Insurance Code provides that a policy may

declare that a violation of specified

provisions thereof shall avoid it. Thus,
in fire insurance policies, which contain
provisions such as Condition No. 15 of the
Insurance Policy, a fraudulent discrepancy
between the actual loss and that claimed in
the proof of loss voids the insurance policy.
Mere filing of such a claim will exonerate the
insurer.

loss was caused by arson, a limitation in the

policy. United Merchants Corporation vs.
Country Bankers Insurance Corporation,
G.R. No. 198588, July 11, 2012.

Considering that all the circumstances point

to the inevitable conclusion that UMC
padded its claim and was guilty of fraud,
UMC violated Condition No. 15 of the
Insurance
Policy. Thus,
UMC
forfeited
whatever benefits it may be entitled under
the Insurance Policy, including its insurance
claim.

Petition for review on certiorari

While it is a cardinal principle of insurance

law that a contract of insurance is to be
construed liberally in favor of the insured
and
strictly
against
the
insurer
company, contracts of insurance, like other
contracts, are to be construed according to
the sense and meaning of the terms which
the parties themselves have used. If such
terms are clear and unambiguous, they
must be taken and understood in their plain,
ordinary and popular sense. Courts are not
permitted to make contracts for the parties;
the function and duty of the courts is simply
to enforce and carry out the contracts
actually
made.
United
Merchants
Corporation vs. Country Bankers Insurance
Corporation, G.R. No. 198588, July 11,
2012.
Insurance; limitation in liability.
An
insurer who seeks to defeat a claim because
of an exception or limitation in the policy
has the burden of establishing that the loss
comes within the purview of the exception
or limitation. If loss is proved apparently
within a contract of insurance, the burden is
upon the insurer to establish that the loss
arose from a cause of loss which is excepted
or for which it is not liable, or from a cause
which limits its liability. In the present case,
CBIC failed to discharge its primordial
burden of establishing that the damage or

COUNTRY BANKERS INSURANCE CORP

v. LIANGA BAY DE LEON; January 25,
2002
NATURE

FACTS
- Lianga Bay is a duly registered cooperative
judicially declared insolvent and is here
represented by, Cornelio Jamero. Country
Bankers Insurance and Lianga Bay entered
into a contract of fire insurance. Country
Bankers insured the respondents stocks-intrade against fire loss, damage or liability
during the period starting from June 20,
1989 at 4:00 p.m. to June 20, 1990 at 4:00
p.m., for the sum of P200,000.00.
- On July 1, 1989, at or about 12:40 a.m.,
the respondents building at Barangay
Diatagon, Lianga, Surigao del Sur was
gutted by fire, resulting in the total loss of
the respondents stocks-in-trade, pieces of
furnitures and fixtures, equipments and
records.
- Due to the loss, the respondent filed an
insurance claim with the petitioner under its
Fire Insurance Policy, submitting: (a) the
Spot Report of Pfc. Arturo V. Juarbal, INP
Investigator, dated July 1, 1989; (b) the
Sworn Statement of Jose Lomocso; and (c)
the Sworn Statement of Ernesto Urbiztondo.
- The petitioner, however, denied the
insurance claim on the ground that, based
on the submitted documents, the building
was set on fire by 2 NPA rebels who wanted
to obtain canned goods, rice and medicines
as provisions for their comrades in the
forest, and that such loss was an excepted
risk under paragraph No. 6 of the policy
conditions of Fire Insurance Policy No. F1397, which provides:
This insurance does not cover any loss or

