Insurance Cases

Insurance
Case Digests
Bance|Benitez|Damasing|Ratilla
died. It declared that there was a genuine ambiguity or obscurity in the

1. The Insular Life Assurance Company, LTD. v. Paz Y. Khu, et al. language of the two documents prepared by Insular life and thus, the
GR No. 195176, April 18, 2016 insurance policy must be deemed reinstated on June 22, 1999.

Facts: Felipe Khu applied for life insurance policy with Insular life and Issue: Whether the policy is already inconstestable at the time of Felipes
accomplished the required medical questionnaire wherein he did not death.
declare any illness or adverse medical condition. He was issued a policy with
a face value of P1M on June 22, 1997. Ruling: Yes.

On June 23, 1999, his policy lapsed due to non-payment of the Section 48 regulates both the actions of the insurers and
premium. On September 7, 1999, he however applied for reinstatement of prospective takers of life insurance. It gives insurers enough time to inquire
his policy and and paid the premium. All his information was the same whether the policy was obtained by fraud, concealment, or
except for the change in his occupation. Insular Life agreed on the misrepresentation; on the other hand, it forewarns scheming individuals
reinstatement subject to certain conditions and the payment of additional that their attempts at insurance fraud would be timely uncovered thus
premium. Two documents were issued to Felipe concerning the deterring them from venturing into such nefarious enterprise. At the same
reinstatement, each containing the phrase effective June 22, 1999. Felipe time, legitimate policy holders are absolutely protected from unwarranted
paid the increased premium annually, covering the years of June 2000 to denial of their claims or delay in the collection of insurance proceeds
June 2001, and again on June 2001 to June 2002. occasioned by allegations of fraud, concealment, or misrepresentation by
insurers, claims which may no longer be set up after the two-year period
On September 22, 2001, Felipe died and the beneficiaries then expires as ordained under the law.
claimed under the policy. However, the claim was denied and instead,
Insular Life advised Felipes beneficiaries that it had decided to rescind the In this case, the court affirmed the CAs findings that the insurer has
reinstated policy on the grounds of concealment and misrepresentation. the necessary facilities to discover such fraudulent concealment or
The beneficiaries filed a complaint for specific performance with damages misrepresentation within a period of two years. It is not fair for the insurer
while Insular countered that at the time of Felipes death, the policy was still to collect the premiums as long as the insured is still alive, only to raise the
contestable and hence, it may rescind the contract on the ground of issue of fraudulent concealment or misrepresentation when the insured
misrepresentation and fraud. dies in order to defeat the right of the beneficiary to recover.

RTC ruled in favor of beneficiaries and ordered the payment of the Ambiguity in contract, interpreted in favor of insured
FV of the policy. Generally, the reinstatement of an insurance policy should be
reckoned from the date when the same was approved by the insurer.
CA dismissed appeal and affirmed the RTCs ruling that the non- Insular Life claims that it approved the reinstatement only in December 27,
contestability of the reinstated insurance policy on the date the insured 1999 while the respondents contend that it was on June 22, 1999. As

Insurance Case Digests
evidence, the beneficiaries presented two documents prepared by Insular used to its advantage. More often than note, insurance contracts are
Life. First, the Letter of acceptance which states that the additional payment contracts of adhesion containing technical terms and conditions of the
of premium is effective June 22, 1999 and second, the Endorsement letter, industry, confusing if at all understandable to laypersons, that are imposed
which states that reinstatement of this policy has been approved x x x on on those who wish to avail of insurance. As such, insurance contracts are
the understanding that the following changers are made on the policy imbued with public interest that must be considered whenever the rights
effective June 22, 1999. and obligations of the insurer and insured are to be delineated. Hence, in
order to protect the interest of insurance applicants, insurance companies
While the phrase, effective June 22, 1999 does not refer explicitly must be obligated to act with haste upon insurance applications, to either
to the effectivity of the reinstatement, the Court noted that the deny or approve the same, or otherwise be bound to honor the application
reinstatement was conditioned upon the payment of additional premium as a valid, binding and effective insurance contract.
not only prospectively, that is, to cover the remainder of the annual period
of coverage, but also retroactively, that is for a period starting June 22. By
paying the additional premium, Khu had paid for the insurance coverage
starting June 22, 1999. At the very least, this circumstance has engendered
a true lacuna. Furthermore, the obscurity is more apparent in the
endorsement letter when the phrase effective June 22, 1999 is not clear
as to whether it refers to the subject of the sentence which is the
reisntatement of the policy or to the subsequent phrase changes are made
on the policy.

Thus, the SC ruled that given the obscurity in the language, the
construction favorable to the insured will be adopted. The policy is deemed
reinstated as of June 22, 1999 and thus, the period of contestability has
already lapsed.

Insurance contract, contract of adhesion
It must be remembered that the insurance contract is a contract of
adhesion which must be construed liberally in favor of the insured and
strictly against the insurer in order to safeguard the latters interest.

To characterize the insurer and the insured as contracting parties on
equal footing is inaccurate at best. Insurance contracts are wholly prepared
by the insurer with vast amounts of experience in the industry purposefully


More than 2 years later or on January 21, 2003, Rheozels sister
found the Personal Accident Insurance Coverage Certificate issued by FGU
Insurance and hence, Laingo sent two letters requesting FGU to process her
request. FGU however denied her request claiming that Laingo should have
filed the claim within three calendar months from the death of Rheozel.

Laingo then filed a complaint for Specific Performance with
damages and attorneys fees against BPI and FGU. RTC ruled that the
prescriptive period of 90 days commenced from the time of the death of the
insured and not from the knowledge of the beneficiary. Since the insurance
claim was filed more than 90 days from the death, the case was must be
dismissed.

CA reversed the decision stating that Laingo could not be expected
to do an obligation which she did not know existed. As Laingo was not a
2. BPI and FGU Insurance v. Yolanda Laingo, GR No. 205206 party to the insurance contract, she could not be bound by the 90-day
March 16, 2016 stipulation.

Facts: On July 20, 1999, Rheozel Laingo, the son of respondent Yolanda BPI and FGU contends that the language used in the insurance
Laingo, opened a Platinum 2-in-1 Savings and Insurance accoutn with BPI. contract is clear and plain and readily understandable. Laingo however
The account is one where depositors are automatically covered by an contends that she had no knowledge of the insurance coverage and as such,
insurance policy against disability or death issued by FGU insurance it was impossible for her to fulfill the condition set forth in the contract.
corporation. Rheozel was issued a Personal Accident Insurance Coverage Furthermore, she informed BPI of the death of her son but the latter did not
Certificate with Laingo as his named beneficiary. notify her of the attached insurance policy.

On September 25, 2000, Rheozel died due to a vehicular accident. Issue: Whether Laingo is bound by the three-calendar month
As he is from a reputable and affluent family, his death was a headline story deadline for filing a written notice of claim upon death of the insured.
in the Daily Mirror on September 26, 2000. On September 27, 2000, Laingo
instructed a secretary to inquire about Rheozels account with BPI so that Ruling: No.
the money may be used for his burial and funeral expenses.Due to the
credit standing of the Laingos and relationship with BPI, BPI accommodated BPI offered a deposit savings account with life and disability
Laingo to withdraw P995,000 from the account of Rheozel. insurance coverage to its customers. This was marketing strategy promtoed

by BPI in order to entice customers to invest their money with the added coverage and the stipulation in the insurance contract for filing a claim to
benefit of an insurance policy. As the main proponent of the 2-in-1 deposit Laingo.
account, BPI tied up with its affiliate FGU Insurance as its partner. Any
customer interested to open a deposit account under this 2-in-1 product, The provision is clear that an agent is bound to carry out the agency.
after submitting all the required documents to BPI and obtaining BPIs The relationship existing between principal and agent is a fiduciary one,
approval, will automatically be given insurance coverage. Thus, BPI acted as demanding conditions of trust and confidence. It is the duty of the agent to
agent of FGU Insurance with respect to the insurance feature of its own act in good faith for the advancement of the interests of the principal. In
marketed product. this case, BPI had the obligation to carry out the agency by informing the
beneficiary, who appeared before BPI to withdraw funds of the insured who
BPI acted as agent of FGU Insurance was BPIs depositor, not only of the existence of the insurance contract but
Under the law, an agent is one who binds himself to render some also the accompanying terms and conditions of the insurance policy in order
service or to do something in representation of another. Agency may be for the beneficiary to be able to properly and timely claim the benefit.
implied from the words and conduct of the parties and the circumstances of
the particular case. For an agency to arise, it is not necessary that the Upon Rheozels death, which was properly communicated to BPI by
principal personally encounter the third person with whom the agent his mother Laingo, BPI, in turn, should have fulfilled its duty, as agent of FGU
interacts. The law in fact contemplates impersonal dealings where the Insurance, of advising Laingo that there was an added benefit of insurance
principal need not personally know or meet the third person with whom the coverage in Rheozels savings account. An insurance company has the duty
agent transacts: precisely, the purpose of agency is to extend the to communicate with the beneficiary upon receipt of notice of the death of
personality of the principal through the facility of the agent. the insured. This notification is how a good father of a family should have
acted within the scope of its business dealings with its clients. BPI is
In this case, since Platinum 2-in-1 Savings and Insurance account expected not only to provide utmost customer satisfaction in terms of its
was BPIs commercial product, offering the insurance coverage for free for own products and services but also to give assurance that its business
every deposit account opened, Rheozel directly communicated with BPI, the concerns with its partner entities are implemented accordingly.
agent of FGU Insurance. BPI not only facilitated the processing of the
deposit account and the collection of necessary documents but also the Doctrine of representation
necessary endorsement for the prompt approval of the insurance coverage
without any other action on Rheozels part. Rheozel did not interact with There is a rationale in the contract of agency, which flows from the
FGU Inusrance directly and every transaction was coursed through BPI. doctrine of representation, that notice to the agent is notice to the
principal. Here, BPI had been informed of Rheozels death by the latters
BPI, as agent of FGU Insurance, had the primary responsibility to family. Since BPI is the agent of FGU Insurance, then such notice of death to
ensure that the 2-in-1 account be reasonably carried out with full disclosure BPI is considered as notice to FGU as well. FGU cannot now justify the denial
to the parties concerned, particularly the beneficiaries. Thus, it was of the claim for being filed out of time when notice of death has been
incumbent upon BPI to give proper notice of the existence of the insurance communicated to its agent within a few days after the death of the

depositor-insured. In short, there was timely notice of Rheozels death given

to FGU Insurance within the 3-month period as required by the policy.
3. HH Hollero Construction v. GSIS, GR No. 152334, September 24, 2014

Facts: On April 26, 1988, GSIS and HH Hollero Construction entered into a
Project Agreement whereby HH Hollero undertook the development of a
GSIS housing project. HH Hollero obligated itself to insure the project,
including all the improvements, upon the execution of the agreement under
a Contractors All Risks (CAR) Insurance with the GSIS General Insurance
Department for an amount equal to its cost or sound value.

Pursuant to the agreement HH Hollero secured a CAR Policy (aka
CAR policy 1) in the amount of P1M for land development which was later
increased to P10M, effective May 2, 1988 to May 2, 1989. Another CAR
policy (aka CAR policy 2) was also taken for the construction of the housing
units at P1M which was later increased to P17.750M to cover the
construction of another 355 new units from May 1988 to June 1, 1989. GSIS,
in turn, reinsured CAR Policy 1 with Pool of Machinery Insurers.

Both policies provide for the following: (a) there must be prior
notice of claim for loss, damage or liability within 14 days from occurrence;
(b) all benefits shall be forfeited if no action is instituted within 12 months
after rejection of claim; and (c) if the sum insured is found to be less than
the amount required to be insured, the amount recoverable shall be
reduced before taking into account the deductibles stated in the schedule
(average clause provision)

Three typhoons hit the country during the construction of the
housing units which caused considerable damage. HH Hollero filed several
claims with GSIS on June 30, 1988, August 25, 1988 and October 18, 1989
respectively. GSIS denied the first two claims on April 26, 1990 pursuant to
the average clause provision and the last claim on June 21, 1990 on a no

loss basis, respectively, as it appears that the policies were not renewed The CAR Policies both provide that if a claim is made and rejected
before the onset of the said typhoon. and no action or suit is commenced within 12 months after such rejection,
all benefits under the policy shall be forfeited.
On September 27, 1991, HH Hollero filed a complaint for Sum of
Money and Damages before the RTC which was opposed by GSIS on the While HH Hollero may argue that the rejection issued by GSIS was
ground that the causes of action are barred by the 12-month limitation not yet final, the SC ruled that while GSIS gave HH Hollero the opportunity
provided in the policy, i.e. the complaint was filed more than 1 year from to dispute its findings, neither of the parties pursued any further action on
the rejection of the claims. the matter; this logically shows that they deemed the said letter as a
rejection of the claims.The statement in the letter pertaining to any queries
RTC denied the motion and later ruled in favor of HH Hollero. It held HH Hollero may have on the denial should be construed, at best, as a form
that: (a) the average clause provision did not contain the assent or signature of notice to HH Hollero that it had the opportunity to seek reconsideration
of HH Hollerro and hence, cannot limit the liability of GSIS for being of the GSISs rejection. Surely, HH Hollero cannot construe said letter as a
inefficacious and contrary to public policy; (b) HH Hollero established that mere tentative resolution.
the damages it sustained were due to the peril insured; and (c) CAR Policy
was deemed renewed when GSIS withheld the amount of P35,855 As correctly observed by the CA, final rejection simply means the
corresponding to the premium payable from the retentions it released to denial by the insurer of the claims of the insured and not the rejection or
HH Hollero. denial by the insurer of the insureds motion or request for reconsideration.
The rejection referred to should be construed as the rejection in the first
CA reversed the RTC ruling and ruled that the complaint is barred by instance, as in the two instances above.
prescription because it was filed beyond the 12-month period provided in
the policy reckoned from April 26, 1990 and June 21, 1990. When cause of action accrues
In Eagle Star Insurance v. Chia Yu, the Court ruled that the right of
Issue: Whether the claim is barred by prescription the insured to the payment of his loss accrues from the happening of the
loss. However, the cause of action in an insurance contract does not accrue
Ruling: Yes. until the insureds claim is finally rejected by the insurer. This is because
before such final rejection, there is no real necessity for bringing suit.
Contracts of insurance, like other contracts, are to be construed
according to the sense and meaning of the terms which the parties Hence, the insureds cause of action or his right to file a claim either
themselves have used. If such terms are clear and unambiguous, they must in the Insurance Commission or in a court of competent jurisdiction
be taken and understood in their plain, ordinary and popular sense. commences from the time of the denial of his claim by the Insurer, either
expressly or impliedly.

