INSURANCE CASE DIGEST

A. CONSTRUCTION OF INSURANCE CONTRACT

Calanoc vs. Court of Appeals, 98 Phil. 79 [1955]

Facts:

Melencio Basilio was a watchman of the Manila Auto Supply located at the corner of Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine American Life Insurance Company in the amount of P2,000 to which was attached a supplementary contract covering death by accident. On January 25, 1951, he died of a gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at the corner of Oroquieta and Zurbaran streets. Calanoc, the widow, was paid the sum of P2,000, face value of the policy, but when she demanded the payment of the additional sum of P2,000 representing the value of the supplemental policy, the company refused alleging, as main defense, that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law which contingencies were expressly excluded in the contract and have the effect of exempting the company from liability.

It is contended in behalf of the company that Basilio was killed which "making an arrest as an officer of the law" or as a result of an "assault or murder" committed in the place and therefore his death was caused by one of the risks excluded by the supplementary contract which exempts the company from liability. This contention was upheld by the Court of Appeals that said Basilio’s killing was not an accident, but rather an intentional act on the part of the robber.

Issue: Whether or not, the death of the victim comes within the purview of the exception clause of the supplementary policy and, hence, exempts the company from liability?

Ruling: NO.

While as a general rule "the parties may limit the coverage of the policy to certain particular accidents and risks or causes of less, and may expressly except other risks or causes of loss therefrom" , however, it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved against the one who has caused the obscurity. And so it has been generally held that the "terms in an insurance policy, which are ambiguous, equivocal, or uncertain are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where a forfeited is involved" and the reason for this rule is that the "insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is

selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company."

The Supreme Court ruled that there was no proof that it was intentional, that the robber had aimed for Basilio, because there was nothing on record that showed how the fatal shot was fired while it was an accident on the part of Basilio. The house being robbed was not the one he was guarding, and he had earlier refused to go to the house without a policeman. Thus, Insurer ordered to pay.

Biagtan vs Insular Life Assurance Co., Ltd., 44 SCRA 58

Facts:

Juan S. Biagtan was insured with defendant Insular Life Assurance Company under Policy No. 398075 for the sum of P5,000.00 and, under a supplementary contract denominated "Accidental Death Benefit Clause, for an additional sum of P5,000.00 if "the death of the Insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident and independently of all other causes." The clause, however, expressly provided that it would not apply where death resulted from an injury "intentionally inflicted by another party."

On the night of May 20, 1964, or during the first hours of the following day a band of robbers entered the house of the insured Juan S. Biagtan.

Biagtan was killed as his house was being robbed. The insurance company paid the basic amount of P5,000 but refused to pay the additional P5,000 under the accidental death benefit clause, on the ground that his death was the result of injuries intentionally inflicted by third parties and was not covered. The trial court ruled that there was no proof that the robbers intended to kill Biagtan, or just to scare him away by thrusting at him with their knives.

Issue: Whether or not, the wounds received by the insured at the hands of the robbers were inflicted intentionally?

Ruling: YES.

Unlike the ruling in the case of Calanoc vs. Court of Appeals, where the killing of the victim was held as accidental and thus covered by the insurance policy, the Supreme Court held that in the instant case, the insured was killed intentionally. The term “intentional” implies the exercise of the reasoning faculties, consciousness and volition.

The Supreme Court held pointing out that there were nine wounds in all. The exception in the accidental benefit clause does not speak of the purpose – whether homicidal or not – of a third party in causing the injuries, but only of the fact that such injuries have been intentionally inflicted. Nine wounds inflicted with bladed weapons at close range cannot be considered innocent insofar as intent is concerned. The manner of execution of the crime permits no other

conclusion.

Where a provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is controlling. If the injuries suffered by the insured clearly resulted from the intentional act of a third party the insurer is relieved from liability.

Under the circumstance, the insurance company was correct in refusing to pay the additional sum of P2,000.00 under the accidental death benefit clause which expressly provided that it would not apply where death resulted from an injury "intentionally" inflicted by a third party.

FINMAN GENERAL ASSURANCE CORPORATION vs.THE HONORABLE COURTOF APPEALS

213 SCRA 493, September 2, 1992NOCON, J.:

FACTS:

On October 22, 1986, deceased, Carlie Surposa was insured with petitioner FinmanGeneral Assurance Corporation with his parents, spouses Julia and Carlos Surposa, and brothers Christopher, Charles, Chester and Clifton, all surnamed, Surposa, as beneficiaries. While said insurance policy was in full force and effect, the insured, Carlie Surposa, died on October 18,1988 as a result of a stab wound inflicted by one of the three (3) unidentified men. Private respondent and the other beneficiaries of said insurance policy filed a written notice of claim with the petitioner insurance company which denied said claim contending that murder and assault are not within the scope of the coverage of the insurance policy. Private respondent filed a complaint with the Insurance Commission which rendered a favorable response for the respondent. The appellate court ruled likewise. Petitioner filed this petition alleging grave abuse of discretion on the part of the appellate court in applying the principle of "expresso unius exclusio alterius" in a personal accident insurance policy, since death resulting from murder and/or assault are impliedly excluded in said insurance policy considering that the cause of death of the insured was not accidental but rather a deliberate and intentional act of the assailant. Therefore, said death was committed with deliberate intent which, by the very nature of a personal accident insurance policy, cannot be indemnified.

ISSUE:

Whether or not the insurer is liable for the payment of the insurance premiums

RULING:

Yes, the insurer is still liable. Contracts of insurance are to be construed liberally in favor of the insured and strictly against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its beneficiary. The terms "accident" and "accidental" as used in insurance contracts have not acquired any technical meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean

that which happen by chance or fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen. Where the death or injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in the doing of the act which produces the injury, the resulting death is within the protection of the policies insuring against death or injury from accident. In the case at bar, it cannot be pretended that Carlie Surposa died in the course of an assault or murder as a result of his voluntary act considering the very nature of these crimes.

.

ZENITH INSURANCE CORP. vs. COURT OF APPEALS, ET AL. G.R. No. 85296 May 14, 1990. AN INSURANCE LAW CASE. BY C Y.

FACTS.

1. Private respondent Fernandez insured his car with the ZENITH INSURANCE COMPANY.

2. The car was disfigured in an accidents.

3. Private respondent try to recover the amount of the insurance policy with the petitioner but the latter they cannot agree on how much the petitioner will pay to the private respondent.

4. Private respondent file a complaint against the petitioner before the trial court of Cebu who order the petitioner to pay the private respondent the amount of 20000 as moral damages, 10000 as exemplary and 5000 as an attorney.

5. Petitioner appealed to the CA who affirm the decision of the trial court.

6. Petitioner filed a petition for review to the Supreme Court claiming that the CA acted in excess of its jurisdiction when it affirmed the decision of the trial court on the ground that while private respondent ask for moral damages of 1,0000 only, he was awarded with 2,0000, exemplary damages of 5,000 and he was awarded 1,0000, an attorney’s fee of 3,000 but he was given 5,000.

ISSUE.

WHETHER OR NOT THE CA ACTED IN EXCESS OF ITS JURISDICTION WHEN IT AFFIRM THE DECISION OF THE TRIAL COURT IN AWARDING THE DAMAGES.

RULING:

According to the Supreme Court, the act of petitioner of delaying payment for two months cannot be considered as so wanton or malevolent to

justify an award of P20,000.00 as moral damages, taking into consideration the fact that the actual damage on the car was only P3,460.

The reason for petitioner's failure to indemnify private respondent within

the two-month period was that the parties could not come to an agreement as regards the amount of the actual damage on the car. The amount of P10,000.00

prayed for by private respondent as moral damages is equitable.

SUN INSURANCE OFFICE, LTD., petitioner, vs. THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

Facts of the case:

The sun insurance issued Personal Accident Policy to Felix Lim, Jr. with a face value of P200,000.00. Two months later, the deceased died with a bullet wound in his head. As beneficiary, his wife Nerissa Lim sought payment on the policy but her claim was rejected. Both parties petitioner agreed that there was no suicide. However the insurance co. stated that there was no accident either.

Pilar Nalagon, Lim's secretary, was the only eyewitness to his death.

She testified that on October 6, 1982, at about 10 o'clock in the evening, after his mother's birthday party. According to Nalagon, Lim was in a happy mood (but not drunk) and was playing with his handgun, from which he had previously removed the magazine. As she watched television, he stood in front of her and pointed the gun at her. She pushed it aside and said it might he loaded. He assured her it was not and then pointed it to his temple. The next moment there was an explosion and Lim slumped to the floor. He was dead before he fell. 1

The nerissa lim sued the insurance co., in the RTC of Zamboanga City and was sustained. 2 The petitioner was sentenced to pay her P200,000.00, representing the face value of the policy, with interest at the legal rate; This decision was affirmed on appeal, and the motion for reconsideration was denied. 3 hence the present petition by sun insurance to fault the Court of Appeals for approving the payment of the claim and the award of damages.

ISSUE: WON there was an accident that occurred which entitles the widow of the deceased to recover from the insurance policy? And WON the petitioner acted in bad faith for resisting a lawful and just claim.

SC DECISION:

An accident is an event which happens without any human agency or, if happening through human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also been defined as an injury which happens by reason of some violence or casualty to the injured without his design, consent, or voluntary co-operation. 5

, the Court is convinced that there was truly an accident that which resulted in lim’s death

Lim was unquestionably negligent and that negligence cost him his own life. But it should not prevent his widow from recovering from the insurance policy he obtained precisely against accident. There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the insured is shown to have contributed to his own accident. Indeed, most accidents are caused by 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. **

1 On the second issue, petitioner is not guilty of bad faith in resisting a legitimate obligation, believing, on the ground that the death of the insured was covered by the exception the issue, as for the court, was highly debatable.

Petition is DENIED

JEWEL VILLACORTA vs. THE INSURANCE COMMISSION

G.R. No. L-54171, 28 October 1980 100 SCRA 467

FACTS:

Villacorta had her Colt Lancer car insured with Empire Insurance Company against own damage, theft and 3rd party liability. While the car was in the repair shop, one of the employees of the said repair shop took it out for a joyride after which it figured in a vehicular accident. This resulted to the death of the driver and some of the passengers as well as to extensive

damage to the car. Villacorta filed a claim for total loss with the said insurance company. However, it denied the claim on the ground that the

accident did not fall within the provisions of the policy either for the Own Damage or Theft coverage, invoking the policy provision on “Authorized Driver Clause”. This was upheld by the Insurance Commission further stating

that the car was not stolen and therefore not covered by the Theft Clause because it is not evident that the person who took the car for a joyride intends to permanently deprive the insured of his/ her car.

ISSUE:

Whether or not the insurer company should pay the said claim, CONSIDERING THE DRIVER IN QUESTION WAS NOT AUTHORIZED BY THE INSURED OWNER

HELD:

Yes. Where the insured’s car is wrongfully taken without the insured’s consent from the car service and repair shop to whom it had been entrusted for check-up and repairs (assuming that such taking was for a joy ride, in the course of which it was totally smashed in an accident),

respondent insurer is liable and must pay insured for the total loss of the insured vehicle under

the Theft Clause of the policy. Assuming, despite the totally inadequate evidence, that the taking was “temporary” and for a “joy ride”, the Court sustains as the better view that which holds that when a person, either

with the object of going to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the consent of its owner, he is guilty of theft because by taking possession of the personal property belonging to another and using it, his intent to gain is evident since he derives there from utility, satisfaction, enjoyment and pleasure. ACCORDINGLY, the appealed decision is set aside and judgment is hereby rendered sentencing private respondent to pay petitioner the sum of P35,000.00 with legal interest from the filing of the complaint until full payment is made and to pay the costs of suit.

Palermo v. Pyramid Insurance

FACTS: On October 12,1968, after having purchased a brand new Nissan Cedric de Luxe Sedan car bearing Motor No. 087797 from the Ng Sam Bok Motors Co. in Bacolod City, plaintiff insured the same with the defendant insurance company against any loss or damage for P 20,000.00 and against third party liability for P 10,000.00. The automobile was, however, mortgaged by the plaintiff with the vendor, Ng Sam Bok Motors Co., to secure the payment of the balance of the purchase price, which explains why the registration certificate in the name of the plaintiff remains in the hands of the mortgagee, Ng Sam Bok Motors Co. On April 17, 1968, while driving the automobile in question, the plaintiff met a violent accident. The La Carlota City fire engine crashed head on, and as a consequence, the plaintiff sustained physical injuries, his father, Cesar Palermo, who was with am in the car at the time was likewise seriously injured and died shortly thereafter, and the car in question was totally wrecked. Palermo, filed a complaint in the Court of First Instance of Negros Occidental against Pyramid Insurance Co., Inc., for payment of his claim. Pyramid Insurance Co., Inc., disallowed the claim because at the time of the accident, the insured was driving his car with an expired driver's license.

