G.R. No.

151890 June 20, 2006

PRUDENTIAL GUARANTEE and ASSURANCE INC., petitioner,
vs.
TRANS-ASIA SHIPPING LINES, INC., Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 151991 June 20, 2006
TRANS-ASIA SHIPPING LINES, INC., petitioner,
vs.
PRUDENTIAL GUARANTEE and ASSURANCE INC., Respondent.

Issue: won trans-asia breached the warranty stated in the insurance policy, thus absolving
prudential from paying trans asia.

Constantino v. Asia Life- Non-payment of Insurance Premiums

87 PHIL 248
Facts:
> Appeal consolidates two cases.
> Asia life insurance Company (ALIC) was incorporated in Delaware.
> For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912
whereby it insured the life of ArcadioConstantino for 20 years for P3T with Paz Constantino as
beneficiary.
First premium covered the period up to Sept. 26, 1942. No further premiums were paid after
the first premium and Arcadio died on Sept. 22, 1944.
> Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945.
> On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and
Agustina Peralta for the sum of P3T for 20 years. The annual premium stipulated was
regularly paid from Aug. 1, 1938 up to and including Sept. 30, 1940.
Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and such
quarterly premiums were paid until Nov. 18, 1941.
Last payment covered the period until Jan. 31, 1942.
Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary.
> Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC.
Aside from this the insured borrowed from the policy P234.00 such that the cash surrender
value of the policy was sufficient to maintain the policy in force only up to Sept. 7, 1942.
> Both policies contained this provision: All premiums are due in advance and any
unpunctuality in making such payment shall cause this policy to lapse unless and except as kept
in force by the grace period condition.
> PazConstantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive
the proceeds of the policies less all sums due for premiums in arrears. They also allege that
non-payment of the premiums were caused by the closing of ALICs offices during the war and
the impossible circumstances by the war, therefore, they should be excused and the policies
should not be forfeited.
> Lower court ruled in favor of ALIC.
Issue:
May a beneficiary in a life insurance policy recover the amount thereof although the insured
died after repeatedly failing to pay the stipulated premiums, such failure being caused by war?

Held: NO.Due to the express terms of the policy, non-payment of the premium produces its
avoidance. In Glaraga v. Sun Life, it was held that a life policy was avoided because the
premium had not been paid within the time fixed; since by its express terms, non-payment of
any premium when due or within the 31 day grace period ipso fact caused the policy to lapse.
When the life insurance policy provides that non-payment of premiums will cause its forfeiture,
war does NOT excuse non-payment and does not avoid forfeiture. Essentially, the reason why
punctual payments are important is that the insurer calculates on the basis of the prompt
payments. Otherwise, malulugisila.
It should be noted that the parties contracted not only as to peace time conditions but also as
to war-time conditions since the policies contained provisions applicable expressly to wartime
days. The logical inference therefore is that the parties contemplated the uninterrupted
operation of the contract even if armed conflict should ensue.

TRAVELLERS INSURANCE & SURETY CORP. v.CA (MENDOZA)

272 SCRA 536
NATURE
The petition herein seeks the review and reversal of the decision of respondent Court of Appeals
affirming in toto the judgment of the Regional Trial Court
inanaction for damages filed by private respondentVicente Mendoza, Jr. as heirof his mother
who waskilled in a vehicular accident.
FACTS :
-an old lady was hit by a taxicab. The taxicab waslater identified and a case was filed against
the driver and owner. Later, an amendment was filed to includethe insurancecompany. RTC
and CA ordered that theowner, driver as well as the insurance company beheld solidarily liable.

ISSUE: WON RTC and CA erred

HELD: YES- Where the contract provides for indemnity against liability to third persons, then
third persons to whom the insured is liable can sue the insurer.
-Where thecontract is for indemnity against actual loss orpayment, then third persons
cannot proceed against the insurer, the contract being solely to reimburse the insured for
liability actually discharged by him thru payment to third persons, said third persons'
recourse being thus limited to the insured alone. Butin the case at bar, there was no contract
shown. What then was the basis of the RTC and the CA to say that the insurance contract was
a third-party liability insurance policy?
Consequently, the trial court was confused as it did not distinguish between the private
respondent's cause of action against the owner and the driver of the lady Love
taxicab and his cause of action against petitioner.The former is based on torts and quasi-
delicts while the latter is based on contract.
- Even assuming arguendothat there was such acontract, private respondent's cause of action
cannot prevail because he failed to file the written claim mandated by the Insurance Code
(before it was amended-action must be brought within six months from date of the accident
(this is whats applicable here);
after amendment-"action or suit for recovery if damage due to loss or injury must be brought
in proper cases, with the Commissioner or the Courts within one year from denial of the claim,
otherwise the claimant's right of action shall prescribe" ).
He is deemed, under this legal provision, to have waived his rights as against petitioner-
insurer. Disposition: petition granted

Gulf Resorts, Inc. v. Phil Charter Insurance, Corporation 458 SCRA 550

Facts:
Plaintiff is the owner of the Plaza Resort situated at Agoo, La Union and had its
propertiesin said resort insured originally with the American Home Assurance Company
(AHAC-AIU). Attached in the said insurance is an indorsement that the same covers loss or
damage(including loss or damage by fire) to any of the property insured by this Policy
occasioned by orthrough or in consequence of Earthquake. In the first four insurance policies
issued by AHAC,the risk of loss from earthquake shock was extended only to plaintiffs two
swimming pools. In1990, anearthquake struck Central Luzon and Northern Luzon so the
properties andtwo swimming pools in its Agoo Playa Resort were damaged. Petitioner filed its
formaldemand for settlement of the damage to all its properties claiming that, pursuant to
itsearthquake shock endorsement rider, Insurance Policy No. 31944 covers all damages to
theproperties within its resort caused by earthquake. Respondent denied petitioners claim on
the ground that its insurance policy only afforded earthquake shock coverage to the two
swimmingpools of the resort. It contended that the rider limits its liability for loss to the two
swimmingpools of petitioner.

Issue:
Whether or not the liability of the insurance company extends to the other properties of the
petitioner?

Held:
No. Petitioner cannot focus on the earthquake shock endorsement to the exclusion of theother
provisions. All the provisions and riders, taken and interpreted together, indubitablyshow the
intention of the parties to extend earthquake shock coverage to the two swimmingpools only.A
careful examination of the premium recapitulation will show that it is the clear intent ofthe
parties to extend earthquake shock coverage only to the two swimming pools. Section 2(1) of
the Insurance Code defines a contract of insurance as an agreement whereby oneundertakes
for a consideration to indemnify another against loss, damage or liability arisingfrom an
unknown or contingent event.

