GAISANO INC. v. INSURANCE CO.

OF NORTH AMERICA
INSURANCE – Interpretation  If a marine insurance company desires to limit or restrict the operation of the general
provisions of its contract by special proviso, exception, or exemption, it should express
 It is well-settled that when the words of a contract are plain and readily understood, such limitation in clear and unmistakable language.
there is no room for construction.  Obviously, the deletion of the FCS Clause and the consequent incorporation of
o In this case, the questioned insurance policies provide coverage for “book subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) gave rise to ambiguity.
debts in connection with ready-made clothing materials which have been sold  If the risk of arrest occasioned by ordinary judicial process was expressly indicated as
or delivered to various customers and dealers of the Insured anywhere in the an exception in the subject policies, there would have been no controversy with
Philippines;” and defined book debts as the “unpaid account still appearing in respect to the interpretation of the subject clauses
the Book of Account of the Insured 45 days after the time of the loss covered  Be that as it may, exceptions to the general coverage are construed most strongly
under this Policy.” against the company.
 The insurance policies cover book debts. o Even an express exception in a policy is to be construed against the
o Nowhere is it provided in the questioned insurance policies that the subject underwriters by whom the policy is framed, and for whose benefit the
of the insurance is the goods sold and delivered to the customers and dealers exception is introduced.
of the insured.  An insurance contract should be so interpreted as to carry out the purpose for which
o What were insured against were the accounts of IMC and LSPI with Gaisano the parties entered into the contract which is, to insure against risks of loss or damage
which remained unpaid 45 days after the loss through fire, and not the to the goods.
loss/destruction of the goods delivered. o Such interpretation should result from the natural and reasonable meaning of
 Indeed, when the terms of the agreement are clear and explicit that they do not justify language in the policy.
an attempt to read into it any alleged intention of the parties, the terms are to be o Where restrictive provisions are open to two interpretations, that which is
understood literally just as they appear on the face of the contract. most favorable to the insured is adopted.
 The insurance policy is clear that the subject of the insurance is the book debts and not  Indemnity and liability insurance policies are construed in accordance with the general
goods sold and delivered to the customers and dealers of the insured. rule of resolving any ambiguity therein in favor of the insured, where the contract or
 Whether fire is a fortuitous event or petitioner was negligent are matters immaterial policy is prepared by the insurer.
to this case. What is relevant here is whether it has been established that petitioner o A contract of insurance, being a contract of adhesion, par excellence, any
has outstanding accounts with IMC and LSPI. ambiguity therein should be resolved against the insurer; in other words, it
should be construed liberally in favor of the insured and strictly against the
MALAYAN INSURANCE CORPORATION V. CA insurer.
INSURANCE - Interpretation o Limitations of liability should be regarded with extreme jealousy and must be
construed in such a way as to preclude the insurer from noncompliance with
 The court found that the insurance agency tried to interpret executive and political its obligations.
acts as those not including ordinary arrests in the exceptions of the FCS clause, and
claims that the War Clauses now included executive and political acts without including Verendia vs CA
ordinary arrests in the new stipulation. INSURANCE - Interpretation
 “A 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 avoided.”  A contract of indemnity, an insurance contract is the law between the parties
 Likewise, it must be borne in mind that such contracts are invariably prepared by the a. As it is also a contract of adhesion, an insurance contract should be liberally
companies and must be accepted by the insured in the form in which they are written. construed in favor of the insured and strictly against the insurer company which
Any construction of a marine policy rendering it void should be avoided. Such policies usually prepares it
will, therefore, be construed strictly against the company in order to avoid a forfeiture,
unless no other result is possible from the language used.
1|INSURANCE
 b. Considering, however, the foregoing discussion pointing to the fact that Verendia c. All the provisions and riders, taken and interpreted together, indubitably show
used a false lease contract to support his claim under Fire Insurance Policy No. F- the intention of the parties to extend earthquake shock coverage to the two
18876, the terms of the policy should be strictly construed against the insured. swimming pools only
c. The policy’s terms that all benefits from such are forfeited if the claim was 2. A careful examination of the premium recapitulation will show that it is the clear intent
fraudulent or there is false declaration of the parties to extend earthquake shock coverage only to the two swimming pools
d. Insurance contracts demand utmost good faith. 3. Although it is a contract of adhesion, and thus must be construed against its maker,
Phil. Charter, there was no proof that Gulf Resorts did not know the provisions of the
New Life vs CA policy.
INSURANCE - Interpretation
DE LA CRUZ v. CAPITAL INSURANCE
 The separate policies of the insurance companies did not indicate the other insurance INSURANCE - Interpretation
policies.
 The terms of the policy are clear. The insured must disclose the other insurance he as  “Accident” and “accidental,” as used in insurance contracts, have not acquired any
effected on the same subject matter. technical meaning, and are construed by the courts in their ordinary and common
a. The knowledge of the agents is not notice that would estop the insurers from acceptation.
denying the claim.  Thus, the terms have been taken to mean that which happen by chance or fortuitously,
b. Resort to construction in favor of the insured cannot prosper without intention and design, and which is unexpected, unusual, and unforeseen.
 An accident is an event that takes place without one’s foresight or expectation – an
TY v. FILIPINAS COMPANIA DE SEGUROS, ET AL. event that proceeds from an unknown cause, or is an unusual effect of a known cause
INSURANCE - Interpretation and, therefore, not expected.
 Where the death or injury is not the natural or probable result of the insured’s
 The condition is clear and express: Partial disability is the loss of either hand by voluntary act, or if something unforeseen occurs in the doing of the act which
amputation through the bones of the wrist. produces the injury, the resulting death is within the protection of policies insuring
 No amputation was made. against death or injury from accident.
 All that was found was that the physical injuries caused temporary total disability of  While his participation in boxing was voluntary, he sustained the injury because he
Ty’s left hand. It was merely temporary (fractures of the index, middle, and fourth slipped which threw him to the ropes. Without this unintentional slipping, he could not
fingers). have received that blow in the head and would not have died.
 Agreement contained in the insurance = law between the parties.  Fact that boxing has some risks of injuries does not make any injury received in that
 Terms are clear, express and specific. An interpretation that would include mere court not accidental.
fractures or temporary disability would be unwarranted.  The policy also specifically excluded certain activities from its coverage and death
resulting from engaging in boxing contests was not declared outside of the protection
Gulf Resorts v. Philippine Charter Insurance of the insurance contract.
INSURANCE - Interpretation  Failure of Capital insurance to include such leads to the conclusion that it did not intend
to limit itself from liability for such death.
1. All the provisions of the insurance policy should be examined and interpreted in
consonance with each other
a. all its parts are reflective of the true intent of the parties; it cannot be construed
piecemeal and segregated from each other
b. Gulf cannot merely focus on the earthquake endorsement portion

