INSURANCE LAW CASE DIGEST PART 1-INTRODUCTION

1. WHITE GOLD V PIONEER G.R. NO. 154514. JULY 28, 2005

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-à-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 shipowners in general who band together for the
specific purpose of providing insurance cover on a mutual basis against liabilities incidental to shipowning that the
members incur in favor of third parties.”
They argued that Steamship Mutual’s 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 shipowning.
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…
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2. VERENDIA V. CA
Facts:
Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. F-18876 effective between
June 23, 1980 and June 23, 1981 covering Rafael (Rex) Verendia's residential in the amount of P385,000.00.
Designated as beneficiary was the Monte de Piedad & Savings Bank. Verendia also insured the same building
with two other companies, namely, The Country Bankers Insurance for P56,000.00 and The Development
Insurance for P400,000.00.
While the three fire insurance policies were in force, the insured property was completely destroyed by fire.
Fidelity appraised the damage amounting to 385,000 when it was accordingly informed of the loss. Despite
demands, Fidelity refused payment under its policy, thus prompting Verendia to file a complaint for the recovery
of 385,000
Fidelity, averred that the policy was avoided by reason of over-insurance, that Verendia maliciously represented
that the building at the time of the fire was leased under a contract executed on June 25, 1980 to a certain
Roberto Garcia, when actually it was a Marcelo Garcia who was the lessee.
Issue:
Whether or not Verendia can claim on the insurance despite the misrepresentation as to the lessee and the
overinsurance.

Held:
NO. The contract of lease upon which Verendia relies to support his claim for insurance benefits, was entered
into between him and one Robert Garcia, a couple of days after the effectivity of the insurance policy. When the
rented residential building was razed to the ground, it appears that Robert Garcia was still within the premises.
However, according to the investigation by the police, the building appeared to have "no occupants" and that Mr.
Roberto Garcia was "renting on the otherside of said compound" These pieces of evidence belie Verendia's
uncorroborated testimony that Marcelo Garcia whom he considered as the real lessee, was occupying the
building when it was burned.
Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed the lease contract but it
was Marcelo Garcia cousin of Robert, who had also been paying the rentals all the while. Verendia, however,
failed to explain why Marcelo had to sign his cousin's name when he in fact he was paying for the rent and why
he (Verendia) himself, the lessor, allowed such a ruse. Fidelity's conclusions on these proven facts appear,
therefore, to have sufficient bases: Verendia concocted the lease contract to deflect responsibility for the fire
towards an alleged "lessee", inflated the value of the property by the alleged monthly rental of P6,500) when in
fact, the Provincial Assessor of Rizal had assessed the property's fair market value to be only P40,300.00,
insured the same property with two other insurance companies for a total coverage of around P900,000, and
created a dead-end for the adjuster by the disappearance of Robert Garcia.
Basically a contract of indemnity, an insurance contract is the law between the parties. Its terms and conditions
constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's

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right to recovery from the. As it is also a contract of adhesion, an insurance contract should be liberally construed
in favor of the insured and strictly against the insurer company which usually prepares it
Considering, however, the foregoing discussion pointing to the fact that Verendia used a false lease contract to
support his claim under Fire Insurance Policy, the terms of the policy should be strictly construed against the
insured. Verendia failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in
terms that are clear and unambiguous, that all benefits under the policy shall be forfeited "if the claim be in any
respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or
devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy". Verendia,
having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract,
he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived
such provision
There is also no reason to conclude that by submitting the subrogation receipt as evidence in court, Fidelity
bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142,685.77.
While the said receipt appears to have been a filled-up form of Fidelity, no representative of Fidelity had signed
it. It is even incomplete as the blank spaces for a witness and his address are not filled up. More significantly,
the same receipt states that Verendia had received the aforesaid amount. However, that Verendia had not
received the amount stated therein, is proven by the fact that Verendia himself filed the complaint for the full
amount of P385,000.00 stated in the policy. It might be that there had been efforts to settle Verendia's claims,
but surely, the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced.
Thus, to interpret Fidelity's presentation of the subrogation receipt in evidence as indicative of its accession to
its "terms" is not only wanting in rational basis but would be substituting the will of the Court for that of the parties
3. PHILAMCARE HEALTH SYSTEMS VS. CA & JULITA TRINOS
FACTS:
Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc. To the question ‘Have you or
any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer,
liver disease, asthma or peptic ulcer?’, Ernani answered ‘No’. Under the agreement, Ernani is entitled to avail of
hospitalization benefits and out-patient benefits. The coverage was approved for a period of one year from March 1,
1988 to March 1, 1989. The agreement was however extended yearly until June 1, 1990 which increased the amount
of coverage to a maximum sum of P75,000 per disability.

