the
HELD: YES. Petition is DENIED. understanding of the insured. Art. 1377 of the New Civil Code
 Any person who is forbidden from receiving any donation
provides that in case ambiguity, uncertainty or obscurity in the
under Article 739 cannot be named beneficiary of a life
interpretation of the terms of the contract, it shall be
insurance policy of the person who cannot make any
donation to him construed against the party who caused such obscurity.
 If a concubine is made the beneficiary, it is believed that Applying this to the situation, the ambiguous or obscure terms
the insurance contract will still remain valid, but the in the insurance policy are to be construed strictly against the
indemnity must go to the legal heirs and not to the insurer and liberally in favor of the insured party. The reason is
concubine, for evidently, what is prohibited under Art. to ensure the protection of the insured since these insurance
2012 is the naming of the improper beneficiary. contracts are usually arranged and employed by experts and
 SECTION 53. The insurance proceeds shall be applied legal advisers acting exclusively in the interest of the insurance
exclusively to the proper interest of the person in whose company. As long as insurance companies insist upon the use
name or for whose benefit it is made unless otherwise of ambiguous, intricate and technical provisions, which
specified in the policy. conceal their own intentions, the courts must, in fairness to
 GR: only persons entitled to claim the insurance proceeds those who purchase insurance, construe every ambiguity in
are either the insured, if still alive; or the beneficiary, if
favor of the insured.
the insured is already deceased, upon the maturation of
the policy.
FINMAN GENERAL ASSURANCE CORPORATION v. CA, GR No.
 EX: situation where the insurance contract was intended
100970, 1992-09-02
to benefit third persons who are not parties to the same
in the form of favorable stipulations or indemnity. In such Facts: October 22, 1986, deceased Carlie Surposa was insured
a case, third parties may directly sue and claim from the with petitioner Finman General Assurance Corporation under
insurer Finman General Teachers Protection Plan Master Policy No.
 It is only in cases where the insured has not designated
2005 and Individual Policy No. 08924 with his parents, spouses
any beneficiary, or when the designated beneficiary is
Julia and Carlos Surposa and brothers Christopher, Charles,
disqualified by law to receive the proceeds, that the
insurance policy proceeds shall redound to the benefit of Chester and Clifton, all surnamed Surposa, as beneficiaries.
the estate of the insured While said insurance policy was in full force and effect, the
insured Carlie Surposa, died on October 18, 1988 as a result of
CALANOC V. CA G.R. NO. L-8151 DECEMBER 16, 1955 a stab wound inflicted by one of the three (3) unidentified men
Doctrine: In case of ambiguity in an insurance contract
without provocation and warning on the part of the former
covering accidental death, the Supreme Court held that such
as... he and his cousin, Winston Surposa, were waiting for a
terms shall be construed strictly against the insurer and ride on their way home along Rizal-Locsin Streets, Bacolod City
liberally in favor of the insured in order to effect the purpose after attending the celebration of the "Maskarra Annual
of indemnity. Festival."... private respondent and the other beneficiaries of
Facts: Melencio Basilio, a watchman of the Manila Auto said insurance policy filed a written notice of claim with the
Supply, secured a life insurance policy from the Philippine petitioner insurance company which denied said claim
American Insurance Company in the amount of P2,000 to contending that murder and assault are not within the scope
which was attached a supplemental contract covering death of the coverage of the insurance... policy.
by accident. He later died from a agunshot wound on the Insurance Commission ruled in favor of insured/beneficiaries
occasion of a robbery committed; subsequently, his widow
was paid P2,000 representing the face value of the policy. The On February 24, 1989, private respondent filed a complaint
widow demanded the payment of the additional sum of with the Insurance Commission
P2,000 representing the value of the supplemental policy
"In the light of the foregoing, we find respondent liable to pay
which the company refused because the deceased died by
complainant the sum of P15,000.00 representing the proceeds
murder during the robbery and while making an arrest as an
of the policy with interest. As no evidence was submitted to
officer of the law which were expressly excluded in the
prove the claim for mortuary aid in the sum of P1,000.00, the SUN INSURANCE OFFICE LTD. V CA G.R. NO. 92383 JULY 17,
same... cannot be entertained. 1992

On July 11, 1991, the appellate court affirmed said decision. Facts: Lim accidentally killed himself with his gun after
removing the magazine, showing off, pointing the gun at his
petitioner filed this petition alleging grave abuse of discretion secretary, and pointing the gun at his temple. The widow, the
on the part of the appellate court in applying the principle of
beneficiary, sued the petitioner and won 200,000 as indemnity
"expresso unius exclusion alterius" in a personal accident
with additional amounts for other damages and attorney’s
insurance policy... since death resulting from murder and/or
fees. This was sustained in the Court of Appeals then sent to
assault are impliedly excluded in said insurance policy
the Supreme court by the insurance company.
considering that the cause of death of the insured was not
accidental but rather a deliberate and intentional act of the Issue:
assailant in killing the former as indicated by the location... of
1. Was Lim’s widow eligible to receive the benefits?
the lone stab wound on the insured.
2. Were the other damages valid?
Therefore, said death was committed with deliberate intent
Held:
which, by the very nature of a personal accident insurance
policy, cannot be indemnified. 1. Yes 2. No
Issue: Ratio: 1. There was an accident.
WON the death of the insured was committed...... with De la Cruz v. Capital Insurance says that "there is no accident
deliberate intent which, by the very nature of a personal when a deliberate act is performed unless some additional,
accident insurance policy, cannot be indemnified unexpected, independent and unforeseen happening occurs
which produces or brings about their injury or death." This was
Ruling:
true when he fired the gun.
We do not agree.
Under the insurance contract, the company wasn’t liable for
In the case at bar, it cannot, be pretended that Carlie Surposa bodily injury caused by attempted suicide or by one needlessly
died in the course of an assault or murder as a result of his exposing himself to danger except to save another’s life.
voluntary act considering the very nature of these crimes.
Lim wasn’t thought to needlessly expose himself to danger due
The personal accident insurance policy, involved herein to the witness testimony that he took steps to ensure that the
specifically enumerated only ten (10) circumstances wherein gun wasn’t loaded. He even assured his secretary that the gun
no liability attaches to petitioner insurance company for any was loaded.
injury, disability or loss suffered by the insured as a result of
There is nothing in the policy that relieves the insurer of the
any of the... stipulated causes. The principle of "expresso unius
responsibility to pay the indemnity agreed upon if the insured
exclusio alterius" -- the mention of one thing implies the
is shown to have contributed to his own accident.
exclusion of another thing -- is therefore applicable in the
instant case since murder and assault, not having been 2. “In order that a person may be made liable to the payment
expressly included in the enumeration of the... circumstances of moral damages, the law requires that his act be wrongful.
that would negate liability in said insurance policy cannot be The adverse result of an action does not per se make the act
considered by implication to discharge the petitioner wrongful and subject the act or to the payment of moral
insurance company from liability for any injury, disability Or damages. The law could not have meant to impose a penalty
loss suffered by the insured. on the right to litigate; such right is so precious that moral
damages may not be charged on those who may exercise it
Thus, the failure of the petitioner insurance company... to
erroneously. For these the law taxes costs.”
include death resulting from murder or assault among the
prohibited risks leads inevitably to the conclusion that it did If a party wins, he cannot, as a rule, recover attorney's fees and
not intend to limit or exempt itself from liability for such death. litigation expenses, since it is not the fact of winning alone that
entitles him to recover such damages of the exceptional
Principles:
circumstances enumerated in Art. 2208. Otherwise, every time
The terms 'accident' and 'accidental', as used in insurance a defendant wins, automatically the plaintiff must pay
contracts have not acquired any technical meaning, and are attorney's fees thereby putting a premium on the right to
construed by the courts in their ordinary and common litigate which should not be so. For those expenses, the law
acceptation. Thus, the terms have been taken to mean that deems the award of costs as sufficient.”
