INCONTESTABILITY
rests upon the provider or insurer. In any case, with or without the
PHILAMCARE HEALTH SYSTEMS, INC., petitioner, vs. COURT
OF APPEALS and JULITA TRINOS, respondents. [G.R. No.
125678. March 18, 2002] YNARES-SANTIAGO, J.:
Facts:
Ernani Trinos applied for a health care coverage with petitioner
Philamcare Health Systems, Inc.
Under the agreement, respondents husband was entitled to
avail of hospitalization benefits. Upon the termination of the
agreement, the same was extended for another year from March 1,
1989 to March 1, 1990, then from March 1, 1990 to June 1, 1990.
During the period of his coverage, Ernani suffered a heart
attack and was confined at the Manila Medical Center (MMC) for
one month beginning March 9, 1990. While her husband was in the
hospital, respondent tried to claim the benefits under the health
care agreement. However, petitioner denied her claim saying that
the Health Care Agreement was void. According to petitioner, there
was a concealment regarding Ernanis medical history. Doctors at
the MMC allegedly discovered at the time of Ernanis confinement
that he was hypertensive, diabetic and asthmatic, contrary to his
answer in the application form. Thus, respondent paid the
hospitalization expenses herself. Later, he was admitted at the
Chinese General Hospital. Due to financial difficulties, however,
respondent brought her husband home again. In the morning of
April 13, 1990, Ernani died.
Thereafter, respondent instituted wan action for damages
against petitioner asking for reimbursement of her expenses plus
moral damages and attorneys fees. RTC and CA bid favor to
respondent.
Issue:
Whether or not inconstestability clause applies?
Held:
Yes. Concealment as a defense for the health care provider or
insurer to avoid liability is an affirmative defense and the duty to
establish such defense by satisfactory and convincing evidence
authority to investigate, petitioner is liable for claims made under
the contract. Having assumed a responsibility under the
agreement, petitioner is bound to answer the same to the extent
agreed upon. In the end, the liability of the health care provider
attaches once the member is hospitalized for the disease or injury
covered by the agreement or whenever he avails of the covered
benefits which he has prepaid.
Under the title Claim procedures of expenses in the Policy, the
defendant Philamcare Health Systems Inc. had twelve months from
the date of issuance of the Agreement within which to contest the
membership of the patient if he had previous ailment of asthma,
and six months from the issuance of the agreement if the patient
was sick of diabetes or hypertension. The periods having expired,
the defense of concealment or misrepresentation no longer lie.
Soliman v. US Life- Rescind Contract of Insurance
104 PHIL 1046
Facts:
> US Life issued a 20 yr endowment life policy on the joint lives of
Patricio Soliman and his wife Rosario, each of them being the
beneficiary of the other.
> In Mar. 1949, the spouses were informed that the premium for
Jan 1949 was still unpaid notwithstanding that the 31-day grace
period has already expired, and they were furnished at the same
time long-form health certificates for the reinstatement of the
policies.
> In Apr 1949, they submitted the certificates and paid the
premiums.
> In Jan. 1950, Rosario died of acute dilation of the heart, and
thereafter, Patricio filed a claim for the proceeds of the insurance.
> US life denied the claim and filed for the rescission of the
contract on the ground that the certificates failed to disclose that
Rosario had been suffering from bronchial asthma for 3 years prior
to their submission.
Issue:
Whether or not the contract can still be rescinded.
Held:
Yes.
The insurer is once again given two years from the date of
reinstatement to investigate into the veracity of the facts
represented by the insured in the application for reinstatement.
When US life sought to rescind the contract on the ground of
concealment/misrepresentation, two years had not yet elapsed.
Hence, the contract can still be rescinded.
G.R. No. L-27541 November 21, 1927
TAN CHAY HENG vs. THE WEST COAST LIFE INSURANCE
COMPANY
Facts: Plaintiff alleges that he is of age and a resident of Bacolod,
Occidental Negros; that the defendant is a foreign insurance
corporation duly organized by the laws of the Philippines to engage
in the insurance business; that in the month of April, 1925, on his
application the defendant accepted and approved a life insurance
policy for the sum of P10,000 in which the plaintiff was the sole
beneficiary; that the policy was issued upon the payment by the
said Tan Ceang of the first year's premium amounting to P936; that
in and by its terms, the defendant agreed to pay the plaintiff as
beneficiary the amount of the policy upon the receipt of the proofs
of the death of the insured while the policy was in force; that
without any premium being due or unpaid, Tan Ceang died on May
10, 1925; that in June, 1925, plaintiff submitted the proofs of the
death of Tan Ceang with a claim for the payment of the policy
which the defendant refused to pay, for which he prays for a
corresponding judgment, with legal interest from the date of the
policy, and costs.
In its defense, the defendant interposes that the insurance policy
on the life of Tan Ceang was obtained by the plaintiff in
confabulation with one Go Chulian, Francisco Sanchez and Dr. V. S.
Locsin, of La Carlota thru fraud and deceit perpetrated against this
defendant. The lower court rendered judgment for the plaintiff for
P10,000, with legal interest from January 4, 1926, and costs, to
which the defendant duly excepted and filed a motion for a new
trial, which was overruled.
Based upon those facts the plaintiff vigorously contended in the
lower court and now contends in the court, that section 47 of the
Insurance Act should be applied, and that when so applied,
defendant is barred and estopped to plead and set forth the
matters alleged in its special defense. That section is as follows:
Whenever a right to rescind a contract of insurance is given
to the insurer by any provision of this chapter, such right
must be exercised previous to the commencement of an
action on the contract.
The defendant contended in the lower court and now contends in
this court, that section 47 does not apply to the new matters
alleged in the special defense. If in legal effect defendant's special
defense is in the nature of an act to rescind "a contract of
insurance," then such right must be exercised prior to an action
enforce the contract.
Issue: WON sec. 47 should apply?
Held: No. In the instant case, it will be noted that even in its prayer,
the defendant does not seek to have the alleged insurance contract
rescinded. It denies that it ever made any contract of insurance on
the life of Tan Ceang or that any such a contract ever existed, and
that is the question which it seeks to have litigated by its special
defense. In the very nature of things, if the defendant never made
or entered into the contract in question, there is no contract to
rescind, and, hence, section 47 upon which the lower based its
decision in sustaining the demurrer does not apply. As stated, an
action to rescind a contract is founded upon and presupposes the
existence of the contract which is sought to be rescinded. If all of
the material matters set forth and alleged in the defendant's
special plea are true, there was no valid contract of insurance, for
the simple reason that the minds of the parties never met and
never agreed upon the terms and conditions of the contract. We are
clearly of the opinion that, if such matters are known to exist by a
preponderance of the evidence, they would constitute a valid
defense to plaintiff's cause of action. Upon the question as to
whether or not they or are not true, we do not at this time have or
express any opinion, but we are clear that section 47 does not
apply to the allegations made in the answer, and that the trial court
erred in sustaining the demurrer.

G.R. No. 48049 June 29, 1989
EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN,
petitioners,
vs.
THE COURT OF APPEALS and THE PHILIPPINE AMERICAN
LIFE INSURANCE COMPANY, respondents.
GUTIERREZ, JR., J.:
Facts:
Petitioners appeal from the Decision of the Insurance
Commissioner dismissing herein petitioners' complaint against
respondent Philippine American Life Insurance Company for the
recovery of the proceeds of Policy No. 1082467 in the amount of P
80,000.00.
Tan Lee Siong, father of herein petitioners, applied for life
insurance in the amount of P 80,000.00 with respondent company.
Said application was approved and Policy No. 1082467 was issued
effective November 6,1973, with petitioners the beneficiaries
thereof. On April 26,1975, Tan Lee Siong died of hepatoma.
Petitioners then filed with respondent company their claim for the
proceeds of the life insurance policy. However, respondent
company denied petitioners' claim and rescinded the policy by
reason of the alleged misrepresentation and concealment of
material facts made by the deceased Tan Lee Siong in his
application for insurance. The premiums paid on the policy were
thereupon refunded.
The evidence for respondent company shows that on
September 19,1972, the deceased was examined by Dr. Victoriano
Lim and was found to be diabetic and hypertensive; that by
January, 1973, the deceased was complaining of progressive weight
loss and abdominal pain and was diagnosed to be suffering from
hepatoma. Another physician, Dr. Wenceslao Vitug, testified that
the deceased came to see him on December 14, 1973 for
consolation and claimed to have been diabetic for five years.
Because of the concealment made by the deceased of his
consultations and treatments for hypertension, diabetes and liver
disorders, respondent company was thus misled into accepting the
risk and approving his application as medically standard (and
dispensing with further medical investigation and examination).For
as long as no adverse medical history is revealed in the application
form, an applicant for insurance is presumed to be healthy and
physically fit and no further medical investigation or examination is
conducted by respondent company.
Alleging that respondent company's refusal to pay them the
proceeds of the policy was unjustified and unreasonable,
petitioners filed a complaint against the former with the Office of
the Insurance Commissioner. After hearing the evidence of both
parties, the Insurance Commissioner rendered judgment dismissing
petitioners' complaint. The Court of Appeals dismissed ' the
petitioners' appeal from the Insurance Commissioner's decision for
lack of merit.
The CA concluded that respondent insurer has the right to
rescind the policy contract when insured is already dead. It also
ruled that respondent insurer may be allowed to avoid the policy on
grounds of concealment by the deceased assured, is contrary to
the provisions of the policy contract itself, as well as, of applicable
legal provisions and established jurisprudence.
The petitioners contend that the respondent company no
longer had the right to rescind the contract of insurance as
rescission must allegedly be done during the lifetime of the insured
within two years and prior to the commencement of action.
Issue: WON respondent company can rescind the contract of
insurance on the ground of concealment
Held: Yes. Section 48 of the insurance code provides:
Whenever a right to rescind a contract of insurance is given
to the insurer by any provision of this chapter, such
right must be exercised previous to the commencement
of an action on the contract.
After a policy of life insurance made payable on the death of
the insured shall have been in force during the lifetime of
the insured for a period of two years from the date of its
issue or of its last reinstatement, the insurer cannot prove
that the policy is void ab initio or is rescindable by
reason of the fraudulent concealment or misrepresentation of
the insured or his agent.
The so-called "incontestability clause" precludes the insurer
from raising the defenses of false representations or concealment
of material facts insofar as health and previous diseases are
concerned if the insurance has been in force for at least two years
during the insured's lifetime. The phrase "during the lifetime" found
in Section 48 simply means that the policy is no longer considered
in force after the insured has died. The key phrase in the second
paragraph of Section 48 is "for a period of two years."
The policy was issued on November 6,1973 and the insured
died on April 26,1975. The policy was thus in force for a period of
only one year and five months. Considering that the insured died
before the two-year period had lapsed, respondent company is not,
therefore, barred from proving that the policy is void ab initio by
reason of the insured's fraudulent concealment or
misrepresentation. Moreover, respondent company rescinded the
contract of insurance and refunded the premiums paid on
September 11, 1975, previous to the commencement of this action
on November 27,1975.
After a policy of life insurance made payable on the death of
the insured shall have been in force during the lifetime of the
insured for a period of two years from the date of its issue or of its
last reinstatement, the insurer cannot prove that the policy is void
ab initio or is rescindable by reason of the fraudulent concealment
or misrepresentation of the insured or his agent.
The petitioners argue that no evidence was presented to
show that the medical terms were explained in a layman's
language to the insured. They state that the insurer should have
presented its two medical field examiners as witnesses. Moreover,
the petitioners allege that the policy intends that the medical
examination must be conducted before its issuance otherwise the
insurer "waives whatever imperfection by ratification."
There is no strong showing that the Court should apply the
"fine print" or "contract of adhesion" rule in this case. There is no
showing that the questions in the application form for insurance
regarding the insured's medical history are in smaller print than the
rest of the printed form or that they are designed in such a way as
to conceal from the applicant their importance. If a warning in bold
red letters or a boxed warning similar to that required for cigarette
advertisements by the Surgeon General of the United States is
necessary, that is for Congress or the Insurance Commission to
provide as protection against high pressure insurance
salesmanship. We are limited in this petition to ascertaining
whether or not the respondent Court of Appeals committed
reversible error. It is the petitioners' burden to show that the factual
findings of the respondent court are not based on substantial
evidence or that its conclusions are contrary to applicable law and
jurisprudence. They have failed to discharge that burden.
WHEREFORE, the petition is hereby DENIED for lack of merit. The
questioned decision of the Court of Appeals is AFFIRMED.
