finals case digests compilation

8/13/2019 FINALS Case Digests Compilation

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INSURANCE G01 CASE DIGESTS

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POLICY

67. RCBCV.CA(FULL CASE POSTED IN THE FB GROUP-ADDITIONAL

CASE-PLEASE READ ON YOUR OWN-FIRST CASE TO BE DISCUSSED)

68. PACIFIC BANKING V.CA,168 SCRA1(1988)

Facts:

An open fire insurance policy, was issued to Paramount Shirt

Manufacturing by Oriental Assurance Corporation to indemnify

P61,000.00, caused by fire to the factorys stocks, materials and

supplies.

The insured was a debtor of Pacific Banking in the amount of(P800,000.00) and the goods described in the policy were held in

trust by the insured for Pacific Banking under trust receipts.

The policy was endorsed to Pacific Banking as mortgagee/ trustor of

the properties insured, with the knowledge and consent of private

respondent to the effect that "loss if any under this policy is payable

to the Pacific Banking Corporation".

A fire broke out on the premises destroying the goods contained in

the building.

The bank sent a letter of demand to Oriental for indemnity.The company wasnt ready to give since it was awaiting the

adjusters report.

The company then made an excuse that the insured had not filed

any claim with it, nor submitted proof of loss which is a clear

violation of Policy Condition No.11, as a result, determination of the

liability of private respondent could not be made.

Pacific Banking filed in the trial court an action for a sum of money

for P61,000.00 against Oriental Assurance.

At the trial, petitioner presented communications of the insurance

adjuster to Asian Surety revealing undeclared co-insurances with

the following: P30,000 with Wellington Insurance; P25,000 with

Empire Surety and P250,000 with Asian Surety undertaken by

insured Paramount on the same property covered by its policy withOriental whereas the only co-insurances declared in the subject

policy are those of P30,000.00 with Malayan P50,000.00 with South

Sea and P25.000.00 with Victory.

The defense of fraud, in the form of non-declaration of co-

insurances which was not pleaded in the answer, was also not

pleaded in the Motion to Dismiss.

The trial court denied the respondents motion. Oriental filed

another motion to include additional evidence of the co-insurance

which could amount to fraud.The trial court still made Oriental liable for P 61,000. The CA

reversed the trial court decision. Pacific Banking filed a motion for

reconsideration of the said decision of the respondent Court of

Appeals, but this was denied for lack of merit.

Issues:

1. WON unrevealed co-insurances Violated policy conditions No. 3

2. WON the insured failed to file the required proof of loss prior to

court action.

Held: Yes. Petition dismissed.

Ratio:

1. Policy Condition No. 3 explicitly provides:

3. The Insured shall give notice to the Company of any insurance

already effected, or which may subsequently be effected, covering

any of the property hereby insured, and unless such notice be given


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and the particulars of such insurance or insurances be stated in or

endorsed on this Policy by or on behalf of the Company before the

occurrence of any loss or damage, all benefit under this policy shall

be forfeited.

The insured failed to reveal before the loss three other insurances.Had the insurer known that there were many co-insurances, it could

have hesitated or plainly desisted from entering into such contract.

Hence, the insured was guilty of clear fraud.

Concrete evidence of fraud or false declaration by the insured was

furnished by the petitioner itself when the facts alleged in the policy

under clauses "Co-Insurances Declared" and "Other Insurance

Clause" are materially different from the actual number of co-

insurances taken over the subject property.

As the insurance policy against fire expressly required that noticeshould be given by the insured of other insurance upon the same

property, the total absence of such notice nullifies the policy.

Petitioner points out that Condition No. 3 in the policy in relation to

the "other insurance clause" supposedly to have been violated,

cannot certainly defeat the right of the petitioner to recover the

insurance as mortgagee/assignee. Hence, they claimed that the

purpose for which the endorsement or assignment was made was

to protect the mortgagee/assignee against any untoward act or

omission of the insured. It would be absurd to hold that petitioner isbarred from recovering the insurance on account of the alleged

violation committed by the insured.

It is obvious that petitioner has missed all together the import of

subject mortgage clause which specifically provides:

Loss, if any, under this policy, shall be payable to the PACIFIC

BANKING CORPORATION Manila mortgagee/trustor as its interest

may appear, it being hereby understood and agreed that this

insurance as to the interest of the mortgagee/trustor only herein,

shall not be invalidated by any act or neglectexcept fraud or

misrepresentation, or arsonof the mortgagor or owner/trustee of

the property insured; provided, that in case the mortgagor or

owner/ trustee neglects or refuses to pay any premium, the

mortgagee/ trustor shall, on demand pay the same.The paragraph clearly states the exceptions to the general rule that

insurance as to the interest of the mortgagee, cannot be

invalidated; namely: fraud, or misrepresentation or arson.

Concealment of the aforecited co-insurances can easily be fraud, or

in the very least, misrepresentation.

Undoubtedly, it is but fair and just that where the insured who is

primarily entitled to receive the proceeds of the policy has by its

fraud and/or misrepresentation, forfeited said right.

Petitioner further stressed that fraud which was not pleaded as adefense in private respondent's answer or motion to dismiss, should

be deemed to have been waived. It will be noted that the fact of

fraud was tried by express or at least implied consent of the parties.

Petitioner did not only object to the introduction of evidence but on

the contrary, presented the very evidence that proved its existence.

2. Generally, the cause of action on the policy accrues when the loss

occurs, But when the policy provides that no action shall be brought

unless the claim is first presented extrajudicially in the manner

provided in the policy, the cause of action will accrue from the timethe insurer finally rejects the claim for payment

In the case at bar, policy condition No. 11 specifically provides that

the insured shall on the happening of any loss or damage give

notice to the company and shall within fifteen (15) days after such

loss or damage deliver to the private respondent (a) a claim in

writing giving particular account as to the articles or goods

destroyed and the amount of the loss or damage and (b) particulars

of all other insurances, if any.


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Twenty-four days after the fire did petitioner merely wrote letters

to private respondent to serve as a notice of loss. It didnt even

furnish other documents. Instead, petitioner shifted upon private

respondent the burden of fishing out the necessary information to

ascertain the particular account of the articles destroyed by fire aswell as the amount of loss. Since the required claim by insured,

together with the preliminary submittal of relevant documents had

not been complied with, it follows that private respondent could

not be deemed to have finally rejected petitioner's claim and

therefore there was no cause of action.

It appearing that insured has violated or failed to perform the

conditions under No. 3 and 11 of the contract, and such violation or

want of performance has not been waived by the insurer, the

insured cannot recover, much less the herein petitioner.

69. ORIENTAL ASSURANCE V.COURT OF APPEALS,200 SCRA459

(1991)

ORIENTAL ASSURANCE v. CA (PANAMA SAW MILL)

200 SCRA 459

MELENCIO-HERRERA; August 9, 1991

NATURE

Petition for review on certiorari

FACTS

- Sometime in January 1986, private respondent Panama SawmillCo., Inc. (Panama) bought, in Palawan, 1,208 pieces of apitong logs,

with a total volume of 2,000 cubic meters. It hired Transpacific

Towage, Inc., to transport the logs by sea to Manila and insured it

against loss for P1-M with petitioner Oriental Assurance

Corporation (Oriental Assurance).

- While the logs were being transported, rough seas and strong

winds caused damage to one of the two barges resulting in the loss

of 497 pieces of logs out of the 598 pieces loaded thereon.

- Panama demanded payment for the loss but Oriental Assurance

refuse on the ground that its contracted liability was for "TOTAL

LOSS ONLY."

- Unable to convince Oriental Assurance to pay its claim, Panama

filed a Complaint for Damages against Oriental Assurance before

the Regional Trial Court.


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- RTC ordered Oriental Assurance to pay Panama with the view that

the insurance contract should be liberally construed in order to

avoid a denial of substantial justice; and that the logs loaded in the

two barges should be treated separately such that the loss

sustained by the shipment in one of them may be considered as"constructive total loss" and correspondingly compensable. CA

affirmed in toto.

ISSUE

WON Oriental Assurance can be held liable under its marine

insurance policy based on the theory of a divisible contract of

insurance and, consequently, a constructive total loss

HELD

NO

- The terms of the contract constitute the measure of the insurer

liability and compliance therewith is a condition precedent to the

insured's right to recovery from the insurer. Whether a contract is

entire or severable is a question of intention to be determined by

the language employed by the parties. The policy in question shows

that the subject matter insured was the entire shipment of 2,000

cubic meters of apitong logs. The fact that the logs were loaded ontwo different barges did not make the contract several and divisible

as to the items insured. The logs on the two barges were not

separately valued or separately insured. Only one premium was

paid for the entire shipment, making for only one cause or

consideration. The insurance contract must, therefore, be

considered indivisible.

