Part 2_Case Digests

MHH_3.1_Insurance Law

M. Cash Surrender Value

(GR No. L-2910, 1951)

67) THE MANUFACTURERS LIFE INSURANCE CO., plaintiff-appellant, vs.
BIBIANO L. MEER, in the capacity as Collector of Internal
Revenue, defendant-appellee
Facts: The Manufacturers Life Insurance Company is duly registered and licensed
to engage in life insurance business in the Philippines for more than five years
until 1941. But due to the exigencies of the war it closed the branch office at
Manila during 1942 up to September 1945. In the course of its operations before
the war, plaintiff issued a number of life insurance policies in the Philippines
containing nonforfeiture clauses, viz:
8. Automatic Premium Loan This Policy shall not lapse for nonpayment of any premium after it has been three full years in
force, if, at the due date of such premium, the Cash Value of this
Policy and of any bonus additions and dividends left on
accumulation (after deducting any indebtedness to the Company
and the interest accrued thereon) shall exceed the amount of said
premium. In which event the company will, without further
request, treat the premium then due as paid, and the amount of
such premium, with interest from its actual due date at six per
cent per annum, compounded yearly, and one per cent,
compounded yearly, for expenses, shall be a first lien on this
Policy in the Company's favour in priority to the claim of any
assignee or any other person. The accumulated lien may at any
time, while the Policy is in force, be paid in whole or in part xxx
From January 1, 1942 to December 31, 1946 for failure of the insured under the
above policies to pay the corresponding premiums for one or more years, the
plaintiff's head office at Toronto, applied the provisions of the automatic
premium loan clauses; and the net amount of premiums so advanced or loaned
totalled P1,069,254.98. On this sum the defendant CIR assessed P17,917.12
which plaintiff paid supra protest. The assessment was made pursuant to section
255 of the National Internal Revenue Code as amended, which partly provides:
SEC. 255. Taxes on insurance premiums There shall be
collected from every person, company, or corporation (except
purely cooperative companies or associations) doing insurance
business of any sort in the Philippines a tax of one per centum of
the total premiums collected . . . whether such premiums are paid
in money, notes, credits, or any substitute for money but
premiums refunded within six months after payment on account
of rejection of risk or returned for other reason to person insured
shall not be included in the taxable receipts . . . .

1
Plantiff: When there are premium loans or premium advances, as above stated,
by virtue of the non-forfeiture clauses, it did not collect premiums within the
meaning of the above sections of the law, and therefore it is not amenable to the
tax therein provided.

Issues:
1. WON premium advances made by plaintiff-appellant under the automatic
premium loan clause of its policies are 'premiums collected' by the Company
subject to tax.
2. WON in the application of the automatic premium loan clause of plaintiffappellant's policies, there is payment in money, notes, credits, or any
substitutes for money.
3. WON the collection of the alleged deficiency premium taxes constitutes double
taxation.
4. Whether the making of premium advances, granting for the sake of argument
that it amounted to collection of premiums, were done in Toronto, Canada, or in
the Philippines.
5. WON the fact that plaintiff-appellant was not doing business in the Philippines
from January 1, 1942 to September 30, 1945 exempts it from payment of
premium taxes corresponding to said period.
Held:
Illustration: Suppose that 'A', 30 years of age, secures a 20-year endowment
policy for P5,000 from plaintiff-appellant Company and pays an annual premium
of P250. 'A' pays the first ten yearly premiums amounting to P2,500 and on this
amount plaintiff-appellant pays the corresponding taxes under section 255 of the
NIRC. Suppose also that the cash value of said policy after the payment of the
10th annual premium amounts to P1,000. When on the 11th year the annual
premium fell due and the insured remitted no money within the month's grace,
the insurer treated the premium then over due as paid from the cash value, the
amount being a loan to the policyholder who could discharge it at any time with
interest at 6 per cent. The insurance contract, therefore, continued in force for the
11th year.
1. Yes. "How could there be such a collection" plaintiff argues "when as a result
thereof, insurer becomes a creditor, acquires a lien on the policy and is entitled
to collect interest on the amount of the unpaid premiums?" Wittingly or
unwittingly, the "premium" and the "loan" have been interchanged in the
argument. The insurer "became a creditor" of the loan, but not of the premium

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that had already been paid. And it is entitled to collect interest on the loan, not
on the premium. In other words, "A" paid the premium for the eleventh year;
but in turn he became a debtor of the company for the sum of P250. This debt
he could repay either by later remitting the money to the insurer or by letting
the cash value compensate for it. The debt may also be deducted from the
amount of the policy should "A" die thereafter during the continuance of the
policy. The debt may also be deducted from the amount of the policy should
the insured die thereafter during the continuance of the policy.
There was an increase in the assets of the insurer. There was the new credit for
the advances made. True, the plaintiff could not sue the insured to enforce that
credit. But it has means of satisfaction out of the cash surrender value. If the
credit is paid out of the cash surrender value, there were no new funds added
to the company's assets. Cash surrender value "as applied to a life
insurance policy, is the amount of money the company agrees to pay to
the holder of the policy if he surrenders it and releases his claims
upon it. The more premiums the insured has paid the greater will be the
surrender value; but the surrender value is always a lesser sum than the total
amount of premiums paid."
The cash value or cash surrender value is therefore an amount which
the insurance company holds in trust for the insured to be delivered
to him upon demand. It is therefore a liability of the company to the
insured. Now then, when the company's credit for advances is paid out of the
cash value or cash surrender value, that value and the company's liability is
thereby diminished pro tanto. The decrease of a person's liabilities means a
corresponding increase in his net assets.
2. Yes. The insurer agreed to consider the premium paid on the strength of
the automatic loan. The premium was therefore paid by means of a "note"
or "credit" or "other substitute for money" and the tax is due because
section 255 above quoted levies taxes according to the total premiums
collected by the insurer "whether such premiums are paid in
money, notes, credits or any substitute for money.

