Case Digests Insurance

Insurance Cases
Eternal Gardens Memorial Park Corporation vs. Philamlife denied the insurance claim alleging that since no
Phil. American Life Insurance Co., GR No. 166245, application had been submitted by the Insured/assured
09 April 2008 prior to his death, but only after his death, Chuang was not
covered under the Policy. This prompted Eternal to file a
case for a sum of money against Philamlife.
FACTS: Respondent PhilamLife entered into an
agreement denominated as Creditor Group Life Policy with RTC : ruled in favor of Eternal. Found that Eternal
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petitioner Eternal. Under the policy, the clients of Eternal submitted Chuang’s application before his death and that
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who purchased burial lots from it on installment basis Philamlife’s inaction from the submission of the
should be insured by Philamlife. The amount of the requirements of the group insurance to Chuang’s death, as
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insurance coverage depended upon the existing balance of well as its acceptance of the premiums during the same
the purchased burial lots. On the provision regarding the period, Philamlife was deemed to have approved Chuang’s
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effective date of benefit, it was stated that “the insurance of application.
any eligible Lot Purchaser shall be effective on the date he
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contracts a loan with the Assured. However, there shall be CA : Reversed the RTC and dismissed the case. Ruled that
no insurance if the application of the Lot Purchaser is not
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Chuang’s application was not enclosed in Eternal’s letter.
approved by the Company.” There being no application form, Chuang was not covered
by Philamlife’s insurance.
Under the policy, Eternal has to submit to Philamlife a list
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of all new purchasers, together with a copy of the ISSUE: May the inaction of the insurer on the insurance
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application of each purchaser, and the amounts of the application be considered as approval of the application? /
respective unpaid balances of all insured lot purchasers. In Whether Philamlife assumed the risk of loss without
Dec. 29, 1982, Eternal submitted a letter containing a list of approving the application
insurable balances of its lot buyers, including one for a
certain John Chuang. On August 2, 1984, John Chuang RULING: YES. The policy stated that “the insurance of
died, leaving a balance of Php 100,000.00. Thus, Eternal any eligible Lot Purchaser shall be effective on the date he
sent a letter to Philamlife as the insurance claim for contracts a loan with the Assured. However, there shall be
Chuang’s death, along with the required forms/documents. no insurance if the application of the Lot Purchaser is not
A year has lapsed and Philamlife never replied to Eternal’s approved by the Company.”
insurance claim, prompting Eternal to demand from
Philamlife the payment of the claim. It must be remembered that an insurance contract is a
contract of adhesion which must be construed liberally in
EM Briones Page 1 of 54 Commercial Law Review 2019-2020

Insurance Cases
favor of the insured and strictly against the insurer in order

to safeguard the latter's interest.
An examination of the above provision would show

ambiguity between its two sentences. The first sentence
appears to state that the insurance coverage of the clients of
Eternal already became effective upon contracting a loan
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with Eternal while the second sentence appears to require
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Philamlife to approve the insurance contract before the
same can become effective.
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The seemingly conflicting provisions must be harmonized
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to mean that upon a party's purchase of a memorial lot on
installment from Eternal, an insurance contract covering
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the lot purchaser is created and the same is effective, valid,
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and binding until terminated by Philamlife by disapproving
the insurance application. The second sentence of Creditor
Group Life Policy No. P-1920 on the Effective Date of
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Benefit is in the nature of a resolutory condition which
would lead to the cessation of the insurance contract.
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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.

Insurance Cases
Philamcare Health Systems, Inc. vs. Court of an action for damages against petitioner and its
Appeals, President, Dr. Benito Reverente. Both the trial court and
379 SCRA 356, G.R. No. 125678, March 18, 2002 CA ruled against PhilamCare.
Exception to rule that concealment avoids a policy; Petitioner’s arguments:
insurable interest 1. The agreement grants “living benefits” which a member
may immediately enjoy so long as he is alive upon
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FACTS: Ernani Trinos, decesed husband of respondent effectivity of the agreement until its expiration one-year
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Julita Trinos, applied for a health case coverage with thereafter.
Petitioner Philamcare. In the application form, he 2. Only medical and hospitalization bene︎fits are given
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answered ‘no’ to the following question: “have you or any
under the agreement without any indemnification,
of your family members ever consulted or been treated for
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unlike in an insurance contract where the insured is
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high blood pressure, heart trouble, diabetes, cancer, liver
indemnified for his loss.
disease, asthma or peptic ulcer? (if Yes, give details).” The
3. Since Health Care Agreements are only for a period of
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application was approved for one year, until March 1989,
one year, as compared to insurance contracts which last
which was extended until June 1, 1990. Under the
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agreement, respondent’s husband was entitled to avail of longer, petitioner argues that the incontestability clause
hospitalization benefits, whether ordinary or emergency, as does not apply, as the same requires an effectivity
well as “out-patient benefits” such as annual physical period of at least two years.
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examinations, preventive health case and other out-patient 4. It is not an insurance company, which is governed by
the Insurance Commission, but a Health Maintenance
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services.
Organization under the authority of the Department of
During the period of his coverage, Ernani suffered a heart Health.
attack. While Ernani was confined in the hospital, 5. Respondent was not the legal wife of the deceased
respondent Julita tried to claim the benefits under the member since the deceased was previously married to
health care agreement, which was denied by petitioner another woman at the time of their marriage.
saying that the Health Care Agreement was void. According
to petitioner, there was a concealment regarding Ernani’s ISSUE: Whether Philamcare is liable for damages
medical history, as it was allegedly discovered at the time of
Ernani’s confinement that he was hypertensive, diabetic RULING: YES. Section 2 (1) of the Insurance Code defines
and asthmatic, contrary to his answer in the application a contract of insurance as an agreement whereby one
form. Thus, respondent paid the hospitalization expenses undertakes for a consideration to indemnify another
herself. In 1990, Ernani died. Respondent then instituted against loss, damage or liability arising from an unknown

Insurance Cases
or contingent event. Section 3 of the Insurance Code states contract. In this case, no rescission was made. Besides, the
that any contingent or unknown event, whether past or cancellation of health care agreements as in insurance
future, which may damnify a person having an insurable policies require the concurrence of the following
interest against him, may be insured against. Every person conditions:
has an insurable interest in the life and health of himself.
1. Prior notice of cancellation to insured;
In the case at bar, the insurable interest of respondent's
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husband in obtaining the health care agreement was his 2. Notice must be based on the occurrence after effective
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own health. The health care agreement was in the nature of date of the policy of one or more of the grounds
non-life insurance, which is primarily a contract of mentioned;
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indemnity. Once the member incurs hospital, medical or
any other expense arising from sickness, injury or other 3. Must be in writing, mailed or delivered to the insured
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stipulated contingent, the health care provider must pay for at the address shown in the policy;
the same to the extent agreed upon under the contract.
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4. Must state the grounds relied upon provided in
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The answer assailed by petitioner was in response to the Section 64 of the Insurance Code and upon request of
question relating to the medical history of the applicant. insured, to furnish facts on which cancellation is
This largely depends on opinion rather than fact, especially based.
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coming from respondent's husband who was not a medical
doctor. Where matters of opinion or judgment are called None of the above pre-conditions was fulfilled in this case.
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for, answers made in good faith and without intent to When the terms of insurance contract contain limitations
deceive will not avoid a policy even though they are untrue. on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his
The fraudulent intent on the part of the insured must be obligation. Being a contract of adhesion, the terms of an
established to warrant rescission of the insurance contract. insurance contract are to be construed strictly against the
Concealment as a defense for the health care provider or party which prepared the contract — the insurer.
insurer to avoid liability is an affirmative defense and the
duty to establish such defense by satisfactory and Re: the incontestability of the membership of respondent’s
convincing evidence rests upon the provider or insurer. husband:
Under Section 27 of the Insurance Code, "a concealment (U)nder the title Claim procedures of expenses, the
entitles the injured party to rescind a contract of defendant Philamcare Health Systems Inc. had twelve
insurance." The right to rescind should be exercised months from the date of issuance of the Agreement within
previous to the commencement of an action on the which to contest the membership of the patient if he had

Insurance Cases
previous ailment of asthma, and six months from the

issuance of the agreement if the patient was sick of diabetes
or hypertension. The periods having expired, the defense of
concealment or misrepresentation no longer lie.
Re: Petitioner’s allegation that respondent was not the legal

wife
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Finally, petitioner alleges that respondent was not the legal
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wife of the deceased member considering that at the time of
their marriage, the deceased was previously married to
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another woman who was still alive. The health care
agreement is in the nature of a contract of indemnity.
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Hence, payment should be made to the party who incurred
the expenses. It is not controverted that respondent paid all
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the hospital and medical expenses. She is therefore entitled
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to reimbursement. The records adequately prove the
expenses incurred by respondent for the deceased's
hospitalization, medication and the professional fees of the
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attending physicians.
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Insurance Cases
Asian Terminals, Inc. v. First Lepanto-Taisho

Insurance Corp., PROVEN denied any liability and averred that the
G.R. No. 185964, June 16, 2014 complaint alleged no specific acts or omissions that makes
it liable for damages. It claimed that the damages were
Subrogation; Non-presentation of insurance contract not sustained before they were withdrawn from ATI’s custody,
fatal for reimbursement as subrogee and that it exercised due diligence and prudence in
handling the shipment.
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FACTS: 3,000 bags of sodium tripolyphosphate contained
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in 100 jumbo bags complete and in good condition were COSCO and SMITH BELL failed to file an answer.
loaded and received on board M/V Da Feng owned by
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COSCO in favor of consignee, GASI. Based on a Certificate MeTC dismissed the complaint. It absolved ATI and
of Insurance, the shipment was insured against all risks by PROVEN from any liability and found COSCO to be the
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GASI with FIRST LEPANTO. Upon arrival of the shipment party at fault and hence liable for the loss/damage.
in Manila, the same was discharged into the possession and however, since COSCO is a foreign corporation, MeTC ruled
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custody of ATI, a domestic corporation engaged in arrestre that it has no jurisdiction over COSCO.
business. The shipment was stored in ATI’s storage area for
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some time until it was withdrawn by broker, PROVEN, for RTC reversed MeTC’s ruling. Ruled that ATI was unable to
delivery to GASI. FIRST LEPANTO paid GASI insurance prove it exercised due diligence and hence, negligent and
indemnity for the loss, after GASI’s claim against SMITH
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should be held liable for the damages. RTC observed that
BELL (COSCO’s Philippine agent), ATI and PROVEN was the Request for Bad Order Survey and the Turn Over
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denied. FIRST LEPANTO, subrogated to all the rights of Survey of Bad Cargo were prepared only two weeks after
recovery and claims of GASI, demanded from COSCO, ATI’s receipt of the shipment, thus, ATI’s contentions were
SMITH BELL, PROVEN and ATI, reimbursement of the belied by its own documentary evidence.
amount it paid to GASI. As FIRST LEPANTO’s demands
were left unheeded, it then filed a Complaint for sum of ATI appealed to the CA, alleging that there was no valid
money against them. subrogation because FIRST LEPANTO failed to present a
valid, existing and enforceable Marine Open Policy of
ATI denied liability, claiming it exercised due diligence and insurance contract. CA dismissed the appeal.
care in handling the same. It averred that upon the arrival
of the shipment, one jumbo bag was discovered to have ISSUE: Whether the presentation of the insurance policy
sustained loss/damage while in the custody of COSCO, and is indispensable in proving the right of FIRST LEPANTO to
that all the shipment, including that one damaged jumbo be subrogated to the right of the consignee
bag, were withdrawn by PROVEN.

