Mayer Steel Pipe Corp. and Hong Kong Gov’t Supplies Dept v.

CA, obligation prescribes in ten years, in accordance with Article 1144 of the
South Sea Surety and Insurance Co., and Charter Insurance Corp. New Civil Code.
(GR No. 124050; June 19, 1997; Topic: Contract of Insurance)

Facts: In 1983, petitioner Hongkong Government Supplies Department

Philippine Health Care Providers, Inc. v. CIR (GR No. 167330; Sept.
contracted petitioner Mayer Steel Pipe Corporation to supply various steel
18, 2009; Topic: Doing or Transacting an Insurance Business)
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 Facts: Petitioner is a domestic corporation whose primary purpose is "to
Insurance Co., Inc. and Charter Insurance Corp. The pipes and fittings with establish, maintain, conduct and operate a prepaid group practice health
a total amount of US$212,772.09 were insured with respondent South Sea, care delivery system or a health maintenance organization to take care of
while the other pipes and fittings with the amount of US$149,470.00 were the sick and disabled persons enrolled in the health care plan and to provide
insured with respondent Charter. Petitioners Mayer and Hongkong for the administrative, legal, and financial responsibilities of the
appointed Industrial Inspection Inc. as third-party inspector to examine organization." Individuals enrolled in its health care programs pay an
whether the pipes and fittings are manufactured in accordance with the annual membership fee and are entitled to various preventive, diagnostic
specifications in the contract. Industrial Inspection certified all the pipes and curative medical services provided by its duly licensed physicians,
and fittings to be in good order condition before they were loaded in the specialists and other professional technical staff participating in the group
vessel. But when the goods reached Hongkong, it was discovered that a practice health delivery system at a hospital or clinic owned, operated or
substantial portion thereof was damaged. accredited by it.

Petitioners filed a claim against private respondents for indemnity under the
Respondent claimed that petitioner's health care agreement was a contract
insurance contract. Respondent Charter paid petitioner Hongkong the
amount of HK$64,904.75. Petitioners demanded payment of the balance of of insurance subject to DST under Section 185 of the 1997 Tax Code. CA
held that petitioner's health care agreement was in the nature of a non-life
HK$299,345.30 representing the cost of repair of the damaged pipes.
insurance contract subject to tax.
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. Petitioner argues that its health care agreement is not a contract of
insurance but a contract for the provision on a prepaid basis of medical
The trial court ruled in favor of petitioners. It found that the damage to the services, including medical check-up, that are not based on loss or damage.
goods is not due to manufacturing defects. It also noted that the insurance It is a health maintenance organization regulated by the DOH, not an
contracts executed by petitioner Mayer and private respondents are "all insurance company under the jurisdiction of the Insurance Commission. For
risks" policies which insure against all causes of conceivable loss or these reasons, petitioner asserts that the health care agreement is not subject
damage. The only exceptions are those excluded in the policy, or those to tax.
sustained due to fraud or intentional misconduct on the part of the insured.