Thus, an insurance contract exists where the followingelements concur:

1.) The insured has an insurable interest;
2.) The insured is subject to a risk of loss by the happening of the designated peril;
3. ) The insurer assumes the risk;
4.) Such assumption of risk is part of a general scheme to distribute actual losses among a
large group ofpersons bearing a similar risk; and
5.) In consideration of the insurer's promise, the insuredpays a premium

An insurance premium is the consideration paid an insurer for undertaking to

indemnifythe insured against a specified peril. In fire, casualty, and marine insurance, the
premiumpayable becomes a debt as soon as the risk attaches.
In the subject policy, no premium payments were made with regard to earthquake
shock coverage, except on the two swimming pools. There is no mention of any premium
payable for the other resort properties with regard to earthquake shock. This is consistent with
the history of petitioners previous insurance policies from AHAC-AIU

NEW WORLD INTERNATIONAL V. NYK SHIPPING GR NO. 171468 August 24, 2011

FACTS:
Insured bought three generators. Insurer covered the goods with a Marine Insurance
Policy. When the generators were found to be damaged upon arrival and investigation (which
was probably caused by the typhoon), Insured sent a formal claim before the Insurer. Insurer
then required Insured to submit an itemized list of the damaged units with corresponding
value. Insured, however, refused to submit such contending that the insurance policy did not
include the submission of such a list in connection with an insurance claim.

ISSUE:
Whether Insurers request for an itemized list is a reasonable imposition and did not violate the
insurance contract.

HELD:
No. Seaboard cannot pretend that the above documents are inadequate since they were
precisely the documents listed in its insurance policy. Being a contract of adhesion, an
insurance policy is construed strongly against the insurer who prepared it. The Court cannot
read a requirement in the policy that was not there.
G.R. No. 185565, November 26, 2014 LOADSTAR SHIPPING COMPANY, INCORPORAT D
AND LOADSTAR INT RNATIONALSHIPPING COMPANY, INCORPORAT D v. MALAYAN
INSuRANCe company inc.MPANY,INCORPORAT D,Respondent

Facts:
Loadstar International Shipping, Inc. (Loadstar Shipping) and Philippine Associated Smelting
and Refining Corporation (PASAR) entered into a Contract of Affreightment for domestic bulk
transport of the latter s copper concentrates which were loaded in Cargo "old #os. $ and % of
&' obcat*, amarine +esselo!ned b Loadstar International Shipping Co., Inc. (Loadstar
International) andoperated b Loadstar Shipping under a charter part agreement. -he cargo
!as insured !ith&ala anInsuranceCompan , Inc. (&ala an). -he +essel s chief officer on
routine inspection found a crack on starboard side of the main deck !hichcausedsea!ater to
enter and !et the cargo. pon inspection, the /lite Ad0usters and Sur+e or, Inc.(/lite
Sur+e or) confirmed that samples of copper concentrates from Cargo "old #o. %
!erecontaminated b sea!ater.PASAR sent a formal notice of claim in the amount of
1P234,544,36$.3$ to Loadstar Shipping. 7n thebasis of the /lite Sur+e or s recommendation,
&ala an paid PASAR the amount of 1P23%,38$,$9%.3%.PASAR signed a subrogation receipt
in fa+or of &ala an. -o reco+er the amount paid and in thee:ercise of its right of subrogation,
&ala an demanded reimbursement from Loadstar Shipping, !hichrefused to compl .
Conse;uentl , on September $<, %99$, &ala an instituted !ith the R-C acomplaint for
damages. In its complaint, &ala anmainl alleged that as a direct and naturalconse;uence of
the unsea!orthiness of the +essel, PASAR suffered loss of the cargo. LoadstarShipping and
Loadstar International denied respondent s allegations and a+erred that
respondent spa ment to PASAR, on the basis of the latter s fraudulent claim, does not entitle
respondent automaticright of reco+er b +irtue of subrogation.
respondent is entitled to the right of recovery by virtue of subrogation against
petitioners, on the basis of PSARYs claim.
R#%&'($
&ala an s claim against the petitioners is based on subrogation to the rights possessed b
PASAR asconsignee of the allegedl damaged goods. -he right of subrogation stems from Article
%%94 of the#e!Ci+il Code. -he rights of a subrogee cannot be superior to the rights possessed
b a subrogor. Inother !ords, a subrogee cannot succeed to a right not possessed b the
subrogor. A subrogeeineffect steps into the shoes of the insured and can reco+eronl if the
insured like!ise could ha+ereco+ered. Conse;uentl , an insurer indemnifies the insured based
on the loss or in0ur the latteractuall suffered from. If there is no loss or in0ur , then there
is no obligation on the part of theinsurer to indemnif the insured. Should the insurer pa the
insured and it turns out thatindemnification is not due, or if due, the amount paid is e:cessi+e,
the insurer takes the risk of notbeing able to seek recompense from the alleged !rongdoer. -his
is because the supposed subrogor did not possess the right to be indemnified and therefore, no
right to collect is passed on to the subrogee.As regards the determination of actual damages,
1i2t is a:iomatic that actual damages must bepro+ed !ith reasonable degree of certaint and a
part is entitled onl to such compensation for thepecuniar loss that !as dul pro+en. As
&ala an is claiming for actual damages, it bears the burden of proof to substantiate its claim.
Actual damages are not presumed. -he claimant must pro+e the actualamount of loss !ith a
reasonable degree of certaint premised upon competent proof and on the
beste+idenceobtainable. Specific facts that could afford a basis for measuring !hate+er
compensator oractual damages are borne must be pointed out. Actual damages cannot be
anchored on meresurmises, speculations or con0ectures. It is not disputed that the copper
concentrates carried b &>' obcat from Poro Point, La niontoIsabel, Le te !ere indeed
contaminated !ithsea!ater. -he issue lies on !hether such contaminationresulted to damage,
and the costs thereof, if an , incurred b the insured PASAR. In this case,&ala an, as the
insurer of PASAR, neither stated nor pro+ed that the goods are rendered useless orunfit for the
purpose intended b PASAR due to contamination !ithsea!ater. "ence, there is no basisfor the
goods re0ection under Article 368 of the Code of Commerce. Clearl , it is erroneous
for&ala an to reimburse PASAR as though the latter suffered from total loss of goods in the
absence of proof that PASAR sustained such kind of loss.