MANILA BANKERS LIFE INSURANCE CORPORATION,
Petitioner. vs. CRESENCIA P. ABAN, Respondent
G.R. No. 175666 July 29, 2013
DEL CASTILLO, J.
FACTS: Delia Sotero took out a life insurance policy from
Manila Bankers Life Insurance Corporation, designating respondent
Cresencia P. Aban, her niece, as her beneficiary. On April 10, 1996,
when the insurance policy had been in force for more than two
years and seven months, Sotero died. Respondent filed a claim for
the insurance proceeds on July 9, 1996. Petitioner conducted an
investigation into the claim, and came out with the following
findings: 1. Sotero did not personally apply for insurance coverage,
as she was illiterate; 2. Sotero was sickly since 1990; 3. Sotero did
not have the financial capability to pay the insurance premiums on
Insurance Policy No. 747411; 4. Sotero did not sign the July 3, 1993
application for insurance;9 and 5. Respondent was the one who
filed the insurance application, and x x x designated herself as the
beneficiary.
For the above reasons, petitioner denied respondents claim on
April 16, 1997 and refunded the premiums paid on the policy. On
April 24, 1997, petitioner filed a civil case for rescission and/or
annulment of the policy. The main thesis of the Complaint was that
the policy was obtained by fraud, concealment and/or
misrepresentation under the Insurance Code, which thus renders it
voidable.
Respondent filed a Motion to Dismiss claiming that petitioners
cause of action was barred by prescription pursuant to Section 48
of the Insurance Code. The CA sustained the trial court. Applying
Section 48 to petitioners case, the CA held that petitioner may no
longer prove that the subject policy was void ab initio or rescindible
by reason of fraudulent concealment or misrepresentation after the
lapse of more than two years from its issuance. It ratiocinated that
petitioner was equipped with ample means to determine, within the
first two years of the policy, whether fraud, concealment or
misrepresentation was present when the insurance coverage was
obtained. If it failed to do so within the statutory two-year period,
then the insured must be protected and allowed to claim upon the
policy.
ISSUE: Whether or not CA erred in applying the
incontestability clause.
RULING: NO. Section 48 serves a noble purpose, as it
regulates the actions of both the insurer and the insured. Under the
provision, an insurer is given two years from the effectivity of a
life insurance contract and while the insured is alive to discover or
prove that the policy is void ab initio or is rescindible by reason of
the fraudulent concealment or misrepresentation of the insured or
his agent. After the two-year period lapses, or when the insured
dies within the period, the insurer must make good on the policy,
even though the policy was obtained by fraud, concealment, or
misrepresentation. This is not to say that insurance fraud must be
rewarded, but that insurers who recklessly and indiscriminately
solicit and obtain business must be penalized, for such recklessness
and lack of discrimination ultimately work to the detriment of bona
fide takers of insurance and the public in general.
Section 48 regulates both the actions of the insurers and
prospective takers of life insurance. It gives insurers enough time to
inquire whether the policy was obtained by fraud, concealment, or
misrepresentation; on the other hand, it forewarns scheming
individuals that their attempts at insurance fraud would be timely
uncovered thus deterring them from venturing into such nefarious
enterprise. At the same time, legitimate policy holders are
absolutely protected from unwarranted denial of their claims or
delay in the collection of insurance proceeds occasioned by
allegations of fraud, concealment, or misrepresentation by insurers,
claims which may no longer be set up after the two-year period
expires as ordained under the law.
Thus, the self-regulating feature of Section 48 lies in the fact that
both the insurer and the insured are given the assurance that any
dishonest scheme to obtain life insurance would be exposed, and
attempts at unduly denying a claim would be struck down. Life
insurance policies that pass the statutory two-year period are
essentially treated as legitimate and beyond question, and the
individuals who wield them are made secure by the thought that
they will be paid promptly upon claim. In this manner, Section 48
contributes to the stability of the insurance industry.
Section 48 prevents a situation where the insurer knowingly
continues to accept annual premium payments on life insurance,
only to later on deny a claim on the policy on specious claims of
fraudulent concealment and misrepresentation, such as what
obtains in the instant case. Thus, instead of conducting at the first
instance an investigation into the circumstances surrounding the
issuance of Insurance Policy No. 747411 which would have timely
exposed the supposed flaws and irregularities attending it as it now
professes, petitioner appears to have turned a blind eye and opted
instead to continue collecting the premiums on the policy. For
nearly three years, petitioner collected the premiums and devoted
the same to its own profit. It cannot now deny the claim when it is
called to account. Section 48 must be applied to it with full force
and effect.
The insurer is deemed to have the necessary facilities to discover
such fraudulent concealment or misrepresentation within a period
of two (2) years. It is not fair for the insurer to collect the premiums
as long as the insured is still alive, only to raise the issue of
fraudulent concealment or misrepresentation when the insured dies
in order to defeat the right of the beneficiary to recover under the
policy.
At least two (2) years from the issuance of the policy or its last
reinstatement, the beneficiary is given the stability to recover
under the policy when the insured dies. The provision also makes
clear when the two-year period should commence in case the
policy should lapse and is reinstated, that is, from the date of the
last reinstatement.
After two years, the defenses of concealment or misrepresentation,
no matter how patent or well-founded, will no longer lie.
As borne by the records, the policy was issued on August 30, 1993,
the insured died on April 10, 1996, and the claim was denied on
April 16, 1997. The insurance policy was thus in force for a period
of 3 years, 7 months, and 24 days. Considering that the insured
died after the two-year period, the plaintiff-appellant is, therefore,
barred from proving that the policy is void ab initio by reason of the
insureds fraudulent concealment or misrepresentation or want of
insurable interest on the part of the beneficiary, herein defendant-
appellee.
insurers cannot be allowed to collect premiums on insurance
policies, use these amounts collected and invest the same through
the years, generating profits and returns therefrom for their own
benefit, and thereafter conveniently deny insurance claims by
questioning the authority or integrity of their own agents or the
insurance policies they issued to their premium-paying clients. This
is exactly one of the schemes which Section 48 aims to prevent.
XXX The business of insurance is a highly regulated commercial
activity in the country, and is imbued with public interest. "An
insurance contract is a contract of adhesion which must be
construed liberally in favor of the insured and strictly against the
insurer in order to safeguard the formers interest."
THE POLICY
G.R. No. L-15895 November 29, 1920
RAFAEL ENRIQUEZ, as administrator of the estate of the late
Joaquin Ma. Herrer, plaintiff-appellant, vs.
SUN LIFE ASSURANCE COMPANY OF CANADA, defendant-
appellee.
This is an action brought by the plaintiff ad administrator of the
estate of the late Joaquin Ma. Herrer to recover from the defendant
life insurance company the sum of pesos 6,000 paid by the
deceased for a life annuity. The trial court gave judgment for the
defendant. Plaintiff appeals.
FACTS: On September 24, 1917, Joaquin Herrer made application to
the Sun Life Assurance Company of Canada through its office in
Manila for a life annuity. Two days later he paid the sum of P6,000
to the manager of the company's Manila office and was given a
provisional receipt.
The application was immediately forwarded to the head office of
the company at Montreal, Canada. On November 26, 1917, the
head office gave notice of acceptance by cable to Manila. (Whether
on the same day the cable was received notice was sent by the
Manila office of Herrer that the application had been accepted, is a
disputed point, which will be discussed later.) On December 4,
1917, the policy was issued at Montreal. On December 18, 1917,
attorney Aurelio A. Torres wrote to the Manila office of the company
stating that Herrer desired to withdraw his application. The
following day the local office replied to Mr. Torres, stating that the
policy had been issued, and called attention to the notification of
November 26, 1917. This letter was received by Mr. Torres on the
morning of December 21, 1917. Mr. Herrer died on December 20,
1917.
ISSUE: Whether or not Herrer received notice of acceptance of his
application.
HELD: No.
The chief clerk of the Manila office of the Sun Life Assurance
Company of Canada at the time of the trial testified that he
prepared the letter dated November 26, 1917, and handed it to the
local manager for signature. The witness admitted on cross-
examination that after preparing the letter and giving it to the
manager, he new nothing of what became of it. The local manager,
Mr. White, testified to having received the cablegram accepting the
application of Mr. Herrer from the home office on November 26,
1917. He said that on the same day he signed a letter notifying Mr.
Herrer of this acceptance. The witness further said that letters,
after being signed, were sent to the chief clerk and placed on the
mailing desk for transmission. The witness could not tell if the letter
had actually been placed in the mails. Mr. Tuason, who was the
chief clerk, on November 26, 1917, was not called as a witness. For
the defense, attorney Manuel Torres testified to having prepared
the will of Joaquin Ma. Herrer, that on this occasion, Mr. Herrer
mentioned his application for a life annuity, and that he said that
the only document relating to the transaction in his possession was
the provisional receipt. Rafael Enriquez, the administrator of the
estate, testified that he had gone through the effects of the
deceased and had found no letter of notification from the insurance
company to Mr. Herrer.
Our deduction from the evidence on this issue must be that the
letter of November 26, 1917, notifying Mr. Herrer that his
application had been accepted, was prepared and signed in the
local office of the insurance company, was placed in the ordinary
channels for transmission, but as far as we know, was never
actually mailed and thus was never received by the applicant.
The law applicable to the case is found to be the second paragraph
of article 1262 of the Civil Code providing that an acceptance made
by letter shall not bind the person making the offer except from the
time it came to his knowledge. The pertinent fact is, that according
to the provisional receipt, three things had to be accomplished by
the insurance company before there was a contract: (1) There had
to be a medical examination of the applicant; (2) there had to be
approval of the application by the head office of the company; and
(3) this approval had in some way to be communicated by the
company to the applicant. The further admitted facts are that the
head office in Montreal did accept the application, did cable the
Manila office to that effect, did actually issue the policy and did,
through its agent in Manila, actually write the letter of notification
and place it in the usual channels for transmission to the
addressee. The fact as to the letter of notification thus fails to
concur with the essential elements of the general rule pertaining to
the mailing and delivery of mail matter as announced by the
American courts, namely, when a letter or other mail matter is
addressed and mailed with postage prepaid there is a rebuttable
presumption of fact that it was received by the addressee as soon
as it could have been transmitted to him in the ordinary course of
the mails. But if any one of these elemental facts fails to appear, it
is fatal to the presumption. For instance, a letter will not be
presumed to have been received by the addressee unless it is
shown that it was deposited in the post-office, properly addressed
and stamped. (See 22 C.J., 96, and 49 L. R. A. [N. S.], pp. 458, et
seq., notes.)
We hold that the contract for a life annuity in the case at bar was
not perfected because it has not been proved satisfactorily that the
acceptance of the application ever came to the knowledge of the
applicant.
VIRGINIA A. PEREZ, petitioner, vs. COURT OF APPEALS and
BF LIFEMAN INSURANCE CORPORATION, respondents.
G.R. No. 112329. January 28, 2000
A contract of insurance, like all other contracts, must be assented
to by both parties, either in person or through their agents and so
long as an application for insurance has not been either accepted
or rejected, it is merely a proposal or an offer to make a contract.
Facts:
Primitivo B. Perez had been insured with the BF Lifeman Insurance
Corporation since 1980 for P20,000.00. Sometime in October 1987,
an agent of the insurance corporation, Rodolfo Lalog, visited Perez
in Guinayangan, Quezon and convinced him to apply for additional
insurance coverage of P50,000.00, to avail of the ongoing
promotional discount of P400.00 if the premium were paid annually.
On October 20, 1987, Primitivo B. Perez accomplished an
application form for the additional insurance coverage of
P50,000.00. On the same day, petitioner Virginia A. Perez,
Primitivos wife, paid P2,075.00 to Lalog. The receipt issued by
Lalog indicated the amount received was a "deposit."
Unfortunately, Lalog lost the application form accomplished by
Perez and so he asked the latter to fill up another application form.
On November 1, 1987, Perez was made to undergo the required
medical examination, which he passed.
Pursuant to the established procedure of the company, Lalog
forwarded the application for additional insurance of Perez,
together with all its supporting papers, to the office of BF Lifeman
Insurance Corporation at Gumaca, Quezon which office was
supposed to forward the papers to the Manila office.