CA set aside the decision of the trial court and dismissed the complaint on Issue: WON the health care agreement in the nature of an insurance
the ground of prescription. It held that the action is barred under Section contract and therefore subject to the documentary stamp tax
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 Ruling: Yes, it is an insurance contract. Under the law, a contract of
the vessel. Section 3(6) of the Carriage of Goods by Sea Act provides that insurance is an agreement whereby one undertakes for a consideration to
"the carrier and the ship shall be discharged from all liability in respect of indemnify another against loss, damage or liability arising from an
loss or damage unless suit is brought within one year after delivery of the unknown or contingent event. The event insured against must be
goods or the date when the goods should have been delivered." To support designated in the contract and must either be unknown or contingent.
its decision, the CA cited Filipino Merchants Insurance
Co., Inc. v. Alejandro where this provision was applied not only to the
carrier but also to the insurer. Petitioner's health care agreement is primarily a contract of indemnity. And
in the recent case of Blue Cross Healthcare, Inc. v. Olivares, this Court
Issue: W/N petitioners' cause of action had prescribed ruled that a health care agreement is in the nature of a non-life insurance
policy.
Ruling: No. Section 3(6) of the Carriage of Goods by Sea Act states that the
carrier and the ship shall be discharged from all liability for loss or damage Contrary to petitioner's claim, its health care agreement is not a contract for
to the goods if no suit is filed within one year after delivery of the goods or the provision of medical services. Petitioner does not actually provide
the date when they should have been delivered. Under this provision, only medical or hospital services but merely arranges for the same and pays
the carrier's liability is extinguished if no suit is brought within one year. for them up to the stipulated maximum amount of coverage. It is also
But the liability of the insurer is not extinguished because the insurer's incorrect to say that the health care agreement is not based on loss or
liability is based not on the contract of carriage but on the contract of damage because, under the said agreement, petitioner assumes the liability
insurance. A close reading of the law reveals that the Carriage of Goods by and indemnifies its member for hospital, medical and related expenses
Sea Act governs the relationship between the carrier on the one hand and (such as professional fees of physicians). The term "loss or damage" is
the shipper, the consignee and/or the insurer on the other hand. It defines broad enough to cover the monetary expense or liability a member will
the obligations of the carrier under the contract of carriage. It does not, incur in case of illness or injury.
however, affect the relationship between the shipper and the insurer. The
latter case is governed by the Insurance Code.
Under the health care agreement, the rendition of hospital, medical and
The Filipino Merchants Insurance Co., Inc. v. Alejandro case is different professional services to the member in case of sickness, injury or
from the case at bar. In Filipino Merchants, it was the insurer which filed a emergency or his availment of so-called "out-patient services" is the
claim against the carrier for reimbursement of the amount it paid to the contingent event which gives rise to liability on the part of the member. In
shipper. In the case at bar, it was the shipper which filed a claim against the case of exposure of the member to liability, he would be entitled to
insurer. The ruling in Filipino Merchants should apply only to suits against indemnification by petitioner.
the carrier filed either by the shipper, the consignee or the insurer. When
the court said in Filipino Merchants that Section 3(6) of the Carriage of Petitioner assumes the risk of paying for the costs of the services even if
Goods by Sea Act applies to the insurer, it meant that the insurer, like the they are significantly and substantially more than what the member has
shipper, may no longer file a claim against the carrier beyond the one-year "prepaid." Petitioner does not bear the costs alone but distributes or spreads
period provided in the law. But it does not mean that the shipper may no them out among a large group of persons bearing a similar risk, that is,
longer file a claim against the insurer because the basis of the insurer's among all the other members of the health care program. This is insurance.
liability is the insurance contract.

An insurance contract is a contract whereby one party, for a Similarly, the insurable interest of every member of petitioner's health
consideration known as the premium, agrees to indemnify another for care program in obtaining the health care agreement is his own health.
loss or damage which he may suffer from a specified peril. An "all Under the agreement, petitioner is bound to indemnify any member who
risks" insurance policy covers all kinds of loss other than those due to incurs hospital, medical or any other expense arising from sickness, injury
willful and fraudulent act of the insured. Thus, when private respondents or other stipulated contingency to the extent agreed upon under the
issued the "all risks" policies to petitioner Mayer, they bound themselves to contract. Therefore, the health care agreement is an insurance contract.
indemnify the latter in case of loss or damage to the goods insured. Such
 PARTY as defined herein in any accident caused by or arising
Eternal Gardens Memorial Park v. Philippine American Life out of the use of the Schedule Vehicle, provided that the liability
Insurance Company (GR No. 166245; Apr. 9, 2008; Topic: Contract of shall have first been determined. In no case, however, shall the
Adhesion or Fine Print Rule) Company's total payment under both Section I and Section II
combined exceed the Limits of Liability set forth herein. With
FACTS: Respondent PhilAm Life entered into an agreement denominated respect to death of or bodily injury to any third party or
as Creditor Group Life Policy with petitioner Eternal Gardens Memorial passenger, the company's payment per victim in any one
Park Corporation (Eternal). Under the policy, clients of Eternal who accident shall not exceed the limits indicated in the Schedule
purchased burial lots from it on installment basis would be insured by of Indemnities provided for in this policy excluding the cost of
Philamlife. Among those insured was John Chuang who died with a additional medicines, and such other burial and funeral
balance of payments of P100, 000. expenses that might have been incurred."

