and discharged the writ of preliminary

Case Digest: Capital attachment.

Insurance vs Del However, on January 15, 2002, the RTC
Monte Motors rendered its decision holding the defendants
liable to pay petitioner. The judgment was
G.R. No. 159979, Dec. 09, 2015
enforceable against the counterbond posted by
FACTS: defendant Vilfran Liner, Inc.

Capital Insurance & Surety Company, Inc. The sheriff levied against petitioner’s personal
sued Vilfran Liner, Inc., Hilaria F. Villegas and properties. It also served a notice of garnishment
Maura F. Villegas to recover the unpaid billings against the security deposit of the petitioner in the
related to the fabrication and construction of 35 Insurance Commission.
passenger bus bodies. It applied for the issuance
Consequently, the office of the Insurance
of a writ of preliminary attachment, which was
Commissioner was ordered to withdraw from
granted, resulting in the levy of 10 buses and
security deposit of Capital Insurance & Surety
three parcels of land belonging to the defendants.
Company, Inc. the amount of P11,835,375.50 to be
The sheriff also sent notices of garnishment of the
paid to Sheriff Manuel S. Paguyo in satisfaction of
defendants’ funds in the Quezon City branches of
the Notice of Garnishment.
BPI Family Bank, China Bank, Asia Trust Bank, City
Trust Bank, and Bank of the Philippine Island. However, Insurance Commissioner Malinis turned
down the request to release, citing Section 203 of
The levy and garnishment prompted
the Insurance Code, which expressly provided that
defendant Maura to file an Extremely Urgent
the security deposit was exempt from execution.
Motion to Discharge Upon Filing of a
Counterbond. The RTC approved the counterbond On January 8, 2003, the respondent moved to cite
Insurance Commissioner Malinis in contempt of
court for refusing to comply with the RTC’s political subdivisions or instrumentalities, or of
resolution. government-owned or controlled corporations and
entities, including the Central Bank of the Philippines:
ISSUES: Provided, That such investments shall at all times be
1. Whether or not securities deposited in an maintained free from any lien or encumbrance; and
insurance company maybe the subject of Provided, further, That such securities shall be
levy deposited with and held by the Commissioner for the
faithful performance by the depositing insurer of all
2. Whether or not the Insurance
its obligations under its insurance contracts. The
Commissioner’s refusal to release the
provisions of section one hundred ninety-two shall, as
security deposit despite the garnishment
far as practicable, apply to the securities deposited
on execution legally justified
under this section.
RULING:
Except as otherwise provided in this Code, no
1. Securities deposited in an insurance judgment creditor or other claimant shall have the
company are immune from levy or right to levy upon any securities of the insurer held
execution. on deposit under this section or held on deposit
pursuant to the requirement of the Commissioner.
Section 203 of the Insurance Code provides as
follows: The forthright text of provision indicates that the
security deposit is exempt from levy by a
Every domestic insurance company shall, to the judgment creditor or any other claimant.
extent of an amount equal in value to twenty-five per
centum of the minimum paid-up capital required 2. The Insurance Commissioner’s refusal to
under section one hundred eighty-eight, invest its release was legally justified.
funds only in securities, satisfactory to the
Under Section 191 and Section 203 of the
Commissioner, consisting of bonds or other evidences
Insurance Code, the Insurance Commissioner had
of debt of the Government of the Philippines or its
the specific legal duty to hold the security deposits declared void. Philam, on the other hand, averred that there Paterno must
submit a verified formal complaint and that his letter didn’t contain
for the benefit of all policy holders. information Philam was seeking from him. Philam then questioned the
Insurance Commission’s jurisdiction over the matter and submitted a
Undeniably, the insurance commissioner has been motion to quash. The commissioner denied this. Hence this petition.

given wide latitude of discretion to regulate the

insurance industry so as to protect the insuring Issue: Whether or not the resolution of the legality of the Contract of
Agency falls within the jurisdiction of the Insurance Commissioner.
public. The law specifically confers custody over
the securities upon the commissioner, with whom
Held: No. Petition granted.
these investments are required to be deposited.
An implied trust is created by the law for the
benefit of all claimants under subsisting insurance Ratio:

contracts issued by the insurance company. According to the Insurance code, the Insurance Commissioner was
authorized to suspend, directors, officers, and agents of insurance
companies. In general, he was tasked to regulate the insurance business,
As the officer vested with custody of the security which includes:
deposit, the insurance commissioner is in the best (2) The term "doing an insurance business" or "transacting an
position to determine if and when it may be insurance business," within the meaning of this Code, shall include

released without prejudicing the rights of other (a) making or proposing to make, as insurer, any insurance contract;

policy holders. (b) making, or proposing to make, as surety, any contract of suretyship as
a vocation and not as merely incidental to any other legitimate business or
activity of the surety; (c) doing any kind of business, including a
Philam v Arnaldo G.R. No. 76452 July 26, reinsurance business, specifically recognized as constituting the doing of
1994 an insurance business within the meaning of this Code; (d) doing or
proposing to do any business in substance equivalent to any of the
J. Quiason
foregoing in a manner designed to evade the provisions of this Code.
(Insurance Code, Sec. 2[2])

Facts: The contract of agency between Philamlife and its agents wasn’t included
with the Commissoner’s power to regulate the business. Hence, the
One Ramon Paterno complained about the unfair practices committed by Insurance commissioner wasn’t vested with jurisidiction under the rule
the company against its agents, employees and consumers. The “expresio unius est exclusion alterius”.
Commissioner called for a hearing where Paterno was required to specify
which acts were illegal. Paterno then specified that the fees and charges The respondent contended that the commissioner had the quasi-judicial
stated in the Contract of Agency between Philam and its agents be power to adjudicate under Section 416 of the Code. It stated:
The Commissioner shall have the power to adjudicate claims and corporation engaged in providing the medical services
complaints involving any loss, damage or liability for which an insurer may enumerated below to individuals who enter into health care
be answerable under any kind of policy or contract of insurance, or for agreements with it:
which such insurer may be liable under a contract of suretyship, or for – Preventive medical services such as periodic monitoring of health
which a reinsurer may be used under any contract or reinsurance it may
problems, family planning counseling, consultation and advices on
have entered into, or for which a mutual benefit association may be held
diet, exercise and other healthy habits, and immunization;
liable under the membership certificates it has issued to its members,
where the amount of any such loss, damage or liability, excluding interest, – Diagnostic medical services such as routine physical
costs and attorney's fees, being claimed or sued upon any kind of examinations, x-rays, urinalysis, fecalysis, complete blood count,
insurance, bond, reinsurance contract, or membership certificate does not and the like and
exceed in any single claim one hundred thousand pesos. – Curative medical services which pertain to the performing of
other remedial and therapeutic processes in the event of an injury
This was, however, regarding complaints filed by the insured against the or sickness on the part of the enrolled member.
Insurance company.
On January 27, 2000, respondent Commissioner of Internal
Also, the insurance code only discusses the licensing requirements for Revenue (CIR) sent petitioner a formal demand letter and the
agents and brokers. The Insurance Code does not have provisions corresponding assessment notices demanding the payment of
governing the relations between insurance companies and their agents. deficiency taxes, including surcharges and interest, for the taxable
Investment Planning Corporation of the Philippines v. Social Security
years 1996 and 1997 in the total amount of P224,702,641.18.
Commission- “that an insurance company may have two classes of agents
who sell its insurance policies: (1) salaried employees who keep definite The deficiency [documentary stamp tax (DST)] assessment was
hours and work under the control and supervision of the company; and (2) imposed on petitioner’s health care agreement with the members
registered representatives, who work on commission basis.” of its health care program pursuant to Section 185 of the 1997 Tax
The agents under the 2nd sentence are governed by the Civil Code laws Code
on agency. This means that the regular courts have jurisdiction over this
category. Petitioner protested the assessment in a letter dated February 23,
2000. As respondent did not act on the protest, petitioner filed a

Philippine Health Care

petition for review in the Court of Tax Appeals (CTA) seeking the
cancellation of the deficiency VAT and DST assessments.

Providers vs. CIR CTA’s decision: Cancelled the DST assessment. Ordered the
payment of VAT deficiency.
CIR appealed the decision to the CA contending that petitioner’s
Philippine Health Care Providers, Inc. vs. Commissioner of health care agreement was a contract of insurance subject to DST
Internal Revenue under Section 185 of the 1997 Tax Code.
G.R. No. 167330, September 18, 2009
600 SCRA 413 CA’s decision: The health care agreement was in the nature of a
FACTS: non-life insurance contract subject to DST.
Petitioner Philippine Health Care Providers, Inc. is a domestic
SC’s decision on Petition for Review: Denied on the ground that Section 185 of the National Internal Revenue Code of 1997 (NIRC
petitioner’s health care agreement during the pertinent period of 1997) – Stamp tax on fidelity bonds and other insurance
was in the nature of non-life insurance which is a contract of policies. – On all policies of insurance or bonds or obligations of
indemnity, citing Blue Cross Healthcare, Inc. v. the nature of indemnity for loss, damage, or liability made or
Olivares and Philamcare Health Systems, Inc. v. CA. It ruled that renewed by any person, association or company or corporation
petitioner’s contention that it is a health maintenance organization transacting the business of accident, fidelity, employer’s liability,
(HMO) and not an insurance company is irrelevant because
plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or
contracts between companies like petitioner and the beneficiaries
other branch of insurance (except life, marine, inland, and fire
under their plans are treated as insurance contracts. Moreover,
DST is not a tax on the business transacted but an excise on the insurance), and all bonds, undertakings, or recognizances,
privilege, opportunity or facility offered at exchanges for the conditioned for the performance of the duties of any office or
transaction of the business. position, for the doing or not doing of anything therein specified,
Petitioner filed a motion for reconsideration and supplemental and on all obligations guaranteeing the validity or legality of any
motion for reconsideration. bond or other obligations issued by any province, city,
municipality, or other public body or organization, and on all
ISSUES: obligations guaranteeing the title to any real estate, or
1. Whether or not petitioner as an HMO is engaged in an insurance guaranteeing any mercantile credits, which may be made or
business. renewed by any such person, company or corporation, there shall
2. Whether or not petitioner is liable for the payment of DST on be collected a documentary stamp tax of fifty centavos (P0.50) on
Health Care Agreement of HMOS in accordance with Section 185. each four pesos (P4.00), or fractional part thereof, of the premium
charged.
RULING:
1. No. Health Maintenance Organizations are not engaged in the
insurance business. Under RA 7875 (or “The National Health
Insurance Act of 1995”), an HMO is an entity that provides, offers or
arranges for coverage of designated health services needed by plan
members for a fixed prepaid premium. To determine whether an
HMO is an insurance business or not, one test – principal object
and purpose test – may be applied, that is to determine whether
the assumption of risk and indemnification of loss (which are
elements of an insurance business) are the principal object and
purpose of the organization or whether they are merely incidental
to its business. If these are the principal objectives, the business is
that of insurance. But if they are merely incidental and service is
the principal purpose, then the business is not insurance. HMO’s
principal object and purpose is service rather than indemnity.
Additionally, petitioner is not supervised by the Insurance member and strictly against the HMO. For this reason, SC’s ruling
Commission but by the Department of Health. in Blue Cross and Philamcare are applicable in the present case.
2. No. Health care agreements are not subject to DST. From the
language of Section 185, it is evident that two requisites must
CIR v. PHILIPPINE AMERICAN ACCIDENT INSURANCE
concur before the DST can apply, namely: (1) the document must
COMPANY, GR NO. 141658, 2005-03-18
be a policy of insurance or an obligation in the nature of indemnity
and (2) the maker should be transacting the business of accident, Facts:
fidelity, employer’s liability, plate, glass, steam boiler, burglar,
Respondents are domestic corporations licensed to transact
elevator, automatic sprinkler, or other branch of insurance (except
insurance business in the country.
life, marine, inland, and fire insurance).
respondents paid the Bureau of Internal Revenue under protest the
NOTES: 3% tax imposed on lending investors by Section 195-A[4]... of
• Even if a contract contains all the elements of an
Commonwealth Act No. 466... was the National Internal Revenue
insurance contract, if its primary purpose is the Code ("NIRC") applicable at the time.
rendering of service, it is not a contract of insurance. These amounts represented 3% of each company's interest...
• Distinctions between a minute resolution and a decision income from mortgage and other loans.
The constitutional requirement under the first paragraph
of Section 14, Article VIII of the Constitution that the facts respondents... petitioner seeking a refund of the taxes paid under
and the law on which the judgment is based must be protest.
expressed clearly and distinctly applies only to decisions,
not to minute resolutions. A minute resolution is signed
When respondents did not receive a response, each respondent
only by the clerk of court by authority of the justices, filed... a petition for review with the CTA.
unlike a decision. It does not require the certification of These three petitions... argued that respondents were not lending
the Chief Justice. Moreover, unlike decisions, minute investors and as such were not subject to the 3% lending investors'
resolutions are not published in the Philippine Reports. tax under Section 195-A... argued that respondents were not
Finally, the proviso of Section 4(3) of Article VIII speaks lending investors and as such were not subject to the 3% lending
of a decision. Indeed, as a rule, this Court lays down investors' tax under Section 195-A.
doctrines or principles of law which constitute binding
precedent in a decision duly signed by the members of the CTA ruled that respondents were entitled to their refund.
the Court and certified by the Chief Justice.
The CTA held that respondents are not taxable as lending
Related Jurisprudence:
investors because the term "lending investors" does not embrace
In Blue Cross and Philamcare, the Court pronounced that a health
insurance companies.
care agreement is in the nature of non-life insurance, which is
primarily a contract of indemnity. However, those cases did not The lending of money at interest by insurance companies
involve the interpretation of a tax provision. Instead, they dealt constitutes a necessary incident of their regular business
with the liability of a health service provider to a member under The lending of money at interest by insurance companies
the terms of their health care agreement. Such contracts, as constitutes a necessary incident of their regular business.
contracts of adhesion, are liberally interpreted in favor of the
The CTA held that the practice of lending money at interest is part Lending investors cannot, for a consideration, hold anyone
of the insurance business. harmless from loss, damage or liability, nor provide compensation
or indemnity for loss.
the Court of Appeals affirmed the ruling of the CTA
The underwriting... of risks is the prerogative of insurers, the great
Court of Appeals affirmed the ruling of the CTA majority of which are incorporated insurance companies[23] like
Petitioner alleges that: respondents.

