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G.R. No. 156956

October 9, 2006


RTC rendered a Decision finding Vilfran Liner, Inc. to pay Del Monte Motors, Inc. the
balance of Vilfran Liner's service contracts with Del Monte Motors, Inc. and further
ordered the execution of the Decision against the counterbond posted by Vilfran Liner
which was issued by Capital Insurance and Surety Co., Inc. (CISCO). RTC released a
motion for execution commanding the sheriff to levy the amount on the property of
CISCO. To satisfy the amount, the Insurance Commissioner was ordered to withdraw
the security deposit filed by CISCO with the Commission according to Sec 203 of the
Insurance Code. Malinis was then 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. Malinis did not obey the order, so the RTC found him guilty
of indirect contempt. Hence, this Petition for Review under Rule 45 of the ROC.


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

2. Whether or not the Insurance Commissioner has power to withhold the release of
the security deposit.


1. NO. Under Sec 203 of the Insurance Code, 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 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.
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. YES. The Insurance Code has vested the Office of the Insurance Commission with
both regulatory and adjudicatory authority over insurance matters. The general
regulatory authority of the insurance commissioner is described in Section 414 of
the Code and this includes the duty to hold the security deposits under Sections
191 and 203 of the Code, for the benefit and security of all policy holders. In
relation to these provisions, Section 192 of the Insurance Code further states that
the securities deposited 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. Also, an implied trust is created
by the law for the benefit of all claimants under subsisting insurance contracts
issued by the insurance company.


G.R. No. 105562
September 27, 1993


Prime Marine Services, Inc. (PMSI) procured a Group Policy from Insular Life
Assurance Co., Ltd. to provide life insurance coverage to its sea-based employees.
During the effectivity of the policy, six covered employees perished at sea when their
vessel sunk. They were survived by the complainants-appellees, the beneficiaries
under the policy. The beneficiaries executed special powers of attorney authorizing
Capt. Nuval, President and General Manager of PMSI, to, among others, “follow-up,
ask, demand, collect and receive” for their benefit indemnities of sums of money due
them relative to the sinking of the vessel. By virtue of these written powers of
attorney, complainants-appellees were able to receive their respective death
benefits. Unknown to them, however, PMSI, in its capacity as employer and
policyholder of the life insurance of its deceased workers, filed with Insular Life formal
claims for and in behalf of the beneficiaries, through Capt. Nuval. On the basis of the
five special powers of attorney, Insular Life drew against its account six checks
payable to the order of complainants-appellees. Capt. Nuval, upon receipt of these
checks endorsed and deposited them in his own account. When the complainants-
appellees learned that they were entitled, as beneficiaries, to life insurance benefits
under a group policy, they sought to recover these benefits from Insular Life but the
latter denied their claim on the ground that the liability to complainants-appellees
was already extinguished.

ISSUE: Whether or not Insular Life is bound by the misconduct of the employer,


YES. The questioned powers of attorney do not contain in clear and

unequivocal terms authority to Captain Nuval to obtain, receive, receipt from
respondent company insurance proceed arising from the death of the seaman-
In Elfstrom vs. New York Life Insurance Company, the California Supreme
Court explicitly ruled that in group insurance policies, the employer is the agent of
the insurer. Thus, the employer is the agent of the insurer in performing the duties
of administering group insurance policies. The most persuasive rationale for adopting
the view that the employer acts as the agent of the insurer, however, is that the
employee has no knowledge of or control over the employer's actions in handling the
policy or its administration. An agency relationship is based upon consent by one
person that another shall act in his behalf and be subject to his control. It is clear
from the evidence regarding procedural techniques here that the insurer-employer
relationship meets this agency test with regard to the administration of the policy,
whereas that between the employer and its employees fails to reflect true agency.
The insurer directs the performance of the employer's administrative acts, and if
these duties are not undertaken properly the insurer is in a position to exercise more
constricted control over the employer's conduct.
In Neider vs. Continental Assurance Company, which was cited in Elfstrom, it
was held that: the employer owes to the employee the duty of good faith and due
care in attending to the policy, and that the employer should make clear to the
employee anything required of him to keep the policy in effect, and the time that the
obligations are due. In its position as administrator of the policy, the employer should
be considered as the agent of the insurer, and any omission of duty to the employee
in its administration should be attributable to the insurer.
The SC held that PMSI, through its President and General Manager, Capt.
Nuval, acted as the agent of Insular Life. The latter is thus bound by the misconduct
of its agent.




Cebu Shipyard and Engineering Works, Inc. (CSEW) is engaged in the business of
dry-docking and repairing of marine vessels while the Prudential Guarantee and
Assurance, Inc. (Prudential) is in the non-life insurance business. William Lines, Inc.
is in the shipping business and owner of M/V Manila City, a luxury passenger-cargo
vessel, which caught fire and sank. At the time of the unfortunate occurrence sued
upon, subject vessel was insured with Prudential for P45M for hull and machinery.
The Hull Policy included an “Additional Perils (INCHMAREE)” Clause covering loss of
or damage to the vessel through the negligence of, among others, ship repairmen.
Petitioner CSEW was also insured by Prudential for third party liability under a Ship
Repairer’s Legal Liability Insurance Policy. The policy was for P10M only, under the
limited liability clause.