Insurance Cases
RULING: NO. It is conspicuous from the records that ATI dispensable evidence in reimbursement claims instituted
put in issue the submission of the insurance contract for by the insurer.
the first time before the CA. Despite opportunity to study
FIRST LEPANTO's complaint before the MeTC, ATI failed It is already settled that the loss/damage to the GASI's
to allege in its answer the necessity of the insurance shipment occurred while they were in ATI's custody,
contract. Neither was the same considered during pre-trial possession and control as arrastre operator. Verily, the
as one of the decisive matters in the case. Further, ATI Certificate of Insurance and the Release of Claim presented
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never challenged the relevancy or materiality of the as evidence sufficiently established FIRST LEPANTO's
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Certificate of Insurance presented by FIRST LEPANTO as right to collect reimbursement as the subrogee of the
evidence during trial as proof of its right to be subrogated consignee, GASI.
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in the consignee's stead. Since it was not agreed during the
pre-trial proceedings that FIRST LEPANTO will have to With ATI's liability having been positively established, to
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prove its subrogation rights by presenting a copy of the strictly require the presentation of the insurance contract
insurance contract, ATI is barred from pleading the will run counter to the principle of equity upon which the
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absence of such contract in its appeal. doctrine of subrogation is premised. Subrogation is
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designed to promote and to accomplish justice and is the
At any rate, the non-presentation of the insurance contract mode which equity adopts to compel the ultimate payment
is not fatal to FIRST LEPANTO's right to collect of a debt by one who in justice, equity and good conscience
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reimbursement as the subrogee of GASI. ought to pay.
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"Subrogation is the substitution of one person in the place The payment by the insurer to the insured operates as an
of another with reference to a lawful claim or right, so that equitable assignment to the insurer of all the remedies
he who is substituted succeeds to the rights of the other in which the insured may have against the third party whose
relation to a debt or claim, including its remedies or negligence or wrongful act caused the loss. The right of
securities." subrogation is not dependent upon, nor does it grow out of
any privity of contract or upon payment by the insurance
As a general rule, the marine insurance policy needs to be company of the insurance claim. It accrues simply upon
presented in evidence before the insurer may recover the payment by the insurance company of the insurance claim.
insured value of the lost/damaged cargo in the exercise of
its subrogatory right. Nevertheless, the rule is not
inflexible. In certain instances, the Court has admitted
exceptions by declaring that a marine insurance policy is

Insurance Cases
Cha vs. Court of Appeals, insurance proceeds/ Whether paragraph 18 of the lease
277 SCRA 690, G.R. No. 124520, August 18, 1997 contract is valid.
Insurable interest; Insurable interest in property must RULING: NO. A non-life insurance policy such as the ︎re
exist at the time the insurance takes effect and at the time
insurance policy taken by petitioner- spouses over their
the loss occurs.
merchandise is primarily a contract of indemnity. Insurable
interest in the property insured must exist at the time the
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FACTS: Petitioner Spouses Cha, as Lessees, entered into a
insurance takes effect and at the time the loss occurs. The
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lease contract with CKS, as lessor. One of the stipulations of
basis of such requirement of insurable interest in property
the contract states “18. . . . The LESSEE shall not insure
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insured is based on sound public policy: to prevent a
against ︎re the chattels, merchandise, textiles, goods and
person from taking out an insurance policy on property
effects placed at any stall or store or space in the leased
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upon which he has no insurable interest and collecting the
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premises without first obtaining the written consent and proceeds of said policy in case of loss of the property.
approval of the LESSOR. If the LESSEE obtain(s) the
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insurance thereof without the consent of the LESSOR then In the present case, it cannot be denied that CKS has no
the policy is deemed assigned and transferred to the
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insurable interest in the goods and merchandise inside the
LESSOR for its own benefit; . . ." leased premises under the provisions of Section 17 of the
Insurance Code.
Spouses Cha insured against loss by fire their merchandise
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inside the leased premises with United Insurance Co. Therefore, respondent CKS cannot, under the Insurance
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without the consent of private respondent CKS. On the day Code — a special law — be validly a beneficiary of the ︎re
the contract was about to expire, fire broke out inside the
insurance policy taken by the petitioner-spouses over their
premises. CKS learned of the insurance procured by
merchandise. This insurable interest over said merchandise
Spouses Cha, so it wrote a letter to the insurer United,
remains with the insured, the Cha spouses. The automatic
demanding that the proceeds of the insurance contract be
assignment of the policy to CKS under the provision of the
paid directly to CKS, based on the lease contract with Cha.
lease contract previously quoted is void for being contrary
United refused to pay CKS, prompting the latter to file a
to law and/or public policy. The proceeds of the ︎re
complaint against the Cha spouses and United.
insurance policy thus rightfully belong to the spouses Nilo
RTC and CA ruled in favor of CKS.
Cha and Stella Uy-Cha (herein co-petitioners). The insurer
(United) cannot be compelled to pay the proceeds of the ︎re
ISSUE: Whether the insurance contract procured by
Spouses Cha is deemed assigned or transferred to CKS, as insurance policy to a person (CKS) who has no insurable
provided under their lease contract, thus, entitled to the interest in the property insured.

Insurance Cases
Gaisano Cagayan, Inc. vs. Insurance Company of vendor until the purchase price is fully paid", IMC and LSPI
North America retained ownership of the delivered goods and must bear
490 SCRA 286, G.R. No. 147839, June 8, 2006 the loss.
CA reversed and set aside RTC’s ruling. It ruled that

FACTS: IMC, maker of Wrangler Blue Jeans, and LSPI, petitioner's obligation to IMC and LSPI is not the delivery
local distributor of products owned by Levi Strauss & Co., of the lost goods but the payment of its unpaid account and
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separately contained from respondent fire insurance as such the obligation to pay is not extinguished, even if the
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policies with book debt endorsements. The insurance ︎re is considered a fortuitous event; that by subrogation, the
policies provide for coverage on "book debts in connection
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insurer has the right to go against petitioner.
with ready-made clothing materials which have been sold
or delivered to various customers and dealers of the
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ISSUE: Whether respondent may claim reimbursement
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Insured anywhere in the Philippines.” The policies de︎ned
against petitioner/ Is petitioner liable for the unpaid
book debts as the "unpaid account still appearing in the accounts?
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Book of Account of the Insured 45 days after the time of the
loss covered under this Policy."
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RULING: YES. With respect to IMC, the respondent has
adequately established its claim. The subrogation receipt,
Petitioner is a customer and dealer of the products of IMC by itself, is sufficient to establish not only the relationship
and LSPI. In February 1991, Gaisano Superstore Complex
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of respondent as insurer and IMC as the insured, but also
in Cagayan de Oro City, owned by petitioner, was the amount paid to settle the insurance claim. The right of
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consumed by fire. Included in the items lost or destroyed subrogation accrues simply upon payment by the insurance
were stock of ready-made clothing materials sold and company of the insurance claim.
delivered by IMC and LSPI. Respondent, which was
subrogated to the rights of IMC and LSPI, demands As to LSPI, respondent failed to present sufficient evidence
payment from petitioner which were unheeded. Thus, to prove its cause of action. No evidentiary weight can be
respondent filed a complaint for damages.
given to Exhibit "F Levi Strauss", a letter dated April 23,
1991 from petitioner's General Manager, Stephen S.
RTC dismissed the complaint. It held that the fire was
Gaisano, Jr., since it is not an admission of petitioner's
purely accidental; that it has not been established that
unpaid account with LSPI. It only con︎rms the loss of Levi's
petitioner is the debtor of IMC and LSPI; that since the
sales invoices state that "it is further agreed that merely for products in the amount of P535,613.00 in the ︎re that razed
purpose of securing the payment of purchase price, the petitioner's building on February 25, 1991.
above-described merchandise remains the property of the

Insurance Cases
title, but whether insured has substantial economic interest

The questioned insurance policies provide coverage for in the property.
"book debts in connection with ready-made clothing
materials which have been sold or delivered to various Therefore, an insurable interest in property does not
customers and dealers of the Insured anywhere in the necessarily imply a property interest in, or a lien upon, or
Philippines."; and de︎ned book debts as the "unpaid account possession of, the subject matter of the insurance, and
still appearing in the Book of Account of the Insured 45 neither the title nor a beneficial interest is requisite to the
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days after the time of the loss covered under this Policy." existence of such an interest, it is sufficient that the insured
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Nowhere is it provided in the questioned insurance policies is so situated with reference to the property that he would
be liable to loss should it be injured or destroyed by the
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that the subject of the insurance is the goods sold and
delivered to the customers and dealers of the insured. Thus, peril against which it is insured. Anyone has an insurable
interest in property who derives a bene︎t from its existence
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what were insured against were the accounts of IMC and
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LSPI with petitioner which remained unpaid 45 days after or would suffer loss from its destruction. Indeed, a vendor
the loss through fire, and not the loss or destruction of the or seller retains an insurable interest in the property sold so
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goods delivered. long as he has any interest therein, in other words, so long
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as he would suffer by its destruction, as where he has a
Section 13 of our Insurance Code defines insurable interest vendor's lien. In this case, the insurable interest of IMC
as "every interest in property, whether real or personal, or and LSPI pertain to the unpaid accounts appearing in their
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any relation thereto, or liability in respect thereof, of such Books of Account 45 days after the time of the loss covered
nature that a contemplated peril might directly damnify the
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by the policies.
insured." Parenthetically, under Section 14 of the same Thus, whether fire is a fortuitous event or petitioner was
Code, an insurable interest in property may consist in: (a) negligent are matters immaterial to this case. What is
an existing interest; (b) an inchoate interest founded on relevant here is whether it has been established that
existing interest; or (c) an expectancy, coupled with an petitioner has outstanding accounts with IMC and LSPI.
existing interest in that out of which the expectancy arises.
IMC and LSPI did not lose complete interest over the
goods. They have an insurable interest until full payment of
the value of the delivered goods. Unlike the civil law
concept of res perit domino, where ownership is the basis
for consideration of who bears the risk of loss, in property
insurance, one's interest is not determined by concept of

Insurance Cases
Sun Life of Canada [Philippines], Inc. vs. Sibya,

793 SCRA 45, G.R. No. 211212 June 8, 2016 RTC dismissed the complaint, and ruled that Atty. Jesus Jr.
did not commit material concealment and
Concealment and misrepresentation; incontestability; misrepresentation.It observed that given the disclosures
After the two-year period lapses, or when the insured dies and the waiver and authorization to investigate executed by
within the period, the insurer must make good on the Atty. Jesus Jr. to Sun Life, the latter had all the means of
policy, even though the policy was obtained by fraud, ascertaining the facts allegedly concealed by the applicant.
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concealment, or misrepresentation
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CA affirmed.
FACTS: Atty. Jesus Jr. applied for life insurance with
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petitioner. In his application, he indicated that he had ISSUE: Whether there was concealment or
sought advice for kidney problems, indicating that in 1987, misrepresentation in Atty. Jesus Jr.’s insurance application
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he underwent lithotripsy due to kidney stone at National with Sun Life
Kidney Institute. His application was approved on feb. 5,
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2001, with respondents as beneficiaries. On May 11, 2001, RULING: NO. The court previously held that Section 48
Atty. Jesus Jr. died as a result of a gunshot wound. Ma.
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serves a noble purpose, as it regulates the actions of both
Daisy then filed a Claimant’s Statement with Sun Life to the insurer and the insured. Under the provision, an
seek the death benefits of Atty. Jesus Jr., as provided in his insurer is given two years — from the effectivity of a life
insurance policy. however, Sun life denied the claim,
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insurance contract and while the insured is alive — to
alleging that the details on Atty. Jesus Jr.’s medical history discover or prove that the policy is void ab initio or is
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were not disclosed in his application. Respondents rescindible by reason of the fraudulent concealment or
reiterated their claim against petitioner, but petitioner Sun misrepresentation of the insured or his agent. After the
Life refused to heed their requests, and instead filed a two-year period lapses, or when the insured dies within the
Complaint for Rescission and prayed for Judicial period, the insurer must make good on the policy, even
confirmation of Atty. Jesus Jr.’s rescission of insurance though the policy was obtained by fraud, concealment, or
policy. misrepresentation.
In its complaint, petitioner alleged that Atty. Jesus Jr. did In the present case, Sun Life issued Atty. Jesus Jr.'s policy
not disclose his previous treatment at the NKTI in 1994 and on February 5, 2001. Thus, it has two years from its
that such undisclosed fact suggested that the insured was in issuance, to investigate and verify whether the policy was
“renal failure” and at a high risk medical condition. obtained by fraud, concealment, or misrepresentation.
consequently, had it known such fact, it would not have Upon the death of Atty. Jesus Jr., however, on May 11,
issued the insurance policy. 2001, or a mere three months from the issuance of the

Insurance Cases
policy, Sun Life loses its right to rescind the policy. As

discussed in Manila Bankers, the death of the insured
within the two-year period will render the right of the
insurer to rescind the policy nugatory. As such, the
incontestability period will now set in.
Assuming, however, for the sake of argument, that the
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incontestability period has not yet set in, the Court agrees,
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nonetheless, with the CA when it held that Sun Life failed
to show that Atty. Jesus Jr. committed concealment and
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misrepresentation. As correctly observed by the CA, Atty.
Jesus Jr. admitted in his application his medical treatment
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for kidney ailment. Moreover, he executed an authorization
in favor of Sun Life to conduct investigation in reference
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with his medical history.
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Indeed, the intent to defraud on the part of the insured
must be ascertained to merit rescission of the insurance
contract. Concealment as a defense for the insurer to avoid
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liability is an affirmative defense and the duty to establish
such defense by satisfactory and convincing evidence rests
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upon the provider or insurer. In the present case, Sun Life
failed to clearly and satisfactorily establish its allegations,
and is therefore liable to pay the proceeds of the insurance.