As a lending investor, an insurance company is subject... to the 3% the investment of premiums and other funds received by
tax of the total premiums collected... and another 3% on the gross respondents through the granting of mortgage and other loans was
receipts as a lending investor under Sections 255 and 195-A, necessary to respondents' business and hence, should not be
respectively of the same Code. taxed separately.

Issues: The Court has also held that when a company is taxed on its main
business, it is no longer taxable further for engaging in an activity
whether respondents are taxable as lending investors. or work which is merely a part of, incidental to and is necessary to
Ruling: its main business.[30] Respondents already paid... percentage and
fixed taxes on their insurance business. To require them to pay
Neither Section 182(A)(3)(dd) nor Section 195-A mentions percentage and fixed taxes again for an activity which is
insurance companies. Section 182(A)(3)(dd) provides for the necessarily a part of the same business, the law must expressly
taxation of lending investors in different localities. Section 195-A require such additional payment of tax. There is, however, no
refers to dealers in securities and lending investors. The burden is provision... of law requiring such additional payment of tax.
thus... on petitioner to show that insurance companies are lending
investors for purposes of taxation. Sections 195-A and 182(A)(3)(dd) of CA 466 do not require
insurance companies to pay double percentage and fixed
In this case, petitioner does not dispute that respondents are in the taxes. They merely tax lending investors, not lending
insurance business. Petitioner merely alleges that the definition of activities. Respondents were not transformed into lending
lending investors under CA 466 is broad enough to encompass investors by the mere fact that they... granted loans, as these
insurance companies. investments were part of, incidental and necessary to their
insurance business.
Insurance companies cannot be considered lending investors
under CA 466, as amended. White Gold v Pioneer G.R. No. 154514.
The definition in Section 194(u) of CA 466 is not broad enough to
include the business of insurance companies. The Insurance
July 28, 2005
Code of 1978[21] is very clear on what constitutes an insurance J. Quisimbing
company. It provides that an insurer or insurance... company
"shall include all individuals, partnerships, associations or
corporations xxx engaged as principals in the insurance business, Facts:
excepting mutual benefit associations."
White Gold procured a protection and indemnity coverage for its vessels
Plainly, insurance companies and lending investors are different from The Steamship Mutual through Pioneer Insurance and Surety
enterprises in the eyes of the law. Corporation. White Gold was issued a Certificate of Entry and
Acceptance. Pioneer also issued receipts. When White Gold failed to They argued that Steamship Mutual’s primary purpose is to solicit and
fully pay its accounts, Steamship Mutual refused to renew the coverage. provide protection and indemnity coverage and for this purpose, it has
engaged the services of Pioneer to act as its agent.
Steamship Mutual thereafter filed a case against White Gold for collection
of sum of money to recover the unpaid balance. White Gold on the other Respondents contended that although Steamship Mutual is a P & I Club,
hand, filed a complaint before the Insurance Commission claiming that it is not engaged in the insurance business in the Philippines. It is merely
Steamship Mutual and Pioneer violated provisions of the Insurance Code. an association of vessel owners who have come together to provide
mutual protection against liabilities incidental to shipowning.
The Insurance Commission dismissed the complaint. It said that there
was no need for Steamship Mutual to secure a license because it was not Is Steamship Mutual engaged in the insurance business?
engaged in the insurance business and that it was a P & I club. Pioneer
was not required to obtain another license as insurance agent because A P & I Club is “a form of insurance against third party liability, where the
Steamship Mutual was not engaged in the insurance business. third party is anyone other than the P & I Club and the members.” By
definition then, Steamship Mutual as a P & I Club is a mutual insurance
The Court of Appeals affirmed the decision of the Insurance association engaged in the marine insurance business.
Commissioner. In its decision, the appellate court distinguished between
P & I Clubs vis-à-vis conventional insurance. The appellate court also The records reveal Steamship Mutual is doing business in the country
held that Pioneer merely acted as a collection agent of Steamship albeit without the requisite certificate of authority mandated by Section
Mutual. 187 of the Insurance Code. It maintains a resident agent in the
Philippines to solicit insurance and to collect payments in its
Hence this petition by White Gold. behalf. Steamship Mutual even renewed its P & I Club cover until it was
cancelled due to non-payment of the calls. Thus, to continue doing
business here, Steamship Mutual or through its agent Pioneer, must
Issues: secure a license from the Insurance Commission.

1. Is Steamship Mutual, a P & I Club, engaged in the insurance business Since a contract of insurance involves public interest, regulation by the
in the Philippines? State is necessary. Thus, no insurer or insurance company is allowed to
engage in the insurance business without a license or a certificate of
2. Does Pioneer need a license as an insurance agent/broker for authority from the Insurance Commission.
Steamship Mutual?
2. Pioneer is the resident agent of Steamship Mutual as evidenced by the
certificate of registration issued by the Insurance Commission. It has
been licensed to do or transact insurance business by virtue of the
Held: Yes. Petition granted.
certificate of authority issued by the same agency. However, a
Certification from the Commission states that Pioneer does not have a
separate license to be an agent/broker of Steamship Mutual.
Ratio:
Although Pioneer is already licensed as an insurance company, it needs
White Gold insists that Steamship Mutual as a P & I Club is engaged in a separate license to act as insurance agent for Steamship
the insurance business. To buttress its assertion, it cites the definition as Mutual. Section 299 of the Insurance Code clearly states:
“an association composed of shipowners in general who band together
for the specific purpose of providing insurance cover on a mutual basis SEC. 299 No person shall act as an insurance agent or as an insurance
against liabilities incidental to shipowning that the members incur in favor broker in the solicitation or procurement of applications for insurance, or
of third parties.” receive for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the September 12, 2000, while in the vicinity of Cresta de Gallo, the
Philippines or any agent thereof, without first procuring a license so to act vessel’s chief officer on routine inspection found a crack on
from the Commissioner… starboard side of the main deck which caused seawater to enter
and wet the cargo inside Cargo Hold No. 2 forward/aft. The
LOADSTAR SHIPPING cracks at the top deck starboard side of Cargo Hold No. 2,
measuring 1.21 meters long x 0.39 meters wide, and at top deck
CO., INC. V. MALAYAN aft section starboard side on other point, measuring 0.82 meters
long x 0.32 meters wide, were welded.

INSURANCE CO., INC., Immediately after the vessel arrived at Isabel, Leyte anchorage
G.R. NO. 185565, area, on September 13, 2000, PASAR and Philex’s
representatives boarded and inspected the vessel and

[NOVEMBER 26, 2014] undertook sampling of the copper concentrates. In its

preliminary report dated September 15, 2000, the Elite Adjusters
and Surveyor, Inc. (Elite Surveyor) confirmed that samples of
copper concentrates from Cargo Hold No. 2 were contaminated
FACTS: Loadstar International Shipping, Inc. (Loadstar by seawater. Consequently, PASAR rejected 750 MT of the
Shipping) and Philippine Associated Smelting and Refining 2,300 MT cargo discharged from Cargo Hold No. 2.
Corporation (PASAR) entered into a Contract of Affreightment
for domestic bulk transport of the latter’s copper concentrates
for a period of one year from November 1, 1998 to October 31, On November 6, 2000, PASAR sent a formal notice of claim in
1999. The contract was extended up to the end of October the amount of [P]37,477,361.31 to Loadstar Shipping. In its final
2000. report dated November 16, 2000, Elite Surveyor recommended
payment to the assured the amount of [P]32,351,102.32 as
adjusted. On the basis of such recommendation, Malayan paid
On September 10, 2000, 5,065.47 wet metric tons (WMT) of PASAR the amount of [P]32,351,102.32.
copper concentrates were loaded in Cargo Hold. Nos. 1 and 2 of
MV “Bobcat”, a marine vessel owned by Loadstar International
Shipping Co., Inc. (Loadstar International) and operated by Meanwhile, on November 24, 2000, Malayan wrote Loadstar
Loadstar Shipping under a charter party agreement. The shipper Shipping informing the latter of a prospective buyer for the
and consignee under the Bill of Lading are Philex Mining damaged copper concentrates and the opportunity to
Corporation (Philex) and PASAR, respectively. The cargo was nominate/refer other salvage buyers to PASAR. On November
insured with Malayan Insurance Company, Inc. (Malayan) under 29, 2000, Malayan wrote Loadstar Shipping informing the latter
Open Policy No. M/OP/2000/001-582. P & I Association is the of the acceptance of PASAR’s proposal to take the damaged
third party liability insurer of Loadstar Shipping. copper concentrates at a residual value of US$90,000.00. On
December 9, 2000, Loadstar Shipping wrote Malayan
requesting for the reversal of its decision to accept PASAR’s
On said date (September 10, 2000), MV “Bobcat” sailed from proposal and the conduct of a public bidding to allow Loadstar
Poro Point, San Fernando, La Union bound for Isabel, Leyte. On Shipping to match or top PASAR’s bid by 10%.
On January 23, 2001, PASAR signed a subrogation receipt in notifying the carrier who has in good faith settled the assured’s
favor of Malayan. To recover the amount paid and in the claim for loss, the settlement is binding on both the assured and
exercise of its right of subrogation, Malayan demanded the insurer, and the latter cannot bring an action against the
reimbursement from Loadstar Shipping, which refused to carrier on his right of subrogation. . . . And where the insurer
comply. Consequently, on September 19, 2001, Malayan pays the assured for a loss which is not a risk covered by the
instituted with the RTC a complaint for damages. The complaint policy, thereby effecting ‘voluntary payment,’ the former has no
was later amended to include Loadstar International as party right of subrogation against the third party liable for the loss . . .
defendant. .”

