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CASE 1
Enriquez
41

v.

SunLifePHIL

Insurance

Policy
269

Facts: On Sept. 24 1917, Herrer made an application to SunLife through its office in Manila for
life annuity. 2 days later, he paid the sum of 6T to the companys manager in its Manila o ce
and
was
given
a
receipt.
On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On the same
date, the Manila office prepared a letter notifying Herrer that his application has been accepted
and this was placed in the ordinary channels of transmission, but as far as known was never
actually mailed and never received by Herrer. Herrer died on Dec. 20, 1917. The plainti as
administrator of Herrers estate brought this action to recover the 6T paid by the deceased.
Issue:

Whether

or

not

the

insurance

contract

was

perfected.

Held: NO. The contract for life annuity was NOT perfected because it had NOT been proved
satisfactorily that the acceptance of the application ever came to the knowledge of the applicant.
An acceptance of an over of insurance NOT actually or constructively communicated to the
proposer does NOT make a contract of insurance, as the locus poenitentiae is ended when an
acceptance has passed beyond the control of the party.

CASE 2

CASE 3

TY VS FIRST NATIONAL SURETY AND ASSURANCE CO. INC. (G.R. NO. L-161138)
Facts:
Diosdado Ty was employed as operator mechanic foreman in the Broadway
Cotton Factory. He insured himself in 18 local insurance companies which issued to
him personal accident policies. His beneficiary was his employer Broadway Cotton
Factory, which paid the insurance premiums. A fire broke out which totally destroyed
the factory and injured the plaintiff on the left hand for which he underwent medical
treatment. The physical injuries have caused temporary total disability of the plaintiffs
left hand that prompted him to file notices of accident and claim to recover indemnity
under their insurance policy: Partial Disability loss of either hand xxx the loss of a
hand shall mean the loss of a hand shall mean loss by amputation through the bones of
the wrist.. The defendants rejected plaintiffs claim on the contention that there being
no severance or amputation of the left hand, the disability suffered by him was not
covered by his policy. The plaintiff asserted that it is not necessary that there should be
an amputation of his left hand in order for him to recover on the insurance policies and it
is sufficient that the injuries prevented him from performing his work or labor necessary
in the pursuance of his occupation or business.
Issue:
Whether Plaintiff Ty may recover on the insurance policies issued to him for the
loss of his left hand.
Ruling:
No. The parties cannot go beyond the clear and express conditions insurance
policies, all of which define partial disability as loss of either hand by amputation. There
was no amputation in the case at bar. It can be noted that the disability of the plaintiffs
hand was temporary. The insurance policy is the law between the parties and the terms
of the policies are clear, express, and specific that only amputation of either hand
should be considered as a a loss thereof. An interpretation that would include
temporary disability not covered by the policy would be unwarranted.

CASE 4

CASE

Cherie Palileo v. Beatriz Cosio

GR No. L-7667, November 28, 1955
In 1951, Cherie Palileo obtained a loan of P12,000 from Beatriz Cosio and to secure payment of
the same, executed a "conditional sale of residential building" where Palileo conveyed to Cosio
a 2-story building but reserved the right to repurchase. Cosio then insured the building against
fire with Associated Insurance & Surety Co. for P15,000.00 and the insurance policy was issued
in the name of Cosio. The building was partly destroyed by fire and hence, Cosio collected from
the insurance company P13,107 as indemnity. Palileo then demanded that she be credited with
the necessary amount to pay her obligation out of the insurance proceeds but defendant
refused to do so. The trial court later rendered judgment finding that the debt is fully
compensated by virtue of the proceeds collected by Cosio and further held that the excess of
P1,107 be refunded to Palileo.
Issue: Whether the trial court is correct in considering the obligation of Palileo paid
Ruling:
No.
The rule is that where a mortgagee, independently of the mortgagor, insures the
mortgaged property in his own name and for his own interest, he is entitled to the insurance
proceeds in case of loss, but in such case, he is not allowed to retain his claim against the
mortgagor, but is passed by subrogation to the insurer to the extent of the money paid.
The lower court erred in declaring that the proceeds of the insurance taken out by Cosio
on the property insured to the benefit of Palileo and in ordering the former to deliver to the latter,
the difference between the indebtedness and the amount of insurance received by Cosio. In the
light of this ruling, the correct solution would be that the proceeds of the Insurance be delivered
to Cosio, but her claim against Palileo should be considered assigned to the insurance company
who is deemed subrogated to the rights of Cosio to the extent of the money paid as indemnity.

CASE 6
Rizal Surety and Insurance Co vs Manila Railroad Co and Manila Port Service
Facts: On Nov 29, 1960, a vessel named SS Flying Trader, loaded on board a cargo which is
an offset press machine, from Italy to Manila. Upon reaching the port of destination and upon
unloading it, it was dropped b the crane which resulted to damages of the machine. The plaintiff
as the insurer had paid the consignee, Suter, Inc. the amount of P16.5k for the machine and
P180.70 for the International Adjustment Bureau as adjusters fee. However, the arrastre
charges in this particular shipment was paid on the weight or measurement basis whichever is
higher, and not on the value thereof.
Issue: Can the insurance get an amount greater than what was declared?
RULING: Plaintiff Insurance Company cannot recover from defendants an amount greater than
that to which the consignee could lawfully lay claim. The management contract is clear, the
amount is limited to P500.
If the plaintiff's 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 right of the insured against the wrong-doer or the
person who has violated the contract. If the amount paid by the insurance company doer 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.
The insurance have no greater right than the party in interest thereof.

CASE 7
Filipinas Investment, etc vs Empire Ins. Co
No. 39041-R September 28, 1972
Reyes, L.B., J:
Facts: On June 21, 1963, defendant - appellant Empire Insurance (EI) insured for Php 7,000
under policy # 1954 (which covers loss, damage, and liability to the public), a car owned by
Cesar Ledesma, Inc. (CLI). The policy had a general exceptions clause which provided that EI
will not be liable for any loss while the vehicle is being driven by any person other than the
insured or any person permitted by him.
The car was later sold to Rodrico Samoy on installment basis and Samoy executed a
promissory note secured Chattel Mortgage over the car in favor of CLI. With the conformity of
Samoy, CLI assigned its rights, interests and title to the promissory note plaintiff-appellee,
Filipinas Investment & Finance Corporation (FIFC). Attached to policy # 1954 was an
endorsement stating that Samoy is the new owner of the insured vehicle and loss, if any, is now
payable to mortgagee-assignee, FIFC.
Samoy failed to pay several consecutive installments which led to a replevin case by FIFC
against Samoy. To enforce the seizure warrant, the car was being taken into custody by the
sheriff. The sheriff parked it near the office of FIFC and left it there for a while to attend another
public auction. Upon his return, however, the car was lost. It was thereafter reported stolen. EI
now denies claim of FIFC for the loss, the car being used neither by Samoy, nor any authorized
person when it got lost. Thus FIFC filed a complaint against EI at the City Court of Manila. The
complaint was dismissed, thus an appeal was made by FIFC to the CFI of Manila which
reversed the City Courts decision, hence this appeal before the CA.
Issue: Whether Filipinas Investment & Finance Corporation can claim against Empire Insurance
against the policy.
Ruling: Yes. A mortgagee is a proper party to prosecute an action for loss sustained under an
insurance policy where it provides that loss, if any shall be payable to such mortgagee as his
interest may appear.
Clauses in a car insurance policy limiting the driving of the car by certain persons and the use
thereof for specified purposes should not be made to operate when the car is lost while in the
possession of a sheriff under a writ of seizure issued by the court, and more so in the absence
of a provision that when the insured is not using the car at the time it is lost, the insurer is not
liable in respect of the loss.

CASE 8
G.R. No. 14300
January 19, 1920
SAN MIGUEL BREWERY v. LAW UNION AND ROCK INSURANCE, FILIPINAS COMPAIA DE
SEGUROS, et.al.
Key Phrases: Insurable interest of creditor- mortgagee; change of interest in any part of the thing without
the corresponding change in the insurance
FACTS
San Miguel Brewery, in its interest as a creditor-mortgagee, obtained an insurance policy amounting to
P15, 000.00 over the property of D.P. Dunn. The mortgage- debt amounts only to P4, 505.30. During the
life of the policy, D.P. Dunn sold the property to Henry Harding without assigning the policy to the latter.
The property was destroyed by fire.

ISSUES
1. Up to what extent can San Miguel Brewery collect from the policy?
2. Is Harding entitled to the proceeds of the policy?
HELD
San Miguel Brewery can collect only to the extent of the mortgage- debt amounting to P4, 505.30. As a
creditor- mortgagee, San Miguels interest over the property is co-extensive to the amount of the
mortgage-debt.
No. Harding has no cause of action against the insurance companies. He is not a party to the contracts of
insurance and cannot directly maintain an action thereon. Section 19 (now 20) of the Insurance Code
provides that xxxa change of interest in any part of a thing insured unaccompanied by a corresponding
change of interest in the insurance, suspends the insurance to an equivalent extent, until the interest in
the thing and the interest in the insurance are vested in the same person.

CASE 9
LINCOLN NATIONAL LIFE V SAN JUAN CA-G.R. NOS. 34586-88-R, MAY 27, 1971
FACTS: Luis Parco secured 5 life insurance policies from Lincoln National Life. He insured a
certain Misterioso San Juan. He FALSELY represented in the policies that: (1) Mysterioso was a
proprietor and a fish merchant for 10 years; (2) That he had no employer but himself; (3) That
his income exceeds P5,000.00 a year; (3) And that he had no pending applications for life
insurance.
Misterioso was in fact not a merchant, and that he is employed as a tenant of Luis. Also, a
number of applications for insurance have been filed by Luis, several of which have been
declined. Luis subsequently tries to collect from the policies. Allegedly, Misterioso was killed. A
severed human head in an advanced state of decomposition found in a jeepney by its driver
apparently left intentionally by 2 unidentified passengers was said to be Misterioso. Lincoln
refuses to pay stating that there was false misrepresentations and concealment of material facts
made by Misterioso and Luis.
ISSUE: W/N Luis can collect on the insurance policies.
RULING: No. There is no shred of evidence that Lincoln had previous knowledge of said false
misrepresentations when it approved the life insurance. The present action is one for rescission
of insurance contracts, and Luis has the burden of proving the defense that Lincoln as the
insurer had previous notice of such false misrepresentations and/or concealment of material
facts when they approved the applications and issued the life insurance policies. The policies
are in effect wagering or highly speculative contacts which are void for reasons of public policy.
They lack the element of INSURABLE INTEREST.

CASE 10
PHILIPPINE AMERICAN INSURANCE COMPANY vs. GREGORIO G. PINEDA
175 SCRA 416
FACTS:
On Jan. 15 1963, Dimayuga processed an ordinary life insurance policy from
Philamlife and designated his wife and children as irrevocable beneficiaries. On Feb. 22, 1980,
Dimayuga filed a petition in court to amend the designation of the beneficiaries in his policy from
irrevocable to revocable. Lower Court granted the petition.
ISSUE: Whether or not the court erred in granting Dimayugas petition.
RULING: YES. Under the Insurance Act, the beneficiary designated in a life insurance contract
cannot be changed without the consent of the beneficiary because he has a vested interest in
the policy. The policy contract states that the designation of the beneficiaries is irrevocable.
Therefore, based on the said provision of the contract, not to mention the law then applicable, it
is only with the consent of all the beneficiaries that any change or amendment in the policy may
be legally and validly effected. The contract between the parties is the law binding on them.

CASE 11
suter vs union surety and insurance company inc 51 o.g. 1965
Facts:
Suter, the managing partner of Morcoin Co., insured two juke boxes with Union Surety for P4,
000. Subsequently, the two juke boxes were destroyed by fire. Suter now claims from Union
Surety, the latter denying the claims on the grounds that: The properties were allegedly
overvalued, it having been proven that the juke boxes cost only P774.00 and Suter had no
insurable interest since the properties insured belong to Morcoin Co.

Issues: (1) Whether or not the juke boxes were overvalued.

(2) Whether or not Suter had insurable interest.
Ruling: 1. No. While acquisition cost is only P774.00, this does not include taxes, freight
insurance, shipping cost, and other improvements made thereon. The value of the property is
determine at the time it was insured and not the time it was acquired.
2.YES, Suter had insurable interest. The test for insurable interest in property is whether or not
the insured will benefit in the propertys reservation or continued existence, or suffer a direct
pecuniary loss in its destruction. Suter, being the managing partner will clearly benefit in the
juke boxes preservation and would also be affected by its destruction.

CASE 12
SEAMAN V. ENTERPRISE FIRE & MARINE INS. CO. INSURANCE
Facts:
In this case the property was a steam-boat, and the insured was the holder of a portion of the
stock, which entitled to three-sixteenths of the corporate property. He took a policy of insurance
upon that interest, valued at $4,000. Some question has been raised as to the measure of
damages. It has been insisted on the part of the defendant that the corporation may be
insolvent; that there may be many debts which must be paid before a stockholder can receive
any dividends; and that, therefore, his interest may be nothing.
Issue:
WON a stockholder has such an interest in the corporate property as will authorize him to take a
policy of insurance for the protection of his interest?
Ruling:
It is not necessary that the party who takes out the policy should have any title to the property
insured; it is sufficient if he has such an interest in it as that by its destruction he would suffer
pecuniary loss. It is true that the title to the property is in the corporation but the beneficial
interest is in the stockholders of the corporation. The stock of a corporation represents its
property, and is evidence of the right of the stockholder to receive the profits and increase of the
corporate property. It is a very evident that the destruction of the corporate property may entail
pecuniary loss upon the stockholder, and therefore that he has a right to insure his interest as
such stockholder.

CASE 13
Cha v. CA
277 SCRA 690 (1997)
Facts: Petitioner spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a one-year
lease contract with private respondent CKS Development Corporation as lessor. The lease
contract provides that the Lessee is not allowed to insure, against fire, the chattels,
merchandise, textiles, goods and effects placed at any stall or store or space in the leased
premises without first obtaining the written consent and approval of the Lessor. If the Lessee
violates such stipulation, the policy is deemed assigned and transferred to the Lessor for his
own benefit. Petitioner took out a policy of fire insurance over the merchandise inside the leased
premises with United Insurance for P500,000 without the consent of CKS.
On the day the lease contract was to expire, a fire broke out inside the leased premises.
CKS, wrote a letter to United asking that the proceeds of the fire insurance be paid directly to
CKS. United refused. Hence, the CKS filed a complaint against the spouses Cha and United.
The RTC ruled in favor of CKS. CA affirmed.
Issue: WON CKS has insurable interest on the property and thus recover from the insurance
policy.
Ruling: No. Section 18 of the Insurance Code provides that: No contract or policy of insurance
on property shall be enforceable except for the benefit of some person having an insurable
interest in the property insured.
CKS has no insurable interest in the goods and merchandise inside the leased premises
under the provisions of Section 17 of the Insurance Code which 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. Therefore, CKS cannot be validly a beneficiary of the fire insurance policy taken
by petitioner-spouses. The insurable interest remains with the Cha spouses.