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ALPHA INSURANCE AND SURETY CO. v ARSENIA SONIA CASTOR reinstatement was conditioned upon the payment of additional premium not only
Topic: Interpretation of Insurance Policies prospectively, that is, to cover the remainder of the annual period of coverage, but also
retroactively, that is for the period starting June 22, 1999.
 Moreover, contracts of insurance, like other contracts, are to be construed according  In the Endorsement, the obscurity is patent. In the first sentence of the Endorsement,
to the sense and meaning of the terms which the parties themselves have used. If such it is not entirely clear whether the phrase "effective June 22, 1999" refers to the subject
terms are clear and unambiguous, they must be taken and understood in their plain, of the sentence, namely "the reinstatement of this policy," or to the subsequent phrase
ordinary and popular sense. "changes are made on the policy."
 Accordingly, in interpreting the exclusions in an insurance contract, the terms used to  Given the obscurity of the language, the construction favorable to the insured will be
specify the excluded classes therein are to be given their meaning as understood in adopted by the courts.
common speech.  Accordingly, the subject policy is deemed reinstated as of June 22, 1999. Thus, the
 Adverse to Alpha’s claim, the words "loss" and "damage" mean different things in period of contestability has lapsed.
common ordinary usage. The word "loss" refers to the act or fact of losing, or failure  It must be remembered that an insurance contract is a contract of adhesion which
to keep possession, while the word "damage" means deterioration or injury to must be construed liberally in favor of the insured and strictly against the insurer in
property. order to safeguard the latter’s interest.
 Therefore, Alpha cannot exclude the loss of respondent’s vehicle under the insurance
policy under paragraph 4 of "Exceptions to Section III," since the same refers only to HEIRS OF MARAMAG v. EVA MARAMAG ET AL, INSULAR LIFE, and GREAT PACIFIC LIFE
"malicious damage," or more specifically, "injury" to the motor vehicle caused by a ASSURANCE
person under the insured’s service. Paragraph 4 clearly does not contemplate "loss of Beneficiaries
property," as what happened in the instant case.
 True, it is a basic rule in the interpretation of contracts that the terms of a contract are  Although the petitioners are the legitimate heirs of Loreto, they were not named as
to be construed according to the sense and meaning of the terms which the parties beneficiaries in the insurance policies issued by Insular and Grepalife.
thereto have used. In the case of property insurance policies, the evident intention of  SECTION 53: The insurance proceeds shall be applied exclusively to the proper interest
the contracting parties, i.e., the insurer and the assured, determine the import of the of the person in whose name or for whose benefit it is made unless otherwise specified
various terms and provisions embodied in the policy. However, when the terms of the in the policy.
insurance policy are ambiguous, equivocal or uncertain, such that the parties o The only persons entitled to claim the insurance proceeds are either the
themselves disagree about the meaning of particular provisions, the policy will be insured, if still alive; or the beneficiary, if the insured is already deceased,
construed by the courts liberally in favor of the assured and strictly against the insurer. upon the maturation of the policy.
 Lastly, a contract of insurance is a contract of adhesion. So, when the terms of the o The exception to this rule is a situation where the insurance contract was
insurance contract contain limitations on liability, courts should construe them in such intended to benefit third persons who are not parties to the same in the form
a way as to preclude the insurer from non-compliance with his obligation. of favorable stipulations or indemnity.
o In such a case, third parties may directly sue and claim from the insurer.
The Insular Life Assurance Company, Ltd. v. Khu  Petitioners are third parties to the insurance contracts with Insular and Grepalife and,
TOPIC: Interpretation of Insurance Policy thus, are not entitled to the proceeds thereof. Accordingly, Insular and Grepalife have
no legal obligation to turn over the insurance proceeds to petitioners.
 In Lalican v. Insular Life, the Court held that the reinstatement of an insurance policy  The shares of Eva in the insurance proceeds, whether forfeited by the court in view of
should be reckoned from the date when the same was approved by the insurer. the prohibition on donations under Article 739 of the Civil Code or by the insurers
 The resolution of this issue hinges on the Letter of Acceptance and the Endorsement. themselves for reasons based on the insurance contracts, must be awarded to the said
 In the Letter of Acceptance, Khu declared that he was accepting "the imposition of an illegitimate children, the designated beneficiaries, to the exclusion of petitioners.
extra/additional x x x premium of P5.00 a year per thousand of insurance; effective  It is only in cases where the insured has not designated any beneficiary, or when the
June 22, 1999". It is true that the phrase as used in this particular paragraph does not designated beneficiary is disqualified by law to receive the proceeds, that the insurance
refer explicitly to the effectivity of the reinstatement. But the Court notes that the policy proceeds shall redound to the benefit of the estate of the insured.
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  Note that with the second marriage it was contracted in good faith, thus the division
SOUTHERN LUZON v. GOLPEO of GSIS was correct.
Beneficiaries a. With respect to the right of the second wife, this Court observed that although the
second marriage can be presumed to be void ab initio as it was celebrated while
 On the beneficiaries being void because it is against public policy: the first marriage was still subsisting, still there is need for judicial declaration of
o Golpeo, by her silence and actions, had acquiesced in the illicit relations such nullity.
between her husband and Maloles. b. And inasmuch as the conjugal partnership formed by the second marriage was
o Golpeo’s argument would certainly not apply to the children of Maloles, dissolved before judicial declaration of its nullity, "[t]he only lust and equitable
likewise named beneficiaries by the deceased Roman A. Concepcion. As a solution in this case would be to recognize the right of the second wife to her share
matter of fact, the new Civil Code recognizes certain successional rights of of one-half in the property acquired by her and her husband and consider the
illegitimate children. other half as pertaining to the conjugal partnership of the first marriage."
 The trial court has not considered the plaintiff as a regular insurance company but
merely ruled that the death benefit in question is analogous to an insurance. INSULAR LIFE v. CARPONIA EBRADO and PASCUALA VDA. DE EBRADO
Moreover, section 1628 of the Revised Administrative Code defines a mutual benefit Beneficiaries.
association as one, among others, "providing for any method of accident or life
insurance among its members out of dues or assessments collected from the  Life insurance policy not different from civil donation. Consideration: liberality. Bar in
membership." donations should also be enforced on life insurance policy.
 The contract of life insurance is a special contract and the destination of the proceeds  No criminal conviction for the offense is a condition precedent. The law plainly states
thereof is determined by special laws which deal exclusively with that subject. that the guilt may be proved in the same action with preponderance of evidence. The
 The Civil Code has no provisions which relate directly and specifically to life-insurance stipulations in the pre-trial conference were judicial admissions which cannot be
contracts or to the destination of life-insurance proceeds. contradicted.
o That subject is regulated exclusively by the Code of Commerce which provides  Carponia disqualified; policy goes to the estate.
for the terms of the contract, the relations of the parties and the destination  The court held that persons forbidden from receiving donations under Art. 739 of the
of the proceeds of the policy. Civil Code cannot be named as beneficiaries
 ART. 739. The following donations shall be void:
VDA. DE CONSUERGA v. GSIS 1. Those made between persons who were guilty of adultery or concubinage at the
Beneficiaries time of the donation;
2. Those made between persons found guilty of the same criminal offense, in
 The insured in a life insurance may designate any person as beneficiary unless consideration thereof;
disqualified to be so under the provisions of the Civil Code. And in the absence of any 3. Those made to a public officer or his wife, descendants and ascendants, by reason
beneficiary named in the life insurance policy, the proceeds of the insurance will go to of his office.
the estate of the insured.  In the case referred to in No.1, the action for declaration of nullity may be brought by
 Retirement insurance is primarily intended for the benefit of the employee — to the spouse of the donor or donee; and the guilt of the donor and donee may be proved
provide for his old age, or incapacity, after rendering service in the government for a by preponderance of evidence in the same action.
required number of years.  Sec. 50 if Insurance Act: “The insurance shall be applied exclusively to the proper
a. The beneficiary of the retirement insurance can only claim the proceeds of the interest of the person in whose name it is made” cannot be validly seized upon to hold
retirement insurance if the employee dies before retirement. If the employee that the same includes beneficiary. “Interest” refers only to the insured, not the
failed or overlooked to state the beneficiary of his retirement insurance, the beneficiary, since a contract of insurance is personal in character. Otherwise, the laws
retirement benefits will accrue to his estate and will be given to his legal heirs in against illicit relationships on property and descent will be rendered nugatory, as the
accordance with law, as in the case of a life insurance if no beneficiary is named in same could easily be circumvented by modes of insurance.
the insurance policy.  The general rules of civil law should be applied to resolve this void in Insurance Law.
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 Article 2012: “Any person forbidden from receiving any donation under Art. 739 cannot  When the seller retains ownership only to insure that buyer will pay its debt, the risk
be named a beneficiary of a life insurance policy by the person who cannot make a of loss is borne by the buyer. Gaisano bears the risk of loss of the goods delivered.
donation to him.” Common-law spouses are, definitely, barred from receiving  IMC and LSPI did not lose complete interest over the goods. They have an insurable
donations from each other. interest until full payment of the value of the delivered goods.
 In property insurance, one’s interest is not determined by concept of title, but whether
Spouses Cha v. CA insured has substantial economic interest in the property.
Insurable Interest  An insurable interest in property does not necessarily imply a property interest in, or a
lien upon, or possession of, the subject matter of the insurance, and neither the title
 A contract cannot be contrary to law, morals, good customs, public order or public nor a beneficial interest is requisite to the existence of such an interest.
policy. o It is sufficient that the insured is so situated with reference to the property
a. Sec. 18. No contract or policy of insurance on property shall be enforceable except that he would be liable to loss should it be injured/destroyed by the peril
for the benefit of some person having an insurable interest in the property against which it is insured.
insured. o A vendor/seller retains an insurable interest in the property sold so long as he
 A non-life insurance policy such as the fire insurance policy over merchandise is has any interest therein; so long as he would suffer by its destruction, as
primarily a contract of indemnity. where he has a vendor’s lien.
a. Insurable interest in the property insured must exist at the time the insurance o The insurable interest of IMC and LSPI pertain to the unpaid accounts
takes effect and at the time the loss occurs. appearing in their Books of Account 45 days after the time of the loss covered
b. The basis of such requirement of insurable interest in property insured is based on by the policies.
sound public policy: to prevent a person from taking out an insurance policy on
property upon which he has no insurable interest and collecting the proceeds of Great Pacific Life Assurance Corporation v CA
said policy in case of loss of the property. Insurable interest
c. In such a case, the contract of insurance is a mere wager which is void under
Section 25 of the Insurance Code.  To resolve the issue, it is necessary to consider the insurable interest in mortgaged
 CKS has no insurable interest in the goods and merchandise inside the leased premises properties and the parties to this type of contract.
under the provisions of Section 17 of the Insurance Code which provide. (Section  The rationale of a group insurance policy of mortgagors, otherwise known as the
17. The measure of an insurable interest in property is the extent to which the insured "mortgage redemption insurance," is a device for the protection of both the mortgagee
might be damnified by loss of injury thereof.) and the mortgagor.
 This insurable interest over said merchandise remains with the insured, the Cha o On the part of the mortgagee, it has to enter into such form of contract so
spouses. The automatic assignment of the policy to CKS under the provision of the that in the event of the unexpected demise of the mortgagor during the
lease contract previously quoted is void for being contrary to law and/or public policy. subsistence of the mortgage contract, the proceeds from such insurance will
be applied to the payment of the mortgage debt, thereby relieving the heirs
GAISANO INC. v. INSURANCE CO. OF NORTH AMERICA of the mortgagor from paying the obligation.
Insurable Interest o In a similar vein, ample protection is given to the mortgagor under such a
concept so that in the event of death; the mortgage obligation will be
 The insurance policies cover book debts. extinguished by the application of the insurance proceeds to the mortgage
o Nowhere is it provided in the questioned insurance policies that the subject indebtedness.
of the insurance is the goods sold and delivered to the customers and dealers  Consequently, where the mortgagor pays the insurance premium under the group
of the insured. insurance policy, making the loss payable to the mortgagee, the insurance is on the
o What were insured against were the accounts of IMC and LSPI with Gaisano mortgagor's interest, and the mortgagor continues to be a party to the contract. In this
which remained unpaid 45 days after the loss through fire, and not the type of policy insurance, the mortgagee is simply an appointee of the insurance fund,
loss/destruction of the goods delivered. such loss-payable clause does not make the mortgagee a party to the contract.

5|INSURANCE
 In this case, Leuterio did not cede to DBP all his rights or interests in the insurance, the  In the absence of evidence that the insured had sufficient medical knowledge as to
policy stating that in the event of Leuterio’s death before his indebtedness with the enable him to distinguish between "peptic ulcer" and "a tumor", his statement that
DBP shall have been fully paid, an amount to pay the outstanding indebtedness shall said tumor was "associated with ulcer of the stomach, " should be construed as an
first be paid to the DBP and the balance of sum assured, if there is any, shall then be expression made in good faith
paid to the beneficiary designated by him  It has been held that where, upon the face of the application, a question appears to be
 The SC has previously held that the insured, being the person with whom the contract not answered at all or to be imperfectly answered, and the insurers issue a policy
was made, is primarily the proper person to bring suit thereon. And although a policy without any further inquiry, they waive the imperfection of the answer and render the
issued to a mortgagor is taken out for the benefit of the mortgagee and is made omission to answer more fully immaterial (Sec. 32 of the Insurance Law)
payable to him, yet the mortgagor may sue thereon in his own name, especially where
the mortgagee's interest is less than the full amount recoverable under the policy. GREAT PACIFIC LIFE ASSURANCE CORP (GREPALIFE) vs. COURT OF APPEALS AND
 Since a policy of insurance upon life or health may pass by transfer, will or succession MEDARDA V. LEUTERIO
to any person, whether he has an insurable interest or not, and such person may TOPIC: Concealment
recover it whatever the insured might have recovered, the widow of Dr. Leuterio may
file the suit against the insurer, Grepalife.  The insured, Dr. Leuterio, had answered in his insurance application that he was in
good health and that he had not consulted a doctor or any of the enumerated ailments,
VICENTE ONG LIM SING V. FEB LEASING including hypertension; when he died the attending physician had certified in the
TOPIC: INSURABLE INTEREST death certificate that the former died of cerebral hemorrhage, probably secondary to
hypertension. From this report, the appellant insurance company refused to pay the
 The stipulation in Section 14 of the lease contract, that the equipment shall be insured insurance claim. Appellant alleged that the insured had concealed the fact that he had
at the cost and expense of the lessee against loss, damage, or destruction from fire, hypertension.
theft, accident, or other insurable risk for the full term of the lease, is a binding and  Contrary to Grepalife’s allegations, there was no sufficient proof that the insured had
valid stipulation. suffered from hypertension. Aside from the statement of the Medarda who was not
 Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles even sure if the medicines taken by Dr. Leuterio were for hypertension, Grepalife had
leased. Section 17 of the Insurance Code provides that the measure of an insurable not proven nor produced any witness who could attest to Dr. Leuterios medical history.
interest in property is the extent to which the insured might be damnified by loss or  Grepalife had failed to establish that there was concealment made by the insured,
injury thereof. It cannot be denied that JVL will be directly damnified in case of loss, hence, it cannot refuse payment of the claim.
damage, or destruction of any of the properties leased.  Fraudulent intent on the part of the insured must be established to entitle the insurer
to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability
Ng Zee v. Asian Crusader Life Insurance is an affirmative defense and the duty to establish such defense by satisfactory and
Concealment convincing evidence rests upon the insurer.
o Grepalife failed to clearly and satisfactorily establish its defense, and is
 Concealment exists where the assured had knowledge of a fact material to the risk, therefore liable to pay the proceeds of the insurance.
and honesty, good faith, and fair dealing requires that he should communicate it to the
assurer, but he designedly and intentionally withholds the same Florendo vs. Philam Plans
 Assuming that the answer given is false, nevertheless, such false statement requires Concealment; Abad, J.
that there was fraudulent intent on the part of the insured – such must be established
to entitle insurer to rescind the contract  Philam waived the medical examination for Manuel, thus they con only rely on his
 Misrepresentation as a defense of the insurer to avoid liability is an 'affirmative' representations.
defense. The duty to establish such a defense by satisfactory and convincing evidence o In his application, there was a provision which states that he has never been
rests upon the defendant, evidence before the Court does not clearly and satisfactorily treated for any hear condition, diabetes in the last 5 years, and that he is in good
establish that defense health and physical condition