5. Doing an insurance business

a. White Gold v Pioneer G.R. No. 154514. July 28, 2005

J. Quisimbing

Facts:
White Gold procured a protection and indemnity coverage for its vessels from The
Steamship Mutual through Pioneer Insurance and Surety Corporation. White Gold was issued
a Certificate of Entry and Acceptance. Pioneer also issued receipts. When White Gold failed to
fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of
money to recover the unpaid balance. White Gold on the other hand, filed a complaint before
the Insurance Commission claiming that Steamship Mutual and Pioneer violated provisions of
the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no need for
Steamship Mutual to secure a license because it was not engaged in the insurance business
and that it was a P & I club. Pioneer was not required to obtain another license as insurance
agent because Steamship Mutual was not engaged in the insurance business.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its
decision, the appellate court distinguished between P & I Clubs vis--vis conventional
insurance. The appellate court also held that Pioneer merely acted as a collection agent of
Steamship Mutual. Hence this petition by White Gold.

Issues:
1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?

Held: Yes. Petition granted.

Ratio:
White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance
business. To buttress its assertion, it cites the definition as an association composed of ship
owners in general who band together for the specific purpose of providing insurance cover on a
mutual basis against liabilities incidental to ship owning that the members incur in favor of
third parties.
They argued that Steamship Mutuals primary purpose is to solicit and provide
protection and indemnity coverage and for this purpose, it has engaged the services of Pioneer
to act as its agent.
Respondents contended that although Steamship Mutual is a P & I Club, it is not
engaged in the insurance business in the Philippines. It is merely an association of vessel
owners who have come together to provide mutual protection against liabilities incidental to
ship owning.

Is Steamship Mutual engaged in the insurance business?

A P & I Club is a form of insurance against third party liability, where the third
party is anyone other than the P & I Club and the members. By definition then, Steamship
Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance
business.
The records reveal Steamship Mutual is doing business in the country albeit without
the requisite certificate of authority mandated by Section 187 of the Insurance Code. It
maintains a resident agent in the Philippines to solicit insurance and to collect payments in its
behalf. Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-
payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its
agent Pioneer, must secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is
necessary. Thus, no insurer or insurance company is allowed to engage in the insurance
business without a license or a certificate of authority from the Insurance Commission.

2. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of

registration issued by the Insurance Commission. It has been licensed to do or transact
insurance business by virtue of the certificate of authority issued by the same agency.
However, a Certification from the Commission states that Pioneer does not have a separate
license to be an agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a separate
license to act as insurance agent for Steamship Mutual. Section 299 of the Insurance Code
clearly states:
SEC. 299 No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for services in obtaining
insurance, any commission or other compensation from any insurance company doing
business in the Philippines or any agent thereof, without first procuring a license so to act from
the Commissioner

Republic v Del Monte G.R. No. 156956 October 9, 2006

C.J. Panganiban

Facts:
Vilfran Liner lost in a case against Del Monte Motors. They were made to pay 11 million
pesos for service contracts with Del Monte, and such was sourced from the counter bond
posted by Vilfran. CISCO issued the counter bond. CISCO opposed but was rebuffed. The RTC
released a motion for execution commanding the sheriff to levy the amount on the property of
CISCO. To completely satisfy the amount, the Insurance Commissioner was also commanded
to withdraw the security deposit filed by CISCO with the Commission according to Sec 203 of
the Insurance Code.
Insurance Commissioner Maliniswas ordered by the RTC to withdraw the security bond of
CISCO for the payment of the insurance indemnity won by Del Monte Motor against Vilfran
Liner, the insured.
Malinisdidnt obey the order, so the respondent moved to cite him in contempt of Court. The
RTC ruled against Malinis because he didnt have legal basis.

Issues:
1. Whether or not the security deposit held by the Insurance Commissioner pursuant to
Section 203 of the Insurance Code may be levied or garnished in favor of only one insured.
2. Whether or not the Insurance Commissioner has power to withhold the release of the
security deposit.

Held: No. Yes. Petition granted.

Ratio:
1. Sec 203- No judgment creditor or other claimant shall have the right to levy upon any of the
securities of the insurer held on deposit pursuant to the requirement of the Commissioner.
The court also claimed that the security deposit shall be:
(1) answerable for all the obligations of the depositing insurer under its insurance contracts;
(2) at all times free from any liens or encumbrance; and
(3) exempt from levy by any claimant.
To allow the garnishment of that deposit would impair the fund by decreasing it to less than
the percentage of paid-up capital that the law requires to be maintained. Further, this move
would create, in favor of respondent, a preference of credit over the other policy holders and
beneficiaries.
Also, the securities are held as a contingency fund to answer for the claims against the
insurance company by all its policy holders and their beneficiaries. This step is taken in the
event that the company becomes insolvent or otherwise unable to satisfy the claims against it.
Thus, a single claimant may not lay stake on the securities to the exclusion of all others. The
other parties may have their own claims against the insurance company under other insurance
contracts it has entered into.

2. The Insurance Code has vested the Office of the Insurance Commission with both
regulatory and adjudicatory authority over insurance matters.
Under Sec 414 of the Insurance Code, "The Commissioner may issue such rulings,
instructions, circulars, orders and decisions as he may deem necessary to secure the
enforcement of the provisions of this Code.
The commissioner is authorized to (1) issue (or to refuse to issue) certificates of authority to
persons or entities desiring to engage in insurance business in the Philippines;
(2) revoke or suspend these certificates of authority upon finding grounds for the revocation or
suspension;
(3) impose upon insurance companies, their directors and/or officers and/or agents
appropriate penalties -- fines, suspension or removal from office -- for failing to comply with the
Code or with any of the commissioner's orders, instructions, regulations or rulings, or for
otherwise conducting business in an unsafe or unsound manner.
Included here is the duty to hold security deposits under Secs 191 and 202 of the Code
for the benefit of policy holders.
Sec 192, on the other hand, states:
the securities deposited as aforesaid shall be returned upon the company's making application
therefor and proving to the satisfaction of the Commissioner that it has no further liability
under any of its policies in the Philippines.
He has been given great discretion to regulate the business to protect the public.
Also An implied trust is created by the law for the benefit of all claimants under
subsisting insurance contracts issued by the insurance company. He believed that the
security deposit was exempt from execution to protect the policy holders.

7. Insurance v Health care organizations (HMOs)

a. PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF INTERNAL

REVENUE July 2, 2014 GR. NO.1677330 September 18, 2009, SPECIAL FIRST
DIVISION (CORONA, J.)