ISSUE: WON THE INSURER IS VALIDLY SUBROGATED TO The rights of a subrogee cannot be superior to the rights
THE RIGHTS OF THE CONSIGNEE. possessed by a subrogor. “Subrogation is the substitution of one
person in the place of another with reference to a lawful claim or
right, so that he who is substituted succeeds to the rights of the
HELD: NO. Malayan’s claim against the petitioners is based on
other in relation to a debt or claim, including its remedies or
subrogation to the rights possessed by PASAR as consignee of securities. The rights to which the subrogee succeeds are the
the allegedly damaged goods. The right of subrogation stems same as, but not greater than, those of the person for whom he
from Article 2207 of the New Civil Code which states: is substituted, that is, he cannot acquire any claim, security or
remedy the subrogor did not have. In other words, a subrogee
Art. 2207. If the plaintiff’s property has been insured, and he has cannot succeed to a right not possessed by the subrogor. A
received indemnity from the insurance company for the injury or subrogee in effect steps into the shoes of the insured and can
loss arising out of the wrong or breach of contract complained recover only if the insured likewise could have recovered.”
of, the insurance company shall be subrogated to the rights of
the insured against the wrongdoer or the person who has Consequently, an insurer indemnifies the insured based on the
violated the contract. If the amount paid by the insurance loss or injury the latter actually suffered from. If there is no loss
company does not fully cover the injury or loss, the aggrieved or injury, then there is no obligation on the part of the insurer to
party shall be entitled to recover the deficiency from the person
indemnify the insured. Should the insurer pay the insured and it
causing the loss or injury.
turns out that indemnification is not due, or if due, the amount
paid is excessive, the insurer takes the risk of not being able to
“The right of subrogation is not dependent upon, nor does it seek recompense from the alleged wrongdoer. This is because
grow out of, any privity of contract or upon written assignment of the supposed subrogor did not possess the right to be
claim. It accrues simply upon payment of the insurance claim by indemnified and therefore, no right to collect is passed on to the
the insurer.” The right of subrogation is however, not absolute. subrogee.
“There are a few recognized exceptions to this rule. For
instance, if the assured by his own act releases the wrongdoer 1. GULF RESORTS, INC., petitioner, vs. PHILIPPINE CHARTER INSURANCE
or third party liable for the loss or damage, from liability, the CORPORATION, respondent.
insurer’s right of subrogation is defeated. . . . Similarly, where SECOND DIVISION [G.R. No. 156167. May 16, 2005]
the insurer pays the assured the value of the lost goods without
FACTS:
• Plaintiff Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union stipulations cannot be segregated and then made to control; neither do particular
and had its properties in said resort insured originally with the American Home words or phrases necessarily determine its character. Petitioner cannot focus on
Assurance Company (AHAC). the earthquake shock endorsement to the exclusion of the other provisions.
• In the first 4 policies issued, the risks of loss from earthquake shock was • All the provisions and riders, taken and interpreted together, indubitably show
extended only to petitioner’s two swimming pools. the intention of the parties to extend earthquake shock coverage to the two
• Gulf Resorts agreed to insure with Phil Charter the properties covered by the swimming pools only.
AHAC policy provided that the policy wording and rates in said policy be copied • A careful examination of the premium recapitulation will show that it is the
in the policy to be issued by Phil Charter. clear intent of the parties to extend earthquake shock coverage only to the two
• Phil Charter issued Policy No. 31944 to Gulf Resorts covering the period of March swimming pools.
14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of P45,159.92. • Section 2(1) of the Insurance Code defines a contract of insurance as an
the break-down of premiums shows that Gulf Resorts paid only P393.00 as agreement whereby one undertakes for a consideration to indemnify another
premium against earthquake shock (ES). against loss, damage or liability arising from an unknown or contingent event.
• In Policy No. 31944 issued by defendant, the shock endorsement provided that Thus, an insurance contract exists where the following elements concur:
“In consideration of the payment by the insured to the company of the sum 1. The insured has an insurable interest;
included additional premium the Company agrees, notwithstanding what is 2. The insured is subject to a risk of loss by the happening of the designated peril;
stated in the printed conditions of this policy due to the contrary, that this 3. The insurer assumes the risk;
insurance covers loss or damage to shock to any of the property insured by this 4. Such assumption of risk is part of a general scheme to distribute actual losses
Policy occasioned by or through or in consequence of earthquake (Exhs. "1-D", among a large group of persons bearing a similar risk; and
"2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit "7-C" the word "included" 5. In consideration of the insurer's promise, the insured pays a premium.[26]
above the underlined portion was deleted. (Emphasis ours)
• On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and • An insurance premium is the consideration paid an insurer for undertaking to
plaintiff’s properties covered by Policy No. 31944 issued by defendant, including indemnify the insured against a specified peril.[27] In fire, casualty, and marine
the two swimming pools in its Agoo Playa Resort were damaged. insurance, the premium payable becomes a debt as soon as the risk attaches.[28]
• Petitioner advised respondent that it would be making a claim under its • In the subject policy, no premium payments were made with regard to
Insurance Policy 31944 for damages on its properties. earthquake shock coverage, except on the two swimming pools. There is no
• Respondent denied petitioner’s claim on the ground that its insurance policy mention of any premium payable for the other resort properties with regard to
only afforded earthquake shock coverage to the two swimming pools of the earthquake shock. This is consistent with the history of petitioners previous
resort. insurance policies from AHAC-AIU.
• The trial court ruled in favor of respondent. In its ruling, the schedule clearly • In sum, there is no ambiguity in the terms of the contract and its riders.
shows that petitioner paid only a premium of P393.00 against the peril of Petitioner cannot rely on the general rule that insurance contracts are
earthquake shock, the same premium it had paid against earthquake shock only contracts of adhesion which should be liberally construed in favor of the
on the two swimming pools in all the policies issued by AHAC. insured and strictly against the insurer company which usually prepares it.[31]
• On appeal, the CA affirmed the decision of the RTC in toto. • A contract of adhesion is one wherein a party, usually a corporation, prepares
the stipulations in the contract, while the other party merely affixes his signature
ISSUE: or his "adhesion" thereto. Through the years, the courts have held that in these
• Whether or not the policy covers only the two swimming pools owned by Gulf type of contracts, the parties do not bargain on equal footing, the weaker party's
Resorts and does not extend to all properties damaged therein participation being reduced to the alternative to take it or leave it. Consequently,
any ambiguity therein is resolved against the insurer, or construed liberally in
HELD: favor of the insured.[33]
• The insurance policy covers only the two swimming pools. • The case law will show that this Court will only rule out blind adherence to terms
• It is basic that all the provisions of the insurance policy should be examined and where facts and circumstances will show that they are basically one-sided.[34]
interpreted in consonance with each other.[25] All its parts are reflective of the
true intent of the parties. The policy cannot be construed piecemeal. Certain
• In Development Bank of the Philippines v. National Merchandising Corporation,
et al.,[35] the parties, who were acute businessmen of experience, were
upon his return to Manila, but the company
presumed to have assented to the assailed documents with full knowledge. merely approved a reimbursement of P12,151.36,
•
an amount that was based on the average cost of
We cannot apply the general rule on contracts of adhesion to the case at bar.
Petitioner cannot claim it did not know the provisions of the policy. From the
inception of the policy, petitioner had required the respondent to copy appendectomy, net of medicare deduction, if the
verbatim the provisions and terms of its latest insurance policy from AHAC-
AIU. procedure were performed in an accredited
hospital in Metro Manila.Amorin received under
protest the approved amount, but asked for its
Case Digest: Fortune adjustment to cover the total amount of

Medicare vs Amorin professional fees which he had paid, and eighty

percent (80%) of the approved standard charges
G.R. No. 195872, March 12, 2014 based on “American standard”, considering that
FACTS: the emergency procedure occurred in the U.S.A.

David Robert U. Amorin was a To support his claim, Amorin cited Section 3,
cardholder/member of Fortune Medicare, Inc., a Article V on Benefits and Coverages of the Health
corporation engaged in providing health Care Contract, part of it states:
maintenance services to its members. The terms
“Whether as an in-patient or out-patient, FortuneCare
of Amorin’s medical coverage were provided in a shall reimburse the total hospitalization cost
Corporate Health Program Contract. including the professional fee (based on the total
While on vacation in Honolulu, Hawaii, Amorin approved charges) to a member who receives
underwent an emergency surgery, specifically emergency care in a non-accredited hospital. The
appendectomy, at the St. Francis Medical Center, above coverage applies only to Emergency
causing him to incur professional and confinement within Philippine Territory. However, if
hospitalization expenses of US$7,242.35 and the emergency confinement occurs in a foreign
US$1,777.79, respectively. He attempted to territory, Fortune Care will be obligated to
recover from Fortune Care the full amount thereof reimburse or pay eighty (80%) percent of the
approved standard charges which shall cover health care provider must pay for the same to the
the hospitalization costs and professional extent agreed upon under the contract.
fees.”
To aid in the interpretation of health care
agreements, the Court laid down the following
ISSUE: guidelines in Philamcare Health Systems v. CA:

Whether or not Fortune Care is liable to pay the When the terms of insurance contract contain
total amount of professional fees which Amorin limitations on liability, courts should construe them
had paid, and eighty percent (80%) of the in such a way as to preclude the insurer from non-
approved standard charges based on “American compliance with his obligation. Being a contract of
standard” adhesion, the terms of an insurance contract are to
be construed strictly against the party which
RULING: prepared the contract – the insurer.
Yes, Fortune Care is liable to the total amount of In this case, the Court agrees with the CA that as
professional fees which Amorin had paid, and may be gleaned from the Health Care Contract,
eighty percent (80%) of the approved standard the parties thereto contemplated the possibility of
charges based on “American standard”. emergency care in a foreign country. As the
contract recognized Fortune Care’s liability for
The Supreme Court emphasized that for purposes
emergency treatments even in foreign territories,
of determining the liability of a health care
it expressly limited its liability only insofar as the
provider to its members, jurisprudence holds that
percentage of hospitalization and professional
a health care agreement is in the nature of non-
fees that must be paid or reimbursed was
life insurance, which is primarily a contract of
concerned, pegged at a mere 80% of the approved
indemnity. Once the member incurs hospital,
standard charges.
medical or any other expense arising from
sickness, injury or other stipulated contingent, the
The word “standard” as used in the cited Ratio:

stipulation was vague and ambiguous, as it could Petitioner claimed that it granted benefits only when the insured is alive
during the one-year duration. It contended that there was no
be susceptible of different meanings. Settled is the indemnification unlike in insurance contracts. It supported this claim by
rule that ambiguities in a contract are interpreted saying that it is a health maintenance organization covered by the DOH
and not the Insurance Commission. Lastly, it claimed that the
against the party that caused the ambiguity. Incontestability clause didn’t apply because two-year and not one-year
effectivity periods were required.
Philamcare v CA G.R. No. 125678. March Section 2 (1) of the Insurance Code defines a contract of insurance as
18, 2002 “an agreement whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or
J. Ynares-Santiago contingent event.”
Section 3 states: every person has an insurable interest in the life and
Facts: health:

Ernani Trinos applied for a health care coverage with Philam. He (1) of himself, of his spouse and of his children.
answered no to a question asking if he or his family members were In this case, the husband’s health was the insurable interest. The health
treated to heart trouble, asthma, diabetes, etc. care agreement was in the nature of non-life insurance, which is primarily
The application was approved for 1 year. He was also given a contract of indemnity. The provider must pay for the medical expenses
hospitalization benefits and out-patient benefits. After the period expired, resulting from sickness or injury.
he was given an expanded coverage for Php 75,000. During the period, While petitioner contended that the husband concealed materialfact of his
he suffered from heart attack and was confined at MMC. The wife tried to sickness, the contract stated that:
claim the benefits but the petitioner denied it saying that he concealed his
medical history by answering no to the aforementioned question. She had “that any physician is, by these presents, expressly authorized to disclose
to pay for the hospital bills amounting to 76,000. Her husband or give testimony at anytime relative to any information acquired by him in
subsequently passed away. She filed a case in the trial court for the his professional capacity upon any question affecting the eligibility for
collection of the amount plus damages. She was awarded 76,000 for the health care coverage of the Proposed Members.”
bills and 40,000 for damages. The CA affirmed but deleted awards for
This meant that the petitioners required him to sign authorization to
damages. Hence, this appeal.
furnish reports about his medical condition. The contract also authorized
Philam to inquire directly to his medical history.

Issue: WON a health care agreement is not an insurance contract; hence Hence, the contention of concealment isn’t valid.
the “incontestability clause” under the Insurance Code does not apply.
They can’t also invoke the “Invalidation of agreement” clause where
failure of the insured to disclose information was a grounds for revocation
simply because the answer assailed by the company was the heart
Held: No. Petition dismissed. condition question based on the insured’s opinion. He wasn’t a medical
doctor, so he can’t accurately gauge his condition.
Henrick v Fire- “in such case the insurer is not justified in relying upon DOCTRINE: Under Article 1987 of the Civil Code of the Philippines, “the agent
such statement, but is obligated to make further inquiry.” who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his
Fraudulent intent must be proven to rescind the contract. This was
authority without giving such party sufficient notice of his powers.”
incumbent upon the provider.
“Having assumed a responsibility under the agreement, petitioner is Facts: In May 1987, Juan B. Dans, together with his family applied for a loan
bound to answer the same to the extent agreed upon. In the end, the of P500,000.00 with the DBP. A loan, in the reduced amount of P300,000.00,
liability of the health care provider attaches once the member is was approved by DBP. Mr. Dans was advised by DBP to obtain a mortgage
hospitalized for the disease or injury covered by the agreement or redemption insurance at DBP MRI pool. DBP deducted the amount to be paid
whenever he avails of the covered benefits which he has prepaid.” for MRI Premium that is worth Php 1476.00. The insurance of Mr. Dans, less
the DBP service fee of 10%, was credited by DBP to the savings account of
Section 27 of the Insurance Code- “a concealment entitles the injured
DBP MRI-Pool. Accordingly, the DBP MRI Pool was advised of the credit.
party to rescind a contract of insurance.”