which happen by chance or... fortuitously, without intention
and design, and which is unexpected, unusual, and GEAGONIA V CA G.R. NO. 114427 FEBRUARY 6, 1995
unforeseen. An accident is an event that takes place without
Facts: Geagonia, owner of a store, obtained from Country
one's foresight or expectation -- an event that proceeds from
Bankers fire insurance policy for P100,000.00. The 1 year policy
an unknown cause, or is an unusual effect of a known cause
and covered thestock trading of dry goods. The policy noted
and, therefore,... not expected."
the requirement that "3. The insured shall give notice to the
The generally accepted rule is that, death or injury does not Company of any insurance or insurances already effected, or
result from accident or accidental means within the terms of which may subsequently be effected, covering any of the
an accident-policy if it is the natural result of the insured's property or properties consisting of stocks in trade, goods in
voluntary act, unaccompanied by anything unforeseen except process and/or inventories only hereby insured, and unless
the death or... injury. notice be given and the particulars of such insurance or
insurances be stated therein or endorsed in this policy What it had in mind was to discourage over-insurance. Indeed,
pursuant to Section 50 of the Insurance Code, by or on behalf the rationale behind the incorporation of "other insurance"
of the Company before the occurrence of any loss or damage, clause in fire policies is to prevent over-insurance and thus
all benefits under this policy shall be deemed forfeited, avert the perpetration of fraud. When a property owner
provided however, that this condition shall not apply when the obtains insurance policies from two or more insurers in a total
total insurance or insurances in force at the time of the loss or amount that exceeds the property's value, the insured may
damage is not more than P200,000.00." The petitioners’ stocks have an inducement to destroy the property for the purpose
were destroyed by fire. He then filed a claim which was of collecting the insurance. The public as well as the insurer is
subsequently denied because the petitioner’s stocks were interested in preventing a situation in which a fire would be
covered by two other fire insurance policies for Php 200,000 profitable to the insured.
issued by PFIC. The basis of the private respondent's denial
was the petitioner's alleged violation of Condition 3 of the FORTUNE INSURANCE AND SURETY CO., INC. V. CA (1995)
policy. Geagonia then filed a complaint against the private G.R. No. 115278 May 23, 1995
respondent in the Insurance Commission for the recovery of Lessons Applicable: Stipulations Cannot Be Segregated
P100,000.00 under fire insurance policy and damages. He (Insurance)
claimed that he knew the existence of the other two policies.
FACTS:
But, he said that he had no knowledge of the provision in the
private respondent's policy requiring him to inform it of the  Producers Bank of the Philippines insured
prior policies and this requirement was not mentioned to him with Fortune Insurance and Surety Co. P725,000
by the private respondent's agent. The Insurance Commission which was lost during a robbery of Producer's
found that the petitioner did not violate Condition 3 as he had armored vehicle while it was in transit from Pasay City
no knowledge of the existence of the two fire insurance City to its Makati head office.
policies obtained from the PFIC; that it was Cebu Tesing  The armored car was driven by Benjamin Magalong Y
Textiles w/c procured the PFIC policies w/o informing him or de Vera, escorted by Security Guard Saturnino Atiga Y
securing his consent; and that Cebu Tesing Textile, as his Rosete.
creditor, had insurable interest on the stocks. The Insurance  After an investigation conducted by the Pasay police
Commission then ordered the respondent company to pay authorities, the driver Magalong and guard Atiga
complainant the sum of P100,000.00 with interest and were charged, together with Edelmer Bantigue Y
attorney’s fees. CA reversed the decision of the Insurance Eulalio, Reynaldo Aquino and John Doe, with violation
Commission because it found that the petitioner knew of the of P.D. 532 (Anti-Highway Robbery Law)
existence of the two other policies issued by the PFIC.  Upon claiming, Fortune refused stating that it is not
liable since under the general exceptions of the
Issues:
policy:
1. WON the petitioner had not disclosed the two insurance  any loss caused by any dishonest, fraudulent or
policies when he obtained the fire insurance and thereby criminal act of the insured or any officer, employee,
violated Condition 3 of the policy. partner, director, trustee or authorized
2. WON he is prohibited from recovering representative of the Insured whether acting alone or
in conjunction with others. . . .
Held: Yes. No. Petition Granted  RTC: favored Producers Bank since Driver and
Security Guard were merely assigned
Ratio:
 CA: Affirmed RTC
1. The court agreed with the CA that the petitioner knew of the
ISSUE: W/N the driver and security guard are employees under
prior policies issued by the PFIC. His letter of 18 January 1991
the general exception
to the private respondent conclusively proves this knowledge.
His testimony to the contrary before the Insurance HELD: YES. Petition is granted.
Commissioner and which the latter relied upon cannot prevail
over a written admission made ante litem motam. It was,  It is clear to us that insofar as Fortune is concerned, it
indeed, incredible that he did not know about the prior policies was its intention to exclude and exempt from
since these policies were not new or original. protection and coverage losses arising from
dishonest, fraudulent, or criminal acts of persons
2. Stated differently, provisions, conditions or exceptions in granted or having unrestricted access to Producers'
policies which tend to work a forfeiture of insurance policies money or payroll. When it used then the term
should be construed most strictly against those for whose "employee," it must have had in mind any person who
benefits they are inserted, and most favorably toward those qualifies as such as generally and universally
against whom they are intended to operate. With these understood, or jurisprudentially established in the
principles in mind, Condition 3 of the subject policy is not light of the four standards in the determination of the
totally free from ambiguity and must be meticulously employer-employee relationship, 21 or as statutorily
analyzed. Such analysis leads us to conclude that (a) the declared even in a limited sense as in the case of
prohibition applies only to double insurance, and (b) the nullity Article 106 of the Labor Code which considers the
of the policy shall only be to the extent exceeding P200,000.00 employees under a "labor-only" contract as
of the total policies obtained. Furthermore, by stating within employees of the party employing them and not of
Condition 3 itself that such condition shall not apply if the total the party who supplied them to the employer
insurance in force at the time of loss does not exceed  Producers entrusted the three with the specific duty
P200,000.00, the private respondent was amenable to assume to safely transfer the money to its head office, with
a co-insurer's liability up to a loss not exceeding P200,000.00. Alampay to be responsible for its custody in transit;
Magalong to drive the armored vehicle which would BF Lifeman Insurance Corporationn in Quezon which office
carry the money; and Atiga to provide the needed was supposed to forward the papers to the Manila office.
security for the money, the vehicle, and his two other  On November 25, 1987, Perez died while he was riding a
companions. banca which capsized during a storm.
 A "representative" is defined as one who represents  At the time of his death, his application papers for the
or stands in the place of another; one who represents additional insurance were still with the Quezon office. Lalog
others or another in a special capacity, as an agent, testified that when he went to follow up the papers, he found
and is interchangeable with "agent." them still in the Quezon office and so he personally brought
the papers to the Manila office of BF Lifeman Insurance
ENRIQUEZ V. SUNLIFE 41 PHIL 269 Corporation. It was only on November 27, 1987 that said
Facts: papers were received in Manila.
 On Sept. 24 1917, Herrer made an application to SunLife  Without knowing that Perez died on November 25, 1987, BF
through its office in Manila for life annuity. Lifeman Insurance Corporation approved the application and
issued the corresponding policy for the P50,000.00 on
 2 days later, he paid the sum of 6T to the company’s manager
in its Manila office and was given a receipt. December 2, 1987
 On Nov. 26, 1917, the head office gave notice of acceptance  Virginia went to Manila to claim the benefits under the
by cable to Manila. On the same date, the Manila office insurance policies of the deceased. She was paid P40,000.00
prepared a letter notifying Herrer that his application has been under the first insurance policy for P20,000.00 (double
accepted and this was placed in the ordinary channels of indemnity in case of accident) but the insurance company
transmission, but as far as known was never actually mailed refused to pay the claim under the additional policy coverage
and never received by Herrer. of P50,000.00, the proceeds of which amount to P150,000.00
in view of a triple indemnity rider on the insurance policy.
