1. SHAFER V.

JUDGE OF OLONGAPO CITY

Issue/ruling:
Facts: This is a petition for review on certiorari. 1. Whether or not an injured party for whom the contract of insurance is intended can sue directly the
On 2 January 1985, petitioner Sherman Shafer obtained a private car policy, GA No. 0889, 2 over his insurer. YES.
Ford Laser car with Plate No. CFN-361 from Makati Insurance Company, Inc., for third party liability
(TPL).<äre||anº•1àw> During the effectivity of the policy, an information for reckless imprudence resulting in It is settled where the insurance contract provides for indemnity against liability to a third party, such
damage to property and serious physical injuries was filed against petitioner when he met an accident. third party can directly sue the insurer. The liability of the insurer to such third person is based on contract while
The owner of the damaged Volkswagen car filed a separate civil action against petitioner for damages, the liability of the insured to the third party is based on tort. It cannot evade its liability as insurer by hiding under
while Jovencio Poblete, Sr., who was a passenger in the Volkswagen car when allegedly hit and bumped by the car the cloak of the insured. Its liability is primary and not dependent on the recovery of judgment from the insured.
driven by petitioner, did not reserve his right to file a separate civil action for damages. Instead, in the course of the Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is primarily intended to
trial in the criminal case, Poblete, Sr. testified on his claim for damages for the serious physical injuries which he provide compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of
claimed to have sustained as a result of the accident. a negligent operation and use of motor vehicles. The victims and/or their dependents are assured of immediate
Shafer then filed a third party complaint against Makati Insurance Company which was allowed financial assistance, regardless of the financial capacity of the motor vehicle owners.
by the former presiding judge of the court. “. . . the insurer’s liability accrues immediately upon the occurrence of the injury or event upon which
Makati Insurance Co. moved to dismiss the case which was granted on the ground that it was the liability depends, and does not depend on the recovery of judgment by the injured party against the insured.”
premature. The court a quo issued an order dismissing the third party complaint on the ground that it was
premature, based on the premise that unless the accused (herein petitioner) is found guilty and sentenced to pay the
offended party (Poblete Sr.) indemnity or damages, the third party complaint is without cause of action. 3. GSIS vs. Court of Appeals 308 SCRA 559 (1997)
The court further stated that the better procedure is for the accused (petitioner) to wait for the outcome Facts: NFA National Food Authority was the owner of Chevrolet truck insured by GSIS-CMVLI. Victor Uy was
of the criminal aspect of the case to determine whether or not the accused, also the third party plaintiff, has a cause the owner of Toyota Tamaraw used as PU insured by Mabuhay Insurance and Guarantee-CMVLI. On May 9, 1979
of action against the third party defendant for the enforcement of its third party liability (TPL) under the insurance at Tabon-Tabon, Butuan City, the two vehicles collided resulting death and injuries to passengers of the Tamaraw.
contract.6 Petitioner moved for reconsideration of said order, but the motion was denied. Hence this petition. Petitioner denies solidary liability with the NFA or the negligent operator of the cargo truck because it claims that
Issue/s: Whether the accused in a criminal action for reckless imprudence, where the civil action they are liable under different obligations. It asserts that the NFAs liability is based on quasi-delict, while
is jointly prosecuted, can legally implead the insurance company as third party defendant under its private petitioner’s liability is based on the contract of insurance. Citing articles 1207 and 1208of the Civil Code of the
car insurance policy, as one of his modes of defense in the civil aspect of said proceedings. Philippines, petitioner asserts that the presumption is that its obligation arising from a contract of insurance is joint.
Ruling: YES. Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is primarily Issue: Whether or not GSIS and NFA are jointly liable.
intended to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers Held: NO. Petitioner’s position insofar as joint liability is concerned is not tenable. It is now established that the
as a result of a negligent operation and use of motor vehicles. 9 The victims and/or their dependents are assured of injured or the heirs of a deceased victim of a vehicular accident may sue directly the insurer of the vehicle. Note
immediate financial assistance, regardless of the financial capacity of motor vehicle owners. that common carriers are required to secure Compulsory Motor Vehicle Liability Insurance [CMVLI] coverage as
The liability of the insurance company under the Compulsory Motor Vehicle Liability Insurance provided under Sec. 374 of the Insurance Code, precisely for the benefit of victims of vehicular accidents and to
is for loss or damage. Where an insurance policy insures directly against liability, the insurer's liability extend them immediate relief. Compulsory Motor Vehicle Liability Insurance is primarily intended to provide
accrues immediately upon the occurrence of the injury or event upon which the liability depends, and does compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of a
not depend on the recovery of judgment by the injured party against the insured. 10 negligent operation and use of motor vehicles. The victims and/or their defendants [dependents] are assured of
The injured for whom the contract of insurance is intended can sue directly the insurer. The immediate financial assistance, regardless of the financial capacity of motor vehicle owners. However, although
general purpose of statutes enabling an injured person to proceed directly against the insurer is to protect injured the victim may proceed directly against the insurer for indemnity, the third-party liability is only up to the extent of
persons against the insolvency of the insured who causes such injury, and to give such injured person a certain the insurance policy and those required by law.
beneficial interest in the proceeds of the policy, and statutes are to be liberally construed so that their intended
purpose may be accomplished. It has even been held that such a provision creates a contractual relation which 4. Tiu vs. Arriesgado
inures to the benefit of any and every person who may be negligently injured by the named insured as if such Facts:  At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor Hollow Blocks and General
injured person were specifically named in the policy. 11 Merchandise" bearing plate number GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City.
In the instant case, the court a quo erred in dismissing petitioner's third party complaint on the ground Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a bridge, one of its rear
that petitioner had no cause of action yet against the insurance company (third party defendant). There is no need tires exploded. The driver, Sergio Pedrano, then parked along the right side of the national highway and removed
on the part of the insured to wait for the decision of the trial court finding him guilty of reckless imprudence. The the damaged tire to have it vulcanized at a nearby shop, about 700 meters away. Pedrano left his helper, Jose
occurrence of the injury to the third party immediately gave rise to the liability of the insurer under its policy. Mitante, Jr. to keep watch over the stalled vehicle, and instructed the latter to place a spare tire six fathoms away
behind the stalled truck to serve as a warning for oncoming vehicles. The trucks tail lights were also left on. It was
2. FIRST INTEGRATED BONDING & INSURANCE CO. VS. HERNANDO about 12:00 a.m., March 16, 1987. 
G.R. NO. L-51221, JULY 31, 1991
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724 driven by Virgilio Te Laspiñas was
Silverio Blanco was the owner of a passenger jeepney which he insured against liabilities for death and cruising along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu.
injuries to third persons with First Integrated Bonding and Insurance Company, Inc. for P30,000. The said jeepney As the bus was approaching the bridge, Laspiñas saw the stalled truck, which was then about 25 meters away. He
driven by Blanco himself bumped a five-year old child, Deogracias Advincula, causing the latter’s death. applied the breaks and tried to swerve to the left to avoid hitting the truck. But it was too late; the bus rammed into
A complaint for damages was brought by the child’s parents, the Advincula spouses, against Silverio the trucks left rear.
Blanco. First Insurance was also impleaded in the complaint as the insurer. Summons were served on Silverio
Blanco and First Insurance. However, only Blanco filed an answer. Upon motion of the Advincula spouses, First Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage, damages and attorneys
Insurance was declared in default. On the basis of the evidence presented by the Advincula spouses, judgment was fees before the Regional Trial Court of Cebu City, D Rough Riders bus operator William Tiu and his driver,
rendered by the trial court on March 1, 1978. First Insurance received a copy of the decision on March 14, 1978. Virgilio Te Laspiñas on May 27, 1987. The respondent alleged that the passenger bus in question was cruising at a
Upon motion of the Advincula spouses, the decision was amended on March 27, 1978 (p. 17, Rollo), which, in fast and high speed along the national road, and that petitioner Laspiñas did not take precautionary measures to
addition to the damages granted in the original decision, awarded damages in the amount of P6,336.50 to Silverio avoid the accident. 
Blanco.
First Insurance then filed a petition for certiorari contending that the victim’s parents have no cause of The petitioners, for their part, filed a Third-Party Complaint against the following: respondent Philippine Phoenix
action against it because they are not parties to the insurance contract and that they may only proceed against the Surety and Insurance, Inc. (PPSII), petitioner Tiu’s insurer; respondent Benjamin Condor, the registered owner of
driver based on the provisions of the New Civil Code. the cargo truck; and respondent Sergio Pedrano, the driver of the truck.
 action against an insurer but obviously to the written notice of claim that had to be submitted within six months
Issue: Whether respondent Phoenix Surety and Insrance, Inc. (PPSII) is liable from the time of the accident.

