PAN MALAYANINSURANCECORP.vCAApril 3, 1990 FACTS: Canlubang Automotive Resources Corp.

. obtained from PanMalay an insurance for its MitsubishiColt Lancer . While the policy was still in effect, the insured car was hit by a pick-up owned by Erlinda Fabie butdriven by another person. The car suffered damages in the amount of P42K. Panmalay defrayed the cost of repair of the insured car. It then demanded reimbursement fromFabie and her driver of said amount, but to no avail. P a n m a l a y f i l e d a c o m p l a i n t f or d a m a g e s w i t h t h e R T C of M a k a t i a g a i n s t F a b i e a n d t h e d r i v e r .P a n m a l a y a v e r r e d t h a t t h e d a m a g e s caused to the insured car was settled under the own d a m a g e coverage of the insurance policy. Private respondents filed a motion to dismiss alleging that Panmalay had no cause of action sincet h e w o n d a m a g e c l a u s e o f t h e p o l i c y p r e c l u d e d s u b r o g a t i o n u n d e r A r t . 2 2 0 7 o f t h e C C . Ind emnification under said article is on the assumption that there was no wrongdoer or no 3 rd p a r t y a t fault. RTC dismissed Panmalays complaint. RTC held that payment by P a n m a l a y u n d e r t h e o w n damage clause was an admission by the insurer that the damage was caused by the assured and/or its representatives. CA affirmed, albeit on a somewhat different ground. Applying the ejusdem generis rule, CA heldthat Section III-I of the pplicy, which was the basis for the settlement of the claim against insurance, didnot cover damage arising from collision or overturning due to the negligence of 3 rd parties as one of theinsurable risks. Both tribunals concluded that Panmalay could not now invoke Art 2207 and claim reimbursement. ISSUE:

WON Panmalay was subrogated to the rights of Canlubang against the driver and his employer HELD: Yes Article 2207 of the CC is founded on the well-settled principle of subrogation.If the insured property is destroyed or damages through the fault or negligence of a party other than theassured, then the insurer, upon payment to the assured, will be subrogated to the right of the assured torecover from the wrongdoer to the extent that the insurer has been obligated to pay.P a y m e n t b y t h e i n s u r e r t o t h e a s s u r e d o p er a t e s a s a n e q u i t a b l e a s s i g n m e n t t o t h e f o r m e r o f a l l t h e remedies which the latter may have against the 3 rd party whose negligence or wrongful act caused theloss.T h e r i g h t of s u b r o g a t i o n i s n o t d e p e n d e n t u p o n a n y p r i v i t y of c o n t r a c t o r u p o n w r i t t e n a s s i g n m e n t o f claim. It accrues simply upon payment of the insurance claim by the insurer. There are exceptions to this rule: 1. if the assured by his won act releases the wrongdoer or 3 rd party liable for the loss or damage, fromliability2 . w h e r e t h e i n s u r e r p a y s t h e a s s u r e d t h e v a l u e of t h e l o s t g o o d s w i t h o u t n o t i f y i n g t h e c a r r i er w h o h a s in good faith settled the assured[s claim for loss3 . w h e r e t h e i n s u r e r p a y s t h e a s s u r e d f or a l o s s w h i c h i s n o t a r i s k c o v e r e d b y t h e p o l i c y ( v o l u n t ar y pymt)None of the exceptions are availing in the present case. AS TO LC RULING: When Panmalay utilized the phrase own d a m a g e - - a p h a r a s e w h i c h , incidentally, is not found in the insurance policy to define the basis for its settlement, it simply meantthat it had assumed to reimburse the costs for repairing the damage to the insured vehicle.I t i s i n t hi s s e n s e t h a t t h e s o - c a l l e d o w n d a m a g e c o v e r a g e of p o l i c y i s different from the 3 rd partyliability coverage and from the property damae coverage. AS TO CA RULING: CAs ruling that the coverage of the insured risks under Section III-I of thep o l i c y d o e s n o t i n c l u d e d a m a g e t o t h e i n s u r e d

v e h i c l e ar i s i n g f r o m c o l l i s i o n o r o v er t u r n i n g d u e t o negligent acts of a 3 rd party, has no merit.N o t o n l y i s i t a n e r r o n e o u s i n t e r p r e t a t i o n of the provisions of the section, b u t i t a l s o v i o l a t e s a fundamental rule on the interpretation of property insurance contracts where interpretation should beliberally in favor of the assured and strictly against the insurer in cases of disagreement between theparties.The meaning advanced by Panmalay regarding the coverage of Section III-I of the policy is undeniablemore beneficial to Canlubang than that insisted upon by the CA.I n a n y c a s e , t h e v e r y p a r t i e s t o t h e p o l i c y , Canlubang and Panmalay, were not shown to be i n disagreement regarding the meaning and coverage of Section III-I. Hence, it was improper for CA to assert its own interpretation of the contract that is contrary to the clear understanding and intention of the parties to it. Thus, SC held that Panmalay, as subrogee, has no legal obstacle f r o m f i l i n g t h e c o m p l a i n t f o r damages against the 3 rd parties responsible for the damage to the car. Attorneys fees and expenses of litigation A r t . 2 2 0 8 . I n t h e a b s e n c e of s t i p u l a t i o n , a t t or n e y ' s f e e s a n d e x p e n s e s o f l i t i g a t i o n , ot h e r t h a n j u d i c i a l costs, cannot be recovered, except:(1) When exemplary damages are awarded;(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or toincur expenses to protect his interest;(3) In criminal cases of malicious prosecution against the plaintiff;(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;( 5) W h e r e t h e d ef e n d a n t a c t e d i n g r o s s a n d e v i d e n t b a d f a i t h i n r ef u s i n g t o s a t i s f y t h e p l a i n t i f f ' s p l a i n l y valid, just and demandable claim;(6) In actions for legal support;(7) In actions for the recovery of wages of household helpers, laborers andskilled workers;(8) In actions for indemnity under workmen's compensation and employer's liability laws;(9) In a separate civil action to recover civil liability arising from a crime;(10) When at least double judicial costs are awarded;(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.In all cases, the attorney's fees and expenses of litigation must be reasonable