Fortune Care argued that the Contract does not cover

hospitalization costs and professional fees incurred in foreign countries as
the contract operates only in PH territory. Furthermore, Fortune argues that
its liability was extinguished when Amorin accepted the P12k.

RTC dismissed Amorins complaint, finding that the parties intended
to use PH standard. Since the provision preceding the clause pointed out by
Amorin talked of PH standard, the RTC ruled that the clause providing for
emergency operation in a foreign territory equivalent to 80% of the
4. Fortune Medicare, Inc. v. David Amorin, GR No. 195872, March 12, 2014 approved standard charges which shall cover hospitalization costs and
professional fees, can only be reasonably construed in connection with the
Facts: David Amorin is a cardholder/member of Fortune Medicare, a preceding clause on professional fees to give meaning to a somewhat vague
corporation engaged in providing health maintenance services to its clause. A particular clause should not be studied as a detached and isolated
members. The terms of Amorins medical coverage were provided in a expression, but the whole and every part of the contract must be
Corporate Health Program Contract which was executed on January 6, 2000 considered in fixing the meaning of its parts.
by Fortune Care and the House of Representatives where Amorin is a
permanent employee. CA ruled in favor of Amorin and granted his appeal. CA pointed out
that health care agreements, being like insurance contracts, must be
While he was on vacation in Hawaii, Amorin underwent emergency liberally construed in favor of the subscriber. In case its provisions are
surgery (appendectomy) causing him to incur professional and doubtful or reasonably susceptible of two interpretations, the construction
hospitalization fees of USD7k+ andUSD1.7k. He tried to recover from conferring coverage is to be adopted and exclusionary clauses of doubtful
Fortune Care for the full amount but he was merely approved a import should be strictly construed against the provider. Furthermore,
reimbursement of P12k based on the average cost of appendectomy, etc. if nothing in the contract states that the PH standard shall be used in the
the procedure was done in Manila. Amorin received the sum under protest event of an emergency confinement in a foreign territory.
but asked for its adjustment to cover the professional fees and 80% of the
hospital fees based on the american standard as the emergency Issue: Whether CA correctly ruled that contract should be interpreted in
procedure occurred in US. It appears that the Contract provides that if the favor of Amorin.
emergency confinement occurs in a foreign territory, Fortune care is obliged
to reimburse or pay 80% of the approved standard charges which shall Ruling: Yes.
cover hospitalization costs and professional fees. However, Fortune care still
denied Amorins request thus prompting the latter to file a complaint for The Court finds no cogent reason to disturb the CAs finding that
breach of contract with damages before the RTC. Fortune Cares liability to Amorin under the subject Health Care Contract
should be based on the expenses for hospital and professional fees which

he actually incurred, and should not be limited by the amount that he would possibility of emergency care in a foreign country. As the contract
have incurred had his emergency treatment been performed in an recognized Fortune Cares liability for emergency treatments even in foreign
accredited hospital in the Philippines. territories, it expressly limited its liability only insofar as the percentage of
hospitalization and professional fees that must be paid or reimbursed was
The SC emphasized that for purposes of determining the liability of concerned, pegged at a mere 80% of the approved standard charges.
a health care provider to its members, jurisprudence holds that a health
care agreement is in the nature of non-life insurance, which is primarily a The word standard as used in the contract was vague and
contract of indemnity. Once the member incurs hospital, medical or any ambiguous, as it could be susceptible of differeng meanings. Plainly, the
other expense arising from sickness, injury or other stipulated contingent, term "standard charges" could be read as referring to the "hospitalization
the health care provider must pay for the same to the extent agreed upon costs and professional fees" which were specifically cited as compensable
under the contract. even when incurred in a foreign country. Contrary to Fortune Cares
argument, from nowhere in the Health Care Contract could it be reasonably
When the terms of insurance contract contain limitations on deduced that these "standard charges" referred to the "Philippine
liability, courts should construe them in such a way as to preclude the standard", or that cost which would have been incurred if the medical
insurer from non-compliance with his obligation. Being a contract of services were performed in an accredited hospital situated in the
adhesion, the terms of an insurance contract are to be construed strictly Philippines. The RTC ruling that the use of the "Philippine standard" could
against the party which prepared the contract the insurer. By reason of be inferred from the provisions of Section 3(A), which covered emergency
the exclusive control of the insurance company over the terms and care in an accredited hospital, was misplaced.
phraseology of the insurance contract, ambiguity must be strictly
interpreted against the insurer and liberally in favor of the insured, Evidently, the parties to the Health Care Contract made a clear
especially to avoid forfeiture. This is equally applicable to Health Care distinction between emergency care in an accredited hospital, and that
Agreements. The phraseology used in medical or hospital service contracts, obtained from a non-accredited hospital. The limitation on payment based
such as the one at bar, must be liberally construed in favor of the on "Philippine standard" for services of accredited physicians was expressly
subscriber, and if doubtful or reasonably susceptible of two interpretations made applicable only in the case of an emergency care in an accredited
the construction conferring coverage is to be adopted, and exclusionary hospital.
clauses of doubtful import should be strictly construed against the provider
All told, in the absence of any qualifying word that clearly limited
In the instant case, the point of dispute is in the proper Fortune Care's liability to costs that are applicable in the Philippines, the
interpretation of the phrase approved standard charges, which shall be amount payable by Fortune Care should not be limited to the cost of
the base for the allowable 80% benefit. The SC held that the phrase must be treatment in the Philippines, as to do so would result in the clear
interpreted in its literal sense, guided by the rule that any ambiguity shall be disadvantage of its member. If, as Fortune Care argued, the premium and
strictly construed against Fortune care, and liberally in favor of Amorin. The other charges in the Health Care Contract were merely computed on
Court agrees with the CA that the parties thereto contemplated the assumption and risk under Philippine cost and, that the American cost

standard or any foreign country's cost was never considered, such Facts: On August 29, 2003, Sumitomo Corporation (Sumitomo) shipped
limitations should have been distinctly specified and clearly reflected in the through MV Eastern Challenger, a vessel owned by Eastern Shipping, 31
extent of coverage which the company voluntarily assumed. various steel sheets in coil from Yokohama, Japan for delivery in favor of
consignee Calamba Steel. The cargo had a declared value of USD125K and
was insured against all risk by Sumitomo with respondent Mitsui Sumitomo
Insurance Co. (Mitsui). On September 6, 2003, the shipment arrived at the
port of Manila where nine coils were observed to be in bad condition. The
cargo was turned over to Asian Terminals (ATI) for stevedoring, storage and
safekeeping pending withdrawal by Calamba Steel. When ATI delivered the
cargo to Calamba Steel, the latter rejected the damaged portion valued at
USD7.7K for being unfit for its intended purpose.

On September 13, 2003, a second shipment of 28 steel sheets in coil
was made by Sumitomo through Eastern Shipping again for delivery to
Calamba. It was insured against all risk with Mitsui. Upon unloading
however, 11 coils were found damaged. Upon delivery, Calamba Steel
rejected the damaged portion, valued at USD7.6k Lastly, Sumitomo shipped
117 steel sheets in coil through Eastern Shipping in favor of Calamba, the
same having been insured with Mitsui. Upon its discharge, six coils were
observed to be in bad condition and Calamba Steel again rejected the
damaged portion valued at USD14k.

Calamba Steel filed an insurance claim with Mitsui through its
settling agent, BPI/MS Insurance Corporation and the former paid the USD
7.7k, USD 7.6K and USD14K damages suffered by all three shipments in the
aggregate amount of USD30.2K. Then, on August 31, 2004, as insurer and
subrogee of Calamba Steel, Mitsui and BPI filed a complaint for damages
against Eastern Line Shipping and ATI.

RTC ordered Eastern Shipping and ATI to pay actual damages in the
5. Eastern Shipping Lines v. BPI and Mitsui, GR No. 193986, January 15, amount of USD 30.2K, plus attorneys fees and costs of suit.
2014

CA affirmed with modification the RTC ruling, deleting the award of shipments were turned over to ATI, the said cargo were already in bad order
attorneys fees for failure of the RTC to state its justification for the award. condition due to damage sustained during the sea voyage.
Eastern Shipping filed an MR which was denied.
ATI was also held liable due to the rough handling of the cargo. One
On appeal before the SC, Eastern avers that the CA erred as the witness testified that the cargoes were roughly handled not only during
evidence shows that it was the rough handling of the goods by ATI during delivery to Calamba Steel but even during the loading operations of the coils
discharge that was the cause of the damage. On the other hand, BPI and from the pier to the trucks. Specifically, some of the coils were dropped to
Mitsui argue that evidence shows that the cargo suffered damage while still the ground, the equipment used to haul the coils is improper as the forklift
in the possession of Eastern Shipping. was sharp that caused scratches, tears and dents to the coils.

Issue: Whether Eastern Shipping is solidarily liable with ATI. It is well-settled in maritime law jurisprudence that cargoes while
being unloaded generally remain under the custody of the carrier. As found
Ruling: Yes. by both the RTC and CA, the goods were damaged even before they were
turned over to ATI. Such damage was even compounded by the negligent
It should be emphasized that both the CA and the RTC found that acts of Eastern and ATI which both mishandled the goods during the
ATI and Eastern Shipping are solidarily liable. The issue raised by petitioner discharging operations. Thus, it bears stressing unto Eastern that common
is a factual one, which should not be for the SC to decide as it is not a trier carriers, form the nature of their business and for reasons of public policy,
of facts. Furthermore, this case does not fall within the exceptions to this are bound to observe extraordinary diligence in the vigilance over the goods
rule. transported by them. Owing to this high degree of diligence, common
carriers as a general rule, are presumed to have been at fault or negligent if
The Court affirmed the findings of the RTC that as evidenced by the the goods they transported deteriorated or got lost or destroyed, unless
Turn Over Survey of Bad Order Cargoes and Request for Bad Order Survey, they prove that they exercised extraordinary diligence in transporting the
the cargo already suffered damage prior to the turn over to ATI. A Turn Over goods. In this case, Eastern failed to hurdle such burden.
Survey of Bad Order Cargo is a document which is requested by an
interested party that incorporates the details of the damage suffered by a
shipped commodity. It is also usually issued by the arrastre contractor (in
this case ATI) as a form of certification that states therein the bad order
condition of a particular cargo, as found prior to its turn over to the custody
or possession of the said arrastre contractor.

The said Damage Reports, Turn Over Survey Reports and Requests
for Bad Order Survey led the Court to conclude that before the subject

6. Alpha Insurance vs Castor spare parts whilst thereon: xxx (b) by fire, external explosion, self-ignition or
G.R. No. 198174, September 2, 2013 lightning or burglary, housebreaking or theft.
In denying Castors claim, Alpha posits that the word damage in
Facts: Castor insured his motor vehicle, a Toyota Revo, with Alpha the cited Exceptions to Section III means loss or injury or harm to person,
Insurance for PHP 630,000.00, covering the period of February 26, 2007 to property or reputation, and should be construed to cover malicious loss as
February 26, 2008. At about 9:00AM of April 16, 2007, Castor instructed her in theft. Thus, by virtue of the exceptions to liability cited in the policy, the
driver, a certain Lanuza to bring the Toyota Revo to an auto-shop for tune- Revo being stolen by Castors driver a person in her service, Alpha cannot
up. Lanuza, however no longer returned the vehicle and despite diligent be made liable.
efforts to recover the same, such efforts proved futile. As a result, Castor This argument is erroneous. The RTC was correct in holding that in
reported the incident to the police and notified Alpha insurance of the loss. Section III of the Policy, there was no qualification as to who would commit
Castor also claimed from Alpha the payment of the insurance proceeds (PHP the theft. Therefore, even if the theft was committed by Castors driver,
630,000.00). there being no categorical declaration of exception, the same must be
In a letter dated July 5, 2007, however, Alpha denied the claim citing covered.
the terms of the insurance policy to wit: An insurance contract should be interpreted as to carry out the
XXX EXCEPTIONS TO SECTION III The Company shall not be liable for: xxx purpose for which the parties entered into the contract which is to insure
Any malicious damage caused by the Insured, any member of his family or against risks of loss or damage to the goods. Such interpretation should
by A PERSON IN THE INSUREDS SERVICE. result from the natural and reasonable meaning of language in the policy.
Castor asserted that the exception cited covers DAMAGE and not Where restrictive provisions are open to two interpretations, that which is
LOSS. Alphas denial, however remained firm. Hence, Castor instituted an most favorable to the insured is adopted.
action for sum of money with damages against Alpha before the RTC of Erroneous, too is the argument of Alpha that if a person employed
Quezon City on Sep 10, 2007. The RTC ruled in favor of Castor. Upon appeal, by the insured would commit the theft and the insurer would be made
the CA likewise ruled in favor of Castor and denied Alphas appeal, hence liable, then this would result to an absurd situation where the insurer would
the petition before the SC. also be made liable if the insured himself would commit the theft. The
Issue: Whether the loss of Castors vehicle is excluded under the terms of absurdity of this argument is inescapable. Of course, if the theft is
the insurance policy. committed by the insured himself, the same would be an exception to
coverage since in that case, there would be fraud on the part of the insured
Ruling: NO. or breach of material warranty under Section 69 of the Insurance Code.

Policy did not distinguish as to who would commit the theft Damage and Loss: Two Different Things

Section III Loss or Damage of the Insurance policy reads: Moreover, contracts of insurance, like other contracts are to be
The Company will, subject to the Limits of Liability, indemnify the Insured construed according to the sense and meaning of the terms which the
against loss of or damage to the Schedule Vehicle and its accessories and parties themselves have used. If such terms are clear and unambiguous,

they must be taken and understood in their plain, ordinary and popular
sense. Accordingly, in interpreting the exclusions in an insurance contract,
the terms used specifying the excluded classes therein are to be given their
meaning as understood in common speech.
In common ordinary usage, damage and loss mean two
different things, the former referring to deterioration or injury to property,
and the latter to the act or fact of losing, or failure to keep possession. Thus,
Alpha cannot use the cited exception under the insurance policy as the
same only refers to malicious damage and does not refer to loss of
property. It is also noteworthy that Alpha used both the terms damage
and loss throughout the policy and not the word damage alone. This
bolsters the Courts interpretation that under the policy, these two mean
different things.

