VIRGINIA PEREZ, PETITIONER, VS.

COURT OF APPEALS AND BF LIFEMAN INSURANCE

CORPORATION
FACTS
Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation since 1980. He
apply for additional insurance coverage to avail of the promotional discount if the premium were paid
annually. Perez accomplished an application form for the additional insurance coverage and made
some payment received as deposit. The application was sent to the Insurance head office in Manila.
Before the head office could have receive the application, Perez died in an accident where he was
riding a banca capsized during a storm. Without knowing that Perez died, BF Lifeman Insurance
Corporation approved the application and issued the corresponding policy for the additional insurance
coverage.
ISSUE
Whether or not there was a consummated contract of insurance between the deceased and BF
Lifeman Insurance Corporation.
HELD
Insurance is a contract whereby, for a stipulated consideration, one party undertakes to
compensate the other for loss on a specified subject by specified perils. When Perez filed an
application for insurance, paid an amount and submitted the results of medical examination, his
application was subject to the acceptance of BF Lifeman Insurance Corporation. The perfection of the
contract of insurance between the deceased and the respondent corporation was further conditioned
that the said policy shall not take effect until the premium has been paid and the policy delivered to and
accepted by the applicant while in good health.
The assent of the private respondent was not given when it merely received the application form
and all the requisite supporting papers of the applicant. Its assent was given when it issues a
corresponding policy to the applicant. It is only when the applicant pays the premium and receives and
accepts the policy while he is in good health that the contract of insurance is deemed to have been
perfected.
In this case, when Perez died, his application papers for additional insurance coverage it was
only then that his application was received in Manila. Consequently, there was absolutely no way the
acceptance of the application could have been communicated to the applicant for the latter to accept
since the applicant at the time was already dead.
GULF RESORTS Inc. vs. PHIL. CHARTER INSURANCE CORP
FACTS:
Gulf Resorts had its properties in its resort insured originally by American Home Assurance
Company (AHAC). In the first 4 policies issued, the risks of loss from earthquake shock was extended
only to Gulf Resorts 2 swimming pools.
Gulf Resorts agreed to insure with Phil Charter the properties covered by the AHAC policy
provided that the policy wording and rates in said policy be copied in the policy to be issued by
Phil Charter. Phil Charter issued Policy to Gulf Resorts for a total premium of P45,159.92. The breakdown of premiums shows that Gulf Resorts paid only P393.00 as premium against earthquake shock
(ES) the same premium it had paid against earthquake shock only on the two swimming pools in all the
policies issued by AHAC. Later, an earthquake struck and Gulf Resorts properties covered by Policy
issued by Philcharter, including the two swimming pools were damaged.
ISSUE:
Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and do
not extend to all properties damaged therein.
HELD:
YES. All the provisions and riders taken and interpreted together, indubitably show the intention
of the parties to extend earthquake shock coverage to the two swimming pools only. An insurance
premium is the consideration paid an insurer for undertaking to indemnify the insured against a
specified peril. In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk
attaches. In the subject policy, no premium payments were made with regard to earthquake shock
coverage except on the two swimming pools. There is no mention of any premium payable for the other
resort properties with regard to earthquake shock.

WHITE GOLD MARINE SERVICES, INC. VS. PIONEER INSURANCE AND SURETY CORP
FACTS:
White Gold procured a protection and indemnity coverage for its vessels from The Steamship
Mutual through Pioneer Insurance and Surety Corporation. White Gold was issued a Certificate of
Entry and Acceptance. Pioneer also issued receipts. When White Gold failed to fully pay its accounts,
Steamship Mutual refused to renew the coverage. Steamship Mutual thereafter filed a case
against White Gold for collection of sum of money to recover the unpaid balance. White Gold on the
other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual
and Pioneer violated provisions of the Insurance Code. The Insurance Commission dismissed the
complaint. It said that there was no need for Steamship Mutual to secure a license because it was not
engaged in the insurance business and that it was a P & I club. Pioneer was not required to obtain
another license as insurance agent because Steamship Mutual was not engaged in the
insurance business.
ISSUE:
Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
HELD:
A P & I Club is a form of insurance against third party liability, where the third party is anyone
other than the P & I Club and the members. By definition then, Steamship Mutual as a P & I Club is a
mutual insurance association engaged in the marine insurance business. The records reveal
Steamship Mutual is doing business in the country albeit without the requisite certificate of authority
mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to
solicit insurance and to collect payments in its behalf. Steamship Mutual even renewed its P & I Club
cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here,
Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no
insurer or insurance company is allowed to engage in the insurance business without a license or a
certificate of authority from the Insurance Commission.
BLUE CROSS HEALTH CARE, INC. VS. NEOMI AND DANILO OLIVARES
FACTS:
Neomi T. Olivares applied for a health care program with Blue Cross Health Care, Inc., a health
maintenance firm. The application was approved. In the health care agreement, ailments due to preexisting conditions were excluded from the coverage. Barely 38 days from the effectivity of her health
insurance, Neomi suffered a stroke. During her confinement, she underwent several laboratory tests
and incurred hospital expenses. She requested from the representative of petitioner a letter of
authorization in order to settle her medical bills. But petitioner refused to issue the letter and suspended
payment pending the submission of a certification from her attending physician that the stroke she
suffered was not caused by a pre-existing condition.
HELD:
A health care agreement is in the nature of a non-life insurance. It is an established rule in
insurance contracts that when their terms contain limitations on liability, they should be construed
strictly against the insurer. These are contracts of adhesion the terms of which must be interpreted and
enforced stringently against the insurer which prepared the contract. This doctrine is equally applicable
to health care agreements. Petitioner never presented any evidence to prove that respondent Neomi's
stroke was due to a pre-existing condition. It merely speculated that Dr. Saniel's report would be
adverse to Neomi, based on her invocation of the doctor-patient privilege. This was a disputable
presumption at best.
Suffice it to say that this presumption does not apply if (a) the evidence is at the disposal of both
parties; (b) the suppression was not willful; (c) it is merely corroborative or cumulative and (d)
the suppression is an exercise of a privilege. Here, respondents' refusal to present or allow the
presentation of Dr. Saniel's report was justified. It was privileged communication between physician
and patient.
Furthermore, as already stated, limitations of liability on the part of the insurer or health care
provider must be construed in such a way as to preclude it from evading its obligations. Since petitioner
had the burden of proving exception to liability, it should have made its own assessment of whether
respondent Neomi had a pre-existing condition when it failed to obtain the attending physician's report.
It could not just passively wait for Dr. Saniel's report to bail it out. The mere reliance on a disputable
presumption does not meet the strict standard required under our jurisprudence.

PHIL. HEALTH CARE VS. CIR

FACTS:
Petitioner is a domestic corporation whose primary purpose is to establish, maintain, conduct
and operate a prepaid group practice health care delivery system or a health maintenance organization
to take care of the sick and disabled persons enrolled in the health care plan. In 2000, the CIR sent
petitioner a formal demand letter and the corresponding assessment notices demanding the payment of
deficiency taxes for the taxable years 1996 and 1997. The deficiency in documentary stamp tax (DST)
was imposed on petitioners health care agreement with the members of its health care program
pursuant to Sec. 185 of the 1997 Tax Code. Petitioner protested the assessment seeking the
cancellation of the deficiency VAT and DST assessments.
ISSUES:
1) Whether or not the health care agreement between the petitioner and its members is an
insurance contract and
2) Whether as an HMO (Health Maintenance Organization), it is engaged in the business of
insurance during the pertinent taxable years.
HELD:
On the first issue, the SC held that Section 2 (1) of the Insurance Code defines a contract
of insurance as an agreement whereby one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event. An insurance contract exists
where the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designed peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among a large
group of persons bearing a similar risk and
5. In consideration of the insurer's promise, the insured pays a premium.
The SC said that the agreements between petitioner and its members do not possess all these
elements. First, even if a contract contains all the elements of an insurance contract, if its primary
purpose is the rendering of service, it is not a contract of insurance. Second, there is no loss, damage
or liability on the part of the member that should be indemnified by petitioner as an HMO. There is no
indemnity precisely because the member merely avails of medical services to be paid or already paid in
advance at a pre-agreed price under the agreements. Third, according to the agreement, a member
can take advantage of the bulk of the benefits anytime even in the absence of any peril, loss or damage
on his or her part. Fourth. In case of emergency, petitioner is obliged to reimburse the member who
receives care from a non-participating physician or hospital. The assumption of the expense by
petitioner is not confined to the happening of a contingency but includes incidents even in the absence
of illness or injury. Since indemnity of the insured was not the focal point of the agreement but the
extension of medical services to the member at an affordable cost, it did not partake of the nature of a
contract of insurance. Fifth. Although risk is a primary element of an insurance contract, it is not
necessarily true that risk alone is sufficient to establish it. Assuming that petitioners commitment to
provide medical services to its members can be construed as an acceptance of the risk that it will shell
out more than the prepaid fees, it still will not qualify as an insurance contract because petitioners
objective is to provide medical services at reduced cost, not to distribute risk like an insurer.
In sum, an examination of petitioners agreements with its members leads us to conclude that it
is not an insurance contract within the context of our Insurance Code.
On the second issue, the SC ruled that Section 2 (2) of PD 1460 (otherwise known as the
Insurance Code) enumerates what constitutes "doing an insurance business" or "transacting an
insurance business:"
a) making or proposing to make, as insurer, any insurance contract;
b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety;
c) doing any kind of business, including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code;
d) doing or proposing to do any business in substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this Code.
One test that they have applied is whether the assumption of risk and indemnification of loss
(which are elements of an insurance business) are the principal object and purpose of the organization

