FEDERAL EXPRESS CORPORATION VS. AMERICAN HOME ASSURANCE COMPANY, ET. AL.

G.R. No. 150094

August 18, 2004
Ponente: Panganiban
Nature of Case: Subrogation of rights

FACTS:

Shipper SMITHKLINE USA delivered to carrier Burlington Air Express, an agent of herein petitioner, a cargo shipment,
insured with respondent which consists of 109 cartons of veterinary biologicals for delivery to consignee
SMITHKLINE and French Overseas Company in Makati City with the words, ‘REFRIGERATE WHEN NOT IN TRANSIT’
and ‘PERISHABLE’ stamp marked on its face however 12 days after the cargoes arrived in Manila it was found out
that the same were stored only in a room with 2 air conditioners running in the warehouse of Cargohaus Inc., to cool
the place instead of a refrigerator.

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

ISSUE:

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

HELD:

No. Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt in favor of
respondents authorizing them “to file claims and begin suit against any such carrier, vessel, person, corporation or
government.” Undeniably, the consignee had a legal right to receive the goods in the same condition it was delivered
for transport to petitioner and if that right was violated, the consignee would have a cause of action against the
person responsible therefor.

In the exercise of its subrogatory right, an insurer may proceed against an erring carrier and to all intents and
purposes, it stands in the place and in substitution of the consignee.

WHEREFORE, the Petition is GRANTED, and the assailed Decision REVERSED insofar as it pertains to Petitioner
Federal Express Corporation. No pronouncement as to costs.

ETERNAL GARDENS MEMORIAL PARK CORPORATION vs. THE PHILIPPINE AMERICAN LIFE INSURANCE
COMPANY
G.R. No. 166245 09 April 2008

Facts:

Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy with petitioner. Under
the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife.
Among those insured was John Chuang who died with a balance of payments pf PhP100,000.00. More than a year
after complying with the required documents, Philamlife had not furnished Eternal with any reply to the latter’s
insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000 on April
25, 1986. Only then did Philamlife respond that the deceased was not covered by the Policy.

The RTC said that since the contract is a group life insurance, once proof of death is submitted, payment must
follow. The CA ruled that the non-accomplishment of the submitted application form violated Section 26 of the
Insurance Code. Thus, the CA concluded, there being no application form, Chuang was not covered by Philamlifes
insurance.

Issue:
May the inaction of the insurer on the insurance application be considered approval of the application?

Ruling:

Yes. As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy
No. P-1920 dated December 10, 1980. In the policy, it is provided that:

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured.
However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.

An examination of the above provision would show ambiguity between its two sentences. A contract of insurance,
being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer. Moreover,
the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be
interpreted as a termination of the insurance contract. The termination of the insurance contract by the insurer must
be explicit and unambiguous.

Manila Mahogany v. Court of Appeals

G.R. No. L-52756, 12 October 1987, 154 SCRA 650

FACTS:

Petitioner insured its Mercedes Benz 4-door sedan with respondent insurance company . The insured vehicle was
bumped and damaged by a truck owned by San Miguel Corporation (SMC). For the damage caused, respondent
company paid petitioner ₱ 5,000.00 in amicable settlement. Petitioner’s general manager executed a Release of
Claim, subrogating respondent company to all its right to action against San Miguel Corp. Respondent company
wrote the Insurer Adjusters, Inc. to demand reimbursements from San Miguel Corporation of the amount it had paid
petitioner. Insurer Adjusters, Inc. refused reimbursement alleging that SMC had already paid petitioner ₱ 4,500.00
for the damages to petitioner’s motor vehicle, as evidenced by a cash voucher and Release of Claim executed by the
General Manager of petitioner discharging SMC from “ all actions, claims, demands the right of action that now exist
or hereafter develop arising out of or as a consequence of the accident.

Respondent demanded the ₱ 4,500.00 amount from petitioner. Petitioner refused. Suit was filed for recovery. City
Court ordered petitioner to pay respondent. CFI affirmed. CA affirmed with modification that petitioner was to pay
respondent the total amount of ₱ 5,000.00 it had received from respondent.

Petitioner’s argument: Since the total damages were valued at P9,486.43 and only ₱ 5,000.00 was received by
petitioner from respondent, petitioner argues that it was entitled to go after SMC to claim the additional which was
eventually paid to it.

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

ISSUE:

Whether or not the insured should pay the insurer despite that the subrogation in the Release of Claim was
conditioned on recovery of the total amount of damages that the insured has sustained.

