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WEEK 1 NATURE AND CHARACTERISTICS

1. CONSENSUAL – perfected by the meeting of the minds fo the


parties. There should be acceptance of the application for
GENERAL insurance.
2. VOLUNTARY – the parties may incorporate such terms and
Laws Governing contracts of insurance in the Philippines: conditions as they may deem convenient: provided they do not
contravene any provision of law and are not opposed to public
1. RA 10607 policy, law, morals, good customs, or public order.
2. New Civil Code GR: The taking out of an insurance contract is not
3. Special Laws compulsory.

Sec. 2. Whenever used in this Code, the following terms shall have XPN: Liability insurance may be required by law in
the respective meanings hereinafter set forth or indicated, unless the certain instances.
context otherwise requires: 3. ALEATORY – the liability of the insurer depends upon some
contingent event.
(1) A "contract of insurance" is an agreement whereby one 4. UNILATERAL – it imposes legal duties only on the insurer who
undertakes for a consideration to indemnify another against promises to indemnify in case of loss.
loss, damage or liability arising from an unknown or 5. CONDITIONAL – it is subject to conditions, the principal one of
contingent event. which is the happening of the event insured against.
6. CONTRACT OF INDEMNITY – recovery is commensurate with
A contract of suretyship shall be deemed to be an insurance the amount of the loss suffered.
contract, within the meaning of this Code, only if made by a surety GR: The insurer promises to make good only the loss of
who or which, as such, is doing an insurance business as hereinafter the insured.
provided.
XPN: the principle is not applicable to life and accident
Requisites: insurance where the result is death because life is not
1. Subject Matter (Object) capable of pecuniary estimation. The only situation
2. Meeting of the Minds (Consent) where the principle of indemnity is applicable to life
3. Consideration, which is the premium paid by the insured, for insurance is when the interest of a person insured is
the insurer’s promise to indemnify the former upon the capable of exact pecuniary measurement.
happening of the event or peril insured against.

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7. PERSONAL – Each party having in view the character, credit Enriquez v. Sun Life Assurance, GR 15895, 29 Nov. 1920
and conduct of the other.
8. PROPERTY – since insurance is a contract, it is property in legal FACTS:
contemplation.  September 24, 1917: Joaquin Herrer made application to the
9. RISK-DISTRIBUTING DEVICE – insurance serves to distribute Sun Life Assurance Company of Canada through its office in
the risk of economic loss among as many as possible of those Manila for a life annuity
who are subject to the same kind of loss.  2 days later: he paid P6,000 to the manager of the company's
10. ONEROUS – there is a valuable consideration called the Manila office and was given a receipt
premium.  according to the provisional receipt, 3 things had to be
accomplished by the insurance company before there was a
Art. 1318. There is no contract unless the following requisites concur: contract:
(1) Consent of the contracting parties;  (1) There had to be a medical examination of the
(2) Object certain which is the subject matter of the contract; applicant; -check
(3) Cause of the obligation which is established.  (2) there had to be approval of the application by the
head office of the company; and - check
Art. 1319. Consent is manifested by the meeting of the offer and the  (3) this approval had in some way to be communicated
acceptance upon the thing and the cause which are to constitute the by the company to the applicant - ?
contract. The offer must be certain and the acceptance absolute. A  November 26, 1917: The head office at Montreal, Canada gave
qualified acceptance constitutes a counter-offer. notice of acceptance by cable to Manila but this was not mailed
 December 4, 1917: policy was issued at Montreal
Acceptance made by letter or telegram does not bind the  December 18, 1917: attorney Aurelio A. Torres wrote to the
offerer except from the time it came to his knowledge. The contract, Manila office of the company stating that Herrer desired to
in such a case, is presumed to have been entered into in the place withdraw his application
where the offer was made.  December 19, 1917: local office replied to Mr. Torres, stating
that the policy had been issued, and called attention to the
Art. 1353. The statement of a false cause in contracts shall render notification of November 26, 1917
them void, if it should not be proved that they were founded upon  December 21, 1917 morning: received by Mr. Torres
another cause which is true and lawful.  December 20, 1917: Mr. Herrer died
 Rafael Enriquez, as administrator of the estate of the late
Joaquin Ma. Herrer filed to recover from Sun Life Assurance
Company of Canada through its office in Manila for a life
annuity

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 RTC: favored Sun Life Insurance company refused to pay the claim under the additional policy coverage
ISSUE: W/N Mr. Herrera received notice of acceptance of his of P50,000.00, the proceeds of which amount to P150,000.00.
application thereby perfecting his life annuity The insurance company maintained that the insurance for P50,000.00
had not been perfected at the time of the death of Primitivo Perez.
Consequently, the insurance company refunded the amount paid.
HELD: NO. Judgment is reversed, and the Enriquez shall have and BF Lifeman Insurance Corporation filed a complaint against Virginia
recover from the Sun Life the sum of P6,000 with legal interest from Perez seeking the rescission and declaration of nullity of the insurance
November 20, 1918, until paid, without special finding as to costs in contract in question.
either instance. So ordered. Petitioner Virginia A. Perez, on the other hand, averred that the
deceased had fulfilled all his prestations under the contract and all the
Perez v. CA, GR 112329. 28 January 2000 elements of a valid contract are present.
On October 25, 1991, the trial court rendered a decision in favor of
Facts: petitioner ordering respondent to pay 150,000 pesos. The Court of
Primitivo B. Perez had been insured with the BF Lifeman Insurance Appeals, however, reversed the decision of the trial court saying that
Corporation for P20,000.00. Sometime in October 1987, an agent of the insurance contract for P50,000.00 could not have been perfected
the insurance corporation, visited Perez in Quezon and convinced him since at the time that the policy was issued, Primitivo was already
to apply for additional insurance coverage of P50,000.00. Virginia A. dead.
Perez, Primitivo’s wife, paid P2,075.00 to the agent. The receipt issued Petitioner’s motion for reconsideration having been denied by
indicated the amount received was a "deposit." Unfortunately, the respondent court, the instant petition for certiorari was filed on the
agent lost the application form accomplished by Perez and he asked ground that there was a consummated contract of insurance between
the latter to fill up another application form. The agent sent the the deceased and BF Lifeman Insurance Corporation.
application for additional insurance of Perez to the Quezon office. Such
was supposed to forwarded to the Manila office. Issue: WON the widow can receive the proceeds of the
Perez drowned. His application papers for the additional insurance of 2nd insurance policy
P50,000.00 were still with the Quezon. It was only after some time
that the papers were brought to Manila. Without knowing that Perez Held: No. Petition dismissed.
died, BF Lifeman Insurance Corporation approved the application and
issued the corresponding policy for the P50,000.00. Ratio:
Petitioner Virginia Perez went to Manila to claim the benefits under Perez’s application was subject to the acceptance of private
the insurance policies of the deceased. She was paid P40,000.00 respondent BF Lifeman Insurance Corporation. The perfection of the
under the first insurance policy for P20,000.00 but the insurance contract of insurance between the deceased and respondent

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corporation was further conditioned with the following requisites
stated in the application form: The third condition isn’t potestative, because the health of the
applicant at the time of the delivery of the policy is beyond the control
"there shall be no contract of insurance unless and until a policy is or will of the insurance company. Rather, the condition is a suspensive
issued on this application and that the said policy shall not take effect one whereby the acquisition of rights depends upon the happening of
until the premium has been paid and the policy delivered to and an event which constitutes the condition. In this case, the suspensive
accepted by me/us in person while I/We, am/are in good health." condition was the policy must have been delivered and accepted by
the applicant while he is in good health. There was non-fulfillment of
BF Lifeman didn’t give its assent when it merely received the the condition, because the applicant was already dead at the time the
application form and all the requisite supporting papers of the policy was issued.
applicant. This happens only when it gives a policy.
As stated above, a contract of insurance, like other contracts, must be
It is not disputed, however, that when Primitivo died on November 25, assented to by both parties either in person or by their agents. So long
1987, his application papers for additional insurance coverage were as an application for insurance has not been either accepted or
still with the branch office of respondent corporation in Quezon. rejected, it is merely an offer or proposal to make a contract. The
Consequently, there was absolutely no way the acceptance of the contract, to be binding from the date of application, must have been
application could have been communicated to the applicant for the a completed contract.
latter to accept inasmuch as the applicant at the time was already The insurance company wasn’t negligent because delay in acting on
dead. the application does not constitute acceptance even after payment.
The corporation may not be penalized for the delay in the processing
Petitioner insists that the condition imposed by BF that a policy must of the application papers due to the fact that process in a week wasn’t
have been delivered to and accepted by the proposed insured in good the usual timeframe in fixing the application. Delay could not be
health is potestative, being dependent upon the will of the corporation deemed unreasonable so as to constitute gross negligence.
and is therefore void. The court didn’t agree. A potestative condition
depends upon the exclusive will of one of the parties and is considered
void. The Civil Code states: When the fulfillment of the condition De Lim v. Sun Life of Canada, GR 15774, Nov. 29, 1920
depends upon the sole will of the debtor, the conditional obligation
shall be void. Facts:
The following conditions were imposed by the respondent company Luis Lim of Zamboanga applied for a Sun Life policy for Php 5,000. He
for the perfection of the contract of insurance: a policy must have designated his wife, Pilar, as beneficiary. The first premium of P433
been issued, the premiums paid, and the policy must have been was paid by Lim, then the company issued a "provisional policy." Lim
delivered to and accepted by the applicant while he is in good health.