- More importantly, the insurer's liability was for "total loss only." A

total loss may be either actual or constructive (Sec. 129, Insurance

Code). An actual total loss is caused by:

(a) A total destruction of the thing insured;

(b) The irretrievable loss of the thing by sinking, or by being

broken up;

(c) Any damage to the thing which renders it valueless to the

owner for the purpose for which he held it; or

(d) Any other event which effectively deprives the owner of the

possession, at the port of destination, of the thing insured.

(Section 130, Insurance Code).

- A constructive total loss is one which gives to a person insured a

right to abandon, under Section 139 of the Insurance Code. This

provision reads:

SECTION 139. A person insured by a contract of marine insurance

may abandon the thing insured, or any particular portion thereof

separately valued by the policy, or otherwise separately insured,

and recover for a total loss thereof, when the cause of the loss is a

peril injured against,

(a) If more than three-fourths thereof in value is actually lost, or

would have to be expended to recover it from the peril;

(b) If it is injured to such an extent as to reduce its value more

than three-fourths;

xxx xxx xxx


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- The requirements for the application of Section 139 of the

Insurance Code, quoted above, have not been met. The logs

involved, although placed in two barges, were not separately valued

by the policy, nor separately insured. Resultantly, the logs lost in the

damaged barge in relation to the total number of logs loaded on thesame barge cannot be made the basis for determining constructive

total loss. The logs having been insured as one inseparable unit, the

correct basis for determining the existence of constructive total loss

is the totality of the shipment of logs. Of the entirety of 1,208,

pieces of logs, only 497 pieces thereof were lost or 41.45% of the

entire shipment. Since the cost of those 497 pieces does not exceed

75% of the value of all 1,208 pieces of logs, the shipment cannot be

said to have sustained a constructive total loss under Section 139(a)

of the Insurance Code.

Dispositionjudgment under review is SET ASIDE

70. FORTUNE ASSURANCE V.COURT OF APPEALS,244 SCRA308

(1995)

G.R. No. 115278 May 23, 1995

Petitioner:FORTUNE INSURANCE AND SURETY CO., INC. (Fortune)

Respondent: PRODUCERS BANK OF THE PHILIPPINES(PBP)

FACTS:

> PBP filed against Fortune a complaint for recovery of the sum ofP725,000.00 under the policy issued by Fortune. The money wasallegedly lost during a robbery of Producer's armored vehicle whileit was in transit to transfer the money from its Pasay City Branch to

its head office in Makati along Taft Avenue.

>The armored car was driven by Benjamin Magalong escorted bySecurity Guard Saturnino Atig.

>Driver Magalong was assigned by PRC Management Systems withthe PBP by virtue of an Agreement and Atiga was assigned byUnicorn Security Services, Inc. by virtue of a contract of SecurityService.

>After an investigation conducted by the Pasay police authorities,the driver Magalong and guard Atiga were charged, together withEdelmer Bantigue, Reynaldo Aquino and John Doe, with violation ofP.D. 532 (Anti-Highway Robbery Law) before the Fiscal of Pasay City.

>Demands were made by PBP but Fortune refused to pay as the lossis excluded from the coverage of the insurance policy which isstipulated under "General Exceptions" Section (b) which reads asfollows:


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GENERAL EXCEPTIONS

The company shall not be liable under this policy in

report 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. . . .

8. The plaintiff opposes the contention of the

defendant and contends that Atiga and Magalong

are not its "officer, employee, . . . trustee orauthorized representative . . . at the time of the

robbery.

>RTC & CA: held that there should be recovery. The trial court ruledthat Magalong and Atiga were not employees or representatives ofProducers. The wages and salaries of both Magalong and Atiga arepresumably paid by their respective firms, which alone wields thepower to dismiss them. Neither is the Court prepared to accept theproposition that driver Magalong and guard Atiga were the"authorized representatives" of plaintiff.

ISSUE:

W/N the recovery in the policy is precluded under the generalexceptions clause?

HELD:

YES.

Fortune is exempt from liability under the general exceptions clauseof the insurance policy.

>It should be noted that the insurance policy entered into by theparties is a theft or robbery insurance policy which is a form of

casualty insurance (Section 174 of the Insurance Code). Other thanwhat is mentioned in the provision, the rights and obligations of theparties must be determined by the terms of their contract, takinginto consideration its purpose and always in accordance with thegeneral principles of insurance law.

>The purpose of the exception is to guard against liability should thetheft be committed by one having unrestricted access to theproperty. In such cases, the terms specifying the excluded classesare to be given their meaning as understood in common

speech. The terms "service" and "employment" are generallyassociated with the idea of selection, control, and compensation.

>A contract of insurance is a contract of adhesion, thus anyambiguity therein should be resolved against the insurer, or itshould be construed liberally in favor of the insured and strictlyagainst the insurer. Limitations of liability should be regarded withextreme jealousy and must be construedin such a way, as to preclude the insurer from non-compliance withits obligation.

>If the terms of the contract are clear and unambiguous, there is noroom for construction and such terms cannot be enlarged ordiminished by judicial construction.

>An insurance contract is a contract of indemnity. It is settled thatthe terms of the policy constitute the measure of the insurer'sliability. In the absence of statutory prohibition to the contrary,insurance companies have the same rights as individuals to limit


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their liability and to impose whatever conditions they deem bestupon their obligations not inconsistent with public policy.

>It was clear that Fortunes intention is to exclude and exempt from

protection and coverage losses arising from dishonest, fraudulent,

or criminal acts of persons granted or having unrestricted access toProducers' money or payroll. When it used then the term"employee," it must have had in mind any person who qualifies assuch as generally and universally understood, or jurisprudentiallyestablished in the light of the four standards in the determination ofthe employer-employee relationship, or as statutorily declared evenin a limited sense as in the case of Article 106 of the Labor Codewhich considers the employees under a "labor-only" contract asemployees of the party employing them and not of the party whosupplied them to the employer.

>Fortune claims that Producers' contracts with PRC ManagementSystems and Unicorn Security Services are "labor-only" contracts.But even granting for the sake of argument that these contractswere not "labor-only" contracts, and PRC Management Systems andUnicorn Security Services were truly independent contractors, weare satisfied that Magalong and Atiga were, in respect of thetransfer of Producer's money from its Pasay City branch to its headoffice in Makati, its "authorized representatives" who served assuch with its teller Maribeth Alampay.

>Producers entrusted the three with the specific duty to safelytransfer the money to its head office, with Alampay to beresponsible for its custody in transit; Magalong to drive the armoredvehicle which would carry the money; and Atiga to provide theneeded security for the money, the vehicle, and his two othercompanions. In short, for these particular tasks, the three acted asagents of Producers. A "representative" is defined as one whorepresents or stands in the place of another; one who represents

others or another in a special capacity, as an agent, and isinterchangeable with "agent."

71. GREAT PACIFIC LIFE V.COURT OF APPEALS,89SCRA543 (1979)

GREAT PACIFIC LIFE v. CA (NGO HING)89 SCRA 543DE CASTRO, J; April 30, 1979!NATUREPetition for certiorari!FACTS

- On March 14, 1957, private respondent Ngo Hing filed anapplication with the Great Pacific Life Assurance Co. (Pacific Life)for a 20 year endowment policy of P50k on the life of his 1year old daughter, Helen. Ngo Hing supplied the essetntial datawhich petitioner Mondragon, branch manager of the Pacific Lifein Cebu, wrote on the corresponding form in his ownhandwriting, later typing the data on an application form signed byNgo Hing. The latter paid the P1077.75 annual premium butretained P1,317 as commission as he was also a dulyauthorized agent of Pacific Life. The binding deposit receiptwas then issued to Ngo Hing;

Mondragon handwrote his strong recommendation for theapproval of the application on theback of the form.

- On April 30, Mondragon received a letter from Pacific Lifewhich stated that the 20 year


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endowment plan was not available for minors below 7, but thatPacific Life could consider the same under the Juvenile TripleAction Plan, advising that if the offer was acceptable, theJuvenile Non-Medical Declaration be sent to the company.

-Mondragon allegedly failed to inform Ngo Hing of the non-acceptance of the insurance plan, instead writing Pacific Lifeagain, recommending the approval of the endowment plan tochildren since customers had been asking for such coverage since1954.