6|INSURANCE
  A blank line below provides that if the same is untrue, then, he must state the to whom the communication is due, in forming his estimate of the proposed contract,
details. or in making his inquiries.
o He signed his application with all those representations – he did not fill in the  The waiver of medical examination renders even more material the information
details regarding his treatments. So it was safe for Philam to assume that he is required of the applicant concerning previous condition of health and diseases
healthy. suffered, for such information necessarily constitutes an important factor which the
 Even if Perla knew that Manuel had a pacemaker 20 years before the application, such insurer takes into consideration in deciding whether to issue the policy or not.
is immaterial.  It is logical to assume that if insurer had been properly apprised of the insured’s
o Manuel signed the application, and even if Perla was made to furnish the details, medical history she would at least have been made to undergo medical examination in
she was acting under his instructions. order to determine her insurability.
o Moreover, the contract stated that in signing the same, the signing party certifies  Contended that the insurer will ask insured to a medical exam if required. Since she
that “the date and other information stated herein are written by me or under my was not required, insurer cannot deny claim: WRONG. She submitted a clean bill of
direction” health that insurer did not consider an actual medical checkup as necessary.
o Moreover, Manuel still had a pacemaker at the time of the application. Lourdes  Insurer did not know that she had cancer: WRONG. The operation itself was concealed
cannot claim that it does not fall within the 5-year period provided in the which is fraudulent in itself.
application  To avoid a policy, it is not necessary to show actual fraud. A concealment, intentional
 Under the Insurance Code, Manuel’s concealment entitles Philam Plans to rescind its or not, entitles insurer to rescind the contract of insurance.
contract of insurance with him.
 There was a 1-year incontestability clause in the contract Manila Bankers Life Insurance V. Aban
o If the contract remains in force for 1 year, the insurer can no longer contest the TOPIC: Concealment/Misrepresentation
agreement for health reasons
o However, the contract was only in force for 11 months because he died sooner.  Section 48 serves a noble purpose, as it regulates the actions of both the insurer and
the insured. Under the provision, an insurer is given two years – from the effectivity
GREAT PACIFIC LIFE v. CA of a life insurance contract and while the insured is alive – to discover or prove that
Concealment the policy is void ab initio or is rescindable by reason of the fraudulent concealment
or misrepresentation of the insured or his agent.
 When Ngo Hing supplied the information for the application, he was fully aware of the  After the two-year period lapses, or when the insured dies within the period, the
condition of his child. insurer must make good on the policy, even though the policy was obtained by fraud,
 Such a congenital physical defect could never be ensconced nor disguised. concealment, or misrepresentation.
 As an associate agent, he ought to know his duty and responsibility to supply such a o This is not to say that insurance fraud must be rewarded, but that insurers
fact. who recklessly and indiscriminately solicit and obtain business must be
 Had he disclosed it, it would have been verified by Pacific and it would have no choice penalized, for such recklessness and lack of discrimination ultimately work to
but to disapprove the application outright. the detriment of bona fide takers of insurance and the public in general.
 Contract of insurance is one of perfect good faith not for the insured but equally for  Section 48 prevents a situation where the insurer knowingly continues to accept
the insurer. annual premium payments on life insurance, only to later on deny a claim on the
policy on specious claims of fraudulent concealment and misrepresentation, such as
SATURNINO v. PHILAM LIFE what obtains in the instant case.
Concealment  The "incontestability clause" is a provision in law that after a policy of life insurance
made payable on the death of the insured shall have been in force during the lifetime
 Are the facts concealed material? Sec. 30: Materiality is to be determined not by the of the insured for a period of two (2) years from the date of its issue or of its last
event, but solely by the probable and reasonable influence of the facts upon the party reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible
by reason of fraudulent concealment or misrepresentation of the insured or his agent.
7|INSURANCE
 After two years, the defenses of concealment or misrepresentation, no matter how  The contract of insurance is one of perfect good faith not for the insured alone, but
patent or well-founded, will no longer lie. equally for the insurer. In fact, it is more so for the latter, since its dominant bargaining
 Insurers may not be allowed to delay the payment of claims by filing frivolous cases in position carries with it stricter responsibility.
court, hoping that the inevitable may be put off for years – or even decades – by the  By reason of the exclusive control of the insurance company over the terms and
pendency of these unnecessary court cases. In the meantime, they benefit from phraseology of the insurance contract, ambiguity must be strictly interpreted against
collecting the interest and/or returns on both the premiums previously paid by the the insurer and liberally for the insured.
insured and the insurance proceeds which should otherwise go to their beneficiaries.
GEAGONIA v. CA and COUNTRY BANKERS
SUN LIFE OF CANADA (PHIL) INC v. MA. DAISY’S SIBYA, JESUS MANUAL S. SIBYA III, JAIME Double Insurance
LUIS SIBYA, AND THE ESTATE OF THE DECEASED ATTY. JESUS SIBYA JR.
TOPIC: CONCEALMENT  A double insurance exists where the same person is insured by several insurers
separately in respect of the same subject and interest
 The Court cited its ruling in Manila Bankers Life vs Aban where it ruled that if the  As earlier stated, the insurable interests of a mortgagor and a mortgagee on the
insured dies within the 2-year contestability period, the insurer is bound to make good mortgaged property are distinct and separate. Since the two policies of the PFIC do not
its obligation under the policy, regardless of the presence or lack of concealment or cover the same interest as that covered by the policy of Country Bankers, no double
misrepresentation. In the said case, the Court ruled that under Section 48, an insurer insurance exists.
is given 2 years from the effectivity of a life insurance contract and while the insured is  The non-disclosure then of the former policies was not fatal to the petitioner’s right to
still alive, to discover that the policy is void or rescindable by reason of fraud or recover on the private respondent's policy.
misrepresentation.  The rationale behind the incorporation of "other insurance" clause in fire policies is to
o After the 2-year period lapses, or when the insured dies within the period, the prevent over-insurance and thus avert the perpetration of fraud.
insurer must make good on the policy, even though the policy was obtained by  When a property owner obtains insurance policies from two or more insurers in a total
fraud. amount that exceeds the property's value, the insured may have an inducement to
 In the CAB, the policy was issued in Feb 5, 2001. Thus, it has two years from its destroy the property for the purpose of collecting the insurance.
issuance, to investigate and verify whether the policy was obtained by fraud,  The public as well as the insurer is interested in preventing a situation in which a fire
concealment, or misrepresentation. would be profitable to the insured.
 Upon the death of Atty. Jesus Jr., however, on May 11, 2001, or a mere three months
from the issuance of the policy, Sun Life loses its right to rescind the policy. MALAYAN INSURANCE v. PHILS. FIRST INSURANCE
 Concealment as a defense for the insurer to avoid liability is an affirmative defense Double Insurance
and the duty to establish such defense by satisfactory and convincing evidence rests
upon the provider or insurer. In the present case, Sun Life failed to clearly and  By the express provision of Section 93 of the Insurance Code, double insurance exists
satisfactorily establish its allegations, and is therefore liable to pay the proceeds of where the same person is insured by several insurers separately in respect to the same
the insurance. subject and interest. The requisites in order for double insurance to arise are as
follows:
QUA CHEE GAN V. LAW UNION AND ROCK INSURANCE o The person insured is the same; 

Warranties o Two or more insurers insuring separately; 

o There is identity of subject matter; 

 Law Union is barred to claim violation of the fire hydrant warranty because it knew o There is identity of interest insured; and 

that the number of hydrants demanded never existed from the beginning but it still
o There is identity of the risk or peril insured against. 