As to cancellation procedure- Cancellation requires certain conditions: On September 3, 1987, Mr. Dans died of cardiac arrest. DBP MRI notified DBP
was not eligible for the coverage of insurance for he was beyond the
1. Prior notice of cancellation to insured; maximum age of 60. The wife, Candida, filed a complaint to the Regional Trial
2. Notice must be based on the occurrence after effective date of the Court Branch I Basilan against DBP and DBP MRI pool for ‘Collection of Sum
policy of one or more of the grounds mentioned; of Money with Damages’. Prior to that, DBP offered the administratrix (Mrs.
Dans) a refund of the MRI payment but she refused for insisting that the
3. Must be in writing, mailed or delivered to the insured at the address
shown in the policy; family of the deceased must receive the amount equivalent of the loan. DBP
also offered and ex gratia for settlement worth Php 30, 000. Mrs. Dans
4. Must state the grounds relied upon provided in Section 64 of the refused to take the offer. The decision of the RTC rendered in favor of the
Insurance Code and upon request of insured, to furnish facts on which family of the deceased and against DBP. However, DBP appealed to the court.
cancellation is based
On March 10, 1990, the trial court rendered a decision in favor of respondent
None were fulfilled by the provider.
Estate and against DBP. The DBP MRI Pool, however, was absolved from
As to incontestability- The trial court said that “under the title Claim liability, after the trial court found no privity of contract between it and the
procedures of expenses, the defendant Philamcare Health Systems Inc. deceased. The trial court declared DBP in estoppel for having led Dans into
had twelve months from the date of issuance of the Agreement within applying for MRI and actually collecting the premium and the service fee,
which to contest the membership of the patient if he had previous ailment despite knowledge of his age ineligibility.
of asthma, and six months from the issuance of the agreement if the
patient was sick of diabetes or hypertension. The periods having expired, Issue: Whether or not DBP should be held liable.
the defense of concealment or misrepresentation no longer lie.”
Held: YES. As an insurance agent, DBP made Dans go through the motion of
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.
applying for said insurance, thereby leading him and his family to believe
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS,
that they had already fulfilled all the requirements for the MRI and that the
represented by CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION issuance of their policy was forthcoming. Apparently, DBP had full
INSURANCE POOL, respondents. knowledge that Dan’s application was never going to be approved.
G.R. No. L-109937 March 21, 1994
Under Article 1987 of the Civil Code of the Philippines, “the agent who acts On June 13, 1992, plaintiffs properties were razed by fire. On
as such is not personally liable to the party with whom he contracts, unless July 13, 1992, plaintiff tendered, and defendant accepted, five
he expressly binds himself or exceeds the limits of his authority without (5) Equitable Bank Manager's Checks as renewal premium
giving such party sufficient notice of his powers.” payments for which Official Receipt Direct Premium was issued
by defendant. Masagana made its formal demand for
The DBP is not authorized to accept applications for MRI when its clients are indemnification for the burned insured properties. On the
more than 60 years of age. Knowing all the while that Dans was ineligible for same day, defendant returned the five (5) manager's checks
MRI coverage because of his advanced age, DBP exceeded the scope of its stating in its letter) that it was rejecting Masagana's claim on
authority when it accepted Dan's application for MRI by collecting the the following grounds:
insurance premium, and deducting its agent's commission and service fee.
"a) Said policies expired last May 22, 1992 and were
The liability of an agent who exceeds the scope of his authority depends upon not renewed for another term;
whether the third person is aware of the limits of the agent's powers. There b) Defendant had put plaintiff and its alleged broker on
is no showing that Dans knew of the limitation on DBP's authority to solicit notice of non-renewal earlier; and
applications for MRI. c) The properties covered by the said policies were
burned in a fire that took place last June 13, 1992, or
If the third person dealing with an agent is unaware of the limits of the before tender of premium payment."
authority conferred by the principal on the agent and he (third person) has
been deceived by the non-disclosure thereof by the agent, then the latter is ISSUE
liable for damages to him Whether Section 77 of the Insurance Code of 1978 (P.D.
No. 1460) must be strictly applied to Petitioner's advantage
However, DBP is not entitled to compensate the family of the deceased with despite its practice of granting a 60- to 90-day credit term for
the entire value of the insurance policy. Speculative damages are too remote the payment of premiums.
to be included in the cost of damages. Mr. Dans is entitled only to moral
HELD
damages. Such damages do not need a proof of pecuniary loss for
Section 77 of the Insurance Code of 1978 provides:
assessment. The court granted only moral damages (Php 50, 000) plus
attorney fees’s (Php 10, 000) and the reimbursement of the MRI fees with SECTION 77. An insurer is entitled to payment of the
legal interest from the date of the filing of the complaint until fully paid. premium as soon as the thing insured is exposed to the
peril insured against. Notwithstanding any agreement
UCPB General Insurance Co., Inc.
to the contrary, no policy or contract of insurance issued
-vs-
by an insurance company is valid and binding unless
Masagana Telemart, inc.
and until the premium thereof has been paid, except in
G.R. No. 137172, 04 April 2001
the case of a life or an industrial life policy whenever
the grace period provision applies.
FACTS
Plaintiff [herein Respondent] obtained from defendant
While the import of Section 77 is that prepayment of
[herein Petitioner] five (5) insurance policies on its properties.
premiums is strictly required as a condition to the validity of
All five (5) policies reflect on their face the effectivity term:
the contract, We are not prepared to rule that the request to
"from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992."
make installment payments duly approved by the insurer
would prevent the entire contract of insurance from going into while being driven by Rodolfo Songco, a duly licensed driver
effect despite payment and acceptance of the initial premium and son of Federico (the vehicle owner) collided with a car in the
or first installment. So is an understanding to allow insured to municipality of Calumpit, province of Bulacan, as a result of
pay premiums in installments not so prescribed. At the very which mishap Federico Songco (father) and Rodolfo Songco
least, both parties should be deemed in estoppel to question (son) died, Carlos Songco (another son), the latter’s wife,
the arrangement they have voluntarily accepted. Angelita Songco, and a family friend by the name of Jose
Manuel sustained physical injuries of varying degrees.”

FIELDMEN’S INSURANCE It was further shown according to the decision of respondent

CO., INC. V. VDA. DE Court of Appeals: “Amor Songco, 42-year-old son of deceased
Federico Songco, testifying as witness, declared that when

SONGCO, G.R. NO. L- insurance agent Benjamin Sambat was inducing his father to
insure his vehicle, he butted in saying: ‘That cannot be, Mr.
Sambat, because our vehicle is an ‘owner’ private vehicle and
24833, [SEPTEMBER 23, not for passengers,’ to which agent Sambat replied: ‘whether
our vehicle was an ‘owner’ type or for passengers it could be
1968], 134 PHIL 90-96 insured because their company is not owned by the
Government and the Government has nothing to do with their
company. So they could do what they please whenever they
FACTS: The facts as found by respondent Court of Appeals, believe a vehicle is insurable’ . . . In spite of the fact that the
binding upon us, follow: “This is a peculiar case. Federico present case was filed and tried in the CFI Pampanga, the
Songco of Floridablanca, Pampanga, a man of scant education, defendant company did not even care to rebut Amor Songco’s
being only a first grader . . ., owned a private jeepney with Plate testimony by calling on the witness-stand agent Benjamin
No. 41-289 for the year 1960. On September 15, 1960, as such Sambat, its Pampanga Field Representative.”
private vehicle owner, he was induced by FIELDMEN’S
Insurance Company Pampanga agent Benjamin Sambat to
apply for a Common Carrier’s Liability Insurance Policy covering The plaintiffs in the lower court, likewise respondents here, were
his motor vehicle .. Upon paying an annual premium of P16.50, the surviving widow and children of the deceased Federico
defendant FIELDMEN’S Insurance Company Inc. issued on Songco as well as the injured passenger Jose Manuel. On the
September 19, 1960, Common Carriers Accident Insurance above facts they prevailed, as had been mentioned, in the lower
Policy No. 45-HO-4254 . . . the duration of which will be for one court and in the respondent Court of Appeals.
(1) year, effective September 15, 1960 to September 15, 1961.
On September 22, 1961, the defendant company, upon ISSUE: WON THE INSURER SHOULD PAY FOR THE
payment of the corresponding premium, renewed the policy by PROCEEDS OF THE INSURANCE.
extending the coverage from October 15, 1961 to October 15,
1962. This time Federico Songco’s private jeepney carried Plate
No. J-68136- Pampanga – 1961 . . . On October 29, 1961, HELD: YES. COMMERCIAL LAWS; INSURANCE
during the effectivity of the renewed policy, the insured vehicle CONTRACTS; COMMON CARRIER LIABILITY INSURANCE;
INSURER WHO REPRESENTS INSURABILITY OF VEHICLE
ESTOPPED FROM DENYING LIABILITY THEREON. — After Facts:
petitioner FIELDMEN’S Insurance Co., Inc., had led the insured
Federico Songco to believe that he could qualify under the Equitable’s insurance policy covered indemnities for bodily injuries and
common carrier liability insurance policy, and to enter into deaths, however, it never specificed an amount to be given in case of a
contract of insurance paying the premiums due, it could not, person’s death by drowning. It specified amounts from 1,000 to 3,000 for
thereafter, in any litigation arising out of such representation, be other causes of death, however.
permitted to change its stand to the detriment of the heirs of the Francisico del Rosario died from drowning after jumping from a sinking
insured. As estoppel is primarily based on the doctrine of good ship. The insurer, Equitable, agreed to pay Php 1,000 as the claim for an
faith and the avoidance of harm that will befall the innocent party accident. His attorney, howvever, contended that he amount should be
due to its injurious reliance, the failure to apply it in this case greater under section 2, Php 1500. The issue was resolved in the
would result in a gross travesty of justice. Insurance Commison, where it was held that Section 1, under the
provisions applied. (Php 1,000 as indemnity) The lawyer still didin’t agree
and instituted a suit. The trail court held that the company had the
INSURER ESTOPPED FROM ASSERTING BREACH OF discretion to pay from Php 1,000 to 3,000 for death by drowning since
IMPOSSIBLE CONDITION IN THE CONTRACT. — Why liability there was no fixed amount for this type of death. The amended decision
under the terms of the policy was inescapable was set forth in ordered the company to pay Php 2,000
the decision of respondent Court of Appeals: Thus: “Since some
of the conditions contained in the policy issued by the
defendant-appellant were impossible to comply with under the Issue: What should the amount be?
existing conditions at the time and ‘inconsistent with the known
facts,’ the insurer ‘is estopped from asserting breach of such
conditions. From this jurisprudence, we find no valid reason to Held: Judgment affirmed. Still 2,000.
deviate and consequently hold that the decision appealed from
should be affirmed. The injured parties, to wit, Carlos Songco,
Angelito Songco and Jose Manuel, for whose hospital and Ratio:
medical expenses the defendant company was being made
liable, were passengers of the jeepney at the time of the The interpretation of obscure stipulations in a contract should not favor
occurrence, and Rodolfo Songco, for whose burial expenses the the party who cause the obscurity.
defendant company was also being made liable, was the driver “Ambigious terms in a policy are to be construed strictly against, the
of the vehicle in question. Except for the fact that they were not insurer, and liberally in favor of the insured for the payment of indemnity
fare-paying passengers, their status as beneficiaries under the where forfeiture is involved. The company takes great care in the wording
policy is recognized therein.” and has legal advisers who create the contracts to the benefit of the
company.

Del Rosario v Equitable G.R. No. L-16215 Trial court ruling are well considered because they are supported by
doctrines on insurance resolving cases against the party who caused the
June 29, 1963 ambiguity in the wording of the contract’s terms. This was also due to the
J. Paredes fact that the insured didn’t have much of a say in formulating the contract.
LANDICHO VS. GSIS/ March 17,1972’ The equitable and ethical considerations justifying the foregoing view
are bolstered up by two (2) factors, namely:

FUCKS: On June 1, 1964, the GSIS issued in favor of Flaviano (a) The aforementioned subdivision (c) states "that this application
Landicho, a civil engineer of the Bureau of Public Works, stationed at serves as a letter of authority to the Collecting Officer of our Office" —
the Bureau of Public Works — "thru the GSIS to deduct from my salary
Mamburao, Mindoro Occidental, optional additional life insurance
the monthly premium in the amount of P33.36." No such deduction was
policy No. OG-136107 in the sum of P7,900. While still under the
made — and, consequently, not even the first premium "paid" —
employment of the Bureau of Public Works, Mr. Landicho met his because the collecting officer of the Bureau of Public Works was not
death, on June 29, 1966, in an airplane crash in Mindoro. The GSIS advised by the GSIS to make it (the deduction) pursuant to said
denied the payment of the policy, upon the ground that the policy had authority. Surely, this omission of the GSIS should not inure to its
never been in force because, pursuant to subdivision (e) of the above- benefit. .
quoted paragraph 7 of the application, the policy "shall be ... effective (b) The GSIS had impliedly induced the insured to believe that
on the first day of the month next following the month the first Policy No. OG-136107 was in force, he having been paid by the GSIS
premium is paid," and no premium had ever been paid on said policy. the dividends corresponding to said policy. Had the insured had the
slightest inkling that the latter was not, as yet, effective for non-payment
of the first premium, he would have, in all probability, caused the same
ISSUE: whether or not the insurance policy in question has ever been to be forthwith satisfied.
in force, not a single premium having been paid thereon.
ETERNAL GARDENS
HELD:
MEMORIAL PARK CORP.
The interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity. This is particularly true as
V. PHILIPPINE AMERICAN
regards insurance policies, in respect of which it is settled that the "
"terms in an insurance policy, which are ambiguous, equivocal, or
LIFE INSURANCE CO.,
uncertain ... are to be construed strictly and most strongly against the
insurer, and liberally in favor of the insured so as to effect the dominant
G.R. NO. 166245, [APRIL
purpose of indemnity or payment to the insured, especially where a
forfeiture is involved,”and the reason for this rule is the "insured usually 8, 2008], 574 PHIL 161-174
has no voice in the selection or arrangement of the words employed and
that the language of the contract is selected with great care and
FACTS: On December 10, 1980, respondent Philippine
deliberation by experts and legal advisers employed by, and acting
American Life Insurance Company (Philamlife) entered into an
exclusively in the interest of, the insurance company."
agreement denominated as Creditor Group Life Policy No. P-
1920 with petitioner Eternal Gardens Memorial Park Corporation
(Eternal). Under the policy, the clients of Eternal who purchased
burial lots from it on installment basis would be insured by Assured to the Company or the sum of P100,000.00, whichever
Philamlife. The amount of insurance coverage depended upon is smaller. Such benefit shall be paid to the Assured if the Lot
the existing balance of the purchased burial lots. The policy was Purchaser dies while insured under the Policy.
to be effective for a period of one year, renewable on a yearly
basis.
EFFECTIVE DATE OF BENEFIT.

The relevant provisions of the policy are:

The insurance of any eligible Lot Purchaser shall be effective on
the date he contracts a loan with the Assured. However, there
ELIGIBILITY. shall be no insurance if the application of the Lot Purchaser is
not approved by the Company.
Any Lot Purchaser of the Assured who is at least 18 but not
more than 65 years of age, is indebted to the Assured for the Eternal was required under the policy to submit to Philamlife a
unpaid balance of his loan with the Assured, and is accepted for list of all new lot purchasers, together with a copy of the
Life Insurance coverage by the Company on its effective date is application of each purchaser, and the amounts of the
eligible for insurance under the Policy. respective unpaid balances of all insured lot purchasers. In
relation to the instant petition, Eternal complied by submitting a
letter dated December 29, 1982, containing a list of insurable
EVIDENCE OF INSURABILITY. balances of its lot buyers for October 1982. One of those
included in the list as “new business” was a certain John
No medical examination shall be required for amounts of Chuang. His balance of payments was PhP100,000. On August
insurance up to P50,000.00. However, a declaration of good 2, 1984, Chuang died. Eternal sent a letter dated August 20,
health shall be required for all Lot Purchasers as part of the 1984 to Philamlife, which served as an insurance claim for
application. The Company reserves the right to require further Chuang’s death. Attached to the claim were the following
evidence of insurability satisfactory to the Company in respect of documents: (1) Chuang’s Certificate of Death; (2) Identification
the following: Certificate stating that Chuang is a naturalized Filipino Citizen;
(3) Certificate of Claimant; (4) Certificate of Attending Physician;
and (5) Assured’s Certificate.
1. Any amount of insurance in excess of P50,000.00.