More than a year after complying with the required documents, PhilAmlife Respondent Rodriguez filed a complaint for damages before the RTC
had not furnished Eternal with any reply to the latter’s insurance claim. against De Dios Transportation who, in turn, filed a third-party complaint
This prompted Eternal to demand from PhilAmlife the payment of the against its insurance carrier, petitioner Western.
claim for PhP 100,000.
The trial court rendered a decision in favor of respondent and was affirmed
PhilAmlife responded that the deceased was not covered by the Policy. The on appeal.
RTC said that since the contract is a group life insurance, once proof of
death is submitted, payment must follow. The CA ruled that the non- Issue: Whether petitioner is liable to pay beyond the limits set forth in the
accomplishment of the submitted application form violated Section 26 of Schedule Indemnities and in finding petitioner liable for loss of earnings,
the Insurance Code. Thus, the CA concluded, there being no application moral damages and attorney’s fees.
form, Chuang was not covered by PhilAmlifes insurance. Ruling: An examination of Sec. 1 shows that Section defines the scope of
the liability of insurer as well as the events, which generate such liability.
ISSUE: WON the inaction of the insurer on the insurance application be The scope of liability of petitioner is marked out in comprehensive terms:
considered approval of the application? “all sums necessary to discharge liability of the insure in respect of the
precipitating events.” The precipitating events which generate liability on
RULING: Yes. As earlier stated, PhilAmlife and Eternal entered into an the part of the insurer, either in favor of a passenger or a thirds party, are
agreement denominated as Creditor Group Life Policy No. P-1920 dated specified in the following terms: (1) death of, or (2) bodily injury to, or (3)
December 10, 1980. In the policy, it is provided that: EFFECTIVE DATE damage to property of, the passenger or the third party.
OF BENEFIT: The insurance of any eligible Lot Purchaser shall be
effective on the date he contracts a loan with the Assured. However, there The schedule of indemnities does not purport to restrict the kinds of
shall be no insurance if the application of the Lot Purchaser is not damages that may be awarded against Western once Liability has arisen. In
approved by the Company. other words, it was not intended to be a closed enumeration. Sec. 1 does
refer to certain “Limits of Liability” which in the case of the third party
An examination of the above provision would show ambiguity between its liability section of the Master Policy, is apparently P50,000 per person per
two sentences. The first sentence appears to state that the insurance accident which includes all kinds of damages allowable by law.
coverage of the clients of Eternal already became effective upon
contracting a loan with Eternal while the second sentence appears to require If what petitioner now urges is what it intended to achieve by its Schedule
PhilAmlife to approve the insurance contract before the same can become of Indemnities, it was incumbent upon petitioner to use language far more
effective. specific and precise than that used in fact by petitioner, so that the insured,
It must be remembered that an insurance contract is a contract of adhesion, and potential purchasers of its Master Policy, and the Office of the
which must be construed liberally in favor of the insured and strictly Insurance Commissioner, may be properly informed and act accordingly.
against the insurer in order to safeguard the latter’s interest.
It is well-settled that contractual limitations of liability found in insurance
In PhilAm Care Health Systems, Inc. v. CA, we reiterated that: When the contracts should be regarded by the courts with a jaundiced eye and
terms of insurance contract contain limitations on liability, courts should extreme care and should be so construed as to preclude the insurer from
construe them in such a way as to preclude the insurer from non- evading compliance with its just obligations.
compliance with his obligation. Being a contract of adhesion, the terms of
an insurance contract are to be construed strictly against the party, which Finally, an insurance contract is a contract of adhesion. The rule is well
prepared the contract, the insurer. By reason of the exclusive control of the entrenched in our jurisprudence that the terms of such contract are to be
insurance company over the terms and phraseology of the insurance construed strictly against the party which prepared the contract. DENIED.
contract, ambiguity must be strictly interpreted against the insurer and
liberally in favor of the insured, especially to avoid forfeiture
Great Pacific Life Assurance Corp. v. CA (316 SCRA 677; Topic:
Insurance contracts are contracts of adhesion containing technical terms and Parties in Insurance Contract)
conditions of the industry, confusing if at all understandable to laypersons,
that are imposed on those who wish to avail of insurance. As such, Facts: A contract of group life insurance was executed between petitioner
insurance contracts are imbued with public interest that must be considered Great Pacific Life Assurance Corporation (Grepalife) and Development
whenever the rights and obligations of the insurer and the insured are to be Bank of the Philippines (DBP). Grepalife agreed to insure the lives of
delineated. Hence, in order to protect the interest of insurance applicants, eligible housing loan mortgagors of DBP.
insurance companies must be obligated to act with haste upon insurance
applications, to either deny or approve the same, or otherwise be bound to Wilfredo Leuterio applied for membership in the group life insurance plan.
honor the application as a valid, binding, and effective insurance contract In his application form, Leuterio answered that he had never consulted a
physician for a heart condition and that he was in good health. Grepalife
approved the insurance coverage to the extent of his DBP mortgage
Western Guaranty Corporation v. CA, Priscilla Rodriguez, and De indebtedness amounting to P86,200.
Dios Transportation Co., Inc. (GR No. 91666; July 20, 1990; Topic:
Contract of Adhesion or Fine Print Rule) Leuterio died due to massive cerebral hemorrhage. Consequently, DBP
submitted a death claim to Grepalife. Grepalife denied the claim alleging
Facts: While crossing the Airport Road on a pedestrian, respondent that Leuterio was not physically healthy when he applied for an insurance
Rodriguez was struck by a De Dios passenger bus. Her face was coverage. Grepalife insisted that Leuterio did not disclose he had been
permanently disfigured, causing her serious anxiety and moral distress. suffering from hypertension, which caused his death. Allegedly, such non-
disclosure constituted concealment that justified the denial of the claim.
Respondent bus company was insured with petitioner Western Guaranty
Corporation where its Master Policy provided for protection against third The widow filed a complaint with the RTC against Grepalife for Specific
party liability, the relevant section reading as follows: Performance with Damages. During the trial, Dr. Hernando Mejia, who
"Section 1. Liability to the Public — Company will, subject to the Limits of issued the death certificate, was called to testify. Dr. Mejias findings stated
Liability, pay all sums necessary to discharge liability of the insured in that Leuterio complained of headaches presumably due to high blood
respect of — pressure.
a. death of or bodily injury to or damage to property of any
passenger as defined herein. Trial court rendered a decision in favor of respondent widow which was
b. death of or bodily injury or damage to property of any THIRD sustained by the CA. Hence, the present petition. Petitioners argued that
“the lower court erred in holding defendant-appellant liable to DBP, which Also, in case of doubt in the stipulation as to the coverage of the fire
is not a party to the case, for payment of the proceeds of a mortgage insurance policy, under Art. 1377 of the New Civil Code, the doubt
redemption insurance on the life of Wilfredo Leuterio, borrowers, instead should be resolved against the Rizal Surety, whose layer or managers
of dismissing the case against Grepalife for lack of cause of action.” drafted the fire insurance policy contract under scrutiny.