RULING:

NO. Supreme Court said there being no other evidence to support its allegation that a gentleman’s agreement
existed between the parties, not embodied in the Release of Claim, such Release of Claim must be taken as the best
evidence of the intent and purpose of the parties. CA was correct in holding petitioner should reimburse respondent
₱ 5,000.00.

When Manila Mahogany executed another release claim discharging SMC from all rights of action after the insurer
had paid the proceeds of the policy – the compromise agreement of ₱ 5,000.00– the insurer is entitled to recover
from the insured the amount of insurance money paid. Petitioner by its own acts released SMC, thereby defeating
respondent’s right of subrogation, the right of action against the insurer was also nullified.

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

Enriquez v. Sun Life Assurance Co. of Canada

G.R. No. L-15895, 29 November 1920, 41 Phil. 269

FACTS:

On Sept. 24 1917, Herrer made an application to SunLife through its office in Manila for life annuity. Two (2) days
later, he paid the sum of 6T to the company’s manager in its Manila office and was given a receipt.

On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On the same date, the Manila office
prepared a letter notifying Herrer that his application has been accepted and this was placed in the ordinary channels
of transmission, but as far as known was never actually mailed and never received by Herrer. Herrer died on Dec. 20,
1917. The plaintiff as administrator of Herrer’s estate brought this action to recover the 6T paid by the deceased.

September 24, 1917: Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its
office in Manila for a life annuity
2 days later: he paid P6,000 to the manager of the company's Manila office and was given a receipt
according to the provisional receipt, 3 things had to be accomplished by the insurance company before there was a
contract:
(1) There had to be a medical examination of the applicant; -check
(2) there had to be approval of the application by the head office of the company; and - check
(3) this approval had in some way to be communicated by the company to the applicant - ?
November 26, 1917: The head office at Montreal, Canada gave notice of acceptance by cable to Manila but this was
not mailed
December 4, 1917: policy was issued at Montreal
December 18, 1917: attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired
to withdraw his application
December 19, 1917: local office replied to Mr. Torres, stating that the policy had been issued, and called attention to
the notification of November 26, 1917
December 21, 1917 morning: received by Mr. Torres
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
RTC: favored Sun Life Insurance

ISSUES:

Whether or not the insurance contract was perfected.

HELD:

NO. The contract for life annuity was NOT perfected because it had NOT been proved satisfactorily that the
acceptance of the application ever came to the knowledge of the applicant. An acceptance of an offer of insurance
NOT actually or constructively communicated to the proposer does NOT make a contract of insurane, as the locus
poenitentiae is ended when an acceptance has passed beyond the control of the party.

Great Pacific v CA G.R. No. L-31845 April 30, 1979

J. De Castro

FACTS:
Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the amount of P50,000.00
on the life of his one-year old daughter Helen. He supplied the essential data which petitioner Mondragon, the
Branch Manager, wrote on the form. The latter paid the annual premium the sum of P1,077.75 going over to the
Company, but he retained the amount of P1,317.00 as his commission for being a duly authorized agent of Pacific
Life.
Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing. Likewise, petitioner
Mondragon handwrote at the bottom of the back page of the application form his strong recommendation for the
approval of the insurance application. Then Mondragon received a letter from Pacific Life disapproving the insurance
application. The letter stated that the said life insurance application for 20-year endowment plan is not available for
minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan, and
advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to
private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly
recommending the approval of the 20-year endowment insurance plan to children, pointing out that since the
customers were asking for such coverage.
Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but having failed in his
effort, he filed the action for the recovery before the Court of First Instance of Cebu, which ruled against him.

ISSUES:
1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in question
2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered void the
policy

HELD:
No. Yes. Petition dismissed.

The receipt was intended to be merely a provisional insurance contract. Its perfection was subject to compliance of
the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates;
(2) that if the company does not accept the application and offers to issue a policy for a different plan, the insurance
contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be refunded;
and (3) that if the company disapproves the application, the insurance applied for shall not be in force at any time,
and the premium paid shall be returned to the applicant.
The receipt is merely an acknowledgment that the latter's branch office had received from the applicant the
insurance premium and had accepted the application subject for processing by the insurance company. There was
still approval or rejection the same on the basis of whether or not the applicant is "insurable on standard rates."
Since Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in
question had never become in force at any time. The binding deposit receipt is conditional and does not insure
outright. This was held in Lim v Sun.
The deposit paid by private respondent shall have to be refunded by Pacific Life.
2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he supplied data, he was
fully aware that his one-year old daughter is typically a mongoloid child. He withheld the fact material to the risk
insured.
“The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and perfect
candor or openness and honesty; the absence of any concealment or demotion, however slight.”
The concealment entitles the insurer to rescind the contract of insurance.