During the period of said coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center
(MMC) for one month. While in the hospital, his wife Julita tried to claim the benefits under the health care agreement.
However, the Philamcare denied her claim alleging that the agreement was void because Ernani concealed his
medical history. Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the application form. Thus, Julita paid for all the
hospitalization expenses.

After Ernani was discharged from the MMC, he was attended by a physical therapist at home. Later, he was admitted
at the Chinese General Hospital. Due to financial difficulties, however, respondent brought her husband home again.
In the morning of April 13, 1990, Ernani had fever and was feeling very weak. Respondent was constrained to bring
him back to the Chinese General Hospital where he died on the same day.

Julita filed an action for damages and reimbursement of her expenses plus moral damages attorney’s fees against
Philamcare and its president, Dr. Benito Reverente. The Regional Trial court or Manila rendered judgment in favor of
Julita. On appeal, the decision of the trial court was affirmed but deleted all awards for damages and absolved

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petitioner Reverente. Hence, this petition for review raising the primary argument that a health care agreement is not
an insurance contract; hence the “incontestability clause” under the Insurance Code does not apply.

ISSUES:

(1) Whether or not the health care agreement is not an insurance contract

(2) Whether or not there is concealment of material fact made by Ernani

HELD:

(1)YES. Section2 (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 of the Insurance Code states that any contingent or unknown event, whether past or future, which my
damnify a person having an insurable against him, may be insured against. Every person has an insurable interest in
the life and health of himself.

Section 10 provides that every person has an insurable interest in the life and health (1) of himself, of his spouse and
of his children.

The insurable interest of respondent’s husband in obtaining the health care agreement was his own health. The health
care agreement was 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.

(2) NO. The answer assailed by petitioner was in response to the question relating to the medical history of the
applicant. This largely depends on opinion rather than fact, especially coming from respondent’s husband who was
not a medical doctor. Where matters of opinion or judgment are called for answers made I good faith and without
intent to deceive will not avoid a policy even though they are untrue.

The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.
Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the
duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In any case,
with or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to answer 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 wherever he avails of the covered benefits which he has prepaid.

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.

4. FORTUNE V CA G.R. NO. 115278 MAY 23, 1995

Facts:Producers Bank’s money was stolen while it was being transported from Pasay to Makati. The people
guarding the money were charged with the theft. The bank filed a claim for the amount of Php 725,000, and such
was refused by the insurance corporation due to the stipulation:

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GENERAL EXCEPTIONS

The company shall not be liable under this policy in report of

(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner,
director, trustee or authorized representative of the Insured whether acting alone or in conjunction with others. .

In the trial court, the bank claimed that the suspects were not any of the above mentioned. They won the case.
The appellate court affirmed on the basis that the bank had no power to hire or dismiss the guard and could only
ask for replacements from the security agency.

Issue: Did the guards fall under the general exceptions clause of the insurance policy and thus absolved the
insurance company from liability?

Held: Yes to both. Petition granted.

The insurance agency contended that the guards automatically became the authorized representatives of the
bank when they cited International Timber Corp. vs. NLRC where a contractor is a "labor-only" contractor in the
sense that there is an employer-employee relationship between the owner of the project and the employees of
the "labor-only" contractor.

They cited Art. 106. Of the Labor Code which said:

Contractor or subcontractor. — There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.

The bank asserted that the guards were not its employees since it had nothing to do with their selection and
engagement, the payment of their wages, their dismissal, and the control of their conduct.

They cited a case where an employee-employer relationship was governed by (1) the selection and engagement
of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct.

The case was governed by Article 174 of the Insurance Code where it stated that casualty insurance awarded
an amount to loss cause by accident or mishap.

“The term "employee," should be read as a person who qualifies as such as generally and universally
understood, or jurisprudentially established in the light of the four standards in the determination of the employer-
employee relationship, or as statutorily declared even in a limited sense as in the case of Article 106 of the Labor
Code which considers the employees under a "labor-only" contract as employees of the party employing them
and not of the party who supplied them to the employer.”

But even if the contracts were not labor-only, the bank entrusted the suspects with the duty to safely transfer the
money to its head office, thus, they were representatives. According to the court, “a ‘representative’ is defined
as one who represents or stands in the place of another; one who represents others or another in a special
capacity, as an agent, and is interchangeable with ‘agent.’”
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5. GULF RESORTS INC. V. PHILIPPINE CHARTER INSURANCE CORP G.R. NO. 156167 MAY 16, 2005

FACTS:

Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company which includes loss
or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of
earthquake

July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties and 2 swimming pools
in its Agoo Playa Resort were damaged

August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only afforded earthquake shock
coverage to the two swimming pools of the resort

Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the earthquake
shock coverage. Thus, the policy extended earthquake shock coverage to all of the insured properties.

