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Calanoc v. CAG.R. No. L-8151 December 16, 1955J. Bautista Angelo
Doctrine: In case of ambiguity in an insurance contract covering
accidental death, the Supreme Courtheld that such terms shall be
construed strictly against the insurer and liberally in favor of the insured
Inorder to effect the purpose of indemnity.
Facts: Melencio Basilio, a watchman of the Manila Auto Supply, secured a
life insurance policy fromthe Philippine American Insurance Company in
the amount of P2,000 to which was attached asupplemental contract
covering death by accident. He later died from a gunshot wound on the
occasionof a robbery committed; subsequently, his widow was paid
P2,000 representing the face value of thepolicy. The widow demanded
the payment of the additional sum of P2,000 representing the value of
thesupplemental policy which the company refused because the
deceased died by murder during therobbery and while making an arrest
as an officer of the law which were expressly excluded in the contract.
The companys contention which was upheld by the Court of Appeals
provides that the circumstances surrounding Basilios death was caused
by one of the risks excluded by the supplementary contract which
exempts the company from liability.
Issue: Is the Philippine American Life Insurance Co. liable to the petitioner
for the amount covered by thesupplemental contract?
Held: Yes. The circumstances of Basilios death cannot be taken as purely
intentional on the part of Basilio to expose himself to the danger. There is
no proof that his death was the result of intentionalkilling because there
is the possibility that the malefactor had fired the shot merely to scare
away the people around. In this case, the companys defense points out
that Basiliosis included among the risksexcluded in the supplementary
contract; however, the terms and phraseology of the exception
clauseshould be clearly expressed within the understanding of the
insured. Art. 1377 of the New Civil Codeprovides that in case ambiguity,
uncertainty or obscurity in the interpretation of the terms of thecontract,
it shall be construed against the party who caused such obscurity.

Applying this to thesituation, the ambiguous or obscure terms in the
insurance policy are to be construed strictly against theinsurer and
liberally in favor of the insured party. The reason is to ensure the
protection of the insuredsince these insurance contracts are usually
arranged and employed by experts and legal advisers actingexclusively in
the interest of the insurance company. As long as insurance companies
insist upon the useof ambiguous, intricate and technical provisions, which
conceal their own intentions, the courts must, infairness to those who
purchase insurance, construe every ambiguity in favor of the insured.
Calanoc vs. CA (98 PHIL 79)
Facts: Basilio was a watchman of the Manila Auto Supply located at the
corner of Avenida Rizal and Zurbaran. He secured a life insurance policy
from the Philippine American Life Insurance Company in the amount of
P2,000 to which was attached a supplementary contract covering death
by accident. On January 25, 1951, he died of a gunshot wound on the
occasion of a robbery committed in the house of Atty. Ojeda at the corner
of Oroquieta and Zurbaran streets. Calanoc, the widow, was paid the sum
of P2,000, face value of the policy, but when she demanded the payment
of the additional sum of P2,000 representing the value of the
supplemental policy, the company refused alleging, as main defense, that
the deceased died because he was murdered by a person who took part
in the commission of the robbery and while making an arrest as an officer
of the law which contingencies were expressly excluded in the contract
and have the effect of exempting the company from liability.
It is contended in behalf of the company that Basilio was killed which
"making an arrest as an officer of the law" or as a result of an "assault or
murder" committed in the place and therefore his death was caused by
one of the risks excluded by the supplementary contract which exempts
the company from liability. This contention was upheld by the Court of
Appeals. Hence, this petition.
Issue: Whether or not the death of the victim comes within the purview
of the exception clause of the supplementary policy and, hence, exempts
the company from liability.

Held: NO.Basilio was a watchman of the Manila Auto Supply which was a
block away from the house of Atty. Ojeda where something suspicious
was happening which caused the latter to ask for help. While at first he
declined the invitation of Atty. Ojeda to go with him to his residence to
inquire into what was going on because he was not a regular policeman,
he later agreed to come along when prompted by the traffic policeman,
and upon approaching the gate of the residence he was shot and died.
The circumstance that he was a mere watchman and had no duty to heed
the call of Atty. Ojeda should not be taken as a capricious desire on his
part to expose his life to danger considering the fact that the place he was
in duty-bound to guard was only a block away. In volunteering to extend
help under the situation, he might have thought, rightly or wrongly, that
to know the truth was in the interest of his employer it being a matter
that affects the security of the neighborhood. No doubt there was some
risk coming to him in pursuing that errand, but that risk always existed it
being inherent in the position he was holding. He cannot therefore be
blamed solely for doing what he believed was in keeping with his duty as
a watchman and as a citizen. And he cannot be considered as making an
arrest as an officer of the law, as contended, simply because he went with
the traffic policeman, for certainly he did not go there for that purpose
nor was he asked to do so by the policeman.
Much less can it be pretended that Basilio died in the course of an assault
or murder considering the very nature of these crimes. In the first place,
there is no proof that the death of Basilio is the result of either crime for
the record is barren of any circumstance showing how the fatal shot was
fired. Perhaps this may be clarified in the criminal case now pending in
court as regards the incident but before that is done anything that might
be said on the point would be a mere conjecture. Nor can it be said that
the killing was intentional for there is the possibility that the malefactor
had fired the shot merely to scare away the people around for his own
protection and not necessarily to kill or hit the victim. In any event, while
the act may not exempt the triggerman from liability for the damage
done, the fact remains that the happening was a pure accident on the
part of the victim. The victim could have been either the policeman or