NSURANCE LAW CASE DIGESTS I.GENERAL PROVISIONS (Section 1)A . O r i g i n o f InsuranceB . L a w s G o v e r n i n g I n s u r a n c e i n t h e Philippinesi . I n s u r a n c e C o d e o f 1978ii.Civil Code (Articles 739, 2012, 2 0 1 1 , 2207)i i i . S p e c i a l L a w s C . I n s u r a n c e C o n t r a c t (Section 2 ) i . D e f i n i t i o n i i . E l e m e n t s i i i . C h a r a c t e r i s t i c s iv.I nterpretation of Insurance Contracts Simeon del Rosario vs. The Equitable Insuranceand Casualty Co Inc. (1963)Facts: On February 7, 1957, Equitable Insurance and Casualty Co., Inc., issued Personal Accident Policy No.7136 on the life of Francisco del Rosario, alias PaquitoBolero, son of Simeon, binding itself to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death of the insured.The provisions of the insurance policy pertinent to thecase are as follows: Part I. Indemnity For Death If the insured sustains any b o d i l y i n j u r y w h i c h i s effected solely through violent, exte rnal, visible anda c c i d e n t a l m e a n s , a n d w h i c h s h a l l r e s u l t , independently of all other causes and within sixty (60)days from the occurrence thereof, in the Death of theI n s u r e d , t h e C o m p a n y s h a l l p a y t h e a m o u n t s e t opposite such injury:Section 1. Injury sustained other than those specifiedb e l o w u n l e s s e x c e p t e d h e r e i n a f t e r . . . . . . . . P1,000.00S e c t i o n 2 . I n j u r y s u s t a i n e d b y t h e w r e c k i n g o r disablement of a railroad passenger car or s t r e e t railway car in or on which the Insured is travelling as afarepaying passenger. . . . . . . P1,500.00 Part VI. Exceptions T h i s p o l i c y s h a l l n o t c o v e r d i s a p p e a r a n c e o f t h e In sured nor shall it cover Death, Disability, Hospital fees, or Loss of Time, caused to the insured:. . . (h) By drowning except as a consequence of thewrecking or disablement in the Philippine waters of apassenger steam or motor vessel in which the Insuredis travelling as a farepaying passenger; . . . .A rider to the Policy contained the following:IV. DROWNINGIt is hereby

declared and agreed that exemption clauseLetter (h) embodied in PART VI of the policy is herebyw a i v e d b y t h e c o m p a n y , a n d t o f o r m a p a r t o f t h e provision covered by the policy.A f i r e broke out in the motor launch ISLAMA. As a consequence of which, Francisco del Rosario and 33o t h e r s w e r e f o r c e d t o j u m p o f f t h e l a u n c h . T h i s resulted in the death of Francisco and his beneficiaryRemedios Jayme.Equitable insurance paid Simeon del Rosario, father of Francisco Php1000 pursuant to Sec.1 of Part 1 of thepolicy. On the day of receipt, Atty. Francisco wroteEquitable acknowledging the receipt of Simeon of theamount of Php1000 but informed the company that thea m o u n t i s i n c o r r e c t a s S i m e o n w a s e n t i t l e d t o Php1,500, under Sec.2 Part 1 of the policy.E q u i t a b l e r e f e r r e d t h e m a t t e r t o t h e I n s u r a n c e C o m m i s s i o n e r w h o o p i n e d t h a t t h e l i a b i l i t y o f t h e co mpany is only Php1000. Thus, Equitable refused topay. Subsequently, Atty. Francisco asked for Php3000from Equitable. The company refused to pay. Hence ac o m p l a i n t f o r t h e r e c o v e r y o f t h e b a l a n c e w a s instituted. Issue: How much should the indemnity be? Ruling: The CFI ruled that:On the face of the policy Exhibit "A" itself, death byd r o w n i n g i s a g r o u n d f o r r e c o v e r y a p a r t f r o m t h e bodily injury because death by bodily injury is coveredb y P a r t I o f t h e p o l i c y w h i l e d e a t h by drowning isc o v e r e d b y P a r t V I t h e r e o f . B u t w h i l e t h e p o l i c y mentions specific amounts that may be recovered ford e a t h f o r b o d i l y i n j u r y , y e t , t h e r e i s n o t s p e c i f ica m o u n t m en ti o n ed in th e p o l ic y f o r de a t h th r u drowning although the latter is, under Part VI of thepolicy, a ground for recovery thereunder. Since thed e f e n d a n t h a s b o u n d i t s e l f t o p a y P 1 0 0 0 . 0 0 t o P3,000.00 as indemnity for the death of the insuredbut the policy does not positively