ISSUE:

WON Palermo is entitled to the claim

HELD:

YES. AUTHORIZED DRIVER:

Any of the following:

(a) The Insured.

(b) Any person driving on the Insured's order or with his permission. Provided that the person driving is permitted in accordance with the licensing or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving such motor vehicle by order of a Court of law

or by reason of any enactment or regulation in that behalf. (Exh. "A.")

There is no merit in the appellant's allegation that the plaintiff was not authorized to drive the insured motor vehicle because his driver's license had expired. The driver of the insured motor vehicle at the time of the accident was, the insured himself, hence an "authorized driver" under the policy.

While the Motor Vehicle Law prohibits a person from operating a motor vehicle on the highway without a license or with an expired license, an infraction of the Motor Vehicle Law on the part of the insured, is not a bar to recovery under the insurance contract. It however renders him subject to the penal sanctions of the Motor Vehicle Law.

The requirement that the driver be "permitted in accordance with the licensing or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving such motor vehicle by order of a Court of Law or by reason of any enactment or regulation in that behalf," applies only when the driver" is driving on the insured's order or with his permission." It does not apply when the person driving is the insured himself.

Figuracion vda. De Maglana v. Consolacion

FACTS:

Lope Maglana was an employee of the Bureau of Customs whose work station was at Lasa, here in Davao City. One morning, while on his way to his work station, driving a motorcycle owned by the Bureau of Customs. At Km. 7, Lanang, he met an accident that resulted in his death. The jeep that bumped the deceased was owned by Destrajo. Destrajo, had an insurance policy issued by AFISCO Insurance. The trial court ordered that AFISCO should reimburse Destrajo for the amount paid to the plaintiff as a result of the accident but only to the extent of the insurance coverage. Petitioners contend that AFISCO’s liability should be direct and primary, and not merely secondary as provided under the insurance code. Hence, they argued that the P20,000.00 coverage of the insurance policy issued by AFISCO, should have been awarded in their favor.

ISSUE:

WON AFISCO’s liability is dependent upon the recovery of judgment by the injured party against the insured.

HELD:

NO. The particular provision of the insurance policy on which petitioners base their claim is as follows:

Sec. 1 — LIABILITY TO THE PUBLIC

1. The Company will, subject to the Limits of Liability, pay all sums necessary to discharge liability of the insured in respect of

(a) death of or bodily injury to any THIRD PARTY

xXX

3. In the event of the death of any person entitled to indemnity under this Policy, the Company will, in respect of the liability incurred to such person indemnify his personal representatives in terms of, and subject to the terms and conditions hereof.

The above-quoted provision leads to no other conclusion but that AFISCO can be held directly liable by petitioners. As this Court ruled in Shafer vs. Judge, RTC of Olongapo City, Br. 75, "[w]here an insurance policy insures directly against liability, the insurer's liability accrues immediately upon the occurrence of the injury or even upon which the liability depends, and does not depend on the recovery of judgment by the injured party against the insured." 8 The underlying reason behind the third party liability (TPL) of the Compulsory Motor Vehicle Liability Insurance is "to protect injured persons against the insolvency of the insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy . . ." 9 Since petitioners had received from AFISCO the sum of P5,000.00 under the no-fault clause, AFISCO's liability is now limited to P15,000.00.

However, we cannot agree that AFISCO is likewise solidarily liable with Destrajo. where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on tort While in solidary obligations, the creditor may enforce the entire obligation against one of the solidary debtors, in an insurance contract, the insurer undertakes for a consideration to indemnify the insured against loss, damage or liability arising from an unknown or contingent event.

PCSI vs. CA, 208 SCRA, 487

FACTS:

Spouses Herminio and Evely Lim executed a promissory note in favor of Supercars secured by a chattel mortgage over a brand new Ford Laser registered under the name of Herminio and insured with PCSI.

Supercars with notice to the spouses assigned to FCP Credit Corp its rights, title and interest on the promissory note and chattel mortgage.

Subsequently, the vehicle was carnapped. Evelyn, was the one driving before it was stolen.

The spouses filed a claim for loss with PCSI but was denied on the ground that Evelyn’s driver’s license was expired at the time of the loss in violation of the authorized driver clause.

ISSUE:

WON PCSI is liable

HELD:

YES. Clearly, the risk against accident is distinct from the risk against theft. The “authorized driver clause” in an insurance policy is in contemplation or anticipation of accident in the legal sense in which it should be understood, and not in in contemplation or anticipation of an event such as theft. Thus, if the insured vehicle had figured in an accident at the time she drove it with an expired license, then PCSI could properly resist the claim for indemnification resulting from the accident. But in the present case, the loss of the vehicle did not result from an accident where intent was involved; the loss in the present case was caused by theft, the commission of which was attended by intent.

It is worthy to note that there is no causal connection between the possession of a valid driver’s license and the loss of the vehicle. To rule otherwise would render car insurance practically a sham since an insurance company can easily escape liability by citing restrictions which are not applicable or germane to the claim, thereby reducing indemnity to a shadow.

GEAGONIA vs. CA, COUNTRY BANKERS INSURANCE CORP., G.R. 114427, 2/6/95

FACTS:

Armando Geagonia is the owner of Norman’s Mart and obtained from Country Bankers a fire insurance policy which covered Stock-in-trade consisting of RTW dry goods.

The policy contained a provision where the insured must give notice to the insurer of any insurance or insurances already affected or which may be subsequently be effected covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories already insured by such policy otherwise it shall be deemed forfeited, provided that such condition does not apply when the total insurance or insurances in force at the time of the loss is not more than 200k

Subsequently, a fire broke out and destroyed Geagonia’s stocks-in-trade. Country bankers denied the claim because it was found that at the time of the loss, the stocks were likewise covered by two other fire insurances for 100k each by PFIC. It had a mortgage clause which stated that loss, if any, shall be payable to Cebu Tesing Textiles.

ISSUE:

WON there was double insurance to justify denial of the claim

HELD:

NO (Country Bankers is liable).

It is a cardinal rule on insurance that a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the company, the reason being, undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he applied for insurance. Provisions, conditions, or exceptions in policies which tend to work a forfeiture of insurance policies should be construed most strictly against those for whose benefits they are inserted, and most favorably toward those against whom they are intended to operate.

The condition in the policy is commonly known as the additional or “other insurance” clause and has been upheld as valid and as a warranty that no other 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 insurable interest, and the same risk.

As to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable interest therein and both interests may be one policy, or each may take out a separate policy covering his interest, either at the same or separate times. The 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 insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon.

A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and cover the same interest. Since the two policies of the PFIC do not cover the same interest as that covered by the policy in issue, no double insurance exists. The non-disclosure is not fatal.

Fortune Insurance and Surety Co., Inc. v. Court of Appeals

Facts:

On June 29, 1987, Producer’s Bank of the Philippines’ armored vehicle was robbed, in transit, of seven hundred twenty-five thousand pesos (Php 725,000.00) that it was transferring from its branch in Pasay to its main branch in Makati. To mitigate their loss, they claim the amount from their insurer, namely Fortune Insurance and Surety Co.

Fortune Insurance, however, assails that the general exemption clause in the Casualty Insurance coverage had a general exemption clause, to wit:

GENERAL EXCEPTIONS

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

xxx xxx xxx

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

And, since the driver (Magalong) and security guard (Atiga) of the armored vehicle were charged with three others as liable for the robbery, Fortune denies Producer’s Bank of its insurance claim.

The trial court and the court appeals ruled in favor of recovery, hence, the case at bar.

Issue:

Whether recovery is precluded under the general exemption clause.

Ruling:

Yes, recovery is precluded under the general exemption clause.

Howsoever viewed, Producers entrusted the three with the specific duty to safely transfer the money to its head office, with Alampay to be responsible for its custody in transit; Magalong to drive thearmored vehicle which would carry the money; and Atiga to provide the needed security for the money, the vehicle, and his two other companions. In short, for these particular tasks, the three acted as agents of Producers. A "representative" is defined as one who represents or stands in the place of another; one who represents others or another in a special capacity, as an agent, and is interchangeable with "agent."

In view of the foregoing, Fortune is exempt from liability under the general exceptions clause of the insurance policy.

Edillon v. Manila Bankers Life

Facts:

In April 1969, Carmen Lapuz filled out an application form for insurance under Manila Banker Life Assurance Corporation. She stated that her date of birth was July 11, 1904. Upon payment of the Php 20.00 premium, she was issued the insurance policy in April 1969. In May 1969, Carmen Lapuz died in a vehicular accident. Regina Edillon, who was named a beneficiary in the insurance policy sought to collect the insurance claim but Manila Banker denied the claim. Apparently, it is a rule of the insurance company that they were not to issue insurance policies to “persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years …” Note, that Lapuz was already 65 years old when she was applying for the insurance policy.

Issue:

Whether or not Edillon is entitled to the insurance claim as a beneficiary.

Ruling:

Yes. Carmen Lapuz did not conceal her true age. Despite this, the insurance company still received premium from Lapuz and issued the corresponding insurance policy to her. When the accident happened, the insurance policy has been in force for 45 days already and such time

was already sufficient for Manila Banker to notice the fact that Lapuz is already over 60 years old and thereby cancel the insurance policy. If Manila Banker failed to act, it is either because it was willing to waive such disqualification; or, through the negligence or incompetence of its employees for which it has only itself to blame, it simply overlooked such fact. Under the circumstances, Manila Banker is already deemed in estoppel.

PERLA COMPANIA DE SEGUROS, INC vs. CA and CAYAS

FACTS:

Cayas was the registered owner of a Mazda bus which was insured with petitioner PERLA COMPANIA DE SEGUROS, INC (PCSI). The bus figured in an accident in Cavite, injuring several of its passengers. One of them, Perea, sued Cayas for damages in the CFI, while three others agreed to a settlement of P4,000.00 each with Cayas.

After trial, the court rendered a decision in favor of Perea, Cayas ordered to compensate the latter with damages. Cayas filed a complaint with the CFI, seeking reimbursement from PCSI for the amounts she paid to ALL victims, alleging that the latter refused to make such reimbursement notwithstanding the fact that her claim was within its contractual liability under the insurance policy.

The decision of the CA affirmed in toto the decision of the RTC of Cavite, the dispositive portion of which states:

IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant PCSI to pay plaintiff Cayas the sum of P50,000.00 under its maximum liability as provided for in the insurance policy; …

In this petition for review on certiorari, petitioner seeks to limit its liability only to the payment made by private respondent to Perea and only up to the amount of P12,000.00. It altogether denies liability for the payments made by private respondents to the other 3 injured passengers totaling P12,000.00.

ISSUE:

How much should PCSI pay?

HELD:

The decision of the CA is modified, petitioner only to pay Cayas P12,000,000.00

The insurance policy provides:

5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the Company …

It being specifically required that petitioner’s written consent be first secured before any payment in settlement of any claim could be made, private respondent is precluded from seeking reimbursement of the payments made to the other 3 victims in view of her failure to comply with the condition contained in the insurance policy.

Also, the insurance policy involved explicitly limits petitioner’s liability to P12,000.00 per person and to P50,000.00 per accident

Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case. Thus, it was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance policy.

We observe that although Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable for the amount of P50,000.00, the maximum liability per accident stipulated in the policy. This is patent error. An insurance indemnity, being merely an assistance or restitution insofar as can be fairly ascertained, cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason of an accident.

Aisporna v CA (1982)

Facts

Mapalad Aisporna, the wife of one Rodolfo Aisporna, an insurance agent, solicited the application of Eugenio Isidro in behalf of Perla Compana de Seguros without the certificate of authority to act from the insurance commissioner. Isidro passed away while his wife was issued Php 5000 fromthe insurance policy. After the death, the fiscal instigated criminal action against Mapalad for violating sec 189 of the Insurance code for feloniously acting as agent when she solicited theapplication form.

In the trial court, she claimed that she helped Rodolfo as clerk and that she solicited a renewal, not a new policy from Isidro through the phone. She did this because her husband was absent when he called. She only left a note on top of her husband’s desk to inform him of what transpired. (She did not accept compensation from Isidro for her services)

Aisporna was sentenced to pay Php 500 with subsidiary costs in case of insolvency in 1971 in the Cabanatuan city court.

In the appellate court, she was found guilty of having violating par 1 of sec 189 of the insurance code.