or whether they are merely incidental to its business. If these are the principal objectives, the business
is that of insurance. But if they are merely incidental and service is the principal purpose, then the
business is not insurance. In adopting the "principal purpose test, the purpose is to determine what
"doing an insurance business" means, thus the operations of the business as a whole is scrutinized
and not its mere components.
Overall, petitioner appears to provide insurance-type benefits to its members (with respect to
its curative medical services), but these are incidental to the principal activity of providing them medical
care. Therefore, since it substantially provides health care services rather than insurance services, it
cannot be considered as being in the insurance business.
UCPB V. MASAGANA TELAMART, INC.
FACTS:
Masagana obtained from UCPB five (5) insurance policies on its properties. Masaganas
properties were razed by fire, on the date after the expiration of the policies. Later, Masagana
tendered, and UCPB accepted, five (5) Equitable Bank Manager's Checks as renewal premium
payments for which Official Receipt was issued by UCPB. Thereafter, Masagana made its formal
demand for indemnification for the burned insured properties. On the same day, UCPB returned the
five (5) manager's checks stating in its letter that it was rejecting Masagana's claim on the following
grounds: a) Said policies expired and were not renewed for another term; and c) The properties
covered by the said policies were burned in a fire that took place before tender of premium payment."
ISSUE:
Whether or not Section 77 of the Insurance Code of 1978 (P.D. No. 1460) must be strictly
applied to Petitioners advantage despite its practice of granting a 60- to 90-day credit term for the
payment of premiums.
Section 77 of the Insurance Code of 1978 provides:
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to
the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid and binding unless and until the premium thereof
has been paid, except in the case of a life or an industrial life policy whenever the grace period
provision applies.
This Section has its source in Section 72 of Act No. 2427 otherwise known as the Insurance Act
as amended by R.A. No. 3540: SEC. 72. An insurer is entitled to payment of premium as soon as the
thing insured is exposed to the peril insured against, unless there is clear agreement to grant the
insured credit extension of the premium due. No policy issued by an insurance company is valid and
binding unless and until the premium thereof has been paid. (Underscoring supplied)
HELD:
It can be seen at once that Section 77 does not restate the portion of Section 72 expressly
permitting an agreement to extend the period to pay the premium. But are there exceptions to Section
77?
The answer is in the affirmative. The following are the exception to the rule that premium has to
be paid first in order to claim from insurance policy:
a. in case of a life or industrial life policy whenever the grace period provision applies
b. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive
evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation
therein that it shall not be binding until premium is actually paid.
c. if the parties have agreed to the payment in installments of the premium and partial payment has
been made at the time of loss
d. if the insurer has granted the insured a credit term for the payment of the premium and loss occurs
before the expiration of the term, recovery on the policy should be allowed even though the
premium is paid after the loss but within the credit term
FEDERAL EXPRESS CORP. V. AMERICAN HOME ASSURANCE CO.
FACTS
SMITHKLINE Beecham (SMITHKLINE) of Nebraska, USA delivered to Burlington Air Express
(BURLINGTON), an agent of Federal Express Corporation, a shipment of veterinary biologicals for
delivery to its consignee here in the Philippines SMITHKLINE. Burlington insured the cargoes with

American Home Assurance Company (AHAC). The following day, Burlington turned over the custody
of said cargoes to Federal Express which transported the same to Manila. When the shipment arrived
in Manila, it was immediately stored at Cargohaus Inc.s warehouse. Prior to the arrival of the cargoes,
Federal Express informed the customs broker hired by the consignee of the impending arrival of its
clients cargoes. It found out that the cargoes were stored only in a room with two (2) air conditioners
instead of a refrigerator. Thereafter, the customs broker did not proceed with the withdrawal of the
vaccines and instead, brought samples of it to the Bureau of Animal Industry of the Department of
Agriculture in the Philippines for examination wherein it was discovered that the vaccines are below the
positive reference serum.
Consequently, SMITHKLINE abandoned the shipment and, declaring total loss for the
unusable shipment, filed a claim with AHAC through its representative in the Philippines, the Philam
Insurance Co., Inc. (PHILAM) which recompensed SMITHKLINE for the whole insured amount.
Thereafter, AHAC and PHILAM filed an action for damages against the Federal Express imputing
negligence on either or both of them in the handling of the cargo.
Trial ensued and ultimately concluded with Federal Express being held solidarily liable for the
loss. Aggrieved, Federal Express appealed claiming among other things that AHAC AND PHILAM had
no personality to sue because the payment was made by the latter to Smithkline when the insured
under the policy is Burlington Air Express.
ISSUE
Whether or not AHAC and PHILAM have no personality to sue.
HELD
Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods,
the insurers entitlement to subrogation pro tanto -- being of the highest equity -- equips it with a cause
of action in case of a contractual breach or negligence. Further, the insurers subrogatory right to sue
for recovery under the bill of lading in case of loss of or damage to the cargo is jurisprudentially upheld.
In the exercise of its subrogatory right, an insurer may proceed against an erring carrier. To all
intents and purposes, it stands in the place and in substitution of the consignee. A fortiori, both the
insurer and the consignee are bound by the contractual stipulations under the bill of lading. Therefore,
AHAC and PHILAM have personality to sue.
FGU INSURANCE CORP VS. CA 454 SCRA 337
FACTS
A car owned by FILCAR Transport Inc., rented to and driven by Dahl-Jensen, a Danish tourist,
swerved into the right and hit the car owned by Lydia Soriano and driven by Benjamin Jacildone. DahlJensen did not possess a Philippine drivers license. Petitioner, as the insurer of Sorianos car, paid the
latter and, by way of subrogation, sued FILCAR, Dahl-Jensen, and Fortune Insurance Corporation,
FILCARs insurer, for quasi-delict. The trial court dismissed the petition for failure to substantiate the
claim for subrogation. The Court of Appeals affirmed the decision, but on the ground that only DahlJensens negligence was proven, not that of FILCAR. Hence, this instant petition.
ISSUE
Whether or not an action based on quasi-delict will prosper against a rent-a-car company and,
consequently, its insurer for fault or negligence of the car lessee in driving the rented vehicle
HELD
The court ruled in the negative. The pertinent provision is Art. 2176 of the Civil Code which
states: "Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict. ". To sustain a claim based thereon, the following
requisites must concur: (a) damage suffered by the plaintiff; (b) fault or negligence of the defendant;
and, (c) connection of cause and effect between the fault or negligence of the defendant and the
damage incurred by the plaintiff. Petitioner failed to prove the existence of the second requisite, i.e.,
fault or negligence of defendant FILCAR, because only the fault or negligence of Dahl-Jensen was
sufficiently established, not that of FILCAR. It should be noted that the damage caused on the vehicle
of Soriano was brought about by the circumstance that Dahl-Jensen swerved to the right while the
vehicle that he was driving was at the center lane. It is plain that the negligence was solely attributable
to Dahl-Jensen thus making the damage suffered by the other vehicle his personal liability. Respondent
FILCAR did not have any participation therein. Respondent FILCAR being engaged in a rent-a-car
business was only the owner of the car leased to Dahl-Jensen. As such, there was no vinculum juris