-On May 28, 1957, Helen died of influenza. Ngo Hing sought thepayment of the proceeds of the insurance, but having failed to doso, filed an action for recovery with the CFI of Cebu. The Courtordered Pacific Life to pay P50k with 6% interest, hence this

petition.

!ISSUEWON the binding deposit receipt constituted a temporarycontract of the life insurance in question!

HELDNO- The binding deposit receipt is merely a provisional contract

and only upon compliance with the ff conditions: (1) that thecompany be satisfied that the applicant was insurable onstandard rates (2) that if the company does not accept theapplication and offers a different policy, the insurance contractshall not be binding until the applicant accepts the new policy(3) that if the applicant is not found to be insurable on standardrates and the application is disapproved, the insurance shall not bein force at any time and the premium be returned to the applicant.

-This implies the receipt is merely an acknowledgement, onbehalf of the company, that the Cebu branch of Pacific Life hadreceived the premium and had accepted the application subject toprocessing by the insurance company, which will approve or reject itdepending on whether the applicant is insurable on standard rates.

As such, the receipt was never in force-it does not insure outright.No liability attaches until the principal approves the risk and areceipt is given by the agent; because private respondent failedto accept Pacific Life's offer for the Juvenile Triple Action plan,there was no meeting of the minds and thus no contract. Also,being an authorized agent of Pacific Life, Ngo Hing must haveknown the company did not offer the insurance applied for andmerely took a chance on Mondragon's recommendation.Disposition the decision appealed from is set aside, absolvingPacific Life from their civil liabilities


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72. BONIFACIO BROTHERS V.MORA,20SCRA261(1967)

FACTS:

Enrique Mora, owner of Oldsmobile sedan model 1956

mortgaged the same to the H.S. Reyes, Inc. , with thecondition that the former would insure the automobilewith the latter as beneficiary.

The automobile was thereafter insured with the StateBonding & Insurance Co., Inc., and motor car insurancepolicy was issued to Enrique Mora.

During the effectivity of the insurance contract, the car metwith an accident. Enrique Mora, without the knowledgeand consent of the H.S. Reyes, Inc., authorized the

Bonifacio Bros. Inc. to furnish the labor and materials,

some of which were supplied by the Ayala Auto Parts Co.For the cost of labor and materials, Enrique Mora wasbilled at P2,102.73 through the H.H. Bayne Adjustment Co.

The insurance company after claiming a franchise in the

amount of P100, drew a check in the amount of P2,002.73,

as proceeds of the insurance policy, payable to the order

of Enrique Mora or H.S. Reyes,. Inc., and entrusted the

check to the H.H. Bayne Adjustment Co.for disposition anddelivery to the proper party.

In the meantime, the car was delivered to Enrique Mora

without the consent of the H.S. Reyes, Inc., and withoutpayment to the Bonifacio Bros. Inc. and the Ayala Auto

Parts Co. of the cost of repairs and materials.

Upon the theory that the insurance proceeds should be

paid directly to them, the Bonifacio Bros. Inc. and the

Ayala Auto Parts Co. filed a complaint with the MTC of

Manila against Enrique Mora and the State Bonding &

Insurance Co., Inc. for the collection of the sum of

P2,002.73.

The insurance company filed its answer with a

counterclaim for interpleader, requiring the Bonifacio

Bros. Inc. and the H.S. Reyes, Inc. to interplead in order to

determine who has better right to the insurance proceeds in question.

Municipal Court rendered a decision declaring the H.S.Reyes, Inc. as having a better right to the disputed amount

and ordering State Bonding & Insurance Co. Inc. to pay to

the H. S. Reyes, Inc. the said sum of P2,002.73.

From this decision, the appellants elevated the case to theCFI of Manila which rendered a decision, affirming thedecision of the Municipal Court. The Bonifacio Bros. Inc.and the Ayala Auto Parts Co. moved for reconsiderationofthe decision, but the trial court deniedthe motion. Hence,this appeal.

ISSUE:WON there is privity of contract between the Bonifacio Bros.Inc. and the Ayala Auto Parts Co. on the one hand and the insurancecompany on the other.

HELD: NONE

Appellant = Bonifacio Bro., Inc.

From the undisputed facts and from the pleadings it will be seenthat the appellants' alleged cause of action rests exclusively uponthe terms of the insurance contract. The appellants seek to recoverthe insurance proceeds, and for this purpose, they rely uponparagraph 4 of the insurance contract document executed by andbetween the State Bonding & Insurance Company, Inc. and EnriqueMora. The appellants are not mentioned in the contract as partiesthereto nor is there any clause or provision thereof from which wecan infer that there is an obligation on the part of the insurance

company to pay the cost of repairs directly to them.


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It is fundamental that contracts take effect only between theparties thereto, except in some specific instances provided by law where the contract contains some stipulation in favor of a thirdperson.1Such stipulation is known as stipulationpour autruior aprovision in favor of a third person not a pay to the contract. Under

this doctrine, a third person is allowed to avail himself of a benefitgranted to him by the terms of the contract, provided that the

contracting parties have clearly and deliberately conferred a favor

upon such person.

In this connection, this Court has laid down the rule that the fairesttest to determine whether the interest of a third person in acontract is a stipulationpour autrui or merely an incidental

interest, is to rely upon the intention of the parties as disclosed by

their contract.4In the instant case the insurance contract does not

contain any words or clauses to disclose an intent to give anybenefit to any repairmen or materialmen in case of repair of the

car in question. The parties to the insurance contract omitted suchstipulation, which is a circumstance that supports the saidconclusion. On the other hand, the "loss payable" clause of theinsurance policy stipulates that "Loss, if any, is payable to H.S.Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which

they intended to benefit.

If it were the intention of the insurance company to make itself

liable to the repair shop or materialmen, it could have easily

inserted in the contract a stipulation to that effect.

Another cogent reason for not recognizing a right of action by theappellants against the insurance company is that "a policy ofinsurance 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 between the

insured and third person."5In this case, no contract of trust,

expressed or implied exists. We, therefore, agree with the trial courtthatno cause of action exists in favor of the appellants in so far asthe proceeds of insurance are concerned.The appellants' claim, ifat all, is merely equitable in nature and must be made effectivethrough Enrique Mora who entered into a contract with the

Bonifacio Bros. Inc. This conclusion is deducible not only from theprinciple governing the operation and effect of insurance contractsin general, but is clearly covered by the express provisions ofsection 50 of the Insurance Actwhich read:

The insurance shall be applied exclusively to the proper

interests of the person in whose name it is made unless

otherwise specified in the policy.

The policy in question has been so framed that "Loss, if any, is

payable to H.S. Reyes, Inc.," which unmistakably shows theintention of the parties.

The final contention of the appellants is that the right of the H.S.Reyes, Inc. to the insurance proceeds arises only if there was lossand not where there is mere damage as in the instant case. Suffice itto say that any attempt to draw a distinction between "loss" and"damage" is uncalled for, because the word "loss" in insurance lawembraces injury or damage. Indeed, according to sec. 120 of theInsurance Act, a loss may be either total or partial.


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73. HEIRS OF L.G.MARAMAG V.MARAMAG,588 SCRA774 (2009)

1. PETITIONERS were legitimate wife and children of LoretoMaramag.

2. PETITIONERS' CONTENTION:a. RESPONDENTS were Loreto''s illegitimate family.

b.Eva Maramag was concubine of Loreto and a suspect in the killingof Loreto. Thus, she is disqualified to receive any proceeds from hisinsurance policies from Insular Life Assurance (INSULAR) and GreatPacific LifeAssurance (GREPALIFE)

c. The illegitimate children were entitled only to 1/2 of the legitimeof the legitimate children,thus the proceeds released to the illegitimate children wereinofficious and should bereduced.d. x x x

3. TRO and writ of preliminary injunction were filed by thepetitioner because, some part ofthe insurance proceeds had already been released in favor of one ofthe illegitimate and the

rest are to be releases in favor of the other illegitimate.

4.Insular admitted that Loreto misrepresented Eva as his legitimatewife and Odessa, KarlBrian, and Trisha Angelie as his legitimate children, and that theyfiled their claims for theinsurance proceeds of the insurance policies.

5. INSULAR ALLEGATION:

THE COMPLAINT OR PETITION FAILED TO STATE A CAUSE OFACTION AS TODECLARE AS VOID THE DESIGNATION OF EVA AS BENEFICIARY forLoreto revoked herdesignation and already disqualified her.

6. GREPALIFR CONTENTION: Eva was not designated as an insurancepolicy beneficiary, that r claims of the illegitimate children weredenied because Loreto was ineligible for the insurance due to themisrepresentation in his application form that he was not morethan 65 years old.