The OSG kept on repeating that she didn’t violate sec 189 of the insurance code.

In seeking reversal of the judgment, Aisporna assigned errors of the appellate court:

1. the receipt of compensation was not a necessary element of the crime in par 1 of sec 189 of the insurance code

2. CA erred in giving due weight to exhibits F, F1, F17 inclusive sufficient to establish petitioner’s guilt beyond reasonable doubt.

3. The CA erred in not acquitting the petitioner

Issues:

Won a person can be convicted of having violated the 1st par of the sec 189 of the IC without reference to the 2nd paragraph of the said section. Or

Is it necessary to determine WON the agent mentioned in the 1st paragraph of the aforesaid section is governed by the definition of an insurance agent found on its second paragraph

Decision:

Aisporna acquitted

Ruling:

Sect 189 of the I.C., par 1 states that “No insurance company doing business with the Philippine Islands nor l any agent thereof shall pay any commission or other compensation to any person for services in obtaining new insurance unless such person shall have first procured from the Insurance Commissioner a certificate of authority to act as an agent of such company as herein after provided.

No person shall act as agent, sub-agent, or broker in the solicitation of procurement of applications for insurance without obtaining a certificate from the Insurance Commissioner.

Par2 Any person who for COMPENSATION solicits or obtains insurance for any for any insurance compna or offers or assumes to act in the negotiating of such insurance shall be an insurance agent in the intent of this section and shall thereby become liable to all liabilities to which an insurance agent is subject.

Par 3 500 pseo fine for person or company violating the provisions of the section.

The court held that the 1st par prohibited a person to act as agent without certificate of authorityfrom the commissioner

In the 2nd par, the definition of an insurance agent is stipulated

The third paragraph provided the penalty for violating the 1st 2 rules

The appellate court said that the petitioner was penalized under the1st paragraph and not the 1nd. The fact that she didn’t receive compensation wasn’t an excuse for her acquittal because she was actually punished separately under sec 1 because she did not have a certificate of authority as under par 1.

The SC held that the definition of an insurance agent was made by CA to be limited to paragraph 2 and not applicable to the 1st paragraph.

The appellate court said that a person was an insurance agent under par 2 if she solicits insurance for compensation, but in the 1st paragraph, there was no necessity that a person solicits an insurance compensation in order to be called an agent.

The SC said that this was a reversible error.

The CA said that Aisporna didn’t receive compensation.

The SC said that the definition of an insurance agent was found in the 2nd par of Sec 189 (check the law) The definition in the 2nd paragraph qualified the definition of an agent used in the 1st and third paragraphs.

DOCTRINE: The court held that legislative intent must be ascertained from the consideration of the statute as a whole. The words shouldn’t be studied in isolated explanations but the whole and every part of the statute must be considered in fixing the meaning of any of its parts in order to pronounce the harmonious whole.

Noscitur a sociis provides that where a particular word or phrase in a statement is ambiguous in itself, the true meaning may be made clear in the company it is fixed in. In applying this, the court held that the definition of an insurance agent in the 2nd paragraph was applicable in the 1stparagraph.

To receive compensation be the agent is an essential element for violation of the 1st paragraph.

The appellate court said that she didn’t receive compensation by the receipt of compensation wasn’t an essential element for violation of the 1st paragraph.

The SC said that this view wasn’t correct owing to the American insurance laws which qualified compensation as a qualifying factor in penalizing unauthorized persons who solicited insurance (Texas code and snyder’s law)

COUNTRY BANKERS INSURANCE CORPORATION, vs. LIANGA BAY AND COMMUNITY MULTI-PURPOSE COOPERATIVEG.R. No. 136914 January 25, 2002DE LEON JR J:

Facts:

The petitioner is a domestic corporation principally engaged in the insurance business wherein it undertakes, for aconsideration, to indemnify another against loss, damage or liability from an unknown or contingent event including fire whilethe respondent is a duly registered cooperative judicially declared insolvent and represented by the elected assignee,Cornelio Jamero.Sometime in1989, the petitioner and the respondent entered into a contract of fire insurance, Fire Insurance Policy No. F-1397. Under Fire Insurance, the petitioner insured the respondent’s stocks-in-trade against fire loss, damage or liabilityduring the period starting from June 20, 1989 to June 20, 1990 for the sum of Two Hundred Thousand Pesos.On July 1, 1989, the respondent’s building located at Surigao del Sur was gutted by fire and reduced to ashes, resulting inthe total loss of the

respondent’s stocks-in-trade, pieces of furnitures and fixtures, equipments and records. Due to the loss,the respondent filed an insurance claim with the petitioner under its Fire Insurance.The petitioner, however, denied the insurance claim on the ground that, based on the submitted documents, the buildingwas set on fire by two NPA rebels who wanted to obtain canned goods, rice and medicines as provisions for their comradesin the forest, and that such loss was an excepted risk under the policy conditions of Fire Insurance Policy which provides:This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of anyof the following occurrences, namely:(d) Mutiny, riot, military or popular uprising, insurrection, rebellion, revolution, military or usurped power.Respondent then instituted in the trial court the complaint for recovery of "loss, damage or liability" against petitioner. Thepetitioner answered the complaint and reiterated the ground it earlier cited to deny the insurance claim.The trial court rendered its Decision in favor of the respondent declaring that the defendant-Country Bankers was liable toplaintiff-Insolvent Cooperative and to fully pay the insurance claim for the loss the insured-plaintiff sustained as a result of the fire under its Fire Insurance in its full face value of P 200,000.00 with interest of 12% per annum from date of filing of thecomplaint until the same is fully paid.Petitioner appealed to the Court of Appeals which affirmed the decision of the trial court in its entirety. Hence, this petition.Issue:Whether Country Bankers in liable

Ruling:

Yes Country bankers is liable.The petitioner does not dispute that the respondent’s stocks-in-trade were insured against fire loss, damage or liability under Fire Insurance Policy and that the respondent lost its stocks-in-trade in a fire that occurred within the duration of said fireinsurance. The petitioner, however, posits the view that the cause of the loss was an excepted risk under the terms of thefire insurance policy. Where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss comes within the purview of the exception or limitation set up. If a proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability. Stated else wise, since the petitioner in this case is defending on the ground of non-coverage and relying upon an exemption or exception clause in the fire insurance policy, it has the burden of proving the facts upon which such excepted risk is based, by a preponderance of evidence. But petitioner failed to do so. The petitioner relies on the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo and on the Spot Report of Pfc. Arturo V. Juarbal specifically that: “investigation revealed by Jose Lomocso that those armed men wanted to get can goodsand rice for their consumption in the forest PD investigation further disclosed that the perpetrator are members of the NPA” .Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned.

AMERICAN HOME ASSURANCE COMPANY vs. TANTUCO ENTERPRISES, INC.

FACTS: Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining industry.It owns two oil mills which were separately covered by fire insurance policies issued by petitionerAmerican Home Assurance Co., Philippine Branch. The first oil mill was insured for P3,000,000.00 under Policy No. 306-7432324-3 for the period March 1, 1991 to 1992. The new oil mill was insured forP6,000,000.00 under Policy No. 306-7432321-9 for the same term. Official receipts indicating payment for the full amount of the premium were issued by the petitioner's agent .A fire that broke out in the early morning of September 30,1991 gutted and consumed the new oil mill. Respondent immediately notified the petitioner of the incident but petitioner rejected respondent's claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the description of the insured establishment referred to another building thus: "Our policy nos. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend insurance coverage to your oil mill under Building No. 5, whilst the affected oil mill was under Building No. 14. "

ISSUE: Whether or not respondent can claim from the petitioner insurance company.

HELD: In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to the insurance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be. Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. If the parties really intended to protect the first oil mill, then there is no need to specify it as new .In determining what the parties intended, the courts will read and construe the policy as a whole and if possible, give effect to all the parts of the contract, keeping in mind always, however, the prime rule that in the event of doubt, this doubt is to be resolved against the insurer. In determining the intent of the parties to the contract, the courts will consider the purpose and object of the contract.

White Gold Marine vs Pioneer Insurance

Facts

Petitioner procured a protection and indemnity coverage for its vessels from The Steamship

Mutual Underwriting Association Ltd. through Pioneer Insurance and Surety Corp. by virtue of a Certificate of Entry and Acceptance. When White Gold failed topay its account, Steamship Mutual refused to renew its coverage so it filed a collection case against the latter. Petitioner contends in defense that it didn’t have the requisite certificate of authority from the Insurance Commissioner under Sec. 187 of the Insurance Code.

Issue

WON Pioneer still needs a license as an insurance agent/broker for Steamship Mutual;

WON Steamship Mutual’s Protection and Indemnity club is engaged in insurance business in the Philippines.

Ruling

YES on both issues.

1) A Protection and Indemnity 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. Steamship Mutual, as P&I club, is a mutual insurance association engaged in marine insurance business.

2) Although Pioneer is already a licensed insurance company, it still needs a separate license to act as an insurance agent for Steamship Mutual as provided by Section 299 of the Insurance Code

Republic (CIR) vs Sun Life Assurance of Canada

Facts

On December 29, 1997, the [Court of Tax Appeals] (CTA) rendered its decision in Insular Life Assurance Co. Ltd. v. [CIR], which held that mutual life insurance companies are purely cooperative companies and are exempt from the payment of premium tax and DST. This pronouncement was later affirmed by this court in [CIR] v. Insular Life Assurance Company, Ltd. Sun Life surmised that[,] being a mutual life insurance company, it was likewise exempt from the payment of premium tax and DST. Hence, on August 20, 1999, Sun Life filed with the CIR an administrative claim for tax credit of its alleged erroneously paid premium tax and DST for the aforestated tax periods.

For failure of the CIR to act upon the administrative claim for tax credit and with the 2-year period to file a claim for tax credit or refund dwindling away and about to expire, Sun Life filed

with the CTA a petition for review. The CTA found in favor of Sun Life.

Seeking reconsideration of the decision of the CTA, the CIR argued that Sun Life ought to have registered, foremost, with the Cooperative Development Authority before it could enjoy the exemptions from premium tax and DST extended to purely cooperative companies or associations under [S]ections 121 and 199 of the Tax Code. For its failure to register, it could not avail of the exemptions prayed for. The CTA denied the CIR’s motion for reconsideration.

Issue:

WON respondent is exempted from payment of tax on life insurance premiums and documentary stamp tax

Ruling:

YES. The Tax Code defines a cooperative as an association “conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit.” Without a doubt, respondent is a cooperative engaged in a mutual life insurance business.

First, it is managed by its members. Both the CA and the CTA found that the management and affairs of respondent were conducted by its member-policyholders. SUNLIFE has been mutualized or converted from a stock life insurance company to a nonstock mutual life insurance corporation pursuant to Section 266 of the Insurance Code of 1978. On the basis of its bylaws, its ownership has been vested in its member-policyholders who are each entitled to one vote; and who, in turn, elect from among themselves the members of its board of trustees.

Second, it is operated with money collected from its members. Since respondent is composed entirely of members who are also its policyholders, all premiums collected obviously come only from them. The member-policyholders constitute “both insurer and insured” who “contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid.”

Third, it is licensed for the mutual protection of its members, not for the profit of anyone. A mutual life insurance company is conducted for the benefit of its member-policyholders, who pay into its capital by way of premiums.

Under the Tax Code although respondent is a cooperative, registration with the Cooperative Development Authority (CDA) is not necessary in order for it to be exempt from the payment of both percentage taxes on insurance premiums, under Section 121; and documentary stamp taxes on policies of insurance or annuities it grants, under Section 199.

PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS and JULITA TRINOS

G.R. No. 125678 | March 18, 2002

Facts:

Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage with petitioner Philamcare Health Systems, Inc.

The application was approved for a period of one year from March 1, 1988 to March 1, 1989 and extended until June 1, 1990. The amount of coverage was increased to a maximum sum of P75,000.00 per disability.

During the period of his coverage, Ernani suffered a heart attack and was confined for one month. While her husband was in the hospital, respondent tried to claim the benefits under the health care agreement. However, petitioner denied her claim saying that the Health Care Agreement was void. Thus, respondent paid the hospitalization expenses herself, amounting to about P76,000.00.

After her husband was discharged from the MMC, he was later admitted at the Chinese General Hospital. In the morning of April 13, 1990, Ernani had fever and was feeling very weak; he died on the same day.

Respondent instituted with the Regional Trial Court (RTC) an action for damages against petitioner. The RTC ruled against petitioner, which was affirmed by the Court of Appeals.