Petitioner alleges that the complaint was instituted by the widow of In Landicho vs. Government Service Insurance System, the Court ruled that
Leuterio, not the real party in interest, hence the trial court acquired no “the terms in an insurance policy, which are ambiguous, equivocal or
jurisdiction over the case. uncertain x x x are to be construed strictly and most strongly against the
insurer, and liberally in favor of the insured so as to effect the dominant
Issues: WON CA erred in holding petitioner liable to DBP as beneficiary in purpose of indemnity or payment to the insured, especially where forfeiture
a group life insurance contract from a complaint filed by the widow of the is involved, and the reason for this is that the insured usually has no voice
decedent/mortgagor? in the selection or arrangement of the words employed and that the
language of the contract is selected with great care and deliberation by
Held: To resolve the issue, we must consider the insurable interest in experts and legal advisers employed by, and acting exclusively in the
mortgaged properties and the parties to this type of contract. interest of, the insurance company.”

The rationale of a group insurance policy of mortgagors, otherwise

known as the mortgage redemption insurance, is a device for the American Home Assurance v. Tantuco (GR No. 138941; Oct. 8, 2001;
protection of both the mortgagee and the mortgagor. On the part of the Topic: Interpretation of Insurance Contracts)
mortgagee, it has to enter into such form of contract so that in the
event of the unexpected demise of the mortgagor during the subsistence FACTS: Tantuco Enterprises, Inc. is a coconut oil milling and refining
of the mortgage contract, the proceeds from such insurance will be company. It owned two mills (the first oil mill and a new one), both located
applied to the payment of the mortgage debt, thereby relieving the at its factory compound at Iyam, Lucena City. The two oil mills are
heirs of the mortgagor from paying the obligation. In a similar vein, separately covered by fire insurance policies issued by American Home
ample protection is given to the mortgagor under such a concept so that in Assurance Co.
the event of death; the mortgage obligation will be extinguished by the
application of the insurance proceeds to the mortgage indebtedness. A fire broke out and gutted and consumed the new oil mill. American
Home rejected the claim for the insurance proceeds on the ground that no
It is held that he is insured, being the person with whom the contract was policy was issued by it covering the burned oil mill. It stated that the new
made, is primarily the proper person to bring suit thereon. Subject to some oil mill was under Building No. 15 while the insurance coverage extended
exceptions, insured may thus sue, although the policy is taken wholly or in only to the oil mill under Building No. 5.
part for the benefit of another person named or unnamed, and although it is
expressly made payable to another as his interest may appear or otherwise. ISSUE: WON the new oil mill is covered by the policy

Although a policy issued to a mortgagor is taken out for the benefit of the HELD: In construing the words used descriptive of a building insured, the
mortgagee and is made payable to him, yet the mortgagor may sue thereon greatest liberality is shown by the courts in giving effect to the insurance. In
in his own name, especially where the mortgagee’s interest is less than the view of the custom of insurance agents to examine buildings before writing
full amount recoverable under the policy. policies upon them, and since a mistake as to the identity and character of
the building is extremely unlikely, the courts are inclined to consider the
An insured may be regarded as the real party in interest, although he has policy of insurance covers any building which the parties manifestly
assigned the policy for the purpose of collection, or has assigned as intended to insure, however inaccurate the description may be.
collateral security any judgment he may obtain. And since a policy of
insurance upon life or health may pass by transfer, will or succession to any Notwithstanding, therefore, the mis-description in the policy, it is beyond
person, whether he has an insurable interest or not, and such person may dispute, to our mind, that what the parties manifestly intended to insure was
recover it whatever the insured might have recovered, the widow of the the new oil mill.
decedent Dr. Leuterio may file the suit against the insurer, Grepalife.
If the parties really intended to protect the first oil mill, then there is no
need to specify it as new. Indeed, it would be absurd to assume that the
Rizal Surety and Insurance Company v. CA and Transworld respondent would protect its first oil mill for different amounts and leave
Kniwtting Mills, Inc. (336 SCRA 12 (2000); Topic: Interpretation of uncovered its second one.
Insurance Contracts)