7.Both Insular and Grepalife countered that the insurance proceedsbelong exclusively to thedesignated beneficiaries in the policies, not to the estate or to theheirs of the insured.Grepalife also reiterated that it had disqualified Eva as a beneficiarywhen it ascertained thatLoreto was legally married to Vicenta Pangilinan Maramag.

8.RTC: In favor of the respondents. Neither could the plaintiffsinvoked (sic) the law on donations or the rules on testamentarysuccession in order to defeat the right of herein defendants tocollect the insurance indemnity. The beneficiary in a contract ofinsuranceis not the donee spoken in the law of donation. The ruleson testamentary succession cannot apply here, for the insurance

indemnity does not partake of a donation.

THE PROCEEDS BELONG EXCLUSIVELY THE BENEFICIARY AND NOTTO THE ESTATE OF THE PERSON. NO SUFFICIENT CAUSE OF ACTIONAGAINST THE ILLEGITIMATE FLR THE REDUCTION AND/ORDECLARATION OF INOFFICIOUS OFDONATION AS PRIMARY BENEFICIARY. EVA AS THE CONCUBINECANNOT BE ABENEFICIARY


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74. COQUIA V.FIELDMENS INSURANCE,26SCRA178 (1968)

Coquia vs Fieldmens Insurance

Facts:1. Fieldmen's Insurance Company, Inc. issued, in favor of the

Manila Yellow Taxicab Co., Inc. a common carrier accidentinsurance policy.

2. It was stipulated in said policy that the company willindemnify the Insured in the event of accident caused by orarising out of the use of Motor Vehicle against all sumswhich the Insured will become legally liable to pay.

3. While the policy was in force, or on February 10, 1962, ataxicab of the Insured, driven by Carlito Coquia, met a

vehicular accident at Mangaldan, Pangasinan, inconsequence of which Carlito died.4. The Insured filed therefor a claim for P5,000.00 to which the

Company replied with an offer to pay P2,000.00, by way ofcompromise.

5. The Insured rejected the same and made a counter-offer forP4,000.00, but the Company did not accept it.

6. The insured and Carlitos parents or the Coquias filed acomplaint against the company to collect the proceeds ofthe insurance policy.

7. As a defence, the company argued lack of cause of action on

the part of the Coquias.8. RTC ruled for the plaintiffs sentencing the company to pay

4k.

Issue:1. Whether or not the Coquias can claim under the policy even

if they are alleged to not have a cause of action against thecompany as they are not parties to the insurance policy?

Held:1. YES2. While the general rule is that only parties to a contract may

bring an action based thereon, one exception is foundunder Article 1311 of the Civil Code.

3. It provides that If a contract should contain some stipulationin favor of a third person, he may demand its fulfillment

provided he communicated his acceptance to the obligor

before its revocation.4. These are contracts pour autrui wherein enforcement of a

contract may be demanded by a third party for whosebenefit it was made, although not a party to the contract.

5. In this case, the policy contained a stipulation which statesthe following: Section I Liability to Passengers. 1. TheCompany will, subject to the Limits of Liability and underthe Terms of this Policy, indemnify the Insured in the eventof accident caused by or arising out of the use of MotorVehicle against all sums which the Insured will becomelegally liable to pay in respect of: Death or bodily injury toany fare-paying passenger including the Driver ... who isriding in the Motor Vehicle insured at the time of accidentor injury.

6. Another stipulation provides that In the event of death ofany person entitled to indemnity under this Policy, theCompany will, in respect of the liability incurred by such

person, indemnify his personal representatives in terms ofand subject to the limitations of this Policy, provided, thatsuch representatives shall, as though they were the Insured,observe, fulfill and be subject to the Terms of this Policyinsofar as they can apply.

7. Pursuant to these stipulations, the Company "willindemnify any authorized Driver who is driving the MotorVehicle" of the Insured and, in the event of death of said


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driver, the Company shall, likewise, "indemnify his personalrepresentatives."

8. Thus, the policy under consideration is typical ofcontractspour autrui, this character being made more

manifest by the fact that the deceased driver paid fiftypercent (50%) of the corresponding premiums, which werededucted from his weekly commissions.

9. Under these conditions, it is clear that the Coquias who,admittedly, are the sole heirs of the deceased have adirect cause of action against the Company,3and, since theycould have maintained this action by themselves, withoutthe assistance of the Insured, it goes without saying thatthey could and did properly join the latter in filing thecomplaint herein.

75. LOPEZ V.DEL ROSARIO,44PHIL 98(1922)

Lopez vs. Del Rosario (1922)

Facts:

1. Mrs. del Rosario owned a bonded warehouse in Manila.Engaged in the business of a warehouse keeper, she storedcopra and other merchandise in building.

2. Among the persons who had copra deposited in the DelRosario warehouse was Froilan Lopez, the holder offourteen warehouse receipts in his own name, and thename of Elias T. Zamora.

3. Lopez named a declared value of P107,990.40. Thewarehouse receipts provided: (1) For insurance at the rateof 1 per cent per month on the declared value; (2) the

company reserves to itself the right to raise and/or lowerthe rates of storage and/or of insurance on giving onecalendar month's notice in writing; (3) this warrant carriesno insurance unless so noted on the face hereof, cost ofwhich is in addition to storage; (4) the time for whichstorage and/or insurance is charged is thirty (30) days; (5)payment for storage and/or insurance, etc., shall be madein advance, and/or within five (5) days after presentation ofbill.

4. It is admitted that insurance was paid by Lopez to May 18,1920, but not thereafter.

5. Mrs. Del Rosario secured insurance on the warehouse andits contents with the National Insurance Co., Inc., theCommercial Union Insurance Company, the AllianceInsurance Company, the South British Insurance Co., Ltd.,and the British Traders Insurance Co., Ltd.

6. The warehouse caught fire. Everything was destroyed. Onlycopra worth P49,985 was salvaged.

7. Mrs. del Rosario was able to settle everything except theaccount of Lopez.


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Issue:Whether or not Mrs. Del Rosario acted as an agent of Lopezin taking out an insurance on the contents of the warehouse

Held:YES. The agency can be deduced from the warehouse receipts,

the insurance policies, and the circumstances surrounding thetransaction. The law is that a policy effected by bailee and coveringby its terms his own property and property held in trust; inures, inthe event of a loss, equally and proportionately to the benefit of allthe owners of the property insured. Even if one secured insurancecovering his own goods and goods stored with him, and even if theowner of the stored goods did not request or know of theinsurance, and did not ratify it before the payment of the loss, yet ithas been held by a reputable court that the warehouseman is liableto the owner of such stored goods for his share.

Moreover, the Court found in two documents of Mrs. Del Rosarioagainst the insurance companies (agreement for arbitration and thestatement of claim)she acknowledged her responsibility to theowners of the stored merchandise, against risk of loss by fire. Theaward of the arbitrators covered not alone Mrs. Del Rosario'swarehouse but the products stored in the warehouse by Lopez andothers.

Lopez' rights to the insurance money have not been forfeited byfailure to pay the insurance provided for in the warehouse receipts.A preponderance of the proof does not demonstrate that he everordered the cancellation of his insurance with the Del Rosario. Noris it shown that the Lopez ever refused to pay the insurance whenthe bills were presented to him, and that notice of an intention tocancel the insurance was ever given to him. Lopez can recover from

the Del Rosario the sum of P81,093.65, with interest at 6 per centper annum from May 13, 1921, until paid.

76. DEVELOPMENT BANK V,INTERMEDIATE APPELLATE COURT,143 SCRA62(1986)

Development Insurance vs IACGR No. 71360 July 16, 1986

Facts:

A fire occurred in the building of Philippine Union RealtyDevelopment Corporation (PURDC) and it sued for damages

from Devt Insurance based on an insurance contract. DevtInsurance failed to answer on time and was declared indefault by the trial court. A judgment of default wassubsequently rendered on the strength of the evidencesubmitted ex parte by PURDC, which was allowed fullrecovery of its claim.

Devt Insuracne moved to lift the order of default, invokingexcusable neglect, and to vacate the judgment by default;which was denied by the court. The IAC affirmed thedecision of the trial court.

The face value of the policy is P2,500,000. Devt Insurance isclaiming that since at the time of the fire, the buildinginsured was worth P5.8M, they can only be liable to theextent of the proportion between the difference betweenthat amount and the face value, as against the total losssustained, which is P508,867; making them only liable foronly P67,629.31.

Issue:


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Whether the insurer should be liable for the whole amount of theloss

Ruling:The insurer is liable for the whole amount.