On November 25, 1987, Perez died in an accident. He was riding in
a banca which capsized during a storm. At the time of his death, his
application papers for the additional insurance of P50,000.00 were
still with the Gumaca office. Lalog testified that when he went to
follow up the papers, he found them still in the Gumaca office and
so he personally brought the papers to the Manila office of BF
Lifeman Insurance Corporation. It was only on November 27, 1987
that said papers were received in Manila. Without knowing that
Perez died on November 25, 1987, BF Lifeman Insurance
Corporation approved the application and issued the corresponding
policy for the P50,000.00 on December 2, 1987.
Petitioner Virginia Perez went to Manila to claim the benefits under
the insurance policies of the deceased. She was paid P40,000.00
under the first insurance policy, but was not paid under the
additional policy coverage. In the letter of BF Lifeman to Virginia, it
maintained that the insurance for P50,000.00 had not been
perfected at the time of the death of Primitivo Perez. Consequently,
the insurance company refunded the amount of P2,075.00 which
Virginia Perez had paid.
Petitioner Virginia A. Perez, on the other hand, averred that the
deceased had fulfilled all his prestations under the contract and all
the elements of a valid contract are present.
The RTC rendered a decision in favor of Virginia. The premium for
the additional insurance of P50,000.00 had been fully paid and
even if the sum of P2,075.00 were to be considered merely as
partial payment, the same does not affect the validity of the policy.
The trial court further stated that the deceased had fully complied
with the requirements of the insurance company. He paid, signed
the application form and passed the medical examination. He
should not be made to suffer the subsequent delay in the
transmittal of his application form to private respondents head
office since these were no longer within his control.
The CA reversed the decision of the trial court saying that the
insurance contract for P50,000.00 could not have been perfected
since at the time that the policy was issued, Primitivo was already
dead. The Court of Appeals held that the contract of insurance had
to be assented to by both parties and so long as the application for
insurance has not been either accepted or rejected, it is merely an
offer or proposal to make a contract.
Issue:
1. Whether, as between Primitivo and BF Lifeman Insurance Corp,
there was a perfected contract of insurance.
2. Whether the condition that the policy issued by the corporation
be delivered and received by the applicant in good health, is
potestative, being dependent upon the will of the insurance
company, and is therefore null and void.
Ruling:
1. None. When Primitivo filed an application for insurance, paid
P2,075.00 and submitted the results of his medical examination, his
application was subject to the acceptance of private respondent BF
Lifeman Insurance Corporation. The perfection of the contract of
insurance between the deceased and respondent corporation was
further conditioned upon compliance with the following requisites
stated in the application form:
"there shall be no contract of insurance unless and until a policy is
issued on this application and that the said policy shall not take
effect until the premium has been paid and the policy delivered to
and accepted by me/us in person while I/We, am/are in good
health."
The assent of private respondent BF Lifeman Insurance Corporation
therefore was not given when it merely received the application
form and all the requisite supporting papers of the applicant. Its
assent was given when it issues a corresponding policy to the
applicant. Also, it when Primitivo died on November 25, 1987, his
application papers for additional insurance coverage were still with
the branch office of respondent corporation in Gumaca and it was
only two days later when Lalog personally delivered the application
papers to the head office in Manila. Consequently, there was
absolutely no way the acceptance of the application could have
been communicated to the applicant for the latter to accept
inasmuch as the applicant at the time was already dead.
2. The SC did not agree. In the case at bar, the following conditions
were imposed by the respondent company for the perfection of the
contract of insurance:
1. a policy must have been issued;
2. the premiums paid; and
3. the policy must have been delivered to and accepted by
the applicant while he is in good health.
The condition imposed by the corporation that the policy must have
been delivered to and accepted by the applicant while he is in good
health can hardly be considered as a potestative or facultative
condition. On the contrary, the health of the applicant at the time
of the delivery of the policy is beyond the control or will of the
insurance company. Rather, the condition is a suspensive one
whereby the acquisition of rights depends upon the happening of
an event which constitutes the condition. In this case, the
suspensive condition was the policy must have been delivered and
accepted by the applicant while he is in good health. There was
non-fulfillment of the condition, however, inasmuch as the
applicant was already dead at the time the policy was issued.
Hence, the non-fulfillment of the condition resulted in the non-
perfection of the contract.
As stated above, a contract of insurance, like other contracts, must
be assented to by both parties either in person or by their agents.
So long as an application for insurance has not been either
accepted or rejected, it is merely an offer or proposal to make a
contract. The contract, to be binding from the date of application,
must have been a completed contract, one that leaves nothing to
be done, nothing to be completed, nothing to be passed upon, or
determined, before it shall take effect. There can be no contract of
insurance unless the minds of the parties have met.
[G.R. No. 119176. March 19, 2002]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now
JARDINE-CMA LIFE INSURANCE COMPANY, INC.) and THE
COURT OF APPEALS, respondents.
Facts: Prior to 1984, Lincoln Philippine Life Insurance Company,
Inc. (now called Jardine-CMA Life Insurance Company, Inc.) used to
issue policies called Junior Estate Builder Policy. A clause therein
provides for an automatic increase in the amount of life insurance
coverage upon attainment of a certain age by the insured without
the need of issuing a new policy. The clause was to take effect in
the year 1984. Documentary stamp taxes due on the policy were
paid by Lincoln Philippine only on the initial sum assured.
When the clause became effective in 1984, the Commissioner of
Internal Revenue assessed an additional tax on the increased
amount of the coverage of the said policies. Said tax was to cover
the deficiency documentary stamps tax for said year. The Court of
Appeals ruled that there is only one policy and the automatic
increase is not a separate policy; that said increase of coverage is
not covered by another documentary stamp tax.
ISSUE: Whether or not there is only one policy.
HELD: Yes. Section 49, Title VI of the Insurance Code defines an
insurance policy as the written instrument in which a contract of
insurance is set forth. Section 50 of the same Code provides that
the policy, which is required to be in printed form, may contain any
word, phrase, clause, mark, sign, symbol, signature, number, or
word necessary to complete the contract of insurance. It is thus
clear that any rider, clause, warranty or endorsement pasted or
attached to the policy is considered part of such policy or contract
of insurance.
The subject insurance policy at the time it was issued contained an
automatic increase clause. Although the clause was to take effect
only in 1984, it was written into the policy at the time of its
issuance. The distinctive feature of the junior estate builder
policy called the automatic increase clause already formed part
and parcel of the insurance contract, hence, there was no need for
an execution of a separate agreement for the increase in the
coverage that took effect in 1984 when the assured reached a
certain age.
The said increase however is imposable with documentary stamp
taxes. The original documentary stamps tax paid by Lincoln
Philippine covers the original amount of the policies without the
projected increase. The said increase was already definite at the
time of the issuance of the policy. Thus, the amount insured by the
policy at the time of its issuance necessarily included the additional
sum covered by the automatic increase clause because it was
already determinable at the time the transaction was entered into
and formed part of the policy.
While tax avoidance schemes and arrangements are not prohibited,
tax laws cannot be circumvented in order to evade the payment of
just taxes. In the case at bar, to claim that the increase in the
amount insured (by virtue of the automatic increase clause
incorporated into the policy at the time of issuance) should not be
included in the computation of the documentary stamp taxes due
on the policy would be a clear evasion of the law requiring that the
tax be computed on the basis of the amount insured by the policy.
LIM vs. SUN LIFE of CANADA
Doctrine:
Binding-Slip doesnt insure itself
When an agreement is made between the applicant and the
agent whether by signing an application containing such
condition or otherwise, that no liability shall attach until the
principal approves the risk and a receipt is given by the
agent, such acceptance is merely conditional and is
subordinated to the companys act in approving or rejecting;
so in life insurance a binding slip or receipt does not
insure itself.
FACTS:
On July 6, 1917, Luis Lim Y Garcia of Zamboanga applied for
a policy of life insurance with Sunlife in the amount of 5k
He designated his wife Pilar Lim as the beneficiary. The first
premium of P433 was paid by Lim and company issued a
provisional policy
Such policy contained the following provisions
o xx the abovementioned life is to be assured in
accordance with the terms and conditions contained
or inserted by the Company in the policy which may
be granted by it in this particular case for 4 months
only from the date of the application, PROVIDED that
the company shall confirm this agreement by issuing
a policy on said application xxx.
Should the company NOT issue such a policy, then this
agreement shall be null and void ab initio and the Company
shall be held not to have been on the risk at all, but in such
case, the amount herein shall be returned
Lim died on Aug. 23, 1917 after the issuance of the
provisional policy but before the approval of the application
by the home office of the insurance company.
The instant action is brought by the beneficiary, his wife,
Pilar, to recover from Sun Life the sum of 5k
ISSUE: WON such provisional policy be considered as the insurance
policy itself
HELD:
NO
The contract of insurance was not consummated by the
parties. The above quoted agreement clearly stated that
the agreement should NOT go into effect until the home
office of the Company shall confirm it by issuing a policy.
It was nothing but an acknowledgment by the Company
that it has received a sum of money agreed upon as the
first years premium upon a policy to be issued upon the
application if it is accepted by the Company.
When an agreement is made between the applicant and the
agent whether by signing an application containing such
condition or otherwise, that no liability shall attach until the
principal approves the risk and a receipt is given by the
agent, such acceptance is merely conditional and is
subordinated to the companys act in approving or
rejecting; so in life insurance a binding slip or receipt does
not insure itself.
G.R. No. L-38613 February 25, 1982
PACIFIC TIMBER EXPORT CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and WORKMEN'S
INSURANCE COMPANY, INC., respondents.
DE CASTRO, ** J.:
Facts
Pacific timber secured temporary insurance from the Workemens
Insurance Co. for its exportation of logs to Japan. Workmen issued
on said date Cover Note 1010 insuring said cargo. The regular
marine cargo 2 policies were issued by the defendant in favor of
the plaintiff. The total cargo insured under the two marine policies
accordingly consisted of 1,395 logs.
After the issuance of a Cover Note but before the issuance of the
two marine policies, some of the logs intended to be exported were
lost during loading operations in the Diapitan Bay due to a bad
weather.
The plaintiff informed the defendant about the loss of several logs.
The defendant wrote the plaintiff denying the latter's claim that the
loss of 30 pieces of logs is not covered by 2 Marine Policies.
However, the defendants did not deny that the said loss may be
covered under the Cover Note. Unfortunately, the cover note is null
and void for lack of valuable consideration.
Issue
Is the cover note null and void for lack of valuable consideration?
Held:
No. Petitioner contends that the Cover Note was issued with a
consideration when, by express stipulation, the cover note is made
subject to the terms and conditions of the marine policies, and the
payment of premiums is one of the terms of the policies. From this
undisputed fact, We uphold petitioner's submission that the Cover
Note was not without consideration for which the respondent court
held the Cover Note as null and void, and denied recovery
therefrom. The fact that no separate premium was paid on the
Cover Note before the loss insured against occurred, does not
militate against the validity of petitioner's contention, for no such
premium could have been paid, since by the nature of the Cover
Note, it did not contain, as all Cover Notes do not contain
particulars of the shipment that would serve as basis for the
computation of the premiums. As a logical consequence, no
separate premiums are intended or required to be paid on a Cover
Note. This is a fact admitted by an official of respondent company,
Juan Jose Camacho, in charge of issuing cover notes of the
respondent company (p. 33, tsn, September 24, 1965).
At any rate, it is not disputed that petitioner paid in full all the
premiums as called for by the statement issued by private
respondent after the issuance of the two regular marine insurance
policies, thereby leaving no account unpaid by petitioner due on
the insurance coverage, which must be deemed to include the
Cover Note. If the Note is to be treated as a separate policy instead
of integrating it to the regular policies subsequently issued, the
purpose and function of the Cover Note would be set at naught or
rendered meaningless, for it is in a real sense a contract, not a
mere application for insurance which is a mere offer.
The adjuster went as far as submitting his report to respondent, as
well as its computation of respondent's liability on the insurance
coverage. This coverage could not have been no other than what
was stipulated in the Cover Note, for no loss or damage had to be
assessed on the coverage arising from the marine insurance
policies. For obvious reasons, it was not necessary to ask petitioner
to pay premium on the Cover Note, for the loss insured against
having already occurred, the more practical procedure is simply to
deduct the premium from the amount due the petitioner on the
Cover Note. The non-payment of premium on the Cover Note is,
therefore, no cause for the petitioner to lose what is due it as if
there had been payment of premium, for non-payment by it was
not chargeable against its fault. Had all the logs been lost during
the loading operations, but after the issuance of the Cover Note,
liability on the note would have already arisen even before
payment of premium. This is how the cover note as a "binder"
should legally operate otherwise, it would serve no practical
purpose in the realm of commerce, and is supported by the
doctrine that where a policy is delivered without requiring payment
of the premium, the presumption is that a credit was intended and
policy is valid.