3. No. Appellant goes back to the illustration, "A failed to pay the premium on
the 11th year and the insurer advanced P250 from the cash value. If the
amount of P250 is deducted from the cash value of P1,000 of the policy,
then taxing this P250 anew as premium collected, as was done in the
present case, will amount to double taxation since taxes had already been
collected on the cash value of P1,000 as part of the P2,500 collected as
premiums for the first ten years." The trouble with the argument is that it
assumes all advances are necessarily repaid from the cash value. That is

2
true in some cases. In others the insured subsequently remits the
money to repay the advance and to keep unimpaired the cash reserve of
his policy. Of the total amount advanced (P1,069,255) P158,667 had
actually been repaid at the time of assessment notice. Besides, the
premiums paid and on which taxes had already been collected, were those
for the 10 years. The tax demanded is on the premium for the 11th year.
Further, there is no constitutional prohibition against double taxation.

4. Philippines. Appellant: as the advances of premiums were made in Toronto,

such premiums are deemed to have been paid there not in the
Philippines and therefore those payments are not subject to local
taxation. The law does not contemplate premiums collected in the
Philippines. Subscribing to this would make foreign insurers evade the tax
by contriving to require that premium payments shall be made at their
head offices. It is enough that the insurer is doing insurance business in
the Philippines, irrespective of the place of its organization or
establishment. In any event there is no constitutional prohibition against
double taxation.

5. Untenable. Although during those years the appellant was not open for
new business because its branch office was closed, still it was practically
and legally, operating in this country by collecting premiums on its
outstanding policies, incurring the risks and/or enjoying the benefits
consequent thereto, without having previously taken any steps indicating
withdrawal in good faith from this field of economic activity. Further, in
objecting to the payment of the tax, plaintiff-appellant never insisted,
before the BIR that it was not engaged in business in this country during
those years.

N. Suretyship
GR No. 109937, 1994
68) DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF
APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE
POOL, respondents
Facts:
In May 1987, Juan B. Dans, together with his family, applied for a loan of
P500,000 with DBP Basilan Branch. As the principal mortgagor, Dans, then 76
years of age, was advised by DBP to obtain a mortgage redemption insurance

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MHH_3.1_Insurance Law

(MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). A loan,
in the reduced amount of P300,000, was approved and released by DBP. From the
proceeds of the loan, DBP deducted the amount of P1,476 as payment for the MRI
premium. Dans accomplished and submitted the "MRI Application for Insurance"
and the "Health Statement for DBP MRI Pool." The MRI premium of Dans, less the
DBP service fee of 10 percent, was credited by DBP to the savings account of the
DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.

carrier or some other form of insurance policy, DBP compelled him to apply with
the DBP MRI Pool for MRI coverage. When Dan's loan was released on August 11,
1987, DBP already deducted from the proceeds thereof the MRI premium. Four
days latter, DBP made Dans fill up and sign his application for MRI, as well as his
health statement. The DBP later submitted both the application form and health
statement to the DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As
service fee, DBP deducted 10 percent of the premium collected by it from Dans.

On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed
this information to the DBP MRI Pool. On September 23, 1987, the 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 husband's MRI application. The DBP offered to
refund the premium of P1,476, but Candida refused to accept it, demanding
payment of the face value of the MRI or an amount equivalent to the loan. She,
likewise, refused to accept anex gratia settlement of P30,000, which the DBP later
offered.

In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and
the second as an insurance agent.

Respondent Estate, through Candida Dans as administratrix, filed a complaint

with RTC against DBP and the insurance pool for "Collection of Sum of Money with
Damages." RTC decided in favor of respondent Estate and against DBP. The DBP
MRI Pool, however, was absolved from liability, after the trial court found no
privity of contract between it and the deceased. The trial court declared DBP in
estoppel for having led Dans into applying for MRI and actually collecting the
premium and the service fee, despite knowledge of his age ineligibility. The CA
affirmed in toto.

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. Apparently, DBP had full knowledge that Dan's
application was never going to be approved. The maximum age for MRI
acceptance is 60 years as clearly and specifically provided in Article 1 of the
Group Mortgage Redemption Insurance Policy signed in 1984 by all the insurance
companies concerned (Exh. "1-Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as
such is not personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such
party sufficient notice of his powers."

Held:

The DBP is not authorized to accept applications for MRI when its clients are more
than 60 years of age (Exh. "1-Pool"). Knowing all the while that Dans was
ineligible for MRI coverage because of his advanced age, DBP exceeded the scope
of its authority when it accepted Dan's application for MRI by collecting the
insurance premium, and deducting its agent's commission and service fee.

Under the provisions of the Health Statement for DBP Pool, the MRI coverage shall
take effect: (1) when the application shall be approved by the insurance pool; and
(2) when the full premium is paid during the continued good health of the
applicant. These two conditions, being joined conjunctively, must concur.

The liability of an agent who exceeds the scope of his authority depends upon
whether the third person is aware of the limits of the agent's powers. There is no
showing that Dans knew of the limitation on DBP's authority to solicit applications
for MRI. LLphil

Undisputably, the power to approve MRI applications is lodged with the DBP MRI
Pool. The pool, however, did not approve the application of Dans. There is also no
showing that it accepted the sum of P1,476.00, which DBP credited to its account
with full knowledge that it was payment for Dan's 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.

