Vda. de Gabriel vs.

Court of Appeals [GR 103883, 14 November 1996] First

Division, Vitug (J): 4 concur
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 National Bureau of Investigation (NBI) to the effect that "due to
advanced state of postmortem decomposition, cause ofdeath could not be determined."
Fortune referred the insurance claim to Mission Adjustment Service, Inc. Following a
series of communications between Jacqueline Jimenez vda. de Gabriel and Fortune, the
latter, on 22 September 1983, ultimately denied the claim of ECDC on the ground of
prescription. Vda. De Gabriel went to the Regional Trial Court 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 and of various other sums by way of actual, moral, and exemplary
damages, plus attorney's fees and costs of suit. 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. Later, Fortune filed an amended answer,
still unverified, reiterating its original defenses but, this time, additionally putting up a
counterclaim and a crossclaim. The trial court dismissed the case against ECDC for the
failure of Vda. de Gabriel to take steps to cause the service of the fourth alias summons
on ECDC. The dismissal was without prejudice. The case proceeded against Fortune
alone. On 28 May 1987, the trial court rendered its decision in favor (partly) of Vda. de
Gabriel's claim. In arriving at its conclusion, the trial court held that Fortune was deemed
to have waived the defense, i.e., that the cause of Gabriel's death was not covered by
the policy, when the latter failed to impugn by evidence Vda. de Gabriel's averment on
the matter. With regard to the defense of prescription, the court considered the complaint
to have been timely filed or within 1 year from Fortune's denial of the claim. Vda. de
Gabriel and Fortune both appealed to the Court of Appeals. The Court of Appeals, on 18
September 1991, reversed the decision of the lower court. The appellate court held that
Vda. de Gabriel had failed to substantiate her allegation that her husband's death was
caused by a risk insured against. The motion for reconsideration was denied. Vda. de
Gabriel filed the petition for review on certiorari.
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. On the other hand, there is absolutely no basis in fact and in
law to hold that the insurance company was deemed to have waived -- by failing to have
its answers (to the Request for Admission) duly verified -- the defense, that the death of
Vda. de Gabriel's husband was not caused by violent accidental external and visible
means' as contemplated in the insurance policy. The Death Certificate and the Autopsy
Report, more than controverted the allegation of Vda. de Gabriel as to the cause of
death of her husband.
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. Said the appellate court in this regard: "It must be noted that
the only evidence presented by her to prove the circumstances surrounding her
husband's death were her purported affidavit and the letter allegedly written by the
deceased co-worker in Iraq. 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. In like manner, the
letter allegedly written by the deceased's co-worker which was never identified to in court
by the supposed author, suffers from the same defect as the affidavit of the plaintiffappellant." 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.

Vda. de Maglana vs. Consolacion [GR 60506, 6 August 1992] Third Division,
Romero (J): 3 concur
Facts: Lope Maglana was an employee of the Bureau of Customs whose work station
was at Lasa, in Davao City. On 20 December 1978, early morning, Lope Maglana was
on his way to his work station, driving a motorcycle owned by the Bureau of Customs. At
Km. 7, Lanang, 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
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 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, Sr., filed an action for damages and attorney's fees against operator Patricio
Destrajo and the Afisco Insurance Corporation (AFISCO) before the then Court of First
Instance of Davao, Branch II. An information for homicide thru reckless imprudence was
also filed against Pepito Into. During the pendency of the civil case, Into was sentenced
to suffer an indeterminate penalty of 1 year, 8 months and 1 day of prision correccional,
as minimum, to 4 years, 9 months and 11 days of prision correcional, as maximum, with
all the accessory penalties provided by law, and to indemnify the heirs of Lope Maglana,
Sr. in the amount of P12,000.00 with subsidiary imprisonment in case of insolvency, plus
P5,000.00 in the concept of moral and exemplary damages with costs. No appeal was
interposed by the accused who later applied for probation. On 14 December 1981, the
lower court rendered a decision finding that Destrajo had not exercised sufficient
diligence as the operator of the jeepney. The court ordered Destrajo to pay the heirs of
Maglana the sum of P28,000.00 for loss of income; the sum of P12,000.00 which
amount shall be deducted in the event judgment in Criminal Case 3527-D against the
driver, accused Into, shall have been enforced; the sum of P5,901.70 representing
funeral and burial expenses of the deceased; the sum of P5,000.00 as moral damages
which shall be deducted in the event judgment (sic) in Criminal Case 3527-D against the
driver, accused Into; the sum of P3,000.00 as attorney's fees and to pay the costs of suit.
The court ordered the insurance company is ordered to reimburse Destrajo whatever
amounts the latter shall have paid only up to the extent of its insurance coverage. The
heirs of Maglana filed a motion for the reconsideration of the second paragraph of the
dispositive portion of the decision contending that AFISCO should not merely be held
secondarily liable because the Insurance Code provides that the insurer's 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." In its Order of February 9, 1982, the
lower court denied the motion for reconsideration ruling 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 coverage." The heirs filed a second motion for reconsideration
reiterating that 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 autrui. This motion was likewise denied for
lack of merit. The heirs filed the petition for certiorari.