damage occasioned by or through or in

consequence, directly or indirectly, of any of
the following occurrences, namely:
(d) Mutiny, riot, military or popular uprising,
insurrection, rebellion, revolution, military
or usurped power.Any loss or damage
happening during the existence of abnormal
conditions (whether physical or otherwise)
which are occasioned by or through or in
consequence, directly or indirectly, of any of
said occurrences shall be deemed to be loss
or damage which is not covered by this
insurance, except to the extent that the
Insured shall prove that such loss or
damage happened independently of the
existence of such abnormal conditions.
Finding
the
denial
of
its
claim
unacceptable, Lianga Bay then instituted in
the trial court the complaint for recovery of
"loss, damage or liability" against Country
Bankers.
- RTC ruled in favor of the cooperative. CA
affirmed.
ISSUE
WON the cause of the loss was an excepted
risk under the terms of the fire insurance
policy
HELD
- 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 else wise, since Country
bank here 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.- The petitioner
relies on the Sworn Statements of Jose
Lomocso and Ernesto Urbiztondo as well as
on the Spot Report of Pfc. Arturo V. Juarbal.
A witness can testify only to those facts
which he knows of his personal knowledge,
which means those facts which are derived
from his perception. Consequently, a
witness may not testify as to what he
merely learned from others either because
he was told or read or heard the same. Such
testimony is considered hearsay and may
not be received as proof of the truth of what
he has learned.
Disposition the appealed Decision is
MODIFIED. The rate of interest on the
adjudged principal amount of Two Hundred
Thousand Pesos (P200,000.00) shall be six
percent (6%) per annum computed from the
date of filing of the Complaint in the trial
court. The awards in the amounts of Fifty
Thousand Pesos (P50,000.00) as actual
damages,
Fifty
Thousand
Pesos
(P50,000.00) as exemplary damages, Five
Thousand Pesos (P5,000.00) as litigation
expenses,
and
Ten
Thousand
Pesos
(P10,000.00) as attorney?s fees are hereby
DELETED.
FGU Insurance
(2005)

Corporation

V.

CA

Lessons
Applicable:
Loss
caused
negligence of the insured (Insurance)

by

FACTS:

Anco Enterprises Company (ANCO), a

partnership between Ang Gui and Co
To, was engaged in the shipping
business operating two common
carriers
M/T ANCO tugboat
D/B Lucio barge - no engine of its
own, it could not maneuver by itself
and had to be towed by a tugboat for
it to move from one place to another.
September 23 1979: San Miguel
Corporation (SMC) shipped from

Mandaue City, Cebu, on board the

D/B Lucio, for towage by M/T ANCO:
25,000 cases Pale Pilsen and 350
cases Cerveza Negra - consignee
SMCs Beer Marketing Division (BMD)Estancia Beer Sales Office, Estancia,
Iloilo
15,000 cases Pale Pilsen and 200
cases Cerveza Negra - consignee
SMCs BMD-San Jose Beer Sales
Office, San Jose, Antique
September 30, 1979: D/B Lucio was
towed by the M/T ANCO arrived and
M/T ANCO left the barge immediately
The clouds were dark and the waves
were big so SMCs District Sales
Supervisor,
Fernando
Macabuag,
requested ANCOs representative to
transfer the barge to a safer place but
it refused so around the midnight, the
barge sunk along with 29,210 cases
of Pale Pilsen and 500 cases of
Cerveza Negra totalling to P1,346,197
When SMC claimed against ANCO it
stated that they agreed that it would
not be liable for any losses or
damages resulting to the cargoes by
reason of fortuitous event and it was
agreed to be insured with FGU for
20,000 cases or P858,500
ANCO filed against FGU
FGU alleged that ANCO and SMC
failed to exercise ordinary diligence or
the diligence of a good father of the
family in the care and supervision of
the cargoes

RTC: ANCO liable to SMC and FGU liable for

53% of the lost cargoes

extraordinary diligence in the vigilance over

the goods and for the safety of the
passengers transported by them, according
to all the circumstances of each case. Such
extraordinary diligence in vigilance over the
goods is further expressed in Articles 1734,
1735, and 1745 Nos. 5, 6, and 7 . . .
Art.
1734.
Common
carriers
are
responsible for the loss, destruction, or
deterioration of the goods, unless the same
is due to any of the following causes only:
(1)
Flood, storm, earthquake, lightning,
or other natural disaster or calamity;
Art. 1739. In order that the common
carrier
may
be
exempted
from
responsibility, the natural disaster must
have been the proximate and only cause of
the loss.
However, the common carrier
must exercise due diligence to prevent or
minimize loss before, during and after the
occurrence of flood, storm, or other natural
disaster in order that the common carrier
may be exempted from liability for the loss,
destruction,
or
deterioration
of
the
goods . . .