Ruling:Yes. In fact, respondent PPSII did not dispute the existence of such contract, and admitted that it was liable The insurance policy expressly provides that to be compensable, the injury or death should be caused by violent
thereon. It claimed, however, that it had attended to and settled the claims of those injured during the incident. As accidental external and visible means. In attempting to prove the cause of Gabriel’s death, all that Jacqueline could
can be gleaned from the Certificate of Cover, such insurance contract was issued pursuant to the Compulsory submit were a letter sent to her by her husband’s co-worker, stating that her husband died when he tried to haul
Motor Vehicle Liability Insurance Law. It was expressly provided therein that the limit of the insurer’s liability for water out of a tank while its submerged motor was still functioning and her sworn affidavit. The said affidavit were
each person was ₱12,000, while the limit per accident was pegged at ₱50,000. An insurer in an indemnity contract considered hearsay under the law for it suffers from procedural infirmity as it was not even testified to or identified
for third party liability is directly liable to the injured party up to the extent specified in the agreement but it cannot by Jacqueline herself.
be held solidarily liable beyond that amount. 58 The respondent PPSII could not then just deny petitioner Tiu’s
claim; it should have paid ₱12,000 for the death of Felisa Arriesgado,59 and respondent Arriesgado’s In summary, evidence is utterly wanting to establish that the insured suffered from an accidental death, the risk
hospitalization expenses of ₱1,113.80, which the trial court found to have been duly supported by receipts. The covered by the policy.
total amount of the claims, even when added to that of the other injured passengers which the respondent PPSII
claimed to have settled,60 would not exceed the ₱50,000 limit under the insurance agreement. 6. Traveller Insurance Surety Corp. vs. CA, 272 SCRA 536 [1997]

Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily intended to provide FACTS: Vicente Mendoza, Jr. as heir of his mother (Feliza Vineza de Mendoza) who was killed in a vehicular
compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of the accident, filed an action for damages against the erring taxicab driver (Rodrigo Dumlao), the owner (Armando
negligent operation and use of motor vehicles. The victims and/or their dependents are assured of immediate Abellon) of the taxicab (Lady Love Taxi with Plate No. 438-HA Pilipinas Taxi 1980) and the alleged insurer of the
financial assistance, regardless of the financial capacity of motor vehicle owners. 61 As the Court, speaking through vehicle which featured in the vehicular accident. The erring taxicab was allegedly covered by a third-party liability
Associate Justice Leonardo A. Quisumbing, explained in Government Service Insurance System v. Court of insurance policy issued by petitioner Travellers Insurance & Surety Corporation. Petitioner was included in the
Appeals:62 complaint as the compulsory insurer of the said taxicab under Certificate of Cover No. 1447785-3.
The trial court rendered judgment in favor of private respondent and ordered Rodrigo Dumlao, Armando
However, although the victim may proceed directly against the insurer for indemnity, the third party liability is Abellon and petitioner to pay private respondent death indemnity, moral damages, exemplary damages, attorney’s
only up to the extent of the insurance policy and those required by law. While it is true that where the insurance fees and other litigation expenses, jointly and severally. The decision was affirmed by the CA and the subsequent
contract provides for indemnity against liability to third persons, and such persons can directly sue the insurer, the MR was denied.  Hence this petition.
direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer ISSUE: Whether petitioner is liable to private respondent?
can be held liable in solidum with the insured and/or the other parties found at fault. For the liability of the insurer RULING: NO. The right of the person injured to sue the insurer of the party at fault (insured), depends on
is based on contract; that of the insured carrier or vehicle owner is based on tort. … whether the contract of insurance is intended to benefit third persons also or on the insured.   And the test applied
has been this:  Where the contract provides for indemnity against liability to third persons, then third persons to
Obviously, the insurer could be held liable only up to the extent of what was provided for by the contract of whom the insured is liable can sue the insurer. Where the contract is for indemnity against actual loss or payment,
insurance, in accordance with the CMVLI law. At the time of the incident, the schedule of indemnities for death then third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability
and bodily injuries, professional fees and other charges payable under a CMVLI coverage was provided for under actually discharged by him thru payment to third persons, said third persons’ recourse being thus limited to the
the Insurance Memorandum Circular (IMC) No. 5-78 which was approved on November 10, 1978. As therein insured alone.”
provided, the maximum indemnity for death was twelve thousand (₱12,000.00) pesos per victim. The schedules for The trial court did not distinguish between the private respondent’s cause of action against the owner and
medical expenses were also provided by said IMC, specifically in paragraphs the driver of the Lady Love taxicab and his cause of action against petitioner insurer. The former is based on torts
and quasi-delicts while the latter is based on contract.  Confusing these two sources of obligations as they arise
5. Jacqueline Jimenez Vda. De Gabriel v. Court of Appeals from the same act of the taxicab fatally hitting private respondent’s mother, and in the face of overwhelming
G.R. No. 103883, 14 November 1996, 264 SCRA 137 evidence of the reckless imprudence of the driver of the Lady Love taxicab, the trial court brushed aside its
ignorance of the terms and conditions of the insurance contract and forthwith found all three - the driver of the
FACTS: Marcelino Gabriel was employed by Emerald Construction & Development Corporation (Emerald taxicab, the owner of the taxicab, and the alleged insurer of the taxicab - jointly and severally liable for actual,
Construction for brevity) at its construction project in Iraq. He was covered by a personal accident insurance in the moral and exemplary damages as well as attorney’s fees and litigation expenses.  This is clearly a misapplication
amount of P100,000.00 under a group policy procured from Fortune Insurance and Surety Company (Fortune of the law by the trial court, and respondent appellate court grievously erred in not having reversed the trial court
Insurance for brevity) by Emerald Construction for its overseas workers. The insured risk was for bodily injury on this ground.
caused by violent accidental external and visible means which injury would solely and independently of any other
cause result in death or disability. 7. Summit Guaranty & Insurance Co. Inc. vs. Arnaldo, 158 SCRA 332 [1988];
FACTS: On November 26, 1976 a vehicular accident happened when a Ford Pick-up owned by Marcos Olaso was
On May 22, 1982, within the life of the policy, Gabriel died in Iraq. On July 12, 1983, Emerald Construction bumped by a cargo truck with owned by Alberto Floralde. FGU insurance by reason of Motor Vehicle Insurance
reported Gabriel’s death to Fortune Insurance by telephone. Because of this development, Fortune Insurance Policy paid Olaso the sum of P 2,817.50 as its share in the repair cost of the said Ford Pick-up. Having thus been
ultimately denied the claim of Emerald Construction on the ground of prescription. Gabriel’s widow, Jacqueline subrogated to the rights and causes of action of said Olaso in the said amount FGU formally demanded payment of
Jimenez, went to the lower court. In her complaint against Emerald Construction and Fortune Insurance, she said amount from Floralde and attempted to verify Floralde's insurance carrier. Floralde failed to reveal his
averred that her husband died of electrocution while in the performance of his work. insurance carrier.
In the early part of 1978 FGU was able to ascertain the Identity of Floralde's insurance carrier to be the
Fortune Insurance alleged that since both the death certificate issued by the Iraqi Ministry of Health and the Summit Guaranty and Insurance Company, Inc. Thereafter, FGU wrote to the insurance commissioner requesting
autopsy report of the NBI failed to disclose the cause of death of Gabriel, it denied liability under the policy. In for a conference with Summit and demanded from Summit through counsel the payment of the damages sustained
addition, private respondent raised the defense of prescription, invoking section 384 of the Insurance Code. by the car of Olaso but to no avail. Hence, FGU filed a case in the Insurance Commissioner's Office against
Summit for recovery of said amount.
ISSUE: Whether Jacqueline Jimenez vda. De Gabriel’s claim against Fortune Insurance should be denied on the A motion to dismiss the complaint was filed by Summit on May 30, 1978 on the ground of prescription
ground of prescription under Section 384 of PD No. 612 (Any person having any claim upon the policy issued pursuant to this chapter
shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim
HELD: Yes. The notice of death was given to Fortune Insurance, concededly, more than a year after the death of setting forth the amount of his loss, and/or the nature, extent and duration of the injuries sustained as certified by
Gabriel. The prescription referred to was not the one-year period from denial of the claim within which to file an a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the
claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must be brought, in
proper cases, with the Commissioner or the Courts within one year from date of accident, otherwise, the action does not accrue until the party obligated refuse, expressly or impliedly, to comply with its duty.In the instant
claimant's right of action shall prescribe.) case, petitioner sent a notice of claim to respondent insurance company as early as July 26, 1979 or two
In an order of June 19, 1978 the resolution of the motion was deferred until after the hearing on the monthsafter the accident. This was followed by a letter dated August 3, 1979 urging respondent insurance
merits. A motion for reconsideration of said order filed by Summit was denied in an order of June 28,1978 and company to take itappropriate action" on petitioner's claim. However, it was only a year later, on August 3, 1980
Summit was required to file its answer to the complaint. Hence, Summit filed the herein petition for certiorari and that respondent replied topetitioner's letter informing it that they could not take appropriate action on petitioners
prohibition with restraining order in this Court alleging that respondent commissioner acted with GADALEJ in claim because the attending adjusterwas still negotiating the case. Two months later, when respondent insurance
denying the aforesaid MR when it has been shown that the action has already prescribed so petitioner sought an company still failed to act on its claim, petitionerfiled the present case in court. During the hearing before the RTC,
order to restrain the respondent commissioner from further proceeding in the case during the pendency of the respondent insurance company never raised the defense of prescription. It was only on appeal that Section 384 of
petition. the Insurance Code was invoked by respondent insurance company andthe CA, relying on the plain language of the
ISSUE: Whether the action has prescribed law, dismissed the case on the ground of prescription.
RULING: No. The Court in a long line of cases had occasion to interpret the aforesaid provision of Section 384 of
the Insurance Code in this manner: Petitioner company contends that the two periods prescribed in the 9. NO CASE FOUND
aforementioned law — that is, the six-month period for filing the notice of claim and the one-year period for
bringing an action or suit — are mandatory and must always concur. Petitioner argues that under this law, even if 10. Perla Compania de Seguros, Inc. vs. Hon. Constante Ancheta, August 1988, 164 SCRA 144
the notice of claim was timely filed with the insurance company within the six-month period, as what happened in
the three cases before Us, the action or suit that follows, if filed beyond the one-year period should necessarily be Facts: There was a collision between the IH Scout (in which private respondents were riding) and a Superlines
dismissed on the ground of prescription. bus. Private respondents sustained injuries. A complaint for damages was filed against Superlines, the bus driver
We find no merit in the contention of petitioner. There is absolutely nothing in the law which mandates that the and petitioner insurance company, the insurer of the bus. The vehicle in which the private respondents were riding
two periods must always concur. On the contrary, it is very clear that the one-year period is only required 'in was insured with Malayan Insurance Co. Even before summons could be served, the judge issued an order for the
proper cases.' It appears that petitioner disregarded this very significant phrase when it made its own interpretation Insurance Company to pay immediately within 5 days the P5,000 under the “no-fault clause” as provided for in
of the law. Had the lawmakers intended it to be the way petitioner company assumes it to be, then the phrase in Section 378 of the Insurance Code. Petitioner moved for the reconsideration of the order; it was denied. Petitioner
proper cases' would not have been inserted. contends that under Sec. 378 of the Insurance Code, the insurer liable to pay the P5,000 is the insurer of the vehicle
It is very obvious that petitioner is trying to use Section 384 of the Insurance Code as a cloak to hide in which private respondents were riding, not petitioner.
itself from its liabilities. The facts of these cases evidently reflect the deliberate efforts of petitioner to prevent the
filing of a formal action against it. It is not denied that an extrajudicial demand for payment was made by Issue: Whether or not petitioner is the insurer liable to indemnify the private respondents under Sec. 378 of the
respondent FGU on petitioner but petitioner failed to respond to the same. Nevertheless the complaint was filed Insurance Code.
even before a denial of the claim was made by petitioner. For all legal purposes, the one-year prescriptive period
provided for in Section 384 of the Insurance Code has not begun to run. The cause of action arises only and starts Ruling: Yes. Supreme Court says that the provision is clear and unambiguous. Under Sec. 378, the claim shall lie
to run upon the denial of the claim by the insurance company. against the insurer of the vehicle in which the occupant is riding and no other. The claimant is not free to choose
from which insurer he will claim the “no fault indemnity” as the law uses the term “shall.” That said vehicle might
8. COUNTRY BANKERS INSURANCE CORP vs.THE TRAVELLERS INSURANCE AND SURETY not be the one that caused the accident is of no moment since the law itself provides that the party paying the claim
CORP. may recover against the owner of the vehicle responsible for the accident.