issued the policies and received premiums for it.
 It is undisputed that Wyeth is the recognized insured of Philippines First under its
Marine Policy, while Reputable is the recognized insured of Malayan under the SR
Policy.
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 The interest of Wyeth over the property subject matter of both insurance contracts is
also different and distinct from that of Reputable’s. As to notice as condition precedent: Where the contract of shipment contains a
 The policy issued by Philippines First was in consideration of the legal and/or equitable reasonable requirement of giving notice of loss / injury to the goods, the giving of notice
interest of Wyeth over its own goods. is a condition precedent to the action for loss / injury / right to enforce the liability of the
 On the other hand, what was issued by Malayan to Reputable was over the latter’s carrier
insurable interest over the safety of the goods, which may become the basis of the  Notice of loss or injury protects the carrier by affording it an opportunity to make an
latter’s liability in case of loss or damage to the property and falls within the investigation of a claim while the matter is fresh and easily investigated so as to
contemplation of Section 15 of the Insurance Code. safeguard itself from false and fraudulent claim.
 Such requirement is not to relieve the carrier from just liability but to reasonably
Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc. inform it that the shipment has been damaged & is charged with liability. Also to give
Notice of Loss an opportunity to examine the nature & extent of injury.
 Failure to comply with the notice requirement bars recovery for the loss/damage
 As to the validity of the paragraph 5 of the bills of lading which prescribes a time suffered.
frame of 30 days for filing a claim w/ the carrier in case of loss/damage to the cargo
& 60 days from accrual of right of actions for instating an action in court, to which BPI and FGU Insurance Corp. vs. Yolanda Laingo
such periods must concur. TOPIC: Notice
 Petitioners were alleging that the shorter period, which limited the right of petitioner
to recovery, is unreasonable, raising it as contract of adhesion. SLI asserts that the  An insurance company has the duty to communicate with the beneficiary upon
conditions for the carrier’s liability is uniformly adopted by nearly all shipping receipt of notice of the death of the insured. This notification is how a good father of
companies. a family should have acted within the scope of its business dealings with its clients.
 SC held that Art 366 of the Code of Commerce applies not only to overland and river  There is a rationale in the contract of agency, which flows from the "doctrine of
transportation but also to maritime transportation. representation," that notice to the agent is notice to the principal.
o Filing of a claim with the carrier within the time limitation under Art 366 o The records show that BPI had ample opportunity to inform Laingo, whether
constitutes a CONDITION PRECEDENT to the accrual of a right of action verbally or in writing, regarding the existence of the insurance policy attached
against a carrier for damages caused to the goods. to the deposit account.
o Art. 366. Within the twenty-four hours following the receipt of the  First, Rheozel's death was headlined in a daily major newspaper a
merchandise, the claim against the carrier for damage or average which may day after his death.
be found therein upon opening the packages, may be made, provided that the  Second, not only was Laingo, through her representative, able to
indications of the damage or average which gives rise to the claim cannot be inquire about Rheozel's deposit account with BPI two days after his
ascertained from the outside part of the packages, in which case the claims death but she was also allowed by BPI's to withdraw from the funds
shall be admitted only at the time of the receipt. in order to help defray Rheozel's funeral and burial expenses.
o ‘After the periods mentioned have elapsed, or the transportation charges  Lastly, an employee of BPI visited Rheozel's wake and submitted
have been paid, no claim shall be admitted against the carrier with regard to documents for Laingo to sign in order to process the withdrawal
the condition in which the goods transported were delivered.’ request.
 Shipper/consignee must allege & prove that the condition was fulfilled & failure to do  Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of
so, no right of action against the carrier can accrue in its favor. the insurance policy, Laingo had no means to ascertain that she was entitled to the
 The requirements in Art 366 were merely restated with slight modification in the insurance claim. It would be unfair for Laingo to shoulder the burden of loss when
assailed paragraph 5 of the bills of lading. They are reasonable conditions precedent BPI was remiss in its duty to properly notify her that she was a beneficiary.
and not limitations of actions. Since they are conditions precedent, their
performance must precede a suit for enforcement and the vesting of the right to file
suit does not take place until the happening of these conditions.
9|INSURANCE
ARCE V. CAPITAL INSURANCE d. (d) discovery of willful, or reckless acts or commissions increasing the hazard
Premiums insured against;
e. (e) physical changes in the property insured which result in the property becoming
 SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is uninsurable;or
exposed to the perils insured against, unless there is clear agreement to grant credit f. (f) a determination by the Commissioner that the continuation of the policy would
extension for the premium due. No policy issued by an insurance company is valid and violate or would place the insurer in violation of this Code
binding unless and until the premium thereof has been paid  A valid cancellation must, therefore, require concurrence of the following conditions:
 Also, it was stipulated that the insurance will be deemed valid and binding upon the a. (1) There must be prior notice of cancellation to the insured;
Company only when the premium and documentary stamps therefore have actually b. (2) The notice must be based on the occurrence, after the effective date of the
been paid in full and duly acknowledged in an official receipt signed by an authorized policy, of one or more of the grounds mentioned;
official/representative of the Company c. (3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured,
 It is obvious from both the Insurance Act, as amended, and the stipulation of the (c) at the address shown in the policy;
parties that time is of the essence in respect of the payment of the insurance premium d. (4) It must state (a) which of the grounds mentioned in Section 64 is relied upon
so that if it is not paid the contract does not take effect unless there is still another and (b) that upon written request of the insured, the insurer will furnish the facts
stipulation to the contrary on which the cancellation is based.

Malayan Insurance (MICO) vs Arnaldo and Pinca PHILIPPINE PHOENIX V. WOODWORKS (1967)
Premiums Premiums

 Sec. 77 is not applicable because payment was made in this case.  Woodworks paid Phoenix 3k of the total premium of 6k.
a. There were invoices to prove this- said invoices provided “Payment Received”  There is no doubt that a contract was perfected -but partially performed as far as
b. The payment was received by an agent of MICO, thus, said agent had authority to payment of the premium was concerned
receive the payments made by Pinca.  Thereafter the obligation of the insurer to pay the insured for which the policy was
i. SEC. 306. xxx xxx xxx Any insurance company which delivers to an issued in case the conditions therefore had been complied with, arose and became
insurance agent or insurance broker a policy or contract of insurance binding upon it, while the obligation of the insured to pay the remainder of the total
shall be deemed to have authorized such agent or broker to receive amount of the premium due became demandable
on its behalf payment of any premium which is due on such policy or  Non-payment of premium did not produce the cancellation of the contract of insurance
contract of insurance at the time of its issuance or delivery or which  Such theory would place exclusively in the hands of one of the parties the right to
becomes due thereon. decide whether the contract should stand or not
c. Payment was in fact made, rendering the policy operative as of June 22, 1981, and  The case should be: as the contract was perfected, parties could demand from each
removing it from the provisions of Article 77, Thereafter, the policy could be other of whatever obligations they had assumed.
cancelled on any of the supervening grounds enumerated in Article 64 (except
"nonpayment of premium") provided the cancellation was made in accordance Tibay vs CA, Fortune Life and General Insurance
therewith and with Article 65. Premiums
 SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except
upon prior notice thereof to the insured, and no notice of cancellation shall be effective  Insurance is a contract whereby one undertakes for a consideration to indemnify
unless it is based on the occurrence, after the effective date of the policy, of one or another against loss, damage or liability arising from an unknown or contingent event.
more of the following: a. The consideration is the premium, which must be paid at the time and in the way
a. (a) non-payment of premium; and manner specified in the policy, and if not so paid, the policy will lapse and be
b. (b) conviction of a crime arising out of acts increasing the hazard insured against; forfeited by its own terms.
c. (c) discovery of fraud or material misrepresentation;

10|INSURANCE
 Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured  There is nothing in Section 77 which prohibits the parties in an insurance contract to
is exposed to the peril insured against. Notwithstanding any agreement to the provide a credit term within which to pay the premiums - The contracting parties may
contrary, no policy or contract of insurance issued by an insurance company is valid and establish such stipulations clauses, terms and conditions as they may deem
binding unless and until the premium thereof has been paid, except in the case of a convenient, provided they are not contrary to law, morals, good customs, public order,
life or an industrial life policy whenever the grace period provision applies or public policy.
a. the payment of partial premium by the assured in this particular instance should
not be considered the payment required by the law and the stipulation of the Gulf Resorts v. Philippine Charter Insurance
parties Premiums
b. it must be taken in the concept of a deposit to be held in trust by the insurer until
the full payment has been tendered and duly receipted for  In this case, no payments were made as regards earthquakes except on the two pools
c. Hence, in the absence of clear waiver of prepayment in full by the insurer, the  All the provisions of the insurance policy should be examined and interpreted in
insured cannot collect on the proceeds of the policy. consonance with each other
d. Cannot be interpreted in favor of the insured because the law is clearly on the side a. all its parts are reflective of the true intent of the parties; it cannot be
of the insurer construed piecemeal and segregated from each other
 The policy provided that the payment of premium must be in full b. Gulf cannot merely focus on the earthquake endorsement portion
a. the cardinal polestar in the construction of an insurance contract is the intention c. All the provisions and riders, taken and interpreted together, indubitably
of the parties as expressed in the policy show the intention of the parties to extend earthquake shock coverage to the
two swimming pools only
UCPB vs Masagana Telemart  A careful examination of the premium recapitulation will show that it is the clear intent
Premiums of the parties to extend earthquake shock coverage only to the two swimming pools
 Although it is a contract of adhesion, and thus must be construed against its maker,
 SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured Phil. Charter, there was no proof that Gulf Resorts did not know the provisions of the
is exposed to the peril insured against. Notwithstanding any agreement to the policy.
contrary, no policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid, except in the case of American Home Assurance v. Chua
a life or an industrial life policy whenever the grace period provision applies. Premiums
 HOWEVER, there are exceptions to Sec. 77
a. first exception is provided by Section 77 itself, and that is, in case of a life or  GR: An insurer is entitled to payment of the premium as soon as the thing insured is
industrial life policy whenever the grace period provision applies. exposed to the peril insured against. Notwithstanding any agreement to the contrary,
b. second is that covered by Section 78 of the Insurance Code, which provides: Any no policy or contract of insurance issued by an insurance company is valid and binding
acknowledgment in a policy or contract of insurance of the receipt of premium is unless and until the premium thereof has been paid, except in the case of life or an
conclusive evidence of its payment, so far as to make the policy binding, industrial life policy whenever the grace period provision applies.
notwithstanding any stipulation therein that it shall not be binding until premium a. In this case, American Home did not terminate the policy; instead it renewed it by
is actually paid. sending to the agent a renewal certificate upon payment of the premiums
c. third exception was laid down in Makati Tuscany Condominium Corporation vs. b. Thus, upon this moment, the insurance was executed and already in effect
Court of Appeals, wherein we ruled that Section 77 may not apply if the parties  Section 306 of the Insurance Code provides that any insurance company which delivers
have agreed to the payment in installments of the premium and partial payment a policy or contract of insurance to an insurance agent or insurance broker shall be
has been made at the time of loss – where it was clearly shown that the policies deemed to have authorized such agent or broker to receive on its behalf payment of
were intended by the parties to be binding notwithstanding staggering payments any premium which is due on such policy or contract of insurance at the time of its
of premium issuance or delivery or which becomes due thereon