state any definitea m o u n t t h a t m a y b e r e c o v e r e d i n c a s e o f d e a t h b y drowning, there is an ambiguity in this respect in thepolicy, which ambiguity must be interpreted in favor of the insured and strictly against the insurer so as to allow greater indemnity. Thus, del Rosario is entitled toPhp3000. Since Equitable has already paid Php1000, abalance of Php2000 remains to be paid.SC upheld the ruling of the CFI for it is supported bythe generally accepted principles of insurance, whiche n u n c i a t e t h a t w h e r e t h e r e i s a n a m b i g u i t y w i t h respect to the terms and conditions of the policy, thes a m e w i l l b e r e s o l v e d a g a i n s t t h e o n e r e s p o n s i b l e th ereof.It should be recalled in this connection, that generally,t h e i n s u r e d , h a s l i t t l e , i f a n y , p a r t i c i p a t i o n i n t h e preparation of the policy, together with the drafting of its terms and Conditions. The interpretation of obscurestipulations in a contract should not favor the party EH 403 2010-2011 2011-2012 Page 1 who cause the obscurity (Art. 1377, N.C.C.), which, inthe case at bar, is the insurance company.. . . . And so it has been generally held that the "termsin an insurance policy, which are ambiguous, equivocalor uncertain . . . are to be construed strictly against,the insurer, and liberally in favor of the insured so ast o e f f e c t t h e d o m i n a n t p u r p o s e o f i n d e m n i t y o r payment to the insured, especially where a forfeiture isinvolved," (29 Am. Jur. 181) and the reason for thisrule is that the "insured usually has no voice in theselection or arrangement of the words employed andthat the language of the

contract is selected with greatc a r e a n d d e l i b e r a t i o n b y e x p e r t a n d l e g a l a d v i s e r s employed by, and acting exclusively in the interest of,the insurance company" (44 C.J.S. 1174). Calanoc v.C o u r t o f Appeals, et al., G.R. No. L-8151, Dec. 1 6 , 1955.. . . . W h e r e t w o i n t e r p r e t a t i o n s , e q u a l l y f a i r , o f languages used in an insurance policy may be made,that which allows the greater indemnity will prevail. (L'Engel v. Scotish Union & Nat. F. Ins. Co., 48 Fla. 82,37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann.Cas. 749).At any event, the policy under consideration, coversd e a t h o r d i s a b i l i t y b y a c c i d e n t a l m e a n s , a n d t h e appellant insurance company agreed to pay P1,000.00to P3,000.00. is indemnity for death of the insured. FIELDMENS INSURANCE CO. vs. VDA. DESONGCOFACTS: Federico Songco owned a private jeepney. On September 15, 1960, he was induced by Fieldmen'si n s u r a n c e a g e n t B e n j a m i n S a m b a t t o a p p l y f o r a Common Carrier's Liability Insurance Policy coveri nghis motor vehicle. He was issued a Common CarriersA c c i d e n t I n s u r a n c e P o l i c y . O n t h e n e x t y e a r , h e renewed the policy by paying the annual premium.D u r i n g t h e e f f e c t i v i t y o f t h e r e n e w e d p o l i c y , t h e insured vehicle collided with another car while beingdriven by Rodolfo Songco, a duly licensed driver ands o n o f F e d e r i c o ( t h e v e h i c l e o w n e r ) . A s a r e s u l t , Federico Songco (father) and Rodolfo Songco (son)died, along with other passengers. A claim was filed but was denied by the i n s u r a n c e company on the pretext that what was insured was aprivate vehicle and not a common carrier. During thetrial, it was declared by a witness that when insuranceagent Benjamin Sambat was inducing Songco to insurehis vehicle, the latter butted in saying, Our vehicle isa p r i v a t e v e h i c l e a n d n o t f o r p a s s e n g e r s . B u t t h e agent replied: Regardless of whether your vehicle wasa n o w n e r type or for passengers, it could still beinsured becaus

e o u r c o m p a n y i s n o t o w n e d b y t h e Government. And the Government has nothing to dowith our company. The Court of Appeals rendered a decision in favor of the claimants. It held that where inequitable conduct iss h o w n b y a n i n s u r a n c e f i r m , i t i s e s t o p p e d f r o m enforcing forfeitures in its favor, in order to forestallfraud or imposition on the insured. After Fieldmen'sInsurance Co. had led the insured Songco to believe that he could qualify under the common carrier liabilityinsurance policy, it could not, thereafter, be permittedto change its stand to the detriment of the heirs of theinsured. The failure to apply the Doctrine of Estoppel inthis case would result in a gross travesty of justice. ISSUE: Whether or not the insurance claim is proper? RULING: The fact that the insured owned a private vehicle, nota common carrier, was something which the companyknew all along. In fact, it exerted the utmost pressureon the insured, a man of scant education, to enter intothe contract of insurance. The Court of Appeals alsoheld that since some of the conditions contained in thep o l i c y w e r e i m p o s s i b l e t o c o m p l y w i t h u n d e r t h e existing conditions at the time, the insurer is estoppedfrom asserting breach of such conditions. The Supreme Court, in affirming the decision of theCourt of Appeals, took judicial notice of the fact thatnowadays, monopolies, cartels and concentration of ca pital, endowed with overwhelming economic power,m a n a g e t o i m p o s e u p o n p a r t i e s d e a l i n g w i t h t h e m cunningly prepared agreements t h a t t h e w e a k e r party may not change one whit, his participation in theagreement being reduced to the alternative of take ito r l e a v e i t labelled since Raymond Saleilles as contracts by adherence ( contrats d'adhesion )