Petitioner filed a petition for review arguing that the agreement grants "living benefits," such as medical check-ups and hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-year thereafter. Petitioner also points out that only medical and hospitalization benefits are given under the agreement without any indemnification, unlike in an insurance contract where the insured is indemnified for his loss. Moreover, since Health Care Agreements are only for a period of one year, as compared to insurance contracts which last longer,7 petitioner argues that the incontestability clause does not apply, as the same requires an effectivity period of at least two years. Petitioner further argues that it is not an insurance company, which is governed by the Insurance Commission, but a Health Maintenance Organization under the authority of the Department of Health.

Issue:

Whether or not a health care agreement is not an insurance contract.

Ruling:

A health care agreement is an insurance contract.

Under Section 2 of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or

liability arising from an unknown or contingent event. An insurance contract exists where the following elements concur: (1) The insured has an insurable interest; (2) The insured is subject to a risk of loss by the happening of the designated peril; (3) The insurer assumes the risk; (4) Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and (5) In consideration of the insurer’s promise, the insured pays a premium.

Further, Section 10 of the Insurance Code provides that every person has an insurable interest in the life and health of himself.

In the case at bar, the insurable interest of respondent’s husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity.9 Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.

COMMISSIONER OF INTERNAL REVENUE vs. LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMA LIFE INSURANCE COMPANY, INC.) and THE COURT OF APPEALS

G.R. No. 119176 | March 19, 2002

Facts:

In the years prior to 1984, private respondent issued a special kind of life insurance policy known as the "Junior Estate Builder Policy," the distinguishing feature of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by petitioner only on the initial sum assured.

Subsequently, petitioner issued deficiency documentary stamps tax assessment for the year 1984 in the amount of P464,898.75 corresponding to the amount of automatic increase of the sum assured on the policy issued by respondent.

Private respondent questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of Tax Appeals.

The Court of Tax Appeals found no valid basis for the deficiency tax assessment on the insurance policy. The Court of Appeals affirmed the decision of the Court of Tax Appeals decision insofar as it nullified the deficiency assessment on the insurance policy.

The Commissioner of Internal Revenue filed the present petition questioning that portion of the Court of Appeals’ decision which invalidated the deficiency assessment on the insurance policy.

Petitioner claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction; and that, while no new

policy was issued, the original policy was essentially re-issued when the additional obligation was assumed upon the effectivity of this "automatic increase clause" in 1984; hence, a deficiency assessment based on the additional insurance not covered in the main policy is in order.

Issues:

1. Whether or not the automatic increase clause is a single agreement embodied in the policy or a separate agreement.

2. Whether or not the Court of Appeals erred in not computing the amount of tax on the total value of the insurance assured in the policy including the additional increase assured by the automatic increase clause.

Ruling:

The petition is impressed with merit.

It is clear from Section 173 that the payment of documentary stamp taxes is done at the time the act is done or transaction had and the tax base for the computation of documentary stamp taxes on life insurance policies under Section 183 is the amount fixed in policy, unless the interest of a person insured is susceptible of exact pecuniary measurement. The amount fixed in the policy is the figure written on its face and whatever increases will take effect in the future by reason of the "automatic increase clause" embodied in the policy without the need of another contract.

Here, although the automatic increase in the amount of life insurance coverage was to take effect later on, the date of its effectivity, as well as the amount of the increase, was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy.

The deficiency of documentary stamp tax imposed on private respondent is definitely not on the amount of the original insurance coverage, but on the increase of the amount insured upon the effectivity of the "Junior Estate Builder Policy."

To claim that the increase in the amount insured (by virtue of the automatic increase clause incorporated into the policy at the time of issuance) should not be included in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax be computed on the basis of the amount insured by the policy.

B. PERFECTION OF INSURANCE CONTRACT

Enriquez v Sun Life

FACTS:

September 24, 1917: Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity

2 days later: he paid P6,000 to the manager of the company's Manila office and was given a receipt

According to the provisional receipt, 3 things had to be accomplished by the insurance company before there was a contract:

(1) There had to be a medical examination of the applicant; -check

(2) there had to be approval of the application by the head office of the company; and - check

(3) this approval had in some way to be communicated by the company to the applicant

November 26, 1917: The head office at Montreal, Canada gave notice of acceptance by cable to Manila but this was not mailed

December 4, 1917: policy was issued at Montreal

December 18, 1917: attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application

December 19, 1917: local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917

December 21, 1917 morning: received by Mr. Torres

December 20, 1917: Mr. Herrer died

Rafael Enriquez, as administrator of the estate of the late Joaquin Ma. Herrer filed to recover from Sun Life Assurance Company of Canada through its office in Manila for a life annuity

RTC: favored Sun Life Insurance

ISSUE:

WON Mr. Herrera received notice of acceptance of his application thereby perfecting his life annuity

RULING:

NO. Not perfected because it has not been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant.

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made.

Judgment is reversed, and the Enriquez shall have and recover from the Sun Life the sum of P6,000 with legal interest from November 20, 1918, until paid, without special finding as to costs in either instance. So ordered.

Great Pacific v CA

FACTS:

Respondent Ngo Hing filed an application with petitioner Great Pacific Life Assurance Company (Pacific Life) for a twenty-year endowment policy in the life of Helen Go, his one year old daughter. Petitioner Lapulapu D. Mondragon, the branch manager, prepared application form using the essential data supplied by respondent. The latter paid the annual premium and Mondragon retained a portion of it as his commission. The binding deposit receipt was issued to respondent. Mondragon wrote his strong recommendation for the approval of the insurance application. However, Pacific Life disapproved the application since the plan was not available for minors below 7 years old but it can consider the same under another plan. The non-acceptance of the insurance plan was allegedly not communicated by Mondragon to respondent. Mondragon again asserted his strong recommendation. Helen Go died of influenza. Thereupon, respondent sought the payment of the proceeds of the insurance, but having failed in his effort, he filed an action for the recovery of the same. Hence the case at bar.

ISSUE:

WON the binding deposit receipt constituted a temporary contract and thus negate the claim that the insurance contract was perfected.

RULING:

YES. The provisions printed on the binding deposit receipt show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract and only upon compliance of the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if the applicant is not insurable according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant.

Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the insurance premium and had accepted the application subject

for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since Pacific Life disapproved the insurance application of Ngo Hing, the binding deposit receipt in question had never become in force at any time. Upon this premise, the binding deposit receipt is, manifestly, merely conditional and does not insure outright. Where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional, and is subordinated to the act of the company in approving or rejecting the application.

Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself. It bears repeating that through the intra-company communication of 30 April 1957, Pacific Life disapproved the insurance application in question on the ground that it is not offering the 20-year endowment insurance policy to children less than 7 years of age. What it offered instead is another plan known as the Juvenile Triple Action, which Ngo Hing failed to accept. In the absence of a meeting of the minds between Pacific Life and Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the non-compliance of the abovequoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between them. Accordingly, the deposit paid by Ngo Hing shall have to be refunded by Pacific Life.

Development Bank of the Philippines v CA

Facts:

Juan B. Dans, together with his family applied for a loan of P500,000 with DBP. As principal mortgagor, Dans, then 76 years of age was advised by DBP to obtain a mortgage redemption insurance (MRI) with DBP MRI pool. A loan in the reduced amount was approved and released by DBP. From the proceeds of the loan, DBP deducted the payment for the MRI premium. The MRI premium of Dans, less the DBP service fee of 10%, was credited by DBP to the savings account of DBP MRI-Pool. Accordingly, the DBP MRI Pool was advised of the credit. Dans died of cardiac arrest. DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years at the time of application. DBP apprised Candida Dans of the disapproval of her late husband’s MRI application. DBP offered to refund the premium which the deceased had paid, but Candida Dans refused to accept the same demanding payment of the face value of the MRI or an amount equivalent of the loan. She, likewise, refused to accept an ex gratia settlement which DBP later offered. Hence, the case at bar.

Issue:

Whether or not the DBP MRI Pool should be held liable on the ground that the contract wasalready perfected?

Held:

No, it is not liable. The power to approve MRI application is lodged with the DBP MRI Pool. The pool, however, did not approve the application. There is also no showing that it accepted the sum which DBP credited to its account with full knowledge that it was payment for the premium. There was as a result no perfected contract of insurance, hence the DBP MRI Pool cannot be held liable on a contract that does not exist. In dealing with Dans, DBP was wearing 2 legal hats: the first as a lender and the second as an insurance agent. As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading him and his family to believe that they had already fulfilled all the requirements for the MRI and that the issuance of their policy was forthcoming. DBP had full knowledge that the application was never going to be approved. The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age. . Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance premium, and deducting its agent's commission and service fee.

The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI.

f the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is liable for damages to him (V Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, p. 422 [1992], citing Sentencia [Cuba] of September 25, 1907). The rule that the agent is liable when he acts without authority is founded upon the supposition that there has been some wrong or omission on his part either in misrepresenting, or in affirming, or concealing the authority under which he assumes to act (Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y. 70, 75). Inasmuch as the non-disclosure of the limits of the agency carries with it the implication that a deception was perpetrated on the unsuspecting client, the provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines come into play.

Perez v CA G.R. No. 112329. January 28, 2000

Facts:

Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for P20,000.00. Sometime in October 1987, an agent of the insurance corporation, visited Perez in Quezon and convinced him to apply for additional insurance coverage of P50,000.00. Virginia A. Perez, Primitivo’s wife, paid P2,075.00 to the agent. The receipt issued indicated the amount received

was a "deposit." Unfortunately, the agent lost the application form accomplished by Perez and he asked the latter to fill up another application form. The agent sent the application for additional insurance of Perez to the Quezon office. Such was supposed to forwarded to the Manila office.

Perez drowned. His application papers for the additional insurance of P50,000.00 were still with the Quezon. It was only after some time that the papers were brought to Manila. Without knowing that Perez died, BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for the P50,000.00.

Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies of the deceased. She was paid P40,000.00 under the first insurance policy for P20,000.00 but the insurance company refused to pay the claim under the additional policy coverage of P50,000.00, the proceeds of which amount to P150,000.00.

The insurance company maintained that the insurance for P50,000.00 had not been perfected at the time of the death of Primitivo Perez. Consequently, the insurance company refunded the amount paid.

BF Lifeman Insurance Corporation filed a complaint against Virginia Perez seeking the rescission and declaration of nullity of the insurance contract in question.

Petitioner Virginia A. Perez, on the other hand, averred that the deceased had fulfilled all his prestations under the contract and all the elements of a valid contract are present.

On October 25, 1991, the trial court rendered a decision in favor of petitioner ordering respondent to pay 150,000 pesos. The Court of Appeals, however, reversed the decision of the trial court saying that the insurance contract for P50,000.00 could not have been perfected since at the time that the policy was issued, Primitivo was already dead.

Petitioner’s motion for reconsideration having been denied by respondent court, the instant petition for certiorari was filed on the ground that there was a consummated contract of insurance between the deceased and BF Lifeman Insurance Corporation.

Issue:

WON the widow can receive the proceeds of the 2nd insurance policy

Held:

No. Petition dismissed.

Ratio:

Perez’s application was subject to the acceptance of private respondent BF Lifeman Insurance Corporation. The perfection of the contract of insurance between the deceased and respondent corporation was further conditioned with the following requisites stated in the application form:

"there shall be no contract of insurance unless and until a policy is issued on this application and that the said policy shall not take effect until the premium has been paid and the policy delivered to and accepted by me/us in person while I/We, am/are in good health."

BF Lifeman didn’t give its assent when it merely received the application form and all the requisite supporting papers of the applicant. This happens only when it gives a policy.

It is not disputed, however, that when Primitivo died on November 25, 1987, his application papersfor additional insurance coverage were still with the branch office of respondent corporation in Quezon. Consequently, there was absolutely no way the acceptance of the application could have been communicated to the applicant for the latter to accept inasmuch as the applicant at the time was already dead.

Petitioner insists that the condition imposed by BF that a policy must have been delivered to and accepted by the proposed insured in good health is potestative, being dependent upon the will of the corporation and is therefore void. The court didn’t agree. A potestative condition depends upon the exclusive will of one of the parties and is considered void. The Civil Code states: When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void.

The following conditions were imposed by the respondent company for the perfection of the contract of insurance: a policy must have been issued, the premiums paid, and the policy must have been delivered to and accepted by the applicant while he is in good health.

The third condition isn’t potestative, because the health of the applicant at the time of the deliveryof the policy is beyond the control or will of the insurance company. Rather, the condition is a suspensive one whereby the acquisition of rights depends upon the happening of an event which constitutes the condition. In this case, the suspensive condition was the policy must have been delivered and accepted by the applicant while he is in good health. There was non-fulfillment of the condition, because the applicant was already dead at the time the policy was issued.