G.R. No. L-109937 March 21, 1994
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B.
DANS, represented by CANDIDA G. DANS, and the DBP
MORTGAGE REDEMPTION INSURANCE POOL, respondents.
QUIASON, J.:
1. Juan B. Dans, together with his wife Candida, his son and
daughter-in-law, applied for a loan of P500,000.00 DBP, Basilan
Branch. As the principal mortgagor, Dans, then 76 years of age,
was advised by DBP to obtain a mortgage redemption insurance
(MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI
Pool).
2. A loan, in the reduced amount of P300,000.00, was approved by
DBP on August 4, 1987 and released on August 11, 1987. From the
proceeds of the loan, DBP deducted the amount of P1,476.00 as
payment for the MRI premium. On August 15, 1987, Dans
accomplished and submitted the "MRI Application for Insurance"
and the "Health Statement for DBP MRI Pool."
3. On August 20, 1987, the MRI premium of Dans, less the DBP
service fee of 10 percent, was credited by DBP to the savings
account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was
advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon
notice, relayed this information to the DBP MRI Pool. On September
23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible
for MRI coverage, being over the acceptance age limit of 60 years
at the time of application.
4. DBP apprised Candida Dans of the disapproval of her late
husband's MRI application. The DBP offered to refund the premium
of P1,476.00 which the deceased had paid, but Candida Dans
refused to accept the same, demanding payment of the face value
of the MRI or an amount equivalent to the loan. She, likewise,
refused to accept an ex gratia settlement of P30,000.00, which the
DBP later offered.
5. Respondent Estate, through Candida Dans as administratrix, filed
a complaint with the RTC Basilan, against DBP and the insurance
pool for "Collection of Sum of Money with Damages." Respondent
Estate alleged that Dans became insured by the DBP MRI Pool when
DBP, with full knowledge of Dans' age at the time of application,
required him to apply for MRI, and later collected the insurance
premium thereon. Respondent Estate therefore prayed: (1) that the
sum of P139,500.00, which it paid under protest for the loan, be
reimbursed; (2) that the mortgage debt of the deceased be
declared fully paid; and (3) that damages be awarded.
ISSUE:
1. Whether or not there was a perfected contract of insurance
between DBP MRI Pool and Juan Dans
2. Whether or not DBP is liable
HELD:
1. NO. When Dans applied for MRI, he filled up and personally
signed a "Health Statement for DBP MRI Pool" (Exh. "5-Bank") with
the following declaration:
I hereby declare and agree that all the statements and answers
contained herein are true, complete and correct to the best of my
knowledge and belief and form part of my application for insurance.
It is understood and agreed that no insurance coverage shall be
effected unless and until this application is approved and the full
premium is paid during my continued good health (Records, p. 40).
Under the aforementioned provisions, the MRI coverage shall take
effect: (1) when the application shall be approved by the insurance
pool; and (2) when the full premium is paid during the continued
good health of the applicant. These two conditions, being joined
conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with
the DBP MRI Pool. The pool, however, did not approve the
application of Dans. There is also no showing that it accepted the
sum of P1,476.00, which DBP credited to its account with full
knowledge that it was payment for Dan's premium. There was, as a
result, no perfected contract of insurance; hence, the DBP MRI Pool
cannot be held liable on a contract that does not exist.
2. YES. It was DBP, as a matter of policy and practice, that required
Dans, the borrower, to secure MRI coverage. Instead of allowing
Dans to look for his own insurance carrier or some other form of
insurance policy, DBP compelled him to apply with the DBP MRI
Pool for MRI coverage. When Dan's loan was released on August 11,
1987, DBP already deducted from the proceeds thereof the MRI
premium. Four days latter, DBP made Dans fill up and sign his
application for MRI, as well as his health statement. The DBP later
submitted both the application form and health statement to the
DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As
service fee, DBP deducted 10 percent of the premium collected by
it from Dans.
In dealing with Dans, DBP was wearing two legal hats: the first as a
lender, and the second as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of
applying for said insurance, thereby leading him and his family to
believe that they had already fulfilled all the requirements for the
MRI and that the issuance of their policy was forthcoming.
Apparently, DBP had full knowledge that Dan's application was
never going to be approved. The maximum age for MRI acceptance
is 60 years as clearly and specifically provided in Article 1 of the
Group Mortgage Redemption Insurance Policy signed in 1984 by all
the insurance companies concerned (Exh. "1-Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent
who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of
his authority without giving such party sufficient notice of his
powers."
The DBP is not authorized to accept applications for MRI when its
clients are more than 60 years of age (Exh. "1-Pool"). Knowing all
the while that Dans was ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its authority when it
accepted Dan's application for MRI by collecting the insurance
premium, and deducting its agent's commission and service fee.
The liability of an agent who exceeds the scope of his authority
depends upon whether the third person is aware of the limits of the
agent's powers. There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications for MRI.
The DBP's liability, however, cannot be for the entire value of the
insurance policy. To assume that were it not for DBP's concealment
of the limits of its authority, Dans would have secured an MRI from
another insurance company, and therefore would have been fully
insured by the time he died, is highly speculative. Considering his
advanced age, there is no absolute certainty that Dans could obtain
an insurance coverage from another company. It must also be
noted that Dans died almost immediately, i.e., on the nineteenth
day after applying for the MRI, and on the twenty-third day from the
date of release of his loan.
While Dans is not entitled to compensatory damages, he is entitled
to moral damages. No proof of pecuniary loss is required in the
assessment of said kind of damages (Civil Code of Philippines, Art.
2216). The same may be recovered in acts referred to in Article
2219 of the Civil Code.
G.R. No. L-20853 May 29, 1967
BONIFACIO BROS., INC., ET AL. vs. ENRIQUE MORA, ET AL.
Facts: Enrique Mora, owner of Oldsmobile sedan model 1956
mortgaged the same to the H.S. Reyes, Inc., with the condition that
the former would insure the automobile with the latter as
beneficiary. The automobile was thereafter insured on June 23,
1959 with the State Bonding & Insurance Co., Inc., and motor car
insurance policy was issued to Enrique Mora.
During the effectivity of the insurance contract, the car met with an
accident. The insurance company then assigned the accident to the
Bayne Adjustment Co. for investigation and appraisal of the
damage. Enrique Mora, without the knowledge and 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 was
billed at P2,102.73 through the H.H. Bayne Adjustment Co. The
insurance company 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 and delivery to the proper
party. In the meantime, the car was delivered to Enrique Mora
without the consent of the H.S. Reyes, Inc., and without payment 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 on May 8, 1961 a complaint with the Municipal Court 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. Enrique Mora was declared in
default for failure to appear at the hearing, and evidence against
him was received ex parte. However, the counsel for the Bonifacio
Bros. Inc., Ayala Auto Parts Co. and State Bonding & Insurance Co.
Inc. submitted a stipulation of facts, on the basis of which are
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 the Court of First Instance of Manila which affirmed the
decision of the MTC. 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
insurance company on the other?
Held: No. The appellants seek to recover the insurance proceeds,
and for this purpose, they rely upon paragraph 4 of the insurance
contract document executed by and between the State Bonding &
Insurance Company, Inc. and Enrique Mora which provides that "the
insured may authorize the repair of the Motor Vehicle necessitated
by damage for which the company may be liable under the policy
provided that (a) the estimated cost of such repair does not exceed
the Authorized Repair Limit, and (b) a detailed estimate of the cost
is forwarded to the company without delay."The appellants are not
mentioned in the contract as parties thereto nor is there any clause
or provision thereof from which we can infer that there is an
obligation on the part of the insurance company to pay the cost of
repairs directly to them. It is fundamental that contracts take effect
only between the parties thereto, except in some specific instances
provided by law where the contract contains some stipulation in
favor of a third person. Such stipulation is known as stipulation pour
autrui or a provision 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 benefit granted to him by the terms of the contract,
provided that the contracting parties have clearly and deliberately
conferred a favor upon such person. Consequently, a third person
not a party to the contract has no action against the parties
thereto, and cannot generally demand the enforcement of the
same. The question of whether a third person has an enforcible
interest in a contract, must be settled by determining whether the
contracting parties intended to tender him such an interest by
deliberately inserting terms in their agreement with the avowed
purpose of conferring a favor upon such third person. In this
connection, this Court has laid down the rule that the fairest test to
determine whether the interest of a third person in a contract is a
stipulation pour autrui or merely an incidental interest, is to rely
upon the intention of the parties as disclosed by their contract. In
the instant case the insurance contract does not contain any words
or clauses to disclose an intent to give any benefit to any
repairmen or materialmen in case of repair of the car in question.
The parties to the insurance contract omitted such stipulation,
which is a circumstance that supports the said conclusion. On the
other hand, the "loss payable" clause of the insurance 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.
As regards paragraph 4 of the insurance contract, a perusal thereof
would show that instead of establishing privity between the
appellants and the insurance company, such stipulation merely
establishes the procedure that the insured has to follow in order to
be entitled to indemnity for repair. This paragraph therefore should
not be construed as bringing into existence in favor of the
appellants a right of action against the insurance company as such
intention can never be inferred therefrom.
Another cogent reason for not recognizing a right of action by the
appellants against the insurance company is that "a policy of
insurance is a distinct and independent contract between the
insured and insurer, and third persons have no right either in a
court of equity, or in a court of law, to the proceeds of it, unless
there be some contract of trust, expressed or implied between the
insured and third person." In this case, no contract of trust,
expressed or implied exists. We, therefore, agree with the trial
court that no cause of action exists in favor of the appellants in so
far as the proceeds of insurance are concerned. The appellants'
claim, if at all, is merely equitable in nature and must be made
effective through Enrique Mora who entered into a contract with the
Bonifacio Bros. Inc. This conclusion is deducible not only from the
principle governing the operation and effect of insurance contracts
in general, but is clearly covered by the express provisions of
section 50 of the Insurance Act which 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.
MELECIO COQUIA, MARIA ESPANUEVA and MANILA YELLOW
TAXICAB CO., INC., vs. FIELDMEN'S INSURANCE CO., INC.
CONCEPCION, C.J.:
FACTS: Dec. 1, 1961 Fieldmens Insurance Co., issued in favour of
Manila Yellow Taxicab Co., Inc. a common carrier accident insurance
policy, covering the period from December 1, 1961 to December 1,
1962. It was stipulated in said policy that: The Company will,
subject to the Limits of Liability and under the Terms of this Policy,
indemnify the Insured in the event of accident caused by or arising
out of the use of Motor Vehicle against all sums which the Insured
will become legally liable to pay in respect of: Death or bodily injury
to any fare-paying passenger including the Driver ... who is riding in
the Motor Vehicle insured at the time of accident or injury.
2) Feb. 10, 1962 A taxicab of the Manila Yellow Taxicab Co., Inc.
(insured), driven by Carlito Coquia, met a vehicular accident at
Mangaldan, Pangasinan, in consequence of which Carlito died. 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 of compromise. The
Insured rejected the same and made a counter-offer for P4,000.00,
but the Company did not accept it.
3) Sept. 18, 1962 The Insured and Carlito's parents filed a
complaint against the Company to collect the proceeds of the
aforementioned policy. In its answer, the Company admitted the
existence thereof, but pleaded lack of cause of action on the part of
the plaintiffs.
4) TRIAL COURT Ruled in favour of the Coquias. Hence, this appeal
by the Fieldmens Insurance Co.
ISSUES:
1) Whether or not the Coquias have no contractual relation with the
Fieldmens Insurance Co.?
2) Whether or not the Insured has not complied with the provisions
of the policy concerning arbitration?
HELD:
1) NO, the Coquias HAVE a contractual relation with the Fieldmens
Insurance Co by virtue of a contract pour autrui.
GR: Only parties to a contract may bring an action based thereon
EXC: Art. 1311, CC (Contracts pour autrui): If a contract should
contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the
obligor before its revocation. A mere incidental benefit or interest of
a person is not sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third person.
Pursuant to the stipulations in the policy, the Company "will
indemnify any authorized Driver who is driving the Motor Vehicle"
of the Insured and, in the event of death of said driver, the
Company shall, likewise, "indemnify his personal representatives."
In fact, the Company "may, at its option, make indemnity payable
directly to the claimants or heirs of claimants ... it being the true
intention of this Policy to protect ... the liabilities of the Insured
towards the passengers of the Motor Vehicle and the Public" in
other words, third parties.