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died after the issuance of the provisional policy but before approval of the agreement should not go into effect until the home office of the
the application. company should confirm it by issuing a policy. The provisional
policy amounts to nothing but an acknowledgment on behalf of the
Pilar brought an action to recover from Sun Life the sum of company, that it has received from the person named therein the sum
P5,000, the amount named in the provisional policy. She lost in the of money agreed upon as the first year's premium upon a policy to be
trial court hence this appeal. issued upon the application, if the application is accepted by the
company.
The "provisional policy" reads as follows: There can be no contract of insurance unless the minds of the parties
have met in agreement. In this case, the contract of insurance was
The above-mentioned life is to be assured in accordance with not consummated by the parties.
the terms and conditions contained or inserted by the Company in the
policy which may be granted by it in this particular case for four The general rule concerning the agent's receipt pending approval or
months only from the date of the application, provided that the issuance of policy is in several points, according to Joyce:
Company shall confirm this agreement by issuing a policy on said
application when the same shall be submitted to the Head Office in Where an agreement is made between the applicant and
Montreal. Should the Company not issue such a policy, then the agent whether by signing an application containing such
this agreement shall be null and void ab initio, and the Company shall condition, or otherwise, that no liability shall attach until the principal
be held not to have been on the risk at all, but in such case the amount approves the risk and a receipt is given buy the agent,
herein acknowledged shall be returned. such acceptance is merely conditional, and it subordinated to
the act of the company in approving or rejecting; so in life insurance
Issue: WON there was a perfected contract of insurance a "binding slip" or "binding receipt" does not insure of itself.

Held: No. Petition dismissed. The court held that this second point applied to the case.
Steinle vs. New York Life Insurance Co.- the amount of the
Ratio: first premium had been paid to an insurance agent and a receipt was
The policy for four months is expressly made subjected to the given. The paper declared that if the application was accepted by the
affirmative condition that "the company shall confirm company, the insurance shall take effect from the date of the
this agreement by issuing a policy on said application when the same application but that if the application was not accepted, the money
shall be submitted to the head office in Montreal." shall be returned. The court held that there was no perfection of the
Should the company not issue such a policy, then contract.
this agreement shall be null and void ab initio, and the company shall
be held not to have been on the risk." This means that

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Cooksey vs. Mutual Life Insurance Co.- the person applying for the two policies did not create any valid obligation because they were
the life insurance paid and amount equal to the first premium, but the fraudulently obtained by the insured. The appealed decision held that
application and the receipt for the money paid, stipulated that the the health of the insured, before acceptance of his application and the
insurance was to become effective only when the application was issuance of the policies, could neither be discussed nor questioned by
approved and the policy issued. There was also no perfection. the defendant company because three physicians of the company
examined the insured; however, all the physicians signified that the
A binding receipt is a custom where temporary insurance insured was in good health. Nevertheless, the findings of the company
pending the consideration of the application was given until the policy physicians were nit the main cause for the issuance (or non-issuance)
be issued or the application rejected, and such contracts are upheld of the policies.
and enforced when the applicant dies before the issuance of a policy
or final rejection of the application. Issues:
1.) W/N the statements of the insured regarding his health
However, there was no perfected contract because of the were false
clause in the application and the receipt stipulate expressly that the 2.) W/N such statements were the causes which induced
insurance shall become effective only when the "application shall be the defendant company to issue the policies
approved and the policy duly signed by the secretary at the head office
of the company and issued." The premium of 433 must be returned. Held/Ratio:
1.) Yes, the statements of the insured regarding his
Musngi v. West Coast Life, GR 41794,30 Aug. 1935 health were false because at the time of application,
he already knew that he had been suffering from
Facts: Plaintiffs Musngi and Garia filed a suit against West Coast Life ailments.
to recover the value of the two insurance policies applied for by
Arsenio Garcia (the insured). In applying for the said insurance, the 2.) Yes, such statements were the causes which
insured was asked if he consulted a physician or practitioner, and if induced the defendant company to issue the
so, for what ailment or illness; he answered “None” and “No”, policies. The concealment and false statements of
respectively. These answers were one of the causes or considerations the insured constituted fraud; the insurance
for the issuance of the policies. Upon the death of the insured, the company, by reason of such statement, accepted the
plaintiffs, as beneficiaries, demanded West Coast to pay the value of risk associated with the policy nut for which it could
the policies. However, West Coast found out that the insured had been have rejected. It was further held that the principal
treated by a lady physician in the General Hospital in Manila for question must be whether the assurer (the
different ailments such as incipient pulmonary tuberculosis, chronic insurance company) was misled or deceived into
bronchitis, and chronic suppurative pyelocystisis. It contended that entering a contract of obligation or in fixing the

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premium of the insurance by withholding of material coverage, and thus, the policy extended earthquake shock coverage
information or facts within the assured’s knowledge to its properties.
or presumed knowledge. Under Art. 1276 of the Civil
Code, the statement of a false consideration shall On 24 January 1991, Gulf Resorts filed a complaint with the RTC Pasig
render the contract void. Such matter is not where it asked for payment for P5, 427,779.00 as amount of the
specifically provided for by the Insurance Law, and lost/damaged properties, attorney fees, lost income, etc. However, on
so the general rules of the civil law regarding 21 February 1994, the said RTC ruled in favor of American Home
contracts (there being a life insurance contract) Assurance Company, where it ruled that the insurance coverage
shall apply. Thus, a valid cause or consideration is a against earthquake is limited only to the two swimming pools of Gulf
requisite for a valid insurance contract. Resorts’ Playa Resort and does not extend against the other properties
damaged by the earthquake.
WEEK 2 Gulf Resort filed a motion for the trial court to reconsider its decision,
but to no avail. Gulf Resorts filed an appeal with the Court of Appeals,
ESSENTIAL ELEMENTS but the Court of Appeals affirmed the trial court’s decision.

Gulf Resorts v. Philippine Charter lns., GR 156167, 16 May Issue – W/N the insurance policy issued by American Home
2005 Assurance Company (AHAC-AIU) to Gulf Resort’s coverage is
not limited only to the two swimming pools of Gulf Resorts’
Facts – Petitioner Gulf Resorts owned Playa Resorts at Agoo, La Playa Resort?
Union, and it entered into an insurance contract with the respondent
American Home Assurance Company which insured Plaza Resort’s Held – The Supreme Court held that the insurance policy issued to
properties against loss or damage due to earthquakes. On 16 July Gulf Resorts is only limited to the two swimming pools and the other
1990, an earthquake struck Central Luzon and Northern Luzon and properties of Playa Resort are not covered by the property insurance
the properties in Playa Resort were damaged including the two (2) issued by American Home Assurance Company (AHAC-AIU). The Court
swimming pools. On 11 August 1990, Gulf Resorts filed its formal held that there is no ambiguity in the insurance contract and the
demand for settlement of the damage to all of its properties in the earthquake shock rider, as Gulf Resorts stated that the swimming
Agoo Playa Resort, but on 23 August 1990, American Home Assurance pools are the only items covered by the insurance against loss due to
Company denied Gulf Resorts’ claim on the ground that its insurance earthquakes. The Court stated that provisions in the insurance policy
policy only covered the two swimming pools of Playa Resort against should be examined and interpreted in consonance with each other,
earthquake shock, and not the other properties damaged by the said and should not be construed piecemeal. All parts of the insurance
earthquake. Gulf Resorts contended that pursuant to this rider, no contract reflect the true intent of the parties. The Supreme Court also
qualifications were placed on the scope of the earthquake shock
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defined contracts of adhesion as contracts where one party prepares asthmatic, contrary to his answer in the application form. Thus, Julita
the stipulations in the contract while the other party merely affixes paid for all the hospitalization expenses.
his/her signature thereto, citing the case of Philippine National Bank
vs. Court of Appeals (196 SCRA 536). Any ambiguity is resolved After Ernani was discharged from the MMC, he was attended by a
against the insurer (who prepared the contract) and construed physical therapist at home. Later, he was admitted at the Chinese
liberally in the insured’s favor. However, since the policy and its riders General Hospital. Due to financial difficulties, however, respondent
are clear about the insurance coverage against earthquake shock, the brought her husband home again. In the morning of April 13, 1990,
Gulf Resorts cannot use the doctrine of contract of adhesion and Ernani had fever and was feeling very weak. Respondent was
liberal interpretation of insurance contract in the insured’s favor in constrained to bring him back to the Chinese General Hospital where
case of ambiguity. he died on the same day.

Philamcare Health Systems v. CA, GR 125678, 18 March 2002 Julita filed an action for damages and reimbursement of her expenses
plus moral damages attorney’s fees against Philamcare and its
FACTS - Ernani Trinos applied for a health care coverage with president, Dr. Benito Reverente. The Regional Trial court or Manila
Philamcare Health Systems, Inc. To the question ‘Have you or any of rendered judgment in favor of Julita. On appeal, the decision of the
your family members ever consulted or been treated for high blood trial court was affirmed but deleted all awards for damages and
pressure, heart trouble, diabetes, cancer, liver disease, asthma or absolved petitioner Reverente. Hence, this petition for review raising
peptic ulcer?’, Ernani answered ‘No’. Under the agreement, Ernani is the primary argument that a health care agreement is not an
entitled to avail of hospitalization benefits and out-patient benefits. insurance contract; hence the “incontestability clause” under the
The coverage was approved for a period of one year from March 1, Insurance Code does not apply.
1988 to March 1, 1989. The agreement was however extended yearly
until June 1, 1990 which increased the amount of coverage to a ISSUES –
maximum sum of P75,000 per disability. (1) Whether or not the health care agreement is not an
insurance contract
During the period of said coverage, Ernani suffered a heart attack and (2) Whether or not there is concealment of material fact
was confined at the Manila Medical Center (MMC) for one month. made by Ernani
While in the hospital, his wife Julita tried to claim the benefits under
the health care agreement. However, the Philamcare denied her claim HELD - (1)YES. Section2 (1)of the Insurance Code defines a contract
alleging that the agreement was void because Ernani concealed his of insurance as an agreement whereby one undertakes for a
medical history. Doctors at the MMC allegedly discovered at the time consideration to indemnify another against loss, damage, or liability
of Ernani’s confinement that he was hypertensive, diabetic and arising from an unknown or contingent event.

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Section 3 of the Insurance Code states that any contingent or answer to the extent agreed upon. In the end, the liability of the health
unknown event, whether past or future, which my damnify a person care provider attaches once the member is hospitalized for the disease
having an insurable against him, may be insured against. Every person or injury covered by the agreement or wherever he avails of the
has an insurable interest in the life and health of himself. covered benefits which he has prepaid.