CA affirmed
ISSUE: W/N FGU should be exempted from
liability to ANCO for the lost cargoes
because of a fortuitous event and
negligence of ANCO
HELD: YES. Affirmed with modification.
Third-party complainant is dismissed.
Art. 1733.
Common carriers, from the
nature of their business and for reasons of
public policy are bound to observe

Caso fortuito or force majeure

extraordinary events not foreseeable
or avoidable, events that could not be
foreseen, or which though foreseen,
were inevitable
not enough that the event should not
have been foreseen or anticipated, as
is commonly believed but it must be
one impossible to foresee or to avoid
- not in this case
other vessels in the port of San Jose,
Antique, managed to transfer to
another place
To be exempted from responsibility,
the natural disaster should have been
the proximate and only cause of the
loss. There must have been no
contributory negligence on the part of
the common carrier.
there was blatant negligence on the
part of M/T ANCOs crewmembers,
first in leaving the engine-less barge
D/B Lucio at the mercy of the storm
without the assistance of the tugboat,

and again in failing to heed the

request of SMCs representatives to
have the barge transferred to a safer
place
When evidence show that the
insureds negligence or recklessness
is so gross as to be sufficient to
constitute a willful act, the insurer
must be exonerated.

ANCOs employees are of such gross

character that it amounts to a wrongful act
which must exonerate FGU from liability
under the insurance contract. Both the D/B
Lucio and the M/T ANCO were blatantly
negligent

SUN INSURANCE OFFICE, LTD. V CA

(LIM) 211 SCRA 554 CRUZ; July 17, 1992

value of the claim along with moral,

exemplary and compensatory damages and
attorneys fees. The decision was affirmed
by the CA.
Petitioners Claim
- Sun Insurance cites one of the four
exceptions in the contract of insurance
which includes bodily injury consequent
upon the insured person attempting to
commit suicide or willfully exposing himself
to needless peril in an attempt to save a
human life.
- There mere act of pointing the gun to his
temple showed that Felix willfully exposed
himself to danger because a gun should
always be handled with caution.
Respondents Comments

Petition for review from the decision of the

Court of Appeals

- Felix believed the gun to be safe because

he had removed the magazine.- He
repeatedly assured his secretary that the
gun was not loaded.

FACTS

ISSUES

- Felix Lim was issued a Personal Accident

Policy insurance with petitioner company
with a face value of P200,000. His
beneficiary was his wife Nerissa.- October 6,
1982 Felix accidentally shot himself in the
head with his own gun.

1. WON Felix Lims death was an accident,

thus making his widow Nerissa liable to
claim the accident insurance2. WON the
award of damages to Nerissa Lim was
justified

NATURE

- He was playing with the handgun after he

had removed the guns magazine (kasi
naman...).- He pointed the gun at his
secretary and only witness Pilar Nalagon as
a joke and assured her that the gun was not
loaded (are you sure...).
- He then put the gun to his temple and
fired it (haaay, sabi ko na nga ba).- Both
parties are in agreement that there was no
suicide.
- Nerissa claimed as Felixs beneficiary but
Sun Insurance would not grant her claim,
saying that her husbands death was not an
accident.- Nerissa sued Sun Insurance and
won the case. Sun Insurance was ordered to
pay her P200,000 representing the face

HELD
1. YES, Felix Lims death was an
accident.
Ratio There is no accident when a
deliberate act is performed unless
some
additional,
unexpected,
independent
and
unforeseen
happening occurs which produces or
brings bout their injury or death.
Reasoning- An accident has been
defined to be that which happens by
chance
or
fortuitously
without
intention or design and which is
unexpected, unusual and unforeseen.
It an event that takes pace without
ones foresight or expectastion an
event that proceeds from an unknown