Atty. Ojeda for it cannot be pretended that the malefactor aimed at the
deceased precisely because he wanted to take his life.
28 October 1980 100 SCRA 467
FACTS: Villacorta had her Colt Lancer car insured with Empire Insurance
Company against own damage, theft and 3
party liability. While the car
was in the repair shop, one of the employees of the said repair shop took
it out for a joyride after which it figured in a vehicular accident. This
resulted to the death of the driver and some of the passengers as well as
to extensive damage to the car.
Villacorta filed a claim for total loss with the said insurance company.
However, it denied the claim on the ground that the accident did not fall
within the provisions of the policy either for the Own Damage or Theft
coverage, invoking the policy provision on Authorized Driver Clause.
This was upheld by the Insurance Commission further stating that the car
was not stolen and therefore not covered by the Theft Clause because it is
not evident that the person who took the car for a joyride intends to
permanently deprive the insured of his/ her car.
ISSUE:Whether or not the insurer company should pay the said claim
HELD:Yes. Where the insureds car is wrongfully taken without the
insureds consent from the car service and repair shop to whom it had
been entrusted for check-up and repairs (assuming that such taking was
for a joy ride, in the course of which it was totally smashed in an
accident), respondent insurer is liable and must pay insured for the total
loss of the insured vehicle under the Theft Clause of the policy.
Assuming, despite the totally inadequate evidence, that the taking was
temporary and for a joy ride, the Court sustains as the better view
that which holds that when a person, either with the object of going to a
certain place, or learning how to drive, or enjoying a free ride, takes
possession of a vehicle belonging to another, without the consent of its
owner, he is guilty of theft because by taking possession of the personal

property belonging to another and using it, his intent to gain is evident
since he derives therefrom utility, satisfaction, enjoymet and pleasure.
ACCORDINGLY, the appealed decision is set aside and judgment is hereby
rendered sentencing private respondent to pay petitioner the sum of
P35,000.00 with legal interest from the filing of the complaint until full
payment is made and to pay the costs of suit.
The underlying reason behind the third party liability (TPL) of the
Compulsory Motor Vehicle Liability Insurance is to protect injured persons
against the insolvency of the insured who causes such injury, and to give
such injured person a certain beneficial interest in the proceeds of the
FACTS Petitioner: Figuracion Vda. De Maglana, Editha M. Cruz, Erlinda M.
Masesar, Leonila M. Mallari, Gilda Antonio and the minors Maglana
Respondents: Honorable Francisco Consolacion, Presiding Judge of
Davao City Branch II and AFISCO Insurance Corporation
The nature of the liability of an insurer sued together with the
insured/operator-owner of a common carrier which figured in an
accident causing the death of a third person is sought to be defined in
this petition for certiorari.
Lope Maglana was an employee of the Bureau of Customs whose work
station was at Lasa, Davao City.
On December 20, 1978, early morning, Lope Maglana was on his way to
his work station, driving a motorcycle owned by the Bureau of
Subsequently, he met an accident that resulted in his death. He died on
the spot.
The PUJ jeep that bumped the deceased was driven by Pepito Into,
operated and owned by defendant Destrajo.

From the investigation conducted by the traffic investigator, the PUJ
jeep was overtaking another passenger jeep that was going towards
the city poblacion.
While overtaking, the PUJ jeep of defendant Destrajo running abreast
with the overtaken jeep, bumped the motorcycle driven by the
deceased who was going towards the direction of Lasa, Davao City.
The point of impact was on the lane of the motorcycle and the
deceased was thrown from the road and met his untimely death.
Consequently, the heirs of Lope Maglana filed an action for damages
and attorneys fees against operator Patricio Destrajo and AFISCO. An
information for homicide thru reckless imprudence was also filed
against Pepito Into.
During the pendency of the civil case, Into was held to be guilty of
homicide thru reckless imprudence and was sentenced accordingly.
Trial Court:
The trial court found that Destrajo had not exercised sufficient
diligence as the operator of the jeepney.
In the dispositive portion of the decision, it was expressly stipulated by
the court that the defendant insurance company is ordered to
reimburse defendant Destrajo whatever amounts the latter shall have
paid only up to the extent of his insurance coverage.
In denying the motions for reconsideration, the Court said that since
the insurance contract is in the nature of suretyship, then the liability
of the insurer is secondary only up to the extent of the insurance
Petitioners contention:
AFISCO should not merely be held secondarily liable because the
Insurance Code provides that the insurers liability is direct and primary
and/or jointly and severally with the operator of the vehicle, although
only up to the extent of the insurance coverage.
Hence, the P20,000 coverage of the insurance policy issued by AFISCO
should have been awarded in their favor.