between them as employer and employee. Respondent FILCAR cannot in any way be responsible for
the negligent act of Dahl-Jensen, the former not being an employer of the latter.
GREAT PACIFIC LIFE ASSURANCE CORP. VS. COURT OF APPEALS
FACTS
A contract of group life insurance was executed between Great Pacific Life Assurance
Corporation (Grepalife) and Development Bank of the Philippines (DBP). Grepalife agreed to insure the
lives of eligible housing loan mortgagors of DBP. Dr. Wilfredo Leuterio, a physician and a housing
debtor of DBP applied for membership in the group life insurance plan. In an application form, Dr.
Leuterio answered questions concerning his health condition in the negative. Grepalife issued
insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness. Dr. Leuterio died
due to "massive cerebral hemorrhage." Consequently, DBP submitted a death claim to Grepalife.
Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an
insurance coverage. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from
hypertension, which caused his death. Allegedly, such nondisclosure constituted concealment that
justified the denial of the claim.
ISSUE
Whether Dr. Leuterio failed to disclose that he had hypertension, which might have caused his
death, and thus concealment can be interposed by Grepalife as a defense to annul the insurance
contract.
HELD
Concealment exists where the assured had knowledge of a fact material to the risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the assured, but he
designedly and intentionally withholds the same. Grepalife merely relied on the testimony of the
attending physician, Dr. Hernando Mejia. 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, including hypertension; when he died the attending physician had certified in the death
certificate that the former died of cerebral hemorrhage, probably secondary to hypertension. Contrary to
Grepalifes allegations, there was no sufficient proof that the insured had suffered from hypertension.
Grepalife had failed to establish that there was concealment made by the insured, hence, it cannot
refuse payment of the claim. The 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
is an affirmative defense and the duty to establish such defense by satisfactory and convincing
evidence rests upon the insurer. Herein, Grepalife failed to clearly and satisfactorily establish its
defense, and is therefore liable to pay the proceeds of the insurance.
COUNTRY BANKERS INSURANCE CORP. VS. LIANGA BAY & COMMUNITY MPC
FACTS:
Country Bankers Insurance Corp. (CBIC) insured the building of Lianga Bay and Community
Multi-Purpose Corp., Inc. against fire, loss, damage, or liability. Thereafter, in one morning a fire
occurred. Lianga filed the insurance claim but CBIC denied the same on the ground that the building
was set on fire by two NPA rebels and that such loss was an excepted risk under par.6 of the
conditions of the insurance policy that the insurance does not cover any loss or damage occasioned by
among others, mutiny, riot, military or any uprising.
ISSUE
Whether or not the insurance corporation is exempted to pay based on the exception clause in
the insurance policy.
HELD
The insurance corporation cannot use a witness to prove that the fire was caused by the NPA
rebels on the basis that the witness learned this from others. Such testimony is considered hearsay and
may not be received as proof of the truth of what he has learned. The petitioner, failing to prove the
exception, cannot rely upon on exemption or exception clause in the fire insurance policy. The petition
was granted.
Where a risk is excepted by the terms of a policy which insures against other perils or hazards,
loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that
risk, and from this it follows that an insurer seeking to defeat a claim because of an exception or
limitation in the policy has the burden of proving that the loss comes within the purview of the exception

or limitation set up. If a proof is made of a loss apparently within a contract of insurance, the burden is
upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is
not liable, or from a cause which limits its liability. Stated elsewise, since the petitioner in this case is
defending on the ground of non-coverage and relying upon an exemption or exception clause in the fire
insurance policy, it has the burden of proving the facts upon which such excepted risk is based, by a
preponderance of evidence. But petitioner failed to do so.
PHILAMCARE HEALTH SYSTEMS, INC., vs. COURT OF APPEALS and JULITA TRINOS
FACTS:
Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with
Philamcare Health Systems, Inc. In the standard application form, he answered NO to the following
question: Have you or any of your family members ever consulted or been treated for high blood
pressure, heart trouble, diabetes,cancer, liver disease, asthma or peptic ulcer?
Ernaniwas was subsequently confined because he suffered a heart attack. Julita tried to claim
the benefits under the health care agreement. Philam denied her claim saying that the Health Care
Agreement was void. There was a concealment regarding Ernanis medical history. Doctors at the
MMC allegedly discovered at the time of Ernanis confinement that he was hypertensive, diabetic and
asthmatic, contrary to his answer in the application form. Philam further argues that it is not an
insurance company, which is governed by the Insurance Commission, but a Health Maintenance
Organization under the authority of the Department of Health.
ISSUE
Whether health care agreements are considered insurance contracts.
HELD
YES, it is an insurance contract. Section 2 (1) of the Insurance Code defines a contract of
insurance as an agreement whereby one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event. An insurance contract exists
where the following elements concur:
(1) The insured has an insurable interest;
(2) The insured is subject to a risk of loss by the happening of the designated peril;
(3) The insurer assumes the risk;
(4) Such assumption of risk is part of a general scheme to distribute actual losses among a
large group of persons bearing a similar risk; and
(5) In consideration of the insurers promise, the insured pays a premium.
Section 3 of the Insurance Code states that any contingent or unknown event, whether past or
future, which may damnify a person having an insurable interest against him, may be insured against.
Every person has an insurable interest in the life and health of himself. Section 10 provides: Every
person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or support, or in whom he has a
pecuniary interest.
In the case at bar, the insurable interest of respondents husband in obtaining the health care
agreement was his own health. The health care agreement was in the nature of non-life insurance,
which is primarily a contract of indemnity. Once the member incurs hospital, medical or any other
expense arising from sickness, injury or other stipulated contingent, the health care provider must pay
for the same to the extent agreed upon under the contract.
The answer assailed by Philam was in response to the question relating to the medical history
of the applicant. This largely depends on opinion rather than fact, especially coming from respondents
husband who was not a medical doctor. Where matters of opinion or judgment are called for, answers
made in good faith and without intent to deceive will not avoid a policy even though they are untrue.
Thus, although false, a representation of the expectation, intention, belief, opinion, or judgment
of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk,
or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is
material to the risk, if the statement is obviously of the foregoing character, since in such case the
insurer is not justified in relying upon such statement, but is obligated to make further inquiry. There is
a clear distinction between such a case and one in which the insured is fraudulently and intentionally
states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue,
or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to
deceive the insurer is obvious and amounts to actual fraud.

The fraudulent intent on the part of the insured must be established to warrant rescission of the
insurance contract. Concealment as a defense for the health care provider or insurer to avoid liability is
an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence
rests upon the provider or insurer. In any case, with or without the authority to investigate, petitioner is
liable for claims made under the contract. Having assumed a responsibility under the agreement,
petitioner is bound to answer the same to the extent agreed upon. In the end, the liability of the health
care provider attaches once the member is hospitalized for the disease or injury covered by the
agreement or whenever he avails of the covered benefits which he has prepaid.
Under Section 27 of the Insurance Code, concealment entitles the injured party to rescind a
contract of insurance. The right to rescind should be exercised previous to the commencement of an
action on the contract.[17] In this case, no rescission was made. Besides, the cancellation of health care
agreements, as in insurance policies require the concurrence of the following conditions:
1.
Prior notice of cancellation to insured;
2.
Notice must be based on the occurrence after effective date of the policy of one or more of the
grounds mentioned;
3.
Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4.
Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon
request of insured, to furnish facts on which cancellation is based.
None of the above pre-conditions was fulfilled in this case. When the terms of insurance
contract contain limitations on liability, courts should construe them in such a way as to preclude the
insurer from non-compliance with his obligation. Being a contract of adhesion, the terms of an
insurance contract are to be construed strictly against the party which prepared the contract the
insurer.[20] By reason of the exclusive control of the insurance company over the terms and phraseology
of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in favor
of the insured, especially to avoid forfeiture. This is equally applicable to Health Care Agreements. The
phraseology used in medical or hospital service contracts, such as the one at bar, must be liberally
construed in favor of the subscriber, and if doubtful or reasonably susceptible of two interpretations the
construction conferring coverage is to be adopted, and exclusionary clauses of doubtful import should
be strictly construed against the provider.
PHIL. CHARTER INSURANCE CORP. VS. CHEMOIL LIGHTERAGE CORP.
FACTS:
A shipment of liquid chemical Dioctyl Phthalate was shipped to consignee Plastic Group Phils.,
Inc. (or PGP) in Manila. PGP insured the cargo with Philippine Charter Insurance Corporation as the
insurer. The cargo was unloaded to the tanker barge of Chemoil Lighterage Corp., a common carrier,
which transported the goods to Del Pan Bridge in Pasig River. When the cargo was received by PGP,
the chemical showed discoloration from yellowish to amber, demonstrating that it was damaged. PGP
sought recovery from its insurer, Phil. Charter Insurance, which paid the amount of the loss. PGP,
thereafter, issued a Subrogation Receipt to the Phil. Charter Insurance.
An action for damages was instituted by the petitioner-insurer (Phil. Charter Insurance) against
respondent-carrier (Chemoil). Respondent carrier refused to pay the damages to the insurer,
contending that the consignee (PGP) failed to file any notice, claim or protest within the period required
by law which is a condition precedent to the accrual of a right of action against the carrier. The carrier
alleged that the telephone call made by a certain employee of PGP, to one of the Vice Presidents of
Chemoil, informing the latter of the discoloration, is not the notice required by Article 366 of the Code of
Commerce.
ISSUE:
Whether or not a notice of claim filed with the carrier within the prescribe period is indispensible
in order that the insurer-subrogee can claim damages against the carrier.
RULING:
Article 366 of the Code of Commerce provides that within twenty-four hours following the
receipt of the merchandise a claim may be made against the carrier on account of damage or average
found upon opening the packages, provided that the indications of the damage or average giving rise to
the claim cannot be ascertained from the exterior of said packages, in which case said claim shall only
be admitted at the time of the receipt of the packages. After the periods mentioned have elapsed, or
after the transportation charges have been paid, no claim whatsoever shall be admitted against the
carrier with regard to the condition in which the goods transported were delivered.
A telephone call made to defendant-company could constitute substantial compliance with the
requirement of notice considering that the notice was given to a responsible official, the Vice-President,