Insurance Cases
Geagonia vs. Court of Appeals Petitioner then filed a complaint with the Insurance
241 SCRA 152, G.R. No. 114427, February 6, 1995 Commission.
Mortgagor and Mortgagee have distinct and separate Insurance Commission ruled in favor of Petitioner. It found
insurable interests over the property that the petitioner did not violate Condition 3 as he had no
knowledge of the existence of the two ︎re insurance policies
FACTS: Petitioner is the owner of Norman’s Mart. He
obtained from the PFIC; that it was Cebu Tesing Textiles
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obtained from the private respondent Country Bankers
which procured the PFIC policies without informing him or
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Insurance Corporation a fire insurance policy, covering
securing his consent; and that Cebu Tesing Textile, as his
stock-in-trade consisting principally of dry goods such as
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creditor, had insurable interest on the stocks. These
RTW’s for men and women wear and other usual to
findings were based on the petitioner's testimony that he
assured’s business. Under the subheading entitled “Co-
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came to know of the PFIC policies only when he ︎led his
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Insurance”, petitioner declared that Mercantile Insurance
Co., was the co-insurer for P50,000.00. Contained in the claim with the private respondent and that Cebu Tesing
Textile obtained them and paid for their premiums without
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policy was Condition 3, which stated that all benefits shall
be deemed forfeited should the insured fail to notify the informing him thereof.
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insurer of the other insurance procured/effected or those
which may subsequently be effected, provided, that such Court of Appeals reversed the decision of the Insurance
condition shall not apply when the total insurance or Commission because it found that the petitioner knew of
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insurances in force at the time of the loss or damage is not the existence of the two other policies issued by the PFIC.
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more than P200,000.00.
ISSUE: Whether petitioner is precluded from recovering
Due to an accidental fire, Petitioner’s insured stock-in- from the insurance he procured from the Private
trade were completely destroyed, prompting him to file Respondent
with the private respondent the claim under the policy.
Private respondent denied the claim because it found that RULING: NO. As to a mortgaged property, the mortgagor
at the time of the loss, the petitioner’s stock-in-trade were and the mortgagee have each an independent insurable
likewise covered by fire insurance policies issued by PFIC. interest therein and both interests may be covered by one
The PFIC policy indicate that the insured was Messrs. policy, or each may take out a separate policy covering his
Discount Mart (Mr. Armando Geagonia, Prop.), with a interest, either at the same or at separate times. The
mortgage clause. mortgagor's insurable interest covers the full value of the
mortgaged property, even though the mortgage debt is
equivalent to the full value of the property. The mortgagee's

Insurance Cases
insurable interest is to the extent of the debt, since the mortgagor and a mortgagee on the mortgaged property are
property is relied upon as security thereof, and in insuring distinct and separate. Since the two policies of the PFIC do
he is not insuring the property but his interest or lien not cover the same interest as that covered by the policy of
thereon. His insurable interest is prima facie the value the private respondent, no double insurance exists. The
mortgaged and extends only the amount of the debt, not non-disclosure then of the former policies was not fatal to
exceeding the value of the mortgaged property. Thus, the petitioner's right to recover on the private respondent's
policy. c
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separate insurances covering different insurable interests
may be obtained by the mortgagor and the mortgagee.
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Condition 3 of the private respondent's Policy No. F-14622 Furthermore, by stating within Condition 3 itself that such
condition shall not apply if the total insurance in force at
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is a condition which is not proscribed by law. Its
incorporation in the policy is allowed by Section 75 of the the time of loss does not exceed P200,000.00, the private
respondent was amenable to assume a co-insurer's liability
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Insurance Code which provides that "[a] policy may declare
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that a violation of specified provisions thereof shall avoid it, up to a loss not exceeding P200,000.00. What it had in
mind was to discourage over-insurance.
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otherwise the breach of an immaterial provision does not
avoid the policy." Such a condition is a provision which
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invariably appears in ︎re insurance policies and is intended
to prevent an increase in the moral hazard. It is commonly
known as the additional or "other insurance" clause and
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has been upheld as valid and as a warranty that no other
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insurance exists. Its violation would thus avoid the policy.
However, in order to constitute a violation, the other
insurance must be upon the same subject matter, the same
interest therein, and the same risk.
The SC ruled that the (a) the prohibition under Condition 3

applies only to double insurance; and (b) the nullity of the
policy shall only be to the extend exceeding P200,000.00
of the total policies obtained.
A double insurance exists where the same person is insured

by several insurers separately in respect of the same subject
and interest. As earlier stated, the insurable interests of a

Insurance Cases
The Insular Life Assurance Company, Ltd. v. Paz Y. respondents to file a complaint for specific
Khu, et al. performance praying among others for the declaration of
G.R. No. 195176; April 18, 2016 the reinstated policy as valid and enforceable, and that
Insular be ordered to pay unto them the proceeds of the
Reinstatement of an insurance policy should be reckoned policy.
from the date when the same was approved by the
insurer; Incontestability Insular countered that Felipe did not disclose the ailments
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(type 2 diabetes mellitus, diabetes nephropathy and
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FACTS: Felipe Khu, Sr. applied for a life insurance policy alcoholic liver cirrhosis with ascites) that he already had
with Insular Life under its Diamond Jubilee Insurance prior to his application for reinstatement of his policy; and
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Plan. In the medical questionnaire Felipe accomplished, he that it would not have reinstated the policy had Felipe
did not declare any illness or adverse medical condition. disclosed the same. Insular contended that when Felipe
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His application was subsequently approved and he was died, the policy was still contestable.
issued a Policy with a face value of 1 Million pesos. The
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policy took effect on Jun 22, 1997. In 1999, Felipe’s policy RTC and CA ruled in favor of respondents. Both courts
lapsed due to non-payment of the period covering
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ruled that the insurance was reinstated on June 22, 1999,
1999-2000. In September 1999, Felipe applied for the thus, the reinstated insurance policy had already become
reinstatement of his policy and paid the premium. The only incontestable by the time of Felipe’s death.
change made from his original application and in his
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application for reinstatement was his occupation, from Insular argued that the reinstated policy only took effect on
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being self-employed to being the Municipal Mayor or December 27, 1999, when Felipe paid the extra premium,
Misamis Oriental. Insular then advised Felipe that his thus, the 2-year incontestability period had not yet lapsed.
application for reinstatement may only be considered if he
agreed to certain conditions such as payment of additional ISSUE: Whether Felipe’s reinstated life insurance policy is
premium and cancellation of the riders, to which Felipe already incontestable at the time of his death
agreed. Thus, he paid additional premium, and paid annual
premiums until June 21, 2002. On September 22, 2001, RULING: YES. It is settled that the reinstatement of an
Felipe died. insurance policy should be reckoned from the date when
the same was approved by the insurer. In this case, the
Respondents, Felipe’s beneficiaries, filed a claim for benefit parties differ as to when the reinstatement was actually
with Insular Life under the reinstated policy. However, approved. Insular Life claims that it approved the
Insular denied the claim on the ground of concealment and reinstatement only on December 27, 1999. On the other
misrepresentation by Felipe. This prompted the hand, respondents contend that it was on June 22, 1999

Insurance Cases
that the reinstatement took effect. Based on the Letter of policy," or to the subsequent phrase "changes are made on
Acceptance and the Endorsement, the subject policy is the policy."
considered as reinstated on June 22, 1999, as held by the
CA. This finding must be upheld not only because it accords Given the obscurity of the language, the construction
with the evidence, but also because this is favorable to the favorable to the insured will be adopted by the courts.
insured who was not responsible for causing the ambiguity accordingly, the subject policy is deemed reinstated as of
or obscurity in the insurance contract. June 22, 1999.
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As expounded by the CA: The Court discerns a genuine Indeed, more than two years had lapsed from the time the
ambiguity or obscurity in the language of the two subject insurance policy was reinstated on June 22, 1999
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documents. vis-a-vis Felipe's death on September 22, 2001. As such, the
subject insurance policy has already become incontestable
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In the Letter of Acceptance, Khu declared that he was at the time of Felipe's death.
accepting "the imposition of an extra/additional . . .
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premium of P5.00 a year per thousand of insurance;
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effective June 22, 1999". It is true that the phrase as used in
this particular paragraph does not refer explicitly to the
effectivity of the reinstatement. But the Court notes that the
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reinstatement was conditioned upon the payment of
additional premium not only prospectively, that is, to cover
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the remainder of the annual period of coverage, but also
retroactively, that is for the period starting June 22, 1999.
Hence, by paying the amount of P3,054.50 on December
27, 1999 in addition to the P25,020.00 he had earlier paid
on September 7, 1999, Khu had paid for the insurance
coverage starting June 22, 1999. At the very least, this
circumstance has engendered a true lacuna.
In the Endorsement, the obscurity is patent. In the first

sentence of the Endorsement, it is not entirely clear
whether the phrase "effective June 22, 1999" refers to the
subject of the sentence, namely "the reinstatement of this

Insurance Cases
Sun Life of Canada (Phils.) vs. Sandra Tan Kit, for insurance policy on October 28, 1999, there is no truth
G.R. No. 183272, October 15, 2014 to his claim that he did not smoke cigarettes within 12
months prior to the said application. CA held that Norberto
is guilty of concealment, giving petitioner the right to
FACTS: Respondent Tan Kit is the widow and designated rescind the insurance contract.
beneficiary of Norberto, whose application for a life
insurance was granted by petitioner Sun Life in 1999. CA ordered petitioner to reimburse respondents the
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Within the 2-year contestability period, Norberto died of amount of the premium paid by Norberto, with interest
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disseminated gastric carcinoma. Consequently, respondent of 12% per annum from the time of death of the
Tan Kit filed a claim under the subject policy. insured until fully paid.
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Petitioner denied the claim on account of Norberto's failure ISSUE: Whether Petitioner is liable to pay interest on the
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to fully and faithfully disclose in his insurance application premium to be refunded to respondents
certain material and relevant information about his health
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and smoking history. Specifically, Norberto answered "No" RULING: NO. There are two kinds of interest — monetary
to the question inquiring whether he had smoked cigarettes
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and compensatory.
or cigars within the last 12 months prior to filing out said "Monetary interest refers to the compensation set by the
application. However, the medical report of Dr. Anna Chua parties for the use or forbearance of money." No such
(Dr. Chua), one of the several physicians that Norberto
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interest shall be due unless it has been expressly stipulated
consulted for his illness, reveals that he was a smoker and in writing. "On the other hand, compensatory interest
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had only stopped smoking in August 1999. Believing that refers to the penalty or indemnity for damages imposed by
the policy is null and void, petitioner opined that its law or by the courts." The interest mentioned in Articles
liability is limited to the refund of all the premiums paid. 2209 and 2212 of the Civil Code applies to compensatory
Accordingly, it enclosed in the said letter a check for interest.
P13,080.93 representing the premium refund. Respondent
refused to accept the check and insisted on the payment of Clearly and contrary to respondents' assertion, the interest
the insurance proceeds. Petitioner then filed a Complaint imposed by the CA is not monetary interest because aside
for Rescission of Insurance Contract. from the fact that there is no use or forbearance of money
involved in this case, the subject interest was not one which
RTC ruled in favor of Respondent Tan Kit. CA reversed was agreed upon by the parties in writing.
RTC’s ruling. It found that Norberto consulted two
physicians to whom he confided that he had stopped
smoking only in 1999. At the time therefore that he applied

Insurance Cases
As a form of damages, compensatory interest is due only if

the obligor is proven to have failed to comply with his
obligation.
In this case, it is undisputed that simultaneous to its giving

of notice to respondents that it was rescinding the policy
due to concealment, petitioner tendered the refund of
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premium by attaching to the said notice a check
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representing the amount of refund. However, respondents
refused to accept the same since they were seeking for the
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release of the proceeds of the policy. Because of this
discord, petitioner ︎led for judicial rescission of the contract.
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Petitioner, after receiving an adverse judgment from the
RTC, appealed to the CA. And as may be recalled, the
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appellate court found Norberto guilty of concealment and
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thus upheld the rescission of the insurance contract and
consequently decreed the obligation of petitioner to return
to respondents the premium paid by Norberto. Moreover,
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we find that petitioner did not incur delay or unjustifiably
deny the claim.
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Based on the foregoing, we find that petitioner properly
complied with its obligation under the law and contract.
Hence, it should not be made liable to pay compensatory
interest.