Facts: On May 24, 1979, a vehicular accident occurred involving a Toyota Land Cruiser owned by Philippine Essence of “no fault indemnity” clause: to provide victims of vehicular accidents or their heir’s immediate
Technical Consultants Inc.(PTCI) and an Isuzu Cargo Truck registered in the name of Avelino Matundan. The compensation pending final determination of who is responsible for the accident. The “no fault indemnity”
Toyota Land Cruiser, which was driven byNorlito R. Limen had stopped at a red light along Epifanio de los Santos provision is part and parcel of the Insurance Code provisions on compulsory motor vehicle liability insurance
Avenue when it was bumped from behind by the IsuzuCargo Truck driven by Alfredo Sion. The Toyota Land (Secs. 373-389) and should be read together with the requirement for compulsory passenger and/or third party
Cruiser suffered extensive damage so that its owner declared a total lossand claimed the proceeds of the insurance liability insurance (Sec. 377).
policy issued by petitioner Country Bankers Insurance Corporation. Finding the claimto be meritorious, petitioner
paid PTCI the amount of eighty-three thousand four hundred seventy pesos (P83,470.00). Assubrogee to all rights
and causes of action of PTCI, petitioner demanded reimbursement from the driver and owner of the IsuzuCargo Sec. 378. Any claim for death or injury to any passenger or third party pursuant to the provision of this chapter
truck and from private respondent travellers Insurance as the insurer of the truck, but the latter failed to act shall be paid without the necessity of proving fault or negligence of any kind. Provided, That for purposes of this
onpetitioner's claim.Petitioner filed a complaint in RTC against respondent, the driver and the owner of the truck. section —
Judgement was rendered in favorof petitioner and ordered that respondent pay damages but dismissed the
complaint as against the other 2 defendants. Onappeal, CA affirmed the judgment of RTC that it was the (i) The indemnity in respect of any one person shall not exceed five thousand pesos;
negligence and recklessness of Alfredo Sion, the driver of the IsuzuCargo Truck, which led to the vehicular (ii) The following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim:
accident. The CA also held that as the insurer of the truck, private respondent is liable toherein petitioner as the (a) Police report of accident, and
subrogee to all the rights and causes of action of the owner of the damaged Toyota Land Cruiser. (b) Death certificate and evidence sufficient to establish the proper payee, or
Nevertheless, the CA dismissed the complaint on the ground that petitioner's cause of action had prescribed. “The (c) Medical report and evidence of medical or hospital disbursement in respect of which
accident occurred on 24 May 1979, but the complaint was not filed until 14 October 1980, or almost seventeen refund is claimed;
(17) months after theaccident. Section 384 of the Insurance Code mandates that the "(a)ction or suit for recovery of
damage due to loss or injurymust be brought, in proper cases, with the courts within one year from the date of the (iii) Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim shall lie
accident, otherwise the claimant's right of action shall prescribe.” against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. In any other case,
Issue: Whether the one-year prescriptive period under Section 384 of the Insurance Code, prior to its amendment claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the
by BatasPambansa Blg. 874, should commence to run from the date of the accident or from the rejection of the claim to recover against the owner of the vehicle responsible for the accident shall be maintained.
claim by the insurer.
Ruling: It is counted from the time that the claim was rejected by the insurer.To prevent the insurance company 11. Villacorta vs. Insurance Commission (1980)
from evading its responsibility to the insured through prevent the insurance company from evading its Facts: Villacorta had her Colt Lancer car insured with Empire Insurance Company against own damage, theft, and
responsibility to the insured through this clever scheme, and to protect theinsuring public against similar acts by third-party liability. While the car was in Sunday Machine Works, Inc., a repair shop, one of the employees of the
other insurance companies, the Court held that the one-year period under Section 384should be counted not from said repair shop took it out for a joyride after which it figured in a vehicular accident. This resulted to the death of
the date of the accident but from the date of the rejection of the claim by the insurer. The Courtfurther held that it the driver and some of the passengers. It also caused extensive damage to the car.
is only from the rejection of the claim by the insurer that the insured's cause of action accrued since a causeof
 FACTS: Spouses Lim purchased a brand new red Ford Laser car from Supercars, Inc. in a sale by installment
Villacorta filed a claim for total loss with the said insurance company. However, the latter denied the claim on the secured by a chattel mortgage. The same car is insured with Perla Compania de Seguros (Perla). On the same day,
ground that the accident did not fall within the provisions of the policy either for the “Own Damage” or “Theft” Supercars, Inc. assigned its rights, title and interest to FCP Credit Corporation (FCP). On a later date, the vehicle
coverage, invoking the policy provision on Authorized Driver Clause. This was upheld by the Insurance was carnapped. Spouses Lim filed a claim for loss with Perla but this was denied on the ground that Evelyn Lim,
Commission which further stated that the car was not stolen and therefore not covered by the “Theft Clause”; that who was using the vehicle before it was carnapped, was in possession of an expired driver’s license at the time of
it is not evident that the person who took the car for a joyride intends to permanently deprive the insured of her car. the loss, in violation of the authorized driver clause of the insurance policy.