CASE 14
HOFFMAN V. AETNA INS. CO.
Facts:
The insurance was on the mercantile stock of Dixon Co., a firm in Michigan, consisting of A.H.
Dixon and Samuel G. Goss. Shortly afterward the firm was dissolved. Dixon succeeded, by
purchase, to the interest of Goss, and continued the business on his own account down to the
time of the fire. The action was brought by Wilson, to whom Dixon subsequently assigned the
claim. Two defenses were interposed. The first was, that the policy was forfeited by the transfer
from one partner to the other, of his interest in the property insured; the other was, that it was
forfeited by Dixon's afterwards obtaining a further insurance on the goods, without the written
consent of the company; though such a consent was obtained from their local agent in
Michigan. The court overruled both defenses, and held that the policy was not forfeited, either
by the sale made by the retiring partner, or by the subsequent insurance effected by his
successor in interest, with the consent of the Michigan agent. The case was heard in this court,
on appeal, in 1856. The counsel for the defendant insisted, as a principal point, that the sale by
one partner to the other avoided the policy. The terms of the proviso are, that the policy shall be
null and void, "if the said property shall be sold and conveyed."
Issue:
Whether or not the sale by one partner to the other avoided the policy.
Ruling:
Reading the proviso as it was read by the parties, it is easy to discern the purpose of its
insertion. It was to protect the company from a continuing obligation to the assured, if the title
and beneficial interest should pass to others, whom they might not be equally willing to trust.
Words should not be taken in their broadest import, when they are equally appropriate in a
sense limited to the object the parties had in view.
The plaintiffs were parties to the contract made with the defendant. They were conducting the
business contemplated by the terms of the policy. The insurance was intended to cover the
mercantile stock of which the assured were proprietors, stored, from time to time, in the building
in which that business was conducted. There was no substantial change material to the risk,
and clearly none within the intent of the proviso. Each member of a partnership firm, as Lord
HARDWICKE said, is "seized per my et per tout" of the common stock and effects. This interest
of each and all, the policy in question was designed to protect; and its language, fairly
construed, is in harmony with this intent. There is no reason why the full measure of agreed
indemnity should be withheld from the plaintiffs, who were owners at the date of the insurance,
and sole owners at the time of the loss.
Judgment is affirmed.

CASE 15
GR No. L-31845 April 30, 1979
GREAT PACIFIC LIFE ASSURANCE COMPANY VS HONORABLE COURT OF APPEALS
GR No. L-31878 April 30, 1979
LAPULAPU D. MONDRAGON VS HON. COURT OF APPEALS AND NGO HING
FACTS:
Ngo Hing filed an application with GREPALIFE for a 20-year endowment policy in the amount of
P50,000.000 on the life of his one-year old daughter Helen Go. Ngo Hing supplied the essential
data on a form with his own handwriting before Mondragon, the Branch Manager of Grepalife,
which the latter then type-wrote. After payment of the insurance premium and issuance of the
binding deposit receipt, Mondragon handwrote at the bottom of the back page of the application
form his strong recommendation for the strong approval of the insurance application. However,
it was disapproved by the Pacific Life on the ground that the plan is not available for minors
below seven years old. The non-acceptance of the insurance plan was not communicated to
Ngo Hing until then the death of Helen Go of influenza with complication of bronchopneumonia.
Thereupon, Ngo Hing sought the payment of the proceeds of the insurance, but having failed in
his effort, filed the action for the recovery of the same before the CFI of Cebu, which rendered
the adverse decision against Grepalife. Hence, the instant petitions.
ISSUES: 1) WON the binding deposit receipt constituted a temporary contract of the life
insurance in question?
2) WON Ngo Hing concealed the state of health and physical condition of Helen
Go, which rendered void the binding deposit receipt?
RULING: 1) The Court ruled in the negative. The binding receipt is manifestly, merely
conditional and does not insure outright. As held by this Court, where an agreement is made
between the applicant and the agent, no liability shall attach until the principal approves the risk
and a receipt is given by the agent. The acceptance is merely conditional and is subordinated to
the act of the company in approving or rejecting the application. Thus, in life insurance, a
binding slip or binding receipt does not insure by itself.
2) The Court held that Ngo Hing had deliberately concealed the state of health
and physical condition of his daughter Helen Go. When Ngo Hing supplied the required data for
the insurance application form, he was fully aware that his child is a typically a mongoloid child.
Such a congenital physical defect should never be disguised. Nonetheless, Ngo Hing, in
apparent bad faith, withheld the fact material to the risk to be assumed by the insurance
company. Hence, rendered the contract void.

CASE 16
INSULAR LIFE vs. FELICIANO 73 Phil 201
FACTS:
Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents.
It appears that during that time, Evaristo was already suffering from tuberculosis. Such fact
appeared during the medical exam, but the examiner and the companys agent ignored it. After
that, Evaristo was made to sign an application form and thereafter the blank spaces were filled
by the medical examiner and the agent making it appear that Evaristo was a fit subject of
insurance. (Evaristo could not read and understand English). When Evaristo died, Insular life
refused to pay the proceeds because of concealment.

ISSUE:
Whether or not Insular Life was bound by their agents acts.
HELD:
Yes.
RULING:
The insurance business has grown so vast and lucrative within the past century. Nowadays,
even people of modest means enter into insurance contracts. Agents who solicit contracts are
paid large commissions on the policies secured by them. They act as general representatives
of insurance companies.

IN the case at bar, the true state of health of the insured was concealed by the agents of the
insurer. The insurers medical examiner approved the application knowing fully well that the
applicant was sick. The situation is one in which of two innocent parties must bear a loss for his
reliance upon a third person. In this case, it is the one who drafted and accepted the policy and
consummated the contract. It seems reasonable that as between the two of them, the one who
employed and gave character to the third person as its agent should be the one to bear the loss.
Hence, Insular is liable to the beneficiaries.

CASE 17
Insular Life Assurance Co., Ltd. vs Feliciano 74 Phil 468
FACTS:
From the courts decision rendered in the case of Insular Life Assurance vs Feliciano (1941),
Insular Life filed a motion for reconsideration. Insular avers that Feliciano is not entitled to the
claim because the insurance policy is void ab initio; that he connived with the insurance agent
and the medical examiner; and that at best, Feliciano is only entitled to refund or the
reimbursement of what he has paid in premium.

ISSUE: Whether or not Insular Life is correct.

HELD:
Yes. This time, the Supreme Court held that Insular Lifes contention is correct. When Evaristo
Feliciano, the applicant for insurance, signed the application in blank and authorized the
soliciting agent and/or medical examiner of Insular to write the answers for him, he made them
his own agents for that purpose, and he was responsible for their acts in that connection. If they
falsified the answers for him, he could not evade the responsibility for the falsification. He was
not supposed to sign the application in blank. He knew that the answers to the questions therein
contained would be the basis of the policy, and for that very reason he was required with his
signature to vouch for truth thereof.

CASE 18

ARANILLA V. INSULAR LIFE

CA GR No. 374-R, December 22, 1971
Facts: In 1959, Jose Aranilla applied for life insurance with Insular. In his application,
these 2 questions appeared:
o WON he has suffered from any disease of the kidney and urinary tract, to which he answered
NO. oWON he has been confined in a hospital for consultation and treatment, to which he
answered that in 1947, he was confined due to influenza.
The truth however, was that a few months prior to his application, he was confined and
treated for nephritis, a disease of the kidney and urinary tract, and he was accordingly informed
of the cause. When Aranilla died of cirrhosis of the liver, Insular refused to pay the proceeds due
to concealment.

Issue: Whether the contract can be rescinded.

Held:
Yes. If an answer given by the insured to a specific question asked by the insurer in an
application for life insurance turns out to be false, it is a concealment of a material fact which
entitles the insurer to rescind, even if the insured died of an ailment which has NO
connection with the specific questions falsely answered by him. This is because materiality is to
be determined NOT by the event but ONLY by the probable and reasonable influence of the
facts upon the party to whom the communication is due, in forming his estimate of the
disadvantages of the proposed contract or in making his inquiries.

CASE 19
Ng Gan Zee v. Asian Crusader Life - Imperfection in the Application Form
Facts:
> In 1962, Kwon Nam applied for a 20yr endowment insurance on his life with his wife, Ng Gan
Zee as the beneficiary.
> He stated in his application that he was operated on for tumor of the stomach associated with
ulcer.
> In 1963, Kwong died of cancer of the liver with metastasis. Asian refused to pay on the
ground of alse information.
> It was found that prior to his application, Kwong was diagnosed to have peptic ulcers, and
that during the operation what was removed from Kwongs body was actually a portion of the
stomach and not tumor.
Issue:
Whether or not the contract may be rescinded on the ground of the imperfection in the
application form.

Held:
NO.
Kwong did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer.
His statement therefore was made in good faith. Asian should have made an inquiry as to the
illness and operation of Kwong when it appeared on the face of the application that a question
appeared to be imperfectly answered. Asians failure to inquire constituted a waiver of the
imperfection in the answer.

CASE 20
SUNLIFE ASSURANCE COMPANY OF CANADA vs.
The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA BACANI
FACTS:
On April 15, 1986, Robert John B. Bacani procured a life insurance contract for himself from
petitioner. He was issued a Policy valued at P100, 000.00, with double indemnity in case of
accidental death. The designated beneficiary was his mother, respondent Bernarda Bacani.
On June 26, 1987, the insured died in a plane crash. Respondent Bernarda Bacani filed a claim
with petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner
conducted an investigation and its findings prompted it to reject the claim because the insured
did not disclose material facts relevant to the issuance of the policy, thus rendering the contract
of insurance voidable.
Petitioner claimed that the insured gave false statements in his application. Petitioner
discovered those two weeks prior to his application for insurance, the insured was examined
and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure.
The trial court decided in favor of private respondents by concluding that the facts concealed by
the insured were made in good faith and under a belief that they need not be disclosed.
The Court of Appeals affirmed the decision of the trial court by saying that the petitioner cannot
avoid its obligation by claiming concealment because the cause of death was unrelated to the
facts concealed by the insured.
ISSUE:
Whether or not the insurer is liable to the petitioner.
HELD:
The Supreme Court reversed the decision of the Court of Appeals by saying that the information
which the insured failed to disclose was material and relevant to the approval and issuance of
the insurance policy
The Court ruled that the petitioner properly exercised its right to rescind the contract of
insurance by reason of the concealment employed by the insured. It must be emphasized that
rescission was exercised within the two-year contestability period as recognized in Section 48 of
The Insurance Code.

CASE 21
Saturnino v. Philamlife - False Representation
7 SCRA 316
Facts:
2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving
complete removal of the right breast, including the pectoral muscles and the glands, found in the
right armpit. Notwithstanding the fact of her operation, Saturnino did not make a disclosure
thereof in her application for insurance.She stated therein that she did not have, nor had she
ever had, among others listed in the application, cancer or other tumors; that she had not
consulted any physician, undergone any operation or suffered any injury within the preceding 5
years. She also stated that she had never been treated for, nor did she ever have any illness or
disease peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders.
The application also recited that the declarations of Saturnino constituted a further basis for the
issuance of the policy.
Issue:
Whether or not the insured made such false representation of material facts as to avoid the
policy.
Held:
YES.
There can be no dispute that the information given by her in the application for insurance was
false, namely, that she never had cancer or tumors or consulted any physician or undergone
any operation within the preceding period of 5 years. The question to determine is: Are the facts
then falsely represented material? The Insurance Law provides that materiality is to be
determined not by the event, but solely by the probable and reasonable influence of the facts
upon the party to whom the communication is due, in forming his estimate of the proposed
contract, or making his inquiries.The contention of appellants is that the facts subject of the
representation were not material in view of the non-medical nature of the insurance applied for,
which does away with the usual requirement of medical examination before the policy is issued.
The contention is without merit. If anything, the waiver of medical examination renders even
more material the information required of the applicant concerning previous condition of health
and diseases suffered, for such information necessarily constitutes an important factor which
the insurer takes into consideration in deciding whether to issue the policy or not.
Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the
insured herself did not know, since her doctor never told her, that the disease for which she had
been operated on was cancer. In the first place, concealment of the fact of the operation itself
was fraudulent, as there could not have been any mistake about it, no matter what the ailment.

CASE 22

Henson vs. Philam Life

Facts:
Celestino Henson was insured by Philamlife in 1954 upon his application or a 20-yr endowment
life policy. In 1955, the policy lapsed due to non-payment of the premiums. Upon payment of the
premiums due, the policy was reinstated, but in the application for reinstatement, Henson did
not disclose the fact that he had been previously diagnosed for pyelonephritis, enlarged liver
and hernia. He also did not disclose that he had been examined by a physician. In 1956,
Henson died, and his beneficiaries claim was rejected by Philamlife on the ground of
concealment. The company then filed for rescission. Beneficiaries contend that the intent to
conceal must be proven to warrant rescission.

Issue:
Whether or not there is need to prove intent to conceal to warrant rescission.

Held:
NO. Sec. 26 provides that a concealment whether intentional or unintentional entitles the
injured party to rescind the contract of insurance. And aside from this, intent, being a state of
the mind is hard to prove.
According to Sec. 30 of the Insurance Code: Materiality is to be determined not by the event,
but solely by the probable and reasonable influence of the facts upon the party to whom the
communication is due, in forming his estimate of the disadvantages of the proposed contract, or
in making his inquiries. In essence therefore, the insured need not have died of the very
diseases he had failed to reveal to the insurance company. It is sufficient that his non-revelation
had misled the insurer in forming its estimate of the disadvantages of the proposed policy
reinstatement or in making its inquiries, in order to entitle the latter to rescind the contract.