Insurance, a contract of adhesion

Lastly, a contract of insurance is a contract of adhesion. So, when
the terms of the insurance contract contain limitations on liability, courts
should construe them in such a way as to preclude the insurer from non-
compliance with his obligation.

breach of an affirmative warranty under the renewal policy when it

7. Malayan vs PAP CO transferred the location of the insured properties without informing it. Such
G.R. No. 200784, August 7, 2013 transfer affected the risk, and should have enabled Malayan to decide
whether it still was willing to assume the risk and if so at what rate of
Facts: On May 13, 1996, PAP CO insured its machineries and equipment premium. In fact, before the issuance of the renewal policy, PAP informed
located at Sanyo Precision Phils. Bldg., Phase III, Lot 4, Block 15, PEZA, Malayan there would be no changes in the renewal policy. PAP was guilty of
Rosario, Cavite (Sanyo building), with Malayan, against fire, for PHP breach of warranty under the renewal policy when contrary to its
15,000,000.00, effective for one year. The insurance was procured by PAP affirmation in the renewal policy that the items were still in the Sanyo Bldg,
for RCBC, the mortgagee of PAP. these items were already transferred to the Pace Bldg. Malayan further
Prior to the expiration of the insurance, PAP renewed the policy for argues that PAP failed to discharge the burden of proving that Malayan
another year on an as is basis. On October 12, 1997, during the received the information regarding the transfer. With regard to the
subsistence of the renewal policy, the insured machineries and equipment increased risk, Malayan said that there was an increase of risk from 0.449%
were totally lost by fire. Hence, PAP filed a claim against Malayan for the in Sanyo Bldg. to 0.657% in Pace Bldg.
amount insured. Issue: Whether Malayan may be held liable under the insurance contract.
Malayan however denied the claim on the ground that at the time Whether Malayan cannot rescind the insurance contract.
of the loss, the machineries and equipment were transferred to a location Ruling: NO to both
different from that stated in the policy (Sanyo Bldg), or specifically at Pace The policy forbade the transfer of the items insured unless sanctioned by
Pacific Building, Lot 14, Block 14, Phase III, PEZA, Rosario Cavite (Pace Malayan
Pacific). PAP however argued that Malayan could not avoid liability as it was Condition No. 9(c) of the renewal policy provides:
informed by RCBC, the party duty-bound to relay the transfer, of the fact of 9. Under any of the following circumstances the insurance ceases to attach
transfer. The RTC ruled in favor of PAP as it found that there was no as regards the property affected unless the insured before the occurrence
increase in the risk insured against by virtue of the transfer. Moreover, of any loss or damage, obtains the sanction of the company signified by
according to the RTC, the notice to RCBC was enough, it being the party endorsement upon the policy, by or on behalf of the Company:
which procured the insurance (meaning it acted as agent for Malayan), and XXX
in fact, RCBC even conducted an inspection of the machinery in the new (c) If property insured be removed to any building or place other than in
location. On appeal, the CA also ruled in favor of PAP. The CA said that that which is herein stated to be insured.
Malayan failed to prove that under the policy, there was a prohibition on PAP failed to notify, and obtain Malayans consent for the transfer
the transfer of the insured items. It also failed to show that under the policy, There is nothing in the records to show that PAP informed and acquired
Malayans consent was needed in event of transfer. It also said that the consent for the transfer of the items from Malayan.
transfer was made during the subsistence of the original policy and not The records however show that the fact of transfer was relayed to RCBC,
during the renewal policy. Malayans sister company, but not in any way its agent. Even if it was RCBC
Basically, Malayan argues that it cannot be held liable under the insurance who referred PAP to Malayan, it was ultimately PAP and Malayan that
contract because PAP committed concealment, misrepresentation and

entered into the insurance contract. In fact, it was shown that it was and 5. the alteration increases the risk of loss. In this case, all the conditions
Malayans insurance agent which procured the insurance and not RCBC. are present.
Even granting that the information acquired by RCBC was binding on
Malayan, the records show that PAP relied on hearsay evidence.
The transfer increased the risk
Malayans findings of increased risk was correct. As such it should have
enabled Malayan to increase the premium payment. Unfortunately, PAP
remained silent on the matter.
Malayan is entitled to rescind the insurance contract
Considering that the original policy was renewed on an as-is basis, it follows
that the renewal policy carried with it the same stipulations and limitations.
Under the terms and conditions of the original policy, the items are located
at the Sanyo Bldg and not the Pace Building. Consequently, PAP must bear
the risk as it transferred the items from the former location to the latter.
Also, the lack of notice and consent of Malayan about the transfer after the
renewal of the policy constituted concealment, misrepresentation and a
breach of a material warranty.
Section 26 of the Insurance Code provides that a neglect to communicate
that which a party knows and ought to communicate, is called a
concealment.
Section 27 of the same Code also provides that a concealment entitles the
injured party to rescind a contract of insurance.
Moreover, under Section 168 of the Insurance Code, the insurer is entitled
to rescind the insurance contract in case of an alteration in the use or
condition of the thing insured, providing more specifically: An alteration in
the use or condition of a thing insured from that to which it is limited by the
policy made without the consent of the insurer, by means within the control
of the insured, and increasing the risks, entitles an insurer to rescind a
contract of fire insurance.
Accordingly, the insurer can rescind the contract if the following are present
1. the policy limits the use or condition of a thing insured; 2. There is an
alteration in said use or condition; 3. the alteration is without the consent of
the insurer; 4. the alteration is made by means within the insureds control;

During the hearing of the MTD, Manila Bankers witness testified that the
8. Manila Bankers Life Insurance vs Aban insurance underwriter who solicited the insurance is a cousin if Abans
G.R. No. 175666, July 29, 2013 husband and that it was Aban who paid the annual premiums.
The RTC granted the MTD. It found that it was Sotero and not Aban
Facts: On July 3, 1993, Sotero took out a life insurance policy, with a face who applied for the insurance. Sotero of course could insure her own life
value of PHP 100,000.00 from Manila Bankers designating Aban, her neice and validly designate anyone as beneficiary. It also held that under Section
as beneficiary. The corresponding insurance policy was then issued in 48, Manila Bankers only had 2 years from the effectivity of the policy to
Soteros favor following the requisite medical examination and payment of question the same. Since the policy had been effective for about 2 years and
the premium. 7 months, Manila Bankers is now barred from contesting the same.
On April 10, 1996, or after 2 years and 7 months, Sotero died. Aban The CA sustained the trial court upon appeal.
filed a claim. Manila Bankers conducted an investigation and found the Manila Bankers argues that Section 48 cannot apply to the case as it
following: 1. Sotero did not personally apply for insurance coverage as she was the beneficiary who applied for the insurance and merely posed as
was illiterate; 2. Sotero was sickly since 1990; 3. Sotero did not have the Sotero and obtained the insurance under fraudulent circumstances. It
financial capability to pay the insurance premiums; 4. Sotero did not sign added that Aban, who was merely the niece had no insurable interest over
the application; 5. Aban was the one who filed the application and the life of her aunt.
designated herself as the beneficiary. For these reasons, Manila Bankers Issue: Whether Section 48 could be made to apply.
denied Abans claim and merely refunded the premiums paid. Ruling: YES.
On April 24, 1997 Manila Bankers filed a civil case for rescission First and foremost, the SC will not depart from the finding of the lower
and/or annulment of the policy before the RTC of Makati on the ground that courts that it was Sotero herself who obtained the life insurance and not
the policy was obtained by fraud, concealment and/or misrepresentation Aban, and that Sotero designated Aban as beneficiary. Hence the allegations
which renders it voidable under Article 1390 of the Civil Code. of fraud are belied by the finding of the lower courts.
Aban filed an MTD claiming that Manila Bankers cause of action Moreover, the findings of the investigation conducted by Manila Bankers is
was barred by prescription pursuant to Section 48 of the Insurance Code self-serving and may not form the basis of a cause of action given the
which provides: existence and application of Section 48.
Whenever a right to rescind a contract of insurance is given to the insurer The lower courts were correct in applying Section 48 to the case. The said
by any provision of this chapter, such right must be exercised previous to provision of the Insurance Code is clear. This provision, more commonly
the commencement of an action on the contract. known as the incontestability clause precludes the insurer from raising the
After a policy of life insurance made payable on the death of the insured defenses of false representations or concealment of material facts insofar as
shall have been in force during the lifetime of the insured for a period of health and previous diseases are concerned if the insurance has been in
two years from the date of its issue or of its last reinstatement, the insurer force for at least two years during the insureds lifetime. The phrase during
cannot prove that the policy is void ab inito or is rescindable by reason of the lifetime simply means that the policy is no longer considered in force
the fraudulent concealment or misrepresentation of the insured or his after the insured has died. The key phrase is the one that bears the words
agent. for a period of two years. And as borne by the records, the policy was

issued on August 30, 1993. Sotero died on April 10, 1996 and the claim was ACTUAL BILLINGS. It also provided that THE HOSPITALIZATION EXPENSES
denied on April 16, 1997. The insurance policy was thus in force for a period MUST BE COVERED BY ACTUAL HOSPITAL AND DOCTORS BILLS and any
of 2 years and 7 months. Considering that the insured died after the two- amount in excess (of the amount only covered by the benefits under the
year period, Manila Bankers is precluded from proving that the policy is void CBA) will be for the account of the employee. The controversy arose when
ab initio by reason of fraudulent concealment or misrepresentation or want three members of the MMPSEU, namely Calida, Oabel and Martin filed
of insurable interest on the part of the beneficiary. claims for reimbursement of hospitalization expenses of their dependents.
The ultimate aim of Section 48 of the Insurance Code is to compel insurers Worthy of noting is the fact that these members are also members of
to solicit business form or provide insurance coverage only to legitimate and MEDICard Philippines, and as such, a portion of the hospital bills was
bona fide clients, by requiring them to thoroughly investigate those they covered by MEDICard. MMPC, however, only paid a portion of the
insure within two years from effectivity of the policy and while the insured hospitalization insurance claims, not the full amount. It did not pay for the
is still alive. If they do not, they will be obligated to honor claims on the portion already covered by MEDICard. The members, however wanted to
policies they issue, regardless of fraud, concealment or misrepresentation. claim the full amount asserting their rights under the CBA. MMPC, however
The law assumes that they will do just that and not sit on their laurels, believing that there would be double insurance, denied their claim for the
indiscriminately soliciting and accepting insurance business from just any full amount.
Tom, Dick and Harry. The dispute was referred to the NCMB and then to the Voluntary
Also, if it is true that the insurance agent, Abans husbands cousin connived Arbitrator. Meanwhile the parties separately sought for a legal opinion from
with Aban, then the insurer could have found this out earlier if in fact it had the Insurance Commission. Through a letter, Atty. Funk of the Insurance
earnestly conducted an investigation. Thus, the Court cannot sympathize Commission opined that in cases of claims for reimbursement of medical
with its plight for its negligence and inaction. Also, if they could not properly expenses where there are two contracts providing benefits to that effect,
screen their agents, or if they could not thoroughly investigate insurance recovery may be had on both simultaneously. According to him in the
contracts, then they have only themselves to blame. absence of an Other Insurance provision, the courts have uniformly held
that an insured is entitled to receive the insurance benefits without regard
9. Mitsubishi Motors Philippines Salaried Employees Union (MMPSEU) vs to the amount of total benefits provided by the other insurance. This was
Mitsubishi Motors Philippines Corporation (MMPC) referred to by him as the collateral source rule.
G.R. No. 175773, June 17, 2013 The Voluntary Arbitrator ruled in favor of the members saying that
simultaneous recovery can be had without resulting to double insurance
Facts: The parties CBA provided for hospitalization insurance benefits for since separate premiums were paid for each contract. It also noted that the
the covered employees dependents. Under the CBA, each employee shall CBA did not prohibit reimbursement in case there are other health insurers.
pay PHP 100.00 through salary deductions per month to serve as the On appeal, the CA reversed the VAs decision. It ruled that despite
dependents group hospitalization insurance. By virtue of the CBA, MMPC the lack of provision barring recovery in case of prior payment by other
undertook to shoulder the expenses subject to the limitations and insurers, there was a clear intention under the CBA that the parties
restrictions provided in the CBA. It however provided that PAYMENT SHALL intended to make MMPC liable only for expenses actually incurred by an
BE DIRECT TO THE HOSPITAL AND DOCTOR AND MUST BE COVERED BY employees qualified dependent (see capitalized provisions stated in the

first paragraph of the facts). According to the CA, these provisions mean regardless of who was at fault in the incident generating the losses. MMPC
that the employees shall only be paid amounts not covered by other health is a no-fault insurer and hence it cannot be obligated to pay the
insurance and is more in keeping with the principle of indemnity in hospitalization expenses already paid by other insurers.
insurance contracts. A contrary interpretation would allow unscrupulous There was clear intention to limit MMPCs liability to actual expenses
employees to unduly profit from the benefits. Hence the petition before incurred by the beneficiaries
the SC. The CA was correct in holding that although there was no express provision
Issue: Whether MMPC is still liable to pay that portion of the expenses barring claims for hospitalization expenses already paid by other insurers,
already paid by the other insurer. the conditions set forth in the CBA is clearly implied the intention of the
Ruling: NO. parties to limit MMPCs liability to only the expenses actually incurred by
First and foremost, a discussion on the correct application of the collateral the dependents, and this excludes the amounts shouldered by other health
source rule, contrary to Atty. Funks opinion, is in order. insurance companies. As there lies no ambiguity in the provisions of the
The correct application collateral source rule CBA, the MMPSEU cannot rely on the rule that the contract of insurance
The collateral source rule was originally applied to tort cases under must be liberally construed in favor of the insured.
American jurisprudence wherein the defendant is prevented from Double recovery not sanctioned by law
benefiting from the plaintiffs receipt of money from other sources. Under MMPSEU insits that MMPC will unjustly profit from the monthly premiums
the rule, if an injured person receives compensation for his injuries from a paid by the employees if MMPC will not pay the amounts covered under the
source wholly independent of the tortfeasor, the payment should not be CBA. This argument is erroneous as to constitute unjust enrichment, it must
deducted from the damages which he would otherwise collect from the be shown that the enrichment was done illegally or unlawfully. As already
tortfeasor. However, double recovery is still prevented as the collateral discussed, under the CBA, MMPCs liability is only limited to the amount to
source (the wholly independent party) will have a lien or subrogation rights. be paid to the hospital and the doctor, excluding those covered by other
The rule is designed to strike a balance between two competing principles insurers. As a result, the employees cannot receive more than what is due
of tort law: 1. a plaintiff is entitled to compensation sufficient to make him them and neither is MMPC under any obligation to give more than what is
whole, but no more; and 2. a defendant is liable for all damages that due under the CBA.
proximately result from his wrong. To quote the Supreme Court of Being in the nature of a non-life insurance contract, and essentially a
Delaware: A plaintiff who receives a double recovery for a single tort contract of indemnity, the CBA provision obligates MMPC to indemnify the
enjoys a windfall; a defendant who escapes, in whole or in part, liability for medical expenses, but only up to the extent of expenses actually incurred.
his wrong enjoys a windfall. Because the law must sanction one windfall and
deny the other, it favors the victim of the wrong rather than the
wrongdoer. The tortfeasor is thus required to bear the cost for the full 10. Paramount Insurance vs Spouses Yves and Maria Teresa Remondeulaz
value of his or her negligent conduct even if it results in a windfall for the (Respondents)
innocent plaintiff. G.R. No. 175773, June 17, 2013
The above-rule finds no application to cases involving no-fault insurances Facts: Respondents insured their Toyota Corolla sedan under a
under which the insured is indemnified for losses by insurance companies, Comprehensive Motor Vehicle Insurance Policy (CMVIP) with Paramount.