FACTS: Rizal Surety & Insurance Company issued a fire insurance policy Pan Malayan Insurance Corp. v. CA, Erlinada Fabie and her unknown
in favor of Transworld Knitting Mills, Inc. The subject policy stated that driver (GR No. 81026; Apr. 3, 1990; Topic: Interpretation of Insurance
Rizal Surety is “responsible in case of loss whilst contained and/or stored Contracts)
during the currency of this Policy in the premises occupied by them
forming part of the buildings situated within own Compound xxx.” The Facts: Canlubang Automotive Resources Corporation (Canlubang) insured
policy also described therein the four-span building covered by the same. a Mitsubishi Colt Lancer car with plate No. DDZ-431 to petitioner Pan
Malayan Insurance Company (Panmalay).
A fire broke out in the compound, razing the middle portion of its four-span
building and partly gutting the left and right sections thereof. A two-storey On May 26, 1985, due to the "carelessness, recklessness, and imprudence"
building (behind said four-span building) was also destroyed by the fire. of the unknown driver of a pick-up with plate no. PCR-220, the insured car
was hit and suffered damages in the amount of P42,052; that PANMALAY
ISSUE: WON Rizal Surety is liable for loss of the two-storey building defrayed the cost of repair of the insured car and, therefore, was subrogated
considering that the fire insurance policy sued upon covered only the to the rights of CANLUBANG against the driver of the pick-up and his
contents of the four-span building employer, Erlinda Fabie; and that, despite repeated demands, defendants,
failed and refused to pay the claim of PANMALAY.
RULING: Yes. Both the trial court and the CA found that the so-called
“annex” as not an annex building but an integral and inseparable part of the The contention of the petitioner was that the damage caused to the insured
four-span building described in the policy and consequently, the machines car was settled under the "own damage" coverage of the insurance policy,
and spare parts stored therein were covered by the fire insurance in dispute. and that the driver of the insured car was, at the time of the accident, an
So also, considering that the two-storey building aforementioned was authorized driver duly licensed to drive the vehicle.
already existing when subject fire insurance policy contract was entered
into on Jan. 12, 1981, having been constructed some time in 1978, On the other hand, private respondent argued that under the "own damage"
petitioner should have specifically excluded the said two-storey building clause of the insurance policy, petitioner was precluded to subrogate under
from the coverage of the fire insurance if minded to exclude the same but if Article 2207 of the Civil Code, since indemnification thereunder was made
did not, and instead, went on to provide that such fire insurance policy on the assumption that there was no wrongdoer or no third party at fault.
covers the products, raw materials and supplies stored within the premises The RTC dismissed the complaint for no cause of action and affirmed by
of Transworld which was an integral part of the four-span building CA.
occupied by Transworld, knowing fully well the existence of such building
adjoining and intercommunicating with the right section of the four-span Issue: WON the interpretation of own damage is covered with the insurance
building. policy and thus subrogation is allowed as provided in Art. 2207 of the Civil
Code.
 For peace of mind and as a hedge against possible loss, many people now
Ruling: YES. It is a basic rule in the interpretation of contracts that the secure fire insurance. This is an aleatory contract. By such insurance, the
terms of a contract are to be construed according to the sense and meaning insured in effect wagers that his house will be burned, with the insurer
of the terms which the parties thereto have used. assuring him against the loss, for a fee. If the house does burn, the
insured, while losing his house, wins the wager. The prize is the
PANMALAY contends that the coverage of insured risks under the above recompense to be given by the insurer to make good the loss the
section, specifically Section III-1(a), is comprehensive enough to include insured has sustained. It would be a pity then if, having lost his house, the
damage to the insured vehicle arising from collision or overturning due to insured were also to lose payment he expects to recover for such loss. In the
the fault or negligence of a third party. CANLUBANG is apparently of the instant case, the respondent has been sustained by the Insurance
same understanding. Considering that the very parties to the policy were Commission in her claim for compensation for her burned property.
not shown to be in disagreement regarding the meaning and coverage of
Section III-1, thus such interpretation which is beneficial to the insured
must be given weight. Sps. Tibay v, CA and Fortune Life and General Insurance Co. (GR No.
119655; May 24, 1996; Topic: Contract is considered a risk-
The Court, furthermore, finds it noteworthy that the meaning advanced by distributing device)
PANMALAY regarding the coverage of Section III-1(a) of the policy is
undeniably more beneficial to CANLUBANG than that insisted upon by FACTS: In January 22 1987, the Petitioners obtained a fire insurance
respondents herein. By arguing that this section covers losses or damages policy for their 2-storey home from the Private Respondent Fortune Life
due not only to malicious, but also to negligent acts of third parties, Insurance Co. The said policy covers the period from January 23, 1987
PANMALAY in effect advocates for a more comprehensive coverage of until January 23, 1988 or one year for P600, 000 and at the agreed premium
insured risks. of P2, 983. On January 23 or the next day, petitioner made a partial
payment of the premium with P600.
In effect, PANMALAY is subrogated in behalf of Canlubang as Article
2207 of the Civil Code, provides: If the plaintiff's property has been Unfortunately, on March 8 1987, the said building was burned to the
insured, and he has received indemnity from the insurance company for the ground. It was only two days after the fire that Petitioner Violeta advanced
injury or loss arising out of the wrong or breach of contract complained of, the full payment of the policy premium which was accepted by the insurer.
the insurance company shall be subrogated to the rights of the insured On this same day, petitioner likewise filed the claim.Investigation of the
against the wrongdoer or the person who has violated the contract. cause of fire commenced and the petitioner submitted the required proof of
loss.
The right of subrogation is not dependent upon, nor does it grow out of, any
privity of contract or upon written assignment of claim. It accrues simply However, Fortune refused to pay the insurance claim saying it as not liable
upon payment of the insurance claim by the insurer as such payment by the due to the non-payment by petitioner of the full amount of the premium as
insurer to the assured operates as an equitable assignment to the former of stated in the policy.
all remedies which the latter may have against the third party whose
negligence or wrongful act caused the loss. The petitioner then brought the matter to the Insurance Commission but
nothing good came out. Hence this case filed.