CASE 23

CASE24
Domingo E. Leonor vs Filipinas Compana de Seguros
CA-G.R No. 3659-R January 10, 1950
Facts:
Sometime in January 1946 Federal Films applied to Seguros company to insure their property,
worth 65, 000 Php, Cine Marikina for 50,000 Php fire insurance coverage through its agent
Efronio De leon . After inspection and appraisal Seguros Company notified, through De Leon,
that the company could only insure 30,000Php. Subsequently Federal Films consented , applied
and was accepted for 30, 000 fire insurance coverage good for one year.
The policy contained a condition (Condition No. 3) that Federal films is mandated to inform of
any previous or subsequent insurance that covers Cine Marikina, and furthermore, failure to
inform Compana de Seguros would in effect void the Policy.
Additionally, the policy contained a Rider stating another condition marked as other insurance
clause inquiring and requiring the Consent of Seguros company if there will be additional
insurance to be taken upon the property and failure to secure consent would also void the
Policy. Federal films placed in the rider that it has no other insurance covering Cine Marikina.
However , further into the Facts Federal Films, obtained another insurance policy on the same
day with Rizal Surety to Cover Cine Marikina for 20,000 Php. That both of the policy were
issued on the same day having the same time coverage of one year and that the agent of
Compana de Seguros, De Leon was present in the transactions involving the other Rizal Surety.
On February of that year Cine Marikina was completely destroyed by fire. Subsequently Federal
Films assigned its insurance rights to Domingo E. Leonor. Leonor now is claiming for both of
the insurance policies, but Seguros Company denied the claim contending that Condition No. 3
and other insurance clause was violated hence the policy is void.
Issue: Whether or Not there has been a violation to the conditions of the policy.
Held: No.
Ruling:
1.
Seguros Company had knowledge, through its agent who was present in the transaction
of the other insurance by Rizal Surety. Seguros cannot discount the acts of the agent, Any
information material to the transaction either possessed by the agent at the time of the
transaction or acquired by him before its completion is deemed to be knowledge of the principal,
at least so far as the transaction is concerned, even though in fact the knowledge is not
communicated to the principal.
2.
Rule on Imputed Knowledge: In fire insurance it is a well settled rule that the insurer is
estopped to plead as a defense breach of conditions against other insurance without the
consent of the company, if it appears that the agent who delivered the policy in question had
knowledge of the existence of the other insurance. De Leon, the agent, in this case being
present in the transaction of the other insurance by Rizal surety had knowledge of such
undertaking.

3.
As regards to condition No. 3 there is no violation, as insurance contracts are not strictly
construed but liberally in favour of the insured. The main purpose of such a condition is to
prevent over insurance, being that the property is worth 65, 000 Php and only insured up to
50,000 Php (both policies) there is no violation of over insurance, together with the fact that
Seguros company had knowledge of the other insurance, therefore there is no violation of such
condition.

CASE 25
25.
BUELL
v.
CONNECTICUT
MUT.
LIFE
INS.
CO.
Facts:
This suit is founded upon a policy of insurance upon the life of Jeptha C. Buell, for the benefit of
his wife, the plaintiff. The defendant avers that the answer of Buell in the application were not in
all respects true and correctly stated, but was incorrect and untrue in this, the father of said
Jeptha C. did not die at the age of 58, but he died before he was of the age of 30 years. Wherefore
the
defendant
says
said
policy
was
and
is
void
and
of
no
effect.
Issue:
WON
the
age
of
the
father
at
death
is
a
warranty
or
representation
Ruling:
Statements in the application for insurance in the declaration, or answers to the questions are
either warranties or representations. If warranties then materiality, or want of materiality as to the
risk has nothing to do with the contract. The only question is, were they untrue, and if so the
policy is void. But if representations, then to avoid the policy they must be substantially and
materially untrue, or made for the purpose of fraud. Where the answers are responsive to direct
questions asked by the insurance company, they are to be regarded as warranties, and where they
are not so responsive, but volunteered without being called for, they should be construed to be
mere representations. In this case the age of the father was not called for, and is only voluntarily
given by the plaintiff, thus, it is considered as a mere representation and does not constitute a
defense unless it appears to have been material as well as false.

CASE 26
SEGUNDINA
[G.R.

MUSGI,
No.

ET AL.,
L-41794

vs.

WEST
|

COAST LIFE
August

INSURANCE CO.
30,
1935]

Facts: The plaintiffs, as beneficiaries, brought suit against the defendant to recover the value of
two life insurance policies. Arsenio T. Garcia was insured by the defendant company in the sum
of P5, 000. Arsenio T. Garcia was again insured by the defendant company in the sum of
P10,000. Subsequently, Arsenio died. Even with the demand made by the plaintiffs to the
defendant company to pay the two policies, defendant refused to pay
It is to be noted that in both applications, the insured had to answer inquiries as to his
state of health and that of his family, which he did voluntarily. In each of the said applications the
following question was asked: "1. What physician or practitioner or any other person not named
above have you consulted or been treated by, and for what illness, or ailment? (If none, so
state.)" In the first application, the insured answered "None", and in the second, "No". These
answers of the insured as well as his other statements contained in his applications were one of
the causes or considerations for the issuance of the policies, and they so positively appear
therein. After the death of the insured and as a result of the demand made by the beneficiaries
upon the defendant to pay the value of the policies, the latter discovered that the
aforementioned answers were false and fraudulent, because the truth was that the insured,
before answering and signing the applications and before the issuance of the policies, had been
treated in the General Hospital by a lady physician for different ailments.
The defendant contends that the two policies did not create any valid obligation because
they
were
fraudulently
obtained
by
the
insured.
Issue: Whether the two answers given by the insured in his applications are false, and if they
were the cause, or one of the causes, which induced the defendant to issue the policies?
Ruling: The concealment and the false statements constituted fraud because the defendant by
reason thereof accepted the risk which it would otherwise have flatly refused. When not
otherwise specially provided for by the Insurance Law, the contract of life insurance is governed
by the general rules of the civil law regarding contracts. Article 1261 of the Civil Code provides
that there is no contract unless there should be, in addition to consent and a definite object, a
consideration for the obligation established. And article 1276 provides that the statement of a
false consideration shall render the contract void. The two answers being one of the
considerations of the policies, and it appearing that they are false and fraudulent, it is evident
that the insurance contracts were null and void and did not give rise to any right to recover their
value or amount.
A similar case was already decided by this court in Argente vs. West Coast Life
Insurance Co. (51 Phil., 725). In discussing the legal phase of the case, this court said:
One ground for the rescission of a contract of insurance under the Insurance Act is a
"concealment", which in section 25 is defined as "A neglect to communicate that which a party
knows and ought to communicate".

CASE 27
Tan Chay Heng vs. The West Coast Life Insurance
Facts:
Tan Chay Heng, as beneficiary of Tan Ceang, filed an action for insurance claim against West
Coast on January 4, 1926. On February 27, 1926, defendant made its original Answer
consisting of general and specific denial and was amended on August 31, 1926. In such general
and specific denial, defendant raises the defense of vitiation of consent through fraud; therefore,
it alleges that there was no contract between Tan Ceang and itself to begin with. Tan Chay Heng
filed a demurrer to the special defense of defendant contending that according to Section 47 of
the Insurance Act, whenever a right to rescind a contract of insurance is given to the insurer,
such right must be exercised previous to the commencement of an action on the contract. The
trial court granted the demurrer and rendered a decision in favor of Tan Chay Heng.
Issue:
Whether or not Section 47 of the Insurance Act applies in the case at bar
Ruling:
No. In the instant case, it will be noted that even in its prayer, the defendant does not seek to
have the alleged insurance contract rescinded. It denies that it ever made any contract of
insurance on the life of Tan Ceang or that any such a contract ever existed, and that is the
question which it seeks to have litigated by its special defense. In the very nature of things, if the
defendant never made or entered into the contract in question, there is no contract to rescind,
and, hence, section 47 upon which the lower court based its decision in sustaining the demurrer
does not apply.

CASE 28
EMILIO GONZALES LA O v. THE YEK TONG LIN FIRE AND MARINE INSURANCE CO., LTD.

55 Phil. 386, December 13, 1930

Facts: This case involved an action to recover from defendant, The Yek Tong Lin Fire and
Marine Insurance Co., Ltd., the two insurance policies totaling P100,000 upon leaf tobacco. On
January 11, 1928, a fire destroyed a building on Soler Street No. 188 damaging the leaf tobacco
stored inside. Plaintiff Emilio Gonzales La O, the owner of the leaf tobacco, filed insurance
claims against three insurance companies including the P100,000 from defendant. The lower
court sentenced the defendant to pay the plaintiff the amount P100,000 and legal interest plus
costs. The case reached the Supreme Court where the defendant made several assignments of
error which included the plaintiffs failure to notify the defendant corporation in writing of the
other insurance policies thereby violating Article 3 of the condition of the policies in question.
Thus, according to the defendant, the policies are null and void.
Issue: Whether or not the insurance policies should be rendered null and void for violating
Article 3 of the said policies because of the plaintiff failed to notify the defendant company in
writing of the other insurance policies.
Ruling: No. The defendants answer showed that it had knowledge of the existence of other
policies obtained by the plaintiff from other insurance companies. By way of special defense,
the fact that there exist other policies issued by the companies was mentioned therein. If, with
the knowledge of existence of other insurances which the defendant deemed violations of the
contract, it has preferred to continue the policy, its action amounts to a waiver of the annulment
of the contract, in accordance with the following doctrine in 19 Cyc., 791, 792:.
FAILURE TO ASSERT FORFEITURE IN GENERAL. While the weight of authority
is that a policy conditioned to become void upon a breach of a warranty is void ipso facto
upon such a breach without formal proceedings on the part of the insurer, yet it is true
that such conditions are inserted for the benefit of the insurer and may be waived, and
that the insurer may elect to continue the policy despite the breach. If it does the policy is
revived and restored. Its failure to assert a forfeiture therefore is at least evidence
tending to show a waiver thereof. Many authorities go further, however, and hold that the
failure to assert a forfeiture after knowledge of a ground thereof will amount of itself to
waiver.
The following clause has been inserted with a typewriter in the policies: "Subject to clauses G
and A and other insurances with a special short period attached to this policy." And attached to
said policies issued by the defendant there is a sheet of "Other insurances" with the amount and
the assurance companies in blank, which, according to the plaintiff, constitutes a notification that
there were other insurances existing at the time. Furthermore, the appellant cannot invoke the
violation of article 3 of the conditions of the insurance policies for the first time on appeal, having
failed to do so in its answer; besides, as the appellee correctly contends in his brief, Guillermo
Cu Unjieng, who was then president and majority shareholder of the defendant company, the
Yek Tong Lin Fire & Marine Insurance Co., knew that there were other insurances.

CASE 29
Pacific v CA G.R. No. L-41014 November 28, 1988
J. Paras
Facts:
An open fire insurance policy, was issued to Paramount Shirt Manufacturing by Oriental
Assurance Corporation to indemnify P61,000.00, caused by fire to the factorys stocks,
materials and supplies.
The insured was a debtor of Pacific Banking in the amount of (P800,000.00) and the goods
described in the policy were held in trust by the insured for Pacific Banking under trust receipts.
The policy was endorsed to Pacific Banking as mortgagee/ trustor of the properties insured, with
the knowledge and consent of private respondent to the effect that "loss if any under this policy
is payable to the Pacific Banking Corporation".
A fire broke out on the premises destroying the goods contained in the building.
The bank sent a letter of demand to Oriental for indemnity.
The company wasnt ready to give since it was awaiting the adjusters report.
The company then made an excuse that the insured had not filed any claim with it, nor
submitted proof of loss which is a clear violation of Policy Condition No.11, as a result,
determination of the liability of private respondent could not be made.
Pacific Banking filed in the trial court an action for a sum of money for P61,000.00 against
Oriental Assurance.
At the trial, petitioner presented communications of the insurance adjuster to Asian Surety
revealing undeclared co-insurances with the following: P30,000 with Wellington Insurance;
P25,000 with Empire Surety and P250,000 with Asian Surety undertaken by insured Paramount
on the same property covered by its policy with Oriental whereas the only co-insurances
declared in the subject policy are those of P30,000.00 with Malayan P50,000.00 with South Sea
and P25.000.00 with Victory.
The defense of fraud, in the form of non-declaration of co-insurances which was not pleaded in
the answer, was also not pleaded in the Motion to Dismiss.
The trial court denied the respondents motion. Oriental filed another motion to include
additional evidence of the co-insurance which could amount to fraud.
The trial court still made Oriental liable for P 61,000. The CA reversed the trial court decision.
Pacific Banking filed a motion for reconsideration of the said decision of the respondent Court of
Appeals, but this was denied for lack of merit.
Issues:

1. WON unrevealed co-insurances Violated policy conditions No. 3

2. WON the insured failed to file the required proof of loss prior to court action.
Held: Yes. Petition dismissed.
Ratio:
1. Policy Condition No. 3 explicitly provides:
3. The Insured shall give notice to the Company of any insurance already effected, or which
may subsequently be effected, covering any of the property hereby insured, and unless such
notice be given and the particulars of such insurance or insurances be stated in or endorsed on
this Policy by or on behalf of the Company before the occurrence of any loss or damage, all
benefit under this policy shall be forfeited.
The insured failed to reveal before the loss three other insurances. Had the insurer known that
there were many co-insurances, it could have hesitated or plainly desisted from entering into
such contract. Hence, the insured was guilty of clear fraud.
Concrete evidence of fraud or false declaration by the insured was furnished by the petitioner
itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other
Insurance Clause" are materially different from the actual number of co-insurances taken over
the subject property.
As the insurance policy against fire expressly required that notice should be given by the
insured of other insurance upon the same property, the total absence of such notice nullifies the
policy.
Petitioner points out that Condition No. 3 in the policy in relation to the "other insurance clause"
supposedly to have been violated, cannot certainly defeat the right of the petitioner to recover
the insurance as mortgagee/assignee. Hence, they claimed that the purpose for which the
endorsement or assignment was made was to protect the mortgagee/assignee against any
untoward act or omission of the insured. It would be absurd to hold that petitioner is barred from
recovering the insuranceon account of the alleged violation committed by the insured.
It is obvious that petitioner has missed all together the import of subject mortgage clause which
specifically provides:
Loss, if any, under this policy, shall be payable to the PACIFIC BANKING CORPORATION
Manila mortgagee/trustor as its interest may appear, it being hereby understood and agreed that
this insurance as to the interest of the mortgagee/trustor only herein, shall not be invalidated by
any act or neglectexcept fraud or misrepresentation, or arsonof the mortgagor or
owner/trustee of the property insured; provided, that in case the mortgagor or owner/ trustee
neglects or refuses to pay any premium, the mortgagee/ trustor shall, on demand pay the
same.