, incontrast to those entered into by parties bargaining onan equal footing, such contracts (i.e. insurance policies& international bills of lading) obviously call for greaterstrictness and vigilance on the part of courts of justicew i t h a v i e w t o p r o t e c t i n g t h e w e a k e r p a r t y f r o m abuses.Citing the case of Qua Chee Gan vs. Law Union & RockI n s u r a n c e , " T h e c o n t r a c t o f insurance is one of perfect good faith ( uberima fides ) not for the insuredalone but equally so for the insurer; in fact, it is moreso for the latter, since its dominant bargaining positioncarries with it stricter responsibility." Landicho vs. GSIS [G.R. No. L-28866 March 17, 1972] FACTS: On June 1, 1964, the GSIS issued in favor of FlavianoL a n d i c h o , a c i v i l e n g i n e e r o f t h e B u r e a u o f P u b l i c Works, stationed at Mamburao, Mindoro Occidental,option al additional life insurance policy No. OG-136107in the sum of P7,900. xxx EH 403 2010-2011 2011-2012 NSURANCE LAW CASE DIGESTS Before the issuance of said policy, Landicho had filedan application, by filing and signing a printed form of the GSIS on the basis of which the policy was issued.Paragraph 7 of said application States:7. xxx I hereby agree as follows: xxxc . T h a t t h i s a p p l i c a t i o n s e r v e s a s a l e t t e r o f a u t h o r i t y t o t h e C o l l e c t i n g Officer of our Office thru the GSIS

tod e d u c t f r o m m y s a l a r y t h e m o n t h l y p r e m i u m i n t h e a m o u n t o f P 3 3 . 3 6 , beginning the month of May, 1964 , and every month thereafter until noticeo f i t s d i s c o n t i n u a n c e s h a l l h a v e beenreceiv ed from the System; .d. That the failure to deduct from mysalary the month premiums shall notm a k e t h e p o l i c y l a p s e , h o w e v e r , t h e premium accoun t shall be consideredas indebtedness which, I bind myself topay the System; .e . T h a t m y p o l i c y s h a l l b e m a d e effective on the first day of the monthn e x t f o l l o w i n g t h e m o n t h t h e f i r s t p r e m i u m i s p a i d ; p r o v i d e d , t h a t i t i s not more ninety (90) days before ora f t e r t h e d a t e o f t h e m e d i c a l e x a m i n a t i o n , w a s c o n d u c t e d i f required."While still an employee of the Bureau of Public Works,M r . L a n d i c h o d i e d i n a n a i r p l a n e c r a s h o n J u n e 2 9 , 1966. Mrs. Landicho, in her own behalf and that of herco-plaintiffs and minor children, Rafael J. and MariaL o u r d e s E u g e n i a , f i l e d w i t h t h e G S I S a c l a i m f o r P15,800, as the double indemnity due under policy No.OG136107. GSIS denied the claim, upon the groundt h a t t h e p o l i c y h a d n e v e r b e e n i n f o r c e b e c a use,pursuant to subdivision (e) of the aboveq u o t e d paragraph 7 of the application, the policy "shall be ...effective on the first day of the month next followingthe month the first premium is paid," and no premiumhad ever been paid on said policy. The Lower Courtdecided in favor of the petitioner. GSIS appealed to theSupreme Court. ISSUE: WON the insurance policy in question has ever been inforce, not a single premium having been paid thereon. RULING: Lower Court decision is sustained.(T)he language, of subdivisions (c), (d) and (e)

is sucha s t o c r e a t e a n a m b i g u i t y t h a t s h o u l d b e r e s o l v e d against the party responsible therefor defendantGSIS, as the party who prepared and furnished theapplication form and in favor of the party misledthereby, the insured employee.Indeed, our Civil Code provides:The interpretation of obscure words orstipulations in a contract shall not favorthe party who caused the obscurity. 2 This is particularly true as regards insurance policies,in respect of which it is settled that the " "terms in aninsurance policy, which are ambiguous, equivocal, oruncertain ... a r e t o b e c o n s t r u e d s t r i c t l y a n d m o s t 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 wherea forfeiture is involved" (29 Am. Jur., 181), and thereason for this rule is the "insured usually has no voicein the selection or arrangement of the words employedand that the language of the contract is selected withg r e a t c a r e a n d d e l i b e r a t i o n b y e x p e r t s a n d l e g a l advisers employed by, and acting exclusively in theinterest of, the insurance company." (44 C.J.S., p.1174.) 3 .The equitable and ethical considerations justifying theforegoing view are bolstered up by two (2) factors,namely:(a) The aforementioned subdivision (c) states "thatthis application serves as a letter of authority to theCollecting Officer of our Office" the Bureau of PublicWorks " thru the GSIS to deduct from my salary themonthly premium in the amount of P33.36." No suchdeduction was made and, consequently, not event h e f i r s t p r e m i u m " p a i d " b e c a u s e t h e c o l l e c t i n g officer of the Bureau of Public Works was not