FACTS:
Petitioner is a domestic corporation whose primary purpose is to establish, maintain,
conduct and operate a prepaid group practice health 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 for the administrative, legal, and financial responsibilities of the
organization. On January 27, 2000, respondent CIR sent petitioner a formal demand letter and
the corresponding assessment notices demanding the 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 deficiency assessment was imposed on petitioners health care agreement with the
members of its health care program pursuant to Section 185 of the 1997 Tax Code. Petitioner
protested the assessment in a letter dated February 23, 2000. As respondent did not act on the
protest, petitioner filed a petition for review in the Court of Tax Appeals (CTA) seeking the
cancellation of the deficiency VAT and DST assessments.
On April 5, 2002, the CTA rendered a decision, ordering the petitioner to PAY the
deficiency VAT amounting to P22,054,831.75 inclusive of 25% surcharge plus 20% interest
from January 20, 1997 until fully paid for the 1996 VAT deficiency and P31,094,163.87
inclusive of 25% surcharge plus 20% interest from January 20, 1998 until fully paid for the
1997 VAT deficiency.Accordingly, VAT Ruling No. [231]-88 is declared void and without force
and effect.
The 1996 and 1997 deficiency DST assessment against petitioner is hereby
CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST from collecting the said
DST deficiency tax.
Respondent appealed the CTA decision to the (CA) insofar as it cancelled the DST
assessment. He claimed that petitioners health care agreement was a contract of insurance
subject to DST under Section 185 of the 1997 Tax Code.
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 contract subject to DST.
Respondent is ordered to pay the deficiency Documentary Stamp Tax. Petitioner moved
for reconsideration but the CA denied it.

ISSUES:
(1) Whether or not Philippine Health Care Providers, Inc. engaged in insurance business.
(2) Whether or not the agreements between petitioner and its members possess all elements
necessary in the insurance contract.
HELD:
NO. Health Maintenance Organizations are not engaged in the insurance business.
The SC said in June 12, 2008 decision that it is irrelevant that petitioner is an HMO
and not an insurer because its agreements are treated as insurance contracts and the DST is
not a tax on the business but an excise on the privilege, opportunity or facility used in the
transaction of the business.
Petitioner, however, submits that it is of critical importance to characterize the
business it is engaged in, that is, to determine whether it is an HMO or an insurance company,
as this distinction is indispensable in turn to the issue of whether or not it is liable for DST on
its health care agreements. Petitioner is admittedly an HMO.
Under RA 7878 an HMO is an entity that provides, offers or arranges for coverage of
designated health services needed by plan members for a fixed prepaid premium. The
payments do not vary with the extent, frequency or type of services provided.
Section 2 (2) of PD 1460 enumerates what constitutes doing an insurance business
or transacting an insurance business which are making or proposing to make, as insurer,
any insurance contract; making or 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.

b. G.R. No. 195872 March 12, 2014

FORTUNE MEDICARE, INC., Petitioner, vs. DAVID ROBERT U. AMORIN,
Respondent

FACTS: David Robert U. Amorin (Amorin) was a cardholder/member of Fortune

Medicare, Inc. (Fortune Care), a corporation engaged in providing health maintenance services
to its members. The terms of Amorin's medical coverage were provided in a Corporate Health
Program Contract4 (Health Care Contract) which was executed on January 6, 2000 by Fortune
Care and the House of Representatives, where Amorin was a permanent employee.
While on vacation in Honolulu, Hawaii, United States of America (U.S.A.) in May
1999, Amorin underwent an emergency surgery, specifically appendectomy, at the St. Francis
Medical Center, causing him to incur professional and hospitalization expenses of US$7,242.35
and US$1,777.79, respectively. He attempted to recover from Fortune Care the full amount
thereof upon his return to Manila, but the company merely approved a reimbursement of
P12,151.36, an amount that was based on the average cost of appendectomy, net of medicare
deduction, if the procedure were performed in an accredited hospital in Metro Manila. Amorin
received under protest the approved amount, but asked for its adjustment to cover the total
amount of professional fees which he had paid, and eighty percent (80%) of the approved
standard charges based on "American standard", considering that the emergency procedure
occurred in the U.S.A. To support his claim, Amorin cited Section 3, Article V on Benefits and
Coverages of the Health Care Contract.
RTC of Makati, Branch 66 rendered its Decision dismissing Amorins complaint. Citing
Section 3, Article V of the Health Care Contract, the RTC explained:
Taking the contract as a whole, the Court is convinced that the parties intended to use the
Philippine standard as Basis. the CA rendered its Decision granting the appeal.

ISSUE: WON THE the phrase "approved standard charges" is subject to interpretation, and
that it did not automatically mean "Philippine Standard".

HELD: The Court finds no cogent reason to disturb the CAs finding that 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 have incurred had his emergency treatment been performed in an
accredited hospital in the Philippines.
We emphasize that for purposes of determining the liability of 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 contract of indemnity. Once the member incurs hospital,
medical or any other expense arising from sickness, injury or other stipulated contingent, the
health care provider must pay for the same to the extent agreed upon under the contract.
When the terms of 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. Being
a contract of adhesion, the terms of an insurance contract are to be construed strictly against
the party which prepared the contract the insurer. By reason of the exclusive control of the
insurance company over the terms and phraseology of the insurance contract, ambiguity must
be strictly interpreted against the insurer and liberally in favor of the insured, especially to
avoid forfeiture. This is equally applicable to Health Care Agreements. The phraseology used in
medical or hospital service contracts, such as the one at bar, must be liberally construed in
favor of the subscriber, and if doubtful or reasonably susceptible of two interpretations the
construction conferring coverage is to be adopted, and exclusionary clauses of doubtful import
should be strictly construed against the provider.
which were specifically cited as compensable even when incurred in a foreign country.
Contrary to Fortune Cares argument, from nowhere in the Health Care Contract could it be
reasonably deduced that these "standard charges" referred to the "Philippine standard", or that
cost which would have been incurred if the medical services were performed in an accredited
hospital situated in the Philippines. The RTC ruling that the use of the "Philippine standard"
could be inferred from the provisions of Section 3(A), which covered emergency care in an
accredited hospital, was misplaced. Evidently, the parties to the Health Care Contract made a
clear distinction between emergency care in an accredited hospital, and that obtained from a
non-accredited hospital.1wphi1 The limitation on payment based on "Philippine standard" for
services of accredited physicians was expressly made applicable only in the case of an
emergency care in an accredited hospital.
 All told, in the absence of any qualifying word that clearly limited Fortune Care's
liability to costs that are applicable in the Philippines, the amount payable by Fortune Care
should not be limited to the cost of treatment in the Philippines, as to do so would result in the
clear disadvantage of its member.
Settled is the rule that ambiguities in a contract are interpreted against the party that
caused the ambiguity. "Any ambiguity in a contract whose terms are susceptible of different
interpretations must be read against the party who drafted.