The paragraph clearly states the exceptions to the general rule that insurance as to the interest
of the mortgagee, cannot be invalidated; namely: fraud, or misrepresentation or arson.
Concealment of the aforecited co-insurances can easily be fraud, or in the very least,
misrepresentation.
Undoubtedly, it is but fair and just that where the insured who is primarily entitled to receive the
proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right.
Petitioner further stressed that fraud which was not pleaded as a defense in private
respondent's answer or motion to dismiss, should be deemed to have been waived. It will be
noted that the fact of fraud was tried by express or at least impliedconsent of the parties.
Petitioner did not only object to the introduction of evidence but on the contrary, presented the
very evidence that proved its existence.
2. Generally, the cause of action on the policy accrues when the loss occurs, But when the
policy provides that no action shall be brought unless the claim is first presented extrajudicially
in the manner provided in the policy, the cause of action will accrue from the time the insurer
finally rejects the claim for payment
In the case at bar, policy condition No. 11 specifically provides that the insured shall on the
happening of any loss or damage give notice to the company and shall within fifteen (15) days
after such loss or damage deliver to the private respondent (a) a claim in writing giving particular
account as to the articles or goods destroyed and the amount of the loss or damage and (b)
particulars of all other insurances, if any.
Twenty-four days after the fire did petitioner merely wrote letters to private respondent to serve
as a notice of loss. It didnt even furnish other documents. Instead, petitioner shifted upon
private respondent the burden of fishing out the necessary information to ascertain the particular
account of the articles destroyed by fire as well as the amount of loss. Since the required claim
by insured, together with the preliminary submittal of relevant documents had not been complied
with, it follows that private respondent could not be deemed to have finally rejected petitioner's
claim and therefore there was no cause of action.
It appearing that insured has violated or failed to perform the conditions under No. 3 and 11 of
the contract, and such violation or want of performance has not been waived by the insurer, the
insured cannot recover, much less the herein petitioner.

CASE 30
EMILIO TAN vs. COURT OF APPEALS G.R. No. 48049, 29 June 1989
FACTS: Tan Lee Siong, father of herein petitioners, applied for life insurance in the amount of
P80,000.00 with respondent company Philippine American Life Insurance Company. Said
application was approved and a corresponding policy was issued effective November 5, 1973,
with petitioners as the beneficiaries. On April 26, 1975, Tan Lee Siong died of hepatoma. Hence,
petitioners filed with respondent company their claim for the proceeds of the life insurance
policy. However, the insurance company denied the said claim and rescinded the policy by
reason of the alleged misrepresentation and concealment of material facts made by the
deceased Tan Lee Siong in his application for insurance. The premiums paid on the policy were
thereupon refunded. The petitioners contend that the respondent company no longer had the
right to rescind the contract of insurance as rescission must allegedly be done during the
lifetime of the insured within two years and prior to the commencement of action.
ISSUE: Whether or not the insurance company has the right to rescind the contract of insurance
despite the presence of an incontestability clause
HELD:
YES. The so-called incontestability clause precludes the insurer from raising the defenses of
false representations or concealment of material facts insofar as health and previous diseases
are concerned if the insurance has been in force for at least two years during the insureds
lifetime. The phrase during the lifetime found in Section 48 of the Insurance Law simply means
that the policy is no longer considered in force after the insured has died. The key phrase in the
second paragraph of Section 48 is for a period of two years. The policy was issued on
November 6, 1973 and the insured died on April 26, 1975. The policy was thus in force for a
period of only one year and five months. Considering that the insured died before the two-year
period has lapsed, respondent company is not, therefore, barred from proving that the policy is
void ab initio by reason of the insureds fraudulent concealment or misrepresentation. Moreover,
respondent company rescinded the contract of insurance and refunded the premiums paid on
November 11, 1975, previous to the commencement of this action on November 27, 1975.
WHEREFORE, the petition is hereby DENIED for lack of merit. The questioned decision of the
Court of Appeals is AFFIRMED.

CASE 31
Tang

v.

CA

90 SCRA 236, May 25, 1979

FACTS: Lee Su Guat, 61 years old,

was a widow. She was illiterate and spoke only Chinese. On

September 25, 1965, she applied for life insurance for P60,000.00 with Philamlife. The application was in
two parts, both in English language.
The second part dealt with her state of health.

Her answers having shown that she was healthy,

Philamlife issued her a policy which is effective on October 23, 1965 with her nephew Vicente Tang as
beneficiary.
On November 15, 1965, Lee again applied for additional insurance of her life for P40,000. 00. Since it
was only recent from the time she first applied, no further medical exam was made but she accomplished
Part 1 (which certified the truthfulness of statements made in Part. 2)
The policy was again approved. On April, 20 1966, Lee Su Guat died of Lung cancer.
Tang claimed the amount of P100,000.00 but Philamlife refused to pay on the ground that the insured was
guilty of concealment and misrepresentation.
Both the trial court and the CA ruled that Lee was guilty of concealment. There is no doubt that she
deliberately concealed material facts about her physical condition and history.
However, Tangs position is that Lee was illiterate and spoke only Chinese and the application for
insurance was in English so she could not be held guilty of concealment of her health history.
Furthermore, the insurer has not proven that the terms thereof had been fully explained to her as provided
by

Art.

1332

of

CC.

The

said

article

When one of the parties is unable to read, or if the contract is in a language

provides

not understood

by him, and mistake/fraud is alleged, the person enforcing the contract must show that the terms of
thereof have been fully explained to the former.
ISSUE: Whether or not Art. 1332 of CC is applicable to this case
RULING:

No, Art. 1332 is NOT applicable here. The insurance company is NOT seeking to enforce

the contract; on the contrary, it is seeking to avoid its performance.

It is petitioner who is seeking to enforce it, even as fraud or mistake is NOT alleged. Accordingly,
Philamlife was under no obligation to prove that the terms of the insurance contract were fully explained
to the other party. Even if we were to say that the insurer is the one seeking the performance of the
contracts by avoiding paying the claim, it has to be noted as above stated that there has been NO
imputation of mistake of fraud by the illiterate insured whose personality is represented by her beneficiary.
In sum, Art. 1332 is inapplicable, and considering the findings of both the trial court and the CA as to the
Concealment of Lee, the SC affirms their decisions.

CASE 32
Insurance Case Digest: Bonifacio Bros., Inc. V. Mora (1967)
FACTS:
Enrique Mora, owner of Oldsmobile sedan model 1956, mortgaged it to H.S. Reyes, Inc.,
with the condition that they would be the beneficiary of its insurance. On June 23, 1959,
the sedan was insured with State Bonding & Insurance Co., Inc. During the period of
effectivity, the sedan met an accident and it was appraised by Bayne Adjustment Co. and
repaired it with Bonifacio Bros. and the parts were supplied by Ayala Auto Parts Co. This
was all done without the knowledge of H.S. Reyes. Enrique was billed P2,102.73 through
Bayne. The insurance company drew a check deducting P100 for franchise and
entrusted it to Bayne payable to Enrique or H.S. Reyes.
Still unpaid, the sedan was delivered to Enrique without the Knowledge of H.S. Reyes.
Bonifacio Bros and Ayala Auto filed in the MTC on the theory that the insuranceproceeds
should be paid directly to them. CFI affirmed MTC: H.S. Reyes, Inc. as having a better
right
ISSUE: W/N there is privity between Bonifacio Bro and Ayala Auto against the insurance
company
HELD: NO. Judgment affirmed. General rule is that contracts take effect only between
the parties thereto. However, the exceptions are some specific instances provided by law
where the contract contains some stipulation in favor of a third person - stipulation pour
autrui. Provision in favor of a third person not a party to the contract. The third person is
allowed to avail himself of a benefit granted to him by the terms of the contract, provided
that the contracting parties have clearly and deliberately conferred a favor upon such
person. Stipulation pour autrui must be clearly expressed - none here. "Loss payable"
clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc."
indicating that it was only the H.S. Reyes, Inc. which they intended to benefit. Stipulation
merely establishes the procedure that the insured has to follow in order to be entitled to
indemnity for repair.
A policy of insurance is a distinct and independent contract between the insured and
insurer, and third persons have no right either in a court of equity, or in acourt of law, to
the proceeds of it, unless there be some contract of trust, expressed or implied between
the insured and third person. "Loss" in insurance law embraces injury or damage. The
injury or damage sustained by the insured in consequence of the happening of one or
more of the accidents or misfortune against which the insurer, in consideration of the
premium, has undertaken to indemnify the insured

CASE 33
Guingon vs Del Monte
FACTS:
Julio Aguilar owned and operated several jeepneys. He entered into a contract with the Capital
Insurance & Surety Co., Inc. insuring the operation of his jeepneys against accidents with thirdparty liability. Iluminado del Monte, one of the drivers of the jeepneys operated by Aguilar,
bumped with the jeepney abovementioned one Gervacio Guingon who had just alighted from
another jeepney and as a consequence the latter died some days thereafter. The heirs of
Gervacio Guingon filed an action for damages praying that the sum of P82,771.80 be paid to
them jointly and severally by the defendants, driver Iluminado delMonte, owner and operator
Julio Aguilar, and the Capital Insurance & Surety Co., Inc. for failure to answer the complaint,
Del Monte and Aguilar were declared in default. Capital Insurance & Surety Co., Inc. answered,
alleging that the plaintiff has no cause of action against it. Capital Insurance & Surety Co.
contends that the "no action" clause in the policy closes the avenue to any third party which may
be injured in an accident wherein the jeepney of the insured might have been the cause of the
injury of third persons, alleging the freedom of contracts.
Issue:
WON the heirs of Guingon have a cause of action against Capital Insurance
RULING:
Yes. Clearly, therefore, it is one for indemnity against liability; from the fact then that the insured
is liable to the third person; such third person is entitled to sue the insurer. The right of the
person injured to sue the insurer of the party at fault (insured), depends on whether the contract
of insurance is intended to benefit third persons also or only the insured. And the test applied
has been this: Where the contract provides for indemnity against liability to third persons, then
third persons to whom the insured is liable, can sue the insurer. The policy requires, as aforestated, that suit and final judgment be first obtained against the insured; that only "thereafter"
can the person injured recover on the policy; it expressly disallows suing the insurer as a codefendant of the insured in a suit to determine the latter's liability. The "no action" clause in the
policy of insurance cannot prevail over the Rules of Court provision aimed at avoiding
multiplicity of suits. Similarly, in the instant suit, Sec. 5 of Rule 2 on "Joinder of causes of action"
and Sec. 6 of Rule 3 on "Permissive joinder of parties" cannot be superseded, at least with
respect to third persons not a party to the contract, as herein, by a "no action" clause in the
contract of insurance.

CASE 34
G.R.
No.
L-23276
November
29,
1968
MELECIO COQUIA, MARIA ESPANUEVA and MANILA YELLOW TAXICAB CO., INC.,
plaintiffs-appellees,
vs.
FIELDMEN'S
INSURANCE
CO.,
INC.,
defendant-appellant.
FACTS:
On December 1, 1961, appellant Company issued, in favor of the Manila Yellow Taxicab Co.,
Inc. the Insured a common carrier accident insurance policy, covering the period from
December 1, 1961 to December 1, 1962. While the policy was in force, or on February 10,
1962, a taxicab of the Insured, driven by Carlito Coquia, met a vehicular accident, in
consequence of which Carlito died. The Insured filed therefor a claim for P5,000.00 to which the
Company replied with an offer to pay P2,000.00, by way of compromise. The Insured rejected
the same and made a counter-offer for P4,000.00, but the Company did not accept it. Hence, on
September 18, 1962, the Insured and Carlito's parents, namely, Melecio Coquia and Maria
Espanueva filed a complaint against the Company to collect the proceeds of the policy. The trial
court rendered a decision sentencing the Company to pay P4,000.00. Hence, this appeal by the
Company.
ISSUE:
Whether the parents of Carlito Coquia has cause of action against the Company.
RULING:
Yes.It should be noted that, although, in general, only parties to a contract may bring an
action based thereon, this rule is subject to exceptions, if a contract should contain
some stipulation pour autrui. The enforcement of which may be demanded by a third
party for whose benefit it was made, although not a party to the contract, before the
stipulation in his favor has been revoked by the contracting parties. Pursuant to the
contract, the Company will indemnify any authorized Driver who is driving the Motor
Vehicle of the Insured and, in the event of death of said driver, the Company shall,
likewise, indemnify his personal representatives. In fact, the Company may, at its option,
make indemnity payable directly to the claimants or heirs. Thus, the policy under
consideration is typical of contracts pour autrui, this character being made more
manifest by the fact that the deceased driver paid fifty percent (50%) of the
corresponding premiums, which were deducted from his weekly commissions. Under
these conditions, it is clear that the parents of Carlito Coquia the sole heirs of the
deceased have a direct
cause of action against
the Company.

CASE 35
PAULO ANG and SALLY C. ANG vs. FULTON FIRE INSURANCE CO., ET AL.,
G.R. No. L-15862
July 31, 1961
FACTS:
On September 9, 1953, Fulton issued a Fire policy in favor of P. & S Department Store (Sally C.
Ang) over stocks of general merchandise, which were contained in a building occupied by the
Sps. at Laoag, Ilocos Norte. The premium is P500.00 annually. The insurance was issued for
one year, but the same was renewed for another year on September 31, 1954. 3 months after,
the store containing the goods insured was destroyed by fire. The Sps. then first claim was
denied on April 6, 1956. It should also be noted that on January 13, 1955, Paulo Ang and 10
others were charged for arson but was acquitted.
Fulton alleged that the loss by the fire was not accidental and was occasioned by the willful act
of the plaintiff Paulo Ang himself. It claims that under paragraph 13 of the policy, if the loss or
damage is occasioned by the willful act of the insured, or if the claim is made and rejected but
no action is commenced within 12months after such rejection, all benefits under the policy
would be forfeited, and that since the claim of the plaintiffs was denied and plaintiffs received
notice of denial on April 18, 1956, and they brought the action only on May 5, 1958, all the
benefits under the policy have been forfeited.
Issue: WON the filing of the previous suit tolled or suspended the running of the prescriptive
period
Held: The condition contained in the insurance policy that claims must be presented within one
year after rejection is not merely a procedural requirement. The condition is an important matter,
essential to a prompt settlement of claims against insurance companies. It is in the nature of a
condition precedent to the liability of the insurer, or in other terms, a resolutory cause, the
purpose of which is to terminate all liabilities in case the action is not filed by the insured within
the period stipulated. The bringing of the action against the Paramount Surety & Insurance
Company, the agent of the defendant Company cannot have any legal effect except that of
notifying the agent of the claim. Beyond such notification, the filing of the action can serve no
other purpose. There is no law giving any effect to such action upon the principal. Besides, there
is no condition in the policy that the action must be filed against the agent, and this Court cannot
by interpretation, extend the clear scope of the agreement beyond what is agreed upon by the
parties.