Thus, the policy under consideration is typical of contracts
pour autrui, this character being made more manifest by the fact
that the deceased driver paid fifty percent (50%) of the
corresponding premiums, which were deducted from his weekly
commissions. Under these conditions, it is clear that the Coquias
who, admittedly, are the sole heirs of the deceased have a direct
cause of action against the Company, and, since they could have
maintained this action by themselves, without the assistance of the
Insured, it goes without saying that they could and did properly join
the latter in filing the complaint herein.
2) NO, both the acts or omissions of the Insured and the Company
constituted a waiver of their respective right to demand arbitration.
Section 17 of the Policy reads:
If any difference or dispute shall arise with respect to the
amount of the Company's liability under this Policy, the
 same shall be referred to the decision of a single arbitrator
to be agreed upon by both parties or failing such agreement
of a single arbitrator, to the decision of two arbitrators, one
to be appointed in writing by each of the parties within one
calendar month after having been required in writing so to
do by either of the parties and in case of disagreement
between the arbitrators, to the decision of an umpire who
shall have been appointed in writing by the arbitrators
before entering on the reference and the costs of and
incident to the reference shall be dealt with in the Award.
And it is hereby expressly stipulated and declared that it
shall be a condition precedent to any right of action or suit
upon this Policy that the award by such arbitrator,
arbitrators or umpire of the amount of the Company's
liability hereunder if disputed shall be first obtained.
The record shows, however, that none of the parties to the contract
invoked Sec. 17 of the Policy, or made any reference to arbitration,
during the negotiations preceding the institution of the present
case. In fact, counsel for both parties stipulated, in the trial court,
that none of them had, at any time during said negotiations, even
suggested the settlement of the issue between them by arbitration,
as provided in said section. Their aforementioned acts or omissions
had the effect of a waiver of their respective right to demand an
arbitration.
DIONISIA, EULOGIO, MARINA, GUILLERMO and NORBERTO all
surnamed GUINGON, plaintiffs-appellees, vs. ILUMINADO DEL
MONTE, JULIO AGUILAR and CAPITAL INSURANCE and
SURETY CO., INC., defendants.
G.R. No. L-22042 August 17, 1967
BENGZON, J.P., J.:
FACTS: Julio Aguilar owned and operated several jeepneys in
the City of Manila. He entered into a contract with the Capital
Insurance & Surety Co., Inc. insuring the operation of his jeepneys
against accidents with third-party liability. An insurance policy was
then executed. The pertinent provisions of which:
Section II LIABILITY TO THE PUBLIC
1. The Company, will, subject to the limits of liability,
indemnify the Insured in the event of accident caused by or
arising out of the use of the Motor Vehicle/s or in connection
with the loading or unloading of the Motor Vehicle/s, against
all sums including claimant's costs and expenses which the
Insured shall become legally liable to pay in respect of:
a. death of or bodily injury to any person
b. damage to property
E. Action Against Company
No action shall lie against the Company unless, as a
condition precedent thereto, the Insured shall have fully
complied with all of the terms of this Policy, nor until the
amount of the Insured's obligation to pay shall have been
finally determined either by judgment against the Insured
after actual trial or by written agreement of the Insured, the
claimant, and the Company.
Any person or organization or the legal representative
thereof who has secured such judgment or written
agreement shall thereafter be entitled to recover under this
policy to the extent of the insurance afforded by the Policy.
Nothing contained in this policy shall give any person or
organization any right to join the Company as a co-
defendant in any action against the Insured to determine
the Insured's liability.
During the effectivity of such policy, del Monte, one of the drivers
of the jeepneys operated by Aguilar, bumped and killed Guingon.
Homicide thru reckless imprudence was filed against Iluminado del
Monte, who pleaded guilty.
As a corollary to such action, the heirs of Gervacio Guingon filed an
action for damages praying that the sum of P82,771.80 be paid to
them jointly and severally by the defendants, driver Iluminado del
Monte, owner and operator Julio Aguilar, and the Capital Insurance
& Surety Co., Inc. For failure to answer the complaint, Del Monte
and Aguilar were declared in default. Capital Insurance & Surety
Co., Inc. answered, alleging that the plaintiff has no cause of action
against it. xxx Appellant contends that the "no action" clause in the
policy closes the avenue to any third party which may be injured in
an accident wherein the jeepney of the insured might have been
the cause of the injury of third persons, alleging the freedom of
contracts.
ISSUES: (1) Can the plaintiffs sue the insurer. (cause of
action)
(2) If so, can plaintiffs sue the insurer jointly with the
insured.
RULING: YES (to both). The policy in the present case, as
aforequoted, is one whereby the insurer agreed to indemnify the
insured "against all sums . . . which the Insured shall become
legally liable to pay in respect of: a. death of or bodily injury to any
person . . . ." Clearly, therefore, it is one for indemnity against
liability;1 from the fact then that the insured is liable to the third
person, such third person is entitled to sue the insurer.1wph1.t to the estate of the deceased and not to the defendant personally;
The right of the person injured to sue the insurer of the party at
fault (insured), depends on whether the contract of insurance is
intended to benefit third persons also or only the insured. And the
test applied has been this: 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.
The "no action" clause in the policy of insurance cannot prevail
over the Rules of Court provision aimed at avoiding multiplicity of
suits. xxx Similarly, in the instant suit, Sec. 5 of Rule 2 on "Joinder
of causes of action" and Sec. 6 of Rule 3 on "Permissive joinder of
parties" cannot be superseded, at least with respect to third
persons not a party to the contract, as herein, by a "no action"
clause in the contract of insurance.
G.R. No. L-9374 February 16, 1915
FRANCISCO DEL VAL, ET AL., plaintiffs-appellants, vs.
ANDRES DEL VAL, defendant-appellee.
MORELAND, J.:
FACTS: The plaintiffs and defendant are brother and sisters. They
are the only heirs at law and next of kin of Gregorio Nacianceno del
Val who died intestate. Gregorio took out insurance on his life for
the sum of P40,000 and made it payable to the defendant as sole
beneficiary.
After his death the defendant collected the face of the policy, paid
the sum of P18,365.20 to redeem certain real estate which the
decedent had sold to third persons with a right to repurchase and
took possession of most of his personal property and the balance
on said insurance policy amounting to P21,634.80.
Plaintiffs contend that the amount of the insurance policy belonged
that, therefore, they are entitled to a partition not only of the real
and personal property, but also of the P40,000 life insurance. The
complaint prays a partition of all the property, both real and
personal, left by the deceased; that the defendant account for
P21,634.80, and that that sum be divided equally among the
plaintiffs and defendant along with the other property of deceased.
The defendant denies the material allegations of the complaint and
sets up as special defense and counterclaim that the redemption of
the real estate sold by his father was made in the name of the
plaintiffs and himself instead of in his name alone without his
knowledge or consent; and that it was not his intention to use the
proceeds of the insurance policy for the benefit of any person but
himself, he alleging that he was and is the sole owner thereof and
that it is his individual property. He, therefore, asks that he be
declared the owner of the real estate redeemed by the payment of
the P18,365.20, the owner of the remaining P21,634.80, the
balance of the insurance policy, and that the plaintiff's account for
the use and occupation of the premises so redeemed since the date
of the redemption.
Issue: Can the proceeds of the policy be divided among the heirs?
HELD: YES
With the finding of the trial court that the proceeds of the life-
insurance policy belong exclusively to the defendant as his
individual and separate property, we agree. That the proceeds of
an insurance policy belong exclusively to the beneficiary and not to
the estate of the person whose life was insured, and that such
proceeds are the separate and individual property of the
beneficiary, and not of the heirs of the person whose life was
insured, is the doctrine in America. We believe that the same
doctrine obtains in these Islands by virtue of section 428 of the
Code of Commerce, which reads:
The amount which the underwriter must deliver to the
person insured, in fulfillment of the contract, shall be the
property of the latter, even against the claims of the
legitimate heirs or creditors of any kind whatsoever of the
person who effected the insurance in favor of the former.
It is claimed by the attorney for the plaintiffs that the section just
quoted is subordinate to the provisions of the Civil Code as found in
article 1035. This article reads:
An heir by force of law surviving with others of the same
character to a succession must bring into the hereditary
estate the property or securities he may have received from
the deceased during the life of the same, by way of dowry,
gift, or for any good consideration, in order to compute it in
fixing the legal portions and in the account of the division.
Counsel also claim that the proceeds of the insurance policy were a
donation or gift made by the father during his lifetime to the
defendant and that, as such, its ultimate destination is determined
by those provisions of the Civil Code which relate to donations,
especially article 819. This article provides that "gifts made to
children which are not betterments shall be considered as part of
their legal portion."
We cannot agree with these contentions. The contract of life
insurance is a special contract and the destination of the proceeds
thereof is determined by special laws which deal exclusively with
that subject. The Civil Code has no provisions which relate directly
and specifically to life- insurance contracts or to the destination of
life insurance proceeds. That subject is regulated exclusively by the
Code of Commerce which provides for the terms of the contract,
the relations of the parties and the destination of the proceeds of
the policy.
The proceeds of the life-insurance policy being the exclusive
property of the defendant and he having used a portion thereof in
the repurchase of the real estate sold by the decedent prior to his
death with right to repurchase, and such repurchase having been
made and the conveyance taken in the names of all of the heirs
instead of the defendant alone, plaintiffs claim that the property
belongs to the heirs in common and not to the defendant alone.
We are not inclined to agree with this contention unless the fact
appear or be shown that the defendant acted as he did with the
intention that the other heirs should enjoy with him the ownership
of the estate in other words, that he proposed, in effect, to make
a gift of the real estate to the other heirs. If it is established by the
evidence that that was his intention and that the real estate was
delivered to the plaintiffs with that understanding, then it is
probable that their contention is correct and that they are entitled
to share equally with the defendant therein. If, however, it appears
from the evidence in the case that the conveyances were taken in
the name of the plaintiffs without his knowledge or consent, or that
it was not his intention to make a gift to them of the real estate,
then it belongs to him. If that facts are as stated, he has two
remedies. The one is to compel the plaintiffs to reconvey to him
and the other is to let the title stand with them and to recover from
them the sum he paid on their behalf.
THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-
appellee,
vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE
EBRADO, defendants-appellants.
G.R. No. L-44059. October 28, 1977
Facts:
Buenaventura Ebrado was insured by The Life Assurance Co., Ltd.
on a whole-life insurance policy for P5,882.00 with a rider for
Accidental Death for the same amount. Buenaventura designated
his common-law wife, Carponia Ebrado, as the revocable
beneficiary in his policy. When Buenaventura died as a result of an
accident when he was hit by a falling branch of a tree, Carponia
filed with the insurer a claim for the proceeds of the Policy as the
designated beneficiary therein, although she admits that she and
the insured Buenaventura were merely living as husband and wife2
without the benefit of marriage. Pascuala Vda. de Ebrado also filed
her claim as the widow of the deceased insured. She asserts that
she is the one entitled to the insurance proceeds, not the common-
law wife.
In doubt as to whom the insurance proceeds shall be paid, the
insurer commenced an action for interpleader. During the pre-trial
conference, Carponia and Pascuala agreed and stipulated, among
others that: 1) that the deceased Buenaventura was married to
Pascuala with whom she has 6 legitimate children and 2) that
during the lifetime of Buenaventura, he was living with his
common-wife, Carponia, with whom she had 2 children although he
was not legally separated from his legal wife.
The trial court rendered judgment declaring Carponia disqualified
from becoming beneficiary of the insured Buenaventura and
directing the payment of the insurance proceeds to the estate of
the deceased insured. The trial court held: It is patent from the last
paragraph of Art. 739 of the Civil Code that a criminal conviction for
adultery or concubinage is not essential in order to establish the
disqualification mentioned therein. Neither is it also necessary that
a finding of such guilt or commission of those acts be made in a
separate independent action brought for the purpose. The guilt of
the donee (beneficiary) may be proved by preponderance of
evidence in the same proceeding (the action brought to declare the
nullity of the donation).
Issue:
Whether or not a common-law wife, named as beneficiary in the
life insurance policy of a legally married man, can claim the
proceeds thereof in case of death of the latter.
Ruling:
NO, the common-law wife cannot claim the insurance proceeds.
(1) It is quite unfortunate that the Insurance Act (RA 2327, as
amended) or even the new Insurance Code (PD No. 612, as
amended) does not contain any specific provision grossly resolutory
of the prime question at hand.