As stated above, a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. So long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date of application, must have been a completed contract.

The insurance company wasn’t negligent because delay in acting on the application does not constitute acceptance even after payment. The corporation may not be penalized for the delay in the processing of the application papers due to the fact that process in a week wasn’t the usual timeframe in fixing the application. Delay could not be deemed unreasonable so as to

constitute gross negligence.

PHILAMCARE HEALTH SYSTEMS, INC., petitioner, vs. COURT OF APPEALS and JULITA TRINOS, respondents.

Facts

Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage with petitioner Philamcare Health Systems, Inc. Accordingly, he was issued Health Care Agreement No. P010194. Under the agreement, respondent's husband was entitled to avail of hospitalization benefits, whether ordinary or emergency, listed therein. The amount of coverage was increased to a maximum sum of P75,000.00 per disability. During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9, 1990. While her husband was in the hospital, respondent tried to claim the benefits under the health care agreement. However, petitioner denied her claim saying that the Health Care Agreement was void. According to petitioner, there was a concealment regarding Ernani's medical history. Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in the application form. Thus, respondent paid the hospitalization expenses herself, amounting to about P76,000.00.

After her husband was discharged from the MMC, he was attended by a physical therapist at home.

Respondent was constrained to bring him back to the Chinese General Hospital where he died on the same day.

After trial, the lower court ruled against petitioners. On appeal, the Court of Appeals affirmed the decision of the trial court but deleted all awards for damages and absolved petitioner Reverente.

Issue:

WON a health care agreement is an insurance contract

Ruling:

An insurance contract exists where the following elements concur: 1. The insured has an

insurable interest; 2. The insured is subject to a risk of loss by the happening of the designated peril; 3. The insurer assumes the risk; 4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and 5. In consideration of the insurer's promise, the insured pays a premium.

In the case at bar, the insurable interest of respondent's husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.

 

GULF RESORTS, INC., petitioner, vs. PHILIPPINE CHARTER INSURANCE CORPORATION, respondent.

Facts:

Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured originally with the American Home Assurance Company (AHAC). In the first 4 policies issued, the risks of loss from earthquake shock was extended only to petitioner’s two swimming pools. Gulf Resorts agreed to insure with Phil Charter the properties covered by the AHAC policy provided that the policy wording and rates in said policy be copied in the policy to be issued by Phil Charter. Phil Charter issued Policy No. 31944 to Gulf Resorts covering the period of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of P45,159.92. the break-down of premiums shows that Gulf Resorts paid only P393.00 as premium against earthquake shock (ES). On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiff’s properties covered by Policy No. 31944 issued by defendant, including the two swimming pools in its Agoo Playa Resort were damaged.

Petitioner advised respondent that it would be making a claim under its Insurance Policy 31944 for damages on its properties. Respondent denied petitioner’s claim on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort. The trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that petitioner paid only a premium of P393.00 against the peril of earthquake shock, the same premium it had paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC.

Issue:

Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and does not extend to all properties damaged.

RULLING:

YES, it only covers the 2 swimming pools. In sum, there is no ambiguity in the terms of the contract and its riders. From the inception of the policy, petitioner had required the respondent to copy verbatim the provisions and terms of its latest insurance policy from AHAC-AIU. All the provisions and riders taken and interpreted together, indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only. An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk attaches. In the subject policy, no premium payments were made with regard to earthquake shock coverage except on the two swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake shock.

C. SUBROGATION

MALAYAN INSURANCE CO., INC. vs. THE HON. COURT OF APPEALS

FACTS:

Sio Choy insured his jeep with Malayan Insurance against 3rd party liability. One day the jeep, driven by an employee of San Leon Rice Mill, figured in an accident with Pantranco Bus.

The passenger of the jeep, Vallejo, who was injured due to the accident, claimed damages from Sio Choy, Malayan and Pantranco. Pantranco was held not liable.

Malayan insurance paid Vallejo and asked for reimbursement from San Leon as the latter driver caused the alleged accident. The latter, however denied liability.

RTC ruled that Sio Choy, Malayan and San Leon are solidary liable, thus, the former is entitled to reimbursement.

CA said although jointly and severally liable, Malayan is not entitled to reimbursement.

ISSUES:

1. WON Sio Choy, Malayan and San Leon Rice Mill are solidary liable.

2. WON Malayan can seek reimbursement.

RULING:

1. Only respondents Sio Choy and San Leon Rice Mill, Inc, (to the exclusion of the petitioner) that are solidarily liable to respondent Vallejos for the damages awarded to Vallejos.

Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily liable to respondent Vallejos. The law states that the responsibility of two or more persons who are liable for a quasi-delict is solidarily. On the other hand, the basis of petitioner's liability is its

insurance contract with respondent Sio Choy.

While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer, 6 however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on tort.

In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, as incorrectly held by the trial court, be made "solidarily" liable with the two principal tortfeasors namely respondents Sio Choy and San Leon Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said two (2) respondents by reason of the indemnity contract against third party liability-under which an insurer can be directly sued by a third party — this will result in a violation of the principles underlying solidary obligation and insurance contracts.

2. Malayan is entitled to re-imbursement from San Leon by virtue of SUBROGATION. Article 1217 says,

Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.

In accordance with Article 1217, MALAYAN, upon payment to Vallejos and thereby becoming the subrogee of solidary debtor Sio Choy, is entitled to reimbursement from respondent San Leon Rice Mill, Inc.

MANILA MAHOGANY MFG CORP V CA & ZENITH INSURANCE

FACTS:

Manila Mahogany insured its Mercedes Benz with respondent insurance company. One day, the vehicle was bumped and damaged by a truck owned by San Miguel Corp (SMC).

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

Later respondent wrote Insurance Adjusters Inc. to demand reimbursement from SMC. Insurance Adjusters refused saying that SMC had already paid petitioner P4,500 for the damages to petitioner’s vehicle, as evidenced by a cash voucher and Release of Claim executed

by the GM of petitioner discharging SMC from “all actions, claims, demands the rights of action that now exist or hereafter develop arising out of or as a consequence of the accident.

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

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

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

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

ISSUE:

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

RULING:

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

CA correct in holding petitioner should reimburse respondent 5K.

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

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

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

PAN MALAYAN INSURANCE CORP. VS. COURT OF APPEALS

FACTS:

Pan Malayan filed a complaint for damages with the RTC of Makati against private respondents Erlinda Fabie and her driver. Pan Malayan insured a Mitsubishi Colt Lancer car registered in the name of Canlubang. Dut to the carelessness, recklessness and imprudence of the unknown driver of a pick-up, the insured car was hit and suffered damages in the amount of P42,052.00. Pan Malayan defrayed the cost of repair of the insured car, and therefore was subrogated to the rights of Canlubang against the driver of the pick-up and his employer, Erlinda Fabie. Despite repeated demands, defendants failed and refused to pay the claim of Pan Malay. Defendants/Private Respondents alleged that Pan Malay had no cause of action against them because payment under the “own damage” clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code, since indemnification thereunder was made on the assumption that there was no wrongdoer or no third party at fault. RTC dismissed the case for no cause of action and denied its motion for reconsideration. The CA affirmed the trial courts decision. Hence, this petition.

ISSUES:

Whether or not the insurer Pan Malayan may institute ac action to recover the amount it had paid its assured in settlement of an insurance claim against private respondents.

RULING:

Pan Malayan is correct.

If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured, will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies, which the latter ma 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 written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.

CEBU SHIPPING AND ENGINEERING WORKS, INC. VS. WILLIAM LINES INC. AND PRUDENTIAL GUARANTEE AND ASSURANCE COMPANY, INC.

FACTS:

William Lines, Inc. brought its vessel M/V Manila City to the Cebu Shipyard in Lapulapu City for annual dry-docking and repair. Subject vessel was insured with Prudential Guarantee for P45,000,000.00 for hull and machinery. The Hull Policy included an “Additional Perils” clause covering loss of or damage to the vessel through the negligence of, amonf others, ship repairmen. CSEW was also insured by Prudential Guarantee for third party liability under s Shiprepairs Legal Liability Insurance Policy for P10,000,000.00 only. After subject vessel was

transferred to the docking quay, it caught fire and sank, resulting to its eventual total loss. William Lines, Inc. filed a complaint for damages against CSEW, alleging that the fire which broke out in M/V Manila City was caused by CSEW’s negligence and lack of care. An amended complaint, impleading Prudential Guarantee as co-plaintiff, was filed after the latter had paid William Lines, Inc. the value of the hull and machinery insurance of M/V Manila City. RTC ruled that the cause of the fire was through the negligence of CSEW. CA affirmed the appealed decision. Hence this petition.

ISSUE:

Whether or not Prudential has the right of subrogation against its own insured and whether or not the parties intended for them to be a co-assured in the insurance policy.

RULING:

The petition is unmeritorious.

Upon proof of payment by Prudential Guarantee to William Lines, the former was subrogated to the right of the latter to indemnification from CSEW. Thus, when Prudential, after due verification of the merit and validity of the insurance claim of William Lines, paid the latter the total amount covered by its insurance policy, it was subrogated to the right of the latter to recover the insured loss from CSEW, the liable party.

A stipulation in the work order that requires William Lines to maintain insurance on the vessel during the period of dry-docking or repair, works to the benefit of CSEW. However, the fact that CSEW benefits from the said stipulation does not automatically make it as a co-assured of William Lines. The hull and machinery insurance procured by William Lines, Inc. from Prudential named only "William Lines, Inc." as the assured. Thus, when the insurance policy involved named only William Lines, Inc. as the assured thereunder, the claim of CSEW that it is a co-assured is unfounded.

Delsan Transport Lines, Inc. vs. Court of Appeals and American Home Assurance Corporation

FACTS:

Caltex Philippines entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., whereby the said common carrier agreed to transport Caltex's industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.

The shipment was insured with the private respondent, American Home Assurance Corporation. On August 14, 1986, petitioner's vessel, the MT Maysun, set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near

Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.

AHAC paid Caltex the sum of P5,096,635.57 representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, AHAC demanded from Delsan the same amount it paid to Caltex.

Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the Regional Trial Court of Makati City, Branch 137, for collection of a sum of money.

The trial court rendered a decision dismissing the complaint against herein petitioner. The trial court found that the vessel, MT Maysun, was seaworthy to undertake the voyage and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting petitioner from liability for the loss of its cargo. The decision of the trial court, however, was reversed, on appeal, by the Court of Appeals.

ISSUES:

(pertaining to subrogation)

1.Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner?

2.Whether or not the non-presentation of the marine insurance policy bars AHAC’s right of subrogation?

RULING:

First Issue:

Before the Court, petitioner theorized that when private respondent paid Caltex the value of its lost cargo, the act of the private respondent is equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, private respondent was not legally liable to Caltex due to the latter's breach of implied warranty under the marine insurance policy that the vessel was seaworthy.

The Supreme Court rejected petitioner's theory. According to the Court, the payment made by the private respondent for the insured value of the lost cargo operates as a waiver of private respondent's right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessel's seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.

The Court also stressed that the right of subrogation is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice and good conscience ought to pay.

It is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance company of the insurance claim. Consequently, the payment made by AHAC (insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies which the latter may have against the petitioner.

Second Issue:

Anent the second issue, it is our view and so hold that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right.

The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.

Federal Express Corporation vs. American Home Assurance Company and PHILAM Insurance Company

FACTS:

On January 26, 1994, SMITHKLINE Beecham of Nebraska, USA delivered to Burlington Air Express (AGENT OF FEDREAL EXPRESS) a shipment of 109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas Company in Makati City, Metro Manila.

The shipment was covered by Burlington Airway Bill No. 11263825 with the words, ‘REFRIGERATE WHEN NOT IN TRANSIT’ and ‘PERISHABLE’ stamp marked on its face. That same day, Burlington insured the cargoes in the amount of $39,339.00 with AHAC.

The following day, Burlington turned over the custody of said cargoes to Federal Express which transported the same to Manila. The first shipment, consisting of 92 cartons arrived in Manila on January 29, 1994 and was immediately stored at Cargohaus Inc.’s warehouse.

While the second, consisting of 17 cartons, came in two (2) days later, or on January 31, 1994,which was likewise immediately stored at Cargohaus’ warehouse.

12 days later, the Customs Broker who was assigned by Smithkline of Makati to facilitate the withdrawal of the Cargoes, did not proceed with such withdrawal for He found out that the Cartons containing the vaccines were not properly stored as ordered. For this reason, the vaccines were examined, only to find out that they were damaged and unusable. Consequently Smithkline of Makati abandoned the shipment.