RTC: Favored American Home - endorsement rider means that only the two swimming pools were insured
against earthquake shock

CA: affirmed RTC

ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools

HELD: YES. Affirmed.

It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with
each other.

All its parts are reflective of the true intent of the parties.

Insurance Code Section 2(1):

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

An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a
specified peril.

In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on
the two swimming pools.

6. MANILA MAHOGANY MFG CORP V CA & ZENITH INSURANCE OCT 12, 1997

FACTS:

From March 6, 1970 – 1971, petitioner insured its Mercedes Benz 4-door sedan w/ respondent insurance
company. On May 4, 1970, vehicle was bumped and damaged by a truck owned by San Miguel Corp (SMC).

Zenith paid P5K to petitioner in amicable settlement. Petitioner’s general manager executed a Release Claim,
subrogating respondent company to all its right to action against SMC

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Dec. 11, 1972 – respondent co. wrote Insurance Adjusters Inc. To demand reimbursement from SMC. Insurance
Adjusters refused saying that SMC had already paid petitioner P4,500 for the damages to petitioner’s vehicle,
as evidenced by a cash voucher and Release of Claim executed by the GM of petitioner discharging SMC from
“all actions, claims, demands the rights of action that now exist or hereafter develop arising out of or as a
consequence of the accident

Respondent demanded the P4.5K amount from petitioner. Petitioner refused. Suit filed for recovery.

City Court ordered petitioner to pay respondent. CFI affirmed. CA affirmed with modification that petitioner was
to pay respondent the total amount of 5K it had received from respondent co.

Petitioner’s argument: Since the total damages were valued at P9,486.43 and only 5K was received by petitioner
from respondent, petitioner argues that it was entitled to go after SMC to claim the additional which was
eventually paid to it

Respondent’s argument: No qualification to its right of subrogation

ISSUE: WON petitioner should pay respondent despite the subrogation in the Release of Claim was conditioned
on recovery of the total amount of damages petitioner has sustained?

HELD: NO.

SC: no other evidence to support its allegation that a gentleman’s agreement existed between the parties, not
embodied in the Release of Claim, such Release of Claim must be taken as the best evidence of the intent and
purpose of the parties

CA is correct in holding petitioner should reimburse respondent 5K

When Manila Mahogany executed another release claim discharging SMC from all rights of action after the
insurer had paid the proceeds of the policy – the compromise agreement of 5K- the insurer is entitled to recover
from the insured the amount of insurance money paid

Petitioner by its own acts released SMC, thereby defeating respondent’s right of subrogation, the right of action
against the insurer was also nullified

Since the insurer can be subrogated to only such rights as the insured may have, should the insured, after
receiving payment from the insurer, release the wrongdoer who caused the loss, the insurer losses his rights
against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has paid
to the latter, unless the release was made w/ the consent of the insurer.

7. FEDEX VS. AHAC AND PHILAM INSURANCE COMPANY, INC G.R. NO. 150094

FACTS:

Shipper SMITHKLINE USA delivered to carrier Burlington Air Express (BURLINGTON), an agent of [Petitioner]
Federal Express Corporation, a shipment of 109 cartons of veterinary biologicals for delivery to consignee
SMITHKLINE and French Overseas Company in Makati City. The shipment was covered by Burlington Airway
Bill No. 11263825 with the words, ‘REFRIGERATE WHEN NOT IN TRANSIT’ and ‘PERISHABLE’ stamp marked
on its face. That same day, Burlington insured the cargoes with American Home Assurance Company (AHAC).

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The following day, Burlington turned over the custody of said cargoes to FEDEX which transported the same to
Manila.

The shipments arrived in Manila and was immediately stored at [Cargohaus Inc.’s] warehouse. Prior to the
arrival of the cargoes, FEDEX informed GETC Cargo International Corporation, the customs broker hired by the
consignee to facilitate the release of its cargoes from the Bureau of Customs, of the impending arrival of its
client’s cargoes.

12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed custom’s broker who was assigned by
GETC, found out, while he was about to cause the release of the said cargoes, that the same [were] stored only
in a room with 2 air conditioners running, to cool the place instead of a refrigerator. DIONEDA, upon instructions
from GETC, did not proceed with the withdrawal of the vaccines and instead, samples of the same were taken
and brought to the Bureau of Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE
for examination wherein it was discovered that the ‘ELISA reading of vaccinates sera are below the positive
reference serum.’