One day, they entrusted the car to a certain Sales for the purpose of adding In one case, the SC ruled that when one takes the motor vehicle of another
accessories thereon. Sales however failed or did not return the subject without the latters consent even if the motor vehicle is later returned,
vehicle within the agreed three-day period. As a result, they sought there is theft there being intent to gain as the use of the thing unlawfully
reimbursement for the lost vehicle from Paramount. Paramount however taken constitutes gain.
refused to pay which prompted Respondents to institute an action against In another case, the taking of a vehicle by another person without the
paramount before the RTC of Makati. permission or authority from the owner is sufficient to place it within the
Interestingly, the RTC of Makati dismissed the action on the ground ambit of the word theft.
double recovery as according to the RTC, the respondents had been In yet another case, similar to this case, the owner of the car entrusted it to
awarded the amount claimed in another action involving the same loss of another for the purpose of repairs, but the owner was not able to retrieve
the same vehicle under the same circumstances although under a different such car when he tried since the entrustee had left. In that case, the SC
insurance policy. distinguished between theft and and estafa. In theft, where the thing is
On appeal, the CA reverse the RTC decision. The CA found that the entrusted to the accused, the thing was entrusted only physically (de facto
subject car is different from the one insured with the other insurance possession) and any misappropriation of the same constitutes theft. On the
company. It however noted that the reason for Paramounts denial of the other hand if what is entrusted is juridical possession, any conversion of the
reimbursement was because the loss of the Toyota sedan did not fall within same constitutes estafa. In this case, Sales did not have juridical possession
the concept of the theft clause of the insurance policy. It found that over the Toyota sedan.
Paramount was wrong and indeed the loss fell within the said clause. Hence The records show that Sales was only entrusted the Toyota sedan only for
this petition by Paramount. the purpose of introducing improvements thereon and not to permanently
Issue: Whether Paramount is liable for the loss of Respondents vehicle. deprive Respondents of the possession of the same. Since theft can also be
Ruling: YES. committed through misappropriation, the fact that Sales failed to return the
The policy was actually clear that Paramount undertook to indemnify the subject vehicle constitutes qualified theft.
insured against loss of or damage to the vehicle caused by theft to wit: Respondents car is covered by a CMVIP that allowed for recovery in cases
SECTION III Loss or Damage of theft. Thus Paramount is liable under the policy for the loss of
1. The Company will, subject to the limits of liability, indemnify the respondents vehicle under the theft clause.
insured against loss of or damage to the Scheduled Vehicle and its
accessories and spare parts whilst thereon:

xxx

b. by fire, external explosion, self-ignition or lightning or burglary,
housebreaking or theft;

xxx

facie case against CBIC. CBIC does not dispute that UMCs stocks in trade
11. were insured against fire under the Insurance Policy and that the
UNITED MERCHANTS CORPORATION v. COUNTRY BANKERS INSURANCE warehouse, where UMCs stocks in trade were stored, was gutted by fire on
CORPORATION 3 July 1996, within the duration of the fire insurance. However, since CBIC
G.R. No. 198588 alleged an excepted risk, then the burden of evidence shifted to CBIC to
J. Carpio prove such exception.
In the present case, CBIC failed to discharge its primordial burden of
Facts: establishing that the damage or loss was caused by arson, a limitation in the
Petitioner United Merchants Corporation (UMC) is engaged in the policy. CBICs evidence did not prove that the fire was intentionally caused
business of buying, selling, and manufacturing Christmas lights. UMC leased by the insured.
a warehouse, where UMC assembled and stored its products. Arson and fraud are two separate grounds based on two different
UMC insured UMCs stocks in trade of Christmas lights against fire sets of evidence, either of which can void the insurance claim of UMC. The
with defendant Country Bankers Insurance Corporation (CBIC) absence of one does not necessarily result in the absence of the other. Thus,
Later on, a fire gutted the warehouse rented by UMC. UMC on the allegation of fraud, we affirm the findings of the Court of Appeals.
demanded for at least fifty percent (50%) payment of its claim from CBIC. Where a fire insurance policy provides that if the claim be in any
CBIC rejected UMCs claim due to breach of Condition No. 15 of the respect fraudulent, or if any false declaration be made or used in support
Insurance Policy. Condition No. 15 states: If the claim be in any respect thereof, or if any fraudulent means or devices are used by the Insured or
fraudulent, or if any false declaration be made or used in support thereof, or anyone acting on his behalf to obtain any benefit under this Policy, and the
if any fraudulent means or devices are used by the Insured or anyone acting evidence is conclusive that the proof of claim which the insured submitted
in his behalf to obtain any benefit under this Policy; or if the loss or damage was false and fraudulent both as to the kind, quality and amount of the
be occasioned by the willful act, or with the connivance of the Insured, all goods and their value destroyed by the fire, such a proof of claim is a bar
the benefits under this Policy shall be forfeited. against the insured from recovering on the policy even for the amount of his
UMC filed a Complaint. The RTC rendered in favor of UMC. However in the actual loss.
Court of Appeals the decision was reversed. In this case the invoices, given by UMC as proof of loss cannot be
taken as genuine. The invoices (Exhibits P-DD) from Fuze Industries
Issue: Whether UMC is entitled to claim from CBIC the full coverage of its Manufacturer Phils. were suspicious. there was no Fuze Industries
fire insurance policy. Manufacturer Phils. located at 55 Mahinhin St., Teachers Village, Quezon
City, the business address appearing in the invoices and the records of the
Ruling: Department of Trade & Industry.
Thus, in fire insurance policies, which contain provisions such as
In insurance cases, once an insured makes out a prima facie case in Condition No. 15 of the Insurance Policy, a fraudulent discrepancy between
its favor, the burden of evidence shifts to the insurer to controvert the the actual loss and that claimed in the proof of loss voids the insurance
insureds prima facie case. [22] In the present case, UMC established a prima policy. Mere filing of such a claim will exonerate the insurer.


The RTC rendered its Decision finding Reputable liable to Philippines

12. First for the amount of indemnity it paid to Wyeth, among others. In turn,
MALAYAN INSURANCE CO., INC. vs PHILIPPINES FIRST INSURANCE CO., Malayan was found by the RTC to be liable to Reputable to the extent of the
INC. and REPUTABLE FORWARDER SERVICES, INC., policy coverage. The CA rendered the assailed decision sustaining the ruling
G.R. No. 184300 of the RTC.

Facts: Issue:
Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Whether double insurance exists in order to apply the other insurance
Forwarder Services, Inc. (Reputable) had been annually executing a contract clause and the over insurance clause
of carriage, whereby the latter undertook to transport and deliver the
formers products to its customers, dealers or salesmen. Ruling: NO
Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from Section 5 (Malayan Contract) is actually the other insurance
respondent Philippines First Insurance Co., Inc. (Philippines First) to secure clause(also called additional insurance and double insurance), Section 5
its interest over its own products. The policy covers all risks of direct does not provide for the nullity of the SR Policy but simply limits the liability
physical loss or damage from any external cause, if by land, and provides a of Malayan only up to the excess of the amount that was not covered by the
limit of P6,000,000.00 per any one land vehicle. other insurance policy. In interpreting the other insurance clause the
The contract between Reputable and Wyeth required Reputable to Court ruled that the prohibition applies only in case of double insurance. In
secure an insurance policy on Wyeths goods. Reputable signed a Special order to constitute a violation of the clause, the other insurance must be
Risk Insurance Policy (SR Policy) with petitioner Malayan. upon the same subject matter, the same interest therein, and the same risk.
During the effectivity of the Marine Policy and SR Policy, the truck Section 12 of the SR Policy, on the other hand, is the over insurance
carrying Wyeths products was hijacked by about 10 armed men. clause. More particularly, it covers the situation where there is over
Philippines First, after due investigation and adjustment, and insurance due to double insurance.
pursuant to the Marine Policy, paid Wyeth Philippines First then demanded
reimbursement from Reputable, having been subrogated to the rights of PRINCIPLE OF CONTRIBUTION provided under of the Insurance Code, which
Wyeth by virtue of the payment. The latter, however, ignored the demand. states that where the insured is over insured by double insurance, each
Philippines First instituted an action for sum of money against insurer is bound, as between himself and the other insurers, to contribute
Reputable. Reputable impleaded Malayan as third-party defendant in an ratably to the loss in proportion to the amount for which he is liable under
effort to collect the amount covered in the SR Policy. Malayan argued that his contract.
inasmuch as there was already a marine policy issued by Philippines First
securing the same subject matter against loss and that since the monetary The requisites in order for double insurance to arise are as follows:
coverage/value of the Marine Policy is more than enough to indemnify the 1. The person insured is the same;
hijacked cargo, Philippines First alone must bear the loss. Malayan relies on 2. Two or more insurers insuring separately;
the other insurance clause and the over insurance clause. 3. There is identity of subject matter;

4. There is identity of interest insured; and Master Policy that Philippine American Life Insurance Company (Philam Life)
5. There is identity of the risk or peril insured against. issued to Philam Plans. Under the master policy, Philam Life was to
It is, however, beyond cavil that the said policies were issued to two automatically provide life insurance coverage, including accidental death, to
different persons or entities. Wyeth is the recognized insured of Philippines all who signed up for Philam Plans comprehensive pension plan. If the plan
First under its Marine Policy, while Reputable is the recognized insured of holder died before the maturity of the plan, his beneficiary was to instead
Malayan under the SR Policy. The fact that Reputable procured Malayans receive the proceeds of the life insurance, equivalent to the pre-need price.
SR Policy over the goods of Wyeth pursuant merely to the stipulated Further, the life insurance was to take care of any unpaid premium until the
requirement under its contract of carriage with the latter does not make pension plan matured, entitling the beneficiary to the maturity value of the
Reputable a mere agent of Wyeth in obtaining the said SR Policy. pension plan.
The interest of Wyeth over the property subject matter of both Manuel died of blood poisoning. Subsequently, Lourdes filed a claim
insurance contracts is also different and distinct from that of Reputable. with Philam Plans for the payment of the benefits under her husbands plan.,
Reputable was over the latters insurable interest over the safety of the Philam Plans then forwarded her claim to Philam Life. PHILAM LIFE declined
goods. her claim. Philam Life found that Manuel was on maintenance medicine for
Therefore, even though the two concerned insurance policies were his heart and had an implanted pacemaker. Further, he suffered from
issued over the same goods and cover the same risk, there arises no double diabetes mellitus and was taking insulin.
insurance since they were issued to two different persons/entities having The RTC rendered judgment, ordering Philam to pay. CA however
distinct insurable interest. reversed the decision.

Issue:
1. Whether or not the CA erred in finding Manuel guilty of concealing
?????? his illness when he kept blank and did not answer questions in his pension
MA??LOURDES??S??FLORENDO??v??PHILAM??PLANS??INC??PERLA??ABC plan application regarding the ailments he suffered from
EDE
GR??No?????????????? Ruling:
J??ABAD??
1. When Manuel signed the pension plan application, he adopted as his own
Facts: the written representations and declarations embodied in it. It is clear from
Manuel Florendo filed an application for comprehensive pension these representations that he concealed his chronic heart ailment and
plan with respondent Philam Plans, Inc. (Philam Plans) after some diabetes from Philam Plans.
convincing by respondent Perla Abcede. Manuel signed the application and Since Manuel signed the application without filling in the details
left to Perla the task of supplying the information needed in the application. regarding his continuing treatments for heart condition and diabetes, the
Aside from pension benefits, the comprehensive pension plan also assumption is that he has never been treated for the said illnesses in the last
provided life insurance coverage to Florendo. This was covered by a Group five years preceding his application. This is implicit from the phrase If your

answer to any of the statements above (specifically, the statement: I have

never been treated for heart condition or diabetes) reveal otherwise, please
give details in the space provided for. But this is untrue since he had been
on Coumadin, a treatment for venous thrombosis.
Manuel had been taking medicine for his heart condition and
diabetes when he submitted his pension plan application. These clearly fell
within the five-year period.
More, even if Perlas knowledge of Manuels pacemaker may be applied to
Philam Plans under the theory of imputed knowledge,[26] it is not claimed
that Perla was aware of his two other afflictions that needed medical
treatments.
Manuels concealment entitles Philam Plans to rescind its contract of
insurance with him.
Since Manuel died on the eleventh month following the issuance of
his plan the one year incontestability period has not yet set in.
Consequently, Philam Plans was not barred from questioning Lourdes
entitlement to the benefits of her husbands pension plan.

of Claim and Subrogation Receipt. Bearing in mind that the claim check
voucher and the Release of Claim and Subrogation Receipt presented by
14. Malayan Insurance are already part of the evidence on record, and since it is
not disputed that the insurance company paid the assured, then there is a
MALAYAN INSURANCE CO., INC v. RODELIO ALBERTO and ENRICO valid subrogation in the case at bar
ALBERTO REYES
G.R. No. 194320 Subrogation is the substitution of one person by another with reference to a
VELASCO, JR., J. lawful claim or right, so that he who is substituted succeeds to the rights of
the other in relation to a debt or claim, including its remedies or securities.
Facts: The principle covers a situation wherein an insurer has paid a loss under an
An accident occurred at the corner of EDSA and Ayala Avenue, insurance policy is entitled to all the rights and remedies belonging to the
Makati City, involving four (4) vehicles. Based on the Police Report All three insured against a third party with respect to any loss covered by the policy.
(3) vehicles were at a halt along EDSA facing the south direction when the It contemplates full substitution such that it places the party subrogated in
Fuzo Cargo Truck simultaneously bumped the rear portion of the Mitsubishi the shoes of the creditor, and he may use all means that the creditor could
Galant and the rear left portion of the Nissan Bus. Due to the strong impact, employ to enforce payment.
these two vehicles were shoved forward and the front left portion of the
Mitsubishi Galant rammed into the rear right portion of the Isuzu Tanker. We have held that payment by the insurer to the insured operates as an
Malayan Insurance issued Car Insurance Policy in favor of First equitable assignment to the insurer of all the remedies that the insured may
Malayan Leasing and Finance Corporation (the assured), insuring the have against the third party whose negligence or wrongful act caused the
aforementioned Mitsubishi Galant against third party liability, own damage loss. The right of subrogation is not dependent upon, nor does it grow out
and theft, among others. Malayan Insurance claimed that it paid the of, any privity of contract. It accrues simply upon payment by the insurance
damages sustained by the assured. company of the insurance claim. The doctrine of subrogation has its roots in
Maintaining that it has been subrogated to the rights and interests of the equity. It is designed to promote and to accomplish justice; and is the mode
assured by operation of law upon its payment to the latter, Malayan that equity adopts to compel the ultimate payment of a debt by one who, in
Insurance sent several demand letters to respondents. Due to no avail, they justice, equity, and good conscience, ought to pay.
filed a complaint in the RTC and the RTC ruled in favor of MALAYAN.
However, the CA reversed the decision of the RTC.