CASE 36
Summit Guaranty and Insurance Company v.
Hon. Jose C. De Guzman, in his capacity as presiding judge of Branch 3, CFI Tarlac, Geronima
Pulmano and Ariel Pulmano
Facts:
This is a consolidated case involving three cases wherein different insurance claims
were filed against the petitioner Summit. In all claims, the petitioner merely gave an assurance
that it will pay but it never took any steps to settle said claims. This prompted the respondents to
file a complaint in court which the petitioner moved to dismiss on the ground of prescription. The
petitioner contends that the law prscribes a six-month period for filing a notice of claim and a
one-year period for bringing an action, both of which must concur. It is therefore submitted that
even if a notice of claim was timely filed as in these cases, the action or suit that follows, if filed
beyond the one-year period must be dismissed for prescription.
Issue:
Whether the action has already prescribed.
Ruling:
No, it has not yet prescribed and the petition must be dismissed. The court once laid
down the rule that the one-year requirement after rejection of the claim is not merely a
procedural requirement but an important matter essential to the prompt settlement of claims
against insurance companies, as it demands that insurance suits be brought by the insured
while evidence as to the cause and origin of destruction have not yet disappeared.
The aforementioned principle, however, has no application in this case because there
was no rejection of the claims in these cases. The one-year period shouls be counted from the
date of rejection by the insurer as this is the time when the cause of action accrues. In this case,
the respondents were merely made to believe that the claims will be settled. Therefore, the
petition is dismissed.

CASE 37
MAYER STEEL PIPE CORP. vs CA
FACTS:
Petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer
Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. Prior
to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private
respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance
Corp. (Charter).
When the goods reached Hongkong, it was discovered that a substantial portion thereof was
damaged. Petitioners filed a claim against private respondents for indemnity under the
insurance contract. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75.
Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair
of the damaged pipes. Private respondents refused to pay because the insurance surveyor's
report allegedly showed that the damage is a factory defect.
Petitioners filed an action against private respondents. The trial court ruled in favor of
petitioners. It found that the damage to the goods is not due to manufacturing defects. It also
noted that the insurance contracts executed by petitioner Mayer and private respondents are "all
risks" policies which insure against all causes of conceivable loss or damage. CA affirmed the
findings of the trial court but set aside its decision and dismissed the complaint on the ground of
prescription.
ISSUE:
WON petitioner's right of action has prescribed
RULING:
NO.
Under Section 3(6) of the Carriage of Goods by Sea Act, only the carrier's liability is
extinguished if no suit is brought within one year. But the liability of the insurer is not
extinguished because the insurer's liability is based not on the contract of carriage but on the
contract of insurance. Carriage of Goods by Sea Act does not affect the relationship between
the shipper and the insurer. The latter case is governed by the Insurance Code.
The ruling in the Filipino Merchants case cited by respondents should apply only to suits against
the carrier filed either by the shipper, the consignee or the insurer. When the court said in
Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer,
it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond
the one-year period provided in the law. But it does not mean that the shipper may no longer file
a claim against the insurer because the basis of the insurer's liability is the insurance contract.
When private respondents issued the "all risks" policies to petitioner Mayer, they bound
themselves to indemnify the latter in case of loss or damage to the goods insured. Such
obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.

CASE 38
MALAYAN INSURANCE CO. INC v. CRUZ ARNALDO 154 SCRA 672
Facts: On June 7, 1981 Malayan Insurance Co. Inc. (MICO) issued a Fire Insurance Policy to
Coronacion Pinca over her property in the amount of P100,000.00 effective July 22, 1981 to
July 22, 1982. On October 15, 1981, MICO cancelled the said policy for Pincas failure to pay
the premium. But on December 24, 1981 Pinca made payment to Domingo Adora, a MICO
agent, which was received and accepted by him. This payment, together with other payments
received by him, was remitted to MICO on January 15, 1982. On January 18, 1982, Pincas
property was completely burned. On February 5, 1982 Pincas payment was returned by MICO
to Adora on the ground that her policy had been cancelled earlier. But Adora refused to accept
the returned payment. Insurance Commission ruled in favor of Pinca. (Although, this petition
was denied by the Supreme Court for having filed beyond the reglementary period, it also ruled
on the merit of the case.)
Issue: Whether or not MICO is liable to indemnify Pinca.
Ruling: Yes. MICO cannot deny the claim as payment was received by Domingo Adora, MICOs
agent even if it was done 6 months later. MICO acknowledged that Adora is one of their agents.
The receipt of such payment by Adora suggests an understanding between MICO and the
insured that such payment could be made later. Reliance of the petitioner of Sec.77 of the
Insurance Code will not hold water as there was actually payment made. It is a well-known
principle in agency that payment to its authorized agent is payment to the principal. Had the
payment was not accepted by reason of cancellation, Pinca was willing to apply for a new
policy. MICO was not able to prove that indeed there was due notice of cancellation to the
insured, as required under Sec. 64 of the Insurance Code. The witness presented by the
petitioner only pointed out that it was mailed through the mailing section. No other proof was
shown. Pinca flatly denied receipt of such notice. MICO has the burden of proof that indeed
prior notice was sent and received by the insured as requirement of the law.
In this case, there is an obvious design to evade or at least delay the discharge of just obligation
through efforts bordering on bad faith if not plain duplicity. The fact that Pincas payment was
remitted by its agent to MICO on January 15, 1982, MICO only sought to return said payment
on February 5, 1982 after learning the occurrence of the loss insured against.

CASE
G.R.
K.
vs.
THE

39Young-vs.-Midland-Textile-Insurance-Company.docx
No.

L-9370

March

S.
MIDLAND

YOUNG,
TEXTILE

INSURANCE

31,

1915

plaintiff-appellee,
COMPANY,

defendant-appellant

Facts:
The plaintiff owns a candy and fruit store in the city of Manila. He occupied a building as
a residence and bodega (storehouse). On May 1912, he entered into a contract of
insurance with the defendant by the terms of which the latter, upon certain conditions,
promised to pay the plaintiff the sum of P3,000 in case said residence and bodega and
contends should be destroyed by fire. Warranty B in the contract of insurance provides
that they agreed that no hazardous goods stored or kept for sale and no hazardous trade
or process be carried on in the building to which the insurance applies or in any building
connected
therewith.
On February 1913, the plaintiff placed in said residence and bodega three boxes which
were filled with fireworks. Such fireworks was given by the former owner of the Candy
Store to use it in the celebration for Chinese new year but the authorities of the city of
Manila prohibited the use of fireworks on the said occasion. On March, 1913, said
residence and bodega and the contents thereof were partially destroyed by fire. Both of
the parties agree that said fireworks come within the phrase hazardous goods
mentioned in warranty B of the policy. The fireworks were found in a part of the
building not destroyed by the fire and that they in no way contributed to the fire or to the
loss occasioned thereby. The plaintiff filed a case to recover the sum of P3,000 upon the
insurance
company.
The lower court rendered a judgment in favor of the plaintiff stating that Warranty B in
the insurance contract provides that no hazardous goods be stored in the building
insured. Both of the parties agreed that if there were hazardous goods and if they were
stored, then the act of the plaintiff was a violation of the terms of the contract of
insurance and the defendant was justified in repudiating its liability thereunder. Nearly all
cases decided by lower courts are cases where the article was being put to some
reasonable and actual use which might easily have been permitted by the terms of the
policy, and within the intention of the parties, are exempted from the operation of the
warranty,
like
the
present.
Said
decisions
are
upon
cases
like:
1. Where merchants have had or kept the hazardous articles in small quantities, and for

actual

daily

use,

for

safe,

such

as

gasoline,

gunpowder,

etc.;

2. Where such articles have been brought on the premises for actual use thereon, and in
small
quantities,
such
as
oil,
paints,
etc.;
and
3. Where such articles or goods were used for lightning purpose, and in small quantities.
The word store is defined as a deposit in a store or warehouse for preservation or
safekeeping. It does not include a deposit in a store, in small quantities for daily use.
Daily use precludes the idea of a deposit for preservation or safe keeping, as well as a
deposit for future consumption or safe keeping. The lower court contends that no claim
is made that the hazardous goods were placed in the bodega for present or daily use. It
is admitted that they were placed in the bodega for future use or for future
consumption or for safekeeping. From this judgment, the defendant appealed to the
Supreme
Court.
Issue:
Whether or not the placing of the said fireworks in the building insured is a violation of
the terms of the contract of insurance, especially of warranty B which provides that no
hazardous
goods
be
stored.
Ruling:
Contract of insurance are contracts of indemnity upon the terms and conditions
specified in the policy. The parties have a right to impose such reasonable conditions at
the time of the making of the contract as they may deem wise and necessary. The rate of
the premium is measured by the character of the risk assumed. The terms of the policy
constitute the measure of the insurers liability, and in order to recover the insured, he
must show himself within those terms, and if it appears that the contract has been
terminated in violation, on the part of the insured, of its condition, then there can be no
right of recovery. The compliance of the insured with the terms of the contract is a
condition
precedent
to
the
right
of
recovery.
The violation of the terms of the contract, by virtue of the provisions of the policy itself,
terminated, at the election of either party, the contractual relations. The plaintiff plaid a
premium based upon the risk at the time the policy was issued. Certainly, it cannot be
denied that the placing of the fireworks in the building insured increased the risk. An
increase of the risk which is substantial and which is continued for a considerable period
of time, is a direct and certain injury to the insurer, and changes the basis upon which
the contract of the insurance rests.
Therefore, the judgment of the lower court is revoked and the defendant is relieved from
responsibility.

CASE 40

CASE 41
Makati Tuscany Condominium Corporation vs. Court of Appeals [GR 95546, 6 November
1992]
Facts: Sometime in early 1982, American Home Assurance Co. (AHAC) issued in favor of
Makati Tuscany Condominium Corporation (Tuscany) Insurance Policy on the latter's building
and premises, for a period beginning March 1, 1982 and ending March 1, 1983, with a total
premium of 466,103.05. The initial insurance contract entered into in 1982 was renewed in
1983, then in 1984. On 20 January 1984, on the renewed policy, Tuscany made two installment
payments, both accepted by AHAC, the first on 6 February 1984 for P52,000.00 and the
second, on 6 June 1984 for P100,000.00. Thereafter, Tuscany refused to pay the balance of the
premium. AHAC filed an action to recover the unpaid balance of P314,103.05. In its
counterclaim, Tuscany explained that it discontinued the payment of premiums because the
policy did not contain a credit clause in its favor and the receipts for the installment payments
covering the policy for 1984-85, as well as the two (2) previous policies, stated the following
reservations: (2) Acceptance of this payment shall not waive any of the company rights to deny
liability on any claim under the policy arising before such payments or after the expiration of the
credit clause of the policy; and (3) Subject to no loss prior to premium payment. If there be any
loss such is not covered. Tuscany claimed that the policy was never binding and valid, and no
risk attached to the policy. It then pleaded a counterclaim for P152,000.00 for the premiums
already paid for 1984-85, sought the refund of 924,206.10 representing the premium payments
for 1982-85. The trial court dismissed the complaint and the counterclaim. The Court of Appeals
rendered a decision modifying that of the trial court by ordering Tuscany to pay the balance of
the premium.
Issue: Whether payment by installment of the premiums due on an insurance policy invalidates
the contract of insurance.
Ruling: NO. The subject policies are valid even if the premiums were paid on installments. The
records show that Tuscany and AHAC intended the insurance policies to be binding and
effective notwithstanding the staggered payment of the premiums. In those 3 years, the insurer
accepted all the installment payments. Such acceptance of payments signified the insurer's
intention to honor the policies issued. Thus, while the import of Section 77 is that prepayment of
premiums is strictly required as a condition to the validity of the contract, the Court was not
prepared to rule that the request to make installment payments duly approved by the insurer,
would prevent the entire contract of insurance from going into effect despite payment and
acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect
allows waiver by the insurer of the condition of prepayment by making an acknowledgment in
the insurance policy of receipt of premium as conclusive evidence of payment so far as to make
the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes
the parties from stipulating that the policy is valid even if premiums are not paid, but does not
expressly prohibit an agreement granting credit extension, and such an agreement is not

contrary to morals, good customs, public order or public policy. So is an understanding to allow
insured to pay premiums in installments not so proscribed. Tuscany may not be allowed to
renege on its obligation to pay the balance of the premium after the expiration of the whole term
of the third in March 1985. Moreover, where the risk is entire and the contract is indivisible, the
insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk
insured for any period, however brief or momentary.

CASE 42
Philippine Pryce Assurance Corp. v. CA G.R. No. 107062 February 21, 1994
FACTS: Gegroco, Inc filed for a collection of the issued surety bond for P500K and P1M by
Interworld Assurance Corporation (now Philippine Pryce Assurance Corporation) in behalf of its
principal Sagum General Merchandise. RTC favored Gegroco, Inc; CAaffirmed the ruling of
RTC.Interworld: checks issued by its principal which were supposed to pay for thepremiums
bounced and it was not yet authorized by the Insurance Commissionto issue surety bonds.
ISSUE: W/N Interworld Assurance Corp. should be liable for the surety bond that it issued as
payment for the premium
HELD: YES.
Interworld did not and never attempted to pay the requisite docket fee and was not
present during the scheduled pre-trial so it is as if third-party complaint was never filed
Sec. 177. The surety is entitled to payment of the premium as soon as the contract of
suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or
bonding shall be valid and binding unless and until the premium therefor has been paid, except
where the obligee has accepted the bond, in which case the bond becomes valid and
enforceable irrespective of whether or not the premium has been paid by the obligor to the
surety
Interworld's defense that it did not have authority to issue a Surety Bond when it did is an
admission of fraud committed against Gegroco. No person can claim benefit from the wrong he
himself committed. A representation made is rendered conclusive upon the person making it
and cannot be denied or disproved as against the person relying thereon.