The trial court rule in favor of the petitioner. Upon appeal, the Court of
Malayan Insurance v. Arnaldo, Pinca (GR No. L-67835; Oct. 12, 1987; Appeals reversed the lower court's decision and held that Fortune is not
Topic: Aleatory as a characteristic of an Insurance Contract) liable but ordered it to return the premium paid with interest to the
petitioner. Hence, this petition for review.
FACTS: Petitioner (MICO) issued to respondent Pinca, on June 7, 1981, a
Fire Insurance Policy on her property for the amount of 100,000, effective ISSUE: WON a fire insurance policy be valid, binding and enforceable
for one year starting July 22, 1981. MICO allegedly cancelled the policy for upon mere partial payment of premium
non-payment of the premium and sent notice to Pinca.
RULING: NO. Insurance is a contract whereby one undertakes for a
On Dec. 24, 1981, the payment for such premium for Pinca was received by consideration to indemnify another against loss, damage or liability arising
Adora, agent of MICO. Adora remitted this to MICO; this was returned by from an unknown or contingent event. The consideration is the premium,
MICO to Adora on the ground that the policy had been cancelled earlier. It which must be paid at the time, way and manner as stated in the policy, and
is to be noted that Pinca’s property was completely burned on Jan. 18, if not so paid as in this case, the policy is therefore forfeited by its own
1982. terms.

MICO argued that there was no payment of premium and that the Policy In this case, clearly, the Policy provides for payment of premium in full.
had been cancelled before the occurrence of the loss, relying on Sec. 77 of Since the petitioner only made partial payment with the remaining balance
the Insurance Code: “x x Notwithstanding any agreement to the contrary, paid only after the fire or peril insured against has occurred, the insurance
no policy or contract of insurance is valid and binding unless and until the contract therefore did not take effect barring the insured from claiming or
premium thereof has been paid x x” collecting from the loss of her building.