The policy issued to PURDC is an open policy and is subjectto the express condition that in the event of loss, whethertotal or partial, it is understood that the amount of the lossshall be subject to appraisal and the liability of thecompany, if established, shall be limited to the actual loss,subject to the applicable terms, conditions, warranties andclauses of the policy, and in no case shall exceed theamount of the policy.

o An open policy is one in which the value of the thinginsured is not agreed upon but is left to beascertained in case of loss

There is no evidence on record that the building was worthP5.8M at the time of the loss; only Devt Insurance says so,and it does not back up its self-serving estimate with anyindependent corroboration.

Since the building was insured at P2.5M, this must beconsidered the value of the building on the day the fireoccurred.

The actual loss has been ascertained in this case and theCourt will respect such factual determination in the absenceof proof that it was arrived at arbitrarily. There is no such

showing. Applying the open policy clause as expressly agreed upon by

the parties in their contract, the Court holds that PURDC isentitled to the payment of indemnity in the total amount ofP508,867.

77. TEAL MOTOR V.ORIENT INSURANCE,59PHIL.809

Facts:

-These seven cases related to insurance policies covering the goods,

wares, and merchandise contained in the building in the Port Area

in the City of Manila which was damaged by a fire of unknown origin

the afternoon of Sunday, January 6, 1929.

-At the request of the insured, the companies gave additional time

for the filing of the claims of loss. These claims were definitely

rejected in writing by the insurance companies through their agents

on April 15, 1929.

- Among the special defenses of the insurance companies is one

based upon a clause in the policies which, with the exception of

those of the Atlas Assurance Company, Ltd., among other things

provides:

if the claim be made and rejected, and action or suit be not

commenced within three months after such rejection, ...

all under this Policy shall be forfeited.

- While those cases were under advisement here, the Supreme

Court noticed that the provision relating to the Atlas policy reads:

if the claim be made and rejected and arbitration

proceedings be not commenced in pursuance of the 18th

Condition of this Policy within three months after such

rejection; all benefit under this Policy shall be forfeited.

- No such arbitration proceedings were instituted within the three

months' period.


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- The seven suits were filed between the 3rd and the 15th day of

August, 1929, or more than three months after the rejection by the

defendant companies of plaintiff's claim.

Issue:

Whether or NOT the claims were filed on time?

Ruling:

The Supreme Court held that the case was filed out of time. Plaintiff

was given such time as it deemed necessary to formulate and

present its claim of loss. That claim was investigated by the

adjusters for several months, and under the contract of insurance,

the insured had three months after rejection in which to bring suit.The issues were virtually joined on the presentation of the claims

and their rejection by the companies in writing, and three months

thereafter is not an unreasonably short time to draft and file in

court an appropriate complaint on a contract of fire insurance.

Ratio:

A provision requiring presentation of claim within three months

after the fire, and the bringing of action within three months afterrefusal of claim is valid.

78. ANG V.FULTON FIRE INSURANCE,2SCRA945 (1961)

G.R. No. L-15862 July 31, 1961

PAULO ANG and SALLY C. ANG,plaintiffs-appellees,vs.FULTON FIRE INSURANCE CO., ET AL.,defendants.FULTON FIRE INSURANCE CO.,defendant-appellant.

LABRADOR,J.:

FACTS

September 9, 1953 - Fulton Fire Insurance Company issued

a fire insurance policy in favor of P. & S Department Store(owned by the Spouses Paulo Ang and Sally C. Ang) overstocks of general merchandise, consisting principally of drygoods, contained in a building occupied by the Angs atLaoag, Ilocos Norte. The premium is P500.00 annually.

September 31, 1954policy was renewed for another year.

December 17, 1954 - the store was destroyed by fire.

December 30, 1954 - the Angs executed the first claim formtogether with all the necessary papers (books of accounts of

the insured for the year 1953-1954 and a clearance fromthe Philippine Constabulary and the police), and they wereall forwarded to the Manila Adjustment Company, Fulton'sadjusters.

January 13, 1955 - Paulo Ang and 10 others were chargedfor arson in a Criminal Case but Paulo Ang was eventuallyacquitted.

April 6, 1956 - Fulton denied the claim.


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April 19, 1956 - denial received by Angs.

May 11, 1956Angs filed 1stcase to assert the claim butagainst Paramount Surety and Insurance Company (Fultonsagent).

September 3, 1957 - 1st

case was dismissed withoutprejudice.

May 5, 1958Angs filed 2ndcase against Fulton andParamount Surety to recover from them the face value ofthe policy, but Paramount was eventually dropped from thecomplaint.

May 26, 1958ANSWER OF FULTON: (1) denied that theloss by the fire was accidental, alleging that it wasoccasioned by the willful act of Paulo Ang himself.

(2) claimed that under paragraph13 of the policy, if the loss or damage isoccasioned by the willful act of theinsured, or if the claim is made and rejectedbut no action is commenced within 12

months after such rejection, all benefitsunder the policy would be forfeited. SinceAngs received notice of denial on April 18,1956, and they filed action only on May 5,1958, all the benefits under the policy have

been forfeited.

February 12, 1959REPLY OF ANGS: The 1stcase was filedMay 11, 1956 but was dismissed without prejudice onSeptember 3, 1957. That period between May 11, 1956 toSeptember 3, 1957 must be deducted from the prescriptiveperiod of 12 months.

CFI2ndcase in favor of Angs (ordering Fulton to pay theAngs the sum of P10,000.00, with interest, and an

additional sum of P2,000.00 as attorney's fees, and costs).The CFI held that the bringing of the action May 11, 1956,tolled the running of the 12 month period.Fulton appealeddirectly to the Supreme Court.

ISSUE

Whether the Angs may validly claim on the policy even with theprohibition on Paragraph 13 of the policy.

SC HELD

NO.

The basic error committed by the trial court is its view that the filing

of the action against the agent of the defendant company was"merely a procedural mistake of no significance or consequence,which may be overlooked." The condition contained in theinsurance policy that claims must be presented within one yearafter rejection is not merely a procedural requirement. Thecondition is an important matter, essential to a prompt settlementof claims against insurance companies, as it demands that insurancesuits be brought by the insured while the evidence as to the originand cause of destruction have not yet disappeared. It is in thenature of a condition precedent to the liability of the insurer, or inother terms, a resolutory cause, the purpose of which is to

terminate all liabilities in case the action is not filed by the insuredwithin the period stipulated.

The bringing of the action against the Paramount Surety &Insurance Company, the agent of the defendant Company cannothave any legal effect except that of notifying the agent of the claim.Beyond such notification, the filing of the action can serve no otherpurpose. There is no law giving any effect to such action upon theprincipal. Besides, there is no condition in the policy that the action


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must be filed against the agent, and this Court can not byinterpretation, extend the clear scope of the agreement beyondwhat is agreed upon by the parties.

The case of E. Macias & Co. vs. China Fire Insurance Co. has settled

the issue presented by the appellees in the case at bar definitelyagainst their claim. In that case, We declared that the contractualstation in an insurance policy prevails over the statutory

limitation, as well as over the exceptions to the statutory limitationsthat the contract necessarily supersedes the statute (of limitations)and the limitation is in all phases governed by the former. (E. Macias& Co. vs. China Fire Insurance & Co., 46 Phil. pp. 345-353). As statedin said case and in accordance with the decision of the SupremeCourt of the United States in Riddlesbarger vs. Hartford FireInsurance Co. (7 Wall., 386), the rights of the parties flow from thecontract of insurance, hence they are not bound by the statute of

limitations nor by exemptions thereto. In the words of our ownlaw, their contract is the law between the parties, and theiragreement that an action on a claim denied by the insurer must be

brought within one year from the denial, governs, not the rules on

the prescription of actions.

The judgment appealed from is hereby set aside and the casedismissed, with costs against the plaintiffs-appellees.

APPEAL GRANTED.

79. SUN INSURANCE OFFICE V.CA,195 SCRA193 (1991)

FACTS:

Emilio Tan took from Sun Insurance Office a P300,000.00 property

insurance policy to cover his interest in the electrical supply store of

his brother. Four 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 Sun Insurance Office, but on

February 29, 1984, Sun Insurance Office wrote Tan denying the

latters claim. On April 3, 1984, Tan wrote Sun Insurance Office,

seeking reconsideration of the denial of his claim. Sun Insurance

Office answered the letter, advising Tans counsel that the Insurers

denial of Tans claim remained unchanged.