Issue: Whether the subrogation is valid

Ruling:
Malayan Insurance contends that there was a valid subrogation in
the instant case, as evidenced by the claim check voucher and the Release

The Insurance Code defines a suretyship as a contract or agreement

15. whereby a party, called the surety, guarantees the performance by another
FIRST LEPANTO-TAISHO INSURANCE CORPORATION (now known as FLT party, called the principal or obligor, of an obligation or undertaking in favor
PRIME INSURANCE CORPORATION v. CHEVRON PHILIPPINES, INC. of a third party, called the obligee.
(formerly known as CALTEX [PHILIPPINES], INC.) The extent of a suretys liability is determined by the language of the
G.R. No. 177839 suretyship contract or bond itself. It cannot be extended by implication,
VILLARAMA, JR., J. beyond the terms of the contract. Thus, to determine whether petitioner is
liable to respondent under the surety bond, it becomes necessary to
Facts: examine the terms of the contract itself.
Respondent Chevron Philippines, Inc., formerly Caltex Philippines, A reading of Surety Bond shows that it secures the payment of
Inc., sued petitioner First Lepanto-Taisho Insurance Corporation (now purchases on credit by Fumitechniks in accordance with the terms and
known as FLT Prime Insurance Corporation) for the payment of unpaid oil conditions of the agreement it entered into with respondent. The word
and petroleum purchases made by its distributor Fumitechniks Corporation agreement has reference to the distributorship agreement, the principal
(Fumitechniks). contract. However, it turned out that respondent has executed written
Fumitechniks, had applied for and was issued Surety Bond by agreements only with its direct customers but not distributors like
petitioner. The bond was in compliance with the requirement for the grant Fumitechniks and it also never relayed the terms and conditions of its
of a credit line with the respondent to guarantee payment/remittance of distributorship agreement to the petitioner after the delivery of the bond.
the cost of fuel products withdrawn within the stipulated time in The law is clear that a surety contract should be read and
accordance with the terms and conditions of the agreement. The surety interpreted together with the contract entered into between the creditor
bond was executed. and the principal. The Insurance Code states: The liability of the surety or
Fumitechniks defaulted on its obligation. Respondent formally sureties shall be joint and several with the obligor and shall be limited to the
demanded from petitioner the payment of its claim under the surety bond. amount of the bond. It is determined strictly by the terms of the contract of
However, petitioner reiterated its position that it was not advised or had no suretyship in relation to the principal contract between the obligor and the
knowledge of the basic contract and without the basic contract subject of oblige.
the bond, it cannot act on respondents claim. A surety contract is merely a collateral one, its basis is the principal
The RTC rendered judgment dismissing the complaint. The RTC contract or undertaking which it secures. Necessarily, the stipulations in
concluded that the bond cannot stand in the absence of the written such principal agreement must at least be communicated or made known to
agreement secured thereby. CA, however favored the respondent. the surety particularly in this case where the bond expressly guarantees the
payment of respondents fuel products withdrawn by Fumitechniks in
Issue: whether a surety is liable to the creditor in the absence of a written accordance with the terms and conditions of their agreement. The bond
contract with the principal. specifically makes reference to a written agreement. It is basic that if the
terms of a contract are clear and leave no doubt upon the intention of the
Ruling: NO contracting parties, the literal meaning of its stipulations shall control.

Moreover, being an onerous undertaking, a surety agreement is strictly Marina, the Manila South Harbor arrastre, received the shipment
construed against the creditor, and every doubt is resolved in favor of the and, upon inspection of the three container vans separately carrying the
solidary debtor. Having accepted the bond, respondent as creditor must be generator sets, two vans bore signs of external damage while the third van
held bound by the recital in the surety bond that the terms and conditions appeared unscathed. The shipment remained under Marinas care pending
of its distributorship contract be reduced in writing or at the very least clearance from the Bureau of Customs. Eventually, petitioners customs
communicated in writing to the surety. Such non-compliance by the creditor broker, Serbros Carrier Corporation, was allowed to withdraw the shipment
(respondent) impacts not on the validity or legality of the surety contract and deliver it to New Worlds job site in Makati City.
but on the creditors right to demand performance. An examination of the three generator sets revealed that all three
Respondent is charged with notice of the specified form of the sets suffered extensive damage and could no longer be repaired. For these
agreement or at least the disclosure of basic terms and conditions of its reasons, New World demanded recompense for its loss from respondents
distributorship and credit agreements with its client Fumitechniks after its NYK, DMT, Advatech, LEP Profit, LEP, Marina, and Serbros. While LEP and
acceptance of the bond delivered by the latter. However, it never made any NYK acknowledged receipt of the demand, both denied liability.
effort to relay those terms and conditions of its contract with Fumitechniks After New World sent it a formal claim under the insurance policy,
upon the commencement of its transactions with said client, which Seaboard Insurance required New World to submit to it an itemized list of
obligations are covered by the surety bond issued by petitioner. the damaged units, parts, and accessories, with corresponding values. New
World refused to do so, insisting that the insurance policy did not include
16. New World International Devt Philippines v. NYK-FILJAPAN the submission of such a list in connection with an insurance claim resulting
Shipping Corp. to Seaboard refusing to process the claim.
G.R. No. 171468 August 24, 2011 Hence, New World filed an action for specific performance and
damages against all the respondents before the RTC.
FACTS The RTC absolved the various respondents from liability with the
Petitioner New World bought from DMT Corporation through its exception of NYK. The RTC found that the generator sets were damaged
agent, Advatech Industries, Inc. three emergency generator sets worth during transit while in the care of NYKs vessel, ACX Ruby. The court ruled
US$721,500.00. that the latter failed to exercise the degree of diligence required of it in the
DMT shipped the generator sets by truck from Wisconsin to LEP face of a foretold raging typhoon in its path.
Profit International, Inc. in Chicago, Illinois. Then, the shipment went by The RTC ruled, however, that petitioner New World filed its claim
train to Oakland, California, where it was loaded on S/S California Luna V59, against the vessel owner NYK beyond the one year provided under the
owned and operated by NYK for delivery to New World in Manila. NYK COGSA. New World filed its complaint on October 11, 1994 when the
issued a bill of lading, declaring that it received the goods in good condition. deadline for filing the action (on or before October 7, 1994) had already
NYK unloaded the shipment in Hong Kong and transshipped it to lapsed. The RTC held that the one-year period should be counted from the
S/S ACX Ruby V/72 that it also owned and operated. On its journey to date the goods were delivered to the arrastre operator and not from the
Manila, however, ACX Ruby encountered typhoon Kadiang. date they were delivered to petitioners job site.

As regards petitioner New Worlds claim against Seaboard, the RTC

held that Seaboard cannot be faulted for denying the claim against it since RULING
New World refused to submit the itemized list that Seaboard needed for First Issue.
assessing the damage. Likewise, the belated filing of the complaint This is not a proper subject of a petition for review on certiorari.
prejudiced Seaboards right to pursue a claim against NYK in the event of Consequently, the Court will not disturb the finding of the RTC, affirmed by
subrogation. the CA, that the generator sets were totally damaged during the typhoon
On appeal, the CA affirmed the RTCs rulings except with respect to which beset the vessels voyage from Hong Kong to Manila and that it was
Seaboards liability. The CA held that petitioner New World can still recoup her negligence in continuing with that journey despite the adverse condition
its loss from Seaboards marine insurance policy, considering a) that the which caused petitioner New Worlds loss.
submission of the itemized listing is an unreasonable imposition and b) that The typhoon, an exempting cause under Article 1734 of the Civil
the one-year prescriptive period under the COGSA did not affect New Code, does not automatically relieve the common carrier of liability. The
Worlds right under the insurance policy since it was the Insurance Code that latter had the burden of proving that the typhoon was the proximate and
governed the relation between the insurer and the insured. only cause of loss and that it exercised due diligence to prevent or minimize
However, in deciding the motion for reconsideration filed by such loss before, during, and after the disastrous typhoon. As found by the
Seaboard, the CA reversed itself as regards the claim against Seaboard. The RTC and the CA, NYK failed to discharge this burden.
CA held that the submission of the itemized listing was a reasonable Second Issue.
requirement that Seaboard asked of New World. Further, the CA held that The marine open policy that Seaboard issued to New World was an
the one-year prescriptive period for maritime claims applied to Seaboard, as all-risk policy. Such a policy insured against all causes of conceivable loss or
insurer and subrogee of New Worlds right against the vessel owner. New damage except when otherwise excluded or when the loss or damage was
Worlds failure to comply promptly with what was required of it prejudiced due to fraud or intentional misconduct committed by the insured. The
such right. policy covered all losses during the voyage whether or not arising from a
marine peril and Seaboard had been unable to show that petitioner New
ISSUES Worlds loss or damage fell within some or one of the enumerated
WON the CA erred in exceptions.
a) affirming the RTCs release from liability of respondents DMT, What is more, Seaboard had been unable to explain how it could
Advatech, LEP, LEP Profit, Marina, and Serbros who were at one not verify the damage that New Worlds goods suffered going by the
time or another involved in handling the shipment; documents that it already submitted, namely, (1) copy of the Suppliers
b) ruling that Seaboards request from New World for an itemized Invoice; (2) copy of the Packing List; (3) copy of the Bill of Lading; (4) the
list is a reasonable imposition and did not violate the insurance Delivery of Waybill Receipts; (5) original copy of Marine Insurance Policy; (6)
contract between them; copies of Damage Report from Supplier and Insurance Adjusters; (7)
c) failing to rule that the one-year COGSA prescriptive period for Consumption Report from the Customs Examiner; and (8) Copies of
marine claims does not apply to New Worlds prosecution of its Received Formal Claim from the following: a) LEP International Philippines,
claim against Seaboard, its insurer. Inc.; b) Marina Port Services, Inc.; and c) Serbros Carrier Corporation.

Notably, Seaboards own marine surveyor attended the inspection of the Sec. 241 of the Insurance Code provides that no insurance company
generator sets. doing business in the Philippines shall refuse without just cause to pay or
Seaboard cannot pretend that the above documents are settle claims arising under coverages provided by its policies. And, under
inadequate since they were precisely the documents listed in its insurance Sec. 243, the insurer has 30 days after proof of loss is received and
policy. Being a contract of adhesion, an insurance policy is construed ascertainment of the loss or damage within which to pay the claim. If such
strongly against the insurer who prepared it. The Court cannot read a ascertainment is not had within 60 days from receipt of evidence of loss, the
requirement in the policy that was not there. insurer has 90 days to pay or settle the claim. And, in case the insurer
Further, submission of the requested itemized listing was refuses or fails to pay within the prescribed time, the insured shall be
incumbent on Advatech as the seller DMTs local agent. Petitioner New entitled to interest on the proceeds of the policy for the duration of delay at
World should not be made to suffer for Advatechs shortcomings. the rate of twice the ceiling prescribed by the Monetary Board.
Third Issue. Notably, Seaboard already incurred delay when it failed to settle
Section 3(6) of the COGSA provides that the carrier and the ship petitioner New Worlds claim as Sec. 243 required. Under Sec. 244, a prima
shall be discharged from all liability in case of loss or damage unless the suit facie evidence of unreasonable delay in payment of the claim is created by
is brought within one year after delivery of the goods or the date when the the failure of the insurer to pay the claim within the time fixed in Sec. 243.
goods should have been delivered. Hence, the Court reversed the CA as regards the second and third
The last day for filing such a suit fell on October 7, 1994. The record issue.
shows that petitioner New World filed its formal claim for its loss with
Seaboard, its insurer, a remedy it had the right to take, as early as
November 16, 1993 or about 11 months before the suit against NYK would
have fallen due.
If Seaboard had processed that claim and paid the same, Seaboard
would have been subrogated to petitioner New Worlds right to recover
from NYK. And it could have then filed the suit as a subrogee. But Seaboard
made an unreasonable demand on February 14, 1994 for an itemized list of
the damaged units, parts, and accessories, with corresponding values when
it appeared settled that New Worlds loss was total and when the insurance
policy did not require the production of such a list in the event of a claim.
Besides, when petitioner New World declined to comply with the
demand for the list, Seaboard should have formally rejected it, allowing
New World to promptly file its suit directly against NYK and the others.
Ultimately, the fault for the delayed court suit could be brought to
Seaboards doorstep.

In his Answer, Lagman alleged that the 1989 Bonds were valid only
17. Country Bankers Insurance Corporation v. Lagman for 1 year from the date of their issuance, as evidenced by receipts; that the
G.R. No. 165487 July 13, 2011 bonds were never renewed and revived by payment of premiums; that
Country Bankers issued another Warehouse Bond (1990 Bond) which was
FACTS also valid for one year and that no Indemnity Agreement was executed for
Nelson Santos applied for a license with the NFA to engage in the the purpose; and that the 1990 Bond supersedes, cancels, and renders no
business of storing not more than 30,000 sacks of palay in his warehouse. force and effect the 1989 Bonds.
Under General Bonded Warehouse Act, the approval for said license was The bond principals, Santos and Ban Lee Lim, were not served with
conditioned upon posting of a cash bond, a bond secured by real estate, or a summons because they could no longer be found. The case was dismissed
bond signed by a duly authorized bonding company, the amount of which against them without prejudice. The other co-signor, Reguine, was declared
shall be fixed by the NFA Administrator at not less than 33 1/3% of the in default for failure to file her answer.
market value of the maximum quantity of rice to be received. The RTC declared Reguine and Lagman jointly and severally liable to
Accordingly, Country Bankers issued two Warehouse Bonds (1989 pay Country Bankers the amount of P2,400,499.87.
Bonds) through its agent, Antonio Lagman. Santos was the bond principal, The trial court rationalized that the bonds remain in force unless
Lagman was the surety and the Republic of the Philippines, through the NFA cancelled by the Administrator of the NFA and cannot be unilaterally
was the obligee. In consideration of these issuances, corresponding cancelled by Lagman and for the failure of Lagman to comply with his
Indemnity Agreements were executed by Santos, as bond principal, obligation under the Indemnity Agreements, he is likewise liable for
together with Ban Lee Lim Santos, Rhosemelita Reguine, and Lagman, as co- damages as a consequence of the breach.
signors. The latter bound themselves jointly and severally liable to Country On appeal, the CA reversed the RTC and ordered the dismissal of
Bankers for any damages, prejudice, losses, costs, payments, advances and the complaint filed against Lagman holding that the 1990 Bond superseded
expenses of whatever kind and nature, which it may sustain as a the 1989 Bonds. The appellate court observed that the 1990 Bond covers
consequence of the said bond; to reimburse Country Bankers of whatever 33.3% of the market value of the palay, thereby manifesting the intention of
amount it may pay or cause to be paid or become liable to pay thereunder; the parties to make the latter bond more comprehensive. Lagman was also
and to pay interest, as well as to pay attorneys fees of 20% of the amount exonerated by the appellate court from liability because he was not a
due it. signatory to the alleged Indemnity Agreement covering the 1990 Bond. The
Santos then secured a loan using his warehouse receipts as appellate court rejected the argument of Country Bankers that the 1989
collateral. When the loan matured, Santos defaulted in his payment. The bonds were continuing, finding that the receipts issued for the bonds
sacks of palay covered by the warehouse receipts were no longer found in indicate that they were effective for only one-year.
the bonded warehouse. By virtue of the surety bonds, Country Bankers was
compelled to pay P1,166,750.37. ISSUES
Consequently, Country Bankers filed a complaint for a sum of 1) WON the 1989 Bonds have expired; and
money before the RTC. 2) WON the 1990 Bond novates the 1989 Bonds.