 Herrer died on Dec. 20, 1917. The plaintiff as administrator
of Herrer’s estate brought this action to recover the 6T paid by  In its letter of January 29, 1988 to Virginia A. Perez, the
the deceased. insurance company maintained that the insurance for
P50,000.00 had not been perfected at the time of the death of
Issue: WON the insurance contract was perfected. Primitivo Perez. Consequently, the insurance company
refunded the amount of P2,075.00 which Virginia Perez had
Held: NO.The contract for life annuity was NOT perfected
paid
because it had NOT been proved satisfactorily that the
 Lifeman filed for the rescission and the declaration of nullity.
acceptance of the application ever came to the knowledge of
Perez, on the other hand, averred that the deceased had
the applicant. An acceptance of an offer of insurance NOT
fulfilled all his prestations under the contract and all the
actually or constructively communicated to the proposer does
elements of a valid contract are present.
NOT make a contract of insurance, as the locus poenitentiae is
 RTC ruled in favor of Perez. CA reversed.
ended when an acceptance has passed beyond the control of
the party.
Issue: WON there was a perfected additional insurance
NOTE: Life annuity is the opposite of a life insurance. In life contract.
annuity, a big amount is given to the insurance company, and Held: The contract was not perfected. Insurance is a contract
if after a certain period of time the insured is stil living, he is whereby, for a stipulated consideration, one party undertakes
entitled to regular smaller amounts for the rest of his life. to compensate the other for loss on a specified subject by
Examples of Life annuity are pensions. Life Insurance on the specified perils. A contract, on the other hand, is a meeting of
other hand, the insured during the period of the coverage the minds between two persons whereby one binds himself,
makes small regular payments and upon his death, the insurer with respect to the other to give something or to render some
pays a big amount to his beneficiaries. service. Consent must be manifested by the meeting of the
offer and the acceptance upon the thing and the cause which
PEREZ V. CA 323 SCRA 613 (2000) are to constitute the contract. The offer must be certain and
the acceptance absolute. When Primitivo filed an application
Facts:
for insurance, paid P2,075.00 and submitted the results of his
 Primitivo Perez had been insured with the BF Lifeman
medical examination, his application was subject to the
Insurance Corporation since 1980 for P20,000.00.
acceptance of private respondent BF Lifeman Insurance
 In October 1987, an agent of Lifeman, Rodolfo Lalog, visited
Corporation. The perfection of the contract of insurance
Perez in Quezon and convinced him to apply for additional
between the deceased and respondent corporation was
insurance coverage of P50,000.00, to avail of the ongoing
further conditioned upon compliance with the following
promotional discount of P400.00 if the premium were paid
requisites stated in the application form:
annually.  Primitivo B. Perez accomplished an application
form for the additional insurance coverage. Virginia A. Perez, "there shall be no contract of insurance unless and until a policy
his wife, paid P2,075.00 to Lalog. The receipt issued by Lalog is issued on this application and that the said policy shall not
indicated the amount received was a "deposit." take effect until the premium has been paid and the policy
 Unfortunately, Lalog lost the application form accomplished delivered to and accepted by me/us in person while I/We,
by Perez and so on October 28, 1987, he asked the latter to fill am/are in good health."
up another application form. On November 1, 1987, Perez was
The assent of private respondent BF Lifeman Insurance
made to undergo the required medical examination, which he
Corporation therefore was not given when it merely received
passed.
the application form and all the requisite supporting papers of
 Lalog forwarded the application for additional insurance of
the applicant. Its assent was given when it issues a
Perez, together with all its supporting papers, to the office of
corresponding policy to the applicant. Under the
abovementioned provision, it is only when the applicant pays
the premium and receives and accepts the policy while he is in Facts:
good health that the contract of insurance is deemed to have  On March 13, 1963, Pacific secured temporary insurance
been perfected. It is not disputed, however, that when from the Workemen’s Insurance Co. for its exportation of logs
Primitivo died on November 25, 1987, his application papers to Japan. Workmen issued on said date Cover Note 1010
for additional insurance coverage were still with the branch insuring said cargo.
office of respondent corporation in Gumaca and it was only  The regular marine policies were issued by the company in
two days later, or on November 27, 1987, when Lalog favor of Pacific on Apr 2, 1963. The 2 marine policies bore the
personally delivered the application papers to the head office number 53H01032 and 53H01033.
in Manila. Consequently, there was absolutely no way the  After the issuance of the cover note but BEFORE the issuance
acceptance of the application could have been communicated of the 2 policies, some of the logs intended to be exported
to the applicant for the latter to accept inasmuch as the were lost due to a typhoon.
applicant at the time was already dead.  Pacific filed its claim with the company, but the latter
refused, contending that said loss may not be considered as
GREAT PACIFIC LIFE ASSURANCE COMPANY VS COURT OF covered under the cover note because such became null and
APPEALS (1979) void by virtue of the issuance of the marine policies.
89 SCRA 543 – Mercantile Law – Insurance Law – Concealment
– Insurance Contract as an Uberrima Fides Contract Issue: WON the cover not was without consideration, thus null
and void.
In March 1957, Ngo Hing filed an application for a 20-
year endowment policy for the life of his one-year old Held: It was with consideration. SC upheld Pacific’s contention
daughter with the Great Pacific Life Assurance Company that said cover not was with consideration. The fact that no
(Grepalife). Lapulapu Mondragon was the insurance agent separate premium was paid on the cover note before the loss
who assisted Ngo Hing. The insurance policy was for was insured against occurred does not militate against the
P50,000.00. The proper form was filled out and Ngo Hing paid validity of Pacific’s contention, for no such premium could
the insurance premium. He received a binding deposit receipt have been paid, since by the nature of the cover note, it did
in return. Said receipt however was subject to certain not contain, as all cover notes do not contain, particulars of the
conditions, among which is the acceptance of Grepalife. shipment that would serve as basis for the computation of the
premiums. As a logical consequence, no separate premiums
Grepalife eventually denied the insurance application because
are required to be paid on a cover note.
the endowment plan by Grepalife is not offered for minors
below seven years old. Grepalife, instead made a counter-offer If the note is to be treated as a separate policy instead of
which Ngo Hing failed to accept because Mondragon, instead integrating it to the regular policies subsequently issued, its
of communicating the said denial to Ngo Hing, wrote a letter purpose would be meaningless for it is in a real sense a
to Grepalife trying to convince Grepalife to allow one-year olds contract, not a mere application.
to be covered by endowment plans.
AREOLA V CA G.R. NO. 95641 SEPTEMBER 22, 1994
In May 1957, Ngo Hing’s one-year old daughter died. Ngo Hing
tried to collect the insurance claim but Grepalife refused as it Facts: Prudential Guarantee cancelled Areola’s personal
claimed that the insurance contract was never perfected sans accident insurance on the grounds that the latter failed to pay
their acceptance. his premiums 7 months after issuing the policy. Areola was
supposed to pay the total amount of P1,609.65 which included
ISSUE: Whether or not Grepalife should pay the insurance the premium of P1,470.00, documentary stamp of P110.25
claim. and 2% premium tax of P29.40. The statement of account had
a stipulation not considering it a receipt. It also reminded the
HELD: No. As properly ruled by the lower court as well as the customer to ask for a receipt after payment. There was also a
Court of Appeals, the insurance contract was never completed stipulation calling for a demand for a provisional receipt after
because Grepalife never accepted the insurance offer. The payment to an agent. A provisional receipt was sent to
binding deposit receipt issued to Ngo Hing is only petitioner telling him that the provisional receipt would be
acknowledgement of his application and receipt of his confirmed by an official one. The company then cancelled the
payment for the insurance premium. policy for non-payment of premiums. After being surprised,
Areola confronted a company agent and demanded an official
The Supreme Court also noted that Ngo Hing failed to disclose receipt. The latter told him that it was a mistake, but never
the fact that his one-year old daughter was a mongoloid. Such gave him an official receipt. Areola sent a letter demanding
congenital defect was withheld by Ngo Hing with bad faith and that he be reinstated or he would file for damages if his
such risk to be assumed by the insurance company. demand was not met. The company then told him that his
payments weren’t in full yet. The company replied to Areola by
The contract of insurance is one of perfect good faith uberrima telling him that there was reason to believe that no payment
fides meaning good faith, absolute and perfect candor or has been made since no official receipt was issued. The
openness and honesty; the absence of any concealment or company then told him that they would still hold him under
demotion, however slight not for the insured alone but equally the policy. The company then confirmed that he paid the
so for the insurer. Concealment is a neglect to communicate premium and that they would extend the policy by one year.
that which a party knows and ought to communicate. Whether Thereby, the company offered to reinstate same policy it had
intentional or unintentional the concealment entitles the previously cancelled and even proposed to extend its lifetime
on finding that the cancellation was erroneous and that the
insurer to rescind the contract of insurance.
premiums were paid in full by petitioner-insured but were not
PACIFIC TIMBER V. CA 112 SCRA 199 remitted by the company’s branch manager, Mr. Malapit.