The contract of Insurance

1. What may be insured(sec 3-5)

a. Philamcare v. CA G.R. No. 125678. March 18, 2002 J. Ynares-Santiago

Facts:
ErnaniTrinos applied for a health care coverage with Philam. He answered no to a
question asking if he or his family members were treated to heart trouble, asthma, diabetes,
etc.
The application was approved for 1 year. He was also given hospitalization benefits and
out-patient benefits. After the period expired, he was given an expanded coverage for Php
75,000. During the period, he suffered from heart attack and was confined at MMC. The wife
tried to claim the benefits but the petitioner denied it saying that he concealed his medical
history by answering no to the aforementioned question. She had to pay for the hospital bills
amounting to 76,000. Her husband subsequently passed away. She filed a case in the trial
court for the collection of the amount plus damages. She was awarded 76,000 for the bills and
40,000 for damages. The CA affirmed but deleted awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the incontestability
clause under the Insurance Code does not apply.

Held: No. Petition dismissed.

Ratio:
Petitioner claimed that it granted benefits only when the insured is alive during the
one-year duration. It contended that there was no indemnification unlike in insurance
contracts. It supported this claim by saying that it is a health maintenance organization
covered by the DOH and not the Insurance Commission. Lastly, it claimed that the
Incontestability clause didnt apply because two-year and not one-year effectivity periods were
required.
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement
whereby one undertakes for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event.
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.

In this case, the husbands health was the insurable interest. The health care
agreement was in the nature of non-life insurance, which is primarily a contract of indemnity.
The provider must pay for the medical expenses resulting from sickness or injury.
While petitioner contended that the husband concealed material fact of his sickness, the
contract stated that:

that any physician is, by these presents, expressly authorized to disclose or give testimony at
anytime relative to any information acquired by him in his professional capacity upon any
question affecting the eligibility for health care coverage of the Proposed Members.
This meant that the petitioners required him to sign authorization to furnish reports about his
medical condition. The contract also authorized Philam to inquire directly to his medical
history.

Hence, the contention of concealment isnt valid.

They cannot invoke the Invalidation of agreement clause where failure of the insured
to disclose information was a ground for revocation simply because the answer assailed by the
company was the heart condition question based on the insureds opinion. He wasnt a medical
doctor, so he cant accurately gauge his condition.
Henrick v Fire- in such case the insurer is not justified in relying upon such
statement, but is obligated to make further inquiry.
Fraudulent intent must be proven to rescind the contract. This was incumbent upon
the provider.
Having assumed a responsibility under the agreement, petitioner is bound to answer
the same to the extent agreed upon. In the end, the liability of the health care provider
attaches once the member is hospitalized for the disease or injury covered by the agreement or
whenever he avails of the covered benefits which he has prepaid.
Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a
contract of insurance.

As to cancellation procedure- Cancellation requires certain conditions:

1. Prior notice of cancellation to insured;

2. Notice must be based on the occurrence after effective date of the policy of one or more
of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and
upon request of insured, to furnish facts on which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that under the title Claim procedures of expenses,
the defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of
the Agreement within which to contest the membership of the patient if he had previous
ailment of asthma, and six months from the issuance of the agreement if the patient was sick
of diabetes or hypertension. The periods having expired, the defense of concealment or
misrepresentation no longer lie.

2. PARTIES TO THE CONTRACT (SEC 6-9)

A. ETERNAL VS. PHILAMLIFE

G.R. No. 166245
April 09, 2008

FACTS: Respondent Philamlife entered into an agreement denominated as Creditor

Group Life Policy with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under
the policy, the clients of Eternal who purchased burial lots from it on installment basis would
be insured by Philamlife. The amount of insurance coverage depended upon the existing
balance of the purchased burial lots.

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he
contracts a loan with the Assured. However, there shall be no insurance if the
application of the Lot Purchaser is not approved by the Company.
 Eternal was required under the policy to submit to Philamlife a list of all new lot
purchasers, together with a copy of the application of each purchaser, and the amounts of the
respective unpaid balances of all insured lot purchasers. Eternal complied by submitting a
letter dated December 29, 1982, containing a list of insurable balances of its lot buyers for
October 1982. One of those included in the list as new business was a certain John Chuang.
His balance of payments was 100K. On August 2, 1984, Chuang died.
Eternal sent a letter dated to Philamlife, which served as an insurance claim for
Chuangs death. Attached to the claim were certain documents. In reply, Philamlife wrote
Eternal a letter requiring Eternal to submit the additional documents relative to its insurance
claim for Chuangs death. Eternal transmitted the required documents through a letter which
was received by Philamlife.
After more than a year, Philamlife had not furnished Eternal with any reply to the
latters insurance claim. This prompted Eternal to demand from Philamlife the payment of the
claim for PhP 100,000.
In response to Eternals demand, Philamlife denied Eternals insurance claim in a letter
a portion of which reads:

The deceased was 59 years old when he entered into Contract #9558 and 9529 with
Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of
P100,000.00 each. No application for Group Insurance was submitted in our office prior to
his death on August 2, 1984

Eternal filed a case with the RTC for a sum of money against Philamlife, which decided
in favor of Eternal, ordering Philamlife to pay the former 100K representing the proceeds of the
policy.

CA reversed. Hence this petition.

ISSUE: WON Philamlife should pay the 100K insurance proceeds

HELD: petition granted.

YES. An examination of the provision of the POLICY under effective date of benefit, would
show ambiguity between its two sentences. The first sentence appears to state that the
insurance coverage of the clients of Eternal already became effective upon contracting a loan
with Eternal while the second sentence appears to require Philamlife to approve the insurance
contract before the same can become effective.
It must be remembered that an 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.