If the third person dealing with an agent is unaware of the limits of the authority
conferred by the principal on the agent and he (third person) has been deceived
by the non-disclosure thereof by the agent, then the latter is liable for damages to
him (V Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines, p. 422 [1992], citing Sentencia [Cuba] of September 25, 1907). The
rule that the agent is liable when he acts without authority is founded upon the
supposition that there has been some wrong or omission on his part either in
misrepresenting, or in affirming, or concealing the authority under which he
assumes to act (Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y.
70, 75). Inasmuch as the non-disclosure of the limits of the agency carries with it

Issue:

The liability of DBP is another matter. prcd

It was DBP, as a matter of policy and practice, that required Dans, the borrower,
to secure MRI coverage. Instead of allowing Dans to look for his own insurance

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the implication that a deception was perpetrated on the unsuspecting client, the
provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines come into
play.
Article 19 provides:
"Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due
and observe honesty and good faith." LexLib
Article 20 provides:
"Every person who, contrary to law, willfully or negligently
causes damage to another, shall indemnify the latter for the
same."

4
Considering that DBP had offered to pay P30,000.00 to respondent Estate in ex
gratia settlement of its claim and that DBP's non-disclosure of the limits of its
authority amounted to a deception to its client, an award of moral damages in the
amount of P50,000.00 would be reasonable.
The award of attorney's fees is also just and equitable under the circumstances
(Civil Code of the Philippines, Article 2208 [11]). LLphil
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV No. 26434 is
MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate
of Juan B. Dans the amount of P1,476.00 with legal interest from the date of the
filing of the complaint until fully paid; and (2) to PAY said Estate the amount of
Fifty Thousand Pesos (P50,000.00) as moral damages and the amount of Ten
Thousand Pesos (P10,000.00) as attorney's fees. With costs against petitioner.
SO ORDERED.

Article 21 provides:
"Any person, who willfully causes loss or injury to another
in a manner that is contrary to morals, good customs or public
policy shall compensate the latter for the damage."
The DBP's liability, however, cannot be for the entire value of the insurance policy.
To assume that were it not for DBP's concealment of the limits of its authority,
Dans would have secured an MRI from another insurance company, and therefore
would have been fully insured by the time he died, is highly speculative.
Considering his advanced age, there is no absolute certainty that Dans could
obtain an insurance coverage from another company. It must also be noted that
Dans died almost immediately, i.e., on the nineteenth day after applying for the
MRI, and on the twenty-third day from the date of release of his loan. LLphil
One is entitles to an adequate compensation only for such pecuniary loss suffered
by him as he has duly proved (Civil Code of the Philippines, Art. 2199). Damages,
to be recoverable, must not only be capable of proof, but must be actually proved
with a reasonable degree of certainty (Refractories Corporation v. Intermediate
Appellate Court, 176 SCRA 539 [1989]; Choa Tek Hee v. Philippine Publishing Co.,
34 Phil. 447 [1916]). Speculative damages are too remote to be included in an
accurate estimate of damages (Sun Life Assurance v. Rueda Hermanos, 37 Phil.
844 [1918]).
While Dans is not entitled to compensatory damages, he is entitled to moral
damages. No proof of pecuniary loss is required in the assessment of said kind of
damages (Civil Code of Philippines, Art. 2216). The same may be recovered in
acts referred to in Article 2219 of the Civil Code.
The assessment of moral damages is left to the discretion of the court according
to the circumstances of each case (Civil Code of the Philippines, Art. 2216).

O. Claims Settlement
GR No. 76101-02, 1991
69) TIO KHE CHIO, petitioner, vs. THE HONORABLE COURT OF APPEALS and
EASTERN ASSURANCE AND SURETY CORPORATION, respondents
CIVIL LAW; ACTUAL DAMAGES; INTEREST FOR JUDGMENT AWARDED BASED
THEREON. 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 six (6%) per cent per annum, and not twelve (12%) per cent, 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, G.R. No. 52478, October 30, 1986, 145 SCRA 311, that
the rates under the Usury Law (amended by P.D. 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.

DECISION

FERNAN, C.J p:
The issue in this petition for certiorari and prohibition is the legal rate of interest
to be imposed in actions for damages arising from unpaid insurance claims.
Petitioner Tio Khe Chio claims that it should be twelve (12%) per cent pursuant to
Articles 243 and 244 of the Insurance Code while private respondent Eastern

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Assurance and Surety Corporation (EASCO) claims that it should be six (6%) per
cent under Article 2209 of the Civil Code. LibLex
The facts are as follows: On December 18, 1978, petitioner Tio Khe Chio imported
one thousand (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 respondent EASCO and
shipped on board the M/V Peskov, a vessel owned by Far Eastern Shipping
Company. When the goods reached Manila on January 28, 1979, they were found
to have been damaged by sea water which rendered the fishmeal useless.
Petitioner filed a claim with EASCO and Far Eastern Shipping. Both refused to pay.
Whereupon, petitioner sued them before the then Court of First Instance of Cebu,
Branch II for damages. EASCO, as the insurer, filed a counterclaim against the
petitioner for the recovery of P18,387.86 representing the unpaid insurance
premiums.
On June 30, 1982, the trial court rendered judgment ordering EASCO and Far
Eastern Shipping to pay petitioner 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. 1
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-G.R.
No. 00161, entitled "Tio Khe Chio vs. Eastern Assurance and Surety Corporation."
The trial court, upon motion by petitioner, issued a writ of execution against
EASCO. The sheriff enforcing the writ reportedly fixed the legal rate of interest at
twelve (12%). Respondent EASCO moved to quash the writ alleging that the legal
interest to be computed should be six (6%) per cent per annum in accordance
with Article 2209 of the Civil Code and not twelve (12%) per cent as insisted upon
by petitioner s counsel. In its order of July 30, 1986, the trial court denied EASCO's
motion. EASCO then filed a petition for certiorari and prohibition before the Court
of Appeals.
On July 30, 1986, the Appellate Court rendered the assailed judgment, the
dispositive part of which states:
"WHEREFORE, the order dated July 30, 1986 is hereby SET ASIDE
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 the private
respondent is entitled to collect from the petitioner is hereby
reduced to 6% per annum.
No pronouncement as to costs." 2