who promptly replied that she will look into the matter. However, it must be pointed out that compliance
with the period for filing notice is an essential part of the requirement. There was no proof that the
notice of claim was relayed or filed with the respondent-carrier immediately or within a period of twentyfour hours from the time the goods were received.
The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just
liability, but reasonably to inform it that the shipment has been damaged and that it is charged with
liability therefore, and to give it an opportunity to examine the nature and extent of the injury. This
protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is
fresh and easily investigated so as to safeguard itself from false and fraudulent claims.
SULPICIO LINES, INC. vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION, June 29, 2005
FACTS:
Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a
contract, to transport a shipment of goods consisting of three (3) wooden crates from Cebu City to
Singapore. For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the
services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc.
During the unloading of the shipment, one crate containing forty-two (42) cartons dropped from the
cargo hatch to the pier apron. Taiyo examined the dropped cargo, and upon an alleged finding that the
contents of the crate were no longer usable for their intended purpose, they were rejected as a total
loss and returned to Cebu City. Thereafter, the owner of the goods sought payment from respondent
First Lepanto-Taisho Insurance Corporation (insurer) under a marine insurance policy issued to the
former. Respondent-insurer paid the claim and asked for reimbursement from Sulpicio Lines.
ISSUE:
Whether or not Petitioner-carrier Sulpicio Lines is liable
HELD:
Upon respondent-insurers payment of the alleged amount of loss suffered by the insured (the
owner of the goods), the insurer is entitled to be subrogated pro tanto to any right of action which the
insured may have against the common carrier whose negligence or wrongful act caused the loss.
Subrogation is the substitution of one person in the place of another with reference to a lawful claim or
right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim,
including its remedies or securities. The rights to which the subrogee succeeds are the same as, but
not greater than, those of the person for whom he is substituted, that is, he cannot acquire any claim,
security or remedy the subrogor did not have. In other words, a subrogee cannot succeed to a right not
possessed by the subrogor. A subrogee in effect steps into the shoes of the insured and can recover
only if the insured likewise could have recovered.
The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot
exculpate itself from liability because it failed to prove that it exercised extraordinary diligence. Hence,
herein petitioner-carrier is liable to pay the amount paid by respondent-insurer for the damages
sustained by the owner of the goods.
However, respondent-insurer had already been paid the full amount granted by the Court of
Appeals, hence, it will be tantamount to unjust enrichment for respondent-insurer to again recover
damages from herein petitioner-carrier.
GAISANO CAGAYAN, INC. vs. INSURANCE COMPANY OF NORTH AMERICA
FACTS
Intercapitol Marketing Corporation (IMC), maker of Wrangler Blue Jeans and Levi Strauss
(Phils.) Inc. (LSPI), local distributor of Levi Strauss & Co. products separately obtained from respondent
fire insurance. The insurance policies provide for coverage on "book debts in connection with readymade clothing materials which have been sold or delivered to various customers and dealers of the
Insured anywhere in the Philippines." The policies defined book debts as the "unpaid account still
appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this
Policy." Gaisano is a customer and dealer of the products of IMC and LSPI. Thereafter, Superstore
Complex was consumed by fire destroying the stocks of ready-made clothing materials sold and
delivered by IMC and LSPI. The insurance company asked for damages and unpaid accounts against
Gaisano, alleging that IMC and LSPI filed with respondent their claims under their respective fire
insurance policies with book debt endorsements.
ISSUE

Whether or not respondent by way of subrogation, can claim against petitioner the proceeds of
insurance it paid in favor of IMC and LSPI.
RULING
The right of subrogation accrues simply upon payment by the insurance company of the
insurance claim.
IMC and LSPI did not lose complete interest over the goods. They have an insurable interest
until full payment of the value of the delivered goods. Unlike the civil law concept of res perit domino,
where ownership is the basis for consideration of who bears the risk of loss, in property insurance,
one's interest is not determined by concept of title, but whether insured has substantial economic
interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in property,
whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a
contemplated peril might directly damnify the insured." Parenthetically, under Section 14 of the same
Code, an insurable interest in property may consist in: (a) an existing interest; (b) an inchoate interest
founded on existing interest; or (c) an expectancy, coupled with an existing interest in that out of which
the expectancy arises.
Therefore, 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 nor a beneficial
interest is requisite to the existence of such an interest, it is sufficient that the insured is so situated with
reference to the property that he would be liable to loss should it be injured or destroyed by the peril
against which it is insured. Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction. Indeed, a vendor or seller retains an insurable
interest in the property sold so long as he has any interest therein, in other words, so long as he would
suffer by its destruction, as where he has a vendor's lien. In this case, the insurable interest of IMC and
LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of the
loss covered by the policies.
PRUDENTIAL GUARANTEE & ASSURANCE vs. TRANS-ASIA
FACTS:
TRANS-Asia is the owner of the vessel M/V Asia Korea. PRUDENTIAL insured M/V Asia Korea
for loss/damage of the hull and machinery arising from perils, inter alia, of fire and explosion. This is
evidenced by Marine Policy. While the policy was in force, a fire broke out while [M/V Asia Korea was]
undergoing repairs at the port of Cebu which prompted TRANS-ASIA to file its notice of claim for
damage sustained by the vessel with a reservation of its right to subsequently notify Prudential to the
full amount of the claim upon final survey and determination by average adjuster of the damage sustain
by reason of fire. Later, TRANS-Asia executed a document denominated Loan and Trust Receipt a
loan without interest under the Policy availed by Trans-asia, repayable only in the event and to the
extent that any net recovery is made by the latter. After the loan was released Prudential sent a letter
to TRANS-ASIA stating that the formers claim under the insurance is denied for having been in breach
of policy conditions, among them WARRANTED VESSEL CLASSED AND CLASS MAINTAINED and
that the claim is not compensable and demanding the return of the amount released under loan.
It interpreted the provision to mean that TRANS-ASIA is required to maintain the vessel at a
certain class at all times during the life of the policy. According to the court a quo, TRANS-ASIA failed
to prove compliance of the terms of the warranty, the violation thereof entitled PRUDENTIAL, the
insured party, to rescind the contract.
ISSUE:
Whether or not TRANS-ASIA is entitled to claim under the policy.
HELD:
In our rule on evidence, TRANS-ASIA, as the plaintiff below, necessarily has the burden of proof
to show proof of loss, and the coverage thereof, in the subject insurance policy. However, in the course
of trial in a civil case, once plaintiff makes out a prima facie case in his favor, the duty or the burden of
evidence shifts to defendant to controvert plaintiffs prima facie case, otherwise, a verdict must be
returned in favor of plaintiff. TRANS-ASIA was able to establish proof of loss and the coverage of the
loss. Thereafter, the burden of evidence shifted to PRUDENTIAL to counter TRANS-ASIAs case, and
to prove its special and affirmative defense that TRANS-ASIA was in violation of the particular condition
on CLASSED AND CLASS MAINTAINED.
PRUDENTIAL was not successful in discharging the burden of evidence that TRANS-ASIA
breached the subject policy condition on CLASSED AND CLASS MAINTAINED. Foremost,
PRUDENTIAL made a categorical admission that at the time of the procurement of the insurance