ISSUES:

(1)WON the filing of a motion for reconsideration interrupts the 12

months prescriptive period to contest the denial of the insurance

claim; and (2)WON the rejection of the claim shall be deemed final

only of it contains words to the effect that the denial is final;

HELD:

(1) No. In this case, Condition 27 of the Insurance Policy 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)


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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.

As the terms are very clear and free from any doubt or ambiguity

whatsoever, it must be taken and understood in its plain, ordinary

and popular sense.

Tan, in his letter addressed to Sun Insurance Office dated April 3,

1984, admitted that he received a copy of the letter of rejection on

April 2, 1984. Thus, the 12-month prescriptive period started to run

from the said date of April 2, 1984, for such is the plain meaning and

intention of Section 27 of the insurance policy.

The condition contained in an insurance policy that claims must be

presented within one year after rejection is not merely a procedural

requirement but an important matter essential to a prompt

settlement of claims against insurance companies as it demands

that insurance suits be brought by the insured while the evidence as

to the origin and cause of destruction have not yet disappeared.

It is apparent that Section 27 of the insurance policy was stipulated

pursuant to Section 63 of the Insurance Code, which states that:

Sec. 63. A condition, stipulation or agreement in any policy of

insurance, limiting the time for commencing an action thereunder

to a period of less than one year from the time when the cause of

action accrues, is void.

It also begs to ask, when does the cause of action accrue? The

insureds cause of action or his right to file a claim either in the

Insurance Commission or in a court of competent jurisdiction

commences from the time of the denial of his claim by the Insurer,

either expressly or impliedly. But the rejection referred to should be

construed as the rejection in the first instance (i.e. at the first

occasion or for the first time), not rejection conveyed in a resolution

of a petition for reconsideration. Thus, to allow the filing of a

motion for reconsideration to suspend the running of the

prescriptive period of twelve months, a whole new body of rules on

the matter should be promulgated so as to avoid any conflict that

may be brought by it, such as:

a.whether the mere filing of a plea for reconsideration of a denial is

sufficient or must it be supported by arguments/affidavits/material

evidence;

b.how many petitions for reconsideration should be permitted?

(2) No. The Eagle Star case cited by Tan to defend his theory that

the rejection of the claim shall be deemed final only of it contains

words to the effect that the denial is final is inapplicable in the

instant case. Final rejection or denial cannot be taken to mean the

rejection of a petition for reconsideration. The Insurance policy inthe Eagle Star case provides that the insured should file his claim,

first, with the carrier and then with the insurer. The final rejection

being referred to in said case is the rejection by the insurance

company.


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80. PACIFIC BANKING CORP.V CA,168 SCRA1(1988)

PACIFIC BANKING CORPORATION vs. CA

No. L-41014; November 29, 1988

Facts:

On October 21, 1963, an Open Fire Policy was issued to theParamount Shirt Manufacturing Co. (insured) by which privaterespondent Oriental Assurance bound itself to indemnify theinsured for any los or damage, not exceeding P61,000.00, causedby fire to its property consisting of stocks, materials and supplies

usual to a shirt factory while contained in the first to third floorsof the building where they are located for a period of one yearstarting October 21, 1964.

At the time the policy was issued, Paramount Shirt was a debtorof Pacific Bank amounting to P800,000.00. Goods in thesaid policy were held in trust by Paramount for Pacific Bankunder trust receipts. Said policy was duly endorsed to thepetitioner bank as mortgagee/trustor of the properties insured,

with the knowledge and consent of private respondent to theeffect that loss if any under this policy is payable to the (PacificBank)".

While the aforesaid policy was in full fore and effect, a fire brokeout on the subject premises destroying the goods contained inits ground and second floors. Pacific Bank sent a letter ofdemand to Oriental Assurance for indemnity, but the latterwasnt ready to give since it was awaiting the adjusters report. It

then made an excuse that the insured had not filed any claimwith it, nor submitted proof of loss which is a clear violation ofPolicy Condition No.11, as a result, determination of the liabilityof private respondent could not be made.

Pacific Banking filed in the trial court an action for a sum ofmoney for P61,000.00 against Oriental Assurance. At the trial,Pacific Bank presented communications of the insuranceadjuster to Asian Surety revealing undeclared co-insurances withthe following: P30,000 with Wellington Insurance; P25,000 withEmpire Surety and P250,000 with Asian Surety undertaken byinsured Paramount on the same property covered by its policywith Oriental whereas the only co-insurances declared in thesubject policy are those of P30,000.00 with Malayan P50,000.00with South Sea and P25.000.00 with Victory.

The defense of fraud, in the form of non-declaration of co-insurances which was not pleaded in the answer, was also notpleaded in the Motion to Dismiss. The trial court denied therespondents motion. Oriental filed another motion to include

additional evidence of the co-insurance which could amount tofraud. The trial court rendered judgment making OrientalAssurance liable for P61,000.00, but the Court of Appealsreversed the RTC decision.

Issues:

1. Whether or not the unrevealed co-insurances violated policyconditions no. 3?

2. Whether or not the insured failed to file the required proof of

loss prior to court action?


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Held and Ratio:

1. YES. Policy Condition 3 provides that the insured must givenotice of any insurance already in effect or subsequently be ineffect covering same property being insured. Failure to do so,

the policy shall be forfeited. Failure to reveal before the loss ofthe 3 other insurances is a clear misrepresentation or a falsedeclaration. The material fact was asked for but was notrevealed. Representations of facts are the foundations of thecontract. Pacific itself provided for the evidences in trial courtthat proved existence of misrepresentation.

2. YES.Generally, the cause of action on the policy accrues whenthe loss occurs, But when the policy provides that no action shallbe brought unless the claim is first presented extrajudicially in

the manner provided in the policy, the cause of action will accruefrom the time the insurer finally rejects the claim for payment.

In the case at bar, policy condition No. 11 specifically provides

that the insured shall on the happening of any loss or damage

give notice to the company and shall within fifteen (15) days

after such loss or damage deliver to the private respondent (a) a

claim in writing giving particular account as to the articles or

goods destroyed and the amount of the loss or damage and (b)

particulars of all other insurances, if any. Likewise, insured was

required "at his own expense to produce, procure and give to

the company all such further particulars, plans, specifications,

books, vouchers, invoices, duplicates or copies thereof,

documents, proofs and information with respect to the claim".

The evidence adduced shows that twenty-four (24) days after

the fire, petitioner merely wrote letters to private respondent to

serve as a notice of loss, thereafter, the former did not furnish

the latter whatever pertinent documents were necessary to

prove and estimate its loss. Instead, petitioner shifted upon

private respondent the burden of fishing out the necessary

information to ascertain the particular account of the articles

destroyed by fire as well as the amount of loss. It is noteworthy

that private respondent and its adjuster notified petitioner that

insured had not yet filed a written claim nor submitted the

supporting documents in compliance with the requirements set

forth in the policy. Despite the notice, the latter remained

unheedful.

Since the required claim by insured, together with the

preliminary submittal of relevant documents had not been

complied with, it follows that private respondent could not be

deemed to have finally rejected petitioner's claim and therefore

the latter's cause of action had not yet arisen. Compliance with

condition No. 11 is a requirement sine qua non to the right to

maintain an action as prior thereto no violation of petitioner's

right can be attributable to private respondent. This is so, asbefore such final rejection, there was no real necessity for

bringing suit. Petitioner should have endeavored to file the

formal claim and procure all the documents, papers, inventory

needed by private respondent or its adjuster to ascertain the

amount of loss and after compliance await the final rejection of

its claim. Indeed, the law does not encourage unnecessary

litigation.


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81. TRAVELLERS INSURANCE V.CA,272 SCRA536 (1997)

TRAVELLERS INSURANCE & SURETY CORP. v. CA (MENDOZA)

272 SCRA 536

HERMOSISIMA, JR; May 22, 1997

NATURE

The petition herein seeks the review and reversal of the decision of

respondent Court of Appeals affirming in toto the judgment of the

Regional Trial Court in an action for damages filed by private

respondent Vicente Mendoza, Jr. as heir of his mother who was

killed in a vehicular accident.

FACTS

An old lady was hit by a taxicab. The taxicab was later identified and

a case was filed against the driver and owner. Later, an amendment

was filed to include the insurance company. RTC and CA ordered

that the owner, driver as well as the insurance company be held

solidarily liable.

ISSUE

WON RTC and CA erred

HELD

YES

Where the contract provides for indemnity against liability

to third persons, then third persons to whom the insured is liable

can sue the insurer. Where the contract is for indemnity against

actual loss or payment, then third persons cannot proceed against

the insurer, the contract being solely to reimburse the insured for

liability actually discharged by him thru payment to third persons,

said third persons' recourse being thus limited to the insured alone.