cause or is an unusual effect of a

known case and therefore not
expected. It happens without any
human agency, an event which, under
the circumstances, is unusual to and
not expected by the person to whom
it happens.- The firing of the gun was
deemed to be the unexpected and
independent
and
unforeseen
occurrence that led to the insured
persons death.- There was no willful
exposure to needless peril for the part
of Felix. Suicide and exposure to
needless peril are similar in the sense
that both signify disregard for ones
life. Suicide imparts a positive act of
ending ones life whereas the latter
indicates recklessness that is almost
suicidal in intent.- Accident insurance
policies were never meant to reward
the insured for his tendency to show
off or for his miscalculations. They
were
intended
to
provide
for
contingencies.Lim
was
unquestionably negligent but it should
not
prevent
his
widow
from
recovering from the insurance policy
he
obtained
precisely
against
accident.
- Insurance contracts are, as a rule,
supposed to be interpreted liberally in favor
of the assured.2. NO, the claim for damages
should not be granted for being unjust.
Ratio A person may be made liable to the
payment of moral damages if his act is
wrongful. The adverse result of an action
does not per se make the act wrongful and
subject the act or to the payment of moral
damages.
Reasoning
- Petitioner was acting in good faith when it
resisted the private respondents claim on
the ground that the death of the insured
was covered by the exception.- The issue
was debatable and was clearly not raised
only for the purpose of evading a legitimate
obligation.
PACIFIC
TIMBER
CORPORATION v. CA

EXPORT
(WORKMENS

INSURANCE
CO)112
SCRA
CASTRO; February 25, 1982

199DE

FACTS
- March 19, 1963 - the plaintiff secured
temporary insurance from the defendant for
its exportation of 1,250,000 board feet of
Philippine Lauan and Apitong logs to be
shipped from the Diapitan Bay, Quezon to
Okinawa and Tokyo, Japan. The defendant
issued on said date Cover Note No. 1010,
insuring the said cargo of the plaintiff
"Subject to the Terms and Conditions of the
WORKMEN'S INSURANCE COMPANY, INC.
printed Marine Policy form as filed with and
approved by the Office of the Insurance
Commissioner.
- April 2, 1963 - The two (2) regular marine
cargo policies were issued by the defendant
in favor of the plaintiff. The total cargo
insured under the two marine policies
accordingly consisted of 1,395 logs, or the
equivalent of 1,195,498 bd. ft.
- After the issuance of cover note but before
the issuance of the two marine policies
some of the logs intended to be exported
were lost during loading operations in the
Diapitan Bay due to bad weather.
- April 4, 1963 - The plaintiff informed the
defendant about the loss of 'approximately
32 pieces of logs' during loading through a
letter.- The plaintiff subsequently submitted
a 'Claim Statement' demanding payment of
the loss under the second marine cargo
policy.
- July 17, 1963 - the defendant requested
the First Philippine Adjustment Corporation
to inspect the loss and assess the damage.August 23, 1963 - the adjuster reported
that 'the loss of 30 pieces of logs is not
covered by the two policies inasmuch as
said policies covered the actual number of
logs loaded on board. But it is covered by
Cover Note.
- On January 13, 1964 - the defendant
wrote the plaintiff denying the latter's claim,
on the ground that defendant's investigation
revealed that the entire shipment of logs

covered by the two marines policies were

received in good order at their point of
destination. It was further stated that the
said loss may not be considered as covered
under cover note because the said note had
become 'null and void by virtue of the
issuance of two marine policies.
- The CFI of Manila ruled in favour of the
petitioner. - The Court of Appeals reversed
the decision of the CFI.
ISSUES
1. WON the cover note is null and void for
lack of valuable consideration because no
separate premiums are collected by private
respondent on all its cover notes
2. WON the court of appeals erred in holding
that private respondent was released from
liability under the cover note due to
unreasonable delay in giving notice of loss
because the court disregarded the proven
fact that private respondent did not
promptly and specifically object to the claim
on the ground of delay in giving notice of
loss and, consequently, objections on that
ground are waived under section 84 of the
insurance act
HELD
1. NORatio Cover note is issued with a
consideration when, by express stipulation,
the cover note is made subject to the terms
and conditions of the marine policies, and
the payment of premiums is one of the
terms of the policies.Reasoninga. the cover
note in question is subject to the terms and
conditions of the marine policiesb. Nature of
the Cover Note: The fact that no separate
premium was paid on the Cover Note before
the loss insured against occurred, does not
militate against the validity of petitioner's
contention, for no such premium could have
been paid, since by the nature of the Cover
Note, it did not contain, as all Cover Notes
do not contain particulars of the shipment
that would serve as basis for the
computation of the premiums. As a logical
consequence, no separate premiums are
intended or required to be paid on a Cover
Note.c. The petitioner paid in full all the