Issue [1]: Whether AFISCO is primarily liable, not secondarily liable, on the insurance
policy.
Held [1]: The particular provision of the insurance policy on which the heirs base their
claim provides "SECTION 1 LIABILITY TO THE PUBLIC 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; xxx 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 the heirs. As the Court
ruled in Shafer vs. Judge, RTC of Olongapo City, Br. 75, "[w]here an insurance policy
insures directly against liability, the insurer's liability accrues immediately upon the
occurrence of the injury or event 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." Since the heirs had received from AFISCO the sum of P5,000.00
under the no-fault clause, AFISCO's liability is now limited to P15,000.00.
Issue [2]: Whether AFISCO is solidarily liable with Destrajo.
Held [2]: NO. In Malayan Insurance Co., Inc. v. Court of Appeals, the Court had the
opportunity to resolve the issue as to the nature of the liability of the insurer and the
insured vis-a-vis the third party injured in an accident, where it ruled that "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." The
Court then proceeded to distinguish the extent of the liability and manner of enforcing
the same in ordinary contracts from that of insurance contracts. 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
event." Herein, the heirs cannot validly claim that AFISCO, whose liability under the
insurance policy is also P20,000.00, can be held solidarily liable with Destrajo for the
total amount of P53,901.70 in accordance with the decision of the lower court. Since
under both the law and the insurance policy, AFISCO's liability is only up to P20,000.00,
the second paragraph of the dispositive portion of the decision in question may have
unwittingly sown confusion among the heirs 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. 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, the heirs have the option either to claim the 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.

Tiu vs. Arriesgado

G.R. No. 138060, September 1, 2004
Facts: At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor Hollow
Blocks and General Merchandise" bearing plate number GBP-675 was loaded with
firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires exploded.
The driver, Sergio Pedrano, then parked along the right side of the national highway and
removed the damaged tire to have it vulcanized at a nearby shop, about 700 meters
away. Pedrano left his helper, Jose Mitante, Jr. to keep watch over the stalled vehicle,
and instructed the latter to place a spare tire six fathoms away behind the stalled truck to
serve as a warning for oncoming vehicles. The trucks tail lights were also left on. It was
about 12:00 a.m., March 16, 1987.
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724 driven
by Virgilio Te Laspias was cruising along the national highway of Sitio Aggies,
Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu City, and
had come from Maya, Daanbantayan, Cebu. Among its passengers were the Spouses
Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side of
the bus, about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspias saw the stalled truck, which was then
about 25 meters away. He applied the breaks and tried to swerve to the left to avoid
hitting the truck. But it was too late; the bus rammed into the trucks left rear. The impact
damaged the right side of the bus and left several passengers injured. Pedro Arriesgado
lost consciousness and suffered a fracture in his right colles. His wife, Felisa, was
brought to the Danao City Hospital. She was later transferred to the Southern Island
Medical Center where she died shortly thereafter.
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorneys fees before the Regional Trial Court of Cebu City,
Branch 20, against the petitioners, D Rough Riders bus operator William Tiu and his
driver, Virgilio Te Laspias on May 27, 1987. The respondent alleged that the passenger
bus in question was cruising at a fast and high speed along the national road, and that
petitioner Laspias did not take precautionary measures to avoid the accident.
The petitioners, for their part, filed a Third-Party Complaint against the following:
respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tius
insurer; respondent Benjamin Condor, the registered owner of the cargo truck; and
respondent Sergio Pedrano, the driver of the truck. They alleged that petitioner Laspias
was negotiating the uphill climb along the national highway of Sitio Aggies, Poblacion,
Compostela, in a moderate and normal speed. It was further alleged that the truck was
parked in a slanted manner, its rear portion almost in the middle of the highway, and that
no early warning device was displayed. Petitioner Laspias promptly applied the brakes