5
In disputing the aforesaid decision of the Court of Appeals, petitioner maintains
that not only is it unjust and unfair but it is also contrary to the correct
interpretation of the fixing of interest rates under Sections 243 and 244 of the
Insurance Code. And since petitioner's claims is based on an insurance contract,
then it is the Insurance Code which must govern and not the Civil Code.
We rule for respondent EASCO. The legal rate of interest in the case at bar is six
(6%) per annum as correctly held by the Appellate Court. LLpr
Section 243 of the Insurance Code provides:
"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:
"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."

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In the case at bar, the Court of Appeals made no finding that there was an
unjustified refusal or withholding of payment on petitioner's claim. In fact,
respondent court had this to say on EASCO's refusal to settle the claim of
petitioner:
". . . EASCO's refusal to settle the claim to Tio Khe Chio was based
on some ground which, while not sufficient to free it from liability
under its policy, nevertheless is sufficient to negate any assertion
that in refusing to pay, it acted unjustifiably.
xxx xxx xxx
"The case posed some genuine issues of interpretation of the
terms of the policy as to which persons may honestly differ. This
is the reason the trial court did not say EASCO's refusal was
unjustified." 3
Simply put, the aforecited sections of the Insurance Code are not pertinent to the
instant case. They apply only when the court finds an unreasonable delay or
refusal in the payment of the claims. Cdpr
Neither does Circular No. 416 of the Central Bank which took effect on July 29,
1974 pursuant to Presidential Decree No. 116 (Usury Law) which raised the legal
rate of interest from six (6%) to twelve (12%) per cent apply to the case at bar as
contended by the petitioner. 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. 4
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 six (6%)
per cent per annum, and not twelve (12%) per cent, 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, G.R. No. 52478, October 30, 1986, 145 SCRA 311, that the rates under
the Usury Law (amended by P.D. 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."

6
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 by the Appellate Court at six (6%) per cent.
WHEREFORE, in view of the foregoing, the petition is DENIED for lack of
merit. LLphil
GR No. 138737, 2001
70) FINMAN GENERAL ASSURANCE CORPORATION, petitioner, vs. COURT
OF APPEALS and USIPHIL INCORPORATED, respondents
SYNOPSIS
USIPHIL Inc. filed an insurance claim against petitioner for the loss of its insured
properties due to fire. USIPHIL submitted a Sworn Statement of Loss and Formal
Claim signed by USIPHIL Manager, and Proof of Loss signed by USIPHIL Accounting
Manager and countersigned by the Adjuster's representative. The amount of
insurance claim was later agreed upon by the parties, but petitioner refused to
pay the same. Petitioner alleged non-compliance of policy condition No. 13 on the
submission of certain documents to prove the loss. Both the trial court and the
Court of Appeals ruled in favor of USIPHIL. aIcSED
There was substantial compliance of policy condition No. 13. USIPHIL immediately
notified petitioner of the fire and thereafter submitted the required documents.
Further, petitioner acknowledged its liability when its Finance Manager signed the
document of the amount due to USIPHIL. The trial court also granted 24% interest
per annum until full payment of the amount. This is properly authorized by
Sections 243 and 244 of the Insurance Code and Section 29 of the policy itself.
Indeed, there was prima facie evidence of unreasonable delay in payment of the
claim when petitioner failed to pay USIPHIL within the 30-day period fixed by both
the law and the policy.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FINDINGS OF TRIAL COURT AFFIRMED BY
APPELLATE COURT, RESPECTED. Well-settled is the rule that factual findings
and conclusions of the trial court and the CA are entitled to great weight and
respect, and will not be disturbed on appeal in the absence of any clear showing
that the trial court overlooked certain facts or circumstances which would
substantially affect the disposition of the case. There is no cogent reason to
deviate from this salutary rule in the present case.

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2. COMMERCIAL LAW; INSURANCE; INSURANCE CLAIM; SUBMISSION OF

DOCUMENT TO PROVE LOSS; SUBSTANTIAL COMPLIANCE WITH REQUIREMENT,
SUFFICIENT. A perusal of the records shows that private respondent, after the
occurrence of the fire, immediately notified petitioner thereof. Thereafter, private
respondent submitted the following documents: (1) Sworn Statement of Loss and
Formal Claim and; (2) Proof of Loss. The submission of these documents, to the
Court's mind, constitutes substantial compliance to proof loss. Indeed, as regards
the submission of documents to prove loss, substantial, not strict as urged by
petitioner, compliance with the requirements will always be deemed
sufficient. SHTcDE
3. ID.; ID.; ID.; TWENTY-FOUR PERCENT (24%) INTEREST PER ANNUM UNTIL FULL
PAYMENT IS AUTHORIZED BY THE INSURANCE CODE. Anent the payment of
24% interest per annum computed from the date insurance claim should be paid
until fully paid, suffice it to say that 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 30 days after proof of loss, the time fixed in both Sections
243 and 244.