11|INSURANCE
 a. EXC: An acknowledgment in a policy or contract of insurance of the receipt of  The premium is the elixir vitae of the insurance business because by law the insurer
premium is conclusive evidence of its payment, so far as to make the policy must maintain a legal reserve fund to meet its contingent obligations to the public
binding, notwithstanding any stipulation therein that it shall not be binding until  hence, the imperative need for its prompt payment and full satisfaction.
the premium is actually paid.  all actuarial calculations and various tabulations of probabilities of losses under
 As to the prior insurance on the same property, American Home is estopped the risks insured against are based on the sound hypothesis of prompt payment
a. It admitted during trial that the insurer knew of the prior insurance over the same of premiums.
property  Upon this bedrock insurance firms are enabled to offer the assurance of security
b. it cannot be said that petitioner was deceived by respondent by the latter’s non- to the public at favorable rates.
disclosure of the other insurance contracts when petitioner actually had prior  Here, there is no dispute that the check was delivered to and was accepted by
knowledge thereof respondent's agent, Trans-Pacific, only on September 28, 1996.
c. the loss adjuster of American Home knew all along of the existing contracts of  No payment of premium had thus been made at the time of the loss of the vehicle
insurance- and still, he did not use such as basis for his denial of the insurance on September 27, 1996.
application.  While petitioner claims that Trans-Pacific was informed that the check was ready
for pick-up on September 27, 1996, the notice of the availability of the check, by
MAKATI TUSCANY V. CA itself, does not produce the effect of payment of the premium.
Premiums  Trans-Pacific could not be considered in delay in accepting the check because
when it informed petitioner that it will only be able to pick-up the check the next
 Policies are valid even if premium were paid on installments day, petitioner did not protest to this, but instead allowed Trans-Pacific to do so.
 Parties intended the insurance policies to be binding and effective notwithstanding the  Thus, at the time of loss, there was no payment of premium yet to make the
staggered payment of the premiums insurance policy effective.
o The initial insurance contract entered into in 1982 was renewed in 1983, then  In UCPB General Insurance Co., Inc., we summarized the exceptions as follows:
in 1984. In those three (3) years, the insurer accepted all the installment 1. In case of life or industrial life policy, whenever the grace period provision applies,
payments as expressly provided by Section 77 itself;
 While the import of Section 77 is that prepayment of premiums is strictly required as 2. Where the insurer acknowledged in the policy or contract of insurance itself the
a condition to the validity of the contract, We are not prepared to rule that the request receipt of premium, even if premium has not been actually paid, as expressly
to make installment payments duly approved by the insurer, would prevent the entire provided by Section 78 itself;
contract of insurance from going into effect despite payment and acceptance of the 3. Where the parties agreed that premium payment shall be in installments and
initial premium or first installment partial payment has been made at the time of loss. (Makati Tuscany v. CA)
4. Where the insurer granted the insured a credit term for the payment of the
JAIME T. GAISANO v. DEVELOPMENT INSURANCE AND SURETY CORP premium, and loss occurs before the expiration of the term. (Makati Tuscany v.
Topic: Premium CA)
5. Where the insurer is in estoppel as when it has consistently granted a 60 to 90-day
 Gaisano is not entitled to the insurance proceeds because no insurance policy became credit term for the payment of premium.
effective for lack of premium payment.
 Insurance is a contract whereby one undertakes for a consideration to indemnify LALICAN v. INSULAR LIFE
another against loss, damage or liability arising from an unknown or contingent event. Reinstatement
 Just like any other contract, it requires a cause or consideration. The consideration
is the premium, which must be paid at the time and in the way and manner  An insurable interest is the most essential requirement of an insurance contract
specified in the policy. a. An insurable interest is that interest which a person is deemed to have in the
 If not so paid, the policy will lapse and be forfeited by its own terms. subject matter insured, where he has a relation or connection with or concern in
it, such that the person will deprive pecuniary benefit or advantage from the
12|INSURANCE
 preservation of the subject matter insured and will suffer pecuniary loss from its  Nonetheless, there are exceptional circumstances wherein the ship agent could still be
destruction/ termination or injury. held answerable despite the abandonment of the vessel, as where the loss or injury
b. Section 10 of the Insurance Code indeed provides that every person has an was due to the fault of the shipowner and the captain.
insurable interest in his own life  The instant petitions provide another occasion for the Court to reiterate the well-
c. Section 19 of the same code also states that an interest in the life or health of a settled doctrine of the real and hypothecary nature of maritime law.
person insured must exist when the insurance takes effect, but need not exist  As a general rule, a ship owner’s liability is merely co-extensive with his interest in the
thereafter or when the loss occurs vessel, except where actual fault is attributable to the shipowner.
 In this case, Lalican failed to reinstate the insurable interest during his lifetime.  The instant petitions cannot be spared from the application of the exception to the
a. To reinstate means to restore the same to premium-paying status after it has been doctrine of limited liability in view of the unanimous findings of the courts below that
permitted to lapse both Aboitiz and the crew failed to ensure the seaworthiness of the M/V P. Aboitiz.
b. The policy allowed reinstatement within 3 years after lapse provided, among
others that the premium is paid and the same is approved by Insular. WHITE GOLD v. PIONEER INSURANCE and THE STEAMSHIP MUTUAL UNDERWRITING
c. Moreover, the agent had no authority to approve the reinstatement because she ASSOCIATION (BERMUDA) LTD
still has to turn over the same to Insular. TOPIC: Marine Insurance
 The conditions for reinstatement is clear and simple and need not be interpreted.
 Lalican’s death, just hours after filing his Application for Reinstatement and depositing  The test to determine if a contract is an insurance contract or not, depends on the
his payment for overdue premiums and interests with Malaluan, does not constitute a nature of the promise, the act required to be performed, and the exact nature of the
special circumstance that can persuade this Court to already consider Policy agreement in the light of the occurrence, contingency, or circumstances under which
No. 9011992 reinstated the performance becomes requisite. Not by what it is called.
a. Said circumstance cannot override the clear and express provisions of the Policy  An insurance contract is a contract of indemnity. In it, one undertakes for a
Contract and Application for Reinstatement consideration to indemnify another against loss, damage or liability arising from an
unknown or contingent event.
ABOITIZ SHIPPING v. CA, MALAYAN INSURANCE ET AL  In particular, a marine insurance undertakes to indemnify the assured against marine
Marine Insurance (Case is mostly about limited liability of shipowners) losses, such as the losses incident to a marine adventure. Section 99 of the Insurance
Code enumerates the coverage of marine insurance.
 The circumstances in the GAFLAC case are not available to the cases above. In the  A mutual insurance company is a cooperative enterprise where the members are both
GAFLAC case, there was no actual finding of negligence on the part of Aboitiz. the insurer and insured. In it, the members all contribute, by a system of premiums or
 There is a categorical finding that Aboitiz was negligent. assessments, to the creation of a fund from which all losses and liabilities are paid, and
o First case, the captain was negligent in failing to take a course of action that where the profits are divided among themselves, in proportion to their
would prevent the vessel from sailing into the typhoon. interest. Additionally, mutual insurance associations, or clubs, provide three types of
o Second case, Aboitiz failed to show that it exercised extraordinary diligence in coverage, namely, protection and indemnity, war risks, and defense costs.
steering the vessel before, during, and after the storm.  A P&I Club is a form of insurance against third party liability, where the third party is
o Third case, RTC said there was negligence. anyone other than the P & I Club and the members. Hence, Steamship Mutual as a P
o CA affirmed all findings. & I Club is a mutual insurance association engaged in the marine insurance business.
 Articles 587, 590, 837 intend to limit the liability of the shipowner to the value of the
vessel, provided that the owner abandons the vessel. When the vessel is to totally lost, FGU Insurance Corporation v CA
abandonment is not required. Marine Insurance
o Because of such total loss the liability of the shipowner or agent for damages
is extinguished.  One of the purposes for taking out insurance is to protect the insured against the
o However, despite the total loss of the vessel, its insurance answers for the consequences of his own negligence and that of his agents. Thus, it is a basic rule in
damages for which a shipowner or agent may be held liable.

13|INSURANCE
 insurance that the carelessness and negligence of the insured or his agents constitute 5. Since the ship was unseaworthy, there was a violation of a breach of warranty of
no defense on the part of the insurer. seaworthiness.
 This rule however presupposes that the loss has occurred due to causes which could a. Thus, Philamgen is entitled to subrogation
not have been prevented by the insured, despite the exercise of due diligence. b. every marine insurance policy the assured impliedly warrants to the assurer that
 When evidence show that the insured’s negligence or recklessness is so gross as to be the vessel is seaworthy and such warranty is as much a term of the contract as if
sufficient to constitute a willful act, the insurer must be exonerated. expressly written on the face of the policy
 The ordinary negligence of the insured and his agents has long been held as a part of c. (i)n every marine insurance upon a ship or freight, or freightage, or upon anything
the risk which the insurer takes upon himself, and the existence of which, where it is which is the subject of marine insurance, a warranty is implied that the ship is
the proximate cause of the loss, does not absolve the insurer from liability. But willful seaworthy.
exposure, gross negligence, negligence amounting to misconduct, etc., have often d. Under Sec. 114, a ship is seaworthy when reasonably fit to perform the service,
been held to release the insurer from such liability and to encounter the ordinary perils of the voyage, contemplated by the parties
 ANCO’s representatives had failed to exercise extraordinary diligence required of to the policy.
common carriers in the shipment of SMC’s cargoes. Such blatant negligence of is of e. Thus it becomes the obligation of the cargo owner to look for a reliable common
such gross character that it amounts to a wrongful act which must exonerate FGU from carrier which keeps its vessels in seaworthy condition. He may have no control
liability under the insurance contract. over the vessel but he has full control in the selection of the common carrier that
will transport his goods. He also has full discretion in the choice of assurer that will
Philippine American General Insurance vs. CA, Felman Shipping Lines underwrite a particular venture
Marine Insurance f. Warranty of seaworthiness is implied. It can only be excluded by implied terms in
writing. In this case, even the policy provided that Philamgen warrants
1. MV Asilda was unseaworthy seaworthiness. Thus, philamgen was liable and he is entitled to subrogation.
a. The statement of the captain confirmed that the weather was fine
b. The captain was suddenly awakened when they hit a log and he saw that there CENTRAL SHIPPING COMPANY INC. v. INSURANCE COMPANY OF NORTH AMERICA
were strong winds; he then saw that the ship was slightly listing Marine Insurance
c. The vessel suddenly listed to portside causing some cargo to be thrown to the
waters. The crew abandoned ship.  M/V Bohol was not seaworthy to meet the perils of the sea. From the nature of their
2. The report of Elite Adjusters submitted a report which said that the vessel was top- business and for reasons of public policy, common carriers are bound to observe
heavy, even if there was no overloading, the distribution of the cargo caused the ship extraordinary diligence over the goods they transport, according to all the
to be unstable. circumstances of each case.
a. That the vessel was designed as a fishing vessel and not meant to carry a  In the event of loss, destruction or deterioration of the insured goods, common carriers
substantial amount of cargo are responsible; that is, unless they can prove that such loss, destruction or
b. The moment the ship was used to load heavy cargo, the vessel was rendered deterioration was brought about -- among others -- by flood, storm, earthquake,
unseaworthy lightning or other natural disaster or calamity. In all other cases not specified under
c. The proximate cause of the sinking was the top-heavy loading of the cargo Article 1734 of the Civil Code, common carriers are presumed to have been at fault or
3. Carrying a deck cargo raises the presumption of unseaworthiness unless it can be to have acted negligently, unless they prove that they observed extraordinary
shown that the deck cargo will not interfere with the proper management of the diligence.
ship. However, in this case it was established that MV Asilda was not designed to carry  The SC was unconvinced that the monsoon encountered by the ship was a force
substantial amount of cargo on deck majeure as there was no storm within Philippine territory at that time and the
4. Art 1733 of the Civil Code, (c)ommon carriers, from the nature of their business and monsoon encountered by the ship in its voyage is an event that can be reasonably
for reasons of public policy, are bound to observe extraordinary diligence in the foreseen considering that the voyage took place in July, during the country’s wet
vigilance over the goods and for the safety of the passengers transported by them, season.
according to all the circumstances of each case