Rather, the general rules of civil law should be applied to resolve
this void in the Insurance Law. Article 2011 of the New Civil Code
states: "The contract of insurance is governed by special laws.
Matters not expressly provided for in such special laws shall be
regulated by this Code." And under Article 2012 of the same Code,
"any person who is forbidden from receiving any donation under
Article 739 cannot be named beneficiary of a fife insurance policy
by the person who cannot make a donation to him. Common-law
spouses are, definitely, barred from receiving donations from each
other. Article 739 of the new Civil Code provides:
The following donations shall be void:
1. Those made between persons who were guilty of adultery or
concubinage at the time of donation;
Those made between persons found guilty of the same criminal
offense, in consideration thereof;
3. Those made to a public officer or his wife, descendants or
ascendants by reason of his office.
In the case referred to in No. 1, the action for declaration of nullity
may be brought by the spouse of the donor or donee; and the guilt
of the donee may be proved by preponderance of evidence in the
same action.
(2) In essence, a life insurance policy is no different from a civil
donation insofar as the beneficiary is concerned. Both are founded
upon the same consideration: liberality. A beneficiary is like a
donee, because from the premiums of the policy which the insured
pays out of liberality, the beneficiary will receive the proceeds or
profits of said insurance. As a consequence, the proscription in
Article 739 of the new Civil Code should equally operate in life
insurance contracts. The mandate of Article 2012 cannot be laid
aside: any person who cannot receive a donation cannot be named
as beneficiary in the life insurance policy of the person who cannot
make the donation.
[G.R. Nos. 128833. April 20, 1998]
RIZAL COMMERCIAL BANKING CORPORATION, UY CHUN BING AND
ELI D. LAO, petitioners, vs. COURT OF APPEALS and GOYU & SONS,
INC., respondents.
Facts:
RCBC Binondo Branch initially granted a credit facility of P30M to
Goyu & Sons, Inc. GOYUs applied again and through Binondo
Branch key officer's Uys and Laos recommendation, RCBCs
executive committee increased its credit facility to P50M to P90M
and finally to P117M.As security, GOYU executed 2 real estate
mortgages and 2 chattel mortgages in favor of RCBC. GOYU
obtained in its name 10 insurance policy on the mortgaged
properties from Malayan Insurance Company, Inc. (MICO), sister
company of RCBC. In February 1992, he was issued 8 insurance
policies in favor of RCBC.
April 27, 1992: One of GOYUs factory buildings was burned so he
claimed against MICO for the loss who denied contending that the
insurance policies were either attached pursuant to writs of
attachments/garnishments or that creditors are claiming to have a
better right
GOYU filed a complaint for specific performance and damages at
the RTC
RCBC, one of GOYUs creditors, also filed with MICO its formal claim
over the proceeds of the insurance policies, but said claims were
also denied for the same reasons that MICO denied GOYUs claims
RTC: Confirmed GOYUs other creditors (Urban Bank, Alfredo
Sebastian, and Philippine Trust Company) obtained their writs of
attachment covering an aggregate amount of P14,938,080.23 and
ordered that 10 insurance policies be deposited with the court
minus the said amount so MICO deposited P50,505,594.60. Another
Garnishment of P8, 696,838.75 was handed down
RTC: favoured GOYU against MICO for the claim, RCBC for damages
and to pay RCBC its loan
CA: Modified by increasing the damages in favor of GOYU
In G.R. No. 128834, RCBC seeks right to intervene in the action
between Alfredo C. Sebastian (the creditor) and GOYU (the debtor),
where the subject insurance policies were attached in favor of
Sebastian
RTC and CA: endorsements do not bear the signature of any officer
of GOYU concluded that the endorsements favoring RCBC as
defective.
ISSUE: W/N RCBC as mortgagee, has any right over the insurance
policies taken by GOYU, the mortgagor, in case of the occurrence of
loss
Held: RCBC has a right over the insurance proceeds.
It is settled that a mortgagor and a mortgagee have separate and
distinct insurable interests in the same mortgaged property, such
that each one of them may insure the same property for his own
sole benefit. There is no question that GOYU could insure the
mortgaged property for its own exclusive benefit. In the present
case, although it appears that GOYU obtained the subject insurance
policies naming itself as the sole payee, the intentions of the
parties as shown by their contemporaneous acts, must be given
due consideration in order to better serve the interest of justice and
equity.
It is to be noted that 9 endorsement documents were prepared by
Alchester in favor of RCBC. The Court is in a quandary how
Alchester could arrive at the idea of endorsing any specific
insurance policy in favor of any particular beneficiary or payee
other than the insured had not such named payee or beneficiary
been specifically disclosed by the insured itself. It is also significant
that GOYU voluntarily and purposely took the insurance policies
from MICO, a sister company of RCBC, and not just from any other
insurance company. Alchester would not have found out that the
subject pieces of property were mortgaged to RCBC had not such
information been voluntarily disclosed by GOYU itself. Had it not
been for GOYU, Alchester would not have known of GOYU's
intention of obtaining insurance coverage in compliance with its
undertaking in the mortgage contracts with RCBC, and verify,
Alchester would not have endorsed the policies to RCBC had it not
been so directed by GOYU.
To permit GOYU to capitalize on its non-confirmation of these
endorsements while it continued to enjoy the benefits of the credit
facilities of RCBC which believed in good faith that there was due
endorsement pursuant to their mortgage contracts, is to
countenance grave contravention of public policy, fair dealing,
good faith, and justice. Such an unjust situation, the Court cannot
sanction. Under the peculiar circumstances obtaining in this case,
the Court is bound to recognize RCBC's right to the proceeds of the
insurance policies if not for the actual endorsement of the policies,
at least on the basis of the equitable principle of estoppel.
GOYU cannot seek relief under Section 53 of the Insurance Code
which provides that the proceeds of insurance shall exclusively
apply to the interest of the person in whose name or for whose
benefit it is made. The peculiarity of the circumstances obtaining in
the instant case presents a justification to take exception to the
strict application of said provision, it having been sufficiently
established that it was the intention of the parties to designate
RCBC as the party for whose benefit the insurance policies were
taken out. Consider thus the following:
1. It is undisputed that the insured pieces of property were the
subject of mortgage contracts entered into between RCBC and
GOYU in consideration of and for securing GOYU's credit facilities
from RCBC. The mortgage contracts contained common provisions
whereby GOYU, as mortgagor, undertook to have the mortgaged
property properly covered against any loss by an insurance
company acceptable to RCBC.
2. GOYU voluntarily procured insurance policies to cover the
mortgaged property from MICO, no less than a sister company of
RCBC and definitely an acceptable insurance company to RCBC.

3. Endorsement documents were prepared by MICO's
underwriter, Alchester Insurance Agency, Inc., and copies thereof
were sent to GOYU, MICO and RCBC. GOYU did not assail, until of
late, the validity of said endorsements.
4. GOYU continued until the occurrence of the fire, to enjoy the
benefits of the credit facilities extended by RCBC which was
conditioned upon the endorsement of the insurance policies to be
taken by GOYU to cover the mortgaged properties.
This Court cannot over stress the fact that upon receiving its copies
of the endorsement documents prepared by Alchester, GOYU,
despite the absence written conformity thereto, obviously
considered said endorsement to be sufficient compliance with its
obligation under the mortgage contracts since RCBC accordingly
continued to extend the benefits of its credit facilities and GOYU
continued to benefit therefrom. Just as plain too is the intention of
the parties to constitute RCBC as the beneficiary of the various
insurance policies obtained by GOYU. The intention of the parties
will have to be given full force and effect in this particular case. The
insurance proceeds may, therefore, be exclusively applied to RCBC,
which under the factual circumstances of the case, is truly the
person or entity for whose benefit the policies were clearly
intended.
SINDAYEN V INSULAR LIFE
Doctrine:
The delivery of the policy to the insured by an agent of the
company who is authorized to make delivery or withhold
delivery is the final act which binds the company and the
insured, in the absence of fraud or other legal grounds for
rescission
FACTS:
Arturo Sindayen was a linotype operator in the Bureau of
Printing. He and his wife Fortunata went to Tarlac to spend
Christmas with his aunt Felicidad Estrada.
On Dec. 26, 1932, while still in Camiling, he made a written
application to Insular Life, through its agent, Cristobal
Hendoza, for a policy of insurance on his life in the sum of
1,000
He paid the agent P15 as part of the first premium. It was
agreed that the policy, when and if issued, should be
delivered to Felicidad with whom Sindayen left the sum
P25.06 to complete the payment of the first annual premium
of P40.06
On Jan 1, 1933, Sindayen was examined by Insulars doctor
who made a favorable report to Insular.
The next day, Sindayen returned to Manila and resumed his
work. On Jan. 11, 1933, Insular accepted the risk and issued
a policy, and mailed the same to its agent for delivery to the
insured.
On Jan. 12, 1933, Sindayen complained of a severe
headache. ON Jan. 15, 1933, he called a physician who
found that Sindayen was suffering from acute nephritis and
uremia. His illness did not yield to treatment and on Jan. 19,
1933, he died
The policy which the company issued and mailed in manila
on Jan. 11 1933 was received by its agent in Camilin on Jan.
16, 1933. On Jan 18, 1933, the agent, in accordance with his
agreement with the insured delivered the policy to Felicided
upon her payment of the balance of the 1st years premium.
The agent asked Felicidad if her nephew was in good health
and she replied that she believed so because she had no
information that he was sick, and thereupon , the policy was
handed to her by the agent.
On Jan. 20, 1933, the agent learned of the death of
Sindayen, afterwhich he called upon Felicidad and asked her
to return the policy. Felicidad did so.
On Feb. 4, 1933, the company obtained from Sindayens
widow Fortunata (also the beneficiary), her signature on a
legal document whereby in consideration of the sum 40.06
representing the amount of premium paid, Fortunata
thereby releases forever and discharges Insular from any
and all claims and obligations she may have against the
latter.
A check for the above-mentioned amount was drawn in the
name of Fortunata, but the same was never encashed.
Instead, it was returned to Insular and this complaint to
enforce payment under the policy was instituted.
The application which Sindayen signed in Camiling
contained the following provisions:
(3) That the said policy shall not take effect until the first
premium has been paid and the policy has been delivered
to and accepted by me, while I am in good health.
 The main defense of the company is the policy never took
effect because of par. 3 of the application, since at the time
of the delivery of the agent, the insured was not in good
health.
ISSUE: WON the policy already took effect.
HELD:
YES
An agent to whom a life insurance policy (similar to the one
at bar) was sent with instruction to deliver it to the insured,
has authority to bind the company by making such delivery,
ALTHOUGH the insured was NOT in good health at the time
of delivery, on the theory that the delivery of the policy
being the final act to the consummation of the contract, the
condition as to the insureds good health was WAIVED by the
company.
That the delivery of the policy by the agent to the insured
consummates the contract even though the agent knew that
the insured was NOT in good health at the time, the theory
being, that his knowledge is the companys knowledge; and
his delivery is the companys delivery; that when the
delivery is made notwithstanding this knowledge of the
defect, the company is deemed to have WAIVED such
defect.
The agent, Mendoza was duly licensed by the Insurance
Commission to act for Insular Life. He had the authority
given by him by the company to withhold the delivery of the
policy to the insured until the first premium has been paid
and the policy has been delivered to and accepted by the
insured while he is in good health. Whether that condition
had been met or not plainly calls for the exercise of
discretion. Mendozas decision that the condition had been
met by the insured and that it was proper to make delivery
of the policy to him is just as binding on the company as if
the decision had been made by its Board of Directors.
Admittedly, Mendoza made a mistake of judgment because
he acted on insufficient evidence as to the state of health of
the insured, and this mistake cannot be said to be induced
by any misconduct on the part of the insured.
It is in the interest of not only of the applicant but of all
insurance companies as well that there should be some act
which gives the applicant the definite assurance that the
contract has been consummated. This sense of security and
of peace of mind that ones dependents are provided for
without risk of either loss or of litigation is the bedrock of life
insurance.
A cloud will be thrown over the entire insurance business if
the condition of health of the insured at the time of the
delivery of the policy may be inquired into years afterwards
with the view of avoiding the policy on the ground that it
never took effect because of an alleged lack of good health
at the time of delivery.
That the delivery of the policy to the insured by an agent of
the company who is authorized to make delivery or withhold
delivery is the final act which binds the company and the
insured, in the absence of fraud or other legal grounds for
rescission. The fact that the agent to whom it has entrusted
this duty is derelict or negligent or even dishonest in the
performance of the duty which has been entrusted to him
would create an obligation based upon the authorized acts
of the agent toward a third party who was not in collusion
with the agent.