However, they were too late for Areola already filed an action agent acting within the general scope of his authority even
for breach of contract in the trial court. The company’s defense though the agent is secretly abusing his authority and
lay in rectifying its omission; hence, there was no breach of attempting to perpetrate a fraud upon his principal or some
contract. The court ruled in favor of Areola and asked other person.” Prudential is liable for damages for the
Prudential to pay 250,000 pesos in moral and exemplary fraudulent acts committed by Malapit. Reinstating the
damages. The court held that the company was in bad faith in insurance policy cannot obliterate the injury inflicted. A
cancelling the policy. Had the insured met an accident at that contract of insurance creates reciprocal obligations for both
time, he wouldn’t be covered by the policy. insurer and insured. Reciprocal obligations are those which
arise from the same cause and in which each party is both a
This ruling was challenged on appeal by respondent insurance debtor and a creditor of the other, such that the obligation of
company, denying bad faith in unilaterally cancelling the one is dependent upon the obligation of the other.
policy. The AC absolved Prudential on the grounds that it was
not motivated by negligence, malice or bad faith in cancelling 2. Due to the agreement to enter into a contract of insurance
subject policy. Rather, the cancellation of the insurance policy where Prudential promised to extend protection to petitioner-
was based on what the existing records showed. The court insured against the risk insured, there was a debtor creditor
even added that the errant manager who didn’t remit the relationship between the two parties. Under Article 1191, the
profits was forced to resign. Areola then filed for a petition in injured party is given a choice between fulfillment or rescission
the Supreme Court. of the obligation in case one of the obligors fails to comply with
what is incumbent upon him. However, said article entitles the
injured party to payment of damages, regardless of whether
Issues:
he demands fulfillment or rescission of the obligation. The
1. Did the erroneous act of cancelling subject insurance policy
damages would be nominal because the insurance company
entitle petitioner-insured to payment of damages?
took steps to rectify the contract. There was also no actual or
2. Did the subsequent act of reinstating the wrongfully
substantial damage inflicted. Nominal damages are
cancelled insurance policy by respondent insurance company,
“recoverable where a legal right is technically violated and
in an effort to rectify such error, obliterate whatever liability
must be vindicated against an invasion that has produced no
for damages it may have to bear, thus absolving it?
actual present loss of any kind, or where there has been a
breach of contract and no substantial injury or actual damages
Held: Yes. No. Petition granted. whatsoever have been or can be shown.”
Ratio:
1. Petitioner alleged that the manager’s misappropriation of VALENZUELA V CA G.R. NO. 83122 OCTOBER 19, 1990
his premium payments is the proximate cause of the
cancellation of the insurance policy. Subsequent
reinstatement could not possibly absolve respondent Facts: Petitioner Valenzuela, a General Agent respondent
insurance company from liability, due to the breach of Philamgen, was authorized to solicit and sell all kinds of non-
contract. He contended that damage had already been done. life insurance. He had a 32.5% commission rate. From 1973 to
Prudential averred that the equitable relief sought by 1975, Valenzuela solicited marine insurance from Delta
petitioner-insured was granted to the filing of the complaint, Motors, Inc. in the amount of P4.4 Million from which he was
petitioner-insured is left without a cause of action. entitled to a commission of 32%. However, Valenzuela did not
Reinstatement effectively restored petitioner-insured to all his receive his full commission which amounted to P1.6 Million
rights under the policy. from the P4.4 Million. Premium payments amounting to
P1,946,886.00 were paid directly to Philamgen. Valenzuela’s
The court held that Malapit’s fraudulent act of commission amounted to P632,737.00. Philamgen wanted to
misappropriating the premiums paid by petitioner-insured is cut Valenzuela’s commission to 50% of the amount. He
directly imputable to respondent insurance company. A declined. When Philamgen offered again, Valenzuela firmly
corporation, such as respondent insurance company, acts reiterated his objection. Philamgen took drastic action against
solely thru its employees. The latters’ acts are considered as its Valenzuela. They: reversed the commission due him,
own. Malapit represented its interest and acted in its behalf. threatened the cancellation of policies issued by his agency,
His act of receiving the premiums collected is well within the and started to leak out news that Valenzuela has a substantial
province of his authority. Thus, his receipt of said premiums is debt with Philamgen. His agency contract was terminated. The
receipt by private respondent insurance company who, by petitioners sought relief by filing the complaint against the
provision of law is bound by the acts of its agent. private respondents. The trial court found that the principal
cause of the termination as agent was his refusal to share his
Article 1910 thus reads: Art. 1910. The principal must comply Delta commission. The court considered these acts as
with all the obligations which the agent may have contracted harassment and ordered the company to pay for the resulting
within the scope of his authority. As for any obligation wherein damage in the value of the commission. They also ordered the
the agent has exceeded his power, the principal is not bound company to pay 350,000 in moral damages. The company
except when he ratifies it expressly or tacitly. Malapit’s failure appealed. The CA ordered Valenzuela to pay the entire amount
to remit the premiums he received cannot constitute a of the commission. Hence, this appeal by Valenzuela.
defense for private respondent insurance company; no
exoneration from liability could result therefrom. The fact that Issues:
private respondent insurance company was itself defrauded 1. WON the agency contract is coupled with interest on the
due to the anomalies that took place does not free the same part of agent Valenzuela.
from its obligation to petitioner Areola. As held in Prudential 2. Whether or not Philamgen can be held liable for damages
Bank v. Court of Appeals “A bank is liable for wrongful acts of due to the termination of the General Agency Agreement it
its officers done in the interests of the bank or in the course of entered into with the petitioners.
dealings of the officers in their representative capacity but not 3. WON Valenzuela should pay the premiums he collected.
for acts outside the scope of their authority. Accordingly, a
banking corporation is liable to innocent third persons where
the representation is made in the course of its business by an Held: Yes. Yes. Petition granted
Ratio: The insurance coverage did not go into effect or did not
1. In any event the principal’s power to revoke an agency at continue and the obligation of Philamgen as insurer ceased.
will is so pervasive, that the Supreme Court has consistently Philam can’t demand from or sue Valenzuela for the unpaid
held that termination may be effected even if the principal acts premiums. The court held that the CA’s giving credence to
in bad faith, subject only to the principal’s liability for damages. an audit that showed Valenzuela owing Philamgen
The Supreme Court accorded great weight on the trial court’s P1,528,698.40 was unwarranted. Valenzuela had no unpaid
factual findings and found the cause of the conflict to be account with Philamgen. But, facts show that the
Valenzuela’s refusal to share the commission. Philamgen told beginning balance of Valenzuela’s account with Philamgen
the petitioners of its desire to share the Delta Commission with amounted to P744,159.80. 4 statements of account were sent
them. It stated that should Delta back out from the agreement, to the agent.