The liability of the insurer is direct, primary and solidary with the
jeepney operator because the petitioners became direct beneficiaries
under the provision of the policy which, in effect, is a stipulation pour
Respondent AFISCOs contention
Since the Insurance Code does not expressly provide for a solidary
obligation, the presumption is that the obligation is joint.
ISSUE WON the liability of the insurance company is solidary with the
jeepney operator. NO.

HELD The particular provision of the insurance policy on which petitioners
base their claim is as follows:
1. The Company will, subject to the Limits of Liability, pay all sums
necessary to discharge liability of the insured in respect of
(a) death of or bodily injury to any THIRD PARTY
(b) . . . .
2. . . . .
3. In the event of the death of any person entitled to indemnity
under this Policy, the Company will, in respect of the liability
incurred to such person indemnify his personal representatives in
terms of, and subject to the terms and conditions hereof.
The above-quoted provision leads to no other conclusion but that
AFISCO can be held directly liable by petitioners.
Shafer vs. Judge, RTC of Olongapo City: Where an insurance policy
insures directly against liability, the insurers liability accrues
immediately upon the occurrence of the injury or even upon which the
liability depends, and does not depend on the recovery of judgment by
the injured party against the insured.

The underlying reason behind the third party liability (TPL) of the
Compulsory Motor Vehicle Liability Insurance is to protect injured
persons against the insolvency of the insured who causes such injury,
and to give such injured person a certain beneficial interest in the
proceeds of the policy.
AFISCO is not solidarily liable with Destrajo.
Malayan Insurance Co., Inc. vs. Court of Appeals [issue as to the nature
of the liability of the insurer and the insured vis--vis the third party
injured in an accident]: While it is true that where the insurance
contract provides for indemnity against liability to third persons, such
third persons can directly sue the insurer, however, the direct liability
of the insurer under indemnity contracts against third party liability
does not mean that the insurer can be held solidarily liable with the
insured and/or the other parties found at fault. The liability of the
insurer is based on contract; that of the insured is based on tort.
While in solidary obligations, the creditor may enforce the entire
obligation against one of the solidary debtors, in an insurance contract,
the insurer undertakes for a consideration to indemnify the insured
against loss, damage or liability arising from an unknown or contingent
Petitioners herein cannot validly claim that AFISCO, whose liability
under the insurance policy is also P20,000 can be held solidarily liable
with Destrajo for the total amount of P53,901.70. Since under both the
law and the insurance policy, AFISCOs liability is only up to P20,000 the
second paragraph of the dispositive portion of the decision in question
may have unwittingly sown confusion among the petitioners and their
counsel. What should have been clearly stressed as to leave no room
for doubt was the liability of AFISCO under the explicit terms of the
insurance contract.
In fine, the Court concludes that the liability of AFISCO based on the
insurance contract is direct, but not solidary with that of Destrajo
which is based on Article 2180 of the Civil Code.
As such, petitioners have the option either to claim P15,000 from
AFISCO and the balance from Destrajo or enforce the entire judgment

from Destrajo subject to reimbursement from AFISCO to the extent of
the insurance coverage.

May 28, 1990
FACTS: Cayas was the registered owner of a Mazda bus which was insured
with petitioner PERLA COMPANIA DE SEGUROS, INC (PCSI). The bus
figured in an accident in Cavite, injuring several of its passengers. One of
them, Perea, sued Cayas for damages in the CFI, while three others
agreed to a settlement of P4,000.00 each with Cayas.
After trial, the court rendered a decision in favor of Perea, Cayas
ordered to compensate the latter with damages. Cayas filed a complaint
with the CFI, seeking reimbursement from PCSI for the amounts she paid
to ALL victims, alleging that the latter refused to make such
reimbursement notwithstanding the fact that her claim was within its
contractual liability under the insurance policy.
The decision of the CA affirmed in toto the decision of the RTC of Cavite,
the dispositive portion of which states:
IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering
defendant PCSI to pay plaintiff Cayas the sum of P50,000.00 under its
maximum liability as provided for in the insurance policy;
In this petition for review on certiorari, petitioner seeks to limit its liability
only to the payment made by private respondent to Perea and only up to
the amount of P12,000.00. It altogether denies liability for the payments
made by private respondents to the other 3 injured passengers totaling
ISSUE: how much should PCSI pay?
HELD: The decision of the CA is modified, petitioner only to pay Cayas
P12,000,000.00. The insurance policy provides:

5. No admission, offer, promise or payment shall be made by or on
behalf of the insured without the written consent of the Company
It being specifically required that petitioners written consent be first
secured before any payment in settlement of any claim could be made,
private respondent is precluded from seeking reimbursement of the
payments made to the other 3 victims in view of her failure to comply
with the condition contained in the insurance policy.
Also, the insurance policy involved explicitly limits petitioners
liability to P12,000.00 per person and to P50,000.00 per accident
Clearly, the fundamental principle that contracts are respected as
the law between the contracting parties finds application in the present
case. Thus, it was error on the part of the trial and appellate courts to
have disregarded the stipulations of the parties and to have substituted
their own interpretation of the insurance policy.
We observe that although Cayas was able to prove a total loss of
only P44,000.00, petitioner was made liable for the amount of
P50,000.00, the maximum liability per accident stipulated in the policy.
This is patent error. An insurance indemnity, being merely an assistance
or restitution insofar as can be fairly ascertained, cannot be availed of by
any accident victim or claimant as an instrument of enrichment by reason
of an accident.

Aisporna v. CA of People, 113SCRA459
Facts: Mapalad Aisporna was accused of acting as an agent in soliciting
insurance without securing the certificate of authority from the Insurance
Commission in violation of section 189 of the Insurance Act.Mapalad
contended that being the wife of a true agent, Rodolfo, she naturally
helped him in his work. She said the policy issued to Isidro, a client, was
merely a renewal at the time when her husband was absent.
Issue: Was Mapalad an insurance agent within the scope or intent of the
Insurance Act?

Held: No. The first paragraph of section 189 prohibits a person from
acting as agent, subagent or broker in thesolicitation or procurement of
applications for insurance without first procuring a certificate
of authorityso to act from the Insurance Commissioner; the second
paragraph defines who is an insurance agentwithin the intent of the
section; and the third paragraph prescribes the penalty to be imposed
for itsviolation.Legislative intent must be ascertained from
a consideration of the statute as a whole. The particularwords, clauses
and phrases should not be studied as detached and isolated expressions,
but the wholeand every part of the statute must be considered in fixing
the meaning of any of its parts and in order toproduce harmonious whole.
Enriquez vs. Sun Life Assurance Co. [GR No. 15895; November 29, 1920]
Facts: Plaintiff is estate administrator for late Joaquin Herrer. Herrer has
pending application with defendant Sun Life Assurance Co (sun Life)
evidenced by a provisional receipt. The provisional receipt reads payment
of Php6, 000 for life annuity received 26 September 1917. The application
was received by Sun Life head office a month after.
04 December 1917, the policy was issued in Montreal. A petition for
withdrawal of application was filed by Herrers lawyer 18 December 1917.
Herrer died 20 December. A letter from Sun Life was received 21
December stating policy was issued and reminds the party of a
notification of acceptance of the application dated 26 November.
Plaintiff testified that he had found no letter of notification from the Sun
Lower Court decides in favor of respondent. Appeal was taken.
Issue: Whether or not the there has been a valid offer and acceptance??
Held: None. The Civil Code provides that the acceptance made by letter
binds the person making the offer only from the date it has came to its
knowledge. The contract of life annuity was not perfected. There was no
satisfactory evidence that the application acceptance came to the
knowledge of Herrer.

Article 16 of the civil code provides that any deficiency in the special
law shall be supplied by the Code. The Insurance Code does not provide
for law on the principle of acceptance, thus the Civil Code shall govern.
Article 1262 provides that consent is shown by concurrence of offer
and acceptance with the thing and the consideration to the contract. The
acceptance by letter shall not bind the person making the offer except
from the time It came to his knowledge.
American Courts held that acceptance of offer not actually
communicated does not complete the contract but the mailing of the
acceptance. Locus Poenitrntiae is ended when acceptance has passed
beyond partys control.
Furthermore, the provisional receipt provides for conditions before a
contract is deemed final. 1. Medical examination. 2. Approval by head
office of the application. 3. the company communicates approval to the
In the case, there was no letter of notification. No evidence of knowledge.
Judgment reversed. Php6000 with interest is to be returned.
Development Bank of the Philippines v CA 231 SCRA 370 March 21, 1994
Facts: Juan B. Dans, together with his family applied for a loan of
P500,000 with DBP. As principal mortgagor, Dans, then 76 years of
age was advised by DBP to obtain a mortgage redemption insurance
(MRI) with DBP MRI pool. A loan in the reduced amount was approved
and released by DBP. From the proceeds of the loan, DBP deducted the
payment for the MRI premium. The MRI premium of Dans, less the DBP
service fee of 10%, was credited by DBP to the savings account of DBP
MRI-Pool. Accordingly, the DBP MRI Pool was advised of the credit.
Dans died of cardiac arrest. DBP MRI Pool notified DBP that Dans was not
eligible for MRI coverage, being over the acceptance age limit of 60 years
at the time of application. DBP apprised Candida Dans of the disapproval
of her late husbands MRI application. DBP offered to refund the premium
which the deceased had paid, but Candida Dans refused to accept the
same demanding payment of the face value of the MRI or an amount