ISSUE: WON the Policy had indeed been cancelled for the non-payment of Accordingly, where the premium has only been partially paid and the
the premium balance paid only after the peril insured against has occurred, the insurance
contract did not take effect and the insured cannot collect at all on the
RULING: The contention of MICO must fail. policy. This is fully supported by Sec. 77 of the Insurance Code which
provides: “SEC. 77. An insurer is entitled to payment of the premium as
The provision cited is not applicable because the payment of premium was soon as the thing insured is exposed to the peril insured against.
in fact eventually made in this case. The premium invoice issued to Pinca at Notwithstanding any agreement to the contrary, no policy or contract of
the time of the delivery of the Policy was stamped “Payment Received.” insurance issued by an insurance company is valid and binding unless and
This is important because it suggests an understanding between MICO and until the premium thereof has been paid, except in the case of a life or an
the insured that such payment could be made later. In any event, it is not industrial life policy whenever the grace period provision applies.”
denied that his payment was actually made by Pinca to Adora, who remitted
the same to Mico. Furthermore, the court explained that in the desire to safeguard the interest
of the assured, it must not be ignored that the contract of insurance is
Furthermore, MICO’s acknowledgement of Adora as its agent defeats its primarily a risk-distributing device, a mechanism by which all members
contention that he was not authorized to receive the premium payment on of a group exposed to a particular risk contribute premiums to an insurer.
its behalf. From these contributory funds are paid whatever losses occur due to
exposure to the peril insured against. Each party therefore takes a risk: the
It is not disputed that premium was paid by Pinca to Adora on Dec. 24, insurer, that of being compelled upon the happening of the contingency to
1981 and it would seem from MICO’s theory that the Policy would have pay the entire sum agreed upon, and the insured, that of parting with the
become effective only upon payment and so would have been valid from amount required as premium, without receiving anything therefor in case
Dec. 24, 1981 but only up to July 22, 1982. IOW, in would have run for the contingency does not happen. To ensure payment for these losses, the
only 8 months although the premium paid was for one whole year. Hence, law mandates all insurance companies to maintain a legal reserve fund in
we do not share MICO’s view that there was no existing insurance at the favor of those claiming under their policies. It should be understood that the
time of the loss sustained by Pinca. integrity of this fund cannot be secured and maintained if by judicial fiat
partial offerings of premiums were to be construed as a legal nexus between Ruling: YES. Basically, an insurance contract is a contract of indemnity. In
the applicant and the insurer despite an express agreement to the contrary. it, one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event.
Interpreting the contract of insurance stringently against the insurer but
liberally in favor of the insured despite clearly defined obligations of the
The test to determine if a contract is an insurance contract or not, depends
parties to the policy can be carried out to extremes that there is the danger
on the nature of the promise, the act required to be performed, and the exact
that we may, so to speak, kill the goose that lays the golden egg. We are
nature of the agreement in the light of the occurrence, contingency, or
well aware of insurance companies falling into the despicable habit of
circumstances under which the performance becomes requisite. It is not by
collecting premiums promptly yet resorting to all kinds of excuses to deny
what it is called.
or delay payment of just insurance claims.

But, in this case, the law is manifestly on the side of the insurer. For as long
as the current Insurance Code remains unchanged and partial payment of Insular Life Assurance Company v. Ebrado (GR No. L-44059; Oct. 29,
premiums is not mentioned at all as among the exceptions provided in Secs. 1977; Topic: Personal Contract)
77 and 78, no policy of insurance can ever pretend to be efficacious or
effective until premium has been fully paid. Facts: Buenaventura Ebrado was issued by The Life Assurance Co., Ltd on
a whole-life for P5,882 with a rider for Accidental Death of the same
amount. Buenaventura Ebrado designated Carpiona Ebrado as the
Fieldman’s Insurance v. CA (GR No. L-24833; Sept. 23, 1968; Topic: revocable beneficiary in his policy.
Characteristics of Insurance – Perfect Good Faith)
Buenaventura was hit by a falling branch and died. As the policy was in
Facts: Benjamin Sambat, agent of Fieldmen’s Insurance, convinced force, The Insular Life Assurance Co., Ltd. was liable to pay the coverage.
Federico Songco, a man of scant education and owner of a private jeepney,
to apply for a common carrier’s liability insurance policy.
Carponia filed with the insurer a claim for the proceeds of the Policy as the
While the vehicle was driven by Rodolfo, Federico’s son, a road mishap designated beneficiary therein, although she admits that she and the insured
Buenaventura C. Ebrado were merely living as husband and wife without
occurred and killed and injured many, including Federico and Rodolfo.
the benefit of marriage.
According to Fieldmen’s Insurance, it is not liable because the jeepney was
not a common carrier although the insurance policy was for common Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased
carrier’s liability and so did not fall within its terms. insured. She asserts that she is the one entitled to the insurance proceeds,
not the common-law wife, Carponia T. Ebrado.
Issue: Is Fieldmen’s Insurance liable?