premiums as called for by the statement

issued by private respondent after the
issuance of the two regular marine
insurance policies, thereby leaving no
account unpaid by petitioner due on the
insurance coverage, which must be deemed
to include the Cover Note. If the Note is to
be treated as a separate policy instead of
integrating it to the regular policies
subsequently issued, the purpose and
function of the Cover Note would be set at
naught or rendered meaningless, for it is in
a real sense a contract, not a mere
application for insurance which is a mere
offer. Had all the logs been lost during the
loading operations, but after the issuance of
the Cover Note, liability on the note would
have already arisen even before payment of
premium. This is how the cover note as a
"binder" should legally operate; otherwise, it
would serve no practical purpose in the
realm of commerce, and is supported by the
doctrine that where a policy is delivered
without requiring payment of the premium,
the presumption is that a credit was
intended and policy is valid.
2. NO- The private respondent company
never raised this ground in the proceedings.
It must be because it did not find any delay,
as this Court fails to find a real and
substantial sign thereof. But even on the
assumption that there was delay, this Court
is satisfied and convinced that as expressly
provided by law, waiver can successfully be
raised against private respondent. Thus
Section 84 of the Insurance Act provides:
"Section 84. - Delay in the presentation to
an insurer of notice or proof of loss is
waived if caused by any act of his or if he
omits to take objection promptly and
specifically upon that ground."
- From what has been said, We find duly
substantiated petitioner's assignments of
error. Disposition The appealed decision is
set aside and the decision of the Court of
First Instance is reinstated in toto with the
affirmance of this Court.
MALAYAN INSURANCE CO., INC. v.
ARNALDO and PINCA154 SCRA 672CRUZ;
October 12, 1987

FACTS
- On June 7, 1981, Malayan Insurance Co.
(MICO), issued fire insurance for the
amount of P14,000 on the property of
private respondent, Pinca, effective July
1981-1982. MICO later allegedly cancelled
the policy for non-payment of the premium
and sent a notice to Pinca. On Dec. 24
Adora, an agent of MICO, received Pincas
payment, which was remitted to MICO. On
Jan. 18, 1982, Pincas property was
completely burned. On Feb. 5, MICO
returned Pincas payment to Adora on the
ground that her policy had been cancelled;
the latter refused to accept it. Her demand
for payment having been rejected by MICO,
Pinca went to the Insurance Commission.
Public respondent Arnaldo, the Insurance
Commissioner, sustained Pinca, hence this
petition from MICO. Records show MICO
received Arnaldos decision on April 10;
MICO filed a MFR on April 25 which was
denied on June 4; MICO received notice of
this denial on June 14; instant petition was
filed on July 2.
ISSUES
Procedural
1. WON the petition should be dismissed for
late filingSubstantive2. WON there was a
valid insurance contract at the time of the
loss
3. WON Adora was authorized to receive
such payment4. WON an adjuster is
indispensable in the valuation of the loss
HELD
Procedural
1. YES- Petitioner invokes Sec 416 of the
Insurance Code which grants it 30 days
from notice of the Insurance Commission
within which to appeal by certiorari with the
Court. MICO filed its MFR on April 25, 15
days after the notice; the reglementary
period began to run again after June 13.
Since the petition was filed only on July 2, it
was tardy by 4 days. Alternatively it invokes
Rule 45 of the Rules of Court for certiorari