RULING This provision in the bonds is but in compliance with the second
First Issue. paragraph of Section 177 of the Insurance Code, which specifies that a
The Court of Appeals held that the 1989 bonds were effective only continuing bond, as in this case where there is no fixed expiration date, may
for one (1) year, as evidenced by the receipts on the payment of premiums. be cancelled only by the obligee, which is the NFA, by the Insurance
We do not agree. Commissioner, and by the court.
The official receipts in question serve as proof of payment of the By law and by the specific contract involved in this case, the
premium for one year on each surety bond. It does not, however, effectivity of the bond required for the obtention of a license to engage in
automatically mean that the surety bond is effective for only 1 year. In fact, the business of receiving rice for storage is determined not alone by the
the effectivity of the bond is not wholly dependent on the payment of payment of premiums but principally by the Administrator of the NFA. From
premium. Section 177 of the Insurance Code expresses: beginning to end, the Administrators brief is the enabling or disabling
Sec. 177. The surety is entitled to payment of the premium as soon document.
as the contract of suretyship or bond is perfected and delivered to the The clear import of these provisions is that the surety bonds in
obligor. No contract of suretyship or bonding shall be valid and binding question cannot be unilaterally cancelled by Lagman.
unless and until the premium therefor has been paid, except where the Second Issue.
obligee has accepted the bond, in which case the bond becomes valid and Lagmans insistence on novation depends on the validity, nay,
enforceable irrespective of whether or not the premium has been paid by existence of the allegedly novating 1990 Bond. Country Bankers
the obligor to the surety: Provided, That if the contract of suretyship or understandably impugns both. We see the point. Lagman presented a mere
bond is not accepted by, or filed with the obligee, the surety shall collect photocopy of the 1990 Bond which we rule as inadmissible.
only reasonable amount, not exceeding 50 per centum of the premium due Under the best evidence rule, the original document must be
thereon as service fee plus the cost of stamps or other taxes imposed for produced whenever its contents are the subject of inquiry. A photocopy,
the issuance of the contract or bond: Provided, however, That if the non- being a mere secondary evidence, is not admissible unless it is shown that
acceptance of the bond be due to the fault or negligence of the surety, no the original is unavailable.
such service fee, stamps or taxes shall be collected. Before a party is allowed to adduce secondary evidence to prove
The 1989 Bonds have identical provisions and they state in very the contents of the original, the offeror must prove the following: (1) the
clear terms the effectivity of these bonds, viz: existence or due execution of the original; (2) the loss and destruction of the
NOW, THEREFORE, if the above-bounded Principal shall well and original or the reason for its non-production in court; and (3) on the part of
truly deliver to the depositors PALAY received by him for STORAGE at any the offeror, the absence of bad faith to which the unavailability of the
time that demand therefore is made, or shall pay the market value original can be attributed. The correct order of proof is as follows: existence,
therefore in case he is unable to return the same, then this obligation shall execution, loss, and contents.
be null and void; otherwise it shall remain in full force and effect and may In the case at bar, Lagman mentioned that there are actually 4
be enforced in the manner provided by said Act No. 3893 as amended by duplicate originals of the 1990 Bond: the first is kept by the NFA, the second
Republic Act No. 247 and P.D. No. 4. This bond shall remain in force until is with the Loan Officer of the NFA in Tarlac, the third is with Country
cancelled by the Administrator of National Food Authority. Bankers and the fourth was in his possession. A party must first present to

the court proof of loss or other satisfactory explanation for the non- superseded by the new one. Quite obviously, neither can there be implied
production of the original instrument. When more than one original copy novation. In this case, there is no new obligation.
exists, it must appear that all of them have been lost, destroyed, or cannot Lagman, being a solidary debtor, is liable for the entire obligation.
be produced in court before secondary evidence can be given of any one. A Petition is GRANTED.
photocopy may not be used without accounting for the other originals.
Despite knowledge of the existence and whereabouts of these
duplicate originals, Lagman merely presented a photocopy. He admitted
that he kept a copy of the 1990 Bond but he could no longer produce it
because he had already severed his ties with Country Bankers. Neither did
Lagman explain why he failed to secure the original from any of the three
other custodians he mentioned in his testimony.
Fueling further suspicion regarding the existence of the 1990 Bond
is the absence of an Indemnity Agreement. While Lagman argued that a
1990 Bond novates the 1989 Bonds, he raises the defense of non-existence
of an indemnity agreement which would conveniently exempt him from
liability. The trial court deemed this defense as indicia of bad faith.
Having discounted the existence and/or validity of the 1990 Bond,
there can be no novation to speak of. Novation is the extinguishment of an
obligation by the substitution or change of the obligation by a subsequent
one which extinguishes or modifies the first, either by changing the object
or principal conditions, or by substituting another in place of the debtor, or
by subrogating a third person in the rights of the creditor. For novation to
take place, the following requisites must concur: 1) There must be a
previous valid obligation; 2) The parties concerned must agree to a new
contract; 3) The old contract must be extinguished; and 4) There must be a
valid new contract.
In this case, only the first element of novation exists. Indeed, there
is a previous valid obligation, i.e., the 1989 Bonds. There is however neither
a valid new contract nor a clear agreement between the parties to a new
contract since the very existence of the 1990 Bond has been rendered
dubious. Without the new contract, the old contract is not extinguished.
Implied novation necessitates a new obligation with which the old
is in total incompatibility such that the old obligation is completely

stevedores who handled the unloading of the cargoes from the vessel
18. Asian Terminals v. Malayan Insurance despite the admonitions of Marine Cargo Surveyors Edgar Liceralde and
G.R. No. 171406 April 4, 2011 Redentor Antonio not to use steel hooks in retrieving and picking-up the
bags, petitioners stevedores continued to use such tools, which pierced the
FACTS bags and caused the spillage. The RTC, thus, ruled that petitioner, as
Shandong Weifang Soda Ash Plant shipped on board the vessel MV employer, is liable for the acts and omissions of its stevedores under Articles
Jinlian I 60,000 plastic bags of soda ash dense (each weighing 50 kg) from 2176 and 2180 paragraph (4) of the Civil Code.
China to Manila. The shipment, with an invoice value of US$456,000.00, was Ruling of the Court of Appeals.
insured with respondent Malayan Insurance Company, Inc. under Marine The CA agreed with the RTC that the damage/loss was caused by
Risk Note No. RN-0001-21430, and covered by a Bill of Lading issued by the negligence of petitioners stevedores in handling and storing the subject
Tianjin Navigation Company with Philippine Banking Corporation as the shipment. The CA likewise rejected petitioners assertion that it received the
consignee and Chemphil Albright and Wilson Corporation as the notify subject shipment in bad order condition as this was belied by Marine Cargo
party. Surveyors Redentor Antonio and Edgar Liceralde, who both testified that
Upon arrival of the vessel at the pier in Manila, the stevedores of the actual counting of bad order bags was done only after all the bags were
petitioner Asian Terminals, Inc., unloaded the bags of soda ash dense and unloaded from the vessel and that the Turn Over Survey of Bad Order
brought them to the open storage area of petitioner for temporary storage Cargoes (TOSBOC) upon which petitioner anchors its defense was prepared
and safekeeping, pending clearance from the Bureau of Customs and only on November 28, 1995 or after the unloading of the bags was
delivery to the consignee. When the unloading of the bags was completed completed.
on November 28, 1995, 2,702 bags were found to be in bad order condition. Petitioner motion for reconsideration was denied for lack of merit.
On November 29, 1995, the stevedores of petitioner began loading
the bags in the trucks of MEC Customs Brokerage for transport and delivery Issues
to the consignee. On December 28, 1995, after all the bags were unloaded (1) Whether the non-presentation of the insurance contract or
in the warehouses of the consignee, a total of 2,881 bags were in bad order policy is fatal to respondents cause of action;
condition due to spillage, caking, and hardening of the contents. (2) Whether the proximate cause of the damage/loss to the
Respondent, as insurer, paid the value of the lost/ damaged shipment was the negligence of petitioners stevedores; and
cargoes to the consignee in the amount of P643,600.25. (3) Whether the court can take judicial notice of the Management
Ruling of the Regional Trial Court. Contract between petitioner and the Philippine Ports Authority in
Respondent, as subrogee of the consignee, filed before the RTC a determining petitioners liability.
Complaint for damages against petitioner, the shipper Inchcape Shipping Petitioners Arguments.
Services, and the cargo broker MEC Customs Brokerage. Petitioner contends that respondent has no cause of action because
The RTC, in finding petitioner liable for the damage/loss sustained it failed to present the insurance contract or policy covering the subject
by the shipment but absolving the other defendants, it found that the shipment. Petitioner argues that the Subrogation Receipt presented by
proximate cause of the damage/loss was the negligence of petitioners respondent is not sufficient to prove that the subject shipment was insured

and that respondent was validly subrogated to the rights of the consignee. RTC, affirmed by the CA, are conclusive and should no longer be disturbed.
Thus, petitioner submits that without proof of a valid subrogation, In fact, under Section 1 of Rule 45 of the Rules of Court, only questions of
respondent is not entitled to any reimbursement. law may be raised in a petition for review on certiorari.
Petitioner avers that the finding that the proximate cause of the As to the Management Contract for cargo handling services,
damage/loss to the shipment was the negligence of petitioners stevedores respondent contends that this is outside the operation of judicial notice.[48]
is contrary to the documentary evidence, i.e., the TOSBOC, the Request for And even if it is not, petitioners liability cannot be limited by it since it is a
Bad Order Survey (RESBOC) and the Report of Survey. According to contract of adhesion.[49]
petitioner, these documents prove that it received the subject shipment in
bad order condition and that no additional damage was sustained by the RULING
subject shipment under its custody. Petitioner asserts that although the The petition is bereft of merit.
TOSBOC was prepared only after all the bags were unloaded by petitioners Non-presentation of the insurance contract or policy is not fatal in
stevedores, this does not mean that the damage/loss was caused by its the instant case.
stevedores. Petitioner claims that respondents non-presentation of the
Petitioner also claims that the amount of damages should not be insurance contract or policy between the respondent and the consignee is
more than P5,000.00, pursuant to its Management Contract for cargo fatal to its cause of action.
handling services with the PPA. Petitioner contends that the CA should have We do not agree.
taken judicial notice of the said contract since it is an official act of an First of all, this was never raised as an issue before the RTC. In fact,
executive department subject to judicial cognizance. it is not among the issues agreed upon by the parties to be resolved during
Respondents Arguments. the pre-trial. Neither was this issue raised on appeal.
Respondent, on the other hand, argues that the non-presentation Besides, non-presentation of the insurance contract or policy is not
of the insurance contract or policy was not raised in the trial court. Thus, it necessarily fatal. In Delsan Transport Lines, Inc. v. Court of Appeals, we
cannot be raised for the first time on appeal. Respondent likewise contends ruled that:
that under prevailing jurisprudence, presentation of the insurance policy is the presentation in evidence of the marine insurance policy is
not indispensable. Moreover, with or without the insurance contract or not indispensable in this case before the insurer may recover from the
policy, respondent claims that it should be allowed to recover under Article common carrier the insured value of the lost cargo in the exercise of its
1236 of the Civil Code. Respondent further avers that the right of subrogatory right. The subrogation receipt, by itself, is sufficient to establish
subrogation has its roots in equity - it is designed to promote and to not only the relationship of herein private respondent as insurer and Caltex,
accomplish justice and is the mode which equity adopts to compel the as the assured shipper of the lost cargo of industrial fuel oil, but also the
ultimate payment of a debt by one who in justice, equity and good amount paid to settle the insurance claim. The right of subrogation accrues
conscience ought to pay. simply upon payment by the insurance company of the insurance claim.
Respondent likewise maintains that the RTC and the CA correctly The presentation of the insurance policy was necessary in the case
found that the damage/loss sustained by the subject shipment was caused of Home Insurance Corporation v. CA (a case cited by petitioner) because
by the negligent acts of petitioners stevedores. Such factual findings of the the shipment therein passed through several stages with different parties

involved in each stage. First, from the shipper to the port of departure; when the judgment of the [CA] is based on misapprehension of facts; (5)
second, from the port of departure to the M/S Oriental Statesman; third, when the CA, in making its findings, went beyond the issues of the case and
from the M/S Oriental Statesman to the M/S Pacific Conveyor; fourth, from the same is contrary to the admissions of both appellant and appellee; (6)
the M/S Pacific Conveyor to the port of arrival; fifth, from the port of arrival when the findings of fact are conclusions without citation of specific
to the arrastre operator; sixth, from the arrastre operator to the hauler, evidence on which they are based; (7) when the CA manifestly overlooked
Mabuhay Brokerage Co., Inc. (private respondent therein); and lastly, from certain relevant facts not disputed by the parties and which, if properly
the hauler to the consignee. We emphasized in that case that in the absence considered, would justify a different conclusion; and (8) when the findings
of proof of stipulations to the contrary, the hauler can be liable only for any of fact of the CA are premised on the absence of evidence and are
damage that occurred from the time it received the cargo until it finally contradicted by the evidence on record. None of these are availing in the
delivered it to the consignee. Ordinarily, it cannot be held responsible for present case.
the handling of the cargo before it actually received it. The insurance Both the RTC and the CA found the negligence of petitioners
contract, which was not presented in evidence in that case would have stevedores to be the proximate cause of the damage/loss to the shipment.
indicated the scope of the insurers liability, if any, since no evidence was In disregarding the contention of petitioner that such finding is contrary to
adduced indicating at what stage in the handling process the damage to the the documentary evidence, the CA had this to say:
cargo was sustained. ATI, however, contends that the finding of the trial court was
The presentation of the insurance contract or policy was not contrary to the documentary evidence of record, particularly, the Turn Over
necessary. Although petitioner objected to the admission of the Survey of Bad Order Cargoes which was executed prior to the turn-over of
Subrogation Receipt in its Comment to respondents formal offer of the cargo by the carrier to the arrastre operator ATI, and which showed that
evidence on the ground that respondent failed to present the insurance the shipment already contained 2,702 damaged bags.
contract or policy, a perusal of petitioners Answer and Pre-Trial Brief shows The Court is not persuaded.
that petitioner never questioned respondents right to subrogation, nor did Contrary to ATIs assertion, witness Redentor Antonio, marine cargo
it dispute the coverage of the insurance contract or policy. Since there was surveyor of Inchcape for the vessel Jinlian I which arrived on and up to
no issue regarding the validity of the insurance contract or policy, or any completion of discharging on November 28, 1995, testified that it was only
provision thereof, respondent had no reason to present the insurance after all the bags were unloaded from the vessel that the actual counting of
contract or policy as evidence during the trial. bad order bags was made.
Factual findings of the CA, affirming the RTC, are conclusive and ATI, for its part, presented its claim officer as witness who testified
binding. that a survey was conducted by the shipping company and ATI before the
Only questions of law are allowed in petitions for review on shipment was turned over to the possession of ATI and that the Turn Over
certiorari under Rule 45 of the Rules of Court. Factual findings of the CA Survey of Bad Order Cargoes was prepared by ATIs Bad Order Inspector.
affirming those of the RTC are conclusive and binding, except in the Considering that the shipment arrived on November 21, 1998 and
following cases: (1) when the inference made is manifestly mistaken, absurd the unloading operation commenced on said date and was completed on
or impossible; (2) when there is grave abuse of discretion; (3) when the November 26, 1998, while the Turn Over Survey of Bad Order Cargoes,
findings are grounded entirely on speculations, surmises or conjectures; (4) reflecting a figure of 2,702 damaged bags, was prepared and signed on