Section 10 provides that every person has an insurable interest in the Being a contract of adhesion, the terms of an insurance contract are
life and health (1) of himself, of his spouse and of his children. to be construed strictly against the party which prepared the contract
– the insurer. By reason of the exclusive control of the insurance
The insurable interest of respondent’s husband in obtaining the health company over the terms and phraseology of the insurance contract,
care agreement was his own health. The health care agreement was ambiguity must be strictly interpreted against the insurer and liberally
in the nature of non-life insurance, which is primarily a contract of in favor of the insured, especially to avoid forfeiture. This is equally
indemnity. Once the member incurs hospital, medical or any other applicable to Health Care Agreements.
expense arising from sickness, injury or other stipulated contingent,
the health care provider must pay for the same to the extent agreed Art. 2011. The contract of insurance is governed by special laws.
upon under the contract. Matters not expressly provided for in such special laws shall be
regulated by this Code.
(2) NO. The answer assailed by petitioner was in response to the
question relating to the medical history of the applicant. This largely Art. 2012. Any person who is forbidden from receiving any donation
depends on opinion rather than fact, especially coming from under Article 739 cannot be named beneficiary of a life insurance
respondent’s husband who was not a medical doctor. Where matters policy by the person who cannot make any donation to him, according
of opinion or judgment are called for answers made I good faith and to said article.
without intent to deceive will not avoid a policy even though they are
untrue. Art. 739. The following donations shall be void:
(1) Those made between persons who were guilty of adultery or
The fraudulent intent on the part of the insured must be established concubinage at the time of the donation;
to warrant rescission of the insurance contract. Concealment as a
defense for the health care provider or insurer to avoid liability is an (2) Those made between persons found guilty of the same
affirmative defense and the duty to establish such defense by criminal offense, in consideration thereof;
satisfactory and convincing evidence rests upon the provider or
insurer. In any case, with or without the authority to investigate, (3) Those made to a public officer or his wife, descedants and
petitioner is liable for claims made under the contract. Having ascendants, by reason of his office.
assumed a responsibility under the agreement, petitioner is bound to

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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 guilt of HELD/RULING - No.
the donor and donee may be proved by preponderance of evidence in The Insurance Act (RA 2327, as amended) or even the new Insurance
the same action. Code (PD No. 612, as amended) does not contain any specific
provision grossly resolutory to the question at hand. Section 50 of the
Insurance Act, which provides that “(t)he insurance shall be applied
lnsular Life v. Ebrado, GR 44059, 28 October 1977 exclusively to the proper interest of the person in whose name it is
made,” cannot be interpreted that it includes the beneficiary because
FACTS - Buenaventura Cristor Ebrado was married to Pascuala a contract of insurance is personal in character. The general rules of
Ebrado. During his lifetime, he was living with his common-law wife, civil law should be applied to resolve this void in the Insurance Law.
Carponia Ebrado, although he was not legally separated from his legal Article 2011 of the New Civil Code states: “The contract of insurance
wife. Buenaventura was issued by The Insular Life Assurance Co., is governed by special laws. Matters not expressly provided for in such
Ltd., Policy No. 009929 on a whole-life plan for PhP 5,8882.00 with a special laws shall be regulated by this Code.” Article 2012 of the same
rider for Accidental Death Benefits for the same amount. Code states that, “any person who is forbidden from receiving any
Buenaventura designated Carponia Ebrado as the revocable donation under Article 739 cannot be named beneficiary of a life
beneficiary in his policy. Buenaventura died as a result of an accident insurance policy by the person who cannot make a donation to him.”
when he was hit by a falling branch of a tree. As the insurance policy Therefore, common-law spouses are barred from receiving donations
was still in force, The Insular Life Assurance Co., Ltd stands liable to from each other.
pay the coverage.
Article 739 provides:
Carponia Ebrado, his common-law wife, filed with the insurer a claim “The following donations shall be void:
for the proceeds of the policy as the designated beneficiary therein. Those made between persons who were guilty of adultery or
Pascuala Vda. de Ebrado also filed her claim as the widow of the concubinage at the time of the donation; Those made between
deceased insured. She asserts that she is the one entitled to the persons found guilty of the same criminal offense, in consideration
insurance proceeds, not the common-law wife. thereof; Those made to a public officer or his wife, descendants or
In doubt as to whom the insurance proceeds shall be paid, the insurer, ascendants by reason of his office.
The Insular Life Assurance Co., Ltd, commenced an action for
Interpleader before the CFI of Rizal. 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 guilt of
ISSUE - Can a common-law wife of a man who was not legally the donee may be proved by preponderance of evidence in the same
separated from his legal wife be a beneficiary of his life action.”
insurance plan?

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In essence, a life insurance policy is no different from a civil donation On June 4, 1986, a decision was rendered by the trial court ordered
insofar as the beneficiary is concerned. Both are founded upon the the insurance company to pay the insured the damage incurred plus
same consideration: liberality. As a consequence, the proscription in interest at the rate of twice the prevailing interest rates, moral
Art. 739 of the New Civil Code should equally operate in life insurance damages (20,000, that is twice the amount the insured prayed for),
contracts. exemplary damages, attorney's fees, litigation expenses and costs.
The CA affirmed the decision of the trial court.
In the case at bar, the requisite proof of common-law relationship
between the insured and the beneficiary has been supplied by the ISSUE - Whether the insurer is liable to the insured for moral
stipulations between the parties in the pre-trial conference. It was and exemplary damages as ordered by the trial court
agreed an stipulated that the deceased insured Buenaventura Ebrado
was married to Pascuala Ebrado and that, during the lifetime of the HELD - The decision of the lower court is modified to which, the moral
deceased insured, he was living with his common-law wife, Carponia damages is reduced to 10,000 and the award of exemplary damages
Ebrado. Based on the foregoing, Carponia Ebrado is hereby declared is deleted
disqualified to be the beneficiary of the late Buenaventura Ebrado in
his life insurance policy. The proceeds of the policy are hereby held In case of unreasonable delay in the payment of the proceeds of an
payable to the estate of the deceased insured. insurance policy, the damages that may be awarded are: 1) attorney's
fees; 2) other expenses incurred by the insured person by reason of
Zenith lnsurance v. CA, GR 85296, 14 May 1990 such unreasonable denial or withholding of payment; 3) interest at
twice the ceiling prescribed by the Monetary Board of the amount of
FACTS - On January 25, 1983, private respondent Lawrence the claim due the injured; and 4) the amount of the claim. (Insurance
Fernandez insured with the insurer his car for "own damage". The car Code Sec. 244) In awarding moral damages in case of breach of
figured in an accident and suffered actual damages in the amount of contract, there must be a showing that the breach was wanton and
P3,640.00. The insurer offered to pay the claim of Fernandez pursuant deliberately injurious or the one responsible acted fraudulently or in
to the terms and conditions of the contract which, the private bad faith. The act of petitioner of delaying payment for two months
respondent rejected. After allegedly being given a run around by cannot be considered as so wanton or malevolent to justify an award
Zenith for two (2) months, Fernandez filed a complaint with the of P20,000.00 as moral damages, taking into consideration the actual
Regional Trial Court for sum of money and damages resulting from damage. The reason for petitioner's failure to indemnify private
the refusal of Zenith to pay the amount claimed. Aside from actual respondent within the two-month period was that the parties could
damages and interests, Fernandez also prayed for moral damages in not come to an agreement as regards the amount of the actual
the amount of P10,000.00, exemplary damages of P5,000.00, damage on the car.
attorney's fees of P3,000.00 and litigation expenses of P3,000.00.

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On the other hand, exemplary or corrective damages are imposed by ISSUES -
way of example or correction for the public good (Art. 2229, NCC). In 1) Whether the complaint of Firestone states a cause of action
the case of Noda v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987; 151 against Jamila?
SCRA 227, exemplary damages were not awarded as the insurance 2) Whether the complaint of Fireman's Fund states a cause of
company had not acted in wanton, oppressive or malevolent manner. action against Jamila?
The same is true in the case at bar. 3) Whether Jamila should reimburse Fireman’s Fund?
HELD - CFI Decision's order of dismissal is legally untenable
Art. 2027. No annuity shall be claimed without first proving the so it was SET ASIDE with costs against Jamila & Co., Inc.
existence of the person upon whose life the annuity is constituted.
RATIO -
Fireman's Fund et al v Jamila et al., GR27427, 7 April 1976 [F&F’s counsel gratuitously alleged in their brief that Firestone and
Jamila entered into a "contract of guard services" on June 1, 1965.
FACTS - Jamila or the Veterans Philippine Scouts Security Agency That allegation was uncalled for because it is not found in the
contracted to supply security guards to Firestone; that Jamila assumed complaint and so created confusion which did not exist. No copy of
responsibility for the acts of its security guards; that First Quezon City the contract was annexed to the complaint. That confusing statement
Insurance Co., Inc. executed a bond in the sum of P20,000 to was an obvious error since it was expressly alleged in the complaint
guarantee Jamila's obligations under that contract; that on May 18, that the loss occurred on May 18, 1963. The fact that such an error
1963 properties of Firestone valued at P11,925 were lost allegedly due was committed is another instance substantiating the observation that
to the acts of its employees who connived with Jamila's security guard; F&F's counsel had not exercised due care in the presentation of his
that Fireman's Fund, as insurer, paid to Firestone the amount of the case.]
loss; that Fireman's Fund was subrogated to Firestone's right to get
reimbursement from Jamila, and that Jamila and its surety, First 1) Firestone is really a nominal party in this case as it had already
Quezon City Insurance Co., Inc., failed to pay the amount of the loss been indemnified for the loss which it had sustained. It joined as a
in spite of repeated demands. party-plaintiff in order to help Fireman's Fund to recover the amount
of the loss from Jamila and First Quezon City Insurance Co., Inc.
Upon defendant's motions, the lower court in its order of July 22, 1966 Firestone had tacitly assigned to Fireman's Fund its cause of action
dismissed the complaint as to Jamila on the ground that there was no against Jamila for breach of contract. Sufficient ultimate facts are
allegation that it had consented to the subrogation and, therefore, alleged in the complaint to sustain that cause of action.
Fireman's Fund had no cause of action against it.
2) Fireman's Fund's action against Jamila is squarely sanctioned by
article 2207. As the insurer, Fireman's Fund is entitled to go after the