Smithkline of Makati filed a claim with PHILAM, the representative of AHAC in the Philippines. By virtue of its right of subrogation, AHAC proceeded against FEDERAL EXPRESS.

Federal Express declined the claim of AHAC contending that the latter had no cause of action against the former. Moreover, Federal Express contended that no notice of claim was filed, hence, not complying with the condition precedent, AHAC was precluded from asserting its claim against it.

ISSUES:

1.Whether or not AHAC has legal personality to sue, thus, no cause of action against Federal Express?

2.Whether or not AHAC complied with the necessary condition precedent in order to file claims against Federal Express?

RULING:

First Issue:

Federal Express argued that payment was erroneous for the proper payment should have been made to Burlington as agent of Federal Express, and as payee of the bill.

Held, Smithkline of Makatin has the personality to claim for the damages because the Certificate of Insurance is payable to the bearer thereof. Upon payment by AHAC to Smithkline, the latter executed a subrogation receipt. Hence, AHAC and PHILAM have personality to file claims.

Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the insurer’s entitlement to subrogation pro tanto — being of the highest equity — equips it with a cause of action in case of a contractual breach or negligence. Further, the insurer’s subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the cargo is jurisprudentially upheld.”

Second Issue:

Under the Warsaw Convention, Notice of Claim is a condition precedent to the accrual of a Right of Action against a carrier for loss or damage to the goods. Being a condition precedent, it must precede a suit for enforcement. In the instant case, AHAC never complied such requirement. Thus, it cannot file claims against Federal Express.

D. INSURABLE INTEREST

Spouses Cha vs. CA

Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)

Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance Code

FACTS:

Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation entered a 1 year lease contract with a stipulation not to insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the lessor. But it insured against loss by fire their merchandise inside the leased premises for P500,000 with the United Insurance Co., Inc. without the written consent of CKS

On the day the lease contract was to expire, fire broke out inside the leased premises and CKS learning that the spouses procured an insurance wrote to United to have the proceeds be paid directly to them. But United refused so CKS filed against Spouses Cha and United.

RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to pay P50,000 as exemplary damages, P20,000 as attorney’s fees and costs of suit

CA: deleted exemplary damages and attorney’s fees

ISSUE:

W/N the CKS has insurable interest because the spouses Cha violated the stipulation

HELD:

NO. CA set aside. Awarding the proceeds to spouses Cha.

Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured

A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist a t the time the insurance takes effect and at the time the loss occurs. The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property. In such a case, the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code.

SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void

Section 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof

The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses. The liability of the Cha spouses to CKS for violating their lease contract in that Cha spouses obtained a fire insurance policy over their own merchandise, without the consent of CKS, is a separate and distinct issue which we do not resolve in this case.

GrePaLife vs. CA

Facts:

Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP.

One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning his test, attesting among others that he does not have any heart conditions and that he is in good health to the best of his knowledge.

However, after about a year, Dr. Leuterio died due to “massive cerebral hemorrhage.” When DBP submitted a death claim to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim.

Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for “Specific Performance with Damages.” Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP.

ISSUE:

Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor

HELD:

The rationale of a group of insurance policy of mortgagors, otherwise known as the “mortgage redemption insurance,” is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death, the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund. Such loss-payable clause does not make the mortgagee a party to the contract.

The insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person, such as a mortgagee.

And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.

Harvardian Colleges c Country Bankers Insurance

Facts:

Harvardian Colleges is a family corporation whose stockholders are Ildefonso Yap, Virginia King Yap and their children. Harvardian Colleges insured the school for fire with CBI for Php500,000. However, the insured property was burned which resulted to its total loss. Harvardian Colleges made claims but was denied by CBI on the ground that there was no insurable interest iver the building on the piece of land which was in the name of Ildefonso Yap, and not of Harvardian Colleges.

Issue:

Whether or not Harvardian has insurable interest and can collect from the insurance

Ruling:

Yes. Regardless of the nature of the title of the insures, or even if he did not have title to the property insured, the contract of fire insurance should still be upheld if his interest in or his relation to the property is such that he will be benefited in its continuing existence or suffer a direct pecuniary loss from its destruction or injury. The test in determining insurable interest in property is whether one will derive pecuniary benefit or advantage from its preservation or will

suffer pecuniary loss or damage from it destruction by the happening of the event insured against.

Ang Ka Yu v. Phoenix Assurance

Facts:

Ang Ka Yu had a piece of property in his possession. He insured it with Phoenix.

The property was lost, so Ang Ka Yu sought to claim the proceeds.

Phoenix denied liability on the ground that Ang was not the owner but a mere possessor and as such, had no insurable interest over the property.

Issue:

WON a mere possessor has insurable interest over the property.

Held:

Yes. A person having a mere right or possession of property may insure it to its full value and in his own name, even when he is not responsible for its safekeeping. The reason is that even if a person is NOT interested in the safety and preservation of material in his possession because they belong to 3rd parties, said person still has insurable interest, because he stands either to benefit from their continued existence or to be prejudiced by their destruction.

E.CONCEALMENT AND REPRESENTATION

THE INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. SERAFIN D. FELICIANO and ANGEL, FLORENDA, EUGENIO, HERMINIO and LETICIA, all surnamed FELICIANO, represented by their guardian ad litem SERAFIN D. FELICIANO, respondents (G.R. No. L-47593, September 13, 1941)

FACTS:

- One Evaristo Feliciano filed an application for insurance with the herein petitioner upon the solicitation of one of its agents. Two insurance policies to the aggregate amount of P25,000 were issued to him.

- Feliciano died on September 29, 1935. The defendant company (petitioner) refused to pay on the ground that the policies were fraudulently obtained, the insured having given false answers and statements in the application as well as in the medical report.

- The present action was brought to recover on said policies.

- Lower court in favor of plaintiff (respondent)finding that:

• Feliciano was made to sign the application and the examiner's report in blank, and that afterwards the blank spaces therein were filled in by the agent (Romulo M. David ) and the medical examiner (Dr. Gregorio Valdez), who made it appear therein that Feliciano was a fit subject for insurance.

• neither the insured nor any member of his family concealed the real state of health of the insured; that as a matter of fact the insured, as well as the members of his family, told the agent and the medical examiner that the applicant had been sick and coughing for sometime and that he had also gone three times to the Santol Sanatarium.

- CA affirmed. Hence, this petition.

ISSUE:

WON the policy remains to be valid in spite of the fact that the agent, without fraud, collusion or bad faith on the part of the insured, falsified the answers given by the insured.

HELD:

YES

- Insurance companies send detailed instructions to their agents to solicit and procure applications. These agents are to be found all over the length and breadth of the land. The agents, in short, do what the company set them to do.

- In the present case, the agent knew all the time the true state of health of the insured. The insurer's medical examiner approve the application knowing full well that the applicant was sick.

- The situation is one in which one of two innocent parties must bear a loss for his reliance upon a third person.

- In this case, it was the insurer who gave the agent authority to deal with the applicant. It was the one who selected the agent, thus implying that the insured could put his trust on him. It seems reasonable that as between the two of them, the one who employed and gave character to the third person as its agent should be the one to bear the loss.

- If the policy should be avoided, it must be because it was void from the very beginning.

- The insurer cannot assert the falsity of such answers as a defense to liability on the policy.

- The fact that the insured did not read the application which he signed, is not indicative of bad faith. It has been held that it is not negligence for the insured to sign an application without first reading it if the insurer by its conduct in appointing the agent influenced the insured to place trust and confidence in the agent.

- In the instant case, it has been proved that the insured could not read English, the language in which the application was written, and that after the contract was signed, it was kept by his mother. As a consequence, the insured had no opportunity to read or correct any misstatement therein.

- Petition dismissed.

THE INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs.SERAFIN D. FELICIANO ET AL., respondents. (G.R. No. L-47593 December 29, 1943)

MOTION FOR RECONSIDERATION

FACTS:

- A motion to reconsider and set aside said decision has been filed by the petitioner, and both parties have submitted exhaustive and luminous written arguments in support of their respective contentions.

- Agent’s reason for falsifying the application: for the purpose of securing the Company's approval of the application so that the policy to be issued thereon might be credited to said agent in connection with the inter-provincial contest which the Company was then holding among its soliciting agents to boost the sales of its policies.

- Moreover, Agent David bribed Medical Examiner Valdez with money which the former borrowed from the applicant's mother by way of advanced payment on the premium, according to the finding of the Court of Appeals.

- petitioner insists: that upon the facts of the case the policies in question are null and void ab initio and that all that the respondents are entitled to is the refund of the premiums paid thereon.

ISSUE

WON Policy still valid.

HELD:

- When the applicant for insurance, signed the application in blank and authorized the soliciting agent and/or the medical examiner of the Company to write the answers for him, he made them his own agents for that purpose, and he was responsible for their acts in that connection. If they falsified the answers for him, he could not evade the responsibility for the falsification. He was not supposed to sign the application in blank. He knew that the answers to the questions therein contained would be "the basis of the policy," and for that very reason he was required with his signature to vouch for the truth thereof.

- By accepting the policy he became charged with knowledge of its contents, whether he

actually read it or not.

- We cannot bring ourselves to believe that the insured did not take the trouble to read the answers contained in the photostatic copy of the application attached to and made a part of the policy before he accepted it and paid the premium thereon. He must have notice that the answers to the questions therein asked concerning his clinical history were false, and yet he accepted the first policy and applied for another.

- The insured, therefore, had no right to rely — and we cannot believe he relied in good faith — upon the oral representation of said agent and medical examiner that he (the applicant) was a fit subject for insurance notwithstanding that he had been and was still suffering with advanced pulmonary tuberculosis.

- Altho the agent and the medical examiner knew that statement to be false, no valid contract of insurance was entered into because there was no real meeting of the minds of the parties.

- From all the facts and circumstances of this case, we are constrained to conclude that the insured was a coparticipant, and coresponsible with Agent David and Medical Examiner Valdez, in the fraudulent procurement of the policies in question and that by reason thereof said policies are void ab initio.

- MR sustained. CA reversed in favor of Petitioner Company.

SUNLIFE ASSURANCE COMPANY OF CANADA, petitioner, vs. The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA BACANI, respondents.

FACTS :

On April 15, 1986, Robert John B. Bacani procured a life insurance contract for himself from petitioner and was issued a policy valued at P100,000.00, with double indemnity in case of accidental death. The designated beneficiary was his mother, respondent Bernarda Bacani.

On June 26, 1987, the insured died in a plane crash. Respondent Bernarda Bacani filed a claim with petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner conducted an investigation and its findings prompted it to reject the claim on the ground that the insured did not disclosed material facts relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to said letter.

Petitioner claimed that the insured gave false statements in his application when he limited his answer to a consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General

Hospital on February 1986, for cough and flu complications only but did not disclose that two weeks prior to his application for insurance, the insured was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure.

ISSUE :

WON there was concealment made by the insured.

RULING :

SC disagrees with the RTC's findings that while indeed there was concealment and misrepresentation, the same was made in "good faith" and the facts concealed or misrepresented were irrelevant since the policy was "non-medical".

Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. The matters concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application.

Thus, "good faith" is no defense in concealment.

The argument, that petitioner's waiver of the medical examination of the insured debunks the materiality of the facts concealed, is untenable. The waiver of a medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not.

Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries.

We, therefore, rule that petitioner properly exercised its right to rescind the contract of insurance by reason of the concealment employed by the insured.

WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is REVERSED and SET ASIDE.

THELMA VDA. DE CANILANG, petitioner, vs. HON. COURT OF APPEALS and GREAT PACIFIC LIFE INSURANCE CORPORATION, respondents.

FACTS:

On 18 June 1982, Jaime Canilang consulted Dr. Wilfredo B. Claudio and was diagnosed as suffering from "sinus tachycardia." The doctor prescribed the following for him: Trazepam, a tranquilizer; and Aptin, a beta-blocker drug. Mr. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis."

On the next day, 4 August 1982, Jaime Canilang applied for a "non-medical" insurance policy with respondent Great Pacific Life Assurance Company naming his wife, petitioner Thelma Canilang, as his beneficiary. Jaime Canilang was issued a policy, with the face value of P19,700, effective as of 9 August 1982.

On 5 August 1983, Jaime Canilang died of "congestive heart failure," "anemia," and "chronic anemia." Petitioner, widow and beneficiary of the insured, filed a claim with Great Pacific which the insurer denied on 5 December 1983 upon the ground that the insured had concealed material information from it.