November 28, 1998 by ATIs BO Inspector and co-signed by a representative entered with the PPA, which limits petitioners liability to P5,000.00 per
of the shipping company, the trial courts finding that the damage to the package.
cargoes was due to the improper handling thereof by ATIs stevedores The petitioner, it cannot avail of judicial notice.
cannot be said to be without substantial support from the records. Sections 1 and 2 of Rule 129 of the Rules of Court provide that:
We thus see no cogent reason to depart from the ruling of the trial SECTION 1. Judicial notice, when mandatory. A court shall take
court. It is hornbook doctrine that the assessment of witnesses and their judicial notice, without the introduction of evidence, of the existence and
testimonies is a matter best undertaken by the trial court, which had the territorial extent of states, their political history, forms of government and
opportunity to observe the demeanor, conduct or attitude of the witnesses. symbols of nationality, the law of nations, the admiralty and maritime
The findings of the trial court on this point are accorded great respect and courts of the world and their seals, the political constitution and history of
will not be reversed on appeal, unless it overlooked substantial facts and the Philippines, the official acts of the legislative, executive and judicial
circumstances which, if considered, would materially affect the result of the departments of the Philippines, the laws of nature, the measure of time,
case. and the geographical divisions.
We also find ATI liable for the additional 179 damaged bags SEC. 2. Judicial notice, when discretionary. A court may take judicial
discovered upon delivery of the shipment at the consignees warehouse in notice of matters which are of public knowledge, or are capable of
Pasig. The final Report of Survey executed by SMS Average Surveyors & unquestionable demonstration or ought to be known to judges because of
Adjusters, Inc., and independent surveyor hired by the consignee, shows their judicial functions.
that the subject shipment incurred a total of 2881 damaged bags. The Management Contract is clearly not among the matters which
We agree with the trial court that the damage to the shipment was the courts can take judicial notice of. It cannot be considered an official act
caused by the negligence of ATIs stevedores and for which ATI is liable of the executive department. The PPA, which was created by virtue of
under Articles 2180 and 2176 of the Civil Code. The proximate cause of the Presidential Decree No. 857, as amended, is a government-owned and
damage was the improper handling of the cargoes by ATIs stevedores. controlled corporation in charge of administering the ports in the country.
We find no reason to disagree with the trial courts conclusion. Obviously, the PPA was only performing a proprietary function when it
Indeed, from the nature of the damage caused to the shipment, i.e., torn entered into a Management Contract with petitioner.
bags, spillage of contents and hardened or caked portions of the contents, it As such, judicial notice cannot be applied.
is not difficult to see that the damage caused was due to the negligence of
ATIs stevedores who used steel hooks to retrieve the bags from the higher
portions of the piles thereby piercing the bags and spilling their contents,
and who piled the bags in the open storage area of ATI with insufficient
cover thereby exposing them to the elements and causing the contents to
cake or harden.
Judicial notice does not apply.
Finally, petitioner implores us to take judicial notice of Section 7.01,
Article VII of the Management Contract for cargo handling services it

agreement was a contract of insurance subject to DST under Section 185 of

19. Phil. Health Care Providers, Inc. v. CIR the 1997 Tax Code.
GR. NO. 1677330 September 18, 2009 On August 16, 2004, the CA rendered its decision which held that
petitioners health care agreement was in the nature of a non-life insurance
FACTS contract subject to DST. Respondent is ordered to pay the deficiency
Petitioner is a domestic corporation whose primary purpose is to Documentary Stamp Tax. Petitioner moved for reconsideration but the CA
establish, maintain, conduct and operate a prepaid group practice health denied it.
care delivery system or a health maintenance organization to take care of
the sick and disabled persons enrolled in the health care plan and to provide ISSUES
for the administrative, legal, and financial responsibilities of the (1) WON Philippine Health Care Providers, Inc. engaged in
organization. insurance business;
On January 27, 2000, respondent CIR sent petitioner a formal (2) WON the agreements between petitioner and its members
demand letter and the corresponding assessment notices demanding the possess all elements necessary in the insurance contract.
payment of deficiency taxes, including surcharges and interest, for the
taxable years 1996 and 1997 in the total amount of P224,702,641.18. The RULING
deficiency assessment was imposed on petitioners health care agreement NO. Health Maintenance Organizations are not engaged in the
with the members of its health care program pursuant to Section 185 of the insurance business. The SC said in June 12, 2008 decision that it is irrelevant
1997 Tax Code. Petitioner protested the assessment in a letter dated that petitioner is an HMO and not an insurer because its agreements are
February 23, 2000. treated as insurance contracts and the DST is not a tax on the business but
As respondent did not act on the protest, petitioner filed a petition an excise on the privilege, opportunity or facility used in the transaction of
for review in the Court of Tax Appeals (CTA) seeking the cancellation of the the business. Petitioner, however, submits that it is of critical importance to
deficiency VAT and DST assessments. On April 5, 2002, the CTA rendered a characterize the business it is engaged in, that is, to determine whether it is
decision, ordering the petitioner to PAY the deficiency VAT amounting to an HMO or an insurance company, as this distinction is indispensable in turn
P22,054,831.75 inclusive of 25% surcharge plus 20% interest from January to the issue of whether or not it is liable for DST on its health care
20, 1997 until fully paid for the 1996 VAT deficiency and P31,094,163.87 agreements. Petitioner is admittedly an HMO. Under RA 7878 an HMO is
inclusive of 25% surcharge plus 20% interest from January 20, 1998 until an entity that provides, offers or arranges for coverage of designated
fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling No. [231]-88 health services needed by plan members for a fixed prepaid premium. The
is declared void and without force and effect. The 1996 and 1997 deficiency payments do not vary with the extent, frequency or type of services
DST assessment against petitioner is hereby CANCELLED AND SET ASIDE. provided. Section 2 (2) of PD 1460 enumerates what constitutes doing an
Respondent is ORDERED to DESIST from collecting the said DST deficiency insurance business or transacting an insurance businesswhich are making
tax. Respondent appealed the CTA decision to the (CA) insofar as it or proposing to make, as insurer, any insurance contract; making or
cancelled the DST assessment. He claimed that petitioners health care proposing to make, as surety, any contract of suretyship as a vocation and
not as merely incidental to any other legitimate business or activity of the

surety; doing any kind of business, including a reinsurance business,

specifically recognized as constituting the doing of an insurance business
within the meaning of this Code; doing or proposing to do any business in
substance equivalent to any of the foregoing in a manner designed to evade
the provisions of this Code.
Overall, petitioner appears to provide insurance-type benefits to its
members (with respect to its curative medical services), but these are
incidental to the principal activity of providing them medical care. The
insurance-like aspect of petitioners business is miniscule compared to its
noninsurance activities. Therefore, since it substantially provides health care
services rather than insurance services, it cannot be considered as being in
the insurance business.

Respondent sued petitioner and ATI for reimbursement of the

amount it paid to Nissan before the RTC. Respondent claimed that it was
20. Eastern Shipping Lines v. Prudential Guarantee and Assurance Inc., subrogated to the rights of Nissan by virtue of said payment.
GR No. 174116 1 September 2009 Ruling of the RTC.
The RTC rendered a judgment in favor of the plaintiff and against
FACTS the defendants Eastern Shipping Lines, Inc. and ATI. Both the counterclaims
56 cases of completely knock-down auto parts of Nissan motor and crossclaims are without legal basis. The counterclaims and crossclaims
vehicle (cargoes) were loaded on board M/V Apollo Tujuh (carrier) at are based on the assumption that the other defendant is the one solely
Nagoya, Japan, to be shipped to Manila. The shipment was consigned to liable. However, inasmuch as the solidary liability of the defendants have
Nissan Motor Philippines, Inc. (Nissan) and was covered by a bill of lading. been established, the counterclaims and crossclaims must be denied.
The carrier was owned and operated by petitioner Eastern Shipping Lines, Ruling of the CA.
Inc. Both petitioner and ATI appealed to the CA.
On November 16, 1995, the carrier arrived at the port of Manila. On The CA exonerated ATI and ruled that petitioner was solely
November 22, 1995, the shipment was then discharged from the vessel responsible for the damages caused to the cargoes. Moreover, the CA
onto the custody of the arrastre operator, Asian Terminals, Inc. (ATI), relying on Delsan Transport Lines, Inc. vs. Court of Appeals, ruled that the
complete and in good condition, except for four cases. right of subrogation accrues upon payment by the insurance company of
On November 24 to 28, 1995, the shipment was withdrawn by the insurance claim and that the presentation of the insurance policy is not
Seafront Customs and Brokerage from the pier and delivered to the indispensable before the appellee may recover in the exercise of its
warehouse of Nissan in Quezon City. subrogatory right.
A survey of the shipment was then conducted by Tan-Gaute Petitioner then filed a motion for reconsideration, which was,
Adjustment Company, Inc. (surveyor) at Nissans warehouse. On January 16, however, denied.
1996, the surveyor submitted its report with a finding that there were
missing and broken items; and that in its opinion, the shortage and damage ISSUE
sustained by the shipment were due to pilferage and improper handling, WON presentation of the marine insurance policy is
respectively while in the custody of the vessel and/or Arrastre Contractors. indispensable before the appellee may recover in the exercise of its
As a result, Nissan demanded the sum of P1,047,298.34 subrogatory right.
representing the cost of the damages sustained by the shipment from
petitioner, the owner of the vessel, and ATI, the arrastre operator. RULING
However, the demands were not heeded. The petition is meritorious.
As insurer of the shipment against all risks, respondent Prudential The rule in our jurisdiction is that only questions of law may be
Guarantee and Assurance Inc. paid Nissan the sum of P1,047,298.34. entertained by this Court in a petition for review on certiorari. This rule,
however, is not iron-clad and admits of certain exceptions, one of which is
when the CA manifestly overlooked certain relevant and undisputed facts

that, if properly considered, would justify a different conclusion. In the case As stated, the Marine Risk Note was issued only on November 16,
at bar, the records of the case contain evidence which justify the application 1995; hence, without a copy of the marine insurance policy, it would be
of the exception. impossible and simply guesswork to know whether the cargo was insured
Petitioner argues that respondent was not properly subrogated during the voyage which started on November 8, 1995. Without the marine
because of the non-presentation of the marine insurance policy. In order to insurance policy, it would be impossible for this Court to know the
prove its claim, respondent presented a marine cargo risk note and a following: first, the specifics of the Institute Cargo Clauses A and other
subrogation receipt. Thus, the question to be resolved is whether the two terms and conditions per Marine Open Policy-86-168 as alluded to in the
documents, without the Marine Insurance Policy, are sufficient to prove Marine Risk Note; second, if the said terms and conditions were actually
respondents right of subrogation. complied with before respondent paid Nissans claim.
It must be emphasized that a marine risk note is not an insurance Furthermore, a reading of the records clearly show that, at the RTC,
policy. It is only an acknowledgment or declaration of the insurer confirming petitioner had already objected to the non-presentation of the marine
the specific shipment covered by its marine open policy, the evaluation of insurance policy.
the cargo and the chargeable premium. In International Container Terminal Clearly, petitioner was not remiss when it openly objected to the
Services, Inc. v. FGU Insurance Corporation, the nature of a marine cargo non-presentation of the Marine Insurance Policy. As testified to by
risk note was explained, thus: respondents witness, they had a copy of the marine insurance policy in
x x x It is the marine open policy which is the main insurance their office. Thus, respondent was already apprised of the possible
contract. In other words, the marine open policy is the blanket insurance to importance of the said document to their cause.
be undertaken by FGU on all goods to be shipped by RAGC during the In its Complaint, respondent alleged: That the above-described
existence of the contract, while the marine risk note specifies the particular shipment was insured for P14,173,042.91 against all risks under plaintiffs
goods/shipment insured by FGU on that specific transaction, including the Marine Cargo Risk Note No. 39821/Marine Open Policy No. 86-168.
sum insured, the shipment particulars as well as the premium paid for such Therefore, other than the marine cargo risk note, respondent should have
shipment. x x x. also presented the marine insurance policy, as the same also served as the
It is undisputed that the cargoes were already on board the carrier basis for its complaint. Section 7, Rule 9 of the 1997 Rules of Civil Procedure,
as early as November 8, 1995 and that the same arrived at the port of provide:
Manila on November 16, 1995. It is, however, very apparent that the SECTION 7. Action or defense based on document. Whenever an
Marine Cargo Risk Note was issued only on November 16, 1995. The same, action or defense is based upon a written instrument or document, the
therefore, should have raised a red flag, as it would be impossible to know substance of such instrument or document shall be set forth in the pleading,
whether said goods were actually insured while the same were in transit and the original or a copy thereof shall be attached to the pleading as an
from Japan to Manila. On this score, this Court is guided by Malayan exhibit, which shall be deemed to be a part of the pleading, or said copy
Insurance Co., Inc. v. Regis Brokerage Corp., where this Court ruled: may, with like effect, be set forth in the pleading.
The Marine Risk Note relied upon by respondent as the basis for its Therefore, since respondent alluded to an actionable document in
claim for subrogation is insufficient to prove said claim. its complaint, the contract of insurance between it and Nissan, as integral to
its cause of action against petitioner, the Marine Insurance Policy should