Issue: Whether the insurer company should pay the claim?

ISSUE: Whether or not Perla is liable despite the alleged violation of the authorized driver clause in the insurance
contract
Ruling: Yes. Where the insured’s car is wrongfully taken without the insured’s consent from the car service and
repair shop to whom it had been entrusted for check-up and repairs, respondent insurer is liable and must pay the
HELD: The Supreme Court held that Perla is liable to pay the insurance claim. The comprehensive motor car
insured for the total loss of the insured vehicle under the “Theft Clause” of the policy.
insurance policy issued by Perla covered loss or damage to the car: (a) xxx; (b) by fire, external explosion, self-
ignition or lightning or burglary, housebreaking or theft; (c) xxx. Where a car is admittedly unlawfully and
Assuming, despite the totally of inadequate evidence, that the taking was “temporary” and for a joyride only, the
wrongfully taken without the owner’s consent or knowledge, such taking constitutes theft, and therefore, it is the
Supreme Court holds that when a person, either with the object of going to a certain place, or learning how to
“THEFT” clause, and not the “AUTHORIZED DRIVER” clause that should apply.
drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the consent of its owner,
The Court of Appeals was correct in holding that: “...Theft is an entirely different legal concept from that of
he is guilty of theft because by taking possession of the personal property belonging to another and using it, his
accident. Theft is committed by a person with the intent to gain or, to put it in another way, with the concurrence of
intent to gain is evident since he derives there from utility, satisfaction, enjoyment, and pleasure.
the doer’s will. On the other hand, accident, although it may proceed or result from negligence, is the happening of
an event without the concurrence of the will of the person by whose agency it was caused.
Accordingly, the appealed decision is set aside and judgment is hereby rendered sentencing private respondent to
pay the petitioner the sum of P35,000.00 with legal interest from the filing of the complaint until full payment is
14. Finman General Assurance Corp. vs. Inocencio
made and to pay the costs of suit.
FACTS: Pan Pacific Overseas Recruiting Services, Inc. ("Pan Pacific") is a private, fee-charging, recruitment and
Main point: The mere happenstance that the employees used the car for their own illicit purpose does not mean
employment agency.
that the Authorized Driver Clause has been violated so as to bar recovery, provided that such employee is duly
qualified under a valid driver’s license. Moreover, when a person takes possession of a vehicle belonging to
another, without the consent of its owner, he is guilty of theft because his intent to gain is evident since he derives  Pan Pacific posted a surety bond issued by petitioner Finman General Assurance Corporation
utility, satisfaction, enjoyment, and pleasure there from. Hence, the insurer must indemnify the insured under the ("Finman") and was granted a license to operate by the POEA.
“Theft Clause” of the policy.  Private respondents William Inocencio, Perfecto Palero, Jr., Edwin Cardones and one Edwin Hernandez
filed with the POEA separate complaints against Pan Pacific for violation of Articles 32 and 34 (a) of
Authorized Driver Clause - it indemnifies the insured owner against loss or damage to the car but limits the use of the Labor Code, as amended and for refund of placement fees paid to Pan Pacific.
the insured vehicle to: (1) the insured himself, or (2) any person who drives on his order or with his permission.  The complainants alleged that Pan Pacific charged and collected such fees from them but did not secure
employment for them.
12. ANDREW PALERMO vs. PYRAMID INSURANCE CO., INC. [G.R. No. L-36480 May 31, 1988]  POEA Administrator motu proprio impleaded petitioner Finman as party respondent in its capacity as
Facts: Petitioner, having purchased a brand new Nissan Cedric de Luxe Sedan, insured the same with the surety for Pan Pacific. Separate summonses were served upon Finman and Pan Pacific.
defendant insurance company against any loss or damage for P 20,000.00 and against third party liability for P  Petitioner Finman filed an answer denying liability and states that: (1) the POEA had no "jurisdiction
10,000.00. While driving the automobile in question, the plaintiff met a violent accident. The insured, Andrew over surety bonds," that jurisdiction being vested in the Insurance Commission or the regular courts; (2)
Palermo, filed a complaint in the Court of First Instance against Pyramid Insurance Co., Inc., for payment of his it (Finman) had not violated Articles 32 and 34 (a) of the Labor Code and complainants' claims had
claim under a Private Car Comprehensive Policy issued by the defendant. accrued during the suspension of the principal obligor, Pan Pacific; (3) complainants had no cause of
In its answer, Pyramid Insurance Co., Inc., alleged that it disallowed the claim because at the time of the accident, action against Finman, since it was not privy to the transactions between them and Pan Pacific and had
the insured was driving his car with an expired driver's license. The court a quo rendered judgment ordering the not received any moneys from them; and (4) the amounts claimed by complainants had been paid by
defendant to pay the plaintiff value of the insurance of the motor vehicle in question and to pay the costs." them as deposits and not as placement fees.
Issue: Whether the insured is considered an unauthorized driver if he has an expired driver’s license, thus the  POEA issued an order holding respondents jointly and severally liable for the complainant’s claims.
insurer is not liable under the policy. Respondent agency is ordered to release cardones passport.
Ruling: There is no merit in the appellant's allegation. The driver of the insured motor vehicle at the time of the  Secretary of Labor upheld the POEA Order
accident was, the insured himself, hence an "authorized driver" under the policy. While the Motor Vehicle Law
prohibits a person from operating a motor vehicle on the highway without a license or with an expired license, an ISSUE: WON petitioner to pay private respondents' claims for refund against Pan Pacific on the basis of the
infraction of the Motor Vehicle Law on the part of the insured, is not a bar to recovery under the insurance surety bond issued by petitioner?
contract. It however renders him subject to the penal sanctions of the Motor Vehicle Law.
The requirement that the driver be "permitted in accordance with the licensing or other laws or regulations to drive HELD: YES. Under Section 176 of the Insurance Code, as amended, the liability of a surety in a surety bond is
the Motor Vehicle and is not disqualified from driving such motor vehicle by order of a Court of Law or by reason joint and several with the principal obligor. Petitioner's bond was posted by Pan Pacific in compliance with the
of any enactment or regulation in that behalf," applies only when the driver" is driving on the insured's order or requirements of Article 31 of the Labor Code.
with his permission." It does not apply when the person driving is the insured himself. The main purpose of the The tenor and scope of petitioner Finman's obligations under the bond it issued are set out in broad ranging terms
"authorized driver" clause, as may be seen from its text, is that a person other than the insured owner, who drives by Section 4, Rule II, Book I of the POEA Rules and Regulations:
the car on the insured's order, such as his regular driver, or with his permission, such as a friend or member of the
family or the employees of a car service or repair shop, must be duly licensed drivers and have no disqualification Section 4. Payment of Fees and Posting of Bonds. — Upon approval of the application by
to drive a motor vehicle. the Minister, the applicant shall pay an annual license fee of P6,000.00. It shall also post a
cash bond of P100,000.00 and a surety bond of P150,000.00 from a bonding company
13. Perla Cia. De Seguros, Inc. v. CA 208 SCRA 487 (1992) acceptable to the Administration duly accredited by the Office of the Insurance Commission.
The bonds shall answer for all valid and legal claims arising from violations of the
conditions for the grant and use of the license or authority and contracts of employment.
The bonds shall likewise guarantee compliance with the provisions of the Labor Code and
 its implementing rules and regulations relating to recruitment and placement, the rules of they made arrangements with the Bureau of Customs for staggered payments since the facts will bear out
the Administration and relevant issuances of the Ministry and all liabilities which the that other than the P 500,000.00 payment by respondents, no further payment was made by them thus
Administration may impose. The surety bonds shall include the condition that notice of leading the Bureau of Customs to go after the petitioner again. The private respondents, contend, however,
garnishment to the principal is notice to the surety. that since the petitioner has not made any payment with the Bureau of Customs, it cannot demand
reimbursement and, thus, petitioner cannot apply legal compensation or set-off against them because their
Doctrine: While petitioner Finman has refrained from attaching a copy of the bond it had issued to its Petition for liability has not yet become due and demandable.
Certiorari, there can be no question that the conditions of the Finman surety bond Pan Pacific had posted with the
POEA include the italicized portions of Section 4, Rule 11, Book I quoted above. It is settled doctrine that the
Clearly, the petitioner can demand reimbursement from the respondents even before it has
conditions of a bond specified and required in the provisions of the statute or regulation providing for the
actually paid its obligation to the Bureau of Customs. It can, in principle, be held liable under the
submission of the bond, are incorporated or built into all bonds tendered under that statute or regulation,
warehouse bonds even before actual payment to the Bureau of Customs. The liability has been fixed. What
even though not there set out in printer's ink
remains is simply its liquidation. The respondents who defaulted on the agreement to make staggered
payments thereby causing the petitioner's liability to the Bureau of Customs cannot refuse the set-off.
15. PIONEER INSURANCE & SURETY CORPORATION, petitioner, Consequently, legal compensation can take place between the petitioner and the private respondents, that is,
vs. THE HON. COURT OF APPEALS, WEAREVER TEXTILE MILLS, INC., and VICENTE the petitioner can partially set-off the insurance proceeds in the amount of P 1,144,744.49 against its liability
LIM, respondents. G.R. No. 76509 December 15, 1989 under the warehousing bonds which has been computed in the amount of P 9,031,000.00 as of 1983.