contract, TRANS-ASIAs vessel, M/V Asia Korea was properly classed by Bureau Veritas, a
classification society recognized in the marine industry. Now, it becomes incumbent upon
PRUDENTIAL to show evidence that the status of TRANS-ASIA as being properly CLASSED by
Bureau Veritas had shifted in violation of the warranty. Unfortunately, PRUDENTIAL failed to support
the allegation.
Sec. 74 of the Insurance Code which provides that, the violation of a material warranty, or
other material provision of a policy on the part of either party thereto, entitles the other to
rescind. However, it is similarly indubitable that for the breach of a warranty to avoid a policy, the
same must be duly shown by the party alleging the same. The Court cannot sustain an allegation that
is unfounded. Consequently, PRUDENTIAL, not having shown that TRANS-ASIA breached the
warranty condition, CLASSED AND CLASS MAINTAINED, it remains that TRANS-ASIA must be
allowed to recover its rightful claims on the policy.
Assuming arguendo that TRANS-ASIA violated the policy condition on WARRANTED VESSEL
CLASSED AND CLASS MAINTAINED, PRUDENTIAL made a valid waiver of the same when, after the
loss, Prudential renewed the insurance policy of Trans-Asia for two (2) consecutive years. This
renewal is deemed a waiver of any breach of warranty. Breach of a warranty or of a condition renders
the contract defeasible at the option of the insurer; but if he so elects, he may waive his privilege and
power to rescind by the mere expression of an intention so to do. In that event his liability under the
policy continues as before. There can be no clearer intention of the waiver of the alleged breach than
the renewal of the policy insurance granted by PRUDENTIAL to TRANS-ASIA.
PHIL. HEALTH CARE PROVIDERS, INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS
Commissioner of Internal Revenue [CIR] sent petitioner a formal demand letter and the
corresponding assessment notices demanding the payment of deficiency taxes and the deficiency
[documentary stamp tax (DST)] assessment was imposed on petitioner's health care agreement with
the members of its health care program pursuant to Section 185 of the 1997 Tax Code.
The CTA ruled that petitioner is liable for the VAT but not the DST.
ISSUE
Whether or not petitioner is liable for the DST.
HELD
In sustaining the CTA, the Court of Appeals found that "the failure of respondent to refer to itself
as a health maintenance organization is not an indication of bad faith or a deliberate attempt to make
false representations." As "the term health maintenance organization did not as yet have any particular
significance for tax purposes," respondent's failure "to include a term that has yet to acquire its present
definition and significance cannot be equated with bad faith."
Respondent, therefore, believed in good faith that it was VAT exempt for the taxable years 1996
and 1997 on the basis of VAT Ruling No. 231-88.
The Commissioner of Internal Revenue is precluded from adopting a position contrary to
one previously taken where injustice would result to the taxpayer. Hence, where an assessment
for deficiency withholding income taxes was made, three years after a new BIR Circular reversed a
previous one upon which the taxpayer had relied upon; such an assessment was prejudicial to the
taxpayer. To rule otherwise, opined the Court, would be contrary to the tenets of good faith, equity, and
fair play.
The rule is that the BIR rulings have no retroactive effect where a grossly unfair deal would
result to the prejudice of the taxpayer, as in this case.
ONG LIM SING, JR. vs. FEB LEASING AND FINANCE CORPORATION
FACTS:
FEB Leasing and Finance Corporation (FEB) entered into a lease of equipment and motor
vehicles with JVL Food Products (JVL). On the same date, Vicente Ong Lim Sing, Jr. (Lim) executed an
Individual Guaranty Agreement with FEB to guarantee the prompt and faithful performance of the terms
and conditions of the aforesaid lease agreement. Under the contract, JVL was obliged to pay FEB a
monthly rental. JVL defaulted in the payment of the monthly rentals. FEB sent a letter to JVL
demanding payment of the said amount. However, JVL failed to pay. Consequently, FEB filed a

Complaint with the Regional Trial Court of Manila, for sum of money, damages, and replevin against
JVL and Lim.
JVL and Lim admitted the existence of the lease agreement but asserted that it is in reality a
sale of equipment on installment basis, with FEB acting as the financier. FEB purportedly assured
them that documenting the transaction as a lease agreement is just an industry practice and that the
proper documentation would be effected as soon as full payment for every item was made. They also
contended that the lease agreement is a contract of adhesion and should, therefore, be construed
against the party who prepared it, FEB.
ISSUE:
Whether or not petitioner has an insurable interest in the equipment and motor vehicles leased.
HELD:
The validity of Lease between FEB and JVL should be upheld. JVL entered into the lease
contract with full knowledge of its terms and conditions. The contract was in force for more than four
years. Since its inception, JVL and Lim never questioned its provisions. They only attacked the validity
of the contract after they were judicially made to answer for their default in the payment of the agreed
rentals.
Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles
leased. Section 17 of the Insurance Code provides that the measure of an insurable interest in
property is the extent to which the insured might be damnified by loss or injury thereof. It cannot be
denied that JVL will be directly damnified in case of loss, damage, or destruction of any of the
properties leased.
ETERNAL GARDENS VS PHIL. AMERICAN LIFE
FACTS
Eternal and PhilAm Life entered into a Group Insurance Policy wherein those who purchase
burial lots from Eternal Gardens automatically becomes one of the insured in the said group insurance
policy. One purchaser of the burial lots named Jhon Chuang died. Eternal filed a claim for the
proceeds. The claim was denied on the ground that the application of Jhon Chuang, sent more than a
year ago, was not yet approved by Phil Am Life. Insurer further avers that mere acceptance of the
premium paid by Eternal did not mean that said application was already approved.
ISSUE
May the inaction of the insurer on the insurance application be considered as an approval of the
application?
RULING
Yes. Mere inaction of the insurer on the insurance application must not work to prejudice the
insured; it cannot be interpreted as a termination of the insurance contract. The termination of the
insurance contract by the insurer must be explicit and unambiguous. Philamlife and Eternal entered into
an agreement denominated as Creditor Group Life Policy which provides among others that the
insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the
Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved
by the Company.
An examination of the above provision would show ambiguity between its two sentences. The
first sentence appears to state that the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife
to approve the insurance contract before the same can become effective.
It must be remembered that an insurance contract is a contract of adhesion which must be
construed liberally in favor of the insured and strictly against the insurer in order to safeguard the
latters interest. Clearly, the vague contractual provision, in Creditor Group Life Policy must be
construed in favor of the insured and in favor of the effectivity of the insurance contract.
On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon
a partys purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot
purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by
disapproving the insurance application. The second sentence of Creditor Group Life Policy on the
Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of
the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not
work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The
termination of the insurance contract by the insurer must be explicit and unambiguous.
Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the
industry purposefully used to its advantage. More often than not, insurance contracts are contracts of
adhesion containing technical terms and conditions of the industry, confusing if at all understandable to

laypersons, that are imposed on those who wish to avail of insurance. As such, insurance contracts are
imbued with public interest that must be considered whenever the rights and obligations of the insurer
and the insured are to be delineated. Hence, in order to protect the interest of insurance applicants,
insurance companies must be obligated to act with haste upon insurance applications, to either deny or
approve the same, or otherwise be bound to honor the application as a valid, binding, and effective
insurance contract.
LALICAN vs. THE INSULAR LIFE CO.
597 SCRA 159
FACTS
Eulogio Lalican applied for insurance with Insular Life thru the latters agent, Malaluan with his
wife Violeta as the beneficiary. A policy was issued in his favor. The premiums are payable on a
quarterly basis until the end of the 20 year period. He failed to pay on the due date for the third quarter
and also was not able to tender payment after the lapse of 31 days grace period. Consequently his
policy has lapsed and avoided by non-payment of premium. Eulogio went to the residence of the agent
Malaluan and applied for reinstatement of the lapsed policy. He gave all the requirements including the
amount which is enough to cover all the unpaid premiums and interests. Unfortunately, on the same
day of his application for reinstatement and few hours thereafter, Eulogio died of cardiac arrest. After a
few days, Violeta filed a claim of payment of full proceeds of the policy. Insular Life refused her claim
saying that said policy has lapsed and Elugio has failed to comply with the requirements of
reinstatement one of which states policy is reinstated upon the approval of the company during the
lifetime and Good health of Eulogio.
ISSUE
May Violeta recover the proceeds from the policy?
HELD
The policy had lapsed and become void earlier, on 24 February 1998, upon the expiration of
the 31-day grace period for payment of the premium, which fell due on 24 January 1998, without any
payment having been made. To reinstate a policy means to restore the same to premium-paying status
after it has been permitted to lapse. Both the Policy Contract and the Application for Reinstatement
provide for specific conditions for the reinstatement of a lapsed policy. According to the Application for
Reinstatement, the policy would only be considered reinstated upon the approval of the application by
Insular Life during the applicant's lifetime and good health and whatever amount the application paid in
connection was considered to be a deposit only until approval of said application.
In the instant case, Eulogios death rendered impossible full compliance with the conditions for
reinstatement of the policy eventhough before his death, managed to file his Application for
Reinstatement and deposit the amount for payment of his overdue premiums and interests thereon with
Malaluan. As expressly provided for in the policy, agents did not have the authority to approve any
Application for Reinstatement. They still had to turn over to Insular Life the Application for
Reinstatement and accompanying deposits, for processing and approval by the latter.
The policy remained lapsed and void, not having been reinstated in accordance with the Policy
Contract and Application for Reinstatement before Eulogios death. Violeta, therefore, cannot claim any
death benefits from Insular Life on the basis of the policy; but she is entitled to receive the full refund of
the payments made by Eulogio thereon.
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., VS. FGU INSURANCE
CORPORATION, HAPAG-LLOYD, HAPAG-LLOYD PHILS., INC.
FACTS
Petitioner insists that Marine Open Policy under which the shipment was insured was no longer
in force at the time it was loaded on board the Hannover Express on June 10, 1994, as provided in the
Endorsement portion of the policy, which states: IT IS HEREBY DECLARED AND AGREED that
effective June 10, 1994, this policy is deemed CANCELLED. FGU, on the other hand, insists that it
was under Marine Risk Note, which was executed on May 26, 1994, that said shipment was covered.
It must be emphasized that a marine risk note is not an insurance policy. It is only an
acknowledgment or declaration of the insurer confirming the specific shipment covered by its marine
open policy, the evaluation of the cargo and the chargeable premium. It is the marine open policy
which is the main insurance contract. In other words, the marine open policy is the blanket insurance to
be undertaken by FGU on all goods to be shipped by RAGC during the existence of the contract, while
the marine risk note specifies the particular goods/shipment insured by FGU on that specific