In reply, Philamlife wrote Eternal a letter on November 12, 1984,

2. Any lot purchaser who is more than 55 years of age. requiring Eternal to submit the following documents relative to
its insurance claim for Chuang’s death: (1) Certificate of
LIFE INSURANCE BENEFIT. Claimant (with form attached); (2) Assured’s Certificate (with
form attached); (3) Application for Insurance accomplished and
signed by the insured, Chuang, while still living; and (4)
The Life Insurance coverage of any Lot Purchaser at any time Statement of Account showing the unpaid balance of Chuang
shall be the amount of the unpaid balance of his loan (including before his death. Eternal transmitted the required documents
arrears up to but not exceeding 2 months) as reported by the
through a letter dated November 14, 1984, which was received Indemnity and liability insurance policies are construed in
by Philamlife on November 15, 1984. After more than a year, accordance with the general rule of resolving any ambiguity
Philamlife had not furnished Eternal with any reply to the latter’s therein in favor of the insured, where the contract or policy is
insurance claim. This prompted Eternal to demand from prepared by the insurer. A contract of insurance, being a
Philamlife the payment of the claim for PhP100,000 on April 25, contract of adhesion, par excellence, any ambiguity therein
1986. should be resolved against the insurer; in other words, it should
be construed liberally in favor of the insured and strictly against
the insurer. Limitations of liability should be regarded with
ISSUE: WON THE INSURER IS LIABLE. extreme jealousy and must be construed in such a way as to
preclude the insurer from noncompliance with its obligations.
HELD: YES. As earlier stated, Philamlife and Eternal entered (Emphasis supplied.) TECcHA
into an agreement denominated as Creditor Group Life Policy
No. P-1920 dated December 10, 1980. In the policy, it is In the more recent case of Philamcare Health Systems, Inc. v.
provided that:
Court of Appeals, we reiterated the above ruling, stating that:

EFFECTIVE DATE OF BENEFIT. When the terms of insurance contract contain limitations on
liability, courts should construe them in such a way as to
The insurance of any eligible Lot Purchaser shall be effective on preclude the insurer from non-compliance with his obligation.
the date he contracts a loan with the Assured. However, there Being a contract of adhesion, the terms of an insurance contract
shall be no insurance if the application of the Lot Purchaser is are to be construed strictly against the party which prepared the
not approved by the Company. IcDESA contract, the insurer. By reason of the exclusive control of the
insurance company over the terms and phraseology of the
insurance contract, ambiguity must be strictly interpreted against
An examination of the above provision would show ambiguity the insurer and liberally in favor of the insured, especially to
between its two sentences. The first sentence appears to state avoid forfeiture.
that the insurance coverage of the clients of Eternal already
became effective upon contracting a loan with Eternal while the
second sentence appears to require Philamlife to approve the Clearly, the vague contractual provision, in Creditor Group Life
insurance contract before the same can become effective. Policy No. P-1920 dated December 10, 1980, must be
construed in favor of the insured and in favor of the effectivity of
the insurance contract.
It must be remembered that an insurance contract is a contract
of adhesion which must be construed liberally in favor of the
insured and strictly against the insurer in order to safeguard the On the other hand, the seemingly conflicting provisions must be
latter’s interest. Thus, in Malayan Insurance Corporation v. harmonized to mean that upon a party’s purchase of a memorial
Court of Appeals, this Court held that: lot on installment from Eternal, an insurance contract covering
the lot purchaser is created and the same is effective, valid, and
binding until terminated by Philamlife by disapproving the
insurance application. The second sentence of Creditor Group On March 6, 1997, Felipe N. Khu, Sr. (Felipe)
Life Policy No. P-1920 on the Effective Date of Benefit is in the
nature of a resolutory condition which would lead to the applied for a life insurance policy with Insular
cessation of the insurance contract. Moreover, the mere inaction Life.However, Felipe’s policy lapsed on June 23,
of the insurer on the insurance application must not work to
prejudice the insured; it cannot be interpreted as a termination 1999 due to non-payment of the premium
of the insurance contract. The termination of the insurance covering the period from June 22, 1999 to June 23,
contract by the insurer must be explicit and unambiguous.
2000.
As a final note, to characterize the insurer and the insured as On September 7, 1999, Felipe applied for the
contracting parties on equal footing is inaccurate at best.
Insurance contracts are wholly prepared by the insurer with vast reinstatement of his policy which was approved by
amounts of experience in the industry purposefully used to its Insular life. Consequently, a Letter of Acceptance
advantage. More often than not, insurance contracts are
contracts of adhesion containing technical terms and conditions and an Endorsement was issued.
of the industry, confusing if at all understandable to laypersons,
that are imposed on those who wish to avail of insurance. As A part of the Letter of Acceptance states
such, insurance contracts are imbued with public interest that
must be considered whenever the rights and obligations of the
that: “[xx] Accept the imposition of an
insurer and the insured are to be delineated. Hence, in order to extra/additional extra premium of [P]5.00 a year per
protect the interest of insurance applicants, insurance thousand of insurance; effective June 22,1999”; while
companies must be obligated to act with haste upon insurance
applications, to either deny or approve the same, or otherwise a part of the Endorsement states: “This certifies
be bound to honor the application as a valid, binding, and that as agreed to by the Insured, the reinstatement of
effective insurance contract.
this policy has been approved by the Company on the
understanding that the following changes are made
Case Digest: Insular Life on the policy effective June 22, 1999”.

vs Khu On September 22, 2001, Felipe died due to several

G.R. No. 195176, April 18, 2016 illnesses including type 2 diabetes and live
cirrhosis. On October 5, 2001, Felipe’s
FACTS: beneficiaries filed with Insular Life a claim for
benefit under the reinstated policy. This claim was
denied. Instead, Insular Life advised Felipe’s
beneficiaries that it had decided to rescind the ISSUE:
reinstated policy on the grounds of concealment
and misrepresentation by Felipe because the Whether or not Felipe’s reinstated life
latter, apparently, did not disclose his illness. insurance policy is already incontestable at the
time of his death?
Trial ensued. Both the Trial Court and the Court of
Appeals ruled in favor of Felipe’s beneficiaries. RULING:

Now in this present petition, Insular Life prays for Yes,Felipe’s reinstated life insurance policy
the reversal of the CA decision arguing that is already incontestable at the time of his death.
respondents should not be allowed to recover on
The Insurance Code pertinently provides that:
the reinstated insurance policy because the two-
year contestability period had not yet lapsed Sec. 48. Whenever a right to rescind a contract of
inasmuch as the insurance policy was reinstated insurance is given to the insurer by any provision of
only on December 27, 1999, whereas Felipe died this chapter, such right must be exercised previous to
on September 22, 2001. the commencement of an action on the contract.

In defense, respondents maintain that the phrase After a policy of life insurance made payable on the
“effective June 22, 1999” found in both the Letter death of the insured shall have been in force during
of Acceptance and in the Endorsement is unclear the lifetime of the insured for a period of two
whether it refers to the subject of the sentence, years from the date of its issue or of its last
i.e., the “reinstatement of this policy” or to the reinstatement, the insurer cannot prove that the
subsequent phrase “changes are made on the policy is void ab initio or is rescissible by reason of
policy;” that granting that there was any obscurity the fraudulent concealment or misrepresentation of
or ambiguity in the insurance policy, the same, the insured or his agent.
should be laid at the door of Insular Life as it was
this insurance company that prepared the The date of last reinstatement mentioned in
necessary documents that make up the same. Section 48 of the Insurance Code pertains to the
date that the insurer approved’ the application for Vs.
THE HONORABLE COURT OF APPEALS and TKC MARKETING CORPORATION,
reinstatement. respondents

In this case, however, the parties differ as to when FACTS:

the reinstatement was actually approved. Insular Private respondent TKC Marketing Corp. was the owner/consignee of some
Life claims that it approved the reinstatement only 3,189.171 metric tons of soya bean meal which was loaded on board the ship
MV Al Kaziemah for carriage from the port of Rio del Grande, Brazil, to the
on December 27, 1999. On the other hand, port of Manila which was insured against the risk of loss by petitioner
respondents contend that it was on June 22, 1999 Malayan Insurance Corporation. While the vessel was docked in Durban,
South Africa, the civil authorities arrested and detained it because of a lawsuit
that the reinstatement took effect. on a question of ownership and possession. As a result, private respondent
notified petitioner of the arrest of the vessel and made a formal claim for the
In light of the ambiguity in the insurance amount of US$916,886.66, representing the dollar equivalent on the policies.
Private respondent likewise sought the assistance of petitioner on what to do
documents to this case, this Court adopts the with the cargo. Petitioner replied that the arrest of the vessel by civil
interpretation favorable to the insured in authority was not a peril covered by the policies. Private respondent,
accordingly, advised petitioner that it might tranship the cargo and requested
determining the date when the reinstatement was an extension of the insurance coverage until actual transhipment, which
approved. It must be remembered that an extension was approved upon payment of additional premium, under the
insurance contract is a contract of adhesion which same terms and conditions embodied in the original policies while in the
process of making arrangements for the transhipment of the cargo from
must be construed liberally in favor of the insured Durban to Manila, covering the period October 4 - December 19, 1989.
and strictly against the insurer in order to However, on December 11, 1989, the cargo was sold in Durban, South Africa,
for US$154.40 per metric ton or a total of P10,304,231.75 due to its
safeguard the latter’s interest. perishable nature which could no longer stand a voyage of twenty days to
Manila and another twenty days for the discharge thereof. On January 5,
Hence, the Court agreed that the reinstatement 1990, private respondent forthwith reduced its claim to US$448,806.09 (or
its peso equivalent of P9,879,928.89 at the exchange rate of P22.0138 per
took place on June 22, 1999, thus, the two-year $1.00) representing private respondent's loss after the proceeds of the sale
contestability period had lapsed even before were deducted from the original claim of $916,886.66 or P20,184,159.55.
Petitioner maintained its position that the arrest of the vessel by civil
Felipe’s death. With that, the court ruled that authorities on a question of ownership was an excepted risk under the marine
Felipe’s reinstated life insurance policy is already insurance policies. This prompted private respondent to file a complaint for
its claim and damages. The lower court decided in favor of private respondent
incontestable at the time of his death. and required petitioner to pay, aside from the insurance claim, consequential
and liquidated damages. On appeal, the Court of Appeals affirmed the
G.R. No. 119599 March 20, 1997 decision of the lower court stating that with the deletion of Clause 12 of the
MALAYAN INSURANCE CORPORATION, petitioner policies issued to private respondent, the same became automatically
covered under subsection 1.1 of Section 1 of the Institute War Clauses involved therein is performing) by a hostile act by or against
(Cargo), thus arrest and seizure by judicial processes which were excluded a belligerent power; and for the purpose of this warranty
under the former policy became one of the covered risks. "power" includes any authority maintaining naval, military or
air forces in association with a power. Further warranted free
ISSUE/S: from the consequences of civil war, revolution, rebellion,
insurrection, or civil strike arising therefrom, or piracy.
Whether or not the CA erred in ruling that the arrest of the vessel was a risk
covered under the subject insurance policies. With the incorporation of subsection 1.1 of Section 1 of the Institute War
Clauses, however, this Court agrees with the Court of Appeals and the private
RULING: respondent that "arrest" caused by ordinary judicial process is deemed
included among the covered risks. This interpretation becomes inevitable
In assigning the first error, petitioner submits the following: (a) an arrest by when subsection 1.1 of Section 1 of the Institute War Clauses provided that
civil authority is not compensable since the term "arrest" refers to "political "this insurance covers the risks excluded from the Standard Form of English
or executive acts" and does not include a loss caused by riot or by ordinary Marine Policy by the clause "Warranted free of capture, seizure, arrest, etc. .
judicial process as in this case; (b) the deletion of the Free from capture or . ." or the F.C. & S. Clause. Jurisprudentially, "arrests" caused by ordinary
Seizure Clause would leave the assured covered solely for the perils specified judicial process is also a risk excluded from the Standard Form of English
by the wording of the policy itself; (c) the rationale for the exclusion of an Marine Policy by the F.C. & S. Clause. This Court agrees with the Court of
arrest pursuant to judicial authorities is to eliminate collusion between Appeals when it held that ". . . . Although the F.C. & S. Clause may have
unscrupulous assured and civil authorities. originally been inserted in marine policies to protect against risks of war, (see
generally G. Gilmore & C. Black, The Law of Admiralty Section 2-9, at 71-73
The exception or limitation to the "Perils" clause and the "All other perils" [2d Ed. 1975]), its interpretation in recent years to include seizure or
clause in the subject policies is specifically referred to as Clause 12 called the detention by civil authorities seems consistent with the general purposes of
"Free from Capture & Seizure Clause" or the F.C. & S. However, the F. C. & S. the clause, . . . .” This Court cannot help the impression that petitioner is
Clause was deleted from the policies. Consequently, the Institute War Clauses overly straining its interpretation of the provisions of the policy in order to
(Cargo) was deemed incorporated which, in subsection 1.1 of Section 1, avoid being liable for private respondent's claim. It has been held that a
provides: strained interpretation which is unnatural and forced, as to lead to an absurd
conclusion or to render the policy nonsensical, should, by all means, be
1. This insurance covers: avoided. Likewise, it must be borne in mind that such contracts are invariably
prepared by the companies and must be accepted by the insured in the form
1.1 The risks excluded from the standard form of English in which they are written. Any construction of a marine policy rendering it
Marine Policy by the clause warranted free of capture, void should be avoided. 11 Such policies will, therefore, be construed strictly
seizure, arrest, restraint or detainment, and the against the company in order to avoid a forfeiture, unless no other result is
consequences thereof of hostilities or warlike operations, possible from the language used. If a marine insurance company desires to
whether there be a declaration of war or not; but this limit or restrict the operation of the general provisions of its contract by
warranty shall not exclude collision, contact with any fixed or special proviso, exception, or exemption, it should express such limitation in
floating object (other than a mine or torpedo), stranding, clear and unmistakable language. Exceptions to the general coverage are
heavy weather or fire unless caused directly (and construed most strongly against the company. 14 Even an express exception
independently of the nature on voyage or service which the in a policy is to be construed against the underwriters by whom the policy is
vessel concerned or, in the case of a collision any other vessel framed, and for whose benefit the exception is introduced. 15
An insurance contract should be so interpreted as to carry out the purpose covered, which is from February 26, 2007 to
for which the parties entered into the contract which is, to insure against risks
of loss or damage to the goods. Such interpretation should result from the February 26, 2008.
natural and reasonable meaning of language in the policy. 16 Where restrictive
provisions are open to two interpretations, that which is most favorable to On April 16, 2007, respondent instructed her
the insured is adopted. 17
driver, Lanuza, to bring the above-described
Indemnity and liability insurance policies are construed in accordance with vehicle to a nearby auto-shop for a tune-up.
the general rule of resolving any ambiguity therein in favor of the insured,
where the contract or policy is prepared by the insurer. 18 A contract of However, Lanuza no longer returned the motor
insurance, being a contract of adhesion, par excellence, any ambiguity therein vehicle to respondent and despite diligent efforts
should be resolved against the insurer; in other words, it should be construed
liberally in favor of the insured and strictly against the insurer. Limitations of to locate the same, said efforts proved futile.
liability should be regarded with extreme jealousy and must be construed in Resultantly, respondent promptly reported the
such a way as to preclude the insurer from noncompliance with its
obligations. 19 incident to the police and concomitantly notified
petitioner of the said loss and demanded payment