Facts: This is a petition for certiorari seeking to annul and set aside the decision of the Court of appeals which 16. MANILA SURETY & FIDELITY CO., INC. VS. COURT OF APPEALS AND WILLIAM QUASHA
affirmed the dismissal of the petitioner's complaint on the ground that compensation cannot take place between the G.R. NO. 55466, DECEMBER 3, 1990
petitioner and the private respondents as its requisites are not present.
Petitioner Pioneer Insurance and Surety Corporation issued general warehousing bonds in favor of the Sometime after 1951, the Republic of the Philippines, thru its Bureau of Internal Revenue, assessed the
Bureau of Customs for importation of raw materials in the total amount of P 6,500,000.00. The bonds were issued Bessire Housing Corporation (BESCO) in the amount of P16,840.04 representing percentage taxes for the year
on behalf of the private respondents Wearever Textile Mills, Inc. To secure the petitioner from and against any 1951. Apparently pressed for payment, the manager thereof (Leon Bessire) executed in his personal capacity on
and all harm, damages and losses of whatever kind and nature which it may incur as a consequence of its October 30, 1956, with Mutual Security Insurance Corporation an "Ordinary Bond for Payment of Taxes", wherein
becoming a surety upon the bonds, the respondents executed jointly and severally in favor of the petitioner the parties undertook to jointly and severally pay the Republic the aforementioned assessment in twelve (12) equal
indemnity agreements for said bonds. Private respondents failed to fulfil its obligation under the warehouse installments as scheduled therein.
bonds thus BOC demanded payment from petitioner. On the same day that the bond was posted, Leon Bessire, Manila Surety, and Corazon Santos Escobar
Meanwhile, pending this issue, a fire gutted the respondent's factory destroying materials insured in her personal capacity and as attorney-in-fact of Eduardo Escobar signed an indemnity agreement binding
with the petitioner in the amount of P l,144,744.49. Respondents demanded from the petitioner payment of themselves solidarily to indemnify Mutual Security for any damages or losses it may sustain as a result of its
the proceeds of the insurance policy but the latter refused to pay claiming that said proceeds must be having consented to become a surety in favor of the Bureau of Internal Revenue (BIR).
applied by way of partial compensation or set-off against its liability with the Bureau of Customs arising On May 19, 1958, Atty. William H. Quasha as substitute for Corazon Santos Escobar signed an
from the warehousing bonds. Indemnity Agreement whereby he undertook to jointly and severally with Leon Bessire and BESCO, indemnify
The trial court rendered judgment in favor of the private respondents and ordered the petitioner to pay, Manila Surety for any damage or loss it may suffer in consequence of its having consented to continue being
among others, the insurance proceeds in the amount of P l,144,744.49 plus legal interest from November 19, 1979 counter surety upon the indemnity.
until the whole amount is fully paid. On April 7, 1960, a letter of demand was again sent to Leon Bessire giving him until April 30, 1960 to
In this petition, Pioneer Insurance alleges that legal compensation or set-off under Articles 1278 and pay the balance of P10,430.02 and a letter of substantially the same tenor to Mutual Security. On June 12, 1961,
1279 can take place because there is due to private respondents from the petitioner the amount of P l,144,744.49 as Leon Bessire died.
proceeds of the fire insurance policy in the same manner that the private respondents are bound, jointly and On February 9, 1962, the Republic of the Philippines upon the request of the BIR filed a complaint
severally, to reimburse petitioner what the latter is liable to pay the Bureau of Customs in the total amount of P against Leon Bessire and Mutual Security Insurance Corporation (Mutual), to have the surety bond guaranteeing
6,390,259.00 and which, as of the date of the filing of the complaint, had already reached P 9,031,000.00. The the payment of percentage taxes forfeited and for the said defendants jointly and severally to pay P10,032.02 plus
petitioner also stresses that even if it has not yet paid the Bureau of Customs any amount, the private respondents interest at the legal rate and costs.
have already become indebted to the petitioner pursuant to the indemnity agreement which stands as the law On March 7, 1962, Mutual filed its answer with cross claim against Leon Bessire. On July 5, 1963 it
between the parties. filed a third party complaint against petitioner, Manila Surety and Fidelity Co., Inc. (Manila Surety). On July 26,
1963, Manila Surety filed a fourth-party complaint against herein private respondent, William H. Quasha.
Issue: Whether the petitioner can partially set-off the insurance proceeds in the amount of P 1,144,744.49
Disposition of cases under the lower courts (RTC and CA)
against its liability under the warehousing bonds which has been computed in the amount of P 9,031,000.00
as of 1983 by virtue of legal compensation?  RTC –
o Declared the surety bond issued by Mutual Security Insurance Corporation forfeited, and
ordering the defendant to ay the plaintiff P10,030.02 plus the legal interest rate of February
Ruling: YES. There is no dispute that the petitioner owes the private respondents the amount representing the 9, 1962 (the date of filing of the suit) until the amount is fully paid.
proceed of the insurance policy. The private respondents, however, try to negate their liability by questioning the o Ordered Manila Surety and Fidelity Co. to pay Mutual Security Insurance whatever amount
veracity and accuracy of the Bureau of Customs' demand letters to the petitioner and by claiming that they have no the latter as defendant is adjudged to pay the plaintiff, plus interest at 12% per annum from
more liability because of the fortuitous event. At the same time, however, they admit liability when they argue that date of payment.
the petitioner was released from the same upon their agreement with the Bureau of Customs to make staggered o The fourth-party defendant (William H. Quasha) was also ordered to pay Manila Surety and
payments. Finally, the private respondents argue that since the petitioner has not made any payment yet regarding Fidelity Co. the amount of judgment which the latter was ordered to pay with 12% interest
the amount demanded by the Bureau of Customs, there is nothing for which the petitioner should be reimbursed. per annum until fully paid.
It is needless to emphasize that at the time the fire occurred, the private respondents together  CA –
with the petitioner had already incurred liability on the warehousing bonds with the Bureau of Customs o Modified the decision by only making William H. Quasha liable for 12% interest per annum
because of the respondents' inability to comply with the provisions of their undertaking. It is, therefore,
starting from the finality of the CA decision (and not from July 5, 1963 which is the date
clear that as far as the amount of P 9,031,000.00 is concerned, both the petitioner and respondents were
when the complaint was filed). The CA reasoned that the amount of liability of both the
already liable for said amount to the Bureau of Customs when the contingency for which compensation is
movant and Manila Surety upon the surety bond is determined only after the decision of the
sought, happened. Neither can the respondents claim that the petitioner was released from liability when
case becomes final and executory. Hence, before the decision becomes final and executory
 and the extent of the liability of Manila Surety is not yet determined, Manila Surety as co- The beneficiaries, except the spouses Alarcon, executed special powers of attorney authorizing Capt.
surety can not demand the 12% per cent interest per annum from the movant as co-surety Nuval, President and General Manager of PMSI, to , among others, “follow-up, ask, demand, collect and receive”
because during this intervening period, there is no liability yet of the movant to pay, hence, for their benefit indemnities of sums of money due them relative to the sinking of the vessel. By virtue of these
there is no interest yet to be reckoned.  written powers of attorney, complainants-appellees were able to receive their respective death benefits. Unknown
to them, however, PMSI, in its capacity as employer and policyholder of the life insurance of its deceased workers,
Issue/ruling: filed with Insular Life formal claims for and in behalf of the beneficiaries, through Capt. Nuval. On the basis of the
1. Whether Quasha’s liability to pay the 12% interest in case of default under the Indemnity Agreement five special powers of attorney, Insular Life drew against its account six (6) checks, four for P200,000.00 each, one
arises only after the decision of the Court of Appeals becomes final and executory. NO. for P50,000.00 and another for P40,000.00 payable to the order of complainants-appellees. Capt. Nuval, upon
Since respondent Quasha’s liability arose on July 5, 1963, the date the third party complaint was filed receipt of these checks endorsed and deposited them in his own account.
and the same not having been paid, his liability to pay the 12% per cent interest per annum, in case of default as When the complainants-appellees learned that they were entitled, as beneficiaries, to life insurance
stated in the aforementioned indemnity agreement also arose. In the cases of Tagawa v. Aldanese, 43 Phil. 852, benefits under a group policy, they sought to recover these benefits from Insular Life but the latter denied their
859 [1922]; Plaridel Surety Insurance Co. v. P. L. Galang Machinery Co., 100 Phil. 679 [1957], it was held: "If a claim on the ground that the liability to complainants-appellees was already extinguished.
surety upon demand fails to pay, he can be held liable for interest, even if in thus paying, the liability becomes
more than that in the principal obligation. The increased liabilities is not because of the contract but because of the ISSUE: Whether or not Insular Life is bound by the misconduct of the employer.
default and the necessity of judicial collection."
RULING: A cursory reading of the questioned powers of attorney would disclose that they do not contain in clear
and unequivocal terms authority to Captain Nuval to obtain, receive, receipt from respondent company insurance
17. Great Pacific Life Insurance Corp. v. Court of Appeals G.R.No. 113899, 13 October 1999, 316 SCRA 677 proceed arising from the death of the seaman-insured. On the contrary, the said powers of attorney are couched in
terms which could easily arouse suspicion of an ordinary man.
FACTS: Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with In Elfstrom vs. New York Life Insurance Company, 27the California Supreme Court explicitly ruled that
Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan in group insurance policies, the employer is the agent of the insurer. Thus:
mortgagors of DBP. We are convinced that the employer is the agent of the insurer in performing the duties of administering
One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions group insurance policies. It cannot be said that the employer acts entirely for its own benefit or for the benefit of its
concerning his test, attesting among others that he does not have any heart conditions and that he is in good health employees in undertaking administrative functions. While a reduced premium may result if the employer relieves
to the best of his knowledge. the insurer of these tasks, and this, of course, is advantageous to both the employer and the employees, the insurer
However, after about a year, Dr. Leuterio died due to “massive cerebral hemorrhage.” When DBP submitted a also enjoys significant advantages from the arrangement. The reduction in the premium which results from
death claim to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose he had been employer-administration permits the insurer to realize a larger volume of sales, and at the same time the insurer's
suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that own administrative costs are markedly reduced.
justified the denial of the claim. The most persuasive rationale for adopting the view that the employer acts as the agent of the insurer,
Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for “Specific Performance with however, is that the employee has no knowledge of or control over the employer's actions in handling the policy or
Damages.” Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay its administration. An agency relationship is based upon consent by one person that another shall act in his behalf
DBP. and be subject to his control. It is clear from the evidence regarding procedural techniques here that the insurer-
employer relationship meets this agency test with regard to the administration of the policy, whereas that between
ISSUE: Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract the employer and its employees fails to reflect true agency. The insurer directs the performance of the employer's
from a complaint filed by the widow of the decedent/mortgagor administrative acts, and if these duties are not undertaken properly the insurer is in a position to exercise more
constricted control over the employer's conduct.
HELD: The rationale of a group of insurance policy of mortgagors, otherwise known as the “mortgage redemption In Neider vs. Continental Assurance Company, which was cited in Elfstrom, it was held that:
insurance,” is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it the employer owes to the employee the duty of good faith and due care in attending to the policy, and that the
has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the employer should make clear to the employee anything required of him to keep the policy in effect, and the time
subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the that the obligations are due. In its position as administrator of the policy, we feel also that the employer should be
mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample considered as the agent of the insurer, and any omission of duty to the employee in its administration should be
protection is given to the mortgagor under such a concept so that in the event of death, the mortgage obligation will attributable to the insurer.
be extinguished by the application of the insurance proceeds to the mortgage indebtedness. In this type of policy In the light of the above disquisitions and after an examination of the facts of this case, we hold that
insurance, the mortgagee is simply an appointee of the insurance fund. Such loss-payable clause does not make the PMSI, through its President and General Manager, Capt. Nuval, acted as the agent of Insular Life. The latter is thus
mortgagee a party to the contract. bound by the misconduct of its agent.chanroblesvirtualawlibrary chanrobles virtual law library
The insured, being the person with whom the contract was made, is primarily the proper person to bring suit
thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the 19. Yu Ban Chuan v Fieldmen’s Insurance Co (1965)
benefit of another person, such as a mortgagee.
And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether FACTS: Yu Ban Chuan is a chinese man doing business of wholsesale deaing in gereneral merhcandise and
he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the school supplies under the name of CMC Trading. His business was first situated in Nueva Street, Manila. While at
widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife. this place, plainitff insured against first his stock merchandise with open policies from 2 insurance companies.
When he transferred his business to Muelle de Binondo. Manila, his 2 insurers agreed to have the coverage of his
18. LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON, DINA LORENA AYO, CELIA policy transferred to the new premises and acknowledged the existence of co insurance.
CALUMBAG and LUCIA LONTOK, Petitioners, vs. HON. COURT OF APPEALS and THE INSULAR
LIFE ASSURANCE COMPANY, LIMITED, Respondents. Less than a month after his transfer, Yu Buan’s business establishment in Binondo was totally destroyed by fire.