transaction, including the sum insured, the shipment particulars as well as the premium paid for such
shipment. In any event, as it stands, it is evident that even prior to the cancellation by FGU of Marine
Open Policy on June 10, 1994, it had already undertaken to insure the shipment of the
400 kgs. of silver nitrate, specially since RAGC had already paid the premium on the insurance of said
shipment.
ABOITIZ SHIPPING v. INSURANCE CO. OF NORTH AMERICA
FACTS:
On June 20, 1993, MSAS Cargo International Limited and/or Associated and/or Subsidiary
Companies (MSAS) procured a marine insurance policy from respondent ICNA UK Limited
of London. The insurance was for a transshipment of certain wooden work tools and workbenches
purchased for the consignee Science Teaching Improvement Project (STIP). ICNA issued an all-risk
open marine policy.
On July 18, 1993, the ship arrived and docked at the Manila where the container van was again
off-loaded. On July 26, 1993, the cargo was received by petitioner Aboitiz Shipping Corporation
(AboitTransport System). The bill of lading issued by Aboitiz contained the notation grounded outside
warehouse.
On August 3, 1993, the shipment arrived in Cebu City and discharged onto a receiving apron of
the Cebu International Port. On August 11, 1993, the cargo was withdrawn by the representative of
the consignee, Science Teaching Improvement Project (STIP) who informed petitioner that the cargo
sustained water damage. The consignee contacted the Philippine office of ICNA for insurance
claims. Aboitiz refused to settle the claim. ICNA paid the amount to consignee. ICNA filed a civil
complaint against Aboitiz for collection of actual damages. ICNA alleged that the damage sustained by
the shipment was exclusively and solely brought about by the fault and negligence of Aboitiz when the
shipment was left grounded outside its warehouse prior to delivery.
Aboitiz disavowed any liability and asserted that the claim had no factual and legal bases. It
countered that the complaint stated no cause of action, plaintiff ICNA had no personality to institute the
suit. The RTC rendered judgment against ICNA. ICNA appealed to the CA. The CA reversed and set
aside the RTC ruling.
ISSUES:
Is respondent ICNA the real party-in-interest that possesses the right of subrogation to claim
reimbursement from petitioner Aboitiz?
B. Was there a timely filing of the notice of claim as required under Article 366 of the Code of
Commerce?
C. If so, can petitioner be held liable on the claim for damages?
A.

HELD:
Affirmative on the triple questions.
A foreign corporation not licensed to do business in the Philippines is not absolutely
incapacitated from filing a suit in local courts. Only when that foreign corporation is transacting or
doing business in the country will a license be necessary before it can institute suits. It may, however,
bring suits on isolated business transactions, which is not prohibited under Philippine law. Thus, this
Court has held that a foreign insurance company may sue in Philippine courts upon the marine
insurance policies issued by it abroad to cover international-bound cargoes shipped by a Philippine
carrier, even if it has no license to do business in this country. It is the act of engaging in business
without the prescribed license, and not the lack of license per se, which bars a foreign corporation from
access to our courts.
The terms of the Open Policy authorize the filing of any claim on the insured goods, to be
brought against ICNA UK, the company who issued the insurance, or against any of its listed agents
worldwide. MSAS accepted said provision when it signed and accepted the policy. The acceptance
operated as an acceptance of the authority of the agents. Hence, a formal indorsement of the policy to
the agent in the Philippines was unnecessary for the latter to exercise the rights of the insurer. The
policy benefits any subsequent assignee, or holder, including the consignee, who may file claims on
behalf of the assured. This is in keeping with Section 57 of the Insurance Code which states:
A policy may be so framed that it will inure to the benefit of whosoever, during the
continuance of the risk, may become the owner of the interest insured. (Emphasis
added)
Respondents cause of action is founded on it being subrogated to the rights of the consignee of
the damaged shipment. The right of subrogation springs from Article 2207 of the Civil Code, which
states:

Article 2207. If the plaintiffs property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing the
loss or injury. (Emphasis added)
As this Court held in the case of Pan Malayan Insurance Corporation v. Court of Appeals,
payment by the insurer to the assured operates as an equitable assignment of all remedies the
assured may have against the third party who caused the damage. Subrogation is not dependent upon,
nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply
upon payment of the insurance claim by the insurer.
Upon payment to the consignee of indemnity for damage to the insured goods, ICNAs
entitlement to subrogation equipped it with a cause of action against petitioner in case of a contractual
breach or negligence. This right of subrogation, however, has its limitations.
a. First, both the insurer and the consignee are bound by the contractual stipulations under the bill
of lading.
b. Second, the insurer can be subrogated only to the rights as the insured may have against the
wrongdoer. If by its own acts after receiving payment from the insurer, the insured releases the
wrongdoer who caused the loss from liability, the insurer loses its claim against the latter.
The giving of notice of loss or injury is a condition precedent to the action for loss or injury or the
right to enforce the carriers liability. Circumstances peculiar to this case lead Us to conclude that the
notice requirement was complied with. Under the Code of Commerce, the notice of claim must be made
within twenty four (24) hours from receipt of the cargo if the damage is not apparent from the outside of
the package. For damages that are visible from the outside of the package, the claim must be made
immediately.
The call to petitioner was made two days from delivery, a reasonable period considering that the
goods could not have corroded instantly overnight such that it could only have sustained the damage
during transit. Moreover, petitioner was able to immediately inspect the damage while the matter was
still fresh. In so doing, the main objective of the prescribed time period was fulfilled. Thus, there was
substantial compliance with the notice requirement in this case.
The rule as stated in Article 1735 of the Civil Code is that in cases where the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence required by law.
Petitioner is thus liable for the water damage sustained by the goods due to its failure to
satisfactorily prove that it exercised the extraordinary diligence required of common carriers.
UCPB GENERAL INSURANCE V. ABOITIZ
FACTS
Three (3) units of waste water treatment plant with accessories were purchased by San Miguel
Corporation (SMC for brevity). The goods came from Charleston, U.S.A. and arrived at the port of
Manila. The same were then transported to Cebu on board MV "ABOITIZ SUPERCON II". After its
arrival at the port of Cebu, the goods were delivered to and received by SMC at its plant site. It was
then discovered that one electrical motor on one unit was damaged. Pursuant to an insurance
agreement, UCPB General Insurance paid SMC, making it the subrogee of SMC. It was established
that the claim by SMC was made three months after receipt of damage. Consequently, UCPB filed a
Complaint as subrogee of SMC seeking to recover from Aboitiz the amount it had paid SMC. The trial
court ruled in favour of UCPB. On appeal of the case, the CA reversed the decision of the trial court
and ruled that UCPBs right of action against respondents did not accrue because UCPB failed to file a
formal notice of claim within 24 hours from (SMCs) receipt of the damaged merchandise as required
under Art. 366 of the Code of Commerce. According to the Court of Appeals, the filing of a claim within
the time limitation in Art. 366 is a condition precedent to the accrual of a right of action against the
carrier for the damages caused to the merchandise.
ISSUE
Whether or not Aboitiz may be held liable in this case.
HELD
Aboitiz cannot be held liable in this case. Art. 366 of the Code of Commerce states:
Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim against the carrier
for damage or average which may be found therein upon opening the packages, may be made,