Insurance Cases
Tiu vs. Arriesgado settled the claims of those who were injured during the
GR No. 138060, 01 September 2004 incident. It could not accede to the claim of respondent
Arriesgado, as such claim was way beyond the scheduled
Compulsory Motor Vehicle Liability indemnity as contained in the Contract of Insurance.
FACTS: At about 10PM of March 15, 1987, the cargo truck RTC ruled in favor of respondent Arriesgado, which was
marked “Condor Hollow Blocks and General Merchandise” affirmed by the CA.
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was loaded with firewood in Bogo, Cebu and left for Cebu CA held that PPSII could not be held liable for respondent
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City. Upon reaching Poblacion, Compostela, Cebu, one of Arriesgado’s claim, nor for contribution, indemnification
its rear tires exploded. The driver, Sergio Pedrano, then and/or reimbursement in case the petitioners were
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parked along the right side of the national highway and adjudged liable.
removed the damaged tire to have it vulcanized. He left his
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helper to keep watch over the stalled vehicle. The tail lights ISSUE: whether PPSII, as insurer, is liable to pay
were left on. At about 4:45 AM, D’ Rough Riders passenger Arriesgado
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bus driven by Virgilio Las Piñas was cruising along the
national highway of Poblacion, Compostela, Cebu. As the
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RULING: YES. As can be gleaned from the Certificate of
bus was approaching the bridge, Las Piñas saw the stalled Cover, such insurance contract was issued pursuant to the
truck, then about 25 meters away. He applied the brakes Compulsory Motor Vehicle Liability Insurance Law. It was
and tried to swerve to the left to avoid hitting the truck, but
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expressly provided therein that the limit of the insurer’s
it was too late; the bus rammed into the truck’s left rear. liability for each person was P12,000, while the limit per
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The impact damaged the right side of the bus and left accident was pegged at P50,000. An insurer in an
several passengers injured. Pedro Arriesgado and his wife, indemnity contract for third party liability is directly liable
Felisa, were passengers of the bus. Felisa died, and Pedro to the injured party up to the extent specified in the
suffered a fracture in his right colles. Repondent Pedro agreement but it cannot be held solidarily liable beyond
then filed a complaint for breach of contract of
carriage against petitioners. Petitioners for their part, that amount. The respondent PPSII could not then just
filed a Third-Party Complaint against respondent Phillipine deny petitioner Tiu’s claim; it should have paid P12,000 for
Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tiu’s the death of Felisa Arriesgado, and respondent Arriesgado’s
insurer, Condor, the registered owner of the cargo truck, hospitalization expenses of P1,113.80, which the trial court
and Pendrano, the driver of the truck. found to have been duly supported by receipts. The total
amount of the claims, even when added to that of the other
Respondent PPSII admitted that it had an existing contract injured passengers which the respondent PPSII claimed to
with Tiu, but averred that it had already attended to and

Insurance Cases
have settled, would not exceed the P50,000 limit under the
insurance agreement.
Indeed, the nature of Compulsory Motor Vehicle Liability

Insurance is such that it is primarily intended to provide
compensation for the death or bodily injuries suffered by
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innocent third parties or passengers as a result of the
negligent operation and use of motor vehicles. The victims
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and/or their dependents are assured of immediate financial
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assistance, regardless of the financial capacity of motor
vehicle owners.
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As previously held by the SC: However, although the victim
may proceed directly against the insurer for indemnity, the
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third party liability is only up to the extent of the insurance
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policy and those required by law. While it is true that where
the insurance contract provides for indemnity against
liability to third persons, and such persons can directly sue
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the insurer, the direct liability of the insurer under
indemnity contracts against third party liability does not
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mean that the insurer can be held liable in solidum with the
insured and/or the other parties found at fault. For the
liability of the insurer is based on contract; that of the
insured carrier or vehicle owner is based on tort . . .
Obviously, the insurer could be held liable only up to the
extent of what was provided for by the contract of
insurance, in accordance with the CMVLI law.

Insurance Cases
Gaisano vs. Development Insurance and Surety Despite petitioner’s final demand, respondent refused to
Corporation pay the insurance proceeds or return the premium paid on
818 SCRA 603, G.R. No. 190702 February 27, 2017 the vehicle.
Insurance contracts take effect upon payment of the Petitioner then filed a complaint for collection of sum
premium. Unless the premium is paid, the insurance of money and damages.
policy is not valid and binding.
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RTC ruled in favor of petitioner. CA reversed. It found that
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FACTS: Petitioner was the registered owner of a the premium was not yet paid at the time of the loss on
Mitsubishi Montero while respondent is a domestic Sept. 27, but only on Sep. 28 when the check was picked up
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corporation engaged in the insurance business. Respondent by Tran-Pacific.
issued a Comprehensive Commercial Vehicle Policy to
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petitioner over the vehicle for a period of 1 year. ISSUE: Whether there is a binding insurance contract
Respondent also issued two other commercial vehicle between petitioner and respondent
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policies to petitioner covering two other motor vehicles for
the same period. To collect the premiums and other
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RULING: NO. Insurance is a contract whereby one
charges on the policies, respondent’s agent, Trans-Pacific, undertakes for a consideration to indemnify another
issued a SOA to petitioner’s company, Noah’s Ark. against loss, damage or liability arising from an unknown
payments were immediately processed on the same day.
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However, nobody from Trans-Pacific picked up the check or contingent event. Just like any other contract, it requires
a cause or consideration. The consideration is the
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that day, and instead informed Noah’s Ark that its
messenger would get the check the next day, September 28. premium, which must be paid at the time and in the way
and manner specified in the policy. If not so paid, the policy
In the evening of September 27, while under the official will lapse and be forfeited by its own terms.
custody of Noah’s Ark marketing manager Pacquing, the
vehicle was stolen. Oblivious of the incident, Trans-Pacific The law, however, limits the parties' autonomy as to when
picked up the check the next day and issued an official payment of premium may be made for the contract to take
receipt, acknowledging the receipt of the payment for effect. The general rule in insurance laws is that unless the
premium and other charges over the vehicle. Pacquing then premium is paid, the insurance policy is not valid and
informed petitioner of the vehicle’s loss. Thereafter, binding.
petitioner reported the loss and filed a claim with
respondent. After investigation, respondent denied the There is no dispute that the check was delivered to and was
claim on the ground that there was no insurance contract. accepted by respondent's agent, Trans-Paci︎c, only on

Insurance Cases
September 28, 1996. No payment of premium had thus expiration of the term, as held in Makati Tuscany
been made at the time of the loss of the vehicle on Condominium Corp.; and
September 27, 1996. While petitioner claims that Trans- (5) where the insurer is in estoppel as when it has
Paci︎c was informed that the check was ready for pick-up on consistently granted a 60 to 90-day credit term for the
September 27, 1996, the notice of the availability of the payment of premiums.
check, by itself, does not produce the effect of payment of
the premium. Trans-Paci︎c could not be considered in delay The insurance policy in question does not fall under the
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in accepting the check because when it informed petitioner first to third exceptions laid out in UCPB General Insurance
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that it will only be able to pick-up the check the next day, Co., Inc.: (1) the policy is not a life or industrial life policy;
(2) the policy does not contain an acknowledgment of the
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petitioner did not protest to this, but instead allowed
Trans-Paci︎c to do so. Thus, at the time of loss, there was no receipt of premium but merely a statement of account on
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payment of premium yet to make the insurance policy its face; and (3) no payment of an installment was made at
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effective. the time of loss on September 27.
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There are, of course, exceptions to the rule that no Petitioner argues that his case falls under the fourth and
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insurance contract takes effect unless premium is paid. In fifth exceptions because the parties intended the contract of
UCPB General Insurance Co., Inc., we summarized the insurance to be immediately effective upon issuance,
exceptions as follows: despite non-payment of the premium. This waiver to a pre-
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(1) in case of life or industrial life policy, whenever the payment in full of the premium places respondent in
grace period provision applies, as expressly provided by estoppel.
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Section 77 itself;
(2) where the insurer acknowledged in the policy or The fourth and fifth exceptions to Section 77 operate under
contract of insurance itself the receipt of premium, even the facts obtaining in Makati Tuscany Condominium Corp.
if premium has not been actually paid, as expressly and UCPB General Insurance Co., Inc. Both contemplate
provided by Section 78 itself; situations where the insurers have consistently granted the
(3) where the parties agreed that premium payment shall insured a credit extension or term for the payment of the
be in installments and partial payment has been made premium. Here, however, petitioner failed to establish the
at the time of loss, as held in Makati Tuscany fact of a grant by respondent of a credit term in his favor, or
Condominium Corp. v. Court of Appeals; that the grant has been consistent.
(4) where the insurer granted the insured a credit term for
the payment of the premium, and loss occurs before the The policy states that the insured's application for the
insurance is subject to the payment of the premium. There
is no waiver of pre-payment, in full or in installment, of the

Insurance Cases
premiums under the policy. Consequently, respondent

cannot be placed in estoppel.
Thus, we find that petitioner is not entitled to the insurance

proceeds because no insurance policy became effective for
lack of premium payment.
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Insurance Cases
Roque vs. Intermediate Appellate Court, CA modified RTC’s decision and absolved Pioneer from
139 SCRA 596, No. L-66935, November 11, 1985 liability after finding that the loss was caused by the “perils
of the ship” and not by “perils of the sea”. It ruled that the
In Marine Insurance, the insurer undertakes to insure loss is not covered by the marine insurance policy.
against perils of the sea and similar perils, not against ISSUE: Whether the loss was caused by perils of the sea,
perils of the ship thus entitling petitioners to claim under the marine
insurance policy
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FACTS: Manila Bay Lighterage Corporation, a common
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carrier, entered into a contract with petitioners whereby the RULING: NO. From Sections 99 and 113 of the Insurance
former would load and carry on board its barge Marble 10 Code, there can be no mistaking the fact that the term
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logs from Palawan to North Harbor, Manila. The logs were “cargo” can be the subject of marine insurance and that
insured against loss with respondent Pioneer Insurance. once it is made the implied warranty of seaworthiness
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immediately attached to whoever is insuring the cargo
811 pieces of logs were loaded on the barge for delivery to whether he be the shipowner or not. Moreover, the fact that
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North Harbor, but the shipment never reached its the unseaworthiness of the ship was unknown to the
destination because Marble 10 sank somewhere in Palawan
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insured is immaterial in ordinary marine insurance and
on its way to Manila. The barge where the logs were loaded may not be used by him as a defense in order to recover on
were not seaworthy such that it developed a leak. Further, the marine insurance policy.
one of the hatches was left open causing water to enter the
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barge and because the barge was not provided with the Since the law provides for an implied warranty of
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necessary cover or tarpaulin, the ordinary splash of sea seaworthiness in every contract of ordinary marine
waves brought more water inside. insurance, it becomes the obligation of a cargo owner to
look for a reliable common carrier which keeps its vessels
Petitioners demanded from Manila Bay payment for the in seaworthy condition. The shipper of cargo may have no
loss of the shipment but the latter ignored the demand. A control over the vessel but he has full control in the choice
letter was then sent to Pioneer claiming the full amount of the common carrier that will transport his goods. Or the
under the insurance policy but respondent refused to pay cargo owner may enter into a contract of insurance which
on the ground that its liability depended upon the “total specifically provides that the insurer answers not only for
loss by total loss of vessel only”. Hence, petitioners the perils of the sea but also provides for coverage of perils
commenced a civil case against Manila Bay and Pioneer. of the ship.
RTC ruled in favor of petitioner. Only Pioneer appealed. We are constrained to apply Section 113 of the Insurance
Code to the facts of this case.

Insurance Cases
It is quite unmistakable that the loss of the cargo was due to

the perils of the ship rather than the perils of the sea. The
facts clearly negate the petitioners' claim under the
insurance policy.
As held in previous case, "It must be considered to be
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settled, furthermore, that a loss which, in the ordinary
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course of events, results from the natural and inevitable
action of the sea, from the ordinary wear and tear of the
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ship, or from the negligent failure of the ship's owner to
provide the vessel with proper equipment to convey the
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cargo under ordinary conditions, is not a peril of the sea.
Such a loss is rather due to what has been aptly called the
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'peril of the ship.' The insurer undertakes to insure against
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perils of the sea and similar perils, not against perils of the
ship.”
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Neither can petitioners allege barratry on the basis of the
findings showing negligence on the part of the vessel's
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crew. Barratry as de︎ned in American Insurance Law is "any
willful misconduct on the part of master or crew in
pursuance of some unlawful or fraudulent purpose without
the consent of the owners, and to the prejudice of the
owner's interest." Barratry necessarily requires a willful and
intentional act in its commission. No honest error of
judgment or mere negligence, unless criminally gross, can
be barratry. In the case at bar, there is no finding that the
loss was occasioned by the willful or fraudulent acts of the
vessel's crew. There was only simple negligence or lack of
skill.

Insurance Cases
Manulife Philippines, Inc. vs. Ybañez the insured’s face, in front, and below his ear, which ought
G.R. No. 204736, November 28, 2016 to have been easily noticed by Dr. Lumapas.
Both RTC and CA dismissed the complaint for insufficiency

FACTS: Two life insurance policies were issued by of evidence.
Manulife in favor of Dr. Gumersindo Solidum Ybañez on
October 25, 2002 and July 25, 2003. In the said policies, ISSUE: Whether the CA committed any reversible error in
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the wife, respondent Hermenegilda, was designated as a affirming the RTC Decision dismissing Manulife's
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revocable beneficiary. On November 10, 2002, when one of Complaint for rescission of insurance contracts for failure
the subject insurance policies had been in force for only 1 to prove concealment on the part of the insured.
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year and 3 months, while the other for only 4 months, the
insured died. Hermenegilda, the widow, filed a Claimant’s RULING: NO. Manulife's Complaint for rescission of the
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Statement-Death Claim with respect to the subject insurance policies in question was totally bereft of factual
insurance policies. Manulife denied Hermenegilda’s death and legal bases because it had utterly failed to prove that
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claims on the ground that the insured misrepresented or the insured had committed the alleged misrepresentation/s
concealed material facts at the time the subject insurance
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or concealment/s of material facts imputed against him.
policies were applied for, and refunded the premiums that The RTC correctly held that the CDH's medical records that
the insured paid on the subject policies. might have established the insured's purported
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misrepresentation/s or concealment/s was inadmissible for
Manulife then institued a Complaint for Rescission of being hearsay, given the fact that Manulife failed to present
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Insurance Contracts against respondent Ybañez and BPI the physician or any responsible ofFIcial of the CDH who
Family. It alleged that the subject policies were void due to could con︎rm or attest to the due execution and authenticity
concealment or misrepresentation of material facts in the
of the alleged medical records. Manulife had utterly failed
application for life insurance, particularly the forms
to prove by convincing evidence that it had been beguiled,
entitled Non-Medical Evidence (NME), Medical Evidence
inveigled, or cajoled into selling the insurance to the
Exam (MEE) and the Declaration of Insurability (DOI).
insured who purportedly with malice and deceit passed
himself off as thoroughly sound and healthy, and thus a ︎t
Hermenegilda countered that there was no concealment or
misrepresentation of the insured’s past illnesses as and proper applicant for life insurance. Manulife's sole
Manulife’s company physician, Dr. Lumapas, personally witness gave no evidence at all relative to the particulars of
examined him. That among others, he couldn’t have the purported concealment or misrepresentation allegedly
concealed that he underwent a Parotidectomy since there perpetrated by the insured. In fact, Victoriano merely
was an obvious scar and disfigurement in the right side of perfunctorily identified the documentary exhibits adduced
by Manulife; she never testified in regard to the