But in the case at bar, there was no contract shown. What then was

the basis of the RTC and the CA to say that the insurance contract

was a third-party liability insurance policy? Consequently, the trial

court was confused as it did not distinguish between the private

respondent's cause of action against the owner and the driver of

the Lady Love taxicab and his cause of action against petitioner. The

former is based on torts and quasi-delicts while the latter is based

on contract.

Even assuming arguendo that there was such a contract,

private respondent's cause of action can not prevail because he

failed to file the written claim mandated by the Insurance Code

(before it was amended-action must be brought within six months

from date of the accident (this is whats applicable here) ; after

amendment- "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 theclaimant's right of action shall prescribe" ). He is deemed, under this

legal provision, to have waived his rights as against petitioner-

insurer.


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82. LOPEZ V.COMPANIA DE SEGUROS,16 SCRA855(1966)

Lopez vs. Filipinas Compaia de Seguros

G.R. No. L-19613 April 30, 1966

FACTS:

Plaintiff applied with the defendant company for theinsurance of his properties: Biederman truck tractor and aWinter Weils trailer from loss or damage in the amount ofP20,000.00 and P10,000.00, respectively.

During the application, the defendant company inquired ofthe plaintiff the ff:

Has any company in respect of the insurance of any

car or vehicle (A) declined, cancelled or refused to renew your

insurance?

(B) increased your premium renewal?

Plaintiff answered in negative but the truth was that theAmerican International Underwriters of the Philippines(AIU) had already declined similar application for insuranceby the plaintiff with respect of the above-mentionedvehicles.

The defendant issued to the plaintiff two Commercial

Vehicle Comprehensive Policies covering the saidproperties.

The vehicles mentioned figured in an accident resulting inthe total loss of the tractor and partial damage to thetrailer. Plaintiff demand upon the defendant for thepayment to him the total amt. of damages resulting fromthe accident.

On April 28, 1960, defendant rejected the claim on theground of concealment of a material fact: that the insured

property previously been declined insurance by anothercompany.

May 27, 1960, the plaintiff filed with the Office of theInsurance Commissioner a complaint against the saidcompany.

As suggested, the plaintiff was willing to submit his claim toarbitration but was contested by the defendant since "theclaim of the plaintiff cannot be resolved by arbitration, asrecourse to arbitration referred to in the policy contract,envisioned only differences or disputes, 'with respect to theamount of the company's liability,' and not to cases wherethe company does not admit its liability to the insured.

With this rejection, the plaintiff filed his complaint with theCFI of Manila on September 19,1961.

Against the above complaint, the defendant-appellee filed

on September 29, 1961 a motion to dismiss on the groundof prescription. The latter argued that the plaintiff's claimhad already prescribed since it was not filed within twelvemonths from its rejection by the insurance company asstipulated under paragraph 9 of the General Conditions ofCommercial Vehicle Comprehensive Policy Nos. 5598 and5599, to wit:

If a claim be made and rejected and an action or suit be not

commenced within twelve months after such rejection or (in case of

an arbitration taking place as provided herein) within twelve

months after the arbitrator, arbitrators, or umpire shall have made

their award then the claim shall for all purposes be deemed to have

been abandoned and shall not thereafter be recovered hereunder.


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ISSUE: Whether the complaint filed by the plaintiff-appellant with

the Office of the Insurance Comm. on May 27,1960 a

commencement of an "action or suit" within the meaning and

intent of general condition? No.

RATIO:

"Action" and "suit":

Rule 2, Section 1 of the Rules of Court

Section 1. Action defined.Action means an ordinary suit in a Court

of Justice by which one party prosecutes another for the

enforcement or protection of a right, or the prevention or redress of

a wrong. (Emphasis supplied.)

Jurisprudence

Suit is the prosecution or pursuit of some claim or demand in a

court of justice or any proceeding in a court of justice in which a

plaintiff pursues his remedy to recover a right or claim. (Emphasis

supplied.)

- Upon the authorities, therefore, it is settled that the terms

"action" and "suit" are synonymous. Moreover, it is clear that the

determinative or operative fact which converts a claim into an

"action or suit" is the filing of the same with a "court or justice."

Filed elsewhere, as with some other body or office not a court of

justice, the claim may not properly be categorized under either

term.

An "action or suit" is essentially "for the enforcement orprotection of a right, or the prevention or redress of awrong." (Rule 2, Sec. 1, Rules of Court). There is nothing inthe Insurance Law, which empowers the InsuranceCommissioner to adjudicate on disputes relating to aninsurance company's liability to an insured under a policyissued by the former to the latter. The validity of aninsured's claim under a specific policy, its amount, and allsuch other matters as might involve the interpretation andconstruction of the insurance policy, are issues which only aregular court of justice may resolve and settle.Consequently, the complaint filed by the appellant hereinwith the Office of the Insurance Commission could not havebeen an "action or suit."


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83. ACCFAV.ALPHA INSURANCE,24SCRA151(1968)

FACTS

1. Alpha insurance issued 5,000 pesos bond to guarantee FACOMA

against loss on account of personal dishonesty, amounting to

larceny or estafa of its Secretary Treasurer.

2. FACOMA assigned its right to ACCFA, with approval of principal

and surety

3. During effectivity of bond, Secretary Treasurer converted and

misappropriated to his personal benefit 11,000 of FACOMA funds,

which 6,307.33 belonged to ACCFA.

4. Upon discovery of the loss, ACCFA immediately notified the

surety company, but despite repeated demands, surety refused to

pay

5. Alpha insurance moved to dismiss the complaint for failure to

state a cause of action, giving as reason that the same was filed

more than one year after plaintiff made claim for loss, contrary to

the eighth condition of the bond

6. Granted and motion to dismiss upon reconsideration kaya nag-

appeal si ACCFA.

ISSUE

Whether or not the provision of a fidelity bondthat no action shall

be had or maintained thereon unless commenced within one year

from the making of a claim for the loss upon which the action is

based, is valid or void? VOID

HELD

Consequently, the condition of the bond in question, limiting the

period for bringing action thereon, is subject to the provisions of

Section 61-A of the Insurance Act (No. 2427), as amended by Act

4101 of the pre-Commonwealth Philippine Legislature, prescribing

that

SEC. 61-A A condition, stipulation or agreement in any policy of

insurance, limiting the time for commencing an action thereunder

to a period of less than one year from the time when the cause of

action accrues is void.

The cause of action does not accrue until the party obligated

refuses, expressly or impliedly, to comply with its duty (in this case,

to pay the amount of the bond). The year for instituting action in

court must be reckoned, therefore, from the time of appellee's

refusal to comply with its bond; it can not be counted from the

creditor's filing of the claim of loss, for that does not import that the

surety company will refuse to pay.

In so far, therefore, as condition eight of the bond requires action to

be filed within one year from the filing of the claim for loss, such

stipulation contradicts the public policy expressed in Section 61-A

of the Philippine Insurance Act. Condition eight of the bond,

therefore, is null and void, and the appellant is not bound to comply

with its provisions.


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84. SAURA IMPORT &EXPORT V.PHIL.INTL SURETY8SCRA143

(1963)

G.R. No. L-15184, May 31, 1963

PAREDES,J.

Topic:Cancellation of non-life policySec. 62

FACTS:

1. Saura Import & Export Co Inc., mortgaged to PNB, a parcelof land, to secure the payment of promissory note of P27,000.00.

2. The mortgage was amended to guarantee an increasedamount, bringing the total mortgaged debt to P37, 000.00.

3. Erected on the land mortgaged, was a building of strongmaterials owned by the mortgagor Saura Import & ExportCo., Inc., which had always been covered by insurance,many years prior to the mortgage contract.

4. Pursuant to the requirement, Saura insured the building andits contents with the Philippine International Surety forP29,000.00 against fire for the period of one year fromOctober 2, 1954.

5. The insurance policy was endorsed to the mortgagee PNB,in a Memo which states Loss if any, payable to thePhilippine National Bank as their interest may appear,

subject to the terms, conditions and warranties of this

policy.6. Barely thirteen (13) days after the issuance of the policy, the

insurer cancelled the same. Notice of the cancellation wasgiven to appellee bank in writing. .

7. The building and its contents, worth P40,685.69 wereburned. Saura filed a claim with the Insurer and mortgageeBank.

8. Upon the presentation of notice of loss with the PNB, Sauralearned for the first time that the policy had previously

been cancelled by the insurer, when Saura's folder in theBank's filed was opened and the notice of cancellation(original and duplicate) sent by the Insurer to the Bank, wasfound.