and swerved to the left to avoid hitting the truck head-on, but despite his efforts to avoid
damage to property and physical injuries on the passengers, the right side portion of the
bus hit the cargo trucks left rear.
Issues:
In third-party liability insurance, would it be possible for a third party to sue the insurer
directly?
Would it be possible for an insurance company to be held jointly and severally liable with
the insured?
Held:
Yes. This is an exception to the rule on mutuality of contract. Whenever a contract
contains stipulation for the benefit of a third person and the moment the third person
communicates his assent thereto, the contract becomes binding upon him. The fact that
a third person demands fulfillment of the insurance policy may be reasonably construed
as an assent on his part to the benefit provided in the policy. This provision arms him
with the requisite legal personality to bring an action on the insurance policy. (stipulation
pour artrui)
No. The basis of cause of action is different. The cause of action against the insurer is
based on contract while the cause of action against the insured is based on torts.
Considering that there are two different causes of action, it will be legally impossible for
them to be made as jointly and severally liable to the injured third party.

Tio Khe Chio vs. Court of Appeals

[GR 76101-02, 30 September 1991]

Third Division, Fernan (J): 4 concur

Facts: On 18 December 1978, Tio Khe Chio imported 1,000 bags of fishmeal valued at
$36,000.30 from Agro Impex, S.A. Dallas, Texas, U.S.A. The goods were insured with
Eastern Assurance and Surety Corporation (EASCO) and shipped on board the M/V
Peskov, a vessel owned by Far Eastern Shipping Company. When the goods reached
Manila on 28 January 1979, they were found to have been damaged by sea water which
rendered the fishmeal useless. Tio filed a claim with EASCO and Far Eastern Shipping.
Both refused to pay. Whereupon, Tio sued them before the then Court of First Instance
of Cebu, Branch II for damages. EASCO, as the insurer, filed a counterclaim against the
Tio for the recovery of P18,387.86 representing the unpaid insurance premiums. On 30
June 1982, the trial court rendered judgment ordering EASCO and Far Eastern Shipping
to pay Tio solidarily the sum of P105,986.68 less the amount of P18,387.86 for unpaid
premiums with interest at the legal rate from the filing of the complaint, the sum of
P15,000.00 as attorney's fees and the costs. The judgment became final as to EASCO
but the shipping company appealed to the Court of Appeals and was absolved from
liability by the said court in AC-GR 00161, entitled "Tio Khe Chio vs. Eastern Assurance
and Surety Corporation." The trial court, upon motion by Tio, issued a writ of execution
against EASCO. The sheriff enforcing the writ reportedly fixed the legal rate of interest at
12%. EASCO moved to quash the writ alleging that the legal interest to be computed
should be 6% per annum in accordance with Article 2209 of the Civil Code and not 12%
as insisted upon by Tio's counsel. In its order of 30 July 1986, the trial court denied
EASCO's motion. EASCO then filed a petition for certiorari and prohibition before the
Court of Appeals. On 30 July 1986, the Appellate Court rendered judgment, setting aside
the order dated 30 July 1986 in so far as it fixes the interest at 12% on the principal

amount of P87,598.82 from the date of filing of the complaint until the full payment of the
amount, and the interest that Tio was entitled to collect from EASCO was reduced to 6%
per annum; without pronouncement as to costs. Tio filed the petition for certiorari and
prohibition.
Issue [1]: Whether Sections 243 and 244, as to interest, apply in the present case.
Held [1]: NO. Section 243 of the Insurance Code provides that "the amount of any loss
or damage for which an insurer may be liable, under any policy other than life insurance
policy, shall be paid within thirty days after proof of loss is received by the insurer and
ascertainment of the loss or damage is made either by agreement between the insured
and the insurer or by arbitration; but if such ascertainment is not had or made within sixty
days after such receipt by the insurer of the proof of loss, then the loss or damage shell
be paid within ninety days after such receipt. Refusal or failure to pay the loss or
damage within the time prescribed herein will entitle the assured to collect interest on the
proceeds of the policy for the duration of the delay at the rate of twice the ceiling
prescribed by the Monetary Board, unless such failure or refusal to pay is based on the
ground that the claim is fraudulent." Section 244 of the aforementioned Code also
provides that "In case of any litigation for the enforcement of any policy or contract of
insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to
make a finding as to whether the payment of the claim of the insured has been
unreasonably denied or withheld; and in the affirmative case, the insurance company
shall be adjudged to pay damages which shall consist of attorney's fees and other
expenses incurred by the insured person by reason of such undeniable denial or
withholding of payment plus interest of twice the ceiling prescribed by the Monetary
Board of the amount of the claim due the insured, from the date following the time
prescribed in section two hundred forty-two or in section two hundred forty-three, as the
case may be, until the claim is fully satisfied; Provided, That the failure to pay any such
claim within the time prescribed in said sections shall be considered prima facie
evidence of unreasonable delay in payment." Herein, there was no unjustified refusal or
withholding of payment on Tio's claim. The aforecited sections of the Insurance Code are
not pertinent to the case, as they apply only when the court finds an unreasonable delay
or refusal in the payment of the claims.
Issue [2]: Whether the interest to be imposed on claims based on an insurance contract
is 6% or 12%.
Held [2]: 6%. The legal rate of interest is 6% per annum. Circular 416 of the Central
Bank which took effect on 29 July 1974 pursuant to Presidential Decree 116 (Usury Law)
which raised the legal rate of interest from 6% to 12% cannot apply as the adjusted rate
mentioned in the circular refers only to loans or forbearances of money, goods or credits
and court judgments thereon but not to court judgments for damages arising from injury
to persons and loss of property which does not involve a loan. On the other hand, in the
case of Philippine Rabbit Bus Lines, Inc. vs. Cruz, G.R. No. 71017, July 28, 1986, 143
SCRA 158, the Court declared that the legal rate of interest is 6% per annum, and not
12%, where a judgment award is based on an action for damages for personal injury, not
use or forbearance of money, goods or credit. In the same vein, the Court held in GSIS
vs. Court of Appeals, GR 52478, 30 October 1986, 145 SCRA 311, that the rates under
the Usury Law (amended by PD 116) are applicable only to interest by way of
compensation for the use or forbearance of money, interest by way of damages is