DECISION

KAPUNAN, J p:
Through this petition for review on certiorari Finman General Assurance
Corporation (petitioner) seeks to reverse and set aside the Decision, dated
January 14, 1999, of the Court of Appeals (CA) in CA-G.R. CV No. 46721 directing
petitioner to pay the insurance claim of Usiphil Incorporated (private respondent).
The appellate court's Resolution, dated May 13, 1999, which denied petitioner's
motion for reconsideration, is likewise sought to be reversed and set aside.
The antecedent facts, as culled from the decision of the trial court and the CA, are
as follows:
On September 15, 1981, private respondent obtained a fire insurance policy from
petitioner (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 No. F3100 issued to private respondent,
petitioner undertook to indemnify private respondent for any damage to or loss of
said properties arising from fire.

7
Sometime in 1982, private respondent filed with petitioner an insurance claim
amounting to P987,126.11 for the loss of the insured properties due to fire. Acting
thereon, petitioner appointed Adjuster H.H. Bayne to undertake the valuation and
adjustment of the loss. H.H. Bayne then required private respondent to file a
formal claim and submit proof of loss. In compliance therewith, private
respondent submitted its Sworn Statement of Loss and Formal Claim, dated July
22, 1982, signed by Reynaldo Cayetano, private respondent's Manager.
Respondent 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 private respondent's claim with petitioner'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 February 28, 1985, which indicated
that the amount due respondent was P842,683.40.
Despite repeated demands by private respondent, petitioner refused to pay the
insurance claim. Thus, private respondent was constrained to file a complaint
against petitioner for the unpaid insurance claim. In its Answer, petitioner
maintained that the claim of private respondent could not be allowed because it
failed to comply with Policy Condition No. 13 regarding the submission of certain
documents to prove the loss.
Trial ensued. On July 6, 1994, the trial court rendered judgment in favor of private
respondent. The dispositive portion of the decision reads:
WHEREFORE, in view of the above observations and findings,
judgment is hereby rendered in favor of the plaintiff and against
the defendant, ordering the latter:
1. To pay the plaintiff the sum of P842,683.40 and to pay
24% interest per annum from February 28, 1985 until fully
paid (par. 29 of Exh. K);
2. To pay the plaintiff the sum equivalent to 10% of the
principal obligation as and for attorney's fees, plus
P1,500.00 per court appearance of counsel;
3. To pay the plaintiff the amount of P30,000.00 as
exemplary damages in addition to the actual and
compensatory damages awarded;
4. Dismissing 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;

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MHH_3.1_Insurance Law

5. Dismissing the claim of interest under par. 2 of the

prayer, there being no agreement to such effect;
6. Dismissing the counter-claim for lack of merit;
7. Ordering the defendant to pay the cost of suit.

SO ORDERED. 1
On appeal, the CA substantially affirmed the decision of the trial court. The
dispositive portion of the CA decision reads: HDIATS
WHEREFORE, the appealed decision is hereby AFFIRMED with the
modification that defendant-appellant is ordered to pay plaintiffappellee the sum of P842,683.40 and to pay 24% interest per
annum from 03 May 1985 until fully paid. In all other respects, the
appealed decision is AFFIRMED IN TOTO.
SO ORDERED. 2
Petitioner now comes to this Court assailing the decision of the appellate court.
Petitioner alleges that:
Respondent Court of Appeals erred in finding that there is
evidence sufficient to justify the Decision of the lower court;
Respondent Court of Appeals erred in failing to consider the fact
that Private Respondent committed a violation of the Insurance
Policy which justifies the denial of the claim by Petitioner;
Respondent Court of Appeals further erred in finding that
Petitioner is liable to pay the respondent, Usiphil, Inc., an interest
of 24% per annum in addition to the principal amount of
P842,683.40. 3
Essentially, petitioner argues that the disallowance of private respondent's claim
is justified by its failure to submit the required documents in accordance with
Policy Condition No. 13. Said requirements were allegedly communicated to
private respondent in the two letters of H.H. Bayne to private respondent. The
first letter stated:
To be able to expedite adjustment of this case, please submit to
us without delay the following documents and/or particulars:
For FFF, Machineries/Equipment Claims
1. Your formal claim (which may be accomplished in the enclosed
form) accompanied by a detailed inventory of the documents
submitted.

8
2. Certification from the appropriate government office indicating
the date of the occurrence of the fire, the property involved, its
location and possible point of origin.
3. Proof of premium payment.
4. Three
color
photographs
of
the
debris
properly
captioned/identified/dated and initiated by the claimant at the
back.
4.1 Close-up (not more than
the most severely damaged.

meters

away)

of

4.2 Close-up (not more

the least damaged.

meters

away)

of

than

4.3 Original view of the debris (may be from farther than 2

meters away); splice two or more frames if necessary.
Though our adjusters will also take photographs in the manner
prescribed above, please do not rely on his photographs in the
preservations of your evidence of loss thru pictures.
5. Copies of purchase invoices.
6. In the absence of No. 5, suppliers' certificates of sales and
delivery.
7. Appraisal report, if any.
8. Where initial estimated loss is exceeding P20,000.00, submit
estimate by at least 2 contractors/suppliers.
9. Others (to be specified)
1. Repairs cost of the affected
or invoices in support thereof ;

items

including

quotation

2. Complete lists of furniture, fixtures & fittings including date and

cost of acquisition, and;
3. Statement of salvage on burned items.
Your preferential
appreciated. 4

While the other letter stated:

attention

to

this

request

will

be

fully

Part 2_Case Digests

MHH_3.1_Insurance Law

Please submit to us without delay the following documents and/or

particulars.