Case Digest: Alpha of the insurance proceeds in the total sum of

₱630,000.00.
Insurance vs Castor Petitioner, however, denied the insurance claim of
G.R. No. 198174, September 2, 2013 respondent, stating among others, that that
among the provisions of the Policy states that:
FACTS:
1.) The Company shall not be liable for:
On February 21, 2007, respondent entered
into a contract of insurance with petitioner, xxxx
involving her motor vehicle, a Toyota Revo. The
contract of insurance obligates the petitioner to (4) Any malicious damage caused by the Insured, any
pay the respondent the amount of Six Hundred member of his family or by “A PERSON IN THE
Thirty Thousand Pesos (₱630,000.00) in case of INSURED’S SERVICE.”
loss or damage to said vehicle during the period
The respondent reiterated her claim and argued
that the exception refers to damage of the motor
vehicle and not to its loss. However, petitioner’s term as part of the provisions of the said
denial of respondent’s insured claim remains firm. insurance contract. Which is why the Court finds it
puzzling that in the said policy’s provision detailing
ISSUE: the exceptions to the policy’s coverage in Section
III thereof, which is one of the crucial parts in the
Whether or not the loss of respondent’s vehicle is
insurance contract, the insurer, after liberally
excluded under the insurance policy
using the words “loss” and “damage” in the entire
RULING: policy, suddenly went specific by using the word
“damage” only in the policy’s exception regarding
The court ruled in the negative. The loss of “malicious damage.”
respondent’s vehicle is not excluded under the
insurance policy. Now, the defendant-appellant would like this
Court to believe that it really intended the word
In denying respondent’s claim, petitioner takes “damage” in the term “malicious damage” to
exception by arguing that the word “damage,” include the theft of the insured vehicle. The Court
under paragraph 4 of “Exceptions to Section III,” does not find the particular contention to be well
means loss due to injury or harm to person, taken.
property or reputation, and should be construed
to cover malicious “loss” as in “theft.” Thus, it True, it is a basic rule in the interpretation of
asserts that the loss of respondent’s vehicle as a contracts that the terms of a contract are to be
result of it being stolen by the latter’s driver is construed according to the sense and meaning of
excluded from the policy. We do not agree. the terms which the parties thereto have used. In
the case of property insurance policies, the
If the intention of the defendant-appellant was to evident intention of the contracting parties, i.e.,
include the term “loss” within the term “damage” the insurer and the assured, determine the import
then logic dictates that it should have used the of the various terms and provisions embodied in
term “damage” alone in the entire policy or the policy. However, when the terms of the
otherwise included a clear definition of the said
insurance policy are ambiguous, equivocal or xxx.” The policy also described therein the four-span building covered
by the same.
uncertain, such that the parties themselves
disagree about the meaning of particular On Jan. 12, 1981, fire broke out in the compound, razing the middle
portion of its four-span building and partly gutting the left and right
provisions, the policy will be construed by the sections thereof. A two-storey building (behind said four-span
courts liberally in favor of the assured and strictly building) was also destroyed by the fire.

against the insurer. ISSUE:

Lastly, a contract of insurance is a contract of

adhesion. So, when the terms of the insurance o Whether or not Rizal Surety is liable for loss of the two-storey
contract contain limitations on liability, courts building considering that the fire insurance policy sued upon
covered only the contents of the four-span building
should construe them in such a way as to
HELD:
preclude the insurer from non-compliance with
his obligation. Both the trial court and the CA found that the so-called “annex” as not
an annex building but an integral and inseparable part of the four-
span building described in the policy and consequently, the machines
Rizal Surety vs. CA and spare parts stored therein were covered by the fire insurance in
dispute.
on 11:25 PM in Case Digests, Commercial Law
So also, considering that the two-storey building aforementioned was
0
already existing when subject fire insurance policy contract was
336 SCRA 12 (2000) entered into on Jan. 12, 1981, having been constructed some time in
1978, petitioner should have specifically excluded the said two-storey
building from the coverage of the fire insurance if minded to exclude
the same but if did not, and instead, went on to provide that such fire
insurance policy covers the products, raw materials and supplies
o INSURANCE LAW: Interpretation of Insurance Contracts stored within the premises of Transworld which was an integral part of
the four-span building occupied by Transworld, knowing fully well the
FACTS: existence of such building adjoining and intercommunicating with the
right section of the four-span building.
Rizal Surety & Insurance Company issued a fire insurance policy in
favor of Transworld Knitting Mills, Inc. The subject policy stated that Also, in case of doubt in the stipulation as to the coverage of the fire
Rizal Surety is “responsible in case of loss whilst contained and/or insurance policy, under Art. 1377 of the New Civil Code, the doubt
stored during the currency of this Policy in the premises occupied by should be resolved against the Rizal Surety, whose layer or managers
them forming part of the buildings situated within own Compound drafted the fire insurance policy contract under scrutiny.
 Germany, the respondent corporation (though organized under
In Landicho vs. Government Service Insurance System, the Court and by virtue of the laws of the Philippines) being controlled by
ruled that “the terms in an insurance policy, which are ambiguous, German subjects and the petitioner being a company under
equivocal or uncertain x x x are to be construed strictly and most American jurisdiction when said policy was issued on October 1,
strongly against the insurer, and liberally in favor of the insured so as 1941. The petitioner, however, in pursuance of the order of the
to effect the dominant purpose of indemnity or payment to the insured, Director of the Bureau of Financing, Philippine Executive
especially where forfeiture is involved, and the reason for this is that Commission, dated April 9, 1943, paid to the respondent the
the insured usually has no voice in the selection or arrangement of the sum of P92,650 on April 19, 1943.
words employed and that the language of the contract is selected with
great care and deliberation by experts and legal advisers employed
by, and acting exclusively in the interest of, the insurance company.” The present action was filed on August 6, 1946, in the Court of
First Instance of Manila for the purpose of recovering from the

FILIPINAS COMPAÑIA DE respondent the sum of P92,650 above mentioned. The theory of
the petitioner is that the insured merchandise were burned after
the policy issued in 1941 in favor of the respondent corporation
SEGUROS V. CHRISTERN, had ceased to be effective because of the outbreak of the war
between the United States and Germany on December 10,
HUNEFELD & CO., INC., 1941, and that the payment made by the petitioner to the
respondent corporation during the Japanese military occupation
G.R. NO. L-2294, [MAY 25, was under pressure. After trial, the Court of First Instance of
Manila dismissed the action without pronouncement as to costs.

1951], 89 PHIL 54-60 Upon appeal to the Court of Appeals, the judgment of the Court
of First Instance of Manila was affirmed, with costs. The case is
now before us on appeal by certiorari from the decision of the
Court of Appeals.
FACTS: On October 1, 1941, the respondent corporation,
Christern, Huenefeld & Co., Inc., after payment of corresponding
premium, obtained from the petitioner, Filipinas Cia. de The Court of Appeals overruled the contention of the petitioner
Seguros, fire policy No. 29333 in the sum of P100,000, covering that the respondent corporation became an enemy when the
merchandise contained in a building located at No. 711 Roman United States declared war against Germany, relying on English
Street, Binondo, Manila. On February 27, 1942, or during the and American cases which held that a corporation is a citizen of
Japanese military occupation, the building and insured the country or state by and under the laws of which it was
merchandise were burned. In due time the respondent created or organized. It rejected the theory that the nationality of
submitted to the petitioner its claim under the policy. The a private corporation is determined by the character or
salvaged goods were sold at public auction and, after deducting citizenship of its controlling stockholders.
their value, the total loss suffered by the respondent was fixed at
P92,650. The petitioner refused to pay the claim on the ground
ISSUE: WON THE VALIDITY OF INSURANCE CONTRACT
that the policy in favor of the respondent had ceased to be in
CEASED UPON THE DECLARATION OF WAR.
force on the date the United States declared war against
HELD: YES. CORPORATIONS; NATIONALITY OF PRIVATE
CORPORATION; CONTROL TEST. — The nationality of a Geagonia v CA G.R. No. 114427
private corporation is determined by the character or citizenship Geagonia v CA G.R. No. 114427 February 6, 1995
of its controlling stockholders.

Facts:
INTERNATIONAL LAW; EFFECT OF WAR. — Where majority
of the stockholders of a corporation were German subjects, the
corporation became an enemy corporation upon the outbreak of Geagonia, owner of a store, obtained from Country Bankers fire insurance
the war between the United States and Germany. policy for P100,000.00. The 1 year policy and covered thestock trading of dry
goods. The policy noted the requirement that "3. The insured shall give notice
to the Company of any insurance or insurances already effected, or which may
TERMINATION OF POLICY OF PUBLIC ENEMY. — As the subsequently be effected, covering any of the property or properties consisting
Philippine Insurance Law (Act No. 2427, as amended), in its of stocks in trade, goods in process and/or inventories only hereby insured,
section 8, provides that “anyone except a public enemy may be and unless notice be given and the particulars of such insurance or insurances
insured,” an insurance policy ceases to be allowable as soon as be stated therein or endorsed in this policy pursuant to Section 50 of the
an insured becomes a public enemy. Insurance Code, by or on behalf of the Company before the occurrence of any
loss or damage, all benefits under this policy shall be deemed forfeited,
provided however, that this condition shall not apply when the total insurance
RETURN OF PREMIUMS UPON TERMINATION OF POLICY or insurances in force at the time of the loss or damage is not more than
BY REASON OF WAR. — Where an insurance policy ceases to P200,000.00." The petitioners’ stocks were destroyed by fire. He then filed a
be effective by reason of war, which has made the insured an claim which was subsequently denied because the petitioner’s stocks were
enemy, the premiums paid for the period covered by the policy covered by two other fire insurance policies for Php 200,000 issued by PFIC.
The basis of the private respondent's denial was the petitioner's alleged
from the date war is declared, should be returned.
violation of Condition 3 of the policy. Geagonia then filed a complaint against
the private respondent in the Insurance Commission for the recovery of
The respondent having become an enemy corporation on P100,000.00 under fire insurance policy and damages. He claimed that he
knew the existence of the other two policies. But, he said that he had no
December 10, 1941, the insurance policy issued in its favor on
knowledge of the provision in the private respondent's policy requiring him to
October 1, 1941, by the petitioner (a Philippine corporation) had inform it of the prior policies and this requirement was not mentioned to him by
ceased to be valid and enforceable, and since the insured the private respondent's agent. The Insurance Commission found that the
goods were burned after December 10, 1941, and during the petitioner did not violate Condition 3 as he had no knowledge of the existence
war, the respondent was not entitled to any indemnity under of the two fire insurance policies obtained from the PFIC; that it was Cebu
said policy from the petitioner. However, elementary rules of Tesing Textiles w/c procured the PFIC policies w/o informing him or securing
justice (in the absence of specific provision in the Insurance his consent; and that Cebu Tesing Textile, as his creditor, had insurable
Law) require that the premium paid by the respondent for the interest on the stocks. The Insurance Commission then ordered the
period covered by its policy from December 11, 1941, should be respondent company to pay complainant the sum of P100,000.00 with interest
and attorney’s fees. CA reversed the decision of the Insurance Commission
returned by the petitioner.
because it found that the petitioner knew of the existence of the two other
policies issued by the PFIC.
Issues:
LALICAN VS INSULAR LIFE (G.R. NO. 183526
1. WON the petitioner had not disclosed the two insurance policies when he AUGUST 25, 2009)
obtained the fire insurance and thereby violated Condition 3 of the policy.