On the other hand, the seemingly conflicting provisions must be harmonized to mean
that upon a partys purchase of a memorial lot on installment from Eternal, an insurance
contract covering the lot purchaser is created and the same is effective, valid, and binding until
terminated by Philamlife by disapproving the insurance application. The second sentence of the
Creditor Group Life Policy on the Effective Date of Benefit is in the nature of a resolutory
condition which would lead to the cessation of the insurance contract. Moreover, the mere
inaction of the insurer on the insurance application must not work to prejudice the insured; it
cannot be interpreted as a termination of the insurance contract. The termination of the
insurance contract by the insurer must be explicit and unambiguous.
 b. FILIPINAS COMPANIA DE SEGUROS vs. CHRISTERN HUENEFELD and CO.,
INC. 89 Phil 54
FACTS:
On October 1, 1941, the respondent corporation, Christern Huenefeld and Co., Inc.,
after payment of corresponding premium, obtained from the petitioner, Filipinas Cia de
Seguros fire policy covering merchandise contained in a building located at Binondo, Manila.
On February 27, 1942 or during the Japanese military occupation, the building and
insured merchandise were burned. In due time, the respondent submitted to the petitioner its
claim under the policy. The petitioner refused to pay the claim on the ground that the policy in
favor of the respondent that ceased to be a force on the date the United States declared war
against Germany, the respondent corporation (though organized under and by virtue of the
laws of Philippines) being controlled by German subjects and the petitioner being a company
under American jurisdiction when said policy was issued on October 1, 1941. The theory of the
petitioner is that the insured merchandise was burned after the policy issued in 1941 had
ceased to be effective because the outbreak of the war between United States and Germany on
December 10, 1941, and that the payment made by the petitioner to the respondent
corporation during the Japanese military occupation was under pressure.

ISSUE: Whether or not the respondent corporation is a corporation of public enemy.

RULING:
Since the majority of stockholders of the respondent corporation were German subjects,
the respondent became an enemy of the state upon the outbreak of the war between US and
Germany. The English and American cases relied upon by the Court of Appeals lost in force
upon the latest decision of the Supreme Court of US in which the control test has adopted.
Since World War I, the determination of enemy nationality of corporations has been
discussed in many countries, belligerent and neutral. A corporation was subject to enemy
legislation when it was controlled by enemies, namely managed under the influence of
individuals or corporations themselves considered as enemies
The Philippine Insurance Law (Act No 2427, as amended), in Section 8, provides that
anyone except a public enemy may be insured. It stands to reason that an insurance policy
ceases to be allowable as soon as an insured becomes a public enemy.
The respondent having an enemy corporation on December 10, 1941, the insurance
policy issued in its favor on October 1, 1941, by the petitioner had ceased to be valid and
enforceable, and since the insured good were burned during the war, the respondent was not
entitled to any indemnity under said policy from the petitioner. However, elementary rule of
justice (in the absence of specific provisions in the Insurance Law) require that the premium
paid by the respondent for the period covered by its policy from December 11, 1941, should be
returned by the petitioner.

c. Constantino v. Asia Life- Non-payment of Insurance Premiums

87 PHIL 248
Facts:
> Appeal consolidates two cases.
> Asia life insurance Company (ALIC) was incorporated in Delaware.
> For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912
whereby it insured the life of Arcadio Constantino for 20 years for P3T with Paz Constantino as
beneficiary.
First premium covered the period up to Sept. 26, 1942. No further premiums were paid after
the first premium and Arcadio died on Sept. 22, 1944.
> Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945.
> On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and
Agustina Peralta for the sum of P3T for 20 years. The annual premium stipulated was
regularly paid from Aug. 1, 1938 up to and including Sept. 30, 1940.
Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and such
quarterly premiums were paid until Nov. 18, 1941.
Last payment covered the period until Jan. 31, 1942.
Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary.
> Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC.
Aside from this the insured borrowed from the policy P234.00 such that the cash surrender
value of the policy was sufficient to maintain the policy in force only up to Sept. 7, 1942.
> Both policies contained this provision: All premiums are due in advance and any
unpunctuality in making such payment shall cause this policy to lapse unless and except as
kept in force by the grace period condition.
> Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive
the proceeds of the policies less all sums due for premiums in arrears. They also allege that
non-payment of the premiums were caused by the closing of ALICs offices during the war and
the impossible circumstances by the war, therefore, they should be excused and the policies
should not be forfeited.
> Lower court ruled in favor of ALIC.

Issue:

May a beneficiary in a life insurance policy recover the amount thereof although the
insured died after repeatedly failing to pay the stipulated premiums, such failure being
caused by war?

Held:
NO. Due to the express terms of the policy, non-payment of the premium produces its
avoidance. In Glaraga v. Sun Life, it was held that a life policy was avoided because the
premium had not been paid within the time fixed; since by its express terms, non-payment of
any premium when due or within the 31 day grace period ipso fact caused the policy to lapse.

When the life insurance policy provides that non-payment of premiums will cause its forfeiture,
war does NOT excuse non-payment and does not avoid forfeiture. Essentially, the reason why
punctual payments are important is that the insurer calculates on the basis of the prompt
payments. Otherwise, malulugi sila.

It should be noted that the parties contracted not only as to peace time conditions but also as
to war-time conditions since the policies contained provisions applicable expressly to wartime
days. The logical inference therefore is that the parties contemplated the uninterrupted
operation of the contract even if armed conflict should ensue.

d. Great Pacific v CA G.R. No. 113899. October 13, 1999

J. Quisimbing

Facts:
A contract of group life insurance was executed between petitioner Great Pacific and
Development Bank Grepalife agreed to insure the lives of eligible housing loan mortgagors of
DBP.
Wilfredo Leuterio, a physician and a housing debtor of DBP, applied for membership in
the group life insurance plan. In an application form, Dr. Leuterio answered questions
concerning his health condition as follows:
7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure,
cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment?
8. Are you now, to the best of your knowledge, in good health?
Grepalife issued a coverage to the value of P86,200.00 pesos.
Dr. Leuterio died due to massive cerebral hemorrhage. DBP submitted a death claim to
Grepalife.
 Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when
he applied for an insurance coverage. Grepalife insisted that Dr. Leuterio did not disclose he
had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure
constituted concealment that justified the denial of the claim.
The widow, respondent Medarda V. Leuterio, filed against Grepalife.
The trial court rendered a decision in favor of respondent widow and against Grepalife.
The Court of Appeals sustained the trial courts decision.

Issues:
1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a
group life insurance contract from a complaint filed by the widow of the decedent/mortgagor?
2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had
hypertension, which would vitiate the insurance contract?
3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six
thousand, two hundred (P86,200.00) pesos without proof of the actual outstanding mortgage
payable by the mortgagor to DBP.

Held: No to all three. Petition dismissed.