Insurance Cases
circumstances attending the execution of these

documentary exhibits much less in regard to its contents.
Of course, the mere mechanical act of identifying these
documentary exhibits, without the testimonies of the actual
participating parties thereto, adds up to nothing. The
fraudulent intent on the part of the insured must be
established to entitle the insurer to rescind the contract.
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Misrepresentation as a defense of the insurer to avoid
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liability is an affirmative defense and the duty to establish
such defense by satisfactory and convincing evidence rests
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upon the insurer." For failure of Manulife to prove intent to
defraud on the part of the insured, it cannot validly sue for
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rescission of insurance contracts.
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Insurance Cases
Loadstar Shipping Company, Incorporated vs. that as a direct and natural consequence of the
Malayan Insurance Company, Incorporated unseaworthiness of the vessel, PASAR suffered loss of the
G.R. No. 185565, November 26, 2014 cargo.
an insurer indemnifies the insured based on the loss or Loadstar denied Malayan’s allegations, claiming, among
injury the latter actually suffered from. If there is no loss others, that it is a private carrier; that the vessel was
or injury, then there is no obligation on the part of the seaworthy; and that due to the inherent nature of the cargo
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insurer to indemnify the insured and the use of water in its production process, the same
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cannot be considered damaged or contaminated.
FACTS: Loadstar Shipping and Philippine Associated
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Smelting and Refining Corporation (PASAR) entered into a RTC dismissed the complaint. It gave credence to the
Contact of Affreightment for domestic bulk transport of the testimony of Francisco Esguerra, expert witness, that
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latter’s copper concentrates. 5,065.72 wet metric tons of despite hight chlorine content, the copper concentrates
copper concentrated were loaded in Cargo Hold. Nos. 1 and remain intact and will not lose their value.
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2 of MV Bobcat, a marine vessel owned by Loadstar
International, and operated by Loadstar Shipping under a
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CA granted the appeal and reversed RTC’s ruling.
charter party agreement. The shipper and consignee under
the Bill of Lading are Philex and PASAR, respectively, and ISSUE: Whether Malayan was validly subrogated to the
the cargo was insured by respondent Malayan.
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rights of PASAR
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MV Bobcat was bound to Isabel, Leyte. From the vessel’s RULING: NO. The rights of a subrogee cannot be superior
chief officer’s routine inspection, it was discovered that a to the rights possessed by a subrogor. "Subrogation is the
crack on the starboard side of the main deck caused substitution of one person in the place of another with
seawater to enter and wet the cargo inside Cargo Hold No. reference to a lawful claim or right, so that he who is
2. substituted succeeds to the rights of the other in relation to
a debt or claim, including its remedies or securities. The
PASAR sent a formal notice of claim to Loadstar Shipping. rights to which the subrogee succeeds are the same as, but
Malayan indemnified PASAR for the same. Malayan, not greater than, those of the person for whom he is
subrogated to the rights of PASAR, demanded substituted, that is, he cannot acquire any claim, security or
reimbursement from Loadstar Shipping, which refused to remedy the subrogor did not have. In other words, a
comply. Consequently, Malayan instituted a Complaint for subrogee cannot succeed to a right not possessed by the
Damages, which was later amended to include Loadstar subrogor. A subrogee in effect steps into the shoes of the
International. In the amended complaint, Malayan alleged

Insurance Cases
insured and can recover only if the insured likewise could certainty premised upon competent proof and on the best
have recovered." evidence obtainable. Specific facts that could afford a basis
for measuring whatever compensatory or actual damages
Consequently, an insurer indemnifies the insured based on are borne must be pointed out. Actual damages cannot be
the loss or injury the latter actually suffered from. If there is anchored on mere surmises, speculation, or conjectures.
no loss or injury, then there is no obligation on the part of
the insurer to indemnify the insured. Should the insurer
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pay the insured and it turns out that indemnification is not
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due, or if due, the amount paid is excessive, the insurer
takes the risk of not being able to seek recompense from the
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alleged wrongdoer. This is because the supposed subrogor
did not possess the right to be indemnified and therefore,
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no right to collect is passed on to the subrogee.
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As regards the determination of actual damages, "[i]t is
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axiomatic that actual damages must be proved with
reasonable degree of certainty and a party is entitled only to
such compensation for the pecuniary loss that was duly
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proven." In the instant case, PASAR and Malayan never
proved the actual damages sustained by PASAR.
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It is also noteworthy that when the expert witness for the
petitioners, Engineer Francisco Esguerra (Esguerra),
testi︎ed as regards the lack of any adverse effect of seawater
on copper concentrates, Malayan never presented evidence
of its own in refutation to Esguerra's testimony. And, even
if the Court will disregard the entirety of his testimony, the
effect on Malayan's cause of action is nil. As Malayan is
claiming for actual damages, it bears the burden of proof to
substantiate its claim.
Actual damages are not presumed. The claimant must

prove the actual amount of loss with a reasonable degree of

Insurance Cases
Alpha Insurance and Surety Co. vs. Castor,

704 SCRA 550, G.R. No. 198174 September 2, 2013 RTC ruled in favor of respondent. CA affirmed in toto.
A contract of insurance is a contract of adhesion. So, when ISSUE: Whether or not the loss of respondents vehicle is
the terms of the insurance contract contain limitations on excluded under the insurance policy
liability, courts should construe them in such a way as to RULING: NO. Section III of the policy provided that the
preclude the insurer from non-compliance with his Company will indemnify the insured against loss or damage
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obligation. from “… (b) fire, external explosion, self ignition or
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lightning or burglary, housebreaking or theft …”
FACTS: Respondent Arsenia Castor entered into a As an exemption to Section III, the Policy also provided
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Contract of Insurance with Petitioner, involving her motor that it shall not be liable to pay for “… any malicious
vehicle Toyota Revo. The contract obligates the petitioner damage cause by the insured, any member of his family or
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to pay respondent the amount of P630,000.00 in case of by a person in the insured’s service.”
loss or damage to the said vehicle during the covered
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period. In denying respondent's claim, petitioner takes exception
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by arguing that the word "damage," under paragraph 4 of
While the policy was in effect, respondent’s driver stole the "Exceptions to Section III," means loss due to injury or
insured vehicle, when she instructed the same to bring the harm to person, property or reputation, and should be
vehicle for a tune-up. Respondent promptly reported the
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construed to cover malicious "loss" as in "theft." Thus, it
incident to the police and concomitantly notified petitioner asserts that the loss of respondent's vehicle as a result of it
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of the said loss and demanded payment of the insurance being stolen by the latter's driver is excluded from the
proceeds. policy. The SC did not agree.
Petitioner denied the insurance claim of respondent, Theft perpetrated by the driver of the insured is not an
quoting a provision of the Policy declaring that the exception to the coverage from the insurance policy, since
company shall not be liable for “any malicious damage Section III thereof did not qualify as to who would commit
caused by the insured, any member of his family, or by a the theft.
person in the insured’s service”.
Adverse to petitioner's claim, the words "loss" and
Respondent reiterated her claim and argued that the "damage" mean different things in common ordinary
exception refers to damage of the motor vehicle and not to usage. The word "loss" refers to the act or fact of losing, or
its loss. Still, petitioner denied the claim. Respondent filed failure to keep possession, while the word "damage" means
a Complaint for sum of money with damages. deterioration or injury to property.

Insurance Cases
Therefore, petitioner cannot exclude the loss of

respondent's vehicle under the insurance policy under
paragraph 4 of "Exceptions to Section III," since the same
refers only to "malicious damage," or more specifically,
"injury" to the motor vehicle caused by a person under the
insured's service. Paragraph 4 clearly does not contemplate
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"loss of property," as what happened in the instant case.
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Further, "malicious damage," as provided for in the subject
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policy as one of the exceptions from coverage, is the
damage that is the direct result from the deliberate or
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willful act of the insured, members of his family, and any
person in the insured's service, whose clear plan or purpose
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was to cause damage to the insured vehicle for purposes of
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defrauding the insurer.
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Insurance Cases
Malayan Insurance vs. Lin complies with the IC Resolution ordering it to accord more
G.R. No. 207277, January 16, 2017 weight to the BFP’s findings.
Criminal and Civil cases are altogether different from Malayan filed a Motion to Dismiss the civil case based on
administrative matters, such that the disposition in the forum shopping.
first two will not inevitably govern the third and vice
versa. RTC ruled that there was no forum shopping as the reliefs
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sought in the civil and administrative cases are distinct
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FACTS: Emma Lin obtained various loans from RCBC from each other.
secured by six clustered warehouses in Bulacan. Five
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warehouses were insured with Malayan against fire for P56 CA upheld RTC’s ruling.
Million, while the remaining was insure for P2 Million.
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ISSUE: Whether there was forum shopping
The 5 warehouses were gutted by fire. A Fire Clearance
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Certification was issued to her by the BFP after having RULING: NO. The settled rule is that criminal and civil
determined that the cause of the fire was accidental.
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cases are altogether different from administrative matters,
Despite the same, her demand for payment of the insurance such that the disposition in the first two will not inevitably
claim was denied since the forensic investigators hired by govern the third and vice versa." In the context of the case
Malayan claimed that the cause of the fire was arson.
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at bar, matters handled by the IC are delineated as either
regulatory or adjudicatory, both of which have distinct
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Lin sought assistance from the Insurance Commission characteristics.
which recommended that Malayan pay Lin’s insurance
claim. Still, Malayan denied and refused to pay her The provisions of the Insurance Code (Presidential Decree
insurance claim. Consequently, she filed a Complaint for [P.D.] No. 1460), as amended, clearly indicate that the
Collection of Sum of Money with Damages before the RTC. Office of the [IC] is an administrative agency vested with
regulatory power as well as with adjudicatory authority.
Five months after instituting the court action, Lin filed The general regulatory authority of the IC is described in
before the IC an administrative case against Malayan for Section 414 of the Insurance Code while the adjudicatory
unfair claim settlement practice under Section 241 in authority of the IC is generally described in Sec. 416 of the
relation to Sec. 247 of the Insurance Code due to its Insurance Code.
unjustified refusal to settle her claim. She alleged that
Malayan’s license to operate as a non-life insurance The findings of the trial court will not necessarily foreclose
company should be revoked or suspended, until it fully the administrative case before the [IC], or [vice versa].

Insurance Cases
True, the parties are the same, and both actions are
predicated on the same set of facts, and will require
identical evidence. But the issues to be resolved, the
quantum of evidence, the procedure to be followed[,] and
the reliefs to be adjudged by these two bodies are different.
ES
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B R
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Insurance Cases
The Insular Assurance Co., Ltd. vs. The Heirs of under the GMRI since he was more than 60 years old when
Jose H. Alvarez his loan was approved.
G.R. No. 207526, October 03, 201818
RTC ruled in favor of the heirs of Alvarez. It explained that
The Insurance Code dispenses with proof of fraudulent UnionBank initiated and negotiated the Group Mortgage
intent in cases of rescission due to concealment, but not so Redemption Insurance with Insular Life, and that
in cases of rescission due to false representations. "ordinary customers will not know about [insurance
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policies such as this] unless it is brought to their knowledge
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FACTS: Alvarez and his wife, Adelina, owned a residential by the bank.
lot with improvements. Alvarez applied for and was granted
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a housing loan by Unionbank. This loan was secured by a CA affirmed RTC’s ruling. It noted that the errors assigned
promissory note, a REM over the lot, and a mortgage by Insular Life and UnionBank to the Regional Trial Court
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redemption insurance taken on the life of Alvarez with boiled down to the issue of whether or not Alvarez was
Unionbank as beneficiary. Alvarez was among the guilty of fraudulent misrepresentation as to warrant the
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mortgagors included in the list of qualified debtors covered rescission of the Group Mortgage Redemption Insurance
by the Group Mortgage Redemption Insurance (GMRI) that
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obtained by UnionBank on Alvarez's life. It explained that
Unionbank had with Insular Life. fraud is never presumed and fraudulent misrepresentation
as a defense of the insurer to avoid liability must be
Alvarez passed away. Unionbank filed with Insular Life a
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established by convincing evidence. Insular Life, in this
death claim under Alvarez’s name pursuant to the GMRI, case, failed to establish this defense. It only relied on
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which was denied by Insular Life after determining that Alvarez's Health Statement Form where he wrote "1942" as
Alvarez was not eligible for coverage as he was supposedly his birth year. However, this form alone was insufficient to
more than 60 years old at the time of his loan’s approval. prove that he fraudulently intended to misrepresent his
age.
Initially, a complaint for declaration of nullity of contract
and damages was filed against Unionbank by the Heirs of Insular Life pinpoints concealment, rather than fraudulent
Alvarez. It was later amended and converted into one for misrepresentation, as the key to the validity of its
specific performance to include a demand against Insula rescission. It asserts that Alvarez's concealment of his age,
Life to fulfill its obligation as an insurer under the GMRI. whether intentional or unintentional, entitles it to rescind
the insurance contract. It claims that proof of fraudulent
Insular Life maintained that based on the documents intent is not necessary for the insurer to rescind the
submitted by Unionbank, Alvarez was no longer eligible contract on account of concealment. It adds that it did not
rely solely on Alvarez's Health Statement Form but also on