Petitioner then filed a complaint against Great Pacific with the Insurance Commission for recovery of the insurance proceeds. A deposition given by Dr. Wilfredo Claudio was presented by petitioner. There Dr. Claudio stated that he was the family physician of the deceased Jaime Canilang and that he had previously treated him for "sinus tachycardia" and "acute bronchitis." Great Pacific for its part presented Dr. Esperanza Quismorio, a physician and a medical underwriter working for Great Pacific. She testified that the deceased's insurance application had been approved on the basis of his medical declaration. She explained that as a rule, medical examinations are required only in cases where the applicant has indicated in his application for insurance coverage that he has previously undergone medical consultation and hospitalization.

Insurance Commissioner Armando Ansaldo ordered Great Pacific to pay P19,700.00 plus legal interest and P2,000.00 as attorney's fees. On appeal by Great Pacific, the Court of Appeals reversed and set aside the decision of the Insurance Commissioner. The Court of Appeals also found that the failure of Jaime Canilang to disclose previous medical consultation and treatment constituted material information which should have been communicated to Great Pacific to enable the latter to make proper inquiries.

ISSUE :

WON there was concealment made by the insured.

HELD:

The Supreme Court agrees with the Court of Appeals that the information which Jaime Canilang failed to discloses was material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage.

The materiality of the information withheld by Great Pacific did not depend upon the state of mind of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance.

Section 27 of the Insurance Code of 1978 is properly read as referring to "any concealment" without regard to whether such concealment is intentional or unintentional. The net result therefore of the phrase "whether intentional or unintentional" is precisely to leave unqualified the term "concealment". In any case, in the case at bar, the nature of the facts not conveyed to the insurer was such that the failure to communicate must have been intentional rather than merely inadvertent.

WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the Court of Appeals dated 16 October 1989 in C.A-G.R. SP No. 08696 is hereby AFFIRMED. No pronouncement as to costs.

Philamcare Health Systems, Inc. vs Court of Appeals and Julita Trinos 379 SCRA 356

Facts: Julita Trinos was the live-in wife of Ernani Trinos, who had a Health Care Agreement with petitioner company. Under coverage, Mr. Trinos suffered a heart attack, was twice confined in a hospital, then subsequently died. Julita Trinos incurred expenses amounting to P76,000.

Philamcare denied the insurance claim on the grounds that a health care agreement is not an insurance contract. That there was material concealment the insured as it would appear that in the application for health coverage, petitioners required respondent's husband to sign an express authorization for any person, organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization, consultation, treatment or any other medical advice or examination. Also, it was contended that Julita Trinos was not the legal wife.

Issue(s): (1) WON the agreement was an insurance contract. (2) WON there was material concealment of facts. (3) WON Julita Trinos is entitled to receive.

Ruling:

1. Yes. An insurance contract exists where the following elements concur: 1. The insured has an insurable interest; 2. The insured is subject to a risk of loss by the happening of the designated peril; 3. The insurer assumes the risk; 4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and 5. In consideration of the insurer's promise, the insured pays a premium.

2. No. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. This largely depends on opinion rather than fact, especially coming from respondent's husband who was not a medical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. Thus, "(A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such

statement, but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual fraud."

3. Yes. In a contract of indemnity, payment should be made to the party who incurred the expenses.

SATURNINO V. PHILAMLIFE - FALSE REPRESENTATION

7 SCRA 316

Facts:

2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving

complete removal of the right breast, including the pectoral muscles and the glands, found in

the right armpit. Notwithstanding the fact of her operation, Saturnino did not make a

disclosure thereof in her application for insurance. She stated therein that she did not have, nor

had she ever had, among others listed in the application, cancer or other tumors; that she had

not consulted any physician, undergone any operation or suffered any injury within the

preceding 5 years.

She also stated that she had never been treated for, nor did she ever have any illness or disease

peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders.

The application also recited that the declarations of Saturnino constituted a further basis for

the issuance of the policy.

Issue:

Whether or not the insured made such false representation of material facts as to avoid the

policy.

Held:

YES.

There can be no dispute that the information given by her in the application for insurance was

false, namely, that she never had cancer or tumors or consulted any physician or undergone

any operation within the preceding period of 5 years.

The question to determine is: Are the facts then falsely represented material? The Insurance

Law provides that “materiality is to be determined not by the event, but solely by the probable

and reasonable influence of the facts upon the party to whom the communication is due, in

forming his estimate of the proposed contract, or making his inquiries.

The contention of appellants is that the facts subject of the representation were not material in

view of the non-medical nature of the insurance applied for, which does away with the usual

requirement of medical examination before the policy is issued. The contention is without

merit. If anything, the waiver of medical examination renders even more material the

information required of the applicant concerning previous condition of health and diseases

suffered, for such information necessarily constitutes an important factor which the insurer

takes into consideration in deciding whether to issue the policy or not.

Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the

insured herself did not know, since her doctor never told her, that the disease for which she

had been operated on was cancer. In the first place, concealment of the fact of the operation

itself was fraudulent, as there could not have been any mistake about it, no matter what the

ailment.

Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part of the

insured. In this jurisdiction, concealment, whether intentional or unintentional entitled the

insurer to rescind the contract of insurance, concealment being defined as “negligence to

communicate that which a party knows and ought to communicate.” The basis of the rule

vitiating the contract in cases of concealment is that it misleads or deceives the insurer into

accepting the risk, or accepting it at a rate of premium agreed upon. The insurer, relying upon

the belief that the insured will disclose every material fact within his actual or presumed

knowledge, is misled into a belief that the circumstances withheld does not exist, and he is

thereby induced to estimate the risk upon a false basis that it does not exist.

F.PERSONS ENTITLED TO RECEIVE UNDER THE POLICY

Bonifacio Brothers, Inc. vs Mora 20 SCRA 261

Facts: Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. with the condition that Mora would insure the car with HS Reyes as beneficiary. The car was then insured with State Insurance Company and the policy delivered to Mora. During the effectivity of the insurance contract, the car figured in an accident. The company then assigned the accident to an insurance appraiserfor investigation and appraisal of the damage. Mora without the knowledge and consent of HS Reyes, authorized Bonifacio Bros to fix the car, using materials supplied by the Ayala Auto Parts Company.For the cost of Labor and materials, Mora was billed P2,102.73. The bill was sent to the insurer’s appraiser. The insurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser for delivery to the proper party. The car was delivered to Mora without the consent of HS Reyes, and without payment to Bonifacio Bros and Ayala.

Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio and Ayala filed a complaint against Mora and the insurer with the municipal court for the collection of P2,102.73. The insurance company filed its answer with a counterclaim for interpleader, requiring Bonifacio and HS Reyes to interplead in order to determine who has a better right to the proceeds.

Issue:

The main issue raised is whether there is privity of contract between the Bonifacio Bros. Inc and the Ayala Auto Parts Co. on the one hand and the insurance company on the other.

Ruling:

1. No Privity. It is fundamental that contracts take effect only between the parties thereto, except on some specific instances provided by law where the contract contains some stipulation in favor of a third person (Art. 1311, Civil Code). Such stipulation is known as stipulation pour autrui or a provision in favor of a third person not a party to the contract. Under this doctrine, a third person is allowed to avail himself of a benefit granted to him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a favor upon such person (Art. 1311, Civil Code; Uy Tam, et al. vs. Leonard, 30 Phil.. 471 ). Consequently, a third person not a party to the contract has no action against the parties thereto, and cannot generally demand the enforcement of the same (Manila Railroad Co. vs. Compañia Transatlantica, 38 Phil. 676).The question of whether a third person has an enforceable interest in a contract, must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring a favor upon such third person. In this connection, this Court has laid down

the rule that the fairest test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract ( Uy Tam, et al. vs. Leonard, supra).A policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust, expressed or implied, by the insured and third person (Lampano vs.Jose, 30 Phil. 537).

First Integrated Bonding & Insurance Company, Inc., petitioner, vs Hon. Harold M. Hernando, Victorino Advincula, Romana Advicula, Silverio Blanco & The Sheriff of Manila and his Deputy Sheriffs, respondents.

Facts:

Silverio Blanco was the owner of a passenger jeepney which he insured against liabilities for death and injuries to third persons with First Integrated Bonding and Insurance Company, Inc. with the face value of P30,000. On November 25, 1976, the said jeepney driven by Blanco himself bumped a five-year old child, Deogracias Advincula, causing the latter’s death.

The child’s parents, the Advincula spouses brought a complaint for damages in the Regional Trial Court of Abra against Silverio Blanco as well as impleading First Insurance in the complaint as insurer. On the basis of the evidence presented by the Advincula spouses, judgment was rendered by the trial court in favour of the spouses. The court adjudicated First Integrated Bonding and Insurance Company liable in the amount of P23,663.50 which must be satisfied independently by it in favour of the spouses and the balance of P6,336.50 shall also be paid by said insurance company to Silverio Blanco, the grand total under the policy being P30,000. Herein petitioner filed a petition for relief from judgment from the order of execution and judgment with preliminary injunction, but was denied by the court. Petitioner the filed a motion for reconsideration of the order denying the petition for relief but the same was denied. Hence, this petition for certiorari.

Issue/s:

Whether the trial court erred in holding petitioner liable in excess of the limits of liability as provided for in the policy contract.

Whether the trial court erred in deciding for the respondent spouse(s) where there exists no cause of action against herein petitioner.

Ruling:

It is the contention of the petitioner that the Advincula spouses have no cause of action against it. Further as contended, as parents of the victim, they may proceed against the driver,

Blanco on the basis of the provisions of the New Civil Code. However, they have no cause of action against First Insurance, because they are not parties to the insurance contract.

It is settled that where the insurance contract provides for indemnity against liability to a third party, such third party can directly sue the insurer. The liability of the insurer to such third person is based on contract while the liability of the insured to the third party is based on tort. Such is to protect injured persons against the insolvency of the insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy. It has been held that such created a contractual relation which inures to the benefit of any and every person who may be negligently injured by the named insured as if such injured person were specifically named in the policy.

In the event that the injured fails or refuses to include the insurer as party defendant in his claim for indemnity against the insured, the latter is not prevented by law to avail of the procedural rules intended to avoid multiplicity of suits. Not even a ‘no action’ clause under the policy which requires that a final judgment be first obtained against the insured and that only thereafter can the person insured recover on the policy can prevail over the Ruled of Court provisions aimed at avoiding multiplicity of suits.

Petitioner cannot evade liability as insurer by hiding under the cloak of the insured. It liability is primary and not dependent on the recovery of judgment from the insured. The insurer’s liability accrues immediately upon the occurrence of the injury or event upon which the liability depends, and does not depend on the recovery of judgment by the injured party against the insured.

However, it appears that the award of damages in favour of Blanco has no basis as it was not put up as a claim against the insurer. However, since the decision of the trial court had become final and executory, it can no longer be corrected or amended.

Petition dismissed.

Sherman Shafer, petitioner, vs Hon. Judge, Regional Trial Court of Olongapo City, Branch 75, and Makati Insurance Company, Inc., respondents.

Facts:

Petitioner Sherman obtained a private car policy over his Ford Laser car from Makati Insurance Company, Inc., for third party liability. During the effectivity of the policy, information for reckless imprudence resulting in damage to property and serious physical injuries was filed against petitioner. The complaint alleged that Sherman recklessly drove his car which bumped a Volkswagen owned and driven by Felino Ilano y Legaspi, thereby causing damage to the car (Volkswagen) and physical injuries were suffered by one Jovencio Poblete, Sr. as a result of such accident who was on board of the said Volkswagen. The owner of the damaged Volkswagen car filed a separate civil action against petitioner for damages while Jovencio did not reserve his right to file a separate civil action for damages.

Petitioner ten filed a third party complaint against herein private respondent, Makati Insurance Company, Inc. The court however issued an order dismissing the third party complaint on the ground that it was premature, based on the premise that unless the herein petitioner (accused) is found guilty and sentenced to pay the offended party (Poblete, Sr.) indemnity for damages, the third party complaint is without cause of action. The better procedure is for accused to wait for the outcome of the criminal aspect of the case to determine whether or not accused, also the third party plaintiff, has a cause of action against the third party defendant for the enforcement of its third party liability under the insurance contract.

Issue/s:

Whether the court a quo erred in dismissing the third party complaint of herein petitioner Sherman against Makati Insurance Company Inc.