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 The SC further ruled that Central Shipping was negligent in properly stowing the goods  Nevertheless, the rule is not inflexible. In certain instances, the Court has admitted
loaded in its ship, as the logs should not have shifted on one side had it been properly exceptions by declaring that a marine insurance policy is dispensable evidence in
stowed, considering further that no storm was encountered by the ship during its reimbursement claims instituted by the insurer.
voyage and the heavy rains, strong winds, and waves can and should have been  The SC disagrees with the Equitable claims that Transmodal's non-presentation of the
reasonably expected, and should have been prepared for by the crew. insurance contract or policy between the respondent and the consignee is fatal to its
 On the applicability of the limited liability rule: The doctrine of limited liability under cause of action. This was never raised as an issue before the RTC.
Article 587 of the Code of Commerce is not applicable to the present case.  Moreover, Equitable was able to prove by substantial evidence their right to institute
o This rule does not apply to situations in which the loss or the injury is due to this action as subrogee of the insured. Transmodal did not present any evidence or
the concurrent negligence of the shipowner and the captain. witness to bolster their defense and to contradict plaintiff’s allegation.
 It has already been established that the sinking of M/V Central Bohol had been caused  To reiterate, in this case, Equitable was able to present as evidence the marine open
by the fault or negligence of the ship captain and the crew, as shown by the improper policy that vested upon it, its rights as a subrogee.
stowage of the cargo of logs. Closer supervision on the part of the shipowner could
have prevented this fatal miscalculation. MALAYAN INSURANCE CO., INC V. REGIS BROKERAGE CORP.,
o As such, the shipowner was equally negligent. TOPIC: On presentation of policies
o It cannot escape liability by virtue of the limited liability rule.
 Since the Marine Insurance Policy was never presented in evidence before the trial
EQUITABLE INSURANCE CORPORATION v. TRANSMODAL INTERNATIONAL, INC. court or the Court of Appeals even, there is no legal basis to consider such document
TOPIC: Marine Insurance Policy in the resolution of this case, reflective as that document may have been of the pre-
existence of an insurance contract between Malayan and ABB Koppel even prior to
 Equitable was able to present as evidence the marine open policy that vested upon the loss of the motors.
it, its rights as a subrogee.  It appears quite plain that Malayans theory of the case it pursued before the trial court
 In fact, in the questioned decision of the CA, the latter, mentioned such policy, thus: was that the perfected insurance contract which it relied upon as basis for its right to
“Contrary to the ruling of the RTC, the marine policy was not at all presented. As borne subrogation was not the Marine Insurance Policy but the Marine Risk Note which,
by the records, only the marine risk note and EQUITABLE INSURANCE CORPORATION unlike the former, was actually presented at the trial and offered in evidence.
Marine Policy No. MN-MOP-HO-0000099 were offered in evidence o Thus, the court can only consider the Marine Risk Note in determining
 "Subrogation is the substitution of one person in the place of another with reference whether there existed a contract of insurance between ABB Koppel and
to a lawful claim or right, so that he who is substituted succeeds to the rights of the Malayan at the time of the loss of the motors.
other in relation to a debt or claim, including its remedies or securities.", Article 2207
of the Civil Code. The insurance contract between Malayan and ABB Koppel was NOT constituted by the
 In Asian Terminals, Inc. v. First Lepanto-Taisho Insurance Corporation: As a general rule, Marine Risk Note alone.
the marine insurance policy needs to be presented in evidence before the insurer may  What the Marine Risk Note bears, as a matter of evidence, is that it is not apparently
recover the insured value of the lost/damaged cargo in the exercise of its subrogatory the contract of insurance by itself, but merely a complementary or supplementary
right. document to the contract of insurance that may have existed as between Malayan and
 In Malayan Insurance Co., Inc. v. Regis Brokerage Corp., the Court stated that the ABB Koppel.
presentation of the contract constitutive of the insurance relationship between the  Since Malayan failed to introduce in evidence the Marine Insurance Policy itself as the
consignee and insurer is critical because it is the legal basis of the latter's right to main insurance contract, or even advert to said document in the complaint, ultimately
subrogation. then it failed to establish its cause of action for restitution as a subrogee of ABB
 In Home Insurance Corporation v. CA, the insurance contract, which was not presented Koppel.
in evidence, was necessary to determine the scope of the insurer's liability.  Malayan’s right of recovery as a subrogee of ABB cannot be predicated alone on the
liability of the respondent to ABB, even though such liability will necessarily have to be
established at the trial for Malayan to recover.
15|INSURANCE
ITCSI v. FGU Insurance o The principle covers a situation wherein an insurer has paid a loss under an
Topic: On Presentation of Policies insurance policy is entitled to all the rights and remedies belonging to the insured
against a third party with respect to any loss covered by the policy
Marine risk note is not an insurance policy. Marine open policy is the main insurance  The payment by the insurer to the insured operates as an equitable assignment to the
contract. insurer of all the remedies that the insured may have against the third party whose
 A marine risk note is not an insurance policy. It is only an acknowledgment or negligence or wrongful act caused the loss.
declaration of the insurer confirming the specific shipment covered by its marine open o The right of subrogation is not dependent upon, nor does it grow out of, any privity
policy, the evaluation of the cargo and the chargeable premium. The marine open of contract.
policy is the main insurance contract. It is the blanket insurance to be undertaken by o It accrues simply upon payment by the insurance company of the insurance claim.
FGU on all goods to be shipped by RAGC during the existence of the contract, while the o The doctrine of subrogation has its roots in equity – to promote and to accomplish
marine risk note specifies the particular goods/shipment insured by FGU on that justice; and is the mode that equity adopts to compel the ultimate payment of a
specific transaction, including the sum insured, the shipment particulars as well as the debt by one who, in justice, equity, and good conscience, ought to pay.
premium paid for such shipment.  We cannot accept KCSIs insistence on upholding the validity Clause 20, which provides
 In any event, as it stands, it is evident that even prior to the cancellation by FGU of that the limit of its liability is only up to P50,000,000.00; nor of Clause 22(a), that KCSI
Marine Open Policy No. MOP-12763 on June 10, 1994, it had already undertaken to stands as a co-assured in the insurance policies, as found in the Shiprepair Agreement.
insure the shipment of the 400 kgs. of silver nitrate, specially since RAGC had already o Clauses 20 and 22(a) of the Shiprepair Agreement are without factual and legal
paid the premium on the insurance of said shipment. foundation. They are unfair and inequitable under the premises. It was established
during arbitration that WG&A did not voluntarily and expressly agree to these
Generally, policy must be presented. In this case, the policy need not be present as the loss provisions.
of the cargo was proven to be lost on board while in ICTSI’s custody. o Engr. Elvin F. Bello, WG&As fleet manager, testified that he did not sign the fine-
 General Rule: Jurisprudence provided that marine insurance policy needs to be print portion of the Shiprepair Agreement where Clauses 20 and 22(a) were found,
presented in evidence, as the issued raised arise from the very existence of an because he did not want WG&A to be bound by them. However, considering that
insurance contract. It must be presented to determine the extent of the coverage. it was only KCSI that had shipyard facilities large enough to accommodate the dry
o Exception: loss of the cargo occurred on board the vessel while in carrier’s docking and repair of big vessels owned by WG&A, such as M/V Superferry 3, in
custody Cebu, he had to sign the front portion of the Shiprepair Agreement; otherwise, the
o Exception: no issue regarding the provisions of the insurance policy vessel would not be accepted for dry docking.

Keppel Cebu Shipyard, Inc. v. Pioneer Insurance Malayan Ins. Co., Inc. v. Rodelio Alberto and Enrico Alberto Reyes
Subrogation Subrogation

 Art. 2207: If the plaintiff’s property has been insured and he has received indemnity  The claim check voucher and the Release of Claim and Subrogation Receipt presented
from the insurance company for the injury or loss arising out of the wrong or breach by Malayan Insurance are already part of the evidence on record, and since it is not
of contract complained of, the insurance company shall be subrogated to the rights of disputed that the insurance company paid First Malayan, then there is a valid
the insured against the wrongdoer or the person who has violated the contract. If the subrogation in this case.
amount paid by the insurance company does not fully cover the injury or loss, the  Payment by the insurer to the insured operates as an equitable assignment to the
aggrieved party shall be entitled to recover the deficiency from the person causing the insurer of all the remedies that the insured may have against the third party whose
loss or injury. negligence or wrongful act caused the loss.
 Subrogation is the substitution of one person by another with reference to a lawful  The right of subrogation is not dependent upon, nor does it grow out of, any privity of
claim or right, so that he who is substituted succeeds to the rights of the other in contract.
relation to a debt or claim, including its remedies or securities. o It accrues simply upon payment by the insurance company of the insurance
claim.