G.R. No. L-5915 March 31, 1955
EAGLE STAR INSURANCE CO., LTD., KURR STEAMSHIP CO.,
INC., ROOSEVELT STEAMSHIP AGENCY, INC., and LEIF HOEGH
& COMPANY, A/S., petitioners,
vs.
CHIA YU, respondent.
Reyes, A. J.
Facts:
Atkin, Kroll & Co., loaded 14 bales of assorted underwear valued at
P8,085.23 consigned to Chia Yu in the City of Manila. The shipment
was insured against all risks by Eagle Star Ins. Co. of San Francisco,
California, under a policy issued to the shipper and by the latter
assigned to the consignee. The vessel arrived in Manila and started
discharging its cargo into the custody of an arrastre operator .
Later, 10 out of 14 bales consigned to Chia Yu were only delivered.
Chia Yu claimed indemnity for the missing and damaged bales. But
the claim was declined, first, by the carrier and afterward by the
insurer, whereupon Chia Yu brought the present action against
both, including their respective agents in the Philippines.
More than two years after delivery of the damaged bales and the
date when the missing bales should have been delivered, the
action was resisted by the insurer principally on the ground of
prescription. The trial court found for Chia Yu and rendered
judgment in his favor for the sum claimed plus legal interest and
costs. The judgment was affirmed by the Court of Appeals, and the
case is now before us on appeal by certiorari.
On the part of the carrier the defense of prescription is made to
rest on the following stipulation of the bill of lading: In any event
the carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year
after the delivery of the goods or the date when the goods should
have been delivered.
The case for the insurer stands on a different footing, for its claim
of prescription is founded upon the terms of the policy and not
upon the bill of lading: No suit action on this Policy, for the
recovery of any claim, shall be sustainable in any Court of law or
equity unless the insured shall have fully complied with all the
terms and conditions of this Policy nor unless commenced with
twelve (12) months next after the happening of the loss
Issue
Whether the plaintiff's action against the insurer has prescribed?
Held:
No. Any 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.
As "matters respecting a remedy, such as the bringing of suit,
admissibility of evidence, and statute of limitations, depend upon
the law of the place where the suit is brought" (Insular
Government vs. Frank, 13 Phil. 236), any policy clause repugnant to
this amendment to the Insurance Act cannot be given effect in an
action in our courts.
Examining the policy sued upon in the present case, we find that its
prescriptive clause, if given effect in accordance with the terms of
the policy, would reduce the period allowed the insured for bringing
his action to less than one year. This is so because the said clause
makes the prescriptive period begin from the happening of the loss
and at the same time provides that the no suit on the policy shall
be sustainable in any court unless the insured shall have first fully
complied with all the terms and conditions of the policy, among
them that which requires that, as so as the loss is determined,
written claim therefor be filed with the carrier and that the letter to
the carrier and the latter's reply should be attached to the claim
papers to be sent to the insurer. It is obvious that compliance with
this condition precedent will necessarily consume time and thus
shorten the period for bringing suit to less than one year if the
period is to begin, as stated in the policy, from "the happening of
the loss." Being contrary to the law of the forum, such stipulation
cannot be given effect.
It may perhaps be suggested that the policy clause relied on by the
insurer for defeating plaintiff's action should be given the
construction that would harmonize it with section 61-A of the
Insurance Act by taking it to mean that the time given the insured
for bringing his suit is twelve months after the cause of action
accrues. But the question then would be: When did the cause of
action accrue? On that question we agree with the court below that
plaintiff's cause of action did not accrue until his claim was finally
rejected by the insurance company. This is because, before such
final rejection, there was no real necessity for bringing suit. As the
policy provides that the insured should file his claim, first, with the
carrier and then with the insurer, he had a right to wait for his claim
to be finally decided before going to court. The law does not
encourages unnecessary litigation.
Sun Insurance Office, Ltd. v. CA and Emilio Tan
G.R. No. 89741 March 13, 1991
Paras, J.
FACTS:
Emilio Tan took from Sun Insurance Office a P300,000.00 property
insurance policy tocover 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,
Tanfiled his claim for fire loss with Sun Insurance Office, but on
February 29, 1984, SunInsurance Office wrote Tan denying the
latters claim. On April 3, 1984, Tan wrote SunInsurance Office,
seeking reconsideration of the denial of his claim. Sun Insurance
Officeanswered the letter, advising Tans counsel that the Insurers
denial of Tans claim remainedunchanged.
ISSUES:
(1)WON the filing of a motion for reconsideration interrupts the 12
monthsprescriptive 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 tothe 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 anaction or suit be not
commenced either in the Insurance Commission orin any court of
competent jurisdiction within twelve (12) months fromreceipt of
notice of such rejection, or in case of arbitration taking placeas
provided herein, within twelve (12) months after due notice of
theaward made by the arbitrator or arbitrators or umpire, then the
claimshall for all purposes be deemed to have been abandoned and
shallnot thereafter be recoverable hereunder.As the terms are very
clear and free from any doubt or ambiguity whatsoever, it mustbe
taken and understood in its plain, ordinary and popular sense. Tan,
in his letter addressed to Sun Insurance Office dated April 3, 1984,
admitted thathe received a copy of the letter of rejection on April 2,
1984. Thus, the 12-monthprescriptive period started to run from
the said date of April 2, 1984, for such is the plainmeaning and
intention of Section 27 of the insurance policy. The condition
contained in an insurance policy that claims must be presented
withinone year after rejection is not merely a procedural
requirement but an important matteressential to a prompt
settlement of claims against insurance companies as it demands
thatinsurance 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 toSection 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
actionaccrues, 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 therejection in the first
instance (i.e. at the first occasion or for the first time), not
rejectionconveyed in a resolution of a petition for reconsideration.
Thus, to allow the filing of amotion for reconsideration to suspend
the running of the prescriptive period of twelvemonths, a whole
new body of rules on the matter should be promulgated so as to
avoid anyconflict that may be brought by it, such as:a.whether the
mere filing of a plea for reconsideration of a denial is sufficient
ormust 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 theclaim shall be deemed final only of it
contains words to the effect that the denial is final isinapplicable in
the instant case. Final rejection or denial cannot be taken to mean
therejection of a petition for reconsideration. The Insurance policy
in theEagle Star case provides that the insured should file his claim,
first, with the carrier and then with theinsurer. The final rejection
being referred to in said case is the rejection by the
insurancecompany.
G.R. No. L-15862 July 31, 1961
PAULO ANG and SALLY C. ANG vs. FULTON FIRE INSURANCE
CO., ET AL.,
Facts: On September 9, 1953, Fulton Fire Insurance Company
issued a policy in favor of P. & S Department Store (Sally C. Ang)
over stocks of general merchandise, consisting principally of dry
goods, contained in a building occupied by the plaintiffs. The
premium is P500.00 annually. The insurance was issued for one
year, but the same was renewed for another year on September
31, 1954. On December 17, 1954, the store containing the goods
insured was destroyed by fire. On December 30, plaintiffs executed
the first claim form. The claim together with all the necessary
papers relating thereto, were forwarded to the Manila Adjustment
Company, the defendants' adjusters and received by the latter on
June 8, 1955. On January 12, 1955, the Manila Adjustment
Company accepted receipt of the claim and requested the
submission of the books of accounts of the insured for the year
1953-1954 and a clearance from the Philippine Constabulary and
the police. On April 6, 1956, the Fulton Fire Insurance Company
wrote the plaintiffs that their claim was denied. This denial of the
claim was received by the plaintiffs on April 19, 1956. On January
13, 1955, Paulo Ang and ten others were charged for arson. The
case was remanded for trial to the Court of First Instance of Ilocos
Norte which acquitted Paulo Ang.
On May 26, 1958, the defendant Fulton Fire Insurance Company
filed an answer to the complaint, admitting the existence of the
contract of insurance, its renewal and the loss by fire of the
department store and the merchandise contained therein, but
denying that the loss by the fire was accidental, alleging that it was
occasioned by the willful act of the plaintiff Paulo Ang himself. It
claims that under paragraph 13 of the policy, if the loss or damage
is occasioned by the willful act of the insured, or if the claim is
made and rejected but no action is commenced within 12 months
after such rejection, all benefits under the policy would be forfeited,
and that since the claim of the plaintiffs was denied and plaintiffs
received notice of denial on April 18, 1956, and they brought the
action only on May 5, 1958, all the benefits under the policy have
been forfeited.
Issue: WON the action already prescribes?
Held: Yes. The condition contained in the insurance policy that
claims must be presented within one year after rejection is not
merely a procedural requirement. The condition is 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 in the nature of
a condition precedent to the liability of the insurer, or in other
terms, a resolutory cause, the purpose of which is to terminate all
liabilities in case the action is not filed by the insured within the
period stipulated.
Filipino Merchants Insurance Co Inc vs. CA
G.R. No. 85141. November 28, 1989
FACTS:
This is an action brought by the consignee of the
shipment of fishmeal loaded on board the vessel SS
Bougainville and unloaded at the Port of Manila on or about
December 11, 1976 and seeks to recover from the
defendant insurance company the amount of P51,568.62
representing damages to said shipment which has been
insured by Filipino Merchant.
Plaintiff insured said shipment with defendant
insurance company for the sum of P267,653.59 for the
goods described as 600 metric tons of fishmeal in new
gunny bags of 90 kilos each from Bangkok, Thailand to
Manila against all risks under warehouse to warehouse
terms. Actually, what was imported was 59.940 metric tons
not 600 tons at $395.42 a ton CNF Manila. The fishmeal in
666 new gunny bags were unloaded from the ship on
December 11, 1976 at Manila unto the arrastre contractor E.
Razon, Inc. and defendant's surveyor ascertained and
certified that in such discharge 105 bags were in bad order
condition as jointly surveyed by the ship's agent and the
arrastre contractor. It was later found out that the extent of
shortage or loss on the bad order bags totalling 227 bags
amounting to 12,148 kilos. Based on said computation the
plaintiff made a formal claim against the defendant Filipino
Merchants Insurance Company for P51,568.62, but the
defendant Filipino Merchants Insurance Company refused to
pay the claim. Consequently, the plaintiff brought an action
against said defendant as adverted to above and defendant
presented a third party complaint against the vessel and the
arrastre contractor.
RTC Manila rendered judgment in favor of private
respondent
CA affirmed the decision of the lower court
ISSUE: Whether Filipino Merchant may be held liable under
the all risks clause of the marine insurance policy in the
absence of proof of some fortuitous event, casualty, or
accidental cause to which the loss is attributable.
HELD:
The SC ruled that Filipino Merchant is liable under the
all risks clause of the marine insurance policy it had with
Choa.
Filipino Merchant contended that an "all risks" marine
policy has a technical meaning in insurance in that before a
claim can be compensable it is essential that there must be
"some fortuity, " "casualty" or "accidental cause" to which
the alleged loss is attributable and the failure of herein
private respondent, upon whom lay the burden, to adduce
evidence showing that the alleged loss to the cargo in
question was due to a fortuitous event precludes his right to
recover from the insurance policy.
The SC ruled in the negative. It explained that an "all
risks policy" should be read literally as meaning all risks
whatsoever and covering all losses by an accidental cause
 of any kind. The terms "accident" and "accidental", as used
in insurance contracts, have not acquired any technical
meaning. They are construed by the courts in their ordinary
and common acceptance. The term "all risks" cannot be
given a strained technical meaning, the language of the
clause under the Institute Cargo Clauses being unequivocal
and clear, to the effect that it extends to all damages/losses
suffered by the insured cargo except (a) loss or damage or
expense proximately caused by delay, and (b) loss or
damage or expense proximately caused by the inherent vice
or nature of the subject matter insured. Generally, the
burden of proof is upon the insured to show that a loss arose
from a covered peril, but under an "all risks" policy the
burden is not on the insured to prove the precise cause of
loss or damage for which it seeks compensation. The
insured under an "all risks insurance policy" has the initial
burden of proving that the cargo was in good condition
when the policy attached and that the cargo was damaged
when unloaded from the vessel; thereafter, the burden then
shifts to the insurer to show the exception to the coverage.