equivalent of the loan. She, likewise, refused to accept an ex gratia
settlement which DBP later offered. Hence the case at bar.
Issue: Whether or not the DBP MRI Pool should be held liable on the
ground that the contract was already perfected?
Held: No, it is not liable. The power to approve MRI application is lodged
with the DBP MRI Pool. The pool, however, did not approve the
application. There is also no showing that it accepted the sum which DBP
credited to its account with full knowledge that it was payment for the
premium. There was as a result no perfected contract of insurance hence
the DBP MRI Pool cannot be held liable on a contract that does not exist
In dealing with Dans, DBP was wearing 2 legal hats: the first as a lender
and the second as an insurance agent. As an insurance agent, DBP made
Dans go through the motion of applying for said insurance, thereby
leading him and his family to believe that they had already fulfilled all the
requirements for the MRI and that the issuance of their policy was
forthcoming. DBP had full knowledge that the application was never going
to be approved. The DBP is not authorized to accept applications for MRI
when its clients are more than 60 years of age. Knowing all the while that
Dans was ineligible, DBP exceeded the scope of its authority when it
accepted the application for MRI by collecting the insurance premium and
deducting its agents commission and service fee. Since the third person
dealing with an agent is unaware of the limits of the authority conferred
by the principal on the agent and he has been deceived by the non-
disclosure thereof by the agent, then the latter is liable for damages to
Gulf Resorts Inc. vs. Philippine Charter Insurance Corporation [G.R. No.
156167 May 16, 2005]
Facts: Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La
Union and had its properties in said resort insured originally with the
American Home Assurance Company (AHAC). In the first 4 policies issued,
the risks of loss from earthquake shock was extended only to petitioners
two swimming pools. Gulf Resorts agreed to insure with Phil Charter the
properties covered by the AHAC policy provided that the policy wording

and rates in said policy be copied in the policy to be issued by Phil
Charter. Phil Charter issued Policy No. 31944 to Gulf Resorts covering the
period of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a
total premium of P45,159.92. the break-down of premiums shows that
Gulf Resorts paid only P393.00 as premium against earthquake shock (ES).
In Policy No. 31944 issued by defendant, the shock endorsement provided
that In consideration of the payment by the insured to the company of
the sum included additional premium the Company agrees,
notwithstanding what is stated in the printed conditions of this policy due
to the contrary, that this insurance covers loss or damage to shock to any
of the property insured by this Policy occasioned by or through or in
consequence of earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D"
and "7-C"). In Exhibit "7-C" the word "included" above the underlined
portion was deleted. On July 16, 1990 an earthquake struck Central Luzon
and Northern Luzon and plaintiffs properties covered by Policy No. 31944
issued by defendant, including the two swimming pools in its Agoo Playa
Resort were damaged.
Petitioner advised respondent that it would be making a claim under
its Insurance Policy 31944 for damages on its properties. Respondent
denied petitioners claim on the ground that its insurance policy only
afforded earthquake shock coverage to the two swimming pools of the
resort. The trial court ruled in favor of respondent. In its ruling, the
schedule clearly shows that petitioner paid only a premium of P393.00
against the peril of earthquake shock, the same premium it had paid
against earthquake shock only on the two swimming pools in all the
policies issued by AHAC.
Issue: Whether or not the policy covers only the two swimming pools
owned by Gulf Resorts and does not extend to all properties damaged
Held: YES. All the provisions and riders taken and interpreted together,
indubitably show the intention of the parties to extend earthquake shock
coverage to the two swimming pools only. An insurance premium is the
consideration paid an insurer for undertaking to indemnify the insured
against a specified peril. In fire, casualty and marine insurance, the