advisedby the GSIS to make it (the deduction) pursuant tosaid authority. Surely, this omission of the GSIS shouldnot inure to its benefit. .(b) T h e G S I S h a d i m p l i e d l y i n d u c e d t h e i n s u r e d t o believe that Policy No . OG-136107 was in force, heh a v i n g b e e n p a i d b y t h e G S I S t h e d i v i d e n d s c orresponding to said policy . Had the insured had thes l i g h t e s t i n k l i n g t h a t t h e l a t t e r w a s n o t , a s y e t , effective for non-payment of the first premium, hewould have, in all probability, caused the same to be forthwith satisfied.WHEREFORE, the decision appealed from should be, itis hereby affirmed, with costs against the defendant-appellant, Government Service Insurance System. It isso ordered. . DELA CRUZ V. CAPITAL INS. & SURETY CO., INC. DEATH RESULTING FROM BOXING IS AN ACCIDENT S I N C E D E A T H I S N O T A N A T U R A L O R P R O B A B L E RE SULT OF BOXING. Facts: Eduardo de la Cruz, employed a s a m u c k e r i n t h e Itogon-Suyoc Mines, Inc. in Baguio, was the holder of a n a c c i d e n t i n s u r a n c e p o l i c y u n d e r w r i t t e n b y t h e Cap ital Insurance & Surety Co., Inc., In connectionwith the celebration of the New Year, the Itogon-SuyocMines, Inc. sponsored a boxing contest for generalentertainment wherein the insured Eduardo de la Cruz,a non-professional boxer participated. In the course of h i s b o u t w i t h a n o t h e r p e r s o n , l i k e w i s e a n o n - professional, of the same height, weight, and size, EH 403 2010-2011

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NSURANCE LAW CASE DIGESTS was filed by Masagana under the policies prior to 14J u l y 1 9 9 2 . O n 1 4 J u l y 1 9 9 2 , M a s a g a n a f i l e d w i t h UCPBGen its formal claim for indemnification of theinsured property razed by fire. On the same day, 14J u l y 1 9 9 2 , U C P B G e n r e t u r n e d t o M a s a g a n a t h e 5 ma nager's checks that it tendered, and at the sametime rejected Masagana's claim for the reasons (a)that the policies had expired and were not renewed, and (b) that the fire occurred on 13 June 1992, beforeMasagana's tender of premium payment. On 21 July1992, Masagana filed with the Regional Trial Court,B r a n c h 5 8 , M a k a t i C i t y , a c i v i l c o m p l a i n t a g a i n s t UCPBGen for recovery of P18,645,000.00, representingt h e f a c e v a l u e o f t h e p o l i c i e s c o v e r i n g M a s a g a n a ' s insured property razed by fire, and for attorney's fees.On 23 October 1992, after its motion to dismiss hadb e e n d e n i e d , U C P B G e n f i l e d a n a n s w e r t o t h e complaint. It alleged that the complaint "fails to state ac a u s e o f a c t i o n " ; t h a t U C P B G e n w a s n o t l i a b l e t o Masagana for insurance proceeds under the policiesbecause at the time of the loss of Masagana's propertydue to fire, the policies had long expired and were notr e n e w e d . A f t e r d u e t r i a l , o n 1 0 M a r c h 1 9 9 3 , t h e R e g i o n a l T r i a l C o u r t , B r a n c h 5 8 , M a k a t i , r e n d e r e d dec ision, (1) authorizing and allowing Masagana toc o n s i g n /

d e p o s i t w i t h t h i s C o u r t t h e s u m o f P225,7 53.95 (refused by UCPBGen) as full payment of t h e c o r r e s p o n d i n g p r e m i u m s f o r t h e r e p l a c e m e n t renewal policies; (2) declaring Masagana to have fullyc o m p l i e d w i t h i t s o b l i g a t i o n t o p a y t h e p r e m i u m thereby rendering the replacement-renewal p o l i c y effective and binding for the duration 22 May 1992until 22 May 1993; and, ordering UCPBGen to deliverforthwith to Masagana the said replacementrenewalpolicies; (3) declaring two of the policies in force from22 August 1991 up to 23 August 1992 and 9 August1991 to 9 August 1992, respectively; and (4) orderingU C P B G e n t o p a y M a s a g a n a t h e s u m s o f : ( a ) P18,645,000.00 representing the latter's claim f o r indemnity under three policies and/or its replacement-renewal policies; (b) 25% of the total amount due asand for attorney's fees; (c) P25,000.00 as necessarylitigation expenses; and, (d) the costs of suit. In duetime, UCPBGen appealed to the Court of Appeals. On 7September 1998, the Court of Appeals promulgated itsdecision affirming that of the Regional Trial Court withthe modification that item 3 of the dispositive portionw a s d e l e t e d , a n d t h e a w a r d o f a t t o r n e y ' s f e e s w a s reduced to 10% of the total amount due. The Court of A p p e a l s h e l d t h a t f o l l o w i n g p r e v i o u s p r a c t i s e , Masagana was allowed a 60 to 90 day credit term forthe renewal of its policies, and that the acceptance of t h e l a t e p r e m i u m p a y m e n t s u g g e s t e d a n understanding that payment could be made la t e r . UCPBGen appealed. Issue: Whether the fire insurance policies issued by UCPBGento the Masagana covering the period 22 May 1991 to22 May 1992, had expired on the latter date or hadb e e n e x t e n d e d o r r e n e w e d b y a n i m p l i e d c r e d i t arrangement though actual payment of premium wastendered on a latter date after the occurrence of therisk (fire) insured against. Held:

The answer is easily found in the Insurance Code. No,an insurance policy, other than life, issued originally oro n r e n e w a l , i s n o t v a l i d a n d b i n d i n g u n t i l a c t u a l p a y m e n t o f t h e p r e m i u m . A n y a g r e e m e n t t o t h e co ntrary is void. The parties may not agree expresslyor impliedly on the extension of credit or time to paythe premium and consider the policy binding beforeactual payment. The case of Malayan Insurance Co.,Inc. vs. Cruz-Arnaldo is not applicable. In that case,payment of the premium was in fact actually made on2 4 D e c e m b e r 1 9 8 1 , a n d t h e f i r e o c c u r r e d o n 1 8 January 1982. Here, the payment of the premium forrenewal of the policies was tendered on 13 July 1992,a month after the fire occurred on 13 June 1992. Theassured did not even give the insurer a notice of losswithin a reasonable time after occurrence of the fire.Hence, the Supreme Court reversed and set aside thedecision of the Court of Appeals in CA-GR CV 42321. Inlieu thereof, the Court rendered judgment dismissingMasagana's complaint and UCPBGen's counterclai msthereto filed with the Regional Trial Court, Branch 58,Makati City, in Civil Case 92-2023, without costs. PHILIPPINE PHOENIX SURETY & INSURANCE,INC. vs. WOODWORKS, INC. [G.R. No. L-22684 August 31, 1967] FACTS: That on April 1, 1960, plaintiff issued to defendant FirePolicy No. 9652 for the amount of P300,000.00. Thepremiums of said policy amounted to P6, 051.95. Thedefendant paid P3,000.00 on September 22, 1960 andthe plaintiff made several demands on defendant topay the amount of P3,522.09.Appellee Philippine Phoenix Surety & Insurance Co .,Inc. commenced this action in the Municipal Court of Manila to recover from appellant Woodworks, Inc. thesum of P3,522.09, representing the unpaid balance of t h e p r e m i u m s o n a f i r e i n s u r a n c e p o l i c y i s s u e d b y appellee in favor of appellant for a term of one yearfrom April 1, 1960 to April 1, 1961. From an adversedecision of said court,

Woodworks, Inc. appealed tothe Court of First Instance of Manila.Appeal upon a question of law taken by Woodworks,Inc. from the judgment of the Court of First Instanceof Manila "ordering the defendant, Woodworks, Inc. top a y t o t h e p l a i n t i f f , P h i l i p p i n e P h o e n i x S u r e t y & Insurance, Inc., the sum of P3,522.09 with interestthereon at the legal rate of 6% per annum from the date of the filing of the complaint until fully paid, andcosts of the suit." Hence, this petition. Issue: EH 403 2010-2011 2011-2012 INSURANCE LAW CASE DIGESTS Whether or not the non-payment of premium does notcancel the policy in a perfected contract of insuranceW h e t h e r o r n o t a p a r t i a l p a y m e n t o f t h e p r e m i u m made the policy effective during the whole period of the policy Ruling: The petition is lack of merit.T h e r e i s , c o n s e q u e n t l y , n o d o u b t a t a l l t h a t , a s between the insurer and the insured, there was notonly a perfected contract of insurance but a partiallyperformed one as far as the payment of the agreed premium was concerned. Thereafter the obligation of the insurer to pay the insured the amount for whichthe policy was issued in case the conditions thereforhad been complied with, arose and became bindingupon it, while the obligation of the insured to pay ther e m a i n d e r o f t h e t o t a l a m o u n t o f t h e p r e m i u m d u e b ecame demandable.The court did not agree with appellant's