As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the shipment
and, declaring ‘total loss’ for the unusable shipment, filed a claim with AHAC through its representative in the
Philippines, the Philam Insurance Co., Inc. (PHILAM) which recompensed SMITHKLINE for the whole insured
amount. Thereafter, PHILAM filed an action for damages against the FEDEX imputing negligence on either or
both of them in the handling of the cargo.

Trial ensued and ultimately concluded with the FEDEX being held solidarily liable for the loss. Aggrieved,
petitioner appealed to the CA. The appellate court ruled in favor of PHILAM and held that the shipping Receipts
were a prima facie proof that the goods had indeed been delivered to the carrier in good condition.

ISSUE: Is FEDEX liable for damage to or loss of the insured goods

HELD: petition granted. Assailed decision reversed insofar as it pertains to FEDEX

Prescription of Claim

From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that
respondents’ claim and right of action are already barred. Indeed, this fact has never been denied by
respondents and is plainly evident from the records.Airway Bill No. 11263825, issued by Burlington as agent of
petitioner, states:

“6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written
notice, sufficiently describing the goods concerned, the approximate date of the damage or loss, and the details
of the claim, is presented by shipper or consignee to an office of Burlington within (14) days from the date the
goods are placed at the disposal of the person entitled to delivery, or in the case of total loss (including non-
delivery) unless presented within (120) days from the date of issue of the [Airway Bill]. xxx

Relevantly, petitioner’s airway bill states:

“12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case:

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12.1.1 of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen
(14) days from receipt of the goods; xxx

Article 26 of the Warsaw Convention, on the other hand, provides:

Xxx (2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the
discovery of the damage, and, at the latest, within 3 days from the date of receipt in the case of baggage and 7
days from the date of receipt in the case of goods. xx

(3) Every complaint must be made in writing upon the document of transportation or by separate notice in
writing dispatched within the times aforesaid.

(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud
on his part.” xxx

Condition Precedent

In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a
condition precedent to the accrual of a right of action against a carrier for loss of or damage to the goods. The
shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action
against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition
precedent; it does not constitute a limitation of action.

The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental
reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being
charged with liability therefor; and (2) to give it an opportunity to examine the nature and extent of the injury.
“This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is
fresh and easily investigated so as to safeguard itself from false and fraudulent claims.

Subrogation

Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt in favor of
respondents. The latter were thus authorized “to file claims and begin suit against any such carrier, vessel,
person, corporation or government.” Undeniably, the consignee had a legal right to receive the goods in the
same condition it was delivered for transport to petitioner. If that right was violated, the consignee would have a
cause of action against the person responsible therefor.

8. ETERNAL GARDENS MEMORIAL PARK CORP V.THE PHILIPPINE AMERICAN LIFE

FACTS:

Dec 10 1980 PhilamLIfe Insurance Company (PhilamLife) entered agreement with Eternal Gardens Memorial
Park (Eternal Gardens)denominated as Policy No. 1920. Policy contains the ff:

 Clients who purchased burial lots on installment would be insured by Philamlife

 Amount of insurance will depend upon the existing balance of purchased burial lots
 Policy is effective for a period of one year renewable on a yearly basis
 Policy says that Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of
age, is indebted to th e assured for the unpaid balance of his loan with the Assured, and is accepted

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for Life Insurance coverage by the Company on its effective date is eligible for insurance under the
Policy
 No med exam shall be required for amount of insurance up to 50K but a declaration of good health
shall be required.
 That the insurance company reserves the right to require further evidence w/ respect to insurance in
excess of 50K and any lot purchaser above 55y/o
 Benefit: amount paid of the unpaid balance of the loan or 100K whichever is lower
 Effectivity: on the date the contract of loan with eternal gardens

John Chuang one of the “new businesses” of Eternal gardens died, so the latter sent an insurance claim letter
to Philamlife. Philam asked for the cert of claim, assured cert, application for insurance accomplished by chuang
& statement of account showing unpaid balance of Chuang. Philamlife received required documents on nov 15,
1984 but after a year no reply was sent to eternal gardens. A demand letter was sent to philamlife and in reply
the latter said that they do not approve the insurance of chuang due to the ff:

 Chuang was 59 y/o

 No application for group insurance was submitted prior his death
 Mr. Chuang is not covered under the agreed policy

RTC ruled in favor of Eternal Gardens, CA reversed the decision. Eternal gardenssubmitted a petition for
certiorari

ISSUE: W/n Chuang is covered the in the policy?

HELD:

Yes, Mr Chuang is covered by the group insurance policy. Philamlife stamped as received the list of burial buyers
without checking id indeed the application of Mr.Chuang was in the attachment.

Also the effectivity statement of the insurance policy is ambiguous: 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. Court ruled that since a contract of insurance is a contract of adhesion, any ambiguity should
be resolved strictly against the insurer and in favor of the insured

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