CASE 43
G.R. No. L-4197
March 20, 1952
FIDELA SALES DE GONZAGA v. CROWN LIFE INSURANCE COMPANY
Key phrases: Non-payment of premiums by reason of war; Insurer (an enemy corporation)
however maintained secret offices to collect premiums from policy holders
FACTS
On September 26, 1939, Ramon Gonzaga obtained a 20-year endowment policy from Crown Life
Insurance of Canada for P15, 000.00. Gonzaga paid in due time the agreed annual premium for 3
consecutive years. However, the payments were stopped on account of the outbreak of war
(WWII). Insurer however maintained clandestine offices during the whole duration of the war.
Gonzaga died on June 27, 1947. Surviving spouse now wants to claim from the policy.
ISSUE
Can the surviving spouse claim the proceeds of the policy?
HELD
No. Non-payment of premiums by reason of war puts an end to the contract of insurance. Time is
material and of the essence of the contract. Non-payment at the day involves absoute forfeiture if
such be the terms of the contract. Courts cannot with safety vary the stipulation of the parties by
introducing equities for the relief of the insured against their own negligence.
Where the offices of the insurer, being an enemy corporation, were ordered closed by the
Japanese, but were opened clandestinely for the purposes of collecting the premiums from policy
holders, the failure of insurer to advise the insured of the new address did not work as a forfeiture
of its right to have the premiums satisfied promptly.

CASE 44
Insurance Case Digest: Philippine Phoenix Surety & Insurance Co. V. Woodworks Inc
(1979)
FACTS:
On July 21, 1960, Woodworks, Inc. was issued a fire policy for its building machinery and
equipment by Philippine Phoenix Surety & Insurance Co. for P500K covering July 21,
1960 to July 21, 1961. Woodworks did not pay the premium totalling to P10,593.36. It was
alleged that Woodworks notified Philippine Phoenix the cancellation of the Policy so
Philippine Phoenix credited P3,110.25 for the unexpired period of 94 days and demanded
in writing the payment of P7,483.11. Woodworks refused stating that it need not pay
premium "because the Insurer did not stand liable for any indemnity during the period
the premiums were not paid."
Philippine Phoenix filed with the CFI to recover its earned premium of P7,483.11. CFI:
favored Philippine Phoenix
ISSUE: W/N there was a valid insurance contract despite no premium payment was paid
RULING: NO. Reversed
Policy provides for pre-payment of premium. To constitute an extension of credit there
must be a clear and express agreement therefore and there must be acceptance of the
extension- there is none in the case at bar. Since the premium had not been paid, the
policy must be deemed to have lapsed. Failure to make a payment of a premium or
assessment at the time provided for, the policy shall become void or forfeited, or the
obligation of the insurer shall cease, or words to like effect, because the contract so
prescribes and because such a stipulation is a material and essential part of the contract.
This is true, for instance, in the case of life, health and accident, fire and hail insurance
policies
Explicit in the Policy itself is plaintiff's agreement to indemnify defendant for loss by fire
only "after payment of premium" Compliance by the insured with the terms of the
contract is a condition precedent to the right of recovery. The burden is on an insured to
keep a policy in force by the payment of premiums, rather than on the insurer to exert
every effort to prevent the insured from allowing a policy to elapse through a failure to
make premium payments.

CASE 45
FLOREA ET AL. V. IOWA STATE INS. CO
FACTS: The policy was issued by defendant to one Elliott, insuring the property described
therein against loss by fire or windstorm.
Among the several clauses of the policy was the provision that the entire policy should be void if
the interest of the insured be other than an unconditional and sole ownership; or if the building
therein described should be or become vacant or unoccupied, and so remain for ten days.
Thereafter the property was sold by Elliott to one Klote by whom it was in turn conveyed by
general warranty deed to plaintiff Florea.
The building was totally destroyed by fire.
Florea has sued as the insured and owner of the property described in the petition at the time of
the loss,
Two defenses were interposed and relied upon by defendant in its answer, the first of which was
that the policy was void, in that Florea, before the loss was sustained, had executed a contract
of purchase and sale with one Murphy.
The second defense was that the property became and remained vacant and unoccupied for
more than ten days prior to the fire, on account of which fact the policy became null and void.
ISSUE: W/N Florea can claim from the insurance policy.
RULING: Yes. On the first defense, such contract with Murphy was not completed. Plaintiffs'
evidence showed that the contract was subsequently abandoned by mutual consent.
On the second defense, if the words used are of doubtful meaning, or if an ambiguity exists
which is fairly susceptible of different interpretations, then that construction will be adopted
which is most favorable to the policyholder. The house was not vacant within the meaning of the
policy, for the evidence shows that a substantial portion of the tenant's household goods were
yet in it at the time of the fire, and were destroyed along with it.

CASE 46
GR NO 81025 APRIL 3, 1990
PAN MALAYAN INSURANCE CORPORATION, petitioner v CA, Erlinda Fabie and her unknown
driver, respondents
Facts: Petitioner PANMALAY was an insurer of the car of CANLUBANG AUTOMOTIVE
RESOURCE CORP. which was hit and suffered damages in the amount of P42,052 by the
private respondent throught its negligent driver. Petitioner PANAMALAY paid the amount of
insurance and subrogated on the rights of CANLUBANG against the driver of the pick-up and
his employer, Erlinda Fabie. Thereafter, petitioner repeatedly demanded payment from the
private respondent who failed and refused to pay the claim of the petitioner.
Thus, PANMALAY filed a complaint for damages with RTC of Makati against private
respondents Erlinda Fabie and her driver. Private respondent filed a motion to dismiss arguing
that payment under the own damage clause of the insurance policy precluded subrogation
under Art 2207 of the Civil code, since indemnification thereunder was made on the assumption
that there was no wrongdoer or no third party at fault. The RTC dismissed the complaint as well
as the motion for reconsideration. On appeal, the CA upheld the ruling of the trial court. Thus
the matter was appealed to the SC.
Issue: WON the petitioner is allowed to recover the amount of insurance it had paid to the
insured
Ruling: Petitioner is correct. Art 2207 of the Civil Code is founded on the well-settled principle of
subrogation. If the insured property is destroyed or damaged through the fault or negligence of
a party other than the assured, then the insurer, upon payment to the assured, will be
subrogated to the rights of the assured to recover from the wrongdoer to the extent that the
insurer has been obligated to pay. Payment by the insurer to the assured operates as an
equitable assignment to the former of all remedies which the latter 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 or upon written assignment of
claim. It accrues simply upon payment of the insurance claim by the insurer.
In conlusion, it must be reiterated that PANMALAY as subrogee merely prays that it be allowed
to institute an action to recover from third parties who allegedly caused damage to the insured
vehicle, the amount which it had paid its assured under the insurance policy. Respondent Court
of Appeals therefore committed reversible error in sustaining the lower courts order which
dismissed PANMALAYs complaint. Petition is granted. Case is remanded to the lower court for
trial on the merits.

CASE 47
Vda. de

Gabriel

vs.

Court

of Appeals

[GR

103883,

14

November

1996]

Facts:
Marcelino Gabriel, the insured, was employed by Emerald Construction & Development
Corporation (ECDC) at its construction project in Iraq. He was covered by a personal
accident insurance in the amount of P100,000.00
under a group policy procured
from Fortune Insurance & Surety Company Inc. by ECDC for its overseas workers. The
insured risk was for "bodily injury caused by violent accidental external and visible
means which injury would solely and independently of any other cause" result in death
or disability. On 22 May 1982, within the life of the policy, Gabriel died in Iraq. A year
later, or on 12 July 1983, ECDC reported Gabriel's death to Fortune by telephone.
Among the documents thereafter submitted to Fortune were a copy of the death
certificate 5 issued by the Ministry of Health of the Republic of Iraq which stated
"REASON OF DEATH: UNDER EXAMINATION NOW NOT YET KNOWN " and an
autopsy report of the (NBI) to the effect that "due to advanced state of postmortem
decomposition, cause of death could not be determined." on 22 September 1983, Fortune
ultimately denied the claim of ECDC on the ground of prescription. Vda. De Gabriel
went to the RTC of Manila. In her complaint against ECDC and Fortune, she averred
that her husband died of electrocution while in the performance of his work and prayed
for the recovery of P100,000.00 for insurance indemnification . Fortune filed its answer,
which was not verified, admitting the genuineness and due execution of the insurance
policy; it alleged, however, that since both the death certificate issued by the Iraqi
Ministry of Health and the autopsy report of the NBI failed to disclose the cause of
Gabriel's death, it denied liability under the policy. In addition, Fortune raised the
defense of "prescription," invoking Section 384 10 of the Insurance Code.
Issue

[1]:

Whether

prescription

was

properly

invoked

by

Fortune

in

this

case.

Held
[1]: YES. On the issue of "prescription," Fortune correctly invoked Section 384 of the
Insurance Code which provides that "Any person having any claim upon the policy
issued pursuant to this chapter shall, without any unnecessary delay, present to the
insurance company concerned a written notice of claim setting forth the nature, extent
and duration of the injuries sustained as certified by a duly licensed physician. Notice of
claim must be filed within six months from date of the accident, otherwise, the claim
shall be deemed waived. 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." The
notice of death was given to Fortune, concededly, more than a year after the death of
Vda. de Gabriel's husband. Fortune, in invoking prescription, was not referring to the
one-year period from the denial of the claim within which to file an action against an
insurer but obviously to the written notice of claim that had to be submitted within six

months

from

the

time

of

the

accident.

Issue [2]: Whether Vda. De Gabriel is required to present proof that the insureds
demise was from an accidental death, unlike in ordinary life insurance where the
insured's death, regardless of the cause thereof, would normally be compensable.
Held [2]: YES. The insurance policy expressly provided that to be compensable, the
injury or death should be caused by "violent accidental external and visible means." In
attempting to prove the cause of her husband's death, all that Vda. de Gabriel could
submit were a letter sent to her by her husband's co-worker, stating that Gabriel died
when he tried to haul water out of a tank while its submerged motor was still
functioning, and Vda. de Gabriel's sinumpaang salaysay which merely confirmed the
receipt and stated contents of the letter. The said affidavit however suffers from
procedural infirmity as it was not even testified to or identified by the affiant (Vda. De
Gabriel) herself. This self-serving affidavit therefore is a mere hearsay under the rules.
Not one of the other documents submitted, to wit, the POEA decision, dated 06 June
1984, the death certificate issued by the Ministry of Health of Iraq and the NBI autopsy
report, could give any probative value to Vda. de Gabriel's claim. The POEA decision
did not make any categorical holding on the specific cause of Gabriel's death. Neither
did the death certificate issued by the health authorities in Iraq nor the NBI autopsy
report provide any clue on the cause of death. All that appeared to be clear was the
fact of Gabriel's demise on 22 May 1982 in Iraq. Evidence, in fine, is utterly wanting to
establish that the insured suffered from an accidental death, the risk covered by the
policy. In an accident insurance, the insured "s beneficiary has the burden of proof in
demonstrating that the cause of death is due to the covered peril. Once the fact is
established, the burden then shifts to the insurer to show any excepted peril that may
have been stipulated by the parties. An "accident insurance" is not thus to be likened to
an ordinary life insurance where the insured's death, regardless of the cause thereof,
would normally be compensable. The latter is akin in property insurance to an "all risk"
coverage where the insured, on the aspect of burden of proof, has merely to show the
condition of the property insured when the policy attaches and the fact of loss or
damage during the period of the policy and where, thereafter, the burden would be on
the insurer to show any "excluded peril." When, however, the insured risk is specified, it
lies with the claimant of the insurance proceeds to initially prove that the loss is caused
by the covered peril.

CASE 48
Firemans Fund Insurance and Firestone Tire and Rubber Co
vs.
Jamilla & Co. and First Quezon City Insurance
Facts:
Jamilla (or the Veterans Philippine Scouts Security Agency) contracted to supply security guards
to Firestone. First Quezon City Insurance guaranteed Jamillas performance through a P20,000
bond. Properties of Firestone valued at P11,925 were subsequently lost allegedly due to acts of
its employee in connivance with Jamillas security guard. Firemans Fund, as insurer, paid
Firestone indemnity for the loss and filed an action for collection against Jamilla and First
Quezon. The lower court dismissed the action on the ground that Jamilla did not consented to
the subrogation of Fireman in the stead of Firestone.
Issue/s:
Whether or not Firemans Fund is subrogated to the rights of Firestone
Ruling:
Yes. The trial court erred in applying to this case the rules on novation. The subrogation claimed
was not based on novation by change of creditors as contemplated in articles 1291 and 1300 to
1303 of the Civil Code (which requires consent) but rather on article 2207. Thus, when the
insurance company pays for the loss, such payment operates as an equitable assignment to the
insurer of the property and all remedies which the insured may have for the recovery thereof.

CASE 49
Insurance Case Digest: Saura Import & Export Co., Inc. V. Philippine International Surety
Co., Inc. (1963)
FACTS: Saura Import & Export Co Inc., mortgaged to the Phil. National Bank, a parcel of land.
The mortgage was amended to guarantee an increased amount, bringing the total mortgaged
debt to P37,000. On the land mortgage is a building owned by Saura Import & Export Co Inc.
which was insured with Philippine International Surety (Insurer) even before the mortgage
contract so it was required to endorse to mortgagee PNB. On October 15, 1954: Barely 13 days
after the issuance of the fire insurance policy, the insurer cancelled it. Notice of the cancellation
was given to PNB (mortgagee). But Saura (insured) was not informed. On April 6, 1955: The
building and all its contents worth P40,685.69 were burned so Saura filed a claim with the
Insurer and mortgagee Bank. The RTC dismissed the case.
ISSUE: W/N Philippine International Surety should be held liable for the claim because notice to
only the mortgagee is not substantial.
HELD: YES. Appealed from is hereby reversed. Philippine International Surety Co., Inc., to pay
Saura Import & Export Co., Inc., P29,000.
It was the primary duty of Philippine International Surety to notify the insured, but it did not.If a
mortgage or lien exists against the property insured, and the policy contains a clause stating
that loss, if any, shall be payable to such mortgagee or the holder of such lien as interest may
appear, notice of cancellation to the mortgagee or lien holder alone is ineffective as a
cancellation of the policy to the owner of the property.
Liability attached principally the insurance company, for its failure to give notice of the
cancellation of the policy to Saura.