but the petition still exceeds the 15 day limit

from the June 13 notice.
-Respondents, on the other hand, invoke
Sec. 39 of B.P. 129 which pegs the period
for appeal from decisions of any court in all
cases at 15 days from the notice of the
decision appealed from. Since the MFR was
filed only 15 days after receiving notice of
the decision, it was already 18 days late by
July 2. So whichever is applied, the petition
is still late.
Substantive
2. YES- A valid cancellation requires the
following conditions based on Sections 6465 of the Code: prior notice which must be
based on the occurrence of one or more of
the grounds mentioned in Sec 64 (in this
case, non-payment of premium), after the
effective date of the policy; the notice must
be written and mailed to the address on the
policy; it must state the ground(s) for
cancellation and the insurer must furnish
details upon the request of the insured.- It
is undisputed that payment of premium was
made. Petitioner relies heavily on Sec 77 of
the Insurance Code to contest this, the said
provision requiring payment of premium as
soon as the thing is exposed to the peril
insured against and that the policy is invalid
without it. However, this is not applicable in
the instant case as payment was eventually
made. It is to be noted that the premium
invoice was stamped Payment Received,
indicating an understanding between the
parties that payment could be made later.
This is furthered by the fact that Adora had
earlier told her to call him anytime she was
ready with her payment. The Court also
finds it strange that MICO only sought to
return Pincas Jan. 15 payment only on Feb.
5, long after her house had burned down
this makes petitioners motives highly
suspect.- MICO claims to have sent a notice
to Pinca, who flatly denied receiving one.
Pinca did not have to prove this since the
strict language of Sec 64 requires that MICO
ensure the cancellation was actually sent to
and received by the insured.- MICO also
suggests that Pinca knew the policy had
been cancelled and was paying the premium
in order to renew the policy. A close study of

the transcripts show, however, that Pinca

only meant to renew the policy had it been
cancelled but not if it was still in effectit
was conditional. Payment was thus legally
made on the original transaction and validly
received by Adora, who was not informed of
the alleged cancellation and thus saw no
reason to reject the payment.
3. YES- Sec. 306 of the Insurance Code
provides that any insurance company that
delivers a policy to its agent is deemed to
have authorized such agent to receive
payment of premium on its behalf. It is a
well-known principle under the law of
agency that payment to an authorized agent
is equivalent to payment to the principal
himself. MICOs acknowledgement of Adora
as its agent thus defeats its contention that
he was not authorized to receive payments
on its behalf.4. NO- In absence of fraud, the
amount of the loss may be determined on
the basis of such proof offered by the
insured. Here. The certification of the
Integrated National Police as the extent of
the loss should suffice.Disposition petition
is DENIED
TRAVELLERS INSURANCE & SURETY
CORP. v. CA (MENDOZA)272 SCRA 536
HERMOSISIMA, JR; May 22, 1997
NATURE
The petition herein seeks the review and
reversal of the decision of respondent Court
of Appeals affirming in toto the judgment of
the Regional Trial Court in an action for
damages filed by private respondent Vicente
Mendoza, Jr. as heir of his mother who was
killed in a vehicular accident.
FACTS
-an old lady was hit by a taxicab. The
taxicab was later identified and a case was
filed against the driver and owner. Later, an
amendment was filed to include the
insurance company. RTC and CA ordered
that the owner, driver as well as the
insurance company be held solidarily liable.
ISSUE

WON RTC and CA erred

HELD
YES- Where the contract provides for
indemnity against liability to third persons,
then third persons to whom the insured is
liable can sue the insurer. Where the
contract is for indemnity against actual loss
or payment, then third persons cannot
proceed against the insurer, the contract
being solely to reimburse the insured for
liability actually discharged by him thru
payment to third persons, said third
persons' recourse being thus limited to the
insured alone. But in the case at bar, there
was no contract shown. What then was
the basis of the RTC and the CA to say
that the insurance contract was a thirdparty
liability
insurance
policy?
Consequently, the trial court was confused
as it did not distinguish between the private
respondent's cause of action against the
owner and the driver of the Lady Love
taxicab and his cause of action against
petitioner. The former is based on torts and
quasi-delicts while the latter is based on
contract.
- Even assuming arguendo that there was
such a contract, private respondent's cause
of action can not prevail because he failed
to file the written claim mandated by
the Insurance Code (before it was
amended-action
must
be
brought
within six months from date of the
accident (this is whats applicable here)
; after amendment- "action or suit for
recovery of damage due to loss or injury
must be brought in proper cases, with the
Commissioner or the Courts within one year
from denial of the claim, otherwise the
claimant's right of action shall prescribe" ).
He is deemed, under this legal provision, to
have waived his rights as against petitionerinsurer.
Disposition petition granted