premium becomes a debt as soon as the risk attaches. In the subject
policy, no premium payments were made with regard to earthquake
shock coverage except on the two swimming pools. There is no mention
of any premium payable for the other resort properties with regard to
earthquake shock. This is consistent with the history of petitioners
insurance policies with AHAC.
Malayan Insurance Co., Inc. vs. CA [G.R. No. L-36413, 26 September
Facts: Malayan Insurance Co. Inc. (MALAYAN) issued a Private Car
Comprehensive Policy covering a Willys jeep. The insurance coverage was
for "own damage" not to exceed P600.00 and "third-party liability" in the
amount of P20,000.00.
During the effectivity of the insurance policy, , the insured jeep,
while being driven by one Juan P. Campollo an employee of the
respondent San Leon Rice Mill, Inc., (SAN LEON) collided with a passenger
bus belonging to the respondent Pangasinan Transportation Co., Inc.
(PANTRANCO) at the national highway in Barrio San Pedro, Rosales,
Pangasinan, causing damage to the insured vehicle and injuries to the
driver, Juan P. Campollo, and the respondent Martin C. Vallejos, who was
riding in the ill-fated jeep.
Martin C. Vallejos filed an action for damages against Sio Choy,
Malayan Insurance Co., Inc. and the PANTRANCO before the Court of First
Instance of Pangasinan. The trial court rendered judgment holding Sio
Choy, SAN LEON, and MALAYAN jointly and severally liable. However,
MALAYANs liability will only be up to P20,000.
On appeal, CA affirmed the decision of the trial court. However, it
ruled that SAN LEON has no obligation to indemnify or reimburse the
petitioner insurance company for whatever amount it has been ordered
to pay on its policy, since the San Leon Rice Mill, Inc. is not a privy to the
contract of insurance between Sio Choy and the insurance company.
MALAYAN appealed to the SC by way of review on certiorari.

Issues: (1) Whether or not MALAYAN is solidarily liable to Vallejos, along
with Sio Choy and SAN LEON
(2) Whether or not MALAYAN is entitled to be reimbursed by SAN LEON
for whatever amount petitioner has been adjudged to pay respondent
Vallejos on its insurance policy.
Held: (1) Only Sio Choy and SAN LEON are solidarily liable to Vallejos for
the award of damages. Sio Choy is liable as owner of the jeep pursuant to
Article 2184, while SAN LEON is liable as the employer of the driver of the
jeep at the time of the accident pursuant to Art 2180.
MALAYANs liability, however, arose only out of the insurance policy
with Sio Choy. Petitioner as insurer of Sio Choy, is liable to respondent
Vallejos, but it cannot, as incorrectly held by the trial court, be made
"solidarily" liable with the two principal tortfeasors namely respondents
Sio Choy and SAN LEON.
(2) MALAYAN is entitled to be reimbursed. Upon payment of the
loss, the insurer is entitled to be subrogated pro tanto to any right of
action which the insured may have against the third person whose
negligence or wrongful act caused the loss. 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. That right is not dependent upon , nor does it
grow out of any privity of contract or upon written assignment of claim,
and payment to the insured makes the insurer assignee in equity.
Pan Malayan Insurance Corporation v. Court of Appeals G.R. No.
81026 April 3, 1990
1. Canlubang Automotive Resources Corp. obtained from PanMalay a
motor vehicle insurance policy for its Mitsubishi Colt Lancer.
2. While the policy was still in effect, the insured car was allegedly hit by a
pick-up owned by Erlinda Fabie but driven by another person. The car
suffered damages in the amount of P42K.

3. PanMalay defrayed the cost of repair of the insured car. It then
demanded reimbursement from Fabie and her driver of said amount,
but to no avail.
4. PanMalay filed a complaint for damages with the RTC of Makati against
Fabie and the driver. It averred that the damages caused to the insured
car was settled under the own damage coverage of the insurance
5. Private respondents filed a motion to dismiss alleging that PanMalay
had no cause of action since the won damage clause of the policy
precluded subrogation under Art. 2207 of the Civil Code. They
contended that indemnification under said article is on the assumption
that there was no wrongdoer or no 3
party at fault.
6. The RTC dismissed PanMalays complaint and ruled that payment under
the own damage clause was an admission by the insurer that the
damage was caused by the assured and/or its representatives.
7. CA affirmed but on different ground. Applying the ejusdem generis rule,
CA held that Section III-I of the policy, which was the basis for
the settlement of the claim against insurance, did not cover damage
arising from collision or overturning due to the negligence of 3
as one of the insurable risks.
Issue: Was PanMalay subrogated to the rights of Canlubang against the
driver and his employer?
Held: Yes. Decision: The Supreme Court remanded the case back to the
trial court.
Ruling: Right of Subrogation of the Insurer
Article 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
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.
There are three exceptions to this rule:
1. where the assured by his own act releases the wrongdoer or third party
liable for the loss or damage
2. where the insurer pays the assured the value of the lost goods without
notifying the carrier who has in good faith settled the assured's claim
for loss
3. where the insurer pays the assured for a loss which is not a risk
covered by the policy, thereby effecting "voluntary payment"
None of these exceptions are present in this case.
As to the trial courts ruling: When PanMalay utilized the phrase "own
damage" a phrase which is not found in the insurance policy to
define the basis for its settlement of Canlubang's claim under the policy, it
simply meant that it had assumed to reimburse the costs for repairing
the damage to the insured vehicle. It is in this sense that the so-called
"own damage" coverage under Section III of the insurance policy is
differentiated from Sections I and IV-1 which refer to "Third Party
Liability" coverage (liabilities arising from the death of, or bodily injuries
suffered by, third parties) and from Section IV-2 which refer to "Property
Damage" coverage (liabilities arising from damage caused by the insured
vehicle to the properties of third parties).
As to the Court of Appeals ruling: The Court of Appeals' ruling on the
coverage of insured risks stems from an erroneous interpretation of the
provisions of the policy. It violates a fundamental rule on the
interpretation of property insurance contracts where interpretation
should be liberally in favor of the assured and strictly against the insurer