the petitioners would be charged interests through a reduced
commission after full payment by Delta. Philamgen proposed It was only after the filing of the complaint that a radically
reducing the petitioners’ commissions by 50% thus giving different statement of accounts surfaced in court. Certainly,
them an agent’s commission of 16.25%. The company insisted Philamgen’s own statements made by its own accountants
on the reduction scheme. The company pressured the agents over a long period of time and covering examinations made on
to share the income with the threat to terminate the agency. four different occasions must prevail over unconfirmed and
The petitioners were also told that the Delta commissions unaudited statements made to support a position made in the
would not be credited to their account. This continued until course of defending against a lawsuit. The records of
the agency was terminated. Philamgen itself are the best refutation against figures made
as an afterthought in the course of litigation. Moreover,
Records also show that the agency is one “coupled with an Valenzuela asked for a meeting where the figures would be
interest,” and, therefore, should not be freely revocable at the reconciled. Philamgen refused to meet with him and, instead,
unilateral will of the company. The records sustain the finding terminated the agency agreement. After off-setting the
that the private respondent started to covet a share of the amount, Valenzuela had overpaid Philamgen the amount of
insurance business that Valenzuela had built up, developed P530,040.37 as of November 30, 1978. Philamgen cannot later
and nurtured. The company appropriated the entire insurance be heard to complain that it committed a mistake in
business of Valenzuela. Worse, despite the termination of the its computation. The alleged error may be given credence if
agency, Philamgen continued to hold Valenzuela jointly and committed only once. But as earlier stated, the reconciliation
severally liable with the insured for unpaid premiums. of accounts was arrived at four (4) times on different occasions
where Philamgen was duly represented by its account
Under these circumstances, it is clear that Valenzuela had an executives. On the basis of these admissionsand
interest in the continuation of the agency when it was representations, Philamgen cannot later on assume a different
unceremoniously terminated not only because of the posture and claim that it was mistaken in its representation
commissions he procured, but also Philamgen’s stipulation with respect to the correct beginning balance as of July 1977
liability against him for unpaid premiums. The respondents amounting to P744,159.80. The audit reportcommissioned by
cannot state that the agency relationship between Valenzuela Philamgen is unreliable since its results are admittedly based
and Philamgen is not coupled with interest. on an unconfirmed and unaudited beginning balance of
There is an exception to the principle that an agency is P1,758,185.43.
revocable at will and that is when the agency has been given Philamgen has been appropriating for itself all these years the
not only for the interest of the principal but also for the mutual gross billings and income that it took away from the
interest of the principal and the agent. The principal may not petitioners. A principal can be held liable for damages in cases
defeat the agent’s right to indemnification by a termination of of unjust termination of agency. This Court ruled that where
the contract of agency. Also, if a principal violates a contractual no time for the continuance of the contract is fixed by its
or quasi-contractual duty which he owes his agent, the agent terms, either party is at liberty to terminate it at will, subject
may as a rule bring an appropriate action for the breach of that only to the ordinary requirements of good faith. The right of
duty. the principal to terminate his authority is absolute and
unrestricted, except only that he may not do so in bad faith.
2. Hence, if a principal acts in bad faith and with abuse of right
in terminating the agency, then he is liable in damages. The The circumstances of the case, however, require that the
Civil Code says that “every person must in the exercise of his contractual relationship between the parties shall be
rights and in the performance of his duties act with justice, give terminated upon the satisfaction of the judgment. No more
every one his due, and observe honesty and good faith: (Art. claims arising from or as a result of the agency shall be
19, Civil Code), and every person who, contrary to law, wilfully entertained by the courts after that date.
or negligently causes damages to another, shall indemnify the
latter for the same (Art. 20, Civil Code). TIBAY V CA G.R. NO. 119655. MAY 24, 1996

3. As to the issue of whether or not the petitioners are liable Facts: Fortune Life issued a fire insurance Policy to Tibay on her
to Philamgen for the unpaid and uncollected premiums which two-storey residential building at Zobel Street, Makati City.
the appellate court ordered Valenzuela to pay, the respondent The insurance was for P600,000.00 covering the period from
court erred in holding Valenzuela liable. Under Section 77 of January 23, 1987 to January 23, 1988. On January 23 1987,
the Insurance Code, the remedy for the non-payment of Tibay only paid P600.00 of 3,000 peso premium and left a
premiums is to put an end to and render the insurance policy balance. The insured building was completely destroyed by
not binding. Philippine Phoenix- non-payment of premium fire. Tibay then paid the balance. On the same day, she filed a
does not merely suspend but puts an end to an insurance claim on the policy. Her claim was accordingly referred to the
contract since the time of the payment is peculiarly of the adjuster, Goodwill, which immediately wrote Violeta
essence of the contract. Section 776 of the insurance Code requesting her tofurnish it with the necessary documents for
says that no contract of insurance by an insurance company is the investigation and processing of her claim. Petitioner
valid and binding unless and until the premium has been paid, complied, and she signed a non-waiver agreement. Fortune
notwithstanding any agreement to the contrary Since the denied the claim for violation of the Insurance Code. Tibay
premiums have not been paid, the policies issued have lapsed. sued for damages in the amount of P600,000.00 representing
the total coverage of the policy. The trial court ruled for are based on the hypothesis of prompt payments. They not
petitioners and made fortune liable for the total value of the only calculate on the receipt of the premiums when due, but
insured building and personal properties. The Court of Appeals on the compounding interest upon them. It is on this basis that
reversed the court by removing liability from Fortune after they are enabled to offer assurance at the favorable rates they
returning the premium. Hence this petition for review. The do.” The failure of appellants to fully pay their premium
petitioner contended that Fortune remained liable under the prevented the contract of insurance from becoming binding an
subject fire insurance policy in spite of the failure of petitioners Fortune. This series of acts is tainted with misrepresentation
to pay their premium in full. and violates the uberrimae fidae principle of insurance
contracts. Tibay had entered into a “Non-Waiver Agreement”
with the adjuster which permitted Fortune to claim non-
Issue: May a fire insurance policy be valid, binding and
payment of premium as a defense. The law neither requires,
enforceable upon mere partial payment of premium?
nor measures the strength of the vinculum juris by any specific
amount of premium payment. Payment on the premium,
Held: No. Petition dismissed. partly or in full, is made by the insured which the insurer
Ratio: The pertinent provisions read: 2. This policy including accepts. In fine, it is either that a juridical tie exists (by such
any renewal thereof and/or any endorsement thereon is not payment) or that it is not extant at all (by an absence thereof).
in force until the premium has been fully paid to and duly Once the juridical relation comes into being, the full efficacy
receipted by the Company in the manner provided herein. This follows. This is a partially performed contract. The non-
policy shall be deemed effective, valid and binding upon the payment of the balance shouldn’t result in an automatic
Company only when the premiums therefor have actually cancellation of the contract; otherwise, the right to decide the
been paid in full and duly acknowledged in a receipt signed by effectivity of the contract would become potestative. Instead,
any authorized official of the company Where the premium the parties should be able to demand from each other the
has only been partially paid and the balance paid only after the performance of whatever obligations they had assumed or, if
peril insured against has occurred, the insurance contract did desired, sue timely for the rescission of the contract. In the
not take effect and the insured cannot collect at all on the meanwhile, the contract endures, and an occurrence of the
policy. The Insurance Code which says that no policy or risk insured riggers the insurer’s liability. Also, legal
contract of insurance issued by an insurance company is valid compensation arises where insurer’s liability to the insured
and binding unless and until the premium has been paid. What would simply be reduced by the balance of the premium. It
does “unless and until the premium thereof has been paid” must here be noted that the insured had made, and the insurer
mean? Escosura v. San Miguel- the legislative practice was to had accepted partial premium payment on the policy weeks
interpret “with pay” in accordance to the intention of before the risk insured against took place. An insurance is an
distinguishbetween full and partial payment, where the aleatory contract effective upon its perfection although the
modifying term is used. Petitioners used Philippine Phoenix v. occurrence of a condition or event may later dictate the
Woodworks, where partial payment of the premium made the demandability of certain obligations. Fortune’s stipulation that
policy effective during the whole period of the policy. The SC insurance shall not “be . . . in force until the premium has been
didn’t consider the 1967 Phoenix case as persuasive due to the fully paid,” and that it “shall be deemed effective, valid and
different factual scenario. In Makati Tuscany v CA, the parties binding upon the company only when the premiums therefor
mutually agreed that the premiums could be paid in have actually been paid in full and duly acknowledged,”
installments, hence, this Court refused to invalidate the override the efficaciousness of the insurance contract despite
insurance policy. Nothing in Article 77 of the Code suggested the payment and acceptance. Article 78 of the Insurance Code
that the parties may not agree to allow payment of the “An acknowledgment in a policy or contract of insurance of the
premiums in installment, or to consider the contract as valid receipt of premium is conclusive evidence of its payment, so
and binding upon payment of the first premium. Phoenix and far as to make the policy binding, notwithstanding any
Tuscany demonstrated the waiver of prepayment in full by the stipulation therein that it shall not be binding until the
insurer. In this case however, there was no waiver. There was premium is actually paid“ Even if a portion was paid in the
a stipulation that the policy wasn’t in force until the premium premium, the insurance coverage becomes effective and
has been fully paid and receipted. There was no juridical tie of binding, any stipulation in the policy to the contrary
indemnification from the fractional payment of premium. The notwithstanding.