Ratio:
1. Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the
real party in interest, hence the trial court acquired no jurisdiction over the case. It argues
that when the Court of Appeals affirmed the trial courts judgment, Grepalife was held liable to
pay the proceeds of insurance contract in favor of DBP, the indispensable party who was not
joined in the suit.
The insured private respondent did not cede to the mortgagee all his rights or interests
in the insurance, the policy stating that: In the event of the debtors death before his
indebtedness with the Creditor [DBP] shall have been fully paid, an amount to pay the
outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if
there is any, shall then be paid to the beneficiary/ies designated by the debtor. When DBPs
claim was denied, it collected the debt from the mortgagor and took the necessary action of
foreclosure on the residential lot of private respondent.
Gonzales vs. Yek Tong Lin- Insured, being the person with whom the contract was
made, is primarily the proper person to bring suit thereon. Insured may thus sue, although
the policy is taken wholly or in part for the benefit of another person named or unnamed, and
although it is expressly made payable to another as his interest may appear or otherwise.
Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is
made payable to him, yet the mortgagor may sue thereon in his own name, especially where
the mortgagees interest is less than the full amount recoverable under the policy. Insured may
be regarded as the real party in interest, although he has assigned the policy for the purpose of
collection, or has assigned as collateral security any judgment he may obtain.
And since a policy of insurance upon life or health may pass by transfer, will or succession to
any person, whether he has an insurable interest or not, and such person may recover it
whatever the insured might have recovered,[14] the widow of the decedent Dr. Leuterio may file
the suit against the insurer, Grepalife.
2. The medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on
the body of the decedent. The medical certificate stated that hypertension was the possible
cause of death. Hence, the statement of the physician was properly considered by the trial
court as hearsay.
Contrary to appellants allegations, there was no sufficient proof that the insured had suffered
from hypertension. Aside from the statement of the insureds widow who was not even sure if
the medicines taken by Dr. Leuterio were for hypertension, the appellant had not proven nor
produced any witness who could attest to Dr. Leuterios medical history.
Appellant insurance company had failed to establish that there was concealment made by the
insured, hence, it cannot refuse payment of the claim.
The fraudulent intent on the part of the insured must be established to entitle the insurer to
rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an
affirmative defense and the duty to establish such defense by satisfactory and convincing
evidence rests upon the insurer.
3. A life insurance policy is a valued policy. Unless the interest of a person insured is
susceptible of exact pecuniary measurement, the measure of indemnity under a policy of
insurance upon life or health is the sum fixed in the policy. The mortgagor paid the premium
according to the coverage of his insurance.
In the event of the debtors death before his indebtedness with the creditor shall have been
fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor.
DBP foreclosed one of the deceased persons lots to satisfy the mortgage. Hence, the insurance
proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries.

3. INSURABLE INTEREST ( SEC 10-25)

A. HEIRS OF LORETO C. MARAMAG, represented by surviving spouse VICENTA

PANGILINAN MARAMAG,Petitioners, vs.
EVA VERNA DE GUZMAN MARAMAG, ODESSA DE GUZMAN MARAMAG, KARL
BRIAN DE GUZMAN MARAMAG, TRISHA ANGELIE MARAMAG, THE INSULAR LIFE
ASSURANCE COMPANY, LTD., and GREAT PACIFIC LIFE ASSURANCE
CORPORATION

G.R. No. 181132 June 5, 2009

Lessons Applicable: To whom insurance proceeds payable (Insurance)

FACTS:
Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag
Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag) and
his concubine Eva de Guzman Maramag, also suspected in the killing of Loreto and his
illegitimate children are claiming for his insurance.
Vicenta alleges that Eva is disqualified from claiming

RTC: Granted - civil code does NOT apply

CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period

ISSUE: W/N Eva can claim even though prohibited under the civil code against donation

HELD: YES. Petition is DENIED.

Any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a life insurance policy of the person who cannot make any donation to
him.
If a concubine is made the beneficiary, it is believed that the insurance contract will still
remain valid, but the indemnity must go to the legal heirs and not to the concubine, for
evidently, what is prohibited under Art. 2012 is the naming of the improper beneficiary.
SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of the
person in whose name or for whose benefit it is made unless otherwise specified in the policy.

GR: only persons entitled to claim the insurance proceeds are either the insured, if still alive;
or the beneficiary, if the insured is already deceased, upon the maturation of the policy.

EX: situation where the insurance contract was intended to benefit third persons who are not
parties to the same in the form of favorable stipulations or indemnity. In such a case, third
parties may directly sue and claim from the insurer.
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

B. VIOLETA LALICAN V. THE INSULAR LIFE ASSURANCE CO.

C. Gaisano v Insurance G.R. No. 147839 June 8, 2006

J. Martinez

Facts:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire
insurance policies with book debt endorsements. The insurance policies provide for coverage on
"book debts in connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book of
Account of the Insured 45 days after the time of the loss covered under this Policy." The
policies also provide for the following conditions:

1. Warranted that the Company shall not be liable for any unpaid account in respect of
the merchandise sold and delivered by the Insured which are outstanding at the date of
loss for a period in excess of six (6) months from the date of the covering invoice or
actual delivery of the merchandise whichever shall first occur.

2. Warranted that the Insured shall submit to the Company within twelve (12) days after the
close of every calendar month all amount shown in their books of accounts as unpaid and thus
become receivable item from their customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the
Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by
fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing
materials sold and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC and
LSPI were paid for their claims and that the unpaid accounts of petitioner on the sale and
delivery of ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was
P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that the fire
was purely accidental; that the cause of the fire was not attributable to the negligence of the
petitioner.
Also, it said that IMC and LSPI retained ownership of the delivered goods and must bear
the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano
to pay Insurance the P 2 million and the P 500,000 the latter paid to IMC and Levi Strauss.
Hence this petition.

Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as one covering the
unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made
clothing materials sold and delivered to petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods by
stipulating in the sales invoices that "[i]t is further agreed that merely for purpose of securing
the payment of the purchase price the above described merchandise remains the property of
the vendor until the purchase price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with IMC and LSPI.

Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly granted.
Ratio:
1. Nowhere is it provided in the questioned insurance policies that the subject of the insurance
is the goods sold and delivered to the customers and dealers of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with
petitioner which remained unpaid 45 days after the loss through fire, and not the loss or
destruction of the goods delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the ownership therein is transferred to
the buyer the goods are at the buyer's risk whether actual delivery has been made or not,
except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations under the contract, the goods are
at the buyer's risk from the time of such delivery
Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk
of loss is borne by the buyer. Petitioner bears the risk of loss of the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of the delivered goods.
Unlike the civil law concept of res perit domino, where ownership is the basis for consideration
of who bears the risk of loss, in property insurance, one's interest is not determined by concept
of title, but whether insured has substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in property,
whether real or personal, or any relation thereto, or liability in respect thereof, of such nature
that a contemplated peril might directly damnify the insured." Parenthetically, under Section
14 of the same Code, an insurable interest in property may consist in: (a) an existing interest;
(b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an
existing interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or would
suffer loss from its destruction. Indeed, a vendor or seller retains an insurable interest in the
property sold so long as he has any interest therein, in other words, so long as he would suffer
by its destruction, as where he has a vendor's lien. In this case, the insurable interest of IMC
and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the
time of the loss coveredby the policies.
3. Petitioner's argument that it is not liable because the fire is a fortuitous event under Article
117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article
1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by
fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the
fire. Accordingly, petitioner's obligation is for the payment of money. As correctly stated by the
CA, where the obligation consists in the payment of money, the failure of the debtor to make
the payment even by reason of a fortuitous event shall not relieve him of his liability. The
rationale for this is that the rule that an obligor should be held exempt from liability when the
loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery
of a determinate thing and there is no stipulation holding him liable even in case of fortuitous
event. It does not apply when the obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the obligation." This rule is based
on the principle that the genus of a thing can never perish. An obligation to pay money is
generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.

4. With respect to IMC, the respondent has adequately established its claim. The P 3 m
claim has been proven. The subrogation receipt, by itself, is sufficient to establish not
only the relationship of respondent as insurer and IMC as the insured, but also the
amount paid to settle the insurance claim. The right of subrogation accrues simply
 upon payment by the insurance company of the insurance claim Respondent's action
against petitioner is squarely sanctioned by Article 2207 of the Civil
Code which provides:

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against
the wrongdoer or the person who has violated the contract.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action.
There was no evidence that respondent has been subrogated to any right which LSPI may have
against petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner's case
for recovery of P535,613.00.

D. iNSUular v Ebrado G.R. No. L-44059 October 28, 1977

Facts:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a
rider for Accidental Death. He designated Carponia T. Ebrado as the revocable beneficiary in
his policy. He referred to her as his wife.
Cristor was killed when he was hit by a falling branch of a tree. Insular Life was made
liable to pay the coverage in the total amount of P11,745.73, representing the face value of the
policy in the amount of P5,882.00 plus the additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated
beneficiary therein, although she admitted that she and the insured were merely living as
husband and wife without the benefit of marriage.
Pascuala Vda. deEbrado also filed her claim as the widow of the deceased insured. She
asserts that she is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given
the proceeds. The court declared Carponia as disqualified.

Issue: WON a common-law wife named as beneficiary in the life insurance policy of a
legally married man can claim the proceeds in case of death of the latter?

Held: No. Petition

Ratio: Section 50 of the Insurance Act which provides that "the insurance shall be applied
exclusively to the proper interest of the person in whose name it is made"
The word "interest" highly suggests that the provision refers only to the "insured" and
not to the beneficiary, since a contract of insurance is personal in character. Otherwise, the
prohibitory laws against illicit relationships especially on property and descent will be rendered
nugatory, as the same could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life
insurance is governed by the general rules of the civil law regulating contracts. And under
Article 2012 of the same Code, any person who is forbidden from receiving any donation under
Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot
make a donation to him. Common-law spouses are barred from receiving donations from each
other.
Article 739 provides that void donations are those made between persons who were
guilty of adultery or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and
those between illegitimate ones should be enforced in life insurance policies since the same are
based on similar consideration. So long as marriage remains the threshold of family laws,
reason and morality dictate that the impediments imposed upon married couple should
likewise be imposed upon extra-marital relationship.
 A conviction for adultery or concubinage isnt required exacted before the disabilities
mentioned in Article 739 may effectuate. The article says that in the case referred to in No. 1,
the action for declaration of nullity may be brought by the spouse of the donor or donee; and
the guilty of the donee may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a
condition precedent. The law plainly states that the guilt of the party may be proved in the
same acting for declaration of nullity of donation. And, it would be sufficient if evidence
preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate
children. He was also living in with his common-law wife with whom he has two children.

E. ONG LIM SING VS FEB LEASING (G.R. NO. 168115 JUNE 8, 2007)
Ong Lim Sing Jr. FEB Leasing & Finance Corporation
G.R. No. 168115 June 8, 2007

Facts: On March 9, 1995, FEB Leasing and Finance Corporation (FEB) entered into a lease of
equipment and motor vehicles with JVL Food Products (JVL). On the same date, Vicente Ong
Lim Sing, Jr. (Lim) executed an Individual Guaranty Agreement with FEB to guarantee the
prompt and faithful performance of the terms and conditions of the aforesaid lease agreement.
Corresponding Lease Schedules with Delivery and Acceptance Certificates over the equipment
and motor vehicles formed part of the agreement. Under the contract, JVL was obliged to pay
FEB an aggregate gross monthly rental of One Hundred Seventy Thousand Four Hundred
Ninety-Four Pesos (P 170,494.00). JVL defaulted in the payment of the monthly rentals. As of
July 31, 2000, the amount in arrears, including penalty charges and insurance premiums,
amounted to Three Million Four Hundred Fourteen Thousand Four Hundred Sixty Eight and
75/100 Pesos (P3,414,468.75). On August 23, 2000, FEB sent a letter to JVL demanding
payment of the said amount. However, JVL failed to pay.

Issue: Whether or not JVL as the lessee have an insurable interest over the leased items.

Held: Yes. The stipulation in Section 14 of the lease contract, that the equipment shall be
insured at the cost and expense of the lessee against loss, damage, or destruction from fire,
theft, accident, or other insurable risk for the full term of the lease, is a binding and valid
stipulation. Petitioner, as a lessee, has an insurable interest in the equipment and motor
vehicles leased. Section 17 of the Insurance Code provides that the measure of an insurable
interest in property is the extent to which the insured might be damnified by loss or injury
thereof. It cannot be denied that JVL will be directly damnified in case of loss, damage, or
destruction of any of the properties leased.

It has also been held that the test of insurable interest in property is whether the assured has
a right, title or interest therein that he will be benefited by its preservation and continued
existence or suffer a direct pecuniary loss from its destruction or injury by the peril insured
against.