in cases of disagreement between the parties. The meaning advanced by
PanMalay regarding the coverage of the policy is undeniable more
beneficial to Canlubang than that insisted upon by the CA. In any case, the
very parties to the policy were not shown to be in disagreement regarding
the meaning and coverage of Section III-I. Hence, it was improper for CA
to assert its own interpretation of the contract that is contrary to the
clear understanding and intention of the parties to it.
* Even assuming for the sake of argument that the insurance policy
does not cover damage to the insured vehicle caused by negligent acts of
third parties, and that PanMalay's settlement of Canlubang's claim for
damages allegedly arising from a collision due to private respondents'
negligence would amount to unwarranted or "voluntary payment",
insurer may still recover from the third party responsible for the damage
to the insured property under Article 1236 of the Civil Code.
Delsan Transport Lines Inc. vs CA
Facts: Caltex entered into a contract of affreightment with Delsan
Transport Lines, Inc., for a period of one year whereby the said common
carrier agreed to transport Caltexs industrial fuel oil from the Batangas-
Bataan Refinery to different parts of the country. Under the contract,
petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of
industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in
Zamboanga City. The shipment was insured with the private respondent,
American Home Assurance Corporation.
On August 14, 1986, MT Maysun set sail from Batangas for
Zamboanga City. Unfortunately, the vessel sank in the early morning of
August 16, 1986 near Panay Gulf in the Visayas taking with it the entire
cargo of fuel oil.
The Respondent (insurance) paid the Caltex the amount
of P5,096,635.57 representing the amount of the value of the lost cargo.
Issue: 1. Whether or not the payment made by the private respondent to
Caltex for the insured value of the lost cargo amounted to an admission

that the vessel was seaworthy, thus precluding any action for recovery
against the petitioner.
2. Whether or not the non-presentation of the marine insurance policy
bars the complaint for recovery of sum of money for lack of cause of
Held: No, under the law, extra ordinary diligence is required by the
common carrier in taking good care of the goods. The common carrier is
presumed negligent unless the contrary provides otherwise. The right of
subrogation has its roots in equity. It is designed to promote and to
accomplish justice and is the mode which equity adopts to compel the
ultimate payment of a debt by one who in justice and good conscience
ought to pay. It 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 by the insurance company of the insurance claim.
The presentation in evidence of the marine insurance policy is not
indispensable in this case before the insurer may recover from the
common carrier the insured value of the lost cargo in the exercise of its
subrogatory right. The subrogation receipt, by itself, is sufficient to
establish not only the relationship of herein private respondent as insurer
and Caltex, as the assured shipper of the lost cargo of industrial fuel oil,
but also the amount paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the insurance company of
the insurance claim.
G.R. No. 150094 August 18, 2004
FACTS: shipper SMITHKLINE USA delivered to carrier Burlington Air
Express (BURLINGTON), an agent of [Petitioner] Federal Express
Corporation, a shipment of 109 cartons of veterinary biologicals for
delivery to consignee SMITHKLINE and French Overseas Company in
Makati City. The shipment was covered by Burlington Airway Bill No.
11263825 with the words, REFRIGERATE WHEN NOT IN TRANSIT and
PERISHABLE stamp marked on its face. That same day, Burlington
insured the cargoes with American Home Assurance Company