3 – EXECUTIVE | Ab Initio Group


12
person or entity that violated its contractual commitment to answer "Although many policies including policies in the standard form, now
for the loss insured against (PAL vs. Heald Lumber Co). provide for subrogation, and thus determine the rights of the insurer
in this respect, the equitable right of subrogation as the legal effect of
CFI erred in applying to this case the rules on novation. F&F in alleging payment inures to the insurer without any formal assignment or any
in their complaint that Fireman's Fund "became a party in interest in express stipulation to that effect in the policy" (44 Am. Jur. 2nd 746).
this case by virtue of a subrogation right given in its favor by"
Firestone, were not relying on the novation by change of creditors as Stated otherwise, when the insurance company pays for the loss, such
contemplated in NCC 1291 and 1300 to 1303 but rather on NCC 2207. payment operates as an equitable assignment to the insurer of the
property and all remedies which the insured may have for the recovery
Article 2207 is a restatement of a settled principle of American thereof. That right is not dependent upon, nor does it grow out of,
jurisprudence. Subrogation has been referred to as the doctrine of any privity of contract, or upon written assignment of claim, and
substitution. It "is an arm of EQUITY that may guide or even force one payment to the insured makes the insurer an assignee in equity
to pay a debt for which an obligation was incurred but which was in (Shambley v. Jobe-Blackley Plumbing and Heating Co).
whole or in part paid by another" (83 C.J.S. 576).
3) Whether the plaintiffs would be able to prove their cause of action
"Subrogation is founded on principles of JUSTICE AND EQUITY, and against Jamila is another question.
its operation is governed by principles of equity. It rests on the
principle that substantial justice should be attained regardless of form, Pan Malayan lnsurance v CA, GR 81026, 3 April 1990
that is, its basis is the doing of complete, essential, and perfect justice
between all the parties without regard to form"(83 C.J.S. 579- 80) FACTS - Canlubang Automotive Resources Corp. obtained from Pan
Malay a motor vehicle insurance policy for its Mitsubishi Colt Lancer.
Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. While the policy was still in effect, the insured car was allegedly hit by
Co. vs Moses). Upon payment of the loss, the insurer is entitled to be a pick-up owned by Erlinda Fabie but driven by another person. The
subrogated pro tanto to any right of action which the insured may car suffered damages in the amount of P42K. Pan Malay defrayed the
have against the third person whose negligence or wrongful act cost of repair of the insured car. It then demanded reimbursement
caused the loss (44 Am. Jur. 2nd 745). from Fabie and her driver of said amount, but to no avail. Pan Malay
filed a complaint for damages with the RTC of Makati against Fabie
The right of subrogation is of the highest EQUITY. The LOSS IN THE and the driver. It averred that the damages caused to the insured car
FIRST INSTANCE is that of the INSURED but AFTER reimbursement was settled under the “own damage” coverage of the insurance policy.
or compensation, it becomes the LOSS OF THE INSURER (44 Am. Jur. Private respondents filed a motion to dismiss alleging that Pan Malay
2d 746). had no cause of action since the “won damage” clause of the policy
precluded subrogation under Art. 2207 of the Civil Code. They

3 – EXECUTIVE | Ab Initio Group


13
contended that indemnification under said article is on the assumption assignment of claim. It accrues simply upon payment of the
that there was no wrongdoer or no 3rd party at fault. The RTC insurance claim by the insurer.
dismissed Pan Malay’s complaint and ruled that payment under the
“own damage” clause was an admission by the insurer that the There are three exceptions to this rule:
damage was caused by the assured and/or its representatives. CA 1. where the assured by his own act releases the wrongdoer
affirmed but on different ground. Applying the ejusdem generis rule, or third party liable for the loss or damage
CA held that Section III-I of the policy, which was the basis for the 2. where the insurer pays the assured the value of the lost
settlement of the claim against insurance, did not cover damage goods without notifying the carrier who has in good faith
arising from collision or overturning due to the negligence of 3rd settled the assured's claim for loss
parties as one of the insurable risks. 3. where the insurer pays the assured for a loss which is not a
risk covered by the policy, thereby effecting "voluntary
ISSUE - Was Pan Malay subrogated to the rights of payment"
Canlubang against the driver and his employer?
None of these exceptions are present in this case.
HELD - Yes.
As to the trial court’s ruling:
The Supreme Court remanded the case back to the trial court. When PanMalay utilized the phrase "own damage" — a phrase which
is not found in the insurance policy — to define the basis for its
Right of Subrogation of the Insurer settlement of Canlubang's claim under the policy, it simply meant that
• Article 2207 of the Civil Code is founded on the well-settled it had assumed to reimburse the costs for repairing the damage to the
principle of subrogation. If the insured property is destroyed insured vehicle. It is in this sense that the so-called "own damage"
or damaged through the fault or negligence of a party other coverage under Section III of the insurance policy is differentiated
than the assured, then the insurer, upon payment to the from Sections I and IV-1 which refer to "Third Party Liability" coverage
assured, will be subrogated to the rights of the assured to (liabilities arising from the death of, or bodily injuries suffered by, third
recover from the wrongdoer to the extent that the insurer parties) and from Section IV-2 which refer to "Property Damage"
has been obligated to pay. coverage (liabilities arising from damage caused by the insured vehicle
• Payment by the insurer to the assured operates as an to the properties of third parties).
equitable assignment to the former of all remedies which
the latter may have against the third party whose As to the Court of Appeals’ ruling:
negligence or wrongful act caused the loss. The Court of Appeals' ruling on the coverage of insured risks stems
• The right of subrogation is not dependent upon, nor does it from an erroneous interpretation of the provisions of the policy. It
grow out of, any privity of contract or upon written violates a fundamental rule on the interpretation of property insurance

3 – EXECUTIVE | Ab Initio Group


14
contracts where interpretation should be liberally in favor of the the consignee for the value thereof. Thereafter, the former sued the
assured and strictly against the insurer in cases of disagreement ship-owner.
between the parties. The meaning advanced by PanMalay regarding Settlement was effected between the Polish cargo insurers
the coverage of the policy is undeniable more beneficial to Canlubang and the ship owner. On August 16, 1954, claiming to have been
than that insisted upon by the CA. In any case, the very parties to the subrogated to the rights of the carrier, plaintiff sued defendant before
policy were not shown to be in disagreement regarding the meaning the Court of First Instance of Manila to recover U.S. $60,733.53 plus
and coverage of Section III-I. Hence, it was improper for CA to assert 17% exchange tax, with legal interest, as the value of the alleged
its own interpretation of the contract that is contrary to the clear cargo short shipment and P10,000 as attorney's fees. Defendant
understanding and intention of the parties to it. answered in due time and countered with a P15,000 counterclaim for
attorney's fees.
* Even assuming for the sake of argument that the insurance policy After trial the lower court September 28, 1963, rendered its decisions
does not cover damage to the insured vehicle caused by negligent dismissing the complaint and awarding P10,000 as attorney's fees to
acts of third parties, and that PanMalay's settlement of Canlubang's defendant.
claim for damages allegedly arising from a collision due to private
respondents' negligence would amount to unwarranted or "voluntary ISSUE:
payment", insurer may still recover from the third party responsible 1. W/N there was shortshipment on defendants part?
for the damage to the insured property under Article 1236 of the Civil 2. W/N the non-presentation of the insurance policy
Code. fatal to plaintiff's case?
3. W/N defendant was merely acting as an agent of
Sveriges Anfartygs Assurance v Qua Chee Gan, L-22146, 5 Louis Dreyfus & Co., who was the real shipper?
Sept 1967
RULING:
FACTS: 1. None. Plaintiff's cause of action suffers from several fatal
Qua Chee Gan, shipped on board the S.S. NAGARA, 2,032,000 defects and inconsistencies. The alleged existence of
kilos of bulk copra at Quezon, consigned to DAL International Trading the Karlshamn bills of lading is negative by the fact that
Co., in Gdynia, Poland. The vessel first called at the port Exhibits A and B - the bills of lading presented by plaintiff -
of Karlshamn, Sweden, where it unloaded 696,419 kilos of bulk show that the 2,032,000 kilos of copra loaded
copra. Then, it proceeded to Gdynia where it unloaded the remaining in Siain were for Gdynia only. Further destroying its case is
copra shipment. The actual outturn weights in the latter port showed the testimony of plaintiff's own witness,
that only 1,569,429 kilos were discharged. Because of the alleged Mr. Claro Pasicolan, who on direct examination
confirmed cargo shortage, the Polish cargo insurers had to indemnify affirmed that these two exhibits constituted the complete
[5]

set of documents which them shipping agent in charge of

3 – EXECUTIVE | Ab Initio Group


15
the vessel S.S. NAGARA issued covering the copra cargo
loaded at Slain. In view of this admission and for want of Plaintiff's action against defendant cannot, however, be considered as
evidentiary support, plaintiff's belated claim that there is clearly unfounded as to warrant an award of attorney's fees as
another complete set of documents cannot be seriously damages to defendant under par. 4, Art. 2208 of the Civil Code. The
taken. facts do not show that plaintiff's cause of action was so frivolous or
untenably as to amount to gross and evident bad faith.[8]
2. No. The lower court ruled so, reasoning that unless the WHEREFORE, but for the award of attorney's fees to defendant which
same — as the best evidence — were presented, it could is eliminated, the decision appealed from is, in all other respects,
not be conclusively determined if "liability for short hereby affirmed. Costs against plaintiff-appellant.
shipment" was a covered risk. And the rule is that an insurer
who pays the insured for loss or liability not covered by the Rizal Surety v Manila Railroad, GR L-24043,25 April 1968
policy is not subrogated to the latter.2 However, even
assuming that there was unwarranted — or "volunteer" — Facts:
payment, plaintiff could still recover what it paid — in effect On Nov 29, 1960, a vessel named SS Flying Trader, loaded on board
— to the carrier from defendant shipper under Art. 1236 of a cargo which is an offset press machine, from Italy to Manila. Upon
the Civil Code which allows a third person who pays on reaching the port of destination and upon unloading it, it was dropped
behalf of another to recover from the latter, although there b the crane which resulted to damages of the machine. The plaintiff
is no subrogation. But since the payment here was without as the insurer had paid the consignee, Suter, Inc. the amount of
the knowledge and consent of defendant, plaintiff's right of P16.5k for the machine and P180.70 for the International Adjustment
recovery is defeasible by the former's defenses since the Bureau as adjuster’s fee. However, the arrastre charges in this
Code is clear that the recovery is only up to the amount by particular shipment was paid on the weight or measurement basis
which the defendant was benefited. whichever is higher, and not on the value thereof.