governed by Article 2209 of the Civil Code. Clearly, the applicable law is Article 2209 of
the Civil Code which reads "If the obligation consists in the payment of a sum of money
and the debtor incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, shall be the payment of interest agreed upon, and in the absence of
stipulation, the legal interest which is six per cent per annum." And in the light of the fact
that the contending parties did not allege the rate of interest stipulated in the insurance
contract, the legal interest was properly pegged at 6%.

Finman General Assurance Corporation vs. Court of Appeals [GR

138737, 12 July 2001] First Division, Kapunan (J): 4 concur
Facts: On 15 September 1981, Usiphil Incorporated obtained a fire insurance policy
from Finman General Assurance Corporation (then doing business under the name
Summa Insurance Corporation) covering certain properties, e.g., office, furniture,
fixtures, shop machinery and other trade equipment. Under Policy F3100 issued to
Usiphil, Finman undertook to indemnify Usiphil for any damage to or loss of said
properties arising from fire. Sometime in 1982, Usiphil filed with Finman an insurance
claim amounting to P987,126.11 for the loss of the insured properties due to fire. Acting
thereon, Finman appointed Adjuster H.H. Bayne to undertake the valuation and
adjustment of the loss. H.H. Bayne then required Usiphil to file a formal claim and submit
proof of loss. In compliance therewith, Usiphil submitted its Sworn Statement of Loss
and Formal Claim, dated 22 July 1982, signed by Reynaldo Cayetano, Usiphil's
Manager. Usiphil likewise submitted Proof of Loss signed by its Accounting Manager
Pedro Palallos and countersigned by H.H. Bayne's Adjuster F.C. Medina. Palallos
personally followed-up Usiphil's claim with Finman's President Joaquin Ortega. During
their meeting, Ortega instructed their Finance Manager, Rosauro Maghirang, to reconcile
the records. Thereafter, Maghirang and Palallos signed a Statement/Agreement, dated
28 February 1985, which indicated that the amount due Usiphil was P842,683.40.
Despite repeated demands by Usiphil, Finman refused to pay the insurance claim. Thus,
Usiphil was constrained to file a complaint against Finman for the unpaid insurance
claim. In its Answer, Finman maintained that the claim of Usiphil could not be allowed
because it failed to comply with Policy Condition 13 regarding the submission of certain
documents to prove the loss. Trial ensued. On 6 July 1994, the trial court rendered
judgment in favor of Usiphil. It ordered Finman to pay Usiphil the sum of P842,683.40
and to pay 24% interest per annum from 28 February 1985 until fully paid; the sum
equivalent to 10% of the principal obligation as and for attorney's fees, plus P1,500.00
per court appearance of counsel; the amount of P30,000.00 as exemplary damages in
addition to the actual and compensatory damages awarded. The court also dismissed
the claim of P30,000.00 for actual damages under par. 4 of the prayer, since the actual
damages. has been awarded under par. 1 of the decision's dispositive portion; dismissed
the claim of interest under par. 2 of the prayer, there being no agreement to such effect;
dismissed the counter-claim for lack of merit; and ordered Finman to pay the cost of suit.
On appeal, the CA substantially affirmed the decision of the trial court. The appellate
court modified the decision by ordering Finman to pay Usiphil the sum of P842,683.40
and to pay 24% interest per annum from 3 May 1985 until fully paid. Finman filed the
petition for review on certiorari.
Issue [1]: Whether Usiphil has complied with Policy Condition 13 in notifying Finman of
the loss. Held [1]: YES. Usiphil had substantially complied with Policy Condition 13
which reads "The insured shall give immediate written notice to the Company of any