FACTS: This is an action for the payment of insurance claims and prayer for administrative sanctions. Prime Because of Yu Ban’s non-compliance or failure to submit the required documents and the adjusters’ demand in
Marine Services, Inc. (PMSI), a crewing/manning outfit, procured a Group Policy from Insular Life Assurance subsequent letters that he submit additional papers, the adjusters and Yu Ban engaged in an exchange of
Co., Ltd. to provide life insurance coverage to its sea-based employees. During the effectivity of the policy, six communications, until finally Fieldman’s Insurance rejected Yu Ban’s claims, and denied liability under their
covered employees perished at sea when their vessel sunk. They were survived by the complainants-appellees, the respective policies, evidently upon their respective adjusters’ recommendations.
beneficiaries under the policy.
The plaintiff commenced suit in the Court of First Instance of Manila, and the defendants answered the complaint Thereafter, Julian Sy filed a claim with Reliance and in support of his claim,submitted the fire clearance, the
with identical special defenses; to wit: insurance policies and inventory of stocks. His claim was denied. He further testified that the 3 insurance
companies are sister companies, when he was following-up his claim with Equitable Insurance, the Claims
1. Insured’s failure to prove the loss claimed; Manager told him to go first to Reliance Insurance and if said company agrees to pay, they would also pay. The
2. False and fraudulent claim; and same treatment was given him by the other insurance companies. Ultimately, the three insurance companies denied
3. arson or causes not independent of the will of the insured; and counterclaims for the annulment of the plaintiffs' claim for payment.
policies. Reliance Insurance, in its letter said that "plaintiff's claim is denied for breach of policy conditions” specifically for
the non-disclosure of previous insurance on said goods. Petitioners admit the coverage by other insurance or co-
In proving the value of his loss, the plaintiff relied upon a merchandise inventory as of 31 December 1959, which insurance effected or subsequently arranged by petitioners were neither stated nor endorsed in the policies of the
he had allegedly submitted on 15 January 1960 to the Bureau of Internal Revenue. three (3) private respondents, warranting forfeiture of all benefits thereunder if we are to follow the express
stipulation in the aforequoted Policy Condition No. 3.
ISSUE: Whether Yu Ban is bound to provide the insurance company a proof of loss. Petitioners contend that they are not to be blamed for the omissions, alleging that insurance agent Leon Alvarez
(for Western) and Yap Kam Chuan (for Reliance and Equitable) knew about the existence of the additional
HELD: NO. Shielding himself under Section 82 of the Insurance Act, the plaintiff asserts that in submitting his insurance coverage and that they were not informed about the requirement that such other or additional insurance
proof of loss he was “not bound to give such proof as would be necessary in a court of justice”. The assertion is should be stated in the policy, as they have not even read policies.
correct, but does not give him any justification for submitting false proofs. Their falsity is the best evidence of the
fraudulent character and the unmeritoriousness of plaintiff’s claim. ISSUE: Whether Conditions 3 and 27 of the Insurance Contracts were violated by petitioners thereby resulting in
their forfeiture of all the benefits thereunder (YES)
The fact of the filing of the inventory as of 15 January 1960 should be considered as true, since there is no
evidence to the contrary. However, it was an error of the trial court of accepting as true the actual existence at the RULING: YES. Condition No. 3 of said insurance policies, otherwise known as the "Other Insurance Clause," is
burned premises of the stocks mentioned in the inventory. uniformly contained in all the aforestated insurance contracts of herein petitioners, as follows:

Six (6) of the many copies of the invoices submitted by the plaintiff to the adjusters uncover a clear case of fraud a. The insured shall give notice to the Company of any insurance or insurances already
and misrepresentation effected, or which may subsequently be effected, covering any of the property or properties
consisting of stocks in trade, goods in process and/or inventories only hereby insured, and
Manager of one of the suppliers denied signing the purchase invoice in favor of petitioner unless such notice be given and the particulars of such insurance or insurances be stated
There were dubious invoices issued by fictitious companies. therein or endorsed on this policy pursuant to Section 50 of the Insurance Code, by or on
There were invoices indicating that merchandise were delivered to the new place of business even way before it behalf of the Company before the occurrence of any loss or damage, all benefits under this
transferred on 15 January 1960. policy shall be deemed forfeited, force at the time of loss or damage not more than
P200,000.00.
The plaintiff, Yu Ban Chuan, adopted a uniform, too uniform, in fact, to be believed, explanation for all the
invoices: that he did not buy the merchandise at the companies’ addresses but bought from the agents who brought
the goods to him; that the originals of the invoices were burned and that he requested for true copies from the Sy never disclosed co-insurance in the contracts he entered into with the 3 corporations. The insured is specifically
agents whom he met casually in the streets after the fire and these agents delivered the exhibits to him; but he did required to disclose the insurance that he had contracted with other companies. Sy also contended that the
not remember, or know the names of these agents, nor did he know their whereabouts. insurance agents knew of the co-insurance. However, the theory of imputed knowledge, that the knowledge of the
agent is presumed to be known by the principal, is not enough. When the words of the document are readily
In other words, he wants the court to believe also that these agents performed a vanishing act after each one of understandable by an ordinary reader, there is no need for construction anymore. The conformity of the insured to
them had turned in the copy of each invoice to the plaintiff. the terms of the policy is implied with his failure to disagree with the terms of the contract. Since Sy, was a
businessman, it was incumbent upon him to read the contracts.
The plaintiff adheres to the inventory as the immaculate basis for the actual worth of stocks that were burned, on “Also, policy condition 15 was used. It stated: 15.. if any false declaration be made or used in support thereof, . . .
the ground that it was made from actual count, and in compliance with law. But this inventory is not binding on the all benefits under this Policy shall be forfeited . . .”
defendants, since it was prepared without their intervention. As for condition number 27, the stipulation read:

It is well to note that plaintiff had every reason to show that the value of his stock of goods exceeded the amount of a. 27. Action or suit clause. — If a claim be made and rejected and an action or suit be
insurance that he carried. And the inventory, having been made prior to the fire, was no proof of the existence of not commenced either in the Insurance Commission or any court of competent
these goods at the store when the fire occurred. jurisdiction of notice of such rejection, or in case of arbitration taking place as
provided herein, within twelve (12) months after due notice of the award made by the
True, there were merchandise that were actually destroyed by fire. But when fraud is conceived, what is true is arbitrator or arbitrators or umpire, then the claim shall for all purposes be deemed to
subtly hidden by the schemer beneath proper and legal appearances, including the preparation of the inventory. have been abandoned and shall not thereafter be recoverable hereunder.

The filing of collection suits for unpaid purchases against Yu Ban Chuan, however valid these may be, do not This is regarding Sy’s claim for one of the companies. Recovery was filed in court by petitioners only on January
legitimize his fraudulent claim against the insurers in the present case, nor show that the goods allegedly delivered 31, 1984, or after more than one 1 year had elapsed from petitioners' receipt of the insurers' letter of denial on
were at the store when the fire occurred. November 29, 1982. This made it void.