3. Yes, suffice it to say that although on Exhibit A and B his Issue:


name appears as the shipper, yet the very loading Can the insurance get an amount greater than what was
certificate, Exhibit 3 [5-Deposition of Horle], issued and declared?
signed by the Chief Mate, and Master of the S.S. NAGARA
shows that defendant was acting merely for account
of Louis Dreyfus & Co. The other documentary Held:
exhibits[7] confirm this. Anyway, in whatever capacity Plaintiff Insurance Company cannot recover from defendants an
defendant is considered, it cannot be liable since amount greater than that to which the consignee could lawfully lay
no shortshipment was shown.

3 – EXECUTIVE | Ab Initio Group


16
claim. The management contract is clear, the amount is limited to amount of Pl,109.67 representingthe C.I.F. value of the damaged
P500. drum and cartons of medicine with the carrier and the arrestre.
-However, both refused to pay.
If the plaintiff’s property has been insured, and he has received -Winthrop-Sterns Philippines filed its claim with the insurer, St.
indemnity from the insurance company for the injury or loss arising Paul Fire & Marine insurance.
out of the wrong or breach of contract complained of, the insurance -The insurance company, on the basis of such claim, paid to the
company shall be subrogated to the right of the insured against the consignee the insured value of the lost and damagedgoods, including
wrong-doer or the person who has violated the contract. If the amount other expenses in connection therewith, in the total amount
paid by the insurance company doer not fully cover the injury or loss, of $1,134.46.
the aggrieved party shall be entitled to recover the deficiency from the -As subrogee of the rights of the shipper and/or consignee, the
person causing the loss or injury. insurer, St. Paul Fire & Marine Insurance Co., instituted with the Court
of First Instance the present action against the defendants for the
The insurance have no greater right than the party in interest thereof. recovery of said amount of $1,134.46, plus costs.
-The Lower court rendered judgment ordering defendants Macondray
St. Paul Fire v Macondray, GR L-27796,25 March 1976 & Co., Inc., Barber Steamship Lines, Inc. andWilhelm Wilhelmsen to
pay to the plaintiff P300.00. It also held defendants Manila Railroad
Facts: Company and Manila PortService to pay to plaintiff, jointly
-Winthrop Products, Inc., of New York shipped aboard the SS “Tai and severally, the sum of P809.67.
Ping”, owned and operated by Wilhelm Wilhelmsen218 cartons and -The Insurer, , contending that it should recover the amount of
drums of drugs and medicine with Winthrop-Stearns Inc., Manila, $1,134.46 or its equivalent in pesos (the rate of P3.90,instead of
Philippines as consingee. BarberSteamship Lines, Inc., agent of P2.00, for every US$1.00), filed a motion for reconsideration, but this
Wilhelm Wilhelmsen issued Bill of Lading No. 34, in the name of was denied.
Winthrop Products. -The Insurer argues that, as subrogee of the consignee, it should be
-The shipment was insured by the shipper against loss and/or damage entitled to recover from the defendants-appelleesthe amount of
with the St. Paul Fire & Marine InsuranceCompany. $1,134.46 which it actually paid to the consignee and which
-“Tai Ping” arrived at the Port of Manila. represents the value of the lost anddamaged shipment as well as other
-The said shipment was discharged complete and in good order with legitimate expenses such as the duties and cost of survey of said
the exception of one (1) drum and several cartonswhich were in bad shipment, andthat the exchange rate on the date of the judgment,
condition. which was P3.90 for every US$1.00.
-Because consignee failed to receive the whole shipment and as -Defendants-appellees countered that:
several cartons of medicine were received in badorder condition, o Their liability is limited to the C.I.F. value of the goods, pursuant
Winthrop-Sterns Philippines filed the corresponding claim in the to contract of sea carriage embodied in the bill of lading that the

3 – EXECUTIVE | Ab Initio Group


17
consignee’s (Winthrop-Stearns Inc.) claim against the carrier C.I.F. value of the goods as per contract of sea carriage embodied in
(Macondray & Co., Inc.,Barber Steamship Lines, Inc., Wilhelm the bill of lading, whichreads:
Wilhelmsen and the arrastre operators (Manila Port Service and Manila o Whenever the value of the goods is less than $500 per package or
Railroad Company) was only for the sum of Pl,109.67 other freight unit, their value in the calculation and adjustment of
claims for which the Carrier may be liable shall for the purpose of
ISSUE(S): avoiding uncertainties and difficulties in fixing value be deemed to be
1.Whether or not, in case of loss or damage, the liability of the invoice value, plus freight and insurance if paid, irrespective of
the carrier to the consignee is limited to the C.I.F value of the whether any other value is greater or less.
goods which were lost or damaged
2.Whether the insurer who has paid the claim in dollars to the National Union Fire lnsurance v. Stolt Nielsen, GR 87958, 26
consignee should be reimbursed in its peso equivalent on the April 1990
date of discharge of the cargo or on the date of the decision.
EMERGENCY RECIT: United Coconut Chemicals (SHIPPER) shipped
HELD: distilled fatty acid on board MT “StoltSceptre” (CARRIER). The shipment
was insured under a marine cargo policy with National Union Fire
The appeal is without merit and the judgement of the lower court Insurance Co (INSURER). Upon receipt of the cargo by the consignee in
is affirmed. Netherlands, it was totally contaminated. Hence, claim was made on the
-The purpose of the bill of lading is to provide for the rights and INSURER of the cargo. The INSURER as subrogee filed a claim for
liabilities of the parties in reference to the contract tocarry. damages against the CARRIER with RTC Manila. The CARRIER invoked
-The stipulation in the bill of lading limiting the common carrier’s that arbitration must be done pursuant to the Charter. The INSURER
opposed, arguing that the provision on arbitration was not included in the
liability to the value of the goods appearing in thebill, unless the Bill of Lading. SC: The INSURER cannot avoid the binding effect of the
shipper or owner declares a greater value, is valid and binding. arbitration clause. By subrogation, it became privy to the Charter Party as
-This limitation of the carrier’s liability is sanctioned by the freedom of fully as the SHIPPER before the latter was indemnified, because as
the contracting parties to establish suchstipulations, clauses, terms, subrogee it stepped into the shoes of the SHIPPER and is subrogated
or conditions as they may deem convenient, provided they are not merely to the latter's rights.
contrary to law,morals, good customs and public policy.
-A stipulation fixing or limiting the sum that may be recovered from FACTS:
the carrier on the loss or deterioration of the goods is valid, provided On 9 January 1985, United Coconut Chemicals, Inc. shipped 404.774
it is: metric tons of distilled C6-C18 fatty acid on board MT "StoltSceptre,"
(a) reasonable and just under the circumstances, and a tanker owned by Stolt-Nielsen Philippines Inc., from Bauan,
(b) has been fairly and freely agreed upon. Batangas, Philippines, consigned to "NieuweMatex" at Rotterdam,
-In the case at bar, the liabilities of the defendants- appellees with Netherlands, covered by Tanker Bill of Lading BL No. BAT-1.
respect to the lost or damaged shipments areexpressly limited to the The shipment was insured under a marine cargo policy with Petitioner
National Union Fire InsuranceCompany of Pittsburg (hereinafter
3 – EXECUTIVE | Ab Initio Group
18
referred to as INSURER), a non-life American insurance corporation, 4. Arbitration. Any dispute arising from the making, performance or
through its settling agent in the Philippines, the American termination of this Charter Party shall be settled in New York, Owner
International Underwriters (Philippines), Inc., the other petitioner and Charterer each appointing an arbitrator, who shall be a merchant,
herein. broker or individual experienced in the shipping business; the two thus
Upon receipt of the cargo by the consignee in the Netherlands, it was chosen, if they cannot agree, shall nominate a third arbitrator who
found to be discoloured and totally contaminated. Hence, a claim was shall be an admiralty lawyer. Such arbitration shall be conducted in
made on the Insurer of the cargo. The insurer as subrogee filed a conformity with the provisions and procedure of the United States
claim for damages against the carrier with the RTC of Manila. arbitration act, and a judgment of the court shall be entered upon any
The carrier filed a motion to dismiss on the ground that the case was award made by said arbitrator. Nothing in this clause shall be deemed
arbritrable and pursuant to the charter party as embodied in the bill to waive Owner's right to lien on the cargo for freight, deed of freight,
of lading, arbitration must be done. The insurer opposed the motion or demurrage.
by arguing that the provision on arbitration was not included in the Clearly, the Bill of Lading incorporates by reference the terms of the
bill of lading and even if it was included, it was nevertheless unjust Charter Party. It is settled law that the charter may be made part of
and unreasonable. the contract under which the goods are carried by an appropriate
The RTC denied the motion but upon reconsideration, the resolution reference in the Bill of Lading. As the respondent Appellate Court
on the motion to dismiss was suspended or deferred. found, the INSURER "cannot feign ignorance of the arbitration clause
The carrier then filed a petition for review on certiorari with since it was already charged with notice of the existence of the charter
preliminary injunction/TRO which was granted by the CA. party due to an appropriate reference thereof in the bill of lading and,
by the exercise of ordinary diligence, it could have easily obtained a
ISSUE: copy thereof either from the shipper or the charterer.
Are the terms of the Charter Party, particularly the provision We hold, therefore, that the INSURER cannot avoid the binding effect
on arbitration, binding on the INSURER? of the arbitration clause. By subrogation, it became privy to the
Charter Party as fully as the SHIPPER before the latter was
indemnified, because as subrogee it stepped into the shoes of the
HELD: SHIPPER-ASSURED and is subrogated merely to the latter's rights. It
Yes. The pertinent portion of the Bill of Lading in issue provides in can recover only the amount that is recoverable by the assured. And
part: since the right of action of the SHIPPER-ASSURED is governed by the
xxx [A]ll the terms whatsoever of the said Charter except the rate and provisions of the Bill of Lading, which includes by reference the terms
payment of freight specified therein apply to and govern the rights of of the Charter Party, necessarily, a suit by the INSURER is subject to
the parties concerned in this shipment.xxx the same agreements. It has not been shown that the arbitral clause
in question is null and void, inoperative, or incapable of being
The provision on arbitration in the Charter Party reads:

3 – EXECUTIVE | Ab Initio Group


19
performed. Nor has any conflict been pointed out between the Charter 20. The insurance on the vessel should be maintained by the customer
Party and the Bill of Lading. and/or owner of the vessel during the period the contract is in effect.
The total liability of the Contractor to the Customer or of any sub-
Cebu Shipyard vWilliam Lines, GR 132607,5 May 1999 contractor shall be limited in respect of any defect or event to the sum
of 1M.
FACTS: While the M/V Manila City was undergoing dry-docking and repairs
Cebu Shipyard and Engineering Works, Inc. (CSEW) is engaged in the within the premises of CSEW, the master, officers and crew of M/V
business of dry-docking and repairing of marine vessels while the Manila City stayed in the vessel, using their cabins as living quarters.
Prudential Guarantee and Assurance, Inc. (Prudential) is in the non- Other employees hired by William Lines to do repairs and maintenance
life insurance business. work on the vessel were also present during the dry-docking.
William Lines, Inc. is in the shipping business. It was the owner of M/V On February 16, 1991, after subject vessel was transferred to the
Manila City, a luxury passenger-cargo vessel, which caught fire and docking quay, it caught fire and sank, resulting to its eventual total
sank. loss
At the time of the unfortunate occurrence sued upon, subject vessel On February 21, 1991, William Lines, Inc. filed a complaint for
was insured with Prudential for P45M for hull and machinery. The Hull damages against CSEW, alleging that the fire which broke out in M/V
Policy included an “Additional Perils (INCHMAREE)” Clause covering Manila City was caused by CSEWs negligence and lack of care.
loss of or damage to the vessel through the negligence of, among Prudential was impleaded as co-plaintiff, after it paid William Lines,
others, ship repairmen Inc. the value of the hull and machinery insurance on the M/V Manila
Petitioner CSEW was also insured by Prudential for third party liability City. As a result of such payment Prudential was subrogated to the
under a Shiprepairer’s Legal Liability Insurance Policy. The policy was claim of P45 million, representing the value of the said insurance it
for P10 million only, under the limited liability clause paid.
On Feb. 5, 1991, William Lines, Inc. brought its vessel, M/V Manila Trial Court: CSEW to pay William Lines and Prudential (45M)
City, to the Cebu Shipyard in Lapulapu City for annual dry-docking and CA: Affirmed TC. Ordered the partial dismissal of the case insofar as
repair. CSEW and William Lines were concerned.
On Feb. 6, 1991, an arrival conference was held between CSEW claims that the insurance policy does not cover loss resulting
representatives of William Lines, Inc. and CSEW to discuss the work from the fault of negligent charterers that are assured in the same
to be undertaken on the M/V Manila City. The contracts, denominated policy and by virtue of clause 20, it is deemed a co-assured.
as Work Orders, were signed thereafter., with the following
stipulations:
10. The Contractor shall replace at its own work and at its own cost
any work or material which can be shown to be defective and which
is communicated in writing

3 – EXECUTIVE | Ab Initio Group


20
ISSUE/S & RATIO: For the doctrine of res ipsa loquitur to apply to a given
situation, the following conditions must concur: (1) the
WON CSEW is co-assured, thus losses caused by it are not accident was of a kind which does not ordinarily occur unless
covered by the policy-NO someone is negligent; and (2) that the instrumentality or
agency which caused the injury was under the exclusive
The fact that clause 20 benefited petitioner, does not control of the person charged with negligence.
automatically make it a co-assured of William Lines.
Intention of parties to make each other co-assured is to be The facts and evidence reveal the presence of these
gleaned from the insurance policy itself and not from any conditions. First, the fire would not have happened in the
other contract because the policy denominates the assured ordinary course of things if reasonable care and diligence had
and the beneficiaries. been exercised.

Prudential named only William Lines, Inc. as the assured. WON the provisions limiting CSEW’s liability for negligence to
There was no manifestation of any intention of William Lines a maximum of Php 1 million are valid- NO
Inc to make CSEW a co-assured. When the terms of a contract
are clear, its stipulations control. Although contracts of adhesion have been consistently
upheld as valid, reliance on such contracts cannot be favored
If CSEW were deemed co-assured, it would nullify any claim especially where the facts and circumstances warrant that
of William Lines Inc. No shipowner would agree to make subject stipulations be disregarded. Tthe facts and
shiprepairer a co-assured because any claim it has under the circumstances vis-a-vis the nature of the provision sought to
policy would be invalidated. Such result could not have been be enforced should be considered, bearing in mind the
intended by William Lines Inc. principles of equity and fair play.

WON CSEW had “management and supervisory control“ of RULING: Petition denied
the ship at the time the fire broke out- YES
Manila Mahogany v CA, GR L-52756,12 October 1987
The factual findings by the CA are conclusive on the parties
and are not reviewable by this Court. FACTS:
Petitioner Manila Mahogany Manufacturing Corporation insured its
WON the doctrine of res ipsa loquitur applies against the Mercedes Benz 4-door sedan withrespondent Zenith Insurance
crew- YES Corporation. The insured vehicle was bumped and damaged by a truck
owned bySan Miguel Corporation. For the damage caused, respondent

3 – EXECUTIVE | Ab Initio Group


21
company paid petitioner five thousand pesos(P5,000.00) in amicable the real partyin interest with regard to the portion of the indemnity
settlement. Petitioner's general manager executed a Release of Claim, paid is the insurer and not the insured.
subrogatingrespondent company to all its right to action against San Hence, petitioner is entitled to keep the sum of P4,500.00 paid by San
Miguel Corporation.Thereafter, respondent company wrote Insurance Miguel Corporation under itsclear right to file a deficiency claim for
Adjusters, Inc. to demand reimbursement from SanMiguel Corporation damages incurred, against the wrongdoer, should the
of the amount it had paid petitioner. Insurance Adjusters, Inc. refused insurancecompany not fully pay for the injury caused (Article 2207,
reimbursement,alleging that San Miguel Corporation had already paid New Civil Code).
petitioner P4,500.00 for the damages to petitioner'smotor vehicle, as However, when petitioner released San Miguel Corporation from any
evidenced by a cash voucher and a Release of Claim executed by the liability, petitioner's right to retain the sum of P5,000.00 no
General Manager of petitioner discharging San Miguel Corporation longer existed, thereby entitling private respondent to recover
from "all actions, claims, demands the rights of action that nowexist the same
or hereafter develop arising out of or as a consequence of the .The right of subrogation can only exist after the insurer has paid the
accident."Respondent insurance company thus demanded from petiti insured otherwise the insured will be deprived of his right to full
oner reimbursement of the sum of P4,500.00 paid by San Miguel indemnity. If the insurance proceeds are not sufficient to cover the
Corporation. Petitioner refused; hence, the instant case. damagessuffered by the insured, then he may sue the party
responsible for the damage for the remainder. To the extentof the
ISSUE: amount he has already received from, the insurer enjoys the right of
Whether or not the respondent insurance company is subrogation.Since the insurer can be subrogated to only such rights
subrogated to the rights of the petitioner againstSan as the insured may have,
Miguel Corporation. should the insured,after receiving payment from the insurer, release
the wrongdoer who caused the loss, the insurer loses hisrights against
HELD: the latter. But in such a case, the insurer will be entitled to recover
YES from the insured whatever it has paid to the latter, unless the
RULING: release was made with the consent of the insurer
The Supreme Court held that if a property is insured and the owner
receives the indemnity from theinsurer, it is provided in [Article 2207 F .F . Cruz v CA, GR L-52732, 29 August 1988
of the New Civil Code] that the insurer is
deemed subrogated Facts:
to therights of the insured against the wrongdoer and if the amount A fire broke up from the furniture shop of the petitioner in Caloocan
paid by the insurer does not fully cover the loss,then the aggrieved city early September 6, 1974. Prior to that, neighbor of the said shop
party is the one entitled to recover the deficiency. Under this legal requested that the petitioner should build a firewall but failed to do
provision,

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22
so. The cause of the fire was never discovered. Private respondent got
P35k from the insurance on their house and contents thereof.
WEEK 3
Issue: Construction of insurance contracts
Whether or not the 35k be deducted from the damages
thereof De la Cruz v. Capital lnsurance, GR L-21 574, 30 June 1966

Ruling: FACTS:
Since P35k had already been claimed by the respondents, the court  Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc
held that such amount should be deducted from the award of Mines, Inc. in Baguio, was the holder of an accident insurance
damages in accordance with Art 2207 NCC policy "against death or disability caused by accidental means"
Art. 2207. If the plaintiff’s property has been insured, and he has  January 1, 1957: For the celebration of the New Year, the
received indemnity from the insurance company for the injury or loss Itogon-Suyoc Mines, Inc. sponsored a boxing contest for
arising out of the wrong or breach of contract complained of, the general entertainment wherein Eduardo, a non-professional
insurance company shall be subrogated to the rights of the insured boxer participated
against the wrongdoer or the person who has violated the contract. If  In the course of his bout with another non-professional
the amount paid by the insurance company does not fully cover the boxer of the same height, weight, and size, Eduardo slipped
injury or loss, the aggrieved party shall be entitled to recover the and was hit by his opponent on the left part of the back of the
deficiency from the person causing the loss or injury. head, causing Eduardo to fall, with his head hitting the rope of
Having been indemnified by their insurer, private respondents are the ring
entitled only to recover the deficiency from the petitioner.  He was brought to the Baguio General Hospital the following
Whether or not the insurer should exercise the rights of the insured day. He died due to hemorrhage, intracranial.
to which it had been subrogated lies solely within the former’s sound  Simon de la Cruz, the father of the insured and who was named
discretion. Since the insurer is not a party to the case, its identity is beneficiary under the policy, thereupon filed a claim with the
not of record and no claim is made on its behalf, the private insurance company
respondent’s insurer has to claim his right to reimbursement of the  The Capital Insurance and Surety co., inc denied stating that
P35,000.00 paid to the insured. the death caused by his participation in a boxing contest was
not accidental
 RTC: favored Simon