For Stock Claim

11. For losses where the estimated value of stocks claimed which
are burned but of sight and/or which may no longer be subject to
actual physical count exceeds P50,000.00, a CPA's detailed
computations in support of such estimated value.

1. Your formal claim (which may be accomplished in the

enclosed), accompanied by a detailed inventory of the documents
submitted.

12. In the absence of purchase invoices/delivery receipts (state

reason for absence), submit suppliers' certificate of sales and
delivery.

2. Certification from the appropriate government office showing

that the Insured's property was involved in the fire as a
consequence of which the claim is being filed.

13. Others (to be specified).

3. Proof of premium payment.

Your compliance with this request will enable us to expedite

adjustment of the loss in caption. 5

4. Three colored photographs of the debris, property

captioned/identified/dated and initiated by the claimant at the
back; in a floor plan, indicate the point from where the picture
was taken and by an arrow where the camera was facing.
4.1 Close-up (not more than 2 meters away) of the most
severely damaged.
4.2 Close-up (not more than 2 meters away) of the least
damaged.
4.3 Overall view of the debris (may be from farther than 2
meters away); splice two or more frames if necessary.

Statement of salvage of the affected stocks in trade.

According to petitioner, in complete disregard of the foregoing requirements,

private respondent never submitted any of the documents mentioned therein.
Further, petitioner assails the award in favor of private respondent of an interest
rate of 24% per annum. Since there was allegedly no express finding that
petitioner unreasonably denied or withheld the payment of the subject insurance
claim, then the award of 24% per annum is not proper. Petitioner opines that the
judgment should only bear the legal interest rate of 12% per annum for the delay
in the payment of the claim.
The petition is bereft of merit.

5. Books of accounts bill, invoices and other vouchers, or certified

copies thereof if originals be lost. This requirement includes, but.
is not limited to, purchase and sales invoices, delivery

Well-settled is the rule that factual findings and conclusions of the trial court and
the CA are entitled to great weight and respect, and will not be disturbed on
appeal in the absence of any clear showing that the trial court overlooked certain
facts or circumstances which would substantially affect the disposition of the
case. 6 There is no cogent reason to deviate from this salutary rule in the present
case.

6. Certified copies of income tax returns for the last three years
and the accompanying financial statements.

Both the trial court and the CA concur in holding that private respondent had
substantially complied with Policy Condition No. 13 which reads:

Our adjuster will also take photographs.

7. Latest inventory of merchandise filed with a financial

institution, the Bureau of Internal Revenue or any government
entity prior to the loss.
8. A detailed inventory of the articles damaged or destroyed,
showing the cost price of each, extent of loss, if any, if the risk
sustained partial or water damaged. CTEaDc
9. Certificates of registration.
10. Bank Statements.

13. 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

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MHH_3.1_Insurance Law

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. 7
A perusal of the records shows that private respondent, after the occurrence of
the fire, immediately notified petitioner thereof. Thereafter, private respondent
submitted the following documents: (1) Sworn Statement of Loss and Formal
Claim (Exhibit C) and; (2) Proof of Loss (Exhibit D). The submission of these
documents, to the Court's mind, constitutes substantial compliance with the
above provision. Indeed, as regards the submission of documents to prove loss,
substantial, not strict as urged by petitioner, compliance with the requirements
will always be deemed sufficient. 8
In any case, petitioner itself acknowledged its liability when through its Finance
Manager, Rosauro Maghirang, it signed the document indicating that the amount
due private respondent is P842,683.40 (Exhibit E). As correctly held by the
appellate court:
Under the aforequoted provision of the insurance policy, the
insured was required to submit to the insurer written notice of the
loss; and a complete inventory of the properties damaged within
60 days after the fire, as well as a signed and sworn statement of

10
Proof of Loss. It is admitted by all parties that plaintiff-appellee
notified the insurer Summa Corporation of the fire which occurred
on 27 May 1982. It is likewise admitted by all parties that plaintiffappellee submitted the following documents in support of its
claim: (1) Sworn Statement of Loss (Exhibit C); (2) formal claim
dated 22 July 1982; (3) unnotarized sworn statement of proof of
loss (Exhibit D). There was, therefore, sufficient compliance with
the requirements in Section 13 of the policy. But, even assuming
that plaintiff-appellee indeed failed to submit certain required
documents as proof of loss per Section 13, such violation was
waived by the insurer Summa when it signed the document
marked Exhibit E, a breakdown of the amount due to plaintiffappellee as of February 1985 on the insurance claim. By such act,
defendant-appellant acknowledged its liability under the
insurance policy.
Antecedent to the execution of Exhibit E, there was a conference
between Pallalos, representing plaintiff-appellee and Ortega
representing Summa Insurance. There is no evidence that in that
meeting, Summa Insurance questioned plaintiff-appellee's
submission of the required documents. What happened was that
Ortega summoned Maghirang so that be could settle with Pallalos
regarding the amount due to plaintiff-appellee from insurance
claim. The result is a reconciliation of claim in Exhibit E which
shows that as of February 1985, the net due sum is P842,683.49.
Defendant-appellant alleges that Maghirang was without
authority to sign Exhibit E, and therefore without authority to bind
defendant-appellant corporation. We de not agree. The evidence
indicate that at a meeting between plaintiff-appellee's corporate
president Pedro. Pallalos and his counterpart in defendantappellant corporation, Joaquin Ortega, the latter summoned
Rosauro Maghirang to reconcile the claims of plaintiff-appellee.
One who clothes another with apparent authority as his agent
and holds him to the public as such, cannot. later be allowed to
deny the. authority of such person to act as his agent when such
third person entered into the contract in good faith and in an
honest belief that he is such, agent. Witness for defendantappellant Luis Manapat's testimony that Maghirang was without
authority to bind the defendant-appellant cannot be given
credence because, as he himself testified, he was not yet part of
the Summa Corporation at the time the negotiations in question
were going on. 9