In the present case, there being no showing that the
loss was caused by any of the excepted perils, the insurer is
liable under the policy. There is no evidence presented to
show that the condition of the gunny bags in which the
fishmeal was packed was such that they could not hold their
contents in the course of the necessary transit, much less
any evidence that the bags of cargo had burst as the result
of the weakness of the bags themselves. Had there been
such a showing that spillage would have been a certainty,
there may have been good reason to plead that there was
no risk covered by the policy.
NOTE:
C & F contracts are shipment contracts. The term
means that the price fixed includes in a lump sum the cost
of the goods and freight to the named destination. 21 It
simply means that the seller must pay the costs and freight
necessary to bring the goods to the named destination but
the risk of loss or damage to the goods is transferred from
the seller to the buyer when the goods pass the ship's rail in
the port of shipment.
MAYER STEEL PIPE CORPORATION and HONGKONG
GOVERNMENT SUPPLIES DEPARTMENT vs. COURT OF
APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC.
and the CHARTER INSURANCE CORPORATION
G.R. No. 124050. June 19, 1997
PUNO, J.
FACTS: Petitioner Hongkong contracted petitioner Mayer to
manufacture and supply various steel pipes and fittings. From
August to October, 1983, Mayer shipped the pipes and fittings to
Hongkong. Prior to the shipping, Mayer insured the pipes and
fittings against all risks with private respondents South Sea Surety
and Insurance Co., Inc. (South Sea) and Charter Insurance Corp.
(Charter).
Industrial Inspection, a 3rd party inspector, certified all the pipes
and fittings to be in good order condition before they were loaded
in the vessel. Nonetheless, when the goods reached Hongkong, it
was discovered that a substantial portion thereof was damaged.
Petitioners filed a claim against private respondents for indemnity
under the insurance contract. Respondent Charter paid petitioner
Hongkong the amount of HK$64,904.75. Petitioners demanded
payment of the balance of HK$299,345.30 representing the cost of
repair of the damaged pipes. Private respondents refused to pay
because the insurance surveyor's report allegedly showed that the
damage is a factory defect which are not covered by the insurance
policies.
Trial court ruled in favor of petitioners. On appeal, CA affirmed the
finding of the trial court that the damage is not due to factory
defect and that it was covered by the "all risks" insurance policies
issued by private respondents to petitioner Mayer. However, it set
aside the decision of the trial court and dismissed the complaint on
the ground of prescription. It held that the action is barred under
Section 3(6) of the Carriage of Goods by Sea Act since it was filed
only on April 17, 1986, more than two years from the time the
goods were unloaded from the vessel. Section 3(6) of the Carriage
of Goods by Sea Act provides that "the carrier and the ship shall be
discharged from all liability in respect of loss or damage unless suit
is brought within one year after delivery of the goods or the date
when the goods should have been delivered." Respondent court
ruled that this provision applies not only to the carrier but also to
the insurer, citing Filipino Merchants Insurance Co., Inc. vs.
Alejandro.
ISSUE: Whether or not 3(6) of COGSA also applies to the
insurer.
RULING: NO, respondent court erred in applying Section
3(6) of COGSA. Under this provision, only the carrier's liability is
extinguished if no suit is brought within one year. But the liability
of the insurer is not extinguished because the insurer's liability is
based not on the contract of carriage but on the contract of
insurance. A close reading of the law reveals that the Carriage of
Goods by Sea Act governs the relationship between the carrier on
the one hand and the shipper, the consignee and/or the insurer on
the other hand. It defines the obligations of the carrier under the
contract of carriage. It does not, however, affect the relationship
between the shipper and the insurer. The latter case is governed
by the Insurance Code.
The Filipino Merchants case is different from the case at bar. In
Filipino Merchants, it was the insurer which filed a claim against the
carrier for reimbursement of the amount it paid to the shipper. In
the case at bar, it was the shipper which filed a claim against the
insurer. The basis of the shipper's claim is the "all risks" insurance
policies issued by private respondents to petitioner Mayer. xxx
When the court said in Filipino Merchants that Section 3(6) of
COGSA applies to the insurer, it meant that the insurer, like the
shipper, may no longer file a claim against the carrier beyond the
one-year period provided in the law. But it does not mean that the
shipper may no longer file a claim against the insurer because the
basis of the insurer's liability is the insurance contract. An
insurance contract is a contract whereby one party, for a
consideration known as the premium, agrees to indemnify another
for loss or damage which he may suffer from a specified peril. An
"all risks" insurance policy covers all kinds of loss other than those
due to willful and fraudulent act of the insured. Thus, when
private respondents issued the "all risks" policies to
petitioner Mayer, they bound themselves to indemnify the
latter in case of loss or damage to the goods insured. Such
obligation prescribes in ten years, in accordance with
Article 1144 of the New Civil Code.
G.R. No. L-33637 December 31, 1931
ANG GIOK CHIP, doing business under the name and style of
Hua Bee Kong Si, plaintiff-appellee,
vs.
SPRINGFIELD FIRE & MARINE INSURANCE
COMPANY, defendant-appellant.
FACTS:
Ang Giok Chip doing business under the name and style of Hua Bee
Kong Si was formerly the owner of a warehouse situated at No. 643
Calle Reina Regente, City of Manila. The contents of the warehouse
were insured with the three insurance companies for the total sum
of P60,000. One insurance policy, in the amount of P10,000, was
taken out with the Springfield Fire & Marine Insurance Company.
The warehouse was destroyed by fire on January 11, 1928, while
the policy issued by the latter company was in force.
Predicated on this policy the plaintiff instituted action in the Court
of First Instance of Manila against the defendant to recover a
proportional part of the loss coming to P8,170.59. Four special
defenses were interposed on behalf of the insurance company, one
being planted on a violation of warranty F fixing the amount of
hazardous goods which might be stored in the insured building. The
trial judge in his decision found against the insurance company on
all points, and gave judgment in favor of the plaintiff for the sum of
P8,188.74. From this judgment the insurance company has
appealed, and it is to the first and fourth errors assigned that we
would address particular attention.
The description of the risk in this policy is as follows:lawphil.net
Ten thousand pesos Philippine Currency. On
general non-hazardous merchandise, chiefly
consisting of chucherias, also produce, Cacao, Flour,
all the property of the Insured, or held by them in
trust, on commission or on joint account with others,
or for which he is responsible, while contained during
the currency of this policy in the godown, situate No.
643 Calle Reina Regent. . . .
This policy is subject to the hereon attached
"Ordinary Short Period Rate Scale"Warranties A & F,
Co-insurances Clause "and Three Fourths Loss
Clause," which are forming part of same. Co-
insurance declared:
"P20,000. Sun Insurance Office Ltd. (K & S)."
(Emphasis inserted.) Securely pasted on the left hand
margin of the face of the policy are five warranties
and special clauses. One of them is warranty F,
specially referred to on the face of the policy, reading
in part as follows:
WARRANTY F
It is hereby declared and agreed that during the
currency of this policy no hazardous goods be stored
 in the Building to which this insurance applies or in
any building communicating therewith, provided,
always, however, that the Insured be permitted to
stored a small quantity of the hazardous goods
specified below, but not exceeding in all 3 per cent of
the total value of the whole of the goods or
merchandise contained in said warehouse, viz; . . . .
The applicable law is found in the Instance Act, Act
No. 2427, as amended, section 65 reading:
"Every express warranty, made at or before the execution of a
policy, must be contained in the policy itself, or in another
instrument signed by the insured and referred to in the policy, as
making a part of it."
As the Philippine law was taken verbatim from the law of California,
in accordance with well settled canons of statutory construction,
the court should follow in fundamental points, at least, the
construction placed by California courts on a California law.
Unfortunately the researches of counsel reveal no authority coming
from the courts of California which is exactly on all fours with the
case before us. However, there are certain consideration lying at
the basis of California law and certain indications in the California
decisions which point the way for the decision in this case
ISSUE: Whether a warranty referred to in the policy as forming part
of the contract of insurance and in the form of a rider to the
insurance policy, is null and void because not complying with the
Philippine Insurance Act.
HELD: No. The warranty is valid. Petition dismissed.
The Insurance Act, Section 65, taken from California law, states:
"Every express warranty, made at or before the execution of a
policy, must be contained in the policy itself, or in another
instrument signed by the insured and referred to in the policy, as
making a part of it."
Warranty F, indemnifying for a value of Php 20,000 and pasted on
the left margin of the policy stated:
It is hereby declared and agreed that during the currency of this
policy no hazardous goods be stored in the Building to which this
insurance applies or in any building communicating therewith,
provided, always, however, that the Insured be permitted to stored
a small quantity of the hazardous goods specified below, but not
exceeding in all 3 per cent of the total value of the whole of the
goods or merchandise contained in said warehouse, viz; . . . .
Also, the court stated a book that said, "any express warranty or
condition is always a part of the policy, but, like any other part of
an express contract, may be written in the margin, or contained in
proposals or documents expressly referred to in the policy, and so
made a part of it."
It is well settled that a rider attached to a policy is a part of the
contract, to the same extent and with like effect as it actually
embodied therein. In the second place, it is equally well settled that
an express warranty must appear upon the face of the policy, or be
clearly incorporated therein and made a part thereof by explicit
reference, or by words clearly evidencing such intention.
The court concluded that Warranty F is contained in the policy
itself, because by the contract of insurance agreed to by the parties
it was made to be a part. It wasnt aseparate instrument agreed to
by the parties.
The receipt of the policy by the insured without objection binds
him. It was his duty to read the policy and know its terms. He also
never chose to accept a different policy by considering the earlier
one as a mistake. Hence, the rider is valid.
MALAYAN INSURANCE CO., INC. (MICO), petitioner,
vs.
GREGORIA CRUZ ARNALDO, in her capacity as the
INSURANCE COMMISSIONER, and CORONACION
PINCA, respondents.
G.R. No. L-67835. October 12, 1987
Facts:
On June 7, 1981, the petitioner (hereinafter called MICO) issued to
Coronacion Pinca, a Fire Insuance Policy on her property for the
amount of P14,000.00 effective July 22, 1981, until July 22, 1982.
On October 15,1981, MICO allegedly cancelled the policy for non-
payment, of the premium and sent the corresponding notice to
Pinca. On December 24, 1981, payment of the premium for Pinca
was received by Domingo Adora, agent of MICO. On January 15,
1982, Adora remitted this payment to MICO, together with other
payments.
On January 18, 1982, Pinca's property was completely burned. On
February 5, 1982, Pinca's payment was returned by MICO to Adora
on the ground that her policy had been cancelled earlier. But Adora
refused to accept it.
In due time, Pinca made the requisite demands for payment, which
MICO rejected. She then went to the Insurance Commission. The
Commission sustained Pinca, hence the appeal of MICO.
Issues:
Whether or not the petition made by MICO was still meritorious
Whether or not there was a valid cancellation of the insurance
policy
Ruling:
Whichever law is applicable, therefore, the petition can and should
be dismissed for late filing.
The petitioner relies heavily on Section 77 of the Insurance Code
providing that:
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 in this case. Notably, the
premium invoice issued to Pinca at the time of the delivery of the
policy on June 7, 1981 was stamped "Payment Received" of the
amoung of P930.60 on "12-24-81" by Domingo Adora. 14 This is
important because it suggests an understanding between MICO and
the insured that such payment could be made later, as agent Adora
had assured Pinca. In any event, it is not denied that this payment
was actually made by Pinca to Adora, who remitted the same to
MICO.
It is not disputed that the preium was actually paid by Pinca to
Adora on December 24, 1981, who received it on behalf of MICO, to
which it was remitted on January 15, 1982. What is questioned is
the validity of Pinca's payment and of Adora's authority to receive
it.
MICO's acknowledgment of Adora as its agent defeats its
contention that he was not authorized to receive the premium
payment on its behalf. It is clearly provided in Section 306 of the
Insurance Code that:
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance agant or
insurance broker a policy or contract of insurance shall be demmed
to have authorized such agent or broker to receive on its behalf
payment of any premium which is due on such policy or contract of
insurance at the time of its issuance or delivery or which becomes
due thereon.
And it is a well-known principle under the law of agency that:
Payment to an agent having authority to receive or collect payment
is equivalent to payment to the principal himself; such payment is
complete when the money delivered is into the agent's hands and
is a discharge of the indebtedness owing to the principal.
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 riskl as she was bound to first check his authority
to receive it.
We do not share MICO'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.
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 effective
date 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.
There is no proof that the notice, assuming it complied with the
other requisites mentioned above, was actually mailed to and
received by Pinca. All MICO'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.
On the other hand, there is the flat denial of Pinca, who says she
never received the claimed cancellation
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.