Insurance Cases
his representations during the background check Section 26 defines concealment as "[a] neglect to
conducted by UnionBank where he said that he was only 55 communicate that which a party knows and ought to
years old at the time of application. communicate." However, Alvarez did not withhold
information on or neglect to state his age. He made an
ISSUE: Whether Insular Life is obliged to pay Unionbank actual declaration and assertion about it.
the balance of Alvarez’s loan given the claim that he lied
about his age at the time of the approval of the loan What this case involves, instead, is an allegedly false
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representation. Section 44 of the Insurance Code states, "A
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RULING: YES. Section 27 of the Insurance Code is representation is to be deemed false when the facts fail to
unequivocal. Insular Life correctly notes that proof of correspond with its assertions or stipulations." If indeed
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fraudulent intent is unnecessary for the rescission of an Alvarez misdeclared his age such that his assertion fails to
insurance contract on account of concealment. It is because correspond with his factual age, he made a false
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in insurance contracts, concealing material facts is representation, not a concealment. Concealment applies
inherently fraudulent: "if a material fact is actually known only with respect to material facts. That is, those facts
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to the [insured], its concealment must of itself necessarily which by their nature would clearly, unequivocally, and
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be a fraud." When one knows a material fact and conceals logically be known by the insured as necessary for the
it, "it is difficult to see how the inference of a fraudulent insurer to calculate the proper risks.
intent or intentional concealment can be avoided." Thus, a
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concealment, regardless of actual intent to defraud, "is The absence of the requirement of intention definitely
increases the onus on the insured. Between the insured and
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equivalent to a false representation.” Thus, good faith is no
defense in concealment. the insurer, it is true that the latter may have more
resources to evaluate risks. Insurance companies are
However, while Insular Life correctly reads Section 27 as imbued with public trust in the sense that they have the
making no distinction between intentional and obligation to ensure that they will be able to provide succor
unintentional concealment, it erroneously pleads Section to those that enter into contracts with them by being both
27 as the proper statutory anchor of this case. frugal and, at the same time, diligent in their assessment of
the risk which they take with every insurance contract.
The Insurance Code distinguishes representations from However, even with their tremendous resources, a material
concealments. Chapter 1, Title 4 is on concealments. It fact concealed by the insured cannot simply be considered
by the insurance company. The insurance company may
spans Sections 26 to 35 of the Insurance Code; it is where have huge resources, but the law does not require it to be
Section 27 is found. Chapter 1, Title 5 is on representations. omniscient.
It spans Sections 36 to 48 of the Insurance Code.

Insurance Cases
On the other hand, when the insured makes a Consistent with the requirement of clear and convincing
representation, it is incumbent on them to assure evidence, it was Insular Life's burden to establish the
themselves that a representation on a material fact is not merits of its own case. Relative strength as against
false; and if it is false, that it is not a fraudulent respondents' evidence does not suffice.
misrepresentation of a material fact. This returns the
burden to insurance companies, which, in general, have A single piece of evidence hardly qualifies as clear and
more resources than the insured to check the veracity of the convincing. Its contents could just as easily have been an
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insured's beliefs as to a statement of fact. Consciousness in isolated mistake.
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defraudation is imperative and it is for the insurer to show
this. TCAScE Pleading just one (1) additional document still fails to
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establish the consistent fraudulent design that was Insular
There may be a mistaken impression, on the part of the Life's burden to prove by clear and convincing evidence.
IO
insured, on the extent to which precision on one's age may Insular Life had all the opportunity to demonstrate
alter the calculation of risks with definitiveness. Alvarez's pattern of consistently indicating erroneous
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Deliberation attendant to an apparently inaccurate entries for his age. All it needed to do was to inventory the
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declaration is vital to ascertaining fraud. documents submitted by Alvarez and note the statements
he made concerning his age. This was not a cumbersome
task, yet it failed at it. Its failure to discharge its burden of
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Not being similarly qualified as rescission under Section 27, proving must thwart its plea for relief from this Court.
rescission under Section 45 remains subject to the basic
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precept of fraud having to be proven by clear and The Insurance Code dispenses with proof of fraudulent
convincing evidence. intent in cases of rescission due to concealment, but not so
in cases of rescission due to false representations. When
Clear and convincing proof is ". . . more than mere an abundance of available documentary evidence can be
preponderance, but not to extent of such certainty as is referenced to demonstrate a design to defraud, presenting
required beyond reasonable doubt as in criminal cases . . ." a singular document with an erroneous entry does not
qualify as clear and convincing proof of fraudulent intent.
The assailed Court of Appeals May 21, 2013 Decision Neither does belatedly invoking just one other document,
discussed the evidentiary deficiency in Insular Life's cause, which was not even authored by the alleged miscreant.
i.e., how it relied on nothing but a single piece of evidence
to prove fraudulent intent.

Insurance Cases
H.H. Hollero vs. GSIS Typhoons Biring and Huaning, finding that no amount is
GR No 152334, Sept 24, 2014 recoverable pursuant to the average clause provision under
the policies. In a letter dated June 21, 1990, the GSIS
similarly rejected petitioner's indemnity claim for damages
FACTS: GSIS and petitioner entered into a Project wrought by Typhoon Saling on a "no loss" basis, it
Agreement whereby the latter undertook the development appearing from its records that the policies were not
of a GSIS housing project known as Modesta Village renewed before the onset of the said typhoon.
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Section B. Petitioner obligated itself to insure the Project,
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including all improvements, upon the execution of the Petitioner then filed a Complaint for Sum of Money and
Agreement under a Contractors’ All Risks (CAR) Insurance Damages, which was opposed by GSIS through a Motion to
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with the GSIS General Insurance Department. Petitioner Dismiss on the ground of prescription.
secured 2 CAR Policies, for land development and for the
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construction of housing units. In turn, GSIS reinsured one RTC granted petitioner’s indemnity claims.
of the policies with respondent Pool of Machinery Insurers. CA reversed RTC’s ruling. It ruled that the complaint ︎led on
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September 27, 1991 was barred by prescription, having
Under both policies, it was provided that: (a) there must be
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been commenced beyond the twelve-month limitation
prior notice of claim for loss, damage or liability within
provided under the policies, reckoned from the final
fourteen (14) days from the occurrence of the loss or
rejection of the indemnity claims on April 26, 1990 and
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damage; (b) all benefits thereunder shall be forfeited if no June 21, 1990.
action is instituted within twelve (12) months after the
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rejection of the claim for loss, damage or liability; and (c) if Petitioner insists that the GSIS's letters dated April 26,
the sum insured is found to be less than the amount 1990 and June 21, 1990 did not amount to a "final
required to be insured, the amount recoverable shall be rejection" of its claims, arguing that they were mere
reduced to such proportion before taking into account the tentative resolutions pending further action on petitioner's
deductibles stated in the schedule (average clause part or submission of proof in refutation of the reasons for
provision). rejection. Hence, its causes of action for indemnity did not
accrue on those dates.
During the construction, 3 typhoons hit the country,
causing considerable damage to the Project. Accordingly, ISSUE: whether or not the GSIS letters amount to “Final
petitioner filed several claims for indemnity with GSIS. rejection” as to bar petitioners from filing the complaint
In a letter dated April 26, 1990, the GSIS rejected
petitioner's indemnity claims for the damages wrought by

Insurance Cases
RULING: YES. Section 10 of the General Conditions of the 1990 letter was also a final rejection of petitioner's
subject CAR Policies commonly provides that “…if a claim indemnity claim.
is made and rejected and no action or suit is commenced
within 12 months after such rejection, … , all benefit under As correctly observed by the CA, "final rejection" simply
this policy shall be forfeited.” means denial by the insurer of the claims of the insured and
not the rejection or denial by the insurer of the insured's
motion or request for reconsideration. The rejection
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A perusal of the letter dated April 26, 1990 shows that the
GSIS denied petitioner's indemnity claims wrought by referred to should be construed as the rejection in the
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Typhoons Biring and Huaning, it appearing that no amount first instance.
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was recoverable under the policies. While the GSIS gave
petitioner the opportunity to dispute its findings, neither of The insured's cause of action or his right to file a claim
either in the Insurance Commission or in a court of
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the parties pursued any further action on the matter; this
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logically shows that they deemed the said letter as a competent jurisdiction commences from the time of the
rejection of the claims. Lest it cause any confusion, the denial of his claim by the Insurer, either expressly or
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statement in that letter pertaining to any queries petitioner impliedly.
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may have on the denial should be construed, at best, as a But the rejection referred to should be construed as the
form of notice to the former that it had the opportunity to rejection, in the first instance, for if what is being referred
seek reconsideration of the GSIS's rejection. Surely, to is a reiterated rejection conveyed in a resolution of a
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petitioner cannot construe the said letter to be a mere petition for reconsideration, such should have been
"tentative resolution." In fact, despite its disavowals, expressly stipulated.
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petitioner admitted in its pleadings that the GSIS indeed
denied its claim through the aforementioned letter, but In light of the foregoing, it is thus clear that petitioner's
tarried in commencing the necessary action in court. causes of action for indemnity respectively accrued from its
receipt of the letters dated April 26, 1990 and June 21,
The same conclusion obtains for the letter dated June 21, 1990, or the date the GSIS rejected its claims in the first
1990 denying petitioner's indemnity claim caused by instance. Consequently, given that it allowed more than
Typhoon Saling on a "no loss" basis due to the non- renewal twelve (12) months to lapse before ︎ling the necessary
of the policies therefor before the onset of the said typhoon. complaint before the RTC on September 27, 1991, its causes
of action had already prescribed.
The fact that petitioner ︎led a letter of reconsideration
therefrom dated April 18, 1991, considering too the inaction
of the GSIS on the same similarly shows that the June 21,

Insurance Cases
GSIS vs. Prudential Guarantee and Assurance, Inc. from the fact that the insured paid — and the insurer
G.R. No. 165585, November 20, 2013 received — several reinsurance premiums due thereon,
although the former refused to pay the remaining balance,
thus:
FACTS: The National Electrification Administration While the import of Section 77 is that prepayment of
(NEA) entered into a MOA with GSIS insuring all real and premiums is strictly required as a condition to the
personal properties mortgaged to it by electrical validity of the contract, We are not prepared to rule
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cooperatives under an Industrial All Risks (IAR) Policy. that the request to make installment payments duly
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Out of the total sum insured under the IAR Policy, 95% was approved by the insurer, would prevent the entire
reinsured by GSIS with PGAI. contract of insurance from going into effect despite
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payment and acceptance of the initial premium or ︎
In the Reinsurance Request Notice (reinsurance cover) and
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first installment. Section 78 of the Insurance Code
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the Reinsurance Binder, GSIS agreed to pay PGAI
in effect allows waiver by the insurer of the
reinsurance premiums in a quarterly basis. While GSIS
condition of prepayment by making an
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remitted to PGAI the reinsurance premiums for the first
acknowledgment in the insurance policy of receipt
three quarters, it, however failed to pay the fourth and last
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of premium as conclusive evidence of payment so
reinsurance premium despite demands. This prompted
far as to make the policy binding despite the fact
PGAI to file a Complaint for sum of money against GSIS.
that premium is actually unpaid. Section 77 merely
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precludes the parties from stipulating that the
GSIS, among others, proffered as an affirmative defense
policy is valid even if premiums are not paid, but
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that the complaint states no cause of action against GSIS
does not expressly prohibit an agreement granting
because non-payment of the last reinsurance premium only
credit extension, and such an agreement is not
renders the insurance contract ineffective, and does not
contrary to morals, good customs, public order or
give PGAI a right of action to collect.
public policy. So is an understanding to allow
insured to pay premiums in installments not so
ISSUE: Whether the reinsurance remained effective
proscribed. At the very least, both parties should be
despite non-payment of the reinsurance premium
deemed in estoppel to question the arrangement
they have voluntarily accepted.
RULING: YES. In the case of Makati Tuscany, the Court
Thus, owing to the identical complexion of Makati Tuscany
already ruled that the non-payment of subsequent
with the present case, the Court upholds PGAI's right to be
installment premiums would not prevent the insurance
paid by GSIS the amount of the fourth and last reinsurance
contract from taking effect; that the parties intended to
premium pursuant to the reinsurance contract between
make the insurance contract valid and binding is evinced
them.