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MHH_3.1_Insurance Law

Anent the payment of 24% interest per annum computed from May 3, 1985 until
fully paid, suffice it to say that the same is authorized by Sections 243 and 244 of
the Insurance Code: SAEHaC
SECTION 243. 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 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 ground that
the claim is fraudulent.

SECTION 244. 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 unreasonable 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
reasonable delay in payment.
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. 10 Further, Section 29 of the
policy itself provides for the payment of such interest:
29. Settlement of claim clause. The amount of any .loss or
damage for which the company may be liable, under this

11
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. 11
The policy itself obliges petitioner to pay the insurance claim within thirty days
after proof of loss and ascertainment of the loss made in an agreement between
private respondent and petitioner. In this case, as found by the CA, petitioner and
private respondent signed the agreement (Exhibit E) indicating that the amount
due private respondent was P842,683.40 on April 2, 1985. Petitioner thus had
until May 2, 1985 to pay private respondent's insurance. 12 For its failure to do
so, the CA and the trial court rightfully directed petitioner to pay, inter alia, 24%
interest per annum in accordance with the above quoted provisions.
WHEREFORE, the instant petition is hereby DENIED for lack of merit. The Decision,
dated January 14, 1999, of the Court of Appeals in CA-G.R. CV No. 46721 and its
Resolution, dated May 13, 1999, are AFFIRMED IN TOTO.

P. Compulsory Motor Vehicle Liability Insurance

GR No. L-49699, 1988
71) PERLA COMPANIA de SEGUROS, INC., petitioner, vs. HON. CONSTANTE
A. ANCHETA, Presiding Judge of the Court of First Instance of Camarines
Norte, Branch III, ERNESTO A. RAMOS and GOYENA ZENAROSA-RAMOS,
for themselves and as Guardian Ad Litem for Minors JOBET, BANJO,
DAVID and GRACE all surnamed RAMOS, FERNANDO M. ABCEDE, SR., for
himself and Guardian Ad Litem for minor FERNANDO G. ABCEDE, JR.,
MIGUEL JEREZ MAGO as Guardian Ad Litem for minors ARLEEN R. MAGO,
and ANACLETA J. ZENAROSA, respondents
SYLLABUS
1.MERCANTILE LAW; INSURANCE; MOTOR VEHICLE LIABILITY INSURANCE; "NO
FAULT LIABILITY" PROVISION (Sec. 378) OF INSURANCE CODE; RULES ON CLAIMS
THEREUNDER. From a reading of Sec. 378 of the Insurance Code, the following
rules on claims under the "no fault indemnity" provision, where proof of fault or

Part 2_Case Digests

MHH_3.1_Insurance Law

negligence is not necessary for payment of any claim for death or injury to a
passenger or a third party, are established: 1. A claim may be made against one
motor vehicle only. 2. If the victim is an occupant of a vehicle, the claim shall lie
against the insurer of the vehicle in which he is riding, mounting or dismounting
from. 3. In any other case (i.e. if the victim is not an occupant of a vehicle), the
claim shall lie against the insurer of the directly offending vehicle.
2.ID.; ID.; ID.; ID.; CLAIM LIES ONLY AGAINST INSURER OF VEHICLE IN WHICH
CLAIMANT WAS RIDING. The law is very clear the claim shall lie against the
insurer of the vehicle in which the "occupant" is riding, and no other. The claimant
is not free to choose from which insurer he will claim the "no fault indemnity," as
the law, by using the word "shall, makes it mandatory that the claim be made
against the insurer of the vehicle in which the occupant is riding, mounting or
dismounting from. Irrespective of whether or not fault or negligence has with the
driver of the Superlines bus, as private respondents were not occupants of the
bus, they cannot claim the "no fault indemnity" provided in Sec. 378 from
petitioner which is the insurer of Superlines. The claim should be made against
the insurer of the vehicle they were riding.
3.ID.; ID.; ID.; ID.; ESSENCE OF NO FAULT INSURANCE. That said vehicle might
not be the one that caused the accident is of no moment since the law itself
provides that the party paying the claim under Sec. 378 may recover against the
owner of the vehicle responsible for the accident. This is precisely the essence of
"no fault indemnity" insurance which was introduced to and made part of our laws
in order to provide victims of vehicular accidents or their heirs immediate
compensation, although in a limited amount, pending final determination of who
is responsible for the accident and liable for the victims' injuries or death.