CASE 50

MANILA MAHOGANY MANUFACTURING CORPORATION

INSURANCE CORPORATION (G.R. NO. L-52756)

VS.

COURT

OF

APPEALS

AND

ZENITH

Facts:
Petitioner Manila Mahogany Manufacturing Corporation insured its Mercedes
Benz 4-door sedan with respondent Zenith Insurance Corporation. The insured vehicle
was bumped and damaged by a truck owned by San Miguel Corporation. For the
damage caused, respondent company paid petitioner 5,000 pesos in amicable
settlement. Petitioners general manager executed a release claim, subrogating
respondent company to all its right to action against San Miguel Corporation.
Thereafter, respondent company wrote Insurance Adjusters, Inc. top demand
reimbursement from San Miguel Corporation of the amount it had paid the petitioner.
Insurance Adjusters, Inc. refused reimbursement, alleging that San Miguel Corporation
had already paid petitioner 4,500 pesos for damages to petitioners motor vehicle, as
evidenced by a cash voucher and Release of Claim executed by the General Manager
of petitioner discharging San Miguel Corporation from all actions, claims, demands,
and rights of action that now exist or thereafter develop arising out of or as a
consequence of the accident.
Respondent insurance company thus demanded from petitioner reimbursement
of the sum of 4,500 paid by San Miguel Corporation. Petitioner refused; hence the
instance case.
Issue:
Whether the respondent insurance company is subrogated to the rights of the
petitioner against San Miguel Corporation.
Ruling:
Yes. The Supreme Court held that if a property is insured and the owner and the
owner receives indemnity from the insurer, it is provided in article 2207 of the New Civil
Code that the insurer is deemed subrogated to the rights of the insured against the
wrongdoer and if the amount paid by the insurer does not fully cover the loss, then the
aggrieved party is the one entitled to recover the deficiency. Under this legal provision,
the real party in interest with regard to the portion of the indemnity paid is the insurer
and not the insured.
Hence the petitioner is entitled to keep the sum of 4,500 pesos paid by San
Miguel Corporation under its clear right to file a deficiency claim for the damages
incurred, against the wrongdoer, should the insurance company not fully pay for the
injury caused. However, when the petitioner released San Miguel Corporation from any

liability, petitioners right to retain the sum of 5,000 pesos no longer exist thereby
entitling private respondent to recover the same.
The right of subrogation can only exist after the insurer has paid the insured
otherwise the insured will be deprived of his right to indemnity. If the insurance
proceeds are not sufficient to cover the damages suffered by the insured, then he may
sue the party responsible for the damage for the remainder. To the extent of the amount
already received from, the insurer enjoys the right of subrogation.
Since the insurer can be subrogated to only such right as the insured may have,
should the insured, after receiving payment from the insurer, release the wrongdoer who
caused the loss, the insurer loses his rights against the latter. But in such a case, the
insurer will be entitled to recover from the insured whatever it has paid to the latter,
unless the release was made with the consent of the insurer.
CASE 51
PIONEER INSURANCE CORPORATION VS. YAP
61 SCRA 426 (G.R. NO. L-36232) DECEMBER 19, 1974
J. Fernandez:
FACTS:
Respondent Oliva Yap owns a store in a two-story building located in Manila. On April 19,
1962,
respondent Yap took out a fire policy from Pioneer Insurance for 25,000.00 covering
her stocks, officer furniture,
fixtures and fittings of every kind and description among the conditions in the policy
was:
The insured shall give notice to the company of any insurance or insurance already
effected, or which may
subsequently be effected, covering any of the property hereby insured and unless such
notice be given and the
particulars of such insurance be stated in or indorsed on this policy by or on behalf of
the company before the
occurrence of any loss or damage, all benefits under this policy shall be forfeited.
At the time of the insurance, an insurance for 20,000.00 issued by the Great

American Insurance Company covering the same properties was noted on said policy as
co-insurance. On
September 26, 1962, Yap took out another Fire Policy for 20,000.00 covering the same
properties, from the
Federal Insurance Company, Inc. which new policy was however procured without notice
to and without the written
consent of Pioneer Ins. and therefore, was not noted as a co-insurance in Policy No.
4219.
On December 19, 1962, a fire broke out in the building housing Yaps above-mentioned
store, and the said
store was burned. Yap filed an insurance claim, but the same was denied on the ground
of breach and/or violative
of any/or all terms and conditions of Policy No. 4219.
ISSUE: Whether or not petitioner should be absolved from liability on the policy.
HELD:
By the plain terms of the policy, other insurance without the consent of petitioner would
ipso facto avoid
the contract. It required no affirmative act of election on the part of the company to make
operative the
clause avoiding the contract, wherever the specified conditions should occur. Its
obligations ceased, unless, being
informed of the fact, it consented to the additional insurance. The obvious purpose of the
aforesaid requirement in
the policy is to prevent over-insurance and thus avert the perpetration of fraud. The
public, as well as the insurer, is
interested in preventing the situation in which a fire would be profitable to the insured.

CASE 52
Pacific

Banking

Corporation

vs.

CA

&

Oriental

Assurance

Corporation

GR. No. L-41014, November 28,1988

FACTS:
An open Fire Policy issued to Paramount Shirt Manufacturing for Php61,000 on the following:
stocks, materils, supplies, furniture, fixture, machinery, equipment contained on the 1st to 3rd
floors. Insurance is for a year starting October 21,1964.
Paramount Shirt is a debtor of Pacific Banking amounting to Php800,000. Goods in policy were
held in trust by Paramount for Pacific under thrust receipts. Fire broke out on January 4, 1964.
Pacific sent letter of demand to Oriental. Insurance Adjuster of Oriental notified Pacific to submit
proof of loss pursuant to Policy Condition 11. Pacific did not accede but asked Insurance
Adjuster to verify records form Bureau of Customs.
Pacific filed for sum of money against Oriental. Oriental alleged that Pacific prematurely filed a
suit, for neither filing a formal claim over loss pursuant to policy nor submitting any proof of loss.
Trial court rule in favor of Pacific. The defense of lack of proof of loss and defects were raised
for the 1st time. On presentation of evidences by Pacific, it was revealed there was violation of
Condition No.3, there were undeclared co-insurances under same property Wellington,
Empire, Asian. The only declared co-insurances were Malayan, South Sea, and Victory.
The CA reversed RTC's decision. Concealment of other co-insurances is a misrepresentation
and can easily be fraud.
ISSUES:
(1) Whether or not unrevealed co-insurances is a violation of Policy Condition No.3
(2) Whether or not there was premature filing of action
RULING:
(1) Yes. Policy Condition 3 provides that the insured must give notice of any insurance already
in effect or subsequently be in effect covering same property being insured. Failure to do so, the
policy shall be forfeited.
It is not disputed that the insured failed to reveal before the loss three other insurances. As
found by the Court of Appeals, by reason of said unrevealed insurances, the insured had been
guilty of a false declaration; a clear misrepresentation and a vital one because where the
insured had been asked to reveal but did not, that was deception. Otherwise stated, had the

insurer known that there were many co-insurances, it could have hesitated or plainly desisted
from entering into such contract. Hence, the insured was guilty of clear fraud.
Representations of facts are the foundations of the contract and if the foundation does not exist,
the superstructure does not arise. Falsehood in such representations shows that no contract
has ever existed. Pacific itself provided for the evidences in trial court that proved existence of
misrepresentation. A void or inexistent contract is one which has no force and effect from the
very beginning, as if it had never been entered into, and which cannot be validated either by
time or by ratification.
As the insurance policy against fire expressly required that notice should be given by the
insured of other insurance upon the same property, the total absence of such notice nullifies the
policy.
(2) Yes. Policy Condition 11 is a sine qua non requirement for maintaining action. It requires that
documents necessary to prove and estimate the loss should be included with notice of loss.
Pacific failed to submit formal claim of loss with supporting documents but shifted the burden to
the insurance company. Failing to submit claim is failure for insurance company to reject claim.
Thus, a lack of cause of action to file suit.
Furthermore, the mortgage clause in the policy specifically provides that the policy is invalidated
by reasons of FRAUD, MISREPRESENTATION and FRAUD. Concealment can easily be fraud
or misrepresentation.
The insured PARAMOUNT is not entitled to proceeds. More so, Pacific as indorsee of policy.
Both will not receive the proceeds

CASE 53

CASE 54
LA RAZON SOCIAL "GO TIAOCO Y HERMANOS" vs. UNION INSURANCE SOCIETY OF
CANTON LTD.
40 Phil 40
FACTS:
A cargo of rice belonging to the Go Tiaoco Brothers was transported in the early days of May,
1915, on the steamship Hondagua from the port of Saigon to Cebu. On discharging the rice
from one of the compartments in the after hold, upon arrival at Cebu, it was discovered that
1,473 sacks had been damaged by sea water. The loss so resulting to the owners of rice, after
proper deduction had been made for the portion saved, was P3,875. The policy of insurance,
covering the shipment, was signed upon a form long in use among companies engaged in
maritime insurance. It purports to insure the cargo from the following among other risks: "Perils .
. . of the seas, men, of war, fire, enemies, pirates, rovers, thieves, .jettisons, . . . barratry of the
master and mariners, and of all other perils, losses, and misfortunes that have or shall come to
the hurt, detriment, or damage of the said goods and merchandise or any part thereof." It was
found out that the drain pipe which served as a discharge from the water closet passed down
through the compartment where the rice in question was stowed and thence out to sea through
the wall of the compartment, which was a part of the wall of the ship. The joint or elbow where
the pipe changed its direction was of cast iron; and in course of time it had become corroded
and abraded until a longitudinal opening had appeared in the pipe about one inch in length. This
hole had been in existence before the voyage was begun, and an attempt had been made to
repair it by filling with cement and bolting over it a strip of iron. The effect of loading the boat
was to submerge the vent, or orifice, of the pipe until it was about 18 inches or 2 feet below the
level of the sea. As a consequence the sea water rose in the pipe. Navigation under these
conditions resulted in the washing out of the cement-filling from the action of the sea water, thus
permitting the continued flow of the salt water into the compartment of rice. An action on a policy
of marine insurance issued by the Union Insurance Society of Canton, Ltd., upon the cargo of
rice belonging to the Go Tiaoco Brothers was filed. The trial court found that the inflow of the
sea water during the voyage was due to a defect in one of the drain pipes of the ship and
concluded that the loss was not covered by the policy of insurance. Judgment was accordingly
entered in favor of Union Insurance and Go Tiaoco Brothers appealed.
ISSUE [1]: Whether perils of the sea includes entrance of water into the ships hold through a
defective pipe.
HELD [1]: NO. It is determined that the words "all other perils, losses, and misfortunes" are to
be interpreted as covering risks which are of like kind (ejusdem generis) with the particular risks
which are enumerated in the preceding part of the same clause of the contract. According to the
ordinary rules of construction these words must be interpreted with reference to the words which
immediately precede them. They were no doubt inserted in order to prevent disputes founded
on nice distinctions. Their office is to cover in terms whatever may be within the spirit of the

cases previously enumerated, and so they have a greater or less effect as a narrower or
broader view is taken of those cases. For example, if the expression "perils of the seas" is given
its widest sense the general words have little or no effect as applied to that case. If on the other
hand that expression is to receive a limited construction and loss by perils of the seas is to be
confined to loss ex marine tempestatis discrimine, the general words become most important.
But still, when they first became the subject of judicial construction, they have always been held
or assumed to be restricted to cases "akin to" or "resembling" or "of the same kind as" those
specially mentioned. I see no reason for departing from this settled rule. In marine insurance it is
above all things necessary to abide by settled rules and to avoid anything like novel refinements
or a new departure. It must be considered to be settled, furthermore, that a loss which, in the
ordinary course of events, results from the natural and inevitable action of the sea, from the
ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide
the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of
the sea. Such a loss is rather due to what has been aptly called the "peril of the ship." The
insurer undertakes to insure against perils of the sea and similar perils, not against perils of the
ship. There must, in order to make the insurer liable, be "some casualty, something which could
not be foreseen as one of the necessary incidents of the adventure. The purpose of the policy is
to secure an indemnity against accidents which may happen, not against events which must
happen." Herein, the entrance of the sea water into the ship's hold through the defective pipe
already described was not due to any accident which happened during the voyage, but to the
failure of the ship's owner properly to repair a defect of the existence of which he was apprised.
The loss was therefore more analogous to that which directly results from simple
unseaworthiness than to that which results from perils of the sea.
ISSUE [2]: Whether there is an implied warranty on the seaworthy of the vessel in every marine
insurance contract.
HELD [2]: YES. It is universally accepted that in every contract of insurance upon anything
which is the subject of marine insurance, a warranty is implied that the ship shall be seaworthy
at the time of the inception of the voyage. This rule is accepted in our own Insurance Law (Act
No. 2427, sec. 106). It is also well settled that a ship which is seaworthy for the purpose of
insurance upon the ship may yet be unseaworthy for the purpose of insurance upon the cargo
(Act No. 2427, sec. 106).

CASE 55
Cathay Insurance company vs ca

151 scra 710

Facts:
A complaint was filed by Remington Industrial Sales Corporation against Cathay Insurance Co.
seeking collection of the sum of P868,339.15 representing Remington's losses and damages
incurred in a shipment of seamless steel pipes under an insurance contract in favor of
Remington as the insured, consignee or importer of aforesaid merchandise. Remington claims
implied coverage from the phrase "perils of the sea" the rusting of the seamless steel pipes.
Issue: Whether the rusting of steel pipes in the course of a voyage is a "peril of the sea," and
whether rusting is a risk insured against.
Held: Yes. There is no question that the rusting of steel pipes in the course of a voyage is a
"peril of the sea" in view of the toll on the cargo of wind, water, and salt conditions. At any rate if
the insurer cannot be held accountable therefor, the Court would fail to observe a cardinal rule
in the interpretation of contracts, namely, that any ambiguity therein should be construed against
the maker/issuer/drafter thereof, namely, the insurer. Besides the precise purpose of insuring
cargo during a voyage would be rendered fruitless.