have been attached to the Complaint. Even in its formal offer of evidence, presentation of the marine insurance policy and had manifested its desire to
respondent alluded to the marine insurance policy which can stand know the specific provisions thereof. Moreover, and the same is critical, the
independent of the Marine Cargo Risk Note. marine risk note in the case at bar is questionable because: first, it is dated
It is significant that the date when the alleged insurance contract on the same day the cargoes arrived at the port of Manila and not during
was constituted cannot be established with certainty without the contract the duration of the voyage; second, without the Marine Insurance Policy to
itself. Said point is crucial because there can be no insurance on a risk that elucidate on the specifics of the terms and conditions alluded to in the
had already occurred by the time the contract was executed. Surely, the marine risk note, it would be simply guesswork to know if the same were
Marine Risk Note on its face does not specify when the insurance was complied with.
constituted. In conclusion, this Court rules that because of the inadequacy of the Marine
Finally, there have been cases where this Court ruled that the non- Cargo Risk Note for the reasons already stated, it was incumbent on
presentation of the marine insurance policy is not fatal. However, as in respondent to present in evidence the Marine Insurance Policy, and having
every general rule, there are admitted exceptions. In Delsan Transport failed in doing so, its claim of subrogation must necessarily fail.
Lines, Inc. v. Court of Appeals, the Court stated that the presentation of the
insurance policy was not fatal because the loss of the cargo undoubtedly
occurred while on board the petitioner's vessel, unlike in Home Insurance in
which the cargo passed through several stages with different parties and it
could not be determined when the damage to the cargo occurred, such that
the insurer should be liable for it.
As in Delsan, there is no doubt that the loss of the cargo in the
present case occurred while in petitioner's custody. Moreover, there is no
issue as regards the provisions of Marine Open Policy No. MOP-12763, such
that the presentation of the contract itself is necessary for perusal, not to
mention that its existence was already admitted by petitioner in open court.
And even though it was not offered in evidence, it still can be considered by
the court as long as they have been properly identified by testimony duly
recorded and they have themselves been incorporated in the records of the
case.
Although the CA may have ruled that the damage to the cargo
occurred while the same was in petitioners custody, this Court cannot apply
the ruling in International to the case at bar. In contrast, unlike in
International where there was no issue as regards the provisions of the
marine insurance policy, such that the presentation of the contract itself is
necessary for perusal, herein petitioner had repeatedly objected to the non-

shares of Odessa, Karl Brian, and Trisha Angelie, considering that no

21. Heirs of Maramag v. Maramag settlement of Loretos estate had been filed nor had the respective shares of
G.R. No. 181132 June 5, 2009 the heirs been determined. Insular further claimed that it was bound to
honor the insurance policies designating the children of Loreto with Eva as
FACTS beneficiaries pursuant to Sec. 53 of the Insurance Code.
The petition alleged, among others, that: (1) petitioners were the In its own answer, Grepalife alleged that Eva was not designated as
legitimate wife and children of Loreto Maramag (Loreto), while respondents an insurance policy beneficiary; that the claims filed by Odessa, Karl Brian,
were Loretos illegitimate family; (2) Eva Maramag (Eva) was a concubine of and Trisha Angelie were denied because Loreto was ineligible for insurance
Loreto and a suspect in the killing of the latter, thus, she is disqualified to due to a misrepresentation in his application form that he was born on
receive any proceeds from his insurance policies from Insular Life Assurance December 10, 1936 and, thus, not more than 65 years old when he signed it
Company, Ltd. and Great Pacific Life Assurance Corporation (Grepalife); (3) in September 2001; that the case was premature, there being no claim filed
the illegitimate children of Loreto, Odessa, Karl Brian, and Trisha Angelie by the legitimate family of Loreto; and that the law on succession does not
were entitled only to one-half of the legitime of the legitimate children, apply where the designation of insurance beneficiaries is clear.
thus, the proceeds released to Odessa and those to be released to Karl Brian As the whereabouts of Eva, Odessa, Karl Brian, and Trisha Angelie
and Trisha Angelie were inofficious and should be reduced; and (4) were not known to petitioners, summons by publication was resorted to.
petitioners could not be deprived of their legitimes, which should be Still, the illegitimate family of Loreto failed to file their answer. Hence, they
satisfied first. Petitioners also alleged that part of the insurance proceeds were declared in default.
had already been released in favor of Odessa, while the rest of the proceeds The trial court granted the motion to dismiss incorporated in the
are to be released in favor of Karl Brian and Trisha Angelie, both minors, answer of defendants Insular Life and Grepalife with respect to defendants
upon the appointment of their legal guardian. Odessa, Karl Brian and Trisha Maramag. The action shall proceed with
In answer, Insular admitted that Loreto misrepresented Eva as his respect to the other defendants Eva Verna de Guzman, Insular Life and
legitimate wife and Odessa, Karl Brian, and Trisha Angelie as his legitimate Grepalife.
children, and that they filed their claims for the insurance proceeds of the Ruling of the Trial Court.
insurance policies; that when it ascertained that Eva was not the legal wife Art. 2011 of the Civil Code provides that the contract of insurance is
of Loreto, it disqualified her as a beneficiary and divided the proceeds governed by the special laws. The principal law on insurance is the
among Odessa, Karl Brian, and Trisha Angelie, as the remaining designated Insurance Code, as amended. Only in case of deficiency in the Insurance
beneficiaries; and that it released Odessas share as she was of age, but Code that the Civil Code may be resorted to.
withheld the release of the shares of minors Karl Brian and Trisha Angelie Under Sec. 53 of the Insurance Code that the insurance proceeds
pending submission of letters of guardianship. Insular alleged that the shall be applied exclusively to the proper interest of the person in whose
petition failed to state a cause of action insofar as it sought to declare as name or for whose benefit it is made, unless otherwise specified in the
void the designation of Eva as beneficiary, because Loreto revoked her policy. Since the defendants are the ones named as the primary
designation as such in Policy No. A001544070 and it disqualified her in beneficiaries in the policies taken by the deceased Loreto C. Maramag and
Policy No. A001693029; and insofar as it sought to declare as inofficious the there is no showing that herein plaintiffs were also included as beneficiaries

therein, the insurance proceeds shall exclusively be paid to them. This is Insular and Grepalife filed their respective motions for
because the beneficiary has a vested right to the indemnity, unless the reconsideration.
insured reserves the right to change the beneficiary. The trial court, in granting the motions for reconsideration, the trial
Neither could the plaintiffs invoke the law on donations or the rules court considered the allegations of Insular that Loreto revoked the
on testamentary succession in order to defeat the right of herein designation of Eva in one policy and that Insular disqualified her as a
defendants to collect the insurance indemnity. The beneficiary in a contract beneficiary in the other policy such that the entire proceeds would be paid
of insurance is not the donee spoken in the law of donation. The rules on to the illegitimate children of Loreto with Eva pursuant to Section 53 of the
testamentary succession cannot apply here, for the insurance indemnity Insurance Code. It ruled that it is only in cases where there are no
does not partake of a donation. As such, the insurance indemnity cannot be beneficiaries designated, or when the only designated beneficiary is
considered as an advance of the inheritance which can be subject to disqualified, that the proceeds should be paid to the estate of the insured.
collation. As to the claim that the proceeds to be paid to Loretos illegitimate children
It is then clear that the plaintiffs have no sufficient cause of action should be reduced based on the rules on legitime, the trial court held that
against Odessa, Karl Brian and Trisha Angelie Maramag for the reduction the distribution of the insurance proceeds is governed primarily by the
and/or declaration of inofficiousness of donation as primary beneficiaries in Insurance Code, and the provisions of the Civil Code are irrelevant and
the insurance policies of the late Loreto C. Maramag. inapplicable. With respect to the Grepalife policy, the trial court noted that
However, plaintiffs are not totally bereft of any cause of action. One Eva was never designated as a beneficiary, but only Odessa, Karl Brian, and
of the named beneficiary in the policy taken by the late Loreto C. Maramag Trisha Angelie; thus, it upheld the dismissal of the case as to the illegitimate
is his concubine Eva De Guzman. Under the Civil Code, any person who is children. It further held that the matter of Loretos misrepresentation was
forbidden from receiving any donation under Article 739 cannot be named premature; the appropriate action may be filed only upon denial of the
beneficiary of a life insurance policy of the person who cannot make any claim of the named beneficiaries for the insurance proceeds by Grepalife.
donation to him, according to said article. If a concubine is made the Ruling of the CA.
beneficiary, it is believed that the insurance contract will still remain valid, The CA, dismissed the appeal for lack of jurisdiction, holding that
but the indemnity must go to the legal heirs and not to the concubine, for the decision of the trial court dismissing the complaint for failure to state a
what is prohibited under Art. 2012 is the naming of the improper cause of action involved a pure question of law. The appellate court also
beneficiary. In such case, the action for the declaration of nullity may be noted that petitioners did not file within the reglementary period a motion
brought by the spouse of the donor or donee, and the guilt of the donor and for reconsideration of the trial courts Resolution dismissing the complaint as
donee may be proved by preponderance of evidence in the same action. against Odessa, Karl Brian, and Trisha Angelie; thus, the said Resolution had
Since the designation of defendant Eva de Guzman as one of the primary already attained finality.
beneficiaries is void under the Civil Code, the insurance indemnity that
should be paid to her must go to the legal heirs of the deceased which this ISSUES
court may properly take cognizance as the action for the declaration for the WON petitioners have a cause of action against the insurance
nullity of a void donation falls within the general jurisdiction of this Court. companies. If so, WON the members of the legitimate family entitled to the
proceeds of the insurance for the concubine?

being illegitimate children, are entitled to a lesser share of the proceeds of

RULING the policies. They also argued that pursuant to Sec. 12 of the Insurance
The petition should be denied. Code, Evas share in the proceeds should be forfeited in their favor, the
The grant of the motion to dismiss was based on the trial courts former having brought about the death of Loreto. Thus, they prayed that
finding that the petition failed to state a cause of action. the share of Eva and portions of the shares of Loretos illegitimate children
A cause of action is the act or omission by which a party violates a should be awarded to them, being the legitimate heirs of Loreto entitled to
right of another. A complaint states a cause of action when it contains the their legitimes.
three (3) elements of a cause of action(1) the legal right of the plaintiff; (2) The Court ruled that petitioners are not entitled to a favorable
the correlative obligation of the defendant; and (3) the act or omission of judgment in light of Article 2011 of the Civil Code which expressly provides
the defendant in violation of the legal right. If any of these elements is that insurance contracts shall be governed by special laws, i.e., the
absent, the complaint becomes vulnerable to a motion to dismiss on the Insurance Code. Section 53 of the Insurance Code states
ground of failure to state a cause of action. SECTION 53. The insurance proceeds shall be applied exclusively to
When a motion to dismiss is premised on this ground, the ruling the proper interest of the person in whose name or for whose benefit it is
thereon should be based only on the facts alleged in the complaint. The made unless otherwise specified in the policy.
court must resolve the issue on the strength of such allegations, assuming Pursuant thereto, it is obvious that the only persons entitled to
them to be true. The test of sufficiency of a cause of action rests on claim the insurance proceeds are either the insured, if still alive; or the
whether, hypothetically admitting the facts alleged in the complaint to be beneficiary, if the insured is already deceased, upon the maturation of the
true, the court can render a valid judgment upon the same, in accordance policy. The exception to this rule is a situation where the insurance contract
with the prayer in the complaint. This is the general rule. was intended to benefit third persons who are not parties to the same in
However, this rule is subject to well-recognized exceptions, such the form of favorable stipulations or indemnity. In such a case, third parties
that there is no hypothetical admission of the veracity of the allegations if: may directly sue and claim from the insurer.
(1) the falsity of the allegations is subject to judicial notice; (2) such Petitioners are third parties to the insurance contracts with Insular
allegations are legally impossible; (3) the allegations refer to facts which are and Grepalife and, thus, are not entitled to the proceeds thereof.
inadmissible in evidence; (4) by the record or document in the pleading, the Respondents then have no legal obligation to turn over the insurance
allegations appear unfounded; or (5) there is evidence which has been proceeds to petitioners. The revocation of Eva as a beneficiary in one policy
presented to the court by stipulation of the parties or in the course of the and her disqualification as such in another are of no moment considering
hearings related to the case. that the designation of the illegitimate children as beneficiaries in Loretos
In this case, it is clear from the petition filed before the trial court insurance policies remains valid. Because no legal proscription exists in
that, although petitioners are the legitimate heirs of Loreto, they were not naming as beneficiaries the children of illicit relationships by the insured,
named as beneficiaries in the insurance policies issued by Insular and the shares of Eva in the insurance proceeds, whether forfeited by the court
Grepalife. The basis of petitioners claim is that Eva, being a concubine of in view of the prohibition on donations under Article 739 of the Civil Code or
Loreto and a suspect in his murder, is disqualified from being designated as by the insurers themselves for reasons based on the insurance contracts,
beneficiary of the insurance policies, and that Evas children with Loreto, must be awarded to the said illegitimate children, the designated

beneficiaries, to the exclusion of petitioners. It is only in cases where the

insured has not designated any beneficiary, or when the designated
beneficiary is disqualified by law to receive the proceeds, that the insurance
policy proceeds shall redound to the benefit of the estate of the insured.

Insurance Cases

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Insurance Cases

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Insurance

died. It declared that there was a genuine ambiguity or obscurity in the

depositor-insured. In short, there was timely notice of Rheozels death given

Fortune Care argued that the Contract does not cover

breach of an affirmative warranty under the renewal policy when it

The RTC rendered its Decision finding Reputable liable to Philippines

answer to any of the statements above (specifically, the statement: I have

The Insurance Code defines a suretyship as a contract or agreement

As regards petitioner New Worlds claim against Seaboard, the RTC

agreement was a contract of insurance subject to DST under Section 185 of

surety; doing any kind of business, including a reinsurance business,

Respondent sued petitioner and ATI for reimbursement of the

shares of Odessa, Karl Brian, and Trisha Angelie, considering that no

being illegitimate children, are entitled to a lesser share of the proceeds of

beneficiaries, to the exclusion of petitioners. It is only in cases where the

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