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 The doctrine of subrogation has its roots in equity.  It can also be said that with the transfer of the location of the subject properties,
o It is designed to promote and to accomplish justice; and is the mode that without notice and without Malayan’s consent, after the renewal of the policy, PAP
equity adopts to compel the ultimate payment of a debt by one who, in clearly committed concealment, misrepresentation and a breach of a material
justice, equity, and good conscience, ought to pay. warranty which entitles the injured party to rescind the contract of insurance.
Accordingly, an insurer can exercise its right to rescind an insurance contract when the
UY HU & CO. v. THE PRUDENTIAL ASSURANCE CO., LTD. following conditions are present:
TOPIC: Fire Insurance o The policy limits the use or condition of the thing insured;
o There is an alteration in said use or condition;
 The representatives of Prudential went to the scene and asked Uy Hu’s manager to o The alteration is without the consent of the insurer;
point out to them where the missing merchandise were stored, but he said that the o The alteration is made by means within the insured’s control; and
missing merchandise and effect had been completely consumed by the fire, and that o The alteration increases the risk of loss.
no trace of them was left.
o In the very nature of things, a large portion of it would not be destroyed, and UNITED MERCHANTS V. COUNTRY BANKERS
some evidence would be left by which the amount, kind and quality of it could TOPIC: FIRE INSURANCE
be substantially ascertained and determined.
 Adjustors demanded Tan Chong to furnish him with all the invoices of the merchandise  Where a fire insurance policy provides that if the claim be in any respect fraudulent, or
claimed to be stored in the bodegas at the time of the fire. if any false declaration be made or used in support thereof, or if any fraudulent means
o Tan Chong stated that it was impossible to deliver the invoices because most or devices are used by the Insured or anyone acting on his behalf to obtain any benefit
of them were purchased in cash. under this Policy, and the evidence is conclusive that the proof of claim which the
 Immediately after the fire, 4 different photos were taken of the merchandise as it insured submitted was false and fraudulent both as to the kind, quality and amount of
appeared after the fire, all of which corroborate the inventory in Exhibit 8. the goods and their value destroyed by the fire, such a proof of claim is a bar against
 Where the proof is conclusive that the insured made a claim for a large amount of the insured from recovering on the policy even for the amount of his actual loss.
property which was never in the bodegas at the time of the fire and for a much larger
amount of property than was actually in the bodegas, it makes the whole claim false PARAMOUNT INSURANCE v. COURT OF APPEALS
and fraudulent, the legal effect of which is to bar plaintiff from the recovery of the Surety
amount of its actual loss.
 What is necessary only is for the attaching party and his surety or sureties to be duly
Malayan Insurance Company v PAP Co., Ltd. notified and given the opportunity to be heard. In the case at bench, this Court accords
Fire Insurance due respect to the factual finding of the Court of Appeals that "PARAMOUNT was
present and represented by its counsel Atty. Nonito Q. Cordero as shown in the trial
 The insurance policy in this case forbade the removal of the insured properties unless court's order
with the consent of Malayan. The records are bereft of any convincing and concrete  Contrary to Paramount’s thesis, it is neither mandatory nor fatal that there should be
evidence that Malayan was notified of the transfer of the insured properties from the a separate hearing in order that damages upon the bond can be claimed, ascertained
Sanyo factory to the Pace factory. and awarded, as can be gleaned from a cursory reading of the provisions of Rule 57,
o What PAP did to prove that Malayan was notified was to show that it relayed Section 20
the fact of transfer to RCBC, the entity which made the referral and the named
beneficiary in the policy. SPS. NOE AND CLARITA QUIAMCO v. CAPITAL INSURANCE CO. INC.
o Malayan and RCBC might have been sister companies, but such fact did not Topic: Surety
make one an agent of the other. The fact that RCBC referred PAP to Malayan
did not clothe it with authority to represent and bind the said insurance  There is no dispute that the parties entered into a contract of suretyship wherein
company. respondent as surety bound itself solidarily with petitioners (the principal debtors) to

17|INSURANCE
 fulfill an obligation. The obligation was to pay the monetary award in the labor case  However, a surety is not released by a change in the contract, which does not have the
should the decision become final and executory against petitioners. effect of making its obligation more onerous.
 The bond was issued after petitioners complied with the requirements. Hence, the  In the instant case, the revision of the subcontract agreement did not in any way make
contract of suretyship was perfected. the obligations of both the principal and the surety more onerous.
 From the moment the contract is perfected, the parties are bound to comply with  Stronghold never assumed added obligations, nor were there any additional
what is expressly stipulated as well as with what is required by the nature of the obligations imposed, due to the modification of the terms of the contract. Failure to
obligation in keeping with good faith, usage and the law. receive any notice of such change did not, therefore, exonerate petitioner from its
o A surety is considered in law to be on the same footing as the principal debtor liabilities as surety.
in relation to whatever is adjudged against the latter.  Neither can Stronghold be exonerated from liability simply because the bonds it issued
 As surety of sps. Quiamco, Capital was obliged to pay on the bond when a writ of were replaced by those issued by Tico.
execution was served on it. Consequently, it now has the right to seek full
reimbursement from petitioners for the amount paid. First Lepanto-Taisho Ins. Corp. vs. Chevron Phils., Inc.,
 Moreover, sps. Quiamco signed an indemnity agreement which contained that: Surety
o They will xxx “reimburse and make good to the SURETY, its successors and
assigns, all sums or all money which it shall pay or become liable to pay by  Section 175 of the Insurance Code defines a suretyship as a contract or agreement
virtue to said bond even if said payment/s or liability exceeds the amount of whereby a party, called the surety, guarantees the performance by another party,
the bond.” called the principal or obligor, of an obligation or undertaking in favor of a third party,
o INCONSTESTABILITY OF PAYMENT MADE BY THE SURETY: Any payment or called the obligee.
disbursement made by the SURETY on account of the above-mentioned o It includes official recognizances, stipulations, bonds or undertakings issued under
bond, xxx shall be final, and will not be contested by the undersigned, who Act 536, as amended.
jointly and severally bind themselves to indemnity the SURETY for any such  The extent of a surety’s liability is determined by the language of the suretyship
payment or disbursement. contract or bond itself. It cannot be extended by implication, beyond the terms of the
contract.
Stronghold Insurance Co. v. Tokyu Construction  It bears stressing that the contract of suretyship imports entire good faith and
Topic: Surety confidence between the parties in regard to the whole transaction, although it has
been said that the creditor does not stand as a fiduciary in his relation to the surety.
 Stronghold’s liability was not affected by the revision of the contract Neither was it The creditor is generally held bound to a faithful observance of the rights of the surety
extinguished because of the issuance of new bonds procured from Tico. and to the performance of every duty necessary for the protection of those rights.
 A contract of suretyship is an agreement whereby a party, called the surety, guarantees
the performance by another party, called the principal or obligor, of an obligation or Intra-Strata Ass. Corp. v. Republic
undertaking in favor of another party, called the obligee. Surety
 By its very nature, under the laws regulating suretyship, the liability of the surety is
joint and several but is limited to the amount of the bond, and its terms are determined  The surety does not, by reason of the surety agreement, earn the right to intervene in
strictly by the terms of the contract of suretyship in relation to the principal contract the principal creditor-debtor relationship; its role becomes alive only upon the debtor’s
between the obligor and the obligee. default, at which time it can be directly held liable by the creditor for payment as a
 Indeed, a surety is released from its obligation when there is a material alteration of solidary obligor.
the principal contract in connection with which the bond is given, such as a change  A surety contract is made principally for the benefit of the creditor-obligee and this is
which imposes a new obligation on the promising party, or which takes away some ensured by the solidary nature of the sureties’ undertaking.
obligation already imposed, or one which changes the legal effect of the original  Under these terms, the surety is not entitled as a rule to a separate notice of default,
contract and not merely its form. nor to the benefit of excussion, and may be sued separately or together with the
principal debtor.
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 A surety agreement is an accessory contract that introduces a third party element in  The right to claim against the security deposit is dependent on the solvency of the
the fulfillment of the principal obligation that an obligor owes an obligee. insurance company, and is subject to all other obligations of the insurance company
 There are effectively two (2) contracts involved when a surety agreement comes into arising from its insurance contracts. Accordingly, the respondent's interest in the
play – a principal contract and an accessory contract of suretyship. security deposit could only be inchoate or a mere expectancy, and thus had no
 Under the accessory contract, the surety becomes directly, primarily, and equally attribute as property.
bound with the principal as the original promissor although he possesses no direct  Therefore, the Insurance Commissioner was justified in refusing to release the funds.
or personal interest over the latter’s obligations and does not receive any benefit
therefrom. GREAT PACIFIC LIFE ASSURANCE CORPORATION v. CA
 Intra Strata and Phil Home’s lack of consent to the withdrawal of the goods is a matter TOPIC: Life Insurance
between them and the principal Grand Textile; it is a matter outside the concern of
government whose interest as creditor-obligee in the importation transaction is the  A life insurance policy is a valued policy. Unless the interest of a person insured is
payment by the importer-obligor of the duties, taxes, and charges due before the susceptible of exact pecuniary measurement, the measure of indemnity under a policy
importation process is concluded. of insurance upon life or health is the sum fixed in the policy.
 Dr. Leuterio paid the premium according to the coverage of his insurance, which states
CAPITAL INSURANCE AND SURETY CO V. DEL MONTE MOTOR WORKS that:
TOPIC: SURETY DEPOSIT o “Upon receipt of due proof of the Debtor’s death during the terms of this
insurance, a death benefit in the amount of P86,200.00 shall be paid.”
 Sec 203 of the insurance code provides that no judgment creditor or other claimant o “In the event of the debtor’s death before his indebtedness with the creditor
shall have the right to levy upon any securities of the insurer held on deposit under this shall have been fully paid, an amount to pay the outstanding indebtedness
section or held on deposit pursuant to the requirement of the Commissioner. shall first be paid to the Creditor and the balance of the Sum Assured, if there
 The forthright text of provision indicates that the security deposit is exempt from levy is any shall then be paid to the beneficiary/ies designated by the debtor”
by a judgment creditor or any other claimant.  Since DBP foreclosed in 1995 their residential lot, in satisfaction of Dr. Leuterio’s
 The law expressly and clearly states that the security deposit shall be (1) answerable outstanding loan. Considering this supervening event, the insurance proceeds shall
for all the obligations of the depositing insurer under its insurance contracts; (2) at all inure to the benefit of his heirs or his beneficiaries.
times free from any liens or encumbrance; and (3) exempt from levy by any claimant.  Equity dictates that DBP should not unjustly enrich itself at the expense of another
 The securities are held as a contingency fund to answer for the claims against the (Nemo cum alterius detrimenio protest).
insurance company by all its policy holders and their beneficiaries. This step is taken in  Hence, DBP cannot collect the insurance proceeds, after it already foreclosed on the
the event that the company becomes insolvent or otherwise unable to satisfy the mortgage. The proceeds now rightly belong to Dr. Leuterio’s heirs represented by,
claims against it. Medarda Leuterio.
o Thus, a single claimant may not lay stake on the securities to the exclusion of  Also, a policy of insurance upon life or health may pass by transfer, will or succession
all others. The other parties may have their own claims against the insurance to any person, whether he has an insurable interest or not, and such person may
company under other insurance contracts it has entered into. recover it whatever the insured might have recovered. Hence, the widow of Dr.
 If they are allowed to claim from the security deposit, the holders or beneficiaries of Leuterio may file the suit against the insurer, Grepalife.
the policies of an insolvent company would thereby likely end up becoming unpaid
claimants.
 Besides, denying the exemption would potentially pave the way for a single claimant,
like the respondent, to short-circuit the procedure normally undertaken in adjudicating
the claims against an insolvent company under the rules on concurrence and
preference of credits in order to ensure that none could obtain an advantage or
preference over another by virtue of an attachment or execution.