insurance contract itself expressly provided that the policy
would be effective only when the premium was paid in full. AMERICAN HOME V CHUA G.R. NO. 130421. JUNE 28, 1999
Verily, it is elemental law that the payment of premium is C.J. DAVIDE
requisite to keep the policy of insurance in force. If the
premium is not paid in the manner prescribed in the policy as
intended by the parties the policy is ineffective. Partial Facts: Chua obtained from American Home a fire insurance
payment even when accepted as a partial payment will not covering the stock-in-trade of his business. The insurance was
keep the policy alive. South Sea v CA stipulated 2 exceptions to due to expire on March 25, 1990.
the requirement of payment of the entire premium as a
prerequisite to the validity of the insurance contract. These are On April 5, 1990, Chua issued a check for P2,983.50 to
when in case the insurance coverage relates to life or American Home’s agent, James Uy, as payment for the renewal
insurance when a grace period applies, and when the insurer of the policy. The official receipt was issued on April 10. In turn,
makes a written acknowledgment of the receipt of premium to the latter a renewal certificate. A new insurance policy was
be conclusive evidence of payment. Hence, in the absence of issued where petitioner undertook to indemnify respondent
clear waiver of prepayment in full by the insurer, the insured for any damage or loss arising from fire up to P200,000 March
cannot collect on the proceeds of the policy. “The terms of the 20, 1990 to March 25, 1991. On April 6, 1990, the business was
insurance policy constitute the measure of the insurer’s completely razed by fire. Total loss was estimated between
liability. In the absence of statutory prohibition to the contrary, P4,000,000 and P5,000,000. Respondent filed an insurance
insurance companies have the same rights as individuals to claim with petitioner and four other co-insurers, namely,
limit their liability and to impose whatever conditions they Pioneer Insurance, Prudential Guarantee, Filipino Merchants
deem best upon their obligations not inconsistent with public and Domestic Insurance. Petitioner refused to honor the claim
policy.” Dissent: J. Vitug “All the calculations of the company hence, the respondent filed an action in the trial court.
American Home claimed there was no existing contract prior knowledge thereof. The loss adjuster, being an employee
because respondent did not pay the premium. Even with a of petitioner, is deemed a representative of the latter whose
contract, they contended that he was ineligible bacue of his awareness of the other insurance contracts binds petitioner.
fraudulent tax returns, his failure to establish the actual loss
and his failure to notify to petitioner of any insurance already 3. Petitioner is liable to pay the loss. But there is merit in
effected. The trial court ruled in favor of respondent because petitioner’s grievance against the damages and attorney’s fees
the respondent paid by way of check a day before the fire awarded. There was no basis for an award for loss of profit.
occurred and that the other insurance companies promptly This cannot be shouldered by petitioner whose obligation is
paid the claims. American homes was made to pay 750,000 in limited to the object of insurance. There was no fraud to justify
damages. moral damages. Exemplary damages can’t be awarded
because the defendant never acted in a reckless manner to
The Court of Appeals found that respondent’s claim was claim insurance. Attorney’s fees can’t be recovered as part of
substantially proved and petitioner’s unjustified refusal to pay damages because no premium should be placed on the right
the claim entitled respondent to the award of damages. to litigate.

American Home filed the petition reiterating its stand that MERCANTILE INSURANCE CO VS. YSMAEL
there was no existing insurance contract between the parties.
It invoked Section 77 of the Insurance Code, which provides
that no policy or contract of insurance issued by an insurance Facts: Felipe Ysmael, Jr. & Co., Inc. and Magdalena Estate, lnc.
company is valid and binding unless and until the premium represented by Felipe Ysmael, Jr. as president and in his
thereof has been paid and the case of Arce v. Capital Insurance personal capacity executed with the plaintiff Mercantile
that until the premium is paid there is no insurance. Insurance Co., Inc. anindemnity agreement. The defendants
Felipe Ysmael, Jr. & Co., Inc. and Felipe Ysmael, Jr. bound
Issues: jointly and severally to indemnify the plaintiff, from and
1. Whether there was a valid payment of premium, against any and all payments, damages, costs, losses,
considering that respondent’s check was cashed after the penalties, charges and expenses which said company as surety
occurrence of the fire (MERICO Bond No. 0007) shall incur or become liable to pay.
2. Whether respondent violated the policy by his submission Paragraph 3 of the indemnity agreement expressly provides:
of fraudulent documents and non-disclosure of the other
3) ACCRUAL OF ACTION: Notwithstanding the provisions of the
existing insurance contracts
next preceding paragraph, where the obligation involves a
3. Whether respondent is entitled to the award of damages.
liquidated amount for the payment of which the company has
become legally liable under the terms of the obligation and its
Held: Yes. No. Yes, but not all damages valid. Petition granted. suretyship undertaking or by the demand of the obligee or
Damages modified. otherwise and the latter has merely allowed the COMPANY a
term or extension for payment of the latter's demand the full
Ratio: 1. The trial court found, as affirmed by the Court of amount necessary to discharge the COMPANY's aforesaid
Appeals, that there was a valid check payment by respondent liability irrespective of whether or not payment has actually
to petitioner. The court respected this. The renewal certificate been made by the COMPANY, the COMPANY for the protection
issued to respondent contained the acknowledgment that of its interest may forthwith proceed against the undersigned
premium had been paid. In the instant case, the best evidence or either of them by court action or otherwise to enforce
of such authority is the fact that petitioner accepted the check
payment even prior to making payment to the obligee which
and issued the official receipt for the payment. It is, as well,
may hereafter be done by the COMPANY. Tordesillas and
bound by its agent’s acknowledgment of receipt of payment.
Section 78 of the Insurance Code explicitly provides: An Torres in their official capacities and the defendantsexecuted
acknowledgment in a policy or contract of insurance of the another indemnity agreement with the plaintiff in
receipt of premium is conclusive evidence of its payment, so consideration of the surety bond (MERICO Bond No. G (16)
far as to make the policy binding, notwithstanding any 0030. In the indemnity agreement the same provisions of
stipulation therein that it shall not be binding until the paragraph 3 is found. Later on, the amount of the Bond was
premium is actually paid. reduced by P40,000.00 so that the total liability of the plaintiff
to the Philippine National Bank in view of the aforesaid
2. Submission of the alleged fraudulent documents pertained reduction is P100,000.00, P60,000.00 onSurety Bond No. 0007
to respondent’s income tax returns for 1987 to 1989. plus P40,000.00 on Surety Bond No. 0030. The defendants
Respondent, however, presented a BIR certification that he failed to pay the overdraft and credit line with the Philippine
had paid the proper taxes for the said years. Since this is a National Bank demanded from Mercantil, settlement of
question of fact, the finding is conclusive. Ordinarily, where the
itsobligation under surety bonds No. (G-16)-0007 for P
insurance policy specifies as a condition the disclosure of
60,000.00 which expired on March 6, 1970 and No. G (-16)-
existing co-insurers, non-disclosure is a violation that entitles
the insurer to avoid the policy. The purpose for the inclusion 0030 for P 40,000.00 which expired since September 4, 1968
of this clause is to prevent an increase in the moral hazard. The (Exh. P) Attached to the demand letter is a statement of
relevant provision is Section 75, which provides that: A policy account. By letter of December 17, 1970, plaintiff company
may declare that a violation of specified provisions thereof wrote a letter of demand to the defendants regarding the the
shall avoid it, otherwise the breach of an immaterial provision letter of demand of the Philippine National Bank sent to the
does not avoid the policy. Respondent acquired several co- plaintiff and demanding from the defendants the settlement
insurers and he failed to disclose this information to petitioner. of said account. The defendants failed to settle their obligation
Nonetheless, petitioner is estopped from invoking this with the Philippine National Bank, on February 10, 1971,
argument due to the loss adjuster’s admission of previous plaintiff brought the present action. Lower court dismissed
knowledge of the co-insurers. It cannot be said that petitioner case for lack of cause of action, the plaintiffhas paid nothing in
was deceived by respondent by the latter’s non-disclosure of
the surety bonds, therefore, they have not suffered any actual
the other insurance contracts when petitioner actually had
damage and held that paragraph 3 of contract is void.