ISSUE: W/N the cause of death was accident

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23
 Furthermore, the policy involved herein specifically excluded
HELD:YES. from its coverage —
 Eduardo slipped, which was unintentional (e) Death or disablement consequent upon the Insured engaging in
 The terms "accident" and "accidental" football, hunting, pigsticking, steeplechasing, polo-playing, racing of
 as used in insurance contracts, have not acquired any any kind, mountaineering, or motorcycling.
technical meaning and are construed by the courts in  Death or disablement resulting from engagement in
their ordinary and common acceptation boxing contests was not declared outside of the
 happen by chance or fortuitously, without intention and protection of the insurance contract
design, and which is unexpected, unusual, and
unforeseen Sun lnsurance Office Ltd v CA, GR 92383, 17 July 1992
 event that takes place without one's foresight or
expectation Facts:
 event that proceeds from an unknown cause, or is an Lim accidentally killed himself with his gun after removing the
unusual effect of a known cause and, therefore, not magazine, showing off, pointing the gun at his secretary, and pointing
expected the gun at his temple. The widow, the beneficiary, sued the petitioner
 where the death or injury is not the natural or probable result and won 200,000 as indemnity with additional amounts for other
of the insured's voluntary act, or if something unforeseen damages and attorney’s fees. This was sustained in the Court
occurs in the doing of the act which produces the injury, the of Appeals then sent to the Supreme court by the insurance company.
resulting death is within the protection of policies insuring
against death or injury from accident Issue:
 while the participation of the insured in the boxing contest is 1. Was Lim’s widow eligible to receive the benefits?
voluntary, the injury was sustained when he slid, giving 2. Were the other damages valid?
occasion to the infliction by his opponent of the blow that threw
him to the ropes of the ring is not Held:
 The fact that boxing is attended with some risks of external 1. Yes 2. No
injuries does not make any injuries received in the course of Ratio:
the game not accidental
 In boxing as in other equally physically rigorous sports, such as 1. There was an accident.
basketball or baseball, death is not ordinarily anticipated to De la Cruz v. Capital Insurance says that "there is no accident
result. If, therefore, it ever does, the injury or death can only when a deliberate act is performed unless some additional,
be accidental or produced by some unforeseen happening or unexpected, independent and unforeseen happening occurs
event as what occurred in this case

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24
which produces or brings about their injury or death." This those expenses, the law deems the award of costs as
was true when he fired the gun. sufficient.”
Under the insurance contract, the company wasn’t liable for
bodily injury caused by attempted suicide or by one Ty v Filipinas Cia de Seguros, GR L-21821-22 and L-21824-
needlessly exposing himself to danger except to save 27, 31 May 1966
another’s life.
FACTS:
Lim wasn’t thought to needlessly expose himself to danger  2 months prior to December 24, 1953: Diosdado C. Ty,
due to the witness testimony that he took steps to ensure that employed as operator mechanic foreman in the Broadway
the gun wasn’t loaded. He even assured his secretary that the Cotton Factory insured himself in 18 local insurance companies
gun was loaded. with Broadway Cotton Factory as his beneficiary
 December 24, 1953: fire broke out at the Broadway Cotton
There is nothing in the policy that relieves the insurer of the Factory where Ty, fighting his way out, injured his left hand by
responsibility to pay the indemnity agreed upon if the insured a heavy object.
is shown to have contributed to his own accident.  He was brought to the Manila Central University hospital, and
after receiving first aid there, he went to the National
2. “In order that a person may be made liable to the payment Orthopedic Hospital for treatment of his injuries.
of moral damages, the law requires that his act be wrongful.  His injuries caused temporary total disability on his left hand so
The adverse result of an action does not per se make the act he filed a claim against all defendants who rejected the claim
wrongful and subject the act or to the payment of moral reasoning that there it was not covered in his policy because
damages. The law could not have meant to impose a penalty there was no severance of amputation of the left hand
on the right to litigate; such right is so precious that moral  Trial Court: absolved the defendants
damages may not be charged on those who may exercise it 
erroneously. For these the law taxes costs.” ISSUE: W/N Ty can claim

If a party wins, he cannot, as a rule, recover attorney's fees


and litigation expenses, since it is not the fact of winning HELD: NO. Affirmed.
alone that entitles him to recover such damages of the  can not go beyond the clear and express conditions of the
exceptional circumstances enumerated in Art. 2208. insurance policies, all of which define partial disability as loss
Otherwise, every time a defendant wins, automatically the of either hand by amputation through the bones of the wrist
plaintiff must pay attorney's fees thereby putting a premium
on the right to litigate which should not be so. For

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25
 Note that the disability of plaintiff's hand was merely Held:
temporary, having been caused by fracture of the index, the Yes. The circumstances of Basilio’s death cannot be taken as
middle and the fourth fingers of the left hand purely intentional on the part of Basilio to expose himself to the
 agreement contained in the insurance policies is the law danger. There is no proof that his death was the result of intentional
between the parties killing because there is the possibility that the malefactor had fired the
shot merely to scare away the people around. In this case, the
Calanoc v CA, GR 81 51 , 16 Dec,ember 1955 company’s defense points out that Basilio’s is included among the risks
excluded in the supplementary contract; however, the terms and
Doctrine: In case of ambiguity in an insurance contract covering phraseology of the exception clause should be clearly expressed within
accidental death, the Supreme Court held that such terms shall be the understanding of the insured. Art. 1377 of the New Civil Code
construed strictly against the insurer and liberally in favor of the provides that in case ambiguity, uncertainty or obscurity in the
insured in order to effect the purpose of indemnity. interpretation of the terms of the contract, it shall be construed
Facts: against the party who caused such obscurity. Applying this to the
Melencio Basilio, a watchman of the Manila Auto Supply, secured a life situation, the ambiguous or obscure terms in the insurance policy are
insurance policy from the Philippine American Insurance Company in to be construed strictly against the insurer and liberally in favor of the
the amount of P2,000 to which was attached a supplemental contract insured party. The reason is to ensure the protection of the insured
covering death by accident. He later died from a gunshot wound on since these insurance contracts are usually arranged and employed by
the occasion of a robbery committed; subsequently, his widow was experts and legal advisers acting exclusively in the interest of the
paid P2,000 representing the face value of the policy. The widow insurance company. As long as insurance companies insist upon the
demanded the payment of the additional sum of P2,000 representing use of ambiguous, intricate and technical provisions, which conceal
the value of the supplemental policy which the company refused their own intentions, the courts must, in fairness to those who
because the deceased died by murder during the robbery and while purchase insurance, construe every ambiguity in favor of the insured.
making an arrest as an officer of the law which were expressly
excluded in the contract. The company’s contention which was upheld Biagtan v lnsular Life, GR L-25579,29 March 1972
by the Court of Appeals provides that the circumstances surrounding
Basilio’s death was caused by one of the risks excluded by the FACTS:
supplementary contract which exempts the company from liability.
1. Juan Biagtan was insured with defendant Insular Life Assurance
Issue: Company (Insular) under policy no. 398075 for the sum of P5,000.00
Is the Philippine American Life Insurance Co. liable to the and under a supplementary contract named “Accidental Death Benefit
petitioner for the amount covered by the supplemental Clause, for an additional sum of P5,000.00 if “death of the insured
contract? resulted directly from bodily injury effected solely through external

3 – EXECUTIVE | Ab Initio Group


26
and violent means sustained in an accident…and independently of all ISSUE:
other causes.” The clause however expressly provided that it would 1. WON the wounds received by the insured at the hands of
not apply where death resulted from an injury “intentionally inflicted the robbers – nine in all, five of them mortal and four non-
by another party.” mortal – were inflicted intentionally, hence the benefit clause
cannot apply.
2. May 20, 1964: While the said life policy and supplementary contract
were in full force and effect, the house of insured Juan Biagtan was HELD:
robbed by a band of robbers who were charged in and convicted for 1. Yes. The decision appealed from is reversed and the
robbery with homicide; that in committing the robbery, the robbers complaint dismissed.
rushed towards the door of the second floor room, where they
suddenly met a person near the door of one of the rooms who turned RATIO:
out to be Juan Biagtan who received thrusts from their sharp-pointed 1. Whether the robbers had the intent to kill or merely to scare the
instruments, causing wounds on the body of said Juan S. Biagtan victim or to ward off any defense he might offer, it cannot be denied
resulting in his death at about 7 a.m. on the same day, May 21, 1964 that the act itself of inflicting the injuries was intentional. It should be
noted that the exception in the accidental benefit clause invoked by
3. Plaintiffs, as beneficiaries of the insured, filed a claim under the the appellant does not speak of the purpose — whether homicidal or
policy. not — of a third party in causing the injuries, but only of the fact that
such injuries have been "intentionally" inflicted — this obviously to
4. Insular paid P5,000.00 but refused to pay the additional sum of distinguish them from injuries which, although received at the hands
P5,000.00 under the accidental death benefit clause, on the ground of a third party, are purely accidental.
that the insured’s death resulted from injuries intentionally inflicted by
third parties and therefore was not covered. But where a gang of robbers enter a house and coming face to face
with the owner, even if unexpectedly, stab him repeatedly, it is
5. Lower court: Rendered judgment in favor of plaintiff beneficiaries contrary to all reason and logic to say that his injuries are not
since the parties presented no evidence, there was no "proof that the intentionally inflicted, regardless of whether they prove fatal or not.
act of receiving thrust from the sharp-pointed instrument of the The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied upon
robbers was intended to inflict injuries upon the person of the insured by the trial court in support of its decision.
or any other person or merely to scare away any person so as to ward
off any resistance or obstacle that might be offered in the pursuit of For while a single shot fired from a distance, and by a person who was
their main objective which was robbery. not even seen aiming at the victim, could indeed have been fired
without intent to kill or injure, nine wounds inflicted with bladed
weapons at close range cannot conceivably be considered as innocent