provided that the indications of the damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which case the claim shall be admitted only at
the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods transported
were delivered. The law clearly requires that the claim for damage or average must be made within 24
hours from receipt of the merchandise if, as in this case, damage cannot be ascertained merely from
the outside packaging of the cargo.
PHIL. FIRST INSURANCE VS WALLEM PHILS. SHIPPING (2009)
FACTS
Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore Master a shipment
consisting of bags of sodium sulphate anhydrous 99 PCT Min, complete and in good order for
transportation to and delivery at the port of Manila for consignee, L.G. Atkimson Import-Export, Inc.
(consignee), covered by a Clean Bill of Lading. Both are foreign firms doing business in the Philippines,
thru its local ship agent, respondent Wallem Philippines Shipping, Inc. (Wallem). The shipment arrived
at the port of Manila from which it was subsequently discharged. It was disclosed during the discharge
of the shipment from the carrier that bags (bags) were in bad order and condition, having sustained
various degrees of spillages and losses. The consignee filed a formal claim with Wallem for the value of
the damaged shipment, to no avail. Since the shipment was insured with petitioner Philippines First
Insurance Co., Inc. against all risks, the consignee filed a formal claim with petitioner for the damage
and losses sustained by the shipment. Petitioner, in the exercise of its right of subrogation, sent a
demand letter to Wallem for the recovery of the amount paid by petitioner to the consignee. However,
despite receipt of the letter, Wallem did not settle nor even send a response to petitioners claim. It
argues that it is only the arrastre that should be liable due to due to its mishandling of goods during
unloading.
ISSUE
Whether or not Wallem should held responsible
HELD
The court ruled in the affirmative. It is settled in maritime law jurisprudence that cargoes while
being unloaded generally remain under the custody of the carrier. In the instant case, the damage or
losses were incurred during the discharge of the shipment while under the supervision of the carrier.
Consequently, the carrier is liable for the damage or losses caused to the shipment.
EASTERN SHIPPING LINES VS PRUDENTIAL GUARANTEE AND ASSURANCE
FACTS:
Cargoes belonging to Nissan were shipped by Eastern Shipping Lines. Upon arrival to the
warehouse of NIssan, it was found out that four of the 56 cases were damaged. As insurer, Prudential
Guarantee paid Nissan for the loss. Respondent then sued Petitioner for the collection of what it has
paid. To prove his right of subrogation, Prudential presented as evidence a MARINE CARGO RISK
NOTE and a SUBROGATION RECEIPT. Eastern shipping primarily contends that such documents are
not sufficient to establish the right of subrogation. What is necessary is the presentation of the MARINE
INSURANCE POLICY ITSELF which covers the goods which were damaged.
ISSUE
Is the presentation of a marine cargo risk note and a subrogation receipt sufficient to establish
the right of subrogation?
HELD
The Marine Risk Note relied upon by respondent as the basis for its claim for subrogation is
insufficient to prove said claim. A marine risk note is not an insurance policy. It is only an
acknowledgement confirming the specific shipment covered by the marine policy, the evaluation of the
cargo and the chargeable premium. It is the marine insurance policy which is constitutive of the insurerinsured relationship from which Prudential can draw its right of subrogation. Moreover, the contract of
marine insurance must also be presented in evidence to indicate the extent of coverage. Failure to
present the original contract of insurance is fatal to the claim of subrogation by Prudential Guarantee.
However, this rule admits of certain exceptions such as when:
a. The loss of the cargo is undoubtedly occurred on board the carriers vessel

b. The existence of the Marine Insurance Policy is admitted by the party to whom the claim
for subrogation is made against
KEPPEL CEBU SHIPYARD, INC. vs. PIONEER INSURANCE AND SURETY CORP
FACTS
Keppel Cebu Shipyard, Inc. (KCSI) and WG&A Jebsens Shipmanagement, Inc. (WG&A)
executed a Ship repair Agreement wherein KCSI would renovate and reconstruct WG&As M/V
"Superferry 3" using its dry docking facilities pursuant to its restrictive safety and security rules and
regulations. Prior to the execution of the Ship repair Agreement, "Superferry 3" was already insured by
WG&A with Pioneer Insurance and Surety Corp. (Pioneer). In the course of its repair, M/V "Superferry
3" was gutted by fire. Claiming that the extent of the damage was pervasive, WG&A declared the
vessels damage as a "total constructive loss" and, hence, filed an insurance claim with
Pioneer. Pioneer paid the insurance claim of WG&A. WG&A, in turn, executed a Loss and Subrogation
Receipt in favor of Pioneer. Armed with the subrogation receipt, Pioneer tried to collect from KCSI, but
the latter denied any responsibility for the loss of the subject vessel. Pioneer claims that they are the
real party in interest since it has been subrogated to the claim of its assured. Also they claim that
Keppel is clearly liable for the loss of M/V Superferry 3, since the immediate cause of the fire was the
hot work done by Keppel's employee. Keppel averred that the Claimant is not a real party in interest
and has no standing because it has not been subrogated to the Vessel Owner and the insurance
policies on which the Claimant bases its right of subrogation were not validly obtained.
ISSUES
1. Whether or not constructive total loss occurred and WG&A's abandonment of the ship was
proper.
2. Whether or not subrogation is proper. If proper, to what extent can subrogation be made?
HELD
1. In marine insurance, a constructive total loss occurs under any of the conditions set forth in
Section 139 of the Insurance Code, which provides Sec. 139. A person insured by a contract of
marine insurance may abandon the thing insured, or any particular portion hereof separately valued by
the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the
loss is a peril insured against:
a. If more than three-fourths thereof in value is actually lost, or would have to be expended
to recover it from the peril;
b. If it is injured to such an extent as to reduce its value more than three-fourths.
It cannot be denied that M/V "Superferry 3" suffered widespread damage from the fire that
occurred, a covered peril under the marine insurance policies obtained by WG&A from Pioneer. A
constructive total loss is one which gives to a person insured a right to abandon under Section one
hundred thirty-nine. Thus, WG&A abandonment of the ship was proper.
2. Subrogation is proper. Subrogation is the substitution of one person by another with
reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or securities. The principle covers a situation wherein
an insurer has paid a loss under an 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. It contemplates full
substitution such that it places the party subrogated in the shoes of the creditor, and he may use all
means that the creditor could employ to enforce payment.
The court have held that payment by the insurer to the insured operates as an equitable
assignment to the insurer of all the remedies that the insured may have against the third party whose
negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it
grow out of, any privity of contract. It accrues simply upon payment by the insurance company of the
insurance claim. To allow KCSI to limit its liability to only P50,000,000.00, notwithstanding the fact that
there was a constructive total loss in the amount of P360,000,000.00, would sanction the exercise of a
degree of diligence short of what is ordinarily required.

PRUDENTIAL GUARANTEE and ASSURANCE, INC. vs. EQUINOX LAND CORPORATION

FACTS:
Equinox constructed 5 additional floors to its existing building which was contracted to Marc
Construction & Development Corporation. JMarc submitted to Equinox two (2) bonds issued by

Prudential to guarantee the unliquidated portion of the advance payment payable to JMarc and its
faithful performance of its obligations under the construction agreement. JMarc did not adhere to the
terms of the contract. Faced with the problem of delay, Equinox formally gave JMarc one final chance
to take remedial steps in order to finish the project on time. However, JMarc failed to undertake any
corrective measure. Consequently, Equinox terminated its contract with JMarc and took over the
project. Equinox then sent Prudential a letter claiming relief from JMarcs violations of the contract.
ISSUE:
Whether or not Prudential be ordered to pay its liability under the bonds.
HELD:
It is not disputed that Prudential entered into a suretyship contract with JMarc. Section 175 of
the Insurance Code defines a suretyship as "a contract or agreement whereby a party, called the
suretyship, guarantees the performance by another party, called the principal or obligor, of an obligation
or undertaking in favor of a third party, called the obligee. It includes official recognizances, stipulations,
bonds, or undertakings issued under Act 536, as amended." Corollarily, Article 2047 of the Civil Code
provides that suretyship arises upon the solidary binding of a person deemed the surety with the
principal debtor for the purpose of fulfilling an obligation.
While a surety and a guarantor are alike in that each promises to answer for the debt or default
of another, the surety assumes liability as a regular party to the undertaking and hence its
obligation is primary. The rule is that while a contract of surety is secondary only to a valid principal
obligation, the suretys liability to the creditor is said to be direct, primary, and absolute. In other words,
the surety is directly and equally bound with the principal. Thus, Prudential is barred from disclaiming
that its liability with JMarc is solidary.
INTRA-STRATA ASSURANCE CORPORATION AND PHILIPPINE HOME ASSURANCE
CORPORATION vs. RP
FACTS
Grand Textile is a local manufacturing corporation which imported from different countries
various articles. Subsequent to the importation, these articles were transferred to Customs Bonded
Warehouse. The Bureau of Customs computed the customs duties, internal revenue taxes, and other
charges due on the importations. To secure the payment of these obligations pursuant to the Tariff and
Customs Code (Code), Intra-Strata and PhilHome each issued general warehousing bonds in favor of
the Bureau of Customs. These bonds commonly provide that the goods shall be withdrawn from the
bonded warehouse "on payment of the legal customs duties, internal revenue, and other charges to
which they shall then be subject. Grand Textile withdrew the articles without payment of the taxes,
customs duties, and charges due. The Bureau of Customs demanded payment of the amounts due
from Grand Textile as importer, and from Intra-Strata and PhilHome as sureties. All three failed to pay.
The government filed a collection suit against the parties with the RTC of Manila. RTC held Grand
Textile (as importer) and the petitioners (as sureties) liable for the taxes, duties, and charges due on
the imported articles, which is also affirmed by the CA.
ISSUE
Whether or not the withdrawal of the imported articles, without notice to the petitioners as
sureties, released them from any liability.
HELD
Petitioners are not released from liability. Section 175 of the Insurance Code defines a contract
of suretyship as an agreement whereby a party called the surety guarantees the performance by
another party called the principal or obligor of an obligation or undertaking in favor of another party
called the obligee, and includes among its various species bonds such as those issued pursuant to
Section 1904 of the Code.
The liability of the surety is joint and several but limited to the amount of the bond, and its terms
are determined strictly by the terms of the contract of suretyship in relation to the principal contract
between the obligor and the obligee.
A surety is released from its obligation when there is a material alteration of the contract in
connection with which the bond is given, such as a change which imposes a new obligation on the
promising party, or which takes away some obligation already imposed, or one which changes the legal
effect of the original contract and not merely its form.
A surety, however, is not released by a change in the contract which does not have the effect of
making its obligation more onerous. However, the court finds under the facts of this case no significant
or material alteration in the principal contract between the government and the importer, or in the
obligation that the petitioners assumed as sureties. The surety does not, by reason of the surety