20. New Life vs. CA, 207 SCRA 669 21. American vs. Chua, 309 SCRA 250;
FACTS: Julian Sy and Jose Sy Bang formed New Life Enterprises, the partnership engaged in the sale of FACTS: Petitioner is a domestic corporation engaged in the insurance business. Sometime in 1990, respondent
construction materials at its place of business, a two-storey building situated at Iyam, Lucena City. Julian Sy obtained from petitioner a fire insurance covering the stock-in-trade of his business, Moonlight Enterprises, located
insured the stocks in trade of New Life Enterprises with Western Guaranty Corporation for P350,000.00, Reliance at Valencia, Bukidnon. The insurance was due to expire on 25 March 1990. On 5 April 1990 respondent issued
Surety and Insurance. Co., Inc. for P700,000.00, and Equitable Insurance Corporation for P200,000.00 PCIBank Checkin the amount of P2,983.50 to petitioner’s agent, James Uy, as payment for the renewal of the
When the building was gutted by fire which was electrical in nature, the stocks in the trade inside said building policy. In turn, the latter delivered Renewal Certificate to Respondent. The check was drawn against a Manila bank
were insured against fire in the total amount of P1,550,000.00. and deposited in petitioner’s bank account in Cagayan de Oro City. The corresponding official receipt was issued
on 10 April. Subsequently, a new insurance policy, Policy, was issued, whereby petitioner undertook to indemnify
respondent for any damage or loss arising from fire up to P200,000 for the period 25 March 1990 to 25 March policy. To constitute a violation the other existing insurance contracts must be upon the same subject matter and
1991. with the same interest and risk. Indeed, respondent acquired several co-insurers and he failed to disclose this
On 6 April 1990 Moonlight Enterprises was completely razed by fire. Total loss was estimated between information to petitioner. Nonetheless, petitioner is estopped from invoking this argument. The trial court cited the
P4,000,000 and P5,000,000. Respondent filed an insurance claim with petitioner and four other co-insurers, testimony of petitioner’s loss adjuster who admitted previous knowledge of the co-insurers. Indubitably, it cannot
namely, Pioneer Insurance and Surety Corporation, Prudential Guarantee and Assurance, Inc., Filipino Merchants be said that petitioner was deceived by respondent by the latter’s non-disclosure of the other insurance contracts
Insurance Co. and Domestic Insurance Company of the Philippines. Petitioner refused to honor the claim when petitioner actually had prior knowledge thereof. Petitioner’s loss adjuster had known all along of the other
notwithstanding several demands by respondent, thus, the latter filed an action against petitioner before the trial existing insurance contracts, yet, he did not use that as basis for his recommendation of denial. The loss adjuster,
court. RTC ruled in favor of respondent. being an employee of petitioner, is deemed a representative of the latter whose awareness of the other insurance
Petitioner filed a MR. Petitioner reiterates its stand that there was no existing insurance contract contracts binds petitioner. We, therefore, hold that there was no violation of the "other insurance" clause
between the parties. It invokes Section 77 of the Insurance Code, which provides: An insurer is entitled to payment by Respondent.
of the premium as soon as the thing insured 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 3. Petitioner is liable to pay its share of the loss. The trial court and the Court of Appeals were correct in awarding
unless and until the premium thereof has been paid, except in the case of life or an industrial life policy whenever P200,000 for this. There is, however, merit in petitioner’s grievance against the damages and attorney’s fees
the grace period provision applies. Petitioner emphasizes that when the fire occurred on 6 April 1990 the awarded.
insurance contract was not yet subsisting pursuant to Article 1249 3 of the Civil Code, which recognizes that a There is no legal and factual basis for the award of P200,000 for loss of profit. It cannot be denied that the fire
check can only effect payment once it has been cashed. Although respondent testified that he gave the check on 5 totally gutted respondent’s business; thus, respondent no longer had any business to operate. His loss of profit
April to a certain James Uy, the check, drawn against a Manila bank and deposited in a Cagayan de Oro City bank, cannot be shouldered by petitioner whose obligation is limited to the object of insurance, which was the stock-in-
could not have been cleared by 6 April, the date of the fire. In fact, the official receipt issued for respondent’s trade, and not the expected loss in income or profit. Neither can we approve the award of moral and exemplary
check payment was dated 10 April 1990, four days after the fire occurred. Petitioner also contends that damages. At the core of this case is petitioner’s alleged breach of its obligation under a contract of insurance.
respondent’s non-disclosure of the other insurance contracts rendered the policy void. It underscores the trial Under Article 2220 of the Civil Code, moral damages may be awarded in breaches of contracts where the
court’s neglect in considering the Commission on Audit’s certification that the BIR receipts submitted by defendant acted fraudulently or in bad faith. We find no such fraud or bad faith. It must again be stressed that
respondent were, in effect, fake since they were issued to other persons. Finally, petitioner argues that the award of moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. Such damages
damages was excessive and unreasonable considering that it did not act in bad faith in denying respondent’s claim. are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate
the moral suffering he has undergone, by reason of the defendant’s culpable action. Its award is aimed at the
ISSUES: 1. Whether there was a valid payment of premium, considering that respondent’s check was cashed after restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the
the occurrence of the fire; suffering inflicted. When awarded, moral damages must not be palpably and scandalously excessive as to indicate
2. Whether respondent violated the policy by his submission of fraudulent documents and non-disclosure of the that it was the result of passion, prejudice or corruption on the part of the trial court judge. The law 16 is likewise
other existing insurance contracts; and clear that in contracts and quasi-contracts the court may award exemplary damages if the defendant acted in a
3. Whether respondent is entitled to the award of damages. wanton, fraudulent, reckless, oppressive, or malevolent manner. Nothing thereof can be attributed to petitioner
which merely tried to resist what it claimed to be an unfounded claim for enforcement of the fire insurance policy.
RULING: 1. YES. The general rule in insurance law is that unless the premium is paid the insurance policy is not
valid and binding. The only exceptions are life and industrial life insurance. Whether payment was indeed made is 22. Sun Insurance Office Ltd. v. Court of Appeals
a question of fact which is best determined by the trial court. The trial court found, as affirmed by the Court of G.R. No. 92383, 17 July 1992, 211 SCRA 554
Appeals, that there was a valid check payment by respondent to petitioner. Well-settled is the rule that the factual
findings and conclusions of the trial court and the Court of Appeals are entitled to great weight and respect, and FACTS: Lim accidentally killed himself with his gun after removing the magazine, showing off, pointing the gun
will not be disturbed on appeal in the absence of any clear showing that the trial court overlooked certain facts or at his secretary and pointing the gun at his temple after the birthday party of his mother with his secretary as the
circumstances which would substantially affect the disposition of the case. We see no reason to depart from this lone witness to the incident. The petitioner rejected the widow’s claim, contending that there was neither an
ruling. According to the trial court the renewal certificate issued to respondent contained the acknowledgment that accident nor a suicide. The widow, the beneficiary, sued the petitioner and won 200,000 as indemnity with
premium had been paid. It is not disputed that the check drawn by respondent in favor of petitioner and delivered additional amounts for other damages and attorney’s fees. This was sustained in the Court of Appeals then sent to
to its agent was honored when presented and petitioner forthwith issued its official receipt to respondent on 10 the Supreme court by the insurance company.
April 1990. Section 306 of the Insurance Code provides that any insurance company which delivers a policy or
contract of insurance to an insurance agent or insurance broker shall be deemed to have authorized such agent or ISSUE: 1. Was Lim’s widow eligible to receive the benefits?
broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the 2. Were the other damages valid?
time of its issuance or delivery or which becomes due thereon. In the instant case, the best evidence of such
authority is the fact that petitioner accepted the check and issued the official receipt for the payment. It is, as well, RATIO: 1. Yes. There was an accident. De la Cruz v. Capital Insurance says that “there is no accident when a
bound by its agent’s acknowledgment of receipt of payment. Section 78 of the Insurance Code explicitly provides: deliberate act is performed unless some additional, unexpected, independent and unforeseen happening occurs
An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its which produces or brings about their injury or death.” This was true when he fired the gun.
payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding Under the insurance contract, the company wasn’t liable for bodily injury caused by attempted suicide or by one
until the premium is actually paid. needlessly exposing himself to danger except to save another’s life.
Lim wasn’t thought to needlessly expose himself to danger due to the witness testimony that he took steps to
2. NO. The submission of the alleged fraudulent documents pertained to respondent’s income tax returns for 1987 ensure that the gun wasn’t loaded. He even assured his secretary that the gun was loaded.
to 1989. Respondent, however, presented a BIR certification that he had paid the proper taxes for the said years.
The trial court and the Court of Appeals gave credence to the certification and it being a question of fact, we hold There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the
that said finding is conclusive. Ordinarily, where the insurance policy specifies as a condition the disclosure of insured is shown to have contributed to his own accident.
existing co-insurers, non-disclosure thereof is a violation that entitles the insurer to avoid the policy. This condition
is common in fire insurance policies and is known as the "other insurance clause." The purpose for the inclusion of 2. No. “In order that a person may be made liable to the payment of moral damages, the law requires that his act be
this clause is to prevent an increase in the moral hazard. We have ruled on its validity and the case of Geagonia v. wrongful. The adverse result of an action does not per se make the act wrongful and subject the act or to the
Court of Appeals 10 clearly illustrates such principle. However, we see an exception in the instant case. Citing payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is
Section 29 11 of the Insurance Code, the trial court reasoned that respondent’s failure to disclose was not so precious that moral damages may not be charged on those who may exercise it erroneously. For these the law
intentional and fraudulent. The application of Section 29 is misplaced. Section 29 concerns concealment which is taxes costs.”
intentional. The relevant provision is Section 75, which provides that: A policy may declare that a violation of
specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the
If a party wins, he cannot, as a rule, recover attorney’s fees and litigation expenses, since it is not the fact of
winning alone that entitles him to recover such damages of the exceptional circumstances enumerated in Art. 2208.
Otherwise, every time a defendant wins, automatically the plaintiff must pay attorney’s fees thereby putting a
premium on the right to litigate which should not be so. For those expenses, the law deems the award of costs as
sufficient.”

23. Edillon v Manila Bankers Life G.R. No. L-34200 September 30, 1982

Facts: Carmen O, Lapuz applied with Manila Bankers for insurance coverage against accident and injuries. She
gave the date of her birth as July 11, 1904. She paid the sum of P20.00 representing the premium for which she
was issued the corresponding receipt. The policy was to be effective for 90 days.During the effectivity, Carmen O.
Lapuz died in a vehicular accident in the North Diversion Road.Petitioner Regina L. Edillon, a sister of the insured
and the beneficiary in the policy, filed her claim for the proceeds of the insurance. Her claim having been denied,
Regina L. Edillon instituted this action in the trial court.
The insurance corporation relies on a provision contained in the contract excluding its liability to pay claims under
the policy in behalf of "persons who are under the age of sixteen (16) years of age or over the age of sixty (60)
years" They pointed out that the insured was over sixty (60) years of age when she applied for the insurance
coverage, hence the policy became void.
The trial court dismissed the complaint and ordered edillon to pay P1000. The reason was that a policy of
insurance being a contract of adhesion, it was the duty of the insured to know the terms of the contract he or she is
entering into.
The insured could not have been qualified under the conditions stated in said contract and should have asked for a
refund of the premium.

Issue: Whether or not the acceptance by the insurance corporation of the premium and the issuance of the
corresponding certificate of insurance should be deemed a waiver of the exclusionary condition of coverage stated
in the policy.

Held: Yes. Petition granted.

Ratio: The age of Lapuz was not concealed to the insurance company. Her application clearly indicated her age of
the time of filing the same to be almost 65 years of age. Despite such information which could hardly be
overlooked, the insurance corporation received her payment of premium and issued the corresponding certificate of
insurance without question.
There was sufficient time for the private respondent to process the application and to notice that the applicant was
over 60 years of age and cancel the policy.
Under the circumstances, the insurance corporation is already deemed in estoppel. It inaction to revoke the policy
despite a departure from the exclusionary condition contained in the said policy constituted a waiver of such
condition, similar to Que Chee Gan vs. Law Union Insurance.
The insurance company was aware, even before the policies were issued, that in the premises insured there were
only two fire hydrants contrary to the requirements of the warranty in question.
It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has knowledge of
existing facts which, if insisted on, would invalidate the contract from its very inception, such knowledge
constitutes a waiver of conditions in the contract inconsistent with the known facts, and the insurer is stopped
thereafter from asserting the breach of such conditions.
To allow a company to accept one's money for a policy of insurance which it then knows to be void and of no
effect, though it knows as it must, that the assured believes it to be valid and binding, is so contrary to the dictates
of honesty and fair dealing.
Capital Insurance & Surety Co., Inc. vs. - involved a violation of the provision of the policy requiring the payment
of premiums before the insurance shall become effective. The company issued the policy upon the execution of a
promissory note for the payment of the premium. A check given subsequent by the insured as partial payment of
the premium was dishonored for lack of funds. Despite such deviation from the terms of the policy, the insurer was
held liable.
“... is that although one of conditions of an insurance policy is that "it shall not be valid or binding until the first
premium is paid", if it is silent as to the mode of payment, promissory notes received by the company must be
deemed to have been accepted in payment of the premium. In other words, a requirement for the payment of the
first or initial premium in advance or actual cash may be waived by acceptance of a promissory note...”