Defendants argued that to allow surety to receive indemnity term of said policies, so risk attached under the policies. The
or compensation for something it has not paid in its capacity Court of Appeals ordered petitioner to pay the balance of the
as surety would constitute unjust enrichment at the expense premiums owing to the reason that it was part of an indivisible
of another. obligation.
Petitioner now asserts that its payment by installment of the
Issue: Whether or not surety can be allowed indemnification premiums for the insurance policies invalidated them because
fromthe defendants-appellants, upon the latter's default even of the provisions of Sec. 77 of the Insurance Code disclaiming
before the former has paid to the creditor. liability for loss for occurring before payment of premiums.

Held: The overdraft line of Php1M and the credit line of Php1M Issue: Whether payment by installment of the premiums due
applied for by the defendant was granted by the Philippine on an insurance policy invalidates the contract of insurance, in
National Bank on the strength of the two surety bonds view of Sec. 77 of P.D. 612
denominated as Bond No. G(16) 0007 and Bond No. G(16)
0030. As security and in consideration of the execution of the Held: Judgment affirmed.
surety bonds,the defendants executed with the plaintiff Ratio: Sec. 77. An insurer is entitled to the payment of the
identical indemnityagreements which provide that payment of premium as soon as the thing is exposed to the peril insured
indemnity or compensation may be claimed whether or not against. Notwithstanding any agreement to the contrary, no
plaintiff company has actually paid the same as provided in policy or contract of insurance issued by an insurance company
paragraph 3 of contract. The cause of action was derived from is valid and binding unless and until the premium thereof has
the terms of the Indemnity Agreement, paragraph 3 thereof. been paid, except in the case of a life or an industrial life policy
By virtue of the provisions of theIndemnity Agreement, whenever the grace period provision applies. Petitioner
defendants-appellants have undertaken to hold plaintiff- concluded that there cannot be a perfected contract of
appellee free and harmless from any suit, damage or liability insurance upon mere partial payment of the premiums
because under Sec. 77 of the Insurance Code, no contract of
which may be incurred by reason of non-performance by the
insurance is valid and binding unless the premium thereof has
defendantsappellants of their obligation with the Philippine
been paid, notwithstanding any agreement to the contrary. As
National Bank. The Indemnity Agreement is principally entered a consequence, petitioner seeks a refund of all premium
into as security of plaintiff-appellee in case of default of payments made on the alleged invalid insurance policies. We
defendants-appellants; and the liability of the parties under hold that the subject policies are valid even if the premiums
the surety bonds is joint and several, so that the obligee PNB were paid on installments. The records clearly show that
may proceed against either of them for the satisfaction of the petitioner and private respondent intended subject insurance
obligation. There is no dispute as to meaning of the terms of policies to be binding and effective notwithstanding the
the Indemnity Agreement. Having voluntarily entered into staggered payment of the premiums. The initial insurance
such contract, the appellants cannot now be heard to contract entered into in 1982 was renewed in 1983, then in
complain. Their indemnity agreement have the force and 1984. In those three (3) years, the insurer accepted all the
effect of law. The principal debtors, defendants-appellants installment payments. Such acceptance of payments speaks
herein, are the same persons who executed the Indemnity loudly of the insurer’s intention to honor the policies it issued
to petitioner.
Agreement. Thus, the positionoccupied by them is that of a
principal debtor and indemnitor at the same time, and their
Quoting the CA decision: “While the import of Section 77 is
liability being joint and several with the plaintiff-appellee's, the that prepayment of premiums is strictly required as a condition
Philippine National Bank may proceed against either for to the validity of the contract, we are not prepared to rule that
fulfillment of the obligation as covered by the surety bonds. the request to make installment payments duly approved by
There is no principle of guaranty involved and, therefore, the the insurer, would prevent the entire contract of insurance
provision of Article 2071 of the Civil Code does not apply. from going into effect despite payment and acceptance of the
There is no more need for the plaintiff-appellee to exhaust all initial premium or first installment. Section 78 of the Insurance
the properties of the principal debtor before it may proceed Code in effect allows waiver by the insurer of the condition of
against defendants-appellants. prepayment by making an acknowledgment in the insurance
policy of receipt of premium as conclusive evidence of
MAKATI TUSCANY V CA G.R. NO. 95546 NOVEMBER 6, 1992 payment so far as to make the policy binding despite the fact
that premium is actually unpaid. Section 77 merely precludes
Facts: American International Underwriters issued a policy in the parties from stipulating that the policy is valid even if
favor of Makati Tuscany Condominium Corporation with a premiums are not paid, but does not expressly prohibit an
total premium of P466,103.05. The company issued a agreement granting credit extension. So is an understanding to
replacement policy. Premium was again paid. In 1984, the allow insured to pay premiums in installments not so
policy was again renewed and private respondent issued to proscribed.
petitioner another policy. The petitioner paid 152,000 pesos
then refused to furnish the balance. The company filed an The reliance by petitioner on Arce vs. Capital Surety and
action to recover the unpaid balance of P314,103.05. The Insurance Co. is unavailing because the facts therein are
condominium administration explained that it discontinued substantially different from those in the case at bar. In Arce,
the payment of premiums because the policy did not contain no payment was made by the insured at all despite the grace
a credit clause in its favor and that the acceptance of premiums period given. Here, petitioner paid the initial installment and
didn’t waive any of the company rights to deny liability on any thereafter made staggered payments resulting in full payment
claim under the policy arising before such payments or after of the 1982 and 1983 insurance policies. For the 1984 policy,
the expiration of the credit clause of the policy and prior to petitioner paid two (2) installments although it refused to pay
premium payment, loss wasn’t covered. Petitioner sought for the balance. It appearing from the peculiar circumstances that
a refund. The trial court dismissed the complaint and the parties actually intended to make three (3) insurance
counterclaim owing to the argument that payment of the contracts valid, effective and binding, petitioner may not be
premiums of the policies were made during the lifetime or allowed to renege on its obligation to pay the balance of the
premium after the expiration of the whole term. Moreover, as non-payment of the premium due in accordance with Section
correctly observed by the appellate court, where the risk is 77 of the Insurance Code.
entire and the contract is indivisible, the insured is not entitled
to a refund of the premiums paid if the insurer was exposed to Valenzuela demanded from South Sea the payment of the
the risk insured for any period, however brief or momentary proceeds of the policy but the latter denied liability under the
policy. Plaintiff likewise filed a formal claim with defendant
UCPB General Insurance Co. Inc vs Masagana Telamart Inc Seven Brothers Shipping Corporation for the value of the lost
G.R. No. 137172 June 15, 1999 logs but the latter denied the claim.

Valenzuela filed a complaint a complaint for the recovery of


Facts: On April 15, 1991, petitioner issued five (5) insurance the value of lost logs and freight charges from Seven Brothers
policies covering respondent’s various property described Shipping Corporation or from South Sea Surety and Insurance
therein against fire, for the period from May 22, 1991 to May Company, the insurer.