agreement, earn the right to intervene in the principal creditor-debtor relationship; its role becomes alive
only upon the debtors default, at which time it can be directly held liable by the creditor for payment as
a solidary obligor. A surety contract is made principally for the benefit of the creditor-obligee and this is
ensured by the solidary nature of the sureties undertaking. Under these terms, the surety is not entitled
as a rule to a separate notice of default, nor to the benefit of excussion, and may be sued separately or
together with the principal debtor.
WHITE GOLD VS. PIONEER
Steamship mutual needs a license to operate in the Philippines. The test to determine if a
contract is an insurance contract or not, depends on the nature of the promise, the act required to be
performed, and the exact nature of the agreement in the light of the occurrence, contingency, or
circumstances under which the performance becomes requisite. It is not by what it is called. If it is a
contract of indemnity, it must be a contract of insurance. In fact, a protection and indemnity club is a
form of insurance where the members are both the insurers and the insured. It is a mutual insurance
company. The club indemnifies the member for whatever risks it may incur against a third party where
the third party is other than the club and the members. Hence, Steamship Mutual needs to procure a
license from the Insurance Commission in order to continue operating here.
Pioneer Insurance also needs to secure another license as an insurance broker/agent of
Steamship Mutual pursuant to Section 299 of the Insurance Code.
REPUBLIC VS. SUNLIFE ASSURANCE (473 SCRA 129, OCTOBER 14, 2005)
FACTS:
The CTA rendered its decision which held that mutual life insurance companies are purely
cooperative companies and are exempt from the payment of premium tax and DST.. Hence, on August
20, 1999, Sun Life filed with the CIR an administrative claim for tax credit of its alleged erroneously paid
premium tax and DST for the aforestated tax periods. For failure of the CIR to act upon the
administrative claim for tax credit and with the 2-year period to file a claim for tax credit or refund
dwindling away and about to expire, Sun Life filed with the CTA a petition for review. The CTA found in
favor of Sun Life. Seeking reconsideration of the decision of the CTA, the CIR argued that Sun Life
ought to have registered, foremost, with the Cooperative Development Authority before it could enjoy
the exemptions from premium tax and DST extended to purely cooperative companies or associations
under [S]ections 121 and 199 of the Tax Code. For its failure to register, it could not avail of the
exemptions prayed for. The CTA denied the CIRs motion for reconsideration.
ISSUE:
Whether or not respondent is exempted from payment of tax on life insurance premiums and
documentary stamp tax
HELD:
YES. The Tax Code defines a cooperative as an association conducted by the members
thereof with the money collected from among themselves and solely for their own protection and not for
profit. Without a doubt, respondent is a cooperative engaged in a mutual life insurance business.
First, it is managed by its members. Both the CA and the CTA found that the management and
affairs of respondent were conducted by its member-policyholders. SUNLIFE has been mutualized or
converted from a stock life insurance company to a nonstock mutual life insurance corporation pursuant
to Section 266 of the Insurance Code of 1978. On the basis of its bylaws, its ownership has been
vested in its member-policyholders who are each entitled to one vote; and who, in turn, elect from
among themselves the members of its board of trustees.
Second, it is operated with money collected from its members. Since respondent is composed
entirely of members who are also its policyholders, all premiums collected obviously come only from
them. The member-policyholders constitute both insurer and insured who contribute, by a system of
premiums or assessments, to the creation of a fund from which all losses and liabilities are paid.
Third, it is licensed for the mutual protection of its members, not for the profit of anyone. A
mutual life insurance company is conducted for the benefit of its member-policyholders, who pay into its
capital by way of premiums.
Under the Tax Code although respondent is a cooperative, registration with the Cooperative
Development Authority (CDA) is not necessary in order for it to be exempt from the payment of both
percentage taxes on insurance premiums, under Section 121; and documentary stamp taxes on
policies of insurance or annuities it grants, under Section 199.

TONGKO V. MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC.

HELD:
Section 186 of the Insurance Code provides that No person, partnership, or association of
persons shall transact any insurance business in the Philippinesexcept as agent of a person or
corporation authorized to do the business of insurance in the Philippines. Sections 299 and 300 of the
Insurance Code on Insurance Agents and Brokers, among other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any
agent thereof, shall pay any commission or other compensation to any person for
services in obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
The application for an insurance agents license requires a written examination, and the
applicant must be of good moral character and must not have been convicted of a crime involving moral
turpitude.[14] The insurance agent who collects premiums from an insured person for remittance to the
insurance company does so in a fiduciary capacity, and an insurance company which delivers an
insurance policy or contract to an authorized agent is deemed to have authorized the agent to receive
payment on the companys behalf.[15] Section 361 further prohibits the offer, negotiation, or collection of
any amount other than that specified in the policy and this covers any rebate from the premium or any
special favor or advantage in the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and
must also act within the parameters of the authority granted under the license and under the contract
with the principal. Other than the need for a license, the agent is limited in the way he offers and
negotiates for the sale of the companys insurance products, in his collection activities, and in the
delivery of the insurance contract or policy. Rules regarding the desired results (e.g., the required
volume to continue to qualify as a company agent, rules to check on the parameters on the authority
given to the agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in
elements of control specific to an insurance agency and should not and cannot be read as elements of
control that attend an employment relationship governed by the Labor Code.
NEW WORLD INTERNATIONAL DEVT. VS. NYK-FILJAPAN SHIPPING
FACTS:
A contract of all-risk marine insurance was entered into between New World Intl and Seaboard
Eastern Insurance. This concerns 3 generator sets to be bought all the way from the United States and
to be delivered in Manila. The same generators were transported by NYK-FilJapan Shipping. When it
arrived in Manila, it was found out that said generators were seriously damaged and it could no longer
be repaired. New World filed to claim the proceeds with Seaboard. Seaboard did not settle the claim
but instead, it required New world to present an itemize list of damage parts with corresponding values.
New world did not comply hence Seaboard refused to process the claim. More than a year later, New
World sued for specific performance plus damages against the shipper NYK and the insurer, Seaboard.
Lower Court ruled that although the shipper was at fault, the same cause of action has been barred by
prescription under section 3 (6) of COGSA which sets a period within which to file a claim against the
shipper. The same court also absolved the insurer from any liability since its right to subrogation has
been impaired by the same prescriptive period.
ISSUE:
Whether or not the refusal of Seaboard to process the claim for failure to give itemized list of
damage parts is valid.
HELD:
Seaboards refusal to process the claim is invalid. Section 241 of the Insurance Code provides
that no insurance company doing business in the Philippines shall refuse without just cause to pay or
settle claims arising under coverages provided by its policies.
And, under Section 243, the insurer has 30 days after proof of loss is received and
ascertainment of the loss or damage within which to pay the claim. If such ascertainment is not had
within 60 days from receipt of evidence of loss, the insurer has 90 days to pay or settle the claim.
And, in case the insurer refuses or fails to pay within the prescribed time, the insured shall be
entitled to interest on the proceeds of the policy for the duration of delay at the rate of twice the ceiling
prescribed by the Monetary Board.
In the instant case, Seaboard was not justified in requiring the insured to present an itemized list
of damage parts. What was entered into between them was an all-risk marine insurance. Said itemized

list was not even part of the insurance policy. Furthermore, Seaboard also failed to formally reject the
claim. Since Seaboard refused to settle the claim without just cause as stated under Art. 241, It must be
held liable not only for the face value of the policy but also damages and interest.