(AHAC). The following day, Burlington turned over the custody of said
cargoes to FEDEX which transported the same to Manila.
The shipments arrived in Manila and was immediately stored at
[Cargohaus Inc.s] warehouse. Prior to the arrival of the cargoes, FEDEX
informed GETC Cargo International Corporation, the customs broker hired
by the consignee to facilitate the release of its cargoes from the Bureau of
Customs, of the impending arrival of its clients cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-
licensed customs broker who was assigned by GETC, found out, while he
was about to cause the release of the said cargoes, that the same [were]
stored only in a room with 2 air conditioners running, to cool the place
instead of a refrigerator. DIONEDA, upon instructions from GETC, did not
proceed with the withdrawal of the vaccines and instead, samples of the
same were taken and brought to the Bureau of Animal Industry of the
Department of Agriculture in the Philippines by SMITHKLINE for
examination wherein it was discovered that the ELISA reading of
vaccinates sera are below the positive reference serum.
As a consequence of the foregoing result of the veterinary biologics
test, SMITHKLINE abandoned the shipment and, declaring total loss for
the unusable shipment, filed a claim with AHAC through its representative
in the Philippines, the Philam Insurance Co., Inc. (PHILAM) which
recompensed SMITHKLINE for the whole insured amount. Thereafter,
PHILAM filed an action for damages against the FEDEX imputing
negligence on either or both of them in the handling of the cargo.
Trial ensued and ultimately concluded with the FEDEX being held
solidarily liable for the loss. Aggrieved, petitioner appealed to the CA. The
appellate court ruled in favor of PHILAM and held that the shipping
Receipts were a prima facie proof that the goods had indeed been
delivered to the carrier in good condition.
ISSUE: Is FEDEX liable for damage to or loss of the insured goods


HELD: petition granted. Assailed decision reversed insofar as it
pertains to FEDEX
Prescription of Claim. - From the initial proceedings in the trial court
up to the present, petitioner has tirelessly pointed out that respondents
claim and right of action are already barred. Indeed, this fact has never
been denied by respondents and is plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of
petitioner, states:
6. No action shall be maintained in the case of damage to or partial
loss of the shipment unless a written notice, sufficiently describing the goods
concerned, the approximate date of the damage or loss, and the details of the
claim, is presented by shipper or consignee to an office of Burlington within
(14) days from the date the goods are placed at the disposal of the person
entitled to delivery, or in the case of total loss (including non-delivery) unless
presented within (120) days from the date of issue of the [Airway Bill]. xxx
Relevantly, petitioners airway bill states: 12./12.1 The person entitled to
delivery must make a complaint to the carrier in writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the
damage and at the latest within fourteen (14) days from receipt of the
goods; xxx
Article 26 of the Warsaw Convention, on the other hand, provides:
Xxx (2) In case of damage, the person entitled to delivery must
complain to the carrier forthwith after the discovery of the damage, and, at
the latest, within 3 days from the date of receipt in the case of baggage and 7
days from the date of receipt in the case of goods. Xx
(3)Every complaint must be made in writing upon the document of
transportation or by separate notice in writing dispatched within the
times aforesaid. (4) Failing complaint within the times aforesaid, no action
shall lie against the carrier, save in the case of fraud on his part. xxx
Condition Precedent - In this jurisdiction, the filing of a claim with
the carrier within the time limitation therefor actually constitutes a
condition precedent to the accrual of a right of action against a carrier for

loss of or damage to the goods. The shipper or consignee must allege and
prove the fulfillment of the condition. If it fails to do so, no right of action
against the carrier can accrue in favor of the former. The aforementioned
requirement is a reasonable condition precedent; it does not constitute a
limitation of action.
The requirement of giving notice of loss of or injury to the goods is
not an empty formalism. The fundamental reasons for such a stipulation
are (1) to inform the carrier that the cargo has been damaged, and that it
is being charged with liability therefor; and (2) to give it an opportunity to
examine the nature and extent of the injury. This protects the carrier by
affording it an opportunity to make an investigation of a claim while the
matter is fresh and easily investigated so as to safeguard itself from false
and fraudulent claims.
NOTES: as to proper payee: The Certificate specifies that loss of or
damage to the insured cargo is payable to order x x x upon surrender of
this Certificate. Such wording conveys the right of collecting on any such
damage or loss, as fully as if the property were covered by a special policy
in the name of the holder itself. At the back of the Certificate appears the
signature of the representative of Burlington. This document has thus
been duly indorsed in blank and is deemed a bearer instrument. Since
the Certificate was in the possession of Smithkline, the latter had the right
of collecting or of being indemnified for loss of or damage to the insured
shipment, as fully as if the property were covered by a special policy in
the name of the holder. Hence, being the holder of the Certificate and
having an insurable interest in the goods, Smithkline was the proper
payee of the insurance proceeds.
Subrogation - Upon receipt of the insurance proceeds, the consignee
(Smithkline) executed a subrogation Receipt in favor of respondents. The
latter were thus authorized to file claims and begin suit against any such
carrier, vessel, person, corporation or government. Undeniably, the
consignee had a legal right to receive the goods in the same condition it
was delivered for transport to petitioner. If that right was violated, the
consignee would have a cause of action against the person responsible