9. Upon refusal of the Insurer Philippine International Suretyto pay the amount of the insurance this present case filedwith the Manila CFI against the Insurer, and the PNB waslater included as party defendant, after it had refused toprosecute the case jointly with Saura Import & Export Co.,Inc.

ISSUE:

Whether or not there is a valid cancellation of the fire insurancepolicy.

HELD:NO

RATIO DECIDENDI:

The policy in question does not provide for the notice, its form

or period. The Insurance Law, Act No. 2427, does not likewiseprovide for such notice. This being the case, it devolves upon theCourt to apply the generally accepted principles of insurance,regarding cancellation of the insurance policy by the insurer.

From what has been stated, actual notice of cancellation ina clear and unequivocal manner, preferably in writing, in view of

the importance of an insurance contract, should be given by the

insurer to the insured, so that the latter might be given an


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opportunity to obtain other insurance for his own protection.Thenotice should be personal to the insured and not to and/or

through any unauthorized person by the policy .

In the case at bar, the defendant insurance company, must

have realized the paramount importance of sending a notice ofcancellation, when it sent the notice of cancellation of the policy tothe defendant bank (as mortgagee), but not to the insured withwhich it (insurance company) had direct dealing. It was the primaryduty of the defendant-appellee insurance company to notify theinsured, but it did not. It should be stated that the house and itscontents were burned on April 6, 1955, at the time when the policywas enforced (October 2, 1954 to October 2, 1955); and that underthe facts, as found by the trial court, to which We are bound, it isevident that both the insurance company and the appellee bankfailed, wittingly or unwittingly, to notify the insured appellant Sauraof the cancellation made.

The defendant insurance company contends that it gavenotice to the defendant-appellee bank as mortgagee of theproperty, and that was already a substantial compliance with itsduty to notify the insured of the cancellation of the policy. Butnotice to the bank, as far appellant herein is concerned, is noteffective notice.

85. MALAYAN INSURANCE V.CRUZ-ARNALDO,154 SCRA672 (1987)

Topic: Cancellation of non-life policy

Facts:

In 1981, petitioner Malayan issued to the privaterespondent Pinca, a Fire Insurance Policy on her propertyfor P14,000 effective July 22, 1981 untul July 22, 1982

Malayan allegedly cancelled the policy for non-payment ofpremiums and sent notice to Pinca (October 15, 1981)

A couple of months after, payment of the premium forPinca was received by Adora, an agent of Malayan(December 24, 1981)

Adora remitted the payment to Malayan

Three days after, Pincas property was completely burned

(Jan 18, 1982)

A couple of weeks after, Malayan returned Pincas paymentas the policy was previously cancelled

Pinca made demands for the proceeds of the policy, butMalayan refused. The Insurance Commission decided infavor of Pinca.

Malayan: There was no payment of premium and that thepolicy had been canceled before the occurrence of the loss

Issue: Whether or not Malayan should be liable for the proceeds of

the policy

Held: YES. Malayans argument was not acceptable.

Malayan relies on Sec 77 of the Insurance Code:


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SEC. 77. An insurer is entitled to payment of the premium as

soon as the thing is exposed to the peril insured against.

Notwithstanding any agreement to the contrary, no policy

or contract of insurance issued by an insurance company is

valid and binding unless and until the premium thereof has

been paid, except in the case of a life or an industrial life

policy whenever the grace period provision applies.

The above provision is not applicable because payment of the

premium was in fact eventually made. The premium invoice issued

to Pinca at the time of delivery of the policy on June 7, 1981 was

stamped, Payment Received of the amount of P930.60 on 12-24-

81 by Adora. It suggests an understanding between Malayan and

the insured that payment could be made later.

The payment was made on December 24, 1981, and the fire

occured on January 18, 1982. One wonders: suppose the payment

had been made and accepted in, say, August 1981, would the

commencement date of the policy have been changed to the date

of the payment, or would the payment have retroacted to July 22,

1981? If MALAYAN accepted the payment in December 1981 and

the insured property had not been burned, would that policy not

have expired just the same on July 22, 1982, pursuant to its original

terms, and not on December 24, 1982?

There is the petitioner's argument, however, that Adora was not

authorized to accept the premium payment because six months had

elapsed since the issuance by the policy itself. It is argued that this

prohibition was binding upon Pinca, who made the payment to

Adora at her own risk as she was bound to first check his authority

to receive it.

MALAYAN is taking an inconsistent stand. While contending thatacceptance of the premium payment was prohibited by the policy, it

at the same time insists that the policy never came into force

because the premium had not been paid. One surely, cannot have

his cake and eat it too.

We do not share MALAYAN's view that there was no existing

insurance at the time of the loss sustained by Pinca because her

policy never became effective for non-payment of premium.

Payment was in fact made, rendering the policy operative as of June

22, 1981, and removing it from the provisions of Article 77,

Thereafter, the policy could be cancelled on any of the supervening

grounds enumerated in Article 64 (except "nonpayment of

premium") provided the cancellation was made in accordance

therewith and with Article 65.

Section 64 reads as follows:

SEC. 64. No policy of insurance other than life shall be

cancelled by the insurer except upon prior notice thereof to

the insured, and no notice of cancellation shall be effective

unless it is based on the occurrence, after the effective date

of the policy, of one or more of the following:

(a) non-payment of premium;

(b) conviction of a crime arising out of acts increasing the

hazard insured against;


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(c) discovery of fraud or material misrepresentation;

(d) discovery of willful, or reckless acts or commissions

increasing the hazard insured against;

(e) physical changes in the property insured which result in

the property becoming uninsurable;or

(f) a determination by the Commissioner that the

continuation of the policy would violate or would place the

insurer in violation of this Code.

As for the method of cancellation, Section 65 provides as follows:

SEC. 65. All notices of cancellation mentioned in the

preceding section shall be in writing, mailed or delivered to

the named insured at the address shown in the policy, and

shall state (a) which of the grounds set forth in section sixty-

four is relied upon and (b) that, upon written request of the

named insured, the insurer will furnish the facts on which

the cancellation is based.

A valid cancellation must, therefore, require concurrence of the

following conditions:

(1) There must be prior notice of cancellation to the insured;

(2) The notice must be based on the occurrence, after the effectivedate of the policy, of one or more of the grounds mentioned;

(3) The notice must be (a) in writing, (b) mailed, or delivered to the

named insured, (c) at the address shown in the policy;

(4) It must state (a) which of the grounds mentioned in Section 64 is

relied upon and (b) that upon written request of the insured, the

insurer will furnish the facts on which the cancellation is based.

All MALAYAN's offers to show that the cancellation was

communicated to the insured is its employee's testimony that the

said cancellation was sent "by mail through our mailing section."

without more

It stands to reason that if Pinca had really received the said notice,she would not have made payment on the original policy on

December 24, 1981. Instead, she would have asked for a new

insurance, effective on that date and until one year later, and so

taken advantage of the extended period. The Court finds that if she

did pay on that date, it was because she honestly believed that the

policy issued on June 7, 1981, was still in effect and she was willing

to make her payment retroact to July 22, 1981, its stipulated

commencement date.

Adora, incidentally, had not been informed of the cancellation

either and saw no reason not to accept the said payment


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WARRANTIES

86.AMERICAN HOME INSURANCE V.TANTUCO ENTERPRISES,366

SCRA740(2011)

G.R. No. 138941October 8, 2001

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 underPolicy 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 paymentfor 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 rejectedrespondent'sclaim for the insurance proceeds on the ground that no

policy was issued by it covering the burned oilmill. It stated that the

description of the insured establishment referred to another

building thus: "Ourpolicy nos. 306-7432321-9 (Ps 6M) and 306-

7432324-4 (Ps 3M) extend insurance coverage to your oilmill under

Building No. 5, whilst the affected oil mill was under Building No.

14."

ISSUE: Whether or not the Court of Appeals erred in its legal

interpretation of 'Fire ExtinguishingAppliances Warranty' of the

policy.

HELD: In construing the words used descriptive of a building

insured, the greatest liberality is shown bythe courts in giving effect

to the insurance. In view of the custom of insurance agents to

examinebuildings before writing policies upon them, and since a

mistake as to the identity and character of thebuilding is extremely

unlikely, the courts are inclined to consider that the policy of

insurance covers anybuilding 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 whatthe parties manifestly

intended to insure was the new oil mill. If the parties really intended

to protectthe 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

rulethat in the event of doubt, this doubt is to be resolved againstthe insurer. In determining the intent of the parties to the contract,

the courts will consider the purpose and object o

finals case digests compilation

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