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Perla Compania de Seguros, Inc. vs. Court of Appeals ALPHA INSURANCE AND SURETY CO. v. ARSENIA SONIA CASTOR
Motor vehicle insurance Theft Clause

 The comprehensive motor car insurance policy issued by Perla undertook to indemnify  Theft perpetrated by a driver of the insured is not an exception to the coverage from
Sps. Lim against loss or damage to the car the insurance policy subject of this case.
 Where a car is admittedly unlawfully and wrongfully taken without the owner’s o This is evident from the very provision of Section III – “Loss or Damage.”
consent or knowledge, such taking constitutes theft, and, therefore, it is the theft o The insurance company, subject to the limits of liability, is obligated to
clause, and not the authorized driver clause, that should apply. indemnify the insured against theft.
 Theft is an entirely different legal concept from that of accident. Theft is committed by o Said provision does not qualify as to who would commit the theft.
a person with the intent to gain or, to put it in another way, with the concurrence of  Alpha cannot exclude the loss of Arsenia’s vehicle under the insurance policy under
the doer’s will. On the other hand, accident, although it may proceed or result from paragraph 4 of “Exceptions to Section III,” since the same refers only to “malicious
negligence, is the happening of an event without the concurrence of the will of the damage,” or more specifically, “injury” to the motor vehicle caused by a person under
person by whose agency it was caused. the insured’s service.
 The ‘authorized driver clause’ in a typical insurance policy is in contemplation or o Par. 4 clearly does not contemplate “loss of property,” as what happened in
anticipation of accident in the legal sense in which it should be understood, and not in the case.
contemplation or anticipation of an event such as theft.  Further, “malicious damage,” as provided for in the subject policy as one of the
 It is worthy to note that there is no causal connection between the possession of a exceptions from coverage, is the damage that is the direct result from the deliberate
valid driver’s license and the loss of a vehicle. To rule otherwise would render car or willful act of the insured, members of his family, and any person in the insured’s
insurance practically a sham since an insurance company can easily escape liability by service, whose clear plan or purpose was to cause damage to the insured vehicle for
citing restrictions which are not applicable or germane to the claim. purposes of defrauding the insurer.

PARAMOUNT INSURANCE CORP V. SPOUSES REMONDEULAZ MALAYAN INSURANCE CO., INC v. PHILIPPINE FIRST INSURANCE CO. INC, AND
TOPIC: THEFT CLAUSE REPUTRABLE FORWARDER SERVICES INC.
Topic: Other Insurance Clauses
 When one takes the motor vehicle of another w/o the latters consent even if the motor
vehicle is later returned, there is theft there being intent to gain as the use of the thing  Malayan refers to Section 5 of its SR Policy as an "over insurance clause" and to Section
unlawfully taken constitutes gain. 12 as a "modified ‘other insurance’ clause".
 The taking of a vehicle by another person w/o the permission or authority from the  Contrary to Malayan’s contention, Section 5 is actually the other insurance clause
owner constitutes theft as contemplated in the policy, and is therefore, compensable (also called "additional insurance" and "double insurance").
 Court discussed the principal distinction between estafa and theft:  In this case, Section 5 does not provide for the nullity of the SR Policy but simply limits
o In theft, the thing is taken, while in estafa, the accused receives the property and the liability of Malayan only up to the excess of the amount that was not covered by
converts it to his own use or benefit. the other insurance policy.
 However, there may be theft even if the accused has possession of the property. If he  In interpreting the "other insurance clause" in Geagonia (case cited in the ruling), the
was entrusted only with the material or physical (natural) or de facto possession of the Court ruled that the prohibition applies only in case of double insurance. It ruled that
thing, his misappropriation of the same constitutes theft, but if he has the juridical in order to constitute a violation of the clause, the other insurance must be upon same
possession of the thing his conversion of the same constitutes embezzlement or estafa. subject matter, the same interest therein, and the same risk.
 Section 93 of the Insurance Code, double insurance exists where the same person is
insured by several insurers separately in respect to the same subject and interest.
REQUISITES OF DOUBLE INSURANCE:
o The person insured is the same;
o Two or more insurers insuring separately;
20|INSURANCE
 o There is identity of subject matter; Great Pacific Life Ass. Corp. vs. Court of Appeals, et. al.,
o There is identity of interest insured; and Mortgage Redemption Insurance
o There is identity of the risk or peril insured against
 Therefore, even though the two concerned insurance policies were issued over the  Grepalife is liable to pay the insurance claim. Medarda is a proper party in interest
same goods and cover the same risk, there arises no double insurance since they (note that it was Wilfredo who has been paying the premium, as the insured, he is the
were issued to two different persons/entities having distinct insurable interests. real party in interest and this status was transferred to his widow).
 Necessarily, over insurance by double insurance cannot likewise exist. Hence, as  The group life insurance or “mortgage redemption insurance” provides that DBP as the
correctly ruled by the RTC and CA, neither Section 5 nor Section 12 of the SR Policy mortgagee is merely an assignee of Wilfredo; and that in the event of Wilfredo’s death
can be applied. before his indebtedness to DBP is paid, proceeds from the insurance shall first be
applied to the sum of the balance insured.
SERRANO v. COURT OF APPEALS o But this does not cease Wilfredo to be a party to the insurance contract.
Topic: Mortgage Redemption Insurance  Grepalife failed to prove that Wilfredo concealed that he was suffering from
hypertension at the time of his application.
 There can be no doubt as to the eligibility of the late Capt. Serrano for coverage under
Sec. 1 of Art. II of the Group Mortgage Redemption Insurance Policy as he was a Paramount Life & Gen. Ins. Corp., vs. Cherry Castro, et. al.
mortgagor of SSS not over the age of 65 nearest his birthday at the time when the Topic: Mortgage Redemption Insurance
mortgage loan was granted to him.
 The problem manifests itself in Secs. 2 and 3 of the same article of the said policy.  Mortgage redemption insurance is a device for the protection of both the mortgagee
 Sec 2 provides that "any mortgagor who is eligible for coverage on or after the Date and the mortgagor:
of Issue shall be automatically insured,..."; while Sec 3 provides that the insurance  On the part of the mortgagee, it has to enter into such form of contract so that in the
"shall take effect from the beginning of the amortization period of such Mortgage loan event of the unexpected demise of the mortgagor during the subsistence of the
or partial release of Mortgage Loan" mortgage contract, the proceeds from such insurance will be applied to the payment
 However, Sec. 3 of Article II presents an ambiguity. The effective date of coverage can of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the
be interpreted to mean that the insurance contract takes effect "from the beginning obligation. In a similar vein, ample protection is given to the mortgagor under such a
of the amortization period of such Mortgage Loan" or "partial release of Mortgage concept so that in the event of death, the mortgage obligation will be extinguished by
Loan." the application of the insurance proceeds to the mortgage indebtedness.
 Applying Article 1374 of the new Civil Code, the mortgagor in the instant case was  In this case, the PPSBI, as the mortgagee-bank, required Virgilio to obtain an MRI from
already covered by the insurance upon the partial release of the loan. Paramount to cover his housing loan. The issuance of the MRI, as evidenced by the
 The ambiguity in Section 3 of Article II should be resolved in favor of the petitioner. Individual Insurance Certificate in Virgilio's favor, was derived from the group
 While the issuance of the Group Mortgage Redemption Insurance is a contract insurance policy issued by Paramount in favor of the PPSBI. Paramount undertook to
between SSS and the Private Life Insurance Companies, the fact is that SSS entered pay the PPSBI "the benefits in accordance with the Insurance Schedule, upon receipt
into such a contract to afford protection not only to itself should the mortgagor die and approval of due proof that the member has incurred a loss for which benefits are
before fully paying the loan, but also to afford protection to the mortgagor. payable."
 Should Paramount succeed in having the individual insurance certificate nullified, the
PPSBI shall then proceed against the Castro’s. This would contradict the provisions of
the group insurance policy that ensure the direct payment by the insurer to the bank

21|INSURANCE
FGU INSURANCE V. CA o Hence, in marine insurance cases, courts are constrained to rely upon their
Liability of Insurer for loss due to Negligence own understanding of these terms of art, or upon imprecise accounts of the
speed of the winds encountered and the strength of the waves experienced
 When evidence show that the insured’s negligence or recklessness is so gross as to be by a vessel.
sufficient to constitute a willful act, the insurer must be exonerated  First, there is no proof that the bad weather encountered by M/V Meryem Ana was the
 ANCO’s employees is of such gross character that it amounts to a wrongful act which proximate and only cause of damage to the shipment. Second, Transimex failed to
must exonerate FGU from liability under the insurance contract. establish that it had exercised the diligence required from common carriers to prevent
loss or damage to the cargo.
HH Hollero Construction v GSIS  Strong winds and waves are not automatically deemed perils of the sea, if these
Right to file Action conditions are not unusual for that particular sea area at that specific time, or if they
could have been reasonably anticipated or foreseen.
 HH Hollero’s right to bring an action has already prescribed.
 The right of the insured to the payment of his loss accrues from the happening of the
loss. However, the cause of action in an insurance contract does not accrue until the
insured’s claim is finally rejected by the insurer. This is because before such final
rejection there is no real necessity for bringing suit.
 Since "cause of action" requires as essential elements not only a legal right of the
plaintiff and a correlated obligation of the defendant in violation of the said legal right,
the cause of action does not accrue until the party obligated refuses, expressly or
impliedly, to comply with its duty (in this case to pay the amount of the bond).
 Final rejection, however, means denial by the insurer of the claims of the insured and
not the rejection or denial by the insurer of the insured’s motion or request for
reconsideration. The rejection referred to should be construed as the rejection in the
first instance. Otherwise, it can easily be used by insured persons as a scheme or device
to waste time until any evidence which may be considered against them is destroyed.
TRANSIMEX CO., v. MAPFRE ASIAN INSURANCE CORP.
Topic: Perils of the Sea

 It must be emphasized that not all instances of bad weather may be categorized as
“storms” or “perils of the sea” within the meaning of the provisions of the Civil Code
and COGSA on common carriers. To be considered absolutory causes under either
statute, bad weather conditions must reach a certain threshold of severity.
 The phrase “perils of the sea” carries the same connotation. Although the term has not
been definitively defined in Philippine jurisprudence, courts in the United States of
America generally limit the application of the phrase to weather that is “so unusual,
unexpected and catastrophic as to be beyond reasonable expectation.” Accordingly,
strong winds and waves are not automatically deemed perils of the sea, if these
conditions are not unusual for that particular sea area at that specific time, or if they
could have been reasonably anticipated or foreseen.
 There are no definite statutory standards for determining the existence of a “storm”
or “peril of the sea” that would exempt a common carrier from liability.
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