Ruling: Yes. After Fieldmen’s Insurance had led the insured Federico In doubt to whom the insurance proceeds shall be paid, The Insular Life
Songco to believe that he could qualify under the common carrier liability Assurance Co., Ltd. commenced an action for Interpleader before the Court
insurance policy and to enter into contract of insurance paying the of First Instance. It was agreed upon and stipulated therein by the parties
premiums due, it could not, thereafter, in any litigation arising out of such that the deceased insured was married to Pascuala Ebrado with whom she
representation, be permitted to change its stand to the detriment of the heirs has six legitimate children; that during his lifetime, the deceased insured
of the insured. was living with his common-law wife, Carponia Ebrado, with whom he has
two children.
As estoppel is primarily based on the doctrine good faith and the avoidance
of harm that will befall the innocent party due to its injurious reliance, the The trial court disqualified Carponia (common law wife) because of
failure to apply it in this case would result in a gross travesty of justice. adultery. It held that 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.
White Gold Marine v. Pioneer Insurance (GR No. 154514; July 28, Neither is it also necessary that a finding of such guilt or commission of
2005; Topic: Contract of Indemnity) those acts be made in a separate independent action brought for the
purpose.
Facts: White Gold Marine Services, Inc. procured a protection and
indemnity coverage for its vessels from The Steamship Mutual
Underwriting Association Limited (Steamship Mutual) through Pioneer It is, however, essential that such adultery or concubinage exists at the time
Insurance and Surety Corporation (Pioneer). Subsequently, White Gold was defendant Carponia was made beneficiary in the policy in question for the
issued a Certificate of Entry and Acceptance. Pioneer also issued receipts disqualification and incapacity to exist and that it is only necessary that
evidencing payments for the coverage. When White Gold failed to fully pay such fact be established by preponderance of evidence in the trial. Since it
its accounts, Steamship Mutual refused to renew the coverage. is agreed in their stipulation that the deceased insured and defendant
Carponia were living together as husband and wife without being legally
married and that the marriage of the insured with the other defendant
Steamship Mutual thereafter led a case against White Gold for collection of Pascuala Vda. de Ebrado was valid and still existing at the time the
sum of money to recover the latter's unpaid balance. White Gold on the insurance in question was purchased. There is no question that defendant
other hand, led a complaint before the Insurance Commission claiming that Carponia Ebrado is disqualified from becoming the beneficiary of the
Steamship Mutual violated Sections 186 and 187 of the Insurance Code, policy in question and as such she is not entitled to the proceeds of the
while Pioneer violated Sections 299, 300 and 301 in relation to Sections insurance upon the death of the insured.
302 and 303, thereof.
ISSUE: W/N Carpiona is disqualified for violating the Civil Code which
The Insurance Commission dismissed the complaint. It said that there was supplements the silent Insurance Code.
no need for Steamship Mutual to secure a license because it was not
engaged in the insurance business. It explained that Steamship Mutual was
a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not Ruling: Yes. The new Insurance Code (PD No. 612, as amended) does not
obtain another license as insurance agent and/or a broker for Steamship contain any specific provision grossly resolutory of the prime question at
Mutual because Steamship Mutual was not engaged in the insurance hand. Section 50 of the Insurance Act, which provides that "the insurance
business. Moreover, Pioneer was already licensed, hence, a separate license shall be applied exclusively to the proper interest of the person in whose
solely as agent/broker of Steamship Mutual was already superfluous. name it is made." The word "interest" highly suggests that the provision
refers only to the "insured" and not to the beneficiary, since a contract
of insurance is personal in character. Otherwise, the prohibitory laws
The CA affirmed the decision of the Insurance Commissioner. In its against illicit relationships especially on property and descent will be
decision, the appellate court distinguished between P & I Clubs vis-à-vis rendered nugatory, as the same could easily be circumvented by modes of
conventional insurance. The appellate court also held that Pioneer merely insurance.
acted as a collection agent of Steamship Mutual.
Rather, the general rules of civil law should be applied to resolve this void
Issue: WON petitioner shall indemnify as there is a contract of insurance. 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." When
not otherwise specifically provided for by the Insurance Law, the contract
of life insurance is governed by the general rules of the civil law regulating
contracts. 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 life insurance policy by the person who cannot
make a donation to him. Common-law spouses are, definitely, barred
from receiving donations from each other.

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.

While it is not yet proven that she is guilty of adultery, we do not think that
a "conviction" for adultery or concubinage is exacted before the disabilities
mentioned in Article 739 may effectuate.

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;
2. 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.

The requisite proof of common-law relationship between the insured and

the beneficiary has been conveniently supplied by the stipulations between
the parties in the pre-trial conference of the case. It case agreed upon and
stipulated therein that the deceased insured Buenaventura Ebrado was
married to Pascuala Ebrado with whom she has six legitimate children;
that during his lifetime, the deceased insured was living with his common-
law wife, Carponia Ebrado, with whom he has two children.

These stipulations are nothing less than judicial admissions, which as a

consequence, no longer require proof and cannot be contradicted. On the
basis of these admissions, a judgment may be validly rendered without
going through the rigors of a trial for the sole purpose of proving the illicit
liaison between the insured and the beneficiary. IOW, there is
preponderance of evidence when they admitted those facts during pre-trial.