Insurance Cases
Equitable Insurance Corp vs. Transmodal CA, on the other hand, ruled that there was no proof of
International insurance of the cargoes at the time of the loss and that the
G.R. No. 223592, Aug 7, 2017 subrogation was improper. According to the CA, the
insurance contract was neither attached in the complaint
nor offered in evidence for the perusal and appreciation of
FACTS: Sytengo Enterprises Corporation hired the RTC, and what was presented was just the marine risk
respondent Transmodal International to clear from the note.
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customs authorities and withdraw, transport, and deliver to
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its warehouse, cargoes consisting of 200 cartons of gum ISSUE: Whether there was a valid subrogation
Arabic.
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RULING: YES. "Subrogation is the substitution of one
Transmodal withdrew the cargoes and delivered them to person in the place of another with reference to a lawful
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Sytengco’s warehouse. It was noted in the delivery receipt claim or right, so that he who is substituted succeeds to the
that all the containers were wet. Elite Surveyors found that rights of the other in relation to a debt or claim, including
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187 cartons had water marks and the contents of the 13 wet its remedies or securities."
cartons were partly hardened.
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A perusal of the records would show that petitioner is
Sytengco demanded from Transmodal payment for the correct in its claim that the Marine Insurance Policy was
total loss of shipment. On the same date, Equitable
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offered as evidence. As such, respondent had the
Insurance, as insurer of the cargoes, paid Sytengco’s claim. opportunity to examine the said documents or to object to
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A subrogation receipt and loss receipt was then issued in its presentation as pieces of evidence. The records also
favor of petitioner. As such, petitioner Equitable Insurance show that respondent was able to cross-examine
demanded from Transmodal reimbursement of the petitioner's witness regarding the said documents. Thus, it
payment given to Sytengco. was well established that petitioner has the right to step
into the shoes of the insured who has a direct cause of
Equitable then filed a complaint for damages invoking its action against herein respondent on account of the
right as subrogee, and averred that Transmodal’s fault and damages sustained by the cargoes.
negligence were the causes of the damages sustained by
Sytengco’s shipment. The records further show that petitioner was able to
accomplish its obligation under the insurance policy as it
RTC ruled in favor of Equitable Insurance. has paid the assured of its insurance claim as evidenced by,
among others, the Subrogation Receipt, Loss Receipt,
Check Voucher, and Equitable PCI Bank Check. The

Insurance Cases
payment by the insurer to the insured operates as an

equitable assignment to the insurer of all the remedies
which the insured may have against the third party whose
negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of
any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon
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payment by the insurance company of the insurance claim.
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Insurance Cases
Oriental Assurance Corporation vs. Manuel Ong 7.01 of the Contract fo Cargo Handling Services
G.R. No. 189524, Oct 11, 2017 (Management Contract) between the Phil. Ports Authority
and Asian Terminals.
FACTS: JEA Steel imported from South Korea 72 RTC dismissed the complaint.
aluminum-zin-alloy-coated steel sheets in coils. These steel CA dismissed the appeal, and ruled that while Asian
sheets were transported to Manila on board the vessel M/V Terminals failed to rebut the presumption of negligence
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Dooyang Glory. Upon arrival at the Manila South Harbor, against it, it cannot be held liable to pay the value of the
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the 72 coils were discharged and stored in Pier 9 under the damaged coils because Oriental's claim was ︎led beyond the
custody of the arrester contractor, Asian Terminals.
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15-day prescriptive period stated in the Gate Pass
From the storage compound of Asian Terminals, the coils
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ISSUE: Whether or not petitioner, who was not a party to
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were loaded on the trucks of Manuel Ong and delivered to
the Gate Pass or Management Contract, is bound by the 15-
JEA Steel’s plant, where it was discovered that 11 of the
day prescriptive period fixed in them to file a claim against
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coils were in damaged condition, dented, or their normal
the arrester operator
round shape deformed.
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RULING: YES. As previously held by this court in the case
JEA filed a claim with Oriental for the value of the 11
of GSIS v. Manila Railroad Company, the provisions of a
damaged coils, pursuant to a Marina Insurance Policy.
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gate pass or of an arrastre m a n a g e m e n t c o n t r a c t a r e
Oriental paid JEA Steel and subsequently demanded
binding on an insurer-subrogee even if the latter is not a
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indemnity from Ong and Asian Terminals, but they refused
party to it.
to pay. Oriental then filed a Complaint for sum of money
The fact that Oriental is not a party to the Gate Pass and the
against respondents.
Management Contract does not mean that it cannot be
bound by their provisions. Oriental is subrogated to the
Ong countered that the coils were already damaged when
rights of the consignee simply upon its payment of the
they were loaded on board his truck.
insurance claim.
Asian Terminals claimed that it exercised due diligence in
As subrogee, petitioner merely stepped into the shoes of the
handling the cargo and that the damaged were sustained
consignee and may only exercise those rights that the
while in the custody of the vessel or the customs broker. It
consignee may have against the wrongdoer who caused the
further argued that Oriental’s claim was barred for the
letters failure to file a notice of claim within the 15-day damage. "It can recover only the amount that is recoverable
period provided in the Gate Pass and in Art. VII, Section by the assured." And since the right of action of the

Insurance Cases
consignee is subject to a precedent condition stipulated in

the Gate Pass, which includes by reference the terms of the
Management Contract, necessarily a suit by the insurer is
subject to the same precedent condition.
Petitioner's assertion that the 15-day prescriptive period

could not be enforced upon it to defeat its claim since the
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Gate Pass was pro forma and it was not given notice of the
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Management Contract is untenable.
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As stated earlier, the dorsal side of the Gate Pass signed by
the consignee's representative upon receipt of the cargo
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expressly refers to the Management Contract between the
Philippine Ports Authority and Asian Terminals. Hence, the
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consignee and its subrogee, petitioner insurance company,
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are deemed to have notice of this Management Contract.
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Insurance Cases
White Gold Marine Services vs. Pioneer Insurance

et al. GR No. 154514, 28 July 2005 ISSUES: 1. Is Steamship Mutual, a P&I Club, engaged in
the insurance business in the Philippine?
Insurance Contract; Doing an insurance business; 2. Does Pioneer need a license as an insurance agent/
necessity of a separate license to act as insurer agent broker for Steamship Mutual?
FACTS: White Gold Marine Services, Inc. procured a RULING: 1. YES. The test to determine if a contract is an
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protection and indemnity coverage for its vessel from the insurance contract or not, depends on the nature of the
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Steamship Mutual Underwriting Association Limited promise, the act required to be performed, and the exact
through Pioneer Insurance and Surety Corporation. nature of the agreement in the light of the occurrence,
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Subsequently, White Gold was issued a Certificate of Entry contingency, or circumstances under which the
and Acceptance. Pioneer also issued receipts evidencing performance becomes requisite. It is not by what it is
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payments for the coverage. When White Gold failed to fully called.
pay its accounts, Steamship Mutual refused to renew the
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coverage. Basically, an insurance contract is a contract of indemnity.
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In it, one undertakes for a consideration to indemnify
Steamship Mutual then filed a case against White Gold for another against loss, damage or liability arising from an
collection of sum of money to recover the latter’s unpaid unknown or contingent event.
balance. White Gold on the other hand, filed a complaint
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before the IC claiming that Steamship Mutual violated In particular, a marine insurance undertakes to indemnify
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Sections 186 and 187 of the Insurance Code (re the need for the assured against marine losses, such as the losses
a license as an insurance company), while Pioneer violated
Section 299, 300 and 301 in relation to Sections 302 and incident to a marine adventure. Section 99 of the Insurance
303 (re procurement of another license as insurance agent). Code enumerates the coverage of marine insurance.
IC dismissed the complaint, ruling that Steamship Mutual , Relatedly, a mutual insurance company is a cooperative
as a Protection and Indemnity Club, is not engaged in the enterprise where the members are both the insurer and
insurance business, thus, there was no need for it to secure insured. In it, the members all contribute, by a system of
a license. Likewise, Pioneer need not obtain another license premiums or assessments, to the creation of a fund from
as insurance agent because Steamship is not engaged in the which all losses and liabilities are paid, and where the pro︎ts
insurance business. are divided among themselves, in proportion to their
interest. Additionally, mutual insurance associations, or
CA affirmed the decision of IC.

Insurance Cases
clubs, provide three types of coverage, namely, protection

and indemnity, war risks, and defense costs.
A P & I Club is "a form of insurance against third party
liability, where the third party is anyone other than the P &
I Club and the members." By definition then, Steamship
Mutual as a P & I Club is a mutual insurance association
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engaged in the marine insurance business.
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2. Pioneer is the resident agent of Steamship Mutual as
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evidenced by the certificate of registration issued by the
Insurance Commission. It has been licensed to do or
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transact insurance business by virtue of the certificate of
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authority issued by the same agency. However, a
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Certification from the Commission states that Pioneer does
not have a separate license to be an agent/broker of
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Steamship Mutual. Although Pioneer is already licensed as
an insurance company, it needs a separate license to act as
insurance agent for Steamship Mutual.
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Insurance Cases
Gulf Resorts Inc. vs. Philippine Charter Insurance ISSUE: Whether under the insurance policy, only the 2
Corp. swimming pools, rather than all the properties covered
GR No. 156167, 16 May 2005 thereunder, are insured against the risk of earthquake
shock
FACTS: Petitioner is the owner of the Plaza Resort in RULING: YES. A careful examination of the premium
Agoo, La Union and had its properties in said resort recapitulation will show that it is the clear intent of the
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insured originally with the American Home Assurance parties to extend earthquake shock coverage only to the two
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Company (AHAC). In the first 4 insurance policies, the risk swimming pools.
of loss from earthquake shock was extended only to
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plaintiff’s two swimming pools and two swimming pools It is basic that all the provisions of the insurance policy
only. should be examined and interpreted in consonance with
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each other. All its parts are reflective of the true intent of
Petitioner agreed to insure with defendant the properties the parties. The policy cannot be construed piecemeal.
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covered by AHAC, provided that the policy wording and Certain stipulations cannot be segregated and then made to
rates in said policy be copied in the policy to be issued by
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control; neither do particular words or phrases necessarily
defendant. Defendant issued the subject policy to plaintiff. determine its character. Petitioner cannot focus on the
In the break-down of premiums, it shows that petitioner earthquake shock endorsement to the exclusion of the other
only paid only P393.00 as premium against earthquake
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provisions. All the provisions and riders, taken and
shock. In all the 6 insurance policies, the premium against interpreted together, indubitably show the intention of the
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the peril of earthquake shock is the same, that is P393.00. parties to extend earthquake shock coverage to the two
swimming pools only.
In 1990, an earthquake struck Central Luzon and Northern
Luzon and petitioner’s properties covered by the subject An insurance premium is the consideration paid an insurer
policy, including the 2 swimming pools in its Agoo Playa for undertaking to indemnify the insured against a
Resort were damaged. Petitioner filed a claim for its
damaged properties. Respondent however denied specified peril. In fire, casualty, and marine insurance, the
petitioner’s claim on the ground that its insurance policy premium payable becomes a debt as soon as the risk
only afforded earthquake shock coverage to the two attaches. In the subject policy, no premium payments were
swimming pools of the resort. After failing to arrive at a made with regard to earthquake shock coverage, except on
settlement, Petitioner filed a Complaint for payment of sum the two swimming pools. There is no mention of any
of money. premium payable for the other resort properties with
regard to earthquake shock. This is consistent with the

Insurance Cases
history of petitioner's previous insurance policies from

AHAC-AIU.
We cannot apply the general rule on contracts of adhesion

to the case at bar. Petitioner cannot claim it did not know
the provisions of the policy. From the inception of the
policy, petitioner had required the respondent to copy
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verbatim the provisions and terms of its latest insurance
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policy from AHAC-AIU.
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Respondent, in compliance with the condition set by the
petitioner, copied AIU Policy No. 206-4568061-9 in
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drafting its Insurance Policy No. 31944. It is true that there
was variance in some terms, specifically in the replacement
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cost endorsement, but the principal provisions of the policy
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remained essentially similar to AHAC-AIU's policy.
Consequently, we cannot apply the "fine print" or "contract
of adhesion" rule in this case as the parties' intent to limit
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the coverage of the policy to the two swimming pools only
is not ambiguous.
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Insurance Cases
Lourdes v. Philam Plans Lourdes points out the following arguments:

G.R. No. 186983, February 22, 2012 1. Seeing the unfilled spaces in Manuel’s pension plan
application relating to his medical history, Philam Plans
should have returned it to him for completion. Since
FACTS: Manuel Florendo filed an application for Philam Plans chose to approve the application just as it
comprehensive pension plan with respondent Philam Plans was, it cannot cry concealment on Manuel’s part.
after some convincing by respondent Perla Abcede. Manuel 2. The mere fact that Manuel signed the application in
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signed the application and left to Perla the task of supplying blank and let Perla fill in the required details did not
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the information needed in the application. Respondent Ma. make her his agent and bind him to her concealment of
Celeste Abcede, Perla’s daughter, signed the application as his true state of health. Since there is no evidence of
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sales counselor. collusion between them, Perla’s fault must be
considered solely her own and cannot prejudice
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The comprehensive plan also provided life insurance Manuel.
coverage to Florence. This was covered by a Group Master 3. Any defect or insufficiency in the information provided
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Policy that Philam Life issued to Philam Plans. Under the by Manuel’s pension plan application should be deemed
master policy, Philam Life was to automatically provide life
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waived after the same has been approved, the policy has
insurance coverage to all who signed up to Philam Plans’ been issued, and the premiums have been collected.
comprehensive pension plan. If the plan holder died before
the maturity of the plan, his beneficiary was to instead
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ISSUE: Whether or not Manuel was guilty of concealing
receive the proceeds of the life insurance. his illness when he kept blank and did not answer
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questions in his pension plan application regarding the
Eleven months after Philam Plans issued the Pension Plan ailments he suffered from
Agreement, Manuel died of blood poisoning. subsequently,
Lourdes, his wife and the insurance beneficiary, filed a RULING: YES. (The SC ruling is based on Lourdes’
claim with Philam Plans for the payment of the benefits. arguments, so it will be presented as an answer to each of
The claim was forwarded to Philam Life since Manuel died her arguments)
before his pension plan matured.
1. Lourdes is shifting to Philam Plans the burden of
Philam Plans declined Lourdes’ claim, since Philam Life putting on the pension plan application the true state of
found out that Manuel was on maintenance medicine for Manuel's health. She forgets that since Philam Plans
his heart and had an implanted pacemaker. This prompted waived medical examination for Manuel, it had to rely
Lourdes to file an action against Philam Plans. largely on his stating the truth regarding his health in
his application.