William Lines, Inc. filed a complaint for damages against CSEW, alleging that the fire
which broke out in M/V Manila City was caused by CSEWs negligence and lack of
care. Prudential was impleaded as co-plaintiff, after it paid William Lines, Inc. the
value of the hull and machinery insurance on the M/V Manila City. As a result of such
payment Prudential was subrogated to the claim of P45 million, representing the
value of the said insurance it paid. The trial court ordered CSEW to pay William Lines
and Prudential (45M) and the CA affirmed and ordered the partial dismissal of the
case insofar as CSEW and William Lines were concerned. CSEW claims that the
insurance policy does not cover loss resulting from the fault of negligent charterers
that are assured in the same policy and by virtue of clause 20, it is deemed a co-


1. Whether or not CSEW is co-assured, thus losses caused by it are not covered
by the policy
2. Whether or not the provisions limiting CSEW’s liability for negligence to a
maximum of Php 1 million are valid


1. NO. The fact that clause 20 benefited petitioner, does not automatically make
it a co-assured of William Lines. Intention of parties to make each other co-
assured is to be gleaned from the insurance policy itself and not from any
other contract because the policy denominates the assured and the
beneficiaries. Prudential named only William Lines, Inc. as the assured. There was
no manifestation of any intention of William Lines Inc to make CSEW a co-assured.
When the terms of a contract are clear, its stipulations control. If CSEW were deemed
co-assured, it would nullify any claim of William Lines Inc. No shipowner would agree
to make ship repairer a co-assured because any claim it has under the policy would
be invalidated. Such result could not have been intended by William Lines Inc.
2. NO. Although contracts of adhesion have been consistently upheld as valid,
reliance on such contracts cannot be favored especially where the facts and
circumstances warrant that subject stipulations be disregarded. The facts and
circumstances vis-a-vis the nature of the provision sought to be enforced
should be considered, bearing in mind the principles of equity and fair play.
It is rather unconscionable if not overstrained to allow CSEW to limit its liability to
P1M notwithstanding the fact that the total loss suffered by the assured and paid for
by Prudential amounted to P45M would sanction the exercise of a degree of diligence
short of what is ordinarily required because, then, it would not be difficult for
petitioner to escape liability by the simple expedient of paying an amount very much
lower than the actual damage or loss suffered by William Lines, Inc.


G.R. No. 94071
March 31, 1992


Julian Sy, owner of New Life, insured his building in 3 different insurance
agencies: Western Guaranty Corporation for P350,000; Reliance Surety and
Insurance Co., Inc. for P300,000; Equitable Insurance Corporation for P200,000.
When his building and the goods inside burned down, he claimed for insurance
indemnities, but these were rejected by the three companies for violation of
"Other Insurance Clause" uniformly contained in all the aforestated insurance
contracts which states that the insured shall give notice to the company of any
insurance or insurances already effected or which may subsequently be effected
covering any of the properties. RTC favored New Life and against the three insurance
companies. CA reversed for failure to state or endorse the other insurance coverage.

ISSUE: Whether or not Sy can claim against the three insurance companies for
violating the “Other Insurance Clause”.


NO. The coverage by other insurance or co-insurance arranged by petitioners

were neither stated nor endorsed in the policies of the three private respondents,
warranting forfeiture of all benefits following the express stipulation in the
"Other Insurance Clause" of the policies. The terms of the contract are clear and
unambiguous. The insured is specifically required to disclose to the insurer any other
insurance and its particulars which he may have effected on the same subject matter.
The knowledge of such insurance by the insurer's agents, even assuming the
acquisition thereof by the former, is not the "notice" that would estop the insurers
from denying the claim.

While it is a cardinal principle of insurance law that a policy or contract of

insurance is to be construed liberally in favor of the insured and strictly against the
insurer company, yet contracts of insurance, like other contracts, are to be construed
according to the sense and meaning of the terms which the parties themselves have
used. If such terms are clear and unambiguous, they must be taken and understood
in their plain, ordinary and popular sense. Moreover, obligations arising from
contracts have the force of law between the contracting parties and should be
complied with in good faith.


G.R. No. 92383
July 17, 1992

The petitioner issued Personal Accident Policy to Felix Lim, Jr. with a face value
of P200,000.00. Two months later, he was dead with a bullet wound in his head. Pilar
Nalagon, Lim's secretary, was the only eyewitness to his death. According to Nalagon,
Lim was in a happy mood (but not drunk) and was playing with his handgun, from
which he had previously removed the magazine. As she watched television, he stood
in front of her and pointed the gun at her. She pushed it aside and said it might be
loaded. He assured her it was not and then pointed it to his temple. The next moment
there was an explosion and Lim slumped to the floor. He was dead before he fell. As
beneficiary, his wife Nerissa Lim sought payment on the policy but her claim was
rejected. The RTC ruled in favor of the beneficiary and CA affirmed.

ISSUE: Whether or not the death of Lim was an accident entitling his beneficiary to
claim against Sun Insurance.


YES. An accident is an event which happens without any human agency or, if
happening through human agency, an event which, under the circumstances is
unusual to and not expected by the person to whom it happens. There is no accident
when a deliberate act is performed unless some additional, unexpected, independent
and unforeseen happening occurs which produces or brings about their injury or
death. There was such a happening. This was the firing of the gun, which was the
additional unexpected and independent and unforeseen occurrence that led to the
insured person's death.
Lim was unquestionably negligent and that negligence cost him his own life.
But it should not prevent his widow from recovering from the insurance policy he
obtained precisely against accident. There is nothing in the policy that relieves the
insurer of the responsibility to pay the indemnity agreed upon if the insured is shown
to have contributed to his own accident.