loss, protect the property from further damage, forthwith separate the damaged and
undamaged personal property, put it in the best possible order, furnish a complete
inventory of the destroyed, damaged, and undamaged property, showing in detail
quantities, costs, actual cash value and the amount of loss claimed; AND WITHIN SIXTY
DAYS AFTER THE LOSS, UNLESS SUCH TIME IS EXTENDED IN WRITING BY THE
COMPANY, THE INSURED SHALL RENDER TO THE COMPANY A PROOF OF LOSS,
signed and sworn to by the insured, stating the knowledge and belief of the insured as to
the following: the time and origin of the loss, the interest of the insured and of all others
in the property, the actual cash value of each item thereof and the amount of loss
thereto, all encumbrances thereon, all other contracts of insurance, whether valid or not,
covering any of said property, any changes in the title, use, occupation, location,
possession or exposures of said property since the issuing of this policy by whom and
for what purpose any buildings herein described and the several parts thereof were
occupied at the time of loss and whether or not it then stood on leased ground, and shall
furnish a copy of all the descriptions and schedules in all policies, and if required verified
plans and specifications of any building, fixtures, or machinery destroyed or damaged.
The insured, as often as may be reasonably required, shall exhibit to any person
designated by the company all that remains of any property herein described, and
submit to examination under oath by any person named by the Company, and subscribe
the same; and, as often as may be reasonably required, shall produce for examination
all books of account, bills, invoices, and other vouchers or certified copies thereof if
originals be lost, at such reasonable time and place as may be designated by the
Company or its representative and shall permit extracts and copies thereof to be made.
No claim under this policy shall be payable unless the terms of this condition have been
complied with." A perusal of the records shows that Usiphil, after the occurrence of the
fire, immediately notified Finman thereof. Thereafter, Usiphil submitted the following
documents: (1) Sworn Statement of Loss and Formal Claim and; (2) Proof of Loss. The
submission of these documents constitutes substantial compliance with the above
provision. Indeed, as regards the submission of documents to prove loss, substantial,
not strict as urged by Finman, compliance with the requirements will always be deemed
sufficient. In any case, Finman itself acknowledged its liability when through its Finance
Manager, Rosauro Maghirang, it signed the document indicating that the amount due
Usiphil is P842,683.40. Issue [2]: Whether the payment of 24% interest per annum is
authorized by Sections 243 and 244 of the Insurance Code. Held [2]: YES. Anent the
payment of 24% interest per annum computed from 3 May 1985 until fully paid, the
same is authorized by Sections 243 and 244 of the Insurance Code. Notably, under
Section 244, a prima facie evidence of unreasonable delay in payment of the claim is
created by the failure of the insurer to pay the claim within the time fixed in both Sections
243 and 244. Further, Section 29 of the policy itself provides for the payment of such
interest: "Settlement of claim clause. The amount of any .loss or damage for which the
company may be liable, under this policy shall be paid within thirty days after proof of
loss is received by the company and ascertainment of the loss or damage is made either
in an agreement between the insured and the company or by arbitration; but if such
ascertainment is not had or made within sixty days after such receipt by the company of
the proof of loss, then the loss or damage shall be paid within ninety days after such
receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will
entitle the assured to collect interest on the proceeds of the policy for the duration of the
delay at the rate of twice the ceiling prescribed by the Monetary Board. unless such
failure or refusal to pay is based on the grounds (sic) that the claim is fraudulent." The
policy itself obliges Finman to pay the insurance claim within 30 days after proof of loss
and ascertainment of the loss made in an agreement between Usiphil and Finman.

Finman and Usiphil signed the agreement indicating that the amount due Usiphil was
P842,683.40 on 2 April 1985. Finman thus had until 2 May 1985 to pay Usiphil's
insurance. For its failure to do so, the Court of Appeals and the trial court rightfully
directed Finman to pay, inter alia, 24% interest per annum in accordance with the above
quoted provisions.