22, 1992. In March 1992, petitioner evaluated the policies and
decided not to renew them upon expiration of their terms on The trial court rendered judgment in favor of plaintiff
May 22, 1992. Petitioner advised respondent’s broker, Zuellig Valenzuela. The Court of Appeals affirmed the judgment only
Insurance Brokers, Inc. of its intention not to renew the against the insurance corporation and absolved the shipping
policies. On April 6, 1992, petitioner gave written notice to entity from liability. The court held that there was a stipulation
respondent of the non-renewal of the policies at the address
in the charterparty exempted the ship owner from liability in
stated in the policies. On June 13, 1992, fire razed
case of loss.
respondent’s property covered by three of the insurance
policies petitioner issued. On July 13, 1992, respondent In the SC petition, petitioner argues that it should have been
presented to petitioner’s cashier at its head office five (5) freed from any liability to Hardwood. It faults
manager’s checks in the total amount of P225,753.95,
the appellate court (a) for having disregarded Section 77 of the
representing premium for the renewal of the policies from
insurance Code and (b) for holding Victorio Chua to have been
May 22, 1992 to May 22, 1993. No notice of loss was filed by
respondent under the policies prior to July 14, 1992. On July an authorized representative of the insurer.
14, 1992, respondent filed with petitioner its formal claim for Issue: WON Mr. Chua acted as an agent of the surety company
indemnification of the insured property razed by fire. On the or of the insured when he received the check for insurance
same day, July 14, 1992, petitioner returned to respondent the
premiums.
five (5) manager’s checks that it tendered, and at the same
time rejected respondent’s claim for the reasons (a) that the Held: Agent of the surety. Petition denied.
policies had expired and were not renewed, and (b) that the
fire occurred on June 13, 1992, before respondent’s tender of Ratio:
premium payment.
To determine if there was a valid contract of insurance, it must
Issue: Whether or not respondent is entitled to compensation be determine if the premium was validly paid to the company
despite the renewal of the insurance policy after the or its agents at the time of the loss. The appellate and trial
occurrence of the event insured. courts have found that Chua acted as an agent.

South Sea insisted that Chua has been an agent for less than
Held: No. An insurance policy, other than life, issued originally
ten years of the Columbia Insurance Brokers, a different
or on renewal, is not valid and binding until actual payment of
company. Appellant argued that Mr. Chua, having received the
the premium. Any agreement to the contrary is void. 11 The
premiums, acted as an agent under Section 301 of the
parties may not agree expressly or impliedly on the extension
of creditor time to pay the premium and consider the policy Insurance Code which provides:
binding before actual payment. Sec. 301. Any person who for any compensation, commission
or other thing of value, acts, or aids in soliciting, negotiating or
Here, the payment of the premium for renewal of the policies
procuring the making of any insurance contract or in placing
was tendered on July 13, 1992, a month after the fire occurred
risk or taking out insurance, on behalf of an insured other than
on June 13, 1992. The assured did not even give the insurer a
himself, shall be an insurance broker within the intent of this
notice of loss within a reasonable time after occurrence of the
fire. Code, and shall thereby become liable to all the
duties requirements, liabilities and penalties to which an
insurance broker is subject.
SOUTH SEA V CA G.R. NO. 102253 JUNE 2, 1995
Valenzuela claimed that the second paragraph of Section 306
Facts: Valenzuela Hardwood entered into an agreement with of the Insurance Code provided:
the defendant Seven Brothers whereby the latter undertook
to load the former's 940 lauan logs for shipment to Manila. Sec. 306 Any insurance company which delivers to an
insurance agent or insurance broker a policy or contract of
South Sea insured the logs for P2,000,000.00 in its marine insurance shall be deemed to have authorized such agent or
policy. Valenzuela then gave the check in payment of broker to receive on its behalf payment of any premium which
the premium on the insurance policy to Mr. Victorio Chua. is due on such policy of contract of insurance at the time of its
issuance or delivery or which becomes due thereon.
Seven Brothers’ ship sank resulting in the loss of the logs.
Mr. Chua testified that the marine cargo insurance policy logs
A check for P5,625.00 to cover payment of
was by South Sea to be given to the wood company.
the premium tendered to the insurer but was not accepted.
Instead, the South Sea Surety and Insurance Co., Inc. cancelled When South Sea delivered to Mr. Chua the
the insurance policy it issued as of the date of inception for marine cargo insurance policy for Valenzuela’s logs, he is
deemed to have been authorized by former to receive  Pascuala Ebrado also filed her claim as the widow of the
the premium which is due on its behalf. deceased insured.
 Insular life filed an interpleader case and the lower court
When the logs were lost, the insured had already paid
found in favor of Pascuala.
the premium to an agent of the South Sea Surety and
Insurance Co., Inc., which is consequently liable to pay the Issue: Between Carponia and Pascuala, who is entitled to the
insurance proceeds under the policy it issued to the insured. proceeds?

The court followed the factual evidence of the lower courts Held: Pascuala. It is quite unfortunate that the Insurance Act
and held that they didn’t try questions of fact. or our own Insurance Code does not contain a specific
provision grossly resolutory of the prime question at hand.
FILIPINAS CIA DE SEGUROS V. CHRISTERN HUENFELD & CO. 80 Rather, the general rules of civil law should be applied to
PHIL 54 resolve this void in the insurance law. Art. 2011 of the NCC
Facts: states: The contract of insurance is governed by special laws.
 Oct. 1, 1941, Domestic Corp Christern, after payment of the Matters not expressly provided for in such special laws shall be
premium, obtained from Filipinas, fire policy no. 29333 for regulated by this Code. When not otherwise specifically
P100T covering merchandise contained in a building located in provided for in the insurance law, the contract of life insurance
Binondo. is governed by the general rules of civil law regulating
contracts. Under Art. 2012, NCC: Any person who is forbidden
 On Feb. 27, 1942, during the Jap occupation, the building and
from receiving any donation under Art. 739 cannot be named
the insured merchandise were burned. Christern submitted to
beneficiary of a life insurance policy by a person who cannot
Filipinas its claim.
make any donation to him, according to said article. Under Art.
 Salvaged goods were sold and the total loss of Christern was
739, donations between persons who were guilty of adultery
P92T.
or concubinage at the time of the donation shall be void. In
 Filipinas denied liability on the ground that Christern was an
essence, a life insurance policy is no different from civil
enemy corp and cannot be insured.
donations insofar as the beneficiary is concerned. Both are
Issue: WON Filipinas is liable to Christern, Huenfeld & Co. founded on the same consideration of liberality. A beneficiary
is like a donee because from the premiums of the policy which
Held: NO. Majority of the stockholders of Christern were the insured pays, the beneficiary will receive the proceeds or
German subjects. This being so, SC ruled that said corporation profits of said insurance. As a consequence, the proscription in
became an enemy corporation upon the war between the US Art. 739 should equally operate in life insurance contracts.
and Germany. The Phil Insurance Law in Sec. 8 provides that Therefore, since common-law spouses are barred from
anyone except a public enemy may be insured. It stands to receiving donations, they are likewise barred from receiving
reason that an insurance policy ceases to be allowable as soon proceeds of a life insurance contract.
as an insured becomes a public enemy.

The purpose of the war is to cripple the power ad exhaust the


resources of the enemy, and it is inconsistent that one country
should destroy its enemy property and repay in insurance the
value of what has been so destroyed, or that it should in such
manner increase the resources of the enemy or render it aid.
All individuals who compose the belligerent powers, exist as to
each other, in a state of utter exclusion and are public
enemies. Christern having become an enemy corporation on
Dec. 10. 1941, the insurance policy issued in his favor on Oct.
1, 1941 by Filipinas had ceased to be valid and enforceable,
and since the insured goods were burned after Dec. 10, 1941,
and during the war, Christern was NOT entitled to any
indemnity under said policy from Filipinas. Elementary rules of
justice require that the premium paid by Christern for the
period covered by the policy from Dec. 10, 1941 should be
returned by Filipinas.

INSULAR LIFE V. EBRADO 80 SCRA 181

Facts:
 Buenaventura Ebrado was issued by Insular Life Assurance
Co. a whole life plan for P5,882.00 with a rider for Accidental
Death Benefits for the same amount.
 Ebrado designated Carponia Ebrado as the revocable
beneficiary in his policy, referring to her as his wife.
 Ebrado died when he was accidentally hit by a falling branch
of tree.
 Insurer by virtue of the contract was liable for 11,745.73, and
Carponia filed her claim, although she admitted that she and
the insured were merely living as husband and wife without
the benefit of marriage.