DECISION

CORTES, J p:
The instant petition for certiorari and prohibition with preliminary injunction
concerns the liability of insurers under the "no fault indemnity" provision of
the Insurance Code. *
On December 27, 1977, in a collision between the IH Scout in which private
respondents were riding and a Superlines bus along the national highway in Sta.
Elena, Camarines Norte, private respondents sustained physical injuries in varying
degrees of gravity. Thus, they filed with the Court of First Instance of Camarines
Norte on February 23, 1978 a complaint for damages against Superlines, the bus

12
driver and petitioner, the insurer of the bus [Rollo, pp. 27-39.] The bus was
insured with petitioner for the amount of P50,000.00 as and for passenger liability
and P50,000.00 as and for third party liability. The vehicle in which private
respondents were riding was insured with Malayan Insurance Co. cdphil
Even before summons could be served, respondent judge issued an order dated
March 1, 1978 [Rollo, pp. 40-41], the pertinent portion of which stated:
The second incident is the prayer for an order of this court for the
Insurance Company, Perla Compania de Seguros, Inc., to pay
immediately the P5,000.00 under the "no fault clause" as
provided for under Section 378 of the Insurance Code, and finding
that the requisite documents to be attached in the record, the
said Insurance Company is therefore directed to pay the plaintiffs
(private respondents herein) within five (5) days from receipt of
this order.
Petitioner denied in its Answer its alleged liability under the "no fault indemnity"
provision [Rollo, p. 44] and likewise moved for the reconsideration of the order.
Petitioner held the position that under Sec. 378 of the Insurance Code, the insurer
liable to pay the P5,000.00 is the insurer of the vehicle in which private
respondents were riding, not petitioner, as the provision states that "[i]n the case
of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in
which the occupant is riding, mounting or dismounting from." Respondent judge,
however, denied reconsideration. A second motion for reconsideration was filed
by petitioner. However, in an order dated January 3, 1979, respondent judge
denied the second motion for reconsideration and ordered the issuance of a writ
of execution [Rollo, p. 69.] Hence, the instant petition praying principally for the
annulment and setting aside of respondent judge's orders dated March 1, 1978
and January 3, 1979.
The Court issued a temporary restraining order on January 24, 1979 [Rollo, pp. 7374.]
The sole issue raised in this petition is whether or not petitioner is the insurer
liable to indemnify private respondents under Sec. 378 of the Insurance
Code. LLpr
The key to the resolution of the issue is of course Sec. 378, which provides:
Sec. 378.Any claim for death or injury to any passenger or third
party pursuant to the provisions of this chapter shall be paid
without the necessity of proving fault or negligence of any kind.
Provided, That for purposes of this section
(i)The indemnity in respect of any one person shall not exceed
five thousand pesos;

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MHH_3.1_Insurance Law

(ii)The following proofs of loss, when submitted under oath, shall

be sufficient evidence to substantiate the claim:
(a)Police report of accident, and
(b)Death certificate and evidence sufficient to
establish the proper payee, or
(c)Medical report and evidence of medical or
hospital disbursement in respect of which refund is
claimed;
(iii)Claim may be made against one motor vehicle only. In the
case of an occupant of a vehicle, claim shall lie against the
insurer of the vehicle in which the occupant is riding, mounting or
dismounting from. In any other case, claim shall lie against the
insurer of the directly offending vehicle. In all cases, the right of
the party paying the claim to recover against the owner of the
vehicle responsible for the accident shall be maintained.
[Emphasis supplied.]
From a reading of the provision, which is couched in straightforward and
unambiguous language, the following rules on claims under the "no fault
indemnity" provision, where proof of fault or negligence is not necessary for
payment of any claim for death or injury to a passenger or a third party, are
established:
1.A claim may be made against one motor vehicle only.
2.If the victim is an occupant of a vehicle, the claim shall lie against the insurer of
the vehicle in which he is riding, mounting or dismounting from.
3.In any other case (i.e. if the victim is not an occupant of a vehicle), the claim
shall lie against the insurer of the directly offending vehicle.
4.In all cases, the right of the party paying the claim to recover against the owner
of the vehicle responsible for the accident shall be maintained.

13
The law is very clear the claim shall lie against the insurer of the vehicle in
which the "occupant" ** is riding, and no other. The claimant is not free to choose
from which insurer he will claim the "no fault indemnity," as the law, by using the
word "shall", makes it mandatory that the claim be made against the insurer of
the vehicle in which the occupant is riding, mounting or dismounting from. Cdpr
That said vehicle might not be the one that caused the accident is of no moment
since the law itself provides that the party paying the claim under Sec. 378 may
recover against the owner of the vehicle responsible for the accident. This is
precisely the essence of "no fault indemnity" insurance which was introduced to
and made part of our laws in order to provide victims of vehicular accidents or
their heirs immediate compensation, although in a limited amount, pending final
determination of who is responsible for the accident and liable for the victims'
injuries or death. In turn, the "no fault indemnity" provision is part and parcel of
the Insurance Code provisions on compulsory motor vehicle liability insurance
[Sec. 373-389] and should be read together with the requirement for compulsory
passenger and/or third party liability insurance [Sec. 377] which was mandated in
order to ensure ready compensation for victims of vehicular accidents.
Irrespective of whether or not fault or negligence has with the driver of the
Superlines bus, as private respondents were not occupants of the bus, they
cannot claim the "no fault indemnity" provided in Sec. 378 from petitioner. The
claim should be made against the insurer of the vehicle they were riding. This is
very clear from the law. Undoubtedly, in ordering petitioner to pay private
respondents the "no fault indemnity," respondent judge gravely abused his
discretion in a manner that amounts to lack of jurisdiction. The issuance of the
corrective writ of certiorari is therefore warranted.
WHEREFORE, the petition is GRANTED and respondent judge's order dated March
1, 1978, requiring petitioner to pay private respondents the amount of P5,000.00
as "no fault indemnity" under Sec. 378 of the Insurance Code, and that of January
3, 1979, denying the second motion for reconsideration and issuing a writ of
execution, are ANNULLED and SET ASIDE. The temporary restraining order issued
by the Court on January 24, 1979 is made permanent.