3 – EXECUTIVE | Ab Initio Group


27
insofar as such intent is concerned. The manner of execution of the
crime permits no other conclusion. HELD:
NO. Petition for certiorari with restraining order and preliminary
Thus, it has been held that "intentional" as used in an accident policy injunction was denied for lack of merit.
excepting intentional injuries inflicted by the insured or any other
person, etc., implies the exercise of the reasoning faculties, RATIO:
consciousness and volition. The terms “accident” and “accidental” as used in insurance
contracts have not acquired any technical meaning, and are
Where a provision of the policy excludes intentional injury, it is the construed by the courts in their ordinary and common
intention of the person inflicting the injury that is controlling. If the acceptation. Thus, the terms have been taken to mean that
injuries suffered by the insured clearly resulted from the intentional which happen by chance or fortuitously, without intention
act of a third person the insurer is relieved from liability as stipulated. and design, and which is unexpected, unusual, and
unforeseen. An accident is an event that takes place without
Finman GeneralAssurance v CA, GR 100970, 2 September one’s foresight or expectation — an event that proceeds from
1992 an unknown cause, or is an unusual effect of a known cause
and, therefore, not expected.
FACTS: [I]t is well settled that contracts of insurance are to be
[P]etitioner filed this petition alleging grove abuse of discretion on the construed liberally in favor of the insured and strictly against
part of the appellate court in applying the principle of “expresso unius the insurer. Thus ambiguity in the words of an insurance
exclusio alterius” in a personal accident insurance policy since death contract should be interpreted in favor of its beneficiary.
resulting from murder and/or assault are impliedly excluded in said
insurance policy considering that the cause of death of the insured Qua Chee Gan v Law Union and Rock, GR L-4611,17
was not accidental but rather a deliberate and intentional act of the December 1955
assailant in killing the former as indicated by the location of the lone
stab wound on the insured. Therefore, said death was committed with FACTS:
deliberate intent which, by the very nature of a personal accident  Qua Chee Gan, a merchant of Albay, owned four bodegas which
insurance policy, cannot be indemnified. he insured with Law Union & Rock Insurance Co., Ltd (Law
Union) since 1937 and the lose made payable to the Philippine
ISSUE: National Bank (PNB) as mortgage of the hemp and crops, to
Whether or not death petitioner is correct that results from the extent of its interest
assault or murder deemed are not included in the terms  July 21, 1940 morning: fire broke out in bodegas 1,2 and 4
“accident” and “accidental”. which lasted for almost a week.

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28
 Qua Chee Gan informed Law Union by telegram insurer and liberraly in favor of the insured, specially to
 Law Union rejected alleging that it was a fraudulent claim that avoid a forfeiture
the fire had been deliberately caused by the insured or by other  3. trial Court found that the discrepancies were a result of the
persons in connivance with him insured's erroneous interpretation of the provisions of the
 Que Chee Gan, with his brother, Qua Chee Pao, and some insurance policies and claim forms, caused by his imperfect
employees of his, were indicted and tried in 1940 for the crime knowledge of English, and that the misstatements were
of arson but was subsequently acquitted innocently made and without intent to defraud.
 During the pendency of the suit, Que Chee Gan paid PNB  4. Similarly, the 20 per cent overclaim on 70 per cent of the
 Law Union states that ff. assignment of errors: hemo stock, was explained by the insured as caused by his
 1. memo of warranty requires 11 hydrants instead of 2 belief that he was entitled to include in the claim his expected
 2. violation of hemp warranty against storage of gasoline profit on the 70 per cent of the hemp, because the same was
since it prohibits oils already contracted for and sold to other parties before the fire
 3. fire was due to fraud occurred
 4. burned bodegas could not possibly have contained
the quantities of copra and hemp stated in the fire claims Del Rosario v. Equitable lnsurance and Casualty, GR L-16215,
 29 June 1963
ISSUE: W/N Qua Chee Gan should be allowed to claim.
FACTS:
 April 13, 1957: Simeon del Rosario, father of the insured who
HELD: YES. Affirmed. died from drowning filed a claim for payment with Equitable
 1. It is a well settled rule of law that an insurer which with Ins. and Casualty Co., Inc. but it refused to pay more than
knowledge of facts entitling it to treat a policy as no longer in P1,000 php so a case was filed with the RTC for the P2,000
force, receives and accepts a preium on the policy, estopped to balance stating that under the policy they are entitled to P1,000
take advantage of the forfeiture to P3,000 as indemnity
 2. oils (animal and/or vegetable and/or mineral and/or their  RTC: entitled to recover P3,000 - policy does not positively
liquid products having a flash point below 300o Fahrenheit", state any definite amount, there is an ambiguity in this respect
and is decidedly ambiguous and uncertain; for in ordinary in the policy, which ambiguity must be interpreted in favor of
parlance, "Oils" mean "lubricants" and not gasoline or kerosene the insured and strictly against the insurer so as to allow
 by reason of the exclusive control of the insurance greater indemnity
company over the terms and phraseology of the 
contract, the ambiguity must be held strictly against the ISSUE: W/N Simeon is entitled to recover P3,000

3 – EXECUTIVE | Ab Initio Group


29
HELD: YES. HELD: YES.
 terms in an insurance policy, which are ambiguous, equivocal  Section 13 thereof which is expressed in terms that are clear
or uncertain are to be construed strictly against, the insurer, and unambiguous, that all benefits under the policy shall be
and liberally in favor of the insured so as to effect the dominant forfeited "If the claim be in any respect fraudulent, or if any
purpose of indemnity or payment to the insured, especially false declaration be made or used in support thereof, or if any
where a forfeiture is involved fraudulent means or devises are used by the Insured or anyone
 reason for this rule is that the "insured usually has no voice in acting in his behalf to obtain any benefit under the policy"
the selection or arrangement of the words employed and that  Robert Garcia then executed an affidavit before the National
the language of the contract is selected with great care and Intelligence and Security Authority (NISA) to the effect that he
deliberation by expert and legal advisers employed by, and was not the lessee of Verendia's house and that his signature
acting exclusively in the interest of, the insurance company on the contract of lease was a complete forgery.
 Worse yet, by presenting a false lease contract, Verendia,
Verendia v CA, GR 75605, 22 January 1993 reprehensibly disregarded the principle that insurance
contracts are uberrimae fidae and demand the most abundant
FACTS: good faith
 Rafael (Rex) Verendia's residential building was insured
with Fidelity and Surety Insurance Company, Country Bankers Fortune lnsurance v CA, GR 115278,23 May 1995
Insurance and Development Insurance with Monte de Piedad &
Savings Bank as beneficiary Facts:
 December 28, 1980 early morning: the building was completely Producers Bank’s money was stolen while it was being transported
destroyed by fire from Pasay to Makati. The people guarding the money were charged
 Fidelity refused the claim stating that there was with the theft. The bank filed a claim for the amount of Php 725,000,
a misrepresentation since the lessee was not Roberto Garcia and such was refused by the insurance corporation due to the
but Marcelo Garcia stipulation:
 trial court: favored Fidelity GENERAL EXCEPTIONS
 CA: reversed 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
ISSUE: W/N there was false declaration which would forfeit insured or any officer, employee, partner, director, trustee or
his benefits under Section 13 of the policy authorized representative of the Insured whether acting alone or in
conjunction with others. . . .

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30
In the trial court, the bank claimed that the suspects were not any of They cited a case where an employee-employer relationship was
the above mentioned. They won the case. The appellatecourt affirmed governed by (1) the selection and engagement of the employee; (2)
on the basis that the bank had no power to hire or dismiss the guard the payment of wages; (3) the power of dismissal; and (4) the power
and could only ask for replacements from the security agency. to control the employee's conduct.
The case was governed by Article 174 of the Insurance Code where it
Issue: Did the guards fall under the general exceptions clause stated that casualty insurance awarded an amount to loss cause by
of the insurance policy and thus absolved the insurance accident or mishap.
company from liability? “The term "employee," should be read as a person who qualifies as
such as generally and universally understood, or jurisprudentially
Held: Yes to both. Petition granted. established in the light of the four standards in the determination of
the employer-employee relationship, or as statutorily declared even in
Ratio: a limited sense as in the case of Article 106 of the Labor Code which
The insurance agency contended that the guards automatically considers the employees under a "labor-only" contract as employees
became the authorized representatives of the bank when they of the party employing them and not of the party who supplied them
cited International Timber Corp. vs. NLRC where a contractor is a to the employer.”
"labor-only" contractor in the sense that there is an employer- But even if the contracts were not labor-only, the bank entrusted the
employee relationship between the owner of the project and the suspects with the duty to safely transfer the money to its head office,
employees of the "labor-only" contractor. thus, they were representatives. According to the court, “a
They cited Art. 106. Of the Labor Code which said: ‘representative’ is defined as one who represents or stands in the place
Contractor or subcontractor. — There is "labor-only" contracting of another; one who represents others or another in a special capacity,
where the person supplying workers to an employer does not have as an agent, and is interchangeable with ‘agent.’”
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 Misamis Lumber v Capital lnsurance, GR L-21380, 20 May
related to the principal business of such employer. In such cases, the 1996
person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same FACTS:
manner and extent as if the latter were directly employed by him.  Misamis Lumber Corporation (Misamis), formerly Lanao Timber
The bank asserted that the guards were not its employees since it had Mills, Inc., insured its Ford Falcon motor car with Capital
nothing to do with their selection and engagement, the payment of Insurance & Surety Company (Capital)
their wages, their dismissal, and the control of their conduct.

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31
 November 25, 1961 11 pm: The car broke when it hit a hollow
block lying alongside the water hole which the driver did not
see because the on-coming car did not dim its light
 The car was towed and repaired by Morosi Motors
costing P302.27
 November 29, 1961: After the repairs were made, Misamis
made a report to Capital who only admits liability of P150
 CFI: paragraph 4 of the policy is clear and specific and leaves
no room for interpretation that the repair liability is limited to
P150

ISSUE: W/N Misamis is entitled to an amount exceeding P150

HELD: NO.
 insurance contract may be rather onerous (one-sided) but that
in itself does not justify the abrogation of its express terms,
terms which the insured accepted or adhered to and which is
the law between the contracting parties

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32