CASE 56

CASE 57
Filipino Merchants Insurance Co. Inc. vs. Court of Appeals [GR 85141, 28 November 1989]
Facts: In December 1976, Choa Tiek Seng insured said shipment with Filipino Merchants
Insurance Company (FMICI) for the sum of P267,653.59 for the goods described as 600 metric
tons of fishmeal in new gunny bags of 90 kilos each from Bangkok, Thailand to Manila against
all risks under warehouse to warehouse terms. Actually, what was imported was 59.940 metric
tons not 600 tons at $395.42 a ton CNF Manila. The fishmeal in 666 new gunny bags were
unloaded from the ship on 11 December 1976 at Manila unto the arrastre contractor E. Razon,
Inc. and FMICI's surveyor ascertained and certified that in such discharge 105 bags were in bad
order condition as jointly surveyed by the ship's agent and the arrastre contractor. The cargo
was also surveyed by the arrastre contractor before delivery of the cargo to the consignee and
the condition of the cargo on such delivery was reflected in E. Razon's Bad Order Certificates
covering a total of 227 bags in bad order condition. FMICI's surveyor has conducted a final and
detailed survey of the cargo in the warehouse for which he prepared a survey report with the
findings on the extent of shortage or loss on the bad order bags totalling 227 bags amounting to
12,148 kilos. An action was brought by the consignee against FMICI seeking to recover the
amount of P51,568.62 representing damages to said shipment. FMICI brought a third party
complaint against third party defendants Compagnie Maritime Des Chargeurs Reunis and/or E.
Razon, Inc. seeking judgment against the third party defendants in case judgment is rendered
against FMICI. The court rendered judgment in favor of Choa, ordering FMICI to pay; and, on
the third party complaint, the third party defendants are ordered to pay FMICI jointly and
severally reimbursement of the amounts paid by FMICI. On appeal, the Court of Appeals
affirmed the decision of the lower court.
Issue: [1] Whether an "all risks" marine policy has a technical meaning in insurance in that
before a claim can be compensable it is essential that there must be "some fortuity," "casualty"
or "accidental cause" to which the alleged loss is attributable. [2] Whether the failure of Choa to
adduce evidence, showing that the alleged loss to the cargo in question was due to a fortuitous
event, precludes his right to recover from the insurance policy. [3] Whether the insurer is liable.
[4] Whether the consignee has an insurable interest in said goods.
Ruling: [1]: NO. The "all risks clause" of the Institute Cargo Clauses read as follows "5. This
insurance is against all risks of logs or damage to the subject-matter insured but shall in no case
be deemed to extend to cover loss, damage, or expense proximately caused by delay or
inherent vice or nature of the subject-matter insured. Claims recoverable hereunder shall be
payable irrespective of percentage." An "all risks policy" should be read literally as meaning all
risks whatsoever and covering all losses by an accidental cause of any kind. The terms
"accident" and "accidental", as used in insurance contracts, are construed by the courts in their
ordinary and common acceptance. The terms have been taken to mean that which happens by
chance or fortuitously, without intention and design, and which is unexpected, unusual and
unforeseen. The nature of the term "all risks" must be given a broad and comprehensive

meaning as covering any loss other than a willful and fraudulent act of the insured. The term "all
risks" means to the effect that it extends to all damages/losses suffered by the insured cargo
except (a) loss or damage or expense approximately caused by delay, and (b) loss or damage
or expense proximately caused by the inherent vice or nature of the subject matter insured. [2]:
NO. The insured under an "all risks insurance policy" has the initial burden of proving that the
cargo was in good condition when the policy attached and that the goods he transported have
been lost, destroyed or deteriorated; thereafter, the burden is shifted to the insurer to prove that
the loss was due to excepted perils. The basic rule is that the insurance company has the
burden of proving that the loss is caused by the risks excepted and for want of such proof, the
company is liable. Coverage under an "all risks" provision of a marine insurance policy creates a
special type of insurance which extends coverage to risks not usually contemplated and avoids
putting upon the insured the burden of establishing that the loss was due to the peril falling
within the policy's coverage; the insurer can avoid coverage upon demonstrating that a specific
provision expressly excludes the loss from coverage. [3]: Yes. There being no showing that the
loss was caused by any of the excepted perils, the insurer is liable under the policy. There is no
evidence presented to show that the condition of the gunny bags in which the fishmeal was
packed was such that they could not hold their contents in the course of the necessary transit,
much less any evidence that the bags of cargo had burst as the result of the weakness of the
bags themselves. Had there been such a showing that spillage would have been a certainty,
there may have been good reason to plead that there was no risk covered by the policy. Under
an all risks policy, it was sufficient to show that there was damage occasioned by some
accidental cause of any kind, and there is no necessity to point to any particular cause. [4]: Yes.
Choa has insurable interest in said goods. Section 13 of the Insurance Code defines insurable
interest in property 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. In principle, anyone has an insurable interest in property who derives a
benefit from its existence or would suffer loss from its destruction whether he has or has not any
title in, or lien upon or possession of the property. Insurable interest in property may consist in
(a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the expectancy arises. A
vendee/consignee of the goods in transit has such existing interest because his interest over the
goods is based on the perfected contract of sale even without delivery. The sale vests in the
vendee an equitable title, an existing interest over the goods sufficient to be the subject of
insurance. The Court has ruled that the delivery of the goods on board the carrying vessels
partake of the nature of actual delivery since, from that time, the foreign buyers assumed the
risks of loss of the goods and paid the insurance premium covering them.

CASE 58
Choa Tiek Seng v.
Hon. Court of Appeals, Filipino Merchants' Insurance Company, Inc., Ben Lines Container Ltd.,
and E. Razon Inc.
Facts:
On Nov. 4, 1976, the petitioner imported some lactose crystals from Holland amounting
to 600 bags, the goods were loaded the vessel MS Benalder as the mother vessel, and
thereafter aboard the Wesser Broker V-25 of respondent Ben Lines Container Ltd. The goods
were insured by respondent Filipino Merchants' Insurance Company agaisnt all risks under the
terms of the insurance cargo policy. Upon its arrival, the goods were unloaded by arrastre
operator, E. Razon Inc. However, of the 600 bags, 403 were in bad order. The surveys showed
that the bags suffered spillage.
Petitioner filed an insurance claim against respondent insurer but it was rejected on the
ground that the petitioner failed to minimize the losses due from spillage. This prompted
petitioner to file a complaint in the RTC which was dismissed on the ground that the all risks
policy covered only losses resulting from fortuitous event. The CA affirmed the decision.
Issue:
Whether the respndent court erred in holding that All Risks policy covers only losses
occasioned by fortuitous event.
Ruling:
The court erred in its ruling. An all risk insurance policy insures against all causes of
conceivable losses or damage except otherwise excluded in the policy or due to fraud or
intentional misconduct on the part of the insured. In this case, the policy excludes losses caused
by delay or inherent vice or nature of the cargo insured.
An all risk provision of marine insurance policy creates a special type of insurance which
extends coverage to risks not usually contemplated and avoids putting upon the insured the
burden of establishing that the loss was due to a peril outside the policy's coverage. In this
case, the loss was not due to any of the exceptions. Therefore, the decision appealed is
reversed and set aside.

CASE 59
Malayan Insurance Corp. vs. CA
270 SCRA 242
FACTS:
TKC Marketing Corp was the owner/ consignee of some 3,189.171 metric tons of
soya bean meal which was loaded on board the ship MV Al Kazeimah for carriage from the port
of Rio del Grande, Brazil, to the part of Manila. Said cargo was insured against the risk of loss
by petitioner Malayan Insurance Corporation for which it issued two (2) Marine Cargo Policies.
While the vessel was docketed in Durban South Africa the civil authorities arrested and detained
it because of lawsuit on a question of ownership and possession. TKC Marketing notified
Malayan of the arrest of the vessel and made a formal claim for the dollar equivalent on the
policies for non delivery of the cargo. Malayan replied that the arrest of the vessel by civil
authority was not a peril covered by the policies. TKC advised Malayan that it might transship
the cargo and requested an extension of the insurance coverage until actual transshipment,
which extension was approved upon payment of additional premium. The insurance coverage
was extended under the same terms and conditions embodied in the original policies while in
the process of making arrangements for the transshipment of the cargo from Durban to Manila.
However the cargo was sold in Durban, South Africa due to its perishable nature which could no
longer stand a voyage of twenty days to Manila and another 20 days for the discharge thereof. It
reduces its claim representing its loss after the proceeds of the sale were deducted from the
original claim. Malayan maintained its position that the arrest if the vessel by civil authorities on
a question of ownership was an excepted risk under the marine insurance.
ISSUES:
1.
Whether the arrest of the vessel was a risk covered under the subject insurance policies.
2.
Whether insurance policies should be strictly construed against the insurer.
HELD:
1.
YES. With the incorporation of subsection1.1 of Section 1 of Institute War Clause,
arrest cause by ordinary judicial process is deemed included among the covered risks.
This interpretation becomes inevitable when the same also provided that this insurance
covers the risk excluded from the Standard Form of English Marine Policy by the clause
Warranted free of capture, seizure, arrest, etc. x x x or the F.C. & S Clause.
Jurisprudentially, arrest caused by ordinary judicial process is also a risk excluded.
Petitioner cannot adopt the argument that arrest caused by ordinary judicial process is not
included in the covered risk simply because the F.C. & S Clause under the Institute War
Clauses can only be operative in case of hostilities or warlike operations on account of its
heading Institute War Clause
2.
YES. Insurance Policies should be construed liberally in favor of the insured and
strictly against the insurer. An insurance contract should be so interpreted as to carry out
the purpose for which the parties entered into the contract which is, to insure against risks
of loss or damage. Such interpretation should result from the natural and reasonable
meaning of language in the policy. Where restrictive provisions are open to two
interpretations, that which is most favorable to the insured is adopted. Indemnity and liability
insurance policies are construed in accordance with the general rule of resolving any

ambiguity therein in favor of the insured, where the contract or polic is prepared by the
insurer. A contract of insurance, being a contract of adhesion, any ambiguity therein should
be resolved against the insurer.

CASE 60

CASE 61
HERMINIA Q. KANAPI v. THE INSULAR LIFE ASSURANCE CO., LTD.
94 Phil. 397, February 25, 1954
Facts:
On August 1, 1848, the defendant insurance company issued a policy on the life of plaintiff's
husband, Henry G. Kanapi. The defendant undertook to pay to plaintiff as beneficiary, upon the
death of the insured, the sum of P5,000 if the death be due to natural causes and an additional
P5,000 if the death be due to accidental means. The payment of the additional sum being
provided for in the "Accidental Death Benefit Policy Clause" appended to and forming part of the
policy but expressly made subject to the exception that the clause would not apply where death
resulted from injury "intentionally inflicted by a third party." During the life of the policy, the
insured died from a bullet wound inflicted, without provocation, by one Conrado Quemosing,
who was found guilty of murder and sentenced to prison.
Upon receiving proof of the insured's death, defendant paid plaintiff P5,000, but refused to pay
the additional P5,000 claimed upon the accidental death benefit clause on the ground that, as
the injured died from an injury intentionally inflicted by a third party, the clause did not apply.
Thus, the action for the recovery of the additional sum was filed by plaintiff Kanapi. The lower
court dismissed the action, whereupon plaintiff appealed to the Supreme Court.
Issue: Whether or not the plaintiff is entitled to the additional P5,000 claimed under the accident
benefit clause of the policy.
Ruling: No, because the insureds death resulted from an injury intentionally inflicted by a third
party which is one of the exceptions to the accident benefit clause. The insured was murdered,
thus making it indisputable that his death resulted from injury "intentionally inflicted by a third
party"; which is one of the exceptions to the accident benefit clause, according to which the
benefit shall not apply to death resulting from "(5) Any injury received . . . (e) that has been
inflicted intentionally by a third party, either with or without provocation on the part of the
Insured, and whether or not the attack or the defense by the third party was caused by a
violation of the law by the Insured. . . ." There is nothing to the suggestion that the case comes
under exception 5 (d) or that portion of it which excepts from the benefit any injury received "in
any assault provoked by the Insured", it being argued that by express mention of provoked
assault an unprovoked one is inferentially excluded. The inference is not admissible because
where the injury is inflicted without provocation the case comes within the terms of exception 5
(e), which, is, therefore, the one that should be applied. Thus, the Supreme Court affirmed the
decision of the lower court.

CASE 62
BIAGTAN VS. THE INSULAR LIFE ASSURANCE COMPANY LTD.
FACT:
Juan S. Biagtan was insured with defendant Insular Life Assurance Company Ltd. for the sum of
5,000.00 and under a supplementary contract denominated Accidental Death Benefit Clause,
for an additional sum of 5,000.00 if the death of the insured resulted directly from bodily injury
effected solely through external and violent means sustained in an accident and
independently of all other causes. The clause, however, expressly provided that it would not
apply where death resulted from an injury intentionally inflicted by another party.
On the night of May 20, 1964 or during the first hours of the following day a band of robbers
entered the house of the insured Juan Biagtan, and that in committing the robbery, the robbers,
on reaching the staircase landing on the second floor, rushed towards the door of the second
floor room, where they suddenly met a person who turned to be insured who received nine
wounds (five mortal wounds and four non-mortal wounds) from their sharp pointed instruments
resulting in Mr. Biagtans death.
Beneficiaries of the insured then filed a claim under the policy the insurance company paid the
basic amount of 5,000.00 but refused to pay additional sum of 5,000.00 under the
accidental benefit clause, on the ground that the insureds death resulted from injuries
intentionally inflicted by third parties and therefore was not covered. (Respondent) Beneficiaries
then filed suit to recover in the CFI of Pangasinan who rendered a decision in their favor. Hence
the present appeal by the petitioner.
ISSUE:
Whether under the facts stipulated and found by the trial court the wounds received by the
insured at the hands of the robbers were inflicted intentionally, hence the benefit clause cannot
apply.
HELD:
Under an Accidental Death Benefit Clause providing for an additional sum of P5,000.00 if the
death of the Insured resulted directly from bodily injury effected solely through external and
violent means sustained in an accident and independently of all other causes but expressly
excepting therefrom a case where death resulted from an injury intentionally inflicted by a third
party, the insured who died under the following circumstances is not entitled to the said
additional sum, to wit: That on the night while the said life policy and supplementary contract
were in full force and effect the house of the insured . . . was robbed by a band of robbers whowere charged in and convicted by the Court of First Instance of Pangasinan for robbery with
homicide; that in committing the robbery, the robbers, on reaching the staircase landing of the
second floor, rushed towards the doors of the second floor room, where they suddenly met a
person near the door of one of the rooms who turned out to be the insured . . . who received
thrusts from their sharp-pointed instruments, causing wounds on the body . . . resulting in his
death