Insurance Cases
When Manuel signed the pension plan application, he he applied for a pension plan in October 1997 is an
adopted as his own the written representations and admission that he remained under treatment for irregular
declarations embodied in it. It is clear from these heartbeat within five years preceding that application.
representations that he concealed his chronic heart ailment
and diabetes from Philam Plans. Manuel had been taking medicine for his heart condition
and diabetes when he submitted his pension plan
Since Manuel signed the application without filling in the application. These clearly fell within the five-year period.
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details regarding his continuing treatments for heart More, even if Perla's knowledge of Manuel's pacemaker
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condition and diabetes, the assumption is that he has never may be applied to Philam Plans under the theory of
been treated for the said illnesses in the last five years imputed knowledge, it is not claimed that Perla was aware
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preceding his application. This is implicit from the phrase of his two other afflictions that needed medical treatments.
"If your answer to any of the statements above (specifically,
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Pursuant to Section 27 of the Insurance Code, Manuel's
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the statement: I have never been treated for heart condition concealment entitles Philam Plans to rescind its contract of
or diabetes) reveal otherwise, please give details in the insurance with him.
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space provided for." But this is untrue since he had been on
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"Coumadin," a treatment for venous thrombosis, and 2. Assuming that it was Perla who filled up the application
insulin, a drug used in the treatment of diabetes mellitus, at form, Manuel is still bound by what it contains since he
that time. certified that he authorized her action. Philam Plans
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had every right to act on the faith of that certification.
Further, the responsibility for preparing the application
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belonged to Manuel. Nothing in it implies that someone Lourdes could not seek comfort from her claim that Perla
else may provide the information that Philam Plans had assured Manuel that the state of his health would not
needed. Manuel cannot sign the application and disown the hinder the approval of his application and that what is
responsibility for having it filled up. If he furnished Perla written on his application made no difference to the
the needed information and delegated to her the filling up insurance company. But, indubitably, Manuel was made
of the application, then she acted on his instruction, not on aware when he signed the pension plan application that, in
Philam Plans' instruction. granting the same, Philam Plans and Philam Life were
acting on the truth of the representations contained in that
A pacemaker is an electronic device implanted into the application.
body and connected to the wall of the heart, designed to
provide regular, mild, electric shock that stimulates the The same may be said of Manuel, a civil engineer and
contraction of the heart muscles and restores normalcy to manager of a construction company. He could be expected
the heartbeat. That Manuel still had his pacemaker when

Insurance Cases
to know that one must read every document, especially if it

creates rights and obligations affecting him, before signing
the same. Manuel is not unschooled that the Court must
come to his succor. It could reasonably be expected that he
would not trifle with something that would provide
additional financial security to him and to his wife in his
twilight years.
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3. The Comprehensive Plan that Philam Plans issued
contains a one-year incontestability period. Such clause
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precludes the insurer from disowning liability under the
policy it issued on the ground of concealment or
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misrepresentation regarding the health of the insured
after a year of its issuance.
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Since Manuel died on the eleventh month following the
issuance of his plan, the one year incontestability period
has not yet set in. Consequently, Philam Plans was not
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barred from questioning Lourdes' entitlement to the
benefits of her husband's pension plan.
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Insurance Cases
UCPB General Insurance vs. Masagana Telamart RULING: NO. An insurance policy, other than life, issued
G.R. No. 137172, June 15, 1999 originally or on renewal, is not valid and binding until
actual payment of the premium. Any agreement to the
FACTS: Petitioner issued 5 insurance policies covering contrary is void. The parties may not agree expressly or
respondent’s various properties against fire. The policies impliedly on the extension of credit or time to pay the
covered the period until May 22, 1992. The policies were premium and consider the policy binding before actual
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not renewed. On April 6, 1992, petitioner gave written payment.
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notice to respondent of the non-renewal of the policies. On
June 13, 1992, ︎re razed respondent's property covered by The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo,
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cited by the Court of Appeals, is not applicable. In that case,
three of the insurance policies petitioner issued. On July 13,
payment of the premium was in fact actually made on
1992, respondent presented to petitioner's cashier five (5)
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December 24, 1981, and the ︎re occurred on January 18,
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manager's checks representing premium for the renewal of
1982. Here, the payment of the premium for renewal of the
the policies from May 22, 1992 to May 22, 1993. No notice
policies was tendered on July 13, 1992, a month after the ︎re
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of loss was ︎led by respondent under the policies prior to
July 14, 1992. On July 14, 1992, respondent ︎led with occurred on June 13, 1992. The assured did not even give
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the insurer a notice of loss within a reasonable time after
petitioner its claim for indemnification of the insured
occurrence of the fire.
property razed by ︎re. On the same day, petitioner returned
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to respondent the manager's checks it tendered and at the
same time rejected its claim. Respondent thus ︎led a civil
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complaint against petitioner with the Regional Trial Court
(RTC) for recovery of the face value of the policies. The RTC
rendered judgment in favor of the plaintiff. The Court of
Appeals affirmed the decision rendered by the RTC. Hence,
this appeal. CDA
ISSUE: whether the fire insurance policies issued by

petitioner to the respondent covering the period May 22,
1991 to May 22, 1992, had expired on the latter date or had
been extended or renewed by an implied credit
arrangement though actual payment of premium was
tendered on a latter date after the occurrence of the risk
(fire) insured against.

Insurance Cases
Sun Insurance Office Ltd. vs. CA An accident is an event which happens without any human
G.R. No. 92383, July 17, 1992 agency or, if happening through human agency, an event
which, under the circumstances, is unusual to and not
expected by the person to whom it happens. It has also
FACTS: Felix Lim, Jr. had a Personal Accident Policy with been defined as an injury which happens by reason of some
petitioner. Under the policy, the insurance company will violence or casualty to the insured without his design,
not be liable in respect of “bodily injury … consequent upon consent, or voluntary co-operation.
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… the insured persons attempting to commit suicide or
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willfully exposing himself to needless peril except in an In light of these definitions, the Court is convinced that the
attempt to save a human life.” incident that resulted in Lim's death was indeed an
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accident.
Two months after the policy was issued, he was dead with a
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bullet wound in his head. As beneficiary, his wife, Nerissa It should be noted at the outset that suicide and willful
Lim, sought payment on the policy but her claim was exposure to needless peril are in pari materia because they
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rejected. Petitioner agreed that there was no suicide, but it both signify a disregard for one's life. The only difference is
also argued that there was no accident.
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in degree, as suicide imports a positive act of ending such
life whereas the second act indicates a reckless risking of it
Pilar Nalagon, Lim’s secretary, and the only eyewitness to that is almost suicidal in intent. To illustrate, a person who
his death, recalled that Lim was playing with his handgun,
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walks a tightrope one thousand meters above the ground
from which he had previously removed the magazine. He and without any safety device may not actually be intending
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stood in front of her and pointed the gun at her. She pushed to commit suicide, but his act is nonetheless suicidal. He
it aside and said it might be loaded. Felix assured her that it would thus be considered as "willfully exposing himself to
was not and then pointed it to his temple. The next moment needless peril" within the meaning of the exception in
there was an explosion and Lim slumped to the floor, dead. question.
ISSUE: Whether the death of Felix Lim could be The petitioner maintains that by the mere act of pointing
considered as an accident the gun to his temple, Lim had willfully exposed himself to
needless peril and so came under the exception. The theory
RULING: YES. An accident is an event that takes place is that a gun is per se dangerous and should therefore be
without one's foresight or expectation — an event that handled cautiously in every case.
proceeds from an unknown cause, or is an unusual effect of
a known case, and therefore not expected. That posture is arguable. But what is not is that, as the
secretary testified, Lim had removed the magazine from the

Insurance Cases
gun and believed it was no longer dangerous. He expressly

assured her that the gun was not loaded. It is submitted
that Lim did not willfully expose himself to needless peril
when he pointed the gun to his temple because the fact is
that he thought it was not unsafe to do so. The act was
precisely intended to assure Nalagon that the gun was
indeed harmless.
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Lim was unquestionably negligent and that negligence cost
him his own life. But it should not prevent his widow from
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recovering from the insurance policy he obtained precisely
against accident. There is nothing in the policy that relieves
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the insurer of the responsibility to pay the indemnity
agreed upon if the insured is shown to have contributed to
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his own accident. Indeed, most accidents are caused by
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negligence. There are only four exceptions expressly made
in the contract to relieve the insurer from liability, and
none of these exceptions is applicable in the case at bar.
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Insurance Cases
Tio Khe Chio vs. CA RULING: The Civil Code should govern. The legal rate of
G.R. Nos. 76101-02, September 30, 1991 interest in the case at bar is 6% per annum as correctly held
by the CA.
FACTS: Petitioner Tio Khe Chio imported 1,000 bags of Sections 243 and 244 of the Insurance Code are not
fishmeal from Texas, USA. The goods were insured with pertinent to the instant case. They apply only when the
respondent EASCO and shipped on board the M/V Peskov, court finds an unreasonable delay or refusal in payment of
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a vessel owned by Far Eastern Shipping Company. When the claims.
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the goods reached Manila, they were found to have been
damaged by sea water which rendered the fishmeal useless. Neither does Circular No. 416 of the Central Bank issued
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Petitioner filed a claim with EASCO and Far Eastern pursuant to the Usury Law increasing the legal rate form
Shipping. Both refused to pay, which prompted petitioner 6% to 12% apply to this case. The adjusted rate in the
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to sue them for damages. circular refers only to loans or forbearance of money, goods
or credits and court judgments thereon but not to court
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RTC ruled in favor of petitioner. A writ of execution was judgments for damages arising from injury to persons and
issued against EASCO, where the sheriff who enforced the
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loss of property which does not involve a loan.
same fixed the legal rate of interest at 12%. EASCO moved
to quash the writ alleging that the legal interest should be Clearly, the applicable law is Art. 2209 of the Civil Code
6% in accordance with Art. 2209 of the Civil Code.
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which provides that: "If the obligation consists in the
payment of a sum of money and the debtor incurs in
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CA reduced the interest to 6% per annum. delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of
Petitioner maintains that the CA decision was contrary to interest agreed upon, and in the absence of stipulation, the
the correct interpretation of the fixing of interest rates legal interest which is six per cent per annum."
under Sections 243 and 244 of the Insurance Code. And
since his claims are based on an insurance contract, then it Since the parties did not allege the rate of interest
is the Insurance Code which must govern and not the Civil stipulated in the insurance contract, the legal interest was
Code. properly pegged by the Appellate Court at 6%.
ISSUE: Which between the Civil Code and the Insurance
Code should govern the imposition of interest rate?

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Insurance Cases

EM Briones Page 1 of 54 Commercial Law Review 2019-2020

favor of the insured and strictly against the insurer in order

An examination of the above provision would show

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previous ailment of asthma, and six months from the

Re: Petitioner’s allegation that respondent was not the legal

Asian Terminals, Inc. v. First Lepanto-Taisho

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CA reversed and set aside RTC’s ruling. It ruled that

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title, but whether insured has substantial economic interest

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Sun Life of Canada [Philippines], Inc. vs. Sibya,

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policy, Sun Life loses its right to rescind the policy. As

Assuming, however, for the sake of argument, that the

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The SC ruled that the (a) the prohibition under Condition 3

A double insurance exists where the same person is insured

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In the Endorsement, the obscurity is patent. In the first

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As a form of damages, compensatory interest is due only if

In this case, it is undisputed that simultaneous to its giving

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Indeed, the nature of Compulsory Motor Vehicle Liability

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premiums under the policy. Consequently, respondent

Thus, we find that petitioner is not entitled to the insurance

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It is quite unmistakable that the loss of the cargo was due to

As held in previous case, "It must be considered to be

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Both RTC and CA dismissed the complaint for insufficiency

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circumstances attending the execution of these

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Actual damages are not presumed. The claimant must

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Alpha Insurance and Surety Co. vs. Castor,

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Therefore, petitioner cannot exclude the loss of

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