2. WON he is prohibited from recovering Lalican vs The Insular Life Assurance Company Limited
G.R. No. 183526 August 25, 2009

Facts: Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio). During his
Held: Yes. No. Petition Granted lifetime, Eulogio applied for an insurance policy with Insular Life. On 24 April 1997,
Insular Life, through Josephine Malaluan (Malaluan), its agent in Gapan City, issued
in favor of Eulogio Policy No. 9011992, which contained a 20-Year Endowment
Ratio: Variable Income Package Flexi Plan worth P500,000.00, with two riders valued at P
500,000.00 each. Thus, the value of the policy amounted to P1,500,000.00. Violeta
was named as the primary beneficiary. P Under the terms of Policy No. 9011992,
Eulogio was to pay the premiums on a quarterly basis in the amount of 8,062.00,
1. The court agreed with the CA that the petitioner knew of the prior policies payable every 24 April, 24 July, 24 October and 24 January of each year, until the end
issued by the PFIC. His letter of 18 January 1991 to the private respondent of the 20-year period of the policy. According to the Policy Contract, there was a grace
conclusively proves this knowledge. His testimony to the contrary before the period of 31 days for the payment of each premium subsequent to the first. If any
Insurance Commissioner and which the latter relied upon cannot prevail over premium was not paid on or before the due date, the policy would be in default, and if
a written admission made ante litem motam. It was, indeed, incredible that he the premium remained unpaid until the end of the grace period, the policy would
did not know about the prior policies since these policies were not new or automatically lapse and become void. Eulogio paid the premiums due on 24 July 1997
original. and 24 October 1997. However, he failed to pay the premium due on 24 January 1998,
even after the lapse of the grace period of 31 days. Policy No. 9011992, therefore,
lapsed and became void. Eulogio submitted to the Cabanatuan District Office of
Insular Life, through Malaluan, on 26 May 1998, an Application for Reinstatement of
2. Stated differently, provisions, conditions or exceptions in policies which tend Policy No. 9011992, together with the amount of P 8,062.00 to pay for the premium
to work a forfeiture of insurance policies should be construed most strictly due on 24 January 1998. In a letter dated 17 July 1998, Insular Life notified Eulogio
against those for whose benefits they are inserted, and most favorably toward that his Application for Reinstatement could not be fully processed because, although
those against whom they are intended to operate. With these principles in he already deposited P8,062.00 as payment for the 24 January 1998 premium, he left
mind, Condition 3 of the subject policy is not totally free from ambiguity and unpaid the overdue interest thereon amounting to P322.48. Thus, Insular Life
must be meticulously analyzed. Such analysis leads us to conclude that (a) instructed Eulogio to pay the amount of interest and to file another application for
the prohibition applies only to double insurance, and (b) the nullity of the policy reinstatement. Eulogio was likewise advised by Malaluan to pay the premiums that
shall only be to the extent exceeding P200,000.00 of the total policies subsequently became due on 24 April 1998 and 24 July 1998, plus interest. On 17
obtained. Furthermore, by stating within Condition 3 itself that such condition September 1998, Eulogio went to Malaluans house and submitted a second
shall not apply if the total insurance in force at the time of loss does not exceed Application for Reinstatement of Policy No. 9011992, including the amount of
P17,500.00, representing payments for the overdue interest on the premium for 24
P200,000.00, the private respondent was amenable to assume a co-insurer's
January 1998, and the premiums which became due on 24 April 1998 and 24 July
liability up to a loss not exceeding P200,000.00. What it had in mind was to
1998. As Malaluan was away on a business errand, her husband received Eulogios
discourage over-insurance. Indeed, the rationale behind the incorporation of second Application for Reinstatement and issued a receipt for the amount Eulogio
"other insurance" clause in fire policies is to prevent over-insurance and thus deposited. A while later, on the same day, 17 September 1998, Eulogio died of cardio-
avert the perpetration of fraud. When a property owner obtains insurance respiratory arrest secondary to electrocution.
policies from two or more insurers in a total amount that exceeds the property's
value, the insured may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as the insurer is Issue: Whether or not Eulogio had an existing insurable interest in his own life until
interested in preventing a situation in which a fire would be profitable to the the day of his death in order to have the insurance policy validly reinstated.
insured.
Held: No. An insurable interest is one of the most basic and essential requirements in
an insurance contract. In general, an insurable interest is that interest which a person Philam v Pineda G.R. No. L-54216 July 19,
is deemed to have in the subject matter insured, where he has a relation or connection
with or concern in it, such that the person will derive pecuniary benefit or advantage 1989
from the preservation of the subject matter insured and will suffer pecuniary loss or J. Paras
damage from its destruction, termination, or injury by the happening of the event
insured against. The existence of an insurable interest gives a person the legal right to
insure the subject matter of the policy of insurance. Section 10 of the Insurance Code
indeed provides that every person has an insurable interest in his own life. Section 19
Facts:
of the same code also states that an interest in the life or health of a person insured Pineda procured an ordinary life insurance policy from the petitioner
must exist when the insurance takes effect, but need not exist thereafter or when the
company and designated his wife and children as irrevocable beneficiaries.
loss occurs.
He then filed a petition to amend the designation of the beneficiaries in his
life policy from irrevocable to revocable.
In the instant case, Eulogios death rendered impossible full compliance with the
conditions for reinstatement of Policy No. 9011992. True, Eulogio, before his death, The judge granted the request.
managed to file his Application for Reinstatement and deposit the amount for payment
of his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 Petitioner promptly filed a motion but was denied. Hence, this petition.
could only be considered reinstated after the Application for Reinstatement had been
processed and approved by Insular Life during Eulogios lifetime and good health.
Issues:
The stipulation in a life insurance policy giving the insured the privilege to reinstate it 1. WON the designation of the irrevocable beneficiaries could be changed
upon written application does not give the insured absolute right to such reinstatement or amended without the consent of all the irrevocable beneficiaries.
by the mere filing of an application. The insurer has the right to deny the reinstatement
if it is not satisfied as to the insurability of the insured and if the latter does not pay all 2. WON the irrevocable minor beneficiaries could give consent to the
overdue premium and all other indebtedness to the insurer. After the death of the change in designation
insured the insurance Company cannot be compelled to entertain an application for
reinstatement of the policy because the conditions precedent to reinstatement can no
longer be determined and satisfied.
Held: No to both. Petition dismissed.
Malaluan did not have the authority to approve Eulogios Application for
Reinstatement. Malaluan still had to turn over to Insular Life Eulogios Application for
Reinstatement and accompanying deposits, for processing and approval by the latter. Ratio:

Under the Insurance Act, the beneficiary designated in a life insurance

Violeta did not adduce any evidence that Eulogio might have failed to fully understand contract cannot be changed without the consent of the beneficiary because
the import and meaning of the provisions of his Policy Contract and/or Application for he has a vested interest in the policy.
Reinstatement, both of which he voluntarily signed. While it is a cardinal principle of
insurance law that a policy or contract of insurance is to be construed liberally in favor There was an express stipulation to this effect: “It is hereby understood
of the insured and strictly as against the insurer company, yet, contracts of insurance, and agreed that, notwithstanding the provisions of this policy to the
like other contracts, are to be construed according to the sense and meaning of the contrary, inasmuch as the designation of the primary/contingent
terms, which the parties themselves have used. If such terms are clear and
beneficiary/beneficiaries in this Policy has been made without reserving
unambiguous, they must be taken and understood in their plain, ordinary and popular
sense. the right to change said beneficiary/ beneficiaries, such designation may
not be surrendered to the Company, released or assigned; and no right or
privilege under the Policy may be exercised, or agreement made with the legitimate children, thus, the proceeds released to Odessa and
Company to any change in or amendment to the Policy, without the those to be released to Karl Brian and Trisha Angelie were
consent of the said beneficiary/beneficiaries.” inofficious and should be reduced; and (4) petitioners could not
The alleged acquiescence of the six (6) children beneficiaries of the policy be deprived of their legitimes, which should be satisfied first.
cannot be considered an effective ratification due to the fact that they were Insular admitted that Loreto misrepresented Eva as his
minors. Neither could they act through their father insured since their legitimate wife and Odessa, Karl Brian, and Trisha Angelie as his
interests are quite divergent from one another. legitimate children, and that they filed their claims for the
insurance proceeds of the insurance policies; that when it
Therefore, the parent-insured cannot exercise rights and/or privileges ascertained that Eva was not the legal wife of Loreto, it
pertaining to the insurance contract, for otherwise, the vested rights of the disqualified her as a beneficiary and divided the proceeds among
irrevocable beneficiaries would be rendered inconsequential. Odessa, Karl Brian, and Trisha Angelie, as the remaining
Of equal importance is the well-settled rule that the contract between the designated beneficiaries; and that it released Odessa’s share as
parties is the law binding on both of them and for so many times, this court she was of age, but withheld the release of the shares of minors
has consistently issued pronouncements upholding the validity and Karl Brian and Trisha Angelie pending submission of letters of
effectivity of contracts. Likewise, contracts which are the private laws of the guardianship. Insular alleged that the complaint or petition failed
contracting parties should be fulfilled according to the literal sense of their to state a cause of action insofar as it sought to declare as void the
stipulations, for contracts are obligatory, no matter in what form they may designation of Eva as beneficiary, because Loreto revoked her
be, whenever the essential requisites for their validity are present designation as such in Policy No. A001544070 and it disqualified
her in Policy No. A001693029; and insofar as it sought to declare
The change in the designation of was not within the contemplation of the
as inofficious the shares of Odessa, Karl Brian, and Trisha
parties. The lower court instead made a new contract for them. It acted in
excess of its authority when it did so.
Angelie, considering that no settlement of Loreto’s estate had
been filed nor had the respective shares of the heirs been
determined. Insular further claimed that it was bound to honor
Heirs of Maramag v. Maramag
the insurance policies designating the children of Loreto with Eva
G.R. No. 181132 , June 5, 2009
as beneficiaries pursuant to Section 53 of the Insurance Code.
Grepalife alleged that Eva was not designated as an insurance
FACTS:
policy beneficiary; that the claims filed by Odessa, Karl Brian, and
Trisha Angelie were denied because Loreto was ineligible for
The case stems from a petition filed against respondents with the
insurance due to a misrepresentation in his application form that
RTC for revocation and/or reduction of insurance proceeds for
he was born on December 10, 1936 and, thus, not more than 65
being void and/or inofficious. The petition alleged that: (1)
years old when he signed it in September 2001; that the case was
petitioners were the legitimate wife and children of
premature, there being no claim filed by the legitimate family of
Loreto Maramag (Loreto), while respondents were Loreto’s
Loreto; and that the law on succession does not apply where
illegitimate family; (2) Eva de Guzman Maramag (Eva) was a
the designation of insurance beneficiaries is clear.
concubine of Loreto and a suspect in the killing of the latter, thus,
she is disqualified to receive any proceeds from his insurance
ISSUE:
policies from Insular Life Assurance Company, Ltd. (Insular) and
Great Pacific Life Assurance Corporation (Grepalife) (3) the
Whether or not illegitimate children can be beneficiaries in an
illegitimate children of Loreto—Odessa, Karl Brian, and Trisha
insurance contract.
Angelie—were entitled only to one-half of the legitime of the
RULING:
FACTS: Petitioner-spouses, as lessess, entered into a
Yes. Section 53 of the Insurance Code states that the insurance lease contract with private respondent CKS Development
proceeds shall be applied exclusively to the proper interest of the
person in whose name or for whose benefit it is made unless
Corporation (CKS), as lessor. One of the stipulations of
otherwise specified in the policy. Pursuant thereto, it is the one (1) year lease contract states:
obvious that the only persons entitled to claim the insurance 18. x x x. The LESSEE shall not insure against fire the
proceeds are either the insured, if still alive; or the beneficiary, if chattels, merchandise, textiles, goods and effects placed
the insured is already deceased, upon the maturation of the at any stall or store or space in the leased premises
policy.The exception to this rule is a situation where the without first obtaining the written consent and approval
insurance contract was intended to benefit third persons who are of the LESSOR. If the LESSEE obtain(s) the insurance
not parties to the same in the form of favorable stipulations or thereof without the consent of the LESSOR then the
indemnity. In such a case, third parties may directly sue
and claim from the insurer.
policy is deemed assigned and transferred to the LESSOR
for its own benefit; x x x1chanroblesvirtuallawlibrary
Petitioners are third parties to the insurance contracts with Notwithstanding the above stipulation in the lease
Insular and Grepalife and, thus, are not entitled to the proceeds contract, the spouses insured against loss by fire their
thereof. Accordingly, respondents Insular and Grepalife have no merchandise inside the leased premises for 500K with
legal obligation to turn over the insurance proceeds to the United Insurance Co., Inc. (United) without the
petitioners. The revocation of Eva as a beneficiary in one policy written consent of private respondents CKS.
and her disqualification as such in another are of no moment
considering that the designation of the illegitimate children
as beneficiaries in Loreto’s insurance policies remains valid. On the day that the lease contract was to expire, fire
Because no legal proscription exists in naming as beneficiaries broke out inside the leased premises.
the children of illicit relationships by the insured, the shares of
Eva in the insurance proceeds, whether forfeited by the court in
view of the prohibition on donations under Article 739 of the Civil When CKS learned of the insurance earlier procured by
Code or by the insurers themselves for reasons based on the the spouses (without its consent), it wrote the United a
insurance contracts, must be awarded to the said illegitimate demand letter asking that the proceeds of the insurance
children, the designated beneficiaries, to the exclusion of contract (between the Cha spouses and United) be paid
petitioners. It is only in cases where the insured has not directly to CKS, based on its lease contract with Cha
designated any beneficiary, or when the designated beneficiary is spouses.
disqualified by law to receive the proceeds, that the
insurance policy proceeds shall redound to the benefit of the
estate of the insured. United refused to pay CKS. Hence, the latter filed a
complaint against the spouses and United.
Spouses CHA and UNITED v. CA and CKS
GR no. 124520
August 18, 1997
The RTC rendered a decision ordering United to pay CKS insurance is a mere wager which is void under Section 25
. the CA affirmed the trial court decision. MR denied, of the Insurance Code, which provides:
hence this petition
SECTION 25. Every stipulation in a policy of Insurance
ISSUE: WON the aforequoted paragraph 18 of the lease for the payment of loss, whether the person insured has
contract entered into between CKS and the spouses is or has not any interest in the property insured, or that
valid insofar as it provides that any fire insurance policy the policy shall be received as proof of such interest, and
obtained by the spouses is deemed assigned or every policy executed by way of gaming or wagering, is
transferred to the CKS if said policy is obtained without void.
the prior written of the latter. In the present case, it cannot be denied that CKS has no
HELD: NO; the provision is void, as against public policy insurable interest in the goods and merchandise inside
It is basic in the law on contracts that the stipulations the leased premises under the provisions of Section 17 of
contained in a contract cannot be contrary to law, the Insurance Code which provide.
morals, good customs, public order or public policy.
Section 17. The measure of an insurable interest in
Sec. 18 of the Insurance Code provides: property is the extent to which the insured might be
damnified by loss of injury thereof.”
Sec. 18. No contract or policy of insurance on property
shall be enforceable except for the benefit of some person United) cannot be compelled to pay the proceeds of the
having an insurable interest in the property insured. fire insurance policy to a person (CKS) who has no
insurable interest in the property insured
A non-life insurance policy such as the fire insurance
policy taken by petitioner-spouses over their The liability of the spouses to CKS for violating their
merchandise is primarily a contract of indemnity. lease contract in that Cha spouses obtained a fire
Insurable interest in the property insured must exist at insurance policy over their own merchandise, without the
the time the insurance takes effect and at the time the consent of CKS, is a separate and distinct issue which we
loss occurs. The basis of such requirement of insurable do not resolve in this case.
interest in property insured is based on sound public
policy: to prevent a person from taking out an insurance
policy on property upon which he has no insurable Filipino Merchants Insurance v CA G.R.
interest and collecting the proceeds of said policy in case No. 85141 November 28, 1989
of loss of the property. In such a case, the contract of J. Regalado
Facts: Ratio:
Choa insured 600 tons of fishmeal for the sum of P267,653.59 from 1. The "all risks clause" of the Institute Cargo Clauses read as follows:
Bangkok, Thailand to Manila against all risks under warehouse to
warehouse terms. What was imported in the SS Bougainville was 59.940 “5. This insurance is against all risks of loss or damage to the subject-
metric tons at $395.42 a ton. The cargo was unloaded from the ship and matter insured but shall in no case be deemed to extend to cover loss,
227 bags were found to be in bad condition by the arrastre. damage, or expense proximately caused by delay or inherent vice or
nature of the subject-matter insured. Claims recoverable hereunder shall
Choa made a formal claim against the defendant Filipino Merchants be payable irrespective of percentage.“
Insurance Company for P51,568.62 He also presented a claim against the
ship, but the defendant Filipino Merchants Insurance Company refused to An "all risks policy" should be read literally as meaning all risks whatsoever
pay the claim. The plaintiff brought an action against the company and and covering all losses by an accidental cause of any kind. “Accident” is
presented a third party complaint against the vessel and the arrastre construed by the courts in their ordinary and common acceptance.
contractor. The very nature of the term "all risks" must be given a broad and
The court below, after trial on the merits, rendered judgment in favor of comprehensive meaning as covering any loss other than a willful and
private respondent, for the sum of P51,568.62 with interest at legal rate. fraudulent act of the insured. This is pursuant to the very purpose of an "all
risks" insurance to give protection to the insured in those cases where
The common carrier, Compagnie, was ordered to pay as a joint debtor. difficulties of logical explanation or some mystery surround the loss or
damage to property.
On appeal, the respondent court affirmed the decision of the lower court
insofar as the award on the complaint is concerned and modified the same Institute Cargo Clauses extends to all damages/losses suffered by the
with regard to the adjudication of the third-party complaint. A motion for insured cargo except (a) loss or damage or expense proximately caused
reconsideration of the aforesaid decision was denied. The AC made by delay, and (b) loss or damage or expense proximately caused by the
Filipino Merchants pay but absolved the common carrier, Compagnie. inherent vice or nature of the subject matter insured.
Hence this petition.
Generally, the burden of proof is upon the insured to show that a loss arose
from a covered peril, but under an "all risks" policy the burden is not on the
insured to prove the precise cause of loss or damage for which it seeks
Issues: compensation. The insured under an "all risks insurance policy" has the
1. WON the "all risks" clause of the marine insurance policy held the initial burden of proving that the cargo was in good condition when the
petitioner liable to the private respondent for the partial loss of the cargo, policy attached and that the cargo was damaged when unloaded from the
notwithstanding the clear absence of proof of some fortuitous event, vessel. The burden then shifts to the insurer to show the exception to the
casualty, or accidental cause to which the loss is attributable. coverage. This creates a special type of insurance which extends coverage
to risks not usually contemplated and avoids putting upon the insured the
2. WON The Court of Appeals erred in not holding that the private burden of establishing that the loss was due to the peril falling within the
respondent had no insurable interest in the subject cargo, hence, the policy's coverage; the insurer can avoid coverage upon demonstrating that
marine insurance policy taken out by private respondent is null and void. a specific provision expressly excludes the loss from coverage.
Under an 'all risks' policy, it was sufficient to show that there was damage
occasioned by some accidental cause of any kind, and there is no
Held: No. No. Petition denied.
necessity to point to any particular cause.
2. Section 13 of the Insurance Code- anyone has an insurable interest in The insurance policies provide for coverage on “book debts in
property who derives a benefit from its existence or would suffer loss from connection with ready-made clothing materials which have been
its destruction sold or delivered to various customers and dealers of the
Insurable interest in property may consist in (a) an existing interest; (b) an Insured anywhere in the Philippines.” The policies defined book
inchoate interest founded on an existing interest; or (c) an expectancy, debts as the “unpaid account still appearing in the Book of
coupled with an existing interest in that out of which the expectancy arises. Account of the Insured 45 days after the time of the loss
covered under this Policy.” The policies also provide for the
Choa, as vendee/consignee of the goods in transit, has such existing following conditions:
interest as may be the subject of a valid contract of insurance. His interest
over the goods is based on the perfected contract of sale. The perfected
contract of sale between him and the shipper of the goods operates to vest 1. Warranted that the Company shall not be liable for any
in him an equitable title even before delivery or before conditions have unpaid account in respect of the merchandise sold and
been performed. delivered by the Insured which are outstanding at the date of
Further, Article 1523 of the Civil Code provides that where, in pursuance
loss for a period in excess of six (6) months from the date of the
of a contract of sale, the seller is authorized or required to send the goods covering invoice or actual delivery of the merchandise
to the buyer, delivery of the goods to a carrier, for the purpose of whichever shall first occur.
transmission to the buyer is deemed to be a delivery of the goods to the
buyer. The Court has heretofore ruled that the delivery of the goods on
2. Warranted that the Insured shall submit to the Company
board the carrying vessels partake of the nature of actual delivery since,
within twelve (12) days after the close of every calendar month
from that time, the foreign buyers assumed the risks of loss of the goods
all amount shown in their books of accounts as unpaid and thus
and paid the insurance premium covering them.
become receivable item from their customers and dealers. . . .

GAISANO CAGAYAN, INC. Petitioner is a customer and dealer of the products of IMC and

V. INSURANCE COMPANY LSPI. On February 25, 1991, the Gaisano Superstore Complex
in Cagayan de Oro City, owned by petitioner, was consumed by

OF NORTH AMERICA,
fire. Included in the items lost or destroyed in the fire were
stocks of ready-made clothing materials sold and delivered by
IMC and LSPI.
G.R. NO. 147839, [JUNE 8,
2006], 523 PHIL 677-694 On February 4, 1992, respondent filed a complaint for damages
against petitioner. It alleges that IMC and LSPI filed with
respondent their claims under their respective fire insurance
policies with book debt endorsements; that as of February 25,
FACTS: Intercapitol Marketing Corporation (IMC) is the maker 1991, the unpaid accounts of petitioner on the sale and delivery
of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the of ready-made clothing materials with IMC was P2,119,205.00
local distributor of products bearing trademarks owned by Levi while with LSPI it was P535,613.00; that respondent paid the
Strauss & Co.. IMC and LSPI separately obtained from claims of IMC and LSPI and, by virtue thereof, respondent was
respondent fire insurance policies with book debt endorsements.
subrogated to their rights against petitioner; that respondent petitioner which remained unpaid 45 days after the loss through
made several demands for payment upon petitioner but these fire, and not the loss or destruction of the goods delivered.
went unheeded.
IMC and LSPI did not lose complete interest over the goods.
In its Answer with Counter Claim dated July 4, 1995, petitioner They have an insurable interest until full payment of the value of
contends that it could not be held liable because the property the delivered goods. Unlike the civil law concept of res perit
covered by the insurance policies were destroyed due to domino, where ownership is the basis for consideration of who
fortuities event or force majeure; that respondent’s right of bears the risk of loss, in property insurance, one’s interest is not
subrogation has no basis inasmuch as there was no breach of determined by concept of title, but whether insured has
contract committed by it since the loss was due to fire which it substantial economic interest in the property.
could not prevent or foresee; that IMC and LSPI never
communicated to it that they insured their properties; that it
Section 13 of our Insurance Code defines insurable interest as
never consented to paying the claim of the insured.
“every interest in property, whether real or personal, or any
relation thereto, or liability in respect thereof, of such nature that
ISSUE: WON IMC AND LSPI HAVE INSURABLE INTEREST a contemplated peril might directly damnify the insured.”
AND WON THE PETITIONER IS LIABLE TO THE INSURER. Parenthetically, under Section 14 of the same Code, an
insurable interest in property may consist in: (a) an existing
interest; (b) an inchoate interest founded on existing interest; or
HELD: YES. It is well-settled that when the words of a contract (c) an expectancy, coupled with an existing interest in that out of
are plain and readily understood, there is no room for which the expectancy arises.
construction. In this case, the questioned insurance policies
provide coverage for “book debts in connection with ready-made
clothing materials which have been sold or delivered to various Therefore, an insurable interest in property does not necessarily
customers and dealers of the Insured anywhere in the imply a property interest in, or a lien upon, or possession of, the
Philippines.” ; and defined book debts as the “unpaid account subject matter of the insurance, and neither the title nor a
still appearing in the Book of Account of the Insured 45 days beneficial interest is requisite to the existence of such an
after the time of the loss covered under this Policy.” Nowhere is interest, it is sufficient that the insured is so situated with
it provided in the questioned insurance policies that the subject reference to the property that he would be liable to loss should it
of the insurance is the goods sold and delivered to the be injured or destroyed by the peril against which it is insured.
customers and dealers of the insured. Anyone has an insurable interest in property who derives a
benefit from its existence or would suffer loss from its
destruction. Indeed, a vendor or seller retains an insurable
Indeed, when the terms of the agreement are clear and explicit interest in the property sold so long as he has any interest
that they do not justify an attempt to read into it any alleged therein, in other words, so long as he would suffer by its
intention of the parties, the terms are to be understood literally
destruction, as where he has a vendor’s lien. In this case, the
just as they appear on the face of the contract. Thus, what were insurable interest of IMC and LSPI pertain to the unpaid
insured against were the accounts of IMC and LSPI with accounts appearing in their Books of Account 45 days after the
time of the loss covered by the policies.
Under Article 1263 of the Civil Code, “[i]n an obligation to deliver loss arising out of the wrong or breach of contract complained
a generic thing, the loss or destruction of anything of the same of, the insurance company shall be subrogated to the rights of
kind does not extinguish the obligation.” If the obligation is the insured against the wrongdoer or the person who has
generic in the sense that the object thereof is designated merely violated the contract. . . .
by its class or genus without any particular designation or
physical segregation from all others of the same class, the loss
Petitioner failed to refute respondent’s evidence.
or destruction of anything of the same kind even without the
debtor’s fault and before he has incurred in delay will not have
the effect of extinguishing the obligation. This rule is based on
the principle that the genus of a thing can never perish. Genus
nunquan perit. An obligation to pay money is generic; therefore,
it is not excused by fortuitous loss of any specific property of the
debtor.

Thus, whether fire is a fortuitous event or petitioner was

negligent are matters immaterial to this case. What is relevant
here is whether it has been established that petitioner has
outstanding accounts with IMC and LSPI.

With respect to IMC, the respondent has adequately established

its claim. Exhibits “C” to “C-22” show that petitioner has an
outstanding account with IMC in the amount of P2,119,205.00.
Exhibit “E” is the check voucher evidencing payment to IMC.
Exhibit “F” is the subrogation receipt executed by IMC in favor of
respondent upon receipt of the insurance proceeds. All these
documents have been properly identified, presented and
marked as exhibits in court. The subrogation receipt, by itself, is
sufficient to establish not only the relationship of respondent as
insurer and IMC as the insured, but also the amount paid to
settle the insurance claim. The right of subrogation accrues
simply upon payment by the insurance company of the
insurance claim. Respondent’s action against petitioner is
squarely sanctioned by Article 2207 of the Civil Code which
provides:

Art. 2207. If the plaintiff’s property has been insured, and he has
received indemnity from the insurance company for the injury or