Ruling:

Compulsory Motor Vehicle Liability Insurance (third party liability) is primarily intended to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of a negligent operation and use of motor vehicles. The victims and/or their defendants are assured of immediate financial assistance, regardless of the financial capacity of motor vehicle owners. Where an insurance policy insures directly against liability, the insurer’s liability accrues immediately upon the occurrence of the injury or event upon which the liability depends, and does not depend on the recovery of judgment by the injured party against the insured. The injured for whom the contract of insurance is intended can sue directly the insurer. The liability of the insurance company under the Compulsory Motor Vehicle Liability insurance is for loss or damage.

The court a quo erred in dismissing petitioner’s third party complaint on the ground that petitioner had no cause of action yet against the insurance company (third party defendant). There is no need on the part of the insured to wait for the decision of the trial court finding him guilty of reckless imprudence. The occurrence of the injury to the third party immediately gave rise to the liability of the insurer under its policy. Petition granted.

G. INCONTESTABLE CLAUSE

Emilio Tan, et al. vs Court of Appeals and Philam Life

Facts:

This is a petition for review on certiorari of the CA's decision affirming the Insurance Commission in dismissing petitioners' complaint for the recovery of the proceeds of their late father.

Their father, Tan Lee Siong, applied for Life Insurance with respondent in the amount of 80000 in Sept. 23, 1973. It was issued on Nov. 6, 1973. Subsequently he died of Hepatoma on April 26, 1975. Respondent company denied payment and rescinded the policy, returning only the amount of premium paid, on the ground of misrepresentation and concealment. The policy in question contained an incontestability clause.

Petitioner's filed a case with the Insurance Commission, but was dismissed. The dismissal was affirmed by the CA.

Petitioners argue that the insurance law on incontestability prevents the insurer from exercising the right to rescind after the death of the insured.

They also question the finding of concealment, saying that no evidence was presented to show that it was explained in a layman's language, and that failure of the insurer to conduct medical examination, the insurer waived whatever imperfection by ratification. They also argue that the application form for insurance pertaining to the medical history were so small as to necessitate the application of the fine print rule.

Issues

1. Does the death of the insured preclude the insurer from rescinding the policy?2. Did the insurer waive the concealment by ratification by not conducting medical examination?3. Does the "fine print" or contract of adhesion rule apply in this case?

Ruling.

PETITION DENIED

1. No.

The so-called "incontestability clause" precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured's lifetime. The phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years."

The policy was issued on November 6, 1973 and the insured died on April 26, 1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance and

refunded the premiums paid on September 11, 1975, previous to the commencement of this action on November 27, 1975.

The insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The petitioners' interpretation would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if the insured fraudulently concealed material facts

2. No

The presumption is that a person intends the ordinary consequence of his voluntary act and takes ordinary care of his concerns.

The evidence for respondent company shows that on September 19, 1972, the deceased was examined by Dr. Victoriano Lim and was found to be diabetic and hypertensive; that by January, 1973, the deceased was complaining of progressive weight loss and abdominal pain and was diagnosed to be suffering from hepatoma.Another physician, Dr. Wenceslao Vitug, testified that the deceased came to see him on December 14, 1973 for consultation and claimed to have been diabetic for five years.

Because of the concealment made by the deceased of his consultations and treatments for hypertension, diabetes and liver disorders, respondent company was thus misled into accepting the risk and approving his application as medically standard and dispensing with further medical investigation and examination. For as long as no adverse medical history is revealed in the application form, and applicant for insurance is presumed to be healthy and physically fit and no further medical investigation or examination is conducted by respondent company

3. Fine print rule. See Sweet Lines v Teves 1978 (Transpo) for further study.

"All provisions, conditions, or exceptions which in any way tend to work a forfeiture of the policy should be construed most strongly against those for whose benefit they are inserted, and most favorably toward those against whom they are meant to operate."

There is no showing that the questions in the application form for insurance regarding the insured's medical history are in smaller print than the rest of the printed form or that they are designed in such a way as to conceal from the applicant their importance.

H. LIABILITY UNDER OPEN POLICY

DEVELOPMENT INSURANCE CORP v. IAC and PHILIPPINE UNION REALTY DEVELOPMENT CORP.

*procedurally heavy case

Facts:

A fire occurred in the building of the private respondent and it sued for recovery of damages from the petitioner on the basis of an insurance contract between them. The petitioner allegedly failed to answer on time and was declared in default by the trial court. A judgment of default was subsequently rendered on the strength of the evidence submitted ex parte by the private respondent, which was allowed full recovery of its claimed damages. On learning of this decision, the petitioner moved to lift the order of default, invoking excusable neglect, and to vacate the judgment by default. Its motion was denied. It then went to the respondent court, which affirmed the decision of the trial court in toto.

The amount of the policy in question is for 2500000. Petitioner questions the actual amount of indemnity based on Condition 17 of the policy making the insured as its own insurer in case the property at the time of the fire be collectively of greater value than the sum insured, and shall bear a ratable proportion of the loss accordingly. The value of the building at the time of the fire was allegedly st 5800000. The policy in question is an Open Policy.

Issue1. Was there excusable neglect justifying the motion to lift the order of default?2. What is the amount of indemnity?

Ruling

PETITION DENIED. DECISION AFFIRMED IN FULL.

1. Yes

It is indisputable that summons was served on it, through its senior vice-president, on June 19, 1980. On July 14, 1980, ten days after the expiration of the original 15-day period to answer (excluding July 4), its counsel filed an ex parte motion for an extension of five days within which to file its answer. On July 18, 1980, the last day of the requested extension — which at the time had not yet been granted — the same counsel filed a second motion for another 5-day extension, fourteen days after the expiry of the original period to file its answer. The trial court nevertheless gave it five days from July 14, 1980, or until July 19, 1980, within which to file its answer. But it did not. It did so only on July 26, 1980, after the expiry of the original and extended periods, or twenty-one days after the July 5, deadline. As a consequence, the trial court, on motion of the private respondent filed on July 28, 1980, declared the petitioner in default. This was done almost one month later, on August 25, 1980. Even so, the petitioner

made no move at all for two months thereafter. It was only on October 27, 1980, more than one month after the judgment of default was rendered by the trial court on September 26, 1980, that it filed a motion to lift the order of default and vacate the judgment by default.

The pattern of inexcusable neglect, if not deliberate delay, is all too clear. The petitioner has slumbered on its right and awakened too late. While it is true that in Trajano v. Cruz, which it cites, this Court declared "that judgments by default are generally looked upon with disfavor," the default judgment in that case was set aside precisely because there was excusable neglect.

Besides, the petitioners in Trajano had a valid defense against the complaint filed against them, and this justified a relaxation of the procedural rules to allow full hearing on the substantive issues raised. In the instant case, by contrast, the petitioner must just the same fail on the merits even if the default orders were to be lifted. As the respondent Court observed, "Nothing would be gained by having the order of default set aside considering the appellant has no valid defense in its favor.

2.

With regards to the condition in the policy.

There is no evidence on record that the building was worth P5,800,000.00 at the time of the loss; only the petitioner says so and it does not back up its self-serving estimate with any independent corroboration. On the contrary, the building was insured at P2,500,000.00, and this must be considered, by agreement of the insurer and the insured, the actual value of the property insured on the day the fire occurred. This valuation becomes even more believable if it is remembered that at the time the building was burned it was still under construction and not yet completed.

Open policy

Sec 60 of the Insurance code.

"an open policy is one in which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss." This means that the actual loss, as determined, will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not exceed the face value of the policy.The actual loss has been ascertained in this case and, to repeat, this Court will respect such factual determination in the absence of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy clause as expressly agreed upon by the parties in their contract, we hold that the private respondent is entitled to the payment of indemnity under the said contract in the total amount of P508,867.00.

i. PRESCRIPTION OF ACTION

SUN INSURANCE OFFICE, LTD.vs. COURT OF APPEALS and EMILIO TAN [G.R. No. 89741. March 13, 1991.]

Facts:

On August 15, 1983, herein private respondent Emilio Tan took from herein petitioner a P300,000.00 property insurance policy to cover his interest in the electrical supply store of his brother housed in a building in Iloilo City. Four (4) days after the issuance of the policy, the building was burned including the insured store. On August 20, 1983, Tan filed his claim for fire loss with petitioner, but on February 29, 1984, petitioner wrote Tan denying the latter's claim. On April 3, 1984, Tan wrote petitioner, seeking reconsideration of the denial of his claim. On September 3, 1985, Tan's counsel wrote the Insurer inquiring about the status of his April 3, 1984 request for reconsideration. Petitioner answered the letter on October 11, 1985, advising Tan's counsel that the Insurer's denial of Tan's claim remained unchanged.

Issue:

Whether or not the filing of a motion for reconsideration interrupts the twelve (12) months prescriptive period to contest the denial of the insurance claim.

Ruling:

No. The filing of a motion for reconsideration does not interrupt the twelve (12) months prescriptive period to contest the denial of the insurance claim.

The insured was definitely advised of the rejection of his claim through the letter of petitioner dated February 29, 1984 of the denial of Tan's claim which was clearly manifested in said letter, the pertinent portion of which reads:

"We refer to your claim for fire loss of 20th August, 1983 at Huervana St., La Paz, Iloilo City.

"We now have the report of our adjusters and after a thorough and careful review of the same and the accompanying documents at hand, we are rejecting, much to our regret, liability for the claim under our policies for one or more of the following reasons:

1.. . .

2.. . .

"For your information, we have referred all these matters to our lawyers for their opinion as to the compensability of your claim, particularly referring to the above violations. It is their

opinion and in fact their strong recommendation to us to deny your claim. By this letter, we do not intend to waive or relinquish any of our rights or defenses under our policies of insurance."

Condition 27 of the Insurance Policy, which is the subject of the conflicting contentions of the parties, reads:

"27.Action or suit clause — If a claim be made and rejected and an action or suit be not commenced either in the Insurance Commission or in any court of competent jurisdiction within twelve (12) months from receipt of notice of such rejection, or in case of arbitration taking place as provided herein, within twelve (12) months after due notice of the award made by the arbitrator or arbitrators or umpire, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder

In enunciating the above-cited principle, this Court had definitely settled the rationale for the necessity of bringing suits against the Insurer within one year from the rejection of the claim. The contention of the respondents that the one-year prescriptive period does not start to run until the petition for reconsideration had been resolved by the insurer, runs counter to the declared purpose for requiring that an action or suit be filed in the Insurance Commission or in a court of competent jurisdiction from the denial of the claim. To uphold respondents' contention would contradict and defeat the very principle which this Court had laid down. Moreover, it can easily be used by insured persons as a scheme or device to waste time until any evidence which may be considered against them is destroyed.

JACQUELINE JIMENEZ VDA. DE GABRIEL vs. HON. COURT OF APPEALS and FORTUNE INSURANCE & SURETY COMPANY, INC. [G.R. No. 103883. November 14, 1996.]

Facts:

Marcelino Gabriel, the insured, was employed by Emerald Construction & Development Corporation ("ECDC") at its construction project in Iraq. He was covered by a personal accident insurance in the amount of P100,000.00 under a group policy 2 procured from private respondent by ECDC for its overseas workers. The insured risk was for "(b)odily injury caused by violent accidental external and visible means which injury (would) solely and independently of any other cause" 3 result in death or disability.

On 22 May 1982, within the life of the policy, Gabriel died in Iraq. A year later, or on 12 July 1983, ECDC reported Gabriel's death to private respondent by telephone.4 Among the documents thereafter submitted to private respondent were a copy of the death certificate 5 issued by the Ministry of Health of the Republic of Iraq — which stated

"REASON OF DEATH: UNDER EXAMINATION NOW — NOT YET KNOWN "6

and an autopsy report 7 of the NBI to the effect that "(d)ue to advanced state of postmortem

decomposition, cause of death (could) not be determined." 8

Following a series of communications between petitioner and private respondent, the latter, on 22 September 1983, ultimately denied the claim of ECDC on the ground of prescription. 9 Petitioner went to the Regional Trial Court of Manila. In her complaint against ECDC and private respondent, she averred that her husband died of electrocution while in the performance of his work

Issue:

Whether or not the petitioner timely filed her notice of claim within the prescriptive period.

Ruling:

NO. The petitioner did not timely file her claim on the insurance proceeds.

Private respondent correctly invoked Section 384 of the Insurance Code; viz:

"Sec. 384.Any person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must be brought, in proper cases, with the Commissioner or the Courts within one year from denial of the claim, otherwise, the claimant's right of action shall prescribe."

The notice of death was given to private respondent, concededly, more than a year after the death of petitioner's husband. Private respondent, in invoking prescription, was not referring to the one-year period from the denial of the claim within which to file an action against an insurer but obviously to the written notice of claim that had to be submitted within six months from the time of the accident.