theory thatnon-payment by it of the premium due, produced thecancellation of the contract of insurance. Such theoryw o u l d place e x c l u s i v e l y i n t h e h a n d s o f o n e o f t h e contracting partie s the right to decide whether thecontract should stand or not. Rather the correct viewwould seem to be this: as the contract had becomeperfected, the parties could demand from each othert h e p e r f o r m a n c e o f w h a t e v e r o b l i g a t i o n s t h e y h a d assumed. In the case of the insurer, it is obvious thati t h a d t h e r i g h t t o d e m a n d f r o m t h e i n s u r e d t h e completion of the payment of the premium due or suef o r t h e r e s c i s s i o n o f t h e c o n t r a c t . A s i t c h o s e t odema nd spec if ic per fo rm an ce o f th e insu red' s obligation to pay t h e b a l a n c e o f t h e p r e m i u m , t h e latter's duty to pay is indeed indubitable.The appealed decision being in accordance with lawand the evidence, the same is affirmed.Digested by: Gestopa, Gevina Makati Tuscany Condominium Corp. vs. Court of AppealsFacts: Sometime in early 1982, private respondent AmericanHome Assurance Co. (AHAC), represented by AmericanInternational Underwriters (Phils.), Inc., issued in favorof petitioner Makati Tuscany Condominium Corporation(TUSCANY) Insurance Policy on the latter's buildi ngand premises, for a period beginning March 1982 ande n d i n g M a r c h 1 9 8 3 , w i t h a t o t a l p r e m i u m o f P466,103.05. The premium was paid on installments,all of which were accepted by private respondent.I n F e b r u a r y 1 9 8 3 , p r i v a t e r e s p o n d e n t i s s u e d t o petitioner another Insurance Policy, which replace dand renewed the previous policy, for a term covering 1M a r c h 1983 to 1 March 1984. The premium in thea m o u n t o f P 4 6 6 , 1 0 3 . 0 5 w a s a g a i n p a i d o n installments. All payments were likewise accepted byprivate respondent.In January 1984, the policy was again renewed andp r i v a t e r e s p o n d e n t i s s u e d t o p e t i t i o n e r I n s u r a n c e P

olicy for the period March 1984 to March 1985. Onthis renewed policy, petitioner made two installmentp a y m e n t s , b o t h a c c e p t e d b y p r i v a t e r e s p o n d e n t . Thereafter, petitioner refused to pay the balance of thepremium.C o n s e q u e n t l y , A H A C f i l e d a n a c t i o n t o r e c o v e r t h e unpaid balance of P314,103.05 for Insurance policy. Inits answer with counterclaim, Tuscany admitted thei s s u a n c e o f I n s u r a n c e P o l i c y . I t e x p l a i n e d t h a t i t discontinued the payment of premiums because thepolicy did not contain a credit clause in its favor andthe receipts for the installment payments covering thepolicy for 1984-85, as well as the two (2) previousp o l i c i e s , s t a t e d t h e f o l l o w i n g r e s e r v a t i o n s : ( 2 ) Acceptance of this payment shall not waive any of thecompany rights to deny liability on any claim under thep o l i c y a r i s i n g b e f o r e s u c h p a y m e n t s o r a f t e r t h e expiration of the credit clause of the policy; and (3)Subject to no loss prior to premium payment. If thereb e a n y l o s s s u c h i s n o t c o v e r e d . T u s c a n y f u r t h e r claimed that the policy was never binding and valid,and no risk attached to the policy. It then pleaded ac o u n t e r c l a i m f o r P 1 5 2 , 0 0 0 . 0 0 f o r t h e p r e m i u m s a lready paid for 1984-85, and in its answer witha m e n d e d c o u n t e r c l a i m , s o u g h t t h e r e f u n d o f P924,206.10 representing the premium payments for1982-85. Issue: Whether payment by installment of the premiums dueo n a n i n s u r a n c e p o l i c y i n v a l i d a t e s t h e c o n t r a c t o f i nsurance. Ruling: No. The subject policies are valid even if the premiumswere paid on installments. The records clearly showthat Tuscany and AHAC intended subject insurancepolicies to be binding and effective notwithstanding thes t a g g e r e d p a y m e n t o f t h e p r e m i u m s . T h e i n i t i a l insurance contract entered into in 1982 was renewedin 1983,

then in 1984. In those 3 years, the insurera c c e p t e d a l l t h e i n s t a l l m e n t p a y m e n t s . S u c h acceptance of payments speaks loudly of the insurer'sintention to honor the policies it issued to Tuscany.Certainly, basic principles of equity and fairness wouldn o t a l l o w t h e i n s u r e r t o c o n t i n u e c o l l e c t i n g a nda c c e p t i n g t h e p r e m i u m s , a l t h o u g h p a i d o n installments, and later deny liability on the l a m e excuse that the premiums were not prepaid in full.T h u s , w h i l e t h e i m p o r t o f S e c t i o n 7 7 i s t h a t prepayment of premiums is strictly required a s a condition to the validity of the contract, the Court wasn o t p r e p a r e d t o r u l e t h a t t h e r e q u e s t t o m a k e installment payments duly approved by the insurer,would prevent the entire contract of insurance fromgoing into effect despite payment and acceptance of EH 403 2010-2011 2011-2012 INSURANCE LAW CASE DIGESTS the initial premium or first installment. Section 78 of t h e I n s u r a n c e C o d e i n e f f e c t a l l o w s w a i v e r b y t h e insurer of the condition of prepayment by making anacknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far ast o m a k e t h e p o l i c y b i n d i n g d e s p i t e t h e f a c t t h a t p r e m i u m i s a c t u a l l y u n p a i d . S e c t i o n 7 7 m e r e l y pre cludes the parties from stipulating that the policy isv a l i d e v e n i f p r e m i u m s a r e not paid, but does note x p r e s s l y p r o h i b i t a n a g r e e m e n t g r a n t i n g c r e d i t extension, and such an agreement is

not contrary tomorals, good customs, public order or public policy. Sois an understanding to allow insured to pay premiumsin installments not so proscribed. At the very least,both parties should be deemed in estoppel to questionthe arrangement they have voluntarily accepted. Itappearing from the peculiar circumstances that thep a r t i e s a c t u a l l y i n t e n d e d t o m a k e t h e t h r e e ( 3 ) insurance contracts vali d , e f f e c t i v e a n d b i n d i n g , Tuscany may not be allowed to renege on its obligationto pay the balance of the premium after the expirationo f t h e w h o l e t e r m o f t h e t h i r d p o l i c y ( A H - C P P - 9210651) in March 1985. Moreover, where the risk isentire and the contract is indivisible, the insured is notentitled to a refund of the premiums paid if the insurerw a s e x p o s e d t o t h e r i s k i n s u r e d f o r a n y p e r i o d , however brief or momentary.Digested by: Roxanne A. Huyo Tibay v. CAFacts: On 22 January 1987 private respondent Fortune Life and General Insurance Co., Inc. (FORTUNE) issued FireI n s u r a n c e P o l i c y N o . 1 3 6 1 7 1 i n f a v o r o f V i o l e t a R . T ibay and/or Nicolas Roraldo on their twostoreyresidential building located at 5855 Zobel Stree t , Makati City, together with all their personal effectstherein. The insurance was for P600,000.00 coveringthe period from 23 January 1987 to 23 January 1988.O n 2 3 J a n u a r y 1 9 8 7 , o f t h e t o t a l p r e m i u m o f P2,983.50, petitioner Violeta Tibay only paid P600.00thus leaving a considerable balance unpaid.On 8 March 1987 the insured building was completelydestroyed by fire. On 10 March 1987 Violeta Tibay paidthe balance of the premium. On the same day, shef i l e d w i t h F O R T U N E a c l a i m o n t h e f i r e i n s u r a n c e policy. Her claim was accordingly referred to i t s adjuster, Goodwill Adjustment Services, Inc. (GASI).Petitioner forthwith complied and signed a non-waiveragreement. In a letter dated 11 June 1987, FORTUNEd e n i e d t h e c l a i m o f V i o l e t a f o r v i o l a t i o n o f P o l i c y Condition No.

2 and of Sec. 77 of the Insurance Code.E f f o r t s t o s e t t l e t h e c a s e b e f o r e t h e I n s u r a n c e Commission proved futile.On 19 July 1990 the trial court ruled for petitionersand adjudged FORTUNE liable. On 24 March 1995 theCourt of Appeals reversed the court a quo by declaringFORTUNE not to be liable to plaintiff-appellees thereinb u t o r d e r i n g d e f e n d a n t - a p p e l l a n t t o r e t u r n t o t h e former the premium of P2,983.50 plus 12% interestfrom 10 March 1987 until full payment. Hence thispetition for review Issue: WON a fire insurance policy is valid, binding and enforceable upon mere partial payment of premium Ruling: The SC finds no merit in the petition; hence, it affirmsthe Court of Appeals.Insurance is a contract whereby one undertakes for ac o n s i d e r a t i o n t o i n d e m n i f y a n o t h e r a g a i n s t l o s s , d a m a g e o r l i a b i l i t y a r i s i n g f r o m a n u n k n o w n o r conting ent event. The consideration is the premium,which must be paid at the time and in the way andmanner specified in the policy, and if not so paid, thepolicy will lapse and be forfeited by its own terms.The pertinent provisions in the Policy on premium readTHIS POLICY OF INSURANCE WITNESSETH, THAT onlya f t e r p a y m e n t t o t h e C o m p a n y i n a c c o r d a n c e w i t h P olicy Condition No. 2 of the total premiums by thei n s u r e d a s s t i p u l a t e d a b o v e f o r t h e p e r i o d aforementioned for insuring against Loss or Damageby Fire or Lightning as herein appears, the Propertyherein described x x x2. This policy including any renewal thereof and/or any endorsement thereon is not in force until the premium has been fully paid toa n d d u l y r e c e i p t e d b y t h e C o m p a n y i n t h e ma nner provided herein . Any supplementary agreement seeking toamend this c o n d i t i o n p r e p a r e d b y a g e n t , b r o k e r o r Company official,

shall be deemed invalid and of noeffect.xxx xxxxxxE x c e p t o n l y i n t h o s e s p e c i f i c c a s e s w h e r e corresponding rules and regulations which are or mayhereafter be in force provide for the payment of thestipulated premiums in periodic installments at fixedp e r c e n t a g e , i t i s h e r e b y d e c l a r e d , a g r e e d a n d warranted that t h i s p o l i c y s h a l l b e d e e m e d effective, valid and binding upon the Company only when the premiums therefor have actually b e e n p a i d i n f u l l a n d d u l y a c k n o w l e d g e d in ar e c e i p t s i g n e d b y a n y a u t h o r i z e d o f f i c i a l o r re p r e s e n t a t i v e / a g e n t o f t h e C o m p a n y i n s u c h manner as provided herein .Clearly the Policy provides for payment of premium infull. Accordingly, where the premium has only beenpartially paid and the balance paid only after the perilinsured against has occurred, the insurance contract did not take effect and the insured cannot collect at allon the policy. This is fully supported by Sec. 77 of theInsurance Code which provides EH 403 2010-2011 2011-2012